TOWN OF MARSHFIELD, MASSACHUSETTS $2,792,000 GENERAL OBLIGATION MUNICIPAL PURPOSE LOAN OF 2018 BONDS

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1 OFFICIAL STATEMENT DATED JULY 11, 2018 New Issue Rating: See Rating herein. S&P Global Ratings: AA+ In the opinion of Locke Lord LLP, Bond Counsel, based upon an analysis of existing law and assuming, among other matters, compliance with certain covenants, interest on the Bonds is excluded from gross income for federal income tax purposes under the Internal Revenue Code of 1986, as amended (the Code ). Interest on the Bonds will not be included in computing the alternative minimum taxable income of individuals or, except as described herein, corporations. Under existing law, interest on the Bonds is exempt from Massachusetts personal income taxes, and the Bonds are exempt from Massachusetts personal property taxes. Bond Counsel expresses no opinion regarding any other tax consequences related to the ownership or disposition of, or the accrual or receipt of interest on, the Bonds. See Tax Exemption herein. The Bonds will not be designated as qualified tax-exempt obligations for purposes of Section 265(b)(3) of the Code. TOWN OF MARSHFIELD, MASSACHUSETTS $2,792,000 GENERAL OBLIGATION MUNICIPAL PURPOSE LOAN OF 2018 BONDS DATED DUE Date of Delivery July 15 (as shown on the inside cover page hereof) The Bonds are issuable only in fully registered form registered in the name of Cede & Co., as Bondowner and nominee for The Depository Trust Company ("DTC"), New York, New York. DTC will act as securities depository for the Bonds. Purchases of the Bonds will be made in book-entry form, in denominations of $5,000 or any integral multiple thereof, with the exception of two $1,000 denominations maturing in (See THE BONDS - Book-Entry Transfer System" herein). Principal of the Bonds will be payable July 15 of the years in which the Bonds mature. Interest on the Bonds will be payable January 15 and July 15, commencing July 15, Principal and semiannual interest on the Bonds will be paid by U.S. Bank National Association, Boston, Massachusetts, as Paying Agent. So long as DTC or its nominee, Cede & Co., is the Bondowner, such payments will be made directly to such Bondowner. Disbursement of such payments to the DTC Participants is the responsibility of DTC and disbursement of such payments to the Beneficial Owners is the responsibility of the DTC Participants and Indirect Participants, as more fully described herein. The Bonds are subject to redemption prior to their stated maturity dates as described herein. An opinion of Bond Counsel will be delivered with the Bonds to the effect that the Bonds are valid general obligations of the Town of Marshfield, Massachusetts, and that the principal of and interest on the Bonds are payable from taxes that may be levied upon all taxable property in the Town, subject to the limit imposed by Chapter 59, Section 21C of the General Laws. MATURITIES, AMOUNTS, RATES, YIELDS AND CUSIPS Due Principal Interest Cusip Due Principal Interest Cusip July 15 Amount Rate Yield July 15 Amount Rate Yield $ 147, % 1.50 % F $ 140, % 2.50 % G , F , H , G , H , G , H , G , H , G , H , G , H , G , J , G , J31 $280,000 Interest Rate 3.00% Term Bond Maturing July 15, 2031 Yield 3.00% CUSIP # H41 The Bonds are offered subject to the final approving opinion of Locke Lord LLP, Boston, Massachusetts, Bond Counsel, as aforesaid, and to certain other conditions referred to herein and in the Notice of Sale. Hilltop Securities Inc., Boston, Massachusetts has acted as Financial Advisor to the Town with respect to the Bonds. (See Financial Advisory Services of Hilltop Securities Inc. herein). The Bonds in definitive form will be delivered to DTC, or its custodial agent, on or about July 26, 2018, against payment to the Town in federal funds.

2 TABLE OF CONTENTS Page SUMMARY STATEMENT 3 NOTICE OF SALE 4 Bidding Parameters 5 EXHIBIT 1 Form of Issue Price Certificates 9 OFFICIAL STATEMENT: 15 THE BONDS: Description of the Bonds 15 Redemption Provisions 15 Optional Redemption 15 Mandatory Redemption 15 Notice of Redemption 15 Record Date 16 Book-Entry Transfer System 16 Authorization of the Bonds and Use of Proceeds 17 Principal Maturities by Purpose 18 Tax Exemption 18 Risk of Future Legislative Changes and/or Court Decisions 19 Security and Remedies 20 Opinion of Bond Counsel 21 Rating 21 Financial Advisory Services of Hilltop Securities Inc. 21 Continuing Disclosure 22 TOWN OF MARSHFIELD, MASSACHUSETTS: General 23 Principal Town Officers 23 Municipal Services 23 Public School Facilities 23 Education 24 Industry and Commerce 24 Largest Employers 25 Labor Force, Employment and Unemployment Rate 25 Economic Development 25 Building Permits 26 Other Data 27 Median Age 27 Per Capita Income 27 Family Income 27 Household Income 28 Median Value Owner 28 Population 28 PROPERTY TAXATION: Tax Levy Computation 29 Assessed Valuations and Tax Levies 30 Classification of Property 30 Largest Taxpayers 31 State Equalized Valuation 31 Abatements and Overlay 31 Tax Collections 32 Page Tax Titles and Possessions 32 Sale of Tax Receivables 33 Taxation to Meet Deficits 33 Tax Limitations 33 Initiative Petitions 34 Unused Levy Capacity 35 Pledged Taxes 35 Community Preservation Act 35 TOWN FINANCES: Budget and Appropriation Process 37 Budget Trends 37 Revenues 38 School Building Assistance 39 Investment of Town Funds 40 Annual Audits 40 Financial Statements 40 Governmental Funds Balance Sheet - June 30, June 30, June 30, Statement of Revenues and Expenditures General Fund as of - June 30, 2017 through Unassigned General Fund Balances and Free Cash 49 Tax Increment Financing for Development Districts 49 INDEBTEDNESS: Authorization of General Obligation Bonds and Notes 50 Debt Limits 50 Types of Obligations 50 Direct Debt Summary 51 Debt Ratios 52 Principal Payments by Purpose 52 Debt Service Requirements 53 Authorized Unissued Debt and Prospective Financing 53 Overlapping Debt 54 Contractual Obligations 54 Retirement Plan 55 Plymouth County Regional Retirement Funding Schedule 56 Other Post-Employment Benefits 57 Collective Bargaining 57 LITIGATION 58 APPENDIX A - Fiscal 2017 Audit APPENDIX B - Proposed Form of Legal Opinion APPENDIX C Proposed Form of Continuing The information and expressions of opinion in this Official Statement are subject to change without notice. Neither the delivery of this Official Statement nor any sale of the Bonds shall, under any circumstances, create any implication that there has been no material change in the affairs of the Town since the date of this Official Statement.

3 SUMMARY STATEMENT The information set forth below is qualified in its entirety by the information and financial statements appearing elsewhere in the Official Statement. Date of Sale: Location of Sale: Issuer: Issue: Wednesday, July 11, 2018, 11:00 A.M. (Eastern Time). Hilltop Securities Inc., 54 Canal Street, 3rd Floor, Boston, Massachusetts (See Financial Advisory Services of Hilltop Securities Inc. herein).. $2,792,000 General Obligation Municipal Purpose Loan of 2018 Bonds. Official Statement Dated: July 11, Dated Date of the Bonds: Principal Due: Purpose and Authority: Redemption: Security for the Bonds: Credit Rating: Bond Insurance: Basis of Award: Tax Exemption: Continuing Disclosure: Bank Qualification: Paying Agent: Legal Opinion: Financial Advisor: Delivery and Payment: Issuer Official: As of their date of delivery. Serially July 15, 2019 through July 15, 2019 and July 15, 2032 through July 15, 2038 with one Term Bond maturing July 15, 2031, as detailed herein. Bond proceeds will be used to finance various capital projects in accordance with the Massachusetts General Laws as detailed herein. See Authorization of the Bonds and Use of Proceeds. The Bonds are subject to redemption prior to their stated maturity dates as described herein. The Bonds are general obligations of the Town, and the principal of and interest on the Bonds are payable from taxes that may be levied upon all taxable property in the Town, subject to the limit imposed by Chapter 59, Section 21C of the General Laws. S&P Global Ratings has assigned a rating of AA+ to the Bonds. The Town has not contracted for the issuance of any policy of municipal bond insurance or any other credit enhancement facility. Lowest True Interest Cost (TIC), as of the dated date. No bid of less than par plus a premium of $60,000 will be accepted on the Bonds. Refer to "THE BONDS - Tax Exemption therein and Appendix B, "Proposed Form of Legal Opinion. Refer to "THE BONDS - Continuing Disclosure" herein and Appendix C, "Proposed Form of Continuing Disclosure Certificate. The Bonds will not be designated as qualified tax-exempt obligations for purposes of Section 265(b)(3) of the Internal Revenue Code of 1986, as amended. U.S. Bank National Association, Boston, Massachusetts. Locke Lord LLP, Boston, Massachusetts. Hilltop Securities Inc., Boston, Massachusetts. It is expected that delivery of the Bonds in book-entry only form will be made to The Depository Trust Company, or to its custodial agent, on or about July 26, 2018, against payment in federal funds. Questions concerning the Official Statement should be addressed to: Mr. Patrick Dello Russo Jr., Town Treasurer, Telephone (781) or Mr. Peter Frazier, Managing Director, Hilltop Securities Inc., Boston, Massachusetts Telephone (617)

4 NOTICE OF SALE TOWN OF MARSHFIELD, MASSACHUSETTS $2,792,000* GENERAL OBLIGATION MUNICIPAL PURPOSE LOAN OF 2018 BONDS The (the Town ) will receive sealed and electronic proposals (as described herein) until 11:00 A.M., Eastern Time, Wednesday, July 11, 2018, for the purchase of the following described General Obligation Municipal Purpose Loan of 2018 Bonds of the Town (the Bonds ): $2,792,000* General Obligation Municipal Purpose Loan of 2018 Bonds payable July 15 of the years and in the amounts as follows: Due Principal Due Principal July 15 Amount* July 15 Amount* 2019 $ 147, ** $ 140, , ** 140, , ** 140, , ** 140, , ** 140, , ** 135, , ** 135, , ** 135, , ** 135, ** 140, ** 135,000 *Preliminary, subject to change. **May be combined into one, two or three Term Bonds. The Bonds will be dated their date of delivery. Principal of the Bonds will be payable on July 15 of the years in which the Bonds mature. Interest will be payable on July 15, 2019, and semiannually thereafter on each January 15 and July 15 until maturity. The Bonds will be issued by means of a book-entry system with no physical distribution of the Bonds made to the public. One certificate for each maturity of the Bonds will be issued to The Depository Trust Company, New York, New York ("DTC"), and immobilized in its custody. Ownership of the Bonds in principal amounts of $5,000 or integral multiples thereof, with the exception of two* $1,000 denominations maturing in 2019, will be evidenced by a book-entry system with transfers of ownership effected on the records of DTC and its participants pursuant to rules and procedures established by DTC and its participants. The winning bidder, as a condition to delivery of the Bonds, shall be required to deposit the Bonds with DTC, registered in the name of Cede & Co. Interest and principal on the Bonds will be payable to DTC or its nominee as Registered Owner of the Bonds. Transfer of principal and interest payments to DTC participants will be the responsibility of DTC. Transfer of principal and interest payments to Beneficial Owners will be the responsibility of such participants and other nominees of Beneficial Owners. The Town will not be responsible or liable for maintaining, supervising or reviewing the records maintained by DTC, its participants or persons acting through such participants. The Bonds maturing in the years 2019 through 2027 will not be subject to redemption prior to maturity. The Bonds maturing on and after July 15, 2028 shall be subject to redemption prior to maturity, at the option of the Town, on or after July 15, 2027, either in whole or in part at any time, and if in part, by lot within a maturity, at the par amount of the Bonds to be redeemed. For Bonds maturing on June 15, 2028 and thereafter, bidders may specify that all of the principal amount of such Bonds in any two or more consecutive years may, in lieu of maturing in each such year, be combined to comprise one maturity of term bonds scheduled to mature in the latest of the combined years, and shall be subject to mandatory redemption prior to maturity at par as described above, in each of the years and in the principal amounts specified in the foregoing maturity schedule. Each mandatory redemption shall be allocated to the payment of the term bond maturing in the nearest subsequent year. Bidders may specify no more than three term bonds. Term Bonds, if any, shall be subject to mandatory redemption on July 15 of the year or years immediately prior to the stated maturity of such Term Bond (the particular Bonds of such maturity to be redeemed to be selected by lot) as indicated in the foregoing maturity schedule at the principal amount thereof, without premium. 4

5 The original Bonds to be immobilized at DTC will be prepared under the supervision of Hilltop Securities Inc. and their legality will be approved by Locke Lord LLP, Boston, Massachusetts, whose opinion will be furnished without charge to the purchaser. Principal and semiannual interest on the Bonds will be paid by U.S. Bank National Association, Boston, Massachusetts as Paying Agent. So long as DTC or its nominee, Cede & Co., is the Bondowner, such payments will be made directly to DTC. Disbursement of such payments to the DTC Participants is the responsibility of DTC and disbursement of such payments to the Beneficial Owners is the responsibility of the DTC Participants and the Indirect Participants, as more fully described herein. Bidding Parameters As between proposals which comply with this Notice of Sale, the award will be to the bidder who offers to purchase all the Bonds at the lowest net effective interest rate to the Town. Such interest rate shall be determined on a true interest cost (TIC) basis, which shall mean that rate which, as of the delivery date, discounts semiannually all future payments on account of principal and interest to the price bid. In the event there is more than one proposal specifying the lowest such rate, the Bonds will be awarded to the bidder whose proposal is selected by the Town Treasurer by lot among all such proposals. The current Bond structure does not reflect any premium. The Town reserves the right to change the aggregate principal amount of the Bonds and the maturity schedule after the determination of the winning bid by decreasing the aggregate principal amount and increasing or decreasing the principal amount of each maturity by such amounts as may be necessary to produce sufficient funds for the Bonds after determining the amount of the net premium to be received by the Town. THE SUCCESSFUL BIDDER MAY NOT WITHDRAW ITS BID OR CHANGE THE INTEREST RATES BID OR THE INITIAL REOFFERING PRICES AS A RESULT OF ANY CHANGES MADE TO THE ANNUAL PRINCIPAL AMOUNTS WITHIN THESE LIMITS. The dollar amount bid for the Bonds by the winning bidder will be adjusted, if applicable, to reflect changes in the dollar amount of the amortization schedule. Any price that is adjusted will reflect changes in the dollar amount of the underwriter s discount and original issue premium, if any, but will not change the per bond underwriter s discount (net of insurance premium, if any) provided in such bid. Nor will it change the interest rate specified for each maturity. Any such adjustments will be communicated to the winning bidder for the Bonds by local time 4 P.M. Eastern Time on the day of the sale. Bidders shall state the rate or rates of interest per annum which the Bonds are to bear in a multiple of 1/20 or 1/8 of one percent, but shall not state (a) more than one interest rate for any Bonds having a like maturity, (b) any interest rate which exceeds the interest rate stated for any other Bonds by more than 3 percent or (c) any interest rate in excess of 5.0%. No bid of less than par plus a premium of $60,000 will be accepted. Bids must be submitted either: (a) In a sealed envelope marked Proposal for Bonds and addressed to Mr. Patrick Dello Russo Jr., Town Treasurer, c/o Hilltop Securities Inc., 54 Canal Street, Boston, Massachusetts Signed blank bid forms may be faxed to (617) prior to submitting bids, and actual bids may be telephoned to Hilltop Securities Inc., telephone (617) , at least one-half hour prior to the 11:00 A.M. Eastern Time sale and after receipt of the faxed bid form by Hilltop Securities Inc. Hilltop Securities Inc. will act as agent for the bidder, but neither the Town nor Hilltop Securities Inc. shall be responsible for any errors in connection with bids submitted in this manner. (b) Electronically via Parity in accordance with this Notice of Sale. To the extent any instructions or directions set forth in Parity conflict with this Notice of Sale, the terms of this Notice of Sale shall control. For further information about Parity, potential bidders may contact the Financial Advisor to the Town or I-deal at 40 West 23rd Street, 5th Floor, New York, NY (212) An electronic bid made in accordance with this Notice of Sale shall be deemed an offer to purchase the Bonds in accordance with the terms provided in this Notice of Sale and shall be binding upon the bidder as if made by a signed and sealed written bid delivered to the Town. The award of the Bonds to the winning bidder will not be effective until the bid has been approved by the Treasurer and the Board of Selectmen of the Town. The right is reserved to reject all bids and to reject any bid not complying with this Notice of Sale and, so far as permitted by law, to waive any irregularity with respect to any proposal. 5

6 The Town of Marshfield has not contracted for the issuance of any policy of municipal bond insurance for the Bonds. If the Bonds qualify for issuance of any such policy or commitment therefor, any purchase of such insurance or commitment shall be at the sole option and expense of the bidder. Proposals shall not be conditioned upon the issuance of any such policy or commitment. Any failure of the Bonds to be so insured or of any such policy or commitment to be issued shall not in any way relieve the purchaser of its contractual obligations arising from the acceptance of its proposal for the purchase of the Bonds. Should the bidder purchase municipal bond insurance, all expenses associated with such policy or commitment will be borne by the bidder, except for the fee paid to S&P Global Ratings for a rating on the Bonds. Any such fee paid to S&P Global Ratings would be borne by the Town. It shall be a condition to the obligation of the successful bidder to accept delivery of and pay for the Bonds that it shall be furnished, without cost, with (a) the approving opinion of the firm of Locke Lord LLP, Boston, Massachusetts, substantially in the form appearing as Appendix B of the Preliminary Official Statement dated June 29, 2018, (b) a certificate in the form satisfactory to Bond Counsel dated as of the date of delivery of the Bonds and receipt of payment therefor to the effect that there is no litigation pending or, to the knowledge of the signers thereof, threatened which affects the validity of the Bonds or the power of the Town to levy and collect taxes to pay them, (c) a certificate of the Town Treasurer to the effect that, to the best of his knowledge and belief, as of its date and the date of sale the Preliminary Official Statement did not, and as of its date and the date of the delivery of the Bonds, the Final Official Statement does not, contain any untrue statement of a material fact and does not omit to state a material fact necessary to make the statements made therein, in the light of the circumstances under which they were made, not misleading, and (d) a Continuing Disclosure Certificate in the form described in the Preliminary Official Statement. In order to assist bidders in complying with Rule 15c2-12 (b)(5) promulgated by the Securities and Exchange Commission, the Town will undertake to provide annual reports and notices of certain significant events. A description of this undertaking is set forth in the Preliminary Official Statement dated June 29, The Bonds will not be designated as qualified tax-exempt obligations for purposes of Section 265(b)(3) of the Internal Revenue Code of 1986, as amended. Additional information concerning the Town of Marshfield and the Bonds is contained in the Preliminary Official Statement dated June 29, 2018, to which prospective bidders are directed. The Preliminary Official Statement is provided for informational purposes only and is not a part of this Notice of Sale. Said Preliminary Official Statement is deemed final by the Town except for the omission of the reoffering price(s), interest rate(s), delivery date, the identity of the underwriter(s), and any other pertinent terms of the Bonds depending on such matters, but is subject to change without notice and to completion or amendment in a Final Official Statement. Copies of the Preliminary Official Statement may be obtained from Hilltop Securities Inc., 54 Canal Street, Boston, Massachusetts (Telephone: ). Within seven (7) business days following the award of the Bonds in accordance herewith, 10 copies of the Final Official Statement will be available from the Hilltop Securities Inc. to the successful bidder for use in reoffering the Bonds. Upon request, additional copies will be provided at the expense of the requester. The successful bidder shall assist the Town in establishing the issue price of the Bonds and shall execute and deliver to the Town on the Closing Date an issue price or similar certificate, in the applicable form set forth in Exhibit 1 to this Notice of Sale, setting forth the reasonably expected initial offering prices to the public or the sales price of the Bonds together with the supporting pricing wires or equivalent communications, or, if applicable, the amount bid, with such modifications as may be appropriate or necessary, in the reasonable judgment of the successful bidder, the Town and Bond Counsel. All actions to be taken by the Town under this Notice of Sale to establish the issue price of the Bonds may be taken on behalf of the Town by Hilltop Securities, Inc. (the Financial Advisor ) and any notice or report to be provided to the Town may be provided to the Financial Advisor. Competitive Sale Requirements. If the competitive sale requirements ( competitive sale requirements ) set forth in Treasury Regulation (f)(3)(i) (defining competitive sale for purposes of establishing the issue price of the Bonds) have been satisfied, the Town will furnish to the successful bidder on the Closing Date a certificate of the Financial Advisor, which will certify each of the following conditions to be true: 1. the Town has disseminated this Notice of Sale to potential underwriters in a manner that is reasonably designed to reach potential underwriters; 2. all bidders had an equal opportunity to bid; 3. the Town received bids from at least three underwriters of municipal bonds who have established industry reputations for underwriting new issuances of municipal bonds; and 6

7 4. the Town awarded the sale of the Bonds to the bidder who submitted a firm offer to purchase the Bonds at the highest price (or lowest interest cost), as set forth in this Notice of Sale. Any bid submitted pursuant to this Notice of Sale shall be considered a firm offer for the purchase of the Bonds, as specified in the bid. Unless a bidder notifies the Town prior to submitting its bid by contacting the Financial Advisor via telephone at or by peter.frazier@hilltopsecurities.com and affirming in writing via or facsimile ( ), or in its bid submitted via Parity, that it will NOT be an underwriter (as defined below) of the Bonds, by submitting its bid, each bidder shall be deemed to confirm that it has an established industry reputation for underwriting new issuances of municipal bonds. Unless the bidder has notified the Town that it will not be an underwriter (as defined below) of the Bonds, in submitting a bid, each bidder is deemed to acknowledge that it is an underwriter that intends to reoffer the Bonds to the public. In the event that the competitive sale requirements are not satisfied, the Town shall so advise the successful bidder. Failure to Meet the Competitive Sale Requirements Option A The Successful Bidder Intends to Reoffer the Bonds to the Public and the 10% Test to Apply. If the competitive sale requirements are not satisfied and the successful bidder intends to reoffer the Bonds to the public, the Town will use the first price at which 10% of a maturity of the Bonds (the 10% test ) is sold to the public as the issue price of that maturity, applied on a maturity-by-maturity basis, of the Bonds. The successful bidder shall advise the Financial Advisor if any maturity of the Bonds satisfies the 10% test as of the date and time of the award of the Bonds. The Town will not require bidders to comply with the hold-the-offering-price rule set forth in the applicable Treasury Regulations and therefore does not intend to use the initial offering price to the public as of the Sale Date of any maturity of the Bonds as the issue price of that maturity, if the competitive sale requirements are not met. If the competitive sale requirements are not satisfied, then until the 10% test has been satisfied as to each maturity of the Bonds or all of the Bonds are sold to the public, the successful bidder agrees to promptly report to the Financial Advisor the prices at which the unsold Bonds of each maturity have been sold to the public, which reporting obligation shall continue, whether or not the Closing Date has occurred, until the 10% test has been satisfied for each maturity of the Bonds or until all the Bonds of a maturity have been sold. The successful bidder shall be obligated to report each sale of Bonds to the Financial Advisor until notified in writing by the Town or the Financial Advisor that it no longer needs to do so. By submitting a bid and if the competitive sale requirements are not met, each bidder confirms that: (i) any agreement among underwriters, any selling group agreement and each retail distribution agreement (to which the bidder is a party) relating to the initial sale of the Bonds to the public, together with the related pricing wires, contains or will contain language obligating each underwriter, each dealer who is a member of the selling group, and each broker-dealer that is a party to such retail distribution agreement, as applicable, to report the prices at which it sells to the public the unsold Bonds of each maturity allotted to it until it is notified by the successful bidder that either the 10% test has been satisfied as to the Bonds of that maturity or all Bonds of that maturity have been sold to the public, if and for so long as directed by the successful bidder and as set forth in the related pricing wires and (ii) any agreement among underwriters relating to the initial sale of the Bonds to the public, together with the related pricing wires, contains or will contain language obligating each underwriter that is a party to a retail distribution agreement to be employed in connection with the initial sale of the Bonds to the public to require each broker-dealer that is a party to such retail distribution agreement to report the prices at which it sells to the public the unsold Bonds of each maturity allotted to it until it is notified by the successful bidder or such underwriter that either the 10% test has been satisfied as to the Bonds of that maturity or all Bonds of that maturity have been sold to the public if and for so long as directed by the successful bidder or such underwriter and as set forth in the related pricing wires. Sales of any Bonds to any person that is a related party to an underwriter shall not constitute sales to the public for purposes of this Notice of Sale. Further, for purposes of this Notice of Sale: 1. public means any person other than an underwriter or a related party, 2. underwriter means (A) any person, including the Successful Bidder, that agrees pursuant to a written contract with the Town (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Bonds to the public and (B) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (A) to participate in the initial sale of the Bonds to the public (including a member of a selling group or a party to a retail distribution agreement participating in the initial sale of the Bonds to the public), and 3. a purchaser of any of the Bonds is a related party to an underwriter if the underwriter and the purchaser are subject, directly or indirectly, to (i) at least 50% common ownership of the voting power or the total 7

8 value of their stock, if both entities are corporations (including direct ownership by one corporation of another), (ii) more than 50% common ownership of their capital interests or profits interests, if both entities are partnerships (including direct ownership by one partnership of another), or (iii) more than 50% common ownership of the value of the outstanding stock of the corporation or the capital interests or profit interests of the partnership, as applicable, if one entity is a corporation and the other entity is a partnership (including direct ownership of the applicable stock or interests by one entity of the other). Failure to Meet the Competitive Sale Requirements Option B The Successful Bidder Intends to Reoffer the Bonds to the Public and Agrees to Hold the Price of Maturities of Bonds for Which the 10% Test in Option A is Not Met as of the Sale Date. The successful bidder may, at its option, notify the Financial Advisor in writing, which may be by (the Hold the Price Notice ), not later than 4:00 p.m. Eastern Time on the Sale Date, that is has not sold 10% of the maturities of the Bonds listed in the Hold the Price Notice (the Unsold Maturities ) and that the successful bidder will not offer the Unsold Maturities to any person at a price that is higher than the initial offering price to the public during the period starting on the Sale Date and ending on the earlier of (i) the close of the fifth business day after the Sale Date or (ii) the date on which the successful bidder has sold at least 10% of the applicable Unsold Maturity to the public at a price that is no higher than the initial offering price to the public. If the successful bidder delivers a Hold the Price Notice to the Financial Advisor, the successful bidder must provide to the Issuer on or before the Closing Date, in addition to the certification described in Option A above, evidence that each underwriter of the Bonds, including underwriters in an underwriting syndicate or selling group, has agreed in writing to hold the price of the Unsold Maturities in the manner described in the preceding sentence. Failure to Meet the Competitive Sale Requirements and/or the Successful Bidder Does Not Intend to Reoffer the Bonds to the Public Option C. If the successful bidder has purchased the Bonds for its own account and will not distribute or resell the Bonds to the public, then, whether or not the competitive sale requirements were met, the reoffering price certificate will recite such facts and identify the price or prices at which the purchase of the Bonds was made. It is anticipated that CUSIP identification numbers will be printed on the Bonds. The Town assumes no responsibility for any CUSIP Service Bureau or other charge that may be imposed for the assignment of such numbers. The Bonds in definitive form will be delivered to The Depository Trust Company or its custodial agent on or about July 26, 2018 for settlement in federal funds. June 29, 2018 TOWN OF MARSHFIELD, MASSACHUSETTS /s/ Mr. Patrick Dello Russo Jr., Town Treasurer 8

9 Issue Price Certificate for Use If the Competitive Sale Requirements Are Met $2,792,000* General Obligation Municipal Purpose Loan of 2018 Bonds Dated July 26, 2018 ISSUE PRICE CERTIFICATE AND RECEIPT EXHIBIT 1 The undersigned, on behalf of (the Successful Bidder ), hereby certifies as set forth below with respect to the sale of the above-captioned obligations (the Bonds ) of the Town of Marshfield, Massachusetts (the Issuer ). 1. Reasonably Expected Initial Offering Prices. (a) As of the Sale Date, the reasonably expected initial offering prices of the Bonds to the Public by the Successful Bidder are the prices listed in Schedule A (the Expected Offering Prices ). The Expected Offering Prices are the prices for the Maturities of the Bonds used by the Successful Bidder in formulating its bid to purchase the Bonds. Attached as Schedule B is a true and correct copy of the bid provided by the Successful Bidder to purchase the Bonds. (b) The Successful Bidder was not given the opportunity to review other bids prior to submitting its bid. (c) The bid submitted by the Successful Bidder constituted a firm offer to purchase the Bonds. 2. Defined Terms. (a) Maturity means Bonds with the same credit and payment terms. Bonds with different maturity dates, or Bonds with the same maturity date but different stated interest rates, are treated as separate Maturities. (b) Public means any person (including an individual, trust, estate, partnership, association, company, or corporation) other than an Underwriter or a related party to an Underwriter. The term related party for purposes of this certificate generally means any two or more persons who have greater than 50 percent common ownership, directly or indirectly. (c) Sale Date means the first day on which there is a binding contract in writing for the sale of a Maturity of the Bonds. The Sale Date of the Bonds is July 11, (d) Underwriter means (i) any person, including the Successful Bidder, that agrees pursuant to a written contract with the Issuer (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Bonds to the Public, and (ii) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (i) of this paragraph to participate in the initial sale of the Bonds to the Public (including a member of a selling group or a party to a retail distribution agreement participating in the initial sale of the Bonds to the Public). 3. Receipt. The Successful Bidder hereby acknowledges receipt from the Issuer of the bonds of the Issuer and further acknowledges receipt of all certificates, opinions, and other documents required to be delivered to the Successful Bidder, before or simultaneously with the Bonds, which certificates, opinions, and other documents are satisfactory to the Successful Bidder. The representations set forth in this certificate are limited to factual matters only. Nothing in this certificate represents the Successful Bidders interpretation of any laws, including specifically Sections 103 and 148 of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations thereunder. The undersigned understands that the foregoing information will be relied upon by the Issuer with respect to certain of the representations set forth in the Tax Certificate and with respect to compliance with the federal income tax rules affecting the Bonds, and by Locke Lord LLP in connection with rendering its opinion that the interest on the Bonds is excluded from gross income for federal income tax purposes, the preparation of the Internal Revenue Service Form 8038-G, and other federal income tax advice that it may give to the Issuer from time to time relating to the Bonds. Dated: July, 2018 *Preliminary, subject to change. Successful Bidder By: Name: Title: 9

10 SCHEDULE A EXPECTED OFFERING PRICES (To Be Attached) SCHEDULE B COPY OF UNDERWRITER S BID (To Be Attached) 10

11 Issue Price Certificate for Use If the Competitive Sale Requirements Are Not Met and the Hold the Price Rule Is Not Imposed $2,792,000* General Obligation Municipal Purpose Loan of 2018 Bonds Dated July 26, 2018 ISSUE PRICE CERTIFICATE AND RECEIPT EXHIBIT 1 OPTION A The undersigned, on behalf of, (the [ Successful Bidder ]), hereby certifies as set forth below with respect to the sale and issuance of the above-captioned obligations (the Bonds ) of the Town of Marshfield, Massachusetts (the Issuer ). 1. Sale of the Bonds. As of the date of this certificate, [except as set forth in paragraph 2 below,] for each Maturity of the Bonds, the first price at which at least 10% of such Maturity of the Bonds was sold to the Public is the respective price listed in Schedule A. [Only use the next paragraph if the 10% test has not been met or all of the Bonds have not been sold for one or more Maturities of Bonds as of the Closing Date.] 2. For each Maturity of the Bonds as to which no price is listed in Schedule A, as set forth in the Notice of Sale for the Bonds, until the 10% test has been satisfied as to each Maturity of the Bonds or all of the Bonds are sold to the Public, the Successful Bidder agrees to promptly report to the Town of Marshfield s financial advisor, Hilltop Securities (the Financial Advisor ) the prices at which the unsold Bonds of each Maturity have been sold to the Public, which reporting obligation shall continue after the date hereof until the 10% test has been satisfied for each Maturity of the Bonds or until all the Bonds of a Maturity have been sold. The Successful Bidder shall continue to report each sale of Bonds to the Financial Advisor until notified by or in writing by the State or the Financial Advisor that it no longer needs to do so. 3. Defined Terms. (a) Maturity means Bonds with the same credit and payment terms. Bonds with different maturity dates, or Bonds with the same maturity date but different stated interest rates, are treated as separate Maturities. (b) Public means any person (including an individual, trust, estate, partnership, association, company, or corporation) other than an Underwriter or a related party to an Underwriter. The term related party for purposes of this certificate generally means any two or more persons who have greater than 50 percent common ownership, directly or indirectly. (c) Underwriter means (i) any person, including the Successful Bidder, that agrees pursuant to a written contract with the Issuer (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Bonds to the Public, and (ii) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (i) of this paragraph to participate in the initial sale of the Bonds to the Public (including a member of a selling group or a party to a retail distribution agreement participating in the initial sale of the Bonds to the Public). 4. Receipt. The Successful Bidder hereby acknowledges receipt from the Issuer of the bonds of the Issuer and further acknowledges receipt of all certificates, opinions, and other documents required to be delivered to the Successful Bidder, before or simultaneously with the Bonds, which certificates, opinions, and other documents are satisfactory to the Successful Bidder. The representations set forth in this certificate are limited to factual matters only. Nothing in this certificate represents the Successful Bidder s interpretation of any laws, including specifically Sections 103 and 148 of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations thereunder. The undersigned understands that the foregoing information will be relied upon by the Issuer with respect to certain of the representations set forth in the Tax Certificate and with respect to compliance with the federal income tax rules affecting the Bonds, and by Locke Lord LLP in connection with rendering its opinion that the interest on the Bonds is excluded from gross income for federal income tax purposes, the preparation of the Internal Revenue Service Form 8038-G, and other federal income tax advice that it may give to the Issuer from time to time relating to the Bonds. Dated: July, 2018 *Preliminary, subject to change. SUCCESSFUL BIDDER By: Name: Title: 11

12 SALE PRICES [(Attached)] SCHEDULE A 12

13 Issue Price Certificate for Use If the Competitive Sale Requirements Are Not Met and the Hold the Price Rule Is Imposed $2,792,000 * TOWN OF MARSHFIELD, MASSACHUSETTS General Obligation Municipal Purpose Loan of 2018 Bonds Dated July 26, 2018 ISSUE PRICE CERTIFICATE AND RECEIPT 13 EXHIBIT 1 OPTION B The undersigned, on behalf of (the ( [Successful Bidder][Representative] ), on behalf of itself and [NAMES OF OTHER UNDERWRITERS] hereby certifies as set forth below with respect to the sale and issuance of the above-captioned obligations (the Bonds ). 1. Sale of the Bonds. As of the date of this certificate, [except as set forth in paragraph 2 below,] for each Maturity of the Bonds, the first price at which at least 10% of such Maturity of the Bonds was sold to the Public is the respective price listed in Schedule A. [Only use the next paragraph if the 10% test has not been met as of the Sale Date.] 2. For each Maturity of the Bonds as to which no price is listed in Schedule A (the Unsold Maturities ), as set forth in the Notice of Sale for the Bonds, the [Successful Bidder][Representative] and any other Underwriter did not reoffer the Unsold Maturities until the earlier of (i), 2018 or (ii) the date on which the Successful Bidder][Representative] sold at least 10% of each Unsold Maturity at a price that is no higher than the initial offering price to the Public. 3. Defined Terms. (a) Issuer means the. (b) Maturity means Bonds with the same credit and payment terms. Bonds with different maturity dates, or Bonds with the same maturity date but different stated interest rates, are treated as separate Maturities. (c) Public means any person (including an individual, trust, estate, partnership, association, company, or corporation) other than an Underwriter or a related party to an Underwriter. The term related party for purposes of this certificate generally means any two or more persons who have greater than 50 percent common ownership, directly or indirectly. (d) Underwriter means (i) any person, including the [Successful Bidder][Representative], that agrees pursuant to a written contract with the Issuer (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Bonds to the Public, and (ii) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (i) of this paragraph to participate in the initial sale of the Bonds to the Public (including a member of a selling group or a party to a retail distribution agreement participating in the initial sale of the Bonds to the Public). 4. Receipt. The [Successful Bidder][Representative] hereby acknowledges receipt from the Issuer of the bonds if the Issue and further acknowledges receipt of all certificates, opinion and other documents required to be delivered to the [Successful Bidder][Representative], before or simultaneously with the delivery of such bonds of the Issue, which certificates, opinions and other documents are satisfactory to the [Successful Bidder][Representative]. The representations set forth in this certificate are limited to factual matters only. Nothing in this certificate represents the [Successful Bidder s][representative s] interpretation of any laws, including specifically Sections 103 and 148 of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations thereunder. The undersigned understands that the foregoing information will be relied upon by the Issuer with respect to certain of the representations set forth in the Tax Certificate and with respect to compliance with the federal income tax rules affecting the Bonds, and by Locke Lord LLP in connection with rendering its opinion that the interest on the Bonds is excluded from gross income for federal income tax purposes, the preparation of the Internal Revenue Service Form 8038-G, and other federal income tax advice that it may give to the Issuer from time to time relating to the Bonds. Dated: July, 2018 *Preliminary, subject to change. [SUCCESSFUL BIDDER] [REPRESENTATIVE] By: Name: Title:

14 [SCHEDULE A SALE PRICES (To be Attached)] 14

15 OFFICIAL STATEMENT TOWN OF MARSHFIELD, MASSACHUSETTS $2,792,000 GENERAL OBLIGATION MUNICIPAL PURPOSE LOAN OF 2018 BONDS This Official Statement is provided for the purpose of presenting certain information relating to the Town of Marshfield, Massachusetts (the Town ) in connection with the sale of $2,792,000 stated principal amount of its General Obligation Municipal Purpose Loan of 2018 Bonds (the Bonds ). The information contained herein has been furnished by the Town, except information attributed to another governmental agency or official as the source. Description of the Bonds THE BONDS The Bonds will be dated as of their delivery date and will bear interest payable semiannually on January 15 and July 15 of each year until maturity, commencing July 15, 2019, each at the rate or rates of interest determined upon their sale in accordance with the Notice of Sale of the Town dated June 29, The Bonds shall mature on July 15 of the years and in the principal amounts as set forth on the cover page of this Preliminary Official Statement. The Bonds are issuable only in fully registered form, without coupons, and, when issued, will be registered in the name of Cede & Co., as Bondowner and nominee for The Depository Trust Company ("DTC"), New York, New York. DTC will act as securities depository for the Bonds. Purchases of the Bonds will be made in book-entry form, in the denomination of $5,000 or any integral multiple thereof, with the exception of two $1,000 denominations maturing in Purchasers will not receive certificates representing their interests in Bonds purchased. So long as Cede & Co. is the Bondowner, as nominee of DTC, references herein to the Bondowners or registered owners shall mean Cede & Co., as aforesaid, and shall not mean the Beneficial Owners (as defined herein) of the Bonds. (See "Book-Entry Transfer System" herein.) Principal of and interest on the Bonds will be paid by U.S. Bank National Association, Boston, Massachusetts, or its successor, as Paying Agent. So long as DTC or its nominee, Cede & Co., is the Bondowner, such payments will be made directly to such Bondowner. Disbursement of such payments to the DTC Participants is the responsibility of DTC and disbursements of such payments to the Beneficial Owners is the responsibility of the DTC Participants and the indirect Participants, as more fully described herein. The Bonds are subject to redemption as described below. Optional Redemption The Bonds maturing in the years 2019 through 2027 will not be subject to redemption prior to maturity. The Bonds maturing on and after July 15, 2028 shall be subject to redemption prior to maturity, at the option of the Town, on or after July 15, 2027, either in whole or in part at any time, and if in part, by lot within a maturity, at the par amount of the Bonds to be redeemed. Mandatory Redemption The Bond maturing July 15, 2031 (the Term Bond ) is subject to mandatory redemption or maturity on each of the dates and in each of the principal amounts set forth below (the particular portion of such Term Bond to be redeemed or to mature on the final maturity date to be delivered by lot), at a redemption price of par, plus accrued interest, if any, to the redemption date. $280,000 Term Bond Maturing July 15, 2031 July 15 Principal Amount 2030 $ 140, * 140,000 *Final maturity. 15

16 Notice of Redemption So long as DTC is the registered owner of the Bonds, notice of any redemption of Bonds prior to their maturities, specifying the Bonds (or the portion thereof) to be redeemed shall be mailed by registered mail to DTC not more than 60 days nor less than 30 days prior to the redemption date. Any failure on the part of DTC to notify the DTC Participants of the redemption or failure on the part of the DTC Participants, Indirect Participants, or of a nominee of a Beneficial Owner (having received notice from DTC Participant or otherwise) to notify the Beneficial Owner shall not affect the validity of the redemption. Record Date The record date for each payment of interest is the last business day of the month preceding the interest payment date provided that, with respect to overdue interest, the Paying Agent may establish a special record date. The special record date may not be more than twenty (20) days before the date set for payment. The Paying Agent will mail notice of a special record date to the Bondowners at least ten (10) days before the special record date. Book-Entry Transfer System DTC (defined above), will act as securities depository for the Bonds. The Bonds will be issued in fully-registered form 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 certificate will be issued for each maturity of each series of the Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC. DTC, the world s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a banking organization within the meaning of the New York Banking Law, a member of the Federal Reserve System, a clearing corporation within the meaning of the New York Uniform Commercial Code, and a clearing agency registered pursuant to the provisions of Section 17A of the Securities Exchange Act of DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-u.s. equity, corporate and municipal debt issues, and money market instruments from over 100 countries that DTC s participants ( Direct Participants ) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ( DTCC ). DTCC, in turn, is owned by a number of Direct Participants of DTC and Members of the National Securities Clearing Corporation, Fixed Income Clearing Corporation, and Emerging Markets Clearing Corporation (NSCC, FICC and EMCC, also subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc., the American Stock Exchange LLC, and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ( Indirect Participants ). DTC has a Standard & Poor s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at Purchases of securities deposited with DTC must be made by or through Direct Participants, which will receive a credit for such securities on DTC's records. The ownership interest of each actual purchaser of each security deposited with DTC ("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 securities deposited with DTC 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 securities deposited with DTC, except in the event that use of the book-entry system for such securities is discontinued. To facilitate subsequent transfers, all securities 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 securities with DTC and their registration in the name of Cede & Co. or such other nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the securities deposited with it, DTC's records reflect only the identity of the Direct Participants to whose accounts such securities 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. 16

17 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 shall be sent to DTC. If less than all of a maturity is being redeemed, DTC s practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed. Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote with respect to securities deposited with it unless authorized by a Direct Participant in accordance with DTC's Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the issuer of such securities 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 such securities are credited on the record date (identified in a listing attached to the Omnibus Proxy). Principal and interest payments on securities deposited with DTC 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 issuer of such securities or its 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 (nor its nominee), the issuer of such securities or its paying agent, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of 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 issuer of such securities or its paying agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as depository with respect to securities held by it at any time by giving reasonable notice to the issuer of such securities or its paying agent. Under such circumstances, in the event that a successor depository is not obtained, physical certificates are required to be printed and delivered. The Town may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, physical 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 Town believes to be reliable, but the Town takes no responsibility for the accuracy thereof. Authorization of the Bonds and Use of Proceeds The following sets forth the purposes, principal amounts, notes outstanding, original authorizations, statutory authorizations, dates of Town approval, and article numbers for the current offering of Bonds: Original M.G.L. This Notes Bond Statutory Date of Article Purpose Issue Outstanding (1) Authorization Reference Approval Number Harbormaster Building $ 475,000 $ 475,000 $ 475,000 Ch. 44, s. 7(1) 10/24/ Foster Ave Seawalls 1,700,000 1,700,000 1,700,000 Ch. 44, s. 7(1) 10/24/ Seawall Repair 617, , ,000 Ch. 44, s. 7(1) 10/16/ $ 2,792,000 $ 2,792,625 (1) This issue will retire a like amount of Bond Anticipation Notes maturing July 28,

18 Principal Maturities by Purpose Fiscal Year Harbormaster Building Foster Ave Seawals Seawall Repair Total 2020 $ 25,000 $ 85,000 $ 37,000 $ 147, ,000 85,000 35, , ,000 85,000 35, , ,000 85,000 30, , ,000 85,000 30, , ,000 85,000 30, , ,000 85,000 30, , ,000 85,000 30, , ,000 85,000 30, , ,000 85,000 30, , ,000 85,000 30, , ,000 85,000 30, , ,000 85,000 30, , ,000 85,000 30, , ,000 85,000 30, , ,000 85,000 30, , ,000 85,000 30, , ,000 85,000 30, , ,000 85,000 30, , ,000 85,000 30, ,000 $ 475,000 $ 1,700,000 $ 617,000 $ 2,792,000 Tax Exemption In the opinion of Locke Lord LLP, Bond Counsel to the Town ( Bond Counsel ), based upon an analysis of existing laws, regulations, rulings, and court decisions, and assuming, among other matters, compliance with certain covenants, interest on the Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986, as amended (the Code ). Bond Counsel is of the further opinion that interest on the Bonds will not be included in computing the alternative minimum taxable income of Bondholders who are individuals or, except as described herein, corporations. Bond Counsel expresses no opinion regarding any other federal tax consequences arising with respect to the ownership or disposition of, or the accrual or receipt of interest on the Bonds. The Bonds will not be designated as qualified tax-exempt obligations for purposes of Section 265(b)(3) of the Code. For taxable years that began before January 1, 2018, interest on the Bonds owned by a corporation (other than an S corporation, a qualified mutual fund, a real estate investment trust, a real estate mortgage investment conduit, or a financial asset securitization investment trust) will be included in such corporation s adjusted current earnings for purposes of computing the alternative minimum taxable income of such corporation. The alternative minimum tax on corporations has been repealed for taxable years beginning on or after January 1, The Code imposes various requirements relating to the exclusion from gross income for federal income tax purposes of interest on obligations such as the Bonds. Failure to comply with these requirements may result in interest on the Bonds being included in gross income for federal income tax purposes, possibly from the date of original issuance of the Bonds. The Town has covenanted to comply with such requirements to ensure that interest on the Bonds will not be included in federal gross income. The opinion of Bond Counsel assumes compliance with these requirements. Bond Counsel is also of the opinion that, under existing law, interest on the Bonds is exempt from Massachusetts personal income taxes, and the Bonds are exempt from Massachusetts personal property taxes. Bond Counsel has not opined as to other Massachusetts tax consequences arising with respect to the Bonds. Prospective Bondholders should be aware, however, that the Bonds are included in the measure of Massachusetts estate and inheritance taxes, and the Bonds and the interest thereon are included in the measure of certain Massachusetts corporate excise and franchise taxes. Bond Counsel expresses no opinion as to the taxability of the Bonds or the income therefrom or any other tax consequences arising with respect to the Bonds under the laws of any state other than Massachusetts. A complete copy of the proposed form of opinion of Bond Counsel is set forth in Appendix B hereto. 18

19 To the extent the issue price of any maturity of the Bonds is less than the amount to be paid at maturity of such Bonds (excluding amounts stated to be interest and payable at least annually over the term of such Bonds), the difference constitutes original issue discount, the accrual of which, to the extent properly allocable to each owner thereof, is treated as interest on the Bonds which is excluded from gross income for federal income tax purposes and is exempt from Massachusetts personal income taxes. For this purpose, the issue price of a particular maturity of the Bonds is either the reasonably expected initial offering price to the public or the first price at which a substantial amount of such maturity of the Bonds is sold to the public, as applicable. The original issue discount with respect to any maturity of the Bonds accrues daily over the term to maturity of such Bonds on the basis of a constant interest rate compounded semiannually (with straight-line interpolations between compounding dates). The accruing original issue discount is added to the adjusted basis of such Bonds to determine taxable gain or loss upon disposition (including sale, redemption, or payment on maturity) of such Bonds. Bondholders should consult their own tax advisors with respect to the tax consequences of ownership of Bonds with original issue discount, including the treatment of purchasers who do not purchase such Bonds in the original offering to the public at the reasonably expected initial offering price or, if applicable, the first price at which a substantial amount of such Bonds is sold to the public. Bonds purchased, whether at original issuance or otherwise, for an amount greater than the stated principal amount to be paid at maturity of such Bonds, or, in some cases, at the earlier redemption date of such Bonds ( Premium Bonds ), will be treated as having amortizable bond premium for federal income tax purposes and Massachusetts personal income tax purposes. No deduction is allowable for the amortizable bond premium in the case of obligations, such as the Premium Bonds, the interest on which is excluded from gross income for federal income tax purposes. However, a Bondholder s basis in a Premium Bond will be reduced by the amount of amortizable bond premium properly allocable to such Bondholder. Holders of Premium Bonds should consult their own tax advisors with respect to the proper treatment of amortizable bond premium in their particular circumstances. Bond Counsel has not undertaken to determine (or to inform any person) whether any actions taken (or not taken) or events occurring (or not occurring) after the date of issuance of the Bonds may adversely affect the value of, or the tax status of interest on, the Bonds. Although Bond Counsel is of the opinion that interest on the Bonds is excluded from gross income for federal income tax purposes and is exempt from Massachusetts personal income taxes, the ownership or disposition of, or the accrual or receipt of interest on, the Bonds may otherwise affect the federal or state tax liability of a Bondholder. Among other possible consequences of ownership or disposition of, or the accrual or receipt of interest on, the Bonds, the Code requires recipients of certain social security and certain railroad retirement benefits to take into account receipts or accruals of interest on the Bonds in determining the portion of such benefits that are included in gross income. The nature and extent of all such other tax consequences will depend upon the particular tax status of the Bondholder or the Bondholder s other items of income, deduction, or exclusion. Bond Counsel expresses no opinion regarding any such other tax consequences, and Bondholders should consult with their own tax advisors with respect to such consequences. Risk of Future Legislative Changes and/or Court Decisions Legislation affecting tax-exempt obligations is regularly considered by the United States Congress and may also be considered by the Massachusetts legislature. Court proceedings may also be filed, the outcome of which could modify the tax treatment of obligations such as the Bonds. There can be no assurance that legislation enacted or proposed, or actions by a court, after the date of issuance of the Bonds will not have an adverse effect on the tax status of interest on the Bonds or the market value or marketability of the Bonds. These adverse effects could result, for example, from changes to federal or state income tax rates, changes in the structure of federal or state income taxes (including replacement with another type of tax), or repeal (or reduction in the benefit) of the exclusion of interest on the Bonds from gross income for federal or state income tax purposes for all or certain taxpayers. For example, H.R. 1, signed into law on December 22, 2017, reduces the corporate tax rate, modifies individual tax rates, eliminates many deductions, and raises the income threshold above which the individual alternative minimum tax is invoked, among other things. These changes may increase, reduce or otherwise change the financial benefits of owning state and local government bonds. Additionally, Bondholders should be aware that future legislative actions (including federal income tax reform) may retroactively change the treatment of all or a portion of the interest on the Bonds for federal income tax purposes for all or certain taxpayers. In all such events, the market value of the Bonds may be affected and the ability of Bondholders to sell their Bonds in the secondary market may be reduced. The Bonds are not subject to special mandatory redemption, and the interest rates on the Bonds are not subject to adjustment, in the event of any such change in the tax treatment of interest on the Bonds. Investors should consult their own financial and tax advisors to analyze the importance of these risks. 19

20 Security and Remedies Full Faith and Credit. General obligation bonds and notes of a Massachusetts city or town constitute a pledge of its full faith and credit. Payment is not limited to a particular fund or revenue source. Except for "qualified bonds" as described below (see "Types of Obligations- Serial Bonds and Notes" under "INDEBTEDNESS" below) and setoffs of state distributions as described below (see "State Distributions" below), no provision is made by the Massachusetts statutes for priorities among bonds and notes and other general obligations, although the use of certain moneys may be restricted. Tax Levy. The Massachusetts statutes direct the municipal assessors to include annually in the tax levy for the next fiscal year "all debt and interest charges matured and maturing during the next fiscal year and not otherwise provided for [and] all amounts necessary to satisfy final judgments." Specific provision is also made for including in the next tax levy payment of rebate amounts not otherwise provided for and payment of notes in anticipation of federal or state aid if the aid is no longer forthcoming. The total amount of a tax levy is limited by statute. However, the voters in each municipality may vote to exclude from the limitation any amounts required to pay debt service on indebtedness incurred before November 4, Local voters may also vote to exempt specific subsequent bond issues from the limitation. (See "Tax Limitations" under "PROPERTY TAXATION" below.) In addition, obligations incurred before November 4, 1980 may be constitutionally entitled to payment from taxes in excess of the statutory limit. No Lien. Except for taxes on the increased value of certain property in designated development districts which may be pledged for the payment of debt service on bonds issued to finance economic development projects within such districts, no provision is made for a lien on any portion of the tax levy or any other moneys to secure particular bonds or notes or bonds and notes generally (or judgments on bonds or notes) in priority to other claims. Provision is made, however, for borrowing to pay judgments, subject to the General Debt Limit. (See "Debt Limits" under INDEBTEDNESS below.) Subject to the approval of the State Director of Accounts for judgments above $10,000, judgments may also be paid from available funds without appropriation and included in the next tax levy unless other provision is made. Court Proceedings. Massachusetts cities and towns are subject to suit on their general obligation bonds and notes and courts of competent jurisdiction have power in appropriate proceedings to order payment of a judgment on the bonds or notes from lawfully available funds or, if necessary, to order the city or town to take lawful action to obtain the required money, including the raising of it in the next annual tax levy, within the limits prescribed by law. (See "Tax Limitations" under "PROPERTY TAXATION" below.) In exercising their discretion as to whether to enter such an order, the courts could take into account all relevant factors including the current operating needs of the city or town and the availability and adequacy of other remedies. The Massachusetts Supreme Judicial Court has stated in the past that a judgment against a municipality can be enforced by the taking and sale of the property of any inhabitant. However, there has been no judicial determination as to whether this remedy is constitutional under current due process and equal protection standards. Restricted Funds Massachusetts statutes also provide that certain water, gas and electric, community antenna television system, telecommunications, sewer, parking meter and passenger ferry, community preservation and affordable housing receipts may be used only for water, gas and electric, community antenna television system, telecommunications, sewer, parking, mitigation of ferry service impacts, and community preservation and affordable housing purposes, respectively; accordingly, moneys derived from these sources may be unavailable to pay general obligation bonds and notes issued for other purposes. A city or town that accepts certain other statutory provisions may establish an enterprise fund for a utility, health care, solid waste, recreational or transportation facility and for police or fire services; under those provisions any surplus in the fund is restricted to use for capital expenditures or reduction of user charges. In addition, subject to certain limits, a city or town may annually authorize the establishment of one or more revolving funds in connection with use of certain revenues for programs that produce those revenues; interest earned on a revolving fund is treated as general fund revenue. A city or town may also establish an energy revolving loan fund to provide loans to owners of privately-held property in the city or town for certain energy conservation and renewable energy projects, and may borrow to establish such a fund. The loan repayments and interest earned on the investment of amounts in the fund shall be credited to the fund. Also, the annual allowance for depreciation of a gas and electric plant or a community antenna television and telecommunications system is restricted to use for plant or system renewals and improvements, for nuclear decommissioning costs, and costs of contractual commitments, or, with the approval of the State Department of Telecommunications and Energy, to pay debt incurred for plant or system reconstruction or renewals. Revenue bonds and notes issued in anticipation of them may be secured by a prior lien on specific revenues. Receipts from industrial users in connection with industrial revenue financings are also not available for general municipal purposes. 20

21 State Distributions State grants and distributions may in some circumstances be unavailable to pay general obligation bonds and notes of a city or town in that the State Treasurer is empowered to deduct from such grants and distributions the amount of any debt service paid on qualified bonds under (See Types of Obligation - Serial Bonds and Notes under INDEBTEDNESS below) and any other sums due and payable by the city or town to the Commonwealth or certain other public entities, including any unpaid assessments for costs of any public transportation authority (such as the Massachusetts Bay Transportation Authority or a regional transit authority) of which it is a member, for costs of the Massachusetts Water Resources Authority if the city or town is within the territory served by the Authority, for any debt service due on obligations issued to the Massachusetts School Building Authority, or for charges necessary to meet obligations under the Commonwealth s Clean Water Revolving Loan Programs, including such charges imposed by another local governmental unit that provides wastewater collection or treatment services or drinking water services to the city or town. If a city or town is (or is likely to be) unable to pay principal or interest on its bonds or notes when due, it is required to notify the State Commissioner of Revenue. The Commissioner shall in turn, after verifying the inability, certify the inability to the State Treasurer. The State Treasurer shall pay the due or overdue amount to the paying agent for the bonds or notes, in trust, within three days after the certification or one business day prior to the due date (whichever is later). This payment is limited, however, to the estimated amount otherwise distributable by the Commonwealth to the city or town during the remainder of the fiscal year (after the deductions mentioned in the foregoing paragraph). If for any reason any portion of the certified sum has not been paid at the end of the fiscal year, the State Treasurer shall pay it as soon as practicable in the next fiscal year to the extent of the estimated distributions for that fiscal year. The sums so paid shall be charged (with interest and administrative costs) against the distributions to the city or town. The foregoing does not constitute a pledge of the faith and credit of the Commonwealth. The Commonwealth has not agreed to maintain existing levels of state distributions, and the direction to use estimated distributions to pay debt service may be subject to repeal by future legislation. Moreover, adoption of the annual appropriation act has sometimes been delayed beyond the beginning of the fiscal year and estimated distributions which are subject to appropriation may be unavailable to pay local debt service until they are appropriated. Bankruptcy. Enforcement of a claim for payment of principal or interest on general obligation bonds or notes would be subject to the applicable provisions of federal bankruptcy laws and to the provisions of other statutes, if any, hereafter enacted by the Congress or the State legislature extending the time for payment or imposing other constraints upon enforcement insofar as the same may be constitutionally applied. Massachusetts municipalities are not generally authorized by the Massachusetts General Laws to file a petition for bankruptcy under federal bankruptcy laws. In cases involving significant financial difficulties faced by a single city, town or regional school district, the Commonwealth has enacted special legislation to permit the appointment of a fiscal overseer, finance control board or, in the most extreme cases, a state receiver. In a limited number of these situations, such special legislation has also authorized the filing of federal bankruptcy proceedings, with the prior approval of the Commonwealth. In each case where such authority was granted, it expired at the termination of the Commonwealth s oversight of the financially distressed city, town or regional school district. To date, no such filings have been approved or made. Opinion of Bond Counsel The purchaser will be furnished the legal opinion of the firm of Locke Lord LLP, Boston, Massachusetts ( Bond Counsel ). The opinion will be dated and given on and will speak only as of the date of original delivery of the Bonds to the successful bidder. The opinion will be substantially in the form presented in Appendix B. Other than as to matters expressly set forth herein as the opinion of Bond Counsel, Bond Counsel is not passing upon and does not assume any responsibility for the accuracy or adequacy of the statements made in this Official Statement and makes no representation that they have independently verified the same. Rating S&P Global Ratings has assigned a rating of AA+ to the Bonds. Said rating only reflects the rating agency's views and is subject to revision or withdrawal, which could affect the market price of the Bonds. Financial Advisory Services of Hilltop Securities Inc. Hilltop Securities Inc., Boston, Massachusetts serves as financial advisor to the. 21

22 Continuing Disclosure In order to assist the Underwriters in complying with Rule 15c2-12(b)(5) promulgated by the Securities and Exchange Commission (the Rule ), the Town will covenant for the benefit of owners of the Bonds to provide certain financial information and operating data relating to the Town by not later than 270 days after the end of each fiscal year (the Annual Report ), and to provide notices of the occurrence of certain significant events. Other than the Town, there are no obligated persons with respect to the Bonds within the meaning of the Rule. The covenants will be contained in a Continuing Disclosure Certificate, the proposed form of which is provided in Appendix C. The Certificate will be executed by the signers of the Bonds, and incorporated by reference in the Bonds. In the past five years the Town believes that it has complied, in all material respects, with its previous undertakings to provide annual reports or notices of significant events in accordance with the Rule. 22

23 TOWN OF MARSHFIELD, MASSACHUSETTS General Marshfield was incorporated as a town in I640 and occupies a land area of approximately square mile s. It is governed by an open town meeting form of government and is located in so utheastern Massachusetts in Plymouth County. The Town is bordered by the Atlantic Ocean on the east, Duxbury on the south and southeast, Pembroke and Norwell on the west and Scituate on the north. Marshfield is a coastal town located in east central Plymouth County approximately 32 miles from Boston, 18 miles from Brockton, 48 miles from Providence, RI, and 225 miles from New York City. According to the most recent estimation, the Town's population is approximately 25,436. Municipal Services PRINCIPAL TOWN OFFICIALS Town Title Name Selection Term Expires Selectman, Chair James Fitzgerald Elected 2019 Selectman Michael Bradley Elected 2018 Selectman Joseph Kelleher Elected 2019 Town Administrator Michael Maresco Appointed 2020 Town Accountant Christine McCarthy Appointed 2020 Town Treasurer/Collector Patrick Dello Russo Appointed 2019 Town Clerk Narice Ann Casper Elected 2018 The Town provides general governmental services for the territory within its boundaries, including police and fire protection, public education in grades kindergarten through twelve, water and sewer services, solid waste disposal, a library, streets, parks and recreation. The principal services provided by the County are space for courts, a jail and house of correction, and a registry of deeds. The Marshfield Housing Authority provides housing for eligible elderly and low-income people. The Town's Water, Sewer and Solid Waste Departments are principally selfsupporting. State routes 3, 3A and 139 are the principal highways and roads serving the Town. Commuter parking facilities exist and frequent bus service is maintained to and from Boston. Chartered flights throughout New England are available at the Marshfield municipal airport. The commuter rail is also in close proximity to Marshfield, giving residents ready access into the City of Boston and other adjacent communities. Public School Facilities The Town presently operates five elementary schools (K-5), one middle school (6-8) and one high school (9-12). The following tables list the public school facilities, current and projected enrollment figures, and student- teacher ratios for the Town. The Town voted $101,438,839 on November 17, 2011 for the construction of a new Marshfield High School. The project is complete and the received $46,887,500 in construction aid from the Massachusetts School Building Authority ( MSBA ). The Town authorized $8,503,235 for remodeling of the Furnace Brook Middle School, of which $4,251,800 is being issued with a portion of these notes. The Town expects a maximum grant from the MSBA of $3,043,678 based on 48.47% reimbursement rate of eligible approved costs. 23

24 The following tables list the public school facilities, enrollment trends, public school student-teacher ratios, and educational attainment for the Town. Date Added to Current Name Grade Built (Remodeled) Capacity Enrollment South River Elementary PreK Daniel Webster Elementary PreK / Governor Winslow Elementary PreK / Martinson Elementary PreK /2000/ Eames Way Elementary PreK /2008/ Furnace Brook Middle /2000/2012 1,685 1,016 Marshfield High School /1996 /2012 1,310 1,370 Tota ls : 6,220 4,245 Education The Town's public school facilities include six elementary schools, one middle school and one high school. Total capacity is estimated at 4,375 students. The table below sets forth the enrollments as of October 1 of each year. Actuals Projected Elementary 2,047 2,022 1,905 1,805 1,859 1,805 Middle 1,066 1,022 1,045 1,019 1, High 1,309 1,323 1,382 1,347 1,370 1,350 Totals 4,422 4,367 4,332 4,171 4,245 4,128 Industry and Commerce Marshfield is a residential suburb of Boston, located within the Boston Primary Metropolitan Statistical Area. Retail trade was the largest source of employment followed by services. The table below sets forth the major categories of employment over the following calendar years. Calendar Year Average Industry Construction & Natural Resources Manufacturing Trade, Transportation & Utilities 1,150 1,202 1,308 1,379 1,372 Financial Activities Professional and Business Services Education and Health Services 1,047 1,088 1,080 1,157 1,911 Leisure and Hospitality 1,117 1,158 1,163 1,260 1,332 Information & Other Services Total Employment 5,048 5,328 5,468 5,663 6,546 Number of Establishments Total Annual Wage(000) $ 235,981 $ 249,957 $ 261,519 $ 280,412 $ 281,927 Average Weekly Wage $ 746 $ 758 $ 785 $ 819 $ 808 Source: Massachusetts Department of Education and Training. Data based upon place of employment, not place of residence. Due to reclassification the U.S. Department of Labor now uses the North American Industry Classification System (NAICS) as the basis for the assignment and tabulation of economic data by industry. 24

25 LARGEST EMPLOYERS The following table sets forth the largest employers in Marshfield, exclusive of the Town itself. Name Product/Function Approximate No. of Employees SOURCE: Companies listed. Road to Responsibility Retail & Service 472 Roche Brothers Supermarket 286 Star Market Supermarket 163 Winslow Woods Assited Living Facility 106 Marshfield County Club Golf Course 96 Kirwan Surgical Manufacturer 93 Cask & Flagon Restaurant 80 Fairview Inn Restaurant & Inn 70 Marshfield Tavern Restaurant 76 Marshall's Retail 50 Waste Solutions Waste Management Company 47 Labor Force, Employment and Unemployment Rates According to the Massachusetts Department of Employment and Training preliminary data, in February 2018 the Town had a total labor force of 15,200 of which 14,615 were employed and 585 or 3.8% were unemployed as compared with 3.5% for the Commonwealth. The following table sets forth the Town's average labor force and unemployment rates for each of the calendar years 2013 through 2017 and the unemployment rate for the Commonwealth and country as a whole for the same period. UNEMPLOYMENT RATES Town of M arshfield M assachusetts United States Year Labor Force Unem ploym ent Rate Unem ploym ent Rate Unem ploym ent Rate , % 3.7% 4.4% , , , , SOURCE: Mass. Department of Employment and Training, Federal Reserve Bank of Boston and U.S. Bureau of Labor Statistics. Data based upon place of residence, not place of employment. Economic Development Below is a listing of ongoing development projects in Town: Highland Green: Highland Green is a 22 unit attached townhouse development off of Proprietors Green, Seth Sprague and Old Woodlot Lane. The special permit was approved last year and the lot has been cleared and in the process of being graded. construction is expected to start by the end of July Modera: Modera is a comprehensive permit (40B) approved 7 months ago by the Zoning Board of Appeals. The development is on the corner of Commerce Way and Endeavor drive which is located in the Industrial park off of Route 139. The development consists of 248 units broken into townhouse and three story garden style apartments, club house, pool and interior roadways and parking. Construction has not yet begun. Proprietor s Marketplace: The marketplace is the second phase of a mixed use multiple building development. The second phase includes three buildings. Two of the building contain commercial on the first floor and 5 two story 25

26 residential condos above. One of the buildings is almost completed and the second building s foundation has been poured. Adelaide: Adelaide is a 15 lot subdivision approved and under construction on Webster Street in the Green Harbor area of Town. The roadway base coat and drainage are in place and three of the homes are built with two of them are occupied. John Sherman Estates: John Sherman Estates is a 13 lot subdivision off of Route 3A and Wright s Way. The Subdivision has the roadway base coat and drainage installed and has 4 homes completed with two more homes starting construction. Wright s Way: Wright s Way is another 13 lot subdivision off of Ferry Street and connected to John Sherman. The roadways base coat and drainage have been installed and seven homes are completed and occupied and another 2 homes are starting construction. Direct Granite: 600 Plain Street is a rehabilitation and expansion of a commercial building on Route 139 by adding a 43 x 120 long building to the existing 45 x 76 metal building. The building will be a combined retail sales and cutting and fabrication of countertops. The permit was issued and construction on the expansion is expected shortly. Quirk Auto Sales: Quirk was an expansion storage and display area for car sales on Route 139 near the Pembroke Town Line. The project was approved and work has begun on the expansion. Horseshoe Farm: Horseshoe Farm is a 24 lot subdivision off of Spring Street in the North Marshfield area of town. Seven of the homes are occupied with another five homes under construction. Chestnut Hill: Chestnut Hill is a 25 lot subdivision that extends Holly Road to Ferry Street. Twelve of the homes are occupied with two more under construction. This subdivision is in the Seaview section of town on a hill with some lots having ocean views. A total of 370 residential units have been permitted and are expected to be online within the next two years. Building Permits The table below sets forth the number of building permits issued and the estimated dollar value of new construction and alterations for the following calendar years. Permits are filed for both private construction as well as for Town projects. (1) Through May 31, New Construction Calendar Residential Non-Residential Year No. Value No. Value 2018 (1) 312 $ 11,507, $ 3,248, ,900, ,433, ,632, ,441, ,241, ,116, ,766, ,420, ,963, ,409,216 26

27 Other Data The following tables set forth age characteristics, income levels, housing characteristics, population trends, and employment figures for the Town of Marshfield, Plymouth County, and The Commonwealth of Massachusetts. Median Age Marshfield Plymouth County Massachusetts Number Percent Number Percent Number Percent Year Under 5 Years 1, , , Years to 19 Years 5, , ,241, Years to 64 Years 14, , ,112, Years and Over 3, , , Total 25, , ,705, Median Age Median Age (2000) Source: U.S. Department of Commerce Per Capita Income Marshfield Plymouth County Massachusetts % % % Amount Change Amount Change Amount Change Year year estiamtes 40, % 36, % 36, % , , , , , , ,961-6,978-7,457 - Source: U.S. Department of Commerce Family Income Marshfield Plymouth County Massachusetts Number Percent Number Percent Number Percent Year Less than $10, % 3, % 58, % 10,000-24, , , ,000-49, , , ,000-74,999 1, , , ,000-99, , , , ,999 1, , , ,000 or more 2, , , Total 6, , ,620, Median Income $ 109,906 $ 91,720 $ 87,085 Source: U.S. Department of Commerce 27

28 Household Income Marshfield Plymouth County Massachusetts Number Percent Number Percent Number Percent Year Less than $10, % 7, % 155, % 10,000-24, , , ,000-49,999 1, , , ,000-74,999 1, , , ,000-99, , , , ,999 2, , , ,000 or more 2, , , Total 9, , ,549, Median Income $ 84,167 $ 75,459 $ 68,563 Source: U.S. Department of Commerce Median Value Owner-Occupied Housing Units Marshfield Plymouth County Massachusetts Number Percent Number Percent Number Percent Year Less than $100, % 6, , % 100, , , , , , , , , ,999 3, , , , ,999 1, , , ,000,000 or more , , Total 7, , ,583, Median Value $ 398,400 $ 328,600 $ 333,100 Source: U.S. Department of Commerce Population Marshfield Plymouth County Massachusetts Number % Change Number % Change Number % Change Year 2015 estimate 25, % 510, % 6,794, % , , ,547, , , ,349, , , ,016, , ,437-5,737,037 0 Source: U.S. Department ofcommernce for actuals and estimates, Massachusetts Institute for Social & Economic Research for projections. 28

29 PROPERTY TAXATION Tax Levy Computation The principal revenue source of the Town is the tax on real and personal property. The amount to be levied in each year is the amount appropriated or required by law to be raised for municipal expenditures less estimated receipts from other sources and less appropriations voted from funds on hand. The total amount levied is subject to certain limits prescribed by law; for a description of those limits, see "Tax Limitations" below. As to the inclusion of debt service and final judgments (see Securities and Remedies above). The estimated receipts for a fiscal year from sources other than the property tax may not exceed the actual receipts during the preceding fiscal year from the same sources unless approved by the State Commissioner of Revenue. Excepting special funds the use of which is otherwise provided for by law, the deduction for appropriations voted from funds on hand for a fiscal year cannot exceed the "free cash" as of the beginning of the prior fiscal year as certified by the State Director of Accounts plus up to nine months' collections and receipts on account of earlier years' taxes after that date. Subject to certain adjustments, free cash is surplus revenue less uncollected overdue property taxes from earlier years. Although an allowance is made in the tax levy for abatements (see "Abatements and Overlay" below), no reserve is generally provided for uncollectible real property taxes. Since some of the levy is inevitably not collected, this creates a cash deficiency which may or may not be offset by other items (see "Taxation to Meet Deficits" below). The table below illustrates the manner in which the tax levy was determined for the following fiscal years. TAX LEVY COMPUTATION Fiscal 2018 Fiscal 2017 Fiscal 2016 Fiscal 2015 Fiscal 2014 Gross Amount to be Raised Appropriations (1) Other Local Expenditures State & County Charges Overlay Reserve Total Gross Amount to be Raised $108,175,399 $102,440,449 $96,924,111 $94,481,582 $92,683,318 64, , ,990 75, , , , , , , , , , , , ,491, ,744,634 98,881,650 95,859,236 94,321,534 Less Estimated Receipts & Other Revenue: Estimated Receipts from State (2) Estimated Receipts - Local Available Funds Appropriated: (3) 18,163,845 17,954,143 17,646,458 17,486,672 17,368,271 23,389,337 20,196,155 19,432,356 19,820,033 19,096,353 Free Cash 2,250,803 2,376, , ,854 1,162,548 Revenue sharing Other Available Funds 838, , , ,888 1,118,137 Free Cash & Other Revenue Used to Reduced the T ax Rate Total Estimated Receipts & Revenue $44,642,426 $40,969,284 $38,097,450 $38,461,447 $38,745,309 Net Amount to be Raised (T ax Levy) $64,848,601 $62,775,350 $60,784,200 $57,397,789 $55,576,225 (1) Includes additional appropriations from taxation voted subsequent to adoption of the annual budget but prior to setting of the tax rate. (2) Estimated by the State Department of Revenue and required by law to be used in setting of the tax rate. Actual state aid payments may vary upward or downward from said estimates, and the State may withhold payments pending receipt of State and County assessments. (3) Transfers from available funds, including "Free Cash", generally made as an offset to a particular appropriation item. 29

30 Assessed Valuations and Tax Levies Property is classified for the purpose of taxation according to its use. The legislature has in substance created three classes of taxable property: (1) residential real property, (2) open space land, and (3) all other (commercial, industrial and personal property). Within limits, cities and towns are given the option of determining the share of the annual levy to be borne by each of the three categories. The share required to be borne by residential real property is at least 50 per cent of its share of the total taxable valuation; the effective rate for open space must be at least 75 per cent of the effective rate for residential real property; and the share of commercial, industrial and personal property must not exceed 175 percent of their share of the total valuation. A city or town may also exempt up to 20 percent of the valuation of residential real property (where used as the taxpayer s principal residence) and up to 10 percent of the valuation of commercial real property (where occupied by certain small businesses). Property may not be classified in a city or town until the State Commissioner of Revenue certifies that all property in the city or town has been assessed at its fair cash value. Such certification must take place every three years, or pursuant to a revised schedule as may be issued by the Commissioner. Related statutes provide that certain forest land, agricultural or horticultural land (assessed at the value it has for these purposes) and recreational land (assessed on the basis of its use at a maximum of 25 percent of its fair cash value) are all to be taxed at the rate applicable to commercial property. Land classified as forest land is valued for this purpose at five percent of fair cash value but not less than ten dollars per acre. A professional revaluation of all real and personal property in the Town to full and fair cash value was completed for use in fiscal The following table sets forth the trend in the Town's assessed valuations, tax rates, tax levies, and tax levies per capita. Tax Rate Per Personal Total $1,000 Valuation Tax Levy Fiscal Real Estate Property Assessed Residential & Comm, Indus., & Per Capita Year Valuation Valuation Valuation Open Space Pers. Prop. Tax Levy (1) 2018 (2) $4,769,588,253 $80,718,490 $4,850,306,743 $13.37 $13.37 $64,848,601 $ ,494,914,398 80,548,370 4,575,462, ,775, ,304,518,888 74,746,291 4,379,265, ,784, ,247,779,555 71,090,968 4,318,870, ,397, (2) 4,111,481,040 70,326,699 4,181,807, ,576, (1) 2010 Federal Census (25,132). (2) Revaluation years. Classification of Property The following is a breakdown of the Town's assessed valuation in fiscal 2016 through Fiscal 2018 Fiscal 2017 Fiscal 2016 Assessed % of Assessed % of Assessed % of Valuation Total Valuation Total Valuation Total Residential $4,478,816, % $4,218,292, % $4,031,604, % Commercial 239,448, ,304, ,476, Industrial 51,322, ,318, ,437, Personal 80,718, ,548, ,746, Total $4,850,306, % $4,575,462, % $4,379,265, % 30

31 Largest Taxpayers The following table lists the ten largest taxpayers in the Town based upon projected assessed valuations for fiscal All of the taxpayers listed below are current in their payments. Name Nature of Business Fiscal 2018 Assessed Valuation Percent of Total Assessed Valuation Shi II Marshfield, LLC Assisted Living $ 43,462, % NSTAR Electric Utility 27,897, Home Proeperties MarsfieldLP Apartment Complex 27,840, Brixmore Webster Square, LLC Shopping Plaza 19,983, Columbia Gas of Massachusetts Utility 17,997, Verizon New England Utility 15,142, Beacon Ocean Shore LTD Partnership Apartment Complex 11,000, OMDB Realty, LLC Shopping Plaza 9,705, Mariner's Hill Limited Partnership Apartment Complex 8,657, VRT Corp. Commercial Industrial Property 8,031, TOTAL $ 189,718, % State Equalized Valuation In order to determine appropriate relative values for the purposes of certain distributions to and assessments upon cities and towns, the Commissioner of Revenue biennially makes a redetermination of the fair cash value of the taxable property in each municipality. This is known as the "equalized value". The following table sets forth the trend in equalized valuations of the Town of Marshfield. Abatements and Overlay State Equalized Percent January 1 Valuation Change 2016 $4,661,838, % ,400,432,600 (2.80) ,527,020,700 (3.25) ,678,944,800 (9.30) ,158,780, The Town is authorized to increase each tax levy by an amount approved by the Commissioner of Revenue as an "overlay" to provide for tax abatements. If abatements are granted in excess of the applicable overlay, the excess is required to be added to the next tax levy. Abatements are granted where exempt real or personal property has been assessed or where taxable real or personal property has been overvalued or disproportionately valued. The assessors may also abate uncollectible personal property taxes. They may abate real and personal property taxes on broad grounds (including inability to pay) with the approval of the State Commissioner of Revenue, but uncollected real property taxes are ordinarily not written off until they become municipal "tax titles" by purchase at the public sale or by taking, at which time the tax is written off in full by reserving the amount of the tax and charging surplus. 31

32 The following table sets forth the amount of the overlay reserve for the last five fiscal years and actual abatements granted as of June 1, Overlay Reserve Fiscal Net Tax Dollar As a % of Year Levy(1) Amount Net Levy Abatements/Exemptions Granted as of June 1, $ 64,433,602 $ 414, % $ 386, ,374, , , ,219, , , ,971, , , ,210, , , ,668, , ,796 (1) Net after deduction of overlay for abatements. Tax Collections The Town has accepted a statute providing for quarterly billing. Under the statute, preliminary tax payments are due August 1 and October 1 with payment of the actual tax bill (after credit is given for the preliminary payments) in installments on February 1 and May 1, if actual tax bills are mailed by December 31. Interest accrues on delinquent taxes at the rate of 14 percent per annum. Real property (land and buildings) is subject to a lien for the taxes assessed upon it, subject to any paramount federal lien and subject to bankruptcy and insolvency laws. In addition, real property is subject to a lien for certain unpaid municipal charges or fees. If the property has been transferred, an unenforced lien expires on the fourth December 31 after the end of the fiscal year to which the tax relates. If the property has not been transferred by the fourth December 31, an unenforced lien expires upon a later transfer of the property. Provision is made, however, for continuation of the lien where it could not be enforced because of a legal impediment. The persons against whom real or personal property taxes are assessed are personally liable for the tax (subject to bankruptcy and insolvency laws). In the case of real property, this personal liability is effectively extinguished by sale or taking of the property as described below. The following table compares the Town's net tax collections with its net tax levy less overlay reserve for the following fiscal years. Collections During Collections as of Gross Overlay Net Fiscal Year Payable(1) June 1, 2018 (1)(2) Fiscal Tax Reserve for Tax Dollar % of Net Dollar % of Net Year Levy Abatements Levy Amount Levy Amount Levy 2018 $ 64,848,601 $ 414,999 $ 64,433,602 N.A. N.A. $ 62,112, % ,775, ,613 62,374,736 $ 59,973, % 62,139, ,784, ,819 60,219,382 58,894, ,218, ,397, ,059 56,971,730 55,825, ,970, ,576, ,407 55,210,818 54,124, ,210, ,084, ,090 50,668,248 49,546, ,667, (1) Actual dollar collections net of refunds. Does not include abatements, proceeds of tax titles or tax possessions attributable to each levy or other non-cash credits. (2) Collections for the current fiscal year are comparable to previous fiscal years. Tax Titles and Possessions Massachusetts law permits a municipality either to sell by public sale (at which the municipality may become the purchaser) or to take real property for non-payment of taxes. In either case the property owner can redeem the property by paying the unpaid taxes, with interest and other charges, but if the right of redemption is not exercised within six months (which may be extended an additional year in the case of certain installment payments) it can be foreclosed by petition to the Land Court. 32

33 Upon such foreclosure, a tax title purchased or taken by the municipality becomes a "tax possession" and may be held and disposed of in the same manner as other land held for municipal purposes. Uncollectible real property taxes are ordinarily not written off until they become municipal tax titles by purchase at the public sale or by taking, at which time the tax is written off in full by reserving the amount of tax and charging surplus. The table below sets forth the amount of overdue property taxes, tax titles and possessions outstanding at the end of the last five fiscal years Aggregate(1) $ 2,696,534 $ 1,721,060 $ 1,711,518 $ 1,741,160 $ 2,298,754 For Current Year(1) 1,639,280 1,234,401 1,175,996 1,152,922 2,055,391 Tax Titles 1,057, , , , ,349 Tax Possessions 574, , , , ,069 Sale of Tax Receivables Cities and towns are authorized to sell delinquent property tax receivables at public sale or auction, either individually or in bulk. The Town does not expect to utilize this option at the present time. Taxation to Meet Deficits As noted elsewhere (see Abatements and Overlay below) overlay deficits, i.e. tax abatements in excess of the overlay included in the tax levy to cover abatements, are required to be added to the next tax levy. It is generally understood that revenue deficits, i.e. those resulting from non-property tax revenues being less than anticipated, are also required to be added to the tax levy (at least to the extent not covered by surplus revenue). Amounts lawfully expended since the prior tax levy and not included therein are also required to be included in the annual tax levy. The circumstances under which this can arise are limited since municipal departments are generally prohibited from incurring liabilities in excess of appropriations except for major disasters, mandated items, contracts in aid of housing and renewal projects and other long-term contracts. In addition, utilities must be paid at established rates and certain established salaries, e.g. civil service, must legally be paid for work actually performed, whether or not covered by appropriations. Cities and towns are authorized to appropriate sums, and thus to levy taxes, to cover deficits arising from other causes, such as free cash deficits arising from a failure to collect taxes. This is not generally understood, however, and it has not been the practice to levy taxes to cover free cash deficits. Except to the extent that such deficits have been reduced or eliminated by subsequent collections of uncollected taxes (including sales of tax titles and tax possessions), lapsed appropriations, non-property tax revenues in excess of estimates, other miscellaneous items or funding loans authorized by special act, they remain in existence. Tax Limitations Chapter 59 Section 21C of the General Laws, also known as Proposition 2½ imposes two separate limits on the annual tax levy of a city or town. The primary limitation is that the tax levy cannot exceed 2½ percent of the full and fair cash value. If a city or town exceeds the primary limitation, it must reduce its tax levy by at least 15 percent annually until it is in compliance, provided that the reduction can be reduced in any year to not less than 7½ percent by majority vote of the voters, or to less than 7½ percent by two-thirds vote of the voters. For cities and towns at or below the primary limit, a secondary limitation is that the tax levy cannot exceed the maximum levy limit for the preceding fiscal year as determined by the State Commissioner of Revenue by more than 2½ percent, subject to exceptions for property added to the tax rolls or property which has had an increase, other than as part of a general revaluation, in its assessed valuation over the prior year s valuation. This growth limit on the tax levy may be exceeded in any year by a majority vote of the voters, but an increase in the secondary or growth limit under this procedure does not permit a tax levy in excess of the primary limitation, since the two limitations apply independently. In addition, if the voters vote to approve taxes in excess of the growth limit for the purpose of funding a stabilization fund, such increased amount may only be taken into account for purposes of calculating the maximum 33

34 levy limit in each subsequent year if the board of selectmen of a town or the city council of a city votes by a two-thirds vote to appropriate such increased amount in such subsequent year to the stabilization fund. The applicable tax limits may also be reduced in any year by a majority vote of the voters. The State Commissioner of Revenue may adjust any tax limit to counterbalance the effects of extraordinary, non-recurring events which occurred during the base year. The statute further provides that the voters may exclude from the taxes subject to the tax limits and from the calculation of the maximum tax levy (a) the amount required to pay debt service on bonds and notes issued before November 4, 1980, if the exclusion is approved by a majority vote of the voters, and (b) the amount required to pay debt service on any specific subsequent issue for which similar approval is obtained. Even with voter approval, the holders of the obligations for which unlimited taxes may be assessed do not have a statutory priority or security interest in the portion of the tax levy attributable to such obligations. It should be noted that Massachusetts General Laws Chapter 44, Section 20 requires that the taxes excluded from the levy limit to pay debt service on any such bonds and notes be calculated based on the true interest cost of the issue. Accordingly, the Department of Revenue limits the amount of taxes which may be levied in each year to pay debt service on any such bonds and notes to the amount of such debt service, less a pro rata portion of any original issue premium received by the city or town that was not applied to pay costs of issuance. Voters may also exclude from the Proposition 2½ limits the amount required to pay specified capital outlay expenditures or for the city or town s apportioned share for certain capital outlay expenditures by a regional governmental unit. In addition, the city council of a city, with the approval of the mayor if required, or the board of selectmen or the town council of a town may vote to exclude from the Proposition 2½ limits taxes raised in lieu of sewer or water charges to pay debt service on bonds or notes issued by the municipality (or by an independent authority, commission or district) for water or sewer purposes, provided that the municipality s sewer or water charges are reduced accordingly. In addition, Proposition 2½ limits the annual increase in the total assessments on cities and towns by any county, district, authority, the Commonwealth or any other governmental entity (except regional school districts, the MWRA and certain districts for which special legislation provides otherwise) to the sum of (a) 2½ percent of the prior year s assessments and (b) any increases in costs, charges or fees for services customarily provided locally or for services subscribed to at local option. Regional water districts, regional sewerage districts and regional veterans districts may exceed these limitations under statutory procedures requiring a two-thirds vote of the district s governing body and either approval of the local appropriating authorities (by two-thirds vote in districts with more than two members or by majority vote in two-member districts) or approval of thef registered voters in a local election (in the case of two-member districts). Under Proposition 2½ any State law to take effect on or after January 1, 1981 imposing a direct service or cost obligation on a city or town will become effective only if accepted or voluntarily funded by the city or town or if State funding is provided. Similarly, State rules or regulations imposing additional costs on a city or town or laws granting or increasing local tax exemptions are to take effect only if adequate State appropriations are provided. These statutory provisions do not apply to costs resulting from judicial decisions. Initiative Petitions Various proposals have been made in recent years for legislative amendments to the Massachusetts Constitution to impose limits on state and local taxes. To be adopted, such amendments must be approved by two successive legislatures and then by the voters at a state election. 34

35 Unused Levy Capacity (1) Primary Levy Limit (2) $ 121,257,669 $ 114,386,569 $ 109,481,629 $ 107,971,763 $ 104,545,193 Prior Fiscal Year Levy Limit 58,529,796 56,370,561 54,334,533 52,392,242 50,451, % Levy Growth 1,463,245 1,409,456 1,358,432 1,309,806 1,261,292 New Growth (3) 690, , , , ,281 Overrides Growth Levy Limit 60,683,624 58,522,123 56,367,819 54,334,533 52,391,840 Debt Exclusions 4,186,711 4,279,861 4,421,764 3,069,505 3,216,788 Capital Expenditure Exclusions Other Adjustments Tax Levy Limit 64,870,335 62,801,984 60,789,583 57,404,038 55,608,628 Tax Levy 64,848,601 62,775,349 60,784,201 57,397,789 55,576,225 Unused Levy Capacity (4) 21,734 26,635 5,382 6,249 32,403 Unused Primary Levy Capacity (5) $ 60,574,045 $ 55,864,446 $ 53,113,810 $ 53,637,230 $ 52,153,353 (1) Source: Massachusetts Department of Revenue. (2) 2.5% of assessed valuation (3) Allowed increase for new valuations (or required reduction) certified by the Department of Revenue. (4) Tax Levy Limit less Tax Levy. (5) Primary Levy Limit less Growth Levy Limit. Pledged Taxes Taxes on the increased value of certain property in designated development districts may be pledged for the payment of costs of economic development projects within such districts and may therefore be unavailable for other municipal purposes. Community Preservation Act The Massachusetts Community Preservation Act (the CPA ) permits cities and towns that accept its provisions to levy a surcharge on its real property tax levy, dedicate revenue (other than state or federal funds), and to receive state matching funds for (i) the acquisition, creation, preservation, rehabilitation and restoration of land for recreational use, open space, and affordable housing and (ii) the acquisition, preservation, rehabilitation and restoration of historic resources. The provisions of the CPA must be accepted by the voters of the city or town at an election after such provisions have first been accepted by either a vote of the legislative body of the city or town or an initiative petition signed by 5% of its registered voters. A city or town may approve a surcharge of up to 3% (but not less than 1% under certain circumstances) and may make an additional commitment of funds by dedicating revenue other than state or federal funds, provided that the total funds collected do not exceed 3% of the real property tax levy, less any exemptions adopted (such as an exemption for lowincome individuals and families and for low and moderate-income senior citizens, an exemption for $100,000 of the value of each taxable parcel of residential real property or $100,000 of the value of each taxable parcel of class three, commercial property, and class four, industrial property as defined in Chapter 59, Section 2A of the General Laws, and an exemption for commercial and industrial properties in cities and towns with classified tax rates). In the event that the municipality shall no longer dedicate all or part of the additional funds to community preservation, the surcharge on the real property tax levy of not less than 1% shall remain in effect, provided that any such change must be approved pursuant to the same process as acceptance of the CPA. The surcharge is not counted in the total taxes assessed for the purpose of determining the permitted levy amount under Proposition 2½ (see Tax Limitations under PROPERT TAXATION above). A city or town may revoke its acceptance of the provisions of the CPA at any time after 5 years from the date of such acceptance and may change the amount of the surcharge or the exemptions to the surcharge at any time, including reducing the surcharge to 1% and committing additional municipal funds as outlined above, provided that any such revocation or change must be approved pursuant to the same process as acceptance of the CPA. 35

36 Any city or town that accepts the provisions of the CPA will receive annual state matching grants to supplement amounts raised by its surcharge and dedication of revenue. The state matching funds are raised from certain recording and filing fees of the registers of deeds. Those amounts are deposited into a state trust fund and are distributed to cities and towns that have accepted the provisions of the CPA, which distributions are not subject to annual appropriation by the state legislature. The amount distributed to each city and town is based on a statutory formula and the total state distribution made to any city or town may not exceed 100% of the amount raised locally by the surcharge on the real property tax levy. The amounts raised by the surcharge on taxes, the dedication of revenue and received in state matching funds are required to be deposited in a dedicated community preservation fund. Each city or town that accepts the provisions of the CPA is required to establish a community preservation committee to study the community preservation needs of the community and to make recommendations to the legislative body of the city or town regarding the community preservation projects that should be funded from the community preservation fund. Upon the recommendations of the committee, the legislative body of the city or town may appropriate amounts from the fund for permitted community preservation purposes or may reserve amounts for spending in future fiscal years, provided that at least 10% of the total annual revenues to the fund must be spent or set aside for open space purposes, 10% for historic resource purposes and 10% for affordable housing purposes. The CPA authorizes cities and towns that accept its provisions to issue bonds and notes in anticipation of the receipt of surcharge and dedicated revenues to finance community preservation projects approved under the provisions of the CPA. Bonds and notes issued under the CPA are general obligations of the city or town and are payable from amounts on deposit in the community preservation fund. In the event that a city or town revokes its acceptance of the provisions of the CPA, the surcharge shall remain in effect until all contractual obligations incurred by the city or town prior to such revocation, including the payment of bonds or notes issued under the CPA, have been fully discharged. The voters of the Town elected to implement the Community Preservation Act with a 3% surcharge on all real estate tax bills beginning in fiscal year The balance in the fund at June 30, 2017 is $493,891. The projected balance as of June 30, 2018 is approximately $1,350,

37 TOWN FINANCES Budget and Appropriation Process Town Meeting: The annual appropriations of the Town are ordinarily made at the annual meeting which takes place in May. Appropriations may also be voted at special meetings. The Town has a finance committee which submits reports and recommendations on proposed expenditures at town meetings. Town meeting may at any time vote to transfer any amount previously appropriated to any other authorized use by law, and, under certain circumstances and subject to certain limits and requirements, the selectmen of a town, with the concurrence of the finance committee, may transfer amounts appropriated for the use of any department to any other appropriation for the same department or to any other department. Water and sewer department expenditures are generally included in the budgets adopted by city councils and town meetings but electric and gas department funds may be appropriated by the municipal light boards. Under certain legislation any city or town which accepts the legislation may provide that the appropriation for the operating costs of any department may be offset, in whole or in part, by estimated receipts from fees charged for services provided by the department. It is assumed that this general provision does not alter the pre-existing power of an electric or gas department to appropriate its own receipts. The school budget is limited to the total amount appropriated by the city council or town meeting, but the school committee retains full power to allocate the funds appropriated. State legislation known as the Education Reform Act of 1993, as amended, imposes certain minimum expenditure requirements on municipalities with respect to funding for education. The requirements are determined on the basis of formulas affected by various measures of wealth and income, enrollments, prior levels of local spending and state aid, and other factors. (See STATE DISTRIBUTIONS below.) Mandatory Items: Mandatory items, such as state and county assessments, the overlay for abatements, abatements in excess of overlays, principal and interest not otherwise provided for and final judgments are included in the tax levy whether or not included in the budget. Revenues: Revenues are not required to be set forth in the budget but estimated non-tax revenues are taken into account by the assessors in fixing the tax levy. (See "PROPERTY TAXATION--Tax Levy Computation".) Budget Trends The following table sets forth the trend in operating budgets for fiscal years 2015 through 2019 as voted at annual town meeting. Also said budgets do not reflect expenditures authorized for non-recurring purposes under "special" warrant articles or transfers occurring subsequent to the annual town meeting. BUDGET COMPARISON Fiscal 2019 Fiscal 2018 Fiscal 2017 Fiscal 2016 Fiscal 2015 General Government $2,665,624 $2,518,373 $3,083,631 $3,228,592 $3,113,124 Public Safety 11,414,830 11,044,505 10,775,763 10,257,738 9,731,691 Heath and Human Services 862,564 1,085, , , ,809 Public Works 2,868,883 2,802,377 3,121,126 3,056,990 3,102,353 Schools 48,326,176 46,860,362 45,881,625 44,137,939 43,597,966 Libraries 767, , , , ,688 Veterans 495, , , , ,745 Unclassied 43,000 23,000 26,000 23,500 31,000 Debt and Interest 10,401,374 9,623,648 9,124,633 9,805,999 7,993,767 Insurance 1,001, ,791 7,519, , ,549 Employee Benefits (Includes Pension) 13,693,413 12,456,510 6,451,747 11,398,920 11,062,252 Solid Waste Enterprise 3,715,232 3,604,157 3,528,108 3,135,583 2,668,411 Reserve for Stabilization Fund 3,200, Water Enterprise 4,313,638 3,998,490 3,332,361 4,091,287 3,319,407 Sewer Enterprise 3,807,771 3,728,217 3,647,585 3,300,561 2,735,021 Total Budget $107,576,539 $99,965,859 $98,158,773 $94,980,040 $89,661,783 37

38 Revenues Property Taxes: Property taxes are the major source of revenue for the Town. The total amount levied is subject to certain limits prescribed by law; for a description of those limits see "PROPERTY TAXATION-- Tax Limitations" above State Aid: In addition to grants for specified capital purposes (some of which are payable over the life of the bonds issued for the projects), the Commonwealth provides financial assistance to cities and towns for current purposes. Payments to cities and towns are derived primarily from a percentage of the State s personal income, sales and use, and corporate excise tax receipts, together with the net receipts from the State Lottery. A municipality s state aid entitlement is based on a number of different formulas, of which the schools and lottery formulas are the most important. Both of the major formulas tend to provide more state aid to poorer communities. The formulas for determining a municipality s state aid entitlement are subject to amendment by the state legislature and, while a formula might indicate that a particular amount of state aid is owed, the amount of state aid actually paid is limited to the amount appropriated by the state legislature. The following reflects state aid receipts in each of the following years. Additionally, the Town expects to receive approximately $14,944 in airport aid and $1,244,776 in roadway aid for fiscal For Fiscal Year 2018 (est.) School Operating Aid $ 14,421,163 $ 14,297,323 $ 14,128,000 $ 13,963,368 $ 13,855,893 Other Cherry Sheet State Aid 2,629,828 2,543,966 2,405,514 2,026,085 2,340,952 Other State Aid 1,230,728 1,473,764 2,047,495 4,613,718 2,034,655 Total State Aid $ 18,281,719 $ 18,315,053 $ 18,581,009 $ 20,603,171 $ 18,231,500 Federal Aid and Airport Aid: The following reflects federal aid receipts in each of the following fiscal years. For Fiscal Year 2018 (est.) Federal Aid $ 2,014,670 $ 2,066,220 $ 2,163,318 $ 2,160,951 $ 1,431,637 Airport Construction 158, ,480 6,155,358 3,886,865 9,160,758 Motor Vehicle Excise: An excise is imposed on the registration of motor vehicles (subject to exemptions) at a uniform rate of $25 per $1,000 of valuation. The excise is collected by and for the benefit of the municipality in which the vehicle is customarily kept. Valuations are determined by a statutory formula based on manufacturer's list price and year of manufacture. Bills not paid when due bear interest at 12 percent per annum. Provision is also made for the non-renewal of registration and operating license by the registrar of motor vehicles. For Fiscal Year 2018 (est.) Motor Vehicle Excise Taxes $ 4,010,000 $ 3,599,611 $ 3,599,611 $ 3,620,731 $ 3,402,629 Local Options Meals Tax: In 2016, the Town adopted the local meals excise tax of 0.75% on the gross receipts of a vendor from the sale of restaurant meals. The tax is paid by the vendor to the State Commissioner of Revenue, who in turn pays the tax to the municipality in which the meal was sold. In fiscal 2017, receipts for this tax totaled $422,152. The Town expects to collect approximately $390,000 from this tax in fiscal Room Occupancy Tax: Under this tax, local governments may tax the provision of hotel, motel and lodging house rooms at a rate not to exceed six percent (6%) of the cost of renting such rooms. The tax is paid by the operator of the hotel, motel or lodging house to the State Commissioner of Revenue, who in turn pays the tax back to the municipality in which the rooms are located in quarterly distributions. The Town levied the full 4% as permitted under the law since the inception of the tax, and in 2009, the Town adopted an increase in the room occupancy tax to 6% to be effective October 1, In fiscal 2017, receipts for this tax totaled $609,170. The Town expects to collect approximately $660,000 from this tax in fiscal

39 Water Rates and Services: The Town's Water Department is accounted for as an Enterprise Fund, and provides water services to approximately 98.52% of the industrial, commercial and residential users within the Town charging them on the basis of metered consumption. Water rates are currently $74.00 per year for metered service, plus $5.42 (on average) per 1,000 gallons consumed. Unmetered services are charged $ per year. In fiscal year 2017 water charges totaled $4,526,047 and water expenditures totaled $4,161,327. Sewer Rates and Services: Approximately 42.13% of the Town is sewered and charged sewer user fees based on water consumption. Sewer charges are currently $346 per year plus $7.07 per 1,000 gallons of water used by residential users, $8.95 per 1,000 gallons of water used for condomiums and apartments and $9.90 per 1,000 gallons of water used by commercial users. The Town maintains a sewer enterprise fund. In fiscal year 2017 sewer charges totaled $2,816,816 and sewer expenditures totaled $3,292,720. Solid Waste Disposal Services: The Town s solid waste disposal activities are accounted for in the Solid Waste Enterprise Fund. In 2017 charges for solid waste disposal totaled $2,993,930, while operating expenses totaled $3,080,726. Other Revenues: Revenue generated from investment income (Water - $14,794, Sewer - $8,842, Solid Waste - $6,664), fines/forfeits (Water - $478,677, Sewer 382,982, Solid Waste - $327,543), other departmental (Water - $36,887, Sewer - $165,378, Solid Waste - $213,263), licenses and permits (Sewer - $275), fees (Sewer - $740, Solid Waste - $294,670), rentals (Water - $5,383), and penalties and interest (Water - $65,052, Sewer - $40,241, Solid Waste - $30,856) in fiscal School Building Assistance Under its school building assistance program, the Commonwealth of Massachusetts provides grants to cities, towns and regional school districts for school construction projects. Until July 26, 2004, the State Board of Education was responsible for approving grants for school projects and otherwise administering the program. Grant amounts ranged from 50% to 90% of approved project costs. Municipalities generally issued bonds to finance the entire project cost, and the Commonwealth disbursed the grants in equal annual installments over the term of the related bonds. Pursuant to legislation which became effective on July 26, 2004, the state legislature created the Massachusetts School Building Authority (the Authority ) to finance and administer the school building assistance program. The Authority has assumed all powers and obligations of the Board of Education with respect to the program. In addition to certain other amounts, the legislation dedicates a portion of Commonwealth sales tax receipts to the Authority to finance the program. Projects previously approved for grants by the State Board of Education are entitled to receive grant payments from the Authority based on the approved project cost and reimbursement rate applicable under the prior law. The Authority has paid and is expected to continue to pay the remaining amounts of the grants for such projects either in annual installments to reimburse debt service on bonds issued by the municipalities to finance such projects, or as lump sum payments to contribute to the defeasance of such bonds. Projects on the priority waiting list as of July 1, 2004 are also entitled to receive grant payments from the Authority based on the eligible project costs and reimbursement rates applicable under the prior law. With limited exceptions, the Authority is required to fund the grants for such projects in the order in which they appear on the waiting list. Grants for any such projects that have been completed or substantially completed have been paid and are expected to continue to be paid by the Authority in lump sum payments, thereby eliminating the need for the Authority to reimburse interest expenses that would otherwise be incurred by the municipalities to permanently finance the Authority s share of such project costs. Interest on debt issued by municipalities prior to July 1, 2004 to finance such project costs, and interest on temporary debt until receipt of the grant, is included in the approved costs of such projects. Grants for any such projects that have not yet commenced or that are underway have been and are expected to continue to be paid by the Authority as project costs are incurred by the municipality pursuant to a project funding agreement between the Authority and the municipality, eliminating the need for the municipality to borrow even on a temporary basis to finance the Authority s share of the project costs in most cases. The range of reimbursement rates for new project grant applications submitted to the Authority on or after July 1, 2007 has been reduced to between 40% and 80% of approved project costs. The Authority promulgated new regulations with respect to the application and approval process for projects submitted after July 1, The Authority expects to pay grants for such projects as project costs are incurred pursuant to project funding agreements between the Authority and the municipalities. None of the interest expense incurred on debt issued by municipalities to finance their portion of the costs of new projects will be included in the approved project costs eligible for reimbursement. 39

40 Investment of Town Funds Investments of funds of cities and towns, except for trust funds, are generally restricted by Massachusetts General Laws Chapter 44, 55. That statute permits investments of available revenue funds and bond and note proceeds in term deposits and certificates of deposits of banks and trust companies, in obligations issued or unconditionally guaranteed by the federal government or an agency thereof with a maturity of not more than one year, in repurchase agreements with a maturity of not more than 90 days secured by federal or federal agency securities, in participation units in the Massachusetts Municipal Depository Trust ( MMDT ), or in shares in SEC-registered money market funds with the highest possible rating from at least one nationally recognized rating organization. MMDT is an investment pool created by the Commonwealth. The State Treasurer is the sole trustee, and the funds are managed under contract by an investment firm under the supervision of the State Treasurer s office. According to the State Treasurer the Trust s investment policy is designed to maintain an average weighted maturity of 90 days or less and is limited to high-quality, readily marketable fixed income instruments, including U.S. Government obligations and highly-rated corporate securities with maturities of one year or less. Trust funds, unless otherwise provided by the donor, may be invested in accordance with 54 of Chapter 44, which permits a broader range of investments than 55, including any bonds or notes that are legal investments for savings banks in the Commonwealth. The restrictions imposed by 54 and 55 do not apply to city and town retirement systems. Breakdown of above investments may be obtained from the Town Treasurer. Annual Audits Annual audits of the Town s general purpose financial statements have been performed by Powers & Sullivan. A copy of the fiscal 2017 audit is attached hereto. Copies of these audits are available upon request from the office of the Town Accountant. The attached report speaks only as of its date, and only to the matters expressly set forth therein. The auditors have not been engaged to review this Official Statement or to perform audit procedures regarding the post-audit period, nor have the auditors been requested to give their consent to the inclusion of their report in Appendix A. Except as stated in their report, the auditors have not been engaged to verify the financial information set out in Appendix A and are not passing upon and do not assume responsibility for the sufficiency, accuracy or completeness of the financial information presented in that appendix. Financial Statements Set forth on the following pages are Governmental Funds Balance Sheets for fiscal years 2017, 2016 and 2015 and Statements of Revenues, Expenditures and Changes in Fund Balances for fiscal years 2013 through Said financial statements were extracted from the Town s audited financial statements. 40

41 TOWN OF MARSHFIELD, MASSACHUSETTS SOURCE: Audited financial statements of the Town. 41

42 TOWN OF MARSHFIELD, MASSACHUSETTS SOURCE: Audited financial statements of the Town. 42

43 TOWN OF MARSHFIELD, MASSACHUSETTS SOURCE: Audited financial statements of the Town. 43

44 TOWN OF MARSHFIELD, MASSACHUSETTS SOURCE: Audited financial statements of the Town. 44

45 TOWN OF MARSHFIELD, MASSACHUSETTS SOURCE: Audited financial statements of the Town. 45

46 TOWN OF MARSHFIELD, MASSACHUSETTS SOURCE: Audited financial statements of the Town. 46

47 TOWN OF MARSHFIELD, MASSACHUSETTS SOURCE: Audited financial statements of the Town. 47

48 TOWN OF MARSHFIELD, MASSACHUSETTS SOURCE: Audited financial statements of the Town. 48

49 Unassigned Fund Balances, Stabilization Fund Balance, Enterprise Fund and CPA Balance Under Massachusetts law an amount known as "free cash" is certified as of the beginning of each fiscal year by the State Bureau of Accounts and this, together with certain subsequent tax receipts, is used as the basis for subsequent appropriations from available funds, which are not required to be included in the annual tax levy. The following table reflects the balance in each fund as follows: Fiscal Year 2018 (est.) Unassigned General Fund Balance $ 4,403,754 $ 7,195,117 $ 4,407,290 $ 5,374,592 $ 4,545,281 Stabilization Fund Balance 3,116,133 2,383,506 2,327,925 2,279,945 2,273,921 Enterprise Fund Balance Sewer 638,024 1,113, , , ,519 Enterprise Fund Balance Water 2,206,736 2,404,430 1,317,911 1,368, ,365 Enterprise Fund Balance Solid Waste 1,000,991 1,212, , , ,248 Unreserved CPA Fund Balance 1,252, , , , ,300 Source: Compiled from Independent Auditor s report or from the Town Accountant. Tax Increment Financing for Development Districts Under recent legislation, cities and towns are authorized to establish development districts to encourage increased residential, industrial and commercial activity. All or a portion of the taxes on growth in assessed value in such districts may be pledged and used solely to finance economic development projects pursuant to the city or town s development program for the district. This includes pledging such tax increments for the payment of bonds issued to finance such projects. As a result of any such pledge, tax increments raised from new growth properties in development districts are not available for other municipal purposes. Tax increments are taken into account in determining the total taxes assessed for the purpose of calculating the maximum permitted tax levy under Proposition 2 ½ (see Tax Limitations above.) The Town has no such districts. 49

50 Authorization of General Obligation Bonds and Notes INDEBTEDNESS Serial bonds and notes are authorized by a two-thirds vote of the town meeting. Refunding bonds and notes are authorized by the selectmen. Borrowings for some purposes require State administrative approval. When serial bonds or notes have been authorized, bond anticipation notes may be issued by the officers authorized to issue the serial bonds or notes. Temporary loans in anticipation of revenue of the fiscal year in which the debt is incurred or in anticipation of authorized federal and state aid generally may be incurred by the Treasurer with the approval of the selectmen. Debt Limits General Debt Limit. The General Debt Limit of the Town consists of a Normal Debt Limit and a Double Debt Limit. The Normal Debt Limit for the Town is 5 percent of the valuation of taxable property as last equalized by the State Department of Revenue. The Town can authorize debt up to this amount without State approval. It can authorize debt up to twice this amount (the Double Debt Limit) with the approval of the State Municipal Finance Oversight Board. There are many categories of general obligation debt which are exempt from and do not count against the General Debt Limit. Among others, these exempt categories include revenue anticipation notes and grant anticipation notes; emergency loans; loans exempted by special laws; certain school bonds, sewer bonds, water bonds, bonds for electric, gas and telecommunications systems, solid waste disposal facility bonds and economic development bonds supported by tax increment financing; and subject to special debt limits, bonds for housing, urban renewal and economic development (subject to various debt limits). Revenue bonds are not subject to these debt limits. The General Debt Limit and the special debt limit for water bonds apply at the time the debt is authorized. The other special debt limits generally apply at the time the debt is incurred. Types of Obligations General Obligations. Massachusetts cities and towns are authorized to issue general obligation indebtedness of these types: Serial Bonds and Notes. These are generally required to be payable in annual principal amounts beginning no later than the end of the next fiscal year commencing after the date of issue and ending within the terms permitted by law. A level debt service schedule, or a schedule that provides for a more rapid amortization of principal than level debt service, is permitted. The principal amounts of certain economic development bonds supported by tax increment financing may be payable in equal, diminishing or increasing amounts beginning within 5 years after the date of issue. The maximum terms of serial bonds and notes vary from one year to 40 years, depending on the purpose of the issue. The maximum terms permitted are set forth in the statutes. In addition, for many projects, the maximum term may be determined in accordance with useful life guidelines promulgated by the State Department of Revenue ( DOR ). Serial bonds and notes may be issued for the purposes set forth in the statutes. In addition, serial bonds and notes may be issued for any other public work improvement or asset not specifically listed in the Statutes that has a useful life of at least 5 years. Bonds or notes may be made callable and redeemed prior to their maturity, and a redemption premium may be paid. Refunding bonds or notes may be issued subject to the maximum applicable term measured from the date of the original bonds or notes and must produce present value savings over the debt service of the refunded bonds. Generally, the first required annual payment of principal of the refunding bonds cannot be later than the first principal payment of any of the bonds or notes being refunded thereby, however, principal payments made before the first principal payment of any of the bonds or notes being refunded thereby may be in any amount. Serial bonds may be issued as qualified bonds with the approval of the state Municipal Finance Oversight Board composed of the State Treasurer, the State Auditor, the Attorney General and the Director of Accounts, subject to such conditions and limitations (including restrictions on future indebtedness) as may be required by the Board. Qualified bonds may mature not less than 10 nor more than 30 years from their dates and are not subject to the amortization requirements described above. The State Treasurer is required to pay the debt service on qualified bonds and thereafter to withhold the amount of the debt service paid by the State from state aid or other state payments; administrative costs and any loss of interest income to the State are to be assessed upon the city or town. Tax Credit Bonds or Notes. Subject to certain provisions and conditions, the officers authorized to issue bonds or notes may designate any duly authorized issue of bonds or notes as tax credit bonds to the extent such bonds and notes are otherwise permitted to be issued with federal tax credits or other similar subsidies for all or a portion of the borrowing costs. Tax credit bonds may be made payable without regard to the annual installments required by any other law, and a sinking fund may be 50

51 established for the payment of such bonds. Any investment that is part of such a sinking fund may mature not later than the date fixed for payment or redemption of the applicable bonds. Bond Anticipation Notes. These generally must mature within two years of their original dates of issuance but may be refunded from time to time for a period not to exceed ten years from their original dates of issuance, provided that for each year that the notes are refunded beyond the second year they must be paid in part from revenue funds in an amount at least equal to the minimum annual payment that would have been required if the bonds had been issued at the end of the second year. For certain school projects, however, notes may be refunded from time to time for a period not to exceed seven years without having to pay any portion of the principal of the notes from revenue funds. The maximum term of bonds issued to refund bond anticipation notes is measured (except for certain school projects) from the date of the original issue of the notes. Revenue Anticipation Notes. These are issued to meet current expenses in anticipation of taxes and other revenues. They must mature within one year but, if payable in less than one year, may be refunded from time to time up to one year from the original date of issue. Grant Anticipation Notes. These are issued for temporary financing in anticipation of federal grants and state and county reimbursements. Generally, they must mature within two years but may be refunded from time to time as long as the municipality remains entitled to the grant or reimbursement. Revenue Bonds. Cities and towns may issue revenue bonds for solid waste disposal facilities, for projects financed under the Commonwealth s Clean Water Programs and for certain economic development projects supported by tax increment financing. In addition, cities and towns having electric departments may issue electric revenue bonds, and notes in anticipation of such bonds, subject to the approval of the State Department of Telecommunications and Energy. The Town of Marshfield does not operate a municipal electric department. General Obligation Bonds: Outstanding: Direct Debt Summary (1) As of June 30, 2018 General (2) $ 19,948,219 School (3) 46,265,350 Sewer (4) 1,831,150 Water (5) 6,324,500 Solid Waste (6) 40,000 Airport (7) 170,000 MCWT (8) 8,108,133 Total Outstanding $ 82,687,352 This Issue of Bonds to be dated July 26, ,792,000 Temporary Notes: Bond Anticipation Notes Outstanding (9) 10,544,425 Less: To Be Retired with Bond Proceeds (2,792,000) To Be Retired with Revenue Funds (625) New Money Bond Anticipation Notes to be Dated July 27, 2018 (10) 3,203,964 Total Outstanding After These Issues (10) 10,955,764 Total Direct Debt: $ 93,643,116 (1) Principal amounts only. Excludes lease purchase obligations, unfunded pension obligation and other post-employment benefits liability. (2) $1,767,218 is outside the Town s debt limit. (3) $44,033,350 is outside the Town s debt limit and exempt from the limits of Proposition 2 ½. (4) Self-supporting. (5) Self-supporting and outside the Town s general debt limit. (6) Self-supporting. (7) Outside the Town s general debt limit. (8) Does not reflect subsidy from the Massachusetts Clean Water Trust ( MCWT ). $7,087,161 is self-supporting and $1,256,959 is outside the Town s general debt limit. (9) Payable July 27, (10) Payable July 26,

52 Debt Ratios The table below sets forth debt as a percentage of assessed valuation and per capita debt at the end of the following fiscal years. The table considers the principal amount of general obligation bonds of the Town of Marshfield only. The table does not deduct anticipated state grant payments applicable to the principal amount of outstanding bonds or debt that may be supported in whole, or part, by non-tax revenues. General Debt as a % Fiscal Obligation Bonds Assessed Per Capita of Assessed Year End Outstanding Population (1) Valuation Debt Valuation 2018 $ 82,687,352 25,709 $ 4,850,306,743 $ 3, % ,548,913 25,709 4,575,462,768 3, ,629,068 25,709 4,379,265,179 3, ,172,408 25,709 4,318,870,523 3, ,843,873 25,709 4,181,807,739 2, (1) Based on the 2010 Federal Census. Principal Payments by Purpose The following table sets forth the principal payments by purpose on outstanding bonds of the Town. As indicated in the table, of the total $82,687,352 bonds outstanding, $37,406,774 or approximately 45.24% of the total outstanding are to be paid by the end of fiscal 2023, and $60,219,758 or approximately 72.83% of the debt will be retired at the end of fiscal GENERAL OBLIGATION BONDS Principal Payments by Purpose As of June 30, 2018 (1) Fiscal Year General (2) School (3) Sewer (4) Water (5) Solid Waste (6) Airport (7) MCWT (8) Total 2019 $ 2,751,264 $ 4,297,080 $ 204,420 $ 689,500 $ 40,000 $ 10,000 $ 978,471 $ 8,970, ,181,978 4,220, , ,000-10,000 1,006,545 8,243, ,043,726 4,177, , ,000-10, ,053 7,933, ,830,509 2,925,000 90, ,000-10, ,505 6,324, ,597,328 2,770,000 90, ,000-10, ,397 5,934, ,054,184 2,730,000 80, ,000-10, ,677 4,837, ,026,077 2,720,000 80, ,000-10, ,280 4,600, ,018,008 2,695,000 80, ,000-10, ,350 4,568, ,019,978 2,695,000 80, ,000-10, ,552 4,416, ,001,988 2,685,000 75, ,000-10, ,888 4,389, ,038 2,515,000 75, ,000-10, ,363 3,833, ,129 2,515,000 75, ,000-10, ,978 3,832, ,262 2,515,000 75, ,000-10, ,736 3,820, ,438 2,455,000 70, ,000-10, ,642 3,755, ,658 2,450,000 70, ,000-10, ,697 3,754, , ,000 70,000 80,000-10,000 10,000 1,449, , ,000 70,000 80,000-10,000 10,000 1,452, ,497-70,000 60, , ,000-70,000 60, ,000 $ 19,948,219 $ 46,265,350 $ 1,831,150 $ 6,324,500 $ 40,000 $ 140,000 $ 7,746,436 $ 82,687,352 (1) Principal amounts only. Excludes lease purchase obligations, unfunded pension obligation and other post-employment benefits liability. (2) $1,767,218 is outside the Town s debt limit. (3) $44,033,350 is outside the Town s debt limit and exempt from the limits of Proposition 2 ½. (4) Self-supporting. (5) Self-supporting and outside the Town s general debt limit. (6) Self-supporting. (7) Outside the Town s general debt limit. (8) Does not reflect subsidy from the Massachusetts Clean Water Trust ( MCWT ). $7,087,161 is self-supporting and $1,256,959 is outside the Town s general debt limit. 52

53 Debt Service Requirements as of June 30, 2018 The following table sets forth the required principal and interest payments on outstanding general obligation bonds of the Town of Marshfield. Less Cumulative % Fiscal Outstanding Debt (1) MCWT Principal Year Principal Interest Subsidy Total Retired 2019 $ 8,970,735 $ 3,287,795 (219,146) $ 12,039, % ,243,523 2,714,151 (199,344) 10,758, ,933,779 2,346,681 (157,299) 10,123, ,324,014 1,997,959 (152,830) 8,169, ,934,725 1,719,848 (142,802) 7,511, ,837,861 1,467,708-6,305, ,600,357 1,248,451-5,848, ,568,358 1,032,735-5,601, ,416, ,145-5,270, ,389, ,692-5,104, ,833, ,059-4,421, ,832, ,581-4,309, ,820, ,378-4,188, ,755, ,347-4,015, ,754, ,238-3,909, ,449,923 77,861-1,527, ,452,233 35,723-1,487, ,497 10, , ,000 3, , Total $ 82,687,352 $ 19,359,700 $ (871,422) $ 101,175,630 (1) Principal totaling $44,033,350 and interest totaling $11,632,999 has been exempted from the provisions of Proposition 2 ½ subject to the provisions of M.G.L. c.44, 20. Authorized Unissued Debt Following the delivery of the Bonds, the Town will have the following authorized unissued debt: Amount Purpose Original Authorization $ 551,339 High School Construction 11/7/ ,000 Water Main Upgrade 4/28/ ,000 Land Acquisition 10/27/2014 2,000,000 Sewer UV Disinfection Facility 4/26/2016 8,503,235 (1) Furnace Brook Middle School 4/24/ ,000 Beach Nourishment 10/16/2017 1,500,000 Emergency Seawall Maintenance 4/2/2018 1,200,000 Fire Pump/Aerial Replacement 4/23/ ,964 Police Public Safety Communication Replacement 4/23/ ,000 Ambulance Replacement 4/23/2018 1,000,000 Seawall Repair 5/22/2018 $ 16,303,538 (1) The Town voted to exempt this authorization from the limitations of Proposition 2 ½. The total cost for the school project is approximately $8,503,235. The Town has a grant agreement with the Massachusetts School Building Authority for a maximum grant of $3,043,

54 Overlapping Debt In addition to direct debt, the Town is indirectly liable for a portion of the debt and other expenses incurred by various overlapping governmental authorities and agencies. The following table sets forth the outsding and authorized but unissued bonded debt of each authority or agency, Marshfield s percentage and dollar share of this outstanding debt and the Town s fiscal year dollar assessment. Outstanding Debt Overlapping Entity as of 6/30/17 Marshfield Estimated Share (1) Estimated Share (2) Plymouth County(2) $ 1,925, % $ 124,740 (1) Estimated share based on debt service only. (2) Source: Massachusetts Department of Revenue. County expenses, including operating costs and debt service on County bonds, if applicable, are assessed upon cities and towns within the county in proportion to their valuation of taxable property as last equalized by the State Commissioner of Revenue. Legislation enacted in 1997 abolished the county governments of Franklin and Middlesex counties as of July 1, 1997, with their assets, functions, debts and other obligations being assumed by the Commonwealth. The abolishment of the Middlesex County government was in part in response to a default by the county in the payment of general obligation notes of the County. The legislation also abolished the county governments of Hampden and Worcester counties as of July 1, Legislation enacted in 1998 abolished the county governments of Hampshire, Essex and Berkshire counties as of January 1, 1999, July 1, 1999 and July 1, 2000, respectively. The legislation requires the state secretary for administration and finance to establish a plan to recover the Commonwealth s expenditures for the liabilities and other debts assumed and paid by the Commonwealth on behalf of an abolished county. Unless these provisions are changed by further legislation, the state treasurer shall assess upon each city and town within the jurisdiction of an abolished county an amount not exceeding or equal to the county tax paid by each such city and town for the fiscal year immediately prior to the abolishment of the county until such expenditures by the Commonwealth are recovered. It is possible that similar legislation will be sought to provide for the abolishment of county government in all remaining counties. Contractual Obligations Municipal contracts are generally limited to currently available appropriations. A city or town generally has the authority to enter into contracts for the exercise of any of its corporate powers for any period deemed to serve its best interest, but generally only when funds are available for the first fiscal year; obligations for succeeding fiscal years generally are expressly subject to availability and appropriation of funds. Municipalities have specific authority in relatively few cases to enter into long-term contractual obligations that are not subject to annual appropriation, including contracts for refuse disposal and sewage treatment and disposal. Municipalities ay also enter into long-term contracts in aid of housing and renewal projects. There may be implied authority to make another long-term contracts required to carry out authorized municipal functions, such as contracts to purchase water from private water companies. Municipal contracts relating to solid waste disposal facilities may contain provisions requiring the delivery of minimum amounts of waste and payments based thereon and requiring payments in certain circumstances without regard to the operational status of the facilities. Municipal electric departments have statutory power to enter into long-term contracts for joint ownership and operation of generating and transmission facilities and for the purchase or sale of capacity, including contracts requiring payments without regard to the operational status of the facilities. Pursuant to the Home Rule Amendment to the Massachusetts Constitution, (see CONSTITUTIONAL STATUS AND FORM OF GOVERNMENT above), cities and towns may also be empowered to make other contracts and leases. 54

55 The Town of Marshfield has the following long-term contractual obligations at this time: Purpose of Contract Trash/Recycling $ 1,394,618 $ 1,351,636 $ 1,149,250 $ 1,105,041 Dispoal 1,375,789 1,318, , ,030 School Bus 1,478,752 1,189,569 1,158,660 1,116,600 Lease Vehicle N/A 49,087 26,011 25,544 RETIREMENT PLAN The Massachusetts General Laws provide for the establishment of contributory retirement systems for state employees, for teachers and for county, city and town employees other than teachers. Teachers are assigned to a separate statewide teachers system and not to the city and town systems. For all employees other than teachers, this law is subject to acceptance in each city and town. Substantially all employees of an accepting city or town are covered. If a town has a population of less than 10,000 when it accepts the statute, its non-teacher employees participate through the county system and its share of the county cost is proportionate to the aggregate annual rate of regular compensation of its covered employees. In addition to the contributory systems, cities and towns provide non-contributory pensions to a limited number of employees, primarily persons who entered service prior to July 1, 1937 and their dependents. The Public Employee Retirement Administration Commission ( PERAC ) provides oversight and guidance for and regulates all state and local retirement systems. The obligations of a city or town, whether direct or through a county system, are contractual legal obligations and are required to be included in the annual tax levy. If a city or town, or the county system of which it is a member, has not established a retirement system funding schedule as described below, the city or town is required to provide for the payment of the portion of its current pension obligations which is not otherwise covered by employee contributions and investment income. Excess earnings, or earnings on individual employees retirement accounts in excess of a predetermined rate, are required to be set aside in a pension reserve fund for future, not current, pension liabilities. Cities and towns may voluntarily appropriate to their system s pension reserve fund in any given year up to five percent of the preceding year s tax levy. The aggregate amount in the fund may not exceed ten percent of the equalized valuation of the city or town. If a city or town, or each member city and town of a county retirement system, has accepted the applicable law, it is required to annually appropriate an amount sufficient to pay not only its current pension obligations, but also a portion of its future pension liability. The portion of each such annual payment allocable to future pension obligations is required to be deposited in the pension reserve fund. The amount of the annual city or town appropriation for each such system is prescribed by a retirement system funding schedule which is periodically reviewed and approved by PERAC. Each system s retirement funding schedule is designed to reduce the unfunded actuarial pension liability of the system to zero by not later than June 30, 2030, with annual increases in the scheduled payment amounts of not more than 4.5 percent. The funding schedule must provide that payment in any year of the schedule is not less than 95 percent of the amount appropriated in the previous fiscal year. City, town and county systems which have an approved retirement funding schedule receive annual pension funding grants from the Commonwealth for the first 16 years of such funding schedule. Pursuant to recent legislation, a system (other than the state employees retirement system and the teachers retirement system) which conducts an actuarial valuation as of January 1, 2009, or later, may establish a revised schedule which reduces the unfunded actuarial liability to zero by not later than June 30, 2040, subject to certain conditions. If the schedule is so extended under such provisions and a later updated valuation allows for the development of a revised schedule with reduced payments, the revised schedule shall be adjusted to provide that the appropriation for each year shall not be less than that for such year under the prior schedule, thus providing for a shorter schedule rather than reduced payments. City, town and county systems may choose to participate in the Pension Reserves Investment Trust Fund (the PRIT Fund ), which receives additional state funds to offset future pension costs of participating state and local systems. If a local system participates in the PRIT Fund, it must transfer ownership and control of all assets of its system to the Pension Reserves Investment Management Board, which manages the investment and reinvestment of the PRIT Fund. Cities and towns with systems participating in the PRIT Fund continue to be obligated to fund their pension obligations in the manner described above. The additional state appropriations to offset future pension liabilities of state and local systems participating in the PRIT Fund are required to total at least 1.3 percent of state payroll. Such additional state appropriations are deposited in the PRIT Fund and shared by all participating systems in proportion to their interests in the assets of the PRIT Fund as of July 1 for each fiscal year. 55

56 Cost-of-living increases for each local retirement system may be granted and funded only by the local system, and only if it has established a funding schedule. Those statutory provisions are subject to acceptance by the local retirement board and approval by the local legislative body, which acceptance may not be revoked. The Town is a member of the Plymouth County Retirement system. The annual contributions of the Town to the retirement system for the following fiscal years are set forth below. Year Ending Contributory June 30, 2019 (projected) $ 5,916,659 June 30, ,646,638 June 30, ,414,747 June 30, ,134,471 June 30, ,134,471 June 30, ,457,147 As of January 1, 2017, the actuarial accrued liability of Plymouth County Contributory Retirement System was $1,520,090,445, its assets were $937,406,228, leaving an unfunded actuarial accrued liability of $582,684,217. The liability assumes an investment rate of return of 8%. Marshfield s share of the unfunded liability is $46,568,903. The foregoing data does not include the retirement system costs or liabilities attributable to employees of the County or the retirement system costs or liabilities of any other entity of which the Town is a consitutuent part. Plymouth County Regional Retirement Funding Schedule Employer Amortization Employer Employer Fiscal Employee Normal Cost Payments Total Cost Total Cost Unfunded Funded Year Contribution with Interest with Interest with Interest % of Payroll Liability Ratio** 2018 $ 23,089,568 $ 6,056,705 $ 63,732,774 $ 69,789, $ 582,684, ,169,174 6,057,426 67,373,921 73,431, ,391, ,297,281 6,049,683 69,118,012 75,167, ,838, ,476,008 6,032,841 71,234,312 77,267, ,622, ,707,566 6,006,228 73,726,163 79,732, ,070, ,994,258 5,969,136 76,305,230 82,274, ,453, ,338,488 5,920,816 78,974,563 84,895, ,277, ,742,763 5,860,477 81,737,323 87,597, ,005, ,209,695 5,787,287 84,596,780 90,384, ,054, ,742,008 5,700,367 87,556,318 93,256, ,790, ,342,543 5,598,789 90,619,440 96,218, ,528, ,014,263 5,481,577 93,751,214 99,232, ,521, ,760,255 5,347,700-5,347, ,583,739 5,196,075-5,196, ,488,072 5,025,557-5,025, ,476,752 4,834,943-4,834, ,553,428 4,622,966-4,622, ,721,903 4,388,292-4,388, ,986,142 4,129,516-4,129, ,350,277 3,845,160-3,845, ,818,617 3,533,671-3,533, ,395,652 3,193,413-3,193, ,086,064 2,822,667-2,822, ,894,731 2,419,624-2,419, ,328,284 2,510,360-2,510, ,853,094 2,604,498-2,604, ,472,585 2,702,167-2,702, ,190,307 2,803,498-2,803, ,009,944 2,908,629-2,908, ,935,317 3,017,703-3,017, ,970,391 3,130,867-3,130, ,119,281 3,248,274-3,248, *Calendar basis **Beginning of Fiscal year Source: Plymouth County Contributory Retirement System revised funding schedule, PERAC. 56

57 Other Post-Employment Benefits In addition to pension benefits, cities and towns may provide retired employees with health care and life insurance benefits. The portion of the cost of such benefits paid by cities or towns is generally provided on a pay-as-you-go basis. Fiscal Year Annual OPEB Cost 2018 (est.) $ 2,765, ,000, ,410, ,188, ,095, ,959,866 The Governmental Accounting Standards Board ( GASB ) promulgated its Statement Nos. 43 and 45, which require public sector entities to report the future costs of these non-pension, post-employment benefits in their financial statements. These new accounting standards do not require pre-funding the payment of these costs as the liability for such costs accrues, but the basis applied by the standards for measurement of costs and liabilities for these benefits is conservative if they continue to be funded on a pay-as-you-go basis and will result in larger yearly cost and liability accruals than if the cost of such benefits were pre-funded in a trust fund in the same manner as traditional pension benefits. Cities and towns that choose to self-insure all or a portion of the cost of the health care benefits they provide to employees and retirees may establish a trust fund for the purpose of paying claims. In addition, cities and towns may establish a trust fund for the purpose of pre-funding other post-employment benefits liability in the same manner as traditional pension benefits. The Town of Marshfield implemented the GASB reporting requirements beginning in fiscal year The results of the most recent report are as follows: June 30, 2014 June 30, 2015 June 30, 2016 Annual OPEB Cost $ 5,878,599 $ 6,188,555 $ 5,794,343 Contributions 2,095,686 2,188,496 2,551,447 Net OPEB Obligation 3,782,913 4,000,059 3,242,896 % Annual OPEB cost contributed 36% 35% 44% Actuarial Accrued Liability 76,601,573 72,909,973 80,421,318 Unfunded Actuarial Accrued Liability 76,538,066 72,869,091 80,264,976 The Town is mainly addressing the liability on a pay-as-you-go basis. In 2009, the Town established an OPEB Liability Trust Fund and has contributed at least $10,000 to the fund beginning in fiscal year The balance of the OPEB Trust Fund was $185,437 at June 30, The above $72,869,091 liabilty which is calculated on a pay-as-you go basis would be reduced to $51,297,160 upon adoption of a 30-year funding schedule assuming a 4.0% rate of return. COLLECTIVE BARGAINING The Town has approximately 1,100 full time and part-time employees of whom approximately 75.8 percent belong to unions or other collective bargaining groups. The following table sets forth the collective bargaining groups. Union Department Members Expires(1) Marshfield Education Association School /01/20 AFSCME Clerical 33 07/01/18 AFSCME Supervisory 16 07/01/18 AFSCME Public Works 63 07/01/20 AFSCME Custodial 30 07/01/20 Marshfield Permanent Firefighers Local Fire 48 07/01/20 Association of Marshfield Police Police 41 07/01/17 Ventress Memorial Library Professional Staff Library 5 07/01/20 Cafeteria Workers Association School Lunch 27 07/01/20 United Food and Commercial Workers Bus Driver 10 07/01/20 Total 834 (1) Expired contracts are in negotiation. 57

58 LITIGATION At present there are several cases pending in various courts throughout the Commonwealth where the Town of Marshfield is a defendant. In the opinion of the Town, none of the pending litigation is likely to result, either individually or in the aggregate, in final judgments against the Town that would materially affect its financial position. July 11, 2018 TOWN OF MARSHFIELD, MASSACHUSETTS /s/ Patrick Dello Russo, Treasurer 58

59 APPENDIX A THE TOWN OF MARSHFIELD, MASSACHUSETTS Islington Town Center COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR JULY 1, 2016 JUNE 30, 2017

60 On the cover: Webster centennial, October 12, 1882 One of the many marshes in Marshfield. Photos: Photos in this report are the courtesy of Elizabeth Bates, Town Assessor/Appraiser

61 TOWN OF MARSHFIELD, MASSACHUSETTS COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Year Ended June 30, 2017 Prepared by: The Fiscal Team

62 On February 8-9, 2013, the Blizzard of 2013 known as Storm Nemo severely impacted the Town of Marshfield. The blizzard caused flooding, prolonged power outages and significant tree damage. The storm also caused damage to infrastructure including compromising one of the Town s jetties and causing a build-up of silt in the channel to the Atlantic Ocean known as the Narrows.

63 TOWN OF MARSHFIELD, MASSACHUSETTS COMPREHENSIVE ANNUAL FINANCIAL REPORT JUNE 30, 2017 TABLE OF CONTENTS Introductory Section... A-1 Letter of Transmittal... A-2 Organizational Chart... A-7 Certificate of Achievement Excellence in Financial Reporting... A-8 Principal Town Officials... A-9 Financial Section... A-11 Independent Auditor s Report... A-13 Management s Discussion and Analysis... A-16 Basic Financial Statements... A-26 Statement of Net Position... A-27 Statement of Activities... A-28 Governmental Funds Balance Sheet... A-30 Reconciliation of the Governmental Funds Balance Sheet Total Fund Balances to the Statement of Net Position... A-31 Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balances... A-32 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities... A-33 Proprietary Funds Statement of Net Position... A-34 Proprietary Funds Statement of Revenues, Expenses and Changes in Net Position... A-35 Proprietary Funds Statement of Cash Flows... A-36 Fiduciary Funds Statement of Fiduciary Net Position... A-37 Fiduciary Funds Statement of Changes in Fiduciary Net Position...A- 38 Notes to Basic Financial Statements... A-39 Required Supplementary Information... A-76 General Fund Budgetary Comparison Schedule... A-77 General Fund Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual...A- 78 Pension Plan Schedules... A-81 Schedule of the Town s Proportionate Share of the Net Pension Liability... A-82 Schedule of Contributions... A-83 Schedule of Special Funding Amounts of the Net Pension Liability... A-84

64 Other Postemployment Benefit Plan Schedules... A-85 Schedule of Town s net OPEB Liability and Related Ratios... A-86 Schedule of Town Contributions...A- 87 Schedule of Investment Returns... A-88 Schedule of Funding Progress and Employer Contributions...A- 89 Actuarial Methods and Assumptions... A-90 Notes to Required Supplementary Information... A-91 Combining and Individual Fund Statements... A-95 Nonmajor Governmental Funds... A-97 Nonmajor Governmental Funds Combining Balance Sheet... A-98 Nonmajor Governmental Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balances...A-100 Agency Fund...A-102 Agency Fund Statement of Changes in Assets and Liabilities...A-103 Statistical Section...A-105 Net Position By Component Last Ten Years... A-106 Changes in Net Position Last Ten Years... A-107 Fund Balances, Governmental Funds Last Ten Years... A-108 Changes in Fund Balances, Governmental Funds Last Ten Years... A-109 Assessed Value and Actual Value of Taxable Property by Classification and Tax Rates Last Ten Years... A-110 Principal Taxpayers Current Year and Eight Years Ago... A-111 Property Tax Levies and Collections Last Ten Years... A-112 Ratios of Outstanding Debt by Type Last Ten Years... A-113 Ratios of Outstanding Debt and General Bonded Debt Last Ten Years...A-114 Direct and Overlapping Governmental Activities Debt... A-115 Computation of Legal Debt Margin Last Ten Years... A-116 Demographic and Economic Statistics Last Ten Years... A-117 Principal Employers Current Year and Eight Years Ago... A-118 Full-Time Equivalent Town Employees by Function Last Ten Years... A-119 Operating Indicators by Function/Program Last Ten Years... A-120 Capital Asset Statistics by Function/Program Last Ten Years...A-121

65 Introductory Section Pictured above is Blue Fish Cove, one of the many beaches in Marshfield.

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67 Introductory Section A-1

68 Letter of Transmittal December 22, 2017 To the Honorable Board of Selectmen and the Citizens of the Town of Marshfield: State law requires the Town of Marshfield to publish at the close of each year a complete set of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) that are audited in accordance with generally accepted auditing standards by a firm of licensed certified public accountants. Pursuant to that requirement, we hereby issue this (CAFR) of the, for the year ending June 30, 2017 for your review. This report consists of management's representations concerning the finances of the Town. Consequently, management assumes full responsibility for the completeness and reliability of all of the information presented in this report. To provide a reasonable basis for making these representations, management of the Town has established a comprehensive internal control framework that is designed to both protect the Town s assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of the Town s financial statements in conformity with GAAP. As management, we assert that this financial report is complete and reliable in all material respects. The CAFR is designed to be used by the elected and appointed officials of Marshfield in addition to those entities concerned with the Town s management and development including credit rating agencies, bond analysts, investors and financial institutions. The format of the report enables the Town to present complex financial data in a manner that is easier for citizens and taxpayers of the Town of Marshfield to review and understand. The Town of Marshfield s financial statements have been audited by Powers & Sullivan, LLC a firm of licensed certified public accountants. The goal of the independent audit was to provide reasonable assurance that the financial statements of the Town of Marshfield for the year ended June 30, 2017 are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditor concluded, based upon the audit, that there was a reasonable basis for rendering an unmodified opinion on the Town of Marshfield s financial statements for the year ended June 30, 2017 and that they are fairly presented in conformity with GAAP. The independent auditor s report is presented as the first component of the financial section of this report. A-2

69 The independent audit of the financial statements of the Town of Marshfield was part of a broader, federally mandated Single Audit designed to meet the special needs of Federal grantor agencies. The standards governing Single Audit engagements require the independent auditor to report not only on the fair presentation of the financial statements, but also on the audited government s internal controls and compliance with legal requirements, with special emphasis on internal controls and legal requirements involving the administration of Federal awards. These reports are available in the Town of Marshfield s separately issued Single Audit Report. GAAP requires that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement MD&A and should be read in conjunction with it. The Town of Marshfield s MD&A can be found immediately following the report of the independent auditors. Profile of Town The Town of Marshfield was incorporated in 1640 and occupies a land area of approximately square miles; noted by the local population as a community of villages. It is governed by an open Town Meeting form of government and the Chief Executive Officer is the Board of Selectmen. Marshfield is located in southeastern Massachusetts in Plymouth County and has been recognized as one of the 14 safest communities in the United States. The Town of Marshfield is bordered by the Atlantic Ocean on the east, Duxbury on the south and southeast, Pembroke and Norwell on the west, and Scituate on the north. Marshfield is a coastal town located in east central Plymouth County approximately 32 miles south of Boston, 18 miles east of Brockton, 48 miles northeast of Providence, RI, and 225 miles north of New York City. State routes 3, 3A and 139 are the principal highways and roads serving the Town. Chartered flights throughout New England are available at the Marshfield Municipal Airport. The commuter rail is also in close proximity to Marshfield, giving residents ready access into the City of Boston and other adjacent communities. The Greater Attleborough Taunton Regional Transit Authority (GATRA) provides local bus service from Plymouth to Scituate, including services for persons with disabilities. Local legislative decisions are made by an open Town Meeting, the purest form of democracy consisting of all of the registered voters in the Town. Subject to the legislative decisions made by the Town Meeting, the affairs of the Town are generally administered by a three-member Board of Selectmen, as well as five other elected Boards. According to the U.S. Department of Commerce, Bureau of Census conducted in 2010, the Town s population was 25,184. However, unofficially the Town s summer population increases (estimated) to over 40,000. Local school affairs are administered by a five-member School Committee through the School Superintendent. Local taxes are assessed by a three-member elected Board of Assessors; all elected for staggered three-year terms on an at large basis. A three-member Board of Public Works, similarly elected, oversees the Town s principally self-supporting Sewer, Water, and Solid Waste enterprise funds in addition to the Highway and Cemetery Departments. The Town of Marshfield provides general governmental services for the territory within its boundaries, including police and fire protection, public education in grades kindergarten through twelve, typical municipal financial services, water and sewer services, solid waste disposal, a library, streets, parks, services to senior citizens and Veterans, and recreational activities. The Town of Marshfield s commitment to open space, historical preservation and community housing is evidenced by its acceptance of the Community Preservation Act beginning in year 2002 at the maximum 3% surcharge. These funds have been authorized by Town Meeting for the purchase of over 350 acres of open space preserving and protecting aquifers, habitats, woodlands, marshland and meadows. A-3

70 Factors Affecting Economic Condition The information presented in the financial statements is perhaps best understood when it is considered from the broader perspective of the specific environment within which the Town operates. The Board of Selectmen has decided that the foundation of Marshfield s government, the Town Charter needed to be modernized. The Charter was adopted in 1975 with only very minimal changes. The Board appointed a Charter Review Committee to examine the Towns governance. It would be likely that one outcome for the Town would be to have a Finance Director built into the Charter. Marshfield had one bond rating increase in the last few years and becoming a AAA bond rated community is not an unrealistic goal for the Town. The Charter would also address all needs of the Town s governance. Improving the Town s organizational structure will create and effective and efficient organization. The Town continues to manage its financial affairs in a prudent manner. Standard & Poor s confirmed the Town s bond rating to AA+ with a stable outlook which is reflective of management s incorporation of long range planning tools such as a five year Capital Improvement Program; maintenance of reserve balances despite tight budget; investing in technology to ensure efficient operations; and maintaining an aggressive debt management strategy for capital improvements and pursuing pay-as-you-go options whenever possible. The Town consistently seeks grant opportunities for operational services as well as capital improvements. The Town faced fiscal challenges over the past year, mostly tied to personnel affairs and has not only resolved those challenges but came to a conclusion that will make the Town fiscally strong for years to come. New staff has joined the Town s operations that will provide a level of succession planning that has not existed in the past. The Town has also enhanced its revenue flexibility by establishing Enterprise funds. This has allowed the Town to shift one hundred percent (except for certain amounts of sewer debt where the general fund is responsible for its 40% share) of the operating cost and capital improvements to the users of sewer, water, and solid waste services so that no tax support goes towards providing these services. All related debt, except as discussed above, is funded through user fees. By doing so the Town is able to provide the maximum tax dollars available to all other services. In 2016, the Town s legislative body successfully adopted a meals tax of.75% that is projected to generate approximately $300,000 of new revenue each year. Major Initiatives Flood Insurance In 2016 the FEMA appeals to correct the flood maps moved to a higher level of technical review. While the Town s appeal was successful and 400 homes were taken out of the new proposed flood zones; the maps still had technical errors that needed to be resolved. In order to address the remaining errors, under the law, the Town had to adopt the maps, with technical errors. In the fall of 2015 the Town overwhelmingly adopted the new flood maps, with the intention of pursuing the remaining errors. The Town will be seeking assistance from the federal legislators and support of the scientific consultant Woods Hole Group. Building Projects The Town has possibly the most popular skate board park in southeastern Massachusetts and a notable recreational facility, Peter Igo Park, both opened for business in Peter Igo Park s focal point may be tennis; but basketball, pickleball, and kayaking are also on the Parks itinerary. The Harbor Park was also opened A-4

71 allowing our residents additional access to the harbor area. Harbor Park and the Peter Igo Park are connected by a walkway. Also, the Library Plaza development got underway and was opened in the spring of Capital Assessment Project The Towns Facility Manager completed the first total building assessment that will define the Towns future needs for maintenance and building improvements. This tool will help the Town s budgeting process and has initiated a dialogue to create a permanent building committee. The overall goal of the Town wide buildings assessment is to create a responsible maintenance plan for all the Towns buildings. Reserves Management has adopted reserve policies to address key areas of concern including: Operational Budget Reserve Fund, Stabilization Fund, Property and Liability Insurance Reserve, Workers Compensation for Police/Fire Reserve, Postemployment Liability Trust Fund and Town Compensated Absence Reserve. The Town is rebuilding its Stabilization Fund after having used the fund to support the general fund budget in years 2003 through Over the last five years, the Town has increased the balance in the fund to $2.4 million. Our goal is 5% of our Annual Budget. The Town plans to achieve this goal by setting aside 25% of free cash. The Property & Liability Reserve will allow the Town to increase deductibles for general liability losses to decrease premium costs in future years. The Town Compensated Absence Reserve insulates the Town from the budgetary impact of unexpected retirements or separations from service of senior employees with those benefits. Internal Controls Management of the Town is responsible for establishing and maintaining an internal control structure designed to ensure the assets of the Town are protected from loss, theft or misuse and to ensure that adequate accounting data is compiled to allow for the preparation of financial statements in conformity with generally accepted accounting principles. The Town Administrator and the Fiscal Team are responsible for evaluating the adequacy and effectiveness of the internal control structure and implementing improvements. The Town completed a Fraud Risk Assessment that has become a guiding tool for all departments. Because the cost of internal controls should not outweigh their benefits, the Town of Marshfield s comprehensive framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements will be free of material misstatement. Budgetary Controls The Town Administrator presents a budget to the Board of Selectmen which is then reviewed and with amendments presented to the Advisory Board. The nine-member Advisory Board holds public hearings to review all departmental budgets and makes recommendations on the budget to Town Meeting in April. The level of budgetary control is established by Town Meeting and this approval defines the level at which expenditures may not exceed appropriations. This level is typically at the individual department salary and expense level. The Town Accountant is responsible for ensuring all payroll and invoices are within the budgetary control level before authorizing payment. Additional appropriations may be approved at subsequent Town Meetings. The Advisory Board may approve during the year a transfer from a reserve fund established at Town Meeting. These controls ensure compliance with the budget approved by Town Meeting. The Treasurer/Collector is responsible for cash and debt management, and the investment of Town funds. A-5

72 The school budget is limited to the total amount appropriated by Town Meeting, but the School Committee retains full power to allocate the funds appropriated. Financial Management The Town adopted a policy in year 2011 to codify the allocation of indirect costs between the three Enterprise funds and the General Fund. A written agreement developed by the Fiscal Team, has been approved by the Board of Selectmen and the School Committee to codify the allocation of revenues and fixed costs between the school and Town departments based on existing verbal agreements. Finally, additional reserves for uncompensated balances and capital projects are being considered for adoption in For 2019, the Town is working to establish a system to make the Beach operations a cashless system through the acceptance of credit and debit cards. Acknowledgements We would like to express our appreciation to all the members of the departments who assisted and contributed to the preparation of this report. Credit must also be given to the Board of Selectmen and the Advisory Board for their unfailing support for maintaining the highest standards of professionalism in the management of the Town, including its finances. Respectfully submitted, Michael Maresco Town Administrator Christine McCarthy Town Accountant Patrick Dello Russo Treasurer/Collector A-6

73 Organizational Chart Org A-7

74 Certificate of Achievement Excellence in Financial Reporting A-8

75 Principal Town Officials Elected Officials Term Expires Board of Selectmen Michael G. Bradley, Chairperson 2018 James J. Fitzgerald, Vice Chairperson 2019 Joseph Kelleher, Clerk 2020 Moderator Donald Gibson 2020 Town Clerk Patricia A. Picco 2018 School Committee Sean P. Costello, Chairperson 2018 Carol Shrand, Vice Chairperson 2017 Richard Greer, Secretary 2019 Kendra Stetson Campbell 2018 Heidi L. Church 2019 Appointed Officials Town Administrator Superintendent of Public Schools Treasurer/Collector Town Accountant Acting Assessor/Appraiser Fire Chief Police Chief DPW Superintendent Michael Maresco Jeffery W. Granatino Patrick Dello Russo Christine McCarthy Anne Marie Sinnott William Hocking Phil Tavares Thomas J. Reynolds A-9

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77 Pictured above is the Cut River. Financial Section

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79 Financial Section Financial Section A-11

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81 Independent Auditor s Report To the Honorable Board of Selectmen Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Town of Marshfield, Massachusetts as of and for the year ended June 30, 2017, and the related notes to the financial statements, which collectively comprise the Town s basic financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. A-13

82 Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the, as of June 30, 2017, and the respective changes in financial position, and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis and required supplementary information, as listed in the table of contents, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the basic financial statements. The introductory section, combining and individual fund statements, and statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual fund statements are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual fund statements are fairly stated, in all material respects, in relation to the basic financial statements as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on them. A-14

83 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 22, 2017, on our consideration of the internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the internal control over financial reporting and compliance. December 22, 2017 A-15

84 Management s Discussion and Analysis Management s Discussion and Analysis A-16

85 Management s Discussion and Analysis As management of the, we offer readers of these financial statements this narrative overview and analysis of the financial activities of the Town of Marshfield for the year ended June 30, We encourage readers to consider the information presented in this report in conjunction with additional information that we have furnished in our letter of transmittal. The Governmental Accounting Standards Board (GASB) is the authoritative standard setting body that provides guidance on how to prepare financial statements in conformity with generally accepted accounting principles (GAAP). Users of these financial statements (such as investors and rating agencies) rely on the GASB to establish consistent reporting standards for all governments in the United States. This consistent application is the only way users (including citizens, the media, legislators and others) can assess the financial condition of one government compared to others. Governments must adhere to GASB pronouncements in order to issue their financial statements in conformity with GAAP. The users of financial statements also rely on the independent auditor s opinion. If the Town s financial statements have significant departures from GAAP the independent auditors may issue a modified opinion or a disclaimer (where no opinion is given). These types of opinions may have an adverse effect on the Town s bond rating and our ability to borrow money at favorable interest rates. The Town has enjoyed an unmodified opinion on its financial statements for many years. Financial Highlights The government-wide assets and deferred outflows of the Town exceeded its liabilities and deferred inflows of resources at the close of the most recent year by $95.2 million and $57.9 million (net position) for governmental activities and business-type activities, respectively. At the close of the current year, the Town s general fund reported an ending fund balance of $9 million, an increase of $2.6 million over the prior year. Total fund balance represents 9.3% of total general fund expenditures. Approximately $7.2 million of this total amount is available for appropriation at the Town s discretion. GASB Statement No. 74, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, was implemented this year. This standard added Note disclosures for the Town s OPEB trust fund. It s sister standard, GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions, is required to be implemented in FY2018. This standard will affect the financial statements themselves by requiring the Town to record its OPEB assets and liabilities and related deferred financial statement elements. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the Town of Marshfield s basic financial statements. The Town s basic financial statements comprise three components: 1) government-wide financial statements 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements. Government-wide financial statements. The government-wide financial statements are designed to provide readers with a broad overview of the Town s finances, in a manner similar to private-sector businesses. A-17

86 The statement of net position presents information on all of the Town s assets and deferred outflows of resources, liabilities and deferred inflows of resources, with the difference between the two reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the Town is improving or deteriorating. The statement of activities presents information showing how the Town s net position changed during the most recent year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing or the related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future periods (e.g., uncollected taxes and earned but unused vacation leave). Both of the government-wide financial statements distinguish functions that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities include general government, public safety, education, public works, health and human services, culture and recreation, community preservation, and interest. The business-type activities include the activities of the sewer, water, and solid waste enterprise funds. Fund financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The Town, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the Town can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the year. Such information may be useful in evaluating a government s near-term financing requirements. Because the focus of governmental funds is narrower than that of government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The Town is reporting three major governmental funds that are presented separately in the governmental fund financial statements. The remaining nonmajor funds are combined into a single, aggregated presentation. Individual fund data for each of these nonmajor governmental funds is provided in the form of combining statements elsewhere in this report. The Town adopts an annual appropriated budget for its general fund. A budgetary comparison schedule has been provided for the general fund to demonstrate compliance with this budget. Proprietary funds. The Town maintains one type of proprietary fund. Enterprise funds are used to report the same functions as business-type activities in the government-wide financial statements. The Town uses enterprise funds to account for its sewer, water, and solid waste activities. A-18

87 Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The proprietary fund financial statements provide separate information for sewer, water, and solid waste activities, all of which are considered major funds of the Town. Fiduciary funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the Town s own programs. The accounting used for fiduciary funds is much like that used for proprietary funds. Notes to financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. Government-wide Financial Analysis As noted earlier, net position may serve over time as a useful indicator of a government s financial position. Assets and deferred outflows exceeded liabilities and deferred inflows by $153.2 million at the close of Government-wide net position of $196.7 million reflects its net investment in capital assets (e.g., land, buildings, machinery, equipment, and infrastructure) less any related debt used to acquire those assets that is still outstanding. The Town uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the investment in capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. An additional portion of net position, $7.2 million, represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net position resulted in a $50.8 million deficit relating to the cumulative effect of recording $37.9 million of other postemployment benefit liabilities and $51.2 million of pension liabilities through June 30, Details related to the Town s governmental and business-type activities follow. A-19

88 Governmental activities. The governmental activities net position decreased by approximately $4.2 million during the current year as compared to an increase in net position of $2.3 million during the prior year. The change between years is mainly related to one-time capital grants received in the prior year for seawalls and other public works projects and for additional expenses recorded in the current year relating to pensions Assets: Current assets $ 36,423,971 $ 34,425,349 Noncurrent assets (excluding capital) 3,428,784 4,413,077 Capital assets, not being depreciated 33,866,892 29,425,102 Capital assets, net of accumulated depreciation (33,866,892) 195,647,458 Total assets 39,852, ,910,986 Total Deferred Outflows of Resources 5,793,560 4,953,529 Liabilities: Current liabilities (excluding debt) 6,710,753 6,296,866 Noncurrent liabilities (excluding debt) 81,815,922 77,575,161 Current debt 14,194,383 13,652,093 Noncurrent debt 71,131,178 71,797,166 Total liabilities 173,852, ,321,286 Total Deferred Inflows of Resources 1,313, ,058 Net Position: Net investment in capital assets 144,078, ,244,882 Restricted 7,239,201 8,004,644 Unrestricted (56,088,916) (57,825,355) Total net position $ 95,228,708 $ 99,424,171 Noncurrent liabilities, excluding debt, include accrued liabilities for other postemployment benefits in the amount of $36 million and for pension liabilities of $42.9 million at June 30, A-20

89 Program revenues: Charges for services $ 5,598,461 $ 5,194,527 Operating grants and contributions 30,333,387 28,216,908 Capital grants and contributions 1,920,726 6,781,879 General revenues: Real estate, personal property taxes, and tax liens 63,310,059 60,645,177 Motor vehicle and other excise taxes 4,397,836 4,634,720 Community preservation taxes 1,351,613 1,321,967 Penalties and interest on taxes 103, ,375 Nonrestricted grants and contributions 2,511,326 2,528,692 Unrestricted investment income 230,714 90,134 Miscellaneous.. 223,773 51,348 Total revenues 109,981, ,752,727 Expenses: General government 5,039,837 5,454,536 Public safety 20,007,583 17,642,972 Education 77,272,810 71,400,698 Public works 5,676,705 5,425,790 Health and human services 1,451,215 1,359,699 Culture and recreation 1,998,183 1,938,060 Community preservation 407, ,802 Interest 2,322,959 2,040,212 Total expenses 114,176, ,786,769 Excess (Deficiency) before transfers (4,195,463) 3,965,958 Transfers - (1,685,646) Change in net position (4,195,463) 2,280,312 Net position - beginning... 99,424,171 97,143,859 Net position - ending $ 95,228,708 $ 99,424,171 Financial notes related to governmental activities: Charges for services represented 5% of governmental activities resources. The Town can exercise more control over this category of revenue than any other. Fees charged for services rendered that are set by the Town are included in this category. Operating grants and contributions accounted for 28% of the governmental activities resources. Most of these resources apply to educational operations. These resources offset costs within the school department and supplement their general fund operating budget. Capital grants and contributions accounted for 2% of the governmental activities resources. Most of these resources apply to MSBA reimbursement for the High School construction project, State grants for roadways improvements and community preservation State revenue. Property taxes are by far the most significant revenue source for the Town s governmental activities. They comprised 56% of current resources. A-21

90 All other taxes and other revenues comprised a total of 10% of the governmental activities resources. These primarily include excise taxes, community preservation taxes and nonrestricted grants and contributions. Education is by far the largest governmental activity of the Town. Approximately $46.2 million in taxes and other revenue were needed to cover its 2017 operating expenses. A pension contribution of approximately $10.3 million made by the state on-behalf of Marshfield teachers was recorded as an expense and grant revenue. Public Safety and Public Works are the second and third largest activities of the Town. Approximately $17.1 million and $4.9 million, respectively, of taxes and other revenue were needed to cover their 2017 operating expenses. Business-type activities. Business-type activities increased the Town s net position by $119,000 compared to an increase of approximately $2.1 million during the previous year. The Sewer enterprise fund experienced a decrease in net position of approximately $662,000 while the Water and Solid Waste enterprise funds both experienced increases in net position of $480,000 and $301,000, respectively. Charges for services decreased 2% when compared to the prior year while expenses for labor, operations, and depreciation increased just over 1%. As shown below, business-type activities assets and deferred outflows exceeded liabilities and deferred inflows by $57.9 million at the close of The net investment in capital assets is $52.7 million (91%) while unrestricted net position is $5.2 million (9%). These results continue to reflect management s goal of maintaining the systems while only charging users for the actual cost of operations Assets: Current assets $ 18,017,469 $ 14,684,731 Noncurrent assets (excluding capital) 1,598,173 1,931,614 Capital assets, not being depreciated 7,546,626 7,452,270 Capital assets, net of accumulated depreciation (7,546,626) 61,175,915 Total assets 19,615,642 85,244,530 Total Deferred Outflows of Resources 1,115, ,357 Liabilities: Current liabilities (excluding debt) 790, ,637 Noncurrent liabilities (excluding debt) 10,448,269 10,138,358 Current debt 3,728,405 1,714,245 Noncurrent debt 15,160,972 15,639,377 Total liabilities 30,127,708 28,365,617 Total Deferred Inflows of Resources 252,712 22,913 Net Position: Net investment in capital assets 52,690,605 52,272,970 Unrestricted 5,238,112 5,536,387 Total net position $ 57,928,717 $ 57,809,357 A-22

91 Program revenues: Charges for services $ 10,624,899 $ 10,867,729 Operating grants and contributions 57,352 67,918 Capital grants and contributions 221, ,507 General revenues: Unrestricted investment income 269, ,847 Total revenues 11,172,975 11,389,001 Expenses: Sewer.. 3,750,001 4,048,263 Water.. 4,070,665 3,747,914 Solid waste 3,232,949 3,161,419 Total expenses 11,053,615 10,957,596 Excess (Deficiency) before transfers 119, ,405 Transfers - 1,685,646 Change in net position 119,360 2,117,051 Net position - beginning 57,809,357 55,692,306 Net position - ending $ 57,928,717 $ 57,809,357 Financial Analysis of the Government s Major Funds As noted earlier, the Town of Marshfield uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental funds. The focus of the Town s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the Town s financing requirements. In particular, the unassigned fund balance may serve as a useful measure of a government s net resources available for spending at the end of the year. As of the end of the current year, governmental funds reported combined ending fund balances of $17.5 million, an increase of $2.9 million from the prior year. The increase mainly relates to timing differences in the general fund where revenues came in higher than expected while expenditures remained level funded. Also, the high school capital project fund had bond proceeds exceeding capital expenditures. General Fund The general fund is the chief operating fund of the Town. At the end of the current year, the unassigned fund balance of the general fund was $7.1 million, while the total fund balance was $9.0 million. As a measure of the general fund s liquidity, it may be useful to compare both the unassigned fund balance and the total fund balance to total fund expenditures. The unassigned fund balance represents 7% of total general fund expenditures, while the total fund balance represents 9% of that same amount. A-23

92 The fund balance of the general fund increased $2.6 million during This change is mainly the result of stronger than expected revenue collections in nearly all revenue categories coupled with expenditures that were right in line with budgeted amounts. The Town also maintains a stabilization fund, which has been classified within the unassigned general fund balance in the governmental funds financial statements to remain compliant with GASB 54. The stabilization fund has a year-end balance of $2.4 million. These funds can be used for general or capital purposes upon Town Meeting approval. High School Capital Project Fund The High School Capital Projects fund is used to account for financial resources to be used for the construction of the new High School. During the year the Town issued $2.2 million in long-term bonds and $4.4 million in BANs to fund the construction project. The Town spent $1.1 million on construction costs and was reimbursed $927,000 from the MSBA for high school construction costs. The fund balance increased $2.1 million due to the timing of grant revenue and bond proceeds exceeding expenditures. Town Capital Project Fund This fund is used to account for financial resources used in the acquisition or construction of major capital facilities. During the year the Town issued $4.4 million in long-term bonds and $2.1 million in BANs to finance the various capital projects. The fund balance decreased $1.4 million from the prior year, which was due to the timing of capital expenditures exceeding bond proceeds. Proprietary funds. The Town s proprietary funds provide the same type of information found in the governmentwide financial statements, but in more detail. The Sewer enterprise fund is used to account for sewage treatment operations. Total revenues amounted to $3,088,000 as compared to $3,303,000 in the prior year and total expenses decreased by $298,000 from the prior year. Net position decreased by $662,000 compared to a decrease of $47,000 in the prior year. The Water enterprise fund is used to account for water distribution operations. Total revenues amounted to $4,551,000 as compared to $4,660,000 in the prior year and expenses increased by $323,000 from the prior year. Net position increased by $480,000 compared to an increase of $1.7 million in the prior year. The Solid Waste fund is used to account for the Town s solid waste disposal operations. Total revenues amounted to $3,534,000 as compared to $3,426,000 in the prior year and expenses increased by $71,500. Net position increased by $301,000 compared to an increase of $439,000 in the prior year. General Fund Budgetary Highlights The final general fund budget appropriations, including transfers, were approximately $340,000 higher than the original budget. Total general fund revenues were higher than budgeted amounts by approximately $2.7 million. Actual expenditures, including carryovers, were lower than budgeted amounts by approximately $457,000, or just less than 1%. A-24

93 Capital Asset and Debt Administration In conjunction with the operating budget, the Town annually prepares a capital budget for the upcoming year and a five-year Capital Improvement Plan (CIP) that is used as a guide for future capital expenditures. Governmental capital assets, net of accumulated depreciation, at year end amounted to approximately $224.7 million which represented a net decrease of $325,000 from the prior year. Major current additions included School projects and infrastructure additions. Depreciation expense of $11.3 million was recorded in year 2017 which increased $422,000 from the prior year. Enterprise fund capital assets, net of accumulated depreciation, were valued at $67.6 million at year end. Current year additions totaled approximately $1.2 million. Depreciation expense of $2.3 million was recorded in year The Town s total long-term debt decreased by $1.1 million during the current year due to the net effect of $7.7 million of proceeds for various governmental and enterprise projects and $8.8 million of scheduled principal payments. Outstanding long-term debt of the general government, as of June 30, 2017, totaled $74.3 million, of which, $49.6 million is related to school projects, $1.4 million is related to the general government s 40% share of sewer debt, $6.3 million is related to sea wall and harbor projects, $3.0 million is related to qualified energy conservation bonds, $2.3 is related to library construction, leaving a balance of $11.7 million for infrastructure and other Town projects. The enterprise funds have $16.5 million in sewer, water, and solid waste debt that is fully supported by the rates and do not rely on a general fund subsidy beyond the Town s bylaw that splits the debt service requirements of certain sewer projects on a ratio of 60% from the sewer fund and 40% from the general fund. Please refer to footnotes 4, 6, and 7 for further discussion of the major capital asset and debt activity. Requests for Information This financial report is designed to provide a general overview of the Town of Marshfield s finances for all those with an interest in the government s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Board of Selectmen, Town Hall, 870 Moraine Street, Marshfield, Massachusetts A-25

94 Basic Financial Statements Basic Financial Statements A-26

95 STATEMENT OF NET POSITION JUNE 30, 2017 Primary Government Governmental Business-type Activities Activities Total ASSETS CURRENT: Cash and cash equivalents $ 21,876,308 $ 13,799,357 $ 35,675,665 Investments 3,642,438-3,642,438 Receivables, net of allowance for uncollectibles: Real estate, personal property and tax deferrals 2,173,427-2,173,427 Tax liens... 1,767,037-1,767,037 Motor vehicle and other excise taxes 655, ,761 User charges - 3,911,775 3,911,775 Departmental and other 1,322,957-1,322,957 Special assessments - 222, ,589 Intergovernmental 4,409,250 83,748 4,492,998 Tax foreclosures 576, ,793 Total Current Assets 36,423,971 18,017,469 54,441,440 NONCURRENT: Receivables, net of allowance for uncollectibles: Special assessments - 1,193,322 1,193,322 Intergovernmental 3,428, ,851 3,833,635 Capital assets, nondepreciable. 33,866,892 7,546,626 41,413,518 Capital assets, net of accumulated depreciation 190,880,801 60,031, ,912,641 Total Noncurrent Assets 228,176,477 69,176, ,353,116 TOTAL ASSETS 264,600,448 87,194, ,794,556 DEFERRED OUTFLOWS OF RESOURCES Deferred outflows of resources related to pensions 5,793,560 1,115,029 6,908,589 LIABILITIES CURRENT: Warrants payable 2,539, ,308 2,968,914 Accrued payroll 2,084,673 33,798 2,118,471 Accrued interest 479, , ,930 Landfill closure - 28,500 28,500 Compensated absences 1,607, ,000 1,733,000 Notes payable 6,924,383 2,160,500 9,084,883 Bonds payable 7,270,000 1,567,905 8,837,905 Total Current Liabilities 20,905,136 4,518,467 25,423,603 NONCURRENT: Landfill closure - 327, ,750 Compensated absences 2,862,000-2,862,000 Other postemployment benefits 36,022,137 1,857,863 37,880,000 Bonds payable 71,131,178 15,160,972 86,292,150 Net pension liability 42,931,785 8,262,656 51,194,441 Total Noncurrent Liabilities 152,947,100 25,609, ,556,341 TOTAL LIABILITIES 173,852,236 30,127, ,979,944 DEFERRED INFLOWS OF RESOURCES Deferred inflows of resources related to pensions 1,313, ,712 1,565,776 NET POSITION Net investment in capital assets 144,078,423 52,690, ,769,028 Restricted for: Permanent funds: Expendable. 1,481,144-1,481,144 Nonexpendable 1,270,028-1,270,028 Grants and gifts 1,945,728-1,945,728 Community preservation 2,542,301-2,542,301 Unrestricted (56,088,916) 5,238,112 (50,850,804) TOTAL NET POSITION $ 95,228,708 $ 57,928,717 $ 153,157,425 See notes to basic financial statements. A-27

96 STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2017 Program Revenues Operating Capital Charges for Grants and Grants and Net (Expense) Functions/Programs Expenses Services Contributions Contributions Revenue Primary Government: Governmental Activities: General government $ 5,039,837 $ 577,170 $ 1,282,343 $ 170,953 $ (3,009,371) Public safety 20,007,583 1,979, ,136 - (17,090,346) Education 77,272,810 2,444,417 27,703, ,741 (46,198,590) Public works 5,676, ,042 17, ,393 (4,944,020) Health and human services 1,451,215 86,814 71,857 - (1,292,544) Culture and recreation 1,998, ,917 27,843 - (1,614,423) Community preservation 407, ,639 (145,019) Interest 2,322, ,896 - (2,030,063) Total Governmental Activities 114,176,950 5,598,461 30,333,387 1,920,726 (76,324,376) Business-Type Activities: Sewer 3,750,001 2,768,763 57, ,041 (702,845) Water 4,070,665 4,359, ,601 Solid waste 3,232,949 3,496, ,921 Total Business-Type Activities 11,053,615 10,624,899 57, ,041 (150,323) Total Primary Government $ 125,230,565 $ 16,223,360 $ 30,390,739 $ 2,141,767 $ (76,474,699) See notes to basic financial statements. (Continued) A-28

97 STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2017 Primary Government Governmental Business-Type Activities Activities Total Changes in net position: Net (expense) revenue from previous page $ (76,324,376) $ (150,323) $ (76,474,699) General revenues: Real estate and personal property taxes, net of tax refunds 61,458,711-61,458,711 Tax liens 1,851,348-1,851,348 Motor vehicle and other excise taxes 4,397,836-4,397,836 Community preservation tax... 1,351,613-1,351,613 Penalties and interest on taxes 103, ,592 Grants and contributions not restricted to specific programs 2,511,326-2,511,326 Unrestricted investment income 230, , ,397 Miscellaneous 223, ,773 Total general revenues and transfers. 72,128, ,683 72,398,596 Change in net position (4,195,463) 119,360 (4,076,103) Net position: Beginning of year. 99,424,171 57,809, ,233,528 End of year $ 95,228,708 $ 57,928,717 $ 153,157,425 See notes to basic financial statements. (Concluded) A-29

98 GOVERNMENTAL FUNDS BALANCE SHEET JUNE 30, 2017 High School Town Nonmajor Total Capital Capital Governmental Governmental General Project Project Funds Funds ASSETS: Cash and cash equivalents $ 8,619,053 $ 2,993,362 $ 1,568,841 $ 8,695,052 $ 21,876,308 Investments 2,324, ,318,182 3,642,438 Receivables, net of uncollectibles: Real estate, personal property and tax deferrals 2,173, ,173,427 Tax liens. 1,767, ,767,037 Motor vehicle and other excise taxes 655, ,761 Departmental and other 1,290, ,755 1,322,957 Intergovernmental 4,413,077 2,063,197-1,361,760 7,838,034 Tax foreclosures 576, ,793 Due from other funds , ,542 TOTAL ASSETS $ 21,819,606 $ 5,056,559 $ 1,568,841 $ 11,816,291 $ 40,261,297 LIABILITIES: Warrants payable $ 378,186 $ 13,633 $ 1,270,229 $ 877,558 $ 2,539,606 Accrued payroll 2,000, ,285 2,084,673 Due to other funds , ,542 Notes payable - 4,699,180 2,225,203-6,924,383 TOTAL LIABILITIES 2,378,574 4,712,813 3,495,432 1,370,385 11,957,204 DEFERRED INFLOWS OF RESOURCES: Unavailable revenues 10,418, ,581 10,783,719 FUND BALANCES: Nonspendable ,270,028 1,270,028 Restricted 1,711, ,746-8,810,297 10,865,537 Assigned 116, ,283 Unassigned 7,195,117 - (1,926,591) - 5,268,526 TOTAL FUND BALANCES 9,022, ,746 (1,926,591) 10,080,325 17,520,374 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES $ 21,819,606 $ 5,056,559 $ 1,568,841 $ 11,816,291 $ 40,261,297 See notes to basic financial statements. A-30

99 RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TOTAL FUND BALANCES TO THE STATEMENT OF NET POSITION JUNE 30, 2017 Total governmental fund balances $ 17,520,374 Capital assets (net) used in governmental activities are not financial resources and, therefore, are not reported in the funds 224,747,693 Accounts receivable are not available to pay for current-period expenditures and, therefore, are unavailable in the funds 10,783,719 Certain changes in the net pension liability are required to be included in pension expense over future periods. These changes are reported as deferred outflows of resources or (deferred inflows of resources) related to pensions 4,480,496 In the statement of activities, interest is accrued on outstanding long-term debt, whereas in governmental funds interest is not reported until due (479,474) Long-term liabilities are not due and payable in the current period and, therefore, are not reported in the governmental funds: Bonds payable.. (78,401,178) Net pension liability (42,931,785) Other postemployment benefits (36,022,137) Compensated absences (4,469,000) Net effect of reporting long-term liabilities (161,824,100) Net position of governmental activities $ 95,228,708 See notes to basic financial statements. A-31

100 GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES YEAR ENDED JUNE 30, 2017 High School Town Nonmajor Total Capital Capital Governmental Governmental General Project Project Funds Funds REVENUES: Real estate and personal property taxes, net of tax refunds $ 63,337,613 $ - $ - $ - $ 63,337,613 Tax liens 750, ,357 Motor vehicle and other excise taxes 4,664, ,664,896 Penalties and interest on taxes 91, , ,592 Charges for services 1,016, ,152 1,062,430 Intergovernmental 28,532, ,741-6,222,823 35,682,320 Departmental and other 1,200, ,983,347 5,184,030 Community preservation taxes ,360,375 1,360,375 Contributions , ,376 Investment income 185, , ,714 TOTAL REVENUES 99,779, , ,056, ,762,703 EXPENDITURES: Current: General government 3,561,671-2,127, ,576 6,581,621 Public safety 10,819,632-1,026, ,502 12,522,963 Education 56,225,141 1,078, ,058 5,257,758 62,710,267 Public works 1,651,567-2,523,613 1,708,813 5,883,993 Health and human services 883, ,548 1,084,256 Culture and recreation 772,812-4, ,670 1,236,280 Pension benefits 5,348, ,348,869 Property and liability insurance 891, ,168 Employee benefits 7,124, ,177 7,304,968 Community preservation ,710,369 2,710,369 State and county charges 687, ,633 Debt service: Principal 6,635, ,635,632 Interest 2,831, ,831,804 TOTAL EXPENDITURES 97,434,428 1,078,310 5,831,672 12,085, ,429,823 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES 2,345,395 (151,569) (5,831,616) (29,330) (3,667,120) OTHER FINANCING SOURCES (USES): Issuance of long-term debt - 2,219,500 4,388,000-6,607,500 Transfers in 226, , ,309 Transfers out - - (61,758) (294,551) (356,309) TOTAL OTHER FINANCING SOURCES (USES) 226,665 2,219,500 4,455,886 (294,551) 6,607,500 NET CHANGE IN FUND BALANCES 2,572,060 2,067,931 (1,375,730) (323,881) 2,940,380 FUND BALANCES AT BEGINNING OF YEAR 6,450,834 (1,724,185) (550,861) 10,404,206 14,579,994 FUND BALANCES AT END OF YEAR $ 9,022,894 $ 343,746 $ (1,926,591) $ 10,080,325 $ 17,520,374 See notes to basic financial statements. A-32

101 RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2017 Net change in fund balances - total governmental funds $ 2,940,380 Governmental funds report capital outlays as expenditures. However, in the Statement of Activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense: Capital outlay 11,008,075 Depreciation expense (11,332,942) Net effect of reporting capital assets (324,867) Revenues in the Statement of Activities that do not provide current financial resources are unavailable in the Statement of Revenues, Expenditures and Changes in Fund Balances. Therefore, the recognition of revenue for various types of accounts receivable (i.e., real estate and personal property, motor vehicle excise, etc.) differ between the two statements. This amount represents the net change in unavailable revenue (2,781,216) The issuance of long-term debt (e.g., bonds and leases) provides current financial resources to governmental funds, while the repayment of the principal of longterm debt consumes the financial resources of governmental funds. Neither transaction, however, has any effect on net position. Also, governmental funds report the effect of premiums, discounts, and similar items when debt is first issued, whereas these amounts are unavailable and amortized in the Statement of Activities: Issuance of long-term debt (6,607,500) Amortization of bond premium 578,349 Debt service principal payments 6,635,632 Net effect of reporting long-term debt 606,481 Some expenses reported in the Statement of Activities do not require the use of current financial resources and, therefore, are not reported as expenditures in the governmental funds: Net change in compensated absences accrual (15,000) Net change in accrued interest on long-term debt (69,505) Net change in other postemployment benefits accrual (3,329,515) Net change in pension liability (868,246) Net change in deferred outflow/(inflow) of resources related to pensions (353,975) Net effect of recording long-term liabilities (4,636,241) Change in net position of governmental activities $ (4,195,463) See notes to basic financial statements. A-33

102 PROPRIETARY FUNDS STATEMENT OF NET POSITION JUNE 30, 2017 Business-type Activities - Enterprise Funds Solid Sewer Water Waste Total ASSETS CURRENT: Cash and cash equivalents $ 3,082,088 $ 7,206,309 $ 3,510,960 $ 13,799,357 Receivables, net of allowance for uncollectibles: User charges 1,313,262 1,383,020 1,215,493 3,911,775 Special assessments 222, ,589 Intergovernmental 83, ,748 Total current assets 4,701,687 8,589,329 4,726,453 18,017,469 NONCURRENT: Receivables, net of allowance for uncollectibles: Intergovernmental 404, ,851 Special assessments 1,193, ,193,322 Capital assets, nondepreciable 182,315 7,272,502 91,809 7,546,626 Capital assets, net of accumulated depreciation 30,015,084 28,280,596 1,736,160 60,031,840 Total noncurrent assets 31,795,572 35,553,098 1,827,969 69,176,639 TOTAL ASSETS 36,497,259 44,142,427 6,554,422 87,194,108 DEFERRED OUTFLOWS OF RESOURCES Deferred outflows of resources related to pensions 418, , ,933 1,115,029 LIABILITIES CURRENT: Warrants payable 32, ,267 21, ,308 Accrued payroll 10,505 16,930 6,363 33,798 Accrued interest 71,613 72,722 28, ,456 Landfill closure ,500 28,500 Compensated absences 22,000 63,000 41, ,000 Notes payable 2,000, ,500-2,160,500 Bonds payable 651, , ,000 1,567,905 Total current liabilities 2,788,028 1,479, ,150 4,518,467 NONCURRENT: Landfill closure , ,750 Other postemployment benefits 560, , ,692 1,857,863 Bonds payable 6,064,892 7,566,080 1,530,000 15,160,972 Net pension liability 3,099,748 3,362,714 1,800,194 8,262,656 Total noncurrent liabilities 9,725,205 11,854,400 4,029,636 25,609,241 TOTAL LIABILITIES 12,513,233 13,333,689 4,280,786 30,127,708 DEFERRED INFLOWS OF RESOURCES Deferred inflows of resources related to pensions 94, ,848 55, ,712 NET POSITION Net investment in capital assets 22,436,788 28,481,174 1,772,643 52,690,605 Unrestricted 1,870,738 2,678, ,867 5,238,112 TOTAL NET POSITION $ 24,307,526 $ 31,159,681 $ 2,461,510 $ 57,928,717 See notes to basic financial statements. A-34

103 PROPRIETARY FUNDS STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION YEAR ENDED JUNE 30, 2017 Business-type Activities - Enterprise Funds Solid Sewer Water Waste Total OPERATING REVENUES: Charges for services... $ 2,768,763 $ 4,359,266 $ 3,496,870 $ 10,624,899 OPERATING EXPENSES: Salaries, wages, and fringe benefits 1,154,295 1,576, ,738 3,422,388 Maintenance and operations 1,174,579 1,419,723 2,389,766 4,984,068 Depreciation 1,280, , ,414 2,270,405 TOTAL OPERATING EXPENSES. 3,609,561 3,837,382 3,229,918 10,676,861 OPERATING INCOME (LOSS) (840,798) 521, ,952 (51,962) NONOPERATING REVENUES (EXPENSES): Investment income 40, ,560 37, ,683 Interest expense (140,440) (233,283) (3,031) (376,754) Intergovernmental 57, ,352 TOTAL NONOPERATING REVENUES (EXPENSES), NET (42,486) (41,723) 34,490 (49,719) INCOME (LOSS) BEFORE CONTRIBUTIONS (883,284) 480, ,442 (101,681) CAPITAL CONTRIBUTIONS 221, ,041 CHANGE IN NET POSITION (662,243) 480, , ,360 NET POSITION AT BEGINNING OF YEAR 24,969,769 30,679,520 2,160,068 57,809,357 NET POSITION AT END OF YEAR $ 24,307,526 $ 31,159,681 $ 2,461,510 $ 57,928,717 See notes to basic financial statements. A-35

104 PROPRIETARY FUNDS STATEMENT OF CASH FLOWS YEAR ENDED JUNE 30, 2017 Business-type Activities - Enterprise Funds Solid Sewer Water Waste Total CASH FLOWS FROM OPERATING ACTIVITIES: Receipts from customers and users $ 3,218,749 $ 4,955,045 $ 3,843,125 $ 12,016,919 Payments to vendors (1,472,914) (1,079,546) (2,582,108) (5,134,568) Payments to employees (1,014,878) (1,383,445) (615,896) (3,014,219) NET CASH FROM OPERATING ACTIVITIES 730,957 2,492, ,121 3,868,132 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Proceeds from the issuance of bonds and notes 2,000,000 1,200,000 50,000 3,250,000 Capital contributions 453, ,588 Acquisition and construction of capital assets (649,673) (571,013) - (1,220,686) Principal payments on bonds and notes (565,789) (913,871) (124,000) (1,603,660) Interest expense (90,274) (244,478) 23,412 (311,340) NET CASH FROM CAPITAL AND RELATED FINANCING ACTIVITIES 1,147,852 (529,362) (50,588) 567,902 CASH FLOWS FROM INVESTING ACTIVITIES: Investment income 40, ,560 37, ,683 NET CHANGE IN CASH AND CASH EQUIVALENTS 1,919,411 2,154, ,054 4,705,717 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR... 1,162,677 5,052,057 2,878,906 9,093,640 CASH AND CASH EQUIVALENTS, END OF YEAR $ 3,082,088 $ 7,206,309 $ 3,510,960 $ 13,799,357 RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH FROM OPERATING ACTIVITIES: Operating income (loss) $ (840,798) $ 521,884 $ 266,952 $ (51,962) Adjustments to reconcile operating income (loss) to net cash from operating activities: Depreciation 1,280, , ,414 2,270,405 Deferred outflows/(inflows) related to pensions 25,557 27,727 14,843 68,127 Changes in assets and liabilities: User charges 449, , ,255 1,392,020 Warrants payable (298,335) 340,177 (163,842) (122,000) Accrued payroll 2,781 4,918 (68) 7,631 Landfill closure - - (28,500) (28,500) Net pension liability 62,689 68,007 36, ,103 Compensated absences - 4,000 (10,000) (6,000) Other postemployment benefits 48,390 88,258 34, ,308 Total adjustments 1,571,755 1,970, ,169 3,920,094 NET CASH FROM OPERATING ACTIVITIES $ 730,957 $ 2,492,054 $ 645,121 $ 3,868,132 NONCASH INVESTING, CAPITAL, AND FINANCING ACTIVITIES: Intergovernmental principal and interest subsidies.. $ 139,205 $ - $ - $ 139,205 See notes to basic financial statements. A-36

105 FIDUCIARY FUNDS STATEMENT OF FIDUCIARY NET POSITION JUNE 30, 2017 Other Postemployment Private Benefit Purpose Agency Trust Fund Trust Funds Fund ASSETS Cash and cash equivalents... $ 19,530 $ 250,181 $ 1,321,000 Equity mutual funds 92, Fixed income mutual funds 73, TOTAL ASSETS 185, ,181 1,321,000 LIABILITIES Liabilities due depositors - - 1,321,000 NET POSITION Restricted for other postemployment benefits 185, Held in trust for other purposes - 250,181 - TOTAL NET POSITION $ 185,437 $ 250,181 $ - See notes to basic financial statements. A-37

106 FIDUCIARY FUNDS STATEMENT OF CHANGES IN FIDUCIARY NET POSITION YEAR ENDED JUNE 30, 2017 Other Postemployment Private Benefit Purpose Trust Fund Trust Funds ADDITIONS: Contributions: Employer contribution to the trust $ 180,177 $ - Employer contribution to pay for OPEB Benefits 2,651,388 - Private donations - 13,038 Total contributions 2,831,565 13,038 Net investment income: Net change in fair value of investments 5,260 - Interest - 5,172 Total investment income. 5,260 5,172 TOTAL ADDITIONS 2,836,825 18,210 DEDUCTIONS: OPEB benefits 2,651,388 - Educational scholarships - 4,674 TOTAL DEDUCTIONS 2,651,388 4,674 CHANGE IN NET POSITION 185,437 13,536 NET POSITION AT BEGINNING OF YEAR - 236,645 NET POSITION AT END OF YEAR $ 185,437 $ 250,181 See notes to basic financial statements. A-38

107 Notes to Basic Financial Statements Year Ended June 30, 2017 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Notes to Basic Financial Statements The accompanying basic financial statements of the (the Town) have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The Governmental Accounting Standards Board (GASB) is the recognized standard-setting body for establishing governmental accounting and financial reporting principles. The significant accounting policies are described herein. A. Reporting Entity The, was incorporated in 1640, and has a Town Meeting form of government with administrative authority vested in a three-member Board of Selectmen and an appointed Town Administrator. The Town s major operations include police and fire protection, parks, library, recreation, public works, education, and general administrative services. In addition, the Town owns and operates a water system, sewer system and a solid waste transfer station. For financial reporting purposes, the Town has included all funds, organizations, agencies, boards, commissions and institutions. The Town has also considered all potential component units for which it is financially accountable as well as other organizations for which the nature and significance of their relationship with the Town are such that exclusion would cause the basic financial statements to be misleading or incomplete. As required by GAAP, these basic financial statements present the Town (the primary government) and its component units. It has been determined that the Town has no component units that require inclusion in these basic financial statements. B. Government-Wide and Fund Financial Statements Government-Wide Financial Statements The government-wide financial statements (i.e., statement of net position and the statement of changes in net position) report information on all of the non-fiduciary activities of the primary government and its component units. Governmental activities, which are primarily supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which are supported primarily by user fees and charges. Fund Financial Statements Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though fiduciary funds are excluded from the government-wide financial statements. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. Nonmajor funds are aggregated and displayed in a single column. Major Fund Criteria Major funds must be reported if the following criteria are met: If the total assets and deferred outflows of resources, liabilities and deferred inflows of resources, revenues, or expenditures/expenses of an individual governmental or enterprise fund are at least 10 percent of the corresponding element (assets, liabilities, etc.) for all funds of that category or type (total governmental or total enterprise funds), and A-39

108 Notes to Basic Financial Statements Year Ended June 30, 2017 If the total assets and deferred outflows of resources, liabilities and deferred inflows of resources, revenues, or expenditures/expenses of the individual governmental fund or enterprise fund are at least 5 percent of the corresponding element for all governmental and enterprise funds combined. Additionally, any other governmental or enterprise fund that management believes is particularly significant to the basic financial statements may be reported as a major fund. Fiduciary funds are reported by fund type. C. Measurement Focus, Basis of Accounting and Financial Statement Presentation Government-Wide Financial Statements The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Under this method, revenues are recorded when earned and expenses are recorded when the liabilities are incurred. Real estate and personal property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. The statement of activities demonstrates the degree to which the direct expenses of a particular function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include the following: Charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment. Grants and contributions that are restricted to meeting the operational requirements of a particular function or segment. Grants and contributions that are restricted to meeting the capital requirements of a particular function or segment. Taxes and other items not identifiable as program revenues are reported as general revenues. For the most part, the effect of interfund activity has been removed from the government-wide financial statements. Exceptions are charges between the general fund and sewer, water and solid waste enterprise funds. Elimination of these charges would distort the direct costs and program revenues reported for the functions affected. Fund Financial Statements Governmental fund financial statements are reported using the flow of current financial resources measurement focus and the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recognized when susceptible to accrual (i.e., when measurable and available). Measurable means the amount of the transaction can be determined and available means collectible within the current period or soon enough thereafter to pay liabilities of the current period. Expenditures are recorded when the related fund liability is incurred, except for unmatured interest on general long-term debt which is recognized when due, and certain compensated absences, claims and judgments which are recognized when the amounts have matured or are due and payable. A-40

109 Notes to Basic Financial Statements Year Ended June 30, 2017 Real estate and personal property tax revenues are considered available if they are collected within 60 days after year-end. Investment income is susceptible to accrual. Other receipts and tax revenues become measurable and available when the cash is received and are recognized as revenue at that time. Entitlements and shared revenues are recorded at the time of receipt or earlier if the susceptible to accrual criteria is met. Expenditure driven grants recognize revenue when the qualifying expenditures are incurred and all other grant requirements are met. The following major governmental funds are reported: The General fund is the primary operating fund. It is used to account for all financial resources, except those that are required to be accounted for in another fund. The High School Capital Project fund is used to account for financial resources to expand and upgrade the High School. The Town Capital Project fund is used to account for financial resources for the acquisition and/or construction of non-school facilities and other capital assets of the governmental funds. The nonmajor governmental funds consist of special revenue and permanent funds that are aggregated and presented in the nonmajor governmental funds column on the governmental funds financial statements. The following describes the general use of these fund types: The special revenue fund is used to account for and report the proceeds of specific revenue sources that are restricted or committed to expenditure for specified purposes other than permanent funds or capital projects. The permanent fund is used to account for and report financial resources that are legally restricted to the extent that only earnings, not principal, may be used for purposes that support the governmental programs. Proprietary fund financial statements are reported using the flow of economic resources measurement focus and use the accrual basis of accounting. Under this method, revenues are recorded when earned and expenses are recorded when the liabilities are incurred. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with the proprietary funds principal ongoing operations. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. The following major proprietary funds are reported: The Sewer enterprise fund is used to account for sewage treatment operations of the department of public works that are financed and operated in a manner similar to private business enterprises where the intent of the governing body is that the costs (expenses, including depreciation) of providing goods and services to the general public on a continuing basis be financed or recovered primarily through user charges. The Water enterprise fund is used to account for water distribution operations of the department of public works that are financed and operated in a manner similar to private business enterprises where the intent of the governing body is that the costs (expenses, including depreciation) of providing goods and services to the general public on a continuing basis be financed or recovered primarily through user charges. A-41

110 Notes to Basic Financial Statements Year Ended June 30, 2017 The Solid Waste enterprise fund is used to account for the Town s solid waste disposal operations of the public works that are financed and operated in a manner similar to private business enterprises where the intent of the governing body is that the costs (expenses, including depreciation) of providing goods and services to the general public on a continuing basis be financed or recovered primarily through user charges. Fiduciary fund financial statements are reported using the flow of economic resources measurement focus and use the accrual basis of accounting. Fiduciary funds are used to account for assets held in a trustee capacity for others that cannot be used to support the governmental programs. The following fiduciary fund types are reported: The other postemployment benefit trust fund is used to accumulate resources to provide funding for future other postemployment benefits (OPEB) liabilities. The private-purpose trust fund is used to account for trust arrangements that exclusively benefit individuals, private organizations, or other governments. Some of these trusts have donor restrictions and trustee policies that do not allow the endowment portion and any unrealized appreciation to be spent. The restrictions and trustee policies only allows the trustees to approve spending of the realized investment earnings. The Town mainly uses this fund to account for educational scholarships. An insignificant portion of the fund is used to account for the Town s cemetery trusts. The agency fund is used to account for assets held in a purely custodial capacity. The Town s agency funds consist of off-duty work details, performance bonds, and fees collected on behalf of other governments. Agency funds apply the accrual basis of accounting for purposes of asset and liability recognition, but do not have a measurement focus. D. Cash and Investments Government-Wide and Fund Financial Statements Cash and cash equivalents are considered to be cash on hand, demand deposits and short-term investments with an original maturity of three months or less from the date of acquisition. Investments are carried at fair value. The fair values were determined by the closing price for those securities traded on national stock exchanges and the average bid-and-ask quotation for those securities traded in the overthe-counter market. E. Fair Value Measurements The Town reports required types of financial instruments in accordance with the fair value standards. These standards require an entity to maximize the use of observable inputs (such as quoted prices in active markets) and minimize the use of unobservable inputs (such as appraisals or valuation techniques) to determine fair value. Fair value standards also require the government to classify these financial instruments into a three-level hierarchy, based on the priority of inputs to the valuation technique or in accordance with net asset value practical expedient rules, which allow for either Level 2 or Level 3 depending on lock up and notice periods associated with the underlying funds. Instruments measured and reported at fair value are classified and disclosed in one of the following categories: Level 1 Quoted prices are available in active markets for identical instruments as of the reporting date. Instruments, which are generally included in this category, include actively traded equity and debt securities, U.S. government obligations, and mutual funds with quoted market prices in active markets. A-42

111 Notes to Basic Financial Statements Year Ended June 30, 2017 Level 2 Pricing inputs are other than quoted in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models or other valuation methodologies. Certain fixed income securities, primarily corporate bonds, are classified as Level 2 because fair values are estimated using pricing models, matrix pricing, or discounted cash flows. Level 3 Pricing inputs are unobservable for the instrument and include situations where there is little, if any, market activity for the instrument. The inputs into the determination of fair value require significant management judgment or estimation. In some instances the inputs used to measure fair value may fall into different levels of the fair value hierarchy and is based on the lowest level of input that is significant to the fair value measurement. Market price is affected by a number of factors, including the type of instrument and the characteristics specific to the instrument. Instruments with readily available active quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value. It is reasonably possible that change in values of these instruments will occur in the near term and that such changes could materially affect amounts reported in these financial statements. For more information on the fair value of the Town s financial instruments, see Note 2 Cash and Investments. F. Accounts Receivable Government-Wide and Fund Financial Statements The recognition of revenue related to accounts receivable reported in the government-wide financial statements and the proprietary funds and fiduciary funds financial statements are reported under the accrual basis of accounting. The recognition of revenue related to accounts receivable reported in the governmental funds financial statements are reported under the modified accrual basis of accounting. Real Estate, Personal Property Taxes and Tax Liens Real estate and personal property taxes are levied and based on values assessed on January 1 st of every year. Assessed values are established by the Board of Assessor s for 100% of the estimated fair market value. Real estate and personal property taxes are billed on a quarterly basis. The first two quarters (August 1 st and November 1 st ) are preliminary tax bills based upon the previous year s total annual tax. The second two quarters (February 1 st and May 1 st ) are actual tax, reflecting the current year assessment and the current tax rate. Taxes due and unpaid are subject to penalties and interest if they are not paid by the respective due date. The Town has an ultimate right to foreclose on property for which taxes have not been paid. Real estate and personal property taxes levied are recorded as receivables in the year of the levy and are recorded under the modified accrual basis of accounting. Real estate tax liens are processed after the tax bills are sent and are recorded as receivables in the year they are processed. Real estate receivables are secured via the tax lien process and are considered 100% collectible. Accordingly, an allowance for uncollectible accounts is not reported. Personal property taxes cannot be secured through the lien process. The allowance of uncollectible accounts is estimated based on historical trends and specific account analysis. A-43

112 Notes to Basic Financial Statements Year Ended June 30, 2017 Motor Vehicle and Other Excise Taxes Motor vehicle excise taxes are assessed annually for each vehicle registered and are recorded as receivables in the year of the levy. The Commonwealth is responsible for reporting the number of vehicles registered and the fair values of those vehicles. The tax calculation is the fair value of the vehicle multiplied by $25 per $1,000 of value. Boat excise taxes are assessed annually for each boat registered and are recorded as receivables in the year of the levy. The Commonwealth is responsible for reporting the number of boats registered and the fair value of those boats. The tax calculation is the fair value of the boat multiplied by $10 per $1,000 of value. The allowance for uncollectible accounts is estimated based on historical trends and specific account analysis. User Charges User fees are levied semi-annually based on individual meter readings and are subject to penalties and interest if they are not paid by the respective due date. Unbilled user fees are estimated at year-end and are recorded as revenue in the current period. Water, Sewer, and Solid Waste liens are processed in December of every year and included as a lien on the property owner s tax bill. Water, Sewer and Solid Waste charges and liens are recorded as receivables in the year of the levy. Since the receivables are secured via the lien process, these accounts are considered 100% collectible and therefore do not report an allowance for uncollectible accounts. Departmental and Other Departmental and other receivables consist primarily of ambulance charges and veterans benefits and are recorded as receivables in the year accrued. The allowance of uncollectible accounts is estimated based on historical trends and specific account analysis. Special Assessments Special assessments consist of sewer construction and particular apportioned street and water line betterments. These receivables are considered to be 100% collectible and therefore do not report an allowance for uncollectible accounts. Intergovernmental Various federal and state grants for operating and capital purposes are applied for and received annually. For non-expenditure driven grants, receivables are recorded as soon as all eligibility requirements imposed by the provider have been met. For expenditure driven grants, receivables are recorded when the qualifying expenditures are incurred and all other grant requirements are met. These receivables are considered 100% collectible and therefore do not report an allowance for uncollectible accounts. G. Inventories Government-Wide and Fund Financial Statements Inventories are recorded as expenditures at the time of purchase. Such inventories are not material in total to the government-wide and fund financial statements, and therefore are not reported. A-44

113 Notes to Basic Financial Statements Year Ended June 30, 2017 H. Capital Assets Government-Wide and Proprietary Fund Financial Statements Capital assets, which include land, land improvements, buildings, machinery and equipment, vehicles and infrastructure (e.g., roads, water mains, sewer mains, and similar items), are reported in the applicable governmental or business-type activity column of the government-wide financial statements, and the proprietary fund financial statements. Capital assets are recorded at historical cost, or at estimated historical cost, if actual historical cost is not available. Donated capital assets; donated works of art, historical treasures and similar assets; and capital assets received in service concession arrangements are recorded at acquisition value. Except for the capital assets of the governmental activities column in the government-wide financial statements, construction period interest is capitalized on constructed capital assets All purchases and construction costs in excess of $25,000 are capitalized at the date of acquisition or construction, respectively, with expected useful lives of greater than one year. Capital assets (excluding land and construction-in-progress) are depreciated on a straight-line basis over the estimated useful life of the assets. The estimated useful lives of capital assets are as follows: Capital Asset Type Estimated Useful Life (in years) Buildings and improvements Improvements other than buildings Machinery and equipment 3-20 Vehicles 5-7 Books, software and other 5 Infrastructure The cost of normal maintenance and repairs that do not add to the value of the assets or materially extend asset lives are not capitalized and are treated as expenses when incurred. Improvements are capitalized. Governmental Fund Financial Statements Capital asset costs are recorded as expenditures in the acquiring fund in the year of the purchase. I. Interfund Receivables and Payables During the course of its operations, transactions occur between and within individual funds that may result in amounts owed between funds. Government-Wide Financial Statements Transactions of a buyer/seller nature between and within governmental funds are eliminated from the governmental activities in the statement of net position. Any residual balances outstanding between the governmental activities and business-type activities are reported in the statement of net position as internal balances. A-45

114 Notes to Basic Financial Statements Year Ended June 30, 2017 Fund Financial Statements Transactions of a buyer/seller nature between and within funds are not eliminated from the individual fund statements. Receivables and payables resulting from these transactions are classified as Due from other funds or Due to other funds on the balance sheet. J. Deferred Outflows/Inflows of Resources Government-Wide Financial Statements (Net Position) In addition to assets, the statement of net position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. The Town has reported deferred outflows of resources related to pensions in this category. In addition to liabilities, the statement of net position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The Town has reported deferred inflows of resources related to pensions in this category. Fund Financial Statements In addition to liabilities, the governmental funds balance sheet will sometimes report a separate section for deferred inflows of resources. This financial statement element, deferred inflows of resources, represents assets that have been recorded in the governmental fund financial statements but the revenue is not available and so will not be recognized as an inflow of resources (revenue) until it becomes available. The Town has recorded unavailable revenue as deferred inflows of resources in the governmental funds balance sheet. K. Interfund Transfers During the course of its operations, resources are permanently reallocated between and within funds. These transactions are reported as transfers in and transfers out. Government-Wide Financial Statements Transfers between and within governmental funds and internal service funds are eliminated from the governmental activities in the statement of net position. Any residual balances outstanding between the governmental activities and business-type activities are reported in the statement of activities as Transfers, net. Fund Financial Statements Transfers between and within funds are not eliminated from the individual fund statements and are reported as transfers in and transfers out. L. Unavailable Revenue Unavailable revenue at the governmental fund financial statement level represent billed receivables that do not meet the available criterion in accordance with the current financial resources measurement focus and the modified accrual basis of accounting, i.e. receivables that are not considered to be available to liquidate liabilities of the current period. Unavailable revenue is recognized as revenue in the conversion to government-wide (full accrual) financial statements. A-46

115 Notes to Basic Financial Statements Year Ended June 30, 2017 M. Net Position and Fund Equity Government-Wide Financial Statements (Net Position) Net position reported as net investment in capital assets includes capital assets, net of accumulated depreciation, less the principal balance of outstanding debt used to acquire capital assets. Unspent proceeds of capital related debt are not considered to be capital assets. Outstanding debt related to future reimbursements from the state s school building program is not considered to be capital related debt. Net position is reported as restricted when amounts that are not available for appropriation or are legally restricted by outside parties for a specific future use. Net position has been restricted for the following: Permanent funds expendable represents the amount of realized and unrealized investment earnings of donor restricted trusts. The restrictions and trustee policies only allows the trustees to approve spending of the realized investment earnings. Permanent funds nonexpendable represent the endowment portion of donor restricted trusts. Gifts and Grants represents restrictions placed on assets from outside parties. Community preservation represents amounts held for uses restricted by law for community preservation purposes. Sometimes the Town will fund outlays for a particular purpose from both restricted (e.g., restricted bond or grant proceeds) and unrestricted resources. In order to calculate the amounts to report as restricted net position and unrestricted net position in the government-wide and proprietary fund financial statements, a flow assumption must be made about the order in which the resources are considered to be applied. It is the Town s policy to consider restricted net position to have been depleted before unrestricted net position is applied. Fund Financial Statements (Fund Balances) Governmental fund balances are classified as nonspendable, restricted, committed, assigned, or unassigned based on the extent to which the government is bound to honor constraints on the specific purposes for which amounts in those funds can be spent. The governmental fund balance classifications are as follows: Nonspendable fund balance includes amounts that cannot be spent because they are either not in spendable form or they are legally or contractually required to be maintained intact. Restricted fund balance includes amounts subject to constraints placed on the use of resources that are either externally imposed by creditors, grantors, contributors, or laws or regulations of other governments; or that are imposed by law through constitutional provisions or enabling legislation. Committed fund balance includes amounts that can only be used for specific purposes pursuant to constraints imposed by formal action of the government s highest level of decision-making authority. Town Meeting is the highest level of decision making authority that can, by adoption of Town Meeting warrant article, commit funds for a specific purpose. Once voted, the limitation imposed by the vote remains in place until the funds are used for their intended purpose or a vote is taken to rescind the commitment. A-47

116 Notes to Basic Financial Statements Year Ended June 30, 2017 Assigned fund balance includes amounts that are constrained by the Town s intent to be used for specific purposes, but are neither restricted nor committed. The Town s by-laws authorize the Town Accountant to assign fund balance. Assignments generally only exist temporarily. Additional action does not have to be taken for the removal of an assignment. Unassigned fund balance includes the residual classification for the general fund. This classification represents fund balance that has not been assigned to other funds and that has not been restricted, committed, or assigned to specific purposes within the general fund. The general fund is the only fund that reports a positive unassigned fund balance amount. The Town s spending policy is to spend restricted fund balance first, followed by committed, assigned and unassigned fund balance. Most governmental funds are designated for one purpose at the time of their creation. Therefore, any expenditure from the fund will be allocated to the applicable fund balance classifications in the order of the aforementioned spending policy. The general fund and certain other funds may have more than one purpose. N. Pensions For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Plymouth County Contributory Retirement System and the Massachusetts Teachers Retirement System and additions to/deductions from the Systems fiduciary net position have been determined on the same basis as they are reported by the Systems. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. O. Long-term Debt Government-Wide and Proprietary Fund Financial Statements Long-term debt is reported as liabilities in the government-wide and proprietary fund statement of net position. Material bond premiums and discounts are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Governmental Fund Financial Statements The face amount of governmental funds long-term debt is reported as other financing sources. Bond premiums and discounts, as well as issuance costs, are recognized in the current period. Bond premiums are reported as other financing sources and bond discounts are reported as other financing uses. Issuance costs, whether or not withheld from the actual bond proceeds received, are reported as general government expenditures. P. Investment Income Excluding the permanent funds, investment income derived from major and nonmajor governmental funds is legally assigned to the general fund unless otherwise directed by Massachusetts General Law (MGL). Investment income from Enterprise Funds is retained in their respective funds. Q. Compensated Absences Employees are granted vacation and sick leave in varying amounts based on collective bargaining agreements, state laws and executive policies. A-48

117 Notes to Basic Financial Statements Year Ended June 30, 2017 Government-Wide and Proprietary Fund Financial Statements Vested or accumulated vacation and sick leave are reported as liabilities and expensed as incurred. Fund Financial Statements Vested or accumulated vacation and sick leave, which will be liquidated with expendable available financial resources, are reported as expenditures and fund liabilities upon maturity of the liability, i.e. unused reimbursable leave still outstanding following an employee s resignation or retirement. R. Use of Estimates Government-Wide and Fund Financial Statements The preparation of basic financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure for contingent assets and liabilities at the date of the basic financial statements and the reported amounts of the revenues and expenditures/expenses during the year. Actual results could vary from estimates that were used. S. Total Column Government-Wide Financial Statements The total column presented on the government-wide financial statements represents consolidated financial information. Fund Financial Statements The total column on the fund financial statements is presented only to facilitate financial analysis. Data in this column is not the equivalent of consolidated financial information. NOTE 2 CASH AND INVESTMENTS A cash and investment pool is maintained that is available for use by all funds. Each fund type's portion of this pool is displayed on the balance sheet as "Cash and Cash Equivalents". The deposits and investments of the trust funds are held separately from those of other funds. Statutes authorize the investment in obligations of the U.S. Treasury, agencies, and instrumentalities, certificates of deposit, repurchase agreements, money market accounts, bank deposits and the State Treasurer's Investment Pool (the Pool). The Treasurer may also invest trust funds in securities, other than mortgages or collateral loans, which are legal for the investment of funds of savings banks under the laws of the Commonwealth. The Pool meets the criteria of an external investment pool. The Pool is administered by the Massachusetts Municipal Depository Trust (MMDT), which was established by the Treasurer of the Commonwealth who serves as Trustee. The fair value of the position in the Pool is the same as the value of the Pool shares. A-49

118 Notes to Basic Financial Statements Year Ended June 30, 2017 Custodial Credit Risk Deposits In the case of deposits, this is the risk that in the event of a bank failure, the Town of Marshfield s deposits may not be returned to it. The Town s policy limits its exposure to custodial credit risk through diversification and prudent selection of investment instruments, choice of depository, and collateralization of balances where practical. At year-end, the carrying amount of deposits totaled $37,186,413 and the bank balance totaled $40,109,623. Of the bank balance, $2,341,963 was covered by Federal Depository Insurance, $893,199 was covered by Share Insurance Fund (SIF), $27,331,653 was covered by Deposit Insurance Fund (DIF), and $9,542,808 was exposed to custodial credit risk because it was uninsured and uncollateralized. Investments As of June 30, 2017, the Town had the following investments and maturities: Investment Type Maturity Under Fair Value 1 Year 1-5 Years 6-10 Years Debt Securities U.S. Government & Agencies $ 1,658,686 $ 151,910 $ 1,223,492 $ 283,284 Corporate Bonds 381, ,959 99,527 Total Debt Securities... 2,040,172 $ 151,910 $ 1,505,451 $ 382,811 Other Investments Equity Securities... 1,602,266 Equity Mutual Funds 92,405 Fixed Income Mutual Funds 73,502 MMDT 79,963 Total Investments... $ 3,888,308 MMDT maintains a cash portfolio and a short-term bond fund with combined average maturities of approximately 2 months. The Town s investment in MMDT is unrated. All of the investments, except for the equity securities, are considered cash and cash equivalents. Custodial Credit Risk Investments For an investment, this is the risk that, in the event of a failure by the counterparty, the Town will not be able to recover the value of its investments or collateral security that are in the possession of an outside party. The Town has custodial credit risk exposure equal to $2,040,172 in debt securities and $1,768,173 in equity securities, equity mutual funds, and fixed income mutual funds because the related securities are uninsured, unregistered and held by the counterparty. The Town does not have an investment policy for custodial credit risk. Interest Rate Risk Interest rate risk exists when there is a possibility that changes in interest rates could adversely affect the fair value of the Town s investments. The Town does not have a formal investment policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. A-50

119 Notes to Basic Financial Statements Year Ended June 30, 2017 Credit Risk The Town restricts investments to only the following: obligations of the U.S. Government and foreign governments and their agencies or instrumentalities, banks (including certificates of deposit, time deposits, and bankers acceptances located in the U.S.), short-term debt obligations, and overnight and term repurchase agreements and reverse purchase agreements secured by any of the obligations previously listed. The Treasurer may invest in MMDT. The Town s investments at June 30, 2017, are rated as follows: Quality Ratings Fair Value AA+ A A- BBB+ Debt Securities U.S. Government & Agencies $ 1,658,686 $ 1,658,686 $ - $ - $ - Corporate Bonds 381,486-25, , ,055 Total Debt Securities... $ 2,040,172 $ 1,658,686 $ 25,591 $ 150,840 $ 205,055 Concentration of Credit Risk The Town restricts holdings to no more than 10% of the net investment in securities of any one issuer, except investments in securities of the U.S. Government, its agencies or instrumentalities, or in repurchase agreements collateralized fully by such obligations. No more than 25% may be invested in any one industry except there is no limitation on the percentage that may be invested in the financial services industry. With the exception of U.S. Treasury obligations or investments fully collateralized by U.S. Treasuries or agencies, and MMDT, no more than 10% of the Town s investments shall be invested in a single financial institution. Fair Value of Investments The Town holds investments that are measured at fair value on a recurring basis. Because investing is not a core part of the Town s mission, the Town determines that the disclosures related to these investments only need to be disaggregated by major type. The Town chooses a tabular format for disclosing the levels within the fair value hierarchy. The Town categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair values of the asset. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant unobservable inputs. A-51

120 Notes to Basic Financial Statements Year Ended June 30, 2017 The Town has the following recurring fair value measurements as of June 30, 2017: Quoted Prices in Active Significant Markets for Other Significant Identical Observable Unobservable June 30, Assets Inputs Inputs Investment Type 2017 (Level 1) (Level 2) (Level 3) Investments measured at fair value: Debt Securities U.S. Government Treasuries $ 1,658,686 $ 1,658,686 $ - $ - Corporate bonds 381, ,486 - Total debt securities 2,040,172 1,658, ,486 - Other Investments Equity securities 1,602,266 1,602, Equity mutual funds 92,405 92, Fixed income mutual funds 73,502 73, Total Other Investments... 1,768,173 1,768, Total investments measured at fair value 3,808,345 $ 3,426,859 $ 381,486 $ - Investments measured at amortized cost: MMDT 79,963 Total investments.. $ 3,888,308 U.S. government treasuries, equity securities, equity mutual funds, and fixed income mutual funds classified in Level 1 of the fair value hierarchy are valued using prices quoted in active markets for those securities. Corporate bonds classified in Level 2 of the fair value hierarchy are valued using a matrix pricing technique. Matrix pricing is used to value securities based on the securities relations to benchmark quoted prices. MMDT investments are valued at amortized cost. Under the amortized cost method, an investment is valued initially at its cost and adjusted for the amount of interest income accrued each day over the term of the investment to account for any difference between the initial cost and the amount payable at maturity. If amortized cost is determined not to approximate fair value, the value of the portfolio securities will be determined under procedures established by the Advisor. A-52

121 Notes to Basic Financial Statements Year Ended June 30, 2017 NOTE 3 RECEIVABLES At June 30, 2017, receivables for the individual major and nonmajor governmental funds in the aggregate, including the applicable allowances for uncollectible accounts, are as follows: Gross Allowance for Net Amount Uncollectibles Amount Receivables: Real estate, personal property and tax deferrals $ 2,173,427 $ - $ 2,173,427 Tax liens 1,767,037-1,767,037 Motor vehicle and other excise taxes 848,939 (193,178) 655,761 Departmental and other 1,514,660 (191,703) 1,322,957 Intergovernmental. 7,838,034-7,838,034 Total $ 14,142,097 $ (384,881) $ 13,757,216 At June 30, 2017, receivables for the sewer, water, and solid waste enterprise funds consist of the following: Gross Allowance for Net Amount Uncollectibles Amount Receivables: User charges $ 3,911,775 $ - $ 3,911,775 Special assessments 1,415,911-1,415,911 Intergovernmental 488, ,599 Total $ 5,816,285 $ - $ 5,816,285 Governmental funds report unavailable revenue in connection with receivables for revenues that are not considered to be available to liquidate liabilities of the current period. At the end of the current year, the various components of unavailable revenue reported in the governmental funds were as follows: Other General Governmental Fund Funds Total Receivable and other asset type: Real estate and personal property taxes $ 1,682,513 $ - $ 1,682,513 Tax liens 1,767,037-1,767,037 Motor vehicle and other excise 655, ,761 Departmental and other 1,322,957-1,322,957 Intergovernmental 4,413, ,581 4,778,658 Tax foreclosures 576, ,793 Total $ 10,418,138 $ 365,581 $ 10,783,719 A-53

122 Notes to Basic Financial Statements Year Ended June 30, 2017 NOTE 4 CAPITAL ASSETS Capital asset activity for the year ended June 30, 2017, was as follows: Governmental Activities Beginning Ending Balance Increases Decreases Balance Capital assets not being depreciated: Land $ 28,156,280 $ 40,623 $ - $ 28,196,903 Construction in progress 1,268,822 4,993,813 (592,646) 5,669,989 Total capital assets not being depreciated 29,425,102 5,034,436 (592,646) 33,866,892 Capital assets being depreciated: Improvements other than buildings 2,657,292 1,185,771-3,843,063 Buildings and improvements 187,807, , ,225,751 Machinery and equipment 15,331,744 1,135,615-16,467,359 Vehicles 5,921, ,827-6,257,315 Books, software and other 5,589, ,870-6,160,274 Infrastructure 69,253,270 2,919,816-72,173,086 Total capital assets being depreciated 286,560,563 6,566, ,126,848 Less accumulated depreciation for: Improvements other than buildings (370,501) (6,250) - (376,751) Buildings and improvements (40,729,479) (8,274,524) - (49,004,003) Machinery and equipment (13,520,061) (336,126) - (13,856,187) Vehicles (4,427,817) (377,094) - (4,804,911) Books, software and other (4,043,462) (182,542) - (4,226,004) Infrastructure (27,821,785) (2,156,406) - (29,978,191) Total accumulated depreciation (90,913,105) (11,332,942) - (102,246,047) Total capital assets being depreciated, net 195,647,458 (4,766,657) - 190,880,801 Total governmental activities capital assets, net $ 225,072,560 $ 267,779 $ (592,646) $ 224,747,693 A-54

123 Notes to Basic Financial Statements Year Ended June 30, 2017 Business-Type Activities Beginning Ending Balance Increases Decreases Balance Capital assets not being depreciated: Land $ 7,452,270 $ - $ - $ 7,452,270 Construction in progress - 94,356-94,356 Total capital assets not being depreciated 7,452,270 94,356-7,546,626 Capital assets being depreciated: Buildings and improvements 16,143, ,494-16,272,720 Machinery and equipment 6,957, ,128-7,151,328 Vehicles 1,618, ,618,744 Infrastructure 90,565, ,708-91,368,623 Total capital assets being depreciated 115,285,085 1,126, ,411,415 Less accumulated depreciation for: Buildings and improvements (9,529,979) (434,802) - (9,964,781) Machinery and equipment (5,488,000) (230,345) - (5,718,345) Vehicles (1,303,827) (96,426) - (1,400,253) Infrastructure (37,787,364) (1,508,832) - (39,296,196) Total accumulated depreciation (54,109,170) (2,270,405) - (56,379,575) Total capital assets being depreciated, net 61,175,915 (1,144,075) - 60,031,840 Total business-type activities capital assets, net $ 68,628,185 $ (1,049,719) $ - $ 67,578,466 Depreciation expense was charged to functions/programs of the primary government as follows: Governmental Activities: General government $ 260,051 Public safety 758,682 Education 7,420,359 Public works 2,585,191 Culture and recreation 308,659 Total depreciation expense - governmental activities $ 11,332,942 Business-Type Activities: Sewer $ 1,280,687 Water 841,304 Solid waste 148,414 Total depreciation expense - business-type activities $ 2,270,405 A-55

124 Notes to Basic Financial Statements Year Ended June 30, 2017 NOTE 5 INTERFUND RECEIVABLES, PAYABLES AND TRANSFERS Interfund receivables and payables between funds at June 30, 2017, are summarized as follows: Receivable Fund Payable Fund Amount Town General Revolving Fund Chapter 90 Fund $ 408,542 (1) (1) Represents advances between funds to meet temporary cash flow needs. Interfund transfers for the year ended June 30, 2017, are summarized as follows: Transfers In: Town General Capital Transfers Out: Fund Projects Total Town Capital Projects $ 61,758 $ - $ 61,758 (1) Nonmajor Governmental Funds 164, , ,551 (2) Total $ 226,665 $ 129,644 $ 356,309 (1) Represents budgeted transfers from the Town capital project fund to the general fund. (2) Represents budgeted transfers into the general fund from nonmajor governmental funds and the expendable trust funds, as well as transfers from the nonmajor funds to the Town capital project fund NOTE 6 SHORT-TERM FINANCING Short-term debt may be authorized and issued to fund the following: Current operating costs prior to the collection of revenues through issuance of revenue or tax anticipation notes (RANS or TANS). Capital project costs and other approved expenditures incurred prior to obtaining permanent financing through issuance of bond anticipation notes (BANS) or grant anticipation notes (GANS). Short-term loans are general obligations of the Town and carry maturity dates that are limited by statute. Interest expenditures for short-term borrowings are accounted for in the General Fund and the Enterprise funds, where applicable. A-56

125 Notes to Basic Financial Statements Year Ended June 30, 2017 Details related to the Town s short-term debt activity for the year ended June 30, 2017, is as follows: Balance at Balance at Rate June 30, Renewed/ Retired/ June 30, Type Purpose (%) Due Date 2016 Issued Redeemed 2017 Governmental funds BAN Municipal Purpose 2.00% 7/29/2016 $ 5,000,000 $ - $ 5,000,000 $ - BAN Municipal Purpose 1.50% 7/28/2017-5,000,000 1,109,500 3,890,500 BAN Municipal Purpose 2.00% 7/29/ , ,000 - BAN Municipal Purpose 2.00% 7/29/ ,600-48,600 - BAN Municipal Purpose 0.90% 7/28/ , ,000 - BAN Municipal Purpose 0.90% 7/28/ , , BAN Municipal Purpose 1.25% 7/28/2017-4,435,000 2,260,000 2,175,000 BAN Municipal Purpose 1.25% 7/28/2017-1,568,907 1,568, SAN Municipal Purpose 1.25% 7/28/ , ,000 Total 6,441,600 12,135,407 12,156,100 6,420,907 Unamortized BAN premium - 503, ,476 Total governmental funds 6,441,600 12,638,883 12,156,100 6,924,383 Business-type funds BAN Water BAN 2.00% 7/29/ ,400-38,400 - BAN Water BAN 1.25% 7/28/2017-1,200,000 1,039, ,500 BAN Solid Waste BAN 2.00% 7/29/ ,000-29,000 - BAN Solid Waste BAN 0.90% 7/28/ ,000-50,000 - BAN Sewer BAN % 7/28/2017-2,000,000-2,000,000 Total business-type funds 117,400 3,200,000 1,156,900 2,160,500 Total Short-Term Debt $ 6,559,000 $ 15,838,883 $ 13,313,000 $ 9,084,883 On the scheduled due date of July 28, 2017, $7.7 million of BANS were converted to long-term debt and have been presented as such in these financial statements. The remaining balance was rolled over into new BANS due July 27, 2018 at interest rates ranging from 2% to 3.6%. NOTE 7 - LONG-TERM DEBT Under the provisions of Chapter 44, Section 10, Municipal Law authorizes indebtedness up to a limit of 5% of the equalized valuation. Debt issued in accordance with this section of the law is designated as being "inside the debt limit". In addition, however, debt may be authorized in excess of that limit for specific purposes. Such debt, when issued, is designated as being "outside the debt limit". The Town s bylaws currently provide for a split between the general fund and the sewer fund for the debt service requirements of certain (issuances prior to FY06) sewer long-term debt. The general fund and the sewer fund are each responsible for their 40% and 60% share of the debt service, respectively. A-57

126 Notes to Basic Financial Statements Year Ended June 30, 2017 Details related to the Town s outstanding general obligation indebtedness at June 30, 2017, and the debt service requirements follow. Bonds Payable Schedule Governmental Funds Original Interest Outstanding Outstanding Maturity Loan Rate at June 30, at June 30, Project Through Amount (%) 2016 Issued Redeemed 2017 MCWT Sewer Bonds $ 3,380, $ 1,444,374 $ - $ 208,800 $ 1,235,574 Municipal Purpose Bonds ,494, ,000-55,000 - Municipal Purpose Bonds ,196, , , ,000 Municipal Purpose Refunding Bonds ,351, ,843,570-1,184,510 4,659,060 Municipal Purpose Refunding Sewer Bonds , ,572-36, ,376 Municipal Purpose Bonds ,353, ,911, ,889 1,457,777 Municipal Purpose Bonds , , ,111 92,223 Municipal Purpose Bonds ,892, ,028, ,067 2,749,137 Qualified Energy Conservation Bonds ,000, ,500, ,000 3,000,000 Municipal Purpose Bonds ,790, ,081,796-1,550,933 22,530,863 MCWT Bonds , ,000-40,000 80,000 Municipal Purpose Bonds ,106, ,495,000-1,810,000 23,685,000 Municipal Purpose Bonds ,879, ,973,100-81,126 1,891,974 Municipal Purpose Bonds ,973, ,879, ,879,400 Municipal Purpose Bonds ,607, ,607,500-6,607,500 Total 74,354,016 6,607,500 6,635,632 74,325,884 Unamortized bond premium 4,653, ,349 4,075,294 Total Long-Term Debt $ 79,007,659 $ 6,607,500 $ 7,213,981 $ 78,401,178 Debt service requirements for principal and interest, not including the subsequent issuances, for Governmental bonds payable in future years are as follows: Year Principal Interest Total 2018 $ 6,732,884 $ 2,039,844 $ 8,772, ,353,573 1,733,546 9,087, ,675,686 1,516,321 8,192, ,451,065 1,310,399 7,761, ,956,131 1,115,736 6,071, ,566,139 3,705,183 23,271, ,505,601 1,493,850 17,999, ,084, ,577 6,246,382 Total $ 74,325,884 $ 13,076,456 $ 87,402,340 The Town is scheduled to be subsidized by the Massachusetts Clean Water Trust (MCWT) on a periodic basis for principal in the amount of $325,733 and interest costs for $112,473. Thus, net MCWT loan repayments, including interest, are scheduled to be $1,027,785. The principal subsidies are guaranteed and therefore a $325,733 intergovernmental receivable and corresponding revenue have been reported in the General Fund. Since the Town is legally obligated for the total amount of the debt, such amounts have been reported in the accompanying basic financial statements. Principal and interest subsidies totaled $54,568 and $38,235, respectively in The Town has been approved to receive school construction assistance through the Massachusetts School Building Authority (MSBA). The MSBA provides resources for eligible construction costs and debt interest and borrowing costs. Reimbursement commenced in 2002 and will be made over 20 years at approximately 67% of eligible costs of the Martinson Elementary School and Furnace Brook Middle School projects. During 2017, approximately $1,113,000 of such assistance was received. Approximately $4,451,000 will be received in future years. Of this amount, approximately $364,000 represents reimbursement of long-term interest costs, and approximately $4,087,000 represents reimbursement of approved construction costs. Accordingly, $4,087,000 intergovernmental receivable and corresponding unavailable revenue has been recorded in the fund based A-58

127 Notes to Basic Financial Statements Year Ended June 30, 2017 financial statements and the change in the receivable has been recognized as revenue in the conversion to the government-wide financial statements. The Commonwealth has modified the method for funding new projects in the school building assistance program. Under the new program, the assistance is paid to support the State s share of construction costs as they are incurred, therefore eliminating the need for the Town to fund the State s share through long-term debt. The Marshfield High School project is being partially funded by this program at an eligible cost rate of 55.6%. The Town did not receive any reimbursements in 2017 and submitted an additional request of $2,063,197 for reimbursement of construction costs incurred through June 30, Accordingly, the Town has recorded an intergovernmental receivable totaling $2,063,197 as of June 30, Bonds Payable Schedule Sewer Enterprise Fund Original Interest Outstanding Outstanding Maturity Loan Rate at June 30, at June 30, Project Through Amount (%) 2016 Issued Redeemed 2017 Municipal Purpose Bonds $ 420, $ 267,858 $ - $ 54,294 $ 213,564 MCWT Bonds ,071, ,166, ,201 1,853,362 Municipal Purpose Bonds , ,000-35, ,000 Municipal Purpose Bonds , ,000-10,000 - MCWT Bonds ,450, ,774, ,147 4,539,001 Total Long-Term Debt $ 7,363,569 $ - $ 647,642 $ 6,715,927 Debt service requirements for principal and interest for Sewer Enterprise Fund bonds payable in future years are as follows: Year Principal Interest Total 2018 $ 651,036 $ 173,374 $ 824, , , , , , , , , , ,113 91, , ,690, ,743 1,970, ,555, ,844 1,683, ,697 6, ,331 Total $ 6,715,927 $ 1,069,631 $ 7,785,558 The Town is scheduled to be subsidized by the Massachusetts Clean Water Trust (MCWT) on a periodic basis for principal in the amount of $488,599 and interest costs for $168,712. Thus, net MCWT loan repayments, including interest, are scheduled to be $1,421,677. The principal subsidies are guaranteed and therefore a $488,599 intergovernmental receivable and corresponding revenue have been reported in Sewer Enterprise Fund. Since the Town is legally obligated for the total amount of the debt, such amounts have been reported in the accompanying basic financial statements. Principal and interest subsidies totaled $81,853 and $57,352, respectively in A-59

128 Notes to Basic Financial Statements Year Ended June 30, 2017 Bonds Payable Schedule Water Enterprise Fund Original Interest Outstanding Outstanding Maturity Loan Rate at June 30, at June 30, Project Through Amount (%) 2016 Issued Redeemed 2017 Municipal Purpose Bonds $ 2,131, $ 210,000 $ - $ 210,000 $ - MCWT Bonds ,500, ,421, ,471 1,255,772 Municipal Purpose Bonds ,492, ,010, ,000 1,735,000 Municipal Purpose Bonds ,685, ,432,250-84,250 1,348,000 Municipal Purpose Bonds ,280, ,750-95, ,000 Municipal Purpose Bonds , ,000-45, ,000 Municipal Purpose Bonds ,380, ,380, ,380,600 Municipal Purpose Bonds ,039, ,039,500-1,039,500 Total water bonds payable 8,011,843 1,039, ,471 8,175,872 Unamortized bond premium 209,810-28, ,078 Total Long-Term Debt $ 8,221,653 $ 1,039,500 $ 904,203 $ 8,356,950 Debt service requirements for principal and interest for Water Enterprise Fund bonds payable in future years are as follows: Year Principal Interest Total 2018 $ 764,413 $ 236,699 $ 1,001, , ,129 1,051, , , , , , , , , , ,636, ,383 2,972, ,145, ,640 1,250, ,000 14, ,689 Total $ 8,175,872 $ 1,311,815 $ 9,487,687 Bonds Payable Schedule Solid Waste Enterprise Fund Original Interest Outstanding Outstanding Maturity Loan Rate at June 30, at June 30, Project Through Amount (%) 2016 Issued Redeemed 2017 Municipal Purpose Bonds $ 175, $ 130,000 $ - $ 45,000 $ 85,000 Municipal Purpose Bonds ,521, ,521, ,521,000 Municipal Purpose Bonds , ,000-50,000 Total Long-Term Debt $ 1,651,000 $ 50,000 $ 45,000 $ 1,656,000 A-60

129 Notes to Basic Financial Statements Year Ended June 30, 2017 Debt service requirements for principal and interest for Solid Waste Enterprise Fund bonds payable in future years are as follows: Year Principal Interest Total 2018 $ 126,000 $ 56,241 $ 182, ,000 28, , ,000 25, , ,000 23, , ,000 21, , ,000 78, , ,000 35, , ,000 12, ,688 Total $ 1,656,000 $ 282,447 $ 1,938,447 The Town is subject to various debt limits by statute and may issue additional general obligation debt under the normal debt limit. At June 30, 2017, the Town had the following authorized and unissued debt: Purpose Amount Pine Street Water Main Replacement $ 20,000 High School Feasibility Study 1,402,000 Harbormaster Building Construction 700,000 New High School 47,438,839 (1) Seawalls & Riprap 70,000 Emergency Repairs - Nemo 399,764 Land Acquisition 50,000 Foster Ave Seawalls 2,073,100 Water Main Upgrades 120,000 Total $ 52,273,703 (1) The MSBA is providing funding for this portion of the new high school construction project. This remaining balance will be rescinded once the project is complete. A-61

130 Notes to Basic Financial Statements Year Ended June 30, 2017 Changes in Long-term Liabilities During the year ended June 30, 2017, the following changes occurred in long-term liabilities: Balance Balance Due June 30, Bonds Bonds Other Other June 30, Within 2016 Issued Redeemed Increases Decreases 2017 One Year Governmental Activities: Long-Term Bonds $ 74,354,016 $ 6,607,500 $ (6,635,632) $ - $ - $ 74,325,884 $ 6,732,884 Unamortized Bond Premium 4,653,643 - (578,349) - - 4,075, ,116 Other Postemployment Benefits 32,692, ,690,089 (1,360,574) 36,022,137 - Compensated Absences 4,454, ,650,000 (1,635,000) 4,469,000 1,607,000 Net Pension Liability 42,063, ,575,036 (5,706,790) 42,931,785 - Total Governmental Activities 158,217,820 6,607,500 (7,213,981) 12,915,125 (8,702,364) 161,824,100 8,877,000 Business-Type Activities: Long-Term Bonds 17,026,412 1,089,500 (1,568,113) ,547,799 1,541,449 Unamortized Bond Premium 209,810 - (28,732) ,078 26,456 Other Postemployment Benefits 1,686, ,219 (50,911) 1,857,863 - Compensated Absences 132, ,000 (132,000) 126, ,000 Landfill Closure 384, (28,500) 356,250 28,500 Net Pension Liability 8,095, ,265,433 (1,098,330) 8,262,656 - Total Business-Type Activities. 27,535,080 1,089,500 (1,596,845) 1,613,652 (1,309,741) 27,331,646 1,722,405 Total $ 185,752,900 $ 7,697,000 $ (8,810,826) $ 14,528,777 $ (10,012,105) $ 189,155,746 $ 10,599,405 Compensated absence and other postemployment liabilities related to both governmental and business-type activities are normally paid from the funds reporting payroll and related expenditures, which consist of the general fund and the sewer, water, and solid waste enterprise funds, respectively. NOTE 8 GOVERNMENTAL FUND BALANCE CLASSIFICATIONS The Town adopted GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, as part of its year 2011 reporting. The intention of the GASB is to provide a more structured classification of fund balance and to improve the usefulness of fund balance reporting to the users of the Town s financial statements. The reporting standard establishes a hierarchy for fund balance classifications and the constraints imposed on the uses of those resources. Massachusetts General Law Ch. 40 5B allows for the establishment of Stabilization funds for one or more different purposes. The creation of a fund requires a two-thirds vote of the legislative body and must clearly define the purpose of the fund. Any change to the purpose of the fund along with any additions to or appropriation from the fund requires a two-thirds vote of the legislative body. At year end the balance of the General Stabilization Fund is $2,383,507 and is reported as unassigned fund balance within the General Fund. GASB 54 provides for two major types of fund balances, which are nonspendable and spendable. Nonspendable fund balances are balances that cannot be spent because they are not expected to be converted to cash or they are legally or contractually required to remain intact. Examples of this classification are prepaid items, inventories, and principal (corpus) of an endowment fund. The Town has reported principal portions of endowment funds as nonspendable. A-62

131 Notes to Basic Financial Statements Year Ended June 30, 2017 In addition to the nonspendable fund balance, GASB 54 has provided a hierarchy of spendable fund balances, based on a hierarchy of spending constraints. Restricted: fund balances that are constrained by external parties, constitutional provisions, or enabling legislation. Committed: fund balances that contain self-imposed constraints of the government for its highest level of decision making authority. Assigned: fund balances that contain self-imposed constraints of the government to be used for a particular purpose. Unassigned: fund balance of the general fund that is not constrained for any particular purpose. As of June 30, 2017, the governmental fund balances consisted of the following: Governmental Funds High School Town Nonmajor Total Capital Capital Governmental Governmental General Projects Projects Funds Funds Fund Balances Nonspendable: Permanent fund principal $ - $ - $ - $ 1,270,028 $ 1,270,028 Restricted for: High School Capital projects - 343, ,746 School state and federal grants , ,668 Town state and federal grants ,277,490 1,277,490 Community preservation fund ,246,908 2,246,908 Airport ,319 72,319 Town general revolving ,428,111 1,428,111 School general revolving , ,062 Other , ,595 Permanent funds ,481,144 1,481,144 Debt exclusion 1,711, ,711,494 Assigned for carryover encumbrances: General government 47, ,175 Public safety 2, ,535 Education 17, ,526 Public works 39, ,047 Human services 10, ,000 Unassigned 7,195,117 - (1,926,591) - 5,268,526 Total Fund Balances $ 9,022,894 $ 343,746 $ (1,926,591) $ 10,080,325 $ 17,520,374 NOTE 9 RISK FINANCING The Town is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; errors and omissions; and natural disasters for which the Town carries commercial insurance. The amount of claim settlements has not exceeded insurance coverage in any of the previous three years. The Town joined the Plymouth County Health Plan effective July 1, This health plan subsequently changed from a county administered plan to a joint purchase agreement (the JPA ) and became known as the Mayflower Municipal Health Group. The purpose of the JPA is for the joint negotiation and purchase of health coverage with insurance carriers. Under these agreements, the insurance claims of the covered employees are paid for by the insurance carrier and are subsequently reimbursed by the JPA. The JPA charges monthly premiums to each A-63

132 Notes to Basic Financial Statements Year Ended June 30, 2017 governmental unit based upon requirements established through underwriting and actuarial estimates. In addition, the JPA provides full reinsurance coverage for all claim costs in excess of $250,000 per covered employee. In the event of the dissolution of the JPA or if the assets of the JPA are insufficient to pay claims which occur, the Town remains liable for its proportionate share. At June 30, 2016 (based on the most recent audited information available), the Mayflower Municipal Health Group had an IBNR accrual of $8.3 million and an ending net position of approximately $13.5 million which appears sufficient to support its ongoing claim liabilities. NOTE 10 PENSION PLAN Plan Descriptions The Town is a member of the Plymouth County Contributory Retirement System (PCCRS), a cost-sharing multiple-employer defined benefit pension plan covering eligible employees of the 59 member units. The PCCRS is administered by five board members (Board) on behalf of all current employees and retirees except for current teachers and retired teachers. Chapter 32 of the MGL assigns authority to establish and amend benefit provisions of the plan. The audited financial report may be obtained by visiting The Town is a member of the Massachusetts Teachers Retirement System (MTRS), a cost-sharing multiemployer defined benefit plan. MTRS is managed by the Commonwealth of Massachusetts (Commonwealth) on behalf of municipal teachers and municipal teacher retirees. The Commonwealth is a nonemployer contributor and is responsible for 100% of the contributions and future benefit requirements of the MTRS. The MTRS covers certified teachers in cities (except Boston), towns, regional school districts, charter schools, educational collaboratives and Quincy College. The MTRS is part of the Commonwealth s reporting entity and the audited financial report may be obtained by visiting Special Funding Situation The Commonwealth is a nonemployer contributor and is required by statute to make 100% of all actuarially determined employer contributions on behalf of the Town to the MTRS. Therefore, the Town is considered to be in a special funding situation as defined by GASB Statement No. 68, Accounting and Financial Reporting for Pensions and the Commonwealth is a nonemployer contributor in MTRS. Since the Town does not contribute directly to MTRS, there is no net pension liability to recognize. The total of the Commonwealth provided contributions have been allocated based on each employer s covered payroll to the total covered payroll of employers in MTRS as of the measurement date of June 30, The Town s portion of the collective pension expense, contributed by the Commonwealth, of $10,337,263 is reported in the general fund as intergovernmental revenue and pension expense in the current year. The portion of the Commonwealth s collective net pension liability associated with the Town is $101,339,201 as of the measurement date. Benefits Provided Both Systems provide retirement, disability, survivor and death benefits to plan members and beneficiaries. Massachusetts Contributory Retirement System benefits are, with certain minor exceptions, uniform from system to system. The System provides for retirement allowance benefits up to a maximum of 80% of a member's highest three-year average annual rate of regular compensation. For persons who became members on or after April 2, 2012, average salary is the average annual rate of regular compensation received during the five consecutive years that produce the highest average, or, if greater, during the last five years (whether or not consecutive) preceding retirement. Benefit payments are based upon a member's age, length of creditable service, level of compensation, and group classification. Members become vested after ten years of creditable service. A-64

133 Notes to Basic Financial Statements Year Ended June 30, 2017 Employees who resign from service and who are not eligible to receive a retirement allowance or are under the age of 55 are entitled to request a refund of their accumulated total deductions. Survivor benefits are extended to eligible beneficiaries of members whose death occurs prior to or following retirement. Cost-of-living adjustments granted between 1981 and 1997 and any increase in other benefits imposed by the Commonwealth s state law during those years are borne by the Commonwealth and are deposited into the pension fund. Cost-of-living adjustments granted after 1997 must be approved by the Board and are borne by the System. Contributions Chapter 32 of the MGL governs the contributions of plan members and member units. Active plan members are required to contribute to the System at rates ranging from 5% to 9% of gross regular compensation with an additional 2% contribution required for compensation exceeding $30,000. The percentage rate is keyed to the date upon which an employee's membership commences. The member units are required to pay into the PCCRS a legislatively mandated actuarial determined contribution that is apportioned among the employers based on active current payroll. The Town s proportionate share of the required contribution equaled its actual contribution for the year ended December 31, 2016 and totaled $5,347,669, 24.46% of covered payroll, actuarially determined as an amount that, when combined with plan member contributions, is expected to finance the costs of benefits earned by plan members during the year, with an additional amount to finance any unfunded accrued liability. Pension Liabilities At June 30, 2017, the Town reported a liability of $51,194,441 for its proportionate share of the net pension liability. The net pension liability was measured as of December 31, 2016, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of January 1, The Town s proportion of the net pension liability was based on a projection of the Town s long-term share of contributions to the pension plan relative to the projected contributions of all participating members, actuarially determined. At December 31, 2016, the Town s proportion was 8.081%, which increased from its proportion measured at December 31, Pension Expense For the year ended June 30, 2017, the Town recognized a pension expense of $6,805,120. At June 30, 2017, the Town reported net deferred outflows of resources and deferred inflows of resources of $6,908,589 and $1,565,776, respectively. A-65

134 Notes to Basic Financial Statements Year Ended June 30, 2017 The balances of deferred outflows and inflows at June 30, 2017 consist of the following: Deferred Deferred Outflows Inflows Deferred category of Resources of Resources Total Differences between expected and actual experience $ 1,335,485 $ - $ 1,335,485 Changes in proportionate share of contributions 630,931 (106,743) 524,188 Difference between projected and actual earnings 4,942,173-4,942,173 Change of assumptions - (1,459,033) (1,459,033) Total Deferred Outflows/(Inflows) of Resources $ 6,908,589 $ (1,565,776) $ 5,342,813 The deferred outflows of resources related to pensions will be recognized in pension expense as follows: Year ended June 30: 2018 $ 1,894, ,894, ,350, ,937 Total $ 5,342,813 Actuarial Assumptions The total pension liability in the January 1, 2017, actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement that was updated to December 31, 2016: Valuation date January 1, 2017 Actuarial cost method Amortization method Individual Entry Age Normal Cost Method. Payments increase at 3.5% for the unfunded actuarial accrued liability, and level amortization of the 2002, 2003, and 2013 Early Retirement Incentives. Remaining amortization period Amortization of the unfunded actuarial accrued liability over 12 years, the 2002 ERI over two years, 2003 ERI over three years, and the 2013 ERI over 11 years; all as of July 1, Asset valuation method Investment rate of return/discount rate Market value with a five-year smoothing of asset returns greater than or less than the assumed rate of return, with a 20% corridor. 8% nominal rate, net of investment expense. A-66

135 Notes to Basic Financial Statements Year Ended June 30, 2017 Projected salary increases Cost of living adjustments Rates of retirement Rates of disability Mortality rates 3.75% per year. 3.0% of the first $14,000 of retirement income. Varies based upon age for general employees, police and fire employees. For general employees, it was assumed that 45% of all disabilities are ordinary (55% are service connected). For police and fire employees, 10% of all disabilities are assumed to be ordinary (90% are service connected). It is assumed that both pre-retirement mortality and beneficiary mortality is represented by the RP-2014 Blue Collar Mortality with Scale MP-2016, fully generational. Mortality for retired members for Group 1 and 2 is represented by the RP-2014 Blue Collar Mortality Table set forward five years for males and 3 years for females, fully generational. Mortality for retired members for Group 4 is represented by the RP-2014 Blue Collar Mortality Table set forward three years for males, and six years for females, fully generational. Mortality for disabled members for Group 1 and 2 is represented by the RP-2000 Mortality Table set forward six years. Mortality for disabled members for Group 4 is represented by the RP-2000 Mortality Table set forward two years. Generational adjusting is based on Scale MP Investment policy The pension plan s policy in regard to the allocation of invested assets is established and may be amended by the Board and pursuant to Massachusetts General Laws and Public Employee Retirement Administration guidelines. Plan assets are managed on a total return basis with a long-term objective of achieving and maintaining a fully funded status for the benefits provided through the pension plan. The investment objective is to fully fund the Plan by generating sufficient long-term inflation adjusted capital appreciation while providing sufficient liquidity to meet short-term withdrawal requirements. The Board desires to balance the goal of higher long-term returns with the goal of minimizing contribution volatility, recognizing these are often competing goals. This requires taking both assets and liabilities into account when setting investment strategy. The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. Best estimates of arithmetic real rates of return for each major asset class included in the pension plan s target asset allocation as of January 1, 2017 are summarized in the following table: A-67

136 Notes to Basic Financial Statements Year Ended June 30, 2017 Rate of return Portfolio Target Long-Term Expected Asset Class Weight Real Rate of Return US equity 26.50% 7.50% Developed markets equity 16.00% 7.30% Emerging markets equity 4.00% 9.80% Core bonds 11.50% 4.20% Foreign bonds 3.00% 2.40% Emerging markets bonds 4.00% 5.50% High yield bonds 4.00% 6.00% Bank loans 3.00% 5.50% Private equity 10.00% 9.60% Real estate 10.00% 6.90% Natural resources 1.00% 7.00% Infrastructure 2.00% 7.80% Hedge funds of funds 4.00% 5.30% Cash 1.00% 2.80% % For the year ended December 31, 2016, the annual money-weighted rate of return on pension plan investments, net of pension plan investment expense, was 7.40%. The money-weighted rate of return expresses investment performance, net of investment expense, adjusted for the changing amounts actually invested. Discount rate The discount rate used to measure the total pension liability was 8.00%. The projection of cash flows used to determine the discount rate assumed plan member contributions will be made at the current contribution rate and that contributions will be made at rates equal to the actuarially determined contribution rate. Based on those assumptions, the pension plan s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. Sensitivity of the net pension liability to changes in the discount rate The following presents the net pension liability, calculated using the discount rate of 8.00%, as well as what the net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower (7.00%) or 1-percentage-point higher (9.00%) than the current rate: Current 1% Decrease Discount 1% Increase (7.00%) (8.00%) (9.00%) The Town's proportionate share of the net pension liability $ 63,994,630 $ 51,194,441 $ 40,282,781 A-68

137 Notes to Basic Financial Statements Year Ended June 30, 2017 Changes in Assumptions The following changes in assumption were included in the January 1, 2017 actuarial valuation: Cost of living increases were 3.0% of the first $14,000 of retirement income, as compared to $13,000 in the prior year. The annual rate of both pre-retirement and beneficiary mortality was changed to the RP-2014 Blue Collar Mortality with Scale MP-2016, fully generational table. The mortality for retired group 1 and 2 members was changed to the RP-2014 Blue Collar Mortality Table set forward five years for males and 3 years for females, fully generational. Group 4 retired members were changed to the RP-2014 Blue Collar Mortality Table set forward 3 years for males, and 6 years for females, fully generational. The assumed family composition was changed to assume that 80% of all male members and 60% of all female members will survived by a spouse, as compared to the prior valuation assumption that 80% of all members will be survived by a spouse. The amortization method changed from the level percent open group method to a method where payments increase at 3.5% for the unfunded actuarial accrued liability and level amortization for the 2002, 2003 and 2013 ERI. The amortization period changed from 17 years to amortization of the unfunded liability over 12 years, the 2002 ERI over 2 years, the 2003 ERI over 3 years, and the 2013 ERI over 11 years. The assumed annual increase in administrative expenses was changed to 3.75%, from 4.00%. Changes in Plan Provisions None. NOTE 11 POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS Plan Description The Town maintains a single employer defined benefit healthcare plan (the Retiree Health Plan). The Plan provides lifetime healthcare and life insurance for eligible retirees and their spouses. Chapter 32B of the MGL assigns authority to establish and amend benefit provisions of the Plan. The Plan provides the benefits by participating in the Mayflower Municipal Health Group. Medical and prescription drug benefits are provided to all eligible retirees through a variety of plans offered by Blue Cross Blue Shield of Massachusetts and Harvard Pilgrim Health Care. Benefit provisions are negotiated between the Town and the unions representing Town employees and are renegotiated each bargaining period. The other postemployment benefit plan does not issue a publicly available financial report. Funding Policy Contribution requirements are also negotiated between the Town and union representatives. Retired plan members and beneficiaries currently receiving benefits are required to contribute 50% of the cost of benefits provided depending on the plan they choose. For the year ended June 30, 2017, the Town is required to contribute the balance of the current premiums and may contribute additional amounts to pre-fund benefits. Administrative costs of the Plan are assumed to be included in the fully insured premium rates. For 2017, the Town contributed approximately $2.7 million to the plan or 4.41% of covered payroll. The Commonwealth of Massachusetts passed special legislation that has allowed the Town to establish a postemployment benefit trust fund and to enable the Town to begin pre-funding its other postemployment benefit (OPEB) liabilities. During 2017, the contributed $180,177 of amounts previously set aside for future benefits to the Other Postemployment Benefit Trust Fund in excess of the pay-as-you-go required contribution. As of June 30, 2017, the balance of this fund totaled $185,437. A-69

138 Notes to Basic Financial Statements Year Ended June 30, 2017 Rate of Return The annual money-weighted rate of return on OPEB plan investments was 2.92%. The moneyweighted rate of return expresses investment performance, net of OPEB plan investment expense, adjusted for the changing amounts actually invested. Plan Membership The following table represent the Plan s membership at June 30, 2017 Current retirees, beneficiaries, and dependents 702 Current active members 569 Total 1,271 Components of the OPEB Liability The following table represents the components of the Plan s OPEB liability as of June 30, 2017: Total OPEB Liability $ 89,022,916 Less: OPEB Plan's fiduciary net positon (185,437) Net OPEB Liabiltiy $ 88,837,479 The OPEB Plan's fiduciary net position as a percentage of the total OPEB liability 0.21% (1) The Net OPEB Liability will be fully recorded in the financial statements at June 30, 2018 when GASB Statement No. 75 is required to be implemented. Significant Actuarial Methods and Assumptions The Plan s total OPEB liability in the June 30, 2017 actuarial valuation was determined using the following actuarial methods and assumptions, applied to all periods included in the measurement date that was updated to June 30, 2017, to be in accordance with GASB Statement No. 74: Valuation date July 1, 2015 Actuarial cost method Asset valuation method Investment rate of return Individual Entry Age Normal Market Value 6.31%, net of OPEB plan investment expense, including inflation. Discount rate 3.25% as of June 30, 2017 and 4.00% as of June 30, 2016, not of OPEB plan investment expense, including inflation. Healthcare cost trend rate 5.00% Inflation Salary increases Pre- retirement mortality Post- retirement mortality 2.75% as of June 30, 2017 and for future periods. 3.00% annually as of June 30, 2017 and for future periods. PR-2000 Mortality Table projected generationally with scale BB and a base year PR-2000 Mortality Table projected generationally with scale BB and a base year A-70

139 Notes to Basic Financial Statements Year Ended June 30, 2017 Investment Policy The OPEB plan s assets are managed on a total return basis with a long-term objective of achieving and maintaining a fully funded status for the benefits provided through the OPEB plan. The long-term real rate of return on OPEB investments was determined using the Town s investment policy. The long-term expected rate of return on OPEB plan investments was determined using a building block method in which best estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation and subtracting expected investment expenses and a risk margin. The Plan s expected future real rate of return of 3.56% is added to the expected inflation of 2.75% to produce the long-term expected nominal rate of return of 6.31%. The target allocation and projected arithmetic real rates of return for each major asset class, after deducting inflation, but before investment expenses, used in the derivation of the long-term expected investment rate of return assumption are summarized below: Long-Term Expected Long-Term Expected Asset Class Asset Allocation Real Rate of Return Domestic equity - large cap 32.00% 4.00% Domestic equity - small/mid cap 6.00% 6.00% International equity - developed market 6.00% 4.50% International equity - emerging market 3.00% 7.00% Domestic fixed income 36.00% 2.00% International fixed income 7.00% 3.00% Alternatives 5.00% 6.50% Real estate 3.00% 6.25% Cash 2.00% 0.00% Total asset allocation 100% Discount rate The discount rated used to measure the total OPEB liability was 3.25% as of June 30, 2017, and 4.00% as of June 30, The discount rate is a blend of the long-term expected rate of return on OPEB Trust Fund assets and a yield or index rate for 20 year, tax exempt general obligation municipal bonds with an average rate of AA/Aa or higher, which was based on the S&P municipal bond 20 Year High Grade Index. The blending is based on the sufficiency of projected assets to make projected benefit payments. Sensitivity of the net OPEB liability to changes in the discount rate The following table presents the net other postemployment benefit liability, calculated using the discount rate of 3.25%, as well as what the net other postemployment benefits liability would be if it were calculated using a discount rate that is 1-percentage-point lower (2.25%) or 1-percentage-point higher (4.25%) than the current rate. 1% Decrease Discount 1% Increase (2.25%) (3.25%) (4.25%) Net OPEB liabiltiy $ 106,928,640 $ 88,857,479 $ 76,363,944 A-71

140 Notes to Basic Financial Statements Year Ended June 30, 2017 Sensitivity of the net OPEB liability to changes in the healthcare trend The following table presents the net other postemployment benefit liability, calculated using the current healthcare trend rate, as well as what the net other postemployment benefits liability would be if it was 1-percentage-point lower or 1-percentage-point higher than the current rate. 1% Decrease Current Trend 1% Increase (4.00%) (5.00%) (6.00%) Net OPEB liabiltiy $ 61,783,794 $ 88,857,479 $ 124,215,494 Changes in Assumptions Effective June 30, 2017: Discount rate is 3.25% - previously 4.00%. The assumed pre-retirement mortality table is the RP-2000 Employees Mortality Table projected generationally with scale BB and a base year The assumed post-retirement mortality table is the RP-2000 Healthy Annuitant Mortality Table projected generationally with scale BB and a base year The actuarial cost method is Individual Entry Age Normal. Changes in Plan Provisions None. Annual OPEB Costs and Net OPEB Obligation The Town s annual other postemployment benefit (OPEB) cost (expense) is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years. The components of the Town s annual OPEB cost for the year, the amount actually contributed to the plan, and changes in the Town s net OPEB obligations are summarized in the following table: Annual required contribution $ 4,911,255 Interest on net OPEB obligation 1,203,271 Adjustments to annual required contribution 37,685 Annual OPEB cost/expense.. 6,152,211 Contributions made (2,651,388) Increase/(Decrease) in net OPEB obligation 3,500,823 Net OPEB obligation - beginning of year 34,379,177 Net OPEB obligation - end of year $ 37,880,000 A-72

141 Notes to Basic Financial Statements Year Ended June 30, 2017 The Town s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for year 2017 and the two preceding years is as follows: Percentage of Year Annual Annual OPEB Net OPEB Ended OPEB Cost Cost Contributed Obligation 6/30/2017 $ 6,152,211 43% $ 37,880,000 6/30/2016 5,794,343 46% 34,379,177 6/30/2015 6,188,555 35% 31,136,281 Funded Status and Funding Progress the funded status of the Plan as of the most recent actuarial valuation date and the two prior valuations is as follows: Actuarial UAAL as a Actuarial Accrued Unfunded Percentage Actuarial Value of Liability (AAL) AAL Funded Covered of Covered Valuation Assets Projected Unit Credit (UAAL) Ratio Payroll Payroll Date (A) (B) (B-A) (A/B) (C) ((B-A)/C) 7/1/2015 $ 156,342 $ 80,421,318 $ 80,264, % $ 55,261, % 7/1/ ,909,973 72,909, % 53,243, % 6/30/ ,246,204 82,246, % 51,297, % Actual valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the notes to the basic financial statements, presents multi-year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. Actuarial Methods and Assumptions Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effect of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. In the most recent actuarial valuation, the actuarial liabilities were determined using the individual entry age normal actual cost method. The actuarial assumptions included a 3.5% investment return assumption, which is based on the expected yield on the assets of the Town, calculated based on the funded level of the plan at the valuation date, salary increases at 3% per year, a general inflation rate of 2.75%, and an annual medical care inflation rate of 6%. The actuarial value of assets is reported at fair market value. The UAAL is being amortized over a 30 year period, using a level dollar amortization method on a closed basis. The remaining amortization period at July 1, 2016, is 22 years. A-73

142 Notes to Basic Financial Statements Year Ended June 30, 2017 NOTE 12 LANDFILL CLOSURE State and federal laws and regulations require the Town to construct a final capping system on its landfill site when it stops accepting waste and to perform certain maintenance and monitoring functions at the site after closure. The Town closed and capped its landfill in The Town has reflected a $356,250 post-closure care liability at June 30, 2017, as an obligation of the solid waste enterprise fund. This amount is based upon estimates of what it would cost to perform all post-closure care. Actual costs may be higher due to inflation, deflation, changes in technology, or changes in regulations. Its cost was estimated based on semi-annual sampling for the current monitoring network at the site and estimated costs to maintain the integrity of the landfill cap during the post-closure period. NOTE 13 COMMITMENTS The Town has various commitments related to the construction projects which will be financed through long-term borrowing. These projects include $2.1 million for Seawall renovations, $140,000 for construction on the water main construction and upgrades, $700,000 for the harbormaster building construction, and $1.9 million for various construction projects throughout the Town. In addition, the Furnace Brook Middle School requires roof repairs that are estimated to cost approximately $8 million. The Town is seeking reimbursement for the project through the Massachusetts School Building Authority s Accelerated Repair Program. This project is scheduled to begin during the summer of NOTE 14 CONTINGENCIES The Town participates in a number of federal award programs. Although the grant programs have been audited in accordance with the provisions of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards through June 30, 2017, these programs are still subject to financial and compliance audits. The amount, if any, of expenditures which may be disallowed by the granting agencies cannot be determined at this time, although it is expected such amounts, if any, to be immaterial. Various legal actions and claims are pending. Litigation is subject to many uncertainties, and the outcome of individual litigated matters is not always predictable. Although the amount of liability, if any, at June 30, 2017, cannot be ascertained, management believes any resulting liability should not materially affect the financial position at June 30, NOTE 15 SUBSEQUENT EVENTS Management has evaluated subsequent events through December 22, 2017, which is the date the financial statements were available to be issued. A-74

143 Notes to Basic Financial Statements Year Ended June 30, 2017 NOTE 16 IMPLEMENTATION OF NEW GASB PRONOUNCEMENTS During 2017, the following GASB pronouncements were implemented: GASB Statement #74, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans. The basic financial statements, related notes and required supplementary information were updated to be in compliance with this pronouncement. GASB Statement #77, Tax Abatement Disclosures. This pronouncement did not impact the basic financial statements. GASB Statement #78, Pensions Provided through Certain Multiple-Employer Defined Benefit Pension Plans. This pronouncement did not impact the basic financial statements. GASB Statement #80, Blending Requirements for Certain Component Units an amendment of GASB Statement #14. This pronouncement did not impact the basic financial statements. GASB Statement #82, Pension Issues an amendment of GASB Statements #67, #68, and #73. The basic financial statements and related notes were updated to be in compliance with this pronouncement. The following GASB pronouncements will be implemented in the future: The GASB issued Statement #75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions, which is required to be implemented in The GASB issued Statement #81, Irrevocable Split-Interest Agreements, which is required to be implemented in The GASB issued Statement #83, Certain Asset Retirement Obligations, which is required to be implemented in The GASB issued Statement #84, Fiduciary Activities, which is required to be implemented in The GASB issued Statement #85, Omnibus 2017, which is required to be implemented in The GASB issued Statement #86, Certain Debt Extinguishment Issues, which is required to be implemented in The GASB issued Statement #87, Leases, which is required to be implemented in Management is currently assessing the impact the implementation of these pronouncements will have on the basic financial statements. A-75

144 Required Supplementary Information Required Supplementary Information A-76

145 General Fund Budgetary Comparison Schedule The General Fund is the general operating fund of the Town. It is used to account for the entire Town s financial resources, except those required to be accounted for in another fund. General Fund Budgetary Comparison Schedule A-77

146 GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL YEAR ENDED JUNE 30, 2017 Budgeted Amounts Actual Amounts Original Final Budgetary Carried Forward Variance to Budget Budget Amounts To Next Year Final Budget REVENUES: Real estate and personal property taxes, net of tax refunds $ 62,374,736 $ 62,374,736 $ 63,304,462 $ - $ 929,726 Tax liens , ,357 Motor vehicle and other excise taxes 3,935,600 3,935,600 4,664, ,296 Charges for services 1,000,000 1,000,000 1,016,278-16,278 Penalties and interest on taxes 275, ,000 91,661 - (183,339) Payments in lieu of taxes 32, Intergovernmental 17,812,532 17,812,532 18,102, ,158 Departmental and other 1,053,975 1,053,975 1,200, ,708 Investment income 40,000 40, ,998-89,998 TOTAL REVENUES 86,523,843 86,491,843 89,261,025-2,769,182 EXPENDITURES: Current: GENERAL GOVERNMENT Moderator Selectmen: Salaries 351, , ,984 2,923 5,616 Expenditures 178, , ,749 3,653 Elected officials 4,322 4,322 4, TOTAL 533, , ,055 2,923 9,269 Facilities Manager: Salaries 165, , , Expenditures 398, , ,496 17,669 20,819 TOTAL 564, , ,700 17,669 21,371 Town Accountant: Salaries 188, , , Expenditures 6,400 6,400 5,048-1,352 TOTAL 195, , ,781-1,352 Assessors: Salaries 222, , ,551-2,413 Expenditures 71,800 71,800 70,758-1,042 Elected officials 3,687 3,687 3, TOTAL 297, , ,996-3,455 Treasurer/Collector: Salaries 436, , , Expenditures 42,775 54,935 54, Tax title 78,000 78,000 78, TOTAL 557, , , Annual Audit: Expenditures 100, ,230 99,327-8,903 Legal: Expenditures 188, , ,561 25,883 76,003 Information Technology: Salaries 57,517 60,688 59,507-1,181 Expenditures 183, , , ,355 TOTAL 240, , , ,536 Town Clerk: Salaries 117, , ,344 3,140 Expenditures 4,110 14,410 8,187-6,223 Elected officials 56,692 56,692 56, TOTAL 178, , ,139-9,447 Elections: Expenditures 74,750 74,750 74, Conservation Commission: Salaries 113, , ,839 6,700 Expenditures 12,862 25,612 24, TOTAL 125, , ,556-7,595 Planning Board: Salaries 125, , , Expenditures 2,400 2,313 2, Elected officials 1,120 1,120 1, TOTAL 129, , , (Continued) A-78

147 GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL YEAR ENDED JUNE 30, 2017 Budgeted Amounts Actual Amounts Original Final Budgetary Carried Forward Variance to Budget Budget Amounts To Next Year Final Budget Zoning Board of Appeals: Salaries 29,135 36,898 36, Expenditures 1,350 1,662 1, TOTAL 30,485 38,560 38, Reserve Fund 100, Total General Government 3,316,877 3,475,627 3,280,146 47, ,306 PUBLIC SAFETY Police: Salaries 4,891,990 4,891,633 4,882,063-9,570 Expenditures 314, , ,556 1,781 1,495 TOTAL 5,206,822 5,206,465 5,193,619 1,781 11,065 Fire: Salaries 4,771,104 4,763,469 4,732,172-31,297 Expenditures 296, , , TOTAL 5,067,250 5,080,015 5,048, ,500 Building Inspection: Salaries 257, , , Expenditures 7,384 6,984 6, TOTAL 264, , , Sealer of Weights/Measures: Expenditures 5,000 5,000 5, Animal Control: Salaries 67,922 69,787 67,433 2,354 Expenditures 8,385 9,564 9, TOTAL 76,307 79,351 76, ,475 Animal Inspector: Salaries 2,500 2,500 2, Harbor Master: Salaries 94,500 94,500 94, Expenditures 60,500 60,500 59,021-1,479 TOTAL 155, , ,521-1,479 Total Public Safety 10,777,405 10,797,734 10,748,159 2,535 47,040 EDUCATION Public Schools: Salaries and Expenditures 45,929,183 45,905,404 45,887,878 17,526 - PUBLIC WORKS Department of Public Works: Salaries 1,784,612 1,784,962 1,710,051-74,911 Expenditures 493, , ,747 24,845 25,949 Elected officials 2,180 2,180 1, TOTAL 2,280,137 2,322,683 2,196,622 24, ,216 Snow and Ice: Expenditures 400, , , Automotive Fuel: Expenditures 446, , ,944 14,202 4,452 Total Public Works 3,126,735 3,234,777 3,090,062 39, ,668 HUMAN SERVICES Health: Salaries 198, , ,910-6,850 Expenditures 28,035 31,435 28,353-3,082 Elected officials 1,460 1,460 1, TOTAL 227, , ,723-9,932 Council on Aging: Salaries 204, , ,426-8,871 Expenditures 24,828 24,828 24, TOTAL 229, , ,756-9,369 (Continued) A-79

148 GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL YEAR ENDED JUNE 30, 2017 Budgeted Amounts Actual Amounts Original Final Budgetary Carried Forward Variance to Budget Budget Amounts To Next Year Final Budget Veterans: Salaries 96, , , Expenditures 396, , ,919 10,000 33,279 TOTAL 492, , ,021 10,000 33,279 Total Human Services 949, , ,500 10,000 52,580 CULTURE AND RECREATION Library: Salaries 543, , , Expenditures 151, , , TOTAL 694, , , Trustees of Soldiers Memorial: Salaries 8,000 8,000 8, Expenditures 8,000 8,000 8, TOTAL 16,000 16,000 16, Historical Commission: Expenditures 3,780 3,780 3, Clam Flats: Salaries 1,000 1, ,000 Expenditures 1,000 1, TOTAL 2,000 2, ,115 Total Culture and Recreation 716, , ,360-1,115 Business insurance 882, , ,168-3,915 Unemployment Compensation 100, , , Retirement 5,451,747 5,348,869 5,348, Employee Benefits 6,359,456 6,247,605 6,245,604-2,001 Medicare 748, , ,891-9,415 State and County Assessment 773, , ,633-86,062 Utilities 366, , ,506 - Unclassified: Salaries 1,000 1,459 1, Expenditures 25,000 30,990 30, TOTAL 26,000 32,449 31, Debt Service Principal 6,454,938 6,704,938 6,704, Debt Service Interest 2,669,695 2,669,695 2,669, TOTAL EXPENDITURES 88,649,901 88,989,539 88,416, , ,666 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (2,126,058) (2,497,696) 844,435 (116,283) 3,225,848 OTHER FINANCING SOURCES (USES): Transfers in 1,718,984 1,718,984 1,718, NET CHANGE IN FUND BALANCE (407,074) (778,712) 2,563,419 (116,283) 3,225,848 BUDGETARY FUND BALANCE, Beginning of year 3,413,431 3,413,431 3,413, BUDGETARY FUND BALANCE, End of year $ 3,006,357 $ 2,634,719 $ 5,976,850 $ (116,283) $ 3,225,848 See notes to required supplementary information. (Concluded) A-80

149 Pension Plan Schedules Pension Plan Schedules The Schedule of the Town s Proportionate Share of the Net Pension Liability presents multi-year trend information on the Town s net pension liability and related schedules. The Schedule of Town s Contributions presents multi-year trend information on the Town s required and actual contributions to the pension plan and related ratios. The Schedule of the Special Funding Amounts of the Net Pension Liability for the Massachusetts Teachers Retirement System presents multi-year trend information on the liability and expense assumed by the Commonwealth of Massachusetts on behalf of the Town along with related ratios. These schedules are intended to present information for ten years. Until a ten-year trend is complied, information is presented for those years for which information is available. A-81

150 SCHEDULE OF THE TOWN'S PROPORTIONATE SHARE OF THE NET PENSION LIABILITY PLYMOUTH COUNTY CONTRIBUTORY RETIREMENT SYSTEM December 31, December 31, December 31, Town's proportion of the net pension liability (asset) 7.909% 7.909% 8.081% Town's proportionate share of the net pension liability (asset) $ 46,100,484 $ 50,159,092 $ 51,194,441 Town's covered employee payroll.. $ 20,842,080 $ 21,623,658 $ 21,859,954 Net pension liability as a percentage of covered-employee payroll % % % Plan fiduciary net position as a percentage of the total pension liability 58.88% 56.80% 58.32% Note: this schedule is intended to present information for 10 years. Until a 10-year trend is compiled, information is presented for those years for which information is available. See notes to required supplementary information. A-82

151 SCHEDULE OF CONTRIBUTIONS PLYMOUTH COUNTY CONTRIBUTORY RETIREMENT SYSTEM June 30, June 30, June 30, Actuarially determined contribution. $ 4,847,897 $ 5,134,471 $ 5,347,669 Contributions in relation to the actuarially determined contribution (4,847,897) (5,134,471) (5,347,669) Contribution deficiency (excess) $ - $ - $ - Covered-employee payroll. $ 20,842,080 $ 21,623,658 $ 21,859,954 Contributions as a percentage of coveredemployee payroll 23.26% 23.74% 24.46% Note: this schedule is intended to present information for 10 years. Until a 10-year trend is compiled, information is presented for those years for which information is available. See notes to required supplementary information. A-83

152 SCHEDULE OF THE SPECIAL FUNDING AMOUNTS OF THE NET PENSION LIABILITY MASSACHUSETTS TEACHERS' RETIREMENT SYSTEM The Commonwealth of Massachusetts is a nonemployer contributor and is required by statute to make all actuarially determined employer contributions on behalf of the member employers which creates a special funding situation. Since the Town does not contribute directly to MTRS, there is no net pension liability to recognize. This schedule discloses the Commonwealth's 100% share of the collective net pension liability that is associated with the Town; the portion of the collective pension expense as both a revenue and pension expense recognized by the Town; and the Plan's fiduciary net position as a percentage of the total liability. Fiscal Year Commonwealth's 100% Share of the Net Pension Liability Associated with the Town Town's Expense and Revenue Recognized for the Commonwealth's Support Plan Fiduciary Net Position as a Percentage of the Total Liability 2017 $ 101,339,201 $ 10,337, % ,481,795 7,825, % ,722,138 5,191, % Note: this schedule is intended to present information for 10 years. Until a 10-year trend is compiled, information is presented for those years for which information is available. See notes to required supplementary information. A-84

153 Other Postemployment Benefit Plan Schedules Other Postemployment Benefit Plan Schedules GASB 74 The Schedule of Changes in the Town s Net Other Postemployment Benefit Liability and Related Ratios presents multi-year trend information on changes in the Plan s total OPEB liability, changes in the Plan s net position, and ending net OPEB liability. It also demonstrates the Plan s net position as a percentage of the total liability and the Plan s net other postemployment benefit liability as a percentage of covered employee payroll. The Schedule of the Town s Contributions presents multi-year trend information on the Town s actual contributions to the other postemployment benefit plan and related ratios. The Schedule of Investment Return presents multi-year trend information on the money-weighted investment return on the Plan s other postemployment assets, net of investment expense. GASB 45 The Schedule of Funding Progress compares, over time, the actuarial accrued liability for benefits with the actuarial value of accumulated plan assets. The Schedule of Employer Contributions compares, over time, the annual required contributions to the actual contribution made. The Schedule of Actuarial Methods and Assumptions presents factors that significantly affect the identification of trends in the amounts reported. A-85

154 SCHEDULE OF CHANGES IN THE TOWN'S NET OPEB LIABILITY AND RELATED RATIOS OTHER POSTEMPLOYMENT BENEFIT PLAN June 30, 2017 Total OPEB Liability Service Cost $ 2,946,110 Interest 2,842,885 Changes of benefit terms.. - Differences between expected and actual experience - Changes of assumptions - Benefit payments... (2,651,388) Net change in total OPEB liability 3,137,607 Total OPEB liability- beginning.. 85,885,309 Total OPEB liability- ending (a) 89,022,916 Plan fiduciary net position Employer contribution to the trust $ 180,177 Employer contribution to pay for OPEB benefits 2,651,388 Net investment income... 5,260 Benefit payments (2,651,388) Net change in plan fiduciary net position 185,437 Plan fiduciary net position- beginning.. - Plan fiduciary net position- ending (b) $ 185,437 Town's net OPEB liability- ending (a)-(b) $ 88,837,479 Plan fiduciary net position as a percentage of the total OPEB liability % Covered-employee payroll.. $ 60,086,698 Town's net OPEB liability as a percentage of covered-employee payroll % Note: this schedule is intended to present information for 10 years. Until a 10-year trend is compiled, information is presented for those years for which information is available. See notes to required supplementary information. A-86

155 SCHEDULE OF TOWN CONTRIBUTIONS OTHER POSTEMPLOYMENT BENEFIT PLAN June 30, 2017 Actuarially determined contribution $ 7,319,653 Contributions in relation to the actuarially determined contribution (2,651,388) Contribution deficiency (excess) $ 4,668,265 Covered-employee payroll $ 60,086,698 Contributions as a percentage of coveredemployee payroll 4.41% Note: this schedule is intended to present information for 10 years. Until a 10-year trend is compiled, information is presented for those years for which information is available. See notes to required supplementary information. A-87

156 SCHEDULE OF INVESTMENT RETURNS OTHER POSTEMPLOYMENT BENEFIT PLAN June 30, 2017 Annual money-weighted rate of return, net of investment expense 2.92% The annual money-weighted rate of return has been calculated by the Pension Reserves Investment Management Board (PRIM). Note: This schedule is intended to present information for 10 years. Until a 10-year trend is compiled, information is presented for those years for which information is available. See notes to required supplementary information. A-88

157 OTHER POSTEMPLOYMENT BENEFIT PLAN SCHEDULE OF FUNDING PROGRESS AND EMPLOYER CONTRIBUTIONS Schedule of Funding Progress Actuarial UAAL as a Actuarial Accrued Unfunded Percentage Actuarial Value of Liability (AAL) AAL Funded Covered of Covered Valuation Assets Projected Unit Credit (UAAL) Ratio Payroll Payroll Date (A) (B) (B-A) (A/B) (C) ((B-A)/C) 7/1/2015 $ 156,342 $ 80,421,318 $ 80,264, % $ 55,261, % 7/1/ ,909,973 72,909, % 53,243, % 6/30/ ,246,204 82,246, % 51,297, % 12/31/ ,656,569 82,656, % 50,324, % 6/30/ ,050,000 62,050, % 43,781, % Schedule of Employer Contributions Annual Actual Percentage of Year Required Contributions the ARC Ended Contribution (ARC) Made Contributed 2017 $ 4,911,255 $ 2,651, % ,666,886 2,551, % ,180,593 2,188, % ,869,389 1,959, % ,593,642 2,396, % ,334,440 2,183, % ,752,977 2,160, % ,437,000 1,479, % ,060,000 1,411, % See notes to required supplementary information. A-89

158 OTHER POSTEMPLOYMENT BENEFIT PLAN ACTUARIAL METHODS AND ASSUMPTIONS Actuarial Methods: Valuation date July 1, 2015 Actuarial cost method Individual Entry Age Normal Amortization method Payments increasing at 3.75%, level % of payroll Remaining amortization period 23 years at July 1, 2015, closed Asset valuation method Market value Actuarial Assumptions: Investment rate of return 3.5%, pay-as-you-go scenario (previously 4%) Inflation rate 2.75% Annual compensation increases 3.0% Medical/drug cost trend rate 6.0% decreasing by 1% for 1 year to an ultimate of 5% per year. Plan Membership: Current retirees, beneficiaries, and dependents 702 Current active members 569 Total 1,271 See notes to required supplementary information. A-90

159 Notes to Required Supplementary Information Year Ended June 30, 2017 NOTE A - STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY Notes to Required Supplementary Information A. Budgetary Information Municipal Law requires the adoption of a balanced budget that is approved by the Finance Committee (Committee). The Committee presents an annual budget to the Open Town Meeting, which includes estimates of revenues and other financing sources and recommendations of expenditures and other financing uses. The Town, which has full authority to amend and/or reject the budget or any line item, adopts the expenditure budget by majority vote. Increases or transfers between and within departments subsequent to the approval of the annual budget, requires majority vote at a Special Town Meeting. The majority of appropriations are non-continuing which lapse at the end of each year. Others are continuing appropriations for which the governing body has authorized that an unspent balance from a prior year be carried forward and made available for spending in the current year. These carry forwards are included as part of the subsequent year s original budget. Generally, expenditures may not exceed the legal level of spending (salaries and expenses) authorized for an appropriation account. However, the payment of debt service is statutorily required, regardless of whether such amounts are appropriated. Additionally, expenditures for disasters, natural or otherwise, and final claims and judgments may exceed the level of spending authorized by majority vote at a Special Town Meeting. An annual budget is adopted for the general fund in conformity with the guidelines described above. The original year 2017 approved budget authorized approximately $88.6 million in appropriations and other amounts to be raised. The Town Accountant s office has the responsibility to ensure that budgetary control is maintained. Budgetary control is exercised through the accounting system. B. Budgetary - GAAP Reconciliation For budgetary financial reporting purposes, the Uniform Municipal Accounting System basis of accounting (established by the Commonwealth) is followed, which differs from the GAAP basis of accounting. A reconciliation of budgetary-basis to GAAP-basis results for the general fund for the year ended June 30, 2017, is presented below: Net change in fund balance, budgetary basis $ 2,563,419 Perspective difference: Activity of the stabilization fund recorded in the general fund for GAAP 55,581 Basis of accounting differences: Net change in recording revenue accruals.. 33,151 Net change in expenditure accruals (80,091) Recognition of revenue for on-behalf payments 10,337,263 Recognition of expenditures for on-behalf payments (10,337,263) Net change in fund balance - GAAP basis $ 2,572,060 A-91

160 Notes to Required Supplementary Information Year Ended June 30, 2017 NOTE B PENSION PLAN Pension Plan Schedules A. Schedule of the Town s Proportionate Share of the Net Pension Liability The Schedule of the Town s Proportionate Share of the Net Pension Liability details the allocated percentage of the net pension liability (asset), the proportionate share of the net pension liability, and the covered employee payroll. It also demonstrates the net position as a percentage of the pension liability and the net pension liability as a percentage of covered payroll. B. Schedule of Town s Contributions Governmental employers are required to pay an annual appropriation as established by PERAC. The appropriation includes the amounts to pay the pension portion of each member s retirement allowance, an amount to amortize the actuarially determined unfunded liability to zero in accordance with the System s funding schedule, and additional appropriations in accordance with adopted early retirement incentive programs. The appropriations are payable on July 1 and January 1. The Town may choose to pay the entire appropriation in July at a discounted rate. Accordingly, actual contributions may be less than the total appropriation. The pension fund appropriation is allocated to the Town based on covered payroll. C. Schedule of the Special Funding Amounts of the Net Pension Liabilities The Commonwealth of Massachusetts is a nonemployer contributor and is required by statute to make all actuarially determined employer contributions on behalf of the member employers which creates a special funding situation. Since the Town does not contribute directly to MTRS, there is no net pension liability to recognize. This schedule discloses the Commonwealth's 100% share of the collective net pension liability that is associated with the Town; the portion of the collective pension expense as both revenue and pension expense recognized by the Town; and the Plan's fiduciary net position as a percentage of the total liability. D. Changes in Assumptions The following changes in assumption were included in the January 1, 2017 actuarial valuation: Cost of living increases were 3.0% of the first $14,000 of retirement income, as compared to $13,000 in the prior year. The annual rate of both pre-retirement and beneficiary mortality was changed to the RP-2014 Blue Collar Mortality with Scale MP-2016, fully generational table. The mortality for retired group 1 and 2 members was changed to the RP-2014 Blue Collar Mortality Table set forward five years for males and 3 years for females, fully generational. Group 4 retired members were changed to the RP-2014 Blue Collar Mortality Table set forward 3 years for males, and 6 years for females, fully generational. The assumed family composition was changed to assume that 80% of all male members and 60% of all female members will survived by a spouse, as compared to the prior valuation assumption that 80% of all members will be survived by a spouse. The amortization method changed from the level percent open group method to a method where payments increase at 3.5% for the unfunded actuarial accrued liability and level amortization for the 2002, 2003 and 2013 ERI. The amortization period changed from 17 years to amortization of the unfunded liability over 12 years, the 2002 ERI over 2 years, the 2003 ERI over 3 years, and the 2013 ERI over 11 years. A-92

161 Notes to Required Supplementary Information Year Ended June 30, 2017 The assumed annual increase in administrative expenses was changed to 3.75%, from 4.00%. E. Changes in Plan Provisions None. NOTE C OTHER POSTEMPLOYMENT BENEFITS The Town administers a single-employer defined benefit healthcare plan ( the Retiree Health Plan ). The plan provides lifetime healthcare for eligible retirees and their spouses through the Town s health insurance plan, which covers both active and retired members, including teachers. The Town primarily finances its other postemployment benefits (OPEB) on a pay-as-you-go basis. As a result, the funded ratio (actual value of assets expressed as a percentage of the actuarial accrued liability) is.19%. In accordance with Governmental Accounting Standards, the Town has recorded its OPEB cost equal to the actuarial determined annual required contribution (ARC) which includes the normal cost of providing benefits for the year and a component for the amortization of the total unfunded actuarial accrued liability of the plan. The Other Postemployment Benefit Plan Schedule of Changes in the Town s Net Other Postemployment Benefit Liability and Related Ratios The Schedule of Changes in the Town s Net Other Postemployment Benefit Liability and Related Ratios presents multi-year trend information on changes in the Plan s total OPEB liability, changes in the Plans net pension, and ending net OPEB liability. It also demonstrates the Plan s net position as a percentage of the total liability and the Plan s net other postemployment benefit liability as a percentage of covered payroll. Schedule of the Town s Contributions The Schedule of the Town s Contributions includes the Town s annual required contribution to the Plan, along with the contribution made in relation to the actuarially determined contribution and the covered employee payroll. The Town is not required to fully fund this contribution. It also demonstrates the contributions as a percentage of covered payroll. Schedule of Investment Return The Schedule of Investment Return includes the money-weighted investment return of the Plan s other postemployment assets, net of investment expense. The Town The Town currently finances its other postemployment benefits (OPEB) on a combined pre-funded and pay asyou-go basis. As a result, the funded ratio (actuarial value of assets expressed as a percentage of the actuarial accrued liability) is 0%. In accordance with Governmental Accounting Standards, the Town has recorded its OPEB cost equal to the actuarial determined annual required contribution (ARC) which includes the normal cost of providing benefits for the year and a component for the amortization of the total unfunded actuarial accrued liability of the plan. Projections of benefits for financial reporting purposes are based on the substantive plan and included the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit cost between the A-93

162 Notes to Required Supplementary Information Year Ended June 30, 2017 employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. Schedule of Funding Progress The Schedule of Funding Progress presents multi-year trend information which compares, over time, the actuarial accrued liability for benefits with the actuarial value of accumulated plan assets. Schedule of Employer Contributions The Schedule of Employer Contributions presents multi-year trend information for required and actual contributions relating to the plan. Schedule of Actuarial Methods and Assumptions The Schedule of Actuarial Methods and Assumptions presents factors that significantly affect the identification of trends in the amounts reported. Changes in Assumptions Effective June 30, 2017: Discount rate is 3.25% - previously 4.00%. The assumed pre-retirement mortality table is the RP-2000 Employees Mortality Table projected generationally with scale BB and a base year The assumed post-retirement mortality table is the RP-2000 Healthy Annuitant Mortality Table projected generationally with scale BB and a base year The actuarial cost method is Individual Entry Age Normal. Changes in Plan Provisions None. A-94

163 Combining and Individual Fund Statements Combining and Individual Fund Statements A-95

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165 Nonmajor Governmental Funds Nonmajor Governmental Funds Special Revenue Funds Special revenue funds are used to account for the proceeds of specific revenue sources (other than permanent funds or capital project funds) that are restricted by law or administrative action to expenditures for specified purposes. The Town s special revenue funds are grouped into the following categories: School State and Federal Grant Fund This fund accounts for all federal and state grants used for school related projects and activities. Town State and Federal Grant Fund This fund is used to account for all federal and state grants used for Town related projects and activities. Community Preservation Fund This fund is used to account for the acquisition, creation, and preservation of open space, outdoor recreation, historical resources, and affordable housing. Airport Fund This fund is used to account for improvements, certain maintenance, and capital equipment associated with the Town s Municipal Airport. Town General Revolving Fund This fund accounts for various Town operations such as insurance recoveries, recreation activities and workers compensation. School General Revolving Fund This fund accounts for school activities, such as operation of the public school lunch program, athletic receipts and tuition costs. Chapter 90 Fund - This fund accounts for grants received from the State mainly in relation to maintaining the Town s streets and sidewalks. Postemployment Benefits This fund is used to account for amounts accumulated for future Town obligations related to postemployment benefits. Other Funds - These funds account for receipts reserved for appropriation as well as various bequests made by benefactors to the Town for which principal portions of bequests as well as the related earnings can be expended by the Town. Permanent Funds Permanent funds are used to report resources that are legally restricted to the extent that only earnings, not principal, may be used for purposes that support governmental programs. Permanent Funds These funds account for all contributions and bequests for which only earnings may be expended to benefit the government. A-97

166 NONMAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET JUNE 30, 2017 Special Revenue Funds School Town Town State & Federal State & Federal Community General Grants Grants Preservation Airport Revolving ASSETS: Cash and cash equivalents $ 635,077 $ 1,280,353 $ 2,279,028 $ 73,935 $ 1,217,359 Investments Receivables, net of uncollectibles: Departmental and other , Intergovernmental ,639 4,583 - Due from other funds ,542 TOTAL ASSETS $ 635,077 $ 1,280,353 $ 2,574,422 $ 78,518 $ 1,625,901 LIABILITIES: Warrants payable $ 11,542 $ 2,324 $ 32,121 $ 1,616 $ 191,828 Accrued payroll 25, ,962 Due to other funds TOTAL LIABILITIES 37,409 2,863 32,121 1, ,790 DEFERRED INFLOWS OF RESOURCES: Unavailable revenue ,393 4,583 - FUND BALANCES: Nonspendable Restricted 597,668 1,277,490 2,246,908 72,319 1,428,111 TOTAL FUND BALANCES 597,668 1,277,490 2,246,908 72,319 1,428,111 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES $ 635,077 $ 1,280,353 $ 2,574,422 $ 78,518 $ 1,625,901 A-98

167 Special Revenue Funds Total School Nonmajor General Permanent Governmental Revolving Chapter 90 Other Sub-total Funds Funds $ 738,570 $ - $ 1,037,740 $ 7,262,062 $ 1,432,990 $ 8,695, ,318,182 1,318, ,755-32,755-1,094,538-1,361,760-1,361, , ,542 $ 738,570 $ 1,094,538 $ 1,037,740 $ 9,065,119 $ 2,751,172 $ 11,816,291 $ 5,962 $ 620,391 $ 11,774 $ 877,558 $ - $ 877,558 13,546-38,371 84,285-84, , , ,542 19,508 1,028,933 50,145 1,370,385-1,370,385-65, , , ,270,028 1,270, , ,595 7,329,153 1,481,144 8,810, , ,595 7,329,153 2,751,172 10,080,325 $ 738,570 $ 1,094,538 $ 1,037,740 $ 9,065,119 $ 2,751,172 $ 11,816,291 A-99

168 NONMAJOR GOVERNMENTAL FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES YEAR ENDED JUNE 30, 2017 Special Revenue Funds School Town Town State & Federal State & Federal Community General Grants Grants Preservation Airport Revolving REVENUES: Charges for services $ - $ - $ - $ 46,152 $ - Penalties and interest on taxes , Intergovernmental 2,740, , , , ,029 Departmental and other ,272 Community preservation tax - - 1,360, Contributions Investment income - - 1, TOTAL REVENUES 2,740, ,949 1,676, ,626 1,479,301 EXPENDITURES: Current: General government - 30, , ,015 Public safety - 158, ,846 Education 2,470, Public works - 221, Health and human services - 51, ,873 Culture and recreation - 21, Employee benefits Community preservation - 2,710, TOTAL EXPENDITURES 2,470, ,905 2,710, ,152 1,230,734 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES 269,987 36,044 (1,034,082) 172, ,567 OTHER FINANCING SOURCES (USES): Transfers out - (81,551) NET CHANGE IN FUND BALANCES 269,987 (45,507) (1,034,082) 172, ,567 FUND BALANCES AT BEGINNING OF YEAR 327,681 1,322,997 3,280,990 (100,155) 1,179,544 FUND BALANCES AT END OF YEAR $ 597,668 $ 1,277,490 $ 2,246,908 $ 72,319 $ 1,428,111 A-100

169 Special Revenue Funds Total School Nonmajor General Postemployment Permanent Governmental Revolving Chapter 90 Benefits Other Sub-total Funds Funds $ - $ - $ - $ - $ 46,152 $ - $ 46, ,931-11, ,552 1,477, ,730 6,222,823-6,222,823 2,142, ,485 3,983,347-3,983, ,360,375-1,360, , , , , ,392 43,687 45,079 2,441,142 1,477,776-1,271,194 11,902, ,084 12,056, , , , , ,316 20, ,502 2,312, ,756 5,257,758-5,257,758-1,477,776-9,094 1,708,813-1,708, , , , , , , , , , ,710,369-2,710,369 2,312,265 1,477, ,177 1,075,112 12,065,227 20,186 12,085, ,877 - (180,177) 196,082 (162,228) 132,898 (29,330) (193,000) (274,551) (20,000) (294,551) 128,877 - (180,177) 3,082 (436,779) 112,898 (323,881) 590, , ,513 7,765,932 2,638,274 10,404,206 $ 719,062 $ - $ - $ 987,595 $ 7,329,153 $ 2,751,172 $ 10,080,325 A-101

170 Agency Fund Agency Fund The Agency Fund is used to account for assets held in a purely custodial capacity. The Town s agency fund is used to account for payroll withholdings, off-duty work details, performance bonds, and fees collected on behalf of other governments. A-102

171 AGENCY FUND STATEMENT OF CHANGES IN ASSETS AND LIABILITIES FOR THE YEAR ENDED JUNE 30, 2017 Agency Agency Accounts Accounts June 30, 2016 Additions Deletions June 30, 2017 ASSETS CURRENT: Cash and cash equivalents.. $ 1,440,901 $ 15,994,183 $ (16,114,084) $ 1,321,000 LIABILITIES Liabilities due depositors $ 1,440,901 $ 15,994,183 $ (16,114,084) $ 1,321,000 A-103

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173 Statistical Section Pictured above is the Ocean Bluff.