HomeMy WebLinkAbout2016 Annual Report Part 6 Appendix BTOWN OF READING, MASSACHUSETTS
Annual Financial Statements
For the Year Ended June 30, 2016
528
(This page intentionally left blank.)
529
TABLE OF CONTENTS
Wfflka-
INDEPENDENT AUDITORS' REPORT
1
MANAGEMENT'S DISCUSSION AND ANALYSIS
5
BASIC FINANCIAL STATEMENTS:
Government -wide Financial Statements:
Statement of Net Position
16
Statement of Activities
17
Fund Financial Statements:
Governmental Funds:
Balance Sheet
19
Reconciliation of Total Governmental Fund Balances to
Net Position of Governmental Activities in the Statement
of Net Position
20
Statement of Revenues, Expenditures, and Changes
in Fund Balances
21
Reconciliation of the Statement of Revenues, Expenditures,
and Changes in Fund Balances of Governmental Funds to
the Statement of Activities
22
Statement of Revenues and Other Sources, and Expenditures
and Other Uses - Budget and Actual- General Fund
23
Proprietary Funds:
Statement of Net Position
24
Statement of Revenues, Expenses, and Changes in Fund
Net Position
25
Statement of Cash Flows
26
Fiduciary Funds:
Statement of Fiduciary Net Position
27
Statement of Changes in Fiduciary Net Position
28
Notes to Financial Statements
29
Electric Light Plant Notes to the Financial Statements
67
530
REQUIRED SUPPLEMENTARY INFORMATION:
Schedule of OPEB Funding Progress 91
Schedule of Proportionate Share of the Net Pension Liability 92
Schedule of Pension Contributions
W
Schedule of Changes in Net Pension Liability 94
Schedules of Net Pension Liability, Contributions, and
Investment Returns 95
SUPPLEMENTARY INFORMATION:
Combining Balance Sheet - Nonmajor Governmental Funds 96
Combining Statement of Revenues, Expenditures and
Changes in Fund Balances - Nonmajor Governmental Funds 100
Combining Schedule of Net Position - Nonmajor Proprietary Funds 104
Combining Schedule of Revenues, Expenses and Changes
in Fund Net Position - Nonmajor Proprietary Funds 105
Combining Schedule of Cash Flows - Nonmajor Proprietary Funds 106
531
MELANSON
ACCOUNTANTS • AUDITORS
10 New England Business
Center Dr. • Suite 107
Andover, MA 01810
INDEPENDENT AUDITORS' REPORT m
melanso9-o0os
lansorfheath.com
To the Board of Selectmen Additional offices:
Town of Reading, Massachusetts Na NH
g Manchester, 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, 2016, (except for the Reading Contributory Retirement System, which is as
of and for the year ended December 31, 2015) 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.
Auditors' 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
auditors' judgment, including the assessment of the risks of material misstatement of
532
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
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, 2016, 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..
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 OPEB Funding Progress,
the Schedule of Proportionate Share of Net Pension Liability, the Schedule of Pension
Contributions, the Schedule of Changes in Net Pension Liability, and the Schedules of
Net Pension Liability, Contributions, and Investment Returns be presented to supple-
ment 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.
533
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 102 through 112 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 accordance 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 27, 2017 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.
M
March 27, 2017
534
(This page intentionally left blank.)
535
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, 2016.
Unless otherwise noted, all amounts reported in this analysis are expressed in whole
numbers.
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, liabilities, and
deferred outflows /inflows of resources, with the difference reported as net posi-
tion. Over time, increases or decreases in net position may serve as a useful
indicator of whether the Town's financial position is improving or deteriorating.
The Statement of Activities presents information showing how the Town's net
position changed during the most recent fiscal year. All changes in net position
are reported as soon as the underlying event giving rise to the change occurs,
regardless of the timing of related cash flows. Thus, revenues and expenses
are reported in this statement for some items that will only result in cash flows
in future fiscal periods (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 stormwater 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.
536
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 the
Town'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 Town's near -term financing decisions. 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 stormwater
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 stormwater 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.
537
Other information. In addition to the basic financial statements and accom-
panying notes, this report also presents certain required supplementary infor-
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 $223,524,901 (i.e., net position), a change of $(617,831) in compari-
son to the prior year.
• As of the close of the current fiscal year, governmental funds reported com-
bined ending fund balances of $38,379,499, a change of $(5,890,840) in
comparison to the prior year.
• At the end of the current fiscal year, unassigned fund balance for the general
fund was $10,246,346, a change of $(1,606,427) in comparison to the prior
year.
• Total bonds payable at the close of the current fiscal year was $45,708,356, a
change of $1,123,160 in comparison to the prior year.
C. GOVERNMENT -WIDE FINANCIAL ANALYSIS
The following is a summary (in thousands) 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
2016 2015
$ 49,254 $ 56,912
131,525 122,785
11,611 115
192,390 179,812
Business -Type
Activities Total
2016 2015 2016 2015
$ 66,985 $ 66,307 $ 116,239 $ 123,219
95,144 91,121 226,669 213,906
6,891 1,553 18,502 1,668
169,020 158,981 361,410 338,793
88,466
69,673
26,822
21,539
115,288
91,212
10,405
12,559
8',953
10,728
19,358
23,287
2,255
151
984
-
3,239
151
101,126
82,383
36,759
32,267
137,885
114,650
101,435
100,596
84,071
80,900
185,506
181,496
17,527
17,461
4,495
5,434
22,022
22,895
27,698
2( 0,628)
43,695
40,380
15,997
19,752
$ 91,264
$ 97,429 $
132,261
$ .126,714 $
223,525 $
224,143
538
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 $223,524,901, a change of $(617,831) from the prior year.
The largest portion of net position, $185,506,096, 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, $22,021,676, represents resources that are
subject to external restrictions on how they may be used. The remaining balance
of unrestricted net position $15,997,129 may be used to meet the Town's
ongoing obligations to citizens and creditors.
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
CHANGES IN NET POSITION
Governmental Business -Type
Activities Activities Total
2016 2015 2016 2015 2016 2015
$ 9,508 $ 8,162 $ 102,330 $ 99,585 $ 111,838 $ 107,747
21,509
18,816
125
62
21,634
18,878
1,398
1,735
318
64
1,716
1,799
62,588
58,416
-
-
62,588
58,416
4,054
3,801
-
-
4,054
3,801
694
647
-
-
694
647
3,212
3,300
-
-
3,212
3,300
1,160
848
232
139
1,392
987
343
413
530
915
873
1,328
104,466
96,138
103,535
100,765
208,001
196,903
539
CHANGES IN NET POSITION
* The Town chose to break out expenses for the maintenance of Town facilities as a separate function in FY2016.
These expenses were previously reported in general government.
Governmental activities. Governmental activities for the year resulted in a
change in net position of $(6,165,283). Key elements of this change are as
follows:
General fund expenditures exceeding revenues $ (1,555,726)
PILOT from RMLD
Governmental
Business -Type
814,719
Current year revenue used for the acquisition
Activities
Activities
Total
settlement liability
2016
2015
2016
2015
2016
2015
Expenses:
Increase in net pension liability
(10,554,744)
Increase in pension - related deferred outflows,
net of pension - related deferred inflows
9,376,802
General government
5,173
6,008
-
-
5,173
6,008
Public safety
14,395
12,664
-
-
14,395
12,664
Education
76,936
65,229
-
-
76,936
65,229
Public works
7,583
8,761
-
-
7,583
8,761
Facilities*
1,763
-
-
-
1,763
-
Human services
1,212
1,083
-
-
1,212
1,083
Culture and recreation
3,780
3,495
-
-
3,780
3,495
Interest on long -term debt
1,145
1,314
-
-
1,145
1,314
Intergovernmental
1,014
1,107
-
-
1,014
1,107
Electric
-
-
84,147
80,418
84,147
80,418
Water
-
-
5,336
4,582
5,336
4,582
Other
-
-
6,135
5,903
6,135
5,903
Total expenses
113,001
99,661
95,618
90,903
208,619
190,564
Change in net position
before transfers
(8,535)
(3,523)
7,917
9,862
(618)
6,339
Transfers in (out)
2,370
3,053
2,370
3,053
-
-
Change in net position
(6,165)
(470)
5,547
6,809
(618)
6,339
Net position - beginning of year
97,429
97,899
126,714
119,905
224,143
217,804
Net position - end of year
$ 91,264$
97,429
$ 132,261
$ 126,714 $
223,525 $
224,143
* The Town chose to break out expenses for the maintenance of Town facilities as a separate function in FY2016.
These expenses were previously reported in general government.
Governmental activities. Governmental activities for the year resulted in a
change in net position of $(6,165,283). Key elements of this change are as
follows:
General fund expenditures exceeding revenues $ (1,555,726)
PILOT from RMLD
2,370,445
Subtotal General Fund
814,719
Current year revenue used for the acquisition
of capital assets
3,995,671
Accrual of High School construction litigation
settlement liability
(6,000,000)
Depreciation expense exceeding debt service
principal
(2,988,560)
Increase in net OPEB obligation
(1,650,635)
Increase in net pension liability
(10,554,744)
Increase in pension - related deferred outflows,
net of pension - related deferred inflows
9,376,802
Other
841,464
Total
$ (6,165,283)
540
Business -type activities. Business -type activities for the year resulted in a
change in net position of $5,547,452. Key elements of this change and the
impact on cash flows are as follows:
Electric division fund
Water fund
Nonmajor funds
Net
Revenues and
Transfers In
$ 89,886,593 $
6,341,771
7,289,790
Expenses and
Transfers Out
(86,517,189)
(5,319,704)
(6,133,809)
Change in
Net Position
$ 3,369,404
1,022,067
1,155,981
$ 103,518,154 $ (97,970,702) $ 5,547,452
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 $38,379,499, a change of $(5,890,840) in comparison to
the prior year. Key elements of this change are as follows:
General fund expenditures exceeding revenues $ (1,555,726)
PILOT from RMLD
2,370,445
Subtotal General Fund
814,719
Premium on general obligation bonds
425,224
Special revenue fund expenditures
exceeding revenues
(75,005)
Library capital project fund expenditures
exceeding revenues and bond proceeds
(7,105,529)
Other capital project fund expenditures
exceeding bond proceeds
(263,869)
Permanent fund revenues exceeding expenditures
313,620
Total
$ (5,890,840)
541
The general fund is the chief operating fund. At the end of the current fiscal year,
unassigned fund balance of the general fund was $10,246,346, while total fund
balance was $18,332,978. 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
aeneral fund expenditures. Refer to the table below.
General Fund 6/30/16 6/30/15 Change
Unassigned fund balance $ 10,246,346 $ 11,852,773 $ (1,606,427)
Total fund balance $ 18,332,978 $ 16,982,984 $ 1,349,994
% of Total
General Fund
Expenditures
12.0%
21.5%
The decrease in the Town's June 30, 2016 unassigned fund balance from the
prior year is primarily due to the Town's management reporting an assigned
fund balance of $2,196,605 for the amount of free cash appropriated in
December 2016 for the High School construction litigation settlement.
The total fund balance of the general fund changed by $1,349,994 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 $ (2,672,564)
Revenues in excess of budget
1,972,024
Expenditures less than budget
1,612,788
Expenditures of prior year encumbrances less
than current year encumbrances
468,370
Other
(30,624)
Total
$
1,349,994
Included in the total general fund balance are the
Town's stabilization accounts
with the following balances:
6/30/16
6/30/15
Change
Stabilization - general $ 1,565,475
$ 1,557,000
$ 8,475
Stabilization - smart growth 503,000
503,000
-
Stabilization - sick buy -back 31
24
7
Total $ 2,068,506
$ 2,060,024
$ 8,482
542
The following table reflects the trend in all the components of the general fund's
fund balance
(in thousands):
Last Six Fiscal Years
Assigned for
Restricted
Committed for
Subsequent
As of
for Debt
Stabilization
Assigned for
Year's
Total Fund
30 -Jun
Service
Fund
Encumbrances
Expenditures
Unassigned
Balance
2010
$ 12,530
$ 375
$ 1,488
$ 1,491
$ 7,822
$ 23,706
2011
11,833
705
1,006
928
8,649
23,121
2012
1,033
400
1,492
1,476
9,728
14,129
2013
817
365
1,087
1,400
10,508
14,177
2014
-
365
2,034
2,050
11,399
15,848
2015
-
503
2,827
1,800
11,852
16,982
2016
-
503
2,937
4,647 (2)
10,246
18,333
(1) The Town used $10,800 of debt reserves to pay down school related debt.
(2) Includes $2,197 for subsequent year free cash appropriation to fund litigation settlement - see Note 18
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 $43,695,386, a change of $3,315,909 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.
E. GENERAL FUND BUDGETARY HIGHLIGHTS
Differences between the original budget and the final amended budget resulted
in an overall change in appropriations of $1,420,049. Major reasons for these
amendments include:
• $838,250 increase in capital expenses
• $250,000 increase in facilities operating costs
• $240,516 increase in legal costs
• $ 91,283 other
Of this increase, $872,564 was funded by free cash, $232,485 through the tax
levy, $50,000 from additional state aid, $130,000 from local revenues, and
$135,000 from transfers in from other funds.
543
F. CAPITAL ASSET AND DEBT ADMINISTRATION
Capital assets. Total investment in capital assets for governmental and business -
type activities at year -end amounted to $226,669,298 (net of accumulated deprecia-
tion), a change of $12,762,982 from the prior year. This investment in capital assets
includes land, buildings and system, improvements, and machinery and equipment.
Governmental additions:
$
10,338,436
in library renovations
$
2,392,073
in various school improvements
$
1,662,746
in roadway improvements
$
263,821
for Town Hall technology
$
181,271
for police vehicles and equipment
$
40,000
for a facilities vehicle
Business -type additions:
$ 6,316,416 in electric infrastructure and equipment
$ 2,591,088 in water infrastructure and vehicles
$ 252,602 in stormwater drainage system
$ 197,320 in sewer infrastructure and vehicles
Additional information on capital assets can be found in the Notes to Financial
Statements.
Long -term debt. At the end of the current fiscal year, total bonded debt out-
standing was $45,708,356, 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 FY2017 general fund budget of $90,333,266 is a 2.8% increase
over the prior year. The FY2017 budget is balanced.
FY2017 state aid will be $13,865,000, which represents a 1.8% percent increase
over prior year.
The tax levy for FY2017 of $64,866,796 represents a 3.8% increase over the
prior year. The FY2017 tax rate is $14.03 per thousand compared to $14.50 in
the prior year. Overall, property values increased 7.3% to $4,623,435,224.
544
For FY2017, the Board of Selectmen, acting as the Water and Sewer Commis-
sioners, voted to increase water rates by 9.17% and sewer rates by 1.23% for all
customers, effective for all billings after September 10, 2016. The 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 FY2016 totaling $370,290. The FY2017 revenue
budgeted for this tax is $350,000.
The Town is working on an $18,541,225 capital improvement project to remodel
the library. In April 2013, voters approved $14,900,000 of debt exclusion. In April
2014, voters approved an additional $3,000,000 of debt exclusion. In November
2016, $141,225 was transferred from other capital project with remaining bal-
ances to cover any potential cost overruns. Note that of these totals, the State
has approved $5,105,114 of grant funding for the project; the balance will be the
local share. The Town borrowed $10,000,000 of excluded debt for this project in
February 2015. The Town received a bond premium of $933,541 which was used
towards the project and reduced the debt authorization. The Town borrowed an
additional $2,115,000 of excluded debt in June 2016 and received an additional
$230,000 premium that again was used toward project costs, and the debt
authorization was reduced by this amount. The renovated library re- opened on
October 2, 2016. The Library renovation is substantially complete, with some work
still in process.
At the 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 (OPEB), Other Post - Employment Benefits liabilities. Currently, the funds
set aside in this trust are invested in MMDT, which invests in US 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. At the April 2017 Town Meeting, the Town will request an addi-
tional vote to accept the provisions of Section 20 of Chapter 32B of MGL, as
amended by Section 15 of Chapter 218 of the Acts of 2016. This will allow the
Town to move forward with the process of investing the Town's OPEB funds with
the State Retiree Benefits Trust (SRTB).
545
The Town has been involved in litigation for several years with TLT, the contrac-
tor of the Reading High School Project. At Town Meeting on December 8, 2016,
a settlement was approved in the amount of $6,000,000 to be paid to TLT. The
settlement was paid on December 28, 2016 using the following funding methods:
Debt Issuance $3,000,000
Free Cash 2,196,605
Remaining Project Funds 803,395
Settlement Total $6,000.000
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
546.
TOWN OF READING, MASSACHUSETTS
STATEMENT OF NET POSITION
JUNE 30, 2016
547
Governmental
Business -Type
Activities
Activities
Total
Assets
Current:
Cash and short-term investments
$ 27,893,273
$ 27,599,512
$ 55,492,785
Investments
19,422,000
-
19,422,000
Receivables, net of allowance for uncollectibles:
Property taxes
310,622
-
310,622
Excises
223,762
-
223,762
Userfees
-
13,525,636
13,525,636
Departmental and other
702,153
-
702,153
Intergovern mental
369,720
-
369,720
Prepaid assets
-
985,756
985,756
Inventory
-
1,686,846
1,686,846
Noncurrent:
Restricted cash and short-term equivalents
-
21,815,636
21,815,636
Restricted investments
-
1,345,663
1,345,663
Investment in associated companies
-
26,994
26,994
Receivables, net of allowance for uncollectibles:
Property taxes
332,145
-
332,145
Capital assets being depreciated, net
111,531,587
88,585,597
200,117,184
Capital assets not being depreciated
19,993,562
6,558,552
26,552,114
Deferred outflows of resources
Related to pensions
11,611,038
6,891,231
18,502,269
Total Assets and Deferred Outflows
of Resources
192,389,862
169,021,423
361,411,285
Liabilities
Current:
Warrants payable
2,444,636
6,472,288
8,916,924
Accrued liabilities
5,613,070
550,853
6,163,923
Unearned revenues
268,264
-
268,264
Tax refunds payable
281,157
-
281,157
Customer advances for construction
-
1,007,142
1,007,142
Customer deposits
-
901,905
901,905
Retainage payable
1,104,104
-
1,104,104
Other current liabilities
693,958
21,271
715,229
Current portion of long -term liabilities:
Bonds and loans payable
4,151,434
1,506,730
5,658,164
Compensated absences
38,814
401,347
440,161
Noncurrent:
Bonds and loans payable, net of current portion
28,783,150
11,267,042
40,050,192
Compensated absences
1,070,169
2,922,658
3,992,827
Net OPEB obligation
17,553,664
420,713
17,974,377
Net pension liability
30,868,736
10,303,772
41,172,508
Litigation settlement liability
6,000,000
-
6,000,000
Deferred Inflows of Resources
Related to pensions
2,119,488
984,119
3,103,607
Other
135,900
-
135,900
Total Liabilities and Deferred Inflows
of Resources
101,126,544
36,759,840
137,886,384
Net Position
Net investment in capital assets
101,434,852
84,071,244
185,506,096
Restricted for:
Grants and other statutory restrictions
7,366,290
4,494,953
11,861,243
Permanent funds:
Nonexpendable
3,194,035
-
3,194,035
Expendable
6,966,398
-
6,966,398
Unrestricted
(27,698,257)
43,695,386
15,997,129
Total Net Position
$ 91,263,318
$ 132,261,583
$ 223,524,901
The accompanying notes are an integral part of these financial statements.
547
TOWN OF READING, MASSACHUSETTS
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2016
The accompanying notes are an integral part of these financial statements.
i•
(continued)
Program Revenues
Operating
Capital
Charges for
Grants and
Grants and
Net (Expenses)
Expenses
Services
Contributions
Contributions
Revenues
Governmental Activities:
General government $
5,173,857
$ 480,872
$ 66,997
$ -
$ (4,625,988)
Public safety
14,394,749
3,346,281
98,439
-
(10,950,029)
Education
76,936,229
4,613,424
20,866,677
-
(51,456,128)
Public works
7,582,807
185,573
59,772
376,487
(6,960,975)
Facilities
1,762,944
-
-
-
(1,762,944)
Health and human services
1,212,347
71,613
309,693
-
(831,041)
Culture and recreation
3,780,076
810,562
.107,118
1,021,023
(1,841,373)
Interest on long -term debt
1,144,836
-
-
-
(1,144,836)
Intergovernmental
1,013,830
-
-
-
(1,013,830)
Total Governmental Activities
113,001,675
9,508,325
21,508,696
1,397,510
(80,587,144)
Business -Type Activities:
Electric operations
84,146,744
88,735,983
125,000
285,921
5,000,160
Water operations
5,336,134
6,341,771
-
-
1,005,637
Other
6,134,609
7,252,068
-
31,950
1,149,409
Total Business -type Activities
95,617,487
102,329,822
125,000
317,871
7,155,206
Total $
208,619,162
$ 111,838,147
$ 21,633,696
$ 1,715,381
$ (73,431,938)
The accompanying notes are an integral part of these financial statements.
i•
(continued)
TOWN OF READING, MASSACHUSETTS
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2016
(continued)
The accompanying notes are an integral part of these financial statements.
i•
Business-
Governmental
Type
Activities
Activities
Total
Change in Net Position:
Net (Expenses) revenue from previous page
$ (80,587,144)
$ 7,155,206
$ (73,431,938)
General Revenues and Transfers:
Property taxes
62,587,732
-
62,587,732
Excises
4,054,424
-
4,054,424
Penalties, interest and other taxes
693,840
-
693,840
Grants and contributions not
restricted to specific programs
3,211,690
-
3,211,690
Investment income
1,160,403
232,516
1,392,919
Other
343,327
530,175
873,502
Transfers, net
2,370,445
(2,370,445)
-
Total general revenues and transfers
74,421,861
(1,607,754)
72,814,107
Change in Net Position
(6,165,283)
5,547,452
(617,831)
Net Position:
Beginning of year
97,428,601
126,714,131
224,142,732
End of year
$ 91,263,318
$ 132,261,583
$ 223,524,901
The accompanying notes are an integral part of these financial statements.
i•
TOWN OF READING, MASSACHUSETTS
GOVERNMENTAL FUNDS
BALANCE SHEET
JUNE 30, 2016
Assets
Cash and short -term investments
Investments
Receivables:
Property taxes
Excises
Departmental and other
Intergovernmental
Total Assets
Liabilities
Warrants payable
Accrued liabilities
Unearned revenue
Retainage payable
Other liabilities
Total Liabilities
Deferred Inflows of Resources
Unavailable revenues
Fund Balances
Nonspendable
Restricted
Committed
Assigned
Unassigned
Total Fund Balances
Total Liabilities, Deferred Inflows
of Resources and Fund Balances
Nonmajor Total
Governmental Governmental
General Funds Funds
$ 15,297,368
$ 12,595,905
$ 27,893,273
10,021,729
9,400,271
19,422,000
711,637
-
711,637
327,448
-
327,448
441,933
260,220
702,153
-
369,720
369,720
$ 26,800,115
$ 22,626,116
$ 49,426,231
$ 1,526,245
$ 918,391
$ 2,444,636
4,963,637
288,836
5,252,473
-
268,264
268,264
-
1,104,104
1,104,104
693,958
-
693,958
7,183,840
2,579,595
9,763,435
1,283,297
-
1,283,297
-
3,194,035
3,194,035
-
17,477,717
17,477,717
503,031
13,131
516,162
7,583,601
-
7,583,601
10,246,346
(638,362)
9,607,984
18,332,978
20,046,521
38,379,499
$ 26,800,115
$ 22,626,116
$ 49,426,231
The accompanying notes are an integral part of these financial statements.
550
TOWN OF READING, MASSACHUSETTS
RECONCILIATION OF TOTAL GOVERNMENTAL FUND
BALANCES TO NET POSITION OF GOVERNMENTAL
ACTIVITIES IN THE STATEMENT OF NET POSITION
JUNE 30, 2016
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.
• 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, including bonds payable, capital leases,
landfill closure, accrued compensated absences and net OPEB
obligation are not due and payable in the current period and,
therefore, are not reported in the governmental funds:
Bonds payable
Compensated absences
Net OPEB obligation
Net pension liability
Litigation settlement liability
• Deferred outflows of resources related to pensions resulting from:
Net difference between projected and actual earnings on
pension plan investments
Changes of assumptions
• Deferred inflows of resources related to pensions resulting from
differences between expected and actual experience
• 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.
551
$ 38,379,499
131, 525,149
829,584
(360,597)
(32,934,584)
(1,108,983)
(17,553,664)
(30,868,736)
(6,000,000)
4,571,942
7,039,096
(2;119,488)
(135,900)
$ 91,263,318
TOWN OF READING, MASSACHUSETTS
GOVERNMENTALFUNDS
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
FOR THE YEAR ENDED JUNE 30, 2016
The accompanying notes are an integral part of these financial statements.
552
Nonmajor
Total
Governmental
Governmental
General
Funds
Funds
Revenues:
Property taxes
$ 62,352,226
$ -
$ 62,352,226
Excises
4,021,915
-
4,021,915
Penalties, interest and other taxes
693,840
-
693,840
Departmental
1,985,599
7,221,032
9,206,631
Licenses and permits
174,205
-
174,205
Fines and forfeitures
112,983
-
112,983
Intergovernmental
13,651,549
4,791,520
18,443,069
Investment income
301,782
504,044
805,826
Contributions
-
362,784
362,784
Other
319,227
24,286
343,513
Total Revenues
83,613,326
12,903,666
96,516,992
Expenditures:
Current:
General government
3,860,246
151,780
4,012,026
Public safety
9,673,364
1,600,847
11,274,211
Education
42,637,012
9,894,348
52,531,360
Public works
5,098,135
913,205
6,011,340
Facilities
875,100
-
875,100
Health and human services
637,444
358,948
996,392
Culture and recreation
2,242,492
11,030,321
13,272,813
Employee benefits
14,731,163
-
14,731,163
Debt service
4,400,266
-
4,400,266
Intergovernmental
1,013,830
-
1,013,830
Total Expenditures
85,169,052
23,949,449
109,118,501
Excess (deficiency) of revenues
over expenditures
(1,555,726)
(11,045,783)
(12,601,509)
Other Financing Sources (Uses):
Proceeds of bonds
-
3,915,000
3,915,000
Premium on bond issuance
195,224
230,000
425,224
Transfers in
2,785,996
75,500
2,861,496
Transfers out
(75,500)
(41,5,551)
(491,051)
Total Other Financing Sources (Uses)
2,905,720
3,804,949
6,710,669
Net change in fund balances
1,349,994
(7,240,834)
(5,890,840)
Fund Balances, at Beginning of Year
16,982,984
27,287,355
44,270,339
Fund Balances, at End of Year
$ 18,332,978
$ 20,046,521
$ 38,379,499
The accompanying notes are an integral part of these financial statements.
552
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, 2016
Net changes in fund balances - Total governmental funds $ (5,890,840)
• 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
14,878,348
Depreciation
(6,138,560)
• 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.
296,791
• 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
(3,915,000)
Repayments of debt
3,150,000
Current year bond premiums, net of current year amortization
(71,037)
• In the Statement of Activities, interest is accrued on outstanding
long -term debt, whereas in governmental funds interest is not
reported until due.
90,330
• 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:
Compensated absences
248,162
Net OPEB obligation
(1,650,635)
Net pension liability, net of related deferred outflows and inflows
(1,177,942)
Litigation settlement liability
(6,000,000)
Other
15,100
Change in net position of governmental activities
$ (6,165,283)
The accompanying notes are an integral part of these financial statements.
553
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, 2016
Expenditures and Transfers:
General government
Budgeted Amounts
4,225,435
Variance with
283,685.
Public safety
10,334,175
10;478,329
Final Budget
172,779
Original
Final
Actual
Positive
69,898
Budget
Budget
Amounts
(Negative)
Revenues and Transfers:
Facilities
977,978
1,327,186
1,009,872
Taxes
$ 61,489,901
$ 61,722,386
$ 62,352,225
$ 629,839
Excise taxes
3,600,000
3,600,000
4,021,915
421,915
Penalties, interest and other taxes
535,000
590,000
693,843
103,843
Departmental
1,700,000
1,750,000
1,985,599
235,599
Licenses and permits
150,000
170,000
174,205
4,205
Fines and forfeitures
102,500
102,500
112,983
10,483
Intergovernmental
13,714,376
13,764,376
13,651,549
(112,827)
Investment income
175,000
180,000
301,782
121,782
Other
134,364
134,364
514,451
380,087
Transfers in
2,504,520
2,639,520
2,816,618
177,098
Total Revenues and Transfers
84,105,661
84,653,146
86,625,170
1,972,024
Expenditures and Transfers:
General government
3,630,941
4,225,435
3,941,750
283,685.
Public safety
10,334,175
10;478,329
10,305,550
172,779
Education
41,711,060
42,142,701
42,072,803
69,898
Public works
5,560,909
5,576,471
5,314,324
262,147
Facilities
977,978
1,327,186
1,009,872
317,314
Health and human services
737,500
742,550
637,444
105,106
Culture and leisure
2,258,719
2,278,159
2,223,390
54,769
Intergovernmental
1,118,635
1,048,635
1,013,830
34,805
Employee benefits
15,050,744
14,905,744
14,717,663
188,081
Debt service
4,525,000
4,525,000
4,400,796
124,204
Transfers out
-
75,500
75,500
-
Total Expenditures and Transfers
85,905,661
87,325,710
85,712,922
1,612,788
Excess (deficiency) of revenues and other
sources over expenditures and other uses
(1,800,000)
(2,672,564)
912,248
3;584,812
Other Financing Sources:
Use of free cash:
For operating budget support
1,500,000
2,372,564
-
(2,372,564)
Use of overlay surplus
300,000
300,000
-
(300,000)
Total Other Financing Sources
1,800,000
2,672,564
-
(2,672,564)
Excess of revenues and other
sources over expenditures and other uses
$ -
$ -
$ 912,248
$ 912,248
The accompanying notes are an integral part of these financial statements.
554
TOWN OF READING, MASSACHUSETTS
PROPRIETARY FUNDS
STATEMENT OF NET POSITION
JUNE 30, 2016
Assets
Current:
Cash and short-term investments
User fees, net of allowance for uncollectibles
Prepaid expenses
Inventory
Total Current Assets
Noncurrent:
Restricted cash and short -term investments
Restricted investments
Investment in associated companies
Capital assets being depreciated, net
Capital assets not being depreciated
Total Noncurrent Assets
Deferred Outflows of Resources
Related to pensions
Total Assets and Deferred Outflows
of Resources
Liabilities
Current:
Warrants payable
Accrued liabilities
Customer deposits
Customer advances for construction
Other current liabilities
Current portion of long -term liabilities:
Bonds and loans payable
Compensated absences
Total Current Liabilities
Noncurrent:
Bonds and loans payable
Compensated absences
Net OPEB obligation
Net pension liability
Total Noncurrent Liabilities
Deferred Inflows of Resources
Related to pensions
Total Liabilities and Deferred Inflows
of Resources
Net Position
Business -Type Activities
Enterprise Funds
Electric
Division Water Non Major
Fund Fund Funds Total
$ 13,123,605
$ 7,495,486
$ 6,980,421
$ 27,599,512
8,203,587
2,468,071
2,853,978
13,525,636
985,756
-
-
985,756
1,590,329
91,823
4,694
1,686,846
23,903,277
10,055,380
9,839,093
43,797,750
21,815,636
-
-
21,815,636
1,345,663
1,345,663
26,994
-
-
26,994
70,936,570
12,015,577
5,633,450
88,585,597
1,265,842
4,205,222
1,087,488
6,558,552
95,390,705
16,220,799
6,720,938
118,332,442
6,338,218
391,339
161,674
6,891,231
125,632,200
26,667,518
16,721,705
169,021,423
5,484,732
838,278
149,278
6,472,288
449,404
87,781
13,668
550,853
901,905
-
-
901,905
1,007,142
-
1,007,142
-
-
21,271
21,271
-
1,414,815
91,915
1,506,730
401,347
-
-
401,347
8,244,530
2,340,874
276,132
10,861,536
11,154,163
112,879
11,267,042
2,856,462
39,621
26,575
2,922,658
-
293,029
127,684
420,713
8,833,549
1,040,402
429,821
10,303,772
11,690,011
12,527,215
696,959
24,914,185
883,172
71,435
29,512
984,119
20, 817, 713 14, 939, 524
Net investment in capital assets 72,202,413 5,110,301
Restricted for depreciation fund 4,494,953 -
Unrestricted 28,117,121 6,617,693
Total Net Position $ 104,814,487 $ 11,727,994
The accompanying notes are an integral part of these financial statements.
555
1,002,603 36,759,840
6,758,530 84,071,244
- 4,494,953
8,960,572 43,695,386
$ 15,719,102 $ 132,261,583
TOWN OF READING, MASSACHUSETTS
PROPRIETARY FUNDS
STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET POSITION
FOR THE YEAR ENDED JUNE 30, 2016
Business -Type Activities
Enterprise Funds
Electric
Division Water Non Major
Fund Fund Funds Total
Operating Revenues:
Charges for services
$ 88,353,905
$ 6,341,771
$ 7,252,068
$ 101,947,744
Other
382,078
-
-
382,078
Total Operating Revenues
88,735,983
6,341,771
7,252,068
102,329,822
Operating Expenses:
Personnel expenses
-
1,464,016
826,097
2,290,113
Non - personnel expenses
-
418,745
207,753
626,498
Intergovernmental
1,400,347
2,032,766
4,624,378
8,057,491
Depreciation
3,944,792
851,798
452,080
5,248,670
Energy purchases
63,700,338
31,353
23,501
63,755,192
Operating
12,848,727
-
-
12,848,727
Maintenance
2,252,540
-
-
2,252,540
Total Operating Expenses
84,146,744
4,798,678
6,133,809
95,079,231
Operating Income
4,589,239
1,543,093
1,118,259
7,250,591
Nonoperating Revenues (Expenses):
Intergovernmental revenue
125,000
-
31,950
156,950
Investment income'
209,514
16,430
6,572
232,516
Interest expense
-
(537,456)
(800)
(538,256)
Other
530,175
-
-
530,175
Total Nonoperating Revenues (Expenses)
864,689
(521,026)
37,722
381,385
Income Before Contributions and Transfers
5,453,928
1,022,067
1,155,981
7,631,976
Capital contributions
285,921
-
-
285,921
Transfers out
(2,370,445)
-
-
(2,370,445)
Change in Net Position
3,369,404
1,022,067
1,155,981
5,547,452
Net Position at Beginning of Year
101,445,083
10,705,927
14,563,121
126,714,131
Net Position at End of Year
$ 104,814,487
$ 11,727,994
$ 15,719,102
$ 132,261,583
The accompanying notes are an integral part of these financial statements.
556
TOWN OF READING, MASSACHUSETTS
PROPRIETARY FUNDS
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 2016
Cash Flows From Capital and Related Financing Activities:
Principal payments on notes
(665,000)
Business -Type Activities
(665,000)
Proceeds from issuance of bonds
5,468,378
Enterprise Funds
5,507,428
Principal payments on bonds
Electric
(84,105)
(5,220,305)
Acquisition and construction of capital assets
(6,316,416) (2,591,089)
Division
Water
Non Major
528,289
-
Fund
Fund
Funds
Total
Cash Flows From Operating Activities:
Net Cash (Used For) Capital and Related Financing Activities
(5,788,127) (3,471,260)
(495,775)
(9,755,162)
Receipts from customers and users
$ 87,519,922
$ 6,381,835
$ 7,357,433
$ 101,259,190
Payments to vendors and employees
(81,064,473)
(1,654,128)
(944,474)
(83,663,075)
Customer purchase power charge adjustments
382,077
(345,382)
382,077
Payments to other governments
-
(2,032,766)
4,624,378
(6,657,144)
Net Cash Provided By Operating Activities
6,837,526
2,694,941
1,788,581
11,321,048
Cash Flows From Noncapital Financing Activities:
29,512_
984,119
MMWEC surplus
250690
-
-
250,690
Intergovernmental revenue
-
31,950
31,950
Other
365,047
-
365,047
Transfer out
(2,370,445)
-
(2,370,445)
Net Cash (Used For) Noncapital Financing Activities
(1,754,706)
31,950
(1,722,758)
Cash Flows From Capital and Related Financing Activities:
Principal payments on notes
(665,000)
-
(665,000)
Proceeds from issuance of bonds
5,468,378
39,050
5,507,428
Principal payments on bonds
(5,136,200)
(84,105)
(5,220,305)
Acquisition and construction of capital assets
(6,316,416) (2,591,089)
(449,920)
(9,357,425)
Capital grants and contributions
528,289
-
528,289
Interest expense
- (547,349)
(800)
(548,149)
Net Cash (Used For) Capital and Related Financing Activities
(5,788,127) (3,471,260)
(495,775)
(9,755,162)
Cash Flows From Investing Activities:
(Increase) decrease in restricted cash and investments
467,538
16,430
-
483,968
Investment income
209,514
5,248,670
6,572
216,086
Net Cash Provided By (Used For) Investing Activities
677,052
16,430
6,572
700,054
Net Change in Cash and Short -Term Investments
(28,257)
(759,889)
1,331,328
543,182
Unrestricted Cash and Short Term Investments, Beginning of Year
13,151,862
8,255,375
5,649,093
27,056,330
Unrestricted Cash and Short Term Investments, End of Year
$ 13,123,605
$ 7,495,486
$ 6,980,421
$ 27,599,512
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
Deferred inflows of resources
Net Cash Provided By Operating Activities
$ 4,589,239
$ 1,543,093
$ 1,118,259
$ 7,250,591
3,944,792
851,798
452,080
5,248,670
(889,528)
40,064
105,365
(744,099)
(9,922)
143
(2,154)
(11,933)
152,142
-
152,142
(4,790,403)
(387,472)
(160,076)
(5,337,951)
438,515
206,044
124,497
769,056
-
19,596
1,164
20,760
55,543
-
(24,637)
30,906
(1,500,000)
(1,500,000)
(345,382)
(345,382)
-
(5,498)
(2,396)
(7,894)
4,309,358
355,738
146,967
4,812,063
883,172
71,435
29,512_
984,119
$ 6,837,526 $ 2,694,941 $ 1,788,581 $ 11,321,048
The accompanying notes are an integral part of these financial statements.
557
TOWN OF READING, MASSACHUSETTS
FIDUCIARY FUNDS'
STATEMENT OF FIDUCIARY NET POSITION
JUNE 30, 2016
Municipal
The accompanying notes are an integral part of these financial statements.
558
Pension
Light
Municipal
Trust Fund
Pension
Light
(As of
Trust
OPEB
OPEB
Agency
December 31-2-0151
Funds
Trust Fund
Trust Fund
Funds
Assets
Cash and short term investments
$ 1,930,861
$ 4,264,442
$ 3,017,710
$ 2,525,843
$ 486,984
Investments
116,101,358
1,345,663
-
-
-
Accounts receivable
45,578
-
-
-
-
Total Assets
118,077,797
5,610,105
3,017,710
2,525,843
486,984
Liabilities
-
-
24,093
Warrants payable
-
-
-
-
462,891
Other liabilities
-
-
Total Liabilities
-
-
-
-
486,984
Net Position
Total net position restricted for
$
pensions and other purposes
$ 118,077,797
$ 5,610,105
$ 3,017,710
$ 2,525,843
-
The accompanying notes are an integral part of these financial statements.
558
TOWN OF READING, MASSACHUSETTS
FIDUCIARY FUNDS
STATEMENT OF CHANGES IN FIDUCIARY NET POSITION
FOR THE YEAR ENDED JUNE 30, 2016
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 change
Net position:
Beginning of year
End of year
Pension
Municipal
Trust Fund
Light
(Year ended
Pension
December 31, 2015)
Trust Funds
OPEB
Trust Fund
Municipal
Light
OPEB
Trust Fund
$ 5,184,813 $ 1,500,000 $ 576,000 $ 308,795
304,631 - - -
2,669,084 - - -
8,158,528 1,500,000 576,000 308,795
1,491,693 123,983 10,284 13,928
(609,279) - - -
882,414 123,983 10,284 13,928
9,040,942 1,623,983 586,284 322,723
9,553,781 - - -
322,461 - - -
106,846 - - -
- 1,464,711 - -
9,983,088 1,464,711 - -
(942,146) 159,272 586,284 322,723
119,019,943 5,450,833 2,431,426 2,203,120
$ 118,077,797 $ 5,610,105 $ 3,017,710 $ 2,525,843
The accompanying notes are an integral part of these financial statements.
559
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 Town and applicable component
units for which the Town is considered to be financially accountable.
Blended Component Unit
The Reading Contributory Retirement System (the System) was estab-
lished 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 2 Haven Street, Unit 307,
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.
.E
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 govern ment- 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 prop-
erty 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 considered to
be measurable and available only when cash is received by the govern-
ment. Expenditures generally are recorded when a liability is incurred, as
under accrual accounting. However, debt service expenditures, as well
as expenditures related to compensated absences and claims and
judgments, are recorded only when payment is due.
561
The Town 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.
In addition, the Town has a Sewer Fund, a Stormwater Fund, and a
Landfill Fund which are reported as non -major proprietary funds.
The fiduciary fund financial statements are reported using the economic
resources measurement focus and the accrual basis of accounting. Under
this method, revenues are recognized when earned and expenses are
recorded when liabilities are incurred.
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 post - employment benefit costs, other than pensions.
• The Municipal Light OPEB Trust Fund accounts for reserves set
aside by the Municipal Light Department to fund ,future post -
employment benefit costs, other than pensions.
562
• The Agency Fund accounts for fiduciary assets held by the Town in
a custodial capacity as an agent on behalf of others. This fund is
primarily used for private public safety details, student activity funds,
and developer escrow funds. Agency funds report only assets and
liabilities and, therefore, have no measurement focus.
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.
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.
The Town considers investments with original maturities of three months
or less to be short -term investments. Non - fiduciary fund investments can
be made in securities issued by or unconditionally guaranteed by the U.S.
Government or agencies that have a maturity of one year or less from the
date of purchase and repurchase agreements guaranteed by such securi-
ties with maturity dates of no more than 90 days from the date of purchase.
During the fiscal year, the Town did not enter into any repurchase agreements.
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. The Town's invest-
ments consist of U.S. Government and agency securities, equities, mutual
funds, and long -term certificates of deposit. Investments are carried at
market value except for nonnegotiable certificates of deposit, which are
reported at cost.
Investments for the Contributory Retirement System and trust funds con-
sist of marketable securities, bonds and short -term money market invest-
ments. Investments are carried at market value.
E. Property Tax Limitations
Legislation known as "Proposition 21/2" 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 2016 tax levy reflected an excess capacity of $18,897.
563
F. 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.
G. 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
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
H. 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.
1. 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-
564
tions are reported as liabilities in the applicable governmental activities,
business -type activities, or proprietary fund type Statement of Net
Position.
J. 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.
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 subject to
various trust agreements (i.e., perpetual 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. In the case of capital project
funds, these funds represent remaining balances that are restricted
by state law and borrowing terms. Other permanent funds repre-
sent assets that are restricted by donors for specific governmental
programs and uses
3) Committed funds are reported and expended as a result of motions
passed by the highest decision making authority in the government
(i.e., Town Meeting). Those committed amounts cannot be used for
any other purpose unless Town Meeting removes or changes the
specified use by taking some type of action (through Town Meeting
articles) it employed to previously commit those amounts.
4) Assigned funds represent amounts that are constrained by the
Town's intent to be used for specific purposes, but are neither
restricted nor committed. The Town Accountant is authorized to
assign fund balance. These funds, which include encumbrances,
have been assigned for specific goods and services ordered but not
yet paid for (i.e., purchase orders). This account also includes fund
balance authorized by Town Meeting to be used. in the subsequent
fiscal year's appropriated budget.
565.
5) Unassigned funds represent amounts that have not been restricted,
committed, or assigned to specific purposes within the general
fund. The general fund is the only fund that reports a positive unas-
signed fund balance. Temporary fund balance deficits are reported
as negative amounts in the unassigned classification in other gov-
ernmental funds. Unassigned amounts in the general fund are
available for any purpose.
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.
K. 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.
2. Stewardship, Compliance, and Accountability
A. Budgetary Information
At the annual Town Meeting, the Finance Committee presents an operat-
ing 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 appropriations
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 con-
tingency appropriation) to a departmental appropriation. "Extraordinary"
includes expenses which are not in the usual line, or are great or excep-
tional. "Unforeseen" includes expenses which are not foreseen as of the
time of the annual meeting when appropriations are voted.
566
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 provisions 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. BudgeVGAAP Reconciliation
The budgetary data for the general fund is based upon accounting principles
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 budgetary. accounting
principles to provide a meaningful comparison to budgetary data.
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.
567
Revenues
Expenditures
and Other
and Other
General Fund
Financing Sources
Financinq Uses
Revenues /Expenditures
(GAAP Basis).
$ 83,613,326
$ 85,169,052
Other financing sources /uses
(GAAP Basis)
2,981,220
75,500
Subtotal (GAAP Basis)
86,594,546
85,244,552
Reverse beginning of year
appropriation carryforwards
from expenditures
-
(2,352,765)
Add end -of -year appropriation
carryforwards to expenditures
-
2,821,135
Other
30,624
-
Budgetary Basis
$ 86,625,170
$ 85,712,922
567
D. Excess of Expenditures Over Appropriations
There were no expenditures exceeding appropriations during the current
fiscal year.
E. Deficit Fund Equity
The Town reported various special revenue and capital project funds
reflecting individual deficit account balances as of June 30, 2016. 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
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, 2016, $48,599,575 of the Town's and $1,939,161 of the
System's bank balances of $88,775,402 and $1,939,161, respectively, were
exposed to custodial credit risk. However, $46,206,004 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
Total investments
$ 22,113,326 $ 13,922,727
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.
At June 30, 2016, the Contributory Retirement System maintained its invest-
ments in the State Investment Pool" with a fair value of $116,101,358. 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 1983. 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.
Of the Town's investment of $22,113,326, the government has a custo-
dial credit risk exposure of $22,113,326 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.
The System's investments of $116,101,358 were exposed to custodial
credit risk as uninsured and uncollateralized. However, the investments
were held in the State Investment Pool (PRIT).
569
Exempt
Fair
From
Average
Value
Disclosure
Rating
$ 5,194,316 $
-
A3
2,996,283
-
A2
11,821,970
11,821,970
N/A
2,100,757
2,100,757
N/A
$ 22,113,326 $ 13,922,727
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.
At June 30, 2016, the Contributory Retirement System maintained its invest-
ments in the State Investment Pool" with a fair value of $116,101,358. 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 1983. 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.
Of the Town's investment of $22,113,326, the government has a custo-
dial credit risk exposure of $22,113,326 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.
The System's investments of $116,101,358 were exposed to custodial
credit risk as uninsured and uncollateralized. However, the investments
were held in the State Investment Pool (PRIT).
569
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 $ 10,021,729
SPDR S &P 500 ETF 1,584,888
Total $ 11,606,617
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.
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 formal investment policy
that limits investment maturities as a means of managing 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 Type
Debt- related Securities:.
Domestic corporate bonds
Foreign corporate bonds
Total
E. Foreign Currency Risk
Investment Maturities (in Years)
Fair. Less
Value Than 1 1_5 6 -10
$ 5,194,316 $ - $ 231,816 $ 4,962,500
2,996,283 - 399,086 2,597,197
$ 8,190,599 $ - $ 630,902 $ 7,559,697
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.
570
F. Fair Value
The Town categorizes its fair value measurements within the fair value
hierarchy established by Governmental Accounting Standards Board
Statement No. 72 Fair Value Measurement and Application (GASB 72).
The hierarchy is based on the valuation inputs used to measure the fair
value of the asset. Level 1 inputs are quoted prices in active markets for
identical assets; Level 2 inputs are significant other observable inputs;
Level 3 inputs are significant unobservable inputs.
The Town has the following fair value measurements as of June 30, 2016:
Description
Investments by fair value level:
Debt securities:
Domestic corporate bonds
Foreign corporate bonds
Corporate equities
Investments measured at
the net asset value (NAV):
External investment pool
Total
Description
External investment pool
Fair Value Measurements Usin
Quoted prices
in active
Significant
Significant
markets for
observable
unobservable
identical assets
inputs
inputs
(Level 1)
(Level 2)
(Level 3)
$ 5,194,316 $ -
2,996,283 -
2,100,757 2,100,757
116,101,358
$ 126,392,714
Unfunded
Value Commitments
$ 116,101,358 $
$ 5,194,316 $ -
2,996,283 -
Redemption
Frequency Redemption
(If currently Notice
eli ible ) Period
Monthly 30 days
Corporate equities classified in Level 1 are valued using prices quoted in
active markets for those equities.
Domestic and foreign corporate bonds classified in Level 2 are valued
using standard inputs consisting of benchmark yields, reportable trades,
benchmark securities (where available), and reference data including
market research publications.
571
5.
Taxes and Motor Vehicle Receivables
Real estate and personal property taxes are levied and based on values
assessed on January 1st 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.
Tax and motor vehicle receivables at June 30, 2016 consist of the following:
Receivables:
Real estate taxes
Personal property taxes
Tax Liens
Deferred taxes
Total property taxes
Motor vehicle excise
Grand total
6. User Fees Receivable
. 327,448 103,686 223,762
$ 1,039,085 $ 172,556 $ 866,529
The Town provides water, sewer, and stormwater services for its residents.
Bills are sent to residential customers on a quarterly basis, based on usage.
572
Allowance
for
Gross
Doubtful
Net
Amount
Accounts
Amount
$ 250,392
$ (25,039) $
225,353
21,953
(6,926)
15,027
369,050
(36,905)
332,145
70,242
-
70,242
711,637
(68,870)
642,767
. 327,448 103,686 223,762
$ 1,039,085 $ 172,556 $ 866,529
The Town provides water, sewer, and stormwater services for its residents.
Bills are sent to residential customers on a quarterly basis, based on usage.
572
7.
Receivables for water, sewer; and stormwater user charges, liens, and other
fees at June 30, 2016 consist of the following:
Receivables:
Water user charges
Water liens
Water - other
Total Water
Sewer user charges
Sewer liens
Sewer - other
Total Sewer
Stormwater user charges
Stormwater liens
Total Stormwater
Grand Total
Allowance
Gross for Doubtful
Amount Accounts Net Amount
$ 2,682,748 $ (268,274) $ 2,414,474
71,169 (21,351) 49,818
7,559 (3,780) 3,779
2,761,476 (293,405) 2,468,071
2,943,435 (294,344) 2,649,091
57,464 (17,239) 40,225
24,217 (12,109) 12,108
3,025,116 (323,692) 2,701,424
156,735 (7,174) 149,561
2,993 - 2,993
159,728 (7,174) 152,554
$ 5,946,320_$ (624,271) $ 5,322,049
Intergovernmental Receivables
This balance represents reimbursements requested from Federal and State
agencies for expenditures incurred in fiscal 2016.
8. 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 2016.
Fund
General Fund
Nonmajor Governmental Funds:
State grants
Revolving funds
Receipts reserved for appropriation
School capital project funds
Major Enterprise Funds:
Electric Division fund
Total
Transfers In Transfers Out
$ 2,785,996 $ 75,500
- 12,481
500 278,070
- 125,000
75,000 -
$ 2,861,496
2,370,445
$ 2,861,496
The transfer from the electric division fund to the general fund is a payment in lieu
of taxes (PILOT). The Town's other transfers include transfers made to move
(1) unrestricted revenues or balances that have been collected or accumulated in
573
Q
the general fund to other funds based on budgetary 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, 2016 was as follows (in
thousands):
Governmental 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
Governmental activities capital assets, net
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
574
Beginning Ending
Balance Increases Decreases Balance
$ 3,966 $ - $ (165) $ 3,801
133,981 2,481 (484) 135,978
10,424 972 (829) 10,567
33,354 738 (2,215) 31,877
181,725 4,191 (3,693) 182,223
(1,427) (171) 165 (1,433)
(42,701) (3,801) 484 (46,018)
(5,724) (909) 829 (5,804)
(18,394) (1,257) 2,215 1( 7,436)
(68,246) 6,138 3,693 7( 0,691)
113,479 (1,947) - 111,532
3,981 - - 3,981
5,325 10,812 (125) 16,012
9,306 10,812 (125) 19,993
$ 122,785 $ 8,865 $ (125) $ 131,525
Beginning Ending
Balance Increases Decreases Balance
$ 1,437 $ - $ - $ 1,437
16,455 1,600 (47) 18,008
35,344 1,071 (217) 36,198
113,719 3,801 (999) 116,521
166,955 6,472 (1,263) 172,164
(399) (70) - (469)
(10,135) (493) 47 (10,581)
(21,883) (1,194) 217 (22,860)
(47,091) (3,492) 914 4( 9,669)
79,508 (5,249) 1,178 8( 3,579)
87,447 1,223 (85) 88,585
1,450 - - 1,450
2,224 2,885 - 5,109
3,674 2,885 - 6,559
$ 91,121 $ 4,108 $ (85) $ 95,144
Depreciation expense was charged to functions of the Town as follows:
Governmental Activities:
General government
$ 226,065
Public safety
477,412
Education
3,533,034
Public works
1,655,310
Facilities
4,667
Health and human services
32,854
Culture and recreation
209,218
Total depreciation expense - governmental activities $ 6,138,560
Business -Type Activities:
Electric $ 3,944,792
Water 851,798
Other - Sewer 421,117
Other - Stormwater 30,964
Total depreciation expense - business -type activities $ 5,248,671
Deferred Outflows of Resources
In addition to assets, the basic financial statements may include a separate
element for 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.
The following is a summary of deferred outflow of resources balances as of
June 30, 2016:
Entity -wide Basis Fund Basis
Governmental Business -type Proprietary Funds
Activities Activities Electric Water Nonmaior
Related to pensions $ 11,611,038 $ 6,891,231 $ 6,338,218 $ 391,339 $ 161,674
Deferred outflows of resources related to pensions will be recognized in pension
expense in future years and is more fully described in Note 21.
575
11. Warrants Payable
Warrants payable represent 2016 expenditures paid by July 15, 2016.
12. Tax Refunds Payable
This balance consists of an estimate of refunds due to property taxpayers for
potential abatements, pending with the state Appellate Tax Board.
13. Notes Payable
The following summarizes activity in notes payable during fiscal year 2016:
Governmental Activities:
Elementary school modular
classrooms
RMHS retaining wall repairs
Total Governmental Activities
Business -type Activities:
Water improvements
Total Business -Type Activities
Total
14. Long -Term Debt
Interest
Beginning
Ending
Date of
Date of
Balance at
New Balance at
Rate
Issue
Maturity
06/30/15
Issues Maturities 06/30/16
0.75%
06/29115
06/29/16 $
1,200,000
$ - $ (1,200,000) $ -
0.75%
06/29/15
06/29/16
500,000
- (500,000) -
1,700,000
- (1,700,000) -
0.75%
06/29/15
06/29116
665,000
- (665,000) -
665,000
- (665,000) -
$
2,365,000
$ - $ (2,365,000) $ -
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:
576
Total Business -Type Activities: $ 12,070,394
577
Amount
Serial
Outstanding
Maturities
Interest
as of
Governmental Activities:
Through
Rates %
6/30/16
Wood End Elementary School
04/15/24
3.94%
$ 30,000
Wood End Elementary School
04/15/24
3.94%
45,000
Downtown Improvements
11/01/17
3.45%
130,000
Ladder Truck
07/01/17
3.05%
160,000
Parker Middle Sch Refunding
07/01/17
3.05%
330,000
Energy conservation
08/01/25
2.99%
2,990,000
RMHS Refunding
02/01/24
2.25%
8,655,000
Killam Roof
02101/22
1.83%
402,000
Birch Meadow Windows
02/01/22
1.83%
198,000
Library Renovation
04/15/25
1.49%
9,000,000
Roadway /Pedestrian Improvements (1)
04/15/25
1.49%
900,000
Roadway /Pedestrian Improvements (11)
04/15/25
1.49%
270,000
Wood End Refunding - Sunset Rock (1)
04/15/24
1.49%
208,790
Wood End Refunding - Sunset Rock (11)
04/15/24
1.49%
308,000
Wood End School Refunding
04/15/24
1.49%
1,130,710
Wood End School Refunding
04/15/24
1.49%
73,800
Barrows School Refunding
04/15/24
1.49%
942,700
Public Library
11/01/24
1.26%
2,115,000
Outdoor Recreational Facility
11/01/16
1.26%
100,000
RMHS Retaining Walls
11/01/20
1-.26%
500,000
Elementary School Modular Classrooms
11/01/23
1.26%
1,200,000
Total Governmental Activities:
$ 29,689,000
Amount
Serial
Outstanding
Maturities
Interest
as of
Business -Type Activities:
Through
Rates %
6/30/16
MWRA Buy -in
04/15/27
4.00%
$ 160,000
MWRA Buy -in
11/01/27
3.88%
780,000
MWRA Buy -in
07101/17
3.05%
160,000
MWRA Water System Pipeline
08/15/21
0.00%
1,230,000
MWRA Water System Pipeline
08/12/23
0.00%
3,209,600
MWRA Buy -in refunding
04/15/27
1.49%
1,561,000
Water GOB
11/01/25
1.26%
1,165,000
MWRA Buy -in refunding
11/01/27
1.26%
3,600,000
MWRA Inflo /Infiltration
08/15/16
0.00 %
44,440
MWRA Inflo /Infiltration
05/19/19
0.00%
115,500
MWPAT septic loans
02/01/17
0.00%
5,804
MWRA Sewer bond
11/15/20
0.00%
39,050
Total Business -Type Activities: $ 12,070,394
577
B. Future Debt Service
The annual payments to retire all general obligation long -term debt
outstanding as of June 30, 2016 are as follows:
Governmental
2017
2018
2019
2020
2021
2022-2026
Total
Business -Type
2017
2018
2019
2020
2021
2022-2026
2027-2029
Total
Principal
$ 3,750,000
3,660,000
3,415,000
3,465,000
3,495,000
11,904,000
$ 29,689,000
Principal
$ 1,448,115
1,408,675
1,298,675
1,255,175
1,255,154
4,554,600
850,000
$ 12,070,394
Interest
$ 1,106,855
993,814
860,233
730,214
597,358
1,053,005
$ 51341,479
Interest
$ 238,618
235,300
209,230
185,130
161,130
444,310
25,425
$ 1,499,143
Total
$ 4,856,855
4,653,814
4,275,233
4,195,214
4,092,358
12,957,005
$ 35,030,479
Total
$ 1,686,733
1,643,975
1,507,905
1,440, 305
1,416,284
4,998,910
875,425
$ 13,569,537
C. Changes in General Long -Term Liabilities
During the year ended June 30, 2016, the following changes occurred in
long -term liabilities (in thousands):
Equals
Total Total Less Long -Term
Balance Balance Current Portion
7/1/15 Additions Reductions 6/30/16 Portion 6/30/16
Governmental Activities
Bonds payable
$ 28,924
$ 3,915
$ (3,150)
$ 29,689
$ (3,750) $
25,939
Unamortized bond premiums
3,174
425
354
3,245
401
2,844
Total bonds payable
32,098
4,340
(3,504)
32,934
(4,151)
28,783
Accrued employee benefits
1,357
48
(296)
1,109
(39)
1,070
Net OPEB obligation
15,903
4,970
(3,319)
17,554
-
17,554
Net pension liability
20,314
10,555
-
30,869
-
30,869
Litigation settlement liability
-
6,000
-
6,000
-
6,000
Total Governmental Activities $ 69,672 $ 25,913 $ 7,119 $ 88,466 $. 4,190 $ 84,276
578
D. Current and Advance Refundinps
Advance Refunding of 11/01/2007
On June 28, 2016, the Town issued general obligation municipal purpose
loan of 2016 bonds in the amount of $8,680,000, of which $3,600,000
represented refunding bonds, with interest rates ranging from 3.00% to
4.00% throughout the life of the bonds. The bonds were issued at a true
interest cost of 1.2613 %.
The $3,600,000 in refunding bonds were issued to advance refund
$3,900,000 of its November 1, 2007 Bonds (the "2007 Bonds "), com-
prised of serial bonds with a 4.0% interest rate. The 2007 Bonds mature
on November 1, 2018 through November 1, 2027 and are callable on
November 1, 2017.
The refunding met the requirements of an in- substance debt defeasance
and the bonds were removed from the Town's financial statements.
After paying the pro -rata share of issuance costs and underwriter's discount
of approximately $47,861, the net bond proceeds were $4,101,177. The net
proceeds from the issuance of the general obligation refunding 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 ser-
vice payments until the bonds are called on November 1, 2017. The advance
refunding met the requirements of an insubstance debt defeasance and the
bonds were removed from the Government's financial statements.
As a result of the advance refunding, the Town reduced its total debt service
cash flow requirements by $487,809, which resulted .in an economic gain
(difference between the present value of the debt service payments on the
old and new debt) of $449,967.
Defeased debt still outstanding at June 30, 2016 is $910,000.
579
Equals
Total
Total
Less
Long -Term
Balance
Balance
Current
Portion
7/1/15
Additions
Reductions
6/30/16
Portion
6/30116
Business -Type Activities
Bonds payable
$ 12,487
$ 4,804
$ (5,221)
$ 12,070
$ (1,448)
$ 10,622
Unamortized bond premiums
-
703
-
703
59
644
Total bonds payable
12,487
5,507
(5,221)
12,773
(1,507)
11,266
Accrued employee benefits
3,132
257
(65)
3,324
(401)
2,923
Net OPEB obligation
429
951
(959)
421
-
421
Net pension liability
5,492
4,812
-
10,304
-
10,304
Total Business -Type
$ 21,540
$ 11,527
$ 6,245
$ 26,822
$ 1,908
$ 24,914
D. Current and Advance Refundinps
Advance Refunding of 11/01/2007
On June 28, 2016, the Town issued general obligation municipal purpose
loan of 2016 bonds in the amount of $8,680,000, of which $3,600,000
represented refunding bonds, with interest rates ranging from 3.00% to
4.00% throughout the life of the bonds. The bonds were issued at a true
interest cost of 1.2613 %.
The $3,600,000 in refunding bonds were issued to advance refund
$3,900,000 of its November 1, 2007 Bonds (the "2007 Bonds "), com-
prised of serial bonds with a 4.0% interest rate. The 2007 Bonds mature
on November 1, 2018 through November 1, 2027 and are callable on
November 1, 2017.
The refunding met the requirements of an in- substance debt defeasance
and the bonds were removed from the Town's financial statements.
After paying the pro -rata share of issuance costs and underwriter's discount
of approximately $47,861, the net bond proceeds were $4,101,177. The net
proceeds from the issuance of the general obligation refunding 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 ser-
vice payments until the bonds are called on November 1, 2017. The advance
refunding met the requirements of an insubstance debt defeasance and the
bonds were removed from the Government's financial statements.
As a result of the advance refunding, the Town reduced its total debt service
cash flow requirements by $487,809, which resulted .in an economic gain
(difference between the present value of the debt service payments on the
old and new debt) of $449,967.
Defeased debt still outstanding at June 30, 2016 is $910,000.
579
15.
E. Bond Authorizations
Long -term debt authorizations which have not been issued or rescinded
as of June 30, 2016 are as follows:
Date Authorized
Purpose
Amount
November 2010
Killam School remodeling
$ 3,050
November 2010
MWRA water system pipeline
235,000
November 20.12
MWRA 1/1 sewer loan
460,000
April 2013
Water improvements - A -1 and A -2
948,000
February 2014
Library renovations.
1,267,367
September 2014
Water main improvements - Phase 1
2,512,000
April 2015
Birch Meadow field lighting
900,000
April 2015
MWRA Sewer 1/1
1,688,000
-
Total
$ 8,013,417
Deferred Inflows of Resources
In addition to liabilities, the basic financial statements may include a separate
element for deferred inflows of resources. Deferred inflows of resources repre-
sent the acquisition of net position by the Town that is applicable to future
reporting periods. Deferred inflows of resources have a negative effect on net
position, similar to liabilities.
The following is a summary of deferred inflow of resources balances as of
June 30, 2016:
Deferred inflows of resources related to pensions will be recognized in
pension expense in future years and is more fully described in Note 21.
Gains on refunding bonds are reported in the government -wide statement of
net position in connection with the unamortized amount of gains resulting
from the refunding of long -term bonds.
Unavailable revenues are reported in the governmental funds balance sheet
in connection with receivables for which revenues are not considered availa-
ble to liquidate liabilities of the current year.
.l
Entity -wide Basis
Fund Basis
Governmental Funds
Proprietary Funds
Governmental
Business -type
General
Activities
Activities
Fund
Electric Water Nonmaior
Related to pensions
$ 2,119,488
$ 984,119
$ - $
883,172 $ 71,435 $ 29,512
Gain on refunding bond
135,900
-
-
- - -
Unavailable revenues
-
-
1,283,297
- -
Total Deferred Inflows
$ 2,255,388
$ 984,119
$ 1,283,29977 $
883,172 $ 71,435 $ 29,512
Deferred inflows of resources related to pensions will be recognized in
pension expense in future years and is more fully described in Note 21.
Gains on refunding bonds are reported in the government -wide statement of
net position in connection with the unamortized amount of gains resulting
from the refunding of long -term bonds.
Unavailable revenues are reported in the governmental funds balance sheet
in connection with receivables for which revenues are not considered availa-
ble to liquidate liabilities of the current year.
.l
16. 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 is segregated between nonexpendable
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.
Assets that have restrictions placed on them from federal and state granting
agencies, as well as assets that are restricted by state law to specific capital
purposes and borrowing terms, are reported as a component of "Grants and
other statutory restrictions ".
17. 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, 2016:
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 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
various special revenue funds, capital project 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,
stabilization funds set aside by Town Meeting vote for future capital acquisi-
tions and improvements (now reported as part of the general fund per
GASB 54) and capital project funds. A similar action is needed to modify or
rescind a commitment.
581
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 in the subsequent budgetary period, surplus set aside to be used in
the subsequent year's budget voted by Town Meeting, and free cash appro-
priated in the subsequent year for the High School construction litigation
settlement.
Unassigned - Represents amounts that are available to be spent in future
periods, the Town's general stabilization account, and deficit balances in
nonmajor governmental funds.
Following is a breakdown of the Town's fund balances at June 30, 2016:
(continued)
582
Nonmajor
Total
General
Governmental
Governmental
Fund
Funds
Funds
Nonspendable
Permanent funds
Cemetery $ -
$ 2,682,748
$ 2,682,748
Other -
511,287
511,287
Total Nonexpendable -
3,194,035
3,194,035
Restricted
Federal grants -
38,174
38,174
State grants
Circuit Breaker -
183,234
183,234
State aid to libraries -
230,661
230,661
Other -
907,579
907,579
Revolving funds:
Extended day program -
1,036,604
1,036,604
RISE preschool program -
386,690
386,690
Special Education tuition -
284,968
.284,968
All -day kindergarten program -
618,985
618,985
Inspection permit -
767,398
767,398
Recreation -
294,717
294,717
Athletic activities -
47,115
47,115
School lunch -
446,518
446,518
Other -
246,121
246,121
Receipts reserved for appropriation
Sale of real estate -
645,696
645,696
Affordable housing fund -
262,013
262,013
Sale of cemetery lots -
194,509
194,509
Other -
8,356
8,356
Gifts and donations -
766,951
766,951
Permanent funds
Healthcare -
4,799,770
4,799,770
Cemetery -
1,733,400
1,733,400
Other -
433,228
433,228
Town capital project funds
Library renovations -
2,441,761
2,441,761
West street road improvements -
533,695
533,695
Other -
36,077
36,077
School capital project funds -
133,497
133,497
Total Restricted -
17,477,717
17,477,717
(continued)
582
(continued)
Committed
Smart growth stabilization account
Sick buy -back stabilization account
For School capital project funds
Total Committed
Assigned
For encumbrances
General government
Public safety
Education
Public works
Facilities
Culture and recreation
Employee benefits
For next year's expenditures
Appropriation of free cash subsequent
to June 30, 2016 for High School
project litigation settlement
Total Assigned
Unassigned - operating fund
Unassigned - general stabilization
Unassigned - deficit balances
Total Unassigned
Total Fund Balance
(1) Includes $1.6 million in general stabilization.
18. Subsequent Events
Subsequent to June 30, 2016, the Town agreed to a settlement in the amount
of $6,000,000 regarding a civil action lawsuit that arose out of Reading
Memorial High School's additions and renovations construction project. At the
December 8, 2016 Special Town Meeting, the Town voted to fund the settle-
ment using the following sources:
Long -term borrowing
Free cash appropriation
Other available funds
Total
Amount
$ 3,000,000
2,196,605
803,395
$ 6,000,000
The Town reported a liability of $6,000,000 in the government -wide financial
statements, and reported an assigned fund balance of $2,196,605 in the
general fund, which represents the free cash appropriated to fund the
settlement.
583
Nonmajor
Total
General
Governmental
Governmental
Fund
Funds
Funds
503,000
-
503,000
31
-
31
-
13,131
13,131
503,031
13,131
516,162
232,560
-
232,560
704,406
-
704,406
1,386,100
-
1,386,100
368,618
-
368,618
224,595
-
224,595
20,187
-
20,187
530
-
530
2,450,000
-
2,450,000
2,196,605
-
2,196,605
7,583,601
-
7,583,601
8,680,811
-
8,680,871
1,565,475
-
1,565,475
-
(638,362)
(638,362)
10,246,346
(638,362)
9,607,984
$ 18,332,978
$ 20,046,521
$ 38,379,499
Subsequent to June 30, 2016, the Town agreed to a settlement in the amount
of $6,000,000 regarding a civil action lawsuit that arose out of Reading
Memorial High School's additions and renovations construction project. At the
December 8, 2016 Special Town Meeting, the Town voted to fund the settle-
ment using the following sources:
Long -term borrowing
Free cash appropriation
Other available funds
Total
Amount
$ 3,000,000
2,196,605
803,395
$ 6,000,000
The Town reported a liability of $6,000,000 in the government -wide financial
statements, and reported an assigned fund balance of $2,196,605 in the
general fund, which represents the free cash appropriated to fund the
settlement.
583
19. Commitments and Contingencies
Outstanding Legal Issues — On an ongoing basis, there are typically pending
legal issues in which the Town is involved. The Town's management is of the
opinion that the potential future settlement of these issues would not materi-
ally affect its financial 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.
20. 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
• d
active employees who retire from the Town and meet the eligibility criteria
will be eligible to receive these benefits.
C. Funding 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 2016 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, 2016, 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.
The Town's annual OPEB cost, the percentage of annual OPEB cost
contributed to the plan, and the net OPEB obligation were as follows:
Governmental
Water
Sewer
Stormwater
Electric
Funds
Fond
Fond
Fund
Fund
Total
Annual Required Contribution (ARC)
$ 4,867,416
$ 123,870
$ 44,779
$ 7,151 $
782,939 $
5,826,155
Interest on net OPEB obligation
954,182
23,136
8,524
1,557
5,698,341
987,399
Adjustment to ARC
(851,654)
(28,634)
1( 0,550)
(1,927 )
-
(892,765)
Annual OPEB cost
4,969,944
118,372
42,753
6,781
782,939
5,920,789
Contributions made
(2,819,309)
(65,145)
(28,588)
(122)
(474,144)
(3,387,308)
Additional funding to trust
(500,000)
(58,725
1( 6'191)
(7,029)
(308,795)
(890,740)
Increase in net OPEB obligation
1,650,635
(5,498)
(2,026)
(370)
1,642,741
Net OPEB obligation - beginning of year
15,903,029
298,527
109,988
20,092
-
16,331,636
Net OPEB obligation - end of year
$ 17,553,664
$ 293,029
$ 107,962
$ 19,722 $
- $
17,974,377
The Town's annual OPEB cost, the percentage of annual OPEB cost
contributed to the plan, and the net OPEB obligation were as follows:
585
Annual
Percentage of
OPEB
OPEB
Net OPEB
Fiscal Year Ended
Cost
Cost Contributed
Obligation
2016
$
5,920,789
57.21%
$
17,974,377
2015
$
5,698,341
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
585
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 OPEB Funding Progress, presented as required supplementary
information 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,
while under a closed amortization the remaining period decreases and the
UAAL is eventually paid off.
21. Reading Contributory Retirement System
The Town follows the provisions of GASB Statement No. 67 Financial Report-
ing 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 31, 2014:
Retirees and beneficiaries receiving benefits 333
Terminated plan members entitled to but not yet
receiving benefits 12
Terminated plan members not entitled to
receive benefits 32
Active plan members 340
Total 717
Number of participating employers 2
587
Participant Retirement Benefits
The System provides for retirement allowance benefits up to a maximum
of 80% of a member's highest 3 -year average annual rate of regular com-
pensation for those hired prior to April 2, 2012 and the highest 5 -year
average annual rate of regular compensation for those first becoming
members of the Massachusetts System on or after that date. However,
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 %, 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. Benefit payments are based
upon a member's age, length of creditable service, level of compensation
and group classification.
A retirement allowance may be received at any age, upon attaining 20
years of service. The plan also provides for retirement at age 55 if the
participant was a member prior to January 1, 1978, with no minimum
vesting requirements. If the participant was a member on or after
January 1, 1978 and a member of Groups 1 or 2, then a retirement
allowance may be received if the participant (1) has at least 10 years of
creditable service, (2) is age 55, (3) voluntarily left Town employment on
or after that date, and (4) left accumulated annuity deductions in the fund.
Members of Group 4, have no minimum vesting requirements, however,
must be at least age 55. Groups 2 and 4 require that participants perform
the duties of the Group position for at least 12 months immediately prior to
retirement.
A participant who became a member on or after April 2, 2012 is eligible for
a retirement allowance upon 10 years creditable service and reaching
ages 60 or 55 for Groups 1 and 2, respectively. Participants in Group 4
must be at least age 55. Groups 2 and 4 require that participants perform
the duties of the Group position for at least 12 months immediately prior to
retirement.
A retirement allowance consists of two parts: an annuity and a pension. 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.
Participant Refunds
Employees who resign from service and who are not eligible to receive a
retirement allowance are entitled to request a refund of their accumulated
total deductions. Members voluntarily withdrawing with at least 10 years of
Om
service or involuntarily withdrawing, receive 100% of the regular interest
that has accrued on those accumulated total deductions. Members volun-
tarily withdrawing with less than 10 years of service get credited interest
each year at a rate of 3 %.
Participants 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. The per-
centages are as follows:
Before January 1, 1975
5.00%
January 1, 1975 - December 31, 1983
7.00%
January 1, 1984 - June 30, 1996
8.00%
Beginning July 1, 1996
9.00%
1979 - present
Additional 2.00% of salary
in excess of $30,000
Group 1 members hired on or after
6.00% with 30 or more years
April 2, 2012
of creditable service
Employer Contributions
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, 2016
was $5,147,236, which was equal to its annual required contribution.
B. Summary of Significant Accountinq Policies
The accounting policies of the System as reflected in the accompanying
financial statements for the year ended June 30, 2016 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.
WK
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, 2016, the annual money- weighted rate of
return on pension plan investments, net of pension. plan investment
expenses, was 0.75 %. 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)
are recognized when due and payable in accordance with benefit terms.
Investments are reported at fair value.
C. Net Pension Liability of Participatinq Employers
The net pension liability was based on an actuarial valuation dated
January 1, 2015.
Net Pension Liability of Employers
The components of the net pension liability of the participating employers
at June 30, 2016 were as follows:
Total pension liability
Plan fiduciary net position
Employers' net pension liability
Plan fiduciary net postion as a
percentage of total pension liability
590
163,609,593
(118,077,797)
$ 45,531,796
72.17%
Actuarial Assumptions
Actuarial valuation of the ongoing System 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 January 1,
2015 valuation were based on the results of the most recent actuarial
experience study, which was for the period July 1, 2013 through
December 31, 2014.
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
January 1, 2015, rolled forward to December
31, 2015
Entry Age Normal
7.65%
Based on years of service: 6.00% - 4.25% for
general employees and 7.00% - 4.75% for
public safety employees
3.75% per year
3% on first $12,000
Mortality rates were based on the RP -2014 Mortality Table projected with
full generational mortality using Scale MP -2014. For disabled lives, the
mortality rates were based on the RP -2014 Disabled Mortality Table.
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:
591
Long -term
Target Expected
Asset Real Rate
Asset Class
Allocation
of Return
Global equity
40.00%
8.02%
Fixed income
13.00 %
3.72%
Value -added fixed income
10.00%
6.86%
Private equity
10.00%
9.50%
Real estate
10.00%
6.50%
Timber /Natural resources
4.00%
7.07%
Hedge funds
9.00%
6.50%
Other
4.00%
6.18%
Total 100.00%
Discount Rate: The discount rate used to measure the total pension
liability was 7.65 %. 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.
Sensitivity of the proportionate share of the net pension liability to chancres
in the discount rate: The following presents the Town's proportionate share
of the net pension liability calculated using the discount rate of 7.65 %, 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 one percentage -
point lower (6.65%) or one percentage -point higher (8.65 %) than the current
rate:
Current
1 % Decrease Discount Rate 1 % Increase
Year Ended (6.65%) (7.65%) (8.65%)
December 31, 2015 $ 63,625,456 $ 41,172,508 $ 29,537,779
D. Pension Liabilities Pension Expense and Deferred Outflows of
Resources and Deferred Inflows of Resources Related to Pensions
At June 30, 2016, the Town reported a liability of $41,172,508 for its
proportionate share of the net pension liability. The net pension liability
was measured as of December 31, 2015, and the total pension liability
used to calculate the net pension liability was determined by an actuarial
592
valuation as of January 1, 2015. 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, 2015,
the Town's proportion was 99.275 %.
For the year ended June 30, 2016, the Town recognized pension expense
of $6,872,107. 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 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:
Deferred
Deferred
Governmental
Outflows of
Inflows of
Resources
Resources
Net difference between projected and
Year ended June 30:
actual investment earnings on pension
2017
plan investments
$ 6,694,784
$ -
Changes of assumptions
10,307,485
-
Differences between expected and actual
2019
2,902,759
experience
-
(3,103,607)
Pension plan contributions made
1,347,807
4,250,568
subsequent to the measurement date
1,500,000
-
Total
$ 18,502,269
$ (3,103,607)
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:
593
Deferred Outflows of Resources
Governmental
Business -type
Activities
Activities
Total
Year ended June 30:
2017
$ 2,902,759
$ 2,847,808
$ 5,750,567
2018
2,902,759
1,347,808
4,250,567
2019
2,902,759
1,347,808
4,250,567
2020
2,902,761
1,347,807
4,250,568
Total
$ 11,611,038
$ 6,891,231
$ 18,502,269
593
Deferred Inflows of Resources
Governmental Business -type
Activities Activities Total
Year ended June 30:
2017 $ (529,872) $ (246,030) $ (775,902)
2018 (529,872) (246,030) (775,902)
2019 (529,872) (246,030) (775,902)
2020 (529,872) (246,029) (775,901)
Total $ (2,119,488) $ (984,119) $ (3,103,607)
22. 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
594
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
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:
Before January 1, 1975
January 1, 1975 - December 31,
January 1, 1984 June 30, 1996
Beginning July 1, 1996
Beginning July 1, 2001
1979 - present
D. Actuarial Assumptions
5.00%
1983 7.00%
8.00%
9.00%
11.00% (for teachers who were hired after
July 1, 2001 and accept the provisions of
Chapter 114 of the Acts of 2000)
Additional 2.00% of salary in excess of
$30,000
A summary,.of the actuarial assu.mptions,as..of.the_latest actuarial valuation
is shown below:
Valuation Date
Actuarial cost method
Actuarial assumptions:
Investment rate of return
Projected salary increases
Interest rate
Cost -of- living increase
January 1, 2015, rolled forward to June 30, 2015
Entry Age Normal
7.50 %, net of pension plan investment expense,
including inflation
Based on years of service, 4.00% - 7.50%
3.50% credited to annuity savings fund
3.00% per year
595
Mortality rates were based on the following:
Pre - retirement RP -2014 Employees table projected generationally with Scale
BB and a base year of 2014 (gender distinct).
Post- retirement RP -2014 Healthy Annuitant table projected generationally with
Scale BB and a base year of 2014 (gender distinct).
Disability RP -2014 Healthy Annuitant table projected generationally with
Scale BB and a base year 2014 set forward 4 years.
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 -
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, 2015 are summarized in the following
table:
E. Discount Rate
The discount rate used to measure the total pension liability was 7.50 %.
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.
Target
Long -Term Expected
Asset Class
Allocation
Real Rate of Return
Global equity
40.00%
6.90%
Core fixed income
13.00%
2.40%
Private equity
10.00%
8.50%
Real estate
10.00%
Value added fixed income
10.00%
5.80%
Hedge Funds
9.00%
5.80%
Portfolio completion strategies
4.00%
5.50%
Timber /natural resources
4.00%
6.60%
Total
100.00%
E. Discount Rate
The discount rate used to measure the total pension liability was 7.50 %.
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.
23.
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 (6.50 %)
Rate (7.50 %)
to (8.50 %)
June 30, 2015
$ 25,449,000
$ 20,489,643
$ 16,221,000
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 2015 (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 $89,977,515
and $7,297,977, respectively, based on a proportionate share of 0.439137°/x.
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 signifi-
cant reductions 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.
597
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 deregula-
tion legislation that restructured the Commonwealth's electricity industry to
foster competition and promote. reduced electric rates. Energy deregula-
tion created a separation between the supply and delivery portions of elec-
tricity 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.
The Pension Trust constitutes the principal instrument of a plan established
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 the 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 maturi-
ties 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
guaranteed by the U.S. Government or agencies that have a maturity of
one year or less from the date of purchase and repurchase agreements
guaranteed 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.
599
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 Depart-
ment 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 esti-
mates 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
New 1
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 construction 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.
Cash and Investments
Total cash and investments as of June 30, 2016 are classified in the accom-
panying financial statements as follows:
Proprietary Fund:
Unrestricted cash and short -term investments $ 13,123,605
Restricted cash and short -term investments 21,815,636
Restricted investments 1,345,663
Fiduciary Funds:
Cash and short-term investments - Pension Trust 4,264,442
Cash and short-term investments - OPEB Trust 2,525,843
Investments - Pension Trust
Total cash and investments
1,345,663
$ 44,420,852
Total cash and investments at June 30, 2016 consist of the following:
Cash on hand
Deposits with financial institutions
Total cash and investments
601
$ 3,000
44,417,852
$ 44,420,852
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 pro-
vide the cash flow and liquidity needed for operations.
As of June 30, 2016, 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, 2016, 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 assigning of
a rating by a nationally recognized statistical rating organization. As of June 30,
2016, the Department and Pension Trust held investments in domestic and
foreign fixed income bonds with varying ratings as follows:
602
Proprietary
Fiduciary
Fund
Funds
Restricted
Pension
Maturity
Investments
Trust
Date
Corporate bonds
AT &T Inc
$ 221,559
$ 221,559
12/01/22
General Electric Cap Corp
220,472
220,472
01/09/23
Wells Fargo & Co
214,864
214,864
08/15/23
Rabobank Nederland Bank
257,210
257,210
11/09/22
Teva Pharmaceut Fin BV
218,036
2181036
12/18/22
BNP Paribas
213,522
213,522
03/03/23
Total
$ 1,345,663
$ 1,345,663
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 assigning of
a rating by a nationally recognized statistical rating organization. As of June 30,
2016, the Department and Pension Trust held investments in domestic and
foreign fixed income bonds with varying ratings as follows:
602
Investment Type
Corporate bonds:
AT &T Inc
General Electric Cap Corp
Wells Fargo & Co
Rabobank Nederland Bank
Teva Pharmaceut Fin BV
BNP Paribas
Total
Concentration of Credit Risk
Proprietary
Fund
Restricted
Investments
$ 221,559
220,472
214,864
257,210
218,036
Fiduciary
Funds
Pension Moody's
Trust
$ 221,559
220,472
214,864
257,210
218,036
213,522 213,522
$ 1,345,663 $ 1,345,663
Rati ng
AMA
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, 2016, 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.
603
Because the Department pools its cash and short -term investments with the
Town of Reading, and bank accounts are maintained in the name of the Town,
the amount of the Department's balance exposed to custodial credit risk at
June 30, 2016, cannot be reasonable determined.
As of June 30, 2016, none of the Department or Pension Trust investments
were exposed to custodial credit risk because the related securities are regis-
tered in the Department's name.
Fair Value
The Department categorizes its fair value measurements within the fair value
hierarchy established by Governmental Accounting Standards Board Statement
No. 72 Fair Value Measurement and Application (GASB 72). The hierarchy is
based on the valuation inputs used to measure the fair value of the asset.
Level 1 inputs are quoted prices in active markets for identical assets; Level 2
inputs are significant other observable inputs; Level 3 inputs are significant
unobservable inputs.
Proprietary Fund
Description
Investments by fair value level:
Debt securities
Corporate bonds
Total
Fiduciary Fund
Description
Investments by fair value level:
Debt securities
Corporate bonds
Total
Fair Value Measurements Using:
Quoted prices
in active
markets for
identical assets.
Level 1
$ 1,345,663 $ 1,345,663
$ 1,345,663
Significant
Significant
observable
unobservable
inputs
inputs
(Level 2)
(Level 3)
Fair Value Measurements Usinq:
Quoted prices
in active
Significant
Significant
markets for
observable
unobservable
identical assets
inputs
inputs
(Level 1)
(Level 2)
(Level 3)
$ 1,345,663 $ 1,345,663 $ - $
$ 1,345,663
•1r
3. 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
6/30/16
6/30/15
Cash Investments Cash Investments
4,494,953 $ - $ 5,434,308 $ -
1,500,000 - 1,400,000 -
5,116,875 - 5,180,285 -
717,418 -
584,606 -
6,822,339 -
6,771,634 -
200,000 -
200,000 -
1,912,146 1,345,663
1,777,582 1,284,061
150,000 -
150,000 -
901,905 -
846,361 -
Total $ 21,815,636 $ 1,345,663 $ 22,344,776 $__1,284,061
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.
- 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 Com-
missioners 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.
605
4.
5.
Accounts Receivable
Accounts receivable consists of the following at June 30, 2016:
Customer Accounts:
Billed
$ 2,085,964
Less allowances:
253,318
Uncollectible accounts
(200,000)
Sales discounts
(83,691)
Total billed
Unbilled, net
Total customer accounts
Other Accounts:
Merchandise sales
116,253
MMWEC surplus
253,318
Intergovernmental grants
307,217
Liens and other
38,416
Total other accounts
Total net receivables
Prepaid Expenses
Prepaid expenses consist of the following:
Insurance and other
Purchase power
NYPA prepayment fund
WC Fuel -Watson
Total
1,802,273
5,686,110
7,488,383
715,204
$ 8,203,587
$ 345,837
72,930
307,573
259,416
$ 985,756
6. Inventory
Inventory comprises supplies and materials at June 30, 2016, 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 require-
.1.
11
0
ments for the Hydro - Quebec Phase II interconnection. The Department is carry-
ing 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, 2016:
New England Hydro- Transmission (NEH & NHH) $ 26,994
Capital Assets
The following is a summary of fiscal year 2016 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,
Deferred Outflows of Resources
Beginning
Ending
Balance
Increases
Decreases
Balance
$ 14,546
$ 1,600
$ -
$ 16,146
31,725
915
(129)
32,511
85,222
3,801
(970)
88,053
131,493
6,316
(1,099)
136,710
(8,525)
(424)
-
(8,949)
(20, 090)
(895)
129
(20, 856)
(34,228)
(2,625)
884
(35,969)
(62, 843)
(3,944)
1,013
(65, 774)
68,650
2,372
(86)
70,936
1,266 - - 1,266
1,266 - - 1, 266
$ 69,916 $ 2,372 $ (86) $ 72,202
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.
607
10.
11.
12
13,
14.
The following is a summary of deferred outflow of resources balances as of
June 30, 2016:
Proprietary
Fund
Pension related:
Net difference between projected and actual
investment earnings on pension plan $ 1,905,088
Pension plan changes in assumptions 2,933,130
Pension plan contributions subsequent to the
measurement date 1,500,000
Total $ 6,338,218
Accounts Payable
Accounts payable represent fiscal 2016 expenses that were paid after June 30,
2016.
Accrued Liabilities
Accrued liabilities consist of the following at June 30, 2016:
Accrued payroll $ 202,793
Accrued sales tax 212,176
Other 34,435
Total $ 449,404
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.
.IS
15.
r
17.
Deferred Inflows of Resources
Deferred inflows of resources are the acquisition of net assets by the Depart-
ment that are applicable . to future reporting periods. Deferred inflows of
resources have a negative effect on net position, similar to liabilities.
The following is a summary of deferred inflow of resources balances as of
June 30, 2016:
Proprietary
Fund
Pension related:
Differences between expected and actual
experience $ 883,172
Total $ 883,172
Restricted Net Position
The proprietary fund financial statements report restricted net position when
external constraints are placed on net position. Specifically, restricted net
position represents depreciation fund reserves, which are restricted for future
capital costs.
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 18, 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 contri-
.1•
butions are governed by Chapter 32 of the Massachusetts General Laws.
As of June 30, 2014, the actuarial valuation measurement date, approxi-
mately 87 retirees and 51 active employees meet the eligibility require-
ments. 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 appro-
priate 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.
D. Annual OPEB Costs and Net OPEB Obligation
The Department's fiscal 2016 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, 2016, the amount actually con-
tributed to the plan, and the change in the Department's net OPEB obliga-
tion based on an actuarial valuation as of June 30, 2014.
Annual Required Contribution (ARC)
$ 553,967
Interest on net OPEB obligation
228,972
Annual OPEB cost
782,939
Projected benefit payments
474,144
Increase in net OPEB obligation
308,795
Net OPEB obligation - beginning of year
-
Contributions to OPEB Trust
(308,795)
Net OPEB obligation - end of year
$ -
(1) See Part Efor additional information
610
The Department's annual OPEB cost, the percentage of annual OPEB
cost contributed to the plan, and the net OPEB obligation for fiscal year
2016 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 actu-
arial valuation measurement date was as follows:
Actuarial accrued liability (AAL)
Annual
Percentage of
1,846,042
Unfunded actuarial accrued liability (UAAL)
OPEB
OPEB
Net OPEB
Fiscal Year Ended
Cost
Cost Contributed
Obligation
2016
$782,939
100.00%
$ -
2015
$758,525
100.00%
$ -
2014
$768,378
100.00%
$ -
2013
$6047987
100.00%
$ -
E. Funded Status and Funding Progress
The funded status of the plan as of June 30, 2014, the most recent actu-
arial valuation measurement date was as follows:
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 2016, the Department contributed $308,795 to this trust, which
was equal to all of its actuarially determined annual contributions through
June 30, 2016. 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
611
trend information about whether the actuarial value of plan assets is increas-
ing 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 payroll
amortization, with amortization payments increasing at 2.5% per year for a
remaining period of 16 years.
18. 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 publicly 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
612
compensation. Benefit payments are based upon a member's age, length
of creditable service, level of compensation and group classification. Mem-
bers become vested after 10 years of creditable service. A retirement allow-
ance may be received upon reaching age 65 or upon attaining 20 years of
service. The plan also provides for early retirement at age 55 if the par-
ticipant (1) has a record of 10 years of creditable service, (2) was on
the Department payroll on January 1, 1978, (3) voluntarily left Department
employment on or after that date, and (4) left accumulated annuity deduc-
tions in the fund. A' retirement allowance consists of two parts: an annuity
and a pension. A member'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 con-
secutive 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, mem-
bers 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 addi-
tion, 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 86/o
Beginning July 1, 1996 9%
613
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,
2016 was $1,464,711, 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 contributions)
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, 2016, the Department reported a liability of $8,833,549 for its
proportionate share of the System's net pension liability. The net pension
liability was measured as of December 31, 2015, and the total pension
liability used to calculate the net pension liability was determined by an
actuarial valuation as of January 1, 2015 rolled forward to December 31,
2015. 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, 2015, the Department's pro-
portion 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 contri-
butions to the trust are actuarially determined to be the net normal cost for
funding the Department's liability for pension benefits for covered employ-
ees, 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 January 1, 2015 rolled forward to December 31,
2015. However, the actuarial valuation does not take into account the
fiduciary net position of the Department's Pension Trust at December 31,
614
2015 (the measurement date). Accordingly, the following reconciliation is
provided:
2016
Net pension liability, per actuarial valuation
Pension Trust Net Position
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)
Pension Trust investment income and fair value
changes subsequent to the net pension liability
measurement date
Net pension liability, as reported on the proprietary
fund Statements of Net Position
$ 12,862,732
(5,610,105)
1,500,000
80,922
$ 8,833,549
For the year ended June 30, 2016, the Department recognized pension
expense of $1,955,548. In addition, the Department reported deferred out-
flows of resources related to pensions from the following sources:
Net differences between expected and actual
experience
Changes of assumptions
Net difference between projected and actual
investment earnings on pension plan
Contributions subsequent to the measurement
date
Total
Deferred Deferred
Outflows of Inflows of
Recni irree P=Qru ircac
$ - $ 883,172
2,933,130 -
1,905,088 -
1,500,000 -
$ 6,338,218 $ 883,172
Deferred outflows of resources related to pensions resulting from contri-
butions subsequent to the measurement date will be recognized as a reduc-
tion of the Department's net pension liability in the year ending June 30,
2017.
615
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:
2017
$ 2,421,062
2018
921,062
2019
921,061
2020
909,108
2021
282,753
Total $ 5,455,046
Actuarial assumptions: The total pension liability was determined by an "
actuarial valuation as of January 1, 2015, rolled forward to the measure-
ment date of December 31, 2015 using the following actuarial assump-
tions, applied to all periods included in the measurement:
Inflation 3.75% per year
Salary increases 6% - 4.25% for General Employees and 7% -
4.75% for Public Safety, depending on years of
service
Investment rate of return 7.65 %, net of pension plan investment expense,
Mortality rates were based on pre- retirement rates that reflect the RP -2014
Mortality Table, projected with fully generational mortality improvement using
Scale MP -2014. Post retirement rates reflect the RP -2014 Table, projected
with fully generational mortality improvement using Scale MP -2014. For
disabled lives, the RP -2014 Disabled Mortality Table was used.
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 esti-
mates of arithmetic real rates of return for each major asset class included
in the pension plan's target asset allocation as of December 31, 2015 are
summarized in the following table:
616
Long -term
Target Expected
Asset Rates
Asset Class
Allocation
of Return
Global equity
40.00%
8.02%
Fixed income
13.00%
3.72%
Value -Added Fixed Income
10.00%
6.86%
Private equity
10.00%
9.50%
Real estate
10.00%
6.50%
Timber /Natural Resources
4.00%
7.07%
Hedge funds
9.00%
6.50%
Other
4.00%
6.18%
Total 100.00%
Discount Rate: The discount rate used to measure the total pension liabil-
ity was 7.65 %. The projection of cash flows used to determine the dis-
count 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 pen-
sion plan's fiduciary net position was projected to be available to make all
projected 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.
Sensitivitv of the Department's proportionate share of the net pension liabilit
to changes in the discount rate: The following table presents the Depart-
ment's proportionate share of the net pension liability (asset) calculated
using the current discount rate of 7.65 %, 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 (6.65 %)
or 1 percentage -point higher (8.65 %) than the current rate:
1%
Decrease
Fiscal Year Ended (6.65 %)
June 30, 2016 $ 14,076,273
Current
Discount 1%
Rate Increase
(7.65 %) (8.65 %)
$ 8,833,549 $ 4,367,178
Pension plan fiduciary net position: Detailed information about the pension
plan's fiduciary net position is available in the separately issued System
financial report.
617
19. 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 service to be
paid into a Reserve and Contingency Fund. In addition, should a Project
Participant fail to make any payment when due, other Project Participants of
that Project may be required to increase (step -up) their payments and corre-
spondingly their Participant's share of that Project's Project Capability to an
additional amount not to exceed 25% of their original Participant's share of
that Project's Project Capability. Project Participants have covenanted to fix,
revise, and collect rates at least sufficient to meet their obligations under the
PSAs.
MMWEC has issued separate issues of revenue bonds for each of its eight
Projects, which are payable solely from, and secured solely by, the revenues
derived from the Project to which the bonds relate, plus available funds
pledged under MMWEC's Amended and Restated General Bond Resolution
(GBR) with respect to the bonds of that Project. 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 3.7% interest
in the W.F. Wyman Unit No. 4 plant, which is operated and owned by its
majority owner, FPL Energy Wyman IV, LLC, a subsidiary of NextEra Energy
Resources LLC, and a 4.8% ownership interest in the Millstone Unit 3 nuclear
unit, operated by Dominion Nuclear Connecticut, Inc. (DNCI), the majority
owner and an indirect subsidiary of Dominion Resources, Inc. DNCI also
owns and operates the Millstone Unit 2 nuclear unit. The operating license for
the Millstone Unit 3 nuclear unit extends to November 25, 2045.
WE
MMWEC A substantial portion of MMWEC's plant investment and financing
program is an 11.6% ownership interest in the Seabrook Station nuclear gen-
erating unit operated by NextEra Energy Seabrook, LLC (NextEra Seabrook)
the majority owner and an indirect subsidiary of NextEra Energy Resources
LLC. The operating license for Seabrook Station extends to March 15, 2030.
NextEra Seabrook has submitted an application to extend the Seabrook Station
operating license for an additional 20 years.
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 costs are being funded through monthly
Project billings. Also, the Project Participants are liable for their proportionate
share of the uninsured costs of a nuclear incident that might be imposed
under the Price - Anderson Act (Act). Originally enacted in 1957, the Act has
been renewed several times. In July 2005, as part of the Energy Policy Act of
2005, Congress extended the Act until the end of 2025.
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 uncon-
ditionally obligated to make payments due to MMWEC whether or not 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, 2016 principal payment, total capital expenditures amounted
to $1,694,153,000, of which $126,048,000 represents the amount associated
with the Department's Project Capability. MMWEC's debt outstanding for the
Projects from Power Supply System Revenue Bonds totals $112,510,000, of
which $4,099,000 is associated with the Department's share of Project Capabil-
ity. After the July 1, 2016 principal payment, MMWEC's total future debt service
requirement on outstanding bonds issued for the Projects is $59,282,000, of
which $1,664,000, 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, 2016 and estimated for future years is shown below.
Annual Costs
For years ending June 30, 2017 $ 1,473,000
2018 191,000
Total $ 1,664,000
619
20
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 $11,894,000 and $12,475,000 for the years ended June 30,
2016 and 2015, respectively.
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 Infor-
mation 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 2016 REC activity and bal-
ances is as follows:
REC Sales Durina Fiscal 2016
(1) Sale proceeds netted against fiscal year 2016 purchased power fuel charge
620
Unit
Certificates
Price
Amount
CT Class 1
6,008
$
24.00
$ 144,192
MA Class 1
394
$
24.00
9,456.
MA Class II
426
$
24.00
10,224
MA Class II
787
$
24.75
19,478
RI Class 1
189
$
44.00
8,316
MA Class l
4,029
$
46.50
187,349
CT Class 1
6,807
$
46.50
316,526
Total
18,640
$ 695,541 (1)
(1) Sale proceeds netted against fiscal year 2016 purchased power fuel charge
620
21.
REC Holdings at June 30, 2016
Banked Projected Total Estimated
Certificates Certificates Certificates Value
MA Class I & 11 -
CT Class I -
RI Class I -
Total -
7,214 7,214
3,957 3,957
384 384
$ 180,350
98,925
9,600
11,555 11,555 $ 288,875
A banked REC is a REC that has been processed by the NEPOOL GIS Coor-
dinator and is in the Department's GIS account. A projected REC is the
Department's estimate of what will be received based on invoices generated
by REC- producing projects that the Department has entitlements to.
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, 2016 are not recognized as an asset on the proprietary fund
Statements of Net Position.
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, 2016. 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:
2017 $ 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 exercised 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:
2017 $ 161,348
2018 147,902
Total $ 309,250
621
TOWN OF READING, MASSACHUSETTS
SCHEDULE OF OPEB FUNDING PROGRESS
REQUIRED SUPPLEMENTARY INFORMATION
June 30, 2016
(Unaudited)
(Amounts Expressed in thousands)
Other Post - Employment Benefits
See Independent Auditors' Report.
622
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.
622
TOWN OF READING, MASSACHUSETTS
SCHEDULE OF PROPORTIONATE SHARE
OF THE NET PENSION LIABILITY
REQUIRED SUPPLEMENTARY INFORMATION
JUNE 30, 2016
(Unaudited)
Reading Contributory Retirement Svstem
Massachusetts Teachers' Retirement Svstem
Proportion
Proportionate
Commonwealth of
Total Net.
Proportionate
of the
Share of the
Proportionate Share of the
Plan Fiduciary Net Position
Fiscal
Net Pension
Net Pension
Covered
Net Pension Liability as a
Percentage of the Total
Year
Liability
Liability
Payroll
Percentage of Covered Payroll
Pension Liability
June 30, 2016
99.275%
$ 41,172,508
$ 22,534,225
182.71%
72.17%
June 30, 2015
99.275%
$ 25,805,701
$ 19,399,338
143.26%
79.89%
Massachusetts Teachers' Retirement Svstem
Schedules are intended to show information for 10 years. Additional years will be displayed as they become available
See Independent Auditors' Report.
623
Commonwealth of
Total Net.
Proportionate
Massachusetts' Total
Pension
Share of the
Plan Fiduciary
Proportion
Proportionate
Proportionate Share
Liability
Net Pension
Net Position
of the
Share of the
of the Net Pension
Associated
Liability as a
Percentage of
Fiscal
Net Pension
Net Pension
Liability Associated
with the
Covered
Percentage of
the Total
Year
Liability
Liability
with the Town
Town
Payroll
Covered Payroll
Pension Liability
June 30, 2016
0.439137%
$ -
$ 89,977,515 $
89,977,515 $
27,836,403
0.00%
55.38%
June 30, 2015
0.425154%
$ -
$ 67,583,938 $
67,583,938 $
26,068,000
0.00%
61.64%
Schedules are intended to show information for 10 years. Additional years will be displayed as they become available
See Independent Auditors' Report.
623
TOWN OF READING, MASSACHUSETTS
SCHEDULE OF PENSION CONTRIBUTIONS
REQUIRED SUPPLEMENTARY INFORMATION
JUNE 30, 2016
(Unaudited)
Reading Contributory Retirement System
Contributions in
Relation to the
Contractually Contractually Contribution Contributions as
Fiscal Required Required Deficiency Covered a Percentage of
Year Contribution Contribution Excess Payroll Covered Payroll
June 30, 2016 $ 5,147,236 $ (5,147,236) $ -
June 30, 2015 $ 4,925,586 $ (4,925,586) $ -
$ 22,534,225 22.84%
$ 20,764,089 23.72%
Schedules are intended to show information for 10 years. Additional years will be displayed as they
become available
See Independent Auditors' Report.
624
READING CONTRIBUTORY RETIREMENT SYSTEM
TOWN OF READING, MASSACHUSETTS
Schedule of Changes in the Net Pension Liability
(Unaudited)
Net pension liability (asset) - ending (a -b) $ 45,531,796 $ 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.
625
2015
2014
Total pension liability
Service cost
$ 3,661,364
$
3,661,364
Interest on unfunded liability- time value of money
11,468,655
10,776,373
Differences between expected and actual experience
(3,800,039)
-
Changes of assumptions
12,620,424
-
Benefit payments, including refunds of member contributions
(9,324,162)
(9,008,745)
Net change in total pension liability
14,626,242
5,428,992
Total pension liability - beginning
148,983,351
143,554,359
Total pension liability - ending (a)
$ 163,609,593
$
148,983,351
Plan fiduciary net position
Contributions - employer
$ 5,184,813
$
4,961,545 .
Contributions - member
2,421,626
2,710,307
Net investment income
882,425
8,416,432
Benefit payments, including refunds of member contributions
(9,324,162)
(9,008,745)
Administrative expense
(106,848)
(114,170)
Net change in plan fiduciary net position
(942,146)
6,965,369
Plan fiduciary net position - beginning
119,019,943
112,054,574
Plan fiduciary net position - ending (b)
$ 118,077,797
$
119,019,943
Net pension liability (asset) - ending (a -b) $ 45,531,796 $ 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.
625
READING CONTRIBUTORY RETIREMENT SYSTEM
TOWN OF READING, MASSACHUSETTS
Schedules of Net Pension Liability, Contributions, and Investment Returns
(Unaudited)
Schedule of Net Pension Liability
Schedule of Contributions
2015 2014
Actuarially determined contribution $ 5,184,813 $ 4,961,545
Contributions in relation to the actuarially determined contribution (5,184,813) (4,961,545)
Contribution deficiency (excess) $
Covered payroll. $ 22,793,551 $ 20,915,728
Contributions as a percentage of covered payroll 22.75% 23.72%
Schedule of Investment Returns
Year Ended December 31
2015 2014
Annual money weighted rate of return, net of investment expense 0.75% 7.66%
Schedules are intended to show information for 10 years.
Additional years will be displayed as they become available.
See Independent Auditors' Report.
626
2015
2014
Total pension liability
$ 163,609,593
$ 148,983,351 .
Plan fiduciary net position
(118,077,797)
(119,019,943)
Net pension liability (asset)
$ 45,531,796
$ 29,963,408
Plan fiduciary net position as a percentage of the total pension liability
72.17%
79.89%
Covered payroll
$ 22,793,551
$ 20,915,728
Participating employer net pension liability (asset)
as a percentage of covered payroll
199.76%
143.26%
Schedule of Contributions
2015 2014
Actuarially determined contribution $ 5,184,813 $ 4,961,545
Contributions in relation to the actuarially determined contribution (5,184,813) (4,961,545)
Contribution deficiency (excess) $
Covered payroll. $ 22,793,551 $ 20,915,728
Contributions as a percentage of covered payroll 22.75% 23.72%
Schedule of Investment Returns
Year Ended December 31
2015 2014
Annual money weighted rate of return, net of investment expense 0.75% 7.66%
Schedules are intended to show information for 10 years.
Additional years will be displayed as they become available.
See Independent Auditors' Report.
626
TOWN OF READING, MASSACHUSETTS
a
COMBINING BALANCE SHEET
NONMAJOR GOVERNMENTAL FUNDS
JUNE 30, 2016
Assets
Cash and short -term investments
Investments
Receivables:
Departmental and other
Intergovernmental
Total Assets
Liabilities
Warrants payable
Accrued liabilities
Unearned revenue
Retainage payable
Total Liabilities
Fund Balances
Nonspendable
Restricted
Committed
Unassigned
Total Fund Balance
Total Liabilities and Fund Balance
See Independent Auditors' Report.
Special Revenue Funds
Federal State Revolving
Grants Grants Funds
$ (247,251) $ 1,218,179 $ 4,407,104
- - 260,220
220,578 149,142 -
$ 26,673) $ 1,367,321 $ 4,667,324
$ 27,743
$ 101,451
$ 158,066
155,525
11,418
121,263
-
-
268,264
183,268
112,869
547,593
38,174
1,321,474
4,129,116
248,115
67,022
9,385
20( 9,941)
1,254,452
4,119,731
$ (26,673)
$ 1,367,321
$ 4,667,324
627
Receipts
Reserved
$ 1,110,574
$ 1,110,574
Special Revenue Funds
Gifts and
Donations
$ 690,334
121,943
$ 812,277
Subtotals
$ 7,178,940
121,943
260,220
369,720
$ 7,930,823
$ - $ 44,696
$ 331,956
- 630
288,836
- -
268,264
- 45,326
889,056
1,110,574 766,951
7,366,289
- -
324,522
1,110,574 766,951
7,041,767
$ 1,110,574 $ 812,277
$ 7,930,823
(continued)
.-
TOWN OF READING, MASSACHUSETTS
COMBINING BALANCE SHEET
NONMAJOR GOVERNMENTAL FUNDS
JUNE 30, 2016
(continued)
Assets
Cash and short -term investments
Investments
Receivables:
Departmental and other
Intergovernmental
Total Assets
Liabilities
Warrants payable
Accrued liabilities
Unearned revenue
Retainage payable
Total Liabilities
Fund Balances
Nonspendable
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
$ 3,588,125
$ 936,892
$ 4,525,017
$ 3,588,125
$ 936,892
$ 4,525,017
$ 576,592
$ -
$ 576,592
-
1,104,104
1,104,104
576,592
1,104,104
1,680,696
3,011,533
133,497
3,145,030
-
13,131
13,131
-
313,840
(313,840)
3,011,533
167,212
2,844,321
$ 3,588,125
$ 936,892
$ 4,525,017
629
630
Permanent Funds
Total
Town
School
Nonmajor
Trust
Trust
Governmental
Funds
Funds
Subtotals
Funds
$ 891,948
$
-
$
891,948
$ 12,595,905
9,081,645
196,683
9,278,328
9,400,271
-
-
-
260,220
-
-
-
369,720
$ 9,973,593
$
196,683
$
10,170,276
$ 22,626,116
$ 9,829
$
14
$
9,843
$ 918,391
-
-
-
288,836
268,264
-
-
-
1,104,104
9,829
14
9,843
2,579,595
3,068,785
125,250
3,194,035
3,194,035
6,894,979
71,419
6,966,398
17,477,717
-
-
-
13,131
_
-
-
(638,362)
9,963,764
196,669
10,160,433
20,046,521
$ 9,973,593
$
196,683
$
10,170,276
$ 22,626,116
630
TOWN OF READING, MASSACHUSETTS
COMBINING STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
NONMAJOR GOVERNMENTAL FUNDS
FOR THE YEAR ENDED JUNE 30, 2016
Special Revenue Funds
See Independent Auditors' Report.
631
Federal
State
Revolving
Grants
Grants
Funds
Revenues:
Departmental
$ -
$ -
$ 7,194,109
Intergovernmental
1,528,081
1,986,940
255,476
Investment income
-
-
157
Contributions
-
-
-
Other
-
-
24,286
Total Revenues
1,528,081
1,986,940
7,474,028
Expenditures:
Current:
General government
-
2,700
102,261
Public safety
32,412
81,027
1,485,282
Education
1,517,839
1,349,155
5,259,439
Public works
-
380,988
12,729
Health and human services
149,622
62,955
27,641
Culture and recreation
-
9,004
637,844
Total Expenditures.
1,699,873
1,885,829
7,525,196
Excess (deficiency) of revenues over
(under) expenditures
(171,792)
101.,111
(51,168)
Other Financing Sources (Uses):
Issuance of bonds
-
-
-
Bond premiums
-
-
-
Transfers in
-
-
500
Transfers out
-
(12,481)
2( 78,070)
Total Other Financing Sources (Uses)
-
(12,481)
277,570
Change in fund balances
(171,792)
88,630
(328,738)
Fund Balances, beginning of year
(38,149)
1,165,822
4,448,469
Fund Balances, end of year
$ (209,941)
$ 1,254,452
$ 4,119,731
See Independent Auditors' Report.
631
Special Revenue Funds
Receipts
Gifts and
116,392
Reserved
Donations
Subtotals
$ 26,923
$ -
$ 7,221,032
-
-
3,770,497
4,059
-
4,216
-
265,503
265,503
-
-
24,286
30,982
265,503
11,285,534
4,704
6,727
116,392
-
2,126
1,600,847
-
164,811
8,291,244
-
.438
394,155
-
566
240,784
-
70,269
717,117
4,704
244,937
11,360,539
26,278
20,566
(75,005)
-
-
500
(125,000)
-
(415,551)
(125,000)
-
(415,051)
(98,722)
20,566
(490,056)
1,209,296
746,385
7,531,823
$ 1,110,574
$ 766,951
$ 7,041,767
(continued)
632
TOWN OF READING, MASSACHUSETTS
COMBINING STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
NONMAJOR GOVERNMENTAL FUNDS
FOR THE YEAR ENDED JUNE 30, 2016
(continued)
See Independent Auditors' Report.
633
Capital Project Funds
Town
School
Capital
Capital
Project Funds
Proiect Funds
Subtotals
Revenues:
Departmental $
-
$ -
$ _
Intergovernmental
.1,021,023
-
1,021,023
Investment income
-
-
_
Contributions
Other
-
_
-
Total Revenues
1,021,023
-
1,021,023
Expenditures:
Current:
General government
Public safety
Education
-
1,593,166
1,593,166
Public works
399,051
-
. 399,051
Health and human services
-
-
-
Culture and recreation
10,313,204
-
10,313,204
Total Expenditures
10,712,255
1,593,166
12,305,421
Excess (deficiency) of revenues over
(under) expenditures
(9,691,232)
(1,593,166)
(11,284,398)
Other Financing Sources (Uses):
Issuance of bonds
2,215,000
1,700,000
3,915,000
Bond premiums
230,000
-
230,000
Transfers in
-
75,000
75,000
Transfers out
-
_
Total Other Financing Sources (Uses)
2,445,000
1,775,000
4,220,000
Change in fund balances
(7,246,232)
1$1,834
(7,064,398)
Fund Balances, beginning of year
10,257,765
(349,046)
9,908,719
Fund Balances, end of year $
3,011,533
$ (167,212)
$ 2,844,321
See Independent Auditors' Report.
633
Permanent Funds
Town School
Trust Trust
Funds Funds Subtotals
493,087
96,681
589,768
35,388
119,999
118,164
273,551
316,217
316,217
9,647,547
$ 9,963,764
6,741
600
7,341
9,938
9,938
(2,597)
(2,597)
199,266
$ 196,669
3M
499,828
97,281
597,109
35,388
9,938
119,999
118,164
283,489
313,620
313,620
9,846,813
$ 10,160,433
Total
Nonmajor
Governmental
Funds
$ 7;221,032
4,791,520
504,044
362,784
24,286
12,903,666
151,780
1,600, 847
9,894,348
913,205
358,948
11,030,321
23,949,449
(11,045,783)
3,915,000
230,000
75,500
(415,551)
3,804,949
(7,240,834)
27,287,355
$ 20,046;521
TOWN OF READING, MASSACHUSETTS
NONMAJOR PROPRIETARY FUNDS
COMBINING SCHEDULE OF NET POSITION
JUNE 30. 2016
Assets
Current:
Cash and short -term investments
User fees, net of allowance for uncollectibles
Inventory
Total current assets
Noncurrent:
Capital assets being depreciated, net
Capital assets not being depreciated
Total noncurrent assets
Deferred Outflows of Resources
Total Assets and Deferred Outflows
of Resources
Liabilities
Current:
Warrants payable
Accrued liabilities
Other current liabilities
Current portion of long -term liabilities:
Bonds payable
Total current liabilities
Noncurrent:
Bonds payable, net of current portion
Compensated absences
Net OPEB obligation
Net pension liability
Total noncurrent liabilities
Deferred Inflows of. Resources
Total Liabilities and Deferred Inflows
of Resources
Net Position
Net investment in capital assets
Unrestricted
Total Net Position
See Independent Auditors' Report.
Business -Type Activities
Enterprise Funds
Landfill
Sewer Closure and Stormwater
Fund Postclosure Management Total
$ 5,722,956
$ 46,706
$ 1,210,759
$ 6,980,421
2,701,424
-
152,554
2,853,978
4,694
-
-
4,694-
8,429,074
46,706
1,363,313
9,839,093
5,338,220
-
295,230
5,633,450
423,501
-
663,987
1,087,488
5,761,721
-
959,217
6,720,938
116,631
-
45,043
161,674
14,307,426
46,706
2,367,573
16,721,705
98,603
25,435
25,240
149,278
10,468
-
3,200
13,668
-
21,271
-
21,271
91,915
-
-
91,915
200,986
46,706
28,440
276,132
112,879
-
-
112,879
15,375
-
11,200
26,575
107,962
-
19,722
127,684
310,072
-
119,749
429,821
546,288
-
150,671
696,959
21,290
-
8,222
29,512
768,564
46,706
187,333
1,002,603
5,799,313
-
959,217
6,758,530
7,739,549
-
1,221,023
8,960,572
$ 13,538,862
$ -
$ 2,180,240
$ 15,719,102
635
TOWN OF READING, MASSACHUSETTS
NONMAJOR PROPRIETARY FUNDS
COMBINING SCHEDULE OF REVENUES, EXPENSES AND CHANGES IN FUND NET POSITION
FOR THE YEAR ENDED JUNE 30, 2016
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):
Intergovernmental revenue
Investment income
Interest expense
Total Nonoperating Revenues (Expenses)
Change in Net Position
Net Position at Beginning of Year
Net Position at End of Year
See Independent Auditors' Report.
Business -Type Activities
Enterprise Funds
Landfill
Sewer Closure and Stormwater
Fund Postclosure Management Total
$ 6,833,296 $
- $ 418,772
$ 7,252,068
6,833,296
- 418,772
7,252,068
654,473
- 171,624
826,097
194,896
- 12,857
207,753
4,624,378
- -
4,624,378
421,117
- 30,963
452,080
23,501
- -
23,501
5,918,365
- 215,444
6,133,809
914,931
- 203,328
1,118,259
31,950
- -
31,950
3,793
- 2,779
6,572
(800)
- -
(800)
34,943
- 2,779
37,722
949,874
- 206,107
1,155,981
12,588,988
- 1,974,133
14,563,121
$ 13,538,862 $
- $ 2,180,240
$ 15,719,102
636
TOWN OF READING, MASSACHUSETTS
NONMAJOR PROPRIETARY FUNDS
COMBINING SCHEDULE OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 2016
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:
Intergovernmental revenue
Net Cash Provided By Noncapital Financing Activities
Cash Flows From Capital and Related Financing Activities:
Proceeds from issuance of bonds -
Principal payments on bonds and notes
Acquisition of capital assets
Interest expense
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 to Net Cash
Provided By (Used For) Operating Activities:
Operating income
Adjustments to reconcile operating income 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
Deferred inflows of resources
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
$ 6,927,784 $ - $ 429,649 $ 7,357,433
(782,693) (3,302) (158,479) (944,474)
(4,624,378) - (4,624,378)
1,520,713 (3,302) 271,170 1,788,581
31,950 - 31,950
31,950 - 31,950
39,050
-
-
39,050
(84,105)
-
-
(84,105)
(197,319)
-
(252,601)
(449,920)
(800)
-
-
(800)
(243,174)
-
(252,601)
(495,775)
3,793
-
2,779
6,572
3,793
-
2,779
6,572
1,313,282
(3,302)
21,348
1,331,328
4,409,674
50,008
1,189,411
5,649,093
$ 5,722,956
$ 46,706
$ 1,210,759
$ 6,980,421
$ 914,931
$ -
$ 203,328
$ 1,118,259
421,117
-
30,963
452,080
94,488
-
10,877
105,365
(2,154)
-
-
(2,154)
(115,478)
-
(44,598)
(160,076)
80,781
21,335
22,381
124,497
1,742
-
(578)
1,164
-
(24,637)
-
(24,637)
(2,026)
-
(370)
(2,396)
106,022
40,945
146,967
21,290
8,222
29,512
$ 1,520,713 $ (3,302) $ 271,170 $ 1,788,581
637