Document Salem_doc_7d3dc587fd

CITY OF SALEM MASSACHUSETTS COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Fiscal Year Ended June 30, 2012 Kimberley L. Driscoll, Mayor Richard Viscay, Jr., Finance Director Prepared by the City of Salem Finance Department ---PAGE BREAK--- On the Cover – Salem Harbor view from Salem Willows The Salem Willows offers beautiful shaded seaside grounds, scenic ocean views, public pier, band-stand 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, beaches, the arcade and the park's ample picnic grounds and recreational facilities. Pickering Wharf Light House ---PAGE BREAK--- CITY OF SALEM, MASSACHUSETTS COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Fiscal Year Ended June 30, 2012 Prepared by Finance Department ---PAGE BREAK--- CITY OF SALEM, MASSACHUSETTS COMPREHENSIVE ANNUAL FINANCIAL REPORT JUNE 30, 2012 TABLE OF CONTENTS Introductory Section 1 Letter of Transmittal 3 Organizational Chart 11 Principal Executive Officers 12 Certificate of Achievement for Excellence in Financial Reporting 13 Distinguished Budget Presentation Award 14 Financial Section 15 Independent Auditors’ Report 17 Management’s Discussion and Analysis 19 Basic Financial Statements 28 Statement of net assets 29 Statement of activities 30 Governmental funds – balance sheet 32 Reconciliation of the governmental funds balance sheet total fund balances to the statement of net assets 33 Governmental funds – statement of revenues, expenditures and changes in fund balances 34 Reconciliation of the statement of revenues, expenditures, and changes in fund balances of governmental funds to the statement of activities 35 Proprietary funds – statement of net assets 36 Proprietary funds – statement of revenues, expenses and changes in fund net assets 37 Proprietary funds – statement of cash flows 38 Fiduciary funds – statement of fiduciary net assets 39 Fiduciary funds – statement of changes in fiduciary net assets 40 Notes to basic financial statements 41 Required Supplementary Information 75 General fund budgetary comparison schedule 76 General fund schedule of revenues, expenditures and changes in fund balance – budget and actual 77 Retirement system schedules 82 Retirement system schedule of funding progress 83 Retirement system schedule of employer contributions 84 ---PAGE BREAK--- Other postemployment benefit plan schedules 85 Other postemployment benefit plan schedule of funding progress and employer contributions 86 Other postemployment benefit plan actuarial methods and assumptions 87 Notes to required supplementary information 88 Combining Statements 91 Nonmajor governmental funds 92 Nonmajor governmental funds – combining balance sheet 95 Nonmajor governmental funds – combining statement of revenues, expenditures, and changes in fund balances 98 Employee benefit trust funds 101 Employee benefit trust funds – combining statement of fiduciary net assets 102 Employee benefit trust funds – combining statement of changes in fiduciary net assets 103 Private purpose trust funds 104 Private purpose trust funds – combining statement of net assets 105 Private purpose trust funds – combining statement of changes in net assets 106 Agency Fund 107 Agency fund – statement of changes in assets and liabilities 108 Statistical Section 109 Net assets by component – last ten fiscal years 110 Changes in net assets – last ten fiscal years 111 Fund balances, governmental funds – last ten fiscal years 112 Changes in fund balances, governmental funds – last ten fiscal years 113 Assessed value and actual value of taxable property by classification and tax rates – last ten fiscal years 114 Principal taxpayers – current year and nine years ago 115 Property tax levies and collections – last ten fiscal years 116 Ratios of outstanding debt and general bonded debt – last ten fiscal years 117 Direct and overlapping governmental activities debt – as of June 30, 2012 118 Computation of legal debt margin – last ten fiscal years 119 Demographic and economic statistics – last ten fiscal years 120 Principal employers (excluding City) – current year and nine years 121 Full-time equivalent City employees by function – last ten fiscal years 122 Operating indicators by function/program – last ten fiscal years 123 Capital asset statistics by function/program – last ten fiscal years 124 Free cash and stabilization fund balances – last ten fiscal years 125 ---PAGE BREAK--- Introductory Section Salem Willows Park The Salem Willows offers beautiful shaded seaside grounds, scenic ocean views, public pier, band stand for concerts, picnic areas, beaches, children’s rides, activities and many eateries. One of Salem’s treasures, 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. Annual Read Picnic and Science Fair-Salem Willows for All Salem School children ---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. 5626 - FAX: [PHONE REDACTED] 3 City of Salem, Massachusetts Finance Department 93 Washington Street Salem, MA 01970 Ph. [PHONE REDACTED] Ext 5625 Fax [PHONE REDACTED] [EMAIL REDACTED] Letter of Transmittal Richard Viscay, Finance Director December 10, 2012 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) 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, 2012 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, 2012, are fairly presented in conformity with GAAP. The City of Salem’s financial statements have been audited by Powers & Sullivan, LLC, 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, 2012, 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 principles 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, 2012 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. 5626 - 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 of Boston. The City has a population of 41,340 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 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 instances, 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% of the City is connected to the sewerage system; the entire area of the City is served by the municipal water system. Both the Salem and Beverly Water Supply Board and the South Essex Sewerage District qualify as joint ventures. Accordingly, the City’s equity interest in both entities has been included in the City’s basic financial statements. 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 development. These units are owned and operated by the Authority. The Salem Housing Authority does not meet the criteria to be considered a component unit of the City. 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 Boston area. ---PAGE BREAK--- SALEM CITY HALL - 93 WASHINGTON STREET - SALEM, MA 01970-3592 TELEPHONE: [PHONE REDACTED] EXT. 5626 - FAX: [PHONE REDACTED] 5 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 amount raised on the tax recapitulation sheet approved by the Department of Revenue for fiscal year 2012 totaled approximately $133 million, which includes Real & Personal Property tax revenue, State Revenues, MSBA Revenue, local revenues, transfers in of $997,042 from Receipts Reserved Harbormaster, Witch House and Golf Course (to reduce tax rate), $3,328,566 from free cash supplemental appropriations ($1,000,000 to reduce the tax rate), other receipts reserved transfers, and $1,477,074 of indirect costs from the Water & Sewer Enterprise funds. These revenues cover general fund budgeted expenses and deficits raised including snow and ice, school lunch, health insurance trust, and to fund the Retirement Anticipation Fund and Capital Improvement Projects Fund. These also include enterprise fund expenses. The City includes the Salem Contributory Retirement System (the System) in its financial reporting since the City represents approximately 85% of the members of the System. The System was established to provide retirement benefits to its members, including employees and beneficiaries of the City of Salem, the Salem-Beverly Water Supply Board, the Salem Housing Authority, the South Essex Sewerage District, and the North Shore Regional Vocational School System. Per the Public Employee Retirement Administration Commission (PERAC) 2011 annual report, the market value of the System’s assets totaled $95 million with 89% of the funds invested in the State’s Pension Reserve Investment Trust’s (PRIT) Core Fund. 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 University, the North Shore Medical Center, the Essex County District Superior and Probate Courts, and Registry of Deeds, the world-famous Peabody 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 also 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, has 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, including a proposed development that would ---PAGE BREAK--- SALEM CITY HALL - 93 WASHINGTON STREET - SALEM, MA 01970-3592 TELEPHONE: [PHONE REDACTED] EXT. 5626 - FAX: [PHONE REDACTED] 6 replace the existing Wal-Mart with a new development that would include an expanded Wal-Mart and Meineke store, a new city water tower and roadway improvements. Additionally, downtown Salem continues to thrive as a vibrant center of commerce and activity. The construction is complete on the new $106 million J. Michael Ruane Judicial Center. Also, the MBTA will be building a new $135 million commuter rail garage and other infrastructure improvements at the Washington/Bridge Street location. The expected completion of this project is Fall 2014. These projects, as well as the $200 million expansion of the Peabody Essex Museum, the 14th largest museum in the world, will ensure long term vibrancy to Downtown Salem. The Salem waterfront is also experiencing a great deal of investment from the addition of the Waterfront Hotel at Pickering Wharf to the South River Harborwalk waterfront development, which will include seawall and bulkhead improvements from Derby Street to Congress Street. The City received a $3 million grant from the Governor’s Seaport Council for Phase I of this project, which included the acquisition of land at the Blaney Street Wharf and for design, engineering, and permitting of the site. Phase II of the project, which will be funded by $4.1 million in federal and state grants, will be used to construct a seawall, install utilities, and construct the parking lot and to begin construction of the new concrete pier. In addition, the City has received an additional $1 million of grant dollars to begin dredging the Salem Harbor. Once the Blaney Street wharf expansion is completed, the City expects to attract the large cruise liners, which is projected to have a significant impact on the local economy. The City also has a partnership with Destination Salem, who markets the City as one of Massachusetts’ best destinations for families, couples, domestic, and international travelers. Visitation to Salem increased an estimated 5% in 2011 over 2010, and generated nearly $104 million in tourism spending in 2011. This infusion of dollars and visitors not only helps keep the current businesses thriving, but also encourages new businesses to open in Salem. In 2011, twenty-three (23) new businesses opened in downtown Salem, including new restaurants and retail establishments. These new businesses generated approximately 83 new jobs in 2011. With the passage of House Bill 4560, Senate Bill 4864 and the approval of Massachusetts Governor Deval Patrick, Salem State College obtained University status. Salem State University is the largest institution of higher education on the North Shore of Massachusetts. Recent expansion at the University includes the construction of the college’s newest campus on the former GTE Sylvania site. Central Campus, as it is currently known, houses the Bertolon School of Business, a recital hall, a ‘green’ and sustainable residence hall, and a small business incubator for the region. Expansion of the college continues currently, including the recent completion of a new 525 bed residence hall and dining facility, as well as the ongoing construction of a new Library and Learning Commons, scheduled to be completed in late 2012. The new library will be a four-level, 124,000-square-foot complex on Salem State's North Campus. 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 23,717, of whom 22,008 were employed and 1,709, or 7.2% were unemployed. The Commonwealth, for the same period, had an unemployment rate of 7.4%. Financial Planning and Forecasting In fiscal year 2009, the City modified its budget format to improve upon its content and layout. The goal was to have a comprehensive budget that would allow an average person to read and comprehend the budget and budget process of the City. It also was modeled after several budgets that were submitted and approved for the Government Financial Officer’s Association (GFOA) “Distinguished Budget Presentation Award”. The new model included more narrative, including goals and objectives of each department, financial forecasts, policies and ---PAGE BREAK--- SALEM CITY HALL - 93 WASHINGTON STREET - SALEM, MA 01970-3592 TELEPHONE: [PHONE REDACTED] EXT. 5626 - FAX: [PHONE REDACTED] 7 glossary of financial terms. It required a significant amount of work for all department heads and especially the finance division, who had to ensure all the materials were pulled together timely for submission to both the City Council and the GFOA. As a result of our efforts, the City has been awarded the GFOA’s “Distinguished Budget Presentation Award” for fiscal years 2009 through 2012. Included in the budget was the City’s Five Year Financial Forecast. This is the sixth year that such a forecast has been completed. This forecast acts as a useful tool to the Mayor and Council to better identify “budget busters” on the expenditure side and to also determine whether forecasted revenue growth is adequate for future expenses. Also included in the budget was the City’s Five Year Capital Improvement Plan (CIP) for the purpose of planning and maintaining the City’s capital and infrastructure. The CIP includes policies on debt service and capital improvement budgeting. As part of the fiscal year 2012 CIP, the City will use $254,217 of one time revenues for capital improvements, including various repairs at the police and fire departments, as well as infrastructure repairs of playground equipment and the Salem Common Fence. Other highlights of the fiscal year 2012 CIP include the investment of over $56.5 million in repairs to the Collins School and Saltonstall School, of which 78.26% of all eligible costs will be reimbursed to the City through the Massachusetts School Building Authority’s Green Repairs Program. Other highlights of the FY2012 CIP are over $870,000 in neighborhood roadway improvements, $2,000,000 for repairs to City Hall envelope, and $200,000 for parking equipment and infrastructure. Fixed Costs ~ Health Insurance and Pension Assessment Health Insurance The City continues to explore options to contain the rising cost of health care for City employees/retirees. 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. This provision saved the City approximately $700,000 in fiscal 2007 and continues to realize savings for the City. 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. The City has used many different approaches to keep the cost of health insurance affordable as it relates to the overall budget of the City, including the procurement of new health care providers, modifications of existing plans, and collective bargaining to modify the employee/employer apportionment of costs. However, the most significant approach was enacted in FY2012 with the City Council’s adoption of the Municipal Health Care Reform Act (the Act). As part of the Act, the City was allowed to enter into the State’s Group Insurance Commission (GIC), which resulted in significant short term savings ($1.5 million in FY13), and long term savings for the City. In fact, the City was able to reduce its long term liability, also known as “other postemployment benefits” (OPEB) by $26 million dollars, from $171 million in 2010 to $145 million in 2012, per the City’s OPEB liability report performed by the Segal Company, the City’s contracted actuary. While there were significant savings for the City, the employees and retirees of the City will also receive financial savings of approximately $1.5 million for FY2013, as well as the long term stability of being a member of the State’s GIC plan. The savings to the City employees and retirees come from lower premiums, an increase in City’s contribution to PPO plans from 65% to 70%, and the establishment of a “mitigation fund” of $220,000 that will pay for 100% of the copayments for inpatient and outpatient visits, as well as 50% of the copayments for all high tech imaging. The City also has agreed to pay all administrative fees for any person who wishes to enroll in a flexible spending account, which allows for pre-tax payments for certain medical costs, prescriptions, and some over the counter medications. ---PAGE BREAK--- SALEM CITY HALL - 93 WASHINGTON STREET - SALEM, MA 01970-3592 TELEPHONE: [PHONE REDACTED] EXT. 5626 - FAX: [PHONE REDACTED] 8 Pension Assessment In fiscal year 2007, the Mayor appointed herself to the Salem Retirement Board. By doing so, Mayor Driscoll has taken an active role in managing the City’s retirement system. The annual assessment from the Retirement Board to the City continues to be one of the biggest budget busters year in and year out. During fiscal year 2009, the Retirement Board moved all available funds into the State’s Public Reserve Investment Trust (PRIT) to take advantage of its higher returns and lower administrative fees. Because of its size, the PRIT can diversify assets for maximum possible return. The Retirement Board shifted these assets voluntarily to the PRIT after a complete analysis and a vote of the Retirement Board. The Salem Contributory Retirement Board completed its most recent actuarial valuation summary for January 1, 2012. The study was performed by the Segal Company and was delivered to the Retirement Board in September of 2012. The study reported the actuarial assets of the system as of January 1, 2012 of $106.8 million and an unfunded liability of $107.5 million. The unfunded liability increased from January 1, 2010 by $14 million, partially due to the net investment losses of calendar year 2011, in which market value rate of return was -0.25%, while the assumed rate of return was 8.25%. However, the market rate of return in calendar year 2010 was 12.03%, which helped offset some of the 2011 losses. As a result of the increased unfunded liability, and the lower than expected return on investment, the Board adopted a funding schedule which will fully amortize the existing unfunded liability plus the expected increases in unfunded liability due to the deferred investment losses by June 30, 2032 with amortization payments that increase 4.5% per year. The total fiscal 2013 appropriation for the system is $10,911,932, with the City’s share of 85.6% amounting to $9,337,442. Other Significant Financial Matters The Salem Harbor Power Station is the City’s largest taxpayer. The power plant, in August of 2012, changed ownership from Dominion Energy to Footprint Power LLC. The new owners plan to run the plant through June 30, 2014 which is when Dominion filed to decommission all four of its power generating units prior to the change in ownership. Immediately after June 2014, Footprint Power plans to demolish all existing structures and undertake any necessary environmental remediation. Footprint plans to construct a state-of-the-art 630 megawatt gas-fired plant on a portion of the site and will open the remaining two-thirds of the 63 –acre waterfront property to private and public development opportunities. From a revenue perspective, at the end of FY2011, the City’s tax agreement with Dominion expired. Prior to this date, the City received a total payment from Dominion Energy in the amount of $4.75 million for FY2011, $3 million in tax dollars within the tax levy and $1.75 million dollars designated as a “host fee” accounted for as miscellaneous non-recurring revenues. In FY2011, Dominion announced major operational changes shutting down two of their power generating units due to market conditions and regulatory challenges at the state level. Due to the implementation of state regulations impacting its operations, during the FY2012 budget process, the Massachusetts Legislature adopted a proposal to ensure that Salem taxpayers will not be overly burdened by lost revenues from the power plant through 2016. Chapter 68 of the Acts of 2011, Section 33 states that “…the municipality shall be entitled to reimbursement for the difference between the amount called for….prior to the full or partial decommissioning or the change in operating status of the facility.” This legislation postpones the financial impact of the loss of a major taxpayer. More importantly, it allows the City to work toward replacing the lost revenues and planning for an appropriate reuse of the site. ---PAGE BREAK--- SALEM CITY HALL - 93 WASHINGTON STREET - SALEM, MA 01970-3592 TELEPHONE: [PHONE REDACTED] EXT. 5626 - FAX: [PHONE REDACTED] 9 In FY2012, the City entered into a one year agreement with Dominion that called for a $1.49 million payment of tax dollars and a $260,000 “host fee”, which triggered a $3 million dollar payment from the Commonwealth, bringing total revenues for FY12 to $4.75 million. The City and Footprint are currently working on a tax agreement for FY2013. Financial Policy The City has set a goal to fund the Stabilization fund in the amount of 5% of the City’s current operating budget, or $6.4 million. As of June 30, 2012, the balance in the City’s Stabilization fund is $3.5 million. The target date to have the Stabilization Fund fully funded is projected to occur by fiscal year 2016. The Stabilization fund shall be funded by appropriations from free cash (available funds), operating budget appropriations when available, and other one-time non-recurring revenues that become available for appropriation per Massachusetts General Law. In fiscal 2008, the City established a second Stabilization fund (Retirement Stabilization Fund) for the funding of retirement buyouts for both City and School employees. As of June 30, 2012, the balance of this account was $130,000. During the fiscal 2013 budget process, all department heads were asked if they anticipated any retirements and to calculate the estimated cost of each person’s buyout for fiscal 2013. As part of the fiscal 2013 budget process, the City Council appropriated an additional $580,000 to the fund. The goal of the Retirement Stabilization Fund is to pay for any unanticipated retirements from this Fund instead of using general fund appropriations. This will allow the departments to backfill vacancies in a timely manner without having to request a supplemental appropriation by the Council. In fiscal 2011, the City adopted Massachusetts General Law Chapter 32B, Section 20, establishing the “Other Postemployment Benefits (OPEB) Liability Trust Fund” as a local option. This fund gives communities a mechanism to reduce the unfunded actuarial liability of health care and other post-employment benefits. The City has designated $381,000 to this fund as of June 30, 2012. Future appropriations will be made to this fund in accordance to financial policies of the Finance Department of the City. 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 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 30th, 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. The balance for free cash was certified for fiscal year 2012 in the amount of $2.53 million. 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 carry forward to the next fiscal year (July 1st). The 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. Once free cash is certified by the Director of Accounts, any drawdown of the Stabilization Fund from the prior fiscal year shall be replenished from the certified free cash if the free cash exceeds such drawdown. Once any drawdown of Stabilization funds are replenished, allocation of the remaining free cash shall be as follows;  20% 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. ---PAGE BREAK--- SALEM CITY HALL - 93 WASHINGTON STREET - SALEM, MA 01970-3592 TELEPHONE: [PHONE REDACTED] EXT. 5626 - FAX: [PHONE REDACTED] 10  20% 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 and  10% of any free cash available after funding any drawdown will be allocated to the OPEB Liability Trust Fund (beginning in FY2012). 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 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, 2011. This was the seventh 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 its eligibility for another certificate. The GFOA also awarded a Distinguished Budget Presentation Award to the City of Salem for its budget document for the fiscal year beginning July 1, 2012. The GFOA established the Distinguished Budget Award in 1984 to encourage and assist state and local governments to prepare budget documents of the very highest quality that reflect both the guidelines established by the National Advisory Council on State and Local Budgeting and the GFOA’s recommended practices on budgeting and then to recognize individual governments that succeed in achieving that goal. Documents submitted to the Budget Awards Program are reviewed by selected members of the GFOA professional staff and by outside reviewers with experience in public-sector budgeting. It should be noted that the Distinguished Budget Award was awarded to only nine of the 351 communities in the Commonwealth for the fiscal period beginning 2009 and that only five entities in the entire Commonwealth received both the Certificate of Achievement of Excellence in Financial Reporting and the Distinguished Budget Presentation Award in 2007. The preparation of both the CAFR and the Distinguished Budget Presentation Award 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--- SALEM CITY HALL - 93 WASHINGTON STREET - SALEM, MA 01970-3592 TELEPHONE: [PHONE REDACTED] EXT. 5626 - FAX: [PHONE REDACTED] 11 Organizational Chart ---PAGE BREAK--- City of Salem, Massachusetts 12 Comprehensive Annual Financial Report Principal Executive Officers TITLE NAME FIRST TOOK OFFICE TERM EXPIRES Mayor Kimberley L. Driscoll 1/2/2006 12/31/2013 President, City Council Joan B. Lovely 1/1/2012 12/31/2012 Finance Director Richard Viscay 3/6/2006 1/31/2014 Treasurer Kathleen McMahon 12/27/2010 1/31/2013 Collector Bonnie Celi 3/11/2004 1/31/2013 City Clerk Cheryl LaPointe 7/15/2004 11/9/2015 City Solicitor Elizabeth Rennard 1/10/2006 Indefinite Assistant Finance Director Nina Bridgman 1/22/2004 1/31/2014 Principal Executive Officers ---PAGE BREAK--- City of Salem, Massachusetts 13 Comprehensive Annual Financial Report Certificate of Achievement for Excellence in Financial Reporting ---PAGE BREAK--- Distinguished Budget Presentation Award The Government Finance Officers Association of the United States and Canada (GFOA) presented a Distinguished Budget Presentation Award to the City of Salem, Massachusetts for the Annual Budget beginning July 1, 2011. In order to receive this award, a governmental unit must publish a budget document that meets program criteria as a policy document, as an operational guide, as a financial plan, and as a communication device. City of Salem, Massachusetts 14 Comprehensive Annual Financial Report ---PAGE BREAK--- Financial Section Salem Police Station October Halloween Parade Helicopter Rescue Operation Salem Fire Department Ladder 1 Salem Fire Department Ladder 1 ---PAGE BREAK--- City of Salem, Massachusetts 15 Comprehensive Annual Financial Report Financial Section ---PAGE BREAK--- City of Salem, Massachusetts 16 Comprehensive Annual Financial Report This page intentionally left blank. ---PAGE BREAK--- City of Salem, Massachusetts 17 Comprehensive Annual Financial Report 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, 2012 (except for the Salem Contributory Retirement System which is as of and for the year ended December 31, 2011), 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 the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free 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, 2012 (except for the Salem Contributory Retirement System which is as of December 31, 2011), 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. In accordance with Government Auditing Standards, we have also issued our report dated December 10, 2012 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, grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or compliance. 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. Our audit was made for the purpose of forming opinions on the financial statements that collectively comprise the City of Salem’s basic financial statements. The combining statements and schedules, as listed in the table of contents, are presented for the purpose of additional analysis and are not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our ---PAGE BREAK--- City of Salem, Massachusetts 18 Comprehensive Annual Financial Report opinion, the information is fairly stated in all material respects in relation to the financial statements taken as a whole. Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis and required supplementary information, as listed in the table of contents, be presented to supplement the basic financial statements. Such information, although not part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, and historical context. We have applied certain limited procedures, to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. The introductory section and statistical tables, as listed in the table of contents, are presented for the purposes of additional analysis and are not a required part of the basic financial statements. Such information has not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly we do not express an opinion or provide any assurance on it. December 10, 2012 ---PAGE BREAK--- City of Salem, Massachusetts 19 Comprehensive Annual Financial Report Management’s Discussion and Analysis Management’s Discussion and Analysis ---PAGE BREAK--- City of Salem, Massachusetts 20 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, 2012. 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 principles (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. The basic financial statements consist of 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, sewer, parking services, trash disposal 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 21 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 to demonstrate compliance with this budget. Proprietary funds. The City maintains two types of proprietary 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, trash disposal, 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. The internal service fund is now used to account for funds set aside by the side to help offset health insurance costs of employees that were highly impacted from the switch to the GIC (Group Insurance Commission). Fiduciary funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the City’s own programs. The accounting used for fiduciary funds is much like that used for proprietary 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 $137 million at the close of fiscal year 2012. This represents a decrease of $184,000 from the prior fiscal year. Net assets of $147.7 million reflects the City’s 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 ---PAGE BREAK--- City of Salem, Massachusetts 22 Comprehensive Annual Financial Report themselves cannot be used to liquidate these liabilities. Invested in capital assets net of related debt increased by approximately $2.8 million during fiscal year 2012. This was mainly the result of the acquisition of new capital assets of approximately $11.8 million, net of $7 million in depreciation recorded against capital assets and the $2 million net decrease in related outstanding debt. An additional portion of the governmental net assets, $11.2 million, represents resources that are subject to external restrictions on how they may be used. This balance was up by approximately $636,000 due to the timing of grant and gift receipts. The balance of unrestricted net assets has a year-end deficit of $21.6 million. The primary reason for this deficit balance is the recognition of other postemployment benefit liabilities totaling $27.1 million, in accordance with the requirements of Governmental Auditing Standards Board (GASB) Statement 45. The statement requires the City to obtain a biannual actuarial valuation of the City’s liability to pay other postemployment benefits to current employees and retirees. The City is allowed to amortize the liability, which is currently estimated to be approximately $145 million, over 30 years. Since there is no legal obligation to fund the liability at this time, the City has opted to continue to fund the majority of its other postemployment benefits on a pay-as-you go basis. As a result, the City is required to record the difference between the current year pay-as- you go cost and the current year actuarial determined cost plus interest on any prior unfunded liability as an expense in the full accrual financial statements. This difference totaled $5.1 million for governmental activities for fiscal year 2012. The City began the process of pre-funding a portion of the liability in fiscal year 2011 by establishing an irrevocable trust which, as of June 30, 2012, has a balance of $381,000 and is reported within the Fiduciary Funds in the City’s financial statements. The City also recorded a decrease in its estimated landfill liability of $1.8 million, as two sites were remediated during fiscal year 2012 at a cost of approximately $1.4 million. Additionally, the City’s General Fund reported expenditures less than appropriations by approximately $1.2 million and higher than budgeted collection of revenues of approximately $1.8 million which had a positive impact on net assets. The most significant revenues that came in higher than anticipated related to tax liens, charges for services for building permits, and fines and forfeitures. The $1.2 million of expenditures less appropriations relates to modest turn-backs in most departments, the most significant being public safety and education. The components of the City’s governmental activities are presented below. Fiscal 2012 Fiscal 2011 Assets: Current 40,433,740 $ 38,183,620 Noncurrent assets (excluding capital)…………………… 18,326,546 20,008,795 Capital 172,195,580 167,439,062 Total 230,955,866 225,631,477 Liabilities: Current liabilities (excluding 11,810,228 8,925,422 Noncurrent liabilities (excluding 35,447,909 30,668,729 Current 6,755,366 8,716,062 Noncurrent 39,669,302 39,864,526 Total liabilities………………………………………… 93,682,805 88,174,739 Net Assets: Invested in capital assets, net of related debt………… 147,692,495 144,887,020 11,197,635 10,562,103 (21,617,069) (17,992,385) Total net $ 137,273,061 $ 137,456,738 Governmental Activities ---PAGE BREAK--- City of Salem, Massachusetts 23 Comprehensive Annual Financial Report Fiscal 2012 Fiscal 2011 Program revenues: Charges for $ 5,356,226 $ 5,137,753 Operating grants and contributions……………………… 47,872,700 49,607,540 Capital grants and contributions………………………… 5,699,571 5,197,515 General Revenues: Real estate and personal property taxes………………… 72,073,381 71,828,412 Motor vehicle and other excise 3,131,334 3,181,247 Nonrestricted 8,220,908 8,155,366 Unrestricted investment 103,015 1,095,518 Other 4,340,294 3,582,351 Total 146,797,429 147,785,702 Expenses: General government……………………………………… 11,904,711 11,702,186 Public 26,551,919 24,917,897 91,261,655 90,009,718 Public 5,952,380 8,894,659 Community development………………………………… 1,530,786 1,845,141 Health and human services……………………………… 6,001,130 5,930,089 Culture and recreation…………………………………… 3,219,315 2,997,090 1,544,887 1,582,033 Total 147,966,783 147,878,813 Excess (Deficiency) before transfers……………………… (1,169,354) (93,111) 985,677 1,251,059 Change in net $ (183,677) $ 1,157,948 Governmental Activities The governmental expenses totaled $148 million of which $57 million (38%) was directly supported by program revenues consisting of charges for services, operating and capital grants, and contributions. Public safety and education expenses increased by $1.6 million and $1.3 million, respectively, both are primarily related to budgetary increases as well as increases in health insurance and pension costs. The large decrease in public works expenses relates to a fiscal year 2011 increase in the City’s estimated landfill remediation liability and a fiscal year 2012 decrease in costs related to snow and ice removal. In fiscal year 2011, the City increased the estimated landfill remediation liability by $1.9 million related to clean-up needed at two City owned properties. Actual costs totaled approximately $1.3 million and were paid in fiscal year 2012. Decreased community development expenses related to activities in the City’s planning department. General revenues totaled $87.9 million, primarily coming from property taxes, motor vehicle and other excise, and non-restricted state aid. Payments from the City’s largest taxpayer decreased in fiscal year 2012 related to the decommissioning of the Power Plant run by the taxpayer. However, the State reimbursed the City for the difference between the actual payments received and the prior year’s payment, making the City whole. Capital grants and contributions increased in fiscal year 2012. In fiscal year 2011 the City received a one-time grant of $3 million for the Seaport wharf project while in fiscal year 2012 the Massachusetts School Building Authority (MSBA) provided capital grants of $5 million for their 78% share of school construction. ---PAGE BREAK--- City of Salem, Massachusetts 24 Comprehensive Annual Financial Report Business-type Activities For the City’s business-type activities, assets exceeded liabilities by $12.7 million at the close of fiscal year 2012. Fiscal 2012 Fiscal 2011 Assets: Current 9,520,269 $ 10,333,632 Capital 21,677,433 19,742,463 Total 31,197,702 30,076,095 Liabilities: Current liabilities (excluding 515,058 589,893 Noncurrent liabilities (excluding 1,228,817 996,504 Current 1,017,520 1,234,880 Noncurrent 15,745,824 14,640,400 Total liabilities………………………………………… 18,507,219 17,461,677 Net Assets: Invested in capital assets, net of related debt………… 8,605,165 8,248,186 4,085,318 4,366,232 Total net $ 12,690,483 $ 12,614,418 Business-type Activities Business-type net assets of $8.6 million (68%) represent investments in capital assets net of related debt. The remaining $4 million (32%) is available to be used for the ongoing operation of the City’s water, sewer, parking, trash and municipal golf course activities. There was an overall increase of $76,000 in net assets reported in connection with the enterprise funds. The water enterprise fund’s net assets of $3.9 million (88%) represent the investment in capital assets net of related debt, while $538,000 (12%) is unrestricted. The water department experienced a net decrease of $175,000 in net assets from the prior year. This is consistent with prior years. The decrease is partially the result of accruing an additional $53,000 in OPEB liabilities. The water fund pays an annual assessment to the Salem Beverly Water Supply Board, which totaled $2.4 million or 64% of the fund’s operating expenses for fiscal year 2012. The sewer enterprise fund’s net assets of $587,000 (14%) represent the investment in capital assets net of related debt, and $3.6 million (86%) is unrestricted. The unrestricted balance includes the City’s $1.1 million equity interest in the South Essex Sewerage District which increased by approximately $443,000 during fiscal year 2012. The sewer department operations experienced an overall net increase of $477,000 during the current fiscal year. Approximately 85% of the expenses in the sewer fund consist of the annual assessments paid to the South Essex Sewerage District. The golf course enterprise fund’s net assets of $359,000 (63%) represent the investment in capital assets, net of related debt, while $208,000 (37%) is unrestricted. Overall, revenues and expenses both increased by approximately 19% at the golf course during fiscal year 2012 as a result, net assets remained substantially unchanged. ---PAGE BREAK--- City of Salem, Massachusetts 25 Comprehensive Annual Financial Report The parking enterprise fund’s net assets of $3.8 million represent the investment in capital assets net of related debt while a deficit balance of $412,000 is reported as unrestricted. The parking operations experienced a net decrease of $253,000 during fiscal year 2012 which is consistent with prior years, and is mostly attributable to recording depreciation on previously purchased capital assets totaling approximately $236,000. The City reports this fee-for-service activity as an enterprise fund however any cash based surplus generated is transferred back to the general fund to support City programs. In fiscal year 2012, $1.5 million was transferred back to the general fund. Consequently, the amounts 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. The City’s trash enterprise fund operates on a trash fee that is set with full knowledge that the revenue will not be sufficient to cover the cost of operations. The City budgets for a subsidy from the general fund equal to the estimated cash basis deficit in the fund at year end. At fiscal year-end a $2.1 million transfer was made from the general fund to subsidize for the budgeted deficit. As of June 30, 2012 the trash fund had unrestricted net assets totaling $147,000. Fiscal 2012 Fiscal 2011 Program revenues: Charges for $ 16,209,028 $ 16,384,403 Operating grants and contributions……………………… - 39,804 Total 16,209,028 16,424,207 Expenses: Cost of service and administration……………………… 5,822,797 5,668,504 District assessment……………………………………… 8,100,740 7,985,222 718,324 650,974 505,425 420,756 Total 15,147,286 14,725,456 Excess (Deficiency) before transfers……………………… 1,061,742 1,698,751 (985,677) (1,251,059) Change in net 76,065 $ 447,692 Business-type Activities 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 the City’s financing requirements. In particular, unassigned fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. In accordance with generally accepted accounting standards, the City reports the components of fund balance as nonspendable, restricted, committed, assigned and unassigned, based on restrictions on spending. Additionally, the City’s stabilization funds are reported within the general fund as unassigned. ---PAGE BREAK--- City of Salem, Massachusetts 26 Comprehensive Annual Financial Report As of the end of the current fiscal year, governmental funds reported combined ending fund balances of $22.8 million of which $10.5 million is reported in the general fund, a deficit of $1.3 million is reported in the school capital projects major fund, and $13.6 million is reported in the nonmajor governmental funds. Cumulatively there was an increase of $1.5 million in fund balances from the prior year. The general fund is the City’s chief operating fund. At the end of the current fiscal year, unassigned fund balance of the general fund totaled $9.6 million, while total fund balance was $10.5 million. The general fund balance increased by $1.5 million in fiscal year 2012. The increase primarily resulted from positive budgetary results. The school capital projects fund is used to account for the City’s ongoing major school construction projects. The fund decreased by $2.7 million in fiscal year 2012 as the City began incurring costs for the improvements to the Saltonstall and Collins schools. The major fund ended the fiscal year with a deficit balance of $1.3 million. Expenditures incurred to date have been partially financed with bond proceeds and partially funded with reimbursements received from the Massachusetts School Building Authority for the state’s share of eligible costs. Bond proceeds totaling $2.5 million were recognized in this fund in fiscal year 2012. Cumulatively, nonmajor governmental funds had a net increase of $582,000. This represents the activity of other nonmajor capital projects, grants, and permanent trust funds. The fiscal year 2012 increase was almost entirely the result of the timing of funding and recognizing expenditures on capital projects, such as the wharf improvement project, net of a decrease in federal stimulus grant funds compared to the prior year. Bond proceeds in this fund totaled $1.4 million in fiscal year 2012. General Fund Budgetary Highlights The $2.9 million increase between the original budget and the final amended budget was due to several council orders issued throughout the fiscal year to appropriate available funds. The most notable components of this increase include an additional $2.3 million in available funds (free cash) appropriated to fund stabilization reserves, veteran’s benefits, capital improvements, and various additional appropriations. The actual general fund revenues came in $1.8 million more than budgeted. The City does not budget revenue for tax liens which totaled $647,000. Additionally, fines and forfeitures reported a budgetary surplus of $306,000 which was the result of an increase in estimated receipts during the budget process. Charges for services reported a surplus of $345,000 mainly due to conservative budgetary estimates. State and county assessments were lower than anticipated by $382,000, which mainly related to the charter school tuition. Overall, expenditures came in under appropriations by approximately $1.2 million. 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, 2012, amounts to $194 million (net of accumulated depreciation). This investment in capital assets includes land, construction in progress, buildings and land improvements, equipment, vehicles and infrastructure related to governmental and business-type activities. The City’s total investment in capital assets for the current year totaled $11.8 million for governmental activities and $2.7 million for business-type activities. The City also transferred $1.8 million, mostly relating water reconstruction projects, from construction in progress to depreciable assets as projects were completed. ---PAGE BREAK--- City of Salem, Massachusetts 27 Comprehensive Annual Financial Report Debt Administration. Outstanding long-term debt of the governmental activities, as of June 30, 2012, totaled $43.6 million. 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, 2012 the City has recorded a receivable from the MSBA totaling $19.6 million, which is equal to 90% of approved construction and interest costs incurred by the City on the eligible projects, less amounts that have been reimbursed by the MSBA. Outstanding debt of the water, sewer, golf and parking enterprise funds totaled $13.8 million, $2.3 million, $140,000 and $575,000, respectively, and funded various repairs, maintenance and infrastructure projects. Please refer to notes 4, 6, 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 28 Comprehensive Annual Financial Report Basic Financial Statements Basic Financial Statements ---PAGE BREAK--- STATEMENT OF NET ASSETS JUNE 30, 2012 Primary Government Governmental Business-type Activities Activities Total ASSETS CURRENT: Cash and cash equivalents………………………………… $ 22,208,730 $ 4,878,858 $ 27,087,588 8,136,549 - 8,136,549 Receivables, net of allowance for uncollectibles: Real estate and personal property taxes……………… 1,046,979 - 1,046,979 Tax 1,499,755 - 1,499,755 Motor vehicle and other excise taxes………………… 467,200 - 467,200 User - 3,418,192 3,418,192 Trash - 93,103 93,103 Departmental and 67,162 - 67,162 Intergovernmental……………………………………… 5,768,986 - 5,768,986 150,753 - 150,753 Investment in joint - 1,130,116 1,130,116 Prepaid 1,087,626 - 1,087,626 Total current 40,433,740 9,520,269 49,954,009 NONCURRENT: Receivables, net of allowance for uncollectibles: Intergovernmental……………………………………… 18,038,829 - 18,038,829 287,717 - 287,717 Capital assets, non depreciable…………………………… 14,920,276 1,187,329 16,107,605 Capital assets, net of accumulated depreciation………… 157,275,304 20,490,104 177,765,408 Total noncurrent 190,522,126 21,677,433 212,199,559 TOTAL 230,955,866 31,197,702 262,153,568 LIABILITIES CURRENT: Warrants 4,062,420 25,539 4,087,959 Accrued 1,144,383 356,162 1,500,545 Accrued 3,931,879 16,478 3,948,357 Tax refunds 298,930 - 298,930 Accrued 636,004 70,112 706,116 Capital lease obligations…………………………………… 126,554 - 126,554 Compensated 1,508,154 46,767 1,554,921 Workers' compensation…………………………………… 101,904 - 101,904 Notes 2,794,739 542 2,795,281 Bonds 3,960,627 1,016,978 4,977,605 Total current liabilities…………………………………… 18,565,594 1,532,578 20,098,172 NONCURRENT: Capital lease obligations…………………………………… 119,149 - 119,149 Landfill 600,000 - 600,000 Compensated 5,944,915 110,510 6,055,425 Other postemployment benefits…………………………… 27,050,790 1,118,307 28,169,097 Workers' compensation…………………………………… 1,733,055 - 1,733,055 Bonds 39,669,302 15,745,824 55,415,126 Total noncurrent liabilities……………………………… 75,117,211 16,974,641 92,091,852 TOTAL 93,682,805 18,507,219 112,190,024 NET ASSETS Invested in capital assets, net of related debt……………… 147,692,495 8,605,165 156,297,660 Restricted for: 438,470 - 438,470 Perm 3,149,668 - 3,149,668 Nonexpendable………………………………………… 2,074,097 - 2,074,097 Grants and 5,535,400 - 5,535,400 (21,617,069) 4,085,318 (17,531,751) TOTAL NET $ 137,273,061 $ 12,690,483 $ 149,963,544 See notes to basic financial statements. City of Salem, Massachusetts 29 Comprehensive Annual Financial Report ---PAGE BREAK--- STATEMENT OF ACTIVITIES FISCAL YEAR ENDED JUNE 30, 2012 Operating Capital Charges for Grants and Grants and Net (Expense) Functions/Programs Expenses Services Contributions Contributions Revenue Primary Government: Governmental Activities: General government……………… $ 11,904,711 $ 783,345 $ 448,834 $ 7,544 $ (10,664,988) Public safety……………………… 26,551,919 2,212,295 1,329,909 - (23,009,715) Education…………………………… 91,261,655 1,271,626 36,934,270 5,033,128 (48,022,631) Public 5,952,380 174,820 225,462 613,695 (4,938,403) Community development………… 1,530,786 8,997 2,815,167 45,204 1,338,582 Health and human services……… 6,001,130 126,694 4,954,421 - (920,015) Culture and recreation…………… 3,219,315 778,449 115,390 - (2,325,476) Interest……………………………… 1,544,887 - 1,049,247 - (495,640) Total Governmental Activities… 147,966,783 5,356,226 47,872,700 5,699,571 (89,038,286) Business-Type Activities: 4,188,083 4,623,340 - - 435,257 6,733,017 7,986,386 - - 1,253,369 Golf 438,613 648,916 - - 210,303 1,042,610 2,274,470 - - 1,231,860 2,744,963 675,916 - - (2,069,047) Total Business-Type Activities… 15,147,286 16,209,028 - - 1,061,742 Total Primary Government………$ 163,114,069 $ 21,565,254 $ 47,872,700 $ 5,699,571 $ (87,976,544) See notes to basic financial statements. (Continued) Program Revenues City of Salem, Massachusetts 30 Comprehensive Annual Financial Report ---PAGE BREAK--- STATEMENT OF ACTIVITIES (Continued) FISCAL YEAR ENDED JUNE 30, 2012 Governmental Business-Type Activities Activities Total Changes in net assets: Net (expense) revenue from previous page…………… $ (89,038,286) $ 1,061,742 $ (87,976,544) General revenues: Real estate and personal property taxes, net of tax refunds payable………………………… 72,073,381 - 72,073,381 Tax 795,443 - 795,443 Motor vehicle and other excise taxes……………… 3,131,334 - 3,131,334 Hotel/motel and meals 1,161,007 - 1,161,007 Penalties and interest on 490,242 - 490,242 Payments in lieu of 1,440,186 - 1,440,186 Grants and contributions not restricted to specific 8,220,908 - 8,220,908 Unrestricted investment income…………………… 103,015 - 103,015 Miscellaneous………………………………………… 453,416 - 453,416 Transfers, net 985,677 (985,677) - Total general revenues and transfers………………… 88,854,609 (985,677) 87,868,932 Change in net (183,677) 76,065 (107,612) Net Assets: Beginning of 137,456,738 12,614,418 150,071,156 End of 137,273,061 $ 12,690,483 $ 149,963,544 (Concluded) Primary Government City of Salem, Massachusetts 31 Comprehensive Annual Financial Report ---PAGE BREAK--- School Nonmajor Total Capital Governmental Governmental ASSETS General Projects Funds Funds Cash and cash $ 11,547,131 $ 1,009,070 $ 9,550,319 $ 22,106,520 2,713,584 - 5,422,965 8,136,549 Receivables, net of uncollectibles: Real estate and personal property 1,046,979 - - 1,046,979 Tax 1,499,755 - - 1,499,755 Motor vehicle and other excise 467,200 - - 467,200 Departmental and - - 67,162 67,162 Intergovernmental……………………………………………………… 19,637,379 2,086,688 2,083,748 23,807,815 - - 438,470 438,470 Due from other - - 315,113 315,113 Prepaid 1,087,626 - - 1,087,626 TOTAL 37,999,654 $ 3,095,758 $ 17,877,777 $ 58,973,189 LIABILITIES AND FUND BALANCES LIABILITIES: Warrants - $ 3,387,106 $ 675,314 $ 4,062,420 Accrued 1,144,383 - - 1,144,383 Accrued 3,749,861 - 182,018 3,931,879 Tax refunds 298,930 - - 298,930 Deferred 22,270,481 - 1,301,958 23,572,439 Due to other - - 315,113 315,113 Notes - 999,062 1,795,677 2,794,739 TOTAL 27,463,655 4,386,168 4,270,080 36,119,903 FUND BALANCES: - - 2,074,097 2,074,097 - 10,970 14,333,448 14,344,418 985,737 - - 985,737 9,550,262 (1,301,380) (2,799,848) 5,449,034 TOTAL FUND 10,535,999 (1,290,410) 13,607,697 22,853,286 TOTAL LIABILITIES AND FUND BALANCES………………………… $ 37,999,654 $ 3,095,758 $ 17,877,777 $ 58,973,189 See notes to basic financial statements. GOVERNMENTAL FUNDS BALANCE SHEET JUNE 30, 2012 City of Salem, Massachusetts 32 Comprehensive Annual Financial Report ---PAGE BREAK--- RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TOTAL FUND BALANCES TO THE STATEMENT OF NET ASSETS JUNE 30, 2012 Total governmental fund $ 22,853,286 Capital assets (net) used in governmental activities are not financial resources and, therefore, are not reported in the 172,195,580 Accounts receivable are not available to pay for current-period expenditures and, therefore, are deferred in the 23,572,439 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 102,210 In the statement of activities, interest is accrued on outstanding long-term debt, whereas in governmental funds interest is not reported until (636,004) Long-term liabilities are not due and payable in the current period and, therefore, are not reported in the governmental funds Bonds (43,629,929) Landfill (600,000) Workers' (1,834,959) Capital (245,703) Compensated (7,453,069) Other postemployment (27,050,790) Net effect of reporting long-term (80,814,450) Net assets of governmental $ 137,273,061 See notes to basic financial statements. City of Salem, Massachusetts 33 Comprehensive Annual Financial Report ---PAGE BREAK--- GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FISCAL YEAR ENDED JUNE 30, 2012 School Nonmajor Total Capital Governmental Governmental General Projects Funds Funds REVENUES: Real estate and personal property taxes, net of tax 72,202,064 $ - $ - $ 72,202,064 Tax 647,045 - - 647,045 Motor vehicle and other excise 3,203,122 - - 3,203,122 Hotel/motel and meals 1,161,007 - - 1,161,007 Charges for 1,394,844 - 123,625 1,518,469 Penalties and interest on 487,842 - 2,400 490,242 Payments in lieu of 1,440,186 - - 1,440,186 Licenses and 499,046 - - 499,046 Fines and 1,255,894 - - 1,255,894 Intergovernmental……………………………………………………… 41,181,730 5,033,128 17,839,514 64,054,372 Departmental and 41,783 - 2,971,012 3,012,795 - - 341,804 341,804 Investment 87,389 - 42,384 129,773 TOTAL 123,601,952 5,033,128 21,320,739 149,955,819 EXPENDITURES: Current: General 5,204,851 - 988,304 6,193,155 Public 16,800,348 - 1,525,760 18,326,108 50,678,452 8,170,151 9,322,804 68,171,407 Public 2,580,477 - 1,644,011 4,224,488 Community - - 3,008,739 3,008,739 Health and human 882,583 - 4,656,038 5,538,621 Culture and 1,915,941 - 1,486,880 3,402,821 Pension 18,538,274 - - 18,538,274 Employee 13,122,992 - - 13,122,992 State and county 6,390,908 - - 6,390,908 Debt service: 4,682,000 - 35,000 4,717,000 1,757,638 - 3,913 1,761,551 TOTAL EXPENDITURES………………………………………… 122,554,464 8,170,151 22,671,449 153,396,064 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES…………………………………… 1,047,488 (3,137,023) (1,350,710) (3,440,245) OTHER FINANCING SOURCES (USES): Issuance of bonds and - 2,500,938 1,400,000 3,900,938 Premium from issuance of 1,059 - - 1,059 Capital lease 38,765 - - 38,765 Transfers 4,081,333 - 1,103,561 5,184,894 Transfers (3,628,125) - (571,092) (4,199,217) TOTAL OTHER FINANCING SOURCES 493,032 2,500,938 1,932,469 4,926,439 NET CHANGE IN FUND 1,540,520 (636,085) 581,759 1,486,194 FUND BALANCES AT BEGINNING OF 8,995,479 (654,325) 13,025,938 21,367,092 FUND BALANCES AT END OF $ 10,535,999 $ (1,290,410) $ 13,607,697 $ 22,853,286 See notes to basic financial statements. City of Salem, Massachusetts 34 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, 2012 Net change in fund balances - total governmental $ 1,486,194 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 11,752,488 Depreciation (6,995,970) Net effect of reporting capital 4,756,518 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 (3,268,782) 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 178,027 Capital lease (38,765) Issuance of bonds and (3,900,938) Debt service principal 4,717,000 Net effect of reporting long-term 955,324 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 (405,050) Net change in landfill liability 1,800,000 Net change in workers' (660,006) Net change in accrued interest on long-term 80,070 Net change in other postemployment (5,132,068) Amortization of premium from issuance of bonds and notes payable………………………… 135,535 Net effect of recording long-term liabilities and amortizing deferred losses…………… (4,181,519) 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…………… 68,588 Change in net assets of governmental $ (183,677) See notes to basic financial statements. City of Salem, Massachusetts 35 Comprehensive Annual Financial Report ---PAGE BREAK--- Governmental Activities - Golf Internal Service Water Sewer Course Parking Trash Total Funds ASSETS CURRENT: Cash and cash equivalents………………………$ 3,504,704 $ 618,607 $ 369,495 $ - $ 386,052 $ 4,878,858 $ 102,210 Receivables, net of allowance for uncollectibles User 1,138,578 2,279,614 - - - 3,418,192 - Trash - - - - 93,103 93,103 - Investment in joint venture……………………… - 1,130,116 - - - 1,130,116 - Total current 4,643,282 4,028,337 369,495 - 479,155 9,520,269 102,210 NONCURRENT: Capital assets, non depreciable………………… 921,496 99,552 118,067 48,214 - 1,187,329 - Capital assets, net of accumulated depreciation 13,053,646 2,773,651 380,656 4,282,151 - 20,490,104 - Total noncurrent assets…………………… 13,975,142 2,873,203 498,723 4,330,365 - 21,677,433 - TOTAL 18,618,424 6,901,540 868,218 4,330,365 479,155 31,197,702 102,210 LIABILITIES CURRENT: Warrants - 25,539 - - - 25,539 - Accrued liabilities………………………………… 33,888 47,255 - - 275,019 356,162 - Accrued 7,419 8,132 - - 927 16,478 - Accrued 56,364 - 1,123 12,625 - 70,112 - Compensated absences………………………… 8,977 8,977 6,563 22,250 - 46,767 - Notes 542 - - - - 542 - Bonds 810,978 100,000 31,000 75,000 - 1,016,978 - Total current liabilities……………………… 918,168 189,903 38,686 109,875 275,946 1,532,578 - NONCURRENT: Compensated absences………………………… 28,438 28,438 13,333 40,301 - 110,510 - Other postemployment benefits obligation……… 288,265 296,861 140,163 336,980 56,038 1,118,307 - Bonds 12,941,824 2,195,000 109,000 500,000 - 15,745,824 - Total noncurrent liabilities…………………… 13,258,527 2,520,299 262,496 877,281 56,038 16,974,641 - TOTAL LIABILITIES………………………………… 14,176,695 2,710,202 301,182 987,156 331,984 18,507,219 - NET ASSETS Invested in capital assets, net of related debt…… 3,903,931 587,146 358,723 3,755,365 - 8,605,165 - Unrestricted…………………………………………… 537,798 3,604,192 208,313 (412,156) 147,171 4,085,318 102,210 TOTAL NET $ 4,441,729 $ 4,191,338 $ 567,036 $ 3,343,209 $ 147,171 $ 12,690,483 $ 102,210 See notes to basic financial statements. Business-type Activities - Enterprise Funds PROPRIETARY FUNDS STATEMENT OF NET ASSETS JUNE 30, 2012 City of Salem, Massachusetts 36 Comprehensive Annual Financial Report ---PAGE BREAK--- PROPRIETARY FUNDS STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS FISCAL YEAR ENDED JUNE 30, 2012 Business-type Activities - Enterprise Funds Governmental Activities - Golf Internal Service Water Sewer Course Parking Trash Total Funds OPERATING REVENUES: Charges for services $ 4,623,340 $ 7,986,386 $ 648,916 $ 2,274,470 $ 675,916 $ 16,209,028 $ - - - - - - - 110,392 TOTAL OPERATING REVENUES 4,623,340 7,986,386 648,916 2,274,470 675,916 16,209,028 110,392 OPERATING EXPENSES: Cost of services and administration 1,035,168 867,192 395,815 779,659 2,744,963 5,822,797 - District Assessment……………………………… 2,403,095 5,697,645 - - - 8,100,740 - Depreciation……………………………………… 336,695 107,055 38,148 236,426 - 718,324 - Employee benefits - - - - - - 41,804 TOTAL OPERATING EXPENSES 3,774,958 6,671,892 433,963 1,016,085 2,744,963 14,641,861 41,804 OPERATING INCOME 848,382 1,314,494 214,953 1,258,385 (2,069,047) 1,567,167 68,588 NONOPERATING REVENUES (EXPENSES): Interest (413,125) (61,125) (4,650) (26,525) - (505,425) - INCOME (LOSS) BEFORE TRANSFERS… 435,257 1,253,369 210,303 1,231,860 (2,069,047) 1,061,742 68,588 TRANSFERS: Transfers 100,000 - 403,269 - 2,089,981 2,593,250 - Transfers (710,471) (776,463) (607,158) (1,484,835) - (3,578,927) - TOTAL TRANSFERS………………………… (610,471) (776,463) (203,889) (1,484,835) 2,089,981 (985,677) - CHANGE IN NET ASSETS………………… (175,214) 476,906 6,414 (252,975) 20,934 76,065 68,588 NET ASSETS AT BEGINNING OF 4,616,943 3,714,432 560,622 3,596,184 126,237 12,614,418 33,622 NET ASSETS AT END OF $ 4,441,729 $ 4,191,338 $ 567,036 $ 3,343,209 $ 147,171 $ 12,690,483 $ 102,210 See notes to basic financial statements. City of Salem, Massachusetts 37 Comprehensive Annual Financial Report ---PAGE BREAK--- PROPRIETARY FUNDS STATEMENT OF CASH FLOWS FISCAL YEAR ENDED JUNE 30, 2012 Business-type Activities - Enterprise Funds Governmental Activities - Golf Internal Service Water Sewer Course Parking Trash Total Funds CASH FLOWS FROM OPERATING ACTIVITIES: Receipts from customers and $ 4,574,152 $ 7,941,521 $ 648,916 $ 2,274,470 $ 686,833 $ 16,125,892 $ - Receipts from interfund services - - - - - - 110,392 Payments to (3,008,194) (6,571,571) (172,975) (219,748) (2,659,628) (12,632,116) - Payments to (386,934) (356,286) (193,484) (467,087) (18,775) (1,422,566) - Payments for interfund services - - - - - - (41,804) NET CASH FROM OPERATING ACTIVITIES…………………………………… 1,179,024 1,013,664 282,457 1,587,635 (1,991,570) 2,071,210 68,588 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: Transfers 100,000 - 403,269 - 2,089,981 2,593,250 - Transfers (710,471) (776,463) (607,158) (1,484,835) - (3,578,927) - NET CASH FROM NONCAPITAL FINANCING ACTIVITIES…………………… (610,471) (776,463) (203,889) (1,484,835) 2,089,981 (985,677) - CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Proceeds from the issuance of bonds and 1,412,944 710,000 - - - 2,122,944 - Acquisition and construction of capital (2,202,340) (600,195) - - - (2,802,535) - Principal payments on bonds and (812,880) (315,000) (32,000) (75,000) - (1,234,880) - Interest (417,170) (61,125) (4,810) (27,800) - (510,905) - NET CASH FROM CAPITAL AND RELATED FINANCING ACTIVITIES……… (2,019,446) (266,320) (36,810) (102,800) - (2,425,376) - NET CHANGE IN CASH AND CASH EQUIVALENTS…………………………… (1,450,893) (29,119) 41,758 - 98,411 (1,339,843) 68,588 CASH AND CASH EQUIVALENTS AT BEGINNING OF 4,955,597 647,726 327,737 - 287,641 6,218,701 33,622 CASH AND CASH EQUIVALENTS AT END OF 3,504,704 $ 618,607 $ 369,495 $ - $ 386,052 $ 4,878,858 $ 102,210 RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH FROM OPERATING ACTIVITIES: Operating income 848,382 $ 1,314,494 $ 214,953 $ 1,258,385 $ (2,069,047) $ 1,567,167 $ 68,588 Adjustments to reconcile operating income (loss) to net cash from operating activities: 336,695 107,055 38,148 236,426 - 718,324 - Changes in assets and liabilities: User (49,188) (44,865) - - - (94,053) - Trash - - - - 10,917 10,917 - Investment in joint - (443,344) - - - (443,344) - Accrued (10,339) 17,213 - - 54,363 61,237 - Accrued 1,120 1,869 - - 556 3,545 - Other postemployment 53,343 62,231 26,345 63,227 11,641 216,787 - Accrued compensated (989) (989) 3,011 29,597 - 30,630 - Total 330,642 (300,830) 67,504 329,250 77,477 504,043 - NET CASH FROM OPERATING ACTIVITIES…………………………………… $ 1,179,024 $ 1,013,664 $ 282,457 $ 1,587,635 $ (1,991,570) $ 2,071,210 $ 68,588 See notes to basic financial statements. City of Salem, Massachusetts 38 Comprehensive Annual Financial Report ---PAGE BREAK--- FIDUCIARY FUNDS STATEMENT OF FIDUCIARY NET ASSETS JUNE 30, 2012 Pension and Other Private Employee Benefit Purpose Agency Trust Funds Trust Funds Fund ASSETS Cash and cash $ 8,354,320 $ 251,271 $ 1,391,068 Investments: Corporate 362,242 1,037,999 - Real estate and alternative investment mutual funds………………… 756,270 - - 85,018,605 - - Receivables, net of allowance for uncollectibles: 425,604 - - NONCURRENT: Capital assets, net of accumulated depreciation………………………… 103,906 - - TOTAL 95,020,947 1,289,270 1,391,068 LIABILITIES Warrants 5,533 - 56,752 Liabilities due - - 1,334,316 TOTAL 5,533 - 1,391,068 NET ASSETS Held in trust for: 94,634,402 - - 381,012 - - Other - 1,289,270 - Held in trust for pension, OPEB benefits, and other purposes………… $ 95,015,414 $ 1,289,270 $ - The Pension Trust Fund is as of December 31, 2011. See notes to basic financial statements. City of Salem, Massachusetts 39 Comprehensive Annual Financial Report ---PAGE BREAK--- FIDUCIARY FUNDS STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS FISCAL YEAR ENDED JUNE 30, 2012 Pension and Other Private Employee Benefit Purpose Trust Funds Trust Funds ADDITIONS: Contributions: 10,822,403 $ - Plan 3,353,392 - Private - 16,052 Total 14,175,795 16,052 Net investment income: Net change in fair value of (2,442,424) (12,450) 2,702,897 1,020 Total investment 260,473 (11,430) Less: investment (473,299) - Net investment (212,826) (11,430) 381,906 - Transfers from other 385,154 - TOTAL 14,730,029 4,622 DEDUCTIONS: 306,474 - Transfers to other 304,484 - Retirement benefits and 13,206,874 - Educational - 16,518 Housing - 89,683 3,125 - TOTAL 13,820,957 106,201 CHANGE IN NET 909,072 (101,579) NET ASSETS AT BEGINNING OF 94,106,342 1,390,849 NET ASSETS AT END OF 95,015,414 $ 1,289,270 The Pension Trust Fund is as of December 31, 2011. See notes to basic financial statements. City of Salem, Massachusetts 40 Comprehensive Annual Financial Report ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2012 City of Salem, Massachusetts 41 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 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. 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, 2012, the City’s equity interest in the operations of the District totaled $1,130,116, 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, ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2012 City of Salem, Massachusetts 42 Comprehensive Annual Financial Report 2012 totaled approximately $2.4 million. Complete financial information for the Water Board can be obtained by contacting them at 50 Arlington Avenue, Beverly, MA 01915. The City operates a Horace Mann Charter School to address the needs of the City’s high school dropouts and at- risk youth. The Salem Community Charter School opened during fiscal year 2012. The Charter School will be managed independently by an appointed Board of Trustees and not by the School Committee and Superintendent. Ongoing funding for the school’s operations will be provided by the City based upon a negotiated amount between the School Committee and Board of Trustees within the guidelines established by the authorizing legislation of the Commonwealth of Massachusetts. The activity will be included within the City’s basic financial statements and will be audited independently. 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% 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% 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. ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2012 City of Salem, Massachusetts 43 Comprehensive Annual Financial Report 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. 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. However, the effect of interfund services provided and used between functions is not eliminated as the 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 when 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 and 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. ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2012 City of Salem, Massachusetts 44 Comprehensive Annual Financial Report 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 school capital projects fund is used to account for the ongoing construction and renovations of the City’s school buildings. 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 and report the proceeds of specific revenue sources that are restricted or committed to expenditure for specified purposes other than permanent funds or capital projects. The capital projects fund is used to account for and report financial resources that are restricted, committed, or assigned to expenditure for capital outlays, including the acquisition or construction of capital facilities and other capital assets of the governmental funds. The permanent fund is used to account for and report 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 water enterprise fund is used to account for the water activities. The sewer enterprise fund is used to account for the sewer 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. The trash enterprise fund is used to account for the solid waste disposal 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 retirees’ health insurance. ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2012 City of Salem, Massachusetts 45 Comprehensive Annual Financial Report Fiduciary fund financial statements are reported using the flow of economic resources measurement focus and use the accrual basis of accounting except for the Agency Fund, which has no measurement focus. 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 other postemployment benefit trust fund is used to accumulate resources to provide funding for future other postemployment benefits (OPEB) liabilities. 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 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, police and fire details, escrow deposits and unclaimed property. Government-Wide and Fund Financial Statements Private-sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed in both the government-wide and proprietary fund financial statements to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board. Governments also have the option of following subsequent private-sector guidance for their business-type activities and enterprise funds, subject to this same limitation. The government has elected not to follow subsequent private-sector guidance. 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. 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. ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2012 City of Salem, Massachusetts 46 Comprehensive Annual Financial Report 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. 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 user fees which includes liening any unpaid balance plus interest to the corresponding real estate tax bills. Trash user fees are levied based on the number of units located on the property. The per unit fee collected is $24 for commercial and $16 for residential. Collection from any one property shall not exceed $100 per month. Unpaid trash fees are subject to interest and demand fees; any fees not paid within thirty (30) days may be liened to the property in the following fiscal years’ real estate bill. Since the receivables are secured via either a shut off or lien 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, 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. ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2012 City of Salem, Massachusetts 47 Comprehensive Annual Financial Report 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 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 and Prepaid Items 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. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both the government-wide and fund financial statements. The cost of prepaid items is recorded as expenditures/expenses when consumed rather than when purchased. 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 $25,000 are capitalized at the date of acquisition or construction, respectively, with expected useful lives of greater than one year. This excludes vehicles, which will all be capitalized. ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2012 City of Salem, Massachusetts 48 Comprehensive Annual Financial Report 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…………………………………… 15-80 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. 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”. ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2012 City of Salem, Massachusetts 49 Comprehensive Annual Financial Report 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 reported as “invested in capital assets, net of related debt” includes capital assets, net of accumulated depreciation, less the principal balance of outstanding debt used to acquire capital assets. Unspent proceeds of capital related debt are not considered to be capital assets. Outstanding debt related to future reimbursements from the state’s school building program is not considered to be capital related debt. Net assets are reported as restricted when amounts 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 loan receivable balances which are funded through the Community Development Block Grant program. The loan repayments are subject to various restrictions which are imposed by the grantors. “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 of the realized investment earnings that support governmental programs. “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) Governmental fund equity is classified as fund balance. Fund balance is further classified as follows: “Nonspendable” fund balance includes amounts that cannot be spent because they are either not in spendable form or they are legally or contractually required to be maintained intact. “Restricted” fund balance includes amounts subject to constraints placed on the use of resources that are either externally imposed by creditors, grantors, contributors, or laws or regulations of other governments; or that are imposed by law through constitutional provisions or enabling legislation. ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2012 City of Salem, Massachusetts 50 Comprehensive Annual Financial Report “Committed” fund balance includes amounts that can only be used for specific purposes pursuant to constraints imposed by formal action of the government’s highest level of decision-making authority. A vote of the City Council is the highest level of decision making authority that can commit funds for a specific purpose. Once voted, the limitation imposed by the vote remains in place until the funds are used for their intended purpose or a vote is taken to rescind the commitment. “Assigned” fund balance includes amounts that are constrained by the City’s intent to be used for specific purposes, but are neither restricted nor committed. The City Finance Director has the authority to assign fund balance. Funds are assigned when the City has an obligation to purchase goods or services from the current years’ appropriation. “Unassigned” fund balance includes the residual classification for the general fund. This classification represents fund balance that has not been assigned to other funds and that has not been restricted, committed, or assigned to specific purposes within the general fund. Sometimes the City will fund outlays for a particular purpose from different components of fund balance. In order to calculate the amounts to report as restricted, assigned, and unassigned fund balance in the governmental fund financial statements a flow assumption must be made about the order in which the resources are considered to be applied. When different components of fund balance can be used for the same purpose, it is the City’s policy to consider restricted fund balance to have been depleted first, followed by assigned fund balance. Unassigned fund balance is applied last. 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. ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2012 City of Salem, Massachusetts 51 Comprehensive Annual Financial Report Government-Wide and Proprietary Fund Financial Statements Vested or accumulated vacation and sick leave are reported as liabilities and expensed as incurred. 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. Fund Deficits and Appropriation Deficits An individual fund deficit existed at June 30, 2012 in the school capital projects major fund. This deficit will be funded through long-term borrowing and capital grants. Actual expenditures exceeded appropriations for snow and ice by under $10,000. This over-expenditures will be funded with available funds during fiscal year 2013. In the snow and ice non-personnel appropriation line, the general law allows deficits to occur and to be raised in the subsequent fiscal year. P. 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. Q. 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 15% of any trust fund may be invested in bank stocks and ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2012 City of Salem, Massachusetts 52 Comprehensive Annual Financial Report insurance company stocks, and not more than 1.5% of any trust fund can be invested in the stock of any one bank or insurance company. 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. The City Treasurer is the custodian of funds held in the Other Postemployment Benefit (OPEB) Trust Fund. As of June 30, 2012, $381,000 from the OPEB Trust Fund is included within the City’s cash and investments balances in the following disclosures. The System participates in the Pension Reserve Investment Trust (PRIT), which meets the criteria of an external investment pool. PRIT is administered by the Pension Reserves Investment Management Board, which was established by the Treasurer of the Commonwealth of Massachusetts who serves as Trustee. The fair value of the position in the PRIT is the same as the value of the PRIT shares. 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. 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 formal deposit policy for custodial credit risk. At fiscal year-end, the carrying amount of deposits totaled $27,902,004 and the bank balance totaled $29,648,348. Of the bank balance, $1,809,399 was covered by Federal Depository Insurance, $4,821,389 was covered by the Share Insurance Fund, $1,494,048 was covered by the Depositors Insurance Fund, $16,192,172 was collateralized and $5,331,340 was exposed to custodial credit risk because it was uninsured and uncollateralized. The System does not have a formal deposit policy for custodial credit risk. At fiscal year-end, the carrying amount of deposits totaled $277,367 and the bank balance totaled $300,000. The entire bank balance was covered by Federal Depository Insurance. ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2012 City of Salem, Massachusetts 53 Comprehensive Annual Financial Report Investments As of June 30, 2012, the City had the following investments: Fair Value Under 1 Year 1-5 Years Over 10 Years Investment Type Debt Securities: Corporate $ 1,632,575 $ 269,251 $ 1,363,324 $ - U.S. Instrumentalities………………………………… 2,238,951 - 2,075,664 163,287 Total Debt 3,871,526 $ 269,251 $ 3,438,988 $ 163,287 Other Investments: Equity 3,182,681 Equity Mutual 1,949,471 Bond Mutual 533,112 Money Market Mutual 773,571 73,122 Total $ 10,383,483 Maturity As of December 31, 2011, the System had the following investments: Maturity Fair Value Under 1 Year Investment Type Repurchase Agreements…………………………… $ 6,731,650 $ 6,731,650 Other Investments: Government Short-term Investment Funds……… 1,326,533 Venture Capital and Limited Partnerships............. 191,598 Real Estate Investment 564,672 Pension Reserve Investment Trust (PRIT)………… 85,018,605 Total $ 93,833,058 The City participates in MMDT which is unrated. MMDT maintains a cash portfolio and a short-term bond portfolio with combined average maturities of approximately 3 months. The System participates in PRIT which is unrated. The effective weighted duration rate for PRIT investments ranged from .08 to 9.69 years. 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 City’s investments, $1,632,575 of corporate bonds, $2,238,951 of U.S. Instrumentalities and $3,182,681 of equity securities are exposed to custodial credit risk because the related securities are uninsured, unregistered and are held by the counterparty. ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2012 City of Salem, Massachusetts 54 Comprehensive Annual Financial Report The City has a formal investment policy related to custodial credit risk to invest in U.S. Treasuries, U.S. Agency obligations and fully collateralized certificates of deposit and, in addition, any investment not meeting this criteria are limited to no more than 5% of an institution’s assets and no more than 10% of the municipality’s cash. 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 Contributory Retirement Board. Interest Rate Risk The City has a formal investment policy limiting investment maturities up to one year as a means of managing its exposure to fair value losses arising from increasing interest rates. The System does not have a formal investment policy related to interest rate risk. Credit Risk The City has not adopted a formal policy related to Credit Risk. The investment ratings are as follows: Fair Value AAA AA+ A A+ A- BBB+ Unrated Debt Securities: Corporate $ 1,632,575 $ - $ 384,389 $ 257,302 $ 197,171 $ 523,628 $ 258,710 $ 11,375 U.S. Instrumentalities………… 2,238,951 2,238,951 - - - - - - Total Debt Securities.............. $ 3,871,526 $ 2,238,951 $ 384,389 $ 257,302 $ 197,171 $ 523,628 $ 258,710 $ 11,375 The System has not adopted a formal policy related to Credit Risk. The alternate investment mutual funds, real estate mutual fund investments and PRIT are unrated. Concentration of Credit Risk The City restricts investments to no more than 5% in any one issuer. The City did not have more than 5% of its investments in any one individual security. The retirement system places no limit on the amount the government may invest in any one issuer. The System did not have more than 5% of its investments in any one individual security. ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2012 City of Salem, Massachusetts 55 Comprehensive Annual Financial Report NOTE 3 – RECEIVABLES At June 30, 2012, 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 $ 1,046,979 $ - $ 1,046,979 Tax 1,499,755 - 1,499,755 Motor vehicle and other excise 970,139 (502,939) 467,200 Departmental and 67,162 - 67,162 Intergovernmental…………………………………………… 23,807,815 - 23,807,815 652,726 (214,256) 438,470 $ 28,044,576 $ (717,195) $ 27,327,381 At June 30, 2012, receivables for the water, sewer and trash enterprise funds consist of the following: Allowance Gross for Net Amount Uncollectibles Amount Receivables: Water user $ 1,138,578 $ - $ 1,138,578 Sewer user 2,279,614 - 2,279,614 Trash 93,103 - 93,103 $ 3,511,295 $ - $ 3,511,295 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 $ 707,777 $ - $ 707,777 Tax 1,499,755 - 1,499,755 Motor vehicle and other excise 467,200 - 467,200 Departmental and - 67,162 67,162 Intergovernmental……………………………………………… 19,595,749 796,326 20,392,075 - 438,470 438,470 $ 22,270,481 $ 1,301,958 $ 23,572,439 ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2012 City of Salem, Massachusetts 56 Comprehensive Annual Financial Report NOTE 4 – CAPITAL ASSETS Capital asset activity for the fiscal year ended June 30, 2012, was as follows: Beginning Ending Balance Increases Decreases Balance Governmental Activities: Capital assets not being depreciated: 6,439,612 $ - $ (4,044) $ 6,435,568 Construction in 557,657 8,216,051 (289,000) 8,484,708 Total capital assets not being depreciated………… 6,997,269 8,216,051 (293,044) 14,920,276 Capital assets being depreciated: Land improvements……………………………………… 6,569,097 943,857 - 7,512,954 Buildings and improvements…………………………… 171,233,847 48,888 - 171,282,735 10,072,273 834,110 - 10,906,383 Infrastructure……………………………………………… 57,053,284 1,882,626 - 58,935,910 5,373,800 120,000 (386,070) 5,107,730 Total capital assets being depreciated…………… 250,302,301 3,829,481 (386,070) 253,745,712 Less accumulated depreciation for: Land improvements……………………………………… (1,965,449) (292,523) - (2,257,972) Buildings and improvements…………………………… (49,328,815) (4,277,377) - (53,606,192) (4,902,630) (618,442) - (5,521,072) Infrastructure……………………………………………… (29,374,409) (1,535,012) - (30,909,421) (4,289,205) (272,616) 386,070 (4,175,751) Total accumulated depreciation…………………… (89,860,508) (6,995,970) 386,070 (96,470,408) Total capital assets being depreciated, 160,441,793 (3,166,489) - 157,275,304 Total governmental activities capital assets…………………$ 167,439,062 $ 5,049,562 $ (293,044) $ 172,195,580 ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2012 City of Salem, Massachusetts 57 Comprehensive Annual Financial Report Beginning Ending Balance Increases Decreases Balance Water Activities: Capital assets not being depreciated: 10,589 $ - $ - $ 10,589 Construction in 1,529,595 881,072 (1,499,760) 910,907 Total capital assets not being depreciated………… 1,540,184 881,072 (1,499,760) 921,496 Capital assets being depreciated: Land improvements……………………………………… 114,550 - - 114,550 296,290 - - 296,290 1,953,196 - - 1,953,196 Infrastructure……………………………………………… 15,101,050 2,760,564 - 17,861,614 Total capital assets being depreciated…………… 17,465,086 2,760,564 - 20,225,650 Less accumulated depreciation for: Land improvements……………………………………… (54,413) (5,728) - (60,141) (112,830) (29,629) - (142,459) (34,156) (9,759) - (43,915) Infrastructure……………………………………………… (6,633,910) (291,579) - (6,925,489) Total accumulated depreciation…………………… (6,835,309) (336,695) - (7,172,004) Total capital assets being depreciated, 10,629,777 2,423,869 - 13,053,646 Total water activities capital 12,169,961 $ 3,304,941 $ (1,499,760) $ 13,975,142 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 48,796 - - 48,796 Infrastructure……………………………………………… 3,575,544 511,418 - 4,086,962 Total capital assets being depreciated…………… 3,629,765 511,418 - 4,141,183 Less accumulated depreciation for: Buildings and improvements…………………………… (5,426) - - (5,426) (34,157) (9,759) - (43,916) Infrastructure……………………………………………… (1,220,894) (97,296) - (1,318,190) Total accumulated depreciation…………………… (1,260,477) (107,055) - (1,367,532) Total capital assets being depreciated, 2,369,288 404,363 - 2,773,651 Total sewer activities capital $ 2,468,840 $ 404,363 $ - $ 2,873,203 ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2012 City of Salem, Massachusetts 58 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 - - 453,988 337,233 - - 337,233 Total capital assets being depreciated…………… 1,104,073 - - 1,104,073 Less accumulated depreciation for: Land improvements……………………………………… (305,046) (1,201) - (306,247) Buildings and improvements…………………………… (140,488) (11,000) - (151,488) (239,735) (25,947) - (265,682) Total accumulated depreciation…………………… (685,269) (38,148) - (723,417) Total capital assets being depreciated, 418,804 (38,148) - 380,656 Total golf course activities capital assets……………………$ 536,871 $ (38,148) $ - $ 498,723 Beginning Ending Balance Increases Decreases Balance Parking Activities: Capital assets not being depreciated: 48,214 $ - $ - $ 48,214 Capital assets being depreciated: Land improvements……………………………………… 1,338,366 - - 1,338,366 Buildings and improvements…………………………… 7,625,100 - - 7,625,100 73,805 - - 73,805 Infrastructure……………………………………………… 24,952 - - 24,952 Total capital assets being depreciated…………… 9,062,223 - - 9,062,223 Less accumulated depreciation for: Land improvements……………………………………… (208,353) (33,500) - (241,853) Buildings and improvements…………………………… (4,312,403) (191,066) - (4,503,469) (15,405) (6,870) - (22,275) Infrastructure……………………………………………… (7,485) (4,990) - (12,475) Total accumulated depreciation…………………… (4,543,646) (236,426) - (4,780,072) Total capital assets being depreciated, 4,518,577 (236,426) - 4,282,151 Total parking activities capital 4,566,791 $ (236,426) $ - $ 4,330,365 In the fiduciary activities, the Retirement System owns a condominium, which is being depreciated on a straight- line basis over 40 years. The historical cost of the condominium was $125,000; accumulated depreciation through December 31, 2011 totals $21,094, for a net book value of $103,906. ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2012 City of Salem, Massachusetts 59 Comprehensive Annual Financial Report Depreciation expense was charged to functions/programs of the primary government as follows: Governmental Activities: General $ 376,634 Public 545,999 4,099,157 Public 1,792,611 Health and human 4,636 Culture and 176,933 Total depreciation expense - governmental activities……………………………… $ 6,995,970 Business-Type Activities: $ 336,695 107,055 Golf 38,148 236,426 Total depreciation expense - business-type activities……………………………… $ 718,324 Fiduciary Activities: Pension 3,125 NOTE 5 – INTERFUND TRANSFERS AND BALANCES Interfund transfers for the fiscal year ended June 30, 2012, are summarized as follows: Trash Golf Course Water Nonmajor General Enterprise Enterprise Enterprise Governmental Transfers Out: Fund Fund Fund Fund Funds Total General $ - $ 2,089,981 $ 403,269 $ 100,000 $ 1,034,875 $ 3,628,125 Nonmajor Governmental Funds………… 512,266 - - - 58,826 571,092 Parking Enterprise 1,484,835 - - - - 1,484,835 Golf Course Enterprise Fund………….. 607,158 - - - - 607,158 Sewer Enterprise 776,463 - - - - 776,463 Water Enterprise 700,611 - - - 9,860 710,471 4,081,333 $ 2,089,981 $ 403,269 $ 100,000 $ 1,103,561 $ 7,778,144 Transfer from general fund to trash enterprise fund for the City's subsidized portion; transfer from general fund to golf enterprise fund to reimburse for amounts raised by taxation; transfer from general fund to nonmajor governmental funds to fund capital projects. Transfer from the nonmajor governmental funds to the general fund for their share of indirect costs and transfers within nonmajor governmental funds. Transfer from the parking enterprise fund to the general fund for their share of indirect costs. Transfer from the golf course enterprise fund to the general fund for their share of indirect costs. Transfer from the sewer enterprise fund to the general fund for their share of indirect costs. Transfer from the water enterprise fund to the general fund for their share of indirect costs, and a transfer to special revenue for a Water Conservation project. Transfers In: ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2012 City of Salem, Massachusetts 60 Comprehensive Annual Financial Report The City’s interfund balances at June 30, 2012 consisted of $315,113 in balances within the nonmajor governmental funds all representing interfund borrowings for cash flow purposes. NOTE 6 – CAPITAL LEASES The City has entered into lease agreements as lessee for financing the acquisition of a fire truck, radio equipment, police vehicles, school buses, 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 541,403 324,719 Less: accumulated depreciation………………………… (302,192) 563,930 The future minimum lease obligations and the net present value of these minimum lease payments as of June 30, 2012, were as follows: Fiscal Years Governmental Ending June 30 Activities 137,958 112,061 14,012 Total minimum lease payments……………………… 264,031 Less: amounts representing interest………………… (18,328) Present value of minimum lease payments………… $ 245,703 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). ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2012 City of Salem, Massachusetts 61 Comprehensive Annual Financial Report 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. Details related to the short-term debt activity for the fiscal year ended June 30, 2012, are as follows: Balance at Balance at Rate June 30, Renewed/ Retired/ June 30, Type Purpose Due Date 2011 Issued Redeemed 2012 Governmental Activities GAN Wharf Expansion………………………………… 1.00% 10/21/11 $ 3,000,000 $ - $ (3,000,000) $ - BAN Municipal 1.60% 06/29/12 999,062 - (999,062) - GAN Wharf Expansion………………………………… 1.50% 10/19/12 - 1,795,677 - 1,795,677 BAN Municipal 1.20% 09/28/12 - 4,900,000 (3,900,938) 999,062 Sub-total government-type 3,999,062 6,695,677 (7,900,000) 2,794,739 Business-type Activities BAN Sewer Improvements…………………………… 1.60% 06/29/12 210,000 - (210,000) - BAN Sewer Improvements…………………………… 1.20% 09/28/12 - 710,000 (710,000) - BAN Water Improvements…………………………… 1.20% 09/28/12 - 1,412,944 (1,412,402) 542 Sub-total business-type 210,000 2,122,944 (2,332,402) 542 Total notes $ 4,209,062 $ 8,818,621 $ (10,232,402) $ 2,795,281 Subsequent to year end, the City issued long-term debt which was used to retire $3,900,938 of governmental BAN’s, $1,412,402 of water BAN’s and $710,000 of sewer BAN’s outstanding at June 30, 2012. These BAN’s have been classified as long-term debt as of June 30, 2012. The remaining BAN outstanding, totaling $999,604, was retired with available funds subsequent to year end. The $1,795,677 GAN outstanding at year end was retired upon maturity with Grant proceeds. 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". Subsequent to year end, the City issued $18,181,000 of long-term general obligation bonds. The bond proceeds were partially utilized to retire $3,900,938 of governmental BAN’s, $1,412,402 of water BAN’s and $710,000 of sewer BAN’s outstanding at June 30, 2012 which have been classified as long-term debt. ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2012 City of Salem, Massachusetts 62 Comprehensive Annual Financial Report Details related to the outstanding general obligation indebtedness at June 30, 2012, and the debt service requirements are reported in the following tables. Bonds Payable Schedule – Governmental Activities Original Interest Outstanding Outstanding Maturities Loan Rate at June 30, at June 30, Project Through Amount 2011 Issued Redeemed 2012 HUD Section 2012 $ 6,000,000 9.00% $ 140,000 $ - $ (35,000) $ 105,000 Municipal Purpose Refunding Bonds of 2001……… 2001 14,140,000 3.50-4.00% 905,000 - (905,000) - Municipal Purpose Bonds of 2023 28,670,000 3.00-5.00% 19,825,000 - (1,325,000) 18,500,000 Municipal Purpose Refunding Bonds of 2003……… 2013 4,480,000 2.25-4.50% 925,000 - (465,000) 460,000 Municipal Purpose Bonds of 2025 2,465,000 3.00-5.00% 1,710,000 - (125,000) 1,585,000 Municipal Purpose Bonds of 2028 8,319,497 3.75-5.00% 6,845,000 - (485,000) 6,360,000 Municipal Purpose Refunding Bonds of 2010……… 2020 8,113,000 2.00-5.00% 7,898,000 - (838,000) 7,060,000 Municipal Purpose Bonds of 2026 5,219,000 3.00-5.00% 5,219,000 - (539,000) 4,680,000 Municipal Purpose Bonds of 2043 3,900,938 2.63-4.00% - 3,900,938 - 3,900,938 Total Governmental bonds 43,467,000 3,900,938 (4,717,000) 42,650,938 Unamortized premiums on 1,114,526 - (135,535) 978,991 Total outstanding bonds payable reported in governmental activities……………………………………$ 44,581,526 $ 3,900,938 $ (4,852,535) 43,629,929 General obligation bonds issued in fiscal year 11,242,660 Less unamortized premiums on (978,991) Total future fiscal year payments of bonds reported in governmental 53,893,598 Debt service requirements for principal and interest for governmental bonds payable include the debt issuance subsequent to year end in which all except $11,242,660 of new funds were used to redeem long-term BANs. The future fiscal years payments are as follows: Fiscal Year Principal Interest Total 3,834,000 $ 1,753,216 $ 5,587,216 4,388,598 1,871,150 6,259,748 3,905,000 1,711,966 5,616,966 3,940,000 1,573,947 5,513,947 3,786,000 1,434,583 5,220,583 3,875,000 1,291,593 5,166,593 3,870,000 1,144,602 5,014,602 3,975,000 978,604 4,953,604 3,055,000 820,554 3,875,554 2,970,000 692,854 3,662,854 3,065,000 562,422 3,627,422 1,120,000 425,858 1,545,858 1,130,000 384,040 1,514,040 900,000 347,749 1,247,749 840,000 319,767 1,159,767 850,000 292,301 1,142,301 465,000 271,519 736,519 475,000 257,719 732,719 495,000 243,469 738,469 505,000 228,769 733,769 2033 through 6,450,000 1,301,163 7,751,163 53,893,598 $ 17,907,845 $ 71,801,443 ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2012 City of Salem, Massachusetts 63 Comprehensive Annual Financial Report The Commonwealth has approved school construction assistance to the City. The assistance program, which is administered by the Massachusetts School Building Authority (MSBA), provides resources for future debt service of general obligation school bonds outstanding along with direct capital grants. During fiscal year 2012, $3,522,000 of such assistance was received. Approximately $25,325,000 will be received in future fiscal years. Of the $25,325,000, $5,729,000 represents reimbursement of long-term interest costs, and $19,596,000 represents reimbursement of approved construction costs. Accordingly, a $19,596,000 intergovernmental receivable and corresponding deferred revenue have been reported in the governmental fund financial statements. Deferred revenue has been eliminated in the conversion to the government-wide financial statements and reported as net assets. The MSBA has modified the method of funding for new projects in the school building assistance program. Under the new program, the assistance is paid to support the State’s share of eligible construction costs as they are incurred, therefore eliminating the need for the City to fund the State’s share through long-term debt. The Saltonstall and Collins School projects are being partially funded through this program. As of June 30, 2012, the City has recorded an intergovernmental receivable totaling $2.1 million, which represents the State’s 78.26% share of eligible construction costs incurred to date that have not yet been reimbursed. Bonds Payable Schedule – Water Enterprise Fund Original Interest Outstanding Outstanding Maturities Loan Rate at June 30, at June 30, Project Through Amount 2011 Issued Redeemed 2012 Water Project - 2027 $ 2,330,656 2.00% $ 1,939,280 $ - $ (103,880) $ 1,835,400 Water 2028 3,250,503 3.75-5.00% 2,750,000 - (165,000) 2,585,000 Water System Tanks and Improvements………… 2031 8,464,000 3.00-5.00% 8,464,000 - (544,000) 7,920,000 Water System Improvements……………………… 2033 1,412,402 2.63-4.00% - 1,412,402 - 1,412,402 Total Water Enterprise $ 13,153,280 $ 1,412,402 $ (812,880) $ 13,752,802 The future fiscal years payments are as follows: Fiscal Year Principal Interest Total 810,978 $ 442,807 $ 1,253,785 2014……………… 865,521 441,331 1,306,852 2015……………… 870,303 414,736 1,285,039 2016……………… 872,532 388,264 1,260,796 2017……………… 874,805 359,047 1,233,852 2018……………… 877,124 326,902 1,204,026 2019……………… 879,490 294,735 1,174,225 2020……………… 881,904 262,521 1,144,425 2021……………… 889,367 229,859 1,119,226 2022……………… 791,880 198,747 990,627 2023……………… 799,443 169,484 968,927 2024……………… 797,058 140,169 937,227 2025……………… 804,726 111,264 915,990 2026……………… 802,447 82,767 885,214 2027……………… 610,224 58,202 668,426 2028……………… 470,000 38,850 508,850 2029……………… 310,000 24,050 334,050 2030……………… 180,000 15,075 195,075 2031……………… 180,000 8,725 188,725 2032……………… 90,000 4,200 94,200 2033……………… 95,000 1,425 96,425 Total………………$ 13,752,802 $ 4,013,160 $ 17,765,962 ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2012 City of Salem, Massachusetts 64 Comprehensive Annual Financial Report Bonds Payable Schedule – Sewer Enterprise Fund Original Interest Outstanding Outstanding Maturities Loan Rate at June 30, at June 30, Project Through Amount 2011 Issued Redeemed 2012 Sewer Improvements………………………………… 2030 $ 1,690,000 3.00-5.00% $ 1,690,000 $ - $ (105,000) $ 1,585,000 Sewer Improvements………………………………… 2033 710,000 2.63-4.00% - 710,000 - 710,000 Total Sewer Enterprise bonds 1,690,000 $ 710,000 $ (105,000) 2,295,000 General obligation bonds issued in fiscal year 725,000 Total Sewer Enterprise 3,020,000 Debt service requirements for principal and interest for sewer enterprise bonds payable include the debt issuance subsequent to year end in which all except $725,000 of new funds were used to redeem long-term BANs. The future fiscal years payments are as follows: Fiscal Year Principal Interest Total 100,000 $ 77,108 $ 177,108 2014……………… 150,000 98,851 248,851 2015……………… 155,000 94,277 249,277 2016……………… 155,000 89,627 244,627 2017……………… 155,000 84,502 239,502 2018……………… 155,000 78,902 233,902 2019……………… 160,000 73,227 233,227 2020……………… 160,000 67,477 227,477 2021……………… 155,000 61,502 216,502 2022……………… 155,000 55,302 210,302 2023……………… 155,000 49,102 204,102 2024……………… 160,000 42,802 202,802 2025……………… 165,000 36,902 201,902 2026……………… 165,000 31,502 196,502 2027……………… 165,000 26,052 191,052 2028……………… 165,000 20,501 185,501 2029……………… 170,000 14,725 184,725 2030……………… 135,000 9,475 144,475 2031……………… 95,000 5,775 100,775 2032……………… 95,000 2,925 97,925 2033……………… 50,000 750 50,750 Total………………$ 3,020,000 $ 1,021,286 $ 4,041,286 ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2012 City of Salem, Massachusetts 65 Comprehensive Annual Financial Report Bonds Payable Schedule – Golf Course Enterprise Fund Original Interest Outstanding Outstanding Maturities Loan Rate at June 30, at June 30, Project Through Amount 2011 Issued Redeemed 2012 Golf Course Clubhouse Refunding of 2010………… 2017 $ 172,000 2.00-5.00% $ 172,000 $ - $ (32,000) $ 140,000 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 31,000 $ 4,180 $ 35,180 2014……………… 30,000 3,120 33,120 2015……………… 30,000 1,920 31,920 2016……………… 30,000 1,020 31,020 2017……………… 19,000 285 19,285 Total………………$ 140,000 $ 10,525 $ 150,525 Bonds Payable Schedule – Parking Enterprise Fund Original Interest Outstanding Outstanding Maturities Loan Rate at June 30, at June 30, Project Through Amount 2011 Issued Redeemed 2012 Parking Garage 2020 $ 1,100,000 3.00-5.00% $ 650,000 $ - $ (75,000) $ 575,000 General obligation bonds issued in fiscal year 200,000 775,000 Debt service requirements for principal and interest for parking enterprise bonds payable include the debt issuance subsequent to year end in which all except $200,000 of new funds were used to redeem long-term BANs. The future fiscal years payments are as follows: Fiscal Year Principal Interest Total 75,000 $ 27,817 $ 102,817 2014……………… 115,000 26,900 141,900 2015……………… 115,000 21,950 136,950 2016……………… 115,000 17,000 132,000 2017……………… 115,000 12,800 127,800 2018……………… 115,000 8,600 123,600 2019……………… 75,000 5,000 80,000 2020……………… 50,000 2,000 52,000 Total………………$ 775,000 $ 122,067 $ 897,067 ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2012 City of Salem, Massachusetts 66 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, 2012, the City had the following authorized and unissued debt: Purpose Amount School Construction……………………$ 57,702,453 Water Systems Improvements………… 4,328,208 Capital 8,872,500 Refunding 1,400,000 $ 72,303,161 Changes in Long-term Liabilities During the fiscal year ended June 30, 2012, the following changes occurred in long-term liabilities: Beginning Ending Due Within Balance Additions Reductions Balance One Year Governmental Activities: Long-term 43,467,000 $ 3,900,938 $ (4,717,000) $ 42,650,938 $ 3,834,000 Add: unamortized premium……………………… 1,114,526 - (135,535) 978,991 126,627 Total bonds 44,581,526 3,900,938 (4,852,535) 43,629,929 3,960,627 Capital 384,965 38,765 (178,027) 245,703 126,554 Compensated absences…………………………… 7,048,019 419,330 (14,280) 7,453,069 1,508,154 Landfill 2,400,000 - (1,800,000) 600,000 - Workers' compensation……..……………………… 1,174,953 758,793 (98,787) 1,834,959 101,904 Other postemployment benefits…………………… 21,918,722 9,372,439 (4,240,371) 27,050,790 - Total governmental activity long-term liabilities………………………………… $ 77,508,185 $ 14,490,265 $ (11,184,000) $ 80,814,450 $ 5,697,239 Business-Type Activities: Long-term 15,665,280 $ 2,122,402 $ (1,024,880) $ 16,762,802 $ 1,016,978 Compensated absences…………………………… 126,647 62,293 (31,663) 157,277 46,767 Other postemployment benefits…………………… 901,520 395,907 (179,120) 1,118,307 - Total business-type activity long-term liabilities………………………………… $ 16,693,447 $ 2,580,602 $ (1,235,663) $ 18,038,386 $ 1,063,745 Compensated absence, workers’ compensation and other postemployment liabilities related to both governmental and business-type activities are normally paid from the funds reporting payroll and related expenditures, which consist of the general fund and the sewer, water, golf, parking, and trash enterprise funds. NOTE 9 – GOVERNMENTAL FUND BALANCE CLASSIFICATIONS The City classifies fund balances according to the constraints imposed on the use of the resources. There are two major types of fund balances, which are nonspendable and spendable. Nonspendable fund balances are balances that cannot be spent because they are not expected to be converted to cash or they are legally or contractually required to remain intact. Examples of this classification are prepaid items, inventories, and principal (corpus) of an endowment fund. The City has reported principal portions of endowment funds as nonspendable. ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2012 City of Salem, Massachusetts 67 Comprehensive Annual Financial Report Spendable fund balances are classified based on a hierarchy of spending constraints.  Restricted: fund balances that are constrained by external parties, constitutional provisions, or enabling legislation.  Committed: fund balances that contain self-imposed constraints of the government from its highest level of decision making authority.  Assigned: fund balances that contain self-imposed constraints of the government to be used for a particular purpose.  Unassigned: fund balance of the general fund that is not constrained for any particular purpose. The City of Salem’s spending policy is to spend restricted fund balance first, followed by committed, assigned and unassigned fund balance. Most governmental funds are designated for one purpose at the time of their creation. Therefore, any expenditure from the fund will be allocated to the applicable fund balance classifications in the order of the aforementioned spending policy. The general fund and certain other funds may have more than one purpose. Massachusetts General Law Ch.40 §5B allows for the establishment of Stabilization funds for one or more different purposes. The creation of a fund requires a two-thirds vote of the legislative body and must clearly define the purpose of the fund. Any change to the purpose of the fund along with any additions to or appropriations from the fund requires a two-thirds vote of the legislative body. At year end the balances of the General Stabilization Fund and the Retirement Stabilization Fund totaled $3,453,722 and $130,520, respectively and are reported as unassigned fund balance within the General Fund. ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2012 City of Salem, Massachusetts 68 Comprehensive Annual Financial Report As of June 30, 2012, the governmental fund balances consisted of the following: School Nonmajor Total Capital Governmental Governmental General Projects Funds Funds FUND BALANCES Nonspendable: Permanent fund principal…………………$ - $ - $ 2,074,097 $ 2,074,097 Restricted for: School Capital Projects fund……………… - 10,970 - 10,970 City revolving - - 1,298,180 1,298,180 City grant - - 1,955,220 1,955,220 School - - 167,023 167,023 School revolving - - 440,173 440,173 School grant - - 1,940,798 1,940,798 Donations and - - 1,565,742 1,565,742 Receipts reserved………………………..… - - 516,050 516,050 Community development grants………… - - 73,640 73,640 Salem Redevelopment Authority………… - - 5,800 5,800 Other capital projects……………………… - - 1,134,466 1,134,466 Cemetery - - 1,843,402 1,843,402 Human services - - 1,127,250 1,127,250 Other permanent - - 179,016 179,016 Assigned to: General government……………………… 104,583 - - 104,583 Public 11,788 - - 11,788 429,179 - - 429,179 Public 423,695 - - 423,695 Human services…………………………… 4,800 - - 4,800 Culture and recreation…………………… 11,692 - - 11,692 9,550,262 (1,301,380) (713,160) 7,535,722 TOTAL FUND BALANCES (DEFICIT)…………$ 10,535,999 $ (1,290,410) $ 13,607,697 $ 22,853,286 GOVERNMENTAL FUNDS NOTE 10 – 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. The amount of claim settlements has not exceeded insurance coverage in any of the previous three fiscal years. As of July 1, 2008, the City changed to a premium based plan for workers’ compensation coverage. The remaining claims that were incurred prior to July 1, 2008 are accounted for in the funds incurring the expenditures. Workers’ Compensation Workers’ compensation claims incurred prior to July 1, 2008 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, 2012, the amount of the liability for workers’ compensation claims totaled $1,834,959. ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2012 City of Salem, Massachusetts 69 Comprehensive Annual Financial Report Changes in the reported liability since July 1, 2010, are as follows: Current Year Balance at Claims and Balance at Beginning of Changes in Claim Fiscal Current Fiscal Year Estimate Payments Year-End Portion Fiscal Year 2011………. $ 812,132 $ 639,627 $ (276,806) $ 1,174,953 $ 98,787 Fiscal Year 2012………. 1,174,953 1,142,946 (482,940) 1,834,959 101,904 NOTE 11 – 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 $9,695,000 for the fiscal year ended June 30, 2012, and, accordingly, are reported in the general fund as intergovernmental revenues and pension expenditures. 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, 2011, the System’s membership consists of the following: Active 870 Inactive 153 Retirees and beneficiaries currently receiving benefits……… 579 1,602 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 86% 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, 2012, 2011, and 2010, were $8,935,504, $8,543,631, and $8,233,450, respectively, which equaled its required contribution for each fiscal year. The required contribution was determined as part of the January 1, 2012, actuarial valuation using the entry age normal actuarial cost method. The actuarial assumptions included an inflation rate of 8% investment rate of return and projected salary increases of 5% per year. The actuarial value of the System's ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2012 City of Salem, Massachusetts 70 Comprehensive Annual Financial Report 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 closed amortization period at January 1, 2012 was 18 years. 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) 01/01/12 $ 106,806,161 $ 214,346,363 $ 107,540,202 49.8% $ 37,076,549 290.0% 01/01/10 100,046,731 193,470,036 93,423,305 51.7% 34,583,002 270.1% 01/01/08 99,998,471 179,382,299 79,383,828 55.7% 34,410,002 230.7% 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% 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 85% of the unfunded liability. The schedule of progress, presented as required supplementary information, following the notes to the basic financial statements, presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits. Additionally, the schedule of employer contributions, presented as required supplementary information, following the notes to the basic financial statements, presents multiyear trend information for required and actual contributions relating to the cost- sharing plan as a whole, of which the City is one participating employer, as well as the City’s proportionate share of the plan’s annual contributions. This information is designed to be helpful for understanding the scale of the information presented relative to the City. NOTE 12 – POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS Plan Description – The City of Salem administers a single-employer defined benefit healthcare plan (“the Retiree Health Plan”). The plan provides lifetime healthcare insurance for eligible retirees and their spouses through the City’s group health insurance plan, which covers both active and retired members. Chapter 32b of the MGL assigns authority to establish and amend benefit provisions of the plan. Benefit provisions are negotiated between the City and the unions representing City employees and are renegotiated each bargaining period. The Retiree Health Plan does not issue a publicly available financial report. Additionally, retired teachers and their spouses receive health insurance through the Group Insurance Commission of the Commonwealth of Massachusetts (GIC). Each participating municipality is assessed for the governmental share of health and life insurance premiums paid on behalf of its teacher retirees by the state. The employer’s share is 90% of the total premium; the retiree's co-payment is 10% of the total premium as well as full payment for catastrophic illness coverage. The City’s assessment of the employer’s share by the GIC, for retired teachers, for fiscal year 2012, totaled $1.9 million. Funding Policy – Contribution requirements are also negotiated between the City and union representatives. The required contribution is based on a pay-as-you-go financing requirement. The City contributes 70% of the cost of current-year premiums for retirees in active plans and 65% for those in senior plans. The City contributes 50% for ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2012 City of Salem, Massachusetts 71 Comprehensive Annual Financial Report surviving spouses. The City will contribute 70% in fiscal year 2013 for retirees in active plans. Plan members receiving benefits contribute the remainder of their premium costs. For fiscal year 2012, the City contributed $3.3 million to the plan, and total member contributions totaled $1.5 million. Annual OPEB Cost and Net OPEB Obligation – The City’s annual other postemployment benefit (OPEB) cost (expense) is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover the normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years. The components of the City’s annual OPEB cost for the year, the amount actually contributed to the plan, and changes in the City’s net OPEB obligation are summarized in the following table: Annual required contribution……………………………………$ 9,555,726 Interest on net OPEB obligation……………………………… 1,029,161 Adjustments to annual required contribution………………… (816,541) Annual OPEB cost 9,768,346 Contributions made (including retired teachers)…………… (4,419,491) Increase in net OPEB obligation……………………………… 5,348,855 Net OPEB obligation-beginning of 22,820,242 Net OPEB obligation-end of 28,169,097 The City’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for fiscal years 2010, 2011 and 2012 are as follows: Percentage of Fiscal Year Annual Annual OPEB Net OPEB Ended OPEB Cost Cost Contributed Obligation 6/30/2012 $ 9,768,346 45% $ 28,169,097 6/30/2011 11,577,795 51% 22,820,242 6/30/2010 11,005,122 48% 17,159,404 Funded Status and Funding Progress – As of December 31, 2011, the most recent actuarial valuation date, the actuarial accrued liability for benefits totaled $145 million, all of which was unfunded. Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2012 City of Salem, Massachusetts 72 Comprehensive Annual Financial Report Actuarial Methods and Assumptions – Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. In the December 31, 2011, actuarial valuation, actuarial liabilities were determined using the projected unit credit cost method. The actuarial assumptions included a 4.5% investment return assumption, which is based on the expected yield on the assets of the City, calculated based on the funded level of the plan at the valuation date, and an annual medical/drug cost trend rate of 9% initially, graded to 5% over 8 years. Both rates included a 4.0% inflation assumption. The UAAL is being amortized over an open 30 year period using a level percentage of projected payroll with amortization payments increasing at 4% per year. NOTE 13 – MAJOR TAXPAYER The City receives a significant portion of its real estate and personal property tax revenue from one taxpayer, Dominion, who is the operator of a coal-fired electric generating power plant on the waterfront in Salem. In fiscal 2009, the City and the taxpayer entered into a three-year agreement, which would provide total payments of $4.75 million in fiscal years 2009, 2010, and 2011, in the form of annual tax payments of $3 million, and annual additional contributions of $1.75 million, to be used exclusively for public purposes. In fiscal year 2011, Dominion filed paperwork to decommission all four of its generating units in Salem, which would have a negative impact on the City’s revenue stream. To provide relief to municipalities from the decommissioning of electric generating stations, if the change in operating status also reduces the Commonwealth’s greenhouse gas emissions, the Commonwealth has enacted Section 33 of Chapter 68 of the Acts of 2011 (the Act). The Act will defray the burden of the closure on the taxpayers by supplementing the difference between the payments in taxes from the plant and what the City would have otherwise collected until fiscal year 2016. During fiscal year 2012, Dominion was sold to Footprint Power in which subject to negotiation Footprint will assume the tax liability from Dominion. Footprint plans to operate the plant until 2014 at which time it will shut down the plant, demolish the old plant, clean up the site and build a new natural gas fired plant. They are in the process of applying for permitting for the complete decommission of the old plant and will demolish existing structures to make room for a new, 630 megawatt natural gas fired plant. This new plant will take up a portion of the property, leaving a significant portion of unused land in which the City and Footprint have been looking into other commercial uses of the land. NOTE 14 – ENVIRONMENTAL REMEDIATION LIABILITY State and federal laws and regulations require the City to construct a final capping system on its inactive landfill site, the Salem Transfer Station, when it stops accepting waste and to perform certain maintenance and monitoring functions at the site after closure. The City has stopped accepting waste at the site and the site is closed. The City is the owner and permittee of the Salem Transfer Station site, while Northside Carting, Inc. operated the facility. The City has completed a preliminary study in order to estimate the cost of the landfill postclosure care which is to be paid for equally by the City and the operator. As a result, the City has recorded a liability of $600,000 in the entity-wide financial statements for the total estimated postclosure costs. Actual costs may be higher due to inflation, changes in technology, or changes in applicable laws, regulations or agreements. ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2012 City of Salem, Massachusetts 73 Comprehensive Annual Financial Report NOTE 15 – COMMITMENTS The City entered into contracts totaling approximately $53.7 million. Of this amount, $1.1 million relates to Lafayette Street improvements, $1.1 million relates to the McGrath Park improvements, $119,000 is for road rehabilitation, $87,000 is for sealcoating, $535,000 is for drain and utility line improvements, and $60,000 is for landscape design services. Additionally, the City is in the process of completing contracts of $1.8 million for new water meters, $691,000 for the installation of said water meters, and $48.4 million for renovations to the Collins Middle School and Saltonstall School. The school projects are comprised of $1.7 million for construction management, $4.4 million for architectural services and $42.3 million for construction. NOTE 16 – 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, 2012, 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 the liability, if any, at June 30, 2012, cannot be ascertained, management believes any resulting liability should not materially affect the financial position at June 30, 2012. NOTE 17 – IMPLEMENTATION OF NEW GASB PRONOUNCEMENTS During fiscal year 2012, the following GASB pronouncements were implemented:  The GASB issued Statement #62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements. The implementation of this pronouncement did not impact the basic financial statements.  The GASB issued Statement #64, Derivative Instruments: Application of Hedge Accounting Termination Provisions, an amendment of GASB Statement No. 53. The implementation of this pronouncement did not impact the basic financial statements. The following GASB pronouncements will be implemented in future fiscal years:  The GASB issued Statement #60, Accounting and Financial Reporting for Service Concession Arrangements, which is required to be implemented in fiscal year 2013. This Statement addresses service concession arrangements, which are a type of public-private or public-public partnership.  The GASB issued Statement #61, The Financial Reporting Entity: Omnibus an amendment of GASB Statements No.14 and No.34, which is required to be implemented in fiscal year 2013. The objective of this Statement is to improve financial reporting for a governmental financial reporting entity. ---PAGE BREAK--- Notes to Basic Financial Statements Fiscal Year Ended June 30, 2012 City of Salem, Massachusetts 74 Comprehensive Annual Financial Report  The GASB issued Statement #63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position, which is required to be implemented in fiscal year 2013.  The GASB issued Statement #65, Items Previously Reported as Assets and Liabilities, which is required to be implemented in fiscal year 2013.  The GASB issued Statement #66, Technical Corrections – 2012 – an amendment of GASB Statements No. 10 and No. 62, which is required to be implemented in fiscal year 2013.  The GASB issued Statement #67, Financial Reporting for Pension Plans – an amendment of GASB Statement No. 25, which is required to be implemented in fiscal year 2014.  The GASB issued Statement #68, Accounting and Financial Reporting for Pensions – an amendment of GASB Statement No. 27, which is required to be implemented in fiscal year 2015. Management is currently assessing the impact that the implementation of these pronouncements will have on the basic financial statements. ---PAGE BREAK--- City of Salem, Massachusetts 75 Comprehensive Annual Financial Report Required Supplementary Information Required Supplementary Information ---PAGE BREAK--- City of Salem, Massachusetts 76 Comprehensive Annual Financial Report General Fund Budgetary Comparison Schedule General fund budgetary comparison schedule The General Fund is the general operating fund of the City. It is used to account for all of the City’s financial resources, except those required to be accounted for in another fund. ---PAGE BREAK--- SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FISCAL YEAR ENDED JUNE 30, 2012 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 $ - $ 72,370,396 $ 72,370,396 $ 72,370,396 $ 72,286,084 $ - $ (84,312) Tax - - - - 647,045 - 647,045 Motor vehicle and other excise taxes………… - 2,960,000 2,960,000 2,960,000 3,203,122 - 243,122 Hotel/motel tax and meals taxes……………… - 1,160,000 1,160,000 1,160,000 1,161,007 - 1,007 Charges for services…………………………… - 1,050,000 1,050,000 1,050,000 1,394,844 - 344,844 Penalties and interest on taxes……………… - 383,000 383,000 383,000 487,842 - 104,842 Payments in lieu of - 1,320,000 1,320,000 1,320,000 1,440,186 - 120,186 Licenses and - 450,000 450,000 450,000 499,048 - 49,048 Fines and forfeitures…………………………… - 950,000 950,000 950,000 1,255,894 - 305,894 Intergovernmental……………………………… - 30,990,057 30,990,057 31,411,934 31,486,730 - 74,796 Departmental and - 2,300,000 2,300,000 2,300,000 2,316,253 - 16,253 Investment - 50,000 50,000 50,000 74,900 - 24,900 TOTAL REVENUES………………… - 113,983,453 113,983,453 114,405,330 116,252,955 - 1,847,625 EXPENDITURES: Current: General government City Council Personnel……………………………… - 119,700 119,700 119,700 119,700 - - Non - Personnel……………………… - 52,627 52,627 52,627 40,092 - 12,535 - 172,327 172,327 172,327 159,792 - 12,535 Mayor Personnel……………………………… - 268,156 268,156 268,156 268,136 - 20 Non - Personnel……………………… 13,000 90,000 103,000 103,000 88,736 10,520 3,744 13,000 358,156 371,156 371,156 356,872 10,520 3,764 Finance/Auditing Personnel……………………………… - 241,899 241,899 241,899 241,783 - 116 Non - Personnel……………………… 4,360 40,700 45,060 45,060 34,042 6,955 4,063 4,360 282,599 286,959 286,959 275,825 6,955 4,179 Purchasing Personnel……………………………… - 99,370 99,370 99,370 48,880 - 50,490 Non - Personnel……………………… - 17,900 17,900 17,900 17,310 - 590 Fixed - 51,254 51,254 51,254 50,798 - 456 - 168,524 168,524 168,524 116,988 - 51,536 Assessors Personnel……………………………… - 253,055 253,055 237,055 232,023 - 5,032 Non - Personnel……………………… - 26,177 26,177 66,177 63,597 - 2,580 - 279,232 279,232 303,232 295,620 - 7,612 Treasurer Personnel……………………………… - 158,842 158,842 158,842 157,831 - 1,011 Non - Personnel……………………… 67,572 58,310 125,882 184,682 123,082 60,200 1,400 67,572 217,152 284,724 343,524 280,913 60,200 2,411 Collector Personnel……………………………… - 199,412 199,412 199,412 197,400 - 2,012 Non - Personnel……………………… 1,000 6,500 7,500 7,500 6,036 1,050 414 1,000 205,912 206,912 206,912 203,436 1,050 2,426 Solicitor Personnel……………………………… 1,900 209,542 211,442 211,853 209,953 - 1,900 Non - Personnel……………………… - 58,400 58,400 85,989 85,605 - 384 1,900 267,942 269,842 297,842 295,558 - 2,284 (continued) Budgeted Amounts GENERAL FUND City of Salem, Massachusetts 77 Comprehensive Annual Financial Report ---PAGE BREAK--- SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FISCAL YEAR ENDED JUNE 30, 2012 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 GENERAL FUND Human Resources Personnel……………………………… - 221,955 221,955 221,955 221,955 - - Non - Personnel……………………… - 29,950 29,950 29,950 29,752 - 198 - 251,905 251,905 251,905 251,707 - 198 Data Processing Personnel……………………………… - 159,657 159,657 159,657 157,783 1,873 1 Non - Personnel……………………… - 31,225 31,225 31,225 23,653 5,145 2,427 Fixed 1,270 322,140 323,410 323,410 303,253 18,840 1,317 GIS Expenses………………………… 450 - 450 450 - - 450 1,720 513,022 514,742 514,742 484,689 25,858 4,195 City Clerk Record Maintenance Personnel……………………………… - 251,256 251,256 251,256 251,053 - 203 Non - Personnel……………………… 500 7,000 7,500 7,500 6,810 - 690 500 258,256 258,756 258,756 257,863 - 893 Elections & Registrations Personnel……………………………… - 97,166 97,166 97,166 97,162 - 4 Non - Personnel……………………… 8,525 50,100 58,625 58,625 56,940 - 1,685 8,525 147,266 155,791 155,791 154,102 - 1,689 Conservation Commission Personnel……………………………… - 25,056 25,056 25,056 24,287 - 769 Non - Personnel……………………… - 425 425 425 389 - 36 - 25,481 25,481 25,481 24,676 - 805 Subdivision, Planning, and Zoning Board Personnel……………………………… - 23,931 23,931 23,931 22,668 - 1,263 Non - Personnel……………………… - 3,000 3,000 3,000 2,185 - 815 - 26,931 26,931 26,931 24,853 - 2,078 Board of Appeals Personnel……………………………… - 3,000 3,000 3,000 3,000 - - Non - Personnel……………………… - 550 550 550 262 - 288 - 3,550 3,550 3,550 3,262 - 288 Planning Department Personnel……………………………… - 256,290 256,290 256,290 255,663 - 627 Non - Personnel……………………… - 7,275 7,275 7,275 6,338 - 937 - 263,565 263,565 263,565 262,001 - 1,564 Public Property/Building Maintenance Fixed - 685,885 685,885 693,885 692,509 - 1,376 Market and Tourism……………………… - 196,375 196,375 196,375 196,353 - 22 Total General Government………………… 98,577 4,324,080 4,422,657 4,541,457 4,337,019 104,583 99,855 (continued) City of Salem, Massachusetts 78 Comprehensive Annual Financial Report ---PAGE BREAK--- SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FISCAL YEAR ENDED JUNE 30, 2012 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 GENERAL FUND Public safety Police Personnel……………………………… - 7,424,200 7,424,200 7,457,016 7,456,520 - 496 Non - Personnel……………………… 16,607 482,145 498,752 562,552 533,500 6,088 22,964 16,607 7,906,345 7,922,952 8,019,568 7,990,020 6,088 23,460 Fire Personnel……………………………… 13,500 6,886,746 6,900,246 6,900,246 6,822,682 - 77,564 Non - Personnel……………………… 9,700 374,064 383,764 404,390 382,397 5,700 16,293 23,200 7,260,810 7,284,010 7,304,636 7,205,079 5,700 93,857 Building, Plumbing, Gas Inspections Personnel……………………………… - 299,951 299,951 305,951 298,314 - 7,637 Non - Personnel……………………… - 24,700 24,700 73,700 66,114 - 7,586 - 324,651 324,651 379,651 364,428 - 15,223 Electrical Inspection and Maintenance Personnel……………………………… - 261,218 261,218 261,218 258,720 - 2,498 Non - Personnel……………………… - 772,000 772,000 772,000 746,411 - 25,589 - 1,033,218 1,033,218 1,033,218 1,005,131 - 28,087 Harbormaster Personnel……………………………… - 159,481 159,481 159,481 155,667 - 3,814 Non - Personnel……………………… - 43,730 43,730 43,730 41,258 - 2,472 - 203,211 203,211 203,211 196,925 - 6,286 Total Public 39,807 16,728,235 16,768,042 16,940,284 16,761,583 11,788 166,913 Education 393,287 48,856,000 49,249,287 49,249,287 48,611,521 429,179 208,587 NSRS/Charter/Choice……………… - 1,601,211 1,601,211 1,574,316 1,574,316 - - Total Education……………….……………… 393,287 50,457,211 50,850,498 50,823,603 50,185,837 429,179 208,587 Public Works Public Services Personnel……………………………… - 1,515,566 1,515,566 1,504,566 1,502,251 - 2,315 Non - Personnel……………………… - 523,741 523,741 1,056,583 661,388 375,083 20,112 - 2,039,307 2,039,307 2,561,149 2,163,639 375,083 22,427 Engineering Personnel……………………………… - 72,320 72,320 72,320 72,314 - 6 Non - Personnel……………………… - 5,750 5,750 5,750 5,134 - 616 - 78,070 78,070 78,070 77,448 - 622 Snow and Ice Personnel……………………………… - 50,000 50,000 50,000 21,395 - 28,605 Non - Personnel……………………… - 344,560 344,560 344,560 317,995 36,550 (9,985) - 394,560 394,560 394,560 339,390 36,550 18,620 Parking Garage Personnel……………………………… - 546,273 546,273 536,273 530,314 - 5,959 Non - Personnel……………………… 3,360 161,100 164,460 174,460 159,453 12,062 2,945 3,360 707,373 710,733 710,733 689,767 12,062 8,904 Total Public 3,360 3,219,310 3,222,670 3,744,512 3,270,244 423,695 50,573 (continued) City of Salem, Massachusetts 79 Comprehensive Annual Financial Report ---PAGE BREAK--- SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FISCAL YEAR ENDED JUNE 30, 2012 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 GENERAL FUND Health and Human Services Board of Health Personnel……………………………… - 344,000 344,000 344,000 314,572 - 29,428 Non - Personnel……………………… - 19,600 19,600 19,600 13,976 - 5,624 - 363,600 363,600 363,600 328,548 - 35,052 Council on Aging Personnel……………………………… - 242,267 242,267 242,267 231,227 - 11,040 Non - Personnel……………………… - 30,100 30,100 30,100 28,915 - 1,185 - 272,367 272,367 272,367 260,142 - 12,225 Veterans Services Personnel……………………………… - 73,543 73,543 68,258 68,258 - - Non - Personnel……………………… 33,900 210,700 244,600 264,885 259,535 4,800 550 33,900 284,243 318,143 333,143 327,793 4,800 550 Total Health and Human Services………… 33,900 920,210 954,110 969,110 916,483 4,800 47,827 Culture and Recreation Library Personnel……………………………… - 869,787 869,787 869,787 853,273 - 16,514 Non - Personnel……………………… - 288,028 288,028 288,028 280,424 - 7,604 - 1,157,815 1,157,815 1,157,815 1,133,697 - 24,118 Parks and Recreation Personnel……………………………… - 335,754 335,754 335,754 328,808 - 6,946 Non - Personnel……………………… 12,843 151,610 164,453 164,453 153,410 9,866 1,177 12,843 487,364 500,207 500,207 482,218 9,866 8,123 Golf Course Personnel……………………………… - 262,706 262,706 233,306 222,840 - 10,466 Non - Personnel……………………… 4,284 99,500 103,784 158,184 143,937 317 13,930 4,284 362,206 366,490 391,490 366,777 317 24,396 Witch House Personnel……………………………… - 74,066 74,066 74,066 69,495 - 4,571 Non - Personnel……………………… 2,994 64,280 67,274 67,274 60,892 1,510 4,873 2,994 138,346 141,340 141,340 130,387 1,510 9,444 Historical Commission Personnel……………………………… - 8,066 8,066 8,066 8,020 - 46 Non - Personnel……………………… - 1,030 1,030 1,030 940 - 90 - 9,096 9,096 9,096 8,960 - 136 Winter Island Personnel……………………………… - 114,047 114,047 114,047 114,044 - 3 Non - Personnel……………………… 842 49,500 50,342 50,342 46,317 - 4,025 842 163,547 164,389 164,389 160,361 - 4,028 Total Culture and Recreation…………… 20,963 2,318,374 2,339,337 2,364,337 2,282,400 11,692 70,245 (continued) City of Salem, Massachusetts 80 Comprehensive Annual Financial Report ---PAGE BREAK--- SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FISCAL YEAR ENDED JUNE 30, 2012 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 GENERAL FUND Debt service: - 4,888,920 4,888,920 4,789,001 4,789,001 - - - 1,752,138 1,752,138 1,752,058 1,752,058 - - Short Term Interest………………………… - 30,000 30,000 38,200 38,190 - 10 - 6,671,058 6,671,058 6,579,259 6,579,249 - 10 State and county charges……………………… - 6,773,027 6,773,027 6,773,027 6,390,908 - 382,119 Pension benefits Contributory Retirement…………………… - 8,765,223 8,765,223 8,774,025 8,773,800 - 225 Non-Contributory Retirement……………… - 87,675 87,675 69,673 69,474 - 199 - 8,852,898 8,852,898 8,843,698 8,843,274 - 424 Workmen's Compensation…………………… - 445,000 445,000 457,000 456,641 - 359 Unemployment Compensation………………… - 250,000 250,000 405,000 349,378 - 55,622 Group Insurance………………………………… - 11,276,999 11,276,999 11,536,923 11,464,758 - 72,165 - 768,282 768,282 852,377 852,215 - 162 Municipal Insurance…………………………… - 305,000 305,000 250,000 249,689 - 311 TOTAL EXPENDITURES…………… 589,894 113,309,684 113,899,578 115,080,587 112,939,678 985,737 1,155,172 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES…………… (589,894) 673,769 83,875 (675,257) 3,313,277 (985,737) 3,002,797 OTHER FINANCING SOURCES (USES): Premium from issuance of bonds……………… - - - - 1,059 - 1,059 Transfers - 2,474,116 2,474,116 2,549,081 2,596,498 - 47,417 Transfers - (3,453,981) (3,453,981) (5,149,053) (5,149,053) - - TOTAL OTHER FINANCING SOURCES - (979,865) (979,865) (2,599,972) (2,551,496) - 48,476 NET CHANGE IN FUND BALANCE……………… (589,894) (306,096) (895,990) (3,275,229) 761,781 (985,737) 3,051,273 BUDGETARY FUND BALANCE, Beginning of - 6,217,521 6,217,521 6,217,521 6,217,521 - - BUDGETARY FUND BALANCE, End of year…… $ (589,894) $ 5,911,425 $ 5,321,531 $ 2,942,292 $ 6,979,302 $ (985,737) $ 3,051,273 (concluded) See notes to required supplementary information. City of Salem, Massachusetts 81 Comprehensive Annual Financial Report ---PAGE BREAK--- City of Salem, Massachusetts 82 Comprehensive Annual Financial Report Retirement System Schedules of Funding Progress and Employer Contributions Retirement system schedules The Retirement System Schedule of Funding Progress presents multiyear trend information relating to the cost- sharing plan as a whole, of which the City is one participating employer, about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits. The Retirement System Schedule of Employer Contributions presents multiyear trend information for required and actual contributions relating to the cost-sharing plan as a whole, of which the City is one participating employer, as well as the City’s proportionate share of the plan’s annual contributions. ---PAGE BREAK--- 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) 01/01/12 $ 106,806,161 $ 214,346,363 $ 107,540,202 49.8% $ 37,076,549 290.0% 01/01/10 100,046,731 193,470,036 93,423,305 51.7% 34,583,002 270.1% 01/01/08 99,998,471 179,382,299 79,383,828 55.7% 34,410,002 230.7% 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% See notes to required supplementary information. SALEM CONTRIBUTORY RETIREMENT SYSTEM SCHEDULE OF FUNDING PROGRESS City of Salem, Massachusetts 83 Comprehensive Annual Financial Report ---PAGE BREAK--- (B/A) Fiscal Year Annual City's Percentage Ended Required Actual Percentage Actual of System Wide June 30 Contributions Contributions Contributed Contributions Actual Contributions 2012 $ 10,470,232 $ 10,470,232 100% $ 8,935,504 85.34% 2011 9,991,587 9,991,587 100% 8,543,631 85.51% 2010 9,628,758 9,628,758 100% 8,233,450 85.51% 2009 9,239,327 9,239,327 100% 7,952,910 86.08% 2008 8,939,812 8,939,812 100% 7,693,291 86.06% 2007 8,431,371 8,431,371 100% 7,209,359 85.51% The City's Actual Contributions equaled 100% of its Required Contributions for each year presented. See notes to required supplementary information. SALEM CONTRIBUTORY RETIREMENT SYSTEM SCHEDULE OF EMPLOYER CONTRIBUTIONS System Wide City of Salem City of Salem, Massachusetts 84 Comprehensive Annual Financial Report ---PAGE BREAK--- City of Salem, Massachusetts 85 Comprehensive Annual Financial Report Other Postemployment Benefit Plan Schedules Other postemployment benefit plan schedules The Schedule of Funding Progress compares, over time, the actuarial accrued liability for benefits with the actuarial value of accumulated plan assets. The Schedule of Employer Contributions presents, over time, the ratio of the actual annual employer contributions to the annual required contribution. The Schedule of Actuarial Methods and Assumptions presents factors that significantly affect the identification of trends in the amounts reported. ---PAGE BREAK--- SCHEDULE OF FUNDING PROGRESS AND EMPLOYER CONTRIBUTIONS Actuarial Accrued UAAL as a Actuarial Liability (AAL) Unfunded Percentage Actuarial Value of Projected AAL Funded Covered of Covered Valuation Assets Unit Credit (UAAL) Ratio Payroll Payroll Date (B-A) (A/B) 12/31/2011 $ - $ 145,033,856 $ 145,033,856 0% $ 50,103,473 289.5% 12/31/2009 - 171,447,034 171,447,034 0% 52,107,612 329.0% 12/31/2007 - 156,258,800 156,258,800 0% 50,103,473 311.9% Fiscal Annual Actual Percentage of Year Required Contributions the ARC Ended Contribution (ARC) Made Contributed 2012 $ 9,555,726 $ 4,419,491 46% 2011 11,374,693 5,916,957 52% 2010 10,869,698 5,287,195 49% 2009 11,068,269 6,799,394 61% 2008 10,554,680 3,443,274 33% See notes to required supplementary information. OTHER POSTEMPLOYMENT BENEFIT PLAN Schedule of Employer Contributions Schedule of Funding Progress City of Salem, Massachusetts 86 Comprehensive Annual Financial Report ---PAGE BREAK--- ACTUARIAL METHODS AND ASSUMPTIONS Actuarial Methods: Valuation date December 31, 2011 Actuarial cost method Projected Unit Credit Amortization method Payments increasing at 4.0% per year as a level percentage of projected payroll Remaining amortization period 30 years as of December 31, 2011, open Actuarial Assumptions: Investment rate of return 4.5%, pay-as-you-go scenario Medical/drug cost trend rate 9.0% decreasing by 0.5% for 8 years to be an ultimate level of 5.0% per year. Plan Membership: Current retirees, beneficiaries, and dependents 1,053 Current active members 890 Total 1,943 See notes to required supplementary information. OTHER POSTEMPLOYMENT BENEFIT PLAN City of Salem, Massachusetts 87 Comprehensive Annual Financial Report ---PAGE BREAK--- Notes to Required Supplementary Information Fiscal Year Ended June 30, 2012 City of Salem, Massachusetts 88 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 it 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 2012 approved budget authorized approximately $117 million in appropriations and other amounts to be raised. During the fiscal year, increases to the original budget were approved totaling approximately $2.9 million. The most notable components of this increase include an additional $2.3 million in available funds (free cash) appropriated to fund stabilization reserves, veteran’s benefits, capital improvements, and various additional appropriations. 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, 2012 City of Salem, Massachusetts 89 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, 2012, is presented below: Net change in fund balance - budgetary $ 761,781 Perspective differences: Reclassification of enterprise fund revenue budgeted in the general fund…………… 1,888,104 Reclassification of enterprise fund expenditures budgeted in the general fund……… (1,888,104) Activity of the Salem Community Charter 271,385 Activity of the stabilization funds recorded in the general fund for 591,376 Basis of accounting differences: Net change in revenues in recording tax refunds (84,022) Recognition of revenue for on-behalf 9,695,000 Recognition of expenditures for on-behalf (9,695,000) Net change in fund balances - GAAP $ 1,540,520 3. Appropriation Deficits During fiscal year 2012, expenditures exceeded budgeted appropriations for snow and ice. These over expenditures will be funded with available funds in fiscal year 2013. NOTE B – PENSION PLAN The City contributes to the System, a cost-sharing, multiple-employer defined benefit pension plan ("Plan") administered by the Salem Contributory Retirement Board. The System provides retirement, disability, and death benefits to members and beneficiaries. Chapter 32 of the MGL assigns authority to establish and amend benefit provisions of the Plan. The City is required to pay into the Retirement System its share of the system-wide actuarially determined contribution which is apportioned among the employers based on active covered payroll. The schedule of funding progress, presented as required supplementary information presents multi-year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits. Additionally, the schedule of employer contributions, presented as required supplementary information presents multi-year trend information for required and actual contributions relating to the cost-sharing plan as a whole, of which the City is one participating employer, as well as the City’s proportionate share of the plan’s annual contributions. This information is designed to be helpful for understanding the scale of the information presented relative to the City. ---PAGE BREAK--- Notes to Required Supplementary Information Fiscal Year Ended June 30, 2012 City of Salem, Massachusetts 90 Comprehensive Annual Financial Report The following actuarial methods and assumptions were used in the Retirement System’s most recent actuarial valuation: Actuarial Methods and Assumptions: Valuation January 1, 2012 Actuarial Cost Method………………………………………Entry Age Normal Cost Method Amortization Method…………………………………………Increasing at 4.5% per year as a level percentage of projected payroll. Remaining Amortization Period……………………………20 years remaining as of July 1, 2012, open Asset Valuation The difference between the expected return on an actuarial basis and actual investment return on a market value basis is recognized over a 5 year period. Investment rate of 8.00% Projected salary increases…………………………………5.00% Cost of living adjustments…………………………………3.00% for the first $12,000 of retirement income NOTE C – OTHER POSTEMPLOYMENT BENEFITS The City administers a single-employer defined benefit healthcare plan (“The Retiree Health Plan”). The plan provides lifetime healthcare insurance for eligible retirees and their spouses through the City’s group health insurance plan, which covers both active and retired members. Additionally, retired teachers and their spouses receive health insurance through the Group Insurance Commission of the Commonwealth of Massachusetts (GIC). Each participating municipality is assessed for the governmental share of health and life insurance premiums paid on behalf of its teacher retirees by the state. The City currently finances its other postemployment benefits (OPEB) on a pay-as-you-go basis. As a result, the funded ratio (actuarial value of assets expressed as a percentage of the actuarial accrued liability) is In accordance with Governmental Accounting Standards, the City has recorded its OPEB cost equal to the actuarial determined annual required contribution (ARC) which includes the normal cost of providing benefits for the year and a component for the amortization of the total unfunded actuarial accrued liability of the plan. The Schedule of Funding Progress presents multiyear trend information which compares, over time, the actuarial accrued liability for benefits with the actuarial value of accumulated plan assets. The Schedule of Employer Contributions presents, over time, the ratio of the actual annual employer contributions to the annual required contribution. Projections of benefits for financial reporting purposes are based on the substantive plan and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. The Schedule of Actuarial Methods and Assumptions presents factors that significantly affect the identification of trends in the amounts reported. ---PAGE BREAK--- City of Salem, Massachusetts 91 Comprehensive Annual Financial Report Combining Statements Combining Statements ---PAGE BREAK--- City of Salem, Massachusetts 92 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. Salem Redevelopment Authority Fund – This fund is used to account for the activity of the Salem Redevelopment Authority (SRA) and is financed by federal, state, and other grants included with the Community Development grants. The funds are used for redevelopment and improvement of buildings and business storefronts located within the Urban Renewal Area which makes up a majority of Downtown Salem. 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 and 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 – 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 Wharf Renovation Fund – This fund is used to account for the renovation of the wharf which is being financed mainly by grants. McGrath Park – This fund is used to account for the renovation and remediation of the McGrath Park. Other Funds – This fund is used to account for various capital projects. ---PAGE BREAK--- City of Salem, Massachusetts 93 Comprehensive Annual Financial Report 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 Fund – This fund is used to account for cemetery perpetual care contributions and expenditures. Human Service Fund – 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--- City of Salem, Massachusetts 94 Comprehensive Annual Financial Report This page intentionally left blank. ---PAGE BREAK--- Community Salem City School Development Redevelopment School Highway Donations Receipts ASSETS Grants Grants Grants Authority Lunch Grants and Gifts Reserved Cash and cash equivalents……………………$ 1,327,636 $ 1,951,242 $ 104,067 $ 5,800 $ 182,607 $ - $ 715,898 $ 516,050 Investments…………………………………… - - - - - - 849,844 - Receivables, net of uncollectibles: Departmental and - - - - - - - 67,162 Intergovernmental…………………………… 669,306 129,532 125,206 - - 888,180 - - - - 293,506 - - - - - Due from other 217,061 - - - - - - - TOTAL $ 2,214,003 $ 2,080,774 $ 522,779 $ 5,800 $ 182,607 $ 888,180 $ 1,565,742 $ 583,212 LIABILITIES AND FUND BALANCES LIABILITIES: Warrants 226,527 $ 29,200 $ 23,946 $ - $ - $ - $ - $ - Accrued 32,256 110,776 6,481 - 15,584 - - - Deferred revenues………………………… - - 293,506 - - 796,325 - 67,162 Due to other - - 125,206 - - 91,855 - - Notes - - - - - - - - TOTAL LIABILITIES…………………………… 258,783 139,976 449,139 - 15,584 888,180 - 67,162 FUND BALANCES: Nonspendable……………………………… - - - - - - - - Restricted…………………………………… 1,955,220 1,940,798 73,640 5,800 167,023 - 1,565,742 516,050 Unassigned………………………………… - - - - - - - - TOTAL FUND BALANCES…………………… 1,955,220 1,940,798 73,640 5,800 167,023 - 1,565,742 516,050 TOTAL LIABILITIES AND FUND BALANCES……………………$ 2,214,003 $ 2,080,774 $ 522,779 $ 5,800 $ 182,607 $ 888,180 $ 1,565,742 $ 583,212 (Continued) Special Revenue Funds NONMAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET JUNE 30, 2012 City of Salem, Massachusetts 95 Comprehensive Annual Financial Report ---PAGE BREAK--- City School Revolving Revolving Wharf McGrath ASSET Accounts Accounts Subtotal Renovation Park Other Subtotal Cash and cash equivalents………………………… $ 1,298,181 $ 463,094 $ 6,564,575 $ 1,663,799 $ 628,047 $ 43,254 $ 2,335,100 - - 849,844 - - - - Receivables, net of uncollectibles: Departmental and - - 67,162 - - - - Intergovernmental………………………………… - - 1,812,224 271,524 - - 271,524 144,964 - 438,470 - - - - Due from other - - 217,061 98,052 - - 98,052 TOTAL $ 1,443,145 $ 463,094 $ 9,949,336 $ 2,033,375 $ 628,047 $ 43,254 $ 2,704,676 LIABILITIES AND FUND BALANCES LIABILITIES: Warrants - $ 6,000 $ 285,673 $ 11,446 $ 345,358 $ 32,837 $ 389,641 Accrued - 16,921 182,018 - - - - Deferred 144,965 - 1,301,958 - - - - Due to other - - 217,061 - - 98,052 98,052 Notes - - - 1,795,677 - - 1,795,677 TOTAL LIABILITIES…………………………………… 144,965 22,921 1,986,710 1,807,123 345,358 130,889 2,283,370 FUND BALANCES: Nonspendable……………………………………… - - - - - - - 1,298,180 440,173 7,962,626 226,252 282,689 625,525 1,134,466 - - - - - (713,160) (713,160) TOTAL FUND BALANCES…………………………… 1,298,180 440,173 7,962,626 226,252 282,689 (87,635) 421,306 TOTAL LIABILITIES AND FUND BALANCES……………………………$ 1,443,145 $ 463,094 $ 9,949,336 $ 2,033,375 $ 628,047 $ 43,254 $ 2,704,676 (Continued) Capital Project Funds NONMAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET JUNE 30, 2012 City of Salem, Massachusetts 96 Comprehensive Annual Financial Report ---PAGE BREAK--- Total Nonmajor Cemetery Human Service Governmental Fund Fund Other Subtotal Funds $ 346,420 $ 163,375 $ 140,849 $ 650,644 $ 9,550,319 2,482,991 1,185,049 905,081 4,573,121 5,422,965 - - - - 67,162 - - - - 2,083,748 - - - - 438,470 - - - - 315,113 $ 2,829,411 $ 1,348,424 $ 1,045,930 $ 5,223,765 $ 17,877,777 $ - $ - $ - $ - $ 675,314 - - - - 182,018 - - - - 1,301,958 - - - - 315,113 - - - - 1,795,677 - - - - 4,270,080 986,009 221,174 866,914 2,074,097 2,074,097 1,843,402 1,127,250 179,016 3,149,668 12,246,760 - - - - (713,160) 2,829,411 1,348,424 1,045,930 5,223,765 13,607,697 $ 2,829,411 $ 1,348,424 $ 1,045,930 $ 5,223,765 $ 17,877,777 (Concluded) Permanent Funds City of Salem, Massachusetts 97 Comprehensive Annual Financial Report ---PAGE BREAK--- Community Salem City School Development Redevelopment School Highway Donations Grants Grants Grants Authority Lunch Grants and Gifts REVENUES: Charges for $ 10,978 $ 112,647 $ - $ - $ - $ - $ - Penalties and interest on - - - - - - - Intergovernmental…………………………………………… 7,831,314 5,749,643 1,298,709 - 1,734,228 664,203 - Departmental and 219,220 89,954 127,904 - - - 2,015 Contributions………………………………………………… 24,663 22,797 - - - - 263,922 Investment income 427 - 235 14 - - 26,331 TOTAL 8,086,602 5,975,041 1,426,848 14 1,734,228 664,203 292,268 EXPENDITURES: Current: General government……………………………………… 759,398 - - - - - 2,069 Public 1,363,785 - - - - - 27,356 171,404 6,077,900 - - 1,622,663 - 36,784 Public 104,070 - - - - 664,203 4,395 Community development………………………………… 1,148,885 - 1,416,828 15,000 - - - Health and human services……………………………… 4,595,973 - - - - - 18,963 Culture and recreation……………………………………… 69,699 - - - - - 18,349 Debt service: - - 35,000 - - - - - - 3,913 - - - - TOTAL EXPENDITURES……………………………… 8,213,214 6,077,900 1,455,741 15,000 1,622,663 664,203 107,916 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES………………………… (126,612) (102,859) (28,893) (14,986) 111,565 - 184,352 OTHER FINANCING SOURCES (USES): Issuance of bonds and - - - - - - - Transfers 1,055,379 45,407 2,775 - - - - Transfers (55,327) (46,488) - - - - (4,429) TOTAL OTHER FINANCING SOURCES (USES)…… 1,000,052 (1,081) 2,775 - - - (4,429) NET CHANGE IN FUND BALANCES………………………… 873,440 (103,940) (26,118) (14,986) 111,565 - 179,923 FUND BALANCES AT BEGINNING OF YEAR……………… 1,081,780 2,044,738 99,758 20,786 55,458 - 1,385,819 FUND BALANCES AT END OF $ 1,955,220 $ 1,940,798 $ 73,640 $ 5,800 $ 167,023 $ - $ 1,565,742 (Continued) NONMAJOR GOVERNMENTAL FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FISCAL YEAR ENDED JUNE 30, 2012 Special Revenue Funds City of Salem, Massachusetts 98 Comprehensive Annual Financial Report ---PAGE BREAK--- City School Receipts Revolving Revolving Wharf McGrath Reserved Accounts Accounts Subtotal Renovation Park Other Subtotal $ - $ - $ - $ 123,625 $ - $ - $ - $ - 2,400 - - 2,400 - - - - - - - 17,278,097 561,417 - - 561,417 523,859 677,791 1,330,269 2,971,012 - - - - - 295 12,800 324,477 - - - - - 1,459 280 28,746 - - - - 526,259 679,545 1,343,349 20,728,357 561,417 - - 561,417 - 161,102 - 922,569 - - 65,735 65,735 - - - 1,391,141 - - 133,619 133,619 - - 1,180,700 9,089,451 - - 233,353 233,353 - 73,557 - 846,225 75,502 - 605,436 680,938 - 168,363 - 2,749,076 259,663 - - 259,663 - 345 - 4,615,281 - - - - - 231,292 - 319,340 - 1,117,311 50,229 1,167,540 - - - 35,000 - - - - - - - 3,913 - - - - - 634,659 1,180,700 19,971,996 335,165 1,117,311 1,088,372 2,540,848 526,259 44,886 162,649 756,361 226,252 (1,117,311) (1,088,372) (1,979,431) - - - - - 1,400,000 - 1,400,000 - - - 1,103,561 - - - - (464,848) - - (571,092) - - - - (464,848) - - 532,469 - 1,400,000 - 1,400,000 61,411 44,886 162,649 1,288,830 226,252 282,689 (1,088,372) (579,431) 454,639 1,253,294 277,524 6,673,796 - - 1,000,737 1,000,737 $ 516,050 $ 1,298,180 $ 440,173 $ 7,962,626 $ 226,252 $ 282,689 $ (87,635) $ 421,306 (Continued) Capital Project Funds Special Revenue Funds City of Salem, Massachusetts 99 Comprehensive Annual Financial Report ---PAGE BREAK--- Total Nonmajor Cemetery Human Service Governmental Fund Fund Other Subtotal Funds REVENUES: Charges for - $ - $ - $ - $ 123,625 Penalties and interest on - - - 2,400 Intergovernmental………………………………………… - - - - 17,839,514 Departmental and - - - - 2,971,012 Contributions……………………………………………… 14,250 - 3,077 17,327 341,804 Investment income 1,066 (9,152) 21,724 13,638 42,384 TOTAL 15,316 (9,152) 24,801 30,965 21,320,739 EXPENDITURES: Current: General government…………………………………… - - - - 988,304 Public - - 1,000 1,000 1,525,760 - - - - 9,322,804 Public 67,808 - 49,040 116,848 1,644,011 Community development……………………………… - - - - 3,008,739 Health and human services…………………………… - 40,757 - 40,757 4,656,038 Culture and recreation…………………………………… - - - - 1,486,880 Debt service: - - - - 35,000 - - - - 3,913 TOTAL EXPENDITURES…………………………… 67,808 40,757 50,040 158,605 22,671,449 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES……………………… (52,492) (49,909) (25,239) (127,640) (1,350,710) OTHER FINANCING SOURCES (USES): Issuance of bonds and - - - - 1,400,000 Transfers - - - - 1,103,561 Transfers - - - - (571,092) TOTAL OTHER FINANCING SOURCES (USES)… - - - - 1,932,469 NET CHANGE IN FUND BALANCES……………………… (52,492) (49,909) (25,239) (127,640) FUND BALANCES AT BEGINNING OF YEAR…………… 2,881,903 1,398,333 1,071,169 5,351,405 13,025,938 FUND BALANCES AT END OF 2,829,411 $ 1,348,424 $ 1,045,930 $ 5,223,765 $ 13,607,697 (Concluded) NONMAJOR GOVERNMENTAL FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FISCAL YEAR ENDED JUNE 30, 2012 Permanent Funds City of Salem, Massachusetts 100 Comprehensive Annual Financial Report ---PAGE BREAK--- City of Salem, Massachusetts 101 Comprehensive Annual Financial Report Employee Benefit Trust Funds Employee benefit trust funds Pension Trust Fund – This fund is used to account for the activity of the Salem Contributory Retirement System, which accumulates resources to provide pension benefits to eligible retirees and their beneficiaries. Other Postemployment Benefit Trust Fund – This fund is used to account for resources being accumulated to fund future liabilities for “other” postemployment employee benefits. ---PAGE BREAK--- EMPLOYEE BENEFIT TRUST FUNDS COMBINING STATEMENT OF FIDUCIARY NET ASSETS JUNE 30, 2012 Pension Other Trust Fund Postemployment Total (as of December Benefits Employee Benefit 31, 2011) Trust Fund Trust Funds ASSETS Cash and cash $ 8,335,550 $ 18,770 $ 8,354,320 Investments: Corporate - 362,242 362,242 Real estate and alternative investment mutual funds………………… 756,270 - 756,270 85,018,605 - 85,018,605 Receivables, net of allowance for uncollectibles: 425,604 - 425,604 NONCURRENT: Capital assets, net of accumulated depreciation………………………… 103,906 - 103,906 TOTAL 94,639,935 381,012 95,020,947 LIABILITIES Warrants 5,533 - 5,533 NET ASSETS Held in trust for pension and OPEB benefits……………………………… $ 94,634,402 $ 381,012 $ 95,015,414 City of Salem, Massachusetts 102 Comprehensive Annual Financial Report ---PAGE BREAK--- EMPLOYEE BENEFIT TRUST FUNDS COMBINING STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS FISCAL YEAR ENDED JUNE 30, 2012 Pension Other Trust Fund Postemployment Total (as of December Benefits Employee Benefit 31, 2011) Trust Fund Trust Funds ADDITIONS: Contributions: 10,497,479 $ 324,924 $ 10,822,403 Plan 3,353,392 - 3,353,392 Total 13,850,871 324,924 14,175,795 Net investment income: Net change in fair value of (2,448,512) 6,088 (2,442,424) 2,702,897 - 2,702,897 Total investment 254,385 6,088 260,473 Less: investment (473,299) - (473,299) Net investment (218,914) 6,088 (212,826) 381,906 - 381,906 Transfers from other 385,154 - 385,154 TOTAL 14,399,017 331,012 14,730,029 DEDUCTIONS: 306,474 - 306,474 Transfers to other 304,484 - 304,484 Retirement benefits and 13,206,874 - 13,206,874 3,125 - 3,125 TOTAL 13,820,957 - 13,820,957 CHANGE IN NET 578,060 331,012 909,072 NET ASSETS AT BEGINNING OF 94,056,342 50,000 94,106,342 NET ASSETS AT END OF 94,634,402 $ 381,012 $ 95,015,414 City of Salem, Massachusetts 103 Comprehensive Annual Financial Report ---PAGE BREAK--- City of Salem, Massachusetts 104 Comprehensive Annual Financial Report Private Purpose Trust Funds Private purpose trust funds Trust Fund Commissioners – This fund is used to account for trusts held by the City to benefit individuals and is 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 NET ASSETS JUNE 30, 2012 Trust Fund Scholarship Commissioners Funds Total ASSETS Cash and cash equivalents………………………………… $ 148,432 $ 102,839 $ 251,271 1,037,999 - 1,037,999 TOTAL 1,186,431 102,839 1,289,270 NET ASSETS Held in trust for other 1,186,431 $ 102,839 $ 1,289,270 Private Purpose Trust Funds City of Salem, Massachusetts 105 Comprehensive Annual Financial Report ---PAGE BREAK--- Trust Fund Scholarship Commissioners Funds Total ADDITIONS: Contributions: Private $ 1,726 $ 14,326 $ 16,052 Net investment income: Net change in fair value of investments……………………………………… (12,450) - (12,450) - 1,020 1,020 Total Net Investment (12,450) 1,020 (11,430) TOTAL (10,724) 15,346 4,622 DEDUCTIONS: Educational 8,218 8,300 16,518 Housing 89,683 - 89,683 TOTAL 97,901 8,300 106,201 CHANGE IN NET (108,625) 7,046 (101,579) NET ASSETS AT BEGINNING OF 1,295,056 95,793 1,390,849 NET ASSETS AT END OF $ 1,186,431 $ 102,839 $ 1,289,270 Private Purpose Trust Funds PRIVATE PURPOSE TRUST FUNDS COMBINING STATEMENT OF CHANGES IN NET ASSETS FISCAL YEAR ENDED JUNE 30, 2012 City of Salem, Massachusetts 106 Comprehensive Annual Financial Report ---PAGE BREAK--- City of Salem, Massachusetts 107 Comprehensive Annual Financial Report Agency Fund Agency Fund This fund is used primarily to account for payroll withholdings, police and fire details, escrow deposits and unclaimed property. ---PAGE BREAK--- Beginning End of Year Additions Deletions of Year ASSETS CURRENT: Cash and cash equivalents………………$ 683,356 $ 11,576,197 $ (10,583,403) $ 1,676,150 LIABILITIES Warrants 17,049 $ 56,752 $ (17,049) $ 56,752 Liabilities due depositors………………… 666,307 36,710,889 (35,757,798) 1,619,398 TOTAL LIABILITIES…………………………$ 683,356 $ 36,767,641 $ (35,774,847) $ 1,676,150 AGENCY FUND STATEMENT OF CHANGES IN ASSETS AND LIABILITIES FISCAL YEAR ENDED JUNE 30, 2012 City of Salem, Massachusetts 108 Comprehensive Annual Financial Report ---PAGE BREAK--- Statistical Section Winter Island Light House Winter Island During the 1930's, the United States Coast Guard created a Search & Rescue Base here on Winter Island Park. The Frigate USS Essex was built and launched in 1799 from this location. It served General George Washington in the U.S. Navy. The three bunkers located in historic Fort Pickering once stored ammunition as early as the Civil War. Winter Island had Salem's first tavern and first shipyard. A fort was erected as early as 1643. In 1867, the War department "turned over" to the city "for public use" the part of the island not occupied by the fort, until it should be wanted for defense. On December 28, 1928, Salem's Park Department took formal possession of the island. The fort was renamed Fort Pickering, after Colonel Timothy Pickering, Secretary of State and War in Washington's Cabinet. Winter Island is located at 50 Winter Island Road in Salem, Massachusetts. It offers RV and Tent Camping May 1 to Nov 1, a public boat ramp that is open year round, Waikiki Beach a public beach with lifeguards, seasonal dinghy rack spaces, and a camp and gift store. Picnic areas can be rented May 1 through Nov 1. Winter Island offers a walking tour where you can see the historic Fort Pickering Lighthouse and is a stop along the Salem Trolley Tour. A function hall is available for year round rentals and is a great place for weddings and more! Go to www.salem.com Recreation Department for more information. ---PAGE BREAK--- City of Salem, Massachusetts 109 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. ---PAGE BREAK--- 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Governmental activities Invested in capital assets, net of related debt………$ 83,045,604 $ 79,729,492 $ 112,740,510 $ 109,183,737 $ 132,787,853 $ 139,683,360 $ 147,373,757 $ 147,313,749 $ 144,887,020 $ 147,692,495 5,237,908 8,759,761 9,734,998 8,649,700 8,868,048 6,948,839 6,968,580 6,892,267 10,562,103 11,197,635 Unrestricted…………………………………………… 9,656,396 6,519,783 (3,667,364) (371,947) (2,189,821) (6,668,493) (13,473,169) (17,907,226) (17,992,385) (21,617,069) Total governmental activities net assets…………………… $ 97,939,908 $ 95,009,036 $ 118,808,144 $ 117,461,490 $ 139,466,080 $ 139,963,706 $ 140,869,168 $ 136,298,790 $ 137,456,738 $ 137,273,061 Business-type activities Invested in capital assets, net of related debt……… 8,319,902 8,147,378 9,212,891 9,018,231 9,138,929 8,836,475 6,939,001 8,245,799 8,248,186 8,605,165 Unrestricted…………………………………………… 6,649,222 7,538,395 4,492,692 4,722,252 5,609,406 5,647,967 6,371,380 3,920,927 4,366,232 4,085,318 Total business-type activities net assets…………………… $ 14,969,124 $ 15,685,773 $ 13,705,583 $ 13,740,483 $ 14,748,335 $ 14,484,442 $ 13,310,381 $ 12,166,726 $ 12,614,418 $ 12,690,483 Primary government Invested in capital assets, net of related debt……… 91,365,506 87,876,870 121,953,401 118,201,968 141,926,782 148,519,835 154,312,758 155,559,548 153,135,206 156,297,660 5,237,908 8,759,761 9,734,998 8,649,700 8,868,048 6,948,839 6,968,580 6,892,267 10,562,103 11,197,635 Unrestricted…………………………………………… 16,305,618 14,058,178 825,328 4,350,305 3,419,585 (1,020,526) (7,101,789) (13,986,299) (13,626,153) (17,531,751) Total primary government net assets……………………… $ 112,909,032 $ 110,694,809 $ 132,513,727 $ 131,201,973 $ 154,214,415 $ 154,448,148 $ 154,179,549 $ 148,465,516 $ 150,071,156 $ 149,963,544 Note: As allowed by GASB #34, the City reported retroactive general infrastructure, acquired prior to fiscal 2002, beginning in fiscal 2005. Fiscal years 2003-2004 have not been restated to reflect this change. Fiscal Year Last Ten Fiscal Years Net Assets By Component City of Salem, Massachusetts 110 Comprehensive Annual Financial Report ---PAGE BREAK--- 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Expenses Governmental activities: General government………………………………… $ 8,514,423 $ 9,454,148 $ 9,373,119 $ 9,867,573 $ 9,641,318 $ 10,598,174 $ 10,914,012 $ 10,865,152 $ 11,702,186 $ 11,904,711 Public 20,884,198 22,235,461 22,058,002 23,481,525 24,433,343 28,262,847 27,421,538 26,755,783 27,989,181 26,551,919 59,386,206 61,775,760 67,483,676 67,258,196 75,513,149 75,874,227 79,410,738 83,743,843 86,938,434 91,261,655 Public 6,464,257 6,517,047 8,421,997 7,991,774 9,229,479 6,846,006 6,705,986 6,820,639 8,894,659 5,952,380 Community development……………………………… 4,954,608 5,767,362 2,066,749 1,891,386 1,804,554 1,567,381 2,093,618 3,226,360 1,845,141 1,530,786 Health and human services………………………… 1,388,761 1,410,712 4,856,306 5,016,513 4,675,688 5,904,063 6,226,498 6,622,114 5,930,089 6,001,130 Culture and recreation………………………………… 4,022,880 4,186,622 3,689,992 3,718,183 2,448,265 3,293,415 3,228,906 3,169,224 2,997,090 3,219,315 3,366,107 3,136,763 2,689,312 2,889,116 2,604,390 2,503,461 2,396,187 1,888,315 1,582,033 1,544,887 Total government activities expenses…………………… 108,981,440 114,483,875 120,639,153 122,114,266 130,350,186 134,849,574 138,397,483 143,091,430 147,878,813 147,966,783 Business-type activities: Water 10,196,489 9,619,356 3,186,840 3,197,864 3,562,372 3,895,551 4,021,536 4,395,607 4,161,481 4,188,083 Sewer 6,616,318 5,686,595 5,612,230 5,894,870 7,467,332 7,400,431 6,590,680 6,733,017 Golf 333,512 320,632 292,187 279,981 363,651 386,099 278,007 399,023 363,625 438,613 679,171 665,458 664,686 800,506 792,903 936,826 905,834 844,615 991,722 1,042,610 3,230,500 2,558,263 2,573,421 2,617,948 2,744,963 Total business type activities expenses………………… 11,209,172 10,605,446 10,760,031 9,964,946 10,331,156 14,343,846 15,230,972 15,613,097 14,725,456 15,147,286 Total primary government expenses…………………… $ 120,190,612 $ 125,089,321 $ 131,399,184 $ 132,079,212 $ 140,681,342 $ 149,193,420 $ 153,628,455 $ 158,704,527 $ 162,604,269 $ 163,114,069 Program Revenues Governmental activities: Education charges for services………………………$ 1,097,764 $ 1,141,196 $ 1,023,839 $ 831,579 $ 1,659,544 $ 1,586,525 $ 1,473,880 $ 1,370,250 $ 1,277,950 $ 1,271,626 Public Safety charges for services………………… 1,804,781 1,865,270 1,923,845 2,003,791 2,217,287 2,378,961 2,456,341 2,074,324 2,115,452 2,212,295 Other charges for services…………………………… 1,197,196 2,055,497 1,481,467 1,825,898 2,561,814 1,602,847 1,693,333 1,824,040 1,744,351 1,872,305 Operating grants and contributions………………… 39,127,290 35,305,349 34,087,248 37,934,300 37,957,703 41,168,760 43,744,124 46,352,034 51,358,511 47,872,700 Capital grant and contributions……………………… 7,019,891 2,129,821 2,090,467 3,312,346 30,118,572 9,615,336 8,762,642 4,135,374 5,197,515 5,699,571 Total government activities program revenues...……… 50,246,922 42,497,133 40,606,866 45,907,914 74,514,920 56,352,429 58,130,320 55,756,022 61,693,779 58,928,497 Business-type activities: Charges for services - 10,415,528 11,708,715 3,853,505 4,319,560 4,822,041 4,318,889 4,085,103 4,511,916 4,517,123 4,623,340 Charges for services - 5,512,922 6,233,883 6,694,172 6,555,593 7,668,044 7,610,195 8,292,908 7,986,386 Charges for services - 549,091 543,467 502,770 525,404 546,841 570,142 547,301 589,345 548,805 648,916 Charges for services - Parking……………………… 1,364,076 1,536,390 1,453,088 1,549,833 1,713,649 1,651,032 1,694,708 2,038,235 2,333,478 2,274,470 Charges for services - 908,577 720,193 740,511 692,089 675,916 Operating grants and contributions………………… - - - - - - - - - - Capital grants and contributions…………………… - - - - - 49,707 43,796 41,820 39,804 - Total business-type activities program revenues...…… 12,328,695 13,788,572 11,322,285 12,628,680 13,776,703 14,053,940 14,759,145 15,532,022 16,424,207 16,209,028 Total primary government program revenues……………$ 62,575,617 $ 56,285,705 $ 51,929,151 $ 58,536,594 $ 88,291,623 $ 70,406,369 $ 72,889,465 $ 71,288,044 $ 78,117,986 $ 75,137,525 Net (Expense)/Revenue Governmental activities……………………………………$ (58,734,518) $ (71,986,742) $ (78,692,287) $ (76,206,352) $ (55,835,266) $ (78,497,145) $ (80,267,163) $ (87,335,408) $ (86,185,034) $ (89,038,286) Business-type activities…………………………………… 1,119,523 3,183,126 562,254 2,663,734 3,445,547 (289,906) (471,827) (81,075) 1,698,751 1,061,742 Total primary government net expense………………… $ (57,614,995) $ (68,803,616) $ (78,130,033) $ (73,542,618) $ (52,389,719) $ (78,787,051) $ (80,738,990) $ (87,416,483) $ (84,486,283) $ (87,976,544) General Revenues and other Changes in Net Assets Governmental activities: Real estate and personal property taxes, net of tax refunds payable………………………… $ 52,118,338 $ 54,855,784 $ 55,915,767 $ 58,379,505 $ 60,991,003 $ 63,230,976 $ 66,672,653 $ 69,067,349 $ 71,828,412 $ 72,073,381 Tax 690,557 635,624 182,650 752,178 527,492 234,353 510,973 795,443 Motor vehicle and other excise taxes……………… 3,793,044 3,478,999 3,489,584 3,452,569 3,357,765 3,286,119 2,978,961 3,092,527 3,181,247 3,131,334 Hotel/motel 219,628 263,962 282,324 373,655 324,622 294,214 955,092 1,161,007 Penalties and interest on 391,429 322,003 288,874 350,651 266,246 353,952 412,572 437,361 438,487 490,242 Payments in lieu of 1,073,539 1,088,754 1,235,083 1,229,435 1,320,945 1,307,078 1,319,079 1,440,186 Grants and contributions not restricted to specific 3,774,422 6,932,546 8,097,351 7,661,752 8,971,625 9,163,777 8,064,486 6,583,118 6,404,395 8,220,908 Unrestricted investment income……………………… 816,614 568,503 521,585 183,980 965,694 462,275 (35,188) 435,769 1,095,518 103,015 Miscellaneous………………………………………… 536,979 431,558 77,454 214,067 248,905 168,417 203,848 250,681 358,720 453,416 2,687,282 2,466,477 2,542,444 2,628,834 2,437,695 (26,013) 702,234 1,062,580 1,251,059 985,677 Total governmental activities 64,118,108 69,055,870 72,916,783 74,859,698 78,938,990 78,994,771 81,172,625 82,765,030 87,342,982 88,854,609 Business-type activities: (2,687,282) (2,466,477) (2,542,444) (2,628,834) (2,437,695) 26,013 (702,234) (1,062,580) (1,251,059) (985,677) Total primary government…………………………………$ 61,430,826 $ 66,589,393 $ 70,374,339 $ 72,230,864 $ 76,501,295 $ 79,020,784 $ 80,470,391 $ 81,702,450 $ 86,091,923 $ 87,868,932 Changes in Net Assets Governmental activities……………………………………$ 5,383,590 $ (2,930,872) $ (5,775,504) $ (1,346,654) $ 23,103,724 $ 497,626 $ 905,462 $ (4,570,378) $ 1,157,948 $ (183,677) Business-type activities…………………………………… (1,567,759) 716,649 (1,980,190) 34,900 1,007,852 (263,893) (1,174,061) (1,143,655) 447,692 76,065 Total primary government…………………………………$ 3,815,831 $ (2,214,223) $ (7,755,694) $ (1,311,754) $ 24,111,576 $ 233,733 $ (268,599) $ (5,714,033) $ 1,605,640 $ (107,612) In fiscal years 2003 - 2004 the City reported a joint water/sewer enterprise fund. In fiscal years 2003 - 2004 the City included in real estate and personal property taxes, net of tax refunds payable. In fiscal years 2003 - 2007 the City reported Trash in the governmental funds. Fiscal Year Last Ten Fiscal Years Changes in Net Assets City of Salem, Massachusetts 111 Comprehensive Annual Financial Report ---PAGE BREAK--- 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 General Fund Reserved…………………………… $ 1,382,756 $ 1,153,872 $ 68,524 $ 197,581 $ 69,631 $ 220,608 $ 372,027 $ 421,825 $ - $ - Unreserved…………………………… 3,980,693 3,398,534 335,643 1,162,714 (1,151,199) 1,321,397 749,849 1,211,094 - - Assigned……………………………… - - - - - - - - 589,894 985,737 Unassigned………………………… - - - - - - - - 8,405,585 9,550,262 Total general 5,363,449 $ 4,552,406 $ 404,167 $ 1,360,295 $ (1,081,568) $ 1,542,005 $ 1,121,876 $ 1,632,919 $ 8,995,479 $ 10,535,999 All Other Governmental Funds Reserved…………………………… $ 1,481,549 $ 1,844,725 $ 1,591,750 $ 1,606,904 $ 1,629,202 $ 1,650,597 $ 1,688,851 $ 1,689,176 $ - $ - Unreserved, reported in: Special revenue funds………… 8,920,508 6,618,566 7,763,007 5,474,128 5,477,136 3,768,323 5,602,931 5,819,702 - - Capital projects funds…………… (14,050,593) (24,963,657) (10,513,270) (1,859,435) (197,270) 2,806,105 (537,848) 3,969,207 - - Permanent funds………………… 2,801,999 2,555,014 2,897,589 3,018,952 3,556,455 3,291,512 2,678,043 2,783,655 - - Nonspendable……………………… - - - - - - - - 1,707,276 2,074,097 Restricted…………………………… - - - - - - - - 11,329,632 14,344,418 Unassigned………………………… - - - - - - - - (665,295) (4,101,228) Total all other governmental funds…. $ (846,537) $ (13,945,352) $ 1,739,076 $ 8,240,549 $ 10,465,523 $ 11,516,537 $ 9,431,977 $ 14,261,740 $ 12,371,613 $ 12,317,287 Note: The City implemented GASB 54 in fiscal year 2011, fund balances prior to fiscal year 2011 have been reported in the pre-GASB 54 format. Fiscal Year Last Ten Fiscal Years Fund Balances, Governmental Funds City of Salem, Massachusetts 112 Comprehensive Annual Financial Report ---PAGE BREAK--- 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Revenues: Real estate and personal property taxes, net of tax $ 52,448,384 $ 55,603,719 $ 55,866,348 $ 58,601,934 $ 60,638,180 $ 63,376,714 $ 66,717,968 $ 68,747,759 $ 71,754,816 $ 72,202,064 Motor vehicle and other excise 3,875,265 3,387,266 3,531,673 3,577,544 3,215,438 3,427,889 3,154,642 3,007,759 3,180,552 3,203,122 Intergovernmental…………………………………………………… 37,949,147 37,305,545 40,601,143 40,386,321 38,496,892 39,569,976 42,962,129 44,150,857 51,562,915 50,048,535 Departmental and 8,628,161 9,324,193 7,539,138 8,496,446 9,017,710 10,086,572 9,382,460 8,511,803 9,656,996 10,366,488 Investment 816,821 568,503 828,933 927,302 925,771 462,585 (32,923) 436,686 1,096,747 129,773 Commonwealth school construction grants……………………… - - 12,739,570 16,559,515 35,025,316 17,324,905 13,130,784 7,095,272 4,310,837 4,310,837 On-behalf pension payments by Commonwealth………………… 4,275,669 5,345,441 5,890,261 6,376,140 7,044,987 7,511,889 8,277,958 8,602,216 9,290,000 9,695,000 Total 107,993,447 111,534,667 126,997,066 134,925,202 154,364,294 141,760,530 143,593,018 140,552,352 150,852,863 149,955,819 Expenditures: General 4,463,397 4,627,702 4,863,297 5,112,025 4,733,168 4,512,126 5,284,403 5,062,768 5,678,376 6,039,335 Public 15,368,476 14,999,915 14,417,276 14,547,596 14,969,952 15,945,719 16,452,689 16,147,666 17,129,546 17,807,607 48,449,552 47,729,470 46,260,838 47,647,867 47,719,326 47,293,548 48,101,995 49,491,944 51,429,439 50,076,848 Public 5,232,421 5,209,599 6,663,143 5,427,108 6,137,334 3,338,981 3,718,860 3,255,769 3,573,118 2,831,181 Community 2,348,162 2,085,553 2,066,749 1,891,386 1,804,554 1,567,381 2,402,149 3,413,203 1,933,227 1,757,053 Health and human 901,407 855,553 4,348,098 4,475,413 4,730,161 5,306,444 5,339,094 6,158,089 5,927,137 5,538,621 Culture and 2,981,769 2,756,066 2,278,899 2,339,600 1,865,609 2,135,563 2,395,536 2,320,698 2,152,872 3,367,206 Pension 4,340,575 6,565,806 11,926,982 13,388,893 14,375,924 15,180,985 16,206,240 16,770,835 17,707,823 18,538,274 Massachusetts teachers' retirement……………………………… 4,275,669 5,345,441 5,890,261 6,376,140 7,044,987 7,511,889 8,277,958 8,602,216 9,290,000 9,695,000 Employee 10,529,297 10,580,395 10,433,140 9,964,302 10,889,249 11,570,087 11,805,651 11,077,682 11,751,691 13,122,992 State and county 3,911,644 4,212,549 4,028,333 5,047,971 5,589,986 5,933,670 6,302,025 6,655,890 6,445,380 6,390,908 Capital 18,550,903 15,793,932 1,422,955 7,581,652 38,018,740 12,930,767 13,552,655 4,654,814 6,194,898 11,752,488 Debt service 2,795,000 3,890,000 4,105,000 4,385,000 4,310,000 6,620,000 4,559,497 5,385,000 7,550,000 4,717,000 2,854,502 3,259,021 2,919,668 2,958,101 2,513,575 2,622,389 2,568,643 2,087,028 1,851,117 1,761,551 Total 127,002,774 127,911,002 121,624,639 131,143,054 164,702,565 142,469,549 146,967,395 141,083,602 148,614,624 153,396,064 Excess of revenues over (under) expenditures…………………… (19,009,327) (16,376,335) 5,372,427 3,782,148 (10,338,271) (709,019) (3,374,377) (531,250) 2,238,239 (3,440,245) Other Financing Sources (Uses) Issuance of 28,670,000 - 2,465,000 - 8,319,497 3,930,000 - 4,589,000 630,000 3,900,938 Premium from issuance of - - 232,856 - 85,169 84,840 - 575,986 1,167,420 1,059 Issuance of refunding - - - - - - 3,785,000 11,043,000 4,589,000 - Payments to refunded bond escrow - - - - - - - (8,512,000) - - Refunding bonds - - - - - - (3,785,000) (2,930,000) (4,589,000) - Capital lease - - 807,283 1,046,619 378,169 394,779 167,454 43,500 185,715 38,765 Sale of capital 300,000 - - - - - - - - - Transfers 9,051,161 10,693,915 3,597,240 5,320,517 3,558,845 4,508,229 5,228,530 6,160,597 5,137,447 5,184,894 Transfers (6,719,057) (8,227,438) (1,054,796) (2,691,683) (1,121,150) (4,534,242) (4,526,296) (5,098,017) (3,886,388) (4,199,217) Total other financing sources 31,302,104 2,466,477 6,047,583 3,675,453 11,220,530 4,383,606 869,688 5,872,066 3,234,194 4,926,439 Net change in fund $ 12,292,777 $ (13,909,858) $ 11,420,010 $ 7,457,601 $ 882,259 $ 3,674,587 $ (2,504,689) $ 5,340,816 $ 5,472,433 $ 1,486,194 Debt service as a percentage of noncapital expenditures…………… 4.51% 6.16% 5.95% 5.94% 5.39% 7.13% 5.34% 5.48% 6.60% 4.57% In fiscal year 2005 certain grants were reclassified to Human Services to better reflect the purpose. Prior to fiscal year 2005 any receipts from the Commonwealth for school construction projects were included in intergovernmental revenue. 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 Last Ten Fiscal Years Changes in Fund Balances, Governmental Funds City of Salem, Massachusetts 113 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 Total Fiscal Residential Residential Commercial Industrial Personal Commercial Commercial Direct City Year Value Tax Rate Value Value Property Value Tax Rate Rate Value 2003 2,575,202,432 $ $ 12.87 $ 341,154,055 $ 135,580,725 $ 254,704,340 $ 731,439,120 $ 26.05 $ 15.79 $ 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 13.69 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 13.23 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 12.93 4,586,174,179 2007 4,137,021,751 10.77 435,740,235 150,255,420 255,302,680 841,298,335 20.48 12.41 4,978,320,086 2008 4,008,575,509 11.67 449,128,612 134,872,400 212,904,820 796,905,832 22.11 13.40 4,805,481,341 2009 3,753,889,412 12.92 446,457,904 133,318,180 177,993,390 757,769,474 24.54 14.87 4,511,658,886 2010 3,527,110,563 14.01 432,747,534 127,061,700 207,643,630 767,452,864 26.93 16.32 4,294,563,427 2011 3,361,382,273 15.05 417,668,102 123,342,500 213,577,900 754,588,502 29.08 17.62 4,115,970,775 2012 3,291,268,444 15.63 410,704,364 118,044,040 153,768,900 682,517,304 29.81 18.07 3,973,785,748 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 City. 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. 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Commercial Value as % of Total Value 83% 10% 3% 4% Total Assessed Value by Classification Fiscal Year Ended June 30, 2012 Residential Commercial Industrial Personal Property 82% 10% 3% 5% Total Assessed Value by Classification Fiscal Year Ended June 30, 2011 Residential Commercial Industrial Personal Property City of Salem, Massachusetts 114 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 $50,000,000 1 1.3% - - New England Power Company Personal & Industrial Property $31,774,550 2 0.8% - - Massachusetts Electric Personal Property $30,234,110 3 0.8% $19,779,700 6 0.6% Shetland Properties Industrial & Commercial Property $26,202,800 4 0.7% $23,706,200 4 0.7% Highlander Plazas Commercial Property $21,105,400 5 0.5% $18,902,300 7 0.6% Algonquin Gas Transmission Personal Property $20,986,100 6 0.5% - - Salem Station LLC Apartments $32,000,700 7 0.8% - - Princeton Crossing Apartments Apartments $27,622,400 8 0.7% $20,246,800 5 0.6% National Grid Industrial Property & PP $14,405,760 9 0.4% - - Verizon New England Personal Property $12,817,000 10 0.0% 12,098,600.00 9 0.4% US Gen New England Personal & Industrial Property - - $195,675,800 1 5.9% Pacific Gas and Electric (PG&E) Utility - - $50,000,000 2 1.5% Jefferson at Salem Retail - - $25,825,300 3 0.8% Second Pickwick Trust Commercial Property - - $12,737,900 8 0.4% Keyspan Energy Delivery Energy - - $10,103,530 10 0.2% Totals $267,148,820 6.4% $389,076,130 11.8% Source: Board of Assessors 2012 2003 City of Salem, Massachusetts 115 Comprehensive Annual Financial Report ---PAGE BREAK--- Percent of Less 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 2003 52,210,909 508,719 51,702,190 51,303,297 99.2% 398,826 51,702,123 100.0% 2004 54,374,223 564,486 53,809,737 53,259,047 99.0% 550,063 53,809,110 100.0% 2005 56,839,329 418,415 56,420,914 55,554,023 98.5% 866,450 56,420,473 100.0% 2006 59,292,238 443,519 58,848,719 58,010,805 98.6% 835,900 58,846,705 100.0% 2007 61,785,514 593,521 61,191,993 60,318,905 98.6% 870,423 61,189,328 100.0% 2008 64,399,664 565,307 63,834,357 63,225,112 99.0% 609,245 63,834,357 100.0% 2009 67,095,914 514,742 66,581,172 66,300,317 99.6% 280,855 66,581,172 100.0% 2010 70,082,325 612,829 69,469,496 68,292,880 98.3% 1,176,616 69,469,496 100.0% 2011 72,532,237 402,324 72,129,913 70,936,056 98.3% 1,193,857 72,129,913 100.0% 2012 71,788,367 360,622 71,427,745 70,558,172 98.8% 0 70,558,172 98.8% Revaluation Year Source: Massachusetts Department of Revenue; Board of Assessors Property Tax Levies and Collections Last Ten Fiscal Years City of Salem, Massachusetts 116 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 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% 2007 40,407 1,107,321,266 4,978,320,086 50,040,000 779,906 1,258 4.59% 1.02% 2008 40,407 1,129,467,691 4,805,481,341 55,704,497 675,954 1,395 4.99% 1.17% 2009 41,421 1,180,967,527 4,511,658,886 51,145,000 530,771 1,248 4.38% 1.15% 2010 41,361 1,202,841,984 4,294,563,427 50,387,000 317,032 1,226 4.22% 1.18% 2011 41,361 1,226,898,824 4,115,970,775 44,581,526 384,965 1,087 3.67% 1.09% 2012 41,340 1,250,801,415 3,973,785,748 43,629,929 245,703 1,061 3.51% 1.10% General Total Percentage Percentage Fiscal Obligation Capital Debt Per of Personal of Assessed Year Bonds Leases Outstanding Capita Income Value 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% 2007 3,570,656 0 54,390,562 1,346 4.91% 1.09% 2008 7,624,241 0 64,004,692 1,584 5.67% 1.33% 2009 7,250,908 0 58,926,679 1,423 4.99% 1.31% 2010 12,949,102 0 63,653,134 1,539 5.29% 1.48% 2011 15,665,280 0 60,631,771 1,466 4.94% 1.47% 2012 16,762,802 0 60,638,434 1,467 4.85% 1.53% Source: Audited Financial Statements, U. S. Census Governmental Activities Debt Business-type Activities Total Primary Government City of Salem, Massachusetts 117 Comprehensive Annual Financial Report ---PAGE BREAK--- Direct and Overlapping Governmental Activities Debt As of June 30, 2012 Estimated Estimated Share of Debt Percentage Overlapping Outstanding Applicable Debt North Shore Regional Vocational School District……………$ 705,000 24.60% $ 173,430 Capital Lease Obligations……………………………… 245,703 General Governmental Debt 43,629,929 City total direct 43,875,632 Total direct and overlapping $ 44,049,062 Source: Treasurer and North Shore Regional Vocational School District Overlapping governments are those that coincide, at least in part, with the geographic boundaries of the Town. This schedule estimates the portion of the outstanding debt of the overlapping governments that is borne by the taxpayers of the Town. This process recognizes that, when considering the government's ability to issue and repay long-term debt, the entire debt burden borne by the property taxpayers should be taken into account. However, this does not imply that every taxpayer is a resident, and therefore responsible for repaying the debt, of each overlapping government. City of Salem, Massachusetts 118 Comprehensive Annual Financial Report ---PAGE BREAK--- 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Equalized Valuation……………………………… $ 3,148,016,400 $ 3,148,016,400 $ 4,184,128,700 $ 4,223,735,800 $ 4,923,330,400 $ 4,923,330,400 $ 5,168,060,200 $ 4,521,039,500 $ 4,521,039,500 $ 4,214,398,700 Debt Limit of Equalized Valuation………… $ 157,400,820 $ 157,400,820 $ 209,206,435 $ 211,186,790 $ 246,166,520 $ 246,166,520 $ 258,403,010 $ 226,051,975 $ 226,051,975 $ 210,719,935 Less: Outstanding debt applicable to limit…………… 4,646,000 4,167,000 6,695,447 6,064,000 5,435,000 12,004,000 12,004,000 10,884,900 16,669,700 14,905,000 Authorized and unissued 69,000,988 70,336,913 39,296,218 48,682,895 54,169,239 28,769,240 28,769,240 11,128,240 13,725,802 72,303,161 Legal debt $ 83,753,832 $ 82,896,907 $ 163,214,770 $ 156,439,895 $ 186,562,281 $ 205,393,280 $ 217,629,770 $ 204,038,835 $ 195,656,473 $ 123,511,774 Total debt applicable to the limit as a percentage of debt limit………………… 46.79% 47.33% 21.98% 25.92% 24.21% 16.56% 15.78% 9.74% 13.45% 41.39% Source: Audited Financial Statements; Statement of Indebtedness Computation of Legal Debt Margin Last Ten Fiscal Years Fiscal Year City of Salem, Massachusetts 119 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 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% 2007 40,407 1,107,321,266 27,404 36.4 4,573 4.5% 2008 40,407 1,129,467,691 27,952 36.4 4,404 4.9% 2009 41,421 1,180,967,527 28,511 36.4 4,474 9.7% 2010 41,361 1,202,841,984 29,082 36.7 4,647 9.6% 2011 41,361 1,226,898,824 29,663 36.5 4,647 9.2% 2012 41,340 1,250,783,040 30,256 37.6 4,541 8.2% Note: Per Capita Personal Income based on 2010 U.S Census Source: Massachusetts Department of Revenue, Division of Local Services; U.S. Census Bureau City of Salem, Massachusetts 120 Comprehensive Annual Financial Report ---PAGE BREAK--- Principal Employers 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 3,240 1 14.2% 3,680 1 16.0% Salem State College Higher Education 1,506 2 6.6% 1,699 2 7.4% City of Salem Municipal Government 1,414 3 6.2% 1,661 3 7.2% Shaughnessy Health Care 560 4 2.4% - - Market Basket Food Market 350 5 1.5% 250 7 1.1% Commonwealth of Massachusetts State Government 344 6 1.5% 655 4 2.8% Salem Five Savings Banking 275 7 1.2% 356 5 1.5% Grovenor Park Nursing Health Care 250 8 1.1% 200 8 0.9% Peabody Essex Museum Cultural Tourism 233 9 1.0% 285 6 1.2% Salem YMCA Social Service Agency 166 10 0.7% - - Home Depot Retail - - 200 9 0.9% Perkin Elmer Opto Electronics Analytical Systems - - 180 10 0.8% 8,338 36.4% 39.8% Source: The City Planning Department 2012 2003 9,166 Employer City of Salem, Massachusetts 121 Comprehensive Annual Financial Report ---PAGE BREAK--- 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Function General government…………… 68 62 64 40 34 36 35 35 35 35 Public safety……………………… 185 180 190 181 190 185 187 191 190 194 Education………………………… 755 756 756 752 752 753 752 752 752 776 Public 47 45 55 35 38 40 37 38 39 40 Engineering……………………… - - - - 1 3 1 1 1 1 Health and human services…… 22 21 21 21 20 17 14 17 15 14 Culture and recreation………… 34 31 31 34 23 21 22 22 23 23 Total 1,111 1,095 1,117 1,063 1,058 1,054 1,048 1,056 1,054 1,083 Source: Various City Departments Fiscal Year Last Ten Fiscal Years Full-time Equivalent City Employees by Function City of Salem, Massachusetts City of Salem, Massachusetts 122 Comprehensive Annual Financial Report ---PAGE BREAK--- Function/Program 2003 2004 2005 2006 2007 2008 2009 2010 2011 2102 General government Marriage recordings………………………………… 327 330 327 375 322 306 276 243 381 321 Birth recordings……………………………………… 1,804 1,839 1,761 2,044 2,043 1,712 1,614 1,774 1,599 1,433 Death recordings…………………………………… 823 935 847 737 755 520 535 557 492 436 Police Physical 984 965 685 2,792 2,793 2,502 2,502 2,072 2,629 1,627 Motor vehicle violations…………………………… 5,489 5,238 4,334 6,477 8,672 6,604 191 6,631 10,309 8,497 Police personnel and officers……………………… 94 85 85 81 84 85 85 87 89 93 Fire 38 Inspections………………………………………… 1,972 3,231 2,789 1,187 1,562 886 886 935 1,077 973 Emergency responses……………………………… 3,911 4,281 4,572 6,235 6,719 6,330 17 6,409 6,079 5,952 Fire personnel and officers………………………… 85 78 78 75 76 81 81 79 83 90 Education Number of 5,016 4,727 4,676 4,744 4,573 4,404 4,474 4,647 4,585 4,541 Number of graduates……………………………… 218 257 246 255 269 254 273 283 246 240 Number of 406 415 409 477 484 479 479 488 507 517 Water Service connections………………………………… 9,898 10,516 10,568 11,000 11,811 11,701 11,737 11,719 11,719 11,719 Consumption in 2,090 2,111 2,136 2,000 2,056 2,123 1,994 2,103 2,025 1,921 Daily consumption 5.73 5.78 6.43 6.84 6.74 5.80 5.44 6.00 6.00 5.00 Sewer Service connections………………………………… 9,898 10,516 10,568 11,000 11,811 11,701 11,727 11,709 11,706 11,719 Health and human services Number of persons using COA transportation…… 44,804 44,500 45,976 37,497 39,052 18,678 15,526 16,076 16,908 19,630 Libraries Volumes in circulation……………………………… 124,435 125,516 128,569 141,595 143,052 148,752 145,634 143,512 148,634 158,011 Total volumes borrowed…………………………… 470,192 464,453 490,116 508,728 500,907 514,708 538,184 508,507 508,293 493,315 Source: Various City Departments; Massachusetts Department of Education Operating Indicators by Function/Program Last Ten Fiscal Years Fiscal Year City of Salem, Massachusetts 123 Comprehensive Annual Financial Report ---PAGE BREAK--- Function/Program 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 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 4 191 4 4 4 Education Number of elementary schools…………… 7 7 7 7 7 7 38 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 17 1 1 1 Public Works Water mains 108 108 108 108 108 108 102 102 102 102 Health and human services Number of personnel……………………… 17 17 17 17 17 17 17 17 15 14.7 Culture and recreation Parks and playgrounds…………………… 35 35 35 35 35 35 35 35 35 35 Park and playground (acreage)…………… 230 230 230 230 230 230 230 230 230 230 Conservation land (acreage)……………… 114 128 128 128 128 128 128 128 128 128 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 Capital Asset Statistics by Function/Program Last Ten Fiscal Years Fiscal Year City of Salem, Massachusetts 124 Comprehensive Annual Financial Report ---PAGE BREAK--- Free Stabilization Fiscal Year Cash Fund $ 2,525,829 $ 3,453,722 $ 3,249,238 $ 2,736,777 $ 750,607 $ 1,913,913 $ 1,261,200 $ 1,489,907 $ 1,114,950 $ 648,947 $ 691,149 $ 487,980 $ 538,372 $ 277,759 $ 2,732,090 $ 1,021,351 $ 1,867,737 $ 1,297,417 $ 3,212,194 $ 2,278,823 Source: City Records Free Cash and Stabilization Fund Balances Last Ten Fiscal Years City of Salem, Massachusetts 125 Comprehensive Annual Financial Report