HomeMy WebLinkAbout2015 Annual Report Part 5 Appendix BTOWN OF READING, MASSACHUSETTS
Annual Financial Statements
For the Year Ended June 30, 2015
477
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TABLE OF CONTENTS
PAGE
INDEPENDENT AUDITORS' REPORT
1
MANAGEMENT'S DISCUSSION AND ANALYSIS
5
BASIC FINANCIAL STATEMENTS:
Government -wide Financial Statements:
Statement of Net Position
15
Statement of Activities
16
Fund Financial Statements:
Governmental Funds:
Balance Sheet
18
Reconciliation of Total Governmental Fund Balances to
Net Position of Governmental Activities in the Statement
of Net Position
19
Statement of Revenues, Expenditures, and Changes
in Fund Balances
20
Reconciliation of the Statement of Revenues, Expenditures,
and Changes in Fund Balances of Governmental Funds to
the Statement of Activities
21
Statement of Revenues and Other Sources, and Expenditures
and Other Uses - Budget and Actual - General Fund
22
Proprietary Funds:
Statement of Net Position
23
Statement of Revenues, Expenses, and Changes in Fund
Net Position
24
Statement of Cash Flows
25
Fiduciary Funds:
Statement of Fiduciary Net Position
26
Statement of Changes in Fiduciary Net Position
27
Notes to Financial Statements
29
Electric Light Plant Notes to the Financial Statements
63
479
PAGE
REQUIRED SUPPLEMENTARY INFORMATION:
Schedule of Funding Progress 86
Schedule of Proportionate Share of the Net Pension Liability 87
Schedule of Contributions 88
Schedule of Changes in Net Pension Liability 89
Schedules of Net Pension Liability, Contributions, and
Investment Returns 90
SUPPLEMENTARY INFORMATION:
Combining Balance Sheet - Nonmajor Governmental Funds
92
Combining Statement of Revenues, Expenditures and
Changes in Fund Balances - Nonmajor Governmental Funds
96
Combining Schedule of Net Position - Nonmajor Proprietary Funds
100
Combining Schedule of Revenues, Expenses and Changes
in Fund Net Position - Nonmajor Proprietary Funds
101
Combining Schedule of Cash Flows - Nonmajor Proprietary Funds
102
H'1
MELANSON
ACCOUNTANTS • AUDITORS
10 New England Business
Center Dr. • Suite 107
Andover, MA 01810
INDEPENDENT AUDITORS' REPORT melans nheath5
melansonheath.com
We have audited the accompanying financial statements of the governmental activi-
ties, the business -type activities, each major fund, and the aggregate remaining fund
information of the Town of Reading, Massachusetts, as of and for the year ended
June 30, 2015, (except for the Reading Contributory Retirement System, which is as
of and for the year ended December 31, 2014) and the related notes to the financial
statements, which collectively comprise the Town's basic financial statements as
listed in the Table of Contents.
Management's Responsibility for the Financial Statements
The Town's 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 conducted our audit in accordance with auditing standards generally
accepted in the United States of America and the standards applicable to financial
audits contained in Government Auditing Standards, issued by the Comptroller
General of the United States. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts
and disclosures in the financial statements. The procedures selected depend on the
auditor's judgment, including the assessment of the risks of material misstatement of
the financial statements, whether due to fraud or error. In making those risk assess-
ments, the auditor considers internal control relevant to the entity's preparation and
sm
Additional offices:
To the Board of Selectmen
Town of Reading, Massachusetts
NH
Ma
Manncchehe ster, NH
Greenfield, MA
Ellsworth, ME
Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activi-
ties, the business -type activities, each major fund, and the aggregate remaining fund
information of the Town of Reading, Massachusetts, as of and for the year ended
June 30, 2015, (except for the Reading Contributory Retirement System, which is as
of and for the year ended December 31, 2014) and the related notes to the financial
statements, which collectively comprise the Town's basic financial statements as
listed in the Table of Contents.
Management's Responsibility for the Financial Statements
The Town's 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 conducted our audit in accordance with auditing standards generally
accepted in the United States of America and the standards applicable to financial
audits contained in Government Auditing Standards, issued by the Comptroller
General of the United States. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts
and disclosures in the financial statements. The procedures selected depend on the
auditor's judgment, including the assessment of the risks of material misstatement of
the financial statements, whether due to fraud or error. In making those risk assess-
ments, the auditor considers internal control relevant to the entity's preparation and
sm
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 manage-
ment, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our audit opinions.
Opinions
In our opinion, the financial statements referred to above present fairly, in all material
respects, the respective financial position of the governmental activities, the business -
type activities, each major fund, and the aggregate remaining fund information of the
Town of Reading, Massachusetts, as of June 30, 2015, and the respective changes in
financial position and, where applicable, cash flows thereof and the respective budgetary
comparison for the general fund for the year then ended in accordance with accounting
principles generally accepted in the United States of America.
Emphasis of Matter
As discussed in Note 17 to the combined financial statements, the Reading Contrib-
utory Retirement System adopted Governmental Accounting Standards Board State-
ment No. 67, Financial Reporting for Pension Plans and GASB Statement No. 68,
Accounting and Financial Reporting for Pensions — an amendment of GASB State-
ment No. 27. Our opinion is not modified with respect to this matter.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require
that Management's Discussion and Analysis, the Schedule of Funding Progress, the
Schedule of Proportionate Share of Net Pension Liability, the Schedule of Contribu-
tions, the Schedule of Changes in Net Pension Liability, and the Schedules of Net
Pension Liability, Contributions, and Investment Returns be presented to supplement
the basic financial statements. Such information, although not a part of the basic
financial statements, is required by the Governmental Accounting Standards Board,
who considers it to be an essential part of financial reporting for placing the basic
financial statements in an appropriate operational, economic, or historical context.
We have applied certain limited procedures to the required supplementary information
in accordance with auditing standards generally accepted in the United States of
America, which consisted of inquiries of management about the methods of preparing
the information and comparing the information for consistency with management's
.•
responses to our 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 evidence sufficient to express an opinion or provide any
assurance.
Other Information
Our audit was conducted for the purpose of forming opinions on the financial state-
ments that collectively comprise the Town's basic financial statements. The accom-
panying supplementary information appearing on pages 92 through 102 is presented
for purposes of additional analysis and is 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 financial statements. The information has been subjected to the auditing
procedures applied in the audit of the financial statements and certain additional
procedures, including comparing and reconciling such information directly to the
underlying accounting and other records used to prepare the financial statements or
to the financial statements themselves, and other additional procedures in accord-
ance with auditing standards generally accepted in the United States of America. In
our opinion, the information is fairly stated in all material respects in relation to the
financial statements as a whole.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report
dated March 15, 2016 on our consideration of the Town's internal control over finan-
cial reporting and on our tests of its compliance with certain provisions of laws, regu-
lations, 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 report-
ing 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 Town's internal control over financial reporting and compliance.
March 15, 2016
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MANAGEMENT'S DISCUSSION AND ANALYSIS
As management of the Town of Reading, Massachusetts we offer readers this narra-
tive overview and analysis of the financial activities of the Town for the June 30, 2015.
Unless otherwise noted, all amounts reported in this analysis are expressed in
thousands.
A. OVERVIEW OF THE FINANCIAL STATEMENTS
This discussion and analysis is intended to serve as an introduction to the basic
financial statements. The basic financial statements are comprised of three com-
ponents: (1) government -wide financial statements, (2) fund financial statements,
and (3) notes to the financial statements. This report also contains other supple-
mentary information in addition to the basic financial statements themselves.
Government -wide financial statements. The government -wide financial state-
ments are designed to provide readers with a broad overview of our finances in
a manner similar to a private- sector business.
The Statement of Net Position presents information on all assets and liabilities,
with the difference between the two reported as net position. Over time, increases
or decreases in net position may serve as a useful indicator of whether the finan-
cial position is improving or deteriorating.
The Statement of Activities presents information showing how the government's
net position changed during the most recent fiscal year. All changes in net posi-
tion are reported as soon as the underlying event giving rise to the change occurs,
regardless of the timing of related cash flows. Thus, revenues and expenses
are reported in this statement for some items that will only result in cash flows
in future fiscal periods (e.g., uncollected taxes and earned but unused vacation
leave).
Both of the government -wide financial statements distinguish functions that are
principally supported by taxes and intergovernmental revenues (governmental
activities) from other functions that are intended to recover all or a significant
portion of their costs through user fees and charges (business -type activities).
The governmental activities include general government, public safety, educa-
tion, public works, health and human services, and culture and recreation. The
business -type activities include water supply and distribution, sewer disposal,
landfill, electric, and storm water activities.
Fund financial statements. A fund is a grouping of related accounts that is used
to maintain control over resources that have been segregated for specific activi-
ties or objectives. Fund accounting is used to ensure and demonstrate compli-
ance with finance- related legal requirements. All of the funds can be divided into
three categories: governmental funds, proprietary funds, and fiduciary funds.
.•
Governmental funds. Governmental funds are used to account for essentially
the same functions reported as governmental activities in the government -wide
financial statements. However, unlike the government -wide financial statements,
governmental fund financial statements focus on near -term inflows and outflows
of spendable resources, as well as on balances of spendable resources available
at the end of the fiscal year. Such information may be useful in evaluating a gov-
ernment's near -term financing requirements.
Because the focus of governmental funds is narrower than that of the government -
wide financial statements, it is useful to compare the information presented for
governmental funds with similar information presented for governmental activities
in the government -wide financial statements. By doing so, readers may better .
understand the long -term impact of the government's near -term financing deci-
sions. Both the governmental fund balance sheet and the governmental fund
statement of revenues, expenditures and changes in fund balances provide
a reconciliation to facilitate this comparison between governmental funds and
governmental activities.
An annual appropriated budget is adopted for the general fund. A budgetary
comparison statement has been provided for the general fund to demonstrate
compliance with this budget.
Proprietary funds. Proprietary funds are maintained as follows:
Enterprise funds are used to report the same functions presented as business -
type activities in the government -wide financial statements. Specifically, enter -
prise funds are used to account for water, sewer, landfill, electric, and storm
water operations.
Proprietary funds provide the same type of information as the business -type
activities reported in the government -wide financial statements, only in more
detail. The proprietary fund financial statements provide separate information
for the water, sewer, landfill, electric, and storm water operations. Water and
electric operations are considered to be major funds.
Fiduciary funds. Fiduciary funds are used to account for resources held for the
benefit of parties outside the government. Fiduciary funds are not reflected in the
government -wide financial statements because the resources of those funds are
not available to support the Town's own programs. The accounting used for fidu-
ciary funds is much like that used for proprietary funds.
Notes to financial statements. The notes provide additional information that is
essential to a full understanding of the data provided in the government -wide and
fund financial statements.
Other information. In addition to the basic financial statements and accom-
panying notes, this report also presents certain required supplementary infor-
a::
mation which is required to be disclosed by accounting principles generally
accepted in the United States of America.
B. FINANCIAL HIGHLIGHTS
• As of the close of the current fiscal year, the total of assets exceeded liabili-
ties by $224,143 (i.e., net position), a change of $6,339 in comparison to the
prior year.
• As of the close of the current fiscal year, governmental funds reported com-
bined ending fund balances of $44,270, a change of $10,277 in comparison
to the prior year.
• At the end of the current fiscal year, unassigned fund balance for the general
fund was $11,853, a change of $454 in comparison to the prior year.
• Total bonds payable at the close of the current fiscal year was $44,585, a
change of $8,626 in comparison to the prior year.
C. GOVERNMENT -WIDE FINANCIAL ANALYSIS
The following is a summary of condensed government -wide financial data for the
current and prior fiscal years.
Current and other assets
Capital assets
Deferred outflows
Total assets and deferred outflows
Long -term liabilities
Other liabilities
Deferred inflows
Total liabilities and deferred inflows
Net position:
Net investment in capital assets
Restricted
Unrestricted
Total net position
NET POSITION
Governmental
Activities
2015 2014
$ 56,912 $ 44,805 $
122,785 122,418
115 -
179,812 167,223
69,673 37,795
12,559 10,174
151 -
82,383 47,969
Business -Type
Activities Total
2015 2014 2015 2014
66,307 $ 59,192 $ 123,219 $ 103,997
91,121 90,648 213,906 213,066
1,553 - 1,668 -
158,981 149,840 338,793 317,063
21,539 17,372 91,212 55,167
10,728 7,876 23,287 18,050
- - 151 -
32,267 25,248 114,650 73,217
100,596
99,820
80,900
81,328
181,496
181,148
17,461
17,586
5,434
4,131
22,895
21,717
20,628
1,848
40,380
39,132
19,752
40,980
$ 97,429 $
119,254 $
126,714
$ 124,591 $
224,143
$ 243,845
EM
Revenues:
Program revenues:
Charges for services
Operating grants and
contributions
Capital grants and
contributions
General revenues:
Property taxes
Excises
Penalties, interest, and
other taxes
Grants and contributions
not restricted to specific
programs
Investment income,
Other
Total revenues
Expenses:
CHANGES IN NET POSITION
6,008
5,384
Governmental
Business -Type
6,008
5,384
Activities
Activities
Total
-
2015 2014
2015 2014
2015
2014
$ 8,162 $ 7,599 $
99,585 $ 97,545 $
107,747 $
105,144
18,816 22,032
62 -
18,878
22,032
1,735 2,126
64 181
1,799
2,307
58,416 55,753
- -
58,416
55,753
3,801 3,226
- -
3,801
3,226
647 972
- -
647
972
3,300 3,086
- -
3,300
3,086
848 1,112
139 138
987
1,250
413 636
915 757
1,328
1,393
96,138 96,542
100,765 98,621
196,903
195,163
General government
6,008
5,384
-
-
6,008
5,384
Public safety
12,664
12,381
-
-
12,664
12,381
Education
65,229
65,725
-
-
65,229
65,725
Public works
8,761
8,278
-
-
8,761
8,278
Human services
1,083
999
-
-
1,083
999
Culture and recreation
3,495
3,372
-
-
3,495
3,372
Interest on long -term debt
1,314
934
-
-
1,314
934
Intergovernmental
1,107
1,025
-
-
1,107
1,025
Electric
-
-
80,418
79,409
80,418
79,409
Water
-
-
4,582
4,395
4,582
4,395
Other
-
-
5,903
5,714
5,903
5,714
Total expenses
99,661
98,098
90,903
89,518
190,564
187,616
Change in net position
before transfers
(3,523)
(1,556)
9,862
9,103
6,339
7,547
Transfers in (out)
3,053
2,997
(3,053)
(2,997)
-
-
Change in net position
(470)
1,441
6,809
6,106
6,339
7,547
Net position - beginning of year,
as restated*
97,899
117,813
119,905
118,485
217,804
236,298
Net position - end of year $ 97,429 $ 119,254 $ 126,714 $ 124,591 $ 224,143 $ 243,845
*July 1, 2014 net position was restated for GASB 68. Due to fiscal year 2015 being the first year of implementation of
GASB 68, prior periods have not been restated in accordance with the standard. Refer to Note 21.
S..
As noted earlier, net position may serve over time as a useful indicator of a
government's financial position. At the close of the most recent fiscal year,
total net position was $224,143, a change of $6,339 from the prior year.
The largest portion of net position $181,496 reflects our investment in capital
assets (e.g., land, buildings, machinery, and equipment); less any related debt
used to acquire those assets that is still outstanding. These capital assets are
used to provide services to citizens; consequently, these assets are not available
for future spending. Although the investment in capital assets is reported net of
related debt, it should be noted that the resources needed to repay this debt
must be provided from other sources, since the capital assets themselves cannot
be used to liquidate these liabilities.
An additional portion of net position $22,895 represents resources that are sub-
ject to external restrictions on how they may be used. The remaining balance
of unrestricted net position $19,752 may be used to meet the government's
ongoing obligations to citizens and creditors.
Governmental activities. Governmental activities for the year resulted in a
change in net position of $(470). Key elements of this change are as follows:
General fund expenditures exceeding revenues
$ (2,588)
PILOT from RMLD
2,333
Enterprise fund indirect costs
720
Subtotal General Fund
465
Current year revenue used for the acquisition
of capital assets
3,750
Depreciation expense exceeding debt service
principal
(3,986)
Increase in net OPEB obligation
(1,654)
Decrease in net pension liability
1,042
Other
87
Total
$ (470)
Business -type activities. Business -type activities for the year resulted in a
change in net position of $6,809. Key elements of this change are as follows:
• The electric operations had revenues of $85,992 and expenses and
transfers of $82,751, resulting in a change in net position of $3,241.
• The water operations had revenues of $6,927 and expenses and transfers
of $5,010, resulting in a change in net position of $1,917.
• The sewer operations had revenues of $7,405 and expenses and transfers
of $5,942, resulting in a change in net position of $1,463.
,..
• The landfill operations did not report any revenues or expenditures.
• The storm water management operations had revenues of $442 and
expenses of $254, resulting in a change in net position of $188.
D. FINANCIAL ANALYSIS OF THE GOVERNMENT'S FUNDS
As noted earlier, fund accounting is used to ensure and demonstrate compliance
with finance - related legal requirements.
Governmental funds. The focus of governmental funds is to provide information
on near -term inflows, outflows and balances of spendable resources.
Such information is useful in assessing financing requirements. In particular,
unassigned fund balance may serve as a useful measure of a government's net
resources available for spending at the end of the fiscal year.
As of the end of the current fiscal year, governmental funds reported combined
ending fund balances of $44,270, a change of $10,277 in comparison to the prior
year. Key elements of this change are as follows:
General fund expenditures exceeding revenues
PILOT from RMLD
Enterprise fund indirect costs
Subtotal General Fund
Premium on general obligation bonds
Special revenue fund. revenues .
exceeding expenditures
Capital project fund revenues and bond proceeds
exceeding expenditures
Permanent fund revenues exceeding expenditures
Other
Total
$ (2,588)
2,333
720
465
1,157
199
8,291
148
17
$ 10,277
The general fund is the chief operating fund. At the end of the current fiscal year,
unassigned fund balance of the general fund was $11,853, while total fund bal-
ance was $16,983. As a measure of the general fund's liquidity, it may be useful
to compare both unassigned fund balance and total fund balance to total general
fund expenditures. Refer to the table below.
% Of
Total General
General Fund
6/30/15
6/30/14
Change
Fund Expenditures
Unassigned fund balance
$ 11,853
$ 11,399
$ 454
14.5%
Total fund balance
$ 16,983
$ 15,848
$ 1,135
20.7%
i • N
The total fund balance of the general fund changed by $1,135 during the current
fiscal year. Key factors in this change are as follows:
General fund:
Use of free cash and overlay surplus as a funding source $ (3,374)
Revenues in excess of budget 1,600
Expenditures less than budget 1,358
Expenditures of prior year encumbrances less
than current year encumbrances 917
Unused overlay 478
Change in stabilization accounts 142
Other 14
Total $ 1,135
Included in the total general fund balance are the Town's stabilization accounts
with the following balances:
The following table reflects the trend in all the components of the general fund's
fund balance:
6/30/15
6/30/14
Change
Stabilization - general
$ 1,557
$ 1,553
$ 4
Stabilization - smart growth
503
353
150
Stabilization - sick buy -back
-
12
12
Total
$ 2,060
$ 1,918
$ 142
The following table reflects the trend in all the components of the general fund's
fund balance:
(')The Town used $10,800 of debt reserves to pay down school related debt.
(2)Reclassified the Town's general stabilization account to unassigned fund balance.
Total Fund
Balance
$ 23,706
23,121
14,129
14,177
15,848
16,983
Proprietary funds. Proprietary funds provide the same type of information found
in the business -type activities reported in the government -wide financial state-
ments, but in more detail.
Unrestricted net position of the enterprise funds at the end of the year amounted to
$40,380, a change of $5,934 in comparison to the prior year. Factors concerning
the finances of proprietary funds have already been addressed in the entity -wide
discussion of business -type activities.
491
Last Six Fiscal Years
Assigned for
Restricted
Committed for
Subsequent
As of
for Debt
Stabilization
Assigned for
Year's
30 -Jun
Service
Fund
Encumbrances
Expenditures
Unassigned
2010
$ 12,530
$ 375 (2)
$ 1,488
$ 1,491
$ 7,822 (2)
2011
11,833
705 (2)
1,006
928
8,649 (2)
2012
1,033 I'I
400 (2)
1,492
1,476
9,728 (2)
2013
817
365
1,087
1,400
10,508
2014
-
365
2,034
2,050
11,399
2015
-
503
2,827
1,800
11,853
(')The Town used $10,800 of debt reserves to pay down school related debt.
(2)Reclassified the Town's general stabilization account to unassigned fund balance.
Total Fund
Balance
$ 23,706
23,121
14,129
14,177
15,848
16,983
Proprietary funds. Proprietary funds provide the same type of information found
in the business -type activities reported in the government -wide financial state-
ments, but in more detail.
Unrestricted net position of the enterprise funds at the end of the year amounted to
$40,380, a change of $5,934 in comparison to the prior year. Factors concerning
the finances of proprietary funds have already been addressed in the entity -wide
discussion of business -type activities.
491
E. GENERAL FUND BUDGETARY HIGHLIGHTS
Differences between the original budget and the final amended budget resulted
in an overall change in appropriations of $3,021. Major reasons for these amend-
ments include:
• $934
increase in library renovations
• $850
increase in snow and ice funding
• $775
increase in capital expenses
• $150
increase in stabilization account funding
Of this increase, $1,324 was funded by free cash, $934 from bond premiums
received on general obligation bond issuances, $344 through the tax levy, $77
from additional state aid, $190 from local revenues, and $152 from transfers in
from other funds.
F. CAPITAL ASSET AND DEBT ADMINISTRATION
Capital assets. Total investment in capital assets for governmental and business -
type activities at year -end amounted to $213,906 (net of accumulated depreciation),
a change of $840 from the prior year. This investment in capital assets includes
land, buildings and system, improvements, and machinery and equipment.
Governmental additions: .
$ 3,919 in library renovations
$ 1,169 in roadway improvements
$ 317 in various school improvements
$ 169 in Washington Park tennis court improvements
$ 154 for a highway pavement spreader
$ 147 for a sidewalk snow plow
Business -type additions:
$ 3,642 in electric infrastructure and equipment
$ 1,731 in water infrastructure and vehicles
$ 271 in sewer infrastructure
$ 51 in stormwater drainage system
Additional information on capital assets can be found in the Notes to Financial
Statements.
I•
Long -term debt. At the end of the current fiscal year, total bonded debt out-
standing was $44,585, all of which was backed by the full faith and credit of the
government.
Additional information on capital assets and long -term debt can be found in the
Notes to Financial Statements.
G. ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES
The adopted FY16 General Fund budget of $86,017 is a 4.6% increase over the
prior year. -The FY16 budget is balanced.
FY2016 State aid will be $13,539 which represents a 1.9% percent increase over
prior year.
The tax levy for FY16 of $62,491 represents a 6.9% increase over the prior year.
The FY16 tax rate is $14.50 per thousand compared to $14.70 in the prior year.
Overall, property values increased 7.8% to $ 4,309,708.
For FY2016, the Board of Selectmen, acting as the Water and Sewer Commis-
sioners, voted to decrease Water Rates by 6.56% and Sewer Rates by 7.58%
for all customers effective for all billings after September 10, 2015. Despite the
decreases, revenues are expected to cover all operations, planned infrastructure
improvements, and debt.
The State passed legislation allowing Massachusetts municipalities to pass a
Local Option Meals Tax of 0.75% with 100 % of the revenue going to the Town.
Reading voted to accept this local option at their November 2010 Town Meeting.
The Town received revenue in FY2015 totaling $356. The FY16 revenue
budgeted for this tax is $ 350.
The Town is working on an $18,400 capital improvement project to remodel the
library. In April 2013, voters approved $14,900 of debt exclusion. In April 2014,
voters approved an additional $3,500 of debt exclusion. Note that of these totals,
the state has approved $5,100 of grant funding for the project; the balance will be
the local share. The Town borrowed $10,000 of excluded debt for this project in
February 2015.
At April 2012 Town Meeting, the Town voted to adopt Massachusetts General
Laws Chapter 32B, Section 20 which allows the Town to set up an irrevocable
trust for Other Post - Employment Benefits (OPEB) liabilities. Currently, the funds
set aside in this trust are invested in MMDT, which invests in U.S. Treasuries,
commercial paper, and very short -term bonds according to the prudent investor
rule set forth in Chapter 203C. The Town is exploring the possibility of investing
the funds in the (SRBT) State Retiree Benefits Trust Fund administered by PRIM.
The SRBT funds are invested in Pension Reserve Investment Trust (PRIT).
Investment in PRIT offers higher returns which would reduce the Town's
unfunded OPEB liability.
493
REQUESTS FOR INFORMATION
This financial report is designed to provide a general overview of the Town of
Reading's finances for all those with an interest in the government's finances.
Questions concerning any of the information provided in this report or requests
for additional financial information should be addressed to:
Town Accountant
Town Hall
16 Lowell Street
Reading, MA 01867
I • I
TOWN OF READING, MASSACHUSETTS
STATEMENT OF NET POSITION
JUNE 30, 2015
495
Governmental
Business -Type
Activities
Activities
Total
ASSETS
Current:
Cash and short-term investments
$ 26,331,778
$ 27,056,330
$ 53,388,108
Investments
27,951,507
-
27,951,507
Receivables, net of allowance for uncollectibles:
Property taxes
293,737
293,737
Excises
191,253
-
191,253
Userfees
-
12,781,537
12,781,537
Departmental and other
481,053
-
481,053
Intergovernmental
1,176,871
-
1,176,871
Prepaid assets
-
1,137,898
1,137,898
Inventory
1,674,913
1,674,913
Noncurrent:
Restricted cash and short-term equivalents
22,344,776
22,344,776
Restricted investments
1,284,061
1,284,061
Investment in associated companies
26,994
26,994
Receivables, net of allowance for uncollectibles:
Property taxes
485,977
-
485,977
Capital assets being depreciated, net
113,479,006
87,447,455
200,926,461
Capital assets not being depreciated
9,306,355
3,673,500
12,979,855
DEFERRED OUTFLOWS OF RESOURCES
114,748
1,553,280
1,668,028
TOTAL ASSETS AND DEFERRED
OUTFLOWS OF RESOURCES
179,812,285
158,980,744
338,793,029
LIABILITIES
Current:
Warrants payable
2,893,109
5,754,853
8,647,962
Accrued liabilities
5,235,383
680,211
5,915,594
Unearned revenues
309,204
-
309,204
Tax refunds payable
650,000
-
650,000
Customer advances for construction.
-
889,774
889,774
Customer deposits
846,361
846,361
Due to pension trust
1,500,000
1,500,000
Due to OPEB trust
-
345,382
345,382
Retainage payable
1,104,104
-
1,104,104
Notes payable
1,700,000
665,000
2,365,000
Other current liabilities
668,171
45,908
714,079
Current portion of long -term liabilities:
Bonds and loans payable
3,505,352
1,320,305
4,825,657
Accrued employee benefits
47,500
66,445
113,945
Noncurrent:
Bonds and loans payable, net of current portion
28,593,195
11,166,344
39,759,539
Accrued employee benefits
1,309,645
3,065,714
4,375,359
Net OPEB obligation
15,903,029
428,607
16;331,636
Net pension liability
20,313,992
5,491,709
25,805,701
DEFERRED INFLOWS OF RESOURCES
151,000
-
151,000
TOTAL LIABILITIES AND DEFERRED
INFLOWS OF RESOURCES
82,383,684
32,266,613
114,650,297
NET POSITION
Net investment in capital assets
100,595,528
80,900,346
181,495,874
Restricted for:
Grants and other statutory restrictions
7,614,110
5,434,308
13,048,418
Permanent funds:
Nonexpendable
3,139,415
-
3,139,415
Expendable
6,707,398
-
6,707,398
Unrestricted
(20,627,850)
40,379,477
19,751,627
TOTAL NET POSITION
$ 97,428,601
$ 126,714,131
$ 224,142,732
The accompanying notes are an integral part of these financial statements.
495
TOWN OF READING, MASSACHUSETTS
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2015
Program Revenues
Operating Capital
Charges for Grants and Grants, and Net (Expenses)
Expenses Services Contributions Contributions Revenues
Governmental Activities:
General government $
6,008,304
$ 427,446
$ 212,592
$ -
$ (5,368,266)
Public safety
12,664,059
2,214,864
161,928
-
(10,287,267)
Education
65,228,721
4,406,748
17,926,027
-
(42,895,946)
Public works
8,761,489
309,568
174,500
713,834
(7,563,587)
Health and human services
1,082,617
100,454
301,992
-
(680,171)
Culture and recreation
3,495,049
702,722
38,980
1,021,023
(1,732,324)
Interest on long -term debt
1,314,124
-
-
-
(1,314,124)
Intergovernmental
1,106,829
-
-
-
(1,106,829)
Total Governmental Activities
99,661,192
8,161,802
18,816,019
1,734,857
(70,948,514)
Business -Type Activities:
Electric operations
80,418,115
85,005,786
62,500
64,474
4,714,645
Water operations
4,582,014
6,737,585
-
-
2,155,571
Other
5,903,348
7,841,367
-
-
1,938,019
Total Business -type Activities
90,903,477
99,584,738
62,500
64,474
8,808,235
Total $
190,564,669
$ 107,746,540
$ 18,878,519
$ 1,799,331
$ (62,140,279)
The accompanying notes are an integral part of these financial statements.
S••
(continued)
TOWN OF READING, MASSACHUSETTS
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2015
(continued)
Change in Net Position:
Net (Expenses) revenue from previous page
General Revenues and Transfers:
Property taxes
Excises
Penalties, interest and other taxes
Grants and contributions not
restricted to specific programs
Investment income
Other
Transfers, net
Total general revenues and transfers
Change in Net Position
Net Position:
Beginning of year, as restated
End of year
Business -
Governmental Type
Activities Activities Total
$ (70,948,514)
$ 8,808,235
$ (62,140,279)
58,416,442
-
58,416,442
3,801,250
3,801,250
646,482
646,482
3,299,404
-
3,299,404
847,991
139,665
987,656
413,351
914,952
1,328,303
3,053,298
(3,053,298)
-
70,478,218
(1,998,681)
68,479,537
(470,296)
6,809,554
6,339,258
97,898,897
119,904,577
217,803,474
$ 97,428,601
$ 126,714,131
$ 224,142,732
The accompanying notes are an integral part of these financial statements.
s
497
TOWN OF READING, MASSACHUSETTS
GOVERNMENTALFUNDS
BALANCE SHEET
JUNE 30, 2015
DEFERRED INFLOWS OF RESOURCES
FUND BALANCES
Nonspendable
Restricted
Committed
Assigned
Unassigned
TOTAL FUND BALANCES
TOTAL LIABILITIES, DEFERRED INFLOWS OF
RESOURCES, AND FUND BALANCES
1,363,888
543,024
4,587,187
11,852,773
16,982,984
3,139,415
23,645,741
933,541
(431,342)
27,287,355
1,363;888
3,139,415
23,645,741
1,476,565
4,587,187
11,421,431
44,270,339
$ 24,688,255 $ 32,405,016 $ 57,093,271
The accompanying notes are an integral part of these financial statements.
W.
Nonmajor
Total
Governmental
Governmental
General
Funds
Funds
ASSETS
Cash and short-term investments
$ 5,114,327
$ 21,217,451
$ 26,331,778
Investments
18,120,755
9,830,752
27,951,507
Receivables:
Property taxes
869,460
-
869,460
Excises
282,602
-
282,602
Departmental and other
301,111
179,942
481,053
Intergovernmental
-
1,176,871
1,176,871
TOTAL ASSETS
$ 24,688,255
$ 32,405,016
$ 57,093,271
LIABILITIES
Warrants payable
$ 1,174,447
$ 1,718,662
$ 2,893,109
Accrued liabilities
4,498,765
285,691
4,784,456
Unearned revenue
-
309,204
309,204
Retainage payable
-
1,104,104
1,104,104
Notes payable
-
1,700,000
1,700,000
Other liabilities
668,171
-
668,171
TOTAL LIABILITIES
6,341,383
5,117,661
11,459,044
DEFERRED INFLOWS OF RESOURCES
FUND BALANCES
Nonspendable
Restricted
Committed
Assigned
Unassigned
TOTAL FUND BALANCES
TOTAL LIABILITIES, DEFERRED INFLOWS OF
RESOURCES, AND FUND BALANCES
1,363,888
543,024
4,587,187
11,852,773
16,982,984
3,139,415
23,645,741
933,541
(431,342)
27,287,355
1,363;888
3,139,415
23,645,741
1,476,565
4,587,187
11,421,431
44,270,339
$ 24,688,255 $ 32,405,016 $ 57,093,271
The accompanying notes are an integral part of these financial statements.
W.
TOWN OF READING, MASSACHUSETTS
RECONCILIATION OF TOTAL GOVERNMENTAL FUND
BALANCES TO NET POSITION OF GOVERNMENTAL
ACTIVITIES IN THE STATEMENT OF NET POSITION
JUNE 30, 2015
Total governmental fund balances
• Capital assets used in governmental activities are not financial
resources and, therefore, are not reported in the funds.
• Revenues are reported on the accrual basis of accounting
and are not deferred until collection.
• Deferred outflows of resources related to the net difference between
projected and actual investment earnings on pension plan investments.
• In the Statement of Activities, interest is accrued on outstanding
long -term debt, whereas in governmental funds interest is not
reported until due.
• Long -term liabilities. are not due and payable in the current
period and, therefore, are not reported in the governmental funds:
Bonds payable
Accrued employee benefits
Net OPEB obligation
Net pension liability .
• Deferred inflows of resources related to gains on refunding bonds.
Net position of governmental activities
The accompanying notes are an integral part of these financial statements.
,..
$ 44,270,339
122, 785, 361
532,793
114,748
(450,927)
(32, 098, 547)
(1,357,145)
(15,903,029)
(20,313,992)
(151,000)
$ 97,428,601
TOWN OF READING, MASSACHUSETTS
GOVERNMENTALFUNDS
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
FOR THE YEAR ENDED JUNE 30, 2015
Revenues:
Property taxes
Excises
Penalties, interest and other taxes
Departmental
Licenses and permits
Fines and forfeitures
Intergovernmental
Investment income
Contributions
Other
Total Revenues
Expenditures:
Current:
General government
Public safety
Education
Public works
Health and human services
Culture and recreation
Employee benefits
Debt service
Intergovernmental
Total Expenditures
Excess (deficiency) of revenues
over expenditures
Other Financing Sources (Uses):
Proceeds of bonds
Proceeds of refunding bonds
Premium on bond issuance
Payment to refunded escrow agent
Transfers in
Transfers out
Total Other Financing Sources (Uses)
Net change in fund balances
Fund Balances, at Beginning of Year
Fund Balances, at End of Year
Nonmajor
Governmental
General Funds
$ 58,614,670 $
3,734,502
646,482
1,881,082
171,606
109,958
13,612, 031
198,250
398,376
79,366,957
4,646,522
9,473,738
40,186, 508
6,524,678
609,366
2,398,422
13,950,882
3,057,740
1,106,829
81,954,685
(2,587,728)
2,939,000
1,438,394
(3,203,757)
3,532,530
(983, 541)
3,722,626
1,134,898
15,848,086
$ 16,982,984
6,205,780
5,214,420
295,555
419,834
15,094
12,150,683
104,860
991,431
7,796,926
1,066,586
308,001
4,545,196
14,813,000
(2,662,317)
11,300,000
1,012,714
(508,405)
11, 804, 309
9,141, 992
Total
Governmental
Funds
$ 58,614,670
3,734,502
646,482
8,086,862
171,606
109,958
18,826,451
493,805
419,834
413,470
91,517,640
4,751,382
10,465,169
47,983,434
7,591,264
917,367
6,943,618
13,950,882
3,057,740
1,106,829
96,767,685
(5,250,045)
11,300,000
2,939,000
1,438,394
(3,203,757)
4,545,244
(1,491,946)
15,526,935
10, 276, 890
18,145,363 33,993,449
$ 27,287,355 $ 44,270,339
The accompanying notes are an integral part of these financial statements.
500
TOWN OF READING, MASSACHUSETTS
RECONCILIATION OF THE STATEMENT OF REVENUES
EXPENDITURES, AND CHANGES IN FUND BALANCES OF
GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2015
Net changes in fund balances - Total governmental funds $ 10,276,890
• Governmental funds report capital outlays as expenditures. However,
in the statement of activities the cost of those assets is allocated
over their estimated useful lives and reported as depreciation expense:
Capital outlay purchases, net of disposals
6,487,960
Depreciation
(6,120,657)
• Revenues in the Statement of Activities that do not provide current
financial resources are fully deferred in the Statement of Revenues,
Expenditures and Changes in Fund Balances. Therefore, the
recognition of revenue for various types of accounts receivable
(i.e., real estate and personal property, motor vehicle excise, etc.)
differ between the two statements. This amount represents the
net change in deferred revenue.
(429,609)
• The issuance of long -term debt (e.g., bonds) provides current
financial resources to governmental funds, while the repayment
of the principal of long -term debt consumes the financial .
resources of governmental funds. Neither transaction, however,
has any effect on net position:
Issuance of general obligation bonds
(11,300,000)
Issuance of refunding bonds
(2,939,000)
Repayments of debt
2,135,000
Refunded debt
3,090,000
Current year amortization of bond premiums, net
(1,084,208)
Gain on refunding bonds
(151,000)
• In the Statement of Activities, interest is accrued on outstanding
long -term debt, whereas in governmental funds interest is not
reported until due.
(126,627)
• 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:
Accrued employee benefits
188,479
Net OPEB obligation
(1,653,874)
Net pension liability, net of deferred outflows
1,156,350
Change in net position of governmental activities
$ (470,296)
The accompanying notes are an integral part of these financial statements.
501
TOWN OF READING, MASSACHUSETTS
GENERALFUND
STATEMENT OF REVENUES AND OTHER SOURCES, AND EXPENDITURES AND OTHER USES -
BUDGET AND ACTUAL
FOR THE YEAR ENDED JUNE 30, 2015
Expenditures and Transfers:
General government
Budgeted Amounts
5,075,799
Variance with
363,058
Public safety
9,388,541
9,473,641
Final Budget
113,638
Original
Final
Actual
Positive
248,121
Budget
Budget
Amounts
(Negative)
Revenues and Transfers:
Health and human services
753,600
702,300
599,316
Taxes
$ 57,793,038
$ 58,136,943
$ 58,136,943
$ -
Excise taxes
3,350,000
3,493,083
3,734,502
241,419
Penalties, interest and other taxes
510,000
510,000
646,502
136,502
Departmental
1,620,000
1,666,750
1,881,082
214,332
Licenses and permits
145,000
145,000
171,606
26,606
Fines and forfeitures
100,000
100,000
109,958
9,958
Intergovernmental
13,304,901
13,382,318
13,612,031
229,713
Investment income
100,000
100,000
198,250
98,250
Other
130,768
1,064,309
1,572,013
507,704
Transfers in
3,228,298
3,379,926
3,515,051
135,125
Total Revenues and Transfers
80,282,005
81,978,329
83,577,938
1,599,609
Expenditures and Transfers:
General government
4,500,021
5,075,799
4,712,741
363,058
Public safety
9,388,541
9,473,641
9,360,003
113,638
Education
40,905,969
41,547,969
41,299,848
248,121
Public works
5,807,925
6,856,700
6,565,087
291,613
Health and human services
753,600
702,300
599,316
102,984
Culture and leisure
2,460,835
2,489,860
2,223,169
266,691
Intergovernmental
995,794
1,075,794
1,106,829
(31,035)
Employee benefits
14,141,590
14,044,252
13,936,497
107,755
Debt service
3,377,730
2,952,730
3,057,740
(105,010)
Transfers out
-
1,133,541
1,133,541
-
Total Expenditures and Transfers
82,332,005
85,352,586
83,994,771
1,357,815
Excess (deficiency) of revenues and other
sources over expenditures and other uses
(2,050,000)
(3,374,257)
(416,833)
2,957,424
Other Financing Sources:
Use of free cash:
For operating budget support
1,700,000
2,594,162
-
(2,594,162)
For stabilization account funding
-
150,000
150,000
For capital outlay
-
280,095
280,095
Use of overlay surplus
350,000
350,000
-
(350,000)
Total Other Financing Sources
2,050,000
3,374,257
430,095
(2,944,162)
Excess of revenues and other
sources over expenditures and other uses
$ -
$ -
$ 13,262
$ 13,262
The accompanying notes are an integral part of these financial statements.
502
TOWN OF READING, MASSACHUSETTS
PROPRIETARY FUNDS
STATEMENT OF NET POSITION
JUNE 30, 2015
The accompanying notes are an integral part of these financial statements.
503
Business -Type Activities
Enterprise Funds
Electric
Division
Water
Non Major
Fund
Fund
Funds
Total
ASSETS
Current:
Cash and short-term investments
$ 13,151,862
$ 8,255,375
$ 5,649,093
$ 27,056,330
User fees, net of allowance for uncollectibles
7,314,059
2,508,135
2,959,343
12,781,537
Prepaid expenses
1,137,898
-
-
1,137,898
Inventory
1,580,407
91,966
2,540
1,674,913
Total Current Assets
23,184,226
10,855,476
8,610,976
42,650,678
Noncurrent:
Restricted cash and short-term investments
22,344,776
-
-
22,344,776
Restricted investments
1,284,061
-
1,284,061
Investment in associated companies
26,994
-
-
26,994
Capital assets being depreciated, net
68,650,507
12,748,884
.6,048,064
87,447,455
Capital assets not being depreciated
1,265,842
1,732,624
675,034
3,673,500
Total Noncurrent Assets
93,572,180
14,481,508
6,723,098
114,776,786
DEFERRED OUTFLOWS OF RESOURCES
1,547,815
3,867
1,598
1,553,280
TOTAL ASSETS AND DEFERRED
OUTFLOWS OF RESOURCES
118,304,221
25,340,851
15,335,672
158,980,744
LIABILITIES
Current:
Warrants payable
5,097,838
632,234
24,781
5,754,853
Accrued liabilities
585,104
81,480
13,627
680,211
Customer deposits
846,361
-
-
846,361
Customer advances for construction
889,774
889,774
Due to pension trust
1,500,000
-
1,500,000
Due to OPEB trust
345,382
-
-
345,382
Other current liabilities
-
-
45,908
45,908
Notes payable
665,000
-
665,000
Current portion of long -term liabilities:
Bonds and loans payable
-
1,236,200
84,105
1,320,305
Accrued employee benefits
66,445
-
-
66,445
Total Current Liabilities
9,330,904
2,614,914
168,421
12,114,239
Noncurrent:
Bonds and loans payable
-
11,000,600
165,744
11,166,344
Accrued employee benefits
3,004,043
36,219
25,452
3,065,714
Net OPEB obligation
-
298,527
130,080
428,607
Net pension liability
4,524,191
684,664
282,854
5,491,709
Total Noncurrent Liabilities
7,528,234
12,020,010
604,130
20,152,374
TOTAL LIABILITIES
16,859,138
14,634,924
772,551
32,266,613
NET POSITION
Net investment in capital assets
69,916,349
4,338,455
6,645,542
80,900,346
Restricted for depreciation fund
5,434,308
-
-
5,434,308
Unrestricted
26,094,426
6,367,472
7,917,579
40,379,477
TOTAL NET POSITION
$ 101,445,083
$ 10,705,927
$ 14,563,121
$ 126,714,131
The accompanying notes are an integral part of these financial statements.
503
TOWN OF READING, MASSACHUSETTS
PROPRIETARY FUNDS
STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET POSITION
FOR THE YEAR ENDED JUNE 30, 2015
Business -Type Activities
Enterorise Funds
Electric
Division Water Non Major
Fund Fond Funds Total
Operating Revenues:
Charges for services
$ 83,985,195
$ 6,737,585
$ 7,841,367
$ 98,564,147
Other
1,020,591
-
-
1,020,591
Total Operating Revenues
85,005,786
6,737,585
7,841,367
99,584,738
Operating Expenses:
Personnel expenses
-
1,016,871
536,210
1,553,081
Non - personnel expenses
-
307,606
250,072
557,678
Intergovernmental
1,395,728
1,931,410
4,642,124
7,969,262
Depreciation
3,861,465
855,773
446,549
5,163,787
Energy purchases
61,073,227
29,617
28,393
61,131,237
Operating
11,606,195
-
-
11,606,195
Maintenance
2,423,204
-
-
2,423,204
Total Operating Expenses
80,359,819
4,141,277
5,903,348
90,404,444
Operating Income
4,645,967
2,596,308
1,938,019
9,180,294
Nonoperating Revenues (Expenses):
Intergovernmental revenue
62,500
-
-
62,500
Investment income
122,693
10,984
5,988
139,665
Interest expense
-
(440,737)
-
(440,737)
Loss on disposal of capital assets
(58,296)
-
-
(58,296)
Other
736,801
178,151
-
914,952
Total Nonoperating Revenues (Expenses)
863,698
(251,602)
5,988
618,084
Income Before Contributions and Transfers
5,509,665
2,344,706
1,944,007
9,798,378
Capital contributions
64,474
-
-
64,474
Transfers out
(2,332,863)
(427,470)
(292,965)
(3,053,298)
Change in Net Position
3,241,276
1,917,236
1,651,042
6,809,554
Net Position at Beginning of Year, as restated
98,203,807
8,788,691
12,912,079
119,904,577
Net Position at End of Year
$ 101,445,083
$ 10,705,927
$ 14,563,121
$ 126,714,131
The accompanying notes are an integral part of these financial statements.
504
TOWN OF READING, MASSACHUSETTS
PROPRIETARY FUNDS
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 2015
Cash Flows From Investing Activities:
(Increase) decrease in restricted cash and investments
Investment income
Net Cash Provided By (Used For) Investing Activities
Net Change in Cash and Short-Term Investments
Unrestricted Cash and Short Term Investments, Beginning of Year
Unrestricted Cash and Short Term Investments, End of Year
Reconciliation of Operating Income to Net Cash
Provided By Operating Activities:
Operating income
Adjustments to reconcile operating income (loss) to net
cash provided by (used for) operating activities:
Depreciation
Changes in assets and liabilities:
User fees receivables
Inventory
Other assets
Deferred outflows of resources
Warrants payable
Accrued liabilities
Other liabilities
Due to pension trust
Due to OPEB trust
Net OPEB obligation
Net pension liability
Net Cash Provided By Operating Activities
(3,116,820)
-
Business -Type Activities
(3,116,820)
122,693
10,984
Enterprise Funds
139,665
(2,994,127)
Electric
5,988
(2,977,155)
1,618,650
443
Division
Water
Non Major
8,255,132
4,887,547
Fund
Fund
Funds
Total
Cash Flows From Operating Activities:
Receipts from customers and users
$ 84,638,647
$ 5,889,460
$ 7,090,229
$ 97,618,336
Payments to vendors and employees
(76,424,486)
(857,895)
(959,803)
(78,242,184)
Customer purchase power charge adjustments
1,020,591
(172,907)
(35,763)
1,020,591
Payments to other governments
-
(1,931,410)
(4,642,124)
(6,573,534)
Net Cash Provided By Operating Activities
9,234,752
3,100,155
1,488,302
13,823,209
Cash Flows From Noncapital Financing Activities:
(117,785)
1,326,545
-
(34,818)
MMWEC surplus
212,689
(76,816)
-
212,689
Other
524,112
178,151
702,263
Transfer out
(2,332,863)
427,470
(292,965)
(3,053,298)
Net Cash (Used For) Noncapital Financing Activities
(1,596,062)
(249,319)
(292,965)
(2,138,346)
Cash Flows From Capital and Related Financing Activities:
(569,485)
Proceeds from issuance of bonds and notes
2,226,000
2,226,000
Acquisition of capital assets
(3,642,005)
(1,730,640)
(322,741)
(5,695,386)
Capital grants and contributions
616,092
616,092
Principal payments on bonds and notes
-
(2,916,000)
(117,038)
(3,033,038)
Interest expense
440,737
(440,737)
Net Cash (Used For) Capital and Related Financing Activities
(3,025,913)
(2,861,377)
(439,779)
(6,327,069)
Cash Flows From Investing Activities:
(Increase) decrease in restricted cash and investments
Investment income
Net Cash Provided By (Used For) Investing Activities
Net Change in Cash and Short-Term Investments
Unrestricted Cash and Short Term Investments, Beginning of Year
Unrestricted Cash and Short Term Investments, End of Year
Reconciliation of Operating Income to Net Cash
Provided By Operating Activities:
Operating income
Adjustments to reconcile operating income (loss) to net
cash provided by (used for) operating activities:
Depreciation
Changes in assets and liabilities:
User fees receivables
Inventory
Other assets
Deferred outflows of resources
Warrants payable
Accrued liabilities
Other liabilities
Due to pension trust
Due to OPEB trust
Net OPEB obligation
Net pension liability
Net Cash Provided By Operating Activities
(3,116,820)
-
-
(3,116,820)
122,693
10,984
5,988
139,665
(2,994,127)
10,984
5,988
(2,977,155)
1,618,650
443
761,546
2,380,639
11,533,212
8,255,132
4,887,547
24,675,891
$ 13,151,862
$ 8,255,575
$ 5,649,093
$ 27,056,530
$ 4,645,967
$ 2,596,308
$ 1,938,019
$ 9,180,294
3,861,465
855,773
446,549
5,163,787
556,991
(848,125)
(751,138)
(1,042,272)
(172,907)
(35,763)
(1,124)
(209,794)
(365,132)
(365,132)
-
(3,867)
(1,598)
(5,465)
834,214
610,116
(117,785)
1,326,545
-
(34,818)
(6,062)
(40,880)
(76,816)
(2,154)
(78,970)
125,462
125,462
345,382
345,382
-
(4,363)
(1,900)
(6,263)
(519,874)
35,106
(14,505)
(569,485)
$ 9,234,752 $ 3,100,155 $ 1,488,302 $ 13,823,209
The accompanying notes are an integral part of these financial statements.
505
TOWN OF READING, MASSACHUSETTS
FIDUCIARY FUNDS
STATEMENT OF FIDUCIARY NET POSITION
JUNE 30, 2015
Municipal
The accompanying notes are an integral part of these financial statements.
506
Pension
Light
Municipal
Trust Fund
Pension
Light
(As of
Trust
OPEB
OPEB
Agency
December 31, 2014)
Funds
Trust Fund
Trust Fund
Funds
ASSETS
Cash and short term investments
$ 2,070,359
$ 2,666,772
$ 2,431,426
$ 1,857,738
$ 472,445
Investments
116,900,024
1,284,061
-
-
-
Accounts receivable
49,585
-
-
-
-
Due from proprietary fund
-
1,500,000
-
345,382
-
Other
-
-
-
-
1,766
Total Assets
119,019,968
5,450,833
2,431,426
2,203,120
474,211
LIABILITIES
Warrants payable
-
-
-
-
12,328
Other liabilities
25
-
461,883
Total Liabilities
25
-
474,211
NET POSITION
Total net position restricted for
pensions and other purposes
$ 119,019,943
$ 5,450,833
$ 2,431,426
$ 2,203,120
$ -
The accompanying notes are an integral part of these financial statements.
506
TOWN OF READING, MASSACHUSETTS
FIDUCIARY FUNDS
STATEMENT OF CHANGES IN FIDUCIARY NET POSITION
FOR THE YEAR ENDED JUNE 30, 2015
Additions:
Contributions:
Employers
Intergovernmental
Plan members
Total contributions
Investment Income:
Increase in fair value of investments
Less: management fees
Net investment income
Total additions
Deductions:
Benefit payments to plan members, beneficiaries,
and other systems
Refunds and transfers to other systems
Administrative expenses
Contribution to employee's pension plan
Total deductions
Net increase
Net position:
Beginning of year
End of year
Pension
Municipal
Trust Fund
Light
(Year ended
Pension
December 31, 2014)
Trust Funds
$ 4,961,545 $ 1,500,000
380,362 -
2,713,918 -
8,055,825 1,500,000
Municipal
Light
OPEB OPEB
Trust Fund Trust Fund
$ 551,000 $ 345,382
551,000 345,382
9,026,985 52,660 3,916 11,696
(610,554) - - -
8,416,431 52,660 3,916 11,696
16,472,256 1,552,660 554,916 357,078
9,081,555
311,164 - -
114,168 - - -
- 1,401,638 -
9,506,887 1,401,638 - -
6,965,369 151,022 554,916 357,078
112,054,574 5,299,811 1,876,510 1,846,042
$ 119,019,943 $ 5,450,833 $ 2,431,426 $ 2,203,120
The accompanying notes are an integral part of these financial statements.
507
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mg
TOWN OF READING, MASSACHUSETTS
Notes to Financial Statements
1. Summary of Significant Accounting Policies
The accounting policies of the Town of Reading, Massachusetts (the Town)
conform to generally accepted accounting principles (GAAP) as applicable to
governmental units. The following is a summary of the more significant
policies:
A. Reporting Entity
The Town is a municipal corporation governed by an elected Board of
Selectmen. As required by generally accepted accounting principles,
these financial statements present the government and applicable com-
ponent units for which the government is considered to be financially
accountable.
In the Fiduciary Funds: The Reading Contributory Retirement System
was established to provide retirement benefits primarily to employees
and their beneficiaries. The System is presented using the accrual basis
of accounting and is reported as a pension trust fund in the fiduciary fund
financial statements. Additional financial information of the System can
be obtained by contacting the System located at 16 Lowell Street,
Reading, Massachusetts 01867.
B. Government -wide and Fund Financial Statements
Government -wide Financial Statements
The government -wide financial statements (i.e., the Statement of Net
Position and the Statement of Activities) report information on all of the
nonfiduciary activities of the primary government. For the most part, the
effect of interfund activity has been removed from these statements.
Governmental activities, which normally are supported by taxes and
intergovernmental revenues, are reported separately from business -type
activities, which rely to a significant extent on fees and charges for support.
The Statement of Activities demonstrates the degree to which the direct
expenses of a given function or segment is offset by program revenues.
Direct expenses are those that are clearly identifiable with a specific func-
tion or segment. Program revenues include (1) charges to customers
or applicants who purchase, use, or directly benefit from goods, services,
or privileges provided by a given function or segment and (2) grants and
contributions that are restricted to meeting the operational or capital
requirements of a particular function or segment. Taxes and other items
not properly included among program revenues are reported instead as
general revenues.
W M191
Fund Financial Statements
Separate financial statements are provided for governmental funds, propri-
etary funds, and fiduciary funds, even though the latter are excluded from
the government -wide financial statements. Major individual governmental
funds and major individual enterprise funds are reported as separate col-
umns in the fund financial statements.
C. Measurement Focus Basis of Accounting, and Financial Statement
Presentation
Government -wide Financial Statements
The government -wide financial statements are reported using the eco-
nomic resources measurement focus and the accrual basis of accounting,
as is the proprietary fund and fiduciary fund financial statements. Reve-
nues are recorded when earned and expenses are recorded when a
liability is incurred, regardless of the timing of related cash flows. Property
taxes are recognized as revenues in the year for which they are levied.
Grants and similar items are recognized as revenue as soon as all eligi-
bility requirements imposed by the provider have been met. As a general
rule, the effect of interfund activity has been eliminated from the govern-
ment -wide financial statements.
Amounts reported as program revenues include (1) charges to customers
or applicants for goods, services, or privileges provided, (2) operating
grants and contributions, and (3) capital grants and contributions, includ-
ing special assessments. Internally dedicated resources are reported as
general revenues rather than as program revenues. Likewise, general
revenues include all taxes and excises.
Fund Financial Statements
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 measur-
able 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 Town considers
property tax revenues to be available if they are collected within 60 days
of the end of the current fiscal period. All other revenue items are consid-
ered to be measurable and available only when cash is received by the
government. Expenditures generally are recorded when a liability is
incurred, as under accrual accounting. However, debt service expendi-
tures, as well as expenditures related to compensated absences and
claims and judgments, are recorded only when payment is due.
510
The government reports the following major governmental funds:
• The General Fund is the government's primary operating fund.
It accounts for all financial resources of the general government,
except those required to be accounted for in another fund.
Proprietary funds distinguish operating revenues and expenses from non -
operating items. Operating revenues and expenses generally result from
providing services and producing and delivering goods in connection with
a proprietary fund's principal ongoing operations. The principal operating
revenues of the enterprise fund are charges to customers for sales and
services. Operating expenses for enterprise funds include the cost of
sales and services, administrative expenses and depreciation on capital
assets. All revenues and expenses not meeting this definition are reported
as nonoperating revenues and expenses.
The Town reports the following major proprietary funds:
• The Electric Division Fund is used to report the Town's electric
distribution enterprise fund operations.
• The Water Fund is used to report the Town's water enterprise fund
operations.
The Town reports the following fiduciary funds:
• The Pension Trust Fund accounts for the activities of the Employees
Contributory Retirement System, which accumulates resources for
pension benefit payments to qualified employees.
• The Municipal Light Pension Trust Fund accounts for the activities
of the Municipal Light Employees Contributory Retirement System,
which accumulates resources for pension benefit payments to quali-
fied employees.
• The OPEB Trust Fund accounts for reserves set aside by the Town
to fund future OPEB costs.
• The Municipal Light OPEB Trust Fund accounts for reserves set
aside by the Municipal Light Department to fund future OPEB costs.
• The Agency Fund is custodial in nature and is used to account for
funds held for others.
D. Cash and Short -Term Investments
Cash balances from all funds, except those required to be segregated by
law, are combined to form a consolidation of cash. Cash balances are
invested to the extent available, and interest earnings are recognized in the
General Fund. Certain special revenue, proprietary, and fiduciary funds
segregate cash, and investment earnings become a part of those funds.
511
Deposits with financial institutions consist primarily of demand deposits,
certificates of deposits, and savings accounts. A cash and investment pool
is maintained that is available for use by all funds. Each fund's portion of
this pool is reflected on the combined financial statements under the cap-
tion "cash and short -term investments ". The interest earnings attributable
to each fund type are included under investment income.
For purpose of the statement of cash flows, the proprietary funds consider
investments with original maturities of three months or, less to be short-
term investments.
E. Investments
State and local statutes place certain limitations on the nature of deposits
and investments available. Deposits in any financial institution may not
exceed certain levels within the financial institution. Non - fiduciary fund
investments can be made in securities issued by or unconditionally guar-
anteed by the U.S. Government or agencies that have a maturity of one
year or less from the date of purchase and repurchase agreements guar-
anteed by such securities with maturity dates of no more than 90 days
from the date of purchase.
Investments for the Contributory Retirement System and Trust Funds
consist of marketable securities, bonds and short-term money market
investments. Investments are carried at market value.
F. Property Tax Limitations
Legislation known as "Proposition 2'/2" limits the amount of revenue that
can be derived from property taxes. The prior fiscal year's tax levy limit is
used as a base and cannot increase by more than 2.5 percent (excluding
new growth), unless an override or debt exemption is voted. The actual
fiscal year 2015 tax levy reflected an excess capacity of $34,560.
G. Inventories
Inventories are valued at cost using the first -in /first -out (FIFO) method.
The costs of governmental fund -type inventories are recorded as expendi-
tures when purchased rather than when consumed. No significant inven-
tory balances were on hand in governmental funds.
H. Capital Assets
Capital assets, which include property, plant, equipment, and infrastruc-
ture assets are reported in the applicable governmental or business -type
activities columns in the government -wide financial statements. Capital
assets are defined by the Town as assets with an initial individual cost of
more than $5,000 and an estimated useful life in excess of two years.
Such assets are recorded at historical cost or estimated historical cost if
512
purchased or constructed. Donated capital assets are recorded at esti-
mated fair market value at the date of donation.
The costs of normal maintenance and repairs that do not add to the value
of the asset or materially extend assets lives are not capitalized.
Major outlays for capital assets and improvements are capitalized as pro-
jects are constructed. Interest incurred during the construction phase of
capital assets of business -type activities is included as part of the capital-
ized value of the assets constructed.
Capital assets are depreciated using the straight -line method over the
following estimated useful lives:
Assets Years
Land improvements 20
Buildings and improvements 20 -50
Machinery, equipment, and furnishings 5 -20
Infrastructure 50
L Compensated Absences
It is the Town's policy to permit employees to accumulate earned but
unused vacation and sick pay benefits. All vested sick and vacation pay is
accrued when incurred in the government -wide, proprietary, and fiduciary
fund financial statements. A liability for these amounts is reported in gov-
ernmental funds only if they have matured, for example, as a result of
employee resignations and retirements.
J. Long -Term Obligations �
In the government -wide financial statements, and proprietary fund types in
the fund financial statements, long -term debt, and other long -term obliga-
tions are reported as liabilities in the applicable governmental activities,
business -type activities, or proprietary fund type Statement of Net
Position.
K. Fund Equity
Fund equity at the governmental fund financial reporting level is classified
as "fund balance ". Fund equity for all other reporting is classified as "net
position ".
Fund Balance - Generally, fund balance represents the difference
between the current assets and current liabilities. The Town reserves
those portions of fund balance that are legally segregated for a specific
future use or which do not represent available, spendable resources
and therefore, are not available for appropriation or expenditure.
513
Unassigned fund balance indicates that portion of fund balance that is
available for appropriation in future periods.
The Town's fund balance classification policies and procedures are as
follows:
1) Nonspendable funds are either unspendable in the current form
(i.e., inventory or prepaid items) or can never be spent (i.e., per-
petual care).
2) Restricted funds are used solely for the purpose in which the fund
was established. In the case of special revenue funds, these funds
are created by statute or otherwise have external constraints on
how the funds can be expended.
3) Committed funds are reported and expended as a result of motions
passed by the highest decision making authority in the government
(i.e., the Town Meeting).
4) Assigned funds are used for specific purposes as established by
management. These funds, which include encumbrances, have
been assigned for specific goods and services ordered but not yet
paid for. This account also includes fund balance (free cash) voted
to be used in the subsequent fiscal year.
5) Unassigned funds are available to be spent in future periods.
When an expenditure is incurred that would qualify for payment from multi-
ple fund balance types, the Town uses the following order to liquidate lia-
bilities: restricted, committed, assigned and unassigned.
Net Position - Net position represents the difference between assets/
deferred outflows and liabilities /deferred inflows. Net investment in capital
assets consist of capital assets, net of accumulated depreciation, reduced
by the outstanding balances of any borrowing used for the acquisition,
construction or improvement of those assets. Net position is reported as
restricted when there are limitations imposed on their use either through the
enabling legislation adopted by the Town or through external restrictions
imposed by creditors, grantors, or laws or regulations of other governments.
The remaining net position is reported as unrestricted.
L. Use of Estimates
The preparation of basic financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities
and disclosures for contingent assets and liabilities at the date of the basic
financial statements, and the reported amounts of the revenues and
expenditures /expenses during the fiscal year. Actual results could vary
from estimates that were used.
514
2. Stewardship, Compliance, and Accountability
A. Budgetary Information
At the annual town meeting, the Finance Committee presents an operating
and capital budget for the proposed expenditures of the fiscal year com-
mencing the following July 1. The budget, as enacted by town meeting,
establishes the legal level of control and specifies that certain appropria-
tions are to be funded by particular revenues. The original budget is
amended during the fiscal year at special town meetings as required by
changing conditions. In cases of extraordinary or unforeseen expenses,
the Finance Committee is empowered to transfer funds from the Reserve
Fund (a contingency appropriation) to a departmental appropriation.
"Extraordinary" includes expenses which are not in the usual line, or are
great or exceptional. "Unforeseen" includes expenses which are not fore-
seen as of the time of the annual meeting when appropriations are voted.
Departments are limited to the line items as voted. Certain items may
exceed the line item budget as approved if it is for an emergency and for
the safety of the general public. These items are limited by the Massa-
chusetts General Laws and must be raised in the next year's tax rate.
Formal budgetary integration is employed as a management control
device during the year for the General Fund and Proprietary Funds.
Effective budgetary control is achieved for all other funds through provi-
sions of the Massachusetts General Laws.
At year -end, appropriation balances lapse, except for certain unexpended
capital items and encumbrances which will be honored during the subse-
quent year.
B. Budgetary Basis
The General Fund final appropriation appearing on the "Budget and
Actual" page of the fund financial statements represents the final amended
budget after all reserve fund transfers and supplemental appropriations.
C. Budget/GAAP Reconciliation
The budgetary data for the General Fund is based upon accounting princi-
ples that differ from generally accepted accounting principles (GAAP).
Therefore, in addition to the GAAP basis financial statements, the results
of operations of the general fund are presented in accordance with budg-
etary accounting principles to provide a meaningful comparison to budg-
etary data.
515
The following is a summary of adjustments made to the actual revenues
and other sources, and expenditures and other uses, to conform to the.
budgetary basis of accounting.
General Fund
Revenues /Expenditures
(GAAP Basis)
Other financing sources /uses
(GAAP Basis)
Subtotal (GAAP Basis)
To adjust property tax revenue
to the budgetary basis
To record the use of free cash
Reverse beginning of year
appropriation carryforwards
from expenditures
Add end -of -year appropriation
carryforwards to expenditures
To reverse the effects of non -
budgeted debt refunding activity
To record stabilization activity
Other
Budgetary Basis
Revenues Expenditures
and Other and Other
Financing Sources Financing Uses
$ 79,366,957 $ 81,954,685
7,909,924 4,187,298
87,276,881 86,141,983
(477,727)
430,095
(3,203,757)
11,628
(29, 087)
$ 84,008,033
(1,721,897)
2,639,183
(3,203,757)
150,000
(10,741)
$ 83,994,771
D. Excess of Expenditures Over Appropriations
Expenditures exceeding appropriations during the current fiscal year were
as follows:
General Fund
Intergovernmental $ (31,035)
Debt service $ (105,010)
E. Deficit Fund Equity
The Town reported various special revenue and capital project funds
reflecting individual deficit account balances as of June 30, 2015. The
deficits in these funds will be eliminated through future intergovernmental
revenues, bond proceeds, and transfers from other funds.
3. Cash and Short -Term Investments
Custodial Credit Risk - Deposits. Custodial credit risk is the risk that in the
event of a bank failure, the Town's and Contributory Retirement System's
(the System) deposits may not be returned. Massachusetts General Law
516
Chapter 44, Section 55, limits the Town's deposits "in a bank or trust company
or banking company to an amount not exceeding sixty percent of the capital
and surplus of such bank or trust company or banking company, unless satis-
factory security is given to it by such bank or trust company or banking com-
pany for such excess. Massachusetts General Law Chapter 32, Section 23,
limits the System's deposits "in a bank or trust company to an amount not
exceeding ten percent of the capital and surplus of such bank or trust company.
The Town and System do not have a deposit policy for custodial credit risk.
As of June 30, 2015, $54,097,662 of the Town's and $1,938,142 of the
System's bank balances of $83,111,760 and $2,275,271, respectively, were
exposed to custodial credit risk. However, $52,496,801 of the Town's exposed
balance and the entire System's exposed balance was on deposit with the
Massachusetts Municipal Depository Trust (MMDT) and Pension Reserves
Investment Trust (PRIT).
4. Investments
A. Credit Risk
Generally, credit risk is the risk that an issuer of an investment will not
fulfill its obligation to the holder of the investment. For short-term invest-
ments that were purchased using surplus revenues, Massachusetts
General Law, Chapter 44, Section 55, limits the Town's investments to
the top rating issued by at least one nationally recognized statistical rating
organization (NRSROs).
The Town and System do not have a policy for credit risk.
Presented below is the actual rating as of year -end for each investment of
the Town:
Investment Type
Domestic corporate bonds
Foreign corporate bonds
Certificates of deposits
Corporate equities
Federal agency securities
Total investments
$ 30,519,629 $ 22,364,252
Massachusetts General Law, Chapter 32, Section 23, limits the investment
of System funds, to the extent not required for current disbursements, in the
PRIT Fund or in securities, other than mortgages or collateral loans, which
are legal for the investment of funds in savings banks under the laws of the
Commonwealth, provided that no more than the established percentage of
assets, is invested in any one security.
517
Exempt
Fair
From
Average
Value
Disclosure
Ratinq
$ 4,572,032 $
-
A3
2,690,116
-
A2
20, 353, 338
20, 353, 338
2,010,914
2,010,914
893,229
-
AAA
$ 30,519,629 $ 22,364,252
Massachusetts General Law, Chapter 32, Section 23, limits the investment
of System funds, to the extent not required for current disbursements, in the
PRIT Fund or in securities, other than mortgages or collateral loans, which
are legal for the investment of funds in savings banks under the laws of the
Commonwealth, provided that no more than the established percentage of
assets, is invested in any one security.
517
At June 30, 2015, the Contributory Retirement System maintained its invest-
ments in the State Investment Pool* with a fair value of $116,900,024. This
investment type is not rated.
*Fair value is the same as the value of the pool share. The Pension Reserves Investment
Trust was created under Massachusetts General Law, Chapter 32, Section 22, in
December 9983. The Pension Reserves Investment Trust is operated under contract with
a private investment advisor, approved by the Pension Reserves Investment Management
Board. The Pension Reserves Investment Management Board shall choose an investment
advisor by requesting proposals from advisors and reviewing such proposals based on
criteria adopted under Massachusetts General Law, Chapter 30B.
B. Custodial Credit Risk
The custodial credit risk for investments is the risk that, in the event of the
failure of the counterparty (e.g., broker - dealer) to a transaction, a govern-
ment will not be able to recover the value of its investment or collateral
securities that are in the possession of another party. The Town and
System do not have policies for custodial credit risk.
The System's investments of $116,900,024 were exposed to custodial
credit risk as uninsured and uncollateralized. However, the investments
were held in the State Investment Pool (PRIT).
Of the Town's investment of $30,519,629, the government has a custo-
dial credit risk exposure of $30,519,629 because the related securities are
uninsured, unregistered and held by the Town's brokerage firm, which is
also the Counterparty to these securities. The Town manages this custo-
dial credit risk with SIPC and excess SIPC.
C. Concentration of Credit Risk
The Town places no limit on the amount the Town may invest in any one
issuer. Investments in any one issuer (other than U.S. Treasury securities
and mutual funds) that represent 5% or more of total investments are as
follows:
Investment Issuer Amount
NBTC - CDARS - General Fund $ 18,120,755
SPDR S &P 500 ETF 1,477,261
Total $ 19,598,016
Massachusetts General Law Chapter 32, Section 23 limits the amount the
System may invest in any one issuer or security type, with the exception of
the PRIT Fund. The System does not have an investment in one issuer
greater than 5% of total investments, with the exception of the PRIT Fund.
518
D. Interest Rate Risk
Interest rate risk is the risk that changes in market interest rates will
adversely affect the fair value of an investment. Generally, the longer the
maturity of an investment, the greater the sensitivity of its fair value to
changes in market interest rates. The Town and System do not have a for-
mal investment policy that limits investment maturities as a means of man-
aging its exposure to fair value losses arising from increasing interest rates.
Information about the sensitivity of the fair values of the Town's invest-
ments to market interest rate fluctuations is as follows:
Investment Maturities (in Years)
Fair Less
Investment Type Value Than 1 11 -55 6 -10
Debt - related Securities:
Domestic corporate bonds $ 4,572,032 $ - $ 385,433 $ 4,186,599
Foreign corporate bonds 2,690,116 - - 2,690,116
Federal agency securities 893,229 - - 893,229
Total $ 8,155,377 $ - $ 385,433 $ 7,769,944
E. Foreign Currency Risk
Foreign currency risk is the risk that changes in foreign exchange rates
will adversely affect the fair value of an investment. The Town and System
do not have policies for foreign currency risk.
5. Taxes and Motor Vehicle Receivables
Real estate and personal property taxes are levied and based on values
assessed on January 1 st of every year. Assessed values are established by
the Board of Assessor's for 100% of the estimated fair market value. Taxes
are due on a quarterly basis and are subject to penalties and interest if they
are not paid by the respective due date. Real estate and personal property
taxes levied are recorded as receivables in the fiscal year they relate to.
Fourteen days after the due date for the final tax bill for real estate taxes, a
demand notice may be sent to the delinquent taxpayer. Fourteen days after
the demand notice has been sent the tax collector may proceed to file a lien
against the delinquent taxpayers' property. The Town has an ultimate right
to foreclose on property for unpaid taxes. Personal property taxes cannot be
secured through the lien process.
Motor vehicle excise taxes are assessed annually for every motor vehicle
and trailer registered in the Commonwealth. The Registry of Motor Vehicles
annually calculates the value of all registered motor vehicles for the purpose
of excise assessment. The amount of motor vehicle excise tax due is calcu-
lated using a fixed rate of $25 per $1,000 of value.
519
Tax and motor vehicle receivables at June 30, 2015 consist of the following:
Receviables:
Real estate taxes
Personal property taxes
Tax Liens
Deferred taxes
Total property taxes
Motor vehicle excise
Grand total
282,602 (91,349) 191,253
$ 1,152,062 $ 181,095 $ 970,967
6. Intergovernmental Receivables
This balance represents reimbursements requested from Federal and State
agencies for expenditures incurred in fiscal 2015.
7. Transfers In /Out
The Town reports interfund transfers between many of its funds. The sum of
all transfers presented in the table agrees with the sum of interfund transfers
presented in the governmental fund financial statements. The following is an
analysis of interfund transfers made in fiscal year 2015.
Fund Transfers In Transfers Out
General Fund $ 3,532,530 $ 983,541
Nonmajor Governmental Funds:
Revolving funds 10,000 264,232
Receipts reserved for appropriation - 175,000
Town capital project funds 1,002,714 21,979
School capital project funds - 47,194
Major Enterprise Funds:
Electric Division fund - 2,332,863
Water fund - 427,470
Nonmajor Enterprise Funds:
Sewer fund - 292,965
Total $ 4,545,244 $ 4,545,244
520
Allowance
Gross
for Doubtful
Net
Amount
Accounts
Amount
$ 210,834
$ (21,083) $
189,751
11,129
(3,913)
7,216
539,975
(53,998)
485,977
107,522
(10,752)
96,770
869,460
(89,746)
779,714
282,602 (91,349) 191,253
$ 1,152,062 $ 181,095 $ 970,967
6. Intergovernmental Receivables
This balance represents reimbursements requested from Federal and State
agencies for expenditures incurred in fiscal 2015.
7. Transfers In /Out
The Town reports interfund transfers between many of its funds. The sum of
all transfers presented in the table agrees with the sum of interfund transfers
presented in the governmental fund financial statements. The following is an
analysis of interfund transfers made in fiscal year 2015.
Fund Transfers In Transfers Out
General Fund $ 3,532,530 $ 983,541
Nonmajor Governmental Funds:
Revolving funds 10,000 264,232
Receipts reserved for appropriation - 175,000
Town capital project funds 1,002,714 21,979
School capital project funds - 47,194
Major Enterprise Funds:
Electric Division fund - 2,332,863
Water fund - 427,470
Nonmajor Enterprise Funds:
Sewer fund - 292,965
Total $ 4,545,244 $ 4,545,244
520
The transfers from the water and sewer funds to the general fund are made to
cover indirect costs of water and sewer funds incurred in the general fund.
The transfer from the electric division fund to the general fund is a payment in
lieu of taxes (PILOT). The transfer from the general fund to the Town capital
project funds is to move the premium paid to the Town upon the sale of bonds
for the purpose of constructing a new library. The premium will be used to pay
costs of the library construction project and reduce the overall amount author-
ized to be borrowed for the project. The Town's other transfers include trans-
fers made to move (1) unrestricted revenues or balances that have been
collected or accumulated in the general fund to other funds based on budget-
ary authorization, and (2) revenues from a fund that by statute or budgetary
authority must collect them to funds that are required by statute or budgetary
authority to expend them.
Capital Assets
Capital asset activity for the year ended June 30, 2015 was as follows (in
thousands):
Total accumulated depreciation
Total capital assets,'being depreciated, net
Capital assets, not being depreciated:
Land
Construction in progress
Total capital assets, not being depreciated
Governmental activities capital assets, net
521
(67,200 ) (6,121) 5,075 (68,246)
117,208 (3,729) - 113,479
3,981 -
1,229 4,096
51210 4,096
$ 122,418 $ 367
3,981
5,325
9,306
$ - $ 122,785
Beginning
Ending
Balance
Increases
Decreases
Balance
Governmental Activities:
Capital assets, being depreciated:
Land improvements
$ 3,693
$ 273
$ -
$ 3,966
Buildings and improvements
134,041
168
(228)
133,981
Machinery, equipment, and furnishings
10,188
834
(598)
10,424
Infrastructure
36,486
1,117
(4,249)
33,354
Total capital assets, being depreciated
184,408
2,392
(5,075)
181,725
Less accumulated depreciation for:
Land improvements
(1,263)
(164)
-
(1,427)
Buildings and improvements
(39,227)
(3,702)
228
(42,701)
Machinery, equipment, and furnishings
(5,364)
(958)
598
(5,724)
Infrastructure
(21,346)
(1,297)
4,249
(18,394)
Total accumulated depreciation
Total capital assets,'being depreciated, net
Capital assets, not being depreciated:
Land
Construction in progress
Total capital assets, not being depreciated
Governmental activities capital assets, net
521
(67,200 ) (6,121) 5,075 (68,246)
117,208 (3,729) - 113,479
3,981 -
1,229 4,096
51210 4,096
$ 122,418 $ 367
3,981
5,325
9,306
$ - $ 122,785
Business -Type Activities:
Capital assets, being depreciated:
Land improvements
Buildings and improvements
Machinery, equipment, and furnishings
Infrastructure
Total capital assets, being depreciated
Less accumulated depreciation for:
Land improvements
Buildings and improvements
Machinery, equipment, and furnishings
Infrastructure
Total accumulated depreciation
Total capital assets, being depreciated, net
Capital assets, not being depreciated:
Land
Construction in progress
Total capital assets, not being depreciated
Business -type activities capital assets,. net
Beginning
Ending
Balance
Increases
Decreases
Balance
$ 1,437
$ -
$ -
$ 1,437
16,614
363
(522)
16,455
35,363
429
(448)
35,344
110,991
3,228
(500)
113,719
164,405
4,020
(1,470)
166,955
(328)
(70)
-
(398)
(10,200)
(459)
522
(10,137)
(21,063)
(1,267)
448
(21,882)
(44,165)
(3,368)
442
(47,091)
(75,756)
(5,164)
1,412
(79,508)
88,649
(1,144)
(58)
87,447
1,450
-
-
1,450
549
1,864
(189)
2,224
1,999
1,864
(189)
3,674
$ 90,648
$ 720
$ (247)
$ 91,121
Depreciation expense was charged to functions of the Town as follows (in
thousands):
Governmental Activities:
General government $ 252
Public safety 522
Education 3,442
Public works 1,655
Health and human services 33
Culture and recreation 217
Total depreciation expense - governmental activities $ 6,121
Business -Type Activities:
Electric $ 3,861
Water 856
Other - Sewer 416
Other - Stormwater 31
Total depreciation expense - business -type activities $ 5,164
522
9. Deferred Outflows of Resources
Deferred outflows of resources represent the consumption of net assets by
the Town that is applicable to future reporting periods. Deferred outflows of
resources have a positive effect on net position, similar to assets.
10.
11.
The following is a summary of deferred outflow of resources balances as of
June 30, 2015:
Entity -wide Basis
Governmental Business -type
Activities Activities
Fund Basis
Proprietary Funds
Electric Water Nonmaior
Net difference between projected and actual
investment earnings on pension plan
investments $ 114,748 $ 53,280 $ 47,815 $ 3,867 $ 1,598
Pension plan contributions made
subsequent to the measurement date - 1,500,000 1,500,000 - -
Total deferred outflows of resources $ 114,748 $ 1,553,280 $ 1,547,815 $ 3,867 $ 1,598
Warrants Payable
Warrants payable represent 2015 expenditures paid by July 15, 2015.
Anticipation Notes Payable
The Town had the following notes outstanding at June 30, 2015:
Governmental Activities:
Elementary school modular classrooms
RMHS retaining wall repairs
Total Governmental Activities
Business -Type Activities:
Water improvements
Total Business -Type Activities
Total
Interest Date of Date of' Balance at
Rate Issue Maturity 6/30/15
0.75% 06/29/15 06/29/16 $ 1,200,000
0.75% 06/29/15 06/29/16 500,000
1,700,000
0.75% 06/29/15 06/29/16 665,000
665,000
$ 2,365,000
The following summarizes activity in notes payable during fiscal year 2015:
523
Balance
Balance
Beginning
New
End of
of Year
Issues Maturities
Year
West Street roadway improvements
$ 1,000,000 $
1,000,000 $ (2,000,000) $
-
Elementary school modular classrooms
-
1,200,000 -
1,200,000
RMHS retaining wall repairs
-
500,000 -
500,000
Water improvements
-
665,000 -
665,000
Total
$ 1,000,000 $
3,365,000 $ (2,000,000) $
2,365,000
523
12.
Long -Term Debt
A. General Obligation Bonds
The Town issues general obligation bonds to provide funds for the acquisi-
tion and construction of major capital facilities. General obligation bonds
have been issued for both governmental and business -type activities.
General obligation bonds currently outstanding are as follows:
Total Business -Type Activities: $ 12,486,649
524
Amount
Serial
Outstanding
Maturities
Interest
as of
Governmental Activities:
Through
Rates %
6/30/15
Wood End Elementary School
04/15/17
3.94%
$ 60,000
Wood End Elementary School
04/15/17
3.94%
90,000
Downtown Improvement projects
11/01/17
3.45%
195,000
Ladder truck
07/01/17
3.05%
240,000
Parker Middle School refunding
07/01/17
3.05%
520,000
Energy improvements
08/01/24
2.99%
3,325,000
RMHS refunding
02/01/24
2.25%
9,555,000
Killam Elementary School roof
02/01122
1.83%
469,000
Birch Meadow Elementary School windows
02/01/22
1.83%
231,000
Library renovations
04/15/25
1.49%
10,000,000
Roadway /pedestrian improvements
04/15/25
1.49%
1,000,000
Roadway /pedestrian improvements
04/15125
1.49%
300,000
Wood End Elementary School refunding
04/15/24
1.49%
208,790
Wood End Elementary School refunding
04/15/24
1.49%
308,000
Wood End Elementary School refunding
04/15/24
1.49%
1,275,710
Wood End Elementary School refunding
04/15/24
1.49%
83,800
Barrows Elementary School refunding
04/15/24
1.49%
1,062,700
Total Governmental Activities:
$ 28,924,000
Amount
Serial
Outstanding
Maturities
Interest
as of
Business -Type Activities:
Through
Rates %
6/30/15
MWRA buy -in
04/15/17
4.00%
$ 320,000
MWRA buy -in
11/01/27
3.05%
5,070,000
MWRA buy -in
07/01/17
3.05%
240,000
MWRA water system pipeline
08/15/21
0.00%
1,435,000
MWRA water system pipeline
08/12/23
0.00%
3,610,800
MWRA buy -in refunding
04/15/27
1.49%
1,561,000
MWPAT septic
02/01/17
0.00 %.
6,969
MWRA sewer
08/15/16
0.00%
88,880
MWRA sewer
05/19/19
0.00%
154,000
Total Business -Type Activities: $ 12,486,649
524
B. Future Debt Service
The annual payments to retire all general obligation long -term debt
outstanding as of June 30, 2015 are as follows:
Governmental
Principal
Interest
Total
2016
$ 3,150,000
$ 1,191,641
$ 4,341,641
2017
3,165,000
988,750
4,153,750
2018
3,175,000
870,315
4,045,315
2019
2,930,000
756,133
3,686,133
2020
2,980,000
645,514
3,625,514
2021-2025
13,524,000
1,482,860
15,006,860
Total
$ 28,924,000
$ 5,935,213
$ 34,859,213
The general fund has been designated as the sole source to repay the
governmental -type general obligation debt outstanding as of June 30, 2015:
Business -Type
Principal
Interest
Total
2016
$ 1,320,305
$ 280,395
$ 1,600,700
2017
1,320,305
242,940
1,563,245
2018
1,280,865
214,950
1,495,815
2019
1,195,865
193,180
1,389,045
2020
1,157,365
172,780
1,330,145
2021-2025
4,751,944
556,740
5,308,684
2026-2028
1,460,000
83,250
1,543,250
Total $ 12,486,649 $ 1,744,235 $ 14,230,884
C. Changes in General Long -Term Liabilities
During the year ended
June 30, 2015, the following changes occurred in
long -term liabilities (in thousands):
Equals
Total
Total
Less
Long -Term
Balance
Balance
Current
Portion
7/1/14 Additions
Reductions
6/30115
Portion
6/30/15
Governmental Activities
Bonds payable
$ 19,910 $ 14,239
$ (5,225)
$ 28,924
$ (3,151)
$ 25,773
Unamortized bond premiums
2,090 1,438
354
3,174
354
2,820
Total bonds payable
22,000 15,677
(5,579)
32,098
(3,505)
28,593
Accrued employee benefits
1,546 53
(241)
1,358
(48)
1,310
Net OPEB obligation
14,249 4,775
(3,121)
15,903
-
15,903
Net pension liability
21,356 -
(1,042)
20,314
-
20,314
Totals
$ 59,151 $ 20,505
$ (9,983)
$ 69,673
$ 31553
$ 66,120
525
D. Current and Advance Refundings
Current Refunding of 1/1/05 and Advance Refunding of 9/15/06
On February 5, 2015, the Town issued general obligation bonds in the
amount of $15,800,000 with various interest rates ranging from 3.0% to
4.0 %. Of the total amount of bonds issued, $4,500,000 represents bonds to
(a) current refund the Town's $6,480,000 general obligation bonds dated
January 1, 2005, maturing April 15 of the years 2016 through 2024, in the
aggregate principal amount of $2,565,000, with interest rates ranging from
4.0% to 4.50 %, and callable on April 15, 2015 and (b) advance refund the
Town's $6,960,000 general obligation bonds dated September 15, 2006,
maturing April 15 of the years 2018 through 2027, in the aggregate principal
amount of $2,105,000, with interest rates ranging from 4.0% to 4.125 %, and
callable on April 15, 2015. The general obligation bonds were issued at a
true interest cost of 1.49868% and, after paying issuance costs of approxi-
mately $33,568, the net proceeds were $4,910,935. The net proceeds from
the issuance of the general obligation bonds were used to purchase U.S.
government securities and those securities were deposited in an irrevocable
trust with an escrow agent to provide debt service payments until the 2005
and 2006 bonds are called on their respective call dates. The refundings
met the requirements of an in- substance debt defeasance and the term
bonds were removed from the Town's financial statements.
As a result of the refundings, the Town reduced its total debt service cash
flow requirements by $513,885, which resulted in an economic gain (differ-
ence between the present value of the debt service payments on the old
and new debt) of $478,338.
Defeased debt still outstanding at June 30, 2015 is $470,000.
526
Equals
Total
Total
Less
Long -Term
Balance
Balance
Current
Portion
7/1/14
Additions
Reductions
6/30/15
Portion
6/30/15
Business -Type Activities
Bonds payable
$ 13,959
$ 1,561
$ (3,033)
$ 12,487
$ (1,320)
$ 11,167
Accrued employee benefits
2,978
350
(197)
3,131
(66)
3,065
Net OPEB obligation
435
165
(171)
429
-
429
Net pension liability
4,616
876
-
5,492
-
5,492
Totals
$ 21,988
$ 2,952
$ (3,401)
$ 21,539
$ (1,386)
$ 20,153
D. Current and Advance Refundings
Current Refunding of 1/1/05 and Advance Refunding of 9/15/06
On February 5, 2015, the Town issued general obligation bonds in the
amount of $15,800,000 with various interest rates ranging from 3.0% to
4.0 %. Of the total amount of bonds issued, $4,500,000 represents bonds to
(a) current refund the Town's $6,480,000 general obligation bonds dated
January 1, 2005, maturing April 15 of the years 2016 through 2024, in the
aggregate principal amount of $2,565,000, with interest rates ranging from
4.0% to 4.50 %, and callable on April 15, 2015 and (b) advance refund the
Town's $6,960,000 general obligation bonds dated September 15, 2006,
maturing April 15 of the years 2018 through 2027, in the aggregate principal
amount of $2,105,000, with interest rates ranging from 4.0% to 4.125 %, and
callable on April 15, 2015. The general obligation bonds were issued at a
true interest cost of 1.49868% and, after paying issuance costs of approxi-
mately $33,568, the net proceeds were $4,910,935. The net proceeds from
the issuance of the general obligation bonds were used to purchase U.S.
government securities and those securities were deposited in an irrevocable
trust with an escrow agent to provide debt service payments until the 2005
and 2006 bonds are called on their respective call dates. The refundings
met the requirements of an in- substance debt defeasance and the term
bonds were removed from the Town's financial statements.
As a result of the refundings, the Town reduced its total debt service cash
flow requirements by $513,885, which resulted in an economic gain (differ-
ence between the present value of the debt service payments on the old
and new debt) of $478,338.
Defeased debt still outstanding at June 30, 2015 is $470,000.
526
13
14.
E. Bond Authorizations
Long -term debt authorizations which have not been issued or rescinded
as of June 30, 2015 are as follows:
Date Authorized
Purpose
Amount
November 2010
Killam School remodeling
$ 3,050
November 2010
MWRA water system pipeline
235,000
November 2012
MWRA 1/1 sewer loan
71,000
January 2013
Library renovations
4,900,000
April 2013
MWRA 1/1 sewer loan
460,000
April 2013
Water improvements - A -1 and A -2
1,448,000
February 2014
Library renovations
2,566,459
September 2014
Water main improvements - .Phase 1
2,512,000
April 2015
Birch Meadow field lighting
1,000,000
April 2015
MWRA Sewer 1/1
1,688,000
Total
$ 14,883,509
Deferred Inflows of Resources
Deferred inflows of resources are the acquisition of net assets by the Town
that are applicable to future reporting periods. Deferred inflows of resources
have a negative effect on net position, similar to liabilities.
Governmental funds report gains on refunding bonds as deferred inflows,
which represent the difference between the reacquisition price of new debt
and the net carrying amount of the old debt.
Restricted Net Position
The accompanying entity -wide financial statements report restricted net posi-
tion when external constraints from grantors or contributors are placed on net
position.
Permanent fund restricted net position are segregated between nonexpend-
able and expendable. The nonexpendable portion represents the original
restricted principal contribution, and the expendable represents accumulated
earnings which are available to be spent based on donor restrictions.
527
15. Governmental Funds - Balances
Fund balances are segregated to account for resources that are either not
available for expenditure in the future or are legally set aside for a specific
future use.
The Town implemented GASB Statement No. 54 (GASB 54), Fund Balance
Reporting and Governmental Fund Type Definitions, which enhances the use-
fulness of fund balance information by providing clearer fund balance classifi-
cations that can be more consistently applied and by clarifying existing gov-
ernmental fund type definitions.
The following types of fund balances are reported at June 30, 2015:
Nonspendable - Represents amounts that cannot be spent because they are
either (a) not in spendable form or (b) legally or contractually required to be
maintained intact. This fund balance classification includes general fund
reserves for prepaid expenditures and nonmajor governmental fund reserves
for the principal portion of permanent trust funds.
Restricted - Represents amounts that are restricted to specific purposes by
constraints imposed by creditors, grantors, contributors, or laws or regulations
of other governments, or constraints imposed by law through constitutional
provisions or enabling legislation. This fund balance classification includes
general fund encumbrances funded by bond issuances, various special reve-
nue funds, and the income portion of permanent trust funds.
Committed - Represents amounts that can only be used for specific pur-
poses pursuant to constraints imposed by formal action of the Town's highest
level of decision - making authority. This fund balance classification includes
general fund encumbrances for non - lapsing, special article appropriations
approved at Town Meeting, and various special revenue funds.
Assigned - Represents amounts that are constrained by the Town's intent to.
use these resources for a specific purpose. This fund balance classification
includes general fund encumbrances that have been established by various
Town departments for the expenditure of current year budgetary financial
resources upon vendor performance in the subsequent budgetary period. The
Town follows an informal policy that permits management to assign fund
balance amounts to a specific purpose, although fund balance to be applied
against a subsequent year's budget is voted by Town Meeting.
Unassigned - Represents amounts that are available to be spent in future
periods.
528
Following is a breakdown of the Town's fund balances at June 30, 2015:
(') Includes $1.6 million in general stabilization
529
Nonmajor
Total
General
Governmental
Governmental
Fund
Funds
Funds
Nonspendable
Permanent funds
Cemetery
$
$ 2,624,228
$ 2,624,228
Other
515,187
515,187
Total Nonexpendable
3,139,415
3,139,415
Restricted
Federal grants
9,680
9,680
State grants
Circuit Breaker
965,729
965,729
State aid to libraries
208,199
208,199
Other.
15,957
15,957
Revolving funds:
Extended day program
867,336
867,336
RISE preschool program
438,056
438,056
Special Education tuition
682,207
682,207
All -day kindergarten program
692,127
692,127
Inspection permit
699,828
699,828
Recreation
322,996
322,996
Athletic activities
-
117,459
117,459
School lunch
-
390,148
390,148
Other
-
248,711
248,711
Receipts reserved for appropriation
Sale of real estate
-
742,738
742,738
Affordable housing fund
-
260,912
260,912
Sale of cemetery lots
-
195,139
195,139
Other
-
10,507
10,507
Gifts and donations
-
746,385
746,385
Permanent funds
Healthcare
-
4,607,984
4,607,984
Cemetery
-
1,658,199
1,658,199
Other
-
441,215
441,215
Town capital project funds
Library renovations
-
8,383,749
8,383,749
West street road improvements
-
932,747
932,747
Other
-
7,728
7,728
School capital project funds
-
5
5
Total Restricted
-
23,645,741
23,645,741
Committed
Smart growth stabilization account
503,000
-
503,000
Sick buy -back stabilization account
24
-
24
For Morton field
40,000
-
40,000
For Town capital project funds
-
933,541
933,541
Total Committed
543,024
933,541
1,476,565
Assigned
For encumbrances
General government
252,844
252,844
Public safety
72,438
72,438
Education
2,077,053
-
2,077,053
Public works
310,960
-
310,960
Culture and recreation
48,277
-
48,277
Employee benefits
25,615
-
25,615
For next year's expenditures
1,800,000
-
1,800,000
Total Assigned
4,587,187
-
4,587,187
Unassigned c11
11,852,773
(431,342)
11,421,431
Total Unassigned
11,852,773
(431,342)
11,421,431
Total Fund Balance
$ 16,982,984
$ 27,287,355
$ 44,270,339
(') Includes $1.6 million in general stabilization
529
16. Commitments and Contingencies
Outstanding Legal Issues - There are several pending legal issues in which
the Town is involved. The Town's management is of the opinion that the
potential future settlement of such claims would not materially affect its finan-
cial statements taken as a whole.
Abatements - There are several cases pending before the Appellate Tax Board
in regard to alleged discrepancies in property assessments. According to Town
counsel, the probable outcome of these cases at the present time is indetermi-
nable, although the Town expects such amounts, if any, to.be immaterial.
Grants - Amounts received or receivable from grantor agencies are subject to
audit and adjustment by grantor agencies, principally the federal government.
Any disallowed claims, including amounts already collected, may constitute
a liability of the applicable funds. The amount of expenditures which may be
disallowed by the grantor cannot be determined at this time, although the
Town expects such amounts, if any, to be immaterial.
17. Post - Employment Healthcare and Life Insurance Benefits
Other Post - Employment Benefits
GASB Statement 45, Accounting and Financial Reporting by Employers for
Postemployment Benefits Other Than Pensions, requires governments to
account for other post - employment benefits (OPEB), primarily healthcare, on
an accrual basis rather than on a pay -as- you -go basis. The effect is the recog-
nition of an actuarially required contribution as an expense on the Statement of
Activities when a future retiree earns their post - employment benefits, rather
than when they use their post - employment benefit. To the extent that an entity
does not fund their actuarially required contribution, a post - employment benefit
liability is recognized on the Statement of Net Position over time.
A. Plan Description
In addition to providing the pension benefits, the Town provides post -
employment health and life insurance benefits for retired employees
through the Town's Massachusetts Interlocal Insurance Association (MIIA)
Health Benefits Trust. Benefits, benefit levels, employee contributions, and
employer contributions are governed by Chapter 32 of the Massachusetts
General Laws. As of June 30, 2014, the actuarial valuation date, approxi-
mately 699 retirees and 540 active employees meet the eligibility require-
ments. The plan does not issue a separate financial report.
B. Benefits Provided
The Town provides post - employment medical, prescription drug, and life
insurance benefits to all eligible retirees and their surviving spouses. All
active employees who retire from the Town and meet the eligibility criteria
will be eligible to receive these benefits.
530
C. Fundinq Policy
Retirees contribute 29% of the cost of the medical and prescription drug
plan, as determined by the MIIA Health Benefits Trust. Retirees also
contribute 50% of the premium for a $5,000 life insurance benefit. The
Town contributes the remainder of the medical, prescription drug, and life
insurance plan costs on a pay -as- you -go basis.
D. Annual OPEB Costs and Net OPEB Obligation
The Town's fiscal 2015 annual OPEB expense is calculated based on
the annual required contribution of the employer (ARC), an amount actu-
arially determined in accordance with the parameters of GASB Statement
No. 45. The ARC represents a level of funding that, if paid on an ongoing
basis, is projected to cover the normal cost per year and amortize the
unfunded actuarial liability over a period of thirty years. The following table
shows the components of the Town's annual OPEB cost for the year end-
ing June 30, 2015, the amount actually contributed to the plan, and the
change in the Town's net OPEB obligation based on an actuarial valuation
as of June 30, 2014.
Net OPEB obligation - beginning of year 14,249,155 302,890 111,595 20,385 14,684,025
Net OPEB obligation - end of year $ 15,903,029 $ 298,527 $ 109,988 $ 20,092 $ $ 16,331,636
The Town's annual OPEB cost, the percentage of annual OPEB cost
contributed to the plan, and the net OPEB obligation were as follows:
Fiscal Year Ended
Annual Percentage of
OPEB OPEB
Cost Cost Contributed
Net OPEB
Obligation
2015
Governmental
Water
Sewer
Stormwater
Electric
2014
$
Funds
Fund
Fund
Fund
Fund
Total
Annual Required Contribution (ARC)
$ 4,683,436 $
120,394 $
43,531
$ 6,854 $
758,525 $
5,612,740
Interest on net OPEB obligation
854,949
23,474
8,649
1,580
-
888,652 .
Adjustment to ARC
(763,084)
(27,837)
(10,256)
(1,873)
-
(803,050)
Annual OPEB cost
4,775,301
116,031
41,924
6,561
758,525
5,698,342
Contributions made
(2,646,427)
(73,624)
(25,626)
(56)
(430,907)
(3,176,640)
Additional funding to trust
(475,000)
(46,770)
(17,905)
(6,798)
(327,618)
(874,091)
Increase in net OPEB obligation
1,653,874
(4,363)
(1,607)
(293)
1,647,611
Net OPEB obligation - beginning of year 14,249,155 302,890 111,595 20,385 14,684,025
Net OPEB obligation - end of year $ 15,903,029 $ 298,527 $ 109,988 $ 20,092 $ $ 16,331,636
The Town's annual OPEB cost, the percentage of annual OPEB cost
contributed to the plan, and the net OPEB obligation were as follows:
Fiscal Year Ended
Annual Percentage of
OPEB OPEB
Cost Cost Contributed
Net OPEB
Obligation
2015
$
5,698,342
71.09%
$
16,331,636
2014
$
5,684,967
71.11%
$
14,684,025
2013
$
5,346,430
100.32%
$
13,041,552
2012
$
6,956,808
50.08%
$
13,058,486
2011
$
6,7331892
48.16%
$
9,248,292
2010
$
6,522,905
57.09%
$
5,757,459
2009
$
6,326,701
53.24%
$
2,958,316
531
E. Funded Status and Funding Progress
The funded status of the plan as of June 30, 2014, the date of the most
recent actuarial valuation was as follows:
Actuarial accrued liability (AAL) $ 66,759,344
Actuarial value of plan assets (3,722,552)
Unfunded actuarial accrued liability (UAAL) $ 63,036,792
Funded ratio (actuarial value of plan assets /AAL) 5.58%
Covered payroll (active plan members) N/A
UAAL as a percentage of covered payroll N/A
Actuarial valuations of an ongoing plan involve estimates of the value of
reported amounts and assumptions about the probability of events far into
the future. Examples include assumptions about future employment, mor-
tality, and the healthcare cost trend. Amounts determined regarding the
funded status of the plan and the annual required contributions of the
employer are subject to continual revision as actual results are compared
to past expectations and new estimates are made about the future. The
schedule of funding progress, presented as required supplementary infor-
mation following the notes to the financial statements, presents multi -year
trend information about whether the actuarial value of plan assets is
increasing or decreasing over time relative to the actuarial accrued liability
for benefits.
F. Actuarial Methods and Assumptions
Projections of benefits for financial reporting purposes are based on the
plan as understood by the Town and the plan members and include the
types of benefits provided at the time of each valuation and the historical
pattern of sharing of benefit costs between the Town and plan members
to that point. The actuarial methods and assumptions used include tech-
niques that are designed to reduce short -term volatility in actuarial
accrued liabilities and the actuarial value of assets, consistent with the
long -term perspective of the calculations.
In the June 30, 2014 actuarial valuation, the Projected Unit Credit actuarial
cost method was used. The actuarial assumptions included a blended
6.00% investment rate of return for governmental funds, a funded 7.75%
investment rate of return for enterprise funds, and an initial annual health-
care cost trend rate of 8.00% which decreases to a 5.00% long -term rate
for all healthcare benefits after seven years. The amortization costs for the
initial UAAL is a level percentage of payroll amortization, with governmen-
tal fund amortization payments increasing at 2.5% per year for a period of
30 years (open), and enterprise fund amortization payments increasing at
2.5% per year for a period of 16 years (closed). In open amortization, the
period is reset to the initial value every year and the UAAL is re- amortized,
532
d "
while under a closed amortization the remaining period decreases and the
UAAL is eventually paid off.
Retirement Svstem — Readinq Contributory Retirement System
The Town follows the provisions of GASB Statement No. 67 Financial
Reporting for Pension Plans — an amendment of GASB Statement No. 25 and
GASB Statement No. 68, Accounting and Financial Reporting for Pensions —
an amendment of GASB Statement No. 27, with respect to the employees'
retirement funds.
A. Plan Description
The System is a member of the Massachusetts Contributory Retirement
Systems and is governed by Chapter 32 of the Massachusetts General
Laws. Because of the significance of its operational and financial relation-
ship with the Town, the System is included as a pension trust fund in the
Town's basic financial systems.
Substantially all employees of the Town (except teachers and administra-
tors under contract employed by the School Department) and Reading
Housing Authority are members of the Reading Contributory Retirement
System (the System), a cost sharing, multiple employer public employee
retirement system (PERS). Eligible employees must participate in the
System. The pension plan provides pension benefits, deferred allowances,
and death and disability benefits. Chapter 32 of the Massachusetts General
Laws establishes the authority of the System, contribution percentages and
benefits paid.
The System is governed by a five- member board. The five members include
two appointed by the town, two elected by the members and retirees, and a
fifth member chosen by the other four members with the approval of the
Public Employee Retirement Administration Commission. The System
Retirement Board does not have the authority to amend benefit provisions.
Membership of each plan consisted of the following at December 3.1, 2014:
Retirees and beneficiaries receiving benefits 330
Terminated plan members entitled to but not yet
receiving benefits 39
Active plan members 334
Total 703
Number of participating employers 2
B. Benefits Provided
The System provides for retirement allowance benefits up to a maximum of
80% of a member's highest three -year average annual rate of regular com-
533
pensation. Benefit payments are based upon a member's age, length of
creditable service, level of compensation and group classification. Members
become vested after 10 years of creditable service. A retirement allowance
may be received upon reaching age 65 or upon attaining 20 years of ser-
vice. The plan also provides for early retirement at age 55 if the participant
(1) has a record of 10 years of creditable service, (2) was on the Town
payroll on January 1, 1978, (3) voluntarily left Town employment on or after
that date, and (4) left accumulated annuity deductions in the fund. A retire-
ment allowance consists of two parts: an annuity and a pension. A mem-
ber's accumulated total deductions and a portion of the interest they
generate constitute the annuity. The difference between the total retirement
allowance and the annuity is the pension. The average retirement benefit is
approximately 80 -85% pension and 15 -20% annuity.
Per Chapter 176 of the Acts of 2011, for members who retire on or after
April 2, 2012, if in the 5 years of creditable service immediately preceding
retirement, the difference in the annual rate of regular compensation
between any 2 consecutive years exceeds 100 percent, the normal yearly
amount of the retirement allowance shall be based on the average annual
rate of regular compensation received by the member during the period of
5 consecutive years preceding retirement.
Employees who resign from service and who are not eligible to receive a
retirement allowance or are under the age of 55 are entitled to request a
refund of their accumulated total deductions. In addition, depending upon
the number of years of creditable service, such employees are entitled to
receive zero, fifty, or one hundred percent of the regular interest which has
accrued upon those deductions. However, effective July 1, 2010, members
voluntarily withdrawing with less than 10 years of service get credited
interest each year at a rate of 3% and do not forfeit any interest previously
earned on contributions.
C. Contributions
Participants contribute a set percentage of their gross regular compensation
annually. Employee contribution percentages are specified in Chapter 32 of
the Massachusetts General Laws. The employee's individual contribution
percentage is determined by their date of entry into the system. In addition,
all employees hired after January 1, 1979 contribute an additional 2% on all
gross regular compensation over the rate of $30,000 per year. The percent -
ages are as follows:
Before January 1, 1975 5%
January 1, 1975 - December 31, 1983 7%
January 1, 1984 - June 30, 1996 8%
Beginning July 1, 1996 9%
534
Employers are required to contribute at actuarially determined rates as
accepted by the Public Employee Retirement Administration Commission
( PERAC).
The Town's contribution to the System for the year ended June 30, 2015
was $4,925,586, which was equal to its annual required contribution.
D. Summary of Significant Accountinq Policies
The accounting policies of the System as reflected in the accompanying
financial statements for the year ended June 30, 2015 conform to generally
accepted accounting principles for public employee retirement systems
(PERS). The more significant accounting policies of the System are sum-
marized below:
Basis of Accounting - Contributory retirement system financial statements
are prepared using the accrual basis of accounting. Plan member contri-
butions are recognized as revenue in the period in which the members
provide services to the employer. Employer contributions are recognized
When due and the employer has made a formal commitment to provide the
contributions. Benefits and refunds are recognized when due and payable
in accordance with the terms of the plan.
Investments
Investment Policy
Investments are reported at fair value in accordance with PERAC require-
ments. System assets are managed on a total return basis with a long -term
objective of achieving and maintaining a fully funded status for the benefits
provided through the pension plan.
Rate of Return
For the year ended June 30, 2015, the annual money- weighted rate of
return on pension plan investments, net of pension plan investment
expenses, was 7.66 %. The money- weighted rate of return expresses
investment performance, net of investment expense, adjusted for the
changing amounts actually invested.
Net Pension Liability
For purposes of measuring the net pension liability, deferred outflows of
resources and deferred inflows of resources related to pensions, and
pension expense, information about the fiduciary net position of the System
and additions to /deductions from System's fiduciary net position have been
determined on the same basis as they are reported by System. For this
purpose, benefit payments (including refunds of employee contributions)
535
are recognized when due and payable in accordance with benefit terms.
Investments are reported at fair value.
E. Net Pension Liability of Participating Employers
The components of the net pension liability of the participating employers
at June 30, 2015 were as follows:
Net Pension Liability of Employers
Total pension liability $ 148,983,351
Plan fiduciary net position (119,019,943)
Employers' net pension liability $ 29,963,408
Plan fiduciary net postion as a
percentage of total pension liability 79.89%
Actuarial Assumptions
A summary of the actuarial assumptions as of the latest actuarial valuation
is shown below:
Valuation Date
Actuarial cost method
Actuarial assumptions:
Investment rate of return
Projected salary increases
Inflation rate
Post - retirement cost -of- living adjustment
July 1, 2013 Rolled Forward
to December 31, 2014
Entry Age
7.75%
4.75% - 8.00%
3.75%
3% on first $12,000
Actuarial valuation of the ongoing Systems involves estimates of the
reported amounts and assumptions about probability of occurrence of
events far into the future. Examples include assumptions about future
employment mortality and future salary increases. Amounts determined
regarding the net pension liability are subject to continual revision as actual
results are compared with past expectations and new estimates are made
about the future. The actuarial assumptions used in the July 1, 2013 valu-
ation were based on the results of the most recent actuarial experience
study, which was for the period July 1, 2012 through June 30, 2013.
Mortality rates were based on the RP -2000 Mortality Table projected to
2012 with Scale AA. For disabled lives, the mortality rates were based on
the RP -2000 Mortality Table set forward five years.
536
Target Allocations
The long -term expected rate of return on pension plan investments was
selected from a best estimate range determined using the building block
approach. Under this method, an expected future real return range
(expected returns, net of pension plan investment expense and inflation) is
calculated separately for each asset class. These ranges are combined to
produce the long -term expected rate of return by weighting the expected
future real rates of return net of investment expenses by the target asset
allocation percentage and by adding expected inflation. The target alloca-
tion and best estimates of arithmetic real rates of return for each major
class are summarized in the following table:
Long -term
Target Expected
Asset Real Rate
Asset Class
Allocation
of Return
Global equity
43.00%
8.23%
Fixed income
23.00%
5.05%
Private equity
10.00%
9.75%
Real estate
10.00%
6.50%
Timber /Natural resources
4.00%
6.88%
Hedge funds
10.00%
7.00%
Total 100.00%
Discount Rate: The discount rate used to measure the total pension
liability was 7.75 %. The projection of cash flows used to determine the
discount rate assumed that the plan member contributions will be made at
the current contribution rate and that employer contributions will be made
at contractually required rates, actuarially determined. Based on those
assumptions, the pension plan's fiduciary net position was projected to be
available to make all projected future benefit payments to current active
and inactive plan members. Therefore, the long -term expected rate of
return on pension plan investments was applied to all periods of projected
benefit payments to determine the total pension liability.
Sensitivitv of the proportionate share of the net pension liability to changes
in the discount rate: The following presents the Town's proportionate share
of the net pension liability calculated using the discount rate of 7.75 %, as
well as what the Town's proportionate share of the net pension liability
would be if it were calculated using a discount rate that is 1 percentage -
point lower (6.75 %) or 1 percentage -point higher (8.75 %) than the current
rate:
Fiscal Year Ended
December 31, 2014 .
1% Current
Decrease
(6.75 %)
$ 37,631,963
537
Discount Rate
(7.75 %)
$ 25,805,701
1% Increase
(8.75 %)
$ 9,270,030
F. Pension Liabilities, Pension Expense, and Deferred Outflows of
Resources and Deferred Inflows of Resources Related to Pensions
At June 30, 2015, the Town reported a liability of $25,805,701 for its
proportionate share of the net pension liability. The net pension liability
was measured as of December 31, 2014, and the total pension liability
used to calculate the net pension liability was determined by an actuarial
valuation as of July 1, 2013. The Town's proportion of the net pension
liability was based on a projection of the Town's long -term share of contri-
butions to the pension plan relative to the projected contributions of all
participating employers, actuarially determined. At December 31, 2014,
the Town's proportion was 92.75 %.
For the year ended June 30, 2015, the Town recognized pension expense
of $3,232,308. In addition, the Town reported deferred outflows of resources
and deferred inflows of resources related to pensions from the following
sources:
Deferred
Outflows of
Resources
Net difference between projected and
actual investment earnings on pension
plan investments $ 168,028
Pension plan contributions made
subsequent to the measurement date 1,500,000
Total $ 1,668,028
Deferred outflows of resources related to pensions resulting from contri-
butions subsequent to the measurement date will be recognized as a
reduction of the net pension liability in the year ended June 30, 2016.
Amounts reported as deferred outflows of resources related to pensions
will be recognized in pension expense as follows:
Year ended June 30:
2016
2017
2018
2019
Total
538
$ 1,542,007
42,007
42,007
42,007
$ 1,668,028
19. Massachusetts Teachers' Retirement System (MTRS)
A. Plan Description
The Massachusetts Teachers' Retirement System (MTRS) is a public
employee retirement system (PERS) that administers a cost - sharing multi -
employer defined benefit plan, as defined in Governmental Accounting
Standards Board (GASB) Statement No. 67, Financial Reporting for
Pension Plans. MTRS is managed by the Commonwealth on behalf of
municipal teachers and municipal teacher retirees. The Commonwealth
is a nonemployer contributor and is responsible for all contributions and
future benefit requirements of the MTRS. The MTRS covers certified
teachers in cities (except Boston), towns, regional school districts, charter
schools, educational collaboratives, and Quincy College. The MTRS is
part of the Commonwealth's reporting entity and does not issue a stand-
alone audited financial report.
Management of MTRS is vested in the Massachusetts Teachers' Retire-
ment Board (MTRB), which consists of seven members —two elected by the
MTRS members, one who is chosen by the six other MTRB members, the
State Treasurer (or their designee), the State Auditor (or their designee), a
member appointed by the Governor, and the Commissioner of Education (or
their designee), who serves ex- officio as the Chairman of the MTRB.
B. Benefits Provided
MTRS provides retirement, disability, survivor, and death benefits to
members and their beneficiaries. Massachusetts General Laws (MGL)
establishes uniform benefit and contribution requirements for all contrib-
utory PERS. These requirements provide for superannuation retirement
allowance benefits up to a maximum of 80% of a member's highest three -
year average annual rate of regular compensation. For employees hired
after April 1, 2012, retirement allowances are calculated on the basis of
the last five years or any five consecutive years, whichever is greater in
terms of compensation. Benefit payments are based upon a member's
age, length of creditable service, and group creditable service, and group
classification. The authority for amending these provisions rests with the
Legislature.
Members become vested after ten years of creditable service. A superan-
nuation retirement allowance may be received upon the completion of
twenty years of creditable service or upon reaching the age of 55 with ten
years of service. Normal retirement for most employees occurs at age 65.
Most employees who joined the system after April 1, 2012 cannot retire
prior to age 60.
The MTRS' funding policies have been established by Chapter 32 of
the MGL. The Legislature has the authority to amend these policies.
The annuity portion of the MTRS retirement allowance is funded by
539
employees, who contribute a percentage of their regular compensation.
Costs of administering the plan are funded out of plan assets.
C. Contributions
Member contributions for MTRS vary depending on the most recent date
of membership:
Hire Date % of Compensation
Prior to 1975
5% of regular compensation
1975-1983
7% of regular compensation
1984 to 6/30/1996
8% of regular compensation
7/1/1996 to present
9% of regular compensation
7/1/2001 to present
11 % of regular compensation (for teachers
hired after 7/1/01 and those accepting provi-
sions of Chapter 114 of the Acts of 2000)
1979 to present
An additional 2% of regular compensation in
excess of $30,000
D. Actuarial Assumptions
The total pension liability for the June 30, 2014 measurement date was
determined by an actuarial valuation as of January 1, 2014 rolled forward
to June 30, 2014. The total pension liability for the June 30, 2013 meas-
urement date was determined by an actuarial valuation as of January 1,
2014, rolled back to June 30, 2013. This valuation used the following
assumptions:
• (a) 8.0% investment rate of return, (b) 3.5% interest rate credited to the
annuity savings fund and (c) 3.0% cost of living increase per year.
• Salary increases are based on analyses of past experience but range
from 4.0% to 7.5% depending on length of service.
• Mortality rates were as follows:
Pre- retirement - reflects RP -2000 Employees table adjusted for
"white- collar" employment projected 22 years with Scale AA
(gender distinct)
— Post - retirement - reflects RP -2000 Healthy Annuitant table adjusted
for large annuity amounts and projected 17 years with Scale AA
(gender distinct)
— Disability — reflects RP -2000 Healthy Annuitant table adjusted for
large annuity amounts and projected 17 years with Scale AA
(gender distinct) set forward 3 years for males.
Investment assets of the MTRS are with the Pension Reserves Investment
Trust (PRIT) Fund. The long -term expected rate of return on pension plan
investments was determined using a building -block method in which best-
540
estimate ranges of expected future rates of return are developed for each
major asset class. These ranges are combined to produce the long -term
expected rate of return by weighting the expected future rates of return by
the target asset allocation percentage. Best estimates of geometric rates
of return for each major asset class included in the PRIT Fund's target
asset allocation as of June 30, 2014 and 2013 are summarized in the
following table:
E. Discount Rate
The discount rate used to measure the total pension liability was 8.0 %.
The projection of cash flows used to determine the discount rate assumed
that plan member contributions will be made at the current contribution
rates and the Commonwealth's contributions will be made at rates equal
to the difference between actuarially determined contribution rates and the.
member rates. Based on those assumptions, the net position was pro-
jected to be available to make all projected future benefit payments of
current plan members. Therefore, the long -term expected rate of return
on pension plan investments was applied to all periods of projected benefit
payments to determine the total pension liability.
F. Sensitivity Analysis
The following illustrates the sensitivity of the collective net pension liability
to changes in the discount rate. In particular, the table presents the MTRS
collective net pension liability assuming it was calculated using a single
discount rate that is one- percentage -point lower or one - percentage -point
higher than the current discount rate (amounts in thousands):
Fiscal Year 1 % Decrease Current Discount 1 % Increase
Ended to 7% Rate 8% to 9%
June 30, 2013 $ 21,426,000
June 30, 2014 $ 201247,000
541
$ 17,234,000 $ 13,672,000
$ 15,896,000 $ 12,200,000
Long -Term Expected
Target
Real Rate of Return
Asset Class
Allocation
2014
2013
Global equity
43.0%
7.2%
7.70%
Core fixed income
13.0%
2.5%
2.00%
Hedge funds
10.0%
5.5%
4.75%
Private equity
10.0%
8.8%
9.00%
Real estate
10.0%
6.3%
6.00%
Value added fixed income
10.0%
6.3%
6.30%
Timber /natural resources
4.0%
5.0%
5.00%
Total
100.0%
E. Discount Rate
The discount rate used to measure the total pension liability was 8.0 %.
The projection of cash flows used to determine the discount rate assumed
that plan member contributions will be made at the current contribution
rates and the Commonwealth's contributions will be made at rates equal
to the difference between actuarially determined contribution rates and the.
member rates. Based on those assumptions, the net position was pro-
jected to be available to make all projected future benefit payments of
current plan members. Therefore, the long -term expected rate of return
on pension plan investments was applied to all periods of projected benefit
payments to determine the total pension liability.
F. Sensitivity Analysis
The following illustrates the sensitivity of the collective net pension liability
to changes in the discount rate. In particular, the table presents the MTRS
collective net pension liability assuming it was calculated using a single
discount rate that is one- percentage -point lower or one - percentage -point
higher than the current discount rate (amounts in thousands):
Fiscal Year 1 % Decrease Current Discount 1 % Increase
Ended to 7% Rate 8% to 9%
June 30, 2013 $ 21,426,000
June 30, 2014 $ 201247,000
541
$ 17,234,000 $ 13,672,000
$ 15,896,000 $ 12,200,000
20.
21.
G. Special Funding Situation
The Commonwealth is a nonemployer contributor and is required by
statute to make all actuarial determined employer contributions on behalf
of the member employers. Therefore, these employers are considered to
be in a special funding situation as defined by GASB Statement No. 68,
Accounting and Financial Reporting for Pensions (GASB 68) and the
Commonwealth is a nonemployer contributing entity in MTRS. Since the
employers do not contribute directly to MTRS, there is no net pension
liability to recognize for each employer.
H. Town Proportions
In fiscal year 2014 (the most recent measurement period), the Common-
wealth's proportionate share of the MTRS' collective net pension liability
and pension expense that is associated with the Town was $67,583,938
and $4,695,381 respectively, based on a proportionate share of 0.425154 %.
As required by GASB 68, the Town has recognized its portion of the collec-
tive pension expense as both a revenue and expense in the government -
wide Statement of Activities.
Risk Management
The Town is exposed to various risks of loss related to torts; theft of, damage to
and destruction of assets; errors and omissions; and natural disasters for which
the government carries commercial insurance. There were no significant reduc-
tions in insurance coverage from the previous year and have been no material
settlements in excess of coverage in any of the past three fiscal years.
Beginning Net Position Restatement
In fiscal year 2015, the Town's beginning net position as of July 1, 2014
was restated for the implementation of the new standard — Governmental
Accounting Standards Board (GASB) Statement 68, Accounting and Financial
Reporting for Pensions, as amended by GASB Statement 71., Pension
Transition for Contributions Made Subsequent to the Measurement Date.
Accordingly, the following reconciliation is provided:
Business -Type Activities
Government -
Wide Financial
Statements Fund Basis Financial Statements
Governmental Electric Water Sewer Stormwater Business -Type
Activities Division Fund Fund Fund Fund Total
As previously reported $ 119,254,491 $ 101,873,334 $ 9,508,461 $ 11,340,775 $ 1,868,663 $ 124,591,233
GASB 68 implementation
for net pension liability (21,355,594) (3,669,527) (719,770) (214,515) (82,844) (4,686,656)
As restated $ 97,898,897 $ 98,203,807 $ 8,788,691 $ 11,126,260 $ 1,785,819 $ 119,904,577
542
Town of Reading, Massachusetts Municipal Light Department
Notes to Financial Statements
1. Summary of Significant Accounting Policies
The significant accounting policies of the Town of'Reading Municipal Light
Department ( "the Department ") (an enterprise fund of the Town of Reading,
Massachusetts) are as follows:
A. Business Activity - The Department purchases electricity for distribution to
more than 25,000 customers within the towns of Reading, North Reading,
Wilmington, and Lynnfield.
B. Regulation and Basis of Accounting_- Under Massachusetts General Laws,
the Department's electric rates are set by the Municipal Light Board. Electric
rates, excluding the purchase power fuel charge and the purchase power
capacity and transmission charge, cannot be changed more than once
every three months. Rate schedules are filed with the Massachusetts
Department of Public Utilities (DPU). While the DPU exercises general
supervisory authority over the Department, the Department's rates are not
subject to DPU approval. The Department's policy is to prepare its financial
statements in conformity with generally accepted accounting principles.
Proprietary funds distinguish operating revenues and expenses from non -
operating items. Operating revenues and expenses generally result from
providing services and producing and delivering goods in connection with
a proprietary fund's principal ongoing operations. The principal operating
revenues of the Department's proprietary fund are charges to customers
for electric sales and services. Operating expenses for the Department's
proprietary fund include the cost of sales and services, administrative
expenses and depreciation on capital assets. All revenues and expenses
not meeting this definition are reported as non - operating revenues and
expenses.
C. Concentrations - The Department operates within the electric utility
industry. In 1998, the Commonwealth of Massachusetts enacted energy
deregulation legislation that restructured the Commonwealth's electricity
industry to foster competition and promote reduced electric rates. Energy
deregulation created a separation between the supply and delivery por-
tions of electricity service and enabled consumers to purchase their
energy from a retail supplier of their choice. Municipal utilities are not
currently subject to this legislation.
D. Retirement Trust - The Reading Municipal Light Department Employees'
Retirement Trust (the "Pension Trust ") was established by the Reading
Municipal Light Board on December 30, 1966, pursuant to Chapter 64 of
the General Laws of the Commonwealth of Massachusetts.
543
The Pension Trust constitutes the principal instrument of a plan estab-
lished by the Municipal Light Board to fund the Department's annual
required contribution to the Town of Reading Contributory Retirement
System (the System), a cost sharing, multi - employer public employee
retirement system.
E. Other Post - Employment Benefits Trust - The Other Post - Employment
Benefits Liability Trust Fund (the "OPEB Trust ") was established by the
Reading Municipal Light Board pursuant to Chapter 32B, Section 20 of
the General Laws of the Commonwealth of Massachusetts.
The OPEB Trust constitutes the principal instrument of a plan established
by the Municipal Light Board to fund the Department's annual actuarially
determined OPEB contribution for future retirees.
F. Revenues - Revenues are based on rates established by the Department
and filed with the DPU. Revenues from sales of electricity are recorded on
the basis of bills rendered from monthly meter readings taken on a cycle
basis and are stated net of discounts. Recognition is given to the amount
of sales to customers which are unbilled at the end of the fiscal period.
G. Cash and Short -term Investments - For the purposes of fhe Statements of
Cash Flows, the Department considers unrestricted cash on deposit with the
Town Treasurer to be cash or short-term investments. For purposes of the
Statements of Net Position, both the proprietary funds and fiduciary funds
consider unrestricted and restricted investments with original maturities of
three months or less to be short-term investments.
H. Investments - State and local statutes place certain limitations on the nature
of deposits and investments available. Deposits in any financial institution
may not exceed certain levels within the financial institution. Non - fiduciary
fund investments can be made in securities issued or unconditionally guar-
anteed by the U.S. Government or agencies that have a maturity of one
year or less from the date of purchase and repurchase agreements guar-
anteed by such securities with maturity dates of no more than 90 days from
date of purchase.
Investments for the Department and the Pension Trust consist of domestic
and foreign fixed income bonds which the Department intends to hold to
maturity. These investments are reported at fair market value in the propri-
etary fund and fiduciary fund financial statements.
I. Inventory - Inventory consists of parts and accessories purchased for use
in the utility business for construction, operation, and maintenance pur-
poses and is stated at average cost. Meters and transformers are capi-
talized when purchased.
544
J. Capital Assets and Depreciation - Capital assets, which include property,
plant, equipment, and utility plant infrastructure, are recorded at historical
cost or estimated historical cost when purchased or constructed. Donated
capital assets are recorded at estimated fair market value at the date of
the donation.
The cost of normal maintenance and repairs that do not add to the value
of the asset or materially extend asset lives are not capitalized.
Major outlays for capital assets and improvements are capitalized as they
are acquired or constructed. Interest incurred during the construction phase
of proprietary fund capital assets is included as part of the capitalized value
of the constructed asset. When capital assets are retired, the cost of the
retired asset, less accumulated depreciation, salvage value and any cash
proceeds, is charged to the Department's unrestricted net position.
Massachusetts General Laws require utility plant in service to be depreci-
ated at a minimum annual rate of 3 %. To change this rate, the Department
must obtain approval from the DPU. Changes in annual depreciation rates
may be made for financial factors relating to cash flow for plant expansion,
rather than engineering factors relating to estimates of useful lives.
K. Accrued Compensated Absences - Employee vacation leave is vested
annually but may only be carried forward to the succeeding year with
supervisor approval and, if appropriate, within the terms of the applicable
Department policy or union contract. Generally, sick leave may accumu-
late according to union and Department contracts and policy, and is paid
upon normal termination at the current rate of pay. The Department's
policy is to recognize vacation costs at the time payments are made. The
Department records accumulated, unused, vested sick pay as a liability.
The amount recorded is the amount to be paid upon normal termination at
the current rate of pay.
L. Long -Term Obligations - The proprietary fund financial statements report
long -term debt and other long -term obligations as liabilities in the State-
ments of Net Position.
M. Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosures for contingent assets and liabilities
at the date of the financial statements, and the reported amounts of the
revenues and expenses during the fiscal year. Actual results could vary
from estimates that were used.
N. Rate of Return - The Department's rates must be set such that earnings
attributable to electric operations do not exceed eight percent of the net
cost of plant. The Department's audited financial statements are prepared
545
2.
in accordance with auditing standards generally accepted in the United
States of America. To determine the net income subject to the rate of
return limitations, the Department performs the following calculation. Using
the net income per the audited financial statements, the return on invest-
ment to the Town of Reading is added back, the fuel charge adjustment is
added or deducted, and miscellaneous debits /credits (i.e., gain /loss on
disposal of fixed assets, etc.) are added or deducted, leaving an adjusted
net income figure for rate of return purposes. Investment interest income
and bond principal payments are then deducted from this figure to deter-
mine the net income subject to the rate of return. The net income subject to
the rate of return is then subtracted from the allowable eight percent rate of
return, which is calculated by adding the book value of net plant and the
investment in associated companies less the contributions in aid of con-
struction multiplied by eight percent. From this calculation, the Municipal
Light Board will determine what cash transfers need to be made at the end
of the fiscal year.
O. Comparative Financial Information - The Department's financial statements
include certain prior -year comparative information. Such information does
not include sufficient detail to constitute a presentation in conformity with
generally accepted accounting principles. Accordingly, such information
should be read in conjunction with the Department's financial statements
for the year ended June 30, 2014, from which the summarized information
was derived.
Cash and Investments
Total cash and investments as of June 30, 2015 are classified in the
accompanying financial statements as follows:
Proprietary Fund:
Unrestricted cash and short-term investments $ 13,151,862
Restricted cash and short -term investments 22,344,776
Restricted investments 1,284,061
Fiduciary Funds:
Cash and short -term investments - Pension Trust 2,666,772
Cash and short-term investments - OPEB Trust 1,857,738
Investments - Pension Trust
Total cash and investments .
546
1,284,061
$ 42,589,270
Total cash and investments at June 30, 2015 consist of the following:
Cash on hand $ 3,000
Deposits with financial institutions 42,586,270
Total cash and investments $ 42,589,270
Disclosures Relating to Interest Rate Risk
Interest rate risk is the risk that the fair value of an investment will be adversely
affected by changes in market interest rates. Generally, the longer the maturity
of an investment, the greater the sensitivity of its fair value to changes in
market interest rates. The Department manages its exposure to interest rate
risk by purchasing a combination of shorter term and longer term investments
and by timing cash flows from maturities so that a portion of the portfolio is
maturing or coming close to maturity evenly over time as necessary to provide
the cash flow and liquidity needed for operations.
As of June 30, 2015, the Department (including the Pension Trust and OPEB
Trust) held cash and short -term investments in pooled investments with the
Massachusetts Municipal Depository Trust (MMDT), FDIC - insured savings
accounts, and 90 -day FDIC - insured bank certificates of deposit. Because of
their immediate liquidity and /or short-term maturity, these funds are classified
as cash and short -term investments in the accompanying financial statements
and are not considered to be exposed to significant interest rate risk.
As of June 30, 2015, the Department and Pension Trust held investments in
domestic and foreign fixed income bonds with varying maturity dates as follows:
Disclosures Relating to Credit Risk
Generally, credit risk is the risk that the issuer of an investment will not fulfill
its obligation to the holder of the investment. This is measured by the assign-
547
Proprietary
Fiduciary
Fund
Funds
Restricted
Pension
Maturity
Investments
Trust
Date
Corporate bonds
AT &T Inc
$ 207,764
$ 207,764
12/01/22
General Electric Cap Corp
206,035
206,035
01/09/23
Wells Fargo & Co
208,048
208,048
08/15/23
Rabobank Nederland Bank
249,043
249,043
11/09/22
Teva Pharmaceut Fin BV
207,707
207,707
12/18/22
BNP Paribas
205,464
205,464
03/03/23
Total
$ 1,284,061
$ 1,284,061
Disclosures Relating to Credit Risk
Generally, credit risk is the risk that the issuer of an investment will not fulfill
its obligation to the holder of the investment. This is measured by the assign-
547
ing of a rating by a nationally recognized statistical rating organization. As
of June 30, 2015, the Department and Pension Trust held investments in
domestic and foreign fixed income bonds with varying ratings as follows:
Concentration of Credit Risk
The Department follows the Town of Reading's investment policy, which does
not limit the amount that can be invested in any one issuer beyond that stipu-
lated by Massachusetts General Laws. At June 30, 2015, the Department and
Pension Trust investments were held in domestic and foreign fixed income
bonds, as detailed in the sections above. Five of the bonds each individually
represent approximately 16% of the Department's and System's total invest-
ments, while the investment in Rabobank Nederland Bank represents approx-
imately 20 %.
Custodial Credit Risk
Custodial Credit Risk for deposits is the risk that, in the event of the failure of
a depository financial institution, the Department will not be able to recover its
deposits or will not be able to recover collateral securities that are in the pos-
session of an outside party. The custodial credit risk for investments is the
risk that, in the event of the failure of the counterparty (e.g., broker - dealer)
to a transaction, the Department will not be able to recover the value of its
investments or collateral securities that are in the possession of another
party. Massachusetts General Laws, Chapter 44, Section 55, limits deposits
"in a bank or trust company or banking company to an amount not exceeding
sixty per cent of the capital and surplus of such bank or trust company or
banking company, unless satisfactory security is given to it by such bank or
trust company or banking company for such excess." The Department follows
the Massachusetts statute as written, as well as the Town of Reading's
deposit policy for custodial credit risk.
MH
Proprietary
Fiduciary
Fund
Funds
Restricted
Pension
Moody's
Investment Type
Investments
Trust
Ratin
Corporate bonds:
AT &T Inc
$ 207,764
$ 207,764
BAA1
General Electric Cap Corp
206,035
206,035
Al
Wells Fargo & Co
208,048
208,048
A3
Rabobank Nederland Bank
249,043
249,043
A3
Teva Pharmaceut Fin BV
207,707
207,707
A3
BNP Paribas
205,464
205,464
Al
Total
$ 1,284,061
$ 1,284,061
Concentration of Credit Risk
The Department follows the Town of Reading's investment policy, which does
not limit the amount that can be invested in any one issuer beyond that stipu-
lated by Massachusetts General Laws. At June 30, 2015, the Department and
Pension Trust investments were held in domestic and foreign fixed income
bonds, as detailed in the sections above. Five of the bonds each individually
represent approximately 16% of the Department's and System's total invest-
ments, while the investment in Rabobank Nederland Bank represents approx-
imately 20 %.
Custodial Credit Risk
Custodial Credit Risk for deposits is the risk that, in the event of the failure of
a depository financial institution, the Department will not be able to recover its
deposits or will not be able to recover collateral securities that are in the pos-
session of an outside party. The custodial credit risk for investments is the
risk that, in the event of the failure of the counterparty (e.g., broker - dealer)
to a transaction, the Department will not be able to recover the value of its
investments or collateral securities that are in the possession of another
party. Massachusetts General Laws, Chapter 44, Section 55, limits deposits
"in a bank or trust company or banking company to an amount not exceeding
sixty per cent of the capital and surplus of such bank or trust company or
banking company, unless satisfactory security is given to it by such bank or
trust company or banking company for such excess." The Department follows
the Massachusetts statute as written, as well as the Town of Reading's
deposit policy for custodial credit risk.
MH
3.
As of June 30, 2015, none of the Department's (including Pension Trust and
OPEB Trust) cash and short-term investments was exposed to custodial
credit risk.
As of June 30, 2015, none of the Department or Pension Trust investments
were exposed to custodial credit risk because the related securities are
registered in the Department's name.
Restricted Cash and Investments
The Department's proprietary fund restricted cash and investment balances
represent the following reserves:
Depreciation fund
Construction fund
Deferred fuel reserve
Deferred energy
conservation reserve
Rate stabilization
Reserve for uncollectible
accounts
Sick leave benefits
Hazardous waste fund
Customer deposits
Total
6/30/15
Cash
$ 5,434,308
1,400,000
5,180,285
584,606
6,771,634
Investments
6/30/14
Cash Investments
$ - $ 4,130,585 $
1,000,000
4,132,695
457,261
6,723,797
200,000 -
200,000
1,777,582 1,284,061
1,674,873
150,000 -
150,000
846,361 -
749,900
1,292,906
$ 22,344,776 $ 1,284,061 $ 19,219,111 $ 1,292,906
The Department maintains the following reserves:
- Depreciation fund - The Department is normally required to reserve
3.0% of capital assets each year to fund capital improvements.
- Construction fund — This represents additional funds set aside to fund
capital expenditures.
- Deferred fuel reserve - The Department transfers the difference
between the customers' monthly fuel charge adjustment and actual
fuel costs into this account to be used in the event of a sudden
increase in fuel costs.
- Deferred energy conservation reserve - This account is used to reserve
monies collected from a special energy charge added to customer bills.
Customers who undertake measures to conserve and improve energy
efficiency can apply for rebates that are paid from this account.
- Rate stabilization - This represents amounts set aside to help stabilize
cost increases resulting from fluctuations in purchase power costs.
549
4.
A
- Reserve for uncollectible accounts - This account was set up to offset
a portion of the Department's bad debt reserve.
- Sick leave benefits - This account is used to offset the Department's
actuarially determined compensated absence liability.
- Hazardous waste fund -This reserve was set up by the Board of
Commissioners to cover the Department's insurance deductible in
the event of a major hazardous materials incident.
Customer deposits - Customer deposits that are held in escrow.
Accounts Receivable
Accounts receivable consists of the following at June 30, 2015:
Customer Accounts:
Billed
$ 1,947,170
Less allowances:
294,455
Uncollectible accounts
(200,000)
Sales discounts
(86,174)
Total billed
$ 1,137,898
Unbilled, net
Total customer accounts
Other Accounts:
Merchandise sales 150,805
MMWEC surplus 212,689
Intergovernmental grants 103,886
Liens and other 19,333
Total other accounts
Total net receivables
Prepaid Expenses
Prepaid expenses consist of the following:
1,660,996
5,166,350
6,827,346
486,713
$ 7,314,059
Insurance and other
$ 292,268
Purchase power
294,455
NYPA prepayment fund
307,573
WC Fuel - Watson
243,602
Total
$ 1,137,898
550
6. Inventory
Inventory is comprised of supplies and materials at June 30, 2015, and is
valued using the average cost method.
7. Investment in Associated Companies
Under agreements with the New England Hydro- Transmission Electric Com-
pany, Inc. (NEH) and the New England Hydro- Transmission Corporation
(NHH), the Department has made the following advances to fund its equity
requirements for the Hydro - Quebec Phase II interconnection. The Depart-
ment is carrying its investment at cost, reduced by shares repurchased. The
Department's equity position in the Project is less than one -half of one percent.
Investment in associated companies consists of the following, at June 30, 2015:
New England Hydro - Transmission (NEH & NHH) $ 26,994
8. Capital Assets
The following is a summary of fiscal year 2015 activity in capital assets (in
thousands):
Business -Type Activities:
Capital assets, being depreciated:
Structures and improvements
Equipment and furnishings
Infrastructure
Total capital assets, being depreciated
Less accumulated depreciation for:
Structures and improvements
Equipment and furnishings
Infrastructure
Total accumulated depreciation
Total capital assets, being depreciated, net
Capital assets, not being depreciated:
Land
Total capital assets, not being depreciated
Capital assets, net
Beginning
Ending
Balance
Increases
Decreases
Balance
$ 14,183
$ 363
$ -
$ 14,546
31,787
309
(371)
31,725
82,739
2,970
(487)
85,222
128,709
3,642
(858)
131,493
(8,136)
(389)
-
(8,525)
(19,490)
(971)
371
(20,090)
(32,155)
(2,502)
429
(34, 228)
(59, 781)
(3,862)
800
(62, 843)
68,928
(220)
(58)
68,650
1,266 - - 1,266
1,266 - - 1,266
$ 70,194 $ (220) $ (58) $ 69,916
9. Deferred Outflows of Resources
Deferred outflows of resources represent the Department's consumption of
net position that is applicable to future reporting periods. Deferred outflows of
resources have a positive effect on net position, similar to assets.
551
1"I
11.
12.
13.
14.
M
The following is a summary of deferred outflow of resources balances as of
June 30, 2015:
Proprietary
Fund
Net difference between projected and actual
investment earnings on pension plan $ 47,815
Pension plan contributions subsequent to the
measurement date 1,500,000
Total
$ 1,547,815
Accounts Payable
Accounts payable represent fiscal 2015 expenses that were paid after June 30,
2015.
Accrued Liabilities
Accrued liabilities consist of the following at June 30, 2015:
Accrued payroll $ 356,436
Accrued sales tax 192,345
Other 36,323
Total. $ 585,104
Customer Deposits
This balance represents deposits received from customers that are held in
escrow.
Customer Advances for Construction
This balance represents deposits received from vendors in advance for work to
be performed by the Department. The Department recognizes these deposits
as revenue after the work has been completed.
Accrued Employee Compensated Absences
Department employees are granted sick leave in varying amounts. Upon retire-
ment, normal termination, or death, employees are compensated for unused
sick leave (subject to certain limitations) at their then current rates of pay.
Restricted Net Position
The proprietary fund financial statements report restricted net position when
external constraints are placed on net position. Specifically, restricted net
552
position represents depreciation fund reserves, which are restricted for future
capital costs.
16. Post - Employment Health Care and Life Insurance Benefits
Other Post - Employment Benefits
The Department follows GASB Statement No. 45, Accounting and Financial
Reporting by Employers for Post - Employment Benefits Other Than Pensions.
Statement No. 45 requires governments to account for other post - employment
benefits (OPEB), primarily healthcare, on an accrual basis rather than on a
pay -as- you -go basis. The effect is the recognition of an actuarially required
contribution as an expense on the proprietary fund Statements of Revenues,
Expenses, and Changes in Net Position when a future retiree earns their post -
employment benefits, rather than when they use them. To the extent that an
entity does not fund their actuarially required contribution, a post - employment
benefit liability is recognized on the proprietary fund Statements of Net
Position over time.
A. Plan Description
In addition to providing the pension benefits described in Note 17, the
Department provides post - employment health and life insurance benefits
to retired employees through the Town of Reading's participation in the
Massachusetts Interlocal Insurance Association (MIIA) Health Benefits
Trust. Benefits, benefit levels, employee contributions and employer con-
tributions are governed by Chapter 32 of the Massachusetts General
Laws. As of June 30, 2014, the actuarial valuation measurement date,
approximately 87 retirees and 51 active employees meet the eligibility
requirements. The plan does not issue a separate financial report.
B. Benefits Provided
The Department provides post - employment medical, prescription drug,
and life insurance benefits to all eligible retirees and their surviving
spouses. All active employees who retire from the Department and
meet the appropriate criteria are eligible to receive these benefits.
C. Fundinq Policy
As of the June 30, 2014, the actuarial valuation measurement date, retirees
are required to contribute 29% of the cost of the medical and prescription
drug plan, as determined by the MIIA Health Benefits Trust. Retirees also
contribute 50% of the premium for a $5,000 life insurance benefit. The
Department contributes the remainder of the medical, prescription drug,
and life insurance plan costs on a pay -as- you -go basis.
553
D. Annual OPEB Costs and Net OPEB Obli. ation
The Department's fiscal 2015 annual OPEB expense is calculated based
on the annual required contribution of the employer (ARC), an amount
actuarially determined in accordance with the parameters of GASB State-
ment No. 45. The ARC represents a level of funding that, if paid on an
ongoing basis, is projected to cover the normal cost per year and amortize
the unfunded actuarial liability over a remaining period of sixteen years.
The following table shows the components of the Department's annual
OPEB cost for the year ending June 30, 2015, the amount actually
contributed to the plan, and the change in the Department's net OPEB
obligation based on an actuarial valuation as of June 30, 2014.
Annual Required Contribution (ARC)
$ 540,456
Interest on net OPEB obligation
218,069
Annual OPEB cost
758,525
Projected benefit payments
413,143
Increase in net OPEB obligation
345,382
Net OPEB obligation - beginning of year
-
Contributions to OPEB Trust
345,382
(1) Net OPEB obligation - end of year
$ -
(1) See Part Efor additional information
The Department's annual OPEB cost, the percentage of annual OPEB
cost contributed to the plan, and the net OPEB obligation for fiscal year
2015 and the two preceding fiscal years were as follows:
E. Funded Status and Funding Progress
The funded status of the plan as of June 30, 2014, the most recent
actuarial valuation measurement date was as follows:
554
Annual
Percentage of
OPEB
OPEB
Net OPEB
Fiscal Year Ended
Cost
Cost Contributed
Obligation
2015
$758,525
100.00%
$ -
2014
$768,378
100.00%
$ -
2013
$604,987
100.00%
$ -
E. Funded Status and Funding Progress
The funded status of the plan as of June 30, 2014, the most recent
actuarial valuation measurement date was as follows:
554
Actuarial accrued liability (AAL)
$ 7,726,667
Actuarial value of plan assets
1,846,042
Unfunded actuarial accrued .liability (UAAL)
$ 5,880,625
Funded ratio (actuarial value of plan assets /AAL)
23.89%
Covered payroll (active plan members)
N/A
UAAL as a percentage of covered payroll
N/A
In 2010, the Department's Municipal Light Board voted to accept the provi-
sions of Chapter 32B §20 of Massachusetts General Laws and create an
Other Post - Employment Benefits Liability Trust Fund as a mechanism to set
aside monies to fund its OPEB liability. In 2013, the Commissioners voted to
create an OPEB trust instrument in alignment with the Town of Reading. In
fiscal year 2015, the Department contributed $345,382 to this trust, which
was equal to all of its actuarially determined annual contributions through
June 30, 2015. The assets and net position of this trust are reported in the
Department's Fiduciary Funds Statements of Fiduciary Net Position.
Actuarial valuations of an ongoing plan involve estimates of the value of
reported amounts and assumptions about the probability of events far into
the future. Examples include assumptions about future employment, mor-
tality, and the healthcare cost trend. Amounts determined regarding the
funded status of the plan and the annual required contributions of the
employer are subject to continual revision as actual results are compared
to past expectations and new estimates are made about the future. The
schedule of funding progress, presented as required supplementary infor-
mation following the notes to the financial statements, presents multi -year
trend information about whether the actuarial value of plan assets is
increasing or decreasing over time relative to the actuarial accrued liability.
F. Actuarial Methods and Assumptions
Projections of benefits for financial reporting purposes are based on the
plan as understood by the Department and the plan members and include
the types of benefits provided at the time of each actuarial valuation and
the historical pattern of sharing of benefit costs between the Department
and plan members to that point. The actuarial methods and assumptions
used include techniques that are designed to reduce short -term volatility in
actuarial accrued liabilities and the actuarial value of assets, consistent
with the long -term perspective of the calculations.
In the June 30, 2014 actuarial valuation, the Projected Unit Credit actuarial
cost method was used. The Department's actuarial value of plan assets
was $1,846,042. The actuarial assumptions included a 7.75% investment
rate of return and an initial annual health care cost trend rate of 8.0%
which decreases by 0.5% for six years to an ultimate level of 5.0% per
year. The amortization costs for the initial UAAL is a level percentage of
555
payroll amortization, with amortization payments increasing at 2.5% per
year for a remaining period of 16 years.
17. Reading Contributory Retirement System
The Department follows the provisions of GASB Statement No. 68, Accounting
and Financial Reporting for Pensions — An Amendment of GASB Statement
No. 27, with respect to the employees' retirement funds.
A. Plan Description
Substantially all employees of the Department are members of the Town
of Reading Contributory Retirement System (the System), a cost sharing,
multiple - employer public employee retirement system (PERS). Eligible
employees must participate in the System. The pension plan provides
pension benefits, deferred allowances, and death and disability benefits.
Chapter 32 of the Massachusetts General Laws establishes the authority
of the System, as well as contribution percentages and benefits paid. The
System Retirement Board does not have the authority to amend benefit
provisions. Additional information is disclosed in the System's annual
financial reports, which are publically available from the System's admin-
istrative offices located at Reading Town Hall, 16 Lowell Street, Reading,
Massachusetts, 01867.
B. Benefits Provided
The System provides for retirement allowance benefits up to a maximum
of 80% of a member's highest three -year average annual rate of regular
compensation. Benefit payments are based upon a member's age, length of
creditable service, level of compensation and group classification. Members
become vested after 10 years of creditable service. A retirement allowance
may be received upon reaching age 65 or upon attaining 20 years of ser-
vice. The plan also provides for early retirement at age 55 if the participant
(1) has a record of 10 years of creditable service, (2) was on the Depart-
ment payroll on January 1, 1978, (3) voluntarily left Department employment
on or after that date, and (4) left accumulated annuity deductions in the
fund. A retirement allowance consists of two parts: an annuity and a pen-
sion. A member's accumulated total deductions and a portion of the interest
they generate constitute the annuity. The difference between the total retire-
ment allowance and the annuity is the pension. The average retirement
benefit is approximately 80 -85% pension and 15 -20% annuity.
Per Chapter 176 of the Acts of 2011, for members who retire on or after
April 2, 2012, if in the 5 years of creditable service immediately preceding
retirement, the difference in the annual rate of regular compensation
between any 2 consecutive years exceeds 100 percent, the normal yearly
amount of the retirement allowance shall be based on the average annual
rate of regular compensation received by the member during the period of
5 consecutive years preceding retirement.
556
Employees who resign from service and who are not eligible to receive a
retirement allowance or are under the age of 55 are entitled to request a
refund of their accumulated total deductions. In addition, depending upon
the number of years of creditable service, such employees are entitled to
receive zero, fifty, or one hundred percent of the regular interest which
has accrued upon those deductions. However, effective July 1, 2010,
members voluntarily withdrawing with less than 10 years of service get
credited interest each year at a rate of 3% and do not forfeit any interest
previously earned on contributions.
C. Contributions
Participants contribute a set percentage of their gross regular com-
pensation annually. Employee contribution percentages are specified
in Chapter 32 of the Massachusetts General Laws. The employee's
individual contribution percentage is determined by their date of entry
into the system. In addition, all employees hired after January 1, 1979
contribute an additional 2% on all gross regular compensation over the
rate of $30,000 per year. The percentages are as follows:
Before January 1, 1975 5%
January 1, 1975 - December 31, 1983 7%
January 1, 1984 - June 30, 1996 8%
Beginning July 1, 1996 9%
Employers are required to contribute at actuarially determined rates as
accepted by the Public Employee Retirement Administration Commission
(PERAC).
The Department's contribution to the System for the year ended June 30,
2015 was $1,401,638, which was equal to its annual required contribution.
D. Summary of Significant Accountinq Policies
For purposes of measuring the net pension liability, deferred outflows of
resources and deferred inflows of resources related to pensions, and pen-
sion expense, information about the fiduciary net position of the System
and additions to /deductions from System's fiduciary net position have
been determined on the same basis as they are reported by System. For
this purpose, benefit payments (including refunds of employee contribu-
tions) are recognized when due and payable in accordance with benefit
terms. Investments are reported at fair value.
E. Pension Liabilities, Pension Expense, and Deferred Outflows of
Resources and Deferred Inflows of Resources Related to Pensions
At June 30, 2015, the Department reported a liability of $4,524,191 for its
proportionate share of the System's net pension liability. The net pension
liability was measured as of December 31, 2014, and the total pension
557
liability used to calculate the net pension liability was determined by an
actuarial valuation as of July 1, 2013 rolled forward to December 31, 2014.
The Department's proportion of the net pension liability was based on an
actuarially determined projection of the Department's long -term share of
contributions to the pension plan relative to the projected contributions of
all participating employers. At December 31, 2014, the Department's
proportion was 28.25 %.
Town of Readinq Municipal Light Department Employees' Retirement
Trust ( "Pension Trust "): The Department has established an irrevocable
trust for the purpose of currently funding its annual required contribution to
the Town of Reading Contributory Retirement System (RCRS). Annual
contributions to the trust are actuarially determined to be the net normal
cost for funding the Department's liability for pension benefits for covered
employees, and both the principal and income of the trust is restricted for
the exclusive benefit of Department employees and their beneficiaries.
This Pension Trust is reported as a fiduciary fund type in the Department's
basic financial statements.
As noted in the first paragraph of this section, the Department's propor-
tionate share of the RCRS net pension liability was determined by an
actuarial valuation as of July 1, 2013 rolled forward to December 31, 2014
However, the actuarial valuation does not take into account the fiduciary
net position of the Department's Pension Trust at December 31, 2014 (the
measurement date). Accordingly, the following reconciliation is provided:
2015
Net pension liability, per actuarial valuation $ 8,464,663
Pension Trust Net Position (5,450,833)
Pension Trust contributions subsequent to the net
pension liability measurement date (reported as
deferred outflows of resources in the proprietary
fund Statements of Net Position) 1,500,000
Pension Trust investment income and fair value
changes subsequent to the net pension liability
measurement date 10,361
Net pension liability, as reported on the proprietary
fund Statements of Net Position $ 4,524,191
558
For the year ended June 30, 2015, the Department recognized pension
expense of $833,949. In addition, the Department reported deferred
outflows of resources related to pensions from the following sources:
Deferred
Outflows of
Resources
Net difference between projected and actual
earnings on pension plan investments $ 47,815
Contributions subsequent to the measurement
date 1,500,000
Total $ 1,547,815
Deferred outflows of resources related to pensions resulting from contri-
butions subsequent to the measurement date will be recognized as a
reduction of the Department's net pension liability in the year ended
June 30, 2016.
Amounts reported as deferred outflows of resources related to pensions
will be recognized in the Department's pension expense as follows:
Year ended June 30:
2016
$ 1,511,954
2017
11,954
2018
11,954
2019
11,953
Total $ 1,547,815
Actuarial assumptions: The total pension liability was determined by an
actuarial valuation as of July 1, 2013, rolled forward to the measurement
date of December 31, 2014 using the following actuarial assumptions,
applied to all periods included in the measurement:
Inflation 3.75% per year
Salary increases Based on years of service, 7.00% - 4.75% for
Group 1 members and 8.00% - 5.25% for
Group 4 members
Investment rate of return 7.75 %, net of pension plan investment expense,
Mortality rates were based on the RP -2000 Mortality Table projected to
2012 with Scale AA. For disabled lives, the mortality rates were based on
the RP -2000 Mortality Table set forward five years.
559
The long -term expected rate of return on pension plan investments was
determined using a building -block method in which best - estimate ranges
of expected future real rates of return (expected returns, net of pension
plan investment expense and inflation) are developed for each major
asset class. These ranges are combined to produce the long -term
expected rate of return by weighting the expected future real rates of
return by the target asset allocation percentage and by adding expected
inflation. Best estimates of arithmetic real rates of return for each major
asset class included in the pension plan's target asset allocation as of
December 31, 2014 are summarized in the following table:
Long -term
Target Expected
Discount Rate: The discount rate used to measure the total pension liability
was 7.75 %. The projection of cash flows used to determine the discount
rate assumed that plan member contributions will be made at the current
contribution rate and that contributions from participating employers will
be made in accordance with Sections 22D and 22F of Chapter 32 of the
Massachusetts General Laws. Based on those assumptions, the pension
plan's fiduciary net position was projected to be available to make all pro-
jected benefit payments of current plan members. Therefore, the long -term
expected rate of return on pension plan investments was applied to all
periods of projected benefit payments to determine the total pension
liability.
Sensitivity of the Department's proportionate share of the net pension
liability to changes in the discount rate: The following table presents the
Department's proportionate share of the net pension liability (asset) cal-
culated using the current discount rate of 7.75 %, as well as what the
Department's proportionate share of the net pension liability (asset) would
be if it were calculated using a discount rate that is 1 percentage -point
lower (6.75 %) or 1 percentage -point higher (8.75 %) than the current rate:
560
Asset
Rates
Asset Class
Allocation
of Return
Global equity
43.00%
8.23%
Fixed income
23.00%
5.05%
Private equity
10.00%
9.75%
Real estate
10.00%
6.50%
Timber /Natural Resources
4.00%
6.88%
Hedge funds
10.00%
7.00%
Total
100.00%
Discount Rate: The discount rate used to measure the total pension liability
was 7.75 %. The projection of cash flows used to determine the discount
rate assumed that plan member contributions will be made at the current
contribution rate and that contributions from participating employers will
be made in accordance with Sections 22D and 22F of Chapter 32 of the
Massachusetts General Laws. Based on those assumptions, the pension
plan's fiduciary net position was projected to be available to make all pro-
jected benefit payments of current plan members. Therefore, the long -term
expected rate of return on pension plan investments was applied to all
periods of projected benefit payments to determine the total pension
liability.
Sensitivity of the Department's proportionate share of the net pension
liability to changes in the discount rate: The following table presents the
Department's proportionate share of the net pension liability (asset) cal-
culated using the current discount rate of 7.75 %, as well as what the
Department's proportionate share of the net pension liability (asset) would
be if it were calculated using a discount rate that is 1 percentage -point
lower (6.75 %) or 1 percentage -point higher (8.75 %) than the current rate:
560
18.
Fiscal Year Ended
06/30/15
1%
Decrease
(6.75 %)
$ 7,521,554
Current
Discount
Rate
(7.75 %)
$ 4,524,191
1%
Increase
(8.75 %)
$ (1,116,986)
Pension plan fiduciary net position. Detailed information about the pension
plan's fiduciary net position is available in the separately issued System
financial report.
Participation in Massachusetts Municipal Wholesale Electric
Company
The Town of Reading, acting through its Light Department, is a Participant in
certain Projects of the Massachusetts Municipal Wholesale Electric Company
(MMWEC).
MMWEC is a public corporation and a political subdivision of the Common-
wealth of Massachusetts, created as a means to develop a bulk power supply
for its Members and other utilities. MMWEC is authorized to construct, own,
or purchase ownership interests in, and to issue revenue bonds to finance,
electric facilities (Projects). MMWEC has acquired ownership interests in
electric facilities operated by other entities and also owns and operates its
own electric facilities. MMWEC sells all of the capability (Project Capability)
of each of its Projects to its Members and other utilities (Project Participants)
under Power Sales Agreements (PSAs). Among other things, the PSAs
require each Project Participant to pay its pro rata share of MMWEC's costs
related to the Project, which costs include debt service on the revenue bonds
issued by MMWEC to finance the Project, plus 10% of MMWEC's debt ser-
vice to be paid into a Reserve and Contingency Fund. In addition, should a
Project Participant fail to make any payment when due, other Project Partici-
pants of that Project may be required to increase (step -up) their payments
and correspondingly their Participant's'share of that Project's Project Capa-
bility to an additional amount not to exceed 25% of their original Participant's
share of that Project's Project Capability. Project Participants have cove-
nanted to fix, revise, and collect rates at least sufficient to meet their obliga-
tions under the PSAs.
MMWEC has eight Projects. MMWEC originally financed all eight Projects
through the issuance of a multiple series of revenue bonds under a General
Bond Resolution adopted by MMWEC in 1976 (GBR). Security for these
bonds included a pledge of the revenues derived by MMWEC from all its
Project PSAs, without regard to Project or series of bonds. In 2001, through
a refinancing of all its outstanding bonds, MMWEC amended and restated
its GBR to eliminate this "joint- pledge" of revenues. In refinancing its debt,
MMWEC issued a separate issue of bonds for each of the eight Projects,
561
which are payable solely from, and secured solely by, the revenues derived
from the Project to which such issue relates plus available funds pledged
under the Amended and Restated GBR with respect to the bonds of such
issue. The MMWEC revenues derived from each Project are used solely to
provide for the payment of the bonds of any bond issue relating to such
Project and to pay MMWEC's cost of owning and operating such Project and
are not used to provide for the payment of the bonds of any bond issue
relating to any other Project.
MMWEC operates the Stony Brook Intermediate Project and the Stony Brook
Peaking Project, both fossil - fueled power plants. MMWEC has a 22.7 MW
interest in the W. F. Wyman Unit No. 4 plant, owned and operated by subsid-
iaries of Florida Power & Light and a 4.8% ownership interest in the Millstone
Unit 3 nuclear unit operated by Dominion Nuclear Connecticut, Inc. (DNCI), a
subsidiary of Dominion Resources, Inc. DNCI has stated its intention to file an
application with the Nuclear Regulatory Commission (NRC) for an extension of
the Millstone Unit 3 operating license, which currently will expire in 2025. DNCI
has not yet filed its application with the NRC.
MMWEC has an 11.6% ownership interest in the Seabrook Station nuclear
generating unit, which represents a substantial portion of its plant investment
and financing program. On November 1, 2002, an indirect subsidiary of FPL
Group Inc., FPL Energy Seabrook, LLC purchased an approximate 88%
share in the Seabrook nuclear plant from seven other owners. MMWEC is
now one of three, minority non - operating owners of Seabrook Station.
Pursuant to the PSAs, the MMWEC Seabrook and Millstone Project Partici-
pants are liable for their proportionate share of the costs associated with
decommissioning the plants, which is being funded through monthly Project
billings. The Project Participants are also liable for their proportionate share
of the uninsured costs of a nuclear incident that might be imposed under the
Price - Anderson Act (Act). By its terms, the Act expired in August 2002.
Congress is currently considering extending the Act.
In November 1997, the Commonwealth of Massachusetts enacted legislation
effective March 1, 1998 to restructure the electric utility industry. MMWEC
and the municipal light departments, including the Massachusetts Project
Participants, are not specifically subject to this legislation. However, it is
management's belief that industry restructuring and customer choice
promulgated by the legislation will have an effect on MMWEC and the
Participants' operations.
The Reading Municipal Light Department has entered into PSAs and Power
Purchase Agreements (PPAs) with MMWEC. Under both the PSAs and
PPAs, the Department is required to make certain payments to MMWEC
payable solely from Department revenues..Under the PSAs, each Participant
is unconditionally obligated to make payments due to MMWEC whether or not
562
the Project(s) is completed or operating and notwithstanding the suspension
or interruption of the output of the Project(s).
MMWEC is involved in various legal actions. In the opinion of management,
the outcome of such litigation or claims will not have a material adverse effect
on the financial position of the company.
After the July 1, 2015 principal payment, total capital expenditures amounted
to $1,682,341,000, of which $125,343,000 represents the amount associated
with the Department's Project Capability. MMWEC's debt outstanding for the
Projects from Power Supply System Revenue Bonds totals $167,110,000,
of which $6,373,000 is associated with the Department's share of Project
Capability. After the July 1, 2015 principal payment, MMWEC's total future
debt service requirement on outstanding bonds issued for the Projects is
$121,353,000, of which $4,362,000 is anticipated to be billed to the
Department in the future.
The aggregate amount of the Department's required payments under the
PSAs and PPAs, exclusive of the Reserve and Contingency Fund billings, to
MMWEC at June 30, 2015 and estimated for future years is shown below.
Annual Costs
For years ended June 30, 2016 $ 2,700,000
2017 1,472,000
2018 190,000
Total $ 4,362,000
In addition, under the PSAs, the Department is required to pay to MMWEC its
share of the Operation and Maintenance (O& M) costs of the Projects in which
it participates. The Department's total O& M costs including debt service under
the PSAs were $12,475,000 and $14,021,000 for the years ended June 30,
2015 and 2014, respectively.
19. Renewable Energy Certificates
In 2003, the Massachusetts Department of Energy and Environmental Affairs
adopted the Massachusetts Renewable Energy Portfolio Standard (RPS), a
regulation that requires Investor Owned Utilities (IOUs) to purchase mandated
amounts of energy generated by renewable resources (Green Energy) as a
percentage of their overall electricity sales. The Massachusetts RPS applies
only to IOUs, so the Department is currently exempt from this mandate.
Energy suppliers meet their annual RPS obligations by acquiring a sufficient
quantity of RPS - qualified renewable energy certificates (RECs) that are
created and recorded at the New England Power Pool (NEPOOL) Generation
563
Information System (GIS). Suppliers can purchase RECs from electricity gen-
erators or from other utilities that have acquired RECs.
As part of its ongoing commitment to Green Energy, the Department has
entered into Purchase Power Agreements (PPAs) with Swift River Hydro LLC
and Concord Steam Corporation to purchase power generated from renewable
energy resources. These PPAs include the Department taking title to RECs,
which certify that the energy produced was the product of a renewable resource.
Because the Department is exempt from the RPS provisions, it has the option of
holding these RECs until they expire or selling them through the NEPOOL GIS.
Information regarding the Department's fiscal year 2015 REC activity and
balances is as follows:
REC Sales During Fiscal 2015
Unit
Certificates Price Amount
MA Class II
1,032
$ 25.50
$ 26,316
MA Class 1
1,324
52.00
68,848
RI New
398
44.00
17,512
CT Class 1
5,702
52.00
296,504
MA Class II
371
25.00
9,275
MA Class 1
624
47.50
29,640
RI New
120
47.50
5,700
CT Class 1
4,452
47.50
211,470
Total
14,023
$ 665,265
Sale proceeds netted against fiscal year
2015 purchased power fuel charge
REC Holdinas at June 30. 2015
Banked Projected Total Estimated
Certificates Certificates Certificates Value
MA Class I & II - 1,550 1,550 $ 74,400
CT Class 1 - 5,435 5,435 260,880
Total - 6,985 6,985 $ 335,280
Because there is no formal accounting guidance under GAAP or IFRS for
RECs and the Department does not have a formal policy for the future disp-
osition of RECs, the estimated fair value of the Department's REC holdings at
June 30, 2015 are not recognized as an asset on the proprietary fund
Statements of Net Position.
564
20. Leases
Related Party Transaction - Property Sub -Lease
The Department is the lessor of facilities that are currently sub - leased to the
Reading Town Employees Federal Credit Union. The original sub -lease
agreement commenced in December 2000 and was extended by various
amendments through November 30, 2015. Following is the future minimum
rental income to be received by the Department under the terms of this lease
for the year ending June 30:
2016 $ 4,084
Total $ 4,084
Operating Lease - Warehouse
The Department is the lessee of a warehouse facility owned by JCM Real
Estate Trust. The original lease agreement for this facility commenced in
December 1998 and was extended by various amendments through May 31,
2016. Under the terms of the most recent lease amendment, the Department
has the option to extend the lease for an additional 24 months until May 31,
2018. Following is the future minimum rental expense to be paid by the
Department for the year ending June 30:
2016 $ 147,902
Total $ 147,902
21. Beginning Net Position Restatement
In fiscal year 2015, the Department implemented GASB Statement No. 68,
Accounting and Financial Reporting for Pensions — An Amendment of GASB
Statement No. 27. As a result of this implementation, the beginning (July 1,
2014) net position of the Department's proprietary fund has been restated as
follows:
Business -Type Activities
Proprietary
Fund
As previously reported $ 101,873,334
GASB 68 Implementation (3,669,527)
As restated $ 98,203,807
565
TOWN OF READING, MASSACHUSETTS
SCHEDULE OF FUNDING PROGRESS
REQUIRED SUPPLEMENTARY INFORMATION
June 30, 2015
(Unaudited)
(Amounts Expressed in thousands)
Other Post - Employment Benefits
See Independent Auditors' Report.
.:
Actuarial
UAAL as
Accrued
a Percent -
Actuarial
Liability
Unfunded
age of
Actuarial
Value of
(AAL) -
AAL
Funded
Covered
Covered
Valuation
Assets
Entry Age
(UAAL)
Ratio
Payroll
Payroll
Date
(a)
(b)
b -a
,(c)
b -a /c
06/30/14
$ 3,723
$ 66,759
$ 63,036
5.58%
N/A
N/A
06/30/13
$ 2,860
$ 67,170
$ 64,310
4.26%
N/A
N/A
06/30/11
$ 1,167
$ 94,458
$ 93,291
1.24%
N/A
N/A
06/30/08
$ -
$ 60,023
$ 60,023
0.0%
N/A
N/A
See Independent Auditors' Report.
.:
TOWN OF READING, MASSACHUSETTS
SCHEDULE OF PROPORTIONATE SHARE
OF THE NET PENSION LIABILITY
REQUIRED SUPPLEMENTARY INFORMATION
JUNE 30, 2015
(Unaudited)
Reading Contributory Retirement System: 2015
Proportion of the net pension liability for the most recent
measurement date
92.75%
Proportionate share of the net pension liability for the most
recent measurement date
$ 25,805,701
Covered- employee payroll for the most recent
measurement date
$ 19,399,338
Proportionate share of the net pension liability (asset) as a
percentage of its covered- employee payroll
143.26%
Plan fiduciary net position as a percentage of the total
pension liability
79.89%
Massachusetts Teachers' Retirement stem: 2015
Proportion of the net pension liability for the most recent
measurement date 0.425154%
The Town's proportionate share of the net pension liability
for the most recent measurement date $ -
Commonwealth of Massachusetts' total proportionate share
of the net pension liability that is associated with the Town 67,583,938
Total net pension liability associated with the Town $ 67,583,938
Covered- employee payroll for the most recent
measurement date $ 26,068,000
Proportionate share of the net pension liability (asset) as a
percentage of its covered- employee payroll 0%
Plan fiduciary net position as a percentage of the total
pension liability 61.64%
Schedules are intended to show information for 10 years. Additional years will be displayed as
See Independent Auditors' Report.
567
TOWN OF READING, MASSACHUSETTS
SCHEDULE OF CONTRIBUTIONS
REQUIRED SUPPLEMENTARY INFORMATION
JUNE 30, 2015
(Unaudited)
2015
Contractually required contribution for the
current fiscal year $ 4,925,586
Contributions in relation to the contractually
required contribution (4,925,586)
Contribution deficiency (excess) $ -
Covered - employee payroll for the current fiscal
year 20,764,089
Contributions as a percentage of covered -
employee payroll 23.72%
Schedules are intended to show information for 10 years. Additional years will be
displayed as they become available
See Independent Auditors' Report.
.:
TOWN OF READING, MASSACHUSETTS
CONTRIBUTORY RETIREMENT SYSTEM
Schedule of Changes in the Net Pension Liability
(Unaudited)
2014
Total pension liability
Service cost $ 3,661,364
Interest on unfunded liability - time value of $ 10,776,373
Benefit payments, including refunds of member contributions (9,008,745)
Net change in total pension liability 5,428,992
Total pension liability - beginning 143,554,359
Total pension liability - ending (a) $ 148,983,351
Plan fiduciary net position
Contributions - employer
$ 4,961,545
Contributions - member
2,710,307
Net investment income
8,416,432
Benefit payments, including refunds of member contributions
(9,008,745)
Administrative expense
(114,170)
Net change in plan fiduciary net position
6,965,369
Plan fiduciary net position - beginning
112,054,574
Plan fiduciary net position - ending (b)
$ 119,019,943
Net pension liability (asset) - ending (a -b)
$ 29,963,408
Schedule is intended to show information for 10 years. Additional years will be displayed as they
become available.
See notes to the Town's financial statements for summary of significant actuarial methods and
assumptions.
See Independent Auditors' Report.
569
TOWN OF READING, MASSACHUSETTS
CONTRIBUTORY RETIREMENT SYSTEM
Schedules of Net Pension Liability, Contributions, and Investment Returns
(Unaudited)
Schedule of Net Pension Liability
Schedule of Contributions
2014
Actuarially determined contribution $ 4,961,545
Contributions in relation to the actuarially determined contribution (4,961,545)
Contribution deficiency (excess) $ -
Covered employee payroll $ 20,915,728
Contributions as a percentage of covered employee payroll - 23.72%
Schedule of Investment Returns
Year Ended December 31
2014
Annual money weighted rate of return, net of investment expense 7.66%
Schedules are intended to show information for 10 years.
Additional years will be displayed as they become available.
See Independent Auditors' Report.
MAI(
2014
Total pension liability
$ 148,983,351
Plan fiduciary net position
(119,019,943)
Net pension liability (asset)
$ 29,963,408
Plan fiduciary net position as a percentage of the total pension liability
79.89%
Covered employee payroll
$ 20,915,728
Participating employer net pension liability (asset)
as a percentage of covered employee payroll
143.26%
Schedule of Contributions
2014
Actuarially determined contribution $ 4,961,545
Contributions in relation to the actuarially determined contribution (4,961,545)
Contribution deficiency (excess) $ -
Covered employee payroll $ 20,915,728
Contributions as a percentage of covered employee payroll - 23.72%
Schedule of Investment Returns
Year Ended December 31
2014
Annual money weighted rate of return, net of investment expense 7.66%
Schedules are intended to show information for 10 years.
Additional years will be displayed as they become available.
See Independent Auditors' Report.
MAI(
(This page intentionally left blank.)
571
TOWN OF READING, MASSACHUSETTS
COMBINING BALANCE SHEET
NONMAJOR GOVERNMENTAL FUNDS
JUNE 30, 2015
ASSETS
Cash and short -term investments
Investments
Receivables:
Departmental and other
Intergovernmental
Total Assets
LIABILITIES AND FUND BALANCE
Liabilities:
Warrants payable
Accrued liabilities
Unearned revenue
Notes payable
Retainage payable
Total Liabilities
Fund Balances:
Non - spendable
Restricted
Committed
Unassigned
Total Fund Balance
Total Liabilities and Fund Balance
See Independent Auditors' Report.
Special Revenue Funds
Federal State Revolving
Grants Grants Funds
$ (110,809) $ 882,833 $ 4,839,879
- - 179,942
247,876 928,995 -
$ 137,067 $ 1,811,828 $ 5,019,821
$ 13,781
$ 645,141
$ 139,107
161,435
865
123,041
-
-
309,204
175,216
646,006
571,352
9,680
1,189,885
4,458,868
47,829
24,063
(10'399)
(38,149)
1,165,822
4,448,469
$ 137,067
$ 1,811,828
$ 5,019,821
572
Special Revenue Funds
Receipts Gifts and
Reserved Donations Subtotals
$ 1,209,296 $ 629,888 $ 7,451,087
- 129,185 129,185
- 179,942
- - 1,176,871
$ 1,209,296 $ 759,073 $ 8,937,085
$ - $ 12,338 $ 810,367
350 285,691
- 309,204
12,688 1,405,262
1,209,296 746,385 7,614,114
82,291
1,209,296 746,385 7,531,823
$ 1,209,296 $ 759,073 $ 8,937,085
(continued)
573
TOWN OF READING, MASSACHUSETTS
COMBINING BALANCE SHEET
NONMAJOR GOVERNMENTAL FUNDS
JUNE 30, 2015
(continued)
ASSETS
Cash and short-term investments
Investments
Receivables:
Departmental and other
Intergovernmental
Total Assets
LIABILITIES AND FUND BALANCE
Liabilities:
Warrants payable
Accrued liabilities
Unearned revenue
Notes payable
Retainage payable
Total Liabilities
Fund Balances:
Non - spendable
Restricted
Committed
Unassigned
Total Fund Balance
Total Liabilities and Fund Balance
See Independent Auditors' Report.
Capital Project Funds
Town School
Capital Capital
Project Funds Project Funds Subtotals .
$ 11,102,556
$
2,504,374
$
13,606,930
$ 11,102,556
$
2,504,374
$
844,791
13,606,930
$ 844,791
$ 49,316
$ 894,107
-
1,700,000
1,700,000
-
1,104,104
1,104,104
844,791
2,853,420
3,698,211
9,324,224
5
9,324,229
933,541
-
933,541
-
349,051
(349,051)
10,257,765
349,046
9,908,719
$ 11,102,556
$ 2,504,374
$ 13,606,930
574
Permanent Funds
Total
Town School Nonmajor
Trust Trust Governmental
Funds Funds Subtotals Funds
$ 159,434 $ - $ 159,434 $ 21,217,451
9,502,301 199,266 9,701,567 9,830,752
- 179,942
- - 1,176,871
$ 9,661,735 $ 199,266 $ 9,861,001 $ 32,405,016
$ 14,188
$ -
$ 14,188
$ 1,718,662
-
-
-
285,691
-
-
-
309,204
-
-
-
1,700,000
-
-
-
1,104,104
14,188
-
14,188
5,117,661
3,014,265
125,150
3,139,415
3,139,415
6,633,282
74,116
6,707,398
23,645,741
-
-
-
933,541
-
-
-
(431,342)
9,647,547
199,266
9,846,813
27,287,355
$ 9,661,735
$ 199,266
$ 9,861,001
$ 32,405,016
575
TOWN OF READING, MASSACHUSETTS
COMBINING STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
NONMAJOR GOVERNMENTAL FUNDS
FOR THE YEAR ENDED JUNE 30, 2015
Special Revenue Funds
See Independent Auditors' Report.
576
Federal
State
Revolving
Grants
Grants
Funds
Revenues:
Departmental
$ -
$ -
$ 6,164,525
Intergovernmental
1,513,970
2,447,005
232,422
Investment income
-
-
86
Contributions
Other
-
-
15,094
Total Revenues
1,513,970
2,447,005
6,412,127
Expenditures:
Current:
General government
-
4,800
57,486
Public safety
45,097
80,212
865,286
Education
1,374,371
1,556,298
4,668,782
Public works
-
885,083
9,475
Health and human services
124,169
47,988
24,169
Culture and recreation
2,075
10,607
599,821
Total Expenditures
1,545,712
2,584,988
6,225,019
Excess (deficiency) of revenues over
(under) expenditures
(31,742)
(137,983)
187,108
Other Financing Sources (Uses):
Issuance of bonds
Transfers in
-
-
10,000
Transfers out
-
-
2( 64,232)
Total Other Financing Sources (Uses)
-
-
(254,232)
Change in fund balances
(31,742)
(137,983)
(67,124)
Fund Balances, beginning of year
6,407
1,303,805
4,515,593
Fund Balances, end of year
$ (38,149)
$ 1,165,822
$ 4,448,469
See Independent Auditors' Report.
576
Special Revenue Funds
Receipts Gifts and
Reserved Donations Subtotals
$ 41,255 $ - $ 6,205,780
- - 4,193, 397
2,203 - 2,289
- 289,953 289,953
- - 15,094
43,458 289,953 10,706,513
4,345
2,221
68,852
-
836
991,431
-
129,928
7,729,379
-
-
894,558
-
1,032
197,358
-
13,269
625,772
4,345
147,286
10, 507,350
39,113
142,667
199,163
-
-
10,000
175,000
-
(439,232)
175,000)
-
(429,232)
(135,887)
142,667
(230,069)
1,345,183
603,718
7,761,892
$ 1,209,296
$ 746,385
$ 7,531,823
(continued)
M&A
TOWN OF READING, MASSACHUSETTS
COMBINING STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
NONMAJOR GOVERNMENTAL FUNDS
FOR THE YEAR ENDED JUNE 30, 2015
(continued)
Revenues:
Departmental
Intergovernmental
Investment income
Contributions
Other
Total Revenues
Expenditures:
Current:
General government
Public safety
Education
Public works
Health and human services
Culture and recreation
Total Expenditures
Excess (deficiency) of revenues over
(under) expenditures
Other Financing Sources (Uses):
Issuance of bonds
Transfers in
Transfers out
Total Other Financing Sources (Uses)
Change in fund balances
Fund Balances, beginning of year
Fund Balances, end of year
See Independent Auditors' Report.
Capital Project Funds
Town School
Capital Capital
Proiect Funds Project Funds Subtotals
1,021,023 - 1,021,023
1,021,023 - 1,021,023
-
58,791
58,791
52,029
-
52,029
3,919,424
-
3,919,424
3,971,453.
58,791
4,030,244
(2,950,430)
(58,791)
(3,009,221)
11,300,000
-
11,300,000
1,002,714
-
1,002,714
(21,979)
(47,194)
(69,173)
12,280,735
(47,194)
12,233,541
9,330,305
(105,985)
9,224,320
927,460
(243,061)
684,399
$ 10,257,765
$ (349,046)
$ 9,908,719
578
11, 300,000
1,012,714
(508,405)
11, 804,309
147,233 508 147,741 9,141,992
9,500,314 198,758 9,699,072 18,145,363
$ 9,647,547 $ 199,266 $ 9,846,813 $ 27,287,355
579
Permanent Funds
Total
Town
School
Nonmajor
Trust
Trust
Governmental
Funds
Funds
Subtotals
Funds
$ 6,205,780
-
-
-
5,214,420
284,602
8,664
293,266
295,555
129,281
600
129,881
419,834
-
-
-
15,094
413,883
9,264
423,147
12,150,683
36,008
-
36,008
104,860
-
-
-
991,431
-
8,756
8,756
7,796,926
119,999
-
119,999
1,066,586
110,643
-
110,643
308,001
-
-
-
4,545,196
266,650
8,756
275,406
14,813,000
147,233
508
147,741
(2,662,317)
11, 300,000
1,012,714
(508,405)
11, 804,309
147,233 508 147,741 9,141,992
9,500,314 198,758 9,699,072 18,145,363
$ 9,647,547 $ 199,266 $ 9,846,813 $ 27,287,355
579
TOWN OF READING, MASSACHUSETTS
NONMAJOR PROPRIETARY FUNDS
COMBINING SCHEDULE OF NET POSITION
JUNE 30, 2015
See Independent Auditors' Report.
WE
Business -Type Activities
Enterprise Funds
Landfill
Sewer
Closure and
Stormwater
Fund
Postclosure
Management
Total
ASSETS
Current:
Cash and short-term investments
$ 4,409,674
$ 50,008
$ 1,189,411
$ 5,649,093
User fees, net of allowance for uncollectibles
2,795,912
-
163,431
2,959,343
Inventory
2,540
-
-
2,540
Total current assets
7,208,126
50,008
1,352,842
8,610,976
Noncurrent:
Capital assets being depreciated, net
5,721,870
-
326,194
6,048,064
Capital assets not being depreciated
263,649
-
411,385
675,034
Total noncurrent assets
5,985,519
-
737,579
6,723,098
DEFERRED OUTFLOWS OF RESOURCES
1,153
-
445
1,598
TOTAL ASSETS AND DEFERRED
OUTFLOWS OF RESOURCES
13,194,798
50,008
2,090,866
15,335,672
LIABILITIES
Current:
Warrants payable
17,822
4,100
2,859
24,781
Accrued liabilities
9,629
-
3,998
13,627
Other current liabilities
-
45,908
-
45,908
Current portion of long -term liabilities:
Bonds payable
84,105
-
-
84,105
Total current liabilities
111,556
50,008
6,857
168,421
Noncurrent:
Bonds payable, net of current portion
165,744
-
-
165,744
Accrued employee benefits
14,472
-
10,980
25,452
Net OPEB obligation
109,988
-
20,092
130,080
Net pension liability
204,050
-
78,804
282,854
Total noncurrent liabilities
494,254
-
109,876
604,130
TOTAL LIABILITIES
605,810
50,008
116,733
772,551
NET POSITION
Net investment in capital assets
5,907,963
-
737,579
6,645,542
Unrestricted
6,681,025
-
1,236,554
7,917,579
TOTAL NET POSITION
$ 12,588,988
$ -
$ 1,974,133
$ 14,563,121
See Independent Auditors' Report.
WE
TOWN OF READING, MASSACHUSETTS
NONMAJOR PROPRIETARY FUNDS
COMBINING SCHEDULE OF REVENUES, EXPENSES AND CHANGES IN FUND NET POSITION
FOR THE YEAR ENDED JUNE 30, 2015
Operating Revenues:
Charges for services
Total Operating Revenues
Operating Expenses:
Personnel expenses
Non personnel expenses
Intergovernmental
Depreciation
Energy purchases
Total Operating Expenses
Operating Income
Nonoperating Revenues (Expenses):
Investment income
Total Nonoperating Revenues (Expenses)
Income Before Transfers
Transfers out
Change in Net Position
Net Position at Beginning of Year, as restated
Net Position at End of Year
See Independent Auditors' Report.
Business -Type Activities
Enterprise Funds
Landfill
Sewer Closure and Stormwater
Fund Postclosure Management Total
$ 7,400,670 $
- $ 440,697
$ 7,841,367
7,400,670
- 440,697
7,841,367
360,219
- 175,991
536,210
203,325
- 46,747
250,072
4,642,124
- -
4,642,124
415,586
- 30,963
446,549
28,393
- -
28,393
5,649,647
- 253,701
5,903,348
1,751,023
- 186,996
1,938,019
4,670
- 1,318
5,988
4,670
- 1,318
5,988
1,755,693
- 188,314
1,944,007
(292,965)
- -
292,965
1,462,728
- 188,314
1,651,042
11,126,260
- 1,785,819
12,912,079
$ 12,588,988 $
- $ 1,974,133
$ 14,563,121
581
TOWN OF READING, MASSACHUSETTS
NONMAJOR PROPRIETARY FUNDS
COMBINING SCHEDULE OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 2015
Cash Flows From Operating Activities:
Receipts from customers and users
Payments to vendors and employees
Payments to other governments
Net Cash Provided By (Used For) Operating Activities
Cash Flows From Noncapital Financing Activities:
Transfer out
Net Cash (Used For) Noncapital Financing Activities
Cash Flows From Capital and Related Financing Activities:
Acquisition of capital assets
Principal payments on bonds and notes
Net Cash (Used For) Capital and Related Financing Activities
Cash Flows From Investing Activities:
Investment income
Net Cash Provided By Investing Activities
Net Change in Cash and Short -Term Investments
Cash and Short Term Investments, Beginning of Year
Cash and Short Term Investments, End of Year
Reconciliation of Operating Income (Loss) to Net Cash
Provided By (Used For) Operating Activities:
Operating income
Adjustments to reconcile operating income (loss) to net
cash provided by (used for). operating activities:
Depreciation
Changes in assets and liabilities:
User fees receivables
Inventory and prepayments
Deferred outflows of resources
Warrants payable
Accrued liabilities
Other liabilities
Net OPEB obligation
Net pension liability
Net Cash Provided By (Used For) Operating Activities
See Independent Auditors' Report.
Business -Type Activities
Enterprise Funds
Landfill
Sewer Closure and . Stormwater
Fund Postclosure Management Total
$ 6,696,957
$ -
$ 393,272
$ 7,090,229
(725,162)
(9,790)
(224,851)
(959,803)
(4,642,124)
4,6( 42,124)
1,329,671
(9,790)
168,421
1,488,302
(292,965)
-
292,965
(292,965)
(292,965)
(271,461)
(51,280)
(322,741)
(117,038)
117,038
(388,499)
(51,280)
(439,779)
4,670
1,318
5,988
4,670
1,318
5,988
652,877
(9,790)
118,459
761,546
3,756,797
59,798
1,070,952
4,887,547
$ 4,409,674
$ 50,008
$ 1,189,411
$ 5,649,093
$ 1,751,023
$ -
$ 186,996
$ 1,938,019
415,586
30,963
446,549
(703,713)
(47,425)
(751,138)
(1,124)
-
(1,124)
(1,153)
(445)
(1,598)
(112,217)
(7,636)
2,068
(117,785)
(6,659)
597
(6,062)
(2,154)
-
(2,154)
(1,607)
(293)
(1,900)
(10,465)
(4,040)
14,505
$ 1,329,671 $ (9,790) $ 168,421 $ 1,488,302
582