PRELIMINARY OFFICIAL STATEMENT DATED JUNE 3, 2014

Transcription

1 This is a Preliminary Official Statement and the information contained herein is subject to completion, amendment or other change without notice. The securities described herein may not be sold nor may offers to buy be accepted prior to the time the Official Statement delivered in final form. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful or to registration or qualification under the applicable securities laws of any such jurisdiction. NEW ISSUE BOOK-ENTRY ONLY PRELIMINARY OFFICIAL STATEMENT DATED JUNE 3, 2014 Rating: S&P A+ (See RATING herein) In the opinion of Dilworth Paxson LLP, Bond Counsel, interest on the Bonds is not includable in gross income for purposes of federal income taxation under existing statutes, regulations, rulings and court decisions, subject to the conditions described in TAX MATTERS herein. Interest on the Bonds will not be an item of tax preference for purposes of the individual and corporate alternative minimum taxes; however, such interest is taken into account in computing the alternative minimum tax for certain corporations. No opinion is expressed regarding other federal tax consequences arising with respect to the Bonds. The Township has designated the Bonds as qualified tax-exempt obligations for purposes of Section 265(b)(3) of the Code (relating to the deductibility of interest expense by certain financial institutions). Further, in the opinion of Bond Counsel, interest on the Bonds and any gain on the sale thereof are not includable as gross income under the New Jersey Gross Income Tax Act. For a more complete discussion see TAX MATTERS herein. $7,980,000 Township of Lakewood Ocean County, New Jersey General Obligation Bonds, Series 2014 (Bank Qualified) (Callable) Dated: Date of Delivery Due: March 1, as shown below The $7,980,000 aggregate principal amount of General Obligation Bonds, Series 2014 (the Bonds ) are general obligations of the Township of Lakewood, County of Ocean, State of New Jersey (the Township ) for which the full faith and credit of the Township are pledged. The Township is authorized and required by law to levy ad valorem taxes on all taxable property within the Township without limitation as to rate or amount for the payment of the principal thereof and the interest thereon. The Bonds will be issued in fully registered book-entry only form and, when issued, will be registered in the name of and held by Cede & Co., as nominee of The Depository Trust Company, New York, New York ( DTC ). DTC, an automated depository for securities and clearing house for securities transactions, will act as securities depository for the Bonds. Individual purchases of the Bonds will be made in book-entry only form in the principal amount of $5,000 or any integral multiple thereof, except that any amount of Bonds maturing in any one year in excess of the largest principal amount thereof equaling a multiple of $5,000 will be in denominations of $1,000 or any integral multiple thereof. The Bonds shall bear interest from the date of delivery thereof, payable semi-annually on March 1 and September 1 of each year, beginning March 1, 2015, at such rates of interest as shown below until maturity. The Bonds will be payable as to principal upon presentation and surrender thereof at the offices of the Township or a duly designated paying agent. Interest on the Bonds will be paid by check, draft or wire transfer mailed, delivered or transmitted by the Township to the registered owner thereof as of the Record Dates (as defined herein). The Bonds are authorized by, and are issued pursuant to, the provisions of the Local Bond Law, N.J.S.A. 40A:2-1 et seq., as amended and supplemented (the Local Bond Law ), various bond ordinances duly adopted by the Township Committee on the dates set forth herein, and a bond resolution duly adopted by the Township Committee on May 22, The Bonds are being issued to: (i) permanently finance Bond Anticipation Notes previously issued by the Township in the total aggregate principal amount $7,980,000 and maturing on July 1, 2014 (the Prior Notes ), and (ii) pay certain costs and expenses incidental to the issuance and delivery of the Bonds. The Bonds are subject to optional redemption prior to their stated maturities as set forth herein. See DESCRIPTION OF THE BONDS under the subheading entitled Optional Redemption. The Bonds are not debt or obligations, legal, moral or otherwise of the State of New Jersey, or any county, municipality or political subdivision thereof other than the Township. MATURITIES, AMOUNTS, INTEREST RATES, YIELDS AND CUSIPS* Year Principal Amount Interest Rate Yield CUSIP* Year Principal Amount 2015 $375,000 % % 2021 $725, , , , , , , , , , ,000 Interest Rate Yield CUSIP* *CUSIP is a registered trademark of the American Bankers Association. CUSIP data herein are provided by Standard & Poor's CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc. The CUSIP numbers listed above are being provided solely for the convenience of Bondholders only at the time of issuance of the Bonds and the Township does not make any representation with respect to such numbers or undertake any responsibility for their accuracy now or at any time in the future. The CUSIP number for a specific maturity is subject to being changed after the issuance of the Bonds as a result of procurement of secondary market portfolio insurance or other similar enhancement by investors that is applicable to all or a portion of certain maturities of the Bonds. This cover page contains certain information for quick reference only. It is not a summary of the issue. Investors must read the entire Official Statement, including all appendices, to obtain information essential to making an informed investment decision. The Bonds are offered when, as and if issued and delivered subject to the approval of the legality thereof by Dilworth Paxson LLP, Red Bank, New Jersey, Bond Counsel, and certain other conditions. Phoenix Advisors, LLC, Bordentown, New Jersey has served as Financial Advisor to the Township in connection with the issuance of the Bonds. Certain legal matters will be passed upon for the Township by the Township Attorney, Lawrence E. Bathgate, II, Esq., Lakewood, New Jersey. It is anticipated that the Bonds will be available for delivery through DTC on or about June 26, BIDS FOR THE BONDS WILL BE RECEIVED BY THE TOWNSHIP UNTIL 11:00 A.M. ON JUNE 12, 2014, VIA PARITY. ALL BIDS MUST BE IN ACCORDANCE WITH THE NOTICE OF SALE POSTED AT FOR MORE DETAILS ON HOW TO BID ELECTRONICALLY, VISIT THE WEBSITE ADDRESS LISTED ABOVE.

2 TOWNSHIP OF LAKEWOOD IN THE COUNTY OF OCEAN, NEW JERSEY 231 THIRD STREET LAKEWOOD, NJ (732) MAYOR Menashe Miller TOWNSHIP COUNCIL Albert Akerman Raymond G. Coles Steven Langert Meir Lichtenstein TOWNSHIP MANAGER Steven Reinman CHIEF FINANCIAL OFFICER William C. Rieker TAX COLLECTOR Effie E. Pressley, CTC TOWNSHIP ATTORNEY Lawrence E. Bathgate, II, Esq. Lakewood, New Jersey AUDITOR Holman Frenia Allison, PC Toms River, New Jersey BOND COUNSEL Dilworth Paxson LLP Red Bank, New Jersey FINANCIAL ADVISOR Phoenix Advisors, LLC Bordentown, New Jersey i

3 No broker, dealer, salesperson or other person has been authorized by the Township to give any information or to make any representations with respect to the Bonds other than those contained in this document, and, if given or made, such information or representations must not be relied upon as having been authorized by the foregoing. The information contained herein has been provided by the Township and other sources deemed reliable; however, no representation or warranty is made as to its accuracy or completeness and such information is not to be construed as a representation of accuracy or completeness and such information is not to be construed as a representation of warranty by the Underwriter or, as to information from sources other than itself, by the Township. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this document nor any sale hereunder shall, under any circumstances, create any implication that there has been no change in any of the information herein since the date hereof, or the date as of which such information is given, if earlier. References in this document to laws, rules, regulations, resolutions, agreements, reports and documents do not purport to be comprehensive or definitive. All references to such documents are qualified in their entirety by reference to the particular document, the full text of which may contain qualifications of and exceptions to statements made herein. This document does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Bonds in any jurisdiction in which it is unlawful for any person to make such an offer, solicitation or sale. No dealer, broker, salesman or other person has been authorized to give any information or to make any representations other than as contained in this document. If given or made, such other information or representations must not be relied upon as having been authorized by the Township or the Underwriter. The Underwriter has reviewed the information in this official statement pursuant to its responsibilities to investors under the federal securities laws, but the Underwriter does not guarantee the accuracy or completeness of such information. ii

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5 TABLE OF CONTENTS Page INTRODUCTION... 1 THE BONDS... 1 General Description... 1 Optional Redemption... 1 Notice of Redemption... 1 Authorization and Purpose of the Bonds... 2 Payment of Bonds... 2 Denominations and Place of Payment... 3 SECURITY FOR THE BONDS... 3 The Township... 3 BOOK-ENTRY-ONLY SYSTEM... 3 Discontinuance of Book-Entry Only System... 5 MUNICIPAL FINANCE FINANCIAL REGULATION OF COUNTIES AND MUNICIPALITIES... 5 Local Bond Law (N.J.S.A. 40A:2-1 et seq.)... 5 Debt Limits... 6 Exceptions to Debt Limits - Extensions of Credit... 6 The Local Budget Law (N.J.S.A. 40A:4-1 et seq.)... 6 Appropriation "CAP"... 7 Tax Appeals... 8 The Local Fiscal Affairs Law (N.J.S.A. 40A:5-1 et seq.)... 8 School Debt Subject to Voter Approval... 9 TAX MATTERS... 9 Federal... 9 State LEGALITY FOR INVESTMENT CONTINUING DISCLOSURE LITIGATION MUNICIPAL BANKRUPTCY CERTAIN REFERENCES CERTIFICATION OF OFFICIAL STATEMENT RATING UNDERWRITING FINANCIAL ADVISOR APPROVAL OF LEGAL PROCEEDINGS FINANCIAL STATEMENTS ADDITIONAL INFORMATION MISCELLANEOUS APPENDIX A: GENERAL INFORMATION REGARDING THE TOWNSHIP APPENDIX B: UNAUDITED FINANCIAL DATA OF THE TOWNSHIP FOR THE YEAR ENDED DECEMBER 31, 2013 AND AUDITED FINANCIAL STATEMENTS OF THE TOWNSHIP FOR THE YEAR ENDED DECEMBER 31, 2012 APPENDIX C: FORM OF CONTINUING DISCLOSURE CERTIFICATE APPENDIX D: FORM OF BOND COUNSEL S OPINION iii

6 OFFICIAL STATEMENT OF THE TOWNSHIP OF LAKEWOOD IN THE COUNTY OF OCEAN, STATE OF NEW JERSEY RELATING TO $7,980,000 GENERAL OBLIGATION BONDS, SERIES 2014 (BANK-QUALIFIED)(CALLABLE) INTRODUCTION This Official Statement, which includes the cover page, and the appendices attached hereto, has been prepared by the Township of Lakewood (the Township ), in the County of Ocean (the County ), New Jersey (the State ) in connection with the sale and issuance of $7,980,000 aggregate principal amount of General Obligation Bonds, Series 2014 (the Bonds ). General Description THE BONDS The Bonds will be dated the date of delivery and will mature on March 1 in each of the years and in the principal amounts as shown on the cover hereof. The interest on the Bonds will be payable semiannually beginning March 1, 2015 and on each March 1 and September 1 thereafter. The record dates for the Bonds are each preceding February 15 and August 15, respectively (the Record Dates ). The Bonds will be issued in book-entry form only. The Bonds are general obligations of the Township and are secured by a pledge of the full faith and credit of the Township for the payment of the principal thereof and interest thereon. The Township is obligated to levy ad valorem taxes upon all of the taxable property within the Township for the payment of principal of and interest on the Bonds without limitation as to rate or amount. Optional Redemption The Bonds maturing prior to March 1, 2023 are not subject to optional redemption. The Bonds maturing on or after March 1, 2023 shall be subject to redemption at the option of the Township, in whole or in part, on any date on or after March 1, 2022 at a price of 100% of the principal amount being redeemed (the Redemption Price ), plus unpaid accrued interest to the date fixed for redemption. Notice of Redemption Notice of redemption shall be given by mailing by first class mail in a sealed envelope with postage prepaid to the registered owners of the Bonds not less than thirty (30) days, nor more than sixty (60) days prior to the date fixed for redemption. Such mailing shall be to the Owners of such Bonds at their respective addresses as they last appear on the registration books kept for that purpose by the Township or a duly appointed Bond Registrar. So long as DTC (the Depository Trust Company ) (or any successor thereto) acts as securities depository for the Bonds ( Securities Depository ), such Notice of Redemption shall be sent directly to such depository and not to the Beneficial Owners of the Bonds. Any failure of the depository to advise any of its participants or any failure of any participant to notify any beneficial owner of any Notice of Redemption shall not affect the validity of the redemption proceedings. If the Township determines to redeem a portion of the Bonds prior to maturity, the Bonds to 1

7 be redeemed shall be selected by the Township; the Bonds to be redeemed having the same maturity shall be selected by the Securities Depository in accordance with its regulations. If Notice of Redemption has been given as provided herein, the Bonds or the portion thereof called for redemption shall be due and payable on the date fixed for redemption at the Redemption Price, together with accrued interest to the date fixed for redemption. Interest shall cease to accrue on and after such redemption date. Authorization and Purpose of the Bonds The Township is authorized to issue the Bonds pursuant to the Local Bond Law, N.J.S.A. 40A: 2-1 et seq., as amended and supplemented (the "Local Bond Law"). The Bonds are authorized by bond ordinances adopted by the Township Committee on the dates and in the amounts as described in the chart below (the Bond Ordinances ) and by a resolution adopted by the Township Committee on May 22, 2014 (the Resolution ). The proceeds of the Bonds will be used to provide funds to: (i) permanently finance Bond Anticipation Notes previously issued by the Township in the total aggregate principal amount $7,980,000 and maturing on July 1, 2014 (the Prior Notes ), as described in the chart below; and (ii) pay certain costs and expenses incidental to the issuance and delivery of the Bonds. Ordinance Number Amount of Prior Notes Being Refunded by the Bonds Description Various Capital Improvements $684, Acquisition of Various Parcels of Real Property 58, Various Capital Improvements 571, Various Capital Improvements 357, Construction of Recreational Complex 12, Various Capital Improvements 136, Construction of a New Public Works Facility 56, Various Capital Improvements 891, Various Capital Improvements 2,062, Various Capital Improvements 814, Various Capital Improvements 691, Various Capital Improvements 1,093, Various Projects for the Police Department 199, Various Capital Improvements 350,000 TOTAL: $7,980,000 Payment of Bonds The Bonds are general obligations of the Township for which the full faith and credit of the Township will be pledged. The Township is authorized and required by law to levy ad valorem taxes on all taxable property within the Township for the payment of principal of and interest on Bonds without limitation as to rate or amount. See Security for the Bonds. 2

8 Denominations and Place of Payment The Bonds are issuable only as fully registered bonds without coupons, and when issued will be in the form of one certificate per maturity and will be registered in the name of Cede & Co., as registered owner and nominee for the Depository Trust Company ( DTC ), New York, New York. DTC will act as Securities Depository for the Bonds. Purchase of the Bonds will be made in book entry form, in the denomination of $5,000 each or any integral multiple thereof. Purchasers will not receive certificates representing their interest in Bonds purchased. So long as Cede & Co. is the registered owner, as nominee of DTC, references herein to the registered owners shall mean Cede & Co. and shall not mean the Beneficial Owners of the Bonds. See Book-Entry-Only System herein. SECURITY FOR THE BONDS The Bonds are general obligations of the Township, and the Township has pledged its full faith and credit for the payment of the principal, redemption premium, if any, and the interest on the Bonds. The Township is required by law to levy ad valorem taxes on all taxable real property in the Township for the payment of the principal, redemption premium, if any, of and the interest on the Bonds, without limitation as to rate or amount. The Township The Township is located along the northern border of the County. See Appendix A for demographic and statistical information concerning the Township. BOOK-ENTRY-ONLY SYSTEM The description which follows of the procedures and record keeping with respect to beneficial ownership interests in the Bonds, payment of principal and interest, and other payments on the Bonds to DTC Participants or Beneficial Owners (as each such terms is hereinafter defined), confirmation and transfer of beneficial ownership interests in the Bonds and other related transactions by and between DTC, DTC Participants and Beneficial Owners, is based on certain information furnished by DTC to the Township. Accordingly, the Township does not make any representations as to the completeness or accuracy of such information. DTC will act as securities depository for the Bonds and the Bonds will be issued as fullyregistered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Bond certificate will be issued in the aggregate principal amount of each maturity of the Bonds, and will be deposited with DTC. DTC, the world's largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-u.s. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC is the holding company 3

9 for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has a Standard & Poor's rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at and Purchases of the Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC's records. The ownership interest of each actual purchaser of the Bonds ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Bonds, except in the event that use of the book-entry system for the Bonds is discontinued. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of the Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Redemption notices, if any, shall be sent to DTC. If less than all of the Bonds within an issue are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Bonds unless authorized by a Direct Participant in accordance with DTC's MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Township or its designated Paying Agent as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Redemption proceeds and distributions on the Bonds, if any, will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from the Township or its designated Paying Agent on payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC, the Township, or the Township 's designated Paying Agent, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds and distributions to 4

10 Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Township or its designated Paying Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the Township or its designated Paying Agent. Under such circumstances, in the event that a successor depository is not obtained, Bond certificates are required to be printed and delivered. The Township may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered to DTC. The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that the Township believes to be reliable, but the Township takes no responsibility for the accuracy thereof. NEITHER THE TOWNSHIP NOR ITS DESIGNATED PAYING AGENT WILL HAVE THE RESPONSIBILITY OR OBLIGATION TO THE DIRECT PARTICIPANTS OR THE PERSONS FOR WHOM THEY ACT AS NOMINEES WITH RESPECT TO THE PAYMENTS TO OR PROVIDING OF NOTICE FOR THE DIRECT PARTICIPANTS, OR THE INDIRECT PARTICIPANTS OR BENEFICIAL OWNERS. SO LONG AS CEDE & CO. IS THE REGISTERED OWNER OF THE BONDS AS NOMINEE OF DTC, REFERENCES HEREIN TO THE BONDHOLDERS HOLDERS OR REGISTERED OWNERS OF THE BONDS (OTHER THAN UNDER THE CAPTION "TAX MATTERS") SHALL MEAN CEDE & CO. AND SHALL NOT MEAN THE BENEFICIAL OWNERS OF THE BONDS. Discontinuance of Book-Entry Only System In the event that the book-entry only system is discontinued and the Beneficial Owners become registered owners of the Bonds, the following provisions apply: (i) the Bonds may be exchanged for an equal aggregate principal amount of Bonds in other authorized denominations and of the same maturity, upon surrender thereof at the office of the Township or its designated paying agent; (ii) the transfer of any Bonds may be registered on the books maintained by the paying agent for such purposes only upon the surrender thereof to the Township, or its designated paying agent, together with the duly executed assignment in form satisfactory to the Township, or its designated paying agent; and (iii) for every exchange or registration of transfer of Bonds, the Township or its designated paying agent, may make a charge sufficient to reimburse for any tax or other governmental charge required to be paid with respect to such exchange or registration of transfer of the Bonds. Interest on the Bonds will be payable by check or draft, mailed on each Interest Payment Date to the registered owners thereof as of the close of business on the Record Dates. MUNICIPAL FINANCE FINANCIAL REGULATION OF COUNTIES AND MUNICIPALITIES Local Bond Law (N.J.S.A. 40A:2-1 et seq.) The Local Bond Law generally governs the issuance of bonds to finance certain general municipal and utility capital expenditures. Among its provisions are requirements that bonds must mature within the statutory period of usefulness of the projects bonded and that bonds be retired in serial 5

11 installments, with no annual principal payment greater than 100% of the smallest amount of any prior year s principal amount. A 5% cash down payment is generally required toward the financing of expenditures for municipal purposes, except for the issuance of bonds. All bonds issued by the Township are general full faith and credit obligations. Debt Limits The authorized bonded indebtedness of the Township is limited by statute, subject to the exceptions noted below, to an amount equal to 3½% of its average equalized valuation basis over the past three years. The equalized valuation basis of a municipality is set by statute as the average for the last three preceding years of the equalized value of all taxable real property and improvements and certain Class II railroad property within its boundaries, as determined annually by the State Director of Taxation. Certain categories of debt, which include the portion of school debt within a school district s debt limitation and the self-liquidating portion of a utility s debt, are permitted by statute to be deducted for purposes of computing the statutory debt limit. As indicated in Appendix A, the Township has not exceeded its statutory debt limit. Exceptions to Debt Limits - Extensions of Credit The Township may exceed its debt limit with the approval of the Local Finance Board, a State regulatory agency, and as permitted by other statutory exceptions. If all or any part of a proposed debt authorization would exceed its debt limit, the Township may apply to the Local Finance Board for an extension of credit. If the Local Finance Board determines that a proposed debt authorization would not materially impair the credit of the Township or substantially reduce the ability of the Township to meet its obligations or to provide essential public improvements and services, or makes certain other statutory determinations, approval is granted. In addition, debt in excess of the statutory limit may be issued by the Township, without approval of the Local Finance Board, to fund certain notes, to provide for selfliquidating purposes, and, in each fiscal year, to provide for purposes in an amount not exceeding 2/3 of the amount budgeted in such fiscal year for the retirement of outstanding obligations (exclusive of utility and assessment obligations). The Local Budget Law (N.J.S.A. 40A:4-1 et seq.) The foundation of the New Jersey local finance system is the annual cash basis budget. Every local unit must adopt a budget in the form required by the Division of Local Government Services, Department of Community Affairs, State of New Jersey (the "Division"). Certain items of revenue and appropriation are regulated by law and the proposed budget must be certified by the Director of the Division ("Director") prior to final adoption. The Local Budget Law requires each local unit to appropriate sufficient funds for payment of current debt service, and the Director is required to review the adequacy of such appropriations. The Director has no authority over individual operating appropriations, unless a specific amount is required by law, but the review functions focusing on anticipated revenues serve to protect the solvency of all local units. The cash basis budgets of local units must be in balance, i.e., the total of anticipated revenues must equal the total of appropriations (N.J.S.A. 40A:4-22). If in any year a local unit's expenditures exceed its realized revenues for that year, then such excess must be raised in the succeeding year's budget. The Local Budget Law (N.J.S.A. 40A:4-26) provides that no miscellaneous revenues from any source may be included as an anticipated revenue in the budget in an amount in excess of the amount actually realized in cash from the same source during the next preceding fiscal year, unless the Director 6

12 determines that the facts clearly warrant the expectation that such excess amount will actually be realized in cash during the fiscal year and certifies that determination to the local unit. No budget or budget amendment may be adopted unless the Director shall have previously certified his approval of such anticipated revenues except that categorical grants-in-aid contracts may be included for their face amount with an offsetting appropriation. The fiscal years for such grants rarely coincide with the municipality's calendar year. However, grant revenue is generally not realized until received in cash. The same general principle that revenue cannot be anticipated in a budget in excess of that realized in the preceding year applies to property taxes. The maximum amount of delinquent taxes that may be anticipated is limited by a statutory formula, which allows the unit to anticipate collection at the same rate realized for the collection of delinquent taxes in the previous year. Also the local unit is required to make an appropriation for a "reserve for uncollected taxes" in accordance with a statutory formula to provide for a tax collection in an amount that does not exceed the percentage of taxes levied and payable in the preceding fiscal year that was received in cash by December 31 of that year. The budget also must provide for any cash deficits of the prior year. Emergency appropriations (those made after the adoption of the budget and the determination of the tax rate) may be authorized by the governing body of a local unit. However, with minor exceptions, such appropriations must be included in full in the following year's budget. The exceptions are certain enumerated quasi-capital projects ("special emergencies") such as ice, snow and flood damage to streets, roads and bridges, which may be amortized over three years, and tax map preparation, re-evaluation programs, revision and codification of ordinances, master plan preparation and drainage map preparation for flood control purposes which may be amortized over five years. Of course, emergency appropriations for capital projects may be financed through the adoption of a bond ordinance and amortized over the useful life of the project. Budget transfers provide a degree of flexibility and afford a control mechanism. Transfers between major appropriation accounts are prohibited, except for: (i) during the first three (3) months of a current fiscal year, appropriation reserves may be transferred to the immediately preceding fiscal year's budget; and (ii) transfers between major appropriation accounts are permitted during the last two (2) months of a current fiscal year. Such transfers must be approved by two-thirds of the full membership of the governing body of a local governmental unit. Although sub-accounts within an appropriation account are not subject to the same year-end transfer restriction, they are subject to internal review and approval. Municipal public utilities are supported by the revenues generated by the respective operations of the utilities in addition to the general taxing power upon real property. For each utility, there is established a separate budget. The anticipated revenues and appropriations for each utility are set forth in the separate budget. The budget is required to be balanced and to provide fully for debt service. The regulations regarding anticipation of revenues and deferral of charges apply equally to the budgets of the utilities. Deficits or anticipated deficits in utility operations which cannot be provided for from utility surplus, if any, are required to be raised in the "Current" or operating budget. Appropriation "CAP" A provision of law known as the New Jersey "Cap Law" (N.J.S.A. 40A: et seq.) imposes limitations on increases in municipal appropriations subject to various exceptions. The payment of debt service is an exception from this limitation. The Cap formula is somewhat complex, but basically, it permits a municipality to increase its overall appropriations by the lesser of 2.5% or the Index Rate if the index rate is greater than 2.5%. The Index Rate is the rate of annual percentage increase, rounded to the nearest one-half percent, in the Implicit Price Deflator for State and Local Government purchases of 7

13 goods and services computed by the U.S. Department of Commerce. Exceptions to the limitations imposed by the Cap Law also exist for other things including capital expenditures; extraordinary expenses approved by the Local Finance Board for implementation of an interlocal services agreement; expenditures mandated as a result of certain emergencies; and certain expenditures for services mandated by law. Counties are also prohibited from increasing their tax levies by more than the lesser of 2.5% or the Index Rate subject to certain exceptions. Municipalities by ordinance approved by a majority of the full membership of the governing body may increase appropriations up to 3.5% over the prior year s appropriation and counties by resolution approved by a majority of the full membership of the governing body may increase the tax levy up to 3.5% over the prior years tax levy in years when the Index Rate is 2.4% or less. Additionally, new legislation constituting P.L. 2010, c. 44, effective July 13, 2010, imposes a two percent (2%) cap on the tax levy of a municipality, county, fire district or solid waste collection district, with certain exceptions and subject to a number of adjustments. The exclusions from the limit include increases required to be raised for capital expenditures, including debt service, increases in pension contributions in excess of 2%, certain increases in health care over 2%, and extraordinary costs incurred by a local unit directly related to a declared emergency. The governing body of a local unit may request approval, through a public question submitted to the legal voters residing in its territory, to increase the amount to be raised by taxation, and voters may approve increases above 2% not otherwise permitted under the law by an affirmative vote of 50%. The Division has advised that counties and municipalities must comply with both budget "CAP" and the tax levy limitation. Neither the tax levy limitation nor the "CAP" law, however, limits the obligation of the Township to levy ad valorem taxes upon all taxable property within the boundaries of the Township to pay debt service on bonds. In accordance with the Local Budget Law, each local unit must adopt and may from time to time amend rules and regulations for capital budgets, which rules and regulations must require a statement of capital undertakings underway or projected for a period not greater than over the next ensuing six years as a general improvement program. The capital budget, when adopted, does not constitute the approval or appropriation of funds, but sets forth a plan of the possible capital expenditures which the local unit may contemplate over the next six years. Expenditures for capital purposes may be made either by ordinances adopted by the governing body setting forth the items and the method of financing or from the annual operating budget if the terms were detailed. Tax Appeals The New Jersey Statutes provide a taxpayer with remedial procedures for appealing an assessment deemed excessive. Prior to February 1 in each year, the Township must mail to each property owner a notice of the current assessment and taxes on the property. The taxpayer has a right to petition the County Tax Board on or before the April 1 for review. The County Board of Taxation has the authority after a hearing to decrease or reject the appeal petition. These adjustments are usually concluded within the current tax year and reductions are shown as canceled or remitted taxes for that year. If the taxpayer feels his petition was unsatisfactorily reviewed by the County Board of Taxation, appeal may be made to the Tax Court of New Jersey for further hearing. Some State Tax Court appeals may take several years prior to settlement and any losses in tax collections from prior years are charged directly to operations. The Local Fiscal Affairs Law (N.J.S.A. 40A:5-1 et seq.) This law regulates the non-budgetary financial activities of local governments. The chief financial officer of every local unit must file annually, with the Director, a verified statement of the financial condition of the local unit and all constituent boards, agencies or commissions. 8

14 An independent examination of each local unit accounts must be performed annually by a licensed registered municipal accountant. The audit, conforming to the Division of Local Government Services' "Requirements of Audit", includes recommendations for improvement of the local units financial procedures and must be filed with the report, together with all recommendations made, and must be published in a local newspaper within 30 days of its submission. The entire annual audit report for each local unit is on file with the Clerk and is available for review during business hours. School Debt Subject to Voter Approval State law permits local school districts, upon approval of the voters in a Type II school district, to authorize school district debt, including debt in excess of its independent debt limitation by using the available borrowing capacity of the Township. If such debt is in excess of the school district s debt limit and the remaining borrowing capacity of the Township, the State Commissioner of Education and the Local Finance Board must approve the proposed debt authorization before it is submitted to the voters for approval. Federal TAX MATTERS In the opinion of Bond Counsel, under existing statutes, regulations, rulings and court decisions, interest on the Bonds will not be includable in the gross income of the holders thereof for federal income tax purposes and will not be an item of tax preference for purposes of computing the alternative minimum tax imposed on individuals and corporations. Interest on the Bonds is taken into account in computing the alternative minimum tax imposed on certain corporations. In rendering this opinion, Bond Counsel has assumed compliance by the Township with its covenants to comply with the provisions of the Internal Revenue Code of 1986 as amended (the Code ) relating to actions to be taken by the Township in respect of the Bonds after the issuance thereof to the extent necessary to effect or maintain the federal exclusion from gross income of the interest on the Bonds. These covenants relate to, among other things, the use of and investment of proceeds of the Bonds and the rebate to the United States Treasury of specified arbitrage earnings, if any. Failure of the Township to comply with such covenants could result in the interest on the Bonds becoming subject to federal income tax from the date of issuance. Prospective purchasers of the Bonds should be aware that ownership of, accrual or receipt of interest on or disposition of tax-exempt obligations, such as the Bonds, may have additional federal income tax consequences for certain taxpayers, including, without limitation, taxpayers eligible for the earned income credit, recipients of certain Social Security and certain Railroad Retirement benefits, taxpayers that may be deemed to have incurred or continued indebtedness to purchase or carry tax-exempt obligations, financial institutions, property and casualty companies, foreign corporations and certain S corporations. Prospective purchasers of the Bonds should also consult with their tax advisors with respect to the need to furnish certain taxpayer information in order to avoid backup withholding. Bond Counsel expresses no opinion regarding any federal tax consequences other than its opinion with regard to the exclusion of interest on the Bonds from gross income pursuant to Section 103 of the Code and interest on the Bonds not constituting an item of tax preference under Section 57 of the Code. Federal, state or local legislation, administrative pronouncements or court decisions may affect the tax-exempt status of interest on the Bonds, gain from the sale or other disposition of the Bonds, the market value of the Bonds, or the marketability of the Bonds. The effect of any legislation, administrative pronouncements or other court decisions cannot be predicted. Prospective purchasers of the Bonds should 9

15 consult their tax advisors with respect to such matters and all other tax consequences (including, but not limited to, those listed above) of holding the Bonds. Section 265(b) of the Code generally denies to institutions any deduction for that portion of interest expense incurred to purchase or carry tax-exempt obligations. An exception is provided for obligations issued by certain small issuers who designate the obligations as "qualified tax-exempt obligations" under Section 265(b)(3) of the Code and, provided certain conditions are met, for obligations the proceeds of which refund obligations which were designated as qualified tax-exempt obligations. Such obligations will be subject to a reduced disallowance rule. The Bonds will be designated by (or deemed designated) the Township as qualified tax exempt obligations under Section 265(b) of the Code State Bond Counsel is of the opinion, based upon existing statutes and judicial decisions, that interest on the Bonds and net gains from the sale of the Bonds are not included as gross income under the New Jersey Gross Income Tax Act. Potential purchasers of the Bonds should consult with their tax advisors in order to understand the tax consequences of ownership of the Bonds under the laws of other states. THE FOREGOING IS NOT INTENDED AS AN EXHAUSTIVE RECITAL OF THE POTENTIAL TAX CONSEQUENCES OF HOLDING THE BONDS. PROSPECTIVE PURCHASERS OF THE BONDS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE FEDERAL, STATE AND LOCAL TAX CONSEQUENCES OF OWNERSHIP OF THE BONDS. LEGALITY FOR INVESTMENT The State and all public officers, municipalities, counties, political subdivisions and public bodies, and agencies thereof, all banks, bankers, trust companies, savings and loan associations, savings banks and institutional building and loan associations, investment companies, and other persons carrying on banking business, all insurance companies, and all executors, administrators, guardians, trustees, and other fiduciaries may legally invest any sinking funds, moneys or other funds belonging to them or within their control in any bonds of the Township including the Bonds, and such Bonds are authorized security for any and all public deposits. CONTINUING DISCLOSURE The Township has covenanted for the benefit of the holders of the Bonds and the beneficial owners of the Bonds to provide certain financial information and operating data of the Township on or prior to September 30 of each year and to comply with the provisions of Rule 15c2-12 (the "Rule") promulgated by the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended and supplemented, and as detailed in a Continuing Disclosure Certificate (the "Certificate") to be executed on behalf of the Township by its Chief Financial Officer, in the form appearing in APPENDIX C (the "Continuing Disclosure Certificate for the Bonds") attached hereto. Such Certificate shall be delivered concurrently with the delivery of the Bonds. Annual financial information, including operating data, and notices of events specified in the Rule, if material, shall be filed with the Municipal Securities Rulemaking Board (the "MSRB"). The Township is in compliance in all material respects, with its obligation with regard to SEC Rule 15c2-12 to provide annual reports on a timely basis. While the Township acknowledges that it previously failed to file material event notices in connection with certain bond insurer downgrades in 2008, 2009, 2012 and 2013 and a rating change in 2010, such notices of material events have been filed as of June 2,

16 LITIGATION Upon delivery of the Bonds, the Township shall furnish a certificate of the Township Attorney, Lawrence E. Bathgate, II, Esq. (the Township Attorney ), dated the date of delivery of the Bonds, to the effect that there is no litigation of any nature pending or, to his/her knowledge, threatened to restrain or enjoin the issuance, sale, execution or delivery of the Bonds, or in any way contesting or affecting the validity of the Bonds or any of the proceedings taken with respect to the issuance and sale thereof or the application of moneys to the payment of the Bonds. In addition, such certificate shall state that there is no litigation of any nature now pending or threatened by or against the Township wherein an adverse judgment or ruling could have a material adverse impact on the financial condition of the Township or adversely affect the power of the Township to levy, collect and enforce the collection of taxes or other revenues for the payment of its bonds or notes, which has not been disclosed in this Official Statement. MUNICIPAL BANKRUPTCY The undertakings of the Township should be considered with reference to Chapter IX of the Bankruptcy Act, 11 U.S.C. Section 401, et seq., as amended by Public Law , approved November 6, 1978, and as further amended on November 3, 1988, by an Act to Amend the Bankruptcy Law to Provide for Special Revenue Bonds, and for Other Purposes, and on October 22, 1994, by the Bankruptcy Reform Act of 1994, and by other bankruptcy laws affecting creditors rights and municipalities in general. Chapter IX permits a state or any political subdivision, public agency or instrumentality that is insolvent or unable to meet its debts to file a petition in a bankruptcy court for the ultimate purpose of effecting a plan to adjust its debts. Chapter IX directs such a petitioner to file with the Bankruptcy Court a list of the petitioner s creditors; provides that a petition filed under this chapter shall operate as a stay of the commencement or continuation of any judicial or other proceeding against the petitioner, with the exception that such petition does not operate as a stay of application of pledged special revenues to the payment of indebtedness secured by such revenues; grants priority to administrative and operational expenses and to debts owed for services or material, up to $4,000 per individual or corporation, actually provided within ninety (90) days of the filing of the petition; directs a petitioner to file a plan for the adjustment of its debts; provides that any securities issued under a reorganization plan will be exempt from the securities laws and, therefore, exempt from registration requirements; permits the petitioner, during bankruptcy proceedings, to continue to pay pre-petition debt without prior court approval; and provides that the plan must be accepted by a class of creditors, in writing, by or on behalf of creditors holding at least two-thirds in amount and more than one-half in number of the allowed claims of such class held by creditors. A plan shall not be approved by the Bankruptcy Court unless it is in the best interests of creditors and is feasible. Reference should also be made to N.J.S.A. 52:27-40 through 52: , which provides that any county, municipality, or other political subdivision of this State has the power to file a petition with any Bankruptcy Court, provided the approval of the municipal finance commission has been obtained, and such petition has been authorized by ordinance of the governing body of the political subdivision. The powers of the municipal finance commission have been vested in the Local Finance Board. The Bankruptcy Act specifically provides that Chapter IX does not limit or impair the power of a state to control, by legislation or otherwise, the procedures that a municipality must follow in order to take advantage of the provisions of the Bankruptcy Act. However, the Bankruptcy Act does provide that a municipality must obtain any regulatory or electoral approval necessary under constitutional, statutory, or charter provisions, for actions taken under the reorganization plan. CERTAIN REFERENCES The foregoing statements and descriptions of provisions of the New Jersey Constitution, the Local Bond Law and other laws of the State of New Jersey, the Federal Bankruptcy Code, the Bond Ordinances and the Resolution of the Township and the Bonds and all references to other material not 11

17 purported to be quoted in full are only brief, generalized descriptions thereof, do not purport to be complete, and are in all respects subject to and qualified in their entireties by express reference to the complete provisions thereof. Copies of the Bond Ordinances and the Resolution will be furnished by the Township on request. All estimates and assumptions herein are believed to be reasonable, but no warranty, guaranty or other representation is made that such estimates or assumptions will be realized or are correct. So far as any statements herein involve matters of opinion, whether or not expressly so stated, they are intended merely as such and not as representations of fact. CERTIFICATION OF OFFICIAL STATEMENT The Township hereby states that the descriptions and statements herein relating to the Township are true and correct in all material respects and, upon request, it will confirm to the purchasers of the Bonds, by certificates signed by the Township Chief Financial Officer that to his/her knowledge such descriptions and statements, as of the date hereof, and as of the date of delivery of the Bonds, are true and correct in all material respects and do not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements herein, in light of the circumstances under which they were made, not misleading. All other information has been obtained from sources which the Township considers to be reliable and it makes no warranty, guaranty or other representation which respect to the accuracy and completeness of such information. Dilworth Paxson LLP has not participated in the preparation of the financial or statistical information contained in this Official Statement, nor has it verified the accuracy, completeness or fairness thereof and, accordingly, expresses no opinion with respect thereto. RATING Standard & Poor s Ratings Services, a Standard & Poor s Financial Services LLC business ("S&P"), has assigned a rating of "A+" to the Bonds. Any desired explanation of the significance of such rating should be obtained from S&P. There is no assurance that the rating will pertain for any given period of time or that it will not be lowered or withdrawn entirely if, in the judgment of S&P, circumstances so warrant. Any downward revision or withdrawal of the rating could have an adverse effect on the market price of the Bonds. UNDERWRITING The Bonds have been purchased at a public sale from the Township by,, (the Underwriter ) at a price of $, pursuant to the notice of sale prepared by the Township for the sale of the Bonds. The Underwriter intends to offer the Bonds to the public initially at the offering yields set forth on the front cover page of this Official Statement, which may subsequently change without any requirement of prior notice. The Underwriter reserves the right to join with dealers and other underwriters in offering the Bonds to the public. The Underwriter may offer and sell the Bonds to certain dealers (including dealers depositing the Bonds into investments trusts) at yields higher than the public offering yields set forth on the front cover page of this Official Statement, and such yields may be changed, from time to time, by the Underwriter without prior notice. 12

18 FINANCIAL ADVISOR Phoenix Advisors, LLC, Bordentown, New Jersey has served as financial advisor to the Township with respect to the issuance of the Bonds (the "Financial Advisor"). The Financial Advisor is not obligated to undertake and has not undertaken, either to make an independent verification of, or to assume responsibility for the accuracy, completeness, or fairness of the information contained in the Official Statement and the appendices hereto. The Financial Advisor is an independent firm and is not engaged in the business of underwriting, trading or distributing municipal securities or other public securities. APPROVAL OF LEGAL PROCEEDINGS All legal matters incident to the authorization, the issuance, the sale and the delivery of the Bond are subject to the approval of Dilworth Paxson LLP, Red Bank, New Jersey, Bond Counsel to the Township, whose approving legal opinion will be delivered with the Bonds substantially in the forms set forth as Appendix D Certain legal matters will be passed on for the Township by the Township Attorney. FINANCIAL STATEMENTS Appendix B contains certain unaudited financial data of the Township extracted from the Township s Annual Financial Statement for the Township s fiscal year ending December 31, 2013 and certain audited financial data of the Township compiled by Holman Frenia Allison, PC, Toms River, New Jersey (the Auditor ) for the Township s fiscal year ending December 31, The audited financial data was provided by the Auditor, to the extent and for the period set forth in their report appearing in Appendix B, and are included herein in reliance upon the authority of such firm. ADDITIONAL INFORMATION Inquiries regarding this Official Statement, including any information additional to that contained herein, may be directed to the Township s Chief Financial Officer, 231 Third Street, Lakewood, New Jersey 08701, telephone (732) or its Financial Advisor, Phoenix Advisors, LLC, 4 West Park Street, Bordentown, New Jersey, telephone (609)

19 MISCELLANEOUS This Official Statement is not to be construed as a contract or agreement between the Township and the purchasers or holders of any of the Bonds. Any statements made in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended merely as opinions and not as representations of fact. The information and expressions of opinion contained herein are subject to change without notice and neither the delivery of this Official Statement nor any sale of Bonds made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Township since the date hereof. This Official Statement has been duly executed and delivered by the Township. TOWNSHIP OF LAKEWOOD, IN THE COUNTY OF OCEAN, NEW JERSEY By: William C. Rieker, Chief Financial Officer Dated: June,

20 APPENDIX A GENERAL INFORMATION REGARDING THE TOWNSHIP

21 INFORMATION REGARDING THE TOWNSHIP 1 The following material presents certain economic and demographic information of the Township of Lakewood (the Township ), in the County of Ocean (the County ), State of New Jersey (the State ). General Information The Township is a community of approximately twenty-six (26) square miles located at the northern edge of the County, about sixty (60) miles from both the New York-New Jersey metropolitan region and the New Jersey-Philadelphia metropolitan region. It is bounded by Brick Township to the east, Dover Township to the south, Jackson Township to the west, and Howell Township (Monmouth County) to the north. Form of Government The Township Committee form of government provides for a five-member committee elected at general elections conducted on the first Tuesday following the first Monday in November. The Township presently employs a Municipal Manager, whose duties are specified by local ordinance, and who generally carries out the policies adopted by the Township Committee. Therefore, the Township has full-time professional management to assist in the conduct of its affairs. The Township also employs a full-time Chief Financial Officer to oversee the finance department which is primarily responsible for the administration of the Township s annual budget and maintenance of the general ledger, among other responsibilities. Education The Township school system began operation in 1869 with the opening of the first public school. Today, the Lakewood Township School District (the Local School District ) operates four (4) kindergarten (K) through grade six (6) elementary schools, a grade seven (7) and grade eight (8) middle school, and a high school and alternative high school for grades nine (9) through twelve (12), serving a total student population of approximately 5,300 students. A significant number of children also attend various private and religious schools in the district. The Local School District is a Type II school district without a board of estimate. Utilities/Public Works The Township is serviced by Verizon, which provides telephone service. Jersey Central Power & Light Company provides electrical service. The Lakewood Township Municipal Utilities Authority (the "LTMUA") operates the former franchise area of the South Lakewood Water Company. There is a private water utility known as the New Jersey Water Company, servicing the remaining portion of the Township. The South Lakewood Sewerage Company which provides service to the southern portion of the Township, is a private utility, and is presently connected to the facilities of the Ocean County Utilities Authority for treatment and disposal of effluent. The LTMUA has no future plans to acquire or operate a sewerage system, 1 Source: The Township, unless otherwise indicated. A-1

22 although authorized to do so under the Municipal Utilities Authority Act. The LTMUA is operating on a self-liquidating basis from water revenues received from its users. In 1975, the Township and the LTMUA entered into a Service Contract providing for certain annual service charges payable by the Township in respect of operating deficits of the LTMUA (including, if necessary, amounts in respect of debt service on obligations of the LTMUA). Through such Service Contract, the Township provides additional security for, and is contingently liable in respect of, certain bonds and notes issued from time to time by the LTMUA. Police and Fire Protection The Township is served by the Lakewood Police Department (LPD), which provides police protection for the Township and has several specialized units including: Traffic and Safety, School Resource Officers, Special Response Team (SWAT), Dive Team, and a Motorcycle Patrol and Bicycle Patrol unit in the spring and summer. The Township is served by the Lakewood Fire Department (LFD), a unified combination fire department consisting of five (5) volunteer fire companies, one (1) fire police unit and two (2) paid fire stations which provide fire protection for the township. Transportation The Township's existing road system is a composite of Federal, State, County and local jurisdiction. Route 9 traverses the Township from north to south and provides easy access to the northern metropolitan New Jersey and New York metropolitan areas, and easy access to the southern resort area of the State. Route 70 traverses the Township from east to west and provides highway traffic to Camden City and the Philadelphia metropolitan region. The Garden State Parkway provides access to both the northern and southern areas of the State with easy access from the Parkway to the New Jersey Turnpike for commuting to New York, New England, and points south and west. Further east-west traffic is provided by Routes 72, 37 and 88. Route 88 connects the Township with Point Pleasant Borough where rail facilities are available for commuting to the northern New Jersey-New York area. The Township is served by the Central Railroad of New Jersey for freight services, which traverses the northwest portion of the Township and connects the Township with major rail centers. The Lakewood airport is located within close proximity to the Township s central business district for fast, easy access to passenger points of destination in the Newark, Philadelphia and New York airports. Retirement Systems All full-time permanent or qualified Township employees who began employment after 1944 must enroll in one of two retirement systems depending upon their employment status. These systems were established by acts of the State Legislature. Benefits, contributions, means A-2

23 of funding and the manner of administration are set by State law. The Division of Pensions, within the New Jersey Department of Treasury (the Division ), is the administrator of the funds with the benefit and contribution levels set by the State. The Township is enrolled in the Public Employees' Retirement System ( PERS ) and the Police and Firemen's Retirement System ( PFRS ). Pension Information 2 Employees, who are eligible to participate in a pension plan, are enrolled in PERS or PFRS, administered by the Division. The Division annually charges municipalities and other participating governmental units for their respective contributions to the plans based upon actuarial calculations. The employees contribute a portion of the cost. The Township s share of pension costs in 2013, which is based upon the annual billings received from the State, amounted to $1,014,150 for PERS and $2,919,818 for PFRS. [Remainder of Page Intentionally Left Blank] 2 Source: State of New Jersey Department of Treasury, Division of Pensions and Benefits A-3

24 Employment and Unemployment Comparisons For the following years, the New Jersey Department of Labor reported the following annual average employment information for the Township, the County, and the State: Total Labor Employed Total Unemployment Force Labor Force Unemployed Rate Township ,925 30,786 2, % ,950 30,426 2, % ,007 30,513 2, % ,847 30,353 2, % ,424 23,217 2, % County , ,808 22, % , ,941 27, % , ,590 26, % , ,301 27, % , ,695 25, % State ,537,800 4,166, , % ,595,500 4,159, , % ,556,200 4,131, , % ,502,400 4,076, , % ,536,700 4,118, , % Source: New Jersey Department of Labor, Office of Research and Planning, Division of Labor Market and Demographic Research, Bureau of Labor Force Statistics, Local Area Unemployment Statistics Income (as of 2010) Township County State Median Household Income $41,527 $59,620 $71,180 Median Family Income 45,420 73,672 86,779 Per Capita Income 16,430 29,826 35,768 Source: US Bureau of the Census 2010 A-4

25 Population The following tables summarize population increases and the decreases for the Township, the County, and the State. Township County State Year Population % Change Population % Change Population % Change , % 576, % 8,791, % , , ,414, , , ,730, , , ,365, , , ,168, Source: United States Department of Commerce, Bureau of the Census Largest Taxpayers The ten largest taxpayers in the Township and their assessed valuations are listed below: 2013 % of Total Taxpayers Assessed Valuation Assessed Valuation Harrogate, Inc. $29,000, % New Hampshire Avenue Investments LLC 29,000, % 1900 Route 70 Associates LLC 25,000, % Lakewood Plaza 9 Associated LP 24,385, % Leisure Park Venture Limited Partnership 23,432, % Lakewood CORGeneration LP 19,777, % Woodlake Village LLC 18,800, % Lighthouse Washington Square LLC 12,300, % HCR Pinewood Realty LLC 12,125, % Verizon - NJ 11,813, % Total $205,633, % Source: Comprehensive Annual Financial Report of the School District and Municipal Tax Assessor A-5

26 Comparison of Tax Levies and Collections Current Year Current Year Year Tax Levy Collection Percentage of Collection 2013U $156,732,622 $150,977, % ,479, ,152, % ,670, ,165, % ,469, ,528, % ,719, ,700, % ,134, ,705, % U: Unaudited Source: Annual Audit Reports of the Township Delinquent Taxes and Tax Title Liens Amount of Tax Amount of Total % of Year Title Liens Delinquent Tax Delinquent Tax Levy 2013U $1,233,737 $3,616,507 $4,850, % ,231,914 3,448,199 4,680, % ,020,090 3,676,409 4,696, % ,220 6,074,597 6,800, % ,432 5,149,752 5,691, % ,836 4,681,163 4,996, % U: Unaudited Source: Annual Audit Reports of the Township Property Acquired by Tax Lien Liquidation Year Amount 2013U $52,704, * 54,789, ,930, ,953, ,959, ,961,192 * The Township has revalued the municipally owned properties that comprise the receivable balance on the current fund comparative statement of assets, liabilities, reserves and fund balance. The balance has been revalued from $5,930,092 to $54,789,200. The revaluation brings the property values to reflect the assessed values in the Township tax duplicate. U:Unaudited Source: Annual Audit Reports of the Township A-6

27 Tax Rates per $100 of Net Valuations Taxable and Allocations The table below lists the tax rates for Township residents for the past five (5) years. Local Fire Total Year Municipal School County District Taxes 2013 $0.783 $1.190 $0.452 $0.044 $ Source: Abstract of Ratables and State of New Jersey Property Taxes Valuation of Property Aggregate Assessed Aggregate True Ratio of Assessed Valuation of Value of Assessed to Value of Equalized Year Real Property Real Property True Value Personal Property Valuation 2013 $6,253,760,900 $7,254,943, % $11,813,766 $7,266,756, ,290,544,200 7,319,693, ,529,480 7,333,222, ,372,225,800 7,587,789, ,896,952 7,600,686, ,337,627,400 7,964,845, ,183,651 7,982,028, ,857,555,500 8,173,034, ,378,436 8,189,413,073 Source: Abstract of Ratables and State of New Jersey Table of Equalized Valuations Classification of Ratables The table below lists the comparative assessed valuation for each classification of real property within the Township for the past five (5) years. Year Vacant Land Residential Farm Commercial Industrial Apartments Total 2013 $235,722,600 $4,648,485,100 $4,138,400 $611,549,700 $477,750,200 $276,114,900 $6,253,760, ,129,800 4,631,938,400 4,138, ,914, ,555, ,867,600 6,290,544, ,418,600 4,597,947,200 4,125, ,029, ,281, ,424,400 6,372,225, ,386,400 4,510,548,500 4,069, ,025, ,339, ,258,700 6,337,627, ,346,300 5,697,250,600 4,933, ,075, ,732, ,218,000 7,857,555,500 Source: Abstract of Ratables and State of New Jersey Property Value Classification A-7

28 Financial Operations The following table summarizes the Township s Current Fund budget for the past five (5) fiscal years ending December 31. This summary should be used in conjunction with the tables from which it is derived. Budget Information Summary of Current Fund Budget Anticipated Revenues Fund Balance $5,500,000 $5,650,000 $5,973,250 $7,997,000 $5,100,000 Miscellaneous Revenues 15,193,524 15,244,216 13,575,859 13,162,954 12,314,060 Receipts from Delinquent Taxes 4,500,000 4,650,000 4,500,000 4,100,000 3,400,000 Amount to be Raised by Taxes for Support of Municipal Budget 43,589,614 43,588,489 43,796,462 43,794,587 49,101,420 Total Revenue: $68,783,137 $69,132,705 $67,845,571 $69,054,541 $69,915,480 Appropriations General Appropriations $51,961,743 $49,811,196 $50,735,916 $52,946,337 $55,229,161 Operations 1,561,658 4,472,893 3,028,029 2,952,291 2,059,011 Deferred Charges and Statutory Expenditures 50, , , , ,200 Judgments Capital Improvement Fund 967,345 1,968,058 43, , ,000 Municipal Debt Service 7,429,956 6,165,065 7,003,935 6,662,408 6,518,284 Reserve for Uncollected Taxes 6,812,436 6,575,493 6,894,691 5,940,305 5,595,824 Total Appropriations: $68,783,137 $69,132,705 $67,845,571 $69,054,541 $69,915,480 Source: Annual Adopted Budgets of the Township A-8

29 Fund Balance The following table lists the Township s fund balance and the amount utilized in the succeeding year s budget for the Current Fund for the past five (5) fiscal years ending December 31. Fund Balance - Current Fund Balance Utilized in Budget Year 12/31 of Succeeding Year 2013U $6,124,306 N/A ,174,884 5,100, ,036,459 7,997, ,035,270 5,973, ,560,991 5,650,000 U:Unaudited Source: Annual Audit Reports of the Township [Remainder of Page Intentionally Left Blank] A-9

30 Township Indebtedness as of December 31, 2013 General Purpose Debt Serial Bonds $34,690,000 Bond Anticipation Notes 9,060,000 Bonds and Notes Authorized but Not Issued 11,833,843 Other Bonds, Notes and Loans 0 Total: $55,583,843 Local School District Debt Serial Bonds $419,000 Temporary Notes Issued 0 Bonds and Notes Authorized but Not Issued 0 Total: $419,000 Self-Liquidating Debt Serial Bonds $0 Bond Anticipation Notes 0 Bonds and Notes Authorized but Not Issued 0 Other Bonds, Notes and Loans 0 Total: $0 TOTAL GROSS DEBT $56,002,843 Less: Statutory Deductions General Purpose Debt $935,000 Local School District Debt 419,000 Self-Liquidating Debt 0 Total: $1,354,000 TOTAL NET DEBT $54,648,843 Source: Annual Debt Statement of the Township [Remainder of Page Intentionally Left Blank] A-10

31 Overlapping Debt (as of December 31, 2013) 3 Related Entity Township Township Name of Related Entity Debt Outstanding Percentage Share Local School District $419, % $419,000 County 424,268, % 33,592,589 Lakewood Municipal Utilities Authority 23,256, % 23,256,078 Net Indirect Debt $57,267,667 Net Direct Debt 54,648,843 Total Net Direct and Indirect Debt $111,916,510 Debt Limit Average Equalized Valuation Basis (2011, 2012, 2013) $7,387,475,264 Permitted Debt Limitation (3 1/2%) 258,561,634 Less: Net Debt 54,648,843 Remaining Borrowing Power $203,912,791 Percentage of Net Debt to Average Equalized Valuation 0.74% Gross Debt Per Capita based on 2010 population of 92,843 $603 Net Debt Per Capita based on 2010 population of 92,843 $589 Source: Annual Debt Statement of the Township 3 Township percentage of County debt is based on the Township s share of total equalized valuation in the County. A-11

32 APPENDIX B UNAUDITED FINANCIAL DATA OF THE TOWNSHIP FOR THE YEAR ENDED DECEMBER 31, 2013 AND AUDITED FINANCIAL STATEMENTS OF THE TOWNSHIP FOR THE YEAR ENDED DECEMBER 31, 2012

33 ~~ ANNUAL FINANCIAL STATEMENT FOR THE YEAR 2013 (UNAUDITED) POPULATION LAST CENSUS NET VALUATION TAXABLE 2013 $6265, MUNICIPAL CODE 1514 FIVE DOLLARS PER DAY PENALTY IF NOT FILED BY: COUNTIES - JANUARY 26, 2014 MUNICIPALITIES - FEBRUARY 10, 2014 ANNUAL FINANCIAL STATEMENT REQUIRED TO BE FILED UNDER NEW JERSEY STATUTES ANNOTATED 40A:5-12, AS AMENDED, COMBINED WITH INFORMATION REQUIRED PRIOR TO CERTIFICATION OF BUDGETS BY THE DIRECTOR OF BUDGETS BY THE DIRECTOR OF THE DIVISION OF LOCAL GOVERNMENT SERVICE. TOWNSHIP OF LAKEWOOD, COUNTY OF OCEAN SEE BACK COVER FOR INDEX AND INSTRUCTIONS. DO NOT USE THESE SPACES Date Examined By: 1 Preliminary Check 2 Examined I hereby certify that the debt shown on Sheets 31 to 3ta\9 to Sla and 6 be supported upon demand by a register or other detaij;& analysis. Sa are complete, were computed by me and can Signature: Title: v q JLJN\. {,...A--VVl..1.0', / Registered Municipal Accountant (This MUST be signed by Chief Financial Office. Comptroller. Auditor or Registered Municipal Accountant.) REQUIRED CERTIFICATION BY THE CHIEF FINANCIAL OFFICER: I hereby certify that I am responsible for filing this verified Annual Financial Statement, which I have not prepared and information required also included herein and that this Statement is an exact copy of the original on file with the clerk of the governing body, that all calculations, extensions and additions are correct, that no transfers have been made to or from emergency appropriations and all statements contained herein are in proof; I further certify that this statement is correct insofar as I can determine from all the books and records kept and maintained in the Local Unit. Further, I do hereby certify that I, William Rieker, am the Chief Financial Officer, License #0-0067, of the Township of Lakewood, County of Ocean and that the statements annexed hereto and made a part hereof are true statements of the financial condition of the Local Unit as at December 31, 2013, completely in compliance with N.J.SAOA:S-12, as amended. I also give complete assurances as to the veracity of required information included herein, needed prior to certification by the Director of Local Government ~erification of cas,ances as of December 31, Signature: C *""--- Title: Chief Financial Officer Address: 231 Third Street, Lakewood, NJ Phone Number: (732) Fax Number: (732) IT IS HEREBY INCUMBENT UPON THE CHIEF FINANCIAL OFFICER, WHEN NOT PREPARED BY SAID, AT A MINIMUM MUST REVIEW THE CONTENTS OF TillS ANNUAL FINANCIAL STATEMENT WITH THE PREPARER, SO AS TO BE FAMILIAR WITH THE REPRESENTATIONS AND ASSERTIONS MADE HEREIN. Sheet 1

34 THE REQUIRED CERTIFICATION BY AN RMA IS AS FOLLOWS: Preparation by Registered Municipal Accountant (Statement of Statutory Auditor Only) I have prepared the post-closing trial balances, related statements and analysis included in the accompanying Annual Financial Statement from the books of account and records made available to me by the Township of Lakewood as of December 31, 2013, and have applied certain agreed-upon procedures thereon as promulgated by the Division of Local Government Services, solely to assist the Chief Financial Officer in connection with the filing of the Annual Financial Statement for the year then ended as reqnired by NJ.S.40A:5-12, as amended. Because the agreed-upon procedures do not constitute an examination of accounts made in accordance with generally accepted auditing standards, I do not express an opinion on any of the post-closing trial balances, related statements and analyses. In connection with the agreed-upon procedures no matters came to my attention that caused me to believe that the Annual Financial Statement for the year ended 2013 is not in substantial compliance with the requirements of the State of New Jersey, Department of Community Affairs, Division of Local Government Services. Had I performed additional procedures or had I made an examination of the financial statements in accordance with generally accepted auditing standards, other matters might have come to my attention that would have been reported to the governing body and the Division. This Annual Financial Statement relates only to the accounts and items prescribed by the Division and does not extend to the financial statements of the municipality/county, taken as a whole. Listing of agreed-upon procedures not performed andlor matters coming to my attention of which the Director should be informed: (R~iStered Municipal Accountant) HOLMAN FRENIA ALLISON, P. C. (Firm Name) 618 Stokes Road, Medford, New Jersey (Address) Telephone Number (609) (phone Number) Certified by me This 10 TH day of February 2014 Sheet la

35 FedLD. # Township of Lakewood Municipality Camden County Report of Federal and State Financial Assistance Expenditures of Awards Fiscal Year Ending: December 31, 2013 (1) (2) (3) State and Federal Programs Expended (administered by the state) State Programs Expended Other State and Federal Programs Expended Total $768,579 $3,279,029 $ Type of Audit required by OMB A-133 and OMB 04-04: L Single Audit Program Specific Audit Financial Statement Audit Performed in Accordance With Govermnent Auditing Standards (Yellow Book) Note: All local govermnents, who are recipients of federal and state awards (financial assistance), must report the total amount of federal and state funds expended during its fiscal year and the type of audit required to comply with OMB A-133 (Revised June 27, 2004) and OMB The single audit threshold has been increased to $500,000 beginning with Fiscal Year ending after December 31, Expenditures are defined in Section 205 ofomb A-133. I) Report expenditures from federal pass-through programs received directly from state govermnent. Federal pass-through funds can be identified by the Catalog of Federal Domestic Assistance (CFDA) number reported in the State's grant/contract agreements. 2) Report expenditures from state programs received directly from state government or indirectly from pass-through entities. Exclude state aid (i.e., CMPTRA, Energy Receipts tax, etc.) since there are no compliance requirements. 3) Report expenditures from federal programs received directly from the federal govermnent or indirectly from entities other than state govermnent. ~o~5:idl.2 j/() Jjlf ---O'ate Sheet Id

36 NOTE THAT A TRIAL BALANCE IS REQUIRED AND NOT A BALANCE SHEET POST CLOSING TRIAL BALANCE-CURRENT FUND AS AT DECEMBER 31, 2013 Cash Liabilities Must be Subtotaled and Subtotal Must be Marked With "C" -- Taxes Receivable Must be Sublolaled TITLE OF ACCOUNT I~I CREDIT I Cash & Investments 16,554,907 Change Fund 1,315 Due from State - Seniors & Vets 94,381 Receivables with Full Reserves: Taxes Receivable 3,616,507 Tax Title Liens 1,233,737 Pronerty Acquired for Taxes 52,704,700 Abatement Receivable 256,065 Due from State & Federal Grant Fund Demolition Charges Receivable 21,854 Deferred Charges: Special Emergency 809,600 Emergency Authorization 250,000 Appropriation Reserves 2,142,976 Encumbrances Payable 915,739 Accounts Payable Tax Overpayments 4,347,004 Prepaid Taxes 862,711 Due County - Added and Omitted Taxes 361,136 Reserve for Deposits on Sale of Property 74,252 Reserve for Retirement Payout 10,111 Reserve for Tent City Relocation 240,000 Due to State - Fees 36,371 Special District Taxes Payable 880 Reserve for Hurricane Sandy Payments 160,375 Reserve for Lakewood Industrial Commission 97,760 (Do not crowd - add additional sheets) Sheet 3

37 eo-="..,.-e-..,..=o~-,- POST CLOSING TRlALBALANCE-TRUSTFUNDS (ASSESSMENT SECTION MUST BE SEPARATELY STATED) AS AT DECEMBER 31, 2013 TITLE OF ACCOUNT ANIMAL CONTROL FUND IEII CREDIT Due Current Fund Due State of New Jersey 33,808 4,391 Reserve for Dog Trust Expenditures 38,199 GRANT TRUST FUND Cash 198,530 Reserve for Revolving Loan 198,530 TRUST FUND OTHER Cash Inves1ments Due from Current Fund 7,942, ,567 1,114,220 Reserve for: Unemployment Compensation Insurance Escrow Perfonnance Sanitary Landfill Escrow Outside Off-Duty Police Emplovrnent Redemption of Tax Sale Certificates Premium at Tax Sale Law Enfocement Law Enforcement Confiscation Planning & Zoning Fees Inspection Fees Street Opening Permits Parking Offenses Adjudication Act Public Defender Accumulated Absences Snow Removal Recreation Pine Park Deposits Garbage Pail Deposits TOTAL 184,580 2,819, , ,810 ' i 587,501 i 2,167, ,225 39, , , ,438 4,572 9, ,383 2,442 39, , III 9808 III (Do not crowd - add additional sheets) Sheet 6

38 --~----" ~,- --~--- POST CLOSING TRIAL BALANCE - GENERAL CAPITAL FUND AS AT DECEMBER3!, TITLE OF ACCOUNT I~II ;REDIT Estimated Proceeds Bonds & Notes Authorized 11,833,843 Bonds & Notes Authorized but Not Issued ,843 Cash Deferred Charges to Future Taxation: Funded 34,690,000 Unfunded 20, Prospective Assessments Raised l:jytaxation 3,600 Serial Bonds Payable 34690,000 Bond Anticipation Notes 9,060,000 Improvement Authorizations: Funded 397,836 Unfunded 8,759,223 Reserve for Improvements 9,716 Reserve for Renewal & Replacement 101,357 Encumbrances Payable 3, Capital Improvement Fund 111,071 Reserve for Prospective Assessments Raised by Taxation 3,600 Reserve for 2012 Refunding Bonds COl 15,504 Fund Balance TOTAL 68,053,637 68,053,637 (Do not crowd - add additional sheets) Sheet 8

39 ~=-~~= STATEMENT OF GENERAL BUDGET REVENUES 2013 Source Excess or Deficit* II~I Rewed I Surplus Anticipated , ,100,000 Surplus Anticipated with Prior Written Consent of Director of Local Government Miscellaneons Revenue Anticipated: xxxxxx xxxxxx == Adopted Budget 12,314,060 12,760, ,895 Added by N.J.S.40A:4-87: (List on 17a) 2,404,761 2,404,761 Total Miscellaneous Revenue Anticipated , Receipts From Delinquent Taxes , ,687,707 (712,293 AmOWlt to be Raised by Taxation: xxxxxx xxxxxx xxxxxx (a) Local Tax for Municipal Purposes , == == (b) Addition to Local District School Tax == == Total AmOWlt to be Raised by Taxation ,101,420 50,696,069 1,594,649 ALLOCATION OF CURRENT TAX COLLECTIONS Current Taxes Realized in Cash (Total ofitem 10 or 14 on Sheet 22) xxxxxx I~~ AmOWlt to be Raised by Taxation xxxxxx xxxxxx Local District School Tax ,557,290 Regional School Tax Regional High School Tax COWltv Taxes ,228,040 Due COWltv for Added and Omitted Taxes ,136 Special District Taxes ,730,880 MWlicipal Open Space Tax Reserve for Uncollected Taxes xxxxxx Deficit in Required Collection of Current Taxes (or) xxxxxx Balance for Support of Municipal Budget (or) *Excess Non-Budget Revenue (see footnote) "Deficit Non-Budget Revenue (see footnote) == 156,573,415 xxxxxx == == xxxxxx xxxxxx == xxxxxx 5,595,824 == == 156,573,415 *These items are applicable only when there is no "Amount to be Raised by Taxation" in the "Budget" column of the statement at the top of this sheet. In such instances, any excess or deficit in the above allocation would apply to "Nonbudget Revenue" only. Sheet 17

40 STATEMENT OF GENERAL BUDGET REVENUES 2013 (continued) Miscellaneous Revenues Anticipated: Added by N.J.S. 40A:4-87 SOURCE [;;][;;] EXCESS OR DEFICIT* Community Development Block Grant 1,197,788 1,197,788 Byrne Justice Grant 32,963 32,963 Airport Development Grant - Runwav 206, ,529 UEZ - Transit Connect 3 17,400 17,400 UEZ - Business Assist Initiative 100, ,000 UEZ - First Responder 20,000 20,000 UEZ - Administration 399, ,891 NJ DOT - Highway Safety Fund 116, ,785 NJ DOT - Municipal Aid 276, ,260 NJ DOT - Jet Fuel Tank 37,145 37,145 Total (Sheet 17) I hereby certify that the above lit of Chapter 159 insertions of revenue have been realized in cash or I have received written notification of the award of public or private revenue. These insertions meet the statutory requirements ofn.j.s.a.40a:4-87 andmatc~o=~:. CFOSigna. ~~L / Sheet l7a

41 ,-=~~=-----~~~~~~~~ STATEMENT OF GENERAL BUDGET APPROPRIATIONS Budget as Adopted Budget - Added by N.J.SAOA: Appropriated for 2013 (Budget Statement Item 9) Appropriated for 2013 by Emergency Appropriation (Budget Statement Item 9) Total General Appropriations (Budget Statement Item 9) ,915,480 2,404,761 72,320, ,000 72,570,241 Add: Overexpenditures (see footnote) Total Appropriations and Overexpenditures ,570,241 Deduct Expenditures: Paid or Charged rbudget Statement Item (Lll ,831,439 Paid or Charged - Reserve for Uncollected Taxes ,595,824 Reserved ,142,976 Total Expenditures Unexpended Balances Canceled (see footnote) ,570,239 2 FOOTNOTES - RE: OVEREXPENDITURES: Every appropriation overexpended in the budget document must be marked with an * and must agree in the aggregate with item. RE: UNEXPENDED BALANCES CANCELLED: Are not to be shown as "Paid or Charged U in the budget document. In all instances "Total Appropriations" and "Overexpenditures" must equal the sum of "Total Expenditures" and "Unexpended Balances Cancelled". NOT APPLICABLE SCHEDULE OF EMERGENCY APPROPRIATIONS FOR LOCAL DISTRICT SCHOOL PURPOSES (EXCEPT FOR TYPE I SCHOOL DEBT SERVICE) 2013 Authorizations N.J.S. 40A:4-46 (After Adoption of Budget) N.J.S. 40A:4-20 (Prior to Adoption of Budget) Total Authorizations Deduct Expenditures: Paid or Charged Reserved Total Expenditures Sheet 18

42 RESULTS OF 2013 OPERATION CURRENT FUND ~II CREDIT Excess of Anticipated Revenues: xxxxxx xxxxxx Miscellaneous Revenues Anticipated xxxxxx Delinquent Tax Collections xxxxxx --- XXXXXX Required Collection of Current Taxes xxxxxx 1,594,649 Unexpended Balances of20 13 Budget Appropriations xxxxxx 2 Miscellaneous Revenue Not Anticipated xxxxxx 2,878,558 Miscellaneous Revenue Not Anticipated: Proceeds of Sale of Foreclosed Property (Sheet 27) xxxxxx Payments in Lieu of Taxes on Real Property xxxxxx Sale of Municipal Assets xxxxxx Unexpended Balances of20 12 Appropriation Reserves xxxxxx 1,597,964 Prior Years Interfunds Returned in xxxxxx Prior Years Accounts Payable Cancelled xxxxxx Federal & State Grants Appropriated Cancelled 212,352 Reserve for Reassessment Cancelled 23,351 Deferred School Tax Revenue: (See School Taxes, Sheets 13 & 14) xxxxxx xxxxxx Balance January xxxxxx Balance December 31, xxxxxx Deficit in Anticipated Revenues: xxxxxx xxxxxx Miscellaneous Revenues Anticipated xxxxxx. Delinquent Tax Collections ,293 xxxxxx xxxxxx Required Collection of Current Taxes xxxxxx Interfund Advances Originating in xxxxxx Adjustment for State and Federal Grants Prior Year Senior Citizens' and Veterans' Disallowed xxxxxx xxxxxx Federal & State Grants Receivable Cancelled Prior Year Refunds Deficit Balance - To Trial Balance (Sheet 3) xxxxxx Surplus Balance - To Surplus (Sheet 21) ,049,422 xxxxxx Sheet 19

43 SCHEDULEOFMUSCELLANEOUSREVENUES NOT ANTICIPATED SOURCE AMOUNT REALIZED Interest on Deposits 33,311 Sale of Municipal Property 1,824,619 Lease of Municipal Property 20,000 Tax Collector - Miscellaneous 1,160 Co-Gen Host Community Fees 236,904 Liquor License Bid 225,100 American Baseball Utility Reimbursement 21,083 Senior & Vets - Admin Fee 13,311 Lakewood Housing Authority - PILOT 30,944 Crossing Guard Reimbursement 5,056 Congregation Ahavas Chesed - Lease 8,531 Outstanding Checks Cancelled 9,610 Baseball Stadium Rent 25,000 Street Opening Admin Fee 16,250 Verizon Franchise Fees 25,901 Lakewood MUA - Fuel Reimbursement 27,496 Police O/S Dnty - Police Vehicle Fee 50,000 Foreign Trade Zone Fees 18,000 Senior Housing 31,805 Lakewood BOE - Fuel Reimbursement 21,179 Miscellaneous 233,298 Total Amount of Miscellaneous Revenues Not Anticipated (Sheet 19) 2,878,558 Sheet 20

44 .~.~~~. --~ ~ ~- SURPLUS-CURRENTFUND-YEAR2013 I~I CREDIT 1. Balance January 1, Excess Resulting From 2013 Operations Amount Appropriated in the 2013 Budget - Cash Amount Appropriated in 2013 Budget - With Prior Written Consent of Director of Local Government Services Balance December 31, xxxxxx xxxxxx xxxxxx 5,100,000 6,124, ,174,884 5,049,422 xxxxxx xxxxxx xxxxxx xxxxxx ANALYSIS OF BALANCE DECEMBER 31, 2013 (FROM CURRENT FUND - TRIAL BALANCE) - I Cash ,554,907 Investments Cham(eFund 1,315 Subtotal 16,556,222 Deduct Cash Liabilities Marked with "C" on Trial Balance ,526,297 Cash Surplus ,029,925 Deficit in Cash Surplus / ) Other Assets Pledged to Surplus: * (l)due From State of N.J. Senior Citizens & Veterans Deduction ,381 Deferred Charges # ,059,600 Cash Deficit # ~cial Emergency Notes Issued (1,059,600 Total Other Assets , *IN THE CASE OF A "DEFICIT IN CASH SURPLUS", "OTHER ASSETS WOULD ALSO BE PLEDGED TO CASH LIABIUTIES. #MAY NOT BE ANTICIPATED AS NONCASH SURPLUS IN 2014 BUDGET. (I)MAY BE ALLOWED UNDER CERTAIN CONDITIONS. NOTE: Deferred charges for authorizations under N.J.SAOA:4-55 (Tax Map, etc.), N.J.SAOA:4-55 (Flood Damage, etc.), N.J.SAOA: (Roads and Bridges, etc.) and N.J.SAOA: (Public Exigencies, etc.) to the extent of emergency notes issued and outstanding for such purposes, together with such emergency notes, may be omitted from this analysis. Sheet 21

45 (FOR MUNICIPALITIES ONLy) CURRENT TAXES LEVY 1. Amount of Levy as Per Duplicate (Analysis) # or (Abstract of Ratables) 2. Amount of Levy Special District Taxes 3. Amount Levied for Omitted Taxes Under N.J.S.A.54: et. seq. 4. Amount Levied for Added Taxes Uuder N.J.S.A.54: et. seq ,001,091 2,730,880 2,000,651 5a. Subtotal 2013 Levy 5b. Reductions due to tax appeals ** 5c. Total 2013 Tax Levy 156,732, ,732, Transferred to Tax Title Liens , Transferred to Foreclosed Property Remitted, Abated or Canceled ,109, Discount Allowed Collected in Cash: In ,335 Io 2013 * ,517,910 State's Share of2013 Senior Citizen & Veteran Deductions Allowed ,560 Homestead Benefit Credit ,972,786 Total to Line ,977,591 I!. Total Credits 153,141, Amount Outstanding December 31, ,590, Percentage of Cash Collections to Total 2013 Levy, (Item 10 Divided by Item 5) is 96.32% Note: If municipality conducted Accelerated Tax Sale or Tax Levy Sale Check here & complete sheet 22a. 14. Calculation of Current Taxes Realized in Cash: Total of Line ,977,591 Less: Reserve for Tax Appeals Pending State Division of Tax Appeals To Current Taxes Realized in Cash (Sheet 17) 150,977,591 Note A: In showing the above percentage the follovring should be noted: Where Item 5 Shows $1,500,000.00, and Item 10 shows $1,049,977.50, the percentage represented by the cash collection would be $1,049, divided by $1,500,000 or The correct percentage to be shown as Item 13 is 69.99% and not 70.00% nor %. # Note: On Item 1 if Duplicate (Analysis) Figure is used; be sure to include Senior Citizen and Veteran Deductions. * Include overpayments applied as part of2013 collections. ** Tax Appeals pursuant to R.S.54:3-21 et seq and/or R.S.54:48-1 et seq approved by resolution of the governing body prior to introdution of municipal budget. Sheet 22

46 SCHEDULE OF DELINQUENT TAXES AND TAX TITLE LIENS I~I CREDIT I I. Balance January 1,2013 4,680,113 xxxxxx A. Taxes ,448,199 xxxxxx xxxxxx B. Tax Title Liens ,231,914 xxxxxx xxxxxx 2. Canceled: xxxxxx xxxxxx A. Taxes xxxxxx 787,257 B. Tax Title Liens xxxxxx 3. Transferred to Foreclosed Tax Title Liens: xxxxxx A. Taxes xxxxxx B. Tax Title Liens xxxxxx 4. Added Taxes xxxxxx 5. Added Tax Title Liens xxxxxx 6. Adiustment Between Taxes (Other Than Current Year) & Tax Title Liens: xxxxxx xxxxxx A. Taxes - Transfers To Tax Title Liens (I) xxxxxx 20,096 B. Tax Title Liens - Transfers From Taxes (I) ,096 xxxxxx 7. Balance Before Cash Payments xxxxxx 3,892, Totals 4,700,209 4,700, Balance Brought Down 3,892,856 xxxxxx 10. Collected: xxxxxx 2,687,707 A. Taxes ,615,146 xxxxxx xxxxxx B. Tax Title Liens ,561 xxxxxx xxxxxx 11. Interest and Costs Tax Sale xxxxxx Taxes Transferred to Liens ,288 xxxxxx Taxes ,590,807 xxxxxx 14. Balance December 31, 2013: xxxxxx 4,850,244 A. Taxes ,616,507 xxxxxx xxxxxx B. Tax Title Liens ,233,737 xxxxxx xxxxxx 15. Totals 7,537,951 7,537, Percentage of Cash Collection to Adjusted Amount Outstanding (Item No. 10 Divided by Item No.9) is 69.04% 17. Item No. 14 Multiplied by Percentage Shown Above is 3,348,608 and represents the maximum amount that may be anticipated in (SEE NOTE A ON SHEET 22 -CURRENT TAXES) (1) These Amounts Will Always be the Same. Sheet 26

47 HF HOLMAN I FRENIA ALLISON, Pc. Certified Public Accountants & Consultanls 28, Turns i~iv0(, NJ 08753'!'s!; 0'18 Stokes Read, [;ledford, 9'12 H::;;hway 3~1, Suite Fi"0Sho'd, i\jj (;7723 :". 1% Canton Street Troy Te: :\;12in Street, The Honorable Mayor and Members ofthe Township Committee Township of Lakewood County of Ocean Lakewood, New Jersey Report on the Financial Statements INDEPENDENT AUDITOR'S REPORT We have audited the accompanying comparative statements of assets, liabilities, reserves and fund balance--regulatory basis of the various funds of the Township of Lakewood, State of New Jersey as of December 31,2012 and 2011, and the related comparative statements of operations and changes in fund balance--regulatory basis for the years then ended, the related comparative statement of revenues- regulatory basis, statement of expenditures--regulatory basis and the related notes to the financial statements for the year ended December 31, Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles and practices prescribed by the Division of Local Government Services, Department of Community Affairs, State of New Jersey; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. hi making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. B-1

48 Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles As discussed in Note I to the financial statements, the Township prepares its financial statements using accowlting practices that demonstrate compliance with regulatory basis of accounting and budget laws of the State of New Jersey, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America. The effects on the financial statements of the variances between these regulatory accounting practices and accounting principles generally accepted in the United States of America, although not reasonably detenninable, are presumed to be material. Adverse Opiuion on U.S. Generally Accepted Accounting Principles In our opinion, because of the effects of the matters, as discussed in the preceding paragraph, the financial statements referred to above do not present fairly, in conformity with accounting principles generally accepted in the United States of America, the financial position of the Township of Lakewood, County of Ocean, State of New Jersey, as of December 31, 2012, or the results of its operations or its cash flows for the year then ended. Opinion on Regulatory Basis of Accounting Furthermore, in our opinion, the financial statements referred to above present fairly, in all material respects, the assets, liabilities, reserves and fnnd balance--regulatory basis of the various funds of the Township of Lakewood, Connty of Ocean, State of New Jersey, as of December 31, 2012 and 2011, and the resnlts of its operations and changes in fund balance of such funds--regulatory basis for the years then ended, and the revennes--regulatory basis, expenditwes--regulatory basis of the various funds and general fixed assets, for the year ended December 31, 2012 in conformity with accounting principles and practices prescribed by the Division of Local Govermnent Services, Department of CommW1ity Affairs, State of New Jersey as described in Note I. Other Matters Report on Supplementary Information Our andit was made for the purpose of fanning an opinion on the finm1cial statements refened to in the first paragraph as a whole. The supplemental finmlcial statements presented for the various funds are presented for purposes of additional analysis as required by the Division of Local Govenunent Services, Department of Community Affairs, State of New Jersey mld is not a required part of the above financial statements. The accompanying schedule of expenditures offederal awards are presented for purposes of additional analysis as required by the U.S. Office of Mmlagement mld Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations m1d New Jersey OMB's Circular 04-04, Single Audit Policy for Recipients of Federal Grants, State Grants and State Aid respectively, and is also not a required part of the above finm1cial statements. Such information is the responsibility of mm1agement and was derived from and relates directly to the underlying accounting mld other records used to prepare the financial statements. Such information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting m1d other records used to prepare the finm1cial statements or to the financial statements themselves, mld other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements of each of the respective individnal fwlds and account group taken as a whole. 2 B-2

49 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our repmi dated March IS, 2013, on our consideration of the Township of Lakewood's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the resnlts of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Township of Lakewood's internal control over financial reporting and compliance. Respectfully submitted, A ALLISON, P. C. Celiified Public Accountant Registered Municipal Accountant No. CR435 Medford, New Jersey May 10,2013 B-3 3

50 B-4

51 BASIC FINANCIAL STATEMENTS 4 B-5

52 I I I I I I B-6

53 The Accompanying Notes to the Financial Statements are an integral prui of this Statement 5 B-7

54 TOWNSHIP OF LAKEWOOD CURRENT FUND COMPARATIVE STATEMENT OF ASSETS, LIABILITIES, RESERVES AND FUND BALANCE - REGULATORY BASIS DECEMBER 31, 2012 AND 2011 EXHIBIT A (Page 2 of2) LIABILITIES, RESERVES & FUND BALANCE REFERENCE 2012 Regular Fund: Liabilities: Appropriation Reserves A-3 $ 3,525,661 Reserve for Encumbrances A-3 1,025,489 Accounts Payable A ,563 Prepaid Taxes A ,335 Tax Overpayments A-17 4,449,041 County Taxes Payable A ,005 Local District School Tax Payable A ,106 Due to State of New Jersey A-22 18,815 Reserve for State Board of Taxation Appeals A-23 Reserve for Reassessment A 24,200 interfunds Payable A ,069 Deposits on Sale of Propeliy A ,752 Due to Lakewood Housing A-25 1,556 Tax Anticipation Note A Special Emergency Notes A-27 1,172,800 Various Reserves A ,224 Total Liabilities 13,411,616 Reserves for Receivables & Other Assets A 60,063,662 Fund Balance A-I 6,174,884 Total Regular Fund 79,650,162 State & Federal Grants: Reserve for State & Federal Grants: Encumbered A ,755 Reserved A-30 7,624,991 Unappropriated Reserves A ,127 Total State & Federal Grants 8,611,873 Total Liabilities, Reserves & Fund Balance $ 88,262,035 $ $ ,988, , , ,496 3,956, , ,615 35, ,698 27,315 1,509, ,252 15,000,000 1,536, ,044 27,979,606 11,083,377 10,036,459 49,099, ,602 8,901,221 98,836 9,725,659 58,825,101 The Accompanying Notes to the Financial Statements are an integral part of this Statement. 6 B-8

55 ExmBIT A-I TOWNSHIP OF LAKEWOOD CURRENT FUND COMPARATIVE STATEMENT OF OPERATIONS AND CHANGES IN FUND BALANCE - REGULATORY BASIS FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 Revenue & Other Income Realized: Fund Balance Utilized :Miscellaneous Revenue Anticipated Receipts fi'om Delinquent Taxes Receipts fi"om Current Taxes Nonbudget Revenues Other Credits to Income: Unexpended Balance of Appropriation Reserves Cancellation of Grant Appropriated Reserve Cancellation of Accounts Payable Reserve for Revaluation Cancelled Cancellation of Reserve for Tax Appeals 111terfunds Returned 2012 $ 7,997,000 15,156,447 2,809, ,152,778 1,541,202 1,686, ,698 37, $ 5,973,250 15,095,032 5,947, ,165,249 2,883, ,820 13,346 82,350 20, ,073 Total 170,695, ,400,421 Expenditures: Budget & Emergency Appropriations: Appropriations Within TleAPS": Operations: Salaries & Wages Other Expenses Deferred Charges & Statutory Expenditures Appropriations Excluded from "CAPS": Operations: Other Expenses Capital Improvements Municipal Debt Service Deferred Charges Local School District Taxes County Taxes Payable Fire District Taxes Payable Cancellatiion of Grant Receivable Without Appropriation Refund of Prior Year Revenue 24,694,523 22,679,169 5,570,945 4,944, ,000 6,639, ,200 72,246,057 27,028,508 2,053,209 65,711 84,112 23,622,947 22,607,731 5,661,238 4,146,821 43,000 7,003, ,000 71,105,078 27,108,995 3,142,673 Total 166,559, ,581,982 Excess in Revenue Expenditures Included Above which are by Statute Deferred Charges to Budgets of Succeeding Years 4,135,425 7,818,439 1,156,000 Statutory Excess to Fund Balance Fund Balance January 1, A 4,135,425 10,036,459 8,974,439 7,035,270 Total 14,171,884 16,009,709 Less: Amount of Fund Balance Utilized as Revenue A-2 7,997,000 5,973,250 Fund Balance December 31, 2012 A $ 6,174,884 $ )0,036,459 The Accompanying Notes to the Financial Statements are an integral part of this Statement. 7 B-9

56 TOWNSHIP OF LAKEWOOD CURRENT FUND STATEMENT OF REVENUES - REGULATORY BASIS FOR THE YEAR ENDED DECEMBER 31, 2012 ANTICIPATED ADOPTED SPECIAL BUDGET N.J.S.40A:4-87 REALIZED EXHIBIT A-2 (Page 1 of3) EXCESS (DEFICIT) Fund Balance Anticipated $ 7,997,000 Miscellaneous Revenues Anticipated: Local Revenues: Licenses: Alcoholic Beverages 80,000 Other 130,000 Fees & Permits: Uniform Construction Code 1,300,000 Other 470,000 Fines & Costs - Municipal Court 681,000 Interest & Costs on Taxes 875,000 Police Identification Fees 24,500 Payment in Lieu of Taxes: Sons of Israel 150,000 Lakewood Plaza II 96,000 Consolidated Municipal Property Tax Relief 601,414 Energy Receipts Tax 4,556,193 Tax Abatement Program Revenues 458,726 Emergency Medical Services 980,000 Recycling Revenues fro111 County 200,000 General Capital Fund Balance 137,000 Municipal Hotel & Occupancy Tax 100,000 Police Off-Duty Funds 90,000 Cell Tower Lease 72,000 Cable TV Franchise Fees 143,711 Subtotal Local Revenues 11,145,544 Federal & State Grants: Recycling Tonnage Grant 79,630 Alcohol Education & Rehabilitation Fund 3,993 Municipal Alliance on Alcoholism & Drug Abuse 48,000 Safe & Secure Communities Program 60,000 Community Development Block Grant 873,048 Clean Communities 88,208 Edward Byrne Memorial Justice Grant 92,535 Body Armor Replacement Grant 10,213 NJDOT Highway Safety Fund 64,361 New Jersey Emerget:Icy Assistance Grant 5,000 US DOT Lakewood AirpOlt 162, ,537 Urban Enterprise Zone: Administrative Grant 180,000 Municipal Services 690,000 $ 7,997,000 81, ,192 1,444, , , ,925 27,156 95, , ,414 4,556, , , , , ,499 97,184 77, ,937 11,146,709 79,630 3,993 48,000 60, ,048 88,208 92,535 10,213 64,361 5, , , ,000 1,550 13, ,311 (15,760) 65, ,656 (55,000) 7,920 (104,690) (79,876) (18,575) 22,499 7,184 5,444 4,226 1,165 The Accompanying Notes to the Financial Statements are an integral part of this Statement. 8 B-10

57 TOWNSHIP OF LAKEWOOD CURRENT FUND STATEMENT OF REVENUES - REGULATORY BASIS FOR THE YEAR ENDED DECEMBER 31, 2012 ANTICIPATED ADOPTED SPECIAL BUDGET N.J.SAOA:4-87 REALIZED Federal & State Grants (continued): NJDOT 2012 Municipal Aid Program 351,200 Financial Assiistance Program 135,000 Hatzolah Emergency Vehicle 20,000 Lakewood Transit Connect 50,000 50,000 Infrastructure Improvements Lakewood Industrial Park 300,000 Downtown Parking Development Phase 37,123 Downtown Parking Development Phase 4 200,000 Food Bank Funds 16,000 Business Assistance Initiative Grant 100, , ,000 20, , ,000 37, ,000 16, ,000 EXHIBIT A-2 (Page 2 of3) EXCESS (DEFICIT) Total Miscellaneous Revenue 13,162,954 1,992,328 15,156,447 1,165 Receipts From Delinquent Taxes 4,100,000 2,809,923 (1,290,077) Amount to be Raised by Taxes 43,794,587 Nonbudget Revenues 45,765,309 1,541,202 1,970,722 1,541,202 Total ~ 69,054,541 $ 1, $ 73,269,881 $ 2.223,012 ANALYSIS OF REALIZED REVENUE Allocation of Current Tax Collections: Revenue From Collection Net Revenue from Collections Allocated to School, County & Fire District Taxes Balance for Support of Municipal Budget Appropriations Add: Reserve for Uncollected Taxes Amount for Support of Municipal Budget Appropriations $ 141,152, ,152, ,327,774 39,825,004 5,940,305 $ 45, The Accompanying Notes to the Financial Statements are an integral part ofthis Statement. 9 B-11

58 TOWNSHIP OF LAKEWOOD CURRENT FUND STATEMENT OF REVENUES - REGULATORY BASIS FOR THE YEAR ENDED DECEMBER 31, 2012 EXHIBIT A-2 (Page 3 ob) ANALYSIS OF NONBUDGET REVENUE Miscellaneous Revenue Not Anticipated: Interest on Investments & Deposits State Administration Fee - Senior Citizens' & Veterans l Cable Television Franchise Fee Recycling Macedonia/Senior Housing - PILOT Miscellaneous Other Miscel1aneous - Tax Collector Cancel Outstanding Checks Seibal American Water Company American Baseball Utility Reimbursement Baseball Stadium Rent Co-Gen Host Community Fees Lakewood Board of Education - Fuel Usage Reimbursement Lakewood MUA - Fuel Usage Reimbursement Street Opening Permit Fees Crossing Guard Reimbursement AirpOlt Lease - Aviation Charter Hurricane Irene Reimbursement Sale of Municipal Property OC 996 Reimbursement Program Lease of Property Total $ 38,789 14,277 23,032 40,529 31,821 43,656 8,839 17,294 60,882 8,445 23,819 25, ,503 34,351 27,806 15,900 7,678 14,767 7, ,500 7,832 34,218 $ 1, The Accompanying Notes to the Financial Statements are an integral paii of this Statement. 10 B-12

59 TOWNSHIP OF LAKEWOOD CURRENT FUND STATEMENT OF EXPENDITURES - REGULATORY BASIS FOR THE YEAR ENDED DECEMBER 31,2012 EXHIBIT A-3 (Page 1 of7) APPROPRIA nons EXPENDED UNEXPENDED BUDGET AFTER PAlDOR BALANCE OPERA TrONS WITHIN CAPS BUDGET MODIFICATION CHARGED RESERVED CANCELLED GENERAL GOVERNMENT FUNCTIONS: Administrative & Executive: Office of the Manager Salaries and \Vages $ 421,790 $ 421,790 $ 391,824 Other Expenses 16,150 16,150 12,952 Goveming Body: Salaries and Wages 108, , ,500 Other Expenses 77,650 77,650 42,064 Office ofthe Clerk: Salaries and Wages 243, , ,023 Other Expenses 39,800 39,800 35,189 Purchasing Depmiment: Salaries and Wages 114, , ,467 Other Expenses 200, , ,398 Financial Administration Salaries and Wages 289, , ,943 Other Expenses 17,480 17,480 3,952 Audit Services: Other Expenses 60,000 60,000 Computer Center: Other Expen ses 118, ,750 89,950 Collection of Taxes: Salaries and Wages 355, , ,587 Other Expenses 40,955 40,955 36,891 Assessment of Taxes: Salaries and Wages 333, , ,058 Other Expenses 209, , ,171 Liquidation of Tax Liens & Foreclosed Property: Other Expen ses 20,500 7,500 Legal Services & Costs: Other Expenses 653, , ,668 Engineering Services & Costs: Other Expenses 581, , ,882 Civil Rights Commission (N.J.S. 18:25-10): Other Expenses 1,250 1,250 AdvisOlY Board on Disability: Other Expenses 1,500 1,500 Tourism Advisory Committee: Other Expenses 3,500 3,500 Veterans Advisory Committee: Other Expenses 8,000 8,000 8,000 $ 29,966 3, , ,611 1,613 17,902 10,474 13,528 60,000 18,800 38,388 4,064 12,924 29,384 7,500 51,332 3,368 1,250 1,500 3,500 The Accompanying Notes to the Financial Statements are an integral part of this Statement. 11 B-13

60 TOWNSHIP OF LAKEWOOD CURRENT FUND STATEMENT OF EXPENDITURES - REGULATORY BASIS FOR THE YEAR ENDED DECEMBER 31, 2012 EXHIBIT A-3 (Page 2 on) APPROPRIATIONS EXPENDED UNEXPENDED BUDGET AFTER PAID OR BALANCE OPERATIONS WITHIN CAPS BUDGET MODIFICATION CHARGED RESERVED CANCELLED LAND USE ADMINISTRATION: Planning Board: Other Expenses 32,755 39,355 39,018 Zoning Board: Other Expenses 42,400 37,400 30,710 PUBLIC SAFETY FUNCTIONS: Police: Salaries and Wages 14,978,000 14,657,500 14,483,595 Other Expenses 534, ,300 Emergency Management Services: Salaries and Wages 76,214 76,214 Other Expenses 36,750 49,750 Emergency Medical Technicians: Salaries and Wages 885, ,695 Other Expenses 35,350 45,850 Municipal Prosecutor: Other Expenses 80,000 80,000 PUBLIC WORKS FUNCTION: Road Repairs & Maintenance: Salaries and Wages 932, ,936 Other Expenses 318, ,500 Street Cleaning: Salaries and Wages 186, ,898 Other Expenses 14,500 14,500 Stoml Sewer Pipe - Emergency Department of Public Works: Salaries and Wages 476, ,547 Other Expenses 44,770 44,770 Shade Tree Commission: Salaries and Wages 125, ,359 Other Expenses 7,000 9,000 Cross Street Landfill Maintenance: Other Expenses 10,000 10,000 Garbage & Trash Removal: Salaries and Wages 1,015,117 1,030,117 Other Expenses 201, ,500 Recycling: Salaries and Wages 729, ,283 Other Expenses 61,000 61,000 Public Buildings & Grounds: Salaries and Wages 226, ,510 Other Expenses 149, ,900 Apartment Trash Reimbursements: Other Expenses 511, ,601 Automotive Mechanics: Salaries and Wages 535, , ,006 74,718 44, ,425 44,455 68, , , ,148 13, ,376 41, ,125 6,437 1,390 1,030, , ,041 58, , , , , , ,905 8,294 1,496 5,535 55,270 1,395 11,250 29, ,569 16, ,171 2,928 2,234 2,563 8,610 2,775 14,242 2, ,513 25, ,391 The Accompanying Notes to the Financial Statements are an integral part of this Statement. 12 B-14

61 TOWNSHIP OF LAKEWOOD CURRENT FUND STATEMENT OF EXPENDITURES - REGULATORY BASIS FOR THE YEAR ENDED DECEMBER 31, 2012 EXHIBIT A-3 (Page 3 of7) APPROPRIATIONS EXPENDED UNEXPENDED BUDGET AFTER PAID OR BALANCE OPERATIONS WITHIN CAPS BUDGET MODIFICATION CHARGED RESERVED CANCELLED PUBLIC WORKS FUNCTION (continued): Municipal Garage: Salaries and Wages 118,556 92,056 80,301 Other Expenses 99,000 99,000 97,881 Community Services Act: Other Expenses 1,500,000 1,460, ,019 MUNICIPAL COURT FUNCTIONS: Municipal Court: Salaries and Wages 502, , ,196 Other Expenses 34,050 37,050 33,993 Public Defender: Other Expenses 35,000 35,000 16,913 HEALTH & HUMAN SERVICES FUNCTIONS: Board of Health: Salaries and Wages 48,000 48,000 44,680 Other Expenses 1,880 2,180 1,924 Environmental Commission (N.l.S. 40:56-A-l, et seq.): Other Expenses 2,000 2,000 1,287 Animal Control Salaries and Wages 58,031 59,531 59,257 Other Expenses 78,700 78,700 70,575 Relocation Assistance Program Other Expenses 7,500 7,500 Senior & Social Services: Other Expenses 230, , ,000 Lakewood Community Services Corporation (N.J.S.A.40: ) 30,000 30,000 30,000 PARKS & RECREATION FUNCTIONS: Recreation: Salaries and Wages 183, , ,714 Other Expenses 95,000 95,000 86,713 COlmnunity Center: Salaries and \Vages 143, , ,064 Other Expenses 28,650 28,650 23,420 11,755 1, ,981 30,734 3,057 18,087 3, ,125 7,500 26,286 8,287 3,326 5,230 The Accompanying Notes to the Financial Statements are an integral pati of this Statement. 13 B-15

62 TOWNSHIP OF LAKEWOOD CURRENT FUND STATEMENT OF EXPENDITURES - REGULATORY BASIS FOR THE YEAR ENDED DECEMBER 31, 2012 EXHIBIT A-3 (page 4 of 7) APPROPRIATIONS ~::-7C",E::X",P:..:E",N.:.:D::.:E::.:D,- UNEXPENDED BUDGET AFTER PAID OR BALANCE OPERATIONS WITHIN CAPS BUDGET MODIFICATION CHARGED RESERVED CANCELLED PARKS & RECREATION FUNCTIONS (continued): Parks & Playgrounds: Salaries and Wages 921, , ,074 Other Expenses 133, , ,463 OTHER COMMON OPERATING FUNCTIONS: Accumulated Leave Compensation 80,000 80,000 80,000 Celebration of Public Events: Other Expenses 12,000 12,000 11,000 Transfer to Lakewood Airport Authority 100, ,000 24,429 Prior Year Bills CODE ENFORCEMENT & ADMINISTRATION: State UnifoTIl1 Construction Code Officials: Salaries and Wages 965, , ,994 Other Expenses 140, , ,348 Property Maintenance Code: Salaries and Wages 110, , ,124 INSURANCE: Liability Insurance 684, , ,983 Workers Compensation Insurance 995, , ,942 Group Insurance Plan for Employees 8,514,480 8,395,980 8,301,501 Health Insurance Waivers 95,000 95,000 95,000 UTILITY EXPENSES & BULK PURCHASES: Electricity 510, , ,937 Street Lighting 950, ,000 38,186 Telephone 90,000 90,000 87,778 Water 48,000 48,000 37,657 Natural Gas 115, ,000 69,459 Gasoline 1,000,000 1,065,000 1,055,201 Stadium Utilities 33,500 33,500 20,753 LANDFILL/SOLID WASTE DISPOSAL COSTS: Landfill Disposal Costs 2,500,000 2,622,000 2,622,000 Total Operations Within CAPS 47,357,892 47,367,892 43,900,600 Contingent 7,500 7,500 1,700 Total Operations Including Contingent Within "CAPS" 47,365,392 47,375,392 43,902,300 Detail: Salaries and Wages 25,084,023 24,694,523 23,994,344 Other Expenses 22,281,369 22,680,869 19,906,256 45, ,000 75,571 24,183 18,302 20, , , ,814 2,222 10,343 45,541 9,799 12,747 3,467,292 5,800 3,473, ,179 2,772,913 DEFERRED CHARGES & STATUTORY EXPENDITURES WITHIN CAPS: Statutory Expenditures: Contributions to Employees Retirement System 1,229,424 1,229,424 1,229,424 The Accompanying Notes to the Financial Statements are an integral part of this Statement. 14 B-16

63 TOWNSHIP OF LAKEWOOD CURRENT FUND STATEMENT OF EXPENDITURES - REGULATORY BASIS FOR THE YEAR ENDED DECEMBER 31,2012 EXIDBIT A-3 (Page 5 of7) APPROPRIATIONS EXPENDED BUDGET AFTER PAID OR OPERATIONS WITHIN CAPS BUDGET MODIFICATION CHARGED RESERVED UNEXPENDED BALANCE CANCELLED Statutory Expenditures (continued): Social Security System (O.A.S.!,) 1,100,000 1,090,000 1,067,431 NJ Police & Fireman's Retirement System 3,246,721 3,246,721 3,246,721 Volunteer Firemen's Widow Pension R.S.43: ,800 4,800 4,800 Deferred Charges & Statutory Expenditures Within CAPS 5,580,945 5,570,945 5,548,376 Total Appropriations Within CAPS 52,946,337 52,946,337 49,450,676 22,569 22,569 3,495,661 OPERATIONS - EXCLUDED FROM CAPS Recycling Tax: Other Expenses 96,849 96,849 96,849 SMFP Fire District Payments 47,327 47,327 47,327 G-roup Insurance Plan for Employees 335, , ,520 Total Operations Excluded from "CAPS" 479, , ,696 Public & Private Programs Offset by Revenues: Drunk Driving Enforcement Program Municipal Drug Alliance: State Share 48,000 48,000 48,000 Local Share 12,000 12,000 12,000 Safe & Secure Communities Program: State Share 60,000 60,000 60,000 Local Share 173, , ,971 OSHP Cars Grant Community Development Block Grant 873, ,048 Alcohol Education & Rehabilitation Fund 3,993 3,993 3,993 Edward Byrne Memorial Justice Grant 92,535 92,535 Recycling Tonnage Grant 79,630 79,630 79,630 Clean Communities 88,208 88,208 Body Armor Replacement Grant 10,213 10,213 10,213 The Accompanying Notes to the Financial Statements are an integral part of this Statement. 15 B-17

64 TOWNSHIP OF LAKEWOOD CURRENT FUND STATEMENT OF EXPENDITURES - REGULATORY BASIS FOR THE YEAR ENDED DECEMBER 31, 2012 EXHIBIT A-3 (Page 6 of7) OPERATIONS EXCLUDED FROM CAPS APPROPRlA TIONS BUDGET AFTER BUDGET MODIFICATION _;:-:c;::e:::xp=e~nd=e:::d~ UNEXPENDED PAID OR BALANCE CHARGED RESERVED CANCELLED Public & Private Programs Offset by Revenues (continued): Matching Funds for Grants 30,000 30,000 30,000 Food Bank Funds 16,000 16,000 Urban Enterprise Zone: Administrative Grant 180, ,000 Municipal Services: State Share 690, , ,000 Local Share 230, , ,640 NJ Emergency Assistance Grant 5,000 5,000 5,000 NJDOT 2011 Highway Safety Fund 64,361 64,361 64,361 Financial Assistance Program 135, , ,000 Downtown Parking Development Phase 37,123 37,123 37,123 Downtown Parking Development Phase IV 200, ,000 HatzoJah Emergency Vehicle 20,000 20,000 20,000 Infrastructure Improvements Lakewood Industrial Park 300, , ,000 Business Assistance Initiative II 100, ,000 NJDOT 2012 Municipal Aide Program 35l, ,200 35l,200 USDOT FAA Lakewood Airport Federal ShaTe l62, , ,427 Local Share 8,574 8,574 8,574 Lakewood Transit Connect 50, ,000 loo,ooo Total Public & Private Programs Offset by Revenues 2,472,595 4,464,923 4,434,923 30,000 Capital Improvements - Excluded from "CAPS": Capital Improvement Fund -'1"'5,,0,"'0,,0"-0 1,,5"'0"',0"'0"'0,,1"'5"'0"',0"'0,,0 Total Capital Improvements - Excluded from CAPS l50, , ,000 The Accompanying Notes to the Financial Statements are an integral PaIt of this Statement. 16 B-18

65 TOWNSHIP OF LAKEWOOD CURRENT FUND STATEMENT OF EXPENDITURES - REGULATORY BASIS FOR THE YEAR ENDED DECEMBER 31, 2012 EXHIBIT A-3 (Page 7 of7) OPERATIONS EXCLUDED FROM CAPS APPROPRIATIONS EXPENDED UNEXPENDED BUDGET AFTER --~PA7I~D~O~R~~~----- BALANCE BUDGET MODIFICATION CHARGED RESERVED CANCELLED Municipal Debt Service - Excluded from "CAPS": Payment of Bond Principal 3,660,000 3,660,000 Payment of Bond Anticipation Notes 860, ,000 Interest on Bonds 1,908,913 1,908,913 Interest on Notes 194, ,870 Green Trust Loan Program: Principal 37,500 37,500 Interest 1,125 1,125 3,660, ,000 1,886, ,860 37,500 1,125 22, Total Municipal Debt Service - Excluded fi'om CAPS 6,662,408 6,662,408 6,639,603 22,805 Deferred Charges - Excluded from "CAPS": Emergency Authorizations 40,000 40,000 Special Emergency Authorizations - 5 Years 363, ,200 40, ,200 Total Deferred Charges - Municipal- Excluded from CAPS: 403, , ,200 Total General Appropriations Excluded fro111 CAPS 10,167,899 12,160,227 12,107,422 30,000 22,805 Subtotal General Appropriations 63,114,236 65,106,564 Reserve For Uncollected Taxes 5,940,305 5,940,305 61,558,098 5,940,305 3,525,661 22,805 Total General Appropriations $ 69,054,541 $ 71,046,869 $ 67,498,403 $3,525,661 $ 22,805 Budget $ 69,054,541 Added by N.J.A. 40A:4-87 1,992,328 Total $ 71,046,869 Disbursements Reserve for Encumbrances Appropriated Reserves for Federal & State Grants Deferred Charges Reserve for Uncollected Taxes $ 55,694,486 1,025,489 4,434, ,200 5,940,305 Total $ 67,498,403 The Accompanying Notes to the Financial Statements are an integral part of this Statement. 17 B-19

66 EXHIBITB TOWNSHIP OF LAKEWOOD TRUST FUND COMPARATIVE STATEMENT OF ASSETS, LIABILITIES, RESERVES AND FUND BALANCE - REGULATORY BASIS DECEMBER 31,2012 AND 2011 ASSETS REFERENCE 2012 Animal Control Trust Fund: Due from State of New Jersey B-5 $ 400 lnterfund - Current Fund B-4 23,877 Total Animal Control Fund 24,277 Grant Trust Fund: Cash B-1 198,033 General Trust Fund: Cash & Cash Equivalents B-1 7,210,675 Investments B-2 2,547,229 Interfund - Current Fund B-7 912,856 Total General Trust Fund 10,670,760 Total Assets $ 10, $ ,012 20, ,536 6,779,029 2,546, ,710 10,313,876 $ 10,531,848 LIABILITIES, RESERVES & FUND BALANCE Animal Control Trust Fund: Reserve for Animal Control Expenditures B-3 $ 24,277 Total Animal Control Fund 24,277 Grant Trust Fund: Reserve for Revolving Loan Grant B-6 198,033 General Trust Fund: Various Reserves B-8 10,670,760 Total General Trust Fund 10,670,760 Total Liabilities, Reserves & Fund Balance $ 10,893,070 $ 20,436 20, ,536 10,313,876 10,313,876 $ ,848 The Accompanying Notes to the Financial Statements are an integral part of this Statement. 18 B-20

67 EXHIBIT C TOWNSHIP OF LAKEWOOD GENERAL CAPITAL FUND COMPARATIVE STATEMENT OF ASSETS, LIABILITIES, RESERVES AND FUND BALANCE - REGULATORY BASIS DECEMBER 31,2012 AND 2011 ASSETS REFERENCE 2012 Cash & Cash Equivalents C-2 $ 1,168,731 $ Deferred Charges to Future Taxation: Funded C-4 38,472,500 Unfunded C-5 19,973,446 Prospective Assessments Raised by Taxation C-6 3,600 Due from American Baseball Company, L.L.C. C-7 Total Assets $ 59,618,277 $ ,603,359 42,315,000 18,214,284 3,600 1,000,000 63,136,243 LIABILITIES, RESERVES & FUND BALANCE Improvement Authorizations: Encumbered C-8 $ 630,703 $ Funded C-8 302,025 Unfunded C-8 10,739,424 Serial Bonds C-9 38,435,000 Bond Anticipation Notes C-IO 8,980,000 Capital Improvement Fund C-11 56,882 N.J. Economic Development Authority Loan C-12 37,500 Reserve for Improvements C-13 9,716 Reserve for Prospective Assessments Raised by Taxation 3,600 Reserve for Bond Funding COE 17,003 Reserve for Renewal & Replacement C ,356 Fund Balance C-I 305,068 Total Liabilities, Reserves & Fund Balance $ 59,618,277 $ 423,764 1,577,469 9,340,770 42,240,000 9,160,000 57,747 75,000 9,716 3, , ,966 63,136,243 There were bonds and notes authorized but not issued on December 31, 2011 of$10,993,446 and on December 31, 20ll was $9,054,283. The Accompanying Notes to the Financial Statements are an integral part ofthis Statement. 19 B-21

68 EXHIBITD TOWNSHIP OF LAKEWOOD PAYROLL FUND COMPARATIVE STATEMENT OF ASSETS, LIABILITIES, RESERVES AND FUND BALANCE - REGULATORY BASIS DECEMBER 31, 2012 AND 2011 ASSETS Cash $ 384,533 $ 144,741 Total Assets $ 384,533 $ 144,741 LIABILITIES & RESERVES Due to Current Fund Due to Various Agencies $ 107, ,985 $ 144,741 Total Liabilities & Reserves $ 384,533 $ 144,741 The Accompanying Notes to the Financial Statements are an integral part of this Statement. 20 B-22

69 TOWNSHIP OF LAKEWOOD GENERAL FIXED ASSETS ACCOUNT GROUP COMPARATIVE STATEMENT OF FIXED ASSETS AND FUND BALANCE - REGULATORY BASIS DECEMBER 31,2012 AND 2011 EXHIBITE ASSETS 2012 General Fixed Assets: Land $ 10,716,400 Buildings 26,933,005 Furniture & Fixtures, Equipment & Vehicles 17,147,792 Total $ 54,797, $ 10,716,400 26,933,005 16,949,938 $ 54,599,343 FUND BALANCE Total Investment in General Fixed Assets $ 54,797,197 $ 54,599,343 The Accompanying Notes to the Financial Statements are an integral paii ofthis Statement. 21 B-23

70 B-24

71 TOWNSIDP OF LAKEWOOD COUNTY OF OCEAN NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2012 ************ 22 B-25

72 I I B-26

73 TOWNSHIP OF LAKEWOOD NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2012 Note 1. Summary of Significant Accounting Policies Description of Financial Reporting Entity - The Township of Lakewood is organized as a Committee Manager municipality under the provisions of NJ.S.40:69A-82 et seq. The Township is governed by an elected Committee and by an appointed Municipal Manager and by such other officers and employees as may be dnly appointed. The Committee shall consist of five members elected at large by voters of the Municipality and shall service for a term of tln'ee years begirming on the first day of January next following their election and that the Mayor shall be elected by the members of the Committee. Each member of the Committee carries a legislative vote. This report includes the financial statements of the township of Lakewood (the "Township"), within the County of Ocean, in the State of New Jersey and reflects the activities of the Municipality which is under the control of the Mayor and Township Committee. The financial statements of the Board of Education and Fire District are reported separately since their activities are administered by separate boards. The Township's governing body is also responsible for appointing the members of the boards of other organizations, but the Township's accountability for these orgmlizations do not extend beyond making the appointments. The governing body appoints the board members of the Lakewood Development Corporation, Lakewood Muoicipal Utilities Authority and the Lakewood Housing Anthority. Basis of Accounting, Measurement Focus and Basis of Presentation - The financial statements of the Township of Lakewood contain all funds and account groups in accordmlce with the "Requirements of Audit" as promulgated by the State of New Jersey, Depmiment of Community Affairs, Division of Local Govermnent Services. The principles and practices established by the Requirements of Audit are designed primarily for determining compliance with legal provisions mld budgetary restrictions and as a memls of reporting on the stewardship of public officials with respect to public funds. Generally, the financial statements are presented using the flow of current financial resources measurement focus mld modified accrual basis of accounting with minor exceptions as mandated by these "Requirements". In addition, the prescribed accounting principles previonsly referred to differ in certain respects from accounting principles generally accepted in the United State of America applicable to local govermnent units. The more significant differences are explained in this Note. In accordance with the "Requirements", the Township of Lakewood accounts for its financial trmlsactions through the use of separate funds are described as follows: Cnrrent Fund - resources and expenditures for government operations of a general nature, including Federal and State Grant flmds. Trust Fnnds - receipt, custodianship and disbursement of funds in accordance with the purpose for which each reserve was created, including dog license revenue and expenditures mld sundry deposits held for satisfactory completion of specific work. 23 B-27

74 TOWNSHIP OF LAKEWOOD NOTES TO FINANCIAL STATEMENTS (continued): FOR THE YEAR ENDED DECEMBER 31, 2012 Note 1. Summary of Significant Accounting Policies (continued): General Capital Fund - receipt and disbursement of funds for the acquisition of capital facilities, other than those acquired in the Current Fund. Budgets and Budgetary Accounting - The Township of Lakewood must adopt an annnal bndget for its current fund in accordance with NJS.A.40A:4 et seq. NJS.A.40A:4-5 requires the governing body to introduce and approve the annual municipal budget no later than February 10 th of each year. At introduction, the governing body shal1 fix the time and place for a public hearing on the budget and must advertise the time and place at least ten days prior to the hearing in a newspaper published and circulating in the mnnicipality. The public hearing must not be held less than twenty-eight days after the date the budget was introduced. After the hearing has been held, the governing body may, by majority vote, adopt the budget or may amend the budget in accordance with NJS.A.40A:4-9. Amendments to adopted budgets, if any, are detailed in the statements of revenues and expenditures. An extension of the statutory dates for introduction, approval and adoption of the municipal budget may be granted by the Director of the Division of Local Government Services, with the pennission of the Local Finance Board. Budgets are adopted on the same basis of accounting ntilized for the preparation of the Township's financial statements. Cash, Cash Equivalents and Investments - Cash and Cash equivalents include petty cash, change fnnds and cash on deposit with public depositories. Investments are stated at cost. Consequently, nnrealized gain or loss on investments has not been recorded in accordance with Governmental Accounting Standards Board Statement No. 31. New Jersey municipal nnits are required by NJSA.40A:5-14 to deposit public funds in a bank or trust company having it place of business in the State of New Jersey and organized under the laws of the United States or of the State of New Jersey or in the New Jersey Cash Management Fund. NJSA.40A:5-1S.1 provides a list of investments, which may be pnrchased by New Jersey municipal units. NJSA.17:9-41 et seq. establishes the requirements for the security of deposits of governmental units. The statute requires that no governmental unit shal1 deposit public funds in a public depository unless such funds are secured in accordance with the Gover1ll1lental Unit Deposit Protection Act, which was enacted in 1970 to protect governmental units from a loss of funds on deposit with a failed banking institution in New Jersey. Public depositories include state or federal1y chartered brulks, savings brujks or associations located in the State of New Jersey or state or federally chartered brulks, savings brulks or associations located in another state Witll a branch office in the State of New Jersey, the deposits of which are federally insured. Al1 public depositories must pledge collateral, having a market value at least equal to five percent of the average daily balance of collected public funds, to secure the deposits of Governmental Units. If a public depository fails, the collateral it has pledged, plus the collateral of all other public depositories, is available to pay the ful1 amount oftheir deposits to the Govermnental Units. 24 B-28

75 TOWNSHIP OF LAKEWOOD NOTES TO FINANCIAL STATEMENTS (continued): FOR THE YEAR ENDED DECEMBER 31, 2012 Note 1. Summary of Significant Accounting Policies (continued): The Township of Lakewood deposit Funds in public depositories protected from loss under lbe provisions of the Act. Interfunds - Interfund receivables and payables that rise from transactions between funds are recorded by all funds affected by such transactions in the period in which the transaction is executed. Interfund receivables in the Current Fund are recorded with offsetting reserves, which are created by charges to operations. Income is recognized in the year the receivables are liquidated. Interfund receivables in the other funds are not offset by reserves. Inventories of Supplies - The costs of inventories of supplies for all funds are recorded as expenditures at the time individual items are purchased. The costs of inventories are not included on the various balance sheets. General Fixed Assets - Property and equipment purchased by the Current and General Capital Funds are recorded as expenditures at the time of purchase and are not capitalized. All interest costs are recorded as expenditures when paid. Accounting for Govermnental Fixed Assets, as promulgated by Technical Accounting Directive No as issued by the Division of Local Government Services, differs in celiain respects from generally accepted accounting principles. The following is brief description of the provisions of the Directive: Fixed assets used in governmental operations (general fixed assets) are accounted for in the General Fixed Assets Account Group. Public domain ("infrastructure") general fixed assets consisting of celiain improvements other than buildings, such as roads, bridges, curbs and gntters, streets and sidewalks and drainage systems are not capitalized. All fixed assets are valued at historical cost or estimated historical cost if actual historical cost is not available except for land, which is valued at estimated market value. No depreciation on general fixed assets is recorded in the financial statements. Donated general fixed assets are valued at their estimated fair market value on the date received. Expenditures for construction in progress are recorded in the Capita! Funds until such time as the construction is completed and put into operation. Fixed assets acquired tluough grants-in-aid or contributed capital has not been accounted for separately. Land & Land Buildings Furniture & Fixtures, Balance December 31, 2011 $10,716,400 26,933,005 Additions Deletions Balance December 31, 2012 $10,716,400 26,933,005 Equipment & Vehicles --'.'16"',9"'4"'9'c,9"'3"'8'-- ""$3"-'1"'4"'.8,,9"'4 -'$"'1."-1-"7,"'0"'40"- -'-17"",""14"'7"', 7",,9,",,2 Total $ $ $J ]7,040 $54, B-29

76 TOWNSHIP OF LAKEWOOD NOTES TO FINANCIAL STATEMENTS (continued): FOR THE YEAR ENDED DECEMBER 31, 2012 Note 1. Snmmary of Significant Accounting Policies (continued): Foreclosed Property - Foreclosed property is recorded in the Current Fund at the assessed valuation when such property was acquired and is fully reserved. Ordinarily it is the intention of the municipality to resell foreclosed property in order to recover all or a portion of the delinquent taxes or assessments and to return the property to a taxpaying basis. For this reason the value of foreclosed propeliy has not been included in the General Fixed Assets Account Group. If such property is convelied to a municipal use, it will be recorded in the General Fixed Assets Account Group. Deferred Charges - The recognition of certain expenditures is deferred to future periods. These expenditures or deferred charges, are generally overexpenditures of legally adopted budget appropriations or emergency appropriations made in accordance with NJS.A.40A:4-46 et seq. Deferred charges are subsequently raised as items of appropriation in budgets of succeeding years. Liens Sold for Other Governmental Units - Liens sold on behalf of other governmental units are not recorded on the records of the tax collector until such liens are collected. Upon their collection, such liens are recorded as a liability due to the govemmental unit net of the costs of the initial sale. The related costs of sale are recognized as revenue when received. Fund Balance - Fund bal31lces included in the Current Fund 31ld Utility Operating Funds represent amounts available for 311ticipation as revenue in future ye31's budgets, with certain restrictions. Revenues - Revenues are recorded when received in cash except for certain amounts, which are due from other govemmental units. Revenue from federal and state gr311ts are realized when 31lticipated as such in the Township's budget. Receivables for propeliy taxes 31'e recorded with offsetting reserves on the balance sheet of the Township's Current Fund; accordingly, such 31nounts are not recorded as revenue until collected. Other 31nounts that are due the Township which are susceptible to accrual are also recorded as receivables with offsetting reserves and recorded as revenue wheu received. Property Tax Revenues - Property tax revenues are collected in qu31ierly installments due February I, May I, August I 31ld November I. The amount of tax levied includes not only the 31nount required in support of the Township's armual budget, but also the 31110unts required in support of the budgets of the County of Oce31l and the Township of Lakewood Regional School District. Unpaid propeliy taxes are subject to tax sale in accordance with the statutes. School Taxes - The municipality is responsible for levying, collecting 31ld remitting school taxes for tl,e Township of Lakewood School District. Operations is ch31'ged for the full amount required to be raised from taxation to operate the local school district for the period from J31mary I to December 31. County Taxes - The municipality is responsible for levying, collecting and remitting county taxes for the County of Ocean. Operations is charged for the 31nount due the County for the year, based upon the ratables required to be certified to the County Board of Taxation by January 10 of the current year. In addition, operations is charged for the County share of Added and Omitted Taxes certified to the County B031'd of Taxation by October 10 of the current ye31' and due to be paid to the County by February 15 of the following year. 26 B-30

77 TOWNSHIP OF LAKEWOOD NOTES TO FINANCIAL STATEMENTS (continued): FOR THE YEAR ENDED DECEMBER 31,2012 Note 1. Summary of Significant Accounting Policies (continued): Fire District Taxes - The municipality is responsible for levying, collecting and remitting taxes for the Township of Lakewood Fire District No. I and Township of Lakewood Fire District 2. Reserve for Uncollected Taxes - The inclusion of the "Reserve for Uncollected Taxes" appropriation in the township's ajmual budget projects the Township from taxes not paid currently. The reserve, the minimum aj110unt of which is detennined on the percentage of collections experienced in the immediate preceding year, with certain exceptions, is required to provide assurance that cash collected in the cunent yem will provide sufficient cash flow to meet expected obligations. Expenditures - Expenditures are recorded on the "budgetary" basis of accounting. Generally, expenditures are recorded when an ajnount is encumbered through the issuajlce of a numerically controlled purchase order or when a contract is executed as required by Teclmical Accounting Directive No. 85- L When expenditure is paid, the amount encumbered is simultaneously liquidated in its original amount. EncumbraJlces me offset by ajl account entitled reserve for encwnbrances. The reserve is classified as a cash liability under New Jersey municipal accounting. At December 31, this reserve represents the portion of appropriation reserves that has been encumbered and is subject to the same statutory provisions as appropriation reserves. Appropriations for principal payments on outstanding general capital and utility bonds and notes are provided on the cash basis; interest on general capital indebtedness is on the cash basis; whereas interest on utility indebtedness is on the accrual basis. Appropriation Reserves - Appropriation reserves covering unexpended appropriation balances are automatically created at yem-end and recorded as liabilities, except for ajnounts, which may be canceled by the governing body. Appropriation reserves me available, wltil lapsed at the close of the succeeding year, to meet specific claims, commitments or contracts incurred during the preceding fiscal year. Lapsed appropriation reserves me recorded as income. Long-Term Debt - Long-term debt, relative to the acquisition of capital assets, is recorded as a liability in the General Capital Fund. Where an improvement is a "local improvement", i.e. assessable upon completion, long-term debt associated with that p011ion of the cost of the improvement to be funded by assessments is transferred to the Trust Fund upon the confirmation of the assessments or when the improvement is fully and pennanently funded. Compensated Absences and Post-Employment Benefits - Compensated absences for vacation, sick leave and other compensated absences me recorded and provided for in the annual budget in the year in which they are paid, on a pay-as-you-go basis. Likewise, no accrual is made for post-employment benefits, if any, which me also funded on the pay-as-you-go basis. Comparative Data - Comparative total data for the prior yea,. have been presented in the accompajlying financial statements in order to provide an wlderstanding of chajlges in the Township'S financial position ajld operations. However, compmative data have not been presented in each of the statements because their inclusion would make the statements Wlduly complex and difficult to read. 27 B-31

78 TOWNSHIP OF LAKEWOOD NOTES TO FINANCIAL STATEMENTS (continned): FOR THE YEAR ENDED DECEMBER 31, 2012 Note 1. Snmmary of Significant Acconnting Policies (continued): Subsequent Events - The Township of Lakewood has evaluated subsequent events occurring after December 31, 2012 through the date of May 10,2013, which is the date the financial statements were available to be issued. Note 2. Cash and Cash Equivalents: The Township is governed by the deposit and investment limitations of New Jersey state law. The Deposits and investments held at December 31, and reported at fair value are as follows: Deposits: Demand Deposits $27.278,164 Total Deposits $ Reconciliation of Statements of Assets, Liabilities, Reserves and Fund Balance: Current: Treasurer $18,316,192 Grant Trust 198,033 Other Trust 7,210,675 Payroll Trust 384,533 General Capital 1,168,731 Total $ Custodial Credit Risk Custodial credit risk is the risk that, in the event of a bank failure, the District's deposits may not be returned. The Districts does not have a deposit policy for custodial credit risk. As of December 31,2012, the District's bank balance of$28,477,145 was insured and collateralized as follows: Insured Collaterized in the District's Name Under GUDPA (See Note 3) Total $ 1,751,656 26, $ B-32

79 TOWNSHIP OF LAKEWOOD NOTES TO FINANCIAL STATEMENTS (continned): FOR THE YEAR ENDED DECEMBER 31, 2012 Note 3. Investments A. Custodial Credit Risk For an investment, custodial credit risk is a risk that, in the event of the failnre of the counterparty, the Township will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. Investment secnrities are exposed to custodial credit risk if the securities are uninsured, are not registered in the name of the Township and are held by either the counterparty or the counterparty's trust department or agent but not in the Township's name. All of the Township's investments are held in the name of the Township and are collateralized by GUDPA. B. Investment Interest Rate Risk Interest rate risk is the risk that changes in interest rates that will adversely affect the fire value of an investment. The Township has no formal investment policy that limits investment maturities as a means of managing its exposure to fair value losses arising ii-din increasing interest rates. Maturities of investments held at December 31,2012, are provided in the above schedule. C. Investment Credit Risk The Township has no investment policy that limits its investment choices other than the limitation of state law as follows: Bonds or other obligations of the United States of America or obligations guaranteed by the United States of America; Government rnoney market mutual funds; Any obligation that a federal agency or federal instrumentality has issued in accordance with an act of Congress, which security has a maturity date not greater than 397 days from the date of purchase, provided that such obligations bear a fixed rate of interest not dependent on any index or other external factor; Bonds or other obligations of the Township or bonds or other obligations of the local m1it or units within which the Township is located; Bonds or other obligations, having a maturity date of not more than 397 days from the date of purchase, approved by the Division of Investment in the Department of Treasury for investment by the Township; Local Govermnent investment pools; Deposits with the State of New Jersey Cash Management Fund established pursnant to section I ofp.l. 1977, c.281; or 29 B-33

80 TOWNSHIP OF LAKEWOOD NOTES TO FINANCIAL STATEMENTS (continued): FOR THE YEAR ENDED DECEMBER 31, 2012 Note 3. Investments (continued): Agreements for the repurchase of fully collateralized securities. As of December 31, 2012, the Township had the following investments and matnrities: Investment Fair Value Trust Other $2,547,299 Total Investment $ Note 4, Governmental Unit Deposit Protection Act (GUDPA) The Township has deposited cash in 2012 with an approved public fund depository qualified under the provisions of the Government Unit Deposit Protection Act. In addition to savings and checking accounts the Township invests monies in certificates of deposits. The Governmental Unit Deposit Protection Act P.L. 1970, Chapter 236, was passed to afford protection against bankruptcy or default by a depository. C.17:9-42 provides that no governmental unit shall deposit funds in a public depository unless such funds are secured in accordance with this act. C.17:9-42 provides that every public depositoly having public funds on deposit shall, as security for such deposits, maintain eligible collateral having a market value at least equal to either (I) 5% of the average daily balance of collected public funds on deposit during the 6 month period ending on the next preceding valuation date (June 30 or December 31) or (2) at the election of the depositoly, at least equal to 5% of the average balance of collected public funds on deposit on the first, eighth, fifteenth, and twenty-second days of each month in the 6 month period ending on the next preceding valuation date (June 30 or December 31). No public depository shall be required to maintain any eligible collateral pursuant to this act as security for any deposit or deposits of any governmental unit to the extent such deposits are insured by F.D.I.C. or any other U.S. agency which insures public depository funds. No public depository shall at any time receive and hold on deposit for any period in excess of IS days public funds of a governmental unit(s) which, in the aggregate, exceed 75% of the capital funds of the depository, unless such depository shall, in addition to the security required to be maintained under the paragraph above, secure such excess by eligible collateral with a market value at least equal to 100% of such excess. In the event of a default, the Commissioner of Banking within 20 days after the default OCCUlTence shall ascertain the amount of public funds on deposit in the defaulting depositoly and the amounts covered by federal deposit insurance and certify the amounts to each affected govermnental unit. Within 10 days after receipt of this certification, each unit shall fumish to the Commissioner verified statements of its public deposits. The Commissioner shall ascertain the amount derived or to be derived from the 30 B-34

81 TOWNSHIP OF LAKEWOOD NOTES TO FINANCIAL STATEMENTS (continued): FOR THE YEAR ENDED DECEMBER 31, 2012 Note 4. Goverumental Unit Deposit Protection Act (GUDPA) (continued): liquidation of the collateral maintained by the defaulting depository and shall distribute such proceeds pro rata among the governmental units to satisry the net deposit liabilities to such units. If the proceeds of the sale of the collateral are insufficient to pay in full the liability to a11 affected governmental units, the Commissioner shall assess the deficiency against a11 other public depositories having pnblic funds on deposit determined by a formula detennined by law. All sums collected by the Commissioner shal1 be paid to the governmental units having deposits in the defaulting depository in the proportion that the net deposit liability to each such governmental unit bears to the aggregate of the net deposit liabilities to all such governmental units. All public depositories are required to furnish information and reports dealing with public funds on deposit every six months, JWle 30th and December 31st, with the Commissioner of Banking. Any public depository which refuses or neglects to give any information so requested may be excluded by the Commissioner from the right to receive public funds for deposit until such time as the COlmnissioner sha11 acknowledge that such depository has furnished the information requested. Upon review and approval of the Certification Statement that the public depository complies with statutory reqnirements, the Commissioner issues forms approving the bank as a municipal depository. The Municipality should request copies of these approval forms semiannually to assure that all depositories are complying with requirements. Note 5. Interfund Receivables and Payables The following interfund balances were recorded on the various balance sheets as of December 31,2012: Interfunds Interfunds Fund Receivable Payable Current Fund $ 107,548 $ 992,069 Federal & State Grant Fund 55,336 Other Trust Funds 912,856 Payroll Fund 107,548 Animal Control Fund 23,877 Total $ $1.099,617 The purpose of these interfwlds are short -term borrowings. 31 B-35

82 TOWNSHIP OF LAKEWOOD NOTES TO FINANCIAL STATEMENTS (continned): FOR THE YEAR ENDED DECEMBER 31,2012 Note 6. Long-Term Debt The Local Bond Law governs the issuance of bonds and notes to finance general municipal capital expenditures. Bonds are retired in serial installments with the statutory period of nsefnlness. Bonds issned by the Township are general obligations bonds backed by the fnll faith and credit ofthe Township. Bond anticipation notes are issned to temporarily finance capital projects prior to the issuance of serial bonds. The tenns of the notes camlot exceed one year but the notes may be renewed from time to time for a period not exceeding one year. All such notes must be paid no later than the tenth anniversary of the date of the original note. The State of New Jersey also prescribes that on or before the third anniversary date ofthe original note a payment of at least equal to the first legally payable installment of the bonds in anticipation of which such notes were issued be paid. A second legal installment must be paid if the notes are to be renewed beyond the fomih amliversaty date ofthe original issuatlce atld so on. Tax atlticipation notes are issued if the cash on hand is not sufficient to carryon normal operations of the municipality at any time during the year. Such notes are authorized by a resolution adopted by the governing body. As of December 31, 2012, the Township's Long-Term Debt is as follows: General Obligation Bonds: $2,800, Refunding Bonds due in annual installments of $260,000 to $280,000 through Mat'ch 2013 at interests rates ranging from 2.875% t03.30%. $1,145, Pension Obligation Refunding Bonds due in annual installments of $35,000 to $165,000 through April 2021 at interests rates ratlging fi'om 4.70% to 5.90%. $9,800, Bonds due in ammal installments of $580,000 to $830,000 Tluough January 15, 2020 at interest rates ranging from 3.625% to 4.00%. $9,800, Bonds due in at1l1ual installments of $300,000 to $500,000 Through November 1,2027 at interest rates ratlging from 4.00% to 4.250%. $21,800, Bonds due in at1l1ual installments of $960,000 to $970,000 Through November 1, 2029 at interest rates ranging from 4.75% to 5.75%. Term Bonds due in 2031 in the amount of$i,940,000 at atl interest rate of5.75% Refunding Bond Issue due in annual installments of$55,000 to $480,000 through January 2017 at interest rates ratlging from 2.0% to 5.0% General Improvement Refunding Bond Issue due in ammal installments of $705,000 to 1,585,000 through Jatmary 2020 at interest rates ranging from 3.0% to 4.0%. $ 260,000 65,000 1,300,000 7,300,000 18,420,000 2,430,000 7,705, B-36

83 TOWNSHIP OF LAKEWOOD NOTES TO FINANCIAL STATEMENTS (continned): FOR THE YEAR ENDED DECEMBER 31,2012 Note 6. Long-Term Debt (continued): 2012 Pension Obligation Refunding Bond Issue due in annual installments of $20,000 to 165,000 through January 2020 at interest rates ranging ii-om 0.75% to 3.50%. Total $38, Schedule of Annual Debt Service for Principal and Interest for the next five (5) years and five-year increments thereafter for Bonded Debt issued and outstanding: Year Principal Interest Total 2013 $ 3,745,000 $1,918,481 $ 5,663, ,515,000 1,757,461 5,272, ,580,000 1,437,060 5,017, ,650,000 1,283,010 4,933, ,780,000 1,142,154 3,922, ,135,000 4,169,204 14,304, ,150,000 2,198,150 9,328, , , Total $ $14,462,785 JL52.,897,785 On January 26, 1994 the Township entered into a low interest rate loan funded by the New Jersey Economic Development Authority in the sum of $750,000. The interest rate is 1.50% and the loan matures on August 5, The proceeds have been used to help with the construction of the new Public Library. Bond Anticipation Notes: Year Principal Interest Total Total $ $ During the year ended December 31, 2012 the Township issned a bond anticipation note in the amount of $7,360,000 with an interest rate of 1.50% and maturing on July 3, 2013 for the purpose of various capital improvements. The Township also issued a second bond anticipation note in the amount of $1,620,000 with an interest rate of 0.84% and maturing on Apri123, 2012 for the purpose of providing the Township with funds to refund celiain tax appeals. 33 B-37

84 TOWNSHIP OF LAKEWOOD NOTES TO FINANCIAL STATEMENTS (continued): FOR THE YEAR ENDED DECEMBER 31, 2012 Note 7. Peusion Plans A. Plan Description The Township of Lakewood contributes to a cost-sharing multiple-employer defmed benefit pension plan, Public Employees' Retirement System (P.E.R.S.) and Police and Fireman's Retirement System (P.F.R.S.), administered by the State of New Jersey, Division of Pensions and Benefits. The Public Employees' Retirement System (P.E.R.S.) was established in January 1955 under the provisions of N.J.S.A.43:15A. The plan was set up to provide retirement, death, disability and medical benefits to certain qualified members. The Public Employees' Retirement System is a cost-sharing multipleemployer plan. Membership is mandatory for substantially all full-time employees of the State of New Jersey or any county, municipality, school district, or public agency, provided the employee is not required to be a member of another state-administered retirement system or other state or local jurisdiction. B. Vesting and Benefit Provisions The vesting and benefit provisions ofpers are set by N.J.S.A.43:15A and 43.3B. All benefits yest after eight to ten years of service, except for medical benefits that vest after 25 years of service. Retirement benefits for age and service are available at age 55 and are generally determined to be 1155 of the final average salary for each year of service credit, as defined. Final average salary equals the average salary for the final three years of service prior to retirement (or highest three years' compensation if other than the final three years). Members may seek eatly retirement after achieving 25 years of service credit or they may elect defened retirement after achieving eight to ten years of service in which case benefits would begin the first day of the month after the member attains normal retirement age. The PERS provides for specified medical benefits for members who retire after achieving 25 years of qualified service, as defined, or under the disability provisions of the System. Members are always fully vested for their own contributions and, after three years of service credit, become vested for 2% of related interest earned on the contributions. In the case of death before retirement, members' beneficiaries are entitled to full interest credited to the members' accounts. Cbapter 78, P.L changed this for employees enrolled after June 28, See Note 6C below: C. Significant Legislation During the year ended June 30, 1997, legislation was enacted (Chapter 114, P.L. 1997) authorizing the New Jersey Economic Development Authority to issue bonds, notes or other obligations for the purpose of financing, in full or in part, the State of New Jersey's portion of the unfunded accrued liability under the State of New Jersey retirement systems. Additional legislation enacted during the year ended June 30, 1997 (Chapter 115, P.L. 1997) changed the asset valuation method from market related value to fullmarket value. This legislation also contained a provision to reduce the employee contribution rate by Yz of 1 % to 4.5% for calendar years 1998 and 1999, and to allow for a reduction in the employee's rate after calendar year 1999, providing excess valuation assets are available. The legislation also provided that 34 B-38

85 TOWNSHIP OF LAKEWOOD NOTES TO FINANCIAL STATEMENTS (continued): FOR THE YEAR ENDED DECEMBER 31, 2012 Note 7. Pension Plans (continued): the District's normal contributions to the Fund may be reduced based on the revaluation of assets. Due to recognition of the bond proceeds and the change in asset valuation method as a result of enactment of Chapters 114 and 115, all unfunded accrued liabilities were eliminated, except for the unfunded liability for local early retirement incentive benefits; accordingly, the pension costs for PERS were reduced. New Legislation signed by the Acting Governor (Chapter 133, Public Laws 2001) changed the formula for calculating retirement benefits for all current and future non-veteran retirees from N/60 to N/55 (a 9.09% increase). This legislation, signed June 29, 2001, provides that all members of the PFRS and the PERS will have their pensions calculated on the basis of years of credit divided by 55. It also provides that all current retirees will have their original pension recalculated under the N/55 formula. Starting Februmy 1,2002, pension cost ofliving adjustments will be based on the new original pension. Effective June 28, 2011, Chapter 78, P.L reformed various pension and health benefits provisions. Employees hired after June 28, 2011 and enrolled in PERS will be enrolled in a new tier, Tier 5. Full retirement for Tier 5 PERS members will be age 65 and 30 years of service. Tier 3 was added to PFRS for enrollees after June 28, Tier 3 retirees will have a maximum retirement benefit of 65% of final compensation after 30 yems of service. All cost of living adjustments are frozen until the pension fund reaches a "tal'get funded ratio". Chapter 78 also requires all covered employees to contribute a prescribed percentage towards their health costs. D. Contribution Requirements The contribution policy is set by N.J.S.A.43:15A, Chapter 62, P.L. of 1994, Chapter 115, P.L. of 1997 and N.J.S.A.18:66, and requires contributions by active members and contributing employers. Plan member and employer contributions may be amended by State of New Jersey legislation. PERS provide for employee contributions of 6.5%, effective October I, 2011, of employees' annual compensation as defl11ed. The rate will increase over the next seven years to 7.5%. Employers are required to contribute at an actuarially detennined rate in PERS. The actumially determined contribution includes funding for both cost-of-living adjustments, noncontributory death benefits and post-retirement medical premiums. The Township of Lakewood's contributions to P.E.R.S. for the years ending December 31, 2012, 2011 and 2010 were $1,229,424, $1,180,132 and $484,682 respectively, equal to the required contributions for each yem, and to P.F.R.S. for the years ending December 31,2012,2011 and 2010 were $3,246,721, $3,412,207 and $1,358,663 respectively, equal to the required contributions for each year. 35 B-39

86 TOWNSHIP OF LAKEWOOD NOTES TO FINANCIAL STATEMENTS (continued): FOR THE YEAR ENDED DECEMBER 31, 2012 Note 8. Compensated Absences Full time Township employees are entitled to fifteen paid sick leave days each year. Unused sick leave may be accumulated and carried forward from year to year; however, upon retirement no lump sum supplemental compensation payment shall exceed $15,000 unless the employee was hired before May of Any employee hired before May of 1991 shall be paid Y, the value of accmnulated sick time. Unused vacation time may be accmnulated and carried over to a succeeding year in an amount not exceeding one year's worth of vacation time. More time than that can be carried over with prior approval of the Mmlicipal Manager through the Governing Body. Upon retirement, payment for vacation time cannot exceed more than two years worth of accumulated time. (If an employee earns 18 days of vacation time per year, the maximmn payout upon retirement for vacation time is 36 days). Part-time employees are entitled to no sick or vacation time. The Township does not record accrued sick leave. In those years where the Township believes that retirement will occur, budgetary appropriations are made to food estimated payments. Note 9. New Jersey Unemployment Compensation Insnrance The Township has elected to fmld its New Jersey unemployment Compensation Insurance ooder the "Benefit Reimbursement Method". Under this plan, the Township is required to reimburse the New Jersey Unemployment Trust Food for benefits paid to its fanner employees and charged to its account with the State. The Township is billed quarterly for amounts due to the State. The following is a snmmary of Township contributions, reimbursements to the State for benefits paid and the ending balance of the Township's Trust Fmld for the current and previous two years: Year Township Amonnt Contributions Reimbursed Endiug Balance $18,306 None None $52,757 45,244 53,454 $235, , ,939 Note 10. Risk Management The Township of Lakewood is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; errors and omissions and natural disasters. The Township is a member of the Ocean County Municipal Joint Insurance Fund (JIF). This public entity risk pool is both an insured and self-administered group of 29 municipalities established for the purpose of insuring against property damage, general liability, motor vehicles and equipment liability and workmen's compensation. The JIF will be self-sustaining through member premiums. The JIF participates in the Municipal Excess Liability Insurance Program. There were no settlements in excess of insurance coverage in 2012,2011 and B-40

87 TOWNSHIP OF LAKEWOOD NOTES TO FINANCIAL STATEMENTS (continued): FOR THE YEAR ENDED DECEMBER 31, 2012 Note 11. Deferred Compensation Salary Account The Township offers it employees a Deferred Compensation Plan in accordance with Internal Revenue Code Section 457, which has been approved by the Director of Local Government Services. The Plan, available to all full time employees at their option, permits employees to defer a portion oftheir salary to future years. The deferred compensation is not available to paliicipants until termination, retirement, death or unforeseeable emergency. Amounts deferred under Section 457 plans must be held in trnst for the exclusive benefit of paj1icipating employees and not be accessible by the Township or its creditors. Note 12. Litigation The Township is a defendant in several legal proceedings that are in various stages of litigation. It is believed that the outcome, or exposure to the Township, from such litigation is either unknown or potential losses, if any, would not be material to the finallcial statements. Note 13. Deferred Charges to be Raised in Succeeding Budgets Certain expenditures are required to be defelted to budgets of succeeding years. At December 31, the following deferred charges are shown on the balance sheets ofthe Current Fund and Trust Other Funds: Current Fund: Special Emergeucy Authorizatious Balance to Succeeding Budgets $1,172,800 Note 14. Post Employment Retirements Benefits In addition to the pension benefits described in Note 7, the Township provides post employment benefits other thall pension benefits to employees who retire from the Tow1lShip and meet certain eligibility criteria in accordance with contractual agreements. These are known as post-employment benefits. Other post-employment benefits inclnde post-employment health care benefits provided, regardless ofthe type of plan that provides them, and all post-employment benefits provided separately from a pension plan, excluding benefits defined as termination offers and benefits. Benefits are provided through the Central Jersey Health Insurance Fund, an agent multiple-employer health insurance fund. 37 B-41

88 TOWNSHIP OF LAKWOOD NOTES TO FINANCIAL STATEMENTS (continued): FOR THE YEAR ENDED DECEMBER 31, 2012 Note 14. Post Employment Retirements Benefits (continued): Results of Valuation + Actuarial Accrued Liability The Actuarial Accrued Liability ("AAL") as of December 31, 2012 is $ 139,782,629 based upon a discount rate of 4.50% per annum and the plan provisions in effect on December 31, Annual Required Contribution The Annual Required Contribution ("ARC") is the measure of annual cost on an accrual hasis. It is comprised of the "Normal Cost" which is the portion of future liabilities attributable to the measurement year, plus 30 year amortization of the Unfunded Actuarial Accrued Liability ("UAAL"). As of the measurement date, the plan had no assets to offset any portion of the AAL, so the UAAL and AAL are equal. The ARC as of December 31,2012 is $12,334,379 based upon a discount rate of 4.50% per mmum mld the plml provisions in effect on December 31,2012. The breakdown of the ARC is as follows: Basis of Valuation (1) Normal Cost $ 3,752,908 (2) Actuarial Accrued Liability $139,782,629 (3) Assets $ 0 (4) UAAL ~ (2) - (3) $139,782,629 (5) 30 Year Amortization ofuaal at Discount Rate $ 8,581,471 (6) ARC ~ (1) + (5) $ 12,334,379 This valuation has been conducted as of December 31,2012 based upon census, plml design and claims information provided by The Fund. Census includes 134 participants currently receiving retiree benefits, and 307 active pm ticipants of whom 9 are eligible to retire as of the valuation date. The average age of the active population is 45 mld the average age ofthe retiree population is 66. Actuarial assumptious were selected with the intention of satisfying the requirements of New Jersey Local Finance Notice in addition to Statement of Govel'1nnent Accounting Standm'd Number 45. Demographic assumptions were selected based on those used in by the State Division of Pensions and Benefits in calculating pension benefits taken from the July 1, 2011 report from Buck Consultmlts. While some assumptions were simplified to reflect the smaller population, and to simplify the valuation process, the valuation results reasonably confol'111 to the requirements of LFN Health care (economic) assumptions were selected based on those used by the State Health Benefits Program in calculating SHBP member OPEB requirements taken from the July 1,2011 repoli from Aon Consultants. 38 B-42

89 TOWNSHIP OF LAKWOOD NOTES TO FINANCIAL STATEMENTS (continned): FOR THE YEAR ENDED DECEMBER 31, 2012 Note 14. Post Employment Retirements Benefits (continned): K ey At c uarm. IA ssumpnons: f Mortality RP 200 Combined Healthy Male Mortality Rates Set Forward Three Years Turnover NJ State Pensions Ultimate Withdrawal Rates - prior to benefits eligibility Assumed Retirement Age At first eligibility after completing 20 years of service for nonunion employees: bargained employees after completing years of service as follows: PBA and SOA- 19 years, EMS - 25 years, AFSCME - 20 years, IBT 97 and AIW IBT years Full Attribution Period Service to Assumed Retirement Age Annual Discount Rate 4.50% Medical Trend 8.5% in 2013, reducin,g by 0.5% per annum, leveling at 5% per annulu in 2020 Medical Cost Aging Factor NJ SHBP Medical Morbidity Rates Attribution period - The attribution period begins with the date of hire and ends with full benefits eligibility date. Per capita cost methods - The valuation reflects per capita net premium costs based on actual 2012 medical, dental and prescription drug premiums and the plan option selected. Plan selections are assumed to remain unchanged in retirement. The age specific cost was derived based on per person costs at the average age ofthe active population (45) and scaled to each age based on the medical cost aging factors. At age 65, Medicare becomes the primary payor of medical benefits and consequentially, per capita plan costs are offset by Medicare payments. Thus, post 65 costs were decreased using the assumption that Medicare picks up 66.7% of medical costs total contributions for retiree benefits as reported by the Fund are $2.96 million. Retiree Contributions - NJ Chapter 78 requires that certain future retirees contribute towm'd the cost of their benefits. Specifically, those who had retired prior to passage of Chapter 78 mld those employees that had more than 25 years of service on the date of passage m'e grandfathered. All others are subject to the contribution rates in effect when they retire, but not less than 1.5% of their mmual retirement allowance from the Public Employees Retirement System. For purposes of this valuation, we have assumed that future retiree contribution percentages will be equal to the minimum percentage of premium so as not to understate actuarial measurements. Assumed percentages as follows: retiree only 4.5%, retiree mld spouse 3.5%, fmnily 3.0%. Based on retiree data, 55% of future retirees are assumed to be manied and 45% m'e assumed to be single. Actuarial valuation method - Projected Unit Credit Funding Method. Note 15. Property Acquired for Taxes The Township has revalued the municipally owned properties that comprise the receivable balance on the CUlTent fund comparative statement of assets, liabilities, reserves and fund balance. The balance has been revalued from $5,930,092 to $54,789,200. The revaluation brings the property values to reflect the assessed values in the Township tax duplicate. 39 B-43

90 APPENDIX C FORM OF CONTINUING DISCLOSURE CERTIFICATE

91 CONTINUING DISCLOSURE CERTIFICATE This Continuing Disclosure Certificate (the "Disclosure Certificate") is executed and delivered by the Township of Lakewood, in the County of Ocean, New Jersey (the "Issuer" or Township ) in connection with the issuance by the Issuer of $ General Obligation Bonds (the "Bonds"). The Bonds are being issued pursuant to various Bond Ordinances (collectively, the Ordinances ) duly adopted by the Township Council of the Issuer (the Council ), as set forth in a Resolution duly adopted by the Council on May 22, 2014 (the Resolution ). The Bonds are dated their date of delivery and shall mature on March 1 st in the years through, inclusive. The Issuer covenants and agrees as follows: SECTION 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the Issuer for the benefit of the holders and Beneficial Owners of the Bonds and in order to assist the Participating Underwriters in complying with S.E.C. Rule 15c2-12, as amended. SECTION 2. Definitions. The following capitalized terms shall have the following meanings: Annual Report shall mean any Annual Report provided by the Issuer pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate. Beneficial Owner shall mean any person which (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Bonds for federal income tax purposes. Dissemination Agent shall mean the Issuer, or any successor Dissemination Agent designated in writing by the Issuer and which has filed with the Issuer a written acceptance of such designation. EMMA shall mean the Electronic Municipal Market Access System operated by MSRB. Listed Events shall mean any of the events listed in Section 5(a) of this Disclosure Certificate. MSRB shall mean the Municipal Securities Rule Making Board. Participating Underwriter shall mean any of the original underwriters of the Bonds required to comply with the Rule in connection with offering of the Bonds. Repository or Repositories shall mean each State Repository, if any, and the Municipal Securities Rulemaking Board (the "MSRB") via the MSRB s Electronic Municipal Market Access system ("EMMA") _1

92 Rule shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. State shall mean the State of New Jersey. State Repository shall mean any public or private repository or entity designated by the State as a state repository for the purpose of the Rule and recognized as such by the Securities and Exchange Commission. As of the date of this Disclosure Certificate, there is no State Repository. SECTION 3. Provision of Annual Reports. (a) The Issuer shall, or cause the Dissemination Agent to, not later than six (6) months after the end of the Issuer's fiscal year, commencing with the Annual Report for the fiscal year ending December 31, 2013, provide to the MSRB via the EMMA an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Certificate. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 4 of this Disclosure Certificate; provided that the audited financial statements of the Issuer may be submitted separately from the balance of the Annual Report and later than the date required above for the filing of the Annual Report if they are not available by that date. If the Issuer's fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(a). (b) Not later than fifteen (15) business days prior to said date, the Issuer shall provide the Annual Report to the Dissemination Agent (if other than the Issuer). If the Issuer is unable to provide an Annual Report by the date required in subsection (a), the Issuer shall, in a timely manner not in excess of ten (10) business days after such required date, send a notice, in substantially the form attached hereto as Exhibit A, to the MSRB via EMMA on such form and in such format as shall be required by the MSRB for such filings. (c) The Dissemination Agent shall: 1. If the Dissemination Agent is other than the Issuer, file a report with the Issuer certifying that the Annual Report has been provided pursuant to this Disclosure Certificate, stating the date it was provided. SECTION 4. Content of Annual Reports. (a) The Issuer's Annual Report shall contain or include by reference the following: 1. The audited financial statements of the Issuer for the prior fiscal year, prepared in accordance with generally accepted accounting principles as from time to time in effect, and as prescribed by the Division of Local Government Services in the Department of Community Affairs of the State pursuant to Chapter 5 of Title 40A of the New Jersey Statutes. If the Issuer's audited financial statements are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the final Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available _1

93 2. The financial information and operating data set forth in the Official Statement dated, 2014 prepared in connection with the sale of the Bonds, in APPENDIX A and APPENDIX B. SECTION 5. Reporting of Listed Events. (a) Pursuant to the provisions of this Section 5, the Issuer shall deliver in a timely manner not in excess of ten (10) business days after the occurrence of the event, through EMMA, at notice of the occurrence of any of the following events with respect to the Bonds: 1. principal and interest payment delinquencies; 2. non-payment related defaults, if material; 3. unscheduled draws on debt service reserves reflecting financial difficulties; 4. unscheduled draws on credit enhancements reflecting financial difficulties; 5. substitution of credit or liquidity providers, or their failure to perform; 6. adverse tax opinions, the issuance by the Internal Revenue Service of a proposed or final determination of taxability, Notice of Proposed Issue (IRS Form 5701 TEB) or other material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds; 7. modifications to rights of holders of the Bonds, if material; 8. bond calls, if material; 9. defeasances; 10. release, substitution, or sale of property securing payment of the Bonds, if material; 11. rating changes; 12. tender offers for the Bonds; 13. bankruptcy, insolvency, receivership or similar events of the Township; 14. the consummation of a merger, consolidation, or acquisition involving the Township or the sale of all or substantially all the assets of the Township, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and _1

94 15. appointment of a successor or additional trustee, or the change of a trustee, if material. The Township does not undertake to provide the above-described event notice of a mandatory scheduled redemption not otherwise contingent upon the occurrence of an event, if (i) the terms, dates and amounts of redemption are set forth in detail in the final official statement (as defined in the Rule), (ii) the only open issue is which securities will be redeemed in the case of a partial redemption; (iii) notice of redemption is given to the Bondholders as required under the terms of the securities and (iv) public notice of redemption is given pursuant to Exchange Act Release No of the SEC, even if the originally scheduled amounts are reduced prior to optional redemptions or security purchases. (b) Whenever the Issuer obtains knowledge of the occurrence of a Listed Event, the Issuer shall as soon as possible determine if such event would be material under applicable federal securities laws. (c) If the Issuer determines that knowledge of the occurrence of a Listed Event (for which a determination of materiality is applicable) would be material under applicable federal securities laws, the Issuer shall promptly file a notice of such occurrence with the MSRB via EMMA. SECTION 6. Termination of Reporting Obligation. The obligations of the Issuer under this Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the Issuer shall give notice of such termination in the same manner as for a Listed Event under Section 5(c). SECTION 7. Dissemination Agent. The Issuer may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any such Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by the Issuer pursuant to this Disclosure Certificate. The Initial Dissemination Agent shall be the Issuer. SECTION 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the Issuer may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied: (a) If the amendment or waiver relates to the provisions of Sections 3(a), 4, or 5(a), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature or status of an obligated person with respect to the Bonds, or the type of business conducted; (b) The undertaking, as amended or taking into account such waiver, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the original issuance of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and _1

95 (c) The amendment or waiver does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the holders or Beneficial Owners of the Bonds. In the event of any amendment or waiver of a provision of this Disclosure Certificate, the Issuer shall describe such amendment in the next Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or, in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the Issuer. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements, (i) notice of such change shall be given in the same manner as for a Listed Event under Section 5(c), and (ii) the Annual Report for the year in which the change is made should present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. SECTION 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the Issuer from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the Issuer chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the Issuer shall have no obligation under this Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. SECTION 10. Prior Compliance with the Rule. The Township is currently in compliance with all pervious undertakings, if any, to provide secondary market disclosure pursuant to the Rule. SECTION 11. Default. In the event of a failure of the Issuer to comply with any provision of this Disclosure Certificate, any holder or Beneficial Owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Issuer to comply with its obligations under this Disclosure Certificate. The sole remedy under this Disclosure Certificate in the event of any failure of the Issuer to comply with this Disclosure Certificate shall be an action to compel performance _1

96 SECTION 12. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the Issuer, the Dissemination Agent, the Participating Underwriters and holders and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity. TOWNSHIP OF LAKEWOOD, IN THE COUNTY OF OCEAN, NEW JERSEY Dated: June, 2014 By WILLIAM C. RIEKER, Chief Financial Officer _1

97 EXHIBIT A NOTICE TO EMMA OF FAILURE TO FILE ANNUAL REPORT Name of Issuer: Township of Lakewood, County of Ocean, New Jersey Name of Bond Issue: $ General Obligation Bonds, Series 2014 Dated Date: June, 2014 (CUSIP Number: ) NOTICE IS HEREBY GIVEN that the above designated Township has not provided an Annual Report with respect to the above-named Bonds as required by the Bond Resolution and a Continuing Disclosure Agreement for the General Obligation Bonds dated, 2014 executed by the Township. The Issuer anticipates that the Annual Report will be filed by. Date: TOWNSHIP OF LAKEWOOD, IN THE COUNTY OF OCEAN, NEW JERSEY By Name: Title: _1

98 APPENDIX D FORM OF BOND COUNSEL S OPINION

99 Dilworth Paxsonw> An opinion in substantially the following form will be delivered at Closing assuming no material changes in facts or law. Meghan Bennett Clark New Jersey Resident Partner June_, 2014 Mayor and Township Committee Township of Lakewood Ocean County, New Jersey RE: Township of Lakewood, County of Ocean, New Jersey $ General Obligation Bonds, Series 2014 Dear Mayor and Council: We have examined the record of proceedings relating to the issuance of $ General Obligation Bonds, Series 2014 (the "Bonds"), of the Township of Lakewood, in the County of Ocean, New Jersey, a municipal corporation of the State of New Jersey (the "Township"). The Bonds are dated June _, 2014 and mature on March 1 st in each year in the principal amounts set forth in the tables below. Interest on the Bonds, at the respective rates of interest set forth below, is payable semiannually on March 1 5t and September 1 st of each year, commencing on March 1, 2015, until maturity or prior redemption. Maturity Principal Maturity Principal (March I) Amount Interest Rate (March I) Amount Interest Rate 2015 $ % 2021 $ % The Bonds are subject to redemption prior to maturity as set forth in the Official Statement. The Bonds are issued in fully registered form without coupons and are transferable as provided therein and are of various denominations and are numbered consecutively upwards. We have examined each bond as executed, and, in our opinion, their form and execution are regular and proper. A Limited Liability Partnership Formed in Pennsylvania One River Centre e 331 Newman Springs Road Building 1 Suite 136 Red Bank, NJ fax : wwwdilworthlaw.com Philadelphia, PA. Cherry Hill, NJ Harrisburg, PA. New York, NY Washington, DC. Wilmington, DE

100 Dilworth Paxson LLP Page 2 To: Mayor and Township Committee The Bonds are authorized pursuant to the Local Bond Law of the State of New Jersey (N.JS.A. 40A:2-1 et seq.) and are issued pursuant to a bond resolution adopted by the Township on May 22,2014 (the "Bond Resolution"), and by virtue of the bond ordinances finally adopted by the Township as identified in said Bond Resolution (the "Bond Ordinances"). The Bonds are being issued to: (i) permanently finance bond anticipation notes previously issued in the total aggregate principal amount of $7,980,000 and maturing on July 1, 2014; and (ii) pay costs of issuance and delivery of the Bonds. In forming our opinion, we have examined certified copies of the Bond Ordinances, Bond Resolution and related proceedings. We also have examined originals (or copies certified or otherwise identified to our satisfaction) of such other instruments, certificates and documents as we have deemed necessary or appropriate, including the Non-Arbitrage and Use of Proceeds Certificate of the Township dated the date of the Bonds (the "Non-Arbitrage Certificate") for the purpose of the opinions rendered below. In such examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals and the conformity to the original documents of all documents submitted to us as copies. As to any facts material to our opinion, we have, when relevant facts were not independently established, relied. upon the aforesaid instruments, certificates and documents. We have relied, as to the execution and delivery of the Bonds, on a certificate of the Township executed by the Mayor, Clerk, and Chief Financial Officer. We have not reviewed and are not passing upon any statistical or financial data or other information relating to the Township which may have been provided to any purchaser or prospective purchaser of the Bonds. The Internal Revenue Code of 1986, as amended (the "Code"), sets forth certain requirements that must be met subsequent to the issuance and delivery of the Bonds in order that interest thereon will be and will remain excluded from gross income pursuant to Section 103 of the Code. The Township has provided the Non-Arbitrage Certificate which contains provisions and procedures regarding compliance with the requirements of the Code. In executing the Non Arbitrage Certificate, the Township has certified to the effect that it expects to be able to, and will, comply with the provisions and procedures set forth therein and that to the extent authorized by law will do and perform all acts and things necessary or desirable to assure that interest paid on the Bonds is not includable in gross income under Section 103 of the Code. In rendering this opinion, we have assumed compliance by the Township with the covenants contained in the Bonds and the statements contained in the Non-Arbitrage Certificate that are intended to comply with the provisions of the Code relating to actions to be taken by the Township in respect of the Bonds after the issuance thereof to the extent necessary to effect or maintain the federal taxexempt status of the interest on the Bonds. These covenants and statements relate to, inter alia, the use of proceeds of the Bonds and the property financed or refinanced thereby and the rebating to the United States Treasury of specified arbitrage earnings, if required. We have assumed that the Township will comply with the provisions of the Non-Arbitrage Certificate. Furthermore, we take no responsibility for the continuing review or verification as to the satisfaction of the requirements under the Code, or any similar or related legislation when enacted or amended. The Township has taken the actions necessary for the Bonds to be designated or deemed designated as "qualified tax-exempt obligations," as defined in and for purposes of Section U