HomeMy WebLinkAbout2017 Annual Report Appendix D TOWN OF READING, MASSACHUSETTS
Annual Financial Statements
For the Year Ended June 30, 2017
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TABLE OF CONTENTS
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INDEPENDENT AUDITORS' REPORT 1
MANAGEMENT'S DISCUSSION AND ANALYSIS 5
BASIC FINANCIAL STATEMENTS:
Government-wide Financial Statements:
Statement of Net Position 15
Statement of Activities 16
Fund Financial Statements:
Governmental Funds:
Balance Sheet 18
Reconciliation of Total Governmental Fund Balances to
Net Position of Governmental Activities in the Statement
of Net Position 19
Statement of Revenues, Expenditures, and Changes
in Fund Balances 20
Reconciliation of the Statement of Revenues, Expenditures,
and Changes in Fund Balances of Governmental Funds to
the Statement of Activities 21
Statement of Revenues and Other Sources, and Expenditures
and Other Uses - Budget and Actual - General Fund 22
Proprietary Funds:
Statement of Net Position 23
Statement of Revenues, Expenses, and Changes in Fund
Net Position 24
Statement of Cash Flows 25
Fiduciary Funds:
Statement of Fiduciary Net Position 26
Statement of Changes in Fiduciary Net Position 27
Notes to the Financial Statements 28
Electric Light Plant Notes to the Financial Statements 64
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REQUIRED SUPPLEMENTARY INFORMATION:
Pension:
Schedule of Proportionate Share of the Net Pension Liability (GASB 68) 89
Schedule of Pension Contributions (GASB 68) 90
OPEB:
Schedule of OPEB Funding Progress (GASB 45) 91
Schedule of Changes in Net OPEB Liability (GASB 74) 92
Schedules of Net OPEB Liability, Contributions, and
Investment Returns (GASB 74) 93
SUPPLEMENTARY INFORMATION:
Combining Balance Sheet- Nonmajor Governmental Funds 94
Combining Statement of Revenues, Expenditures, and
Changes in Fund Balances - Nonmajor Governmental Funds 98
Combining Schedule of Net Position - Nonmajor Proprietary Funds 102
Combining Schedule of Revenues, Expenses, and Changes
in Fund Net Position - Nonmajor Proprietary Funds 103
Combining Schedule of Cash Flows - Nonmajor Proprietary Funds 104
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MELANSON
ACCOUNTANTS-AUDITORS 0
10 New England Business
Center Dr.•Suite 107
Andover,MA 01810
INDEPENDENT DENT,AUDITORS' REPORT ORT (978)749-0005
melansonheath.com
To the Board of Selectmen Additional Offices:
Town of Reading, Massachusetts Nashua,NH
Manchester,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, 2017, (except for the Reading Contributory Retirement System, which is as
of and for the year ended December 31, 2016) 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
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
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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, 2017, 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 Pension and OPEB schedules appear-
ing on pages 89 to 93 be presented to supplement the basic financial statements.
Such information, although not a part of the basic financial statements, is required by
the Governmental Accounting Standards Board, who considers it to be an essential
part of financial reporting for placing the basic financial statements in an appropriate
operational, economic, or historical context. We have applied certain limited proce-
dures to the required supplementary information in accordance with auditing stand-
ards generally accepted in the United States of America, which consisted of inquiries
of management about the methods of preparing the information and comparing the
information for consistency with management's responses to our inquiries, the basic
financial statements, and other knowledge we obtained during our audit of the basic
financial statements. We do not express an opinion or provide any assurance on the
information because the limited procedures do not provide us with evidence sufficient
to express an opinion or provide any assurance.
Other Information
Our audit was conducted for the purpose of forming opinions on the financial state-
ments that collectively comprise the Town's basic financial statements. The accom-
panying supplementary information appearing on pages 94 through 104 is presented
for purposes of additional analysis and is not a required part of the basic financial
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statements. Such information is the responsibility of management and was derived
from and relates directly to the underlying accounting and other records used to
prepare the financial statements. The information has been subjected to the auditing
procedures applied in the audit of the financial statements and certain additional
procedures, including comparing and reconciling such information directly to the
underlying accounting and other records used to prepare the financial statements or
to the financial statements themselves, and other additional procedures in accord-
ance with auditing standards generally accepted in the United States of America. In
our opinion, the information is fairly stated in all material respects in relation to the
financial statements as a whole.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report
dated March 26, 2018 on our consideration of the Town's internal control over finan-
cial reporting and on our tests of its compliance with certain provisions of laws, regu-
lations, contracts, and grant agreements and other matters. The purpose of that
report is to describe the scope of our testing of internal control over financial report-
ing and compliance and the results of that testing, and not to provide an opinion on
internal control over financial reporting or on compliance.That report is an integral
part of an audit performed in accordance with Government Auditing Standards in
considering Town's internal control over financial reporting and compliance.
March 26, 2018
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MANAGEMENT'S DISCUSSION AND ANALYSIS
As management of the Town of Reading, Massachusetts, we offer readers this narra-
tive overview and analysis of the financial activities of the Town for the June 30, 2017.
A. OVERVIEW OF TIME 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, facilities, health and human services, and culture and
recreation. The business-type activities include water supply and distribution,
sewer disposal, landfill, electric, and stormwater operations.
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.
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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 fund reporting focuses on the determination of
operating income, changes in net position (or cost recovery), financial position,
and cash flows. The proprietary fund category includes enterprise and internal
service funds.
Enterprise funds are used to report activity for which a fee is charged to external
users, and must be used when one of the following criteria are met: (1) activity is
financed with debt that is secured solely by a pledge of the net revenues from
fees and charges, (2) laws or regulations require the activity's costs of providing
services be recovered with fees and charges, and (3) the pricing policies of the
activity establish fees and charges designed to recover its costs, including capital
costs such as depreciation or debt service. The primary focus on these criteria is
on fees charged to external users. Enterprise funds are used to report the same
functions presented as business-type activities in the government-wide financial
statements, only in more detail. Specifically, enterprise funds are used to account
for water, sewer, landfill, electric and stormwater operations, of which water and
electric operations are considered to be major funds.
The Town does not maintain internal service funds.
Fiducia 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.
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Notes to the financial statements. The notes provide additional information that
is essential to a full understanding of the data provided in the government-wide
and fund financial statements.
Other information. In addition to the basic financial statements and accom-
panying notes, this report also presents certain required supplementary infor-
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 and deferred
outflows of resources exceeded liabilities and deferred inflows of resources
by $232,670,351 (i.e., net position), a change of$9,064,528 in comparison to
the prior year.
• As of the close of the current fiscal year, governmental funds reported com-
bined ending fund balances of$33,611,978, a change of$(4,767,521) in
comparison to the prior year.
• At the end of the current fiscal year, unassigned fund balance for the general
fund was $11,564,990, a change of 1,318,644 in comparison to the prior year.
C. OOVERNMENT- IDE FINANCIAL ANALYSIS
The following is a summary of condensed government-wide financial data for the
current and prior fiscal years:
NET POSITION
Governmental Business-Type
FhcWh es l rt4upd,u s Total
2017 2016 2017 2016 2017 2016
Current and other assets $ 42,667,526 $ 49,253,675 $ 82,451,612 $ 72,596,148 $ 125,119,138 $ 121,849,823
Capital assets 132 582„554 _9$,525 52 9,518.62 5„144,14L 232,100,816 226,669,29L
Total assets 175,250,080 180,778,824 181,969,874 167,740,297 357,219,954 348,519,121
Deferred outflows of resources 8,846,381 11,611,038 4,908,972 5,391,231 13,755,353 17,002,269
Long-term liabilities 80,689,329 88,465,967 36,125,085 30,851,445 116,814,414 119,317,412
Other liabilities 8 86,128 to 405,189 10,043„420 8,953,459 18 19,358,648
Total liabilities 88,975,457 98,871,156 46,168,505 39,804,904 135,143,962 138,676,060
Deferred inflows of resources 2,326,946 2,255,388 834,048 984,119 3,160,994 3,239,507
Net position:
Net investment in capital assets 101,672,301 101,434,852 89,259,199 84;071,244 190,931,500 185,506,096
Restricted 17,761,046 17,526,723 11,250,323 10,105,058 29,011,369 27,631,781
Unrestricted 26� 27,698,25'x' 39 38,166,203 12,727 482 10
Total net position(') $ 92 794,058 $ 91 263 318 $ 139,876,293 $ 132 342.505 $ _232 670„351 $ 223,605 823
as restated for Electric fund
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 $232,670,351, a change of$9,064,528 from the prior year.
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The largest portion of net position, $190,931,500, 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, $29,011,369, represents resources that are
subject to external restrictions on how they may be used. The remaining balance
of unrestricted net position $12,727,482 may be used to meet the Town's ongoing
obligations to citizens and creditors.
The following is a summary of condensed government-wide statement of changes
in net position financial data for the current and prior fiscal years:
CHANGES IN NET POSITION
Governmental Business-Type
Activities Activities Total
2017 2016 2017 2016 2017,
2016
Revenues
Program revenues:
Charges for services $ 8,704,119 $ 9,508,325 $ 106,630,695 $ 102,329,822 $ 115,334,814 $ 111,838,147
Operating grants and
contributions 25,350,989 21,508,696 67,797 125,000 25,418,786 21,633,696
Capital grants and contributions 1,454,456 1,397,510 968,198 317,871 2,422,654 1,715,381
General revenues:
Property taxes 64,651,227 62,587,732 - 64,651,227 62,587,732
Excises 4,143,498 4,054,424 4,143,498 4,054,424
Penalties,interest,and
other taxes 586,333 693,840 - 586,333 693,840
Grants and contributions not
restricted to specific programs 3,356,933 3,211,690 - - 3,356,933 3,211,690
Investment income 1;302,345 1,160,403 426,612 356,499 1,728,957 1,516,902
Other 325,689 343,327 693,772 530,175 1p019„461 873,502
Total revenues 109,875,589 104,465,947 108,787,074 103,659,367 218,662,663 208,125,314
Expenses
General government 5,328,963 5,173,857 - 5,328,963 5,173,857
Public safety 15,722,993 14,394,749 15,722,993 14,394,749
Education 72,790,008 76,936,229 - 72,790,008 76,936,229
Public works 7,156,998 7,582,807 7,156,996 7,582,807
Facilities 1,663,004 1,762,944 1,663,004 1,762,944
Health and Human Services 1,253,232 1,212,347 1,253,232 1,212,347
Culture and recreation 4,747,487 3,780,076 4,747,487 3,780,076
Interest on long-term debt 1,055,194 1,144,836 - 1,055,194 1,144,836
Intergovernmental 1,011,638 1,013,830 - 1,011,638 1,013,830
Electric operations - - 87,127,810 84,200,166 87,127,810 84,200,166
Water operations - 5,391,238 5,336„134 5,391,238 5,336,134
Other ____L349,570 6 34,609 6,349,570 6,134,609
Total expenses 110,729,517 1110 98,868,618 95 670,909 209,598„135 tp8,672 84
Change in net position
before transfers (853,928) (8,535,728) 9,918,456 7,988,458 9,064,528 (547,270)
Transfers in(out) 2,384,66L 2,370,445 __(L384,66.80,445
Change in net position 1,530,740 (6,165,283) 7,533,788 5,618,013 9,064,528 (547,270)
Net position-beginning of year(') 9_1,26,3,318 97 428€301 x,342 505 026,724,492 223 605 823 224 A 53„093
Net position-end of year $ p 92„794,058 $ 1 203,318 $ 139,8'6,29«1 $=L3=263,42,505 $ 232 670,351 $ 223„605,823
as restated for Electric fund
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Governmental activities. Governmental activities for the year resulted in a change
in net position of$1,530,740. Key elements of this change are as follows:
General fund expenditures exceeding revenues $ (2,017,098)
PILOT from RMLD 2,384,668
Current year revenues used for the acquisition
of capital assets 2,233,254
Capital grants and contributions 5,795,923
Depreciation expense exceeding debt service principal (3,208,872)
Increase in net OPEB obligation (2,128,250)
Net pension liability activity net of pension related
deferred outflows/inflows of resources (1,426,021)
Other (102,864
Total $ 1,530,740
Business-type activities. Business-type activities for the year resulted in a
change in net position of$7,533,788. Key elements of this change and the
impact on cash flows are as follows:
Revenues and Expenses and Change in
Transfers In Transfers Out Net Position
Electric division fund $ 93,985,128 $ (89,512,478) $ 4,472,650
Water fund 6,850,738 (5,391,238) 1,459,500
Nonmajor funds 7,951.208 (6,349,570) 1,601.638
Total $ 108,787,074 $ (101,253,286) $ 7,533.788
The change in net position for business-type activities is largely attributable to
the reporting of acquisition of capital outlay (capital assets). These amounts are
reported net of related outstanding debt obligations and are included in net posi-
tion as net investment in capital assets. Business-type activities reported net
investment in capital assets of$89,259,199, an increase of$5,187,955, or
6.17%, over the prior year.
Unrestricted net position of the Business-type activities at the end of the year
amounted to $39,366,771, a change of$1,200,568 in comparison to the prior
year. Key elements of this change are as follows:
Fund 6/30/17 6130/16 Change
Electric(l) $ 22,622,447 $ 22,587,938 $ 34,509
Water 7,861,702 6,617,693 1,244,009
Nonmajor 8,882,622 8,960,572 (77,950)
Total $ 39„366,771 $ 38,166, 03 $ 1,200,568
Mas restated for Electric fund
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The change in unrestricted net position of the Business-type activities is mainly
attributable to the water fund. This change is primarily due to increasing Water
user charges by 9.17% which was effective September 1, 2016.
D. FINANCIAL,ANALYSIS.01F T (, BRI E NT'S 1 1 DS
As noted earlier, fund accounting is used to ensure and demonstrate compliance
with finance-related legal requirements.
Governmental i 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$33,611,978, a change of$(4,767,521) in comparison to
the prior year. Key elements of this change are as follows:
General fund expenditures exceeding revenues $ (2,017,098)
PILOT from RMLD 2,384,668
Premium on general obligation bonds 173,491
Special revenue fund revenues exceeding
expenditures 393,024
Town capital project fund expenditures
exceeding revenues (2,483,643)
School capital project fund expenditures (4,895,896)
School capital project fund proceeds from issuance
of long-term debt 1,355,000
Permanent fund revenues exceeding expenditures 322,933
Total $ (4,767,521).
The general fund is the chief operating fund. At the end of the current fiscal year,
unassigned fund balance of the general fund was $11,564,990, while total fund
balance was $16,585,797. The following table reflects the trend in all components
of the general fund's fund balance:
Last Five Fiscal Years
Assigned for
Restricted Committed for Subsequent
Fiscal for Debt Stabilization Assigned for Year's Total Fund
Year Service Fund Encurn r t Exr�erLditures Umas id Balance
2013 $ 817,305 $ 365,413 $ 1,086,291 $ 1,400,000 $ 10,507,772 $ 14,176,781
2014 - 364,628 2,034,921 2,050,000 11,398,537 15,848,086
2015 - 503,000 2,827,211 1,800,000 11,852,773 16,982,984
2016 - 503,031 2,936,996 4,646,605 10,246,346 18,332,978
2017 62,468 503,000 2,855,339 1,600,000 11,564,990 16,585,797
Includes$2,197,000 for subsequent year free cash appropriation to fund litigation settlement.
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As a measure of the general fund's liquidity, it may be useful to compare both
unassigned fund balance and total fund balance to total general fund
expenditures. Refer to the table below.
% of Total
General Fund
General Fund 6/30/17 6/30/16 Change Expenditures
Unassigned fund balance $ 11,564,990 $ 10,246,346 $ 1,318,644 11.8%
Total fund balance $ 16,585,797 $ 18,332,978 $ (1,747,181) 16.9%
The decrease in the Town's June 30, 2017 unassigned fund balance from the
prior year is primarily due to the Town's management reporting an assigned fund
balance in fiscal year 2016 of$2,196,605 for the amount of free cash appropriated
for the High School construction litigation settlement in fiscal year 2017.
The total fund balance of the general fund changed by $(1,747,181) 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 $ (5,335,338)
Revenues in excess of budget 1,601,604
Expenditures less than budget 1,638,916
Expenditures of prior year encumbrances less than current
year encumbrances 502,648
Other (155,011)
Total $ (1,747,181)
Included in the total general fund balance are the Town's stabilization accounts
with the following balances:
Fund Balance
6/30/17 6/30/16 Chanq Classification
Stabilization -general $ 1,584,336 $ 1,565,475 $ 18,861 Unassigned
Stabilization -smart growth 503,000 503,000 - Committed
Stabilization -sick buy-back 31 31 Committed
Total $ 2 087,336 $ 2,068,506 $ 18,830
ProI26gjqnLfMpSLs. 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.
Factors concerning the finances of proprietary funds have already been addressed
in the entity-wide discussion of business-type activities.
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E. GENERAL F'U'ND BUDGETARY HIGHLIGHTS
Differences between the original budget and the final amended budget resulted
in an overall change in appropriations of$3,242,017. Major reasons for these
amendments include:
• $2,196,605 increase for Reading Memorial High School litigation
• $579,000 increase for capital improvements
• $250,000 increase for snow & ice budget
• $216,415 increase for other Town operations
Of this increase, $2,885,338 was funded by free cash, $216,648 through the tax
levy, $140,000 from additional state aid, and $31 from transfers in from other
funds.
F. CAPITAL ASSET AND DEET ADMINISTRATION
Ca Itaul assets. Total investment in capital assets for governmental and business-
type activities at year-end amounted to $232,100,816 (net of accumulated deprecia-
tion), a change of$5,431,518 from the prior year. This investment in capital assets
includes land, buildings and system, improvements, and machinery and equipment.
Governmental additions:
$ 3,395,859 in library renovations
• $ 2,600,520 in various school improvements
• $ 717,692 for public safety vehicles
• $ 593,273 for public works vehicles
• $ 530,151 in roadway improvements
Business-t a additions:
• $ 4,786,765 in electric infrastructure and equipment
• $ 589,397 in water infrastructure and vehicles
• $ 1,004,378 in sewer infrastructure
Additional information on capital assets can be found in the Notes to the Financial
Statements.
Long-term debt. At the end of the current fiscal year, total bonded debt out-
standing was $47,719,902, all of which was backed by the full faith and credit of
the government.
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Additional information on capital assets and long-term debt can be found in the
Notes to the Financial Statements.
G. ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES
The adopted FY2018 general fund budget of$92,333,521 is a 2.2% increase
over the prior year. The FY2018 budget is balanced.
FY2018 state aid will be $14,109,667, which represents a 1.8% percent increase
over prior year.
The tax levy for FY2018 of$67,262,268 represents a 3.7% increase over the
prior year. The FY2018 tax rate is $13.87 per thousand for residential properties
and $13.92 per thousand for commercial properties, compared to $14.03 in the
prior year. Overall, property values increased 5.4% to $4,874,351,402.
For FY2018, the Board of Selectmen, acting as the Water and Sewer Commissioners,
voted to increase water rates by 3.73% and sewer rates by 2.94% for all customers,
effective for all billings after September 10, 2017. The revenues are expected to
cover all operations, planned infrastructure improvements, and debt.
The Commonwealth 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 FY2017 totaling $390,794. The FY2018
revenue budgeted for this tax is $350,000.
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 Other Post-Employment Benefits liabilities (OPEB). Currently, the funds
set aside in this trust are invested in MMDT, which invests in US Treasuries, com-
mercial 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 State Retiree Benefits Trust Fund (SRBT) 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 liabil-
ity. At the April 2017 Town Meeting, the Town voted 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.
13
414
QUE ')T S 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 con-
cerning any of the information provided in this report or requests for additional finan-
cial information should be addressed to:
Town Accountant
Town Hall
16 Lowell Street
Reading, MA 01867
14
415
TOWN OF READING,MASSACHUSETTS
STATEMENT OF NET POSITION
JUNE 30,2017
Governmental Business-Type
Activities Activities Total
Assets
Current:
Cash and short-term investments $ 13,805,298 $ 37,140,527 $ 50,945,825
Investments 27,341,020 27,341,020
Receivables,net of allowance for uncollectibles:
Property taxes 288,836 288,836
Excises 259,258 - 259,258
User fees 13,522,732 13,522,732
Departmental and other 339,040 339,040
Intergovernmental 233,493 233,493
Prepaid assets 680,703 680,703
Inventory 1,752,915 1,752,915
Noncurrent:
Restricted cash and short-term equivalents 26,482,494 26,482,494
Restricted investments 2,659,813 2,659,813
Investment in associated companies 212,428 212,428
Receivables,net of allowance for uncollectibles:
Property taxes 400,581 400,581
Capital assets being depreciated,net 127,373,142 91,744,375 219,117,517
Capital assets not being depreciated 5,209,412 7,773,887 12,983,299
Deferred Outflows of Resources
Related to pensions 8,846,381 4,908,972 13,755,353
Total Assets and Deferred Outflows of Resources 184,096,461 186,878,846 370,975,307
Liabilities
Current:
Warrants payable 1,608,001 7,391,553 8,999,554
Accrued liabilities 3,755,508 620,037 4,375,545
Unearned revenues 266,935 - 266,935
Tax refunds payable 95,685 -- 95,685
Customer advances for construction 927,303 927,303
Customer deposits 1,080,257 1,080,257
Notes payable 1,490,000 - 1,490,000
Other current liabilities 1,069,999 24,270 1,094,269
Current portion of long-term liabilities:
Bonds and loans payable 4,218,783 2,147,412 6,366,195
Compensated absences 113,006 23,695 136,701
Noncurrent:
Bonds and loans payable,net of current portion 26,092,857 15,260,850 41,353,707
Compensated absences 1,017,057 3,186,223 4,203,280
Net OPEB obligation 19,681,914 604,150 20,286,064
Net pension liability 29,565,712 14,902,755 44,468,467
Deferred Inflows of Resources
Related to pensions 2,083,876 834,048 2,917,924
Other 243,070 243,070
Total Liabilities and Deferred Inflows of Resources 91,302,403 47,002,553 138,304,956
Net Position
Net investment in capital assets 101,672,301 89,259,199 190,931,500
Restricted for:
Grants and other statutory restrictions 7,277,680 11,250,323 18,528,003
Permanent funds:
Nonexpendable 3,310,195 3,310,195
Expendable 7,173,171 7,173,171
Unrestricted . (26,639„289) 39,366,771 12,727,482
Total Net Position $ 92,794,058 $ 139,876,293 $ 232,670,351
The accompanying notes are an integral part of these financial statements.
15
416
TOWN OF READING,MASSACHUSETTS
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30,2017
Program Revenues
Operating Capital
Charges for Grants and Grants and Net(Expenses)
menses Services Contributions Contributions Revenues
Governmental Activities
General government $ 5,328,963 $ 489,940 $ 299,075 $ $ (4,539,948)
Public safety 15,722,993 2,319,485 107,336 - (13,296,172)
Education 72,790,008 4,670,904 24,141,774 (43,977,330)
Public works 7,156,998 195,075 116,060 433,435 (6,412,428)
Facilities 1,663,004 - (1,663,004)
Health and human services 1,253,232 73,886 442,898 - (736,448)
Culture and recreation 4,747,487 954,829 243,846 1,021,021 (2,527,791)
Interest on long-term debt 1,055,194 - mm (1,055,194)
Intergovernmental 1,011,638 - - (1,011,638)
Total governmental activities 110,729,517 8,704,119 25,350,989 1,454,456 (75,219,953)
Business-Type Activities
Electric operations 87,127,810 92,616,756 67,797 335,198 5,891,941
Water operations 5,391,238 6,749,159 - 1,357,921
Other 6,349,570 7264..780 - 533,000 1,548,210
Total business-type activities 98,868,618 106 630,695 67,797 968,198 8,798,072
Total $ 209,598,135 $ 115,334x814 $ 25,418,786 $ 2,422,654 $ (66,421,881)
The accompanying notes are an integral part of these financial statements. (continued)
16
417
TOWN OF READING,MASSACHUSETTS
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30,2017
(continued)
Governmental Business-Type
Activities Activities Total
Change in Net Position:
Net(Expenses)revenues from previous page $ (75,219,953) $ 8,798,072 $ (66,421,881)
General Revenues and Transfers
Property taxes 64,651,227 64,651,227
Excises 4,143,498 4,143,498
Penalties,interest,and other taxes 586,333 586,333
Grants and contributions not
restricted to specific programs 3,356,933 ,, 3,356,933
Investment income 1,302,345 426,612 1,728,957
Other 325,689 693,772 1,019,461
Transfers,net 2,384,668 (2,384,668)
Total general revenues and transfers 76,750,693 (1,264,284) 75,486,409
Change in Net Position 1,530,740 7,533,788 9,064,528
Net Position
Beginning of year,as restated') 91,263,318 132,342,505 223,605,823
End of year $ 92,794,058 $ 139,876,293 $ 232,670,351
as restated for Electric fund
The accompanying notes are an integral part of these financial statements.
17
418
TOWN OF READING, MASSACHUSETTS
GOVERNMENTALFUNDS
BALANCE SHEET
JUNE 30, 2017
Nonmajor Total
General Governmental Governmental
Fund Funds Funds
Assets
Cash and short-term investments $ 5,273,091 $ 8,532,207 $ 13,805,298
Investments 16,939,988 10,401,032 27,341,020
Receivables:
Property taxes 764,156 - 764,156
Excises 373,901 - 373,901
Departmental and other 221,016 118,024 339,040
Intergovernmental 233,493 233,493
Total assets $ 23,572,152 $ 19,284,756 $ 42,856,908
Liabilities
Warrants payable $ 1,248,331 $ 359,670 $ 1,608,001
Accrued liabilities 3,304,087 141,970 3,446,057
Unearned revenue - 266,935 266,935
Notes payable 1,490,000 1,490,000
Other liabilities 1,069,999 - 1,069,999
Total liabilities 5,622,417 2,258,575 7,880,992
Deferred Inflows of Resources
Unavailable revenues 1,363,938 - 1,363,938
Fund Balances
Nonspendable - 3,310,195 3,310,195
Restricted 62,468 15,342,236 15,404,704
Committed 503,000 - 503,000
Assigned 4,455,339 - 4,455,339
Unassigned 11,564,990 . (1,626,250) 9,938,740
Total fund balances 16,585,797 17,026,181 33,611,978
Total Liabilities, Deferred Inflows of Resources,
and Fund Balances $ 23,572,152 $ 19,284,756 $ 42,856,908
The accompanying notes are an integral part of these financial statements.
18
419
TOWN OF READING, MASSACHUSETTS
RECONCILIATION OF TOTAL GOVERNMENTAL FUND
BALANCES TO NET POSITION OF GOVERNMENTAL
ACTIVITIES IN THE STATEMENT OF NET POSITION
JUNE 30, 2017
Total governmental fund balances $ 33,611,978
• Capital assets used in governmental activities are not financial
resources and, therefore, are not reported in the funds. 132,582,554
• Revenues are reported on the accrual basis of accounting
and are not deferred until collection. 956,601
Deferred outflows of resources related to pensions to be recognized as
an increase to pension expense in future periods. 8,846,381
• Long-term liabilities are not due and payable in the current period and,
therefore, are not reported in the governmental funds:
Bonds payable (30,311,640)
Compensated absences (1,130,063)
Net OPEB obligation (19,681,914)
Net pension liability (29,565,712)
• Deferred inflows of resources related to pensions to be recognized as a
decrease to pension expense in future periods. (2,083,876)
• Deferred inflows of resources related to gains on refunding bonds. (120,800)
• In the Statement of Activities, interest is accrued on outstanding
long-term debt, whereas in governmental funds interest is not
reported until due. (309,451)
Net position of governmental activities $ 92,794,058
The accompanying notes are an integral part of these financial statements.
19
420
TOWN OF READING, MASSACHUSETTS
GOVERNMENTALFUNDS
STATEMENT OF REVENUES, EXPENDITURES,AND CHANGES IN FUND BALANCES
FOR THE YEAR ENDED JUNE 30, 2017
Nonmajor Total
General Governmental Governmental
Fund Funds Funds
Revenues
Property taxes $ 64,447,707 $ - $ 64,447,707
Excises 4,108,000 - 4,108,000
Penalties, interest, and other taxes 586,333 586,333
Departmental 1,901,467 6,512,991 8,414,458
Licenses and permits 171,539 - 171,539
Fines and forfeitures 87,530 - 87,530
Intergovernmental 24,278,646 5,305,305 29,583,951
Investment income 419,311 481,599 900,910
Contributions - 720,915 720,915
Other 313,860 11,934 3251794
Total revenues 96,314,393 13,032,744 109,347,137
Expenditures
Current:
General government 4,018,523 140,845 4,159,368
Public safety 10,944,929 1,045,093 11,990,022
Education 52,780,624 13,052,413 65,833,037
Public works 5,100,393 665,937 5,766,330
Facilities 1,373,262 - 1,373,262
Health and human services 651,094 391,347 1,042,441
Culture and recreation 2,165,935 4,400,691 6,566,626
Employee benefits 15,413,653 _ 15,413,653
Debt service 4,871,440 4,871,440
Intergovernmental 1,011,638 - 1,011,638
Total expenditures 98,331,491 19,696,326 118,027,817
Excess(deficiency)of revenues
over(under)expenditures (2,017,098) (6,663,582) (8,680,680)
Other Financing Sources(Uses)
Issuance of general obligation bonds - 1,355,000 1,355,000
Premium on issuance of bonds 173,491 173,491
Transfers in 2,678,031 2,715,102 5,393,133
Transfers out (2,581,605) (426,860) (3,008,465)
Total other financing sources(uses) 269,917 3,643,242 3,913,159
Net change in fund balances (1,747,181) (3,020,340) (4,767,521)
Fund Balance at Beginning of Year 18,332,978 20,046,521 38,379,499
Fund Balance at End of Year $ 16,585,797 $ 17,026,181 $ 33,611,978
The accompanying notes are an integral part of these financial statements.
20
421
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 30,2017
Net changes in fund balances-Total governmental funds $ (4,767,521)
• 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 8,029,177
Loss on disposal of capital assets (12,900)
Depreciation (6,958,872)
• 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,excises,etc.)
differ between the two statements.This amount represents the
net change in deferred revenue. (58,455)
• The issuance of long-term debt 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 (1,355,000)
Repayments of general obligation and refunding bonds 3,750,000
Premiums from issuance of general obligation bonds (173,491)
• In the Statement of Activities,interest is accrued on outstanding
long-term debt,whereas in governmental funds interest is not
reported until due. 51,146
• 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:
Current year amortization of premiums from issuance of general obligation
and refunding bonds 401,435
Change in tax refunds payable 185,472
Change in compensated absences (21,080)
Change in net OPEB obligation (2,128,250)
Change in net pension liability,net of related deferred outflows and inflows
of resources (1,426,021)
• Litigation settlement liability accrued in the prior year. 6,000,000
• Other 11100
Change in net position of governmental activities $ 1,530,740
The accompanying notes are an integral part of these financial statements.
21
422
TOWN OF READING,MASSACHUSETTS
GENERALFUND
STATEMENT OF REVENUES AND OTHER SOURCES,AND EXPENDITURES AND OTHER USES-
BUDGET AND ACTUAL
FOR THE YEAR ENDED JUNE 30,2017
Budgeted Amounts Variance with
Final Budget
Original Final Actual Positive
Budg t Pud et Amounts INMalivel
Revenues and Transfers
Property taxes $ 63,974,776 $ 64,191,424 $ 64,447,707 $ 256,283
Excise 3,735,000 3,735,000 4,108,000 373,000
Penalties,interest,and other taxes 565,000 565,000 586,294 21,294
Departmental 1,775,000 1,775,000 1,901,467 126,467
Licenses and permits 160,000 160,000 171,539 11,539
Fines and forfeitures 105,000 105,000 87,530 (17,470)
Intergovernmental 13,825,000 13,965,000 14,234,262 269,262
Investment income 175,000 175,000 419,311 244,311
Other 134,998 134,998 333,553 198,555
Transfers in 2,559,668 2,559,699 2,678,062 118,363
Total revenues and transfers 87,009,442 87,366,121 88,967,725 1,601,604
Expenditures and Transfers
General government 4,162,992 4,205,416 4,076,369 129,047
Public safety 10,394,800 10,775,091 10,558,492 216,599
Education 43,365,281 44,156,202 43,477,169 679,033
Public works 6,186,264 6,594,589 6,287,618 306,971
Health and human services 754,025 756,801 651,646 105,155
Culture and recreation 2,681,130 2,321,805 2,248,618 73,187
Intergovernmental 1,026,450 976,450 1,011,638 (35,188)
Employee benefits 15,988,500 15,588,500 15,448,653 139,847
Debt service 4,900,000 4,900,000 4,875,735 24,265
Transfers out - 2,426,605 2,426,605 p
Total expenditures and transfers 89,459,442 92,701,459 91,062,543 1,638,916
Excess(deficiency)of revenues and transfers in
over(under)expenditures and transfers out (2,450,000) (5,335,338) (2,094,818) 3,240,520
Other Financing Sources(Uses)
Use of free cash:
For operating budget support 2,150,000 2,838,733 (2,838,733)
For litigation settlement - 2,196,605 - (2,196,605)
Use of overlay surplus 300,000 300,000 (300,000)
Total other financing sources 2,450,000 5,335,338
Excess of revenues and other
sources over expenditures and other uses $ $ - $ (2,094,818) $ 2,094,8181
The accompanying notes are an integral part of these financial statements.
22
423
TOWN OF READING,MASSACHUSETTS
PROPRIETARY FUNDS
STATEMENT OF NET POSITION
JUNE 30,2017
Business-Type,,Activities
Electric
Division Water Nonmajor Total
Fund Fund Funds En(er rise Funds
Assets
Current:
Cash and short-term investments $ 15,522,815 $ 10,830,355 $ 10,787,357 $ 37,140,527
User fees,net of allowance for uncollectibles 8,761,845 2,271,107 2,489,780 13,522,732
Prepaid expenses 680,703 - 680,703
Inventory 1,648,675 100,748 3,492 1,752,915
Total current assets 26,614,038 13,202,210 13,280,629 53,096,877
Noncurrent:
Restricted cash and short-term investments 26,482,494 26,482,494
Restricted investments 2,659,813 - 2,659,813
Investment in associated companies 212,428 -. - 212,428
Capital assets being depreciated,net 74,845,094 11,202,437 5,696,844 91,744,375
Capital assets not being depreciated 1,265,842 4,794,619 1,713,426 7,773,887
Total noncurrent assets 105,465,671 15,997,056 7,410,270 128,872,997
Deferred Outflows of Resources
Related to pensions 4,135,078 610,402 163,492 4„908,972
Total Assets and Deferred Outflows of Resources 136,214,787 29,809,668 20,854,391 186,878,846
Liabilities
Current:
Warrants payable 7,193,756 80,089 117,708 7,391,553
Accrued liabilities 565,784 54,202 51 620,037
Customer deposits 1,080,257 - 1,080,257
Customer advances for construction 927,303 927,303
Other current liabilities 24,270 24,270
Current portion of long-term liabilities:
Bonds and loans payable - 1,775,739 371,673 2,147,412
Compensated absences 23,695 - 23,695
Total current liabilities 9,790,795 1,910,030 513,702 12,214,527
Noncurrent:
Bonds and loans payable - 12,879,160 2,381,690 15,260,850
Compensated absences 3,126,439 42,950 16,834 3,186,223
Net OPEB obligation 138,068 332,401 133,681 604,150
Net pension liability 13,076,538 1,382,076 444,141 14,902,755
Total noncurrent liabilities 16,341,045 14,636,587 2,976,346 33,953,978
Deferred Inflows of Resources
Related to pensions 714,888 75,557 43,603 834,048
Total Liabilities and Deferred Inflows of Resources 26,846,728 16,622,174 3,533,651 47,002,553
Net Position
Net investment in capital assets 76,110,937 5,325,792 7,822,470 89,259,199
Restricted for depreciation fund 10,634,675 10,634,675
Restricted for capital projects 615,648 615,648
Unrestricted 22,622,447 7,861,702 8,882,622 39,366,771
Total Net Position $ 109,368,059 $ 13,187,494 $ 17,320,740 $ 139,876,293
The accompanying notes are an integral part of these financial statements.
23
424
TOWN OF READING,MASSACHUSETTS
PROPRIETARY FUNDS
STATEMENT OF REVENUES,EXPENSES,AND CHANGES IN FUND NET POSITION
FOR THE YEAR ENDED JUNE 30,2017
Business-Type Activities
Electric
Division Water Nonmajor Total
Fund Fund Funds Enterprisunds
Operating Revenues
Charges for services $ 91,822,764 $ 6,749,159 $ 7,264,780 $ 105,836,703
Other 793,992 - - 793,992
Total operating revenues 92,616,756 6,749,159 7,264,780 106,630,695
Operating Expenses
Personnel expenses - 1,714,475 825,026 2,539,501
Non-personnel expenses _ 456,070 258,700 714,770
Intergovernmental 1,433,143 2,109,549 4,769,928 8,312,620
Depreciation 4,101,308 813,140 446,192 5,360,640
Energy purchases 64,703,438 29,231 22,856 64,755,525
Operating 14,311,692 14,311,692
Maintenance 2,578,229 - 2,578,229
Total operating expenses 87,127,..810
p g p 5,122,465 6,322,702 98,572,977
Operating Income 5,488,946 1,626,694 942,078 8,057,718
Nonoperating Revenues(Expenses)
Intergovernmental revenue 67,797 - 67,797
Investment income 271,658 101,526 53,428 426,612
Interest expense - (268,773) (26,868) (295,641)
Other 693,719 53 - 693,772
Total nonoperating revenues(expenses) 1,033 174 (167,194) 26,560 892,540
Income Before Contributions and Transfers 6,522,120 1,459,500 968,638 8,950,258
Capital grants and contributions 335,198 - 633,000 968,198
Transfers out (2,384,668) (2,384„668)
Change in Net Position 4,472,650 1,459,500 1,601,638 7,533,788
Net Position at Beginning of Year,as restated') 104,895,409 11,727,994 15,719,102 132,342,505
Net Position at End of Year $ 109,368,059 $ 13,187,494 $ 17,320,740 $ 139,876,293
as restated for Electric fund
The accompanying notes are an integral part of these financial statements.
24
425
TOWN OF READING,MASSACHUSETTS
PROPRIETARY FUNDS
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30,2017
Business-Type Activities
Electric
Division Water Nonmajor Total
Fund Fund Funds, Froterro/w4r d untie
Cash Flows From Operating Activities
Receipts from customers and users $ 91,442,858 $ 6,946,123 $ 7,628,978 $ 106,017,959
Payments to vendors and employees (80,175,335) (2,830,126) (1,124,719) (84,130,180)
Customer purchase power charge adjustments 793,993 793,993
Payments to other governments2,109 tr49 9,928 { 819 4r"l)
Net cash provided by operating activities 12,061,516 2,006,448 1,734,331 15,802,295
Cash Flows From Noncapital Financing Activities
MMWEC surplus 148,898 - 148,898
Other 589,512 53 589,565
Transfer out ('2,384,668) __EJ84,668
Net cash provided by(used for)noncapital financing activities (1,646,258) 53 (1,646,205)
Cash Flows From Capital and Related Financing Activities
Proceeds from issuance of bonds 3,500,736 2,640,484 6,141,220
Principal payments on bonds (1,356,200) (91,915) (1,448,115)
Acquisition and construction of capital assets (8,054,525) (589,397) (1,135,524) (9,779,446)
Capital grants and contributions 323,156 633,000 956,156
Interest expense 128 297
2d.6, 4ti (355,165)
Net cash provided by(used for)capital and related financing activities (7,731,369) 1,226,842 2,019,177 (4,485,350)
Cash Flows From Investing Activities
(increase)in restricted cash and investments (556,337) - (556,337)
Investment income 271,658 101,526 53„428 426,612
Net cash provided by(used for)investing activities (264,679) 101,526 53,428 (129,725)
Net change in cash and short-term investments 2,399,210 3,334,869 3,806,936 9,541,015
Unrestricted Cash and Short Term Investments,Beginning of Year 13,123,605 7,4L5 486 6,980,421 27,599,512
Unrestricted Cash and Short Tenn Investments,End of Year $ 15,522,815 $ 10.830 355 $ 10,78"/357 $ 37,140,527
Reconciliation of Operating Income to Net Cash
Provided By Operating Activities
Operating income $ 5,488,946 $ 1,626,694 $ 942,078 $ 8,057,718
Adjustments to reconcile operating income(loss)to net
cash provided by(used for)operating activities!
Depreciation 4,101,308 813,140 446,192 5,360,640
Changes in assets,liabilities,and deferred outflows/inflows:
User fees receivables (558,258) 196,964 364,198 2,904
Inventory (58,346) (8,925) 1,202 (66,069)
Other assets 305,054 - 305,054
Deferred outflows-related to pensions 703,140 (219,063) (1,818) 482,259
Warrants payable 1,717,729 (758,189) (31,570) 927,970
Accrued liabilities - (29,341) (23,358) (52,699)
Other liabilities 178,353 2,999 181,352
Net OPEB obligation 138,068 39,372 5,997 183,437
Net pension liability 213,806 341,674 14,320 569,800
Deferred inflows-related to pensions �('168284) 4,122 14,091 (150,071)
Net cash provided by operating activities $ 12,061,516 $ 2,006,448 $ 1,734,331 $ 15-802,295
The accompanying notes are an integral part of these financial statements.
25
426
TOWN OF READING, MASSACHUSETTS
FIDUCIARY FUNDS
STATEMENT OF FIDUCIARY NET POSITION
JUNE 30,2017
Electric
Division
Other Other
Pension Post Post
Trust Fund Employment Employment
(As of Benefits Benefits Agency
December 31,2.0161 Trust Fund Trust Fund Funds
Assets
Cash and short-term investments $ 2,439,240 $ 3,621,148 $ 2,857,150 $ 467,254
Investments 121,496,781 - -
Accounts receivable 56,221
Other 1,247'
Total assets 123,992,242 3,621,148 2,857,150 468„501
Liabilities
Warrants payable - - - 17,687
Other liabilities - - 450,814
Total liabilities - - - 468,501'.
Net Position
Total net position restricted for
pensions, OPEB, and other purposes $ 123,992,242 $ 3,621,148 $ 2,857,150 $
The accompanying notes are an integral part of these financial statements.
26
427
TOWN OF READING, MASSACHUSETTS
FIDUCIARY FUNDS
STATEMENT OF CHANGES IN FIDUCIARY NET POSITION
FOR THE YEAR ENDED JUNE 30, 2017
Electric
Division
Other Other
Pension Post Post
Trust Fund Employment Employment
(for the year ended Benefits Benefits
December 31 2016, Trust Fund Trust Fund
Additions
Contributions:
Employers $ 5,418,129 $ 3,566,677 $ 794,319
Intergovernmental 430,720
Plan members 2,500,355
Other 8,043 -
Total contributions 8,357,247 3,566,677 794,319
Investment Income:
Increase in fair value of investments 9,280,195 27,438 22,561
Less: management fees (639,647) - r
Net investment income 8,640,548 27,438 22,561
Total additions 16,997,795 3,594,115 816,880
Deductions
Benefit payments to plan members, beneficiaries,
and other systems 10,402,424 2,990,677 485,573
Refunds and transfers to other systems 443,883 -
Administrative expenses 237,043
Total deductions 11,083,350 2,990,677 485,573
Net change 5,914,445 603,438 331,307
Net position restricted for pensions, OPEB,and
other purposes
Beginning of year 118,077,797 3,017,710 2,525,843
End of year $ 123,992,242 $ 3,621,148 $ 2,857,150
The accompanying notes are an integral part of these financial statements.
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TOWN OF READING, MASSACHUSETTS
Notes to the Financial Statements
1
Sumrr of Sifnt ccoaatwoliucies
The accounting policies of the Town of Reading, Massachusetts (the Town) con-
form to generally accepted accounting principles (GAAP) as applicable to gov-
ernmental units. The following is a summary of the more significant policies:
A. e orting 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.
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. Detailed information about the pension plan's fidu-
ciary net position is available in the separately issued System financial
report. 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 anti 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
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429
not properly included among program revenues are reported instead as
general revenues.
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 ofaAccountin and Financial Statement
Presentation
Government-wide Financial Statements
The government-wide financial statements are reported using the eco-
nomic resources measurement focus and the accrual basis of accounting.
Revenues 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.
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430
The Town reports the following major governmental funds:
• The General Fund is the Town's primary operating fund. It accounts
for all financial resources of the general government, except those
required to be accounted for in another fund.
The proprietary 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.
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 dis-
tribution 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 nonmajor 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 Other Post-Employment Benefit Trust Fund is used to
accumulate resources for health and life insurance benefits for
retired employees.
• The Electric Division Other Post-Employment Benefit Trust Fund is
used to accumulate resources for health and life insurance benefits
for retired employees.
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431
• The Agency Funds account 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. Case Case F uivalents, and 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.
For purpose of the statement of cash flows, the proprietary funds consider
investments with original maturities of three months or less to be short-
term investments.
State and local statutes place certain limitations on the nature of deposits
and investments available. Deposits in any financial institution may not
exceed certain levels within the financial institution. Non-fiduciary fund
investments can be made in securities issued by or unconditionally guar-
anteed by the U.S. Government or agencies that have a maturity of one
year or less from the date of purchase and repurchase agreements guar-
anteed by such securities with maturity dates of no more than 90 days
from the date of purchase. Municipalities having such funds in the custody
of the treasurer in an aggregate amount in excess of two hundred and fifty
thousand dollars may also invest such funds in securities, other than ,
mortgages or collateral loans, which are legal for the investment of funds
of savings banks under the laws of the commonwealth; provided, that not
more than fifteen percent of any such trust funds shall be invested in bank
stocks and insurance company stocks, nor shall more than one and one-
half percent of such funds be invested in the stock of any one bank or
insurance company.
Investments consist of marketable securities, bonds, and short-term
money market investments. Investments are carried at fair value, except
certificates of deposit which are reported at cost.
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432
E. F'reafftz Tax kimitation,s
Legislation known as "Proposition 2Y2" 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 2017 tax levy reflected an excess capacity of$43,812.
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 acqui-
sition 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. Com orsatec Asonoes
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
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433
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. d..or� 4Term li atior�s
In the government-wide financial statements, and proprietary fund types in
the fund financial statements, long-term debt, and other long-term obliga-
tions are reported as liabilities in the applicable governmental activities,
business-type activities, or proprietary fund type Statement of Net Position.
The general fund and applicable enterprise funds typically repay these
obligations.
J, Fund Eguiter
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/deferred outflows of resources and current liabilities/deferred
inflows of resources. 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 appro-
priation or expenditure. Unassigned fund balance indicates that portion of
fund balance that is available for appropriation in future periods.
When an expenditure is incurred that would qualify for payment from multi-
ple fund balance types, the Town uses the following order to liquidate lia-
bilities: restricted, committed, assigned, and unassigned.
Not,Position- Net position represents the difference between assets/deferred
outflows of resources and liabilities/deferred inflows of resources. 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 posi-
tion 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.
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434
2. Stevan hi Cow w pian r d Ac o t b 11t
A. Bud eta it forr ation
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.
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 a; i,
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. Budge_tIGAAP Reqonciliation
The budgetary data for the general fund is based upon accounting princi-
ples that differ from generally accepted accounting principles (GAAP).
Therefore, in addition to the GAAP basis financial statements, the results
of operations of the general fund are presented in accordance with budg-
etary accounting principles to provide a meaningful comparison to budg-
etary data.
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435
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.
Revenues Expenditures
and Other and Other
General Fund,
Financia Sources Firnancir7 'Uses
Revenues/Expenditures
(GAAP Basis) $ 96,314,393 $ 98,331,491
Other financing sources/uses
(GAAP Basis) 2,851,522 __2J581,605
Subtotal (GAAP Basis) 99,165,915 100,913,096
Reverse beginning of year
appropriation carryforwards
from expenditures (2,371,070)
Add end-of-year appropriation
carryforwards to expenditures - 2,718,702
To reverse the effect of non-
budgeted State contributions for
teachers retirement (10,044,384) (10,044,384)
Other (153,806) (153,801)
Budgetary Basis $ 88,967,725 $ 91.062,543
D. Excess of Expenditures Over Appropriations
There were no expenditures exceeding appropriations during the current
fiscal year excluding intergovernmental expenditures related to state
assessments.
E. Deficit f=und E uit
The Town reported various special revenue and capital project funds
reflecting individual deficit account balances as of June 30, 2017. It is
anticipated that the deficits in these funds will be eliminated through future
intergovernmental and departmental revenues, bond proceeds, and trans-
fers 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 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
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436
not exceeding sixty percent 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.
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 does not
have a deposit policy for custodial credit risk.
As of June 30, 2017, $52,158,635 of the Town's bank balances of$86,370,624,
were exposed to custodial credit risk. However, $48,919,122 of the Town's
exposed balance was on deposit with the Massachusetts Municipal Depository
Trust (MMDT).
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 does not have a policy for credit risk.
Presented below is the actual rating as of year-end for each investment of
the Town:
Exempt
From Average
Investment Tice Amount Disclosure Ratin
Domestic corporate bonds $ 5,984,184 $ - A-
Foreign corporate bonds 3,160,667 - A
Certificates of deposits 18,533,354 18,533,354 N/A
Corporate equities 2,322.628 2,322,628 N/A
Total investments $ 30,000,833 $ 20,855,982
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 does not
have policies for custodial credit risk.
The Town's investments are subject to custodial credit risk exposure
because the related securities are uninsured, unregistered, and/or held
by the Town's brokerage firm, which is also the Counterparty to these
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437
securities. The Town manages this custodial credit risk by investing in
counter-party's that participate in the Securities Investor Protection
Corporation (SIPC) and excess SIPC coverages.
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,
government agency securities, and mutual funds) that represent 5% or more
of total investments are as follows:
Investment Issuer Amount
NBTC - CDARS - General Fund $ 16,939,988
SPDR S&P 500 ETF 1,765,624
Total $ 18,705,612
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 does 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 investments
to market interest rate fluctuations is as follows:
Investment Maturities(in Years)
Less
Investment Type Amount Than 1 11-55 6-10
Debt-related Securities:
Domestic corporate bonds $ 5,984,184 $ $ 600,697 $ 5,383,487
Foreign corporate bonds 3,160,667 - 595,628 2,565,039
Total $ 9,144,851 $ $ 1,196,325 $ 7,948,526
E.
Fora1 n Curronc Risk
Foreign currency risk is the risk that changes in foreign exchange rates
will adversely affect the fair value of an investment. The Town does not
have policies for foreign currency risk.
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).
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438
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, 2017:
Fair Value Measurements usin
Quoted prices
in active Significant Significant
markets for observable unobservable
identical assets inputs inputs
QgLO-ro-t—ton Level 1 Level 2 Level 3
Investments by fair value level:
Debt securities:
Domestic corporate bonds $ 5,984,184 $ $ 5,984,184 $
Foreign corporate bonds 3,160,667 3,160,667
2 32.2,628 equities Corporate a 2,322,628 -
p q
Total $ 11,467.479
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.
5. Taxes and Excises Receivable
Real estate and personal property taxes are levied and based on values
assessed on January 1 st of every year. Assessed values are established by
the Board of Assessor's for 100% of the estimated fair market value. Taxes
are due on a quarterly basis and are subject to penalties and interest if they
are not paid by the respective due date. Real estate and personal property
taxes levied are recorded as receivables in the fiscal year they relate to.
The day 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.
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439
Tax and excise receivables at June 30, 2017 consist of the following:..
Allowance
for
Gross Doubtful Net
Receivables Amount Accounts Amount
Real estate taxes $ 249,790 $ (24,979) $ 224,811
Personal property taxes 15,045 (5,251) 9,794
Tax Liens 445,090 (44,509) 400,581
Deferred taxes 54,231 54,231
Total property taxes 764,156 (74,739) 689,417
Motor vehicle excise 373,901 (114,643) 259,258
Grand total $ 1,138,057 $ (189,382) $ 948,675
6. User Fees Receivable
The Town provides water, sewer, and stormwater services for its residents.
Bills are sent to residential customers on a quarterly basis, based on usage.
Receivables for water, sewer, and stormwater user charges, liens, and other
fees at June 30, 2017 consist of the following:
Allowance
Gross for Doubtful
Receivables Amount Accounts Net Amount
Water user charges $ 2,475,019 $ (247,502) $ 2,227,517
Water liens 46,404 (10,504) 35,900
Water-other 15,380 (7,690) 7,690
Total Water 2,536,803 (265,696) 2,271,107
Sewer user charges 2,547,585 (254,759) 2,292,826
Sewer liens 44,779 (10,120) 34,659
Sewer-other 19..107 (9,554) 9,553
Total Sewer 2,611,471 (274,433) 2,337,038
Stormwater user charges 157,664 (7,170) 150,494
Stormwater liens 2,248 - 2,248
Total Stormwater 159„912 (7,170) 152742
Grand Total $ 5,355 186 $ (547,299) $ 4,760,887
7. Intergovernmental ental eceivables
This balance represents reimbursements requested from Federal and State
agencies for expenditures incurred in fiscal 2017.
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440
8. Interfund Transfers In andCoat
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 2017.
Fund Transfers In Transfers Out
General Fund $ 2,678,031 $ 2,581,605 (1)(2)(3)(4)
Nonmajor Governmental Funds:
Revolving funds - 218,363 (2)
Receipts reserved for appropriation - 75,000 (2)
Town capital project funds 363,497 • - (4)
School capital project funds 2,351,605 133,497 (3)(4)
Major Enterprise Funds:
Electric Division fund _ 2,384,668 (1)
Total $ 5,393„133 $ 5,393,133
(1)Payment in lieu of taxes(PILOT)
(2)To general fund for operating budget and appropriations
(3)For high school litigation settlement
(4)For library renovation project
9. Caaltal . ssets
Capital asset activity for the year ended June 30, 2017 was as follows:
Beginning Ending
Balance Increases LcrNW Balance
Governmental Activities
Capital assets,being depreciated:
Land improvements $ 3,801,018 $ 54,336 $ - $ 3,855,354
Buildings and improvements 135,978,390 20,755,676 (411,958) 156,322,108
Machinery,equipment,and furnishings 10,566,595 1,569,880 (1,172,052) 10,964,423
Infrastructure 31,876,830 433,435 32,310,265
Total capital assets,being depreciated 182,222,833 22,813,327 (1,584,010) 203,452,150
Less accumulated depreciation for:
Land improvements (1,433,257) (172,973) (1,606,230)
Buildings and improvements (46,018,992) (4,580,411) 399,058 (50,200,345)
Machinery,equipment,and furnishings (5,804,762) (935,217) 1,172,052 (5,567,927)
Infrastructure (17,434,235) (1,270,271)_ - 18,704,506
Total accumulated depreciation 70„691,246) ',958,87 1,571,110 _L7 0790011
Total capital assets,being depreciated,net 111,531,587 15,854,455 (12,900) 127,373,142
Capital assets,not being depreciated:
Land 3,981,386 3,981,386
Construction in progress 16,012.176
213,155 14 997,3 1,228,026
Total capital assets,not being depreciated 19,993,562 213,155 (14,997,305) 5„209,412
Governmental activities capital assets,net $ 131 525,149 $ 16,067610 $ 15 0101,205 $ 132„58:2,554
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441
Beginning Ending
Balance Increases Decreases _Balance
Business-Type Activities
Capital assets,being depreciated:
Land improvements $ 1,436,717 $ - $ $ 1,436,717
Buildings and improvements 18,007,244 3,267,759 (919,537) 20,355,466
Machinery,equipment,and furnishings 36,198,395 1,357,634 (341,140) 37,214,889
Infrastructure 116,521,570 3,938,717 (1,102,144) 119„358,143
Total capital assets,being depreciated 172,163,926 8,564,110 (2,362,821) 178,365,215
Less accumulated depreciation for:
Land improvements (468,902) (70,063) (538,965)
Buildings and improvements (10,580,594) (497,054) 919,538 (10,158,110)
Machinery,equipment,and furnishings (22,860,035) (1,192,316) 341,138 (23,711,213)
Infrastructure (49,6613,798) (3,601,207) 1,057,45352,212,552
Total accumulated depreciation (83,578,329) (5,360,640) 2,318,129 (88;,620,840)
Total capital assets,being depreciated,net 88,585,597 3,203,470 (44,692) 91,744,375
Capital assets,not being depreciated:
Land 1,449,426 - 1,449,426
Construction in progress 5,109,126 1,689,920 (474,585) 6,324,461
Total capital assets,not being depreciated 6,558,552 1,689,920 (474,585) 7,773,887
Business-type activities capital assets,net $ 95,144,149 $ 4,893,390 $ (519,277) $ 99,518,262
Depreciation expense was charged to functions of the Town as follows:
Governmental Activities
General government $ 238,214
Public safety 478,298
Education 3,632,452
Public works 1,702,190
Facilities 8,000
Health and human services 32,854
Culture and recreation 866,864
Total depreciation expense- governmental activities $ 6,958,872
Business-Type Activities
Electric $ 4,101,308
Water 813,140
Other- Sewer 406,040
Other- Stormwater 40,152
Total depreciation expense- business-type activities $ 5,360,640
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10. Deferred outflows of Resources
Deferred outflows of resources represent the consumption of net position by the
Town that is applicable to future reporting periods. Deferred outflows of
resources have a positive effect on net position, similar to assets. Deferred
outflows of resources related to pensions, in accordance with GASB Statement
No. 68, Accounting and Financial Reporting for Pensions— an amendment of
GASB Statement No. 27(GASB 68), are more fully discussed in Note 18.
11. arrants ? abls
Warrants payable represent fiscal year 2017 expenditures paid by July 15,
2017.
12. Accrued Liabilities,
This balance primarily represents amounts accrued interest and other
expenditures related to fiscal year 2017 paid subsequent to July 15, 2017.
13. Tai Refunds Paable
This balance consists of an estimate of refunds due to property taxpayers for
potential abatements, pending with the state Appellate Tax Board.
14. Notes lea able
The following summarizes activity in notes payable during fiscal year 2017:
Beginning Ending
Interest Date of Date of Balance at New Balance at
Governmental Activities Rate Issue Maturity 06/30/16 Issues iLgturities 06/30/117
General Obligation BAN 1.25% 06/30/17 12/15/17 $ $ 1,400 000 $ $ 1490000
Total Governmental Activities $ - $ 1,410,000 $ - $® 1 k 400,000
15. L+ rt "' rr1 abt
A, General Gbli tation 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:
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443
Amount
Serial Outstanding
Maturities Interest as of
Governmental Activities Through Rates / 6/30/17
Ladder Truck 07/01/17 3.05% $ 80,000
Parker Middle School Refunding 07/01/17 3.05% 150,000
Downtown Improvements 11/01/17 3.59% 65,000
RMHS Retaining Walls 11/01/20 1.26% 400,000
Killam Roof 02/01/22 1:83% 335,000
Birch Meadow Windows 02/01/22 1.83% 165,000
Elementary School Modular Classrooms 11/01/23 1.26% 1,050,000
RMHS Refunding 02/01/24 2.25% 7,730,000
Wood End Refunding-Sunset Rock 1 04/15/24 1.49% 208,790
Wood End Refunding-Sunset Rock II 04/15/24 1.49% 308,000
Wood End School Refunding 04/15/24 1.49% 985,710
Wood End School Refunding 04/15/24 1.49% 63,800
Barrows School Refunding 04/15/24 1.49% 822,700
Library Renovation 1 11/01/24 1.26% 1,880,000
Library Renovation II 04/15/25 1.49% 8,000,000
Roadway/Pedestrian Improvements 1 04/15/25 1.49% 800,000
Roadway/Pedestrian Improvements II 04/15/25 1.49% 240,000
Energy Conservation 08/01/25 3.19% 2,655,000
RMHS Renovation Project 06/15/27 4.00% 1.355,000
Total Governmental Activities $ 27,294,000
Amount
Serial Outstanding
Maturities Interest as of
Businssype Activities Through Rates %a 6/30/17
MWPAT Septic Loans 02/01/17 0.00% $ 4,639
MWRA Buy-in 07/01/17 3.05% 80,000
MWRA Inflo/Infiltration 05/19/19 0.00% 77,000
MWRA Sewer Bond 11/15/20 0.00% 31,240
MWRA Water System Pipeline 08/15/21 0.00% 1,025,000
MWRA Water System Pipeline 08/12/23 0.00% 2,808,400
Sewer Station 06/15/25 4.00% 2,183,500
Water GOB 11/01/25 1.26% 1,045,000
MWRA Sewer Bond 08/15/26 0.00% 211,000
MWRA Buy-in Refunding 04/15/27 1.49% 1,561,000
Water Improvements A-1 &A-2 06/15/27 4.00% 851,500
Water Main Improvements Phase 1 06/15/27 4.00% 2,255,000
MWRA Buy-in 11/01/27 3.88% 390,000
MWRA Buy-in Refunding 11/01/27 1.26% 3,600,000
Total Business-Type Activities
yp 16,123,279
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B. Future Debt Service
The annual payments to retire all general obligation long-term debt
outstanding as of June 30, 2017 are as follows:
Cove,rnmentalrinci al Interest Total
2018 $ 3,800,000 $ 1,045,756 $ 4,845,756
2019 3,550,000 908,833 4,458,833
2020 3,600,000 773,414 4,373,414
2021 3,630,000 635,158 4,265,158
2022 3,565,000 404,927 3,969,927
2023 - 2027 9,149,000 761,478 9,910,478
Total $ 27,294,000 $ 4,529,566 $ 31,823,566
business-T e princi al Interest Total
2018 $ 2,024,775 $ 438,083 $ 2,462,858
2019 1,904,775 397,030 2301,805
2020 1,861,275 349,530 2,210,805
2021 1,861,254 302,130 2,163,384
2022 1,842,300 254,830 2,097,130
2023- 2027 6,278,900 578,055 6,856,955
2028 350,000 5,250
355,250
Total $ 16,123,279 $ 2,324,908 $ 18,448,187
C. Cbaa es ira +Serreraiar -Tbrrrx ia'bilities
During the year ended June 30, 2017, the following changes occurred in
long-term liabilities:
Equals
Total Total Less Long-Term
Balance Balance Current Portion
7/1/16 &ddi(nns ( tl A tLO_n$ 6/30/17 Portion 6130/17
Governmental Activities
Bonds payable $ 29,689„000 $ '1,355,000 $ (3,750,000) $ 27 294,000 $ (:1,800,000) $ 23,494,000
Unarnortied bond premiums 3„245,584 179141„491,01764047 2,57
Total bonds payable 32,934,584 1,528,491 (4,151,435) 30,311,640 (4,218,783) 26,092,857
Accrued employee benefits 1,108,983 135,864 (114,784) 1,130,063 (113,006) 1,017,057
Net OPEB obligation 17,553,664 5,481,445 (3,353,195) 19,681,914 19,681,914
Net pension liability 30,868,736 - (1,303,024) 29,565,712 29,565,712
Litigation settlement liability 6,000 000 �6,000'1000�
Total Governmental Activities U846
5 967 $% 7„145,800 $ 14,922„4388 $ 80,689,329 $ 4.131„789 $ 76,357,540
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445
Equals
Total Total Less Long-Term
Balance Balance Current Portion
7/1/16dpi Ir dmrs Red.n 6/30/17 P__j_Oron6/30/17
Business-Type Activities
Bonds payable $ 12,070,394 $ 5,501,000 $ (1,448,115) $ 16,123,279 $ (2,024,775) $ 14,098,504
Unamortized bond premiums 703,378 640,220 (58,615) 1„284 983 (122,637) 1i1t32,,;34GS
Total bonds payable 12,773,772 6,141,220 (1,506,730) 17,408,262 (2,147,412) 15,260,850
Accrued employee benefits 3,324,005 140,589 (254,676) 3,209,918 (23,695) 3,186,223
Net OPEB obligation 420,713 1,191,239 (1,007,802) 604,150 - 604,150
Net pension liability(') 14,332,955 569,800 84,902,755 14,902„756
Total Business-Type $ 30,851,445 $ 8,042,848 $ (2,769,208) $ 36,125,085 $ 2,171 10�T $ 33,953,978
Mas restated for Electric fund
D. Bond Authorizations
Long-term debt authorizations which have not been issued or rescinded
as of June 30, 2017 are as follows:
Date Authorized Purpose Amount
November 2012 MWRA 1/1 sewer loan $ 460,000
April 2013 Water improvements-A-1 and A-2 96,500
February 2014 Library renovations 1,037,367
September 2014 Water main improvements- Phase 1 257,000
April 2015 Birch Meadow field lighting 900,000
April 2015 MWRA Sewer 1/1 1,477,000
Total $ 4,227,867
16. Deferred Inflows of Resources
Deferred inflows of resources refer to the acquisition of net position by the Town
that are applicable to future reporting periods. Deferred inflows of resources have
a negative effect on net position, similar to liabilities. The Town reports two items
as deferred inflows of resources: one which is attributable to changes in the net
pension liability, and the other which arises from the current financial resources
measurement focus and the modified accrual basis of accounting in governmental
funds. Deferred inflows of resources related to pension will be recognized in
pension expense in future years and is more fully described in Note 18.
The following is a summary of other deferred inflows of resources balances as
of June 30, 2017:
Entity-wide Basis Fund Basis
Governmental Funds
Governmental General
Activities Fund
Gains on refunding bond $ 120,800 $ -
Unavailable revenues 122,270 1,363,938
Total Deferred Inflows of
Resources $ 243,070 $ 1,363,938
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446
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 government-wide statement of net
position and governmental funds balance sheet in connection with receivables
for which revenues are not considered available to liquidate liabilities of the
current year.
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, Fund Balance Reporting
and Governmental Fund Type Definitions (GASB 54), which enhances the
usefulness of fund balance information by providing clearer fund balance
classifications that can be more consistently applied and by clarifying existing
governmental fund type definitions.
The following types of fund balances are reported at June 30, 2017:
1 ons endable - 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). A similar action is needed to modify or rescind a commitment.
Asaig_neo - 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 and surplus set aside to be
used in the subsequent year's budget voted by Town Meeting.
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447
Unassi n d - 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, 2017:
Nonmajor Total
General Governmental Governmental
Fund Funds Funds
Nonspendable
Permanent funds
Cemetery $ $ 2,505,498 $ 2,505,498
Other - 804,697 804,697
Total Nonexpendable 3,310,195 3,310,195
Restricted
For high school debt service 62,468 - 62,468
Federal grants - 75,539 75,539
State grants
Special Education(Circuit Breaker) - 1,062,770 1„062,770
State aid to libraries - 50,222 50,222
Other - 43,506 43,506
Revolving funds:
Extended day program 1,048,252 1,048,252
RISE preschool program 312,743 312,743
Special Education tuition - 193,967 193,967
All-day kindergarten program 510,395 510,395
Inspection permit _ 677,914 677,914
Recreation 307,117 307,117
Athletic activities 58,254 58,254
School lunch - 489,965 489,965
Other - 264,815 264,815
Receipts reserved for appropriation
Sale of real estate - 601,584 601,584
Affordable housing fund 264,403 264,403
Sale of cemetery lots - 219,249 219,249
Other - 10,547 10,547
Gifts and donations _ 1,086,436 1,086,436
Permanent funds
Healthcare - 4,915,204 4,915,204
Cemetery - 1,809,226 1,809,226
Other - 448,741 448,741
Town capital project funds
Library renovations ry 438,149 438,149
West street road improvements - 424,889 424,889
Other - 28,349 28,349
Total Restricted 62,468 15,342,236 15,404,704
(continued)
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448
(continued)
Nonmajor Total
General Governmental Governmental
Fund Funds Funds
Committed
Smart growth stabilization account 503.000 503.000
Total Committed 503,000 - 503,000
Assigned
For encumbrances
General government 284,744 - 284,744
Public safety 310,551 - 310,551
Education 1,295,501 - 1,295,501
Public works 660,738 - 660,738
Facilities 257,932 - 257,932
Culture and recreation 7,250 - 7,250
Employee benefits 38,623 - 38,623
For next year's expenditures 1,600,000 - 1,600,000
Total Assigned 4,455,339 4,455,339
Unassigned-operating fund 9,980,654 - 9,980,654
Unassigned-general stabilization 1,584,336 1,584,336
Unassigned-deficit balances - (1,626,250' (1,626.250)
g
Total Unassigned 11,564,990 (1,626,250) 9,938,740
Total Fund Balance $ 16„585,797 $ 17,026',181 $ 33,611;978
18. Redir Cntribl4lltctlre �nt t+
The Town follows the provisions of GASB Statement No. 68, Accounting and
Financial Reporting for Pensions— an amendment of GASB Statement No. 27
(GASB 68), with respect to the employees' retirement funds.
A. Plan l escri tion
Substantially all employees of the Town (except teachers and administrators
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
Reading Contributory Retirement Board does not have the authority to
amend benefit provisions. Additional information is disclosed in the System's
annual financial reports publicly available from the System located at
2 Haven Street, Unit 304, Reading, Massachusetts 01867.
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449
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.
If a participant was a member prior to February 2012, a retirement allow-
ance 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 par-
ticipant 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 IRefunds
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
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450
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 3.00°/x.
Partici ants 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 Pudic Employee Retirement Administration Commission
(PERAC).
The Town's contribution to the System for the year ended June 30, 2017
was $5,370,991 which was equal to its annual required contribution.
B. Somm� a of Si nificant ACCOUnting 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.
C. Pension Liabilities Pension E oense and Deferred Outflows of Resources
and Deferred Inflows of esources belated to l erasions
At June 30, 2017, the Town reported a liability of$44,468,467 for its propor-
tionate share of the net pension liability. The net pension liability was measured
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451
as of December 31, 2016, and the total pension liability used to calculate
the net pension liability was determined by an actuarial valuation as of
January 1, 2015 and rolled forward to December 31, 2016. The Town's
proportion of the net pension liability was based on a projection of the
Town's long-term share of contributions to the pension plan relative to the
projected contributions of all participating employers, actuarially determined.
At December 31, 2016, the Town's proportion was 99.13%.
For the year ended June 30, 2017, the Town recognized pension expense
of$7,708,849. In addition, the Town reported deferred outflows of resources
and deferred inflows of resources related to pensions from the following
sources:
Deferred Deferred
Outflows of Inflows of
Resources Resources
Net difference between projected and
actual investment earnings on pension
plan investments $ 5,231,548 $ M
Changes of assumptions 8,073,898
Changes in proportion and differences
between employer contributions and
proportionate share of contributions 449,907 (486,855)
Differences between expected and actual
experience - (2,431,069)
Total $ 13,755,353 $ (2,,917,924)
Amounts reported as deferred outflows of resources related to pensions
will be recognized in pension expense as follows:
Fiscal Year
2018 $ 3,278,866
2019 3,278,866
2020 3,236,924
2021 11,042 773
Total $ 10,837,429
D. ActuafialAssumptions
The total pension liability in the December 31, 2016 actuarial valuation was
determined using the following actuarial assumptions, applied to all periods
included in the measurement:
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452
Valuation date January 1, 2015 rolled forward to
December 31, 2016
Actuarial cost method Entry age normal cost method
Inflation Rate 3.00%Annually
Salary increases 4.25%-6.00%for Group 1 and
4.75%-7.00%for Group 4
Investment rate of return 7.65°/x, net of pension plan
investment expense, including
inflation
Post-retirement cost-of- 3.00%of first$12,000
living adjustment
Mortality Rates:
Pre-retirement and RP-2014 Mortality Table with full
beneficiary mortality generational mortality improvement
using Scale MP-2014
Morality for retired RP-2014 Mortality Table
members
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
lona-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 allocation and best estimates of
arithmetic real rates of return for each major class are summarized in the
following table.
Long-term
Target Expected
Asset Real Rate
Asset Class Allocation of Return
International equity 22.00% 8.75%
Domestic equity 18.00% 7.63%
Core fixed income 13.00% 3.76%
Value-added fixed income 10.00% 6.45%
Private equity 10.00% 9.50%
Real estate 10.00% 6.50%
Hedge funds 9.00% 6.50%
Timber/natural resources 4.00% 7.07%
Portfolio completion strategies 4.00% 6.18%
Total 100.00%
E. 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
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453
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 pro-
jected future benefit payments to current active and inactive plan members.
Therefore, the long-term expected rate of return on pension plan invest-
ments was applied to all periods of projected benefit payments to deter-
mine the total pension liability.
F. Sensitivitv of the Piro ortionate Share of the Net Pension Liability to Change
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 1-percentage-point lower (6.65%)
or 1-percentage-point higher (8.65%) than the current rate:
Current
Discount 1%
1% Decrease Rate Increase
(6.65%) (7.65%) (8.65%)
$ 63,351,637 $ 44,468,467 $ 28,394,892
G. Pension Pian Fiduciary Net Position
Detailed information about the pension plan's fiduciary net position is
available in the separately issued System financial report.
19. Massachusetts Teachers' Retirennen § ste (MTRS
A. Plaii DesgLJ] tion
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– an Amendment of GASB Statement No. 25 (GASB 67).
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 require-
ments 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
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454
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. Serief"ifs Provided
MTRS provides retirement, disability, survivor, and death benefits to mem-
bers and their beneficiaries. Massachusetts General Laws (MGL) establishes
uniform benefit and contribution requirements for all contributory PERS.
These requirements provide for superannuation retirement allowance ben-
efits 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 com-
pensation. Benefit payments are based upon a member's age, length of
creditable service, and group creditable service, and group classification.
The authority for amending these provisions rests with the Legislature.
Members become vested after ten years of creditable service. A superan-
nuation retirement allowance may be received upon the completion of
twenty years of creditable service or upon reaching the age of 55 with ten
years of service. Normal retirement for most employees occurs at age 65.
Most employees who joined the system after April 1, 2012 cannot retire
prior to age 60.
The MTRS' funding policies have been established by Chapter 32 of
the MGL. The Legislature has the authority to amend these policies.
The annuity portion of the MTRS retirement allowance is funded by
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:
MernberLhip Date 00 of Coni ens ti n
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%
Beginning July 1, 2001 11.00% (for teachers who were hired after
July 1, 2001 and accept the provisions of
Chapter 114 of the Acts of 2000)
1979 -present Additional 2.00%of salary in excess of
$30,000
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455
D. Actuar/at Assam tions
The total pension liability for the June 30, 2016 measurement date was
determined by an actuarial valuation as of January 1, 2016 rolled forward
to June 30, 2016. This valuation used the following assumptions:
• (a) 7.50% investment rate of return, (b) 3.50% interest rate credited to
the annuity savings fund and (c) 3.00% cost of living increase on the
first $13,000 per year.
• Salary increases are based on analyses of past experience but range
from 4.00% to 7.50% depending on length of service.
• Experience study is dated July 21, 2014 and encompasses the period
January 1, 2006 to December 31, 2011.
Mortality rates were as follows:
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, 2016 are summarized in the following table:
Target Long-Term Expected
Asset Class Allocation Real Rate of Return
Global equity 40.00% 6.90%
Core fixed income 13.00% 1.60%
Private equity 10.00% 8.70%
Real estate 10.00% 4.60%
Value added fixed income 10.00% 4.80%
Hedge funds 9.00% 4.00%
Portfolio completion strategies 4.00% 3.60%
Timber/natural resources 4.00% 5.40%
Total 100.00%
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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.
F. Sensitivit Acral sis
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 1-percentage-point lower or 1-percentage-point higher
than the current discount rate (amounts in thousands):
1% Decrease Current Discount 1% Increase
to (6.50%) Rate (7.50%) to (8.50%)
$ 27,464,000 $ 22,357,928 $ 18,022,000
G. Special l=Lundin Situaion
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— an Amendment of
GASB Statement No. 27(GASB 68) and the Commonwealth is a non-
employer contributing entity in MTRS. Since the employers do not con-
tribute directly to MTRS, there is no net pension liability to recognize for
each employer.
H. Town Pro crrticans
In fiscal year 2017 (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 $98,468,028 and
$10,044,384, respectively, based on a proportionate share of 0.440417%.
As required by GASB 68, the Town has recognized its portion of the collec-
tive pension expense as both a revenue and expenditure in the general
fund.
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457
20. Other Post-Employment Benefits OPE OAS 45
GASB Statement 45, Accounting and Financial Reporting by Employers for
Postemployment Benefits Other Than Pensions (GASB 45), requires govern-
ments to account for other post-employment benefits (OPEB), primarily health-
care, 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
Statement of Activities when a future retiree earns their post-employment bene-
fits, 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 Desgdptidn
In addition to providing the pension benefits described, 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, 2017, the actuarial valuation date, approxi-
mately 620 retirees and 581 active employees meet the eligibility require-
ments. The plan does not issue a separate financial report.
B. Benefits Provided
The Town provides post-employment medical, prescription drug, and life
insurance benefits to all eligible retirees and their surviving spouses. All
active employees who retire from the Town and meet the eligibility criteria
will be eligible to receive these benefits.
C. Fundina Polic
As of June 30, 2017, the actuarial valuation measurement date, 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 contrib-
utes 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 year 2017 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 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 ending
June 30, 2017, the amount actually contributed to the plan, and the
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458
change in the Town's net OPEB obligation based on an actuarial valuation
as of June 30, 2014,
Governmental Water Sewer Stormwater Electric
Funds Fund Fund Fund Fund Total
Annual Required Contribution(ARC) $ 5,278,147 $ 199,853 $ 56,261 $ 12,875 $ 932,387 $ 6,479,523
Interest on net OPEB obligation 1,316,525 21,977 8,097 1,479 - 1,348,078
Adjustment to ARC (1,113.227) 29,038 10,698) 1,954) - (1,154,,917)
Annual OPEB cost 5,481,445 192,792 53,660 12,400 932,387 6,672,684
Contributions made f3„353„195 153,420 53,996 (6,067) (194,319) (4 360,997)
Increase in net OPEB obligation 2,128,250 39,372 (336) 6,333 138,068 2,311,687
9beginning Y 107,962 19,722 - 17,974,
Net OPEB obligation- of year 17,553,664 2,33 029 377
9 Y $ 332„401 $ 107,626 $ 26,055 $ 138,068 $ 20,286,06'-4
Net OPEB obligation-end of year $ 19,681,914
The Town's annual OPEB cost, the percentage of annual OPEB cost
contributed to the plan, and the net OPEB obligation for fiscal year 2017
and the two preceding fiscal years were as follows:
Annual Percentage of
OPEB OPEB Net OPEB
Fiscal Year Ended Cost Cost Contributed Obligation
2017 $ 6,672,684 65.36% $ 20,286,064
2016 $ 5,920,789 57.21% $ 17,974,377
2015 $ 5,698,341 71.09% $ 16,331,636
E. Funded States q � rocess
The funded status of the plan as of June 30, 2017, the date of the most
recent actuarial valuation was as follows:
Actuarial accrued liability (AAL) $ 75,292,954
Actuarial value of plan assets (6,478,298)
Unfunded actuarial accrued liability (UAAL) $ 68„814„656
Funded ratio (actuarial value of plan assets/AAL) 8.60%
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
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459
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 andss� tions
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.
The following actuarial assumptions were applied to all periods included in
the measurement, unless otherwise specified:
Valuation date June 30,2017
Actuarial cost method Entry age normal-level percentage of payroll
Amortization method Payments increasing at 2.50%
Inflation 2.50%
Salary increases 6.00%decreasing to 4.25%based on service for
Group 1 and Group 2
7.50%decreasing to 4.00%based on service for
Teachers
7.00%decreasing to 4.75%based on service for
Group 4
Discount rate 7.50%
Investment rate of return 7.50%
Remaining amortization 30-year closed for General Government and 14-year
period closed for all other departments
Asset valuation method Market value
Medical/Prescription drug 7.00%decreasing by 0.50%for five years to an
trend rate ultimate level of 4.50% per year
21, Other Post-EmMoyment Benefits — OPEB (GASB 74)
In fiscal year 2011 the Town established an OPEB Trust fund to provide
funding for future employee health care costs.
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460
Investments
The OPEB Trust fund does not have a formal investment policy. At June 30,
2017, cash and short-term investments consisted of amounts held in money
market and certificates of deposit. Concentration and rate of return informa-
tion was not available.
Net OPEB Liability
The components of the net OPEB liability were as follows:
Total OPEB liability $ 75,292,954
Plan fiduciary net position (6,478,298)
Net OPEB liability $ 68,814,656
Plan fiduciary net position as a
percentage of the total OPEB liability 8.60%
Actuarial assumptions. The total OPEB liability was determined using the
following actuarial assumptions, applied to all periods included in the measure-
ment, unless otherwise specified:
Valuation date June 30, 2017
Actuarial cost method Entry age normal-level percentage of payroll
Inflation 2.50%
Salary increases 6.00% decreasing to 4.25% based on service for Group 1 and
Group 2
7.50% decreasing to 4.00% based on service for Teachers
7.00% decreasing to 4.75% based on service for Group 4
Discount rate 7.50%
Investment rate of return 7.50%
Health care trend rates:
Medical/Prescription Drug 7.00%decreasing by 0.50%for five years to an ultimate level of
4.50% per year
Mortality tables:
Pre-retirement(non- RP-2014 Healthy Employee Table projected generationally with
teachers) Scale MP2014
Healthy (non-teachers) RP-2014 Healthy Annuitant Table projected generationally with
Disabled (non-teachers) RP-2014 Disabled Retiree Table projected generationally with
Pre-retirement(teachers) RP-2014 White Collar Employee Mortality Table projected
generationally with Scale MP-2016
Healthy(teachers) RP-2014 White Collar Healthy Annuitant Mortality Table
projected generationally with Scale MP-2016
Disabled (teachers) RP-2014 Healthy Annuitant Mortality Table set forward 4 years
projected generationally with Scale BB from 2014
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461
The long-term expected rate of return on OPEB plan investments was deter-
mined using a building-block method in which best-estimate ranges of expected
future real rates of return (expected returns, net of investment expense and
inflation) are developed for each major asset class. These ranges are com-
bined to produce the long-term expected rate of return by weighting the
expected future real rates of return by the target asset allocation percentage
and by adding expected inflation. Best estimates of arithmetic real rates of
return for each major asset class included in the target asset allocation as of
June 30, 2017 are summarized in the following table:
Target Asset Long-term Expected
Asset Class Allocation Real Rate of Return
Domestic equity 18.00% 6.44%
International developed markets equity 16.00% 7.40%
Hedge fund, GTAA, risk parity 13.00% 3.75%
Core fixed income 12.00% 2.02%
Private equity 11.00% 10.47%
High-yield fixed income 10.00% 4.43%
Real estate 10.00% 5.00%
International emerging markets equity 6.00% 9.42%
Commodities 4.00% 4.43%
Total 100.00%
Discount rate. The discount rate used to measure the total OPEB liability was
7.50%. The projection of cash flows used to determine the discount rate
assumed that contributions from plan member will be made at the current
contribution rate. Based on those assumptions, the OPEB plan fiduciary net
position was projected to be available to make all projected future benefit
payments of current plan members.
Sensitivity of the net OPEB liability to changes in the discount rate. The follow-
ing presents the net OPEB liability as well as what the net OPEB liability would
be if it were calculated using a discount rate that is 1-percentage-point lower
(6.50%) or 1-percentage-point higher (8.50%) than the current discount rate:
1% Discount 1%
Decrease Rate Increase
(6.50%) (7.50%) 8.50'✓'
$ 78,147,496 $ 68,814,656 $ 61,050,477
Sensitivity of the net OPER liability to changes in the healthcare cost trend rates.
The following presents the net OPEB liability as well as what the net OPEB
liability would be if it were calculated using healthcare cost trend rates that are
1-percentage-point lower (6.00% decreasing to 3.50%) or 1-percentage-point
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462
higher (8.00% decreasing to 5.50%) than the current healthcare cost trend
rates:
Current
Healthcare Cost
1% Decrease Trend Rates 1% Increase
(6.00% (7.00% (8.00%
decreasing to decreasing to decreasing to
3.50%) 4.50%) 5.50%)
$ 60,342,347 $ 68,814,656 $ 77,996,332
22. Commitr� nt� nd Oa��ti�r �
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.
23. Beghip,ing Net Position Restatement and Reclassification
In fiscal year 2017 the Governmental Accounting Standards Board (GASB)
released Implementation Guide No. 2017-1. The implementation guide states
that a municipality cannot reduce their net pension liability by the value of a
separate pension trust. Furthermore, the implementation guide states that the
pension trust should be presented as part of the proprietary Statement of Net
Position and not a separate fiduciary fund. As a result of this implementation
guide, the beginning (July 1, 2015) net position of the Department's proprietary
and fiduciary funds have been restated and reclassified as follows:
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Government-Wide Financial Statements
Business-Type Activities
As previously reported $ 132,261,583
Reclassification to Business-Type Activities 5,610,105
GASB 68 Restatement (51529,183)
As restated $ 132,342,505
Fund Basis Financial Statements
Business-Type Activities Fiduciary Funds
Electric Division Fund Pension Trust Fund
As previously reported $ 104,814,487 $ 5,610,105
Reclassification to Business-Type Activities 5,610,105 (5,610,105)
GASB 68 Restatement (5,529,183) -
As restated $ 104,895,409 $ -
24. Implementation entation f New GAW Standard
The Governmental Accounting Standards Board (GASB) has issued Statement
No. 75, Accounting and Financial Reporting for Postemployment Benefits
Other than Pensions, replacing requirements of Statements No. 45 and 57
(GASB 75), effective for the Town beginning with its year ending June 30,
2018. This Statement establishes standards for recognizing and measuring
liabilities, deferred outflows of resources, deferred inflows of resources, and
expense/expenditures. In addition, this Statement details the recognition and
disclosure requirements for employers with payables to defined benefit OPEB
plans that are administered through trusts that meet the specific criteria and
for employers whose employees are provided with defined contribution OPEB.
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464
Town of Reading, Massachusetts Municipal Light Department
Notes to Financial Statements
1
gummant of n f�cant Ac r n�tir Po �c e�
The significant accounting policies of the Town of Reading Municipal Light Depart-
ment (the Department) (an enterprise fund of the Town of Reading, Massachu-
setts) are as follows:
A. Business Activit -The Department purchases electricity for distribution to
more than 25,000 customers within the towns of Reading, North Reading,
Wilmington, and Lynnfield.
B. Re ulatior and Basis of Accourtin - 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 author-
ity 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.
The proprietary 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.
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 rev-
enues of the Department's proprietary fund are charges to customers for
electric sales and services. Operating expenses for the Department's pro-
prietary fund include the cost of sales and services, administrative expenses
and depreciation on capital assets.All revenues and expenses not meeting
this definition are reported as non-operating revenues and expenses.
C. Concentrations -The Department operates within the electric utility industry.
In 1998, the Commonwealth of Massachusetts enacted energy deregulation
legislation that restructured the Commonwealth's electricity industry to foster
competition and promote reduced electric rates. Energy deregulation created a
separation between the supply and delivery portions of electricity service
and enabled consumers to purchase their energy from a retail supplier of
their choice. Municipal utilities are not currently subject to this legislation.
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465
D. Retirement Trust -The Reading Municipal Light Department Employees'
Retirement Trust(the "Pension Trust") was established by the Reading Munic-
ipal 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 con-
tribution to the Town of Reading Contributory Retirement System (the System),
a cost-sharing, multi-employer public employee retirement system.
In accordance with Government Accounting Standards Board Statement 68
(GASB 68), the Retirement Trust was consolidated into the Business-Type
Proprietary Fund and is reflected in net position as "restricted for pension trust."
E. Other Post-Ern to ment 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 deter-
mined 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 guar-
anteed by the U.S. Government or agencies that have a maturity of one
year or less from the date of purchase and repurchase agreements guaran-
teed 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.
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466
I. Inventory - Inventory consists of parts and accessories purchased for use
in the utility business for construction, operation, and maintenance purposes
and is stated at average cost. Meters and transformers are capitalized
when purchased.
J. Ca ital 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 Com ensated Absences - Employee vacation leave is vested annu-
ally 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 accumulate according to
union and Department contracts and policy, and is paid upon normal termi-
nation at the current rate of pay. The Department's policy is to recognize
vacation costs at the time payments are made. The Department records
accumulated, unused, vested sick pay as a liability. The amount recorded is
the amount to be paid upon normal termination at the current rate of pay.
L. Lona-Term Obligations -The proprietary fund financial statements report long-
term debt and other long-term obligations as liabilities in the Statements of
Net Position.
M. Use of Estimates -The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures for contingent assets and liabilities at the date of
the financial statements, and the reported amounts of the revenues and
expenses during the fiscal year.Actual results could vary from estimates
that were used.
N. Fate 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
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467
of plant. The Department's audited financial statements are prepared in
accordance with auditing standards generally accepted in the United States
of America.To determine the net income subject to the rate of return limita-
tions, the Department performs the following calculation. Using the net income
per the audited financial statements, the return on investment 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 determine 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 mul-
tiplied 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.
2. Cash and Investments
Total cash and investments as of June 30, 2017 are classified in the accom-
panying financial statements as follows:
Proprietary Fund:
Unrestricted cash and short-term investments $ 15,522,815
Restricted cash and short-term investments 26,482,494
Restricted investments 2,659,813
Fiduciary Funds:
Cash and short-term investments-OPEB Trust 2.857,150
Total cash and investments $ 47,522,272
Total cash and investments at June 30, 2017 consist of the following:
Cash on hand $ 3,500
Deposits with financial institutions 47,518,772
Total cash and investments $ 47,522,272
Disclosures Relating to Interest Rate Risk
Interest rate risk is the risk that the fair value of an investment will be adversely
affected by changes in market interest rates. Generally, the longer the maturity
of an investment, the greater the sensitivity of its fair value to changes in market
interest rates. The Department manages its exposure to interest rate risk by
purchasing a combination of shorter term and longer-term investments and by
timing cash flows from maturities so that a portion of the portfolio is maturing or
coming close to maturity evenly over time as necessary to provide the cash
flow and liquidity needed for operations.
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468
As of June 30, 2017, 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, 2017, the Department and Pension Trust held investments in
domestic and foreign fixed income bonds with varying maturity dates as follows:
Proprietary
Fund
Restricted Maturity
Investments Date
Corporate bonds
AT&T Inc - $ 433,147 12/01/22
General Electric Cap Corp 429,272 01/09/23
Wells Fargo & Co 422,960 08/15/23
Rabobank Nederland Bank 522,140 11/09/22
Teva Pharmaceut Fin BV 427,700 12/18/22
BNP Paribas 424.594 03/03/23
Total $ 2,659,813
Disclosures Relating to Credit Risk
Generally, credit risk is the risk that the issuer of an investment will not fulfill
its obligation to the holder of the investment. This is measured by the assign-
ing of a rating by a nationally recognized statistical rating organization.As of
June 30, 2017, the Department and Pension Trust held investments in domestic
and foreign fixed income bonds with varying ratings as follows:
Proprietary
Fund
Restricted Moody's
Investment Type Investments Rating
Corporate bonds:
AT&T Inc $ 433,147 BAA1
General Electric Cap Corp 429,272 Al
Wells Fargo & Co 422,960 A3
Rabobank Nederland Bank 522,140 A3
Teva Pharmaceut Fin BV 427,700 BAA2
BNP Paribas 424,594 Al
Total $ 2,659,813
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Concentration of Credit Risk
The Department follows the Town of Reading's investment policy, which does
not limit the amount that can be invested in any one issuer beyond that stipu-
lated by Massachusetts General Laws. At June 30, 2017, 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
approximately 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 invest-
ments 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.
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, 2017, cannot be reasonable determined.
As of June 30, 2017, none of the Department or Pension Trust investments were
exposed to custodial credit risk because the related securities are registered
in the Department's name.
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 unob-
servable inputs.
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470
Fair Value Measurements Usina:
Quoted prices
in active Significant Significant
markets for observable unobservable
identical assets inputs inputs
Descritton (Level 1) (Level 2) (Level 3)
Investments by fair value level:
Debt securities
Corporate bonds $ 2,659,813 $ 2,659,813 $ - $ -
Total $ 2,659,813
3. Restricted Cash and Investments
The Department's proprietary fund restricted cash and investment balances
represent the following reserves:
6/30/17 6/30/16
Cash Investments Cash Investments
Depreciation fund $ 2,451,661 $ - $ 4,494,953 $ -
Construction fund 2,500,000 - 1,500,000 -
Deferred fuel reserve 5,841,567 - 5,116,875 -
Deferred energy
conservation reserve 602,131 - 717,418 -
Rate stabilization 6,883,542 _ 6,822,339 -
Reserve for uncollectible
accounts 200,000 - 200,000 -
Sick leave benefits 1,820,228 1,329,907 1,912,146 1,345,663
Hazardous waste fund 750,000 150,000
Customer deposits 1,080,257 - 901,905 -
Pension trust 4,353,108 1,329,906 4,264,442 1,345,663
Total $ 26,482,494 $ 2,659,813 $ 26,080,078 $ 2,691,326
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 enerav 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.
- Date stabilization -This represents amounts set aside to help stabilize
cost increases resulting from fluctuations in purchase power costs.
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- 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 actu-
arially 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 de osits - Customer deposits that are held in escrow.
Pension trust-The principal instrument of a plan established by the Munic-
ipal 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.
4. Accounts Receivable
Accounts receivable consists of the following at June 30, 2017:
Customer Accounts:
Billed $ 2,488,551
Less allowances:
Uncollectible accounts (200,000)
Sales discounts (98,570)
Total billed 2,189,981
Unbilled, net 6,118,951
Total customer accounts 8,308,932
Other Accounts:
Merchandise sales 249,384
MMWEC surplus 147,193
Intergovernmental grants 43,056
Liens and other 13,280
Total other accounts 452,913
Total net receivables $ 8,761,845
5. ��°e sig �x eases
Prepaid expenses consist of the following:
Insurance and other $ 298,971
Purchase power (201,947)
NYPA prepayment fund 307,573
WC Fuel-Watson 276„106
Total $ 680,703
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6. Inventory
Inventory comprises supplies and materials at June 30, 2017, and is valued
using the average cost method.
7. Investment in Associated CoManiea
Under agreements with the New England Hydro-Transmission Electric Company,
Inc. (NEH) and the New England Hydro-Transmission Corporation (NHH), the
Department has made the following advances to fund its equity requirements
for the Hydro-Quebec Phase II interconnection. The Department is carrying its
investment at fair value, 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, 2017:
New England Hydro-Transmission (NEH & NHH) $ 212,428
8. Ca ital Assets
The following is a summary of fiscal year 2017 activity in capital assets (in
thousands):
Beginning Ending
Balance Increases Decreases Balance
Business-Type Activities:
Capital assets, being depreciated:
Structures and improvements $ 16,146 $ 3,268 $ - $ 19,414
Equipment and furnishings 32,511 1,322 (241) 33,592
Infrastructure 88,053 3,465 (991) 90,527
Total capital assets, being depreciated 136,710 8,055 (1,232) 143,533
Less accumulated depreciation for:
Structures and improvements (8,949) (465) - (9,414)
Equipment and furnishings (20,856) (905) 241 (21,520)
Infrastructure (35,969) (2,731) 946 (37,754)
Total accumulated depreciation (65,774) (4,101) 1,187 (68,688)
Total capital assets, being depreciated, net 70,936 3,954 (45) 74,845
Capital assets, not being depreciated.-
Land 1,266 - 1,266
Total capital assets, not being depreciated 1,266 - 1,266
Capital assets, net $ 72,202 $ 3,954 $ (45) $ 76,111
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9. Deferred Outflows of Resources
Deferred outflows of resources represent the Department's consumption of net
position that is applicable to future reporting periods. Deferred outflows of resources
have a positive effect on net position, similar to assets. Deferred outflows of
resources related to pensions, in accordance with GASB Statement No. 68,
Accounting and Financial Reporting for Pensions, are more fully discussed in
Note 16.
10. Accounts Pavable
Accounts payable represent fiscal 2017 expenses that were paid after June 30,
2017.
11. Accrued Liabilities
Accrued liabilities consist of the following at June 30, 2017:
Accrued payroll $ 143,561
Accrued sales tax 219,158
Other 203,065
Total $ 565,784
12. Customer Deposits
This balance represents deposits received from customers that are held in escrow.
13. 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.
14. ,Accrued m to ee Co ensated 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.
15. Deferred Inflows of Resources
Deferred inflows of resources are the acquisition of net position by the Depart-
ment that are applicable to future reporting periods. Deferred inflows of resources
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have a negative effect on net position, similar to liabilities. The Department
reports two items as deferred inflows of resources: one which is attributable to
changes in the net pension liability, and the other which arises from the current
financial resources measurement focus and the modified accrual basis of
accounting in governmental funds. Deferred inflows of resources related to
pension will be recognized in pension expense in future years and is more fully
described in Note 16.
16. Readi,ng Con tri bgt2tiirgnt§ stern
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 Qescdptrffl
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 administrative offices located at
2 Haven Street, Unit 304, Reading, Massachusetts 01867.
Participant Retirement Benefits
The System provides for retirement allowance benefits up to a maximum
of 80% of a member's highest three-year average annual rate of regular
compensation for those hired prior to April 2, 2012 and the highest five-
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 retire-
ment, 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. Benefit payments are based upon a
member's age, length of creditable service, level of compensation and group
classification.
If a participant was a member prior to February 2012, a retirement allow-
ance may be received at any age, upon attaining 20 years of service. The
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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 par-
ticipant 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
Department 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 retirement
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
service or involuntarily withdrawing, receive 100% of the regular interest
that has accrued on those accumulated total deductions. Members voluntarily
withdrawing with less than 10 years of service get credited interest each
year at a rate of 3%.
Iartici ants Contributions
Participants contribute a set percentage of their gross regular compensation
annually. Employee contribution percentages are specified in Chapter 32 of
the Massachusetts General Laws. The employee's individual contribution
percentage is determined by their date of entry into the system. In addition,
all employees hired after January 1, 1979 contribute an additional 2% on all
gross regular compensation over the rate of$30,000 per year. The percent-
ages are as follows:
Before January 1, 1975 5%
January 1, 1975 - December 31, 1983 7%
January 1, 1984 -June 30, 1996 8%
Beginning July 1, 1996 9%
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For those members entering a Massachusetts System on or after April 2,
2012 in Group 1, the contribution rate will be reduced to 6% when at least
30 years of creditable service has been attained.
Em-lover Contributions
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,
2017 was $1,579,345, which was equal to its annual required contribution,
B. Summaiv o/Si nificant Accountin 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.
C. Pension Liabilities Pension Exoense and Deferred Outflows of Pesoumes
and Deferred Inflows of Resources Related to Pensions
At June 30, 2017, the Department reported a liability of$13,076,538 for its
proportionate share of the System's net pension liability. The net pension
liability was measured as of December 31, 2016, and the total pension lia-
bility used to calculate the net pension liability was determined by an actuarial
valuation as of January 1, 2015 rolled forward to December 31, 2016. The
Department's proportion of the net pension liability was based on an actuari-
ally determined projection of the Department's long-term share of contribu-
tions to the pension plan relative to the projected contributions of all par-
ticipating employers. At December 31, 2016, the Department's proportion
was 29.15%.
Town of Peadir7 /Wunici al Li lit De atft7rent E'rrr to ees'I etirernent Trust
feenion "rust`" : The Department has established an irrevocable trust for
the purpose of currently funding its annual required contribution to the Town
of Reading Contributory Retirement System (RCRS).Annual contributions
to the trust are actuarially determined to be the net normal cost for funding
the Department's liability for pension benefits for covered employees, and
both the principal and income of the trust is restricted for the exclusive
benefit of Department employees and their beneficiaries. This Pension Trust
is included in the proprietary fund statements in the Department's basic finan-
cial statements.
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As noted in the first paragraph of this section, the Department's proportion-
ate share of the RCRS net pension liability was determined by an actuarial
valuation as of January 1, 2015 rolled forward to December 31, 2016. How-
ever, the actuarial valuation does not take into account the fiduciary net
position of the Department's Pension Trust at December 31, 2016 (the meas-
urement date).Accordingly, the following reconciliation is provided:
For the year ended June 30, 2017, the Department recognized pension
expense of$2,313,974. In addition, the Department reported deferred out-
flows of resources and deferred inflows of resources related to pensions
from the following sources:
Deferred Deferred
Outflows of Inflows of
Resources Resources
Net differences between expected and actual
experience $ - $ 714,888
Changes of assumptions 2,374,236 -
Net difference between projected and actual
investment earnings on pension plan 1,538,405
Changes in proportion and differences
between employer contributions and
proportionate share of contributions 222,437 -
Total $ 4,135,078 $ 714,888
Amounts reported as deferred outflows of resources and deferred inflows
of resources related to pensions will be recognized in pension expense as
follows:
Year ended June 30:
2018 $ 1,028,288
2019 1,028,288
2020 1,015,954
2021 347,660
Total $ 3,420,190
D. Actuarial Assunnotions
The total pension liability was determined by an actuarial valuation as of
January 1, 2015, rolled forward to the measurement date of December 31,
2016 using the following actuarial assumptions, applied to all periods included
in the measurement:
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Valuation Date January 1, 2015
Actuarial Cost Method Entry Age Normal Cost Method
Actuarial Assumptions:
Investment rate of return 7.65%, net of pension plan investment expense,
Projected salary increases 4.25%-6.00%for Group 1 and 4.75%-7.00%for
Group 4
Inflation rate 3.00%Annually
Post-retirement cost-of-living 3.00%of first$12,000
adjustment
Mortality rates were based on the RP-2014 Mortality Table with full genera-
tional mortality improvement using Scale MP-2014. For disabled lives, the mor-
tality rates were based on the RP-2014 Disabled Mortality Table.
The long-term expected rate of return on pension plan investments was
determined using a building-block method in which best-estimate ranges of
expected future real rates of return (expected returns, net of pension plan
investment expense and inflation) are developed for each major asset class.
These ranges are combined to produce the long-term expected rate of return
by weighting the expected future real rates of return by the target asset
allocation percentage and by adding expected inflation. Best estimates of
arithmetic real rates of return for each major asset class included in the
pension plan's target asset allocation as of December 31, 2015 are summa-
rized in the following table:
Long-term
Target Expected
Asset Rates
Asset Class Allocation of Return
International Equity 22.00% 8.75%
Domestic Equity 18.00% 7.63%
Core Fixed Income 13.00% 3.76%
Value-Added Fixed Income 10.00% 6.45%
Private Equity 10.00% 9.50%
Real estate 10.00% 6.50%
Hedge funds 9.00% 6.50%
Timber/Natural Resources 4.00% 7.07%
Portfolio Completion Strategies 4.00% 6.18%
Total 100.00%
E. 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
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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. There-
fore, the long-term expected rate of return on pension plan investments was
applied to all periods of projected benefit payments to determine the total
pension liability.
F. Sensitivity of the Rra or'tionate Share of the l et ensirara +is rlit to Clean es
in the Discount Rate
The following table presents the Department'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:
Current
1% Discount 1%
Decrease Rate Increase
(6.65%) (7.65%) (8.65%)
$ 18,629,075 $ 13,076,538 $ 8,349,754
G. Pension PlanFidyciarLNq F'ositionF"osition
Detailed information about the pension plan's fiduciary net position is avail-
able in the separately issued System financial report.
H. Town of Reading Municipal l..r" ht D artrnent Idea to ees Retirement Thist
"lerasirn Trust""
The Department has established an irrevocable trust for the purpose of cur-
rently funding its annual required contribution to the Town of Reading Con-
tributory Retirement System (RCRS).Annual contributions to the trust are
actuarially determined to be the net normal cost for funding the Department's
liability for pension benefits for covered employees, and both the principal
and income of the trust is restricted for the exclusive benefit of Department
employees and their beneficiaries.This Pension Trust is included in the
proprietary fund statements in the Department's basic financial statements.
As noted in the first paragraph of this section, the Department's proportion-
ate share of the RCRS net pension liability was determined by an actuarial
valuation as of January 1, 2015 rolled forward to December 31, 2016. How-
ever, the actuarial valuation does not take into account the fiduciary net
position of the Department's Pension Trust at December 31, 2016 (the meas-
urement date).As of December 31, 2016, the value of the pension trust was
$4,016,746.
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17. Other Post-Employment Benefits — OPgg_Lq&SB 451
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 contri-
bution 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 Descdtion
In addition to providing the pension benefits described in Note 18, the Depart-
ment provides post-employment health and life insurance benefits to retired
employees through the Town of Reading's participation in the Massachusetts
Interlocal Insurance Association (MITA) Health Benefits Trust. Benefits, ben-
efit levels, employee contributions and employer contributions are governed
by Chapter 32 of the Massachusetts General Laws.As of June 30, 2017, the
actuarial valuation measurement date, approximately 91 retirees and 58 active
employees meet the eligibility requirements. The plan does not issue a sep-
arate financial report.
B. Benefits Provided
The Department provides post-employment medical, prescription drug, and
life insurance benefits to all eligible retirees and their surviving spouses. All
active employees who retire from the Department and meet the appropriate
criteria are eligible to receive these benefits.
C. Funding Polio!
As of the June 30, 2017, 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 OPER Crests ,and Net OPEB Obligation
The Department's fiscal 2017 annual OPEB expense is calculated based on
the annual required contribution of the employer (ARC), an amount actuari-
ally 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 remaining period of sixteen years.
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The following table shows the components of the Department's annual OPEB
cost for the year ending June 30, 2017, the amount actually contributed to
the plan, and the change in the Department's net OPEB obligation based
on an actuarial valuation as of June 30, 2017.
Annual Required Contribution (ARC) $ 932,387
Annual OPEB cost 932,387
Projected benefit payments (485,573)
Increase in net OPEB obligation 446,814
Net OPEB obligation-beginning of year -
Contributions to OPEB Trust (308,746)
Net OPEB obligation-end of year $ 138,068
See Part Efor additional information
The Department's annual OPEB cost, the percentage of annual OPEB
cost contributed to the plan, and the net OPEB obligation for fiscal year 2017
and the two preceding fiscal years were as follows:
Annual Percentage of
OPEB OPEB Net OPEB
Fiscal Year Ended Cost Cost Contributed Obligation
2017 $932,387 85.2% $ 138,068
2016 $782,939 100.0% $ -
2015 $758,525 100.0% $
2014 $768,378 100.0% $ -
2013 $604,987 100.0% $ -
E. Funded Stales qoaLFundinQ Pro cess
The funded status of the plan as of June 30, 2017, the most recent actu-
arial valuation measurement date was as follows:
Actuarial accrued liability(AAL) $ 10,015,425
Actuarial value of plan assets 2,857,072
Unfunded actuarial accrued liability(UAAL) $ 7,158,353
Funded ratio (actuarial value of plan assets/AAL) 28.53%
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
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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.
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 expec-
tations and new estimates are made about the future. The schedule of fund-
ing 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.
F. Actuarial Methods and Assam pl°°ions
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 actu-
arial accrued liabilities and the actuarial value of assets, consistent with the
long-term perspective of the calculations.
In the June 30, 2017 actuarial valuation, the Projected Unit Credit actuarial
cost method was used. The Department's actuarial value of plan assets was
$2,857,072. The actuarial assumptions included a 7.50% investment rate
of return and an initial annual health care cost trend rate of 7.0% which
decreases by 0.5% for five years to an ultimate level of 4.5% per year. The
amortization costs for the initial UAAL is a level percentage of payroll amor-
tization, with amortization payments increasing at 2.5% per year for a remain-
ing period of 14 years.
18. Other Post-E,mployment Benefits (GASB
In 2010 the Government established an OPEB Trust fund to provide funding
for future employee health care costs.
Cash and Short-term Investments
At June 30, 2017, cash and short-term investments consisted of amounts held
in money market and certificates of deposit. Concentration and rate of return infor-
mation was not available.
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Net OPEB Liabil
The components of the net OPEB liability were as follows:
Total OPEB liability $ 10,015,425
Plan fiduciary net position 2,857,072
Net OPEB liability ' $ 7,158,353
Plan fiduciary net position as a
percentage of the total OPEB liability 28.5%
Actuarial assumptions. The total OPEB liability was determined by an actuarial
valuation as of June 30, 2017, using the following actuarial assumptions,
applied to all periods included in the measurement, unless otherwise specified:
Inflation 2.50%
Salary increases 6.00% decreasing to 4.25% for Groups 1 & 2
7.00% decreasing to 4.75% for Group 4
Investment rate of return 7.50% percent, net of OPEB plan investment expense,
including inflation
Mortality rates were based on:
• Pre-Retirement— RP-2014 Healthy Employee Table projected genera-
tionally with Scale MP2014.
• Healthy— RP-2014 Healthy Annuitant Table projected generationally
with Scale MP2014.
• Disabled— RP-2014 Disabled Retiree Table projected generationally with
Scale MP2014.
The actuarial assumptions used in the June 30, 2017 valuation were the same
used during the January 1, 2015 actuarial valuation of the Reading Contributory
Retirement System.
The long-term expected rate of return on OPEB plan investments was deter-
mined using a building-block method in which best-estimate ranges of expected
future real rates of return (expected returns, net of investment expense and
inflation) are developed for each major asset class. These ranges are combined
to produce the long-term expected rate of return by weighting the expected future
real rates of return by the target asset allocation percentage and by adding
expected inflation. Best estimates of arithmetic real rates of return for each major
asset class included in the target asset allocation as of June 30, 2017 are sum-
marized in the following table:
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Target Asset Long-term Expected
Asset Class Allocation Real Rate of Return
Domestic equity 18.00% 6.44%
International developed markets equity 16.00% 7.40%
International emerging markets equity 6.00% 9.42%
Core fixed income 12.00% 2.02%
High-yield fixed income 10.00% 4.43%
Real estate 10.00% 5.00%
Commodities 4.00% 4.43%
Hedge Fund, GTAA, Risk parity 13.00% 3.75%
Private equity 11.00% 10.47%
Total 100.00%
Discount rate. The discount rate used to measure the total OPEB liability was
7.50%. The projection of cash flows used to determine the discount rate assumed
that contributions from plan member will be made at the current contribution
rate. Based on those assumptions, the OPEB plan fiduciary net position was
not projected to be available to make all projected future benefit payments of
current plan members.
Sensitivity of the net OPEB liability to changes in the discount rate. The follow-
ing presents the net OPEB liability as well as what the net OPEB liability would
be if it were calculated using a discount rate that is 1-percentage-point lower
(6.50%) or 1-percentage-point higher (8.50%) than the current discount rate:
1% Discount 1%
Decrease Rate Increase
(6.50%) (7.50%) (8.50%)
$ 7,814,750 $ 7,158,353 $ 6,105,048
Sensitivity of the net OPEB liability to changes in the healthcare cost trend rates.
The following presents the net OPEB liability as well as what the net OPEB
liability would be if it were calculated using healthcare cost trend rates that are
1-percentage-point lower (7.00% decreasing to 6.00%) or 1-percentage-point
higher(7.00% increasing to 8.00%)than the current healthcare cost trend rates:
1% Decrease Healthcare 1% Increase
(7.00% Cost Trend (7.00%
decreasing to Rates increasing to
6.00%) (7.00%) 8.00%
$ 6,034,235 $ 7,158,353 $ 7,799,633
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19. Participation in Massachusetts 'ur i c2q ho!e§21 !+ k!
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 facili-
ties 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 correspondingly 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.
85
486
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 unconditionally
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, 2017 principal payment, total capital expenditures amounted to
$1,704,467,000, of which $126,846,000 represents the amount associated with
the Department's Project Capability. MMWEC's debt outstanding for the
Projects from Power Supply System Revenue Bonds totals $10,680,000, of
which $182,000 is associated with the Department's share of Project Capability.
After the July 1, 2017 principal payment, MMWEC's total future debt service
requirement on outstanding bonds issued for the Projects is $11,540,000, of
which $190,000 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, 2017 and estimated for future years is shown below.
Annual Costs
For years ending June 30, 2018 $ 190,000
Total $ 190,000
86
487
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 $9,548,000 and $11,894,000 for the years ended June 30, 2017
and 2016, respectively.
20. RenewableineM 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 generators
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 2017 REC activity and bal-
ances is as follows:
REC Sales During Fiscal 2017
Unit
Certificates Price Amount
CT Class 1 9,173 $ 16.00 $ 146,768
MA Class 1 2,770 $ 9.50 26,315
MA Class II 3,827 $ 24.00 91,848
MA/RVCT Class 1 14,934 $ 9.50 141,873
CT Class 1 3,155 $ 9.50 29,973
Total 33,859 $ 436,777 (1)
(1) Sale proceeds netted against fiscal year 2017 purchased power fuel charge
87
488
REC Holdings at June 30. 2017
Banked Projected Total Estimated
Certificates Certificates Certificates Value
MA Class I& II 8,655 8,580 17,235 $ 275,380
CT Class 1 2,218 3,356 3,356 89,184
RI Class 1 8 20 20 828
Total 10,881 11,956 20,611 $ 365,392
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 Depart-
ment'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 disposition of
RECs, the estimated fair value of the Department's REC holdings at June 30,
2017 are not recognized as an asset on the proprietary fund Statements of Net
Position.
21. Leases
Related Part Transaction , Prg ert 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 agree-
ment commenced in December 2000 and was extended by various amend-
ments through November 30, 2017. 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:
2018 $ 4,084
Total $ 4,084
O-eratin 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:
2018 $ 147,902
Total $ 147,902
88
489
TOWN OF READING,MASSACHUSETTS
SCHEDULE OF PROPORTIONATE SHARE
OF THE NET PENSION LIABILITY(GASB 68)
REQUIRED SUPPLEMENTARY INFORMATION
JUNE 30,2017
(Unaudited)
ReadinaCorieffi tirervm„_mentSystem
Proportion Proportionate
of the Share of the Proportionate Share of the Plan Fiduciary Net Position
Fiscal Measurement Net Pension Net Pension Covered Net Pension Liability as a Percentage of the Total
Year Date ii idi LaabIW Payroll0t nloi:u ov N PaYr i Mika Lai ay
June 30,2017 December 31,2016 99.130% $ 44,468,467 $ 23,499,057 189.24% 73.43%
June 30,2016 December 31,2015 99.275% $ 41,172,508 $ 22,534,225 162.71% 72.17%
June 30,2015 December 31,2014 99.275% $ 25,805,701 $ 19,399,338 143.26% 79.89%
Massachusetts Teachers'Retirement System
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 Measurement Net Pension Net Pension Liability Associated with the Covered Percentage of the Total
Year Date L1.90-Aly MR"1111 with the Town Town• Payroll Cover a6 Pavr 9 qj§Mon LlraNRy.
June 30,2017 June 30,2016 0.440417% $ $ 98,468,028 $ 98,468,028 $ 28,969,111 52.73%
June 30,2016 June 30,2015 0.439137% $ $ 69,977,515 $ 69,977,515 $ 27,836,403 55.38%
June 30,2015 June 30,2014 0.425154% $ $ 67,583,938 $ 67,583,938 $ 26,068,000 61.64%
Schedules are intended to show information for 10 years. Adtflfianal years will be displayed as they become available
See Independent Auditors'Report.
89
490
TOWN OF READING, MASSACHUSETTS
SCHEDULE OF PENSION CONTRIBUTIONS(GASB 68)
REQUIRED SUPPLEMENTARY INFORMATION
JUNE 30, 2017
(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 Pavroll
June 30, 2017 $ 5,370,991 $ (5,370,991) m $ 23,499,057 22.86%
June 30, 2016 $ 5,147,236 $ (5,147,236) $ 22,534,225 22.84%
June 30, 2015 $ 4,925,586 $ (4,925,586) - $ 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.
90
491
TOWN OF READING, MASSACHUSETTS
SCHEDULE OF OPEB FUNDING PROGRESS (GASB 45)
REQUIRED SUPPLEMENTARY INFORMATION
June 30, 2017
(Unaudited)
Other Post-Employment Benefits
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-a) LC b-a /c
06/30/17 $ 6,478,298 $ 75,292,954 $ 68,814,656 8.60% N/A N/A
06/30/14 $ 3,722,552 $ 66,759,344 $ 63,036,792 5.58% N/A N/A
06/30/13 $ 2,860,432 $ 67,170,840 $ 64,310,408 4.26% N/A N/A
06/30/11 $ 1,167,161 $ 94,458,486 $ 93,291,325 1.24% N/A N/A
06/30/08 $ - $ 83,501,922 $ 83,501,922 0.0% N/A N/A
See Independent Auditors' Report.
91
492
TOWN OF READING,MASSACHUSETTS
OTHER POST-EMPLOYMENT BENEFITS(OPEB)
SCHEDULES OF CHANGES IN THE NET OPEB LIABILITY(GASB 74)
(Unaudited)
2017
Total OPEB liability
Service cost $ 1,891,090
Interest on unfunded liability-time value of money 5,376,453
Benefit payments, including refunds of member contributions (3,476.250)
Net change in total OPEB liability 3,791,293
Total OPEB liability-beginning 71,501,661
Total OPEB liability-ending(a) $ 75,2.92„954
Plan fiduciary net position
Contributions-employer $ 4,360,996
Net investment income 50,000
Benefit payments, including refunds of member contributions (3,476,250)
Net change in plan fiduciary net position 934,746
Plan fiduciary net position-beginning 5,543,552
Plan fiduciary net position-ending(b) $ 6,478,298
Net OPEB liability(asset)-ending(a-b) $ 68,814,656
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.
92
493
TOWN OF READING, MASSACHUSETTS
OTHER POST-EMPLOYMENT BENEFITS(OPEB)
SCHEDULES OF NET OPEB LIABILITY,CONTRIBUTIONS,AND INVESTMENT RETURNS
(GASB 74)
(Unaudited)
Schedule of Net OPEB Liability
2017
Total OPEB liability $ 75,292,954
Plan fiduciary net position 6,478,298
Net OPEB liability $ 68,814,656
Plan fiduciary net position as a percentage of the total OPEB liability 8.60%
Covered payroll N/A
Participating employer net OPEB liability
as a percentage of covered payroll N/A
Schedule of Contributions
2017
Actuarially determined contribution $ 6,479,523
Contributions in relation to the actuarially determined contribution 4,360,996
Contribution deficiency $ 27118,527
Covered payroll N/A
Contributions as a percentage of covered payroll N/A
Schedule of Investment Returns
2017
Annual money weighted rate of return, net of investment expense 7.50%
Schedules are intended to show information for 10 years.Additional years will be displayed as they
become available.
See notes to Town's financial statements for summary of significant actuarial methods and
assumptions.
93
494
TOWN OF READING, MASSACHUSETTS
COMBINING BALANCE SHEET
NONMAJOR GOVERNMENTAL FUNDS
JUNE 30, 2017
Special Revenue Funds
Federal State Revolving
Grants Grants Funds
Assets
Cash and short-term investments $ (73,797) $ 1,094,579 $ 4,084,669
Investments - - -
Receivables:
Departmental and other - - 118,024
Intergovernmental 209,220 24,273
Total assets $ 135,423 $ 1,118,852 $ 4,202,693
Liabilities
Warrants payable $ 11,472 $ 28,616 $ 48,766
Accrued liabilities 103,965 - 38,005
Unearned revenue - - 266,935
Notes payable - - -
Total liabilities 115,437 28,616 353,706
Fund Balances
Nonspendable - - -
Restricted 75„539 1,156,498 3,863,422
Unassigned55,553 (66,262) (14,43X
Total fund balance 19,986 1,090,236 3,848,987
Total Liabilities and Fund Balance $ 135,423 $ 1,118,852 $ 4,202,693
See Independent Auditors' Report.
94
495
Special Revenue Funds
Receipts Gifts and
Reserved Donations Subtotals
$ 1,095,783 $ 967,350 $. 7,168,584
124,573 124,573
- 118,024
- - 233,493
$ 1,095,783 $ 1,091,923 $ 7,644,674
$ $ 5,487 $ 94,341
- 141,970
- - 266,935
5,487 503,246
1,095,783 1,086,436 7,277,678
- (136,250)
1,095,783 1,086,436 7,141,428
$ 1,095,783 $ 1,091,923 $ 7,644,674
(continued)
95
496
TOWN OF READING, MASSACHUSETTS
COMBINING BALANCE SHEET
NONMAJOR GOVERNMENTAL FUNDS
JUNE 30,2017
(continued)
Capital Proiect Funds
Town School
Capital Capital
Prcject Funds Project Funds Subtotals
Assets
Cash and short-term investments $ 1,145,273 $ - $ 1,145,273
Investments
Receivables:
Departmental and other -
Intergovernmental - -
Total assets $ 1,145,273 $ - $ 1,145,273
Liabilities
Warrants payable $ 253,886 $ _ $ 253,886
Accrued liabilities - mm
Unearned revenue - - -
Total liabilities - 1,490,000 1,490,000
Total Liabilities 253,886 1,490,000 1,743,886
Fund Balances
Nonspendable - -
Restricted 891,387 - 891,387
Unassigned (1,490,000) (1,490,000)
Total fund balance 891,387 (1,490,000) (598,613)
Total Liabilities and Fund Balance $ 1,145,273 $ $ 1,145,273
See Independent Auditors' Report.
96
497
Permanent Funds
Total
Town School Nonmajor
Trust Trust Governmental
Funds Funds Subtotals Funds
$ 218,350 $ $ 218,350 $ 8,532,207
10,090,690 185,769 10,276,459 10,401,032
- - 118,024
- - - 233,493
$ 10,309,040 $ 185,769 $ 10,494,809 $ 19,284,756
$ 11,379 $ 64 $ 11,443 $ 359,670
- - - 141,970
- 266,935
mm - 1,490,000
11,379 64 11,443 2,258,575
3,184,845 125,350 3,310,195 3,310,195
7,112,816 60,355 7,173,171 15,342,236
- (1,626,250)
10,297,661 185,705 10,483,366 17,026,181
$ 10,309,040 $ 185,769 $ 10,494,809 $ 19,284,756
97
498
TOWN OF READING, MASSACHUSETTS
COMBINING STATEMENT OF REVENUES, EXPENDITURES,
AND CHANGES IN FUND BALANCES
NONMAJOR GOVERNMENTAL FUNDS
FOR THE YEAR ENDED JUNE 30, 2017
Special Revenue Funds
Federal State Revolving
Grants Grants Funds
Revenues
Departmental $ $ - $ 6,457,996
Intergovernmental 1,943,937 2,092,332 248,015
Investment income - - 338
Contributions
Other - - 11,934
Total revenues 1,943,937 2,092,332 6,718,283
Expenditures
Current:
General government 6,500 107,514
Public safety 30,623 61,286 950,918
Education 1,514,880 1,475,696 5,051,841
Public works - 434,684 2,447
Health and human services 168,507 57,141 27,207
Culture and recreation - 221,241 630,737
p
Total expenditures 1,714,010 2,256,548 6,770,664.
Excess(deficiency)of revenues over
(under)expenditures 229,927 (164,216) (52,381)
Other Financing Sources(Uses)
Issuance of bonds - -
Transfers in - µ
Transfers out - - 218,363
Total other financing sources(uses) - _ 218,363'
Change in fund balances 229,92.7 (164,216) (270,744)
g g
Fund Balances at beginning of year __229,9411 1,254,452 4,119,731
Fund Balances at end of year $ 19,986 $ 1,090,236 $ 3,848,987
See Independent Auditors'Report.
98
499
Special Revenue Funds
Receipts Gifts and
Reserved Donations Subtotals
$ 54,995 $ $ 6,512,991
4,284,284
8,277 - 8,615
573,489 573,489
- - 11,934
63,272 573,489 11,391,313
3,063 2,066 119,143
2,266 1,045,093
95,011 8,137,428
437,131
1,806 254,661
152,855 1,004,833
3,063 254,004 10,998,289
60,209 319,485 393,024
(75,000) (293,363)
(75,000) - (293,363)
(14,791) 319,485 99,661
1,110,574 766,951 7,041,767
$ 1,095,783 $ 1,086,436 $ 7,141,428
(continued)
99
500
TOWN OF READING, MASSACHUSETTS
COMBINING STATEMENT OF REVENUES, EXPENDITURES,
AND CHANGES IN FUND BALANCES
NONMAJOR GOVERNMENTAL FUNDS
FOR THE YEAR ENDED JUNE 30,2017
(continued)
Capital Pro"ect Funds
Town School
Capital Capital
Pr9k,ct Funds Project.Funds uhto aq'a
Revenues
Departmental $ - $ - $ -
Intergovernmental 1,021,021 1,021,021
Investment income -
Contributions -
Other -
Total revenues 1,021,021 mm 1,021,021
Expenditures
Current:
General government - -
Public safety - -
Education - 4,895,896 4,895,896
Public works 108,806 - 108,806
Health and human services - - -
Culture and recreation 3,395,858 3,395,858
Total expenditures 3,504,664 4,895,896 8,400,560
Excess(deficiency)of revenues over
(under)expenditures (2,483,643) (4,895,896) (7,379,539)
Other Financing Sources(Uses)
Issuance of bonds - 1,355,000 1,355,000
Transfers in 363,497 2,351,605 2,715,102
Transfers out - (133,497) (133,497)
Total other financing sources(uses) 363,497 3,573,108 3,936,605
Change in fund balances (2,120,146) (1,322,788) (3,442,934)
Fund Balances at beginning of year 3,011,533 (167,212) 2,844,321
Fund Balances at end of year $ 891,387 $ 1,490,E $ 598,613)
See Independent Auditors'Report.
100
501
Permanent Funds
Total
Town School Nonmajor
Trust Trust Governmental
Funds Funds Subtotals Funds
$ $ - $ _ $ 6,512,991
µ - - 5,305,305
465,459 7,525 472,984 481,599
146,826 600 147,426 720,915
- - 11,934
612,285 8,125 620,410 13,032,744
21,702 - 21,702 140,845
- - 1,045,093
- 19,089 19,089 13,052,413
120,000 120,000 665,937
136,686 - 136,686 391,347
- - - 4,400,691
278.388 19,089 297,477 19,696,326
333,897 (10,964) 322,933 (6,663,582)
- - 1,.355,000
2„115,102
- 3,643,242
333,897 (10,964) 322,933 (3,020,340)
9,963,764 198,669 10,160,433 20,046,521
$ 10,297,661 $' 185,705 $ 10,483,366 $ 17,026,181
101
502
TOWN OF READING,MASSACHUSETTS
NONMAJOR PROPRIETARY FUNDS
COMBINING SCHEDULE OF NET POSITION
JUNE 30,2017
Business-Type Activities
Landfill Total
Sewer Closure and Stormwater Nonmajor
Fund Postclosure _MgDggpf�ent Enteflarwse Fuad ,
Assets
Current:
Cash and short-term investments $ 9,361,736 $ 38,889 $ 1,386,732 $ 10,787,357
User fees,net of allowance for uncollectibles 2,337,038 - 152,742 2,489,780
Inventory 3,492 3,492
Total current assets 11,702,266 38,889 1,539,474 13,280,629
Noncurrent:
Capital assets being depreciated,net 4,982,281 714,563 5,696,844
Capital assets not being depreciated 1,508,924 - 204,502 1,713,426
Total noncurrent assets 6,491,205 - 919,065 7,410,270
Deferred Outflows of Resources
Related to pensions 138,644
- 24,848 163,492
Total Assets and Deferred Outflows
of Resources 18,332,115 38,889 2,483,387 20,854,391
Liabilities
Current:
Warrants payable 99,662 14,619 3,427 117,708
Accrued liabilities - 51 51
Other current liabilities 24,270 - 24,270
Current portion of long-term liabilities:
Bonds payable 371,673 371,673
Total current liabilities 471,335 38,889 3,478 513,702
Noncurrent:
Bonds payable,net of current portion 2,381,690 mm 2,381,690
Compensated absences 16,834 - 16,834
Net OPEB obligation 107,626 - 26,055 133,681
pension liability 361
Net ,095
p ty - 83,046 444,141
Total noncurrent liabilities 2,867,245 109,101 2,976,346
Deferred Inflows of Resources
Related to pensions 19,741 23,862 43,603
Total Liabilities and Deferred Inflows
of Resources 3,358,321 38,889 136,441 3,533,651
Net Position
Net investment in capital assets 6,903,405 - 919,065 7,822,470
Restricted for capital projects 615,648 - 615,648
Unrestricted 7,454,741 1,427,881 8,882,622
Total Net Position $ 14,973,794 $ $ 2,346,946 $ 17,320,740
See Independent Auditors'Report.
102
503
TOWN OF READING, MASSACHUSETTS
NONMAJOR PROPRIETARY FUNDS
COMBINING SCHEDULE OF REVENUES, EXPENSES,AND CHANGES IN FUND NET POSITION
FOR THE YEAR ENDED JUNE 30,2017
Business-T e Activities
Landfill Total
Sewer Closure and Stormwater Nonmajor
Fund Postclosure WAa_gqMo( - to rise Funds
Operating Revenues
Charges for services $ 6,827,305 $ - $ 437,475 $ 7,264,780
Total operating revenues 6,827,305 - 437,475 7,264,780
Operating Expenses
Personnel expenses 620,436 - 204,590 825,026
Non personnel expenses 224,748 33,952 258,700
Intergovernmental 4,769,928 - 4,769,928
Depreciation 406,040 40,152 446,192
Energy purchases 22,856 - 22,856
Total operating expenses 6,044,008 278,694 6,322,702
Operating income 783,297 158,781 942,078
Nonoperating Revenues(Expenses)
Investment income 45,503 7,925 53,428
Interest expense 228681 - (26,868)
Total nonoperating revenues 18,635 7,925 26.560
Income Before Transfers 801,932 166,706 968,638
g -
Capital rants and contributions 633,000 - 633,000
Change in Net Position 1,434,932 166,706 1,601,638
Net Position at Beginning of Year 13,538,862 2,180,240 15,719,102
Net Position at End of Year $ 14,973,794 $ $ 2,346,946 $ 17,320,740
See Independent Auditors'Report.
103
504
TOWN OF READING,MASSACHUSETTS
NONMAJOR PROPRIETARY FUNDS
COMBINING SCHEDULE OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30,2017
Business-Type Activities
Landfill Total
Sewer Closure and Stormwater Nonmajor
Fund Postclosure f�an��,gmen� k nter.Lmse FuT14§
Cash Flows From Operating Activities
Receipts from customers and users $ 7,191,691 $ $ 437,287 $ 7,628,978
Payments to vendors and employees (847,663) (7,817) (269,239) (1,124,719)
Payments to other governments �4„769,920') 4,769 928
Net cash provided by(used for)operating activities 1,574,100 (7,817) 168,048 1,734,331
Cash Flows From Capital and Related Financing Activities
Proceeds from issuance of bonds 2,640,484 2,640,484
Principal payments on bonds and notes (91,915) (91,915)
Acquisition of capital assets (1,135,524) (1,135,524)
Capital grants and contributions 633,000 - 633,000
Interest expense 26,868'
- (26,868-
Net cash provided by capital and related financing activities 2,019,177 - - 2,019,177
Cash Flows From Investing Activities
Investment income 45,503 _ 7,925 53,428
Net cash provided by investing activities 45,503 7,925 53,428
Net Change in Cash and Short-Term Investments 3,638,780 (7,817) 175,973 3,806,936
Cash and Short Term Investments,Beginning of Year 5,722,956 46,706 1,210,759 6,980,421
Cash and Short Term Investments,End of Year $ 9,361,736 $ 38,889 $ 1,386,732 $ 10,787,357
Reconciliation of Operating Income to Net Cash
Provided By(Used For)Operating Activities
Operating income $ 783,297 $ $ 158,781 $ 942,078
Adjustments to reconcile operating income to net
cash provided by(used for)operating activities:
Depreciation 406,040 40,152 446,192
Changes in assets and liabilities:
User fees receivables 364,386 (188) 364,198
Inventory and prepayments 1,202 - 1,202
Deferred outflows of resources (22,013) 20,195 (1,818)
Warrants payable 1,059 (10,816) (21,813) (31,570)
Accrued liabilities (9,009) (14,349) (23,358)
Other liabilities 2,999 - 2,999
Net OPEB obligation (336) - 6,333 5,997
Net pension liability 51,023 (36,703) 14,320
Deferred inflows of resources 5M 15,640 14,091
Net cash provided by(used for)operating activities $ 1,574,100 $... ,7817' $ 168,048 $ 1,734,331
See Independent Auditors'Report.
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