Document Salem_doc_1734e5f20d

Gity of Salem Five Year Financial Forecast FY 20't2 - 20't7 updared 5¡612013 PROJECTED FYî6 PROJECTED 909 0 1 136 141 27 5 PROJECTED 4 MAYORS 1 1 't71 RECAP 1 1 095 1 7 186 1 6l 7 õ FYî5-FYI7 5Oo/o 3.00% 3.00% vanes vanes FY13 v FY14 3 97o/o 1 7 27.44% -14.84% 0.7't% 11 3.08% ¡ncluded ¡n ENTERPRISE PROPERTY TAX LEVY TOTAL: TOTAL: CULTURAL AND RM DEBT SERVICE - LONG TE SHORE VOC. DEBT SERVICE - SHORT ESSEX Sec 6 - 1 ---PAGE BREAK--- Five Year Financial Forecast - Narrative FY20l4 through FY2017 Executive Summary The five year financial forecast for the City of Salem is used as a budget tool that enables municipal officials to review operating needs, identify fiscal challenges and opportunities, and help develop long term budgeting policies as part of an overall strategic plan. The five year financial forecast is invaluable in identifying key areas that the City needs to focus on such as rising health insurance costs, retirement assessments, and collective bargaining agreements. It also helps the City plan for its capital budget, debt service management, and long term sustainability. Financial forecasting is the process ofprojecting revenues and expenditures over a five to ten year period. Factors that affect forecasting are current and future economic conditions, collective bargaining agreements, future operating and capital scenarios, and other factors that affect future revenues and expenditures. The five year financial forecast is also used as a coÍìmunication tool for both the City Council and the public. A separate power point document helps the administration communicate the long term strategies, f,rscal challenges, and overall financial health of the City of Salem. The forecast is always evolving and is constantly updated as information becomes available. The recent news of Dominion closing the Power Plant has been the most significant item to be addressed in term of long term planning. Additionally, the Salem Public Schools will continue to run the Salem Community Charter School in FY2014. This new Charter School was established in FY20l2 to help curb the dropout rate in the City while keeping the Chapter 70 funds in tact. Sec 6 - 2 ---PAGE BREAK--- Revenues Tax Lew: s77,849,522 The tax levy is the City's primary revenue source, comprising approximately 63Yo of the City's total general fund revenues. Residential property values pay 82Yo of the total property taxes, while commercial, industrial, and personal property values pay I8Yo. The City has a split tax rate of 1.65, which translates to a residential rate of $16.39lm. and commercial rate of $31.46lm. for FY2013. The City realizes an automatic 2.5%o increase to the tax levy under Proposition 2 plus any increase due to "new growth" in the City. New growth includes new development, condominium conversions, and renovations/expansions to existing properties, to name a few. The City's Assessor has seen a dramatic drop in all of the above listed growth categories due to the poor economic climate. The City has typically averaged approximately $900,000 per year in new growth; however, it is recommended by the City's Assessor that the growth estimate to be used for FY20l4 should be $600,000. Local Receints: $14,408,835 Local receipts are locally generated revenues other than real and personal property taxes. Examples include motor vehicle excise, investment income, hotel/motel tax, fees, rentals, and charges. The City has increased its estimate for local receipts by 1.52% for FY2014 due to some anticipated increases in charges for services, frnes and forfeits, and parking fees related to the implemented parking study. Estimated non-recurring revenues remains steady due to the hold harmless agreement with Footprint Power LLC. It is expected that the hold harmless agreement will reimburse the City $3 million in FY14. Most other local receipts are level funded, except for payments in lieu of taxes (PILOT), which has been decreased by $149,000. This decrease represents the property at 10-12 First Street - a250 unit low income apartment building that was a 1214 property and will be coming back on the tax rolls under 59-59; therefore the property has stopped paying excise taxes, causing a reduction of $149,000 in receipts from the State. Cherrv Sheet Revenue lState Aid): $28,013,113 Named for the cherry colored paper on which it was originally printed, the Cherry Sheet is the offrcial notification by the Commissioner of Revenue to municipalities and regional school districts of estimated state aid to be paid and charges to be assessed over the next fiscal year. Cherry Sheets are usually issued each spring, following enactment by the Legislature of the state budget for the following year. Sec 6 - 3 ---PAGE BREAK--- This year, the Legislature has decreased the estimated state aid to the City of Salem by approximately 5257,796 from the FY20l3 amount. Decreases included Charter Tuition Reimbursement, and Veteran's Benehts. A chapter 70 appropriation has been increased from 520,759,584 in FYl3 to $20,879,459 million in FYl4, a9.9Yo increase. Also, Unrestricted General Government Aid (UGGA) has been increased by $I37,92I or 9.7Yo (from $5.83 million to $5.97 million). The two accounts (Chapter 70 and UGGA) account for the lion's share of the cherry sheet dollars; as such, the total decrease in State Aid is only .52%o from FY13. It is difficult to gauge the amount that the Commonwealth will allocate to the 351 municipalities due to the volatile economy. Nevertheless, we need to assume a figure for purposes of completing the five-year financial forecast. Therefore, it is predicted that the State will increase the FY2014 appropriation by I%o each year through FY20l7. V/e hope that this is a conservative estimate; however, it could be the opposite. School Buildins Assistance: $2,534,339 The Massachusetts School Building Authority (MSBA) administers the school building assistance program that reimburses cities, towns, and regional school districts varying percentages of their school construction costs depending on the wealth of the community or district and the category of reimbursement. The City of Salem was lucky enough to receive 90o/o reimbursement for all its building projects. In FYl4, the amount of SBA reimbursement has remained the same at52,534,339. The amounts listed in the hve year forecast reflect the funding schedule of the MSBA for FY2014 through FY20I7. Enterprise Fund Revenue: $14,007,348 An enterprise fund, authorized by MGL Chapter 44, Section 53F % is a separate accounting and financial reporting mechanism for municipal services for which a fee is charged in exchange for goods or services. It allows a community to demonstrate to the public the portion oftotal costs ofa service that is recovered through user charges and the portion that is subsidized by the tax levy, ifany. The City of Salem has three Enterprise Funds; water, sewer, and solid waste. The water and sewer enterprise funds, with estimated revenues of $4,838,523 and$6,982,17I respectively, provide for full cost recovery, including indirect costs that are appropriated in the general fund. Water and sewer enterprise fund revenues are estimated to have various increases over the next four fiscal years depending on the costs of assessments from the Salem Beverly W'ater Supply Board and the South Essex Sewer District, as well as the debt service from some of the major projects underway in the City, including the installation of new water meters throughout the City, the Sec 6 - 4 ---PAGE BREAK--- reconstruction of several water mains, rehabilitation of the Gallows and Folly Hill storage tanks, South River Basin upgrades, Canal Street Upgrades and water meter replacements. In FY 2013 they City Council will vote to COMBINE the water and sewer enterprise funds for FY 2014 as allowed by the Department of Revenue as outlined in Bulletin 2012-B (page 317). Over the past two years the Water Enterprise fund revenue has not been sufhcient to cover expenses and we have had to appropriate free cash to cover the deficits. In FY 2013 we had to raise $218,738 on the General Fund RECAP to cover the FY 2012 deficit. 'We will also have to appropriate Free Cash to cover the June 30,2013 anticipated dehcit of approximately $200,000. By combining the funds we can use sewer revenue to help offset the water deficit. We are also requestíng a 5o/o increase on both water and sewer rates for FY 2014 to cover the deficit and to build up funds to cover anticipated water and sewer projects include the Canal Street project. The water and sewer funds will remain in SEPARATE funds for accounting and budgeting purposes within the City. But they will be COMBINED for reporting purposes on the City's annual hnancial statements (CAFR) and when calculating Retained Eamings by the Department of Revenue. For FY14, the administration is recommending a water rate increase of 5olo and a sewer rate increase of 5olo to cover the costs of debt service for the infrastructure repairs listed above. These rate increases are estimated to increase the average single family water/sewer bill by $6a.a0 per year. The City's overall average bill is estimated to be $1,350 per year, keeping Salem's annual combined water/sewer cost below the average of the comparable surrounding communities, such as Beverly, Danvers, Gloucester, and Marblehead. The Solid'Waste Enterprise fund, established in FY08, does not recoup all operating costs. However, the $580,000 estimated revenues will cover approximately 37%o of the total cost of 52,424,288 in FY20l4. The revenues from the Solid Waste Enterprise fund are projected to decrease for the next five years due to the renegotiated contract. Other Financial Resources - Recurrins: s1,097,226 The City has three "receipts reserve" accounts; Harbormaster, Witch House, and Golf Course. Receipts reserve accounts are accounts in which proceeds are earmarked by law and placed in separate accounts for appropriation for particular purposes. The City treats these accounts similar to Enterprise Funds, by which the fees charged cover the expenses of the particular program. It is estimated that the revenues generated will increase each year by 2.5%oto keep up with rising costs of running each of the three departments. The City also has one "offset receipt" account for the Electrical department, used to pay the City Electricians for their work on fire systems of Sec 6 - 5 ---PAGE BREAK--- conìmercial properties. This account is expected to be level funded for the foreseeable future. The City has not budgeted any non- recurring "other financial resources" for FY2014 through FY20l7. Expenses General Government: s4,802,367 Departments under General Government include all of the f,rnancial off,rces and overhead support functions, including Mayor, City Council, accounting, assessing, legal, treasury, collector, purchasing, city clerk, etc. In FY13, the administration has budgeted $525,000 in the Human Resources department, which went towards funding collective bargaining agreements in FY13. As you can see, the General Government budget has been reduced by $206,178 to reflect the utilization of funds related to the FYl3 collective bargaining agreement settlements. Also group insurance was reducedby $102,273 due to a better numbers for health insurance enrollment. The estimated expense increase for general government services for the City will be 3Yo for FY2015 through FY20I7 Public Safety: S18,966,567 Departments under Public Safety include police, f,rre, inspectional services, electrical, and harbormaster. The estimated expense increase for public safety for the City will be 5Yo for police and fire and 3Yo for inspectional services, electrical and harbormaster for FY2015 through FY20l7. These increased are expected due to the historical costs of collective bargaining agreements for police and fire, including minimum levels, as well as the rising costs of utilities for both electrical and harbormaster departments. Public Works and Facilities $3,609,902 Departments under Public Works and Facilities include public services, engineering, snow and ice removal, and parking department. Estimated expense increase for public services is expected to increase at 5Yo per year through FY20I7. Engineering and parking expense increase are expected to increaseby 3Yo per year through FY20I7, and the snow and ice budget will be level funded through FY20l7. Human Services: s1,227,257 Departments under Human Services include the health department, council on aging, and veterans' services. Expenses in human services are projected to increaseby 3Yo per year due to normal increases in salaries and expenses, although the increase of veterans returning from war may put additional pressures on the veterans' budget which is primarily driven by costs of veterans' benefits. Sec 6 - 6 ---PAGE BREAK--- Cultural and Recreation: [PHONE REDACTED] Departments under Cultural and Recreation include library, park & recreation, golf course, witch house, Winter Island, and historical commission. Expenses in Culture and Recreation are projected to increase by 3% per year due to normal increases in salaries and expenses. Fixed Costs: s25,726,903 Fixed costs are costs that are legally or contractually mandated such as health insurance, retirement assessment, Medicare, workers compensation, unemployment, and several other items. Fixed costs continue to be the biggest challenge in municipal budgets. Each fixed cost has its own projected increase over the five year forecast that reflects the average costs municipalities are seeing in each category. The projected increases for FY2015 through FY20I7 for each fixed cost are as follows: Health Insurance: 5% o Average increase statewide over the last several years. Retirement Assessment: 5.7o/o o Estimated increases needed to fully fund liabilityby 2030. Retirement Anticipation Stabilization Fund : 5 o/o o This fund is for those employees who retire and are due sick/vacation buyback. Capital Improvement Fund: various o This fund is typically used for unexpected capital purchases/repairs; however, the FY2014 Capital Improvement Program has proposed to fund $303,000 into this account to pay for many capital needs throughout the City. By using this approach, the City will not look to issue long term bonds for these projects/equipment purchases. The City plans to fund the CIP with $300,000 per year through FY20l7 and beyond. Medicare: 3olo o Average increase in wages for City workers over the past several years. Municipal Insurance: 30á o Historical average of our increases since 2006. Worker's Compensation: 5o/o o 'We are fully insured and expect rates to increase at this level. o FY14 was unusual due to an unexpected payroll audit error relating to the input of risk and personnel codes for the School Department into Munis. Unemployment: 3% o Reasonable estimate a a o a a a a Sec 6 - 7 ---PAGE BREAK--- Non - Contributory Pension: -3olo o Negative number due to the shrinking number of those retirees who are part of this group. Fixed Costs - Debt Service: $5,030,047 Debt service is the repayment cost, usually stated in annual terms and based on an amortization schedule, of the principal and interest on any particular bond issue. The overall debt service for the City is scheduled to decrease for existing deb! however, as part of our capital planning, we try to maintain a2o/o inqease in the total cost of debt service so that we can actively manage the replacement of vehicles and machinery, maintenance on existing buildings and infrastructure, and construction of new facilities. FY14 is unique in short-debt service, due to the new debt related to the construction of the new Essex AggieÀtrorth Shore Voc. Assessment - North Shore Resional Vocational School District: $1,945,039 The assessment to the City of Salem from reflects the number of students attending the school and the associated costs. It is estimated that these assessments will increase 5% through FY20l7. These payments are forecasted at 9274,000, $559,000, and $468,000 for FYl5 through FYIT respectively, as per estimated debt schedules provided by the district. Education: 552,533,423 for Salem School District & $1,060,257 for Salem Community Charter School The School Committee oversees the budget process for the schools, and it has a bottom line budget of $52,533 ,423 for FY20l4 regular school, an increase of $2,045,383 that was approved in fiscal year 2013 ($50,508,040). Additional funds have been budgeted ($1,060,257) to fund the Salem Community Charter School that started in September of 2011. For financial forecasting pu{poses, we expect that the cost of education will increase the general fund budget by 4% per year in both personnel and non-personnel expenses. The City's finance director and the School's business administrator continue to work on cost saving measures and shared services to ensure that the level of staff at the SPS will be adequate to provide quality education to its students. Enterprise Fund Expenses z 51412441982 Expenses in the enterprise fund represent personnel, expenses, contracted services, assessments, and debt service costs for the three enterprise funds of the City: water, sewer, and solid waste. Expenses in the funds are projected to rise from FY2015 to FY20l7 as follows: a o Water Enterprise Sec 6 - 8 ---PAGE BREAK--- o Personnel: 3% o Expenses: 3% o Assessments: 3% o Debt Service: per debt schedule (actual and projected) Sewer Enterprise o Personnel: 3% o Expenses: 3% o Assessments: 3% o Debt Service: per debt schedule (actual and projected) Solid V/aste Enterprise o Personnel: 5% (newrecycling coordinator) o Expenses: 3% o Contracted Services: 3% Cherrv Sheet Assessment: s5,644,448 Named for the cherry colored paper on which it was originally printed, the Cherry Sheet is the ofhcial notification by the Commissioner of Revenue to municipalities and regional school districts of estimated state aid to be paid and charges to be assessed over the next fiscal year. Cherry Sheets are usually issued each spring, following enactment by the Legislature of the state budget for the following year. The categories of charges include mosquito control projects, RMV non-renewal surcharge, MBTA, and tuition assessment. This year's overall assessments have increased by 1.69% or $93,975 from last year's assessment of $5,550,473. It is projected that the Cherry Sheet assessment from the Commonwealth will increase 4Yo from FY2015 to FY2017. Other Expenditures: $1,715,681 Overlay: $900,000 o Overlay is an account established annually to fund anticipated property tax abatements exemptions and uncollected taxes in that year. It is anticipated that overlay will vary in its increases due to the triennial certifications of values per the DOR and the increased values of properties throughout the City. Typically, a municipality will increase its overlay on a Sec 6 - 9 ---PAGE BREAK--- certification years (our triennial will occurred in FY2013) due to the adjustments typically made to conform to all Massachusetts General Laws for assessing property taxes. Snow and Ice Deficit $700,000 o The winter season of FY201 3 was a tough one, and therefore our deficit is at $700,000. It is anticipated that future years will have deficits. Therefore, the amount budgeted for FY15 though FY17 is $500,000. Cherry Sheet Offset: $75,681 o Offset receipts are receipts from the Cheny Sheet that are to be used for a specific pu{pose (school lunch and public library). These obligations are expectedto increase3o/ofor FY2015 toFY2017. Conclusion The City of Salem, like all municipalities throughout the Commonwealth, continue to struggle with rising fixed costs, a sluggish economy, and contractual obligations that make balancing budgets very challenging. In most cases, Proposition 2 Yr, the law that regulates the increases a municipality can increase its property taxes, does not allow for property tax revenue to keep up with the costs of doing business. The five year financial forecast is a tool that helps us best manage the challenges. It is a tool that uses reasonable estimates in both revenue and expenditure trends while considering the overall economic picture of the current times. The goal is to project revenues and expenditures up to five years into the future which will help the administration analyze where current trends are leading and estimate if money will be available for discretionary spending such as capital purchases, collective bargaining settlements, and new municipal program. It also will help identifu those "budget buster" items that need reform from the local or state government. The five year forecast, combined with the capital improvement program and FY2014 budget will continue to be the basis for all future financial plaruring for the City of Salem. a a Sec 6 - 10 ---PAGE BREAK--- Long-Tem lÞtÍ obligãtiG FÉêlY@r2011-Nú D# of Orig¡Èl Pd ls* hsæ ___________lf9i9g_ors sctr Offind¡E lftEt atJæ 30, Rab m11 m12 2013 m1l Ptuml hlÉ m1s 2016 2017 lftEl Pdmiml PdmiGl Bo*: 9/1 5/2000 9n 5t2000 9/l 52000 8t1i2001 8t1t2001 8t1[2001 1t15t2003 1t1st2007 1t15t2003 6t1î2003 111t2005 1t1noos 111f2005 10t15t2007 10t1512001 10n512007 1t2712010 10/1520' 0 10t1sr2010 9t27t2012 9î27t2012 9f27f2012 9127t2012 10.705,000 ,{50.000 470,000 4,710.000 6,495,000 2,935,000 17,646,075 9,523,925 1.500,000 4,480,000 1,887,447 577.553 1,100,000 6,885,633 658,89 775,0æ 8,285,000 1,995,000 4224,OOO 3,647,5m 1,400.000 6,639,854 3.656,244 $ $ $ $ 612,000 $ 293,000 $ 12,280,000 $ 6,æ5,000 $ 920,000 $ 925,000 $ 1,315,000 $ 395,000 $ 650,000 $ 5,850,000 $ 400,000 $ 595,000 $ 8285,000 $ 1,995,000 $ 4,224,000 $ 612,000 $ 293,000 $ 805,000 $ ,135,000 $ 85,000 $ 465,000 $ 95,000 $ 30,000 $ 75,000 t g5,m $ 80,000 $ 60.000 $ 870,000 $ 245,000 $ 394,000 $ 12,240 S 5,860 $ 540,100 $ 291,329 $ 39,655 $ 27,675 $ 55,51 $ 16,708 $ 27.E00 $ 233,119 S 15,400 S 23,350 $ 254.975 $ 64,525 $ 143,760 $ &0,000 $ 4s5,000 $ 90,000 t 460.000 $ 95,000 $ 30,000 s 75,000 $ 345,000 $ 80,000 $ 60,000 $ &0,000 $ 245,000 $ 290.000 $ 509.913 275,016 3,034 10,350 52,331 15,688 25,250 215,869 1 1,400 20,350 237,ø7s 57,175 101,500 95,000 ¡ 30,000 3 75¡lr0 ¡ 3,45¡00 ¡ 80,000 ¡ il,o00 5 t¡m,w ¡ 85.0m 3 285,00O 217,50O :¡o¡o0 l3,l¡5¡r 7124 39,t43 5 27,690 $ .s 4¿s8r $ 14188 $ 21,500 $ 20o¡a¿ $ 7,m $ 17,650 $ lg/¡¡ts $ 49,975 $ 92816 tt2¡31 46.038 211ñ7 110â2 80,000 $ 60,000 $ 95.000 $ 30,000 $ 75,000 $ 95,000 $ 80,000 $ 60,000 $ 8,10,000 $ 225,000 $ 280,000 230,000 30,000 140,000 75,000 -s s,r43 $ 25,690 $ 42,831 $ 12,68E $ 17,750 $ lm,g 5 4,600 $ 15250 $ 116,875 $ ,t3,075 $ 84,400 99,69 44,1 38 210,74 116,ffig 80,000 $ 60,000 $ 95,000 $ 30,000 $ 75,000 $ 345,000 $ 80,000 $ 60,000 s 850,000 $ 210,000 $ 280,000 240,000 30,000 145,000 80,000 85,000 $ 60,000 $ 95,000 $ 30,m0 $ 75.000 s 345,000 $ 60,000 $ 785,000 $ 150.000 s 230,000 250,000 35,000 150,000 85,000 Bates School Coñudion_ Svimminq Poof Golf CouÉ' SchoolCoñdion School Con*uction Pol¡ce Shlion Sdool Coñdon SdoolCoffidion School Coñudon School Coñudion School Coffidion Sc*lool Coßtudion Parkinq GaÉge Repa¡E H¡sh School Pol¡ce Equipmed Fery Boat Proied G-O Sbb Qual Retundinq' CIP 2009 Bonds CIP 2O1O Bon& CIP 2012 Bonds M6Eb Park SóælCoffidion SchoolCôñudoh I 506 75% 1 504 750/. 4 506 750/" 3.50-4 00% 3 50-4 000/6 3 50-1 00% 3 0ù5 00% 3 0G5.00% 3 0G5 00% 2254 50.Á 3 0G5 00% 3 0G5 00% 3 00-5-000Á 4 1215 OOa/. 3 750-5 00olo 4 0ù5 00% 2 00-5 00.k 300&400% 300&400% 300&400% 300&400% 300&400% 300&400% 32,%3 23,290 38,081 11,188 14,000 173,175 1,500 12,925 æ.550 76,000 97,719 43,234 2m,469 113,74 75.m 80,000 29,643 20,815 342e1 9,988 11,000 159,8æ $ 10,600 97,000 30¡00 67 200 91,719 42263 202,W 1 1 1,269 N/A 2006 1U15t2007 r0/152010 9n1no12 2.330,656 3,250,503 7,464,000 1,1t2,402 Wabr Sylem lmprovemeñ Water Bonè 200% 4 125-5 00% 300&400% 300&400% 1,939,280 2.7S,000 7,¡lô1,000 103,880 $ f65,000 $ 444,000 5 37,747 S 109,563 $ æ9,860 S 105,978 I 65,000 440,000 35,il8 101,313 287,100 l08ll9 t55,000 610,O00 82,102 33,507 S El¡88 $ 2ru,9m 43¡36 I 10,303 165.000 554,000 55,000 31,323 87 288 251,700 41,125 112532 165,000 5¡10,000 55.000 29,095 80,894 238.500 39,775 114,805 165.000 540,000 55,000 26,821 74,500 2't 9,600 38,125 $ $ Serer L@É 1U15nO10 9Ì27t2012 1.690,000 SewerBmò 1,435,000 S4er Bonè 3 00 & 4,000/6 3m&400% $ 1,590,m0 $ 10s,000 $ 61.125 $ 100,000 $ 58,050 ¡ 95¡m 3 55¡00 ¡ 6+125 $ ¡ß,7:¿5 $ 95,000 $ 60,000 $ 52,275 S 42,000 $ 9s,000 $ 60,000 $ 49,42s $ 40200 $ 95,000 $ 60.000 $ €,1m 38.4¡0 TOTAL BONDS SS92O728O9s,7m¡8052rs.351¡4,715,978S2,017.86134190,119¡1,744¡00¡3,584,30351,59¡1,874S3,il7,532S1,$0234$3,15,1305¡'1,361.573 HUD Sedon 108 B-S-MG25 231-319% $ 14o,OOO S 35,m0$ 6,169S 35,000$ 4,€3¡ 35,0@¡ 2,7D6$ 3s,000$ HUD ffion 108 Lffi: 5/'30209 350,000 HUD SECNON IG TOTI ç t4m 6 lcg 33 Om 3 35m 3 2ffi 35.m s 904 Sec 6 - 11 ---PAGE BREAK--- Long-fem tuhObligdioE FìsâlYâr2011 -2On Dæ of oriq¡El bsæ lssÞ Bonds: 9/152000 10,705,000 9t15t2000 4s0,000 9115f2000 470.000 at1t2001 4,710,000 a112001 6,495,000 at12001 2,935.000 1t15t2003 17,646,075 1t15t2003 9,523,925 1t1512003 1,500,000 6t1t2003 4,480,000 1t1¡2005 t,887,447 1t1r200s 577,553 1t1¡2005 1,100,000 10t15t2007 6,885,533 10t15r2007 658,8s 10t1512007 775,000 1n72010 8,285,000 10/1s20'10 1,995,000 10t15t2010 4,?24,OOO 9t27t2012 3,il7,s00 9Ì27t2012 r,400,000 9t2712012 6.639,8s4 9t27n!12 3,656,244 ors Pil Sch hed 2018 mí9 m20 202 Prirc¡Þal PrirciFl ltuÞl m21 IftreÉ lderd IfrreÉ Bat6 School Coñudion' Swimminq Poof GolfcouFe- School Coñdion School Coffidion Polæ Shfon School CoMdion Scnool Coffidion Sctìool Comdion School Coffidion Sdod Coñudon School Coffidion 4,506 75% $ 4 505 7s% $ 4 50€ 75% $ 3 5o-4 00% $ 35G400% $ 350400% $ 3 00-5 00% $ 3 0o-5 00% $ 30G500% $ 22s4soo/o $ 3 00-5 00% s 3F500% $ 30N00% $ 4 125-5 00% $ 3 75G5 00% 4 0G5 00% $ 20ù500% $ 300&400% $ 3 00 &,100% 300&400% 300&400% 3 00 &,100% 300&400% -s 95,000 $ 65.000 $ 95,000 $ 30,000 $ 75,000 $ s5,000 $ 26,030 $ 18265 $ 30,€l $ 8,7E8 $ 8,000 $ 146,006 S 8,200 s 73,300 $ 24.600 $ 5€,300 84,m9 41,213 197.544 108,71 9 -s 100,000 $ 65,000 $ 95,000 $ 30,000 $ 75.000 $ 345,000 $ 21,s5 $ 15,470 S 26,681 $ 7,566 $ 5,000 $ 132,206 $ 65,000 65.000 95,000 25,000 90,000 65,000 95.000 25,000 s- $ 8,370 $ 6,M5 $ 15,2E1 $ 4.188 4,230 3,055 1 1.363 3,1 56 90.000 $ 25,000 s 7,650 2,125 9,569 29,600 78,500 22,500 95.000 65,000 95,000 30,000 50,000 345,000 60,000 860.000 130.000 210,000 105.000 35,000 165,000 90,000 16,945 12220 ?2,441 6,388 2,000 118,4æ 12,195 $ 8,970 $ 19,08r $ 5,1E6 $ $ 90,000 65,000 90,000 25,000 30,000 170.000 125,OOO 40,000 190,000 105.000 't29,443 160,000 440,000 70,000 132,058 160,000 435,000 70,000 Hiqh School Potue Equipmeñ Fery Boat Proied G O Shte Qual Retundins' CIP 2009 Bonds clP 2010 Bmds clP 2012 Bonds MccÉlh Park Sclool Coffidion School Coñdion 60,000 795,000 140,000 215,000 260,000 35,000 150,000 85,000 60,000 $ E30,000 $ 135,000 $ 215,000 105,000 35,000 155,000 90,000 5,E00 47.888 19,1 00 49,700 69,493 40,163 192.S9 1 06,094 130,000 $ 205,000 105,000 35,000 170,0m 90,000 6,600 32,900 71,769 37,888 182294 100,24 30,000 170,000 110,000 40,000 175,000 100,000 5,400 $ 25,400 67.469 36,388 1 75,394 96,& 30,000 $ 170,000 120,000 40,000 't85.000 100,000 4,200 18,600 62.S9 34,744 168,197 92,414 3,000 11.800 57,59 33,188 150.694 88,344 345.000 $ 104.606 $ 345,000 $ 90,86 $ #,000 $ 77,0ffi $ 34s,000 $ æ26 55,000 $ 1,100 3,400 $ 17,200 13,800 $ 41,200 7s,444 39,1 13 166,169 103.394 19,722 55,200 154,800 32,800 2006 10t15t2007 10115no10 9n7Þ012 2,330,6S 3,250,503 7.4&,000 1.412,402 water-MwPAT-DW4t12 Water Sy$em lmprovemeñ water Bonds 200% 4 12t5 00% 300&400% 300&400% 117,124 160,000 540,000 60,000 21,sO2 $ 68,000 $ 198,000 æ,400 1 19,490 160,000 540,000 60.000 ?2,1æ 61,600 1 76,400 34,600 121,901 160,000 540,000 60,000 124,æ7 160,000 540,000 65,000 17259 $ ,1E.600 $ 133.200 30.600 126,880 $ 160.m0 $ 440,0m 65.000 14,747 42,100 1 13,600 28,000 12,1U $ s,000 $ s,000 25,300 10t15t2010 9t27t2012 '1,690,000 Sser Bonds 1,435,000 300&400% $ 300&400% $ 95,000 $ 60,000 $ 42,300 $ 36,600 $ 95.000 $ 65,000 $ 38,500 $ 31,725 S 95,000 $ 65,000 $ 34,700 $ 32,775 S 90,000 $ 65,000 $ 31,000 s 30,500 $ 85,000 $ 27,500 $ 65,m0 $ 27,E00 $ 85,000 $ 70,000 $ 24,100 $ 25,000 $ 85,000 $ 75,000 $ 20,700 ?2,100 TOTAL BONDS HUD Sedion 108 B-g+Mc.2s HUOffimlOS hß: 6¡30/2004 350,000 HUD SECTION IM TOTAL 2 31-5 194/, 53.177..121¡t,239,3't633,374,49051,108,056¡3¡76,qX$gs,s$t2,449,357$676,193$2.186¡80¡78sr3152211,Æ4598,¡t9'l¡2,077,058¡610.944 Sec 6 - 12 ---PAGE BREAK--- LorE-Tem Deh obliglioË FÉâtYærm11-2028 De of lssæ Bords: 9t13t2000 9115t2000 911s12000 8t112001 al1200l 4t112001 1t15¡2003 1t152003 111512ñ3 61112ñ3 1111200s 1111200s 1t1n005 1U1sr2007 10t15t2007 10t152007 127f2010 1U15n010 10t15f2010 9n7¡2012 9t27t2012 9n7Ì2012 9D7nO12 Oriq¡El lssæ Pd sá ItrEl A25 90.000 $ 25.000 $ 202Ê 2027 2024 20æ 2030 2031 o/s 10,705,000 450,000 470,000 4,710,0æ 6,495,000 2,935,000 17,646,075 9.523,92s 1,500,000 4,480,000 1,AA7,147 577,553 1,100,000 6,885.6æ 658,8e1 775,000 8,285,000 1,995,000 4,221,000 3,647,500 1,400.000 6,639,854 3,656,244 Bats Sc-hool Contudion' Swimmìnq Poof GolfcouEe' Sdìool Coñudon School Coffidion Pol¡ce Sbton School Coffidion School cotuion Sc+Þol coGhdion School CoÉudion School Coñdon Scfiool Coñdion Parkim Garage RepaiF H¡qh Sclþol Polìæ Equìpment Fery Boat Proied G O Sãte Qual Retund¡ns' CIP 2009 Bonè CIP 2010 Bonds CIP 2012 Bonds MccÉlh Park School CoEtudion School Coffidon 4506.7s% $ 4 506 75% $ 4sM7s% $ 3 s04 00% $ 3 5G4 00% $ 3sM00% $ 3 00-5 00% $ 3 00-5 000¿ $ 3 0G5 00% $ 2.2* sO% S 3 00-s.00% $ 3 00-5 00% $ 3 0ù5 00% $ 4 125-5 00% $ 3.75G5 00% 4,0È5 00% 2 0G5 00% 300&400% $ 300&400% 300&400% 300&400% 300&400% 3 00 & 4.00% 3,E25 $ 1,m3 $ 34s,000$ 49,191 $ 340,000$ 35,063$ 340,000$ 21,038$ 340,000$ 7,013 x 30,000 170,000 125,000 45,000 195,000 1 05,000 1,800 5,000 53,907 31,825 I 54,456 84,931 30,000 40,000 130,000 45,000 200,000 1 15,000 600 800 50,719 30,700 149,519 82,1 81 130,000 45,000 210.000 1 15,000 47,388 29,547 114263 79,244 43,834 28,338 138,550 76,075 75,000 50,000 20,ooo 120,000 40,981 26,969 126,969 72,æ5 75,000 50.000 25,OOO 125.000 36,4m 23,S9 11ø,719 65,125 130,000 ,15,000 215.000 120,000 38,73'l 25,169 125,619 68,950 75,000 50.000 235,000 130,000 206 1U1sr2007 10t15Í2010 9t2712012 200% 4 12'5 00% 300&400% 3.00 & 4 00% 14,726 $ 160,000 $ 435,000 75,000 6,901 23, t 00 61,100 20,1 63 137,447 160,000 435,000 75,000 140,221 160,000 430,000 80,000 1,402 9,900 30,600 16,300 160.000 $ 3,300 230,000 21,400 80,000 14,150 2.330,5s Waler-MWPAT-DW-0512 3,250,503 7,464,000 Wate.Bonè 1.412,402 WaterSFtem lmprovemenb x 1,179 16,500 43,E00 18,288 230,000 80.000 12,200 '11,850 95,000 85.000 5,700 9,375 95,000 85.000 '1,900 6,A25 10t15no10 9D72012 1,690,000 Sewer Bonds 1,435,000 Sryer Bonè 300&4-00% $ 300&400% $ 85,000 $ '3,900 $ E0,000 $ 17,5a2 $ 85,000 $ 10,500 $ 80,000 $ 15.550 $ 85.000 $ 80,000 $ 7,100 $ 13,400 $ 85,000 $ 3,700 $ 50,000 $ 8s.000 $ 11.025 $ 8s,000 s 1,000 8.,f75$ 5,000$ 5,72s 85,000 $ 80,000 $ 17.300 $ '19.600 $ TOÍAL BONDS HUD Sedon 108 B-*MG25 6ßOt2004 350,000 HUD SECÍION 1M TOTAL 231-5 19% t2,os,t2Êts3,t,161 l1ß72,1175463,83051.815224¡0sJ!2$1,¡l8s,m¡3s,139$945,mS3æ,319¡7$,mS283,319¡765,0m5258,659 Sec 6 - 13 ---PAGE BREAK--- Dæ of or¡s¡El Pd lssæ lssæ Pre¡ed O/S Sch Long-Tem thh oblitdiG F¡søl Y€r ã)lí - 2028 Bonds: 911512000 9n 5/2000 9n 5/2000 ?'/12001 8r/1n001 ønt200 l 111sÌ2003 1t1st2003 1t15¡2003 61112003 111r200s 1t1n005 1112005 10t15no07 10t15t2007 10t15t2007 1n7¡2010 10t15t2010 1U15t2010 9f2712012 st27t2012 9t272012 9272012 m32 90,000 2033 m! 10,705,000 4S,000 470,000 ¡1,710,000 6,495,000 2,935,000 17,ffi,075 9,523,925 1,500,000 4¡80,000 'I,887,417 577,553 1,1 00,000 6,885,633 658,864 775,000 8,285,000 1,995,000 4,21,000 3,ô17,500 1,400,000 6,639,854 3,656,244 Bat6 School Colfuion' tuimminq Poof GofCNEe- School Coßtudion Scåool Coffidion Poliæ Sbton Sclool Colfuion Sclìool Coffidon SchoolCoffidion Sc+rool CorÉbudion Sclool Coffidion School Coffidion Park¡nq Garaqe Repa¡E Hish School Pofce Ê+¡pmenl Fery Bod Proied G o ste Qual Refundnq' clP 2m9 Bonds CIP 20'0 Bon6 CIP 2012 Bonds Mccrath Park Scfiool Coñdon Sc+lool Coffidion 1506_75% 4 506 75% 4.506.75% 3 50-4.00% 3 50-4 00% 3 50.1 00% 3 00-5 00% 3 0G5 000/6 3 0ù5 00% 22* 50% 3 00-5.00% 3 0û.5 000¿ 3 0G5 00% 4 125-5 00% 3 75G5 00% 4 0È5 00% 2 00-5 00% 300&400% 300&400% 3 00 &4 00% 3.00 & 4 00% 300&400% 300&¿00% 75,000 $ 50,000 $ 240,000 $ 't35,000 $ 34,006 2.,ß9 1 1 1,59,t 61.'150 80,000 50,000 245,000 135,000 3t,531 $ 70,000 20,894 $ 55.000 10,1,319 $ 250,000 57,100 $ 140,000 29,085 19,209 96,?38 52,E8E 2006 101152007 10t15t2010 9t27t2012 2,330,6S 3,250,503 7,4èr,000 1,412,102 Water sysem Wabr Bonds Water SFtem lmÞrovemeñ 2 00./. 4 125-5 OOY. 300&400% 300&400% N/A 4,200 95,000 1,425 '10n5t20 t0 9t27¡2012 1,690,000 Sewer Bonds 1,435,000 Serer Bonds 300&400% 300&4.00% $ s5,000 $ 2.92s $ 50,000 $ 750 TOTAL BONDS HUD Sedion 108 B-9+MC-2s HUD Sdion 108 Lffi: 6ß020s 350,000 HUD SECTION IM TOTI 2.31-5 190/" $ æs,mo a 2a6,311 $ 65s,0m S 215,019 5 sls,m ¡ 197,913 Sec 6 - 14 ---PAGE BREAK--- City of Salem, Massachusetts Fiscal 2014 Long Term Debt Service By Month 000 Princjpal October-15 and Obligãlion Bonds of 2007 Refund¡n9 16 School Renovations Refund¡ng '17 Bates Sciool ReÍunding 18 Golf Course Clubhouse 59198 59t9r 5919D lnlerest $545,000 Princ¡pal lnterest $6,656,100 Princ¡pal lnterest $172,000 Princ¡pal 615,000 00 15.ô75 00 85,000 00 4,675_00 670,000 00 92,452 50 30,000 00 300 00 000 2,550 00 000 75,702 50 000 7 185 00 168, Obl¡gat¡on State Qual¡f¡ed Bonds of 2010 000 lnterest 11 1,400,000 00 $2,935,000 Princ¡pal lnterest $6,495,000 Principal 5943 5930 590 1Buìlding Reîund¡ng 2 School Prcject 000 000 Obl¡gation Bonds of 2001 lnteresl Bowd¡tch School 4 School Prcject Cadton School 5 School Prcject 59484 s908t 59/t8B 590E( 5948C $17,646,075 Pnncipal lnterest $9,523,925 lnterest $1,500,000 Pñncipal lnlerest 19,s71 2s 000 13,845 00 000 000 19,57't 25 50,000 00 13,845 00 000 000 125,000 00 Pñnc¡pal Obl¡gation Bonds of 2003 15 15 and 000 000 Princ¡pal s948D 000 000 000 000 Obligat¡on Bonds of 2003 15 and 59/t8E 5908F 59/t8F 5908C 000 10,750-00 000 23,790 63 000 10.750 00 95,000.00 23,790 63 30,000 00 I W¡tchqaft Elementary I Carlton School 75 75 21 47,581 147 $1,887,447 Princ¡pal lnterest $577,553 Princ¡pal .100,000 Princ¡pal lnlê€st Principal lntêresl 000 Obligat¡on 1 and 000 17 lntêrest 5936 10 Principal lntêrest I 08.1 19.00 15 and 108, 000 12 Pol¡æ Equipment '13 Feny Boat Prcject 14 Water System lmprovements s948H 59t0A 59304 5918 5938 [PHONE REDACTED] 6't0034 5939 lnteaest $658,864 Principal lnterest $775,000 Principal lnterest $3,250,503 Principal lnteresl '103,621 88 80,000 00 4,700 00 60,000 00 9,425 00 165,000 00 96,721 Aa 000 3,100 00 000 4,225 00 000 75 200,u3 11 lmprovemert 2'l Water Meters 22 Water Ma¡n 23 Sewer Pump Stat¡on 24 Sorjth R¡ver Bas¡n UpgÉde 25 GolfCourse Depl Equ¡p $1,9ô4,000 $3,000,000 $2,500,000 $190,000 $1,500,000 $100,000 Principal lnterest Principal lnterest Princlpal lnterest Principal lnterest Princ¡pal lnterest Principal 33,700 00 200,000 00 49,000 00 140,000 00 42,300 00 10,000 00 3,050 00 85,000 00 25225 00 10,000 00 32,200 00 000 46,000 00 000 40,200 00 000 2,900 00 000 23,950 00 000 page .l of 4 FírstSouthwet* 49, Sec 6 - 15 ---PAGE BREAK--- City of Salem, Massachusetts Fiscal 2014 Long Term Debt Service By Month 1711 O.ig¡nal 26 Dump Truck 27 DPW Equipment 28 Engineering lnfrastructure 29 Engineering Seawalls 30 Pol¡æ Veh¡c.¡es 31 Pol¡æ Equ¡pment 32 Pol¡æ Radar 33 Po¡¡æ Range Repa¡r 34 F¡re PumperTruck 35 Tumout Gear Equ¡pment 36 Parking Equipment 37 Witch House 38 Departmental Equipment 39 Forest R¡ver Pool 40 Foræt River Park 4'l \Mllow Publ¡c Bath@m 42 Fire Alam Reæ¡ver 43 TEff¡c S¡gnal 44 School F¡re Alam Systems 45 Schæl Buses 46 School lnfEsfuclure 47 School Equipment 48 Parking Multi Spaæ MeteF 49 Park¡ng Posts & S¡gnage 50 Poliæ Veh¡cles 2 51 F¡re SCBA Compressor 52 Publ¡cseryiæ Equ¡p &Veh¡cles 53 Publ¡c SeN¡æ GaÉge Doors 54 Roads, S¡dewalks & Crosswalks 55 Playgrcund Equ¡pment $65,000 $65,000 $150,000 $50,000 $70,000 s50,000 $25,000 $40,000 $375,000 $35,000 $50,000 $50,000 $50,000 $165,000 $50,000 $.100,000 $30,000 $100,000 $130,000 $'135,000 $75,000 $35,000 $50,000 $50,000 $140,000 $50,000 $295,000 $30,000 $1,500,000 $50,000 lnteEst Principal lnterest Principal lnlerest Prìncipal lnterest Princ¡pal lnterest Principal lnterest Princ¡pal lnterest Princ¡pal lnterest Princ¡pal lnterest Principal lnterest Principal lnterest Princip¿l lnterest Principal lnterest Principal lnterest Principãl lnterest Principal lnterest Princ¡pal lnterest Princjpal lnteresl Principal lnlerest Princ¡pal lnterest Principal lnterest Principãl lnterest Principal lnterest Pñnc¡pal lnterest Principal lnterest Princ¡pal lnterest Principal lnterest Principal lnterest Principal lnterest Principal lnterêst Principal lnteresl 1,450 00 10,000-00 77500 10.000 00 15,000 00 2,'l7soo 5,000 00 725 00 '15,000 00 600 00 10,000 00 450 00 5,000 00 '10,000 00 300 00 25,000 00 6,125 00 5,000 00 22500 5,000 00 72s OO 5,000 00 725 00 5,000_00 72500 20,000 00 2,250 00 5,000 00 725 00 10,000 00 1,450 00 5,000 00 325 00 20,000 00 900 00 15,000 00 1,775 00 15,000 00 't,875 00 5,000 00 1,225 00 5,000 00 22500 10,000 00 450 00 10,000.00 450 00 30,000 00 1,200 00 5,000 00 725 00 30,000 00 4,250 00 5,000 00 325 00 I 10,000 00 23,950 00 5,000 00 725 00 .1,300 00 000 625 00 0.00 625 00 000 1,950 00 000 650 00 000 375 00 0,00 300 00 000 150 00 000 150 00 000 5,750 00 000 150 00 0.00 650,00 0-00 650 00 000 650 00 000 1,950 00 000 650 00 000 1,300 00 000 250 00 000 600 00 000 1,550 00 000 1,650 00 000 1,150.00 0,00 150 00 000 300 00 000 300 00 000 750 00 000 650 00 000 3,800 00 000 250 00 000 22,300 00 000 650 00 2 750 00 10 000 00 .l 400 00 10 000 00 1 400 00 '15 000 00 4'125 00 5 000 00 1 375 00 15 000 00 975 00 10 000 00 750 00 5 000 00 375 00 10 000 00 450 00 2s 000 00 11 87500 5 000 00 375 00 5 000 00 I 375 00 5 000 00 1 375 00 5 000 00 1 375 00 20 000 00 4 200 00 5 000 00 1 375 00 10 000 00 2 750 00 5 000 00 575 00 20 000 00 'I 500 00 15 000 00 3 325 00 15 000 00 3 525 00 5 000 00 2375 00 5 000 00 375 00 10 000 00 750 00 10 000 00 750 00 30 000 00 1 950 00 5 000 00 1 375 00 30 000.00 8 050 00 5 000 00 575 00 110 000 00 46 250 00 5 000 00 1 375_00 page zof 4 FirstSothret*Sec 6 - 16 ---PAGE BREAK--- Gity of Salem, Massachusetts Fiscal 2014 Long Term Debt Service By Month Original 1711 1,155,000 00 1, 000 Principal State Oualified Bonds of 2010 'l and lvlarch 1 56 Furlong Park Remodel¡ng 57 W¡llom Guebo Roof 58 Roãds, S¡dewalks & 2 59 Canal St Design 60 StoEge Tanks 6'l School Ballfield Remodel¡ng 62 School F¡eld House Remodeling 64 Sewer Pump Stat¡on UpgEde 65 South R¡ver Basin UpgEde 66 South R¡ver Basin UpgEde 2 67 ForesterStreet DÉ¡n Relief 68 Doma¡n Controller & Exchange Sery¡æs 69 DomaÌn Controller & Exchange Sery¡æs 2 70 City Hall Roof 71 City Hãll Skyl¡ghG 72 City Hall W¡ndows 73 City Hall Masonry Repaiß 74 Park¡ng Study 75 Pol¡æ Veh¡cle Replacement 76 Public Serv¡æ Equ¡pment 77 Roads, S¡derelks & 78 Coll¡ns Cove Seæall 79 Parks & Rec Equ¡pment 80 School - Wheelchair Bus 81 School - Conventional Bus 82 Remed¡ãl¡on 83 Collins School 84 Collins School 2 85 Sãltonstall School $289,000 s25,000 $150.000 $480,000 $'1,000,000 lnterest Principal lnterest Princ¡pal lnterest Pñnc¡pal lnterest Principal lnterest $75,000 Principal lnterest $40,000 Principa¡ lnterest 20,000 00 4,500 00 5,000 00 22500 10,000 00 2,450 00 35,000 00 7,675 00 100,000 00 14,500 00 5,000 00 1,125 00 5,000 00 525 00 000 4,200.0o 000 150 00 000 2,300 00 000 7,150 00 000 13,000 00 000 1,050 00 000 2't,125 00 000 3,11A75 000 7,45625 000 5,262 50 000 5,612 50 000 600 00 000 900 00 0.00 10,562 50 000 2,350 00 000 5,506 25 000 't3,67.1 88 000 2,400 00 000 1,500 00 000 825 00 000 11,984 3E 000 1,859 38 000 450 00 000 1,050 00 000 1,125 00 000 22,29375 000 20,93125 000 85,490 63 000 27 2 $2'10,000 $500,000 $350,000 $375,000 $50,000 $75,000 $660,000 $150,000 $340,000 $850,000 $200,000 $120,000 $65.000 $800,000 $125,000 $35,000 $87,500 $90,000 $1,400,000 $.1,312,938 $5,326,916 $ t,1 88.000 lnterest Principal lnterest Princ¡pal lnterest Principal lnlerest Princ¡pal lntêrest Princ¡pal lnterest Principal lnterest Princ¡pal lnterest Principal lnterest Princ¡pal lnterest Pñnc¡pal lnterest Princ¡pal lnterest Princ¡pal lnteresl Princ¡pal lnterest Princ¡pal lnterest Princ¡pal lnterest Princjpal lnteresl Principal lnteresl Princ¡pal lnterest Princjpal lnteresl Princjpal lnterest Principal lnterest Princjpal 21,91103 10,000 00 3,26475 20,000 00 7,756 25 't0,000 00 5,412 sO 15,000 00 5,837 50 10,000 00 750 00 15,000 00 1,125 00 15,000 00 10,747 50 5,000 00 2,425 00 5,000 00 5,581 25 15,000 00 13,896 88 40,000 00 3,000 00 20,000 00 1,800 00 10,000 00 975 00 40,000 00 12,5a4 3A 5,000 00 1,934 38 5,000 00 525 00 17,500 00 1,3'12 50 .t5,000 00 1,350 00 30,000 00 22,74375 27,938 00 2'1,350 32 't06,916 00 47,o94 37 23,000 00 2'1 6,387 11 11,OA7 page 3 of4 ,7 Sec 6 - 17 ---PAGE BREAK--- City of Salem, Massachusetts Fiscal 2014 Long Term Debt Service By Month Original ¡nterest $2,468,244 Princjpal lnterest Amount 19,316.88 48,244 00 86 Saltonstall School 2 F¡scal 2014 Short Term Debt Service By Month 18,971 88 000 38,288. 000 ,000 00 Principal State Qualified Bonds of 2012 1 and March 1 000 000 000 000 000 000 144 40 91 325,000 00 lnteresl Total Debt Service 000 000 000 000 108,11900 o00 lnterest 1 4,1 99,1 1 000 3,1.16,00000 000 page 4 of 4 6 - 18 ---PAGE BREAK--- City of Salem - Financial Reserve Policy Stabilization Fund A stabilization fund is a fund designed to accumulate amounts for capital and other future spending pu{poses, although it may be appropriated for any lawful purpose (MGL Ch. 40 $5B). Communities may establish one or more stabilization funds for different purposes and may appropriate into them in any year an amount not to exceed ten percent of the prior year's tax levy. The total of all stabilization fund balances shall not exceed ten percent of the community's equalized value, and any interest shall be added to and become a part of the funds. A two-thirds vote of the city council is required to establish, amend the purpose of, or appropriate money from the stabilization fund. The City has set a target level for the Stabilization fund of SYo of the City's current general fund operating budget (6.1M based on2014 budget). The target funding date is projected to occur by f,rscal year 2016. The stabilization fund shall be funded by appropriations from free cash, operating budget appropriations when available, and other one time non-recurring revenues that become available for appropriation per M.G.L. 1 . Any draw down of the stabilization fund from the prior fiscal year should be allocated from the certified free cash if available 2. Twenty percent of any free cash available after funding #1 above will be allocated from free cash to the stabilization fund, up to the proposed reserve balance of the stabilization fund of operating budget). The stabilization fund should only be used for the following circumstances: l. When net State Aid (receipts less assessments) is reduced by an amount less than the average of the prior two years 2. When Local Receipts projected are below a three per cent (3%o) inuease of the prior two year's actual receipts as reported on page three of the Tax Rate Recapitulation as certified by the Director of the Bureau of Accounts (excluding non-recuring receipts). 3. When there is a catastrophic or emergency event(s) that cannot be supported by current general fund appropriations. In FY 2013 there was a transfer made from the general fund to the stabilization fund. The transfer was $505,165 which was20%o of the free cash certification. Sec 6 - 19 ---PAGE BREAK--- In FY 2013, any remaining balance will be transferred to the stabilization fund. Should factors changes between now and the time the actual tax rate is set, or once Free Cash has been certif,red, there could be transfers to the stabilization fund at that time. We anticipate 20Yo of theFY 2014 Free cash certification to be transferred to stabilization as per policy. Stabilization Fund 5,000,000 4,00o,000 3,ooo,ooo 2,ooo,ooo L,ooo,ooo FYO5 FYO6 FYOT FYOs FYO9 FY1O FY11 FY72 FYl-3 FYT4 Retirement Stabili zation Fu nd The Retirement Stabilization Fund was created in FY 2008 to fund all appropriations for sick and vacation time earned by an employee as regulated by collective bargaining agreements or City of Salem policy for non-union and management employees. V/hen budget season begins, the finance department will request each department to determine if there are any employees in their department who may be retiring. Departments (including Salem Public Schools) will submit list of employees and the anticipated amounts of each employee's retirement buyout. In FY 2013 the Commonwealth of Massachusetts created Massachusetts General Law Chapter 40 Section 13D which authorizes the creation of a retirement stabilization account to fund future payment of accrued liabilities for compensated absences. A council order was submitted to the City Council on May 23,2013 to adopt this legislation. The Finance Department will calculate the cumulative amount of anticipated retirement dollars needed for the following year's budget and incorporate the amount into the Mayor's recommended budget submitted to Council. There is line item within the Budget Transfers Out to account for retirement anticipations. This line item will be reviewed and voted on by the City Council as it does with other budgets. Estinated Estinpted Revenue 1,021,351 277,759 487,980 648,947 1,489,907 1,913,913 2,736,777 3,400,563 3,600,000 4,200,000 FiscalYear 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Sec 6 - 20 ---PAGE BREAK--- Once Council approves the budget, the funds are then booked into the Retirement Stabilization Fund as voted. Appropriations both into and from the Retirement Stabilization Fund require a2l3 vote of the City Council. 1. The fund is limited to I\Yo of the prior year's tax lery. 2. All interest earned in the Retirement Stabilization Fund will stay with the Fund. Any appropriations that are not used during the fiscal year will be carried over into the next fiscal year as a fund balance. All employees who are on the list will then be compensated at retirement for their accrued sick, vacation, and other benef,rts that they are entitled once approved by both Human Resources and the Department Head. If an employee retires that was not anticipated (nor budgeted for in the Retirement Stabilization Fund), the department head shall submit a request to the Mayor for a supplemental appropriation for the amount due to the employee who is retiring. The Mayor and Finance Director will consider the request and fund it from surplus Retirement Stabilization funds, other available funds or have the department fund the costs within their operating budget if other funds are unavailable. In FY 2013 we budgeted $850,000 to be transfered from the General Fund to the Retirement Stabilization Fund to cover anticipated retirements with the City and School during the year. In FY 2014 we are budgeting 600,000 to be transfer to this fund. The decrease is due to a reduced number of teachers retiring at the end of the school year Retirement Stabilization Fund - Budgeted Amounts 1,000,000 800,000 600,000 400,000 200,000 Per Recap Estirnated Revenue 400,000 850,000 325,000 400,000 850,000 600,000 FiscalYear 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 FYOs FYO6 FYOT FYOS FYO9 FYI.O FY11 FYT2 FY13 FY14 Sec 6 - 21 ---PAGE BREAK--- Other Post Employment Benefit (GASB 45) The City is mandated by the Governmental Accounting Standards Board (GASB) to start accounting for Other Post Employment Benefit (OPEB) as outlined in statement 45. In FY 20ll the City Council voted to establish n OPEB Stabilization Fund. V/e anticipate funding this account through annual appropriation from certified free cash (10%) as we do for our Capital Project and our Stabilization fund. Ten percent (10%) of any free cash certihed will be allocated from free cash to the OPEB Reserve Fund for the future liability of current worker's post employment benefits (other than retirement pension). This includes the cost of health, life, and dental benefits. The amount to be funded for GASB 45 is to be determined by an actuarial study that is to be performed by an actuary that the City chooses (perhaps in conjunction with actuarial studies done by the Salem Contributory Retirement System). In FY 2013 the City transfenedS252,5S2 (I0% of the FY 2012 certified free cash) to this fund. Any remaining balance in free cash at the end of the fiscal year may also be transferred to this fund at the discretion of the Finance Director and Mayor. Other Post Employment Benefit (oPEB) GASB 4s 400,000 300,000 200,000 100,000 FYO5 FYO6 FYOT FYO8 FYOg FY1O FY11 FY].2 FY13 FYT4 Actual Estimated Revenue 50,000 374,924 252,582 300,000 FiscalYear 200s 2006 2007 2008 2009 2010 2011 20'12 2013 2014 Sec 6 - 22 ---PAGE BREAK--- Capital Project Fund - Short-Term Supplemental Miscellaneous & Unanticipated Funds The City of Salem uses a capital project fund to supplement the short-term capital needs of the City 1. Twenty percent of any free cash available after funding #1 above will be allocated from free cash to the Capital Improvement Program (CIP) Fund. These funds are used during the fiscal year for to supplement the Capital Improvement Plan (Section 7) for unanticipated or emergency equipment or repairs as needed, or for those items that don't meet the CIP criteria (value > $25,000 and a life expectancy of 5 or more years). InFY2013, $505,165 (20%) ofthefreecashwasallocatedtotheClPfund. InFY2014wehavebudgeted$303,000tobetransfe1ed from the General Fund to the Capital Projects Fund to cover short term capital needs during the fiscal year. Additional funds (20o/o of free cash) will be transferred once the Free Cash has been certified by the Department of Revenue (DOR). We estimate the FY 2014 beginning fund balance to be approximately $1.2M Capital Project Fun - Short Term L,4oo,o00 1,200,000 1,000,000 800,000 600,000 r100,000 200,000 FYO5 FYO6 FYOT FYO8 FYO9 FY1O FY11 FYT2 FY13 TY1.4 Estimated Estimated Revenue 1,027,976 265,606 53,259 146,131 367,567 309,240 177,173 525,874 950,000 1,200,000 FiscalYear 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Sec 6 - 23 ---PAGE BREAK--- Free Cash Free cash is the remaining, unrestricted funds from operations of the previous f,rscal year including unexpended free cash from the previous year, actual receipts in excess of revenue estimates shown on the tax rate recapitulation sheet, and unspent amounts in budget line-items. Unpaid property taxes and certain deficits reduce the amount that can be certihed as free cash. The calculation of free cash is based on the balance sheet as of June 30, which is submitted by the community's auditor, accountant, or comptroller. Free cash is not available for appropriation until certified by the Massachusetts Director of Accounts. Free cash is the term used for a com.munity's funds that are available for appropriation. Once free cash is certified, it is available for appropriation by City Council. Free cash may be used for any lawful municipal purpose and provides communities with flexibility to fund additional appropriations after the tax rate has been set. Free cash balances do not necessarily carry forward to the next fiscal year (July lst); the Director's certification expires on June 30th at the end ofthe fiscal year. The City's policy is to use free cash for reserves, capital, and special uses in accordance with the policies set forth by the Mayor and Finance Director as stated above. Any free cash available after funding the above may be used to augment trust funds related to fünge benefits and un-funded liabilities related to employee benefits, including Health Insurance Trust Fund, Workers' Compensation Fund, Unemployment Fund, and any health benehts payable through Police and Fire operating budgets (11lf settlements). Free Cash available may also be used to augment general fund appropriations for expenses that increased due to extraordinary and/or unforeseen events as detailed by the department head of the affected budget. In FY 2014 we expect to see approximately the same $2.5M available for free cash. Free Cash 3,5oo,ooo 3,000,000 2,500,000 2,000,000 1.,500,000 L,ooo,oo0 500,000 Actual Estimated Revenue 2,732,090 538,372 591,149 1,114,950 1,261,2O0 750,607 3,249,238 1,500,000 2,525,829 2,500,000 FiscalYear 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 FYO5 FYO6 FYOT FYO8 FYOg FYI.O FY11 TY12 FY13 FYL4 Sec 6 - 24 ---PAGE BREAK--- Retained Earnings - Enterprise Funds Retained Earnings is the portion of Net Assets Unrestricted that is certihed by the Department of Revenue as available for appropriation. Certif,rcation requires submission of a June 30 balance sheet accompanied by all information necessary to calculate free cash in the General Fund. Once certified, retained eamings may be appropriated through the following June 30 and no appropriation may be in excess of the certif,red amount. Retained earnings may be appropriated to: I . Fund direct costs of the enterprise for the current fiscal year; 2. Fund costs appropriated in the General Fund operating budget and allocated to the enterprise for the current fiscal year; 3. Reimburse the General or other fund for subsidized capital costs of the enterprise not already reimbursed for the two full, immediately prior, fiscal years. The City of Salem generally uses Vy'ater & Sewer retained earnings to fund capital improvements that may come up during the fiscal year as well as emergency repairs needed due to water or sewer main breaks or other related repairs. Some capital equipment may be funded during the year from these as well. In FY 2013 the Mayor submitted a council order to request that the water and sewer enterprise funds be combined for FY 2014 as allowed by the Department of Revenue as outlined in Bulletin 20I2-B (page 317). Over the past two years the V/ater Enterprise fund revenues have been insufficient to cover expenses and the City had to appropriate free cash to cover the dehcits. Part of the problem was the one time use of retained earnings in FY 2012 to supplement the revenue. That funding was not used in FY 2013 and the rate increases were insufficient to cover expenses. In FY 2013 we had to raise $218,738 on the General Fund RECAP to cover the FY 2012 deficit. 'We also had to appropriate Free Cash to cover the June 30,2013 anticipated dehcit of approximately $200,000. By combining the funds we can use sewer revenue to help offset the water deficit. Vy'e are also requesting a 5olo increase on both water and sewer rates for FY 2014 to cover further deficits and to build up funds to pay for anticipated water and sewer capital projects including the Canal Street project. The water and sewer funds will remain in separate funds for accounting and budgeting purposes within the City. But they will be combined for reporting purposes on the City's annual financial statements (CAFR), when calculating Retained Earnings by the Department of Revenue, and when filing the City's FY 2014 Tax Recapitulation (RECAP). Sec 6 - 25 ---PAGE BREAK--- The following are the Sewer and Water retained earnings as of June 30 of each Fiscal Year. The Trash Enterprise fund is not a fully self- supporting fund and only has minimal retained earnings. In FY 2013 we received $850K from the South Essex Sewer District (SESD). This money was Salem's retained earnings being held by the SESD. Therefore we anticipate approximately 1.lM in retained earnings for FY 2013 Sewer and Water (combined). Sewer Retained Earnings L,200,000 1,000,000 800,000 600,000 400,000 200,000 FYO5 FYO6 FYOT FYOS FYOg FY1O FY11 FYtz FY13 TYT4 Actual Estimated Revenue 463,387 364,610 471,874 168,999 424,141 388,323 597,610 400,000 347,312 I,100,000 FiscalYear 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Water Retained Earnings 2,000,000 L,500,000 1,000,000 500,000 Per Recap Estimated Revenue 412,058 I,r09,910 1,382,302 1,743,685 1,199,261 552,230 103,604 0 0 0 FiscalYear 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 FYO5 FYO6 FYOT FYO8 FYOg FY1O FY1.1. FY!2 FY13 FY74 Sec 6 - 26 ---PAGE BREAK--- Actual Estirnated Revenue 0 0 0 -11,oil 43,4il 7,905 66,613 75,000 110,108 125,000 FiscalYear 200s 2006 2007 2008 2009 2010 2011 2012 2013 2014 Trash Retained Earnings 150,000 100,000 50,000 (50,000) FYOs FYO6 FYOT FYOS FY1O FYll FYT2 FY13 FY14 Sec 6 - 27 ---PAGE BREAK--- Investment Policies Section I - The investment of General Funds, Special Revenue Funds, Enterprise Funds, and Capital Projects Funds. Scope This section of the policy applies only to short term operating funds such as general funds, special revenue funds, enterprise funds, and capital project funds. Section 2 will deal with trust funds, bond proceeds, and any other funds with special circumstances such as stabilization funds. A separate Contributory Retirement Board, either local or county, is responsible for the investment of the pension funds. Objectives Massachusetts General Laws, Chapter 44, section 55B requires the municipal/district treasurer to invest all public funds except those required to be kept un-invested for purposes of immediate distribution. Modern banking systems enable the public treasurer to maintain even these funds in interest bearing form until the date a disbursement order clears through the banking system. The state law further requires that invested are to be placed at the highest possible rate of interest reasonably available, taking account of safety, liquidity and yield. Therefore, these guidelines are intended to further the objective of securing the highest return that is consistent with safety of principal while meeting the daily cash requirements for the operation of the entity's business. Sof"ty of principal is the foremost objective of the investment program. Investments shall be undertaken in a manner that seeks to ensure the preservation of capital through the mitigation of credit risk and interest rate risk. The diversification and prudent selection of investment instruments and choice of depository shall mitigate these risks. Credit risk is the risk of loss due to the failure of the security issuer or backer. Interest rate risk is the risk that the market value of the security will fall due to changes in general interest rates. Liquidity is the next most important objective. The overall investment portfolio shall remain suff,rciently liquid to meet all operating requirements that may be reasonably anticipated. Since all possible cash demands cannot be anticipated, the treasurer shall carry out investment activities in a manner that provides for meeting unusual cash demands without the liquidation of investments that could result in forfeiture of accrued interest earnings, and loss of principal in some cases. a a Sec 6 - 28 ---PAGE BREAK--- Yield is the third, and last, objective. Investments shall be undertaken so as to achieve a fair market average rate of return, taking into account safety and liquidity constraints as well as all legal requirements. Investment Instruments The Treasurer may invest in the following instruments: 1. Massachusetts State pooled fund: Unlimited amounts (Pool is liquid) The Massachusetts Municipal Depository Trust (MMDT), an investment pool for state, local, county and other independent governmental authorities, is under the auspices of the Massachusetts State Treasurer and currently managed by Fidelity Investments. It invests in Bankers Acceptances, Commercial Paper of high quality, Bank Certificates of Deposit, Repurchase agreements (Repos), and U. S. Treasury Obligations. It has Federal Deposit Insurance Corporation (F.D.I.C.) pass-through insurance on the CD's and takes delivery on the Repos and Treasuries. Under Government Accounting Standards Board Regulation (GASB III), it is not considered an uncollateralizedproduct. 2. U. S. Treasuries that will be held to maturity: Unlimited amounts (Up to one-year maturity from date of purchase) 3. U.S. Agency obligations that will be held to maturity. Unlimited amounts (Up to one-year maturity from date of purchase) 4. Bank accounts or Certificates of Deposit, hitherto termed CD's. (Up to one year) which are fully collateralized through a third party agreement: Unlimited amounts 5. Bank accounts and CD's (Up to one year) fully insured by F.D.I.C. and in some cases also Depository Insurance Fund of Massachusetts (D.I.F.M): $250.000 limit all bank accounts and CD's in one institution are considered in the aggregate to receive the $250,000 insurance coverage. 6. Unsecured bank deposits of any kind such as oth& checking, savings, money market, or Certihcates of Deposit accounts at Banks that do not fit the above categories. These investments are subject to the following limitations: These investments will be limited to no more thart 5Yo of an institution's assets and no more than l}Yo of a municipality's cash. Their credit worthiness will be tracked by Veribanc, Sheshunoff, or other bank credit worthiness reporting systems. They will be diversified as much as possible. CD's will be purchased for no more than three months and will be reviewed frequently. 7. Money Market Mutual Funds that are registered with the Securities and Exchange Commission that have received the highest possible rating from at least one nationally recognized statistical rating organization and as otherwise referenced in the a Sec 6 - 29 ---PAGE BREAK--- Massachusetts General Law 44 Section 55 8. Risk Tolerance Credit Risk is the risk that an issuer or other counterparty to an investment neither will nor fulfill its obligations. The City will manage credit risk several ways. There will be no limit to the amount of United States Treasury and United States Government Agency obligations, as they carry an AAA rating. In regards to other investments, the City will only purchase investment grade securities with a high concentration in securities rated A or better. The City may invest in the Massachusetts Municipal Depository Trust (MMDT) with no limit to the amount of funds placed in the fund. Custodial Risk is the risk for deposits that in the event of the failure of a depository financial institution, a municipality will not be able to recover 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 to a transaction, a municipality will not be able to recover the value of investment or collateral securities that are in the possession of an outside party. The City will review the financial institution's financial statements and the background of the Advisor. The intent of qualihcation is to limit the City's exposure to only those institutions with a proven hnancial strength, Capital adequacy of the firm, and the overall affirmative reputation in the municipal industry. Further all securities not held directly by the City, will be held in the City's name and tax identification number by a third party custodian approved by the Treasurer and evidenced by safekeeping receipts showing individual CUSIP numbers for each security. Concentration of Credit Risk is the risk of loss attributed to the magnitude of a government's investment in a single issuer. The City will minimize concentration of credit risk by diversi$'ing the investment portfolio so that the impact of potential losses from any one type of security or issuer will be minimized or not exist. Interest Rate Risk is the risk that changes in interest rates will adversely affect the fair market value of an investment. The City will manage interest rate risk by managing duration in the account. Foreign Currency Risk is the risk that changes in foreign monetary exchange rates will adversely affect the fair value of an investment. The City will not invest in any instrument exposed to foreign currency risk. Sec 6 - 30 ---PAGE BREAK--- Diversification Diversification should be interpreted in two ways: in terms of maturity as well as instrument type and issuer. The diversification concept should include prohibition against over concentration of maturities as well as concentration in a specihc institution. With the exception of U.S. Treasury obligations or investments fully collateralized by U.S. Treasuries or agencies, and State pools (MMDT), no more fhan l\Yo of the Town's investments shall be invested in a single financial institution. Authorization The Treasurer has authority to invest municipality/district funds, subject to the statutes of the Commonwealth cited above. Ethics The Treasurer (and any Assistant Treasurers) shall refrain from any personal activity that may conflict with the proper execution of the investment program or which could impair or appear to impair ability to make impartial investment decisions. Said individuals shall disclose to the Chief Executive Ofhcer any material financial interest in financial institutions that do business with the City. They shall also disclose any large personal financial investment positions or loans that could be related to the performance of the town's investments. Relationship with Financial Institutions Financial institutions should be selected first and foremost with regard to safety. Municipalities/Districts should subscribe to and use one or more of the recognized bank rating services, such as Veribanc or Sheshunoff. Brokers should be recognized, reputable dealers. The Treasurer shall require any brokerage houses and broker/dealers, wishing to do business with the municipality, to supply the following information to the Treasurer: Audited f,rnancial statements Proof of National Association of Security Dealers certification A statement that the dealer has read the municipality's investment policy and will comply with it Proof of credit worthiness (minimum standards: at least f,rve years in operation and a minimum capital of 10 million dollars) a a a Sec 6 - 31 ---PAGE BREAK--- Section II - The Investment of Trust Funds and Bond Proceeds This section of the policy applies only to funds that could be invested long term, i.e. trust funds, stabilization funds and bond proceeds. For issues subject to arbitrage rebate, an arbitrage tracking system such as those available at banks and Mass Municipal Depository Trust (MMDT) will be used to track expenditures of and interest earned on borrowed funds. Alternative tracking systems should be approved by and used under the advice of Bond Counsel. Arbitrage Regulations Tax free debt may be issued by cities, towns, and districts, which means that they are able to borrow at rates well below market rates. At the same time, the federal govemment has issued regulations to prevent them from issuing debt with the goal of investing the borrowed funds at a higher rate of interest than that at which the money was borrowed, or committing arbitrage. If the federal regulations are not followed, there are fines and penalties, but even worse, the tax free status of the debt could be jeopardized. The following arbitrage regulations will be followed: Unless debt is issued as a "small issuer," that is, an entity issuing less than $10 million of tax exempt debt in a calendar year, the proceeds shall be used within certain prescribed time frames, or be subject to fines and penalties as described above. Following are the general rules and time frames for spending borrowed funds in order to avoid having to pay a rebate to the Federal government on investment income earned on the borrowed funds. All funds must be used according to the following schedules or sooner: CONSTRUCTION DEBT First six months: First year: Eighteen months: Two years: First six months: First year: Eighteen months CAPITAL EXPENDITURES DEBT OTHER THAN CONSTRUCTION PROJECTS r0% 45% 75% r00% 60% l00o/o Sec 6 - 32 ---PAGE BREAK--- ALL OTHER MUNICIPAL PURPOSE DEBT First six months: 100% Trust Funds Trust Funds may be co-mingled and invested in any instruments allowed by the Legal List issued by the Banking Commissioner each July. Each trust fund must be accounted for separately. Stabilization Funds The Stabilizatíon Fund shall not exceed ten per cent of the equalized valuation of the city or town, and any interest shall be added to and become apart of the fund. The treasurer may invest the proceeds in the following: o National Banks o Savings Banks . Cooperative banks or trust companies orgarized under Massachusetts laws o Securities legal for savings banks ( i.e. those on the Legal List described above) o Federal Savings and Loan Associations situated in the Commonwealth o Massachusetts Municipal Depository Trust Reportin g Requirements On a regular basis (quarterly, semi-annually, or annually), a report containing the following information will be prepared by the Treasurer and distributed to the Chief Executive Off,rcer, Town Manager, and/or Finance Committee, as appropriate. The quarterly report will include the following information, as a minimum requirement: o A listing of the individual accounts and individual securities held at the end of the reporting period. o d listing of the short-term investment portfolio by security type and maturity to ensure compliance with the diversification and maturity guidelines established in the "Diversification" section of this Investment Policy. o A summary of the income earned on a basis and year to date basis shall be reported. o The municipal treasurer shall include in the report a brief statement of general market and economic conditions and other factors that may affect the City's cash position. o The report should demonstrate the degree of compliance with the tenets set forth in the Investment Policy. Sec 6 - 33 ---PAGE BREAK--- City of Salem - Investment Policy Section I - The investment of General Funds, Special Revenue Funds, Enterprise Funds, and Capital Projects Funds. Scope This section of the policy applies only to short term operating funds such as general funds, special revenue funds, enterprise funds, and capital project fi.mds. Section 2 will deal with trust funds, bond proceeds, and any other funds with special circumstances such as stabilization funds. A separate Contributory Retirement Board, either local or county, is responsible for the investment of the pension funds. Objectives Massachusetts General Laws, Chapter 44, section 55B requires the municipal/district treasurer to invest all public funds except those required to be kept un-invested for purposes of immediate distribution. Modem banking systems enable the public treasurer to maintain even these funds in interest bearing form until the date a disbursement order clears through the banking system. The state law further requires that invested funds are to be placed at the highest possible rate of interest reasonably available, taking account of safety, liquidity and yield. Therefore, these guidelines are intended to further the objective of securing the highest return that is consistent with safety of principal while meeting the daily cash requirements for the operation of the entity's business. SuÍety of principal is the foremost objective of the investment program. Investments shall be undertaken in a manner that seeks to ensure the preservation of capital through the mitigation of credit risk and interest rate risk. The diversification and prudent selection of investment instruments and choice of depository shall mitigate these risks. Credit risk is the risk of loss due to the failure of the security issuer or backer. Interest rate risk is the risk that the market value of the security will fall due to changes in general interest rates. Liquidity is the next most important objective. The overall investment portfolio shall remain sufficiently liquid to meet all operating requirements that may be reasonably anticipated. Since all possible cash demands cannot be anticipated, the treasurer shall carry out investment activities in a manner that provides for meeting unusual cash demands without the liquidation of investments that could result in forfeiture of accrued interest earnings, and loss of principal in some cases. a a Sec 6 - 34 ---PAGE BREAK--- Yield is the third, and last, objective. Investments shall be undertaken so as to achieve a fair market average rate of retum, taking into account safety and liquidity constraints as well as all legal requirements. Investment Instruments The Treasurer may invest in the following instruments 1. Massachusetts State pooled fund: Unlimited amounts (Pool is liquid) The Massachusetts Municipal Depository Trust (MMDT), an investment pool for state, local, county and other independent govemmental authorities, is under the auspices of the Massachusetts State Treasurer and currently managed by Fidelity Investments. It invests in Bankers Acceptances, Commercial Paper of high quality, Bank Certif,rcates of Deposit, Repurchase agreements (Repos), and U. S. Treasury Obligations. It has Federal Deposit Insurance Corporation (F.D.I.C.) pass-through insurance on the CD's and takes delivery on the Repos and Treasuries. Under Government Accounting Standards Board Regulation (GASB III), it is not considered an uncollatenlizedproduct. 2. U. S. Treasuries that will be held to maturity: Unlimited amounts (Up to one-year maturity from date of purchase) 3. U.S. Agency obligations that will be held to maturity. Unlimited amounts (Up to one-year maturity from date of purchase) 4. Bank accounts or Certificates of Deposit, hitherto termed CD's. (Up to one year) which are fully collateralized through a third party agreement: Unlimited amounts 5. Bank accounts and CD's (Up to one year) fully insured by F.D.I.C. and in some cases also Depository Insurance Fund of Massachusetts (D.I.F.M): $250.000 limit all bank accounts and CD's in one institution are considered in the aggregate to receive the $250,000 insurance coverage. 6. Unsecured bank deposits of any kind such as other checking, savings, money market, or Certihcates of Deposit accounts at Banks that do not fit the above categories. These investments are subject to the following limitations: These investments will be limited to no more than 5o/o of an institution's assets and no more than I\Yo of a municipality's cash. Their credit worthiness will be tracked by Veribanc, Sheshunoff, or other bank credit worthiness reporting systems. They will be diversified as much as possible. CD's will be purchased for no more than three months and will be reviewed frequently. 7. Money Market Mutual Funds that are registered with the Securities and Exchange Commission that have received the highest possible rating from at least one nationally recognized statistical rating organization and as otherwise referenced in the a Sec 6 - 35 ---PAGE BREAK--- Massachusetts General Law 44 Section 55 8. Risk Tolerance Credit Risk is the risk that an issuer or other counterparty to an investment neither will nor fulfill its obligations. The City will manage credit risk several ways. There will be no limit to the amount of United States Treasury and United States Government Agency obligations, as they carry anAAA rating. In regards to other investments, the City will only purchase investment grade securities with a high concentration in securities rated A or better. The City may invest in the Massachusetts Municipal Depository Trust (MMDT) with no limit to the amount of funds placed in the fund. Custodial Risk is the risk for deposits that in the event of the failure of a depository financial institution, a municipality will not be able to recover 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 to a transaction, a municipality will not be able to recover the value of investment or collateral securities that are in the possession of an outside party. The City will review the financial institution's financial statements and the background of the Advisor. The intent of qualification is to limit the City's exposure to only those institutions with a proven financial strength, Capital adequacy of the firm, and the overall affirmative reputation in the municipal industry. Further all securities not held directly by the City, will be held in the City's name and tax identifrcation number by a third party custodian approved by the Treasurer and evidenced by safekeeping receipts showing individual CUSIP numbers for each security. Concentration of Credit Risk is the risk of loss attributed to the magnitude of a government's investment in a single issuer. The City will minimize concentration of credit risk by diversiffing the investment portfolio so that the impact of potential losses from any one type of security or issuer will be minimized or not exist. Interest Rate Risk is the risk that changes in interest rates will adversely affect the fair market value of an investment. The City will manage interest rate risk by managing duration in the account. Foreign Currency Risk is the risk that changes in foreign monetary exchange rates will adversely affect the fair value of an investment. The City will not invest in any instrument exposed to foreign currency risk. Sec 6 - 36 ---PAGE BREAK--- Diversification Diversification should be interpreted in two ways: in terms of maturity as well as instrument type and issuer. The diversification concept should include prohibition against over concentration of maturities as well as concentration in a specific institution. With the exception of U.S. Treasury obligations or investments fully collateralized by U.S. Treasuries or agencies, and State pools (MMDT), no more than l\Yo of the Town's investments shall be invested in a single financial institution. Authorization The Treasurer has authority to invest municipality/district funds, subject to the statutes of the Commonwealth cited above Ethics The Treasurer (and any Assistant Treasurers) shall refrain from any personal activity that may conflict with the proper execution of the investment progam or which could impair or appear to impair ability to make impartial investment decisions. Said individuals shall disclose to the Chief Executive Officer any material financial interest in financial institutions that do business with the City. They shall also disclose any large personal financial investment positions or loans that could be related to the performance of the town's investments. Relationship with Financial Institutions Financial institutions should be selected first and foremost with regard to safety. Municipalities/Districts should subscribe to and use one or more of the recognized bank rating services, such as Veribanc or Sheshunoff. Brokers should be recognized, reputable dealers. The Treasurer shall require any brokerage houses and broker/dealers, wishing to do business with the municipality, to supply the following information to the Treasurer: Audited f,rnancial statements Proof of National Association of Security Dealers certification A statement that the dealer has read the municipality's investment policy and will comply with it Proof of credit worthiness (minimum standards: at least five years in operation and a minimum capital of 10 million dollars) a a Sec 6 - 37 ---PAGE BREAK--- Section II - The Investment of Trust Funds and Bond Proceeds This section of the policy applies only to funds that could be invested long term, i.e. trust funds, stabilization funds and bond proceeds. For issues subject to arbitrage rebate, an arbitrage tracking system such as those available at banks and Mass Municipal Depository Trust (MMDT) will be used to track expenditures of and interest earned on borrowed funds. Alternative tracking systems should be approved by and used under the advice of Bond Counsel. Arbitrage Regulations Tax free debt may be issued by cities, towns, and districts, which means that they are able to borrow at rates well below market rates. At the same time, the federal government has issued regulations to prevent them from issuing debt with the goal of investing the borrowed funds at a higher rate of interest than that at which the money was borrowed, or committing arbitrage. If the federal regulations are not followed, there are fines and penalties, but even worse, the tax free status of the debt could be jeopardized. The following arbitrage regulations will be followed: Unless debt is issued as a "small issuer," that is, an entity issuing less than $10 million of tax exempt debt in a calendar year, the proceeds shall be used within certain prescribed time frames, or be subject to fines and penalties as described above. Following are the general rules and time frames for spending borrowed funds in order to avoid having to pay a rebate to the Federal government on investment income earned on the borrowed funds. All funds must be used according to the following schedules or sooner: CONSTRUCTION DEBT First six months: First year: Eighteen months Two years: CAPTTA First six months: First year: Eighteen months: t0% 4s% 75% r00% T, ITURES t5% 60% r00% DF,RT OTHER THAN CONSTRUCTION PROJECTS Sec 6 - 38 ---PAGE BREAK--- ALL OTHER MLTNICIPAL PURPOSE DEBT First six months: I00% Trust Funds Trust Funds may be co-mingled and invested in any instruments allowed by the Legal List issued by the Banking Commissioner each July. Each trust must be accounted for separately. Stabilization Funds The StabilizationFund shall not exceed ten per cent of the equalized valuation of the city or town, and any interest shall be added to and become apart of the fund. The treasurer may invest the proceeds in the following: o National Banks o Savings Banks o Cooperative banks or trust companies organized under Massachusetts laws . Securities legal for savings banks ( i.e. those on the Legal List described above) o Federal Savings and Loan Associations situated in the Commonwealth . Massachusetts Municipal Depository Trust Reporting Requirements On a regular basis (quarterly, semi-annually, or annually), a report containing the following information will be prepared by the Treasurer and distributed to the Chief Executive Officer, Town Manager, and./or Finance Committee, as appropriate. The quarterly report will include the following information, as a minimum requirement: o A listing of the individual accounts and individual securities held at the end of the reporting period. o A listing of the short-term investment portfolio by security type and maturity to ensure compliance with the diversification and maturity guidelines established in the "Diversification" section of this Investment Policy. ¡ A of the income eamed on a basis and year to date basis shall be reported. . The municipal treasurer shall include in the report a brief statement of general market and economic conditions and other factors that may affect the City's cash position. . The report should demonstrate the degree of compliance with the tenets set forth in the Investment Policy. Sec 6 - 39 ---PAGE BREAK--- City of Salem - Debt Policy Bond Ratings - Upgraded On October 2012 the City of Salem received notification from Standard and Poor's that they City's bond rating was increased from A to A+ based on their view of the City's improved financial management procedures and sound budgeting practices. The increased bond rating will help decrease the City's borrowing costs and send a positive message with regard to the City's approach to budgeting both operational and capital needs. The bond rating upgrade is a great acknowledgement of all of the City's work to improve the management of its finances. This is a confirmation that, despite the down economy, Salem is managing its resources as well as it can. Reasons for the upgrade cited by Standard and Poor's include the City's improved financial management procedures which began in 2007 and budget changes that eliminated the negative general fund balance in FY 2008 allowing for structurally balanced budgets in FY 2009 and FY 2010. A stable area employment and good household incomes, extremely strong per capita market values and low net debt position are other reasons mentioned for the bond rating increase. Moody's recalibrated local government ratings in Massachusetts, including regional school and other districts. On April 26,2010, Moody's upgraded the City of Salem's bond rating from A2 to Aa3. Our General Obligation debt rating went from negative to stable as of October 2012. The Aa3 underlying rating and stable outlook affects approximately 31.9M in rated outstanding general obligation debt. Capital Improvement Projects V/hen the city finances capital projects by issuing bonds, it will pay back the bonds within a period not to exceed the expected useful life of the project. Total net debt service payments from general obligation debt will not exceed five percent of total annual operating budget as listed on part la of the annual tax rate recapitulation as submitted to the Department of Revenue. Per the total amount to be raised on the FYl3 Tax Rate Recapitulation Sheet - 5136,792,744.10, this limit would be $6,839,637.20. The FY14 amount would be calculated on the actual amount to be raised on the FYl4 RECAP sheet estimated at 9137,910,383 or $6,895,519.00. Sec 6 - 40 ---PAGE BREAK--- Debt will only be issued for capital that is valued greater than $25,000, and has a depreciable life of frve or more years. A cash flow statement will be required for each project funded with long term debt. Total general obligation debt will not exceed the limits provided in the state statues. 'Whenever possible, the city will use special revenue funds, special assessments, or other self-supporting bonds, instead of general obligation bonds. The city will not use long-term debt for current operations unless otherwise allowed via special legislation. The city will maintain good communications with bond rating agencies about its financial condition. The city will follow a policy of full disclosure on every financial report and bond prospectus. General Information on Debt Authorization and Legal Limit Notes and notes including notes are generally authorized on behalf of the City by vote of two-thirds of all the members of the City Council with the approval of the Mayor. Provision is made for a referendum on the filing of a petition bearing the requisite number of signatures. Borrowings for certain purposes require state administrative approval. When serial bonds or notes have been authorized, bond anticipation notes may be issued by the officers authorized to issue the serial bonds or notes Temporary loans in anticipation of certain state and county reimbursements are generally authorized by majority vote but provision is made for temporary loans in anticipation of current revenues and federal grants and for other purposes in certain circumstances without City Council authorization. The general debt limit of the City consists of a normal debt limit and a double debt limit. The normal debt limit is 5 percent of the valuation of taxable property as last equalized by the State Department of Revenue. The City can authorize debt up to this amount without State approval. It can authorize debtup to twice this amount (the double debt limit) with the approval of the State's Municipal Finance Oversight Board. Based on the City's equalized valuation (EQV) of $4,256,808,900, effective January 1,2013, its normal debt limit is $212,840,445 and its double debt limit is $425,680,890. There are many categories of general obligation debt which are exempt from and do not count against the general debt limit. Among others, these exempt categories include revenues anticipation notes and grant anticipation notes; emergency loans exempted by special Sec 6 - 41 ---PAGE BREAK--- laws, bonds for water (limited to l0 percent of equalized valuation), housing, urban renewal and economic development (subject to various debt limits) and electric, gas, colnmunity antenna television systems, and telecommunication systems (subject to separate limits. Revenue bonds and water pollution abatement revenue bonds are not subject to these debt limits. The general debt limit and the special debt limit for water bonds apply at the time debt is authorized. The other special debt limits generally apply at the time the debt is incurred. The amount borrowed in each hscal year by the issue of revenue anticipation notes is limited to the tax lely of the prior fiscal year, together with the net receipts in the prior fiscal year from the motor vehicle excise and certain payments made by the Commonwealth in lieu of taxes. The fiscal year ends on June 30. Notes may mature in the following fiscal year, and notes may be refunded into the following fiscal year to the extent of the uncollected, unabated current tax levy and certain other items, including revenue dehcits, overlay deficits, final judgments and lawful un-appropriated expenditures, which are to be added to the next tax levy, but excluding deficits arising from a failure to collect taxes of earlier years. In any event, the period from an original borrowing to its final maturity cannot exceed one year. Types of Obligations General Obligations - Massachusetts cities and towns are authorizedto issue general obligation indebtedness of the following types: Serial Bonds and Notes.- These are generally required to be payable in equal or diminishing annual principal amounts beginning no later than the end of the next fiscal year commencing after the date of issue and ending within the terms permitted by law. Level debt service is permitted for bonds and notes issued for certain purposes including self supporting enterprise purposes, certain state aided school projects and for projects for which debt service has been exempted from property tax limitations. The maximum terms vary from one year to 40 years, depending on the purpose of the issue. Most of the purposes are capital projects. Bonds or notes may be made callable and redeemed prior to their maturity, and a redemption premium may be paid. Refunding bonds or notes may be issued subject to the maximum term measuted from the date of the original bonds or notes. Serial bonds may be issued as "qualif,red bonds" with the approval the state Municipal Finance Oversight Board consisting of the Attorney General, the State Treasurer, the State Auditor, and the Director of Accounts, subject to such conditions and limitations (including restrictions on future indebtedness) as may be required by the Board. Qualified bonds may mature in not less than 10 or more than 30 years from their dates and are not subject to the arnofüzation requirements described above. The State Treasurer is required to pay the debt service on qualified bonds Sec 6 - 42 ---PAGE BREAK--- and thereafter to withhold the amount of the debt service from state aid or other state payments. Administrative costs and any loss of interest income to the State are to be assessed upon the city or town. Bond Anticipation Notes (BAN). These generally must mature within two years of their original dates of issuance but may be refunded from time to time for a period not to exceed hve years from their original dates of issuances, provided that (except for notes issued for certain school projects that have been approved for state school construction aid) for each year that the notes are refunded beyond the second year they must be paid in part from revenue funds in an amount at least equal to the minimum annual payment that would have been required if the bonds had been issued at the end of the second year. The maximum term of bonds issued to bond anticipation notes is measured from the date of the original issue of the notes, (except for certain school projects). Revenue Anticipation Notes (RAN). These are issued to meet current expenses in anticipation of taxes and other revenues. They must mature within one year but, if payable in less than one yeaÍ, may be refunded from time to time up to one year from the original date of issue. (Such notes may be extended beyond fiscal year end in an amount not exceeding current receivables.) Grant Anticipation Notes (GAN). These are issued for temporary financing in anticipation of federal grants and state and county reimbursements. Generally they must mature within two years, but may be refunded from time to time as long as the municipality remains entitled to the grant or reimbursement. Revenue Bonds - Cities and towns may issue revenue bonds for solid waste disposal facilities and for projects financed under the Commonwealth's Water Pollution Abatement or Drinking Water Revolving Loan Programs and for cert¿in economic development projects supported by tax increment financing. In addition to general obligation bonds and notes, cities and towns having electric departments may issue electric revenue bonds, and notes in anticipation of such bonds, subject to the approval of the State Department of Telecommunications and Energy. Sec 6 - 43 ---PAGE BREAK--- City of Salem - Fraud Policy The City of Salem is committed to protecting its revenue, property, information, and other assets from any attempt, either by members of the public, contractors, vendors, agents or its own employees, to gain by deceit, financial or other benefits at the expense of the taxpayers. City Offrcials and employees must, at all times, comply with all applicable laws and regulations. The City will not condone the activities of officials or employees who achieve results through violation of the law or unethical business dealings. The City does not permit any activity that fails to stand the closest possible public scrutiny. This policy sets out specific guidelines and responsibilities regarding appropriate actions that must be followed for the investigation of fraud and other similar irregularities. Definitions Occupational fraud is defined by the Association of Certified Fraud Examiners as the use of one's occupation for personal enrichment through the deliberate misuse or misapplication of the employing organization's resources or assets. There are three major categories ofoccupational fraud. a Asset Misappropriations - Theft or misuse of an organization's assets. o Cash. Fraudulent Disbursements - Perpetrator causes organization to disburse funds through some trick or device (e.g. submitting false invoices/time card./sheets, expense reimbursement schemes, check tampering, etc.) . Skimming - Cash is stolen from an orgarization before it is recorded on the organization's books and records. . Cash Larceny - Cash is stolen from an organization after it has been recorded on the organization's books and records. o Inventory and all other assets . Misuse - Misuse of an organization's inventory or assets for personal use (e.g. City vehicles, computers, supplies, etc.) Sec 6 - 44 ---PAGE BREAK--- a Larceny - Inventory or other assets are stolen from an organization. Corruption - Wrongfully use influence in a business transaction in order to procure some benefit for themselves or another person, contrary to duty to employer or the rights of another. o Conflicts of Interest - An turdisclosed economic or personal interest in a transaction that adversely affects the employer. o Bribery - The offering, giving, receiving, or soliciting of anything of value to influence an official act or business decision. o Illegal Gratuities - A parry who benefits from an official act or a business decision gives a gift to a person who made the decision. An illegal gratuity does not require proof o Economic Extortion - An employee demands that a vendor/contractor/etc. pay to influence an official act or a business decision. Fraudulent Statements - Falsification of an organization's financial statements o Other similar irregularities is defined as any activity involving questionable behavior or business dealings by members of the public, contractors, vendors, agents or govenìment employees, that put government revenue, properq/, information and other assets at risk of waste or abuse. Applicabilitv This policy applies to all Elected Officials and employees of the City of Salem as well as any business or individual doing business with the government. General Policv and Resnonsibilitv 1. It is the government's intent to fully investigate any suspected acts of fraud or other similar inegularity. An objective and impartial investigation will be conducted regardless of the position, title, and length of service, or relationship with the government of any party who might be or becomes involved in or becomes/is the subject of such investigation. 2. Each Elected Official, Department Head, Commissioner and Manager is responsible for instituting and maintaining a system of intemal control to provide reasonable assurance for the prevention and detection of fraud, misappropriations and other Sec 6 - 45 ---PAGE BREAK--- inegularities. Management should be familiar with the types of improprieties that might occur within their area of responsibility and be alert for any indications of such conduct. 3. The Finance Director has the primary responsibility for the investigation of all activity defined in this policy. 4. The Finance Director will notiS their Independent Auditing Firm and the Mayor of a reported allegation of fraudulent or irregular conduct upon the conìmencement of the investigation to the extent practical. Throughout the investigation the Mayor will be informed of pertinent investigative findings. 5. In all circumstance where there are reasonable grounds to indicate that a fraud may have occurred, the Finance Department andJor Independent Auditor, subject to the advice of Mayor and City Solicitor, will contact the office of the Distriót Afiorney and./or the Salem Police. 6. Upon conclusion of the investigation, the results will be reported to the Mayor and others as determined necessary 7. The City Solicitor will pursue every reasonable effort, including court ordered restitution, to obtain recovery of the City's losses from the offender, or other appropriate source. Procedures 1. All Employees Any employee who has knowledge of an occurrence of irregular conduct, or has reason to suspect that afraud has occurred, shall immediately notify hislher supervisor. If the employee has reason to believe that their supervisor may be involved or does not feel comfortable reporting the to their supervisor, the employee shall immediately notify the OTA. Employees have a duty to cooperate during an investigation. Employees who knowingly make false allegations will be subject to discipline and possible termination of employment. 2. City ManagemenlElected Offrcials/Board Members Sec 6 - 46 ---PAGE BREAK--- Upon notification from an employee of suspected fraud, or if management has reason to suspect that a fraud has occurred, they shall immediately notify the Finance Director. 3. Offrce of the Mayor Upon notification or discovery of a suspected fraud, the Finance Director and./or Independent Auditor will investigate the suspected fraud. In all circumstances, where there are reasonable grounds to indicate that a fraud may have occurred, the Finance Director or Independent Auditor will inform the Mayor. Subject to the advice of the City Solicitor, the Finance Director or Independent Auditor will contact the Office of the District Attorney and/or the Salem Police. 4. Contacts/Protocols After an initial review and a determination that the suspected fraud warrants additional investigation, the Finance Director or Independent Auditor will notifu the Mayor. The Finance Director or Independent Auditor will coordinate the investigation with the Mayor and appropriate law enforcement officials. 5. Security of Evidence Once a suspected fraud is reported, the Finance Director or Independent Auditor, in consultation with the City Solicitor, shall take immediate action to prevent the theft, alteration, or destruction of relevant records. Such actions include, but are not necessarily limited to, removing the records and placing them in a secure location, limiting access to the location where the records currently exist, and preventing the individual suspected of committing the fraud from having access to the records. The records must be adequately secured until the Finance Director or Independent Auditor obtains the records to begin the audit investigation. 6. Personnel Actions If a suspicion of fraud is substantiated by the investigation, disciplinary action shall be taken by the Mayor, in consultation with the Personnel Director and the Finance Director or Independent Auditor. 7. Whistle-Blower Protection Sec 6 - 47 ---PAGE BREAK--- Under Massachusetts General Law Chapter I49, paragraphs 1484, 185 and 187, no employer or person acting on behalf of an employer shall: o Dismiss or threaten to dismiss an employee o Discipline or suspend, or threaten to discipline or suspend, an employee o Impose any penalty upon an employee; or o Intimidate or coerce an employee because the employee has acted in accordance with the requirements of this policy. The violation of this section will result in discipline up to an including dismissal in accordance with the applicable federal, state, and local administrative laws. 8. Media Issues Any City employee or elected official contacted by the media with respected to an audit investigation shall refer the media to the Mayor's Office at978-619-5600. The alleged fraud or audit investigation shall not be discussed with the media by any person other than the through the Mayor's Office. If the Finance Director or Independent Auditor is contacted by the media regarding an alleged fraud or audit investigation, they will consult the Mayor, before responding to a media request. Neither the Finance Director nor Independent Auditor will discuss the details of any ongoing fraud investigation with the media that may compromise the integrity of the investigation. 9. Documentation At the conclusion of the investigation, the results will be reported to the Mayor and others as determined necessary. If the report concludes that the allegations are founded, the report will be forwarded to the Office of the District Attorney and/or the Salem Police. 10. Completion of the Investigation Sec 6 - 48 ---PAGE BREAK--- Upon completion of the investigation, including all legal and personnel action, any records, documents and other evidentiary material will be returned by the Finance Director or Independent Auditor to the appropriate department. 11. Training New employees are trained at the time of hiring about the City's Code of Conduct and Fraud Policy. This training explicitly covers expectations of all employees regarding: Their duty to communicate certain matters; A list of the types of matters, including actual or suspected fraud, to be communicated along with specific examples; and Information on how to communicate those matters. Sec 6 - 49