HomeMy WebLinkAbout2019 Annual Report -Appendix D Financial Statements M «,
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TOWN OF READING, MASSACHUSETTS
Annual Financial Statements
For the Year Ended June 30, 2019
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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 16
Statement of Activities 17
Fund Financial Statements:
Governmental Funds:
Balance Sheet 19
Reconciliation of Total Governmental Fund Balances to
Net Position of Governmental Activities in the Statement
of Net Position 20
Statement of Revenues, Expenditures, and Changes
in Fund Balances 21
Reconciliation of the Statement of Revenues, Expenditures,
and Changes in Fund Balances of Governmental Funds to
the Statement of Activities 22
Statement of Revenues and Other Sources, and Expenditures
and Other Uses - Budget and Actual - General Fund 23
Proprietary Funds:
Statement of Net Position 24
Statement of Revenues, Expenses, and Changes in Fund
Net Position 25
Statement of Cash Flows 26
Fiduciary Funds:
Statement of Fiduciary Net Position 27
Statement of Changes in Fiduciary Net Position 28
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Notes to the Financial Statements 29
Electric Division Notes to the Financial Statements 76
REQUIRED SUPPLEMENTARY INFORMATION:
Pension:
Schedule of Proportionate Share of the Net Pension Liability
(GASB 68) 105
Schedule of Pension Contributions (GASB 68) 106
OPEB:
Schedule of Changes in the Net OPEB Liability (GASB 74 and 75) 107
Electric Division Schedule of Changes in the Net OPEB Liability
(GASB 74 and 75) 108
Schedules of the Net OPEB Liability, Contributions, and
Investment Returns (GASB 74 and 75) 109
Electric Division Schedules of the Net OPEB Liability, Contributions,
and Investment Returns (GASB 74 and 75) 110
SUPPLEMENTARY INFORMATION:
Comparison Balance Sheet — General Fund 112
Comparison Statement of Revenues, Expenditures, and Changes in
Fund Balance — General Fund 113
Combining Balance Sheet - Nonmajor Governmental Funds 114
Combining Statement of Revenues, Expenditures, and
Changes in Fund Balances - Nonmajor Governmental Funds 118
Combining Schedule of Net Position - Nonmajor Proprietary Funds 122
Combining Schedule of Revenues, Expenses, and Changes
in Fund Net Position - Nonmajor Proprietary Funds 123
Combining Schedule of Cash Flows - Nonmajor Proprietary Funds 124
MELANSON
ACCOUNTANTS•AUDITORS
10 New England Business
Center Dr.•Suite 107
Andover,MA 01810
INDEPENDENT AUDITORS' REPORT (978)749-0005
melansonheath.com
To the Select Board 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 activities,
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, 2019, (except for the Reading Contributory Retirement System and Electric
Division, which are as of and for the year ended, and the six months ended,
December 31, 2018, respectively) 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 assessments, the auditor
considers internal control relevant to the entity's preparation and fair presentation of the
financial statements in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of
the entity's internal control.Accordingly, we express no such opinion. An audit also
includes evaluating the appropriateness of accounting policies used and the
reasonableness of significant accounting estimates made by management, 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, 2019 (except for the Reading Contributory
Retirement System and Electric Division, which are as of and for the year ended, and the six
months ended, December 31, 2018, respectively), and the respective changes in financial
position and, where applicable, cash flows thereof and the respective budgetary comparison
for the general fund for the year then ended in accordance with accounting principles
generally accepted in the United States of America.
Emphasis of Matters
The Reading Municipal Light Department (Electric Division) changed from a June 30
fiscal year-end to a December 31 calendar year-end. Where applicable, the
accompanying financial statements reflect Electric Division activities for a six month
period from July 1, 2018 to December 31, 2018.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that
Management's Discussion and Analysis, and certain Pension and OPEB schedules, be
presented to supplement the basic financial statements. Such information, although not a
part of the basic financial statements, is required by the Governmental Accounting
Standards Board, who considers it to be an essential part of financial reporting for
placing the basic financial statements in an appropriate operational, economic, or
historical context. We have applied certain limited procedures to the required supple-
mentary information in accordance with auditing standards generally accepted in the
United States of America, which consisted of inquiries of management about the
methods of preparing the information and comparing the information for consistency with
management's responses to our inquiries, the basic financial statements, and other
knowledge we obtained during our audit of the basic financial statements. We do not
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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 statements
that collectively comprise the Town's basic financial statements. The accompanying
supplementary information appearing on pages 112 through 124 is presented for
purposes of additional analysis and is not a required part of the basic financial
statements. Such information is the responsibility of management and was derived from
and relates directly to the underlying accounting and other records used to prepare the
financial statements. The information has been subjected to the auditing procedures
applied in the audit of the financial statements and certain additional procedures,
including comparing and reconciling such information directly to the underlying accounting
and other records used to prepare the financial statements or to the financial statements
themselves, and other additional procedures in accordance with auditing standards
generally accepted in the United States of America. In our opinion, the information is fairly
stated in all material respects in relation to the financial statements as a whole.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report
dated February 26, 2020 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 solely to describe the scope of our testing of internal control over financial reporting
and compliance and the results of that testing, and not to provide an opinion on the
effectiveness of the Town's 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.
February 26, 2020
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MANAGEMENT'S DISCUSSION AND ANALYSIS
As management of the Town of Reading, Massachusetts (the Town), we offer readers this
narrative overview and analysis of the financial activities of the Town for the fiscal year
ended June 30, 2019 (except for the Electric Division which is as of December 31, 2018).
A. OVERVIEW OF THE FINANCIAL STATEMENTS
This discussion and analysis is intended to serve as an introduction to the basic
financial statements. The basic financial statements are comprised of three com-
ponents: (1) government-wide financial statements, (2) fund financial statements,
and (3) notes to the financial statements. This report also contains other supple-
mentary information in addition to the basic financial statements themselves.
Government-wide financial statements. The government-wide financial state-
ments are designed to provide readers with a broad overview of our finances in
a manner similar to a private-sector business.
The Statement of Net Position presents information on all assets, deferred outflows
of resources, liabilities, and deferred inflows of resources, with the difference
reported as net position. 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 sick 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, education, public
works, facilities, health and human services, and culture and recreation. The business-
type activities include electric division operations, water supply and distribution,
sewer disposal, landfill, 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 activities or
objectives. Fund accounting is used to ensure and demonstrate compliance 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 funds balance sheet and the governmental funds 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. Included in the proprietary fund category are the Town's enterprise
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 electric
division, water, sewer, landfill, and stormwater operations, of which electric division,
water, and sewer operations are considered to be major funds.
The Town does not maintain internal service funds.
Fiduciary funds. Fiduciary funds are used to account for resources held for the
benefit of parties outside the Town. 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 fiduciary
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 accompanying
notes, this report also presents certain required supplementary information 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 for the Town's
governmental activities by $50,974,405 (i.e., net position), a change of
$(1,334,013) in comparison to the prior year.
• 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 for the Town's
business-type activities by $147,234,804 (i.e., net position), a change of
$7,219,745 in comparison to the prior year.
• As of the close of the current fiscal year, governmental funds reported combined
ending fund balances of$38,588,734, a change of$6,197,599 in comparison to
the prior year.
• At the end of the current fiscal year, unassigned fund balance for the general
fund was $18,781,232, a change of $4,929,214 in comparison to the prior year.
C. GOVERNMENT-WIDE FINANCIAL ANALYSIS
The following is a summary of condensed government-wide financial data for the
current and prior fiscal years:
NET POSITION
Governmental Business-Type
Activities Activities Total
2019 2018 20191 2018 20191 2018
Current and other assets $ 46,856,674 $ 41,562,429 $ 89,945,473 $ 83,436,180 $ 136,802,147 $ 124,998,609
Capital assets 124,352,767 128,379,352 106,388,736 103,351,691 230,741,503 231,731,043
Total Assets 171,209,441 169,941,781 196,334,209 186,787,871 367,543,650 356,729,652
Deferred Outflows of Resources 17,946,348 7,954,088 6,975,287 4,712,612 24,921,635 12,666,700
Long-term liabilities 124,250,679 111,911,827 38,738,050 39,635,404 162,988,729 151,547,231
Other liabilities 7,406,494 8,416,315 14,878,859 9,436,400 22,285,353 17,852,715
Total Liabilities 131,657,173 120,328,142 53,616,909 49,071,804 185,274,082 169,399,946
Deferred Inflows of Resources 6,524,211 5,259,309 2,457,783 2,413,620 8,981,994 7,672,929
Net investment in capital assets 102,789,291 102,926,593 96,748,349 94,747,230 199,537,640 197,673,823
Restricted 13,452,691 12,962,345 12,984,552 9,767,995 26,437,243 22,730,340
Unrestricted (65,267,577) (63,580,520) 37,501,903 35,499,834 (27,765,674) (28,080,686)
Total Net Position $ 50,974,405 $ 52,308,418 $ 147,234,804 $ 140,015,059 $ 198,209,209 $ 192,323,477
'Included in the Town's Business-Type activities is the Electric Division which is presented as of December 31,2018
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As noted earlier, net position may serve over time as a useful indicator of the Town's
financial position. At the close of the most recent fiscal year, total net position was
$198,209,209, a change of$5,885,732 in comparison to the prior year.
The largest portion of net position, $199,537,640, 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, $26,437,243, represents resources that are
subject to external restrictions on how they may be used. The remaining balance of
unrestricted net position reflects a deficit of$(27,765,674) primarily resulting from
unfunded pension and OPEB liabilities.
s
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
2019 2018 20191 2018 20191 2018
Revenues
Program revenues:
Charges for services $ 10,611,027 $ 9,723,339 $ 64,391,661 $ 111,427,378 $ 75,002,688 $ 121,150,717
Operating grants and contributions 25,408,684 25,820,694 - - 25,408,684 25,820,694
Capital grants and contributions 717,683 1,906,371 881,395 1,005,680 1,599,078 2,912,051
General revenues:
Property taxes 73,560,941 67,024,574 - - 73,560,941 67,024,574
Excises 4,434,079 4,345,158 4,434,079 4,345,158
Penalties,interest,and
other taxes 599,869 578,670 599,869 578,670
Grants and contributions not
restricted to specific programs 3,613,974 3,637,261 - - 3,613,974 3,637,261
Investment income 2,399,713 1,388,888 612,582 521,682 3,012,295 1,910,570
Other 427,149 453,117 380,168 694,309 807,317 1,147,426
Total Revenues 121,773,119 114,878,072 66,265,806 113,649,049 188,038,925 228,527,121
Expenses
General government 6,437,581 5,575,808 - - 6,437,581 5,575,808
Public safety 17,233,365 14,642,864 17,233,365 14,642,864
Education 79,667,962 74,603,267 79,667,962 74,603,267
Public works 9,729,267 8,400,805 9,729,267 8,400,805
Facilities 4,116,162 3,850,642 4,116,162 3,850,642
Health and human services 1,094,414 1,054,153 1,094,414 1,054,153
Culture and recreation 5,291,728 4,683,085 5,291,728 4,683,085
Interest on long-term debt 874,077 1,007,435 874,077 1,007,435
Intergovernmental 1,143,082 1,077,974 1,143,082 1,077,974
Electric division operations - - 45,085,315 91,196,214 45,085,315 91,196,214
Water operations 5,744,137 5,544,322 5,744,137 5,544,322
Sewer operations 6,618,484 6,359,280 6,618,484 6,359,280
Other - 357,872 339,985 357,872 339,985
Total Expenses 125,587,638 114,896,033 57,805,808 103,439,801 183,393,446 218,335,834
Change in net position
before transfers (3,814,519) (17,961) 8,459,998 10,209,248 4,645,479 10,191,287
Transfers in(out) 2,480,506 2,419,770 (1,240,253) (2,419,770) 1,240,253 -
Changeinnetposition (1,334,013) 2,401,809 7,219,745 7,789,478 5,885,732 10,191,287
Net position-beginning of year 52,308,418 49,906,609 140,015,059 132,225,581 192,323,477 182,132,190
Net position-end of year $ 50,974,405 $ 52,308,418 $ 147,234,804 $ 140,015,059 $ 198,209,209 $ 192,323,477
'Included in the Town's Business-Type activities is the activities of the Electric Division which is presented as of the six months ended December 31,2018
Governmental activities. Governmental activities for the year resulted in a change in
net position of $(1,334,013). Key elements of this change are as follows:
Change in governmental funds $ 6,197,599
Increase in net pension liability, net of related deferred
outflows/inflows of resources (2,172,590)
Increase in net OPEB liability, net of related deferred
outflows/inflows of resources (5,777,920)
Other 418,898
Total $ (1,334,013)
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Business-type activities. Business-type activities for the year resulted in a change
in net position of $7,219,745. 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 fundi $ 51,217,336 $ (46,325,568) $ 4,891,768
Water fund 6,778,031 (5,744,137) 1,033,894
Sewer fund 7,635,424 (6,618,484) 1,016,940
Nonmajor funds 635,015 (357,872) 277,143
Total $ 66,265,806 $ (59,046,061) $ 7,219,745
Activityfor the Electric division is reported for the six months ended December 31,2018
The change in net position for business-type activities is largely attributable
to Electric divisions sales and other revenues exceeding operating expenses by
$5,436,188 (operating income).
Additional changes in the business-type activities are attributable to the Town's
ongoing investment in capital improvements. These amounts are reported net of
related outstanding debt obligations and are included in net position as net
investment in capital assets. Business-type activities reported net investment in
capital assets of$96,748,349, an increase of$2,001,119, or 2.11%, over the prior
year.
Unrestricted net position of the business-type activities at the end of the fiscal year
amounted to $37,501,903, a change of$2,002,069 in comparison to the prior year.
Key elements of this change are as follows:
Fund 12/31/18 6/30/18 Change
Electric division $ 21,701,945 $ 19,523,546 $ 2,178,399
6/30/19
Water 6,678,523 6,552,073 126,450
Sewer 7,773,719 8,066,467 (292,748)
Nonmajor 1,347,716 1,357,748 (10,032)
Total $ 37,501,903 $ 35,499,834 $ 2,002,069
The change in unrestricted net position of the business-type activities is largely
attributable to the use of current resources for capital improvements as well as the
change in the business-type activities proportionate share of the net pension and net
OPEB liabilities, as further discussed the notes to the financial statements.
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D. FINANCIAL ANALYSIS OF THE TOWN'S FUNDS
As noted earlier, fund accounting is used to ensure and demonstrate compliance
with finance-related legal requirements.
Governmental funds. The focus of governmental funds is to provide information on
near-term inflows, outflows, and balances of spendable resources.
Such information is useful in assessing financing requirements. In particular,
unassigned fund balance may serve as a useful measure of the Town's net
resources available for spending at the end of the fiscal year.
As of the end of the current fiscal year, governmental funds reported combined
ending fund balances of$38,588,734, a change of$6,197,599 in comparison to the
prior year. Key elements of this change are as follows:
General fund expenditures exceeding revenues $ 2,201,496
Payment in lieu of taxes (PILOT)from RMLD 2,480,506
Special revenue fund revenues exceeding expenditures 1,071,541
Permanent fund revenues exceeding expenditures 444,056
Total $ 6,197,599
The general fund is the chief operating fund of the Town. At the end of the current
fiscal year, unassigned fund balance of the general fund was $18,781,232, while total
fund balance was $24,668,636. 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 Encumbrances Expenditures Unassigned Balance
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
2018 62,468 503,000 2,788,933 1,600,000 13,852,018 18,806,419
2019 36,078 503,000 3,973,326 1,375,000 18,781,232 24,668,636
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 as
illustrated in the following table:
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% of Total
General Fund
General Fund 6/30/19 6/30/18 Change Expenditures
Unassigned fund balance $ 18,781,232 $ 13,852,018 $ 4,929,214 18.58%
Total fund balance 24,668,636 18,806,419 5,862,217 24.41%
The increase in the Town's June 30, 2019 unassigned fund balance over the prior year
is primarily due to current year actual revenues exceeding those budgeted and current
year actual expenditures coming in less than budgeted, as illustrated in the budget and
actual page in the basic financial statements.
The total fund balance of the general fund changed by $5,862,217 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 $ (1,600,000)
Revenues and transfers in excess of budget 3,019,903
Expenditures less than budget 2,673,540
Expenditures of prior year encumbrances less than current
year encumbrances 1,715,783
Change in stabilization accounts 52,991
Total $ 5,862,217
Included in the total general fund balance are the Town's stabilization accounts with
the following balances:
Fund Balance
6/30/19 6/30/18 Change Classification
General $ 1,670,442 $ 1,617,451 $ 52,991 Unassigned
Smart growth 503,000 503,000 - Committed
Total $ 2,173,442 $ 2,120,451 $ 52,991
Proprietary funds. Proprietary funds provide the same type of information found in
the business-type activities reported in the government-wide financial statements,
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 FUND BUDGETARY HIGHLIGHTS
Differences between the original budget and the final amended budget resulted in an
overall change in appropriations of $1,235,502. Major reasons for these
amendments include:
• $800,000 increase for land acquisitions
• $386,000 increase for capital improvements
• $49,502 increase for other Town operations
Of this increase, $800,000 was directly related to land acquisitions funded through
transfers from special revenue funds as voted at the Town's Special Town Meeting
held in April 2019.
Additional increases of$435,502 were funded through the tax levy and local receipts
by $304,018 and $131,484, respectively.
F. CAPITAL ASSET AND DEBT ADMINISTRATION
Capital assets. Total investment in capital assets for governmental and business-type
activities at year-end amounted to $230,741,503 (net of accumulated depreciation), a
change of$(989,540) from the prior year. This investment in capital assets includes
land, land improvements, infrastructure, buildings and improvements, machinery,
equipment, and furnishings.
Major capital asset acquisitions are attributable to the following:
Governmental additions:
$ 1,134,907 in roadway improvements
930,601 in various school improvements
800,000 for purchase of land parcels
134,425 for public safety vehicles
Business-type additions:
$ 2,302,494 in electric division infrastructure
1,522,076 in water infrastructure and improvements
136,008 in sewer infrastructure
179,620 in stormwater improvements and vehicles
Additional information on capital assets can be found in note 9 and note 31 of the
notes to the financial statements.
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Long-term debt. At the end of the current fiscal year, total bonded debt outstanding
was $35,807,833, all of which was backed by the full faith and credit of the Town.
Additional information on capital assets and long-term debt can be found in note 15
of the notes to the financial statements.
G. ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES
The adopted FY2020 general fund budget of $103,016,753 is a 3.00% increase over
the prior year. The FY2020 budget is balanced.
FY2020 state aid will be $14,701,465, which represents a 1.7% percent increase
over the prior year.
The tax levy for FY2020 of $73,110,687 represents a 3.2% increase over the prior
year. The FY2020 tax rate is $13.95 per thousand for residential properties and
$14.20 per thousand for commercial properties, compared to $14.23 per thousand
for residential properties and $14.48 per thousand for commercial properties in the
prior year. Overall, property values increased 5.3% to $5,467,372,988.
For FY2020, the Select Board, acting as the Water and Sewer Commissioners, voted to
increase water rates by 3.70% and sewer rates by 8.46% for all customers, effective for
all billings after September 10, 2019. 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 FY2019 totaling $442,632. The FY2020
revenue budgeted for this tax is $400,000.
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, commercial paper,
and very short-term bonds according to the prudent investor rule set forth in Chapter
203C. The Town is interested in 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 liability. In April 2017 Town Meeting, the Town
voted to re-accept the provisions of Section 20 of Chapter 32B of MGL, as amended
by Section 15 of Chapter 218 of the Acts of 2016. The Select Board approved and
signed the OPEB Trust Agreement on October 15, 2019. With all these steps
completed, the Town is now eligible to apply to invest the Town's OPEB funds with
the State Retiree Benefits Trust.
14
REQUESTS FOR INFORMATION
This financial report is designed to provide a general overview of the Town of Reading's
finances for all those with an interest in the government's finances. Questions 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
15
TOWN OF READING,MASSACHUSETTS
STATEMENT OF NET POSITION
JUNE 30,2019
(Except for the Electric Division Fund which is as of December 31,2018)
Governmental Business-Type
Activities Activities Total
Assets
Current:
Cash and short-term investments $ 19,416,927 $ 41,275,997 $ 60,692,924
Investments 23,545,405 - 23,545,405
Receivables,net of allowance for uncollectibles:
Property taxes 387,805 387,805
Excises 132,164 - 132,164
User fees - 13,249,422 13,249,422
Departmental and other 2,341,517 - 2,341,517
Intergovernmental 559,506 - 559,506
Prepaid assets - 2,097,356 2,097,356
Inventory 1,597,469 1,597,469
Noncurrent:
Restricted cash and short-term investments 28,827,501 28,827,501
Restricted investments 2,490,210 2,490,210
Investment in associated companies - 289,474 289,474
Receivables,net of allowance for uncollectibles:
Property taxes 473,350 - 473,350
Capital assets depreciable,net 117,919,051 94,961,645 212,880,696
Capital assets non-depreciable 6,433,716 11,427,091 17,860,807
Other assets - 118,044 118,044
Deferred Outflows of Resources
Related to pensions 14,312,403 6,146,796 20,459,199
Related to OPEB 3,633,945 828,491 4,462,436
Total Assets and Deferred Outflows of Resources 189,155,789 203,309,496 392,465,285
Liabilities
Current:
Warrants payable 2,161,351 11,094,007 13,255,358
Accrued liabilities 4,199,451 324,382 4,523,833
Unearned revenues 389,086 - 389,086
Tax refunds payable 52,470 - 52,470
Customer advances for construction - 2,262,718 2,262,718
Customer deposits - 1,197,752 1,197,752
Other current liabilities 604,136 - 604,136
Current portion of long-term liabilities:
Bonds and loans payable 4,018,362 2,031,012 6,049,374
Compensated absences 87,539 530,245 617,784
Noncurrent:
Bonds and loans payable, net of current portion 18,106,133 11,652,326 29,758,459
Compensated absences, net of current portion 787,853 2,522,741 3,310,594
Net pension liability 34,307,165 13,005,953 47,313,118
Net OPEB liability 66,943,627 8,995,773 75,939,400
Deferred Inflows of Resources
Related to pensions 4,449,383 2,411,320 6,860,703
Related to OPEB 1,918,245 46,463 1,964,708
Other 156,583 - 156,583
Total Liabilities and Deferred Inflows of Resources 138,181,384 56,074,692 194,256,076
Net Position
Net investment in capital assets 102,789,291 96,748,349 199,537,640
Restricted for:
Grants and other statutory restrictions 7,435,690 12,984,552 20,420,242
Permanent funds:
Nonexpendable 3,314,553 - 3,314,553
Expendable 2,702,448 - 2,702,448
Unrestricted (65,267,577) 37,501,903 (27,765,674)
Total Net Position $ 50,974,405 $ 147,234,804 $ 198,209,209
The accompanying notes are an integral part of these financial statements.
16
TOWN OF READING, MASSACHUSETTS
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2019
(Except for the Electric Division Fund which is for the six months ended December 31, 2018)
Program Revenues
Operating Capital
Charges for Grants and Grants and Net(Expenses)
Expenses Services Contributions Contributions Revenues
Governmental Activities
General government $ 6,437,581 $ 331,867 $ 358,838 $ - $ (5,746,876)
Public safety 17,233,365 3,783,812 222,238 - (13,227,315)
Education 79,667,962 5,354,285 24,266,006 - (50,047,671)
Public works 9,729,267 221,828 188,840 717,683 (8,600,916)
Facilities 4,116,162 - - - (4,116,162)
Health and human services 1,094,414 42,008 317,747 - (734,659)
Culture and recreation 5,291,728 877,227 55,015 - (4,359,486)
Interest on long-term debt 874,077 - - - (874,077)
Intergovernmental 1,143,082 - - - (1,143,082)
Total Governmental Activities 125,587,638 10,611,027 25,408,684 717,683 (88,850,244)
Business-Type Activities
Electric division operations 45,085,315 50,463,442 - 99,509 5,477,636
Water operations 5,744,137 6,635,436 - - 891,299
Sewer operations 6,618,484 6,675,872 - 781,886 839,274
Nonmajor operations 357,872 616,911 - - 259,039
Total Business-Type Activities 57,805,808 64,391,661 - 881,395 7,467,248
Total $ 183,393,446 $ 75,002,688 $ 25,408,684 $ 1,599,078 (81,382,996)
(continued)
The accompanying notes are an integral part of these financial statements.
17
TOWN OF READING, MASSACHUSETTS
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2019
(Except for the Electric Division Fund which is for the six months ended December 31, 2018)
(continued)
Governmental Business-Type
Activities Activities Total
Change in Net Position:
Net(Expenses)Revenues from previous page $ (88,850,244) $ 7,467,248 $ (81,382,996)
General Revenues and Transfers
Property taxes 73,560,941 - 73,560,941
Excises 4,434,079 - 4,434,079
Penalties, interest, and other taxes 599,869 - 599,869
Grants and contributions not
restricted to specific programs 3,613,974 - 3,613,974
Investment income 2,399,713 612,582 3,012,295
Other 427,149 380,168 807,317
Transfers, net 2,480,506 (1,240,253) 1,240,253
Total General Revenues and Transfers 87,516,231 (247,503) 87,268,728
Change in net position (1,334,013) 7,219,745 5,885,732
Net Position
Beginning of year 52,308,418 140,015,059 192,323,477
End of year $ 50,974,405 $ 147,234,804 $ 198,209,209
The accompanying notes are an integral part of these financial statements.
18
TOWN OF READING, MASSACHUSETTS
GOVERNMENTALFUNDS
BALANCE SHEET
JUNE 30, 2019
Nonmajor Total
General Governmental Governmental
Fund Funds Funds
Assets
Cash and short-term investments $ 11,827,339 $ 7,589,588 $ 19,416,927
Investments 17,579,145 5,966,260 23,545,405
Receivables:
Property taxes 954,740 - 954,740
Excises 244,594 - 244,594
Departmental and other 1,831,485 510,032 2,341,517
Intergovernmental - 559,506 559,506
Total Assets $ 32,437,303 $ 14,625,386 $ 47,062,689
Liabilities
Warrants payable $ 2,011,441 $ 149,820 $ 2,161,261
Accrued liabilities 3,805,131 166,382 3,971,513
Unearned revenue - 389,086 389,086
Other liabilities 604,136 - 604,136
Total Liabilities 6,420,708 705,288 7,125,996
Deferred Inflows of Resources
Unavailable revenues 1,347,959 - 1,347,959
Fund Balances
Nonspendable - 3,314,553 3,314,553
Restricted 36,078 10,699,158 10,735,236
Committed 503,000 - 503,000
Assigned 5,348,326 - 5,348,326
Unassigned 18,781,232 (93,613) 18,687,619
Total Fund Balances 24,668,636 13,920,098 38,588,734
Total Liabilities, Deferred Inflows of Resources,
and Fund Balances $ 32,437,303 $ 14,625,386 $ 47,062,689
The accompanying notes are an integral part of these financial statements.
19
TOWN OF READING, MASSACHUSETTS
RECONCILIATION OF TOTAL GOVERNMENTAL FUND
BALANCES TO NET POSITION OF GOVERNMENTAL
ACTIVITIES IN THE STATEMENT OF NET POSITION
JUNE 30, 2019
Total governmental fund balances $ 38,588,734
• Capital assets used in governmental activities are not financial
resources and, therefore, are not reported in the governmental funds. 124,352,767
• Revenues are reported on the accrual basis of accounting
and are not deferred until collection. 1,023,491
• Deferred outflows of resources to be recognized as an increase to pension
and OPEB expense in future periods:
Related to pensions 14,312,403
Related to OPEB 3,633,945
• Long-term liabilities are not due and payable in the current period and,
therefore, are not reported in the governmental funds:
Bonds payable (22,124,495)
Compensated absences (875,392)
Net pension liability (34,307,165)
Net OPEB liability (66,943,627)
• Deferred inflows of resources to be recognized as a decrease to pension and
OPEB expense in future periods:
Related to pensions (4,449,383)
Related to OPEB (1,918,245)
• Deferred inflows of resources related to gains on refunding bonds. (90,600)
• In the Statement of Activities, interest is accrued on outstanding
long-term debt, whereas in governmental funds interest is not
reported until due. (228,028)
Net position of governmental activities $ 50,974,405
The accompanying notes are an integral part of these financial statements.
20
TOWN OF READING, MASSACHUSETTS
GOVERNMENTAL FUNDS
STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES
FOR THE YEAR ENDED JUNE 30, 2019
Nonmajor Total
General Governmental Governmental
Fund Funds Funds
Revenues
Property taxes $ 73,440,816 $ - $ 73,440,816
Excises 4,518,208 - 4,518,208
Penalties, interest, and other taxes 599,869 - 599,869
Departmental 2,312,514 8,013,675 10,326,189
Licenses and permits 161,819 - 161,819
Fines and forfeitures 101,396 - 101,396
Intergovernmental 20,417,819 4,296,274 24,714,093
Investment income 1,513,149 468,202 1,981,351
Contributions - 423,045 423,045
Other 212,556 215,136 427,692
Total Revenues 103,278,146 13,416,332 116,694,478
Expenditures
Current:
General government 5,281,210 234,519 5,515,729
Public safety 11,498,415 1,618,751 13,117,166
Education 50,076,779 8,186,252 58,263,031
Public works 4,738,102 848,664 5,586,766
Facilities 3,771,257 - 3,771,257
Health and human services 606,863 243,558 850,421
Culture and recreation 2,514,322 768,991 3,283,313
Employee benefits 16,967,755 - 16,967,755
Debt service 4,478,865 - 4,478,865
Intergovernmental 1,143,082 - 1,143,082
Total Expenditures 101,076,650 11,900,735 112,977,385
Excess of revenues
over expenditures 2,201,496 1,515,597 3,717,093
Other Financing Sources(Uses)
Transfers in 3,811,642 150,921 3,962,563
Transfers out (150,921) (1,331,136) (1,482,057)
Total Other Financing Sources (Uses) 3,660,721 (1,180,215) 2,480,506
Net change in fund balances 5,862,217 335,382 6,197,599
Fund Balance at Beginning of Year 18,806,419 13,584,716 32,391,135
Fund Balance at End of Year $ 24,668,636 $ 13,920,098 $ 38,588,734
The accompanying notes are an integral part of these financial statements.
21
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, 2019
Net changes in fund balances -Total governmental funds $ 6,197,599
• 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 3,363,554
Depreciation (7,390,139)
• 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 unavailable revenue. 39,016
• 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:
Repayments of general obligation and refunding bonds 3,550,000
• In the Statement of Activities, interest is accrued on outstanding
long-term debt, whereas in governmental funds interest is not
reported until due. This amount reflects the change in accrued interest. 39,688
• 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 418,362
Change in tax refunds payable 15,638
Change in compensated absences 367,679
Change in net pension liability, net of related deferred outflows and
inflows of resources (2,172,590)
Change in net OPEB liability, net of related deferred outflows and
inflows of resources (5,777,920)
• Other 15,100
Change in net position of governmental activities $ (1,334,013)
The accompanying notes are an integral part of these financial statements.
22
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, 2019
Budgeted Amounts Variance with
Final Budget
Original Final Actual Positive
Budget Budget Amounts (Negative)
Revenues
Property taxes $ 72,760,019 $ 73,064,037 $ 73,440,816 $ 376,779
Excises 4,185,000 4,285,000 4,518,208 233,208
Penalties, interest, and other taxes 570,000 570,000 599,856 29,856
Departmental 1,878,471 1,878,471 2,312,514 434,043
Licenses and permits 170,000 170,000 161,819 (8,181)
Fines and forfeitures 95,000 95,000 101,396 6,396
Intergovernmental 14,622,409 14,503,893 14,852,262 348,369
Investment income 200,000 350,000 1,460,158 1,110,158
Other 138,695 138,695 212,556 73,861
Total Revenues 94,619,594 95,055,096 97,659,585 2,604,489
Expenditures
General government 4,746,672 5,689,672 5,343,970 345,702
Public safety 11,597,775 11,671,775 11,445,761 226,014
Education 45,415,275 45,415,275 45,111,548 303,727
Public works 5,379,375 5,506,125 5,055,451 450,674
Facilities 4,606,775 4,901,775 4,683,829 217,946
Health and human services 776,375 709,375 607,152 102,223
Culture and recreation 2,485,065 2,496,315 2,389,450 106,865
Employee benefits 18,207,600 17,855,700 16,967,755 887,945
Debt service 4,471,158 4,491,723 4,478,865 12,858
Intergovernmental 1,129,752 1,162,668 1,143,082 19,586
Total Expenditures 98,815,822 99,900,403 97,226,863 2,673,540
Excess (deficiency)of revenues over
(under)expenditures (4,196,228) (4,845,307) 432,722 5,278,029
Other Financing Sources(Uses)
Transfers in 2,596,228 3,396,228 3,811,642 415,414
Transfers out - (150,921) (150,921) -
Use of free cash:
For operating budget support 1,200,000 1,200,000 (1,200,000)
Use of overlay surplus:
For operating budget support 400,000 400,000 - (400,000)
Total Other Financing Sources (Uses) 4,196,228 4,845,307 3,660,721 (1,184,586)
Excess of revenues and other financing sources
sources over expenditures and other financing uses $ - $ - $ 4,093,443 $ 4,093,443
The accompanying notes are an integral part of these financial statements.
23
TOWN OF READING,MASSACHUSETTS
PROPRIETARY FUNDS
STATEMENT OF NET POSITION
JUNE 30,2019
(Except for the Electric Division Fund which is as of December 31,2018)
Business-Type Activities
Electric
Division Water Sewer Nonmajor Total
Fund Fund Fund Funds Enterprise Funds
Assets
Current:
Cash and short-term investments $ 20,832,516 $ 10,189,963 $ 8,796,015 $ 1,457,503 $ 41,275,997
User fees,net of allowance for uncollectibles 8,705,414 2,146,729 2,197,965 199,314 13,249,422
Prepaid assets 2,097,356 - - - 2,097,356
Inventory 1,486,470 107,379 3,620 - 1,597,469
Total Current Assets 33,121,756 12,444,071 10,997,600 1,656,817 58,220,244
Noncurrent:
Restricted cash and short-term investments 28,827,501 - - - 28,827,501
Restricted investments 2,490,210 2,490,210
Investment in associated companies 289,474 - - - 289,474
Capital assets depreciable,net 77,217,470 10,403,864 6,006,512 1,333,799 94,961,645
Capital assets non-depreciable 1,265,842 6,388,794 3,772,455 - 11,427,091
Other assets 118,044 - - - 118,044
Total Noncurrent Assets 110,208,541 16,792,658 9,778,967 1,333,799 138,113,965
Deferred Outflows of Resources
Related to pensions 5,039,390 936,866 160,640 9,900 6,146,796
Related to OPEB 740,468 62,776 20,326 4,921 828,491
Total Assets and Deferred Outflows of Resources 149,110,155 30,236,371 20,957,533 3,005,437 203,309,496
Liabilities
Current:
Warrants payable 9,718,305 670,778 547,684 157,240 11,094,007
Accrued liabilities 280,307 41,533 2,542 - 324,382
Customer advances for construction 2,262,718 - - 2,262,718
Customer deposits 1,197,752 - - 1,197,752
Current portion of long-term liabilities:
Bonds and loans payable - 1,654,239 376,773 2,031,012
Compensated absences 530,245 - 530,245
Total Current Liabilities 13,989,327 2,366,550 926,999 157,240 17,440,116
Noncurrent:
Bonds and loans payable,net of current portion - 9,565,682 2,086,644 - 11,652,326
Compensated absences,net of current portion 2,469,394 44,554 8,793 - 2,522,741
Net pension liability 10,781,819 1,827,397 371,674 25,063 13,005,953
Net OPEB liability 7,374,246 1,156,442 374,438 90,647 8,995,773
Total Noncurrent Liabilities 20,625,459 12,594,075 2,841,549 115,710 36,176,793
Deferred Inflows of Resources
Related to pensions 2,105,560 195,004 62,381 48,375 2,411,320
Related to OPEB - 33,137 10,729 2,597 46,463
Total Liabilities and Deferred Inflows of Resources 36,720,346 15,188,766 3,841,658 323,922 56,074,692
Net Position
Net investment in capital assets 78,483,312 8,369,082 8,562,156 1,333,799 96,748,349
Restricted for:
Depreciation fund 6,326,373 - - - 6,326,373
Pension trust 5,878,179 - 5,878,179
Capital projects - - 780,000 - 780,000
Unrestricted 21,701,945 6,678,523 7,773,719 1,347,716 37,501,903
Total Net Position $ 112,389,809 $ 15,047,605 $ 17,115,875 $ 2,681,515 $ 147,234,804
The accompanying notes are an integral part of these financial statements.
24
TOWN OF READING, MASSACHUSETTS
PROPRIETARY FUNDS
STATEMENT OF REVENUES, EXPENSES,AND CHANGES IN FUND NET POSITION
FOR THE YEAR ENDED JUNE 30, 2019
(Except for the Electric Division Fund which is for the six months ended December 31, 2018)
Business-Type Activities
Electric Total
Division Water Sewer Nonmajor Enterprise
Fund Fund Fund Funds Funds
Operating Revenues
Charges for services $ 50,205,195 $ 6,635,436 $ 6,675,872 $ 616,911 $ 64,133,414
Other 258,247 - - - 258,247
Total Operating Revenues 50,463,442 6,635,436 6,675,872 616,911 64,391,661
Operating Expenses
Personnel - 1,948,161 730,729 157,608 2,836,498
Non-personnel - 449,193 307,603 128,586 885,382
Intergovernmental 767,705 2,296,922 5,090,525 - 8,155,152
Depreciation 2,231,977 809,346 404,429 71,678 3,517,430
Energy purchases 34,727,304 47,228 32,296 - 34,806,828
Operating 6,492,375 - - 6,492,375
Maintenance 807,893 - - - 807,893
Total Operating Expenses 45,027,254 5,550,850 6,565,582 357,872 57,501,558
Operating income 5,436,188 1,084,586 110,290 259,039 6,890,103
Nonoperating Revenues(Expenses)
Investment income 274,217 142,595 177,666 18,104 612,582
Interest expense - (193,287) (52,902) - (246,189)
Loss on disposal of capital assets (58,061) (58,061)
Other 380,168 - - 380,168
Total Nonoperating Revenues(Expenses) 596,324 (50,692) 124,764 18,104 688,500
Income before capital contributions and transfers 6,032,512 1,033,894 235,054 277,143 7,578,603
Capital grants and contributions 99,509 - 781,886 - 881,395
Transfers out (1,240,253) - - - (1,240,253)
Change in net position 4,891,768 1,033,894 1,016,940 277,143 7,219,745
Net Position at Beginning of Year 107,498,041 14,013,711 16,098,935 2,404,372 140,015,059
Net Position at End of Year $ 112,389,809 $ 15,047,605 $ 17,115,875 $ 2,681,515 $ 147,234,804
The accompanying notes are an integral part of these financial statements.
25
TOWN OF READING,MASSACHUSETTS
PROPRIETARY FUNDS
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30,2019
(Except for the Electric Division Fund which is for the six months ended December 31,2018)
Business-Type Activities
Electric Total
Division Water Sewer Nonmajor Enterprise
Fund Fund Fund Funds Funds
Cash Flows From Operating Activities
Receipts from customers and users $ 51,827,386 $ 6,775,409 $ 6,806,829 $ 559,411 $ 65,969,035
Payments to vendors and employees (41,852,122) (1,521,809) (685,772) (192,110) (44,251,813)
Customer purchase power charge adjustments 258,248 258,248
Payments to other governments - (2,296,922) (5,090,525) - (7,387,447)
Net cash provided by operating activities 10,233,512 2,956,678 1,030,532 367,301 14,588,023
Cash Flows From Noncapital Financing Activities
Other 380,168 - - - 380,168
Transfer out (1,240,253) (1,240,253)
Net cash(used for)noncapital financing activities (860,085) - (860,085)
Cash Flows From Capital and Related Financing Activities
Proceeds from issuance of bonds 260,000 260,000
Principal payments on bonds (1,561,200) (364,675) (1,925,875)
Acquisition and construction of capital assets (2,498,143) (1,535,525) (2,399,246) (179,621) (6,612,535)
Capital grants and contributions 212,763 781,886 994,649
Interest expense - (321,430) (77,500) (398,930)
Net cash(used for)capital and related financing activities (2,285,380) (3,418,155) (1,799,535) (179,621) (7,682,691)
Cash Flows From Investing Activities
(Decrease)in restricted cash and investments (18,527) - - - (18,527)
Investment income 274,217 142,595 177,666 18,104 612,582
Net cash provided by investing activities 255,690 142,595 177,666 18,104 594,055
Net change in cash and short-term investments 7,343,737 (318,882) (591,337) 205,784 6,639,302
Unrestricted Cash and Short Term Investments,Beginning of Year 42,316,280 10,508,845 9,387,352 1,251,719 63,464,196
Unrestricted Cash and Short Term Investments,End of Year $ 49,660,017 $ 10,189,963 $ 8,796,015 $ 1,457,503 $ 70,103,498
Reconciliation of Operating Income to Net Cash
Provided By Operating Activities
Operating income $ 5,436,188 $ 1,084,586 $ 110,290 $ 259,039 $ 6,890,103
Adjustments to reconcile operating income to net
cash provided by operating activities:
Depreciation 2,231,977 809,346 404,429 71,678 3,517,430
Changes in assets,liabilities,and deferred outflows/inflows:
User fees receivables 1,580,311 139,973 130,957 (57,500) 1,793,741
Inventory (54,405) (1,670) (111) (56,186)
Other assets (1,487,682) - - (1,487,682)
Deferred outflows of resources:
Related to pensions (1,691,058) (457,195) (50,379) 10,327 (2,188,305)
Related to OPEB (91,853) (59,802) (19,363) (4,688) (175,706)
Deferred inflows of resources:
Related to pensions (27,550) 4,232 21,018 (2,300)
Related to OPEB - 33,137 10,729 2,597 46,463
Warrants payable 4,052,260 635,239 337,699 132,049 5,157,247
Accrued liabilities - (3,690) (9,596) (56) (13,342)
Other liabilities 41,881 - - (32,931) 8,950
Net pension liability - 687,777 73,915 (43,366) 718,326
Net OPEB liability 215,893 116,527 37,730 9,134 379,284
Net cash provided by operating activities $ 10,233,512 $ 2,956,678 $ 1,030,532 $ 367,301 $ 14,588,023
The accompanying notes are an integral part of these financial statements.
26
TOWN OF READING, MASSACHUSETTS
FIDUCIARY FUNDS
STATEMENT OF FIDUCIARY NET POSITION
JUNE 30, 2019
Pension Private
and OPEB Purpose Agency
Trust Funds Trust Funds Fund
Assets
Cash and short-term investments $ 21,816,458 $ 50,026 $ 470,003
Investments
Certificates of deposit - 1,428,107 -
Domestic corporate bonds - 2,191,839 -
External investment pool 123,159,975 - -
Foreign corporate bonds - 1,391,957 -
Market linked certificates of deposit - 222,653 -
Total investments 123,159,975 5,234,556 -
Accounts receivable 58,692 - -
Other - - 2,271
Total Assets 145,035,125 5,284,582 472,274
Liabilities
Warrants payable 585 5,508 22,480
Other liabilities - - 449,794
Total Liabilities 585 5,508 $ 472,274
Net Position
Restricted for:
Pensions 136,261,046 -
O P E B 8,773,494 -
Other purposes - 5,279,074
Total Net Position $ 145,034,540 $ 5,279,074
The accompanying notes are an integral part of these financial statements.
27
TOWN OF READING, MASSACHUSETTS
FIDUCIARY FUNDS
STATEMENT OF CHANGES IN FIDUCIARY NET POSITION
FOR THE YEAR ENDED JUNE 30, 2019
Pension Private
and OPEB Purpose
Trust Funds Trust Funds
Additions
Contributions:
Employers $ 10,706,545 $ -
Plan members 2,801,575 -
Other - 1,908
Total contributions 13,508,120 1,908
Investment Income (Loss):
Increase (decrease) in fair value of investments (1,833,841) 376,135
Less: management fees (694,633) -
Net investment income (2,528,474) 376,135
Total Additions 10,979,646 378,043
Deductions
Benefit payments to plan members and beneficiaries 15,404,195 -
Administrative expenses 212,080 -
Scholarship payments - 22,275
Hospital payments - 131,728
Total Deductions 15,616,275 154,003
Net change (4,636,629) 224,040
Net position restricted for pensions, OPEB, and
other purposes
Beginning of year 149,671,169 5,055,034
End of year $ 145,034,540 $ 5,279,074
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. Summary of Significant Accounting Policies
The accounting policies of the Town of Reading, Massachusetts (the Town) conform
to generally accepted accounting principles (GAAP) as applicable to governmental
units. For information pertaining to the Electric Division please refer to the Electric
Division notes to the financial statements beginning on page 76. The following is a
summary of the more significant policies:
A. Reporting Entity
The Town is a municipal corporation governed by an elected Select Board. 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 established
to provide retirement benefits primarily to employees and their beneficiaries.
The System is presented using the accrual basis of accounting and is
reported as a pension trust fund in the fiduciary fund financial statements.
Detailed information about the pension plan's fiduciary 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 and Fund Financial Statements
Government-wide Financial Statements
The government-wide financial statements (i.e., the Statement of Net Position
and the Statement of Activities) report information on all of the nonfiduciary
activities of the primary government. For the most part, the effect of interfund
activity has been removed from these statements. Governmental activities,
which normally are supported by taxes and intergovernmental revenues, are
reported separately from business-type activities, which rely to a significant
extent on fees and charges for support.
The Statement of Activities demonstrates the degree to which the direct
expenses of a given function or segment is offset by program revenues.
Direct expenses are those that are clearly identifiable with a specific function
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
29
contributions that are restricted to meeting the operational or capital
requirements of a particular function or segment. Taxes and other items not
properly included among program revenues are reported instead as general
revenues.
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 columns in the
fund financial statements.
C. Measurement Focus, Basis of Accounting, and Financial Statement
Presentation
Government-wide Financial Statements
The government-wide financial statements are reported using the economic
resources measurement focus and the accrual basis of accounting. Revenues
are recorded when earned and expenses are recorded when a liability is
incurred, regardless of the timing of related cash flows. 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 eligibility requirements
imposed by the provider have been met. As a general rule, the effect of
interfund activity has been eliminated from the government-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, including
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 measurable
and available. Revenues are considered to be available when they are
collectible within the current period or soon enough thereafter to pay liabilities
of the current period. For this purpose, the Town considers property tax
revenues to be available if they are collected within 60 days of the end of the
current fiscal period. Revenue from grants, entitlements, and donations is
recognized when all eligibility requirements have been satisfied and they are
measurable and available. All other revenue items are considered to be
30
measurable and available only when cash is received by the Town.
Expenditures generally are recorded when a liability is incurred, as under
accrual accounting. However, certain expenditures such as debt service,
claims and judgments, compensated absences, pension, and OPEB are
recorded only when payment is due.
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 Town, 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.
• The Sewer Fund is used to report the Town's sewer enterprise fund
operations.
In addition, the Town has 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.
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The Town reports the following fiduciary funds:
• The Pension and OPEB Trust Funds are used to accumulate resources
for retiree pension and other post-employment benefits.
• The Private Purpose Trust Funds is used to account for hospital and
scholarship trust arrangements, under which principal and investment
income exclusively benefit individuals, private organizations, or other
governments.
• The Agency Fund accounts for fiduciary assets held by the Town in a
custodial capacity as an agent on behalf of others. This fund is primarily
used for private public safety details, student activity funds, and
developer escrow funds. Agency funds report only assets and liabilities
and, therefore, have no measurement focus.
D. Cash and Short-Term Investments
Cash balances from all funds, except those required to be segregated by law,
are combined to form a consolidation of cash. Cash balances are invested to
the extent available, and interest earnings are recognized in the general fund.
Certain special revenue, proprietary, and fiduciary funds segregate cash, and
investment earnings become a part of those funds.
Deposits with financial institutions consist primarily of demand deposits,
certificates of deposits, and savings accounts. A cash and investment pool is
maintained that is available for use by all funds. Each fund's portion of this
pool is reflected on the combined financial statements under the caption
"cash and short-term investments". The interest earnings attributable to each
fund type are included under investment income.
For purpose of the statement of cash flows, the proprietary funds consider
investments with original maturities of three months or less to be short-term
investments.
E. Investments
State and local statutes place certain limitations on the nature of deposits and
investments available. Deposits in any financial institution may not exceed
certain levels within the financial institution. Non-fiduciary fund investments
can be made in securities issued by or unconditionally guaranteed by the U.S.
Government or agencies that have a maturity of one year or less from the
date of purchase and repurchase agreements guaranteed by such securities
with maturity dates of no more than 90 days from 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
32
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 for the Town consist of marketable securities, bonds, and
certificates of deposit. Investments are carried at fair value, except certificates
of deposit which are reported at cost.
Investments for the Reading Contributory Retirement System, presented in
the Town's fiduciary funds, consist of investments in the Pension Reserves
Investment Trust (PRIT).
F. Property Tax Limitations
Legislation known as "Proposition 2'/2" limits the amount of revenue that can
be derived from property taxes. The prior fiscal year's tax levy limit is used as
a base and cannot increase by more than 2.5% (excluding new growth),
unless an override or debt exemption is voted. The actual fiscal year 2019 tax
levy reflected an excess capacity of$97,166.
In fiscal year 2019 the Town voted a Proposition 2'/2 override of $4.15 million
to be funded through the tax levy for general operations of the public schools,
five police officers, four firefighter/paramedics, and various general
government operations.
G. Inventories
Inventories are valued at cost using the first-in/first-out (FIFO) method. The
costs of governmental fund-type inventories are recorded as expenditures
when purchased rather than when consumed. No significant inventory
balances were on hand in governmental funds.
H. Capital Assets
Capital assets, which include property, plant, equipment, and infrastruc-
ture assets are reported in the applicable governmental or business-type
activities columns in the government-wide financial statements. Capital assets
are defined by the Town as summarized in the following table:
33
Minimum Minimum
Capitalization Useful
Asset Type Amount Life (Years)
Equipment $ 5,000 5
Land 10,000 N/A
Land improvements 10,000 20
Buildings 50,000 40
Building improvements 25,000 20
Plant (Water) (B&I) 50,000 50
Passenger vehicles 5,000 5
Heavy vehicular equipment 5,000 10
Fire apparatus 5,000 20
Equipment 5,000 10
Technology equipment 5,000 5
Infrastructure 50,000 20
Such assets are recorded at historical cost or estimated historical cost if
purchased or constructed. Donated capital assets are recorded at acquisition
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 projects
are constructed. Interest incurred during the construction phase of capital
assets of business-type activities is included as part of the capitalized value of
the assets constructed.
Capital assets are depreciated using the straight-line method over the
estimated useful lives noted in the previous table.
1. Compensated Absences
It is the Town's policy to permit employees to accumulate earned but unused
sick pay benefits. All vested sick pay is accrued when incurred in the
government-wide, proprietary, and fiduciary fund financial statements. A
liability for these amounts is reported in governmental funds only if they have
matured, for example, as a result of employee resignations and retirements.
J. Long-Term Obligations
In the government-wide financial statements, and proprietary fund types in the
fund financial statements, long-term debt, and other long-term obligations 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.
34
K. Fund Equity
Fund equity at the governmental fund financial reporting level is classified as "fund
balance". Fund equity for all other reporting is classified as "net position".
Fund Balance - Generally, fund balance represents the difference between the
current assets/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 appropriation 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 multiple
fund balance types, the Town uses the following order to liquidate liabilities:
restricted, committed, assigned, and unassigned.
Net 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 position is
reported as restricted when there are limitations imposed on their use either
through the enabling legislation adopted by the Town or through external
restrictions imposed by creditors, grantors, or laws or regulations of other
governments. The remaining net position is reported as unrestricted.
L. Use of Estimates
The preparation of basic financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures for contingent assets and liabilities at the date of the basic
financial statements, and the reported amounts of the revenues and
expenditures/expenses during the fiscal year. Actual results could vary from
estimates that were used.
2. Stewardship, Compliance, and Accountability
A. Budgetary Information
At the annual Town Meeting, the Finance Committee presents an operating and
capital budget for the proposed expenditures of the fiscal year commencing 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
35
special Town Meetings as required by changing conditions. In cases of
extraordinary or unforeseen expenses, the Finance Committee is empowered
to transfer funds from the Reserve Fund (a contingency appropriation) to a
departmental appropriation. "Extraordinary" includes expenses which are not in
the usual line or are great or exceptional. "Unforeseen" includes expenses
which are not 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 Massachusetts 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 subsequent
year.
B. Budgetary Basis
The general fund final appropriation appearing on the "Budget and Actual"
page of the fund financial statements represents the final amended budget
after all reserve fund transfers and supplemental appropriations.
C. Budget/GAAP Reconciliation
The budgetary data for the general fund is based upon accounting principles
that differ from generally accepted accounting principles (GAAP). Therefore,
in addition to the GAAP basis financial statements, the results of operations of
the general fund are presented in accordance with budgetary accounting
principles to provide a meaningful comparison to budgetary data.
36
The following is a summary of adjustments made to the actual revenues,
expenditures and other financing sources/uses, to conform to the budgetary
basis of accounting:
Other
Financing
General Fund Revenues Expenditures Sources/Uses
GAAP Basis $ 103,278,146 $ 101,076,650 $ 3,660,721
Reverse beginning of year
appropriation carryforwards
from expenditures - (1,938,415) -
Add end-of-year appropriation
carryforwards to expenditures - 3,654,179
To reverse the effect of non-
budgeted State contributions
for teachers retirement (5,565,557) (5,565,557) -
Remove effect of combining
stabilization fund with general
fund (52,991) - -
Other (13) 6 -
Budgetary Basis $ 97,659,585 $ 97,226,863 $ 3,660,721
D. Excess of Expenditures Over Appropriations
There were no expenditures exceeding appropriations during the current
fiscal year.
E. Deficit Fund Equity
The Town reported various special revenue funds reflecting individual deficit
account balances as of June 30, 2019. It is anticipated that the deficits in
these funds will be eliminated through future intergovernmental and
departmental revenues, bond proceeds, and transfers from other funds.
3. Cash and Short-Term Investments
Custodial Credit Risk- Deposits. Custodial credit risk is the risk that in the event of a
bank failure, the Town's deposits may not be returned. Massachusetts General
Law Chapter 44, Section 55, limits the Town's deposits "in a bank or trust company
or banking company to an amount not exceeding 60% 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 10% of the capital and
37
surplus of such bank or trust company. The Town does not have formal deposit
policies related to custodial credit risk.
As of June 30, 2019, $41,151,391 of the Town's bank balances of $49,475,961,
were exposed to custodial credit risk. However, $40,143,297 of the Town's
exposed balance was on deposit with the Massachusetts Municipal Depository
Trust (MMDT).
4. Investments
Town (Excluding the Pension Trust Fund)
The following is a summary of the Town's investments as of June 30, 2019:
Investment Type Amount
Certificates of deposits $ 19,187,659
Corporate equities 2,849,925
Domestic corporate bonds 5,350,420
Foreign corporate bonds 1 ,391,957
Total investments $ 28,779,961
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 investments 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 formal investment policies related to credit risk.
Presented below is the actual rating as of year-end for each investment type
of the Town:
Average Rating as of Year End
Investment Type Amount A A-
Domestic corporate bonds $ 5,350,420 $ 5,350,420 $ -
Foreign corporate bonds 1,391,957 - 1,391,957
Total $ 6,742,377 $ 5,350,420 $ 1 ,391,957
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 government
38
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 formal
investment policies related to custodial credit risk.
As of June 30, 2019, $9,592,302 of the Town's total investments were 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 securities as follows:
Held by
Investment Type Amount Counterparty
Corporate equities $ 2,849,925 $ 2,849,925
Domestic corporate bonds 5,350,420 5,350,420
Foreign corporate bonds 1,391,957 1,391,957
Total $ 9,592,302 $ 9,592,302
C. Concentration of Credit Risk
The Town places no limit on the amount the Town may invest in any one
issuer. The Town does not have formal investment policies related to
concentration of credit risk exposure.
As of June 30, 2019, the Town does not have an investment in one issuer
greater than 5% of total investments.
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 formal investment policies limiting
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)
Investment Type Amount 1-5 6-10
Domestic corporate bonds $ 5,350,420 $ 2,792,018 $ 2,558,402
Foreign corporate bonds 1,391,957 671,245 720,712
Total $ 6,742,377 $ 3,463,263 $ 3,279,114
39
E. Foreign Currency Risk
Foreign currency risk is the risk that changes in foreign exchange rates will
adversely affect the fair value of an investment. The Town does not have
formal investment policies related to 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).
The hierarchy is based on the valuation inputs used to measure the fair value
of the asset and give the highest priority to unadjusted quoted prices in active
markets for identical assets or liabilities (level 1 measurements) and the
lowest priority to unobservable inputs (level 3 measurements). The hierarchy
categorizes the inputs to valuation techniques used for fair value
measurement into three levels as follows:
• Level 1 — inputs that reflect quoted prices (unadjusted) in active
markets for identical assets or liabilities that the fund has the ability to
access at the measurement date.
• Level 2 — inputs other than quoted prices that are observable for an
asset or liability either directly or indirectly, including inputs in markets
that are not considered to be active. Because they must often be priced
on the basis of transactions involving similar but not identical securities
or do not trade with sufficient frequency, certain directly held securities
are categorized as level 2.
• Level 3 — unobservable inputs based on the best information available,
using assumptions in determining the fair value of investments and
derivative instruments.
In instances where inputs used to measure fair value fall into different levels
in the fair value hierarchy, fair value measurements in their entirety are
categorized based on the lowest level input that is significant to the valuation.
40
The Town has the following fair value measurements as of June 30, 2019:
Fair Value Measurements Using:
Quoted prices
in active Significant Significant
markets for observable unobservable
identical assets inputs inputs
Investment Type Amount Level 1 Level 2 Level 3
Investments by fair value level:
Corporate equities $ 2,849,925 $ 2,849,925 $ - $
Debt securities:
Domestic corporate bonds 5,350,420 - 5,350,420
Foreign corporate bonds 1,391,957 1,391,957
Total $ 9,592,302
Equity securities classified in Level 1 are valued using prices quoted in active
markets for those securities.
Debt securities classified in Level 2 are valued using either a bid evaluation or
a matrix pricing technique. Bid evaluations may include market quotations, yields,
maturities, call features, and ratings. Matrix pricing is used to value securities
based on the securities relationship to benchmark quote prices. Level 2 debt
securities have non-proprietary information that was readily available to market
participants, from multiple independent sources, which are known to be
actively involved in the market.
Pension Trust Fund(The System)
The following is a summary of the System's investments as of December 31, 2018:
Investment Type Amount
External investment pool (PRIT)' $ 123,159,975
*Fair value is the same as the value of the pool share. The Pension Reserves Investment Trust
was created under Massachusetts general law, chapter 32, section 22, in December 1983. The
Pension Reserves Investment Trust is operated under contract with a private investment advisor,
approved by the Pension Reserves Investment Management Board. The Pension Reserves
Investment Management Board shall choose an investment advisor by requesting proposals from
advisors and reviewing such proposals based on criteria adopted under Massachusetts general
law, chapter 30B.
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. Massachusetts General Law,
Chapter 32, Section 23, limits the investment of System funds, to the extent
not required for current disbursements, in the PRIT Fund or in securities, other
than mortgages or collateral loans, which are legal for the investment of funds in
41
savings banks under the laws of the Commonwealth, provided that no more
than the established percentage of assets, is invested in any one security.
Presented below is the actual rating as of year-end for each investment type:
Average Rating as of Year End
Investment Type Amount Unrated
External investment pool (PRIT) $ 123,159,975 $ 123,159,975
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 government
will not be able to recover the value of its investment or collateral securities
that are in the possession of another party. The System does not have formal
investment policies related to custodial credit risk.
As of December 31, 2018, none of the System's investments are exposed to
custodial credit risk as investments in external investment pools are not
exposed to custodial credit risk as their existence is not evidenced by
securities that exist in physical or book entry form.
C. Concentration of Credit Risk
Massachusetts General Law Chapter 32, Section 23 limits the amount the
System may invest in any one issuer or security type, with the exception of
the PRIT Fund. The System does not have formal policies related to
concentration of credit risk.
As of December 31, 2018, the System did not have any investments subject
to concentration of credit risk as investments in external investment pools are
excluded from concentration of credit risk disclosure.
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 System does not have formal investment policies limiting
investment maturities as a means of managing its exposure to fair value
losses arising from increasing interest rates.
42
E. Foreign Currency Risk
Foreign currency risk is the risk that changes in foreign exchange rates will
adversely affect the fair value of an investment. The System does not have
formal investment policies related to foreign currency risk.
F. Fair Value
The System 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. The hierarchy categorizes the inputs to valuation techniques
used for fair value measurement into three levels as follows:
• Level 1 — Inputs that reflect quoted prices (unadjusted) in active
markets for identical assets or liabilities that the fund has the ability to
access at the measurement date.
• Level 2 — Inputs other than quoted prices that are observable for an
asset or liability either directly or indirectly, including inputs in markets
that are not considered to be active. Because they must often be priced
on the basis of transactions involving similar but not identical securities
or do not trade with sufficient frequency, certain directly held securities
are categorized as level 2.
• Level 3 — Unobservable inputs based on the best information available,
using assumptions in determining the fair value of investments and
derivative instruments.
The net asset value (NAV) per share is the amount of net assets attributable
to each share of capital stock outstanding at the close of the period.
Investments measured at the NAV for fair value are not subject to level
classification.
The System has the following fair value measurements as of December 31,
2018:
Redemption
Unfunded Redemption Notice
Investment Type Amount Commitments Frequency Period
Investments measured at the net asset value(NAV):
External investment pool(PRIT) $ 123,159,975 $ - Monthly 30 Days
5. Property 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
43
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 calculated
using a fixed rate of$25 per $1,000 of value.
Property tax and excises receivables at June 30, 2019 consist of the following:
Gross Allowance Long-
Amount for Doubtful Current Term
(fund basis) Accounts Portion Portion
Real estate taxes $ 340,008 $ (34,001) $ 306,007 $ -
Personal property taxes 22,802 (6,990) 15,812 -
Tax liens 525,944 (52,594) - 473,350
Deferred taxes 65,986 - 65,986 -
Total property taxes $ 954,740 $ (93,585) $ 387,805 $ 473,350
Motor vehicle excise $ 244,594 $ (112,430) $ 132,164 $ -
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.
44
Receivables for water, sewer, and stormwater user charges, liens, and other fees
at June 30, 2019 consist of the following:
Allowance
Gross for Doubtful Net
Amount Accounts Amount
Water user charges $ 2,391,621 $ (299,162) $ 2,092,459
Water liens 60,599 (18,180) 42,419
Other 23,703 (11,852) 11,851
Total Water 2,475,923 (329,194) 2,146,729
Sewer user charges 2,446,213 (304,721) 2,141,492
Sewer liens 53,874 (16,162) 37,712
Other 37,523 (18,762) 18,761
Total Sewer 2,537,610 (339,645) 2,197,965
Stormwater user charges 224,423 (27,842) 196,581
Stormwater liens 3,320 (996) 2,324
Other 819 (410) 409
Total Stormwater 228,562 (29,248) 199,314
Total $ 5,242,095 $ (698,087) $ 4,544,008
7. Intergovernmental Receivables
This balance represents reimbursements requested from Federal and State
agencies for expenditures incurred in fiscal year 2019.
45
8. Interfund Transfers In and (Out)
The Town reports interfund transfers between many of its funds. The sum of all
transfers presented in the table agrees with the sum of interfund transfers
presented in the governmental fund financial statements. The following is an
analysis of interfund transfers made in fiscal year 2019:
Fund Transfers In Transfers Out
General Fund $ 3,811,642 $ 150,921 (1) (2)(3)(4)(5)(6)
Nonmajor Governmental Funds:
Revolving funds:
School rentals fund - 100,000 (1)
Recreation fund - 176,136 (2)
Receipts reserved for appropriation:
Sale of cemetery lots - 25,000 (1)
Sale of real estate - 600,000 (3)
Gifts and donations - 200,000 (3)
Town capital project funds - 230,000 (4)
School capital project funds 150,921 - (6)
Major Enterprise Funds:
Electric Division fund - 2,480,506 (5)
Total $ 3,962,563 $ 3,962,563
To General Fund for:
(1)Operating budget and appropriations
(2)Excess recreation revenues
(3)Purchase of land
(4)Reclassification of prior year bond premiums
(5)Payment in lieu of taxes (PILOT)
From General Fund for:
(6)Difference between project expenditures and final MSBA payment
46
9. Capital Assets
Capital asset activity for the year ended June 30, 2019 for the Town's
Governmental Activities was as follows:
Beginning Ending
Balance Increases Decreases Balance
Governmental Activities
Capital assets,depreciable:
Land improvements $ 3,855,354 $ 14,945 $ - $ 3,870,299
Buildings and improvements 156,377,822 289,725 (447,597) 156,219,950
Machinery,equipment,and furnishings 11,845,881 807,095 (567,297) 12,085,679
Infrastructure 31,864,159 1,134,907 32,999,066
Total capital assets,depreciable 203,943,216 2,246,672 (1,014,894) 205,174,994
Less accumulated depreciation for:
Land improvements (1,781,194) (174,962) - (1,956,156)
Buildings and improvements (54,949,114) (4,825,960) 447,597 (59,327,477)
Machinery,equipment,and furnishings (5,893,661) (1,076,996) 567,297 (6,403,360)
Infrastructure (18,256,729) (1,312,221) - (19,568,950)
Total accumulated depreciation (80,880,698) (7,390,139) 1,014,894 (87,255,943)
Total capital assets,depreciable,net 123,062,518 (5,143,467) - 117,919,051
Capital assets,non-depreciable:
Land 3,981,386 800,000 - 4,781,386
Construction in progress 1,335,448 474,313 (157,431) 1,652,330
Total capital assets,non-depreciable 5,316,834 1,274,313 (157,431) 6,433,716
Governmental activities capital assets,net $ 128,379,352 $ (3,869,154) $ (157,431) $ 124,352,767
Capital asset activity for the year ended June 30, 2019 for the Town's Business-
Type Activities was as follows:
Beginning Ending
Balance Increases Decreases Balance
Water Enterprise Fund
Capital assets,depreciable:
Land improvements $ 1,410,225 $ $ - $ 1,410,225
Buildings and improvements 587,299 - (89,719) 497,580
Machinery,equipment,and furnishings 2,145,260 13,450 (134,569) 2,024,141
Infrastructure 16,018,719 (49,392) 15,969,327
Total capital assets,depreciable 20,161,503 13,450 (273,680) 19,901,273
Less accumulated depreciation for:
Land improvements (589,817) (69,398) - (659,215)
Buildings and improvements (463,226) (16,480) 89,719 (389,987)
Machinery,equipment,and furnishings (1,498,017) (157,705) 134,569 (1,521,153)
Infrastructure (6,410,683) (565,763) 49,392 (6,927,054)
Total accumulated depreciation (8,961,743) (809,346) 273,680 (9,497,409)
Total capital assets,depreciable,net 11,199,760 (795,896) - 10,403,864
Capital assets,non-depreciable:
Land 121,823 - - 121,823
Construction in progress 4,744,896 1,522,075 - 6,266,971
Total capital assets,non-depreciable 4,866,719 1,522,075 - 6,388,794
Water enterprise capital assets,net $ 16,066,479 $ 726,179 $ $ 16,792,658
47
Beginning Ending
Balance Increases Decreases Balance
Sewer Enterprise Fund
Capital assets,depreciable:
Land improvements $ 26,492 $ $ $ 26,492
Buildings and improvements 176,850 176,850
Machinery,equipment,and furnishings 1,154,687 - 1,154,687
Infrastructure 12,730,925 1,646,881 (202,001) 14,175,805
Total capital assets,depreciable 14,088,954 1,646,881 (202,001) 15,533,834
Less accumulated depreciation for:
Land improvements (19,207) (662) (19,869)
Buildings and improvements (128,216) (4,422) (132,638)
Machinery,equipment,and furnishings (609,829) (109,776) - (719,605)
Infrastructure (8,567,642) (289,569) 202,001 (8,655,210)
Total accumulated depreciation (9,324,894) (404,429) 202,001 (9,527,322)
Total capital assets,depreciable,net 4,764,060 1,242,452 - 6,006,512
Capital assets,non-depreciable:
Land 61,761 - - 61,761
Construction in progress 2,958,329 2,263,238 (1,510,873) 3,710,694
Total capital assets,non-depreciable 3,020,090 2,263,238 (1,510,873) 3,772,455
Sewer enterprise capital assets,net $ 7,784,150 $ 3,505,690 $ (1,510,873) $ 9,778,967
Beginning Ending
Balance Increases Decreases Balance
Nonmajor Enterprise Funds
Capital assets,depreciable:
Machinery,equipment,and furnishings $ 653,406 $ - $ $ 653,406
Infrastructure 663,987 358,853 - 1,022,840
Total capital assets,depreciable 1,317,393 358,853 - 1,676,246
Less accumulated depreciation for:
Machinery,equipment,and furnishings (242,164) (49,860) - (292,024)
Infrastructure (28,605) (21,818) - (50,423)
Total accumulated depreciation (270,769) (71,678) - (342,447)
Total capital assets,depreciable,net 1,046,624 287,175 - 1,333,799
Capital assets,non-depreciable:
Construction in progress 179,232 - (179,232) -
Total capital assets,non-depreciable 179,232 - (179,232) -
Nonmajor enterprise capital assets,net $ 1,225,856 $ 287,175 $ (179,232) $ 1,333,799
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Depreciation expense was charged to functions of the Town as follows:
Governmental Activities:
General government $ 182,306
Public safety 592,007
Education 3,622,265
Public works 1 ,801,566
Facilities 42,265
Health and human services 32,854
Culture and recreation 1 ,116,876
Total governmental activities $ 7,390,139
Business-Type Activities:
Water Enterprise Fund $ 809,346
Sewer Enterprise Fund 404,429
Nonmajor Enterprise Fund 71,678
Total business-type activities $ 1 ,285,453
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 and OPEB, in accordance with GASB Statement
No. 68, Accounting and Financial Reporting for Pensions— an amendment of
GASB Statement No. 27 and GASB Statement No. 75, Accounting and Financial
Reporting for Postemployment Benefits Other Than Pensions are more fully
discussed in the corresponding pension and OPEB notes.
11. Warrants Payable
Warrants payable represent fiscal year 2019 expenditures paid by July 15, 2019.
12. Accrued Liabilities
This balance primarily represents amounts accrued interest and other
expenditures related to fiscal year 2019 paid subsequent to July 15, 2019.
13. Tax Refunds Payable
This balance consists of an estimate of refunds due to property taxpayers for
potential abatements, pending with the state Appellate Tax Board.
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14. Notes Payable
The following summarizes activity in notes payable during fiscal year 2019:
Beginning Ending
Interest Date of Date of Balance at New Balance at
Governmental Activities Rate Issue Maturity 06/30/18 Issues Maturities 06/30/19
Reading Memorial High
School repairs and
additions 2.00% 12/15/17 08/17/18 $ 1,490,000 $ - $ (1,490,000)$ -
15. Long-Term Debt
A. General Obligation Bonds
The Town issues general obligation bonds to provide funds for the acquisition
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:
Amount
Serial Outstanding
Maturities Interest as of
Governmental Activities Through Rates % 6/30/19
General Obligation Bonds 06/15/27 1.26-4.00% $ 19,944,000
Amount
Serial Outstanding
Maturities Interest as of
Water Enterprise Fund Through Rates % 6/30/19
General Obligation Bonds 06/15/27 1.26-4.00% $ 3,285,000
Massachusetts Clean Water Trust 11/01/27 0.00- 1.49% 7,092,000
Total Water enterprise $ 10,377,000
Amount
Serial Outstanding
Maturities Interest as of
Sewer Enterprise Fund Through Rates % 6/30/19
General Obligation Bonds 06/15/25 4.00% $ 1,630,000
Massachusetts Clean Water Trust 05/15/29 0.00% 636,629
Total Sewer enterprise $ 2,266,629
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B. Future Debt Service
The annual payments to retire all general obligation long-term debt
outstanding, payable by fiscal year, as of June 30, 2019 are as follows:
Governmental Principal Interest Total
2020 $ 3,600,000 $ 773,414 $ 4,373,414
2021 3,630,000 635,158 4,265,158
2022 3,565,000 496,927 4,061,927
2023 3,504,000 358,433 3,862,433
2024 3,545,000 222,557 3,767,557
2025 - 2027 2,100,000 88,488 2,188,488
Total $ 19,944,000 $ 2,574,977 $ 22,518,977
Water Principal Interest Total
2020 $ 425,000 $ 129,100 $ 554,100
2021 425,000 112,100 537,100
2022 425,000 95,100 520,100
2023 425,000 78,100 503,100
2024 425,000 61,100 486,100
2025 - 2027 1,160,000 83,600 1,243,600
Total $ 3,285,000 $ 559,100 $ 3,844,100
Sewer Principal Interest Total
2020 $ 275,000 $ 65,200 $ 340,200
2021 275,000 54,200 329,200
2022 270,000 43,200 313,200
2023 270,000 32,400 302,400
2024 270,000 21,600 291,600
2025 270,000 10,800 280,800
Total $ 1,630,000 $ 227,400 $ 1,857,400
The Town has issued direct borrowings from the Massachusetts Pollution
Abatement Trust (MWPAT), a state revolving loan fund (SRF) of the
Massachusetts Clean Water Trust (MCWT), a component unit of the
Commonwealth of Massachusetts. MCWT issues special obligation bonds
under its SRF programs to provide low cost financing to Cities, Towns, and
other eligible borrowers, primarily for the construction and improvement of
drinking water and wastewater infrastructure. There were no unused lines of
credit or assets pledged as collateral for debt. The Town certified that rates
and charges in the Water and Sewer Enterprise funds have been set at a
51
sufficient level to cover estimated operating expenses and debt service
related to direct borrowings. In addition, the Town as an "obligated person"
with respect to Rule 15c2-12(b)(5) adopted by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, agrees with MCWT
to provide an annual report, not later than 270 days after the close of each
fiscal year, that incorporates the most recently available audited financial
statements to meet continuing disclosure requirements.
The annual payments to retire all state revolving loan direct borrowings
outstanding, payable by fiscal year, as of June 30, 2019 are as follows:
Water Principal Interest Total
2020 $ 1,131,200 $ 155,230 $ 1,286,430
2021 1,131,200 135,830 1,267,030
2022 1,126,200 116,530 1,242,730
2023 917,200 97,330 1,014,530
2024 916,200 78,250 994,450
2025 - 2028 1,870,000 120,125 1,990,125
Total $ 7,092,000 $ 703,295 $ 7,795,295
Sewer Principal Interest Total
2020 $ 77,175 $ - $ 77,175
2021 77,154 - 77,154
2022 68,200 - 68,200
2023 68,200 - 68,200
2024 68,200 - 68,200
2025 - 2029 277,700 - 277,700
Total $ 636,629 $ - $ 636,629
C. Changes in General Long-Term Liabilities
During the year ended June 30, 2019, the following changes occurred in long-
term liabilities:
Less Equals
Beginning Ending Current Long-Term
Balance Additions Reductions Balance Portion Portion
Governmental Activities
Bonds payable $ 23,494,000 $ $ (3,550,000) $ 19,944,000 $ (3,600,000) $ 16,344,000
Unamortized bond premiums 2,598,857 (418,362) 2,180,495 (418,362) 1,762,133
Total bonds payable 26,092,857 (3,968,362) 22,124,495 (4,018,362) 18,106,133
Accrued employee benefits 1,243,071 215,166 (582,845) 875,392 (87,539) 787,853
Net pension liability 24,377,732 9,929,433 34,307,165 34,307,165
Net OPEB liability 60,198,167 6,745,460 66,943,627 66,943,627
Total Governmental Activities $ 111,911,827 $ 16,890,059 $ (4,551,207) $ 124,250,679 $ (4,105,901) $ 120,144,778
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Less Equals
Beginning Ending Current Long-Term
Balance Additions Reductions Balance Portion Portion
Water Enterprise Fund
Bonds payable $ 3,715,000 $ $ (430,000) $ 3,285,000 $ (425,000) $ 2,860,000
Unamortized bond premiums 940,960 (98,039) 842,921 (98,039) 744,882
State revolving loans
(direct borrowings) 8,223,200 (1,131,200) 7,092,000 (1,131,200) 5,960,800
Total bonds payable 12,879,160 (1,659,239) 11,219,921 (1,654,239) 9,565,682
Accrued employee benefits 47,245 5,368 (8,059) 44,554 44,554
Net pension liability 1,139,620 687,777 1,827,397 1,827,397
Net OPEB liability 1,039,915 116,527 - 1,156,442 - 1,156,442
Tota I Wate r e nte rp ri se $ 15,105,940 $ 809,672 $ (1,667,298) $ 14,248,314 $ (1,654,239) $ 12,594,075
Less Equals
Beginning Ending Current Long-Term
Balance Additions Reductions Balance Portion Portion
Sewer Enterprise Fund
Bonds payable $ 1,905,000 $ $ (275,000) $ 1,630,000 $ (275,000) $ 1,355,000
Unamortized bond premiums 221,386 (24,598) 196,788 (24,598) 172,190
State revolving loans
(direct borrowings) 466,304 260,000 (89,675) 636,629 (77,175) 559,454
Total bonds payable 2,592,690 260,000 (389,273) 2,463,417 (376,773) 2,086,644
Accrued employee benefits 18,517 11,287 (21,011) 8,793 8,793
Net pension liability 297,759 73,915 371,674 371,674
Net OPEB liability 336,708 37,730 374,438 374,438
Total Sewer enterprise $ 3,245,674 $ 382,932 $ (410,284) $ 3,218,322 $ (376,773) $ 2,841,549
Less Equals
Beginning Ending Current Long-Term
Balance Additions Reductions Balance Portion Portion
Nonmajor Enterprise Funds
Net pension liability $ 68,429 $ - $ (43,366) $ 25,063 $ $ 25,063
Net OPEB liability 81,513 9,134 90,647 90,647
Total Nonmajor enterprise $ 149,942 $ 9,134 $ (43,366) $ 115,710 $ $ 115,710
D. Bond Authorizations
Long-term debt authorizations which have not been issued or rescinded as of
June 30, 2019 are as follows:
Date Authorized Purpose Amount
April 2013 MWRA 1/1 sewer loan $ 460,000
April 2015 Birch meadow field lighting 900,000
November 2018 MWRA sewer I & I phase 12 1,040,000
November 2018 MWRA sewer I & I phase 13 1,040,000
April 2019 Turf II with lighting 2,225,000
April 2019 Building security 4,000,000
April 2019 Auburn water tank replacement 4,500,000
April 2019 Grove street water main improvements 1,000,000
Total $ 15,165,000
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E. Long-Term Debt Supporting Governmental and Business-Type Activities
General obligation bonds and state revolving loans issued by the Town for
various municipal projects are approved by Town Meeting and repaid with
revenues recorded in the general fund and user fees recorded in enterprise
funds. All other long-term debt is repaid from the funds that the cost relates to,
primarily the general fund and enterprise funds.
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. Deferred inflows of resources
related to pension and OPEB, in accordance with GASB Statement No. 68,
Accounting and Financial Reporting for Pensions — an amendment of GASB
Statement No. 27 and GASB Statement No. 75, Accounting and Financial
Reporting for Postemployment Benefits Other Than Pensions will be recognized as
decreases in the respective expense in future years and is more fully described in
the corresponding pension and OPEB notes.
The following is a summary of other deferred inflows of resources balances as of
June 30, 2019:
Entity-wide Basis Fund Basis
Governmental Governmental Funds
Activities General Fund
Gains on refunding bonds $ 90,600 $ -
Unavailable revenues related to:
Outstanding receivables - 1,281,976
Taxes collected in advance 65,983 65,983
Total deferred inflows of resources $ 156,583 $ 1,347,959
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 (1) receivables
for which revenues are not considered available to liquidate liabilities of the
current year and (2) property taxes collected in advance for periods subsequent to
the reporting date.
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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, 2019:
Nonspendable - Represents amounts that cannot be spent because they are
either (a) not in spendable form or (b) legally or contractually required to be
maintained intact. This fund balance classification includes governmental fund
reserves for the principal portion of permanent trust funds.
Restricted - Represents amounts that are restricted to specific purposes by
constraints imposed by creditors, grantors, contributors, or laws or regulations of
other governments, or constraints imposed by law through constitutional
provisions or enabling legislation. This fund balance classification includes
general fund restrictions for debt service, 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 acquisitions
and improvements (now reported as part of the general fund per GASB 54). A
similar action is needed to modify or rescind a commitment.
Assigned - Represents amounts that are constrained by the Town's intent to use
these resources for a specific purpose. This fund balance classification includes
general fund encumbrances that have been established by various Town
departments for the expenditure of current year budgetary financial resources in
the subsequent budgetary period and surplus set aside to be used in the
subsequent year's budget voted by Town Meeting.
Unassigned - Represents amounts that are available to be spent in future
periods, the Town's general stabilization account, and deficit balances in
nonmajor governmental funds. The Town's stabilization account is authorized in
accordance with Massachusetts General Law Chapter 40, section 513. The
creation of, appropriation into, and appropriation out of the stabilization account
requires two-thirds approval at Town Meeting.
55
Following is a breakdown of the Town's fund balances at June 30, 2019:
Nonmajor Total
General Governmental Governmental
Fund Funds Funds
Nonspendable
Permanent funds:
Cemetery $ - $ 3,042,388 $ 3,042,388
Other - 272,165 272,165
Total Nonspendable - 3,314,553 3,314,553
Restricted
For high school debt service 36,078 - 36,078
Federal grants - 17,284 17,284
State grants:
Special education(circuit breaker) - 1,058,625 1,058,625
State aid to libraries - 42,060 42,060
Other - 116,225 116,225
Revolving funds:
Inspection permit - 946,114 946,114
Extended day program - 923,244 923,244
All-day kindergarten program - 832,234 832,234
School lunch - 583,449 583,449
Recreation - 311,071 311,071
RISE preschool program - 222,644 222,644
Athletic activities - 141,907 141,907
Special education tuition - 83,313 83,313
Public health clinics - 64,893 64,893
Other - 371,293 371,293
Receipts reserved for appropriation:
Affordable housing fund - 345,862 345,862
Sale of cemetery lots - 248,989 248,989
Sale of real estate - 26,153 26,153
Other - 43,179 43,179
Gifts and donations - 1,057,152 1,057,152
Permanent funds:
Cemetery - 2,228,974 2,228,974
Other - 473,474 473,474
Town capital project funds:
West street road improvements - 367,156 367,156
Library renovations - 165,514 165,514
Other - 28,349 28,349
Total Restricted 36,078 10,699,158 10,735,236
(continued)
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(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 414,866 - 414,866
Public safety 55,039 - 55,039
Education 1,357,338 - 1,357,338
Public works 733,118 - 733,118
Facilities 1,391,835 - 1,391,835
Employee benefits 21,130 - 21,130
For next year's expenditures 1,375,000 - 1,375,000
Total Assigned 5,348,326 - 5,348,326
Unassigned
Operating fund 17,110,790 - 17,110,790
General stabilization 1,670,442 - 1,670,442
Deficit balances - (93,613) (93,613)
Total Unassigned 18,781,232 (93,613) 18,687,619
Total Fund Balance $ 24,668,636 $ 13,920,098 $ 38,588,734
18. Reading Contributory Retirement System
The Town follows the provisions of GASB Statement No. 68, Accounting and
Financial Reporting for Pensions— an amendment of GASB Statement No. 27,
with respect to the employees' retirement funds.
A. Plan Description
Substantially all employees of the 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.
57
Participant 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 on or after January 1, 1979 contribute an additional 2% on all
gross regular compensation over the rate of $30,000 per year. The percentages
are as follows:
Before January 1, 1975 5.00%
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
April 2, 2012 years
of creditable service
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.
Participant Retirement Benefits
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.
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.
58
There are 4 classes of membership in the retirement system, but one of these
classes, Group 3, is made up exclusively of the Massachusetts State Police.
The other three classes are as follows:
• Group 1 — General employees, including clerical, administrative,
technical, and all other employees not otherwise classified.
• Group 2 — Certain specified hazardous duty positions.
• Group 4 — Police officers, firefighters, and other specified hazardous
positions.
A retirement allowance may be received at any age, upon attaining 20 years of
service. The plan also provides for retirement at age 55 if the participant was a
member prior to January 1, 1978, with no minimum vesting requirements. If the
participant was a member on or after January 1, 1978 and a member of Groups
1 or 2, then a retirement allowance may be received if the participant (1) has at
least 10 years of creditable service, (2) is age 55, (3) voluntarily left Town
employment on or after that date, and (4) left accumulated annuity deductions
in the fund. Members of Group 4 have no minimum vesting requirements,
however, must be at least age 55. Groups 2 and 4 require that participants
perform the duties of the Group position for at least 12 months immediately
prior to retirement.
A participant who became a member on or after April 2, 2012 is eligible for a
retirement allowance upon 10 years creditable service and reaching ages 60
or 55 for Groups 1 and 2, respectively. Participants in Group 4 must be at
least age 55. Groups 2 and 4 require that participants perform the duties of
the Group position for at least 12 months immediately prior to retirement.
Methods of Payment
A member may elect to receive his or her retirement allowance in one of three
forms of payment as follows:
• Option A— Total annual allowance, payable in monthly installments,
commencing at retirement and terminating at the members death.
• Option B —A reduced annual allowance, payable in monthly install-
ments, commencing at retirement and terminating at the death of the
member, provided however, that if the total amount of the annuity
portion received by the member is less than the amount of his or her
accumulated deductions, including interest, the difference or balance
of his accumulated deductions will be paid in a lump sum to the
retiree's beneficiary or beneficiaries of choice.
• Option C—A reduced annual allowance, payable in monthly installments,
commencing at retirement.At the death of the retired employee, 2/3 of the
59
allowance is payable to the member's designated beneficiary (who may
be the spouse, or former spouse who has not remarried, child, parent,
sister, or brother of the employee) for the life of the beneficiary. For
members who retired on or after January 12, 1988, if the beneficiary pre-
deceases the retiree, the benefit payable increases (or "pops up" to
Option A) based on the factor used to determine the Option C benefit at
retirement. For members who retired prior to January 12, 1988, if the
System has accepted Section 288 of Chapter 194 of the Acts of 1998
and the beneficiary pre-deceases the retiree, the benefit payable "pops
up" to Option A in the same fashion. The Option C became available to
accidental disability retirees on November 7, 1996.
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 3.00%.
Employer Contributions
Employers are required to contribute at actuarially determined rates as
accepted by the Public Employee Retirement Administration Commission
(PERAC).
The Town's contribution to the System for the year ended June 30, 2019 was
$4,228,374 which was equal to its annual required contribution.
B. Summary of Significant Accounting Policies
For purposes of measuring the net pension liability, deferred outflows and
deferred inflows of resources related to pensions, and pension expense,
information about the fiduciary net position of the System and additions
to/deductions from System's fiduciary net position have been determined on
the same basis as they are reported by System. For this purpose, benefit
payments (including refunds of employee contributions) are recognized when
due and payable in accordance with benefit terms. Investments are reported at
fair value.
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C. Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and
Deferred (Inflows) of Resources Related to Pensions
The following disclosures are reported as of June 30, 2019 and do not include
the Electric division which is reported as of December 31, 2018 with a net
pension liability reported as of December 31, 2017.
At June 30, 2019, the Town reported a liability of $36,531,299 for its propor-
tionate share of the net pension liability. The net pension liability was measured as
of December 31, 2018, and the total pension liability used to calculate the net
pension liability was determined by an actuarial valuation as of January 1,
2019. 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, 2018, the Town's proportion was 70.90%.
For the year ended June 30, 2019, the Town recognized pension expense of
$6,619,746. 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 $ 4,084,782 $ -
Changes of assumptions 2,601,643 (3,114,934)
Changes in proportion and differences between
employer contributions and proportionate share of
contributions 988,898 (856,849)
Differences between expected and actual experience 7,744,486 (783,360)
Total $ 15,419,809 $ (4,755,143)
Amounts reported as deferred outflows (inflows) of resources related to
pensions will be recognized in pension expense as follows:
Fiscal Year Ended June 30:
2020 $ 3,800,508
2021 2,254,296
2022 1,549,449
2023 2,862,474
2024 197,939
Total $ 10,664,666
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D. Actuarial Assumptions
The total pension liability in the January 1, 2019 actuarial valuation was
determined using the following actuarial assumptions, applied to all periods
included in the measurement:
Valuation date January 1 , 2019
Actuarial cost method Entry age normal
Amortization method:
UAAL: Increasing dollar amount at 4.50% to
reduce the Unfunded Actuarial Accrued
Liability(UAAL) to zero on or before
June 30, 2029. The annual increase in
appropriation is further limited to 5.00%,
with the exception of the 2021
appropriation (no limit)
Inflation Rate 3.00%
Salary increases 6.00% -4.25%, based on service for
Groups 1 and 2; 7.00% -4.75% based
on service for Group 4
Investment rate of return 7.50%, net of pension plan investment
expense, including inflation
Post-retirement cost-of- 3.00% of first$12,000
living adjustment
Mortality Rates:
Pre-retirement, RP-2000 Mortality table, base year
retirement, and 2009, projected with fully generational
beneficiary mortality mortality improvement using Scale BB
Mortality for disabled RP-2000 Mortality table, base year
members 2012, projected with fully generational
mortality improvement using Scale BB
E. Target Allocations
The long-term expected rate of return on pension plan investments was
selected from a best estimate range determined using the building block
approach. Under this method, an expected future real return range (expected
returns, net of pension plan investment expense and inflation) is calculated
separately for each asset class. These ranges are combined to produce the
long-term expected rate of return by weighting the expected future real rates of
return net of investment expenses by the target asset allocation percentage and
by adding expected inflation. The target allocation and best estimates of
62
arithmetic real rates of return for each major class are summarized in the
following table:
Long-term
Target Expected
Asset Real Rate
Asset Class Allocation of Return
Global equity 39.00% 4.75%
Fixed income 15.00% 1.05%
Private equity 13.00% 8.15%
Hedge funds and portfolio completion 11.00% 3.76%
Real estate 10.00% 3.43%
Value-added fixed income 8.00% 4.58%
Timber/natural resources 4.00% 4.00%
Total 100.00%
F. 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 the
plan member contributions will be made at the current contribution rate and
that employer contributions will be made at contractually required rates,
actuarially determined. Based on those assumptions, the pension plan's
fiduciary net position was projected to be available to make all projected future
benefit payments to current active and inactive plan members. Therefore, the
long-term expected rate of return on pension plan investments was applied to
all periods of projected benefit payments to determine the total pension
liability.
G. Sensitivity of the Proportionate Share of the Net Pension Liability to Changes in
the Discount Rate
The following presents the Town's proportionate share of the net pension
liability calculated using the discount rate of 7.50°/x, as well as what the
Town's proportionate share of the net pension liability would be if it were
calculated using a discount rate that is one percentage-point lower or one
percentage-point higher than the current rate:
Current
1% Discount 1%
Decrease Rate Increase
6.50% 7.50% 8.50%
$ 51,163,209 $ 36,531,299 $ 24,105,809
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H. Pension Plan 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' Retirement System (MTRS)
A. Plan Description
The Massachusetts Teachers' Retirement System (MTRS) is a public
employee retirement system (PERS) that administers a cost-sharing multi-
employer defined benefit plan, as defined in Governmental Accounting
Standards Board (GASB) Statement No. 67, Financial Reporting for Pension
Plans– an Amendment of GASB Statement No. 25. MTRS is managed by the
Commonwealth on behalf of municipal teachers and municipal teacher
retirees. The Commonwealth is a nonemployer contributor and is responsible
for all contributions and future benefit requirements of the MTRS. The MTRS
covers certified teachers in cities (except Boston), towns, regional school
districts, charter schools, educational collaboratives, and Quincy College. The
MTRS is part of the Commonwealth's reporting entity and does not issue a
stand-alone audited financial report.
Management of MTRS is vested in the Massachusetts Teachers' Retire-
ment Board (MTRB), which consists of seven members—two elected by the
MTRS members, one who is chosen by the six other MTRB members, the
State Treasurer (or their designee), the State Auditor (or their designee), a
member appointed by the Governor, and the Commissioner of Education (or
their designee), who serves ex-officio as the Chairman of the MTRB.
B. Benefits Provided
MTRS provides retirement, disability, survivor, and death benefits to members
and their beneficiaries. Massachusetts General Laws (MGL) establish uniform
benefit and contribution requirements for all contributory PERS. These
requirements provide for superannuation retirement allowance benefits up to a
maximum of 80% of a member's highest 3-year average annual rate of regular
compensation. For employees hired after April 1, 2012, retirement allowances
are calculated on the basis of the last 5 years or any 5 consecutive years,
whichever is greater in terms of compensation. Benefit payments are based
upon a member's age, length of creditable service, group creditable service,
and group classification. The authority for amending these provisions rests
with the Legislature.
Members become vested after 10 years of creditable service. A superannuation
retirement allowance may be received upon the completion of 20 years of
creditable service or upon reaching the age of 55 with 10 years of service.
64
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:
Membership Date % of Compensation
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
D. Actuarial Assumptions
The total pension liability for the June 30, 2018 measurement date was
determined by an actuarial valuation as of January 1, 2018 rolled forward to
June 30, 2018. This valuation used the following assumptions:
• (a) 7.35% 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.
65
Mortality rates were as follows:
Pre-retirement RPT-2014 White Collar Employees table projected
generationally with Scale MP-2016 (gender distinct)
Post-retirement RP-2014 White Collar Healthy Annuitant table projected
generationally with Scale MP-2016 (gender distinct)
Disability RP-2014 White Collar Healthy Annuitant table projected
generationally with Scale MP-2016 (gender distinct)
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, 2018 are summarized in the following table:
Target Long-Term Expected
Asset Class Allocation Real Rate of Return
Global equity 39.00% 5.00%
Portfolio completion strategies 13.00% 3.70%
Core fixed income 12.00% 0.90%
Private equity 12.00% 6.60%
Real estate 10.00% 3.80%
Value added fixed income 10.00% 3.80%
Timber/natural resources 4.00% 3.40%
Total 100.00%
E. Discount Rate
The discount rate used to measure the total pension liability was 7.35%. 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 projected 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.
66
F. Sensitivity Analysis
The following illustrates the sensitivity of the collective net pension liability to
changes in the discount rate. In particular, the table presents the MTRS
collective net pension liability assuming it was calculated using a single
discount rate that is one percentage-point lower or one percentage-point
higher than the current discount rate (amounts in thousands):
1% Decrease Current Discount 1% Increase
to 6.35% Rate (7.35%) to 8.35%
$ 29,482,300 $ 23,711,289 $ 18,771,300
G. Special Funding Situation
The Commonwealth is a nonemployer contributor and is required by statute to
make all actuarial determined employer contributions on behalf of the
member employers. Therefore, these employers are considered to be in a
special funding situation as defined by GASB Statement No. 68, Accounting
and Financial Reporting for Pensions— an Amendment of GASB Statement
No. 27 and the Commonwealth is a nonemployer contributing entity in MTRS.
Since the employers do not contribute directly to MTRS, there is no net
pension liability to recognize for each employer.
H. Town Proportions
In fiscal year 2018 (the most recent measurement period), the Town's
proportionate share of the MTRS' collective net pension liability was
approximately $100,371,336 based on a proportionate share of 0.423306%.
As required by GASB 68, the Town has recognized its portion of the
Commonwealth's contribution of approximately $5,565,557 as both a revenue
and expenditure in the general fund, and its portion of the collective pension
expense of approximately $10,171,182 as both a revenue and expense in the
governmental activities.
20. Other Post-Employment Benefits (GASB 74 and 75)
GASB Statement No. 74, Financial Reporting for Postemployment Benefit Plans
Other Than Pension Plans (OPEB), replaces the requirement of Statement No.
43, Financial Reporting for Postemployment Benefit Plans Other Than Pension
Plans. This applies if a trust fund has been established to fund future OPEB costs.
In fiscal year 2012, the Town established an OPEB Trust Fund to provide funding
for future employee health care costs.
GASB Statement No. 75, Accounting and Financial Reporting for Postemployment
Benefits Other Than Pensions, replaces the requirements of Statement No. 45,
Accounting and Financial Reporting by Employers for Postemployment Benefits
67
Other Than Pensions. The Statement establishes standards for recognizing and
measuring liabilities, deferred outflows of resources, deferred inflows of resources,
and expense/expenditures. This Statement identifies the methods and assumptions
that are required to be used to project benefit payments, discounted projected
benefit payments to their actuarial present value, and attribute that present value to
periods of employee service.
All the following OPEB disclosures are based on a measurement date of June 30,
2019 (excluding the Electric division).
A. General Information about the OPEB Plan
Plan Description
The Town provides post-employment healthcare benefits for retired
employees through the Town's plan. The Town provides health insurance
coverage through Blue Cross Blue Shield. The benefits, benefit levels,
employee contributions, and employer contributions are governed by
Chapter 32 of the Massachusetts General Laws.
Benefits Provided
The Town provides medical and prescription drug insurance to retirees and
their covered dependents. All active employees who retire from the Town and
meet the eligibility criteria will receive these benefits.
Funding Policy
The Town's funding policy includes financing the implicit subsidy on a pay-as-
you-go basis, as required by statute. Additional contributions are based
annual budget limitations/authorizations.
Plan Membership
At June 30, 2019, the following employees were covered by the benefit terms:
Inactive employees or beneficiaries
currently receiving benefit payments 634
Active employees 526
Total 1,160
B. Investments
The OPEB trust fund assets consist of cash and short-term investments.
68
Rate of return. For the year ended June 30, 2019, the annual money-
weighted rate of return on investments, net of investment expense, was not
available.
C. Actuarial Assumptions and Other Inputs
The net OPEB liability was determined by an actuarial valuation as of
June 30, 2019, using the following actuarial assumptions, applied to all
periods included in the measurement, unless otherwise specified:
Inflation 3.00%
Salary increases 6.00% decreasing to 4.25% based on service
for Group 1 and Group 2; 7.00% decreasing to
4.75% based on service for Group 4; 7.50%
decreasing to 4.00% based on service for
teachers
Discount rate 7.25%
Healthcare cost trend rates 7.00% decreasing by 0.25% for 10 years to an
ultimate level of 4.50% per year
Mortality rates were based on the following:
• Pre-Retirement (Non-Teachers): RP-2014 Blue Collar Employee
Mortality Table projected generationally with Scale MP-2018
• Healthy (Non-Teachers): RP-2014 Blue Collar Healthy Annuitant
Mortality Table projected generationally using Scale MP-2018
• Disabled (Non-Teachers): RP-2014 Healthy Annuitant Mortality Table
set forward one year projected generationally using Scale MP-2018
• 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 using Scale MP-2016
• Disabled (Teachers): RP-2014 White Collar Healthy Annuitant Mortality
Table projected generationally with Scale MP-2016
D. Target Allocations
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
69
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, 2019 are summarized in the following table:
Target Long-term
Asset Expected Real
Asset Class Allocation Rate of Return
Domestic equity 17.50% 6.16%
International developed markets equity 15.50% 6.69%
Hedge fund, GTAA, risk parity 13.00% 3.68%
Core fixed income 12.00% 1 .89%
Private equity 12.00% 10.00%
High yield fixed income 10.00% 4.00%
Real estate 10.00% 4.58%
International emerging markets equity 6.00% 9.47%
Commodities 4.00% 4.77%
Total 100.00%
E. Discount Rate
The discount rate used to measure the net OPEB liability was 7.25%. The
projection of cash flows used to determine the discount rate assumed that
contributions from plan members 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.
F. Net OPEB Liability
The components of the net OPEB liability, measured as of June 30, 2019,
were as follows:
Total OPEB liability $ 73,776,929
Plan fiduciary net position (5,211,775)
Net OPEB liability $ 68,565,154
Plan fiduciary net position as a
percentage of the total OPEB liability 7.06%
The fiduciary net position has been determined on the same basis used by the
OPEB Plan. For this purpose, the Plan recognizes benefit payments when due
and payable.
70
G. Changes in the Net OPEB Liability
The following summarizes the changes in the net OPEB liability for the past
year:
Increase (Decrease)
Plan
Total OPEB Fiduciary Net OPEB
Liability Net Position Liability
(a) (a)-(b)
Balances, beginning of year $ 68,686,810 $ 4,245,537 $ 64,441,273
Changes for the year:
Service cost 1,760,928 - 1,760,928
Interest 5,149,105 - 5,149,105
Contributions-employer - 4,466,003 (4,466,003)
Net investment income - 86,238 (86,238)
Differences between expected
and actual experience (2,455,887) - (2,455,887)
Changes in assumptions
or other inputs 4,221,976 - 4,221,976
Benefit payments (3,586,003) (3,586,003) -
Net Changes 5,090,119 966,238 4,123,881
Balances, end of year $ 73,776,929 $ 5,211,775 $ 68,565,154
Changes of assumptions and other inputs reflect the following:
• Change in the discount rate from 7.50% in prior years to 7.25 in fiscal year
2019
• The mortality assumptions for non-teachers were updated based on
experience with similar systems and the mortality assumptions for
teachers were updated to match the Massachusetts Teachers' Retirement
System Actuarial Valuation Report as of January 1, 2018, dated
October 10, 2018
• The per capita costs and trends were updated to reflect current
experience
• The excise tax on high cost health plans beginning in 2022 was
recalculated with this valuation
H. Sensitivity of the Net OPEB Liability to Changes in the Discount Rate
The following 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 one
71
percentage-point lower or one percentage-point higher than the current
discount rate:
Current
1% Discount 1%
Decrease Rate Increase
$ 78,011 ,901 $ 68,565,154 $ 60,743,782
I. 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 one percentage-point lower or one percentage-point higher than the
current healthcare cost trend rates:
Current
Healthcare
1% Cost Trend 1%
Decrease Rates Increase
$ 59,577,231 $ 68,565,154 $ 79,608,556
J. OPEB Expense and Deferred Outflows of Resources and Deferred (Inflows) of
Resources Related to OPEB
For the year ended June 30, 2019, the Town recognized an OPEB expense of
$7,008,954. At June 30, 2019, the Town reported deferred outflows and
deferred (inflows) of resources related to OPEB from the following sources:
Deferred Deferred
Outflows of (Inflows) of
Resources Resources
Differences between expected and
actual experience $ - $ (1,964,708)
Changes of assumptions 3,377,580
Net difference between projected
and actual earnings on OPEB plan
investments 344,388 -
Total $ 3,721,968 $ (1,964,708)
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Amounts reported as deferred outflows and (inflows) of resources related to
OPEB will be recognized in OPEB expense as follows:
Year Ended June 30:
2020 $ 450,335
2021 450,335
2022 450,337
2023 406,253
Total $ 1,757,260
21. Consolidation of Pension and OPEB Trust Funds
The Reading Contributory Retirement System, the Town of Reading OPEB Trust
Fund, and the Electric Division OPEB Trust Fund, are presented in a single
column in the accompanying fiduciary fund financial statements. Details of the
financial position and changes in net position are as follows:
Electric Other
Pension Division OPEB Post
Trust Fund Trust Fund Employment Pension
(As of (As of Benefits and OPEB
December 31,2018) December 31,2018) Trust Fund Trust Funds
Assets
Cash and short-term investments $ 13,042,964 $ 3,561,719 $ 5,211,775 $ 21,816,458
Investments:
External investment pool 123,159,975 - - 123,159,975
Accounts receivable 58,692 - 58,692
Total Assets 136,261,631 3,561,719 5,211,775 145,035,125
Liabilities
Accounts payable 585 - - 585
Net Position
Restricted for:
Pensions 136,261,046 - - 136,261,046
OPEB - 3,561,719 5,211,775 8,773,494
Total Net Position $ 136,261,046 $ 3,561,719 $ 5,211,775 $ 145,034,540
73
Electric Other
Pension Division OPEB Post
Trust Fund Trust Fund Employment Pension
(for the year ended (for the six months ended Benefits and OPEB
December 31,2018) December 31,2018) Trust Fund Trust Funds
Additions
Contributions:
Employers $ 5,964,366 $ 276,176 $ 4,466,003 $ 10,706,545
Plan members 2,801,575 - - 2,801,575
Total contributions 8,765,941 276,176 4,466,003 13,508,120
Investment Income:
Increase(Decrease)in fair value of investments (1,962,084) 41,927 86,316 (1,833,841)
Less:management fees (694,633) - - (694,633)
Net investment income (2,656,717) 41,927 86,316 (2,528,474)
Total Additions 6,109,224 318,103 4,552,319 10,979,646
Deductions
Benefit payments to plan members and beneficiaries 11,542,016 276,176 3,586,003 15,404,195
Administrative expenses 212,080 - - 212,080
Total Deductions 11,754,096 276,176 3,586,003 15,616,275
Net change (5,644,872) 41,927 966,316 (4,636,629)
Net position restricted for pensions and OPEB
Beginning of year 141,905,918 3,519,792 4,245,459 149,671,169
End of year $ 136,261,046 $ 3,561,719 $ 5,211,775 $ 145,034,540
22. Commitments and Contingencies
Outstanding Legal Issues - On an ongoing basis, there are typically pending legal
issues in which the Town is involved. The Town's management is of the opinion
that the potential future settlement of these issues would not materially 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.
Encumbrances —At year-end the Town's general fund has $3,973,326 in
encumbrances that will be honored in the next fiscal year.
23. New Pronouncements
The Governmental Accounting Standards Board (GASB) has issued Statement
No. 84, Fiduciary Activities, effective for the Town beginning with its fiscal year
74
ending June 30, 2020. This statement establishes guidance on how to address
the categorization of fiduciary activities for financial reporting and how fiduciary
activities are to be reported, and may require reclassification of certain funds.
The Governmental Accounting Standards Board (GASB) has issued Statement
No. 87, Leases, effective for the Town beginning with its fiscal year ending
June 30, 2021. This statement establishes new reporting and disclosure
requirements, including the recording of various operating leases in the financial
statements.
75
Town of Reading, Massachusetts Electric Division
Notes to the Financial Statements
24. Summary of Significant Accounting Policies
The significant accounting policies of the Town of Reading Municipal Light Depart-
ment (the Department) (an enterprise fund of the Town of Reading, Massachusetts —
Electric Division) are as follows:
A. Business Activity - The Department purchases electricity for distribution to
more than 68,000 residents within the towns of Reading, North Reading,
Wilmington, and Lynnfield Center.
B. Regulation and Basis of Accounting - Under Massachusetts General Laws,
the Department's electric rates are set by the Municipal Light Board. Electric
rates, excluding the purchase power fuel charge and the purchase power
capacity and transmission charge, cannot be changed more than once every
three months. Rate schedules are filed with the Massachusetts Department of
Public Utilities (DPU). While the DPU exercises general supervisory authority
over the Department, the Department's rates are not subject to DPU approval.
The Department's policy is to prepare its financial statements in conformity
with generally accepted accounting principles.
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.
76
D. Retirement Trust - The Reading Municipal Light Department Employees'
Retirement Trust (the "Pension Trust") was established by the Reading Municipal
Light Board on December 30, 1966, pursuant to Chapter 64 of the General Laws
of the Commonwealth of Massachusetts.
The Pension Trust constitutes the principal instrument of a plan established
by the Municipal Light Board to fund the Department's annual required 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-Employment Benefits Trust -The Other Post-Employment Benefits
Liability Trust Fund (the "OPEB Trust") was established by the Reading
Municipal Light Board pursuant to Chapter 32B, Section 20 of the General
Laws of the Commonwealth of Massachusetts.
The OPEB Trust constitutes the principal instrument of a plan established by the
Municipal Light Board to fund the Department's annual actuarially determined
OPEB contribution for future retirees.
F. Revenues - Revenues are based on rates established by the Department and
filed with the DPU. Revenues from sales of electricity are recorded on the
basis of bills rendered from monthly meter readings taken on a cycle basis
and are stated net of discounts. Recognition is given to the amount of sales to
customers which are unbilled at the end of the fiscal period.
G. Cash and Short-term Investments - For the purposes of the Statements of
Cash Flows, the Department considers unrestricted cash on deposit with the
Town Treasurer to be cash or short-term investments. For purposes of the
Statements of Net Position, both the proprietary funds and fiduciary funds
consider unrestricted and restricted investments with original maturities of
three months or less to be short-term investments.
H. Investments - State and local statutes place certain limitations on the nature
of deposits and investments available. Deposits in any financial institution
may not exceed certain levels within the financial institution. Non-fiduciary
fund investments can be made in securities issued or unconditionally guar-
anteed by the U.S. Government or agencies that have a maturity of one year
or less from the date of purchase and repurchase agreements guaranteed by
such securities with maturity dates of no more than 90 days from date of
purchase.
77
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.
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. Capital Assets and Depreciation - Capital assets, which include property, plant,
equipment, and utility plant infrastructure, are recorded at historical cost or
estimated historical cost when purchased or constructed. Donated capital
assets are recorded at estimated fair market value at the date of the donation.
The cost of normal maintenance and repairs that do not add to the value of
the asset or materially extend asset lives are not capitalized.
Major outlays for capital assets and improvements are capitalized as they are
acquired or constructed. Interest incurred during the construction phase of
proprietary fund capital assets is included as part of the capitalized value of
the constructed asset. When capital assets are retired, the cost of the retired
asset, less accumulated depreciation, salvage value and any cash proceeds, is
charged to the Department's unrestricted net position.
Massachusetts General Laws require utility plant in service to be depreciated
at a minimum annual rate of 3%. To change this rate, the Department must
obtain approval from the DPU. Changes in annual depreciation rates may be
made for financial factors relating to cash flow for plant expansion, rather than
engineering factors relating to estimates of useful lives.
K. Accrued Compensated Absences - Employee vacation leave is vested annually
but may only be carried forward to the succeeding year with supervisor
approval and, if appropriate, within the terms of the applicable Department
policy or union contract. Generally, sick leave may accumulate according to
union and Department contracts and policy and is paid upon normal termination
at the current rate of pay. The Department's policy is to recognize vacation costs
at the time payments are made. The Department records accumulated, unused,
vested sick pay as a liability. The amount recorded is the amount to be paid
upon normal termination at the current rate of pay.
L. Long-Term Obligations - The proprietary fund financial statements report long-
term debt and other long-term obligations as liabilities in the Statements of
Net Position.
M. Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
78
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures for contingent assets and liabilities at the date of the
financial statements, and the reported amounts of the revenues and expenses
during the fiscal year. Actual results could vary from estimates that were used.
N. Rate of Return - The Department's rates must be set such that earnings
attributable to electric operations do not exceed eight percent of the net cost of
plant. The Department's audited financial statements are prepared in
accordance with auditing standards generally accepted in the United States of
America. To determine the net income subject to the rate of return limitations, the
Department performs the following calculation. Using the net income per the
audited financial statements, the return on 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 multiplied by
eight percent. From this calculation, the Municipal Light Board will determine
what cash transfers need to be made at the end of the fiscal year.
25. Cash and Investments
Total cash and investments as of December 31, 2018 are classified in the accom-
panying financial statements as follows:
Proprietary Fund:
Unrestricted cash and short-term investments $ 20,832,516
Restricted cash and short-term investments 28,827,501
Restricted investments 2,490,210
Fiduciary Funds:
Cash and short-term investments - OPEB Trust 3,561 ,719
Total cash and investments $ 55,711 ,946
Total cash and investments at December 31, 2018 consist of the following:
Deposits with financial institutions $ 55,711 ,946
Total cash and investments $ 55,711 ,946
79
Disclosures Relating to Interest Rate Risk
Interest rate risk is the risk that the fair value of an investment will be adversely
affected by changes in market interest rates. Generally, the longer the maturity of
an investment, the greater the sensitivity of its fair value to changes in market
interest rates. The Department manages its exposure to interest rate risk by
purchasing a combination of shorter term and longer-term investments and by
timing cash flows from maturities so that a portion of the portfolio is maturing or
coming close to maturity evenly over time as necessary to provide the cash flow and
liquidity needed for operations.
As of December 31, 2018, 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 December 31, 2018, the Department and Pension Trust held investments in
domestic and foreign fixed income bonds with varying maturity dates as follows:
Maturity
Corporate Bonds Date
AT&T Inc $ 424,580 12/01/22
General Electric Cap Corp 386,282 01/09/23
Wells Fargo & Co 402,336 08/15/23
Simon Property 372,926 06/15/27
Rabobank Nederland Bank 498,340 11/09/22
BNP Paribas 405,746 03/03/23
Total $ 2,490,210
Disclosures Relating to Credit Risk
Generally, credit risk is the risk that the issuer of an investment will not fulfill its
obligation to the holder of the investment. This is measured by the assigning of a
rating by a nationally recognized statistical rating organization.As of December 31,
80
2018, 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 $ 424,580 BAA2
General Electric Cap Corp 386,282 BAA1
Wells Fargo & Co 402,336 A3
Simon Property 372,926 A2
Rabobank Nederland Bank 498,340 BAA1
BNP Paribas 405,746 AA3
Total $ 2,490,210
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 stipulated by
Massachusetts General Laws. At December 31, 2018, 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 investments, 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 possession
of an outside party. The custodial credit risk for investments is the risk that, in the
event of the failure of the counterparty (e.g., broker-dealer) to a transaction, the
Department will not be able to recover the value of its investments or collateral
securities that are in the possession of another party. Massachusetts General
Laws, Chapter 44, Section 55, limits deposits "in a bank or trust company or banking
company to an amount not exceeding sixty per cent of the capital and surplus of
such bank or trust company or banking company, unless satisfactory security is
given to it by such bank or trust company or banking company for such excess." The
Department follows the Massachusetts statute as written, as well as the Town of
Reading's deposit policy for custodial credit risk.
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
81
the Department's balance exposed to custodial credit risk at December 31, 2018,
cannot be reasonable determined.
As of December 31, 2018, 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 GASB Statement No. 72, Fair Value Measurement and
Application (GASB 72). The hierarchy is based on the valuation inputs used to
measure the fair value of the asset. Level 1 inputs are quoted prices in active
markets for identical assets; Level 2 inputs are significant other observable inputs;
Level 3 inputs are significant unobservable inputs.
Fair Value Measurements Using:
Quoted prices
in active Significant Significant
markets for observable unobservable
identical assets inputs inputs
Description Value (Level 1) (Level 2) Level3
Investments by fair value level:
Debt securities
Corporate bonds $ 2,490,210 $ 2,490,210 $ - $ -
Total $ 2,490,210
26. Restricted Cash and Investments
The Department's proprietary fund restricted cash and investment balances rep-
resent the following reserves:
Cash Investments
Depreciation fund $ 6,326,373 $ -
Construction fund 1,288,181 -
Deferred fuel reserve 5,185,048 -
Deferred energy
conservation reserve 417,735 -
Rate stabilization 7,074,804 -
Reserve for uncollectible
accounts 200,000 -
Sick leave benefits 1,754,534 1,245,105
Hazardous waste fund 750,000 -
Customer deposits 1,197,752 -
Pension trust 4,633,074 1,245,105
Total $ 28,827,501 $ 2,490,210
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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 account represents amounts set aside by the
Municipal Light Board for construction-related projects.
- Deferred fuel reserve - The Department transfers the difference between
the customers' monthly fuel charge adjustment and actual fuel costs into
this account to be used in the event of a sudden increase in fuel costs.
- Deferred energy conservation reserve - This account is used to reserve
monies collected from a special energy charge added to customer bills.
Customers who undertake measures to conserve and improve energy
efficiency can apply for rebates that are paid from this account.
- Rate stabilization - This represents amounts set aside to help stabilize cost
increases resulting from fluctuations in purchase power costs.
- Reserve for uncollectible accounts - This account was set up to offset a
portion of the Department's bad debt reserve.
- Sick leave benefits-This account is used to offset the Department's actuarially
determined compensated absence liability.
- Hazardous waste fund -This reserve was set up by the Board of Com-
missioners to cover the Department's insurance deductible in the event of
a major hazardous materials incident.
- Customer deposits - Customer deposits that are held in escrow.
- Pension trust-The principal instrument of a plan established by the Municipal
Light Board to fund the Department's annual required contribution to the
Town of Reading Contributory Retirement System (the System), a cost-
sharing, multi-employer public employee retirement system.
83
27. Accounts Receivable
Accounts receivable consists of the following at December 31, 2018:
Customer Accounts:
Billed $ 4,070,383
Less allowances:
Uncollectible accounts (200,000)
Sales discounts (253,694)
Total billed 3,616,689
Unbilled, net 4,930,225
Total customer accounts 8,546,914
Other Accounts:
Liens and other 158,500
Total other accounts 158,500
Total net receivables $ 8,705,414
28. Prepaid Assets
Prepaid assets consist of the following:
Insurance and other $ 1,483,500
Purchase power (20,943)
NYPA prepayment fund 307,573
WC Fuel -Watson 327,226
Total $ 2,097,356
29. Inventory
Inventory comprises supplies and materials at December 31, 2018, and is valued
using the average cost method.
30. Investment in Associated Companies
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.
84
Investment in associated companies consists of the following, at December 31,
2018:
New England Hydro-Transmission (NEH & NHH) $ 289,474
31. Capital Assets
The following is a summary of the six month period ended December 31, 2018
activity in capital assets (in thousands):
Beginning Ending
Balance Increases Decreases Balance
Business-Type Activities:
Capital assets, depreciable:
Structures and improvements $ 20,270 $ 32 $ - $ 20,302
Equipment and furnishings 34,734 173 - 34,907
Infrastructure 93,794 2,303 (440) 95,657
Total capital assets, depreciable 148,798 2,508 (440) 150,866
Less accumulated depreciation for:
Structures and improvements (9,954) (279) - (10,233)
Equipment and furnishings (22,307) (493) - (22,800)
Infrastructure (39,549) (1,460) 393 (40,616)
Total accumulated depreciation (71,810) (2,232) 393 (73,649)
Total capital assets, depreciable, net 76,988 276 (47) 77,217
Capital assets, non-depreciable:
Land 1,287 - (21) 1,266
Total capital assets, non-depreciable 1,287 - (21) 1,266
Capital assets, net $ 78,275 $ 276 $ (68) $ 78,483
32. Deferred Outflows of Resources
Deferred outflows of resources represent the consumption of net position by the
Department 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 and OPEB, in accordance with GASB Statements
No. 68 and 75, are more fully discussed in the corresponding pension and OPEB
notes.
33. Warrants Payable
Warrants payable represent fiscal year 2018 expenses that were paid after
December 31, 2018.
85
34. Accrued Liabilities
Accrued liabilities consist of the following at December 31, 2018:
Accrued payroll $ 189,672
Accrued sales tax 77,351
Other 13,284
Total $ 280,307
35. Customer Deposits
This balance represents deposits received from customers that are held in escrow.
36. 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.
37. Accrued Employee Compensated Absences
Department employees are granted sick leave in varying amounts. Upon retire-
ment, normal termination, or death, employees are compensated for unused sick
leave (subject to certain limitations) at their then current rates of pay.
38. Long-Term Debt
Changes in General Long-Term Obligations
During the six month period ended December 31, 2018, the following changes
occurred in long-term obligations (in thousands):
Equals
Total Total Less Long-Term
Balance Balance Current Portion
6/30/18 Additions Reductions 12/31/18 Portion 12/31/18
Net pension liability $ 10,782 $ - $ - $ 10,782 $ - $ 10,782
Net OPEB liability 7,158 216 - 7,374 - 7,374
Other:
Compensated absences 3,194 - (195) 2,999 (530) 2,469
Subtotal -other 3,194 - (195) 2,999 (530) 2,469
Totals $ 21,134 $ 216 $ (195) $ 21,155 $ (530) $ 20,625
86
39. Deferred Inflows of Resources
Deferred inflows of resources are the acquisition of net position by the Department
that are applicable to future reporting periods. Deferred inflows of resources have a
negative effect on net position, similar to liabilities. Deferred inflows of resources
related to pension will be recognized as expense in future years and is more fully
described in the corresponding pension note.
40. Reading Contributory Retirement System
The Department follows the provisions of GASB Statement No. 68, Accounting
and Financial Reporting for Pensions —An Amendment of GASB Statement
No. 27, with respect to the employees' retirement funds.
A. Plan Description
Substantially all employees of the Department are members of the Town of
Reading Contributory Retirement System (the System), a cost-sharing, multiple-
employer public employee retirement system (PERS). Eligible employees
must participate in the System. The pension plan provides pension benefits,
deferred allowances, and death and disability benefits. Chapter 32 of the
Massachusetts General Laws establishes the authority of the System, as well
as contribution percentages and benefits paid. The System Retirement Board
does not have the authority to amend benefit provisions. Additional
information is disclosed in the System's annual financial reports, which are
publicly available from the System's administrative offices located at Reading
Town Hall, 16 Lowell Street, Reading, Massachusetts, 01867.
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 compen-
sation 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 retirement, the difference in the
annual rate of regular compensation between any 2 consecutive years exceeds
100 percent, the normal yearly amount of the retirement allowance shall be
based on the average annual rate of regular compensation received by the
member during the period of 5 consecutive years preceding retirement. 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 allowance
may be received at any age, upon attaining 20 years of service. The plan also
provides for retirement at age 55 if the participant was a member prior to
87
January 1, 1978, with no minimum vesting requirements. If the participant was
a member on or after January 1, 1978 and a member of Groups 1 or 2, then a
retirement allowance may be received if the participant (1) has at least
10 years of creditable service, (2) is age 55, (3) voluntarily left 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 with-
drawing with less than 10 years of service get credited interest each year at a
rate of 3.00%.
Participants Contributions
Participants contribute a set percentage of their gross regular compensation
annually. Employee contribution percentages are specified in Chapter 32 of
the Massachusetts General Laws. The employee's individual contribution
percentage is determined by their date of entry into the system. 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%
88
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.
Employer 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 period ended December 31,
2018 was $1,691,058 which was equal to its annual required contribution.
B. Summary of Significant Accounting Policies
For purposes of measuring the net pension liability, deferred outflows of
resources and deferred inflows of resources related to pensions, and pension
expense, information about the fiduciary net position of the System and
additions to/deductions from System's fiduciary net position have been deter-
mined 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 Expense, and Deferred Outflows of Resources
and Deferred Inflows of Resources Related to Pensions
At December 31, 2018, the Department reported a liability of$10,781,819 for its
proportionate share of the System's net pension liability. The net pension
liability was measured as of December 31, 2017, and the total pension liability
used to calculate the net pension liability was determined by an actuarial
valuation as of January 1, 2017 rolled forward to December 31, 2017. 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, 2017, the Department's proportion was
29.15%.
89
For the period ended December 31, 2018, the Department recognized pension
expense of $1,533,131. 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
Differences between expected and actual
experience $ 1,465,091 $ 518,485
Changes of assumptions 1,721,957 -
Net difference between projected and actual
investment earnings on pension plan
investments - 1,587,075
Changes in proportion and differences
between employer contributions and
proportionate share of contributions 161,284 -
Contributions subsequent to the
measurement date 1,691,058 -
Total $ 5,039,390 $ 2,105,560
The $1,691,058 reported as deferred outflows of resources related to pensions
resulting from contributions subsequent to the measurement date and before the
end of the fiscal year will be included as a reduction of the net pension liability
in the year ended December 31, 2019.
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 December 31 :
2019 $ 690,475
2020 678,142
2021 9,861
2022 (337,787)
2023 202,081
Total $ 1 ,242,772
D. Actuarial Assumptions
The total pension liability was determined by an actuarial valuation as of
January 1, 2017, rolled forward to the measurement date of December 31,
90
2017 using the following actuarial assumptions, applied to all periods included in
the measurement:
Valuation Date January 1, 2017 rolled forward to
December 31, 2017
Actuarial Cost Method Entry Age Normal Cost Method
Actuarial Assumptions:
Investment rate of return 7.65%, net of pension plan investment
expense, including inflation
Projected salary increases 4.25%-6.00% for Group 1
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 fully 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, 2017 are summa-
rized in the following table:
Long-term
Target Expected
Asset Rates
Asset Class Allocation of Return
Global Equity 40.00% 4.91%
Hedge Funds & Portfolio Completion 13.00% 3.40%
Fixed Income 12.00% 0.71%
Private Equity 11.00% 6.50%
Value-Added Fixed Income 10.00% 3.64%
Real Estate 10.00% 3.70%
Timber/Natural Resources 4.00% 3.25%
Total 100.00%
91
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 and
that employer contributions will be made at contractually required rates,
actuarially determined. Based on those assumptions, the pension plan's
fiduciary net position was projected to be available to make all projected future
benefit payments to current active and inactive plan members. Therefore, the
long-term expected rate of return on pension plan investments was applied to all
periods of projected benefit payments to determine the total pension liability.
F. Sensitivity of the Proportionate Share of the Net Pension Liability to Changes
in the Discount Rate
The following table presents the Department's proportionate share of the net
pension liability calculated using the current discount rate of 7.65%, as well as
what the Department's proportionate share of the net pension liability would
be if it were calculated using a discount rate that is one percentage-point lower
(6.65%) or one percentage-point higher (8.65%) than the current rate:
Current
1% Discount 1%
Decrease Rate Increase
(6.65%) (7.65%) (8.65%)
$16,642,839 $10,781,819 $5,811 ,342
G. Pension Plan Fiduciary Net Position
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 Light Department Employees Retirement Trust
("Pension 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 propri-
etary fund statements in the Department's basic financial statements.
As noted in the first paragraph of this section, the Department's proportionate
share of the RCRS net pension liability was determined by an actuarial
92
valuation as of January 1, 2017 rolled forward to December 31, 2017. However,
the actuarial valuation does not take into account the fiduciary net position of
the Department's Pension Trust at December 31, 2017 (the measurement
date).As of December 31, 2017, the value of the pension trust was $5,695,996.
41. Other Post-Employment Benefits (GASB 75)
GASB Statement No. 75, Accounting and Financial Reporting for Postemploy-
ment Benefits Other Than Pensions, replaces the requirements of Statement
No. 45, Accounting and Financial Reporting by Employers for Postemployment
Benefits Other Than Pensions. The Statement establishes standards for recog-
nizing and measuring liabilities, deferred outflows of resources, deferred inflows of
resources, and expense/expenditures. This Statement identifies the methods and
assumptions that are required to be used to project benefit payments, discounted
projected benefit payments to their actuarial present value, and attribute that
present value to periods of employee service.
All the following OPEB disclosures are based on a measurement date of
December 31, 2017.
A. General Information about the OPEB Plan
Plan Description
The Department provides post-employment healthcare benefits for retired
employees through the Department's plan. The Department provides health
insurance coverage through Blue Cross Blue Shield. The benefits, benefit
levels, employee contributions, and employer contributions are governed by
Chapter 32 of the Massachusetts General Laws.
Benefits Provided
The Department provides medical and prescription drug insurance to retirees
and their covered dependents. All active employees who retire from the
Department and meet the eligibility criteria will receive these benefits.
Plan Membership
At December 31, 2017, the following employees were covered by the benefit
terms:
Inactive employees or beneficiaries
currently receiving benefit payments 91
Active employees 87
Total 178
93
B. Actuarial Assumptions and Other Inputs
The net 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 6.0% decreasing to 4.25% based on service for Group 1
Investment rate of return 7.50%
Discount rate 7.50%
Healthcare cost trend rates Medical/Prescription Drug: 7.0% decreasing by 0.5%for
5 years to an ultimate level of 4.5% per year.
Contributions: Retiree contributions are expected to
increase with medical trend.
Mortality rates were based on:
• Pre-Retirement: RP-2014 Healthy Employee Table projected gener-
ationally with Scale MP-2014
• Healthy: RP-2014 Healthy Annuitant Mortality Table projected gener-
ationally with Scale MP-2014
• Disabled: RP-2014 Disabled Retiree Table projected generationally
with Scale MP-2014
The actuarial assumptions used in the valuation were based on the results of
an actuarial experience study as of June 30, 2017.
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:
94
Target Long-term
Asset Expected Real
Asset Class Allocation 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%
C. Discount Rate
The discount rate used to measure the net OPEB liability was 7.50%. The pro-
jection of cash flows used to determine the discount rate assumed that contri-
butions from plan members 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.
D. Net OPEB Liability
The components of the net OPEB liability, measured as of December 31,
2017, were as follows:
Total OPEB liability $ 10,253,318
Plan fiduciary net position 2,879,072
Net OPEB liability $ 7,374,246
95
E. Changes in the Net OPEB Liability
Increase (Decrease)
Plan
Total OPEB Fiduciary Net OPEB
Liability Net Position Liability
(a) (a)- (b)
Balances at 12/31/16 $ 9,794,075 $ 2,535,281 $ 7,258,794
Changes for the year:
Service cost 230,880 - 230,880
Interest 733,280 - 733,280
Contributions -employer - 813,663 (813,663)
Net investment income - 35,045 (35,045)
Benefit payments (504,917) (504,917) -
Net Changes 459,243 343,791 115,452
Balances at 12/31/17 $ 10,253,318 $ 2,879,072 $ 7,374,246
F. Sensitivity of the Net OPEB Liability to Changes in the Discount Rate
The following 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 one
percentage-point lower or one percentage-point higher than the current dis-
count rate:
Current
1% Discount 1%
Decrease Rate Increase
$ 8,556,383 $ 7,374,246 $ 6,382,969
G. 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 one percentage-point lower or one percentage-point higher than the
current healthcare cost trend rates:
Current
Healthcare
1% Cost Trend 1%
Decrease Rates Increase
$ 6,267,849 $ 7,374,246 $ 8,556,810
96
H. OPEB Expense and Deferred Outflows of Resources Related to OPEB
For the period ended December 31, 2018, the Department recognized an
OPEB expense of$795,772. At December 31, 2018, the Department reported
deferred outflows of resources related to OPEB from the following sources:
Deferred
Outflows of
Resources
Contributions subsequent to the
measurement date $ 607,125
Net difference between projected and
actual OPEB investment earnings 133,343
Total $ 740,468
The $607,125 reported as deferred outflows of resources related to OPEB
resulting from contributions subsequent to the measurement date and before the
end of the fiscal year will be included as a reduction of the net OPEB liability
in the year ended December 31, 2019.
Other amounts reported as deferred outflows of resources related to OPEB
will be recognized in OPEB expense as follows:
Year Ended December 31 :
2019 $ 33,336
2020 33,336
2021 33,336
2022 33,335
Total $ 133,343
42. Other Post-Employment Benefits (GASB 74)
GASB Statement No. 74, Financial Reporting for Postemployment Benefit Plans
Other Than Pension Plans (OPEB), replaces the requirements of Statement
No. 43, Financial Reporting for Postemployment Benefit Plans Other Than Pension
Plans. This applies if a trust fund has been established to fund future OPEB
costs. In fiscal year 2010, the Department established an OPEB Trust Fund to
provide funding for future employee health care costs.
All the following OPEB disclosures are based on a measurement date of
December 31, 2018.
97
A. Investments
The OPEB trust fund assets consist of cash and short-term investments.
Rate of return. For the year ended December 31, 2018, the annual money-
weighted rate of return on investments, net of investment expense, was not
available.
B. Actuarial Assumptions and Other Inputs
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 6.0% decreasing to 4.25% based on service for
Group 1 and Group 2
Investment rate of return 7.50%, net of OPEB plan investment expense
Discount rate 7.50%
Healthcare cost trend rates Medical/Prescription Drug: 7.0% decreasing by 0.5%
for 5 years to an ultimate level of 4.5% per year.
Contributions: Retiree contributions are expected to
increase with medical trend.
Mortality rates were based on:
• Pre-Retirement: RP-2014 Healthy Employee Table projected gener-
ationally with Scale MP-2014
• Healthy: RP-2014 Healthy Annuitant Mortality Table projected gener-
ationally with Scale MP-2014
• Disabled: RP-2014 Disabled Retiree Table projected generationally
with Scale MP-2014
The actuarial assumptions used in the valuation were based on the results of
an actuarial experience study as of June 30, 2017.
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
December 31, 2018 are summarized in the following table:
98
Target Long-term
Asset Expected Real
Asset Class Allocation Rate of Return
Domestic equity 17.50% 6.15%
International developed markets equity 15.50% 7.11%
International emerging markets equity 6.00% 9.41%
Core fixed income 12.00% 1 .68%
High yield fixed income 10.00% 4.13%
Real estate 10.00% 4.90%
Commodities 4.00% 4.71%
Hedge fund, GTAA, risk parity 13.00% 3.94%
Private equity 12.00% 10.28%
Total 100.00%
C. 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 members will be made at the current contribution rate.
Based on those assumptions, the OPEB plan fiduciary net position was pro-
jected to be available to make all projected future benefit payments of current
plan members.As a result, the discount rate and the investment rate of return
are the same.
D. Net OPEB Liability
The components of the net OPEB liability, measured as of December 31,
2018, were as follows:
Total OPEB liability $ 10,705,889
Plan fiduciary net position 3,561 ,719
Net OPEB liability $ 7,144,170
Plan fiduciary net position as a
percentage of the total OPEB liability 33.27%
E. Sensitivity of the Net OPEB Liability to Changes in the Discount Rate
The following 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 one
99
percentage-point lower or one percentage-point higher than the current dis-
count rate:
Current
1% Discount 1%
Decrease Rate Increase
$ 8,360,411 $ 7,144,170 $6,123,898
F. 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 one percentage-point lower or one percentage-point higher than the
current healthcare cost trend rates:
Current
Healthcare
1% Cost Trend 1%
Decrease Rates Increase
$ 5,920,483 $ 7,144,170 $ 8,454,644
43. Participation in Massachusetts Municipal Wholesale Electric Company
The Town of Reading, acting through its Light Department, is a Participant in
certain Projects of the Massachusetts Municipal Wholesale Electric Company
(MMWEC).
MMWEC is a public corporation and a political subdivision of the Commonwealth 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 pur-
chase ownership interests in, and to issue revenue bonds to finance, electric
facilities (Projects). MMWEC has acquired ownership interests in electric facilities
operated by other entities and also owns and operates its own electric facilities.
MMWEC sells all of the capability (Project Capability) of each of its Projects to its
Members and other utilities (Project Participants) under Power Sales Agreements
(PSAs). Among other things, the PSAs require each Project Participant to pay its
pro rata share of MMWEC's costs related to the Project, which costs include debt
service on the revenue bonds issued by MMWEC to finance the Project, plus 10%
of MMWEC's debt service to be paid into a Reserve and Contingency Fund. In
addition, should a Project Participant fail to make any payment when due, other
Project Participants of that Project may be required to increase (step-up) their
payments and correspondingly their Participant's share of that Project's Project
Capability to an additional amount not to exceed 25% of their original
100
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.
A substantial portion of MMWEC's plant investment and financing program is an
11.6% ownership interest in the Seabrook Station nuclear generating 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 Participants 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
101
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.
As of December 31, 2018, total capital expenditures amount to $1,652,338,000,
of which $118,564,000 represents the amount associated with the Department's
Project Capability. MMWEC's debt outstanding for the Projects from Power Supply
System Revenue Bonds totals $7,110,000, of which none is associated with the
Department's share of Project Capability. As of December 31, 2018, MMWEC's total
future debt service requirement on outstanding bonds issued for the Projects is
$7,419,000, none of which is anticipated to be billed to the Department in the
future.
The Department has no required payments under the PSAs and PPAs.
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 $7,897,000 and $7,760,000 for the years ended December 31, 2018
and 2017, respectively.
44. Renewable Energy Certificates
In 2003, the Massachusetts Department of Energy and Environmental Affairs
adopted the Massachusetts Renewable Energy Portfolio Standard (RPS), a
regulation that requires Investor Owned Utilities (IOUs) to purchase mandated
amounts of energy generated by renewable resources (Green Energy) as a
percentage of their overall electricity sales. The Massachusetts RPS applies only to
IOUs, so the Department is currently exempt from this mandate.
Energy suppliers meet their annual RPS obligations by acquiring a sufficient
quantity of RPS-qualified renewable energy certificates (RECs) that are created and
recorded at the New England Power Pool (NEPOOL) Generation Information
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.
102
Information regarding the Department's six month period ending December 31, 2018
REC activity and balances is as follows:
REC Holdings at December 31, 2018
Banked Projected Total Estimated
Certificates Certificates Certificates Value
CT Class 1 $ 7,596 $ 12,010 $ 19,606 $ 45,576
MA Class I & 11 4,363 8,626 12,989 82,840
MA/RI/NH 1 5,448 9,804 15,252 32,688
MA/CT/RI/NH 1 7,983 17,714 25,697 47,898
Total $ 25,390 $ 48,154 $ 73,544 $ 209,002
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 December 31,
2018 are not recognized as an asset on the proprietary fund Statements of Net
Position.
45. Leases
Related Party Transaction - Property Sub-Lease
The Department is the lessor of facilities that are currently sub-leased to the
Reading Town Employees Federal Credit Union. The original sub-lease agree-
ment commenced in December 2000 and was extended by various amendments
through November 30, 2019. Following is the future minimum rental income to be
received by the Department under the terms of this lease for the year ending
December 31:
2019 $ 8,984
Total $ 8,984
Operating Lease - Warehouse
The Department is the lessee of a warehouse facility owned by JCM Real Estate
Trust. The original lease agreement for this facility commenced in December 1998
and was extended by various amendments through May 31, 2018. 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, 2020.
103
Following is the future minimum rental expense to be paid by the Department for the
year ending December 31 :
2019 $ 161 ,348
2020 40,337
Total $ 201 ,685
46. Commitments and Contingencies
Outstanding Legal Issues - On an ongoing basis, there are typically pending legal
issues in which the Department is involved. The Department's management is of
the opinion that the potential future settlement of these issues would not
materially affect its financial statements taken as a whole.
47. Change of Year-end
The financial year-end of the Department was changed from June 30 to
December 31 in the interest of improved overall cost and reporting efficiency as it
relates to the Town, the ratepayers, and the Department of Public Utilities and
improved financial controls of the utility structure, specifically relating to the ISO
New England billing structure. Accordingly, the current financial statements are
prepared for 6 months from July 1, 2018 to December 31, 2018.
104
TOWN OF READING,MASSACHUSETTS
REQUIRED SUPPLEMENTARY INFORMATION
SCHEDULE OF PROPORTIONATE SHARE
OF THE NET PENSION LIABILITY(GASB 68)
JUNE 30,2019
(Unaudited)
Reading Contributory Retirement System(Town)
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 Liabili Liabili Payroll Percentage of Covered Payroll Pension Liability
June 30,2019 December 31,2018 70.90% $ 36,531,299 $ 17,836,375 204.81% 72.56%
June 30,2018 December 31,2017 69.98% 25,883,540 17,480,607 148.07% 79.32%
June 30,2017 December 31,2016 69.98% 31,391,929 16,588,964 189.23% 73.43%
June 30,2016 December 31,2015 71.03% 32,338,958 16,189,120 199.76% 72.17%
June 30,2015 December 31,2014 71.03% 21,281,510 14,855,396 143.26% 79.89%
Reading Contributory Retirement System(Electric Division)
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 Liabili Liabili Payroll Percentage of Covered Payroll Pension Liability
December 31,2018 December 31,2017 28.35% $ 14,610,001 $ 7,132,034 204.85% 79.32%
June 30,2018 December 31,2017 29.15% 10,781,819 7,281,401 148.07% 79.32%
June 30,2017 December 31,2016 29.15% 13,076,538 6,910,093 189.24% 73.43%
June 30,2016 December 31,2015 28.25% 12,862,732 6,439,178 199.76% 72.17%
June 30,2015 December 31,2014 28.25% 8,464,663 5,908,693 143.26% 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 Liabili Liabili with the Town Town Payroll Covered Payroll Pension Liability
June 30,2019 June 30,2018 0.423306% $ $ 100,371,336 $ 100,371,336 $ 29,728,213 54.84%
June 30,2018 June 30,2017 0.451014% 103,216,357 103,216,357 30,625,961 54.25%
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% 89,977,515 89,977,515 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. Additional years will be displayed as they become available.
See Independent Auditors' Report.
105
TOWN OF READING,MASSACHUSETTS
REQUIRED SUPPLEMENTARY INFORMATION
SCHEDULE OF PENSION CONTRIBUTIONS(GASB 68)
JUNE 30,2019
(Unaudited)
Reading Contributory Retirement System(Town)
Contributions in
Relation to the
Contractually Contractually Contribution Contributions as
Fiscal Measurement Required Required Deficiency Covered a Percentage of
Year Date Contribution Contribution Excess Payroll Covered Payroll
June 30,2019 December 31,2018 $ 4,228,374 $ 4,228,374 $ $ 17,836,375 23.71%
June 30,2018 December 31,2017 3,962,037 3,962,037 17,480,607 22.67%
June 30,2017 December 31,2016 3,791,423 3,791,423 16,588,964 22.86%
June 30,2016 December 31,2015 3,682,525 3,682,525 16,189,120 22.75%
June 30,2015 December 31,2014 3,523,949 3,523,949 14,855,396 23.72%
Reading Contributory Retirement System(Electric Division)
Contributions in
Relation to the
Contractually Contractually Contribution Contributions as
Fiscal Measurement Required Required Deficiency Covered a Percentage of
Year Date Contribution Contribution Excess Payroll Covered Payroll
December 31,2018 December 31,2017 $ 1,691,058 $ 1,691,058 $ $ 7,132,034 23.71%
June 30,2018 December 31,2017 1,650,416 1,650,416 7,281,401 22.67%
June 30,2017 December 31,2016 1,579,345 1,579,345 6,910,093 22.86%
June 30,2016 December 31,2015 1,464,711 1,464,711 6,439,178 22.75%
June 30,2015 December 31,2014 1,401,638 1,401,638 5,908,693 23.72%
Massachusetts Teachers'Retirement System
Contractually Contributions in
Required Relation to the
Contribution Contractually Contribution Contributions as
Fiscal Measurement Provided by Required Deficiency Covered a Percentage of
Year Date Commonwealth Contribution Excess Payroll Covered Payroll
June 30,2019 June 30,2018 $ 5,565,557 $ 5,565,557 $ $ 29,728,213 18.72%
June 30,2018 June 30,2017 5,572,348 5,572,348 30,625,961 18.19%
June 30,2017 June 30,2016 4,952,850 4,952,850 28,969,111 17.10%
June 30,2016 June 30,2015 4,487,668 4,487,668 27,836,403 16.12%
June 30,2015 June 30,2014 3,985,303 3,985,303 26,068,000 15.29%
Schedules are intended to show information for 10 years. Additional years will be displayed as they become available.
See Independent Auditors' Report.
106
TOWN OF READING,MASSACHUSETTS
REQUIRED SUPPLEMENTARY INFORMATION
OTHER POST-EMPLOYMENT BENEFITS (OPEB)
SCHEDULES OF CHANGES IN THE NET OPEB LIABILITY(GASB 74 and 75)
(Unaudited)
2019 2018 2017
Total OPEB Liability
Service cost $ 1,760,928 $ 1,717,979 $ 1,645,248
Interest on unfunded liability-time value of money 5,149,105 4,906,280 4,677,514
Changes of benefit terms
Differences between expected and actual experience (2,455,887) - -
Changes of assumptions 4,221,976 - -
Benefit payments to plan members and beneficiaries (3,586,003) (3,214,978) (2,990,677)
Net change in total OPEB liability 5,090,119 3,409,281 3,332,085
TotalOPEBliability-beginning 68,686,810 65,277,529 61,945,444
Total OPEB liability-ending (a) 73,776,929 68,686,810 65,277,529
Plan Fiduciary Net Position
Contributions-employer 4,466,003 3,790,978 3,566,677
Contributions-member
Net investment income 86,238 48,311 27,516
Benefit payments to plan members and beneficiaries (3,586,003) (3,214,978) (2,990,677)
Net change in plan fiduciary net position 966,238 624,311 603,516
Plan fiduciary net position-beginning 4,245,537 3,621,226 3,017,710
Plan fiduciary net position-ending (b) 5,211,775 4,245,537 3,621,226
Net OPEB liability-ending (a-b) $ 68,565,154 $ 64,441,273 $ 61,656,303
Schedules are 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.
107
TOWN OF READING, MASSACHUSETTS
ELECTRIC DIVISION
REQUIRED SUPPLEMENTARY INFORMATION
OTHER POST-EMPLOYMENT BENEFITS (OPEB)
SCHEDULE OF CHANGES IN THE NET OPEB LIABILITY(GASB 74 and 75)
(Unaudited)
2018 2017
Total OPEB liability
Service cost $ 238,384 $ 230,880
Interest on unfunded liability-time value of money 766,539 733,280
Benefit payments to plan members and beneficiaries (552,351) (504,917)
Net change in total OPEB liability 452,572 459,243
Total OPEB liability- beginning 10,253,318 9,794,075
Total OPEB liability-ending (a) 10,705,890 10,253,318
Plan fiduciary net position*
Contributions-employer 1,159,476 813,663
Net investment income 75,523 35,045
Benefit payments to plan members and beneficiaries (552,351) (504,917)
Net change in plan fiduciary net position 682,648 343,791
Plan fiduciary net position - beginning 2,879,072 2,535,281
Plan fiduciary net position -ending (b)* 3,561,720 2,879,072
Net OPEB liability(asset) -ending (a-b) $ 7,144,170 $ 7,374,246
*Activity will not agree to the Statement of Changes in Fiduciary Net Position
due to Department switching to a 12/31 year end.
Schedules are intended to show information for 10 years. Additional years will be displayed as they become available.
See notes to the Department's financial statements for summary of significant actuarial methods and assumptions.
See Independent Auditors' Report.
108
TOWN OF READING, MASSACHUSETTS
REQUIRED SUPPLEMENTARY INFORMATION
OTHER POST-EMPLOYMENT BENEFITS (OPEB)
SCHEDULES OF THE NET OPEB LIABILITY,CONTRIBUTIONS,AND INVESTMENT RETURNS (GASB 74 and 75)
(Unaudited)
2019 2018 2017
Schedule of Net OPEB Liability
Total OPEB liability $ 73,776,929 $ 68,686,810 $ 65,277,529
Plan fiduciary net position (5,211,775) (4,245,537) (3,621,226)
Net OPEB liability $ 68,565,154 $ 64,441,273 $ 61,656,303
Plan fiduciary net position as a
percentage of the total OPEB liability 7.06% 6.18% 5.55%
2019 2018 2017
Schedule of Contributions
Actuarially determined contribution $ 5,930,470 $ 5,848,374 $ 5,547,136
Contributions in relation to the actuarially
determined contribution (4,466,003) (3,790,978) (3,566,677)
Contribution deficiency $ 1,464,467 $ 2,057,396 $ 1,980,459
2019 2018 2017
Schedule of Investment Returns
Annual moneyweighted rate of return,net of investment expense unavailable unavailable unavailable
Schedules are 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.
109
TOWN OF READING, MASSACHUSETTS
ELECTRIC DIVISION
REQUIRED SUPPLEMENTARY INFORMATION
OTHER POST-EMPLOYMENT BENEFITS (OPEB)
SCHEDULES OF THE NET OPEB LIABILITY, CONTRIBUTIONS, AND INVESTMENT RETURNS (GASB 74 and 75)
(Unaudited)
Schedule of Net OPEB Liability
2018 2017
Total OPEB liability $ 10,705,890 $ 10,253,318
Plan fiduciary net position 3,561,719 2,879,072
Net OPEB liability (asset) $ 7,144,171 $ 7,374,246
Plan fiduciary net position as a percentage of the total OPEB liability 33.27% 28.08%
Schedule of Contributions
2018 2017
Actuarially determined contribution $ 991,048 $ 932,387
Contributions in relation to the actuarially determined contribution 1,159,476 813,663
Contribution deficiency (excess) $ (168,428) $ 118,724
2018 2017
Schedule of Investment Returns
Annual money weighted rate of return, net of investment expense unavailable unavailable
Schedules are intended to show information for 10 years. Additional years will be displayed as they become available.
See notes to the Department's financial statements for summary of significant actuarial methods and assumptions.
See Independent Auditors' Report.
110
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111
TOWN OF READING, MASSACHUSETTS
COMPARISON BALANCE SHEET
GENERALFUND
JUNE 30, 2019 AND JUNE 30, 2018
Current Prior
Year Year
General General
Fund Fund Change
Assets
Cash and short-term investments $ 11,827,339 $ 7,072,315 $ 4,755,024
Investments 17,579,145 17,246,043 333,102
Receivables:
Property taxes 954,740 815,882 138,858
Excises 244,594 332,654 (88,060)
Departmental and other 1,831,485 329,406 1,502,079
Total Assets $ 32,437,303 $ 25,796,300 $ 6,641,003
Liabilities
Warrants payable $ 2,011,441 $ 1,597,913 $ 413,528
Accrued liabilities 3,805,131 3,485,300 319,831
Other liabilities 604,136 621,078 (16,942)
Total Liabilities 6,420,708 5,704,291 716,417
Deferred Inflows of Resources
Unavailable revenues 1,347,959 1,285,590 62,369
Fund Balances
Restricted 36,078 62,468 (26,390)
Committed 503,000 503,000 -
Assigned 5,348,326 4,388,933 959,393
Unassigned 18,781,232 13,852,018 4,929,214
Total Fund Balances 24,668,636 18,806,419 5,862,217
Total Liabilities, Deferred Inflows of Resources,
and Fund Balances $ 32,437,303 $ 25,796,300 $ 6,641,003
See Independent Auditors' Report.
112
TOWN OF READING, MASSACHUSETTS
COMPARISON STATEMENT OF REVENUES, EXPENDITURES,AND CHANGES IN FUND BALANCE
GENERALFUND
FOR THE YEARS ENDED JUNE 30, 2019 AND JUNE 30, 2018
Current Prior
Year Year
General General
Fund Fund Change
Revenues
Property taxes $ 73,440,816 $ 66,950,236 $ 6,490,580
Excises 4,518,208 4,388,124 130,084
Penalties, interest, and other taxes 599,869 578,670 21,199
Departmental 2,312,514 2,070,060 242,454
Licenses and permits 161,819 161,084 735
Fines and forfeitures 101,396 113,136 (11,740)
Intergovernmental 20,417,819 19,983,990 433,829
Investment income 1,513,149 785,756 727,393
Other 212,556 276,241 (63,685)
Total Revenues 103,278,146 95,307,297 7,970,849
Expenditures
General government 5,281,210 4,021,394 1,259,816
Public safety 11,498,415 10,870,911 627,504
Education 50,076,779 47,042,692 3,034,087
Public works 4,738,102 5,508,766 (770,664)
Facilities 3,771,257 3,418,322 352,935
Health and human services 606,863 631,028 (24,165)
Culture and recreation 2,514,322 2,334,173 180,149
Employee benefits 16,967,755 16,005,253 962,502
Debt service 4,478,865 4,864,270 (385,405)
Intergovernmental 1,143,082 1,077,974 65,108
Total Expenditures 101,076,650 95,774,783 5,301,867
Excess (deficiency)of revenues -
over(under)expenditures 2,201,496 (467,486) 2,668,982
Other Financing Sources (Uses)
Transfers in 3,811,642 2,688,108 1,123,534
Transfers out (150,921) - (150,921)
Total Other Financing Sources (Uses) 3,660,721 2,688,108 972,613
Net change in fund balances 5,862,217 2,220,622 $ 3,641,595
Fund Balance at Beginning of Year 18,806,419 16,585,797
Fund Balance at End of Year $ 24,668,636 $ 18,806,419
See Independent Auditors' Report.
113
TOWN OF READING, MASSACHUSETTS
COMBINING BALANCE SHEET
NONMAJOR GOVERNMENTAL FUNDS
JUNE 30, 2019
Special Revenue Funds
Federal State Revolving
Grants Grants Funds
Assets
Cash and short-term investments $ (64,273) $ 776,953 $ 4,514,672
Investments - - -
Receivables:
Departmental and other - - 510,032
Intergovernmental 117,865 441,641 -
Total Assets $ 53,592 $ 1,218,594 $ 5,024,704
Liabilities
Warrants payable $ 16,972 $ 18,660 $ 85,047
Accrued liabilities 94,267 1,706 70,409
Unearned revenue - - 389,086
Total Liabilities 111,239 20,366 544,542
Fund Balances
Nonspendable - - -
Restricted 17,284 1,216,910 4,480,162
Unassigned (74,931) (18,682) -
Total Fund Balance (57,647) 1,198,228 4,480,162
Total Liabilities and Fund Balance $ 53,592 $ 1,218,594 $ 5,024,704
See Independent Auditors' Report.
114
Special Revenue Funds
Receipts Gifts and
Reserved Donations Subtotals
$ 664,183 $ 1,086,293 $ 6,977,828
- - 510,032
- - 559,506
$ 664,183 $ 1,086,293 $ 8,047,366
$ - $ 29,141 $ 149,820
- - 166,382
- - 389,086
- 29,141 705,288
664,183 1,057,152 7,435,691
- - (93,613)
664,183 1,057,152 7,342,078
$ 664,183 $ 1,086,293 $ 8,047,366
(continued)
See Independent Auditors' Report.
115
TOWN OF READING, MASSACHUSETTS
COMBINING BALANCE SHEET
NONMAJOR GOVERNMENTAL FUNDS
JUNE 30, 2019
(continued)
Capital Project Funds
Town School
Capital Capital
Project Funds Project Funds Subtotals
Assets
Cash and short-term investments $ 561,019 $ - $ 561,019
Investments - - -
Receivables:
Departmental and other - - -
Intergovernmental - - -
Total Assets $ 561,019 $ - $ 561,019
Liabilities
Warrants payable $ - $ - $ -
Accrued liabilities - - -
Unearned revenue - - -
Total Liabilities - - -
Fund Balances
Nonspendable - - -
Restricted 561,019 - 561,019
Unassigned - - -
Total Fund Balance 561,019 - 561,019
Total Liabilities and Fund Balance $ 561,019 $ - $ 561,019
See Independent Auditors' Report.
116
Permanent Funds
Total
Cemetary Other Nonmajor
Trust Trust Governmental
Funds Funds Subtotals Funds
$ 44,453 $ 6,288 $ 50,741 $ 7,589,588
5,226,909 739,351 5,966,260 5,966,260
- - - 510,032
- - - 559,506
$ 5,271,362 $ 745,639 $ 6,017,001 $ 14,625,386
$ - $ - $ - $ 149,820
- - - 166,382
- - - 389,086
- - - 705,288
3,042,388 272,165 3,314,553 3,314,553
2,228,974 473,474 2,702,448 10,699,158
- - - (93,613)
5,271,362 745,639 6,017,001 13,920,098
$
5,271,362 $ 745,639 $ 6,017,001 $ 14,625,386
See Independent Auditors' Report.
117
TOWN OF READING, MASSACHUSETTS
COMBINING STATEMENT OF REVENUES, EXPENDITURES,
AND CHANGES IN FUND BALANCES
NONMAJOR GOVERNMENTAL FUNDS
FOR THE YEAR ENDED JUNE 30, 2019
Special Revenue Funds
Federal State Revolving
Grants Grants Funds
Revenues
Departmental $ - $ - $ 7,969,650
Intergovernmental 1,411,236 2,549,780 335,258
Investment income - - 1,472
Contributions - - -
Other - - 149,362
Total Revenues 1,411,236 2,549,780 8,455,742
Expenditures
Current:
General government - 68,622 154,373
Public safety 44,605 91,384 1,477,449
Education 1,340,841 1,376,313 5,306,780
Public works - 718,933 9,731
Health and human services 116,134 69,447 35,060
Culture and recreation - 43,409 656,193
Total Expenditures 1,501,580 2,368,108 7,639,586
Excess (deficiency) of revenues over
(under) expenditures (90,344) 181,672 816,156
Other Financing Sources(Uses)
Transfers in - - -
Transfers out - - (276,136)
Total other financing sources (uses) - - (276,136)
Change in fund balances (90,344) 181,672 540,020
Fund Balances at Beginning of Year 32,697 1,016,556 3,940,142
Fund Balances at End of Year $ (57,647) $ 1,198,228 $ 4,480,162
See Independent Auditors' Report.
118
Special Revenue Funds
Receipts Gifts and
Reserved Donations Subtotals
$ 44,025 $ - $ 8,013,675
- - 4,296,274
21,497 10,538 33,507
- 272,405 272,405
65,774 - 215,136
131,296 282,943 12,830,997
2,767 8,757 234,519
- 5,313 1,618,751
162,318 8,186,252
- 728,664
1,638 222,279
- 69,389 768,991
2,767 247,415 11,759,456
128,529 35,528 1,071,541
(625,000) (200,000) (1,101,136)
(625,000) (200,000) (1,101,136)
(496,471) (164,472) (29,595)
1,160,654 1,221,624 7,371,673
$ 664,183 $ 1,057,152 $ 7,342,078
(continued)
See Independent Auditors' Report.
119
TOWN OF READING, MASSACHUSETTS
COMBINING STATEMENT OF REVENUES, EXPENDITURES,
AND CHANGES IN FUND BALANCES
NONMAJOR GOVERNMENTAL FUNDS
FOR THE YEAR ENDED JUNE 30, 2019
(continued)
Capital Project Funds
Town School
Capital Capital
Project Funds Project Funds Subtotals
Revenues
Departmental $ - $ - $ -
Intergovernmental - - -
Investment income - - -
Contributions - - -
Other - - -
Total Revenues - - -
Expenditures
Current:
General government - - -
Public safety - - -
Education - - -
Public works - - -
Health and human services - - -
Culture and recreation - - -
Total Expenditures - - -
Excess (deficiency)of revenues over
(under)expenditures - - -
Other Financing Sources(Uses)
Transfers in - 150,921 150,921
Transfers out (230,000) - (230,000)
Total other financing sources (uses) (230,000) 150,921 (79,079)
Change in fund balances (230,000) 150,921 (79,079)
Fund Balances at Beginning of Year 791,019 (150,921) 640,098
Fund Balances at end of year $ 561,019 $ - $ 561,019
See Independent Auditors' Report.
120
Permanent Funds
Total
Cemetery Other Nonmajor
Trust Trust Governmental
Funds Funds Subtotals Funds
$ - $ - $ - $ 8,013,675
- - - 4,296,274
381,623 53,072 434,695 468,202
150,060 580 150,640 423,045
- - - 215,136
531,683 53,652 585,335 13,416,332
- - - 234,519
1,618,751
- - - 8,186,252
120,000 - 120,000 848,664
- 21,279 21,279 243,558
- - - 768,991
120,000 21,279 141,279 11,900,735
411,683 32,373 444,056 1,515,597
- - - 150,921
- - (1,331,136)
- - - (1,180,215)
411,683 32,373 444,056 335,382
4,859,679 713,266 5,572,945 13,584,716
$
5,271,362 $ 745,639 $ 6,017,001 $ 13,920,098
See Independent Auditors' Report.
121
TOWN OF READING, MASSACHUSETTS
NONMAJOR PROPRIETARY FUNDS
COMBINING SCHEDULE OF NET POSITION
JUNE 30, 2019
Business-Type Activities
Landfill Total
Closure and Stormwater Nonmajor
Postclosure Management Enterprise Funds
Assets
Current:
Cash and short-term investments $ 17,633 $ 1,439,870 $ 1,457,503
User fees, net of allowance for uncollectibles - 199,314 199,314
Total Current Assets 17,633 1,639,184 1,656,817
Noncurrent:
Capital assets being depreciated, net - 1,333,799 1,333,799
Total Noncurrent Assets - 1,333,799 1,333,799
Deferred Outflows of Resources
Related to pensions - 9,900 9,900
Related to OPEB - 4,921 4,921
Total Assets and Deferred Outflows of Resources 17,633 2,987,804 3,005,437
Liabilities
Current:
Warrants payable 17,633 139,607 157,240
Noncurrent:
Net pension liability - 25,063 25,063
Net OPEB obligation - 90,647 90,647
Total Noncurrent Liabilities - 115,710 115,710
Deferred Inflows of Resources
Related to pensions - 48,375 48,375
Related to OPEB - 2,597 2,597
Total Liabilities and Deferred Inflows of Resources 17,633 306,289 323,922
Net Position
Net investment in capital assets - 1,333,799 1,333,799
Unrestricted - 1,347,716 1,347,716
Total Net Position $ - $ 2,681,515 $ 2,681,515
See Independent Auditors' Report.
122
TOWN OF READING, MASSACHUSETTS
NONMAJOR PROPRIETARY FUNDS
COMBINING SCHEDULE OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION
FOR THE YEAR ENDED JUNE 30, 2019
(continued)
Business-Type Activities
Landfill Total
Closure and Stormwater Nonmajor
Postclosure Management Enterprise Funds
Operating Revenues
Charges for services $ - $ 616,911 $ 616,911
Total Operating Revenues - 616,911 616,911
Operating Expenses
Personnel expenses - 157,608 157,608
Non personnel expenses - 128,586 128,586
Depreciation - 71,678 71,678
Total Operating Expenses - 357,872 357,872
Operating income - 259,039 259,039
Nonoperating Revenues(Expenses)
Investment income - 18,104 18,104
Change in net position - 277,143 277,143
Net Position at Beginning of Year - 2,404,372 2,404,372
Net Position at End of Year $ - $ 2,681,515 $ 2,681,515
See Independent Auditors' Report.
123
TOWN OF READING, MASSACHUSETTS
NONMAJOR PROPRIETARY FUNDS
COMBINING SCHEDULE OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 2019
Business-Type Activities
Landfill Total
Closure and Stormwater Nonmajor
Postclosure Management Enterprise Funds
Cash Flows From Operating Activities
Receipts from customers and users $ - $ 559,411 $ 559,411
Payments to vendors and employees (15,298) (176,812) (192,110)
Net cash provided by (used for)operating activities (15,298) 382,599 367,301
Cash Flows From Capital and Related Financing Activities
Acquisition of capital assets - (179,621) (179,621)
Net cash (used for)capital and related financing activities - (179,621) (179,621)
Cash Flows From Investing Activities
Investment income - 18,104 18,104
Net cash provided by investing activities - 18,104 18,104
Net change in cash and short-term investments (15,298) 221,082 205,784
Cash and Short Term Investments, Beginning of Year 32,931 1,218,788 1,251,719
Cash and Short Term Investments, End of Year $ 17,633 $ 1,439,870 $ 1,457,503
Reconciliation of Operating Income to Net Cash
Provided By(Used For) Operating Activities
Operating income $ - $ 259,039 $ 259,039
Adjustments to reconcile operating income to net
cash provided by (used for)operating activities:
Depreciation - 71,678 71,678
Changes in assets and liabilities:
User fees receivables - (57,500) (57,500)
Deferred outflows of resources:
Related to pensions - 10,327 10,327
Related to OPEB - (4,688) (4,688)
Warrants payable 17,633 114,416 132,049
Accrued liabilities - (56) (56)
Other liabilities (32,931) - (32,931)
Net OPEB obligation - 9,134 9,134
Net pension liability - (43,366) (43,366)
Deferred inflows of resources - 23,615 23,615
Net cash provided by (used for)operating activities $ (15,298) $ 382,599 $ 367,301
See Independent Auditors' Report.
124