This Preliminary Official Statement and the information contained herein are subject to completion or amendment. These securities may not be sold nor may offers to buy be accepted prior to the time the Official Statement is delivered in final form. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. * Investors mustreadtheentire OfficialStatementtoobtaininformationessential tomakinganinformeddecision. or aboutApril__,2016through thefacilitiesofDTC. Eggleston &CramerPC,Montpelier, Vermont.ItisexpectedthatdeliveryoftheSeries 2016ABondswillbemadeon other conditions.Certain legalmatters will be passed upon for the Underwriter by itscounsel,Primmer Piper receipt ofthelegalopinionBurakAnderson&Melloni, PLCofBurlington,Vermont,BondCounsel,andcertain 2016A Bondsaresubjecttooptionalandmandatoryredemption priortomaturityasdescribedherein. beneficial ownersoftheSeries2016ABondsasdescribed herein.(See“Book-EntryOnlySystem”herein.)TheSeries be paidtoDTCwhichwillinturnremitsuchprincipal andinteresttoitsparticipantsforsubsequentdispersalthe and interestontheSeries2016ABonds,payableeach May1andNovember1,commencing2016,will interest intheSeries2016ABondspurchased. principal amountof$5,000orintegralmultiplesthereof. Purchaserswillnotreceivecertificatesrepresentingtheir securities depositoryoftheSeries2016ABonds.Individualpurchasesmaybemadeinbook-entryformonly, inthe registered inthenameofCede&Co.,asnomineeTheDepositoryTrustCompany(“DTC”).DTCwill actas resolutions oftheCityCouncil. costs ofissuancetheSeries2016ABonds. Bonds shallbeusedforthepurposesof:(i)refundingcertainoutstandingdebtofCityand(ii)paying certain the levyofadvaloremtaxestopaySeries2016ABondsandinterestthereon.Theproceeds 2016A general obligationsoftheCityBurlington,Vermont(the“City”),withinwhichalltaxablerealpropertyissubject to Dated: Date of Delivery B –FormofProposedLegalOpinion”herein. to theVermontpersonalincometaxorcorporatetax.See“TaxExemption”and“Appendix Counsel isfurtheroftheopinionthat,underexistinglaw,interestonSeries2016ABondsnotsubject earnings forpurposesofcalculatingthefederalalternativeminimumtaximposedoncertaincorporations.Bond on individualsandcorporations;however,suchinterestwillbeincludedindeterminingtheadjustedcurrent will notbeanitemoftaxpreferenceforpurposescomputingthefederalalternativeminimumimposed income forfederaltaxpurposesunderSection103oftheInternalRevenueCode1986(the“Code”),and City andthecompliancewithcertaincovenants,interestonSeries2016ABondswillbeexcludedfromgross regulations andrulings,assuming,amongothermatters,theaccuracyofcertainrepresentations N
e Preliminary, subjectto change. w I This cover page contains certain information for quick reference only. It is not a summary of this issue. The Series 2016A Bonds are issued when, as and if issued and received by the Underwriter and subject to the Principal of the Series 2016A Bonds, payable annually on each November 1, commencing November 1, 2016, The Series2016ABondswillbeissuedasfullyregisteredbondswithoutcouponsand,whenissued, be The Series2016ABondsarebeingissuedpursuantto(i)Sections59and60oftheCharterCity (ii) The $16,930,000*GeneralObligationRefundingBonds,Series2016A(the“SeriesBonds”or“Bonds”) are In the opinion of Burak Anderson & Melloni, PLC, Bond Counsel, based upon an analysis of existing laws, ss u e : Fu ll PRELIMINARY OFFICIAL STATEMENT DATED MARCH 9, 2016 B oo
G k-E eneral ObligationRefundingBonds,Series2016A ntry C ity ONLY
OFFICIAL STATEMENT of W Bu
ells FargoSecurities $16,930,000* rlin g ton , V ermont Due: November1,asshownonthe
Ratings: insidecover Moody’s “A3” MATURITY SCHEDULES
$16,930,000* Series 2016A Bonds Serial Bonds
Maturity Principal Interest Price November 1* Amount* Rate or Yield CUSIP** 2016 $ 300,000 % % 2017 865,000 2018 1,025,000 2019 1,435,000 2020 1,500,000 2021 1,560,000 2022 1,655,000 2023 1,670,000 2024 1,415,000 2025 1,495,000 2026 1,385,000 2027 965,000 2028 805,000 2029 855,000
The Series 2016A Bonds are subject to optional and mandatory redemption prior to maturity as described herein.
+ Priced to the call date of November 1, 2026.
* Preliminary, subject to change.
**The CUSIP (Committee on Uniform Securities Identification Procedures) numbers appearing in this Official Statement have been assigned by an organization not affiliated with the City or the Underwriter, and neither the City nor the Underwriter is responsible for the selection or use of CUSIP numbers. The CUSIP numbers appearing in this Official Statement are included solely for the convenience of holders of the Bonds and no representation is made as to the correctness of any CUSIP number appearing in this Official Statement. Any CUSIP number assigned to any of the Bonds may be changed during the term of the Bonds based on a number of factors including without limitation the refunding or defeasance of such issue or the use of secondary market financial products. Neither the City nor the Underwriter has agreed to, nor does either of such parties have any duty or obligation to, update this Official Statement to reflect any change or correction in any CUSIP number included in this Official Statement.
No dealer, broker, salesman or other person has been authorized by the City of Burlington, Vermont (the “City”) to give any information or to make any representations, other than those contained in this Official Statement and if given or made, such information or representations must not be relied upon as having been authorized. This Official Statement does not constitute an offer to sell or solicitation of an offer to buy any of the Series 2016A Bonds in any jurisdiction to any person to whom it is unlawful to make such offer or solicitation in such jurisdiction. The information, estimates and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City since the date hereof.
The Underwriter has provided the following sentence and paragraph for inclusion in this Official Statement: “The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of its responsibilities under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information.”
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE BONDS AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
The order and placement of materials in this Official Statement, including the Appendices, are not to be deemed to be a determination of relevance, materiality or importance, and this Official Statement, including the Appendices, must be considered in its entirety.
IN MAKING ANY INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE CITY AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THE BONDS HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Other than as to matters expressly set forth in “Appendix A – Audited Financial Statements for FY 2015” herein, the Independent Auditors of the City are not passing on and do 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.
The City deems this Official Statement to be “final” for purposes of Securities and Exchange Commission (“SEC”) Rule 15c2-12(b)(1) (“Rule”), but this Official Statement is subject to revision or amendment to the extent provided for by the Rule.
Certain statements included or incorporated by reference in this Official Statement constitute “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. Such statements are generally identifiable by the terminology used such as “plan”, “expect”, “anticipate”, “estimate”, “budget”, “forecast”, or other similar words. The achievement of certain results or other expectations contained in such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements described to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The City does not plan to issue any updates or revisions to those forward-looking statements if or when its expectations, or events, conditions or circumstances on which such statements are based, occur.
References to web site addresses presented herein are for informational purposes only and may be in the form of a hyperlink solely for the reader’s convenience. Unless specified otherwise, such web sites and the information or links contained therein are not incorporated into, and are not part of, this Official Statement for purposes of, and as that term is defined in, SEC rule 15c2-12.
The cover page, inside cover, this page and the appendices attached hereto are a part of this Official Statement.
i TABLE OF CONTENTS
Page Page
INTRODUCTION TO THE OFFICIAL PROPERTY VALUATIONS AND TAXES...... 36 STATEMENT ...... 1 Property Taxation ...... 36 FINANCIAL SUMMARY ...... 3 Act 60 ...... 36 DESCRIPTION OF THE BONDS ...... 4 Property Valuation ...... 36 Authorization and Purpose ...... 4 Tax Collections ...... 39 Plan of Refunding ...... 4 Tax Rates/Levy Limits ...... 40 Security ...... 4 Principal Taxpayers ...... 41 Registration ...... 4 ECONOMIC AND DEMOGRAPHIC Interest Computation ...... 5 INFORMATION ...... 43 Redemption Provisions ...... 5 Economic Activity ...... 43 Undertaking to Provide Continuing Disclosure on Population ...... 43 the Bonds ...... 5 Employment Data ...... 43 Book Entry-Only System ...... 8 Major Employers ...... 45 THE CITY OF BURLINGTON ...... 11 Construction ...... 46 Description of the City ...... 11 Housing Market ...... 46 Form of Government ...... 11 TAX EXEMPTION ...... 47 Employee Relations ...... 11 RATING ...... 48 Retirement System ...... 12 CERTIFICATION ...... 48 Insurance ...... 13 LEGAL MATTERS ...... 48 Health Benefits ...... 14 AUDITOR ...... 49 City Services ...... 14 FINANCIAL ADVISOR ...... 49 City Enterprises ...... 17 UNDERWRITING ...... 49 Community Amenities ...... 20 VERIFICATION OF MATHEMATICAL Education ...... 21 COMPUTATIONS ...... 49 Overlapping Governmental Units ...... 22 LITIGATION ...... 50 DEBT STRUCTURE ...... 23 Debt Summary ...... 23 Appendix A City of Burlington Vermont – Authorization of Direct Debt ...... 23 Audited Financial Statements for FY Debt Limit ...... 24 2015 Authorized but Unissued Debt ...... 24 Appendix B Form of Proposed Legal Opinion General Obligation Long-Term Debt ...... 25 Appendix C Form of Continuing Disclosure Certificates of Participation...... 26 Certificate Revenue Debt ...... 27 Other Notes Payable ...... 29 Overlapping Debt ...... 30 FINANCIAL INFORMATION ...... 31 Budget Process ...... 31 Financial Reports ...... 32 Results of Operations ...... 32 Management Discussion ...... 34
CITY OF BURLINGTON, VERMONT
Initial Term Current Term Commenced Expires Miro Weinberger Mayor 2012 2018
City Council
Sharon Foley Bushor Ward 1 1987 2018 Max Tracy Ward 2 2012 2018 Sara Giannoni Ward 3 2015 2018 Kurt Wright Ward 4 2013 2018 William “Chip” Mason Ward 5 2012 2018 Karen Paul Ward 6 2008 2018 Tom Ayres Ward 7 2013 2018 Adam Roof Ward 8 2015 2018 Selene Colburn East District 2014 2017 Jane Knodell, President, City Council Central District 2013 2017 Dave Hartnett North District 2011 2017 Joan Shannon South District 2003 2017
City Administration
Bob Rusten Chief Administrative Officer Rich Goodwin Assistant Chief Administrative Officer John Vickery City Assessor Eileen Blackwood, Esq. City Attorney Ann Barton Chief Accountant
Financial Advisor
PUBLIC FINANCIAL MANAGEMENT, INC. Minneapolis, Minnesota
Bond Counsel
BURAK ANDERSON & MELLONI, PLC Burlington, Vermont
iii
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INTRODUCTION TO THE OFFICIAL STATEMENT
The following information is furnished solely to provide limited introductory information regarding the City's $16,930,000* General Obligation Refunding Bonds, Series 2016A (the “Series 2016A Bonds” or “Bonds”) and does not purport to be comprehensive. All such information is qualified in its entirety by reference to the more detailed descriptions appearing in this Official Statement, including the appendices hereto. Investors must read the entire Official Statement to obtain information essential to making an informed decision.
Issuer: City of Burlington, Vermont.
Security: General obligation, unlimited tax levy.
Purpose: The Series 2016A Bonds are issued by the City for the purposes of: (i) refunding certain outstanding debt of the City and (ii) paying certain costs of issuance of the Series 2016A Bonds.
Redemption Provisions: The Series 2016A Bonds maturing on or after November 1, 2027 are subject to optional redemption on November 1, 2026, and on any date thereafter, in whole or in part, at a price of par plus accrued interest thereon to the date of redemption. The Series 2016A Bonds maturing November 1, ____* and thereafter will be subject to mandatory redemption as set forth herein.
Denominations: $5,000 or integral multiples thereof.
Registration: The Bonds will be initially registered in the name of Cede & Co., as nominee for The Depository Trust Company, New York, New York, which will act as securities depository for the Bonds.
Principal Payments: Annually each November 1, commencing November 1, 2016.
Interest Payments: Semiannually on each May 1 and November 1, commencing November 1, 2016.
Tax Status: Interest on the Series 2016A Bonds is generally exempt from federal and state income taxes (see “Tax Exemption” herein).
The Series 2016A Bonds will not be designated as Qualified Tax- Exempt Obligations under the Internal Revenue Code of 1986.
Professional Consultants: Financial Advisor: Public Financial Management, Inc. Minneapolis, Minnesota
Bond Counsel: Burak Anderson & Melloni, PLC Burlington, Vermont
Registrar/Paying Agent: City of Burlington, Vermont
Verification Agent: ______
* Preliminary, subject to change.
1
Legal Matters: Legal matters incident to the authorization and issuance of the Bonds are subject to the opinion of Burak Anderson & Melloni, PLC, Bond Counsel, as to validity and tax exemption. The opinion will be substantially in the form set forth in “Appendix B – Form of Proposed Legal Opinion” attached hereto. Other than as to matters expressly set forth herein as prepared by Bond Counsel or as the opinion of Bond Counsel, Bond Counsel is not passing on and does not assume any responsibility for the accuracy or adequacy of the statements made in this Official Statement and makes no representation that it has independently verified the same.
Authority for Issuance: The Series 2016A Bonds are being issued pursuant to (i) Sections 59 and 60 of the Charter of the City and (ii) resolutions of the City Council.
Conditions Affecting Issuance: The Bonds are offered when, as and if issued, subject to the approving legal opinion of Burak Anderson & Melloni, PLC, and subject to the other conditions contained in the Bond Purchase Agreement between the City and Wells Fargo Bank, N.A. (the “Underwriter”).
Delivery: Expected on or about April __, 2016 at the Depository Trust Company, New York, New York, on behalf of the Underwriter of the Series 2016A Bonds.
Book-Entry Only: The Bonds will be issued as book-entry only securities through The Depository Trust Company, New York, New York.
Limitations on Offering or No dealer, broker, salesperson or other person has been authorized by Reoffering Securities: the City or the Financial Advisor to give any information or to make any representations other than those contained in this Official Statement and, if given or made, such information and representations must not be relied upon as having been authorized by the City or the Financial Advisor. This Official Statement does not constitute an offer to sell or solicitation of an offer to buy, nor shall there be any sale of the Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale.
No Litigation: There is no litigation now pending or, to the knowledge of City officials, threatened which questions the validity of the Bonds or of any proceedings of the City taken with respect to the issuance or sale thereof. See “LITIGATION” herein for further information concerning such litigation.
Continuing Disclosure: The City will covenant to provide continuing disclosure with respect to the Bonds. See “Appendix C – Form of Continuing Disclosure Certificate” for the Form of Continuing Disclosure Undertaking.
Questions regarding the Bonds or the Official Statement can be directed to and additional copies of the Official Statement, the City's audited financial reports, and the Resolution may be obtained from Public Financial Management, Inc., 800 Nicollet Mall, Suite 2710, Minneapolis, Minnesota 55402, (612/338-3535), www.pfm.com, the City's financial advisor.
2 FINANCIAL SUMMARY
(This summary is subject in all respects to more complete information contained in this Official Statement.)
ESTIMATED MARKET VALUE 2014/15 $ 4,268,806,046
ASSESSED VALUE 2014/15 $ 3,778,550,520
GRAND LIST (1% OF ASSESSED VALUATION) 2014/15 $ 37,785,505
GENERAL OBLIGATION DEBT: (Includes the Bonds) Levy Supported $ 64,689,286 Revenue Supported $ 43,770,714
SHORT-TERM: $ 10,761,613
LONG-TERM LEASE OBLIGATIONS: $ 7,025,000
REVENUE DEBT: $ 81,153,020
OVERLAPPING GENERAL OBLIGATION DEBT (As of June 30, 2015) $ --
POPULATION (2014 Estimate) 42,284
AREA 16.1 square miles
DEBT RATIOS:
% of Debt Per Capita Estimated Outstanding (42,284) Market Value
General Obligation Debt Levy Supported $ 64,689,286 $ 1,530 1.52% Revenue Supported 43,770,714 1,035 1.03% Overlapping Debt -- -- 0.00%
Total $108,460,000 $2,565 2.55%
3 DESCRIPTION OF THE BONDS
Authorization and Purpose
The Series 2016A Bonds are issued by the City for the purposes of: (i) refunding certain outstanding debt of the City and (ii) paying certain costs of issuance of the Series 2016A Bonds. The Series 2016A Bonds are being issued pursuant to (i) Sections 59 and 60 of the Charter of the City and (ii) resolutions of the City Council.
Plan of Refunding
The proceeds of the Series 2016A Bonds, along with available funds on hand, will be used to refund the 2016-2022 maturities of the City’s outstanding Series 2002A Bonds, the 2016-2018 maturities of the City’s outstanding Series 2003A Bonds, the 2016-2025 maturities of the City’s outstanding Series 2005A Bonds, the 2016-2025 maturities of the City’s outstanding Series 2005B Bonds on a current refunding basis, and to advance refund the 2017-2026 maturities of the City’s outstanding Series 2006A Bonds, the 2018-2027 maturities of the City’s outstanding Series 2007A Bonds, the 2019-2029 maturities of the City’s outstanding Series 2009A Bonds, and the 2017-2023 maturities of the City’s outstanding Series 2013B Bonds.
Following is a list of outstanding maturities and amounts of the bonds to be refunded:
Amount to be Series Refunded Maturities Amount Outstanding Call Date Call Price Refunded 2002A 2016 – 2022 $ 390,000 100% $ 390,000 2003A 2016 – 2018 630,000 100% 630,000 2005A 2016 – 2025 605,000 100% 605,000 2005B 2016 – 2025 1,060,000 100% 1,060,000 2006A 2017 – 2026 4,135,000 11/1/16 100% 3,840,000 2007A 2018 – 2027 1,915,000 11/1/17 100% 1,665,000 2009A 2019 – 2029 8,075,000 11/1/18 100% 8,075,000 2013B 2016 200,000 N/A N/A -- 2013B 2023 Term Bond 1,850,000 11/1/16 100% 1,850,000 Total $ 18,115,000
Security
The Bonds are general obligations of the City to which its full faith credit and unlimited taxing powers are pledged.
Registration
The Bonds will be issued as fully registered bonds without coupons and, when issued, will be registered in the name of Cede & Co., as nominee of DTC. DTC will act as securities depository of the Bonds. Individual purchases may be made in book-entry form only, in the principal amount of $5,000 and integral multiples thereof. Purchasers will not receive certificates representing their interest in the Bonds purchased.
4 Interest Computation
Interest is payable semi-annually on the Bonds on May 1 and November 1, commencing November 1, 2016.
Interest on the Bonds will be computed on a 360-day year, 30-day month basis. Payments coming due on a non- business day will be paid on the next business day.
Redemption Provisions
Optional Redemption
The Bonds maturing on or after November 1, 2027 are subject to optional redemption on November 1, 2026, and on any date thereafter, in whole or in part, at a price of par plus accrued interest thereon to the date of redemption.
Mandatory Redemption
The Bonds maturing November 1, ____ are subject to redemption in part by lot on each November 1 commencing November 1, ____, at a redemption price equal to the principal amount of such Series 2016A Bonds to be redeemed plus accrued interest to the date of redemption in amounts sufficient to redeem on November 1 of each year the principal amount of such Series 2016A Bonds specified for each of the years shown below:
Year Principal Amount $
General Provisions
If redemption is in part, the Bonds to be redeemed will be selected by the City. If only part of the Bonds having a common maturity date are called for redemption, the City will notify The Depository Trust Company, New York, New York (“DTC”) of the particular amount of such maturity to be prepaid. DTC will determine by lot the amount of each participant’s interest in such maturity to be redeemed and each particular participant will then select by lot the beneficial ownership interests in such maturity to be redeemed.
In the event the Bonds are called for redemption, notice will be sent by registered or certified mail not less than thirty (30) days prior to the redemption date to DTC. It will be the responsibility of DTC and its participants to give notice of the redemption to beneficial owners of the Bonds. Failure to mail notice of the redemption to the registered owner of any other Bonds, any defect in the notice to such an owner, or failure by DTC and its participants to provide notice of redemption to the beneficial owners of the Bonds will not affect the redemption of the Bonds.
Undertaking to Provide Continuing Disclosure on the Bonds
At the time of the delivery of the Series 2016A Bonds, the City will provide an executed copy of its “Undertaking to Provide Continuing Disclosure” (the “Undertaking”); see “Appendix C-Form of Continuing Disclosure Undertaking” herein. Said Undertaking will constitute a written agreement or contract of the City for the benefit of holders and/or beneficial owners of the Series 2016A Bonds, to provide, or cause to be provided to the Electronic Municipal Market Access (“EMMA”) System implemented by the Municipal Securities Rulemaking Board (“MSRB”) established pursuant to Section 15B(b)(1) of the Securities Exchange Act of 1934, or any successor thereto, (i) within 270 days after the fiscal year end while any of the Series 2016A Bonds are outstanding, commencing with the fiscal year ending June 30, 2015, in accordance with SEC Rule 15c2-12 and in an electronic format as prescribed by the MSRB: (A) financial information and certain operating data relating to the City, updating the financial information and operating data relating to the City presented in the final Official Statement for the Series 2016A Bonds which specifically includes updated information set forth in Tables 13, 14 and 15 therein
5 and (B) the audited financial statements of the City for the most recently ended fiscal year, prepared in accordance with generally accepted accounting principles as in effect from time to time. In each case, if then permitted by SEC Rule 15c2-12 and the requirements of the MSRB, the items referred to in this paragraph may be submitted as a single document or as separate documents comprising a package, and may cross-reference other documents that may have been filed with the MSRB or the Securities and Exchange Commission. If the document incorporated by reference is a final official statement, it shall be available from the MSRB. The City shall clearly identify each such other document so incorporated by reference. Notwithstanding the foregoing, the audited financial statements of the City may be submitted separately from, and at a later date than, the balance of the items referred to in this paragraph if such audited financial statements are not available as of the date set forth above. If the City submits the audited financial statements of the City at a later date, it shall provide unaudited financial statements by the above-specified deadline and shall provide the audited financial statements as soon as practicable after the audited financial statements become available;
(ii) timely notice, not in excess of ten (10) business days after occurrence of such event, of the occurrence of any of the following events with respect to the Series 2016A Bonds:
(A) principal and interest payment delinquencies;
(B) non-payment related defaults, if material;
(C) unscheduled draws on debt service reserves reflecting financial difficulties;
(D) unscheduled draws on credit enhancements reflecting financial difficulties;
(E) substitution of credit or liquidity providers, or their failure to perform;
(F) adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Series 2016A Bonds, or other material events affecting the tax status of the Series 2016A Bonds;
(G) modification to rights of holders of the Series 2016A Bonds, if material;
(H) bond calls, if material and tender offers;
(I) defeasances;
(J) release, substitution or sale of property securing the repayment of the Series 2016A Bonds, if material;
(K) rating changes;
(L) bankruptcy, insolvency, receivership or similar event of the City;
(M) the consummation of a merger, consolidation, or acquisition involving the City or the sale of all or substantially all of the assets of the City, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; or
(N) appointment of a successor or additional trustee or the change of name of a trustee, if material;
(iii) in a timely manner, notice of a failure of the City to provide within 270 days after the fiscal year end the annual financial information, operating data or reports required by the Undertaking.
The City may provide notice of the occurrence of certain other events, in addition to those listed above, if it determines that any such other event is material with respect to the Series 2016A Bonds; but the City does not undertake to commit to provide any such notice of the occurrence of any event except those events listed above.
6 Failure of the City to comply with this covenant shall not constitute an event of default under the Series 2016A Bonds or under any authorizing resolution for the Series 2016A Bonds
The City’s Undertaking shall remain in full force and effect until such time as the principal of, redemption premiums, if any, and interest on the Series 2016A Bonds shall have been paid in full or in the event that those portions of SEC Rule 15c2-12 which require the Undertaking, or such provision, as the case may be, do not or no longer apply to the Series 2016A Bonds. The sole and exclusive remedy for breach or default under the Undertaking is an action to compel specific performance of the undertakings of the City, and no person or entity, including a Holder of the Series 2016A Bonds, shall be entitled to seek or recover monetary damages thereunder under any circumstances.
The City reserves the right to amend or waive the Undertaking in any way so long as such amendment or waiver would not, in and of itself, violate SEC Rule 15c2-12.
During the previous five years, the City has failed to comply with its continuing disclosure undertakings as set forth herein.
The City had not posted notice of the changes in ratings on its outstanding general obligation bonds, bond anticipation notes and tax and revenue anticipation notes by Moody’s Investors Service, Inc. (“Moody’s”), which rating changes occurred in July 2010 from A3 to A2 and in January 2011 from A2 to A3. On July 21, 2011, the City filed notice of the failure to file such rating changes as well as the rating changes on its outstanding general obligation bonds, bond anticipation notes and tax and revenue anticipation notes. Notice of the January 7, 2011 rating downgrade was also posted on October 17, 2014. Moody’s further downgraded the City’s general obligation bonds from A3 to Baa3 on June 20, 2012, notice of which was posted October 17, 2014. On August 20, 2013, Moody’s continued the rating of Baa3 for the City’s general obligation bonds, notice of which was filed on October 13, 2015.
On January 15, 2014, Moody's revised the outlook to stable from negative on the City’s airport revenue bonds, while affirming the Ba1 rating. Notice of the change was filed on February 21, 2014.
The City failed to provide timely notice for rating changes to certain of its bond insurers: notice of a Moody’s downgrade of Assured Guaranty Municipal Corp. and Assured Guaranty Corp. on January 17, 2013 was filed on January 31, 2013; notice of a Standard & Poor’s Rating Services (“S&P”) upgrade of MBIA Insurance Corp. on May 8, 2013 was filed on October 13, 2015; notice of an S&P upgrade of National Public Finance Guarantee Corp. on May 10, 2013 was filed on October 13, 2015 (notice of a previous downgrade of National Public Finance Guaranty Cap on December 19, 2011 had not been filed); notice of an S&P upgrade of MBIA Insurance Corp. on May 21, 2013 was filed on October 13, 2015; notice of an S&P upgrade of National Public Finance Guarantee Corp. on March 18, 2014 was filed on October 13, 2015; and notice of an S&P upgrade of Assured Guaranty Municipal Corp., Assured Guaranty Corp., Assured Guaranty Re Ltd, and Municipal Assurance Corp. on March 18, 2014 was filed on October 13, 2015.
Over the past several years, the City was unable to file its audited financial reports and accompanying operating data for its fiscal year ending June 30 by the November 30 filing date set forth in the then existing continuing disclosure undertaking agreements. Such inability was due, in large part, to the need to prepare a single audit that included and compiled financial statements and other information from several enterprise funds, several of which had their own audits to complete. The City failed to timely file its audited financial statements (i) for its fiscal year ending June 30, 2010, which was filed February 23, 2011 (the City’s unaudited financial statements were filed December 29, 2010, also after the deadline and the list of the top 20 taxpayers was filed November 12, 2013), (ii) for its fiscal year ending June 30, 2011, which was filed March 23, 2012, (iii) for its fiscal year ending June 30, 2012, which was filed January 30, 2013 and (iv) for its fiscal year ending June 30, 2013, which was filed February 18, 2014. The City filed notice of its failure to timely file audited financial statements (i) for the fiscal years ending in 2010 and 2011 on August 13, 2014, (ii) for the fiscal year ending in 2012 on December 3, 2012 and (iii) for the fiscal year ending in 2013 on November 21, 2013. The City filed its single audit report for fiscal year 2013 on April 1, 2014 and for fiscal year 2014 on March 27, 2015. The City did not file single audit reports for fiscal years 2010, 2011 or 2012. In November of 2014, the City amended the continuing disclosure undertaking agreements for each of its outstanding series of bonds to change the filing deadline for its audited financial reports to 270 days after the end of each fiscal
7 year. The City made a timely filing on March 27, 2015 of its audited financial statements for its fiscal year ending June 30, 2014. Additionally, the City failed to timely file the following other information: (i) operating data for fiscal year 2010, which was filed February 23, 2011 (and incorporated by reference into another official statement filed on December 30, 2011), (ii) operating data for fiscal year 2011, which was incorporated by reference to another official statement filed on December 30, 2011, (iii) operating data for fiscal year 2012, which was incorporated by reference to another official statement filed on December 3, 2012 and (iv) certain information about the City’s waterworks systems in connection with a series of public improvement bonds that have been repaid in full and no longer outstanding.
In addition, the City failed to timely file audited financial statements for the airport (i) for its fiscal year ending June 30, 2010, which was filed on February 23, 2011 (unaudited financial statements for 2010 were filed on December 29, 2010), (ii) for its fiscal year ending June 30, 2011, which was filed May 11, 2012, (iii) for its fiscal year ending June 30, 2012, which was filed December 28, 2012 and (iv) for its fiscal year ending June 30, 2013, which was filed February 21, 2014. Notice of failure to timely file audited financials was filed for fiscal year 2012 on December 3, 2012, and for fiscal year 2013 on November 21, 2013. The City timely filed the airport’s audited financials for its fiscal year ending June 30, 2014 on November 14, 2014. Additionally, the City failed to timely file the following other airport information: (i) operating data for fiscal year 2010, which was filed December 6, 2012 and December 27, 2013, (ii) operating data, aviation activity report and a consultant’s report regarding compliance with the airport’s rate covenant for fiscal year 2011, which were each filed on December 6, 2012, (iii) the operating data for fiscal year 2012, which was incorporated by reference to another official statement filed December 3, 2012 and December 6, 2012, (iv) the operating data for fiscal year 2013, which was filed initially on December 27, 2013 and then supplemented on October 23, 2014 and (v) the operating data for fiscal year 2014, which was filed on March 27, 2015. In several instances, the reports did not conform to the continuing disclosure undertakings on the initial filing date.
As a result of a review of its filings with the MSRB through EMMA, the City has identified that, when making certain filings of its financial statements and operating data, and filings of changes in ratings for its outstanding bonds, the City had not filed, on a timely basis, notices that such filings were late as described above. The City posted a notice on November 11, 2015, that those filings were not made on a timely basis.
The City expects to have its audited financial statements available within 270 days after the end of each such succeeding fiscal year in order to facilitate timely filings of certain annual financial information and operating data for the preceding fiscal year with EMMA.
Failure by the City to comply with the Undertaking could adversely affect the market price of the Series 2016A Bonds. In November 2012, the City engaged Disclosure Assurance Certification, L.L.C. (“DAC”) as a disclosure dissemination agent to assist the City in its continuing disclosure undertakings pursuant to a Disclosure Dissemination Agreement. In November 2014, the City put in place written continuing disclosure procedures that provide for a disclosure manager, appointed by the City’s Chief Administrative Officer, to coordinate with DAC to make sure all of the required filings are timely made, review filings, and monitor and maintain the efficacy of the City’s disclosure procedures on an ongoing basis. The City shall amend the Disclosure Dissemination Agreement with DAC to include assistance with respect to its disclosure undertakings with respect to the Series 2016A Bonds.
Book Entry-Only System
The information contained in the following paragraphs of this subsection “Book-Entry Only System” has been extracted from a schedule prepared by Depository Trust Company (“DTC”) entitled “SAMPLE OFFERING DOCUMENT LANGUAGE DESCRIBING BOOK-ENTRY ONLY ISSUANCE.” The City makes no representation as to the completeness or the accuracy of such information or as to the absence of material adverse changes in such information subsequent to the date hereof.
DTC 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). One fully-registered certificate will be issued for each annual maturity of the Bonds, each in the aggregate principal amount of such annual maturity, and such certificates will be deposited with DTC.
8
DTC 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 securities that its participants (“Participants”) deposit with DTC. DTC also facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in Participants' accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations (“Direct Participants”). DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc., and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks, and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). The Rules applicable to DTC and 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 Bonds on DTC's records. The ownership interest of each actual purchaser of each certificate (“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 Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds 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 Bonds, except in the event that use of the book-entry system for the Bonds is discontinued.
To facilitate subsequent transfers, all Bonds deposited by Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co. The deposit of Bonds 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 Bonds; DTC’s records reflect only identity of the Direct Participants to whose accounts such Bonds 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.
Redemption notices shall be sent to Cede & Co. 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.
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.
Neither DTC nor Cede & Co. will consent or vote with respect to Bonds. Under its usual procedures, DTC mails an Omnibus Proxy to the City as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).
Principal and interest payments on the Bonds will be made to DTC. DTC’s practice is to credit Direct Participants’ accounts on the payable date in accordance with their respective holdings shown on DTC’s records unless DTC has reason to believe that it will not receive payment on the payable date. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC or the City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to DTC is the responsibility of the City, disbursements 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.
9 DTC may discontinue providing its services as securities depository with respect to the Bonds at any time by giving reasonable notice to the City. Under such circumstances, in the event that a successor securities depository is not obtained, Bonds are required to be printed and delivered.
NEITHER THE CITY NOR THE UNDERWRITERS WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO PARTICIPANTS, TO INDIRECT PARTICIPANTS OR TO ANY BENEFICIAL OWNER WITH RESPECT TO (1) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC, ANY DTC PARTICIPANT OR ANY INDIRECT PARTICIPANT; (2) THE PAYMENT BY DTC, ANY DTC PARTICIPANT OR ANY INDIRECT PARTICIPANT OF ANY AMOUNT WITH RESPECT TO THE PRINCIPAL OF OR INTEREST ON THE BONDS; (3) ANY NOTICE WHICH IS PERMITTED OR REQUIRED TO BE GIVEN TO CERTIFICATEHOLDERS; (4) ANY CONSENT GIVEN BY DTC OR OTHER ACTION TAKEN BY DTC AS CERTIFICATEHOLDER; OR (5) THE SELECTION BY DTC, ANY DTC PARTICIPANT OR ANY INDIRECT PARTICIPANT OF ANY BENEFICIAL OWNER TO RECEIVE PAYMENT IN THE EVENT OF A PARTIAL REDEMPTION OF BONDS. SO LONG AS CEDE & CO. IS THE REGISTERED OWNER OF THE BONDS, AS NOMINEE OF DTC, REFERENCES HEREIN TO THE BONDOWNERS AS REGISTERED OWNERS OF THE BONDS SHALL MEAN CEDE & CO. AND SHALL NOT MEAN THE BENEFICIAL OWNERS OF THE BONDS.
10 THE CITY OF BURLINGTON
Description of the City
The City of Burlington, Vermont (the “City”) is the largest city in Vermont and located in northwestern Vermont on the eastern shore of Lake Champlain directly across from northern New York State. The City is the commercial center of Chittenden County and encompasses 16 square miles. The City is 90 miles south of Montreal, Quebec, 220 miles northwest of Boston, Massachusetts, and 300 miles north of New York, New York.
Highways serving Burlington include State Highways 2 and 7 and Interstates U.S. 89 and 189. The Lake Champlain Transportation Company operates ferries on Lake Champlain between Vermont and New York.
The Burlington International Airport serves over 1.2 million passengers per year and accommodates non-stop air service to all three New York City area airports, Philadelphia, both Washington D.C. airports, Chicago, Detroit and seasonally to Toronto. In addition, non-stop service to Atlanta began June of 2013, non-stop service to Orlando/Sanford FL began in February 2014, and non-stop service to Charlotte, NC began in August 2015. Passengers can reach nearly any destination world-wide with just one connection from Burlington.
Bus service is provided by Greyhound Lines, Megabus, and Vermont Trans Lines (operated by Vermont Agency of Transportation). Freight service is provided by the Vermont Railway Corporation and Rail America. The Chittenden County Transportation Authority, which represents Burlington, Essex Junction, South Burlington, Shelburne, Charlotte and Winooski, provides local bus service.
Form of Government
Burlington was incorporated as a City in 1865. On November 7, 2000, voters approved amendments to the City Charter providing for direct Mayoral appointment of department heads with City Council confirmation, clarified the Mayor’s authority as the City’s Chief Executive Officer, established the position of Chief Administrative Officer, and provided that City commissions would become advisory except when authority was re-delegated by the City Council.
Employee Relations
As of December 31, 2015, the City of Burlington employed 1,604 full time employees, including school employees. The City does not anticipate a significant increase in such staff in the foreseeable future, and believes its relations with its employees are generally good. All public employees except most supervisors, confidential employees, and certain school district employees in the State of Vermont have the right to organize and the right to bargain collectively with their public employers on matters of wages, terms and other conditions of employment other than managerial policy. The school contract for teachers with the Burlington Education Association, Inc. has been extended until August 31, 2016. The City has five separate labor associations: American Federation of State, County, & Municipal Employees, AFL-CIO, Council 93, Local 1343 (AFSCME) (the school negotiates separately for the school AFSCME employees), the International Brotherhood of Electrical Workers, AFL-CIO Local 300 (IBEW), the Burlington Police Officers’ Association (BPOA) the Burlington Firefighters Association, International Association of Fire Fighters Local 3044 (BFA), and the International Alliance of Theatrical Stage Employees, Local 919 (IATSE) . The BPOA contract expired on June 30, 2014 and negotiations are on-going. The AFSCME and BFA were recently settled and expire on June 30, 2018 and the collective bargaining contract with IBEW has been ratified by both sides and is expected to be signed shortly and will expire June 30, 2018. Prior to their expiration the City began negotiations for new contracts. The IATSE contract expired June 30, 2015, and negotiations are ongoing.
11 Retirement System
The Burlington Employees’ Retirement System became effective as of July 1, 1954, and covers virtually all City employees, except the majority of teachers who are eligible for the Vermont Teachers Retirement System. The Vermont Teachers Retirement System is funded by employee contributions of 5% of the teacher’s contract and the remainder is funded from the Annual State of Vermont budget. Membership in the Burlington Employees Retirement System (the pension plan) is divided into two classes. Class A consists of members of the Fire and Police Departments not including clerical employees. Class B represents the remainder of Burlington’s City work force.
The contribution by the City, excluding operation expenses, consists of two parts. The first is a normal contribution to cover the cost of benefits expected to accrue under the Plan during the fiscal year following the valuation date, reduced by required Class A member contributions equal to 10.8% of compensation and required Class B member contributions equal to 3.4% of compensation. The second is a past service contribution to liquidate unfunded past service costs over a 30-year period in accordance with the policy adopted by the Retirement Board. Unfunded past service costs are amortized over 30 years and per the BERS Report on the 62nd Actuarial Valuation totaled $61 million at June 30, 2015. The City’s contribution under the plan for FY 2015 totaled $9 million, and included amortization of unfunded service costs of $6 million. The pension is 75% funded on June 30, 2014 (pre GASB 67), and has enacted changes so that the plan will be 85% funded by fiscal year 2022 while meeting the additional goal of the City to keep its contribution flat for fiscal years 2016, 2017, and 2018 Plan fiduciary net position as a percentage of the total pension liability 75.31% at June 30, 2014 (measurement date for June 30, 2015 financial statements) after GASB 67.
The City’s share of the system is funded partially on an annual funding basis by a special government tax levy. This retirement portion of the tax rate is determined by the City’s Retirement Board through the yearly budget preparation process and subject to appropriation in the annual budget approved by the City Council and is not subject to limit.
Governmental Accounting Standards Board (GASB) Statement 68, approved on June 25, 2012, requires governments that provide defined pension benefits to recognize their long-term obligation for pension benefits as a liability for the first time, and to more comprehensively and comparably measure the annual costs of pension benefits. GASB Statement 68 is effective for fiscal years beginning after July 1, 2014 and will impact the City’s financial statements after such date.
For further information regarding the City’s pension fund, refer to Note 24 of the Notes to Financial Statements contained in Appendix A to this Official Statement.
The following table sets forth the historical funding ratios of the Retirement System as of the actuarial valuation dates listed below including among other things, the unfunded actuarial accrued liability. The schedule below is pre GASB 67 per 61st Actuarial Valuation for June 30, 2014.
Actuarial Excess as a Valuation Accrued Funded Covered % of Date Actuarial Value Liability Excess of Assets Ration Payroll Covered (June 30) of Assets (a) (AAL)(b) over AAL (a-b) (a/b) (c) Payroll 2010 $ 130,594,539 $ 179,323,343 $ (48,728,804) 72.83% $ 41,161,578 -118.38% 2011 135,097,458 190,196,691 (55,099,233) 71.03% 42,971,870 -128.22% 2012 137,838,546 196,445,981 (58,607,435) 70.17% 43,865,945 -133.61% 2013 143,944,820 207,539,449 (63,594,629) 69.36% 45,788,173 -138.89% 2014 158,411,427 222,951,312 (64,539,885) 71.05% 47,853,353 -134.87%
12 Schedule of Net Pension Liability for June 30, 2014 (measurement date for June 30, 2015 financial statements) is as follows:
Total pension liability $ 218,004,014 Plan fiduciary net position (164,174,241) Net pension liability (asset) $ 53,829,773
Plan fiduciary net position as a percentage of the total pension liability 75.31%
The following table sets forth the historical employer contributions.
Year Ended Annual Required Actual Percentage (June 30) Contribution Contribution Contributed 2011 $6,778,735 $6,779,226 100.01% 2012 7,547,910 7,547,954 100.00% 2013 8,175,461 8,175,461 100.00% 2014 8,357,370 8,357,370 100.00% 2015 8,920,879 8,920,879 100.00%
Insurance
Effective January 1, 2007, the City entered into a comprehensive insurance program underwritten by Travelers Insurance Company for all City departments with the exception of the operating entities of the electric department, the airport, and the department providing telecom (internet, phone and television services) related services.
Travelers currently provides the following insurance for the City: Property (building and contents), Boiler and Machinery, Business Interruption, Contractors Equipment, Electronic Data Processing Equipment, Valuable Papers (i.e. library periodicals and books) and Fine Art.
Additionally, the City transfers its catastrophic risk of loss to Travelers Insurance Company in the following areas: General Liability coverage (covering negligent acts committed by the City resulting in property damage, bodily and personal injury to third parties), Sexual Abuse Liability, Auto Liability, Public Officials Liability (including coverage for employment related practices suits), Crime, Police Professional Liability as well as First Response Medical Professional coverage for EMT’s and Ambulance Attendants.
In addition to the primary liability coverages highlighted in the preceding paragraph, the City of Burlington has purchased an Excess Liability policy to a limit of $15,000,000.
All coverage provided by Travelers, with the exception of workers’ compensation, is offered on a guaranteed cost basis with deductibles ranging from $0 to $50,000. The workers’ compensation program is a “paid large deductible” structure with an each occurrence deductible of $350,000.
The City also has purchased a “pollution liability” policy from the Chubb Insurance Company protecting the City against third party suits related to certain known and unknown exposures to pollutants.
The City contracts with an external risk manager, Hickok & Boardman, Inc., to coordinate insurance coverage as well as acting as an intermediary in obtaining claims adjudication and loss prevention services through Travelers Insurance Company.
No assurance can be given that these insurance arrangements can be renewed on the same terms in the future and increases in cost and/or decreases in availability of insurance could adversely affect the City.
13 Health Benefits
In June 2004, the Governmental Accounting Standards Board (“GASB”) issued Statement No. 45, Accounting and Financial Reporting by Employers for Post-Employment Benefits Other Than Pensions (“GASB 45”). GASB 45 establishes standards for the measurement, recognition, and display of Other Post-Employment Benefits (“OPEB”), including Post Employment healthcare and other forms of Post-Employment benefits such as life insurance. While GASB 45 requires recognition of unfunded OPEB liability, there is no requirement that such liability be funded. As of June 30, 2015, the unfunded actuarial accrued liability (AAL) was $3,778,744. See the City’s audited financial statements attached as Appendix A hereto, in particular Note 25 thereto.
Fiscal Percentage of Year Annual OPEB OPEB Cost Net OPEB Ended Cost Contributed Obligation 2015 $325,681 66.3% $1,529,910 2014 442,314 86.2% 1,420,191 2013 335,169 108.3% 1,359,145 2012 365,319 32.4% 1,387,098 2011 345,427 0.8% 1,140,113
City Services
The City provides the full range of municipal services including police and fire protection, emergency medical services, street construction and maintenance, solid waste management, traffic signalization, planning and zoning, community and economic development, parks and recreation, library services, youth services, arts programs, educational and general administrative services. The City also operates the following major enterprise funds: (1) electric, (2) water, (3) sewage collection and treatment, (4) airport facilities and (5) telecommunication services.
OSHA inquiry
The City is finishing making certain improvements and upgrades to the working conditions at several locations, including its water and wastewater treatment plants, the City fire houses, the public works and parks and recreation work facility on Pine Street, and the electric department after inspections in September by the Vermont Department of Labor, Occupational Safety and Health Administration (“VOSHA”). The City has recently received citations and notifications of penalties based on those inspections and has an informal conference scheduled with VOSHA to discuss its abatements of the conditions and possible reduction of the penalties. Before reduction, the penalties total approximately $42,000.
Public Safety
The City’s Police and Fire Departments provide crime prevention, firefighting, and fire prevention services. As of July 1, 2015 the Police Department has 97 police officers and 36 civilian personnel. The Police Department is fully staffed at 100, which is the most significant factor for delivery of police services. The Fire Department currently has 78 full-time firefighters and a Class IV fire insurance rating. The City’s Code Enforcement Office provides public health and safety regulatory enforcement and inspections, including a minimum housing inspection program. Voters approved a dedicated tax of five cents to support Police and Fire activities effective in 2003. Voters approved an additional increase of 2.5 cents in 2005. This resulted in a dedicated tax rate of almost fifteen cents per hundred of valuation for Police and Fire purposes. Subsequently after a reappraisal of all property in Burlington in 2005, this tax rate was adjusted proportionate to the reappraisal based increase in the Grand List, to 8.07 cents. The Fire Department now has Fire Alarm redundancy with their relay to an off-site Dispatch Center. The fire service insurance rating has improved to a rating of 3.
14 Department of Public Works
The Department of Public Works (DPW) consists of six divisions. The Street Maintenance Division constructs and maintains highways, sidewalks, and water and sewer distribution systems, and removes snow. A half-cent tax increase was approved in 2004 to provide additional funding for highways. The Wastewater Division manages the City’s combined sewer system. The City’s garages are also operated within the DPW. The City garage maintains the vehicles of all the divisions of the DPW as well as the vehicles of the Police, Fire and Parks and Recreation departments. The Administration and Engineering Division is responsible for all engineering work, public works, contract management, traffic engineering and the management of parking throughout the City. The Water Division manages and operates the City’s water supply and treatment facilities. The Inspection Services Division is responsible for building code inspections. Effective in fiscal year 2001, voters approved an additional five cents per hundred of valuation dedicated to street repairing, bringing the tax rate to 7.71 cents for this purpose. Subsequently, after a reappraisal of all property in the City, this tax rate was adjusted proportionate to the reappraisal based increase in the Grand List, to 4.17 cents. In November 2009, Burlington voters authorized an additional 2 cent increase for an expanded street repair program. This dedicated tax of 6.17 cents along with the Public Safety tax of 8.07 cents was expected to generate approximately $5,316,000 in property tax revenue during fiscal year 2013.
The Public Works Department’s responsibilities also include the design, construction, maintenance, and repair of the City-wide traffic signal system; all regulatory and directional right-of-way signage; all pavement markings; and the School Crossing Guard Safety program.
Libraries
The Fletcher Free Library is the City’s urban public library – the largest and busiest public library in Vermont, averaging 275,000 visits per year (or 753 visits a day), a circulation of over 375,000 per year and a total collection of over 160,000 materials. Fletcher Free contributes to community development and economic growth by facilitating universal access to knowledge, building community connections, and enhancing lifelong learning and literacy. During FY14, Fletcher Free offered more than 575 literacy programs that benefitted 10,000 preschoolers, youths, teens, adults and seniors. Fletcher Free works closely with municipal and community partners to coordinate the City’s annual Summer Reading Program, encouraging children (Pre-K through 12) to read and maintain their reading achievement over the summer months. During FY14, over 70% of all 1st through 4th graders participated in this program. The Fletcher Free provides all library services and programming universally and publicly to the greater Burlington community.
Recreation
In November 2009, the City voters authorized an additional 1 cent increase in the Parks tax rate for Parks capital projects called Penny for Parks. The dedicated tax supports ongoing work to maintain and improve assets in the Burlington Parks System. In November 2012, the City voters approved a half cent increase in the general city tax rate to provide funds for bike path maintenance, which was effective for fiscal year 2014.
Burlington City Arts
Since 1983, the City has partially funded the Burlington City Arts Department (“BCA”), which was established to make arts more accessible to all segments of the population. The arts council brings a broad spectrum of arts programming to the City and encourages partnerships between business, educational, artistic and governmental organizations in the production of cultural events. Over the course of its 30-year history, BCA’s programs and goals still reflect its original objectives for accessibility while also expanding opportunities for an ever-growing and diverse population of artists, community members and region-wide visitors seeking a cultural environment. Its renovation of the old firehouse on Church Street into a five-floor arts center and management of clay and print studios at Memorial Auditorium provide resources for arts experiences, learning, and exhibition that have a positive impact on the local economy and quality of life. Since opening all five floors in 2004, the BCA Center has blossomed into Vermont’s premiere location for contemporary art. Securing and exhibiting national-level artists from Vermont and elsewhere, the Center’s mission is to bring a unique arts experience to the public that will challenge, teach and engage. The BCA Center features two floors of Contemporary art exhibition, the Art Lab artist-
15 in-residence studio on the fourth floor, and numerous contemporary events throughout the year including music, film and performance. Last year, BCA’s programs served approximately 6,500 adults and young people, and visitors enjoyed a large variety of exhibitions at the BCA Center, as well as free concerts in Battery Park, and performances such as the Festival of Fools.
Community Development
The development and implementation of a comprehensive community development strategy for the City and the maintenance of new development within the City’s Municipal Development Plan falls under the direction of the Community and Economic Development Office (CEDO), the Department of Planning and Zoning and the Burlington Housing Authority.
CEDO provides funding for community development programs primarily financed by federal grants. The Burlington Housing Authority administers housing assistance programs with the use of federal funds and rental payments. The Department of Planning and Zoning develops and enforces zoning ordinances designed to maintain City development within the standards of the Department’s development plan.
Church Street Marketplace District
Established in 1981, the Church Street Marketplace District is a four-block pedestrian mall and business improvement district located in the heart of Burlington’s downtown. The Marketplace Department (City of Burlington) manages the public right of way on Church Street by providing maintenance, marketing and administrative services. Because no city tax dollars may fund operations of the Marketplace District, the Marketplace Department’s operating budget must be funded entirely through fees and sponsorships. The majority of operating revenues are derived from a “common area fee” charged to all properties in the District. The Church Street Marketplace District Commission consists of nine members appointed by City Council to three-year terms. Their role is to set policy for the district, and recommend the annual common area fee. Church Street has received the Great American Main Street Award from the National Trust for Historic Preservation and been recognized as one of America’s “Great Public Spaces” by the American Planning Association.
City Parking System
The Department of Public Works Traffic Division is currently responsible for the management, operation, and maintenance of three (3) multi-level parking structures totaling approximately 1,600 spaces; five metered surface lots totaling 188 spaces; one 77 space leased surface lot; and 1,076 on-street parking meters; all within the downtown business district.
These operations are organized within the Traffic Fund, a Special Revenue Fund. By City Charter, all revenues generated by the Fund are restricted for traffic-related expenditures. The bulk of the Fund’s revenues are generated by monthly lease holders and transient parkers utilizing the parking system. A portion of these revenues supports two free hours of parking by visitors to the Church Street Marketplace.
Additionally, Public Works is the contract operator of a 2,000 space parking structure at the Burlington International Airport. After deducting the costs of operating the airport garage, the net parking fees collected are remitted to the Airport.
The Department of Public Works provides these identified traffic services within an annual budget of $4.3 million. Capital expenditures are preprogrammed into the operating budget as either cash expenses or in the case of some equipment, lease purchased over a five-year term.
The City is currently considering additional financing for the construction of renovations and improvements to the City owned parking garages.
16 City Enterprises
Burlington International Airport – Airport Commission
The Burlington International Airport has been in operation for over 90 years and has been the site of significant military and general aviation along with scheduled commercial service since 1932. Passenger enplanements for calendar year 2014 totaled approximately 612,000 passengers, a decrease of less than 1% from calendar year 2013. The Burlington International Airport serves over 1.2 million passengers per year and accommodates non-stop air service to all three New York City area airports, Philadelphia, both Washington D.C. airports, Chicago, Detroit and Toronto. In addition, non-stop services to Atlanta began in June of 2013, non-stop service to Orlando/Sanford, FL began in February 2014, and non-stop service to Charlotte, NC began in August 2015. Passengers can reach nearly any destination world-wide with one stop from Burlington.
In December 2014, the City issued $15,660,000 of Airport Revenue Refunding bonds secured by a pledge of the revenues of the Airport. This bond issue refunded the 2003 Revenue Bond issue. As of March 1, 2016, $37,040,000 of airport revenue bonds were outstanding under the general bond resolution authorizing the issuance of Airport Revenue Bonds (the “Airport Resolution”). See Table 9, Revenue Debt.
The Airport Resolution contains a rate covenant. The City’s airport did not meet such rate covenant for Fiscal Years 2008, 2009, and 2010, resulting in a downgrade in 2011 by Moody’s Investors Service on the Airport Revenue Bonds. The City implemented changes in the Airport’s operations and met the Airport resolution rate covenant for Fiscal Years 2011, 2012, 2013, 2014 and 2015.
The City may issue Airport Revenue Bonds from time to time, payable from a pledge of airport revenues. See “Revenue Debt” herein.
Income from landing fees, terminal rents, concession fees and more than 60 businesses on and around the airfield allows the airport to be self-supporting. More than 1,000 people work at the airport which has an estimated $350 million positive economic impact on the region.
Electric Department
During fiscal year 2015, Burlington's 50% ownership in the McNeil Generating Station together with its 100% ownership in Winooski One Hydro Facility, provided approximately 48% of the City's energy needs. Burlington’s 100% ownership of its Gas Turbine peaking facility provided a very small (less than 0.1%) proportion of the City’s energy needs. Of the balance, 48% was supplied through long-term arrangements for energy from the Vermont Electric Power Producers, Inc., the New York Power Authority Nextera, Vermont Wind, and Georgia Mountain Community Wind, as well as several smaller resource arrangements. The 4.0% of the City's energy needs were met with a number of shorter term (1 year or less) arrangements with various energy suppliers, including net exchange (purchases and sales) with the New England Independent System Operator (ISO-NE).
The City has issued on behalf of the Electric Department (the “Department”), a $5,000,000 General Obligation Revenue Anticipation Note (Line of Credit) with a local bank, placing the Line of Credit directly with the Department. In March 2015 that Line of Credit was renewed. Through fiscal year 2015, the Department had that entire line of credit balance of $5,000,000 available for use. The Line of Credit is due to mature in March 2017.
As of March 1, 2016, $28,345,000 of Electric System Revenue Bonds was outstanding under the Electric Resolution.
On August 29, 2014 the Department executed a purchase and sale agreement to purchase the Winooski One Hydro Facility. The Project’s owners and the Department participated in binding arbitration to determine the facility’s fair market value, and in December 2013 an arbitration decision determined the fair market value to be $16,000,000. The Project is a 7.4 MW hydroelectric generating facility with three turbines located on the Winooski River between the Cities of Burlington and Winooski, Vermont. The facility is Low Impact Hydro Institute (LIHI) certified and is qualified to sell RECs in New England. Annual output is expected to be approximately 30,000,000 kWH, which is 8-9% of the Department’s annual load.
17
The Department sought voter approval in March 2014 to issue bonds for a portion of the final purchase price. The bond issuance was approved by approximately 80% of voters. On August 28, 2014, the Department issued $12,000,000 of 2014 Series A electric system revenue bonds to cover the majority portion of the purchase price for the hydro facility. The Department financed the balance of the purchase price from operating funds.
On August 28, 2014, the Department, through the City, also issued $5,820,000 of new Electric System Revenue Bonds 2014 Series B, for the purpose of refinancing its outstanding 2004 Series A bonds. These new Revenue Bonds 2014 Series A and Series B have an average coupon rate of 3.78% and 3.36%, respectively.
In July 2014, the Department, through the City, issued $3,000,000 in general obligation public improvement bonds for the purpose of capital improvements to the electric infrastructure of the Department. These bonds have an average coupon rate of 2.778%.
For the Fiscal Year ending June 30, 2014, the Burlington Electric Department (BED) had an audited debt service coverage ratio under its Electric Resolution of 7.4 to 1, in excess of the 1.25 to 1 ratio required. Net position at June 30, 2015 decreased $5,605,609 when compared to net position at June 30, 2014. This resulted primarily from the adoption of GASB 68 and the Department reporting of deferred outflows of resources pertaining to its proportionate share of pension plan funding and other post-employment benefits. In addition, the change reflects the termination of a previous agreement with a utility for the funding of a portion of expired bonds of the McNeil Station.
Water Division
The Water Division of the Department of Public Works provides potable water, distribution and metering through approximately 9,800 connections. During the calendar year 2014, an average of 3.92 million gallons per day (MGD) was produced at the water treatment plant. The plant is staffed 24/7 and water is pumped through 121 miles of water mains in the City. Storage of 7 million gallons is provided in the two covered reservoirs and pressure is provided to the high service area by two elevated storage tanks that contain a combined capacity of 650,000 gallons. Water is also provided to Colchester Fire District #2 (CFD#2) through a connection off Plattsburgh Avenue. CFD#2 has been a customer since 1965 and is the largest user. The next largest users within the City limits are the University of Vermont and Fletcher Allen Hospital.
Wastewater Division
The Wastewater Division of the Department of Public Works provides Wastewater Treatment through three different Treatment Plants located in the City. Some of the flow is transported to the plants via gravity, but there are 25 pump stations located throughout the City in areas where flow must be pushed or boosted. There is a network of over 100 miles of pipe collection system that in some cases carries wastewater only, and in other areas of the City transports wastewater and storm water in one pipe. The largest plant, Main Wastewater serves the part of the City with the largest combined flow and this often treats storm events in excess of a flow rate of 100 MGD. The three plants Main, East, and North are permitted for flows of 5.3, 1.2 and 2.0 million gallons per day respectively.
Operating and debt service expenses are supported by the retail wastewater rate. Services such as sludge dewatering, seepage and landfill leachate treatment, as well as wastewater treatment, are also provided for a small section of South Burlington.
Stormwater Division
The Stormwater Division of the Department of Public Works provides for the operation and maintenance of the City’s separate stormwater system (approximately 37 miles of pipe, over 2000 storm drains and 102 outfalls) in compliance with the City’s Municipal Separate Stormwater Sewer System (MS4) permit as well as improvements in the management of stormwater runoff quantity and quality to both the separate and combined stormwater sewer systems. The Stormwater Division also administers the stormwater management and erosion prevention and sediment control regulations under Chapter 26 of the Burlington Code of Ordinances.
18 Operating and debt service expenses are supported by the stormwater user fee, which is based on impervious surface. Single family, duplex and triplex properties are assessed flat fees, which are based on the average amount of impervious associated with those types of properties. All other properties are directly assessed and pay according to the amount of impervious measured on their individual properties.
Burlington Telecom
Burlington Telecom (“BT”) was formed under the City’s Charter as an enterprise of the City to provide internet, phone and cable television services over a “fiber to the premises” network to customers in the City. Burlington Telecom also provides various telecommunications services to the City and its departments. In September of 2005, BT received its Certificate of Public Good from the Vermont Public Service Board to provide cable services in the City. The Certificate of Public Good contained various obligations of and restrictions on the City, particularly concerning the build-out of the system, and restrictions on the City’s subsidizing of the telecom enterprise.
In August 2007, the City entered into a Master State and Municipal Lease/Purchase Agreement (the “Master Lease”) with Municipal Leasing Consultants, pursuant to which the City refinanced earlier leases for a total of approximately $33 million. Municipal Leasing Consultants assigned the Master Lease to CitiCapital Municipal Finance (“CitiCapital”). The obligation of the City to make lease or “rental payments” under the Master Lease was subject to annual appropriation by the City Council. There was no pledge of the revenues of any City enterprise, nor was the Master Lease supported by the full faith and credit of the City. The Master Lease provided that its term would end in the event the City does not make an annual appropriation of rental payments.
Up until 2010, the City also used its own resources to fund BT and advanced approximately $16.9 million to support BT’s operations. However, following the report of a City Council-appointed Blue Ribbon Committee, which concluded that BT was not viable with the current fixed costs, in March 2010, the City hired Dorman and Fawcett to undertake a financial and operational restructuring of BT. In September 2010, Dorman and Fawcett assumed an interim General Manager role at BT.
At the same time, pursuant to the terms of the Master Lease, the City notified CitiCapital that the City would likely not make an appropriation for payments for the next fiscal year and the City Council did not make an appropriation for BT in its budget for the 2010-2011 fiscal year. Accordingly, under the terms of the Master Lease, the Master Lease terminated.
On or about September 2, 2011, Citibank, NA, as purported assignee of CitiCapital, commenced litigation against the City and its attorneys in connection with the Master Lease. On January 29, 2014, the parties reached a mediated settlement agreement, which called for a payment of $10.5 million to Citibank, along with some additional compensation as the settlement was perfected. That payment consisted of amounts already held in escrow by the court, monthly payments from BT during the pendency of the settlement, $1.47 million from the City’s attorneys, $500,000 from insurance, about $1.3 million from the City, and about $6 million in financing (described below). The settlement was contingent on approval by the Public Service Board of the new financing arrangement and closing on the financing.
The Public Service Board approved the financing arrangement on November 3, 2014. It then granted de minimis regulation of Blue Water Holdings, LLC, a Vermont limited liability company (BWH) and continued the City’s responsibility to operate BT under its Certificate of Public Good on December 18, 2014. Following that decision, the financing arrangement closed resulting in final settlement and dismissal of the lawsuit on January 2, 2015.
The financing arrangement is designed as a bridge to an eventual arm’s-length sale of the BT system, so is intended as a limited-time arrangement. At the closing, the City transferred all of the assets of BT to BWH, and then leased those assets back from BWH so that the City continues to operate BT. In return, BWH provided $6,000,000 to complete the settlement of the Citibank lawsuit. The parties entered into a Lease Agreement and a Management and Sale Agreement that govern the continuing operation of BT with Dorman & Fawcett as its financial manager and provides for the eventual sale of the BT system to a qualified purchaser. If the system is sold within 36 months, the City receives 50% of the net sales proceeds, with the percentage diminishing incrementally in stages to 10% over the following years after such initial 36 month period. As part of the settlement with Citibank, 50% of the City’s proceeds is then payable to Citibank. The financial manager’s fees are deferred until a sale occurs.
19 Winooski Valley Park District
The Winooski Valley Park District was formed in 1967 to conserve natural areas and provide recreation in the Winooski River Valley. Approximately one quarter of the District’s land is located within the City of Burlington.
Solid Waste
The City’s solid waste program consisted of landfill operations and recycling until December, 1992. At that point, these functions were transferred to the Chittenden Solid Waste District. The lined landfill which had operated in conjunction with five other communities was then closed. Landfill post closure costs are being funded by wastewater revenues.
Community Amenities
The City is regularly recognized in nationally published periodicals as one of the best places to live and receives frequent awards from these national publications.
The City’s location, economic climate, and abundance of community resources contributed to its award as the most livable city in America for cities of less than 100,000 people by the U.S. Conference of Mayors in 1989. Located between the highest section of the Green Mountains and the widest part of Lake Champlain, the City of Burlington enjoys superb scenery and outstanding year-round recreational opportunities.
In 2008, the City was named America’s healthiest city according to a report from the U.S. Centers for Disease Control and Prevention.
In May 2010, the City was named “prettiest town in America” and “one of the best cities for new jobs this spring” by Forbes.com.
In June 2010, Kiplinger’s recognized Burlington as “one of the 10 best cities in the United States for the decade.”
In December 2010, the City received a Home Depot Foundation Award of “Excellence for Sustainable Community Development.”
In March 2011, Gallup-Healthways Poll listed the City as #1 of the top 10 small cities for well-being.
In October 2011, Livability.com Magazine listed the City as #3 in its top 10 downtowns ranking.
In 2012, Gallup-Healthways Poll ranked the City #3 of the top 10 cities in the nation for well-being.
Cheapflights.com ranked the Burlington International Airport 4th in the United States for airport affordability based on August 2013 prices. The Airport is leading the industry with its continued amenity upgrades, such as the Mamava nursing mothers’ pod, green roof which includes solar panels and a garden, as well as free wifi and convenient access.
In Kiplinger’s September 2013 issue, the City ranked #2 on their “Great Places to Live” list.
In August 2014, the City was ranked #10 among top 12 college towns for commuting by The SpareFoot Blog.
In 2015, Men’s Health Magazine named the City as “Top 10 Places to Live Now.”
Cultural activities abound and are encouraged by the participation of businesses, educational institutions, and government. Several theaters for the performing arts, theater troupes, museums, fairs, and festivals fill the City’s cultural calendar, while Burlington City Arts, a City Department, provides a well-known gallery for the display of contemporary art, as well as events including music, film, and performance.
20 The University of Vermont Medical Center is the state’s academic medical center and serves approximately one million people in Vermont and New York. UVM Medical Center includes three founding organizations – Medical Center Hospital of Vermont, Fanny Allen Hospital, and University Health Center – and the UVM College of Medicine. The Vermont Regional Cancer Center and the Vermont-New Hampshire Regional Red Cross Blood Center are also located in Greater Burlington.
Education
Burlington Schools
The school system of the City consists of one senior high school, two middle schools and six elementary schools. There are also three parochial elementary schools and one parochial secondary school in Burlington. For the 2015/16 academic year, there are approximately 891 public school employees plus a variable number of seasonal or part-time employees. The public school system prepares its own budget and authorizes its own expenditures. The City issues debt secured by a dedicated tax to support its public school system. Enrollment figures for Burlington Public Schools as of September of each of the last ten years are presented in Table 1.
Table 1 Burlington Public School District Enrollment
Elementary Secondary Schools(1) Schools
2006/07 2,121 1,737 2007/08 2,229 1,708 2008/09 2,178 1,759 2009/10 2,210 1,585 2010/11 1,792 1,890 2011/12 2,051 1,870 2012/13 2,158 1,859 2013/14 2,076 1,864 2014/15 2,411 1,562 2015/16 2,408 1,597
(1) Includes students enrolled in preschool partner programs.
Higher Education
The graduation rate for Burlington High School for 2013-2014 (the most recent year for which data is available) was 83.39%. In 2015, 60% of Burlington High School’s 248 graduating seniors went on to four-year colleges and another 18% went on to two-year colleges. The University of Vermont, Champlain College, Burlington College, and St. Michael’s College offer continuing education for day, evening and weekend programs. The Vermont Technical College is also located in nearby Randolph. The approximate enrollment of area colleges is presented below:
Table 2 University Undergraduate Full time Student Enrollment (as per current data from each institution or its website)
Institution Enrollment University of Vermont 11,329 St. Michael’s College 2,750 Champlain College 2,000 Vermont Technical College 1,658 Burlington College 225
21 Overlapping Governmental Units
Governmental entities which overlap the City of Burlington but which are not under the authority of the City Council are Chittenden County, the Chittenden County Transportation Agency, the Chittenden Solid Waste District and the Winooski Valley Park District.
Chittenden County
Chittenden County is primarily responsible for the operation of the court system and the sheriff’s department for the County.
Chittenden County Transportation Agency (CCTA)
The Chittenden County Transportation Agency operates the public transit system within the County. The CCTA is funded through rider fees, state and federal funding programs and contributions from underlying governmental units.
The charter of CCTA authorizes CCTA to borrow money. The obligation to repay such borrowing is the joint and several obligation of the CCTA and each member municipality of CCTA, which obligation is allocated among such member municipalities as determined by CCTA’s annual budget; provided that, the formula for such allocation may only be changed by CCTA with the consent of at least 75% of its member municipalities.
Chittenden Solid Waste District (CSWD)
The Chittenden Solid Waste District (CSWD) is a union municipal district organized and established under Vermont law in 1987. The District’s overall purpose is to manage solid waste generated by CSWD member municipalities and their residents. CSWD serves a population of approximately 157,000 consisting of the Cities of Burlington, South Burlington, and Winooski and the Towns of Bolton, Charlotte, Colchester, Essex, Hinesburg, Huntington, Jericho, Milton, Richmond, St. George, Shelburne, Underhill, Westford, Williston and the Village of Essex Junction.
CSWD commenced operation of the Interim Phase III Landfill on December 22, 1992. This landfill reached capacity and was closed on August 19, 1995. CSWD has reserved funds for the estimated costs of all necessary closure and post-closure activities for such landfill. While CSWD continues to pursue permitting of additional landfill sites, municipal solid waste is transported to privately owned waste disposal facilities.
A public/private partnership, the Materials Recovery Facility (MRF), located in Williston, opened in April 1993. The MRF is owned by CSWD and operated by a private business. This facility is capable of accepting commingled recyclable materials for sorting and baling prior to shipping to markets. Proceeds from the sale of recycled materials defray a portion of the operating costs of the facility.
CSWD owns and operates the Hazardous Waste Depot in Burlington and The Rover. The Rover is a mobile household hazardous waste collection unit that travels around Chittenden County between the months of April and October. CSWD’s Unregulated Hazardous Waste Program has been nationally recognized as one of the most cost effective programs that collects hazardous waste materials from households and businesses.
CSWD owns and operates seven Drop-Off Centers located throughout Chittenden County. The Drop-off Centers are intended to be self-supporting and accept solid waste generated by households and small businesses from within Chittenden County.
CSWD processes a variety of special waste materials. The Wood and Yard Waste Depot accepts organic materials. The Intervale Compost Project, a partnership between the non-profit Intervale Foundation and CSWD, diverts compostable materials from the landfill waste stream and redirects it to the composting facility located in the Intervale area of Burlington.
The CSWD Charter provides that, should anticipated user fees and revenues from CSWD services and facilities not be sufficient to pay for any obligations or liabilities of CSWD, each member municipality of CSWD shall be assessed a percentage of the sum of CSWD obligations and liabilities equal to the ratio which the solid waste
22 generated by such member municipality bears to the total solid waste generated within the Chittenden Solid Waste District. The board of commissioners of CSWD may annually determine the percentage of solid waste generation attributed to each member municipality of CSWD, which determination shall be based on waste generation information for the most recent 12-month period for which information is available. The amount of solid waste generation allocated to the City may vary from time to time. CSWD may also incur short term indebtedness or, with a vote of the voters within the Chittenden Solid Waste District, bonded indebtedness for capital projects. The amount of such debt service shall be allocated as a joint obligation of the City and the other member municipalities of CSWD based upon such ratio.
DEBT STRUCTURE
Debt Summary
Table 3 presents a summary of the City’s outstanding debt as of June 30 for the last ten years.
Table 3 Historical Summary of Outstanding Debt
General Obligation Bonds Certificates of Participation and June 30 General Enterprise Revenue Bonds Capital Lease Debt 2006 $15,790,000 $26,921,359 $122,760,000 $39,731,015 2007 18,762,305 26,706,009 114,315,000 40,493,825 2008 18,067,175 29,907,217 105,440,000 49,120,000 2009 15,897,809 49,820,434 96,125,000 48,353,667 2010 20,757,499 43,948,084 108,637,954 50,511,857 2011 30,753,333 42,413,105 93,648,092 15,431,790(1) 2012 37,605,000 41,385,000 95,204,432 14,151,866 2013 51,505,000 44,685,000 94,863,082 12,253,572 2014 53,150,000 45,810,000 85,630,970 10,753,739 2015 55,092,130 46,770,714 85,117,803 7,840,000
(1) Reflects the termination of the City’s lease for the Burlington Telecom assets with CitiCapital.
Source: Compiled from annual audited financial statements.
The City entered into a Lease Purchase Agreement with CitiCapital for the leasing of equipment used for the Burlington Telecom (BT) system. The lease payments were subject to annual appropriation. The lease agreement terminated in accordance with its terms when the City Council did not appropriate moneys to make payments under the lease in Fiscal Year 2011. See “City Enterprise – Burlington Telecom” and “LITIGATION” for more information concerning BT.
Authorization of Direct Debt
Pursuant to the City Charter, the City’s general obligation debt is generally authorized by a two-thirds vote of the legal voters in the City or, for school purposes, by a majority of the electorate. Urban Renewal Debt is authorized pursuant to provisions of the Vermont Statutes, which authorization generally provides for general obligation debt to be issued for urban renewal projects by a majority vote. Revenue debt is authorized by a majority vote. Tax increment financing debt is also authorized by a majority vote. The City Charter also authorizes the City to borrow in anticipation of taxes an amount not exceeding during any quarter of any fiscal year twenty-five (25%) percent of the annual tax assessment.
23 The City Charter allows the City Council to pledge the credit of the City by temporary loans in anticipation of the receipt of revenue from the airport department, or the traffic division, wastewater or water divisions of the public works department during any fiscal year. The City issued a Grant Anticipation Note in Fiscal Year 2016 for the Airport Department in an amount of $7,000,000, which has a current maturity date of September 20, 2016.
The City Charter further provides that the City Council may authorize the pledging of the credit of the City by temporary loans in anticipation of the receipt of revenue from the electric department in an aggregate amount not to exceed $5,000,000 and for up to a two year period. The City has established a $5,000,000 revenue anticipation line of credit for the electric department, which matures March 30, 2017. The City has currently not drawn any funds from such line of credit.
For capital improvements of the City during any fiscal year, an amount not to exceed $2,000,000 is authorized for both capital improvements for the City in general, an amount not to exceed $2,000,000 is authorized for the City’s school department and an amount not to exceed $3,000,000 is authorized for the City’s electric department, without requiring a vote of the legal voters of the City pursuant to the City Charter.
The City issued a Tax Anticipation Note (TAN) under a drawdown line of credit in the amount of $10,000,000, $9,000,000, and $5,000,000 to finance working capital in anticipation of the receipt of tax revenues for fiscal years 2014, 2015, and 2016 respectively. The City has not drawn on the TANs in the past three years.
In July 2015 the City established a $5,000,000 revolving tax anticipation line of credit with KeyBank National Association. The proceeds of the line of credit shall be used solely as a short-term financing in anticipation of the collection of taxes assessed upon the entire grand list of the City and other revenues of the City for the fiscal year ending June 30, 2016. The line of credit constitutes a general obligation of the City that is secured by the full faith and credit of the City.
Debt Limit
The debt limit provided by Vermont law is ten times the amount of the last Grand List, or approximately 10% of the assessed value of real and personal property in the City. Tax anticipation bonds and most revenue-supported debt are outside the limit. A computation of the City’s general obligation borrowing limit is presented below.
Table 4 Debt Limit Computation (June 30, 2015)
June 30, 2015 Computation of Borrowing Capacity – Debt Limit(1) (10% of $3,778,550,520) $377,855,052 Less: Outstanding Bonds and Bonds Subject to Limit 55,092,130 Net Borrowing Capacity (85.4%) $322,762,922
(1) The Grand List is equal to 1% of the assessed value of property in the City after deduction of the Veteran’s exemption.
Authorized but Unissued Debt
General Obligation Debt
In November 2012, the City voters approved the issuance of up to $6,050,000 of general obligation bonds or notes in order to finance public improvements that serve the City’s Waterfront Tax Increment Financing (TIF) district, specifically for the Waterfront Access North Project and for Bike Path improvements. It is expected that tax increments from properties within the TIF district shall be pledged and appropriated for the payment of principal and interest on any bonds or notes issued for such purpose.
In July 2014, the City voters approved the issuance of $7,800,000 of special obligation tax increment financing bonds in order to finance public improvements that serve the City’s Waterfront Tax Increment Financing (TIF)
24 district. It is expected that tax increments from properties within the TIF district shall be pledged and appropriated for the payment of principal and interest on any bonds or notes issued for such purpose. In the event that the TIF revenues are insufficient, the City’s full faith and credit remains liable.
General Obligation Long-Term Debt
The following table summarizes the City’s general obligation debt outstanding as of March 1, 2016. The City issues general obligation debt paid from two sources: tax levies and enterprise fund revenues. A portion of the City’s general obligation debt is issued from certain enterprises, such as the electric department and the water department, and is expected to be repaid from the associated enterprise fund revenues.
Table 5 General Obligation Long-Term Debt by Issue
Principal Principal Maturity Maturities Outstanding Issue Dated Interest Rate Date Original Issue 3/1/2016 G.O. Bonds, Series A 7/15/2002 4.250%-4.75% 9/1/2022 $ 1,610,000 $ --(1) G.O. Bonds, Series A 4/1/2003 4.00% 11/1/2018 2,500,000 --(1) G.O. Refunding Bonds, Series B 7/15/2004 3.80% 12/1/2016 3,410,000 275,000 G.O. Bonds, Series A 6/28/2005 3.60%-4.20% 11/1/2025 1,250,000 --(1) G.O. Bonds, Series B 7/6/2005 3.50%-4.20% 11/1/2025 2,750,000 --(1) G.O. Bonds, Series A 10/10/2006 3.75%-4.00% 11/1/2026 6,365,000 295,000(2) G.O. Bonds, Series A 12/20/2007 3.75%-4.25% 11/1/2027 2,750,000 250,000(3) G.O. Bonds 4/20/2009 3.00%-4.375% 11/1/2029 12,750,000 1,670,000(4) G.O. Bonds 4/20/2009 4.125%-6.00% 11/1/2029 8,250,000 6,600,000 G.O. Bonds, Series C 8/18/2009 2.50%-4.125% 11/1/2029 19,985,000 15,295,000 G.O. Bonds, Series D 8/18/2009 4.40%-5.60% 11/1/2029 4,615,000 3,690,000 G.O. Bonds, Series A (QSCBs) 7/21/2010 6.50% 11/1/2026 9,700,000 9,700,000 G.O. Bonds, Series B (QZABs) 7/21/2010 6.50% 11/1/2026 2,000,000 2,000,000 G.O. Bonds 8/8/2011 3.00%-4.75% 11/1/2031 6,575,000 5,650,000 G.O. Bonds 8/25/2011 3.00%-4.75% 11/1/2031 4,000,000 3,420,000 G.O. Bonds 10/10/2012 5.00% 11/1/2032 10,000,000 9,070,000 G.O. Bonds 10/10/2012 6.00% 11/1/2032 1,250,000 1,145,000 G.O. Bonds (Taxable) 4/25/2013 3.50%-5.25% 11/1/2028 9,000,000 7,960,000 G.O. Bonds 9/19/2013 5.00%-6.75% 11/1/2033 7,000,000 4,775,000(5) G.O. Bonds 7/31/2014 0.913%-3.993% 11/15/2034 7,000,000 6,650,000 G.O. Bonds 12/4/2015 5.00% 11/1/2035 7,000,000 7,000,000 G.O. Refunding Bonds 4/__/2016 2016A 11/1/2033 16,930,000(6) 16,930,000 (6)
Total $102,375,000 (1) To be refunded by the Series 2016A Bonds (2) Maturities 2017-2026 to be refunded by the Series 2016A Bonds (3) Maturities 2018-2027 to be refunded by the Series 2016A Bonds (4) Maturities 2019-2029 to be refunded by the Series 2016A Bonds (5) Maturities 2017-2023 to be refunded by the Series 2016A Bonds (6) Preliminary, subject to change
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25 Future general obligation debt requirements as of March 1, 2016 are presented in the following table.
Table 6 Future General Obligation Payments as of March 1, 2016 (Principal and Interest)
Fiscal Year Levy Revenue Series 2016A (June 30) Supported Supported Bonds Total 2016 $ 1,151,128 $ 697,495 2017 4,851,301 3,530,283 2018 4,252,338 3,359,009 2019 4,161,360 3,331,521 2020 3,997,391 2,748,503 2021 3,988,625 2,739,845 2022 3,974,511 2,746,015 2023 3,974,794 2,752,082 2024 3,955,236 2,752,755 2025 4,051,463 2,777,258 2026 4,032,803 2,779,359 2027 15,328,051 2,793,626 2028 3,247,279 2,791,241 2029 3,235,392 2,817,003 2030 2,355,122 2,814,375 2031 1,847,546 786,175 2032 1,831,288 781,350 2033 1,187,071 638,275 2034 687,876 237,750 2035 669,738 237,000 2036 317,750 235,750
Total $ 73,098,062 $ 44,346,669
Certificates of Participation
The City has entered into capital leases for property and equipment for various purposes. The following table summarizes the City’s certificates of participation outstanding as of March 1, 2016.
Table 7 Certificates of Participation by Issue
Principal Principal Maturity Maturities Outstanding Issue Dated Interest Rate Date Original Issue March 1, 2016(1) COPs, Parking Facility Project 01/01/99 4.75%-4.80% 12/01/2018 $ 5,500,000 $ --(2) COPs, Series 2000 06/01/00 5.50%-5.75% 12/01/2020 4,100,000 --(3) COPs, Parking Facility Projects 06/01/05 4.25%-4.375% 05/01/2025 7,870,000 415,000(2) COPs, Series 2016A 04/__/16 Series 2016A 12/01/2024 5,160,000(4) 5,160,000(4) COPs, Series 2016B 04/__/16 Series 2016B 12/01/2020 1,450,000(4) 1,450,000(4) Subtotal $7,025,000(4)
(1) Reflects the termination of the City’s lease for the Burlington Telecom assets with CitiCapital. (2) To be refunded by the Series 2016A Certificates of Participation, which are expected to be executed and delivered contemporaneously with the Bonds. (3) To be refunded by the Series 2016B Certificate of Participation, which are expected to be executed and delivered contemporaneously with the Bonds. (4) Preliminary, subject to change
26 Future minimum payments under capital leases as of March 1, 2016 are presented in the table below.
Table 8 Future Lease Payments as of March 1, 2016 (Principal and Interest)
Total Total Enterprise Total Governmental/ Governmental Enterprise 2016 $ 1,286,522 $ 776,873 $ 509,649 2017 1,068,310 767,991 300,319 2018 902,537 753,619 148,918 2019 897,366 749,853 147,513 2020 785,402 738,742 46,660 Thereafter 8,098,713 8,098,713 -- $ 13,038,850 $ 11,885,791 $ 1,153,059
Revenue Debt
Table 9 presents gross revenue debt of the City’s enterprise funds which were outstanding on March 1, 2016. Not included are Revenue Bonds of the Water Division of the City’s Public Works Department and the Electric Department which have been advance refunded, and for which funds for the payment of principal and interest have been placed in escrow.
Table 9 Revenue Debt
Principal Original Maturity Outstanding Issue Dated Amount Interest Rate Date 3/1/2016 Electric Revenue Debt Series A Revenue Bonds 10/13/2011 $ 8,775,000 4.375%-5.75% 7/1/2031 $ 8,430,000 Series B Revenue Bonds 10/13/2011 3,135,000 7.25%-8.25% 7/1/2031 3,040,000 Series A Revenue Bonds 8/28/2014 12,000,000 2.00%-5.00% 7/1/2034 11,565,000 Series B Refunding Revenue Bonds 8/28/2014 5,820,000 3.00%-4.00% 7/1/2024 5,310,000 Total Electric Revenue Debt $28,345,000
Wastewater Revenue Debt State Wastewater Loan 7/1/2000 $ 1,614,835 0.00% 8/1/2027 $ 1,044,000 State Wastewater Loan 9/6/2006 1,650,000 0.00% 5/1/2027 993,258 State Wastewater Loan 2/9/2010 662,000 0.00% 10/1/2031 549,704 Wastewater Revenue Refunding Bond 1/7/2014 14,645,620 1.033%-4.723% 11/15/2033 13,181,058 Total Wastewater Revenue Debt $15,768,020
Airport Revenue Debt Airport, Series 2012A 12/6/2012 $ 17,670,000 4.00-5.00% 7/1/2028 $17,670,000 Airport, Series 2012B 12/6/2012 7,130,000 3.50% 7/1/2018 4,085,000 Airport, Series 2014A 12/17/2014 15,660,000 4.00%-5.00% 7/1/2030 15,285,000 Total Airport Revenue Debt $37,040,000
Total All Revenue Debt $81,153,020
27 Table 10 presents the annual principal and interest outstanding for the City’s Revenue Debt as of March 1, 2016.
Table 10 Revenue Debt
Fiscal Electric Wastewater Airport Year Principal & Interest Principal & Interest Principal & Interest (June 30) Total Total(1) Total 2016 $ -- $ 299,138 $ -- 2017 2,666,238 1,361,560 3,646,388 2018 2,662,519 1,356,372 3,661,838 2019 2,654,456 1,348,365 3,660,063 2020 2,661,781 1,337,247 3,609,675 2021 2,666,431 1,322,873 3,604,675 2022 2,664,756 1,305,538 3,608,800 2023 2,653,681 1,286,158 3,606,675 2024 2,662,525 1,265,285 3,602,075 2025 2,653,431 1,243,103 3,610,275 2026 1,976,006 1,219,760 3,607,850 2027 1,972,725 1,195,477 3,604,775 2028 1,976,800 1,076,555 3,600,850 2029 1,975,156 950,201 3,590,950 2030 1,972,941 919,879 1,438,625 2031 1,973,697 888,802 1,440,125 2032 1,976,756 856,642 -- 2033 856,100 783,500 -- 2034 854,500 749,574 -- 2035 851,700 -- -- Total $40,332,200 $18,178,678 $49,893,638
(1) Does not include $260,000 Revenue Note with the Vermont State Revolving Loan Fund for the City’s Water Division which is not fully drawn.
In September 2015 the City established a $7,000,000 grant anticipation note payable from FAA grants for various airport improvement projects. The grants for such projects are pledged to payment of such line of credit. Such line of credit matures September 20, 2016.
In December 2015, the City established a $2,200,000 Parking Revenue non-revolving line of credit payable from the net revenues of the City’s municipal parking system, excluding the parking lots at the City’s airports. Such revenue debt is not included in the table 10. The Parking Revenue debt matures on December 3, 2016.
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28 Other Notes Payable
The principal amounts of bond anticipation notes and other notes payable outstanding on March 1, 2016 are presented below. Table 11 Other Notes Payable
Maturity Original Principal Outstanding Other Notes Payable Issue Date Interest Rate Date Amount 3/1/2016 HUD Section 108-US Guaranteed Notes 4/28/1999 6.05-6.20% 8/1/2017 $ 1,930,000 $ 220,000 HUD Section 108-US Guaranteed Notes 2/12/2003 3.25% 8/1/2022 3,602,000 495,000 HUD Section 108-US Guaranteed Notes 1/23/2009 variable 8/1/2018 1,827,000 800,000 Storm Water Loan 2/9/2010 0.00% 10/1/2031 1,204,000 325,704 Special Obligation TIF Bonds(1) 7/31/2014 0.513%-4.283% 11/15/2024 7,800,000 7,020,000 HUD Section 108-US Guaranteed Notes 9/11/2014 5.00% 9/11/2024 2,091,000 1,900,909
Total $10,761,613
(1) In the event that the TIF revenues are insufficient, the City’s full faith and credit remains liable.
Waterfront TIF District
In 1996, the City established a Tax Increment Financing (TIF) district known as the "Waterfront TIF District" along the central and northern end of the Lake Champlain waterfront in the City. The district was established to promote redevelopment and reclaim the post-industrial nearby waterfront area focusing on investment in public infrastructure and facilities that support economic development and public access. In 1997, the City expanded the Waterfront TIF District with a sliver of property extending from the lakefront to Church Street along Cherry Street to facilitate increasing the housing supply and parking garage additions to help stimulate a market for commercial, retail stores and business offices.
Under state law, when a municipality creates a tax increment district, the existing property values for properties within the district are recorded. This is called the Original Taxable Value (OTV). Revenues generated based upon the OTV will continue to go to the taxing entities (the City for its municipal share and the State for the portion attributable to the state education property tax). As property values increase within the tax increment financing district, the tax revenues generated increase. The tax increment is the additional new property taxes generated within the TIF district above the OTV. A portion of the incremental education property tax and the municipal property tax generated are set aside by the City and used to pay debt service on TIF related debt and also to pay related costs associated with the TIF District. The TIF District allows the City to use a portion of the incremental tax revenues derived from growth in the assessed value of properties within the TIF District to pay for the costs of improvements and infrastructure that serve the TIF district, provide for employment opportunities, improve and broaden the tax base, or enhance the general economic vitality of the municipality, the region, or the State.
In 2012, the voters of the City authorized the issuance of general obligation bonds or notes for the Waterfront TIF District of up to $6,050,000 in order to finance public improvements that serve the Waterfront TIF District. In 2014, through the City's Public Investment Action Plan (PIAP), and solicitation of proposals for infrastructure improvements on the waterfront, the voters of the City authorized an additional amount of general obligation bonds and notes of up to $9,600,000.
The purpose of these Waterfront TIF district investments is designed to further a number of the City’s waterfront goals, without impacting municipal property tax rates: • Strengthen existing waterfront resources, including investments in the City’s waterfront; • Resolve the use of the abandoned Moran site, a former electric generating facility; • Increase public access and use of the waterfront and Lake Champlain; • Protect Lake Champlain and continue the City’s efforts in improving water quality; and • Leverage additional investment designed to further economic opportunity and grow City revenues.
29 Through June 2014, the value of the property in the Waterfront TIF District has increased from the 1997 OTV level by approximately $94,000,000, generating, over the period of time since the district was created, about $16,400,000 in incremental revenues as estimated by the State of Vermont Department of Taxes. Under state law, a portion of such incremental property tax revenue is paid to the State Education Fund and the remainder is to be used by the City to pay debt service on TIF related indebtedness and related costs.
The City has incurred indebtedness under HUD Section 108 Loans, certificates of participation and lease financing for the TIF District. In July 2014, the City incurred $7,800,000 of special obligation tax increment bonded debt intended to be repaid from the Waterfront TIF District tax incremental revenues. While such bonds and notes are expected to be fully repaid with the available tax increment revenues, the City remains liable for payment in the event such incremental tax revenues are not sufficient to pay debt service.
Under current law, the use of such tax increment funds for the TIF related indebtedness is set to expire in 2025.
Downtown TIF District
In 2011, the City Council of Burlington created a separate Downtown TIF District. As required by state law, the Vermont Economic Progress Council (VEPC) approved the Downtown TIF District Plan. In March, 2015, the voters of the City authorized the City Council to pledge the credit of the City to secure indebtedness or make direct payments for the purpose of funding one or more public improvements and related costs attributable to projects serving the Downtown Tax Increment Financing (TIF) District, in a principal amount not to exceed $10,000,000. The purpose of such financing is for the following projects:
(a) Main Street Streetscape Upgrades, to include streetscape, stormwater, utility, lighting and transportation upgrades;
(b) St. Paul Street Streetscape Upgrades, to include streetscape, stormwater, utility, lighting and transportation upgrades;
(c) Brownfields Remediation/Brown’s Court, relating to preparation of site for redevelopment;
(d) Marketplace Garage Improvements and Repair, as a supplement to other funding for this project; and
(e) Related Costs for the creation, implementation and administration of the Downtown TIF District.
The City has not yet issued any notes or bonds for such Downtown TIF District. Under current law, the City may retain up to 75% of the incremental property tax revenues to pay for TIF infrastructure debt and related costs for a period of 20 years beginning with the year in which the first Downtown TIF District debt is incurred. In March 2016, the City activated the Downtown TIF District when it made an inter-fund loan in the amount of $200,000 to the department of Public Works to fund some improvements within the Downtown TIF District.
Overlapping Debt
In addition to the indebtedness described above, the City is indirectly liable for a portion of the debt and other expenses incurred by Chittenden County and the Chittenden County Transit Authority (CCTA), the Chittenden Solid Waste District and the Winooski Valley Park District. See “Overlapping Governmental Units” for additional information.
30 FINANCIAL INFORMATION
Budget Process
The budget process in the City of Burlington normally commences with a request by the Mayor that all Departments submit, in writing, a detailed estimate of the appropriations required for the efficient and proper conduct of their respective Departments during the next fiscal year. On or before the fifteenth day of June, the Mayor must submit to the City Council a copy of the Budget for the ensuing fiscal year which contains a clear general summary of its contents, and in detail, all estimated income, the proposed property tax levy and all proposed expenditures, including debt service.
The City Council shall adopt the budget by resolution no later than June 30 of each year. The Council may reduce the submitted appropriations by a majority vote, but may not increase the appropriations without an approving two- thirds vote of the Council. The City has never failed to adopt a budget.
Table 12 General Fund Budget
2015 2016
PROJECTED REVENUES: General Administration & Taxes(1) $ 41,225,256 $ 45,271,903 Safety Services 6,277,694 5,531,650 Culture & Recreation 4,577,719 4,891,351 Public Works 4,827,537 4,685,706 Grants & Capital Projects 3,132,775 4,508,161 Total Projected Revenues $ 60,040,981 $ 64,888,771
PROJECTED EXPENDITURES: General Administration & Taxes(1) $ 13,597,101 $ 15,540,340 Safety Services 25,571,250 25,295,763 Culture & Recreation 10,437,923 10,821,945 Public Works Function 7,422,677 7,716,815 Operating Transfers Out Subtotal Operating Expenditures 57,028,951 59,374,863 Infrastructure & Capital Improvements 3,132,775 4,508,161 Total Projected Expenditures $ 60,161,726 $ 63,883,024
(1) General Administration is composed of A. General Departments (i.e. Clerk, Treasurer, etc.) B. Administrative Expense consisting of employee benefits (health, dental, life insurance, etc.) C. General Governmental consisting of payments for municipal transit service, county taxes etc. and D. Operating Transfers to the Retirement, Debt Service, Housing Trust, CEDO, and Marketplace Funds.
Source: City of Burlington.
31 Financial Reports
The City’s financial statements have been audited by an independent accountant. The City of Burlington financial statement was audited by Melanson & Heath. The Burlington School District was audited by R &H Smith, LLP. The Burlington Electric Department was audited by KPMG. See Appendix A for the audited financial statements for the fiscal year ended June 30, 2015.
Results of Operations
Statements of revenues and expenditures of the General Fund and of the Special Revenue Funds of the City have been compiled from the City’s financial statements. They have been organized in such a manner as to facilitate year-to-year comparison. Tables 13 and 14 present statements of revenues and expenditures of the City’s General Fund and the City’s School Fund, respectively, for fiscal years 2011 through 2015.
Table 13 Combined Statement of Revenues and Expenditures and Changes in Fund Balance General Fund (For the Years Ended June 30)
2011 2012 2013 2014 2015(1) Revenues: Taxes $31,390,109 $31,848,679 $28,873,069 $30,430,765 $32,911,176 Payments in Lieu of Taxes 2,115,482 2,068,995 2,168,816 2,257,824 2,395,762 Licenses and Permits 5,133,300 5,046,372 3,963,253 4,247,198 3,739,704 Intergovernmental Revenues 1,877,142 1,618,401 2,107,986 2,249,370 2,173,036 Charges for Services 8,531,502 9,439,689 12,710,746 14,219,394 14,811,677 Fines and Forfeits 1,609,974 1,572,016 ------Investment Income 877,829 631,422 25,627 13,464 93,192 Miscellaneous Revenues-Other 2,450,862 2,634,712 106,122 77,980 153,629 Total Revenues $53,986,200 $54,860,286 $49,955,619 $53,495,995 $56,278,176 Expenditures: General Administration $12,944,358 $13,311,627 $13,694,272 $13,449,222 $10,916,573 Safety Services 21,075,037 21,768,729 23,500,466 22,548,367 24,650,066 Public Works 2,749,601 3,172,083 1,058,061 2,307,826 4,093,595 Capital Outlay 4,840,253 4,548,455 ------Culture and Recreation 8,148,833 8,263,436 7,337,775 8,852,580 9,727,811 Community Development ------2,316 Debt Service 4,108,219 3,250,690 3,092,991 3,428,819 3,628,566 Total Expenditures $53,866,301 $54,315,020 $48,683,565 $50,586,814 $53,018,927 Excess of Revenues Over (Under) Expenditures $ 119,899 $ 545,266 $ 1,272,054 $ 2,909,181 $ 3,259,249 Other Financing Sources (Uses): Operating Transfers In $ 219,747 $ 272,226 $ 23,750 $ 35,688 $ 151,768 Operating Transfers Out (1,965,602) (1,589,225) (641,475) (1,439,857) (635,911) Proceeds from Long-Term Debt 5,015,000 3,092,703 9,139,140 1,000,000 -- Proceeds from Capital Lease ------483,768 Net Premium/(Discount) on Debt -- -- 213,165 -- -- Other Financing Sources (Uses) $ 3,269,145 $ 1,775,704 $ 8,734,580 $ (404,169) $ (375) Special item ------(16,936,492) -- Excess of Revenues and Other Sources Over (Under) Expenditures and Other Uses $ 3,389,044 $ 2,320,970 $10,006,634 $(14,431,480) $ 3,258,874 Fund Balance Beginning 9,915,766 13,304,810 9,417,469 19,424,103 4,992,623 Fund Balance End of Year $13,304,810 $15,625,780 $19,424,103 $ 4,992,623 $ 8,251,497
(1) The Notes to the Financial Statements for Fiscal Year 2015 contained in Appendix A herein are an integral part of this summary. Source: Compiled from the City’s audited financial statements.
32 Table 14 Combined Statement of Revenues and Expenditures and Changes in Fund Balance School General Fund (For the Years Ended June 30)
2011 2012 2013 2014 2015(1) Revenues: Taxes $ -- $ -- $ -- $ -- $ -- Payments in Lieu of Taxes 1,322,698 1,322,723 1,365,420 -- -- General State Support ------55,356,925 Intergovernmental Revenues 62,728,215 63,645,258 61,611,987 69,886,591 15,884,236 Charges for Services 3,097,778 3,112,442 2,650,479 959,733 560,191 Licenses and Permits ------Investment Income 12,968 5,513 15,540 606,783 584,344 Other Revenue 1,584,993 2,582,456 103,850 291,803 1,335,473 Total Revenues $68,746,652 $70,668,392 $65,747,276 $71,744,910 $73,721,169 Expenditures: Education $66,139,968 $70,387,936 $65,412,426 $66,407,815 $67,609,977 Capital Outlay ------Debt Service 1,221,565 1,279,097 1,405,871 $ 2,324,354 $ 2,397,093 Total Expenditures $67,361,533 $71,667,033 $66,818,297 $68,732,169 $70,007,070 Excess of Revenues Over (Under) Expenditures $ 1,385,119 $ (998,641) $ (1,071,021 $ 3,012,741 $ 3,714,099 Other Financing Sources (Uses): Operating Transfers In $ 305,038 $ 62,926 $ -- $ 1,193,306 $ -- Operating Transfers Out (209,044) (1,067,281) (825,525) (1,928,098) (638,097) Net Sources (Uses) Related to ------Bonding Other Financing Sources (Uses) $ 95,994 $(1,004,355) $ 825,525 $ (734,792) $ (638,097) Excess of Revenues and Other Sources Over (Under) Expenditures and Other Uses $ 1,481,113 $(2,002,996) $( 1,896,546) $ 2,277,949 $ 3,076,002 Fund Balance Beginning 10,158 $ 1,491,271 $ (683,999) $(2,580,545) $ (302,596) Fund Balance End of Year $ 1,491,271 $ (511,725) $ (2,580,545) $ (302,596) $ 2,773,406
(1) The Notes to the Financial Statements for Fiscal Year 2015 contained in Appendix A herein are an integral part of this summary.
Source: Compiled from the City’s audited financial statements.
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33 Table 15 Balance Sheet General Fund and School General Fund(1) (For the Year Ended June 30, 2015)
School General Fund General Fund Assets Cash & cash equivalents $ 6,546,406 $ 5,795,610 Investments 2,106,063 -- Receivables, net of allowance for uncollectibles: Property & other taxes 1,888,502 -- City of Burlington -- 107,895 Departmental & other 1,945,719 190,944 Intergovernmental 87,708 1,547,590 Due from other funds -- 850,378 Advances to other funds 1,983,605 -- Inventory 191,525 -- Prepaid expenditures 146,774 8,250 Other current assets 316,607 -- Due from component unit -- -- Total Assets $15,212,909 $8,500,667
Liabilities & Fund Balances Liabilities: Accounts payable $1,327,096 $1,679,067 Accrued payroll & benefits payable 1,043,743 -- Accrued liabilities 336,379 -- Accrued expenses -- 1,187,915 Unearned revenues 1,770,061 -- Due to other funds 107,895 2,860,279 Insurance reserve 500,000 -- Other liabilities 50,579 -- Total Liabilities $5,135,753 $5,727,261
Deferred Inflows of Resources $1,825,659 $ -- Fund Balances: Nonspendable $2,321,904 $ 8,250 Restricted 17,265 -- Committed 1,624,950 1,104,785 Unassigned 4,287,378 1,660,371
Total Fund Balances 8,251,497 2,773,406 Total Liabilities & Fund Balances $15,212,909 $8,500,667
(1) The Notes to the Financial Statements for Fiscal Year 2015 contained in Appendix A herein are an integral part of this summary.
Source: Compiled from the City’s audited financial statements.
Management Discussion
The City is a complex financial entity involving numerous enterprise funds, many revenue streams, and nearly $185 million (excluding the School District) in total expenditures. When creating budgets, the City strives to treat all stakeholders and constituencies fairly when determining how to allocate expenses and revenues. The budget consists of over 3,600 line items and shows comparisons to spending in previous years. The City has implemented a new accounting systems which has allowed the City budget and spending information to be available online and updated daily. Because of these measures, budget accuracy has and are expected to continue to improve.
34 Within the City Council-approved FY 15 Annual Financial Statements (Audit) the auditors identify a General Fund unassigned fund balance of over $4.2 million. Essentially the unassigned fund balance is the year-over-year accumulated surplus within the General Fund. In FY 14 the unassigned balance was approximately $70,000, and that was the first year that there was a positive balance since 2010. This was a positive improvement in the City’s fund balance, something that Moody’s identified as a key step before the rating agency would upgrade the City’s credit rating. In March 2016, Moody’s did upgrade the City’s credit rating for its general obligation bonds from a Baa2 rating to an A3 rating. This surplus was due to many factors. The FY 15 audit showed a “surplus”, actual revenues over actual expenditures, for all General Fund accounts totaling around $3.3 million. This surplus was primarily due to actual expenditures being below budget by almost $2.5 million and revenues coming in above budget by approximately $800,000. This positive unassigned fund balance, which is a significant step towards our achieving the Council-approved Fund Balance Policy, stabilizes city finances, allows us to make targeted investments to improve the City’s future, will be viewed favorably by credit rating agencies and investors, and provides us with a “rainy day fund” in case of emergencies or a downturn in the economy.
* The FY 15 Auditor’s Management letter, approved and accepted by the City Council, shows significant improvement over FY 14, and even more so from FY 12.
The FY 12 Management Letter listed 27 findings of which twelve were identified as a “Material Weakness”, and one was a “Significant Deficiency.
The FY 13 Management Letter listed 17 findings of which ten were identified as a “Material Weakness”, and one was a “Significant Deficiency.
The FY 14 Management Letter, listed nine findings of which four were identified as a “Material Weakness” and none listed as a “Significant Deficiency”.
The draft FY 15 Management Letter identifies four findings with two identified as a “Material Weakness”.
So, from Fiscal Year 12 to 15 the Management Letter shows a decrease of 85% in the number of findings (27 to 4), and a decrease of 85% (13 to 2) in findings identified as material or significant.
Several measures were taken to improve finances, including:
* Implementing Central Purchasing that has already reduced purchasing costs and identified possible new revenues sources such as rebates.
* Collaborating with the Human Resources Department to hire a new third party administrator for the City’s health insurance plan to reduce administrative costs and improve monitoring of expenses.
* Collaborating with all City departments’ in developing the 10-year Capital Plan to have a planned, proactive, and cost efficient approach to address long-standing city infrastructure needs.
* Implementing of Agency of Education requirement of financial fire wall between the City and the School District.
* Presenting FY 14 Audit to City Council at the earliest date in over 10 years.
* Refinancing of airport debt service that significantly reduced the airports interest payments towards its current debt.
* Achieving a clean Federal Audit report.
* Conducting, with Collaboration with City Attorney’s Office, March 2015 Town Meeting election without any significant issues even with implementation of reapportionment changes to City’s Council and Schoolboard wards.
35 * Burlington Employees Retirement System Board voting to make changes in actuary methods and funding, the result of which was to see an increase in the retirement fund’s funding level while level funding the City’s contribution amount.
The City of Burlington is in the final stages of resolving a matter with the Internal Revenue Service over the timing of remittance of tax withholdings for employees of the City’s School department and for certain City W-2 forms. The City had been making the payments of payroll taxes withheld for school district employees on behalf of the School District, which for school administrative reasons were often made one or more days after such withholdings were required to be paid to the Internal Revenue Service. Remittance of such payments to the Internal Revenue Service is now being handled directly by the school department, which the City believes will resolve the issues of making timely payments. The City has re-sent W-2 forms to the IRS in relation to that inquiry. The City expects to resolve the matter with the Internal Revenue Service waiving any interest and penalties.
PROPERTY VALUATIONS AND TAXES
Property Taxation
The principal tax of the City of Burlington is the tax on real and personal property. The tax is assessed by the City Council after the adoption of the budget for a fiscal year. Separate amounts are assessed for county taxes, city purposes, redemption of bonds, and payment of debt service, library book fund, schools, the police, street repairs, highways, parks and the retirement system.
Act 60
The Vermont General Assembly passed Act 60, also known as the Equal Educational Opportunity Act, in June 1997. The first full year of implementation of Act 60 was the 2000-2001 school year. Pursuant to Act 60, rather than funding education at the municipal level, through the assessment of a local property tax, Vermont has a statewide educational property tax. Such educational property tax revenues inure to the benefit of the State of Vermont, not the City, and are not available for debt service on the Series 2016A Bonds.
Property Valuation
The City determines property valuations as of April 1 of each year according to the law. The current base period for establishing assessments at 100% of the fair market value is April 1, 2005. Beginning with the fiscal year 2006, all residential property has been assessed at 100% of the fair market value and all nonresidential real and personal property has been assessed at 120% of the fair market value with the exceptions of farm land, land zoned RCO (recreation, conservation and open space), and regulated utilities.
For municipal taxing purposes the tax classification system described above remains in effect. The voters approved in November 1998 the imposition of a special property tax assessment of valuation on properties in a newly designated downtown district. Commercial residents of the City’s Downtown Improvement District (bounded by properties fronted on Pearl Street to the North, South Winooski Avenue to the East, Main Street from South Winooski Avenue to Battery Street and then Maple Street to the South, and Lake Champlain to the West) pay a tax of $.09 per $100 of appraised valuation of their property. This special tax assessment is devoted to the parking system. Beginning in April 1, 1998 and as a result of Act 60, personal property taxation for school purposes was eliminated. As of April 1, 1999 the 120% assessment tax classification has been eliminated on the school tax rate.
A single tax rate applies to the assessed value of all taxable real and personal property. The tax is applied to the Grand List (equal to 1% of the assessed value of the City after the deduction of the veteran’s exemption) in order to determine the tax levy. Accordingly, a tax rate of $1 on the Grand List represents $10 per $1,000 of assessed
36 valuation. Table 16 sets forth the trend in the City’s valuations for the last ten years. Table 17 presents the Grand List for the last ten years.
A City-wide reappraisal of all property was completed on April 1, 2005. In all Vermont communities, the point at which a municipality must appraise is determined by the State of Vermont. Act 60 and Act 68, which is the primary State legislation for funding public education, drives the timing of an appraisal process. This state funding mechanism, described in the Acts, speaks to the fact that public education is funded through a tax on property value and a distinction of whether the property is a homestead or non-homestead. For this reason, the State has mandated that once a municipality’s overall appraised values drop below 80% of the estimated fair market value then the municipality must conduct a reappraisal. The measure of listed appraised value to market value is expressed in the common level of appraisal (CLA). The City’s CLA for FY14 is 89.69%, FY15 is 88.15% and FY16 is 87.54%.
For the fiscal year 2015, the City has received from the State of Vermont the final total Equalized Education Property Value of $4,026,124,000, and the final Grand List total of $36,469,219. This does not include property assessment of $155,617,500 which is the 120% assessment on non-residential properties.
Table 16 Assessed and Estimated Actual Value of Taxable Property
Real Property Personal Property Total Property Fiscal Estimated Estimated Estimated Year Assessed Fair Market Assessed Fair Market Assessed Fair Market Ending Value(1) Value(2) Value(1) Value Value(1) (100%) Value 2004 $ 1,738,130,902 $ 2,259,570,173 $ 153,590,520 $ 153,590,520 $ 1,891,751,422 $ 2,413,160,693 2005 1,748,640,126 2,630,397,155 151,966,452 151,966,452 1,900,606,578 2,782,363,607 2006 (3) 3,279,767,848 3,279,767,848 128,955,204 128,955,204 3,408,723,052 3,408,723,052 2007 3,280,619,721 3,333,963,131 120,396,098 120,396,098 3,401,015,819 3,454,359,229 2008 3,300,620,527 3,534,611,830 133,175,304 133,175,304 3,433,795,831 3,667,787,134 2009 3,332,911,500 3,785,678,669 139,806,696 139,806,696 3,472,718,196 3,925,485,365 2010 3,364,949,900 3,792,774,910 140,861,850 140,861,850 3,505,811,750 3,933,636,760 2011 3,393,140,000 3,770,155,556 137,113,980 137,113,980 3,530,253,980 3,907,269,536 2012 3,431,440,600 3,825,900,000 131,700,400 131,700,400 3,563,141,000 3,957,600,400 2013 3,463,420,400 3,936,152,290 123,656,600 123,656,600 3,587,077,000 4,056,808,890 2014 3,492,997,900 3,894,523,247 124,872,230 124,872,230 3,617,870,130 4,019,395,477 2015 3,646,921,910 4,137,177,436 131,628,610 131,628,610 3,778,550,520 4,268,806,046
(1) The appraisal does not include the 120% classification portion on real non-residential property and business personal property. As of April 1, 2005, a general reappraisal updated all assessments to 100% of actual value. (2) The estimated fair market value of real property is calculated by the assessed value divided by the Common Level of Appraisal (CLA). The State Tax Department has determined the final CLA for 2015 to be 88.15%. (3) A city wide reappraisal was completed for Fiscal Year 2006.
Source: City of Burlington Assessor’s Office.
37 Table 17 Assessed Value - Real and Personal Property (120% Included)
Fiscal Real Non- Year Residential Personal Total 120% Ending Property Property Included 2004 $ 73,694,202 $ 25,598,420 $ 99,292,622 2005 85,117,021 25,327,742 110,444,763 2006 129,057,627 25,791,040 154,848,667 2007 130,131,480 24,079,219 154,210,700 2008 129,081,067 26,635,061 155,716,128 2009 130,600,288 27,961,339 158,561,627 2010 134,314,346 26,961,654 161,276,000 2011 128,272,411 26,936,700 155,209,111 2012 123,626,500 25,820,100 149,446,600 2013 125,682,854 24,242,300 149,925,154 2014 128,026,597 24,974,446 153,001,043 2015 130,374,432 25,243,068 155,617,500
Table 18 Grand List
Assessed Value Fiscal 120% With 120% Year Assessed Value Classification(1) Classification Grand List(2) 2004 $ 1,792,458,800 $ 99,292,622 $ 1,891,751,422 $ 18,917,514 2005 1,790,161,815 110,444,763 1,900,606,578 19,006,065 2006(3) 3,408,723,052 154,848,667 3,563,571,719 35,635,717 2007 3,401,015,819 154,210,700 3,555,226,519 35,552,265 2008 3,433,795,831 155,716,128 3,589,511,959 35,895,119 2009 3,472,718,196 158,561,627 3,631,279,823 36,312,798 2010 3,504,214,610 161,276,000 3,665,490,610 36,654,906 2011 3,527,823,500 155,209,111 3,683,032,611 36,830,326 2012 3,553,485,600 149,446,600 3,702,932,200 37,029,322 2013 3,577,511,000 149,925,154 3,727,436,154 37,274,361 2014 3,617,870,130 153,001,043 3,770,871,173 37,708,711 2015 3,646,921,910 155,617,500 3,802,539,410 38,025,394
(1) Nonresidential real and personal property is assessed at 120% of fair market value with certain exceptions. See “Property Valuation.” City Charter Section 81 (2) The tax rate is applied to the Grand List to determine the tax levy. The Grand List is equal to 1% of the assessed valuation. (3) A city wide reappraisal was completed for Fiscal Year 2006.
38 Table 19 Assessed Value of Real Property by Property Type(1)
2012/13 2013/2014 2014/15 Category Value % of Total Value % of Total Value % of Total Residential $2,372,845,900 68.51% $2,372,845,900 68.51% $2,391,164,100 67.84% Mobile Homes 3,405,100 0.10% 3,405,100 0.10% 3,498,600 0.10% Commercial 967,328,300 27.93% 967,328,300 27.93% 1,008,252,400 28.60% Industrial 42,938,500 1.24% 42,938,500 1.24% 42,938,500 1.22% Utilities 41,797,200 1.21% 41,797,200 1.21% 41,740,700 1.18% Farms 449,000 0.01% 449,000 0.01% 449,000 0.01% Miscellaneous 34,828,000 1.00% 34,828,000 1.00% 36,901,100 1.05% Total $3,463,592,600 100.00% $3,463,592,600 100.00% $3,524,945,200 100.00%
(1) After deduction of veteran’s exemptions.
A group of property owners owning certain rental properties in the City are appealing the tax appraisals of their properties by challenging the City’s right to make those assessments without a general city reassessment. The City is defending its tax assessments as ongoing maintenance of its grand list. The appeal was initially made to the Board of Tax Appeals, a quasi-judicial panel that hears challenges to the City tax assessor’s determinations. The panel upheld the assessment and the claimants have appealed the ruling to the Vermont Superior Court.
Tax Collections
The City of Burlington levies taxes for the City, County, School District and the Chittenden County Transportation Authority (CCTA). Tax bills are sent out in July and taxes are due quarterly on the 12th of August, November March and June. After the 12th day of the month in which a quarter’s taxes are due, a 1% penalty is levied for the first week of delinquency and thereafter a 4% penalty is levied and an additional 1% interest charge is added each month thereafter. On June 23, an additional 8% collection fee and a $1 warrant fee are charged to delinquent accounts by the City. The following table compares Burlington’s net tax collections with its gross tax levies for the fiscal years ended June 30, 2011, through June 30, 2015.
Table 20 Tax Collections
2011 2012 2013 2014 2015 Tax Rate Per $100 of Assessed Valuation $2.00 $2.03 $2.15 $2.29 $2.44 Total Property Tax Levy(1) $74,818,352 $76,089,194 $78,862,874 $83,526,157 $89,907,261 Current Levy Collected End of Each Fiscal Year(1) $74,276,290 $75,617,383 $78,330,310 $82,869,824.00 $89,275,258 % of Current Gross Tax Levy Collected 99.30% 99.40% 99.33% 99.30% 99.29% Total Collections $74,758,954 $75,968,657 $78,338,310 $83,393,681 $89,719,767 % of Current Gross Levy 99.95% 99.80% 99.33% $99.90% 99.79%
(1) Includes City, School, County and CCTA.
39 Tax Rates/Levy Limits
Taxes are applied to the Grand List (1% of assessed value) in order to determine the tax rate per $100 of assessed value. The City Charter prescribes limits on the rate of taxes assessable by the City Council for certain purposes. These limits may be exceeded in a particular year if authorized by the voters.
Other taxes, including the tax prescribed by the Charter for the payment of general obligation debt service and retirement benefits, are not subject to such limits. The City’s Charter requires the City Council to annually assess a tax upon the City’s Grand List in an amount sufficient to pay debt service on outstanding bonds of the City to the extent that funds are not otherwise available therefor.
Tax rate limits per $100 of assessed value are presented in Table 21. Table 22 presents the tax rates per $100 of assessed value for collection years 2012 through 2015.
Table 21 Tax Rate Limitation
Charter Limit(3) General City .2329 Police and Fire .0807 Highways(1) .0312 Parks(1) .0350 Streets Special(2) .0617 Housing Trust Fund .0100 Library .0050 Open Space .0100
(1) These tax rate items have charter prescribed minimum tax rates. (2) Voter approved tax of up to 2¢ to be used for the Street Special tax within the City. (3) The charter limit was adjusted to produce revenue neutrality for the General City, Police/Fire and Streets Special taxes as the result of the City-wide reappraisal. Effective July 1, 2013, there will be a $0.005 increase in the general city tax rate to provide for maintenance of the City’s Bike Path.
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40 Table 22 Tax Rates Per $100 of Assessed Value
2012/13 2013/14 2014/15 2015/16 City General 0.2329 0.2379 0.2604 0.2604 Highway 0.0312 0.0312 0.3120 0.0312 Parks – General 0.0250 0.0250 0.2500 0.0250 Penny for Parks 0.0100 0.0100 0.0100 0.0100 CCTA 0.0390 0.0422 0.4320 0.0429 County 0.0050 0.0050 0.0051 0.0052 Debt Service 0.0462 0.0641 0.0817 0.0800 Police and Fire Special 0.0807 0.0807 0.0807 0.0807 Retirement 0.1678 0.1848 0.1810 0.1797 Streets – Special(2) 0.0617 0.0617 0.0617 0.0617 Housing Trust Fund 0.0054 0.0054 0.0054 0.0054 Library Book Tax 0.0050 0.0050 0.0050 0.0050 Open Space(2) 0.0054 0.0054 0.0054 0.0054 City Tax 0.7153 0.7584 0.7958 0.7926 Local Agreement - - 0.0039 0.0038
School(1) 1.4302 1.5257 1.6358 1.6544
Total Tax Rate 2.1455 2.2841 2.4355 2.4470
(1) Beginning in fiscal year ending June 30, 2004, the School tax represents the State Education Tax Rate for which a homestead rate and a non-residential rate are set by the State of Vermont. The rates included are for homestead properties. For non-residential properties the rates were 1.5390, 1.5441, 1.5684, 1.6055, and 1.7187 for 2010/2011, 2011/2012, 2012/2013, 2013/2014, and 2014/2015 respectively. (2) Voter approved tax of up to 1¢ to be used for the preservation of open space within the City became effective for fiscal year ending June 30, 2005. Voters approved an increase for Street special tax for June 30, 2009.
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41 Principal Taxpayers
A list of the taxpayers in the City with the twenty highest assessed valuations on the 2015 assessment is presented in Table 23. No single taxpayer is assessed more than .75% of the City’s Grand List, and all twenty taxpayers represent under 7% of the Grand List. Table 23 Top Twenty Taxpayers
% Assessed Value to Owner Assessed Value total Grand List Value Diamondrock Burlington Owner LLC $25,933,400 0.72% UVM/Redstone Lofts LLC 24,820,000 0.49% Burlington Town Center LLC 20,837,900 0.58% Fortieth Burlington LLC 18,785,200 0.52% Burlington Harbor Hotel Group LLC 16,833,400 0.47% Burlington Electric Dept./CVPS 14,902,723 0.41% Antonio B Pomerleau LLC 14,649,300 0.41% Vermont Electric Power 13,197,200 0.37% May Department Stores Co. 11,123,400 0.31% New Northgate Housing LLC 11,089,000 0.31% Howard Opera House Assoc LLC 9,001,300 0.20% Champlain Housing Trust Inc. 8,728,800 0.24% Vermont Gas Systems Inc. 7,910,200 0.22% MP Vermont LLC 7,882,300 0.22% UVM/Catamount Redstone Apts LLC 7,830,000 0.22% Lake and College LLC 7,754,500 0.21% Investors Corporation of Vermont 7,721,200 0.21% Investors Corporation of Vermont 7,649,000 0.21% Courthouse Plaza LLC 7,060,000 0.20% UVM/Centennial Court LP 6,679,600 0.19%
TOTAL $250,388,423 6.72%
Source: City Assessor’s Office.
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42 ECONOMIC AND DEMOGRAPHIC INFORMATION
Economic Activity
The Greater Burlington area, which includes the City of Burlington and all of Chittenden County, is Vermont’s major economic area. Most of the County’s nonfarm employment lies within the three-community region of Burlington, Essex and South Burlington. Manufacturing employment represents approximately 10% of the nonagricultural employment in the Burlington area labor market. Non-manufacturing employment accounts for approximately 90% of employment. Education and health services, government and trade are principal areas of non-manufacturing employment in the Greater Burlington area.
Chittenden County has provided the bulk of the State’s economic growth over the past ten years, which is reflected in the area’s employment statistics. The Burlington Labor Market Area had an annual unemployment rate of 2.9% in June 2015. The State’s unemployment rate was 3.6% as of June 2015.
Population
Population statistics for the City, Chittenden County and the State of Vermont are shown in the following table.
Table 24 Population Statistics
City of Burlington Chittenden County State of Vermont Change From Change From Change From Previous Previous Previous Total Census Total Census Total Census 1960 35,531 7.17% 74,425 18.95% 389,881 3.21% 1970 38,633 8.73% 99,131 13.20 % 444,330 13.97% 1980 37,712 (2.38%) 115,534 16.55% 511,456 15.11% 1990 39,127 3.78% 131,765 14.05% 562,758 10.03% 2000 38,889 (0.61%) 146,571 11.24% 608,827 8.19% 2010 42,417 9.10% 156,545 6.80% 625,741 2.80% 2014(1) 42,284 (0.3%) 160,531 2.5% 626,562 0.1%
Source: U.S. Census Bureau. (1) Estimate
Employment Data
The Greater Burlington area possesses a growing, educated work force with skills in a variety of areas. To keep a supply of workers skilled to meet the needs of new and existing business and industry, the State of Vermont assists with tuition-free training of new Vermont employees. Educational institutions, such as the University of Vermont, provide customized training programs and continuing education required by technicians and others in rapidly changing technological fields.
Employment opportunities in Burlington and Chittenden County have grown to more than match growth in the area’s work force. The following table presents average annual nonagricultural employment figures for the years 2005 through June 2015 for the Burlington Labor Market Area, the State of Vermont and the United States.
43 Table 25 Employment
State Burlington Labor Market Area of Vermont United States Unemployment Unemployment Unemployment Year Labor Force Rate Rate Rate(1) 2005 113,350 3.2% 3.5% 5.1% 2006 114,250 3.3% 3.6% 4.6% 2007 112,750 3.4% 4.0% 4.6% 2008 113,200 4.1% 4.8% 5.8% 2009 114,750 6.0% 6.7% 9.3% 2010 113,700 5.3% 6.7% 9.6% 2011 117,400 3.5% 5.6% 8.9% 2012 117,300 4.0% 5.0% 8.1% 2013 124,400 3.5% 4.4% 7.4% 2014 124,000 3.3% 4.1% 6.2% 2015 125,050 2.4%(2) 3.1%(2) 5.0%(2)
(1) Seasonally Adjusted. (2) December only. Source: Vermont Department of Labor.
Employment opportunities in the City of Burlington are distributed among manufacturing, government, service, and commercial enterprises. The following is a table of average nonagricultural employment by industry as of June 2015 in the Burlington Labor Market Area.
Table 26 Employment by Industry As of December 2015
Number of % of Total Employees Employment Goods-Producing/Manufacturing 18,800 14.70% Trade, Transportation and Utilities 23,900 18.69% Information 2,400 1.88% Finance 4,800 3.75% Professional and Business Services 14,600 11.42% Educational and Health Services 22,600 17.67% Leisure and Hospitality 12,000 9.38% Other Services 4,200 3.28% Government 24,600 19.23% Total 127,900 100.00%
Source: Vermont Department of Labor.
44 Major Employers
The largest employers in and near the City of Burlington (Chittenden County) are presented in Table 27.
Table 27 Burlington Area Largest Employers
Approximate Number of Full-Time Name Employees University of Vermont Medical Center 5,383 International Business Machines (IBM) 4,000 University of Vermont 3,446 City of Burlington/Burlington School District 1,612 People’s United Bank 1,000 Howard Center for Human Services 998 Adecco 775 Ben & Jerry’s Homemade 735 GE Healthcare 700 Dealer.com 675 Green Mountain Power Corp 615 Fairpoint Communications 545 Saint Michael’s College 489 Mount Family Group, LTD (Westaff) 450 Burton Snowboards 375 VNA of Chittenden & Grand Isle Counties 412 SD Ireland Concrete Construction Corp 400 Manpower of Vermont 375 Crystal Rock Holdings, Inc. 350 Husky Injection Molding System 350 Sodexho 350 Champlain College 310
Source: Vermont Business Magazine 2014/2015 Vermont Business & Manufacturing Directory, except for the City and the Burlington City Schools.
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45 Construction
The following table sets forth information with respect to building permits and property value for the City from 2007 through 2014 and the most recent data available for 2015.
Table 28 Property Value and Building Permits
Commercial Residential Construction Construction Total Property Value(1)(2) Fiscal No. No. Year Of of Ending Permits Value Permits Value Commercial Residential Total 2007 271 $29,597,016 734 $26,702,234 $995,547,950 $2,244,574,702 $3,240,122,652 2008 272 22,089,243 773 $23,111,581 1,017,637,193 2,267,867,953 3,285,505,146 2009 316 48,544,419 837 $14,132,849 1,066,198,821 2,281,968,102 3,348,166,923 2010 392 22,518,890 1,074 $21,626,106 1,088,789,887 2,303,659,107 3,392,448,994 2011 514 54,657,163 1,122 $32,822,076 1,146,797,979 2,341,552,873 3,488,350,852 2012 484 33,114,527 1,170 $23,699,481 1,179,923,153 2,365,040,959 3,544,964,112 2013 468 38,114,527 1,232 $25,071,633 1,221,633,086 2,386,552,899 3,608,185,985 2014 518 55,205,320 1,391 $21,088,576 1,198,902,730 2,418,967,400 3,617,870,130 2015 409 30,867,585 1,396 $24,884,493 2,432,013,600 1,224,560,210 3,656,560,210
(1) Estimated fair market value - real property. (2) Final 411 for PV&R Source: City of Burlington.
Housing Market
The median price for primary residences under six acres sold in the City as of August 2015 was $259,500, a 5% decrease in median sale price from the 2014 figure of $273,250. The City contains approximately 6,649 owner- occupied housing units, accounting for 16% of Chittenden County’s 41,083 owner-occupied units. The City’s share of Chittenden County’s home sales as of August 2015 is 26%. According to Zillow, the median sales price for a residential condominium in Burlington as of August 2015 is $235,100, a 2.6% increase from the August 2014 median price of $229,200. The number of single family primary residences sold in Burlington has remained relatively stable since tracking of this data began in 1988. Based on the December 2014 Allen & Brooks Report, the number of Chittenden County single family home sales in 2013 was 1,646.
A number of homes sold in Burlington that fall below the median sale price are purchased through Champlain Housing Trust (CHT) or Green Mountain Habitat for Humanity. CHT and Green Mountain Habitat for Humanity have placed resale restriction covenants on over 220 homes in Burlington. These organizations receive operating or development grants from the City in order to ensure an adequate supply of homes for low and moderate income residents.
The rental housing market in Burlington remains very strong, though low vacancy rates pose a challenge for prospective renters. According to the 2009-2013 American Community Survey 5-Year Estimate, Burlington’s rental vacancy rate is 1.6%. The low vacancy rate pushes demand for rental housing up which results in increased rental rates. Various forms of rental housing assistance for low to moderate-income households are provided by the Burlington Housing Authority, Champlain Housing Trust and several other nonprofit housing corporations.
Vermont enjoys a low foreclosure rate relative to the national average, but saw an increase in foreclosures throughout the summer of 2015 for a foreclosure rate of 1 in every 4,363 homes; Chittenden County enjoys a slightly lower rate of 1 in every 6,000. Burlington has seen a steady decline in foreclosures since 2009, when 40 homes went into foreclosure in the wake of the economic recession. In 2014, eight Burlington homes went into foreclosure, the lowest number in 11 years.
46
TAX EXEMPTION
In the opinion of Burak Anderson & Melloni, PLC, Bond Counsel, under existing law, rules and regulations, and assuming (among other things) the accuracy of certain representations of the City and the compliance by the City with certain covenants, the interest on the Series 2016A Bonds will be excluded from gross income for federal income tax purposes and will not be an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations. Interest on the Series 2016A Bonds will be taken into account in determining adjusted current earnings of certain corporations (as defined for federal income tax purposes) for purposes of calculating the alternative minimum tax imposed on such corporations. Bond Counsel expresses no opinion regarding any other federal tax consequences arising with respect to the Series 2016A Bonds.
The Internal Revenue Code of 1986, as amended (the “Code”) establishes certain requirements that must be continuously satisfied subsequent to the issuance of the Series 2016A Bonds in order for interest on the Series 2016A Bonds to remain excluded from gross income for federal income tax purposes. These requirements include restrictions on the use, expenditure and investment of bond proceeds and also include the payment of rebates or penalties in lieu of rebates to the United States of America. Failure to comply with these requirements may cause inclusion of interest on the Series 2016A Bonds in gross income for federal income tax purposes retroactive to the date of issuance of the Series 2016A Bonds. The City will covenant to take all lawful action necessary to comply with all requirements of the Code that must be satisfied subsequent to the issuance of the Series 2016A Bonds in order that interest on the Series 2016A Bonds be or continue to be excluded from gross income for federal income tax purposes. The opinion of Bond Counsel assumes compliance with such covenants.
It should also be noted that the Code denies a deduction for interest on indebtedness incurred or continued to purchase or carry the Series 2016A Bonds or, in the case of a financial institution, for that portion of the holder's interest expense allocated to interest on the Series 2016A Bonds and, for insurance companies subject to the tax imposed by Section 831 of the Code, the amount of certain deductions is reduced by a specific percentage of, among other things, interest on the Series 2016A Bonds. In addition, interest on the Series 2016A Bonds earned by certain corporations could be subject to the environmental tax or the foreign branch profits tax imposed by the Code, and may be included in passive investment income subject to federal income taxation under provisions of the Code applicable to certain S corporations. The Code also requires recipients of certain social security and certain railroad retirement benefits to take into account receipts or accruals of interest on the Series 2016A Bonds in determining the portion of such benefits that are included in gross income. No assurance can be given that future legislation will not have adverse tax consequences for holders of the Series 2016A Bonds.
The Series 2016A Bonds will not be designated as “qualified tax-exempt obligations” for purposes of Section 265(b)(3) of the Code.
Bond Counsel is also of the opinion that, under existing law, interest on the Series 2016A Bonds is exempt from State of Vermont personal income taxes and State of Vermont corporate income taxes to the extent interest on the Series 2016A Bonds is excluded from gross income for federal income tax purposes. Bond Counsel expresses no opinion regarding any other State of Vermont tax consequences arising with respect to the Series 2016A Bonds. Bond Counsel also has not opined as to the taxability of the Series 2016A Bonds or the income therefrom under the laws of any state other than the State of Vermont.
Although Bond Counsel is of the opinion that interest on the Series 2016A Bonds is excluded from gross income for federal income tax purposes and is exempt from state of Vermont personal income taxes and State of Vermont corporate income taxes, the ownership or disposition of, or the accrual or receipt of interest on, the Series 2016A Bonds may otherwise affect a Bondholder’s federal or state tax liability. The nature and extent of these other tax consequences will depend upon the particular tax status of the Bondholder or the Bondholder’s other items of income or deduction. Bond Counsel expresses no opinion regarding any such other tax consequences, and Bondholders should consult with their own tax advisors with respect to such consequences
Future legislative proposals, if enacted into law, clarification of the Code or court decisions may cause interest on the Series 2016A Bonds to be subject, directly or indirectly, to federal income taxation or to be subject to or
47 exempted from state income taxation, or otherwise prevent beneficial owners of the Series 2016A Bonds from realizing the full current benefit of the exclusion from gross income of such interest for tax purposes. The introduction or enactment of any future legislative proposals, clarification of the Code or court decisions may also affect the market price for, or marketability of, the Series 2016A Bonds. Prospective purchasers of the Series 2016A Bonds should consult their own tax advisors regarding any pending or proposed federal or state tax legislation, regulations or litigation, as to which Bond Counsel expresses no opinion.
Bond Counsel has not undertaken to advise in the future whether any events after the date of issuance of the Series 2016A Bonds may affect the tax exempt status of interest on the Series 2016A Bonds or the tax consequences of ownership of the Series 2016A Bonds. No assurance can be given that future legislation, if enacted into law, will not contain provisions which could directly or indirectly affect the exclusion of the interest on the Series 2016A Bonds from gross income for federal income tax purposes.
Interest paid on tax-exempt obligations such as the Series 2016A Bonds is now generally required to be reported by payors to the Internal Revenue Service (“IRS”) and to recipients in the same manner as interest on taxable obligations. In addition, such interest may be subject to “backup withholding” if the bond owner fails to provide the information required on IRS Form W-9, Request for Taxpayer Identification Number and Certification, or the IRS has identified the bond owner as being subject to backup withholding.
RATING
Moody’s Investors Service (“Moody’s) assigned an underlying rating of “A3” to the Series 2016A Bonds. A rating is subject to withdrawal at any time; withdrawal of a rating may have an adverse effect on the marketability of the Bonds. For an explanation of the significance of the rating, an investor should communicate with the rating agency. Any such downward revision or withdrawal of such rating may have an adverse effect on the market price of the Series 2016A Bonds.
CERTIFICATION
An officer of the City will furnish a certificate to the effect that this Official Statement, to the best of such officer’s knowledge and belief as of the date of sale and the date of delivery, is true and correct in all material respects and does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made herein, in light of the circumstances under which they were made, not misleading.
LEGAL MATTERS
Legal matters incident to the authorization and issuance of the Bonds are subject to the opinion of Burak Anderson & Melloni, PLC, Burlington, Vermont, Bond Counsel to the City, as to validity and tax exemption. The opinion will be substantially in the forms set forth in Appendix B attached hereto. Certain legal matters with respect to the Bonds will be passed upon for the Underwriter by its counsel, Primmer Piper Eggleston & Cramer PC, Montpelier, Vermont. Other than as to matters expressly set forth herein as prepared by Bond Counsel or as the opinion of Bond Counsel, Bond Counsel is not passing on and does not assume any responsibility for the accuracy or adequacy of the statements made in this Official Statement and makes no representation that it has independently verified the same.
48 AUDITOR
The firm of Melanson Heath & Company, PC has agreed to the inclusion in this Official Statement of its report, dated January 27, 2016, on the audit of the financial statements of the City of Burlington, Vermont. Such report is included herein as pages 5-7 of Appendix A. Melanson Heath & Company, PC did not perform the audit of the City’s financial statements for any year prior to Fiscal Year 2011.
FINANCIAL ADVISOR
The City retained Public Financial Management, Inc., of Minneapolis, Minnesota, as financial advisor (the “Financial Advisor”) in connection with the issuance of the Bonds. In preparing the Official Statement, the Financial Advisor has relied upon governmental officials, and other sources, who have access to relevant data to provide accurate information for the Official Statement, and the Financial Advisor has not been engaged, nor has it undertaken, to independently verify the accuracy of such information. The Financial Advisor is not a public accounting firm and has not been engaged by the City to compile, review, examine or audit any information in the Official Statement in accordance with accounting standards. The Financial Advisor is an independent advisory firm and is not engaged in the business of underwriting, trading or distributing municipal securities or other public securities and therefore will not participate in the underwriting of the Bonds.
Requests for information concerning the City should be addressed to Public Financial Management, Inc., 800 Nicollet Mall, Suite 2710, Minneapolis, Minnesota 55402 (612/338-3535), www.pfm.com.
UNDERWRITING
Wells Fargo Securities (the “Underwriter”) has agreed to purchase the Series 2016A Bonds from the City pursuant to a bond purchase agreement by and between the City and the Underwriter (the “Bond Purchase Agreement”) at a purchase price of $______, equal to the principal amount of the Series 2016A Bonds, less an underwriter’s discount of $______plus a net original issue premium of $______. The Bond Purchase Agreement provides that the Underwriter will purchase all of the Series 2016A Bonds, if any are purchased, the obligation to make such purchase being subject to certain terms and conditions set forth therein. The Underwriter may offer and sell the Series 2016A Bonds to certain dealers and others (including dealers depositing the Series 2016A Bonds into investment trusts) a prices lower than the public offering prices stated in the inside cover hereof.
Wells Fargo Bank, National Association ("WFBNA"), the sole underwriter of the 2016A Bonds, has entered into an agreement (the "Distribution Agreement") with its affiliate, Wells Fargo Advisors, LLC ("WFA"), for the distribution of certain municipal securities offerings, including the 2016A Bonds. Pursuant to the Distribution Agreement, WFBNA will share a portion of its underwriting or remarketing agent compensation, as applicable, with respect to the 2016A Bonds with WFA. WFBNA also utilizes the distribution capabilities of its affiliate Wells Fargo Securities, LLC (“WFSLLC”), for the distribution of municipal securities offerings, including the 2016A Bonds. In connection with utilizing the distribution capabilities of WFSLLC, WFBNA pays a portion of WFSLLC’s expenses based on its municipal securities transactions. WFBNA, WFSLLC, and WFA are each wholly-owned subsidiaries of Wells Fargo & Company. Wells Fargo Securities is the trade name for certain securities-related capital markets and investment banking services of Wells Fargo & Company and its subsidiaries, including Wells Fargo Bank, National Association.
VERIFICATION OF MATHEMATICAL COMPUTATIONS
______(the “Verification Agent”), at the time of issuance of the Series 2016A Bonds, will verify from the information provided to it the mathematical accuracy as of the date of the closing on the Series 2016A Bonds of the computations contained in such information to determine that the securities and cash deposits listed in the applicable schedules, to be deposited in the escrow trust fund established in connection with the Bonds to be Refunded, will be sufficient to pay, when due, the principal, interest and call premium payment requirements, if any, of the Bonds to
49 be Refunded, which report will be relied upon by Bond Counsel to the City. The Verification Agent will express no opinion on the assumptions provided to it, nor as to the exemption from taxation of the interest on the Series 2016A Bonds.
LITIGATION
There is no litigation now pending or, to the knowledge of City officials, threatened which restrains or enjoins the issuance of the Series 2016A Bonds or questions or affects the validity of the Series 2016A Bonds, any proceeding of the City taken with respect to the sale thereof or the pledge of the full faith and credit of the City for the benefit of the Series 2016A Bonds. Neither the creation, organization, nor existence of the City, nor title of the Mayor or present members of the City Council or other officers of the City in their respective offices is being contested.
The City experiences routine litigation and claims incidental to the conduct of its affairs. In the opinion of the City Attorney, there are no actions presently pending or threatened, the adverse outcome of which would have a material adverse effect on the financial condition of the City except as provided herein.
In connection with the enterprise of Burlington Telecom, certain taxpayers within the City initiated a lawsuit against the City and its former Chief Administrative Officer alleging that the City did not fully reimburse the City's general fund for expenditures made to the City’s telecom enterprise within the requirements of the City Charter and the City’s operating license from the Vermont Public Service Board (Osier vs. Burlington Telecom, an enterprise of The City of Burlington and Jonathan Leopold in Docket No. S1588-09, Chittenden Unit, Superior Court). The trial court dismissed the plaintiffs’ claims against the City, and following a trial on the claims against Mr. Leopold, found a breach of fiduciary duty but awarded no damages. In June 2014 the plaintiffs appealed both the dismissal of the City and the trial court decision on the claims against Mr. Leopold to the Vermont Supreme Court. That case has been fully briefed, oral arguments were held on March 16, 2015, and a decision is pending. See also “City Enterprises – Burlington Telecom” herein for additional information.
THERE ARE VARIOUS OTHER SUITS AND CLAIMS PENDING AGAINST THE CITY OF BURLINGTON. THE CITY BELIEVES THAT SUCH OTHER MATTERS ARE COVERED BY NOT HAVE A MATERIAL IMPACT ON THE CITY.
IT SHOULD BE NOTED THAT ADVERSE DEVELOPMENTS IN PENDING OR FUTURE LITIGATION COULD HAVE A MATERIAL IMPACT ON THE CITY AND ITS FINANCIAL CONDITION TO THE EXTENT SUCH CLAIMS ARE NOT COVERED BY THE CITY’S INSURANCE POLICIES.
CITY OF BURLINGTON, VERMONT
By:______Bob Rusten Chief Administrative Officer
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APPENDIX A
City of Burlington, Vermont 2015 Financial Statements
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CITY OF BURLINGTON, VERMONT
Annual Financial Statements
For the Year Ended June 30, 2015
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CITY OF BURLINGTON, VERMONT
TABLE OF CONTENTS
PAGE
INDEPENDENT AUDITORS’ REPORT 1
MANAGEMENT’S DISCUSSION AND ANALYSIS 9
BASIC FINANCIAL STATEMENTS:
Government-wide Financial Statements:
Statement of Net Position 22
Statement of Activities 24
Fund Financial Statements:
Governmental Funds:
Balance Sheet 26
Reconciliation of Total Governmental Fund Balances to Net Position of Governmental Activities in the Statement of Net Position 27
Statement of Revenues, Expenditures, and Changes of Net Position 28
Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 29
Statement of Revenues and Other Sources, and Expenditures and Other Uses - Budget and Actual - General and School funds 30
Proprietary Funds:
Statement of Net Position 31
Statement of Revenues, Expenses, and Changes in Fund Net Position 33
Statement of Cash Flows 34
Fiduciary Funds:
Statement of Fiduciary Net Position 36
Statement of Changes in Fiduciary Net Position 37
Component Units:
Statement of Net Position 38
Statement of Activities 40
Notes to Financial Statements 41
PAGE
REQUIRED SUPPLEMENTARY INFORMATION:
Schedule of Funding Progress 105
Pension Schedule 106
SUPPLEMENTARY STATEMENTS AND SCHEDULES:
Combining Financial Statements:
Governmental Funds:
Combining Balance Sheet – Nonmajor Governmental Funds 108
Combining Statement of Revenues, Expenditures, and Changes in Fund Equity – Nonmajor Governmental Funds 114
Proprietary Funds:
Combining Statement of Net Position – Nonmajor Proprietary Funds 119
Combining Statement of Revenues, Expenses, and Changes in Fund Net Position – Nonmajor Proprietary Funds 120
Combining Statement of Cash Flows – Nonmajor Proprietary Funds 121
Fiduciary Funds:
Combing Statement of Fiduciary Net Position – Private Purpose Trust Funds 122
Combing Statement of Change in Fiduciary Net Position – Private Purpose Trust Funds 123
102 Perimeter Road Nashua, NH 03063 (603)882-1111 melansonheath.com INDEPENDENT AUDITORS’ REPORT
Additional Offices: To the Honorable Mayor and City Council Andover, MA Greenfield, MA City of Burlington, Vermont Manchester, NH Ellsworth, ME
Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund (except the Burlington School District and the Burlington Electric Enterprise Fund), and the aggregate remaining fund information of the City of Burlington, Vermont (the City), as of and for the year ended June 30, 2015, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the Table of Contents.
Management’s Responsibility for the Financial Statements
The City’s management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of the Burlington Electric Enterprise Fund, a major enterprise fund, which represents 41 percent, 28 percent and 61 percent, respectively, of the assets, net position and revenues of the business-type activities. Those financial statements were audited by other auditors whose report thereon has been furnished to us, and our opinion, insofar as it relates to the amounts included for the Burlington Electric Enterprise Fund and its effects on the business-type activities, is based solely on the report of the other auditors. Also, we did not audit the financial statements of the Burlington School District, a major discretely presented component unit. The financial statements of Burlington School District were audited by other auditors whose report thereon has been furnished to us, and our opinion, insofar as it relates to the amounts included for the entity and its effects on the discretely presented component units is based solely on the report of the other auditors. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards 5
require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. The financial statements of the Burlington Electric Department, a major proprietary fund, were not audited in accordance with Government Auditing Standards.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circum- stances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Opinions
In our opinion, based on our audit and the reports of the other auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, business-type activities, each major fund, the aggregate discretely presented component units, and the aggregate remaining fund information of the City, as of June 30, 2015, and the respective changes in financial position and, where applicable, cash flows thereof and the respective budgetary comparison for the General fund for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that Management’s Discussion and Analysis, the Schedule of Funding Progress, the Schedule of Changes in Net Pension Liability, and the Schedules of Net Pension Liability, Contributions, and Investment Returns be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s 6
responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with evidence sufficient to express an opinion or provide any assurance.
Other Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The combining and individual nonmajor fund financial statements are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated January 27, 2016 on our consideration of the City'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. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control over financial reporting and compliance.
January 27, 2016
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MANAGEMENT’S DISCUSSION AND ANALYSIS
As management of the City of Burlington, we offer readers this narrative overview and analysis of the financial activities of the City of Burlington for the fiscal year ended June 30, 2015. Unless otherwise noted, all amounts are expressed in thousands.
A. OVERVIEW OF THE FINANCIAL STATEMENTS
This discussion and analysis is intended to serve as an introduction to the basic financial statements. The basic financial statements comprise three components: (1) government- wide financial statements, (2) fund financial statements, and (3) notes to financial state- ments. This report also contains other supplementary information in addition to the basic financial statements themselves.
Government-wide financial statements. The government-wide financial statements are designed to provide readers with a broad overview of our finances in a manner similar to a private-sector business.
The Statement of Net Position presents information on all assets and liabilities, with the difference between the two reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position is improving or deteriorating.
The Statement of Activities presents information showing how the government’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes, earned but unused vacation leave, and net pension liability).
Both of the government-wide financial statements distinguish functions that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities include general government, public safety, public works, culture and recreation, and com- munity development. The business-type activities include the operation of the Airport, Electric, Water, Wastewater, and Stormwater Utilities, Telecommunications (including cable television, internet access, and telephone service).
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 state- ments. However, unlike the government-wide financial statements, governmental fund
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financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources measurable and available at the end of the fiscal year. Such information may be useful in evaluating a government’s near-term financing requirements.
Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government- wide financial statements. By doing so, readers may better understand the long-term impact of the government’s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities.
An annual appropriated budget is adopted for the general fund. A budgetary comparison statement has been provided for the general fund to demonstrate compliance with this budget.
Proprietary funds. Proprietary funds are maintained as follows:
Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. Specifically, enterprise funds are used to account for Airport, Electric, Telecom, Wastewater, Water, and Stormwater.
Proprietary funds provide the same type of information as the business-type activities reported in the government-wide financial statements, only in more detail. The proprie- tary fund financial statements provide separate information for the Airport and Electric which are considered to be major funds.
Fiduciary funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the City’s own programs. The accounting used for fiduciary funds is much like that used for proprietary funds.
Notes to financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements.
Other information. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information which is required to be disclosed by accounting principles generally accepted in the United States of America.
B. FINANCIAL HIGHLIGHTS
As of the close of the current fiscal year, the total of assets exceeded liabilities by $288,553 (i.e., net position), a change of $17,658 in comparison to the prior year. As of the close of the current fiscal year, governmental funds reported combined ending fund balances of $19,532, a change of $8,222 in comparison to the prior year.
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At the end of the current fiscal year, unassigned fund balance for the general fund was $4,287, a change of $4,215 in comparison to the prior year. Total long-term liabilities at the close of the current fiscal year were $251,418, a change of $32,361 in comparison to the prior year. Total net position of the City’s component units, the Burlington Community Development Corporation and the Burlington School District, amounted to $12,180, an increase of $5,398 for the year. There is a significant change in presentation for the year ending June 30, 2015 in the financial statements due to reclassifying School funds from governmental funds and activities to a discretely presented component unit. The school’s legal structure changed effective July 1, 2014 resulting in this change in presentation. The nonspendable portion of the governmental funds balance was $3,486 which consists of inventories, prepaid assets, and permanent funds, as well as general fund advances to other funds not expected to be repaid within a short period of time. $9,526 is restricted for specific purposes. In addition, $4,134 is committed for purposes funded by dedicated revenue. This leaves the City with an unassigned fund balance of $2,386.
C. GOVERNMENT-WIDE FINANCIAL ANALYSIS
The following is a summary of condensed government-wide financial data for the current and prior fiscal years. NET POSITION (000s) Governmental Business-Type Activities Activities Total 2015 2014 2015 2014 2015 2014 Current and other assets $ 44,199 $ 36,837 $ 91,045 $ 102,751 $ 135,244 $ 139,588 Capital assets 126,353 166,462 297,193 277,925 423,546 444,387 Total assets 170,552 203,299 388,238 380,676 558,790 583,975 Deferred outflows of resources 5,485 - 3,504 6 8,989 6 Total assets and deferred outflows $ 176,037 $ 203,299 $ 391,742 $ 380,682 $ 567,779 $ 583,981
Long-term liabilities outstanding $ 89,212 $ 77,391 $ 162,206 $ 141,666 $ 251,418 $ 219,057 Other liabilities 8,366 11,540 13,529 21,502 21,895 33,042 Total liabilities 97,578 88,931 175,735 163,168 273,313 252,099 Deferred inflows of resources 4,122 - 1,791 - 5,913 - Net position: Net investment in capital assets 82,986 104,389 172,630 156,804 255,616 261,193 Restricted 16,800 15,286 19,319 32,018 36,119 47,304 Unrestricted (25,449) (5,307) 22,267 28,692 (3,182) 23,385 Total net position 74,337 114,368 214,216 217,514 288,553 331,882 Total liabilities, deferred inflows of resources and net position $ 176,037 $ 203,299 * $ 391,742 $ 380,682 * $ 567,779 $ 583,981
*Due to fiscal year 2015 being the first year of implementation of GASB 68, prior periods have not been restated in accordance with standards. Refer to Note 29.
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CHANGES IN NET POSITION (000s) Governmental Business-Type Activities Activities Total 2015 2014 2015 2014 2015 2014 Revenues: Program revenues: Charges for services $ 23,141 $ 24,368 $ 103,117 $ 106,092 $ 126,258 $ 130,460 Operating grants and contributions 5,922 84,298 - - 5,922 84,298 Capital grants and contributions 3,113 2,340 7,432 7,723 10,545 10,063 General revenues: Property taxes 33,054 29,495 - - 33,054 29,495 Rooms and meals tax 3,665 3,190 - - 3,665 3,190 Local sales option tax 2,180 2,125 - - 2,180 2,125 Payment in lieu of tax 2,396 2,258 - - 2,396 2,258 Franchise fees 2,128 2,193 - - 2,128 2,193 Impact fees 350 82 - - 350 82 Interest and penalties on delinquent taxes 356 369 - - 356 369 Investment income 101 634 127 291 228 925 Dividends from associated companies - - 3,129 2,908 3,129 2,908 Other revenue 1,175 1,048 429 (368) 1,604 680 Total revenues 77,581 152,400 114,234 116,646 191,815 269,046 Expenses: Governmental activities: General government 14,068 12,702 - - 14,068 12,702 Public safety 23,820 22,693 - - 23,820 22,693 Education - 77,471 - - - 77,471 Public works 16,811 14,172 - - 16,811 14,172 Culture and recreation 10,422 9,966 - - 10,422 9,966 Community development 4,892 4,069 - - 4,892 4,069 Interest on long-term debt 1,582 3,087 - - 1,582 3,087 Business-type activities: Electric - - 62,409 65,062 62,409 65,062 Airport - - 20,289 20,773 20,289 20,773 Non-major - - 19,931 22,384 19,931 22,384 Total expenses 71,595 144,160 102,629 108,219 174,224 252,379 Change in net position before transfers, additions to permanent fund principal, and special items 5,986 8,240 11,605 8,427 17,591 16,667 Additions to permanent fund principal 67 26 - - 67 26 Special item - (16,936) - 16,936 - - Transfers in (out) 29 (98) (29) 98 - - Change in net position 6,082 (8,768) 11,576 25,461 17,658 16,693 Net position - beginning of year, as restated 68,255 123,136 202,640 192,053 270,895 315,189 Net position - end of year $ 74,337 $ 114,368 * $ 214,216 $ 217,514 * $ 288,553 $ 331,882
* July 1, 2014 net position was restated for GASB 68, while prior periods were not restated.
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As noted earlier, net position may serve over time as a useful indicator of a government’s financial position. At the close of the most recent fiscal year, total net position was $288,553, a change of $17,658 from the prior year.
The largest portion of net position $255,616 reflects our investment in capital assets (e.g., land, buildings, machinery, equipment, and infrastructure); less any related debt used to acquire those assets that is still outstanding. These capital assets are used to pro- vide services to citizens; consequently, these assets are not available for future spending. Although the investment in capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities.
An additional portion of net position of $30,840 represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net position is a deficit of $3,182. The significant decrease from the previous year in the unrestricted net positon resulted from the implementation of a new accounting principle – Governmental Accounting Standards Board (GASB) Statement Number 68, Accounting and Financial Reporting for Pensions, which required the recognition of the net pension liability on the City’s statement of net position. See financial statement footnotes for additional information.
Governmental activities. Governmental activities for the year resulted in a change in net position of $6,082. Key elements of this change are as follows:
City general fund budget versus actual results $ 3,385 Special revenue funds revenues over expenditures 1,753 Capital assets from current year revenues 4,768 Depreciation in excess of principal debt service expense (3,067) Other (757) Total $ 6,082
Business-type activities. Business-type activities for the year resulted in a change in net position of $11,577. Key elements of this change are as follows:
Electric $ 4,450 Airport 5,554 Telecom 864 Wastewater 115 Water 147 Stormwater 447 Total $ 11,577
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D. FINANCIAL ANALYSIS OF THE GOVERNMENT’S FUNDS
As noted earlier, fund accounting is used to ensure and demonstrate compliance with finance-related legal requirements.
Governmental funds. The focus of governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing financing requirements. In particular, unassigned fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year.
As of the end of the current fiscal year, governmental funds reported combined ending fund balances of $19,532, a change of $8,222 in comparison to the prior year. Key elements of this change are as follows:
General fund revenues and transfers in, in excess of expenditures and other financing uses $ 3,259 Special revenue fund revenues, transfers in and issuance of debt in excess of expenditures and transfers out (mostly CEDO, Traffic Commission and TIF) 4,505 Capital project fund revenues and other financing sources in excess of expenditures and transfers out 388 Permanent fund revenues 70
Total $ 8,222
The general fund is the chief operating fund. At the end of the current fiscal year, unassigned fund balance of the general fund was $4,287, while total fund balance was $8,251.
As a measure of the general fund’s liquidity, it may be useful to compare both unassigned fund balance and total fund balance to total general fund expenditures. Refer to the table below, and also Note 2A. % of Total General City General Fund 6/30/15 6/30/14 Change Fund Expenditures Unassigned fund balance $ 4,287 $ 72 $ 4,215 8.1% Total fund balance $ 8,251 $ 4,993 $ 3,258 15.6%
The general fund unassigned fund balance positive increase of $4,215 results from the positive operating results reported in the budget and actual comparative schedule and a reduction in the advances to other funds (primarily certain capital project funds).
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The following table summarizes the activity in the general fund unassigned fund balance:
Unassigned fund balance, June 30, 2014 $ 72 Actual revenues in excess of budget 815 Actual expenditures less than budgeted 2,570 Decrease in advances to capital project and special revenue funds 1,199 Other (369) Unassigned fund balance, June 30, 2015 $ 4,287
The City issued $9,000 in Fiscal Stability Bonds in fiscal year 2013 to reduce reliance on tax anticipation notes. In accordance with the Governmental Accounting Standards Board’s Statement 54, the City has classified the $9,000 as a component of unassigned fund balance because the authorized Stability Bonds do not contain any specific spending purpose constraints. In fact, the Bonds were issued as taxable bonds since the purpose was not to finance specific capital governmental projects for the City as is customarily financed by tax-exempt bonds.
Without the issues of the Stability Bonds, the City’s unassigned fund balance would have been $(4,203). In accordance with the bond resolution, as stated by Bond Council; the City can use the proceeds for working capital, and cash flow needs.
Proprietary funds. Proprietary funds provide the same type of information found in the business-type activities reported in the government-wide financial statements, but in more detail.
A comparison of the unrestricted net position of each enterprise compared to the prior year is show below: Unrestricted Net Position 6/30/15 6/30/14 Change Electric $ 15,918 $ 21,710 $ (5,792) Airport 2,805 947 1,858 Nonmajor funds: Telecom (48) 617 (665) Wastewater 1,929 2,948 (1,019) Water 1,102 966 136 Stormwater 560 101 459
Specific factors concerning the finances of each proprietary fund are discussed below:
The City of Burlington, Vermont Electric Department (BED) reported a decrease in the unrestricted net position primarily resulting from the adoption of GASB 68, requiring the Department to record its share of the City’s unfunded net pension liability for the year ended June 30, 2015 (the implementation year), while prior
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periods were not restated. For additional information, please refer the separate finan- cial statements issued for the BED. The Burlington International Airport’s unrestricted net position increased from the previous year due to a variety of factors, including the Debt Service Reserve Fund requirements, which reduced the restricted net position, and the asset depreciation exceeding the principal debt service payments, which reduced the investment in capital assets. The reductions in the other two categories of net position resulted in the increase of unrestricted net position. For additional information, please refer the separate financial statements issued for the City of Burlington, Vermont Airport Enterprise Fund. The Burlington Telecom’s unrestricted net position decreased from the previous year primarily resulting from the adoption of GASB 68. Prior period was not restated for the GASB 68 liability. However, due to other restatements, unrestricted net position reported in prior year financial statements as $1,111 has been restated to $617 as of June 30, 2014. See the restatement footnote for additional information. The Wastewater Fund’s unrestricted net position decreased primarily as a result of the contingency reserve restriction on the net position. The net improvement in the Water and Stormwater Funds (which are managed on a combined basis with the Wastewater Fund), is primarily the result of operations. The Stormwater Fund’s unrestricted net position for the previous year was restated, as the fund was reported as a governmental fund in years prior to fiscal year 2015.
E. GENERAL FUND BUDGETARY HIGHLIGHTS
The City approved a fiscal year 2015 budget of $64,325 including dedicated taxes, tax increment financing and interdepartmental charges that were netted against appropriations for the presentation on the budget and actual statement in the financial statements. The following is a reconciliation of the approved fiscal year 2015 appropriation with the amounts reported on the General fund budget and actual comparison statement:
City approved appropriation $ 64,325 Less dedicated taxes: Capital streets program (1,983) Open space (190) Greenbelt (190) Housing Trust (190) Pennies for parks (352) Less tax increment (2,662) Less interdepartmental charges (2,971) Less other charges (45) Appropriation reported on page 30 $ 55,742
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The City’s adopted general fund budget for fiscal year 2015 after budgetary amendments resulted in a deficit of $(126). The adjusted actual performance (budgetary basis) resulted in revenues and other sources exceeding expenditures and other uses by $2,901. This variance is primarily attributable to:
Revenue from housing and development licenses and certificates exceeded budget expectations by $558 due to several large projects requiring additional permitting including, but not limited to, the Hospital, Grove Street and University Place. This revenue is included in charges for services category. Various departments had significant turnbacks in the general administration and safety services functions. Debt principal budget significantly exceeded payments.
F. CAPITAL ASSET AND DEBT ADMINISTRATION
Capital assets. Total investment in capital assets for governmental activities at year-end amounted to $126,353 (net of accumulated depreciation), a change of $2,252 from the prior year. Total investment in capital assets for business-type activities at year-end amounted to $297,193 (net of accumulated depreciation), a change of $18,321 from the prior year. This investment in capital assets includes land, buildings and system, improvements, and machinery and equipment.
Major capital asset events during the current fiscal year for Governmental Activities included the following: Governmental Activities Infrastructure improvements $ 1,196 Vehicles, machinery, equipment and furniture 1,082 Buildings and improvements 45 Other capital projects 275 Construction in progress 6,027 Depreciation expense (6,304) Effect on disposal of assets (69) Total $ 2,252
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Change in capital assets, net of accumulated depreciation for Business-Type Activities are as follows: Business-type Activities Electric $ 20,872 Airport 1,017 Telecom (1,983) Wastewater (1,466) Water (157) Stormwater 38 Total $ 18,321
Additional information on capital assets can be found in the notes to the financial statements.
Change in credit rating. The City’s Baa3 credit rating from Moody’s Investor Service (Moody’s) on the general obligation with a negative outlook was upgraded to Baa2 with positive outlook on March 3, 2015. The rating for the City’s certificates of participation is Ba1, with a stable outlook. Moody’s upgraded Burlington International Airport’s rating from Ba1 to Baa3 on November 12, 2014 with stable outlook reflecting an improvement of financial metrics including debt service coverage and liquidity as well as other factors. Moody’s upgraded BED credit rating from Baa2 to Baa1 with stable outlook subsequent to year end, on November 9, 2015.
Long-term debt. At the end of the current fiscal year, total outstanding general obligation bonds payable, revenue bonds payable (excluding premiums and discounts) and other long term notes payable outstanding were $131,889, all of which was backed by the full faith and credit of the government.
Bonds Payable 6/30/15 6/30/14 Change Governmental Activities: City (excludes school) $ 46,423 $ 37,459 $ 8,964 Total $ 46,423 $ 37,459 $ 8,964
Business-Type Activities: Electric $ 76,501 $ 71,720 $ 4,781 Airport 38,690 42,770 (4,080) Wastewater 16,076 16,951 (875) Water 228 - 228 Stormwater 394 344 50 Total $ 131,889 $ 131,785 $ 104
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Additional information on long-term debt can be found in the Notes to the Financial Statements.
G. ECONOMIC FACTORS AND NEXT YEAR’S BUDGETS AND RATES
The FY16 General Fund budget continues to make progress toward goal of increased financial stability and responsibility.
The proposed FY16 General Fund budget includes $1 million to fund the City’s new unassigned fund balance policy. In FY11 audited financial report, the City’s unassigned fund balance was negative $16.8 million, a figure that, according to the FY11 manage- ment letter, place the City’s “at risk, as it is overly reliant on borrowing from financial institutions.” After several years of focus, the voter approval of the Fiscal Stability Bond, the repayment of large deficits by the Water and Sewer enterprise funds, and emphasis on securing reimbursement for Champlain Parkway expenditures, our audited FY14 unassigned fund balance improved to a positive $71.8 thousand, the City’s first positive unassigned fund balance since the Burlington Telecom (BT) deficits began in 2009. Now, with the FY16 budget before you, the City projects to increase the fund balance to over $1 million, which would represent solid progress towards the goal of our new Fund Balance Policy, which commits the City to increasing the balance to a minimum of five percent of the annual General Fund operating spending (approximately $3 million currently) by the end of FY19.
Also, the City similarly is making great strides with its days cash on hand (COH) both at the Burlington International Airport (BTV) and Burlington Electric Department (BED) in its effort to improve the credit ratings of both BTV and BED by increasing the liquidity of these enterprises. Moody’s Investors Service has indicated the BTV’s reaching 200 days COH will be significant factor as Moody’s considers the Airport for another credit ratings upgrade. At the end of FY14, BTV had accumulated 145 days COH, and it is targeting 175 days COH as its FY16 goal. BED has reached 73 days COH by the end of FY14, and now has set its sights on reaching 93 days COH in FY16.
The FY16 budget includes modest revenue and expense growth.
The proposed FY16 General Fund budget includes a revenue increase of 7.5 percent, which is 1.7 percent greater than the 5.8 percent growth in expenditures. Some of these increases are the result of shifts in how the City accounts for certain revenue and expense items, not true increases. Two examples of how expenses now included in the FY16 budget that previously were not shown in the General Fund budget are:
$625,000 for the City streetlights- in the years past, BED was netting the street- lights against the PILOT. Going forward, the General Fund will pay BED for City streetlights, and General Fund revenues will increase because BED will be paying its full PILOT. $768,090 for part of the Community and Economic Development Office (CEDO) - going forward, pursuant to Government Accounting Standards Board (GASB)
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procedures, CEDO administrative, neighborhood support, and sustainability functions will be paid for by the General Fund, instead of being organized as an outside special revenue fund.
Excluding the above two examples that collectively total $1.39 million, FY16 expendi- ture would increase by 3.6 percent (rather than 5.8 percent). For purposes of comparison, revenues would increase by an appropriate corresponding percentage.
The changes in tax rates are shown in the table below:
Approved Tax Rate, per $100 Fiscal Year Fiscal Year Tax Rate Item 2015 2016 Change Revenue Neutral Rates: General City $ 0.26040 $ 0.26040 $- Streets 0.06170 0.06170 - Police/Fire 0.08070 0.08070 - Open Space 0.00540 0.00540 - Housing Trust 0.00540 0.00540 - Fixed Rates: Parks - General 0.02500 0.02500 - Penny for Parks 0.01000 0.01000 - Highway 0.03120 0.03120 - Library 0.00500 0.00500 - Budget Driven Rates: CCTA 0.04320 0.04290 (0.00030) County Tax 0.00510 0.00520 0.00010 Retirement 0.18100 0.17970 (0.00130) Debt Service 0.08170 0.08000 (0.00170) Local Exemption 0.00390 0.00380 (0.00010) Total $ 0.79970 $ 0.79640 $ (0.00330)
20
REQUESTS FOR INFORMATION
This financial report is designed to provide a general overview of the City of Burlington’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 can be found on the City’s web page at www.burlingtonvt.gov or should be addressed to:
Clerk/Treasurer’s Office City Hall 149 Church Street Burlington, Vermont 05401
21
CITY OF BURLINGTON, VERMONT
STATEMENT OF NET POSITION
JUNE 30, 2015
Primary Government Governmental Business-Type Component Activities Activities Total Units ASSETS AND DEFERRED OUTFLOWS OF RESOURCES ASSETS: Current: Cash and cash equivalents $ 21,035,509 $ 18,752,033 $ 39,787,542 $ 8,489,714 Investments 2,206,063 - 2,206,063 200,938 Restricted investments - 650,256 650,256 - Receivables, net of allowance for uncollectibles: Property taxes 1,888,502 - 1,888,502 - User fees - 8,846,134 8,846,134 - Departmental and other 3,483,397 - 3,483,397 283,919 Intergovernmental 8,481,146 2,752,761 11,233,907 3,406,668 Estimated unbilled revenues - 3,429,150 3,429,150 - Capital lease receivable - - - 94,256 Due from component unit 65,413 67,941 133,354 - Due from primary government - - - 107,895 Inventory 446,681 6,237,265 6,683,946 21,753 Prepaid expenses 146,971 76,399 223,370 8,250 Other assets 316,607 1,030,705 1,347,312 3,758 Total current assets 38,070,289 41,842,644 79,912,933 12,617,151
Noncurrent: Restricted cash - 11,817,383 11,817,383 - Restricted investments - 7,502,127 7,502,127 - Due from component unit 288,328 804,091 1,092,419 - Notes and loans receivable 4,785,455 - 4,785,455 - Capital lease receivable - - - 1,553,608 Accrued interest receivable 1,054,720 - 1,054,720 - Investment in associated companies - 25,990,556 25,990,556 - Regulatory assets and other prepaid charges - 3,089,081 3,089,081 - Capital assets: Land and construction in progress 29,849,653 61,499,726 91,349,379 2,792,396 Intangible asset - 6,549,636 6,549,636 - Other capital assets, net of accumulated depreciation 96,503,490 229,143,142 325,646,632 43,874,430 Total noncurrent assets 132,481,646 346,395,742 478,877,388 48,220,434 TOTAL ASSETS 170,551,935 388,238,386 558,790,321 60,837,585 Deferred Outflows of Resources 5,484,769 3,503,533 8,988,302 1,436,817 TOTAL ASSETS AND DEFERRED OUTFLOWS OF RESOURCES $ 176,036,704 $ 391,741,919 $ 567,778,623 $ 62,274,402
(continued)
22
(continued) Primary Government Governmental Business-Type Component Activities Activities Total Units LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND NET POSITION LIABILITIES: Current: Accounts payable $ 4,451,150 $ 5,527,104 $ 9,978,254 $ 1,945,581 Accrued payroll and benefits payable 1,128,799 157,498 1,286,297 - Accrued liabilities 451,311 - 451,311 1,213,936 Accrued interest payable 280,002 897,879 1,177,881 - Unearned revenue 1,795,061 1,776,943 3,572,004 191,784 Due to component unit 107,895 - 107,895 - Due to primary government - - - 133,354 Other liabilities 151,369 4,519,324 4,670,693 3,753 Payable from restricted assets - 650,256 650,256 - Current portion of long-term liabilities: General obligation bonds and other debt payable 3,685,802 2,256,428 5,942,230 1,187,357 Revenue bonds payable - 4,130,422 4,130,422 - Note payable - 8,485 8,485 - Capital lease payable 478,131 333,579 811,710 50,735 Compensated absences 204,715 - 204,715 250,000 Insurance reserves 500,000 - 500,000 - Total current liabilities 13,234,235 20,257,918 33,492,153 4,976,500 Noncurrent: Due to primary government - - - 1,092,419 General obligation bonds and other debt payable 43,045,169 44,913,785 87,958,954 30,903,229 Revenue bonds payable - 83,234,045 83,234,045 - Long term note payable - 219,521 219,521 - Capital lease payable 608,187 6,500,718 7,108,905 26,626 Compensated absences 1,842,436 1,684,129 3,526,565 2,375,334 Insurance reserves 3,287,037 - 3,287,037 - Net OPEB obligation 963,051 566,859 1,529,910 2,018,658 Net pension liability 34,597,295 12,774,362 47,371,657 6,458,116 Regulatory liabilities - 5,466,563 5,466,563 - Other liabilities - 117,250 117,250 426,476 Total noncurrent liabilities 84,343,175 155,477,232 239,820,407 43,300,858 TOTAL LIABILITIES 97,577,410 175,735,150 273,312,560 48,277,358
Deferred Inflows of Resources 4,121,967 1,790,537 5,912,504 1,816,589
NET POSITION: Net investment in capital assets 82,986,888 172,629,734 255,616,622 25,111,075 Restricted externally or constitutionally for: Education - - - 646,896 Community development 8,437,252 - 8,437,252 - Debt service/renewal and replacements/capital projects 4,899,664 12,243,299 17,142,963 - Contingency reserve - 1,433,426 1,433,426 - Revenue fund - 364,186 364,186 - Deposits with bond trustees - 5,278,599 5,278,599 - Permanent funds: Nonspendable 909,230 - 909,230 - Spendable 361,434 - 361,434 - Restricted by enabling legislation 2,192,357 - 2,192,357 - Unrestricted (25,449,498) 22,266,988 (3,182,510) (13,577,516) TOTAL NET POSITION 74,337,327 214,216,232 288,553,559 12,180,455 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND NET POSITION $ 176,036,704 $ 391,741,919 $ 567,778,623 $ 62,274,402 The accompanying notes are an integral part of these financial statements. 23
CITY OF BURLINGTON, VERMONT
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2015
Program Revenues Operating Capital Charges for Grants and Grants and Net (Expenses) Expenses Services Contributions Contributions Revenue
Primary Government: Governmental Activities: General government $ 14,068,127 $ 5,289,088 $ 543,786 $ - $ (8,235,253) Public safety 23,820,259 5,587,200 423,423 289,321 (17,520,315) Public works 16,811,137 7,475,742 513,288 2,823,405 (5,998,702) Culture and recreation 10,422,351 4,074,232 624,415 - (5,723,704) Community development 4,891,704 714,715 3,817,253 - (359,736) Interest on long-term debt 1,581,846 - - - (1,581,846)
Total Governmental Activities 71,595,424 23,140,977 5,922,165 3,112,726 (39,419,556)
Business-Type Activities: Electric 62,408,788 62,622,315 - 833,098 1,046,625 Airport 20,288,983 19,030,728 - 6,508,327 5,250,072 Nonmajor 19,931,149 21,464,113 - 90,077 1,623,041
Total Business-Type Activities 102,628,920 103,117,156 - 7,431,502 7,919,738
Total Primary Government $ 174,224,344 $ 126,258,133 $ 5,922,165 $ 10,544,228 (31,499,818)
Component Units: Burlington School District $ 85,982,558 $ 1,184,805 $ 31,326,772 $ - $ (53,470,981) Burlington Community - Development Corporation 349,284 364,000 - - 14,716
Total component units $ 86,331,842 $ 1,548,805 $ 31,326,772 $- $ (53,456,265)
The accompanying notes are an integral part of these financial statements. (continued)
24
CITY OF BURLINGTON, VERMONT
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2015
(continued)
Primary Government Business- Governmental Type Component Activities Activities Total Units
Change in Net Position Net (expenses) revenue from previous page $ (39,419,556) $ 7,919,738 $ (31,499,818) $ (53,456,265)
General Revenues: Property taxes 33,054,429 - 33,054,429 - Gross receipts taxes 3,665,158 - 3,665,158 - Local option sales tax 2,179,587 - 2,179,587 - Payments in lieu of taxes 2,395,762 - 2,395,762 - Franchise fees 2,128,227 - 2,128,227 - Impact fees 349,714 - 349,714 - Interest and penalties on delinquent taxes 356,550 - 356,550 - General state support - - - 55,356,925 Unrestricted investment earnings 100,725 127,214 227,939 654,321 Dividends from associated companies - 3,128,753 3,128,753 - Other revenues 1,175,521 429,794 1,605,315 2,842,573 Additions to permanent funds 67,115 - 67,115 - Transfers, net 28,921 (28,921) - -
Total general revenues, additions to permanent funds and transfers 45,501,709 3,656,840 49,158,549 58,853,819
Change in Net Position 6,082,153 11,576,578 17,658,731 5,397,554
Net Position: Beginning of year, as restated 68,255,174 202,639,654 270,894,828 6,782,901
End of year $ 74,337,327 $ 214,216,232 $ 288,553,559 $ 12,180,455
25
CITY OF BURLINGTON, VERMONT
GOVERNMENTAL FUNDS
BALANCE SHEET
JUNE 30, 2015
Nonmajor Total Governmental Governmental General Funds Funds ASSETS Cash and cash equivalents $ 6,546,406 $ 14,489,104 $ 21,035,510 Investments 2,106,063 100,000 2,206,063 Receivables, net of allowance for uncollectibles: Property and other taxes 1,888,502 - 1,888,502 Departmental and other 1,945,719 1,537,678 3,483,397 Intergovernmental 87,708 2,437,245 2,524,953 Notes and loans receivable - 4,785,455 4,785,455 Accrued interest receivable - 1,054,720 1,054,720 Advances to other funds 1,983,605 - 1,983,605 Inventory 191,525 255,156 446,681 Prepaid expenditures 146,774 197 146,971 Other current assets 316,607 - 316,607 Due from component unit - 353,741 353,741 TOTAL ASSETS $ 15,212,909 $ 25,013,296 $ 40,226,205
LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES Liabilities: Accounts payable $ 1,327,096 $ 3,124,056 $ 4,451,152 Accrued payroll and benefits payable 1,043,743 85,056 1,128,799 Accrued liabilities 336,379 114,931 451,310 Unearned revenue 1,770,061 25,000 1,795,061 Due to component unit 107,895 - 107,895 Advances from other funds - 1,983,605 1,983,605 Insurance reserve 500,000 - 500,000 Other liabilities 50,579 100,790 151,369 TOTAL LIABILITIES 5,135,753 5,433,438 10,569,191 Deferred Inflows of Resources 1,825,659 8,299,792 10,125,451 Fund Balances: Nonspendable 2,321,904 1,164,508 3,486,412 Restricted 17,265 9,508,362 9,525,627 Committed 1,624,950 2,508,603 4,133,553 Unassigned 4,287,378 (1,901,407) 2,385,971 TOTAL FUND BALANCES 8,251,497 11,280,066 19,531,563 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES $ 15,212,909 $ 25,013,296 $ 40,226,205
The accompanying notes are an integral part of these financial statements.
26
CITY OF BURLINGTON, VERMONT
RECONCILIATION OF TOTAL GOVERNMENTAL FUND BALANCES TO NET POSITION OF GOVERNMENTAL ACTIVITIES IN THE STATEMENT OF NET POSITION
JUNE 30, 2015
Total governmental fund balances $ 19,531,563
Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. 126,353,143
Revenues are reported on the accrual basis of accounting and are not deferred until collection. 10,125,451
Long-term receivable from Vermont Municipal Bond Bank for general obligation bond drawdowns. 5,956,193
Long-term liabilities, including bonds and other debt payable and net pension obligation, are not due and payable in the current period and, therefore, are not reported in the governmental funds. General obligation bonds and other debt payable, net of related unamortized premiums and loss on refunding (46,712,573) Capital lease payable (1,086,318) Compensated absenses payable (2,047,151) Insurance reserves, long-term (3,287,037) Net other post-employment benefits payable (963,051) Net pension obligation, net of related deferred outflows and inflows (33,252,891) Accrued interest on long-term obligations (280,002)
Net position of governmental activities $ 74,337,327
The accompanying notes are an integral part of these financial statements.
27
CITY OF BURLINGTON, VERMONT
GOVERNMENTAL FUNDS
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
FOR THE YEAR ENDED JUNE 30, 2015
Nonmajor Total Governmental Governmental General Funds Funds Revenues: Taxes $ 32,911,176 $ 5,859,283 $ 38,770,459 Payments in lieu of taxes 2,395,762 - 2,395,762 Licenses and permits 3,739,704 127,229 3,866,933 Intergovernmental 2,173,036 6,544,775 8,717,811 Charges for services 14,811,677 6,970,253 21,781,930 Investment income 93,192 7,533 100,725 Loan repayments - 122,544 122,544 Other 153,629 1,076,783 1,230,412 Total Revenues 56,278,176 20,708,400 76,986,576
Expenditures: Current: General government 10,916,573 241,632 11,158,205 Public safety 24,650,066 18,129 24,668,195 Public works 4,093,595 5,361,855 9,455,450 Culture and recreation 9,727,811 1,896,287 11,624,098 Community development 2,316 4,078,807 4,081,123 Capital outlay - 9,483,616 9,483,616 Debt service: Principal 2,424,319 948,783 3,373,102 Interest and bond issue costs 1,204,247 364,022 1,568,269 Total Expenditures 53,018,927 22,393,131 75,412,058 Excess (deficiency) of revenues over (under) expenditures 3,259,249 (1,684,731) 1,574,518
Other Financing Sources (Uses): Issuance of bonds and loans - 5,934,807 5,934,807 Proceeds from capital lease 483,768 199,950 683,718 Transfers in 151,768 4,211,782 4,363,550 Transfers out (635,911) (3,698,718) (4,334,629) Total Other Financing Sources (Uses) (375) 6,647,821 6,647,446 Net change in fund balances 3,258,874 4,963,090 8,221,964 Fund Balances, at Beginning of Year, as reclassified 4,992,623 6,316,976 11,309,599 Fund Balances, at End of Year $ 8,251,497 $ 11,280,066 $ 19,531,563
The accompanying notes are an integral part of these financial statements. 28
CITY OF BURLINGTON, VERMONT
RECONCILIATION OF THE STATEMENT OF REVENUES EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2015
NET CHANGES IN FUND BALANCES - TOTAL GOVERNMENTAL FUNDS $ 8,221,964
Governmental funds report capital outlays as expenditures. However, in the Statement of Activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense: Capital outlay purchases 8,625,809 Depreciation (6,304,472) Loss on disposal of capital assets (69,320) Revenues in the Statement of Activities that do not provide current financial resources are fully 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, etc.) differ between the two statements. This amount represents the net change in deferred inflows. (632,881) The issuance of long-term debt (e.g., bonds and leases) provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the financial resources of governmental funds. Neither transaction, however, has any effect on net position: Issuance of debt (5,934,807) Issuance of capital leases (683,718) Repayments of debt 3,237,646 Bond premium, discount, and other adjustments 12,223 In the statement of activities, interest is accrued on outstanding long-term debt, whereas in governmental funds interest is not reported until due. (13,581) Some expenses reported in the Statement of Activities do not require the use of current financial resources and therefore, are not reported as expenditures in the governmental funds. Net pension obligation, net of related deferred outflows & inflows 895,933 Compensated absences (59,044) Net OPEB obligation (87,930) Insurance reserves (1,125,669)
CHANGE IN NET POSITION OF GOVERNMENTAL ACTIVITIES $ 6,082,153
The accompanying notes are an integral part of these financial statements.
29
CITY OF BURLINGTON, VERMONT
GENERAL FUND
STATEMENT OF REVENUES AND OTHER SOURCES, AND EXPENDITURES AND OTHER USES - BUDGET AND ACTUAL
FOR THE YEAR ENDED JUNE 30, 2015
Budgeted Amounts Adjusted Original Final Actual Variance With Budget Budget Amounts Final Budget Revenues and other sources: Taxes and special assessments $ 30,200,738 $ 30,200,738 $ 30,731,589 $ 530,851 Local option sales tax 2,100,000 2,100,000 2,179,587 79,587 Payments in lieu of taxes 2,205,375 2,205,375 2,395,762 190,387 Licenses and permits 4,117,000 4,117,000 3,739,704 (377,296) Intergovernmental 1,836,338 2,865,319 2,173,036 (692,283) Charges for services 13,740,036 13,842,069 14,811,677 969,608 Investment income 60,000 60,000 93,192 33,192 Transfers in (50,000) 74,745 151,768 77,023 Other 125,500 150,040 153,629 3,589 Total Revenues and Other Sources 54,334,987 55,615,286 56,429,944 814,658
Expenditures and other uses: General administration 11,275,801 11,587,475 10,916,577 670,898 Safety services 24,450,767 25,320,128 24,650,066 670,062 Public works 3,756,950 3,751,950 3,609,827 142,123 Culture and recreation 9,915,953 10,138,542 9,727,811 410,731 Community development - - 2,316 (2,316) Debt service 4,221,011 4,238,748 3,628,562 610,186 Transfers out 704,688 704,688 635,911 68,777 Total Expenditures and Other Uses 54,325,170 55,741,531 53,171,070 2,570,461 Excess (deficiency) of revenues and other sources over expenditures and other uses $ 9,817 $ (126,245) $ 3,258,874 $ 3,385,119
The accompanying notes are an integral part of these financial statements.
30
CITY OF BURLINGTON, VERMONT
PROPRIETARY FUNDS
STATEMENT OF NET POSITION
JUNE 30, 2015
Business-Type Activities Enterprise Funds Nonmajor Enterprise Electric Airport Funds Total ASSETS AND DEFERRED OUTFLOWS OF RESOURCES ASSETS: Current: Cash and cash equivalents $ 13,424,653 $ 2,442,260 $ 2,885,120 $ 18,752,033 Restricted investments 650,256 - - 650,256 Receivables, net of allowance for uncollectibles: User fees 5,081,316 1,217,605 2,547,213 8,846,134 Intergovernmental - 2,543,938 208,823 2,752,761 Estimated unbilled revenues 2,051,877 322,534 1,054,739 3,429,150 Due from Burlington Community Development Corporation - current - 67,941 - 67,941 Inventory 5,354,448 266,194 616,623 6,237,265 Prepaid expenses - - 76,399 76,399 Other current assets 1,025,690 15 5,000 1,030,705 Total current assets 27,588,240 6,860,487 7,393,917 41,842,644
Noncurrent: Restricted cash - 10,019,771 1,797,612 11,817,383 Restricted investments 5,278,599 2,223,528 - 7,502,127 Due from Burlington Community Development Corporation - long-term - 804,091 - 804,091 Investment in associated companies 25,990,556 - - 25,990,556 Regulatory assets and other prepaid charges 3,089,081 - - 3,089,081 Capital assets: Land and construction in progress 2,140,679 58,087,086 1,271,961 61,499,726 Intangible asset - - 6,549,636 6,549,636 Capital assets, net of accumulated depreciation 96,790,316 92,694,374 39,658,452 229,143,142 Total noncurrent assets 133,289,231 163,828,850 49,277,661 346,395,742 TOTAL ASSETS 160,877,471 170,689,337 56,671,578 388,238,386
Deferred Outflow of Resources 1,648,091 802,967 1,052,475 3,503,533 TOTAL ASSETS AND DEFERRED OUTFLOWS OF RESOURCES $ 162,525,562 $ 171,492,304 $ 57,724,053 $ 391,741,919
(continued)
31
(continued) Business-Type Activities Enterprise Funds Nonmajor Enterprise Electric Airport Funds Total
LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND NET POSITION LIABILITIES: Current: Accounts payable $ 2,892,529 $ 1,587,993 $ 1,046,582 $ 5,527,104 Accrued payroll and benefits payable - 74,146 83,352 157,498 Accrued interest - 897,879 - 897,879 Unearned revenue - 1,331,516 445,427 1,776,943 Other current liabilities 4,076,975 13,415 428,934 4,519,324 Payable from restricted assets: Deposits with bond trustees 650,256 - - 650,256 Current portion of long-term liabilities: General obligation bonds payable 2,256,428 - - 2,256,428 Revenue bonds payable 1,385,000 1,842,077 903,345 4,130,422 Note payable - - 8,485 8,485 Capital leases payable - 150,798 182,781 333,579 Total current liabilities 11,261,188 5,897,824 3,098,906 20,257,918
Noncurrent: General obligation bonds payable 44,913,785 - - 44,913,785 Revenue bonds payable 29,109,822 38,557,770 15,566,453 83,234,045 Long term note payable - - 219,521 219,521 Capital leases payable - 647,110 5,853,608 6,500,718 Compensated absences payable 1,176,301 200,047 307,781 1,684,129 Net OPEB obligation 224,099 126,442 216,318 566,859 Net pension liability 9,427,247 1,278,506 2,068,609 12,774,362 Regulatory liabilities 5,466,563 - - 5,466,563 Other noncurrent liabilities 117,250 - - 117,250 Total noncurrent liabilities 90,435,067 40,809,875 24,232,290 155,477,232 TOTAL LIABILITIES 101,696,255 46,707,699 27,331,196 175,735,150
Deferred Inflows of Resources 1,391,757 152,323 246,457 1,790,537
NET POSITION: Net investment in capital assets 38,240,833 109,583,705 24,805,196 172,629,734 Restricted: For debt service/renewal and replacements/capital projects - 12,243,299 - 12,243,299 For contingency reserve - - 1,433,426 1,433,426 For revenue fund - 364,186 364,186 Deposits with bond trustees 5,278,599 - - 5,278,599 Unrestricted 15,918,118 2,805,278 3,543,592 22,266,988 TOTAL NET POSITION 59,437,550 124,632,282 30,146,400 214,216,232 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND NET POSITION $ 162,525,562 $ 171,492,304 $ 57,724,053 $ 391,741,919
The accompanying notes are an integral part of these financial statements.
32
CITY OF BURLINGTON, VERMONT
PROPRIETARY FUNDS
STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET POSITION
FOR THE YEAR ENDED JUNE 30, 2015
Business-Type Activities Enterprise Funds Nonmajor Enterprise Electric Airport Funds Total Operating Revenues: Charges for services $ 47,726,819 $ 16,494,977 $ 21,920,695 $ 86,142,491 Intergovernmental - 144,871 23,553 168,424 Miscellaneous 14,895,496 - 249,873 15,145,369 Total Operating Revenues 62,622,315 16,639,848 22,194,121 101,456,284
Operating Expenses: Personnel - 3,677,473 5,953,479 9,630,952 Nonpersonnel - 8,323,633 9,831,015 18,154,648 Electric department 52,411,282 - - 52,411,282 Depreciation and amortization 4,608,670 5,809,621 2,742,850 13,161,141 Payments in lieu of taxes - - 1,403,805 1,403,805 Total Operating Expenses 57,019,952 17,810,727 19,931,149 94,761,828 Operating Income (Loss) 5,602,363 (1,170,879) 2,262,972 6,694,456
Nonoperating Revenues (Expenses): Dividends from associated companies 3,128,753 - - 3,128,753 Passenger facility charges - 2,390,880 - 2,390,880 Investment income 72,899 54,186 129 127,214 Other income/expense - net 201,265 249,261 (20,732) 429,794 Interest income/expense - net (3,218,784) (2,478,256) (730,008) (6,427,048) Gain/loss on disposal of capital assets (233,469) - - (233,469) Total Nonoperating Revenues (Expenses) (49,336) 216,071 (750,611) (583,876) Income Before Contributions and Transfers 5,553,027 (954,808) 1,512,361 6,110,580 Capital contributions 833,098 6,508,327 90,077 7,431,502 Payment in lieu of taxes (1,936,583) - - (1,936,583) Transfers out - - (28,921) (28,921) Change in Net Position 4,449,542 5,553,519 1,573,517 11,576,578 Net Position at Beginning of Year, as restated 54,988,008 119,078,763 28,572,883 202,639,654 Net Position at End of Year $ 59,437,550 $ 124,632,282 $ 30,146,400 $ 214,216,232
The accompanying notes are an integral part of these financial statements.
33
CITY OF BURLINGTON, VERMONT PROPRIETARY FUNDS STATEMENT OF CASH FLOWS FOR THE YEAR ENDED JUNE 30, 2015
Nonmajor Enterprise Electric Airport Funds Total Cash Flows From Operating Activities: Receipts from customers and users $ 47,245,968 $ 16,433,013 $ 21,622,870 $ 85,301,851 Receipts of operating grants - 144,871 23,553 168,424 Receipts for interfund services - 242,617 242,617 Other receipts 16,198,822 327,614 - 16,526,436 Payments to suppliers (40,211,890) (8,574,044) (9,708,171) (58,494,105) Payments for wages and benefits - (3,564,240) (5,841,425) (9,405,665) Payment in lieu of taxes - - (1,403,805) (1,403,805) Payments for other expenses (11,734,130) (488,206) - (12,222,336) Net Cash Provided by Operating Activities 11,498,770 4,279,008 4,935,639 20,713,417 Cash Flows From Noncapital Financing Activities: Other income, net 201,265 - 135,970 337,235 Payment in lieu of taxes (1,936,583) - - (1,936,583) Receipt from loan receivable from BCDC - 65,941 - 65,941 Decrease in advances from other funds - - (163,169) (163,169) Receipt/(payment) of interfund transfers - - (28,921) (28,921) Interest paid on cash deficit to general fund - (21,979) - (21,979) Net Cash Provided/(Used) by Noncapital Financing Activities (1,735,318) 43,962 (56,120) (1,747,476) Cash Flows From Capital and Related Financing Activities: Proceeds from bonds, notes & leases payable 20,820,000 - 112,713 20,932,713 Proceeds from issuance of refunding debt - 15,660,000 - 15,660,000 Proceeds from premium - 1,906,637 - 1,906,637 Payment to defease revenue bond - (17,580,000) - (17,580,000) Acquisition and construction of capital assets (24,732,961) (6,826,833) (1,695,744) (33,255,538) Proceeds from sale of capital assets 16,031 - - 16,031 Capital grants/contributions 833,098 5,290,570 90,077 6,213,745 Passenger facility charges - 2,390,880 - 2,390,880 Payments to CitiCapital - - (163,354) (163,354) Settlement charges - - (1,000,000) (1,000,000) Principal Paid on: General obligation bonds (16,039,287) - - (16,039,287) Revenue bonds (2,160,000) (893,109) (3,053,109) Capital lease obligations - (280,521) (120,702) (401,223) Interest paid on outstanding debt, including issue costs (3,772,548) (2,475,762) (731,141) (6,979,451) Net Cash Used by Capital and Related Financing Activities (22,875,667) (4,075,029) (4,401,260) (31,351,956)
Cash Flows From Investing Activities: Net (additions)/reductions to restricted cash and investments 13,181,604 700,306 (1,439,257) 12,442,653 Purchase of investment in associated companies (1,717,200) - - (1,717,200) Receipt of interest & dividends 3,636,343 54,186 694 3,691,223 Net Cash Provided/(Used) by Investing Activities 15,100,747 754,492 (1,438,563) 14,416,676 Net Increase/(Decrease) in Cash 1,988,532 1,002,433 (960,304) 2,030,661
Cash and cash equivalents at beginning of year 11,436,121 1,439,827 3,845,424 16,721,372
Cash and cash equivalents at end of year $ 13,424,653 $ 2,442,260 $ 2,885,120 $ 18,752,033
(continued)
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(continued)
Nonmajor Enterprise Electric Airport Funds Total Adjustments to Reconcile Operating Income/(Loss) to Net Cash Provided by Operating Activities: Operating income/(loss) $ 5,602,363 $ (1,170,879) $ 2,262,972 $ 6,694,456 Depreciation and amortization 4,917,644 5,809,621 2,742,850 13,470,115 Other operating net revenues and expenses - (101,161) - (101,161) (Increase)/decrease in receivables (757,991) (161,947) (314,512) (1,234,450) (Increase)/decrease in unbilled revenues 361,848 32,283 (19,339) 374,792 (Increase)/decrease in inventory (581,383) (15,656) (27,642) (624,681) (Increase)/decrease in prepaids - 4,583 - 4,583 (Increase)/decrease in notes receivable 1,070,000 - - 1,070,000 Increase/(decrease) in accounts payable (1,846,706) (236,730) (90,967) (2,174,403) Increase/(decrease) in customer deposits - - 10,699 10,699 Increase/(decrease) in accrued payroll and benefits - 32,505 34,185 66,690 Increase/(decrease) in accrued liabilities - (2,608) 256,281 253,673 Increase/(decrease) in deferred charges 891,690 18,074 909,764 Increase/(decrease) in compensated absences - 3,746 (5,098) (1,352) Increase/(decrease) in other post employment benefits liability - 23,000 15,600 38,600 Increase/(decrease) in net pension liability and related deferred inflow/outflow (542,501) 53,982 67,367 (421,152) Increase/(decrease) in unearned revenue - 8,269 - 8,269 Increase/(decrease) in other operating assets/liabilities 2,383,806 - (14,831) 2,368,975 Net Cash Provided by Operating Activities $ 11,498,770 $ 4,279,008 $ 4,935,639 $ 20,713,417
Statement of noncash transactions: Sale-leaseback financing of settlement liability $ - $ - $ 6,000,000 $ 6,000,000 Vehicles acquired under capital lease financing $ - $ - $ 83,378 $ 83,378
The accompanying notes are an integral part of these financial statements.
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CITY OF BURLINGTON, VERMONT
FIDUCIARY FUNDS
STATEMENT OF FIDUCIARY NET POSITION
JUNE 30, 2015
Private Pension Purpose Trust Trust Fund Funds ASSETS
Cash and cash equivalents $ 1,309,836 $ 37,818 Investments 160,078,935 - Reimbursement receivable 399,890 -
Total Assets 161,788,661 37,818
LIABILITIES
Accounts payable 70,736 - Accrued payroll 820 - Compensated absences 1,116 - Due to primary government 132 -
Total Liabilities 72,804 -
NET POSITION
Held in trust for: Employees' pension benefits 161,715,857 - Individuals and organizations - 37,818
Total Net Position $ 161,715,857 $37,818
The accompanying notes are an integral part of these financial statements.
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CITY OF BURLINGTON, VERMONT
FIDUCIARY FUNDS
STATEMENT OF CHANGES IN FIDUCIARY NET POSITION
FOR THE YEAR ENDED JUNE 30, 2015
Pension Private Trust Purpose Fund Trust Funds
Additions: Contributions: Employer - pension $ 8,840,768 $ - Plan members 2,167,652 - Total Contributions 11,008,420 -
Investment earnings: Interest and dividends 5,358,291 - Net increase in the fair value of investments (5,206,163) 5 Total Investment Earnings 152,128 5 Less Investment Expenses (709,485) - Net Investment Earnings (557,357) 5 Total Additions 10,451,063 5
Deductions: Benefits - pension 12,686,561 - Benefits - FICA (5,579) - Benefits - post employment health (78,330) - Administrative expenses 306,795 - Total deductions 12,909,447 - Change in net position (2,458,384) 5
Net position: Beginning of year 164,174,241 37,813 End of year $ 161,715,857 $ 37,818
The accompanying notes are an integral part of these financial statements.
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CITY OF BURLINGTON, VERMONT
COMPONENT UNITS
STATEMENT OF NET POSITION
JUNE 30, 2015 Burlington Burlington Community School Development District Corporation Total ASSETS AND DEFERRED OUTFLOWS OF RESOURCES ASSETS: Current: Cash and cash equivalents $ 8,472,568 $ 17,146 $ 8,489,714 Investments 200,938 - 200,938 Receivables, net of allowance for uncollectibles: Intergovernmental 3,406,668 - 3,406,668 Other 283,919 283,919 Capital lease receivable - 94,256 94,256 Due from primary government 107,895 - 107,895 Inventory 21,753 - 21,753 Prepaid expenses 8,250 - 8,250 Other current assets - 3,758 3,758 Total current assets 12,501,991 115,160 12,617,151 Noncurrent: Capital lease receivable - 1,553,608 1,553,608 Capital assets: Land and construction in progress 2,299,751 492,645 2,792,396 Capital assets, net of accumulated depreciation 39,756,957 4,117,473 43,874,430 Total noncurrent assets 42,056,708 6,163,726 48,220,434 TOTAL ASSETS 54,558,699 6,278,886 60,837,585 Deferred Outflows of Resources 1,190,910 245,907 1,436,817 TOTAL ASSETS AND DEFERRED OUTFLOWS OF RESOURCES $ 55,749,609 $ 6,524,793 $ 62,274,402
(continued)
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Burlington Burlington Community School Development District Corporation Total LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND NET POSITION LIABILITIES: Current: Accounts payable $ 1,945,581 $ - $ 1,945,581 Accrued expenses 1,213,936 - 1,213,936 Accrued interest payable 191,784 - 191,784 Due to primary government - 133,354 133,354 Other liabilities - 3,753 3,753 Current portion of long-term liabilities: General obligation bonds payable 954,286 233,071 1,187,357 Capital leases payable 50,735 - 50,735 Compensated absences 250,000 - 250,000 Total current liabilities 4,606,322 370,178 4,976,500 Noncurrent: Due to primary government - 1,092,419 1,092,419 General obligation bonds and other debt payable 27,055,701 3,847,528 30,903,229 Revenue bonds payable - - - Capital leases payable 26,626 - 26,626 Compensated absences payable 2,375,334 - 2,375,334 Net OPEB obligation 2,018,658 - 2,018,658 Net pension liability 6,458,116 - 6,458,116 Other 426,476 - 426,476 Total noncurrent liabilities 38,360,911 4,939,947 43,300,858 TOTAL LIABILITIES 42,967,233 5,310,125 48,277,358 Deferred Inflows of Resources 1,816,589 - 1,816,589 NET POSITION: Net investment in capital assets 13,969,360 11,141,715 25,111,075 Restricted: For education 646,896 - 646,896 Unrestricted (3,650,469) (9,927,047) (13,577,516) TOTAL NET POSITION 10,965,787 1,214,668 12,180,455 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND NET POSITION $ 55,749,609 $ 6,524,793 $ 62,274,402
The accompanying notes are an integral part of these financial statements.
CITY OF BURLINGTON, VERMONT
COMPONENT UNITS
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2015
Net (Expenses) Revenues and Changes Program Revenues in Net Position Burlington Operating Capital Burlington Community Charges for Grants and Grants and School Development Expenses Services Contributions Contributions District Corporation Total
Burlington School District Educational $ 83,135,170 $ 1,184,805 $ 31,326,772 $ - $ (50,623,593) $ - $ (50,623,593) Interest on long-term debt 1,422,614 - - - (1,422,614) - (1,422,614) Unallocated depreciation 1,424,774 - - - (1,424,774) - (1,424,774) Total Burlington School District 85,982,558 1,184,805 31,326,772 - (53,470,981) - (53,470,981)
Burlington Community Development Corporation Cost of services 32,024 364,000 - - - 331,976 331,976 Interest on long-term debt 210,011 - - - - (210,011) (210,011) Depreciation 107,249 - - - - (107,249) (107,249) Total Burlington Community Development Corporation 349,284 364,000 - - - 14,716 14,716 Total component units $ 86,331,842 $ 1,548,805 $ 31,326,772 $ - (53,470,981) 14,716 (53,456,265)
General Revenues: General state support 55,356,925 - 55,356,925 Unrestricted investment earnings 599,184 55,137 654,321 Miscellaneous 2,790,470 52,103 2,842,573 Total general revenues 58,746,579 107,240 58,853,819 Change in Net Position 5,275,598 121,956 5,397,554
Net Position: Beginning of year, as restated 5,690,189 1,092,712 6,782,901 End of year $ 10,965,787 $ 1,214,668 $ 12,180,455 The accompanying notes are an integral part of these financial statements.
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CITY OF BURLINGTON, VERMONT
Notes to Financial Statements
Incorporated in 1865, the City of Burlington operates under a tripartite system of government with the Mayor serving as Chief Executive, the City Council as the legislative body and the Commissioners as the primary policy makers within their respective departments. The City Charter authorizes the provision for the following services for the residents of the City: general administration, public safety, public works, community development, culture and recreation, utilities and education.
1. Summary of Significant Accounting Policies
The accounting policies adopted by the City of Burlington (the “City”) conform to generally accepted accounting principles (GAAP) as applicable to governmental entities. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing accounting and financial reporting principles. The following is a summary of the more significant accounting policies employed in the preparation of these financial statements.
A. The Financial Reporting Entity
This report includes all of the funds of the City of Burlington, Vermont. The reporting entity consists of the primary government; organizations for which the primary government is financially accountable; and other organizations for which the nature and significance of their relationship with the primary government are such that their exclusion would cause the reporting entity’s financial statements to be misleading or incomplete. Component units are legally separate organizations for which the elected officials of the primary government are financially account- able. The primary government is financially accountable if it appoints a voting majority of the organization’s governing body and it is able to impose its will on that organization or there is a potential for the organization to provide specific financial benefits to or burdens on the primary government. The primary govern- ment may be financially accountable if an organization is fiscally dependent on the primary government. The following entities are reported as discretely pre- sented component units, in a separate column in the government-wide financial statements to emphasize that they are legally separate from the City:
Burlington Community Development Corporation – the organization’s pri- mary purpose is to carry out the industrial and economic development of the City of Burlington, including specifically the development of businesses located, or to be located, on lands owned by the City of Burlington at the Burlington International Airport. As such, the purposes of the Corporation shall include fostering, encouraging and assisting the physical location of business enterprises in the Greater Burlington area and otherwise fulfilling the purposes of a “local development corporation”. The Board of Directors of the
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Burlington Community Development Corporation must be members of the City of Burlington’s Board of Finance.
Burlington School District – the organization’s primary purpose is to carry out the vision of education in the community. The Burlington School District is governed by a separately elected School Board, the legal entity for conducting a system of public education within the geographic area of a school district. The system was created by, and is governed by, state statutes. Members of a board are, therefore, state officers chosen by citizens of a district to represent them and the state in the legislative management of public schools. The Board of School Commissioners has the dual responsibility for implementing statu- tory requirements pertaining to public education and local citizens’ desires for educating the community’s youth. For detailed information on the Burlington School District accounts, refer to separately issued financial statements.
Excluded are organizations such as the Chittenden County Transportation Authority, Burlington Housing Authority, Chittenden County Government, the Winooski Valley Park District, the Friends of Fletcher Free Library, the Burlington City Arts Foundation, Burlington Schools Foundation, and the Chittenden Solid Waste District, since after considering all factors related to oversight responsibility, the City has concluded they are not part of the reporting entity.
B. Basis of Presentation
The accounts of the City are organized and operated on the basis of fund account- ing. A fund is an independent fiscal and accounting entity with a separate set of self-balancing accounts which comprise its assets, liabilities, fund equity, reve- nues, and expenditures or expenses, as appropriate. Government resources are allocated to and accounted for in individual funds based upon the purposes for which they are spent and the means by which spending activities are controlled.
The basic financial statements of the City include both government-wide state- ments and fund financial statements. The focus of the government-wide state- ments is on reporting the operating results and financial position of the City as a whole and present a longer term view of the City’s finances. The focus of the fund financial statements is on reporting on the operating results and financial position of the most significant funds of the City and present a shorter term view of how operations were financed and what remains available for future spending.
Government-wide Statements: The statement of net position and the statement of activities display information about the primary government, the City, and its component units, the Burlington Community Development Corporation and the Burlington School District. These statements include the financial activities of the overall government, except for fiduciary activities. Eliminations have been made to minimize the double counting of activities between funds. These statements distinguish between the governmental and business-type activities of the City. Governmental activities generally are financed through taxes, intergovernmental
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revenues, and other nonexchange transactions. Business-type activities are financed in whole or in part by fees charged to external parties.
The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the City’s governmental activities and for each segment of the City’s business-type activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Program revenues include (a) charges paid by the recipients of goods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues.
Fund Financial Statements: The fund financial statements provide information about the City’s funds, including 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 and enterprise funds are aggregated and reported as nonmajor 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. Operating revenues consists of sales of electricity, rents of electric property, fees to transmit electricity of others, sales of renewable energy credits, operation of other utilities to run generation facilities, rent of airport terminal space and buildings, concessions, commissions, parking receipts, sales of water, wastewater user charges, telephone, cable and internet access, hot lunch sales and other miscellaneous fees for service. Nonoperating revenues result from certain nonexchange transactions or ancillary activities. Non-operating revenues consist of investment earnings, electric services rendered to customers upon their request, passenger facility charges, grant income and building rents from buildings purchased for future expansion.
Operating expenses are defined as the ordinary costs and expenses for the opera- tion, maintenance and repairs of the electric plant, airport, water facility, waste- water facility, telecommunications equipment and lines, and hot lunch programs. Operating expenses include the cost of production, purchased power, maintenance of transmission and distribution systems, administrative, and general expenses and depreciation and amortization. Operating expenses do not include the interest on bonds, notes or other evidences or indebtedness and related costs.
The City reports on the following major governmental funds:
General Fund - This is the City’s main operating fund. It accounts for all financial resources of the City except those required to be accounted for in another fund.
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The City reports on the following major Enterprise funds:
Electric Fund - This fund accounts for the operations of the Burlington Electric Department.
Airport Fund - This fund accounts for the operations of the Burlington International Airport.
Additionally, the City reports the following fund types:
Private-Purpose Trust Funds – These funds are used to report trust arrangements under which resources are to be used for the benefit of firemen injured in the line of duty, Christmas gifts for servicemen overseas, Christmas dinners for the desti- tute and student educational expenses and scholarships. All investment earnings, and in some cases, the principal of these funds may be used to support these activities.
Pension Trust Fund – This fund accounts for monies contributed by the City and its employees and the income on investments less amounts expended for the pensions of retired City employees. This fund is supported by a dedicated tax rate from the General Fund and charges to non-general fund funds based on a percent- age of payroll. This Fund also pays for the FICA costs for the City’s employer’s share of FICA.
C. Measurement Focus
The accounting and financial reporting treatment applied to a fund is determined by its measurement focus. Government-wide and proprietary fund financial state- ments are reported using the economic resources measurement focus. This means that all assets and liabilities associated with the operation of these funds (whether current or noncurrent) are included on the balance sheet (or statement of net posi- tion). Equity (i.e., net total assets) is segregated into net investment in capital assets; restricted net position; and unrestricted net position. Operating statements present increases (i.e., revenues) and decreases (i.e., expenses) in net total position.
Governmental fund financial statements are reported using the current financial resources measurement focus. This means that only current assets and current liabilities are generally reported on their balance sheets. Their reported fund balances (net current assets) are considered a measure of available spendable resources, and are segregated into nonspendable; restricted; committed; assigned and unassigned amounts. Operating statements of these funds present increases (i.e., revenues and other financing sources) and decreases (i.e., expenditures and other financing uses) in net current assets. Accordingly, they are said to present a summary of sources and uses of available spendable resources during a period.
D. Basis of Accounting
Basis of accounting refers to when revenues and expenditures or expenses are recognized in the accounts and reported in the financial statements. Basis of
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accounting relates to the timing of the measurements made, regardless of the measurement focus applied.
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 the liabilities are incurred, regardless of when the related cash flow takes place. Nonexchange transactions, in which the City gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, grants, entitlements, and donations. On the 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 funds are reported using the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. “Measurable” means the amount of the transaction can be determined, and “available” means the amount is collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. The City con- siders all revenues reported in governmental funds to be available if the revenues are collected within sixty days after year-end. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long- term debt, certain compensated absences, self-insured health and dental benefits, reserves for property and casualty and workers’ compensation claims, landfill post- closure costs, net pension obligation, post-employment benefits and other long-term liabilities which are recognized when the obligations are expected to be liquidated or are funded with expendable available financial resources.
General capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term debt and acquisitions under capital leases are reported as other financing sources.
Under the terms of grant agreements, the City funds certain programs by a combi- nation of specific cost-reimbursement grants, categorical block grants, and gen- eral revenues. Thus, when program expenses are incurred, there are both restricted and unrestricted net positions available to finance the program. It is the City’s policy to first apply cost-reimbursement grant resources to such programs, fol- lowed by general revenues. Expenditure driven grants are recognized as revenue when the qualifying expenditures have been incurred and other grant requirements have been met.
Recognition of revenues on funds received in connection with loan programs are recognized when loans are awarded and expenses incurred in excess of current grants and program income. An offsetting deferred revenue is recognized for all loans receivable. Loan repayment revenue is recognized as the loans are repaid.
The Burlington Electric Department (the Department) is an enterprise fund of the City of Burlington, Vermont (the City). The City has overall financial account- 45
ability for the Department; its Council appoints the Commissioners of the Depart- ment which oversee its operations, and the City collateralizes the Department’s general obligation debt. The Department is also subject as to rates, accounting, and other matters, to the regulatory authority of the State of Vermont Public Service Board (VPSB) and the Federal Energy Regulatory Commission (FERC). In accordance with FASB ASC Topic 980, Regulated Operations (and Codified in GASB Statement 62), the Department records certain assets and liabilities in accordance with the economic effects of the rate making process.
E. Cash and Short-Term Investments
Cash balances from all funds, except those required to be segregated by law, are combined to form a consolidation of cash. Cash balances are invested to the extent available, and interest earnings are recognized in the general fund. Certain special revenue, proprietary, and fiduciary funds segregate cash, and investment earnings become a part of those funds.
Deposits with financial institutions consist primarily of demand deposits, certifi- cates of deposits, and savings accounts. A cash and sweep account is maintained that is available for use by all funds. Each fund’s portion of this pool is reflected on the combined financial statements under the caption “cash and short-term investments”. The interest earnings attributable to each fund type are included under investment income.
For purpose of the statement of cash flows, the proprietary funds consider invest- ments with original maturities of three months or less to be short-term investments.
F. Investments
State and local statutes place certain limitations on the nature of deposits and investments available. Deposits in any financial institution may not exceed certain levels within the financial institution. Non-fiduciary fund investments can be made in securities issued by or unconditionally guaranteed by the U.S. Govern- ment or agencies that have a maturity of one year or less from the date of pur- chase and repurchase agreements guaranteed by such securities with maturity dates of no more than 90 days from the date of purchase.
Investments for the Trust Funds consist of marketable securities, bonds, and short-term money market investments. Investments are carried at fair value.
G. Interfund Receivables and Payables
Transactions between funds that are representative of lending/borrowing arrange- ments outstanding at the end of the fiscal year are referred to as either “due from/to other funds” (i.e., the current portion of interfund loans) or “advances to/from other funds” (i.e., the non-current portion of interfund loans).
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Advances between funds are offset by a fund balance reserve account in appli- cable governmental funds to indicate the portion not available for appropriation and not available as expendable financial resources.
Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as “internal balances”.
H. Jointly Owned Facilities
The Burlington Electric Department has recorded its ownership interest in jointly owned facilities as capital assets. The Department’s ownership interest in each of the jointly owned facilities is as follows:
McNeil Station 50.0% Highgate Station 7.7%
The Department is responsible for its proportionate share of the operating expenses of the jointly owned facilities which are billed to the Department on a monthly basis. The associated operating costs allocated to the Department are classified in their respective expense categories in the statement of operations. Separate financial statements are available from the Department for these jointly owned facilities.
I. Investments in Associated Companies
The Electric Department follows the cost method of accounting for its 6.38% Class B common stock, 1.97% Class C common stock, and 7.69% Class C preferred stock ownership interest in Vermont Electric Power Company, Inc. (VELCO), and its 5.13% ownership interest in Vermont Transco LLC (Transco). Transco is an affiliated entity of VELCO. VELCO owns and operates a transmission system in the State of Vermont over which bulk power is delivered to all electric utilities in the State of Vermont. Under a Power Transmission Contract with the State of Vermont, VELCO bills all costs, including amortization of its debt and a fixed return on equity, to the State of Vermont and others using the system.
During the year ended June 30, 2015, the Department purchased 75,557 Class A units and 96,163 Class B units in VT Transco LLC for a cost of $1,717,200.
Schedule of Ownership in Associated Companies FY 15 Velco, Class B Common Stock $ 1,403,800 Velco, Class C Common Stock 39,200 Velco, Class C Preferred Stock 11,196 VT Transco, LLC, A Units 10,796,000 VT Transco, LLC, B Units 13,740,360 $ 25,990,556
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J. Inventories
Inventories are valued at cost using the first-in/first-out (FIFO) method. The costs of governmental fund-type inventories are recorded as expenditures when pur- chased rather than when consumed. No significant inventory balances were on hand in governmental funds.
K. Capital Assets
Capital assets, which include property, plant, equipment, and infrastructure assets, (for enterprise funds only) are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets are defined by the government as assets with an estimated useful life of five years or greater. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation.
The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets’ lives are not capitalized.
Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business-type activities is included as part of the capitalized value of the assets constructed.
Property, plant, and equipment are depreciated using the straight-line method over the following estimated useful lives: Capitalization Estimated Threshold Service Life Land $ - N/A Construction in Progress - N/A Antiques and Works of Art 10,000 N/A Land Improvements 25,000 30 years Buildings and Building Improvements 20,000 25-150 years Vehicles, Machinery, Equipment and Furniture various 3-15 years Computer Equipment - Hardware and Software 10,000 5-15 years Book Collections 10,000 5 years Infrastructure 50,000 10-40 years Distribution, Production and Collection Systems 10,000 10-100 years Intangible asset - 20 years
The Electric Department has recorded its ownership in jointly owned facilities as capital assets. The associated operating costs allocated to the Electric Department are classified in their respective expense categories.
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Capital assets reported in the government-wide and proprietary fund financial statements are depreciated in order that the cost of these assets will be charged to expenses over their estimated service lives, generally using the straight line method of calculating depreciation. The Electric Department depreciates the McNeil & Highgate Converter Stations using the straight-line method. However, only a portion of the current depreciation is recoverable through future rates. The difference is included in deferred depreciation and will be recovered through future rates.
L. Nonutility Property
In 1986, land along the Winooski River was purchased at a cost of $775,600 from a neighboring utility for the development of the Chace Mill hydroelectric project. Although the Department incurred various engineering and other related costs in investigating the feasibility of pursuing this project, the Department declined to move forward. In 1991, under a long-term agreement, the land and land rights were leased to the Winooski One Partnership for the construction of the Winooski One hydroelectric facility. That lease agreement was terminated as of August 31, 2014 with the Department’s purchase of the Winooski One Hydroelectric facility. In addition, the $775,600 that was Nonutility property has been reclassified to capital assets as part of the Winooski One hydroelectric plant purchase.
M. Renewable Energy Credit Sales
In 2008, the McNeil Generating Station (McNeil) installed a Regenerative Selective Catalytic Reduction (RSCR) unit. The RSCR unit significantly reduces McNeil’s Nitrous Oxide (NOx) emission levels which allow the station to qualify to sell Connecticut Class 1 Renewable Energy Certificates (RECs). The McNeil RECs are determined to be qualified for sale based on a review of emissions outputs by McNeil. At the end of every quarter, an affidavit is signed stating whether or not McNeil’s emissions out met the requirements needed to sell the RECs. McNeil receives a certification from the State of Connecticut indicating that they met the standards for the quarter based on the statistics provided by McNeil. Connecticut Class 1 RECs are one of the more valuable REC products in New England and REC sales from McNeil are expected to continue to be a significant revenue source for the Department. Sales are recorded as revenue upon delivery of the RECs to the customer.
The Electric Department receives RECs from the Vermont Wind Project in Sheffield (BED is entitled to 40% of the output of the 40MW project). During FY 2013, commercial operations commenced at Georgia Mountain Community Wind Farm (BED has entitlement to the 10MW of output from the project). The RECs from both of these wind facilities are qualified for participation in most of the New England REC markets, making revenue for the sale of these RECs a significant source of revenue as well.
The Department planning staff monitors McNeil and Vermont Wind output levels, REC commitments made, the markets for these RECs, and the State statutes and
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rules that govern the creation and sale of these RECs. The Department will involve itself in discussions/proceedings as needed, either in Vermont or else- where in New England, where such rules and statutes are the subject at hand.
The Department periodically sells RECs either through an auction structure, through broker-initiated transactions, or through direct placement with entities who need the RECs to comply with various New England statutes. The Depart- ment enters into agreements to sell these RECs for both the current year’s generation and future years’ production.
N. Pollution Remediation Obligations
The Electric Department faces possible liability as a potentially responsible party (PRP) with respect to the cleanup of certain hazardous waste sites. The City is currently a PRP as a landowner of a hazardous waste superfund site in Burlington, Vermont that is the subject of a remediation investigation by the Environmental Protection Agency (the EPA). The Department has agreed to share on an equal basis all past and future costs incurred in connection with any and all settlements or actions resulting from the designation of the City as a PRP at this site. In light of a recent agreement between the City and the EPA concerning the remediation plan at the site, the Department believes that the likelihood of any liability mate- rial to the financial position of the Department is remote and as such, no liability has been accrued as of June 30, 2015.
O. Compensated Absences
It is the government’s policy to permit employees to accumulate earned but unused vacation and sick pay benefits. All vested sick and vacation pay is accrued when incurred in the government-wide, proprietary, and fiduciary fund financial state- ments. A liability for these amounts is reported in governmental funds only if they have matured, for example, as a result of employee resignations and retirements.
P. Liabilities to be Paid from Restricted Assets
The balance in these liabilities represents accrued interest payable on the revenue bonds and construction invoices which will be paid from restricted assets. The restricted assets will also be used for additional construction of certain assets, including certain costs in accounts and contracts payable.
Q. Long-Term Obligations
In the government-wide financial statements, and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type statement of net position.
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R. Fund Equity
Fund equity at the governmental fund financial reporting level is classified as “fund balance”. Fund equity for all other reporting is classified as “net position”.
Fund Balance - Fund balance represents the difference between the current assets and current liabilities. The City reserves those portions of fund balance that are legally segregated for a specific future use or which do not represent available, spendable resources and therefore, are not available for appropria- tion or expenditure. Unassigned fund balance indicates that portion of fund balance that is available for appropriation in future periods.
The City’s fund balance classification policies and procedures are as follows:
1) Nonspendable funds are either unspendable in the current form (i.e., inventory or prepaid items) or can never be spent (i.e., perpetual care). 2) Restricted funds are used solely for the purpose in which the fund was established. In the case of special revenue funds, these funds are created by statute or otherwise have external constraints on how the funds can be expended. 3) Committed funds are reported and expended as a result of motions passed by the highest decision making authority in the government (i.e., the City Council). 4) Assigned funds are used for specific purposes as established by manage- ment. These funds, which include encumbrances, have been assigned for specific goods and services ordered but not yet paid for. This account also includes fund balance voted to be used in the subsequent fiscal year. 5) Unassigned funds are available to be spent in future periods.
When an expenditure is incurred that would qualify for payment from multiple fund balance types, the City uses the following order to liquidate liabilities: restricted, committed, assigned, and unassigned.
Net Position - Net position represent the difference between assets and liabilities. Net investment in capital assets, consist of capital assets, net of accumulated depreciation, reduced by the outstanding balances of any borrowing used for the acquisition, construction or improvement of those assets. Net position is reported as restricted when there are limitations imposed on their use either through the enabling legislation adopted by the City or through external restrictions imposed by creditors, grantors, or laws or regulations of other governments. The remaining net position is reported as unrestricted.
S. Use of Estimates
The preparation of basic financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that
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affect the reported amounts of assets and liabilities and disclosures for contingent assets and liabilities at the date of the basic financial statements, and the reported amounts of the revenues and expenditures/expenses during the fiscal year. Actual results could vary from estimates that were used.
2. Stewardship, Compliance, and Accountability
A. Liquidity Risk
During fiscal year 2013, the City issued a $9,000,000 Stability Bond to decrease its reliance on short-term cash flow financing. Prior to the issuance of the stability bonds, the City faced liquidity risk which is the risk of not having sufficient liquid financial resources to meet obligations when they fall due, or having to incur excessive costs to do so. Primarily as a result of the Burlington Telecom (BT) deficit and various capital project and enterprise funds deficits, the City had relied on short-term borrowing to obtain cash to pay operating expenditures. On July 1, 2013 the City signed a Revolving Tax Anticipation Line of Credit for $10,000,000 which matured on June 30, 2014, and renewed on July 1, 2014.
The General Fund unassigned fund balance includes the proceeds of the $9,000,000 stability bond from fiscal year 2013. It is the City’s intent to arrange its financial affairs, manage its budget and provide for future balanced financial operations.
The City’s current plans include:
Adhere to policy with financing first, and spending second. Continue to monitor cash position daily, and update forecast weekly. Improve the collection rate on outstanding receivables. Refinance short-term debt with attractive rates, and issue long-term debt approved by the voters. Utilize lines of credit (LOC) instead of anticipation notes and reduce the amounts of LOC. Ensure Enterprise and Special Funds operate at a profit, and are cash positive reducing reliance on General Fund pooled cash.
B. Budgetary Information
The City follows these procedures in establishing the budgetary data reflected in the financial statements for the General Fund:
1. Departments, and departments with commission approval, prepare detailed recommendations to the Mayor on the budget. Prior to June 15, the Mayor, with the assistance of the other members of the Board of Finance, prepares and submits to the City Council a proposed budget for the fiscal year
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commencing the following July 1. The operating budget includes proposed expenditures and estimated revenues. 2. Prior to July l, the budget is legally enacted through passage of a resolu- tion of the City Council. 3. The Mayor may propose, with the advice of the Board of Finance, amend- ments to the budget. Such proposed amendments require a majority approval of the City Council. The amount of such proposed amendments may be decreased by a simple majority vote of the City Council. Such pro- posed amendments may be increased above the level proposed by the Mayor only with a two-thirds vote of the City Council. 4. The Board of Finance is authorized to transfer budgeted amounts between line items within an appropriation account or within accounts of a depart- ment. Any revisions which increase the total expenditures of any depart- ment function or fund above the original appropriation must be approved by resolution of the City Council. 5. That portion of the designated fund balance that consists of operating and capital improvement carry-overs, represents unexpended appropriations, which are allowed to be carried over to later years as provided for by City Charter or by resolution of the City Council. All other unexpended appro- priations lapse at the close of the fiscal year. The City Charter specifically prohibits expenditures in excess of appropriations, except on an emer- gency basis for health, police, fire and public welfare. 6. The City of Burlington tax rate can change each year by the cost of CCTA, Retirement, County and Debt Service without voter approval. However, any rate change on the tax rate for other purposes, above the maximum approved tax rate previously approved by voters, must be approved by City voters.
Encumbrance accounting, under which purchase orders, contracts and other com- mitments for the expenditure of monies are recorded in order to reserve that portion of the applicable appropriation, is not employed as an extension of formal budgetary integration in any fund in the City.
C. Budgetary Basis
The general fund final appropriation appearing on the “Budget and Actual” page of the fund financial statements represents the final amended budget after all reserve fund transfers and supplemental appropriations.
D. Budget/GAAP Reconciliation
The budgetary data for the general fund is based upon accounting principles that differ from generally accepted accounting principles (GAAP). Therefore, in addi- tion to the GAAP basis financial statements, the results of operations of the general fund are presented in accordance with budgetary accounting principles to provide a meaningful comparison to budgetary data.
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The following is a summary of adjustments made to the actual revenues and other sources, and expenditures and other uses, to conform to the budgetary basis of accounting. Revenues Expenditures and Other and Other City General Fund Financing Sources Financing Uses Revenues/expenditures (GAAP Basis) $ 56,278,176 $ 53,018,927 Other financing sources/uses (GAAP Basis) 635,536 635,911 Reverse gross up of capital leases (483,768) (483,768) Budgetary Basis $ 56,429,944 $ 53,171,070
E. Deficit Fund Equity
The following funds had unassigned fund balance deficits as of June 30, 2015:
Non-major Governmental funds: Special Revenue funds: Church St. Marketplace $ (105,469) Dedicated taxes (43,997) Capital Project funds: Waterfront Access (1,423,089) Wayfinding (28,742) FEMA (285,425) Downtown Westlake (11,132) Other (3,553) Total $ (1,901,407)
The deficits will be eliminated through future departmental revenues, bond pro- ceeds, and transfers from other funds.
3. Cash and Cash Equivalents
The custodial credit risk for current operating deposits is the risk that in the event of a bank failure, the City’s deposits may not be recovered. The deposits in the bank in excess of the insured amount are uninsured and uncollateralized. The deposits at June 30, 2015 totaled $40,456,286, of which $26,298,984 were insured or collateralized by the FDIC and the FHLB Pittsburgh letter of credit up to $25,500,000. At June 30, 2015, $26,928,537 remains uncollateralized and exposed to custodial credit risk.
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4. Investments
City
A. Credit Risk
Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment.
Presented below is the actual rating as of year-end of the City (excluding BED and BERS): Fair Maturity in Years Investment Type Value Less than 1 1 - 5 6 - 10 U.S. Treasury notes $ 2,223,528 $- $ 743,558 $ 1,479,970 Certificates of deposit 2,206,063 450,493 1,755,570 - Total investments $ 4,429,591 $ 450,493 $ 2,499,128 $ 1,479,970
B. Custodial Credit Risk
The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty (e.g., broker-dealer) to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The City does not have policies for custodial credit risk.
C. Concentration of Credit Risk
The City places no limit on the amount the City may invest in any one issuer. Investments in any one issuer (other than U.S. Treasury securities) that represents 5% or more of City investments are as follows:
Bank Investment Type Amount KeyBanc Capital Markets Certificate of deposit $ 250,493 KeyBanc Capital Markets Certificate of deposit $ 250,933 KeyBanc Capital Markets Certificate of deposit $ 251,120 KeyBanc Capital Markets Certificate of deposit $ 251,160 KeyBanc Capital Markets Certificate of deposit $ 250,508 KeyBanc Capital Markets Certificate of deposit $ 249,968 KeyBanc Capital Markets Certificate of deposit $ 250,385 KeyBanc Capital Markets Certificate of deposit $ 251,500
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D. Interest Rate Risk
Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. The City has a formal investment policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates.
E. Foreign Currency Risk
Foreign currency risk is the risk that changes in foreign exchange rates will adversely affect the fair value of an investment. The City does not have any such invest- ments, or policies for foreign currency risk.
Burlington Electric Department
A. Investments
The Department has a formal investment policy and is authorized per Article 1, Section 1.1 of the General Bond Resolution to invest in obligations as follows:
(1) Direct obligations of the United States of America or obligations guaranteed by the United States of America. (2) Bonds, notes or other evidence of indebtedness issued or guaranteed by the CoBank, Federal Intermediate Credit Banks, FHLB, FNMA, GNMA, Export-Import Bank of the United States, Federal Land Banks, U.S. Postal Service, Federal Financing Bank, or any agency or instrumentality of or cor- poration wholly-owned by the United States of America. (3) New Housing Authority Bonds issued by public agencies or municipalities and fully secured by a pledge of annual contributions under annual contri- bution contracts with the United States or America, or Project Notes issued by public agencies or municipalities and fully secured by a requisition or payment agreement with the United States of America. (4) Obligations of any state, commonwealth or territory of the United States of America, or the District of Columbia, or any political subdivision of the foregoing, with an investment grade rating not lower than the three highest categories by at least one nationally recognized debt rating service. (5) Certificates of deposit and bankers acceptances issued by banks which are members of the FDIC and each of which has a combined capital and surplus of not less than ten million dollars, provided that the time deposits in and acceptances of any bank under the Resolution (a) do not exceed at any time twenty-five percent of the combined capital and surplus of the bank or (b) are fully secured by obligations described in items 1, 2, 3, and 4 of this paragraph. (6) Repurchase contracts with banks which are described in item 5 of this para- graph, or with recognized primary dealers in government bonds, fully secured by obligations described in items 1, 2, 3, and 4 or this paragraph.
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B. Concentration of Credit Risk - Investments
Concentration of credit risk of investments is the risk of loss attributable to the magnitude of a government’s investment in a single issuer. The Electric Department invests its current operating cash in three money market accounts with TD Bank and its restricted noncurrent funds in several money market accounts with its bond trustees (US Bank and Peoples United), which exceed 49% of the total investment balance at June 30, 2015. The invested balance of current money market funds at June 30, 2015 was $5,304,272. The invested balance on noncurrent money market funds at June 30, 2015 was $3,208,247.
C. Interest Rate Risk
Interest rate risk is the risk that changes in interest rates of debt investments that will adversely affect the fair value of an investment. The Electric Department has minimized its risk exposure as its investments are limited to government securities and other conservative investments as outlined in the investment policy.
The Electric Department’s investments as of June 30, 2015 (all of which are restricted by Bond resolution) are presented below by investment type, and debt securities are presented by maturity.
Fair Maturity in Years Investment Type Value Less than 1 1 - 2 2 - 3 Money market $ 3,208,247 $ 3,208,247 $- $ - Certificates of deposit 2,714,000 - 1,000,000 1,714,000 Total investments $ 5,922,247 $ 3,208,247 $ 1,000,000 $ 1,714,000
The Department is required by its bond indenture to make monthly deposits into the renewal and replacement fund equal to 10% of the monthly revenue bond debt service funding requirements. Funds on deposit may be withdrawn from the renewal and replacement fund for expenses allowed by the bond covenant. Amounts in excess of $867,000 at June 30 may be returned to the revenue fund. A summary of deposits with bond trustees is as follows:
6/30/15 Bond funds: Renewal and replacement fund $ 996,671 Debt service fund 2,201,437 Debt service reserve fund 2,724,139 5,922,247 Accrued interest receivable 6,608 Total $ 5,928,855
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Burlington Employees Retirement System
A. Credit Risk
Presented below are the System’s investment types, which are exempt from the credit risk disclosure: Fair Investment Type Value State investment pool* $ 153,697,633 Private equities 6,381,302 Total investments $ 160,078,935
*Fair value is the same as the value of the pool share. The Vermont Pension Investment Committee (VPIC) was established by Act of the Vermont Legislature (Acts 2005, No. 215 [Adj. Sess.], as amended by Acts of 2007, No. 100 [Adj. Sess.]) to combine the assets of the State Teachers’ Retirement System of Vermont, the Vermont State Employees’ Retirement System, and the Vermont Municipal Employees’ Retirement System for the purpose of (i) investment in a manner that is more cost and resource efficient; (ii) improving the effectiveness of the oversight and management of the assets of the Retirement Systems; and (iii) maintaining the actuarial accounting, and asset allocation integrity of the Retirement systems. Subsequent legislation (Acts of 2005, No. 50) authorized the VPIC to enter into agreements with municipalities administering their own retirement systems to invest retirement funds for those municipal plans. The VPIC is operated under contract with professional investment managers. All external investment managers shall be retained pursuant to written contracts that delineate their respective responsibilities and performance expectation and include a formal set of investment guidelines and administrative requirements for management of each portfolio. The VPIC shall retain one or more custodian bank or trust institutions to hold the VPIC portfolio. The custodian bank accounts for and assists in the settlement of all transactions executed by VPIC’s investment managers and reports to the VPIC and to staff on holdings and transactions of the VPIC portfolio.
B. Custodial Credit Risk
The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty (e.g., broker-dealer) to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The City and System do not have policies for custo- dial credit risk.
Of the System’s investment in private equities of $6,381,302 and pooled funds of $153,697,633, the System has a custodial credit risk exposure of $160,078,935 because the related securities are uninsured, unregistered, and held by VPIC. The System manages the risk with SIPC, Excess SIPC and because the assets are held in separately identifiable trust accounts. Of the System’s total exposure, $153,697,633 is invested in the state investment pool.
C. Concentration of Credit Risk
The System does not have an investment in one issuer greater than 5% of total investments, with the exception of VPIC Fund.
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D. Interest Rate Risk
Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. The City has a formal investment policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates.
E. Foreign Currency Risk
Foreign currency risk is the risk that changes in foreign exchange rates will adversely affect the fair value of an investment. The City and System do not have any such investments, or policies for foreign currency risk.
5. Taxes Receivable
The City is responsible for assessing and collecting its own property taxes as well as education property taxes for the State. Property taxes are assessed based on property valuations as of April 1, annually. Taxes are due four times per year on August 12, November 12, March 12, and June 12. Taxes unpaid after each due date are considered to be late and are subject to 1% interest added on the next day; an additional 4% interest is added after the tenth day late and an additional 1% per month thereafter. Taxes which remain unpaid ten days after the June 12 due date are delinquent and are subject to an 8% penalty and interest calculated at 12%. Unpaid taxes become an enforceable lien on the property and such properties are subject to tax sale.
Taxes receivable at June 30, 2015 consist of the following:
Property taxes: 2015 $ 571,027 2014 136,743 2013 102,934 Prior years 709,697 Gross receipts taxes 534,712 Allowance for doubtful taxes (166,611) Total $ 1,888,502
6. User Fees Receivable
User fees receivable include amounts due from customers for electric service, rent and passenger facility charges at the airport, cable, internet and phone services, and water, wastewater, and stormwater usage. User fees receivable are reported net of an allowance for doubtful accounts estimated at up to 30% of accounts receivable depending on the aging of the receivables. Water, wastewater, and stormwater delin- quent receivables are liened in a similar manner as property taxes, described in Note 5.
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User fees receivable and related allowance for doubtful accounts at June 30, 2015 consist of the following: Billed Allowance for Service Fees Doubtful Fees Total Electric $ 5,386,423 $ (305,108) $ 5,081,315 Airport 1,243,926 (26,321) 1,217,605 Nonmajor Enterprise Funds: Telecom 971,596 (93,333) 878,263 Wastewater 893,761 (3,000) 890,761 Water 686,911 (3,000) 683,911 Stormwater 94,279 - 94,279 Total $ 9,276,896 $ (430,762) $ 8,846,134
7. Departmental and Other Receivables
Departmental and other receivables, as reported in the governmental funds, represent ambulance, police tickets, local option sales tax, community and economic develop- ment office receivables, and other reimbursements.
Local Option School Ambulance Police Sales Tax PILOT CEDO Other Total Gross $ 1,008,045 $ 2,299,725 $ 525,298 $ 486,245 $ 1,443,479 $ 408,448 $ 6,171,240 Less: Allowance for doubtful accounts (778,137) (1,826,784) - - - (82,922) (2,687,843) Total $ 229,908 $ 472,941 $ 525,298 $ 486,245 $ 1,443,479 $ 325,526 $ 3,483,397
8. Intergovernmental Receivables
This balance represents reimbursements requested from Federal and State agencies for expenditures incurred in fiscal 2015.
Governmental Business-Type Activities Activities Total Public safety grants $ 87,708 $ - $ 87,708 V.T. municipal bond bank 5,956,193 208,823 6,165,016 Capital project grants 2,437,245 - 2,437,245 Airport improvements - 2,543,938 2,543,938 Total $ 8,481,146 $ 2,752,761 $ 11,233,907
9. Notes and Loans Receivables
The City, through various state and federal grant programs, has extended loans for the development or rehabilitation of residential and commercial properties within the City 60
and small business loans for new Burlington businesses. The repayment terms of these loans and interest rates all vary and are contingent on numerous factors outside of the control of the City, such as the financial viability of the projects. It is the City's policy to recognize the grant revenues when the loans are repaid.
The following is a summary of the major components of notes, loans, and accrued interest receivables at June 30, 2015: Governmental Funds Interest free HODAG loan receivable for Riverside Avenue and Salmon Run dated October 16, 2009 maturing on October 16, 2039. $2,750,000 Less: allowance for doubtful accounts (2,750,000) CEDO loans receivable represent loans under Housing and Urban Development programs. 14,647,600 Less: allowance for doubtful accounts (9,862,145) Total notes and loans receivable $ 4,785,455
10. Capital Lease Receivable - BCDC
The Burlington Community Development Corporation (BCDC) has various receiv- ables on outstanding development or rehabilitation of properties within the City from new businesses. The repayment terms vary and are contingent on numerous factors outside the control of the City.
The following is a summary of the major components of capital lease receivables for BCDC at June 30, 2015: Component Unit BCDC capital lease receivable from Westlake Parking, LLC dated 7/26/2007. The annual lease payment is $72,000, including interest at 7% annually, maturing on 7/26/2026 with a lump sum payment of $448,000. The lease requires an annual contribution of $6,000 to a capital reserve fund. $ 770,791 BCDC 1993 relief bond receivables (3) from Champlain Housing Trust Corporation, offset by bond payable. The total quarterly payments are $21,588 including interest rates between 3.25% - 4.00%, maturing in FY2024 and FY2025. 658,000 BCDC Multi-generational bond receivable from Champlain Housing Trust Corporation, offset by bond payable. The monthly payment is $1,879, maturing on October 1, 2028. 219,073 Total capital leases receivable 1,647,864 Less: amount due within one year (94,256) Capital leases receivable, net of current portion $ 1,553,608
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Expected future receipts of BCDC’s lease receivables are as follows:
Fiscal Year Principal Interest Total 2016 $ 94,258 $ 86,612 $ 180,870 2017 98,401 82,497 180,898 2018 102,744 78,154 180,898 2019 107,289 73,599 180,888 2020 112,076 68,822 180,898 2021-2025 542,550 265,760 808,310 2026-2029 590,546 76,577 667,123 Total $ 1,647,864 $ 732,021 $ 2,379,885
11. Interfund Advances and Transfers
Although self-balancing funds are maintained, most transactions flow through the general fund. In order to obtain accountability for each fund, interfund receivable and payable accounts must be utilized. The composition of advances to/from other funds (amounts considered to be long-term) as of June 30, 2015 is as follows:
Advances to Advances from Fund Other Funds Other Funds General fund $ 1,983,605 $ - Other Nonmajor Governmental funds: Community and Economic Development Office - 1,072,713 Downtown Westlake - 367,032 FEMA - 285,426 Church Street Marketplace - 141,697 Church Street Marketplace - 87,995 Wayfinding - 28,742 Total $ 1,983,605 $ 1,983,605
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The City reports interfund transfers between many of its funds. The sum of all transfers presented in the table agrees with the sum of interfund transfers presented in the governmental and proprietary fund financial statements. The following is an analysis of interfund transfers made in fiscal year 2015:
Governmental Funds: Transfers In Transfers Out Major funds: General fund $ 151,768 $ 635,911 Nonmajor funds: Special Revenue funds: Traffic commission 432,529 50,000 Tax increment financing - 2,979,560 Community and economic development 502,100 330,887 Dedicated taxes 811,928 - Impact Fees - 118,118 Church street market place 11,000 - Capital Project funds: Southern connector 9,073 - Street & sidewalk infrastructure - 220,153 Waterfront access 1,478,279 - FEMA 4,977 - General capital 961,072 - Wayfinding 824 - Subtotal Nonmajor Governmental funds 4,211,782 3,698,718 Business-Type Funds: Nonmajor funds: Wastewater - 28,921 Subtotal Nonmajor Business-Type funds - 28,921 Grand Total $ 4,363,550 $ 4,363,550
Transfers are used to (1) move revenues from the fund that statute or budget requires collecting them to the fund that statute or budget requires to expend them, and (2) use unrestricted revenues collected in the general fund to finance various programs and accounted for in other funds in accordance with budgetary authorizations.
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12. Capital Assets
Capital asset activity for the City’s Governmental and Business-Type Activities, as well as each enterprise fund, for the year ended June 30, 2015 was as follows:
Beginning Ending Balance Increases Decreases Balance Governmental Activities: Capital assets, not being depreciated: Land $ 13,680,454 $ - $ - $ 13,680,454 Construction in progress 10,107,316 6,026,700 (16,817) 16,117,199 Antiques and works of art 52,000 - - 52,000 Total capital assets, not being depreciated 23,839,770 6,026,700 (16,817) 29,849,653 Capital assets, being depreciated: Land improvements 2,820,015 99,751 - 2,919,766 Buildings and building improvements 52,248,558 45,644 - 52,294,202 Vehicles, machinery, equipment and furniture 21,334,721 1,082,371 (612,127) 21,804,965 Book collections 1,640,326 175,835 - 1,816,161 Infrastructure 113,386,873 1,195,508 - 114,582,381 Total capital assets, being depreciated 191,430,493 2,599,109 (612,127) 193,417,475 Less accumulated depreciation for: Land improvements (1,191,529) (99,711) - (1,291,240) Buildings and building improvements (11,321,948) (744,305) - (12,066,253) Vehicles, machinery, equipment and furniture (14,810,996) (1,712,422) 559,624 (15,963,794) Book collections (1,135,540) (195,232) - (1,330,772) Infrastructure (62,709,124) (3,552,802) - (66,261,926) Total accumulated depreciation (91,169,137) (6,304,472) 559,624 (96,913,985) Total capital assets, being depreciated, net 100,261,356 (3,705,363) (52,503) 96,503,490 Governmental activities capital assets, net $ 124,101,126 $ 2,321,337 $ (69,320) $ 126,353,143
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Beginning Ending Balance Increases Decreases Balance Business-Type Activities- Combined all Enterprise Funds: Capital assets, not being depreciated: Land $ 23,495,385 $ 1,963,600 $ - $ 25,458,985 Construction in progress 30,667,042 11,975,295 (6,601,596) 36,040,741 Total capital assets, not being depreciated 54,162,427 13,938,895 (6,601,596) 61,499,726 Capital assets, being depreciated: Land improvements 98,054,295 33,954 - 98,088,249 Buildings and building improvements 85,724,924 117,779 (8,897) 85,833,806 Vehicles, machinery, equipment and furniture 27,631,876 415,902 (4,127,965) 23,919,813 Distribution and collection systems 208,777,085 26,380,685 (524,487) 234,633,283 Intangible asset 6,000,000 980,349 - 6,980,349 Total capital assets, being depreciated 426,188,180 27,928,669 (4,661,349) 449,455,500 Less accumulated depreciation for: Land improvements (44,958,422) (3,372,650) - (48,331,072) Buildings and building improvements (29,637,202) (2,591,324) 148 (32,228,378) Vehicles, machinery, equipment and furniture (17,044,562) (1,198,634) 1,535,668 (16,707,528) Distribution and collection systems (109,838,954) (6,609,956) 383,879 (116,065,031) Intangible asset - (430,713) - (430,713) Total accumulated depreciation (201,479,140) (14,203,277) 1,919,695 (213,762,722) Total capital assets, being depreciated, net 224,709,040 13,725,392 (2,741,654) 235,692,778 Business-type activities capital assets, net $ 278,871,467 $ 27,664,287 $ (9,343,250) $ 297,192,504
Beginning Ending Balance Increases Decreases Balance Electric Enterprise Fund: Capital assets, not being depreciated: Land $ 559,921 $ 775,600 $ - $ 1,335,521 Construction in progress 1,097,966 6,023,026 (6,315,834) 805,158 Total capital assets, not being depreciated 1,657,887 6,798,626 (6,315,834) 2,140,679 Capital assets, being depreciated: Distribution and collection systems 155,447,195 26,177,224 (484,664) 181,139,755 Total capital assets, being depreciated 155,447,195 26,177,224 (484,664) 181,139,755 Less accumulated depreciation for: Distribution and collection systems (79,046,180) (5,650,809) 347,550 (84,349,439) Total accumulated depreciation (79,046,180) (5,650,809) 347,550 (84,349,439) Total capital assets, being depreciated, net 76,401,015 20,526,415 (137,114) 96,790,316 Electric Enterprise Fund capital assets, net $ 78,058,902 $ 27,325,041 $ (6,452,948) $ 98,930,995
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Beginning Ending Balance Increases Decreases Balance Airport Enterprise Fund: Capital assets, not being depreciated: Land $ 21,878,462 $ 1,188,000 $ - $ 23,066,462 Construction in progress 29,569,076 5,737,310 (285,762) 35,020,624 Total capital assets, not being depreciated 51,447,538 6,925,310 (285,762) 58,087,086 Capital assets, being depreciated: Land improvements 68,135,260 33,954 - 68,169,214 Buildings and building improvements 84,527,975 24,273 - 84,552,248 Vehicles, machinery, equipment and furniture 10,203,361 129,058 - 10,332,419 Total capital assets, being depreciated 162,866,596 187,285 - 163,053,881 Less accumulated depreciation for: Land improvements (30,128,127) (2,640,348) - (32,768,475) Buildings and building improvements (29,415,441) (2,568,858) - (31,984,299) Vehicles, machinery, equipment and furniture (5,006,318) (600,415) - (5,606,733) Total accumulated depreciation (64,549,886) (5,809,621) - (70,359,507) Total capital assets, being depreciated, net 98,316,710 (5,622,336) - 92,694,374 Airport Enterprise Fund capital assets, net $ 149,764,248 $ 1,302,974 $ (285,762) $ 150,781,460
Beginning Ending Balance Increases Decreases Balance Telecom Enterprise Fund: Capital assets, not being depreciated: Land $ 157,800 $ - $ - $ 157,800 Total capital assets, not being depreciated 157,800 - - 157,800 Capital assets, being depreciated: Buildings and building improvements 1,196,949 11,188 (8,897) 1,199,240 Vehicles, machinery, equipment and furniture 4,086,188 83,378 (4,008,178) 161,388 Intangible asset 6,000,000 980,349 - 6,980,349 Total capital assets, being depreciated 11,283,137 1,074,915 (4,017,075) 8,340,977 Less accumulated depreciation for: Buildings and building improvements (221,761) (20,820) 148 (242,433) Vehicles, machinery, equipment and furniture (1,442,025) (19,582) 1,430,502 (31,105) Intangible asset - (430,713) - (430,713) Total accumulated depreciation (1,663,786) (471,115) 1,430,650 (704,251) Total capital assets, being depreciated, net 9,619,351 603,800 (2,586,425) 7,636,726 Telecom Enterprise Fund capital assets, net $ 9,777,151 $ 603,800 $ (2,586,425) $ 7,794,526
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Beginning Ending Balance Increases Decreases Balance Wastewater Enterprise Fund: Capital assets, not being depreciated: Land $ 847,952 $ - $ - $ 847,952 Total capital assets, not being depreciated 847,952 - - 847,952 Capital assets, being depreciated: Land improvements 29,919,035 - - 29,919,035 Buildings and building improvements - 82,318 - 82,318 Vehicles, machinery, equipment and furniture 11,952,819 35,985 (36,452) 11,952,352 Distribution and collection systems 17,689,669 - - 17,689,669 Total capital assets, being depreciated 59,561,523 118,303 (36,452) 59,643,374 Less accumulated depreciation for: Land improvements (14,830,295) (732,302) - (15,562,597) Buildings and building improvements - (1,646) - (1,646) Vehicles, machinery, equipment and furniture (9,703,199) (489,897) 32,275 (10,160,821) Distribution and collection systems (7,192,440) (356,209) - (7,548,649) Total accumulated depreciation (31,725,934) (1,580,054) 32,275 (33,273,713) Total capital assets, being depreciated, net 27,835,589 (1,461,751) (4,177) 26,369,661 Wastewater Enterprise Fund capital assets, net $ 28,683,541 $ (1,461,751) $ (4,177) $ 27,217,613
Beginning Ending Balance Increases Decreases Balance Water Nonmajor Enterprise Fund: Capital assets, not being depreciated: Land $ 51,250 $ - $ - $ 51,250 Construction in progress - 214,959 - 214,959 Total capital assets, not being depreciated 51,250 214,959 - 266,209 Capital assets, being depreciated: Vehicles, machinery, equipment and furniture 1,389,508 167,481 (83,335) 1,473,654 Distribution and collection systems 34,471,223 126,081 (39,823) 34,557,481 Total capital assets, being depreciated 35,860,731 293,562 (123,158) 36,031,135 Less accumulated depreciation for: Vehicles, machinery, equipment and furniture (893,020) (88,740) 72,891 (908,869) Distribution and collection systems (23,499,670) (562,505) 36,329 (24,025,846) Total accumulated depreciation (24,392,690) (651,245) 109,220 (24,934,715) Total capital assets, being depreciated, net 11,468,041 (357,683) (13,938) 11,096,420 Water Enterprise Fund capital assets, net $ 11,519,291 $ (142,724) $ (13,938) $ 11,362,629
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Beginning Ending Balance Increases Decreases Balance Stormwater Nonmajor Enterprise Fund: Capital assets, being depreciated: Distribution and collection systems $ 1,168,998 $ 77,380 $ - $ 1,246,378 Total capital assets, being depreciated 1,168,998 77,380 - 1,246,378 Less accumulated depreciation for: Distribution and collection systems (100,664) (40,433) - (141,097) Total accumulated depreciation (100,664) (40,433) - (141,097) Total capital assets, being depreciated, net 1,068,334 36,947 - 1,105,281 Other Nonmajor Enterprise Funds capital assets, net $ 1,068,334 $ 36,947 $ - $ 1,105,281
Certain amounts in the beginning balance column have been reclassified from amounts reported in the fiscal year 2014 financial statements.
Depreciation expense was charged to functions of the City as follows:
Governmental Activities: General government $ 387,745 Public safety 899,649 Public works 4,020,094 Community development 142,728 Culture and recreation 854,256 Total depreciation expense - governmental activities $ 6,304,472
Business-Type Activities: Electric $ 5,650,809 * Airport 5,809,621 Telecom 471,115 Wastewater 1,580,054 Water 651,245 Stormwater 40,433 Total depreciation expense - business-type activities $ 14,203,277
*Represents depreciation of Electric Capital Assets and not regulatory depreciation expense as reported on the Proprietary Funds Statement of Revenues, Expenses and Changes in Fund Net Position.
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A summary of Burlington’s component unit Burlington Community Development Corporation’s capital assets activity is as follow:
Beginning Ending Balance Increases Decreases Balance Burlington Community Development Corporation: Capital Assets, Not Being Depreciated: Land $ 492,645 $ - $ - $ 492,645 Total Capital Assets, Not Being Depreciated 492,645 - - 492,645 Capital Assets, Being Depreciated: Buildings 4,690,387 - - 4,690,387 Total 4,690,387 - - 4,690,387 Less accumulated depreciation for: Buildings (510,376) (62,538) - (572,914) Totals (510,376) (62,538) - (572,914) Total Capital Assets, Being Depreciated 4,180,011 (62,538) - 4,117,473 Component Unit Capital Assets, Net $ 4,672,656 $ (62,538) $ - $ 4,610,118
A summary of Burlington’s component unit Burlington School District’s capital assets activity is as follow: Beginning Ending Balance Increases Decreases Balance Burlington School District: Capital assets, not being depreciated: Land $ 2,251,677 $ - $ - $ 2,251,677 Construction in progress 7,206,991 48,074 (7,206,991) 48,074 Total capital assets, not being depreciated 9,458,668 48,074 (7,206,991) 2,299,751 Capital assets, being depreciated: Buildings and building improvements 42,667,952 9,050,580 - 51,718,532 Vehicles, machinery, equipment and furniture 6,859,940 202,333 - 7,062,273 Total capital assets, being depreciated 49,527,892 9,252,913 - 58,780,805 Less accumulated depreciation for: Buildings and building improvements (11,907,126) (1,127,825) - (13,034,951) Vehicles, machinery, equipment and furniture (5,665,485) (323,412) - (5,988,897) Total accumulated depreciation (17,572,611) (1,451,237) - (19,023,848) Total capital assets, being depreciated, net 31,955,281 7,801,676 - 39,756,957 School capital assets, net $ 41,413,949 $ 7,849,750 $ (7,206,991) $ 42,056,708
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13. Regulatory Assets and Other Prepaid Charges
Regulatory and other prepaid charges at June 30, 2015 comprise the following:
Electric Fund Deferred depreciation expense to be recovered in future years $ 2,258,112 Deferred VPSB accounting orders 400,699 Retirement of meters 430,270 Total $ 3,089,081
A. Deferred Depreciation Expense to be Recovered in Future Years
Provisions for depreciation of capital assets, with the exception of the Joseph C. McNeil Generating Station (the McNeil Station) and the Highgate Converter Station (the Highgate Station), are reported using the straight-line method at rates based upon the estimated service lives and salvage values of the several classes of property. Depreciation of capital assets for the McNeil Station and the Highgate Station are calculated using the straight-line method. However, a portion of the current depreciation expense is only recoverable through future rates. The differ- ence is included in deferred charges (calculated as the straight-line depreciation expense less the depreciation expense on a sinking fund basis) and will be recovered in future years. The Department recorded straight-line depreciation of $5,449,605 for the year ended June 30, 2015. In 2015 $866,933 of deferred depreciation expense was realized. Unamortized deferred depreciation balance of $2,258,112 remained at June 30, 2015.
B. Deferred-VPSB Accounting Orders
In 2012, the Department obtained an accounting order from the Vermont Public Service Board (VPSB) related to costs for the McNeil Station turbine overhaul. The total deferred cost was $935,044 and will be amortized over seven years (84 months) beginning July 2011. Amortization expense related to the deferred overhaul charges was $133,566 for 2015, and has been reported as a component of production expense. The unamortized balance at June 30, 2015 is $400,699.
C. Deferred Retirement of Meters
Due to the Smart Grid/Meter project in 2012-2013, under a Department of Public Service directive, the depreciated book value of certain retired meters has been deferred and will be amortized over a five-year period. Amortization expense related to the deferred write off was $124,527 for 2015.
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14. Deferred Outflows of Resources
Deferred outflows of resources represent the consumption of net assets by the City that is applicable to future reporting periods. Deferred outflows of resources have a positive effect on net position, similar to assets.
The following is a summary of deferred outflow of resources balances as of June 30, 2015: Entity-wide Basis Fund Basis Governmental Business-type Proprietary Funds Activities Activities Electric Airport Nonmajor Changes in proportional share of pension contributions $ 150,239 $ 1,165,504 $- $ 521,592 $ 643,912 Fiscal year 2015 deferred pension contributions 5,316,132 2,333,705 1,643,767 281,375 408,563 Loss on advanced refunding 18,398 4,324 4,324 - - Total deferred outflows $ 5,484,769 $ 3,503,533 $ 1,648,091 $ 802,967 $ 1,052,475
15. Accounts Payable and Accrued Expenses
Accounts payable represent fiscal year 2015 expenditures paid on or after July 1, 2015.
16. Long-Term Obligations – City of Burlington
A. Types of Long-Term Obligations
General Obligation Bonds. The City issues general obligation bonds to provide resources for the acquisition and construction of major capital facilities and to refund prior bond issues. General obligation bonds have been issued for both governmental and proprietary activities. Bonds are reported in governmental activities if the debt is expected to be repaid from governmental fund revenues and in business-type activities if the debt is expected to be repaid from proprietary fund revenues.
General obligation bonds are direct obligations and pledge the full faith and credit of the City.
No-Interest Revolving Loans. The State of Vermont offers a number of no- interest revolving loan programs to utilize for predetermined purposes. Two of the five no-interest loans do charge a 2% administration fee. The City has borrowed money from the Vermont Special Environmental Revolving Fund for sewer storm- water projects. These bonds are both general obligation and revenue supported bonds.
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Revenue Bonds - The City issues bonds where the City pledges income to pay the debt service. Revenue bonds are reported in business type activities only because the debt is expected to be repaid from proprietary fund revenues.
Certificates of Participation - The City enters into agreements for the purpose of financing the acquisition and/or renovation of land and buildings. These agree- ments qualify as long-term debt obligations for accounting purposes (even though they include clauses that allow for cancellation of the certificate of participation in the event the City does not appropriate funds in future years). The Certificates of Participation are reported in governmental activities because all of the debt is expected to be repaid from general governmental revenues.
Other Notes Payable - The City has other notes payable to finance various capital projects through local banks and U.S. Government agencies.
Capital Lease Obligations - The City enters into lease agreements as the lessee for the purpose of financing the acquisition of major pieces of equipment. These lease agreements qualify as capital lease obligations for accounting purposes (even though they include clauses that allow for cancellation of the lease in the event the City does not appropriate funds in future years) and, therefore, have been recorded at the present value of the future minimum lease payments as of the inception date of the leases. Leases are reported in governmental activities if the debt is expected to be repaid from general governmental revenue and in business– type activities if the debt is expected to be repaid from proprietary fund revenues.
Compensated Absences - It is the policy of the City to permit certain employees to accumulate earned but unused benefits. The City, excluding the School Fund, allows employees to carryover up to 360 hours of vested vacation time to the next fiscal year. The City also allows all employees hired prior to July 1, 2000 to carry over the lesser of 25% of their sick leave balance or 120 hours. City employees hired after July 1, 2000 may carryover earned sick leave balances; however, it is not a vested benefit upon termination. The School Fund allows certain employees to carryover up to 80 hours vested vacation time. The School Fund also allows sick leave to be vested upon reaching certain plateaus, depending on the individ- ual contract. The School has made the assumption that the employee will likely reach the eligibility threshold once they are within three (3) years of the actual vesting date. The accrual for unused compensated absences time, based on current pay rates, is recorded in the government-wide financial statements and proprietary fund financial statements.
Unamortized Premiums, Discounts, and Refunding Losses
Debt premiums, discounts, and refunding losses incurred in connection with the sale of bonds are amortized over the terms of the related debt. Unamortized balances are included as a component of long-term debt.
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Other Post-employment Benefits
The City has recorded a liability for the governmental activities in the government- wide financial statements and in the individual enterprise funds and for the business-type activities in the government-wide financial statements which repre- sent their actuarially determined costs for post-employment benefits. These costs relate to subsidized health care and life insurance for retirees during the period from retirement to the date of eligibility for social security benefits.
Compensated Absences and Post-employment Benefits are paid by the applicable fund where the employee is charged. Insurance Reserves are generally liquidated by the General Fund.
A detailed listing of the general obligation bonds and other notes payable expected to be repaid by governmental funds are as follows: Amount Serial Outstanding Maturities Interest Amount as of Governmental Activities: Through Rate(s) % Issued 6/30/15 General obligation bonds: Fire Equipment Bond 2003A 11/01/2018 3.50 - 4.00% $ 2,500,000 $ 820,000 General Improvements 2004 Refunding Series B 12/01/2016 2.00 - 3.80% 530,000 85,000 General Improvements 2005 Series A 11/01/2015 3.50 - 3.60% 250,000 30,000 General Improvements 2005 Series B 11/01/2015 3.25 - 3.50% 1,000,000 120,000 General Improvements 2006 Series A 11/01/2026 3.50 - 4.00% 1,000,000 695,000 General Improvements 2007 Series A 11/01/2027 3.50 - 4.25% 1,000,000 740,000 General Improvements 2009 Series C 11/01/2029 2.00 - 4.125% 1,000,000 805,000 General Improvements 2009 Series C 11/01/2029 2.00 - 4.125% 1,000,000 805,000 General Improvements 2009 Series C - Street Impr. 11/01/2029 2.00 - 4.125% 2,250,000 1,825,000 General Improvements 2011 Series A 11/01/2031 3.00 - 4.75% 1,000,000 900,000 General Improvements 2011 Series A - Fire 11/01/2031 3.00 - 4.75% 1,325,000 1,190,000 General Improvements 2011 Series A - Street Paving 11/01/2031 3.00 - 4.75% 3,250,000 2,915,000 General Improvements 2011 Series B 11/01/2031 2.00 - 4.75% 1,000,000 895,000 Public Improvement Bonds 2012 Series A 11/01/2032 5.00% 1,000,000 940,000 Public Improvement Bonds 2012 Series A 11/01/2032 5.00% 2,000,000 1,880,000 Taxable G.O. Bonds 2013 Series A - Fiscal Stability 11/01/2028 3.50 - 5.25% 9,000,000 8,490,000 Public Improvement Bonds 2013 Series B 11/01/2033 4.00 - 6.75% 2,000,000 1,947,143 Public Improvement Bonds 2014 Series A 11/15/2034 0.51 - 3.99% 2,000,000 2,000,000 Total general obligation bonds 27,082,143 Other debt: Downtown Parking - Certificate of Participation 12/01/2018 4.30 - 4.80% 5,500,000 1,050,000 Capital Projects - Certificate of Participation 12/01/2020 5.375 - 5.75% 4,100,000 1,720,000 Downtown Parking - Certificate of Participation 05/01/2025 4.0 - 4.375% 7,870,000 5,070,000 HUD Section 108 - US Guaranteed Notes 1999 08/01/2017 5.40 - 6.20% 1,930,000 315,000 HUD Section 108 - US Guaranteed Notes 2003 08/01/2022 3.25% 3,602,000 495,000 HUD Section 108 - US Guaranteed Notes 2005 08/01/2018 variable 1,827,000 800,000 Special Obligation Tax Increment Financing Bond 11/15/2024 0.51 - 4.28% 7,800,000 7,800,000 HUD Section 108 - US Guaranteed Notes 2014 06/15/2025 5.00% 2,091,000 2,091,000 Total other debt 19,341,000 Total Governmental Activities: $ 46,423,143
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The HUD Section 108-US guaranteed notes, originally issued in 2003 and 2005, have a variable rate of interest based on the three (3) month LIBOR rate plus .2%.
A detailed listing of the general and revenue obligation bonds expected to be repaid by proprietary funds are as follows: Amount Serial Outstanding Maturities Interest Amount as of Business-Type Activities: Through Rate(s) % Issued 6/30/15 General obligation bonds: Electric 2004 Series B Refunding Bonds 12/01/2016 2.00 - 3.80% $ 510,002 $ 80,000 Electric 2005 Series A Bonds 11/01/2025 3.50 - 4.20% 1,000,000 655,000 Electric 2005 Series B Bonds 11/01/2025 3.25 - 4.20% 1,000,000 655,000 Electric 2006 Series A Bonds 11/01/2026 3.50 - 4.00% 1,000,000 695,000 Electric 2007 Series A Bonds 11/01/2027 3.50 - 4.25% 1,000,000 740,000 Electric 2009 Series A Bonds 11/01/2029 2.00 - 4.375% 12,750,000 10,270,000 Electric 2009 Series B Bonds 11/01/2029 4.00 - 6.00% 8,250,000 6,900,000 Electric 2009 Series C Bonds 11/01/2029 2.00 - 4.125% 10,985,000 8,870,000 Electric 2009 Series D Bonds 11/01/2029 1.45 - 5.60% 4,615,000 805,000 Electric 2009 Series C Bonds 11/01/2029 2.00 - 4.125% 1,000,000 805,000 Electric 2009 Series C Bonds 11/01/2029 2.00 - 4.125% 1,000,000 3,865,000 Electric General Improvements 2011 Series A 11/01/2031 3.00 - 4.75% 1,000,000 900,000 Electric General Improvements 2011 Series B 11/01/2031 2.00 - 4.75% 1,000,000 895,000 Electric Public Improvement 2012 Series A 11/01/2032 5.00% 2,000,000 1,885,000 Electric Public Improvement 2012 Series A 11/01/2032 5.00% 1,750,000 1,645,000 Electric Taxable Public Improvement 2012 Series B 11/01/2032 6.00% 1,250,000 1,185,000 Electric G.O. Public Improvement Bonds 2013 Series B 11/01/2033 4.00 - 6.75% 3,000,000 2,920,714 Electric G.O. Public Improvement Bonds 2014 Series 3 11/01/2034 2.78% 3,000,000 3,000,000 Total general obligation bonds 46,770,714 Other debt: Electric Revenue Bonds 2011 Series A 07/01/2031 4.25 - 5.75% 8,775,000 8,775,000 Electric Revenue Bonds 2011 Series B 07/01/2031 7.25 - 8.25% 3,135,000 3,135,000 Electric Revenue Bonds 2014 Series A 07/01/2035 3.78% 12,000,000 12,000,000 Electric Revenue Bonds 2014 Series B 07/01/2035 3.36% 5,820,000 5,820,000 Wastewater State of VT-EPA 2006 Series 1 (Siphon) 02/01/2027 0.00% 1,650,000 993,257 Stormwater Revenue Obligation Bond 10/01/2031 0.00% 1,204,000 393,900 Wastewater State of VT-EPA 2009 Series I (Turbo) 10/01/2031 0.00% 120,000 48,558 Wastewater State of VT-EPA 2001 Series 1 (Digester) 08/01/2027 0.00% 2,500,000 1,120,743 Airport Revenue Refunding 2012 Series A 07/01/2028 4.00 - 5.00% 17,670,000 17,670,000 Airport Revenue Refunding 2012 Series B 07/01/2018 3.50% 7,130,000 5,360,000 Wastewater VT Municpal Bond Bank 2014 Series 1 11/15/2033 0.643 - 4.723% 14,645,620 13,913,339 Water State Revolving Loan RF3-295 11/01/2034 1.00% 253,340 228,006 Airport Revenue Refunding 2014 Series A 07/01/2030 0.67 - 3.59% 15,660,000 15,660,000 Total other debt 85,117,803 Total Business-Type Activities: $ 131,888,517
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B. Future Debt Service
The annual payments to retire all governmental general obligation long-term debt outstanding as of June 30, 2015 are as follows:
Governmental Activities Combined Principal Interest Total 2016 $ 3,664,377 $ 1,702,768 $ 5,367,145 2017 3,617,234 1,592,975 5,210,209 2018 3,941,520 1,470,873 5,412,393 2019 4,740,805 1,332,497 6,073,302 2020 3,120,091 1,208,068 4,328,159 2021 - 2025 15,874,116 4,472,129 20,346,245 2026 - 2030 8,763,571 1,656,011 10,419,582 2031 - 2035 2,701,429 224,432 2,925,861 Total $ 46,423,143 $ 13,659,753 $ 60,082,896
The annual payments to retire all business-type (and each Enterprise fund) long- term debt outstanding as of June 30, 2015 are as follows:
Business-Type Activities Combined all Enterprise Funds Principal Interest Total 2016 $ 6,203,259 $ 4,868,041 $ 11,071,300 2017 6,671,220 4,664,805 11,336,025 2018 6,851,401 4,468,215 11,319,616 2019 7,096,659 4,255,859 11,352,518 2020 7,306,995 4,017,142 11,324,137 2021 - 2025 41,109,365 15,743,407 56,852,772 2026 - 2030 43,113,052 7,130,668 50,243,720 2031 - 2035 13,536,566 737,151 14,273,717 Total $ 131,888,517 $ 45,885,288 $ 177,773,805
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Electric Enterprise Fund Principal Interest Total 2016 $ 3,641,429 $ 2,672,825 $ 6,314,254 2017 3,740,714 2,577,531 6,318,245 2018 3,822,143 2,473,364 6,295,507 2019 3,978,571 2,360,060 6,338,631 2020 4,135,000 2,237,195 6,372,195 2021 - 2025 23,392,857 8,985,196 32,378,053 2026 - 2030 24,742,857 4,284,084 29,026,941 2031 - 2035 9,047,145 435,939 9,483,084 Total $ 76,500,716 $ 26,026,194 $ 102,526,910
Airport Enterprise Fund Principal Interest Total 2016 $ 1,650,000 $ 1,735,642 $ 3,385,642 2017 2,015,000 1,634,938 3,649,938 2018 2,110,000 1,551,838 3,661,838 2019 2,195,000 1,465,063 3,660,063 2020 2,245,000 1,364,675 3,609,675 2021 - 2025 13,020,000 5,012,500 18,032,500 2026 - 2030 14,050,000 1,793,050 15,843,050 2031 1,405,000 35,125 1,440,125 Total $ 38,690,000 $ 14,592,831 $ 53,282,831
Wastewater Non-major Principal Interest Total Enterprise Fund 2016 $ 884,949 $ 452,734 $ 1,337,683 2017 888,002 445,750 1,333,752 2018 891,117 436,690 1,327,807 2019 894,294 424,683 1,318,977 2020 897,533 409,497 1,307,030 2021 - 2025 4,538,585 1,721,309 6,259,894 2026 - 2030 4,142,953 1,037,450 5,180,403 2031 - 2034 2,938,464 259,646 3,198,110 Total $ 16,075,897 $ 5,187,759 $ 21,263,656
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Water Non-major Principal Interest Total Enterprise Fund 2016 $ 8,485 $ 6,840 $ 15,325 2017 8,740 6,586 15,326 2018 9,002 6,323 15,325 2019 9,272 6,053 15,325 2020 9,550 5,775 15,325 2021 - 2025 52,225 24,402 76,627 2026 - 2030 60,544 16,084 76,628 2031 - 2035 70,187 6,441 76,628 Total $ 228,005 $ 78,504 $ 306,509
Stormwater Non-major Principal Interest Total Enterprise Fund 2016 $ 18,396 $ - $ 18,396 2017 18,764 - 18,764 2018 19,139 - 19,139 2019 19,522 - 19,522 2020 19,912 - 19,912 2021 - 2025 105,698 - 105,698 2026 - 2030 116,698 - 116,698 2031 - 2033 75,770 - 75,770 Total $ 393,899 $ - $ 393,899
C. Changes in General Long-Term Liabilities
During the year ended June 30, 2015, the following changes occurred in long- term liabilities for the City’s Governmental and Business-Type Activities, as well as each enterprise fund: Equal Total Total Less Long Balance Balance Current Term 7/1/2014 Additions Reduction 6/30/2015 Portion Portion Governmental Activities General obligation bonds payable $ 26,715,000 $ 2,000,000 $ (1,632,856) $ 27,082,144 $ (1,689,286) $ 25,392,858 Other debt 10,410,000 9,891,000 (960,000) 19,341,000 (1,975,091) 17,365,909 Add unamortized premium 329,252 - (21,425) 307,827 (21,425) 286,402 Subtotal 37,454,252 11,891,000 (2,614,281) 46,730,971 (3,685,802) 43,045,169 Obligations under capital leases 1,047,390 683,718 (644,790) 1,086,318 (478,131) 608,187 Compensated absences 1,988,107 59,044 - 2,047,151 (204,715) 1,842,436 Insurance reserves 2,467,775 1,319,262 - 3,787,037 (500,000) 3,287,037 Net OPEB obligation 875,121 87,930 - 963,051 - 963,051 Net pension obligation 34,148,823 448,472 - 34,597,295 - 34,597,295 Total $ 77,981,468 $ 14,489,426 $ (3,259,071) $ 89,211,823 $ (4,868,648) $ 84,343,175
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Equal Total Total Less Long Business-type Activities - Combined All Balance Balance Current Term Enterprise Funds 7/1/2014 Additions Reduction Refunding 6/30/2015 Portion Portion General obligation bonds payable $ 45,810,000 $ 3,000,000 $ (2,039,287) $ - $ 46,770,713 $ (2,256,428) $ 44,514,285 Add unamortized premium 448,743 - (17,329) - 431,414 - 431,414 Subtract unamortized discount (33,343) - 1,429 - (31,914) - (31,914) Subtotal 46,225,400 3,000,000 (2,055,187) - 47,170,213 (2,256,428) 44,913,785 Revenue bonds payable 85,974,711 33,555,078 (17,059,991) (17,580,000) 84,889,798 (3,938,345) 80,951,453 Add unamortized premium 379,918 2,517,716 (422,965) - 2,474,669 (192,077) 2,282,592 Subtotal 86,354,629 36,072,794 (17,482,956) (17,580,000) 87,364,467 (4,130,422) 83,234,045 Long term note payable - 253,340 (25,334) - 228,006 (8,485) 219,521 Obligations under capital leases 1,152,142 6,083,378 (401,223) - 6,834,297 (333,579) 6,500,718 Compensated absences 1,661,519 44,393 (21,783) - 1,684,129 - 1,684,129 Net OPEB obligation 304,160 262,699 - - 566,859 - 566,859 Net pension obligation 13,603,859 1,023,314 (1,852,811) - 12,774,362 - 12,774,362 Other noncurrent liabilities 6,311,593 - (727,780) - 5,583,813 - 5,583,813 Total $ 155,613,302 $ 46,739,918 $ (22,567,074) $ (17,580,000) $ 162,206,146 $ (6,728,914) $ 155,477,232
Equal Total Total Less Long Balance Balance Current Term Electric Enterprise Fund 7/1/2014 Additions Reduction Refunding 6/30/2015 Portion Portion General obligation bonds payable $ 45,810,000 $ 3,000,000 $ (2,039,287) $ - $ 46,770,713 $ (2,256,428) $ 44,514,285 Add unamortized premium 448,743 - (17,329) - 431,414 - 431,414 Subtract unamortized discount (33,343) - 1,429 - (31,914) - (31,914) Subtotal 46,225,400 3,000,000 (2,055,187) - 47,170,213 (2,256,428) 44,913,785 Revenue bonds payable 25,910,000 17,820,000 (14,000,000) - 29,730,000 (1,385,000) 28,345,000 Add unamortized premium 226,286 611,079 (72,543) - 764,822 - 764,822 Subtotal 26,136,286 18,431,079 (14,072,543) - 30,494,822 (1,385,000) 29,109,822 Compensated absences 1,152,339 23,962 - - 1,176,301 - 1,176,301 Net OPEB obligation - 224,099 - - 224,099 - 224,099 Net pension obligation 11,280,058 - (1,852,811) - 9,427,247 - 9,427,247 Other noncurrent liabilities 6,311,593 - (727,780) - 5,583,813 - 5,583,813 Total $ 91,105,676 $ 21,679,140 $ (18,708,321) $- $ 94,076,495 $ (3,641,428) $ 90,435,067
Equal Total Total Less Long Balance Balance Current Term Airport Enterprise Fund 7/1/2014 Additions Reduction Refunding 6/30/2015 Portion Portion Revenue bonds payable $ 42,770,000 $ 15,660,000 $ (2,160,000) $ (17,580,000) $ 38,690,000 $ (1,650,000) $ 37,040,000 Add unamortized premium 153,632 1,906,637 (350,422) - 1,709,847 (192,077) 1,517,770 Subtotal 42,923,632 17,566,637 (2,510,422) (17,580,000) 40,399,847 (1,842,077) 38,557,770 Obligations under capital leases 1,078,429 - (280,521) - 797,908 (150,798) 647,110 Compensated absences 196,301 3,746 - - 200,047 - 200,047 Net OPEB obligation 103,442 23,000 - - 126,442 - 126,442 Net pension obligation 785,759 492,747 - - 1,278,506 - 1,278,506 Total $ 45,087,563 $ 18,086,130 $ (2,790,943) $ (17,580,000) $ 42,802,750 $ (1,992,875) $ 40,809,875
Equal Total Total Less Long Telecom Non-Major Balance Balance Current Term Enterprise Fund 7/1/2014 Additions Reduction Refunding 6/30/2015 Portion Portion Obligations under capital leases $ 27,324 $ 6,083,378 $ (96,202) $ - $ 6,014,500 $ (168,260) $ 5,846,240 Compensated absences 64,515 16,685 - - 81,200 - 81,200 Net OPEB obligation 91,162 15,600 - - 106,762 - 106,762 Net pension obligation 586,881 158,962 - - 745,843 - 745,843 Total $ 769,882 $ 6,274,625 $ (96,202) $ - $ 6,948,305 $ (168,260) $ 6,780,045
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Equal Total Total Less Long Wastewater Non-Major Balance Balance Current Term Enterprise Fund 7/1/2014 Additions Reduction Refunding 6/30/2015 Portion Portion Revenue bonds payable $ 16,950,972 $ 6,882 $ (881,956) $ $ 16,075,898 $ (884,949) $ 15,190,949 Subtotal 16,950,972 6,882 (881,956) - 16,075,898 (884,949) 15,190,949 Obligations under capital leases 7,947 - (7,947) - - - - Compensated absences 92,934 - (17,899) - 75,035 - 75,035 Net OPEB obligation 47,206 - - - 47,206 - 47,206 Net pension obligation 416,229 116,295 - - 532,524 - 532,524 Total $ 17,515,288 $ 123,177 $ (907,802) $ - $ 16,730,663 $ (884,949) $ 15,845,714
Equal Total Total Less Long Water Non-Major Balance Balance Current Term Enterprise Fund 7/1/2014 Additions Reduction Refunding 6/30/2015 Portion Portion Long term note payable $ - $ 253,340 $ (25,334) $ - $ 228,006 $ (8,485) $ 219,521 Obligations under capital leases 38,442 - (16,553) - 21,889 (14,521) 7,368 Compensated absences 155,430 - (3,884) - 151,546 - 151,546 Net OPEB obligation 62,350 - - - 62,350 - 62,350 Net pension obligation 534,932 255,310 - - 790,242 - 790,242 Total $ 791,154 $ 508,650 $ (45,771) $ - $ 1,254,033 $ (23,006) $ 1,231,027
Equal Total Total Less Long Stormwater Non-Major Balance Balance Current Term Enterprise Fund 7/1/2014 Additions Reduction Refunding 6/30/2015 Portion Portion Revenue bonds payable $ 343,739 $ 68,196 $ (18,035) $ - $ 393,900 $ (18,396) $ 375,504 Total $ 343,739 $ 68,196 $ (18,035) $ - $ 393,900 $ (18,396) $ 375,504
17. Capital Lease Obligations
The City is the lessee of certain equipment under capital and operating leases expiring in various years through 2034. Future minimum lease payments under the capital and operating leases consisted of the following as of June 30, 2015:
Governmental Business-Type Activities Activities Capital lease for garage equipment. The rental payments are to be made in equal monthly installments of $1,032 including interest at 4.3601% annually, maturing on June 29, 2017. $23,670 $ - Capital lease for airport equipment. The rental payments are to be made in equal semiannual installments of $86,730 including interest at 3.214% annually, maturing on June 26, 2020. - 795,331
Capital lease for accounting software, police cars, public works vehicles, office equipment, mowers, tractors, backhoe, and zamboni. The rental payments are to be made in equal semiannual installments of $120,160 including interest at 1.96% annually, maturing on November 18, 2016. 329,069 24,466
(continued)
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(continued)
Governmental Business-Type Activities Activities
Capital lease for recycling equipment. The rental payments are to be made in equal annual installments of $96,147 including interest at 3.43% annually, maturing on March 9, 2016. 92,958 - Capital lease for traffic vehicles. The rental payments are to be made in equal annual installments of $28,649 including interest at 5.155% annually, maturing on June 22, 2017. 52,226 - Capital lease for telecom bucket truck. The rental payments are to be made in equal monthly installments of $753 including interest at 0.60% annually, maturing on November 1, 2017. - 20,003 Capital lease for public works vehicle. The rental payments are to be made in equal annual installments of $7,996 including interest at 5.95% annually, maturing on June 12, 2019. 27,739 - Capital lease for public works vehicle and plow gear. The rental payments are to be made in equal annual installments of $27,812 including interest at 2.67% annually, maturing on April 2, 2020. 127,663 - Capital lease for public works vehicle. The rental payments are to be made in equal annual installments of $38,929 including interest at 3.28% annually, maturing on October 15, 2018. 143,741 - Capital lease for public works sidewalk tractor. The rental payments are to be made in equal annual installments of $27540, maturing in fiscal year 2019. 110,160 - Capital lease for traffic smart parking meters. The rental payments are to be made in equal monthly installments of $3,770 including interest at 0.41% annually, maturing on November 19, 2019. 179,092 - Capital lease for telecom truck. The rental payments are to be made in equal monthly installments of $1,143 including interest at 0.64% annually, maturing on November 8, 2018. - 51,392 Capital lease for telecom ford focus. The rental payments are to be made in equal monthly installments of $346 including interest at 0.61% annually, maturing on September 1, 2019. - 15,146 Capital lease for Burlington Telecom with Blue Water Holdings LLC. The rental payments are to be made in equal monthly installments of $46,544 including interest at 7% annually, maturing on December 30, 2034. - 5,927,959 Total capital lease obligations 1,086,318 6,834,297 Less: amount due within one year (478,131) (333,579) Capital lease obligation, net of current portion $ 608,187 $ 6,500,718
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Fiscal Governmental Business-Type Year Activities Activities 2016 $ 509,649 $ 776,873 2017 300,319 767,991 2018 148,918 753,619 2019 147,513 749,853 2020 46,660 738,742 Thereafter - 8,098,713 Total minimum lease payments 1,153,059 11,885,791 Less amounts representing interest (66,741) (5,051,494) Present Value of Minimum Lease Payments $ 1,086,318 $ 6,834,297
18. Sale-Leaseback Transaction Accounted for as a Financing Arrangement
In connection with the City’s Burlington Telecom project, the City entered into the Master State and Municipal Lease/Purchase Agreement dated as of August 9, 2007 (the “Telecom Lease”) for the City of Burlington Telecom project. The Telecom Lease was originally entered into with Municipal Leasing Consultants, which assigned the Telecom Lease on August 15, 2007 to CitiCapital Municipal Finance (“CitiCapital”). The Telecom Lease provided for the leasing of equipment from the lessor to the City as lessee. The City was obligated to only make payments as may lawfully be made from funds budgeted and appropriated. The City Council did not make an appropriation of monies in its budget for fiscal year 2011. CitiCapital was notified in March 2010 that the City would likely not make an appropriation. Accord- ingly, under the Telecom Lease, the Telecom Lease terminated. Citibank, NA, as purported assignee of CitiCapital (“Citibank”), filed a complaint in US District Court, State of Vermont (the “US District Court”) against the City with respect to the Telecom Lease, and against the McNeil, Leddy & Sheahan, P.C. law firm. The complaint seeks monetary damages, including punitive damages, and/or equitable relief, including the return of the equipment under the Telecom Lease. The complaint was filed on September 2, 2011.
On January 29, 2014, the parties to the litigation executed a mediated settlement agreement pending the approval of City Council and PSB. The terms of the settlement agreement called for the approximately $33M Citibank lawsuit to be dismissed fully in exchange for a total $10.5M, with the City of Burlington’s share being approx- imately $9.03M, $0.5M of which will be paid by the City’s insurance carrier. The balance was paid by the City’s law firm as co-defendant and/or its insurance carrier and such firm was released from the litigation and claims associated with the Telecom Lease. In further detail, the funding sources for $10.5M of payments to Citibank are the following:
Approximately $6M in bridge financing from a special situation lender secured entirely by BT revenues and assets; 81
Approximately $1.47M from co-defendant McNeil, Leddy & Sheahan, P.C. law firm and/or its insurance carrier; Approximately $0.98M from BT revenues that have been paid to Citibank or into a court escrow since early 2012; Approximately $0.25M of additional payments from BT revenues that will be made to Citibank between January 29, 2014 and the closing of this settlement; Approximately $0.5M from the City of Burlington’s insurance carrier – this payment is in addition to the costs of defending the City in the litigation over the past several years; and Approximately $1.3M from the City of Burlington to be financed by general fund and BT revenues.
The City received an order issued by the PSB on November 3, 2014 in Docket No. 7044 regarding the petition to effectuate the settlement and resolve outstanding CPG violations, and request for associated approvals. PSB approved the requests, including a proposed sale of substantially all the assets to Blue Water Holdings, LLC (BWH). Under CPG conditions, BWH is required to file under section 107 of 30 V.S.A. a petition for the acquisition of a controlling interest in BT.
On December 31, 2014, the City executed a lease agreement with BWH conveying certain assets of BT, primarily the fiber optic network ROU and related capital assets for a consideration of $6M. BWH agreed to lease back the assets to the City for BT to provide phone, internet and cable television service to its residents and businesses under its trade name “Burlington Telecom”. Under the sale leaseback arrangement, BT began making periodic lease payments to BWH on January 31, 2015 in monthly amounts of $46,544, including interest payment of 7%, maturing on December 30, 2034. The transaction has been accounted for as a financing arrangement, wherein the ROU remains on BT’s books as an intangible asset and the financing obligation in the amount of $6M has been recorded under capital leases payable. If the lease is terminated and the successor operator with PSB approval is not in place, the City will continue to operate BT as required under the terms of the Certificate of Public Good (CPG).
19. Long-Term Obligations of Component Units
Burlington School District:
A. Bonds Payable
The Burlington School District has various bonds outstanding as follows (amounts include unamortized bond premium):
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Amount Serial Outstanding Maturities Interest Amount as of Governmental Activities: Through Rate(s) % Issued 6/30/15 General obligation bonds: G.O. School 2002 Series A Bonds 9/1/2022 3.00 - 4.75% $ 860,000 $ 435,000 G.O. School 2004 Refunding Series B Bonds 12/01/2016 2.00 - 3.80% 2,370,000 383,120 G.O. School 2005 Series B Bonds 11/1/2025 3.25 - 4.2% 750,000 510,899 G.O. School 2006 Series A Bonds 11/1/2026 3.50 - 4.00% 750,000 551,210 G.O. School 2006 Series A Bonds - Athletic Field 11/1/2026 3.50 - 4.00% 3,615,000 2,515,000 G.O. School 2007 Series A Bonds 11/1/2027 3.50 - 4.25% 750,000 560,000 G.O. School 2009 Series C Bonds 11/1/2029 2.00 - 4.125% 750,000 605,000 G.O. School 2009 Series C Bonds 11/1/2029 2.00 - 4.125% 2,000,000 1,744,445 G.O. School 2010 Series B Taxable GO Public Impr. 11/1/2026 6.50% 2,000,000 2,000,000 G.O. School 2010 Series A Qualified School Constr. 11/1/2026 6.50% 9,700,000 9,700,000 General Improvements 2011 Series B 11/1/2031 2.00 - 4.75% 2,000,000 1,790,000 Public Improvement Bonds 2012 Series A 6/30/2033 5.00% 3,250,000 3,262,977 G.O. Public Improvement Bonds 2013 Series B 11/1/2033 4.00 - 6.75% 2,000,000 1,952,336 G.O. Public Improvement Bonds 2014 Series A 11/15/2034 0.51 - 3.99% 2,000,000 2,000,000 Total Governmental Activities: $ 28,009,987 B. Future Debt Service
The annual payments to retire the Burlington School District’s notes payable outstanding as of June 30, 2015 are as follows (amounts include unamortized bond premiums):
School Principal Interest Total 2016 $ 984,111 $ 1,424,055 $ 2,408,166 2017 1,016,968 1,390,832 2,407,800 2018 857,193 1,357,922 2,215,115 2019 881,478 1,325,783 2,207,261 2020 915,764 1,291,513 2,207,277 2021 - 2025 5,022,391 5,863,036 10,885,427 2026 - 2030 16,184,895 2,143,869 18,328,764 2031 - 2035 2,147,187 197,795 2,344,982 Total $ 28,009,987 $ 14,994,805 $ 43,004,792
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Burlington Community Development Corporation:
A. Notes Payable
The Burlington Community Development Corporation (BCDC) has various loans outstanding as follows: Component Unit TD Bank (Gilbane Property) Note secured by the mortgage on the property. The terms require annual payment of $33,483 for 15 years with an interest rate of 6.25% maturing in October 2025. $ 253,346 People's United Bank notes offset by notes receivable from Champlain Housing Trust Corporation. The terms require annual payments of $22,547 for 21 years with an interest rate of 5.00% maturing October 1, 2028. 219,073 Union Bank Note (refinanced previous VEDA Loan) requiring annual payment of $217,818 for 10 years with an interest rate of 4.09% maturing in November 2020. A balloon payment of $1,803,380 is due at maturity. The City guarantees the debt. 2,476,531 BCDC 1993 Relief Bonds terms require annual payments of $86,352 with an interest rate ranging between 3.25% - 4.00% maturing in FY2024 and FY2025. 658,001 Swap Terminator Fee Loan (related to above noted VEDA refinancing) terms require annual payment of $38,333 for 20 years with an interest rate of 3.75% maturing in November 2030. 473,648 Total Notes Payable $ 4,080,599
B. Future Debt Service
The annual payments to retire BCDC’s notes payable outstanding as of June 30, 2015 are as follows:
Fiscal Year Principal Interest Total 2016 $ 233,071 $ 165,299 $ 398,370 2017 243,151 155,212 398,363 2018 253,355 145,002 398,357 2019 264,001 134,348 398,349 2020 274,867 123,473 398,340 2021-2025 2,507,620 164,131 2,671,751 2026-2030 244,417 33,130 277,547 2031 60,117 841 60,958 Total $ 4,080,599 $ 921,436 $ 5,002,035
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C. Due to Primary Government
Component Unit BCDC borrowed $1,400,000 from the Airport Enterprise fund to assist in financing construction of the Aviation Support Hanger. The terms require annual payments of $93,172 for 20 years with an interest rate of 3%, maturing in June 2026. $ 872,032 BCDC owes the City (the Primary Government) for its share of the Westlake Parking Garage. The terms requires annual payment of at least $72,000 with an interest rate of 2.3%, maturing in December 2020. 353,741 Total Due to Primary Government $ 1,225,773
D. Future Debt Service
The annual payments to retire the amounts that BCDC owes to the City (the Primary government) are as follows:
Fiscal Year Principal Interest Total 2016 $ 133,354 $ 31,819 $ 165,173 2017 136,738 28,434 165,172 2018 140,212 24,960 165,172 2019 143,778 21,394 165,172 2020 160,662 17,734 178,396 2021-2025 419,351 46,512 465,863 2026 91,678 1,497 93,175 Total $ 1,225,773 $ 172,350 $ 1,398,123
20. Deferred Inflows of Resources
Deferred inflows of resources are the acquisition of net assets by the City that are applicable to future reporting periods. Deferred inflows of resources have a negative effect on net position, similar to liabilities.
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The following is a summary of deferred inflow of resources balances as of June 30, 2015:
Entity-wide Basis Fund Basis Governmental Business-type Governmental Funds Proprietary Funds Activities Activities General Fund Nonmajor Electric Airport Nonmajor
Unavailable revenues $ - $ - $ 1,825,659 $ 8,299,792 $- $ - $ - Net difference between projected and actual pension investment earnings 4,121,967 1,521,955 - - 1,123,175 152,323 246,457 Changes in proportional share of pension contributions - 268,582 - - 268,582 - - Total deferred inflows $ 4,121,967 $ 1,790,537 $ 1,825,659 $ 8,299,792 $ 1,391,757 $ 152,323 $ 246,457
21. Governmental Funds - Balances
Fund balances are segregated to account for resources that are either not available for expenditure in the future or are legally set aside for a specific future use.
The City has implemented GASB Statement No. 54 (GASB 54), Fund Balance Reporting and Governmental Fund Type Definitions, which enhances the usefulness of fund balance information by providing clearer fund balance classifications that can be more consistently applied and by clarifying existing governmental fund type definitions.
The following types of fund balances are reported at June 30, 2015:
Nonspendable - Represents amounts that cannot be spent because they are either (a) not in spendable form or (b) legally or contractually required to be maintained intact. This fund balance classification includes general fund reserves for prepaid expenditures, inventory, and nonmajor governmental fund reserves for the principal portion of permanent trust funds. Restricted - Represents amounts that are restricted to specific purposes by constraints imposed by creditors, grantors, contributors, or laws or regulations of other govern- ments, or constraints imposed by law through constitutional provisions or enabling legislation. This fund balance classification includes general fund encumbrances funded by bond issuances, various special revenue funds, and the income portion of permanent trust funds. Committed - Represents amounts that can only be used for specific purposes pursuant to constraints imposed by formal action of the City’s highest level of decision-making authority, the City Council. This fund balance classification includes general fund encumbrances for non-lapsing, special article appropriations approved at City Council meetings and various special revenue funds. Assigned - Represents amounts that are constrained by the City’s intent to use these resources for a specific purpose. This fund balance classification includes general fund encumbrances that have been established by various City departments for the
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expenditure of current year budgetary financial resources upon vendor performance in the subsequent budgetary period. Unassigned - Represents amounts that may be available to be spent in future periods.
Following is a breakdown of the City's fund balances at June 30, 2015:
Nonmajor Total General Governmental Governmental Fund Funds Funds Nonspendable Inventory and prepaid expenditures $ 338,299 $ 255,278 $ 593,577 Advances to other funds 1,983,605 - 1,983,605 Nonexpendable permanent funds - 909,230 909,230 Total Nonspendable 2,321,904 1,164,508 3,486,412
Restricted Community development - 2,058,286 2,058,286 Champlain parkway - 88,373 88,373 Expendable permanent funds - 361,434 361,434 General capital - 297,526 297,526 Impact fees - 597,432 597,432 Mary E. Waddell - 13,886 13,886 Street and sidewalk infrastructure - 4,513,765 4,513,765 Tax increment financing - 1,577,660 1,577,660 Other purposes 17,265 - 17,265 Total Restricted 17,265 9,508,362 9,525,627
Committed Conservation legacy - 874,544 874,544 CCTA and County tax 30,921 - 30,921 Police equitable sharing funds 694,389 - 694,389 Pennies for parks - 144,523 144,523 Greenbelt - 326,225 326,225 Library books and donations 182,332 - 182,332 Natural gas 127,168 - 127,168 Public records restoration 117,140 - 117,140 Parking 23,000 - 23,000 Traffic - 1,163,311 1,163,311 Sale of land 450,000 - 450,000 Total Committed 1,624,950 2,508,603 4,133,553
Unassigned 4,287,378 (1,901,407) 2,385,971 Total Unassigned 4,287,378 (1,901,407) 2,385,971 Total Fund Balance $ 8,251,497 $ 11,280,066 $ 19,531,563
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22. Restricted Net Position
The accompanying entity-wide financial statements report restricted net position when external constraints from grantors or contributors are placed on net position.
Permanent fund restricted net position are segregated between nonexpendable and expendable. The nonexpendable portion represents the original restricted principal contribution, and the expendable represents accumulated earnings which are available to be spent based on donor restrictions.
23. Subsequent Events
Subsequent to year end, the City issued the following debt:
Interest Issue Maturity Amount Rate Date Date Governmental Activities: G.O. Public Improvement Bonds 2015 Series A - City $ 2,000,000 5.00% 11/23/2015 11/1/2035 Business-Type Activities: G.O. Public Improvement Bonds 2015 Series A - Electric 3,000,000 5.00% 11/23/2015 11/1/2035 Component Unit - Burlington School District: G.O. Public Improvement Bonds 2015 Series A - School 2,000,000 5.00% 11/23/2015 11/1/2035 Total $ 7,000,000
On September 22, 2015 the City issued a $7,000,000 Grant Anticipation Note for FAA approved Airport Improvement Projects with a maturity date of September 20, 2016 and interest rate accruing at the overnight LIBOR rate plus 175 basis points.
On December 4, 2015 the City issued a $2,200,000 Parking Revenue Note with a maturity date of December 3, 2016 and interest rate accruing at overnight LIBOR rate plus 250 basis points.
24. Retirement System
The City follows the provisions of GASB Statement No. 68, Accounting and Financial Reporting for Pensions with respect to the Burlington Employees’ Retirement System. The System follows the provision of GASB Statement No. 67, Financial Reporting for Pension Plans.
A. Plan Description
The City maintains a single employer, defined benefit pension plan covering substantially all of its employees except elective officials, other than the mayor, and the majority of the public school teachers, who are eligible for the Vermont State Teacher's Retirement System. The plan is broken down into Class A partici-
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pants and Class B participants. Class A participants are composed of firemen and policemen. Class B participants include all other covered City employees. The City’s total covered payroll was $45,788,172. The System does not issue a stand- alone financial report.
The System is governed by an eight-member board. The eight members include three appointed by the City Council, two Class A members of the system selected by the Class A membership, two Class B members of the system elected by the Class B membership, and the City Treasurer as an ex officio member. Of the Class A and Class B board members, no two shall be employed at the same department.
The City Council has the authority to amend the benefit terms of the System by enacting ordinances and sending them to the Mayor for approval.
There are 174 active members and 170 retirees and beneficiaries in Class A and 668 active members and 444 retirees and beneficiaries in Class B. Additionally, there are 383 former Class A and Class B employees with vested rights.
B. Benefits Provided
Class A participants vest 20 percent after three years of creditable service, and 20 percent for each year thereafter until they are 100 percent vested after 7 years of creditable service. The normal benefit is payable commencing at age 55 or with 25 years of service. Class A participants who retire at or after age 55 with 7 years of creditable service are entitled to a retirement benefit, payable monthly for life, equal to 2.75 percent of their average final compensation (AFC) during the highest three non-overlapping twelve-month periods (five years for certain non- union police employees) times creditable service not in excess of 25 years plus .5 percent of the AFC times years of creditable service between 25 and 35 years, prior to age 60 and a yearly COLA based on CPI. Class A retirees could alterna- tively elect to choose an accrual rate of 3.25% and one-half the yearly COLA, or an accrual rate of 3.8% (3.6% for service from July, 2006 forward) and no COLA. The half and no COLA options have been eliminated for new policemen hired after July 1, 2006 and new firemen hired after January 1, 2007. Also, these new hires have a 2.65 percent accrual rate only. Employees may retire prior to age 55 and receive reduced retirement benefits. Class A employees have unreduced bene- fits after 25 years of service, regardless of age.
All eligible City Class B employees vest 20 percent after three years of creditable service, and 20 percent for each year thereafter until they are 100 percent vested after 7 years of creditable service. Class B participants who retire at or after age 65 are entitled to a retirement benefit, payable monthly for life, equal to 1.60 percent of AFC (at age 65) during the highest three non-overlapping twelve- month periods times creditable service at age 65 not in excess of 25 years plus .5 percent of AFC times creditable service at age 65 in excess of 25 years and a yearly COLA based on the CPI. Class B retirees could alternatively elect to choose an accrual rate of 1.9% for service up to June 30, 2006 and 1.8% thereafter
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and one half the yearly COLA, or an accrual rate of 2.2% for service up to June 30, 2006 and 2.0% thereafter and no COLA. The half and no COLA options have been eliminated for new hires after January 1, 2006 and they are only entitled to a 1.4% accrual rate. Employees may retire prior to age 65 and receive reduced retirement benefits. Creditable service or an actuarial increase is used after age 65. For Class B IBEW participants hired after October 30, 2012, the number of years used in the calculation of AFC was changed from three years to five. Also the disability retirement was revised from 75% of pay to 66 % of pay.
The system also provides accidental and line of duty death benefits for Class A participants, and disability and survivor income benefits for both Class A and Class B participants. The benefits are changed by negotiation and by the Retirement Board with budgetary approval by the City Council.
C. Contributions
Participants contribute a set percentage of their gross regular compensation annually. Class A participants contribute 10.8% of earnable compensation for the first 35 years of creditable service, and none thereafter. Class A employees do not contribute to the social security retirement system. Class B participants contribute 3.0% of earnable compensation other than IBEW employees hired before May 1, 2008 who elected to contribute 4.0% of earnable compensation.
The Board establishes employer contributions based on an actuarially determined contribution recommended by an independent actuary. The actuarially determined contribution is the estimated amount necessary to finance the costs of benefits earned by the System members during the year, with an additional amount to finance a portion of any unfunded accrued liability. The calculation of the actu- arially determined contribution is governed by the applicable provisions of the Retirement Code.
It is the policy of the City of Burlington to fund, by actuarially determined periodic contributions, the normal cost of the Plan plus a provision for amortiza- tion of past service cost over a thirty (30) year period from date of establishment. The contribution rate for normal cost is determined using the projected unit credit cost method with costs allocated based on earnings of plan members. The City funded one-hundred percent (100%) of the annual required contribution in 2015.
D. Summary of Significant Accounting Policies
Basis of Accounting - For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the System and additions to/deductions from System’s fiduciary net position have been deter- mined on the same basis as they are reported by System. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with benefit terms.
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Basis of Presentation - The System is operated on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles. The preparation of the statements requires management to make a number of estimates and assumptions relating to the reported amounts. Due to the inherent nature and uncertainty of these estimates, actual results could differ, and the differences may be material.
Method Used to Value Investments - Investments are reported at fair value.
E. Actuarial Assumptions
The total actuarially determined contribution to the system for 2014 was $8,920,879 which was computed through an actuarial valuation performed as of June 30, 2015. A summary of the actuarial assumptions as of the latest actuarial valuation is shown below:
Summary of Actuarial Assumptions: Valuation Date 6/30/13 rolled forward to 6/30/14 Actuarial cost method Entry Age Normal - Level Percentage of Pay Actuarial assumptions: Investment rate of return 8.0% Projected salary increases 3.8 - 8.8% Inflation rate 3.0% Post-retirement cost-of-living adjustment 3.0%
Actuarial valuation of the ongoing System involves estimates of the reported amounts and assumptions about probability of occurrence of events far into the future. Examples include assumptions about future employment mortality and future salary increases. Amounts determined regarding the net pension liability are subject to continual revision as actual results are compared with past expec- tations and new estimates are made about the future. The actuarial assumptions used in the June 30, 2015 valuation were based on the results of the most recent actuarial experience study, dated June 30, 2014, which was for the period through June 30, 2013.
Mortality rates were based on the RP-2000 Combined Mortality tables for Males and Females projected to 2017 with scale AA; RP-2000 Disability Mortality Table projected with scale AA to 2017 for the period after disability retirement, and prior to the state of the service retirement benefit.
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F. Net Pension Liability
The components of the net pension liability (i.e., the retirement system’s liability determined in accordance with GASB No. 67 less the fiduciary net position) as of June 30, 2014, is shown below: 2014 Total pension liability $ 218,004,014 System fiduciary net position (164,174,241) Net pension liability $ 53,829,773 System fiduciary net position as a percentage of the total pension liability 75.3%
Actuarial valuation of the ongoing System involves estimates of the reported amounts and assumptions about probability of occurrence of events far into the future. Examples include assumptions about future employment mortality and future salary increases. Amounts determined regarding the net pension liability are subject to continual revision as actual results are compared with past expec- tations and new estimates are made about the future. The Schedule of Employers’ Net Pension Liability presents multi-year end information about whether the plan fiduciary net positions are increasing or decreasing over time relative to the total pension liability. These schedules are presented in the Required Supplementary Information section. The Total Pension Liability as of June 30, 2014, is based on the results of an actuarial valuation date of January 1, 2013, and rolled-forward using generally accepted actuarial procedures.
Target Allocations – The long-term expected rate of return on pension plan investments was selected from a best estimate range determined using the building block approach. Under this method, an expected future real return range (expected returns, net of pension plan investment expense and inflation) is calcu- lated separately for each asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return net of investment expenses by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major class are summarized in the following table:
Long-term Expected Target Asset Real rate Asset Class Allocation of Return Equity 27.12% 6.70% Fixed income 28.41% 2.94% Alternatives 27.25% 6.26% Multi-strategy 17.22% 5.98%
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Discount rate – The discount rate used to measure the total pension liability was 8.00%. The projection of cash flows used to determine the discount rate assumed that contributions will continue to be made in accordance with the current funding policy. Based on those assumptions, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments to current System members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to deter- mine the total pension liability.
Sensitivity of the net pension liability to changes in the discount rate – The following presents the System’s net pension liability calculated using the discount rate of 8.00 percent, as well as what the System’s net pension liability would be if it were calculated using a discount rate that is 1 percentage-point lower (7.00%) or 1 percentage-point higher (9.00%) than the current rate:
Current 1% Discount 1% Decrease Rate Increase (7.0%) (8.0%) (9.0%) Net Pension Liability $ 78,635,265 $ 53,829,773 $ 32,830,114
G. Deferred Outflows and Inflows of Resources
For the year ended June 30, 2015, the City recognized pension expense of $6,799,450. In addition, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:
Deferred Deferred Outflows of Inflows of Resources Resources Fiscal year 2015 deferred pension contributions $ 7,649,837 $ - Changes in proportional share of contributions 1,315,743 268,582 Difference between projected and actual investment earnings - 5,643,922 Total $ 8,965,580 $ 5,912,504
Deferred outflows of resources related to pension resulting from contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2016. Amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows:
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Deferred Deferred Outflows of Inflows of Resources Resources Year ended June 30: 2016 $ 7,978,772 $ 1,478,126 2017 328,936 1,478,126 2018 328,936 1,478,126 2019 328,936 1,478,126 Total $ 8,965,580 $ 5,912,504
H. Rate of Return
For the year ended June 30, 2014, the annual money-weighted rate of return on pension plan investments, net of pension plan investment expenses, was 13.62%. The money-weighted rate of return expresses investment performance, net of investment expense, adjusted for the changing amounts actually invested.
25. Post-Employment Healthcare and Life Insurance Benefits
Other Post-Employment Benefits
GASB Statement 45, Accounting and Financial Reporting by Employers for Post- Employment Benefits Other Than Pensions, requires governments to account for other post-employment benefits (OPEB), primarily healthcare, on an accrual basis rather than on a pay-as-you-go basis. The effect is the recognition of an actuarially required contribution as an expense on the Statement of Activities when a future retiree earns their post-employment benefits, rather than when they use their post-employment benefit. To the extent that an entity does not fund their actuarially required contribu- tion, a post-employment benefit liability is recognized on the Statement of Net Position over time.
A. Plan Description
In addition to providing the pension benefits described, the City provides post- employment healthcare and life insurance benefits for retired employees through the City and School’s plan. There are 699 active members and 33 retirees and beneficiaries as of June 30, 2015, the date of the last actuarial valuation.
In addition, the City allows certain retired employees to purchase health insurance through the City at the City’s group rates. GASB No. 45 recognizes this as an implied subsidy and requires accrual of this liability.
B. Benefits Provided
The City provides medical, prescription drug, mental health/substance abuse and life insurance to retirees and their covered dependents. All active employees who retire from the City and meet the eligibility criteria may receive these benefits. 94
C. Funding Policy
Retirees contribute various amounts of the cost of the health plan, as determined by the City. The City contributes the remainder of the health plan costs on a pre- funded basis.
D. Annual OPEB Costs and Net OPEB Obligation
The City’s fiscal 2015 annual OPEB expense is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover the normal cost per year and amortize the unfunded actuarial liability over a period of thirty years. The City has elected not to pre-fund OPEB liabilities. The following table shows the components of the City’s annual OPEB cost for the year ending June 30, 2015, the amount actually contributed to the plan, and the change in the City’s net OPEB obligation based on an actuarial valuation as of June 30, 2015 for the City.
Annual Required Contribution (ARC) $ 316,817 Interest on net OPEB obligation 53,183 Adjustment to ARC (44,319) Annual OPEB cost 325,681 Contributions made (215,982) Increase in net OPEB obligation 109,699 Net OPEB obligation - beginning of year 1,420,211 Net OPEB obligation - end of year $ 1,529,910
The City’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation were as follows:
Annual Percentage of Fiscal Year OPEB OPEB Net OPEB Ended Cost Cost Contributed Obligation 2015 $ 325,681 66.3% $ 1,529,910 2014 442,314 86.2% 1,420,191 2013 335,169 108.3% 1,359,145 2012 365,319 32.4% 1,387,098 2011 345,427 34.3% 1,140,113 2010 324,800 0.8% 913,000 2009 306,048 0.9% 591,000 , ,
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E. Funded Status and Funding Progress
The funded status of the plan as of June 30, 2015, the date of the most recent actuarial valuation was as follows:
Actuarial accrued liability (AAL) $ 3,778,744 Actuarial value of plan assets - Unfunded actuarial accrued liability (UAAL) $ 3,778,744 Funded ratio (actuarial value of plan assets/AAL) 0% Covered payroll (active plan members) $ 36,668,126 UAAL as a percentage of covered payroll 10.3%
Actuarial valuations of an ongoing plan involve estimates of the value of reported amount and assumptions about the probability of occurrence of events far into the future. Examples included assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to contin- ual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the Notes to the Financial Statements, presents multiyear trend information that shows whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits.
F. Actuarial Methods and Assumptions
Projections of benefits for financial reporting purposes are based on the plan as understood by the City and the plan members and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the City and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations.
In the June 30, 2015 City actuarial valuation the projected unit credit cost method was used. The actuarial value of assets was not determined as the City has not advance funded its obligation. The actuarial assumptions included a 4% invest- ment rate of return and an initial annual healthcare cost trend rate of 8%, which decreases to a 5% long-term rate for all healthcare benefits after six years for the City. The amortization costs for the initial UAAL is a level percentage of payroll for a period of 30 years, on an open basis. This has been calculated assuming the amortization payment increases at a rate of 4%.
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26. Risk Management
The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; and natural disasters for which the gov- ernment carries commercial insurance. There were no significant reductions in insur- ance coverage from the previous year and have been no material settlements in excess of coverage in any of the past three fiscal years.
27. Commitments and Contingencies
A. Burlington International Airport
Mansfield Heliflight, Inc. v. City of Burlington, Vermont
On or around July 29, 2014, Mansfield Heliflight, Inc. (“Mansfield”) filed a Part 16 Complaint with the FAA against the City, alleging the City has prevented Mansfield from becoming a Fixed-Base Operator (“FBO”) at BTV, and that its efforts in this regard effectively granted an exclusive right to Heritage Aviation, Inc. The Complaint alleges that (1) the City is in violation of Grant Assurance No. 23, prohibiting the grant of an exclusive right to any person to conduct aero- nautical activities at BTV; (2) the City is in violation of Grant Assurance No. 2,2 prohibiting unjust discrimination; and (3) predatory conduct and illegal restraint of trade by the City in violation of the Sherman Act and Grant Assurance No. 1, which prohibits a sponsor’s violation of federal law. The City filed a Consolidated Answer, Motion for Summary Judgment and Motion to Dismiss on October 2, 2014, denying many of the factual allegations in Mansfield’s Complaint. The City has moved to dismiss Count 3 on the grounds FAA lacks jurisdiction over the alleged Sherman Act violation, and for summary judgment on Counts 1 and 2 on the grounds that the undisputed facts do not demonstrate a violation of the City’s Grant Assurances. The last round of pleadings was filed in January of 2015. The case is now pending before FAA. The City believes that Mansfield’s claims are without merit and will continue contesting them vigorously.
South Burlington Assessments
The City has appealed the City of South Burlington’s assessment of all the Airport-related properties owned by the City as of April 1, 2012, as well as the succeeding three years. The City appealed the assessments through South Burlington’s administrative proceedings and then to the civil division of the Vermont Superior Court, where the appeal remains pending. Various attempts to negotiate a settlement of the matter have not been successful, and a formal media- tion held during the month of November, 2014 was likewise unsuccessful. Both parties moved for partial summary judgment in July 2015, and those motions are under advisement with the Court at this time. The City has paid the taxes and is seeking refunds. The City continues to aggressively assert that South Burlington’s assessment does not comport with Vermont law and that the assessment of Airport properties is substantially greater than Vermont law allows.
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B. Electric Department Commitments and Contingencies
The Burlington Electric Department (BED) receives output from generation of the McNeil Station (of which BED is the 50% owner and operator) and the Burlington Gas Turbine (which BED wholly owns and operates).
In addition to energy provided by its owned generation, BED purchases a portion of its electricity requirements pursuant to long-term (greater than one year in duration) contracts. During the fiscal year ended June 30, 2015, long-term sources of purchased power included:
New York Power Authority (NYPA) power from hydro stations on the Niagara and St. Lawrence rivers under contracts through September 1, 2025 (Niagara) and through April 30, 2017 (St. Lawrence). Vermont Electric Power Producers, Inc. (VEPP) which is agent for 15 hydro facilities and one biomass facility located within Vermont (hydro facility contracts expire between 2013 and 2020 and the biomass facility contract expired in 2012). Deliveries pursuant to a long term contract with Vermont Wind commenced in September 2011 (for test energy), with the official ten year contract start date being October 19, 2011 when commercial energy production began. Under the contract, the Department receives 16 MW (40%) of Vermont Wind’s wind farm in northeast Vermont (Sheffield). BED’s 16 MW entitlement is expected to provide approximately 13% of BED’s annual energy requirements. Deliveries pursuant to a ten year contract with Hancock Wind are scheduled to commence in January 2016. Although the facility has not been built yet it has been permitted. Under the contract, the Department will receive 13.5 MW (26.5%) of Hancock’s wind farm. The Department began taking energy from the Georgia Mountain Community Wind project in December 2012, with commercial operation on December 31, 2012. Pursuant to a 25-year contract, the Department receives 10 MW entitlements from Georgia Mountain’s wind farm in Milton/Georgia, Vermont. Long-term purchases from a number of small in-state resources under a state mandated feed-in tariff program (called SPEED resources). Purchase of the output from 6 small in-city solar projects under long-term agreements. BED is purchasing energy and Renewal Energy Credits (RECs) from Nextera for a 5-year period beginning January 1, 2013. For calendar year 2013 and 2014, hourly energy is 10 MW, for the final 3 years (calendar 2015 – 2017), the volume is 5 MW per hour. The delivered energy is unit contingent on a portfolio of hydro facilities, and includes RECs from those units equal in volume to the energy purchased.
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The Burlington City Council, the Vermont Public Service Board, and the voters of Burlington have approved a 23-year energy-only contract with Hydro-Quebec. The contract has been executed and deliveries will begin in 2015 for BED. Under the contract, BED will receive 5 MW of contract energy for the period of November 1, 2015 to October 31, 2020 and an additional 4 MW of contract energy for the period of November 1, 2020 to October 31, 2038. BED’s entitlement is expected to provide approximately 6-15% of BED’s annual energy requirements depending on whether one or both contract entitlements are flowing in a particular year.
Payments under these long-term power supply contracts were $12,819,245 for the year ended June 30, 2015, with the increase from 2014 being largely due to a full year of output from the Georgia Mountain Community Wind farm. Budgeted commitments under these long-term contracts and long-term contracts approved and executed for future delivery periods total approximately $90,974,800 for the 5-year period from July 1, 2015 to June 30, 2020.
The remainder of the Department s energy requirement is satisfied through short- term purchases including:
Short-term purchases from a number of market counterparties. Net exchange of energy through the Independent System Operator New England power markets.
The costs of power purchased under these contracts are accounted for as purchase power expenses in the statements of revenues, expenses, and changes in net posi- tion. The percentages of the Department’s total energy requirements were provided as follows: 2015 McNeil Generating Station and Gas Turbine 41% Winooski One 7% New York Power Authority 5% Vermont Electric Power Producers 2% Standard Offer 1% Wind Production 20% Solar 0% Nextera 20% Short Term/Other (net) 4% Total 100%
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The Department is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The Department manages these risks through a combination of commercial insurance packages purchased in the name of the Department, and through the City’s risk management program. Insurance settlements have not exceeded insurance coverage for any of the past three fiscal years.
C. Burlington Employee Retirement System
The System directly invests as a limited partner in several private equity partner- ships sponsored by Hamilton Lane. In general, such partnerships require an aggregate investment commitment at the outset and then require periodic capital calls against the commitment. At June 30, 2015, the System had aggregate remaining commitments to limited partnerships of $926,099, against which calls may be made periodically over the next several years.
D. Other Funds’ Commitments and Contingencies
1. Grant Programs
The City participates in a number of federally assisted grant programs. These programs are subject to program compliance audits by the grantors or their representatives. The audits of these programs for, or including, the year ended June 30, 2015 have not yet been conducted. Accordingly, the City’s compli- ance with grant application requirements will be established at some future date. The amount, if any, of expenditures which may be disallowed by the granting agencies cannot be determined at this time, although the City expects such amounts, if any, to be immaterial.
2. Construction Commitments
The Airport has a number of ongoing Airport Improvement Program (AIP) projects for construction and land acquisition as well as several Passenger Facility Program (PFC) projects for terminal improvements that are funded from restricted assets. AIP projects include taxiway reconstruction, storm- water treatment projects, building demolition related to previously acquired property and land acquisition. The PFC projects include energy projects, cargo apron reconstruction, escalator and baggage carousel projects and related work.
E. General Commitments and Contingencies
The City has several claims for which the insurance carriers have issued a reser- vation of rights. The City is not able to assess the likelihood or the amount, if any, of an unfavorable outcome on these cases at this time.
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1. Insurance Reserves
The City is self-insuring worker’s compensation claims up to $250,000 per occurrence and with an aggregate limit that changes each year. On January 1, 2010, the City increased the per occurrence limit to $350,000 per claim. The aggregate limit for calendar years 2010 and 2011 was $2,758,800. The City has hired a third-party administrator, the Travelers Indemnity Company, to process, pay, and administer the claims after which they bill the City for reim- bursement. The City has an irrevocable standby letter of credit with the Travelers Indemnity Company as beneficiary in the amount of $1,500,000 to secure the payment of claims.
The City also self-insures for health insurance. The Plan is administered by a third-party administrator that is responsible for approval, processing and pay- ment of claims, after which they bill the City for reimbursement. The City has reinsurance for individual claims in excess of $130,000 and for aggregate stop loss of 125% of projected claims for the 2012 policy year.
The City also self-insures for dental insurance. This plan is administered by a third-party administrator that is responsible for approval, processing and payment of claims, after which they bill the City for reimbursement. Each covered employee is guaranteed $1,500 of paid claims per year after which the employee must pick up any excess costs.
The costs associated with these self-insurance plans are budgeted in the General Fund and allocated to other funds based on the following:
Type Allocation Method Worker's Compensation 50% Experience and 50% Exposure Health Number of Employees and Levels of Coverage Dental Actual Claims and Administration Fees Paid
At June 30, 2015, the City has recorded an estimated liability of $500,000 in the General Fund, which represents the short term payable for health claims as of June 30, 2015. A long-term reserve liability of $3,287,037 is included for claims incurred but not reported on the governmental statement of net position. This consists of $2,610,171 for workers’ compensation claims, $15,268 for dental claims, and additional $1,161,598 of reported health claims incurred on or before June 30, 2015, but not paid by the City as of that date. In addition to these short-term and long-term liabilities for insurance reserves, $259,313 liability for insurance reserves is carried in the General Fund as it is funded by a working fund deposit. This amount was determined by the third-party administrators as described above for property, liability and workers' com- pensation and based on subsequent claims with a completion factor for health and dental.
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Settled claims resulting from insured risks have not exceeded coverage in the past three fiscal years.
The City has elected to pay actual unemployment claims instead of enrolling in an unemployment insurance program. No liabilities have been accrued as the City is not able to make an estimate as to any future costs.
28. Deferred Compensation
The City also offers its employees two deferred compensation plans in accordance with Internal Revenue Code Section 457 through the International City/County Management Association’s (ICMA) Retirement Corporation and Nationwide Retire- ment Solutions. The plans permit employees to defer a portion of their salary until future years. Deferred compensation is not available to employees until termination, retire- ment, or death. The City has no liability for losses under the plans, but does have the duty of due care that would be required of an ordinary prudent inventor.
29. Beginning Net Position/Fund Balance Reclassification
Change in Accounting Principle and Other Restatements In fiscal year 2015, the Town’s beginning net position as of July 1, 2014 was restated for the implementation of the new standard – Governmental Accounting Standards Board (GASB) Statement 68, Accounting and Financial Reporting for Pensions, as amended by GASB Statement 71, Pension Transition for Contributions Made Subse- quent to the Measurement Date. Other restatements were made as necessary.
Reclassification of Beginning Fund Balance/Net Position In fiscal year 2015, beginning fund balances and net position were reclassed for several funds in accordance with GASB 34 definition of major funds as well as certain other reclassifications, including the change in legal definition of the Burlington School District as well as converting Stormwater from governmental to an enterprise fund in accordance with other governmental standards.
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Accordingly, the following reconciliations for the net position and fund balances are provided:
Government-Wide Financial Statements: Governmental Business-Type Component Activities Activities Units As previously reported for June 30, 2014 $ 114,367,905 $ 217,514,215 $ 1,092,712 Net position reclassification: To reclass School governmental activities to a discretely presented component unit (12,443,817) - 12,443,817 To reclass School non-major, Food Service, to a discretely presented component unit - (1,131,524) 1,131,524 To reclass Stormwater Special Revenue Fund to enterprise fund (263,287) 263,287 - To reclass Stormwater Upgrade Capital Project Fund to enterprise fund 163,171 (163,171) - To reclass Stormwater capital assets to enterprise fund (1,068,335) 1,068,335 - To reclass Stormwater note payable to enterprise fund 343,739 (343,739) - Subtotal reclassification (13,268,529) (306,812) 13,575,341 Net position restatement: To remove prior year pension liability estimate 1,304,621 - - GASB 68 implementation for net pension liability (39,882,421) (13,603,859) (8,878,273) Contributions made during fiscal year 2014 5,733,598 2,117,017 1,070,264 Telecom restatements - (3,080,907) - Other - - (77,143) Subtotal restatement (32,844,202) (14,567,749) (7,885,152) As restated for July 1, 2014 $ 68,255,174 $ 202,639,654 $ 6,782,901
Governmental Fund Basis Financial Statements: Non-major School Major Governmental Total General Fund Funds Governmental As previously reported for June 30, 2014 $ (302,596) $ 9,527,595 $ 9,224,999 To reclass to discretely presented component unit 302,596 (3,110,503) (2,807,907) To reclass Stormwater to Enterprise Funds - (100,116) (100,116) As restated for July 1, 2014 $ - $ 6,316,976 $ 6,316,976
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Proprietary Fund Basis Financial Statements: Telecom Wastewater Electric Major Airport Major Major Major Non-major Total Enterprise Enterprise Enterprise Enterprise Enterprise Enterprise As previously reported for June 30, 2014 $ 64,705,746 $ 119,652,643 $ 4,861,009 $ 14,716,615 $ 13,578,202 $ 217,514,215 Net position reclassification: To reclass major enterprise funds to non- major - - (4,861,009) (14,716,615) 19,577,624 - To reclass School Food Service to discretely presented component unit - - - - (1,131,524) (1,131,524) To reclass Stormwater to Non-major Enterprise Fund - - - - 824,712 824,712 Subtotal reclassification - - (4,861,009) (14,716,615) 19,270,812 (306,812) Net position restatement: GASB 68 implementation for net pension liability (11,280,058) (785,759) - - (1,538,042) (13,603,859) Contributions made during fiscal year 2014 1,562,320 211,879 - - 342,818 2,117,017 To restate value of Telecom intangible assets - - - - (2,586,425) (2,586,425) To restate prior year settlement charges related to Telecom - - - - (450,000) (450,000) Other - - - - (44,482) (44,482) Subtotal restatement (9,717,738) (573,880) - - (4,276,131) (14,567,749) As restated for July 1, 2014 $ 54,988,008 $ 119,078,763 $- $ - $ 28,572,883 $ 202,639,654
Fiscal year 2014 and prior periods have not been restated for GASB 68 due to impractical nature of allocating annual activity and lack of information for measure- ment dates June 30, 2012 and prior; as this is a new standard and beginning net position restatement for July 1, 2014 does not recognize beginning balances for other deferred outflows of resources and deferred inflows of resources related to pensions in accordance with GASB 71.
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CITY OF BURLINGTON, VERMONT SCHEDULE OF FUNDING PROGRESS REQUIRED SUPPLEMENTARY INFORMATION June 30, 2015 (Unaudited)
Other Post-Employment Benefits Actuarial UAAL as Accrued a Percent- Actuarial Liability Unfunded age of Actuarial Value of (AAL) - AAL Funded Covered Covered Valuation Assets Entry Age (UAAL) Ratio Payroll Payroll Date (a) (b) (b-a) (a/b) (c) [(b-a)/c]
City Plan 6/30/2015 $ - $ 3,778,744 $ (3,778,744) 0.0% $ 36,668,126 10.3% 6/30/2013 - 3,862,554 (3,862,554) 0.0% 36,346,808 10.6% 6/30/2011 - 3,920,235 (3,920,235) 0.0% 34,624,868 11.3% 6/30/2009 - 3,593,453 (3,593,453) 0.0% 33,073,193 10.9%
See Independent Auditors' Report.
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CITY OF BURLINGTON, VERMONT EMPLOYEES' RETIREMENT SYSTEM
(A Component Unit of the City of Burlington, Vermont)
SCHEDULE OF CHANGES IN THE EMPLOYERS' NET PENSION LIABILITY
REQUIRED SUPPLEMENTAL INFORMATION
June 30, 2014 (Unaudited)
2014 Total Pension Liability Service $ 5,314,021 Interest on unfunded liability - time value of $ 16,598,877 Changes of benefit terms - Differences between expected and actual experience - Changes of assumptions - Benefit payments, including refunds of member contributions (11,932,108) Net change in total pension liability 9,980,790 Total pension liability - beginning 208,023,224 Total pension liability - ending (a) $ 218,004,014
Plan Fiduciary Net Position Contributions - employer $ 8,920,879 Contributions - member 2,148,842 Net investment income 19,625,825 Benefit payments, including refunds of member contributions (11,932,108) Administrative expense (253,796) Other 5,927 Net change in plan fiduciary net position 18,515,569
Plan fiduciary net position - beginning 145,658,672
Plan fiduciary net position - ending (b) $ 164,174,241
Net pension liability (asset) - ending (a-b) $ 53,829,773
(continued)
106
(continued)
Schedules of Net Pension Liability 2014 Total pension liability $ 218,004,014 Plan fiduciary net position (164,174,241) Net pension liability (asset) $ 53,829,773
Plan fiduciary net position as a percentage of the total pension liability 75.31%
Covered employee payroll as of June 30, 2013 actuarial valuation $ 45,788,172
Net -pension liability as a percentage of covered payroll 117.56%
Schedules of Employer Contributions 2014 Actuarially determined contribution $ 8,920,879 Contributions in relation to the actuarially determined contribution 8,920,879 Contribution deficiency (excess) $ -
Covered employee payroll as of June 30, 2013 actuarial valuation $ 45,788,172
Contributions as a percentage of covered employee payroll 19.48%
Schedule of Investment Returns 2014 Annual money weighted rate of return, net of investment expense 13.62%
Schedules are intended to show information for 10 years. Additional years will be displayed as they become available.
See Independent Auditors' Report.
107 CITY OF BURLINGTON, VERMONT
Combining Balance Sheet
Nonmajor Governmental Funds
June 30, 2015
Special Revenue Funds Community Tax Traffic and Economic Increment Commission Development Financing
ASSETS
Cash and short-term investments $ 1,328,960 $ 2,714,376 $ 1,577,660 Investments - - - Departmental and other receivables 65,203 1,443,479 - Intergovernmental receivables - - - Loans receivable - 4,785,455 - Accrued interest receivable - 1,054,720 - Inventory 255,156 - - Prepaid expenditures 122 - - Due from component unit - - -
Total Assets $ 1,649,441 $ 9,998,030 $ 1,577,660
LIABILITIES AND FUND BALANCES
Liabilities: Accounts payable $ 170,741 $ 454,258 $ - Accrued payroll and benefits payable 38,744 29,446 - Accrued liabilities 1,931 4,362 - Unearned revenue - - - Other liabilities - - - Advances from other funds - 1,072,713 -
Total Liabilities 211,416 1,560,779 -
DEFERRED INFLOWS OF RESOURCES Deferred revenues 19,436 6,378,965 -
Fund Balances: Nonspendable 255,278 - - Restricted - 2,058,286 1,577,660 Committed 1,163,311 - - Unassigned - - -
Total Fund Balances 1,418,589 2,058,286 1,577,660
Total Liabilities. Deferred Inflows of Resources and Fund Balances $ 1,649,441 $ 9,998,030 $ 1,577,660
108 Special Revenue Funds Church Street Impact Dedicated Mary E. Marketplace Fees Taxes Waddell Subtotals
$- $ 728,677 $ 1,301,295 $ 13,886 $ 7,664,854 - - - - - 28,996 - - - 1,537,678 ------4,785,455 - - - - 1,054,720 - - - - 255,156 - - - - 122 - - - - -
$ 28,996 $ 728,677 $ 1,301,295 $ 13,886 $ 15,297,985
$ 2,808 $ 44,083 $ - $ - $ 671,890 7,602 - - - 75,792 - 87,838 - - 94,131 25,000 - - - 25,000 - - - - - 87,995 - - - 1,160,708
123,405 131,921 - - 2,027,521
11,060 (676) - - 6,408,785
- - - - 255,278 - 597,432 - 13,886 4,247,264 - - 1,345,292 - 2,508,603 (105,469) - (43,997) - (149,466)
(105,469) 597,432 1,301,295 13,886 6,861,679
$ 28,996 $ 728,677 $ 1,301,295 $ 13,886 $ 15,297,985
(continued)
109 (continued) Capital Project Funds Street & Champlain Waterfront Sidewalk On & Off Parkway Access Infrastructure Church St Wayfinding FEMA
ASSETS
Cash and short-term investments $ 50,894 $ 35,923 $ 4,686,447 $ 141,696 $ 4,412 $ 1 Investments ------Departmental and other receivables ------Intergovernmental receivables 118,698 1,541,537 464,647 1 24,399 285,425 Loans receivable ------Accrued interest receivable ------Inventory ------Prepaid expenditures ------Due from component unit ------
Total Assets $ 169,592 $ 1,577,460 $ 5,151,094 $ 141,697 $ 28,811 $ 285,426
LIABILITIES AND FUND BALANCES
Liabilities: Accounts payable $ 65,140 $ 1,649,114 $ 421,643 $ - $ 8,888 $ - Accrued payroll and benefits payable - - 224 - Accrued liabilities ------Unearned revenue ------Other liabilities - - - - Advances from other funds - - - 141,697 28,742 285,426
Total Liabilities 65,140 1,649,114 421,867 141,697 37,630 285,426
DEFERRED INFLOWS OF RESOURCES Deferred revenues 16,079 1,351,435 215,462 - 19,923 285,425
Fund Balances: Nonspendable ------Restricted 88,373 - 4,513,765 - - - Committed ------Unassigned - (1,423,089) - - (28,742) (285,425)
Total Fund Balances 88,373 (1,423,089) 4,513,765 - (28,742) (285,425)
Total Liabilities. Deferred Inflows of Resources and Fund Balances $ 169,592 $ 1,577,460 $ 5,151,094 $ 141,697 $ 28,811 $ 285,426
(continued)
110 Capital Project Funds Permanent Funds Lolita General Downtown Loomis Deming Capital Westlake Other Subtotals Cemetery Library Estate
$ 588,872 $ 2,159 $ 143,182 $ 5,653,586 $ 1,146,238 $ 10,948 $ 11,242 - - - - 100,000 ------2,538 2,437,245 ------75 - - 75 - - - - 353,741 - 353,741 - - -
$ 588,947 $ 355,900 $ 145,720 $ 8,444,647 $ 1,246,238 $ 10,948 $ 11,242
$ 282,381 $- $ 25,000 $ 2,452,166 $ - $ - $ - 9,040 - - 9,264 - - - - - 20,800 20,800 ------100,790 100,790 - - - - 367,032 - 822,897 - - -
291,421 367,032 146,590 3,405,917 - - -
- - 2,683 1,891,007 - - -
- - - - 894,796 10,948 2,486 297,526 - - 4,899,664 351,442 - 8,756 ------(11,132) (3,553) (1,751,941) - - -
297,526 (11,132) (3,553) 3,147,723 1,246,238 10,948 11,242
$ 588,947 $ 355,900 $ 145,720 $ 8,444,647 $ 1,246,238 $ 10,948 $ 11,242
(continued)
111 (continued) Permanent Funds WEZF Nonmajor 93 FM Governmental DARE Subtotals Funds
ASSETS
Cash and short-term investments $ 2,236 $ 1,170,664 $ 14,489,104 Investments - 100,000 100,000 Departmental and other receivables - - 1,537,678 Intergovernmental receivables - - 2,437,245 Loans receivable - - 4,785,455 Accrued interest receivable - - 1,054,720 Inventory - - 255,156 Prepaid expenditures - - 197 Due from component unit - - 353,741
Total Assets $ 2,236 $ 1,270,664 $ 25,013,296
LIABILITIES AND FUND BALANCES
Liabilities: Accounts payable $ - $ - $ 3,124,056 Accrued payroll and benefits payable - - 85,056 Accrued liabilities - - 114,931 Unearned revenue - - 25,000 Other liabilities - - 100,790 Advances from other funds - - 1,983,605
Total Liabilities - - 5,433,438
DEFERRED INFLOWS OF RESOURCES Deferred revenues - - 8,299,792
Fund Balances: Nonspendable 1,000 909,230 1,164,508 Restricted 1,236 361,434 9,508,362 Committed - - 2,508,603 Unassigned - - (1,901,407)
Total Fund Balances 2,236 1,270,664 11,280,066
Total Liabilities. Deferred Inflows of Resources and Fund Balances $ 2,236 $ 1,270,664 $ 25,013,296
112
113 CITY OF BURLINGTON, VERMONT
Combining Statement of Revenues, Expenditures and Changes in Fund Equity
Nonmajor Governmental Funds
For the Year Ended June 30, 2015
Special Revenue Funds Community and Economic Traffic Development and Tax Increment Commission Housing Trust Financing
Revenues: Taxes $ - $ 190,790 $ 2,768,273 Licenses and permits - - - Intergovernmental - 3,736,187 - Charges for services 4,812,258 714,715 - Investment income 1,010 31 - Loan repayments - 122,544 - Other 5,865 146,447 -
Total Revenues 4,819,133 4,910,714 2,768,273
Expenditures: Current: General government - - 241,632 Public safety - - - Education - - - Public works 4,475,678 - - Culture and recreation - - - Community development - 4,078,807 - Capital outlay - - - Debt service: Principal 92,066 30,000 801,782 Interest and bond issue costs 11,535 5,347 344,649
Total Expenditures 4,579,279 4,114,154 1,388,063
Excess (deficiency) of revenues over (under) expenditures 239,854 796,560 1,380,210
Other Financing Sources (Uses): Issuance of bonds and loans - 2,091,000 2,182,235 Proceeds from capital lease 199,950 - - Transfers in 432,529 502,100 - Transfers out (50,000) (330,887) (2,979,560)
Total Other Financing Sources (Uses) 582,479 2,262,213 (797,325)
Net change in fund balances 822,333 3,058,773 582,885
Fund Balances, beginning of year, as restated 596,256 (1,000,487) 994,775
Fund Balances, end of year $ 1,418,589 $ 2,058,286 $ 1,577,660
114 Special Revenue Funds
Church Street Impact Dedicated Mary E. Marketplace Fees Taxes Waddell Subtotals
$- $ - $ 861,637 $ - $ 3,820,700 127,229 - - - 127,229 79,500 - - - 3,815,687 736,895 349,714 - - 6,613,582 - 3,430 - - 4,471 - - - - 122,544 - - 5,400 - 157,712
943,624 353,144 867,037 - 14,661,925
- - - - 241,632 - 18,129 - - 18,129 - - - - - 886,177 - - - 5,361,855 - 202,598 1,693,689 - 1,896,287 - - - - 4,078,807 - - - - -
24,316 - - - 948,164 2,491 - - - 364,022
912 ,984 220,727 1,693,689 -12,908,896
30,640 132,417 (826,652) - 1,753,029
- - - - 4,273,235 - - - - 199,950 11,000 - 811,928 - 1,757,557 - (118,118) - - (3,478,565)
11,000 (118,118) 811,928 - 2,752,177
41,640 14,299 (14,724) - 4,505,206
(147,109) 583,133 1,316,019 13,886 2,356,473
$ (105,469) $ 597,432 $ 1,301,295 $ 13,886 $ 6,861,679
(continued)
115 (continued) Capital Project Funds
Street & Champlain Waterfront Sidewalk On & Off Parkway Access Infrastructure Church St Wayfinding FEMA
Revenues: Taxes $ - $ - $ 2,038,583 $ - $ - $ - Licenses and permits ------Intergovernmental 846,444 1,198,809 326,731 141,697 33,966 181,441 Charges for services - - 356,671 - - - Investment income ------Loan repayments ------Other - 28,334 793,658 - 6,895 -
Total Revenues 846,444 1,227,143 3,515,643 141,697 40,861 181,441
Expenditures: Current: General government ------Public Safety ------Education ------Public works ------Culture and recreation ------Community development ------Capital outlay 453,635 3, 892,930 4,641,559 - 38,597 49,769 Debt service: Principal ------Interest and bond issue costs ------
Total Expenditures 453,635 3,892,930 4,641,559 - 38,597 49,769
Excess (deficiency) of revenues over (under) expenditures 392,809 (2,665,787) (1,125,916) 141,697 2,264 131,672
Other Financing Sources (Uses): Issuance of bonds and loans - - 1,661,572 - - - Proceeds from capital lease ------Transfers in 9,073 1,478,279 - - 824 4,977 Transfers out - - (220,153) - - -
Total Other Financing Sources (Uses) 9,073 1,478,279 1,441,419 - 824 4,977
Net change in fund balances 401,882 (1,187,508) 315,503 141,697 3,088 136,649
Fund Balances, beginning of year, as restated (313,509) (235,581) 4,198,262 (141,697) (31,830) (422,074)
Fund Balances, end of year $ 88,373 $ (1,423,089) $ 4,513,765 $ - $ (28,742) $ (285,425)
116 Capital Project Funds Permanent Funds
Lolita General Downtown Loomis Deming Capital Westlake Other Subtotals Cemetery Library Estate
$- $ - $ - $ 2,038,583 $- $ - $ ------2,729,088 ------356,671 ------3,060 - 2 ------23,069 851,956 67,115 - -
- - 23,069 5,976,298 70,175 - 2
------397,127 - 9,999 9,483,616 - - -
619 - - 619 ------
397,746 - 9,999 9,484,235 - - -
(397,746) - 13,070 (3,507,937) 70,175 - 2
- - - 1,661,572 ------961,072 - - 2,454,225 ------(220,153) - - -
961,072 - - 3,895,644 - - -
563,326 - 13,070 387,707 70,175 - 2
(265,800) (11,132) (16,623) 2,760,016 1,176,063 10,948 11,240
$ 297,526 $ (11,132) $ (3,553) $ 3,147,723 $ 1,246,238 $10,948 $11,242
(continued)
117 (continued)
Total WEZF Nonmajor 93 FM Governmental DARE Subtotals Funds
Revenues: Taxes $ - $ - $ 5,859,283 Licenses and permits - - 127,229 Intergovernmental - - 6,544,775 Charges for services - - 6,970,253 Investment income - 3,062 7,533 Loan repayments - - 122,544 Other - 67,115 1,076,783
Total Revenues - 70,177 20,708,400
Expenditures: Current: General government - - 241,632 Public Safety - - 18,129 Education - - - Public works - - 5,361,855 Culture and recreation - - 1,896,287 Community development - - 4,078,807 Capital Outlay - - 9,483,616 Debt service: - Principal - - 948,783 Interest and bond issue costs - - 364,022
Total Expenditures - - 22,393,131
Excess (deficiency) of revenues over (under) expenditures - 70,177 (1,684,731)
Other Financing Sources (Uses): Issuance of bonds and loans - - 5,934,807 Proceeds from capital lease - - 199,950 Transfers in - - 4,211,782 Transfers out - - (3,698,718)
Total Other Financing Sources (Uses) - - 6,647,821
Net change in fund balances - 70,177 4,963,090
Fund Balances, beginning of year, as restated 2,236 1,200,487 6,316,976
Fund Balances, end of year $ 2,236 $ 1,270,664 $ 11,280,066
118 CITY OF BURLINGTON, VERMONT
NONMAJOR PROPRIETARY FUNDS
STATEMENT OF NET POSITION
JUNE 30, 2015
Nonmajor Enterprise Funds Telecom Wastewater Water Stormwater Total ASSETS AND DEFERRED OUTFLOWS OF RESOURCES Assets: Current: Cash and cash equivalents $ 745,366 $ 1,174,975 $ 551,343 $ 413,436 $ 2,885,120 Receivables, net of allowance for uncollectibles: User fees 878,262 890,761 683,911 94,279 2,547,213 Intergovernmental - - 208,823 - 208,823 Estimated unbilled revenues 3,726 568,875 398,464 83,674 1,054,739 Inventory 187,323 126,374 302,926 - 616,623 Prepaid expenses 74,078 1,462 859 - 76,399 Other current assets 5,000 - - - 5,000 Total current assets 1,893,755 2,762,447 2,146,326 591,389 7,393,917
Noncurrent: Restricted cash 364,186 1,433,426 - - 1,797,612 Capital assets: Land and construction in progress 157,800 847,952 266,209 - 1,271,961 Intangible asset 6,549,636 - - - 6,549,636
Capital assets, net of accumulated depreciation 1,087,090 26,369,661 11,096,420 1,105,281 39,658,452 Total noncurrent assets 8,158,712 28,651,039 11,362,629 1,105,281 49,277,661 TOTAL ASSETS 10,052,467 31,413,486 13,508,955 1,696,670 56,671,578 Deferred Outflows of Resources 353,697 261,613 437,165 - 1,052,475 TOTAL ASSETS AND DEFERRED OUTFLOWS OF RESOURCES $ 10,406,164 $ 31,675,099 $ 13,946,120 $ 1,696,670 $ 57,724,053
LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND NET POSITION Liabilities: Current: Accounts payable $ 348,783 $ 347,990 $ 324,233 $ 25,576 $ 1,046,582 Accrued payroll and benefits payable - 28,597 49,129 5,626 83,352 Unearned revenue 445,427 - 445,427 Other current liabilities 394,143 - 34,791 - 428,934 Current portion of long-term liabilities: Revenue bonds payable - 884,949 - 18,396 903,345 Note payable - - 8,485 - 8,485 Capital leases payable 168,260 - 14,521 - 182,781 Total current liabilities 1,356,613 1,261,536 431,159 49,598 3,098,906
Noncurrent: Revenue bonds payable - 15,190,949 - 375,504 15,566,453 Long term note payable - - 219,521 - 219,521 Capital leases payable, net of current portion 5,846,240 - 7,368 - 5,853,608 Compensated absences payable 81,200 75,035 151,546 - 307,781 Net OPEB obligation 106,762 47,206 62,350 - 216,318 Net pension liability 745,843 532,524 790,242 - 2,068,609 Total noncurrent liabilities 6,780,045 15,845,714 1,231,027 375,504 24,232,290 TOTAL LIABILITIES 8,136,658 17,107,250 1,662,186 425,102 27,331,196 Deferred Inflows of Resources 88,861 63,446 94,150 - 246,457 NET POSITION Net investment in capital assets 1,864,700 11,141,715 11,087,400 711,381 24,805,196 For contingency reserve - 1,433,426 - - 1,433,426 For revenue fund 364,186 - - - 364,186 Unrestricted (48,241) 1,929,262 1,102,384 560,187 3,543,592 TOTAL NET POSITION 2,180,645 14,504,403 12,189,784 1,271,568 30,146,400 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND NET POSITION $ 10,406,164 $ 31,675,099 $ 13,946,120 $ 1,696,670 $ 57,724,053
See notes to financial statements. 119 CITY OF BURLINGTON, VERMONT
NONMAJOR PROPRIETARY FUNDS
STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET POSITION
FOR THE YEAR ENDED JUNE 30, 2015
Nonmajor Enterprise Funds Telecom Wastewater Water Stormwater Total Operating Revenues: Charges for services $ 7,617,994 $ 7,690,557 $ 5,548,429 $ 1,063,715 $ 21,920,695 Intergovernmental - - - 23,553 23,553 Miscellaneous - - 242,617 7,256 249,873 Total Operating Revenues 7,617,994 7,690,557 5,791,046 1,094,524 22,194,121
Operating Expenses: Personnel 2,170,403 1,385,309 2,177,185 220,582 5,953,479 Nonpersonnel 3,735,935 3,184,002 2,440,663 470,415 9,831,015 Depreciation and amortization 471,116 1,580,054 651,247 40,433 2,742,850 Payments in lieu of taxes 96,838 906,837 400,130 - 1,403,805 Total Operating Expenses 6,474,292 7,056,202 5,669,225 731,430 19,931,149 Operating Income 1,143,702 634,355 121,821 363,094 2,262,972
Nonoperating Revenues (Expenses): Investment income - 129 - - 129 Other income/expense - net (56,630) 10,564 25,334 - (20,732) Interest income/expense - net (223,253) (507,243) (79) 567 (730,008) Total Nonoperating Revenues (Expenses) (279,883) (496,550) 25,255 567 (750,611) Income Before Contributions and Transfers 863,819 137,805 147,076 363,661 1,512,361 Capital contributions - 6,881 - 83,196 90,077 Transfers out - (28,921) - - (28,921) Change in Net Position 863,819 115,765 147,076 446,857 1,573,517
Net Position at Beginning of Year, as restated 1,316,826 14,388,638 12,042,708 824,711 28,572,883 Net Position at End of Year $ 2,180,645 $ 14,504,403 $ 12,189,784 $ 1,271,568 $ 30,146,400
See notes to financial statements.
120 CITY OF BURLINGTON, VERMONT NONMAJOR PROPRIETARY FUNDS STATEMENT OF CASH FLOWS FOR THE YEAR ENDED JUNE 30, 2015
Telecom Wastewater Water Stormwater Fund Fund Fund Fund Total Cash Flows From Operating Activities: Receipts from customers and users $ 7,417,663 $ 7,623,325 $ 5,479,263 $ 1,102,619 $ 21,622,870 Receipts of operating grants - - - 23,553 23,553 Receipts for interfund services - - 242,617 - 242,617 Payments to suppliers (3,854,251) (3,120,274) (2,282,598) (451,048) (9,708,171) Payments for wages and benefits (2,120,388) (1,389,202) (2,116,879) (214,956) (5,841,425) Payments in lieu of taxes (96,838) (906,837) (400,130) - (1,403,805) Net Cash Provided by Operating Activities 1,346,186 2,207,012 922,273 460,168 4,935,639 Cash Flows From Noncapital Financing Activities: Other income, net 106,725 14,744 14,501 - 135,970 Decrease in advances from other funds - - - (163,169) (163,169) Receipt/(payments) of interfund transfers - (28,921) - - (28,921) Cash Provided/(Used) by Noncapital Financing Activities 106,725 (14,177) 14,501 (163,169) (56,120) Cash Flows From Capital and Related Financing Activities: Acquisition and construction of capital assets (991,538) (118,303) (508,523) (77,380) (1,695,744) Capital grants/contributions - 6,881 - 83,196 90,077 Payments to CitiCapital (163,354) - - - (163,354) Settlement charges (1,000,000) - - - (1,000,000) Issuance of bonds and notes - - 44,517 68,196 112,713 Principal paid on: Bonds and notes - (875,074) - (18,035) (893,109) Capital lease obligations (96,202) (7,947) (16,553) - (120,702) Interest paid on outstanding debt, including issue costs (223,253) (507,243) (645) - (731,141) Net Cash Provided/(Used) by Capital and Related Financing Activities (2,474,347) (1,501,686) (481,204) 55,977 (4,401,260) Cash Flows From Investing Activities: Increase in restricted cash (364,186) (1,075,071) - - (1,439,257) Receipt of interest & dividends - 129 - 565 694 Net Cash Provided/(Used) by Investing Activities (364,186) (1,074,942) - 565 (1,438,563) Net Increase/(Decrease) in Cash (1,385,622) (383,793) 455,570 353,541 (960,304)
Cash and cash equivalents at beginning of year 2,130,988 1,558,768 95,773 59,895 3,845,424
Cash and cash equivalents at end of year $ 745,366 $ 1,174,975 $ 551,343 $ 413,436 $ 2,885,120
Adjustments to Reconcile Operating Income to Net Cash Provided by Operating Activities: Operating Income $ 1,143,702 $ 634,355 $ 121,821 $ 363,094 $ 2,262,972 Depreciation and amortization 471,116 1,580,054 651,247 40,433 2,742,850 (Increase)/Decrease in receivables (219,383) (48,030) (75,202) 28,103 (314,512) (Increase)/Decrease in unbilled revenues 978 (19,200) (4,662) 3,545 (19,339) (Increase)/Decrease in inventory 24,835 22,016 (74,493) - (27,642) Increase/(Decrease) in accounts payable (385,078) 41,710 233,034 19,367 (90,967) Increase/(Decrease) in customer deposits - - 10,699 - 10,699 Increase/(Decrease) in accrued payroll and benefits - 7,626 20,933 5,626 34,185 Increase/(Decrease) in accrued liabilities 256,281 - - - 256,281 Increase/(Decrease) in deferred charges 18,074 - - - 18,074 Increase/(Decrease) in compensated absences 16,685 (17,899) (3,884) - (5,098) Increase/(Decrease) in other post employment benefits liability 15,600 - - - 15,600 Increase/(Decrease) in net pension liability and related deferred inflow/outflow 17,730 6,380 43,257 - 67,367 Increase/(Decrease) in other operating assets/liabilities (14,354) - (477) - (14,831) Net Cash Provided by Operating Activities $ 1,346,186 $ 2,207,012 $ 922,273 $ 460,168 $ 4,935,639
Statement of noncash transactions: Sale-leaseback financing of settlement liability $ 6,000,000 $- $ - $ - $ 6,000,000 Vehicles acquired under capital lease financing $ 83,378 $ - $ - $ - $ 83,378 See Notes to Financial Statements
121 CITY OF BURLINGTON, VERMONT
Combining Statement of Fiduciary Net Position
Private Purpose Trust Funds
June 30, 2015
Louisa Walter Fireman's Christmas Howard Carpenter Relief Gift Total
ASSETS
Cash and short-term investments $ 28,088 $ 7,483 $ 628 $1,619 $37,818
Total Assets 28,088 7,483 628 1,619 37,818
NET POSITION
Net position held in trust $ 28,088 $ 7,483 $ 628 $1,619 $37,818
122 CITY OF BURLINGTON, VERMONT
Combining Statement of Changes in Fiduciary Net Position
Private Purpose Trust Funds
For the Year Ended June 30, 2015
Louisa Walter Fireman's Christmas Howard Carpenter Relief Gift Total
ADDITIONS
Investment income $ 5 $ - $ - $ - $ 5
Total Additions 5 - - - 5
DEDUCTIONS
Payments to beneficiaries - - - - -
Net increase 5 - - - 5
NET POSITION
Beginning of year 28,083 7,483 628 1,619 37,813
End of year $ 28,088 $ 7,483 $ 628 $ 1,619 $ 37,818
123
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124
APPENDIX B
Form of Proposed Legal Opinion
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Form of Legal Opinion for Series 2016A Refunding Bonds
[Date of Closing]
City Council City of Burlington City Hall Burlington, VT 05401
Ladies and Gentlemen: We have acted as Bond Counsel to the City of Burlington, Vermont, a public body corporate and politic of the State of Vermont (the “City”), in connection with the City’s $16,930,000* General Obligation Refunding Bonds, Series 2016A, dated the original issuance date thereof (the “Bonds”). In such capacity, we examined the laws of the State of Vermont and a record of proceedings relating to the issuance of the Bonds.
The Bonds are issued under and pursuant to (i) the Charter of the City and (ii) Resolutions of the City Council adopted December 21, 2015 and March 7, 2016.
The Bonds are payable on November 1 of the years and in the principal amounts and bear interest at the respective rates, as follows: (November 1) (November 1) Year Amount Interest Rate Year Amount Interest Rate 2016 $ % 2023 $ % 2017 2024 2018 2025 2019 2026 2020 2027 2021 2028 2022 2029
The Bonds maturing prior to November 1, 20__ are not subject to optional redemption prior to their stated dates of maturity. The Bonds maturing on and after November 1, 20__ are subject to redemption prior to their stated dates of maturity at the option of the City, on November 1, 20__ , and any date thereafter, either in whole or in part, at par plus accrued interest upon the terms and conditions stated in the Bonds. The Bonds are immobilized in the custody of The Depository Trust Company and a book- entry system is being used to evidence ownership and transfer on the records of the Depository Trust Company and its participants.
* Preliminary, subject to change.
{00135758.4} B-1 City Council [Date of Closing] Page 2
On the basis of this examination, we are of the opinion, as of the date hereof and under existing law, rules and regulations, as follows:
(1) The Bonds are valid general obligations of the City and all taxable property in the City is subject to taxation without limitation as to rate or amount to pay the Bonds and the interest thereon.
(2) Assuming the accuracy of certain representations of the City and the compliance by the City with certain requirements of the Internal Revenue Code of 1986, as amended (the “Code”), and covenants regarding the use, expenditure and investment of proceeds of the Bonds, the interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of computing the alternative minimum tax imposed on individuals and corporations under the Code. Interest on the Bonds will be taken into account in determining the adjusted current earnings of certain corporations for purposes of calculating the alternative minimum tax imposed on such corporations. The opinions set forth in the preceding sentences are subject to the condition that the City comply with all requirements of the Code that must be satisfied subsequent to the issuance of the Bonds in order that interest thereon be, or continue to be, excluded from gross income for federal income tax purposes. The City has covenanted to comply with these requirements. Failure to comply with certain of these requirements may cause the inclusion of interest on the Bonds in gross income for federal income tax purposes to be retroactive to the date of issuance of the Bonds. We express no opinion regarding any other federal tax consequences arising with respect to the Bonds.
(3) The interest on the Bonds is not subject to the Vermont personal income tax or the Vermont corporate income tax to the extent interest on the Bonds is excluded from gross income for federal income tax purposes. We express no opinion regarding any other state tax consequences arising with respect to the Bonds.
The rights of the holders of the Bonds and the enforceability thereof may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors’ rights heretofore or hereafter enacted, and to the application of general principles of equity, whether considered in a proceeding at law or in equity, and their enforcement may also be subject to the exercise of judicial discretion in appropriate cases.
This opinion is rendered as of the date hereof and based on existing laws, which are subject to change. We disclaim any obligation to update this letter based upon any future changes in laws or circumstances, which changes may have the effect of causing us to reach a different opinion than that expressed herein.
Very truly yours,
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APPENDIX C
Continuing Disclosure Undertaking
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APPENDIX C FORM OF CONTINUING DISCLOSURE UNDERTAKING
The City of Burlington, Vermont (the “City”) hereby executes this Continuing Disclosure Certificate (this “Certificate”) in connection with the following bond issue:
$[ ] General Obligation Refunding Bonds, Series 2016A (the “Bonds”) dated as of the date of this Certificate.
1. This Certificate is delivered to enable the purchasers of the Bonds to comply with Rule 15c2-12 promulgated by the Securities and Exchange Commission (the “Commission”) pursuant to the Securities Exchange Act of 1934 (as the same may be amended or interpreted from time to time, the “Rule”) in connection with the Bonds. In connection with the issuance of the Bonds, there has been prepared an Official Statement dated as of March [ ], 2016 (the “Official Statement”) setting forth information concerning the Bonds and the City.
2. The City agrees to undertake for the benefit of the holders and/or beneficial owners of the Bonds to provide continuing disclosure with respect to the Bonds as set forth in this Certificate and in accordance with the provisions of the Rule.
3. As used herein, “MSRB” means the Municipal Securities Rulemaking Board established pursuant to the provisions of Section 15B(b)(1) of the Securities Exchange Act of 1934, or any other entity designated or authorized by the Commission to receive reports pursuant to the Rule. The undersigned Chief Administrative Officer, being the chief fiscal officer of the City, hereby agrees, in accordance with the provisions of the Rule, to provide or cause to be provided,
(a) Within 270 days after the fiscal year end while any of the Bonds are outstanding, commencing with the fiscal year ending June 30, 2016 (the “Submission Date”), the City will, or shall cause the Disclosure Agent (as defined herein) to, provide to the MSRB, during each fiscal year that the Bonds are outstanding:
(A) financial information and operating data relating to the City, updating the financial information and operating data relating to the City presented in the final Official Statement for the Bonds, which specifically includes updated information set forth in Tables 13, 14 and 15 therein; and
(B) the audited financial statements of the City for the most recently ended fiscal year, prepared in accordance with generally accepted accounting principles as in effect from time to time.
In each case, if then permitted by the Rule and the requirements of the MSRB, the items referred to in this paragraph (3)(a) may be submitted as a single document or as separate documents comprising a package, and may cross-reference other documents which may have been filed with the MSRB or the Commission. If the document incorporated by reference is a final official statement, it shall be available from the MSRB. The City or Disclosure Agent, as the case may
C-1 be, shall clearly identify each such other document so incorporated by reference. Notwithstanding the foregoing, the audited financial statements of the City may be submitted separately from, and at a later date than, the balance of the items referred to in this paragraph (3)(a) if such audited financial statements are not available as of the date set forth above. If the City or Disclosure Agent, as applicable, submits the audited financial statements of the City at a later date, it shall provide unaudited financial statements by the above-specified deadline and shall provide the audited financial statements as soon as practicable after the audited financial statements become available.
The Disclosure Agent, if any, shall:
(A) determine each year prior to the Submission Date the address of the MSRB and the required mode of filing; and
(B) file a report with the City certifying that the annual financial information as set forth in Section 3(a) above has been provided pursuant to this Certificate, stating the date it was provided and listing all persons to which it was provided.
If there is not a Disclosure Agent, the City shall determine each year prior to the Submission Date the address of the MSRB and mode of filing.
(b) The City will, or cause the Disclosure Agent to, provide, in a timely manner, not in excess of ten (10) business days after the occurrence of the event, to the MSRB notice of the occurrence of any of the following events with respect to the Bonds: (A) principal and interest payment delinquencies; (B) non-payment related defaults, if material; (C) unscheduled draws on debt service reserves reflecting financial difficulties; (D) unscheduled draws on credit enhancements reflecting financial difficulties; (E) substitution of credit or liquidity providers, or their failure to perform; (F) adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds; (G) modification to rights of holders of the Bonds, if material; (H) bond calls, if material and tender offers; (I) defeasances; (J) release, substitution or sale of property securing the repayment of the Bonds, if material; (K) rating changes; (L) bankruptcy, insolvency, receivership or similar event of the City; (M) the consummation of a merger, consolidation, or acquisition involving the City or the sale of all or substantially all of the assets of the City, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; or (N) appointment of a successor or additional trustee or the change of name of a trustee, if material.
Event (C) is included pursuant to a letter from the Commission staff to the National Association of Bond Lawyers dated September 19, 1995. However, event (C) is not applicable, since no “debt service reserves” will be established for the Bonds.
With respect to event (L) above, the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for the City in a
C-2 proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or government authority has assumed jurisdiction over substantially all of the assets or business of the City, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and order of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the City.
The City may from time to time choose to provide notice of the occurrence of certain other events, in addition to those listed above, if the City determines that any such other event is material with respect to the Bonds; but the City does not undertake to commit to provide any such notice of the occurrences of any material event except those events listed above.
(c) If the City on its own or through a Disclosure Agent, if any, is unable to provide the annual financial information as set forth in Section 3(a) above to the MSRB by the Submission Date, the City or Disclosure Agent, as applicable, shall complete and file with the MSRB in a timely manner notice of such failure to file and the anticipated date of filing in the form attached hereto as Exhibit A.
(d) Failure of the City to comply with this undertaking shall not constitute an event of default under the Bonds or under any authorizing resolution for the Bonds nor entitle any holder of the Bonds to recover monetary damages.
(e) Any holder or beneficial owner of the Bonds may take such actions as may be necessary and appropriate, including seeking specific performance by court order, to cause the City to comply with its obligations under this Certificate. An action to compel performance shall be the sole remedy for any failure of the City to comply with this Certificate.
(f) Notwithstanding anything herein, this Certificate may be amended or waived by the City, if such amendment or waiver would not, in and of itself, violate the Rule. Without limiting the foregoing, the City may amend this Certificate if (i) such amendment is made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature or status of the City; (ii) this Certificate, as so amended, would have complied with the requirements of the Rule at the time the Bonds were issued, taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and (iii) the amendment does not materially impair the interests of the holders of the Bonds (including holders of beneficial interests in the Bonds). The annual disclosure following any such amendment or waiver will contain an explanation, in narrative form, of the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided.
(g) The City's obligations under this Certificate shall terminate if and when the City no longer remains an obligated person with respect to the Bonds within the meaning of the Rule.
C-3 (h) This Certificate shall inure solely to the benefit of the City, the purchaser of the Bonds, and the holders and beneficial owners from time to time of the Bonds, and shall create no rights in any other person or entity.
(i) Unless otherwise required by law, all notices, documents and information provided to the MSRB pursuant to this Certificate shall be provided to the Electronic Municipal Market Access (“EMMA”) system of the MSRB or in any other electronic format as may be prescribed by the MSRB and shall be accompanied by identifying information as prescribed by the MSRB.
(j) As used in this Certificate, the term “Disclosure Agent” shall mean any agent of the City designated in writing by the City, which agent has filed with the City a written acceptance of such designation. The City has engaged Disclosure Assurance Certification, L.L.C. (“DAC”) to act as the City’s disclosure dissemination agent in connection with the City’s outstanding continuing disclosure obligations under the Rule pursuant to that certain SEC Post- Issuance Compliance Services Pricing Agreement (the “Disclosure Agreement”) dated as of November 28, 2012 by and between the City and DAC. The City hereby designates DAC as the initial Disclosure Agent for the Bonds and the City and DAC agree to amend the Disclosure Agreement to include the Bonds.
(k) The City represents that it adopted a written policy and internal administrative procedures on November 17, 2014 to facilitate the City’s continuing compliance with the Rule.
[signature page follows]
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IN WITNESS WHEREOF, the City has executed this Certificate as of ______, 2016.
CITY OF BURLINGTON, VERMONT
By: Chief Administrative Officer
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EXHIBIT A
NOTICE TO MSRB OF FAILURE TO FILE ANNUAL REPORT
Name of Issuer: City of Burlington, Vermont
Name of Bond Issue: $[ ] General Obligation Refunding Bonds, Series 2016A (the “Bonds”) dated as of the date of this Certificate.
Date of Issuance: April [ ], 2016
NOTICE IS HERERBY GIVEN that the above-captioned Issuer (the “Issuer”) has not provided an Annual Report with respect to the above-named Bonds as required by a Continuing Disclosure Agreement dated April [ ], 2016 of the Issuer with respect to the above-named Bonds. The Issuer anticipates that the Annual Report will be filed by [______].
Dated:______
CITY OF BURLINGTON, VERMONT, as Issuer
By:______Authorized Officer
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City of Burlington, Vermont • General Obligation Refunding Bonds, Series 2016A