OFFICIAL STATEMENT AND NOTICE OF SALE DATED MAY 10, 2005

Rating: See “Rating” herein.

Moody’s Investors Service: Aaa

XL Capital Assurance Insured

New Issue

In the opinion of Palmer & Dodge 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. Interest on the Bonds is not a specific preference item for purposes of the federal individual or

corporate alternative minimum taxes, although such interest is included in adjusted current earnings when calculating corporate

alternative minimum taxable income. Under existing law, interest on the Bonds is exempt from Massachusetts personal income

taxes, and the Bonds are exempt from Massachusetts personal property taxes. The Town WILL designate the Bonds as "qualified

tax-exempt obligations" for purposes of Section 265(b)(3) of the Internal Revenue Code of 1986, as amended. See "THE

BONDS-Tax Exemption" herein and Appendix B attached hereto.

TOWN OF WAREHAM, MASSACHUSETTS

$4,206,000 GENERAL OBLIGATION BONDS

DATED DUE

May 15, 2005 May 15

(as shown below)

The Bonds are issuable only as fully registered Bonds, 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, except for one denomination of $1,000 maturing in 2006. See ("Book-Entry Only System" herein.)

Principal of the Bonds will be payable May 15 of the years in which the Bonds mature. Interest on the Bonds will be payable November 15, 2005, and semiannually thereafter on May 15 and November 15.

The Bonds are subject to redemption prior to their stated dates of maturity as described herein.

In the opinion of Bond Counsel, the Bonds are valid general obligations of the Town of Wareham, Massachusetts and the principal of and interest on the Bonds are payable from taxes which may be levied upon all taxable property in the Town, subject to the limitation imposed by Chapter 59, Section 21C.

MATURITIES, AMOUNTS, RATES, PRICES OR YIELDS

CUSIP BASE: 934221

Due Principal Interest CUSIP Due Principal Price/or CUSIPMay 15 Amount Rate 934221 May 15 Amount Yield 934221

2006 341,000$ 3.50 % 2.80 % MP4 2013 $320,000 4.00 % 3.50 % MW92007 340,000 5.00 2.95 MQ2 2014 250,000 4.00 3.60 MX72008 335,000 5.00 3.00 MR0 2015 250,000 4.00 3.70 MY52009 330,000 4.00 3.00 MS8 2016 140,000 3.75 3.80 MZ22010 330,000 4.00 3.10 MT6 2017 140,000 3.85 3.90 NA62011 330,000 4.00 3.25 MU3 2018 130,000 4.00 4.00 NB42012 320,000 4.00 3.40 MV1

$260,000 4.05% Term Bonds Maturing on May 15, 2020 @ 4.10 934221 ND0$390,000 4.25% Term Bonds Maturing on May 15, 2023 @ 4.25 934221 NG3

Price/orYield

InterestRate

______________________

(plus accrued interest to be added)

The Bonds are offered subject to the final approving opinion of Palmer & Dodge LLP, Bond Counsel, as aforesaid, and to certain

other conditions referred to herein. First Southwest Company has acted as Financial Advisor to the Town of Wareham,

Massachusetts with respect to the Bonds. Bonds in definitive form will be delivered at The Depository Trust Company on or about

May 18, 2005 for settlement in Federal Reserve Funds.

LEGG MASON WOOD WALKER, INC.

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TABLE OF CONTENTS

Page

SUMMARY STATEMENT..................................... 3 NOTICE OF SALE................................................ 4

PRELIMINARY OFFICIAL STATEMENT:

THE BONDS: Description of the Bonds ....................................... 6 Redemption Provisions ......................................... 6 Record Date.......................................................... 7 Book-Entry Only System....................................... 7 Authorization of the Bonds and Use of Proceeds ................................................ 8 Principal Maturities by Purpose............................. 9 Tax Exemption ..................................................... 10 Continuing Disclosure ........................................... 11 Opinion of Bond Counsel ...................................... 11 Rating ................................................................... 11 Financial Advisory Services of First Southwest Company ............................................. 11 Security and Remedies ......................................... 11 Use of State Distributions to Pay Debt Service ............................................ 12

TOWN OF WAREHAM, MASSACHUSETTS:

General................................................................. 13 Principal Town Officials ........................................ 13 Municipal Services................................................ 13 Education.............................................................. 14 Public School Enrollments .................................. 14 Industry and Commerce........................................ 14 Employment and Payrolls ................................... 14 Largest Employers .............................................. 15 Building Permits.................................................... 15 Labor Force, Employment and Unemployment ..... 16 Unemployment Rates ......................................... 16 Population Composition ........................................ 16 Income Levels ...................................................... 17

PROPERTY TAXATION: Tax Levy Computation.......................................... 19 Assessed Valuations and Tax Levies .................... 20 Largest Taxpayers ................................................ 21 State Equalized Valuation ..................................... 21 Abatements/Exemptions and Overlay ................... 21 Tax Collections ..................................................... 22 Tax Outstanding ................................................... 23 Tax Levies ............................................................ 23

Page

TOWN FINANCES: Budget and Appropriation Process ........................ 26 Budget Comparison .............................................. 26 Revenues ............................................................. 27 State Aid............................................................... 27 State School Building Assistance Program............ 27 Motor Vehicle Excise ............................................ 28 Investment of Town Funds.................................... 29 Annual Audits........................................................ 29 Summary of Significant Accounting Policies ......... 29 Financial Statements ............................................ 29 Combined Balance Sheet - All Fund Types and Account Group - June 30, 2004..................... 30 Combined Balance Sheet - All Fund Types and Account Group - June 30, 2003..................... 31 Combined Balance Sheet - All Fund Types and Account Group - June 30, 2002.................... 32 Comparative Statement of Revenues, Expenditures, and Changes in Fund Balances - General Fund June 30, 2000 - 2004 ........................................ 33 Revenues and Expenditures – Fiscal 2004............ 34 Free Cash............................................................. 35 Stabilization Fund ................................................. 35 Tax Increment Financing for Development Districts

INDEBTEDNESS: Authorization of General Obligation Bonds and Notes 36 Debt Limits ........................................................... 36 Types of Obligations ............................................. 36 Direct Debt Summary ........................................... 37 Bond Debt vs. Population, Valuations and Income 37 Projected Principal Payments by Purpose............. 38 Debt Service Requirements .................................. 39 Authorized Unissued Debt and Prospective Financing.................................. 39 Five Years Outstanding Debt ................................ 40 Overlapping Debt.................................................. 40 Contractual Obligations......................................... 41 RETIREMENT PLAN ............................................ 41 EMPLOYEE RELATIONS..................................... 43 LITIGATION ......................................................... 43 APPENDIX A - Fiscal 2003 Audit APPENDIX B - Proposed Form of Legal Opinion APPENDIX C – Proposed Form of Continuing Disclosure Certificate APPENDIX D – XL Capital Assurance Language and Bond Specimen

Unused Levy Capacity .......................................... 24 Pledged Taxes...................................................... 25 Community Preservation Act ................................ 25

The information and expressions of opinion in this Official Statement are subject to change without notice. Neither the delivery of this Official Statement nor any sale of the Bonds shall, under any circumstances, create any implication that there has been no material change in the affairs of the Town since the date of this Official Statement.

3

SUMMARY STATEMENT

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

Date of Sale: Tuesday, May 10, 2005, 11:00 a.m. (E.T).

Location of Sale: First Southwest Company, 54 Canal Street, Suite 320, Boston, Massachusetts 02114.

Issuer: Town of Wareham, Massachusetts.

Issue: $4,206,000 General Obligation Bonds Book Entry Bonds, see "Book-Entry Only System" herein.

Preliminary Official Statement Dated: April 28, 2005.

Dated Date: May 15, 2005. Principal Due: Serially May 15, 2006 through May 15, 2023 as detailed herein. Purpose and Authority: Bond proceeds will finance various municipal projects as authorized by Town

Meeting under provisions of Chapter 44, Section 7 of the Massachusetts General Laws as detailed herein.

Redemption: The Bonds are subject to redemption prior to their stated dates of maturity as

described herein. Security: The Bonds will be valid general obligations of the Town of Wareham,

Massachusetts, and the principal of and interest on the Bonds are payable from taxes which may be levied upon all taxable property in the Town subject to the limit imposed by Chapter 59, Section 21C of the General Laws.

Credit Rating: Moody’s Investors Service has assigned the rating of “Aaa” (A3 Underlying) on

the Bonds. Bond Insurance: XL Capital Assurance Insured. Basis of Award: Lowest True Interest Cost (TIC), as of the dated date. Tax Exemption: Refer to "Tax Exemption" herein and Appendix B, "Proposed Form of Legal

Opinion". Continuing Disclosure: Refer to "Continuing Disclosure" herein and Appendix C, "Proposed Form of

Continuing Disclosure Certificate". Bank Qualification: The Bonds WILL BE designated by the Issuer as "qualified tax-exempt

obligations" for purposes of Section 265(b)(3) of the Internal Revenue Code of 1986, as amended.

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

Legal Opinion: Palmer & Dodge LLP, Boston, Massachusetts.

Financial Advisor: First Southwest Company, 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 on or about May 18, 2005, against payment in Federal Funds.

Issuer Official: Questions concerning the Official Statement should be addressed to: Mr. John D. Foster, Treasurer, Town of Wareham, Massachusetts Telephone (508) 291-3100 or Allan Tosti, Senior Vice President, First Southwest Company, Boston, Massachusetts Telephone (617) 619-4407.

4

NOTICE OF SALE

TOWN OF WAREHAM, MASSACHUSETTS

$4,206,000

GENERAL OBLIGATION BONDS

The Town of Wareham, Massachusetts will receive sealed and electronic (as described herein) proposals until 11:00 A.M., Eastern Time, Tuesday, May 10, 2005, for the purchase of the following described General Obligation Bonds of the Town (the "Bonds"):

$4,206,000 General Obligation Municipal Purpose Loan of 2005 Bonds payable as follows:

Due Principal Due Principal

May 15 Amount May 15 Amount

2006 341,000$ 2015 250,000$

2007 340,000 2016 140,000 *

2008 335,000 2017 140,000 *

2009 330,000 2018 130,000 *

2010 330,000 2019 130,000 *

2011 330,000 2020 130,000 *

2012 320,000 2021 130,000 *

2013 320,000 2022 130,000 *

2014 250,000 2023 130,000 *

* Callable maturities. May be combined into one or two Term Bonds as set forth herein.

The Bonds will be dated May 15, 2005. Principal of the Bonds will be payable on May 15 of the years in which the Bonds mature. Interest will be payable on November 15, 2005 and semi-annually thereafter on May 15 and November 15.

The Bonds will be issued by means of a book-entry system with no physical distribution of Bond certificates made to the public. One Bond certificate for each maturity 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, except for one denomination of $1,000 maturing in 2006, will be evidenced by a book-entry system with transfers of ownership effected on the records of DTC and its Participants pursuant to rules and procedures established by DTC and its Participants. The winning bidder, as a condition to delivery of the Bonds, shall be required to deposit the Bonds with DTC, registered in the name of Cede & Co. Interest and principal on the Bonds will be payable to DTC or its Nominee as Registered Owner of the Bonds. Transfer of principal and interest payments to 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 prepared under the supervision of First Southwest Company and their legality will be approved by Palmer & Dodge LLP, Boston, Massachusetts, whose opinion will be furnished to the purchaser without charge.

The Bonds maturing in the years 2006 through 2015 will not be subject to redemption prior to maturity. The Bonds maturing on and after May 15, 2016 shall be subject to redemption prior to maturity, at the option of the Town, on or after May 15, 2015, 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. 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 or (b) any interest rate which exceeds the interest rate stated for any other Bonds by more than 3 percent. No bid of less than par and accrued interest to date of delivery will be considered. For Bonds maturing on May 15, 2016 and thereafter, bidders may specify that all of the principal amount of such Bonds in any two or more consecutive years may, in lieu of maturing in each such year, be combined to comprise one or two maturities of Term Bonds scheduled to mature in the latest of the combined years, and shall be subject to mandatory redemption prior to maturity at par as described above, in each of the years and in the principal amounts specified in the foregoing maturity schedule. Bidders may specify no more than two maturities of Term Bonds.

5

As between proposals, which comply with this Notice, the award will be to the bidder offering to purchase all of the Bonds at the lowest net effective interest cost to the Town. Such interest rate shall be determined on a true interest cost (TIC) basis, which shall mean that rate which, as of May 15, 2005, discounts semi-annually all future payments of principal as set forth above and interest on the Bonds to the price bid, not including interest accrued to the date of delivery, which accrued interest shall be paid by the successful bidder. In the event there is more than one proposal specifying the lowest such rate, the Bonds will be awarded to the bidder whose proposal is selected by the Town Treasurer by lot from among all such proposals.

Bids must be submitted either:

(a) In a sealed envelope marked “Proposal for Bonds” and addressed to Mr. John D. Foster, Treasurer, Town of Wareham, Massachusetts, c/o First Southwest Company, Municipal Advisory Group, 54 Canal Street, Suite 320 Boston, Massachusetts 02114 or,

(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 Ideal @ 40 West 23rd Street, 5th Floor, New York, NY 10010 (212) 404-8102

The right is reserved to reject any or 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 Wareham 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 his/her contractual obligations arising from the acceptance of his/her 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 Moodys Investors Service for a rating on the Bonds. Any such fees paid to Moody’s Investors Service would be borne by the issuer.

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

The Bonds will be designated as “qualified tax-exempt obligations” for the purpose of Section 265(b)(3) of the Code. Accordingly, in the opinion of Bond Counsel, a deduction will be allowed to a financial institution for eighty percent of its interest expense allocable to the Bonds.

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 material events. A description of this undertaking is set forth in the Preliminary Official Statement.

It is anticipated that CUSIP identification numbers will be printed on the Bonds. All expenses in relation to the printing of CUSIP numbers on the Bonds shall be paid for by the Town, provided, however, that 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 Wareham and the Bonds is contained in the Preliminary Official Statement dated April 28, 2005, 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 First Southwest Company, 54 Canal Street, Boston, Massachusetts 02114 (Telephone: 617-619-4407). Within seven (7) business days following the award of the Bonds in accordance herewith, 50 copies of the Final Official Statement will be available from the First Southwest Company 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 on or about May 18, 2005 for settlement in Federal Reserve Funds.

__________________________

/s/ Mr. John D. Foster

April 28, 2005 Town Treasurer

6

OFFICIAL STATEMENT

TOWN OF WAREHAM, MASSACHUSETTS

$4,206,000 GENERAL OBLIGATION BONDS

This Official Statement is provided for the purpose of presenting certain information relating to the Town of Wareham, Massachusetts in connection with the sale of $4,206,000 aggregate principal amount of its General Obligation Municipal Purpose Loan of 2005 Bonds (the "Bonds"). The information contained herein has been furnished by the Town, except information attributed to another governmental agency or official as the source.

THE BONDS

Description of the Bonds

The Bonds will be dated May 15, 2005 and will bear interest payable semiannually on November 15 and May 15 commencing November 15, 2005. The Bonds shall mature on May 15 of the years and in the principal amounts as set forth on the first page of this Official Statement.

The Bonds are issuable only as fully registered Bonds without coupons, and, when issued, will be registered in the name of Cede & Co., as Bondowner and nominee for The Depository Trust Company ("DTC"), New York, New York. DTC will act as securities depository for the Bonds. Purchases of the Bonds will be made in book-entry form, in the denomination of $5,000 or any integral multiple thereof, except for one denomination of $1,000 maturing in 2006. Purchasers will not receive certificates representing their interest 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 Only System" herein.)

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.

Redemption Provisions

The Bonds maturing in the years 2006 through 2015 will not be subject to redemption prior to maturity. The Bonds maturing on and after May 15, 2016 shall be subject to redemption prior to maturity, at the option of the Town, on or after May 15, 2015, 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.

Term Bonds, if any, shall be subject to mandatory redemption on May 15 of the year or years immediately prior to the stated maturity of such Term Bonds (the particular Bond of such maturity to be redeemed to be selected by lot), as indicated in the maturity schedule on the front page of this Official Statement at the principal amount thereof plus accrued interest to the redemption date, without premium.

Mandatory Redemption

The Bonds maturing on May 15, 2020 and May 15, 2023, respectively (the “Term Bonds”) are subject to mandatory

redemption or maturity on each of the dates and in each of the principal amounts set forth below “the particular portion of each Term

Bond to be redeemed or to mature on the final maturity date to be delivered by lot), at a redemption price of par, plus accrued

interest, if any, to the redemption date.

$260,000 Term Bonds Maturing May 15, 2020 Year Principal A mount

2019 130,000$

2020* 130,000

*Final maturity.

$390,000 Term Bonds Maturing May 15, 2023

Year Principal Am ount

2021 130,000$

2022 130,000

2023* 130,000 *Final maturity.

7

So long as DTC is the registered owner of the Bonds, notice of any redemption of Bonds prior to their maturities, specifying the Bonds (or the portion thereof) to be redeemed shall be mailed to DTC not more than 60 days nor less than 30 days prior to the redemption date. Any failure on the part of DTC to notify the DTC Participants of the redemption or failure on the part of the DTC Participants, Indirect Participants, or of a nominee of a Beneficial Owner (having received notice from DTC Participant or otherwise) to notify the Beneficial Owner shall not affect the validity of the redemption.

Record Date The record date for each payment of interest is the last business day of the month preceding the interest payment date, provided that, with respect to overdue interest, the Paying Agent may establish a special record date. The special record date may not be more than twenty (20) days before the date set for payment. The Paying Agent will mail notice of a special record date to the Bondowners at least ten (10) days before the special record date.

Book-Entry Only System The Depository Trust Company ("DTC"), New York, New York, will act as securities depository for the Bonds. The Bonds will be issued as fully registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully registered Bond certificate will be issued 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 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 2 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments from over 85 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 bond and note certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC, in turn, is owned by a number of Direct Participants of DTC and Members of the National Securities Clearing Corporation, Government Securities Clearing Corporation, MBS Clearing Corporation, and Emerging Markets Clearing Corporation, (NSCC, GSCC, MBSCC, EMCC, also subsidiaries of DTCC), as well as the New York Stock Exchange, Inc., the American Stock Exchange LLC, and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has Standard & Poor’s highest rating: AAA. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. Purchases of securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the securities on DTC's records. The ownership interest of each actual purchaser of each security ("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, but Beneficial Owners are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participants through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the securities are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial owners will not receive certificates representing their ownership interests in securities, except in the event that use of the book-entry system for the securities is discontinued. To facilitate subsequent transfers, all securities deposited by 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. effect no change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the securities; 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 Participants will remain responsible for keeping account of their holdings on behalf of their customers.

8

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 within a maturity are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed.

Principal and interest payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts upon DTC’s receipt of funds and corresponding detail information from the Town or the Paying Agent on payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC, the Paying Agent, or the Town 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 or may be requested by an authorized representative of DTC) is the responsibility of the Town or the Paying Agent, disbursement of such payments to Direct Participants shall be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants.

DTC may discontinue providing its services as securities depository with respect to the Bonds at any time by giving reasonable notice to the Town or the Paying Agent. Under such circumstances, in the event that a successor securities depository is not obtained, Bond certificates are required to be printed and delivered.

The Town may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered.

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 table sets forth the principal amounts, purposes and statutory references for the current offering.

Massachusetts

Principal Date of Total General Laws

Amount Purpose Passage Authorization Chapter 44

597,000$ Sewer Planning (1) 6/29/1992 950,000$ 7(22)

422,289 Equipment 10/21/2002 422,289 7(9)

239,965 Land Acquisition 10/27/2003 550,000 7(3)

219,709 Departmental Equipment 10/28/2003 227,632 7(9)

1,265,930 Land Acquisition 4/27/2004 1,265,930 7(3)

95,622 Land Acquisition 4/27/2004 95,622 7(3)

1,100,000 Equipment 10/25/2004 1,100,000 7(9)

100,000 Remodeling 10/25/2004 100,000 7(3A)

165,485 Remodeling 4/25/2005 165,485 7(3A)4,206,000$

9

Principal Maturities by Purpose

Fiscal Year Sewer Planning (1) General Total

2006 32,000$ 309,000$ 341,000$

2007 35,000 305,000 340,000

2008 35,000 300,000 335,000

2009 35,000 295,000 330,000

2010 35,000 295,000 330,000

2011 35,000 295,000 330,000

2012 35,000 285,000 320,000

2013 35,000 285,000 320,000

2014 35,000 215,000 250,000

2015 35,000 215,000 250,000

2016 35,000 105,000 140,000

2017 35,000 105,000 140,000

2018 30,000 100,000 130,000

2019 30,000 100,000 130,000

2020 30,000 100,000 130,000

2021 30,000 100,000 130,000

2022 30,000 100,000 130,000

2023 30,000 100,000 130,000

Total 597,000$ 3,609,000$ 4,206,000$

______________

(1) Debt service is expected to be paid entirely from sewer revenues, although as a general obligation of the Town it is not limited to this or any other revenue

source.

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Tax Exemption In the opinion of Palmer & Dodge 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 (the “Code”). Bond Counsel is of the further opinion that interest on the Bonds is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes, although Bond Counsel observes that such interest is included in adjusted current earnings when calculating corporate alternative minimum taxable income. 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 purchasers of the Bonds 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 has not opined as to the taxability of the Bonds or the income therefrom 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 the first price at which a substantial amount of such maturity of the Bonds is sold to the public (excluding bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers). 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. Holders of the Bonds 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 first price at which a substantial amount of such Bonds is sold to the public. 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 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. Further, no assurance can be given that any pending, proposed or future legislation, including amendments to the Code, if enacted into law, or any regulatory or administrative development with respect to existing law, will not adversely affect the value of, or the tax status of interest on, the Bonds. Prospective holders of the Bonds are urged to consult their own tax advisors with respect to proposals to restructure the federal income tax. 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 holder of the Bonds. 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 holder or the holder’s other items of income or deduction. Except as indicated in the following paragraph, Bond Counsel expresses no opinion regarding any such other tax consequences, and holders of the Bonds should consult with their own tax advisors with respect to such consequences. The Bonds will be designated as "qualified tax-exempt obligations" for purposes of Section 265(b)(3) of the Code. Accordingly, in the opinion of Bond Counsel, a deduction will be allowed to a financial institution for

eighty percent of its interest expense allocable to the Bonds.

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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, if material. 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. The Town has never failed to provide annual reports or notices of material events in accordance with the Rule. Opinion of Bond Counsel

The purchaser will be furnished the legal opinion of the firm of Palmer & Dodge LLP, of Boston, Massachusetts. 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 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 make no representation that they have independently verified the same.

Rating Moody's Investors Service, Inc. has assigned a rating of "Aaa" to the Bonds, with the understanding that upon delivery of the Bonds, a policy insuring the payment when due of the principal of and interest on the Bonds will be issued by XL Capital Assurance. See Appendix D attached hereto for a discussion of XL Capital Assurance’s bond insurance and rating assigned to the Bonds. Said rating reflects only the rating agency’s views and is subject to revision or withdrawal, which could affect the market price of the Bonds.

Financial Advisory Services of First Southwest Company

First Southwest Company serves as financial advisor to the Town of Wareham. The Town has consented to First Southwest Company’s participation in the public bidding on the Bonds if it so desires.

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 "Use of State Distributions to pay debt service" below), no provision is made by the Massachusetts statutes for priorities among bonds and notes and other general obligations, although the use of certain moneys may be restricted. Tax Levy. The Massachusetts statutes direct the municipal assessors to include annually in the tax levy for the next fiscal year "all debt and interest charges matured and maturing during the next fiscal year and not otherwise provided for [and] all amounts necessary to satisfy final judgments." Specific provision is also made for including in the next tax levy payment of rebate amounts not otherwise provided for and payment of notes in anticipation of federal or state aid if the aid is no longer forthcoming.

The total amount of a tax levy is limited by statute. However, the voters in each municipality may vote to exclude from the limitation any amounts required to pay debt service on indebtedness incurred before November 4, 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.

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 to secure particular bonds or notes or bonds and notes generally (or judgments on bonds or notes) in priority to other claims. Provision is made, however, for borrowing to pay judgments, subject to the

General Debt Limit. (See "Debt Limits" 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.

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

Restricted Funds. Massachusetts statutes also provide that certain water, gas and electric, sewer, community antenna television system, telecommunication system, parking meter and passengers ferry receipts may be used only for water, gas and electric, community antenna television system, telecommunications, sewer, and parking, mitigation of ferry service impacts and related 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. 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 financing 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 "Types of Obligations" below) and any other sums due and payable by the city or town to the Commonwealth, or certain other public entities, including any unpaid assessments for costs of any public transportation authority (such as the Massachusetts Bay Transportation Authority or a regional transit authority) of which it is a member, for costs of the Massachusetts Water Resources Authority if the city or town is within the territory served by the Authority, or for charges necessary to meet obligations under the Commonwealth’s Water Pollution Abatement or Drinking Water Revolving Loan Programs, including such charges imposed by another local governmental unit that provides wastewater or drinking water treatment or collection services to the city or town.

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.

Use of State Distributions to Pay Debt Service

Section 19A of Chapter 44 of the General Laws provides in part that, 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 shall 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 paragraphs). 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.

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TOWN OF WAREHAM, MASSACHUSETTS The Town of Wareham, a coastal community located in Plymouth County approximately 61 miles from Boston, is bordered on the south by the Towns of Marion and Bourne and Buzzards Bay, on the west by the Town of Rochester, on the north by the Towns of Carver and Plymouth, on the northwest by the Town of Middleborough, and on the east by Bourne. With a population of approximately 20,335 the Town occupies a land area of 35.8 square miles and is primarily a residential community. The principal highways serving the Town are state Routes 6 and 28 and Interstate Routes 495 and 195. Wareham, incorporated as a Town in 1739, is governed by the open town meeting form of government. Principal Town Officials Local legislative decisions are made by an open town meeting consisting of all the registered voters in the Town. Subject to the legislative decisions made by the town meeting, the affairs of the Town are generally administered by a Town Administrator who is appointed by board of five selectmen who are elected on an at-large basis for staggered three-year terms. Local school affairs are administered by an elected school committee of five persons, while local taxes are assessed by a board of five assessors, elected for staggered three year terms on an at-large basis. The following is a list of the principal executive officers: Manner of Selection Term Office Name and Term Expires Selectmen Patrick G. Tropeano, Chairman 2005 Bruce D. Sauvageau, Clerk 2007 Mary Jane Pillsbury 2005 Cynthia Chamberlain 2006 R. Renee Fernandes-Abbott 2007 Town Administrator Michael J. Hartman Appointed/3 years 2007 Treasurer/Collector John D. Foster Appointed/Indefinite Indefinite Finance Director/Town Accountant Robert S. Bliss, CPA Appointed/Indefinite Indefinite Town Clerk Mary Ann Silva Elected/3 years 2007 Town Counsel Kopelman & Paige Appointed/1 year 2005 Municipal Services The Town provides general governmental services for the territory within its boundaries including police protection, sewer services, public education in grades Kindergarten through twelve, a library, streets, parks and recreation. The Upper Cape Cod Regional Vocational Technical School District provides vocational technical education in grades 9 to 12.

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Education The Town‘s school system provides education for students from pre-kindergarten through grade twelve. The Town has two elementary schools providing education for grades pre-K through 6, one middle school for grades 7 through 8 and one secondary school providing education for grades 9-12. The total design capacity of existing buildings is estimated at 3,556. The Town has authorized the renovation and expansion of the middle school to increase capacity. Following is a table setting forth actual enrollments in the Town's schools as of October 1 of each year.

Grades 2000 2001 2002 2003 2004

K-6 2,087 2,063 1,933 1,909 1,886

7-12 1,544 1,570 1,558 1,607 1,576

Totals 3,631 3,633 3,491 3,516 3,462

Actual

Educational Attainment 2000 (1)

Wareham Plymouth County Massachusetts

Years of School Completed Number Percent Number Percent Number Percent Less than 9th Grade 699 5.0 10,332 3.3% 247,556 5.8% 9th to 12th Grade 1,765 12.5 28,314 9.1 403,537 9.4 High School Graduate 5,176 36.7 96,116 30.7 1,165489 27.3 Some College, No Degree 3,122 22.2 63,873 20.4 730,135 17.1 Associate’s Degree 1,030 7.3 27,268 8.7 308,263 7.2 Bachelor’s Degree 1,542 10.9 58,575 18.7 834,554 19.5 Graduate or Professional Degree 756 5.4 28,205 9.0 583,741 13.7 Total 14,090 100.0% 312,683 100.0% 4,273,275 100.0%

High School Graduate or Higher 11,626 82.5% 274,037 87.6% 3,622,182 84.8% Bachelor’s Degree or Higher 2,298 16.3% 86,780 27.8% 1,418,295 33.2% _____________________

(1) Source: U.S. Department of Commerce.

Industry and Commerce

Employment and Payrolls

Industry 1999 2000 2001

Government 531 532 542 Agriculture 182 124 127 Construction 73 90 114 Manufacturing 645 759 723 Transportation, 549 496 512 Wholesale/Retail 2,479 2,524 2,654 Finance, Insurance 121 118 115 Services 1,837 1,959 2,016 Total Employment 6,417 6,602 6,803

Number of 508 520 536 Average Annual 27,547$ 28,426$ 29,230$

Total Annual Payroll 176,880,272$ 187,756,012$ 198,911,993$

Calendar Year Average

_____________________

Source: Massachusetts Department of Employment and Training.

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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.

Industry 2002 2003

Construction 152 179

Manufacturing 511 589

Trade, Transportation and Utilities 2,302 2,341

Information 183 179

Financial Activities 152 163

Professional and Business Services 862 857

Education and Health Services 1,404 1,711

Leisure and Hospitality 1,032 1,033

Other Services 259 273

Total Employment 6,857 7,325

Number of Establishments 604 613

Average Weekly Wages 586$ 630$

Total Wages 219,687,992$ 252,836,155$

Calendar Year Average

__________________ Source: Massachusetts Department of Education and Training. Data based upon place of employment, not place of

residence. Largest Employers

The following are the principal employers located in the Town, excluding the Town itself:

Approximate Company Nature of Business Number of Employees Tobey Hospital Health Care 500 WalMart Retail Store 250 USPS Postal Service 200 Home Depot Retail Store 200 Stop n’ Shop Retail Grocery Store 175 Forestview Nursing & Rehabilitation Center Medical Facility 175 Cape Cod Express Trucking 137 Chatham Village Croutons Food Processor 128 Millbrook Nursing & Rehabilitation Center Medical Facility 110 H.L. Bouton Manufacturer Plastic 82 Marian Heath Mfg. Greeting Cards 68 Springborn Life Sciences Chemical Laboratory 65 Factory 5 Racing Build Race Car Kits 42 Fiberspar Mfg High Pressure Flexible Hose 31

Building Permits

Fiscal

Year No. Value

2004 1,134 42,939,220$

2003 1,263 45,284,980 (1)

2002 1,196 27,024,150

2001 1,146 25,559,880

2000 1,092 21,101,724

_________________ (1) $22,000,000 of this amount was for a sewer treatment plant.

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Labor Force, Employment and Unemployment According to the Massachusetts Division of Employment and Training, in March 2005, the Town had a total labor force of 11,414 of which 10,667 were employed and 747, or 6.5% were unemployed as compared with 5.3% for the Commonwealth. (Note: monthly data are unadjusted.) The following table sets forth the Town's average labor force and unemployment rates and the unemployment rates for the Commonwealth and the United States for calendar years 2000 through 2004.

Year

2004 5.4 % 5.3 % 6.0 %

2003 7.5 5.8 6.0

2002 6.2 5.3 5.8

2001 3.8 3.7 4.8

2000 3.9 2.6 4.0

Wareham Massachusetts United States

__________________

(1) Massachusetts Department of Employment and Training.

Population Density (1) Wareham Plymouth County Massachusetts

Year Number Density (2) Number Density Number Density 2010 (Proj.) 20,755 579.8 507,857 768.8 6,690,740 853.6 2005 (Proj.) 20,248 565.7 490,077 741.9 6,505,160 830.0 2000 20,335 568.1 472,822 715.8 6,349,097 810.0 1990 19,232 537.3 435,276 658.9 6,016,425 767.6 1980 18,457 515.6 405,437 613.8 5,737,037 732.0 1970 11,492 321.1 333,314 504.6 5,689,170 725.8 1960 9,461 264.3 248,449 376.1 5,148,578 656.9 _________________

(1) Source: U.S. Department of Commerce.

(2) Based on 35.8 square miles.

Population Composition 2000 (1) Wareham Plymouth County Massachusetts

Age Number Percent Number Percent Number Percent Under 5 Years 1,201 5.9% 33,099 7.0% 397,268 6.3% 5 Years to 19 Years 4,222 20.7 104,493 22.1 1,277,845 20.1 20 Years to 64 Years 11,622 57.1 279,458 59.1 3,813,822 60.1 65 Years & Over 3,290 16.1 55,772 11.8 860,162 13.5 Median Age 39.6 36.8 36.5 Median Age (1990) 34.3 33.1 33.6 _______________________

(1) Source: U.S. Department of Commerce.

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Income Levels (1)

Wareham Plymouth County Massachusetts % Change from % Change from % Change from

Year Amount Previous Census Amount Previous Census Amount Previous Census

Per Capita-Personal 1999 $21,312 58.7% $24,789 50.0% $25,952 50.7% 1989 13,428 125.9 16,523 136.8 17,224 131.0 1987 (Est.) 11,418 10.7 13,636 15.4 14,389 15.0 1985 (Est.) 10,315 21.4 11,817 20.6 12,510 19.0 1983 (Est.) 8,495 15.6 9,801 15.0 10,517 15.6 Median Family Income (1999) $45,750 $65,554 $61,664 Median Household Income (1999) $40,422 $55,615 $50,502 % Below Poverty Level (1999) 8.1% 4.9% 6.7% _________________________ (1) Source: U.S. Department of Commerce.

Household Income Distribution 2000 (1)

Wareham Plymouth County Massachusetts Income for Households Households Percent Households Percent Households Percent

Less than $10,000 847 10.3% 10,990 6.5% 214,700 8.8% 10,000 - 24,999 1,691 20.6 23,509 14.0 385,395 15.8 25,000 - 49,999 2,532 30.8 40,128 23.8 608,320 24.9 50,000 - 74,999 1,523 18.6 37,053 22.0 490,998 20.1 75,000 - 99,999 897 10.9 25,077 14.9 312,741 12.8 100,000 - 149,999 475 5.8 20,722 12.3 267,300 10.9 150,000 or more 245 1.7 10,969 6.5 165,134 6.8 ___________________ (1) Source: U.S. Bureau of the Census.

Family Income Distribution 2000(1) Wareham Plymouth County Massachusetts

Income for Households Families Percent Families Percent Families Percent Less than $10,000 290 5.3 % 3,778 3.1% 71,198 4.5% 10,000 - 24,999 959 17.6 11,593 9.4 175,120 11.0 25,000 - 49,999 1,737 32.0 27,144 22.1 368,418 23.2 50,000 - 74,999 1,188 21.8 29,727 24.1 359,202 22.6 75,000 - 99,999 679 12.5 22,213 18.0 251,231 15.8 100,000 - 149,999 396 7.3 18,590 15.1 222,234 14.0 150,000 or more 190 3.5 10,075 8.2 140,134 8.8

_________________ (1) Source: U.S. Department of Commerce.

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Value Distribution of Specified Owner-Occupied Housing Units 2000 (1) Wareham Plymouth County Massachusetts

Units Number Percent Number Percent Number Percent Less than $50,000 68 1.3% 423 0.4% 8,071 0.7% 50,000 - 99,999 1,247 24.1 6,160 5.6 105,192 8.9 100,000 - 149,999 2,325 44.9 29,094 26.4 277,571 23.4 150,000 - 199,999 922 17.8 30,412 27.6 273,542 23.0 200,000 - 299,999 408 7.9 26,133 23.7 286,599 24.1 300,000 or more 213 4.2 18,002 16.4 236,896 19.9 Median Value $121,900 $179,200 $185,700 ______________

(1) Source: U.S. Department of Commerce.

Age Distribution of Housing Units 2000 (1)

Wareham Plymouth County Massachusetts Year Built Number Percent Number Percent Number Percent

1990 to March 2000 805 7.5% 19,636 10.8% 218,407 8.3% 1980 to 1989 1,134 10.6 22,913 12.6 292,701 11.2 1940 to 1979 6,556 61.4 93,145 51.3 1,205,183 46.0 1939 or Earlier 2,175 20.4 45,830 25.2 905,698 34.5 Total 10,670 100.0% 181,524 100.0% 2,621,989 100.0% Median Year Built 1963 1961 1953 _________________ (1) Source: U.S. Department of Commerce.

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PROPERTY TAXATION Tax Levy Computation A principal revenue source of the Town is the tax on real and personal property. The amount to be levied in each year is the amount appropriated or required by law to be raised for municipal expenditures less estimated receipts from other sources and less appropriations voted from available funds. The total amount levied is subject to certain limits prescribed by law. (For a description of those limits, see "Tax Limitations" below. As to the inclusion of debt service and final judgments, see "Security and Remedies".) The estimated receipts for a fiscal year from other sources may not exceed the actual receipts during the preceding fiscal year from the same sources unless approved by the State Commissioner of Revenue. Excepting special funds the use of which is otherwise provided for by law, the deduction for appropriations voted from available funds for a fiscal year cannot exceed 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, no reserve is generally provided for uncollectible real property taxes. (See "Abatements/Exemptions and Overlay") 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 following table shows the details of the calculation of the tax levies for the most recent fiscal years:

Fiscal Fiscal Fiscal Fiscal Fiscal2005 2004 2003 2002 2001

Gross Amount to be Raised:

Appropriations (1)(2) 50,821,223$ 48,885,552$ 47,331,817 44,866,677 42,370,418

Local Expenditures 539,247 593,686 550,238 901,855 904,077

State and County Charges 977,792 787,692 648,195 622,170 581,874

Overlay Reserve 240,392 295,216 358,671 242,627 287,655

Total Gross Am ount to be Raised: 52,578,654 50,562,146 48,888,921 46,633,329 44,144,024

Deductions:

Estimated Receipts from the State(3) 14,404,642 14,283,331 15,524,528 15,603,376 15,518,425

Estimated Receipts - Local 12,420,235 11,228,022 9,811,810 7,948,469 7,961,272

Available Funds(4):

Free Cash 1,520,258 1,422,607 683,790 1,780,488 10,096

Other 329,000 474,116 1,195,681 683,424 809,968

Free Cash & Other Revenue Used

to Reduce the Tax Rate 223,621 268,537 313,453 358,369 403,285

Total Deductions 28,897,756 27,676,613 27,529,262 26,374,126 24,703,046 Net Am ount to be Raised

(Tax Levy) 23,680,898$ 22,885,533$ 21,359,659$ 20,259,203$ 19,440,978$

__________________________

(1) Includes additional appropriations from taxation voted subsequent to adoption of the annual budget but prior to setting of the tax rate.

(2) Fluctuations are due to utilization of retained earnings for capital projects. (3) Estimated by various state agencies 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. See “Revenues --State Aid".

(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. Until fiscal year 2004, the share required to be borne by residential real property was at least 50 per cent of its share of the total taxable valuation; under legislation enacted in the beginning of 2004, however, cities and towns were authorized to reduce the required share to be borne by residential real property to at least 45 per cent of its share of the total taxable valuation in fiscal year 2004, 47 per cent in fiscal year 2005, 49 per cent in fiscal year 2006 and 50 per cent thereafter. The effective rate for open space must be at least 75 per cent of the effective rate for residential real property. Until fiscal year 2004, the share of commercial, industrial and personal property was limited to not more than 175 per cent of their share of the total valuation; under legislation enacted in the beginning of 2004, however, cities and towns were authorized to increase the limit on the share of the total taxable valuation of such property to not more than 200 per cent in fiscal year 2004, 197 per cent in fiscal year 2005, 190 per cent in fiscal year 2006, 183 percent in fiscal year 2007, 175 per cent in fiscal year 2008, and, if the share of such property in a particular city or town exceeded 175 per cent in any of fiscal years 2004 through 2007, 170 per cent in fiscal years 2009 and thereafter. A city or town may also exempt up to 20 percent of the valuation of residential real property (where used as the taxpayer’s principal residence) and up to 10 percent of the valuation of commercial real property (where occupied by certain small businesses). Property may not be classified in a city or town until the State Commissioner of Revenue certifies that all property in the city or town has been assessed at its fair cash value. Such certification must take place every three years. 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 per cent 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 per cent of fair cash value but not less than ten dollars per acre. A professional revaluation of all real and personal property in the Town to full and fair cash value was completed for use in fiscal 2003. The following table sets forth the trend in the Town's assessed valuations, tax rates, tax levies, and tax levies per capita.

Personal Total

Fiscal Real Estate Property Assessed Tax Rate Tax Levy

Year Valuation Valuation Valuation Per $1,000 Tax Levy Per Capita(1)

2005 2,895,848,700$ 56,881,800$ 2,952,730,500$ 8.02$ 23,680,899$ 1,165$

2004 2,184,775,000 54,513,900 2,239,288,900 10.22 22,885,533 1,125

2003 (2) 2,148,071,900 44,911,577 2,192,983,477 9.74 21,359,659 1,050

2002 1,403,239,900 45,916,284 1,449,156,184 13.98 20,259,203 996

2001 1,388,457,200 45,243,275 1,433,700,475 13.56 19,440,978 956 ________________

(1) Based on the 2000 population of 20,335.

(2) Revaluation.

The table below sets forth the assessed valuations of real estate of the Town for the following fiscal years.

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

Residential(1) 2,602,381,203$ 88.1 % 1,926,917,362$ 86.05 % 1,896,372,582$ 86.47

Commercial 239,034,637 8.1 210,317,918 9.39 205,358,298 9.36

Industrial 54,432,860 1.8 47,539,720 2.12 46,341,020 2.11

Personal 56,881,800 1.9 54,513,900 2.43 44,911,577 2.05Total Real Estate 2,952,730,500$ 100.0 % 2,239,288,900$ 100.00 % 2,192,983,477$ 100.00

200320042005

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Largest Taxpayers

The following is a list of the largest taxpayers for fiscal 2005: All of the tax payers listed below are current in their payments.

Total Assessed

Nature of Valuation for

Name Business Fiscal 2005

Commonwealth Electric Co. Utility 26,857,500$ 0.910 %

Tedeschi Darman Co. LLC Shopping Center 21,935,500 0.743

Wal-Mart Stores, Inc. Retail Store 15,102,100 0.511

A.D. Makepeace Co. Cranberry Growers 14,842,600 0.503

Home Depot USA Inc. Retail Store 10,697,400 0.362

Burke, James M. Trustee Industrial Properties 7,928,400 0.269

Roger L. Hall, Jr. Mobile Home Park 5,908,000 0.200

Colonial Gas Company Utility 5,906,800 0.200

HCRI Massachusetts Properties Nursing Home 5,638,200 0.191

Verizon New England Inc. Telephone Utility 5,463,600 0.185

Total 120,280,100$ 4.074 %

% of Total

Assessed

Valuation

State Equalized Valuation and Estimated Full Value Tax Rate 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 as of January 1 of even numbered years. This is known as the "equalized value". The following table sets forth the trend in equalized valuations of the Town.

State Equalized

January 1, Valuation % Change

2004 $2,847,668,900 48.58 %

2002 1,916,534,000 27.55

2000 1,502,560,500 19.31

1998 1,259,404,900 1.08

1996 1,245,904,000 3.46

1994 1,204,294,200 (19.56)

1992 1,497,197,000

Abatements/Exemptions 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 and real estate exemptions. If abatements/exemptions are granted in excess of the applicable overlay, the excess is required to be added to the next tax levy. A real estate tax exemption is a discharge from obligation to pay all or a portion of a tax. Exemptions are conferred by the legislature on particular categories of persons or property. Abatements are granted where 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 shows the abatements granted during each of the last five fiscal years: For Fiscal Year

2004 2003 2002 2001 2000 Total Tax Levy 22,885,533 $21,359,65

9$20,259,203 $19,440,978 $18,684,89

Overlay Reserve for Abatements 295,216 358,671 $242,627 $287,655 $357,121Percent of Total Tax Levy 1.3% 1.7% 1.2% 1.5% 1.9%Abatements/Exemptions Granted: Through June 30, 2004 167,221 $161,485 $144,438 $174,036 $203,214

Tax Collections Payment Dates. The taxes for each fiscal year are due in four installments on August 1, November 1, February 1 and May 1. Under this statute preliminary tax payments are to be due on August 1 and November 1 with payment of the actual tax bill (after credit is given for the preliminary payments) in installments on February 1 and May 1 if the actual tax bills are mailed by December 31. Interest accrues on delinquent taxes at the rate of 14 percent per annum. Lien. Real property (land and buildings) is subject to a lien for the taxes assessed upon it subject to any paramount federal lien and subject to bankruptcy and insolvency laws. (In addition, real property is subject to a lien for certain unpaid municipal charges or fees.) If the property has been transferred, an unenforced lien expires on the fourth December 31 after the end of the fiscal year to which the tax relates. If the property has not been transferred by the fourth December 31, an unenforced lien expires upon a later transfer of the property. Provision is made, however, for continuation of the lien where it could not be enforced because of a legal impediment. Personal Liability. The persons against whom real or personal property taxes are assessed are personally liable for the tax (subject to bankruptcy and insolvency laws.) In the case of real property, this personal liability is effectively extinguished by sale or taking of the property as described in “Taking and Sale” below. The following shows the total tax levy, the reserve for abatements, the net levy and the amounts collected during each fiscal year and as of a more recent date for each of the last five fiscal years:

Overlay

Fiscal Gross Tax Reserve for Net Dollar % of Dollar % of

Year Levy Abatements Tax Levy Amount Net Levy Amount Net Levy

2004 22,885,533$ 295,216$ 22,590,317$ 21,990,531$ 97.34 % 21,990,531$ 97.34 %

2003 21,359,659 358,369 21,001,290 20,236,438 96.36 20,635,602 98.26

2002 20,259,203 242,627 20,016,576 18,896,630 94.40 19,643,909 98.14

2001 19,440,978 287,655 19,153,323 18,454,106 96.35 18,925,039 98.81

2000 18,684,890 357,121 18,327,769 17,629,059 96.19 18,195,130 99.28

Collections During Collections as of

Fiscal Year Payable(1) June 30, 2004 (1)(2)

___________ (1) Actual collections. Does not include, abatements, proceeds of tax titles or tax possessions attributable to each

levy or other non-cash credits. (2) Collections for fiscal 2005 are comparable to prior years. Taking and Sale. Massachusetts law permits a municipality either to sell by public sale (at which the municipality may become the purchaser) or to take real property for nonpayment of taxes. In either case the property owner can redeem the property by paying the unpaid taxes, with interest 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.

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Sale of Tax Receivables. Legislation enacted in 1996 authorized public sales by cities and towns of delinquent property tax receivables, either individually or in bulk. Taxes Outstanding (1)

The following shows taxes outstanding at the end of each of the last five fiscal years: For Fiscal Year

2004 2003 2002 2001 2000 Aggregate (1) $ 912,626 $ 810,190 $1,301,612 $1,257,907 $994,241 For Current Year (1) 729,974 752,613 737,393 813,049 852,260 Tax Titles 1,846,921 2,036,097 1,987,999 1,883,032 2,265,364 _________________

(1) Excludes tax titles, tax possessions and abated taxes. Includes taxes in litigation, if any.

Tax Levies

Taxation to Meet Deficits. As noted elsewhere (see “Abatements/Exemptions 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. In the opinion of Bond Counsel, 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 580 of the Acts of 1980, which was proposed by an initiative petition known as “Proposition 2½”, was adopted at the November 4, 1980 general election and took effect on December 4, 1980. The law is subject to amendment or repeal by the legislature. The legislation (as subsequently amended) 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. The applicable tax limits may also be reduced in any year by a majority vote of the voters.

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The State Commissioner of Revenue may adjust any tax limit “to counterbalance the effects of extraordinary, non-recurring events which occurred during the base year”.

The statute further provides that the voters may exclude from the taxes subject to the tax limits and from the calculation of the maximum tax levy (a) the amount required to pay debt service on bonds and notes issued before November 4, 1980, if the exclusion is approved by a majority vote of the voters, and (b) the amount required to pay debt service on any specific subsequent issue for which similar approval is obtained. Even with voter approval, the holders of the obligations for which unlimited taxes may be assessed do not have a statutory priority or security interest in the portion of the tax levy attributable to such obligations. It should be noted that Massachusetts General Laws Chapter 44, Section 20 requires that the taxes excluded from the levy limit to pay debt service on any such bonds and notes be calculated based on the true interest cost of the issue. Accordingly, the Department of Revenue limits the amount of taxes which may be levied in each year to pay debt service on any such bonds and notes to the amount of such debt service, less a pro rata portion of any original issue premium received by the city or town that was not applied to pay costs of issuance.

Voters may also exclude from the Proposition 2½ limits the amount required to pay specified capital outlay expenditures. 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, the statute 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 the statute any State law to take effect on or after January 1, 1981 imposing a direct service or cost obligation on a city or town will become effective only if accepted or voluntarily funded by the city or town or if State funding is provided. Similarly, State rules or regulations imposing additional costs on a city or town or laws granting or increasing local tax exemptions are to take effect only if adequate State appropriations are provided. These statutory provisions do not apply to costs resulting from judicial decisions.

Initiative Petitions. Various other 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.

Unused Levy Capacity

The following table shows the calculation of levy limits for the current and most recent fiscal years:

2005 2004 2003 2002

Primary Levy Limit (1) 73,818,263$ 55,982,223$ 54,824,587$ 36,228,905$

Prior Fiscal Year Levy Limit 22,422,071 21,350,310 20,260,032 19,445,352

2.5% Levy Growth 560,552 533,758 506,501 486,134

New Growth (2) 599,303 538,003 583,777 328,546

Overrides - - - -

Growth Levy Limit 23,581,926 22,422,071 21,350,310$ 20,260,032

Debt Exclusions 105,265 475,552 29,993 -

Tax Levy Limit 23,687,191 22,897,623$ 21,380,303$ 20,260,032$

Tax Levy 23,680,899 22,885,533 21,359,659 20,259,203

Unused Levy Capacity (3) 6,292$ 12,090$ 20,644$ 829$

Unused Primary Levy Capacity (4) 50,236,337$ 33,560,152$ 33,474,277$ 15,968,873$

__________________ (1) 2.5% of assessed valuation.

(2) Allowed increase for new valuations - certified by the Department of Revenue.

(3) Tax Levy Limit less Tax Levy. The additional amount which may be levied without voter approval.

(4) Primary Levy Limit less Growth Levy Limit.

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Pledged Taxes

Taxes on the increased value of certain property in designated development districts may be pledged for the payment of costs of economic development projects within such districts and may therefore be unavailable for other municipal purposes.

Community Preservation Act

The Massachusetts Community Preservation Act (the “CPA”), permits cities and towns that accept its provisions to levy a surcharge on its real property tax levy and to receive state matching funds for the acquisition, creation, preservation rehabilitation and restoration of open space, historic resources and affordable housing. 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% of the real property tax levy, and it may accept one or more exemptions to the surcharge under the CPA, including 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, and an exemption for commercial and industrial properties in cities and towns with classified tax rates. The surcharge is not counted in the total taxes assessed for the purpose of determining the permitted levy amount under Proposition 2½ (see “Property Tax Limitations” above). A city or town may revoke its acceptance of the provisions of the CPA at any time after 5 years from the date of such acceptance and may change the amount of the surcharge or the exemptions to the surcharge at any time, 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 on the real property tax levy. 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 which requires that 80% of the amount in the state trust fund be used to match an equal percentage of the amount raised locally by each city and town, and that the remaining 20% of the amount in the fund be distributed only to those cities and towns that levy the maximum 3% surcharge based on a formula which takes into account equalized property valuation and population, resulting in larger distributions to those communities with low valuations and small populations. The total state distribution made to any city or town may not, however, exceed 100% of the amount raised locally by the surcharge on the real property tax levy.

The amounts raised by the surcharge on real property taxes 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 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 accepted the Act and set the rate at 3% minus certain exemptions. The Town implemented the program in fiscal 2003 and had revenues in 2004 of $670,176. The Town anticipates revenues of $850,000 in fiscal 2005.

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TOWN FINANCES Budget and Appropriation Process The annual appropriations of a town are ordinarily made at the annual meeting which takes place in February, March, April or 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. Water and Sewer department expenditures 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. Under recent legislation, the board of selectmen of a town with the concurrence of the finance committee may transfer within the last 2 months of fiscal years 2004 and 2005 any amount appropriated for the use of any department to the appropriation for any other department, provided that no such transfer may be made from any appropriation for a school department, regional school district, or municipal light department. 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 Comparison The following table sets forth the budgets for fiscal years 2006 – 2002:

Fiscal Fiscal Fiscal Fiscal Fiscal

2006 2005 2004 2003 2002

General Government 3,138,207$ 3,174,292$ 3,221,205$ 3,300,987$ 3,424,297$

Public Safety 4,757,826 4,687,280 4,268,692 4,198,086 4,042,671

Human Services 434,203 410,581 387,556 305,509 320,389

Public Works 1,439,234 1,434,831 1,539,282 1,445,661 1,702,910

Education 25,227,194 25,096,622 24,296,753 24,780,627 24,135,567

Culture & Recreation 860,024 804,385 767,670 749,540 786,746

Insurance 623,403 599,433 608,250 441,189 453,947

Employee Benefits 4,541,247 4,692,010 4,215,000 3,700,184 3,384,337

Debt Service 3,132,500 2,883,012 2,707,383 2,476,270 2,125,646

Pensions 1,841,156 1,438,355 1,231,478 1,083,128 1,051,729

State & County Assessments 973,061 973,061 787,692 648,056 619,644

Totals 46,968,055$ 46,193,862$ 44,030,961$ 43,129,237$ 42,047,883$

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Revenues 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 the actual state aid payments may vary from the estimate. In 1993, the Massachusetts Supreme Judicial Court found that the State has an enforceable constitutional obligation to provide an adequate public education and that, at that time, the State was not fulfilling its obligation. Promptly thereafter, the state legislature adopted the Education Reform Act of 1993, which, among other things, increased funding levels and changed allocation formulas for state school aid. In 1999, the litigation was reinstituted by a number of municipalities challenging the adequacy of the public education being provided by the State and seeking, among other things, additional state aid for their schools. Pursuant to a fact finding trial, the Superior Court issued a report to the Supreme Judicial Court which, among other things, concluded that the State is not satisfying its constitutional obligation with respect to certain municipal school systems and recommended that the Court order the State to provide funding necessary to pay for an adequate education in such municipalities. On February 15, 2005, the Supreme Judicial Court in effect held that the Commonwealth was meeting its constitional obligation. 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. The following table sets forth the actual State aid received in each of the most recent fiscal years and the amount projected for fiscal 2005: Fiscal Year Receipts

2005 $14,390,452 2004 14,245,345 2003 14,909,402 2002 15,622,856 2001 15,430,232 Legislation was enacted in 1991 to help municipalities compensate for additional local aid reductions by the Commonwealth for fiscal year 1992. Under that law, municipalities were allowed to defer budgeting for teacher’s summer compensation payable by the end of the fiscal years 1992 and 1993. Municipalities that chose to defer such amounts are required to amortize the resulting budget deficiency by raising at least one fifteenth of the deferred amount in each of the fiscal years 1997 through 2011, or in accordance with a more rapid amortization schedule.The Town chose to accept the deferral in the deferred amount of $627,865. The Town has approved a 15-year amortization schedule for the deferred amount that began in fiscal year 1998. The Town has budgeted $44,916 for fiscal 2005. 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. Approved project costs included the interest expense incurred on debt issued by a municipality to finance the school project. In recent years, demand for school building assistance grants far exceeded available funds. As of July 1, 2004, a total of 425 projects for which completed grant applications had been submitted were still on the Department of Education’s project priority list awaiting approval of a grant.

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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. It is expected that the Authority will continue to pay the remaining amounts of the grants for such projects in annual installments to reimburse debt service on bonds issued by the municipalities to finance such projects. 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. The Authority expects to pay grants for all of the projects on the priority waiting list by the end of fiscal year 2008. Grants for such projects are expected to be paid 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, shall be included in the approved costs of such projects. Grant applications for new projects may not be submitted to the Authority until July 1, 2007. The range of reimbursement rates for such projects has been reduced to between 40% and 80% of approved project costs. Prior to that date, the Authority is required to engage in a comprehensive review of the school building assistance program, to recommend legislative changes, to adopt new maximum eligible cost and size standards, and to promulgate new regulations. The Authority expects to pay grants for such projects in lump sum payments as project costs are incurred. None of the interest expense incurred on debt issued by municipalities to finance new projects will be included in the approved project costs eligible for reimbursement. 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 motor vehicle is customarily kept. Valuations are determined by a statutory formula based on manufacturers’ list price and year of manufacture. Bills not paid when due bear interest at 12 percent per annum. Provision is also made, after notice to the owner, for suspension of the owner’s operating license or registration by the registrar of motor vehicles. The following table shows the recent trend in actual receipts: Fiscal Year Receipts (1)

2004 $2,033,068 2003 2,300,565 2002 1,932,017 2001 1,661,700 2000 1,593,923 __________________ (1) Net after refunds. Includes receipts for prior years.

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Investments Investments of funds of cities and towns, except for trust funds, are generally restricted by Massachusetts General Laws Chapter 44, §55. That statute permits investments of available revenue funds and bond and note proceeds in term deposits and certificates of deposits of banks and trust companies, in obligations issued or unconditionally guaranteed by the federal government or an agency thereof with a maturity of not more than one year, in repurchase agreements with a maturity of not more than 90 days secured by federal or federal agency securities, in participation units in the Massachusetts Municipal Depository Trust (“MMDT”), or in shares in SEC-registered money market funds with the highest possible rating from at least one nationally recognized rating organization. MMDT is an investment pool created by the Commonwealth under the supervision of the State Treasurer’s office. According to the State Treasurer the Trust’s investment policy is designed to maintain an average weighted maturity of 90 days or less and is limited to high-quality, readily marketable fixed income instruments, including U.S. Government obligations and highly-rated corporate securities with maturities of one year or less. Trust funds, unless otherwise provided by the donor, may be invested in accordance with §54 of Chapter 44, which permits a broader range of investments than §55, including any bonds or notes that are legal investments for savings banks in the Commonwealth. The restrictions imposed by §§54 and 55 do not apply to city and town retirement systems.

Annual Audits The Town’s accounts were most recently audited for the fiscal year ended June 30, 2003 by Cicoria & Company Certified Public Accountants. The audit for the year ended June 30, 2004 is in process. Summary of Significant Accounting Policies See Appendix A attached. Financial Statements Set forth on the following pages is Combined Balance Sheet for fiscal years 2004, 2003 and 2002 and a Comparative Statement of Revenues, Expenditures and Changes in Fund Balance for fiscal years 1999 through 2003.

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Proprietary Fiduciary Account

Fund Types Fund Types Group Total

Special Capital Trust and Long Term Governmental

ASSETS General Revenues Projects Enterprise Agency Obligations Funds

Cash and cash equivalents 5,005,680$ 3,012,401$ 3,546,016$ 7,009,660$ 2,903,839$ -$ 21,477,596

Receivables: -

Property Taxes 907,384 204,452 - - - - 1,111,836

Tax Liens, Foreclosures, Deferred Taxes 2,163,851 - - - - - 2,163,851

Excises 606,241 - - - - - 606,241

Sewer User Charges - - - 384,343 - - 384,343

Sewer Liens - - - 46,724 - - 46,724

Departmental 264,232 1,067,253 - - - 1,331,485

Special Assessments and Betterments 238,593 1,475,383 - 2,484,151 - - 4,198,127

Committed Interest - - - - - - -

Due From Other Governments - 30,000 - 7,397,364 - - 7,427,364

Amounts to be Provided Bonds Payable - - - 21,218,341 - 10,727,060 31,945,401

Total Assets: 9,185,981$ 5,789,489$ 3,546,016$ 38,540,583$ 2,903,839$ 10,727,060$ 70,692,968$

LIABILITIES

Warrants Payable 1,796,627 - - - - - 1,796,627$

Accrued Payroll 83,937 - - - - - 83,937

Withholding Payable 323,789 - - - - - 323,789

Abandoned Property Unclaimed Items 37,778 - - - - - 37,778

Bond Premium - - - - - - -

Other Liabilities - - - - - - -

Deferred Revenues - - - - 1,510,273 - 1,510,273

Property Taxes 555,362 204,452 - - - - 759,814

Other Receivables 3,272,916 2,542,636 - 2,915,218 - - 8,730,770

Provision for Abatements and Exemptions 352,023 - - - - - 352,023

Notes Payable - 1,361,552 22,672,000 21,542,367 - - 45,575,919

Bonds Payable - 178,872 - 21,218,341 - 10,727,060 32,124,273

Total Liabilities: 6,422,432$ 4,287,512$ 22,672,000$ 45,675,926$ 1,510,273$ 10,727,060$ 91,295,203$

FUND EQUITY

Retained Earnings

Reserved - - - - - - -

Unreserved - - - 500,450 - - 500,450

Reserved Fund Balance - - -

Deficits (454,497) - - - - - (454,497)

Endowments 1,393,566 - 1,393,566

Encumbrances 854,589 - - - - - 854,589

Petty Cash 425 205 - - - - 630

Unreserved fund balance -

Desginated 758,258 1,501,772 (19,125,984) (7,635,793) - - (24,501,747)

Undesignated 1,604,774 - 1,604,774

Total Fund Equity: 2,763,549 1,501,977 (19,125,984) (7,135,343) 1,393,566 - (20,602,235)

Total Liabilities and Fund Equity: 9,185,981$ 5,789,489$ 3,546,016$ 38,540,583$ 2,903,839$ 10,727,060$ 70,692,968$

(1) Extracted from unaudited Financial Statements of the Town.

Town of Wareham, Massachusetts

Combined Balance Sheet - All Fund Types and Account Group

June 30, 2004 (1)

Governmental Fund Types

31

Non-Major TotalSchool Governmental Governmental

ASSETS General Construction Funds Funds

Cash and cash equivalents 8,847,966$ 5,327,753$ 3,156,762$ 17,332,481$ Receivables, net of uncollectible accounts: -

Real estate and personal property taxes 1,017,022 - 9,382 1,026,404 Tax/utility liens 2,073,800 - - 2,073,800 Excises 521,298 - - 521,298 Departmental and other 209,037 - 219,366 428,403 Due from other governments 7,291,497 9,705,730 1,742,361 18,739,588 Loans - - 55,980 55,980

Prepaid and other assets - - - - Cash and investments, restricted - - 300,139 300,139 Total Assets: 19,960,620$ 15,033,483$ 5,483,990$ 40,478,093$

LIABILITIES

Accounts payable 4,862,060 - 460,942 5,323,002$ Accrued expenses: - Payroll and taxes 107,899 - - 107,899 Notes payable - 16,574,000 590,000 17,164,000 Deferred revenues 10,978,655 9,705,730 2,244,941 22,929,326 Other liabilities 37,778 - - 37,778 Total Liabilities: 15,986,392$ 26,279,730$ 3,295,883$ 45,562,005$

FUND EQUITY

Reserved for:Encumbrances and continued appropriations 913,712 - - 913,712 Community preservation - 645,979 645,979 Perpetual permanent funds - - 264,066 264,066

Unreserved: - Designated fro subsequent year expenditures 940,929 - - 940,929 Undesignated, reported in: - General fund 2,119,587 - - 2,119,587 Special revenue funds - - 1,278,062 1,278,062 Capital projects funds - (11,246,247) - (11,246,247)

Total Fund Equity: 3,974,228 (11,246,247) 2,188,107 (5,083,912) Total Liabilities and Fund Equity: 19,960,620$ 15,033,483$ 5,483,990$ 40,478,093$

(1) Extracted from audited Financial Statements of the Town.

Town of Wareham, Massachusetts

Combined Balance Sheet - All Fund Types and Account Group

June 30, 2003 (1)

32

TotalsProprietary Fiduciary Account (Memorandum

Governmental Fund Types Fund Types Fund Type Group Only)Special Capital Trust and Long-Term Primary

ASSETS General Revenue Projects Enterprise Agency Obligations GovernmentCash and cash equivalents 4,016,027$ 1,682,329$ 1,034,941$ 2,491,680$ 1,823,605$ 11,048,582$ Receivables, net of uncollectible accounts:

Property Taxes 1,301,612 1,301,612 Tax liens and foreclosures 1,591,628 1,591,628 Excises 444,447 444,447 Sewer user charges 346,566 346,566 Sewer liens 519,276 519,276 Departmental 166,533 768,162 (29,000) 905,695 Special assessments and betterments 261,701 2,888,442 3,150,143 Committed interest 720 24,616 25,336

Commodities inventory 25,000 25,000 Prepaid expensesNotes receivableDue from WEDICDue from other governments 75,910 115,000 (32,645) 158,265 Cash, restricted for endowments 292,339 292,339 Construction in progress 2,344,377 2,344,377 Property, plant and equipment (net of accumulated depreciation of $16,848,430) 35,131,288 35,131,288 Amounts to be provided for:

Bonds payable 2,593,375 14,421,723$ 17,015,098 Accrued sick and vacation leave 1,130,000 1,130,000

Total Assets: 7,858,578$ 2,590,491$ 1,034,941$ 46,277,975$ 2,115,944$ 15,551,723$ 75,429,652$

LIABILITIESWarrants payable 860,534$ 860,534 Accounts payable 242,397$ 190,428$ 432,825 Withholdings payable 160,917 160,917 Payroll payable 23,849 23,849 Accrued expenses: -

Sick and vacation leave 186,000 1,130,000 1,316,000 Interest 220,000 220,000

Bonds payable, current portion 600,000 600,000 Other liabilities 49,758 999 477,377$ 528,134 Deferred revenues: -

Property Taxes 576,839 576,839 Other receivables 2,554,841 768,162 (698,100) 2,624,903 Grants 573,000 573,000

Provision for abatements and exemptions 554,773 554,773 Notes payable 2,197,700 580,000 2,777,700 Bonds payable, less current portion 12,713,609 14,421,723 27,135,332 Total Liabilities: 4,781,511$ 1,583,559$ 2,197,700$ 13,792,936$ 477,377$ 15,551,723$ 38,384,806$

FUND EQUITYMunicipal contributed capital 25,464,075 25,464,075 Retained earnings -

Reserved 2,104,140 2,104,140 Unreserved 4,916,824 4,916,824

Reserved fund balance: - Endowments 292,339 292,339 Encumbrances 1,191,721 1,191,721 Petty cash 525 913 1,438

Unreserved fund balance: - Designated (154,857) (1,162,759) 250,000 (1,067,616) Undesignated 1,884,821 1,160,876 1,096,228 4,141,925

Total Fund Equity: 3,077,067 1,006,932 (1,162,759) 32,485,039 1,638,567 - 37,044,846 Total Liabilities and Fund Equity: 7,858,578$ 2,590,491$ 1,034,941$ 46,277,975$ 2,115,944$ 15,551,723$ 75,429,652$

(1) Extracted from the audited Financial Statements of the Town.

Town of Wareham, Massachusetts

Combined Balance Sheet - All Fund Types and Account Group

June 30, 2002 (1)

33 33

REVENUES 2003 2002 2001 2000 1999

Property Taxes 21,107,225$ 20,230,375$ 19,369,100$ 18,250,309$ 17,604,149$

Tax liens 433,422 407,065 370,099 415,268 691,590

Excises 2,317,385 1,967,329 1,661,700 1,621,548 1,350,432

Other charges for services 425,463 428,698 345,411 305,168 280,840

Departmental 277,449 140,445 129,241 134,532 135,868

Licenses and permits 891,164 646,136 553,245 471,089 495,394

Intergovernmental 17,675,127 17,464,840 17,671,773 (2) 16,070,940 (2) 13,539,645

Fines and forfeits 524,346 175,703 143,360 162,013 156,499

Earnings on investments 205,005 192,535 329,602 275,591 192,442

Penalties and interest 123,624 426,924 370,209 389,012 518,110

Miscellaneous 97,304 30,527 46,443 57,683 78,027

Total Revenues: 44,077,514$ 42,110,577$ 40,990,183$ 38,153,153$ 35,042,996$

EXPENDITURES

General government 2,793,761$ 2,580,113$ 2,570,215$ 2,441,339$ 2,505,149$

Public Safety 4,125,458 4,032,161 3,698,795 3,724,133 3,636,244

Education 26,936,887 24,691,642 23,602,676 22,073,971 20,968,418

Public Works 1,578,402 1,480,741 1,548,427 1,266,256 1,263,223

Human services 343,506 343,460 300,668 307,596 318,361

Culture and recreation 722,013 756,568 714,549 748,728 707,988

Debt service 2,389,884 2,081,150 2,255,373 2,411,017 2,429,102

Intergovernmental charges 697,113 648,029 600,852 557,391 480,350

Employee benefits 3,931,610 3,392,014 3,029,199 2,627,462 2,477,960

Retirement contribution 1,094,109 2,618,277 2,592,439 (2) 2,434,765 (2) 867,911

Insurance 495,028 365,884 416,329 375,147 353,290

Capital outlay 38,363 261,571 76,420 396,001 355,702

Judgements 127,373

Total Expenditures: 45,273,507$ 43,251,610$ 41,405,942$ 39,363,806$ 36,363,698$

Excess (deficiency) of revenues over

expenditures (1,195,993) (1,141,033) (415,759) (1,210,653) (1,320,702)

OTHER FINANCING SOURCES (USES)

Bond Anticipation note premium 75,777

Operating transfer in 1,484,070 1,809,727 1,309,471 1,739,842 1,465,864

Operating transfer out (21,227) (507,166) (3,495) (439,162) (458,090)

Total Other Financing Sources (Uses): 1,538,620 1,302,561 1,305,976 1,300,680 1,007,774

Excess (deficiency) of revenues and

other financing sources over

expenditures and other financing uses 342,627 161,528 890,217 90,027 (312,928)

Fund Balance, Beginning of Year 3,631,601 2,915,539 2,025,322 1,935,295 2,248,223

Fund Balance, End of Year 3,974,228$ 3,077,067$ 2,915,539$ 2,025,322$ 1,935,295$

(1) Extracted from the audited financial statements of the Town.

Town of Wareham, Massachusetts

Combined Statement of Revenues, Expenditures and Changes in Fund Balance(1)

For the Year Ending June 30,

34 34

Special Capital

General Revenue Projects Enterprise Trust Total

Total Revenues 42,460,760 8,138,219 - 4,659,034 43,818 55,301,831

Total Expenditures 44,555,979 8,516,686 8,179,100 18,367,939 - 79,619,704

Total excess (deficiency) of Revenues over

Expenditures (2,095,219) (378,467) (8,179,100) (13,708,905) 43,818 (24,317,873)

OTHER FINANCING SOURCES (USES)

Transfers From Other Funds 1,456,901 30,070 87,300 - 350,000 1,924,271

Other Financing Sources 339,933 345,191 - 10,061,289 - 10,746,413

Transfers to Other Funds 350,000 397,971 - 924,000 252,300 1,924,271

Other Financing Uses - - - - - -

TOTAL OTHER FINANCING SOURCES (USES) 1,446,834 (22,710) 87,300 9,137,289 97,700 10,746,413

TOTAL EXCESS (DEFICIENCY) OF REVENUES OVER

EXPENDITURES AND OTHER FINANCING

SOURCES (USES) (648,385) (401,177) (8,091,800) (4,571,616) 141,518 (13,571,460)

Fund Equity (Retained Earnings) Beginning of Year 3,533,551 1,903,154 (10,946,884) (2,563,727) 1,252,047 (6,821,859)

Other Adjustments - - - - -

TOTAL FUND EQUITY (RETAINED EARNINGS)

END OF YEAR 2,885,166 1,501,977 (19,038,684) (7,135,343) 1,393,565 (20,393,319)

REVENUES AND EXPENDITURES FROM FINANCIAL REPORT

RECONCILIATION OF FUND EQUITY (RETAINED EARNINGS) FOR THE FISCAL YEAR END JUNE 30, 2004 (Unaudited)

35 35

Undesignated 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 undesignated general fund balance and certified free cash for the most recent fiscal years: Undesignated General July 1, Fund Balance Free Cash 2004 $1,604,774 $ 701,635 2003 2,234,597 1,596,550 2002 1,780,120 1,430,105 2001 1,329,788 1,446,018 2000 176,965 334,470 Stabilization Fund The Town has maintained a Stabilization Fund for several years. Under Massachusetts statutes, funds may be appropriated from the Fund for any municipal purpose. The following is the balance in the fund at the end of the most recent fiscal years. In the September Special Town Meeting, the Town transferred $350,000 into the Stabilization Fund. Fiscal Year Balance 2004 $434,487 2003 227,625 2002 568,132 2001 529,950 2000 601,015 Tax Increment Financing for Development Districts

Under recent legislation, cities and towns are authorized to establish development districts to encourage increased residential, industrial and commercial activity. All or a portion of the taxes on growth in assessed value in such districts may be pledged and used solely to finance economic development projects pursuant to the city or town’s development program for the district. This includes pledging such “tax increments” for the payment of bonds issued to finance such projects. As a result of any such pledge, tax increments raised from new growth properties in development districts are not available for other municipal purposes. Tax increments are taken into account in determining the total taxes assessed for the purpose of calculating the maximum permitted tax levy under Proposition 2 ½ (see “Tax Limitations” above.)

36 36

INDEBTEDNESS

Authorization Of General Obligation Bonds and Notes

Serial bonds and notes are authorized by a two-thirds vote of the town meeting. Refunding bonds and notes are authorized by the selectmen. Borrowings for some purposes require State administrative approval.

When serial bonds or notes have been authorized, bond anticipation notes may be issued by the officers authorized to issue the serial bonds or notes. Temporary loans in anticipation of revenue of the fiscal year in which the debt is incurred or in anticipation of authorized federal and state aid generally may be incurred by the Treasurer with the approval of the selectmen.

Debt Limits

General Debt Limit. The General Debt Limit of the Town consists of a Normal Debt Limit and a Double Debt Limit. The Normal Debt Limit for the Town is 5 percent of the valuation of taxable property as last equalized by the State Department of Revenue. The Town can authorize debt up to this amount without State approval. It can authorize debt up to twice this amount (the Double Debt Limit) with the approval of the State Municipal Finance Oversight Board.

There are many categories of general obligation debt which are exempt from and do not count against the General Debt Limit. Among others, these exempt categories include revenue anticipation notes and grant anticipation notes, emergency loans, loans exempted by special laws, certain school bonds, sewer bonds, and solid waste disposal facility bonds and subject to special debt limits, bonds for water (limited to 10 percent of equalized valuation), housing, urban renewal and economic development (subject to various debt limits), and electric, gas, community antenna television and telecommunications systems (subject to a separate limit). 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 equal or diminishing 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. Level debt service is permitted for bonds or notes issued for certain purposes, including self-supporting enterprise purposes, certain state-aided school projects and certain community preservation and open space projects, as well as for those projects for which debt service has been exempted from property tax limitations. 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. Most of the purposes are capital projects. 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 term measured from the date of the original bonds or notes. 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 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. Bond Anticipation Notes These generally must mature within two years of their original dates of issuance but may be refunded from time to time for a period not to exceed five years from their original dates of issuance, provided that for each 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.

37 37

Revenue Anticipation Notes. These are issued to meet current expenses in anticipation of taxes and other revenues. They must mature within one year but, if payable in less than one year, may be refunded from time to time up to one year from the original date of issue.

Grant Anticipation Notes. These are issued for temporary financing in anticipation of federal grants and state and county reimbursements. Generally, they must mature within two years but may be refunded from time to time as long as the municipality remains entitled to the grant or reimbursement.

Revenue Bonds. Cities and towns may issue revenue bonds for solid waste disposal facilities, for projects financed under the Commonwealth’s Water Pollution Abatement or Drinking Water Revolving Loan Programs and for certain economic development projects supported by tax increment financing. In addition, cities and towns having electric departments may issue electric revenue bonds, and notes in anticipation of such bonds, subject to the approval of the State Department of Telecommunications and Energy.

The Town has not borrowed in anticipation of revenue for the current and the prior five fiscal years.

DIRECT DEBT SUMMARY

Projected as of June 30, 2005 (1)

G en era l O b liga tio n B o nd s :

W ith in G e ne ra l D eb t L im it (2 )

S e w e r & D ra ins (3 ) 8 ,1 55 ,4 98$

La n d A cq u is itio n 1 40 ,0 00

S cho o ls 9 49 ,0 00

O th e r B u ild ing 1 ,3 55 ,0 00

D e pa rtm e n ta l E q u ip m e n t 1 00 ,0 00

A rch ite c tu ra l & E n g ine e r ing S e rv ice s (4 ) 1 ,2 27 ,4 00

O th e r In s id e G en e ra l 1 25 ,0 00

To ta l 1 2 ,0 5 1 ,8 9 8$

O u tside G e n e ra l D e b t L im it

S e w e rs (3 ) 22 ,0 62 ,2 59

S cho o ls 6 ,0 15 ,0 00

O th e r 5 05 ,7 12

2 8 ,5 8 2 ,9 7 1

4 0 ,63 4 ,86 9$

The B on d s 4 ,20 6 ,00 0$

Tem p ora ry L o an s:

B o nd A n tic ipa tio n N o te s: (4 ) 32 ,4 46 ,0 00

R e tired w ith Th is I ssue (2 ,8 08 ,7 11 )

P a y d o w n w ith R e v e n ue F un ds (7 ,9 23 )

P a y d o w n w ith G ran t f rom C o m m u n ity P res e rv a tio n A c t (2 44 ,3 66 )

To ta l 2 9 ,38 5 ,00 0

To ta l D ire ct D e b t 7 4 ,22 5 ,86 9$

_________________ (1) Principal amount only. Excludes lease and installment purchase obligations, overlapping debt and unfunded pension liability. (2) At the present time, the normal general debt limit is $142,383,445 and the double general debt limit is $284,766,890. (3) $30,217,758 is self-spporting. (4) $16,964,000 payable Juune 15, 2005; $6,981,000 payable July 14, 2005; and $8,501,000 payable December 15, 2005. Excludes interim loan notes

issued through the Massachusetts Water Pollution Abatement Trust.

Bond Debt vs. Population, Valuations and Income

2005 2004 2003 2002 2001

Amount (000 omitted) (1) $44,841 $44,043 $34,680 $27,531 $24,096Per Capita (2) $2,205 $2,088 $1,644 $1,318 $1,167

Percent of Assessed Valuation (3) 1.52% 1.97% 1.58% 1.90% 1.68%

Percent of Equalized Valuation (4) 1.57% 2.30% 1.81% 1.83% 1.60%

Per Capita as a percent of

Personal Income (2) Per Capita 10.35% 9.80% 7.72% 6.19% 5.48%

As of June 30

_________________ (1) Principal on general obligation bonds. Excludes lease and installment purchase obligations, overlapping debt and unfunded pension liability. Fiscal year

2005 is projected. (2) Source: U.S. Department of Commerce, Bureau of the Census - latest applicable actuals or estimates. (3) The assessed valuation used here is the assessed valuation for that fiscal year.

38 38

(4) The equalized valuation used here is the equalized valuation in effect for that fiscal year.

Projected Principal Payments by Purpose

The following table sets forth the projected principal payments by purpose on outstanding of the Town projected as of June 30, 2005.

GENERAL OBLIGATION BONDS (1)

Projected Principal Payments by Purpose

Projected as of June 30, 2005

Fiscal

Year

Sewers &

Drains (2) Schools Other Building

Architect &

Engineering Other General The Bonds Total

2006 1,688,608$ 1,475,000$ 257,000$ 60,000$ 86,999$ $ 341,000 3,908,607$

2007 1,709,911 1,540,000 147,000 70,000 87,499 340,000 3,894,410

2008 1,754,312 1,625,000 147,000 70,000 88,203 335,000 4,019,515

2009 1,796,496 1,694,000 147,000 70,000 83,699 330,000 4,121,195

2010 1,842,415 79,000 136,000 70,000 55,999 330,000 2,513,414

2011 1,892,648 79,000 76,000 70,000 55,999 330,000 2,503,647

2012 1,942,180 79,000 76,000 70,000 40,999 320,000 2,528,179

2013 1,985,813 79,000 71,000 70,000 39,563 320,000 2,565,376

2014 1,762,211 79,000 71,000 70,000 40,750 250,000 2,272,961

2015 1,511,627 60,000 70,000 65,000 40,746 250,000 1,997,373

2016 1,552,049 60,000 61,000 65,000 41,221 140,000 1,919,270

2017 1,593,670 60,000 61,000 65,000 41,221 140,000 1,960,891

2018 1,407,606 15,000 40,000 65,000 41,221 130,000 1,698,827

2019 1,342,606 15,000 40,000 65,000 41,221 130,000 1,633,827

2020 1,377,606 15,000 40,000 65,000 21,388 130,000 1,648,994

2021 1,407,000 10,000 15,000 65,000 21,388 130,000 1,648,388

2022 1,442,000 - - 65,000 10,000 130,000 1,647,000

2023 1,407,000 - - - 10,000 130,000 1,547,000

2024 802,000 - - - 5,000 807,000

2025 - - - - 5,000 5,000

Total 30,217,758$ 6,964,000$ 1,455,000$ 1,140,000$ 858,112$ 4,206,000$ $44,840,870

____________________

(1) Exludes lease and installment purchase obligations, overlapping debt and unfunded pension liability.

(2) Principal and interest thereon will be paid from the sewer enterprise fund.

39 39

Debt Service Requirement

The following table sets forth the required principal and interest payments on outstanding general obligation bonds, of the Town projected as of June 30, 2005.

Annual Debt Service (1)

Outstanding as of 6/30/05 This Issue

Fiscal Total Debt MWPAT SBAB Total Net

Year Principal (2) Interest Principal Interest Service Subsidy Subsidy Debt Service

2006 $ 3,567,607 $ 1,911,020 $ 341,000 $ 173,830 $ 5,993,456 $ (1,537,895) $ (1,171,857) $ 3,283,704

2007 3,554,410 1,749,773 340,000 161,895 5,806,077 (1,502,923) (1,171,857) 3,131,297

2008 3,684,515 1,583,668 335,000 144,895 5,748,078 (1,466,811) (1,171,857) 3,109,409

2009 3,791,195 1,418,385 330,000 128,145 5,667,724 (1,430,188) (1,171,857) 3,065,680

2010 2,183,414 1,277,059 330,000 114,945 3,905,417 (1,385,545) (1,171,857) 1,348,015

2011 2,173,647 1,171,435 330,000 101,745 3,776,827 (1,346,446) - 2,430,380

2012 2,208,179 1,064,455 320,000 88,545 3,681,179 (1,306,080) - 2,375,099

2013 2,245,376 963,243 320,000 75,745 3,604,364 (1,276,681) - 2,327,683

2014 2,022,961 802,191 250,000 62,945 3,138,097 (1,028,468) - 2,109,629

2015 1,747,373 701,396 250,000 52,945 2,751,713 (814,653) - 1,937,060

2016 1,779,270 611,007 140,000 42,945 2,573,222 (784,448) - 1,788,773

2017 1,820,891 518,096 140,000 37,695 2,516,682 (752,168) - 1,764,514

2018 1,568,827 436,303 130,000 32,305 2,167,435 (596,107) - 1,571,328

2019 1,503,827 374,632 130,000 27,105 2,035,564 (576,621) - 1,458,943

2020 1,518,994 281,279 130,000 21,840 1,952,113 (539,789) - 1,412,323

2021 1,518,388 215,151 130,000 16,575 1,880,114 (516,039) - 1,364,075

2022 1,517,000 152,700 130,000 11,050 1,810,750 (493,527) - 1,317,223

2023 1,417,000 76,025 130,000 5,525 1,628,550 (463,508) - 1,165,042

2024 807,000 20,425 - - 827,425 (246,050) - 581,375

2025 5,000 125 - - 5,125 (125) - 5,000

Total 40,634,870$ 15,328,367$ 4,206,000$ 1,300,675$ 61,469,912$ (18,064,073)$ (5,859,284)$ $37,546,554

____________________

(1) Excludes short-term debt, lease and installment purchase obligations, overlapping debt and unfunded pension liability.

(2) $9,234,499 is self-supporting

Authorized Unissued Debt and Prospective Financing Following the delivery of the Bonds, the Town will have $41,115,875 in authorized unissued debt for various projects. $22,997,793 is for various school projects which have been exempted from the limits of Proposition 2 1/2. $15,620,136 is for Engineering- Water Pollution Control and sewer projects. The balance is for various general projects (town hall repair, department equipment, storm drains, dredging and land aquisition). The school will be permanently financed upon the award of the grant from the State Board of Education. The Water Pollution and Sewer projects will be funded through the State Revolving Fund.

40 40

Five Years Outstanding Debt (1)

2005 (2) 2004 2003 2002 2001

Sewers & Drains $ 8,752,498 $ 8,824,283 $ 9,482,666 $ 10,225,809 $ 8,874,868

Schools 140,000 155,000 170,000 184,000 913,000

Other Buildings 1,214,485 1,031,000 1,116,000 1,201,000 1,106,000

Streets, Sidewalks & Parking 1,355,000 1,505,000 1,654,000 1,803,000 -

Departmental Equipment 1,841,998 310,000 520,000 731,595 70,000

Architectural & Engineering Services 1,227,400 1,318,000 1,408,300 1,498,200 167,700

Other Inside General 1,726,517 150,000 175,000 200,000

16,257,898 13,293,283 14,525,966 15,843,604 11,131,568

Sewers 22,062,259 23,062,466 11,175,422 1,678,000 1,784,000

Schools 6,015,000 7,345,000 8,615,000 9,825,000 10,985,000

Other 505,712 341,932 363,406 184,804 195,676

28,582,971 30,749,398 20,153,828 11,687,804 12,964,676

44,840,869 44,042,681 34,679,794 27,531,408 24,096,244

Revenue Anticipation Notes - - - - -

Grant Anticipation Notes - - - - -

State Aid Anticipation Notes - - - 207,700 41,769

Bond Anticipation Notes 29,385,000 32,440,552 16,964,000 1,990,000 5,857,000

29,385,000 32,440,552 16,964,000 2,197,700 5,898,769

$ 74,225,869 $ 76,483,233 $ 51,643,794 $ 29,729,108 $ 29,995,013

As of June 30

Total Outstanding Indebtedness

Total Within the General Debt limit

Outside the General Debt Limit:

Total Outside the General Debt Limit

Total Long-Term Indebtedness

Long-Term Indebtedness

Within the General Debt Limit

Short-Term Indebtedness

Total Short-Term Indebtedness

__________________

(1) Excludes lease and installment purchase obligations, overlapping debt and unfunded pension liability.

(2) Projected.

Overlapping Debt

The following table sets forth the portion of overlapping debt assessed to the Town: (1) Share of Assessment for Authorized Estimated Operations and Debt Outstanding Unissued Share of Wareham Service Fiscal Year 2005 Plymouth County (2) $5,225,000 $ 0 4.64% $48,762 Upper Cape Cod Regional Vocational Technical School District (3) 0 1,400,000 22.54 1,709,585 Carver, Marion & Wareham Refuse Disposal District (4) $491,309,980 0 58.00 4,222 ___________________ (1) Excludes temporary loans in anticipation of revenue. Omits debt of the Commonwealth.

(2) Source: Treasurer, Plymouth County. Debt projected as of June 30, 2005. County expenses including debt service on county

bonds are assessed upon the cities and towns within the county in proportion to their taxable valuation as last equalized

by the State Commissioner of Revenue. Estimated share and dollar assessment shown here are based on the 2004

equalized valuation. Legislation was enacted in 1997 abolishing the county governments of Franklin and Middlesex

Counties as of July 1, 1997, with their assets, functions, debts and other obligations begin assumed by the

Commonwealth. The legislation also abolished the county governments of Hampden and Worcester counties as of July 1,

2000. Legislation enacted in 1998 abolished the county governments of Hampshire, Essex and Berkshire counties as of

January 1, 1999, July 1, 1999 and July 1, 2000, respectively. The legislation also requires the state secretary for

administration and finance to establish a plan to recover the Commonwealth’s expenditures for the liabilities and other

debts assumed and paid by the Commonwealth on behalf of an abolished county. Unless these provisions are changed

by further legislation, the state treasurer shall assess upon each city and town within the jurisdiction of an abolished

county an amount not exceeding or equal to the county tax paid by each such city and town for the fiscal year immediately

41 41

prior to the abolishment of the county until such expenditures by the Commonwealth are recovered. It is possible that

similar legislation will be sought to provide for the abolishment of county government in all the remaining counties.

(3) Source: Treasurer, Upper Cape Cod Regional Vocational Technical School District. Debt is projected as of June 30, 2005. The

other members of the district are the Towns of Bourne, Falmouth, Marion, and Sandwich.

(4) Source: Carver, Marion & Wareham Refuse Disposal District. Debt is projected as of June 30, 2005; Fiscal year 2004

assessment.

Local Districts There are local districts within a number of towns organized for special purposes, such as fire protection, water and sewer. Except to the extent met from betterment assessments or user charges, their debt service is ordinarily assessed, along with operating expenses, on the taxable property within the district.

Two separate districts provide fire protection and water services to the entire Town. Those districts are: Debt Authorized Outstanding (1) Unissued (2) Onset Fire District $ 30,000 $ 300,000 Wareham Fire District 7,260,000 3,029,500 ______________ (1) Projected as of June 30, 2005. (2) As of June 30, 2004

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 interests, but generally only when funds are available for the first fiscal year; obligations for succeeding fiscal years generally are expressly subject to availability and appropriation of funds. Municipalities have specific authority in relatively few cases to enter long-term contractual obligations that are not subject to annual appropriation, including contracts for refuse disposal 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, (see “CONSTITUTIONAL STATUS AND FORM OF GOVERNMENT” above), cities and towns may also be empowered to make other contracts and leases. The Town has no significant long term contracts.

RETIREMENT PLAN

The Massachusetts General Laws provide for the establishment of contributory retirement systems for state employees, for teachers and for county, city and town employees other than teachers. Teachers are assigned to a separate statewide teachers’ system and not to the city and town systems. For all employees other than teachers, this law is subject to acceptance in each city and town. Substantially all employees of an accepting city or town are covered. If a town has a population of less than 10,000 when it accepts the statute, its non-teacher employees participate through the county system and its share of the county cost is proportionate to the aggregate annual rate of regular compensation of its covered employees. In addition to the contributory systems, cities and towns provide non-contributory pensions to a limited number of employees, primarily persons who entered service prior to July 1, 1937 and their dependents. The Public Employee Retirement Administration Commission (“PERAC”) provides oversight and guidance for and regulates all state and local retirement systems. The obligations of a city or town, whether direct or through a county system, are contractual legal obligations and are required to be included in the annual tax levy. If a city or town, or the county system of which it is a member, has not established a

42 42

retirement system funding schedule as described below, the city or town is required to provide for the payment of the portion of its current pension obligations which is not otherwise covered by employee contributions and investment income. “Excess earnings,” or earnings on individual employees’ retirement accounts in excess of a predetermined rate, are required to be set aside in a pension reserve fund for future, not current, pension liabilities. Cities and towns may voluntarily appropriate to their system’s pension reserve fund in any given year up to five percent of the preceding year’s tax levy. The aggregate amount in the fund may not exceed ten percent of the equalized valuation of the city or town. If a city or town, or each member city and town of a county retirement system, has accepted the applicable law, it is required to annually appropriate an amount sufficient to pay not only its current pension obligations, but also a portion of its future pension liability. The portion of each such annual payment allocable to future pension obligations is required to be deposited in the pension reserve fund. The amount of the annual city or town appropriation for each such system is prescribed by a retirement system funding schedule which is periodically reviewed and approved by PERAC. Each system’s retirement funding schedule is designed to reduce the unfunded actuarial pension liability of the system to zero by not later than June 30, 2028, with annual increases in the scheduled payment amounts of not more than 4.5 percent. 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. Under recent legislation, cities and towns that accept its provisions and that obtain certain state approvals therefor may, within limits, reduce the amount of their scheduled appropriations for fiscal year 2004 and fiscal year 2005 for the unfunded portion of their pension liability to offset recent reductions in state aid. Cities and towns that reduce such appropriations are required to revise their retirement system funding schedule for eliminating their unfunded pension liability and may extend such schedule by one year, provided that in no event may such funding schedule extend beyond June 30, 2028. 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. In addition to pension benefits, cities and towns may provide retired employees with payments for a portion of their health care and life insurance benefits. These benefit payments are generally provided on a pay-as-you-go basis. The Town participates in the contributory retirement system of Plymouth County. The annual contributions of the Town to the retirement system for the most recent fiscal years are as follows:

Fiscal Year Amount

2005 $1,438,355 2004 1,227,115 2003 1,083,128 2002 1,051,729 2001 1,014,568

As of January 1, 2002, Town of Wareham’s share of the total estimated past service liability of the system was $38,500,783 and its assets were $24,487,107, leaving an estimated unfunded actuarial liability of $14,013,676. The foregoing data do not include the retirement system costs or liabilities attributable to employees of the county or the retirement system costs or liabilities of any other entity of which the Town is a constituent part.

43 43

EMPLOYEE RELATIONS The following table sets forth the collective bargaining groups of the Town and the status of union contracts.

Name of Union Effective Date (1) # of Employees

Wareham Public Employees July 1, 2004 - June 30, 2007 26

Wareham Clerical Employees July 1, 2004- June 30, 2007 28

Wareham Police Union July 1, 2001-June 30, 2004 42

Telecommunication Dispatchers July 1, 2001-June 30, 2004 6

Library July 1, 2001-June 30, 2004 7

Forepersons July 1, 2001-June 30, 2004 7

Superior Officers Association July 1, 2001-June 30, 2004 3

Emergency Medical Services July 1, 2001-June 30, 2004 8

School Custodiams July 1, 2004 - June 30, 2007 25

School Fields & Grounds July 1, 2001-June 30, 2004 3

School Garage Mechanics September 1, 2004 - August 31, 2007 2

School Nurses September 1, 2002 - August 31, 2005 6

School Secretaries July 1, 2003 - June 30, 2006 31 Unit B - Asst. Price July 1, 2001-June 30, 2004 4

School Teachers September 1, 2002 - August 31, 2005 277

School Teacher Assistants September 1, 2002 - August 31, 2005 62

Transportation Director September 1, 2002 - August 31, 2005 1

NON UNION

Personnel Plan July 1, 2001-June 30, 2004 49 _____________________ (1) Expired contracts are currently in negotiations.

LITIGATION

There is no pending litigation that is considered likely to result, either individually or in the aggregate, in final judgments which would materially affect the Town’s financial position.

TOWN OF WAREHAM, MASSACHUSETTS By: /s/ John D. Foster Treasurer April 28, 2005

THIS PAGE INTENTIONALLY LEFT BLANK

TOWN OF WAREHAM, MASSACHUSETTS FINANCIAL STATEMENTS

FOR THE FISCAL YEAR ENDED JUNE 30, 2003

Cicoria & Company, Certified Public Accountants (800) 750-6761 or (508) 291-9988

TOWN OF WAREHAM, MASSACHUSETTS TABLE OF CONTENTS

JUNE 30, 2003 Page

INDEPENDENT AUDITORS' REPORT

A-1

REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS A-3

MANAGEMENT'S DISCUSSION & ANALYSIS

A-5

BASIC FINANCIAL STATEMENTS: Government Wide Financial Statements

Statement of Net Assets (Exhibit 1) A-14

Statement of Activities (Exhibit 2) A-16 Fund Financial Statements

Governmental Funds - Balance Sheet (Exhibit 3) A-17

Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets (Exhibit 4) A-18

Governmental Funds - Statement of Revenues, Expenditures and Changes in Fund Balance (Exhibit 5) A-19

Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balance of Governmental Funds to the Statement of Activities (Exhibit 6) A-20

Proprietary Funds - Statement of Net Assets (Exhibit 7) A-21 Proprietary Funds - Statement of Revenues, Expenses, and Changes in

Net Assets (Exhibit 8) A-22

Proprietary Funds - Statement of Cash Flows (Exhibit 9) A-23

Fiduciary Funds - Statement of Net Assets (Exhibit 10) A-24

Fiduciary Funds - Statement of Changes in Fiduciary Net Assets (Exhibit 11) A-25

Notes to Financial Statements (Exhibit 12) A-26

2870 CRANBERRY HIGHWAY, UNIT B EAST WAREHAM, MA 02538 (508) 291-9988 " (800) 750-6761

Email:

Fax: (508) 291-1288

Website: mjccpa@comcast.net

cicotiaaudcoxom

To the Board of Selectmen Town of Wareham Wareham, Massachusetts

Cicoria & Company CERTIFIED PUBLIC ACCOUNTANTS

INDEPENDENT AUDITOR'S REPORT

We have audited the accompanying financial statements of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of Town of Wareham, Massachusetts, as of and for the year ended June 30, 2003, which collectively comprise the Town's basic financial statements as listed in the table of contents . These financial statements are the responsibility of Town's management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements . An audit also includes assessing the accounting principles used and the significant estimates made

by management, as well as evaluating the overall financial statement presentation. We believe that our audit

provides a reasonable basis for our opinions,

In our opinion, the financial statements referred to above present-fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the discretely. presented

component unit, each major fund, and the aggregate remaining fund information of the Town of Wareham,

as of June 30, 2003, and the respective changes in financial position.and cash flows, where applicable, thereof

for the year then ended in conformity with accounting principles generally accepted in the United States of

America.

As described in Note X, the Town of Wareham, Massachusetts has implemented a new financial reporting

model, as required by the provisions of GASB Statement No. 34, Basic Financial Statements-and Management's Discussion and Analysis-for State and Local Governments, as of June 3 0, 2003 .

In accordance with Government Auditing Standards, we have also issued our report dated November 3, 2004,

on our consideration of the Town of Wareham's internal control over financial reporting and on our tests of

its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters.

Member of-American Institute of CPA's " Massachusetts Society of CPA's

To the Board of Selectmen Town of Wareham, Massachusetts

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 the internal control over financial reporting or on compliance . That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.

The management's discussion and analysis on pages 5 though 12 and budgetary comparison information on page 52, are not a required part of the basic financial statements but are supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and

express no opinion on it.

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Town of Wareham basic financial statements . The introductory section and the budgetary comparison schedule are presented for purposes of additional analysis and are not a required part of the basic

financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by U.S . Office ofManagement and Budget Circular A-133, Audits of States,

Local Governments, and Non-Profit Organizations, and is also not a required part of the basic financial statements of the Town of Wareham, Massachusetts. The schedule of expenditures of federal awards has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. The

introductory section and the budgetary comparison schedule have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on them.

November 3, 2004

Cleoria & Company CERTIFIED PUBLIC ACCOUNTANTS

2870 CRANBERRY HIGHWAY, UNIT B EAST WAREHAM, MA 02538 (508) 291-9988 - (800) 750-6761

Email:

Fax: (508) 291-1288

Website : miccpa@comcast.net

cicoriaandco.com

REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT

OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS

To the Board of Selectmen Town of Wareham Wareham, Massachusetts

We have audited the financial statements of the governmental activities, the business-type activities, the

discretely presented component unit, each major fund, and the aggregate remaining fund information of the Town of Wareham, Massachusetts as of and for the year ended June 30, 2003, which collectively comprise Town of Wareham, Massachusetts's basic financial statements and have issued our report thereon dated November 3, 2004 . 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 .

Internal Control Over Financial Reporting In planning and performing our audit, we considered Town of Wareham, Massachusetts's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinions on the financial statements and not to provide an opinion on the internal control over financial reporting . However, we noted certain matters involving the internal control over financial reporting and its operation that we consider to be reportable. conditions . Reportable conditions involve matters coming to our attention

relating to significant deficiencies in the design or operation of the internal control over financial reporting

that, in our judgment, could adversely affect Town of Wareham, Massachusetts's ability to record, process,

summarize, and report financial data consistent with the assertions of management in the financial statements .

Reportable conditions are described in the accompanying schedule of findings and questioned costs as items

2003.1-Component Unit Accounting System, 2003.2-Grant Accounting, Police, 2003.3-Compensated

Absences, School, and 2002.1 Financial Records.

A material weakness is a reportable condition in which the design or operation of one or more of the internal

control components does not reduce to a relatively low level the risk that misstatements caused by error or

fraud in amounts that would be material in relation to the financial statements being audited may occur and

not be detected within a timely period by employees in the normal course of performing their assigned functions .

A-3

Member of-American Institute of CPAs - Massachusetts Society of CPA's

To the Board of Selectmen Town of Wareham, Massachusetts

Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses . However, of the reportable conditions described above, we consider item 2003.1-Component Unit Accounting System to be a material weaknesses .

Compliance and Other Matters As part of obtaining reasonable assurance about whether Town of Wareham, Massachusetts' financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards .

This report is intended solely for the information and use of the Board of Selectmen, management and federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.

November 3, 2004

TOWN OF WAREHAM, MASSACHUSETTS

MANAGEMENT'S DISCUSSION AND ANALYSIS

As management of the Town of Wareham, Massachusetts, we offer readers of the Town of Wareham financial statements this narrative overview and analysis of the financial activities of the. Town of Wareham for the fiscal year ended June 30, 2003 . The Town must comply with new financial reporting requirements issued under Governmental Accounting Standards Board Statement 434, Basic Financial Statements-and Management's Discussion and Analysis-for State and Local Governments, for the fiscal year ending June 30, 2003 . Management's discussion and analysis is part of the new requirements .

The Governmental Accounting Standards Board (GASB) is the authoritative standards setting body that provides guidance on how to prepare financial statements in conformity with generally accepted accounting principals (GAAP). Users of these financial statements (such as investors and rating agencies) rely on the GASB to establish consistent reporting standards for all governments in the United States . This consistent application is the only way users (including citizens, the media, legislators and others) can assess the financial condition of one government compared to others .

Governments must adhere to GASB pronouncements in order to issue their financial statements in conformity with GAAP. The users of financial statements also rely on the independent auditor's opinions .

FINANCIAL HIGHLIGHTS

"

The assets of the Town of Wareham exceeded its liabilities as of June 30, 2003 by $75.5 million.

TOWN OF WAREHAM, MASSACHUSETTS MANAGEMENT'S DISCUSSION AND ANALYSIS

RINE 30, 2003

At the end of the current year, unreserved fund balance for the general fund was $3.974 million or 8.78% of the fiscal 2003 actual general fund expenditures . The General Fund operations resulted in a $342,627 increase in fund balance.

"

Wareham's long-term debt increased by $6,948,386 during the year.

Because the Town implemented new reporting standards for the current fiscal year, much of the information is not easily comparable to prior years. However, in future years, comparisons will be more meaningful to the Town's financial position and results of operations .

OVERVIEW OF THE FINANCIAL STATEMENTS

This discussion and analysis is intended to serve as an introduction to the Town of Wareham'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. This report also contains other supplementary information in addition to the basic financial statements .

A-6

TOWN OF WAREHAM, MASSACHUSETTS MANAGEMENT'S DISCUSSION AND ANALYSIS

JUNE 30, 2003

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

The statement of net assets presents information on all assets and liabilities, with the difference between the two reported as net assets . Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position is improving or deteriorating.

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

Both of the government-wide financial statements distinguish functions that are principally supported bytaxes 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 debt service. The business-type activities include water pollution control and camp activities .

The government-wide financial statements include not only the Town of Wareham itself (known as the primary government), and its only component unit, Wareham Community Development Authority (the Authority), for which the Town of Wareham is financially accountable as disclosed in the notes to the financial statements . Additional information concerning the Wareham Community Development Authority is available in its separately issued financial statements available from the Director of Finance/Accountant at Wareham Town Hall, 54 Marion Road, Wareham, Massachusetts 02571 . Effective July 1, 2003, the Wareham Community Development Authority ceased to be a separate entity and became a department of the Town.

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 fiscal year . Such information may be useful in evaluating a government's near-term financing requirements .

A-7

TOWN OF WAREHAM, MASSACHUSETTS MANAGEMENT'S DISCUSSION AND ANALYSIS

JUNE 30, 2003

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 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 balance provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The Town of Wareham adopts an annual appropriated budget for its general fund . A budgetary comparison schedule has been provided for the general fund to demonstrate compliance with this budget.

Proprietary funds. The Town maintains 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 water pollution control and camp activities .

Internal service funds are an accounting device used to accumulate and allocate costs internally among various functions . The Town has no internal service funds for the year ended June 30, 2003 .

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 statement 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 propriety funds.

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

As noted earlier, net assets may serve over time as a useful indicator of a government's financial position . Governmental assets exceeded liabilities by $75,522,132 at the close of FY 2003 .

Net assets of $48,077,423 (64%) reflect the Town's investment in capital assets (e.g . land, buildings, machinery, and equipment), less any related debt used to acquire those assets that is still outstanding. The Town uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the investment in its capital assets is reported net of its related debt, it should be noted that the resources needed to repay this debt are generally provided from other sources, since the capital assets themselves are seldom used to liquidate these liabilities .

TOWN OF WAREHAM, MASSACHUSETTS MANAGEMENT'S DISCUSSION AND ANALYSIS

JUNE 30, 2003

$910,045 (1% of the net assets) represents resources that are subject to restrictions on expenditures . The remaining balance of unrestricted net assets of $26,534,664 (35%) may be used to meet the government's ongoing obligations to citizens and creditors.

Town of Wareham - Governmental Activities Net Assets

At the end of the current fiscal year, the Town is able to report positive balances in all categories of net assets . Net assets increased by 10 million during the fiscal year. Much of the increase can be directly attributed to $9.9 million surplus generated from Governmental activities .

Net assets from the Town's governmental activities increased by over 9.9 million during fiscal 2003 . Key elements of the change are as follows:

Governmental Activities FY03

Assets : Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $22,505,113 Non-current assets(excluding capital) . . . . 18,811,751 Capital Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,826.363

Total assets . . . . . . . . . . . . . . . . . . . . .. . . . . . 80,143,227

Liabilities: Current liabilities (excluding debt). . . . . . 7,462,248 Non-current liabilities (excluding debt). 2,099,365 Current debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,949,474 Non-current debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,905,932

Total liabilities . . .., . . ... . . . . . . ... . . .. 39,417,019

Net Assets : Capital assets net of related debt. . . . . . . . 26,134,957 Restricted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 910,045 Unrestricted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,681,205

Total net assets .. . . . ... . . . . . . . . . . . . . . 40,726,207

Numerous factors contributed to the change in net assets within the governmental activities category. Some of the major items are:

"

The revenue recognition of School Building Assistance(SBAB)formiddle school construction $8,406,789

TOWN OF WAREHAM, MASSACHUSETTS MANAGEMENT'S DISCUSSION AND ANALYSIS

JUNE 30, 2003

The net effect where debt service principal payments on long-term debt is used to acquire capital assets . Since the Town raises current revenues to cover the principal payment and the useful life of the capital assets are significantly longer than the debt issues, net assets will increase in each year .

Business-type Activities : Business-type activities contributed $247,760 in increases to net assets for the year . The following table identifies key elements of the enterprise operations :

A-10

General revenues : Real estate and personal property taxes 21,938,806 Motor vehicle and other excise taxes . . . 2,426,926 Non-restricted grants and contributions. 2,680,367 Unrestricted investment income . . . . . . . . . 225,849 Other revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 758.129

Total revenues.. . . . . . . . . . . . . . . . . . . . . . 59,125,134

Expenses: General Government . . . . . . . . . . . . . . . . . . . . . . 3,415,473 Public Safety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,357,833 Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,178,853 Public Works. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,476,536 Human Services . . . . . . . . . . . . . . . . . . . . . . . . . . . 517,952 Culture & Recreation . . . . . . . . . . . . . . . . . . . . . 910,064 Debt Service. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107,209

Total expenses . . . . . . . . . . . . . . . . . . . .... 49,963,920 Transfers in(out). . . . . . ... . . . . . . . . . . . . . . . . . . . 772,273 Changes in net assets . . . . . . . . . . . . . . . . . . ... $ 9,933,487

Program revenues : Charges for services . . . . . . . . . . . . . . . . . . . . . . $ 4,295,056 Operating grants and contributions . . . . . 17,863,207 Capital grants and contributions . . . . . . . . 8,936,794

Business -Type Activities FY03

Assets : Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $8,065,321 Non-Capital assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,854,582 Capital assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,930.854

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,850,757

Capital Asset and Debt Administration

TOWN OF WAREHAM, MASSACHUSETTS MANAGEMENT'S DISCUSSION AND ANALYSIS

JUNE 30, 2003

Capital Assets : The Town of Wareham's investment in capital assets for its governmental and business-type activities as of June 30, 2003 amounts to $82,757,217 (net of depreciation). This investment in capital assets includes land, buildings, improvements to land and buildings, machinery and equipment, vehicles, and water pollution control lines.

The total increase in the Town of Wareham's investment in capital assets for the current year was $18,300,406 including $10,471,250 for governmental activities and $7,829,156 business-type activities . The Town's major capital projects relate to land acquisition, school construction design and the upgrade of the water pollution control facility.

Major Capital asset events during the current fiscal year included the following :

"

$10,017,053

Middle School construction in progress

"

$7,801,136

Water pollution control facility upgrade in progress

Liabilities : Current Liabilities (excluding debt) . . . . . . . . . $4,066,443 Current debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,233,002 Non-current debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,755,386

Total liabilities. . . . . . . . . . . . . . . . . . . . . . ... . . 26,054,831

Net Assets : Capital Assets net of related debt. . . . . . . . . . . . 21,942,466 Unrestricted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,853,459

Total net assets .. . . . . . . . ... . . . . . . . . . . . . . . . 34,795,925

Program revenues : Charges for services . . . . . . . . . . . . . . . . . . . . . . . . 2,136,578 Operating grants and contributions . . . . . . . . 434,197 Capital grants and contributions . . . . . . . . . . . 2,147,847 Other revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123,252

Total revenues... ... . . . . . . . . . . . . . . . . . . 4,841,874

Expenses: water pollution control. . . . . . . . . . . . . . . . . . . . . . . 3,747,407 Camp . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74,434

Total expenses . ... . . . . . . . .. . . . . . . . . . . . 3,821,841

Transfers in (out) . . . . . . . . . . . . . . . . . . . ... . . . . . .. ( 772,273)

Change in net assets .. . . . . ... . . . . . . . . . . . . . . . .. 247,760

$200,000 m BANS for Title V compliance

$390,000 in BANS for equipment

Requests for information

TOWN OF WAREHAM, MASSACHUSETTS MANAGEMENT'S DISCUSSION AND ANALYSIS

JUNE 30, 2003

Debt : At the end of the current fiscal year, the Town of Wareham had total debt outstanding of $51,843,794. The entire amount is classified as general obligation debt and is backed by the full faith and credit of the government. Of this amount $17,164,000 is in short term notes, and the remaining $34,679,794 is in outstanding bonds. The Town has no revenue bonds.outstanding, which are bonds secured solely by specified revenue sources . During fiscal 2003, the Town retired long-term debt of $2,655,036 and short-term debt of $2,197,700 .

The Town of Wareham issued $17,164,000 in bond anticipation notes to finance the following :

$16,574,000 in BANS for middle school construction

The business-type funds have $21,988,388 in outstanding bonds that are fully supported by the rates and do not rely on a general fund subsidy.

This financial report is designed to provide a general overview of the Town of Wareham'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 Director of Finance/Accountant at Wareham Town Hall, 54 Marion Road, Wareham, Massachusetts 02571 .

TOWN OF WAREHAM, MASSACHUSETTS

BASIC FINANCIAL STATEMENTS

TOWN OF WAREHAM, MASSACHUSETTS STATEMENT OF NET ASSETS

JUNE 30, 2003

The accompanying notes are an integral part of these financial statements .

Exhibit 1 Page 1 of 2

Governrnental Activities

Primary Government Business-type

Activities Total

Component Unit

Community Development

ASSETS Current assets : Cash and cash equivalents $ 18,135,852 $ 1,402,676 $ 19,538,528 $ 349,856 Receivables, net of uncollectible accounts :

Real estate, personal property, betterments 831,979 256,375 1,088,354 - Tax/utility liens 513,557 43,490 557,047 - Charges for services - 297,213 297,213 - Excises 521,298 - 521,298 - Departmental and other 450,947 - 450,947 - Due from other governments 2,051,480 6,065,567 8,117,047 416,973 Loans - - - 1,827,263

Prepaid and other assets - - - 5,853

Total current assets 22,505,113 8,065,321 30,570,434 2,599,945

Noncurrent assets : Betterment loans 250,406 2,654,598 2,905,004 - Tax/utility liens 1,573,097 - 1,573,097 - Due from other governments 16,688,108 6,199,984 22,888,092 - Cash and investments, restricted for endowments 300,139 - 300,139 - Capital assets, net of accumulated depreciation 38,826,363 43,930,854 82,757,217 35,983

Total noncurrent assets 57,638,113 52,785,436 110.,423,549 35,983 Total Assets $ 80,143,226 $ 60,850,757 $ 140,993,983 $ 2,635,928

TOWN OF WAREHAM, MASSACHUSETTS STATEMENT OF NET ASSETS

JUNE 30, 2003

Exhibit I Page 2o

The accompanying notes are an integral part of these financial statements .

LIABILITIES

Governmental Activities

Primary Government Business type Activities of

Component Unit

Community Development

Current liabilities: Accounts payable $ 5,323,002 $ 3,620,272 $ 8,943,274 $ 138,650 Accrued expenses :

Payroll and taxes 107,899 - 107,899 - Interest 281,641 384,037 665,678 - Compensated absences 213,000 61,136 274,136 934

Notes payable 17,164,000 - 17,164,000 - Tax refunds payable - - - - Bonds payable, current portion 1,785,474 1,233,002 3,018,476 - Deferred revenues 695,556 - 695,556 2,361,002 Other liabilities 841,150 999 842,149 - Total current liabilities 26,411,722 5,299,446 31,711,168 2,500,586

Non-current liabilities : Non-current portion of long-term liabilities: Compensated absences 2,099,365 - 2,099,365 - Bonds payable 10,905,932 20,755,386 31,661,318 - Special termination benefits - - - - Total Liabilities 39,417,019 26,054,832 65,471,851 2,500,586

NET ASSETS Invested in capital assets, net of related debt 26,134,957 21,942,466 48,077,423 35,983 Restricted for: Highways - - - - Community preservation 645,979 - 645,979 - Loans - - - - Perpetual funds: Non-expendable 264,066 - 264,066 -

Other purposes - - - - Unrestricted 13,681,205 12,853,459 26,534,664 99,359

Total net assets 40,726,207 34,795,925 75,522,132 135,342

Total Liabilities and Net Assets $ 80,143,226 $ 60,850,757 $ 140,993,983 $ 2,635,928

TOWN OF WAREHAM, MASSACHUSETTS STATEMENT OF ACTIVITIES

FOR THE YEAR ENDED JUNE 30, 2003

The accompanying notes are an integral part of these financial statements .

Program Revenues

Exhibit 2

Charges for Function/Program Expenses Services

Operating Grants and

Contributions

Capital Grants and Contributions

Net (Expense)/ Revenue

Component Unit

Community Development

Governmental activities : General government $ 3,415,473 $ 679,739 $ 9,867 $ 530,005 $ (2,195,862) $ (154,520) Public safety 6,357,833 1,801,751 147,236 - (4,408,846) - Education 36,178,853 910,073 17,251,860 8,406,789 (9,610,131) - Public works 2,476,536 377,973 333,742 - (1,764,821) - Human services 517,952 449,698 27,569 - (40,685) - Culture and recreation 910,064 75,822 92,933 - (741,309) - Dkebt service 107,209 - - - (107,209) - Intergovernmental charges - - - - - - Employee benefits - - - - - - Retirement contribution - - - - - - Insurance - - - - - - Other - - - - - - Special termination benefits - - - - - - Capital outlay - - - - - - Total government activities 49,963,920 4,295,056 17,863,207 8,936,794 (18,868,863) (154,520)

Business-type activities : Water pollution control 3,747,407 2,094,021 424,197 2,147,847 918,658 - Camp 74,434 42,557 10,000 (21,877) - Total business-type activities 3,821,841 2,136,578 434,197 2,147,847 896,781 -

Total primary government $ 53,785,761 $ 6,431,634 $ 18,297,404 $ 11,084,641 $ (17,972,082) $ (154,520)

Change in net assets : Governmental Business-type

activities activities Total

Net (expense)/revenue $ (18,868,863) $ 896,781 $ (17,972,082)

Real and personal property taxes levied for general purposes 21,938,806 - 21,938,806 - Motor vehicle and other excise taxes 2,426,926 - 2,426,926 - Interest and penalties 660,825 121,804 782,629 - Grants and contributions not restricted to specific programs 2,680,367 - 2,680,367 - Unrestricted investment income 225,849 - 225,849 $ 6,534 Miscellaneous revenue 97,304 1,448 98,752 24,560 Transfers, net 772,273 (772,273) - -

Total general revenues, special items, and transfers 28,802,350 (649,021) 28,153,329 31,094

Change in net assets 9,933,487 247,760 10,181,247 31,094

Net Assets, beginning 30,792,720 34,548,165 65,340,885 258,768

Net Assets, ending $ 40,726,207 $ 34,795,925 $ 75,522,132 $ 135,342

Exhibit 3 TOWN OF WAREHAM, MASSACHUSETTS

BALANCESHEET GOVERNMENTAL FUNDS

JUNE 30, 2003

The accompanying notes are an integral part of these financial statements .

General School

Construction

Non-Major Governmental

Funds

Total Governmental

Funds ASSETS

Cash and cash equivalents $ 8,847,966 $ 5,327,753 $ 3,156,762 $ 17,332,481 Receivables, net of uncollectible accounts :

Real estate and personal property taxes 1,017,022 - 9,382 1,026,404 Tax/utility liens 2,073,800 - - 2,073,800 Excises 521,298 - - 521,298 Departmental and other 209,037 - 219,366 428,403 Due from other governments 7,291,497 9,705,730 1,742,361 18,739,588 Loans - - 55,980 55,980

Prepaid and other assets - - - - Cash and investments, restricted - - 300,139 300,139 Total assets 19,960,620 15,033,483 5,483,990 40,478,093

LIABILITIES Accounts payable 4,862,060 - 460,942 5,323,002 Accrued expenses:

Payroll and taxes 107,899 - - 107,899 Notes payable - 16,574,000 590,000 17,164,000 Deferred revenues 10,978,655 9,705,730 2,244,941 22,929,326 Other liabilities 37,778 - - 37,778

Total Liabilities 15,986,392 26,279,730 3,295,883 45,562,005

FUND BALANCES Reserved for:

Encumbrances and continued appropriations 913,712 - - 913,712 Community preservation - - 645,979 645,979 Perpetual permanent funds - - 264,066 264,066

Unreserved : Designated for subsequent year expenditures 940,929 - - 940,929 Undesignated, reported in : General fund 2,119,587 - - 2,119,587 Special revenue funds - - 1,278,062 1,278,062 Capital projects funds - (11,246,247) - (11,246,247) Total Fund Balances 3,974,228 (11,246,247) 2,188,107 (5,083,912)

Total Liabilities and Fund Balances $ 19,960,620 $ 15,033,483 $ 5,483,990 $ 40,478,093

Exhibit 4 TOWN OF WAREHAM, MASSACHUSETTS

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS

JUNE 30, 2003

Total governmental fund balances, Exhibit 3

$

(5,083,912)

Total net assets reported for governmental activities in the statement, of net assets is different because:

Capital assets used in governmental activities are not functional resources and, therefore, are not reported in the funds

38,826,363

Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds but are deferred . These include :

Real estate and personal property taxes

11,373,602 State school building assistance grant reimbursements

7,291,497 Chapter 90 highway grants

1,084,430 Ambulance receivables

219,366 Other receivables

22,544

The accompanying notes are an integral part of these financial statements.

53,733,890

Liens receivable are reflected in governmental funds in the amount of tax assessed and are offset by an equal amount of deferred revenue . Governmental funds include unrecorded interest, eliminate deferred and make a provision for uncollectible amounts

2,048,951

Governmental funds report the provision for abatements and exemptions as as liability whereas the government wide reflect this amount as a reservation of fund balance reduced by tax refunds payable

228,778

In the statement of activities, interest is accrued on outstanding long-term debt, whereas in the governmental funds interest is not reported until due

(281,641)

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

Bonds and notes payable

(12,691,406) Compensated absences

(2,312,365) Accrued interest expense Special termination benefits

- Net assets of governmental activities, Exhibit 1

$

40,726,207

TOWN OF WAREHAM, MASSACHUSETTS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE

GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2003

Exhibit 5

The accompanying notes are an integral part of these financial statements .

General School

Construction

Non-Major Governmental

Funds

Total Governmental

Funds REVENUES

Property taxes $ 21,107,225 - $ 317,427 $ 21,424,652 Payments in lieu of taxes - - - - Tax liens 433,422 - - 433,422 Excises 2,317,385 - - 2,317,385 Interest and penalties 123,624 - - 123,624 Departmental 277,449 - 2,200,804 2,478,253 Charges for services 425,463 - 4,207 429,670 Licenses and permits 891,164 - - 891,164 Contributions - - 12,870 12,870 Intergovernmental - federal 68,173 - 2,594,844 2,663,017 Intergovernmental - state 17,606,954 - 1,415,363 19,022,317 Fines and forfeitures 524,346 - - 524,346 Investment income 205,005 - 25,969 230,974 Miscellaneous 97,304 - - 97,304

Total Revenues 44,077,514 - 6,571,484 50,648,998

EXPENDITURES General government 2,793,761 - 26,680 2,820,441

4,241,258 Public safety 4,125,458 - 115,800 Education 26,936,887 - 4,296,452 31,233,339 Public works 1,578,402 - 1,183,179 2,761,581 Human services 343,506 - 53,293 396,799 Culture and recreation 722,013 - 26,374 748,387 Debt service 2,389,884 - - 2,389,884 Intergovernmental charges 697,113 - - 697,113 Employee benefits 3,931,610 - - 3,931,610 Retirement contribution 1,094,109 - - 1,094,109 Insurance 495,028 - 22,764 517,792 Capital outlay 38,363 $ 9,933,378 476,105 10,447,946. Judgments 127,373 - 127,373

Total Expenditures 45,273,507 9,933,378 6,200,647 61,407,532

Excess (deficiency) of revenues over expenditures (1,195,993) (9,933,378) 370,837 (10,758,534)

OTHER FINANCING SOURCES (USES) Bond anticipation note premium 75,777 - - 75,777 Operating transfers in 1,484,070 - 21,227 1,505,297 Operating transfers out (21,227) - (575,970) (597,197)

Total Other Financing Sources (Uses) 1,538,620 - (554,743) 983,877 -

Net change in fund balances 342,627 (9,933,378) (183,906) (9,774,657)

FUND BALANCE, Beginning of Year 3,631,601 (1,312,869) 2,372,013 4,690,745

FUND BALANCE, End of Year $ 3,974,228 $ (11,246,247) $ 2,188,107 $ (5,083,912)

TOWN OF WAREHAM, MASSACHUSETTS RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES

FOR THE YEAR ENDED JUNE 30, 2003

Exhibit 6

Net changes in fund balances - total governmental funds, Exhibit 4 $ (9,774,657)

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.

Equipment purchases 10,497,250 Depreciation (834,488)

Revenues in the Statement of Activities that do not provide current financial resources are deferred in the Statement of Revenues, Expenditures, and Changes in Fund balances . Therefore, the recognition of revenue for various types of accounts receivable (i .e., real estate and personal property, motor vehicle excise, etc.) differ between the two statements . This amount represents the net change in deferred revenue. 765,459

22,544 State aid in the statement of activities does not include the portion of school building assistance attributable to interest expense. This amount is portion of state aide allocated to offset current interest expense. 7,680,521

The issuance of long-term debt (e.g., bonds and leases) provides current financial resources to governmental funds, while the repayments of the principal of long-term debt consumes financial resources of governmental funds. Neither transaction, however, has any effect on net assets. Also, governmental funds report the effect of issuance costs, premiums, discounts, and similar items when debt is first issued, whereas these amounts are deferred and amortized in the Statement of activities .

Bond maturities 1,725,993

Governmental funds interest is not reported until due. This amount represents the net change in accrued interest payable. (91,254)

Some expenses reported in the Statement of Activities, such as compensated absences, do not require the use of current financial resources and in , therefore, are not reported as expenditures the governmental funds. This amount represents the net change in the following liabilities ; Compensated absences (57,881)

Changes in net assets of governmental activities, Exhibit 2 $ 9,933,487

The accompanying notes are an integral part of these financial statements .

TOWN OF WAREHAM, MASSACHUSETTS PROPRIETARY FUNDS

STATEMENT OF NET ASSETS JUNE 30, 2003

The accompanying notes are an integral part of these financial statements .

Exhibit 7

Business-type activities Water Pollution Control FaciUV Camp Total

ASSETS Current assets : Cash and cash equivalents $ 1,371,989 $ 30,687 $ 1,402,676 Receivables, net of uncollectible accounts :

Betterments 330,000 - 330,000 Charges for services 340,702 - 340,702 Due from other governments 6,065,567 - 6,065,567

Total current assets 8,108,258 30,687 8,138,945

Noncurrent assets : Due from other governments 6,199,984 - 6,199,984 Betterments 2,580,972 - 2,580,972 Land and construction in progress 9,626,537 - 9,626,537 Capital assets, net 34,304,317 - 34,304,317 Total noncurrent assets 52,711,810 - 52,711,810

Total Assets $ 60,820,068 $ 30,687 $ 60,850,755

LIABILITIES Current liabilities : Accounts payable $ 3,620,272 - $ 3,620,272 Bonds and notes payable 1,233,002 - 1,233,002 Accrued expenses: -

Interest 384,037 - 384,037 Compensated absences 61,136 - 61,136

Other current liabilities 999 - 999 Total current liabilities 5,299,446 - 5,299,446

Non-current liabilities : Non-current portion of long-term liabilities : Bonds and notes payable 20,755,386 - 20,755,386 Total non-current liabilities : 20,755,386 - 20,755,386 Total Liabilities 26,054,832 - 26,054,832

NET ASSETS Invested in capital assets, net of related debt 21,942,466 - 21,942,466 Unrestricted (deficit) 12,822,770 $ 30,687 12,853,457

Total net assets 34,765,236 30,687 34,795,923

Total Liabilities and Net Assets $ 60,820,068 $ 30,687 $ 60,850,755

Exhibit 8 TOWN OF WAREHAM, MASSACHUSETTS

PROPRIETARY FUNDS STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS

GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2003

The accompanying notes are an integral part of these financial statements .

Business-type activities - Enterprise Funds

Water Pollution Control Facility Camn Total

Revenues User charges for services $ 2,075,291 $ 42,557 $ 2,117,848 Other charges for services 49,965 - 49,965 Betterments 86,066 - 86,066 Interest and penalties - - - Miscellaneous - 10,000 10,000

Total Operating Revenues 2,211,322 52,557 2,263,879

Operating expenses Personnel costs 534,336 54,186 588,522 Purchase of services 841,061 - 841,061 Supplies 53,214 11,248 64,462 Other charges and expenses 255,642 - 255,642 Depreciation 1,167,337 - 1,167,337

Total Operating Expenses 2,851,590 65,434 2,917,024 Operating income/(loss) (640,268) (12,877) (653,145)

Non Operating Revenues (Expenses) Investment income 5,951 - 5,951 Intergovernmental 2,572,045 - 2,572,045 Interest expense (768,993) - (768,993) Total Non Operating Revenues xpenses) 1,809,003 - 1,809,003

Income/(loss) before transfers 1,168,735 (12,877) 1,155,858

Operating transfers out (896,100) (12,000) (908,100) Total transfers (896,100) (12,000) (908,100)

Change in Net Assets 272,635 (24,877) 247,758

Net Assets, beginning 34,492,601 55,564 34,548,165

Net Assets, ending $ 34,765,236 $ 30,687 $ 34,795,923

Exhibit TOWN OF WAREHAM, MASSACHUSETTS

PROPRIETARY FUNDS STATEMENT OF CASH FLOWS GOVERNMENTAL FUNDS

FOR THE YEAR ENDED JUNE 30,200 Business-type activities - Enterprise Funds

The accompanying notes are an integral part of these financial statements .

Water Pollution Control Facility Came Tot

CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers and users $ 2,746,647 $ 52,557 $ 2,799,204 Payments to vendors (1,153,660) (11,248) (1,164,908) Payments to employees (515,152) (54,186) (569,338) Net Cash Provided by (Used in) Operating Activities 1,077,835 (12,877) 1,064,958

CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES

Transfers out (896,100) (12,000) (908;100) Net Cash Provided by (Used in) Noncapital Financing Activities (896,100) (12,000) (908,100)

CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES,

Proceeds from issuance of bonds and notes 3,925,405 - 3,925,405 Principal payments on bonds and notes (617,883) - (617,883) Acquisition and construction of capital assets (4,236,677) - (4,236,677) Interest payments (362,658) - (362,658) Net Cash Provided by (Used in) Capital and Related Financing Activities (1,291,813) - (1,291,813)

CASH FLOWS FROM INVESTING ACTIVITIES Investment income 5,951 - 5,951 Net Cash Provided by (Used in) Investment Activities 5,951 - 5,951 Net increase (decrease) in cash and cash equivalents (1,104,127) (24,877) (1,129,004)

Cash and cash equivalents, beginning 2,476,116 55,564 2,531,680 Cash and cash equivalents, ending $ 1,371,989 $ 30,687 $ 1,402,676

Reconciliation of operating income to net cash provided by (used by) operating activities

Operating income (loss) '$ (640,268) $ (12,877) $ (653,145) Adjustments to reconcile operating income (loss) to net cash provided by (used in) operating activities : Depreciation 1,167,337 - 1,167,337 Changes in assets and liabilities : Charges for services 530,112 - 530,112 Accrued expenses 20,654 - 20,654 Total adjustments 1,718,103 - 1,718,103 Net Cash Provided by (Used in) Operating Activities $ 1,077,835 $ (12,877) $ 1,064,958

TOWN OF WAREHAM, MASSACHUSETTS FIDUCIARY FUNDS

STATEMENT OF NET ASSETS JUNE 30, 2003

The accompanying notes are an integral part of these financial statements .

Exhibit 1 0

Private Trust

Purpose Funds

Agency Fund

ASSETS Cash and cash equivalents $ 75,174 $ 803,371

Total Assets $ 75,174 $ 803,371

LIABILITIES Other liabilities - $ 803,371

Total Liabilities - 803,371

NET ASSETS Net Assets Held in Trust $ 75,174

Total Liabilities and Net Assets $ 75,174 $ 803,371

TOWN OF WAREHAM, MASSACHUSETTS FIDUCIARY FUNDS

STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS FOR THE YEAR ENDED JUNE 30, 2003

Exhibit 1 1

The accompanying notes are an integral part of these financial statements .

Private Trust

Purpose Funds

ADDITIONS Contributions $ 13,032 Total contributions 13,032

INVESTMENT EARNINGS Interest and dividends 1,510 Total investment earnings 1,510 Total additions 14,542

DEDUCTIONS Educational scholarships & awards 4,050 Total deductions 4,050 Change in fiduciary net assets 10,492

Net Assets, beginning 64,682 Net Assets, ending $ 75,174

TOWN OF WAREHAM, MASSACHUSETTS NOTES TO THE FINANCIAL STATEMENTS

JUNE 30, 2003

NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. Reporting Entity The Town of Wareham, Massachusetts (the Town) is located in Plymouth County in southeastern Massachusetts. The Town was settled in 1653, incorporated in 1812, and is governed by the selectmen-representative town meeting form of government .

Discretely presented component unit - The component unit column in the financial statements includes the financial data of the Town's discretely presented component unit, the Wareham Community Development Authority (the Authority) . It is reported in a separate column to emphasize that it is legally separate from the Town.

The Authority is responsible for the administration of U.S . Department of Housing and Urban Development Small Cities Grant program passed through the Massachusetts Department of Housing and Development. Employees of the Authority are actually employees of the Town. The Authority has no taxing authority and is dependent upon the Town for the appointment of its officers and for its operating facilities . The Authority consist of only a general fund.

The Authority issued its own financial statements for the year ended June 30, 2003 which are available from the Director of Finance/Town Accountant for the Town of Wareham, 54 Marion Road, Wareham, MA 02571.

B . Basis of Presentation, Basis of Accounting The financial statements of the Town have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP), applicable to governmental units . The Governmental Accounting Standards Board (GASB) is the standard setting body for governmental accounting and financial reporting.

Government-wide Statements : The statement of net assets and the statement of activities display information about the primary government (the Town). These statements include the financial activities of the overall government, except for fiduciary activities and component units that are fiduciary in nature . These statements distinguish between the governmental and business-type activities of the Town . Governmental activities generally are financed through taxes, intergovernmental revenues, and other non exchange transactions . Business-type activities are financed in whole or in part by fees charged to external parties.

The statement of activities reports the expenses of a given function offset by program revenues directly connected with the functional program. A function is an assembly of similar activities and may include portions of a fund or summarize more than one fund to capture the expenses and program revenues associated with a distinct functional activity. Employee benefits, property and liability insurance; and state assessments and charge costs have been allocated to major functions in order to present a more accurate and complete picture of the cost of Town services . The Town does not allocate indirect expense to functional activities . Program revenues include (a) charges for services which report fees, fines and forfeitures, and other charges to users of the Town's services and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function . Revenues that are not classified as program revenues, including all taxes, are presented as general revenues .

A-26

TOWN OF WAREHAM, MASSACHUSETTS NOTES TO THE FINANCIAL STATEMENTS

JUNE 30, 2003

NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

Fund Financial Statements : The fund financial statements provide information about the Town's funds, including its fiduciary funds. Separate statements for each fund category - governmental, proprietary, and fiduciary are presented. The emphasis of fund financial statements is on major governmental and enterprise funds, each displayed in a separate column . All remaining governmental funds are aggregated and reported as non major funds.

Proprietary fund operating revenues, such as charges for services, result from exchange transactions associated with the principal activity of the fund . Exchange transactions are those in which each party receives and gives up essentially equal values . Non-operating revenues, such as subsidies and investment earnings, result from non exchange transactions or ancillary activities .

Major funds must be reported if the following criteria are met:

Total assets, liabilities, revenues, or expenditures/expenses of an individual governmental or enterprise fund is at least 10% of the corresponding element (assets, liabilities, etc.) for all fiends of that category or type (total governmental or enterprise funds), and

Total assets, liabilities, revenues, or expenditures/expenses of the individual governmental fund or enterprise fund are at least 5% of the corresponding element for all governmental and enterprise funds combined .

Any other governmental or enterprise fund that management believes is particularly significant to the basic financial statements may be reported as a major fund .

The Town reports the following major governmental fund :

General Fund : This is the Town's primary operating fund . It accounts for all financial resources of the general government, except those required to be accounted for in another fund.

The non major governmental funds consist of other special revenue, capital projects and permanent funds that are aggregated and presented in the non major governmental funds column on the governmental funds financial statements. The following describes the general use of these fund types:

The special revenue fund is used to account for the proceeds of specific revenue sources (other than permanent funds or capital projects funds) that are restricted by law or administrative action to expenditures for specified purposes .

The capital projects fund is used to account for financial resources to be used for the acquisition or construction of major capital facilities (other than those financed by enterprise and trust funds) .

The permanent fund is 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 the governmental programs .

The Town reports the following major enterprise funds:

TOWN OF WAREHAM, MASSACHUSETTS NOTES TO THE FINANCIAL STATEMENTS

JUNE 30, 2003

NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-Continued

Water Pollution Control Facility Fund (VWPCF): This fund accounts for the operation and maintenance of the Town's sanitary sewer collection and disposal system.

Camp Fund: This fund accounts for the operation of summer camping activities.

The Town reports the following fund types :

Private Purpose Trust Funds: These funds are used to account for resources legally held in trust for the benefit of persons and organizations other than the Town . Since such funds cannot be used for purposes of providing Town services, they are excluded from the Town`s entity-wide financial statements .

Agency Fund : This fund is used to account for monies held on behalf of parties other than the Town, such as state and federal agencies ; public school student activities, and builder's bond deposits .

For the government-wide financial . statements, and proprietary and fiduciary fund accounting, all applicable Financial Accounting Standards Board (FASB) pronouncements issued on or prior to November 30, 1989, are applied, unless those pronouncements conflict with or contradict GASB pronouncements.

Measurement Focus, Basis of Accounting Government-wide, Proprietary, and Fiduciary Fund Financial Statements : The government-wide, proprietary, and fiduciary fund financial statements are reported using the economic resources measurement focus. The government-wide and proprietary fund financial statements are reported using the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time that liabilities are incurred, regardless of when the related cash flows take place. Non exchange transactions, in which the Town gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, grants, entitlements, and donations . On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied . Revenue from grants, entitlements, and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied .

Governmental Fund Financial Statements : Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. The Town considers all revenues reported in the governmental funds to be available if the revenues are collected within sixty days after year-end . Property taxes, motor excise taxes, charges for service, investment income, and in-lieu-of-tax payments are considered to be susceptible to accrual.

Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long term debt and compensated absences, which are recognized as expenditures only to the extent that they have matured. General capital asset acquisitions are reported as expenditures in governmental funds.

When both restricted and unrestricted resources are available for use, it is the government's policy to use restricted resources first, then unrestricted resources as they are needed .

A-28

NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

C. Assets, Liabilities, and Equity

TOWN OF WAREHAM, MASSACHUSETTS NOTES TO THE FINANCIAL STATEMENTS

JUNE 30, 2003

Cash and Investments, Town and Component Unit The Town's 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. This policy also applies to the Authority.

Restricted Cash and Investments Permanent fund cash and investments and cash associated with certain development deposits are classified as restricted assets . These assets are not available to finance the general operations of the Town.

Receivables, Town All trade and property tax receivables are shown net of an allowance for uncollectibles . Outstanding personal property taxes, and motor vehicle and boat excise taxes that are three or more years old have been classified as uncollectible for financial reporting purposes . Outstanding real estate taxes are deemed fully collectible until liened . Tax liens receivable, and related interest, are reflected with an allowance for uncollectible amounts of approximately 44%. Outstanding ambulance receivables more than 180 days old are deemed uncollectible. All other receivables are considered fully collectible .

Based upon an analysis of billing activity for the WPCF over the past three years,, 5% of outstanding WPCF user charges receivable have been assigned to an allowance for uncollectible amounts. Real estate taxes receivable are considered to be collectible in full until they are moved to tax liens.

Receivables, Component Unit The Authority operates revolving loan programs with funds provided by the Massachusetts Department of Housing and Community Development (DHCD). All grant funds provided by DHCD to establish revolving loan programs are ultimately returnable to the DHCD to extent related loans and interest are recovered from borrowers for housing rehabilitation loans. As such, the Authority does not provide for uncollectible amounts as any amount uncollected will reduce the amount repayable to DHCD.

Property Taxes The Town is responsible for assessment and collection of all property taxes. The Board of Assessors determine the estimated fair market value of all real and personal property, subject to the property tax, each January 1 . Taxes are then levied on each property based upon the budget that is adopted by the Town Meeting net of the amount of state aid. Property taxes are due in semi-annual installments on November 1, and May 1, and subject to penalties and 14% interest if not paid by the due date . It is the Town's policy to perfect tax liens on delinquent properties within two years from the date that the tax is levied . At this point the interest rate on the delinquent tax increases to 16% per annum.

Motor Vehicle Excise Taxes Motor vehicle excise taxes are assessed annually for each vehicle registered in the Town and are recorded as receivables in the fiscal 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.

TOWN OF WAREHAM, MASSACHUSETTS NOTES TO THE FINANCIAL STATEMENTS

JUNE 30, 2003

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

WPCF User Charges Commercial and residential user fees are billed semiannually. All billings are based on individual meter readings and are subject to penalties and interest if they are not paid by their respective due dates. WPCF liens are processed in the subsequent year as a lien on the property owner's tax bill . WPCF charges and related liens are recorded as receivables in the fiscal year of the levy.

Intergovernmental Various federal and state grants for operating and capital purposes are applied for and received annually . For non expenditure driven grants, receivables are recognized as soon as all eligibility requirements imposed by the provider have been met. For expenditure driven grants, receivables are recognized when the qualifying expenditures are incurred and all other grant requirements are met.

Inventories Since the amount of inventories are not material in total to the fmancial statements of the Town, inventories are recorded as expenditures at the time of purchase .

Capital Assets, Town Purchased or constructed capital assets are recorded at cost or estimated historical cost . Donated capital assets are recorded at their estimated fair value at the date of donation . GASB 34 requires that general infrastructure assets must be recorded no later than June 30, 2007 . Wareham has not recorded general infrastructure assets . The cost of improvements to existing, but unrecorded, infrastructure is expensed since the cost of improvements does not meet the requirements of GASB 34 . The cost of normal maintenance and repairs that do not significantly add to the value of the assets or materially extend the assets' useful lives are not capitalized .

Capital assets are defined by the Town as assets with an initial, individual cost in excess of capitalization thresholds and an estimated useful life of more than a single year.

Capitalization Asset Class

Threshold Equipment and vehicles

$25,000 Buildings and land

$100,000 Infrastructure $500,000

Capital assets are depreciated using the straight-line method over the following estimated useful lives:

Buildings and improvements

40 years Machinery and equipment

5-20 years

Capital Assets, Component Unit The Authority capitalizes major equipment having an initial unit cost in excess of $500 and records depreciation on a straight-line basis over the estimated useful lives of 5 to 7 years.

TOWN OF WAREHAM, MASSACHUSETTS NOTES TO THE FINANCIAL STATEMENTS

JUNE 30, 2003

NOTE l. - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

Inter-fund Transactions The Town does not record any transactions of a buyer/seller nature between and within governmental funds.

Inter-fund Transfers During the course of its operations, resources are permanently reallocated between and within funds. These transactions are reported as transfers in and transfers out.

Government-wide financial statements - Transfers between and within governmental funds and internal service funds are eliminated from the governmental activities' in the statement of net assets. Any residual balances outstanding between the governmental activities and business-type activities are reported in the statement of activities as "Transfers, net."

Fund financial statements - Transfers between and within funds are not eliminated from the individual fund statements and are reported as transfers in and transfers out.

Deferred and Unearned Revenue, Town Deferred revenue at the governmental fund financial statement level represents billed receivables that do not meet the available criterion in accordance with the current financial resources measurement focus and the modified accrual basis of accounting . Deferred revenue is recognized as revenue in the conversion to the government-wide (full accrual) financial statements .

Deferred and Unearned Revenue, Component Unit The Authority recognizes all grant funds provided by DHCD for revolving loan programs as deferred grants payable. This amount includes interest and principal repayments from outstanding loans as well as additional DHCD advances because all unused loan funds are ultimately returnable to DHCD.

Unearned revenue at the government-wide and fund financial statement level represents resources that have been received, but not yet earned .

Net Assets and Fund Equity, Town

Government - wide financial statements - Net assets are reported as restricted when amounts are not available for appropriation or are legally restricted by outside parties for a specific future use.

Net assets have been reported as restricted for the following purposes :

Capital projects represent amounts restricted for capital purposes .

Highways represent amounts committed by the Commonwealth of Massachusetts under the Chapter 90 program for repair and/or reconstruction of streets and sidewalks .

Perpetual funds - expendable represents amounts held in trust for which the expenditures are restricted by various trust agreements.

TOWN OF WAREHAM, MASSACHUSETTS NOTES TO THE FINANCIAL STATEMENTS

JUNE 30, 2003

NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

Perpetual funds - non expendable represents amounts held in trust for which only investment earnings may be expended .

Other Purposes represents restrictions placed on net assets by other outside parties.

Fund financial statements - Fund balances are reserved for amounts that are not available for appropriation or are legally restricted by outside parties for a specific future use.

Fund balances have been reserved for the following purposes :

Encumbrances and continued appropriations represent amounts obligated under purchase orders, contracts, or other commitments for expenditure that are being carried forward to the ensuing fiscal year.

Perpetual permanent funds represent amounts held in trust for which only investment earnings may be expended .

Other specified purposes represent restrictions placed on assets by outside parties .

Fund balances have been designated for subsequent year expenditures and represent amounts appropriated by the Town Meeting for the fiscal year 2004 budget.

Net Assets and Fund Equity, Component Unit

Government - wide financial statements - Net assets are reported as restricted when amounts are not available for appropriation or are legally restricted by outside parties for a specific future use. Net assets have been reported as restricted for community development.

Fund financial statements - Fund balances are reported as unreserved and undesignated because the full amount relates to the Authorities general function of community development.

Long Term Debt Government-wide and Proprietary Fund Financial Statements - Long term debt is reported as liabilities in the government wide and proprietary fund statements of net assets . Material bond premiums and discounts, if any, are deferred and amortized over the life of the bonds using the effective interest method . Bonds payable are reported net of the applicable premium or discount.

Governmental Fund Financial Statements - The face amount of proceeds from the issuance of governmental funds long term debt is reported as other financing sources. 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, are reported as General Government (treasury and collection) expenditures .

TOWN OF WAREHAM, MASSACHUSETTS NOTES TO THE FINANCIAL STATEMENTS

JUNE 30, 2003

NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

Investment Income Excluding the permanent funds, investment income derived from major and non major governmental funds is legally assigned to the General Fund, unless otherwise directed by legal or contractual provisions .

Interest Expense Interest on general long-term liabilities is generally considered an indirect expense. However, interest on long-term debt is included in direct expenses in those limited instances when borrowing is essential to the creation or continuing existence of a program and it would be misleading to exclude the interest from direct expenses of that program (for example, a new program that is highly leveraged in its early stages).

Compensated Absences Employees are granted vacation and special leave based upon collective bargaining agreements and Town policy. These benefit costs are accrued when incurred in the government-wide and proprietary fund financial statements . A liability is reported in the governmental funds at June 30th only as a result of retirement, resignation, or termination.

Post Retirement Benefits In addition to the pension benefits described in Note 9, the Town provides post-retirement health care and life insurance benefits, in accordance with state statutes, for all of the Town's full-time employees and part-time employees over 20 hours who retire from the Town on or after attaining age 55 with at least 10 years of service . Currently, 154 retirees are provided post-retirement benefits . The Town pays approximately 75% of medical and life insurance premiums for the retirees and their dependents . The Town recognizes the cost of providing these benefits by expensing premiums in the year paid (pay-as-you-go method).

The cost incurred in fiscal 2003 (net of retiree contributions) was approximately $661,000.

Use of Estimates The preparation of basic financial statements in conformitywith 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 the revenues and expenditures/expenses during the fiscal year. Actual results could vary from estimates that were used .

Total Column Government - wide financial statements - The total column presented on the government-wide financial statements represents consolidated financial information.

Fund financial statements - The total column on the fund financial statements is presented only to facilitate financial analysis . Data in this column is not the equivalent of consolidated financial information.

TOWN OF WAREHAM, MASSACHUSETTS NOTES TO THE FINANCIAL STATEMENTS

JUNE 30, 2003

NOTE 2 - STEWARDSH T, COMPLIANCE, AND ACCOUNTABILITY

A. Budget Information, Town The municipal finance laws of the Commonwealth of Massachusetts require that the Town adopt a balanced budget each fiscal year at its Annual Town Meeting. Appropriations are approved for each municipal department with activities in the General, and WPCF funds for personal services (salaries and wages), expenses (supplies and services), debt service and capital outlay/improvements, and fringe benefits . A single bottom-line appropriation budget is recommended and voted for the Wareham Public Schools.

Amendments to the original budget, transfers between municipal departments, and transfers between departmental appropriation units require prior approval of a Special Town Meeting. The Town Accountant's Office has responsibility for malting certain that the budget is executed in accordance with the approved budget, and monthly appropriation status reports are provided to the affected departments. Budgetary control is exercised on a line item basis for all municipal departments and transfers between line items within departmental appropriation units require advance approval of the Town Meeting. Encumbrance accounting is used as an additional control measure. Encumbrances outstanding at year-end are reported as reservations of fund balance and do not constitute expenditures or liabilities since goods and services have not been received.

Unobligated annual appropriation balances generally lapse at year-end, it is the Town's policy to continue certain appropriations into the following year under certain limited circumstances . These are limited to Town Meeting articles and encumbrances .

An annual budget is voted in conformity with the guidelines described above. The original fiscal year 2003 budget authorized $44,048,104 in appropriations and other amounts to be raised (including $1,191,721 in encumbrances and continued appropriations brought forward from the fiscal year ended June 30, 2002). During the fiscal year, Special Town Meetings authorized supplemental appropriations totaling $1,023,212 for a total final budget of $45,071,316 .

Total transfers to other funds totaled $221,227 and $913,712 in appropriation balances were carried forward into fiscal year 2004 to support encumbrances and continuing appropriations .

B. Budget Information, Component Unit The Authority does not adopt an operating budget .

C. Budge, tare - GAAP Reconciliation Accounting principles followed for purposes of preparing the basic financial statements on a budgetary basis differ from those used to present basic financial statements in accordance with generally accepted accounting principles (GAAP). A reconciliation of the budgetary-basis to GAAP basis results for the General Fund for the fiscal year ended June 30, 2003 is presented below:

TOWN OF WAREHAM, MASSACHUSETTS NOTES TO THE FINANCIAL STATEMENTS

JUNE 30, 2003

D. Excess of Expenditures over Appro riap

tions The Town experienced operational deficits in its snow and ice account in the amount of $229,827.

E. Deficit Fund Equity Capital project funds . may reflect an accumulated deficit as a result using bond anticipation notes to finance interim project costs . The Town intends to fund such accumulated deficits through the issuance of long-term bonds in future years. Individual project deficits are as follows :

NOTE 3 - DEPOSITS AND INVESTMENTS

Project

Deficit Middle school design and construction

$11,246,247 Capital asset acquisition

361,674 Land acquisition

87.300 Total Capital Project Deficits

$11.695,221

A. SummM of Deposit and Investment Balances. Town The municipal finance laws of the Commonwealth authorize the Town to invest temporarily idle cash in bank term deposits and certificates of deposits, and treasury and agency obligations of the United States government, with maturities of one year or less ; U.S . treasury or agency repurchase agreements with maturities of not more than 90 days ; money market accounts; and the state treasurer's investment pool-the Massachusetts Municipal Depository Trust (MMDT). The Town's participation in the MMDT meets the criteria of an external investment pool .

Municipal finance laws allow the Town to invest private purpose trust funds in securities other than mortgages or collateral loans that are legal for the investment of funds of savings banks under the laws of the Commonwealth of Massachusetts .

NOTE 2 - STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY

Net change in budgetary amounts, budgetary basis $2,581,321 Basis of accounting differences :

Recognition of Commonwealth of Massachusetts revenue "on-behalf' payments for teachers retirement contributions 1,933,306 Prior year appropriations for encumbrances and carryover articles (1,191,721) Other financing sources not reflected on a GAAP basis ( 885,981) Net transfers from stabilization fund ( 343,467) Other financing uses not reflected on a GAAP basis 106,698 Bond anticipation note premium 75,777 Recognition of intergovernmental expense "on-behalf' payments for teachers retirement contributions ( 1 L211,306)

Net change in fund balances, GAAP basis $ 342,627

NOTE 3 - DEPOSITS AND INVESTMENTS - Continued

B.

TOWN OF WAREHAM, MASSACHUSETTS NOTES TO THE FINANCIAL STATEMENTS

JUNE 30, 2003

All investments for the Town are reported at fair value.

The MMDT operates in accordance with applicable state laws and regulations and the reported value of the pool is the same as the fair value of pool shares.

Deposits Deposits are classified into three levels of credit risk :

Category 1 : Insured or collateralized with securities held by the Town or its agent in the Town's name.

Category 2: Collateralized with securities held by the pledging financial institution's trust department or agent in the Town's name.

Category 3 : Uncollateralized, including any bank balance that is collateralized with securities held by the pledging financial institution, or by its trust department or agent but not in the Town's name .

The Town maintains a cash and short term investment pool that is available for use by all funds including internal service and private purpose funds. The following details the carrying amount of cash and short term investments, and investments as reported in the basic financial statements at June 30, 2003 .

Deposits $5,117,366 $ - $ 13,933 .605 $ 19,050,971 $19,913,843

Summary of Deposit and Investment Balances, Component Unit The Authority maintained deposits ($365,669 bank balance and $349,856 carrying amount) in several financial institutions . All deposits are covered by the Federal Deposit Insurance Corporation(FDIC) or Depositor's Insurance Fund (DIF) limits .

NOTE 4 - RECEIVABLES

Category

Bank Carrying Balance Amount

A. Town At June 30, 2003, receivables for individual major and non-major governmental funds, and fiduciary funds in the aggregate, including applicable allowances for uncollectible amounts are as follows:

A-36

Receivable Type Gross

Amount Allowance for Uncollectible Net Amount

Real estate and personal property taxes $ 831,979 - $ 831,979 Tax/utility liens 3,787,717 $1,701,063 2,086,654 Excises 553,987 32,689 521,298 Departmental and other 538,804 87,857 450,947 Title V betterment loans 250,406 - 250,406 Due from other governments 18,739,588 18,739,588

Total $24,702,481 $ 1,821,609 $22,880,872

NOTE 4 - RECEIVABLES - Continued

TOWN OF WAREHAM, MASSACHUSETTS NOTES TO THE FINANCIAL STATEMENTS

JUNE 30, 2003

At June 30, 2003, receivables for the enterprise funds consist of the following :

Governmental funds report deferred revenue in connection with receivables for revenues that are not considered to be available to liquidate liabilities of the current period. At June 30, 2003, the various components of deferred revenue reported in the governmental funds were as follows:

B. Component Unit All program receivables for the Authority are for housing rehabilitation loans. As noted earlier, the Authority does not provide for uncollectible amounts because uncollectible amounts reduce the amount returnable to DHCD.

Non-major General School Governmental

Receivable Tyne Fund Construction Funds Total Real estate and personal property taxes $ 713,894 - $ 331,687 $1,045,581 Tax/utility liens 2,036,097 - - 2,036,097 Excises 521,298 - - 521,298 Ambulance - - 219,366 219,366 Highway - - 1,084,430 1,084,430 Grants - - 609,458 609,458 Departmental and other 415,870 - - 415,870 Due from other governments 7,291,496 $9,705,730 - 16,997,226 Total $10.978,655 $9,705,730 $2,244,941 $22,929,326

Gross Allowance for Receivable Type Amount Uncollectible Net Amount Betterments $2,910,972 - $2,910,972 Tax/utility liens 43,490 - 43,490 Charges for services 308,308 $11,096 297,212 Due from other governments 12,265,551 - 12,265,551

Total $1-552-8321 $11 ,096 $15 517,225

Receivable Tvpe Gross

Amount Allowance for Uncollectible Net Amount

Housing rehabilitation $1,827,263 - $ 1,827,263 Other 5,557 - 5,557 Due from other governments 416.973 - 416,973

Total $2,249,793 -0- $2.249,793

NOTE 5 - CAPITAL ASSETS

A. Town

TOWN OF WAREHAM, MASSACHUSETTS NOTES TO THE FINANCIAL STATEMENTS

JUNE 30, 2003

Changes in Capital Assets - The following table provides a summary of changes in capital assets,

Capital assets, not Depreciated Capital Assets Depreciated

Land Construction in Progress

Improve- Buildines ments

Machinery and

Equipment Totals Primary Government Governmental Activities Balance, June 30, 2002 $ 267,500 $ 1,312,869 $45,369,136 $ 920,854 $ 5,390,907 $53,261,266

Increases - 10,017,053 - - 480,197 10,497,250 Decreases - ( 26,000 ( 26,0001

Balance, June 30, 2003 267,500 11,329,922 45,369,136 920,854 5,845,104 63,732,516

Accumulated Depreciation Balance, June 30, 2002 - - 20,666,148 371,683 3,059,834 24,097,665

Increases - - 312,580 10,600 511,308 834,488 Decreases - ( 26,000) ( 26,000)

Balance, June 30, 2003 - - 20,978,728 382,283 3,545,142 24,906,153

Governmental Activities Capital Assets, Net 267,500 11,329,922 24,390,408 538,571 2,299,962 38,826,363

Business-type Activities Balance, June 30, 2002 4,842,708 1,825,401 4,499,812 29,822,064 13,937,545 54,927,530

Increases - 7,801;136 - - 28,020 7,829,156 Decreases

Balance, June 30, 2003 4,842,708 9,626,537 4,499,812 29,822,064 , 13,965,565 62,756,686

Accumulated Depreciation Balance, June 30, 2002 - - 1,724,906 9,825,586 6,108,003 17,658,495

Increases - - 92,280 621,043 454,014 1,167,337 Decreases

Balance, June 30, 2003 - 1,817,186 10,446,629 6,562,017 18,825,832 Business-type Activities Capital Assets, Net 4,842,708 9,626,537 2,682,626 19,375,435 7,403,548 43,930,854 Primary Government Capital Assets, Net $5,110,208 $20,956,459 $27,073,034 $ 19,914,006 $ 9,703,510 $82,757,217

NOTE 5 - CAPITAL ASSETS - Continued

B . Component Unit

TOWN OF WAREHAM, MASSACHUSETTS NOTES TO THE FINANCIAL STATEMENTS

JUNE 30, 2003

Depreciation expense was charged to functions of the primary government as follows:

Governmental Activities

Business-type Activities General government

$ 29,559

WPCF

$1,167,337 Public safety

247,230 Education

474,591 Public works

79,373 Human services

701 Culture and recreation

3,034 Total $834,488

Total $-116-7337

NOTE 6 - INTER FUND BALANCES AND ACTIVITY

Transfers to/from Other Funds The government-wide statement of activities eliminates transfers as reported within the segregated governmental and business-type activities columns. Only transfers between the two columns appear in this statement . Inter-fund transfers for the fiscal year ended June 30, 2003, consisted of the following :

See next page for full schedule.

Governmental Activities Balance, June 30, 2002

Increases

Land $7,500

-

Building $128,055

-

Equipment $24,950

-

Total $160,505

- Decreases

Balance, June 30, 2003 $7,500 $128,055 $24,950 $160,505 Accumulated Depreciation Balance, June 30, 2002 - 97,787 19,077 116,864

Increases - 4,657 3,000 7,657 Decreases - - - -

Balance, June 30, 2003 - 102,445 22,077 124,522 Capital Assets, Net $7,500 $ 25,610 $ 2,873 $35.,983

TOWN OF WAREHAM, MASSACHUSETTS NOTES TO THE FINANCIAL STATEMENTS

JUNE 30, 2003

NOTE 6 - INTER FUND BALANCES AND ACTIVITY - Continued

In the statement of activities, portions of transfers from business-type activities attributable to fringe benefits, retirement, and insurance have been allocated to functional accounts as follows:

NOTE 7 - SHORT-TERM FINANCING

WP CF

Camping

Total Gross transfers

($896,100) ($12,000)

($908,100) Expenses allocated

126,827

9,000

135,827 Net transfers

($769,273 )

($ 3,000)

($772 273

Under state law and with the appropriate local authorization, the Town is authorized to borrow funds on a temporary basis as follows:

1 .

To fund current operations prior to the collection of revenues, by issuing revenue anticipation notes (BANS).

2.

To fund federal and state aided capital projects and other program expenditures prior to receiving reimbursement through issuance of federal and state aid anticipation notes (FANS and SANS).

General Non-Major Business- Transfers (to) from Fund Governmental Tvae Ambulance $ 10,000 ($ 10,000) - Waterways 61,026 ( 61,026) - Pension reserve 21,237 ( 21,237) - Insurance recovery 69,422 ( 69,422) - Hotel tax 21,249 ( 21,249) - Wetlands 10,000 ( 10,000) - Harbor service 69,000 ( 69,000) - Parking meter fund 25,000 ( 25,000) - Dog fund 34,766 ( 34,766) - WPCF enterprise 896,100 - ($896,100) Camping 12,000 - ( 12,000) Offset receipts 140,372 ( 140,372) - Public safety 113,898 ( 111898 - Subtotal transfers $1,484,070 ) _- ($575,970 ($908100

Capital expenditures ($ 21,227 ) $ 21,227 Subtotal transfers ($ 21,227 ) $21.,227

NOTE 7 - SHORT-TERM FINANCING - Continued

3.

To fund capital project costs incurred prior to selling permanent debt by issuing bond anticipation notes (BANS).

4.

To fund grants prior to reimbursement by issuing grant anticipation notes (GANS).

Temporary loans are general obligations of the Town and carry maturity dates which are limited by statute. There were no interest expenditures for temporary borrowings of governmental funds. When paid, such expenditures are accounted for in the General Fund. As of June 30, 2003, the Town had outstanding the following loans:

Short term debt was issued for the following purposes :

NOTE 8 - LONG-TERM DEBT

TOWN OF WAREHAM, MASSACHUSETTS NOTES TO THE FINANCIAL STATEMENTS

JUNE 30, 2003

Title V

$

200,000 Education 16,574,000 Equipment 390,000 Total $ 17,164.000

All short term notes are expected to be refinanced on their due date under substantially similar terms as the existing notes and subsequently bonded .

The Town is subject to debt limits established Massachusetts General Laws Chapter 44, Section 10. Such limits are equal to 5% and 10% of the equalized valuation of taxable property and are known as debt issued inside and outside the debt limit. Details related to outstanding indebtedness at June 30, 2003, and debt service requirements follow.

See next page for full schedule .

Interest Rates BANS

Outstanding 7/1/2002 3.10-4.99% $ 2,197,700 Issued 1.48-2.50% 17,164,000 Matured 3.10-4.99% 2,197,700

Balance 6/30/2003 1 .48-2.50% $17,164,000

NOTE S - LONG-TERM DEBT - Continued

TOWN OF WAREHAM, MASSACHUSETTS NOTES TO THE FINANCIAL STATEMEN'

JUNE 30, 2003

Debt service requirements for principal and interest for bonds payable in future years are as follows :

A. Bonds Payable

Purpose of Bonds Interest Rates

Balance 6/30/2002 Issued Retired

Balance 6/30/2003

Governmental Funds: Public library construction 6.1-7.5% $ 545,000 $ 70,000 $ 475,000 Multi-purpose 3 .85-5 .25% 11,172,000 1,309,000 9,863,000 Septic-management #1 184,804 10,872 173,932 Septic-management #2 200,000 10,526 . 189,474 . Multi-purpose 3.125-4.875% 2,315,595 325-595 1,990,000 Total governmental fund bonds $14,417,399 $1,725,993 $12,691,406

Business-type Funds: Sewer design & construction 3 .125-4.875% $ 3,161,405 $ 276,405 $2,885,000 Sewer design & construction 3 .85-5 .25% 1,678,000 106,000 1,572,000 Sewer design & construction 6.0% 280,916 15,607 265,309 Sewer design & construction 6.0% 252,270 28,030 224,240 Sewer design & construction 5.875% 95,000 9,500 85,500 MWPAT construction variable 7,846,418 - 493,501 7,352,917 MWPAT construction 3 .7-5.6% - $9,603,422 - 9,603,422 Total business-type funds $13,314,009 $9,603,422 $ 929,043 $21,988,388

Fiscal Year Governmental Activities

Principal Interest Total

2004 $ 1,785,474 $ 567,725 $ 2,353,199 2005 1,840,474 487,540 2,328,014 2006 1,795,474 402,198 2,197,672 2007 1,750,474 315,208 2,065,682 2008 1,836,474 225,883 2,062,357

2009-2013 2,760,933 396,298 3,157,231 2014-2018 733,107 129,990 863,097 2019-2023 188,996 14,799 203,795

Totals $12,691,406 $2,539,641 $ 15,231,047

NOTE 8 - LONG-TERM DEBT - Continued

TOWN OF WAREHAM, MASSACHUSETTS NOTES TO THE FINANCIAL STATEMENTS

JUNE 30, 2003

The Commonwealth of Massachusetts has approved school building assistance grant reimbursements for the Wareham high school which is financed with outstanding debt . This assistance program, administered by the School Building Assistance Bureau (SBAB) of the Department of Education, provides resources for 75% of future debt service for outstanding high school renovation bonds. During the fiscal year ended June 30, 2003 the Town received $1,171,856 of such assistance(interest reimbursement of $321,485 is reflected as current year operating grants for education) and an additional$8,202,997 ($7,291,497 in principal and $911,500 in interest) has been committed for future years. An intergovernmental receivable in the amount of $7,291,497 has been reported in both the statement of net assets and balance sheet for high school assistance.

In addition, the SBAB has approved assistance for Wareham middle school renovation and expansion . This grant provides 88.75% reimbursement of future debt service for middle school renovation bonds which have not yet been issued. The total estimated SBAB commitment is $ 36,126,460 ($20,046,666 principal and $16,079,794 interest). In the current year, the Town has recognized educational operating grant income of $124,103 for interest and an educational capital contribution of $8,406,789 to offset applicable middle school renovation costs .

The Town reflects interest on general long-term liabilities as an indirect expense. However, interest on debt related to the construction or rehabilitation of major assets is included in direct expense in those limited instances when borrowing is essential to the creation or continuing existence of a program. These financial statements reflect $572,158 of interest expense related to the High School renovation and construction as part of direct education expense.

B . Interest Expense Total governmental interest expense for the year from temporary and long-term debt was $679,368 including the $572,158 charged to education . Total business type interest expense was $768,993 which includes $424,197 subsidized by the Massachusetts Water Pollution Abatement Trust (MWPAT).

Fiscal Year Principal Interest Total Business-type Activities

2004 $ 1,233,002 $1,057,119 $ 2,290,121 2005 1,250,322 1,005,690 2,256,012 2006 1,264,311 952,508 2,216,819 2007 1,291,682 896,085 2,187,767 2008 1,323,356 837,425 2,160,781

2009-2013 7,103,953 3,167,632 10,271,585 2014-2018 5,000,550 1,502,915 6,503,465 2019-2023 3,521,212 443,668 3,964,880 Totals $21,988,388 $9,863,042 $31,851,430

NOTE 8 - LONG-TERM DEBT - Continued

TOWN OF WAREHAM, MASSACHUSETTS NOTES TO THE FINANCIAL STATEMENTS

JUNE 30, 2003

C. Overlapping Debt The Town pays assessments which include debt service payments to other governmental agencies providing services to the Town (commonly referred to as overlapping or conduit debt). The following summary sets forth the debt of such governmental agencies and the estimated share being financed by the Town as of June 30, 2003 .

A enc Upper Cape Cod Regional-Vocational School

D. Loans Authorized and Unissued The Town's authorized and unissued debt as of June 30, 2003 consists of the following :

None of the authorized but unissued debt is scheduled to be rescinded .

See next page for full schedule .

The following is a summary of changes in long-term liabilities for the year ended June 30, 2003 :

Pu ose Amounts

Authorized Amounts Unissued

Water pollution control-Cranberry Highway $ 3,700,000 $1,693,241 Sewer extensions 950,000 597,000 Sludge management 250,000 41,262 Repair and improvements town buildings and capital equipment 968,674 23,674 Sewer - Sunset Island 296,000 21,000 Equipment and repairs to buildings and waterways 505,222 25,222 Up-grade water pollution control facility 24,300,000 14,300,000 Wareham middle school 22,587,793 6,013,793 Equipment 422,289 32,289 Sewer System Weweantic Shores 4,200,000 4,200,000 Land acquisition 39,500 39,500 Improvements, pumping stations 1,300,000 1,300,000

Totals $59,519,478 $28,286,981

Town's Town's Debt Estimated Indirect

Outstanding Share Debt $440,000 22.71% $99-924

NOTE 8 - LONG-TERM DEBT - Continued

TOWN OF WAREHAM, MASSACHUSETTS NOTES TO THE FINANCIAL STATEMENTS

JUNE 30, 2003

The governmental activities long-term liabilities are generally liquidated by the general fund .

NOTE 9 - PLYMOUTH COUNTY RETIREMENT SYSTEM PENSION PLAN

A. Plan Description The Town contributes to the Plymouth County Retirement System (the System), a cost-sharing multiple-employer defined benefit pension plan administered by the Plymouth County Retirement Board, Substantially all employees are members of the System except for public school teachers who are members ofthe Commonwealth ofMassachusetts Teachers Contributory Retirement System (MTCRS) to which the Town does not contribute. Contributions to the MTCRS are funded by the Commonwealth of Massachusetts. During the current year, the Town has recorded Intergovernmental - State income and an equal retirement expense of $1,933,306 within the general fund.

The System and MTCRS are contributory defined benefitplans and membership in both the System and MTCRS is mandatory immediately upon commencement of employment for all permanent, full-time employees . The system provides retirement, disability and death benefits to plan members and beneficiaries .

Chapter 32 of the Massachusetts General Laws (MGL) assigns authority to establish and amend benefit provisions of the plan . Cost of living increases are authorized and funded by the State. The accounting records of the System are maintained on a calendar year basis and the System issues a publicly available financial report in accordance with guidelines established by the Commonwealth of Massachusetts Public Employee Retirement Administration Commission. That report may be obtained by contacting the System located at 11 South Russell Street, Plymouth, MA 02360 .

B. Funding. Policy Plan members are required to contribute to the System at rates from 5% to 9% of their annual covered compensation . The Town is required to pay into the System its share of the system-wide actuarial determined contribution plus administrative costs which are apportioned among the employers based on active current payroll as determined by the Public Employees Retirement Administration Commission .

Description and p ose Balance 7/1/2002 Issued Retired

Balance 6/30/2003

Due in One Year

Government activities : Bonds payable $14,417,399 $1,725,993 $12,691,406 $ 1,785,474 Notes payable 2,197,700 $17,164,000 2,197,700 17,164,000 17,164,000 Compensated absences 2,254,483 57,882 - 2,312,365 213,000

Business-type activities : Bonds payable 13,314,009 9,603,422 929,043 21,988,388 1,233,002 Total primary government $32,183,591 $26,825,304 $4,852,736 $54,156,159 $20,395,476

C.

NOTE 10 - COMMITMENTS

TOWN OF WAREHAM, MASSACHUSETTS NOTES TO THE FINANCIAL STATEMENTS

JUNE 30, 2003

NOTE 9 - PLYMOUTH_ COUNTY RETIREMENT SYSTEM PENSION PLAN - Continued

The contribution of plan members and the Town are governed by Chapter 332 of the MGL. The Town's contributions to the System fot the years ended June 30, 2003, 2002, 2001, and 2000 were $1,083,128, $1,051,729, $1,014,568, and $973,284 respectively, which equaled its required contribution for each year .

Component Unit The Authority participates in the same Plymouth County Retirement System since the employees of the Authority are actually Town employees . The Authority's contribution to the System was $13,324

A. Town The Town is obligated under the terms of several significant contracts as follows :

Spent to

Remaining June 30, 2003

Commitment

Construction projects included in governmental activities are substantially funded with general obligation bond proceeds . See Note 8 for SBAB assistance on school construction and bond payments . Business-type projects are likewise substantially funded with proceeds from bond proceeds and paid from user rates.

B. Component Unit As previously noted, all amounts received from the DHCD and used for revolving loans are ultimately returnable to the DHCD and are reflected in these financial statements as deferred revenues in the amount of $2,361,002 .

Governmental Activities : Middle school construction $ 9,218,856 $7,524,520 Middle school project management 203,261 215,699 Middle school renovations 1,618,400 285,600 Street improvements 223;540 Total governmental activities $ 11,040,517 $_8249359

Business-type Activities : Water pollution control facility upgrade $ 6,812,738 $12,979,109 Pump station 11,110 772,565 Total Business-type activities $_6,823.,848 $13,751,674

NOTE 11- CONTINGENCIES

TOWN OF WAREHAM, MASSACHUSETTS NOTES TO THE FINANCIAL STATEMENTS

JUNE 30, 2003

Numerous lawsuits are pending or threatened against the Town, which arose from the ordinary course of operations, including actions commenced and claims asserted against it for property damage and personal injury, breaches of contract, condemnation proceedings and other alleged violations of law. The Town and its legal counsel estimate the unrecorded potential claims against the Town, not covered by insurance, would not materially affect the general-purpose financial statements .

The Town receives financial assistance from federal and state agencies in the form of grants for specified use in accordance with the grant agreements . Any disallowed costs incurred by the grants could become a liability of the general fund . Based on prior experience, Town officials believe such disallowances, if any, would not have a material effect on the general-purpose financial statements.

NOTE 12 - JOINT VENTURE

Upper Cape Cod Regional Technical High School is considered a joint venture operation. Government Accounting Standards Board (GASB) Statement #14 provides the following definition of a joint venture: A joint venture is a legal entity that results from a contractual arrangement and that is owned, operated or governed by two or more participants as a separate and specific activity subject to joint control, in which the participants retain an on-going financial responsibility.

Joint control means that no single participant has the ability to unilaterally control the financial or operating policies of the joint venture. A participating government has an on-going financial responsibility for a joint venture if it is obligated in some manner for the debts of the joint venture, or if the joint venture's continued existence depends on continued funding by the government .

SQecific Activity Subject to Joint Control The powers and duties of the regional school district are vested in and exercised by a regional school district committee composed of representatives of the member towns of Bourne, Falmouth, Marion, Sandwich, and Wareham Massachusetts. The committee has all powers and duties conferred and imposed upon regional school district committees by law.

On-going Financial Responsibility Annual assessments are levied by the District against member towns based on relative enrollment . Wareham's annual assessment for the current year was 1,597,500. The district's financial statements are audited by another independent accounting firm on an annual basis . These financial statements are not examined by the Town's independent auditors . Financial statements are available at Upper Cape Cod Regional Technical School, 220 Sandwich Road, Bourne, Massachusetts.

NOTE 13 - EVIPLEMENTATION OF NEW GASB PRONOUNCEMENTS

A. Town During the fiscal year that ended on June 30, 2003, the Town implemented the following GASB pronouncements :

Management discussion and analysis

TOWN OF WAREHAM, MASSACHUSETTS NOTES TO THE FINANCIAL STATEMENTS

JUNE 30, 2003

NOTE 13 - IMPLEMENTATION OF NEW GASB PRONOUNCEMENTS - Continued

Statement #34 - Basic Financial Statements and Management Discussion and Analysis for State and Local Governments.

Statement #37 - Basic Financial Statements and Management Discussion and Analysis for State and Local Governments: omnibus

Statement #3 8 - Certain Financial Statement Note Disclosures

The pronouncements identified above are all related to the new financial reporting requirements as defined in Statement #34. Fiscal year 2003 is the required implementation date . The most significant changes required by the new financial reporting standards are as follows:

Basic financial statements, which include

Government-wide financial statements, prepared measurement focus and accrual basis of accounting .

Fund financial statements, consisting of a series of statements that focus on major governmental and enterprise funds.

Schedules to reconcile the fund financial statements to the government-wide financial statements.

Notes to the basis financial statements .

As a result of implementing these pronouncements, the following restatements have been made to beginning fund balances :

See next page for full schedule.

TOWN OF WAREHAM, MASSACHUSETTS NOTES TO THE FINANCIAL STATEMENTS

JUNE 30, 2003

NOTE 13 - IMPLEMENTATION OF NEW GASB PRONOUNCEMENTS - Continued

Beginning net assets for governmental activities was calculated as follows:

See next page for full schedule .

Governmental Fund Types Business General School Special Capital Fiduciary -type Fund Construction Revenue Proiects Funds Funds

Fund balances at June 30, 2002 $2,967,056 - $1,178,099 ($1,147,269) $1,638,567 $30,496,141 Reclassify to new reporting model - - (1,178,099 1,147,269 ( 1,638,567 Subtotal 2,967,056 - - - - 30,496,141

Non-Major Private Governmental Purpose

Funds Funds Reclassify capital projects - ($1,312,869) 165,600 - - - Reclassify special revenue - - 1,178,099 - - - Reclassify trust funds - - 1,638,567 - - - Establish private purpose funds from non-expendable fund - - ( 64,682) - 64,682 -

Reclassify stabilization fund 568,132 ( 568,132 - - - Fund balances at June 30, 2002, reclassified 3,535,188 (1,312,869) 2,349,452 - 64,682 30,496,141

Adjustments to conform to GASB 34 : Reclassify transfers 80,000 - (80,000) - - - Reflect Chapter 90 highway - - 102,561 - - - Record State aid receivable - - - - - 4,750,779 Record additional pump

stations - - - - - 156,000 Reclass emergency services

as offset receipts in general fund 16,413 - - - - ( 854,755 Fund balances at July 1, 2002, restated $3,631,601 ($1,312,869 $2,372,013 - $ 64,682 $34,548,165

TOWN OF WAREHAM, MASSACHUSETTS NOTES TO TEE FINANCIAL STATEMENTS

JUNE 30, 2003

NOTE 13 - IMPLEMENTATION OF NEW GASB PRONOUNCEMENTS - Continued

B.. Component Unit As a component unit of the Town, the Authority also adopted the provisions of the new reporting model. The following restatements have been made to beginning general fund balance which is the only fund in the Authority:

Fund balances at June 30, 2002

$541,419 Eliminate capital assets

(141,427) Adjust deferred revenue

133,438 Adjust accounts receivable

6,496 Fund balances at June 30, 2002, reclassified

$539,927

The beginning net assets for governmental activities was calculated as follows :

Total fund balance at June 30, 2002 $541,419 Record building depreciation ( 97,787) Reclassify deferred grant payable ( 184,864) Net Assets at June 30, 2002 $258,768

Total fund balances of general, special revenue, capital projects, expendable and non expendable trust fund $ 4,636,453 Add: Chapter 90 receivable 1,191,654 Emergency services conversion to offset receipts 260,809 Net fixed assets 28,419,204 State aid for school construction 9,316,706 Elimination of deferred revenue 3,465,943

Less : Compensated absences ( 879,034) Provision for uncollectible taxes ( 71;098) Accrued interest expense ( 190,387) Segregation of private purpose funds ( 64,682) Amounts to be provided for long term debt ( 15,292,848)

Net Assets at June 30, 2002, governmental activities $30,792,720

PROPOSED FORM OF LEGAL OPINION APPENDIX B

B-1

(Date of Delivery)

John D. Foster, Treasurer

Town of Wareham Wareham, Massachusetts

$4,206,000 Town of Wareham, Massachusetts

Municipal Purpose Loan of 2005 Bonds Dated May 15, 2005

We have acted as bond counsel to the Town of Wareham, 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 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, subject to the limit

imposed by Chapter 59, Section 21C of the General Laws.

2. Interest on the Bonds is excluded from the gross income of the owners of the

Bonds for federal income tax purposes. In addition, interest on the Bonds is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes.

However, such interest is included in adjusted current earnings when calculating corporate alternative minimum taxable income. 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 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 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. Except

as expressed in paragraph 4 below, we express no opinion regarding any other federal tax consequences arising with respect to the Bonds.

M A I N 617.239 .0100 F A X 617.227.4420 www.palmerdodge. com

B-2

3. Interest on the Bonds is exempt from Massachusetts personal income taxes and the 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.

4. The Bonds are qualified tax-exempt obligations within the meaning of Section

265(b)(3) of the Code.

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.

Palmer & Dodge LLP

C-1

APPENDIX C

PROPOSED FORM OF

CONTINUING DISCLOSURE CERTIFICATE

This Continuing Disclosure Certificate (the "Disclosure Certificate") is executed and

delivered by the Town of Wareham, Massachusetts (the "Town") in connection with the issuance

of its $4,206,000 Municipal Purpose Loan of 2005 Bonds dated May 15, 2005 (the "Bonds").

The Town covenants and agrees as follows:

SECTION 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being

executed and delivered by the Town 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 Town 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.

"National Repository" shall mean any nationally recognized municipal securities

information repository for purposes of the Rule. The current National Repositories are listed on

Exhibit A attached hereto.

"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.

"Repository" shall mean each National Repository and each State Depository.

"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.

"State Depository" shall mean any public or private depository or entity designated by The

Commonwealth of Massachusetts as a state information depository for the purpose of the Rule.

(As of the date of this Disclosure Certificate there is no State Depository).

“Transmission Agent” shall mean any central filing office, conduit or similar entity which

undertakes responsibility for accepting filings under the Rule for submission to each Repository. The

current Transmission Agent is listed on Exhibit A attached hereto.

C-2

SECTION 3. Provision of Annual Reports.

(a) The Town shall, not later than 270 days after the end of each fiscal year, provide

to each Repository 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 Section 4 of this Disclosure Certificate; provided that the audited financial statements of the

Town may be submitted when available separately from the balance of the Annual Report.

(b) If the Town is unable to provide to the Repositories an Annual Report by the date

required in subsection (a), the Town shall send a notice to the Municipal Securities Rulemaking

Board and the State Depository, if any, in substantially the form attached as Exhibit B.

SECTION 4. Content of Annual Reports. The Town's Annual Report shall contain or

incorporate by reference the following:

(a) quantitative information for the preceding fiscal year of the type presented in the

Town's Official Statement dated May __, 2005 relating to the Bonds regarding (i) the revenues

and expenditures of the Town relating to its operating budget, (ii) capital expenditures, (iii) fund

balances, (iv) property tax information, (v) outstanding indebtedness and overlapping debt of the

Town, and (vi) pension obligations of the Town, and

(b) the most recently available audited financial statements of the Town, prepared in

accordance 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 Town or related public entities, which have been

submitted to each of the Repositories or the Securities and Exchange Commission. If the

document incorporated by reference is a final official statement, it must be available from the

Municipal Securities Rulemaking Board. The Town shall clearly identify each such other

document so incorporated by reference.

SECTION 5. Reporting of Material Events.

(a) The Town shall give notice, in accordance with subsection 5(b) below, of the

occurrence of any of the following events with respect to the Bonds, if material:

1. Principal and interest payment delinquencies.

2. Non-payment related defaults.

C-3

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 or events affecting the tax-exempt status of the Bonds.

7. Modifications to rights of the Owners of the Bonds.

8. Bond calls.

9. Defeasances.

10. Release, substitution or sale of property securing repayment of the Bonds.

11. Rating changes.

It should be noted, however, that as of this date events of the types listed in paragraphs 2,

3, [4, 5,] and 10 above are not applicable to the Bonds.

(b) Whenever the Town obtains knowledge of the occurrence of a Listed Event, the

Town shall as soon as possible determine if such an event would be material under applicable

federal securities laws and if so, the Town shall promptly file a notice of such occurrence with the

Municipal Securities Rulemaking Board and the State Depository, if any.

SECTION 6. Alternative Methods for Reporting. The Town may satisfy its obligations to

make a filing with each Repository hereunder by transmitting the same to a Transmission Agent if and

to the extent such Transmission Agent has received an interpretive advice from the Securities and

Exchange Commission, which has not been withdrawn, to the effect that an undertaking to transmit a

filing to such Transmission Agent for submission to each Repository is an undertaking described in the

Rule.

SECTION 7. Termination of Reporting Obligation. The Town's obligations under this

Disclosure Certificate shall terminate upon the legal defeasance in accordance with the terms of

the Bonds, prior redemption or payment in full of all of the Bonds.

SECTION 8. Amendment; Waiver. Notwithstanding any other provision of this

Disclosure Certificate, the Town 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 Town), 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.

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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 Town 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 each

Repository.

SECTION 9. Default. In the event of a failure of the Town to comply with any provision

of this Disclosure Certificate any Owner of the Bonds may seek a court order for specific

performance by the Town 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 Town to comply with this

Disclosure Certificate shall be an action for specific performance of the Town's obligations

hereunder and not for money damages in any amount.

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: ______________, 2005 TOWN OF WAREHAM,

MASSACHUSETTS

By______________________________

Treasurer

______________________________

______________________________

______________________________

______________________________

______________________________

Selectmen

[EXHIBIT A: List of National Repositories and Transmission Agent]

[EXHIBIT B: Form of Notice of Failure to File Annual Report]

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APPENDIX D

DESCRIPTION OF THE INSURER

The following information has been supplied by the Insurer for inclusion in this Official

Statement. No representation is made by the Town of Wareham as to the accuracy or completeness of the information.

The Insurer accepts no responsibility for the accuracy or completeness of this Official Statement or any other information or disclosure contained herein, or omitted herefrom, other

than with respect to the accuracy of the information regarding the Insurer and its affiliates set forth under this heading. In addition, the Insurer makes no representation regarding the Bonds or

the advisability of investing in the Bonds.

General

XL Capital Assurance Inc. (the “Insurer” or “XLCA”) is a monoline financial guaranty insurance company incorporated under the laws of the State of New York. The Insurer is

currently licensed to do insurance business in, and is subject to the insurance regulation and supervision by, all 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands and

Singapore.

The Insurer is an indirect wholly owned subsidiary of XL Capital Ltd, a Cayman Islands

corporation (“XL Capital Ltd”). Through its subsidiaries, XL Capital Ltd is a leading provider of insurance and reinsurance coverages and financial products to industrial, commercial and

professional service firms, insurance companies and other enterprises on a worldwide basis. The common stock of XL Capital Ltd is publicly traded in the United States and listed on the New

York Stock Exchange (NYSE: XL). XL Capital Ltd is not obligated to pay the debts of or

claims against the Insurer.

The Insurer was formerly known as The London Assurance of America Inc. (“London”), which was incorporated on July 25, 1991 under the laws of the State of New York. On February

22, 2001, XL Reinsurance America Inc. ("XL Re") acquired 100% of the stock of London. XL Re merged its former financial guaranty subsidiary, known as XL Capital Assurance Inc.

(formed September 13, 1999) with and into London, with London as the surviving entity. London immediately changed its name to XL Capital Assurance Inc. All previous business of

London was 100% reinsured to Royal Indemnity Company, the previous owner at the time of acquisition.

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Reinsurance

The Insurer has entered into a facultative quota share reinsurance agreement with XL Financial Assurance Ltd (“XLFA”), an insurance company organized under the laws of

Bermuda, and an affiliate of the Insurer. Pursuant to this reinsurance agreement, the Insurer expects to cede up to 90% of its business to XLFA. The Insurer may also cede reinsurance to

third parties on a transaction-specific basis, which cessions may be any or a combination of quota share, first loss or excess of loss. Such reinsurance is used by the Insurer as a risk

management device and to comply with statutory and rating agency requirements and does not alter or limit the Insurer's obligations under any financial guaranty insurance policy. With

respect to any transaction insured by XLCA, the percentage of risk ceded to XLFA may be less than 90% depending on certain factors including, without limitation, whether XLCA has

obtained third party reinsurance covering the risk. As a result, there can be no assurance as to the percentage reinsured by XLFA of any given financial guaranty insurance policy issued by

XLCA, including the Policy.

Based on the audited financials of XLFA, as of December 31, 2004, XLFA had total assets, liabilities, redeemable preferred shares and shareholders’ equity of $1,173,450,000,

$558,655,000, $39,000,000 and $575,795,000, respectively, determined in accordance with generally accepted accounting principles in the United States (“US GAAP”). XLFA’s insurance

financial strength is rated “Aaa” by Moody’s and “AAA” by S&P and Fitch Inc. In addition, XLFA has obtained a financial enhancement rating of “AAA” from S&P.

The obligations of XLFA to the Insurer under the reinsurance agreement described above are unconditionally guaranteed by XL Insurance (Bermuda) Ltd ("XLI"), a Bermuda company

and one of the world's leading excess commercial insurers. XLI is a wholly owned indirect subsidiary of XL Capital Ltd. In addition to A.M. Best’s rating of “A+” (Negative Outlook),

XLI’s insurance financial strength rating is “Aa2” (Outlook Negative) by Moody’s, “AA-” by Standard & Poor’s and “AA” (Ratings Watch Negative) by Fitch. The ratings of XLFA and XLI

are not recommendations to buy, sell or hold securities, including the Bonds and are subject to revision or withdrawal at any time by Moody’s, Standard & Poor’s or Fitch.

Notwithstanding the capital support provided to the Insurer described in this section, the Bondholders will have direct recourse against the Insurer only, and neither XLFA nor XLI will

be directly liable to the Bondholders.

Financial Strength and Financial Enhancement Ratings of XLCA

The Insurer's insurance financial strength is rated “Aaa” by Moody’s and “AAA” by Standard & Poor’s and Fitch, Inc. (“Fitch”). In addition, XLCA has obtained a financial

enhancement rating of “AAA” from Standard & Poor’s. These ratings reflect Moody’s, Standard & Poor’s and Fitch's current assessment of the Insurer's creditworthiness and claims-paying

ability as well as the reinsurance arrangement with XLFA described under "Reinsurance" above.

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The above ratings are not recommendations to buy, sell or hold securities, including the Bonds and are subject to revision or withdrawal at any time by Moody’s, Standard & Poor’s or

Fitch. Any downward revision or withdrawal of these ratings may have an adverse effect on the market price of the Bonds. The Insurer does not guaranty the market price of the Bonds nor does

it guaranty that the ratings on the Bonds will not be revised or withdrawn.

Capitalization of the Insurer

Based on the audited financials of XLCA, as of December 31, 2004, XLCA had total assets, liabilities, and shareholder’s equity of $827,815,000, $593,849,000, and $233,966,000,

respectively, determined in accordance with U.S. GAAP.

Based on the unaudited statutory financial statements for XLCA as of December 31, 2004 filed with the State of New York Insurance Department, XLCA has total admitted assets of

$341,937,445, total liabilities of $144,232,151 and total capital and surplus of $197,705,294 determined in accordance with statutory accounting practices prescribed or permitted by

insurance regulatory authorities (“SAP”). Based on the audited statutory financial statements for XLCA as of December 31, 2003 filed with the State of New York Insurance Department, XLCA

has total admitted assets of $329,701,823, total liabilities of $121,635,535 and total capital and surplus of $208,066,288 determined in accordance with SAP.

Incorporation by Reference of Financials

For further information concerning XLCA and XLFA, see the financial statements of XLCA and XLFA, and the notes thereto, incorporated by reference in this Official Statement.

The financial statements of XLCA and XLFA are included as exhibits to the periodic reports filed with the Securities and Exchange Commission (the “Commission”) by XL Capital Ltd and

may be reviewed at the EDGAR website maintained by the Commission. All financial statements of XLCA and XLFA included in, or as exhibits to, documents filed by XL Capital

Ltd pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 on or prior to the date of this Official Statement, or after the date of this Official Statement but prior to

termination of the offering of the Bonds, shall be deemed incorporated by reference in this Official Statement. Except for the financial statements of XLCA and XLFA, no other

information contained in XL Capital Ltd's reports filed with the Commission is incorporated by reference. Copies of the statutory quarterly and annual statements filed with the State of New

York Insurance Department by XLCA are available upon request to the State of New York Insurance Department.

Regulation of the Insurer

The Insurer is regulated by the Superintendent of Insurance of the State of New York. In addition, the Insurer is subject to regulation by the insurance laws and regulations of the other

jurisdictions in which it is licensed. As a financial guaranty insurance company licensed in the State of New York, the Insurer is subject to Article 69 of the New York Insurance Law, which,

among other things, limits the business of each insurer to financial guaranty insurance and related lines, prescribes minimum standards of solvency, including minimum capital

requirements, establishes contingency, loss and unearned premium reserve requirements,

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requires the maintenance of minimum surplus to policyholders and limits the aggregate amount of insurance which may be written and the maximum size of any single risk exposure which may

be assumed. The Insurer is also required to file detailed annual financial statements with the New York Insurance Department and similar supervisory agencies in each of the other

jurisdictions in which it is licensed.

The extent of state insurance regulation and supervision varies by jurisdiction, but New York and most other jurisdictions have laws and regulations prescribing permitted investments

and governing the payment of dividends, transactions with affiliates, mergers, consolidations, acquisitions or sales of assets and incurrence of liabilities for borrowings.

THE FINANCIAL GUARANTY INSURANCE POLICIES ISSUED BY THE

INSURER, INCLUDING THE INSURANCE POLICY, ARE NOT COVERED BY THE

PROPERTY/CASUALTY INSURANCE SECURITY FUND SPECIFIED IN ARTICLE 76

OF THE NEW YORK INSURANCE LAW.

The principal executive offices of the Insurer are located at 1221 Avenue of the

Americas, New York, New York 10020 and its telephone number at this address is (212) 478-3400.

1221 Avenue of the Americas

New York, New York 10020 Telephone: (212) 478-3400

MUNICIPAL BOND INSURANCE POLICY

ISSUER: [ ] BONDS: [ ]

Policy No: [ ] Effective Date: [ ]

XL Capital Assurance Inc. (XLCA), a New York stock insurance company, in consideration of the payment of the

premium and subject to the terms of this Policy (which includes each endorsement attached hereto), hereby agrees unconditionally and irrevocably to pay to the trustee (the "Trustee") or the paying agent (the "Paying Agent") (as set forth in the documentation providing for the issuance of and securing the Bonds) for the benefit of the Owners of the Bonds or, at the election of XLCA, to each Owner, that portion of the principal and interest on the Bonds that shall become Due for Payment but shall be unpaid by reason of Nonpayment.

XLCA will pay such amounts to or for the benefit of the Owners on the later of the day on which such principal and interest becomes Due for Payment or one (1) Business Day following the Business Day on which XLCA shall have received Notice of Nonpayment (provided that Notice will be deemed received on a given Business Day if it is received prior to 10:00 a.m. New York time on such Business Day; otherwise it will be deemed received on the next Business Day), but only upon receipt by XLCA, in a form reasonably satisfactory to it, of (a) evidence of the Owner's right to receive payment of the principal or interest then Due for Payment and (b) evidence, including any appropriate instruments of assignment, that all of the Owner's rights with respect to payment of such principal or interest that is Due for Payment shall thereupon vest in XLCA. Upon such disbursement, XLCA shall become the owner of the Bond, any appurtenant coupon to the Bond or the right to receipt of payment of principal and interest on the Bond and shall be fully subrogated to the rights of the Owner, including the Owner's right to receive payments under the Bond, to the extent of any payment by XLCA hereunder. Payment by XLCA to the Trustee or Paying Agent for the benefit of the Owners shall, to the extent thereof, discharge the obligation of XLCA under this Policy.

In the event the Trustee or Paying Agent has notice that any payment of principal or interest on a Bond which has become Due for Payment and which is made to an Owner by or on behalf of the Issuer of the Bonds has been recovered from the Owner pursuant to a final judgment by a court of competent jurisdiction that such payment constitutes an avoidable preference to such Owner within the meaning of any applicable bankruptcy law, such Owner will be entitled to payment from XLCA to the extent of such recovery if sufficient funds are not otherwise available.

The following terms shall have the meanings specified for all purposes of this Policy, except to the extent such terms are expressly modified by an endorsement to this Policy. "Business Day" means any day other than (a) a Saturday or Sunday or (b) a day on which banking institutions in the State of New York or the Insurer's Fiscal Agent are authorized or required by law or executive order to remain closed. "Due for Payment", when referring to the principal of Bonds, is when the stated maturity date or a mandatory redemption date for the application of a required sinking fund installment has been reached and does not refer to any earlier date on which payment is due by reason of call for redemption (other than by application of required sinking fund installments), acceleration or other advancement of maturity, unless XLCA shall elect, in its sole discretion, to pay such principal due upon such acceleration; and, when referring to interest on the Bonds, is when the stated date for payment of interest has been reached. "Nonpayment" means the failure of the Issuer to have provided sufficient funds to the Trustee or Paying Agent for payment in full of all principal and interest on the Bonds which are Due for Payment. "Notice" means telephonic or telecopied notice, subsequently confirmed in a signed writing, or written notice by registered or certified mail, from an Owner, the Trustee or the Paying Agent to XLCA which notice shall specify (a) the

became Due for Payment. "Owner" means, in respect of a Bond, the person or entity who, at the time of Nonpayment, is entitled under the terms of such Bond to payment thereof, except that "Owner" shall not include the Issuer or any person or entity whose direct or indirect obligation constitutes the underlying security for the Bonds.

XLCAP-005 Form of Municipal Policy [Specimen]

person or entity making the claim, (b) the Policy Number, (c) the claimed amount and (d) the date such claimed amount

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XLCA may, by giving written notice to the Trustee and the Paying Agent, appoint a fiscal agent (the "Insurer's

Fiscal Agent") for purposes of this Policy. From and after the date of receipt by the Trustee and the Paying Agent of such notice, which shall specify the name and notice address of the Insurer's Fiscal Agent, (a) copies of all notices required to be delivered to XLCA pursuant to this Policy shall be simultaneously delivered to the Insurer's Fiscal Agent and to XCLA and shall not be deemed received until received by both and (b) all payments required to be made by XLCA under this Policy may be made directly by XLCA or by the Insurer's Fiscal Agent on behalf of XLCA. The Insurer's Fiscal Agent is the agent of XLCA only and the Insurer's Fiscal Agent shall in no event be liable to any Owner for any act of the Insurer's Fiscal Agent or any failure of XLCA to deposit or cause to be deposited sufficient funds to make payments due hereunder.

Except to the extent expressly modified by an endorsement hereto, (a) this Policy is non-cancelable by XLCA, and (b) the Premium on this Policy is not refundable for any reason. This Policy does not insure against loss of any prepayment or other acceleration payment which at any time may become due in respect of any Bond, other than at the sole option of XLCA, nor against any risk other than Nonpayment. This Policy sets forth the full undertaking of XLCA and shall not be modified, altered or affected by any other agreement or instrument, including any modification or amendment thereto.

THIS POLICY IS NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE NEW YORK INSURANCE LAW.

In witness whereof, XLCA has caused this Policy to be executed on its behalf by its duly authorized officers.

_____________ Name: Title:

_____________ Name: Title:

XLCAP-005 Form of Municipal Policy [Specimen]

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