OFFICIAL STATEMENT DATED OCTOBER 25, New Issue Book-Entry-Only

Transcription

1 OFFICIAL STATEMENT DATED OCTOBER 25, 2017 New Issue Book-Entry-Only Not Rated In the opinion of McManimon, Scotland & Baumann, LLC, Bond Counsel to the Township (as defined herein), pursuant to Section 103(a) of the Internal Revenue Code of 1986, as amended (the "Code"), interest on the Notes (as defined herein) is not included in gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the alternative minimum tax imposed on individuals and corporations. It is also the opinion of Bond Counsel that interest on the Notes held by corporate taxpayers is included in "adjusted current earnings" in calculating alternative minimum taxable income for purposes of the federal alternative minimum tax imposed on corporations. In addition, in the opinion of Bond Counsel, interest on and any gain from the sale of the Notes are not includable as gross income under the New Jersey Gross Income Tax Act. Bond Counsel s opinions described herein are given in reliance on representations, certifications of fact and statements of reasonable expectation made by the Township in its Tax Certificate (as defined herein), assume continuing compliance by the Township with certain covenants set forth in its Tax Certificate, and are based on existing statutes, regulations, administrative pronouncements and judicial decisions. See "TAX MATTERS" herein. TOWNSHIP OF MONTCLAIR, In the County of Essex, New Jersey $29,141,218 NOTES, Consisting of: $22,320,772 Bond Anticipation Note, $5,297,346 Water and Sewer Utility Bond Anticipation Note, $723,100 Tax Appeal Refunding Bond Anticipation Note and $800,000 Special Emergency Note (Not Bank-Qualified) $6,270,218 TEMPORARY NOTE (Not Bank-Qualified) Dated Date: November 2, 2017 Maturity Date: November 2, 2018 Interest Rate: 2.50% Re-Offer Yield: 1.18% CUSIP No.: V6 Dated Date: November 2, 2017 Maturity Date: November 2, 2018 Interest Rate: 2.50% Re-Offer Yield: 1.18% CUSIP No.: U8 The (i) $29,141,218 Notes, consisting of a $22,320,772 Bond Anticipation Note, a $5,297,346 Water and Sewer Utility Bond Anticipation Note, a $723,100 Tax Appeal Refunding Bond Anticipation Note and an $800,000 Special Emergency Note (collectively, the Municipal Notes ), and (ii) a $6,270,218 Temporary Note (the Temporary Note and, together with the Municipal Notes, the Notes ) are being issued by the Township of Montclair, in the County of Essex, New Jersey (the "Township") to provide funding for (i) various capital improvements, (ii) various water and sewer utility improvements, (iii) amounts owing to others for taxes levied, (iv) the preparation and execution of a complete program of revaluation of all real property, including tax map updates, and (v) improvements to various school buildings and grounds. The Notes will be issued in the form of one certificate for the aggregate principal amount of each series of the Notes and when issued will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ("DTC"), which will act as securities depository. Interest on the Notes will be credited to the Participants (as defined herein) of DTC as listed on the records of DTC as of one business day prior to the maturity date set forth above. See THE NOTES - Book-Entry-Only System herein. The Notes are valid and legally binding general obligations of the Township and, unless paid from other sources, are payable from ad valorem taxes levied upon all the taxable real property within the Township for the payment of the Notes and the interest thereon without limitation as to rate or amount. This cover page contains information for quick reference only. It is not a summary of this issue. Investors must read the entire Official Statement, including the Appendices, to obtain information essential to the making of an informed investment decision. The Notes are offered when, as and if issued and delivered to the Underwriters (as defined herein), subject to prior sale, to withdrawal or modification of the offer without notice and to approval of legality by the law firm of McManimon, Scotland & Baumann, LLC, Roseland, New Jersey, and certain other conditions described herein. It is expected that the Notes will be available for delivery through DTC in New York, New York, on or about November 2, 2017.

2 TOWNSHIP OF MONTCLAIR IN THE COUNTY OF ESSEX NEW JERSEY MAYOR Robert D. Jackson COUNCIL MEMBERS Robert J. Russo Rich McMahon William L. Hurlock Robin Schlager Sean M. Spiller Dr. Renee E. Baskerville TOWNSHIP CLERK Linda S. Wanat TOWNSHIP MANAGER Timothy F. Stafford CHIEF FINANCIAL OFFICER Padmaja Rao TOWNSHIP ATTORNEY Ira Karasick, Esq. Montclair, New Jersey INDEPENDENT ACCOUNTANT PKF O Connor Davies, LLP Livingston, New Jersey BOND COUNSEL McManimon, Scotland & Baumann, LLC Roseland, New Jersey FINANCIAL ADVISOR Benecke Economics Moonachie, New Jersey

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 Notes other than those contained in this Official Statement, 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 or warranty by the Underwriter or, as to information from sources other than itself, by the Township. The information and the expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder under any circumstances shall create any implication that there has been no change in any of the information herein since the date hereof or since the date as of which such information is given, if earlier. References in this Official Statement 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, and copies of which may be inspected at the offices of the Township during normal business hours. For purposes of compliance with Rule 15c2-12 of the Securities and Exchange Commission, this document, as the same may be supplemented or amended by the Township from time to time (collectively, the "Official Statement"), may be treated as a "Final Official Statement" with respect to the Notes described herein that is deemed final as of the date hereof (or of any such supplement or amendment) by the Township. "CUSIP" is a registered trademark of the American Bankers Association. CUSIP numbers are provided by Standard & Poor s, CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc. The CUSIP numbers listed on the cover hereof are being provided solely for the convenience of Noteholders only at the time of issuance of the Notes and the Township does not make any representations 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 specified Note is subject to being changed after the issuance of the Notes as a result of various subsequent actions including, but not limited to, a refunding in whole or in part of such maturity or as a result of the procurement of secondary market portfolio insurance or other similar enhancement by investors that is applicable to all or a portion of the Notes. IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE TERMS OF THIS OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. NO REGISTRATION STATEMENTS RELATING TO THE NOTES HAVE BEEN FILED WITH THE SEC OR ANY STATE SECURITIES AGENCY. THE NOTES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC OR ANY STATE SECURITIES AGENCY, NOR HAS THE SEC OR ANY STATE SECURITIES AGENCY PASSED UPON THE ACCURACY OR ADEQUACY OF THIS OFFICIAL STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Notes in any jurisdiction in which it is unlawful for any person to make such an offer, solicitation or sale. McManimon, Scotland & Baumann, LLC has not participated in the preparation of the financial or statistical information contained in this Official Statement nor have they verified the accuracy or completeness thereof, and, accordingly, they express no opinion with respect thereto.

4 TABLE OF CONTENTS INTRODUCTION... 1 THE NOTES... 1 General Description... 1 Redemption... 2 Book-Entry-Only System... 2 Discontinuation of Book-Entry-Only System... 4 AUTHORIZATION AND PURPOSE... 4 Bond Anticipation Note... 4 Water and Sewer Utility Note... 7 Tax Appeal Refunding Note... 8 Special Emergency Note... 8 Temporary Note... 9 SECURITY AND SOURCE OF PAYMENT... 9 MUNICIPAL FINANCE - FINANCIAL REGULATION OF COUNTIES AND MUNICIPALITIES Local Bond Law (N.J.S.A. 40A:2-1 et seq.) The Local Budget Law (N.J.S.A. 40A:4-1 et seq.) Tax Assessment and Collection Procedure Tax Appeals The Local Fiscal Affairs Law (N.J.S.A. 40A:5-1 et seq.) THE STATE S ROLE IN PUBLIC EDUCATION STRUCTURE OF SCHOOL DISTRICTS IN NEW JERSEY Categories of School Districts School Budgetary Process (N.J.S.A. 18A:22-1 et seq.) SUMMARY OF CERTAIN PROVISIONS FOR THE PROTECTION OF SCHOOL DEBT Levy and Collection of Taxes Budgets and Appropriations Tax and Spending Limitations Issuance of Debt Annual Audit (N.J.S.A. 18A:23-1 et seq.) Temporary Financing (N.J.S.A. 18A:24-3) Debt Limitation (N.J.S.A. 18A:24-19) Exceptions to Debt Limitation Capital Lease Financing Energy Saving Obligations SUMMARY OF STATE AID TO SCHOOL DISTRICTS SUMMARY OF FEDERAL AID TO SCHOOL DISTRICTS TAX MATTERS General Certain Federal Tax Consequences Relating to the Note Bank Qualification New Jersey Gross Income Tax Future Events LITIGATION SECONDARY MARKET DISCLOSURE... 23

5 MUNICIPAL BANKRUPTCY APPROVAL OF LEGAL PROCEEDINGS UNDERWRITING RATING PREPARATION OF OFFICIAL STATEMENT ADDITIONAL INFORMATION MISCELLANEOUS CERTAIN ECONOMIC AND DEMOGRAPHIC INFORMATION ABOUT THE TOWNSHIP OF MONTCLAIR... Appendix A AUDITED FINANCIAL STATEMENTS... Appendix B FORM OF APPROVING LEGAL OPINION OF BOND COUNSEL FOR THE MUNCIPAL NOTES... Appendix C FORM OF APPROVING LEGAL OPINION OF BOND COUNSEL FOR THE TEMPORARY NOTE... Appendix D

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7 OFFICIAL STATEMENT Relating to TOWNSHIP OF MONTCLAIR, In the County of Essex, New Jersey $29,141,218 NOTES, Consisting of: $22,320,772 Bond Anticipation Note, $5,297,346 Water and Sewer Utility Bond Anticipation Note, $723,100 Tax Appeal Refunding Bond Anticipation Note and $800,000 Special Emergency Note $6,270,218 TEMPORARY NOTE INTRODUCTION This Official Statement, which includes the cover page and the appendices attached hereto, has been prepared by the Township of Montclair (the "Township"), in the County of Essex (the "County"), New Jersey (the "State"), in connection with the sale and the issuance by the Township of (i) $29,141,218 Notes, consisting of a $22,320,772 Bond Anticipation Note (the "Bond Anticipation Note"), a $5,297,346 Water and Sewer Utility Bond Anticipation Note (the "Water and Sewer Utility Note"), a $723,100 Tax Appeal Refunding Bond Anticipation Note (the "Tax Appeal Refunding Note") and an $800,000 Special Emergency Note (the Special Emergency Note and, together with the Bond Anticipation Note, the Water and Sewer Utility Note and the Tax Appeal Refunding Note, the Municipal Notes ), and (ii) a $6,270,218 Temporary Note (the "Temporary Note" and, together with the Municipal Notes, the "Notes"). This Official Statement has been executed by and on behalf of the Township by its Chief Financial Officer and may be distributed in connection with the sale of the Notes described herein. This Official Statement is "deemed final," as of its date, within the meaning of Rule 15c2-12 of the Securities and Exchange Commission. General Description THE NOTES The Notes are dated, will mature on the date and in the amounts and will bear interest payable at the interest rates as set forth on the cover page hereof. Interest shall be computed on the basis of a 30-day month/360-day year. The principal of and interest due on the Notes will be paid to the registered owners by the Township as paying agent (the "Paying Agent"). Principal of and interest due on the Notes will be credited to the registered owner as of the business day immediately preceding the maturity date of the Notes (the "Record Date" for the payment of principal and interest on the Notes). 1

8 The Notes are issuable as fully registered book-entry obligations in the form of one certificate in the principal amount of each series of such Notes. The Notes may be purchased in book-entry-only form in the amount of any integral multiple of $1,000 with a minimum purchase of $5,000 required (or a necessary odd denomination) through book-entries made on the books and records of The Depository Trust Company, New York, New York ("DTC"), and its participants. So long as DTC or its nominee, Cede & Co. (or any successor or assign), is the registered owner of the Notes, payments of the principal of and interest on the Notes will be made by the Township, acting as Paying Agent, directly to Cede & Co. (or any successor or assign), as nominee for DTC. Redemption The Notes are not subject to redemption prior to their stated maturities. Book-Entry-Only System The description which follows of the procedures and recordkeeping with respect to beneficial ownership interest in the Notes, payment of principal of and interest and other payments on the Notes to Direct and Indirect Participants (each as defined below) or Beneficial Owners (defined below), confirmation and transfer of beneficial ownership interests in the Notes and other related transactions by and between DTC, Direct Participants and Beneficial Owners, is based on certain information furnished by DTC to the Township. DTC will act as securities depository for the Notes. The Notes 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 Note certificate will be issued in the aggregate principal amount of each series of Notes, and will be deposited with DTC. DTC, the world's largest 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 posttrade 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 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+. 2

9 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 Notes under the DTC system must be made by or through Direct Participants, which will receive a credit for the Notes on DTC's records. The ownership interest of each actual purchaser of the Notes ("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 Notes 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 the Notes, except in the event that use of the book-entry system for the Notes are discontinued. To facilitate subsequent transfers, all Notes 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 Notes with DTC and its 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 Notes; DTC's records reflect only the identity of the Direct Participants to whose accounts such Notes 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 Notes are being redeemed, DTC's practice is to determine by lot the amount of interest of each Direct Participant in such maturity to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Notes unless authorized by a Direct Participant in accordance with DTC's procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Township 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 Notes are credited on the Record Date (identified in a listing attached to the Omnibus Proxy). Redemption proceeds, if any, and principal and interest payments on the Notes 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 Paying Agent on the 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 or the Township as Paying Agent, subject to any statutory or regulatory requirements as may be in 3

10 effect from time to time. Payment of redemption proceeds, if any, and principal and interest to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Paying Agent, disbursement of such payments to Direct Participants shall be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as securities depository with respect to the Notes at any time by giving reasonable notice to the Paying Agent. Under such circumstances, in the event that a successor securities depository is not obtained, Note 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, Note 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. THE TOWNSHIP WILL NOT HAVE ANY RESPONSIBILITY OR OBLIGATION TO SUCH DTC PARTICIPANTS OR THE PERSONS FOR WHOM IT ACTS AS NOMINEES WITH RESPECT TO THE PAYMENTS TO OR PROVIDING OF NOTICE FOR THE DTC PARTICIPANTS, OR THE INDIRECT PARTICIPANTS, OR BENEFICIAL OWNERS. SO LONG AS CEDE & CO. IS THE REGISTERED OWNER OF THE NOTES, AS NOMINEE OF DTC, REFERENCES HEREIN TO THE NOTEHOLDERS OR REGISTERED OWNERS OF THE NOTES (OTHER THAN UNDER THE CAPTIONS "TAX MATTERS" AND SECONDARY MARKET DISCLOSURE ) SHALL MEAN CEDE & CO. AND SHALL NOT MEAN THE BENEFICIAL OWNERS OF THE NOTES. Discontinuation of Book-Entry-Only System If the Township, in its sole discretion, determines that DTC is not capable of discharging its duties, or if DTC discontinues providing its services with respect to the Notes at any time, the Township will attempt to locate another qualified securities depository. If the Township fails to find such a securities depository, or if the Township determines, in its sole discretion, that it is in the best interest of the Township or that the interest of the Beneficial Owners might be adversely affected if the book-entry-only system of transfer is continued (the Township undertakes no obligation to make an investigation to determine the occurrence of any events that would permit it to make such determination) the Township shall notify DTC of the termination of the book-entry-only system. Bond Anticipation Note: AUTHORIZATION AND PURPOSE The Bond Anticipation Note is authorized by and is being issued pursuant to: (i) the Local Bond Law of the State of New Jersey, N.J.S.A. 40A:2-1 et seq., (the Local Bond Law ), and (ii) the various bond ordinances of the Township set forth below. 4

11 Ordinance No. Description Amounts to be Issued Various library capital improvements, finally adopted August 10, Various capital improvements, finally adopted February 20, Removal and replacement of trees, finally adopted November 10, Various capital improvements, finally adopted November 25, Redevelopment activities with respect to the amended Hahnes Redevelopment Plan and the Orange Road Redevelopment Plan, finally adopted April 7, Various capital improvements, finally adopted March 9, Traffic calming improvements, finally adopted March 9, Various capital improvements, finally adopted December 7, Shade tree improvements, finally adopted April 21, Edgemont Pond improvements, finally adopted April 21, Paving of South Mountain Avenue, finally adopted April 17, Pavement restoration and repaving at South Park Plaza, finally adopted May 1, Various capital improvements, finally adopted May 22, Various capital improvements, finally adopted May 22, Acquisition of various vehicles, finally adopted June 12, $67,893 $138,352 $23,934 $152,695 $20,221 $37,947 $472,549 $168,397 $52,614 $23,773 $500,582 $42,104 $310,923 $491,453 $511,200 5

12 12-41 Various capital improvements, finally adopted June 12, Acquisition of an ambulance, finally adopted June 12, HVAC upgrades to the Firehouse server room, finally adopted May 14, $605,811 $127,111 $96, , as supplemented by Acquisition of a new radio, finally adopted June 11, 2013, as supplemented March 4, $927, Improvements to Union Street and Park Street, finally adopted March 4, Various park improvements, finally adopted March 4, $346,000 $325, , as supplemented by Various road improvements, finally adopted March 4, 2014, as supplemented August 12, $3,377, Acquisition of vehicles and equipment, finally adopted April 29, Acquisition of trucks and equipment, finally adopted August 12, Various capital improvements, finally adopted August 12, Multi-use field improvements and the installation of artificial turf at Washington Field, finally adopted October 7, Improvements to the library, finally adopted October 7, Various capital improvements, finally adopted March 17, Various capital improvements, finally adopted March 15, Various capital improvements, finally adopted March 28, $429,200 $1,090,000 $417,700 $250,000 $6,300 $3,206,250 $5,101,450 $3,000,000 6

13 The proceeds of the Bond Anticipation Note will be used to (i) currently refund $17,970,772 of the Township s $18,638,000 Bond Anticipation Note, dated and issued November 4, 2016 and maturing November 3, 2017, together with $667,228 in principal reduction payments from the 2017 budget, (ii) provide $4,350,000 in new money for the projects described above, and (iii) pay costs and expenses incidental to the issuance and delivery of the Bond Anticipation Note. Water and Sewer Utility Note: The Water and Sewer Utility Note is authorized by and is being issued pursuant to: (i) the Local Bond Law and (ii) the various bond ordinances of the Township set forth below. Ordinance No. Description Amounts to be Issued Construct facilities for the Nishuane Well, finally adopted July 23, $160, Various water system improvements, finally adopted November 12, Various sewer utility improvements, finally adopted March 11, Various improvements to the water system, finally adopted October 21, Repairs to the sewer utility, finally adopted October 21, Various sewer utility improvements, finally adopted May 19, Various water utility improvements, finally adopted December 8, Various sewer utility improvements, finally adopted December 8, Various improvements to the water utility, finally adopted December 7, Various water utility improvements, finally adopted December 6, Various capital improvements, finally adopted December 27, $36,205 $76,816 $361,146 $243,191 $344,128 $639,715 $333,401 $544,886 $611,891 $539,023 7

14 14-19 Various sanitary sewer improvements, finally adopted June 17, Various water improvements, finally adopted June 17, $244,300 $1,162,044 The proceeds of the Water and Sewer Utility Note will be used to (i) currently refund $5,297,346 of the Township s $7,394,000 Water and Sewer Utility Bond Anticipation Note, dated and issued November 4, 2016 and maturing November 3, 2017, together with $2,096,654 in principal reduction payments, $2,095,257 of which is from the 2017 budget and $1,397 of which is from unspent prior loan proceeds that have been cancelled, and (ii) pay costs and expenses incidental to the issuance and delivery of the Water and Sewer Utility Note. Tax Appeal Refunding Note: The Tax Appeal Refunding Note is authorized by and is being issued pursuant to: (i) the Local Bond Law and (ii) the bond ordinance of the Township set forth below. Ordinance No. Description Amounts to be Issued Payments of amounts owing to others for taxes levied, finally adopted December 6, $723,100 The proceeds of the Tax Appeal Refunding Note will be used to (i) currently refund $723,100 of the Township s $1,446,200 Tax Appeal Refunding Bond Anticipation Note, dated and issued November 4, 2016 and maturing November 3, 2017, together with a $723,100 principal reduction payment from the 2017 budget, and (ii) pay costs and expenses incidental to the issuance and delivery of the Tax Appeal Refunding Note. Special Emergency Note: The Special Emergency Note is authorized by and is being issued pursuant to: (i) the Local Budget Law of the State of New Jersey, N.J.S.A. 40A:4-1 et seq., and (ii) the ordinance and resolution of the Township set forth below. Ordinance/ Resolution No R Description Funding the preparation and execution of a complete program of revaluation of all real property, including approved tax map updates, adopted September 6, 2016 and October 4, Amounts to be Issued $800,000 The proceeds of the Special Emergency Note will be used to (i) currently refund $800,000 of the Township s $1,000,000 Special Emergency Note, dated and issued November 8

15 4, 2016 and maturing November 3, 2017, together with a $200,000 principal reduction payment from the 2017 budget, and (ii) pay costs and expenses incidental to the issuance and delivery of the Special Emergency Note. Temporary Note: The Temporary Note is authorized by and is being issued pursuant to: (i) the Local Bond Law and (ii) the various bond ordinances of the Township set forth below. Ordinance No. Description Amounts to be Issued Various improvements to school buildings, finally adopted May 6, Various improvements to school buildings, finally adopted July 12, Various school facility improvements, finally adopted May 22, Various improvements to school buildings and grounds, finally adopted May 14, 2013, Various improvements to school buildings and grounds, finally adopted August 25, Various improvements to school buildings and grounds, finally adopted May 24, $77,984 $142,656 $688,936 $960,642 $2,400,000 $2,000,000 The proceeds of the Temporary Note will be used to (i) currently refund $3,183,145 of the Township s $4,855,000 Temporary Note, dated and issued November 4, 2016 and maturing November 4, 2016, together with $1,671,855 in principal reduction payments from the 2017 budget, (ii) provide $3,087,073 in new money for the projects described above, and (iii) pay costs and expenses incidental to the issuance and delivery of the Temporary Note. SECURITY AND SOURCE OF PAYMENT The Notes are valid and legally binding general obligations of the Township, and the Township has pledged its full faith and credit for the payment of the principal of and the interest due on the Notes. The Township is required by law to levy ad valorem taxes upon all the taxable property within the Township for the payment of the principal of and the interest due on the Notes without limitation as to rate or amount. 9

16 MUNICIPAL FINANCE - FINANCIAL REGULATION OF COUNTIES AND MUNICIPALITIES Local Bond Law (N.J.S.A. 40A:2-1 et seq.) The Local Bond Law governs the issuance of bonds and notes 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 installments. A 5% cash down payment is generally required toward the financing of expenditures for municipal purposes. All bonds and notes issued by the Township are general full faith and credit obligations. The authorized bonded indebtedness of the Township for municipal purposes is limited by statute, subject to the exceptions noted below, to an amount equal to 3½% of its average equalized valuation basis. The average for the last three years of the equalized value of all taxable real property and improvements and certain Class II railroad property within the boundaries of Township, as annually determined by the State Director of Taxation, is $6,686,904,939. Certain categories of debt are permitted by statute to be deducted for purposes of computing the statutory debt limit, including school bonds that do not exceed the school bond borrowing margin and certain debt that may be deemed self-liquidating. The Township has not exceeded its statutory debt limit, as approved in each case by the Local Finance Board. As of December 31, 2016, the statutory net debt as a percentage of average equalized valuation was 1.029%. As noted above, the statutory limit is 3½%. 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. When any part of a proposed debt authorization exceeded its debt limit, the Township applied to the Local Finance Board for an extension of credit. The Local Finance Board determined that the proposed debt authorization did 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, and/or based on certain other statutory determinations, approval was granted. In addition, debt in excess of the statutory limit may be issued by the Township to fund certain notes, to provide for self-liquidating 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 Township may sell short-term "bond anticipation notes" to temporarily finance a capital improvement or project in anticipation of the issuance of bonds if the bond ordinance or a subsequent resolution so provides. Bond anticipation notes for capital improvements may be issued in an aggregate amount not exceeding the amount specified in the ordinance creating such capital expenditure, as it may be amended and supplemented. A local unit s bond anticipation notes may be issued for periods not greater than one year. Generally, bond anticipation notes may not be outstanding for longer than ten years. An additional period may be available following the tenth anniversary date equal to the period from the notes maturity to the end of the tenth fiscal year in which the notes mature plus 4 months (May 1) in the next following fiscal year from the date of original issuance. Beginning in the third year, the amount 10

17 of notes that may be issued is decreased by the minimum amount required for the first year s principal payment for a bond issue. 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 (the "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 Township is authorized to issue Emergency Notes and Special Emergency Notes pursuant to the Local Budget Law. Tax Anticipation Notes are limited in amount by law and must be paid off in full within 120 days of the close of the fiscal year. 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 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-inaid 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 local 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. 11

18 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,n drainage map preparation for flood control purposes and contractually required severance liabilities, 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 appropriation accounts may be made only during the last two months of the year. Appropriation reserves may also be transferred during the first three (3) months of the year to the previous year s budget. Both types of transfers require a 2/3 vote of the full membership of the governing body; however, transfers cannot be made from either the down payment account or the capital improvement fund. Transfers may be made between subaccount line items within the same account at any time during the year, subject to internal review and approval. In a "CAP" budget, no transfers may be made from excluded from "CAP" appropriations to within "CAP" appropriations nor can transfers be made between excluded from "CAP" appropriations. 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". 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 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 year s tax levy in years when the Index Rate is 2.5% or less. Additionally, legislation constituting P.L. 2010, c. 44, approved July 13, 2010, limits tax levy increases for those local units to 2% with exceptions only for capital expenditures including debt service, increases in pension contributions and accrued liability for pension contributions in excess of 2%, certain healthcare increases, extraordinary costs directly related to a declared emergency and amounts approved by a simple majority of voters voting at a special election. 12

19 Neither the tax levy limitation nor the "Cap Law" limits the obligation of the Township to levy ad valorem taxes upon all taxable real property within the Township to pay debt service on its bonds or notes, including the Notes. 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 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 Assessment and Collection Procedure Property valuations (assessments) are determined on true values as arrived at by a cost approach, market data approach and capitalization of net income where appropriate. Current assessments are the result of new assessments on a like basis with established comparable properties for newly assessed or purchased properties. This method assures equitable treatment to like property owners. But it often results in a divergence of the assessment ratio to true value. Because of the changes in property resale values, annual adjustments could not keep pace with the changing values. A re-evaluation of all property in the Township was last completed in Upon the filing of certified adopted budgets by the Township s local school district and the County, the tax rate is struck by the County Board of Taxation based on the certified amounts in each of the taxing districts for collection to fund the budgets. The statutory provision for the assessment of property, the levying of taxes and the collection thereof are set forth in N.J.S.A. 54:4-1 et seq. Special taxing districts are permitted in New Jersey for various special services rendered to the properties located within the special districts. Tax bills are mailed annually in June by the Township. The taxes are due August 1 and November 1, respectively, and are adjusted to reflect the current calendar year s total tax liability. The preliminary taxes due February 1 and May 1 of the succeeding year are based upon one-half of the current year s total tax. Tax installments not paid on or before the due date are subject to interest penalties of 8% per annum on the first $1, of the delinquency and 18% per annum on any amount in excess of $1, These interest rates and penalties are the highest permitted under New Jersey statutes. Delinquent taxes open for one year or more are annually included in a tax sale in accordance with New Jersey statues. 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 April 1 for review. The County Board of Taxation has the authority after a hearing to decrease or reject the appeal 13

20 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. An independent examination of each local unit s 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 unit s 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 the year ended December 31, 2016 for the Township is on file with the Clerk and is available for review during business hours. THE STATE S ROLE IN PUBLIC EDUCATION The constitution of the State of New Jersey provides that the legislature of the State shall provide for the maintenance and support of a thorough and efficient system of free public schools for the instruction of all children in the State between the ages of 5 and 18 years. Case law has expanded the responsibility to include children between the ages of 3 and 21. The responsibilities of the State with respect to the general supervision and control of public education have been delegated to the New Jersey Department of Education (the "Department"), which is a part of the executive branch of the State government and was created by the State Legislature. The Department is governed and guided by the policies set forth by the New Jersey Board of Education (the "State Board"). The State Board is responsible for the general supervision and control of public education and is obligated to formulate plans and to make recommendations for the unified, continuous and efficient development of public education of all people of all ages within the State. To fulfill these responsibilities, the State Board has the power, inter alia, to adopt rules and regulations that have the effect of law and that are binding upon school districts. The Commissioner of Education (the "Commissioner") is the chief executive and administrative officer of the Department. The Commissioner is appointed by the Governor of the State with the advice and consent of the State Senate, and serves at the pleasure of the Governor during the Governor's term of office. The Commissioner is Secretary and Chief Executive Officer of the State Board and is responsible for the supervision of all school districts in the State and is obligated to enforce the rules and regulations of the State Board. The Commissioner has the authority to recommend the withholding of State financial aid and the Commissioner's consent is required for authorization to sell school bonds that exceed the debt limit of the municipality in which the school district is located and may also set the amount to be raised by taxation for a board of education if a school budget has not been adopted by a board of school estimate or by the voters. 14

21 An Executive County Superintendent of Schools (the "County Superintendent") is appointed for each county in the State by the Governor, upon the recommendation of the Commissioner and with the advice and consent of the State Senate. The County Superintendent reports to the Commissioner or a person designated by the Commissioner. The County Superintendent is responsible for the supervision of the school districts in the county and is charged with the enforcement of rules pertaining to the certification of teachers, pupil registers and financial reports and the review of budgets. Under the Uniform Shared Services and Consolidation Act, P.L. 2007, c. 63 approved April 3, 2007 (A4), the role of the County Superintendent was changed to create the post of the Executive County Superintendent with expanded powers for the operation and management of school districts to, among other things, promote administrative and operational efficiencies, eliminate non-operating school districts and recommend a school district consolidation plan to eliminate districts though the establishment or enlargement of regional school districts, subject to voter approval. Categories of School Districts STRUCTURE OF SCHOOL DISTRICTS IN NEW JERSEY State school districts are characterized by the manner in which the board of education or the governing body takes office. School districts are principally categorized in the following categories: (1) Type I, in which the mayor or chief executive officer ("CEO") of a municipality appoints the members of a board of education and a board of school estimate, which board of school estimate consists of two (2) members of the board of education, two (2) members of the governing body of the municipality and the mayor or CEO of the municipality comprising the school district, approves all fiscal matters; (2) Type II, in which the registered voters in a school district elect the members of a board of education and either (a) the registered voters also vote upon all fiscal matters, or (b) a board of school estimate, consisting of two (2) members of the governing body of and the CEO of each municipality within the district and the president of and one member of the board of education, approves all fiscal matters; (3) Regional and consolidated school districts comprising the territorial boundaries of more than one municipality in which the registered voters in the school district elect members of the board of education and vote upon all fiscal matters. Regional school districts may be All Purpose Regional School Districts or Limited Purpose Regional School Districts ; (4) State operated school districts created by the State Board, pursuant to State law, when a local board of education cannot or will not correct severe educational deficiencies; (5) County vocational school districts have boards of education consisting of the County Superintendent and four (4) members unless it is a county of the first class, which adopted an ordinance, in which case it can have a board consisting of seven (7) appointed members which the board of chosen freeholders of the county appoints. Such vocational school districts shall also have a board of school estimate, consisting of two (2) members appointed by 15

22 the board of education of the school district, two (2) members appointed by the board of chosen freeholders and a fifth member being the county executive or the director of the board of chosen freeholders of the county, which approves all fiscal matters; (6) County special services school districts have boards of education consisting of the County Superintendent and six (6) persons appointed by the board of chosen freeholders of the county. Such special services school districts shall also have a board of school estimate, consisting of two (2) members appointed by the board of education of the school, two (2) members appointed by the board of chosen freeholders and a fifth member being the freeholder-director of the board of chosen freeholders, which approves all fiscal matters. There is a procedure whereby a Type I school district or a Type II school district may change from one type to the other after an approving public referendum. Such a public referendum must be held whenever directed by the municipal governing body or board of education in a Type I district, or the board of education in a Type II district, or when petitioned for by fifteen percent (15%) of the voters of any school district. The Township s school district is a Type I school district. School Budgetary Process (N.J.S.A. 18A:22-1 et seq.) In a Type I school district, a separate body from the school district, known as the board of school estimate, examines the budget requests and fixes the appropriation amounts for the next year's operating budget at or after a public hearing. This board, whose composition is fixed by statute, certifies the budget to the municipal governing body or board of education. If the board of education disagrees with the certified budget of the board of school estimate, then it can appeal to the Commissioner to request changes. In a Type II district, the elected board of education develops the budget proposal and, at or after a public hearing, submits it for voter approval unless the board of education has moved its annual election to November as described below. Debt service provisions are not subject to public referendum. If approved, the budget goes into effect. If defeated, the governing bodies of the constituent municipalities must develop the school budget by May 19 of each year. Should the governing bodies be unable to do so, the Commissioner establishes the local school budget. The New Budget Election Law (P.L. 2011, c. 202, effective January 17, 2012) establishes procedures that allow the date of the annual school election of a Type II district, without a board of school estimate, to be moved from April to the first Tuesday after the first Monday in November, to be held simultaneously with the general election. Such change in the annual school election date must be authorized by resolution of either the board of education or the governing body of the municipality, or by an affirmative vote of a majority of the voters whenever a petition, signed by at least 15% of the legally qualified voters, is filed with the board of education. Once the annual school election is moved to November, such election may not be changed back to an April annual school election for four years. School districts that opt to move the annual school election to November are no longer required to submit the budget to the voters for approval if the budget is at or below the twopercent property tax levy cap as provided for in the New Cap Law. For school districts that opt to change the annual school election date to November, proposals to spend above the two- 16

23 percent property tax levy cap would be presented to voters at the annual school election in November. SUMMARY OF CERTAIN PROVISIONS FOR THE PROTECTION OF SCHOOL DEBT Levy and Collection of Taxes School districts in the State do not levy or collect taxes to pay those budgeted amounts that are not provided by the State. The municipality within which a school district is situated levies or collects the required taxes and must remit them in full to the school district. Budgets and Appropriations School districts in the State must operate on an annual cash basis budget. Each school district must adopt an annual budget in such detail and upon forms as prescribed by the Commissioner, to which must be attached an itemized statement showing revenues, including State and Federal aid, and expenditures. The Commissioner must approve a budget prior to its final adoption and has the power to increase or decrease individual line items in a budget. Any amendments to a school district's budget must be approved by the board of education or the board of school estimate, as the case may be. Every budget submitted must provide no less than the minimum permissible amount deemed necessary under State law to provide for a thorough and efficient education as mandated by the State constitution. The Commissioner may not approve any budget unless the Commissioner is satisfied that the district has adequately implemented within the budget the Core Curriculum Content Standards required by State law. If necessary, the Commissioner is authorized to order changes in the local school district s budget. The Commissioner will also ensure that other provisions of law are met including the limitations on taxes and spending explained below. Tax and Spending Limitations The Public School Education Act of 1975, N.J.S.A. 18A:7A-1 et seq., P.L. 1975, c. 212 (amended and partially repealed) (the "QEA") first limited the amount of funds that could be raised by a local school district. It limited the annual increase of any school district's net current expense budget. The budgetary limitation was known as a CAP on expenditures. The CAP was intended to control the growth in local property taxes. Subsequently there have been numerous legislative changes as to how the spending limitations would be applied. The Quality Education Act of 1990, N.J.S.A. 18A:7D-1 et seq., P.L. 1990, c. 52 ( QEA ) (now repealed) also limited the annual increase in the school district's current expense and capital outlay budgets by a statutory formula linked to the annual percentage increase in per capita income. The QEA was amended and revised by Chapter 62 of the Laws of New Jersey of 1991, and further amended by Chapter 7 of the Laws of New Jersey of The Comprehensive Educational Improvement and Financing Act of 1996, N.J.S.A. 18A:7F-1 et seq., P.L. 1996, c. 138 ( CEIFA ), (as amended by P.L. 2004, c.73, effective July 1, 2004), which followed QEA, also limited the annual increase in a school district's net budget by a spending growth limitation. CEIFA limited the amount school districts could increase their annual current expenses and capital outlay budgets, defined as a school district's Spending Growth Limitation. Generally, budgets could increase by either a set percentage or the consumer price index, whichever was greater. Amendments to CEIFA lowered the budget cap 17

24 to 2.5% from 3%. Budgets could also increase because of certain adjustments for enrollment increases, certain capital outlay expenditures, pupil transportation costs, and special education costs that exceeded $40,000 per pupil. Waivers were available from the Commissioner based on increasing enrollments and other fairly narrow grounds and increases higher than the cap could be approved by a vote of 60% of the voters at the annual school election. P.L. 2007, c. 62, effective April 3, 2007 (Assembly Bill A1), provided additional limitations on school district spending by limiting the amount a school district could raise for school district purposes through the property tax levy by 4% over the prior budget year s tax levy. P.L. 2007, c. 62 provided for adjustments to the cap for increases in enrollment, reductions in State aid and increased health care costs and for certain other extraordinary cost increases that required approved by the Commissioner. The bill granted discretion to the Commissioner to grant other waivers from the cap for increases in special education costs, capital outlay, and tuition charges. The Commissioner also had the ability to grant extraordinary waivers to the tax levy cap for certain other cost increases beginning in fiscal year 2009 through P.L. 2007, c. 62 was deemed to supersede the prior limitations on the amount school districts could increase their annual current expenses and capital outlay budgets, known as a school district's spending growth limitation amount, created by CEIFA (as amended by P.L. 2004, c.73, effective July 1, 2004). However, Chapter 62 was in effect only through fiscal year Debt service was not limited either by the Spending Growth Limitation or the 4% Cap on the tax levy increase imposed by Chapter 62. The previous legislation has now been amended by P.L. 2010, c. 44, approved July 13, 2010 and became applicable to the next local budget year following enactment. The new law limits the school district tax levy for the general fund budget to increases of 2% over the prior budget year with exceptions only for enrollment increases, increases for certain normal and accrued liability for pension contributions in excess of 2%, certain healthcare increases, and amounts approved by a simple majority of voters voting at a special election. The process for obtaining waivers from the Commissioner for additional increases over the tax levy or spending limitations has been eliminated under Chapter 44. The restrictions are solely on the tax levy for the general fund and are not applicable to the debt service fund. There are no restrictions on a local school district s ability to raise funds for debt service, and nothing would limit the obligation of a school district to levy ad valorem taxes upon all taxable real property within the district to pay debt service on its bonds or notes. Issuance of Debt Among the provisions for the issuance of school debt are the following requirements: (i) bonds must mature in serial installments within the statutory period of usefulness of the projects being financed but not exceeding forty (40) years, (ii) debt must be authorized by a resolution of a board of education (and approved by a board of school estimate in a Type I school district), and (iii) there must be filed with the State by each municipality comprising a school district a Supplemental Debt Statement and a school debt statement setting forth the amount of bonds and notes authorized but unissued and outstanding for such school district. 18

25 Annual Audit (N.J.S.A. 18A:23-1 et seq.) Every board is required to provide an annual audit of the school district's accounts and financial transactions. Beginning with the year ended June 30, 2010, a licensed public school accountant must complete the annual audit no later than five (5) months after the end of the fiscal year. P.L. 2010, c. 49 amended N.J.S.A. 18A:23-1 to provide an additional month for the completion of a school district s audit. Previously the audit was required to be completed within four months. The audit, in conformity with statutory requirements, must be filed with the board of education and the Commissioner. Additionally, the audit must be summarized and discussed at a regular public meeting of the local board of education within thirty (30) days following receipt of the annual audit by such board of education. Temporary Financing (N.J.S.A. 18A:24-3) Temporary notes may be issued in anticipation of the issuance of permanent bonds for a capital improvement or capital project. Such temporary notes may not exceed in the aggregate the amount of bonds authorized for such improvement or project. A school district's temporary notes may be issued for one (1) year periods, with the final maturity not exceeding five (5) years from the date of original issuance; provided, however, that no such notes shall be renewed beyond the third anniversary date of the original notes unless an amount of such notes, at least equal to the first legally payable installment of the bonds in anticipation of which said notes are issued, is paid and retired subsequent to such third anniversary date from funds other than the proceeds of obligations. School districts may not capitalize interest on temporary notes, but must include in each annual budget the amount of interest due and payable in each fiscal year on all outstanding temporary notes. Debt Limitation (N.J.S.A. 18A:24-19) Except as provided below, no additional debt shall be authorized if the principal amount, when added to the net debt previously authorized, exceeds a statutory percentage of the average equalized valuation of taxable property in a school district. Exceptions to Debt Limitation A Type II school district (other than a regional district) may also utilize its constituent municipality's remaining statutory borrowing power (i.e. the excess of 3.5% of the average equalized valuation of taxable property within the constituent municipality over the constituent municipality's net debt). A school district may also authorize debt in excess of this limit with the consent of the Commissioner and the Local Finance Board. Capital Lease Financing School districts are permitted to enter into lease purchase agreements for the acquisition of equipment or for the improvement of school buildings. Generally, lease purchase agreements cannot exceed five years except for certain energy-saving equipment which may be leased for up to fifteen (15) years if paid from energy savings. Lease purchase agreements for a term of five (5) years or less must be approved by the Commissioner. The Educational 19

26 Facilities Construction and Financing Act, P.L. 2000, c. 72 ( EFCFA ), repealed the authorization to enter into facilities leases in excess of five years. The payment of rent on an equipment lease and on a five year and under facilities lease is treated as a current expense and within the school district s Spending Growth Limitation and tax levy cap. Lease purchase payments on leases in excess of five years entered into under prior law (CEIFA) are treated as debt service payments and, therefore, will receive debt service aid if the school district is entitled and are outside the school district s Spending Growth Limitation and tax levy cap. Energy Saving Obligations Under P.L. 2009, c. 4, approved January 21, 2009 and effective 60 days thereafter, districts may issue energy savings obligations without voter approval to fund certain improvements that result in reduced energy use, facilities for production of renewable energy or water conservation improvements provided that the value of the savings will cover the cost of the measures. SUMMARY OF STATE AID TO SCHOOL DISTRICTS In 1973, the Supreme Court of the State of New Jersey (the "Court") first ruled in Robinson v. Cahill that the method then used to finance public education principally through property taxation was unconstitutional. Pursuant to the Court's ruling, the State Legislature enacted the Public School Education Act of 1975, N.J.S.A. 18A:7A-1 et seq., (P.L. 1975, c. 212) (the "Public School Education Act") (since amended and partially repealed), which required funding of the State's school aid through the New Jersey Gross Income Tax Act, P. L.1976, c. 47, since amended and supplemented, enacted for the purpose of providing property tax relief. On June 5, 1990, the Court ruled in Abbott v. Burke that the school aid formula enacted under the Public School Education Act was unconstitutional as applied. The Court found that poorer urban school districts were significantly disadvantaged under that school funding formula because school revenues were derived primarily from property taxes. The Court found that wealthy school districts were able to spend more, yet tax less for educational purposes. Since that time there has been much litigation and many cases affecting the State s responsibilities to fund public education and many legislative attempts to distribute State aid in accordance with the court cases and the constitutional requirement. The cases addressed not only current operating fund aid but also addressed the requirement to provide facilities aid as well. The legislation has included the QEA (now repealed), CEIFA and EFCFA, which became law on July 18, For many years aid was simply determined in the State Budget, which itself is an act of the legislature, based upon amounts provided in prior years. The most current school funding formula, provided in the School Funding Reform Act of 2008, P.L. 2007, c. 260 approved January 1, 2008 (A500), removed the special status given to certain districts known as Abbott Districts after the school funding cases and instead has funding follow students with certain needs and provides aid in a way that takes into account the ability of the local district to raise local funds to support the budget in amounts deemed adequate to provide for a thorough and efficient education as required by the State constitution. This legislation was challenged in the Court, and the Court held that the State s current plan for school aid is a constitutionally adequate scheme. Notwithstanding over 35 years of litigation, the State provides State aid to school districts of the State in amounts provided in the State Budget each year. These now include 20

27 equalization aid, educational adequacy aid, special education categorical aid, transportation aid, preschool education aid, school choice aid, security aid, adjustment aid and other aid determined in the discretion of the Commissioner. State law requires that the State will provide aid for the construction of school facilities (Facilities Aid) in an amount equal to the greater of the district aid percentage or 40% times the eligible costs determined by the Commissioner of Education either in the form of a grant or debt service aid as determined under the Education Facilities Construction and Financing Act of The amount of the aid to which a district is entitled is established prior to the authorization of the project. Grant funding is provided by the State up front and debt service aid must be appropriated annually by the State. The State reduced debt service aid by fifteen percent (15%) for the fiscal years 2011 through As a result of the debt service aid reduction, for these fiscal years, school districts received eighty-five percent (85%) of the debt service aid that they would have otherwise received. In addition, school districts which received grants under the EFCFA, which grants were financed through the New Jersey Economic Development Authority (the EDA ), were assessed an amount in their budget representing 15% of the school district s proportionate share of the fiscal years 2011 through 2017 principal and interest payments on the outstanding EDA bonds issued to fund such grants. SUMMARY OF FEDERAL AID TO SCHOOL DISTRICTS Federal funds are available for certain programs approved by the Federal government with allocation decided by the State, which assigns a proportion to each local school district. The Elementary and Secondary Education Act, as amended and restated by the No Child Left Behind Act of 2001, 20 U.S.C.A et seq., is a Federal assistance program for which a school district qualifies to receive aid. A remedial enrichment program for children of low income families is available under Chapter 1 Aid. Such Federal aid is generally received in the form of block grants. Aid is also provided under the Individuals with Disabilities Education Act although never in the amounts federal law required. General TAX MATTERS Section 103(a) of the Internal Revenue Code of 1986, as amended (the "Code"), provides that interest on the Notes is not included in gross income for federal income tax purposes if various requirements set forth in the Code are met. The Township has covenanted in its Arbitrate and Tax Certificate (the "Tax Certificate"), delivered in connection with the issuance of the Notes, to comply with these continuing requirements and has made certain representations, certifications of fact and statements of reasonable expectation in connection with the issuance of the Notes to assure this exclusion. Pursuant to Section 103(a) of the Code, failure to comply with these requirements could cause interest on the Notes to be includable in gross income for federal income tax purposes retroactive to the date of issuance of the Notes. In the opinion of Bond Counsel, pursuant to Section 103(a) of Code, interest on the Notes is not included in gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the alternative minimum tax imposed on individuals and corporations. Bond Counsel is also of the opinion that interest on the Notes held by corporate 21

28 taxpayers is included in adjusted current earnings in calculating alternative minimum taxable income for purposes of the federal alternative minimum tax imposed on corporations. Bond Counsel s opinions described herein are given in reliance on the representations, certifications of fact, and statements of reasonable expectation made by the in its Tax Certificate, assume continuing compliance by the Township with certain covenants set forth in its Tax Certificate, and are based on existing statutes, regulations, administrative pronouncements and judicial decisions. Certain Federal Tax Consequences Relating to the Notes Although, pursuant to Section 103(a) of the Code, interest on the Notes is excluded from gross income for federal income tax purposes, the accrual or receipt of interest on the Notes may otherwise affect the federal income tax liability of the recipient. The nature and extent of these other tax consequences will depend upon the recipient s particular tax status or other items of income or deduction. Bond Counsel expresses no opinion regarding any such consequences. Purchasers of the Notes, particularly purchasers that are corporations (including S corporations and foreign corporations operating branches in the United States), property or casualty insurance companies, banks, thrifts or other financial institutions and certain recipients of Social Security benefits, are advised to consult their own tax advisors as to the tax consequences of purchasing or holding the Notes. Bank Qualification The Notes will not be designated as qualified under Section 265 of the Code by the Township for an exemption from the denial of deduction for interest paid by financial institutions to purchase or to carry tax-exempt obligations. The Code denies the interest deduction for certain indebtedness incurred by banks, thrift institutions and other financial institutions to purchase or to carry tax-exempt obligations. The denial to such institutions of one hundred percent (100%) of the deduction for interest paid on funds allocable to tax-exempt obligations applies to those tax-exempt obligations acquired by such institutions after August 7, For certain issues, which are eligible to be designated and which are designated by the issuer as qualified under Section 265 of the Code, eighty percent (80%) of such interest may be deducted as a business expense by such institutions. New Jersey Gross Income In the opinion of Bond Counsel, the interest on the Notes and any gain realized on the sale of the Notes are not includable as gross income under the New Jersey Gross Income Tax Act. Future Events Tax legislation, administrative action taken by tax authorities and court decisions, whether at the federal or State level, may adversely affect the exclusion from gross income of interest on the Notes for federal income tax purposes, or the exclusion of interest on and any gain realized on the sale of the Notes under the existing New Jersey Gross Income Tax Act, and any such legislation, administrative action or court decisions and even proposals for change could adversely affect the market price or marketability of the Notes. 22

29 ALL POTENTIAL PURCHASERS OF THE NOTES SHOULD CONSULT THEIR OWN ADVISORS IN ORDER TO UNDERSTAND THE TAX IMPLICATIONS OF THE CODE. ALL POTENTIAL PURCHASERS OF THE NOTES SHOULD CONSULT THEIR OWN ADVISORS REGARDING ANY CHANGES IN THE STATUTES, PROPOSED FEDERAL OR NEW JERSEY STATE TAX LEGISLATION, ANY CHANGES IN THE STATUS OF PENDING OR PROPOSED LEGISLATION, ADMINISTRATIVE ACTION TAKEN BY TAX AUTHORITIES, COURT DECISIONS OR PROPOSALS FOR CHANGE ON THE TAX AND MARKET IMPLICATIONS OF OWNERSHIP OF THE NOTES. LITIGATION To the knowledge of the Township Attorney, Ira Karasick, Esq., Montclair, New Jersey, there is no litigation of any nature now pending or threatened, restraining or enjoining the issuance or the delivery of the Notes, or the levy or the collection of any taxes to pay the principal of or the interest on the Notes, or in any manner questioning the authority or the proceedings for the issuance of the Notes or for the levy or the collection of taxes, or contesting the corporate existence or the boundaries of the Township or the title of any of the present officers. Moreover, to the knowledge of the Township Attorney, no litigation is presently pending or threatened that, in the opinion of the Township Attorney, would have a material adverse impact on the financial condition of the Township if adversely decided. SECONDARY MARKET DISCLOSURE The Township has covenanted for the benefit of the Noteholders and the beneficial owners of the Notes to provide certain secondary market disclosure information pursuant to the Securities and Exchange Commission Rule 15c2-12 (the "Rule"). Specifically, for so long as the Notes remain outstanding (unless the Notes have been wholly defeased), the Township will provide in a timely manner not in excess of ten business days after the occurrence of the event, to the Municipal Securities Rulemaking Board (the MSRB ), notice of any of the following events with respect to the Notes (herein "Material Events"): (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 proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Notes, or other material events affecting the tax status of the Notes; (7) Modifications to rights of holders of the Notes, if material; (8) Bond calls, if material, and tender offers; (9) Defeasances; (10) Release, substitution or sale of property securing repayment of the Notes, if material; (11) Rating changes; 23

30 (12) Bankruptcy, insolvency, receivership or similar event of the Township; (13) The consummation of a merger, consolidation or acquisition involving an Township or the sale of all or substantially all of 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 (14) Appointment of a successor or additional trustee or the change of name of a trustee, if material. For the purposes of the event identified in subparagraph (12) above, the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for the Township in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the Township, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the Township. In the event that the Township fails to comply with the above-described undertaking and covenants, the Township shall not be liable for any monetary damages, remedy of the beneficial owners of the Notes being specifically limited in the undertaking to specific performance of the covenants. The undertaking may be amended by the Township from time to time, without the consent of the Noteholders or the beneficial owners of the Notes, in order to make modifications required in connection with a change in legal requirements or change in law, which in the opinion of nationally recognized bond counsel complies with the Rule. The Township has entered into prior undertakings to provide continuing disclosure for certain outstanding bond issues. In connection with such bond issues, the Township failed to timely file its audited financial statements for the fiscal year ended December 31 st, It also failed to timely file certain operating data and/or budgets for the fiscal years ended December 31 st in the years 2011 through In addition, the Township failed to timely file notices with respect to such late filings and event notices with respect to certain rating changes. The Township has engaged Digital Assurance Certification, L.L.C. to ensure timely filings on a going-forward basis. There can be no assurance that there will be a secondary market for the sale or purchase of the Notes. Such factors as prevailing market conditions, financial condition or market position of firms who may make the secondary market and the financial condition of the Township may affect the future liquidity of the Notes. MUNICIPAL BANKRUPTCY The undertakings of the Township should be considered with reference to Chapter IX of the Bankruptcy Act, 11 U.S.C. Section 901 et seq., as amended by Public Law , 24

31 approved April 8, 1976, and as further amended on November 6, 1978 by the Bankruptcy Reform Act of 1978, effective October 1, 1979, as further amended by Public Law , effective November 3, 1988, and as further amended and other bankruptcy laws affecting creditors, rights and municipalities in general. The amendments of P.L replace former Chapter IX and permit any political subdivision of the State, public agency or instrumentality that is insolvent or unable to meet its debts to file a petition in a court of bankruptcy for the purpose of effecting a plan to adjust its debts; directs such a petitioner to file with the court a list of petitioner s creditors; provides that a petition filed under said chapter shall operate as a stay of the commencement or continuation of any judicial or other proceeding against the petitioner; grants priority to debt owed for services or material actually provided within three months of the filing of the petition; directs a petitioner to file a plan for the adjustment of its debts; and provides that the plan must be accepted in writing by or on behalf of creditors holding at least two-thirds in amount or more than one-half in number of the listed creditors. The 1976 Amendments were incorporated into the Bankruptcy Reform Act of 1978 with only minor changes. Reference should also be made to N.J.S.A. 52:27-40 et seq., which provides that a municipality has the power to file a petition in bankruptcy provided the approval of the Municipal Finance Commission has been obtained. 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. APPROVAL OF LEGAL PROCEEDINGS All legal matters incident to the authorization, the issuance, the sale and the delivery of the Notes are subject to the approval of McManimon, Scotland & Baumann, LLC, Roseland, New Jersey, Bond Counsel to the Township, whose approving legal opinions will be delivered with the Notes substantially in the forms set forth as Appendix "C" and Appendix D. Certain legal matters will be passed on for the Township by its Attorney, Ira Karasick, Esq., Montclair, New Jersey. UNDERWRITING Jefferies LLC, New York, New York (the "Underwriter"), has agreed, subject to certain customary conditions precedent to closing, to purchase the Notes at a purchase price of $35,868, The purchase price reflects the principal amount of the Notes, plus an original issue premium of $457, The Notes are being offered to the public at the yield set forth on the cover page of this Official Statement, which yield may be changed from time to time by the Underwriter without notice. The Notes may be offered and sold to dealers, including the Underwriter and dealers acquiring the Notes for their own account or any account managed by them, at prices lower than the public offering price. The Notes are not rated. RATING 25

32 PREPARATION OF OFFICIAL STATEMENT The Township hereby states that the descriptions and statements herein, including financial statements, are true and correct in all material respects, and it will confirm to the Underwriter, by certificates signed by the Mayor and Chief Financial Officer of the Township, that to their knowledge such descriptions and statements, as of the date of this Official Statement, 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. PKF O Connor Davies, LLP, Livingston, New Jersey, assisted in the preparation of information contained in this Official Statement and takes responsibility for the audited financial statements to the extent specified in their Independent Auditor s Report. All other information has been obtained from sources which Township considers to be reliable and they make no warranty, guaranty or other representation with respect to the accuracy and completeness of such information. McManimon, Scotland & Baumann, LLC has not participated in the preparation of the financial or statistical information contained in this Official Statement, nor have they verified the accuracy, completeness or fairness thereof and, accordingly, expresses no opinion with respect thereto. ADDITIONAL INFORMATION Inquiries regarding this Official Statement, including information additional to that contained herein, may be directed to Padmaja Rao, Chief Financial Officer, at 205 Claremont Avenue, Montclair, New Jersey 07042, telephone (973) or by at prao@montclairnjusa.org. 26

33 MISCELLANEOUS This Official Statement is not to be construed as a contract or agreement among the Township, the Underwriter and the holders of the Notes. 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 the Notes made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Township (financial or otherwise) since the date hereof. The information contained in this Official Statement is not guaranteed as to accuracy or completeness. TOWNSHIP OF MONTCLAIR Dated: October 25, 2017 By: /s/ Padmaja Rao Padmaja Rao Chief Financial Officer 27

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35 APPENDIX A CERTAIN ECONOMIC AND DEMOGRAPHIC INFORMATION ABOUT THE TOWNSHIP OF MONTCLAIR, IN THE COUNTY OF ESSEX, NEW JERSEY

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37 GENERAL INFORMATION The Township is situated in the center of northwestern Essex County. First settled in 1694 by English and Dutch farmers, the Township was formed in 1868 by the joining of Speertown (now Upper Montclair) and Cranetown. In the nineteenth century, the Township became a country retreat for the wealthy and in 1894 was incorporated as a Town under a council form of government. From 1916 to 1980, a commission form of government managed the Town. On November 6, 1979, the Town s electorate voted to change the form of government to Council-Manager Plan C, as authorized by the Faulkner Act (NJSA 40:60A-104 et seq.). The governing body is composed of seven elected council persons - the mayor, two at-large councilors, and one councilor from each of the four wards. The non-partisan governing body is elected in May of every fourth year. Effective July 1, 1980, the new Council took office and an Administrative Code, finally adopted on September 9, 1980, sets forth the Council s powers and duties as well as the administrative organization under the control of the Manager. On November 4, 1980, the electorate approved a name change from the Town of Montclair to the Township of Montclair. The Township, its 6.16 square miles formed in a north to south narrow rectangle, is primarily residential in nature. Residences range from grand estates on the eastern slope of the Watchung Mountains overlooking the New York skyline to modest apartments in multi-family buildings. Seventy-five percent of the land area is residential and just over 10% is commercial. Single-family houses make up 48% of the housing stock. Forty percent of the housing stock was built prior to Ninety-two individual properties and 6 districts are listed on the State and National Registers of Historic Places, two of which are also locally designated districts - Town Center and Pine Street. Our housing stock has increased by 800 units since The Township enjoyed a major period of growth in the 1930s and experienced relatively stable population since that time. Population had been decreasing since a high of 44,000 in 1970 to 37,387 in Population decreased slightly in the last decade to 37,669 in Population segments experiencing increases include the 0 to 19 and age groups. The elderly population has declined. The median age is now Commercial The principal commercial area is located along Bloomfield Avenue in the Township s Central Business District. A second major shopping center is in Upper Montclair along Valley Road. Five smaller neighborhood commercial districts include a variety of retail, personal services and restaurants. National retailers such as Anthropologie, The Gap, Talbot s, Urban Outfitters, Whole Foods and Williams Sonoma located here several years ago and provide solid anchors for the independent businesses. Banks continue to show an interest in Montclair, with several locating here within the past few years. The Township has attracted many new restaurants, including three Starbucks coffee shops. The Wellmont Theater reopened in 2012 after significant improvements to the structure and offers various popular acts that draw large crowds to the central business district on a regular basis. Many of the Township s older commercial buildings have been redeveloped for more intensive uses. Several older bank buildings along Bloomfield Avenue that have been vacant for many years are being adapted to provide retail on the first floor and offices on the upper floors. In Upper Montclair, the long-vacant Charlie Brown s restaurant was converted into a new mixed-use A-1

38 A-2building with 10,000 square feet of office on the second floor and 10,000 square feet of retail on the first floor. Similarly, the Planning Board recently approved a site plan to adapt and expand the vacant Warner Communications building to provide 5,000 square feet of retail on the first floor and 7,000 square feet of office. Finally, the Georgian Inn, which has operated as a rooming house for many years, is being completely overhauled to create a new 40-room boutique hotel. Two properties that received site plan approval in 2007 have submitted revised site plan to the Planning Board with the intent to start construction on 34 dwelling units and 3,000 square feet of retail space in the near future. Montclair has successfully utilized the Local Redevelopment and Housing Laws to redevelop vacant and underutilized properties in the Township Center. The former Hahne s Department Store, vacant for 15 years, was demolished in late 2004 and a seven story mixed residential/retail building was recently completed. The Montclair Parking Authority opened the Crescent Parking Deck in late 2005 which provides 430 parking spaces for shoppers and employees of the Township Center. The Bay Street Redevelopment Project, which is located adjacent to the Bay Street train station and includes 163 dwelling units and a 262 space parking garage, was completed in Nearby, Montclarion II, a new mixed-use redevelopment project, is under construction and will include 40 new dwelling units and 1,500 square feet of new retail space. Another mixed-use building is proposed on the adjacent property and will include a total of 46 dwelling units and 2,000 square feet of retail space. The Montclair Center Gateway Phase 1 redevelopment project is currently completing construction and will provide 256 new dwelling units, 20,000 square feet of office space, 21,000 square feet of retail space, a 148 room Marriot Autograph hotel and a parking garage with a maximum capacity of over 600 cars. Redevelopment plans are currently in the works for a complete renovation of the Lackawanna Plaza shopping center, redevelopment of the vacant social security building and adjacent parking lots, and a new 60,000 square foot medical office building adjacent to the Hackensack University Medical Center/Mountainside Hospital. Services The 365 bed Mountainside Hospital serves the Township and the surrounding area. Other services include two libraries with over a quarter million volumes, a YMCA with an indoor swimming pool, and new addition, 19 parks totaling about 300 acres providing a wide variety of recreational facilities including three municipally-owned outdoor swimming pools, tennis courts, an indoor ice rink, a private beach club and private indoor tennis, squash and racquetball facilities and a soccer dome. Safety is provided by a 106-officer police force and a fire department with a compliment of 87 full-time officers. Cultural Activities The Montclair Art Museum has numerous exhibitions each year and houses an outstanding collection of American and Native American art. The Museum offers classes for children and adults. The Township is also served by a number of arts organizations and private galleries. The Township formed a Montclair Arts Council in 2005 and hired its first director to coordinate arts programming and facilitate the installation of public art throughout the community. Entertainment is provided by the Montclair Operetta Club, Studio Players, Unity Concerts, the Montclair Dramatic Club (the oldest existing amateur dramatic club in the country), Luna Stage, as well as three movie theaters, a nationally recognized comedy club, jazz clubs and many ethnically-diverse restaurants.

39 A-3Transportation The large number of commuters to New York City and Newark are served by six train stations on a New Jersey Transit rail line that offers both direct service to Penn Station via the Midtown Direct and to connections in Lower Manhattan. The DeCamp Bus Line and New Jersey Transit both provide bus service to both New York and to neighboring municipalities. The Township is currently undertaking numerous efforts to maintain its quiet zone neighborhoods status. Newark International and Teterboro Airports are each about 30 minutes from the Township. The Garden State Parkway provides access to east/west Interstate Routes 80, 280 and 46. These routes just north of Montclair connect with the NJ Turnpike and Route 17, providing direct access to the NJ Meadowlands Sports Complex and Lincoln Tunnel. Education Educational facilities within the Township include a public school system, two private schools and two parochial schools, each providing instruction for grades K through 12. Over 100,000 square feet of building space was added to Montclair s public and private schools over the last 10 years to accommodate an increase in enrollment and improve programming. Montclair State University, founded in 1908 and offering a four-year curriculum to approximately 15,000 full and part-time students, as well as graduate programs and research facilities, is located at the northern boundary of Montclair. The University continues to implement a major capital expansion plan. There are also some 22 colleges and universities within a ten-mile radius of the Township offering various degree programs. Utilities To conserve energy and reduce expenses, the Township has implemented an extensive energy savings program. In October, 2005, Montclair received the first municipal Clean Energy Leadership Award from the N.J. Board of Public Utilities for our commitment to clean energy and efficiency programs, including investment in 6 CNG low-emission vehicles, and upgrading our traffic lights to Light-Emitting Diodes (LEDS). Electricity and gas are provided by PSE&G. In 2009, Montclair was awarded $155,000 from the U.S. Dept. of Energy s Energy Efficiency and Conservation Block Grants. The funds were used to leverage additional incentives from the NJ Office of Clean Energy, enabling us to complete comprehensive efficiency upgrades to all of our municipal buildings, at no cost to our taxpayers. The resulting improvements save the Township $65,000 annually on our utility bills. That same year, the U.S. EPA designated Montclair as a Climate Showcase Community. In 2016, the Township proceeded with another round of energy audits in hopes of saving more energy and more money. The Township also is exploring options for adding solar panels to several more municipal buildings. The Township pays reduced rate for our electricity supply through a cooperative purchasing agreement with 40 other municipalities, with the added benefit of a higher percentage of clean energy.

40 The Township collects solid waste and recycling weekly. Emphasis has been on reducing waste and extensive recycling, to decrease costs and environmental impacts from hauling to the Essex incinerator. We maintain one of the highest recycling rates in Essex County. The Township s water is obtained from the Wanaque Reservoir, of the North Jersey District Water Supply Commission, and we supplement the supply with three Township-owned wells. SEWERAGE COLLECTION SYSTEM The sewerage collection system is comprised of 104 miles of sewer lines and one pump station serving the entire Township and a small part of Cedar Grove and Little Falls. There are about 10,737 Township sewer line connections including Montclair State University. A sewer line is one connection to each residence, apartment, commercial establishment or public facility. The Township's sewerage collection system is connected with the Joint Second River Sewerage Meeting which in turn is connected with the Passaic Valley Sewerage Commission's trunk sewer collection system for treatment at its plant facilities located in Newark. The Township is one of five municipalities connected with the Joint Second River Sewerage Meeting, which annually invoices each municipality on the basis of each municipality's water usage for the year prior to the current fiscal year. Any discrepancies in the amount billed to each municipality at the start of a fiscal year are settled at the end of the fiscal year based upon a municipality's actual water usage during such fiscal year. WATER UTILITY The Montclair Water Bureau is a self-supporting utility with operations, maintenance and debt service charges paid from user fees. The supply of water is provided from two principal sources: 1. North Jersey District Water Supply Commission's Wanaque Reservoir. The Township's share of the Wanaque Reservoir's safe yield is 4.7 million gallons per day ("MGD") or 5% of the reservoir's safe yield; and 2. Three deep wells, with well head chlorination facilities and air stripping treatment facilities, supplying 1.5 MGD. The Township is currently requesting additional water capacity with DEP through Well Allocation. While the permit and construction has run into issues the Montclair Water Bureau has entered into an agreement with NJDWSC for an additional 1MGD of water to supplement its existing supply. The additional water is for 10yrs with 3 5 year option to extend. Supplemental water supplies can be provided by interconnections with Newark, the Passaic Valley Water Commission and NJ American systems. The Township's water distribution system requires two pumping stations, both with standby diesel-driven pumps, having a total pumping capacity of 16 MGD. Within the distribution system there is also 2 storage tanks with a combined capacity of 4 MG. Both pumping stations have recently been updated. A-4

41 A-5The Water Utility supplies water at wholesale rates to NJ American Water Company for Little Falls, Glen Ridge and the Passaic Valley Water Commissioners. User Charges Charges are billed quarterly to private and monthly to municipal and commercial entities. Quarterly charges are payable at the end of each quarter as the town is now is fully drive-by read type reading system. SOLID WASTE The Essex County Utilities Authority (the "ECUA") holds a franchise, granted by the New Jersey Department of Environmental Protection, that gives the ECUA control over the disposal of solid waste generated within Essex County, including the Township. In 1994, the United States Supreme Court in C&A Carbone v. Clarkstown held that the waste flow control ordinance of Clarkstown, New York violated the commerce clause of the United States Constitution. The flow control ordinance in Carbone is similar, though not identical, to the waste flow rules in New Jersey that authorize the ECUA's solid waste franchise. As a result, the State s waste flow control rules have been declared unconstitutional insofar as they discriminate against out-of-state operators of waste disposal facilities. See Atlantic Coast Demolition Co., Inc. v. Atlantic County Board of Chosen Freeholders et al., 112 F.3d 652 (3d Cir. 1997). The Township of Montclair negotiated a seven year contract with the ECUA to dispose its refuse. The contract period is from February 1, 2015 through January 31, This contract provides for a competitive rate and guaranteed disposal site thereby stabilizing one of the more volatile variables in municipal budgeting. The contract also addresses hazardous waste and environmental issues in a way that addresses the concerns of the community while providing a fiscally sound solution.

42 Environment The Township has become a model community for environmental sustainability, as sited by the NJ DEP s Office of Energy and Sustainability. This year we will again achieve re-certification with the innovative Sustainable Jersey Program ( making us eligible for further grants. Montclair s Environmental Commission recently passed a Tree Protection Ordinance, and crafted a Community Forestry Management Plan to protect our canopy, our liability, and earn grants. Montclair is a bike- and pedestrian-friendly community. We passed the state s first Complete Streets Policy (now adapted by over 130 municipalities and 7 counties in NJ), and we have received almost $1,000,000 in grants, and several awards, for our town-wide Safe Routes to Schools Programs. The Montclair Farmer s Market has just begun its 25 th successful season. Other Post Employment Benefits The Township provides post retirement health benefits in accordance with three (3) Resolutions adopted December 11, 2007 effective as of April 1, 2007 to employees represented by the Communication Workers of America (CWA), Office Professional Employee International Union (OPEIU) and other nonunion members. Each resolution specifies the length of employment and the percentage (%) of coverage costs, etc. that the Township will provide. In accordance with GASB 45, the Township has disclosed this information in the audit for the period ending December 31, BOARD OF EDUCATION OF MONTCLAIR Montclair Public Schools (the "School System") was established in The School System is a Type I school district that is coterminous with the Township's borders. The Board of Education of Montclair (the "Board") governs the nonfiscal operations of the School System and the Board of School Estimate oversees the School System's fiscal operations. The School System's fiscal year end is June 30th. The Board is composed of seven members appointed by the Township's Mayor for three-year terms on a staggered basis. The President and Vice-President are chosen for one-year terms from among the members. Two members of the Board serve on the Board of School Estimate. The Board is a policy making body and has the general responsibility for providing an educational program, the power to establish policies and supervise the public schools in the School System, responsibility to draw up the annual budget and present it to the Board of School Estimate for approval and the power to appoint the Superintendent of Schools (the "Superintendent"). The Administrative structure of the Board gives final responsibility for both the educative process and the business operation to the Superintendent. The Superintendent is the chief executive officer of the Board in charge of carrying out Board policies. The Business Administrator/Board Secretary is the chief financial officer and must submit monthly financial reports to the Board and annual reports to the State Department of Education. State law requires a Treasurer of School Moneys to hold in trust all school moneys and to make a monthly report to the Board. A-6

43 A-7MEMBERS OF THE BOARD OF EDUCATION Expiration Members Title of Term Jessica G. de Koninck Member May 15, 2020 Anne Mernin Member May 15, 2020 Jevon Caldwell-Gross Member May 15, 2019 Laura Hertzog President May 15, 2017 Joseph Kavesh Member May 15, 2018 Eve Robinson Member May 15, 2017 Franklin Turner Vice President May 15, 2018 SCHOOL OFFICIALS Interim Superintendent of Schools Barbara Pinsak Interim Board Secretary Steve DiGeronimo Treasurer of School Moneys Michael Zazzarino

44 A-8MEMBERS OF THE BOARD OF SCHOOL ESTIMATE The Board of School Estimate is composed of five members; the Mayor, two members of the Township Council and two members from the Board. The Board Secretary is also Secretary of the Board of School Estimate. The Board of School Estimate approves all operating and capital expenditures by the Board, the issuance of debt, and an annual budget. Members Township Members: Robert Jackson William Hurlock Richard McMahon Board of Education Members: Jessica de Koninck Joseph Kavesh Position Mayor Councilor Councilor Board Member Board Member THE SCHOOL SYSTEM The School System is comprised of seven elementary schools, three middle schools, one high school composed of a main building and an annex building, one building for administration and computer center. School Personnel There are 727 certified staff including administrators, principals, assistant principals, teachers, guidance counselors, librarians, nurses and child study team members. Of the 727 certified staff, 272 have B.A. degrees, 426 have Master degrees and 29 have Doctorates.

45 A-9School Site Descriptions In general, the school sites are adequate although some are below the State's recommended minimum acreage size. Elementary School System School Name Bradford 1927 Edgemont Hillside Nishuane Northeast Watchung Bullock Year Built Additions/ Renovations / N/A Student Capacity Enrollment Grades K-5 K K-2 K-5 K-5 K-5 Number of Classrooms Principal Assistant Principal Teachers Auditorium Gymnasium Library

46 Secondary School System High Middle Schools High School Complex Montclair Renaissance Glenfield Buzz Aldrin (1) Year Built * Additions/Renovations * 1902,29, ,30, ,75, 2003 Student Capacity , Enrollment Grades Number of Classrooms Principal Assistant Principal Teachers Auditorium Gymnasium Library (1) The Montclair High School physical plant is composed of a main building and the George Inness Annex building. Source: Board of Education Historical Student Enrollments Fiscal Year Number of Students , , , , , ,645 A-10

47 Graduation Requirements , , , ,621 Montclair High requires a minimum of 119 credits for graduation, and all graduates must meet the following requirements of the State of New Jersey: English 20 Mathematics 15 Social Studies/History 15 Science 15 Physical Education/Health 15 Fine, Practical and/or Performing Arts 5 Career Exploration 5 World Languages 5 Electives 21.5 Computers 2.5 In order to graduate, all students must successfully pass the State High School Proficiency Test in reading, writing and computational skills. SUMMARY OF THE ELEMENTARY AND SECONDARY EDUCATION SYSTEM IN NEW JERSEY The State's Constitution provides that the maintenance and the support of a thorough and efficient system of free public schools for the instruction of all children between the ages of 5 and 18 years is a legislative responsibility. Below is a summary of the role of the State. State Department of Education The New Jersey Department of Education (the "Department") was created by the State Legislature to exercise general supervision and control of public education. State Board of Education The Department is guided by the policy set forth by the State Board of Education (the "State Board"). The State Board adopts rules and regulations that have the effect of law and are A-11

48 binding upon local school districts. The State Board also decides on appeals from decisions of the Commissioner of Education on matters of school law or State Board regulations. Commissioner of Education The Commissioner of Education (the "Commissioner"), appointed by the Governor for a five-year, salaried term with the consent of the Senate, is secretary and chief executive officer of the State Board. He has the authority to recommend withholdings of State Financial Aid. His consent is required for authorization to sell school bonds that exceed the debt limit of a Board and he may also set the amount to be raised by taxation in a Board if a School Budget has not been adopted by a Board of School Estimate or by the voters. County Superintendents County Superintendents are appointed by the Commissioner, with the approval of the State Board, to act as an agent of the Department. They are charged with the enforcement of rules pertaining to the certification of teachers, financial reports and pupil registers. THE STATE S ROLE IN PUBLIC EDUCATION The constitution of the State of New Jersey provides that the legislature of the State shall provide for the maintenance and support of a thorough and efficient system of free public schools for the instruction of all children in the State between the ages of 5 and 18 years. Case law has expanded the responsibility to include children between the ages of 3 and 21. The responsibilities of the State with respect to the general supervision and control of public education have been delegated to the New Jersey Department of Education (the "Department"), which is a part of the executive branch of the State government and was created by the State Legislature. The Department is governed and guided by the policies set forth by the New Jersey Board of Education (the "State Board"). The State Board is responsible for the general supervision and control of public education and is obligated to formulate plans and to make recommendations for the unified, continuous and efficient development of public education of all people of all ages within the State. To fulfill these responsibilities, the State Board has the power, inter alia, to adopt rules and regulations that have the effect of law and that are binding upon school districts. The Commissioner of Education (the "Commissioner") is the chief executive and administrative officer of the Department. The Commissioner is appointed by the Governor of the State with the advice and consent of the State Senate, and serves at the pleasure of the Governor during the Governor's term of office. The Commissioner is Secretary and Chief Executive Officer of the State Board and is responsible for the supervision of all school districts in the State and is obligated to enforce the rules and regulations of the State Board. The Commissioner has the authority to recommend the withholding of State financial aid and the Commissioner's consent is required for authorization to sell school bonds that exceed the debt limit of the municipality in which the school district is located and may also set the amount to be A-12

49 raised by taxation for a board of education if a school budget has not been adopted by a board of school estimate or by the voters. An Executive County Superintendent of Schools (the "County Superintendent") is appointed for each county in the State by the Governor, upon the recommendation of the Commissioner and with the advice and consent of the State Senate. The County Superintendent reports to the Commissioner or a person designated by the Commissioner. The County Superintendent is responsible for the daily supervision of the school districts in the county and is charged with the enforcement of rules pertaining to the certification of teachers, pupil registers and financial reports and the review of budgets. Under the Uniform Shared Services and Consolidation Act, P.L. 2007, c. 63 approved April 3, 2007 (A4), the role of the county superintendent was changed to create the post of the Executive County Superintendent with expanded powers for the operation and management of school districts to, among other things, promote administrative and operational efficiencies, eliminate non-operating school districts and recommend a school district consolidation plan to eliminate districts though the establishment or enlargement of regional school districts, subject to voter approval. Categories of School Districts STRUCTURE OF SCHOOL DISTRICTS IN NEW JERSEY State school districts are characterized by the manner in which the board of education or the governing body, takes office. School districts are principally categorized in the following categories: (1) Type I, in which the mayor or chief executive officer ("CEO") of a municipality appoints the members of a board of education and a board of school estimate, which board of school estimate consists of two (2) members of the board of education, two (2) members of the governing body of the municipality and the mayor or CEO of the municipality comprising the school district, approves all fiscal matters; (2) Type II, in which the registered voters in a school district elect the members of a board of education and either (a) the registered voters also vote upon all fiscal matters, or (b) a board of school estimate, consisting of two (2) members of the governing body of and the CEO of each municipality within the district and the president of and one member of the board of education, approves all fiscal matters; (3) Regional and consolidated school districts comprising the territorial boundaries of more than one municipality in which the registered voters in the school district elect members of the board of education and vote upon all fiscal matters. Regional school districts may be All Purpose Regional School Districts or Limited Purpose Regional School Districts ; (4) State operated school districts created by the State Board, pursuant to State law, when a local board of education cannot or will not correct severe educational deficiencies; A-13

50 (5) County vocational school districts have boards of education consisting of the County Superintendent and four (4) members unless it is a county of the first class, which adopted an ordinance, in which case it can have a board consisting of seven (7) appointed members which the board of chosen freeholders of the county appoints. Such vocational school districts shall also have a board of school estimate, consisting of two (2) members appointed by the board of education of the school district, two (2) members appointed by the board of chosen freeholders and a fifth member being the county executive or the director of the board of chosen freeholders of the county, which approves all fiscal matters; (6) County special services school districts have boards of education consisting of the County Superintendent and six (6) persons appointed by the board of chosen freeholders of the county. Such special services school districts shall also have a board of school estimate, consisting of two (2) members appointed by the board of education of the school, two (2) members appointed by the board of chosen freeholders and a fifth member being the freeholder-director of the board of chosen freeholders, which approves all fiscal matters. There is a procedure whereby a Type I school district or a Type II school district may change from one type to the other after an approving public referendum. Such a public referendum must be held whenever directed by the municipal governing body or board of education in a Type I district, or the board of education in a Type II district, or when petitioned for by fifteen percent (15%) of the voters of any school district. The School System is a Type I school district. Under the Uniform Services and Consolidation Act, the Executive County Superintendent is required to eliminate non-operating school districts and to recommend consolidation to eliminate districts though the establishment or enlargement of regional school districts, subject to voter approval. School Budgetary Process (N.J.S.A. 18A:22-1 et seq.) In a Type I school district, a separate body from the school district, known as the board of school estimate, examines the budget requests and fixes the appropriation amounts for the next year's operating budget at or after a public hearing. This board, whose composition is fixed by statute, certifies the budget to the municipal governing body or Board. If the Board disagrees with the certified budget of the board of school estimate, then it can appeal to the Commissioner to request changes. In a Type II district, the elected Board develops the budget proposal and, at or after a public hearing, submits it for voter approval. Debt service provisions are not subject to public referendum. If approved, the budget goes into effect. If defeated, the governing bodies of the constituent municipalities must develop the school budget by May 19 of each year. Should the governing bodies be unable to do so, the Commissioner establishes the local school budget. A-14

51 Levy and Collection of Taxes SUMMARY OF CERTAIN PROVISIONS FOR THE PROTECTION OF SCHOOL DEBT School districts in the State do not levy or collect taxes to pay those budgeted amounts that are not provided by the State. The municipality within which a school district is situated levies or collects the required taxes and must remit them in full to the school district. Budgets and Appropriations School districts in the State must operate on an annual cash basis budget. Each school district must adopt an annual budget in such detail and upon forms as prescribed by the Commissioner, to which must be attached an itemized statement showing revenues, including State and Federal aid, and expenditures. The Commissioner must approve a budget prior to its final adoption and has the power to increase or decrease individual line items in a budget. Any amendments to a school district's budget must be approved by the board of education or the board of school estimate, as the case may be. Every budget submitted must provide no less than the minimum permissible amount deemed necessary under State law to provide for a thorough and efficient education as mandated by the State constitution. The Commissioner may not approve any budget unless the Commissioner is satisfied that the district has adequately implemented within the budget the Core Curriculum Content Standards required by State law. If necessary, the Commissioner is authorized to order changes in the local school district s budget. The Commissioner will also ensure that other provisions of law are met including the limitations on taxes and spending explained below. Tax and Spending Limitations The Public School Education Act of 1975, N.J.S.A. 18A:7A-1 et seq., P.L. 1975, c. 212 (amended and partially repealed) first limited the amount of funds that could be raised by a local school district. It limited the annual increase of any school district's net current expense budget. The budgetary limitation was known as a "CAP" on expenditures. The "CAP" was intended to control the growth in local property taxes. Subsequently there have been numerous legislative changes as to how the spending limitations would be applied. The Quality Education Act of 1990, N.J.S.A. 18A:7D-1 et seq., P.L. 1990, c. 52 (now repealed) (the QEA ) also limited the annual increase in the school district's current expense and capital outlay budgets by a statutory formula linked to the annual percentage increase in per capita income. The QEA was amended and revised by chapter 62 of the Laws of New Jersey of 1991, and further amended by chapter 7 of the Laws of New Jersey of The Comprehensive Educational Improvement and Financing Act of 1996, N.J.S.A. 18A:7F-1 et seq., P.L. 1996, c. 138 (CEIFA), (as amended by P.L. 2004, c.73, effective July 1, 2004), which followed QEA, also limited the annual increase in a school district's net budget by a spending growth limitation. CEIFA limited the amount school districts can increase their annual current expenses and capital outlay budgets, defined as a school district's Spending A-15

52 Growth Limitation. Generally, budgets could increase by either 2.5% or the consumer price index, whichever is greater. Amendments to CEIFA lowered the budget cap to 2.5% from 3%. Budgets can also increase because of certain adjustments for enrollment increases, certain capital outlay expenditures, pupil transportation costs, and special education costs that exceed $40,000 per pupil. Waivers are available from the Commissioner based on increasing enrollments and other fairly narrow grounds or by limited approval of the voters at the annual school election. P.L. 2007, c. 62, effective April 3, 2007 (Assembly Bill A1), further provided limitations on a school district spending by limiting the amount a school district can raise for school district purposes through the property tax levy by 4% over the prior budget year s tax levy. P.L. 2007, c. 62 provides for adjustments to the cap for increases in enrollment, reductions in State aid and increased health care costs and for certain other extraordinary cost increases that must be approved by the Commissioner. Although P.L. 2007, c. 62 allows for certain adjustments to the 4% tax levy cap, for increases in enrollment, reductions in certain State aid and increases in health care costs, the bill also grants discretion to the Commissioner to grant other waivers from the cap for increases in special education costs, capital outlay, and tuition charges for sending districts. The Commissioner will have the ability to grant extraordinary waivers to the tax levy cap for certain other cost increases beginning in fiscal year 2009 through P.L. 2007, c. 62 is deemed to supersede the prior limitations on the amount school districts can increase their annual current expenses and capital outlay budgets known as a school district's spending growth limitation amount (the "Spending Growth Limitation") created by CEIFA (as amended by P.L. 2004, c.73, effective July 1, 2004). However, Chapter 62 is in effect only through fiscal year 2012 and would have to be extended by legislation if it is to continue. Otherwise, the Spending Growth Limitations on the general fund and capital outlay budget would be in effect. Debt service is not limited either by the Spending Growth Limitations or the 4% Cap on the tax levy increase imposed by Chapter 62. Issuance of Debt Among the provisions for the issuance of school debt are the following requirements: (i) bonds must mature in serial installments within the statutory period of usefulness of the projects being financed but not exceeding forty (40) years, (ii) debt must be authorized by a resolution of a board of education (and approved by a board of school estimate in a Type I school district), and (iii) there must be filed with the State by each municipality comprising a school district a Supplemental Debt Statement and a school debt statement setting forth the amount of bonds and notes authorized but unissued and outstanding for such school district. A-16

53 Annual Audit (N.J.S.A. 18A:23-1 et seq.) Every board of education is required to provide an annual audit of the school district's accounts and financial transactions. A licensed public school accountant must perform the audit no later than five (5) months after the end of the school fiscal year. The audit, in conformity with statutory requirements, must be filed with the board of education and the Commissioner. Additionally, the audit must be summarized and discussed at a regular public meeting of the local board of education within thirty (30) days following receipt of the annual audit by such board of education. Temporary Financing (N.J.S.A. 18A:24-3) Temporary notes may be issued in anticipation of the issuance of permanent bonds for a capital improvement or capital project. Such temporary notes may not exceed in the aggregate the amount of bonds authorized for such improvement or project. A school district's temporary notes may be issued for one (1) year periods, with the final maturity not exceeding five (5) years from the date of original issuance; provided, however, that no such notes shall be renewed beyond the third anniversary date of the original notes unless an amount of such notes, at least equal to the first legally payable installment of the bonds in anticipation of which said notes are issued, is paid and retired subsequent to such third anniversary date from funds other than the proceeds of obligations. School districts may not capitalize interest on temporary notes, but must include in each annual budget the amount of interest due and payable in each fiscal year on all outstanding temporary notes. Debt Limitation (N.J.S.A. 18A:24-19) Except as provided below, no additional debt shall be authorized if the principal amount, when added to the net debt previously authorized, exceeds a statutory percentage of the average equalized valuation of taxable property in a school district. As a kindergarten (K) through grade six (6) school district, the School System can borrow up to 2.5% of the average equalized valuation of taxable property in the School System. The School System has not exceeded its 2.5% debt limit. Capital Lease Financing School districts are permitted to enter into lease purchase agreements for the acquisition of equipment or for the improvement of school buildings. Generally, lease purchase agreements cannot exceed five years except for certain energy-saving equipment which may be leased for up to fifteen (15) years if paid from energy savings. Lease purchase agreements for a term of five (5) years or less must be approved by the Commissioner. The Educational Facilities Construction and Financing Act, P.L.2000, c. 72, repealed the authorization to enter into facilities leases in excess of five years. The payment of rent on an equipment lease and on a five year and under facilities lease is treated as a current expense and within the school district s Spending Growth Limitation and tax levy cap. Lease purchase payments on leases in excess of five years entered into under prior law (CEIFA) are treated as debt service payments and, therefore, will receive debt service aid if the school district is entitled and are outside the school district s Spending Growth Limitation and tax levy cap. A-17

54 Energy Saving Obligations Under P.L. 2009, c. 4, approved January 21, 2009 and effective 60 days thereafter, districts may issue energy savings obligations without voter approval to fund certain improvements that result in reduced energy use, facilities for production of renewable energy or water conservation improvements provided that the value of the savings will cover the cost of the measures. SUMMARY OF STATE AID TO SCHOOL DISTRICTS In 1973, the Supreme Court of the State of New Jersey (the "Court") first ruled in Robinson v. Cahill that the method then used to finance public education principally through property taxation was unconstitutional. Pursuant to the Court's ruling, the State Legislature enacted the Public School Education Act of 1975, N.J.S.A. 18A:7A-1 et seq., (P.L. 1975, c. 212) (the "Public School Education Act") (since amended and partially repealed), which required funding of the State's school aid through the New Jersey Gross Income Tax Act, P. L.1976, c. 47, since amended and supplemented, enacted for the purpose of providing property tax relief. On June 5, 1990, the Court ruled in Abbott v. Burke that the school aid formula enacted under the Public School Education Act was unconstitutional as applied. The Court found that poorer urban school districts were significantly disadvantaged under that school funding formula because school revenues were derived primarily from property taxes. The Court found that wealthy school districts were able to spend more, yet tax less for educational purposes. Since that time there has been much litigation and many cases affecting the State s responsibilities to fund public education and many legislative attempts to distribute State aid in accordance with the court cases and the constitutional requirement. The cases addressed not only current operating fund aid but also addressed the requirement to provide facilities aid as well. The legislation has included the Quality Education Act of 1990, N.J.S.A. 18A:7D-1 et seq., (P.L. 1990, c. 52) ("QEA") (now repealed), the Comprehensive Educational Improvement and Financing Act of 1996, N.J.S.A. 18A:7F-1 et seq., (P.L. 1996, c. 138) (CEIFA) and the Educational Facilities Construction and Financing Act, (P.L. 2000, c. 72) ( EFCFA ), which became law on July 18, For the past several years aid was simply determined in the State Budget, which itself is an act of the legislature, based upon amounts provided in prior years. The most current school funding formula, provided in the School Funding Reform Act of 2008, P.L. 2007, c. 260 approved January 1, 2008 (A500), attempts to remove the special status given to certain districts known as Abbot Districts after the school funding cases and instead has funding follow students with certain needs and provides aid in a way that takes into account the ability of the local district to raise local funds to support the budget in amounts deemed adequate to provide for a thorough and efficient education as required by the State constitution. This legislation was recently challenged in the Court, and the Court held that the State s plan for school aid is a constitutionally adequate scheme. A-18

55 Notwithstanding over 35 years of litigation, the State provides State aid to school districts of the State in amounts provided in the State Budget each year. These now include equalization aid, special education categorical aid, transportation aid, preschool education aid, instructional supplement aid, supplemental core curriculum standards aid, distance learning network aid, bilingual aid, security aid, adjustment aid and other aid determined in the discretion of the Commissioner. State law requires that the State will provide aid for the construction of school facilities (Facilities Aid) in an amount equal to the greater of the district aid percentage or 40% times the eligible costs determined by the Commissioner of Education either in the form of a grant or debt service aid as determined under the Education Facilities Construction and Financing Act of The amount of the aid to which a district is entitled is established prior to the authorization of the project. Grant funding is provided by the State up front and debt service aid must be appropriated annually by the State. ECONOMIC AND DEMOGRAPHIC INFORMATION FOR THE TOWNSHIP OF MONTCLAIR COUNTY OF ESSEX, NEW JERSEY ECONOMIC INFORMATION Population Year Montclair Essex County New Jersey , ,969 8,791, , ,633 8,414, , ,206 7,730, , ,451 7,364, , ,526 7,171, , ,545 6,066, , ,949 4,835,329 A-19

56 Population per Square Mile Square Miles Township of Montclair , , , , , County of Essex , , , , , State of New Jersey 7, , , , Source: N.J. Department of Labor and Industry, Office of Demographic and Economic Analysis. TOWNSHIP OF MONTCLAIR COUNTY OF ESSEX, NEW JERSEY TREND OF EMPLOYMENT AND UNEMPLOYMENT Labor Unemployment Year Force Employment Rate 2017(April) Township 19,400 18, % County 376, , State 4,560,900 4,340, Township 19,600 18, % County 376, , State 4,560,900 4,340, Township 19,800 18, % County 375, , State 4,560,900 4,340, Township 21,100 20, % County 366, , State 4,495,300 4,200, Township 20,987 19, % County 367, , State 4,598,300 4,206, Township 21,010 19, % County 368, , State 4,528,000 4,095, A-20

57 2011 Township 21,000 19, % County 371, , State 4,556,200 4,131, Township 21,000 19, % County 370, , State 4,554,100 4,116, Source: State of New Jersey Department of Labor and Workforce Development, Planning and Demographic Reports. TOWNSHIP OF MONTCLAIR COUNTY OF ESSEX, NEW JERSEY TEN LARGEST TAXPAYERS PROPERTY OWNER/TAXPAYER Rockcliffe Apartments Lackawanna 2013 LLC Hawthorne Towers, LLC Princeton Bank & Industry Consulting Group Bellclair, LLC Richard Grabowsky Orange Pavilion, LLC Church Street Association Bank of America First Montclair, LLC 2017 PROPERTY ASSESSED TYPE VALUE 4C - Apartments $15,146,300 4A - Commercial $13,487,000 4C - Apartments $11,288,000 4A - Commercial $10,732,400 4A - Commercial $10,649,300 4A - Commercial $9,674,600 4C - Apartments $9,250,000 4A - Commercial $8,315,000 4A - Commercial $8,088,400 4A - Commercial $7,841,300 A-21

58 TOWNSHIP OF MONTCLAIR COUNTY OF ESSEX, NEW JERSEY ASSESSED VALUATION OF PROPERTY BY CLASS PROPERTY CLASSIFICATION * Vacant Land $16,524,600 $17,238,900 $17,717,300 $16,472,400 $16,130,300 $26,808,200 $27,591,400 Residential $4,895,004,400 $4,879,919,300 $4,884,480,810 $4,898,705,110 $4,900,422,400 $6,190,707,050 $6,303,710,350 Commercial $563,938,000 $569,184,400 $581,743,800 $588,899,400 $590,234,900 $672,102,250 $392,606,250 Industrial $3,891,000 $3,891,000 $4,539,200 $4,539,500 $4,539,500 $5,059,900 $5,059,900 Apartments $243,149,800 $240,140,600 $246,801,000 $252,173,500 $252,992,300 $274,447,400 $282,541,400 Total $5,722,507,800 $5,710,374,200 $5,735,282,110 $5,760,789,910 $5,764,319,400 $7,169,124,800 $7,011,509,300 Exempt Property $699,897,000 $672,102,200 $657,073,600 $656,601,900 $659,913,200 $732,540,450 $686,023,950 Total $6,422,404,800 $6,382,476,400 $6,392,355,710 $6,417,391,810 $6,424,232,600 $7,901,665,250 $7,697,533,250 * Reassessment Source: The Township of Montclair A-22

59 TOWNSHIP OF MONTCLAIR COUNTY OF ESSEX, NEW JERSEY PROPERTY VALUATIONS * Assessed Valuation: Land and Improvements $5,722,507,800 $5,710,374,200 $5,735,282,110 $5,734,327,210 $5,756,789,910 $5,764,319,400 $7,169,124,800 Personal Tangible Property $8,116,600 $8,386,600 $7,948,928 $8,380,841 $9,368,010 $11,362,189 $12,016,628 Net Valuation Taxable $5,730,624,400 $5,718,760,800 $5,743,231,038 $5,742,708,051 $5,766,157,920 $5,775,681,589 $7,181,141,428 Net Valuation for County Tax Apportionment $7,107,693,577 $6,805,822,663 $6,746,283,622 $6,519,107,090 $6,603,712,425 $6,881,985,278 $6,956,465,593 County Equalized Ratio 80.75% 84.17% 85.28% 88.26% 87.49% % % * Reassessment Source: County of Essex Abstract of Ratables A-23

60 TOWNSHIP OF MONTCLAIR COUNTY OF ESSEX, NEW JERSEY APPORTIONMENT OF TAX RATE (Per $100 of Assessed Valuation) * Municipal $0.924 $0.913 $0.906 $0.902 $0.884 $0.683 Municipal Library $0.040 $0.039 $0.038 $0.038 $0.040 $0.033 Local School $0.129 $0.125 $0.107 $0.107 $0.106 $0.066 District School $1.922 $1.840 $1.767 $1.692 $1.688 $1.358 County $0.601 $0.591 $0.572 $0.545 $0.517 $0.407 County Open Space $0.018 $0.018 $0.018 $0.017 $0.018 $0.014 Total Tax Rate $3.634 $3.526 $3.408 $3.301 $3.253 $2.561 * Reassessment Source: County of Essex Abstract of Ratables A-24

61 TOWNSHIP OF MONTCLAIR COUNTY OF ESSEX, NEW JERSEY APPORTIONMENT OF TAX LEVY Municipal 52,801, ,420, ,011, ,011, ,062, ,079, Library 2,273, ,244, ,177, ,199, ,283, ,359, School 117,304, ,856, ,634, ,651, ,616, ,222, County 35,405, ,971, ,851, ,422, ,893, ,232, $ $ $ $ $ $ Total 207,785, ,492, ,674, ,285, ,855, ,893, Source: The Township Financial Statements A-25

62 TOWNSHIP OF MONTCLAIR COUNTY OF ESSEX, NEW JERSEY COMPARISON OF TAX LEVIES AND COLLECTIONS TAX TITLE LIENS AND DELINQUENT TAXES A-26 Current Year's Collections Total Tax Levy Collected to Collection Year Tax Levy Amount Percentage Date Percentage 2016 $209,768,645 $207,379, $207,379, ,446, ,644, ,644, ,667, ,571, ,571, ,234, ,113, ,113, ,639, ,621, ,621, ,649, ,677, ,677, ,102, ,341, ,341, Amount Amount of Percentage of Tax Delinquent Total of Dec. 31 Title Liens Taxes Delinquent Tax Levy 2016 $152,642 $2,171,936 $2,324, ,409 2,449,282 2,616, ,336 2,541,987 2,674, ,556 2,358,955 2,478, ,177 2,791,165 2,898, ,979 3,064,484 3,159, ,850 3,582,694 3,656, Source: The Township Financial Statements

63 TOWNSHIP OF MONTCLAIR COUNTY OF ESSEX, NEW JERSEY COMPARATIVE SCHEDULE OF FUND BALANCES Current Fund Utilized in Balance Succeeding Year December 31 Years Budget 2016 $10,937,643 $3,935, ,370,256 3,235, ,807,797 3,025, ,150,431 2,408, ,346,174 1,394, ,341,735 1,100,000 Water Utility 2016 $3,192,116 $1,947, ,786,127 2,646, ,337, , ,149, , ,600, , ,691, ,895 Sewer Utility 2016 $1,552,134 $ 926, ,260, , ,491, , ,466, , ,374, , ,861,618 1,627,039 Parking Utility 2016 $1,492,261 $504, ,322, , ,549, , , ,735, , ,791 0 A-27

64 TOWNSHIP OF MONTCLAIR COUNTY OF ESSEX, NEW JERSEY DEBT STATEMENT AS OF DECEMBER 31, 2016 Gross Debt School Debt: Serial Bonds Issued and Outstanding $66,760,000 Temporary Bonds and Notes Issued and Outstanding 4,855,000 Temporary Bonds and Notes Authorized but Not Issued 5,204,114 Self-Liquidating Purposes: N.J. Environmental Infrastructure Loan Program: Issued 2,666,521 Serial Bonds Issued and Outstanding 19,790,000 Bond Anticipation Notes Issued and Outstanding 7,394,000 Bond Anticipation Notes Authorized but Not Issued 470,461 Municipal Purposes: Serial Bonds Issued and Outstanding 43,034,000 Bond Anticipation Notes Issued and Outstanding 20,084,200 Bond Anticipation Notes Authorized but Not Issued 6,492,038 Green Acres and Infrastructure Loans Payable 1,332,459 $ 76,819,114 30,320,982 70,942,697 Total Gross Debt 178,082,793 Statutory Deductions School Debt: Local School District: Maximum 76,819,114 Self-Liquidating Purposes 30,320,982 Municipal Purposes 235, ,375,250 Statutory Net Debt $ 70,707,543 Average Equalized Valuation of Real Property for $6,869,904,939 Net Debt Percentage (Statutory Debt Limit - 3 ½%) 1.029% REMAINING STATUTORY BORROWING POWER 3 1/2% of Equalized Valuation Basis $240,446,673 Less: Statutory Net Debt $70,707,543 Remaining Municipal Borrowing Power December 31, 2016 $169,739,130 *Statutory deductions are used for the purpose of determining municipal borrowing power under State Law. The Municipality is obligated to pay the full amount of its gross debt. A-28

65 TOWNSHIP OF MONTCLAIR COUNTY OF ESSEX, NEW JERSEY UNDERLYING DEBT DECEMBER 31, 2016 County of Essex $ 558,400,689 Essex County Utilities Authority: Guaranteed Project Bonds and Notes Under Deficiency Agreement 49,515,000 Essex County Improvement Authority: Guarantee of Bonds Pursuant to N.J.S. 40:37A ,955,000 Gross Debt December 31, 2016* $1,045,873,689 Apportionment to Township of Montclair $ 87,163, Basis of Debt Apportionment: Ratio of Equalized Valuation Basis: Township of Montclair $6,805,822,663 Essex County Equalized Valuation Basis $83,791,332,909 Ratio - Township of Montclair 8.12% *Includes both the Guarantee of Essex County Improvement Authority Bonds as well as Bonds Issued and Bonds Authorized but Not Issued for Capital Projects of County Colleges. A-29

66 TOWNSHIP OF MONTCLAIR COUNTY OF ESSEX, NEW JERSEY GROSS DEBT COMPARED WITH TRUE VALUE Municipal Debt Municipal Debt Including Apportioned underlying Gross Debt as of December 31, 2016 $70,942, $158,105, Aggregate Fair Value for All Taxable Property: Assessed Value $5,718,760,800 Amount Added for Equalization: Real Property Assessed 84.17% of True Value 1,145,747 Total Property at True Value (2016) $5,719,906,547 Gross Debt as a Percentage of True Value 1.240% 2.764% A-30

67 APPENDIX B AUDITED FINANCIAL STATEMENTS

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101 TOWNSHIP OF MONTCLAIR SEWER UTILITY FUND COMPARATIVE BALANCE SHEETS REGULATORY BASIS DECEMBER 31, 2016 AND 2015 E Sheet # 1 ASSETS Operating Fund Cash - Checking $ 2,046, $ 1,012, Change Fund ,046, ,012, Interfund Receivable 27, , ,074, ,644, Receivables and Inventory with Full Reserves: Consumer Accounts Receivable 597, , Inventory - Materials and Supplies , , , ,671, ,389, Capital Fund Cash 409, , Environmental Infrastructure Loan Receivable 318, Fixed Capital 5,098, ,407, Fixed Capital Authorized and Uncompleted 439, ,145, ,947, ,655, $ 8,633, $ 9,044, See accompanying notes to financial statements. -34-

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