· 2020-07-02 · preliminary official statement and notice of sale dated july 2, 2020 rating: see...

PRELIMINARY OFFICIAL STATEMENT AND NOTICE OF SALE DATED JULY 2, 2020

Rating: See “Rating” herein. S&P Global Ratings:

New Issue

In the opinion of Locke Lord LLP, Bond Counsel, based upon an analysis of existing law and assuming, among other matters, compliance with certain covenants, interest on the Bonds is excluded from gross income for federal income tax purposes under the Internal Revenue Code of 1986, as amended (the “Code”). Interest on the Bonds will not be included in computing the alternative minimum taxable income of individuals. Under existing law, interest on the Bonds is exempt from Massachusetts personal income taxes, and the Bonds are exempt from Massachusetts personal property taxes. Bond Counsel expresses no opinion regarding any other tax consequences related to the ownership or disposition of, or the accrual or receipt of interest on, the Bonds. See “Tax Exemption” herein. The Bonds will not be designated as “qualified tax-exempt obligations” for purposes of Section 265(b)(3) of the Code.

TOWN OF MARBLEHEAD, MASSACHUSETTS $41,775,000* GENERAL OBLIGATION MUNICIPAL PURPOSE LOAN OF 2020 BONDS

DATED DUEDate of Delivery July 15

(as shown below)

The Bonds are issuable only in fully registered form, registered in the name of Cede & Co., as Bondowner and nominee for The Depository Trust Company ("DTC"), New York, New York. DTC will act as securities depository for the Bonds. Purchases of the Bonds will be made in book-entry form in the denomination of $5,000, or any integral multiple thereof. (See "THE BONDS- Book-Entry Transfer System" herein.)

Principal of the Bonds will be payable July 15 of the years in which the Bonds mature. Interest on the Bonds will be payable January 15 and July 15, commencing July 15, 2021. Principal and semiannual interest on the Bonds will be paid by U.S. Bank National Association, Boston, Massachusetts, as Paying Agent. So long as DTC or its nominee, Cede & Co., is the Bondowner, such payments will be made directly to such Bondowner. Disbursement of such payments to the DTC Participants is the responsibility of DTC and disbursement of such payments to the Beneficial Owners is the responsibility of the DTC Participants and Indirect Participants, as more fully described herein.

The Bonds will be subject to redemption prior to their stated maturity dates as described herein.

An opinion of Bond Counsel will be delivered with the Bonds to the effect that the Bonds are valid general obligations of the Town of Marblehead, Massachusetts, and that the principal of and interest on the Bonds are payable from taxes which may be levied upon all taxable property within the territorial limits of the Town, without limitation as to rate or amount, except as provided under Chapter 44, Section 20 of the General Laws.

________________________________

MATURITIES, AMOUNTS*, RATES, PRICES OR YIELDS AND CUSIPS

Due Principal Interest Price or CUSIP Due Principal Interest Price or CUSIPJuly 15 Amount* Rate Yield 566081 July 15 Amount* Rate Yield 566081

2021 $ 1,045,000 % % 2031 1,905,000$ % %2022 1,780,000 2032 1,955,000 2023 1,870,000 2033 1,990,000 2024 1,965,000 2034 2,030,000 2025 2,065,000 2035 2,075,000 2026 2,170,000 2036 2,125,000 2027 2,290,000 2037 2,170,000 2028 2,400,000 2038 2,215,000 2029 2,515,000 2039 2,270,000 2030 2,615,000 2040 2,325,000

________________________________

THE BONDS ARE BEING OFFERED FOR SALE AT 11:00 A.M. (EASTERN TIME) ON TUESDAY, JULY 14, 2020, AT HILLTOP SECURITIES INC., 54 CANAL STREET, 3RD FLOOR, BOSTON, MASSACHUSETTS IN THE CASE OF SEALED PROPOSALS AND IN THE CASE OF ELECTRONIC PROPOSALS, VIA PARITY, IN THE MANNER SET FORTH IN THE NOTICE OF SALE. REFERENCE IS MADE TO THE NOTICE OF SALE DATED JULY 2, 2020 FOR THE CONDITIONS OF SUCH SALE.

The Bonds are offered subject to the final approving opinion of Locke Lord LLP, Boston, Massachusetts, Bond Counsel, as aforesaid, and to certain other conditions referred to herein and in the Notice of Sale. Hilltop Securities Inc., Boston, Massachusetts has acted as Financial Advisor to the Town of Marblehead, Massachusetts, with respect to the Bonds. The Bonds in definitive form will be delivered to DTC, or its custodial agent, on or about July 30, 2020, against payment to the Town in federal funds.

______________________ *Preliminary, subject to change.

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TABLE OF CONTENTS

Page

SUMMARY STATEMENT ............................................... 3 NOTICE OF SALE ........................................................... 4 Bidding Parameters ......................................................... 5 Establishment of Issue Price ........................................... 6 Exhibit 1 – Form of Issue Price Certificates ..................... 9

OFFICIAL STATEMENT .................................................. 15 THE BONDS ................................................................... 15 Description of the Bonds ................................................. 15 Redemption Provisions.................................................... 15 Record Date .................................................................... 16 Book-Entry Transfer System ........................................... 16 Authorization of the Bonds and Use of Proceeds ............ 17 Sources and Uses of Bond Proceeds .............................. 18 Plan of Refunding ............................................................ 18 Principal Payment by Purpose ........................................ 18 Tax Exemption ................................................................ 19 Risk of Future Legislative Changes and/or Court Decisions ...................................................................... 20 Security and Remedies ................................................... 20 Opinion of Bond Counsel ................................................. 22 Rating .............................................................................. 22 Financial Advisory Services of Hilltop Securities Inc. .................................................... 22 Continuing Disclosure ..................................................... 22

TOWN OF MARBLEHEAD, MASSACHUSETTS: General............................................................................ 23 Government ..................................................................... 23 Principal Town Officials ................................................... 23 Corona Virus (COVID-19) ................................................ 23 Municipal Services .......................................................... 24 Education ........................................................................ 24 Public School Enrollments ............................................. 24 Industry and Commerce .................................................. 25 Labor Force, Employment and Unemployment ............... 25 Unemployment Rates .................................................... 25 Building Permits .............................................................. 26 Transportation ................................................................. 26 Population and Income .................................................... 26 Population Trends ......................................................... 26

PROPERTY TAXATION: Tax Levy Computation .................................................... 27 Assessed Valuations and Tax Levies .............................. 28 Classification of Property ................................................. 28 Largest Taxpayers ........................................................... 29 State Equalized Valuation ............................................... 29 Abatements and Overlay ................................................. 29 Tax Collections ................................................................ 30 Tax Titles and Possessions ............................................. 31 Taxation to Meet Deficits ................................................. 31 Tax Limitations ................................................................ 31 Unused Levy Capacity .................................................... 32

Page

Pledged Taxes ................................................................ 33 Initiative Petitions ............................................................ 33 Community Preservation Act ........................................... 33

TOWN FINANCES: Budget and Appropriation Process .................................. 34 Budget Trends................................................................. 34 Revenues ........................................................................ 35 State School Building Assistance Program ..................... 36 Investment of Town Funds .............................................. 37 Summary of Significant Accounting Policies ................... 37 Annual Audits .................................................................. 37 Financial Statements ....................................................... 37 2020 Fiscal Year End Results ......................................... 37 Governmental Funds Balance Sheet As of June 30, 2019 .................................................. 38 Governmental Funds Balance Sheet As of June 30, 2018 .................................................. 39 Governmental Funds Balance Sheet As of June 30, 2017 .................................................. 40 Statement of Revenues, Expenditures and Changes

in Fund Balances as of June 30, 2015 – 2019 .......... 41 Unassigned General Fund and Free Cash ...................... 46 Energy Reserve .............................................................. 46 Utility Reserve ................................................................. 46 Salary Reserve ................................................................ 47 Tax Increment Financing for Development District .......... 47

INDEBTEDNESS: Authorization Procedure and Limitations ......................... 48 Types of Obligations ....................................................... 48 Direct Debt Summary ...................................................... 49 Debt Ratios ..................................................................... 50 Principal Payments by Purpose ...................................... 50 Debt Service Requirements ............................................ 51 Authorized Unissued Debt .............................................. 51 Pay-as-you-go Capital Spending..................................... 52 Overlapping Debt ............................................................ 52 Contractual Obligations ................................................... 53 RETIREMENT PLAN ...................................................... 53 Current Funding Schedule .............................................. 55 Other Post-Employment Benefits .................................... 56 EMPLOYEE RELATIONS ............................................... 56 LITIGATION .................................................................... 57

APPENDIX A – Fiscal 2019 Audit

APPENDIX B – Proposed Form of Legal Opinion

APPENDIX C – Proposed Form of Continuing Disclosure Certificate

__________________________________

The information and expressions of opinion in this Official Statement are subject to change without notice. Neither the delivery of this Official Statement nor any sale of the Bonds shall, under any circumstances, create any implication that there has been no material change in the affairs of the Town since the date of this Official Statement. The information set forth herein has been obtained from the Town and from other sources which are believed to be reliable but it is not guaranteed as to accuracy or completeness. Any statement, made in this Official Statement involving matters of opinion, whether or not expressly stated are intended merely as opinion and not as representations of fact.

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SUMMARY STATEMENT

The information set forth below is qualified in its entirety by the information and financial statements appearing elsewhere in the Official Statement.

Date of Sale: Tuesday, July 14, 2020, 11:00 A.M. (Eastern Time).

Location of Sale: Hilltop Securities Inc., 54 Canal Street, 3rd Floor, Boston, Massachusetts 02114.

Issuer: Town of Marblehead, Massachusetts.

Issue: $41,775,000* General Obligation Municipal Purpose Loan of 2020 Bonds, see "THE BONDS Book-Entry Transfer System" herein.

Preliminary Official Statement Dated: July 2, 2020.

Dated Date of the Bonds: As of their date of delivery.

Principal Due: Serially July 15, 2021 through July 15, 2040 as detailed herein.

Interest Payable: Semi-annually January 15 and July 15, commencing July 15, 2021.

Purpose and Authority: The Bonds are authorized by the Town for various municipal purposes under provisions of the Massachusetts General Laws as detailed herein.

Redemption: The Bonds will be subject to redemption prior to their stated maturity dates as detailed herein.

Security: The Bonds are valid and binding general obligations of the Town and, except to the extent they are paid from other sources, the principal of and interest on the Bonds are payable from taxes which may be levied upon all taxable property in the Town, without limitation as to rate or amount, except as provided under Chapter 44, Section 20 of the General Laws.

Credit Rating: The Town has applied to S&P Global Ratings for a rating on the Bonds.

Bond Insurance: The Town has not contracted for the issuance of any policy of municipal bond insurance or any other credit enhancement facility.

Basis of Award: Lowest True Interest Cost (TIC), as of the dated date. BIDS MUST INCLUDE A PREMIUM OF AT LEAST $170,000.

Tax Exemption: Refer to "THE BONDS - Tax Exemption" herein and Appendix B, "Proposed Form of Legal Opinion.”

Continuing Disclosure: Refer to "THE BONDS - Continuing Disclosure" herein and Appendix C, "Proposed Form of Continuing Disclosure Certificate.”

Bank Qualification: The Bonds will not be designated by the Town as “qualified tax-exempt obligations” for purposes of Section 265(b)(3) of the Internal Revenue Code of 1986, as amended.

Paying/Escrow Agent: U.S. Bank National Association, Boston, Massachusetts.

Legal Opinion: Locke Lord LLP, Boston, Massachusetts.

Financial Advisor: Hilltop Securities Inc., Boston, Massachusetts.

Delivery and Payment: It is expected that delivery of the Bonds in book-entry only form will be made to The Depository Trust Company, or to its custodial agent, on or about July 30, 2020, against payment in federal funds.

Issuer Official: Questions concerning the Official Statement should be addressed to: Alison Nieto, Finance Director/Town Accountant, Town of Marblehead, Massachusetts Telephone (781) 631-1705 or Peter Frazier, Managing Director, Hilltop Securities, Inc. Boston, Massachusetts Telephone (617) 617-4409.


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NOTICE OF SALE

TOWN OF MARBLEHEAD, MASSACHUSETTS $41,775,000* GENERAL OBLIGATION MUNICIPAL PURPOSE LOAN OF 2020 BONDS

The Town of Marblehead, Massachusetts (the “Town”) will receive sealed and electronic (as described herein) proposals until 11:00 A.M., Eastern Time, Tuesday, July 14, 2020, for the purchase of the following described General Obligation Municipal Purpose Loan of 2020 Bonds of the Town (the "Bonds"): $41,775,000* General Obligation Municipal Purpose Loan of 2020 Bonds payable July 15 of the years and in the

amounts as follows:

Due Principal Due PrincipalJuly 15 Amount* July 15 Amount*

2021 $ 1,045,000 2031 ** 1,905,000$ 2022 1,780,000 2032 ** 1,955,000 2023 1,870,000 2033 ** 1,990,000 2024 1,965,000 2034 ** 2,030,000 2025 2,065,000 2035 ** 2,075,000 2026 2,170,000 2036 ** 2,125,000 2027 2,290,000 2037 ** 2,170,000 2028 2,400,000 2038 ** 2,215,000 2029 2,515,000 2039 ** 2,270,000 2030 ** 2,615,000 2040 ** 2,325,000

______________________ *Preliminary, subject to change. **Callable maturities. May be combined into not more than three Term Bonds as described herein.

The Bonds will be dated their date of delivery. Principal of the Bonds will be payable on July 15 of the years in which the Bonds mature. Interest will be payable on January 15 and July 15, until maturity or redemption prior to maturity, commencing July 15, 2021.

The Bonds will be issued by means of a book-entry system with no physical distribution of the Bonds made to the public. One certificate for each maturity of the Bonds will be issued to The Depository Trust Company, New York, New York ("DTC"), and immobilized in its custody. Ownership of the Bonds in principal amounts of $5,000 or integral multiples thereof, will be evidenced by a book-entry system with transfers of ownership effected on the records of DTC and its Participants pursuant to rules and procedures established by DTC and its Participants. The successful bidder, as a condition to delivery of the Bonds, shall be required to deposit the Bonds with DTC, registered in the name of Cede & Co. Interest and principal on the Bonds will be payable to DTC or its nominee as Registered Owner of the Bonds. Transfer of principal and interest payments to Participants of DTC will be the responsibility of DTC. Transfer of principal and interest payments to Beneficial Owners will be the responsibility of such Participants and other nominees of Beneficial Owners. The Town will not be responsible or liable for maintaining, supervising or reviewing the records maintained by DTC, its Participants or persons acting through such Participants.

The original Bonds to be immobilized at DTC will be approved by Locke Lord LLP, Boston, Massachusetts, whose opinion will be furnished to the purchaser without charge.

The Bonds maturing on and before July 15, 2029 are not subject to redemption prior to their stated maturity dates. Bonds maturing on and after July 15, 2030 are subject to redemption prior to their stated maturity dates, at the option of the Town, on and after July 15, 2029 either in whole or in part at any time, and if in part, by lot within a maturity, at the par amount of the Bonds to be redeemed, plus accrued interest to the date set for redemption.

For Bonds maturing on and after July 15, 2030, bidders may specify that all of the principal amount of such Bonds in any two or more consecutive years may, in lieu of maturing in each such year, be combined to comprise one, two or three term bonds, and shall be subject to mandatory redemption or mature at par, as described above, in each of the years and in the principal amounts specified in the foregoing maturity schedule. Each mandatory redemption shall be allocated to the payment of the term bond maturing in the nearest subsequent year. Bidders may specify no more than three term bonds.

Term bonds, if any, shall be subject to mandatory redemption on July 15 of the year or years immediately prior to the stated maturity of such term bond (the particular Bonds of such maturity to be redeemed to be selected by lot) as indicated in the foregoing maturity schedule at the principal amount thereof plus accrued interest to the redemption date, without premium.

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Principal and semiannual interest on the Bonds will be paid by U.S. Bank National Association, Boston, Massachusetts as Paying Agent. So long as DTC or its nominee, Cede & Co., is the Bondowner, such payments will be made directly to DTC. Disbursement of such payments to the DTC Participants is the responsibility of DTC and disbursements of such payments to the Beneficial Owners is the responsibility of the DTC Participants and the Indirect Participants, as more fully described herein.

Bidding Parameters

Bidders shall state the rate or rates of interest per annum which the Bonds are to bear in a multiple of 1/20 or 1/8 of one percent, but shall not state (a) more than one interest rate for any Bonds having a like maturity, (b) any interest rate which exceeds the interest rate stated for any other Bonds by more than 3 percent or (c) any coupon in excess of 5.0%. NO BID OF LESS THAN PAR PLUS A PREMIUM OF AT LEAST $170,000 WILL BE CONSIDERED.

The Town reserves the right to change the aggregate principal amount of the Bonds after the determination of the winning bid by increasing or decreasing the aggregate principal amount and the principal amount of each maturity by such amounts as may be necessary to (i) produce debt service savings in each maturity of the bonds being issued for refunding purposes versus the bonds being refunded, in approximately level amounts, (ii) restructure the annual principal amortization of each purpose of the Bonds issued for project costs such that debt service is approximately level through the same original term and (ii) comply with Massachusetts General Law. THE SUCCESSFUL BIDDER MAY NOT WITHDRAW ITS BID OR CHANGE THE INTEREST RATES BID OR THE INITIAL REOFFERING PRICES AS A RESULT OF ANY CHANGES MADE TO THE ANNUAL PRINCIPAL AMOUNTS WITHIN THESE LIMITS. The dollar amount bid for the Bonds by the successful bidder will be adjusted, if applicable, to reflect changes in the dollar amount of the amortization schedule. Any price that is adjusted will reflect changes in the dollar amount of the underwriter’s discount and original issue premium, if any, but will not change the per bond underwriter’s discount (net of insurance premium, if any) provided in such bid. Nor will it change the interest rate specified for each maturity. Any such adjustments will be communicated to the successful bidder for the Bonds by 4 P.M. Eastern Time on the day of the sale.

Bids must be submitted either:

(a) In a sealed envelope marked “Proposal for Bonds” and addressed to Alison Nieto, Finance Director/Town Accountant, Town of Marblehead, Massachusetts c/o Hilltop Securities Inc., 54 Canal Street, Boston, Massachusetts 02114. Hilltop Securities Inc. will act as agent for the bidder, but neither the Town nor Hilltop Securities Inc. shall be responsible for any errors in connection with bids submitted in this manner.

(b) Electronically via Parity in accordance with this Notice of Sale. To the extent any instructions or directions set forth in Parity conflict with this Notice of Sale, the terms of this Notice of Sale shall control. For further information about Parity, potential bidders may contact the Financial Advisor to the Town or I-deal at 40 West 23rd Street, 5th Floor, New York, NY 10010 (212) 404-8102. An electronic bid made in accordance with this Notice of Sale shall be deemed an offer to purchase the Bonds in accordance with the terms provided in this Notice of Sale and shall be binding upon the bidder as if made by a signed and sealed written bid delivered to the Town.

The award of the Bonds to the winning bidder will not be effective until the bid has been approved by the Treasurer and the Board of Selectmen of the Town.

The right is reserved to reject all bids and to reject any bid not complying with this Notice of Sale and, so far as permitted by law, to waive any irregularity with respect to any proposal.

The Town of Marblehead has not contracted for the issuance of any policy of municipal bond insurance for the Bonds. If the Bonds qualify for issuance of any such policy or commitment therefor, any purchase of such insurance or commitment shall be at the sole option and expense of the bidder. Proposals shall not be conditioned upon the issuance of any such policy or commitment. Any failure of the Bonds to be so insured or of any such policy or commitment to be issued shall not in any way relieve the purchaser of its contractual obligations arising from the acceptance of its proposal for the purchase of the Bonds. Should the bidder purchase municipal bond insurance, all expenses associated with such policy or commitment will be borne by the bidder, except for the fee paid to S&P Global Ratings for a rating on the Bonds. Any such fee paid to S&P Global Ratings would be borne by the Town.

In order to assist bidders in complying with Rule 15c2-12 (b)(5) promulgated by the Securities and Exchange Commission, the Town will undertake to provide annual reports and notices of certain significant events. A description of this undertaking is set forth in the Preliminary Official Statement.

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The Bonds will not be designated as “qualified tax-exempt obligations” for purposes of Section 265(b)(3) of the Internal Revenue Code of 1986 as amended (the “Code”).

It shall be a condition to the obligation of the successful bidder to accept delivery of and pay for the Bonds that it shall be furnished, without cost, with (a) the approving opinion of the firm of Locke Lord, LLP, Boston, Massachusetts, substantially in the form appearing as Appendix B of the Preliminary Official Statement dated July 2, 2020, (b) a certificate in the form satisfactory to Bond Counsel dated as of the date of delivery of the Bonds and receipt of payment therefor to the effect that there is no litigation pending or, to the knowledge of the signers thereof, threatened which affects the validity of the Bonds or the power of the Town to levy and collect taxes to pay them, (c) a certificate of the Town Treasurer to the effect that, to the best of her knowledge and belief, as of its date and the date of sale the Preliminary Official Statement did not, and as of its date and the date of the delivery of the Bonds, the Final Official Statement did not and does not, contain any untrue statement of a material fact and did not and does not omit to state a material fact necessary to make the statements made therein, in the light of the circumstances under which they were made, not misleading, and (d) a Continuing Disclosure Certificate in the form described in the Preliminary Official Statement.

Establishment of Issue Price

The successful bidder shall assist the Town in establishing the issue price of the Bonds and shall execute and deliver to the Town on the Closing Date an “issue price” or similar certificate, substantially in the applicable form set forth in Exhibit 1 to this Notice of Sale, setting forth the reasonably expected initial offering prices to the public or the sales price of the Bonds together with the supporting pricing wires or equivalent communications, or, if applicable, the amount bid, with such modifications as may be appropriate or necessary, in the reasonable judgment of the successful bidder, the Town and Bond Counsel. All actions to be taken by the Town under this Notice of Sale to establish the issue price of the Bonds may be taken on behalf of the Town by Hilltop Securities Inc. (the “Financial Advisor”) and any notice or report to be provided to the Town may be provided to the Financial Advisor.

Competitive Sale Requirements. If the competitive sale requirements (“competitive sale requirements”) set forth in Treasury Regulation § 1.148-1(f)(3)(i) (defining “competitive sale” for purposes of establishing the issue price of the Bonds) have been satisfied, the Town will furnish to the successful bidder on the Closing Date a certificate of the Financial Advisor, which will certify each of the following conditions to be true:

1. the Town has disseminated this Notice of Sale to potential underwriters in a manner that is reasonably designed to reach potential underwriters;

2. all bidders had an equal opportunity to bid;

3. the Town received bids from at least three underwriters of municipal bonds who have established industry reputations for underwriting new issuances of municipal bonds; and

4. the Town awarded the sale of the Bonds to the bidder who submitted a firm offer to purchase the Bonds at the highest price (or lowest interest cost), as set forth in this Notice of Sale.

Any bid submitted pursuant to this Notice of Sale shall be considered a firm offer for the purchase of the Bonds, as specified in the bid. Unless a bidder notifies the Town prior to submitting its bid by contacting the Financial Advisor, telephone (617) 619-4400, and affirming in writing via email, or in its bid submitted via Parity, that it will NOT be an “underwriter” (as defined below) of the Bonds, by submitting its bid, each bidder shall be deemed to confirm that it has an established industry reputation for underwriting new issuances of municipal bonds. Unless the bidder has notified the Town that it will not be an “underwriter” (as defined below) of the Bonds, in submitting a bid, each bidder is deemed to acknowledge that it is an “underwriter” that intends to reoffer the Bonds to the public.

In the event that the competitive sale requirements are not satisfied, the Town shall so advise the successful bidder.

Failure to Meet the Competitive Sale Requirements – Option A – The Successful Bidder Intends to Reoffer the Bonds to the Public and the 10% Test to Apply. If the competitive sale requirements are not satisfied and the successful bidder intends to reoffer the Bonds to the public, the successful bidder may, at its option, use the first price at which 10% of a maturity of the Bonds (the “10% test”) is sold to the public as the issue price of that maturity, applied on a maturity-by-maturity basis, of the Bonds. The successful bidder shall advise the Financial Advisor if any maturity of the Bonds satisfies the 10% test as of the date and time of the award of the Bonds.

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If the competitive sale requirements are not satisfied, then until the 10% test has been satisfied as to each maturity of the Bonds or all of the Bonds are sold to the public, the successful bidder agrees to promptly report to the Financial Advisor the prices at which the unsold Bonds of each maturity have been sold to the public, which reporting obligation shall continue, whether or not the Closing Date has occurred, until the 10% test has been satisfied for each maturity of the Bonds or until all the Bonds of a maturity have been sold. The successful bidder shall be obligated to report each sale of Bonds to the Financial Advisor until notified in writing by the Town or the Financial Advisor that it no longer needs to do so. If the successful bidder uses Option A the successful bidder shall provide to the Town on or before the Closing Date, the certificate attached to this Notice of Sale as Exhibit 1 – Option A.

By submitting a bid and if the competitive sale requirements are not met, each bidder confirms that: (i) any agreement among underwriters, any selling group agreement and each third-party distribution agreement (to which the bidder is a party) relating to the initial sale of the Bonds to the public, together with the related pricing wires, contains or will contain language obligating each underwriter, each dealer who is a member of the selling group, and each broker-dealer that is a party to such third-party distribution agreement, as applicable, to report the prices at which it sells to the public the unsold Bonds of each maturity allotted to it until it is notified by the successful bidder that either the 10% test has been satisfied as to the Bonds of that maturity or all Bonds of that maturity have been sold to the public, if and for so long as directed by the successful bidder and as set forth in the related pricing wires and (ii) any agreement among underwriters relating to the initial sale of the Bonds to the public, together with the related pricing wires, contains or will contain language obligating each underwriter that is a party to a third-party distribution agreement to be employed in connection with the initial sale of the Bonds to the public to require each broker-dealer that is a party to such third-party distribution agreement to report the prices at which it sells to the public the unsold Bonds of each maturity allotted to it until it is notified by the successful bidder or such underwriter that either the 10% test has been satisfied as to the Bonds of that maturity or all Bonds of that maturity have been sold to the public if and for so long as directed by the successful bidder or such underwriter and as set forth in the related pricing wires.

Sales of any Bonds to any person that is a related party to an underwriter shall not constitute sales to the public for purposes of this Notice of Sale. Further, for purposes of this Notice of Sale:

1. “public” means any person other than an underwriter or a related party,

2. “underwriter” means (A) any person, including the Successful Bidder, that agrees pursuant to a written contract with the Town (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Bonds to the public and (B) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (A) to participate in the initial sale of the Bonds to the public (including a member of a selling group or a party to a third-party distribution agreement participating in the initial sale of the Bonds to the public), and

3. a purchaser of any of the Bonds is a “related party” to an underwriter if the underwriter and the purchaser are subject, directly or indirectly, to (i) more than 50% common ownership of the voting power or the total value of their stock, if both entities are corporations (including direct ownership by one corporation of another), (ii) more than 50% common ownership of their capital interests or profits interests, if both entities are partnerships (including direct ownership by one partnership of another), or (iii) more than 50% common ownership of the value of the outstanding stock of the corporation or the capital interests or profit interests of the partnership, as applicable, if one entity is a corporation and the other entity is a partnership (including direct ownership of the applicable stock or interests by one entity of the other).

Failure to Meet the Competitive Sale Requirements – Option B – The Successful Bidder Intends to Reoffer the Bonds to the Public and Agrees to Hold the Price of Maturities of Bonds for Which the 10% Test in Option A is Not Met as of the Sale Date. The successful bidder may, at its option, notify the Financial Advisor in writing, which may be by email (the “Hold the Price Notice”), not later than 4:00 P.M. Eastern Time on the Sale Date, that it has not sold 10% of the maturities of the Bonds listed in the Hold the Price Notice (the “Unsold Maturities”) and that the successful bidder will not offer the Unsold Maturities to any person at a price that is higher than the initial offering price to the public during the period starting on the Sale Date and ending on the earlier of (i) the close of the fifth business day after the Sale Date or (ii) the date on which the successful bidder has sold at least 10% of the applicable Unsold Maturity to the public at a price that is no higher than the initial offering price to the public. If the successful bidder delivers a Hold the Price Notice to the Financial Advisor, the successful bidder must provide to the Town on or before the Closing Date, in addition to the certification described in Option A above, evidence that each underwriter of the Bonds, including underwriters in an underwriting syndicate or selling group, has agreed in writing to hold the price of the Unsold Maturities in the manner described in the preceding sentence.

The Successful Bidder Does Not Intend to Reoffer the Bonds to the Public – Option C. If the successful bidder has purchased the Bonds for its own account and will not distribute, resell or reoffer the Bonds to the public, then, whether or not the competitive sale requirements were met, the issue price certificate will recite such facts and identify the price or prices at which the purchase of the Bonds was made.

8

It is anticipated that CUSIP identification numbers will be printed on the Bonds, but neither the failure to print such numbers on any Bond, nor any error with respect thereto, shall constitute a cause for failure or refusal by the purchaser thereof to accept delivery and pay for the Bonds. The Town assumes no responsibility for any CUSIP Service Bureau or other charge that may be imposed for the assignment of such numbers.

Additional information concerning the Town of Marblehead and the Bonds is contained in the Preliminary Official Statement dated July 2, 2020, to which prospective bidders are directed. The Preliminary Official Statement is provided for informational purposes only and is not a part of this Notice of Sale. Said Preliminary Official Statement is deemed final by the Town except for the omission of the reoffering price(s), interest rate(s), delivery date, the identity of the underwriter(s), and any other pertinent terms of the Bonds depending on such matters, but is subject to change without notice to completion or amendment in a Final Official Statement. Copies of the Preliminary Official Statement may be obtained from Hilltop Securities Inc., 54 Canal Street, Boston, Massachusetts 02114 (Telephone: 617-619-4400). Within seven (7) business days following the award of the Bonds in accordance herewith, 15 copies of the Final Official Statement will be available from the Hilltop Securities Inc. to the successful bidder for use in reoffering the Bonds. Upon request, additional copies will be provided at the expense of the requester.

The Bonds in definitive form will be delivered to The Depository Trust Company or its custodial agent on or about July 30, 2020 for settlement in federal funds.

__________________________________

TOWN OF MARBLEHEAD, MASSACHUSETTS /s/ Alison Nieto, Finance Director/Town Accountant

July 2, 2020

9

EXHIBIT 1 Issue Price Certificate for Use If the Competitive

Sale Requirements Are Met $41,775,000*

Town of Marblehead, Massachusetts General Obligation Municipal Purpose Loan of 2020 Bonds Dated July 30, 2020

ISSUE PRICE CERTIFICATE AND RECEIPT

The undersigned, on behalf of _______________________ (the “Successful Bidder”), hereby certifies as set forth below with respect to the sale of the above-captioned obligations (the “Bonds”) by the Town of Marblehead, Massachusetts (the “Issuer”).

1. Reasonably Expected Initial Offering Prices.

(a) As of the Sale Date, the reasonably expected initial offering prices of the Bonds to the Public by the Successful Bidder are the prices listed in Schedule A (the “Expected Offering Prices”). The Expected Offering Prices are the prices for the Maturities of the Bonds used by the Successful Bidder in formulating its bid to purchase the Bonds. Attached as Schedule B is a true and correct copy of the bid provided by the Successful Bidder to purchase the Bonds.

(b) The Successful Bidder was not given the opportunity to review other bids prior to submitting its bid.

(c) The bid submitted by the Successful Bidder constituted a firm offer to purchase the Bonds.

2. Defined Terms.

(a) Maturity means Bonds with the same credit and payment terms. Bonds with different maturity dates, or Bonds with the same maturity date but different stated interest rates, are treated as separate Maturities.

(b) Public means any person (including an individual, trust, estate, partnership, association, company, or corporation) other than an Underwriter or a related party to an Underwriter. The term “related party” for purposes of this certificate generally means any two or more persons who have greater than 50 percent common ownership, directly or indirectly.

(c) Sale Date means the first day on which there is a binding contract in writing for the sale of a Maturity of the Bonds. The Sale Date of the Bonds is July 14, 2020.

(d) Underwriter means (i) any person, including the Successful Bidder, that agrees pursuant to a written contract with the Issuer (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Bonds to the Public, and (ii) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (i) of this paragraph to participate in the initial sale of the Bonds to the Public (including a member of a selling group or a party to a third-party distribution agreement participating in the initial sale of the Bonds to the Public).

3. Receipt.

The Successful Bidder hereby acknowledges receipt from the Issuer of the Bonds and further acknowledges receipt of all certificates, opinions and other documents required to be delivered to the Successful Bidder, before or simultaneously with the delivery of such Bonds, which certificates, opinions and other documents are satisfactory to the Successful Bidder.

The representations set forth in this certificate are limited to factual matters only. Nothing in this certificate represents the Successful Bidder’s interpretation of any laws, including specifically Sections 103 and 148 of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations thereunder. The undersigned understands that the foregoing information will be relied upon by the Issuer with respect to certain of the representations set forth in the Tax Certificate and with respect to compliance with the federal income tax rules affecting the Bonds, and by Locke Lord LLP in connection with rendering its opinion that the interest on the Bonds is excluded from gross income for federal income tax purposes, the preparation of the Internal Revenue Service Form 8038-G, and other federal income tax advice that it may give to the Issuer from time to time relating to the Bonds.

Dated: ___________, 2020 Successful Bidder By:

Name: Title:


10

SCHEDULE A

EXPECTED OFFERING PRICES

(To be Attached)

SCHEDULE B

COPY OF SUCCESSFUL BIDDER’S BID

(To Be Attached)

11

EXHIBIT 1 – OPTION A

Issue Price Certificate for Use If the Competitive Sale Requirements Are Not Met and the 10% Test to Apply

$41,775,000* Town of Marblehead, Massachusetts

General Obligation Municipal Purpose Loan of 2020 Bonds Dated July 30, 2020 ISSUE PRICE CERTIFICATE AND RECEIPT

The undersigned, on behalf of ______________________ (the [Successful Bidder][Representative], on behalf of itself and [NAMES OF OTHER UNDERWRITERS] hereby certifies as set forth below with respect to the sale and issuance of the above-captioned obligations (the “Bonds”) by the Town of Marblehead, Massachusetts (the “Issuer”).

1. Sale of the Bonds. As of the date of this certificate, [except as set forth in the following paragraph,] for each Maturity of the Bonds, the first price at which at least 10% of such Maturity of the Bonds was sold to the Public is the respective price listed in Schedule A.

[Only use the next paragraph if the 10% test has not been met or all of the Bonds have not been sold for one or more Maturities of Bonds as of the Closing Date.]

For each Maturity of the Bonds as to which no price is listed in Schedule A, as set forth in the Notice of Sale for the Bonds, until at least 10% of each such Maturity of the Bonds is sold to the Public (the “10% Test”) or all of the Bonds are sold to the Public, the [Successful Bidder][Representative] agrees to promptly report to the Issuer’s financial advisor, Hilltop Securities Inc. (the “Financial Advisor”) the prices at which the unsold Bonds of each Maturity have been sold to the Public, which reporting obligation shall continue after the date hereof until the 10% test has been satisfied for each Maturity of the Bonds or until all the Bonds of a Maturity have been sold. The [Successful Bidder][Representative] shall continue to report each sale of Bonds to the Financial Advisor until notified by email or in writing by the Issuer or the Financial Advisor that it no longer needs to do so.

2. Defined Terms.



(c) Underwriter means (i) any person, including the [Successful Bidder][Representative] that agrees pursuant to a written contract with the Issuer (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Bonds to the Public, and (ii) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (i) of this paragraph to participate in the initial sale of the Bonds to the Public (including a member of a selling group or a party to a third-party distribution agreement participating in the initial sale of the Bonds to the Public).

3. Receipt. The [Successful Bidder][Representative] hereby acknowledges receipt from the Issuer of the Bonds and further acknowledges receipt of all certificates, opinion and other documents required to be delivered to the Successful Bidder, before or simultaneously with the delivery of such Bonds, which certificates, opinions and other documents are satisfactory to the [Successful Bidder][Representative].

The representations set forth in this certificate are limited to factual matters only. Nothing in this certificate represents the [Successful Bidder][Representative]’s interpretation of any laws, including specifically Sections 103 and 148 of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations thereunder. The undersigned understands that the foregoing information will be relied upon by the Issuer with respect to certain of the representations set forth in the Tax Certificate and with respect to compliance with the federal income tax rules affecting the Bonds, and by Locke Lord LLP in connection with rendering its opinion that the interest on the Bonds is excluded from gross income for federal income tax purposes, the preparation of the Internal Revenue Service Form 8038-G, and other federal income tax advice that it may give to the Issuer from time to time relating to the Bonds.

Dated: _______________ 2020 [SUCCESSFUL BIDDER][REPRESENTATIVE] By: ________________________________

Name: Title:


12

SCHEDULE A SALE PRICES

[(Attached)]

13

EXHIBIT 1 –OPTION B

Issue Price Certificate for Use If the Competitive Sale Requirements Are Not Met and the Hold the Price Rule Is Used

$41,775,000* TOWN OF MARBLEHEAD, MASSACHUSETTS

GENERAL OBLIGATION MUNICIPAL PURPOSE LOAN OF 2020 BONDS

DATED JULY 30, 2020

ISSUE PRICE CERTIFICATE AND RECEIPT

The undersigned, on behalf of ______________________ (the (“[Successful Bidder][Representative]”), on behalf of itself and [NAMES OF OTHER UNDERWRITERS] hereby certifies as set forth below with respect to the sale and issuance of the above-captioned obligations (the “Bonds”) by the Town of Marblehead, Massachusetts (the “Issuer).

1. Sale of the Bonds. As of the date of this certificate, [except as set forth in following paragraph,] for each Maturity of the Bonds, the first price at which at least 10% of such Maturity of the Bonds was sold to the Public is the respective price listed in Schedule A.

[Only use the next paragraph if the 10% test has not been met as of the Sale Date.]

For each Maturity of the Bonds as to which no price is listed in Schedule A (the “Unsold Maturities”), as set forth in the Notice of Sale for the Bonds, the [Successful Bidder][Representative] and any other Underwriter did not reoffer the Unsold Maturities to any person at a price that is higher than the initial offering price to the public until the earlier of (i) __________, 2020 or (ii) the date on which the “Successful Bidder][Representative] or any other Underwriter sold at least 10% of each Unsold Maturity at a price that is no higher than the initial offering price to the Public.

2. Defined Terms.



(c) Underwriter means (i) any person, including the [Successful Bidder][Representative], that agrees pursuant to a written contract with the Issuer (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Bonds to the Public, and (ii) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (i) of this paragraph to participate in the initial sale of the Bonds to the Public (including a member of a selling group or a party to a third-party distribution agreement participating in the initial sale of the Bonds to the Public).

3. Receipt. The [Successful Bidder][Representative] hereby acknowledges receipt from the Issuer of the Bonds and further acknowledges receipt of all certificates, opinions and other documents required to be delivered to the [Successful Bidder][Representative], before or simultaneously with the delivery of the Bonds, which certificates, opinions and other documents are satisfactory to the [Successful Bidder][Representative].

The representations set forth in this certificate are limited to factual matters only. Nothing in this certificate represents the [Successful Bidder’s][Representative’s] interpretation of any laws, including specifically Sections 103 and 148 of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations thereunder. The undersigned understands that the foregoing information will be relied upon by the Issuer with respect to certain of the representations set forth in the Tax Certificate and with respect to compliance with the federal income tax rules affecting the Bonds, and by Locke Lord LLP in connection with rendering its opinion that the interest on the Bonds is excluded from gross income for federal income tax purposes, the preparation of the Internal Revenue Service Form 8038-G, and other federal income tax advice that it may give to the Issuer from time to time relating to the Bonds. ______________________ *Preliminary, subject to change. Dated: ___________, 2020 [SUCCESSFUL BIDDER] [REPRESENTATIVE]

By: ________________________________ Name: Title:

14

[SCHEDULE A

SALE PRICES

(To be Attached)]

15

OFFICIAL STATEMENT

TOWN OF MARBLEHEAD, MASSACHUSETTS

$41,775,000* GENERAL OBLIGATION MUNICIPAL PURPOSE LOAN OF 2020 BONDS

This Official Statement is provided for the purpose of presenting certain information relating to the Town of Marblehead, Massachusetts (the “Town”) in connection with the sale of $41,775,000* stated principal amount of its General Obligation Municipal Purpose Loan of 2020 Bonds (the "Bonds"). The information contained herein has been furnished by the Town, except information attributed to another source.

THE BONDS

Description of the Bonds

The Bonds will be dated their date of delivery and will bear interest payable semiannually on January 15 and July 15, until maturity or redemption prior to maturity, commencing July 15, 2021. The Bonds shall mature on July 15 of the years and in the principal amounts as set forth on the cover page of this Official Statement.

The Bonds are issuable only in fully registered form registered in the name of Cede & Co., as Bondowner and nominee for The Depository Trust Company ("DTC"), New York, New York. DTC will act as securities depository for the Bonds. Purchases of the Bonds will be made in book-entry form, in the denomination of $5,000, or any integral multiple thereof. Purchasers will not receive certificates representing their interests in Bonds purchased. So long as Cede & Co. is the Bondowner, as nominee of DTC, references herein to the Bondowners or Registered Owners shall mean Cede & Co., as aforesaid, and shall not mean the Beneficial Owners (as defined herein) of the Bonds. (See "Book-Entry Transfer System" herein.)

Principal and semiannual interest on the Bonds will be paid by U.S. Bank National Association, Boston, Massachusetts or its successor as Paying Agent. So long as DTC or its nominee, Cede & Co., is the Bondowner, such payments will be made directly to DTC. Disbursement of such payments to the DTC Participants is the responsibility of DTC and disbursement of such payments to the Beneficial Owners is the responsibility of the DTC Participants and the Indirect Participants, as more fully described herein.

Redemption Provisions

Optional Redemption

Bonds maturing on or prior to July 15, 2029 shall not be subject to redemption prior to their stated maturity dates. Bonds maturing on or after July 15, 2030 shall be subject to redemption prior to maturity, at the option of the Town, on or after July 15, 2029, either in whole or in part at any time, and if in part, by lot within a maturity, at the par amount of the Bonds to be redeemed, plus accrued interest to the date set for redemption.

Mandatory Redemption

If the successful bidder designated principal amounts of the Bonds to be combined into one, two or three term bonds (which may be done only for principal amounts in consecutive years and only with respect to Bonds maturing on and after July 15, 2030), each such term bond shall be subject to mandatory redemption commencing on July 15 of the first year which has been combined to form such term bond and continuing on July 15 in each year thereafter until the stated maturity date of that Bond. The amount redeemed or paid at maturity in any year shall be equal to the principal amount for that year set forth in the schedule contained in the Notice of Sale dated July 2, 2020 relating to the Bonds. Principal amounts to be redeemed in any year by mandatory redemption shall be redeemed at par (without premium), plus accrued interest to the redemption date, and shall be selected by lot from among the Bonds then subject to redemption. The Town Treasurer may credit against any mandatory redemption requirement term bonds which have been purchased and cancelled by the Town or have been redeemed and not theretofor applied as a credit against any mandatory redemption requirement.

Notice of Redemption

Notice of any redemption of Bonds, prior to their dates of maturity, specifying the Bonds (or the portions thereof) to be redeemed shall be mailed or sent in such other manner acceptable to DTC not more than 60 days nor less than 30 days prior to the redemption date. Any failure on the part of DTC to notify the Direct Participants of the redemption or failure on the part of DTC’s Participants, Indirect Participants or of a nominee of a Beneficial Owner having received notice from a DTC Participant or otherwise to notify the Beneficial Owners shall not affect the validity of the redemption. ______________________ *Preliminary, subject to change.

16

Record Date The record date for each payment of interest is the last business day of the month preceding the interest payment date provided that, with respect to overdue interest, the Paying Agent may establish a special record date. The special record date may not be more than twenty (20) days before the date set for payment. The Paying Agent will mail notice of a special record date to the Bondowners at least ten (10) days before the special record date. Book-Entry Transfer System The Depository Trust Company ("DTC"), New York, NY, will act as securities depository for the Bonds. The Bonds will be issued in fully-registered form registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One-fully registered certificate will be issued for each maturity of the Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC. DTC, the world's largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC's Participants ("Direct Participants") deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has a rating from S&P Global Ratings of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com. Purchases of securities deposited with DTC must be made by or through Direct Participants, which will receive a credit for such securities on DTC's records. The ownership interest of each actual purchaser of each security deposited with DTC ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in securities deposited with DTC are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in securities deposited with DTC, except in the event that use of the book-entry system for such securities is discontinued. To facilitate subsequent transfers, all securities deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of securities with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the securities deposited with DTC; DTC's records reflect only the identity of the Direct Participants to whose accounts such securities are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Redemption notices shall be sent to DTC. If less than all of the Bonds are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in the Bonds to be redeemed. Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote with respect to securities deposited with DTC unless authorized by a Direct Participant in accordance with DTC's MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the issuer of such securities or its paying agent as soon as possible after the record date.

17

The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts such securities are credited on the record date (identified in a listing attached to the Omnibus Proxy). Principal and interest payments on securities deposited with DTC will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from issuer of such securities or its paying agent, on the payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC (nor its nominee), the issuer of such securities or its paying agent, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the issuer of such securities or its paying agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as depository with respect to securities held by it at any time by giving reasonable notice to the issuer of such securities or its paying agent. Under such circumstances, in the event that a successor depository is not obtained, physical certificates are required to be printed and delivered to Beneficial Owners. The Town may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, physical certificates will be printed and delivered to Beneficial Owners. The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that the Town believes to be reliable, but the Town takes no responsibility for the accuracy thereof. Authorization of the Bonds and Use of Proceeds The following sets forth the principal amounts, purposes, total amount authorized, bond anticipation notes outstanding, statutory references and dates of approval for the current offering of Bonds:

Bond StatutoryOriginal Anticipation Notes Reference

This Issue* Purpose Authorization Outstanding (G.L., as amended)

30,000,000$ Gerry School Construction (3) 54,844,767$ (4) -$ Ch. 70B 5/7/2019 (art. 51) & 6/18/20195,000,000 Abbott Hall Renovations (3) 8,982,963 7,350,000 (5) Ch. 44, s. 7(1) 5/6/2018 (art. 36) & 6/21/2018

394,000 (1) Seawalls & Protective Fencing (3) 871,894 871,894 (6) Ch. 44, s. 7(1) 5/6/2018 (art. 10) & 6/21/2018171,000 (2) Fort Sewall Repairs (3) 750,000 600,000 (7) Ch. 44, s. 7(1) 5/7/2019 (art. 50) & 6/18/2019

6,210,000 Refunding (3) - - Ch. 44, s. 21A N/A

41,775,000$ * 8,821,894$

Date ofAuthorization

______________________ *Preliminary, subject to change. (1) Final pricing will include $549 of additional proceeds. (2) Final pricing will include $265 of additional proceeds. (3) The Town has voted to exempt these authorizations from the limits of Proposition 2 ½. (4) This project is eligible for a maximum total facilities grant from the Massachusetts School Building Authority (MSBA) in the amount

of $13,989,674 which will reduce the borrowing authority by a like amount. To date, the Town has received $800,386. (5) Payable July 31, 2020. To be retired in part with the proceeds of this issue and $2,350,000 bond anticipation notes. (6) Payable July 31, 2020. To be retired in part with the proceeds of this issue and $477,345 grant proceeds. (7) Payable July 31, 2020. To be retired in part with the proceeds of this issue, $400,000 bond anticipation notes and $28,735 grant

proceeds. Bond proceeds will be used to current refund the callable maturities of Town’s original $12,000,000 General Obligation School Bonds (Unlimited Tax) dated August 1, 2010, maturing in the years 2021 through 2030 in the aggregate principal amount of $7,120,000 (the “Refunded Bonds”) and to pay costs of issuing the refunding portion of the Bonds.

18

Sources and Uses of Bond Proceeds

Proceeds of the Bonds will be applied as follows:

SOURCES:Par Amount of the Bonds $Original Issue Premium

Total Sources $

USES:Deposit to Refunding Escrow Fund $Retire Maturing NotesProject Fund DepositUnderwriter's DiscountCosts of IssuanceRounding Amount

Total Uses $

Plan of Refunding Upon delivery of the Bonds, the Town will enter into a Refunding Escrow Agreement (the “Refunding Escrow Agreement”) with U.S. Bank National Association, as Refunding Escrow Agent, to provide for the refunding of the Refunded Bonds. Upon receipt of the portion of the proceeds of the Bonds necessary to refund the Refunded Bonds, the Refunding Escrow Agent will deposit in the Refunding Escrow Fund established under the Refunding Escrow Agreement an amount which will be held in cash to pay on September 15, 2020, the outstanding principal of and interest on the Refunded Bonds. The Refunding Escrow Fund will be pledged for the benefit of the holders of the Refunded Bonds. Principal Payments by Purpose

Maturity Year School (1)* General (1)* Refunding (1)* Total (1)*

2021 565,000$ 110,000$ 370,000$ 1,045,000$ 2022 1,055,000 195,000 530,000 1,780,000 2023 1,110,000 205,000 555,000 1,870,000 2024 1,165,000 215,000 585,000 1,965,000 2025 1,225,000 225,000 615,000 2,065,000 2026 1,290,000 235,000 645,000 2,170,000 2027 1,355,000 255,000 680,000 2,290,000 2028 1,425,000 265,000 710,000 2,400,000 2029 1,490,000 280,000 745,000 2,515,000 2030 1,550,000 290,000 775,000 2,615,000 2031 1,605,000 300,000 - 1,905,000 2032 1,650,000 305,000 - 1,955,000 2033 1,680,000 310,000 - 1,990,000 2034 1,715,000 315,000 - 2,030,000 2035 1,750,000 325,000 - 2,075,000 2036 1,790,000 335,000 - 2,125,000 2037 1,830,000 340,000 - 2,170,000 2038 1,870,000 345,000 - 2,215,000 2039 1,915,000 355,000 - 2,270,000 2040 1,965,000 360,000 - 2,325,000

Total 30,000,000$ 5,565,000$ 6,210,000$ 41,775,000$ *

______________________ *Preliminary, subject to change. (1) Exempt from the limitations imposed by Proposition 2 ½.

19

Tax Exemption In the opinion of Locke Lord LLP, Bond Counsel to the Town (“Bond Counsel”), based upon an analysis of existing laws, regulations, rulings, and court decisions, and assuming, among other matters, compliance with certain covenants, interest on the Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986, as amended (the “Code”). Bond Counsel is of the further opinion that interest on the Bonds will not be included in computing the alternative minimum taxable income of Bondholders who are individuals. Bond Counsel expresses no opinion regarding any other federal tax consequences arising with respect to the ownership or disposition of, or the accrual or receipt of interest on the Bonds. The Bonds will not be designated as “qualified tax-exempt obligations” for purposes of Section 265(b)(3) of the Code. The Code imposes various requirements relating to the exclusion from gross income for federal income tax purposes of interest on obligations such as the Bonds. Failure to comply with these requirements may result in interest on the Bonds being included in gross income for federal income tax purposes, possibly from the date of original issuance of the Bonds. The Town has covenanted to comply with such requirements to ensure that interest on the Bonds will not be included in federal gross income. The opinion of Bond Counsel assumes compliance with these requirements. Bond Counsel is also of the opinion that, under existing law, interest on the Bonds is exempt from Massachusetts personal income taxes, and the Bonds are exempt from Massachusetts personal property taxes. Bond Counsel has not opined as to other Massachusetts tax consequences arising with respect to the Bonds. Prospective Bondholders should be aware, however, that the Bonds are included in the measure of Massachusetts estate and inheritance taxes, and the Bonds and the interest thereon are included in the measure of certain Massachusetts corporate excise and franchise taxes. Bond Counsel expresses no opinion as to the taxability of the Bonds or the income therefrom or any other tax consequences arising with respect to the Bonds under the laws of any state other than Massachusetts. A complete copy of the proposed form of opinion of Bond Counsel is set forth in Appendix B hereto. To the extent the issue price of any maturity of the Bonds is less than the amount to be paid at maturity of such Bonds (excluding amounts stated to be interest and payable at least annually over the term of such Bonds), the difference constitutes “original issue discount,” the accrual of which, to the extent properly allocable to each owner thereof, is treated as interest on the Bonds which is excluded from gross income for federal income tax purposes and is exempt from Massachusetts personal income taxes. For this purpose, the issue price of a particular maturity of the Bonds is either the reasonably expected initial offering price to the public or the first price at which a substantial amount of such maturity of the Bonds is sold to the public, as applicable. The original issue discount with respect to any maturity of the Bonds accrues daily over the term to maturity of such Bonds on the basis of a constant interest rate compounded semiannually (with straight-line interpolations between compounding dates). The accruing original issue discount is added to the adjusted basis of such Bonds to determine taxable gain or loss upon disposition (including sale, redemption, or payment on maturity) of such Bonds. Bondholders should consult their own tax advisors with respect to the tax consequences of ownership of Bonds with original issue discount, including the treatment of purchasers who do not purchase such Bonds in the original offering to the public at the reasonably expected initial offering price or, if applicable, the first price at which a substantial amount of such Bonds is sold to the public. Bonds purchased, whether at original issuance or otherwise, for an amount greater than the stated principal amount to be paid at maturity of such Bonds, or, in some cases, at the earlier redemption date of such Bonds (“Premium Bonds”), will be treated as having amortizable bond premium for federal income tax purposes and Massachusetts personal income tax purposes. No deduction is allowable for the amortizable bond premium in the case of obligations, such as the Premium Bonds, the interest on which is excluded from gross income for federal income tax purposes. However, a Bondholder’s basis in a Premium Bond will be reduced by the amount of amortizable bond premium properly allocable to such Bondholder. Holders of Premium Bonds should consult their own tax advisors with respect to the proper treatment of amortizable bond premium in their particular circumstances. Bond Counsel has not undertaken to determine (or to inform any person) whether any actions taken (or not taken) or events occurring (or not occurring) after the date of issuance of the Bonds may adversely affect the value of, or the tax status of interest on, the Bonds. Although Bond Counsel is of the opinion that interest on the Bonds is excluded from gross income for federal income tax purposes and is exempt from Massachusetts personal income taxes, the ownership or disposition of, or the accrual or receipt of interest on, the Bonds may otherwise affect the federal or state tax liability of a Bondholder. Among other possible consequences of ownership or disposition of, or the accrual or receipt of interest on, the Bonds, the Code requires recipients of certain social security and certain railroad retirement benefits to take into account receipts or accruals of interest on the Bonds in determining the portion of such benefits that are included in gross income. The nature and extent of all such other tax consequences will depend upon the particular tax status of the Bondholder or the

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Bondholder’s other items of income, deduction, or exclusion. Bond Counsel expresses no opinion regarding any such other tax consequences, and Bondholders should consult with their own tax advisors with respect to such consequences. Risk of Future Legislative Changes and/or Court Decisions

Legislation affecting tax-exempt obligations is regularly considered by the United States Congress and may also be considered by the Massachusetts legislature. Court proceedings may also be filed, the outcome of which could modify the tax treatment of obligations such as the Bonds. There can be no assurance that legislation enacted or proposed, or actions by a court, after the date of issuance of the Bonds will not have an adverse effect on the tax status of interest on the Bonds or the market value or marketability of the Bonds. These adverse effects could result, for example, from changes to federal or state income tax rates, changes in the structure of federal or state income taxes (including replacement with another type of tax), or repeal (or reduction in the benefit) of the exclusion of interest on the Bonds from gross income for federal or state income tax purposes for all or certain taxpayers. Additionally, Bondholders should be aware that future legislative actions (including federal income tax reform) may retroactively change the treatment of all or a portion of the interest on the Bonds for federal income tax purposes for all or certain taxpayers. In all such events, the market value of the Bonds may be affected and the ability of Bondholders to sell their Bonds in the secondary market may be reduced. The Bonds are not subject to special mandatory redemption, and the interest rates on the Bonds are not subject to adjustment, in the event of any such change in the tax treatment of interest on the Bonds.

Investors should consult their own financial and tax advisors to analyze the importance of these risks.

Security and Remedies

Full Faith and Credit. General obligation bonds and notes of a Massachusetts city or town constitute a pledge of its full faith and credit. Payment is not limited to a particular fund or revenue source. Except for “qualified bonds” as described below (see “Serial Bonds and Notes” under “INDEBTEDNESS-TYPES OF OBLIGATIONS” below) and setoffs of state distributions as described below (see “State Distributions” below), no provision is made by the Massachusetts statutes for priorities among bonds and notes and other general obligations, although the use of certain moneys may be restricted.

Tax Levy. The Massachusetts statutes direct the municipal assessors to include annually in the tax levy for the next fiscal year “all debt and interest charges matured and maturing during the next fiscal year and not otherwise provided for [and] all amounts necessary to satisfy final judgments”. Specific provision is also made for including in the next tax levy payments of rebate amounts not otherwise provided for and payment of notes in anticipation of federal or state aid, if the aid is no longer forthcoming.

The total amount of a tax levy is limited by statute. However, the voters in each municipality may vote to exclude from the limitation any amounts required to pay debt service on indebtedness incurred before November 4, 1980. Local voters may also vote to exempt specific subsequent bond issues from the limitation. (See “Tax Limitations” under “PROPERTY TAXATION” below.) In addition, obligations incurred before November 4, 1980 may be constitutionally entitled to payment from taxes in excess of the statutory limit.

No Lien. Except for taxes on the increased value of certain property in designated development districts which may be pledged for the payment of debt service on bonds issued to finance economic development projects within such districts, no provision is made for a lien on any portion of the tax levy or any other moneys to secure particular bonds or notes or bonds and notes generally (or judgments on bonds or notes) in priority to other claims. Provision is made, however, for borrowing to pay judgments, subject to the General Debt Limit. (See “INDEBTEDNESS-Authorization Procedures and Limitations” below.) Subject to the approval of the State Director of Accounts for judgments above $10,000, judgments may also be paid from available funds without appropriation and included in the next tax levy unless other provision is made.

Court Proceedings. Massachusetts cities and towns are subject to suit on their general obligation bonds and notes and courts of competent jurisdiction have power in appropriate proceedings to order payment of a judgment on the bonds or notes from lawfully available funds or, if necessary, to order the city or town to take lawful action to obtain the required money, including the raising of it in the next annual tax levy, within the limits prescribed by law. (See “Tax Limitations” under “PROPERTY TAXATION” below.) In exercising their discretion as to whether to enter such an order, the courts could take into account all relevant factors including the current operating needs of the city or town and the availability and adequacy of other remedies. The Massachusetts Supreme Judicial Court has stated in the past that a judgment against a municipality can be enforced by the taking and sale of the property of any inhabitant. However, there has been no judicial determination as to whether this remedy is constitutional under current due process and equal protection standards.

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Restricted Funds. Massachusetts statutes also provide that certain water, gas and electric, community antenna television system, telecommunications, sewer, parking meter and passenger ferry fee, community preservation and affordable housing receipts may be used only for water, gas and electric, community antenna television system, telecommunications, sewer, parking, mitigation of ferry service impacts, community preservation and affordable housing purposes, respectively; accordingly, moneys derived from these sources may be unavailable to pay general obligation bonds and notes issued for other purposes. A city or town that accepts certain other statutory provisions may establish an enterprise fund for a utility, health care, solid waste, recreational or transportation facility and for police or fire services; under those provisions any surplus in the fund is restricted to use for capital expenditures or reduction of user charges. In addition, subject to certain limits, a city or town may annually authorize the establishment of one or more revolving funds in connection with use of certain revenues for programs that produce those revenues; interest earned on a revolving fund is treated as general fund revenue. A city or town may also establish an energy revolving loan fund to provide loans to owners of privately-held property in the city or town for certain energy conservation and renewable energy projects, and may borrow to establish such a fund. The loan repayments and interest earned on the investment of amounts in the fund shall be credited to the fund. Also, the annual allowance for depreciation of a gas and electric plant or a community antenna television and telecommunications system is restricted to use for plant or system renewals and improvements, for nuclear decommissioning costs, and costs of contractual commitments, or, with the approval of the State Department of Telecommunications and Energy, to pay debt incurred for plant or system reconstruction or renewals. Revenue bonds and notes issued in anticipation of them may be secured by a prior lien on specific revenues. Receipts from industrial users in connection with industrial revenue financings are also not available for general municipal purposes.

State Distributions. State grants and distributions may in some circumstances be unavailable to pay general obligation bonds and notes of a city or town in that the State Treasurer is empowered to deduct from such grants and distributions the amount of any debt service paid on “qualified bonds” (See “Serial Bonds and Notes” under “INDEBTEDNESS-TYPES OF OBLIGATIONS” below) and any other sums due and payable by the city or town to The Commonwealth of Massachusetts (“the Commonwealth”) or certain other public entities, including any unpaid assessments for costs of any public transportation authority (such as the Massachusetts Bay Transportation Authority (“MBTA”) or a regional transit authority) of which it is a member, for costs of the Massachusetts Water Resources Authority (“MWRA”) if the city or town is within the territory served by the MWRA, for any debt service due on obligations issued to the Massachusetts School Building Authority (“MSBA”), or for charges necessary to meet obligations under the Commonwealth’s Clean Water or Drinking Water Revolving Loan Programs, including such charges imposed by another local governmental unit that provides wastewater collection or treatment services or drinking water services to the city or town.

If a city or town is (or is likely to be) unable to pay principal or interest on its bonds or notes when due, it is required to notify the State Commissioner of Revenue. The Commissioner shall in turn, after verifying the inability, certify the inability to the State Treasurer. The State Treasurer shall pay the due or overdue amount to the paying agent for the bonds or notes, in trust, within three days after the certification or one business day prior to the due date (whichever is later). This payment is limited, however, to the estimated amount otherwise distributable by the Commonwealth to the city or town during the remainder of the fiscal year (after the deductions mentioned in the foregoing paragraph). If for any reason any portion of the certified sum has not been paid at the end of the fiscal year, the State Treasurer shall pay it as soon as practicable in the next fiscal year to the extent of the estimated distributions for that fiscal year. The sums so paid shall be charged (with interest and administrative costs) against the distributions to the city or town.

The foregoing does not constitute a pledge of the faith and credit of the Commonwealth. The Commonwealth has not agreed to maintain existing levels of state distributions, and the direction to use estimated distributions to pay debt service may be subject to repeal by future legislation. Moreover, adoption of the annual appropriation act has sometimes been delayed beyond the beginning of the fiscal year and estimated distributions which are subject to appropriation may be unavailable to pay local debt service until they are appropriated.

Bankruptcy. Enforcement of a claim for payment of principal or interest on general obligation bonds or notes would be subject to the applicable provisions of federal bankruptcy laws and to the provisions of other statutes, if any, hereafter enacted by the Congress or the State legislature extending the time for payment or imposing other constraints upon enforcement insofar as the same may be constitutionally applied. Massachusetts municipalities are not generally authorized by the Massachusetts General Laws to file a petition for bankruptcy under federal bankruptcy laws. In cases involving significant financial difficulties faced by a single city, town or regional school district, however, the Commonwealth has enacted special legislation to permit the appointment of a fiscal overseer, finance control board or, in the most extreme cases, a state receiver. In a limited number of these situations, such special legislation has also authorized the filing of federal bankruptcy proceedings, with the prior approval of the Commonwealth. In each case where such authority was granted, it expired at the termination of the Commonwealth’s oversight of the financially distressed city, town or regional school district. To date, no such filings have been approved or made.

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Opinion of Bond Counsel

The purchaser will be furnished the legal opinion of the firm of Locke Lord, LLP, Boston, Massachusetts (“Bond Counsel”). The opinion will be dated and given on and will speak only as of the date of original delivery of the Bonds to the successful bidder. The opinion will be substantially in the form presented in Appendix B.

Other than as to matters expressly set forth herein as the opinion of Bond Counsel, Bond Counsel is not passing upon and does not assume any responsibility for the accuracy or adequacy of the statements made in this Official Statement and makes no representation that they have independently verified the same.

Rating

Application has been made to S&P Global Ratings for a rating on the Bonds. Such rating, if obtained, will be printed on the cover of the Final Official Statement and will only reflect the rating agency's views and will be subject to revision or withdrawal, which could affect the price and marketability of the Bonds.

Financial Advisory Services of Hilltop Securities Inc.

Hilltop Securities Inc., Boston, Massachusetts serves as financial advisor to the Town of Marblehead, Massachusetts.

Continuing Disclosure

In order to assist the underwriters in complying with Rule 15c2-12(b)(5) promulgated by the Securities and Exchange Commission (the “Rule”), the Town will covenant for the benefit of owners of the Bonds to provide certain financial information and operating data relating to the Town by not later than 270 days after the end of each fiscal year (the “Annual Report”), and to provide notices of the occurrence of certain enumerated events. Other than the Town, there are no obligated persons with respect to the Bonds within the meaning of the Rule. The covenants will be contained in a Continuing Disclosure Certificate, the proposed form of which is provided in Appendix C. The Certificate will be executed by the signers of the Bonds, and incorporated by reference in the Bonds.

In the past five years, the Town believes it has complied, in all material respects, with its previous undertakings to provide annual reports or notices of significant events in accordance with the Rule.

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General The Town of Marblehead (the “Town”) is located in southeastern Essex County along the Atlantic coast. It is bordered on the east by the Atlantic Ocean, on the south by the Town of Swampscott, and on the north and west by the City of Salem. Established as a Town in 1649, Marblehead has a population of 20,461 according to the 2010 census and occupies a land area of 4.33 square miles. One of the Town’s main attractions is its extensive shoreline of approximately 13.5 miles, bordered by the Atlantic Ocean on the north and east. The Town is considered one of the leading yacht centers of the United States. Government Local legislative decisions are made by an open town meeting with administrative authority in a five-member board of selectmen. Local taxes are assessed by a board of three assessors elected for staggered three year terms. In addition, the Board of Selectmen appoints members to various boards, committees and commissions. The Town also has a Town Administrator and Finance Director.

PRINCIPAL TOWN OFFICIALS

Manner of TermTitle Name Selection Expires

Selectman (Chair) Jackie Belf-Becker Elected 2021Selectman David Glen Depew Elected 2021Selectman Judith R. Jacobi Elected 2021Selectman M. C. Moses Grader Elected 2021Selectman James E. Nye Elected 2021Town Administrator Jason Silva Appointed 2021Finance Director/Town Accountant Alison B. Nieto Appointed 2021Treasurer/Collector Nancy Connelly Appointed 2021Town Clerk Robin A. Michaud Elected 2022

Corona Virus (COVID-19) COVID-19 is a new respiratory disease caused by a novel coronavirus that has not previously been seen in humans. On March 10, 2020, the Governor of The Commonwealth of Massachusetts declared a state of emergency to support the Commonwealth’s response to the outbreak of the virus. On March 11, 2020 the World Health Organization declared COVID-19 a pandemic. On March 13, 2020, the President declared a national emergency due to the outbreak, which has enabled disaster funds to be made available to states to fight the pandemic. On March 15, 2020, the Governor announced emergency actions to help address the spread of the virus, and as a result the Town issued a declaration of emergency on March 23, 2020. This declaration included closing all municipal buildings to the public until further notice is given by the Board of Selectmen and the Board of Health. The Town is adhering to these actions by strictly following the public health recommendations of social distancing guidelines and limiting public gatherings to 10 people or less. Essential Town employees are currently reporting to work as directed and under the discretion of management, while many employees are working remotely. The Town continues to and expects to continue to maintain all essential functions and service and Abbot Hall and the Town’s municipal offices have reopened to employees and to the public. Pursuant to M.G.L. Chapter 44, Section 31, the Town can set up a fund specifically related to COVID-19 expenses. This fund can be used to capture all unbudgeted costs related to the COVID-19 pandemic and deficit spending for these costs, including but not limited to, overtime, cleaning and medical supplies, and IT equipment would be allowed, with the approval of the Commonwealth’s Department of Revenue. The Town has created a COVID-19 fund. The virus and the resulting actions by national, state and local governments is altering the behavior of businesses and people in a manner that will have negative impacts on global and local economies. There can be no assurances regarding the extent to which COVID-19 will impact the national and state economies and, accordingly, how it will adversely impact municipalities, including the Town. These negative impacts are likely to include reduced collections of property taxes and other revenues, including local meals and rooms tax revenue, motor vehicle excise taxes and other fees and charges

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collected by the Town. Additionally, state aid payments to the Town, which are dependent upon collections by the Commonwealth of income, sales, capital gains and other similar taxes, may be adversely impacted by reduced or delayed collections of those revenue streams. The Town put a freeze on all departments’ non-essential expenses through the end of the year. All COVID-19 related expenses are being tracked in a separate account and the Town is expecting federal reimbursement to cover a large portion of these expenses. The Town’s fiscal 2020 local receipts have remained close to original projections. However, it is expected that local receipts, new growth, and state support in fiscal 2021 will decrease. The Town estimates approximately a $1.5 million decrease from its original projections made in January 2020. Over the last few months of the fiscal year, the Town worked with all departments to reduce their fiscal 2021 budgets in anticipation of reduced revenues due to the COVID-19 outbreak. The Town made reductions in personnel, as well as vehicle, equipment, and capital expenses, in order to present a balanced fiscal 2021 budget to Town Meeting on June 29, 2020. Town Meeting approved the budget with these reductions. The rapid economic changes associated with the COVID-19 pandemic are likely to have negatively impacted the employment, income, and related statistics presented herein. Municipal Services The Town operates self-sufficient water, sewer, electric and harbor enterprises. In addition to paying normal operating expenses, the utility rates and user fees include payment for principal and interest on bonds and assessments of the Massachusetts Municipal Wholesale Electric Company (“MMWEC”), the Massachusetts Water Resources Authority (“MWRA”) and the South Essex Sewerage District. Each enterprise reimburses the Town for expenditures paid by the Town such as pensions, workmen’s compensation, employee health and life insurance, unemployment compensation and other insurance. The Town has a full time police and fire department. In addition, the Town provides general governmental services for the territory within its boundaries, including public education K-12, parks and recreation, a public library and housing for the elderly and veterans. The Essex North Shore Agricultural and Technical School District provides vocational technical education in grades nine through twelve for the Town and fifteen neighboring communities. The Marblehead Housing Authority provides housing for eligible low-income families and handicapped persons. The MBTA provides rail and bus service to the Town. Education The Town provides public education from kindergarten through grade twelve. The Town has one high school, one middle school and six elementary schools. The system has a capacity of 3,680 students.

PUBLIC SCHOOL ENROLLMENTS - OCTOBER 1

The following sets forth the trend in public school enrollments.

2015 2016 2017 2018 2019

P re-S choo l-K indergarten 238 267 227 221 207G rades 1 -4 936 887 896 889 847G rades 5 -6 467 443 447 421 419G rades 7 -8 510 506 489 466 488

G rades 9 -12 1 ,071 1 ,066 1 ,030 1 ,049 998Tota ls 3 ,222 3 ,169 3 ,089 3 ,046 2 ,959

A ctua l

______________________ SOURCE: Marblehead School Department.

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Industry and Commerce

Marblehead is located on the Atlantic Ocean with a large harbor and is home to many coastal activities. The Town's waterfront and architectural significance attract many tourists to the area. The service industry is the Town's largest economic sector. The table below sets forth the major categories of income and employment in the Town during the following calendar years.

Industry 2014 2015 2016 2017 2018

Construction 293 293 316 334 340 Manufacturing 46 79 77 80 83 Trade, Transportation and Utilities 641 639 628 642 608 Information Technology 78 83 82 73 72 Financial Activities 311 324 343 359 333 Professional and Business Services 433 459 477 551 414 Education and Health Services 1,400 1,427 1,453 1,461 1,467 Leisure and Hospitality 866 878 918 947 887 Other Services 636 656 643 680 776 Total Employment 4,704 4,838 4,937 5,127 5,170

Number of Establishments 667 666 671 681 661 Average Weekly Wages 871$ 891$ 911$ 922$ 923$ Total Wages $ 222,617,825 $ 232,111,910 $ 242,321,671 $ 253,576,135 $ 248,252,259

Calendar Year Average

______________________ SOURCE: Massachusetts Department of Employment and Training. Data based upon place of employment, not place of

residence. Due to the 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.

Labor Force, Employment and Unemployment

According to the Massachusetts Department of Employment and Training preliminary data, in May 2020 the Town had a total labor force of 9,826 of which 8,673 were employed and 1,153 or 11.7% were unemployed as compared to 16.3% for the Commonwealth, it is likely that the COVID-19 pandemic will continue to adversely affect unemployment levels nationwide. (Note: Monthly data are unadjusted.) The following table sets forth the Town's average labor force and unemployment rates for each of the calendar years 2015 through 2019 and the unemployment rate for the Commonwealth and country as a whole for the same period.

UNEMPLOYMENT RATES

Massachusetts United StatesYear Labor Force Unemployment Rate Unemployment Rate Unemployment Rate

2019 11,275 2.4 % 2.9 % 3.9 %2018 11,275 2.7 3.3 3.92017 11,027 3.1 3.7 4.42016 10,761 2.9 3.9 4.92015 10,783 3.8 5.3 5.0

Town of Marblehead

______________________ SOURCE: Mass. Department of Employment and Training, Federal Reserve Bank of Boston and U.S. Bureau of Labor

Statistics. Data based upon place of residence, not place of employment.

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BUILDING PERMITS The following table sets forth the number of building permits issued and the estimated dollar value of new construction and alterations for fiscal years 2015 through 2019. Permits are filed for both private construction as well as for Town projects.

FiscalYear No. Value No. Value No. Value

2019 9 4,693,000$ 816 48,767,104$ 825 53,460,104$ 2018 3 2,317,724 783 33,896,882 786 36,214,606 2017 11 7,269,072 768 37,835,889 779 45,104,961 2016 6 3,504,040 864 33,767,487 870 37,271,527 2015 11 6,153,833 759 30,031,349 770 36,185,182

New Construction Additions/Alterations Totals

______________________ SOURCE: Report of the Building Inspector. It is likely that the COVID-19 pandemic will negatively affect the total number and dollar value of building permits issued in the current calendar year. Transportation The Town is a member of the MBTA which provides bus service to Swampscott, Lynn and Boston. Commuter rail service to North Station in Boston is readily accessible in the neighboring communities of Salem and Swampscott.

POPULATION AND INCOME

Marblehead Massachusetts United StatesMedian Age:

2010 45.7 39.1 37.22000 41.9 36.5 35.31990 39.5 33.6 32.91980 36.1 31.2 30.0

Median Family Income:2010 $97,097 $81,165 $51,1442000 99,892 61,664 50,0461990 65,024 44,367 35,2251980 49,817 21,166 19,908

Per Capita Income:2010 $56,552 $33,966 $27,3342000 46,738 25,952 21,5871990 30,615 17,224 14,4201980 11,619 7,459 7,313

______________________ SOURCE: Federal Census. On the basis of the 2010 Federal census, the Town has a population density of approximately 4,371 persons per square mile. POPULATION TRENDS 2010 2000 1990 1980 19,808 20,377 19,971 20,126 ______________________ SOURCE: Federal Census.

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PROPERTY TAXATION Tax Levy Computation The principal revenue source of the Town is the tax on real and personal property. The amount to be levied in each year is the amount appropriated or required by law to be raised for municipal expenditures less estimated receipts from other sources and less appropriations voted from funds on hand. The total amount levied is subject to certain limits prescribed by law; for a description of those limits, see "Tax Limitations" below. The estimated receipts for a fiscal year from sources other than the property tax may not exceed the actual receipts during the preceding fiscal year from the same sources unless approved by the State Commissioner of Revenue. Excepting special funds the use of which is otherwise provided for by law, the deduction for appropriations voted from funds on hand for a fiscal year cannot exceed the "free cash" as of the beginning of the prior fiscal year as certified by the State Director of Accounts plus up to nine months' collections and receipts on account of earlier years' taxes after that date. Subject to certain adjustments, free cash is surplus revenue less uncollected overdue property taxes from earlier years. Although an allowance is made in the tax levy for abatements (see "Abatements and Overlay" below) no reserve is generally provided for uncollectible real property taxes. Since some of the levy is inevitably not collected, this creates a cash deficiency which may or may not be offset by other items (See "Taxation to Meet Deficits"). The table below illustrates the manner in which the tax levy was determined for the following fiscal years:

TAX LEVY COMPUTATION

2016 2017 2018 2019 2020

Total Appropriations(1) $83,184,867 $89,096,568 $94,135,973 $96,728,928 $99,376,892Additions: State & County Assessments(2) 2,893,363 3,058,786 3,298,675 3,152,584 3,301,025 Overlay Reserve 600,000 500,000 500,000 500,000 500,000 Other Additions 718,184 124,670 183,549 228,803 119,228 Total Additions 4,211,547 3,683,456 3,982,224 3,881,387 3,920,253Gross Amount to be Raised 87,396,414 92,780,023 98,118,198 100,610,315 103,297,145Deductions: Local Estimated Receipts 12,763,860 13,887,605 15,900,275 16,121,245 15,712,783 State Aid:(3) Current Year 6,923,804 7,187,794 7,323,759 7,469,266 7,685,986 Available Funds:(4) Free Cash 5,460,000 6,025,000 7,100,000 7,900,000 9,167,783 Municipal Light payments 330,000 330,000 330,000 330,000 330,000 Other Revenue Source 580,830 1,400,686 1,148,716 960,592 587,560 Total Deductions 26,058,494 28,831,085 31,802,750 32,781,103 33,484,112Net Amount to be Raised $61,337,920 $63,948,938 $66,315,447 $67,829,212 $69,813,033

Fiscal Year

______________________ (1) Includes additional appropriations from taxation subsequent to adoption of the annual budget but prior to setting of

the tax rate. (2) Charter School assessments are accounted for under State and County Assessments. (3) Estimated by the State Department of Revenue and required by law to be used in setting of the tax rate. Actual

state aid payments may vary upward or downward from said estimates, and the State may withhold payments pending receipt of State and County assessments.

(4) Transfers from other available funds, including “Free Cash” generally made as an offset to a particular appropriation item.

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Assessed Valuations and Tax Levies Property is classified for the purpose of taxation according to its use. The legislature has in substance created three classes of taxable property: (1) residential real property, (2) open space land, and (3) all other (commercial, industrial and personal property). Within limits, cities and towns are given the option of determining the share of the annual levy to be borne by each of the three categories. The share required to be borne by residential real property is at least 50 per cent of its share of the total taxable valuation; the effective rate for open space must be at least 75 per cent of the effective rate for residential real property; and the share of commercial, industrial and personal property must not exceed 175 percent of their share of the total valuation. A city or town may also exempt up to 20 percent of the valuation of residential real property (where used as the taxpayer’s principal residence) and up to 10 percent of the valuation of commercial real property (where occupied by certain small businesses). Property may not be classified in a city or town until the State Commissioner of Revenue certifies that all property in the city or town has been assessed at its fair cash value. Such certification must take place every five 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 “Authorization Procedures and Limitations” under “INDEBTEDNESS” below. The Town completed a revaluation of all real and personal property for 2016. The next professional valuation is expected to take place in 2021. Additionally, the Town has analyzed and trended values annually. The following table sets forth the trend in the Town’s assessed valuations, tax rates, tax levies, and tax levies per capita.

Real Personal Total Tax RateFiscal Estate Property Assessed Per $1,000 Tax LevyYear Valuation Valuation Valuation Valuation Tax Levy Per Capita (1)

2020 $6,643,512,891 $75,739,520 $6,719,252,411 $10.39 $69,813,033 $3,5242019 6,241,097,967 74,471,080 6,315,569,047 10.74 67,829,212 3,4242018 5,945,696,967 72,038,720 6,017,735,687 11.02 66,315,447 3,3482017 5,742,410,087 65,849,510 5,808,259,597 11.01 63,948,938 3,2282016 (2) 5,468,320,986 57,617,730 5,525,938,716 11.10 61,337,920 3,097

______________________ (1) Based on the 2010 population of 19,808. (2) Town revaluation year. Classification of Property The following is a breakdown of the Town’s assessed valuation in fiscal years 2018, 2019 and 2020.

Property Type Amount % of Total Amount % of Total Amount % of Total

Residential 5,698,494,403$ 94.7 % 5,986,503,712$ 94.8 % 6,377,782,863$ 94.9 %Commercial 231,431,764 3.8 238,506,055 3.8 248,077,728 3.7Industrial 15,770,800 0.3 16,088,200 0.3 17,652,300 0.3Personal 72,038,720 1.2 74,471,080 1.2 75,739,520 1.1Total Real Estate 6,017,735,687$ 100.0 % 6,315,569,047$ 100.0 % 6,719,252,411$ 100.0 %

202020192018

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Largest Taxpayers

The following table lists the ten largest taxpayers in the Town based upon assessed valuation for fiscal 2020. All taxpayers listed are current in their property taxes, except as noted. The Town Treasurer has sent out demands for all outstanding real estate payments.

Fiscal 2020 % of TotalAssessed Assessed

Name Nature of Business Valuation Valuation

Various Edward T. Moore LLC Trusts Real Estate Investor 66,051,800$ 0.98 %Algonquin Gas Co. Utility 43,360,600 0.65Various Rockett LLC Trusts (1) Real Estate Investor 23,098,000 0.34Bessom Associates Co-operative Housing 19,299,800 0.29Eastern Yacht Club Private Yacht Club 18,770,420 0.28Boston Gas Co dba National Grid Utility 16,438,290 0.24Hennricus A Termeer Residential 13,736,400 0.20Eyk Van Otterloo & Various LLC's Real Estate Investor 11,888,100 0.18Corinthian Yacht Club Private Yacht Club 11,401,910 0.17Tedesco Country Club (2) Private Golf Club 11,355,596 0.17

Total 235,400,916$ 3.50 %

______________________ SOURCE: Town Assessor. (1) Currently owes $5,754 in overdue property taxes.(2) Currently owes $1,628 in overdue property taxes.

State Equalized Valuation

In order to determine appropriate relative values for the purposes of certain distributions to and assessments upon cities and towns, the Commissioner of Revenue biennially makes a redetermination of the fair cash value of the taxable property in each municipality. This is known as the "equalized value". The following table sets forth the trend in equalized valuations of the Town of Marblehead.

State EqualizedJanuary 1, Valuation % Change

2018 6,182,649,400$ 7.80 %2016 5,735,475,100 7.73 2014 5,323,866,200 (0.72) 2012 5,362,642,300 (3.91) 2010 5,580,750,300 (6.62) 2008 5,976,188,400 7.04

Abatements and Overlay

A city or town is authorized to increase each tax levy by an amount approved by the State Commissioner of Revenue as an “overlay” to provide for tax abatements. If abatements are granted in excess of the applicable overlay, the excess is required to be added to the next tax levy. Abatements are granted where exempt real or personal property has been assessed or where taxable real or personal property has been overvalued or disproportionately valued. The assessors may also abate uncollectible personal property taxes. They may abate real and personal property taxes on broad grounds (including inability to pay) with the approval of the State Commissioner of Revenue. But uncollected real property taxes are ordinarily not written off until they become municipal “tax titles” by purchase at the public sale or by taking, at which time the tax is written off in full by reserving the amount of the tax and charging surplus.

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The following table sets forth the amount of the overlay reserve for each of the following fiscal years and actual abatements and refunds granted against each levy as June 30, 2019.

& ExemptionsFiscal Net Dollar % of Granted ThroughYear Tax Levy (1) Amount Net Levy June 30, 2019

2019 67,329,212$ 500,000$ 0.74 % 233,562$ 2018 65,815,447 500,000 0.76 213,014 2017 63,448,938 500,000 0.79 266,796 2016 60,737,920 600,000 0.99 219,545 2015 58,515,212 500,000 0.85 203,381

Overlay ReserveAbatements

______________________ (1) Tax levy prior to the addition of the overlay reserve. Tax Collections The Town of Marblehead has accepted a state statute allowing cities and towns to collect tax payments quarterly; under the statute preliminary tax payments are due 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. In response to the COVID-19 pandemic, cities and towns may choose to postpone the May 1, 2020 payment date to June 1, 2020. Real property (land and buildings) is subject to a lien for 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 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 of taking of the property as described below. The following table compares the Town's net tax collections with its net tax levies (gross tax levy minus the overlay reserve for abatements) for the last five fiscal years.

OverlayFiscal Gross Tax Reserve for Net Dollar % of Dollar % ofYear Levy Abatements Tax Levy(2) Amount Net Levy Amount Net Levy

2019 67,829,212$ 500,000$ 67,329,212$ 66,848,738$ 99.29 % 66,848,738$ 99.29 %2018 66,315,447 500,000 65,815,447 65,319,217 99.25 65,795,099 99.97 2017 63,948,938 500,000 63,448,938 62,843,686 99.05 63,383,638 99.90 2016 61,337,920 600,000 60,737,920 60,294,264 99.27 60,795,100 100.09 2015 59,015,212 500,000 58,515,212 58,048,814 99.20 58,566,678 100.09

Collections DuringFiscal Year Payable(1)

CollectionsAs of June 30, 2019 (1)(3)

______________________ (1) Actual dollar collections net of refunds. Does not include abatements, proceeds of tax titles or tax possessions

attributable to each levy or other non-cash credits. (2) Net after deduction of overlay reserve for abatements. (3) Collections for fiscal year 2020 are comparable to prior fiscal years.

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Tax Titles and Possessions

Massachusetts law permits a municipality either to sell by public sale (at which the municipality may become the purchaser) or to take real property for non-payment of taxes. In either case the property owner can redeem the property by paying the unpaid taxes, with interest and other charges, but if the right of redemption is not exercised within six months (which may be extended an additional year in the case of certain installment payments) it can be foreclosed by petition to the Land Court. Upon foreclosure, a tax title purchased or taken by the municipality becomes a "tax possession" and may be held and disposed of in the same manner as other land held for municipal purposes.

Cities and towns are authorized to sell delinquent property tax receivables by public sale or auction, either individually or in bulk.

The table below sets forth the amount of tax titles and possessions outstanding at the end of the following fiscal years.

Fiscal Tax Titles andYear Tax Title Possessions Possessions

2019 216,220$ 77,826$ 294,046$ 2018 384,900 39,046 423,946 2017 325,258 38,693 363,951 2016 374,436 15,715 390,151 2015 364,698 15,715 380,413

Taxation to Meet Deficits

As noted elsewhere (see “Abatements and Overlay” 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, known as Proposition 2 ½, 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.

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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”.

Proposition 2 ½ 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 has been in full compliance with Proposition 2 1/2 since its inception.

Unused Levy Capacity

2020 2019 2018 2017 2016

Primary Levy Limit (2) 167,981,310$ 157,889,226$ 150,443,392$ 145,206,490$ 138,148,468$ Prior Fiscal Year Levy Limit 61,400,179 59,592,925 57,779,806 55,875,187 54,101,450 2.5% Levy Growth 1,535,004 1,489,823 1,444,495 1,396,880 1,352,536 New Growth (3) 303,231 317,431 368,624 507,739 421,201 Overrides - - - - - Growth Levy Limit 63,238,414 61,400,179 59,592,925 57,779,806 55,875,187 Debt Exclusions 6,570,806 6,441,114 6,726,010 6,208,217 5,477,833 Capital Expenditure Exclusions 50,000 - - - - Other Adjustments - - - - - Tax Levy Limit 69,859,220 67,841,293 66,318,935 63,988,023 61,353,020 Tax Levy 69,813,033 67,829,212 66,315,447 63,948,938 61,337,920 Unused Levy Capacity (4) 46,187$ 12,081$ 3,488$ 39,085$ 15,100$ Unused Primary Levy Capacity (5) 104,742,896$ 96,489,047$ 90,850,467$ 87,426,684$ 82,273,281$

Unused Levy Capacity (1)

______________________ (1) Source: Massachusetts Department of Revenue. (2) 2.5% of assessed valuation. (3) Allowed increase for new valuations (or required reduction) – certified by the Department of Revenue. (4) Tax Levy Limit less Tax Levy. (5) Primary Levy Limit Less Growth Levy Limit.

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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.

Initiative Petitions

Various proposals have been made in recent years for legislative amendments to the Massachusetts Constitution to impose limits on state and local taxes. To be adopted such amendments must be approved by two successive legislatures and then by the voters at a state election.

Community Preservation Act

The Massachusetts Community Preservation Act (the “CPA”) permits cities and towns that accept its provisions to levy a surcharge on its real property tax levy, dedicate revenue (other than state or federal funds), and to receive state matching funds for (i) the acquisition, creation, preservation, rehabilitation and restoration of land for recreational use, open space, and affordable housing and (ii) the acquisition, preservation, rehabilitation and restoration of historic resources. The provisions of the CPA must be accepted by the voters of the city or town at an election after such provisions have first been accepted by either a vote of the legislative body of the city or town or an initiative petition signed by 5% of its registered voters.

A city or town may approve a surcharge of up to 3% (but not less than 1% under certain circumstances) and may make an additional commitment of funds by dedicating revenue other than state or federal funds, provided that the total funds collected do not exceed 3% of the real property tax levy, less any exemptions adopted (such as an exemption for low-income individuals and families and for low and moderate-income senior citizens, an exemption for $100,000 of the value of each taxable parcel of residential real property or $100,000 of the value of each taxable parcel of class three, commercial property, and class four, industrial property as defined in Chapter 59, Section 2A of the General Laws, and an exemption for commercial and industrial properties in cities and towns with classified tax rates). In the event that the municipality shall no longer dedicate all or part of the additional funds to community preservation, the surcharge on the real property tax levy of not less than 1% shall remain in effect, provided that any such change must be approved pursuant to the same process as acceptance of the CPA. The surcharge is not counted in the total taxes assessed for the purpose of determining the permitted levy amount under Proposition 2½ (see “Tax Limitations” under “PROPERTY TAX” herein). A city or town may revoke its acceptance of the provisions of the CPA at any time after 5 years from the date of such acceptance and may change the amount of the surcharge or the exemptions to the surcharge at any time, including reducing the surcharge to 1% and committing additional municipal funds as outlined above, provided that any such revocation or change must be approved pursuant to the same process as acceptance of the CPA.

Any city or town that accepts the provisions of the CPA will receive annual state matching grants to supplement amounts raised by its surcharge and dedication of revenue. The state matching funds are raised from certain recording and filing fees of the registers of deeds. Those amounts are deposited into a state trust fund and are distributed to cities and towns that have accepted the provisions of the CPA, which distributions are not subject to annual appropriation by the state legislature. The amount distributed to each city and town is based on a statutory formula and the total state distribution made to any city or town may not exceed 100% of the amount raised locally by the surcharge on the real property tax levy.

The amounts raised by the surcharge on taxes, the dedication of revenue and received in state matching funds are required to be deposited in a dedicated community preservation fund. Each city or town that accepts the provisions of the CPA is required to establish a community preservation committee to study the community preservation needs of the community and to make recommendations to the legislative body of the city or town regarding the community preservation projects that should be funded from the community preservation fund. Upon the recommendations of the committee, the legislative body of the city or town may appropriate amounts from the fund for permitted community preservation purposes or may reserve amounts for spending in future fiscal years, provided that at least 10% of the total annual revenues to the fund must be spent or set aside for open space purposes, 10% for historic resource purposes and 10% for affordable housing purposes.

The CPA authorizes cities and towns that accept its provisions to issue bonds and notes in anticipation of the receipt of surcharge and dedicated revenues to finance community preservation projects approved under the provisions of the CPA. Bonds and notes issued under the CPA are general obligations of the city or town and are payable from amounts on deposit in the community preservation fund. In the event that a city or town revokes its acceptance of the provisions of the CPA, the surcharge shall remain in effect until all contractual obligations incurred by the city or town prior to such revocation, including the payment of bonds or notes issued under the CPA, have been fully discharged.

The Town has not accepted the provisions of CPA.

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TOWN FINANCES Budget and Appropriation Process The annual appropriations of the Town of Marblehead are made at the annual meeting that takes place in May. Appropriations may also be voted at special meetings. Every town must have an appropriation, advisory or finance committee. The committee (or the board of selectmen if authorized by by-law) is required to submit a budget of proposed expenditures at the annual town meeting. Town meeting may at any time vote to transfer any amount previously appropriated to any other authorized use by law, and, under certain circumstances and subject to certain limits and requirements, the selectmen of a town, with the concurrence of the finance committee, may transfer amounts appropriated for the use of any department to any other appropriation for the same department or to any other department. Water and sewer department expenditures generally are included in the budgets adopted by town meetings but electric and gas department funds may be appropriated by the municipal light boards. Under certain legislation any city or town which accepts the legislation may provide that the appropriation for the operating costs of any department may be offset, in whole or in part, by estimated receipts from fees charged for services provided by the department. It is assumed that this general provision does not alter the pre-existing power of an electric or gas department to appropriate its own receipts. The school budget is limited to the total amount appropriated by the town meeting, but the school committee retains full power to allocate the funds appropriated. State legislation known as the Education Reform Act of 1993, as amended, imposes certain minimum expenditure requirements on municipalities with respect to funding for education. The requirements are determined on the basis of formulas affected by various measures of wealth and income, enrollments, prior levels of local spending and state aid, and other factors. The Town has met or exceeded the requirements of the Act since its inception. 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. (See PROPERTY TAXATION above.) Budget Trends The table below sets forth the trend in operating budgets for the following fiscal years as voted by the Town Meeting.

Fiscal 2017 Fiscal 2018 Fiscal 2019 Fiscal 2020 Fiscal 2021

General Government $2,244,018 $2,370,975 $2,377,462 $2,423,854 $2,302,145Pensions & Employee Benefits 16,683,598 17,403,792 18,386,385 18,263,603 18,616,196 Human Services 629,515 654,774 665,700 709,895 691,913 Public Safety 7,894,870 8,246,485 8,257,522 8,991,306 9,001,222 Public Works 16,204,730 17,886,487 18,143,617 17,924,783 18,330,673 Education 35,188,587 37,066,791 38,894,541 40,888,180 41,332,946 Debt Service 6,824,406 7,157,767 6,735,428 6,916,992 7,508,960 Insurance 503,057 503,057 475,888 475,888 475,888 Culture & Recreation 2,025,291 2,044,787 2,121,805 2,027,592 2,018,597 State & County Assessments (1) 3,058,786 3,312,779 3,152,584 3,274,504 2,681,117 Reserve Fund 144,000 144,000 144,000 144,000 144,000 Overlay 500,000 500,000 500,000 500,000 300,000 TOTAL $91,900,858 97,291,694$ 99,854,932$ $102,540,597 $103,403,657

______________________ (1) The decreases and increases in assessments reflect changes in charter school enrollment.

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Revenues Property Taxes: Property taxes are the major source of revenue for the Town. The total amount levied is subject to certain limits prescribed by law; for a description of those limits see "PROPERTY TAXATION--Tax Limitations" above. State Aid: In addition to grants for specified capital purposes (some of which are payable over the life of the bonds issued for the projects), the Commonwealth provides financial assistance to cities and towns for current purposes. Payments to cities and towns are derived primarily from a percentage of the State's personal income, sales and use, and corporate excise tax receipts, together with the net receipts from the State Lottery. A municipality's state aid entitlement is based on a number of different formulas, of which the "schools" and "lottery" formulas are the most important. Both of the major formulas tend to provide more state aid to poorer communities. The formulas for determining a municipality’s state aid entitlement are subject to amendment by the State legislature and, while a formula might indicate that a particular amount of state aid is owed, the amount of state aid actually paid is limited to the amount appropriated by the state legislature. The state annually estimates state aid but actual payments may vary from the estimate. The following table sets forth the actual state aid received in each of the most recent fiscal years and an estimate for fiscal 2020. Fiscal Year State Aid 2020 $7,662,699 (estimate) 2019 7,378,941 2018 7,145,343 2017 7,199,677 2016 6,887,338 2015 6,651,265 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. 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. Motor Vehicle Excise: An excise is imposed on the registration of motor vehicles (subject to exemptions) at the rate of $25 per $1,000 of valuation. The excise is collected by and for the benefit of the municipality in which the vehicle is customarily kept. Valuations are determined by a statutory formula based on manufacturer's list price and year of manufacture. Bills not paid when due bear interest at 12 percent per annum. Provision is also made for non-renewal of the owner's operating license or registration by the registrar of motor vehicles. The following table sets forth the actual motor vehicle excise tax received in each of the most recent fiscal years and an estimate for fiscal 2020. Motor Vehicle Fiscal Year Excise Receipts 2020 $3,900,000 (estimate) 2019 3,943,011 2018 3,653,743 2017 3,627,690 2016 3,575,360 2015 3,317,888 Electric Division Services: The Town provides electricity to residential and commercial units. Electric operations are fully self-supporting and are accounted for in the Enterprise Fund. (For additional information see Appendix A.) Harbor Master Division Services: The Town provides services for boat owners in the harbor. Harbor operations are fully self-supporting and are accounted for in the Enterprise Fund. (For additional information see Appendix A.) Sewer Services: The Town provides sewer services to residential and commercial units. Sewer operations are fully self-supporting and are accounted for in the Sewer Special Revenue Fund. (For additional information see Appendix A.)

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Water Services: The Town provides water to residential and commercial units. Water operations are fully self-supporting and are accounted for in the Water Special Revenue Fund. (For additional information see Appendix A). 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. The Village School Project had a total project cost of $20,851,353 of which the Town received 40% MSBA reimbursement on the eligible project costs. This project was completed in 2012. The construction of the Glover School Renovation project began in the summer of 2012 and the renovated Glover School opened in February 2014. The total project cost was $25.9 million and as of the date of this Official Statement the Town had received $9,558,418 from the MSBA as reimbursement. The Town undertook a $750,000 feasibility study for the Gerry School, for which the Town received $230,738 in MSBA grants. This project of $54,844,767 was authorized on May 6, 2019 and was contingent upon a vote of the Town excluding the debt service from Proposition 2 ½ which was passed June 18, 2019. Construction of the project began in 2020. To date, the Town has received $800,386 in MSBA reimbursements.

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Investment of Town Funds All funds of the Town, except for trust funds and funds of the Marblehead Contributory Retirement System, are invested in accordance with Section 55 of Chapter 44 of the Massachusetts General Laws (MGL). This section permits investment of available funds and bond and note proceeds in term deposits and Certificates of Deposit of banks and trust companies, in obligations issued or unconditionally guaranteed by the federal government or agency thereof with a maturity of one year or less, in repurchase agreements secured by federal or federal agency securities, with a maturity of 90 days or less, in participation units in the Massachusetts Municipal Depository Trust (MMDT), or in shares in SEC-registered money market funds with the highest possible rating from at least one nationally recognized rating organization. MMDT is an investment pool created by the Commonwealth. The State Treasurer is the sole trustee, and the funds are managed under contract by an investment firm under the supervision of the State Treasurer’s office. According to the State Treasurer the Trust’s investment policy is designed to maintain an average weighted maturity of 90 days or less and is limited to high-quality, readily marketable fixed income instruments, including U.S. Government obligations and highly-rated corporate securities with maturities of one year or less. Trust funds, unless otherwise provided by the donor, may be invested in accordance with Section 54 of Chapter 44 of the MGL, 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 restriction imposed by Sections 54 and 55 do not apply to Town and town retirement systems. A breakdown of Town investments may be obtained from the Town Treasurer. Summary of Significant Accounting Policies See Appendix A. Annual Audits The Town has had annual audits prepared by Powers & Sullivan, Certified Public Accountants since fiscal 1999, and most recently for fiscal 2019 which is attached hereto as Appendix A. Prior audits are available upon request from the Town. The attached report speaks only as of its date, and only to the matters expressly set forth therein. The auditors have not been engaged to review this Official Statement or to perform audit procedures regarding the post-audit period, nor have the auditors been requested to give their consent to the inclusion of their report in Appendix A. Except as stated in their report, the auditors have not been engaged to verify the financial information set out in Appendix A and are not passing upon and do not assume responsibility for the sufficiency, accuracy or completeness of the financial information presented. Financial Statements Set forth on the following pages are the Combined Governmental Funds Balance Sheets for fiscal years 2019, 2018, and 2017, and Statements of General Fund Revenues, Expenditures and Changes in Fund Balances for fiscal years 2015 through 2019. Said financial statements were extracted from annual audits and then combined for purposes of this presentation. All such statements are presented in accordance with the fund method of accounting described in Appendix A. 2020 Fiscal Year End Results The Town has created a COVID-19 fund to account for COVID-19 related expenses and anticipates receiving federal funds to cover these costs. (See “Corona Virus (COVID-19) Disclosure” above.) Aside from COVID-related expenses, the Town expects to end fiscal 2020 with a small operating surplus.

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Capital Highway Nonmajor TotalProjects Improvement Public Governmental Governmental

General Fund Fund Funds Funds FundsASSETSCash and cash equivalents 22,192,606$ 5,563,623$ -$ 7,184,351$ 8,061,132$ 43,001,712$ Investments - - - - 1,772,830 1,772,830 Receivables, net of uncollectibles:

Real estate and personal property taxes 1,473,938 - - - - 1,473,938 Tax liens 216,220 - - - - 216,220 Motor vehicle and other excise taxes 218,496 - - - - 218,496 Departmental and other 56,782 - - - 135,293 192,075 Intergovernmental 31,360 - 454,159 - 287,729 773,248

Tax foreclosures 77,826 - - - - 77,826 Due from other funds 5,353 - - - 153,199 158,552 Working capital deposit - - - 10,000 10,000 Other assets 41,139 - - - - 41,139 Total Assets 24,313,720$ 5,563,623$ 454,159$ 7,184,351$ 10,420,183$ 47,936,036$

LIABILITIES, DEFERRED INFLOWS OFRESOURCES AND FUND BALANCES

LIABILITIES:Warrants payable 1,138,454$ 439,533$ 125,973$ 7,935$ 396,822$ 2,108,717$ Tax refunds payable 431,209 - - - - 431,209 Due to other funds - - 5,353 - 153,199 158,552 Liabilities due depositors 1,590 - - - - 1,590 Other liabilities 564,864 - - - - 564,864 Notes payable - 134,933 - - - 134,933

Total Liabilities 2,136,117 574,466 131,326 7,935 550,021 3,399,865

Deferred Inflows of ResourcesUnavailable revenue 1,020,947 - 322,833 - 16,559 1,360,339

Total Deferred Inflows of Resources 1,020,947 - 322,833 - 16,559 1,360,339

FUND BALANCES:Nonspendable - - - 3,656,980 - 3,656,980 Restricted - 4,989,157 - 3,519,436 9,853,603 18,362,196 Committed 443,895 - - - - 443,895

Assigned 8,769,666 - - - - 8,769,666 Unassigned 11,943,095 - - - - 11,943,095

Total Fund Balances 21,156,656 4,989,157 - 7,176,416 9,853,603 43,175,832

Total Liabilities, Deferred Inflows of Resources and Fund Balances 24,313,720$ 5,563,623$ 454,159$ 7,184,351$ 10,420,183$ 47,936,036$

_________________SOURCE: Audited financial statements of the Town.

TOWN OF MARBLEHEAD, MASSACHUSETTSGovernmental Funds Balance Sheet

June 30, 2019

39


General Fund Fund Funds Funds FundsASSETSCash and cash equivalents 23,311,687$ 964,458$ -$ 4,864,735$ 7,880,219$ 37,021,099$ Investments - - - - 1,266,157 1,266,157 Receivables, net of uncollectibles:

Real estate and personal property taxes 1,245,899 - - - - 1,245,899 Tax liens 384,900 - - - - 384,900 Motor vehicle and other excise taxes 226,159 - - - - 226,159 Departmental and other 59,231 - - - 98,132 157,363 Intergovernmental 36,277 - 370,147 - 2,998 409,422

Tax foreclosures 39,046 - - - - 39,046 Due from other funds 6,845 - - - - 6,845 Working capital deposit - - - 10,000 10,000 Other assets 24,712 - - - - 24,712 Total Assets 25,334,756$ 964,458$ 370,147$ 4,864,735$ 9,257,506$ 40,791,602$


LIABILITIES:Warrants payable 1,622,800$ 133,148$ 2,097$ 13,525$ 567,740$ 2,339,310$ Tax refunds payable 551,930 - - - - 551,930 Due to general fund - - 6,845 - - 6,845 Liabilities due depositors 3,590 - - - - 3,590 Other liabilities 525,113 - - - - 525,113


Deferred Inflows of ResourcesTaxes paid in advance 305,718 - - - - 305,718 Unavailable revenue 1,089,852 - 361,205 - 31,921 1,482,978

Total Deferred Inflows of Resources 1,395,570 - 361,205 - 31,921 1,788,696

FUND BALANCES:Nonspendable - - - 3,621,446 - 3,621,446 Restricted - 831,310 - 1,229,764 8,657,845 10,718,919 Committed 404,071 - - - - 404,071


Total Fund Balances 21,235,753 831,310 - 4,851,210 8,657,845 35,576,118

Total Liabilities, Deferred Inflows of Resources and Fund Balances 25,334,756$ 964,458$ 370,147$ 4,864,735$ 9,257,506$ 40,791,602$



June 30, 2018

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General Fund Fund Funds Funds FundsASSETSCash and cash equivalents 23,260,353$ 2,370,227$ -$ 3,346,864$ 9,522,217$ 38,499,661$ Investments - - - 1,413,333 - 1,413,333 Receivables, net of uncollectibles:

Property taxes 629,863 - - - - 629,863 Real estate tax deferrals 843,853 - - - - 843,853 Tax liens 325,258 - - - - 325,258 Motor vehicle and other excise taxes 228,211 - - - - 228,211 Interest and dividends 14,164 - - - - 14,164 Departmental and other 56,349 - - - 144,491 200,840 Intergovernmental 36,895 - 402,339 - 20,640 459,874

Due from highway improvement fund 13,790 - - - - 13,790 Working capital deposit - - - - 10,000 10,000 Tax foreclosures 38,693 - - - - 38,693 Total Assets 25,447,429$ 2,370,227$ 402,339$ 4,760,197$ 9,697,348$ 42,677,540$


LIABILITIES:Warrants payable 906,080$ 895,618$ -$ 26,567$ 723,278$ 2,551,543$ Accrued payroll and amounts withheld 468,489 - - - - 468,489 Due to general fund - - 13,790 - - 13,790 Liabilities due depositors 4,340 - - - - 4,340 Other liabilities 169,681 - - - - 169,681 Tax refunds payable 638,379 - - - - 638,379


Deferred Inflows of ResourcesUnavailable revenue 1,102,724 - 388,549 - 5,522 1,496,795

FUND BALANCES:Nonspendable - - - 3,586,670 - 3,586,670 Restricted - 1,474,609 - 1,146,960 8,968,548 11,590,117 Committed 335,975 - - - - 335,975


Total Fund Balances 22,157,736 1,474,609 - 4,733,630 8,968,548 37,334,523

Total Liabilities, Deferred Inflows of Resources and Fund Balances 25,447,429$ 2,370,227$ 402,339$ 4,760,197$ 9,697,348$ 42,677,540$



June 30, 2017

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REVENUES: General Fund Fund Funds Funds FundsReal estate and personal property taxes, net of tax refunds 67,683,970$ -$ -$ -$ -$ 67,683,970$ Motor vehicle and other excise taxes 3,947,263 - - - - 3,947,263 Charges for services 799,621 - - - 3,773,356 4,572,977 Penalties and interest on taxes 331,608 - - - - 331,608 Licenses and permits 915,577 - - - - 915,577 Fines and forfeitures 138,759 - - - - 138,759 Intergovernmental - state aid 7,378,941 - - - - 7,378,941 Intergovernmental - School Building Authority - 104,545 - - - 104,545 Intergovernmental - Teachers Retirement 8,950,916 - - - - 8,950,916 Intergovernmental - other 175,787 - 581,918 - 3,407,109 4,164,814 Departmental and other 456,511 - - - 1,338,651 1,795,162 Contributions and donations - - - 2,331,993 882,028 3,214,021 Investment income 716,343 - - 62,058 613,678 1,392,079

TOTAL REVENUES 91,495,296$ 104,545$ 581,918$ 2,394,051$ 10,014,822$ 104,590,632$

EXPENDITURES:Current:

General government 1,723,646 - - - 157,286 1,880,932

Public safety 8,698,267 - - - 771,248 9,469,515 Education 39,258,005 - - 14,105 6,114,207 45,386,317 Public works 5,126,411 - 581,918 - 815,498 6,523,827 Human services 682,214 - - - 248,903 931,117 Culture and recreation 2,059,873 - - 28,740 817,730 2,906,343 Pension benefits 3,100,539 - - - - 3,100,539 Pension benefits - Teachers Retirement 8,950,916 - - - - 8,950,916 Property and liability insurance 428,360 - - - - 428,360 Employee benefits 11,836,691 - - - - 11,836,691

State and county charges 2,995,396 - - - - 2,995,396 Capital outlay - 3,057,466 - - - 3,057,466 Debt Service:

Principal 4,150,000 126,193 - - - 4,276,193 Principal payment on current refunding 1,741,759 - - - - 1,741,759 Interest 2,584,428 - - - - 2,584,428

TOTAL EXPENDITURES 93,336,505 3,183,659 581,918 42,845 8,924,872 106,069,799

EXCESS (DEFICIENCY) OF REVENUESOVER (UNDER) EXPENDITURES (1,841,209)$ (3,079,114)$ -$ 2,351,206$ 1,089,950$ (1,479,167)$

Other Financing Sources (Uses):Issuance of bonds - 7,236,961 - - - 7,236,961 Issuance of refunding bonds 1,741,759 - - - - 1,741,759 Premium from issuance of bonds - - - - 100,161 100,161 Transfers in 416,516 - - - 406,263 822,779 Transfers out (396,163) - - (26,000) (400,616) (822,779)

TOTAL OTHER FINANCING SOURCES (USES) 1,762,112 7,236,961 - (26,000) 105,808 9,078,881

Net change in fund balances (79,097)$ 4,157,847$ -$ 2,325,206$ 1,195,758$ 7,599,714$ Fund Balances at Beginning of Year 21,235,753 831,310 4,851,210 8,657,845 35,576,118 Fund Balances at End of Year 21,156,656$ 4,989,157$ -$ 7,176,416$ 9,853,603$ 43,175,832$

__________________SOURCE: Audited financial statements of the Town.

TOWN OF MARBLEHEAD, MASSACHUSETTSGovernmental Funds

Statement of Revenues, Expenditures and Changes in Fund BalancesJune 30, 2019

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REVENUES: General Fund Fund Funds Funds FundsReal estate and personal property taxes, net of tax refunds 66,431,146$ -$ -$ -$ -$ 66,431,146$ Motor vehicle and other excise taxes 3,653,743 - - - - 3,653,743 Charges for services 891,419 - - - 3,593,041 4,484,460 Penalties and interest on taxes 296,552 - - - - 296,552 Licenses and permits 755,907 - - - - 755,907 Fines and forfeitures 114,002 - - - 200 114,202 Intergovernmental - state aid 7,145,343 - - - - 7,145,343 Intergovernmental - School Building Authority - 126,193 - - - 126,193 Intergovernmental - Teachers Retirement 8,952,060 - - - - 8,952,060 Intergovernmental - other 156,331 - 478,111 - 3,720,830 4,355,272 Departmental and other - - - - 888,830 888,830 Contributions and donations - - - 127,938 578,943 706,881 Investment income (loss) 253,036 - - 22,464 (76,110) 199,390 Miscellaneous 36,537 - - 6,713 300,677 343,927

TOTAL REVENUES 88,686,076$ 126,193$ 478,111$ 157,115$ 9,006,411$ 98,453,906$


General government 2,429,115 12,415 - - 104,039 2,545,569

Public safety 8,345,305 8,326 - - 820,755 9,174,386 Education 38,072,882 489,453 - - 5,256,092 43,818,427 Public works 5,110,130 634,298 478,111 - 1,155,452 7,377,991 Human services 652,685 - - - 238,643 891,328 Culture and recreation 1,942,827 - - 92,577 694,037 2,729,441 Pension benefits 2,875,231 - - - - 2,875,231 Pension benefits - Teachers Retirement 8,952,060 - - - - 8,952,060 Property and liability insurance 393,809 - - - - 393,809 Employee benefits 11,912,535 - - - - 11,912,535

State and county charges 2,872,858 - - - - 2,872,858 Debt Service:

Principal 4,507,000 - - - 1,107,000 5,614,000 Principal payment on current refunding 9,272,952 - - - - 9,272,952 Interest 2,649,767 - - - - 2,649,767


EXCESS (DEFICIENCY) OF REVENUESOVER (UNDER) EXPENDITURES (11,303,080)$ (1,018,299)$ -$ 64,538$ (369,607)$ (12,626,448)$

Other Financing Sources (Uses):Issuance of bonds - 375,000 - - - 375,000 Issuance of refunding bonds 9,272,952 - - - - 9,272,952 Premium from issuance of bonds - - - - 614,322 614,322 Transfers in 1,108,145 - - 84,042 26,000 1,218,187 Transfers out - - - (31,000) (581,418) (612,418)

TOTAL OTHER FINANCING SOURCES (USES) 10,381,097 375,000 - 53,042 58,904 10,868,043

Net change in fund balances (921,983)$ (643,299)$ -$ 117,580$ (310,703)$ (1,758,405)$ Fund Balances at Beginning of Year 22,157,736 1,474,609 4,733,630 8,968,548 37,334,523 Fund Balances at End of Year 21,235,753$ 831,310$ -$ 4,851,210$ 8,657,845$ 35,576,118$




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REVENUES: General Fund Fund Funds Funds FundsReal estate and personal property taxes 63,692,746$ -$ -$ -$ -$ 63,692,746$ Motor vehicle excise taxes 3,627,692 - - - - 3,627,692 Penalties and interest on taxes 276,660 - - - - 276,660 Charges for services 857,714 - - - 3,236,599 4,094,313 Licenses and permits 763,738 - - - - 763,738 Fines and forfeitures 162,196 - - - - 162,196 Intergovernmental 15,710,914 - 609,251 - 3,219,840 19,540,005 Departmental and other - - - - 1,247,506 1,247,506 Contributions - - - 71,247 527,403 598,650 Investment income 210,647 - - 14,286 99,142 324,075 Miscellaneous 82,885 - - - 265,166 348,051

TOTAL REVENUES 85,385,192$ -$ 609,251$ 85,533$ 8,595,656$ 94,675,632$


General government 2,146,815 130,558 - 94 158,109 2,435,576

Public safety 7,834,122 607,763 - - 623,699 9,065,584 Education 35,295,069 3,001 - - 5,935,489 41,233,559 Public works 4,973,413 863,309 609,251 - 646,421 7,092,394 Landfill - 3,407,515 - - - 3,407,515 Human services 620,569 - - 3,039 233,810 857,418 Culture and recreation 1,864,285 - - 147,309 783,826 2,795,420 Pension benefits 10,955,785 - - - - 10,955,785 Property and liability insurance 371,239 - - - - 371,239 Employee benefits 11,221,929 - - - - 11,221,929

State and county charges 3,082,820 - - - - 3,082,820 Debt Service:

Principal on current refunding 17,151,952 335,483 - - 754,495 18,241,930 Principal 4,085,000 - - - - 4,085,000 Interest 2,738,406 10,971 - - - 2,749,377


EXCESS (DEFICIENCY) OF REVENUESOVER (UNDER) EXPENDITURES (16,956,212)$ (5,358,600)$ -$ (64,909)$ (540,193)$ (22,919,914)$

Other Financing Sources (Uses):Issuance of debt - 995,000 - - - 995,000 Issuance of refunding debt 17,151,952 - - - - Premium from issuance of debt - - - - 807,149 807,149 Transfers in 1,307,815 - - - 4,000 1,311,815 Transfers out - - - (29,000) (761,928) (790,928)

TOTAL OTHER FINANCING SOURCES (USES) 18,459,767 995,000 - (29,000) 49,221 19,474,988

Net change in fund balances 1,503,555$ (4,363,600)$ -$ (93,909)$ (490,972)$ (3,444,926)$ Fund Balances at Beginning of Year 20,654,181 5,838,209 4,827,539 9,459,520 40,779,449 Fund Balances at End of Year 22,157,736$ 1,474,609$ -$ 4,733,630$ 8,968,548$ 37,334,523$




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REVENUES: General Fund Fund Funds Funds FundsReal estate and personal property taxes 61,069,137$ -$ -$ -$ -$ 61,069,137$ Motor vehicle excise taxes 3,575,360 - - - - 3,575,360 Penalties and interest on taxes 244,181 - - - - 244,181 Charges for services 737,449 - - - 2,741,600 3,479,049 Licenses and permits 793,817 - - - - 793,817 Fines and forfeitures 130,804 - - - 405 131,209 Intergovernmental 13,178,368 335,483 423,762 - 2,823,915 16,761,528 Departmental and other - - - - 1,138,951 1,138,951 Contributions - - - 82,840 979,276 1,062,116 Investment income 251,850 - - 39,750 162,340 453,940 Miscellaneous 44,823 - - - - 44,823

TOTAL REVENUES 80,025,789$ 335,483$ 423,762$ 122,590$ 7,846,487$ 88,754,111$


General government 2,291,227 86,624 - 7,500 123,049 2,508,400

Public safety 7,611,091 1,058 - - 600,314 8,212,463 Education 33,598,274 138,443 - - 5,776,221 39,512,938 Public works 4,412,491 364,014 423,762 1,400 524,533 5,726,200 Landfill 114,600 9,480,805 - - - 9,595,405 Human services 578,527 - - 476 170,685 749,688 Culture and recreation 1,932,249 - - 463,140 655,435 3,050,824 Pension benefits 8,420,207 - - - - 8,420,207 Property and liability insurance 347,329 - - - - 347,329 Employee benefits 11,017,859 - - - - 11,017,859

State and county charges 2,868,544 - - - - 2,868,544 Debt Service: -

Principal 3,718,000 105,000 - - - 3,823,000 Interest 2,254,324 - - - - 2,254,324


EXCESS (DEFICIENCY) OF REVENUESOVER (UNDER) EXPENDITURES 861,067$ (9,840,461)$ -$ (349,926)$ (3,750)$ (9,333,070)$

Other Financing Sources (Uses):Issuance of debt - 11,805,725 - - - 11,805,725 Premium from issuance of debt - - - - 1,129,222 1,129,222 Transfers in 1,186,553 - - - 13,178 1,199,731 Transfers out - - - (29,000) (599,193) (628,193)


Net change in fund balances 2,047,620$ 1,965,264$ -$ (378,926)$ 539,457$ 4,173,415$ Fund Balances at Beginning of Year 18,606,561 3,872,945 - 5,206,465 8,920,063 36,606,034 Fund Balances at End of Year 20,654,181$ 5,838,209$ -$ 4,827,539$ 9,459,520$ 40,779,449$




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REVENUES: General Fund Fund Funds Funds FundsReal estate and personal property taxes 58,955,860$ -$ -$ -$ -$ 58,955,860$ Motor vehicle excise taxes 3,317,889 - - - - 3,317,889 Penalties and interest on taxes 287,496 - - - - 287,496 Charges for services 720,016 - - - 2,561,142 3,281,158 Licenses and permits 780,713 - - - - 780,713 Fines and forfeitures 125,921 - - - 100 126,021 Intergovernmental 10,755,992 - 596,585 - 2,597,319 13,949,896 Departmental and other - - - - 752,356 752,356 Contributions - - - 370,096 983,958 1,354,054 Investment income 227,140 - - 27,145 48,465 302,750 Miscellaneous 41,522 - - - 47 41,569

TOTAL REVENUES 75,212,549$ -$ 596,585$ 397,241$ 6,943,387$ 83,149,762$


General government 2,288,748 1,529,595 - 30,041 302,401 4,150,785

Public safety 7,364,246 5,833 - - 534,578 7,904,657 Education 32,273,638 364,862 - - 4,567,910 37,206,410 Public works 5,074,729 1,093,178 596,585 1,771 342,671 7,108,934 Landfill - 8,476,944 - - - 8,476,944 Human services 548,063 - - 302 201,998 750,363 Culture and recreation 1,746,796 - - 16,411 534,029 2,297,236 Pension benefits 6,171,613 - - - - 6,171,613 Property and liability insurance 318,315 - - - - 318,315 Employee benefits 10,423,210 - - - - 10,423,210

State and county charges 2,705,864 - - - - 2,705,864 Debt Service: -

Principal 3,219,000 21,553,239 - - - 24,772,239 Interest 2,221,195 - - - - 2,221,195


EXCESS (DEFICIENCY) OF REVENUESOVER (UNDER) EXPENDITURES 857,132$ (33,023,651)$ -$ 348,716$ 459,800$ (31,358,003)$

Other Financing Sources (Uses):Issuance of debt - 25,001,205 - - - 25,001,205 Premium from issuance of debt - - - - 583,768 583,768 Transfers in 1,254,045 23,610 - 1,101 372,779 1,651,535 Transfers out (134,946) (256,983) - (29,000) (653,387) (1,074,316)


Net change in fund balances 1,976,231$ (8,255,819)$ -$ 320,817$ 762,960$ (5,195,811)$ Fund Balances at Beginning of Year 16,630,330 12,128,764 - 4,885,648 8,157,103 41,801,845 Fund Balances at End of Year 18,606,561$ 3,872,945$ -$ 5,206,465$ 8,920,063$ 36,606,034$




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Unassigned General Fund Balance 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. Subject to certain adjustments, free cash is surplus revenue less uncollected and overdue property taxes from prior years. The Town Accountant may certify as available for appropriation an adjusted free cash figure by adding back those uncollected and overdue property taxes which are subsequently collected between July 1 and the following March 31 of any year. The following table sets forth the unassigned general fund balance and certified free cash for the most recent fiscal years. Unassigned General July 1 Fiscal Year, Fund Balance Free Cash

2019 $11,943,095 $10,243,709 2018 12,763,640 12,675,462 2017 14,327,422 13,432,440 2016 13,909,193 13,087,811 2015 (1) 12,480,102 12,326,179 ______________________ (1) The Town’s fiscal 2015 snow and ice deficit was $697,792. This amount was covered by the Town’s budget and was

not amortized. Energy Reserve In response to rising energy costs and the resulting pressures these increased costs place on departmental budgets, the Town instituted an energy reserve in its fiscal 2007 budget. The sole purpose of this reserve is to provide the additional resources needed to meet the rising energy costs of various departments. The following chart demonstrates the effectiveness of this reserve:

Fiscal Year

Amount Appropriated

Amount Expended

Amount Remaining

2019 533,544$ 431,947$ 101,597$ 2018 533,544 533,535 9 2017 533,544 194,768 338,776 2016 533,544 200,260 333,284 2015 533,544 309,147 224,397

Utility Reserve Similar to the Energy Reserve described above, the Town instituted a utility reserve in its fiscal 2017 budget. The sole purpose of this reserve is to provide the additional resources needed to meet the rising utility costs of various departments. Fiscal 2017 was the first year that the Town had a utility reserve. The following chart demonstrates the effectiveness of this reserve:

Fiscal Year

Amount Appropriated

Amount Expended

Amount Remaining

2019 100,000$ 85,016$ 14,984$ 2018 100,000 58,255 41,745 2017 100,000 71,948 28,052

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Salary Reserve In the fiscal 2009 budget the Town created a second reserve called a salary reserve. The sole purpose of this reserve is to fund one time salary pay-outs related to retirements of long term employees. This removes this type of extraordinary salary pay out from affected departmental budgets and allows for better year comparisons of salary accounts and better budget control. At a minimum, the Town annually funds the salary reserve at $110,770 and increases the funds as needed. The Town appropriated $110,770 for this purpose for fiscal 2019. As of June 30, 2019, the balance of the salary reserve was $50,000. 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 Town 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. The Town has not established any tax increment financing for development districts.

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INDEBTEDNESS

Authorization Procedure and Limitations

Serial bonds and notes are authorized by vote of two-thirds of all the members of the Town meeting. Provision is made for a referendum on the filing of a petition bearing the requisite number of signatures. Refunding bonds are authorized by the selectmen. Borrowings for certain purposes require state administrative approval. When serial bonds or notes have been authorized, bond anticipation notes may be issued by the officers authorized to issue the serial bonds or notes. Temporary loans in anticipation of the revenues of the fiscal year in which debt is incurred, or in anticipation of state and federal grants generally can be incurred by the Treasurer with the approval of the Selectmen.

The general debt limit of the Town of Marblehead 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 Municipal Finance Oversight Board composed of the State Treasurer, the State Auditor, the Attorney General and the Director of Accounts.

There are many categories of general obligation debt which are exempt from and do not count against the General Debt Limit. Among others, these exempt categories include revenue anticipation notes and grant anticipation notes; emergency loans; loans exempted by special laws; certain school bonds, sewer bonds, water bonds, bonds for electric gas and telecommunication systems, solid waste disposal facility bonds and economic development bonds supported by tax increment financing; and subject to special debt limits, bonds for housing, urban renewal and economic development. Revenue bonds are not subject to these debt limits. The General Debt Limit and the special debt limit for water bonds apply at the time the debt is authorized. The other special debt limits generally apply at the time the debt is incurred.

Types of Obligations

General Obligations. Massachusetts cities and towns are authorized to issue general obligation indebtedness of these types:

Serial Bonds and Notes. These are generally required to be payable in annual principal amounts beginning no later than the end of the next fiscal year commencing after the date of issue and ending within the terms permitted by law. A level debt service schedule, or a schedule that provides for a more rapid amortization of principal than level debt service, is permitted. The principal amounts of certain economic development bonds supported by tax increment financing may be payable in equal, diminishing or increasing amounts beginning within 5 years after the date of issue. The maximum terms of serial bonds and notes vary from one year to 40 years, depending on the purpose of the issue. The maximum terms permitted are set forth in the statutes. In addition, for many projects, the maximum term may be determined in accordance with useful life guidelines promulgated by the State Department of Revenue (“DOR”). Serial bonds and notes may be issued for the purposes set forth in the statutes. In addition, serial bonds and notes may be issued for any other public work improvement or asset not specifically listed in the Statutes that has a useful life of at least 5 years. Bonds or notes may be made callable and redeemed prior to their maturity, and a redemption premium may be paid. Refunding bonds or notes may be issued subject to the maximum applicable term measured from the date of the original bonds or notes and must produce present value savings over the debt service of the refunded bonds. Generally, the first required annual payment of principal of the refunding bonds cannot be later than the first principal payment of any of the bonds or notes being refunded thereby, however, principal payments made before the first principal payment of any of the bonds or notes being refunded thereby may be in any amount.

Serial bonds may be issued as “qualified bonds” with the approval of the state Municipal Finance Oversight Board composed of the State Treasurer, the State Auditor, the Attorney General and the Director of Accounts, subject to such conditions and limitations (including restrictions on future indebtedness) as may be required by the Board. Qualified bonds may mature not less than 10 nor more than 30 years from their dates and are not subject to the amortization requirements described above. The State Treasurer is required to pay the debt service on qualified bonds and thereafter to withhold the amount of the debt service paid by the State from state aid or other state payments; administrative costs and any loss of interest income to the State are to be assessed upon the city or town.

Tax Credit Bonds or Notes. Subject to certain provisions and conditions, the officers authorized to issue bonds or notes may designate any duly authorized issue of bonds or notes as “tax credit bonds” to the extent such bonds and notes are otherwise permitted to be issued with federal tax credits or other similar subsidies for all or a portion of the borrowing costs. Tax credit bonds may be made payable without regard to the annual installments required by any other law, and a sinking fund may be established for the payment of such bonds. Any investment that is part of such a sinking fund may mature not later than the date fixed for payment or redemption of the applicable bonds.

Bond Anticipation Notes. These generally must mature within two years of their original dates of issuance but may be refunded from time to time for a period not to exceed ten years from their original dates of issuance, provided that for each

49

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 TAXATION" above.) In any event, the period from an original borrowing to its final maturity cannot exceed one year. The Town has not issued any revenue anticipation notes during the current or the last five fiscal years.

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 and for projects financed under the Commonwealth’s Clean 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.

DIRECT DEBT SUMMARY As of June 30, 2020,

Including Subsequent Issue (1) Excludes the Effects of the Refunding

General Obligation Bonds Outstanding:Inside the Debt Limit

Schools (2)(3) 17,785,000$ General (2)(3) 5,422,600 Sewer (2)(3)(4) 4,723,700

Total Inside the Debt Limit 27,931,300$

Outside the Debt LimitSchools (3) 22,042,500 General (3) 21,616,200 Water (4) 2,200,000

Total Outside the Debt Limit 45,858,700

Total Long-Term Debt Outstanding: 73,790,000

This Issue of New Money Bonds to be Dated July 30, 2020 35,565,000 *

Temporary Loans:Bond Anticipation Notes Outstanding (5) 8,831,894 Less: To Be Retired with Available Funds of the Town (12) To Be Retired with MSBA Grant Proceeds (506,080) To Be Retired with Bond Proceeds (5,565,814) Pending New Money Bond Anticipation Notes (6) 482,963

Total Short-Term Debt Outstanding (6) 3,242,951

Total Direct Debt: 112,597,951$ *

______________________ *Preliminary, subject to change. (1) Principal amount only. Excludes lease and installment purchase obligations, overlapping debt, unfunded pension liability and post-

employment benefits liability. (2) Subject to the Town’s general debt limit. (3) Exempt from the limits of Proposition 2 ½. (4) Self-supporting. (5) Payable August 4, 2020. (6) Payable July 30, 2021 (pending issue of bond anticipation notes).

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Debt Ratios The following table sets forth the Town's general obligation bonds outstanding, population, assessed valuations, per capita debt and general obligation debt as a percentage of the assessed valuation, at the end of the last five fiscal years. These figures reflect the principal amount of each of the Town's general obligations only, and do not deduct anticipated State grant payments applicable to the principal of the outstanding bonds, or any debt that may be partially supported by non-tax revenues.

Fiscal Year

General Obligation Bonds

Outstanding Population(1)State Equalized

Valuation (2)Per Capita

Debt(1)

Debt as a % of Assessed Valuation

2020 73,790,000$ 19,808 6,182,649,400$ 3,725$ 1.19 %2019 64,520,000 19,808 6,182,649,400 3,257 1.042018 68,670,000 19,808 5,735,475,100 3,467 1.202017 65,397,000 19,808 5,735,475,100 3,302 1.142016 61,715,000 19,808 5,323,866,200 3,116 1.16

______________________ (1) Based on the 2010 U.S. Bureau of Census. (2) 2014 state equalized valuation is used for fiscal 2016; 2016 state equalized valuation is used for fiscal 2017 and 2018; 2018 state

equalized valuation is used for fiscal 2019 and 2020. Principal Payments by Purpose – Excludes the Bonds The following table sets forth the principal payments by purpose for the Town's outstanding debt as of June 30, 2020. As indicated in the table, 36.1% of the debt outstanding is to be paid by the end of fiscal 2025 and 65.0% of the debt outstanding is to be paid by the end of fiscal 2030.

Fiscal Year Sewer Water School General Total

2021 $220,000 $220,000 $3,120,000 $1,300,000 $4,860,0002022 230,000 220,000 3,426,000 1,389,000 5,265,000 2023 241,000 220,000 3,570,000 1,464,000 5,495,000 2024 242,700 220,000 3,720,000 1,387,300 5,570,000 2025 260,000 220,000 3,851,000 1,434,000 5,765,000 2026 270,000 220,000 2,090,000 1,495,000 4,075,000 2027 280,000 220,000 2,160,000 1,570,000 4,230,000 2028 290,000 220,000 2,235,000 1,620,000 4,365,000 2029 300,000 220,000 2,330,000 1,625,000 4,475,000 2030 310,000 220,000 2,420,000 1,685,000 4,635,000 2031 320,000 - 2,419,000 1,731,000 4,470,000 2032 335,000 - 1,535,500 1,794,500 3,665,000 2033 345,000 - 1,590,500 1,849,500 3,785,000 2034 350,000 - 1,305,500 1,699,500 3,355,000 2035 365,000 - 840,000 1,610,000 2,815,000 2036 175,000 - 635,000 1,550,000 2,360,000 2037 115,000 - 650,000 975,000 1,740,000 2038 75,000 - 625,000 565,000 1,265,000 2039 - - 640,000 145,000 785,000 2040 - - 665,000 150,000 815,000

Total 4,723,700$ 2,200,000$ 39,827,500$ 27,038,800$ 73,790,000$

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Debt Service Requirements – Excludes the Bonds The following table sets forth the required principal and interest payments on the outstanding general obligation bonds of the Town as of June 30, 2020.

TotalFiscal Net DebtYear Principal Interest Service

2021 4,860,000$ 2,735,838$ 7,595,838$ 6.6 %2022 5,265,000 2,299,856 7,564,856 13.7 2023 5,495,000 2,088,275 7,583,275 21.2 2024 5,570,000 1,880,600 7,450,600 28.7 2025 5,765,000 1,680,013 7,445,013 36.5 2026 4,075,000 1,504,184 5,579,184 42.1 2027 4,230,000 1,351,375 5,581,375 47.8 2028 4,365,000 1,196,128 5,561,128 53.7 2029 4,475,000 1,037,531 5,512,531 59.8 2030 4,635,000 880,172 5,515,172 66.0 2031 4,470,000 727,041 5,197,041 72.1 2032 3,665,000 589,978 4,254,978 77.1 2033 3,785,000 466,369 4,251,369 82.2 2034 3,355,000 347,775 3,702,775 86.7 2035 2,815,000 249,119 3,064,119 90.6 2036 2,360,000 171,584 2,531,584 93.8 2037 1,740,000 111,075 1,851,075 96.1 2038 1,265,000 66,975 1,331,975 97.8 2039 785,000 36,225 821,225 98.9 2040 815,000 12,225 827,225 100.0

73,790,000$ 19,432,339$ 93,222,339$

June 30, 2020 (1)Cumulative %

PrincipalRetired

Outstanding as of

______________________ (1) Principal and associated interest has been exempted from the limits of Proposition 2 ½. Excludes lease and installment purchase

obligations, overlapping debt, unfunded pension liability and post-employment benefits liability. Authorized Unissued Debt Following delivery of the Bonds, the Town will have approximately the following amounts of authorized unissued debt:

Original Date Amount Purpose Authorization Authorized

2,682,963$ Abbott Hall Renovations (1) 8,982,963 6/21/20183,059,400 Water Distribution System 5,259,400 5/6/2019

550,000 Fort Seawall Repairs (1) 750,000 6/18/201914,844,767 (2) New Gerry School (1) 54,844,767 6/18/2019

21,137,130$

______________________ (1) Debt service has been excluded from the limits of Proposition 2½. (2) This project is eligible for a maximum total facilities grant from the MSBA in the amount of $13,989,674 which will further reduce

the borrowing authority by a like amount. To date, the Town has received $800,386.

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Pay-As-You-Go Capital Spending The Town has had a long-term practice of funding a portion of its capital needs on a pay as you go basis. For the past several years and for the fiscal 2020 budget the Town has appropriated the following amounts to fund capital expenditures:

FY16 FY17 FY18 FY19 FY20

Drains 332,000$ 332,000$ 332,000$ 417,000$ 314,000$ Building Improvements 291,900 260,000 313,848 462,596 346,242 Equipment - Rolling stock 525,565 434,615 494,699 468,538 472,665 IT / Computers 85,500 85,500 85,500 85,500 125,500 Water Construction 729,788 893,505 992,577 1,336,652 773,398 Sewer Construction 582,115 455,880 1,788,408 1,156,786 896,029 Harbor Outlays 107,500 141,000 120,000 260,000 133,000

Total 2,654,368$ 2,602,500$ 4,127,032$ 4,187,072$ 3,060,834$

Overlapping Debt The Town of Marblehead is a member of several authorities and districts. The following table sets forth the outstanding bonded debt, exclusive of temporary loans in anticipation of bonds or current revenue of the following as of June 30, 2019, as well as the Town’s gross share of such debt and the fiscal 2020 dollar assessment to the Town.

Outstanding Marblehead's FY 2020 Dollar6/30/2019 % Share Assessment (1)

Essex North Shore Agricultural Technical School District (2) 28,335,000$ 1.79 % 726,435$ MBTA (3) 5,478,860,000 0.27 464,719 South Essex Sewerage District (4) 19,287,587 6.29 3,880,167 MWRA Water (5) 2,052,587,000 1.02 1,518,082

______________________ (1) Estimated dollar assessment based upon total net operating expenses, inclusive (where applicable) of debt service. (2) SOURCE: Essex North Shore Agricultural and Technical School District. Towns may organize regional school districts to carry out

general or specialized educational functions. Pursuant to special laws a number of cities may also participate in regional school districts, primarily for vocational education. The operating expenses and debt service of regional school districts are apportioned among the member municipalities in accordance with the agreements establishing the districts. $70,000 of the debt currently outstanding is associated with the North Shore Regional Vocational Technical School District prior to consolidation into the Essex North Shore Agricultural and Technical School District.

(3) SOURCE: The MBTA. The MBTA was created in 1964 to finance and operate mass transportation facilities within the greater Boston metropolitan area. Under its enabling act, the MBTA is authorized to issue bonds for capital purposes, other than refunding bonds, and for certain specified purposes to an outstanding amount, which does not exceed the aggregate principal amount of $3,556,300,000. In addition, pursuant to certain of the Commonwealth’s transportation bond bills, the MBTA is authorized to issue additional bonds for particular capital projects. The MBTA also is authorized to issue bonds of the purpose of refunding bonds. Under the MBTA’s enabling act debt service, as well as other operating expenses of the MBTA, are to be financed by a dedicated revenue stream consisting of the amounts assessed on the cities and towns of the MBTA and a dedicated portion of the statewide sales tax. The amount assessed to each city and town is based on its weighted percentage of the total population of the authority as provided in the enabling act. The aggregate amount of such assessments is generally not permitted to increase by more than 2.5 percent per year. (See “Tax Limitations” under “PROPERTY TAX” below.).

(4) SOURCE: South Essex Sewerage District. The Town is a member along with the Town of Danvers, and the Cities of Peabody, Salem and Beverly.

(5) SOURCE: The MWRA. This represents water debt only. The Town does not utilize the Authority's sewer services. The MWRA provides wholesale drinking water services in whole or in part to 48 cities, towns and special purpose entities and provides wastewater collection and treatment services to 43 cities, towns and special purpose entities. Under its enabling legislation, as amended, the aggregate principal amount of all bonds issued by the MWRA for its corporate purposes may not exceed $6.1 billion outstanding at any time. Its obligations are secured by revenues of the MWRA. The MWRA assesses member cities, towns and special purpose entities, which continue to provide direct retail water and sewer services to users. The cities, towns and other entities collect fees from the users to pay all or part of the assessments; some municipalities levy property taxes to pay part of the amounts assessed upon them.

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Contractual Obligations Municipal contracts are generally limited to currently available appropriations. 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 interest, but generally only when funds are available for the first fiscal year; obligations for succeeding fiscal years generally are expressly subject to availability and appropriation of funds. Municipalities have specific authority in relatively few cases for long-term contractual obligations that are not subject to annual appropriation, including contracts for refuse disposal and sewage treatment and disposal. 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 contracts relating to solid waste disposal facilities may contain provisions requiring the delivery of minimum amounts of waste and payments based thereon and requiring payments in certain circumstances without regard to the operational status of the facilities. Municipal electric departments have statutory power to enter into long-term contracts for joint ownership and operation of generating and transmission facilities and for the purchase or sale of capacity, including contracts requiring payments without regard to the operational status of the facilities. Pursuant to the Home Rule Amendment to the Massachusetts Constitution, cities and towns may also be empowered to make other contracts and leases. Listed below are significant contracts of the Town:

Contract Contract FY19 FY20Vendor Name Nature of Contract Term Expires Cost Budget

JRM Hauling & Recycling Solid waste/Yard Waste Disposal and Recycling 10 years September 30, 2026 843,552$ 856,000$ Waste Management of Massachusetts Solid Waste Disposal 6 years June 30, 2022 1,055,247 1,060,000 Leftfield LLC New School project manager 3 years December 1, 2022 51,386 1,000,000 Raymond Design New School project designer 3 years December 1, 2022 176,609 2,000,000 Kronenberger & Sons Restoration Abbot Hall Renovations Upon completion Upon completion 852,115 2,500,000

For information concerning the Marblehead Municipal Light Department’s participation in Massachusetts Municipal Wholesale Electric Company please see Appendix A.

RETIREMENT PLAN The Massachusetts General Laws provide for the establishment of contributory retirement systems for state employees, for teachers and for county, city and town employees other than teachers. Teachers are assigned to a separate statewide teachers’ system and not to the city and town systems. For all employees other than teachers, this law is subject to acceptance in each city and town. Substantially all employees of an accepting city or town are covered. If a town has a population of less than 10,000 when it accepts the statute, its non-teacher employees participate through the county system and its share of the county cost is proportionate to the aggregate annual rate of regular compensation of its covered employees. In addition to the contributory systems, cities and towns provide noncontributory 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.

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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, 2040, 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 has a contributory retirement system that is partially funded by employee contributions. The Town’s method of funding for the contributory plan is a combination of required pay-as-you-go contributions and optional funding of certain past service costs based on an actuarial valuation. Funding for the non-contributory pension plan is primarily on a pay-as-you-go basis. The annual required contributions of the Town to the retirement system for the following fiscal years are:

Year Ending Contributory (1)

June 30, 2021 (budgeted) $4,405,062 June 30, 2020 4,078,761 June 30, 2019 3,776,631 June 30, 2018 3,496,880 June 30, 2017 3,237,852 June 30, 2016 2,998,011

______________________ (1) Represents contributions of the Town and enterprises. The latest actuarial valuation of the Town’s retirement program was conducted by PERAC as of January 1, 2018. A copy of this report is available at http://www.mass.gov/perac/board-info/profiles/marblehead.html. As of January 1, 2018, the Town’s accrued actuarial liability (“AAL”) totaled $148,535,913, with an actuarial value of assets of $96,181,619, resulting in an unfunded accrued actuarial liability (“UAAL”) of $52,354,294, assuming a 7.35% investment rate of return on plan assets. As such, the Town’s retirement system is 64.8% funded.

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The following table sets forth the historical funding ratios of the Town’s retirement system in the last 5 calendar years.

Actuarial Actuarial Actuarial Unfunded Funded Covered UAALValuation Value of Accrued AAL (UAAL) Ratio Payroll as a % of

Date Assets Liability (b-a) (a/b) (c) Cov. Payroll(a) (AAL)(1) ((b-a)/c)

(b)1/1/2018 96,181,619$ 148,535,913$ 52,354,294$ 64.8% 21,324,819$ 245.5%1/1/2016 88,309,295$ 134,203,533$ 45,894,238$ 65.8% 20,286,731$ 226.2%1/1/2014 81,979,599$ 122,307,600$ 40,328,001$ 67.0% 18,842,144$ 214.0%1/1/2012 79,866,225$ 108,293,125$ 28,426,900$ 73.8% 16,564,039$ 171.6%

______________________ SOURCE: January 1, 2016 Marblehead Retirement System Actuarial Valuation, PERAC. (1) Excludes state reimbursed COLA. The Town’s retirement system has approved a funding schedule to fully amortize its UAAL by 2039 as shown below. Current Funding Schedule

______________________ SOURCE: January 1, 2018 Marblehead Retirement System Actuarial Valuation, PERAC. The foregoing projected costs assume the Town’s retirement system will earn a compounded rate of return on investments of 7.35%. Should the rate of return be lower or higher, the level of annual payments by the Town in each year will increase or decrease accordingly. The estimated contributions set forth above are also subject to change on account of changes in benefits, cost of living assumptions, assumptions with respect to mortality, and the like.

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Other Post-Employment Benefits

In addition to pension benefits, the Town provides its retired employees with health care and life insurance benefits.

The Governmental Accounting Standards Board (“GASB”) Statement Nos. 43 and 45 require public sector entities to report the future costs of these non-pension, post-employment benefits in their financial statements. These accounting standards do not require pre-funding the payment of these costs as the liability for such costs accrues, but the basis applied by the standards for measurement of costs and liabilities for these benefits is conservative if they continue to be funded on a pay-as-you-go basis and will result in larger yearly cost and liability accruals than if the cost of such benefits were pre-funded in a trust fund in the same manner as traditional pension benefits. Cities and towns that choose to self-insure all or a portion of the cost of the health care benefits they provide to employees and retirees may establish a trust fund for the purpose of paying claims. In addition, cities and towns may establish a trust fund for the purpose of pre-funding other post-employment benefits liability in the same manner as traditional pension benefits.

The Town has implemented the GASB reporting requirements for other post-employment benefits. As of June 30, 2018, the Town’s net OPEB liability was approximately $190,286,125 assuming a 2.98% discount rate. The actual contribution made was $5,010,000 in fiscal 2016, $6,400,000 in fiscal 2017, and $4,717,100 in fiscal 2018.

In fiscal 2016, the Town appropriated $300,000 for the purpose of funding its OPEB liability. These funds have been invested with the State Retiree Trust Fund. The Town appropriated an additional $300,000 as part of the fiscal 2017 budgeting process, $350,000 as part of the fiscal 2018 budgeting process, $350,000 as part of the fiscal 2019 budgeting process, and $250,000 as a part of the fiscal 2020 budgeting process. The balance of the OPEB fund was $2,303,659 as of June 30, 2019.

Projections of benefits are based on the plan as understood by the Town and the plan members, and include the types of benefits provided at the time of each valuation and the historical pattern of sharing the benefit costs between the Town and plan members to that point. As such, any changes in benefits offered, cost sharing and the like, will have an impact upon the total amount of the Town’s actuarial liability for postemployment benefits, other than pensions.

For a further discussion about the Town’s liability for post-employment benefits other than pensions, see Appendix A.

EMPLOYEE RELATIONS

The Town presently employs approximately 1,245 full-time workers and part-time workers. 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. Approximately 657 town employees are covered by various collective bargaining agreements.

The following table provides information regarding the various unions which represent Town employees.

Number ExpirationUnion Department of people Date

Government:Marblehead Police Union Police 32 6/30/2021International Association of Firefighters AFL-CIO, Local 2043 Fire 38 6/30/2021Marblehead Municipal Employees Association Public Works & Clerical 91 6/30/2021IUE-CWA, Local 214 Light Department 13 6/30/2022

School:Mass. Education Association, Unit A (Teachers) Teachers 303 8/31/2021Mass. Education Association, Paraprofessionals Unit Teacher Aides 63 8/31/2021Mass. Education Association, Custodians Unit Custodians 33 6/30/2021Mass. Education Association, Tutors Unit Tutors 76 8/31/2021AFSCME Council 93, Local 2610 Cafeteria Workers Cafeteria Workers 9 8/31/2021

Total 657

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LITIGATION

At present there are various cases pending in various courts throughout the Commonwealth where the Town of Marblehead is a defendant. In the opinion of Town Counsel, none of the threatened or pending litigation is likely to result, either individually or in the aggregate, in final judgments against the Town that would materially affect its financial position or its ability to pay its obligations.

_______________________

TOWN OF MARBLEHEAD, MASSACHUSETTS /s/ Alison Nieto, Finance Director/Town Accountant

July 2, 2020

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COMPREHENSIVE ANNUAL FINANCIAL REPORT

Photo by Yacht Shotz LLC

For the Year Ended June 30, 2019

APPENDIX A

On the Cover: Aerial view of the Abbot Hall Tower on a clear, bright day.

View of the harbor from the roof of Abbot Hall.

Photo by Brad Smith Fire boat on the water during a quiet winter morning.

Photo by Laurie Blaisdell

The Police Station after digging out from two significant snow storms in March 2015.

Police Photo by Matt Freeman


COMPREHENSIVE ANNUAL FINANCIAL REPORT

For the Year Ended June 30, 2019 Prepared by the Finance Department

Town of Marblehead, Massachusetts Comprehensive Annual Financial Report

This page left intentionally blank.

TOWN OF MARBLEHEAD, MASSACHUSETTS Comprehensive Annual Financial Report

Year Ended June 30, 2019

TABLE OF CONTENTS

Introductory Section ...................................................................................................................................................... A-1 Letter of Transmittal ..................................................................................................................................................... A-3

Organizational Chart .................................................................................................................................................... A-9

Principal Executive Officers ....................................................................................................................................... A-10

Certificate of Achievement for Excellence in Financial Reporting ............................................................................. A-11

Financial Section ......................................................................................................................................................... A-13

Independent Auditor’s Report .................................................................................................................................... A-15

Management’s Discussion and Analysis ................................................................................................................... A-19

Basic Financial Statements ........................................................................................................................................ A-27

Government-Wide Financial Statements ............................................................................................................ A-29

Statement of Net Position ............................................................................................................................... A-29

Statement of Activities .................................................................................................................................... A-30

Fund Financial Statements ................................................................................................................................. A-32

Governmental Funds – Balance Sheet ........................................................................................................... A-32

Reconciliation of the Governmental Funds Balance Sheet Total Fund Balances to the

Statement of Net Position ............................................................................................................................... A-33

Governmental Funds – Statement of Revenues, Expenditures and Changes in Fund Balances .................. A-34

Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of

Governmental Funds to the Statement of Activities ........................................................................................ A-35

Proprietary Funds – Statement of Net Position .............................................................................................. A-36

Proprietary Funds – Statement of Revenues, Expenses and Changes in Net Position ................................. A-37

Proprietary Funds – Statement of Cash Flows ............................................................................................... A-38

Fiduciary Funds – Statement of Fiduciary Net Position ..................................................................................A- 39

Fiduciary Funds – Statement of Changes in Fiduciary Net Position .............................................................. A-40

Notes to the Basic Financial Statements ............................................................................................................ A-41

Required Supplementary Information ........................................................................................................................A- 86

General Fund ...................................................................................................................................................... A-87

General Fund - Schedule of Revenues, Expenditures and Changes in Fund Balance – Budget and

Actual .............................................................................................................................................................. A-88

Pension Plan Schedules - Retirement System ................................................................................................... A-91

Schedule of Changes in the Net Pension Liability and Related Ratios .......................................................... A-92

Schedule of Contributions ............................................................................................................................... A-93

Schedule of Investment Returns ..................................................................................................................... A-94

Pension Plan Schedules – Town & Municipal Light Enterprise .......................................................................... A-95

Schedule of the Town’s Proportionate Share of the Net Pension Liability ..................................................... A-96

Schedule of the Municipal Light Enterprise’s Proportionate Share of the Net Pension Liability ....................A- 97

Schedule of the Town’s Contributions ............................................................................................................ A-98

Schedule of Special Funding Amounts of the Net Pension Liability ............................................................... A-99

Other Postemployment Benefits Plan Schedules ............................................................................................. A-100

Schedule of Changes in the Town’s Net OPEB Liability and Related Ratios ............................................... A-101

Schedule of the Town’s Contributions .......................................................................................................... A-102

Schedule of Investment Returns ................................................................................................................... A-103

Schedule of Changes in the Municipal Light Enterprise’s Net OPEB Liability and Related Ratios .............. A-104

Schedule of the Municipal Light Enterprise’s Contributions ......................................................................... A-105

Schedule of the Municipal Light Enterprise’s Investment Returns ............................................................... A-106

Notes to Required Supplementary Information ................................................................................................ A-107

Other Supplementary Information ............................................................................................................................ A-111

Combining and Individual Fund Financial Statements ..................................................................................... A-112

Nonmajor Governmental Funds .................................................................................................................... A-113

Nonmajor Governmental Funds - Combining Balance Sheet ................................................................... A-114

Nonmajor Governmental Funds - Combining Statement of Revenues, Expenditures and Changes in

Fund Balances ........................................................................................................................................... A-116

Fiduciary Funds ............................................................................................................................................. A-118

Private Purpose Trust Funds - Combining Statement of Net Position ...................................................... A-119

Private Purpose Trust Funds - Combining Statement of Changes in Net Position ................................... A-120

Agency Fund - Statement of Changes in Assets and Liabilities ................................................................ A-121

Statistical Section ...................................................................................................................................................... A-123

Financial Trends....................................................................................................................................................... A-125

Net Position by Component .............................................................................................................................. A-125

Changes in Net Position ................................................................................................................................... A-126

Fund Balances – Governmental Funds ............................................................................................................ A-127

Changes in Fund Balance – Governmental Funds .......................................................................................... A-128

Revenue Capacity .................................................................................................................................................... A-129

Assessed Value and Actual Value of Taxable Property by Classification and Tax Rates ............................... A-129

Principal Taxpayers .......................................................................................................................................... A-130

Property Tax Levies and Collections ................................................................................................................ A-131

Debt Capacity ........................................................................................................................................................... A-132

Ratios of Outstanding Debt .............................................................................................................................. A-132

Ratios of General Bonded Debt ........................................................................................................................ A-133

Direct and Overlapping Governmental Activities Debt ..................................................................................... A-134

Computation of Legal Debt Margin ................................................................................................................... A-135

Demographic and Economic Information ................................................................................................................. A-136

Demographic and Economic Statistics ............................................................................................................. A-136

Principal Employers .......................................................................................................................................... A-137

Full-time Equivalent Town Employees by Function .......................................................................................... A-138

Operating Indicators by Function/Program ....................................................................................................... A-139

Capital Asset Statistics by Function/Program .................................................................................................. A-140

Introductory Section

Photo by Yacht Shotz LLC

Small sailboats lined up on calm waters.


Introductory Section

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Alison Nieto Mary Alley Building Finance Director 7 Widger Road 781-631-1705 Marblehead, MA 01945 [email protected]

Letter of Transmittal

December 19, 2019

Honorable Members of the Board of Selectmen and Citizens of the Town of Marblehead, Massachusetts:

It is with great pleasure that the Comprehensive Annual Financial Report of the Town of Marblehead, Massachusetts, for the fiscal year ended June 30, 2019 is presented. The financial statements are presented in conformity with accounting principles generally accepted in the United States of America (GAAP) that are audited in accordance with generally accepted auditing standards by a firm of licensed certified public accountants. This report also complies with the financial reporting model developed by the Governmental Accounting Standards Board (GASB) Statement 34.

In addition to the fund financial information traditionally presented in the Town’s financial statements, this report also includes government-wide financial statements. The government-wide financial statements include a Statement of Net Assets that provides the total net assets of the Town including all capital assets (as well as infrastructure) and the Statement of Activities that shows the cost of providing government services.

The report is designed to be used by the elected and appointed officials of the Town and others who are concerned with the Town’s management and progress such as bond analysts, banking institutions and credit raters, as well as residents and taxpayers of the Town of Marblehead.

This report consists of management’s representations concerning the finances of the Town of Marblehead. Consequently, management assumes full responsibility for the completeness and reliability of all of the information presented in this report. To provide a reasonable basis for making those representations, management has established an internal control framework that is designed to both protect the assets of the Town from loss, theft or misuse and to allow for the compiling of sufficient reliable information for the preparation of the Town’s financial statements in conformity with GAAP. Because the cost of internal controls should not outweigh their benefits, the Town’s comprehensive framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements will be free from material misstatement. To the best of management’s knowledge and belief, this financial report is complete and reliable in all material respects.

The Town of Marblehead’s financial statements have been audited by Powers & Sullivan, LLC, a firm of licensed certified public accountants. The goal of the independent audit was to provide reasonable assurance that the financial statements of the Town of Marblehead, for the fiscal year ended June 30, 2019, are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditor concluded, based upon the audit, that there was a reasonable basis for rendering an unmodified opinion that the Town of Marblehead’s financial statements for the fiscal year ended June 30,

TOWN OF MARBLEHEAD

FINANCIAL SERVICES

www.marblehead.org/finance

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2019, are fairly presented in conformity with GAAP. The independent auditor’s report is presented as the first component of the financial section of this report.

The independent audit of the financial statements of the Town of Marblehead was part of a broader, federally-mandated “Single Audit” designed to meet the special needs of federal grantor agencies. The standards governing Single Audit engagements require the independent auditor to report not only on the fair presentation of the financial statements, but also on the audited government’s internal controls and compliance with legal requirements, with special emphasis on internal controls and legal requirements involving the administration of federal awards. These reports are available in the Town of Marblehead’s separately issued Single Audit Report.

GAAP require that management provide a narrative introduction, overview and analysis to accompany the basic financial statements in the form of Management’s Discussion and Analysis (MD&A). This letter of transmittal is designed to compliment MD&A and should be read in conjunction with it. The Town of Marblehead’s MD&A can be found immediately following the report of the independent auditors.

PROFILE OF THE TOWN

The Town of Marblehead, originally incorporated in 1649, is a picturesque seacoast town steeped in history. In its early years, fishing and the shoe industry were its two main sources of income. While Marblehead has been known through the years as the “Birthplace of the American Navy,” in recent times the Town has also been known as one of the yachting capitals of the world. Pleasure boating is a popular pastime of its residents. Visitors come from all over the world to view the original of the famous painting “The Spirit of ’76,” which is housed in Abbot Hall in the office of the Board of Selectmen, as well as to see the beautiful harbor crowded with sailing, fishing, lobster, and pleasure boats. Another major attraction for visitors is the Town’s historic district, the largest in the State, and the narrow crooked streets lined with Colonial and Victorian buildings, many of which have been placed on the National Register.

With a population of 19,752, Marblehead is located in the Greater Boston Area, 18 miles northeast of Boston, with a land area of 4.53 square miles. Marblehead is situated in eastern Massachusetts, bordered by Swampscott on the south, Salem on the southwest, and the Atlantic Ocean on the west, north, and east. Commuter rail service to North Station in Boston is convenient from the Salem or Swampscott stations and Marblehead is a member of the Massachusetts Bay Transportation Authority, which provides bus service to Swampscott, Lynn, and Boston.

The Town operates under a Board of Selectmen/Open Town Meeting/Town Administrator form of government. The five-member Board of Selectmen, elected annually, makes policy decisions. The Town Administrator is responsible for carrying out the policies and direction of the Board of Selectmen and for managing the day-to-day operations of the Town.

THE REPORTING ENTITY AND ITS SERVICES

The financial reporting entity (the Town) of the primary government includes all funds and activities considered a part of the Town of Marblehead. Specifically excluded are the Marblehead Housing Authority and the Essex North Shore Agricultural and Technical School since they have substantial autonomy and separate governmental entity characteristics.

The Town includes the Marblehead Contributory Retirement System (the System) in its financial reporting since the Town represents approximately 98% of the members of the System. The System was established to provide retirement benefits to its members, including employees and beneficiaries of the Town of Marblehead and the Marblehead Housing Authority.

The Town provides a range of municipal services normally associated with municipal government including education, public safety (police, fire and emergency medical services), recreation and parks, elder services (Council on Aging), street construction and maintenance, solid waste collection and disposal, library, cemetery,

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building inspection and general administrative services. The Town also operates electric, water and sewer utilities, and harbor and waterfront services as enterprises.

FACTORS AFFECTING ECONOMIC CONDITION

The Town of Marblehead real estate market continues to experience a strong period of revitalization, both in terms of value and new construction. New growth in fiscal year 2019 was $317,431. In addition, the median family income has remained significantly higher than state averages and the unemployment rate continues to be lower than the state average (2.5% vs. 3.2% for the state). The Town remains a very desirable community given its close proximity to Boston and for its tourism, history, boating, and the quality of services provided.

Marblehead has 14 miles of seacoast of varying topography. The housing stock is also varied. There are 6,223 single family dwellings as of January 1, 2018. There are 2,047 Colonial style homes, constituting 33% of the single family housing stock. Old Style construction (typically pre-1920) represents 21% with 1,283 properties. Cape, Ranch, Contemporary, Split level, and Antique style properties comprise 28% of the single family inventory. The balance consists of conventional (non- specific architectural style) Bungalows, Split Entries, Row House (attached by common wall), and Mansions. Additionally, there are 986 condominiums, 304 two-family properties, and 151 properties with three or more units. A total of 53% of the single family housing stock was built prior to 1950 and Marblehead has one of largest inventories of homes built prior to 1800, including 229 properties built before 1750. The vast majority of early construction is located in the area of town referred to as “Old Town” and designated as the Historic District. The Historic District is a high density, homogeneous, and distinct area. Antique architecture is predominant and lots rarely exceed 5,000 square feet with some lots mirroring only the foundation of the dwelling. The Historic District has a more rigorous building standard than the standard zoning by-laws with regard to permit work involving the exterior.

Residential properties comprise 95% of the tax levy. In FY 2019, single family dwellings had an average assessment of $820,000, representing an increase of $39,000 from FY 2018. The average tax bill of $8,806 is based on a single tax rate of $11.74.

Commercial properties are typically one and two-story structures located along Atlantic Avenue, Pleasant Street, and in the Historic District. The predominant composition of the commercial properties is small retail, clothing boutiques, restaurants, banks, and office space, with many mixed use properties located in the Historic District. Notable exceptions are three small strip centers located on Pleasant Street and a 15,000 square foot supermarket with attached residential improvements located in the Historic District. Commercial vacancies remain at historic lows and higher rental rates reflect the strong demand for space. Building permits continue to be issued at an unprecedented rate and reflect the ongoing revitalization of properties approaching the end of their economic life.

The Town continues to be in the revitalization stage of the real estate cycle as demonstrated by the continued number of “tear downs” and the redevelopment of 11 new dwellings. All relevant data from multiple sources, particularly sales data and assessment analysis, indicate a very strong real estate market with an aggregate increase of 4.95% for Marblehead in FY 2019. Average marketing time for properties is 30 to 45 days, with many properties selling in less than 30 days if priced properly. Demand continues to outweigh supply, resulting in a seller’s market and an upward trend in values, and several properties selling above asking price.

Based on market demand, current and proposed development, and increasing sale prices (in calendar year 2018 and the first 9 months of 2019), indications are that strong real estate market remains in place. This will result in a continued increase in market values for FY 2020 and similarly, a corresponding increase in assessments. It is expected that for FY 2020 the aggregate value of the community will continue to set new highs for assessments, surpassing the previous high point of 2019.

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FINANCIAL AND MANAGEMENT POLICIES

Ongoing Long-Term Financial Planning

The Town manages its financial matters in a prudent manner, which has been affirmed by its ability to maintain its AAA bond rating for eleven consecutive years. The Town’s financial actions are generally guided by multi-year planning tools, pay-as-you-go financing strategies for certain capital investments, long-term planning for liabilities such as employee health insurance costs and pension obligations, and establishment of reserves to alleviate volatility in departmental budgets.

The Town of Marblehead has also enhanced its revenue flexibility by establishing self-sufficient enterprise funds for sewer, water, electric and harbor operations. All costs related to the enterprises are funded through user fees and each enterprise pays the Town for its share of general government services.

In FY19, the Town borrowed $9.1 million in short-term debt to fund a number of ongoing capital projects. The details of these projects and the related financing are included in the accompanying notes to the financial statements.

Minimal Formal Changes to FY19 Approved Operating Budget

The Town’s Finance Committee is responsible for reviewing departmental budget requests and submits to Town Meeting an operating budget for the proposed expenditures and other financing uses for the next fiscal year. The budget, as enacted by Town Meeting, also establishes that certain appropriations are to be funded by particular revenues. The original budget can be amended during the fiscal year at special town meetings or at the next annual town meeting held prior to the end of the fiscal year. In FY19, no such budget amendments occurred.

However, during the fiscal year, it came to the Town's attention that the School Department paid several tuition bills for out of district special education tuition from FY18 with its FY19 budget. Additionally, the School Department stated that they would be unable to meet its FY19 obligations for out of district tuition bills.

Town Meeting in May 2019 voted to appropriate $592,783 in free cash to pay for the prior years out of district tuition bills that were originally paid from the FY19 budget. Also, in June 2019, the Town was able to find savings in various appropriation line items to cover the shortfall in the School Department's budget for paying out of district tuition. In accordance with M.G.L. Chapter 44, section 33B, the Board of Selectmen and the Finance Committee approved the transfer of an additional $270,000 to the School Department appropriation for these bills.

Property Tax Collection Rates Remain Consistently High

The Town has consistently had a first year collection rate for net property taxes due in excess of 98%. This collection rate was achieved again in FY2019 with a rate of 98.8%. Property tax revenue represents approximately 80% of the Town's revenue base.

Funding of Energy and Utility Reserves to Manage Cost Volatility

In response to volatile energy costs, the Town established an energy reserve beginning with its Fiscal Year 2007 operating budget. Departments with energy costs are allowed to access this reserve after they exhaust their entire departmental budget for various forms of energy (heating, electricity, and motor vehicle fuel). Similarly, the Town established a utility reserve as part of the Fiscal Year 2017 operating budget. The utility reserve is used by departments that expend their utility budgets during the year, particularly for water and sewer costs due to usage and/or rate increases.

The use of both the energy and utility reserves has accomplished two important goals. First, it alleviates pressure on departmental budgets that have been historically pitting increases in these costs against other

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needs. Second, the reserve ensures that the monies appropriated for increased energy and utility costs are not used for other purposes.

In FY19, the Town appropriated $533,544 into the energy reserve and a total of $331,947 was spent. Additionally, the Town appropriated $100,000 into the utility reserve, of which $60,016 was spent. For FY20, the Town has once again appropriated $533,544 for the energy reserve and $100,000 for the utility reserve to meet the departments' needs.

SIGNIFICANT EVENTS

Town’s AAA Bond Rating Affirmed for 11TH Consecutive Year

In August of 2019, the Town issued Bonds and Notes for various capital projects. In the process of preparing for these financings, the Town was reviewed by the independent rating agency of Standard and Poor’s (S&P). After careful review of the Town’s finances and management practices, S&P affirmed the Town’s Bond rating at AAA, their highest municipal rating. This represents the 11th consecutive year that S&P has set the Town’s bond rating at AAA.

Equipment Purchased

The Town purchased several new pieces of equipment in FY19. This included, by department:

Highway…………………2 Trucks with PlowsCemetery…………………Sod cutter, Thaw Units, and Urns for ChapelSchool…..................... Student BusPolice……………………2 Police Patrol Vehicles and Bulletproof VestsRecreation and Park……2 Trucks with PlowsWater….......................TruckFire….......................... Collar for 27 foot Defender Boat

June 18, 2019 Special Election

The Town held a special election on June 18, 2019, for two debt exclusion override questions and one operating override question. An affirmative vote on the debt exclusion override questions would allow the Town to borrow for the related projects and exclude the amounts required to repay any borrowing from the limitations of proposition 2 1/2. An affirmative vote on the operating override question would allow the Town to assess additional funds through real estate and personal property taxes.

The first question was to appropriate a total of $54,844,767 for the design and construction of a new Pre-K through Third Grade Elementary School. The question was approved, with 3,440 voters in favor and 1,976 voters opposed.

The second question was to appropriate a total of $750,000 for improvements to Fort Sewall. The question was approved, with 4,492 voters in favor and 903 voters opposed.

The Third question was to assess an additional $50,000 in real estate and property taxes for the purpose of purchasing and planting trees in the Town of Marblehead. The question was approved, with 3,669 voters in favor and 1,743 voters opposed.

FEMA Reimbursement

The Town experienced significant damages from the winter storms of March 2-3, 2018, and March 13, 2018. The Commonwealth received major disaster declarations for both storms, which allowed eligible towns and cities to receive federal funding for disaster-related costs.

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Since October 2018, the Town has been working directly with representatives from the Federal Emergency Management Agency (FEMA) to submit worksheets detailing the costs for clean-up and reconstruction of various seawalls, parks, and structures in Town. The Town expects to receive a total of close to $1 million in reimbursements from FEMA over the next year.

AWARDS AND ACKNOWLEDGMENTS

The Government Finance Officers Association (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the Town of Marblehead for its comprehensive annual financial report (CAFR) for the fiscal year ended June 30, 2018. This was the fifteenth consecutive year that the Town submitted a CAFR to the GFOA. The Town was awarded this Certificate for all fifteen years of submissions. In order to receive this prestigious award, a government must publish an easily readable and efficiently organized CAFR that satisfies both generally accepted accounting principles and applicable legal requirements.

A Certificate of Achievement is valid for a period of one year only. We believe that the FY2019 CAFR continues to meet the Certificate of Achievement Program’s requirements and we are submitting it to the GFOA to determine its eligibility for another certificate.

The preparation of this report on a timely basis could not be accomplished without the diligent and dedicated staff of the Financial Services Department, which includes the Treasurer, Accounting, Payroll, and Retirement offices. I would like to express my sincere appreciation to all members of the Town’s Financial Services Department who assisted and contributed to the preparation of this report. I would also like to thank the Town Administrator, the Board of Selectmen, the Board of Assessors, and the Finance Committee for their ongoing support in conducting the financial operations of the Town in a responsible and efficient manner.

Respectfully submitted,

Alison Nieto Finance Director/Town Accountant

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Town of Marblehead, MassachusettsOrganization Chart

Board ofSelectmen

TownAdministrator

BudgetAccounting

PayrollTreasurer/Collector

ProcurementTown Counsel

Data ProcessingVoter Registration

Parking ClerkConservationZoning Board

Old and Historic DistrictsPublic Buildings

ModeratorBoard of Assessors

Town ClerkPlanning Board

PoliceFire

Emergency ManagementAmbulance

Inspectional ServicesAnimal Control

Harbor and Waters

EngineeringHighway

Snow RemovalTree

Water & Sewer CommissionLight Commission

Cemetery Commission

School Committee

Council on AgingVeterans' Benefits

Board of Health

Historical CommissionCelebrations

Library TrusteesRecreation & Park Commission

ElectedBoards and Officials

AppointedBoards and Officials

Citizens

Organizational Chart

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Manner of TermTitle Name Selection Expires

Selectmen (Chair) Jackie Belf-Becker Elected 2020Selectmen Harry C. Christensen, Jr. Elected 2020Selectmen Judith R. Jacobi Elected 2020Selectmen M. C. Moses Grader Elected 2020Selectmen James E. Nye Elected 2020Town Administrator Jason Silva Appointed 2021Finance Director/Town Accountant Alison B. Nieto Appointed 2021Treasurer/Collector To Be Determined AppointedTown Clerk Robin A. Michaud Elected 2020

Town of Marblehead, Massachusetts Principal Executive Officers

Principal Executive Officers

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Certificate of Achievement for Excellence in Financial Reporting

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Financial Section

Photo by Cami Iannarelli

Sailboats off the coast of Chandler Hovey Park.


Financial Section

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Independent Auditor’s Report

To the Honorable Board of Selectmen Town of Marblehead, Massachusetts

Report on the Financial Statements

We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Town of Marblehead, Massachusetts, as of and for the year ended June 30, 2019 (except for the Marblehead Contributory Retirement System and the Marblehead Municipal Light Department which are as of and for the year ended December 31, 2018), and the related notes to the financial statements, which collectively comprise the Town’s basic financial statements as listed in the table of contents.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of the Marblehead Municipal Light Department, which is both a major fund and 49.3%, 33.9%, and 60.9%, respectively, of the assets and deferred outflows of resources, net position, and operating revenues of the business-type activities, for the year ended December 31, 2018. Those statements were audited by other auditors whose report thereon has been furnished to us and our opinion, insofar as it relates to the amounts included for the Marblehead Municipal Light Department, is based solely on the report of the other auditors. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

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We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Opinions

In our opinion, based on our audit and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Town of Marblehead, Massachusetts, as of June 30, 2019 (except for the Marblehead Contributory Retirement System and the Marblehead Municipal Light Department which are as of and for the year ended December 31, 2018), and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Other Matters

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis and required supplementary information, as listed in the table of contents, be presented to supplement the basic financial statements. Such information, although not part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, and historical context. We have applied certain limited procedures, to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Other Information

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Town of Marblehead’s basic financial statements. The introductory section, combining and individual fund financial statements, and statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements.

The combining and individual fund financial statements are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United State of America. In our opinion, based on our audit and the procedures performed as described above, the information is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.

The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them.

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Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated December 19, 2019, on our consideration of the Town of Marblehead, Massachusetts’ internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Town of Marblehead’s internal control over financial reporting and compliance.

December 19, 2019

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Management’s Discussion and Analysis

As management of the Town of Marblehead, we offer readers of these financial statements this narrative overview and analysis of the financial activities for the year ended June 30, 2019. We encourage readers to consider the information presented in this report in conjunction with the information that we have provided in our letter of transmittal. All amounts, unless otherwise indicated, are expressed in whole dollars.

Overview of the Financial Statements

This discussion and analysis is intended to serve as an introduction to the Town of Marblehead’s basic financial statements. These basic financial statements are comprised of three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. The government-wide financial statements provide both long-term and short-term information about the Town as a whole. The fund financial statements focus on the individual components of the Town government, reporting the Town’s operations in more detail than the government-wide statements. Both presentations (government-wide and fund) allow the user to address relevant questions, broaden the basis of comparison and enhance the Town’s accountability. An additional part of the basic financial statements are the notes to the financial statements. This report also contains supplementary information in addition to the basic financial statements themselves.

Government-wide financial statements. The government-wide financial statements are designed to provide readers with a broad overview of finances, in a manner similar to private-sector business.

The statement of net position presents information on all assets, liabilities and deferred inflows/outflows of resources, with the difference between them reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the Town’s financial position is improving or deteriorating.

The statement of activities presents information showing how the government’s net position changed during the most recent year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future periods (e.g., uncollected taxes and earned but unused vacation leave).

Both of the government-wide financial statements distinguish functions that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities include general government, public safety, education, public works, human services, culture and recreation, and interest. The business-type activities include the activities of the sewer, water, harbor and municipal light departments.

Fund financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. Fund accounting is used to ensure and demonstrate compliance with finance-related legal requirements. All of the funds can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds.

Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund statements focus on near-term inflows of spendable resources, as well as on balances of spendable resources available at the end of the year. Such information may be useful in evaluating a government’s near-term financing requirements.

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Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government’s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities.

The Town of Marblehead adopts an annual appropriated budget for its general fund. A budgetary comparison schedule has been provided as required supplementary information for the general fund to demonstrate compliance with this budget.

Proprietary funds. The Town maintains two types of proprietary funds.

Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The Town uses enterprise funds to account for its sewer, water, harbor and municipal light department activities.

Internal service funds are an accounting device used to accumulate and allocate costs internally among the Town’s various functions. The Town uses internal service funds to account for Town appropriations used to fund Workers’ Compensation Claims.

Fiduciary funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the Town’s own programs. The accounting used for fiduciary funds is much like that used for proprietary funds.

The fiduciary fund financial statements provide combined information for the pension and OPEB trust funds of the Town. The pension and other employee benefits trust fund is used to account for assets accumulated to provide funding for future pension and other postemployment benefits (OPEB) liabilities. Private-purpose trust funds and agency funds are reported and combined into a single, aggregate presentation in the fiduciary fund financial statements under the captions “private purpose trust funds” and “agency funds”, respectively.

Notes to the basic financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements.

Government-wide Financial Analysis

During fiscal year 2019, the Town’s overall net position of the primary government decreased by $9.3 million, to a deficit balance of $85.4 million. This was comprised of a $10 million decrease in governmental net position and a $769,000 increase in business-type net position. The $228.7 million deficit in unrestricted government-wide net position is attributable to the Town’s recognition of $207.2 million in net OPEB liabilities and the recognition of $55.8 million in net pension liabilities. These are long-term unfunded liabilities, which do not require significant short-term resources.

Governmental Activities

As noted earlier, net position may serve over time as a useful indicator of a government’s financial position. For the governmental activities, Marblehead’s liabilities and deferred inflows of resources exceeded assets and deferred outflows of resources by $127.7 million, at the close of 2019.

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2019 2018Assets:

Current assets………………………………………… $ 48,988,319 $ 42,022,370 Capital assets, nondepreciable……………………… 10,442,735 8,633,668 Capital assets, net of accumulated depreciation…… 123,730,673 126,640,049

Total assets………………………………………… 183,161,727 177,296,087

Deferred outflows of resources……………………… 17,705,481 10,304,471

Liabilities:Current liabilities (excluding debt)…………………… 5,488,038 5,765,604 Noncurrent liabilities (excluding debt)……………… 241,922,040 216,694,254 Current debt…………………………………………… 4,892,112 4,520,154 Noncurrent debt………………………………………… 71,740,071 69,386,482

Total liabilities…………………………………… 324,042,261 296,366,494

Deferred inflows of resources………………………… 4,490,227 8,856,384

Net position:Net investment in capital assets…………………… 81,183,548 81,296,691 Restricted……………………………………………… 13,419,904 10,425,505 Unrestricted…………………………………………… (222,268,732) (209,344,516)

Total net position…………………………………$ (127,665,280) $ (117,622,320)

Governmental net position of $81.2 million reflects its investment in capital assets (e.g., land, construction in progress, land improvements, buildings, building improvements, machinery and equipment, and infrastructure); less any related debt used to acquire those assets that are still outstanding. The Town uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the investment in its capital assets is reported net of its related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities.

An additional portion of the net position, $13.4 million, represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net position has a year-end deficit balance of $222.3 million. The primary reason for this deficit balance in net position is the recognition of net other postemployment benefit (OPEB) liabilities of $191.7 million and the recognition of net pension liabilities in the amount of $46.6 million. Accounting standards require the Town to obtain an actuarial valuation of the Town’s liability to pay other postemployment benefits to current employees and retirees. Since there is no legal obligation to fund the liability at this time, the Town has opted to continue to fund the majority of the other postemployment benefits on a pay-as-you-go basis. The Town has begun to partially fund the liability and, as of June 30, 2019, the OPEB trust fund has a balance of $4.1 million. The Town’s net pension liability is on a schedule to be funded in accordance with state regulations. GASB standards require the entire unfunded pension and OPEB liabilities to be recorded on the full accrual financial statements.

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2019 2018Program Revenues:

Charges for services…………………………… $ 7,459,437 $ 6,636,560 Operating grants and contributions…………… 19,437,238 19,339,810 Capital grants and contributions……………… 699,305 576,960

General Revenues:Real estate and personal property taxes,

net of tax refunds payable…………………… 67,643,148 66,330,626Motor vehicle and other excise taxes………… 3,869,773 3,731,262Penalties and interest on taxes………………… 331,608 296,552Grants and contributions not restricted to

specific programs…………………………… 1,415,366 1,325,050Unrestricted investment income……………… 3,623,438 204,081

Total revenues……………………………… 104,479,313 98,440,901

Expenses:General government……………………………… 5,347,875 4,149,528Public safety……………………………………… 15,803,260 15,087,411Education………………………………………… 76,926,325 72,244,837Public works……………………………………… 8,418,205 7,004,811Human services………………………………… 1,519,921 1,504,584Culture and recreation…………………………… 4,321,098 4,052,809Interest…………………………………………… 2,185,589 2,154,964

Total expenses……………………………… 114,522,273 106,198,944

Change in net position…………………………… (10,042,960) (7,758,043)

Net position, beginning of year………………… (117,622,320) (109,864,277)

Net position, end of year………………………… $ (127,665,280) $ (117,622,320)

Key components of the $10 million overall decrease in governmental net position are the $9.5 million net increase in net OPEB liability and $4.2 million net increase in the Town’s net pension liability and the changes in related deferred outflows and inflows of resources.

The governmental expenses totaled $114.5 million of which $27.6 million (24%) was directly supported by program revenues consisting of charges for services, operating and capital grants and contributions. General revenues totaled $76.9 million, primarily coming from property taxes, motor vehicle excise taxes, and non-restricted state aid.

Business-type Activities

For the Town’s business-type activities, assets and deferred outflows exceeded liabilities and deferred inflows of resources by $42.3 million at the close of 2019.

Business-type net position of $41.8 million represents investments in capital assets. An additional $6.9 million is restricted for depreciation within the Municipal Light Enterprise Fund, and the remaining balance of unrestricted

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net position has a year-end deficit balance of $6.5 million. There was a net increase of $769,000 in total net position reported in the business-type activities during 2019.

The Town’s Water, Sewer, and Harbor funds have a policy of appropriating available funds at the end of each year to fund capital expenses in lieu of issuing long-term debt. As a result, the net position remains relatively consistent from year-to-year and there is no debt reported in the Town’s business-type activities.

Beginning net position of the Light fund has been revised to reflect the implementation of GASB Statement #75. The implementation of this standard required the OPEB liability to be revised due to the use of different methods and assumptions as previously required by GASB Statement #45. Accordingly, previously reported net position of $48.8 million has been revised and totals $41.5 million (See Note 11 for details).

20182019 (As Revised)

Assets:Current assets…………………………………………$ 27,904,523 $ 28,168,304 Noncurrent assets (excluding capital)……………… 684,602 575,150 Capital assets, nondepreciable……………………… 3,222,360 10,187,355 Capital assets, net of accumulated depreciation… 43,661,848 35,139,148

Total assets……………………………………… 75,473,333 74,069,957

Deferred outflows of resources……………………… 2,466,965 2,055,453

Liabilities:Current liabilities (excluding debt)…………………… 2,609,508 3,478,232 Noncurrent liabilities (excluding debt)……………… 24,797,386 23,974,267 Current debt…………………………………………… 5,077,574 5,016,073

Total liabilities…………………………………… 32,484,468 32,468,572

Deferred inflows of resources………………………… 3,152,534 2,122,832

Net position:Net investment in capital assets…………………… 41,806,634 40,310,430 Restricted……………………………………………… 6,949,454 6,949,454 Unrestricted…………………………………………… (6,452,792) (5,725,878)

Total net position……………………………… $ 42,303,296 $ 41,534,006

The Water Enterprise Fund’s net position totaled $13.2 million at year end; an increase of $322,000 from the prior year. This balance is approximately 3.1 times the annual operating expenses and has remained consistent over the past several years. Revenues in this fund consist primarily of charges for water service and approximately 57.9% of the operating expenses consist of assessments paid to the Massachusetts Water Resource Authority.

The Sewer Enterprise Fund’s net position totaled $12.3 million at year end; an increase of $728,000 from the prior year. This balance is approximately 2.5 times the annual operating expenses. Revenues in this fund consist primarily of charges for sewer services and approximately 57.7% of the Sewer expenses relate to the annual assessment paid to the South Essex Sewerage District (SESD).

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The Harbor Enterprise Fund’s net position totaled $2.5 million at year end; a decrease of $134,000 from the prior year. The balance in the Harbor Enterprise Fund has remained consistent over the past several years. Revenues in this fund consist of a combination of charges for services such as mooring permits, storage, and rent and boat excise taxes assessed.

The Municipal Light Enterprise Fund’s net position totaled $14.3 million at year end; a decrease of $147,000. The majority of the revenue in this fund consists of charges for services and 91.2% of the expenses relate to cost of services and administration.

20182019 (As Revised)

Program Revenues:Charges for services………………………………$ 28,595,179 $ 26,618,769 Operating grants and contributions……………… 208,641 78,010

General Revenues:Boat excise taxes………………………………… 104,797 164,659Unrestricted investment income………………… 154,278 96,002

Total revenues……………………………… 29,062,895 26,957,440

Expenses:Water……………………………………………… 4,369,277 4,553,630Sewer……………………………………………… 5,105,008 4,870,418Harbor……………………………………………… 1,078,663 1,014,642Municipal Light…………………………………… 17,740,657 16,223,014

Total expenses……………………………… 28,293,605 26,661,704

Change in net position…………………………… 769,290 295,736

Net position, beginning of year………………… 41,534,006 41,238,270

Net position, end of year………………………… $ 42,303,296 $ 41,534,006

Financial Analysis of the Government’s Funds

As noted earlier, the Town uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements.

Governmental funds. The focus of the Town’s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the Town’s financing requirements. In particular, unassigned fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the year.

As of the end of the current year, governmental funds reported combined ending fund balances of $43.2 million, an increase of $7.6 million from the prior year.

The General Fund is the chief operating fund. At the end of the current year, unassigned fund balance of the General Fund totaled $11.9 million, while total fund balance was $21.2 million. Of the $8.8 million assigned fund balance, $8.6 million, has been allocated to balance the 2020 budget and the remainder represents funds encumbered at year end. Articles voted at the Town’s Annual Town Meeting that have not been spent as of year-end, have been classified as committed and have a balance of $444,000 as of June 30, 2019. As a measure of the general fund’s liquidity, it may be useful to compare both unassigned fund balance and total fund balance to

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total fund expenditures. Unassigned fund balance represents 12.8% of total general fund expenditures, while total fund balance represents 22.7% of that same amount.

The General Fund decreased by $79,000. This decrease is primarily attributable to the use of $7.9 million of free cash used to decrease the tax rate, offset by conservative revenue budgeting. Revenues came in over budget by $3.9 million; appropriations exceeded actual expenditures and encumbrances by $3.4 million mainly due to group insurance surplus of $2.7 million; these surpluses were offset by the use of prior year resources to balance the 2019 budget.

The Capital Projects Fund is used to account for the financial activities associated with major capital projects that have been authorized by Town Meeting and approved by the voters to be funded by the proceeds of bond sales. The Town’s primary major capital projects during 2019 have been the completion of the landfill/transfer station project, design costs for the new elementary school, and Town drainage improvements. The capital projects fund had a net increase of approximately $4.2 million during 2019, which was the net result of $7.2 million from the issuance of long-term bonds and $3.2 million spent on projects.

The Highway Improvement Fund is used to account for financial activities associated with highway and road repair projects funded by the State’s Chapter 90 Highway Program. Revenues consisted of reimbursements from the state grant program and expenditures consist of road improvements. The fund had a year-end receivable due from the state of $454,000 and annual expenditures totaled $582,000.

The Public Funds major fund is used to account for trust funds that have been established to fund public purposes. This fund had a year-end balance of $7.2 million and the fund increased by $2.3 million during the year. The increase was primarily due to a $2 million trust left to the Town by a former resident, the late Larz J. Anderson.

General Fund Budgetary Highlights

The Town experienced a $3.9 million surplus of actual over budgeted revenues. The largest surpluses were in motor vehicle excises taxes, charges for services, and investment income. These surpluses were the result of conservative budget estimates. In addition, the Town does not budget for police detail administration fees, water, sewer and harbor indirect costs which contributed to a $312,000 surplus in transfers in.

Budgeted expenditures ended the year approximately $3.4 million under budget. The most notable is the group insurance appropriation, which ended the year $2.7 million under budget. Expenditures exceeded the budget for snow removal by $96,000; under state law, the Town is allowed to overspend for snow and ice removal and to raise any unfunded deficit in the subsequent year.

The main changes between the original and final budget for the Town consisted of reserve fund transfers within appropriation lines. There were no net increases in appropriations from the original voted budget.

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Capital Asset and Debt Administration

Capital assets. In conjunction with the operating budget, departments with proposed capital budgets submit them to the Finance Committee and if large enough, to the Capital Planning Committee. These committees are responsible for reviewing the proposed capital budgets and reporting to the Annual Town Meeting. The major capital asset activity of the governmental activities during the year consisted of increases to upgrade and improve infrastructure totaling $1.1 million mainly for drain and road improvements. The other $3.3 million of capital asset activity consisted of land improvements, building improvements, machinery and equipment, including the purchase of several new vehicles.

Capital additions of the business-type activities consisted of upgrades to infrastructure, buildings, land improvements and purchases of new equipment in the Sewer and Water activities of approximately $765,000 and $642,000, respectively; the purchase of equipment, land improvements and piers in the Harbor activities of $76,000; and Municipal Light construction in progress of approximately $200,000, $2.4 million in light plant improvements.

Debt administration. Outstanding long-term debt of the general government, as of June 30, 2019, totaled $76.5 million, of which $33.9 million is related to school projects, $19.3 million is for land acquisition and remediation projects, $5.4 million is for the transfer station, $4.3 million is for drainage projects, $8.6 million is for the Abbot Hall Clock Tower repair, $1 million is for a fire ladder truck, and $100,000 is for Old Town Hall improvements.

The Town’s net long-term debt outstanding increased by $3 million during 2019 through a combination of new issuances and the retirement of existing debt.

Please refer to the notes 5, 6 and 7 of the basic financial statements for further discussion of the Town’s major capital and debt activity.

Requests for Information

This financial report is designed to provide a general overview of the Town of Marblehead’s finances for all those with an interest in the government’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Finance Director, Mary Alley Building, 7 Widger Road, Marblehead, Massachusetts 01945.

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Basic Financial Statements

Basic Financial Statements

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A-28

Governmental Business-type

Activities Activities Total

ASSETS

CURRENT:

Cash and cash equivalents………………………………………… $ 44,212,547 $ 12,849,617 $ 57,062,164

Restricted cash and cash equivalents……………………………… - 6,176,016 6,176,016

Investments…………………………………………………………… 1,772,830 - 1,772,830

Receivables, net of allowance for uncollectibles:

Real estate and personal property taxes……………………… 1,473,938 - 1,473,938

Tax liens……………………………………...…………………… 216,220 - 216,220

Motor vehicle and boat excise taxes…………………………… 218,496 86,034 304,530

User fees…………………………………………………………… - 5,842,632 5,842,632

Departmental and other………………………………………… 192,075 - 192,075

Intergovernmental………………………………………………… 773,248 - 773,248

Tax foreclosures……………………………………………………… 77,826 - 77,826

Inventory……………………………………………………………… - 94,922 94,922

Working capital deposit……………………………………………… 10,000 - 10,000

Other assets…………………………………………………………… 41,139 1,446,660 1,487,799 Purchased power advanced deposits……………………………… - 1,408,642 1,408,642

Total current assets…………………………………………… 48,988,319 27,904,523 76,892,842

NONCURRENT:

Investment in joint venture…………………………………………… - 684,602 684,602

Capital assets, nondepreciable……………………………………… 10,442,735 3,222,360 13,665,095

Capital assets, net of accumulated depreciation………………… 123,730,673 43,661,848 167,392,521

Total noncurrent assets……………………………………… 134,173,408 47,568,810 181,742,218

TOTAL ASSETS………………………………………………………… 183,161,727 75,473,333 258,635,060

DEFERRED OUTFLOWS OF RESOURCES

Deferred outflows related to pensions……………………………… 6,780,035 1,798,070 8,578,105

Deferred outflows related to other postemployment benefits…… 10,925,446 668,895 11,594,341

TOTAL DEFERRED OUTFLOWS OF RESOURCES……………… 17,705,481 2,466,965 20,172,446

LIABILITIES

CURRENT:

Warrants payable…………………………………………………… 2,138,245 2,191,859 4,330,104

Tax refunds payable………………………………………………… 431,209 - 431,209

Accrued interest……………………………………………………… 1,183,119 - 1,183,119

Liabilities due depositors…………………………………………… 1,590 - 1,590

Other liabilities………………………………………………………… 564,864 - 564,864

Customer deposits…………………………………………………… - 210,792 210,792

Landfill closure………………………………………………………… 114,600 - 114,600

Compensated absences……………………………………………… 913,939 206,857 1,120,796

Workers' compensation……………………………………………… 140,472 - 140,472

Notes payable………………………………………………………… 134,933 5,077,574 5,212,507

Bonds payable………………………………………………………… 4,757,179 - 4,757,179

Total current liabilities………………………………………… 10,380,150 7,687,082 18,067,232

NONCURRENT:

Landfill closure………………………………………………………… 2,750,400 - 2,750,400

Compensated absences……………………………………………… 218,367 - 218,367

Workers' compensation……………………………………………… 749,185 - 749,185

Net pension liability…………………………………………………… 46,552,373 9,208,447 55,760,820

Net other postemployment benefits liability………………………… 191,651,715 15,588,939 207,240,654

Bonds payable………………………………………………………… 71,740,071 - 71,740,071

Total noncurrent liabilities…………………………………… 313,662,111 24,797,386 338,459,497

TOTAL LIABILITIES……………………………………………………… 324,042,261 32,484,468 356,526,729

DEFERRED INFLOWS OF RESOURCESContributions in aid of construction….......................................... - 178,417 178,417

Rate stabilization reserve…………………………………………… - 1,287,476 1,287,476

Deferred inflows related to pensions……………………………… 331,980 1,185,687 1,517,667

Deferred inflows related to other postemployment benefits……… 4,158,247 500,954 4,659,201

TOTAL DEFERRED INFLOWS OF RESOURCES…………………… 4,490,227 3,152,534 7,642,761

NET POSITION

Net investment in capital assets………………………………..……… 81,183,548 41,806,634 122,990,182

Restricted for:

Depreciation…………………………………………………………… - 6,949,454 6,949,454

Permanent funds:

Expendable……….……………………………………………… 3,519,436 - 3,519,436

Nonexpendable…………………………………………………… 3,656,980 - 3,656,980

Gifts and grants……………………………………………………… 6,243,488 - 6,243,488

Unrestricted………………………………………………………………… (222,268,732) (6,452,792) (228,721,524)

TOTAL NET POSITION………………………………………………… $ (127,665,280) $ 42,303,296 $ (85,361,984)

See notes to basic financial statements.

Primary Government

STATEMENT OF NET POSITION

JUNE 30, 2019

Town of Marblehead, Massachusetts Comprehensive Annual Financial ReportA-29

Operating CapitalCharges for Grants and Grants and Net (Expense)

Functions/Programs Expenses Services Contributions Contributions RevenuePrimary Government:

Governmental Activities:General government……………… $ 5,347,875 $ 824,554 $ 389,662 $ - $ (4,133,659) Public safety………………………… 15,803,260 1,595,340 126,423 - (14,081,497) Education…………………………… 76,926,325 2,618,409 18,343,202 104,545 (55,860,169) Public works………………………… 8,418,205 1,465,007 257,337 543,546 (6,152,315) Human services…………………… 1,519,921 166,432 100,399 16,214 (1,236,876) Culture and recreation……………… 4,321,098 789,695 220,215 35,000 (3,276,188) Interest……………………………… 2,185,589 - - - (2,185,589)

Total Governmental Activities…… 114,522,273 7,459,437 19,437,238 699,305 (86,926,293)

Business-Type Activities:Water………………………………… 4,369,277 4,652,262 - - 282,985 Sewer………………………………… 5,105,008 5,771,655 - - 666,647 Harbor………………………………… 1,078,663 829,876 3,444 - (245,343) Municipal Light……………………… 17,740,657 17,341,386 205,197 - (194,074)

Total Business-Type Activities…… 28,293,605 28,595,179 208,641 - 510,215

Total Primary Government……… $ 142,815,878 $ 36,054,616 $ 19,645,879 $ 699,305 $ (86,416,078)

See notes to basic financial statements. (Continued)

STATEMENT OF ACTIVITIES

YEAR ENDED JUNE 30, 2019

Program Revenues


Governmental Business-Type

Activities Activities Total

Changes in net position:

Net (expense) revenue from previous page…… $ (86,926,293) $ 510,215 $ (86,416,078)

General revenues:

Real estate and personal property taxes,net of tax refunds payable…………………… 67,643,148 - 67,643,148

Motor vehicle and boat excise taxes………… 3,869,773 104,797 3,974,570 Penalties and interest on taxes……………… 331,608 - 331,608 Grants and contributions not restricted to

specific programs…………………………… 1,415,366 - 1,415,366 Unrestricted investment income……………… 3,623,438 154,278 3,777,716

Total general revenues….................................... 76,883,333 259,075 77,142,408

Change in net position……………………… (10,042,960) 769,290 (9,273,670)

Net position:

Beginning of year, as revised………………… (117,622,320) 41,534,006 (76,088,314)

End of year……………………………………… $ (127,665,280) $ 42,303,296 $ (85,361,984)

See notes to basic financial statements. (Concluded)

Primary Government

STATEMENT OF ACTIVITIES



Capital Highway Nonmajor Total

Projects Improvement Public Governmental Governmental

General Fund Fund Funds Funds Funds

ASSETS

Cash and cash equivalents………………………………$ 22,192,606 $ 5,563,623 $ - $ 7,184,351 $ 8,061,132 $ 43,001,712

Investments……………………………………………… - - - - 1,772,830 1,772,830

Receivables, net of uncollectibles:

Real estate and personal property taxes…………… 1,473,938 - - - - 1,473,938

Tax liens……………………………………...………… 216,220 - - - - 216,220

Motor vehicle and boat excise taxes………………… 218,496 - - - - 218,496

Departmental and other……………………………… 56,782 - - - 135,293 192,075

Intergovernmental…………………………………… 31,360 - 454,159 - 287,729 773,248

Tax foreclosures…………………………………………… 77,826 - - - - 77,826

Due from other funds…………………………………… 5,353 - - - 153,199 158,552

Working capital deposit…………………………………… - - - - 10,000 10,000

Other assets……………………………………………… 41,139 - - - - 41,139

TOTAL ASSETS………………………………………… $ 24,313,720 $ 5,563,623 $ 454,159 $ 7,184,351 $ 10,420,183 $ 47,936,036

LIABILITIES

Warrants payable………………………………………$ 1,138,454 $ 439,533 $ 125,973 $ 7,935 $ 396,822 $ 2,108,717

Tax refunds payable…………………………………… 431,209 - - - - 431,209

Due to other funds…………………………………… - - 5,353 - 153,199 158,552

Liabilities due depositors……………………………… 1,590 - - - - 1,590

Other liabilities………………………………………… 564,864 - - - - 564,864

Notes payable………………………………………… - 134,933 - - - 134,933

TOTAL LIABILITIES……………………………………… 2,136,117 574,466 131,326 7,935 550,021 3,399,865

DEFERRED INFLOWS OF RESOURCES

Unavailable revenue………………………………… 1,020,947 - 322,833 - 16,559 1,360,339

FUND BALANCES

Nonspendable………………………………………… - - - 3,656,980 - 3,656,980

Restricted……………………………………………… - 4,989,157 - 3,519,436 9,853,603 18,362,196

Committed……………………………………………… 443,895 - - - - 443,895

Assigned……………………………………………… 8,769,666 - - - - 8,769,666

Unassigned…………………………………………… 11,943,095 - - - - 11,943,095

TOTAL FUND BALANCES……………………………… 21,156,656 4,989,157 - 7,176,416 9,853,603 43,175,832

TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES…………… $ 24,313,720 $ 5,563,623 $ 454,159 $ 7,184,351 $ 10,420,183 $ 47,936,036


GOVERNMENTAL FUNDS

BALANCE SHEET

JUNE 30, 2019


Total governmental fund balances……………………………………………………………… $ 43,175,832

Capital assets (net) used in governmental activities are not financial resourcesand, therefore, are not reported in the funds……………………………………………… 134,173,408

Accounts receivable are not available to pay for current-periodexpenditures and, therefore, are unavailable in the funds……………………………… 1,360,339

The statement of net position includes certain deferred inflows of resourcesand deferred outflows of resources that will be amortized over future periods.In governmental funds, these amounts are not deferred………………………………… 13,215,254

The assets and liabilities of the internal service funds are included inthe governmental activities in the statement of net position……………………………… 291,650

In the statement of activities, interest is accrued on outstanding long-term debt,whereas in governmental funds interest is not reported until due……………………… (1,183,119)

Long-term liabilities are not due and payable in the current period and, therefore,are not reported in the governmental funds:

Bonds payable……………………………………………………………………………… (76,497,250) Net pension liability………………………………………………………………………… (46,552,373) Net other postemployment benefits liability…………………………………………… (191,651,715) Landfill closure……………………………………………………………………………… (2,865,000) Compensated absences………………………………………………………………… (1,132,306)

Net effect of reporting long-term liabilities………………………………………… (318,698,644)

Net position of governmental activities…………………………………………………………… $ (127,665,280)


RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEETTOTAL FUND BALANCES TO THE STATEMENT OF NET POSITION

JUNE 30, 2019


Capital Highway Nonmajor Total

Projects Improvement Public Governmental Governmental

General Fund Fund Funds Funds Funds

REVENUES:

Real estate and personal property taxes,

net of tax refunds……………………………………………$ 67,683,970 $ - $ - $ - $ - $ 67,683,970

Motor vehicle and other excise taxes……………………… 3,947,263 - - - - 3,947,263

Charges for services………………………………………… 799,621 - - - 3,773,356 4,572,977

Penalties and interest on taxes……………………………… 331,608 - - - - 331,608

Licenses and permits………………………………………… 915,577 - - - - 915,577

Fines and forfeitures…………………………………………… 138,759 - - - - 138,759

Intergovernmental - state aid………………………………… 7,378,941 - - - - 7,378,941

Intergovernmental - School Building Authority……………… - 104,545 - - - 104,545

Intergovernmental - Teachers Retirement………………… 8,950,916 - - - - 8,950,916

Intergovernmental - other…………………………………… 175,787 - 581,918 - 3,407,109 4,164,814

Departmental and other……………………………………… 456,511 - - - 1,338,651 1,795,162

Contributions and donations………………………………… - - - 2,331,993 882,028 3,214,021

Investment income…………………………………………… 716,343 - - 62,058 613,678 1,392,079

TOTAL REVENUES…………………………………… 91,495,296 104,545 581,918 2,394,051 10,014,822 104,590,632

EXPENDITURES:

Current:

General government……………………………………… 1,723,646 - - - 157,286 1,880,932

Public safety………………………………………………… 8,698,267 - - - 771,248 9,469,515

Education…………………………………………………… 39,258,005 - - 14,105 6,114,207 45,386,317

Public works………………………………………………… 5,126,411 - 581,918 - 815,498 6,523,827

Human services…………………………………………… 682,214 - - - 248,903 931,117

Culture and recreation…………………………………… 2,059,873 - - 28,740 817,730 2,906,343

Pension benefits…………………………………………… 3,100,539 - - - - 3,100,539 Pension benefits - Teachers Retirement………………… 8,950,916 - - - - 8,950,916

Property and liability insurance…………………………… 428,360 - - - - 428,360

Employee benefits………………………………………… 11,836,691 - - - - 11,836,691

State and county charges…………………………………… 2,995,396 - - - - 2,995,396

Capital outlay…………………………………………………… - 3,057,466 - - - 3,057,466

Debt service:

Principal…………………………………………………… 4,150,000 126,193 - - - 4,276,193

Principal payment on current refunding………………… 1,741,759 - - - - 1,741,759

Interest……………………………………………………… 2,584,428 - - - - 2,584,428

TOTAL EXPENDITURES……………………………… 93,336,505 3,183,659 581,918 42,845 8,924,872 106,069,799

EXCESS (DEFICIENCY) OF REVENUES

OVER (UNDER) EXPENDITURES………………………… (1,841,209) (3,079,114) - 2,351,206 1,089,950 (1,479,167)

OTHER FINANCING SOURCES (USES):

Issuance of bonds……………………………………………… - 7,236,961 - - - 7,236,961

Issuance of refunding bonds………………………………… 1,741,759 - - - - 1,741,759

Premium from issuance of bonds…………………………… - - - - 100,161 100,161

Transfers in…………………………………………………… 416,516 - - - 406,263 822,779

Transfers out…………………………………………………… (396,163) - - (26,000) (400,616) (822,779)

TOTAL OTHER FINANCING SOURCES (USES)… 1,762,112 7,236,961 - (26,000) 105,808 9,078,881

NET CHANGE IN FUND BALANCES………………………… (79,097) 4,157,847 - 2,325,206 1,195,758 7,599,714

FUND BALANCES AT BEGINNING OF YEAR………………… 21,235,753 831,310 - 4,851,210 8,657,845 35,576,118

FUND BALANCES AT END OF YEAR………………………… $ 21,156,656 $ 4,989,157 $ - $ 7,176,416 $ 9,853,603 $ 43,175,832


GOVERNMENTAL FUNDS

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES



Net change in fund balances - total governmental funds………………………………………………………… $ 7,599,714

Governmental funds report capital outlays as expenditures. However, in the

Statement of Activities the cost of those assets is allocated over their

estimated useful lives and reported as depreciation expense.

Capital outlay……………………………………………………………………………………………… 4,462,179

Depreciation expense……………………………………………………………………………………… (5,562,488)

Net effect of reporting capital assets……………………………………………………………… (1,100,309)

Revenues in the Statement of Activities that do not provide current financial

resources are unavailable in the Statement of Revenues, Expenditures and

Changes in Fund Balances. Therefore, the recognition of revenue for various

types of accounts receivable differ between the two statements. This amount

represents the net change in unavailable revenue………………………………………………………… (122,639)

The issuance of long-term debt provides current financial resources to governmental

funds, while the repayment of the principal of long-term debt consumes the

financial resources of governmental funds. Neither transaction has any effect

on net position. Also, governmental funds report the effect of premiums,

discounts, and similar items when debt is first issued, whereas these amounts

are unavailable and amortized in the Statement of Activities.

Issuance of bonds………………………………………………………………………………………… (7,236,961)

Issuance of refunding bonds……………………………………………………………………………… (1,741,759)

Premium from issuance of bonds………………………………………………………………………… (100,161)

Payments of refunded debt………………………………………………………………………………… 1,741,759

Net amortization of premium from issuance of bonds………………………………………………… 470,315

Debt service principal payments………………………………………………………………………… 4,276,193

Net effect of reporting long-term debt…………………………………………………………… (2,590,614)

Some expenses reported in the Statement of Activities do not require the use of

current financial resources and, therefore, are not reported as expenditures

in the governmental funds.

Net change in compensated absences accrual………………………………………………………… (30,012)

Net change in accrued interest on long-term debt……………………………………………………… (71,476)

Net change in deferred outflow/(inflow) of resources related to pensions…………………………… 4,674,465

Net change in net pension liability………………………………………………………………………… (8,864,626)

Net change in deferred outflow/(inflow) of resources related to other postemployment benefits… 6,786,984

Net change in other postemployment benefits liability………………………………………………… (16,303,476)

Net change in landfill closure…………………………………………………………………….……… 114,600

Net effect of recording long-term liabilities……………………………………………………… (13,693,541)

The net activity of internal service funds is reported with Governmental Activities………………………… (135,571)

Change in net position of governmental activities………………………………………………………………… $ (10,042,960)


RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES,

AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS

TO THE STATEMENT OF ACTIVITIES



Business-type Activities - Enterprise Funds

GovernmentalMunicipal Light Activities -December 31, Internal Service

Water Sewer Harbor 2018 Total FundASSETSCURRENT:

Cash and cash equivalents……………………………………… $ 2,919,204 $ 3,618,169 $ 763,696 $ 5,548,548 $ 12,849,617 $ 1,210,835 Restricted cash and cash equivalents……………….………… - - - 6,176,016 6,176,016 - Receivables, net of allowance for uncollectibles:

Boat excise taxes……………………………………………… - - 86,034 - 86,034 - User fees………………………………………………………… 1,190,157 2,133,757 10,405 2,508,313 5,842,632 -

Inventory…………………………………………………………… - - - 94,922 94,922 - Other assets………………………………………………………… - - - 1,446,660 1,446,660 - Purchased power advanced deposits…………………………… - - - 1,408,642 1,408,642 -

Total current assets………………………………………… 4,109,361 5,751,926 860,135 17,183,101 27,904,523 1,210,835

NONCURRENT:Investment in joint venture………………………………………… - 684,602 - - 684,602 - Capital assets, nondepreciable…………………………………… 49,427 115,466 2,004,077 1,053,390 3,222,360 - Capital assets, net of accumulated depreciation……………… 12,293,138 10,933,386 1,808,389 18,626,935 43,661,848 -

Total noncurrent assets…………………………………… 12,342,565 11,733,454 3,812,466 19,680,325 47,568,810 -

TOTAL ASSETS……………………………………………………… 16,451,926 17,485,380 4,672,601 36,863,426 75,473,333 1,210,835

DEFERRED OUTFLOWS OF RESOURCESDeferred outflows related to pensions…………………………… 191,551 207,574 104,151 1,294,794 1,798,070 - Deferred outflows related to other postemployment benefits… 119,561 215,987 88,012 245,335 668,895 -

TOTAL DEFERRED OUTFLOWS OF RESOURCES…………… 311,112 423,561 192,163 1,540,129 2,466,965 -

LIABILITIESCURRENT:

Warrants payable………………………………………………… 63,840 186,248 22,450 1,919,321 2,191,859 29,528 Customer deposits………………………………………………… 1,517 - - 209,275 210,792 - Compensated absences…………………………………………… 48,270 47,252 27,101 84,234 206,857 - Workers' compensation…………………………………………… - - - - - 140,472 Notes payable……………………………………………………… - - - 5,077,574 5,077,574 -

Total current liabilities……………………………………… 113,627 233,500 49,551 7,290,404 7,687,082 170,000

NONCURRENT:Workers' compensation…………………………………………… - - - - - 749,185 Net pension liability………………………………………………… 1,315,208 1,425,226 715,113 5,752,900 9,208,447 - Net other postemployment benefits liability……………………… 2,122,514 3,834,332 1,562,422 8,069,671 15,588,939 -

Total noncurrent liabilities………………………………… 3,437,722 5,259,558 2,277,535 13,822,571 24,797,386 749,185

TOTAL LIABILITIES…………………………………………………… 3,551,349 5,493,058 2,327,086 21,112,975 32,484,468 919,185

DEFERRED INFLOWS OF RESOURCESContributions in aid of construction……………………………… - - - 178,417 178,417 - Rate stabilization reserve………………………………………… - - - 1,287,476 1,287,476 - Deferred inflows related to pensions…………………………… 9,379 10,164 5,099 1,161,045 1,185,687 - Deferred inflows related to other postemployment benefits…… 44,399 80,208 32,683 343,664 500,954 -

TOTAL DEFERRED INFLOWS OF RESOURCES………………… 53,778 90,372 37,782 2,970,602 3,152,534 -

NET POSITIONNet investment in capital assets………………………………..…… 12,342,565 11,048,852 3,812,466 14,602,751 41,806,634 - Restricted for:

Depreciation………………………………………………………… - - - 6,176,016 6,176,016 - Unrestricted…………………………………………………………… 815,346 1,276,659 (1,312,570) (6,458,789) (5,679,354) 291,650

TOTAL NET POSITION……………………………………………… $ 13,157,911 $ 12,325,511 $ 2,499,896 $ 14,319,978 $ 42,303,296 $ 291,650


PROPRIETARY FUNDSSTATEMENT OF NET POSITION

JUNE 30, 2019




Water Sewer Harbor 2018 Total FundOPERATING REVENUES:

Charges for services…………………………………$ 4,637,933 $ 5,759,795 $ 829,876 $ 17,341,386 $ 28,568,990 $ 382,225 Licenses and permits………………………………… - 11,375 - - 11,375 -Other operating revenues…………………………… 14,329 485 - 205,197 220,011 -

TOTAL OPERATING REVENUES …………… 4,652,262 5,771,655 829,876 17,546,583 28,800,376 382,225

OPERATING EXPENSES:Cost of services and administration……………… 421,236 1,051,039 583,852 16,134,156 18,190,283 -Salaries and wages………………………………… 916,147 715,188 358,709 - 1,990,044 -Operating assessments…………………………… 2,531,598 2,943,662 - - 5,475,260 -Depreciation………………………………………… 500,296 395,119 136,102 1,526,383 2,557,900 -Employee benefits…………………………………… - - - - - 529,116

TOTAL OPERATING EXPENSES……………… 4,369,277 5,105,008 1,078,663 17,660,539 28,213,487 529,116

OPERATING INCOME (LOSS)………………… 282,985 666,647 (248,787) (113,956) 586,889 (146,891)

NONOPERATING REVENUES (EXPENSES):Boat excise taxes…………………………………… - - 104,797 - 104,797 -Investment income…………………………………… 39,369 61,009 7,042 46,858 154,278 11,320 Interest expense……………………………………… - - - (80,118) (80,118) -Intergovernmental assessments…………………… - - 3,444 - 3,444 -

TOTAL NONOPERATING REVENUES (EXPENSES), NET……………… 39,369 61,009 115,283 (33,260) 182,401 11,320

CHANGE IN NET POSITION…………………… 322,354 727,656 (133,504) (147,216) 769,290 (135,571)

NET POSITION AT BEGINNING OF YEAR, AS REVISED…….…………………….…………… 12,835,557 11,597,855 2,633,400 14,467,194 41,534,006 427,221

NET POSITION AT END OF YEAR…………………… $ 13,157,911 $ 12,325,511 $ 2,499,896 $ 14,319,978 $ 42,303,296 $ 291,650


PROPRIETARY FUNDSSTATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION





Water Sewer Harbor 2018 Total Fund

CASH FLOWS FROM OPERATING ACTIVITIES:Receipts from customers and users……………………………………………… $ 4,542,347 $ 5,360,987 $ 836,883 $ 17,572,000 $ 28,312,217 $ - Receipts from interfund services provided……………………………………… - - - - - 382,225 Payments to vendors……………………………………………………………… (2,889,943) (3,757,273) (440,408) (17,288,564) (24,376,188) - Payments to employees…………………………………………………………… (916,147) (715,188) (358,709) - (1,990,044) - Payments for interfund services used…………………………………………… - - - - - (420,323)

NET CASH FROM OPERATING ACTIVITIES……………………………………… 736,257 888,526 37,766 283,436 1,945,985 (38,098)

CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES:Boat excise taxes………………………………………………………………….. - - 124,069 - 124,069 - Intergovernmental assessments…………………………………………………… - - 3,444 - 3,444 -

NET CASH FROM NONCAPITAL FINANCING ACTIVITIES……………………… - - 127,513 - 127,513 -

CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES:Proceeds from the issuance of notes…………………………………………… - - - 61,501 61,501 - Acquisition and construction of capital assets…………………………………… (641,776) (764,836) (76,330) (2,632,663) (4,115,605) - Interest expense…………………………………………………………………… - - - (80,118) (80,118) -

NET CASH FROM CAPITAL AND RELATED FINANCING ACTIVITIES………… (641,776) (764,836) (76,330) (2,651,280) (4,134,222) -

CASH FLOWS FROM INVESTING ACTIVITIES:Investment income………………………………………………………………… 39,369 61,009 7,042 46,858 154,278 11,320

NET CHANGE IN CASH AND CASH EQUIVALENTS…………………………… 133,850 184,699 95,991 (2,320,986) (1,906,446) (26,778)

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR………………… 2,785,354 3,433,470 667,705 14,045,550 20,932,079 1,237,613

CASH AND CASH EQUIVALENTS AT END OF YEAR…………………………… $ 2,919,204 $ 3,618,169 $ 763,696 $ 11,724,564 $ 19,025,633 $ 1,210,835

RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASHFROM OPERATING ACTIVITIES:Operating income (loss)…………………………………………………………… $ 282,985 $ 666,647 $ (248,787) $ (113,956) $ 586,889 $ (146,891) Adjustments to reconcile operating income to net

cash from operating activities:Depreciation……………………………………………………………………… 500,296 395,119 136,102 1,526,383 2,557,900 - Deferred (outflows)/inflows related to pensions……………………………… (126,813) (144,914) (71,563) 941,522 598,232 - Deferred (outflows)/inflows related to other postemployment benefits…… (74,193) (134,030) (54,616) 98,329 (164,510) - Deferred (outflows)/inflows related to rate stabilization reserve…………… - - - 6,051 6,051 - Deferred (outflows)/inflows related to contributions in aid of construction… - - - 178,417 178,417 - Changes in assets and liabilities:

User charges………………………………………………………………… (109,916) (410,668) 7,007 (172,410) (685,987) - Inventory……………………………………………………………………… - - - (21,896) (21,896) - Other assets………………………………………………………………… - - - (50,294) (50,294) - Purchased power advanced deposits……………………………………… - - - (903,760) (903,760) - Investment in joint venture………………………………………………… - (109,452) - - (109,452) - Warrants payable…………………………………………………………… (69,367) (16,046) (991) (779,966) (866,370) 29,528 Customer deposits…………………………………………………………… 1 - - 19,410 19,411 - Compensated absences…………………………………………………… 10,627 153 4,337 (36,882) (21,765) - Workers' compensation……………………………………………………… - - - - - 79,265 Net pension liability………………………………………………………… 138,860 309,724 130,996 (733,522) (153,942) - Other postemployment benefits…………………………………………… 183,777 331,993 135,281 326,010 977,061 -

Total adjustments………………………………………………………… 453,272 221,879 286,553 397,392 1,359,096 108,793

NET CASH FROM OPERATING ACTIVITIES……………………………………… $ 736,257 $ 888,526 $ 37,766 $ 283,436 $ 1,945,985 $ (38,098)


PROPRIETARY FUNDSSTATEMENT OF CASH FLOWS



Pension and OtherEmployee Private

Benefit Purpose AgencyTrust Funds (1) Trust Funds Funds

ASSETSCash and cash equivalents………………………………… $ 153,126 $ 3,154,014 $ 364,200 Investments:

Investments in Pension Reserve Investment Trust…… 98,991,171 - - Receivables, net of allowance for uncollectibles:

Departmental and other…………………………………… 4,601 175 - Capital assets, nodepreciable…………………………………… - 2,045 - Capital assets, net of accumulated depreciation………… - 150,734 -

TOTAL ASSETS………………………………………………… 99,148,898 3,306,968 364,200

LIABILITIESWarrants payable……………………………………………… 1,309 1,685 - Liabilities due depositors…………………………………… - - 364,200 Other liabilities………………………………………………… - 175 -

TOTAL LIABILITIES……………………………………………… 1,309 1,860 364,200

NET POSITIONRestricted for pensions……………………………………… 95,016,993 - - Restricted for other postemployment benefits…………… 4,130,596 - - Held in trust for other purposes……………………………. - 3,305,108 -

TOTAL NET POSITION………………………………………… $ 99,147,589 $ 3,305,108 $ -

(1)The Pension Trust Fund is as of December 31, 2018


FIDUCIARY FUNDS

STATEMENT OF FIDUCIARY NET POSITION

JUNE 30, 2019


Pension and OtherEmployee Private

Benefit PurposeTrust Funds (1) Trust Funds

ADDITIONS:Contributions:

Employer contributions……………………………………………………… $ 4,135,523 $ - Employer contributions for other postemployment benefit payments…… 3,889,738 - Member contributions………………………………………………………… 2,264,073 - Transfers from other systems………………………………………………… 212,900 - 3(8)c contributions from other systems……………………………………… 139,177 - State COLA reimbursements………………………………………………… 77,151 - Private donations……………………………………………………………… - 69,596

Total contributions………………………………………………………… 10,718,562 69,596

Net investment income:Investment income…………………………………………………………… 2,979,132 42,845 Net change in fair value of investments…………………………………… (4,459,022) - Less: investment expense…………………………………………………… (524,059) -

Net investment income (loss)………………………………………………… (2,003,949) 42,845

TOTAL ADDITIONS……………………………………………………… 8,714,613 112,441

DEDUCTIONS:Administration………………………………………………………………… 150,184 55,916 Transfers to other systems…………………………………………………… 643,207 - Retirement benefits and refunds…………………………………………… 9,843,616 - Depreciation…………………………………………………………………… - 10,163 Other postemployment benefit payments…………………………………… 3,889,738 - Educational scholarships……………………………………………………… - 18,463

TOTAL DEDUCTIONS…………………………………………………… 14,526,745 84,542

NET INCREASE (DECREASE) IN NET POSITION…………………… (5,812,132) 27,899

NET POSITION AT BEGINNING OF YEAR…………………………………… 104,959,721 3,277,209

NET POSITION AT END OF YEAR………………………………………………$ 99,147,589 $ 3,305,108

(1) The Pension Trust Fund is as of the year ended December 31, 2018


FIDUCIARY FUNDS

STATEMENT OF CHANGES IN FIDUCIARY NET POSITION



Notes to Basic Financial Statements Year Ended June 30, 2019


NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Notes to the Basic Financial Statements The accompanying summary of the Town of Marblehead's significant accounting policies is presented to assist the reader in interpreting the financial statements and other data in this report. These policies, as presented, should be viewed as an integral part of the accompanying financial statements. The financial statements and notes are representations of the Town's management, which is responsible for their integrity and objectivity. These accounting policies conform to generally accepted accounting principles (GAAP), as applicable to governments, and have been consistently applied in the preparation of the financial statements. The Governmental Accounting Standards Board (GASB) is the recognized standard-setting body for establishing governmental accounting and financial reporting principles.

A. Reporting Entity

The Town of Marblehead is a municipal corporation that is governed by an elected five member Board of Selectmen.

For financial reporting purposes, the Town has included all funds, organizations, agencies, boards, commissions and institutions. As required by generally accepted accounting principles, these financial statements present the government and its component units, entities for which the Town is considered to be financially accountable. Component units, although legally separate entities, are, in substance, part of the government’s operations and data from these units are combined with the data of the primary government. Specifically excluded from the Town's financial statements because they are autonomous entities or agencies are the Marblehead Housing Authority and Essex North Shore Agricultural and Technical School District.

The Town presents the financial position of the Marblehead Municipal Light Plant (MMLP) and the results of its operations on a calendar year basis as an Enterprise Fund in the Proprietary Fund Financial Statements. The MMLP is a department of the Town of Marblehead that maintains a separate set of books and records on a calendar year basis, and issues yearly financial statements. The MMLP’s financial statements for the year ended December 31, 2018, were audited by other independent public accountants. A copy of the report can be obtained by contacting the MMLP at 80 Commercial Street, Marblehead, MA 01945.

Component Unit Presented as a Fiduciary Fund – The Marblehead Contributory Retirement System (the System) is presented using the accrual basis of accounting and is reported as a pension trust fund in the fiduciary fund financial statements. The System is governed by a five member board comprised of the Town’s Finance Director (ex-officio), two elected members and one member appointed by the Board of Selectmen and one member appointed by the Board members. The System is a legally separate entity, but the nature and significance of its relationship with the Town warrants inclusion in the basic financial statements. The System issues a publicly available unaudited financial report in accordance with guidelines established by the Commonwealth of Massachusetts’ Public Employee Retirement Administration Commission (PERAC). That report may be obtained by contacting the System at 7 Widger Road, Marblehead, MA 01945.

Joint Ventures – The South Essex Sewerage District (District), a joint venture with the Cities of Salem, Peabody and Beverly and the Towns of Marblehead and Danvers, for the operation of a septage disposal facility. The members share in overseeing the operations of the District. Each member is responsible for its proportionate share of the operational costs of the District, which are paid in the form of assessments. As of June 30, 2019, the Town’s equity interest in the operations of the District is $685,000, which is recorded in the Sewer Enterprise Fund. Complete financial statements can be obtained directly from their administrative offices located at 50 Fort Avenue, Salem, MA 01970.

The Town is a member of the Essex North Shore Agricultural and Technical School District that serves the members’ students seeking an education in academic, technical and agricultural studies. The members’ share in

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the operations of the Essex North Shore Agricultural and Technical School District and each member is responsible for its proportionate share of the operational and capital cost of the Essex North Shore Agricultural and Technical School District, which are paid in the form of assessments. The Town does not have an equity interest in the Essex North Shore Agricultural and Technical School District and the 2019 assessment was $455,000. Complete financial information can be obtained by contacting them at 565 Maple Street, Danvers, MA 01923.

B. Government-Wide and Fund Financial Statements

Government-Wide Financial Statements

The government-wide financial statements (i.e. statement of net position and the statement of changes in net position) report information on all of the non-fiduciary activities of the primary government and its component units. Governmental activities, which are primarily supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which are supported primarily by user fees and charges.

Fund Financial Statements

Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though fiduciary funds are excluded from the government-wide financial statements. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. Nonmajor funds are aggregated and displayed in a single column.

Major Fund Criteria

Major funds must be reported if the following criteria are met:

If total assets and deferred outflows of resources, liabilities and deferred inflows of resources,revenues, or expenditures/expenses of an individual governmental or enterprise fund are at least 10percent of the corresponding element (assets and deferred outflows of resources, liabilities anddeferred inflows or resources, etc.) for all funds of that category or type (total governmental or totalenterprise funds), and

If the total assets and deferred outflows of resources, liabilities and deferred inflows of resources,revenues, or expenditures/expenses of the individual governmental fund or enterprise fund are atleast 5 percent of the corresponding element for all governmental and enterprise funds combined.

Additionally, any other governmental or enterprise fund that management believes is particularly significant to the basic financial statements may be reported as a major fund.

Internal service funds and fiduciary funds are reported by fund type.

C. Measurement Focus, Basis of Accounting and Financial Statement Presentation


The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Under this method, revenues are recorded when earned and expenses are recorded when the liabilities are incurred. Real estate and personal property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met.

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The statement of activities demonstrates the degree to which the direct expenses of a particular function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include the following:

Charges to customers or applicants who purchase, use, or directly benefit from goods, services, orprivileges provided by a given function or segment.

Grants and contributions that are restricted to meeting the operation requirements of a particular functionor segment.

Grants and contributions that are restricted to meeting the capital requirements of a particular function orsegment.

Taxes and other items are not identifiable as program revenues and are reported as general revenues.

For the most part, the effect of interfund activity has been removed from the government-wide financial statements. However, the effect of interfund services provided and used between functions is not eliminated as the elimination of these charges would distort the direct costs and program revenues reported for the functions affected.


Governmental funds are accounted for using the flow of current financial resources measurement focus and the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recognized when susceptible to accrual (i.e., measurable and available). Measurable means the amount of the transaction can be determined and available means collectible within the current period or soon enough thereafter to pay liabilities of the current period. Expenditures are recorded when the related fund liability is incurred, except for unmatured interest on general long-term debt which is recognized when due, and certain compensated absences, claims and judgments which are recognized when the obligations are due and payable. Obligations for compensated absences and claims and judgements are recognized in the general fund only when they are due.

Property taxes, excise taxes, police detail fees and trash user charges are considered available if they are collected within 60 days after year-end. Investment income is susceptible to accrual. Other receipts and tax revenues become available when the cash is received and are recognized as revenue at that time.

Entitlements and shared revenues are recorded at the time of receipt or earlier if the susceptible to accrual criteria is met. Expenditure driven grants recognize revenue when the qualifying expenditures are incurred and all other grant requirements are met.

The following major governmental funds are reported:

The General Fund is the primary operating fund. It is used to account for all financial resources, except those required to be accounted for in another fund.

The Capital Projects Fund is used to account for the financial activities associated with major capital projects that have been authorized by Town Meeting and approved by the voters to be funded by the proceeds of bonds sales.

The Highway Improvement Fund is used to account for financial activities associated with highway and road repair projects funded by the State’s Chapter 90 Highway Program.

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The Public Funds are the Town’s Permanent Funds which are used to account for financial resources that are legally restricted to the extent that only earnings, not principal, may be used for purposes that support governmental programs.

The nonmajor governmental funds consist of special revenue funds that are aggregated and presented in the nonmajor governmental funds column on the governmental funds financial statements. The following describe the general use of this fund type:

The special revenue fund is used to account for and report the proceeds of specific revenue sources that are restricted or committed to expenditure for specified purposes other than permanent funds or capital projects.

Proprietary funds are accounted for using the flow of economic resources measurement focus and use the accrual basis of accounting. Under this method, revenues are recorded when earned and expenses are recorded when the liabilities are incurred.

Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with the proprietary funds principal ongoing operations. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses.

The following major enterprise funds are reported:

The Water enterprise fund is used to account for the Town’s water activities.

The Sewer enterprise fund is used to account for the Town’s sewer activities.

The Harbor enterprise fund is used to account for the Town’s harbor activities.

The Municipal Light enterprise fund is used to account for the Town’s electricity activities.

The Internal Service Funds are used to account for the financing of services provided by one department to other departments or governmental units.

The following activity within the internal service fund is reported:

The workers’ compensation activity is used to account for Town appropriations and investment earnings which are expended for the payment of injury claims, resulting from on-the-job accidents of Town employees.

Fiduciary funds are reported using the flow of economic resources measurement focus and use the accrual basis of accounting excluding Agency Funds. Fiduciary funds are used to account for assets held in a trustee capacity for others that cannot be used to support the governmental programs.

The following Fiduciary funds are reported:

The pension and other employee benefit trust funds are used to account for the activities of the Retirement System and the Town’s defined benefit healthcare plan, which accumulate resources to provide pension and OPEB benefits to eligible retirees and their beneficiaries.

The private-purpose trust fund is used to account for trust arrangements that exclusively benefit individuals, private organizations, or other governments. Some of these trusts have donor restrictions and trustee policies

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that do not allow the endowment portion and any unrealized appreciation to be spent. The donor restrictions and trustee policies only allow the trustees to authorize spending of the realized investment earnings. The Town’s educational scholarships and assistance to benefit the needy are accounted for in this fund.

The agency fund is used to account for assets held in a purely custodial capacity. Agency funds apply the accrual basis of accounting but do not have a measurement focus. The Town’s agency fund consist of performance bonds and the collection and payment of hunting and fishing licenses, firearm permits, sales taxes, meals taxes, and dog licenses to the State, proceeds of extra work details to the Town employees, and school student activity accounts.

D. Cash and Investments

Government-Wide and Fund Financial Statements

Cash and cash equivalents are considered to be cash on hand, demand deposits and short-term investments with an original maturity of three months or less from the date of acquisition.

Investments are carried at fair value. The fair values were determined by the closing price for those securities traded on national stock exchanges and at the average bid-and-asked quotation for those securities traded in the over-the-counter market. The fair value of real estate investments is based upon independent appraisals. Investments that do not have an established market are reported at estimated fair values.

E. Fair Value Measurements

The Town reports required types of financial instruments in accordance with the fair value standards. These standards require an entity to maximize the use of observable inputs (such as quoted prices in active markets) and minimize the use of unobservable inputs (such as appraisals or valuation techniques) to determine fair value. Fair value standards also require the government to classify these financial instruments into a three-level hierarchy, based on the priority of inputs to the valuation technique or in accordance with net asset value practical expedient rules, which allow for either Level 2 or Level 3 depending on lock up and notice periods associated with the underlying funds.

Instruments measured and reported at fair value are classified and disclosed in one of the following categories:

Level 1 – Quoted prices are available in active markets for identical instruments as of the reporting date. Instruments, which are generally included in this category, include actively traded equity and debt securities, U.S. government obligations, and mutual funds with quoted market prices in active markets.

Level 2 – Pricing inputs are other than quoted in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models or other valuation methodologies. Certain fixed income securities, primarily corporate bonds, are classified as Level 2 because fair values are estimated using pricing models, matrix pricing, or discounted cash flows.

Level 3 – Pricing inputs are unobservable for the instrument and include situations where there is little, if any, market activity for the instrument. The inputs into the determination of fair value require significant management judgment or estimation.

In some instances, the inputs used to measure fair value may fall into different levels of the fair value hierarchy and is based on the lowest level of input that is significant to the fair value measurement.

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Market price is affected by a number of factors, including the type of instrument and the characteristics specific to the instrument. Instruments with readily available active quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value. It is reasonably possible that change in values of these instruments will occur in the near term and that such changes could materially affect amounts reported in these financial statements. For more information on the fair value of the Town’s financial instruments, see Note 2 – Cash and Investments.

F. Accounts Receivable and Allowance for Uncollectible Accounts


The recognition of revenue related to accounts receivable reported in the government-wide financial statements and the proprietary and fiduciary funds financial statements are reported under the accrual basis of accounting. The recognition of revenue related to accounts reported in the governmental funds financial statements are reported under the modified accrual basis of accounting.

Real and personal property taxes are based upon values assessed as of January 1 and are levied each July for the following year ending June 30. Taxes for each year are due in quarterly installments and are normally payable August 1, November 1, February 1 and May 1. Interest accrues on delinquent taxes and is recognized as revenue when received. Tax liens are processed within twelve months after the close of the valuation year on delinquent properties.

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 the sale or taking of the property by the Town.

Motor vehicle excise taxes are assessed annually for each vehicle registered and are recorded as receivables in the year of the levy. The Commonwealth is responsible for reporting the number of vehicles registered and the fair values of those vehicles. The tax calculation is the fair value of the vehicle multiplied by $25 per $1,000 of value.

Boat excise taxes are assessed annually for each boat registered and are recorded as receivables in the year of the levy. The Commonwealth is responsible for reporting the number of boats registered and the fair value of those boats. The tax calculation is the fair value of the boat multiplied by $10 per $1,000 of value. Various federal and state grants for operating and capital purposes are applied for and received annually. For non-expenditure driven grants, receivables are recorded as soon as all eligibility requirements imposed by the provider have been met. For expenditure driven grants, receivables are recorded when the qualifying expenditures are incurred, and all other grant requirements are met.

Water and Sewer user fees are based on individual meter readings and are subject to penalties and interest if they are not paid by the respective due date. Unbilled user fees are estimated at year-end and are recorded as revenue in the current period.

Harbor user fees are assessed based on an annual basis and the portion of the fees that relate to July 1 through December 31 is recorded as unearned revenue at June 30.

The allowance for uncollectible accounts has been estimated based on historical trends and is reflected as a reduction to the receivables in the asset section of the financial statements.

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G. Inventories


Inventories are recorded as expenditures at the time of purchase except in the Municipal Light Enterprise Fund where inventories of parts and accessories purchased for use in the utility business for construction, operation and maintenance purposes are stated at average cost at December 31, 2018. Such inventories of both the Governmental Funds and Enterprise Funds, except the Municipal Light Fund, are not material in total to the basic financial statements and therefore are not reported.

H. Capital Assets


Capital assets, which include land, construction in progress, piers, buildings, building improvements, machinery and equipment, and infrastructure (e.g., roads, water mains, sewer mains, and similar items), are reported in the applicable governmental, business-type activity and fiduciary column of the government-wide and fund based financial statements. Capital assets are recorded at historical cost or at estimated historical cost if actual historical cost is not available. Donated capital assets, donated works of art and similar items, and capital assets received in a service concession arrangement are reported at acquisition value. Except for capital assets of the governmental activities column in the government-wide financial statements, construction period interest is capitalized on constructed capital assets.

All purchases and construction costs in excess of $10,000, and with the expected useful lives of greater than one year, are capitalized at the date of acquisition or construction. Capital assets (excluding land and construction in progress) are depreciated on a straight-line basis.

The estimated useful lives of capital assets are as follows:

EstimatedUseful Life

Capital Asset Type (in years)

Land improvements…………………… 10-30Buildings……………………………… 40Buildings and improvements………… 6-20Machinery and equipment…………… 3-15Light plant and equipment…………… 20Piers…………………………………… 15-75Infrastructure…………………………… 5-50

I. Deferred Outflows/Inflows of Resources

Government-Wide Financial Statements (Net Position)

In addition to assets, the statement of net position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/ expenditure) until then. The Town has reported deferred outflows of resources related to pensions and other postemployment benefits in this category.

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In addition to liabilities, the statement of net position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The Town reported deferred inflows of resources related to pensions, other postemployment benefits, contributions in aid of construction, and a provision for rate stabilization in this category.

Governmental Fund Financial Statements

In addition to liabilities, the statement of net position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The Town has recorded taxes paid in advance and unavailable revenue as deferred inflows of resources in the governmental funds balance sheet. Unavailable revenue is recognized as revenue in the conversion to the government-wide (full accrual) financial statements.

J. Compensated Absences


Under the terms of various union contracts, Town employees are granted vacation and sick leave benefits in varying amounts. In the event of termination, an employee is paid for all accumulated vacation. Vacation earned in one year may be carried forward to be used in the following year. Town employees are granted a varying proportion of their unused sick leave upon death or retirement. Accumulated unpaid vacation, sick pay and other employee benefit amounts are reported as liabilities in the government-wide and enterprise financial statements.

K. Long-term Debt

Government-Wide and Proprietary Fund Financial Statements

Long-term debt is reported as liabilities in the government-wide and proprietary fund statement of net position. Material bond premiums and discounts are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount.

Governmental Fund Financial Statements

The face amount of governmental funds long-term debt is reported as other financing sources. Bond premiums and discounts, as well as issuance costs, are recognized in the current period. Bond premiums are reported as other financing sources and bond discounts are reported as other financing uses. Issuance costs, whether or not withheld from the actual bond proceeds received, are reported as general government expenditures.

L. Net Position and Fund Equity

Government-Wide Financial Statements (Net Position)

Net position are reported as restricted when amounts that are not available for appropriation or are legally restricted by outside parties for a specific future use.

Net position reported as “net investment in capital assets” includes capital assets, net of accumulated depreciation, less the principal balance of outstanding debt used to acquire capital assets. Unspent proceeds of capital related debt are not considered to be capital assets. Outstanding debt related to landfill monitoring are not considered to be capital related debt.

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Net position has been “restricted for” the following:

Depreciation – represents amounts restricted in the Municipal Light for the statutory reserve for funded depreciation.

Permanent Funds - Expendable Trust Funds - represents the amount of realized and unrealized investment earnings of donor restricted trusts. The donor restrictions and trustee policies only allows the trustees to approve spending of the realized investment earnings to support governmental programs.

Permanent Funds – Nonexpendable Trust Funds - represents the endowment portion of donor restricted trusts that support governmental programs.

Gifts and Grants - represents grants and gifts restricted by outside parties.

Sometimes the Town will fund outlays for a particular purpose from both restricted (e.g., restricted bond or grant proceeds) and unrestricted resources. In order to calculate the amounts to report as restricted – net position and unrestricted – net position in the government-wide and proprietary fund financial statements, a flow assumption must be made about the order in which the resources are considered to be applied. It is the Town’s policy to consider restricted – net position to have been depleted before unrestricted – net position is applied.

Fund Financial Statements (Fund Balance)

“Nonspendable” fund balance includes amounts that cannot be spent because they are either not in spendable form or they are legally or contractually required to be maintained intact.

“Restricted” fund balance includes amounts subject to constraints placed on the use of resources that are either externally imposed by creditors, grantors, contributors, or laws or regulations of other governments; or that are imposed by law through constitutional provisions or enabling legislation.

“Committed” fund balance includes amounts that can only be used for specific purposes pursuant to constraints imposed by formal action of the government’s highest level of decision-making authority. For the Town, Town Meeting is the highest level of decision making authority that can vote, by article, to commit fund balance. Once committed, the limitation imposed by the vote remains in place until the funds are used for their intended purpose or a Town Meeting vote is taken to remove or revise the commitment.

“Assigned” fund balance includes amounts that are constrained by the Town’s intent to be used for specific purposes but are neither restricted nor committed. Town management is authorized by state law the ability to assign fund balance when there is an obligation to purchase goods or services from the current years’ appropriation. The Finance Director is responsible making the assignment. Assignments generally only exist temporarily. Additional action does not have to be taken for the removal of an assignment.

“Unassigned” fund balance includes the residual classification for the general fund. This classification represents fund balance that has not been assigned to other funds and that has not been restricted, committed, or assigned to specific purposes within the general fund. The general fund is the only fund that reports a positive unassigned fund balance amount.

The Town’s spending policy is to spend restricted fund balance first, followed by committed, assigned and unassigned fund balance. Most governmental funds are designated for one purpose at the time of their creation. Therefore, any expenditure from the fund will be allocated to the applicable fund balance classifications in the order of the aforementioned spending policy. The general fund and certain other funds may have more than one purpose.

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M. Investment Income

Investment income from Special Revenue, Capital Projects, and Agency Funds is legally assigned to the General Fund unless otherwise directed by Massachusetts General Law (MGL).

N. Pensions

For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of both the Marblehead Contributory Retirement System and the Massachusetts Teachers Retirement System and additions to/deductions from the Systems fiduciary net position have been determined on the same basis as they are reported by the Systems. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value.

O. Total Columns


The total column presented on the government-wide financial statements represents consolidated financial information.


The total column presented on the fund financial statements is presented only to facilitate financial analysis. Data in this column is not the equivalent of consolidated financial information.

P. On-Behalf Payments


The Commonwealth makes contributions to a contributory retirement plan administered by the Massachusetts Teachers’ Retirement Board (the “State Plan”) on behalf of the Town’s teaching employees. The Town is not legally required to contribute to the State Plan, which is fully funded by the Commonwealth. The accompanying basic financial statements include the required adjustments, which have increased both intergovernmental revenue and pension expenditures by the same amount. The effect of such an adjustment has not changed the excess of revenues and other financing sources over expenditures and other financing uses or fund balances.

Q. Use of Estimates


The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the basic financial statements and the reported amounts of revenues and expenditures during the reporting period. Actual results could differ from those estimates.

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NOTE 2 – CASH AND INVESTMENTS

A cash and investment pool is maintained that is available for use by all funds. Each fund type's portion of this pool is displayed on the balance sheet as "Cash and Cash equivalents.” The deposits and investments of the trust funds are held separately from those of other funds.

Statutes authorize the investment in obligations of the U.S. Treasury, agencies, and instrumentalities, certificates of deposit, repurchase agreements, money market accounts, bank deposits and the State Treasurer's Investment Pool (Pool). The Treasurer may also invest trust funds in securities, other than mortgages or collateral loans, which are legal for the investment of funds of savings banks under the laws of the Commonwealth.

The Pool meets the criteria of an external investment pool. The Pool is administered by the Massachusetts Municipal Depository Trust (MMDT), which was established by the Treasurer of the Commonwealth who serves as Trustee. The fair value of the position in the Pool is the same as the value of the Pool shares.

The Town’s trust funds and retirement system have expanded investment powers including the ability to invest in equity securities, corporate bonds, annuities and other investments. The retirement system and the OPEB trust fund participate in the Commonwealth of Massachusetts’ Pensions Reserves Investment Trust (PRIT) Fund which is a pooled investment fund that meets the criteria of an external investment pool. The Pension Reserves Investment Management (PRIM) Board is charged with the general supervision of the PRIT Fund. The fair value of the position in the PRIT fund is the same as the value of the PRIT shares.

Custodial Credit Risk – Deposits

In the case of deposits, this is the risk that in the event of a bank failure, the government’s deposits may not be returned to it. The Town’s policy limits unsecured bank deposits to no more than 10% of the Town’s cash. At year-end, the carrying amount of deposits totaled $52,177,958 and the bank balance totaled $53,878,105. Of the bank balance, $2,000,000 was covered by Federal Depository Insurance, $13,787,478 was covered by DIF Insurance, $37,189,162 was collateralized and $901,465 was exposed to custodial credit risk because it was uninsured and uncollateralized.

Restricted cash of $6,176,016 consisted of the Municipal Light Plant’s depreciation fund which may be used for the cost of plant, nuclear decommissioning costs, costs of contractual commitments, and future costs related to such commitments which the Municipal Light Board determines are above market value.

At December 31, 2018, the carrying amount of deposits for the System totaled $153,126, and the bank balance of $164,697, was fully covered by Federal Depository Insurance.

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Investments

At year end, the Town and the System had the following investments:

Town balances at June 30, 2019:

Investment Type Fair value

Other investments:Equity securities....................................... $ 1,772,830 Money market mutual funds………………… 2,220,039 Pension Reserve Investment Trust (PRIT)…… 4,130,596 MMDT - Cash portfolio………………………… 12,358,397

Total investments...................................... $ 20,481,862

System balances at December 31, 2018:

Investment Type Fair value

Pension Reserve Investment Trust (PRIT)……$ 94,860,575

The Town participates in the MMDT Cash Portfolio. MMDT maintains a cash portfolio and a short-term bond portfolio with combined average maturities of approximately 33 to 77 days and a weighted average maturity of 2.78 years, respectively. The Town’s investment in MMDT is unrated.

The Town and the System participate in PRIT. The effective weighted duration rate for PRIT investments ranged from 0.18 to 15.31 years.

Custodial Credit Risk – Investments

For investments, custodial credit risk is the risk that, in the event of a failure by the counterparty, the government will not be able to recover the value of its investments or collateral security that are in the possession of an outside party. The primary objective of the Town’s investment policy for custodial credit risk is to minimize the risk to investment principal through the careful selection of investment custodians. The Town does not have any custodial credit risk exposure as of June 30, 2019, because the $1,772,830 in equity securities are held by the Town and the $12,358,397 in shares of MMDT and $4,130,596 in PRIT are not subject to custodial credit risk because they are not evidenced by securities that exist in physical or book entry form.

At December 31, 2018, the System’s $94,860,575 investment in PRIT is not subject to custodial credit risk exposure because it is not evidenced by securities that exist in physical or book-entry form.

The System has not adopted a formal policy related to custodial credit risk.

Interest Rate Risk

The Town has a formal investment policy limiting investment maturities up to one year as a means of managing its exposure to fair value losses arising from increasing interest rates. The System does not have a formal investment policy related to interest rate risk.

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The System does not have a formal investment policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates.

Credit Risk

The Town has not adopted a formal policy related to Credit Risk. The Town’s investments in MMDT and PRIT are unrated. The System has not adopted a formal policy related to Credit Risk. The System’s investments in PRIT are unrated.

Concentration of Credit Risk

The Town restricts investments to no more than 5% in any one issue. The Town did not have more than 5% of its investments in any one individual security

The System does not have a formal investment policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates.

Fair Market Value of Investments

The Town holds investments that are measured at fair value on a recurring basis. Because investing is not a core part of the Town’s mission, the Town determines that the disclosures related to these investments only need to be disaggregated by major type. The Town chooses a tabular format for disclosing the levels within the fair value hierarchy.

The Town categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant unobservable inputs.

The Town has the following recurring fair value measurements as of June 30, 2019:

Quoted Prices Significant

in Active Other Significant

Markets for Observable Unobservable

June 30, Identical Assets Inputs Inputs

Investment Type 2019 (Level 1) (Level 2) (Level 3)

Investments measured at fair value:

Equity securities......................................... $ 1,772,830 $ 1,772,830 $ - $ -

Money market mutual funds…………………… 2,220,039 2,220,039 - -

Total investments measured at fair value………… 3,992,869 $ 3,992,869 $ - $ -

Investments measured at amortized cost:

MMDT - Cash portfolio………………………… 12,358,397

Investments measured at net asset value:

Pension Reserve Investment Trust (PRIT)…… 4,130,596

Total investments……………………………………$ 20,481,862

Fair Value Measurements Using

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Equity securities classified in Level 1 of the fair value hierarchy are valued using prices quoted in active markets for those securities.

PRIT Investments are valued using the net asset value method. This investment pool was established by the Treasurer of the Commonwealth of Massachusetts, who serves as Trustee. PRIT is administered by the Pension Reserves Investment Management Board (PRIM). The fair values of the positions in each investment Pool are the same as the value of each Pool’s shares. The Town does not have the ability to control any of the investment decisions relative to its funds in PRIT.

MMDT investments are valued at amortized cost. Under the amortized cost method, an investment is valued initially at its cost and adjusted for the amount of interest income accrued each day over the term of the investment to account for any difference between the initial cost and the amount payable at its maturity. If amortized cost is determined not to approximate fair value, the value of the portfolio securities will be determined under procedures established by the Advisor.

Retirement System

The retiree pension defined benefit plan holds significant amounts of investments that are measured at fair value on a recurring basis. Because investing is a key part of the System’s activities, the plan shows greater disaggregation in its disclosures. The System chooses a narrative format for disclosing the levels within the fair value hierarchy. The System categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles.

The System’s investments in PRIT are valued at $94,860,575 as of December 31, 2018. The PRIT Investments are valued using the net asset value (NAV) method. This investment pool was established by the Treasurer of the Commonwealth of Massachusetts, who serves as Trustee. PRIT is administered by the Pension Reserves Investment Management Board (PRIM). The values of the positions in each investment pool are the same as the value of each Pool’s shares. The System does not have the ability to control any of the investment decisions relative to its funds in PRIT.

NOTE 3 – RECEIVABLES

At June 30, 2019, receivables for the individual major and non-major governmental funds; and the fiduciary funds in the aggregate, including the applicable allowance for uncollectible accounts are as follows:

AllowanceGross for Net

Amount Uncollectibles AmountReceivables:

Real estate and personal property taxes……$ 1,490,954 $ (17,016) $ 1,473,938 Tax liens……………………………………... 216,220 - 216,220Motor vehicle and other excise taxes……… 290,855 (72,359) 218,496 Departmental and other……………………… 193,534 (1,459) 192,075 Intergovernmental - governmental funds…… 773,248 - 773,248Intergovernmental - pension fund…………… 4,601 - 4,601

Total…………………………………………… $ 2,969,412 $ (90,834) $ 2,878,578

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At June 30, 2019, receivables for the enterprise funds consist of the following:

AllowanceGross for Net

Amount Uncollectibles AmountReceivables:

Water user fees………………………………………… $ 1,225,743 $ (35,586) $ 1,190,157 Sewer user fees………………………………………… 2,199,054 (65,297) 2,133,757 Harbor user fees………………………………………… 13,006 (2,601) 10,405 Boat excise taxes……………………………………… 90,562 (4,528) 86,034 Municipal light user charges (December 31, 2018)… 2,508,313 - 2,508,313

Total……………………………………………………… $ 6,036,678 $ (108,012) $ 5,928,666

Unavailable Revenue

Property taxes and other receivables in Governmental Funds that are measurable but not available have been classified as deferred inflows of resources on June 30, 2019, as follows:

OtherGeneral Governmental

Fund Funds TotalReceivable and other asset type:

Real estate and personal property taxes… $ 591,821 $ - $ 591,821 Tax liens…………………………………….. 216,220 - 216,220Motor vehicle and other excise taxes……… 113,950 - 113,950Departmental and other……………………… 5,837 16,559 22,396 Intergovernmental…………………………… 31,360 322,833 354,193Tax foreclosures……………………………… 61,759 - 61,759

Total……………………………………………$ 1,020,947 $ 339,392 $ 1,360,339

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NOTE 4 – INTERFUND TRANSFERS AND BALANCES

Funds are transferred from one fund to support expenditures of other funds in accordance with the authority established for the individual fund. Transfers within fund types have been eliminated. Transfers between funds during the year ended June 30, 2019, have been reported as follows:

NonmajorGeneral governmental

Transfers Out: fund funds Total

General fund……………………… $ - $ 396,163 $ 396,163 (1)Public funds……………………… 26,000 - 26,000 (2)Nonmajor governmental funds…… 390,516 10,100 400,616 (3)

Total……………………………… $ 416,516 $ 406,263 $ 822,779

Transfers In:

(1) Transfers from General Fund to the School Lunch Fund and the Revolving Special Revenue NonmajorGovernmental Funds.

(2) Transfer from Public Funds to the General fund support the cemetery budget from the perpetual caretrust.

(3) Transfers from Nonmajor Governmental Funds to the General Fund to support the general operatingbudget; these items include police detail administration fees and the use of bond premiums. Transfer toNonmajor governmental funds is a one- time transfer to support the Other Grant Investment NonmajorGovernmental Fund.

The Town’s interfund balance at June 30, 2019, consisted of $5,353 due from the Highway Improvement Fund to the General Fund and $153,199 within the nonmajor governmental funds for interfund borrowings for cash flow purposes.

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NOTE 5 – CAPITAL ASSETS

Capital asset activity in the Governmental Funds for the year ended June 30, 2019, was as follows:

Beginning EndingBalance Increases Decreases Balance

Governmental Activities:Capital assets not being depreciated:

Land………………………………………………… $ 8,057,539 $ - $ - $ 8,057,539 Construction in progress…………………………… 576,129 1,809,067 - 2,385,196

Total capital assets not being depreciated… 8,633,668 1,809,067 - 10,442,735

Capital assets being depreciated:Land improvements………………………………… 8,870,033 445,891 - 9,315,924 Buildings………………………………….………… 106,786,868 - - 106,786,868Buildings and improvements……………………… 32,620,985 350,019 (141,142) 32,829,862Machinery and equipment………………………… 13,632,621 703,152 (606,382) 13,729,391Infrastructure………………………………………… 39,936,482 1,154,050 - 41,090,532

Total capital assets being depreciated……… 201,846,989 2,653,112 (747,524) 203,752,577

Less accumulated depreciation for:Land improvements………………………………… (2,382,449) (306,930) - (2,689,379) Buildings………………………………….………… (39,872,885) (2,492,063) - (42,364,948)Buildings and improvements……………………… (11,095,706) (888,223) 141,142 (11,842,787)Machinery and equipment………………………… (9,192,370) (950,552) 606,382 (9,536,540) Infrastructure………………………………………… (12,663,530) (924,720) - (13,588,250)

Total accumulated depreciation……………… (75,206,940) (5,562,488) 747,524 (80,021,904)

Total capital assets being depreciated, net………… 126,640,049 (2,909,376) - 123,730,673

Total governmental activities capital assets, net……$ 135,273,717 $ (1,100,309) $ - $ 134,173,408

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Capital asset activity for the Business Type Activities for the year ended June 30, 2019, was as follows:


Water:Capital assets not being depreciated:

Land………………………………………………$ 49,427 $ - $ - $ 49,427

Capital assets being depreciated:Land improvements…………………………… 1,574,820 - - 1,574,820 Buildings………………………………….……… 1,228,719 - - 1,228,719 Machinery and equipment……………………… 1,358,333 74,164 (24,472) 1,408,025 Infrastructure…………………………………… 15,274,382 567,612 (68,500) 15,773,494

Total capital assets being depreciated… 19,436,254 641,776 (92,972) 19,985,058

Less accumulated depreciation for:Land improvements…………………………… (144,384) (63,089) - (207,473) Buildings………………………………….……… (327,158) (30,718) - (357,876) Machinery and equipment……………………… (724,180) (103,303) 24,472 (803,011) Infrastructure…………………………………… (6,088,874) (303,186) 68,500 (6,323,560)

Total accumulated depreciation………… (7,284,596) (500,296) 92,972 (7,691,920)

Total capital assets being depreciated, net…… 12,151,658 141,480 - 12,293,138

Total water activities capital assets, net…………$ 12,201,085 $ 141,480 $ - $ 12,342,565


Sewer:Capital assets not being depreciated:

Land…………………………………………… $ 115,466 $ - $ - $ 115,466

Capital assets being depreciated:Buildings and improvements………………… 489,261 73,716 - 562,977 Machinery and equipment…………………… 1,214,900 27,705 - 1,242,605Infrastructure…………………………………… 15,629,426 663,415 (241,442) 16,051,399

Total capital assets being depreciated… 17,333,587 764,836 (241,442) 17,856,981

Less accumulated depreciation for:Buildings and improvements………………… (143,748) (13,569) - (157,317) Machinery and equipment…………………… (954,102) (69,283) - (1,023,385)Infrastructure…………………………………… (5,672,068) (312,267) 241,442 (5,742,893)

Total accumulated depreciation………… (6,769,918) (395,119) 241,442 (6,923,595)

Total capital assets being depreciated, net…… 10,563,669 369,717 - 10,933,386

Total sewer activities capital assets, net……… $ 10,679,135 $ 369,717 $ - $ 11,048,852

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Harbor:Capital assets not being depreciated:

Land………………………………………………$ 2,004,077 $ - $ - $ 2,004,077

Capital assets being depreciated:Land improvements……………………………… 980,199 15,400 - 995,599Piers……………………………………………… 439,955 13,592 - 453,547Buildings………………………………….……… 883,440 - - 883,440Buildings and improvements…………………… 129,160 - - 129,160Machinery and equipment……………………… 1,631,677 47,338 - 1,679,015

Total capital assets being depreciated…… 4,064,431 76,330 - 4,140,761

Less accumulated depreciation for:Land improvements……………………………… (519,676) (20,854) - (540,530)Piers……………………………………………… (85,127) (14,427) - (99,554)Buildings………………………………….……… (451,854) (21,563) - (473,417)Buildings and improvements…………………… (74,855) (3,822) - (78,677)Machinery and equipment……………………… (1,064,758) (75,436) - (1,140,194)

Total accumulated depreciation…………… (2,196,270) (136,102) - (2,332,372)

Total capital assets being depreciated, net…… 1,868,161 (59,772) - 1,808,389

Total harbor activities capital assets, net……… $ 3,872,238 $ (59,772) $ - $ 3,812,466


Municipal Light:Capital assets not being depreciated:

Land………………………………………………… $ 53,947 $ - $ - $ 53,947 Construction in progress…………………………… 7,964,438 200,000 (7,164,995) 999,443

Total capital assets not being depreciated…… 8,018,385 200,000 (7,164,995) 1,053,390

Capital assets being depreciated:Light plant and equipment………………………… 30,527,651 9,597,658 (802,892) 39,322,417

Less accumulated depreciation for:Light plant and equipment………………………… (19,971,991) (1,526,383) 802,892 (20,695,482)

Total capital assets being depreciated, net………… 10,555,660 8,071,275 - 18,626,935

Total municipal light activities capital assets, net……$ 18,574,045 $ 8,271,275 $ (7,164,995) $ 19,680,325

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Capital asset activity for the Fiduciary Funds for the year ended June 30, 2019, was as follows:


Fiduciary Activities:Capital assets not being depreciated:

Land…………………………………………… $ 2,045 $ - $ - $ 2,045

Capital assets being depreciated:Buildings and improvements………………… 294,455 - - 294,455 Equipment……………………………………… 25,940 - - 25,940

Total capital assets being depreciated… 320,395 - - 320,395

Less accumulated depreciation for:Buildings and improvements………………… (149,619) (9,363) - (158,982) Equipment……………………………………… (9,879) (800) - (10,679)

Total accumulated depreciation………… (159,498) (10,163) - (169,661)

Total capital assets being depreciated, net…… 160,897 (10,163) - 150,734

Total fiduciary activities capital assets, net…… $ 162,942 $ (10,163) $ - $ 152,779

Depreciation expense was charged to functions/programs of the primary government as follows:

Governmental Activities:General government…………………………………… $ 244,250

Public safety…………………………………………… 361,112 Education………………………………………………… 3,131,467 Public works……………………………………………… 1,355,006 Human services………………………………………… 40,094 Culture and recreation………………………………… 430,559

Total depreciation expense - governmental activities……$ 5,562,488

Business-Type Activities:Water………………………………………………………$ 500,296 Sewer…………………………………………………… 395,119 Harbor…………………………………………………… 136,102 Municipal Light…………………………………………… 1,526,383

Total depreciation expense - business-type activities… $ 2,557,900

Fiduciary Activities:Private purpose trust funds…………………………… $ 10,163

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NOTE 6 – SHORT-TERM FINANCING

The Town of Marblehead is authorized, through its Treasurer, to borrow in anticipation of taxes (TANS), to fund capital project costs in anticipation of the issuance of bonds (BANS) or in anticipation of the receipt of federal (FANS) and state (SANS) grants.

The Town had $9,113,653 in outstanding Bond Anticipation Notes as of June 30, 2019. The BANs had a 2% interest rate and matured on August 2, 2019. Subsequent to year end, $30,388 was retired with available funds and $104,545 was retired with grant reimbursements. The remaining $9 million of the Town’s BANs have been classified as long-term debt. Refer to Note 7 for information regarding BANs classified as long-term debt as of June 30, 2019.

As of September 2017, the Marblehead Municipal Light Department entered into a Pooled Loan Program Agreement with the Massachusetts Municipal Wholesale Electric Company (“MMWEC”) for the purpose of financing renovations on the Department’s existing office building. Interest only is due monthly at a fixed interest rate of 2.50% per annum. Interest amounted to $80,118 as of December 31, 2018, which has been capitalized. The outstanding principal balance as of December 31, 2018, was $5,077,574.

At the inception of the loan, MMWEC was required to collect 10% of the initial borrowing amount to be deposited into a Reserve Requirement Account to serve as collateral for the bank. MMWEC is also required to collect 10% of the amount of interest due monthly from each Pooled Loan Participant to further fund the Pooled Financing Reserve Account. These funds will either be returned to the Department or used as the final loan payments at the end of the amortization period. The balance in the Pooled Financing Reserve Account as of December 31, 2018, was $1,408,642.

NOTE 7 – LONG-TERM DEBT

The Town of Marblehead's long-term debt issues constitute a pledge of the Town's full faith and credit. Payment is not limited to a particular revenue source. However, as previously noted, the Town's ability to raise property taxes is restricted by the enactment of legislation known as "Proposition 2½.”

State law permits the Town, under the provisions of Chapter 44, Section 10, to authorize indebtedness up to a limit of 5% of its equalized valuation. Debt issued in accordance with this section of the law is designated as being “inside the debt limit.” In addition, however, a Town may authorize debt in excess of that limit for specific purposes. Such debt, when issued, is designated as being “outside the debt limit.”

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The following is a summary of the long-term debt transactions of the Town for the year ended June 30, 2019:

Original Interest OutstandingMaturities Loan Rate at June 30,

Project Through Amount (%) 2019

Village School……………………………………………… 2031 $ 2,600,000 3.08 $ 1,810,000 Village School……………………………………………… 2031 12,000,000 3.06 8,250,000 School Refunding Bonds of 2012………………………… 2025 15,860,000 5.00 10,145,000 General Obligation Bonds of 2012………………………… 2033 9,171,000 2.39 6,715,000 General Obligation Bonds of 2013………………………… 2034 8,974,000 3.51 7,455,000 General Obligation Bonds of 2014………………………… 2035 8,158,000 3.36 6,705,000 General Obligation Bonds of 2015………………………… 2036 9,225,000 3.81 8,470,000 General Obligation Bonds of 2016………………………… 2037 7,767,000 2.00 7,375,000 General Obligation Bonds of 2017………………………… 2038 7,780,000 2.00 7,595,000 General Obligation Long-term Refunding BAN of 2019… 2021 1,741,759 2.75 1,741,759 General Obligation Long-term BAN of 2019….............. 2021 8,978,720 2.75 7,236,961

Total Bonds Payable…………….……………………………………………………………………… 73,498,720

Add: Unamortized premium on bonds…………………………………………………………………… 2,998,530

Total Bonds Payable, net…………….……………………………………………………………………$ 76,497,250

As of June 30, 2019, the Town has approximately $1.7 million in Massachusetts School Building Authority (MSBA) reimbursements and unamortized premiums on bonds reserved in a special revenue fund to offset future interest expenses related to long-term bonds. During 2019, the Town released $293,000 from this fund to offset interest expenses and the Town added $100,000 of bond premiums received.

On June 30, 2018, the Town had $1.9 million in long-term BANs outstanding which were due on August 3, 2018. In 2019, the Town reissued $1.7 million as part of a new BAN with an interest rate of 2.75% due August 2, 2019; and paid $126,000 of the BAN with available funds. The $1.7 million BAN, along with $7.3 million in new BAN funds have been classified as long-term debt in the financial statements.

Subsequent to year-end the Town permanently financed $2.9 million of the long-term BAN’s and reissued $6.1 million as part of a new long-term refunding BAN with an interest rate of 1.5%, which will mature on July 31, 2020.

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Annual Requirements

The annual requirements to amortize all long-term debt outstanding as of June 30, 2019, are as follows:

Year Principal Interest Total

2020……………$ 4,425,000 $ 2,241,060 $ 6,666,060 2021…………… 13,468,720 2,301,691 15,770,411 2022…………… 4,665,000 1,858,306 6,523,306 2023…………… 4,870,000 1,666,348 6,536,348 2024…………… 4,925,000 1,479,423 6,404,423 2025…………… 5,095,000 1,300,713 6,395,713 2026…………… 3,385,000 1,147,894 4,532,894 2027…………… 3,515,000 1,019,023 4,534,023 2028…………… 3,630,000 890,204 4,520,204 2029…………… 3,710,000 756,845 4,466,845 2030…………… 3,840,000 627,746 4,467,746 2031…………… 3,875,000 500,893 4,375,893 2032…………… 3,035,000 388,232 3,423,232 2033…………… 3,135,000 293,323 3,428,323 2034…………… 2,680,000 198,227 2,878,227 2035…………… 2,110,000 123,646 2,233,646 2036…………… 1,635,000 67,562 1,702,562 2037…………… 1,000,000 29,026 1,029,026 2038…………… 500,000 7,500 507,500

Total……………$ 73,498,720 $ 16,897,662 $ 90,396,382

Bond Authorizations

Long-term debt authorizations voted by Town Meetings which have not been issued or rescinded as of June 30, 2019, are as follows:

Date Authorized Purpose Amount

May 2015 New Transfer Station………… $ 1,117,952 May 2016 Gerry School Feasibility……… 750,000 June 2018 Abbott Hall Repairs…………… 8,982,963 June 2018 Seawall Repairs……………… 871,894 June 2019 Fort Sewall Repairs…........... 750,000 June 2019 New Gerry School…............. 54,844,767

Total…………………………… $ 67,317,576

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Changes in Long-term Liabilities

During the year ended June 30, 2019, the following changes occurred in long-term liabilities:

Bonds and Bonds andBeginning Notes Notes Other Other Ending Due WithinBalance Issued Redeemed Increases Decreases Balance One Year

Governmental Activities:Long-term bonds payable……………………. $ 70,537,952 $ 8,978,720 $ (6,017,952) $ - $ - $ 73,498,720 $ 4,425,000

Add: Unamortized premium on bonds…… 3,368,684 100,161 (470,315) - - 2,998,530 332,179 Total bonds payable…………………………… 73,906,636 9,078,881 (6,488,267) - - 76,497,250 4,757,179 Landfill closure………………………………… 4,419,600 - - (1,440,000) (114,600) 2,865,000 114,600 Compensated absences……………………… 1,141,603 - - 894,768 (904,065) 1,132,306 913,939 Workers' compensation……………………… 781,349 - - 323,661 (215,353) 889,657 140,472 Net pension liability…………………………… 38,389,557 - - 10,960,248 (2,797,432) 46,552,373 - Net other postemployment benefits liability… 167,246,613 - - 28,463,754 (4,058,652) 191,651,715 -

Total governmental activitylong-term liabilities………………………… $ 285,885,358 $ 9,078,881 $ (6,488,267) $ 39,202,431 $ (8,090,102) $ 319,588,301 $ 5,926,190

Business-Type Activities:Compensated absences………………………$ 200,679 $ - $ - $ 234,800 $ (228,622) $ 206,857 $ 206,857 Net pension liability…………………………… 9,230,576 - - 623,736 (645,865) 9,208,447 - Net other postemployment benefits liability… 7,148,295 - - 8,831,274 (390,630) 15,588,939 -

Total business-type activitylong-term liabilities………………………… $ 16,579,550 $ - $ - $ 9,689,810 $ (1,265,117) $ 25,004,243 $ 206,857

Long-term liabilities related to both governmental and business-type activities are normally paid from the funds reporting payroll and related expenditures, which consist of the general fund and the water, sewer, harbor, and municipal light enterprise funds.

NOTE 8 – GOVERNMENTAL FUND BALANCE CLASSIFICATIONS

The Town classifies fund balance according to the constraints imposed on the use of the resources.

There are two major types of fund balances, which are nonspendable and spendable. Nonspendable fund balances are balances that cannot be spent because they are not expected to be converted to cash or they are legally or contractually required to remain intact. Examples of this classification are prepaid items, inventories, and principal (corpus) of an endowment fund. The Town has reported principal portions of endowment funds as nonspendable.

In addition to the nonspendable fund balance, spendable fund balances are classified based on a hierarchy of spending constraints.

Restricted: fund balances that are constrained by external parties, constitutional provisions, or enablinglegislation.

Committed: fund balances that contain self-imposed constraints of the government from its highest levelof decision making authority. The Town’s highest level of decision making authority is the Town Meeting.

Assigned: fund balances that contain self-imposed constraints of the government to be used for aparticular purpose. Management determines the need for an assignment of fund balance. The approvalof the Town’s highest level of decision making authority is not required for the assignment.

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Unassigned: fund balance of the general fund that is not constrained for any particular purpose and thedeficit fund balances for other funds that would otherwise be restricted, committed, or assigned. Thegeneral fund is the only fund that reports a positive unassigned fund balance amount.

The Town’s spending policy is to spend restricted fund balance first, followed by committed, assigned and unassigned fund balance. Most governmental funds are designated for one purpose at the time of their creation. Therefore, any expenditure from the fund will be allocated to the applicable fund balance classifications in the order of the aforementioned spending policy. The general fund and certain other funds may have more than one purpose.

The general fund is the only fund that reports a positive unassigned fund balance amount. In other governmental funds it is not appropriate to report a positive unassigned fund balance amount. However, in governmental funds other than the general fund, if expenditures incurred for specific purpose exceed the amounts that are restricted, committed, or assigned to those purpose, it may be necessary to report a negative unassigned fund balance in that fund.

As of June 30, 2019, the governmental fund balances consisted of the following:

Capital Nonmajor TotalProjects Public Governmental Governmental

General Fund Funds Funds Funds

Fund Balances:Nonspendable:

Permanent fund principal………………………………$ - $ - $ 3,656,980 $ - $ 3,656,980 Restricted for:

Capital projects fund…………………………………… - 4,989,157 - - 4,989,157 Public funds…………………………………………… - - 3,519,436 - 3,519,436 Federal grants………………………………………… - - - 237,354 237,354 State grants…………………………………………… - - - 27,707 27,707 Other grants…………………………………………… - - - 1,148,436 1,148,436 Revolving funds………………………………………… - - - 2,086,650 2,086,650 Receipts reserved for appropriation………………… - - - 1,846,298 1,846,298 Gifts……………………………………………………… - - - 683,541 683,541 Special revenue trust funds…………………………… - - - 3,823,617 3,823,617

Committed to:Articles and continuing appropriations:

General government:Equipment……………………………………… 14,093 - - - 14,093 Improving public buildings…………………… 109,553 - - - 109,553

Public works:Walls and fences……………………………… 75,216 - - - 75,216 Drain construction……………………………… 245,033 - - - 245,033

Assigned to:Encumbrances:

General government……………………………… 47,811 - - - 47,811 Public safety:

Building commissioner………………………… 25,093 - - - 25,093 Public works & facilities:

Engineering department……………………… 2,451 - - - 2,451 Highway department…………………………… 18,386 - - - 18,386 Tree Department……………………………… 10,000 - - - 10,000

Culture and recreation:Library…………………………………………… 2,500 - - - 2,500 Parks department……………………………… 7,293 - - - 7,293

Property and liability insurance…………………… 10,000 - - - 10,000 Fringe benefits:

Salary Reserve………………………………… 50,000 - - - 50,000 Group insurance……………………………… 21,132 - - - 21,132

Free cash used for subsequent year budget……… 8,575,000 - - - 8,575,000 Unassigned………………………………………………… 11,943,095 - - - 11,943,095

Total Fund Balances…………….……………………………$ 21,156,656 $ 4,989,157 $ 7,176,416 $ 9,853,603 $ 43,175,832

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NOTE 9 – PENSION PLAN

Plan Description

The Town is a member of the Marblehead Contributory Retirement System (MCRS), a cost-sharing multiple-employer defined benefit pension plan covering eligible employees of the 2 member units. The System is administered by five board members (Board) on behalf of all current employees and retirees except for current teachers and retired teachers. Chapter 32 of the MGL assigns authority to establish and amend benefit provisions of the plan. The System is a component unit and is reported as a pension trust fund in the fiduciary fund financial statements.

The Town is a member of the Massachusetts Teachers’ Retirement System (MTRS), a cost-sharing multi-employer defined benefit plan. MTRS is managed by the Commonwealth of Massachusetts (Commonwealth) on behalf of municipal teachers and municipal teacher retirees. The Commonwealth is a nonemployer contributor and is responsible for 100% of the contributions and future benefit requirements of the MTRS. The MTRS covers certified teachers in cities (except Boston), towns, regional school districts, charter schools, educational collaboratives and Quincy College. The MTRS is part of the Commonwealth’s reporting entity and the audited financial report may be obtained by visiting http://www.mass.gov/osc/publications-and-reports/financial-reports/.

Special Funding Situation

The Commonwealth is a nonemployer contributor and is required by statute to make 100% of all actuarially determined employer contributions on behalf of the Town to the MTRS. Therefore, the Town is considered to be in a special funding situation as defined by GASB Statement No. 68, Accounting and Financial Reporting for Pensions and the Commonwealth is a nonemployer contributor in MTRS. Since the Town does not contribute directly to MTRS, there is no net pension liability to recognize. The total of the Commonwealth provided contributions have been allocated based on each employer’s covered payroll to the total covered payroll of employers in MTRS as of the measurement date of June 30, 2018. The Town’s portion of the collective pension expense, contributed by the Commonwealth, of $8,950,916, is reported in the general fund as intergovernmental revenue and pension benefits in the current fiscal year. The portion of the Commonwealth’s collective net pension liability associated with the Town is $88,329,506, as of the measurement date.

Benefits Provided

Both Systems provide retirement, disability, survivor and death benefits to plan members and beneficiaries. Massachusetts Contributory Retirement System benefits are, with certain minor exceptions, uniform from system to system. The Systems provide retirement allowance benefits up to a maximum of 80% of a member's highest three-year average annual rate of regular compensation. For persons who became members on or after April 2, 2012, average salary is the average annual rate of regular compensation received during the five consecutive years that produce the highest average, or, if greater, during the last five years (whether or not consecutive) preceding retirement. Benefit payments are based upon a member's age, length of creditable service, level of compensation, and group classification. Members become vested after ten years of creditable service.

Employees who resign from service and who are not eligible to receive a retirement allowance or are under the age of 55 are entitled to request a refund of their accumulated total deductions. Survivor benefits are extended to eligible beneficiaries of members whose death occurs prior to or following retirement.

Cost-of-living adjustments granted between 1981 and 1997 and any increase in other benefits imposed by the Commonwealth’s state law during those years are borne by the Commonwealth and are deposited into the pension fund. Cost-of-living adjustments granted after 1997 must be approved by the Board and are borne by the

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System. There were no changes in benefit terms that effected the measurement of the total pension liability at December 31, 2018.

At December 31, 2018, the MCRS membership consists of the following:

Active members………………………………………………… 427 Inactive members……………………………………………… 155 Retirees and beneficiaries currently receiving benefits….… 358

Total……………………………………………………………… 940

Contributions

Chapter 32 of the MGL governs the contributions of plan members and member units. Active plan members are required to contribute at rates ranging from 5% to 9% of gross regular compensation with an additional 2% contribution required for compensation exceeding $30,000. The percentage rate is keyed to the date upon which an employee's membership commences. The member units are required to pay into the MCRS a legislatively mandated actuarial determined contribution that is apportioned among the employers based on active current payroll. The total member units’ contribution for the year ended December 31, 2018, was $3,776,631, 17.36% of covered payroll, actuarially determined as an amount that, when combined with plan member contributions, is expected to finance the costs of benefits earned by plan members during the year, with an additional amount to finance any unfunded accrued liability. The Town’s proportionate share of the required contribution for the year ended December 31, 2018, was $3,251,778, and equaled its actual contribution.

Pension Liabilities

The components of the net pension liability of the participating member units at December 31, 2018, were as follows:

Total pension liability…………………………… $ 153,096,440

Total pension plan's fiduciary net position…… (95,016,993)

Total net pension liability…………………………$ 58,079,447

The pension plan's fiduciary net position asa percentage of the total pension liability…… 62.06%

At June 30, 2019, the Governmental Activities, Water, Sewer and Harbor enterprise reported a liability of $50,007,920, for its proportionate share of the net pension liability measured at December 31, 2018. The Municipal Light enterprise fund net pension liability of $5,752,900 was measured as of December 31, 2017 for their year ended December 31, 2018. The total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of January 1, 2018. The Town’s proportion of the net pension liability was based on a projection of the Town’s long-term share of contributions to the pension plan relative to the projected contributions of all participating members. At December 31, 2018, the Town’s proportion was 98.314% (including the Municipal Light Department).

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Pension Expense

For the year ended June 30, 2019, the Town recognized pension expense of $7,678,229, exclusive of the Municipal Light Department. At June 30, 2019, the Town and the Municipal Light Department reported deferred outflows of resources related to pensions of $7,283,311, and $1,294,794, respectively. At June 30, 2019, the Town and the Municipal Light Department reported deferred inflows of resources related to pensions of $356,622 and $1,161,045, respectively. The balances of deferred outflows and inflows at June 30, 2019, for the Town, excluding the Municipal Light Department are as follows:

Deferred DeferredOutflows of Inflows of

Deferred Category Resources Resources Total

Differences between expected and actual experience………………$ 1,142,659 $ (356,622) $ 786,037 Difference between projected and actual earnings, net…………… 3,281,889 - 3,281,889 Changes in assumptions……………………………………………… 2,517,999 - 2,517,999 Changes in proportion and proportionate share of contributions… 340,764 - 340,764

Total deferred outflows/(inflows) of resources……………………… $ 7,283,311 $ (356,622) $ 6,926,689

The balances of deferred outflows and inflows at December 31, 2018, for the Municipal Light Department are as follows:



Differences between expected and actual experience………………$ 229,580 $ (106,775) $ 122,805 Difference between projected and actual earnings, net…………… - (518,348) (518,348) Changes in assumptions……………………………………………… 604,035 - 604,035Changes in proportion and proportionate share of contributions… - (535,922) (535,922)Contributions made subsequent to the measurement date……… 461,179 - 461,179

Total deferred outflows/(inflows) of resources……………………… $ 1,294,794 $ (1,161,045) $ 133,749

The deferred outflows and inflows of resources related to pensions will be recognized in pension expense as follows:

Year ended June 30/December 31: Town Municipal Light Total

2019…………………………………………………$ - $ 81,387 $ 81,387 2020………………………………………………… 3,114,686 69,343 3,184,029 2021………………………………………………… 1,398,517 (174,048) 1,224,469 2022………………………………………………… 697,718 (224,247) 473,471 2023………………………………………………… 1,715,768 (79,865) 1,635,903

Subtotal amortized deferred outflows/(inflows) of resources……………………………………… 6,926,689 (327,430) 6,599,259

Contributions made subsequent to the measurement date……………………………… - 461,179 461,179

Total deferred outflows/(inflows) of resources… $ 6,926,689 $ 133,749 $ 7,060,438

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Changes of Assumptions

The most recent actuarial valuation as of January 1, 2018, included several changes of assumptions from the prior actuarial valuation. These changes include a decrease in the assumed discount rate from 7.50% down to 7.35%, as well as changes in the applied mortality tables.

Changes in Plan Provisions

None.

Actuarial Assumptions

The total pension liability in the January 1, 2018, actuarial valuation was determined using the following actuarial assumptions, applied to all periods in the measurement that was rolled-forward to December 31, 2018, for the Town’s measurement date:

Valuation date……………………………… January 1, 2018

Actuarial cost method……………………… Entry age normal cost method

Amortization method……………………… Total appropriation increases 8.0% per year until FY38 with a final amortization payment in FY39

Remaining amortization period…………… 21 years from July 1, 2019

Asset valuation method…………………… Market value for GASB 67/68. For funding purposes, gains and losses each year are recognized over 5 years

Investment rate of return/discount rate…… 7.35% net of pension plan investment expense, including inflation

Inflation rate………………………………… Not explicitly assumed

Projected salary increases………………… Select and ultimate by job group, ultimate rates 4.25% for Group 1 and 4.75% for Group 4

Cost of living adjustments………………… 3% of first $12,000

Rates of retirement………………………… Varies based upon age and gender for Groups 1 & 2, varies upon age for Group 4

Rates of disability…………………………… It is assumed that the percentage of job-related disabilities is 55% for Groups 1 & 2 and 90% for Group 4

Mortality Rates:Pre-Retirement………………………… Rates reflect the RP-2000 Employees table projected

generationally with Scale BB and a base year of 2009 (gender distinct)

Post-Retirement……………………… Rates reflect the RP-2000 Healthy Annuitant table projected generationally with Scale BB and a base year of 2009 (gender distinct)

Disabled Retirees…………………… Rates reflect the RP-2000 Healthy Annuitant Table projected generationally with Scale BB and a base year of 2012 (gender distinct)

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Investment Policy

The System’s policy in regard to the allocation of invested assets is established and may be amended by the Board. Plan assets are managed on a total return basis with a long-term objective of achieving and maintaining a fully funded status for the benefits provided through the pension plan.

The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. Best estimates of geometric real rates of return for each major asset class included in the pension plan’s target asset allocation as of December 31, 2018, are summarized in the following table:

Target Long-Term ExpectedAsset Class Allocation Real Rate of Return

US Equity…............................................ 17.50% 7.62%International Equities…............................ 15.50% 7.80%Emerging International Equities…………… 6.00% 9.31%Core Bonds…………………………………… 5.00% 4.37%Long Treasuries……………………………… 2.00% 3.50%TIPS…………………………………………… 5.00% 4.00%Value-Added Fixed Income…................... 10.00% 7.58%Private Equity………………………………… 12.00% 11.15%Real Estate…………………………………… 10.00% 6.59%Timberland…........................................... 4.00% 7.00%Portfolio Completion…............................. 13.00% 6.83%

100.00%

Rate of Return

For the year ended December 31, 2018, the annual money-weighted rate of return on pension plan investments, net of pension plan investment expense, was -2.28%. The money-weighted rate of return expresses investment performance, net of investment expense, adjusted for the changing amounts actually invested.

Discount Rate

The discount rate used to measure the total pension liability was 7.35% as of June 30, 2019. The projection of cash flows used to determine the discount rate assumed plan member contributions will be made at the current contribution rate and that contributions will be made at rates equal to the actuarially determined contribution rate. Based on those assumptions, the System’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability.

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Sensitivity of the net pension liability to changes in the discount rate

The following presents the net pension liability, calculated using the discount rate of 7.35%, as well as what the net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower (6.35%) or 1-percentage-point higher (8.35%) than the current rate:

Current1% Decrease Discount 1% Increase

(6.35%) (7.35%) (8.35%)

The Town's proportionate share of thenet pension liability………………………………… $ 64,305,734 $ 50,007,920 $ 37,867,928

The Retirement System's total net pension liability… $ 74,685,000 $ 58,079,447 $ 43,980,000

The Municipal Light Plant's proportionateshare of the net pension liability……………………$ 7,720,291 $ 5,752,900 $ 4,082,393

December 31, 2018 Measurement Date

December 31, 2017 Measurement Date

NOTE 10 – POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS

Plan Description – The Town of Marblehead administers a single-employer defined benefit healthcare plan (“the Plan”). The plan provides lifetime healthcare insurance for eligible retirees and their spouses through the Town’s participation in the Group Insurance Commission of the Commonwealth of Massachusetts (GIC), which covers both active and retired members. Chapter 32B of the MGL assigns authority to establish and amend benefit provisions of the plan. The Plan does not issue a publicly available financial report.

Funding Policy – The contribution requirements of plan members and the Town are established and may be amended by the Town. The required contribution is based on a pay-as-you-go financing requirement. The Town contributes 65-83 percent of the cost of pre-Medicare coverage and 75 percent of the cost of the Medex plan and Medicare Part B. Plan members receiving benefits contribute the remaining 17-35 percent of the cost of pre-Medicare and 25 percent of the cost of Medex plan and Medicare Part B. For 2019, the Town’s age-adjusted contribution to the plan totaled $4.2 million. For the year ended June 30, 2019, the Town’s average contribution rate was 8.47% of covered-employee payroll.

The Commonwealth of Massachusetts passed special legislation that has allowed the Town to establish the Other Postemployment Benefits Trust Fund which allows the Town to set aside amounts to begin pre-funding its OPEB liabilities. The Town has named the Health Care Security Board of Trustees (HCSBT) as Trustees of the OPEB Fund and as such has authorized the OPEB Trust Funds to be invested entirely in the State Retirement Benefits Trust Fund (SRBT Fund). Massachusetts General Law directs the HSCBT to invest the SRBT Fund in the Pension Reserves Investment Trust (PRIT) Fund. The Trustees have adopted a trust agreement detailing their duties and responsibilities as Trustees. The PRIT Fund is subject to oversight by the Pension Reserves Investment Management Board (PRIM) Board. A nine-member Board of Trustees governs the PRIM Board. The Board of Trustees has the authority to employ an Executive Director, outside investment managers, custodians, consultants, and others as it deems necessary to formulate policies and procedures and to take such other actions as necessary and appropriate to manage the assets of the PRIT Fund.

During fiscal year 2019, the Town pre-funded future OPEB liabilities in the amount of $360,000 by contributing funds to the Other Postemployment Benefits Trust Fund in excess of the pay-as-you-go required contribution. The balance of the Fund at year end is $4.1 million, which is reported within the Fiduciary Fund financial statements.

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Summary of Significant Accounting Policies – For purposes of measuring the net OPEB liability, deferred outflows of resources and deferred inflows of resources related to OPEB, and OPEB expense, information about the fiduciary net position of the Plan and additions to/deductions from the Plan’s fiduciary net position have been determined on the same basis as they are reported by the Plan. For this purpose, the Plan recognizes benefit payments when due and payable in accordance with the benefit terms. Investments are reported at fair value, except for money market investments and participating interest-earning investment contracts (repurchase agreements) that have a maturity at the time of purchase of one year or less, which are reported at cost.

OPEB Plan Financial Reporting & OPEB Employer Reporting for the Town, inclusive of the Municipal Light Plant

Measurement Date –The net OPEB liability for the Town was measured as of June 30, 2019, and the total OPEB liability used to calculate the net OPEB liability was determined by an actuarial valuation as of July 1, 2018. The Municipal Light Plant has a fiscal year end of December 31st, and uses a measurement date of June 30, 2018. The following disclosures for the Town as a whole, include the Municipal Light Plant as of June 30, 2019. The disclosures for the Municipal Light Plant as of June 30, 2018 are presented separately, following the Town’s disclosures below.

Plan Membership – The following table represents the Plan’s membership at July 1, 2018:

Active members…………………………………… 717 Inactive members currently receiving benefits…… 537

Total………………………………………………… 1,254

Components of OPEB Liability – The following table represents the components of the Plan’s OPEB liability as of June 30, 2019:

Total OPEB liability……………………………………………………………$ 211,877,452 Less: OPEB plan's fiduciary net position………………………………… (4,130,596)

Net OPEB liability…………………………………………………………… 207,746,856

Liability related to Municipal Light Department June 30, 2019………… (8,575,873)

Liability recorded by Municipal Light Department as of June 30, 2018… 8,069,671

Total OPEB liability reported on Statement of Net Position…………… $ 207,240,654

The OPEB plan's fiduciary net positionas a percentage of the total OPEB liability……………………………… 1.95%

Significant Actuarial Methods and Assumptions – The total OPEB liability in the July 1, 2018, actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement, unless otherwise specified, that was updated to June 30, 2019.

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Valuation date………………… July 1, 2018

Actuarial cost method……… Entry Age Normal

Asset valuation method……… Market Value

Discount rate………………… 2.79%

Inflation rate…………………… 3.0% per annum

Healthcare cost trend rate…… 8% for the first year, decreases by .5% per year through year 7 to 5% thereafter

Salary increases……………… 3% per annum

Mortality rates………………… RP-2014 Mortality table with MP-2016 projection

Rate of return – For the year ended June 30, 2019, the annual money-weighted rate of return on investments, net of investment expense, was 6.40%. The money-weighted rate of return expresses investment performance, net of investment expense, adjusted for the changing amounts actually invested.

Investment Policy – The Town’s policy in regard to the allocation of invested assets is established and may be amended by the Board of Selectmen by a majority vote of its members. The OPEB plan’s assets are managed on a total return basis with a long-term objective of achieving and maintaining a fully funded status for the benefits provided through the OPEB plan. The long-term real rate of return on OPEB investments was determined using the Town’s investment policy.

The long-term expected rate of return on OPEB plan investments was determined using the building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The Plan’s expected future real rate of return is added to the expected inflation to produce the long-term expected nominal rate of return. Best estimates of geometric real rates of return for each major asset class included in the OPEB plan’s target asset allocation as of June 30, 2019, are summarized in the following table:

Target Long-Term ExpectedAsset Class Allocation Real Rate of Return

Global equity……… 40.00% 6.50%Fixed income……… 23.00% 1.50%Private equity……… 10.00% 6.00%Real estate……… 10.00% 5.50%Other……………… 17.00% 0.00%

Total……………… 100.00%

Discount Rate – The Town’s net other postemployment benefits liability was determined based on the Standard & Poor’s Municipal Bond 20-year High Grade Rate Index as of June 30, 2019, which is 2.79%. Due to the low value of the OPEB trust compared to the Town’s liability, the Plan fiduciary net position is not projected to satisfy future benefit payments and, accordingly, the Municipal Bond Rate was applied rather than the projected investment return.

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Changes in the Net OPEB Liability

PlanTotal OPEB Fiduciary Net OPEB

Liability Net Position Liability(a) (b) (a) - (b)

Balances at June 30, 2018………………………………………$ 193,821,017 $ 3,534,892 $ 190,286,125

Changes for the year:Service cost………………………………………………… 7,611,613 - 7,611,613 Interest………………………………………………………… 5,726,006 - 5,726,006 Differences between expected and actual experience…… 2,387,552 - 2,387,552 Changes in assumptions and other inputs……………… 6,221,002 - 6,221,002 Benefit payments…………………………………………… (3,889,738) (3,889,738) - Contributions - employer…………………………………… - 4,249,988 (4,249,988) Net investment income……………………………………… - 235,454 (235,454)

Net change……………………………………………… 18,056,435 595,704 17,460,731

Balances at June 30, 2019………………………………………$ 211,877,452 $ 4,130,596 $ 207,746,856

Increase (Decrease)

Sensitivity of the net other postemployment liability to changes in the discount rate – The following table presents the net other postemployment benefit liability and service cost, calculated using the discount rate of 2.79%, as well as what the net other postemployment benefit liability and service cost would be if it were calculated using a discount rate that is 1-percentage-point lower (1.79%) or 1-percentage-point higher (3.79%) than the current rate.

Current1% Decrease Discount Rate 1% Increase

(1.79%) (2.79%) (3.79%)

Net OPEB liability……$ 240,486,948 $ 207,746,856 $ 175,006,765

Sensitivity of the net other postemployment liability to changes in the healthcare trend – The following table presents the net other postemployment benefit liability and service cost, calculated using the current healthcare trend rate of 8.00% decreasing to 5.00% as well as what the net other postemployment benefit liability and service cost would be if it were calculated using a healthcare trend rate that is 1-percentage-point lower (7.00% decreasing to 4.00%) or 1-percentage-point higher (9.00% decreasing to 6.00%).

1% Decrease Current Trend 1% Increase(7.00% decreasing

to 4.00%)(8.00% decreasing


to 6.00%)


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OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB – For the year ended June 30, 2019, the Town recognized OPEB expense of $17,820,981. At June 30, 2019, the Town reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources:



Differences between expected and actual experience…………$ 1,958,564 $ (4,068,298) $ (2,109,734) Difference between projected and actual earnings, net……… - (247,239) (247,239) Changes in assumptions………………………………………… 9,390,442 - 9,390,442

Total deferred outflows/(inflows) of resources………………… $ 11,349,006 $ (4,315,537) $ 7,033,469

Amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized in OPEB expense as follows:

Year ended June 30:

2020………………………………… $ 1,143,257 2021………………………………… 1,143,257 2022………………………………… 1,143,257 2023………………………………… 1,143,257 2024………………………………… 1,208,403 Thereafter…………………………… 1,252,038

$ 7,033,469

Changes in Assumptions – The discount rate was lowered from 2.98% to 2.79%.

Changes in Plan Provisions – None.

OPEB Employer Financial Reporting for the Marblehead Municipal Light Plant as of December 31, 2018

Plan Description – The Municipal Light Department (Department) participates in the Town sponsored single employer defined benefit health plan. The Department provides certain health care and life insurance benefits for eligible retirees, spouse and dependents. Chapter 32B of the MGL assigns authority to establish and amend benefit provisions of the plan.

Employees Covered by Benefit Terms - At the measurement date of June 30, 2018, OPEB plan membership consisted of the following:

Active members…………………………………………………………… 21

Inactive employees or beneficiaries currently receiving benefits…… 31

Total………………………………………………………………………… 52

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Components of OPEB Liability – The following table represents the components of the Plan’s OPEB liability as of June 30, 2018:

Total OPEB liability…………………………………………………$ 9,798,802 Less: OPEB plan's fiduciary net position………………………… (1,729,131)

Net OPEB liability………………………………………………… $ 8,069,671

The OPEB plan's fiduciary net positionas a percentage of the total OPEB liability…………………… 17.65%

Significant Actuarial Methods and Assumptions – The total OPEB liability in the July 1, 2017, actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement, unless otherwise specified:

Valuation date………………………………… July 1, 2017

Healthcare cost trend rate…………………… 8% for 2017, decreasing by .5% per year to an ultimate rate of 5% for 2023 and later years.

Inflation rate…………………………………… 3.0% per annum

Discount Rate / Investment Rate of Return… 2.98% 6/30/2018; 3.13% 7/1/2017

Mortality rates………………………………… RP-2014 Mortality table with MP-2016 projection

Rate of Return – The money-weighted rate of return considers the changing amounts actually invested during a period and weights the amounts of OPEB plan investments by the proportion of time they are available to earn a return during that period. The rate of return is then calculated by solving, through an iterative process, for the rate that equals the sum of the weighted external cash flows into and out of the OPEB plan investments to the ending fair value of OPEB plan investments.

The long- term expected rate of return on OPEB plan investment was determined using a building-block method in which best-estimate ranges of expected future real rates of returns (expected returns, net of OPEB plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. Best estimates of arithmetic real rates of return for each major asset class included in the target asset allocation as of the measurement date of June 30, 2018, are summarized in the following table:

Target Long-Term ExpectedAsset Class Allocation (Town) Real Rate of Return (Town)

Global equity……… 40.00% 6.50%Fixed income……… 23.00% 1.50%Private equity……… 10.00% 6.00%Real estate……… 10.00% 5.50%Other……………… 17.00% 0.00%

Total……………… 100.00%

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Discount Rate – The discount rate used to measure the total OPEB liability was 2.98% as of June 30, 2018. The discount rate is determined by the S&P 20 AA Municipal Bond Index due to the small OPEB Trust asset levels versus Plan liabilities. The Plan is not projected to have a Plan fiduciary net position in excess of benefits payments for any year.

Sensitivity of Net OPEB Liability to Changes in the Discount Rate – The following table presents the net other postemployment benefit liability and service cost, calculates using the discount rate of 2.98%, as well as what the net other postemployment benefit liability and service cost would be if it were calculated using a discount rate that is 1-percentage-point lower (1.98%) and 1-percentage-point higher (3.98%) than the current rate.

Current1% Decrease Discount Rate 1% Increase

(1.98%) (2.98%) (3.98%)


Sensitivity of Net OPEB Liability to Changes in the Healthcare Trend Rate – The following table presents the net other postemployment benefit liability and service cost, calculated using the current healthcare trend rate as well as what the net other postemployment benefit liability and service cost would be if it were calculated using a healthcare trend rate that is 1-percentage-point lower (7% year 1 decreasing to 4%) and 1-percentage-point higher (9% year 1 decreasing to 6%) than the current healthcare trend rate.

1% Decrease Current Trend 1% Increase(7.00% decreasing



to 6.00%)


OPEB Expense and Deferred Outflows/Inflows of Resources Related to OPEB- For the year ended December 31, 2018, the Department recognized OPEB expense of $640,029. Deferred outflows and deferred inflows of resources related to OPEB at December 31, 2018 were reported as follows:



Differences between expected and actual experience…………$ - $ (240,441) $ (240,441) Difference between projected and actual earnings, net……… - (103,223) (103,223) Changes in assumptions………………………………………… 245,335 - 245,335

Total deferred outflows/(inflows) of resources………………… $ 245,335 $ (343,664) $ (98,329)

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Amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized in the Department’s OPEB expense as follows:

Year ended December 31:

2019………………………………$ (20,268) 2020……………………………… (20,268) 2021……………………………… (20,268) 2022……………………………… (20,268) 2023……………………………… (20,266) Thereafter…........................... 3,009

$ (98,329)

NOTE 11 – REVISION OF NET POSITION PREVIOUSLY REPORTED

Beginning net position of the Municipal Light business-type activity has been revised to reflect the implementation of GASB Statement #75 and an increase of the Rate Stabilization Reserve. Beginning balance from this fund was revised from $21.8 million to $14.5 million.

NOTE 12 – FINANCIAL STATEMENTS FOR INDIVIDUAL PENSION AND OTHER POSTEMPLOYMENT BENEFIT TRUST FUNDS

GAAP requires that all Pension and Other Employee Benefit Trust Funds be combined and presented in one column in the Fiduciary Funds financial statements and that the individual financial statements for each trust fund plan are reported in the notes to the financial statements. Provided below are the individual financial statements for the pension and OPEB plans that are included in the Fiduciary Funds as Pension and Other Employee Benefit Trust Funds.

Total Pension

Pension Other and Other

Trust Fund Postemployee Employee

(as of December Benefit Benefit

31, 2018) Trust Fund Trust Funds

ASSETSCash and cash equivalents…………………………………$ 153,126 $ - $ 153,126

Investments:

Investments in Pension Reserve Investment Trust…… 94,860,575 4,130,596 98,991,171

Receivables, net of allowance for uncollectibles:

Departmental and other………………………………… 4,601 - 4,601

TOTAL ASSETS………………………………………………… 95,018,302 4,130,596 99,148,898

LIABILITIES

Warrants payable…………………………………………… 1,309 - 1,309

NET POSITION

Restricted for pensions……………………………………… 95,016,993 - 95,016,993

Restricted for other postemployment benefits…………… - 4,130,596 4,130,596

TOTAL NET POSITION…………………………………………$ 95,016,993 $ 4,130,596 $ 99,147,589

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Total Pension

Pension Other and Other

Trust Fund Postemployee Employee

(as of December Benefit Benefit

31, 2018) Trust Fund Trust Funds

ADDITIONS:

Contributions:

Employer contributions…………………………………………………… $ 3,775,273 $ 360,250 $ 4,135,523

Employer contributions for other postemployment benefit payments… - 3,889,738 3,889,738

Member contributions……………………………………………………… 2,264,073 - 2,264,073

Transfers from other systems…………………………………………… 212,900 - 212,900

3(8)c contributions from other systems………………………………… 139,177 - 139,177

State COLA reimbursements……………………………………………… 77,151 - 77,151

Total contributions……………………………………………………… 6,468,574 4,249,988 10,718,562

Net investment income:

Investment income………………………………………………………… 2,743,678 235,454 2,979,132

Net change in fair value of investments………………………………… (4,459,022) - (4,459,022)

Less: investment expense………………………………………………… (524,059) - (524,059)

Net investment income (loss)……………………………………………… (2,239,403) 235,454 (2,003,949)

TOTAL ADDITIONS……………………………………………………… 4,229,171 4,485,442 8,714,613

DEDUCTIONS:

Administration……………………………………………………………… 150,184 - 150,184

Transfers to other systems………………………………………………… 643,207 - 643,207

Retirement benefits and refunds………………………………………… 9,843,616 - 9,843,616

Other postemployment benefit payments……………………………… - 3,889,738 3,889,738

TOTAL DEDUCTIONS………………………………………………… 10,637,007 3,889,738 14,526,745

NET INCREASE (DECREASE) IN NET POSITION………………… (6,407,836) 595,704 (5,812,132)

NET POSITION AT BEGINNING OF YEAR………………………………… 101,424,829 3,534,892 104,959,721

NET POSITION AT END OF YEAR………………………………………… $ 95,016,993 $ 4,130,596 $ 99,147,589

NOTE 13 – COMMITMENTS

The Town has various commitments through its participation in a bulk power supply agency, as discussed more fully in Note 15.

In May of 2012, the Town voted to authorize the Treasurer to borrow $4,937,687 to finance drainage improvements in the Pleasant Street area. These drainage improvements commenced in 2013 and were divided into three phases. The first phase of the project began in May 2013 and was completed by the end of summer 2014. A Federal Emergency Management Agency (FEMA) grant was awarded to the Town for a portion of the Phase II work. Phase II work included the replacement and upgrade of the drainage system on School and Pleasant Streets and was completed in the fall of 2018. A request for additional funding was submitted to FEMA in December of 2018. As of this report, FEMA has not advised the town of the status of that request. The Town continues to monitor the drainage catchment area that this project was intended to improve and has noticed a marked improvement. The Phase III scope of work is currently under revision to reflect the improvements that have been seen to date.

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In May of 2015, the Town voted to authorize the Treasurer to borrow $8,000,000 for additional work on the landfill and transfer station projects. This work includes repair of the drainage culvert that crosses the landfill property, removal or disposal of solid waste in areas adjacent to the landfill closure project, and work associated with deconstruction of the old transfer station and construction of a new transfer station. The repair work of the 60-inch culvert, as well as removal and relocation of solid waste in areas adjacent to the landfill closure project, was completed in the fall of 2016. All properties have been restored to preconstruction conditions and the capping of the landfill is complete. The Massachusetts Department of Environmental Protection (MassDEP) has issued the certification of the landfill. The Town has received a Certificate of Compliance from the Marblehead Conservation Commission and has completed the required deed recording. The deconstruction of the old transfer station building is 90% complete, leaving just the compactor in place to handle daily solid waste. The remaining 10% of the old transfer station building will be deconstructed once the new building has been completed.

In May of 2016, the Town voted to authorize the Treasurer to borrow $750,000 for a feasibility study to analyze various options and probable costs for the renovation and/or reconstruction of the Elbridge Gerry School. The project is being conducted in conjunction with the Massachusetts School Building Authority (MSBA). As part of this collaboration with the MSBA, the study was comprised of two student enrollment options. One for the Elbridge Gerry School and the other for integrating the Gerry School, Coffin School, and Bell School into one elementary school. During the feasibility study it was clear that the larger enrollment option (combining all three-schools) was the preferred choice. Under the guidance and direction of the Elbridge Gerry School Building Committee, the School Committee, and working with the Owner’s Project Manager (OPM), Leftfield, and the Designer/Architect, Raymond Design Associates, the feasibility study and schematic design culminated in a preferred option to construct a 81,935 square foot, 450-student elementary school on the current Bell Elementary School site located at 40 Baldwin Rd. The preferred option resulted in a total project cost of $54,844,767 with a maximum reimbursement of $13,989,674 from the MSBA. On February 13, 2019, the MSBA board of directors unanimously voted to approve the project to enter into a Project Funding Agreement (PFA) with the Town. On May 6th and May 7th, the Town conducted its annual Town Meeting during which time, Article 51 – Construct New School, recommend that the sum of $54,844,767 be appropriated subject to a Proposition 2 ½ override. Article 51 passed overwhelmingly. Subsequently, on June 18th, 2019; Question One, Construct New School, successfully passed. In early August of 2019, the Town and the MSBA executed a PFA for the project. Currently, the project is completing various design elements, procuring a construction manager, and reviewing early permitting and enabling opportunities. The school is planned to commence construction in earnest in spring of 2020 with completion slated in summer of 2022.

In May of 2018, the Town voted to authorize the Treasurer to borrow $8,982,963 to renovate, repair, and restore Abbot Hall. The Abbot Hall project involves major exterior work to the building, which includes: work on the slate roof, copper gutter and skirt; replacing galvanized iron finials and historic ridge; installing new windows; rebuilding the southwest chimney; removing the existing coating on masonry and the non-breathable coating from sandstone; applying a breathable coating to sandstone and a coating to black brick; replacing brick course under gutter; adding lead weather caps to joints at the top stone cornice; repairing structural wall cracks; cutting and pointing of exterior brick and stone work; dismantling and reconstructing of projecting corbels; repairing and replacing sandstone; cutting and pointing granite stairs; replacing column capitals; replacing weather sculpted bands; sistering rafters; reinforcing the truss connection; reinforcing the damaged truss chord; replacing damaged roof sheathing; reinforcing the attic floor; installing floor sheathing; replacing the dormer trim; repairing and painting the circular window; replacing existing asbestos piping with copper; repairing the brick trough; replacing the iron fence rails; replacing broken granite posts; and rebuilding granite site walls. The Abbot Hall project commenced in FY2019 and is expected to be completed by June 2020.

Additionally, in May of 2018, the Town voted to authorize the Treasurer to borrow $871,894 to repair and reconstruct seawalls and fences in town that were impacted by the March 2018 winter storms. Permitting, design, and construction of the Grace Oliver Beach and Front Street seawalls have been permitted, designed, and

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constructed. New railings are to be installed at the Grace Oliver Beach seawall in December of 2019. Also, the Fort Sewall revetment has been permitted, designed, and constructed. Work on the Peabody Lane, Parker Lane, Lovis Cove, Front Street, and Harvard Street seawalls have all been permitted and design is currently underway for repairs. Permitting and design are under way for repairs to the Ferry Lane parking lot. The embankment supporting the former railroad right of way at the Lead Mills was also severely damaged by the storms of 2018. The damage wasn’t discovered until after this report was printed last year. The right of way, commonly referred to as the rail trail, has buried electric cables that supply power to the Town of Marblehead. The damage consisted of erosion to the beach and the formation of escarpments in the slope supporting the right of way. The facility was previously protected by a soft treatment of coir fascines (coir logs) fastened in place with stainless steel cables and duckbill anchors. The coir logs were destroyed by storm wave action leaving the embankment unprotected. Due to the failure of the coir logs and the critical nature of the facility to public health and safety, it was determined that armoring the slope with rip-rap was necessary. This work was permitted with an emergency certificate issued by the Conservation Commission and completed in October 2018.

NOTE 14 – CONTINGENCIES

The Town participates in a number of federal award programs. Although the grant programs have been audited in accordance with the provisions of the Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, these programs are still subject to financial and compliance audits. The amount, if any, of expenditures which may be disallowed by the granting agencies cannot be determined at this time, although it is expected such amounts, if any, to be immaterial.

There are several pending lawsuits in which the Town is involved. Town Counsel estimates that the potential claims against the Town, resulting from such litigation, which are not covered by insurance, would not materially affect the financial statements of the Town.

NOTE 15 – CONTINGENT LIABILITIES OF THE MARBLEHEAD MUNICIPAL LIGHT DEPARTMENT

Berkshire Wind Cooperative Corporation

The Marblehead Municipal Light Department (Department) is a Member of the Berkshire Wind Cooperative Corporation (Cooperative).

The Cooperative is organized under Chapters 157 and 164; Section 47C of the State of Massachusetts Statutes and constitutes a municipal lighting plant cooperative. The Cooperative was formed by the Massachusetts Municipal Wholesale Electric Company (MMWEC) and 14 Municipal Light Departments (Members) for the purpose of financing, owning, constructing and operating wind generation facilities located on Brodie Mountain in the towns of Hancock and Lanesborough, Massachusetts (Berkshire Wind Facility).

The Cooperative provides wind energy to MMWEC pursuant to the Berkshire Wind Power Purchase Agreement dated May 21, 2008 between MMWEC and the Cooperative. Under this agreement, MMWEC entered into a Power Sales Contract with the Cooperative pursuant to which MMWEC has agreed to purchase 100% of the capacity and energy output and, to the extent uncommitted to any third party under existing agreements, associated environmental energy attributes of a wind power generating facility to be owned, constructed and operated by the Cooperative at the Berkshire Wind Facility.

MMWEC sells all of the capability of the Berkshire Wind Facility (Capability) to the Members of the Cooperative (Members) under Power Purchase Agreements (PPAs). Among other things, the PPAs require each Cooperative

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Member to pay its pro rata share of the costs related to the Berkshire Wind Facility, which costs include debt service on the bonds issued by the Cooperative to finance the Berkshire Wind Facility, plus 10% of the debt service to be paid into a Reserve and Contingency Fund. In addition, should a Cooperative Member fail to make any payment when due, other Cooperative Members may be required to increase (step-up) their payments and correspondingly their share of the Capability to any additional amount.

The Cooperative has issued revenue bonds, which are payable solely from, and secured solely by, the revenues derived from the Berkshire Wind Facility. The revenues are used solely to provide for the payment of any bond issue relating to the Berkshire Wind Facility and to pay the Cooperative’s cost of owning and operating the Berkshire Wind Facility.

The Marblehead Municipal Light Department has entered into a PPA with the Berkshire Wind Cooperative Corporation. Under the PPA, the Department is required to make certain payments to the Cooperative. Under the PPA, each Participant is unconditionally obligated to make all payments due to the Berkshire Wind Cooperative Corporation, whether or not the Berkshire Wind Facility is completed or operating, and notwithstanding the suspension or interruption of the output of the Berkshire Wind Facility. In addition, under the PPA, the Department is required to pay to the Cooperative its share of the Operation and Maintenance (O&M) costs of the Berkshire Wind Facility.

As of December 31, 2018, total capital expenditures for the Berkshire Wind Facility amounted to $64,863,000, of which $5,047,000, represents the amount associated with the Department’s share of the Capability of the Berkshire Wind Facility of which it is a Member, although such amount is not allocated to the Department. The Cooperative’s debt outstanding for the Berkshire Wind Facility includes bonds totaling $54,955,000, of which $4,754,000 is associated with the Department’s share of Capability of the Berkshire Wind Facility or which it is a Member, although such amount is not allocated to the Department. As of December 31, 2018, the Cooperative’s total future debt service requirement on outstanding bonds issued for the Projects is $73,317,000, of which $6,373,000 is anticipated to be billed to the Department in the future.

The estimated aggregate amount of the Marblehead Municipal Light Department’s required payments under the PSA, exclusive of the Reserve and Contingency Fund billings, to the Cooperative at December 31, 2018, and estimated for future years is shown in the following table:

For years ended December 31: Annual

Cost

2019………………………………… $ 416,000 2020………………………………… 453,000 2021………………………………… 453,000 2022………………………………… 453,000 2023………………………………… 452,000 2024-2028…………………………… 2,257,000 2029-2033…………………………… 1,889,000

Total…....................................... $ 6,373,000

Other Power Supply

The Department has entered into an All Requirements Bulk Power Sales Agreement (All Requirements Agreements) with MMWEC, under which MMWEC provides, delivers and sells all electric power and energy to the Department whether through owned generation, purchased power contracts or other power supply arrangements.

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Under the terms of the All Requirements Agreement, the Department is committed to purchase additional power through MMWEC in the amount of $1,927,530 in 2019, $1,710,217 in 2020, $1,028,844 in 2021, $683,151 in 2022, $502,200 in 2023, and $209,250 in 2024.

MMWEC Contingencies and Liabilities

Through membership in MMWEC, the Light Department is contingently liable on the various projects in which they participate as detailed below:

MMWEC has issued separate revenue bonds for each of its eight Projects, which are payable solely from, and secured solely by, the revenues derived from the Project to which the bonds relate, plus available funds pledged under MMWEC’s Amended and Restated General Bond Resolution (GBR) with respect to the bonds of that Project. The MMWEC revenues derived from each Project are used solely to provide for the payment of the bonds of any bond issue relating to such Project and to pay MMWEC’s cost of owning and operating such Project and are not used to provide for the payment of the bonds of any bond issue relating to any other Project.

MMWEC operates the Stony Brook Intermediate Project and the Stony Brook Peaking Project, both fossil-fueled power plants. MMWEC has a 3.7% interest in the W.F. Wyman Unit No. 4 plant, which is operated and owned by its majority owner, FPL Energy Wyman IV, LLC, a subsidiary of NextEra Energy Resources LLC, and a 4.8% ownership interest in the Millstone Unit 3 nuclear unit, operated by Dominion Nuclear Connecticut, Inc. (“DNCI”), the majority owner and an indirect subsidiary of Dominion Resources, Inc. DNCI also owns and operates the Millstone Unit 2 nuclear unit. The operating license for the Millstone Unit 3 nuclear unit extends to November 25, 2045.

A substantial portion of MMWEC’s plant investment and financing program is an 11.6% ownership interest in the Seabrook Station nuclear generating unit operated by NextEra Energy Seabrook, LLC (NextEra Seabrook), the majority owner and an indirect subsidiary of NextEra Energy Resources LLC. The operating license for Seabrook Station extends to March 15, 2030. NextEra Seabrook has submitted an application to extend the Seabrook Station operating license for an additional 20 years.

Pursuant to the PSAs, the MMWEC Seabrook and Millstone Project Participants are liable for their proportionate share of the costs associated with decommissioning the plants, which costs are being funded through monthly Project billings. Also, the project participants are liable for their proportionate share of the uninsured costs of a nuclear incident that might be imposed under the Price-Anderson Act. Originally enacted in 1957, the act has been renewed several times. In July 2005, as part of the Energy Policy Act of 2005, Congress extended the Act until the end of 2025.

MMWEC is involved in various legal actions. In the opinion of MMWEC management, the outcome of such actions will not have a material adverse effect on the financial position of the company.

As of December 31, 2018, total capital expenditures for MMWEC’s projects amounted to $1,652,338,000, of which $27,196,000 represents the amount associated with the Department's Project Capability. MMWEC's debt outstanding for the Projects from Power Supply System Revenue Bonds totals $7,110,000, of which $0 is associated with the Department’s Project Capability. As of December 31, 2018, MMWEC’s total future debt service requirement on outstanding bonds issued for the Projects is $7,419,000, of which $0 is anticipated to be billed to the Department in the future.

There is no aggregate amount of the Marblehead Municipal Light Department’s required payments under the PSAs and the PPAs, exclusive of the Reserve and Contingency Fund billings, to MMWEC at December 31, 2018.

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In addition, under the PSAs, the Department is required to pay MMWEC 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 PSAs were $1,850,0000 and $1,869,000 for the years ended December 31, 2018 and 2017, respectively.

NOTE 16 – RISK FINANCING

The Town is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; errors and omissions; and natural disasters for which the Town carries commercial insurance. The amount of claim settlements has not exceeded insurance coverage in any of the previous three years.

The Town is self-insured for its workers’ compensation activities. These activities are accounted for in the Town’s Internal Service Fund where revenues are recorded when earned and expenses are recorded when the liability is incurred.

The Town provides statutory workers’ compensation benefits under a self-insurance plan. In 1989, the Town established a workers’ compensation fund by accepting the provisions of Massachusetts General Laws, Chapter 40, Section 13a. A private consultant hired by the Town administers workers’ compensation claims. The Town estimates its future workers’ compensation liability based on history and type and records the liability in the Internal Service Fund.

An analysis of workers’ compensation activity is presented below:

Current YearBalance at Claims and

Beginning of Changes in Claims Balance at CurrentYear Estimate Payments Year-End Portion

2018……………$ 781,350 $ 176,832 $ (147,790) $ 810,392 $ 215,353 2019…………… 810,392 294,618 (215,353) 889,657 140,472

NOTE 17 – CLEANUP AND REMEDIATION LIABILITY RELATED TO THE OLD LANDFILL

State and federal laws and regulations require the Town to construct a final capping system on its inactive landfill located at the rear of the Transfer Station at 5 Woodfin Terrace and to perform certain maintenance and monitoring functions at the site after closure. The Town stopped accepting waste and closed the site in 1975 in accordance with the regulations in place at that time. The Town was compelled to provide for the capping and monitoring of its landfill by an administrative consent order issued by the Department of Environmental Protection. During 2018, the Town completed capping the landfill. Since the capping and closure project is complete, the Town is required to pay monitoring costs of approximately $115,000 per year for 30 years. The total remaining monitoring costs have been reported as a total $2.9 million liability of the Town as of June 30, 2019. Actual costs may change due to inflation, changes in technology, or changes in regulations.

NOTE 18 – SUBSEQUENT EVENTS

Management has evaluated subsequent events through December 19, 2019, which is the date the financial statements were available to be issued.

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NOTE 19– IMPLEMENTATION OF NEW GASB PRONOUNCEMENTS

During 2019, the following GASB pronouncements were implemented:

GASB Statement #83, Certain Asset Retirement Obligations. This pronouncement did not impact thebasic financial statements.

GASB Statement #88, Certain Disclosures Related to Debt, including Direct Borrowings and DirectPlacements. This pronouncement did not impact the basic financial statements.

The following GASB pronouncements will be implemented in the future:

The GASB issued Statement #84, Fiduciary Activities, which is required to be implemented in 2020.

The GASB issued Statement #87, Leases, which is required to be implemented in 2021.

The GASB issued Statement #89, Accounting for Interest Cost Incurred before the End of a ConstructionPeriod, which is required to be implemented in 2021.

The GASB issued Statement #90, Majority Equity Interests – an amendment of GASB Statements #14and #61, which is required to be implemented in 2020.

The GASB issued Statement #91, Conduit Debt Obligations, which is required to be implemented in2022.

Management is currently assessing the impact the implementation of these pronouncements will have on the basic financial statements.

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Required Supplementary Information Required Supplementary Information

A-86


General Fund General Fund

The General Fund is used to account for all transactions encompassing the approved current operating budget, the related revenues, expenditures, assets, liabilities and fund balances which are not accounted for in other funds. The budget of the Town is recorded in detail in the general fund by line item within department and, as a result, most of the current operations of the Town are recorded here.

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GENERAL FUNDSCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -

BUDGET AND ACTUAL


Actual Amounts VarianceOriginal Final Budgetary Carried Forward to FinalBudget Budget Amounts To Next Year Budget

REVENUES:Real estate and personal property taxes,

net of tax refunds………………………………………………… $ 67,329,212 $ 67,329,212 $ 67,683,970 $ - $ 354,758 Motor vehicle and boat excise taxes……………………………… 2,844,821 2,844,821 3,947,263 - 1,102,442 Charges for services………………………………………………… 151,000 151,000 758,137 - 607,137 Penalties and interest on taxes…………………………………… 105,000 105,000 331,958 - 226,958 Payments in lieu of taxes…………………………………………… 12,000 12,000 24,343 - 12,343 Licenses and permits……………………………………………… 364,500 364,500 915,577 - 551,077 Fines and forfeitures………………………………………………… 51,000 51,000 138,759 - 87,759 Intergovernmental…………………………………………………… 7,447,563 7,585,383 7,554,728 - (30,655) Investment income………………………………………………… 80,000 80,000 716,343 - 636,343 Miscellaneous………………………………………………………… 154,000 154,000 473,302 - 319,302

TOTAL REVENUES…………………………………… 78,539,096 78,676,916 82,544,380 - 3,867,464


GENERAL GOVERNMENTModerator - Officials Expense……………………………… 100 100 100 - - Selectmen Officials Expense……………………………… 5,500 5,500 4,631 - 869 Salaries…………………………………………………… 424,783 409,783 395,865 - 13,918 Expense………………………………………………… 108,245 108,245 78,533 28,000 1,712 Zoning Board Legal Services……………………………… 32,262 32,262 21,805 10,457 - Out of State Travel…………………………………………… 2,000 2,000 2,000 - - Finance Committee - Salaries……………………………… 9,942 9,942 9,942 - -

Expense………………………………………………… 5,585 5,585 2,480 - 3,105 Local Travel……………………………………………… 175 175 - - 175

Reserve Fund………………………………………………… 144,000 - - - - Finance - Salaries…………………………………………… 652,286 652,286 637,899 - 14,387 Expense………………………………………………… 268,310 268,310 250,097 - 18,213 Art. 8, 2018 - Equipment…............................................... 422,282 422,282 408,189 14,093 - Art. 9, 2017 - Equipment…………………………………… 530 530 530 - - Assessors - Officials Expense……………………………… 300 300 300 - - Assessors - Salaries………………………………………… 217,217 217,217 217,216 - 1 Expense………………………………………………… 33,685 33,685 33,354 - 331 Local Travel……………………………………………… 500 500 106 - 394 Town Counsel - Salaries…………………………………… 2,000 2,000 2,000 - -

Expense………………………………………………… 85,576 145,576 141,529 4,001 46 Parking Tickets - Expense…………………………………… 13,095 13,095 9,383 3,712 - Town Clerk - Salaries………………………………………… 186,807 186,807 185,596 - 1,211

Expense………………………………………………… 10,137 10,137 8,721 - 1,416 Election and Registration - Salaries………………………… 32,462 32,462 30,821 - 1,641 Expense………………………………………………… 25,375 29,375 28,982 - 393 Planning Board - Expense…………………………………… 5,616 5,616 3,197 1,641 778 Public Buildings - Salaries…………………………………… 106,899 106,899 100,496 - 6,403

Expense………………………………………………… 114,663 114,663 100,943 - 13,720 Local Travel……………………………………………… 400 400 - - 400

Art. 9, 2018 - Improve Public Buildings…......................... 463,596 463,596 406,941 56,655 - Art. 10, 2017 - Improve Public Buildings…………………… 84,548 84,548 31,650 52,898 - Art. 11, 2016 - Ocean Ave Seawall………………………… - - - - - Art. 14, 2015 - Improve Public Buildings…………………… - - - - - Town Reports………………………………………………… 4,300 4,300 3,377 - 923 Town Audit of Accounts……………………………………… 54,500 54,500 54,500 - - Training Expense…………………………………………… 15,000 15,000 13,937 - 1,063

TOTAL GENERAL GOVERNMENT…………………… 3,532,676 3,437,676 3,185,120 171,457 81,099

Budgeted Amounts

(Continued)



BUDGET AND ACTUAL



Budgeted Amounts

PUBLIC SAFETYPolice - Salaries……………………………………………… 3,854,203 3,906,788 3,889,532 - 17,256

Expense………………………………………………… 182,392 182,392 182,392 - -Indemnification…………………………………………… 5,000 5,000 273 - 4,727

Fire - Salaries………………………………………………… 3,667,954 3,652,954 3,651,894 - 1,060 Expense………………………………………………… 187,020 202,020 201,273 - 747 Alarm Expense…………………………………………… 5,000 5,000 4,028 - 972 Fire SCBA Equipment…………………………………… - - - - -

Building Commissioner - Salaries………………………… 531,978 506,978 495,815 - 11,163 Expense………………………………………………… 64,924 64,924 25,930 25,093 13,901 Local Travel……………………………………………… 6,000 6,000 3,076 - 2,924

Sealer of Weights & Measurers - Expense………………… 725 725 535 - 190 Animal Inspector - Salaries………………………………… 2,400 2,400 2,200 - 200

TOTAL PUBLIC SAFETY………………………………… 8,507,596 8,535,181 8,456,948 25,093 53,140

EDUCATIONSchools………………………………………………………… 37,874,291 38,224,285 38,224,285 - - Art. 27, 2016 - Essex North Shore………………………… 455,256 455,256 449,603 - 5,653

TOTAL SCHOOL………………………………………… 38,329,547 38,679,541 38,673,888 - 5,653

PUBLIC WORKS & FACILITIESEngineering - Salaries……………………………………… 162,646 162,646 161,042 - 1,604

Expense………………………………………………… 10,645 10,645 8,193 2,451 1 Highway - Salaries…………………………………………… 883,105 863,105 843,190 - 19,915

Expense………………………………………………… 107,084 107,084 104,814 - 2,270 Rebuild & Maintain HTTP STS………………………… 76,978 76,978 58,309 18,386 283 Snow Removal…………………………………………… 100,000 100,000 195,939 - (95,939) Street Lighting…………………………………………… 128,820 128,820 128,820 - -

Art. 10, 2018 - Walls and Fences….................................. 53,094 53,094 4,757 48,337 - Art. 11, 2017 - Walls and Fences…………………………… 7,500 7,500 - 7,500 - Art. 10, 2016 - Walls and Fences…………………………… 1,937 1,937 - 1,937 - Art. 9, 2015 - Walls and Fences…………………………… 7,262 7,262 - 7,262 - Art. 9, 2014 - Walls and Fences….................................... 7,500 7,500 - 7,500 - Art. 10, 2013 - Walls and Fences..................................... 2,680 2,680 - 2,680 - Waste Collection - Salaries………………………………… 352,987 352,987 341,459 - 11,528

Expense………………………………………………… 1,801,556 1,755,403 1,598,417 - 156,986 Landfill Monitor Expense………………………………… 114,600 114,600 112,602 - 1,998

Art. 13, 2014 - Landfill Regulatory………………………… - - - - - Drains - Salaries……………………………………………… 163,828 163,828 147,711 - 16,117

Expense………………………………………………… 5,650 5,650 4,622 - 1,028 Art. 16, 2018 - Drain Construction…................................. 417,000 417,000 173,584 243,416 Art. 17, 2017 - Drain Construction………………………… 290,639 290,639 289,022 1,617 - Art. 16, 2016 - Drain Construction………………………… 1,475 1,475 1,475 - - Cemetery - Officials Expense……………………………… 300 300 300 - -

Salaries…………………………………………………… 367,805 367,805 359,290 - 8,515 Expense………………………………………………… 26,226 26,226 26,111 - 115

Tree - Salaries…………………………………...…………… 289,852 289,852 277,401 - 12,451 Expense………………………………………………… 51,578 51,578 40,342 10,000 1,236

TOTAL PUBLIC WORKS & FACILITIES……………… 5,432,747 5,366,594 4,877,400 351,086 138,108

HUMAN SERVICESHealth - Officials Expense…………………………………… 400 400 400 - -

Salaries…………………………………………………… 167,356 167,356 167,355 - 1 Expense………………………………………………… 15,655 15,655 6,292 - 9,363 Local Travel……………………………………………… 1,632 1,632 495 - 1,137 Healing Abuse Working for Change (HAWC)………… 4,000 4,000 - - 4,000

Mental Health - Contractual Services……………………… 60,000 60,000 60,000 - - Council on Aging - Salaries………………………………… 312,340 312,340 312,111 - 229

Expense………………………………………………… 11,990 11,990 11,986 - 4 Veterans Benefits - Salaries………………………………… 66,238 66,238 66,238 - -

Expense………………………………………………… 1,243 1,243 1,240 - 3 Local Travel……………………………………………… 1,100 1,100 764 - 336 Benefits....………………………………………………… 40,000 40,000 39,572 - 428

TOTAL HUMAN SERVICES……………………………… 681,954 681,954 666,453 - 15,501

(Continued)



BUDGET AND ACTUAL



Budgeted Amounts

CULTURE & RECREATIONLibrary - Salaries……………………………………………… 853,390 778,390 747,394 - 30,996

Expense………………………………………………… 267,448 267,448 263,564 2,500 1,384 Local Travel……………………………………………… 100 100 100 - -

Park - Salaries………………………………………………… 676,596 676,596 646,063 - 30,533 Expense………………………………………………… 176,190 176,190 161,597 5,000 9,593 Park Facility Expense…………………………………… 52,874 52,874 50,505 2,293 76

Memorial & Veterans Day…………………………………… 6,300 6,300 4,883 - 1,417

TOTAL CULTURE & RECREATION…………………… 2,032,898 1,957,898 1,874,106 9,793 73,999

ENERGY & UTILITY RESERVEEnergy Reserve……………………………………………… 533,544 433,544 331,948 - 101,596 Utility Reserve………………………………………………… 100,000 75,000 60,016 - 14,984

TOTAL ENERGY & UTILITY RESERVE...................... 633,544 508,544 391,964 - 116,580

PENSION BENEFITSContributory Retirement Fund………………………….…… 3,027,427 3,027,427 3,027,427 - - Noncontributory Retirement………………………………… 79,524 79,524 73,112 - 6,412

TOTAL PENSION BENEFITS…………………………… 3,106,951 3,106,951 3,100,539 - 6,412

PROPERTY AND LIABILITY INSURANCEOther Insurance……………………………………………… 475,888 475,888 428,360 10,000 37,528

FRINGE BENEFITSMedicare……………………………………………………… 690,000 690,000 653,319 - 36,681 Salary Reserve……………………………………………… 110,770 94,344 44,344 50,000 - Group Insurance……………………………………………… 13,848,753 13,848,753 11,157,717 - 2,691,036 Group Insurance FY13……………………………………… 46,787 46,787 25,655 21,132 -

TOTAL FRINGE BENEFITS……………………………… 14,696,310 14,679,884 11,881,035 71,132 2,727,717

INTERGOVERNMENTALState…………………………………………………………… 3,152,584 3,152,584 2,995,396 - 157,188

DEBT SERVICESMaturing Debt………………………………………………… 4,150,000 4,150,000 4,150,000 - - Interest………………………………………………………… 2,585,428 2,585,428 2,584,428 - 1,000

TOTAL DEBT SERVICES………………………………… 6,735,428 6,735,428 6,734,428 - 1,000

TOTAL EXPENDITURES……………………………… 87,318,123 87,318,123 83,265,637 638,561 3,413,925

EXCESS (DEFICIENCY) OF REVENUESOVER EXPENDITURES…………………………………… (8,779,027) (8,641,207) (721,257) (638,561) 7,281,389

OTHER FINANCING SOURCES (USES):Transfers in…………………………………………………………… 718,418 718,418 1,029,980 - 311,562 Transfers out………………………………………………………… (250,000) (387,820) (387,820) - -

TOTAL OTHER FINANCING SOURCES (USES)……………………………… 468,418 330,598 642,160 - 311,562

NET CHANGE IN FUND BALANCE…………………………………… (8,310,609) (8,310,609) (79,097) (638,561) 7,592,951

BUDGETARY FUND BALANCE, Beginning of year………………… 21,235,753 21,235,753 21,235,753 - -

BUDGETARY FUND BALANCE, End of year…………………………$ 12,925,144 $ 12,925,144 $ 21,156,656 $ (638,561) $ 7,592,951

(Concluded)

See notes to required supplementary information.



Pension Plan Schedules – Retirement System

Pension Plan Schedules - Retirement System

The Pension Plan’s Schedule of Changes in the Net Pension Liability presents multi-year trend information on the net pension liability and related ratios.

The Pension Plan’s Schedule of Contributions presents multi-year trend information on the required and actual contributions to the pension plan and related ratios.

The Pension Plan’s Schedule of Investment Return presents multi-year trend information on the money-weighted investment return on retirement assets, net of investment expense.

These schedules are intended to present information for ten years. Until a ten-year trend is compiled, information is presented for those years for which information is available.

A-91

December 31, December 31, December 31, December 31, December 31,

2014 2015 2016 2017 2018

Total pension liability:

Service cost…………………………………………………………………$ 2,681,899 $ 2,769,061 $ 3,069,000 $ 3,207,000 $ 3,376,000

Interest……………………………………………………………………… 9,363,589 9,660,905 9,968,038 10,286,000 10,812,000

Differences between expected and actual experience………………… - (2,255,000) - 2,433,000 -

Changes in assumptions………………………………………………… - 6,300,000 - 3,240,000 -

Benefit payments, including refunds of employee contributions……… (8,275,382) (8,317,787) (8,731,326) (9,139,829) (9,627,288)

Net change in total pension liability………………………………………… 3,770,106 8,157,179 4,305,712 10,026,171 4,560,712

Total pension liability - beginning…………………………………………… 122,276,560 126,046,666 134,203,845 138,509,557 148,535,728

Total pension liability - ending (a)……………………………………………$ 126,046,666 $ 134,203,845 $ 138,509,557 $ 148,535,728 $ 153,096,440

Plan fiduciary net position:

Employer contributions…………………………………………………… $ 2,791,015 $ 3,004,813 $ 3,247,889 $ 3,502,012 $ 3,775,273

Member contributions……………………………………………………… 1,820,099 1,913,812 2,195,793 2,153,343 1,833,766

Net investment income (loss)…………………………………………… 6,532,623 585,701 6,346,121 15,100,863 (2,239,403)

Administrative expenses………………………………………………… (135,341) (141,511) (140,850) (129,292) (150,184)

Retirement benefits and refunds………………………………………… (8,275,382) (8,317,787) (8,731,326) (9,139,829) (9,627,288)

Military service fund contribution………………………………………… 16,440 - - - -

Net increase (decrease) in fiduciary net position………………………… 2,749,454 (2,954,972) 2,917,627 11,487,097 (6,407,836)

Fiduciary net position - beginning of year………………………………… 87,225,623 89,975,077 87,020,105 89,937,732 101,424,829

Fiduciary net position - end of year (b)…………………………………..…$ 89,975,077 $ 87,020,105 $ 89,937,732 $ 101,424,829 $ 95,016,993

Net pension liability - ending (a)-(b)………………………………………$ 36,071,589 $ 47,183,740 $ 48,571,825 $ 47,110,899 $ 58,079,447

Plan fiduciary net position as a percentage of the

total pension liability……………………………………………………… 71.38% 64.84% 64.93% 68.28% 62.06%

Covered payroll……………………………………………………………… $ 18,842,144 $ 20,286,731 $ 20,692,466 $ 21,325,000 $ 21,751,500

Net pension liability as a percentage of

covered payroll…………………………………………………………… 191.44% 232.58% 234.73% 220.92% 267.01%

Note: this schedule is intended to present information for 10 years.

Until a 10-year trend is compiled, information is presented for those years for which information is available.


SCHEDULE OF CHANGES IN THE NET PENSION LIABILITY

AND RELATED RATIOSMARBLEHEAD CONTRIBUTORY RETIREMENT SYSTEM


Contributions in

relation to the Contributions as

Actuarially actuarially Contribution a percentage of

determined determined deficiency Covered covered

Year contribution contribution (excess) payroll payroll

December 31, 2018…… $ 3,776,631 $ (3,776,631) $ - $ 21,751,500 17.36%

December 31, 2017…… 3,496,880 (3,496,880) - 21,325,000 16.40%

December 31, 2016…… 3,237,852 (3,237,852) - 20,692,466 15.65%

December 31, 2015…… 2,998,011 (2,998,011) - 20,286,731 14.78%

December 31, 2014…… 2,775,936 (2,775,936) - 18,842,144 14.73%




SCHEDULE OF CONTRIBUTIONSMARBLEHEAD CONTRIBUTORY RETIREMENT SYSTEM


Annual money-weighted

rate of return,

Year net of investment expense

December 31, 2018……………………………… -2.28%

December 31, 2017……………………………… 17.14%

December 31, 2016……………………………… 7.45%

December 31, 2015……………………………… 0.66%

December 31, 2014……………………………… 7.64%

Note: this schedule is intended to present information for 10 years.Until a 10-year trend is compiled, information is presented for those

years for which information is available.


SCHEDULE OF INVESTMENT RETURNSMARBLEHEAD CONTRIBUTORY RETIREMENT SYSTEM



Pension Plan Schedules – Town & Municipal Light Enterprise

Pension Plan Schedules – Town & Municipal Light Enterprise

The Schedule of the Town’s Proportionate Share of the Net Pension Liability presents multi-year trend information on the Town’s net pension liability and related ratios.

The Schedule of the Municipal Light Enterprise’s Proportionate Share of the Net Pension Liability presents multi-year trend information on the Light’s net pension liability and related ratios.

The Schedule of Town’s Contributions presents multi-year trend information on the Town’s required and actual contributions to the pension plan and related ratios.

The Schedule of the Special Funding Amounts of the Net Pension Liability for the Massachusetts Teachers Contributory Retirement System presents multi-year trend information on the liability and expense assumed by the Commonwealth of Massachusetts on behalf of the Town along with related ratios.

These schedules are intended to present information for ten years. Until a ten-year trend is compiled, information is presented for those years for which information is available.

A-95

Net pension Plan fiduciary

Proportionate liability as a net position as

Proportion of share of the percentage of a percentage of

the net pension net pension Covered covered the total

Year liability (asset) liability (asset) payroll payroll pension liability

December 31, 2018…… 86.10% $ 50,007,920 $ 18,728,607 267.01% 62.06%

December 31, 2017…… 86.10% 40,563,714 18,361,000 220.92% 68.28%

December 31, 2016…… 85.07% 41,319,080 18,042,000 229.02% 64.93%

December 31, 2015…… 85.07% 40,138,264 17,517,000 229.14% 64.84%

December 31, 2014…… 84.63% 30,528,625 16,186,000 188.61% 71.38%



The Town's Municipal Light Enterprise year end is December 31st while the Town's is June 30th.

This schedule does not include the Municipal Light Enterprise which is presented on a separate schedule.


SCHEDULE OF THE TOWN'S PROPORTIONATE SHARE

OF THE NET PENSION LIABILITYMARBLEHEAD CONTRIBUTORY RETIREMENT SYSTEM


Net pension Plan fiduciary

Proportionate liability as a net position as

Proportion of share of the percentage of a percentage of

the net pension net pension Covered covered the total

Year liability (asset) liability (asset) payroll payroll pension liability

December 31, 2018…… 12.21% $ 7,092,308 $ 2,656,163 267.01% 62.06%

December 31, 2017…… 12.21% 5,752,900 2,604,081 220.92% 68.28%

December 31, 2016…… 13.35% 6,486,422 2,763,332 234.73% 64.93%

December 31, 2015…… 13.35% 6,301,053 2,709,151 232.58% 64.84%

December 31, 2014…… 14.12% 5,093,878 1,844,000 276.24% 71.38%



The Town's Municipal Light Enterprise Fund year end is December 31st while the Town is June 30th.

This schedule provides only the Municipal Light information.


SCHEDULE OF THE MUNICIPAL LIGHT ENTERPRISE'S PROPORTIONATE SHARE

OF THE NET PENSION LIABILITYMARBLEHEAD CONTRIBUTORY RETIREMENT SYSTEM


Contributions inrelation to the Contributions as

Actuarially actuarially Contribution a percentage ofdetermined determined deficiency Covered covered

Year contribution contribution (excess) payroll payroll

June 30, 2019…............ $ 3,251,778 $ (3,251,778) $ - $ 18,916,000 17.19%

June 30, 2018…............ 3,010,905 (3,010,905) - 18,545,000 16.24%

June 30, 2017…............ 2,754,376 (2,754,376) - 18,222,000 15.12%

June 30, 2016…............ 2,550,338 (2,550,338) - 17,692,000 14.42%

June 30, 2015............... 2,349,370 (2,349,370) - 16,348,000 14.37%

Note: this schedule is intended to present information for 10 years.Until a 10-year trend is compiled, information is presented for those years for which information is available.


SCHEDULE OF THE TOWN'S CONTRIBUTIONSMARBLEHEAD CONTRIBUTORY RETIREMENT SYSTEM


Year

Commonwealth's 100% Share of the

Associated Net Pension Liability

Expense and Revenue

Recognized for the Commonwealth's

Support

Plan Fiduciary Net Position as a

Percentage of the Total Liability

2019………………………………$ 88,329,506 $ 8,950,916 54.84%

2018……………………………… 85,769,953 8,952,060 54.25%

2017……………………………… 81,616,869 8,325,456 52.73%

2016……………………………… 73,593,284 5,969,070 55.38%

2015……………………………… 56,034,714 3,893,000 61.64%




SCHEDULE OF THE SPECIAL FUNDING AMOUNTS

OF THE NET PENSION LIABILITYMASSACHUSETTS TEACHERS' RETIREMENT SYSTEM

The Commonwealth of Massachusetts is a nonemployer contributor and is required by statute to make all actuarially determined employer contributions on behalf of the member employers which creates a special funding situation. Therefore, there is no net pension liability to recognize. This schedule discloses the Commonwealth's 100% share of the associated collective net pension liability; the portion of the collective pension expense as both a revenue and pension expense recognized; and the Plan's fiduciary net position as a percentage of the total liability.



Other Postemployment Benefits Plan Schedules

Other Postemployment Benefits Plan Schedules The Schedule of Changes in the Town’s Net Other Postemployment Benefit Liability and Related Ratios presents multi-year trend information on changes in the Plan’s total OPEB liability, changes in the Plan’s net position, and ending net OPEB liability. It also demonstrates the Plan’s net position as a percentage of the total liability and the Plan’s net other postemployment benefit liability as a percentage of covered employee payroll.

The Schedule of the Town’s Contributions presents multi-year trend information on the Town’s actual contributions to the other postemployment benefit plan and related ratios.

The Schedule of Investment Returns presents multi-year trend information on the money-weighted investment return on the Plan’s other postemployment assets, net of investment expense.

Municipal Light Enterprise

The Schedule of Changes in the Municipal Light Enterprise’s Net Other Postemployment Benefit Liability and Related Ratios presents multi-year trend information on changes in the Plan’s total OPEB liability, changes in the Plan’s net position, and ending net OPEB liability. It also demonstrates the Plan’s net position as a percentage of the total liability and the Plan’s net other postemployment benefit liability as a percentage of covered employee payroll.

The Schedule of the Municipal Light Enterprise’s Contributions presents multi-year trend information on the Town’s actual contributions to the other postemployment benefit plan and related ratios.

The Schedule of the Municipal Light Enterprise’s Investment Returns presents multi-year trend information on the money-weighted investment return on the Plan’s other postemployment assets, net of investment expense.

These schedules are intended to present information for ten years. Until a ten year trend is compiled, information is presented for those years for which information is available.

A-100

June 30, June 30, June 30,2017 2018 2019

Total OPEB LiabilityService Cost………………………………………………… $ 5,000,000 $ 7,763,590 $ 7,611,613 Interest………………………………………………………… 5,822,000 5,610,395 5,726,006 Differences between expected and actual experience…… - (4,756,135) 2,387,552 Changes of assumptions…………………………………… 129,593,198 4,852,941 6,221,002 Benefit payments…………………………………………… (4,700,000) (4,054,972) (3,889,738)

Net change in total OPEB liability…………………………… 135,715,198 9,415,819 18,056,435

Total OPEB liability - beginning……………………………..… 48,690,000 184,405,198 193,821,017

Total OPEB liability - ending (a)……………………………… $ 184,405,198 $ 193,821,017 $ 211,877,452

Plan fiduciary net positionEmployer contributions……………………………..……… $ 1,700,000 $ 360,000 $ 360,250 Employer contributions for OPEB payments……………… 4,700,000 4,054,972 3,889,738 Net investment income………………………...…………… 326,130 294,264 235,454 Benefit payments……………………………...……………… (4,700,000) (4,054,972) (3,889,738)

Net change in plan fiduciary net position…………………… 2,026,130 654,264 595,704

Plan fiduciary net position - beginning of year……………… 854,498 2,880,628 3,534,892

Plan fiduciary net position - end of year (b)………………… $ 2,880,628 $ 3,534,892 $ 4,130,596

Net OPEB liability - ending (a)-(b)………………………… $ 181,524,570 $ 190,286,125 $ 207,746,856

Plan fiduciary net position as a percentage of the total OPEB liability………………………..…………… 1.56% 1.82% 1.95%

Covered-employee payroll………………………………..……$ 50,200,000 $ 50,300,000 $ 53,800,000

Net OPEB liability as a percentage ofcovered-employee payroll…………………………..… 361.60% 378.30% 386.15%



SCHEDULE OF CHANGES IN THE TOWN'S NET OPEB LIABILITY AND RELATED RATIOS

OTHER POSTEMPLOYMENT BENEFIT PLAN


Contributions in



determined determined deficiency Covered- covered-

Year contribution contribution (excess) employee payroll employee payroll

June 30, 2019…… $ 20,615,873 $ (4,249,988) $ 16,365,885 $ 53,800,000 7.90%

June 30, 2018…… 13,381,849 (4,414,972) 8,966,877 50,300,000 8.78%

June 30, 2017…… 11,310,000 (6,400,000) 4,910,000 50,200,000 12.75%




SCHEDULE OF THE TOWN'S CONTRIBUTIONSOTHER POSTEMPLOYMENT BENEFIT PLAN



rate of return,


June 30, 2019…………………………… 6.40%

June 30, 2018…………………………… 10.50%

June 30, 2017…………………………… 13.00%


Until a 10-year trend is compiled, information is presented for those



SCHEDULE OF INVESTMENT RETURNSOTHER POSTEMPLOYMENT BENEFIT PLAN


June 30,2018

Total OPEB LiabilityService Cost………………………………………………………………………………… $ 189,381 Interest………………………………………………………………………………………… 497,819 Changes of benefit terms……………………………………..…………………………… -Differences between expected and actual experience………………………………… (240,441) Changes of assumptions…………………………………………………………………… 245,335 Benefit payments……………………………………………...…………………………… (215,690)

Net change in total OPEB liability…………………………………………………………… 476,404

Total OPEB liability - beginning……………………………..………………………………… 9,322,398

Total OPEB liability - ending (a)…………………………………….…………………………$ 9,798,802

Plan fiduciary net positionEmployer contributions……………………………..……………………………………… $ 215,690 Employer contributions for OPEB payments……………………………………………… Net investment income………………………...…………………………………………… 150,394 Benefit payments……………………………...…………………………………………… (215,690)

Net change in plan fiduciary net position…………………………………………………… 150,394

Plan fiduciary net position - beginning of year…………………………..………………… 1,578,737

Plan fiduciary net position - end of year (b)………………………………………………… $ 1,729,131

Net OPEB liability - ending (a)-(b)………………………………………………………… $ 8,069,671

Plan fiduciary net position as a percentage of the total OPEB liability………………………..…………………………………………… 17.65%

Covered-employee payroll………………………………..……………………………………$ 2,240,000

Net OPEB liability as a percentage ofcovered-employee payroll…………………………..………………………………… 360.25%


The Municipal Light Department implemented GASB 75 for the year ended December 31, 2018using a measurement date of June 30, 2018.


SCHEDULE OF CHANGES IN THE MUNICIPAL LIGHT ENTERPRISE FUND'S NET OPEB LIABILITY AND RELATED RATIOS

OTHER POSTEMPLOYMENT BENEFIT PLAN


Contributions in



determined determined deficiency Covered- covered-

Year contribution contribution (excess) employee payroll employee payroll

June 30, 2018…… $ 9,798,802 $ (215,690) $ 9,583,112 $ 2,240,000 9.63%



The Municipal Light Department implemented GASB 75 for the year ended December 31, 2018 using a

measurement date of June 30, 2018.


SCHEDULES OF THE MUNICIPAL LIGHT ENTERPRISE FUND'S NET OPEB LIABILITY,

OTHER POSTEMPLOYMENT BENEFIT PLAN EMPLOYER CONTRIBUTIONS AND INVESTMENT RETURNS



rate of return,


June 30, 2018…………………………… 10.50%


Until a 10-year trend is compiled, information is presented for those



SCHEDULE OF INVESTMENT RETURNSOTHER POSTEMPLOYMENT BENEFIT PLAN

MUNICIPAL LIGHT ENTERPRISE FUND'S

Town of Marblehead, Massachusetts Comprehensive Annual Financial Report A-106

Notes to Required Supplementary Information Year Ended June 30, 2019


NOTE A – STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY Notes to Required Supplementary Information

1. Budgetary information

During the year, the finance committee submits to the Town Meeting an operating budget for theproposed expenditures and other financing uses for the year commencing the following July 1st. Thebudget, as enacted by the Town Meeting, also establishes that certain appropriations are to be funded byparticular revenues. The original budget is amended during the year at Special Town Meetings or at thenext Annual Town Meeting held prior to the end of the year. During the year the finance committee maytransfer funds for extraordinary or unforeseen expenditures. The Town appropriated $144,000 for thispurpose in 2019 and transfers equal to that amount were made. All unencumbered and unexpendedappropriations lapse at year-end.

Formal budgetary integration is employed as a management control device during the year for theGeneral Fund. Although formal budgetary integration is not employed for Special Revenue Funds,effective budgetary control is alternatively achieved through provisions of the Massachusetts GeneralLaws and the Town's by-laws.

Appropriations are authorized by the Town Meeting for line items within departments. Typical line itemsare salaries, expense, and local travel. These are the legal levels of budgetary control (level at whichexpenditures may not exceed budget). However, the Town is statutorily required to pay debt service,regardless of whether such amounts are appropriated. Additionally, expenditures for disasters, natural orotherwise, and final judgments may exceed the level of spending authorized by majority vote at a specialTown Meeting.

An annual budget is adopted for the general fund in conformity with the guidelines described above. Theoriginal 2019 approved budget authorized approximately $87.1 million in appropriations and otheramounts to be raised. During the year, line item transfers were made between appropriated amounts andtransfers out was increased by $137,820 from the original to final budget.

2. Budgetary – GAAP Reporting Reconciliation

The budgetary basis and modified accrual basis of accounting are substantially the same.

A reconciliation of budgetary-basis to GAAP-basis results is as follows:

Net change in fund balance - budgetary basis………………$ (79,097)

Basis of accounting differences:Recognition of revenue for on-behalf payments………… 8,950,916Recognition of expenditures for on-behalf payments…… (8,950,916)

Net change in fund balance - GAAP basis………………… $ (79,097)

3. Appropriation Deficits

During 2019, expenditures exceeded budgeted appropriations for snow removal. These overexpenditures will be funded in 2020.

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NOTE B – PENSION PLAN

Pension Plan Schedules – Retirement System

A. Schedule of Changes in the Net Pension Liability and Related Ratios

The Schedule of Changes in the Net Pension Liability and Related Ratios includes the detailed changes in the System’s total pension liability, changes in the System’s net position, and the ending net pension liability. It also demonstrates the System’s net position as a percentage of the total pension liability and the net pension liability as a percentage of covered payroll.

B. Schedule of Contributions

Governmental employers are required to pay an annual appropriation as established by PERAC. The appropriation includes the amounts to pay the pension portion of each member’s retirement allowance, an amount to amortize the actuarially determined unfunded liability to zero in accordance with the system’s funding schedule, and additional appropriations in accordance with adopted early retirement incentive programs. The appropriations are payable on July 1 and January 1. Employers may choose to pay the entire appropriation in July at a discounted rate. Accordingly, actual employer contributions may be less than the “total appropriation”. The appropriations are allocated amongst employers based on an actuarial valuation.

C. Schedule of Investment Return

The money weighted rate of return is calculated as the internal rate of return on pension plan investments, net of pension plan investment expense. A money weighted rate of return expresses investment performance, net of pension plan investment expense, adjusted for the changing amounts actually invested. Inputs to the money weighted rate of return calculation are determined monthly.

Pension Plan Schedules – Town

A. Schedule of the Town’s Proportionate Share of the Net Pension Liability

The Schedule of the Town’s Proportionate Share of the Net Pension Liability details the allocated percentage of the net pension liability (asset), the proportionate share of the net pension liability, and the covered payroll. It also demonstrates the net position as a percentage of the pension liability and the net pension liability as a percentage of covered payroll.

B. Schedule of Town’s Contributions

Governmental employers are required to pay an annual appropriation as established by PERAC. The appropriation includes the amounts to pay the pension portion of each member’s retirement allowance, an amount to amortize the actuarially determined unfunded liability to zero in accordance with the system’s funding schedule, and additional appropriations in accordance with adopted early retirement incentive programs. The appropriations are payable on July 1 and January 1. The Town may choose to pay the entire appropriation in July at a discounted rate. Accordingly, actual contributions may be less than the “total appropriation”.

C. Schedule of the Special Funding Amounts of the Net Pension Liabilities

The Commonwealth of Massachusetts is a nonemployer contributor and is required by statute to make all actuarially determined employer contributions on behalf of the member employers which creates a special funding situation. Since the Town does not contribute directly to MTRS, there is no net pension liability to recognize. This

A-108



schedule discloses the Commonwealth's 100% share of the collective net pension liability that is associated with the Town; the portion of the collective pension expense as both revenue and pension expense recognized by the Town; and the Plan's fiduciary net position as a percentage of the total liability.

D. Changes in Assumptions

The most recent actuarial valuation as of January 1, 2018, included several changes of assumptions from the prior actuarial valuation. These changes include a decrease in the assumed discount rate from 7.50% down to 7.35%, as well as changes in the applied mortality tables.

E. Changes in Plan Provisions

None

NOTE C – OTHER POSTEMPLOYMENT BENEFITS

The Town administers a single-employer defined benefit healthcare plan (“The Retiree Health Plan”). The plan provides lifetime healthcare insurance for eligible retirees and their spouses through the Town’s group health insurance plan, which covers both active and retired members. Additionally, retired teachers and their spouses receive health insurance through the Group Insurance Commission of the Commonwealth of Massachusetts (GIC). Each participating municipality is assessed for the governmental share of health and life insurance premiums paid on behalf of its teacher retirees by the state.

The Other Postemployment Benefit Plan

A. Schedules of Changes in the Town’s and the Municipal Light Enterprise Fund’s Net Other PostemploymentBenefit Liability and Related Ratios

The Schedules of Changes in the Town’s and the Municipal Light Enterprise Fund’s Net Other Postemployment Benefit Liability and Related Ratios present multi-year trend information on changes in the Plan’s total OPEB liability, changes in the Plan’s net position, and ending net OPEB liability. It also demonstrates the Plan’s net position as a percentage of the total liability and the Plan’s net other postemployment benefit liability as a percentage of covered employee payroll.

B. Schedules of the Town’s and the Municipal Light Enterprise Fund’s Contributions

The Schedules of the Town’s and the Municipal Light Enterprise Fund’s Contributions include the annual required contributions to the Plans, along with the contributions made in relation to the actuarially determined contributions and the covered employee payroll. The Town and Municipal Light Enterprise Fund are not required to fully fund this contribution. It also demonstrates the contributions as a percentage of covered payroll. Actuarially determined contribution rates are calculated as of June 30, two years prior to the end of the fiscal year in which contributions are reported. Methods and assumptions used to determine contribution rates are as follows:

A-109



Valuation date………………… July 1, 2018

Actuarial cost method……… Entry Age Normal

Asset valuation method……… Market Value

Discount rate………………… 2.79%

Inflation rate…………………… 3.0% per annum

Healthcare cost trend rate…… 8% for the first year, decreases by .5% per year through year 7 to 5% thereafter

Salary increases……………… 3% per annum

Mortality rates………………… RP-2014 Mortality table with MP-2016 projection

C. Schedules of Investment Returns

The Schedules of Investment Returns include the money-weighted investment returns on the Plan’s other postemployment assets, net of investment expense.

D. Changes in Assumptions – For The Town, the Discount rate was decreased from 2.98% to 2.79%. For theMunicipal Light Enterprise Fund, the Discount rate was decreased from 3.13% to 2.98%.

E. Changes in Plan Provisions – None.

A-110


Other Supplementary Information Other Supplementary Information

A-111


Combining and Individual Fund Financial Statements

Combining and Individual Fund Financial Statements

A-112


Nonmajor Governmental Funds Nonmajor Governmental Funds

Special Revenue Funds:

Special revenue funds are used to account for specific revenues that are legally restricted to expenditure for particular purposes.

Federal Grants - To account for grants from the Federal Government for various purposes. They are expended in accordance with the grant.

State Grants - To account for grants from the Commonwealth of Massachusetts for various purposes. They are expended in accordance with the grant.

Other Grants - To account for grants from individuals and foundations for various purposes. They are expended for the purpose designated by the grantor or benefactor.

Revolving Funds - To account for revolving funds specifically allowed by the laws of the Commonwealth of Massachusetts. These funds are expended for purposes specified by the enabling state statute or vote of the Town Meeting.

Receipts Reserved for Appropriation - To account for receipts set aside for specific purposes as allowed by the laws of the Commonwealth of Massachusetts. Receipts reserved for appropriation are transferred to the general fund when appropriated as part of the Town's annual budget.

Gifts - To account for receipts of various gifts and donations. They are expended for the purpose designated by the donor or benefactor.

Special Revenue Trust Funds - To account for contributions where both principal and investment earnings may be spent to support the government.

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Receipts

Federal State Other Revolving Reserved for

Grants Grants Grants Funds Appropriation

ASSETS

Cash and cash equivalents………………………………$ 131,129 $ - $ 1,149,500 $ 2,173,126 $ 1,846,298

Investments……………………………………………… - - - - -

Receivables, net of uncollectibles:

Departmental and other……………………………… - - - 134,468 825

Intergovernmental - other…………………………… 4,492 283,237 - - -

Due from other funds…………………………………… 153,199 - - - -

Working capital deposit………………………………… - - - - -

TOTAL ASSETS………………………………………… $ 288,820 $ 283,237 $ 1,149,500 $ 2,307,594 $ 1,847,123

LIABILITIES

Warrants payable………………………………………$ 51,466 $ 102,331 $ 1,064 $ 205,210 $ -

Due to other funds…………………………………… - 153,199 - - -

TOTAL LIABILITIES……………………………………… 51,466 255,530 1,064 205,210 -

DEFERRED INFLOWS OF RESOURCES

Unavailable revenue………………………………… - - - 15,734 825

FUND BALANCES

Restricted……………………………………………… 237,354 27,707 1,148,436 2,086,650 1,846,298

TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES…………… $ 288,820 $ 283,237 $ 1,149,500 $ 2,307,594 $ 1,847,123

(Continued)

NONMAJOR GOVERNMENTAL FUNDS

COMBINING BALANCE SHEET

JUNE 30, 2019

Special Revenue Funds


Total

Special Nonmajor

Revenue Governmental

Gifts Trust Funds Funds

$ 720,292 $ 2,040,787 $ 8,061,132

- 1,772,830 1,772,830

- - 135,293

- - 287,729

- - 153,199

- 10,000 10,000

$ 720,292 $ 3,823,617 $ 10,420,183

$ 36,751 $ - $ 396,822

- - 153,199

36,751 - 550,021

- - 16,559

683,541 3,823,617 9,853,603

$ 720,292 $ 3,823,617 $ 10,420,183

(Concluded)



Receipts

Federal State Other Revolving Reserved for

Grants Grants Grants Funds Appropriation

REVENUES:

Charges for services………………………………………… $ - $ - $ - $ 3,732,217 $ 40,350

Intergovernmental - other…………………………………… 1,104,211 2,112,610 - 176,916 6,200

Departmental and other……………………………………… - - - 1,338,651 -

Contributions and donations………………………………… - - 122,139 92,523 -

Investment income…........…………………………………… - 94 25,764 5,017 -

TOTAL REVENUES……………………………………… 1,104,211 2,112,704 147,903 5,345,324 46,550

EXPENDITURES:

Current:

General government……………………………………… - 101,432 - 14,268 21,220

Public safety………………………………………………… 20,630 74,511 - 670,306 -

Education…………………………………………………… 919,878 1,867,408 41 3,016,203 -

Public works………………………………………………… 138,450 62,234 - 614,814 -

Human services…………………………………………… - 59,038 16,214 139,517 -

Culture and recreation……………………………………… - 27,207 145,264 534,909 -

TOTAL EXPENDITURES……………………………… 1,078,958 2,191,830 161,519 4,990,017 21,220

EXCESS (DEFICIENCY) OF REVENUES

OVER (UNDER) EXPENDITURES………………………… 25,253 (79,126) (13,616) 355,307 25,330

OTHER FINANCING SOURCES (USES):

Premium from issuance of bonds…………………………… - - - - 100,161

Transfers in…………………………………………………… - - 8,000 396,163 -

Transfers out…………………………………………………… - (2,000) - (62,097) (328,419)

TOTAL OTHER FINANCING SOURCES (USES)…… - (2,000) 8,000 334,066 (228,258)

NET CHANGE IN FUND BALANCES………………………… 25,253 (81,126) (5,616) 689,373 (202,928)

FUND BALANCES AT BEGINNING OF YEAR……………… 212,101 108,833 1,154,052 1,397,277 2,049,226

FUND BALANCES AT END OF YEAR……………………… $ 237,354 $ 27,707 $ 1,148,436 $ 2,086,650 $ 1,846,298

(Continued)


NONMAJOR GOVERNMENTAL FUNDS

COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES



Total

Special Nonmajor

Revenue Governmental

Gifts Trust Funds Funds

$ 789 $ - $ 3,773,356

- 7,172 3,407,109

- - 1,338,651

563,258 104,108 882,028

- 582,803 613,678

564,047 694,083 10,014,822

20,366 - 157,286

1,792 4,009 771,248

310,677 - 6,114,207

- - 815,498

1,537 32,597 248,903

5,189 105,161 817,730

339,561 141,767 8,924,872

224,486 552,316 1,089,950

- - 100,161

2,100 - 406,263

- (8,100) (400,616)

2,100 (8,100) 105,808

226,586 544,216 1,195,758

456,955 3,279,401 8,657,845

$ 683,541 $ 3,823,617 $ 9,853,603

(Concluded)




Fiduciary Funds Fiduciary Funds

Private Purpose Trust Funds:

Charity Funds - To account for contributions held by the Town to benefit private charities.

Scholarship Funds - To account for scholarship funds held by the Town to benefit individuals.

Other Funds - To account for other amounts held by the Town for the benefit of individuals or private organizations.

Agency Fund - To account for performance bonds and the collection and payment of hunting and fishing licenses, firearm permits, sales taxes, meals taxes, dog licenses to the State, proceeds of extra work details to the Town employees, and school student activity accounts.

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TotalPrivate

Charity Scholarship Other PurposeFunds Funds Funds Trust Funds

ASSETSCash and cash equivalents…………………………… $ 2,142,377 $ 861,250 $ 150,387 $ 3,154,014 Receivables, net of allowance for uncollectibles:

Departmental and other…………………………… - 175 - 175 Capital assets, net of accumulated depreciation…… 152,779 - - 152,779

TOTAL ASSETS…………………………………………… 2,295,156 861,425 150,387 3,306,968

LIABILITIESWarrants payable……………………………………… - 1,685 - 1,685 Other liabilities…………………………………………… - 175 - 175

TOTAL LIABILITIES……………………………………… - 1,860 - 1,860

NET POSITIONHeld in trust for other purposes……………………… $ 2,295,156 $ 859,565 $ 150,387 $ 3,305,108

PRIVATE PURPOSE TRUST FUNDSCOMBINING STATEMENT OF NET POSITION

JUNE 30, 2019


Total

PrivateCharity Scholarship Other PurposeFunds Funds Funds Trust Funds

ADDITIONS:Contributions:

Private donations……………………………………………… $ 69,596 $ - $ - $ 69,596

Net investment income:Net investment income (loss)………………………………… 29,574 11,331 1,940 42,845

TOTAL ADDITIONS………………………………………… 99,170 11,331 1,940 112,441

DEDUCTIONS:Administration…………………………………………………… 55,916 - - 55,916 Depreciation…………………………………………………… 10,163 - - 10,163 Educational scholarships……………………………………… - 18,463 - 18,463

TOTAL DEDUCTIONS……………………………………… 66,079 18,463 - 84,542

NET INCREASE (DECREASE) IN NET POSITION…… 33,091 (7,132) 1,940 27,899

NET POSITION AT BEGINNING OF YEAR…………………… 2,262,065 866,697 148,447 3,277,209

NET POSITION AT END OF YEAR………………………………$ 2,295,156 $ 859,565 $ 150,387 $ 3,305,108

PRIVATE PURPOSE TRUST FUNDSCOMBINING STATEMENT OF CHANGES IN NET POSITION



AGENCY FUND

STATEMENT OF CHANGES IN ASSETS AND LIABILITIES


June 30, June 30,

2018 Additions Deletions 2019

CURRENT:Cash and cash equivalents………$ 352,146 $ 593,211 $ (581,157) $ 364,200

Liabilities due depositors…………$ 352,146 $ 593,211 $ (581,157) $ 364,200

ASSETS

LIABILITIES




A-122

Statistical Section Statistical tables differ from financial statements since they usually cover more than one year and may present nonaccounting data. The following tables reflect social and economic data, financial trends,

and fiscal capacity.

Photo by Brad Smith

An iconic tree at Fort Sewall still stands after a storm hits Town.


Statistical Section

A-123


Statistical Section

This part of the Town of Marblehead’s comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the Town’s overall financial health.

Financial Trends

These schedules contain trend information to help the reader understand how the Town’s financialperformance and well-being have changed over time.

Revenue Capacity

These schedules contain information to help the reader assess the Town’s most significant local revenuesource, the property tax.

Debt Capacity

These schedules present information to help the reader assess the affordability of the Town’s currentlevels of outstanding debt and the Town’s ability to issue additional debt in the future.

Demographic and Economic Information

These schedules offer demographic and economic indicators to help the reader understand theenvironment within which the Town’s financial activities take place.

Operating Information

These schedules contain service and infrastructure data to help the reader understand how theinformation in the Town’s financial report relates to the services the Town provides and the activities itperforms.

SOURCES: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant year.

A-124

2010 2011 2012 2013 2014 (1) 2015 2016 2017 (2) 2018 (3) 2019

Governmental activitiesNet investment in capital assets……………$ 70,685,450 $ 71,782,028 $ 75,341,535 $ 77,717,668 $ 79,318,461 $ 83,481,653 $ 74,362,302 $ 80,043,188 $ 81,296,691 $ 81,183,548 Restricted……………………………………… 9,422,889 9,048,458 8,900,151 11,077,540 10,146,657 10,617,440 10,358,396 10,142,342 10,425,505 13,419,904 Unrestricted…………………………………… (509,557) (6,852,476) (12,034,478) (14,679,598) (51,151,235) (63,332,782) (69,515,140) (200,049,807) (209,344,516) (222,268,732)

Total governmental activities net position……$ 79,598,782 $ 73,978,010 $ 72,207,208 $ 74,115,610 $ 38,313,883 $ 30,766,311 $ 15,205,558 $ (109,864,277) $ (117,622,320) $ (127,665,280)

Business-type activitiesNet investment in capital assets……………$ 33,710,827 $ 34,878,749 $ 35,945,212 $ 36,688,303 $ 36,510,098 $ 35,675,503 $ 36,547,443 $ 38,020,264 $ 40,310,430 $ 41,806,634 Restricted……………………………………… 2,468,338 3,309,675 3,625,528 3,918,771 5,147,074 5,815,665 6,751,653 6,949,454 6,949,454 6,949,454 Unrestricted…………………………………… 11,977,792 11,996,780 12,095,677 11,924,405 10,517,972 11,706,630 7,273,751 3,565,638 (5,725,878) (6,452,792)

Total business-type activities net position……$ 48,156,957 $ 50,185,204 $ 51,666,417 $ 52,531,479 $ 52,175,144 $ 53,197,798 $ 50,572,847 $ 48,535,356 $ 41,534,006 $ 42,303,296

Primary governmentNet investment in capital assets……………$ 104,396,277 $ 106,660,777 $ 111,286,747 $ 111,301,356 $ 115,828,559 $ 119,157,156 $ 110,909,745 $ 118,063,452 $ 121,607,121 $ 122,990,182 Restricted……………………………………… 9,422,889 9,048,458 12,525,679 14,996,311 15,293,731 16,433,105 17,110,049 17,091,796 17,374,959 20,369,358 Unrestricted…………………………………… 13,936,573 8,453,979 61,199 349,422 (40,633,263) (51,626,152) (62,241,389) (196,484,169) (207,773,308) (228,721,524)

Total primary government net position……… $ 127,755,739 $ 124,163,214 $ 123,873,625 $ 126,647,089 $ 90,489,027 $ 83,964,109 $ 65,778,405 $ (61,328,921) $ (68,791,228) $ (85,361,984)

(1) Unrestricted net position has been revised to reflect the implementation of GASB #68.(2) Unrestricted net position has been revised to reflect the implementation of GASB #75 in fiscal year 2018.(3) Unrestricted net position of the Municipal Light Plant has been revised to reflect the implementation of GASB #75 in fiscal year 2019.

Net Position By Component

Last Ten Years


2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

ExpensesGovernmental activities:

General government…………………………………$ 3,134,661 $ 3,179,481 $ 3,513,212 $ 3,076,096 $ 3,499,711 $ 3,914,552 $ 4,049,880 $ 3,998,948 $ 4,149,528 $ 5,347,875 Public safety………………………………………… 10,288,405 10,586,017 10,651,355 10,936,104 11,614,901 12,092,961 13,059,638 13,546,839 15,087,411 15,803,260 Education……………………………………………… 52,081,576 53,942,639 55,866,599 57,452,006 60,720,945 57,790,071 63,223,425 68,164,424 72,235,555 76,926,325 Public works………………………………………… 6,331,557 6,214,732 4,510,987 6,719,828 7,225,046 7,602,455 8,464,369 5,120,344 7,004,811 8,418,205 Landfill closure……………………………………… 1,800,000 2,314,578 - - 7,306,000 3,189,744 8,010,805 - - - Human services……………………………………… 1,120,478 1,150,910 1,025,102 1,074,478 1,103,986 1,091,063 1,161,803 1,302,548 1,508,463 1,519,921 Culture and recreation……………………………… 3,019,415 3,111,617 3,271,325 3,132,696 3,203,979 3,080,540 3,722,667 3,721,534 4,062,091 4,321,098 Interest………………………………………………… 899,311 1,319,979 1,893,926 1,054,818 2,062,389 1,758,181 2,055,607 2,341,770 2,154,964 2,185,589

Total government activities expenses………………… 78,675,403 82,405,028 80,732,506 83,446,026 96,736,957 90,519,567 103,748,194 98,196,407 106,202,823 114,522,273

Business-type activities:Water………………………………………………… 3,128,927 3,557,383 3,609,833 3,930,931 3,933,073 3,724,151 3,987,766 4,132,387 4,553,630 4,369,277 Sewer………………………………………………… 3,508,376 3,202,370 3,303,657 3,499,343 3,598,145 5,797,156 4,095,094 4,627,409 4,870,418 5,105,008 Municipal Light……………………………………… 14,008,068 14,127,177 14,596,683 14,280,634 14,848,824 15,701,747 16,422,802 15,631,285 16,223,014 17,740,657 Harbor………………………………………………… 671,745 730,953 786,565 904,765 874,951 911,766 1,011,537 1,059,866 1,014,642 1,078,663

Total business-type activities expenses……………… 21,317,116 21,032,808 22,296,738 22,615,673 23,254,993 26,134,820 25,517,199 25,450,947 26,661,704 28,293,605

Total primary government expenses………………… $ 99,992,519 $ 103,437,836 $ 103,029,244 $ 106,061,699 $ 119,991,950 $ 116,654,387 $ 129,265,393 $ 123,647,354 $ 132,864,527 $ 142,815,878

Program RevenuesGovernmental activities:

Public Safety charges for services…………………$ 1,216,490 $ 994,204 $ 1,147,383 $ 1,052,468 $ 1,234,957 $ 1,239,297 $ 1,249,704 $ 1,362,391 $ 1,425,496 $ 1,595,340 Education charges for services…………………… 1,763,683 1,870,151 1,897,607 1,865,303 1,865,241 1,952,485 2,255,951 2,842,596 2,624,923 2,618,409 Public Works charges for services………………… 634,244 668,395 694,942 742,302 781,471 757,319 866,927 1,136,212 1,320,282 1,465,007 Other charges for services………………………… 971,731 954,162 996,624 1,027,894 1,009,683 1,036,822 1,174,048 1,234,788 1,265,859 1,780,681 Operating grants and contributions………………… 15,041,092 15,253,787 15,690,591 15,550,212 16,037,171 12,532,233 15,344,880 18,290,706 19,339,810 19,437,238 Capital grant and contributions……………………… 3,817,694 761,615 555,654 5,517,233 6,114,742 1,006,775 723,405 521,930 576,960 699,305

Total government activities program revenues……… 23,444,934 20,502,314 20,982,801 25,755,412 27,043,265 18,524,931 21,614,915 25,388,623 26,553,330 27,595,980

Business-type activities:Charges for services - Water……………………… 3,251,067 3,904,213 3,884,316 3,833,234 3,863,695 4,231,978 4,575,779 4,827,808 4,528,184 4,652,262 Charges for services - Sewer……………………… 3,694,883 3,730,846 3,595,910 3,680,594 3,933,742 5,779,133 5,449,253 5,674,707 5,078,499 5,771,655 Charges for services - Municipal Light…………… 14,233,656 15,160,793 15,420,818 15,164,940 15,696,628 16,205,464 16,761,424 16,347,202 16,107,739 17,341,386 Charges for services - Harbor……………………… 591,969 632,242 633,384 638,807 637,156 674,827 681,730 697,328 904,347 829,876 Operating grants and contributions………………… 22,634 17,260 2,832 3,407 12,092 129,482 2,724 1,680 78,010 208,641 Capital grant and contributions……………………… - - - - 228,749 - - - - -

Total business-type activities program revenues…… 21,794,209 23,445,354 23,537,260 23,320,982 24,372,062 27,020,884 27,470,910 27,548,725 26,696,779 28,803,820

Total primary government program revenues……… $ 45,239,143 $ 43,947,668 $ 44,520,061 $ 49,076,394 $ 51,415,327 $ 45,545,815 $ 49,085,825 $ 52,937,348 $ 53,250,109 $ 56,399,800

Net (Expense)/RevenueGovernmental activities…………………………………$ (55,230,469) $ (61,902,714) $ (59,749,705) $ (57,690,614) $ (69,693,692) $ (71,994,636) $ (82,133,279) $ (72,807,784) $ (80,255,262) $ (86,926,293) Business-type activities………………………………… 477,093 2,412,546 1,240,522 705,309 1,117,069 886,064 1,953,711 2,097,778 640,844 510,215

Total primary government net expense……………… $ (54,753,376) $ (59,490,168) $ (58,509,183) $ (56,985,305) $ (68,576,623) $ (71,108,572) $ (80,179,568) $ (70,710,006) $ (79,614,418) $ (86,416,078)

General Revenues and Other Changes in Net PositionGovernmental activities:

Real estate and personal property taxes, net of tax refunds payable………………………… $ 50,046,317 $ 51,217,033 $ 53,545,032 $ 54,731,549 $ 56,625,268 $ 59,012,950 $ 60,478,448 $ 63,759,278 $ 66,330,626 $ 67,643,148 Motor vehicle excise taxes………………………… 2,656,948 2,752,897 2,843,878 3,016,278 3,169,957 3,365,276 3,570,737 3,637,261 3,731,262 3,869,773 Penalties and interest on taxes……………………… 192,715 226,937 241,114 235,370 231,501 287,496 244,181 276,660 296,552 331,608 Grants and contributions not restricted to specific programs…………………………………… 1,164,113 1,110,208 1,111,126 1,062,086 1,083,252 1,471,815 1,822,044 1,270,198 1,328,929 1,415,366 Unrestricted investment income…………………… 547,427 389,792 237,753 553,733 351,665 309,527 457,113 328,165 204,081 3,623,438

Total governmental activities…………………………… 54,607,520 56,281,942 57,978,903 59,599,016 61,461,643 64,447,064 66,572,523 69,271,562 71,891,450 76,883,333

Business-type activities:Boat excise…………………………………………… 140,873 136,513 134,871 125,100 135,970 104,504 130,184 124,716 164,659 104,797 Unrestricted investment income…………………… 92,386 64,263 54,338 34,653 27,679 32,086 44,896 68,310 96,002 154,278 Settlements and refunds…………………………… - - 8,218 - - - - - - - Transfers……………………………………………… - - 43,264 - - - - 57,000 - -

Total business-type activities………………………… $ 233,259 $ (384,299) $ 240,691 $ 159,753 $ 163,649 $ 136,590 $ 175,080 $ 250,026 $ 260,661 $ 259,075

Changes in Net PositionGovernmental activities…………………………………$ (622,949) $ (5,620,772) $ (1,770,802) $ 1,908,402 $ (8,232,049) $ (7,547,572) $ (15,560,756) $ (3,536,222) $ (7,758,043) $ (10,042,960) Business-type activities………………………………… 710,352 2,028,247 1,481,213 865,062 1,280,718 1,022,654 2,128,791 2,347,804 295,736 769,290

Total primary government………………………………$ 87,403 $ (3,592,525) $ (289,589) $ 2,773,464 $ (6,951,331) $ (6,524,918) $ (13,431,965) $ (1,188,418) $ (7,462,307) $ (9,273,670)

Changes in Net Position

Last Ten Years


2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

General FundReserved………………………………$ 610,212 $ - $ - $ - $ - $ - $ - $ - $ - $ -Unreserved…………………………… 9,178,812 - - - - - - - - -Committed…………………………… - - 917,834 591,174 676,235 501,644 437,823 335,975 404,071 443,895 Assigned……………………………… - 5,097,591 5,906,121 4,559,500 4,582,975 5,624,815 6,307,165 7,494,339 8,068,042 8,769,666 Unassigned…………………………… - 6,281,372 6,251,245 9,397,403 11,371,120 12,480,102 13,909,193 14,327,422 12,763,640 11,943,095

Total general fund……………………… $ 9,789,024 $ 11,378,963 $ 13,075,200 $ 14,548,077 $ 16,630,330 $ 18,606,561 $ 20,654,181 $ 22,157,736 $21,235,753 21,156,656

All Other Governmental FundsReserved………………………………$ 3,379,233 $ - $ - $ - $ - $ - $ - $ - $ - $ -Unreserved, reported in:

Special revenue funds…………… 7,253,938 - - - - - - - - -Capital projects funds…………… 1,813,173 - - - - - - - - -Permanent funds………………… 1,420,238 - - - - - - - - -

Nonspendable………………………… - 3,379,232 3,410,414 3,437,053 3,483,784 3,513,939 3,553,879 3,586,670 3,621,446 3,656,980 Restricted……………………………… - 9,044,027 10,424,988 18,463,217 9,558,967 14,485,534 16,571,389 11,590,117 10,718,919 18,362,196

Total all other governmental funds……$ 13,866,582 $ 12,423,259 $ 13,835,402 $ 21,900,270 $ 13,042,751 $ 17,999,473 $ 20,125,268 $ 15,176,787 $ 14,340,365 $ 22,019,176

The Town implemented GASB 54 in 2011, fund balances prior to 2011 have been reported in the pre-GASB 54 format.

Fund Balances, Governmental Funds

Last Ten Years


2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Revenues:Real estate and personal property taxes, net of tax refunds……………………………………………$ 49,720,655 $ 51,170,197 $ 53,542,174 $ 54,653,329 $ 56,513,528 $ 58,955,860 $ 61,069,137 $ 63,692,746 $ 66,431,146 $ 67,683,970 Motor vehicle excise taxes…………………………………… 2,649,742 2,757,607 2,851,176 2,994,944 3,212,814 3,317,889 3,575,360 3,627,692 3,653,743 3,947,263 Penalties and interest on taxes……………………………… 192,732 226,937 241,114 235,370 231,501 287,496 244,181 276,660 296,552 331,608 Charges for services…………………………………………… 3,017,786 2,984,996 3,135,718 3,265,285 3,302,028 3,281,158 3,479,049 4,094,313 4,484,460 4,572,977 Licenses and permits………………………...………………… 848,233 729,262 773,464 676,788 723,707 780,713 793,817 763,738 755,907 915,577 Fines and forfeitures…………………………………………… 157,626 141,860 175,186 153,061 144,147 126,021 131,209 162,196 114,202 138,759 Intergovernmental……………………………………………… 19,023,864 17,282,267 16,668,016 20,163,582 22,368,797 13,949,896 16,761,528 19,540,005 20,578,868 20,599,216 Departmental and other………………………………………… 294,815 317,306 570,975 301,435 682,753 752,356 1,138,951 1,247,506 888,830 1,795,162 Contributions…………………………………………………… 439,403 461,556 570,902 1,629,007 508,769 1,354,054 1,062,116 598,650 706,881 3,214,021 Investment income…………………………………………… 524,246 382,329 231,290 551,404 341,630 302,750 453,940 324,075 199,390 1,392,079 Miscellaneous…………………………………………………… 304,615 329,000 351,966 331,532 48,727 41,569 44,823 348,051 343,927 -

Total Revenue…………………………………………… 77,173,717 76,783,317 79,111,981 84,955,737 88,078,401 83,149,762 88,754,111 94,675,632 98,453,906 104,590,632

Expenditures:General government…………………………………………… 1,563,105 1,603,514 168,467 1,432,002 1,611,320 1,965,464 1,865,701 1,706,411 1,890,127 2,687,135 Public safety…………………………………………………… 6,706,967 6,916,177 5,463,055 7,136,638 7,507,189 7,751,988 7,982,485 8,213,378 9,053,076 9,317,504 Education………………………………………………………… 32,711,645 33,258,875 24,301,066 34,488,972 36,141,943 36,777,030 39,049,399 40,923,146 43,080,416 45,035,283 Public works…………………………………………………… 4,338,817 4,095,893 6,385,885 5,255,558 5,037,579 5,311,258 5,876,241 5,088,393 5,088,820 5,151,787 Landfill…………………………………………………………… - - - - - 8,476,944 9,595,405 - - - Human services………………………………………………… 777,377 805,497 709,399 730,629 709,822 738,308 749,688 857,418 891,328 931,117 Culture and recreation………………………………………… 1,945,935 2,035,638 2,228,610 1,996,187 2,035,713 1,859,522 2,528,741 2,149,995 2,482,153 2,570,512 Pension benefits………………………………………………… 8,117,079 8,333,338 8,758,191 8,886,922 9,231,574 6,171,613 8,420,207 10,955,785 11,827,291 12,051,455 Property and liability insurance……………………………… 206,956 223,932 216,606 271,764 302,420 318,315 347,329 371,239 393,809 428,360 Employee benefits……………………………………………… 9,999,049 8,786,164 10,841,607 10,037,694 10,633,116 10,423,210 11,017,859 11,221,929 11,912,535 11,836,691 State and county charges……………………………………… 1,719,351 2,188,061 2,365,570 2,583,423 2,672,504 2,705,864 2,868,544 3,082,820 2,872,858 2,995,396 Capital outlay…………………………………………………… 14,103,307 6,187,452 16,526,990 16,552,382 17,526,722 4,437,596 1,136,720 7,427,838 3,445,453 4,462,179 Debt service: Principal payment on current refunding…………………… 11,782,000 13,682,000 243,000 874,000 5,527,000 21,553,239 6,541,205 18,241,930 9,272,952 1,741,759 Principal……………………………………………………… 2,820,000 3,008,000 2,614,000 2,738,000 2,866,000 3,219,000 3,718,000 4,085,000 5,614,000 4,276,193 Interest………………………………………………………… 1,601,955 1,444,950 1,872,515 1,508,446 1,912,631 2,221,195 2,254,324 2,749,377 2,649,767 2,584,428

Total Expenditures……………………………………………… 98,393,543 92,569,491 82,694,961 94,492,617 103,715,533 113,930,546 103,951,848 117,074,659 110,474,585 106,069,799

Excess of revenues over (under) expenditures……………… (21,219,826) (15,786,174) (3,582,980) (9,536,880) (15,637,132) (30,780,784) (15,197,737) (22,399,027) (12,020,679) (1,479,167)

Other Financing Sources (Uses)Issuance of debt………………………………………………… 2,618,000 1,650,000 6,195,000 12,824,000 8,158,000 10,000 - 995,000 375,000 7,236,961 Issuance of refunding bonds…………………………………… 11,782,000 13,682,000 16,103,000 5,527,000 12,328,239 24,991,205 18,241,930 17,151,952 9,272,952 1,741,759 Premium from issuance of debt……………………………… 349,262 600,790 2,270,852 723,625 504,391 583,768 1,129,222 807,149 614,322 100,161 Payments to refunding bond escrow agent………………… - - (17,877,492) - - - - - - - Transfers in……………………………………………………… 3,318,191 2,972,243 581,477 590,674 1,179,791 1,074,316 628,193 790,928 612,418 822,779 Transfers out…………………………………………………… (3,318,191) (2,972,243) (581,477) (590,674) (1,179,791) (1,074,316) (628,193) (790,928) (612,418) (822,779)

Total other financing sources (uses)…………………………… 14,749,262 15,932,790 6,691,360 19,074,625 20,990,630 25,584,973 19,371,152 18,954,101 10,262,274 9,078,881

Net change in fund balances………………………………………$ (6,470,564) $ 146,616 $ 3,108,380 $ 9,537,745 $ 5,353,498 $ (5,195,811) $ 4,173,415 $ (3,444,926) $ (1,758,405) $ 7,599,714

Debt service as a percentage of noncapital expenditures…… 19.22% 24.75% 7.15% 6.64% 12.78% 30.70% 13.35% 22.87% 16.38% 8.47%

In 2009 though 2017 the debt service % has been adjusted for the current refunding of long-term BANs.

Last Ten Years

Changes in Fund Balances, Governmental Funds


Assessed Value and Actual Value of Taxable Property by Classification and Tax Rates

Last Ten Years

Assessed and Actual Values and Tax RatesTotal Total Total

Residential Residential Commercial Industrial Personal Commercial Commercial Direct TownYear Value Tax Rate Value Value Property Value Tax Rate Rate Value

2010 4,993,336,363$ 9.57 192,606,528$ 20,090,100$ 43,380,290$ 256,076,918$ 9.57 9.57 5,249,413,281$ 2011 4,764,628,638 10.21 192,325,493 18,290,900 56,716,040 267,332,433 10.21 10.21 5,031,961,071 2012 4,822,272,753 10.52 203,536,923 17,934,700 56,201,470 277,673,093 10.52 10.52 5,099,945,846 2013 4,773,366,165 10.85 203,018,401 17,367,700 55,583,590 275,969,691 10.85 10.85 5,049,335,856 2014 4,840,763,845 11.09 206,220,721 16,553,800 54,689,890 277,464,411 11.09 11.09 5,118,228,256 2015 5,048,269,078 11.08 207,099,668 16,058,600 54,855,310 278,013,578 11.08 11.08 5,326,282,656 2016 5,233,392,658 11.10 218,833,428 16,094,900 57,617,730 292,546,058 11.10 11.10 5,525,938,716 2017 5,499,968,414 11.01 225,864,473 16,577,200 65,849,510 308,291,183 11.01 11.01 5,808,259,597 2018 5,698,494,403 11.02 231,431,764 15,770,800 72,038,720 319,241,284 11.02 11.02 6,017,735,687 2019 5,986,503,712 10.74 238,506,055 16,088,200 74,471,080 329,065,335 10.74 10.74 6,315,569,047

Source: Town of Marblehead, Assessor's Department

Note: Chapter 59, Section 21C of the Massachusetts General Laws, known as "Proposition 2 1/2", imposes 2 separate limits on the annual tax levy of the Town. The primary limitation is that the tax levy cannot exceed 2 1/2 percent of the full and fair cash value. The secondary limitation is that the tax levy cannot exceed the maximum levy limit for the preceding year as determined by the State Commissioner of Revenue by more than 2 1/2 percent, subject to an exception for property added to the tax rolls and for certain substantial valuation increases other than as part of a general revaluation. The secondary limit may be exceeded in any year by a majority vote of the voters, however it cannot exceed the primary limitation.


Principal Taxpayers

Current Year and Nine Years Ago

Percentage of Percentage ofTotal Taxable Total Taxable

Assessed Assessed Assessed AssessedName Valuation Rank Value Valuation Rank Value

Various Edward T. Moore LLC/Trusts 62,877,500$ 1 1.00% 62,274,500$ 1 1.11%

Algonquin Gas Transmission Co. 42,893,700 2 0.68% 16,193,100 4 0.29%

Various Rockett LLC/Trusts 22,089,700 3 0.35% 35,334,800 2 0.63%

Eastern Yacht Club 18,388,850 4 0.29% 14,971,200 5 0.27%

Bessom Associates 16,918,900 5 0.27% 17,277,500 3 0.31%

Boston Gas (dba National Grid) 15,743,880 6 0.25%

Henricus A. Termeer 13,475,600 7 0.21%

Eyk Van Otterloo & Various LLC's 11,662,100 8 0.18% 8,991,100 9 0.16%

Corinthian Yacht Club 11,020,310 9 0.17%

Tedesco Country Club 10,500,096 10 0.17%

Angelo Arena 11,453,400 6 0.20%

Peter S. Lynch 10,226,300 7 0.18%

Philip A. Gianatasio 9,657,000 8 0.17%

Robert W. Green 8,789,800 10 0.16%

225,570,636$ 3.57% 195,168,700$ 3.48%

Source: Town of Marblehead, Assessor's Department

2019 2008


Percent of(1) Less (1) First Year Percent of Delinquent Total Total Tax

Total Abatements & Net Current Net Levy Tax Tax Collections toYear Tax Levy Exemptions Tax Levy Tax Collections Collected Collections Collections Net Tax Levy

2010 50,236,558$ 202,945$ 50,033,613$ 49,329,485$ 98.6% 430,008$ 49,759,493$ 99.5%2011 51,376,323 170,026 51,206,297 50,460,080 98.5% 458,017 50,918,097 99.4%2012 53,651,430 190,822 53,460,608 52,730,436 98.6% 467,619 53,198,055 99.5%2013 54,785,294 196,959 54,588,335 53,749,406 98.5% 534,587 54,283,993 99.4%2014 56,761,148 178,533 56,582,615 55,709,938 98.5% 583,231 56,293,169 99.5%2015 59,015,212 184,531 58,830,681 58,048,814 98.7% 517,460 58,566,274 99.6%2016 61,337,920 211,730 61,126,190 60,294,264 98.6% 506,186 60,800,450 99.5%2017 63,948,938 255,507 63,693,431 62,843,686 98.7% 539,918 63,383,604 99.5%2018 66,315,447 202,656 66,112,791 65,319,217 98.8% 477,284 65,796,501 99.5%2019 67,829,212 228,686 67,600,526 66,815,929 98.8% - 66,815,929 98.8%

Source: Town of Marblehead's, Finance Department

(1) Includes omitted and revised assessments.

Property Tax Levies and Collections

Last Ten Years

$0

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000

$30,000,000

$35,000,000

$40,000,000

$45,000,000

$50,000,000

$55,000,000

$60,000,000

$65,000,000

$70,000,000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Year

Real Estate Tax Levies vs. First Year CollectionsLast Ten Years

Real Estate Tax Levy First Year Current Tax Collections


General Percentage PercentageU. S. Census Personal Assessed Obligation Capital Per of Personal of Assessed

Year Population Income Value Bonds Leases Capita Income Value

2010 19,808 1,160,939,921$ 5,249,413,281$ 43,340,822$ -$ 2,127$ 3.73% 0.83%2011 19,961 1,079,516,192 5,031,961,071 42,405,271 - 2,141 3.93% 0.84%2012 20,076 1,100,506,092 5,099,945,946 46,114,891 182,393 2,306 4.21% 0.91%2013 19,808 1,122,162,816 5,049,335,856 61,267,217 87,365 3,097 5.47% 1.22%2014 20,187 1,167,313,275 5,118,227,956 73,758,730 - 3,654 6.32% 1.44%2015 20,454 1,188,009,228 5,326,282,656 74,064,865 - 3,621 6.23% 1.39%2016 20,517 1,222,505,445 5,525,938,716 82,660,432 - 4,029 6.76% 1.50%2017 20,493 1,176,236,721 5,808,259,597 78,878,404 - 3,849 6.71% 1.36%2018 20,517 1,274,023,632 6,017,735,687 73,906,636 - 3,602 5.80% 1.23%2019 19,752 1,222,505,445 6,315,569,047 76,497,250 - 3,728 6.26% 1.21%

Source: Audited Financial Statements, U. S. Census

Governmental Activities Debt

Ratios of Outstanding Debt by Type

Last Ten Years


EnterpriseGeneral Total Percentage Percentage

Obligation Debt Per of Personal of AssessedYear Bonds Outstanding Capita Income Value

(1)

2010 $ - $ 43,340,822 $ 2,036 3.57% 0.79%2011 - 42,405,271 2,076 3.81% 0.82%2012 - 46,114,891 2,246 4.10% 0.88%2013 - 61,267,217 3,012 5.32% 1.18%2014 - 73,758,730 3,554 6.15% 1.40%2015 - 74,064,865 3,519 6.06% 1.35%2016 - 82,660,432 3,897 6.54% 1.45%2017 - 78,878,404 3,698 6.44% 1.30%2018 - 73,906,636 3,438 5.54% 1.17%2019 - 76,497,250 3,728 5.76% 1.17%

(1) Sewer, Water, Harbor and Municipal Light Enterprise Funds

Source: Audited Financial Statements, U. S. Census

Total Primary Government

Last Ten Years

Ratios of General Bonded Debt


Share ofDebt Percentage Overlapping

Town of Marblehead, Massachusetts Outstanding Applicable (1) Debt

Overlapping debt:Essex North Shore Agriculture & Technical School District…………………$ 28,338,000 2.58% $ 455,256 Massachusetts Bay Transit Authority…..................................................... 452,136 South Essex Sewerage District….............................................................. 6,680,669 40.32% 3,225,157 Massachusetts Water Resource Authority…………………………………… 20,712,500 1.01% 2,677,308

Subtotal, overlapping debt…………………………………………………………… 6,809,857

Town direct debt………………………………………………………………………… 76,497,250

Total direct and overlapping debt…………………………………………………… $ 83,307,107

Note: Overlapping governments are those that coincide, at least in part, with geographic boundaries of the Town. This scheduleestimates the portion of the outstanding debt of those overlapping governments that is borne by the taxpayers of Town. Thisprocess recognizes that, when considering the government's ability to issue and repay long-term debt, the entire debt burden borneby the property taxpayers should be taken into account. However, this does not imply that every taxpayer is a resident, andtherefore responsible for repaying the debt, of each overlapping government.

(1) The percentage applicable for the Essex North Shore Agricultural and Technical School District is based on the number ofstudents attending from the Town of Marblehead as a percentage of all students at the Regional School.

Source: Town of Marblehead's, Finance DepartmentNote: The Town obtains the debt outstanding and percentages directly from the entities.

Direct and Overlapping Governmental Activities Debt

As of June 30, 2019


2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Equalized valuation…………………………………$ 5,580,750,300 $ 5,580,750,300 $ 5,362,642,300 $ 5,362,642,300 $ 5,323,866,200 $ 5,323,866,200 $ 5,735,475,100 $ 5,735,475,100 $ 5,735,475,100 $ 6,182,649,400

Debt Limit - 5% of equalized valuation…………… 279,037,515 279,037,515 268,132,115 268,132,115 266,193,310 266,193,310 286,773,755 286,773,755 286,773,755 309,132,470

Less: Total debt applicable to limitation…………… 28,080,000 37,790,000 38,475,000 45,151,000 51,259,000 56,323,000 61,715,000 65,397,000 68,670,000 64,520,000

Legal debt margin………………………………… $ 250,957,515 $ 241,247,515 $ 229,657,115 $ 222,981,115 $ 214,934,310 $ 209,870,310 $ 225,058,755 $ 221,376,755 $ 218,103,755 $ 244,612,470

Total debt applicable to the limit as a percentage of debt limit………………………… 11% 16% 17% 20% 24% 27% 27% 30% 31% 26%

Source: Town of Marblehead's, Finance Department

Computation of Legal Debt Margin

Last Ten Years


Demographic and Economic Statistics

Last Ten Years

PerCapita

Population Personal Personal Median School UnemploymentYear Estimates Income Income Age Enrollment Rate

2010 19,808 $ 1,136,792,076 $ 55,788 41.9 3,232 6.60%2011 19,961 1,079,516,192 54,499 41.9 3,206 5.40%2012 20,076 1,100,506,092 54,817 38.7 3,170 4.70%2013 19,808 1,122,162,816 56,652 38.7 3,246 5.30%2014 20,187 1,167,313,275 57,825 45.7 3,327 4.10%2015 20,454 1,188,009,228 58,082 45.7 3,245 3.90%2016 20,517 1,222,505,445 59,585 46.5 3,208 3.50%2017 20,493 1,176,236,721 57,397 47.4 3,264 3.60%2018 20,517 1,274,023,632 62,096 48.0 3,185 3.00%2019 19,752 1,279,080,264 64,757 47.8 3,051 3.04%

Source: U. S. Census; Labor and Workforce Development


Principal Employers

Current and Nine Years Ago

Nature Percentage of Percentage ofof Total Town Total Town

Business Employees Rank Employment Employees Rank Employment

Town of Marblehead Municipal Government 1,264 1 24.78% 605 1 12.45%

Recreational 558 2 10.94% 175 2 3.60%

Eastern Yacht Club Yacht Club 253 3 4.96% 126 4 2.59%

Corinthian Yacht Club Yacht Club 180 4 3.53% 150 3 3.09%

Tedesco Country Club Country Club 169 5 3.31% 85 8 1.75%

Boston Yacht Club Yacht Club 151 6 2.96% 80 9 1.65%

Health Care 115 7 2.25% 125 5 2.57%

Devereux House Health Care 88 8 1.73% 120 6 2.47%

Crosby's Marketplace Food Market 69 9 1.35% 86 7 1.77%

Marblehead Bank Banking 55 10 1.08%

National Grand Bank Banking 57 10 1.17%

Source: Town of Marblehead, Assessor's Department's survey of large employersSource of total employment : Mass. Executive Office of Labor and Workforce Development

Lafayette Nursing Home

2019 2009

Employer

Lynch/van Otterloo YMCA


2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

FunctionGeneral government………… 22.75 22.75 22.50 22.50 21.50 22.03 21.55 21.50 21.98 22.03 Public safety………………… 56.00 55.75 55.75 56.75 55.75 55.54 55.84 51.28 53.18 54.44 Fire…………………………… 42.50 42.50 42.75 42.75 42.75 42.75 39.70 39.70 39.70 40.00 Education……………………… 487.71 488.01 480.00 490.00 492.00 489.80 489.17 493.17 504.20 483.90 Public works………………… 36.10 36.18 36.18 36.18 36.18 36.06 34.37 33.40 36.51 33.96 Human services……………… 8.18 8.18 8.18 8.93 9.93 9.64 8.40 9.35 9.54 11.16 Culture and recreation……… 29.00 29.25 29.50 29.00 29.00 30.78 25.64 27.25 26.21 25.61

Total…………………………… 682.24 682.62 674.86 686.10 687.11 686.60 674.67 675.65 691.32 671.10

Source: Town Records

Full-time Equivalent Town Employees by Function

Last Ten Years


Function/Program 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

PolicePhysical arrests………………… 250 146 144 171 157 167 153 188 137 103 Motor vehicle violations………… 2,118 1,443 1,323 1,344 553 1,096 964 1,104 1,036 765 Parking violations………………… 3,039 2,230 2,782 2,857 2,200 2,097 2,645 3,195 3,164 2,971

FireInspections……………………… 1,817 2,160 1,793 2,571 2,375 937 1,315 1,755 565 933 Emergency responses…………… 2,396 2,540 2,540 2,307 2,522 2,663 2,645 2,634 2,548 2,344

LibrariesVolumes in circulation…………… 125,975 126,230 135,433 138,683 143,559 143,559 150,050 142,915 137,086 130,460 Total volumes borrowed………… 240,518 226,953 245,447 228,339 230,625 217,318 211,233 203,800 190,975 187,911

WaterService connections……………… 8,080 7,991 7,991 8,030 8,045 8,032 8,032 8,041 8,047 8,051 Consumption in gallons………… 1,993,000 1,815,000 1,649,863 1,742,740 1,776,000 1,789,600 1,893,400 1,817,194 1,750,000 1,657,900 Daily consumption……………… 3,820,000 4,118,000 3,445,000 3,428,000 3,165,000 3,470,000 3,294,000 3,640,000 3,320,000 3,487,000

SewerService connections……………… 8,160 7,883 7,883 7,883 7,883 7,885 7,865 7,874 7,880 7,885 Daily average collection………… 2,244,000 2,244,000 2,244,000 1,584,300 1,155,000 1,878,028 1,780,800 1,830,500 2,059,733 2,343,468

Source: Various Town departments

Last Ten Years

Operating Indicators by Function/Program


Function/Program 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

EducationNumber of elementary schools………… 6 6 6 6 6 6 6 6 5 4 Number of middle schools……………… 1 1 1 1 1 1 1 1 1 1 Number of high schools………………… 1 1 1 1 1 1 1 1 1 1 Number of teachers……………………… 294 243 285 289 288 289 294 297 293 290 Number of administrators……………… 26 22 22 22 27 22 22 22 22 19 Number of students……………………… 3,250 3,262 3,188 3,269 3,304 3,255 3,208 3,264 3,185 3,051

WaterWater mains (miles)……………………… 88 88 89 88 88 88 88 88 88 88 Fire hydrants……………………………… 860 860 860 860 860 861 861 861 861 861

SewerSanitary sewers (miles)………………… 89 89 89 89 89 89 89 89 89 89 Storm sewers (miles)…………………… 52 52 52 52 52 52 52 52 52 52

RecreationParks and playgrounds………………… 13 13 13 13 13 13 13 13 13 13 Park and playground (acreage)………… 74 74 74 74 74 74 74 74 74 74 Conservation land (acreage)…………… 134 134 134 203 203 203 203 203 203 203 Railroad right of way (acreage)………… 19 19 19 19 19 19 19 19 19 19 Public beaches…………………………… 6 6 6 6 6 6 6 6 6 6 Ball fields………………………………… 15 16 16 16 16 16 16 16 16 16 Tennis courts……………………………… 12 13 14 14 14 14 14 14 14 12 Pickleball courts…................................ 6

HarborHarbors…………………………………… 2 2 2 2 2 2 2 2 2 2 Moorings………………………………… 2,200 2,200 2,400 2,600 2,800 2,800 2,800 2,800 3,000 3,000 Private yacht clubs……………………… 6 6 6 6 6 6 6 6 6 6 Municipal boatyards……………………… 2 2 2 2 2 2 2 2 2 2 Boat ramps……………………………… 2 2 2 2 2 2 2 2 2 2 Public landings…………………………… 6 6 7 7 7 7 7 7 7 7 Emergency rescue watercraft…………… 2 2 2 2 2 3 3 3 3 3

Source: Various Town Departments

Capital Asset Statistics by Function/Program

Last Ten Years


Old Marblehead Fire Department horse drawn rig passing the Train Depot on Pleasant Street.

Photo by Dan Dixey

Marblehead Neck from the end of the Causeway in 1891.

Photo by Dan Dixey

The Devereux Train Station on Devereux Street in 1891.

Photo by Dan Dixey

PROPOSED FORM OF LEGAL OPINION APPENDIX B

111 Huntington Avenue9th Floor

Boston, MA 02199-7613Telephone: 617-239-0100

Fax: 617-227-4420www.lockelord.com

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Atlanta | Austin | Boston | Brussels | Chicago | Cincinnati | Dallas | Hartford | Hong Kong | Houston | London | Los Angeles Miami | New Orleans | New York | Princeton | Providence | San Francisco | Stamford | Washington DC | West Palm Beach

(Date of Delivery)

Nancy Connelly, Treasurer Town of Marblehead Marblehead, Massachusetts

$41,775,000* Town of Marblehead, Massachusetts

General Obligation Municipal Purpose Loan of 2020 Bonds Dated July 30, 2020

We have acted as bond counsel to the Town of Marblehead, Massachusetts (the “Town”) in connection with the issuance by the Town of the above-referenced bonds (the “Bonds”). In such capacity, we have examined the law and such certified proceedings and other papers as we have deemed necessary to render this opinion.

As to questions of fact material to our opinion we have relied upon representations and covenants of the Town contained in the certified proceedings and other certifications of public officials furnished to us, without undertaking to verify the same by independent investigation.

Based on our examination, we are of the opinion, under existing law, as follows:

1. The Bonds are valid and binding general obligations of the Town and, except tothe extent they are paid from other sources, the principal of and interest on the Bonds are payable from taxes which may be levied upon all taxable property in the Town without limitation as to rate or amount, except as provided under Chapter 44, Section 20 of the General Laws.

2. Interest on the Bonds is excluded from the gross income of the owners of theBonds for federal income tax purposes. In addition, interest on the Bonds is not a specific preference item for purposes of the federal individual alternative minimum tax. In rendering the opinions set forth in this paragraph, we have assumed compliance by the Town with all requirements of the Internal Revenue Code of 1986, as amended that must be satisfied subsequent to the issuance of the Bonds in order that interest thereon be, and continue to be, excluded from gross income for federal income tax purposes. The Town has covenanted to

* Preliminary, subject to change.

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comply with all such requirements. Failure by the Town to comply with certain of such requirements may cause interest on the Bonds to become included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. We express no opinion regarding any other federal tax consequences arising with respect to the Bonds.

3. Interest on the Bonds is exempt from Massachusetts personal income taxes andthe Bonds are exempt from Massachusetts personal property taxes. We express no opinion regarding any other Massachusetts tax consequences arising with respect to the Bonds or any tax consequences arising with respect to the Bonds under the laws of any state other than Massachusetts.

This opinion is expressed as of the date hereof, and we neither assume nor undertake any obligation to update, revise, supplement or restate this opinion to reflect any action taken or omitted, or any facts or circumstances or changes in law or in the interpretation thereof, that may hereafter arise or occur, or for any other reason.

The rights of the holders of the Bonds and the enforceability of the Bonds may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors’ rights heretofore or hereafter enacted to the extent constitutionally applicable, and their enforcement may also be subject to the exercise of judicial discretion in appropriate cases.

LOCKE LORD LLP

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APPENDIX C

PROPOSED FORM OF CONTINUING DISCLOSURE CERTIFICATE

This Continuing Disclosure Certificate (the “Disclosure Certificate”) is executed and delivered by the Town of Marblehead, Massachusetts (the “Issuer”) in connection with the issuance of its $41,775,000* General Obligation Municipal Purpose Loan of 2020 Bonds dated July 30, 2020 (the “Bonds”). The Issuer covenants and agrees as follows:

SECTION 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the Issuer for the benefit of the Owners of the Bonds and in order to assist the Participating Underwriters in complying with the Rule.

SECTION 2. Definitions. For purposes of this Disclosure Certificate the following capitalized terms shall have the following meanings:

“Annual Report” shall mean any Annual Report provided by the Issuer pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate.

“Listed Events” shall mean any of the events listed in Section 5(a) of this Disclosure Certificate.

“MSRB” shall mean the Municipal Securities Rulemaking Board as established pursuant to Section 15B(b)(1) of the Securities Exchange Act of 1934, or any successor thereto or to the functions of the MSRB contemplated by this Disclosure Certificate. Filing information relating to the MSRB is set forth in Exhibit A attached hereto.

“Obligated Person” shall mean the Issuer.

“Owners of the Bonds” shall mean the registered owners, including beneficial owners, of the Bonds.

“Participating Underwriter” shall mean any of the original underwriters of the Bonds required to comply with the Rule in connection with offering of the Bonds.

“Rule” shall mean Rule 15c2-12 adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time.

SECTION 3. Provision of Annual Reports.

(a) The Issuer shall, not later than 270 days after the end of each fiscal year, provide tothe MSRB an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Certificate. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross-reference other information as provided in

* Preliminary, subject to change.

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Section 4 of this Disclosure Certificate; provided that the audited financial statements of the Issuer may be submitted when available separately from the balance of the Annual Report.

(b) If the Issuer is unable to provide to the MSRB an Annual Report by the daterequired in subsection (a), the Issuer shall send a notice to the MSRB in a timely manner, in substantially the form attached as Exhibit B.

SECTION 4. Content of Annual Reports. The Issuer’s Annual Report shall contain or incorporate by reference the following:

(a) quantitative information for the preceding fiscal year of the type presented in theIssuer’s Official Statement dated July 14, 2020 relating to the Bonds regarding (i) the revenues and expenditures of the Issuer relating to its operating budget, (ii) capital expenditures, (iii) fund balances, (iv) property tax information, (v) outstanding indebtedness and overlapping debt of the Issuer, (vi) pension obligations of the Issuer, and (vii) other post-employment benefits liability of the Issuer, and

(b) the most recently available audited financial statements of the Issuer, prepared inaccordance with generally accepted accounting principles, with certain exceptions permitted by the Massachusetts Uniform Municipal Accounting System promulgated by the Department of Revenue of the Commonwealth. If audited financial statements for the preceding fiscal year are not available when the Annual Report is submitted, the Annual Report will include unaudited financial statements for the preceding fiscal year and audited financial statements for such fiscal year shall be submitted when available.

Any or all of the items listed above may be incorporated by reference from other documents, including official statements of debt issues of the Issuer or related public entities, which (i) are available to the public on the MSRB internet website or (ii) have been filed with the Securities and Exchange Commission. The Issuer shall clearly identify each such other document so incorporated by reference.

SECTION 5. Reporting of Significant Events.

(a) The Issuer shall give notice, in accordance with the provisions of this Section 5, ofthe occurrence of any of the following events with respect to the Bonds:

1. Principal and interest payment delinquencies.

2. Non-payment related defaults, if material.

3. Unscheduled draws on debt service reserves reflecting financial difficulties.

4. Unscheduled draws on credit enhancements reflecting financial difficulties.

5. Substitution of credit or liquidity providers, or their failure to perform.

6. Adverse tax opinions, the issuance by the Internal Revenue Service of proposed orfinal determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other

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material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds.

7. Modifications to rights of the Owners of the Bonds, if material.

8. Bond calls, if material, and tender offers.

9. Defeasances.

10. Release, substitution or sale of property securing repayment of the Bonds, ifmaterial.

11. Rating changes.

12. Bankruptcy, insolvency, receivership or similar event of the Obligated Person.*

13. The consummation of a merger, consolidation, or acquisition involving anObligated Person or the sale of all or substantially all of the assets of the Obligated Person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material.

14. Appointment of a successor or additional trustee or the change of name of a trustee,if material.

15. Incurrence of a financial obligation of the Obligated Person, if material, oragreement to covenants, events of default, remedies, priority rights, or other similar terms of a financial obligation of the Obligated Person, any of which affect Owners of the Bonds, if material.†

16. Default, event of acceleration, termination event, modification of terms, or othersimilar events under the terms of a financial obligation of the Obligated Person, any of which reflect financial difficulties.†

* As noted in the Rule, this event is considered to occur when any of the following occur: (i) the appointment of areceiver, fiscal agent or similar officer for the Obligated Person in a proceeding under the U.S. Bankruptcy Code orin any proceeding under state or federal law in which a court or governmental authority has assumed jurisdictionover substantially all of the assets or business of the Obligated Person, or if such jurisdiction has been assumed byleaving the existing governing body and officials or officers in possession but subject to the supervision and ordersof a court or governmental authority, or (ii) the entry of an order confirming a plan of reorganization, arrangement orliquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assetsor business of the Obligated Person.

† For purposes of event numbers 15 and 16 in Section 5(a) of this Disclosure Certificate, the term “financial obligation” means a (i) debt obligation; (ii) derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation; or (iii) guarantee of (i) or (ii). The term “financial obligation” excludes municipal securities for which a final official statement has been provided to the MSRB consistent with the Rule.

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(b) Upon the occurrence of a Listed Event, the Issuer shall, in a timely manner not in excess of ten (10) business days after the occurrence of the event, file a notice of such occurrence with the MSRB.

SECTION 6. Transmission of Information and Notices. Unless otherwise required by law, all notices, documents and information provided to the MSRB shall be provided in electronic format as prescribed by the MSRB and shall be accompanied by identifying information as prescribed by the MSRB.

SECTION 7. Termination of Reporting Obligation. The Issuer’s obligations under this Disclosure Certificate shall terminate upon the prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the Issuer shall give notice of such termination in the same manner as for a Listed Event under Section 5(b).

SECTION 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the Issuer may amend this Disclosure Certificate and any provision of this Disclosure Certificate may be waived if such amendment or waiver is permitted by the Rule, as evidenced by an opinion of counsel expert in federal securities law (which may include bond counsel to the Issuer), to the effect that such amendment or waiver would not cause the Disclosure Certificate to violate the Rule. The first Annual Report filed after enactment of any amendment to or waiver of this Disclosure Certificate shall explain, in narrative form, the reasons for the amendment or waiver and the impact of the change in the type of information being provided in the Annual Report.

If the amendment provides for a change in the accounting principles to be followed in preparing financial statements, the Annual Report for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison shall include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information in order to provide information to investors to enable them to evaluate the ability of the Issuer to meet its obligations. To the extent reasonably feasible, the comparison shall also be quantitative. A notice of the change in the accounting principles shall be sent to the MSRB.

SECTION 9. Default. In the event of a failure of the Issuer to comply with any provision of this Disclosure Certificate any Owner of the Bonds may seek a court order for specific performance by the Issuer of its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not constitute a default with respect to the Bonds, and the sole remedy under this Disclosure Certificate in the event of any failure of the Issuer to comply with this Disclosure Certificate shall be an action for specific performance of the Issuer’s obligations hereunder and not for money damages in any amount.

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SECTION 10. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the Owners of the Bonds from time to time, and shall create no rights in any other person or entity.

Date: July 30, 2020 TOWN OF MARBLEHEAD, MASSACHUSETTS

By: Treasurer

Selectmen

[EXHIBIT A: Filing Information for the MSRB] [EXHIBIT B: Form of Notice of Failure to File Annual Report]

PROPOSAL FOR BONDS

Alison Nieto, Finance Director/Town Accountant July 14, 2020 Town of Marblehead, Massachusetts c/o Hilltop Securities Inc. 54 Canal Street, 3rd Floor Boston, MA 02114

Dear Ms. Nieto:

For $41,775,000* Town of Marblehead, Massachusetts, General Obligation Municipal Purpose Loan of 2020 Bonds as further described in your Notice of Sale dated July 2, 2020, which Notice of Sale is hereby made a part of this proposal, we bid.........................and accrued interest to date of delivery for each $100 par value of bonds, bearing interest at the rate or rates per annum as follows:

Due DueJuly 15 Rate July 15 Rate

2021 ........…% 2031 ** ........…%2022 ........... 2032 ** ........…2023 ........... 2033 ** ...........2024 ........... 2034 ** ...........2025 ........... 2035 ** ...........2026 ........... 2036 ** ...........2027 ........… 2037 ** ...........2028 ........… 2038 ** ...........2029 ........… 2039 ** ...........2030 ** ........… 2040 ** ...........

______________________ *Preliminary, subject to change.**TERM BONDS (Optional – No more than three Term Bonds.)

First Year of Mandatory Redemption Year of Maturity Interest Rate

If Term Bond(s) are included in this bid, they shall be subject to the restrictions and mandatory redemption requirements set forth in Notice of Sale.

The undersigned hereby acknowledges receipt of the Preliminary Official Statement referred to in the aforementioned Notice of Sale.

S yn d ic a te M a n a g e r

S yn d ic a te M a n a g e r A d d re s s

T e le p h o n e :

F a x :

The following is our computation of the net interest cost and percent true interest cost calculated in accordance with the Notice of Sale, is for informational purposes only, and is subject to verification prior to award.

Gross Interest Cost $______________________________Underwriter's Premium $______________________________ BIDS MUST INCLUDE A PREMIUM OF AT LEAST $170,000.Net Interest Cost $______________________________Percent True Interest Cost ______________________________

(four decimals)

Hilltop Securities Inc. would be pleased to assist you in entering your bid on these Bonds if you will e-mail your signed bid form in advance and telephone figures about one-half hour before the time of sale. The Town and Hilltop Securities Inc. are not responsible for errors in bids submitted in this manner.

TELEPHONE (617) 619-4400 HILLTOP SECURITIES INC.

· 2020-07-02 · preliminary official statement and notice of sale dated july 2, 2020 rating: see...

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