Document Salem_doc_5fd72117dd

CITY OF SALEM MASSACHUSETTS COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Fiscal Year Ended June 30, 2006 Kimberley L. Driscoll, Mayor Richard Viscay, Jr., Finance Director Prepared by the City of Salem Finance Department ---PAGE BREAK--- On the cover: The Pickering Wharf is a full service facility located in Salem, Massachusetts. The docks surround Pickering Wharf, a mixed-use development consisting of retail shops, restaurants, office space, and residential condominiums. It offers summer and protected winter dockage to power and sail boats up to 120 feet. Both 30 and 50 amp electrical service is available, along with telephone and cable television hook-up. It also has clean showers, heads, and laundry facilities. Cover Photo courtesy of Jeff Brown. Photo courtesy of Jeff Brown Salem Common In 1802, the Salem Common was named Washington Square. A wooden fence with four large, impressive gates was added to the Common in 1805 with one of the gates on the western side decorated with carvings by Samuel McIntire, the famous Salem architect and wood carver. Today the medallion portrait of George Washington and the gold painted eagle which adorned the original gate are preserved in the Peabody Essex Museum. After Salem’s great fire of 1914 which cut a destructive path through much of the city, the Salem Common was filled with tents to house the people who had lost their homes in the fire’s devastation. Reminders of the City’s past and evidence of our current lifestyle coexist in harmony on Salem Common today. A modern playground fills a large area of the park with the sounds of children playing while a handsome bandstand from an earlier era looms over the grounds. ---PAGE BREAK--- CITY OF SALEM, MASSACHUSETTS COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Fiscal Year Ended June 30, 2006 Prepared by Finance Department ---PAGE BREAK--- CITY OF SALEM, MASSACHUSETTS COMPREHENSIVE ANNUAL FINANCIAL REPORT JUNE 30, 2006 TABLE OF CONTENTS Introductory Letter of Transmittal Organizational Principal Executive Officers Certificate of Financial Section Independent Auditors’ Report Management’s Discussion and Analysis Basic Financial Statement of net Statement of activities Governmental funds – balance sheet Reconciliation of the governmental funds balance sheet total fund balances to the statement of net assets.......29 Governmental funds – statement of revenues, expenditures and changes in fund balances Reconciliation of the statement of revenues, expenditures, and changes in fund balances of governmental funds to the statement of Proprietary funds – statement of net Proprietary funds – statement of revenues, expenses and changes in fund net assets Proprietary funds – statement of cash flows Fiduciary funds – statement of fiduciary net assets Fiduciary funds – statement of changes in fiduciary net Notes to basic financial Required Supplementary Information Schedule of revenues, expenditures and changes in fund balance – general fund – budget and Notes to required supplementary information Combining Nonmajor governmental funds Nonmajor governmental funds – combining balance sheet Nonmajor governmental funds – combining statement of revenues, expenditures, and changes in fund balances ---PAGE BREAK--- Private Purpose Trust Private purpose trust funds – combining statement of net Private purpose trust funds – combining statement of changes in net assets Agency Fund Agency fund – statement of changes in assets and liabilities Statistical Net assets by component – last five fiscal Changes in net assets – last five fiscal Fund balances, governmental funds – last ten fiscal Changes in fund balances, governmental funds – last ten fiscal Assessed value and actual value of taxable property by classification and tax rates – last ten fiscal years Principal taxpayers – current year and nine years ago Property tax levies and collections – last ten fiscal Ratios of outstanding debt and general bonded debt – last ten fiscal Direct and overlapping governmental activities debt – as of June 30, 2006 Computation of legal debt margin – last ten fiscal years Demographic and economic statistics – last ten fiscal years Principal employers (excluding City) – current year and nine years Full-time equivalent City employees by function – last ten fiscal Operating indicators by function/program – last ten fiscal Capital asset statistics by function/program – last ten fiscal Free cash & stabilization fund balances – last ten fiscal years ---PAGE BREAK--- Introductory Section Photo courtesy of Jeff Brown Salem Willows Park Beautiful shaded seaside grounds, scenic ocean views, public pier, bandstand for concerts, picnic areas, beaches, children’s rides, activities and many eateries. One of Salem’s treasurers, this park has a fascinating history. Salem Willows is renowned for the European white willow trees planted here in 1801 to form a shaded walk for patients convalescing at the old smallpox hospital. Later the area became a park. During the first half of the 20th century, Restaurant Row on the park's north shore served fresh seafood favored by locals and visitors alike. A carousel with carved flying horses was another special attraction at Salem Willows, which then, as now, operated as an entertainment center. Visitors still flock here during the summer to enjoy the sunshine, the arcade and the park's ample picnic grounds and recreational facilities. ---PAGE BREAK--- City of Salem, Massachusetts 1 Comprehensive Annual Financial Report Introductory Section ---PAGE BREAK--- City of Salem, Massachusetts 2 Comprehensive Annual Financial Report This page intentionally left blank. ---PAGE BREAK--- SALEM CITY HALL - 93 WASHINGTON STREET - SALEM, MA 01970-3592 TELEPHONE: [PHONE REDACTED] EXT. 211 - FAX: [PHONE REDACTED] 3 CITY OF SALEM, MASSACHUSETTS OFFICE OF FINANCE RICHARD VISCAY DIRECTOR OF FINANCE Letter of Transmittal September 29, 2006 To the Honorable Mayor, Members of the City Council and Citizens of the City of Salem, Massachusetts: At the close of each fiscal year, state law requires the City of Salem to publish a complete set of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP), and that are audited in accordance with generally accepted auditing standards by a firm of licensed certified public accountants. Pursuant to that requirement, we hereby issue the Comprehensive Annual Financial Report (CAFR) of the City of Salem, Massachusetts, for the fiscal year ending June 30, 2006 for your review. This report consists of management’s representations concerning the finances of the City. Consequently, management assumes full responsibility for the completeness and reliability of all of the information presented in this report. To provide a reasonable basis for making these representations, management of the City has established a comprehensive internal control framework that is designed both to protect the government’s assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of the City’s financial statements in conformity with GAAP. Because the cost of internal controls should not outweigh their benefits, the City’s comprehensive framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements for the fiscal year ended June 30, 2006, are fairly presented in conformity with GAAP. The City of Salem’s financial statements have been audited by Powers & Sullivan, a firm of licensed certified public accountants. The goal of the independent audit was to provide reasonable assurance that the financial statements of the City for the fiscal year ended June 30, 2006, are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principals used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditor concluded, based upon the audit, that there was a reasonable basis for rendering an unqualified opinion that the City’s financial statements for the fiscal year ended June 30, 2006 are fairly presented in conformity with GAAP. The independent auditor’s report is presented as the first component of the financial section of this report. The independent audit of the financial statements of the City was part of a broader, federally mandated “Single Audit” designed to meet the special needs of federal grantor agencies. The standards governing Single Audit engagements require the independent auditor to report not only on the fair presentation of the financial statements, but also on the audited government’s internal controls and compliance with legal requirements, with ---PAGE BREAK--- SALEM CITY HALL - 93 WASHINGTON STREET - SALEM, MA 01970-3592 TELEPHONE: [PHONE REDACTED] EXT. 211 - FAX: [PHONE REDACTED] 4 special emphasis on internal controls and legal requirements involving the administration of federal awards. These reports are available in the City of Salem’s separately issued Single Audit Report. GAAP requires that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management’s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement that analysis and should be read in conjunction with it. The City’s MD&A can be found immediately following the report of the independent auditors. Profile of the City The City of Salem, which was incorporated as a town in 1630 and became a city on March 23, 1836, is situated on the Massachusetts coast, 16 miles northeast on Boston. The City has a population of approximately 40,407 and occupies a land area of approximately 8 square miles. The second city in the Commonwealth to be incorporated, it is the Shire City of Essex County. Salem has operated under the Plan B form of government, with a mayor and an eleven-person City Council, seven elected from wards, and four at-large, since 1915. The Mayor is elected for four years in November of unevenly-numbered years. The Mayor is the administrative head of the city and chairman ex-officio of the School Committee, the Board of Library Trustees, and the Board of Trust Fund Commissioners. The Mayor acts with the City Council and School Committee to carry out city business. The Mayor appoints his or her office staff, the City Solicitor, and the Assistant City Solicitor without City Council confirmation. The appointments of most city department heads, and members of the various boards and commissions, however, require City Council confirmation. The Mayor has the right to veto any order, resolution, or ordinance passed by the Council. However, a veto may be overturned by a two-thirds vote of all councilors. After reviewing and revising estimates prepared by department heads, the Mayor submits the budget to the City Council for final action. The Mayor approves all municipal payrolls, vouchers, contracts and instruments; and recommends bond issues, legislations and orders to the City Council; and represents the city with other levels of government. As the general administrator of all city departments, the Mayor is consulted by department heads pertaining to the city’s welfare. The City Council is primarily the legislative branch of the city government. As the legislative body, the Council confirms appointments made by the Mayor and appropriates all monies necessary to city operation. It can approve, disapprove, or reduce the amount of appropriations, but not add to the appropriation. The Council receives orders of recommendation by the Mayor and petitions from the public, and acts on them after committee study. The City Council also has the power to enact the Ordinances and other regulations. A majority of the City Council constitutes a quorum, and the affirmative vote of a majority of all the members of the Council is necessary for the adoption of any motion resolution, or ordinance. In some instance, adoption by a two-thirds vote of the members is required by statute. The City provides general governmental services for the territory within its boundaries, including police and fire protection, disposal of garbage and rubbish (for residential properties); public education, including vocational- technical education at the high school level; street maintenance; certain water services, through the Salem and Beverly Water Supply Board; certain sewerage disposal services, through the South Essex Sewerage District; and parks and recreational facilities. Approximately 95 percent of the City is connected to the sewerage system; the entire area of the City is served by the municipal water system. The Salem Housing Authority is responsible for managing 1,462 units of low income housing for the City. Buildings are either owned by the Authority, or are part of the rental subsidy program or the voucher program. Of the 1,462 units, 715 are included in twelve elderly developments, nine family developments, and one handicapped accessible family developments. These units are owned and operated by the Authority. The principal highways serving the City are state Routes 1A, 107, and 114, all of which provide immediate access to Routes 1 and 128 and other major highways serving the greater ---PAGE BREAK--- SALEM CITY HALL - 93 WASHINGTON STREET - SALEM, MA 01970-3592 TELEPHONE: [PHONE REDACTED] EXT. 211 - FAX: [PHONE REDACTED] 5 Boston area. The City is a member municipality of the Massachusetts Bay Commuter Railroad, which provides passenger and freight service. Within 170 days after the annual organization of the city government (which is ordinarily in early January), the Mayor is required to submit a budget of proposed expenditures for the fiscal year beginning on the next July 1. The City Council may make appropriations for the recommended purposes and may reduce or reject any item. Without recommendation of the Mayor, the City Council may not increase any item or make an appropriation for a purpose not included in the proposed budget (except by a two-thirds vote in case of the failure of the Mayor to recommend an appropriation for such a purpose within 7 days after a request from the City Council, pursuant to state statute). If the Council fails to act on any item of the proposed budget within 45 days, that item takes effect. The City’s operating budget for fiscal year 2006 totaled approximately $102 million. Factors Affecting Economic Condition The City of Salem is a historic waterfront community that has a rich cultural heritage, known worldwide for its architecture, maritime history, literary prominence, and hysteria. For this reason, tourism is one of the City’s major industries, accommodating almost one million visitors each year. Salem originated as one of the earliest landing sites of the English colonists, and went on to rise as the first major port in the United States, opening up the East Indian trade. In its heyday, Salem was known as a thriving hub of American commerce and was the home of Nathaniel Hawthorne. Salem is well known for the infamous Salem Trials of 1692, when nineteen people were convicted for the crime of and were put to their deaths. The City's golden years have left her modern inhabitants with architectural treasures, fine museums, and a sparkling literary heritage. Equally important, the development of Salem has produced a rich ethnic history, to which people of all races, creeds, colors and origins have contributed over the generations. Long a trading, manufacturing and retail center, Salem has been making a slow, and sometimes painful, transition to a service- based economy. The City today serves as the home of Salem State College, the North Shore Medical Center, the Essex County District Superior and Probate Courts, and Registry of Deeds, the world-famous Peabody and Essex Museum, and a host of banks and other financial institutions. It is the educational, medical, legal, cultural and banking hub of the North Shore. Salem boasts an impressive collection of historically significant residential structures that are always in high demand. The uniqueness of these historic homes, coupled with a growing downtown condominium market, have helped boost home sales prices in Salem. The City also enjoys a mix of commercial businesses and markets. Commercial development has been prominent in the Highland Avenue and Vinnin Square areas. Additionally, the City has recently experienced a $100 million expansion of the Peabody Essex Museum and the privately funded renovation and reuse of several key properties. In fact, private investment in commercial and residential developments in downtown since 2001 totals close to $50 million, and expected future investment over the next two years totals close to an additional $10 million. The redevelopment of long dormant and underutilized industrial sites is helping to revitalize our central business district. The Salem waterfront is also experiencing a great deal of investment from the addition of the Pickering Wharf Hotel and a municipally managed Harbor Walkway project which will connect pedestrians walking along the harbor from the Pickering Wharf area to adjacent areas. ---PAGE BREAK--- SALEM CITY HALL - 93 WASHINGTON STREET - SALEM, MA 01970-3592 TELEPHONE: [PHONE REDACTED] EXT. 211 - FAX: [PHONE REDACTED] 6 The City also boasts Shetland Park, a sprawling business park which houses more than 70 concerns and an industrial park on Technology Way which houses large or expanding companies. The North Shore Medical Center has recently invested $12 million for their new 10,700 square foot cardiac surgical suite and also built a new 19,000 square foot Emergency Department, which is one of the most sophisticated and modern emergency facilities in the state. According to the Massachusetts Workforce Development Agency, the City had a labor force of 23,504, of whom 22,531 were employed and 973, or 4.1% were unemployed. The Commonwealth, for the same period, had an unadjusted unemployment rate of 5.1%. On the operating side, the City had experienced financial challenges during fiscal year 2005 and into the 2006 budget cycle. One of the key challenges for the City has been rising health care costs for City employees/retirees, as well as increases in pension costs. Since the state law, known as proposition 2 ½, caps the City’s ability to raise taxes to meet rising costs, the City is actively exploring the use of alternative, local revenue sources to help offset the aforementioned rising expenditures. In fiscal year 2006, the City Council accepted the provisions of Massachusetts General Law chapter 32B, section 18, a Massachusetts statute requiring all Medicare-eligible retirees who are currently on self-insured plans to move from self-insured coverage to a fully insured Medicare supplement plan, is estimated to save the City approximately $700,000 this fiscal year and next. This is a major cost saving initiative that will insure that all retirees over the age of 65 are treated consistently, while also providing greater control of costs associated with the City’s Healthcare Insurance Trust account, the fastest rising municipal budget item for each of the last five years. To help curb the fiscal challenges, the City also expanded the hours at the parking garage, instituted Saturday meter collections, and also installed seasonal meters at Salem Willows recreational park. The additional revenue from these new collections is estimated to generate $100,000 per year. At the end of fiscal year 2006, the City purchased a Ferry Boat in which they received a state grant for 75% of the purchase cost. The City is leasing the Ferry Boat to Water Transportation Services, Inc., which operates the ferry. The City anticipates revenue from the ferry to grow from $60,000 to $100,000 over the next three years. The City implemented a trash fee for fiscal year 2007 which went into effect in September 2006. The revenue generated from the trash fees is anticipated to be $700 thousand for the ten months of collections during fiscal year 2007 and $840 thousand a year for the twelve months of collections in future fiscal years. These amounts are based on the number of residential and commercial units that are currently being billed for trash. The fees collected are used to offset the cost of collecting solid waste. The City planns to adopt an Enterprise Fund for solid waste collections by fiscal year 2008. The City has been in the process of renovating several schools which is being financed, in part, by the State’s School Building Assistance Program which is run by the Massachusetts School Building Authority. Through this program, the City is reimbursed for 90% of the construction and debt interest costs of the projects. The City has set a target level for the Stabilization fund of 5% of the City’s current operating budget. The target funding date is projected to occur by fiscal year 2011. 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. Free cash is the remaining, unrestricted funds from operations of the previous fiscal year including unexpended free cash from the previous year, actual receipts in excess of revenue estimates shown on ---PAGE BREAK--- SALEM CITY HALL - 93 WASHINGTON STREET - SALEM, MA 01970-3592 TELEPHONE: [PHONE REDACTED] EXT. 211 - FAX: [PHONE REDACTED] 7 the tax rate recapitulation sheet, and unspent amounts in budget line-items. Unpaid property taxes and certain deficits reduce the amount that can be certified 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 community’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 1st); the Director’s certification expires on June 30th at the end of the 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. Any drawdown of the Stabilization Fund from the prior fiscal year should be allocated from the certified free cash if the free cash exceeds such drawdown. Twenty percent of any free cash available after funding a prior year drawdown will also be allocated from free cash to Stabilization Fund up to the goal of stabilization fund equaling 5% of the current operating budget of the City. Twenty percent of any free cash available after funding a prior year drawdown of Stabilization fund will also be allocated to the Capital Improvement Fund for funding Capital. Any free cash available after funding the above may be used to augment trust funds related to fringe benefits and unfunded liabilities related to employee benefits, including Health Insurance Trust Fund, Workers' Compensation Fund, Unemployment Fund, and any health benefits payable through Police and Fire operating budgets (111f 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. Awards and Acknowledgements The Government Finance Officers Association (GFOA) awarded a Certificate of Achievement of Excellence in Financial Reporting to the City of Salem for its comprehensive annual financial report (CAFR) for the fiscal year ended June 30, 2005. This was the first year that the City submitted a CAFR to the GFOA. In order to receive this prestigious award, a government had to publish an easily readable and efficiently organized CAFR that satisfied both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe that our current CAFR continues to meet the Certificate of Achievement Program’s requirements and we are submitting it to the GFOA to determine it’s eligibility for another certificate. The preparation of this report would not have been possible without the efficient and dedicated services of the Finance department’s staff. We would like to express our appreciation to all the members of the departments who assisted and contributed to the preparation of this report. Credit must also be given to the City Council and Mayor for their unfailing support for maintaining the highest standards of professionalism in the management of the City of Salem’s finances. Respectfully submitted, Richard Viscay Finance Director ---PAGE BREAK--- ---PAGE BREAK--- City of Salem, Massachusetts 9 Comprehensive Annual Financial Report Principal Executive Officers TITLE NAME FIRST TOOK OFFICE TERM EXPIRES Mayor Kimberley L. Driscoll 1/2/2006 12/31/2009 President, City Council Jean Pelletier 1/2/2006 12/31/2006 Finance Director Richard Viscay 3/6/2006 1/31/2009 Treasurer Anne L. Busteed 5/22/2000 1/31/2007 City Clerk Cheryl LaPointe 7/15/2004 11/9/2006 City Solicitor Elizabeth Rennard 1/10/2006 Indefinite ---PAGE BREAK--- City of Salem, Massachusetts 10 Comprehensive Annual Financial Report Certificate of Achievement ---PAGE BREAK--- Financial Section Photo courtesy of Jeff Brown Downtown Salem The Essex Street Pedestrian Mall, a shady red-bricked plaza sandwiched between rows of shops. The inventory of the corner bookstore spills onto tables out front on most days, and trolleys occasionally pass by. Young women hand out coupons and ads for nearby shops. Many tourists and locals enjoy the view of the terrace garden of the Peabody Essex Museum. Fountains at each end of the mall are a great place for people to relax and enjoy the views of historic Salem or sit on a bench and have a bite to eat. The red line of the Heritage Trail will lead visitors in and out of the area to various points of interest and history within the City. ---PAGE BREAK--- City of Salem, Massachusetts 11 Comprehensive Annual Financial Report Financial Section ---PAGE BREAK--- City of Salem, Massachusetts 12 Comprehensive Annual Financial Report This page intentionally left blank. ---PAGE BREAK--- 13 Independent Auditors’ Report To the Honorable Mayor and Members of the City Council City of Salem, Massachusetts We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Salem, Massachusetts, as of and for the fiscal year ended June 30, 2006 (except for the Salem Contributory Retirement System which is as of and for the year ended December 31, 2005), which collectively comprise the City’s basic financial statements as listed in the table of contents. These financial statements are the responsibility of the City of Salem, Massachusetts' management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Salem, Massachusetts, as of June 30, 2006 (except for the Salem Contributory Retirement System which is as of December 31, 2005), and the respective changes in financial position and cash flows, where applicable, thereof for the fiscal year then ended in conformity with accounting principles generally accepted in the United States of America. Management’s discussion and analysis, located on the following pages, and schedule of revenues, expenditures and changes in fund balance – general fund – budgetary basis, located after the notes to the basic financial statements, are not a required part of the basic financial statements but are supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was made for the purpose of forming an opinion on the financial statements taken as a whole. The combining fund statements, as listed in the table of contents, are presented for the purpose of supplementary analysis and are not a required part of the financial statements of the City of Salem, Massachusetts. Such supplementary information has been subjected to the auditing procedures applied in the audit of the financial statements and, in our opinion, is fairly presented in all material respects in relation to the financial statements taken as a whole. The introductory and statistical sections, as listed in the table of contents, are presented for purposes of additional analysis and are not a required part of the financial statements. Such information has not been subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it. ---PAGE BREAK--- 14 As described in Note 4, the City has reported all major general infrastructure assets acquired prior to July 1, 2001, as required by GASB Statement No. 34, Basic Financial Statements – and Management’s Discussion and Analysis – for State and Local Governments, as amended and interpreted, as of June 30, 2006. In accordance with Government Auditing Standards, we have also issued our report dated September 29, 2006 on our consideration of the City of Salem, Massachusetts’ internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grants. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. September 29, 2006 ---PAGE BREAK--- City of Salem, Massachusetts 15 Comprehensive Annual Financial Report Management’s Discussion and Analysis Management’s Discussion and Analysis ---PAGE BREAK--- City of Salem, Massachusetts 16 Comprehensive Annual Financial Report Management’s Discussion and Analysis As management of the City of Salem, we offer readers of these financial statements this narrative overview and analysis of the financial activities for the fiscal year ended June 30, 2006. We encourage readers to consider the information presented in this report in conjunction with additional information that we have furnished in our letter of transmittal. The Governmental Accounting Standards Board (GASB) is the authoritative standard setting body that provides guidance on how to prepare financial statements in conformity with generally accepted accounting principals (GAAP). Users of these financial statements (such as investors and rating agencies) rely on the GASB to establish consistent reporting standards for all governments in the United States. This consistent application is the only way users (including citizens, the media, legislators and others) can assess the financial condition of one government compared to others. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the City of Salem’s basic financial statements. These basic financial statements comprise three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Government-wide financial statements. The government-wide financial statements are designed to provide readers with a broad overview of finances, in a manner similar to private-sector business. The statement of net assets presents information on all assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position is improving or deteriorating. The statement of activities presents information showing how the government’s net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods uncollected taxes and earned but unused vacation leave). Both of the government-wide financial statements distinguish functions that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities include general government, public safety, education, public works, community development, health and human services, culture and recreation and interest. The business-type activities include the activities of water and sewer and parking services as well as the municipal golf course. The government-wide financial statements include not only the City of Salem itself (known as the primary government), but also a legally separate public employee retirement system for which the City of Salem is financially accountable. Financial information for this component unit is reported separately within the fiduciary fund statements. Fund financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. Fund accounting is used to ensure and ---PAGE BREAK--- City of Salem, Massachusetts 17 Comprehensive Annual Financial Report demonstrate compliance with finance-related legal requirements. All of the funds can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund statements focus on near-term inflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government’s near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government’s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City of Salem adopts an annual appropriated budget for its general fund. A budgetary comparison schedule has been provided as required supplementary information for the general fund to demonstrate compliance with this budget. Proprietary funds. The City maintains two types of propriety funds. Enterprise funds are used to report the same functions presented as business-type activities in the government- wide financial statements. The City uses enterprise funds to account for its water and sewer activities, parking services, and for the operation of the municipal golf course. The internal service fund is used to account for the financing of services provided by one department to other departments or governmental units. This fund is used to account for risk financing activities related to active employees’ and retirees’ health insurance. Fiduciary funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statement because the resources of those funds are not available to support the City’s own programs. The accounting used for fiduciary funds is much like that used for propriety funds. Notes to the basic financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. Government-wide Financial Analysis Governmental Activities As noted earlier, net assets may serve over time as a useful indicator of a government’s financial position. The City of Salem’s governmental assets exceeded liabilities by $117.5 million at the close of Fiscal 2006 a decrease of $1.3 million from the prior year. The City reported the major general infrastructure capital assets for the first time in FY2006, as required by GASB Statement No.34, and the FY2006 depreciation was $1.3 million. When comparing the current results to FY2005’s net asset decrease of $7.1 million the City’s long-term financial condition and outlook is improving. Major steps were taken by the new administration in FY2006 to balance the budget and stop the annual decline of net assets. ---PAGE BREAK--- City of Salem, Massachusetts 18 Comprehensive Annual Financial Report Net assets of $109 million (93%) reflects its investment in capital assets land, buildings, infrastructure, machinery, and equipment), less any related debt used to acquire those assets that are still outstanding. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the investment in its capital assets is reported net of its related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. This balance is significantly higher than prior years because the City included the historical cost of pre-2002 general infrastructure assets for the first time in fiscal year 2006 as allowed by GASB Statement No.34. This increased the beginning net assets of governmental activities by $28.8 million. An additional portion of the governmental net assets, $8.6 million represents resources that are subject to external restrictions on how they may be used. The balance of unrestricted net assets has a year end deficit of $372 thousand, which reflects the City’s lack of resources available to be used to meet the City’s ongoing obligations to citizens and creditors. The condensed statement of governmental activities presented below include the FY2005 restatement for infrastructure. The components of the City’s governmental activities are presented below. Fiscal 2006 Fiscal 2005 Assets: Current $ 31,394,323 $ 35,292,646 Noncurrent assets (excluding capital)…………………… 39,293,034 45,917,070 Capital 124,167,537 121,654,778 Total 194,854,894 202,864,494 Liabilities: Current liabilities (excluding 10,087,831 8,572,285 Noncurrent liabilities (excluding 5,161,709 5,467,647 Current 12,103,864 15,541,418 Noncurrent 50,040,000 54,475,000 Total liabilities………………………………………… 77,393,404 84,056,350 Net Assets: Capital assets net of related 109,183,737 112,740,510 8,649,700 9,734,998 (371,947) (3,667,364) Total net $ 117,461,490 $ 118,808,144 Governmental Activities ---PAGE BREAK--- City of Salem, Massachusetts 19 Comprehensive Annual Financial Report Fiscal 2006 Fiscal 2005 Program revenues: Charges for $ 4,661,268 $ 4,429,151 Operating grants and contributions……………………… 37,934,300 34,087,248 Capital grants and contributions………………………… 3,312,346 2,090,467 General Revenues: Real estate and personal property taxes……………… 58,379,505 55,915,767 Motor vehicle and other excise 3,452,569 3,489,584 Nonrestricted 7,661,752 8,097,351 Unrestricted investment 183,980 521,585 Other 2,553,058 2,350,052 Total 118,138,778 110,981,205 Expenses: General government……………………………………… 9,867,573 9,373,119 Public 23,481,525 22,058,002 67,258,196 67,483,676 Public 7,991,774 8,421,997 Community development………………………………… 1,891,386 2,066,749 Health and human services……………………………… 5,016,513 4,856,306 Culture and recreation…………………………………… 3,718,183 3,689,992 2,889,116 2,689,312 Total 122,114,266 120,639,153 Excess (Deficiency) before transfers……………………… (3,975,488) (9,657,948) 2,628,834 2,542,444 Change in net $ (1,346,654) $ (7,115,504) The governmental expenses totaled $122.1 million of which $45.9 million (38%) was directly supported by program revenues consisting of charges for services, operating and capital grants and contributions. General revenues totaled $72.2 million, primarily coming from property taxes, motor vehicle and other excise, and non- restricted state aid. The governmental net assets decreased by $1.3 million during the current fiscal year which directly relates to $1.3 million in depreciation expense on the retroactive general infrastructure capital assets reported in FY2006 Otherwise the total net assets did not change which mirrored the fund based results. Restricted net assets are down from fiscal year 2005 by approximately 11% primarily due to the timing of expenditures of City and School Grant funds. The City’s unrestricted net assets are up by approximately $3.3 million. A key factor in this increase is the recognition of a capital grant from the state for 75% of the cost of the Salem Ferry, which was purchased by the City in fiscal year 2006. ---PAGE BREAK--- City of Salem, Massachusetts 20 Comprehensive Annual Financial Report Business-type Activities For the City’s business-type activities, assets exceeded liabilities by $13.7 million at the close of fiscal year 2006. Fiscal 2006 Fiscal 2005 Assets: Current 6,414,075 $ 7,154,697 Capital 12,482,454 11,706,546 Total 18,896,529 18,861,243 Liabilities: Current liabilities (excluding 396,910 330,078 Noncurrent liabilities (excluding 73,000 122,000 Current 3,446,136 3,358,582 Noncurrent 1,240,000 1,345,000 Total liabilities………………………………………… 5,156,046 5,155,660 Net Assets: Invested in capital assets, net of related debt………… 9,018,231 9,212,891 4,722,252 4,492,692 Total net $ 13,740,483 $ 13,705,583 Business-type Activities Business-type net assets of $9 million (66%) represent investments in capital assets net of related debt. The remaining $4.7 million (34%) is available to be used for the ongoing operation of the City’s water, sewer, parking and the municipal golf course activities. There was an increase of $35 thousand in net assets reported in connection with the water, sewer, parking, and the municipal golf course. The water enterprise fund’s net assets of $3.6 million (68%) represent the investment in capital assets while $1.7 million (32%) is unrestricted. The water department experienced a net increase of $368 thousand in net assets from the prior year. The water fund pays an annual assessment to the Salem Beverly Water Supply Board, which totaled $2 million, or 66% of the funds expenses for fiscal year 2006. The minor change in net assets is the result of the City’s policy to recover 100% of the cost of operations through rates while still maintaining adequate reserves. The sewer enterprise fund’s net assets of $514 thousand (15%) represent the investment in capital assets net of related debt, and $2.8 million (85%) is unrestricted. The unrestricted balance includes the City’s equity interest in the South Essex Sewerage District. The sewer department operations experienced a net decrease of $205 thousand during the current fiscal year. Approximately 83% of the expenses in the sewer fund consist of the annual assessments paid to the South Essex Sewerage District. The minor change in net assets is the result of the City’s policy to recover 100% of the cost of operations through rates while still maintaining adequate reserves. The golf course enterprise fund’s net assets of $288 thousand (59%) represent the investment in capital assets while $202 thousand (41%) is unrestricted. The golf course operations experienced an increase of $52 thousand on revenues of $525 thousand. ---PAGE BREAK--- City of Salem, Massachusetts 21 Comprehensive Annual Financial Report The parking enterprise fund’s net assets of $4.6 million (100%) represent the investment in capital assets net of related debt while $17 thousand (less than is unrestricted. The parking operations experienced a net decrease of $180 thousand during fiscal year 2006 due to depreciation expense of $227 thousand. The City reports this fee-for-service activity an enterprise fund however any cash based surplus generated is transferred back to the general fund to support City programs. In FY2006 $929 thousand was transferred back to the general fund. Consequently, the funds remaining in the enterprise fund at year end represent non-current assets and liabilities and the assets and liabilities related to the enterprise funds capital construction projects. Fiscal 2006 Fiscal 2005 Program revenues: Charges for $ 12,628,680 $ 11,322,285 Expenses: Cost of service and administration……………………… 2,556,558 2,762,436 District assessment……………………………………… 6,750,205 7,546,146 439,720 375,821 218,463 75,628 Total 9,964,946 10,760,031 Excess (Deficiency) before transfers……………………… 2,663,734 562,254 (2,628,834) (2,542,444) Change in net 34,900 $ (1,980,190) Activities Business-type Financial Analysis of the Government’s Funds As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental funds. The focus of the City’s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. As of the end of the current fiscal year, governmental funds reported combined ending fund balances of $9.6 million of which $1.4 million is reported in the general fund, $278 thousand is reported in the stabilization major fund, and $9.2 million is reported in the nonmajor governmental funds and a deficit of $1.2 million is reported in the school capital projects major fund. Cumulatively there was an increase of $7.5 million in fund balances from the prior year. The general fund is the chief operating fund. At the end of the current fiscal year, unreserved fund balance of the general fund was $1.2 million, while total fund balance was $1.4 million. As a measure of the general fund’s liquidity, it may be useful to compare both unreserved fund balance and the total fund balance to total fund expenditures. Unreserved fund balance and total fund balance represent 1.1% and 1.3% of the total general fund expenditures, respectively. ---PAGE BREAK--- City of Salem, Massachusetts 22 Comprehensive Annual Financial Report There was a fund balance increase in the City’s general fund of approximately $956 thousand during fiscal year 2006. The fund balance change of the general fund has its foundation in how well the revenues and expenditures were managed against the budget. The revenue and expenditure budget, established by the prior administration, relied heavily on optimistic revenue projections. Excluding tax lien revenues of $1.1 million that are not budgeted, the City experienced a deficiency of actual revenues compared to budget of ($450 thousand). The net revenue surplus of $645 thousand is directly related to the increase in fund balance. The remaining increase came from a push to reduce expenditures which resulted in a budget surplus for expenditures of $231 thousand. The stabilization major fund is used to account for the accumulation of resources to be used for general and/or capital purposes upon approval of City Council. The fund decreased by $744 thousand in fiscal 2006, due to the budgeted use of $1 million to fund the operations of the general fund netted with a $247 thousand budgeted transfer in from the general fund to fund the stabilization fund and approximately $10 thousand in investment earnings. The School Capital Projects fund is used to account for the City’s ongoing major school construction projects. The fund balance is in a deficit position because short-term notes of $4 million have not yet been borrowed long- term or funded by state grants. Permanent long-term borrowing is anticipated to occur for the City’s share of the projects once the Commonwealth reimburses the City for 90% of approved project costs. During fiscal 2006, the City received an additional $12.5 million to offset current school construction expenditures and to pay down a portion of its short-term debt on school construction projects. General Fund Budgetary Highlights The $15,828 increase between the original budget (expenditures and transfers out) and the final amended budget was the net result of a $500,000 reduction in the school department’s budget, $172,079 from other special revenue and trust accounts to fund general fund line items, an additional $29,254 in additional appropriations from taxation to fund public properties, and $314,495 in appropriations from “available funds” to fund current operations and a transfer to the stabilization fund. The total general fund revenues exceeded the final budget by $645,508. This was primarily the result of collecting over $1 million on properties that were put into tax title. Total expenditures and encumbrances were lower than the amounts appropriated by $230,823. In most line items, the City operated a very tight budget and expenditures and encumbrances were very close to the amounts appropriated. As allowed by state law, the City overspent the appropriated snow & ice removal by $256,592. This deficit is required to be funded in the subsequent year’s tax levy. Capital Asset and Debt Administration Capital Assets. The City’s investment in capital assets for its governmental and business-type activities as of June 30, 2006, amounts to $137 million (net of accumulated depreciation). This investment in capital assets includes land, buildings, system improvements, machinery and equipment, and infrastructure related to governmental and business-type activities. The City’s total investment in capital assets for the current year was $7.6 million for governmental activities and $2.1 million for business-type activities. Major capital asset events during the current fiscal year included the City’s implementation of the final phase of GASB Statement #34, which allowed for the postponement of reporting retroactive general infrastructure assets. The reporting of the pre-GASB #34 general infrastructure increased the beginning balance of net assets in the governmental funds by approximately $28.8 million. ---PAGE BREAK--- City of Salem, Massachusetts 23 Comprehensive Annual Financial Report Additionally, the City has completed several school construction projects, which have been transferred from construction in progress and are now being depreciated. The City is still in the process of a major renovation to Salem High School which continues to be reported as construction in progress pending the completion of the project. The City also purchased the Salem Ferry for $2.9 million, the Salem Ferry is a 92 foot catamaran used to provide seasonal high-speed passenger ferry service between Salem and Boston. The Ferry’s maiden voyage took place on June 22, 2006. The purchase of the ferry has been partially funded through a 75% capital grant from the state. The $2 million in additions to water and sewer fund capital assets are attributable to infrastructure improvements. Debt Administration. Outstanding long-term debt of the general government, as of June 30, 2006, totaled $54,385,000, of which $52,086,000 is related to school projects, leaving a balance of $2,299,000 for other CIP related projects. The Commonwealth of Massachusetts is obligated to provide school construction assistance for approved school projects through a grant program administered by the Massachusetts School Building Authority (MSBA). The assistance is paid to support construction costs and reduce the total debt service of the City. At June 30, 2006 the City has recorded a receivable from the MSBA of $43.7 million, which is equal to 90% of approved construction and interest costs incurred by the City to date, less amounts that have been reimbursed to the City by the MSBA. The City has $8 million and $3.1 million outstanding at year-end in short-term notes due on 1/1/07 and 7/21/06, with interest rates of 4.3% and respectively. The City’s short-term notes represent temporary financing for school construction, police equipment, the Salem Ferry, and water system improvements. At year end the golf course and parking enterprise funds have $320,000 and $1,025,000, respectively, of outstanding long-term debt, which is fully supported by fees and does not rely on a general fund subsidy. Please refer to notes 4, 7 and 8 in the financial statements for further discussion of the major capital and debt activity. Requests for Information This financial report is designed to provide a general overview of the City of Salem’s finances for all those with an interest in the government’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Finance Director, City Hall, 93 Washington Street, Salem, Massachusetts 01970. ---PAGE BREAK--- City of Salem, Massachusetts 24 Comprehensive Annual Financial Report Basic Financial Statements Basic Financial Statements ---PAGE BREAK--- STATEMENT OF NET ASSETS JUNE 30, 2006 Primary Government Governmental Business-type Activities Activities Total ASSETS CURRENT: Cash and cash equivalents……………………………… $ 13,176,564 $ 3,078,160 $ 16,254,724 4,072,397 - 4,072,397 Receivables, net of allowance for uncollectibles: Real estate and personal property taxes…………… 703,725 - 703,725 Tax 880,994 - 880,994 Motor vehicle and other excise taxes………………… 628,649 - 628,649 User - 2,281,844 2,281,844 Departmental and 114,118 - 114,118 Intergovernmental……………………………………… 11,449,315 - 11,449,315 203,561 - 203,561 Investment in joint - 1,054,071 1,054,071 Working capital 165,000 - 165,000 Total current 31,394,323 6,414,075 37,808,398 NONCURRENT: Receivables, net of allowance for uncollectibles: Intergovernmental……………………………………… 38,494,109 - 38,494,109 798,925 - 798,925 Capital assets, non depreciable………………………… 7,999,832 1,312,954 9,312,786 Capital assets, net of accumulated depreciation……… 116,167,705 11,169,500 127,337,205 Total noncurrent 163,460,571 12,482,454 175,943,025 TOTAL 194,854,894 18,896,529 213,751,423 LIABILITIES CURRENT: Warrants 3,900,801 264,175 4,164,976 Accrued 336,472 3,495 339,967 Accrued 745,438 - 745,438 Health claims 1,312,237 - 1,312,237 Tax refunds 100,188 - 100,188 Accrued 1,149,661 95,240 1,244,901 Capital lease obligations………………………………… 661,898 - 661,898 Compensated 1,758,000 34,000 1,792,000 Workers' compensation…………………………………… 123,136 - 123,136 Bonds and notes 12,103,864 3,446,136 15,550,000 Total current liabilities………………………………… 22,191,695 3,843,046 26,034,741 NONCURRENT: Capital lease obligations………………………………… 510,753 - 510,753 Compensated 4,344,000 73,000 4,417,000 Workers' compensation…………………………………… 306,956 - 306,956 Bonds and notes 50,040,000 1,240,000 51,280,000 Total noncurrent liabilities……………………………… 55,201,709 1,313,000 56,514,709 TOTAL 77,393,404 5,156,046 82,549,450 NET ASSETS Invested in capital assets, net of related debt……………… 109,183,737 9,018,231 118,201,968 Restricted for: 1,002,486 - 1,002,486 Permanent funds: 2,626,984 - 2,626,984 Nonexpendable………………………………………… 1,998,872 - 1,998,872 Grants and 3,021,358 - 3,021,358 (371,947) 4,722,252 4,350,305 TOTAL NET $ 117,461,490 $ 13,740,483 $ 131,201,973 See notes to basic financial statements. City of Salem, Massachusetts 25 Comprehensive Annual Financial Report ---PAGE BREAK--- STATEMENT OF ACTIVITIES FISCAL YEAR ENDED JUNE 30, 2006 Operating Capital Charges for Grants and Grants and Net (Expense) Functions/Programs Expenses Services Contributions Contributions Revenue Primary Government: Governmental Activities: General government……………… $ 9,867,573 $ 948,101 $ 875,377 $ 2,295,688 $ (5,748,407) Public safety……………………… 23,481,525 2,003,791 989,410 - (20,488,324) Education………………………… 67,258,196 831,579 28,291,883 211,835 (37,922,899) Public 7,991,774 235,912 68,445 804,823 (6,882,594) Community development………… 1,891,386 16,275 2,348,707 - 473,596 Health and human services……… 5,016,513 79,250 3,483,215 - (1,454,048) Culture and recreation…………… 3,718,183 546,360 75,685 - (3,096,138) Interest……………………………… 2,889,116 - 1,801,578 - (1,087,538) Total Governmental Activities… 122,114,266 4,661,268 37,934,300 3,312,346 (76,206,352) Business-Type Activities: 3,197,864 4,319,560 - - 1,121,696 5,686,595 6,233,883 - - 547,288 Golf 279,981 525,404 - - 245,423 800,506 1,549,833 - - 749,327 Total Business-Type Activities… 9,964,946 12,628,680 - - 2,663,734 Total Primary Government………$ 132,079,212 $ 17,289,948 $ 37,934,300 $ 3,312,346 $ (73,542,618) See notes to basic financial statements. (Continued) Program Revenues City of Salem, Massachusetts 26 Comprehensive Annual Financial Report ---PAGE BREAK--- STATEMENT OF ACTIVITIES (Continued) FISCAL YEAR ENDED JUNE 30, 2006 Governmental Business-Type Activities Activities Total Changes in net assets: Net (expense) revenue from previous page…………… $ (76,206,352) $ 2,663,734 $ (73,542,618) General revenues: Real estate and personal property taxes, net of tax refunds payable………………………… 58,379,505 - 58,379,505 Tax 635,624 - 635,624 Motor vehicle and other excise taxes……………… 3,452,569 - 3,452,569 Hotel/motel 263,962 - 263,962 Penalties and interest on 350,651 - 350,651 Payments in lieu of 1,088,754 - 1,088,754 Grants and contributions not restricted to specific 7,661,752 - 7,661,752 Unrestricted investment income…………………… 183,980 - 183,980 Miscellaneous………………………………………… 214,067 - 214,067 Transfers, net 2,628,834 (2,628,834) - Total general revenues and transfers………………… 74,859,698 (2,628,834) 72,230,864 Change in net (1,346,654) 34,900 (1,311,754) Net Assets: Beginning of year, as restated for infrastructure…… 118,808,144 13,705,583 132,513,727 End of $ 117,461,490 $ 13,740,483 $ 131,201,973 (Concluded) Primary Government City of Salem, Massachusetts 27 Comprehensive Annual Financial Report ---PAGE BREAK--- GOVERNMENTAL FUNDS BALANCE SHEET JUNE 30, 2006 School Nonmajor Total Capital Governmental Governmental ASSETS General Stabilization Projects Funds Funds Cash and cash $ 2,973,783 $ 277,759 $ 3,060,445 $ 6,531,480 $ 12,843,467 - - - 4,072,397 4,072,397 Receivables, net of uncollectibles: Real estate and personal property 703,725 - - - 703,725 Tax 880,994 - - - 880,994 Motor vehicle and other excise 628,649 - - - 628,649 Departmental and - - - 28,300 28,300 Intergovernmental……………………………………………………… 44,307,275 - 1,563,962 4,072,187 49,943,424 - - - 1,002,486 1,002,486 Due from other - - - 334,693 334,693 TOTAL $ 49,494,426 $ 277,759 $ 4,624,407 $ 16,041,543 $ 70,438,135 LIABILITIES AND FUND BALANCES LIABILITIES: Warrants $ 1,327,850 $ - $ 1,836,480 $ 736,471 $ 3,900,801 Accrued 336,472 - - - 336,472 Accrued 745,438 - - - 745,438 Tax refunds 100,188 - - - 100,188 Accrued interest on short-term 165,100 - - - 165,100 Deferred 45,459,083 - - 2,036,652 47,495,735 Due to other - - - 334,693 334,693 Notes - - 4,000,000 3,758,864 7,758,864 TOTAL 48,134,131 - 5,836,480 6,866,680 60,837,291 FUND BALANCES: Reserved for: Encumbrances and continuing appropriations…………………… 197,581 - - - 197,581 Perpetual permanent - - - 1,606,904 1,606,904 Unreserved: Undesignated, reported in: General 1,162,714 - - - 1,162,714 Special revenue - 277,759 - 5,196,369 5,474,128 Capital projects - - (1,212,073) (647,362) (1,859,435) Permanent - - - 3,018,952 3,018,952 TOTAL FUND 1,360,295 277,759 (1,212,073) 9,174,863 9,600,844 TOTAL LIABILITIES AND FUND BALANCES………………………… $ 49,494,426 $ 277,759 $ 4,624,407 $ 16,041,543 $ 70,438,135 See notes to basic financial statements. City of Salem, Massachusetts 28 Comprehensive Annual Financial Report ---PAGE BREAK--- RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TOTAL FUND BALANCES TO THE STATEMENT OF NET ASSETS JUNE 30, 2006 Total governmental fund $ 9,600,844 Capital assets (net) used in governmental activities are not financial resources and, therefore, are not reported in the 124,167,537 Accounts receivable are not available to pay for current-period expenditures and, therefore, are deferred in the 47,495,735 Internal service funds are used by management to account for health insurance activities. The assets and liabilities of the internal service funds are included in the governmental activities in the statement of net (728,322) In the statement of activities, interest is accrued on outstanding long-term debt, whereas in governmental funds interest is not reported until (984,561) Long-term liabilities are not due and payable in the current period and, therefore, are not reported in the governmental funds Bonds and notes (54,385,000) Workers' (430,092) Capital (1,172,651) Compensated (6,102,000) Net effect of reporting long-term (62,089,743) Net assets of governmental $ 117,461,490 See notes to basic financial statements. City of Salem, Massachusetts 29 Comprehensive Annual Financial Report ---PAGE BREAK--- GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FISCAL YEAR ENDED JUNE 30, 2006 School Nonmajor Total Capital Governmental Governmental General Stabilization Projects Funds Funds REVENUES: Real estate and personal property taxes, net of tax 58,601,934 $ - $ - $ - $ 58,601,934 Tax 1,095,631 - - - 1,095,631 Motor vehicle and other excise 3,577,544 - - - 3,577,544 Hotel/motel 263,962 - - - 263,962 Charges for 1,198,183 - - 403,897 1,602,080 Penalties and interest on 350,651 - - - 350,651 Payments in lieu of 1,088,754 - - - 1,088,754 Licenses and 497,479 - - - 497,479 Fines and 1,084,428 - - - 1,084,428 Intergovernmental……………………………………………………………… 32,710,385 - 12,568,964 18,042,627 63,321,976 Departmental and 214,067 - - 1,772,277 1,986,344 - - - 527,117 527,117 Investment 573,227 9,745 - 344,330 927,302 TOTAL 101,256,245 9,745 12,568,964 21,090,248 134,925,202 EXPENDITURES: Current: General 4,233,161 - - 3,791,760 8,024,921 Public 14,018,353 - - 1,188,025 15,206,378 43,034,876 - 3,267,767 10,818,483 57,121,126 Public 5,294,030 - - 1,045,933 6,339,963 Community - - - 1,891,386 1,891,386 Health and human 826,366 - - 3,649,047 4,475,413 Culture and 2,145,885 - - 193,715 2,339,600 Pension 13,388,893 - - - 13,388,893 Employee 9,763,944 - - 200,358 9,964,302 State and county 5,047,971 - - - 5,047,971 Debt service: 4,205,000 - - 180,000 4,385,000 2,938,527 - - 19,574 2,958,101 TOTAL EXPENDITURES……………………………………………… 104,897,006 - 3,267,767 22,978,281 131,143,054 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES…………………………………………… (3,640,761) 9,745 9,301,197 (1,888,033) 3,782,148 OTHER FINANCING SOURCES (USES): Capital lease 131,808 - - 914,811 1,046,619 Transfers 5,073,854 246,663 - - 5,320,517 Transfers (608,773) (1,000,000) - (1,082,910) (2,691,683) TOTAL OTHER FINANCING SOURCES 4,596,889 (753,337) - (168,099) 3,675,453 NET CHANGE IN FUND 956,128 (743,592) 9,301,197 (2,056,132) 7,457,601 FUND BALANCES AT BEGINNING OF 404,167 1,021,351 (10,513,270) 11,230,995 2,143,243 FUND BALANCES AT END OF $ 1,360,295 $ 277,759 $ (1,212,073) $ 9,174,863 $ 9,600,844 See notes to basic financial statements. City of Salem, Massachusetts 30 Comprehensive Annual Financial Report ---PAGE BREAK--- RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FISCAL YEAR ENDED JUNE 30, 2006 Net change in fund balances - total governmental $ 7,457,601 Governmental funds report capital outlays as expenditures. However, in the Statement of Activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. Capital 7,581,652 Depreciation (5,068,893) Net effect of reporting capital 2,512,759 Revenues in the Statement of Activities that do not provide current financial resources are fully deferred in the Statement of Revenues, Expenditures and Changes in Fund Balances. Therefore, the recognition of revenue for various types of accounts receivable real estate and personal property, motor vehicle excise, etc.) differ between the two statements. This amount represents the net change in deferred (16,811,373) The issuance of long-term debt bonds and leases) provides current financial resources to governmental funds, while the repayment of the principal of long- term debt consumes the financial resources of governmental funds. Neither transaction, however, has any effect on net assets. Also, governmental funds report the effect of premiums, discounts, and similar items when debt is first issued, whereas these amounts are deferred and amortized in the Statement of Activities. Capital lease principal 597,182 Capital lease (1,046,619) Debt service principal 4,385,000 Net effect of reporting long-term 3,935,563 Some expenses reported in the Statement of Activities do not require the use of current financial resources and, therefore, are not reported as expenditures in the governmental funds. Net change in compensated absences 1,043,000 Net change in workers' 275,133 Net change in accrued interest on long-term 68,985 Net effect of recording long-term liabilities and amortizing deferred losses…………… 1,387,118 Internal service funds are used by management to account for health insurance activities The net activity of internal service funds is reported with Governmental Activities…………… 171,678 Change in net assets of governmental $ (1,346,654) See notes to basic financial statements. City of Salem, Massachusetts 31 Comprehensive Annual Financial Report ---PAGE BREAK--- PROPRIETARY FUNDS STATEMENT OF NET ASSETS JUNE 30, 2006 Governmental Activities - Golf Internal Service Water Sewer Course Parking Total Funds ASSETS CURRENT: Cash and cash equivalents……………………… $ 2,426,257 $ 369,918 $ 220,217 $ 61,768 $ 3,078,160 $ 333,097 Receivables, net of allowance for uncollectibles User 852,417 1,429,427 - - 2,281,844 - Departmental and - - - - - 85,818 Working capital - - - - - 165,000 Investment in joint venture………………………… - 1,054,071 - - 1,054,071 - Total current 3,278,674 2,853,416 220,217 61,768 6,414,075 583,915 NONCURRENT: Capital assets, non depreciable………………… 10,589 99,552 118,067 1,084,746 1,312,954 - Capital assets, net of accumulated depreciation 5,758,678 414,623 490,220 4,505,979 11,169,500 - Total noncurrent assets……………………… 5,769,267 514,175 608,287 5,590,725 12,482,454 - TOTAL 9,047,941 3,367,591 828,504 5,652,493 18,896,529 583,915 LIABILITIES CURRENT: Warrants 239,071 5,104 - 20,000 264,175 - Accrued liabilities…………………………………… 3,293 202 - - 3,495 - Health claims - - - - - 1,312,237 Accrued 71,100 - 4,521 19,619 95,240 - Compensated absences…………………………… 4,000 4,000 10,000 16,000 34,000 - Bonds and notes payable………………………… 3,341,136 - 30,000 75,000 3,446,136 - Total current liabilities………………………… 3,658,600 9,306 44,521 130,619 3,843,046 1,312,237 NONCURRENT: Compensated absences…………………………… 23,000 23,000 4,000 23,000 73,000 - Bonds and notes payable………………………… - - 290,000 950,000 1,240,000 - Total noncurrent liabilities…………………… 23,000 23,000 294,000 973,000 1,313,000 - TOTAL LIABILITIES………………………………… 3,681,600 32,306 338,521 1,103,619 5,156,046 1,312,237 NET ASSETS Invested in capital assets, net of related debt……… 3,650,044 514,175 288,287 4,565,725 9,018,231 - Unrestricted…………………………………………… 1,716,297 2,821,110 201,696 (16,851) 4,722,252 (728,322) TOTAL NET 5,366,341 $ 3,335,285 $ 489,983 $ 4,548,874 $ 13,740,483 $ (728,322) See notes to basic financial statements. Business-type Activities - Enterprise Funds City of Salem, Massachusetts 32 Comprehensive Annual Financial Report ---PAGE BREAK--- PROPRIETARY FUNDS STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS FISCAL YEAR ENDED JUNE 30, 2006 Business-type Activities - Enterprise Funds Governmental Activities - Golf Internal Service Water Sewer Course Parking Total Funds OPERATING REVENUES: Employee contributions $ - $ - $ - $ - $ - $ 4,067,266 Employer contributions - - - - - 8,520,368 Charges for services 4,319,560 6,233,883 525,404 1,549,833 12,628,680 - - - - - - 286,689 TOTAL OPERATING REVENUES 4,319,560 6,233,883 525,404 1,549,833 12,628,680 12,874,323 OPERATING EXPENSES: Cost of services and administration 860,370 941,636 221,730 532,822 2,556,558 - District Assessment……………………………………… 2,023,668 4,726,537 - - 6,750,205 - Depreciation……………………………………………… 151,466 18,422 42,886 226,946 439,720 - Employee benefits - - - - - 12,727,594 TOTAL OPERATING EXPENSES 3,035,504 5,686,595 264,616 759,768 9,746,483 12,727,594 OPERATING INCOME 1,284,056 547,288 260,788 790,065 2,882,197 146,729 NONOPERATING REVENUES (EXPENSES): Investment - - - - - 24,949 Interest (162,360) - (15,365) (40,738) (218,463) - TOTAL NONOPERATING REVENUES (EXPENSES), (162,360) - (15,365) (40,738) (218,463) 24,949 INCOME (LOSS) BEFORE TRANSFERS………… 1,121,696 547,288 245,423 749,327 2,663,734 171,678 TRANSFERS: Transfers - - 362,110 - 362,110 - Transfers (753,162) (753,162) (555,147) (929,473) (2,990,944) - TOTAL TRANSFERS………………………………… (753,162) (753,162) (193,037) (929,473) (2,628,834) - CHANGE IN NET 368,534 (205,874) 52,386 (180,146) 34,900 171,678 NET ASSETS AT BEGINNING OF YEAR, 4,997,807 3,541,159 437,597 4,729,020 13,705,583 (900,000) NET ASSETS AT END OF $ 5,366,341 3,335,285 $ 489,983 $ 4,548,874 $ 13,740,483 $ (728,322) See notes to basic financial statements. City of Salem, Massachusetts 33 Comprehensive Annual Financial Report ---PAGE BREAK--- PROPRIETARY FUNDS STATEMENT OF CASH FLOWS FISCAL YEAR ENDED JUNE 30, 2006 Business-type Activities - Enterprise Funds Governmental Activities - Golf Internal Service Water Sewer Course Parking Total Funds CASH FLOWS FROM OPERATING ACTIVITIES: Receipts from customers and 4,544,003 $ 6,490,046 $ 525,404 $ 1,549,833 $ 13,109,286 $ - Receipts from interfund services - - - - - 12,839,532 Payments to (2,481,853) (5,613,266) (35,409) (135,579) (8,266,107) - Payments to (372,739) (368,422) (204,321) (369,243) (1,314,725) - Payments for interfund services - - - - - (12,387,894) NET CASH FROM OPERATING ACTIVITIES……………………………………… 1,689,411 508,358 285,674 1,045,011 3,528,454 451,638 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: Transfers - - 362,110 - 362,110 - Transfers (753,162) (753,162) (555,147) (929,473) (2,990,944) - Advances to other - - - - - (143,490) NET CASH FROM NONCAPITAL FINANCING ACTIVITIES…………………… (753,162) (753,162) (193,037) (929,473) (2,628,834) (143,490) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Proceeds from the issuance of bonds and 3,341,136 - - - 3,341,136 - Acquisition and construction of capital (1,159,628) - (56,000) - (1,215,628) - Principal payments on bonds and (3,253,582) - (30,000) (75,000) (3,358,582) - Principal payments on capital lease obligations………………………………… - - (20,205) - (20,205) - Interest (113,560) - (16,175) (42,238) (171,973) - NET CASH FROM CAPITAL AND RELATED FINANCING ACTIVITIES……… (1,185,634) - (122,380) (117,238) (1,425,252) - CASH FLOWS FROM INVESTING ACTIVITIES: Investment - - - - - 24,949 NET CHANGE IN CASH AND CASH EQUIVALENTS…………………………… (249,385) (244,804) (29,743) (1,700) (525,632) 333,097 CASH AND CASH EQUIVALENTS AT BEGINNING OF 2,675,642 614,722 249,960 63,468 3,603,792 - CASH AND CASH EQUIVALENTS AT END OF 2,426,257 $ 369,918 $ 220,217 $ 61,768 $ 3,078,160 $ 333,097 RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH FROM OPERATING ACTIVITIES: Operating income 1,284,056 $ 547,288 $ 260,788 $ 790,065 $ 2,882,197 $ 146,729 Adjustments to reconcile operating income (loss) to net cash from operating activities: 151,466 18,422 42,886 226,946 439,720 - Changes in assets and liabilities: User 224,443 256,163 - - 480,606 - Investment in joint - (265,616) - - (265,616) - Departmental and - - - - - (34,791) Warrants 83,543 (716) - 20,000 102,827 (72,537) Accrued (25,097) (18,183) - - (43,280) - Health claims - - - - - 412,237 Accrued compensated (29,000) (29,000) (18,000) 8,000 (68,000) - Total 405,355 (38,930) 24,886 254,946 646,257 304,909 NET CASH FROM OPERATING 1,689,411 $ 508,358 $ 285,674 $ 1,045,011 $ 3,528,454 $ 451,638 See notes to basic financial statements. City of Salem, Massachusetts 34 Comprehensive Annual Financial Report ---PAGE BREAK--- FIDUCIARY FUNDS STATEMENT OF FIDUCIARY NET ASSETS JUNE 30, 2006 Pension Trust Fund Private (as of December Purpose Agency 31, 2005) Trust Funds Fund ASSETS CURRENT: Cash and cash equivalents…………………………………… $ 6,775,063 $ 99,893 $ 476,628 Investments: U.S. Treasury 1,214,107 - - Corporate 7,886,503 1,331,659 - Equity 11,334,087 - - Equity mutual 44,116,819 Real estate and alternative investment mutual funds… 9,531,719 - - Federal Home Loan Mortgages………………………… 677,179 - - Federal National Mortgage Association………………… 669,168 - - Receivables, net of allowance for uncollectibles: Departmental and 130,307 - 6,041 Intergovernmental………………………………………… 440,617 - - TOTAL 82,775,569 1,431,552 482,669 LIABILITIES Warrants 594,598 - 28,099 Liabilities due depositors……………………………………… - - 454,570 TOTAL 594,598 - 482,669 NET ASSETS Held in trust for pension benefits and other purposes…… $ 82,180,971 $ 1,431,552 $ - See notes to basic financial statements. City of Salem, Massachusetts 35 Comprehensive Annual Financial Report ---PAGE BREAK--- FIDUCIARY FUNDS STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS FISCAL YEAR ENDED JUNE 30, 2006 Pension Trust Fund Private (as of December Purpose 31, 2005) Trust Funds ADDITIONS: Contributions: $ 8,022,361 $ - Plan 2,725,917 - Private - 12,093 Total 10,748,278 12,093 Net investment income (loss): Net change in fair value of 3,316,173 - 849,432 77,350 Total investment income 4,165,605 77,350 Less: investment (470,968) - Net investment income 3,694,637 77,350 494,525 - Transfers from other 270,872 - TOTAL 15,208,312 89,443 DEDUCTIONS: 407,231 - Retirement benefits and 11,345,199 - Educational - 27,523 Housing - 27,833 TOTAL 11,752,430 55,356 CHANGE IN NET 3,455,882 34,087 NET ASSETS AT BEGINNING OF 78,725,089 1,397,465 NET ASSETS AT END OF 82,180,971 $ 1,431,552 See notes to basic financial statements. City of Salem, Massachusetts 36 Comprehensive Annual Financial Report ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2006 City of Salem, Massachusetts 37 Comprehensive Annual Financial Report NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Notes to basic financial statements The accompanying basic financial statements of the City of Salem, Massachusetts (the City) have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The Governmental Accounting Standards Board (GASB) is the recognized standard-setting body for establishing governmental accounting and financial reporting principles. The significant accounting policies are described herein. A. Reporting Entity The City is a Massachusetts municipal corporation with a Mayor-Council form of government. The Mayor is elected at large for a four-year term. The City Council is comprised of eleven members elected for two-year terms from seven wards and four at-large. For financial reporting purposes, the City has included all funds, organizations, agencies, boards, commissions and institutions. The City has also considered all potential component units for which it is financially accountable as well as other organizations for which the nature and significance of their relationship with the City are such that exclusion would cause the basic financial statements to be misleading or incomplete. As required by GAAP, these basic financial statements present the City (the primary government) and its component units. One entity has been included as a component unit in the reporting entity, because of the significance of its operational and/or financial relationship. Blended Component Units – Blended component units are entities that are legally separate from the City, but are so related that they are, in substance, the same as the City, or entities providing services entirely or almost entirely for the benefit of the City. The following component unit is blended within the Fiduciary Funds of the primary government: The Salem Contributory Retirement System (the System) was established to provide retirement benefits to City employees, the Salem Housing Authority employees, the South Essex Sewerage District employees, the Salem- Beverly Water Supply Board employees, the North Shore Regional Vocational School employees and their beneficiaries. The System is governed by a five-member board comprised of the Finance Director (ex-officio), two members elected by the System’s participants, one member appointed by the Mayor and one member appointed by the other board members. The System is presented using the accrual basis of accounting and is reported as a pension trust fund in the fiduciary fund financial statements. The City is a member of the South Essex Sewerage District (the District), a joint venture with the Cities of Salem and Beverly and the Towns of Danvers and Marblehead, for the operation of a septage disposal facility. The members share in overseeing the operations of the District. Each member is responsible for its proportionate share of the operational costs of the District, which are paid in the form of assessments. As of June 30, 2006, the City’s equity interest in the operations of the District totaled $1,054,071, which is recorded in the Sewer Enterprise Fund. Complete financial statements for the District can be obtained by contacting them at 50 Fort Avenue, Salem, MA 01970. The City is a member of the Salem-Beverly Water Supply Board (Water Board), a joint venture with the City of Beverly for the operation of a water distribution system. The City does not have an equity interest in the Salem- Beverly Water Supply Board. The annual assessment from the Water Board for the fiscal year ended June 30, 2006 totaled approximately $2.0 million. Complete financial information for the Water Board can be obtained by contacting them at 50 Arlington Avenue, Beverly, MA 01915. ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2006 City of Salem, Massachusetts 38 Comprehensive Annual Financial Report Availability of Financial Information for Component Units The System did not issue a separate audited financial statement. The System issues a publicly available unaudited financial report in accordance with guidelines established by the Commonwealth of Massachusetts’ (Commonwealth) Public Employee Retirement Administration Commission (PERAC). That report may be obtained by contacting the System located at 20 Central Street, Suite 110, Salem, Massachusetts 01970. B. Government-Wide and Fund Financial Statements Government-Wide Financial Statements The government-wide financial statements statement of net assets and the statement of changes in net assets) report information on all of the non-fiduciary activities of the primary government and its component units. Governmental activities, which are primarily supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which are supported primarily by user fees and charges. Fund Financial Statements Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though fiduciary funds are excluded from the government-wide financial statements. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. Nonmajor funds are aggregated and displayed in a single column. Major Fund Criteria Major funds must be reported if the following criteria are met: • If the total assets, liabilities, revenues, or expenditures/expenses of an individual governmental or enterprise fund are at least 10 percent of the corresponding element (assets, liabilities, etc.) for all funds of that category or type (total governmental or total enterprise funds), and • If the total assets, liabilities, revenues, or expenditures/expenses of the individual governmental fund or enterprise fund are at least 5 percent of the corresponding element for all governmental and enterprise funds combined. Additionally, any other governmental or enterprise fund that management believes is particularly significant to the basic financial statements may be reported as a major fund. Internal service funds and fiduciary funds are reported by fund type. C. Measurement Focus, Basis of Accounting and Financial Statement Presentation Government-Wide Financial Statements The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Under this method, revenues are recorded when earned and expenses are recorded when the liabilities are incurred. Real estate and personal property taxes are recognized as revenues in the fiscal year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2006 City of Salem, Massachusetts 39 Comprehensive Annual Financial Report The statement of activities demonstrates the degree to which the direct expenses of a particular function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include the following: • Charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment. • Grants and contributions that are restricted to meeting the operational requirements of a particular function or segment. • Grants and contributions that are restricted to meeting the capital requirements of a particular function or segment. Taxes and other items not identifiable as program revenues are reported as general revenues. For the most part, the effect of interfund activity has been removed from the government-wide financial statements. Exceptions are charges between the general fund and proprietary funds. Elimination of these charges would distort the direct costs and program revenues reported for the functions affected. Fund Financial Statements Governmental fund financial statements are reported using the flow of current financial resources measurement focus and the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recognized when susceptible to accrual measurable and available). Measurable means the amount of the transaction can be determined and available means collectible within the current period or soon enough thereafter to pay liabilities of the current period. Expenditures are recorded when the related fund liability is incurred, except for unmatured interest on general long-term debt which is recognized when due, and certain compensated absences, claims and judgments which are recognized when the obligations are expected to be liquidated with current expendable available resources. Real estate and personal property tax revenues are considered available if they are collected within 60 days after fiscal year-end. Investment income is susceptible to accrual. Other receipts and tax revenues become measurable and available when the cash is received and are recognized as revenue at that time. Entitlements and shared revenues are recorded at the time of receipt or earlier if the susceptible to accrual criteria is met. Expenditure driven grants recognize revenue when the qualifying expenditures are incurred and all other grant requirements are met. The following major governmental funds are reported: The general fund is the primary operating fund. It is used to account for all financial resources, except those that are required to be accounted for in another fund. The stabilization fund is a special revenue fund used to account for the accumulation of resources to be used for general and/or capital purposes upon approval of City Council. The school capital projects fund is used to account for the ongoing construction and renovations of the City’s school buildings. ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2006 City of Salem, Massachusetts 40 Comprehensive Annual Financial Report The nonmajor governmental funds consist of other special revenue, capital projects and permanent funds that are aggregated and presented in the nonmajor governmental funds column on the governmental funds financial statements. The following describes the general use of these fund types: The special revenue fund is used to account for the proceeds of specific revenue sources (other than permanent funds or capital projects funds) that are restricted by law or administrative action to expenditures for specified purposes. The capital projects fund is used to account for financial resources to be used for the acquisition or construction of major capital facilities (other than those financed by Enterprise Funds). The permanent fund is used to account for financial resources that are legally restricted to the extent that only earnings, not principal, may be used for purposes that support the governmental programs. Proprietary fund financial statements are reported using the flow of economic resources measurement focus and use the accrual basis of accounting. Under this method, revenues are recorded when earned and expenses are recorded when the liabilities are incurred. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with the proprietary funds principal ongoing operations. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. The following major proprietary funds are reported: The sewer enterprise fund is used to account for the sewer activities. The water enterprise fund is used to account for the water activities. The golf course enterprise fund is used to account for the golf course activities. The parking activities enterprise fund is used to account for parking activities. Additionally, the following proprietary fund type is reported: The internal service fund is used to account for the financing of services provided by one department to other departments or governmental units. This fund is used to account for risk financing activities related to active employees’ and retirees’ health insurance. Fiduciary fund financial statements are reported using the flow of economic resources measurement focus and use the accrual basis of accounting. Fiduciary funds are used to account for assets held in a trustee capacity for others that cannot be used to support the governmental programs. The following fiduciary fund types are reported: The pension trust fund is used to account for the activities of the System, which accumulates resources to provide pension benefits to eligible retirees and their beneficiaries. The private-purpose trust fund is used to account for trust arrangements that exclusively benefit individuals, private organizations, or other governments. Some of these trusts have donor restrictions and trustee policies ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2006 City of Salem, Massachusetts 41 Comprehensive Annual Financial Report that do not allow the endowment portion and any unrealized appreciation to be spent. The donor restrictions and trustee policies only allow the trustees to authorize spending of the realized investment earnings. The City’s educational scholarships and housing subsidy trust funds are accounted for in this fund. The agency fund is used to account for assets held in a purely custodial capacity. The City’s agency funds consist primarily of payroll withholdings, and police and fire special detail accounts. Government-Wide and Fund Financial Statements For enterprise fund accounting, all applicable Financial Accounting Standards Board (FASB) pronouncements issued on or prior to November 30, 1989, are applied, unless those pronouncements conflict with or contradict GASB pronouncements. D. Cash and Investments Government-Wide and Fund Financial Statements Cash and cash equivalents are considered to be cash on hand, demand deposits and short-term investments with an original maturity of three months or less from the date of acquisition. Investments are carried at fair value. The fair values were determined by the closing price for those securities traded on national stock exchanges and at the average bid-and-asked quotation for those securities traded in the over-the-counter market. Mortgages are valued on the basis of future plan principal and interest payments, and are discounted at prevailing interest rates for similar instruments. The fair value of real estate investments is based upon independent appraisals. Investments that do not have an established market are reported at estimated fair values. E. Accounts Receivable Government-Wide and Fund Financial Statements The recognition of revenue related to accounts receivable reported in the government-wide financial statements and the proprietary funds and fiduciary funds financial statements are reported under the accrual basis of accounting. The recognition of revenue related to accounts receivable reported in the governmental funds financial statements are reported under the modified accrual basis of accounting. Real Estate, Personal Property Taxes, Tax Liens and Tax Foreclosures Real estate and personal property taxes are levied and based on values assessed on January 1st of every year. Assessed values are established by the Board of Assessor’s for 100% of the estimated fair market value. Taxes are due on August 1st, November 1st, February 1st and May 1st and are subject to penalties and interest if they are not paid by the respective due date. Real estate and personal property taxes levied are recorded as receivables in the fiscal year of the levy. The City has the ability to process real estate tax liens on delinquent properties. Tax liens are processed once a year following the first quarter of the following fiscal year. Liens are recorded as receivables in the fiscal year they are processed. ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2006 City of Salem, Massachusetts 42 Comprehensive Annual Financial Report Real estate receivables which have been secured via the tax lien process are considered 100% collectible. Accordingly, an allowance for uncollectibles is not reported. Personal property taxes cannot be secured through the lien process. The allowance for uncollectibles is estimated based on historical trends and specific account analysis. Motor Vehicle and Other Excise Taxes Motor vehicle excise taxes are assessed annually for each vehicle registered and are recorded as receivables in the fiscal year of the levy. The Commonwealth is responsible for reporting the number of vehicles registered and the fair values of those vehicles. The tax calculation is the fair value of the vehicle multiplied by $25 per $1,000 of value. Boat excise taxes are assessed annually for each boat registered and are recorded as receivables in the fiscal year of the levy. The Commonwealth is responsible for reporting the number of boats registered and the fair value of those boats. The tax calculation is the fair value of the boat multiplied by $10 per $1,000 of value. The allowance for uncollectibles is estimated based on historical trends and specific account analysis. User Fees Water and Sewer user fees are levied based on individual meter readings and are subject to penalties and interest if they are not paid by the respective due date. Unbilled user fees are estimated at year-end and are recorded as revenue in the current period. The City abides by a strict policy for unpaid fees resulting in the discontinuation of service also known as a “shut off” policy. The water department provides strict guidelines as to the process of discontinuation of service Since the receivables are secured via a shut off process, these accounts are considered 100% collectible and therefore do not report an allowance for uncollectibles. Departmental and Other Departmental and other receivables consist primarily of grant proceeds and fire detail fees and investment funds of the retirement system received after year end that are recorded as receivables in the fiscal year accrued. The allowance of uncollectibles is estimated based on historical trends and specific account analysis. Intergovernmental Various federal and state grants for operating and capital purposes are applied for and received annually. For non-expenditure driven grants, receivables are recorded as soon as all eligibility requirements imposed by the provider have been met. For expenditure driven grants, receivables are recorded when the qualifying expenditures are incurred and all other grant requirements are met. These receivables are considered 100% collectible and therefore do not report an allowance for uncollectibles. Loans Loan receivables are comprised of funds advanced to small businesses and developers under various Urban Development Action Grants (UDAG) and Community Development Block Grants (CDBG). The City loans funds to owners of commercial and residential properties for the purpose of rehabilitating these properties. The City receives funding for these loans from the U.S Department of Housing and Urban Development (HUD) under Community Development Block Grant (CDBG) programs for the City. These loans are repaid to the City under ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2006 City of Salem, Massachusetts 43 Comprehensive Annual Financial Report various terms and conditions stipulated by each loan agreement. The loan repayments may be used by the City for any eligible activity relevant to the community development program. F. Inventories Government-Wide and Fund Financial Statements Inventories are recorded as expenditures at the time of purchase. Inventories are not material in total to the government-wide and fund financial statements, and therefore are not reported. G. Capital Assets Government-Wide and Proprietary Fund Financial Statements Capital assets, which include land, land improvements, buildings and improvements, machinery and equipment, and infrastructure roads, water mains, sewer mains, and similar items), are reported in the applicable governmental or business-type activity column of the government-wide financial statements, and the proprietary fund financial statements. Capital assets are recorded at historical cost, or at estimated historical cost, if actual historical cost is not available. Donated capital assets are recorded at the estimated fair market value at the date of donation. Except for the capital assets of the governmental activities column in the government-wide financial statements, construction period interest is capitalized on constructed capital assets. All purchases and construction costs in excess of $10,000 are capitalized at the date of acquisition or construction, respectively, with expected useful lives of greater than one year. Capital assets (excluding land and construction in progress) are depreciated on a straight-line basis. The estimated useful lives of capital assets are as follows: Estimated Useful Life (in years) Land improvements…………………………… 20-30 Buildings and improvements…………….…… 40 5-10 5-15 Infrastructure…………………………………… 15-40 Capital Asset Type The cost of normal maintenance and repairs that do not add to the value of the assets or materially extend asset lives are not capitalized and are treated as expenses when incurred. Improvements are capitalized. Governmental Fund Financial Statements Capital asset costs are recorded as expenditures in the acquiring fund in the fiscal year of the purchase. H. Interfund Receivables and Payables During the course of its operations, transactions occur between and within individual funds that may result in amounts owed between funds. ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2006 City of Salem, Massachusetts 44 Comprehensive Annual Financial Report Government-Wide Financial Statements Transactions of a buyer/seller nature between and within governmental funds and internal service funds are eliminated from the governmental activities in the statement of net assets. Any residual balances outstanding between the governmental activities and business-type activities are reported in the statement of net assets as “internal balances”. Fund Financial Statements Transactions of a buyer/seller nature between and within funds are not eliminated from the individual fund statements. Receivables and payables resulting from these transactions are classified as “Due from other funds” or “Due to other funds” on the balance sheet. I. Interfund Transfers During the course of its operations, resources are permanently reallocated between and within funds. These transactions are reported as transfers in and transfers out. Government-Wide Financial Statements Transfers between and within governmental funds and internal service funds are eliminated from the governmental activities in the statement of net assets. Any residual balances outstanding between the governmental activities and business-type activities are reported in the statement of activities as “Transfers, net”. Fund Financial Statements Transfers between and within funds are not eliminated from the individual fund statements and are reported as transfers in and transfers out. J. Deferred Revenue Deferred revenue at the governmental fund financial statement level represents billed receivables that do not meet the available criterion in accordance with the current financial resources measurement focus and the modified accrual basis of accounting. Deferred revenue is recognized as revenue in the conversion to the government-wide (full accrual) financial statements. K. Net Assets and Fund Equity Government-Wide Financial Statements (Net Assets) Net assets are reported as restricted when amounts that are not available for appropriation or are legally restricted by outside parties for a specific future use. Net assets have been “restricted for” the following: “Loans” represents community development outstanding loans receivable balances. “Permanent funds - expendable” represents the amount of realized and unrealized investment earnings of donor restricted trusts. The donor restrictions and trustee policies only allow the trustees to approve spending o the realized investment earnings that support governmental programs. ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2006 City of Salem, Massachusetts 45 Comprehensive Annual Financial Report “Permanent funds - nonexpendable” represents the endowment portion of donor restricted trusts that support governmental programs. “Grants and gifts” represents assets that have restrictions placed on them from outside parties. Fund Financial Statements (Fund Balances) Fund balances are reserved for amounts that are not available for appropriation or are legally restricted by outside parties for a specific future use. Designations of fund balance represent tentative management plans that are subject to change. Fund balances have been “reserved for” the following: “Encumbrances and continuing appropriations” represents amounts obligated under purchase orders, contracts and other commitments for expenditures that are being carried over to the ensuing fiscal year. “Perpetual permanent funds” represents amounts held in trust for which only investment earnings may be expended. L. Long-term debt Government-Wide and Proprietary Fund Financial Statements Long-term debt is reported as liabilities in the government-wide and proprietary fund statement of net assets. Material bond premiums and discounts are deferred and amortized over the life of the bonds using the effective interest method. Governmental Fund Financial Statements The face amount of governmental funds long-term debt is reported as other financing sources. Bond premiums and discounts, as well as issuance costs, are recognized in the current period. Bond premiums are reported as other financing sources and bond discounts are reported as other financing uses. Issuance costs, whether or not withheld from the actual bond proceeds received, are reported as general government expenditures. M. Investment Income Excluding the permanent funds, investment income derived from major and nonmajor governmental funds is legally assigned to the general fund unless otherwise directed by Massachusetts General Law (MGL). Investment income of the enterprise funds is voluntarily assigned to the general fund. N. Compensated Absences Employees are granted vacation and sick leave in varying amounts based on collective bargaining agreements, state laws and executive policies. Compensated absence liabilities related to both governmental and business- type activities are normally paid from the funds reporting payroll and related expenditures. Government-Wide and Proprietary Fund Financial Statements Vested or accumulated vacation and sick leave are reported as liabilities and expensed as incurred. ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2006 City of Salem, Massachusetts 46 Comprehensive Annual Financial Report Governmental Fund Financial Statements Vested or accumulated vacation and sick leave, which will be liquidated with expendable available financial resources, are reported as expenditures and fund liabilities upon maturity of the liability. O. Post Retirement Benefits Government-Wide and Fund Financial Statements In addition to providing pension benefits, health insurance coverage is provided for retired employees and their survivors in accordance with MGL, Chapter 32, on a pay-as-you-go basis. The cost of providing health insurance is recognized by recording its share of insurance premiums in the general fund in the fiscal year paid. For the fiscal year ended June 30, 2006, this expenditure totaled approximately $2,183,000. There were approximately 595 participants eligible to receive benefits at June 30, 2006. The Commonwealth of Massachusetts administers a health insurance plan for all retired teachers of the Commonwealth. The cost of providing that benefit is assessed to each community annually. For the fiscal year ending June 30, 2006 this expense/expenditure amounted to approximately $6,376,000. The number of participants covered is not provided by the Commonwealth. P. Fund Deficits and Appropriation Deficits Individual fund deficits exist at June 30, 2006 in the School Capital Projects Fund and the School Lunch, Police Station and Salem Ferry nonmajor governmental funds. These deficits will be funded by grants, departmental revenues, long-term borrowing and available fund balance. Massachusetts General Laws require that any operating deficit within the health insurance internal service fund be funded by a general fund transfer. In addition any deficit created by recording the incurred but not reported liability must be funded through general fund contributions or other available funds beginning in fiscal year 2006. Actual expenditures exceeded appropriations for snow and ice removal. These over-expenditures will be funded through available funds during fiscal year 2007. Q. Use of Estimates Government-Wide and Fund Financial Statements The preparation of basic financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure for contingent assets and liabilities at the date of the basic financial statements and the reported amounts of the revenues and expenditures/expenses during the fiscal year. Actual results could vary from estimates that were used. ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2006 City of Salem, Massachusetts 47 Comprehensive Annual Financial Report R. Total Column Government-Wide Financial Statements The total column presented on the government-wide financial statements represents consolidated financial information. Fund Financial Statements The total column on the fund financial statements is presented only to facilitate financial analysis. Data in this column is not the equivalent of consolidated financial information. NOTE 2 – CASH AND INVESTMENTS A cash and investment pool is maintained that is available for use by all funds. Each fund type's portion of this pool is displayed on the balance sheet as "Cash and cash equivalents". The deposits and investments of the trust funds are held separately from those of other funds. Statutes authorize the investment in obligations of the U.S. Treasury, agencies, and instrumentalities, certificates of deposit, repurchase agreements, money market accounts, bank deposits and the State Treasurer's Investment Pool (the Pool). The Treasurer and Trust Fund Commission may also invest trust funds in securities, other than mortgages or collateral loans, which are legal for the investment of funds of savings banks under the laws of the Commonwealth; provided, that not more than fifteen per cent of any trust fund may be invested in bank stocks and insurance company stocks, and not more than one and one-half per cent of any trust fund can invested in the stock of any one bank or insurance company. The System also has expanded investment powers which are governed by Chapter 32 of the general laws of the Commonwealth and by the regulations issued by the Public Employee Retirement Administration Commission (PERAC). The existing law provides that Systems will invest in securities other than mortgages or collateral loans, which are legal for the investment of funds of savings banks under the laws of the Commonwealth. The Pool meets the criteria of an external investment pool. The Pool is administered by the Massachusetts Municipal Depository Trust (MMDT), which was established by the Treasurer of the Commonwealth who serves as Trustee. The fair value of the position in the Pool is the same as the value of the Pool shares. Custodial Credit Risk – Deposits In the case of deposits, this is the risk that in the event of a bank failure, the City’s deposits may not be returned to it. The City does not have a deposit policy for custodial credit risk. At fiscal year-end, the carrying amount of deposits totaled $14,069,668 and the bank balance totaled $15,868,575. Of the bank balance, $416,692 was covered by Federal Depository Insurance, $69,826 was covered by the Depositors Insurance Fund, and $15,382,057 was exposed to custodial credit risk because it was uninsured and uncollateralized. The System does not have a deposit policy for custodial credit risk. At fiscal year-end, the carrying amount of deposits totaled $2,586,762 and the bank balance totaled $2,643,300. The entire bank balance was covered by Federal Depository Insurance. ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2006 City of Salem, Massachusetts 48 Comprehensive Annual Financial Report Investments As of June 30, 2006, the City had the following investments: Fair Value Under 1 Year 1-5 Years 6-10 Years Investment Type Debt Securities: Federal Farm Credit 95,625 $ - $ 95,625 $ - Corporate 1,381,747 101,201 977,256 303,290 Repurchase Agreements…………………… 2,729,395 2,729,395 - - Total Debt 4,206,767 $ 2,830,596 $ 1,072,881 $ 303,290 Other Investments: Equity 3,303,207 Equity Mutual 377,889 Real Estate Investment Trusts…………… 245,588 32,182 Total 8,165,633 Maturity As of December 31, 2005, the System had the following investments: Fair Value Under 1 Year 1-5 Years 6-10 Years Over 10 Years Investment Type Debt Securities: U.S. Treasury 1,214,107 $ 532,949 $ - $ 681,158 $ - Corporate 7,886,503 493,373 2,080,128 293,186 5,019,816 Federal Home Loan Mortgages…………… 677,179 - 305,685 - 371,494 Federal National Mortgage Association…… 669,168 - - - 669,168 Repurchase Agreements…………………… 4,188,301 4,188,301 - - - Total Debt 14,635,258 $ 5,214,623 $ 2,385,813 $ 974,344 $ 6,060,478 Other Investments: Equity 11,334,087 Equity Mutual 44,116,819 Alternative Investment Mutual 3,274,408 Real Estate Mutual Funds………………… 6,257,311 Total 79,617,883 Maturity Custodial Credit Risk – Investments For an investment, this is the risk that, in the event of a failure by the counterparty, the City will not be able to recover the value of its investments or collateral security that are in the possession of an outside party. Of the ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2006 City of Salem, Massachusetts 49 Comprehensive Annual Financial Report City’s investments of $95,625 in Federal Farm Credit Bank securities, $1,381,747 in corporate bonds and $3,681,096 in equity securities are exposed to custodial credit risk because the related securities are uninsured, unregistered and are held by the counterparty. The investments in MMDT is not exposed to custodial credit risk because the existence is not evidenced by securities that exist in physical or book entry form. The $2,729,395 repurchase agreement is invested in collateralized Federal Home Loan Mortgage Corporation government backed securities. The City does not have an investment policy related to custodial credit risk. The System’s investments are not subject to custodial credit risk as all of the securities are insured or registered, and held by its agents in the name of the Salem Retirement System. Interest Rate Risk Neither the City nor the System have formal investment policies limiting investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. Credit Risk The City has not adopted a formal policy related to Credit Risk. Moody’s Investors Service rated $295,615 of corporate bonds AAA, $197,548 AA, and $888,584 A. The federal farm credit bank investment of $95,625 and $32,182 of MMDT investments are rated AA. The repurchase agreements and equity mutual fund investments are unrated The System has not adopted a formal policy related to Credit Risk. Moody’s Investors Service rated $2,549,962 of corporate bonds AAA, $1,598,654 AA, $2,333,029 A, $1,276,379 BAA, $91,000 BA and 706,649 were unrated. The Federal Home Loan investments of $677,179 are rated AAA. The repurchase agreement, equity mutual fund securities, alternate investment mutual funds and real estate mutual fund investments are unrated. Concentration of Credit Risk The City places no limit on the amount the government may invest in any one issuer. More than 5 percent of the City’s investments are in the following securities: Percentage of Issuer Federal Home Loan Mortgage Corporation………………… 33% Total Investments The retirement system places no limit on the amount the government may invest in any one issuer. More than 5 percent of the System’s investments are in the following securities: Percentage of Issuer Freedom Capital Equity Style 12% Freedom Large Capital Value 10% Freedom Core Plus Fixed Income 13% Freedom Large Capital Growth 9% Invesco Equity Real Estate 7% TBC International Core 11% Total Investments ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2006 City of Salem, Massachusetts 50 Comprehensive Annual Financial Report NOTE 3 – RECEIVABLES At June 30, 2006, receivables for the individual major governmental funds, non-major governmental funds and internal service funds in the aggregate, including the applicable allowances for uncollectible accounts, are as follows: Allowance Gross for Net Amount Uncollectibles Amount Receivables: Real estate and personal property $ 703,725 $ - $ 703,725 Tax 880,994 - 880,994 Motor vehicle and other excise 872,902 (244,253) 628,649 Departmental and 114,118 - 114,118 Intergovernmental…………………………………………… 49,943,424 - 49,943,424 1,002,486 - 1,002,486 $ 53,517,649 $ (244,253) $ 53,273,396 At June 30, 2006, receivables for the water and sewer enterprise funds consist of the following: Allowance Gross for Net Amount Uncollectibles Amount Receivables: Water user $ 852,417 $ - $ 852,417 Sewer user 1,429,427 - 1,429,427 $ 2,281,844 $ - $ 2,281,844 Governmental funds report deferred revenue in connection with receivables for revenues that are not considered to be available to liquidate liabilities of the current period. At the end of the current fiscal year, the various components of deferred revenue reported in the governmental funds were as follows: Other General Governmental Fund Funds Total Receivable type: Real estate and personal property $ 281,504 $ - $ 281,504 Tax 880,994 - 880,994 Motor vehicle and other 628,649 - 628,649 Intergovernmental……………………………………………… 43,667,936 1,034,166 44,702,102 - 1,002,486 1,002,486 $ 45,459,083 $ 2,036,652 $ 47,495,735 ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2006 City of Salem, Massachusetts 51 Comprehensive Annual Financial Report NOTE 4 – CAPITAL ASSETS As allowed by GASB Statement #34, in fiscal year 2006, the City retroactively reported general infrastructure assets acquired prior to the initial year of implementation of GASB Statement #34. Accordingly, net assets of governmental activities as of June 30, 2005, which were previously reported as $90,022,004, have been restated to $118,808,144. Capital asset activity for the fiscal year ended June 30, 2006, was as follows: Beginning Ending Balance Increases Decreases Balance Governmental Activities: Capital assets not being depreciated: $ 4,684,753 $ - $ - $ 4,684,753 Construction in 2,047,584 2,937,819 (1,670,324) 3,315,079 Total capital assets not being depreciated………… 6,732,337 2,937,819 (1,670,324) 7,999,832 Capital assets being depreciated: Land improvements……………………………………… 2,401,862 - - 2,401,862 Buildings and improvements…………………………… 108,288,058 1,542,149 - 109,830,207 3,891,272 3,354,422 (208,343) 7,037,351 Infrastructure……………………………………………… 50,255,463 659,962 - 50,915,425 6,474,013 757,624 (1,225,512) 6,006,125 Total capital assets being depreciated…………… 171,310,668 6,314,157 (1,433,855) 176,190,970 Less accumulated depreciation for: Land improvements……………………………………… (1,185,436) (89,583) - (1,275,019) Buildings and improvements…………………………… (26,700,876) (2,862,958) - (29,563,834) (2,566,162) (388,780) 208,343 (2,746,599) Infrastructure……………………………………………… (20,819,559) (1,356,690) - (22,176,249) (5,116,194) (370,882) 1,225,512 (4,261,564) Total accumulated depreciation…………………… (56,388,227) (5,068,893) 1,433,855 (60,023,265) Total capital assets being depreciated, 114,922,441 1,245,264 - 116,167,705 Total governmental activities capital assets………………… $ 121,654,778 $ 4,183,083 $ (1,670,324) $ 124,167,537 ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2006 City of Salem, Massachusetts 52 Comprehensive Annual Financial Report Beginning Ending Balance Increases Decreases Balance Water Activities: Capital assets not being depreciated: $ 10,589 $ - $ - $ 10,589 Construction in 876,413 - (876,413) - Total capital assets not being depreciated………… 887,002 - (876,413) 10,589 Capital assets being depreciated: Land improvements……………………………………… 114,550 - - 114,550 Infrastructure……………………………………………… 9,081,083 2,036,041 - 11,117,124 Total capital assets being depreciated…………… 9,195,633 2,036,041 - 11,231,674 Less accumulated depreciation for: Land improvements……………………………………… (20,047) (5,728) - (25,775) Infrastructure……………………………………………… (5,301,483) (145,738) - (5,447,221) Total accumulated depreciation…………………… (5,321,530) (151,466) - (5,472,996) Total capital assets being depreciated, 3,874,103 1,884,575 - 5,758,678 Total water activities capital $ 4,761,105 $ 1,884,575 $ (876,413) $ 5,769,267 Beginning Ending Balance Increases Decreases Balance Sewer Activities: Capital assets not being depreciated: $ 99,552 $ - $ - $ 99,552 Capital assets being depreciated: Buildings and improvements…………………………… 5,425 - - 5,425 125,486 - - 125,486 Infrastructure……………………………………………… 1,444,815 - - 1,444,815 Total capital assets being depreciated…………… 1,575,726 - - 1,575,726 Less accumulated depreciation for: Buildings and improvements…………………………… (4,815) (136) - (4,951) (125,486) - - (125,486) Infrastructure……………………………………………… (1,012,380) (18,286) - (1,030,666) Total accumulated depreciation…………………… (1,142,681) (18,422) - (1,161,103) Total capital assets being depreciated, 433,045 (18,422) - 414,623 Total sewer activities capital $ 532,597 $ (18,422) $ - $ 514,175 ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2006 City of Salem, Massachusetts 53 Comprehensive Annual Financial Report Beginning Ending Balance Increases Decreases Balance Golf Course Activities: Capital assets not being depreciated: $ 118,067 $ - $ - $ 118,067 Capital assets being depreciated: Land improvements……………………………………… 312,852 - - 312,852 Buildings and improvements…………………………… 453,988 - - 453,988 274,409 56,000 - 330,409 Total capital assets being depreciated…………… 1,041,249 56,000 - 1,097,249 Less accumulated depreciation for: Land improvements……………………………………… (283,397) (10,829) - (294,226) Buildings and improvements…………………………… (64,739) (11,350) - (76,089) (216,007) (20,707) - (236,714) Total accumulated depreciation…………………… (564,143) (42,886) - (607,029) Total capital assets being depreciated, 477,106 13,114 - 490,220 Total golf course activities capital assets…………………… $ 595,173 $ 13,114 $ - $ 608,287 Beginning Ending Balance Increases Decreases Balance Parking Activities: Capital assets not being depreciated: $ 48,214 $ - $ - $ 48,214 Construction in 1,036,532 - - 1,036,532 Total capital assets not being depreciated………… 1,084,746 - - 1,084,746 Capital assets being depreciated: Land improvements……………………………………… 292,700 - - 292,700 Buildings and improvements…………………………… 7,625,100 - - 7,625,100 5,100 - - 5,100 10,668 - (10,668) - Total capital assets being depreciated…………… 7,933,568 - (10,668) 7,922,900 Less accumulated depreciation for: Land improvements……………………………………… (20,653) (33,488) - (54,141) Buildings and improvements…………………………… (3,166,007) (192,948) - (3,358,955) (3,315) (510) - (3,825) (10,668) - 10,668 - Total accumulated depreciation…………………… (3,200,643) (226,946) 10,668 (3,416,921) Total capital assets being depreciated, 4,732,925 (226,946) - 4,505,979 Total parking activities capital $ 5,817,671 $ (226,946) $ - $ 5,590,725 ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2006 City of Salem, Massachusetts 54 Comprehensive Annual Financial Report Depreciation expense was charged to functions/programs of the primary government as follows: Governmental Activities: General $ 215,722 Public 395,248 2,731,571 Public 1,479,243 Health and human 57,619 Culture and 189,489 Total depreciation expense - governmental activities……………………………… $ 5,068,893 Business-Type Activities: $ 151,466 18,422 Golf 42,886 226,946 Total depreciation expense - business-type activities……………………………… $ 439,720 NOTE 5 – INTERFUND TRANSFERS AND BALANCES Interfund transfers for the fiscal year ended June 30, 2006, are summarized as follows: Golf Course General Stabilization Enterprise Transfers Out: Fund Fund Fund Total General - $ 246,663 $ 362,110 $ 608,773 Stabilization 1,000,000 - - 1,000,000 Nonmajor Governmental Funds……… 1,082,910 - - 1,082,910 Parking Enterprise Fund……………… 929,473 - - 929,473 Golf Course Enterprise Fund………… 555,147 - - 555,147 Sewer Enterprise 753,162 - - 753,162 Water Enterprise 753,162 - - 753,162 $ 5,073,854 $ 246,663 $ 362,110 $ 5,682,627 Transfer from general fund to stabilization fund and golf course enterprise fund to reimburse for amounts raised by taxation. Transfer from stabilization fund to general fund to support general operating budget. Transfer from nonmajor funds to general fund to support general operating budget. Transfer from parking enterprise fund to general fund to support general operating budget. Transfer from golf course enterprise fund to general fund to support general operating budget. Transfer from sewer enterprise fund to general fund to reimburse for indirect costs. Transfer from water enterprise fund to general fund to reimburse for indirect costs. Transfers In: ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2006 City of Salem, Massachusetts 55 Comprehensive Annual Financial Report The City’s interfund balances at June 30, 2006 consisted of $143,490 due from the general fund to the internal service fund for transfers not yet recorded and $514,049 in balances within the nonmajor governmental funds which represent interfund borrowings for cash flow purposes. NOTE 6 – CAPITAL & OPERATING LEASES The City has entered into lease agreements as lessee for financing the acquisition of a fire truck, police cruiser, a snow plow, a school bus, and computer hardware and software. These lease agreements qualify as capital leases for accounting purposes and therefore, have been recorded at the present value of their future minimum lease payments as of the inception date. The assets acquired through capital leases are as follows: Governmental Activities Asset: Machinery and 2,236,248 196,648 Less: accumulated depreciation………………………… (318,643) 2,114,253 The future minimum lease obligations and the net present value of these minimum lease payments as of June 30, 2006, were as follows: Fiscal Years Governmental Ending June 30 Activities 720,364 242,968 57,264 57,264 57,264 57,264 57,264 57,264 Total minimum lease payments……………………… 1,306,916 Less: amounts representing interest………………… (134,265) Present value of minimum lease payments………… $ 1,172,651 The City leases office space for the City Hall Annex under an operating lease that expires on February 28, 2011. The cost of the lease for the fiscal year ended June 30, 2006, totaled $360,000, and is reported as a general government expenditure in the general fund. ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2006 City of Salem, Massachusetts 56 Comprehensive Annual Financial Report The future minimum lease payments for the City’s operating lease are as follows: Fiscal Years Governmental Ending June 30 Activities 360,000 360,000 360,000 360,000 240,000 $ 1,680,000 NOTE 7 – SHORT-TERM FINANCING Short-term debt may be authorized and issued to fund the following: • Current operating costs prior to the collection of revenues through issuance of revenue or tax anticipation notes (RANS or TANS). • Capital project costs and other approved expenditures incurred prior to obtaining permanent financing through issuance of bond anticipation notes (BANS) or grant anticipation notes (GANS). Short-term loans are general obligations and carry maturity dates that are limited by statute. Interest expenditures and expenses for short-term borrowings are accounted for in the general fund and enterprise funds, respectively. ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2006 City of Salem, Massachusetts 57 Comprehensive Annual Financial Report Details related to the short-term debt activity for the fiscal year ended June 30, 2006, are as follows: Balance at Balance at Rate June 30, Renewed/ Retired/ June 30, Type Purpose Due Date 2005 Issued Redeemed 2006 BAN School Construction…………………… 3.5% 01/12/06 $ 7,000,000 $ - $ 7,000,000 $ - BAN School Construction…………………… 3.5% 01/12/06 4,246,418 - 4,246,418 - RAN Governmental Activities……………… 4.8% 02/02/06 - 4,500,000 4,500,000 - RAN Governmental Activities……………… 3.8% 05/02/06 - 2,500,000 2,500,000 - BAN School Construction…………………… 3.9% 04/12/06 - 4,246,418 4,246,418 - BAN School Construction…………………… 4.3% 01/11/07 - 4,000,000 - 4,000,000 GAN Equipment - Ferry 6.0% 07/21/06 - 2,325,000 - 2,325,000 BAN Equipment - Ferry 6.0% 07/21/06 - 775,000 - 775,000 BAN Police Equipment……………………… 4.3% 01/11/07 - 658,864 - 658,864 Sub-total governmental-type notes…… 11,246,418 19,005,282 22,492,836 7,758,864 BAN Water 3.5% 01/12/06 3,253,582 - 3,253,582 - BAN Water 4.3% 01/11/07 - 3,341,136 - 3,341,136 Sub-total business-type notes………… 3,253,582 3,341,136 3,253,582 3,341,136 Total notes payable…………………… $ 14,500,000 $ 22,346,418 $ 25,746,418 $ 11,100,000 Subsequent to year end, on August 30, 2006, the City borrowed Revenue Anticipation Notes to finance the timing difference of anticipated receipts, including taxes and Grant reimbursements, and budgeted expenditures. The Revenue Anticipation Notes were issued for $9,100,000 at a 3.75% rate and mature on November 1, 2006. On July 21, 2006, the City retired the $2,325,000 Grant Anticipation Note with a capital grant received from the Commonwealth and available funds. The City reissued the $775,000 BAN at 6.5% with a maturity date of July 18, 2007. ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2006 City of Salem, Massachusetts 58 Comprehensive Annual Financial Report NOTE 8 – LONG-TERM DEBT Under the provisions of Chapter 44, Section 10, Municipal Law authorizes indebtedness up to a limit of 5% of the equalized valuation. Debt issued in accordance with this section of the law is designated as being "inside the debt limit". In addition, however, debt may be authorized in excess of that limit for specific purposes. Such debt, when issued, is designated as being "outside the debt limit". Details related to the outstanding indebtedness at June 30, 2006, and the debt service requirements are as follows: Bonds and Notes Payable Schedule – Governmental Funds Interest Outstanding Outstanding Rate at June 30, at June 30, Project 2005 Issued Redeemed 2006 School Construction………………. 5.125-5.750% $ 4,575,000 $ - $ 395,000 $ 4,180,000 School Construction………………… 5.125-5.750% 1,025,000 - 95,000 930,000 HUD Section 3.41-3.70% 165,000 - 110,000 55,000 HUD Section 9.00% 315,000 - 70,000 245,000 School Construction………………. 4.50-6.75% 9,340,000 - 395,000 8,945,000 Swimming 4.50-6.75% 280,000 - 40,000 240,000 School Construction………………. 3.50-4.00% 3,220,000 - 565,000 2,655,000 School Construction………………… 3.50-4.00% 4,657,000 - 721,000 3,936,000 Police Station……………………… 3.50-4.00% 2,053,000 - 294,000 1,759,000 School Construction………………… 3.00-5.00% 16,470,000 - 630,000 15,840,000 School Construction………………. 3.00-5.00% 8,890,000 - 340,000 8,550,000 School Construction………………… 3.00-5.00% 1,375,000 - 70,000 1,305,000 School Construction………………… 2.25-4.50% 3,940,000 - 530,000 3,410,000 School Construction……………… 3.00-5.00% 1,887,447 - 97,447 1,790,000 School Construction………………… 3.00-5.00% 577,553 - 32,553 545,000 Total Governmental bonds payable…………………… $ 58,770,000 $ - $ 4,385,000 $ 54,385,000 ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2006 City of Salem, Massachusetts 59 Comprehensive Annual Financial Report Debt service requirements for principal and interest for Governmental bonds payable in future fiscal years are as follows: Fiscal Year Principal Interest Total 4,255,000 $ 2,297,438 $ 6,552,438 2008……………… 4,390,000 2,136,191 6,526,191 2009……………… 4,390,000 1,968,429 6,358,429 2010……………… 4,465,000 1,787,278 6,252,278 2011……………… 4,540,000 1,603,724 6,143,724 2012……………… 4,115,000 1,427,507 5,542,507 2013……………… 3,285,000 1,268,175 4,553,175 2014……………… 2,960,000 1,122,693 4,082,693 2015……………… 2,440,000 1,000,289 3,440,289 2016……………… 2,500,000 892,458 3,392,458 2017……………… 2,520,000 782,711 3,302,711 2018……………… 2,645,000 667,644 3,312,644 2019……………… 2,765,000 545,650 3,310,650 2020……………… 2,890,000 405,391 3,295,391 2021……………… 1,920,000 283,872 2,203,872 2022……………… 2,000,000 198,072 2,198,072 2023……………… 2,075,000 106,640 2,181,640 2024……………… 115,000 9,776 124,776 2025……………… 115,000 4,888 119,888 Totals……………$ 54,385,000 $ 18,508,826 $ 72,893,826 The Commonwealth has approved school construction assistance to the City. The assistance program, which is administered by the Massachusetts School Building Authority, provides resources for future debt service of general obligation school bonds outstanding along with direct capital grants. During fiscal year 2006, $16,560,000 of such assistance was received. Approximately $61,826,000 will be received in future fiscal years. Of this amount, approximately $48,080,000 represents reimbursement of long-term interest costs, and approximately $13,746,000 represents reimbursement of approved construction costs. Accordingly, a $48,080,000 intergovernmental receivable and corresponding deferred revenue have been reported in the governmental fund financial statements. The net change in deferred revenue has been recognized as revenue in the conversion to the government-wide financial statements. Bonds and Notes Payable Schedule – Golf Course Enterprise Fund Interest Outstanding Outstanding Rate at June 30, at June 30, Project 2005 Issued Redeemed 2006 Golf 4.50-6.75% $ 350,000 $ - $ 30,000 $ 320,000 ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2006 City of Salem, Massachusetts 60 Comprehensive Annual Financial Report Debt service requirements for principal and interest for the golf course enterprise fund bonds payable in future fiscal years are as follows: Fiscal Year Principal Interest Total 30,000 $ 14,825 $ 44,825 2008……………… 30,000 13,475 43,475 2009……………… 30,000 11,938 41,938 2010……………… 30,000 10,401 40,401 2011……………… 30,000 9,036 39,036 2012……………… 30,000 7,641 37,641 2013……………… 30,000 6,216 36,216 2014……………… 30,000 4,761 34,761 2015……………… 30,000 3,276 33,276 2016……………… 30,000 1,776 31,776 2017……………… 20,000 513 20,513 Totals……………$ 320,000 $ 83,858 $ 403,858 Bonds and Notes Payable Schedule – Parking Enterprise Fund Interest Outstanding Outstanding Rate at June 30, at June 30, Project 2005 Issued Redeemed 2006 Parking Garage Repairs………….. 3.00-5.00% $ 1,100,000 $ - $ 75,000 $ 1,025,000 Debt service requirements for principal and interest for the parking enterprise fund bonds payable in future fiscal years are as follows: Fiscal Year Principal Interest Total 75,000 $ 39,238 $ 114,238 2008……………… 75,000 36,988 111,988 2009……………… 75,000 34,738 109,738 2010……………… 75,000 32,488 107,488 2011……………… 75,000 30,238 105,238 2012……………… 75,000 27,800 102,800 2013……………… 75,000 25,250 100,250 2014……………… 75,000 21,500 96,500 2015……………… 75,000 17,750 92,750 2016……………… 75,000 14,000 89,000 2017……………… 75,000 11,000 86,000 2018……………… 75,000 8,000 83,000 2019……………… 75,000 5,000 80,000 2020……………… 50,000 2,000 52,000 Total………….. $ 1,025,000 $ 305,990 $ 1,330,990 ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2006 City of Salem, Massachusetts 61 Comprehensive Annual Financial Report The City is subject to various debt limits by statute and may issue additional general obligation debt under the normal debt limit. At June 30, 2006, the City had the following authorized and unissued debt: Purpose Amount School construction………………….. $ 19,666,031 School construction…………………… 7,850,000 Water systems improvements………… 8,658,864 School construction…………………… 10,183,000 Ferry Boat Project……………………… 2,325,000 $ 48,682,895 Changes in Long-term Liabilities During the fiscal year ended June 30, 2006, the following changes occurred in long-term liabilities: Beginning Ending Due Within Balance Additions Reductions Balance One Year Governmental Activities: Capital 723,214 $ 1,046,619 $ (597,182) $ 1,172,651 $ 661,898 Long-term bonds and notes………… 58,770,000 - (4,385,000) 54,385,000 4,255,000 Compensated absences……………… 7,145,000 1,015,491 (2,058,491) 6,102,000 1,758,000 Workers' compensation……..……… 705,225 119,493 (394,626) 430,092 123,136 Total governmental activity long-term liabilities……………………$ 67,343,439 $ 2,181,603 $ (7,435,299) $ 62,089,743 $ 6,798,034 Business-Type Activities: Capital $ 20,205 $ - $ (20,205) $ - $ - Long-term bonds and notes………… 1,450,000 - (105,000) 1,345,000 105,000 Compensated absences……………… 175,000 34,000 (102,000) 107,000 34,000 Total business-type activity long-term liabilities……………………$ 1,645,205 $ 34,000 $ (227,205) $ 1,452,000 $ 139,000 Compensated absence and workers’ compensation liabilities related to both governmental and business-type activities are normally paid from the funds reporting payroll and related expenditures, namely the general fund and the sewer, water, golf and parking enterprise funds. NOTE 9 – RISK FINANCING The City is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; errors and omissions; and natural disasters for which the City carries commercial insurance. In addition, the City is self- insured for damages not covered by commercial insurance. The amount of claim settlements has not exceeded insurance coverage in any of the previous three fiscal years. ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2006 City of Salem, Massachusetts 62 Comprehensive Annual Financial Report The City is self-insured for health care insurance of its active employees and retirees. The City is also self- insured for its workers’ compensation and unemployment compensation activities which are accounted for in the funds incurring the expenditures. The self-insured health insurance activities are accounted for in the City’s internal service fund where revenues are recorded when earned and expenses are recorded when the liability is incurred. Health Insurance Health insurance claims are administered by a third party administrator and are funded on an as needed basis from the City’s internal service fund. The estimate of Incurred But Not Reported (IBNR) claims is based on 10% of the previous year’s claims. The City purchases individual stop loss insurance for claims in excess of the coverage provided by the City in the amount of $110,000 per claim. At June 30, 2006, the estimated future liability ranges from $900,000 to $987,000. This liability is the best estimate based on available information. Changes in the reported liability since July 1, 2004, are as follows: Current Year Balance at Claims and Balance at Beginning of Changes in Claims Fiscal Current Fiscal Year Estimate Payments Year-End Portion Fiscal Year 2005………. $ 800,000 $ 8,878,000 $ (8,778,000) $ 900,000 $ 900,000 Fiscal Year 2006………. 900,000 10,092,974 (10,014,974) 978,000 978,000 Workers’ Compensation Workers’ compensation claims are administered by the City and are funded on a pay-as-you-go basis from annual appropriations. The estimated future workers’ compensation liability is based on history and injury type. At June 30, 2006, the amount of the liability for workers’ compensation claims totaled $430,092. Changes in the reported liability since July 1, 2004, are as follows: Current Year Balance at Claims and Balance at Beginning of Changes in Claims Fiscal Current Fiscal Year Estimate Payments Year-End Portion Fiscal Year 2005………. $ 895,225 $ 129,331 $ (319,331) $ 705,225 $ 320,000 Fiscal Year 2006………. 705,225 119,493 (394,626) 430,092 123,136 NOTE 10 – PENSION PLAN Plan Description - The City contributes to the System, a cost-sharing multiple-employer defined benefit pension plan administered by the Salem Contributory Retirement Board. Substantially all employees are members of the System, except for public school teachers and certain administrators who are members of the Massachusetts Teachers Retirement System, to which the City does not contribute. Pension benefits and administrative expenses paid by the Teachers Retirement Board are the legal responsibility of the Commonwealth. The amount of these on-behalf payments totaled $6,376,140 for the fiscal year ended June 30, 2006, and, accordingly, are reported in the general fund as intergovernmental revenues and pension expenditures. ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2006 City of Salem, Massachusetts 63 Comprehensive Annual Financial Report The System provides retirement, disability and death benefits to plan members and beneficiaries. Chapter 32 of the MGL assigns authority to establish and amend benefit provisions of the plan. Cost-of-living adjustments granted between 1981 and 1997 and any increase in other benefits imposed by the Commonwealth’s state law during those years are borne by the Commonwealth and are deposited into the pension fund. Cost-of-living adjustments granted after 1997 must be approved by the Salem Contributory Retirement Board and are borne by the System. The System issues a publicly available unaudited financial report in accordance with guidelines established by the Commonwealth’s PERAC. That report may be obtained by contacting the System located at 20 Central Street, Salem, Massachusetts 01970. At December 31, 2005, the System’s membership consists of the following: Active 840 Inactive 162 Retirees and beneficiaries currently receiving benefits……… 619 1,621 Funding Policy - Plan members are required to contribute to the System at rates ranging from 5% to 11% of annual covered compensation. The City is required to pay into the System its share of the system-wide actuarial determined contribution that is apportioned among the employers based on active current payroll. Administrative expenses are funded through investment earnings. The current and two preceding fiscal years apportionment of the annual pension cost between the employers required the City to contribute 90% of the total. Chapter 32 of the MGL governs the contributions of plan members and the City. Annual Pension Cost - The City’s contributions to the System for the fiscal years ended June 30, 2006, 2005, 2004, 2003, 2002 and 2001 were $6,957,102, $5,918,415, $4,923,382, $5,053,036, $4,323,114 and $4,158,590, respectively, which equaled its required contribution for each fiscal year. At June 30, 2006, the City did not have a net pension obligation. The required contribution was determined as part of the January 1, 2006, actuarial valuation using the entry age normal actuarial cost method. The actuarial assumptions included an inflation rate of 4.5%, 8.25% investment rate of return and projected salary increases of 5.5% per year. The actuarial value of the System's assets was determined using the fair value of the assets. The System's unfunded actuarial accrued liability is being amortized as a level percentage of projected payroll. The remaining open amortization period at January 1, 2006 was 19 years. ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2006 City of Salem, Massachusetts 64 Comprehensive Annual Financial Report Schedule of Funding Progress Actuarial UAAL as a Actuarial Accrued Unfunded Percentage Actuarial Value of Liability (AAL) AAL Funded Covered of Covered Valuation Assets Entry Age (UAAL) Ratio Payroll Payroll Date (B-A) (A/B) 01/01/06 $ 84,796,044 $ 166,958,606 $ 82,162,562 50.8% $ 32,824,144 250.3% 01/01/05 81,801,377 156,479,479 74,678,102 52.3% 31,328,083 238.4% 01/01/04 80,659,012 142,499,185 61,840,173 56.6% 29,355,291 210.7% 01/01/03 76,438,885 137,111,559 60,672,674 55.7% 31,089,195 195.2% 01/01/01 73,727,923 117,334,727 43,606,804 62.8% 29,072,197 150.0% 01/01/99 68,563,143 111,294,953 42,731,810 61.6% 25,411,629 168.2% 01/01/97 51,236,360 82,440,774 31,204,414 62.1% 22,930,939 136.1% Funding progress is reported based on the biennial actuarial valuation performed by the System, and is being accumulated on a biennial basis. The City is responsible for approximately 90% of the unfunded liability. Noncontributory Retirement Allowance – The City pays the entire retirement allowance for certain retirees who are eligible for noncontributory benefits and are not members of the System. The general fund expenditure for fiscal year 2006 totaled approximately $173,000. NOTE 11 – MAJOR TAXPAYER The City receives a significant portion of its real estate and personal property tax revenue from one taxpayer under a Real and Personal Property Tax Appeal Settlement Agreement (the Agreement). The Agreement was entered into in July 1997 and covers fiscal years 1997 through 2007. The City and the taxpayer have agreed on a real and personal property tax assessment amount for fiscal years 1997 through 2004. For fiscal years 2005 through 2007, the City and the taxpayer have agreed that a portion of the property would be assessed at fair market value as calculated by the City and that, in the absence of an agreement by the parties, the remaining property will be assessed at fair market value of the existing facilities as determined in binding arbitration, resulting in tax revenue not to exceed $4.5 million in each fiscal year. The parties further agreed if additional facilities are constructed during this period, the total assessment would be based on the fair market value of the new facilities and existing facilities, resulting in a tax revenue not to exceed $4.5 million plus 50% of any such taxes in excess of $4.5 million resulting from the aggregate assessed valuation of any new facilities. For the fiscal year ended June 30, 2006, the City received approximately 8% ($4.5 million) of its total real estate and personal property tax revenue from this taxpayer. NOTE 12 – COMMITMENTS The City is in the process of completing school construction projects. Consequently, the City has entered into, or is planning to enter into, contracts totaling approximately $30,550,000 to complete the projects. The City is in the process of completing improvements to its water system. Consequently, the City has entered into, or is planning to enter into, contracts totaling approximately $8,746,000 to complete the improvements. ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2006 City of Salem, Massachusetts 65 Comprehensive Annual Financial Report NOTE 13 – CONTINGENCIES The City participates in a number of federal award programs. Although the grant programs have been audited in accordance with the provisions of the Single Audit Act Amendments of 1996 through June 30, 2006, these programs are still subject to financial and compliance audits. The amount, if any, of expenditures which may be disallowed by the granting agencies cannot be determined at this time, although it is expected such amounts, if any, to be immaterial. Various legal actions and claims are pending. Litigation is subject to many uncertainties, and the outcome of individual litigated matters is not always predictable. Although the amount of liability, if any, at June 30, 2006, cannot be ascertained, management believes any resulting liability should not materially affect the financial position at June 30, 2006. NOTE 14 – IMPLEMENTATION OF NEW GASB PRONOUNCEMENTS During fiscal year 2006, the following GASB pronouncements were implemented: The GASB issued Statement #42, Accounting and Financial Reporting for Impairment of Capital Assets and for Insurance Recoveries, which was required to be implemented in Fiscal 2006. This pronouncement did not impact the basic financial statements. The GASB issued Statement # 46, Net Assets Restricted by Legislation an amendment of GASB Statement No. 34. This Statement clarifies that a legally enforceable enabling legislation restriction is one that a party external to a government—such as citizens, public interest groups, or the judiciary—can compel a government to honor. It requires governments to disclose the portion of total net assets that is restricted by enabling legislation. This statement did not impact the basic financial statements. The GASB issued Statement # 47, Accounting for Termination Benefits. The Statement provides accounting and reporting guidance for state and local governments that offer benefits such as early retirement incentives or severance to employees that are involuntarily terminated. The Statement requires that similar forms of termination benefits be accounted for in the same manner and is intended to enhance both the consistency of reporting for termination benefits and the comparability of financial statements. This statement did not impact the basic financial statements. The GASB issued Statement # 48, Sales and Pledges of Receivables and Future Revenues and Intra-Entity Transfers of Assets and Future Revenues which is required to be implemented in Fiscal 2008. Management has elected to implement this GASB early. The basic financial statements were not impacted by this GASB. Other Future GASB Pronouncements: The GASB issued Statement #43, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, which is required to be implemented in Fiscal 2007. Since there is no legally established separate trust for the postemployment benefit plan this pronouncement will not impact the basic financial statements. The GASB issued Statement #45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions, which is required to be implemented in Fiscal 2008. Management believes this pronouncement will require additional disclosure and impact the basic financial statements. ---PAGE BREAK--- City of Salem, Massachusetts 66 Comprehensive Annual Financial Report Required Supplementary Information Required Supplementary Information ---PAGE BREAK--- GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FISCAL YEAR ENDED JUNE 30, 2006 Amounts Current Year Actual Amounts Carried forward Initial Original Final Budgetary Carried Forward Variance From Prior Year Budget Budget Budget Amounts To Next Year To Final Budget REVENUES: Real estate and personal property taxes, net of tax $ - $ 59,266,632 $ 59,266,632 $ 58,795,886 $ 58,523,805 $ - $ (272,081) Tax - - - - 1,095,631 - 1,095,631 Motor vehicle and other excise taxes…………… - 3,650,000 3,650,000 3,650,000 3,577,544 - (72,456) Hotel/motel - 295,500 295,500 295,500 263,962 - (31,538) Charges for services……………………………… - 1,300,000 1,300,000 1,300,000 1,198,183 - (101,817) Penalties and interest on - 310,000 310,000 310,000 350,651 - 40,651 Payments in lieu of - 1,073,500 1,073,500 1,073,500 1,088,754 - 15,254 Licenses and - 500,000 500,000 500,000 497,479 - (2,521) Fines and forfeitures……………………………… - 1,000,000 1,000,000 1,000,000 1,084,428 - 84,428 Intergovernmental………………………………… - 26,730,453 26,730,453 26,730,453 26,762,477 - 32,024 Departmental and - 1,910,000 1,910,000 1,910,000 1,763,900 - (146,100) Investment - 155,000 155,000 155,000 159,031 - 4,031 TOTAL REVENUES…………………… - 96,191,085 96,191,085 95,720,339 96,365,845 - 645,506 EXPENDITURES: Current: General government City Council Personnel………………………………… - 119,700 119,700 119,700 119,303 - 397 Non - Personnel………………………… - 22,850 22,850 22,850 22,424 - 426 - 142,550 142,550 142,550 141,727 - 823 Mayor Personnel………………………………… - 228,464 228,464 228,464 228,464 - - Non - Personnel………………………… 32,000 77,135 109,135 109,135 88,035 21,100 - 32,000 305,599 337,599 337,599 316,499 21,100 - Finance/Auditing Personnel………………………………… - 211,848 211,848 211,848 202,050 9,700 98 Non - Personnel………………………… 3,100 3,955 7,055 7,055 4,017 580 2,458 3,100 215,803 218,903 218,903 206,067 10,280 2,556 Purchasing Personnel………………………………… - 132,856 132,856 122,856 121,804 - 1,052 Non - Personnel………………………… - 17,600 17,600 17,600 15,329 - 2,271 Fixed - 61,504 61,504 61,504 52,255 - 9,249 - 211,960 211,960 201,960 189,388 - 12,572 Assessors Personnel………………………………… - 232,688 232,688 222,028 219,283 - 2,745 Non - Personnel………………………… - 34,000 34,000 34,000 17,809 12,300 3,891 - 266,688 266,688 256,028 237,092 12,300 6,636 Treasurer Personnel………………………………… - 140,663 140,663 140,663 140,588 - 75 Non - Personnel………………………… - 91,550 91,550 91,550 84,614 - 6,936 - 232,213 232,213 232,213 225,202 - 7,011 Collector Personnel………………………………… - 145,694 145,694 145,694 141,840 - 3,854 Non - Personnel………………………… - 23,025 23,025 23,025 15,430 7,300 295 - 168,719 168,719 168,719 157,270 7,300 4,149 Solicitor Personnel………………………………… - 115,340 115,340 93,340 93,340 - - Non - Personnel………………………… - 113,200 113,200 135,200 135,200 - - - 228,540 228,540 228,540 228,540 - - (continued) Budgeted Amounts City of Salem, Massachusetts 67 Comprehensive Annual Financial Report ---PAGE BREAK--- GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FISCAL YEAR ENDED JUNE 30, 2006 Amounts Current Year Actual Amounts Carried forward Initial Original Final Budgetary Carried Forward Variance From Prior Year Budget Budget Budget Amounts To Next Year To Final Budget Budgeted Amounts Human Resources Personnel………………………………… - 184,037 184,037 184,037 183,968 - 69 Non - Personnel………………………… - 27,687 27,687 27,687 23,455 - 4,232 - 211,724 211,724 211,724 207,423 - 4,301 Data Processing Personnel………………………………… - 145,291 145,291 145,291 145,281 - 10 Non - Personnel………………………… 985 9,116 10,101 10,101 9,606 - 495 Fixed - 238,029 238,029 238,029 237,655 - 374 - 57,000 57,000 57,000 57,000 - - 985 449,436 450,421 450,421 449,542 - 879 City Clerk Record Maintenance Personnel………………………………… - 149,094 149,094 149,094 149,087 - 7 Non - Personnel………………………… - 10,200 10,200 10,200 9,832 - 368 - 159,294 159,294 159,294 158,919 - 375 Elections & Registrations Personnel………………………………… - 161,129 161,129 162,165 161,551 - 614 Non - Personnel………………………… - 51,850 51,850 51,850 51,347 - 503 - 212,979 212,979 214,015 212,898 - 1,117 Licensing Personnel………………………………… - 46,039 46,039 46,039 46,037 - 2 Non - Personnel………………………… - 1,539 1,539 1,539 1,060 - 479 - 47,578 47,578 47,578 47,097 - 481 Conservation Commission Personnel………………………………… - 21,669 21,669 21,669 14,475 - 7,194 Non - Personnel………………………… - 425 425 425 165 - 260 - 22,094 22,094 22,094 14,640 - 7,454 Subdivision, Planning, and Zoning Board Personnel………………………………… - 21,669 21,669 21,669 21,509 - 160 Non - Personnel………………………… - 3,500 3,500 3,500 1,231 - 2,269 - 25,169 25,169 25,169 22,740 - 2,429 Board of Appeals Personnel………………………………… - 3,000 3,000 3,000 3,000 - - Non - Personnel………………………… - 975 975 975 598 - 377 - 3,975 3,975 3,975 3,598 - 377 Planning Department Personnel………………………………… - 177,684 177,684 170,162 151,455 - 18,707 Non - Personnel………………………… - 7,275 7,275 7,275 4,051 - 3,224 - 184,959 184,959 177,437 155,506 - 21,931 Public Property/Building Maintenance Personnel………………………………… - 107,329 107,329 87,329 85,707 - 1,622 Non - Personnel………………………… 11,906 117,160 129,066 183,320 176,392 4,739 2,189 Fixed - 533,500 533,500 508,500 495,918 11,900 682 11,906 757,989 769,895 779,149 758,017 16,639 4,493 Market and Tourism………………………… - 8,767 8,767 8,767 7,248 - 1,519 Total General Government…………………… 47,991 3,856,036 3,904,027 3,886,135 3,739,413 67,619 79,103 (continued) City of Salem, Massachusetts 68 Comprehensive Annual Financial Report ---PAGE BREAK--- GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FISCAL YEAR ENDED JUNE 30, 2006 Amounts Current Year Actual Amounts Carried forward Initial Original Final Budgetary Carried Forward Variance From Prior Year Budget Budget Budget Amounts To Next Year To Final Budget Budgeted Amounts Public safety Police Personnel………………………………… - 6,529,444 6,529,444 6,554,167 6,554,166 - 1 Non - Personnel………………………… 9,047 438,052 447,099 447,099 436,256 - 10,843 9,047 6,967,496 6,976,543 7,001,266 6,990,422 - 10,844 Fire Personnel………………………………… - 5,425,208 5,425,208 5,423,208 5,414,508 - 8,700 Non - Personnel………………………… - 363,863 363,863 365,863 331,084 - 34,779 - 5,789,071 5,789,071 5,789,071 5,745,592 - 43,479 Building, Plumbing, Gas Inspections Personnel………………………………… - 247,513 247,513 247,513 225,988 - 21,525 Electrical Inspection and Maintenance Personnel………………………………… - 264,219 264,219 264,219 264,217 - 2 Non - Personnel………………………… - 527,545 527,545 527,545 524,441 - 3,104 - 791,764 791,764 791,764 788,658 - 3,106 Harbormaster Personnel………………………………… - 179,023 179,023 168,122 164,209 - 3,913 Non - Personnel………………………… - 35,900 35,900 38,570 37,436 - 1,134 - 214,923 214,923 206,692 201,645 - 5,047 Parking Fines Personnel………………………………… - 27,576 27,576 27,576 27,182 - 394 Total Public 9,047 14,038,343 14,047,390 14,063,882 13,979,487 - 84,395 Education 1,098,447 42,163,350 43,261,797 42,761,797 42,760,339 - 1,458 NSRS/Charter/Choice…………………… - 1,330,094 1,330,094 1,302,497 1,302,497 - - Total 1,098,447 43,493,444 44,591,891 44,064,294 44,062,836 - 1,458 Public Works Public Services/Engineering Personnel………………………………… - 685,849 685,849 615,849 610,954 - 4,895 Non - Personnel………………………… - 328,600 328,600 342,782 320,913 - 21,869 - 1,014,449 1,014,449 958,631 931,867 - 26,764 Snow and Ice Personnel………………………………… - 50,000 50,000 50,000 55,175 - (5,175) Non - Personnel………………………… - 344,560 344,560 344,560 595,977 - (251,417) - 394,560 394,560 394,560 651,152 - (256,592) Solid Waste Collection……………………… - 3,002,347 3,002,347 3,002,347 2,998,597 - 3,750 Parking Garage Personnel………………………………… - 411,059 411,059 396,059 369,243 - 26,816 Non - Personnel………………………… - 132,261 132,261 147,261 133,879 12,691 691 - 543,320 543,320 543,320 503,122 12,691 27,507 (continued) City of Salem, Massachusetts 69 Comprehensive Annual Financial Report ---PAGE BREAK--- GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FISCAL YEAR ENDED JUNE 30, 2006 Amounts Current Year Actual Amounts Carried forward Initial Original Final Budgetary Carried Forward Variance From Prior Year Budget Budget Budget Amounts To Next Year To Final Budget Budgeted Amounts Open Space/Cemetery / Shade Tree Personnel………………………………… - 462,645 462,645 490,491 488,778 - 1,713 Non - Personnel………………………… 6,605 57,803 64,408 102,588 91,828 5,695 5,065 6,605 520,448 527,053 593,079 580,606 5,695 6,778 Total Public 6,605 5,475,124 5,481,729 5,491,937 5,665,344 18,386 (191,793) Health and Human Services Board of Health Personnel………………………………… - 367,175 367,175 367,175 357,963 - 9,212 Non - Personnel………………………… 570 16,650 17,220 17,220 14,396 1,220 1,604 570 383,825 384,395 384,395 372,359 1,220 10,816 Council on Aging Personnel………………………………… - 319,729 319,729 305,829 301,389 - 4,440 Non - Personnel………………………… - 18,797 18,797 18,797 15,318 - 3,479 - 338,526 338,526 324,626 316,707 - 7,919 Veterans Services Personnel………………………………… - 58,136 58,136 58,136 56,227 - 1,909 Non - Personnel………………………… - 88,937 88,937 88,937 81,073 - 7,864 - 147,073 147,073 147,073 137,300 - 9,773 Total Health and Human Services…………… 570 869,424 869,994 856,094 826,366 1,220 28,508 Library Personnel………………………………… - 753,400 753,400 736,400 727,404 - 8,996 Non - Personnel………………………… - 258,167 258,167 258,167 255,064 - 3,103 - 1,011,567 1,011,567 994,567 982,468 - 12,099 Parks and Recreation Personnel………………………………… - 741,753 741,753 689,717 685,284 - 4,433 Non - Personnel………………………… 4,311 233,112 237,423 237,423 202,784 656 33,983 4,311 974,865 979,176 927,140 888,068 656 38,416 Golf Course Personnel………………………………… - 219,173 219,173 219,173 214,956 - 4,217 Non - Personnel………………………… - 77,911 77,911 109,211 100,979 2,000 6,232 - 297,084 297,084 328,384 315,935 2,000 10,449 Witch House Personnel………………………………… - 74,066 74,066 74,066 70,808 - 3,258 Non - Personnel………………………… - 45,680 45,680 60,680 51,705 - 8,975 - 119,746 119,746 134,746 122,513 - 12,233 Historical Commission Personnel………………………………… - 6,729 6,729 6,729 6,721 - 8 Non - Personnel………………………… - 1,609 1,609 1,609 191 - 1,418 - 8,338 8,338 8,338 6,912 - 1,426 Winter Island Personnel………………………………… - 106,841 106,841 106,841 105,658 - 1,183 Non - Personnel………………………… - 39,020 39,020 44,020 40,266 - 3,754 - 145,861 145,861 150,861 145,924 - 4,937 Total Culture and Recreation……………… 4,311 2,557,461 2,561,772 2,544,036 2,461,820 2,656 79,560 (continued) City of Salem, Massachusetts 70 Comprehensive Annual Financial Report ---PAGE BREAK--- GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FISCAL YEAR ENDED JUNE 30, 2006 Amounts Current Year Actual Amounts Carried forward Initial Original Final Budgetary Carried Forward Variance From Prior Year Budget Budget Budget Amounts To Next Year To Final Budget Budgeted Amounts Debt service: - 4,310,000 4,310,000 4,310,000 4,310,000 - - - 2,491,307 2,491,307 2,491,307 2,491,306 - 1 Short Term Interest…………………………… - 442,532 442,532 442,532 428,277 14,000 255 - 7,243,839 7,243,839 7,243,839 7,229,583 14,000 256 State and county charges………………………… - 5,184,105 5,184,105 5,184,105 5,047,971 - 136,134 Pension benefits Contributory Retirement………………… - 6,977,372 6,977,372 6,901,854 6,839,449 62,400 5 Non-Contributory Retirement…………… - 185,000 185,000 185,000 173,304 11,600 96 - 7,162,372 7,162,372 7,086,854 7,012,753 74,000 101 Workmen's Compensation………………………… - 321,121 321,121 395,190 394,626 - 564 Unemployment Compensation…………………… - 200,000 200,000 183,941 183,941 - - Group - 10,486,802 10,486,802 10,642,000 10,634,171 - 7,829 - 670,000 670,000 670,000 645,640 19,700 4,660 Municipal Insurance……………………………… - 311,898 311,898 493,798 493,748 - 50 TOTAL EXPENDITURES……………… 1,166,971 101,869,969 103,036,940 102,806,105 102,377,699 197,581 230,825 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES…………………………… (1,166,971) (5,678,884) (6,845,855) (7,085,766) (6,011,854) (197,581) 876,331 OTHER FINANCING SOURCES (USES): Premium from issuance of bonds………………… - - - - 10,443 - 10,443 Transfers - 3,970,993 3,970,993 4,143,072 4,144,381 - 1,309 Transfers - - - (246,663) (246,663) - - TOTAL OTHER FINANCING SOURCES - 3,970,993 3,970,993 3,896,409 3,908,161 - 11,752 NET CHANGE IN FUND BALANCE………………… (1,166,971) (1,707,891) (2,874,862) (3,189,357) (2,103,693) (197,581) 888,083 BUDGETARY FUND BALANCE, Beginning of year 4,113,613 4,113,613 4,113,613 4,113,613 4,113,613 - - BUDGETARY FUND BALANCE, End of year……… $ 2,946,642 $ 2,405,722 $ 1,238,751 $ 924,256 $ 2,009,920 $ (197,581) $ 888,083 (concluded) See notes to required supplementary information. City of Salem, Massachusetts 71 Comprehensive Annual Financial Report ---PAGE BREAK--- Notes to Required Supplementary Information Fiscal Year Ended June 30, 2006 City of Salem, Massachusetts 72 Comprehensive Annual Financial Report NOTE A - STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY Notes to required supplementary information 1. Budgetary Information Within 170 days after the annual organization of the City government (which is ordinarily in early January), the Mayor is required to submit a budget of proposed expenditures for the fiscal year beginning on the next July 1. The City Council may make appropriations for the recommended purposes and may reduce or reject any item. Without a recommendation of the Mayor, the Council may not make any appropriation for a purpose not included in the proposed budget, except by a two-thirds vote in the case of the failure of the Mayor to recommend an appropriation for such a purpose within 7 days after a request from the Council. The Council may not increase any item without the recommendation of the Mayor (except as provided by legislation, recommendation of the school committee or regional district school committee and by two-thirds vote of the Council, provided that such increase does not cause the total annual budget to exceed the property tax limitations). If the Council fails to act on any item of the proposed budget within 45 days, that item takes effect. City department heads are generally required to submit their budget requests to the Mayor between January 1, March 1, and December 1. This does not apply to the school department, which must submit its request in time for the Mayor to include them in the submission to the council. If the Mayor does not make a timely budget submission, provision is made for preparation of a budget by the Council. Provision is also made for supplementary appropriations upon recommendation of the Mayor. Water and sewer department expenditures are included in the budgets adopted by City Council. Under recent legislation, the City Council on the recommendation of the Mayor may transfer within the last 2 months of the fiscal year, any amount appropriated for the use of any department to the appropriation for any other department, provided that no such transfer may be made from any appropriation for a school department, regional school district, or municipal light department. The majority of appropriations are non-continuing which lapse at the end of each fiscal year. Others are continuing appropriations for which the governing body has authorized that an unspent balance from a prior fiscal year be carried forward and made available for spending in the current fiscal year. These carry forwards are included as part of the subsequent fiscal year’s original budget. Generally, expenditures may not exceed the legal level of spending (salaries, expenses and capital) authorized for an appropriation account. However, the payment of debt service is statutorily required, regardless of whether such amounts are appropriated. Additionally, expenditures for disasters, natural or otherwise, and final judgments may exceed the level of spending authorized by two-thirds majority vote of the City Council. An annual budget is adopted for the general fund in conformity with the guidelines described above. The original fiscal year 2006 approved budget authorized approximately $101,900,000 in appropriations and other amounts to be raised. During fiscal year 2006, the Council also approved supplemental appropriations and budget reductions for a net increase of $15,828. The Finance Department has the responsibility to ensure that budgetary control is maintained. Budgetary control is exercised through the accounting system. ---PAGE BREAK--- Notes to Required Supplementary Information Fiscal Year Ended June 30, 2006 City of Salem, Massachusetts 73 Comprehensive Annual Financial Report 2. Budgetary - GAAP Reconciliation For budgetary financial reporting purposes, the Uniform Municipal Accounting System basis of accounting (established by the Commonwealth) is followed, which differs from the GAAP basis of accounting. A reconciliation of budgetary-basis to GAAP-basis results for the general fund for the fiscal year ended June 30, 2006, is presented below: Net change in fund balance - budgetary $ (2,103,693) Basis of accounting differences: Net change in revenues in recording tax refunds payable………………………… 78,129 Additional expense to fund internal service 2,142,901 Recognition of revenue for on-behalf 6,376,140 Recognition of expenditures for on-behalf payments……………………………… (6,376,140) Reclassification of enterprise fund revenue budged in the general fund………… (1,549,833) Reclassification of enterprise fund expenditures budged in the general fund… 1,549,833 Net difference in recognition of expenditures……………………………………… 838,791 Net change in fund balances - GAAP $ 956,128 3. Excess of Expenditures over Appropriations For the fiscal year ended June 30, 2006, actual expenditures exceeded appropriations for snow and ice removal. These over-expenditures will be funded through available funds during fiscal year 2007. ---PAGE BREAK--- City of Salem, Massachusetts 74 Comprehensive Annual Financial Report Combining Statements Combining Statements ---PAGE BREAK--- City of Salem, Massachusetts 75 Comprehensive Annual Financial Report Nonmajor governmental funds Nonmajor Governmental Funds Special Revenue Funds Special revenue funds are used to account for specific revenues that are legally restricted to expenditure for particular purposes. City Grants Fund – This fund is used to account for non-school related activity specifically financed by federal, state, and other grants which are designated for specific programs. School Grants Fund – This fund is used to account for the educational programs specifically financed by federal, state, and other grants which are designated for specific programs. Community Development Grants Fund – This fund is used to account for community development activity specifically financed by federal, state, and other grants which are designated for specific programs. School Lunch Fund – This fund is used to account for all cafeteria activities and is funded by user charges, federal and state grants and commodities received. Highway Grants Fund – This fund is used to account for construction, reconstruction and improvements to roadways, streets and sidewalks. Funding is provided primarily by grants. Donations & Gifts Fund – This fund is used to account for gifts which have been accepted by the City to be used for the purpose specified by the donor. Receipts Reserved Fund ñ This fund is used to account for receipts reserved for appropriation. City Revolving Accounts Fund – This fund is used to account for non school related revolving funds specifically allowed by the laws of the Commonwealth of Massachusetts. These funds are expended for purposes specified by the enabling statute. School Revolving Accounts Fund – This fund is used to account for school related revolving funds specifically allowed by the laws of the Commonwealth of Massachusetts. These funds are expended for purposes specified by the enabling statutes. Capital Project Funds Police Station Equipment Fund – This fund is used to account for the purchase of equipment for the Police Station which is being financed through the issuance of capital leases. Salem Ferry – This fund is used to account for the purchase of the Salem Ferry, a high-speed catamaran purchased by the City to provide seasonal ferry service between Salem and Boston. Computer System – This fund is used to account for the purchase of new computers for the school department which are being financed through the issuance of capital leases. Permanent Funds Permanent funds are used to report resources that are legally restricted to the extent that only earnings, not principal, may be used for purposes that support governmental programs. Cemetery Funds – This fund is used to account for cemetery perpetual care contributions and expenditures. ---PAGE BREAK--- City of Salem, Massachusetts 76 Comprehensive Annual Financial Report Human Service Funds – This fund is used to account for various contributions associated with human service activities. Other Funds – This fund is used to account for various contributions associated with governmental programs. ---PAGE BREAK--- Community City School Development School Highway Donations ASSETS Grants Grants Grants Lunch Grants & Gifts Cash and cash equivalents…………………………$ 1,251,464 $ 961,825 $ 184,972 $ - $ - $ 491,481 Investments………………………………………… - - - - - - Receivables, net of uncollectibles: Departmental and - - 28,300 - - - Intergovernmental……………………………… 267,899 186,859 2,727 95,000 1,224,014 - - - - - - - Due from other 334,693 - - - - - TOTAL $ 1,854,056 $ 1,148,684 $ 215,999 $ 95,000 $ 1,224,014 $ 491,481 LIABILITIES AND FUND BALANCES LIABILITIES: Warrants 45,322 $ 102,575 $ 49,484 $ 21,905 $ 123,671 $ - Deferred revenues……………………………… - - - - 1,034,166 - Due to other - - - 268,516 66,177 - Notes - - - - - - TOTAL LIABILITIES………………………………… 45,322 102,575 49,484 290,421 1,224,014 - FUND BALANCES: Reserved for: Perpetual permanent funds………………… - - - - - - Unreserved: Undesignated, reported in: Special revenue 1,808,734 1,046,109 166,515 (195,421) - 491,481 Capital projects - - - - - - Permanent - - - - - - TOTAL FUND BALANCES………………………… 1,808,734 1,046,109 166,515 (195,421) - 491,481 TOTAL LIABILITIES AND FUND BALANCES……$ 1,854,056 $ 1,148,684 $ 215,999 $ 95,000 $ 1,224,014 $ 491,481 (Continued) NONMAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET JUNE 30, 2006 Special Revenue Funds City of Salem, Massachusetts 77 Comprehensive Annual Financial Report ---PAGE BREAK--- City School Police Receipts Revolving Revolving Station Salem ASSETS Reserved Accounts Accounts Subtotal Equipment Ferry Subtotal Cash and cash equivalents…………………………$ 619,010 $ 1,527,499 $ 44,082 $ 5,080,333 $ 628,710 $ 268,978 $ 897,688 Investments………………………………………… - - - - - - - Receivables, net of uncollectibles: Departmental and - - - 28,300 - - - Intergovernmental……………………………… - - - 1,776,499 - 2,295,688 2,295,688 - 1,002,486 - 1,002,486 - - - Due from other - - - 334,693 - - - TOTAL $ 619,010 $ 2,529,985 $ 44,082 $ 8,222,311 $ 628,710 $ 2,564,666 $ 3,193,376 LIABILITIES AND FUND BALANCES LIABILITIES: Warrants - $ 311,215 $ 425 $ 654,597 $ - $ 81,874 $ 81,874 Deferred revenues……………………………… - 1,002,486 - 2,036,652 - - - Due to other - - - 334,693 - - - Notes - - - - 658,864 3,100,000 3,758,864 TOTAL LIABILITIES………………………………… - 1,313,701 425 3,025,942 658,864 3,181,874 3,840,738 FUND BALANCES: Reserved for: Perpetual permanent funds………………… - - - - - - - Unreserved: Undesignated, reported in: Special revenue 619,010 1,216,284 43,657 5,196,369 - - - Capital projects - - - - (30,154) (617,208) (647,362) Permanent - - - - - - - TOTAL FUND BALANCES………………………… 619,010 1,216,284 43,657 5,196,369 (30,154) (617,208) (647,362) TOTAL LIABILITIES AND FUND BALANCES……$ 619,010 $ 2,529,985 $ 44,082 $ 8,222,311 $ 628,710 $ 2,564,666 $ 3,193,376 (Continued) Capital Project Funds NONMAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET JUNE 30, 2006 Special Revenue Funds City of Salem, Massachusetts 78 Comprehensive Annual Financial Report ---PAGE BREAK--- Total Nonmajor Cemetery Human Service Governmental Funds Funds Other Subtotal Funds $ 285,305 $ 158,773 $ 109,381 $ 553,459 $ 6,531,480 2,099,293 1,168,257 804,847 4,072,397 4,072,397 - - - - 28,300 - - - - 4,072,187 - - - - 1,002,486 - - - - 334,693 $ 2,384,598 $ 1,327,030 $ 914,228 $ 4,625,856 $ 16,041,543 $ - $ - $ - $ - $ 736,471 - - - - 2,036,652 - - - - 334,693 - - - - 3,758,864 - - - - 6,866,680 927,105 221,174 458,625 1,606,904 1,606,904 - - - - 5,196,369 - - (647,362) 1,457,493 1,105,856 455,603 3,018,952 3,018,952 2,384,598 1,327,030 914,228 4,625,856 9,174,863 $ 2,384,598 $ 1,327,030 $ 914,228 $ 4,625,856 $ 16,041,543 (Concluded) Permanent Funds City of Salem, Massachusetts 79 Comprehensive Annual Financial Report ---PAGE BREAK--- Community City School Development School Highway Donations Grants Grants Grants Lunch Grants & Gifts REVENUES: Charges for 15,642 $ 9,095 $ - $ - $ - $ - Intergovernmental………………………………………………… 4,255,086 6,902,814 1,981,421 1,435,907 752,569 - Departmental and 44,587 32,230 - - - - 308,932 - - - - 168,818 Investment 3,650 - 3,786 - - - TOTAL 4,627,897 6,944,139 1,985,207 1,435,907 752,569 168,818 EXPENDITURES: Current: General 245,634 - - - - 117,596 Public 516,946 - - - - 3,161 214,810 7,753,208 - 1,542,180 - 10,176 Public 89,939 - - - 752,569 101,411 Community development…………………………………… - - 1,732,143 - - - Human 3,496,884 - - - - 66,077 Culture and 71,191 - - - - 16,246 Employee 17,066 163,832 - - - - Debt service: - - 180,000 - - - - - 19,574 - - - TOTAL EXPENDITURES………………………………… 4,652,470 7,917,040 1,931,717 1,542,180 752,569 314,667 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES……………………………… (24,573) (972,901) 53,490 (106,273) - (145,849) OTHER FINANCING SOURCES (USES): Capital lease - - - - - - Transfers - - - - - - Transfers (600,350) - (940) - - - TOTAL OTHER FINANCING SOURCES (USES)…… (600,350) - (940) - - - NET CHANGE IN FUND BALANCES……………………………… (624,923) (972,901) 52,550 (106,273) - (145,849) FUND BALANCES AT BEGINNING OF 2,433,657 2,019,010 113,965 (89,148) - 637,330 FUND BALANCES AT END OF 1,808,734 $ 1,046,109 $ 166,515 $ (195,421) $ - $ 491,481 (Continued) FISCAL YEAR ENDED JUNE 30, 2006 Special Revenue Funds NONMAJOR GOVERNMENTAL FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES City of Salem, Massachusetts 80 Comprehensive Annual Financial Report ---PAGE BREAK--- City School Police Receipts Revolving Revolving Station Salem Computer Reserved Accounts Accounts Subtotal Equipment Ferry System Subtotal $ 350,000 $ 29,160 $ - $ 403,897 $ - $ - $ - $ - - 408,600 - 15,736,397 - 2,295,688 - 2,295,688 412,316 478,145 804,999 1,772,277 - - - - - - 9,543 487,293 - - - - - 29,401 2,546 39,383 - - - - 762,316 945,306 817,088 18,439,247 - 2,295,688 - 2,295,688 - 486,015 - 849,245 - 2,912,896 - 2,912,896 - - 66 520,173 657,490 - - 657,490 - - 1,010,634 10,531,008 - - 287,475 287,475 - 35,591 - 979,510 - - - - - 159,243 - 1,891,386 - - - - - - - 3,562,961 - - - - - 101,819 - 189,256 - - - - - - 19,460 200,358 - - - - - - - 180,000 - - - - - - - 19,574 - - - - - 782,668 1,030,160 18,923,471 657,490 2,912,896 287,475 3,857,861 762,316 162,638 (213,072) (484,224) (657,490) (617,208) (287,475) (1,562,173) - - - - 627,336 - 287,475 914,811 - - - - - - - - (459,755) (18) - (1,061,063) - - - - (459,755) (18) - (1,061,063) 627,336 - 287,475 914,811 302,561 162,620 (213,072) (1,545,287) (30,154) (617,208) - (647,362) 316,449 1,053,664 256,729 6,741,656 - - - - $ 619,010 $ 1,216,284 $ 43,657 $ 5,196,369 $ (30,154) $ (617,208) $ - $ (647,362) (Continued) Special Revenue Funds Capital Project Funds City of Salem, Massachusetts 81 Comprehensive Annual Financial Report ---PAGE BREAK--- Total Nonmajor Cemetery Human Service Governmental Funds Funds Other Subtotal Funds REVENUES: Charges for - $ $ - $ - $ 403,897 Intergovernmental………………………………………………… - - 10,542 10,542 18,042,627 Departmental and - - - - 1,772,277 34,491 - 5,333 39,824 527,117 Investment 169,400 85,631 49,916 304,947 344,330 TOTAL 203,891 85,631 65,791 355,313 21,090,248 EXPENDITURES: Current: General - - 29,619 29,619 3,791,760 Public - - 10,362 10,362 1,188,025 - - - - 10,818,483 Public 66,423 - - 66,423 1,045,933 Community development…………………………………… - - - - 1,891,386 Human - 86,086 - 86,086 3,649,047 Culture and - - 4,459 4,459 193,715 Employee - - 200,358 Debt service: - - - - - 180,000 - - - - 19,574 TOTAL EXPENDITURES………………………………… 66,423 86,086 44,440 196,949 22,978,281 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES…………………………… 137,468 (455) 21,351 158,364 (1,888,033) OTHER FINANCING SOURCES (USES): Capital lease - - - - 914,811 Transfers - - - - - Transfers (21,847) - - (21,847) (1,082,910) TOTAL OTHER FINANCING SOURCES (USES)…… (21,847) - - (21,847) (168,099) NET CHANGE IN FUND BALANCES……………………………… 115,621 (455) 21,351 136,517 (2,056,132) FUND BALANCES AT BEGINNING OF 2,268,977 1,327,485 892,877 4,489,339 11,230,995 FUND BALANCES AT END OF $ 2,384,598 $ 1,327,030 $ 914,228 $ 4,625,856 $ 9,174,863 (Concluded) FISCAL YEAR ENDED JUNE 30, 2006 Permanent Funds NONMAJOR GOVERNMENTAL FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES City of Salem, Massachusetts 82 Comprehensive Annual Financial Report ---PAGE BREAK--- City of Salem, Massachusetts 83 Comprehensive Annual Financial Report Private Purpose Trust Purpose Trust Funds Trust Fund Commissioners – This fund is used to account for trusts held by the City to benefit individuals and administered by the City’s Board of Trust Fund Commissioners.. Scholarship Funds – This fund is used to account for scholarships held by the City to benefit individuals. ---PAGE BREAK--- PRIVATE PURPOSE TRUST FUNDS COMBINING STATEMENT OF PRIVATE PURPOSE TRUST FUNDS NET ASSETS JUNE 30, 2006 Trust Fund Scholarship Commissioners Funds Total ASSETS CURRENT: Cash and cash equivalents………………………………… $ 29,395 $ 70,498 $ 99,893 1,331,659 - 1,331,659 TOTAL 1,361,054 70,498 1,431,552 NET ASSETS Held in trust for other 1,361,054 $ 70,498 $ 1,431,552 Private Purpose Trust Funds City of Salem, Massachusetts 84 Comprehensive Annual Financial Report ---PAGE BREAK--- Trust Fund Scholarship Commissioners Funds Total ADDITIONS: Contributions: Private $ 1,093 $ 11,000 $ 12,093 Net investment income (loss): 75,529 1,821 77,350 TOTAL 76,622 12,821 89,443 DEDUCTIONS: Educational 16,634 10,889 27,523 Housing 27,833 - 27,833 TOTAL 44,467 10,889 55,356 CHANGE IN NET 32,155 1,932 34,087 NET ASSETS AT BEGINNING OF 1,328,899 68,566 1,397,465 NET ASSETS AT END OF $ 1,361,054 $ 70,498 $ 1,431,552 Private Purpose Trust Funds PRIVATE PURPOSE TRUST FUNDS COMBINING STATEMENT OF CHANGES IN PRIVATE PURPOSE TRUST FUNDS NET ASSETS FISCAL YEAR ENDED JUNE 30, 2006 City of Salem, Massachusetts 85 Comprehensive Annual Financial Report ---PAGE BREAK--- City of Salem, Massachusetts 86 Comprehensive Annual Financial Report Agency Fund Agency Fund This fund is used primarily to account for payroll withholdings, police and fire details, and unclaimed property. ---PAGE BREAK--- Beginning End of Year Additions Deletions of Year ASSETS CURRENT: Cash and cash equivalents…………………………… $ 274,062 $ 4,045,068 $ (3,842,502) $ 476,628 Receivables, net of allowance for uncollectibles: Departmental and 88,559 6,041 (88,559) 6,041 TOTAL $ 362,621 $ 4,051,109 $ (3,931,061) $ 482,669 LIABILITIES Warrants $ 18,753 $ 1,047,224 $ (1,037,878) $ 28,099 Payroll witholdings……………………………………… 48,373 1,426,664 (1,353,715) 121,322 Special 31,843 1,033,068 (1,049,731) 15,180 Other 263,652 449,553 (395,137) 318,068 TOTAL 362,621 $ 3,956,509 $ (3,836,461) $ 482,669 AGENCY FUND STATEMENT OF CHANGES IN ASSETS AND LIABILITIES FOR THE FISCAL YEAR ENDED JUNE 30, 2006 City of Salem, Massachusetts 87 Comprehensive Annual Financial Report ---PAGE BREAK--- City of Salem, Massachusetts 88 Comprehensive Annual Financial Report This page intentionally left blank. ---PAGE BREAK--- Statistical Section Photo courtesy of Jim McAllister Pioneer Village - 1630 Located in Forest River Park, Pioneer Village is a recreation of the English colony established by Roger Conant and his intrepid band of settlers. From these humbling beginnings the seeds of Revolution were planted. ---PAGE BREAK--- City of Salem, Massachusetts 89 Comprehensive Annual Financial Report Statistical Section This part of the comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the City’s overall financial health. Financial Trends • These schedules contain trend information to help the reader understand how the City’s financial performance and well-being have changed over time. Revenue Capacity • These schedules contain information to help the reader assess the City’s most significant local revenue source, the property tax. Debt Capacity • These schedules present information to help the reader assess the affordability of the City’s current levels of outstanding debt and the City’s ability to issue additional debt in the future. Demographic and Economic Information • These schedules offer demographic and economic indicators to help the reader understand the environment within which the City’s financial activities take place. Operating Information • These schedules contain service and infrastructure data to help the reader understand how the information in the City’s financial report relates to the services the City provides and the activities it performs. SOURCES: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant year. The City implemented GASB Statement 34 in 2002; schedules presenting government-wide information include information beginning in that year. Statistical Section ---PAGE BREAK--- 2002 2003 2004 2005 2006 Governmental activities Invested in capital assets, net of related debt………$ 82,253,876 $ 83,045,604 $ 79,729,492 $ 112,740,510 $ 109,183,737 5,755,817 5,237,908 8,759,761 9,734,998 8,649,700 Unrestricted…………………………………………… 4,546,625 9,656,396 6,519,783 (3,667,364) (371,947) Total governmental activities net assets……………………$ 92,556,318 $ 97,939,908 $ 95,009,036 $ 118,808,144 $ 117,461,490 Business-type activities Invested in capital assets, net of related debt……… 8,782,331 8,319,902 8,147,378 9,212,891 9,018,231 Unrestricted…………………………………………… 7,754,552 6,649,222 7,538,395 4,492,692 4,722,252 Total business-type activities net assets……………………$ 16,536,883 $ 14,969,124 $ 15,685,773 $ 13,705,583 $ 13,740,483 Primary government Invested in capital assets, net of related debt……… 91,036,207 91,365,506 87,876,870 121,953,401 118,201,968 5,755,817 5,237,908 8,759,761 9,734,998 8,649,700 Unrestricted…………………………………………… 12,301,177 16,305,618 14,058,178 825,328 4,350,305 Total primary government net assets……………………… $ 109,093,201 $ 112,909,032 $ 110,694,809 $ 132,513,727 $ 131,201,973 Note: As allowed by GASB#34 , the City reported retroactive general infrastructure, acquired prior to fiscal 2002, beginning in fiscal 2006. Fiscal years 2002-2004 have not been restated to reflect this change. Fiscal Year Net Assets By Component Last Five Fiscal Years City of Salem, Massachusetts 90 Comprehensive Annual Financial Report ---PAGE BREAK--- 2002 2003 2004 2005 2006 Expenses Governmental activities: General 8,640,622 $ 8,514,423 $ 9,454,148 $ 9,373,119 $ 9,867,573 Public 20,770,322 20,884,198 22,235,461 22,058,002 23,481,525 59,420,837 59,386,206 61,775,760 67,483,676 67,258,196 Public 5,397,486 6,464,257 6,517,047 8,421,997 7,991,774 Community development…………………………………… 5,856,034 4,954,608 5,767,362 2,066,749 1,891,386 Health and human 1,416,802 1,388,761 1,410,712 4,856,306 5,016,513 Culture and recreation……………………………………… 3,694,420 4,022,880 4,186,622 3,689,992 3,718,183 3,046,692 3,366,107 3,136,763 2,689,312 2,889,116 Total government activities expenses………………………… 108,243,215 108,981,440 114,483,875 120,639,153 122,114,266 Business-type activities: Water 10,967,114 10,196,489 9,619,356 3,186,840 3,197,864 Sewer 6,616,318 5,686,595 Golf 387,935 333,512 320,632 292,187 279,981 719,042 679,171 665,458 664,686 800,506 Total business type activities expenses………………………… 12,074,091 11,209,172 10,605,446 10,760,031 9,964,946 Total primary government expenses……………………………$ 120,317,306 $ 120,190,612 $ 125,089,321 $ 131,399,184 $ 132,079,212 Program Revenues Governmental activities: Education charges for services…………………………… $ 1,216,334 $ 1,097,764 $ 1,141,196 $ 1,023,839 $ 831,579 Public Safety charges for services………………………… 1,323,642 1,804,781 1,865,270 1,923,845 2,003,791 Other charges for 1,489,223 1,197,196 2,055,497 1,481,467 1,825,898 Operating grants and contributions………………………… 40,717,414 39,127,290 35,305,349 34,087,248 37,934,300 Capital grant and contributions…………………………… 17,467,468 7,019,891 2,129,821 2,090,467 3,312,346 Total government activities program revenues...……………… 62,214,081 50,246,922 42,497,133 40,606,866 45,907,914 Business-type activities: Charges for services - 9,794,892 10,415,528 11,708,715 3,853,505 4,319,560 Charges for services - 5,512,922 6,233,883 Charges for services - 615,878 549,091 543,467 502,770 525,404 Charges for services - 1,270,928 1,364,076 1,536,390 1,453,088 1,549,833 Total business-type activities program revenues...…………… 11,681,698 12,328,695 13,788,572 11,322,285 12,628,680 Total primary government program revenues…………………$ 73,895,779 $ 62,575,617 $ 56,285,705 $ 51,929,151 $ 58,536,594 Net (Expense)/Revenue Governmental $ (46,029,134) $ (58,734,518) $ (71,986,742) $ (78,692,287) $ (76,206,352) Business-type (392,393) 1,119,523 3,183,126 562,254 2,663,734 Total primary government net (46,421,527) $ (57,614,995) $ (68,803,616) $ (78,130,033) $ (73,542,618) General Revenues and other Changes in Net Assets Governmental activities: Real estate and personal property taxes net of tax refunds 49,486,747 $ 52,118,338 $ 54,855,784 $ 55,915,767 $ 58,379,505 Tax 690,557 635,624 Motor vehicle excise 3,626,065 3,793,044 3,478,999 3,489,584 3,452,569 Hotel/motel 219,628 263,962 Penalties and interest on 330,035 391,429 322,003 288,874 350,651 Payments in lieu of 1,073,539 1,088,754 Grants and contributions not restricted to specific 3,931,117 3,774,422 6,932,546 8,097,351 7,661,752 Unrestricted investment 125,481 816,614 568,503 521,585 183,980 Miscellaneous………………………………………………… 504,968 536,979 431,558 77,454 214,067 2,274,567 2,687,282 2,466,477 2,542,444 2,628,834 Total governmental activities 60,278,980 64,118,108 69,055,870 72,916,783 74,859,698 Business-type activities: (2,274,567) (2,687,282) (2,466,477) (2,542,444) (2,628,834) Total primary government……………………………………… $ 58,004,413 $ 61,430,826 $ 66,589,393 $ 70,374,339 $ 72,230,864 Changes in Net Assets Governmental $ 14,249,846 $ 5,383,590 $ (2,930,872) $ (5,775,504) $ (1,346,654) Business-type (2,666,960) (1,567,759) 716,649 (1,980,190) 34,900 Total primary government……………………………………… $ 11,582,886 $ 3,815,831 $ (2,214,223) $ (7,755,694) $ (1,311,754) In fiscal years 2002 - 2004 the City reported a joint water/sewer enterprise fund In fiscal years 2002 - 2004 the City included in real estate and personal property taxes, net of tax refunds payable Changes in Net Assets Last Five Fiscal Years Fiscal Year City of Salem, Massachusetts 91 Comprehensive Annual Financial Report ---PAGE BREAK--- 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 General Fund Reserved…………………………… $ 557,509 $ 250,549 $ 978,075 $ 966,088 $ 1,432,723 $ 1,442,182 $ 1,382,756 $ 1,153,872 $ 68,524 $ 197,581 Unreserved………………………… 2,146,333 5,327,627 4,738,658 5,764,170 5,901,496 4,633,278 3,980,693 3,398,534 335,643 1,162,714 Total general 2,703,842 $ 5,578,176 $ 5,716,733 $ 6,730,258 $ 7,334,219 $ 6,075,460 $ 5,363,449 $ 4,552,406 $ 404,167 $ 1,360,295 All Other Governmental Funds Reserved…………………………… $ - $ - $ - $ - $ - $ 1,430,279 $ 1,481,549 $ 1,844,725 $ 1,591,750 $ 1,606,904 Unreserved, reported in: Special revenue funds………… 6,898,664 2,477,573 4,477,410 5,738,091 6,910,085 8,289,823 8,920,508 6,618,566 7,763,007 5,474,128 Capital projects funds………… 1,621,835 (390,925) (3,404,797) (14,076,153) (17,882,945) (26,709,082) (14,050,593) (24,963,657) (10,513,270) (1,859,435) Permanent funds……………… - - - - - 3,137,655 2,801,999 2,555,014 2,897,589 3,018,952 Total all other governmental funds… $ 8,520,499 $ 2,086,648 $ 1,072,613 $ (8,338,062) $ (10,972,860) $ (13,851,325) $ (846,537) $ (13,945,352) $ 1,739,076 $ 8,240,549 Notes: Fiscal years 1997 through 2001 exclude Expendable and Nonexpendable Trust Funds which were reported under the pre-GASB 34 format. In fiscal year 1999, the unreserved fund balance of 1998 was restated. Fiscal Year Fund Balances, Governmental Funds Last Ten Fiscal Years City of Salem, Massachusetts 92 Comprehensive Annual Financial Report ---PAGE BREAK--- 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Revenues: Real estate and personal property taxes, net of tax $ 42,400,497 $ 45,004,696 $ 45,299,037 $ 45,824,415 $ 48,802,188 $ 50,152,793 $ 52,448,384 $ 55,603,719 $ 55,866,348 $ 58,601,934 Motor vehicle and excise 2,327,427 2,658,569 2,658,847 2,686,784 3,178,682 3,156,366 3,875,265 3,387,266 3,531,673 3,577,544 Intergovernmental………………………………………………… 25,753,506 27,339,805 29,619,516 32,053,323 37,284,876 39,949,863 37,949,147 37,305,545 40,601,143 40,386,321 Departmental and 5,104,053 5,659,080 7,383,713 8,793,381 8,473,063 8,122,563 8,628,161 9,324,193 7,539,138 8,496,446 Investment 294,782 540,904 392,136 736,266 1,024,892 127,462 816,821 568,503 828,933 927,302 Commonwealth school construction grants…………………… - - - - - - - - 12,739,570 16,559,515 On-behalf pension payments by Commonwealth……………… - - - - 4,505,009 4,301,287 4,275,669 5,345,441 5,890,261 6,376,140 Total 75,880,265 81,203,054 85,353,249 90,094,169 103,268,710 105,810,334 107,993,447 111,534,667 126,997,066 134,925,202 Expenditures: General 4,784,959 4,709,129 4,281,803 4,287,021 5,801,716 4,866,231 4,463,397 4,627,702 4,863,297 5,112,025 Public 11,794,339 12,471,452 14,328,164 14,074,132 14,589,271 15,738,798 15,368,476 14,999,915 14,417,276 14,548,888 31,435,082 34,208,249 37,518,451 40,101,425 45,852,552 47,250,529 48,449,552 47,729,470 46,125,572 47,189,744 Public 5,150,084 4,804,094 4,490,661 5,044,735 6,004,568 4,652,745 5,232,421 5,209,599 6,663,143 6,339,963 Community 2,354,083 2,813,361 1,700,155 3,118,010 2,462,534 1,936,213 2,348,162 2,085,553 2,066,749 1,891,386 Health and human 862,893 886,308 2,053,609 920,083 927,024 960,817 901,407 855,553 4,348,098 4,475,413 Culture and 2,465,461 2,570,079 2,824,761 2,963,811 3,338,502 2,728,470 2,981,769 2,756,066 2,278,899 2,339,600 3,221,976 3,365,633 3,474,477 3,813,000 4,610,788 4,204,226 4,340,575 6,565,806 11,926,982 13,388,893 Massachusetts teachers' retirement…………………………...… - - - - 4,505,009 4,301,287 4,275,669 5,345,441 5,890,261 6,376,140 Employee 5,043,845 4,864,929 5,374,227 5,499,340 5,550,602 9,853,473 10,529,297 10,580,395 10,433,140 9,964,302 State and district assessments…………………………………… 1,842,397 1,887,916 1,970,865 3,495,301 2,183,362 3,770,566 3,911,644 4,212,549 4,028,333 5,047,971 Capital 785,085 1,909,687 3,198,871 10,684,440 17,106,792 12,975,601 18,550,903 15,793,932 1,422,955 7,125,628 Debt 2,725,000 3,050,000 2,980,702 2,835,050 3,220,000 2,605,000 2,795,000 3,890,000 4,105,000 4,385,000 2,395,126 2,111,236 2,010,471 2,482,071 2,482,795 3,111,786 2,854,502 3,259,021 2,919,668 2,958,101 Total 74,860,330 79,652,073 86,607,217 99,318,419 118,635,515 118,955,742 127,002,774 127,911,002 121,489,373 131,143,054 Excess of revenues over (under) expenditures………………… 1,019,935 1,550,981 (1,253,968) (9,224,250) (15,366,805) (13,145,408) (19,009,327) (16,376,335) 5,507,693 3,782,148 Other Financing Sources (Uses) Issuance of 8,800,000 - 400,000 - 13,300,000 - 28,670,000 - 2,465,000 - Premium from issuance of - - - - - - - - 232,856 - Capital lease - - - - - - - - 807,283 1,046,619 Transfers 1,828,026 2,207,493 2,131,143 2,187,421 1,813,102 9,045,003 9,051,161 10,693,915 3,597,240 5,320,517 Transfers (1,148,211) (1,690,956) (1,733,369) (1,360,322) (1,435,512) (6,770,436) (6,719,057) (8,227,438) (1,054,796) (2,691,683) Total other financing sources 9,479,815 516,537 797,774 827,099 13,677,590 2,274,567 31,302,104 2,466,477 6,047,583 3,675,453 Net change in fund $ 10,499,750 $ 2,067,518 $ (456,194) $ (8,397,151) $ (1,689,215) $ (10,870,841) $ 12,292,777 $ (13,909,858) $ 11,555,276 $ 7,457,601 Debt service as a percentage of noncapital expenditures………… 6.27% 6.51% 6.04% 5.09% 4.54% 4.86% 4.56% 4.87% 6.06% 5.69% Prior to fiscal year 2005 any receipts from the Commonwealth for school construction projects were included in intergovernmental revenue. In fiscal year 2005 certain grants were reclassified to Human Services to better reflect the purpose. The Commonwealth is legally obligated to fund the Salem teachers retirement. Therefore the revenue and expenditure has been recorded in accordance with GASB 24. Fiscal Year Changes in Fund Balances, Governmental Funds Last Ten Fiscal Years City of Salem, Massachusetts 93 Comprehensive Annual Financial Report ---PAGE BREAK--- Assessed Value and Actual Value of Taxable Property by Classification and Tax Rates Last Ten Fiscal Years Assessed and Actual Values and Tax Rates Total Total Fiscal Residential Residential Commercial Industrial Personal Commercial Commercial Town Year Value Tax Rate Value Value Property Value Tax Rate Value 1997 $1,393,420,200 $15.23 $232,530,700 $118,096,600 $237,232,900 $587,860,200 $35.03 $1,981,280,400 1998 $1,462,850,200 $15.22 $247,668,000 $114,333,800 $238,873,800 $600,875,600 $34.67 $2,063,725,800 1999 $1,552,242,000 $15.17 $254,271,400 $112,399,300 $240,804,300 $607,475,000 $33.96 $2,159,717,000 2000 $1,705,349,600 $14.23 $266,300,300 $141,171,100 $247,511,700 $654,983,100 $31.65 $2,360,332,700 2001 $1,963,462,114 $13.42 $315,485,948 $168,301,665 $254,604,294 $738,391,907 $29.63 $2,701,854,021 2002 $2,135,490,544 $13.53 $324,729,500 $136,077,225 $261,760,050 $722,566,775 $28.62 $2,858,057,319 2003 $2,575,202,432 $12.87 $341,154,055 $135,580,725 $254,704,340 $731,439,120 $26.05 $3,306,641,552 2004 $3,247,929,862 $11.71 $369,848,655 $140,122,325 $213,400,595 $723,371,575 $22.59 $3,971,301,437 2005 $3,536,283,952 $11.38 $383,694,522 $142,371,000 $234,191,813 $760,257,335 $21.83 $4,296,541,287 2006 $3,807,396,999 $11.21 $393,448,700 $143,388,000 $241,940,480 $778,777,180 $21.33 $4,586,174,179 Revaluation year. Source: Assessor's Department, City of Salem All property in the Commonwealth of Massachusetts is assessed at 100% of fair cash value. Note: Chapter 59, Section 21C of the Massachusetts General Laws, known as "Proposition 2 1/2", imposes 2 separate limits on the annual tax levy of the Town. The primary limitation is that the tax levy cannot exceed 2 1/2 percent of the full and fair cash value. The secondary limitation is that the tax levy cannot exceed the maximum levy limit for the preceding fiscal year as determined by the State Commissioner of Revenue by more than 2 1/2 percent, subject to an exception for property added to the tax rolls and for certain substantial valuation increases other than as part of a general revaluation. The secondary limit may be exceeded in any year by a majority vote of the voters, however it cannot exceed the primary limitation. Total Assessed Value by Classification Fiscal Year Ended June 30, 2006 83% 9% 3% 5% Residential Commercial Industrial Personal Property Total Assessed Value by Classification Fiscal Year Ended June 30, 2005 83% 9% 3% 5% Residential Commercial Industrial Personal Property Commercial Value as % of Total Value 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 City of Salem, Massachusetts 94 Comprehensive Annual Financial Report ---PAGE BREAK--- Principal Taxpayers Current Year and Nine Years Ago Percentage of Percentage of Total Taxable Total Taxable Nature of Assessed Assessed Assessed Assessed Name Business Valuation Rank Value Valuation Rank Value Dominion Personal & Industrial Property $210,964,700 1 4.6% - - Salem LLC Apartments $40,550,000 2 0.9% - - Princeton Crossing Apartments Apartments $36,354,900 3 0.8% $11,888,200 4 Hawthorne Commons Apartments $28,599,100 4 0.6% - - Shetland Properties Industrial Property $26,346,200 5 0.6% $11,748,500 5 0.6% New England Power Personal & Industrial Property $23,966,550 6 0.5% $254,268,600 1 13.0% Massachusetts Electric Personal Property $21,489,250 7 0.5% $25,798,400 2 1.3% Highlander Plaza RT Commercial Property $20,628,500 8 0.4% $11,567,900 6 0.6% Second Pickwick Trust Commercial Property $11,871,200 9 0.3% - - Apartments $10,788,700 10 0.2% - - NYNEX Utility - - $13,795,100 3 0.7% Boston Gas/Mass LNG Utility - - $9,317,800 7 0.5% Hawthorne Square Mall Shopping Center - - $8,104,000 8 0.4% Osram Sylvania Electronics Manufacturer - - $7,238,400 9 0.4% Applied Extrusion Tech Electronics - - $6,281,300 10 0.3% Totals $431,559,100 9.4% $360,008,200 18% Source: Board of Assessors * Actual numbers from fiscal 1996 2006 1997* City of Salem, Massachusetts 95 Comprehensive Annual Financial Report ---PAGE BREAK--- Percent of Less First Year Percent of Delinquent Total Total Tax Fiscal Total Abatements & Net Current Net Levy Tax Tax Collections to Year Tax Levy Exemptions Tax Levy Tax Collections Collected Collections Collections Net Tax Levy 1997 $41,814,532 $728,298 $41,086,234 $40,660,473 99.0% $425,761 $41,086,234 100.00% 1998 $43,096,937 $735,267 $42,361,670 $41,210,163 97.3% $1,151,507 $42,361,670 100.00% 1999 $44,177,362 $379,865 $43,797,497 $43,723,214 99.8% $73,228 $43,796,442 100.00% 2000 $44,997,340 $549,334 $44,448,006 $43,623,904 98.1% $820,868 $44,444,772 99.99% 2001 $48,228,214 $654,519 $47,573,695 $47,565,588 100.0% $6,113 $47,571,701 100.00% 2002 $49,789,935 $484,373 $49,305,562 $49,199,288 99.8% $87,458 $49,286,746 99.96% 2003 $52,210,909 $508,719 $51,702,190 $51,303,297 99.2% $386,573 $51,689,870 99.98% 2004 $54,374,223 $564,486 $53,809,737 $53,259,047 99.0% $539,944 $53,798,991 99.98% 2005 $56,839,329 $418,415 $56,420,914 $55,554,023 98.5% $865,641 $56,419,664 100.00% 2006 $59,292,238 $414,204 $58,878,034 $58,010,805 98.5% $0 $58,010,805 98.53% Revaluation Year Source: Massachusetts Department of Revenue; Board of Assessors Property Tax Levies and Collections Last Ten Years City of Salem, Massachusetts 96 Comprehensive Annual Financial Report ---PAGE BREAK--- Ratios of Outstanding Debt and General Bonded Debt Last Ten Fiscal Years General Percentage Percentage Fiscal U. S. Census Personal Assessed Obligation Capital Per of Personal of Assessed Year Population Income Value Bonds Leases Capita Income Value 1997 38,172 857,114,758 1,981,280,400 $41,950,000 $0 $1,099 4.89% 2.12% 1998 38,351 878,708,191 2,063,725,800 $36,345,000 $0 $948 4.14% 1.76% 1999 38,341 896,407,212 2,159,717,000 $33,460,698 $494,359 $886 3.79% 1.57% 2000 40,564 967,735,348 2,360,332,700 $30,716,400 $2,517,607 $819 3.43% 1.41% 2001 41,130 1,000,863,178 2,701,854,021 $40,700,000 $1,929,115 $1,036 4.26% 1.58% 2002 42,179 1,046,917,485 2,858,057,319 $37,625,000 $1,103,986 $918 3.70% 1.36% 2003 42,067 1,065,020,304 3,307,181,452 $63,730,000 $441,217 $1,525 6.03% 1.94% 2004 41,912 1,082,318,054 3,971,301,437 $59,840,000 $307,360 $1,435 5.56% 1.51% 2005 41,976 1,105,650,179 4,296,541,287 $58,770,000 $723,214 $1,417 5.38% 1.38% 2006 40,407 1,085,609,084 4,586,174,179 $54,385,000 $1,172,651 $1,375 5.12% 1.21% General Total Percentage Percentage Fiscal Obligation Capital Debt Per of Personal of Assessed Year Bonds Leases Outstanding Capita Income Value 1997 $0 $0 $41,950,000 $1,099 4.89% 2.12% 1998 $2,225,000 $0 $38,570,000 $1,006 4.39% 1.87% 1999 $1,880,000 $0 $35,835,057 $935 4.00% 1.66% 2000 $1,600,000 $0 $34,834,007 $859 3.60% 1.48% 2001 $1,345,000 $0 $43,974,115 $1,069 4.39% 1.63% 2002 $650,000 $0 $39,378,986 $934 3.76% 1.38% 2003 $515,000 $0 $64,686,217 $1,538 6.07% 1.96% 2004 $380,000 $0 $60,527,360 $1,444 5.59% 1.52% 2005 $1,450,000 $0 $60,943,214 $1,452 5.51% 1.42% 2006 $1,345,000 $0 $56,902,651 $1,408 5.24% 1.24% Source: Audited Financial Statements, U. S. Census Governmental Activities Debt Business-type Activities Total Primary Government City of Salem, Massachusetts 97 Comprehensive Annual Financial Report ---PAGE BREAK--- Direct and Overlapping Governmental Activities Debt As of June 30, 2006 Estimated Estimated Share of Debt Percentage Overlapping Outstanding Applicable Debt North Shore Regional Vocational School District……………$ 2,120,000 71.44% $ 1,514,562 City direct 54,385,000 Total direct and overlapping $ 55,899,562 Source: Treasurer and North Shore Regional Vocational School District City of Salem, Massachusetts 98 Comprehensive Annual Financial Report ---PAGE BREAK--- 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Equalized Valuation…………………………… $2,083,065,400 $2,083,065,400 $2,174,217,600 $2,174,217,600 $2,472,012,500 $2,472,012,500 $3,148,016,400 $3,148,016,400 $4,184,128,700 $4,223,735,800 Debt Limit of Equalized Valuation……… $104,153,270 $104,153,270 $108,710,880 $108,710,880 $123,600,625 $123,600,625 $157,400,820 $157,400,820 $209,206,435 $211,186,790 Less: Outstanding debt applicable to limit………… $5,195,000 $4,940,000 $3,785,000 $3,475,000 $5,080,000 $5,625,000 $4,646,000 $4,167,000 $6,695,447 $6,064,000 Authorized and unissued $500,000 $100,000 $72,050,000 $63,950,000 $82,537,000 $83,033,130 $69,000,988 $70,336,913 $39,296,218 $48,682,895 Legal debt $98,458,270 $99,113,270 $32,875,880 $41,285,880 $35,983,625 $34,942,495 $83,753,832 $82,896,907 $163,214,770 $156,439,895 Total debt applicable to the limit as a percentage of debt limit……………… 5.47% 4.84% 69.76% 62.02% 70.89% 71.73% 46.79% 47.33% 21.98% 25.92% Source: Audited Financial Statements; Statement of Indebtedness Computation of Legal Debt Margin Last Ten Fiscal Years City of Salem, Massachusetts 99 Comprehensive Annual Financial Report ---PAGE BREAK--- Demographic and Economic Statistics Last Ten Fiscal Years Per Capita Fiscal Population Personal Personal Median School Unemployment Year Estimates Income Income Age Enrollment Rate 1997 38,172 $857,114,758 $22,454 33.5 5,028 4.0% 1998 38,351 $878,708,191 $22,912 33.5 5,128 3.5% 1999 38,341 $896,407,212 $23,380 33.5 5,059 3.3% 2000 40,564 $967,735,348 $23,857 36.4 5,007 2.5% 2001 41,130 $1,000,863,178 $24,334 36.4 5,107 3.9% 2002 42,179 $1,046,917,485 $24,821 36.4 5,064 5.6% 2003 42,067 $1,065,020,304 $25,317 36.4 5,016 6.2% 2004 41,912 $1,082,318,054 $25,824 36.4 4,727 5.3% 2005 41,976 $1,105,650,179 $26,340 36.4 4,676 4.9% 2006 40,407 $1,085,609,084 $26,867 36.4 4,714 4.1% Note: Per Capita Personal Income and Median Age based on 1990 and 2000 U.S Censuses Source: Massachusetts Department of Revenue, Division of Local Services; U.S. Census Bureau City of Salem, Massachusetts 100 Comprehensive Annual Financial Report ---PAGE BREAK--- Principal Employers (excluding City) Current Year and Nine Years Ago Nature Percentage of Percentage of of Total City Total City Business Employees Rank Employment Employees Rank Employment North Shore Medical Center Healthcare 5,910 1 24.9% 2,500 1 11.7% Salem State College Higher Education 1,400 2 5.9% 750 2 3.5% State Government 545 3 2.3% - - Food Market 310 4 1.3% - - Cultural/ tourism 265 5 1.1% - - Banking 200 6 0.8% - - Retail 200 7 0.8% - - Retail 180 8 0.8% - - Lodging 175 9 0.7% - - Public Utility 170 10 0.7% - - Sears Boston Credit Central Public Utility - - 600 3 2.8% New England Power Co. Public Utility - - 476 4 2.2% North Shore Children's Hospital Children's Health Care - - 400 5 1.9% EG & G Inc. Diabetic Supplies - - 281 6 1.3% Atwood & Morrill co., Inc. Valve Manufacturing - - 189 7 0.9% Food Markets - - 176 8 0.8% Van Waters & Rogers Chemical Distribution - - 162 9 0.8% Harbor Sweets Candy & Confection Wholesale - - 101 10 0.5% 9,355 39.4% 5,635 26.5% Source: The City Planning Department * Actual numbers from fiscal 1996 Commonwealth of Massachusetts Offices Crosby's Market Place Wal-Mart Employer 2006 1997* Market Basket Peabody Essex Museum Salem Five Savings Bank Home Depot Hawthorne Hotel Dominion/NEGT Salem Harbor Station City of Salem, Massachusetts 101 Comprehensive Annual Financial Report ---PAGE BREAK--- 2000 2001 2002 2003 2004 2005 2006 Function General government……………… 82 59 62 68 62 64 61 Public safety……………………… 198 183 183 185 180 190 181 Education………………………… 755 755 755 755 756 756 752 Public 67 50 59 47 45 55 55 Health and human services……… 23 20 22 22 21 21 21 Culture and recreation…………… 36 36 35 34 31 31 31 Total 1,161 1,103 1,116 1,111 1,095 1,117 1,101 Source: Various City Departments Information not available on years prior to FY2000. City of Salem, Massachusetts Full-time Equivalent City Employees by Function Last Ten Fiscal Years Fiscal Year City of Salem, Massachusetts 102 Comprehensive Annual Financial Report ---PAGE BREAK--- Function/Program 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 General government Marriage recordings…………………………………… 290 274 317 292 328 362 327 330 327 375 Birth recordings……………………………………… 1,793 1,708 1,726 1,777 1,680 1,708 1,804 1,839 1,761 2,044 Death recordings……………………………………… 843 765 765 764 865 848 823 935 847 737 Police Physical 1,097 1,157 1,131 975 1,039 1,057 984 965 685 2,792 Motor vehicle violations……………………………… 4,772 3,472 2,791 3,066 3,967 4,872 5,489 5,238 4,334 6,477 Police personnel and officers………………………… 97 95 94 94 103 105 94 85 85 81 Fire 2,486 2,805 3,417 3,226 3,004 2,950 1,972 3,231 2,789 1,187 Emergency responses………………………………… 3,786 3,517 3,433 3,717 3,917 3,993 3,911 4,281 4,572 6,235 Fire personnel and officers…………………………… 94 88 89 90 92 96 85 78 78 75 Education Number of 5,028 5,128 5,059 5,007 5,107 5,064 5,016 4,727 4,676 4,744 Number of graduates………………………………… 197 213 187 213 220 237 218 257 246 255 Number of 340 352 369 370 369 397 406 415 409 477 Water Service connections…………………………………… 9,600 9,600 9,627 9,720 9,812 9,842 9,898 10,516 10,568 11,000 Consumption in 1,779 1,764 1,853 1,985 2,107 2,064 2,090 2,111 2,136 2,000 Daily consumption 4.87 4.83 5.10 5.44 5.77 5.66 5.73 5.78 6.43 6.84 Sewer Service connections…………………………………… 9,600 9,600 9,627 9,720 9,812 9,842 9,898 10,516 10,568 11,000 Health and human services Number of persons using COA transportation…… N/A 40,535 54,620 44,326 45,523 47,220 44,804 44,500 45,976 37,497 Libraries Volumes in circulation………………………………… 117,758 119,300 127,923 126,526 130,510 128,626 124,435 125,516 128,569 141,595 Total volumes borrowed……………………………… 363,817 370,542 379,511 379,534 395,311 453,548 470,192 464,453 490,116 508,728 N/A - information not available Source: Various City Departments; Massachusetts Department of Education Fiscal Year Last Ten Fiscal Years Operating Indicators by Function/Program City of Salem, Massachusetts 103 Comprehensive Annual Financial Report ---PAGE BREAK--- Function/Program 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 General government Number of buildings………………………… 2 2 2 2 2 2 2 2 2 2 Police Number of stations………………………… 1 1 1 1 1 1 1 1 1 1 Fire Number of stations………………………… 4 4 4 4 4 4 4 4 4 4 Education Number of elementary schools…………… 7 7 7 7 7 7 7 7 7 7 Number of middle schools………………… 1 1 1 1 1 1 1 1 1 1 Number of high schools…………………… 1 1 1 1 1 1 1 1 1 1 Public Works Water mains 103 103 103 103 103 103 108 108 108 108 Health and human services Number of personnel……………………… 20 18 20 19 18 18 17 17 17 17 Culture and recreation Parks and playgrounds…………………… 33 34 35 35 35 35 35 35 35 35 Park and playground (acreage)…………… 218 218 219 230 230 230 230 230 230 230 Conservation land (acreage)……………… 114 114 114 114 114 114 114 128 128 128 Railroad right of way (acreage)…………… 89 89 89 89 89 89 89 89 89 89 Public 7 7 7 7 7 7 7 7 7 7 Ball 13 13 13 13 13 13 13 13 13 13 Tennis 10 10 10 10 10 10 10 10 10 10 Source: Various City Departments, Manual of the City Government Fiscal Year Capital Asset Statistics by Function/Program Last Ten Fiscal Years City of Salem, Massachusetts 104 Comprehensive Annual Financial Report ---PAGE BREAK--- Free Stabilization Fiscal Year Cash Fund $ 538,372 $ 277,759 $ 2,732,090 $ 1,021,351 $ 1,867,737 $ 1,297,417 $ 3,212,194 $ 2,278,823 $ 4,010,382 $ 2,248,337 $ 4,965,894 $ 1,713,814 $ 4,425,158 $ 1,149,864 $ 4,313,929 $ 1,087,575 $ 2,756,091 $ 639,004 $ 1,423,512 $ - Source: City Records Free Cash & Stabilization Fund Balances Last Ten Fiscal Years City of Salem, Massachusetts 105 Comprehensive Annual Financial Report