1. business and industrial
2. company
3. annual report

RULE 15c2-12 FILING COVER SHEET
This cover sheet is sent with all submissions to the Municipal Securities Rulemaking Board (the
Nationally Recognized Municipal Securities Information Repository) and any applicable State
Information Depository pursuant to Securities and Exchange Commission (SEC) Rule 15c2-12 or any
analogous state statute.
Issuer Name: Town of Reading, Massachusetts
Issue(s):
$
$
$
$
$
$
35,000,000
6,480,000
6,960,000
9,535,000
5,525,000
11,620,000
General Obligation School Bonds Dated 1/1/04
General Obligation Bonds Dated 1/1/05
General Obliation Bonds Dated 9/15/06
General Obligation Municipal Purpose Loan of 2007 bonds dated 11/1/07
General Obligation Municipal Purpose Loan of 2009 Bonds, Dated 8/1/09
General Obligation Municipal Purpose Loan of 2012 Bonds, Dated 3/22/12
Filing Format X electronic ___ paper; If available on the Internet, give URL:_______________
CUSIP Numbers to which the information filed relates (optional):
X Nine-digit number(s) (see following page(s)):
___ Six-digit number if information filed relates to all securities of the issuer
* * *
Financial & Operating Data Disclosure Information
X Annual Financial Report or CAFR
X Financial Information & Operating Data
___ Other (describe)
X Fiscal Period Covered: FYE 2012
___ Monthly ___ Quarterly X Annual ___Other:
* * *
I hereby represent that I am authorized by the issuer or its agent to distribute this information publicly:
Signature: /s/ Nancy Heffernan
Name:
Nancy Heffernan
Employer: Town of Reading, Massachusetts
Voice Telephone Number: (781) 942-6634
Email Address:
[email protected]
Title:Treasurer
DESCRIPTION OF ISSUES COVERED BY THIS REPORT
General Obligation School Bonds Dated 1/1/04
Date
03/15/14
$
Principal
1,670,000
$
1,670,000
CUSIP
755417UF7
General Obligation Bonds Dated 1/1/05
Date
04/15/13
04/15/14
04/15/15
04/15/16
04/15/17
04/15/18
04/15/19
04/15/20
04/15/21
04/15/22
04/15/23
04/15/24
$
$
Principal
390,000
385,000
385,000
285,000
285,000
285,000
285,000
285,000
285,000
285,000
285,000
285,000
3,725,000
CUSIP
755417VA7
755417VB5
755417VC3
755417VD1
755417VE9
755417VF6
755417VG4
755417VH2
755417VJ8
755417VK5
755417VL3
755417VM1
General Obliation Bonds Dated 9/15/06
Date
04/15/13
04/15/14
04/15/15
04/15/16
04/15/17
04/15/18
04/15/19
04/15/20
04/15/21
04/15/22
04/15/23
04/15/24
04/15/25
04/15/26
04/15/27
$
$
Principal
235,000
235,000
235,000
235,000
235,000
235,000
235,000
235,000
235,000
235,000
235,000
235,000
160,000
150,000
150,000
CUSIP
755417VX7
755417VY5
755417VZ2
755417WA6
755417WB4
755417WC2
755417WD0
755417WE8
755417WF5
755417WG3
755417WH1
755417WJ7
755417WK4
755417WL2
755417WM0
3,280,000
General Obligation Municipal Purpose Loan of 2007 bonds dated 11/1/07
Date
11/01/13
11/01/14
11/01/15
11/01/16
11/01/17
11/01/18
11/01/19
11/01/20
11/01/21
11/01/22
11/01/23
11/01/24
11/01/27
$
$
Principal
455,000
455,000
455,000
455,000
455,000
390,000
390,000
390,000
390,000
390,000
390,000
390,000
1,170,000
6,175,000
CUSIP
755417WU2
755417WV0
755417WW8
755417WX6
755417WY4
755417WZ1
755417XA5
755417XB3
755417XC1
755417XD9
755417XE7
755417XF4
755417XJ6
General Obligation Municipal Purpose Loan of 2009 Bonds, Dated 8/1/09
Date
08/01/13
08/01/14
08/01/15
08/01/16
08/01/17
08/01/18
08/01/19
08/01/20
08/01/21
08/01/22
08/01/23
08/01/24
$
$
Principal
440,000
440,000
335,000
335,000
335,000
335,000
335,000
330,000
330,000
330,000
330,000
330,000
CUSIP
755417XT4
755417XU1
755417XV9
755417XW7
755417XX5
755417XY3
755417XZ0
755417YA4
755417YB2
755417YC0
755417YD8
755417YE6
4,205,000
General Obligation Municipal Purpose Loan of 2012 Bonds, Dated 3/22/12
Date
02/01/14
02/01/15
02/01/16
02/01/17
02/01/18
02/01/19
02/01/20
02/01/21
02/01/22
02/01/23
02/01/24
$
$
Principal
175,000
990,000
1,000,000
1,025,000
1,065,000
1,115,000
1,165,000
1,205,000
1,245,000
1,185,000
1,250,000
11,420,000
CUSIP
755417 YG1
755417 YH9
755417 YJ5
755417 YK2
755417 YL0
755417 YM8
755417 YN6
755417 YP1
755417 YQ9
755417 YR7
755417 YS5
ONTINUING
ISCAL
ISCLOSURE EPORT
OR HE
EAR NDED UNE
GENERAL OBLIGATION DEBT
FINANCIAL STATEMENTS
The audited financial statements for the Town for the fiscal year ended June 30, 2012 are being
separately filed directly with the Nationally Recognized Municipal Securities Information Repository
and any applicable State Information Depository, and are hereby incorporated by reference into this
Annual Continuing Disclosure Report.
SIGNATURE OF ISSUER
The information set forth herein has been obtained from the Town and other sources believed to be
reliable, but such information is not guaranteed as to accuracy or completeness and is not to be
construed as a promise or guarantee. This Annual Continuing Disclosure Report may contain, in part,
estimates and matters of opinion which are not intended as statements of fact, and no representation is
made as to the correctness of such estimates and opinions, or that they will be realized. The
information and expressions of opinion contained herein are subject to change without notice, and the
delivery of this Annual Continuing Disclosure Report will not, under any circumstances, create any
implication that there has been no change in the affairs of the Town or other matters described.
TOWN OF READING, MASSACHUSETTS
/s/ Nancy Heffernan
Nancy Heffernan
Treasurer
Approved for Submission:
03/18/2013
Date
CERTIFICATE OF SUBMISSION OF ANNUAL REPORT
Subject to the continuing disclosure requirements of SEC Rule 15c2-12, this Annual Continuing
Disclosure Report for the Town of Reading, Massachusetts with respect to the issues listed on the
report cover was submitted directly to the National Recognized Municipal Securities Information
Repository (“NRMSIR”) listed below as well as to any applicable State Information Depository
(“SID”).
NRMSIR
Municipal Securities Rulemaking Board ("MSRB")
via the Electronic Municipal Market Access ("EMMA") system
First Southwest Company
Signed by:
/s/ Henriqueta Da Costa
Annual Report
TOWN OF READING, MASSACHUSETTS
For Fiscal Year Ended
June 30, 2012
TOWN OF READING, MASSACHUSETTS
/s/ Nancy J. Heffernan, Treasurer
Filing Date: March 25, 2013
TOWN OF READING, MASSACHUSETTS
Description
The Town of Reading, incorporated as a town in 1644, is located in Middlesex County. It is bordered on the north by
the Town of North Reading, on the south by the Town of Stoneham, on the west by the Town of Wilmington and the
City of Woburn, and on the east by the Towns of Lynnfield and Wakefield. The Town occupies a land area of 9.9
square miles and, based on the 2010 Federal Census, has a population of 24,747.
Local Government
The Town is governed by a Representative Town Meeting and a five-member Board of Selectmen assisted by a Town
Manager.
Principal Executive Officials
The following table sets forth the principal executive officials of the Town. Members of the Board of Selectmen are
elected for staggered three-year terms.
Office
Name
Board of Selectmen: Stephen Goldy, Chair
John Arena
James E. Bonazoli
Richard W. Shubert
Ben Tafoya
Town Manager
Peter I. Hechenbleikner
Finance Director
Robert W. LeLacheur, Jr., CFA
Treasurer/Collector Nancy J. Heffernan, CMMT/CMMC
Town Accountant
Sharon M. Angstrom, CPA
Town Clerk
Laura A. Gemme
Town Counsel
Brackett & Lucas
Term and
Manner of Selection
Elected, 3 year term
Elected, 3 year term
Elected, 3 year term
Elected, 3 year term
Elected, 3 year term
Appointed by Board of Selectmen
Appointed Annually
Appointed Annually
Appointed by Board of Selectmen
Appointed Annually
Appointed Annually
Term
Expires
2013
2015
2014
2013
2014
2013
2013
2013
2013
2013
2013
Municipal Services
The Town provides general governmental services for the territory within its boundaries, including police and fire
protection, public education in grades K-12, solid waste collection and disposal, library services and street
maintenance. Water and sewer services are provided on an enterprise basis.
The Reading Housing Authority currently owns and operates 108 units of elderly, low income and/or special needs
housing in the Town. In addition, the Authority administers several state and federal rental assistance programs.
Gas service is provided by established private utilities, and the Reading Municipal Light Department provides the
Town's electric services. (See "READING MUNICIPAL LIGHT DEPARTMENT," below.)
Water Supply and Distribution
The Town of Reading is now a full-time member of the MWRA. Historically, the Town had acquired substantially all of
its water from the Ipswich River Watershed area, and treated the water at the Town’s Louanis Water Treatment Plant.
In May of 2006, Reading began seasonal (summer time) use of supplemental water from the MWRA, in order to
reduce the stress on the Ipswich River basin. The Town received unanimous support from the MWRA Board of
Directors for this supplementary seasonal use of MWRA water. In September 2006, the Town sold $3.18 million in 20
year permanent debt to finance this partial buy-in to the MWRA.
In June 2006, at a Special Town Meeting, the Town decided to pursue full-time MWRA membership, and approved the
$8.6 million in debt for related purposes. This was done after careful consideration of the financial factors over the
long-term, the expected environmental impacts and the risks involved in ceding local control of the water supply. This
decision to join the MWRA full-time was done without legal precedent. Legislation was filed on behalf of the Town to
speed up the MWRA application process, and the Town subsequently negotiated an Administrative Consent Order
(ACO) with the Massachusetts Department of Environmental Protection in consultation with the Executive Office of
Environmental Affairs.
The Town stopped drawing water from the Louanis Water Treatment Plant in the fall of 2006, and utilized 100%
MWRA water under the terms of the ACO until receiving final approval from all parties in the fall of 2007. In November
2007 the Town sold $7.8 million of 20-year permanent debt to complete the full buy-in to the MWRA.
The remaining $800,000 of authorized debt from June 2006, plus a $200,000 grant received from The Commonwealth
of Massachusetts, plus newly authorized $450,000 of debt from June 2008, will help finance the demolition of the
Louanis Water Treatment Plant, the design of a chlorine treatment system, and related work.
This will complete all expected significant debt obligations of the water supply system in the Town of Reading for the
foreseeable future. The Town’s water distribution system will incur modest amounts of debt in order to finance small
(usually less than $1 million) water main repair projects. In accordance with the Town’s extensive 10-yr capital plan,
this debt is expected to be issued for terms not to exceed five years in length.
The Board of Selectmen, acting as the Water Commissioners, voted to increase the rate for water usage to $7.65/100
cubic feet effective as of the September 10, 2008 billing. Billing is done quarterly. This rate is intended to maintain full
cost recovery from rates for the Water Department. Users receive a 10 percent discount if the bill is paid within 30
days; a 1.17 percent per month interest charge is added after 50 days. Unpaid water fees are liened to the real estate
tax bill each year. The cost of operating is funded 100 percent by departmental revenues. For the September 2009
billing, the water rate was increased to $7.73/100 cubic feet. For the September 2010 billing, the water rate was
increased to $8.03/100 cubic feet. For the September 2011 billing, the water rate was increased to $8.27/100 cubic
feet. For the September 2012 billing, the water rate was increased to $8.96/100 cubic feet.
In fiscal 2012, revenues (on a budgetary basis) totaled $5,272,557 and expenditures (on a budgetary basis) totaled
$5,571,958. The Town used $750,000 in water funds to reduce rates and to offset added expenditures in FY12. The
water reserve fund account balance was $1,177,777 on June 30, 2012.
Sewerage System
The Town of Reading is a member community of the Massachusetts Water Resources Authority (MWRA) sewage
system. The Town has a distribution system consisting of twelve pumping stations and approximately 105 miles of
gravity sewer mains that are tied into the MWRA system. The sanitary sewer system within the Town serves
approximately 97 percent of the population.
The Board of Selectmen, acting as the Sewer Commissioners, voted to increase the rate for sewer usage to $7.59/100
cubic feet effective as of the September 10, 2008 billing, with a 10 percent discount for bills paid within 30 days and a
1.17 percent interest charge per month for payment after 50 days. Billing is done quarterly. Unpaid sewer fees are
liened to the real estate tax bill each year. This is intended to maintain full cost recovery for the Sewer Department.
For the September 2009 billing, the sewer usage increased to $8.02/100 cubic feet. For the September 2010 billing,
the sewer usage increased to $8.44/100 cubic feet. For the September 2011 billing, the sewer usage rate has
increased to $8.57/100 cubic feet. For the September 2012 billing, the sewer usage rate has increased to $9.80/100
cubic feet.
In fiscal 2012, revenues (on a budgetary basis) totaled $5,284,500, while expenditures (on a budgetary basis) totaled
$5,133,278. The Town used $200,000 in sewer funds to reduce rates and to offset added expenditures in fiscal 2012.
The sewer reserve fund account balance was $1,325,544 on June 30, 2012.
Storm Water Management
The Town of Reading is required by the United States Environmental Protection Agency (EPA) to develop a storm
water management plan that reduces the discharge of pollutants into its storm water drain system and water ways.
The Town is required to be in full compliance with the terms of its National Pollutant Discharge Elimination System
(NPDS) Phase II permit by 2008 to meet federal and state mandates. The Town established a Storm Water enterprise
fund in fiscal 2007 to provide a dedicated and adequate source of funding for its storm water management program.
Single and two-family properties are billed a flat rate of $10.00/quarter. All other properties are assessed a storm
water fee based on the total amount of impervious surface area on the lot. Impervious surface areas were measured
using the Town’s mapping system (GIS). Buildings, driveways and parking areas were delineated from aerial photos.
The surface area of these features were calculated and are assessed at a rate of $40.00/2,552 square feet (annually)
for multi-family, commercial and industrial properties. The amounts appear as a separate charge on the quarterly
water and sewer bill.
3
In fiscal 2012 revenues (on a budgetary basis) totaled $396,657 and expenditures (on a budgetary basis) totaled
$222,871. The Town used $0 in sewer funds to reduce rates and to offset added expenditures in fiscal 2012. The
Storm Water Management reserve fund account balance was $560,674 on June 30, 2012.
Landfill
The Town’s landfill ceased operations in 1982. The Town successfully negotiated and signed a purchase and sale
agreement to sell the landfill site to Dickinson Development Corporation of Quincy, Massachusetts, on September 15,
2000. The sale was finalized on March 10, 2003. The project consists of a 135,000 square foot Home Depot, a
158,000 square foot Jordan’s Furniture store, and a Chili’s Restaurant in Phase 1. Phase 2 consisting of
approximately 9 acres of the former Reading Landfill consists of approximately 70,000 square feet of retail space.
The major tenants include Bank of America, Staples, Macaroni Grille, Starbucks, Bear Rock Cafe, and two smaller
tenants. The final phase of construction of the landfill development (Walkers Brook Crossing) was completed in the
fall of 2005, and all certificates of occupancy have been issued.
All aspects of the closure and sale of the Reading landfill to Dickinson Development have been completed. The Town
received from Dickinson Development the sum of $3 million for the sale of the Landfill. This sum had been held in
escrow until certain capping benchmarks were met. By the end of 2003, $750,000 of the $3 million sale price had
been released to the Town’s Sale of Real Estate fund. In 2006 the remaining $2,250,000 (plus accrued interest) of the
Financial Assurance Mechanism (FAM) was released by the Massachusetts Department of Environmental Protection.
Dickinson was responsible for all costs of closing and capping the landfill, which was over $4 million.
In addition, the Town is required to guarantee to the Massachusetts DEP the post closure monitoring and maintenance
of the landfill for up to 30 years. The developer, Dickinson Development, is in turn required to pay to the Town the
payment of up to $40,000 (escalated by a 3% CPI per year) for that post closure monitoring and maintenance. As of
June 30, 2008, June 30, 2009 and June 30, 2010, the Town held $94,488, $76,768 and $91,650, respectively, in post
closure monitoring and maintenance funds, pursuant to the Administrative Consent Order, respectively. As of June 30,
2011, the Town held $68,142 in post closure and monitoring and maintenance funds, pursuant to the Administrative
Consent Order. As of June 30, 2012 the Town held $73,611 in post closure and monitoring and maintenance funds,
pursuant to the Administrative Consent Order.
Additional Development
Reading Woods, 1 Jacob Way – Reading Woods is a 24.8 acre site being developed by Pulte Homes of New England,
LLC and is a redevelopment of a former office complex known as Addison Wesley. The former office use consisted of
208,000 square feet of vacant and dilapidated buildings and related parking. In total the project will include 424 forsale residential homes (208 age restricted and 43 low/moderate housing units as required under the 40R zoning
district designation) that mostly are garden style condominiums with the exception of 16 which will be townhouses.
The site was cleared of all former structures, and construction of the first phase of the project was completed. Phase I
includes a clubhouse, a 50 unit building (in the 40R district), and 16 townhouses. Phase II has commenced.
Calareso’s Garden Center, 80-100 Main Street – Calareso’s is an expansion and new construction of a stalwart local
business that has outgrown its original home (several blocks away on South Main Street). The new development is a
retail store that is more than 2.5 times larger, a greenhouse 2 times larger, and a parking area that provides double the
capacity.
E-cars, 281 Main Street – An electric car dealership has been developed in place of a former vacant, abandoned
building on South Main Street that housed an artist shop. The project has been completed and the business opened
at the end of 2011.
Perfecto’s, 285 Main Street – A coffee shop/café is being planned for this former building that housed a tux shop.
Construction is expected to commence in the spring of 2013. This replaces a vacant, abandoned fire site.
MF Charles Building, 600 Main Street – A mixed use building, largely vacant with some active tenants. The
redevelopment of the property will focus on the commercial retail areas located on the first floor. Upper story
residential use will follow in a future phase. Construction is anticipated in the spring of 2013. The building is fully
leased with first floor commercial tenants including a restaurant, bakery, frozen yogurt shop and clothing retailer.
Oaktree, 30 Haven Street – a mixed use redevelopment of approximately 100,000 square feet with 20,000 square feet
of first floor commercial/retail space and 80,000 square feet of both underground parking and upper level housing (53
units). This redevelopment replaces a former vacant, closed, downtown supermarket. This is the first project to be
built under the Town’s Downtown Smart Growth District (40R). Construction was completed in late 2012. One
business, a frozen yogurt shop, opened on the first floor. A restaurant is permitted to follow.
4
Education
The Town's school system provides education for students in grades K-12. The Town operates five elementary
schools, two middle schools and a high school, with a current total capacity of 4,400.
In July of 1996, the Town issued $6,230,000 of Bonds for renovations to the Birch Meadow and Eaton Elementary
Schools, which increased the combined capacity of the two schools from 850 to 1,200 students.
In August 1997 and September 1998, the Town issued $5,478,000 and $7,750,000, respectively, of Bonds for the
construction of a new Parker Middle School, with an area of 108,000 square feet, which is approximately 70 percent
larger than the old building with an area of 62,700 square feet. Enrollment capacity was increased by 55 percent, from
400 to 620 students. Special features of the school include a new science lab, media center and gym, and complete
renovation of the historic auditorium, with state of the art technology throughout. Construction was completed for fall
1997 enrollments.
On March 12, 1998, the Town voted to authorize $9,000,000 for the remodeling and expansion of the Arthur W.
Coolidge Middle School in order to meet projected enrollment needs. The expansion was completed in the Fall of
2000 and increased the total number of classrooms from 16 to 25 and the pupil capacity from 400 to 600. The Town
received approval from the Massachusetts Department of Education for school construction grants equal to 66 percent
of eligible projects cost, including debt service, for the Parker Middle School, Birch Meadow, Joshua Eaton and
Coolidge Schools, subject to annual appropriation by the state legislature.
In November of 1998, Town Meeting approved construction of a new (Wood End School at Sunset Rock) elementary
school and renovations to the Barrows Elementary School. Town Meeting approval of the new school was reversed by
the voters in a town-wide referendum vote on January 26, 1999. The same new school project was approved at the
November 1999 Town Meeting and approved by the voters in a referendum on January 11, 2000. Total appropriations
for the new Wood End School and Barrows School are $10,966,000 and $7.934 million, respectively. The Town has
received state construction grants for the projects which will cover 59.79% percent of eligible costs, including interest
on bond anticipation notes. On February 25, 2003, the Town voted to exclude debt service on $2,500,000 principal
from the limitations of Proposition 2 ½ (the balance was retired with grant proceeds). The Wood End School at Sunset
Rock opened in September 2004. The Barrows School was completed and opened in 2005.
5
Student Enrollments
The following table sets forth actual and projected enrollments for the various schools attended by Reading students:
Elementary
Middle School
Senior High
Total
2008-09
2009-10
Actual
2010-11
2011-12
2012-13
Projected
2013-14
2,078
1,052
1,222
4,352
2,039
1,090
1,246
4,375
2,040
1,083
1,246
4,369
2,074
1,050
1,262
4,386
2,038
1,055
1,285
4,378
1,968
1,025
1,342
4,335
(1) Source: Superintendent of Schools (as of October 1 of each year).
In addition to the above, the Northeast Metropolitan Regional Vocational School District provides vocational education
for students in grades 9-12. As of October 1, 2012, the vocational school had a total enrollment of 1,250 of which 16
were from the Town of Reading.
In addition to the above, the Minuteman Regional Vocational School District provides vocational education for students
in grades 9-12. As of October 1, 2012, the vocational school had a total enrollment of 700 of which 4 were from the
Town of Reading.
Transportation
The principal highways serving the Town are Interstate 93 and Interstate 95 (State Route 128). Other principal
highways serving the Town are State Routes 28 and 129. Logan International Airport is located 15 miles southeast of
the Town. Commuter rail train service is available from Reading to North Station in Boston.
Industry and Commerce
The Town of Reading is a residential suburb of Boston. In 2011, 582 firms were located in Reading, with a total annual
payroll of $275,254,492, as reported to the Massachusetts Division of Employment and Training.
6
Employment by Industry
The following table presents a breakdown of the major categories of employment for the Town:
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.
Industry
2007
Construction
Manufacturing
Trade, Transportation & Utilities
Information
Financial Activities
Professional and Business Services
Education and Health Services
Leisure and Hospitality
Other Services
Total Employment
Number of Establishments
Average Weekly Wages
Total Wages
2008
Calendar Year Average
2009
2010
2011
334
214
1,445
124
269
606
1,591
709
487
5,779
327
181
1,788
74
391
476
1,580
779
511
6,107
285
141
1,865
103
375
329
1,522
775
499
5,894
286
152
2,039
155
379
309
1,597
807
532
6,256
286
159
2,376
154
383
347
1,673
877
551
6,806
572
$
711
$ 224,074,238
574
$
708
$ 234,492,604
566
$
715
$ 232,177,196
562
$
725
$ 244,616,078
582
$
752
$ 275,254,492
Major Employers
The following table lists the Town's largest employers, exclusive of the Town itself:
Name
Market Basket
YMCA
Home Depot
Super Stop & Shop
Wingate Nursing Home
Austin Preparatory School
Recreational Equipment Inc.
Bertucci's
Longhorn Steakhouse
Longwood Place
Daniels Nursing Home
Chili's Grill & Bar
Romano's Macaroni Grill
Fuddruckers
Nature of Business
Grocery Store
Social Services
Home Improvement Store
Grocery Store
Nursing Home
Private High School
Sporting Goods Retailer
Restaurant
Restaurant
Retirement Home (Assisted Living)
Nursing Home
Restaurant
Restaurant
Restaurant
_______________________
Source: In each case, the company listed.
7
# of Employees
500
255
189
145
130
98
75
65
60
55
53
45
45
35
Labor Force, Employment and Unemployment Rate
According to the Massachusetts Department of Employment and Training, in November 2012, the Town had a total
labor force of 13,690 of whom 13,069 were employed and 621 or 4.5% were unemployed as compared to 4.8% for
Middlesex County and 6.1% for the Commonwealth.
The following table sets forth the Town's average labor force and unemployment rates for calendar years 2007 through
2011 and the unemployment rates for the County and the Commonwealth for the same period:
C ale n d ar
Y ea r
2011
2010
2009
2008
2007
Source:
Tow n o f R ea di n g
L a b or
U n e m p loym en t
For ce
R a te
1 3 ,5 0 1
1 2 ,7 7 6
1 2 ,7 4 9
1 2 ,7 6 2
1 2 ,7 3 6
5 .5 %
6 .5
7 .1
4 .0
3 .3
U ne m p loym e nt R ate
U n ited
M a ssa ch u setts
S tate s
6 .6
8 .5
8 .4
5 .3
4 .5
Massachusetts Division of Employment and Training.
employment.
%
8 .3
9 .6
9 .3
5 .8
4 .6
%
Data based on place of residence, not place of
Age, Income and Wealth Levels
Reading
Median Age:
2010
2000
1990
1980
Median Family Income:
2010
2000
1990
1980
Per Capita Income:
2010
2000
1990
1980
Massachusetts
U.S.
41.6
39.1
36.1
32.1
39.1
36.5
33.6
31.2
37.2
35.3
32.9
30.0
$99,130
89,076
60,921
28,160
$81,165
61,664
44,367
21,166
$51,144
50,046
35,225
19,908
$43,887
32,888
21,074
8,805
$33,966
25,952
17,224
7,459
$27,334
21,587
14,420
7,313
Source: Federal Census.
Population Trends
On the basis of the 2010 Federal Census, the Town has a population density of 2,493.1 persons per square mile. The
following table sets forth the trend in the Town's population:
2010
24,747
2000
23,708
1990
22,539
Source: Federal Census.
8
1980
22,678
Housing Values - Specified Owner-Occupied (One Unit, Detached or Attached)
Units
Less than $100,000
100,000-149,999
150,000-199,999
200,000-299,999
300,000-499,999
500,000 or more
Total
Reading
Number
Percent
43
136
692
3,147
2,053
249
6,320
Median Value
Middlesex County
Number
Percent
0.7 %
2.2
10.9
49.8
32.5
3.9
100.0 %
6,376
24,823
54,887
89,469
64,563
28,424
268,542
$271,600
2.4 %
9.2
20.4
33.3
24.0
10.6
100.0 %
$247,900
Massachusetts
Number
Percent
113,263
277,571
273,542
286,588
170,536
66,360
1,187,860
9.5 %
23.4
23.0
24.1
14.4
5.6
100.0 %
$185,700
_____________________
SOURCE: US Census Bureau (2000)
Building Permits
The following table sets forth the number of building permits issued and the estimated dollar value of new construction
and alterations for calendar years 2008 through 2012. The estimated dollar values are builders' estimates and are
generally considered to be conservative. Estimated valuations include both private construction and Town projects:
Calendar
Year
New
Dwellings
Commercial
Foundations
Additions/
Alterations
Other
No.
2012
2011
2010
2009
2008
54
16
13
12
22
4
4
3
4
367
504
540
462
448
261
274
237
267
294
687
798
790
744
768
Source: Building Inspector.
9
Totals
Value
$35,656,213
48,651,971
22,636,635
24,150,098
34,181,102
PROPERTY TAXATION
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 available funds. The total amount levied is subject to certain limits
prescribed by law; for a description of those limits, see "Tax Limitations," below.
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
available funds for a fiscal year cannot exceed "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.
Tax Levy Computation
The following table illustrates the manner in which the tax levy was determined for the current and last four fiscal
years:
Gross Amount tobe Raised:
Appropriations
State Aid Offsets
State Charges
Overlay Reserve
Total Gross Amount to be Raised
Fiscal 2013
Fiscal 2012
Fiscal 2011
Fiscal 2010
Fiscal 2009
$ 89,875,719
43,699
647,755
638,571
91,205,744
$ 87,535,490
40,648
593,061
599,887
88,769,086
$ 86,439,039
37,425
552,912
526,683
87,556,059
$ 84,410,064
57,625
580,006
620,688
85,668,383
$ 84,439,017
48,030
596,923
681,743
85,765,713
Less Estimated Receipts and Other
Revenue:
Estimated Receipts from State
Estimated Receipts - Local
Estimated Receipts - Enterprise
Available FundsAppropriated:
Free Cash
Other Available Funds
Total Estimated Receipts and Revenue
13,028,372
19,696,554
-
12,811,531
19,667,173
-
12,992,769
19,185,419
-
12,679,378
19,260,057
-
14,239,163
19,826,290
-
1,031,966
2,370,487
$ 36,127,379
1,221,385
1,808,204
$ 35,508,293
1,785,000
1,676,736
$ 35,639,924
1,017,082
2,582,655
$ 35,539,172
1,456,615
1,104,454
$ 36,626,522
Net Amount to be Raised (TaxLevy)
$ 55,078,365
$ 53,260,793
$ 51,916,135
$ 50,129,211
$ 49,139,191
Property Valuation (000)
Tax Rate per $l,000
$ 3,686,637
$
14.94
$ 3,764,014
$
14.15
$ 3,702,250
$
13.80
$ 3,599,982
$
13.75
$ 3,719,848
$
13.21
Source: Board of Assessors.
10
Assessed and Equalized Valuations
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.
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”. See “DEBT LIMITS” below.
The Town classifies property for purposes of taxation according to its use. Valuation of real and personal property in
Reading is established by the Board of Assessors. Based on an equalized valuation of $3,951,469,400, proposed as
of January 1, 2012, the Town is currently valued at approximately 93.3% percent of equalized valuation as shown
below:
Fiscal
Year
2013
2012
2011
2010
2009
Assessed Valuations (1)
Personal
Property
Real
Property
$
3,640,514,408
3,719,855,346
3,702,250,747
3,599,982,041
3,685,549,347
$
46,123,120
44,158,260
45,295,130
45,778,760
34,298,590
$
Official
Equalized
Valuation (2)
Total
3,686,637,528
3,764,013,606
3,747,545,877
3,645,760,801
3,719,847,937
$
Assessed Valuation
as a Percent of
Equalized Valuation
3,951,469,400
3,880,445,100
3,880,445,100
4,068,819,300
4,068,819,300
93.3 %
97.0
96.6
89.6
91.4
(1) Source: Board of Assessors
(2) Source: Massachusetts Department of Revenue - Equalized valuations are established as of January 1 of evennumbered years for the next two years.
Classification of Property
The following table sets forth the trend in the Town’s assessed valuations for the current and last two fiscal years:
Fiscal 2013
Assessed
Valuation
Residential
Commercial
Industrial
Personal
Total
$ 3,313,536,178
317,324,930
9,653,300
46,123,120
$ 3,686,637,528
% of
Total
89.9 %
8.6
0.3
1.3
100.0 %
Fiscal 2012
Assessed
Valuation
$ 3,389,725,591
320,481,055
9,648,700
44,158,260
$ 3,764,013,606
Source: Board of Assessors.
11
% of
Total
90.1 %
8.5
0.3
1.2
100.0 %
Fiscal 2011
Assessed
Valuation
$ 3,373,086,171
319,506,376
9,658,200
45,295,130
$ 3,747,545,877
% of
Total
90.0 %
8.5
0.3
1.2
100.0 %
Largest Taxpayers
Following is a list of the ten largest taxpayers in the Town based upon assessed valuations for fiscal 2013, all of whom
are current in their property tax payments:
Name
Nature of Business
Jordan's Furniture Inc**
HD Development of Maryland Inc
Reading Apartment LLC*
Two Walkers Brook Crossing LLC*
Verizon NE, Inc.
Pulte Homes of New England Inc.
55 WB Acquisitions LLC
Danis George E Tr
PRI Cedar Glen LLC
25 WBD LLC*
Total
Retail
Retail
Apartments
Retail
Telecommunications
Apartments
Office
Industrial/Retail
Apartments
Supermarket
Total Assessed
Valuation for
Fiscal 2013
Taxes
Assessed for
Fiscal 2013
$
$
23,463,600
23,431,300
23,103,600
22,078,500
19,503,600
16,521,000
15,454,800
15,168,800
13,043,200
10,209,200
$ 181,977,600
350,546
350,064
345,168
329,853
291,384
246,824
230,895
226,622
194,865
152,525
$ 2,718,746
% of Net Taxes
Levied for
Fiscal 2013
0.67 %
0.66
0.66
0.63
0.55
0.47
0.44
0.43
0.37
0.29
5.16 %
Source: Board of Assessors.
* Denotes the value/taxes of more than one parcel.
**Denotes the value/taxes of personal property and real estate.
Tax Collections
The Town has accepted a statute providing for quarterly tax payments; under the statute, preliminary tax payments are
due on August 1 and November 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. The Town generally takes real property into tax title for nonpayment of
taxes within a year following the levy.
The following table presents the tax collections of the Town for the five fiscal years as shown:
Fiscal
Year
Gross
Tax Levy
Overlay
Reserve for
Abatements
Net
Tax Levy (1)
2012
2011
2010
2009
2008
$ 53,260,793
51,716,135
50,129,211
49,139,191
47,440,395
$ 599,887
526,683
620,688
681,743
510,701
$ 52,660,906
51,189,452
49,508,523
48,457,448
46,929,694
% of Net Collected
At Fiscal Year End (2)(3)
Dollar
Percentage
$ 52,720,446
51,055,856
49,525,145
48,602,023
46,854,247
% of Net Collected
At June 30, 2012 (3)
Dollar
Percentage
100.1 % $ 52,720,446
99.7
51,239,587
100.0
49,698,587
100.3
48,702,292
99.8
47,095,216
100.1 %
100.1
100.4
100.5
100.4
Source: Board of Assessors as to rates and levies; Town Accountant as to collections.
(1) Net of overlay for abatements.
(2) I.e., at the end of the fiscal year for which levied.
(3) Actual collections less refunds, but excluding proceeds of tax titles and possessions attributable to that year's
levy. Non-cash credits which may be abated later are not included in the amount allowed for refunds here.
12
Tax Titles and Possessions
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.
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 nonpayment of taxes. In either case, the property owner can redeem the
property by paying the unpaid taxes, with interest (at the rate of 16 percent) and other charges, but if the right to
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. Upon such foreclosure, a tax title purchased
or taken by the municipality becomes a "tax possession" and may be held and disposed of like any land held for
municipal purposes.
Taxes Outstanding
The following table presents a summary of aggregate taxes outstanding at fiscal year end, including tax titles and
possessions and funds realized through tax title redemption for the last five fiscal years:
FY Ending
6/30
2012
2011
2010
2009
2008
Aggregate Taxes
Outstanding
$243,928
289,083
234,090
188,997
369,240
Tax Titles
and Possessions
$730,157
613,031
607,657
504,440
411,974
Total Realized Through
Tax Title Redemption
$124,429
198,340
153,368
173,046
218,776
Source: Town Accountant.
Overlay and Abatements
The Town is authorized by law to increase each tax levy by up to five percent (or a larger amount approved by the
State Department 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
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.
13
The following table sets forth the amount of the overlay reserve for the last five fiscal years and abatements granted
through June 30, 2012 against each levy:
Fiscal
Year
Net Tax
Levy (1)
2012
2011
2010
2009
2008
$ 52,660,906
51,189,452
49,508,523
48,457,448
46,929,694
O verlay Reserve
Dollar
As a % of
Amount
Net Levy
$
599,887
526,683
620,688
681,743
510,701
1.14 %
1.03
1.25
1.41
1.09
Abatements
Granted through
6/30/2012
$
177,579
277,290
275,624
254,147
252,774
Source: Town Accountant.
(1) Net of overlay reserve for abatements.
Taxation to Meet Deficits
As noted elsewhere (see “Overlay and Abatements” above) 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 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.
14
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 the 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.
The Town of Reading, which has been in full compliance with Proposition 2 1/2 since its inception, passed a general
override in the amount of $2,410,512 in March of 1993. On April 8, 2003, the Town voted a general override of
$4,500,000 in response to anticipated reductions in state aid.
On February 25, 2003, the Town voted to exclude the debt service from the limitations of Proposition 2 ½ on
$54,305,000 principal authorized for the remodeling and expansion of the Reading Memorial High School and
$2,500,000 for additional construction costs for the Wood End Elementary School.
Pledged Taxes
Taxes on 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. (See “Tax
Increment Financing for Development Districts” below).
15
Unused Levy Capacity (1)
The following table sets forth the Town's tax levy limits and unused levy capacity for the current and last four fiscal
years:
(1)
(2)
(3)
(4)
(5)
2013
2012
For Fiscal Year
2011
2010
2009
Primary Levy Limit (2)
$ 92,165,938
$ 94,100,340
$ 93,688,947
$ 91,144,020
$ 92,996,198
Prior Fiscal Year Levy Limit
2.5% Levy Growth
New Growth (3)
Overrides
Growth Levy Limit
Debt Exclusions
Capital Expenditure Overrides
Tax Levy Limit
Tax Levy
Unused Levy Capacity (4)
51,203,066
1,280,077
579,830
53,062,973
2,030,661
55,093,634
55,078,365
$
15,269
49,637,594
1,240,940
324,532
51,203,066
2,059,720
53,262,786
53,260,793
$
1,993
48,073,001
1,201,825
362,768
49,637,594
2,086,632
51,724,226
51,716,133
$
8,093
43,360,640
1,159,016
553,345
48,073,001
2,108,142
50,181,143
50,129,211
$
51,932
44,687,184
1,117,180
556,276
46,360,640
2,780,988
49,141,628
49,139,191
$
2,437
Unused Primary Levy Capacity (5)
$ 39,102,965
$ 42,897,274
$ 44,051,353
$ 43,071,019
$ 46,635,558
Source: Massachusetts Department of Revenue.
2.5% of assessed valuation.
Allowed increase for new valuations - certified by the Department of Revenue.
Tax Levy Limit Less Tax Levy.
Primary Levy Limit Less Growth Levy Limit.
Initiative Petitions
The Massachusetts Constitution provides a procedure for the filing of petitions, signed by the requisite number of
registered voters, to place on the ballot for State elections questions for the enactment of statutes by the voters.
Legislation enacted by the voters may subsequently be amended or repealed by the legislative process.
16
TOWN FINANCES
The Budget and Appropriation Process
The annual appropriations of a town are ordinarily made at the annual meeting which takes place in April.
Appropriations may also be voted at special meetings. The Town has a finance committee which submits reports and
recommendations on proposed expenditures at Town Meeting
In a town, 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 to any other department.
Water and sewer department expenditures are generally included in the budgets adopted by city councils and town
meetings but electric 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 town meeting, but the school committee retains
full power to allocate the funds appropriated.
Mandatory items, such as state and county assessments, 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 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.
The Town's Municipal Light Department and Water and Sewer Departments are operated as Enterprise Funds. Town
meeting does not vote general operating appropriations for the Municipal Light Department. The Light Department's
budget is voted by the Light Department Board. Town Meeting does vote general operating appropriations for the
water and sewer enterprises.
Operating Budget Trends
The following table sets forth the trend in the Town's operating budgets, as voted by Town Meeting and modified by
the Finance Committee for fiscal years 2009 through 2013.
Appropriated
FY-13
General Government & Facilities
Public Safety & Inspections
Education
Public Works
Human Services
Culture and Recreation
Employee Benefits
Intergovernmental
Debt Service
Enterprises:
Water
Sewer
Storm Water
Total
$
$
Stabilization Fund
$
Appropriated
FY-12
5,452,870
5,772,546
388,312
89,119,126
5,672,710
5,406,894
376,650
$ 87,235,571
5,433,291
5,412,723
377,826
$ 86,228,899
5,597,038
5,255,261
291,391
$ 84,479,497
5,348,472
5,049,025
315,514
$ 84,217,288
$
$
$
$
Source: Town Accountant
17
3,705,182
8,182,399
36,410,308
5,420,135
574,441
1,945,962
11,712,081
896,548
6,158,003
350,000
$
3,672,501
8,228,154
36,386,347
5,217,408
576,277
1,921,916
11,071,082
557,009
5,705,113
Appropriated
FY-09
$
-
$
Appropriated
FY-10
3,861,317
8,639,778
37,582,287
5,881,513
660,101
2,069,113
13,329,635
942,079
4,539,575
-
3,795,461
8,100,714
36,128,307
5,308,968
551,760
1,979,936
12,845,486
1,005,239
6,063,446
Appropriated
FY-11
-
$
3,585,199
7,789,018
36,320,843
5,045,639
512,799
1,889,599
10,835,903
581,218
6,944,059
350,000
Education Reform
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 and related programs, and may affect the level of
state aid to be received 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. Since its
passage, the Town has complied with the Act and appropriations for education have equaled or exceeded the
minimum required level.
Capital Plan
The Town of Reading’s Finance Committee works with the Town Manager to develop and update a capital
improvements plan.
Financing goals for the Capital Improvement Program are as follows:


All bonding except that being reimbursed by School Building Assistance and certain enterprise-supported
projects will be for no longer than ten years.
Capital projects of less than $100,000 will not be bonded, but will be financed by cash or through short
term borrowing.
Revenues
Property Taxes: Property taxes are the major source of revenue of the Town. The total amount levied is subject to
certain limits prescribed by law; for a description of those limits, see "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. None of the major local
aid programs has a termination date under existing law 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.
In the fall of 1986, both the State Legislature (by statute repealed as of July 1, 1999) and the voters (by initiative
petition) placed limits on the growth of state tax revenues. Although somewhat different in detail, each measure
essentially limited the annual growth in state tax revenues to an average rate of growth in wages and salaries in the
Commonwealth over the three previous calendar years. If not amended, the remaining law could restrict the amount of
state revenues available for state aid to local communities.
Fiscal Year
2013 (est.)
2012
2011
2010
2009
2008
Amount of
State Aid
$12,985,784
12,308,847
12,462,792
12,493,308
12,118,192
13,873,498
State Aid Reductions
In FY09 the Town planned for mid-year cuts to their $13 million state aid. The Town lined up $1 million in cuts that they
could make if they had to, and in their financial systems they actually put ‘holds’ on these funds so they could not be
spent. This included $240,000 in benefits that were surplus because of negotiated plan design changes; $214,000
from the Town government (eliminating some jobs and reducing some service to the public) and $538,000 from the
School Department (eliminating some planned curriculum upgrades and slowing all classroom expenses). In January
when the actual reduction to state aid came in, it was smaller than the Town had prepared for, so they released about
half of these funds back to the departments, but the Town did cut about $506,000 from their budgets.
18
In FY10 the Town did not need to make any large reductions because they had forecast a low figure at the beginning
of the budget process. Because the Town enjoys a collaborative relationship between all Town and School
departments, the reduction in FY10 was evenly distributed and therefore less noticeable. The same was true in FY11.
On the other hand, in FY11 for the first time in many years, the Town used some free cash in building their budgets.
They did the same in FY12.
State School Building Assistance Program
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, 2007. 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.
Federal Aid: In addition to state aid, the Town receives annually certain amounts of federal aid, comprised mainly of
aid to education, which in fiscal 2011 and fiscal 2012 totaled approximately $3,069,235 and $2,480,870 respectively.
Motor Vehicle Excise Tax: 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 motor 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
to deny renewal of registration and owner's operating license until excise taxes are paid. In fiscal 2010, motor vehicle
excise tax receipts totaled $2,582,330. In fiscal 2011, motor vehicle excise tax receipts totaled $2,936,623. In fiscal
2012, motor vehicle excise tax receipts totaled $2,750,982.
19
Local Options Meals Tax
On June 23, 2010, the Town adopted the local meals excise tax to be effective October 1, 2010. The local meals
excise tax is a 0.75% tax 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.
Annual Audits
The financial statements of the Town of Reading have been audited annually by Melanson Heath & Company, PC,
Certified Public Accountants, of Andover, Massachusetts. For a summary of “Significant Accounting Policies,” please
refer to the audit for fiscal year ending June 30, 2012 which is attached hereto as Appendix A.
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 Annual Report 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 our 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 ending June 30, 2012, June
30, 2011 and 2010 and a Comparative Statement of Revenues and Expenditures (General Fund) for fiscal years
ending June 30, 2012 through 2008. All statements have been extracted from the Town’s audited financials.
20
Town of Reading, Massachusetts
Balance Sheet
Governmental Funds
June 30, 2012 (1)
Assets
Cash and short-term investments
Investments
Receivables:
Property taxes
Excises
Departmental and other
Intergovernmental
Other assets
Total Assets
LIABILITIES AND FUND BALANCES
Liabilities:
Warrants payable
Accrued liablilities
Deferred revenue
Retainage payable
Other liabilities
Total liabilities
Nonmajor
Government
Funds
Total
Governmental
Funds
19,050,119
-
$ 11,896,268
4,714,352
$
884,089
252,649
363,147
3,206
20,553,210
2,159
380,607
$ 16,993,386
$
$
$
General
$
$
$
936,834
2,880,462
1,459,012
1,147,735
6,424,043
Fund balances:
Nonspendable
Restricted
1,033,133
Committed
2,275,967
Assigned
2,968,472
Unassigned
7,851,595
Total fund balances
14,129,167
Total liabilities and fund balances
$ 20,553,210
______________
(1) Extracted from the audited financial statements of the Town.
21
198,326
346,445
94,661
1,104,104
1,743,536
3,575,769
12,004,680
(330,599)
15,249,850
$ 16,993,386
$
30,946,387
4,714,352
884,089
252,649
365,306
380,607
3,206
37,546,596
1,135,160
3,226,907
1,553,673
1,104,104
1,147,735
8,167,579
3,575,769
13,037,813
2,275,967
2,968,472
7,520,996
29,379,017
37,546,596
Town of Reading, Massachusetts
Balance Sheet
Governmental Funds
June 30, 2011 (1)
Assets
Cash and short-term investments
Investments
Receivables:
Property taxes
Excises
Departmental and other
Intergovernmental
Other assets
Total Assets
LIABILITIES AND FUND BALANCES
Liabilities:
Warrants payable
Accrued liablilities
Deferred revenue
Tax refunds payable
Retainage payable
Notes payable
Other liabilities
Total liabilities
Nonmajor
Government
Funds
Total
Governmental
Funds
26,471,188
1,000,000
$
$
812,116
153,937
283,078
83,366
28,803,685
118,018
$ 16,501,402
$
$
$
General
$
$
$
1,088,174
2,967,713
1,173,412
453,457
5,682,756
Fund balances:
Nonspendable
Restricted
11,832,693
Committed
2,244,822
Assigned
1,934,414
Unassigned
7,109,000
Total fund balances
23,120,929
Total liabilities and fund balances
$ 28,803,685
______________
(1) Extracted from the audited financial statements of the Town.
22
7,790,220
8,593,164
309,948
38,816
1,104,104
140,000
1,592,868
2,833,730
12,059,791
150,000
(134,987)
14,908,534
$ 16,501,402
$
34,261,408
9,593,164
812,116
153,937
283,078
118,018
83,366
45,305,087
1,398,122
2,967,713
1,212,228
1,104,104
140,000
453,457
7,275,624
2,833,730
23,892,484
2,394,822
1,934,414
6,974,013
38,029,463
45,305,087
Town of Reading, Massachusetts
Balance Sheet
Governmental Funds
June 30, 2010 (1)
Assets
Cash and short-term investments
Investments
Receivables:
Property taxes
Excises
Departmental and other
Intergovernmental
Total Assets
LIABILITIES AND FUND BALANCES
Liabilities:
Warrants payable
Accrued liablilities
Deferred revenue
Retainage payable
Other liabilities
Total liabilities
Nonmajor
Government
Funds
Total
Governmental
Funds
13,274,544
15,132,033
$ 10,816,666
8,278,616
$
752,569
224,638
254,433
29,638,217
276,662
$ 19,371,944
$
$
$
General
$
$
$
Fund balances:
Reserved for:
Encumbrances
Expenditures
Debt Service
Stabilization
Perpetual (nonexpendable) permanent funds
Unreserved:
Undesignated, reported in:
General fund
Special revenue funds
Capital projects funds
Permanent funds
Total fund balances
1,158,047
2,781,804
1,231,639
760,649
5,932,139
305,204
548331
222
1,369,598
2,223,355
24,091,210
23,410,649
752,569
224,638
254,433
276,662
49,010,161
1,463,251
3,330,135
1,231,861
1,369,598
760,649
8,155,494
1,488,245
1,490,827
12,529,683
1,899,866
-
-
1,488,245
1,490,827
12,529,683
2,748,172
2,748,172
6,297,457
23,706,078
5,463,693
3,407,747
5,528,977
17,148,589
6,297,457
5,463,693
3,407,747
5,528,977
40,854,667
Total liabilities and fund balances
$ 29,638,217
______________
(1) Extracted from the audited financial statements of the Town.
$ 19,371,944
23
$
49,010,161
TOWN OF READING, MASSACHUSETTS
COMPARATIVE STATEMENT OF REVENUES AND EXPENDITURES
(GENERAL FUND) (1)
2012(2)
Revenues:
Property taxes
Excisetaxes
Penaltiesand interest ontaxes andexcises
Departmental
Payment inlieuof taxes
Charges for services
Licenses andpermits
Intergovernmental
Special assessments
Fines
Investment income
Other
$ 53,002,666
2,752,620
841,939
1,566,961
165,967
20,477,810
115,549
161,142
139,283
2011
$
For Fiscal Years EndedJune 30
2010
51,396,712
2,936,623
694,269
1,511,243
156,266
20,331,901
111,598
370,203
273,460
$
49,772,342
2,582,328
460,742
1,444,431
156,881
32,525,629
111,653
600,776
107,379
$
2009
2008
49,115,125
2,700,961
492,643
1,586,917
143,581
19,934,137
126,893
974,816
63,786
$ 47,558,693
2,829,582
693,241
1,551,406
87,910
27,689,903
159,594
1,623,333
12,811
Total Revenues
79,223,937
77,782,275
87,762,161
75,138,859
82,206,473
Expenditures:
Current:
General government
Public safety
Education
Public works andfacilities
Health andhumanservices
Cultureandrecreation
Employeebenefits
Intergovernmental
Debt service
3,353,843
8,182,521
43,437,852
4,811,993
595,652
1,973,307
12,441,164
955,854
6,142,478
3,373,174
8,323,155
43,239,761
5,612,821
605,248
2,019,445
11,506,088
923,008
6,153,445
3,231,604
8,135,773
41,344,781
5,364,023
619,207
1,905,298
10,521,099
907,253
5,805,523
3,406,483
7,806,744
41,846,980
6,118,999
578,159
1,873,548
9,474,193
1,012,478
10,165,398
3,093,631
7,273,605
40,945,725
6,291,114
492,418
1,317,234
9,968,302
583,408
11,761,874
Total Expenditures
81,894,664
81,756,145
77,834,561
82,282,982
81,727,311
Excess(Deficiency) of Revenues Over
Expenditures
(2,670,727)
(3,973,870)
9,927,600
(7,144,123)
479,162
3,469,547
-
3,388,721
-
3,479,105
-
3,352,344
-
2,450,000
2,865,519
(86,350)
798,820
(585,149)
13,406,705
(3,791,779)
5,708,331
4,164,368
2,389,383
10,620,000
(26,964,333)
(9,790,582)
(8,991,762)
23,120,929
$ 14,129,167
23,706,078
23,120,929
10,299,373
23,706,078
14,091,152
10,299,373
8,382,821
$ 14,091,152
Other FinancingSources (Uses):
Issuance of bonds
Premiums on bonds issued
OperatingTransfers In (in)
OperatingTransfers In (Out)
Excess(Deficiency) of Revenues and Other
Sources Over Expenditures andOther Uses
Special Items:
Final payment of MSBAgrant
BondPremiumon refunding
Issuance of refundingbonds
Payments torefundingescrowagent
Changefromspecial items
Net Change infundbalance
FundBalance, Beginningof Year
FundBalance, End of Year
______________
$
$
$
(1) Extracted fromtheaudited financial statements.
(2) InMarch 2012, in conjunctionwitharefunding bondissue, the Townreceivedalumpsumpayment of $14,553,209 fromtheMassachusetts School
BuildingAuthority whichwasused to prepay outstanding bonds for the HighSchool andthe Coolidge Middle School.
24
Reserves Policy
The Finance Committee of the Town has adopted a policy aimed at establishing minimum cash reserves of 5% of the
annual operating budget at the beginning of each fiscal year. Reserves are held in the undesignated fund balance
(certified free cash), appropriated finance committee reserve fund, overlay reserve, stabilization fund and an
earmarked "sale of real estate fund." Funds such as those in the sale of real estate fund earmarked for specific
purposes are not included as part of these reserves. However, sale of real estate funds not specifically earmarked are
included in the reserves.
Stabilization Fund
At the Town meeting on November 10, 2003, the Town voted to establish a Stabilization Fund with an appropriation of
$700,000. In April, 2004, an additional $100,000 was appropriated into the Stabilization Fund. Establishment of a
Stabilization Fund requires a 2/3 vote of Town Meeting, as well as for all future appropriations.
With over $851,000 in the Stabilization Fund and approximately $3,000,000 in Free Cash, the Town is meeting its'
target for reserves of 5% of the General Fund Budget.
As of June 30, 2008, the balance of the Stabilization Fund was $1,453,992. The balance of the Stabilization Fund as
of June 30, 2009 was $1,840,302. The balance of the Stabilization Fund as of June 30, 2010 was $1,899,865. The
balance of the Stabilization Fund as of June 30, 2011 was $2,244,791. The balance of the Stabilization Fund as of
June 30, 2012 was $1,944,967.
Sale of Real Estate Fund
The sale of real estate fund was established by a special home rule petition. The proceeds of the sale of town-owned
land are automatically credited to this fund, and interest earned on the fund is credited to the fund. It may be
expended by 2/3 vote of town meeting for three purposes:



capital projects
debt service
funding the Town's unfunded pension liability
The Town's ten-year capital improvement program includes portions of the sale of real estate fund to help to stabilize
that program. The program was designed to spend 6.5 percent of the operating budget for capital expenditures. In
fiscal 2008, $350,000 of the sale of real estate fund was used to fund capital purchases. The $3 million proceeds from
the sale of the Town’s landfill property will be appropriated into the Sale of Real Estate Fund and used over a 10 year
period to fund capital purchases.
The Commonwealth of Massachusetts Department of Environmental Protection approved the release of the final
installment of the $3,000,000 price for the sale of the Landfill to the Town in December 2005. Expenditures from this
fund are restricted to appropriations for debt service, capital expenditures or for unfunded pension liabilities.
As of June 30, 2007, the balance of the Sale of Real Estate Fund was $1,930,503. As of June 30, 2008, the balance of
the Sale of Real Estate Fund was $1,667,720. The balance of the Sale of Real Estate fund was $1,354,285 at June
30, 2009. The balance of the Sale of Real Estate fund was $1,003,709 at June 30, 2010. The balance of the Sale of
Real Estate fund was $704,822 at June 30, 2011. The balance of the Sale of Real Estate fund was $457,031 at June
30, 2012.
25
Undesignated General Fund Balances and Free Cash
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.
Under the Uniform Municipal Accounting System (UMAS) prescribed by the Commonwealth of Massachusetts
Department of Revenue, adjusted for accounts receivable, free cash is undesignated fund balance. Uncollected
property taxes are fully reserved under UMAS.
The following table sets forth the trend in the Town's undesignated general fund balances and free cash as certified by
the Bureau of Accounts:
Year
2012
2011
2010
2009
2008
(1)
(2)
Undesignated/Unassigned
General Fund Balance
as of June 30
(GAAP) (1)
$7,851,595 (2)
7,109,000 (2)
6,297,457
6,485,868
6,451,350
Certified
Free Cash
$6,537,985
5,499,128
4,953,340
5,189,292
5,267,080
Source: Audited Financial Statements.
Unassigned General Fund Balances.
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”
under “PROPERTY TAXATION” above.)
At this time, the Town has not established any development districts and has no immediate plans to do so.
Investment of Town Funds
Investments of funds of cities and town, except for trust funds, are generally restricted by Massachusetts General Laws
Chapter 44, section 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 highlyrated corporate securities with maturities of one year or less.
Trust funds, unless otherwise provided by the donor, may be invested in accordance with section 54 of Chapter 44,
which permits a broader range of investments than section 55, including any bonds or notes that are legal investments
for savings banks in the Commonwealth. The restrictions imposed by sections 54 and 55 do not apply to city and town
retirement systems.
26
READING MUNICIPAL LIGHT DEPARTMENT
General
The Reading Municipal Light Department (RMLD) was established by statute in 1894. A board of five Light
Commissioners is elected by voters of the Town of Reading for staggered three year terms. A General Manager is
appointed by the Board of Light Commissioners, and a yearly operating budget is adopted by the Board. There is also
a citizen’s advisory board, with members appointed from each community served by the RMLD. Bonding for Light
Department projects is a general obligation of the Town of Reading.
The Town Treasurer is also Treasurer of the Light Department and the general fund cash of the Light Department is
deposited twice weekly with the Town's general fund cash. Since RMLD bills are paid by Fed funds wire on the day
due, the Town is able to take full advantage of the Light Department cash flow. This cash flow has been an important
factor in the Town not having to borrow in anticipation of revenue.
As of June 30, 2012, the RMLD served 29,180 customers located in Reading, North Reading, Wilmington and a
section of Lynnfield. Of these, approximately 25,517 are residential customers. The Department generates no output
itself, but it purchases power from other sources. In FY12, the Department purchased 15,297,247 KWH at an average
cost of $.0844 per KWH and sold 685,978,955 KWH at an average sale of $.1169 per KWH.
In an era of deregulation, the RMLD is taking a number of steps to protect itself from stranded costs; e.g., it has forged
20-year agreements with the Towns of North Reading, Wilmington and Lynnfield which require that the towns must
give no less than ten years' notice before they can leave the service area of the RMLD.
The RMLD has developed a rate stabilization fund that as of June 30, 2007 had a fund balance of $6,215,866. The
rate stabilization fund had a balance of $6,078,549 as of June 30, 2008. The rate stabilization fund had a balance of
$5,349,467 as of June 30, 2010. The rate stabilization fund had a balance of $6,046,137 as of June 30, 2011. The
rate stabilization fund had a balance of $6,679,695 as of June 30, 2012. This fund, which is invested with the interest
accruing to the fund, will help to compensate for any drop in customer base. It will also enable RMLD to mitigate
potential increases in rates. The fund balance constitutes approximately 14.90 percent of the RMLD base yearly
revenues.
The RMLD is well diversified for sources of fuel and power entitlements. The breakdown is as follows: Nuclear 12%;
Hydro 6%; Combine cycle 4%; Energy only 63%; System power 15%.
Rate Comparison
The following table presents a commercial/residential electric rate comparison, as of June 2011, between the RMLD
and surrounding municipalities and investor-owned utilities:
Commercial (per 7,300 KWH/25.000 KW)
vs. Reading @ $863.87
Residential (per 500 KWH)
vs. Reading @ $65.56
Middleton
Commercial - Per 7,300 KW/25.000 KW
Peabody
Wakefield
Nstar
National Grid
$959.51
$95.64
11.07%
$944.26 $1,045.84
$80.39
$181.97
9.31%
21.06%
$1,048.46
$184.59
21.37%
Middleton
Residential - Per 500 KW
Peabody
Wakefield
Nstar
$66.90
$1.34
2.04%
$62.81
($2.75)
(4.19%)
27
$72.09
$6.53
9.96%
$1,158.27
$294.40
34.08%
$86.15
$20.59
31.40%
National Grid
$82.01
$16.45
25.08%
Distribution of Earnings
The Light Department annually turns over to the Town of Reading a "distribution-of-earnings" payment. The Light
Commissioners are currently using the CPI to determine the amount of the distribution. In addition, under special
legislation, the Light Department pays voluntary in-lieu-of tax payments to all of the member towns. The payments are
based on a formula which distributes two percent of the department’s net plant value among the four towns based on
kilowatt hour usage.
Following is a five-year history of these payments to the Town of Reading:
FY-2012
Distribution
of Earnings
Payment in Lieu
of Taxes
Payments from the Light Department to the General Fund
FY-2011
FY-2010
FY-2009
FY-2008
$2,205,957
$2,171,880
$2,186,670
$2,112,725
$2,073,332
$277,582
$272,609
$260,902
$240,754
$227,016
Purchase Power Agreements
The Town of Reading acting through its Light Department is a Participant in certain projects of the Massachusetts
Municipal Wholesale Electric Company (MMWEC). MMWEC is a public corporation and a political subdivision of the
Commonwealth of Massachusetts created as a means to develop a bulk power supply for its Members and other
utilities. MMWEC is authorized to construct, own or purchase ownership interests in and to issue revenue bonds to
finance electric facilities (Projects). MMWEC has acquired ownership interest in electric facilities operated by other
utilities and also owns and operates its own electric facilities. MMWEC sells all of the capability (Project Capability) of
each of its projects to its Members and other Utilities (Project Participants) under Power Sales Agreements (PSA's).
MMWEC also contracts to purchase power from third parties, which is resold to Members and other utilities under
agreements known as Power Purchase Agreements (PPA's). The payments required to be made to MMWEC under
the PSA's and PPA's are payable solely from Municipal Light Department revenues.
The following table presents the aggregate amount of RMLD's required payments under PSA's and PPA's, exclusive of
the Reserve and Contingency Fund billings, to MMWEC at June 30, 2012, and estimated for future years:
For Year Ended
June 30,
Annual
Cost
2012
2013
2014
2015
2016
Thereafter
$
Total
4,349,448
3,985,453
3,551,564
2,573,569
2,700,157
1,663,433
$ 18,823,624
In addition, the Department is required to pay its share of the Operation and Maintenance (O&M) costs of the Projects
in which it participates. The Department's total O&M costs, including debt service under the PSA's, were $15,726,000
and $16,070,000 for the years ended June 30, 2008 and 2009, respectively. The Department’s total O&M costs,
including debt service under PSA’s, was $13,178,000 for the fiscal year ended June 30, 2010. The Department’s total
O&M costs, including debt service under PSA’s, was $18,273,000 for fiscal year ended June 30, 2011. The
Department’s total O&M costs, including debt service under PSA’s, was $14,291,416 for fiscal year ended June 30,
2012.
28
Other Purchase Power Obligations
In addition to its agreements through MMWEC, the RMLD has entered into agreements to purchase power from
Hydro-Quebec, New York Power Authority (PASNY), Macquarie, JP Morgan, Constellation and Nextera, under
contracts with terms ranging from 3 to 17 years. Under these contracts the Department is required to make purchases
based on an entitlement percentage or system power contract. The following is a schedule of the aggregate amount of
such required purchases as of June 30, 2012:
For Year Ended
June 30,
Annual
Cost
2012
2013
2014
2015
$ 16,938,000
17,862,000
18,355,000
20,094,095
Total
$ 73,249,095
Deregulation
In November 1997, the Commonwealth of Massachusetts enacted legislation effective March 1, 1998 to restructure the
electric utility industry. The RMLD is not specifically subject to the legislation. However, it is Management's belief that
industry restructuring and customer choice promulgated within the legislation will have an effect on RMLD's operations.
Annual Audits
The financial statements of the Reading Municipal Light Department are audited annually by the firm of Melanson,
Heath & Company, PC of Andover, Massachusetts. Set forth on the following pages are a Comparative Balance
Sheet and a Comparative Statement of Revenues, Expenses and Changes in Fund Net Assets for the fiscal years
ending June 30, 2008 through June 30, 2012. Said statements were extracted from audited financials.
29
TOWN OF READING, MASSACHUSETTS
MUNICIPAL LIGHT DEPARTMENT
BUSINESS-TYPE PROPRIETARY FUND
STATEMENT OF NET ASSETS
6/30/2012
ASSETS
Current:
Unrestricted cash
Receivables, net of allowance for uncollectibles
Prepaid expenses
Inventory
Total current assets
Noncurrent:
Restricted cash
Restricted investments
Investment in associated companies
Non-depreciable capital assets
Depreciable capital assets, net of accumulated depreciation
Unamortized bond discount
Other assets
Total noncurrent assets
$
TOTAL ASSETS
LIABILITIES
Current:
Accounts payable
Customer deposits
Customer advances for construction
Accrued interest payable
Accrued liabilities
Due to retirement trust
Current portion of bonds payable
Accrued employee compensated absences
Calpine contract termination
Total current liabilities
Noncurrent:
Bonds payable, net of current portion
Accrued employee compensated absences
Calpine contract termination
Other post-employment benefits
Total noncurrent liabilities
$
TOTAL LIABILITIES
6/30/2011
9,957,960
8,115,722
762,930
1,495,337
20,331,949
$
6,596,634
8,749,838
753,132
1,586,245
17,685,849
6/30/2010
$
8,167,774
7,823,935
756,954
1,634,571
18,383,234
6/30/2009
$
8,635,772
7,087,246
753,345
1,563,070
18,039,433
6/30/2008
$
11,859,292
9,143,636
152,718
1,662,582
22,818,228
19,187,119
61,574
1,265,842
67,405,075
87,919,610
16,385,677
2,200,000
77,463
1,265,842
66,294,667
86,223,649
15,255,385
1,400,000
97,690
1,265,842
65,615,657
83,634,574
11,563,437
4,400,000
122,391
1,265,842
63,391,248
15,988
80,758,906
11,011,779
4,400,000
122,391
3,102,442
57,876,740
19,504
76,532,856
108,251,559
103,909,498
102,017,808
98,798,339
99,351,084
4,934,861
631,268
363,459
469,906
1,000,000
116,062
7,515,556
$
4,997,392
561,385
255,980
390,660
56,698
6,262,115
$
6,188,258
499,197
333,919
343,076
73,802
7,438,252
$
5,448,255
496,335
696,517
258,000
550,000
81,713
7,530,820
$
6,450,130
481,328
710,537
303,842
550,000
78,470
8,574,307
2,866,854
1,335,089
4,201,943
2,878,001
1,165,800
4,043,801
2,946,231
813,461
3,759,692
2,791,401
436,402
3,227,803
550,000
2,603,748
3,153,748
11,717,499
10,305,916
11,197,944
10,758,623
11,728,055
68,670,917
2,635,206
1,344,829
23,883,108
67,560,510
4,265,768
1,169,499
20,607,805
66,881,500
4,801,694
19,136,670
64,107,090
4,403,130
19,529,496
59,879,183
2,937,735
24,806,111
NET ASSETS
Invested in capital assets, net of related debt
Restricted for depreciation fund
Restricted for other post-employment benefits
Unrestricted
TOTAL NET ASSETS
$
96,534,060
(1) Extracted from audited financial statements
30
$
93,603,582
$
90,819,864
$
88,039,716
$
87,623,029
TOWN OF READING, MASSACHUSETTS
MUNICIPAL LIGHT DEPARTMENT
BUSINESS-TYPE PROPRIETARY FUND
STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS
Operating Revenues:
Electric sales, net of discounts of $4,229,951 (FY12)
and $4,323,198 (FY11), respectively
Customer refunds and fuel charge adjustments:
Rate refund
Purchase power capacity refunds
Fuel charge adjustments
Contract work - street lights revenue
Total Operating Revenues
Operating Expenses:
Purchase power
Operating
Maintenance
Depreciation
Voluntary payments to towns
Contract work - street lights expenses
Hazardous waste mitigation - Gaw Substation
Total Operating Expenses
Operating Income
Nonoperating Revenues (Expenses):
Contributions in aid of construction
Return on investment to Town of Reading
Interest Income
Interest expense
MMWEC refund
FEMA Grant
Loss on disposal of capital assets
Other
Total Nonoperating Revenues (Expenses), Net
Change in Net Assets
Net Assets at Beginning of Year, as restated
Net Assets at End of Year
_________________
(1) Extracted from audited financial statements.
For Fiscal Year Ended
6/30/2010
6/30/2009
6/30/2012
6/30/2011
$ 82,546,941
$ 87,511,283
$ 80,892,291
$ 91,111,013
$ 86,243,927
3,203
(785,180)
81,764,964
1,055,105
729,113
89,295,501
5,063,829
586,718
86,542,838
2,222,886
834,086
94,167,985
2,352,276
(1,649,970)
86,946,233
60,361,614
9,882,934
2,235,228
3,552,330
1,351,568
77,383,674
66,822,547
9,762,601
2,189,310
3,452,749
1,330,070
1,386,395
84,943,672
68,012,702
8,780,835
1,815,612
2,240,846
1,282,631
1,096,431
83,229,057
77,172,343
9,106,788
1,912,948
3,134,387
1,207,979
92,534,445
69,641,773
8,701,880
2,049,360
3,023,536
1,146,094
84,562,643
4,381,290
4,351,829
3,313,781
1,633,540
2,383,590
17,226
(2,205,957)
88,705
(1,460)
516,183
325,007
(563,957)
373,441
(1,450,812)
65,693
(2,171,880)
103,765
(2,005)
571,635
(371,491)
236,172
(1,568,111)
772,279
(2,186,670)
184,618
(11,620)
371,273
(3,571)
340,058
(533,633)
177,680
(2,112,725)
398,369
(49,911)
107,879
(39,767)
301,622
(1,216,853)
151,992
(2,073,332)
595,433
(85,843)
383,202
(24,797)
303,020
(750,325)
2,930,478
2,783,718
2,780,148
416,687
1,633,265
93,603,582
90,819,864
88,039,716
87,623,029
85,989,764
$ 96,534,060
$ 93,603,582
$ 90,819,864
$ 88,039,716
$ 87,623,029
31
6/30/2008
INDEBTEDNESS
General Information on Debt Authorization and Legal Limit
Bonds and notes are generally authorized on behalf of a town by a two-thirds vote of the town meeting, subject to a
referendum vote if a petition therefore is timely filed. Borrowings for certain purposes require state administrative
approval. Temporary loans in anticipation of current revenues and certain state and county reimbursements are
generally authorized by majority vote, but provision is made for temporary loans in anticipation of federal grants and for
other purposes in certain circumstances without town meeting authorization.
The general debt limit of the Town consists of a normal debt limit and a double debt limit. The normal debt limit 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’s Municipal Finance Oversight Board, consisting of the attorney general, the state
treasurer, the state auditor, and the director of accounts.
There are many categories of debt which are exempt from and do not count against either the normal debt limit or the
double debt limit. Among others, these exempt categories include temporary loans in anticipation of current revenues,
temporary loans in anticipation of grants and reimbursements, certain school bonds and sewer bonds, and subject to
special debt limits, bonds for water and urban renewal purposes. Industrial revenue bonds not backed by the credit of
the municipality and are not reflected in any statement of indebtedness herein.
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 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 five years from their original dates of issuance, provided that for each
32
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. The amount borrowed in each fiscal year by the issue of revenue anticipation notes is
limited to the tax levy of the prior fiscal year, together with the net receipts in the prior fiscal year from the motor vehicle
excise and certain payments made by the Commonwealth in lieu of taxes. The fiscal year ends on June 30. Notes
may mature in the following fiscal year, and notes may be refunded into the following fiscal year to the extent of the
uncollected, unabated current tax levy and certain other items, including revenue deficits, overlay deficits, final
judgments and lawfully unappropriated expenditures, which are to be added to the next tax levy, but excluding deficits
arising from a failure to collect taxes of earlier years. (See "Taxation to Meet Deficits" under "PROPERTY TAX"
above). In any event, the period from an original borrowing to its final maturity cannot exceed one year.
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 Water Pollution Abatement or Drinking Water Revolving Loan Programs and for certain
economic development projects supported by tax increment financing. In addition to general obligation bonds and
notes, cities and towns having electric departments may issue revenue bonds, and notes in anticipation of such bonds,
subject to the approval of the State Department of Telecommunications and Energy.
Trend in Revenue Anticipation Note Borrowing
The Town has not issued revenue anticipation notes since fiscal year 1974 and does not plan to do so in fiscal 2012.
DIRECT DEBT SUMMARY (1)
As of June 30, 2012
Long-Term Indebtedness:
General
Water (2)
MWPAT (2)(3)
School (4)
MWRA
$ 6,040,000
9,400,000
10,463
20,415,000
2,379,868
Total Long Term Debt Outstanding
$ 38,245,331
Total Direct Debt
(1)
(2)
(3)
(4)
$ 38,245,331
Excludes lease and installment purchase obligations, overlapping debt, and unfunded pension liability.
Outside the Town’s general debt limit.
Exempt from the limits of Proposition 2 ½. MWPAT subsidy not reflected.
$1,190,000 is outside the Town’s general debt limit and $14,380,000 is exempt from Proposition 2 ½. As of June
30, 2012, the unpaid balance of state school construction grants payable over the life of outstanding school
bonds for eligible project costs, including debt service, is approximately $4,620,360.
33
Key Debt Ratios
2012 (5)
Amount (1)
Debt per Capita (2)
Percent of Assessed Valuation (3)
Percent of Equalized Valuation (4)
Amount per Capita as a Percent of
Personal Income per Capita (2)
(1)
(2)
(3)
(4)
(5)
$
$
As of June 30,
2010
2011
38,245,331
1,545.45
1.02%
0.99%
$
$
55,071,096
2,225.36
1.46%
1.41%
3.52%
$
$
2009
60,729,061
2,561.54
1.67%
1.49%
6.76%
$
$
2008
60,853,099
2,566.77
1.64%
1.50%
7.89%
$
$
7.80%
65,001,807
2,883.97
1.73%
1.65%
8.77%
Excludes temporary loans, lease-purchase obligations, overlapping debt, unfunded pension liability, and other
liabilities or contractual obligations not more than 90 days past due.
Source: U.S. Department of Commerce, Bureau of the Census.
Source: Board of Assessors. Assessed valuation as of the prior January 1.
Source: Massachusetts Department of Revenue - Equalized valuation in effect for that fiscal year. (Equalized
valuations are established as of January 1 of even-numbered years for the next two fiscal years.)
In March 2012, in conjunction with a refunding bond issue, the Town received a $14,553,209 lump sum grant
from the MSBA which was used to prepay outstanding bonds for the High School and Coolidge Middle School.
Annual Debt Service as of June 30, 2012 (1)
Fiscal
Year
2013
Less
MWPAT
Subsidy
Outstanding (2)
Principal
Interest
$
4,557,405
5,453,294
11.9
1,300,885
(482)
(462,036)
4,861,907
22.4
2015
3,148,539
1,165,485
(416)
(462,036)
3,851,572
30.7
2016
2,910,605
1,063,339
(351)
(462,036)
3,511,557
38.3
2017
2,925,605
950,029
(285)
(462,036)
3,413,313
45.9
2018
2,891,165
834,288
(219)
(462,036)
3,263,198
53.5
2019
2,566,165
726,820
(154)
(462,036)
2,830,795
60.2
2020
2021
2,616,165
2,651,143
624,138
518,336
(91)
(30)
(462,036)
(462,036)
2,778,177
2,707,413
67.0
74.0
2022
2,690,000
410,369
-
(462,036)
2,638,333
81.0
2023
2,425,000
299,805
-
-
2,724,805
87.3
2024
2,490,000
191,686
-
-
2,681,686
93.9
2025
880,000
79,763
-
-
959,763
96.2
2026
540,000
51,375
-
-
591,375
97.6
2027
540,000
29,588
-
-
569,588
99.0
397,800
100.0
390,000
$ 38,245,331
$
7,800
$
9,612,174
(543)
$
$
(462,036)
$
Cumulative
% Principal
Retired
4,023,539
Total
1,358,468
Net Debt
Service
2014
2028
$
Less State
School
Construction Aid
-
(2,571)
$
(4,620,360)
$
43,234,574
_______________
(1) Excludes short-term debt, lease and installment purchase obligations, overlapping debt and unfunded pension
liability.
(2) Principal totaling $14,390,463 and interest totaling $4,359,953 is exempt from the provisions of Proposition 2 1/2.
34
Authorized Unissued Debt and Prospective Financing
Currently, the Town has $1,853,800 of authorized unissued debt, as follows:
Memorial High School
Sewer
Water
Killam School Remodeling
Birch Meadow School Remodeling
Additional School Remodeling (Killam & Birch Meadow)
Total
$
187,000
181,800
235,000
830,000
170,000
250,000
$ 1,853,800
Debt Service Mitigation Plan
On November 19, 1989, a special act of the state legislature was signed by the Governor enabling the Town of
Reading to establish a special fund for the proceeds of sales of real estate. (See "TOWN FINANCES - Sale of Real
Estate Fund," above.) The Fund can only be used to provide funding for capital projects, retirement of the debt service
related to capital projects or to provide funding for the unfunded pension liability and requires a two-thirds appropriation
vote. (See "TOWN OF READING, MASSACHUSETTS - Landfill," above.)
Overlapping Debt
The following are the principal entities whose indebtedness is chargeable to or payable in part from taxation of
property within the Town of Reading:
Outstanding
Bonded Debt
as of June 30, 2012
Massachusetts Bay Transportation
Authority (2)
Massachusetts Water Resources
Authority (3)
Water
Sewer
Northeast Metropolitan Regional
Vocational School District (4)
$5,769,214,580
2,099,794,000
4,027,396,000
-
Reading's
Estimated $
Share %
N/A
N/A
1,898,258
0.03%
N/A
N/A
Total Fiscal
2013 Dollar
Assessment (1)
$
522,885
1,811,212
4,326,182
195,691
(1) Dollar assessment based upon total net operating expenses, inclusive of debt service where applicable.
(2) Source: M.B.T.A. The municipal share is based on a percentage furnished by the M.B.T.A. as that used in the
most recent assessment of aggregate net cost of service of the M.B.T.A., including debt service and net operating
expenses, although assessments for various categories of service are separately calculated by different formulae.
Shares vary from year to year. The Commonwealth pays approximately 90% of the debt service on M.B.T.A.
bonds. It has also been State practice in recent years to absorb enough of the net cost of service of the M.B.T.A.
to assure that total assessments on the cities and towns within territory of the M.B.T.A. will not exceed 102 1/2
percent of the prior year's assessments.
(3) Source: The Massachusetts Water Resources Authority (the "Authority"), established by the Massachusetts Water
Resources Authority Act, Chapter 372 of the Acts of 1984 of the Commonwealth of Massachusetts, is a body
politic and corporate and public instrumentality and an independent public authority of the Commonwealth. In
1985, the Authority assumed possession and control from the Metropolitan District Commission of a water
distribution system and a sewer system which provides wholesale services to 61 cities and towns located primarily
in eastern Massachusetts, including most of the metropolitan Boston area. In addition to its operating
responsibilities, the Authority is responsible for rehabilitating and repairing the systems to bring them into
compliance with applicable environmental laws. The largest share of major capital improvements to the system
(the "Capital Program") is for projects relating to constructing and rehabilitating sewerage collection and treatment
facilities in order to bring the sewer system's wastewater discharges into Boston Harbor into compliance with
federal and state pollution control requirements. These projects are conducted in substantial part under court
35
orders entered by the U.S. District Court in a continuing Clean Water Act enforcement proceeding filed against the
Authority by the U. S. Environmental Protection Agency.
(4) Source: Business Manager, Northeast Metropolitan Regional Vocational School District. The operating expenses
and debt service of regional school districts are apportioned among the member municipalities in accordance with
the agreements establishing the districts, subject to the provisions of the Education Reform Act of 1993. The
Town is a member along with the Towns of North Reading, Saugus, Stoneham, Wakefield, Winchester and
Winthrop and the Cities of Chelsea, Malden, Melrose, Revere and Woburn.
Contractual Obligations
Municipal contracts are generally limited to currently available appropriations. Statutory authority is granted, however,
to make contracts extending into future years for certain specified purposes and subject to specific maximum term
limits. A city or town generally has authority to enter into contracts for the exercise of any of its corporate powers for
any period of time deemed to serve its best interests, 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 long-term contractual obligations that are not
subject to annual appropriation, including contracts for refuse disposal (20 year maximum term). Municipalities may
also enter into long-term contracts in aid of housing and renewal projects. There may be implied authority to make
other long-term contracts required to carry out authorized municipal functions, such as contracts to purchase water
from private water companies.
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.
(See "READING MUNICIPAL LIGHT
DEPARTMENT," above.)
Pursuant to the Home Rule Amendment to the Massachusetts Constitution, cities and towns may also be empowered
to make other contracts and leases.
The Town presently has the following significant contracts in effect:
Nature of Contract
Solid Waste Collection and
Collection of Recyclables
Solid Waste Disposal
Budget
FY-12
Vendor
JRM Hauling and Recycling
JRM Hauling and Recycling
Covanta Haverhill, Inc
Source: Public Works Director.
36
$
604,500
170,500
639,116
Budget
FY-13
$
650,000
210,000
575,000
Contract
Expiration
Date
7/2/2016
7/2/2016
6/30/2015
TOWN OF READING RETIREMENT SYSTEM
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.
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 contributes to the Town of Reading Retirement System (the "System"), a multi-employer, public employee
retirement system that acts as the investment and administrative agent for the Town, the Reading Municipal Light
Department and the Reading Housing Authority. The System covers substantially all full-time municipal employees
except school teachers, whose pensions are covered by the Commonwealth of Massachusetts Teachers' Retirement
System to which the Town of Reading does not contribute.
37
Covered payroll for employees participating in the Town's system for the year ended June 30, 2011 was $19,937,502.
As of June 30, 2012, there were 338 active participants in the system and 336 retirees and beneficiaries. The System
is partially funded by employee contributions. One town retiree is covered by the Town’s non-contributory pension
plan.
The System participates in PRIT and, as such, shares in the annual appropriation made to PRIT by the
Commonwealth. State contributions are based upon the System's net assets in PRIT at the beginning of the fiscal
year. As of June 30, 2012, the System's shares in PRIT had a market value of $90,424,492.
The annual contributions of the Town to the retirement system for the current and last five fiscal years are as follows:
Fiscal Year
2013 (budgeted)
2012
2011
2010
2009
2008
Contributory (1)
$4,543,434
4,420,234
4,206,995
3,667,731
3,582,522
3,785,504
Non-Contributory
$67,500
75,000
73,500
73,500
77,280
102,681
Source: Town Accountant.
(1) Includes contributions of the Municipal Light Department and excludes those of the Reading Housing Authority.
As of June 30, 2011, the total benefit obligation of the System was $134,440,050 and net assets available for benefits
at actuarial value were $91,359,151, resulting in an unfunded pension benefit obligation of $43,080,899.
The Town formally accepted all of the provisions of Chapter 697 effective December 28, 1989. Prior to that date, the
Town's contributions to the system were actuarially determined using the entry age normal cost method. The
contribution level was calculated using a level percent of future payroll to amortize the unfunded actuarial liability over
a 40-year period. Thus, prior to the acceptance of Chapter 697, the Town had initiated a contribution level sufficient to
fund its unfunded liability. The Reading Municipal Light Department pays its contribution to the System from the
employees retirement trust. As of June 30, 2012, the balance in the trust (fair value) was $5,476,777.
The Town has voted to accept legislation that provides for cost of living adjustments (COLA) for retirees, subject to the
approval of the Reading Retirement Board. The statutory provisions have been accepted by the Retirement Board,
which acceptance may not be revoked. The impact of this legislation is estimated to require an increase in the
appropriation to the retirement system of approximately 2.5% per year through 2028.
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.
The pay-as-you-go cost to the Town for such benefits in recent years has been as follows:
Fiscal Year
2012
2011
2010
2009
2008
2007
Benefit Cost
N.A.
$
4,337,028
3,723,762
3,368,385
2,795,821
1,369,957
The Governmental Accounting Standards Board (“GASB”) recently promulgated its Statement Nos. 43 and 45, which will
for the first time 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.
38
The Town is required to implement the new GASB reporting requirements for other post-employment benefits
beginning in fiscal year 2008. As of June 30, 2011, the Town’s unfunded actuarial accrued liability was approximately
$93.29 million and the Town’s annual required contribution (‘ARC’) is approximately $6.56 million. These totals
include municipal light department, water, sewer and the general fund. The Town has not yet determined how it will
fund this liability.
EMPLOYEE RELATIONS
City and town employees (other than managerial and confidential employees) are entitled to join unions and to bargain
collectively on questions of wages, hours and other terms and conditions of employment. Provisions for compulsory
arbitration or labor disputes involving firefighters and police officers were repealed by the Proposition 2 1/2 legislation.
The Town employs approximately 1,417 full and part-time workers of whom 987 are employed by the School
Department, 57 by the Police Department, 59 by the Department of Public Works, 48 by the Fire Department, 76 by
the Municipal Light Department, and the balance by other departments of the Town.
Approximately 816 employees are represented in collective bargaining by 13 bargaining units, as follows:
Number of
Employees
Employee Category
School:
Reading Teacher's Association
Custodians
Secretaries and Clerical
Cafeteria Workers
Para-educators
Town:
Patrolmen's Association
Police Superior Officers
Dispatchers
Firefighters
DPW Laborers
Engineers and Water Treatment Workers
Reading Municipal Light Department:
Clerical and Technical
Linemen, Station Operators, and Meter Readers
Total
Contract
Expiration (1)
389
23
16
35
141
8/31/14
6/30/14
6/30/14
6/30/14
6/30/14
32
9
9
46
40
6
6/30/14
6/30/14
6/30/14
6/30/14
6/30/14
6/30/14
25
45
816
12/31/12
12/31/12
___________________
(1) Expired contracts are currently in negotiations.
LITIGATION
There are various suits pending in courts within the State in which the Town is a defendant. In the opinion of the
Town, no litigation is pending, or to its knowledge threatened, which is likely to result, either individually or in the
aggregate, in final judgments against the Town materially affecting its financial position.
_____________________________
TOWN OF READING, MASSACHUSETTS
/s/ Nancy J. Heffernan, Treasurer
March 25, 2013
39