NEW ISSUE – BOOK-ENTRY ONLY RATING: See “RATINGS” herein
In the opinion of McManimon, Scotland & Baumann, LLC, Bond Counsel to the City (as defined herein), pursuant to Section 103(a) of the Internal Revenue Code of 1986, as amended (the “Code”), interest on the Tax-Exempt Bonds (as defined herein) is not included in gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the alternative minimum tax imposed on individuals and corporations. It is also the opinion of Bond Counsel, that interest on the Tax-Exempt Bonds held by corporate taxpayers is included in “adjusted current earnings” in calculating alternative minimum taxable income for purposes of the federal alternative minimum tax imposed on corporations. In addition, in the opinion of Bond Counsel, interest on and any gain from the sale of the Bonds (as defined herein) is not includable as gross income under the New Jersey Gross Income Tax Act. Bond Counsel’s opinions described herein are given in reliance on representations, certifications of fact, and statements of reasonable expectation made by the City in its Tax Certificate (as defined herein), assume continuing compliance by the City with certain covenants set forth in its Tax Certificate, and are based on existing statutes, regulations, administrative pronouncements and judicial decisions. See “TAX MATTERS” herein.
CITY OF BAYONNE IN THE COUNTY OF HUDSON, NEW JERSEY $6,322,000 SPECIAL ASSESSMENT BONDS, SERIES 2014A (CALLABLE) $6,121,000 SCHOOL BONDS, SERIES 2014B (SCHOOL BOND RESERVE ACT, P.L. 1980, C.72, AS AMENDED) (CALLABLE) $1,027,000 SCHOOL BONDS, SERIES 2014C (FEDERALLY TAXABLE) (SCHOOL BOND RESERVE ACT, P.L. 1980, C.72, AS AMENDED) (NON-CALLABLE)
Dated: Date of Delivery Due: November 15, as shown on the inside front cover pages
The $6,322,000 Special Assessment Bonds, Series 2014A (the “Series 2014A Bonds”), the $6,121,000 School Bonds, Series 2014B (School Bond Reserve Act, P.L. 1980, c.72, as Amended) (the “Series 2014B Bonds” and, together with the 2014A Bonds, the “Tax-Exempt Bonds”), and the $1,027,000 School Bonds, Series 2014C (Federally Taxable) (School Bond Reserve Act, P.L. 1980, c.72, as Amended) (the “Series 2014C Bonds” or “Taxable Bonds” and, together with the Tax-Exempt Bonds, the “Bonds”) of the City of Bayonne, in the County of Hudson, New Jersey (the “City”) will be issued in the form of one certificate for the aggregate principal amount of the Bonds of each series maturing in each year and when issued will be registered in the name of CEDE & Co., as nominee of The Depository Trust Company, Jersey City, New Jersey (“DTC”), which will act as Securities Depository. See “THE BONDS - Book-Entry Only System” herein.
Interest on the Bonds will be payable by the City semiannually on the fifteenth day of May and November in each year until maturity or prior redemption, commencing on May 15, 2015. Principal of and interest on the Bonds will be paid to DTC by the City as paying agent. Interest on the Bonds will be credited to the participants of DTC as listed on the records of DTC as of each preceding May 1 and November 1 (the “Record Dates”) for the payment of interest on the Bonds.
The Series 2014A Bonds are being issued pursuant to the Local Bond Law of the State of New Jersey, constituting Chapter 2 of Title 40A of the New Jersey Statutes, as amended, a bond ordinance and a resolution of the City. Proceeds from the sale and issuance of the Series 2014A Bonds will be used by the City to (i) currently refund $6,322,000 of the City’s $6,322,094 Bond Anticipation Notes, dated and issued on July 15, 2014 and maturing on January 15, 2015, together with a $94 principal reduction payment from available funds, and (ii) provide funds for the costs associated with the authorization, sale and issuance of the Series 2014A Bonds.
The Series 2014B Bonds are being issued pursuant to Title 18A, Education of the New Jersey Statutes and the Local Bond Law of the State of New Jersey, constituting Chapter 2 of Title 40A of the New Jersey Statutes, each as amended, a bond ordinance and a resolution of the City. Proceeds from the sale and issuance of the Series 2014B Bonds will be used by the City to (i) currently refund $6,121,000 of the City’s $6,121,906 Temporary Note, dated and issued on July 15, 2014 and maturing on January 15, 2015, together with a $906 principal reduction payment from available funds, and (ii) provide funds for the costs associated with the authorization, sale and issuance of the Series 2014B Bonds.
The Series 2014C Bonds are being issued pursuant to Title 18A, Education of the New Jersey Statutes and the Local Bond Law of the State of New Jersey, constituting Chapter 2 of Title 40A of the New Jersey Statutes, each as amended, a bond ordinance and a resolution of the City. Proceeds from the sale and issuance of the Series 2014C Bonds will be used by the City to (i) currently refund $1,027,000 of the City’s $1,027,469 Temporary Note, dated and issued on July 15, 2014 and maturing on January 15, 2015, together with a $469 principal reduction payment from available funds, and (ii) provide funds for the costs associated with the authorization, sale and issuance of the Series 2014C Bonds.
The Series 2014A Bonds and the Series 2014B Bonds are subject to optional redemption prior to their stated maturities. The Series 2014C Bonds are not subject to optional redemption prior to their stated maturities. See “THE BONDS – Optional Redemption” herein.
The scheduled payment of principal of and interest due on the Series 2014A Bonds and the Series 2014B Bonds when due will be guaranteed under a municipal bond insurance policy to be issued concurrently with the delivery of the Bonds by Build America Mutual.
The Bonds are valid and legally binding general obligations of the City and, unless paid from other sources, are payable from ad valorem taxes levied upon all the taxable property within the City for the payment of the Bonds and the interest thereon without limitation as to rate or amount. The Series 2014B Bonds and the Series 2014C Bonds are additionally secured pursuant to the provisions of the New Jersey School Bond Reserve Act, P.L. 1980, c.72, as amended.
This cover page contains information for quick reference only. It is not a summary of this issue. Investors must read the entire Official Statement, including the Appendices, to obtain information essential to the making of an informed investment decision.
The Bonds are offered when, as and if issued and delivered to the purchaser, subject to prior sale, to withdrawal or modification of the offer without notice and to approval of legality by the law firm of McManimon, Scotland & Baumann, LLC, Roseland, New Jersey and certain other conditions described herein. Delivery is anticipated to be through the facilities of DTC in Jersey City, New Jersey, on or about November 19, 2014.
ROOSEVELT & CROSS, INC. AND ASSOCIATES , , . (Series 2014A Bonds & Series 2014B Bonds) (Series 2014C Bonds)
October 30, 2014 CITY OF BAYONNE IN THE COUNTY OF HUDSON, STATE OF NEW JERSEY
$6,322,000 SPECIAL ASSESSMENT BONDS, SERIES 2014A
MATURITIES, INTEREST RATES, YIELDS AND CUSIP NUMBERS
Interest CUSIP Year Principal Amount Rate Yield Number* 2015 $322,000 4.000% 0.60% 072887 H70 2016 320,000 5.000 0.80 072887H88 2017 320,000 5.000 1.10 072887 H96 2018 320,000 5.000 1.35 072887 J29 2019 315,000 5.000 1.70 072887 J37 2020 315,000 5.000 2.00 072887 J45 2021 315,000 5.000 2.25 072887 J52 2022 315,000 2.250 2.45 072887 J60 2023 315,000 2.500 2.60 072887 J78 2024 315,000 2.750 2.80 072887 J86 2025 315,000 3.000 3.00 072887 J94 2026 315,000 3.000 3.10 072887 K27 2027 315,000 3.000 3.20 072887 K35 2028 315,000 3.125 3.25 072887 K43 2029 315,000 3.125 3.30 072887 K50 2030 315,000 3.250 3.35 072887 K68 2031 315,000 3.375 3.40 072887 K76 2032 315,000 3.500 3.45 072887 K84 2033 315,000 3.500 3.50 072887 K92 2034 315,000 3.500 3.55 072887 L26
* "CUSIP" is a registered trademark of the American Bankers Association. CUSIP numbers are provided by Standard & Poor’s, CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc. The CUSIP Numbers listed above are being provided solely for the convenience of Bondholders only at the time of issuance of the Series 2014A Bonds and the City does not make any representations with respect to such numbers or undertake any responsibility for their accuracy now or at any time in the future. The CUSIP number for a specified maturity is subject to being changed after the issuance of the Series 2014A Bonds as a result of various subsequent actions including, but not limited to, a refunding in whole or in part of such maturity or as a result of the procurement of secondary market portfolio insurance or other similar enhancement by investors that is applicable to all or a portion of certain maturities of the Series 2014A Bonds. CITY OF BAYONNE IN THE COUNTY OF HUDSON, STATE OF NEW JERSEY
$6,121,000 SCHOOL BONDS, SERIES 2014B (SCHOOL BOND RESERVE ACT, P.L. 1980, c.72, AS AMENDED)
MATURITIES, INTEREST RATES, YIELDS AND CUSIP NUMBERS
Interest CUSIP Year Principal Amount Rate Yield Number* 2015 $215,000 4.000% 0.50% 072887 L34 2016 220,000 4.000 0.70 072887 L42 2017 225,000 5.000 1.00 072887 L59 2018 235,000 5.000 1.25 072887 L67 2019 240,000 5.000 1.60 072887 L75 2020 250,000 5.000 1.90 072887 L83 2021 255,000 4.000 2.15 072887 L91 2022 270,000 2.250 2.35 072887 M25 2023 280,000 2.500 2.50 072887 M33 2024 290,000 3.000 2.70 072887 M41 2025 305,000 3.000 2.90 072887 M58 2026 320,000 3.000 3.00 072887 M66 2027 330,000 3.000 3.10 072887 M74 2028 345,000 3.000 3.15 072887 M82 2029 355,000 3.125 3.20 072887 M90 2030 370,000 3.125 3.25 072887 N24 2031 385,000 3.250 3.30 072887 N32 2032 395,000 3.250 3.35 072887 N40 2033 410,000 3.375 3.40 072887 N57 2034 426,000 3.500 3.45 072887 N65
* "CUSIP" is a registered trademark of the American Bankers Association. CUSIP numbers are provided by Standard & Poor’s, CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc. The CUSIP Numbers listed above are being provided solely for the convenience of Bondholders only at the time of issuance of the Series 2014B Bonds and the City does not make any representations with respect to such numbers or undertake any responsibility for their accuracy now or at any time in the future. The CUSIP number for a specified maturity is subject to being changed after the issuance of the Series 2014B Bonds as a result of various subsequent actions including, but not limited to, a refunding in whole or in part of such maturity or as a result of the procurement of secondary market portfolio insurance or other similar enhancement by investors that is applicable to all or a portion of certain maturities of the Series 2014B Bonds. CITY OF BAYONNE IN THE COUNTY OF HUDSON, STATE OF NEW JERSEY
$1,027,000 SCHOOL BONDS, SERIES 2014C (FEDERALLY TAXABLE) (SCHOOL BOND RESERVE ACT, P.L. 1980, c.72, AS AMENDED)
MATURITIES, INTEREST RATES, YIELDS AND CUSIP NUMBERS
Interest CUSIP Year Principal Amount Rate Yield Number* 2015 $140,000 2.00% 1.00% 072887 N73 2016 140,000 2.00 1.50 072887 N81 2017 140,000 3.00 2.00 072887 N99 2018 145,000 3.00 2.50 072887 P22 2019 150,000 3.00 2.75 072887 P30 2020 155,000 3.00 3.00 072887 P48 2021 157,000 3.25 3.25 072887 P55
* "CUSIP" is a registered trademark of the American Bankers Association. CUSIP numbers are provided by Standard & Poor’s, CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc. The CUSIP Numbers listed above are being provided solely for the convenience of Bondholders only at the time of issuance of the Series 2014C Bonds and the City does not make any representations with respect to such numbers or undertake any responsibility for their accuracy now or at any time in the future. The CUSIP number for a specified maturity is subject to being changed after the issuance of the Series 2014C Bonds as a result of various subsequent actions including, but not limited to, a refunding in whole or in part of such maturity or as a result of the procurement of secondary market portfolio insurance or other similar enhancement by investors that is applicable to all or a portion of certain maturities of the Series 2014C Bonds. CITY OF BAYONNE IN THE COUNTYOF HUDSON NEW JERSEY
MAYOR
Honorable James M. Davis
COUNCIL MEMBERS
Sharon Ashe Nadrowski Juan M. Perez Thomas Cotter Salvatore Gullace Gary La Pelusa, Sr.
CITY CHIEF FINANCIAL OFFICER
Terrence Malloy
CITY TREASURER
Janet Convery
CITY CLERK
Robert F. Sloan
CITY ATTORNEY
John F. Coffey, II, Esq. Bayonne, New Jersey
INDEPENDENT ACCOUNTANT
Donohue, Gironda & Doria Bayonne, New Jersey
BOND COUNSEL
McManimon, Scotland & Baumann, LLC Roseland, New Jersey
FINANCIAL ADVISOR
NW Financial Group, LLC Hoboken, New Jersey No dealer, broker or salesperson or other person has been authorized by the City to give any information or to make any representations with respect to the Bonds 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 by the City. The information contained herein has been provided by the City and other sources deemed reliable; however, no representation or warranty is made as to its accuracy or completeness and such information is not to be construed as a representation of accuracy or completeness and such information is not to be construed as a representation or warranty by the Underwriter or, as to information from sources other than itself, by the City. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale hereunder shall, under any circumstances, create any implication that there has been no change in any of the information herein since the date hereof, or the date as of which such information is given, if earlier.
References in this Official Statement to laws, rules, regulations, resolutions, agreements, reports and documents do not purport to be comprehensive or definitive. All references to such documents are qualified in their entirety by references to the particular document, the full text of which may contain qualifications of and exceptions to statements made herein, and copies of which may be inspected at the offices of the City’s Chief Financial Officer during normal business hours.
For purposes of compliance with Rule 15c2-12 of the Securities and Exchange Commission, this document, as the same may be supplemented or amended by the City from time to time (collectively, the "Official Statement"), may be treated as a "Final Official Statement" with respect to the Bonds described herein that is deemed final as of the date hereof (or of any such supplement or amendment) by the City.
The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale hereunder shall under any circumstances create any implication that there has been no change in the affairs of the City since the date hereof or any earlier date as of which any information contained herein is given. This Official Statement is submitted in connection with the sale of the Bonds referred to herein and may not be used, in whole or in part, for any other purpose.
This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Bonds in any jurisdiction in which it is unlawful for any person to make such an offer, solicitation or sale. No dealer, broker, salesman or other person has been authorized to give any information or to make any representations other than as contained in this Official Statement. If given or made, such other information or representations must not be relied upon as having been authorized by the City.
Build America Mutual Assurance Company (“BAM”) makes no representation regarding the Bonds or the advisability of investing in the Bonds. In addition, BAM has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding BAM, supplied by BAM and presented under the heading “BOND INSURANCE” and “Exhibit E - Specimen Municipal Bond Insurance Policy”.
TABLE OF CONTENTS
INTRODUCTION ...... 1 THE BONDS ...... 1 General Description ...... 1 Book-Entry Only System ...... 2 Discontinuation of Book-Entry Only System ...... 3 Optional Redemption ...... 4 AUTHORIZATION AND PURPOSE OF THE BONDS ...... 4 Series 2014A Bonds ...... 4 Series 2014B Bonds ...... 5 Series 2014C Bonds ...... 5 SECURITY FOR THE BONDS ...... 5 NEW JERSEY SCHOOL BOND RESERVE ACT (N.J.S.A. 18A:56-17 ET SEQ) ...... 5 BOND INSURANCE ...... 6 Bond Insurance Policy ...... 6 Build America Mutual Assurance Company ...... 6 Capitalization of BAM ...... 7 Additional Information Available from BAM ...... 7 MUNICIPAL FINANCE - FINANCIAL REGULATION OF COUNTIES AND MUNICIPALITIES ...... 8 Local Bond Law (N.J.S.A. 40A:2-1 et seq) ...... 8 Local Budget Law (N.J.S.A. 40A:4-1 et seq.) ...... 8 Tax Assessment and Collection Procedure ...... 10 Tax Appeals ...... 11 Local Fiscal Affairs Law (N.J.S.A. 40A:5-1 et seq.) ...... 11 TAX MATTERS ...... 11 Tax-Exempt Bonds ...... 11 Taxable Bonds ...... 12 The Bonds ...... 14 LITIGATION ...... 14 SECONDARY MARKET DISCLOSURE ...... 15 MUNICIPAL BANKRUPTCY ...... 17 APPROVAL OF LEGAL PROCEEDINGS ...... 17 UNDERWRITING ...... 17 Series 2014A Bonds ...... 17 Series 2014B Bonds ...... 17 Series 2014C Bonds ...... 18 RATINGS ...... 18 FINANCIAL ADVISOR ...... 18 PREPARATION OF OFFICIAL STATEMENT ...... 19 ADDITIONAL INFORMATION ...... 19 MISCELLANEOUS ...... 19
APPENDIX A - General Information Concerning the City of Bayonne APPENDIX B - 2012 Audited Financial Statements of the City of Bayonne APPENDIX C - 2013 Unaudited Financial Statements of the City of Bayonne APPENDIX D - Form of Approving Legal Opinions of Bond Counsel APPENDIX E - Specimen Municipal Bond Insurance Policy
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OFFICIAL STATEMENT OF CITY OF BAYONNE IN THE COUNTY OF HUDSON, NEW JERSEY
$6,322,000 SPECIAL ASSESSMENT BONDS, $6,121,000 SCHOOL BONDS, SERIES 2014B SERIES 2014A (SCHOOL BOND RESERVE ACT, P.L. 1980, C.72, AS AMENDED)
$1,027,000 SCHOOL BONDS, SERIES 2014C (FEDERALLY TAXABLE) (SCHOOL BOND RESERVE ACT, P.L. 1980, C.72, AS AMENDED)
INTRODUCTION
This Official Statement, which includes the cover page, the inside front cover pages and the appendices attached hereto, has been prepared by the City of Bayonne (the "City"), in the County of Hudson (the "County"), State of New Jersey (the "State"), in connection with the sale and issuance of the $6,322,000 Special Assessment Bonds, Series 2014A (the "Series 2014A Bonds"), the $6,121,000 School Bonds, Series 2014B (School Bond Reserve Act, P.L. 1980, c.72, as Amended) (the “Series 2014B Bonds” and, together with the 2014A Bonds, the “Tax-Exempt Bonds”), and the $1,027,000 School Bonds, Series 2014C (Federally Taxable) (School Bond Reserve Act, P.L. 1980, c.72, as Amended) (the “Series 2014C Bonds” or "Taxable Bonds" and, together with the Tax-Exempt Bonds, the "Bonds"). This Official Statement has been executed by and on behalf of the City by its Chief Financial Officer, and its distribution and use in connection with the sale of the Bonds has been authorized by the City.
This Official Statement contains specific information relating to the Bonds including their general description, certain matters affecting the financing, certain legal matters, historical financial information and other information pertinent to this issue. This Official Statement should be read in its entirety.
All financial and other information presented herein has been provided by the City from its records, except for information expressly attributed to other sources. The presentation of information is intended to show recent historic information and, but only to the extent specifically provided herein, certain projections into the immediate future, and is not necessarily indicative of future or continuing trends in the financial position of the City.
THE BONDS
General Description
The Bonds shall be dated their date of delivery and mature on November 15 in the years and in the principal amounts as set forth on the inside front cover pages hereof. Interest on the Bonds is payable semiannually on the fifteenth day of May and November in each year until maturity or redemption, commencing on May 15, 2015, until maturity or prior optional redemption, as applicable. Interest on the Bonds will be credited to the participants of The Depository Trust Company, Jersey City, New Jersey ("DTC"), as listed on the records of DTC as of each next preceding May 1 and November 1.
The Bonds are issuable as fully registered book-entry bonds in the form of one certificate for the aggregate principal amount of the Bonds of each series maturing in each year. So long as DTC or its nominee, CEDE & Co. (or any successor or assign), is the registered owner of the Bonds, payments of the principal of and interest on the Bonds will be made by the City as paying agent directly to CEDE & Co. (or any successor or assign), as nominee for DTC. Disbursement of such payments to the participants of DTC is the responsibility of DTC. See "Book-Entry Only System" herein.
1 Book-Entry Only System
DTC will act as securities depository for the Bonds. The Bonds will be issued as fully registered Bonds registered in the name of CEDE & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully registered Bond certificate will be issued for each year of maturity of each series of the Bonds, in the aggregate principal amount of each maturity, and will be deposited with DTC.
DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants ("Direct Participants") deposit with DTC. DTC also facilitates the post- trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks and trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has Standard & Poor’s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org.
Purchases of Bonds 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 Bond ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in 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 Direct Participants with DTC are registered in the name of DTC’s partnership nominee, CEDE & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of CEDE & Co., or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time.
Neither DTC nor CEDE & Co. (nor any other DTC nominee) will consent or vote with respect to the Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the City as soon as possible after the record date. The Omnibus
2 Proxy assigns CEDE & Co.’s consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).
Redemption proceeds, if any, and principal and interest payments on the Bonds will be made to CEDE & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the City or the paying agent, if any, on the payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and shall be the responsibility of such Participant and not of DTC or its nominee, the paying agent, if any, 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 CEDE & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the City or the paying agent, if any, disbursement of such payments to Direct Participants shall be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as securities depository with respect to the Bonds at any time by giving reasonable notice to the City or the paying agent, if any. Under such circumstances, in the event that a successor securities depository is not obtained, Bond certificates are required to be printed and delivered.
The City may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered.
The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that the City believes to be reliable, but the City takes no responsibility for the accuracy thereof.
THE INFORMATION CONTAINED IN THIS SUBSECTION "BOOK-ENTRY ONLY SYSTEM" HAS BEEN PROVIDED BY DTC. THE CITY MAKES NO REPRESENTATIONS AS TO THE COMPLETENESS OR THE ACCURACY OF SUCH INFORMATION OR AS TO THE ABSENCE OF ADVERSE CHANGES IN SUCH INFORMATION SUBSEQUENT TO THE DATE HEREOF.
THE CITY WILL NOT HAVE ANY RESPONSIBILITY OR OBLIGATION TO DTC PARTICIPANTS OR TO ANY BENEFICISAL OWNER WITH RESPECT TO (I) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC OR ANY DTC PARTICIPANT; (II) ANY NOTICE THAT IS PERMITTED OR REQUIRED TO BE GIVEN TO BONDHOLDERS; (III) THE PAYMENT BY DTC OR ANY DTC PARTICIPANT OF ANY AMOUNT WITH RESPECT TO THE PRINCIPAL OR INTEREST DUE ON THE BONDS; OR (IV) ANY CONSENT GIVEN OR OTHER ACTION TAKEN BY CEDE & Co., AS NOMINEE OF DTC AND THE REGISTERED OWNER OF THE BONDS. THE RULES APPLICABLE TO DTC ARE ON FILE WITH THE SECURITIES AND EXCHANGE COMMISSION AND THE PROCEDURES OF DTC TO BE FOLLOWED IN DEALING WITH DTC PARTICIPANTS ARE ON FILE WITH DTC.
Discontinuation of Book-Entry Only System
If the City, in its sole discretion, determines that DTC is not capable of discharging its duties, or if DTC discontinues providing its services with respect to the Bonds at any time, the City will attempt to locate another qualified Securities Depository. If the City fails to find such a Securities Depository, or if the City determines, in its sole discretion, that it is in the best interest of the City or that the interest of the Beneficial Owners might be adversely affected if the book-entry only system of transfer is continued (the City undertakes no obligation to make an investigation to determine the occurrence of any events that would permit it to make such determination) the City shall notify DTC of the termination of the book-entry only system.
3 Optional Redemption
Series 2014A Bonds & Series 2014B Bonds
The Series 2014A Bonds and Series 2014B Bonds maturing prior to November 15, 2025, are not subject to optional redemption prior to their stated maturities. The Series 2014A Bonds and Series 2014B Bonds maturing on or after November 15, 2025 are redeemable at the option of the City in whole or in part on any date on or after November 15, 2024 at a redemption price equal to 100% of the principal amount of such Series 2014A Bonds and Series 2014B Bonds being redeemed (the “Redemption Price”), plus interest on such Series 2014A Bonds accrued to the date of redemption upon notice as required herein.
Notice of Redemption shall be given by mailing by first class mail in a sealed envelope with postage prepaid to the registered owners of the bonds being redeemed not less than thirty (30) days, nor more than sixty (60) days prior to the date fixed for redemption. Such mailing shall be to the owners of such bonds being redeemed at their respective addresses as they last appear on the registration books kept for that purpose by the City or a duly appointed Bond Registrar. Any failure of the Securities Depository to advise any of its participants or any failure of any participant to notify any beneficial owner of any notice of redemption shall not affect the validity of the redemption proceedings. If the City determines to redeem a portion of the bonds being redeemed prior to maturity, the bonds to be redeemed shall be selected by the City; the bonds to be redeemed having the same maturity shall be selected by the Securities Depository in accordance with its regulations.
If Notice of Redemption has been given as provided herein, the bonds or the portion thereof called for redemption shall be due and payable on the date fixed for redemption at the Redemption Price, together with accrued interest to the date fixed for redemption. Interest shall cease to accrue on the bonds after the date fixed for redemption and no further interest shall accrue beyond the redemption date. Payment shall be made upon surrender of the bonds redeemed.
Series 2014C Bonds
The Series 2014C Bonds are not subject to redemption prior to their stated maturities.
AUTHORIZATION AND PURPOSE OF THE BONDS
Series 2014A Bonds
The Series 2014A Bonds are issued pursuant to the Local Bond Law of the State of New Jersey and Bond Ordinance #O-04-02, finally adopted January 21, 2004, and entitled, “Bond Ordinance Providing for the Acquisition of an Easement in Land in and by the City of Bayonne, in the County of Hudson, New Jersey, Appropriating $4,500,000, Authorizing the Issuance of $4,500,000 Bonds or Notes of the City for Financing Part of the Cost Thereof, Directing the Special Assessment of Part of the Cost Thereof and Authorizing the Execution of One or More Purchase Contracts in Connection Therewith” as supplemented by Bond Ordinance #O-06-01, finally adopted January 18, 2006, and entitled, "Bond Ordinance Providing a Supplemental Appropriation of $2,500,000 for Acquisition of an Easement in Land in and by the City of Bayonne, in the County of Hudson, New Jersey Authorizing the Issuance of $2,500,000 Bonds or Notes of the City for Financing Part of the Appropriation and Directing the Special Assessment of the Cost Thereof and, Authorizing the Acquisition of Such Easement of the City", each in all respects duly approved and published as required by law, and a resolution of the City duly adopted on October 15, 2014 (the "Resolution").
The proceeds of the Series 2014A Bonds are being issued to (i) currently refund $6,322,000 of the City’s $6,322,094 Bond Anticipation Notes, dated and issued on July 15, 2014 and maturing on January 15, 2015, together with a $94 principal reduction payment from available funds, and (ii) provide funds for the costs associated with the authorization, sale and issuance of the Series 2014A Bonds.
4 Series 2014B Bonds
The Series 2014B Bonds are issued pursuant to Title 18A, Education of the New Jersey Statutes, the Local Bond Law of the State of New Jersey and Bond Ordinance #O-09-23 of the City, finally adopted October 14, 2009, and entitled, "Bond Ordinance Appropriating $7,744,750 for Improvements to Various School Facilities in the City of Bayonne, in the County of Hudson, New Jersey and Authorizing the Issuance of $7,744,750 Bonds or Notes of the City for Financing the Cost Thereof" in all respects duly approved and published as required by law and the Resolution.
The proceeds of the Series 2014B Bonds will be issued to (i) currently refund $6,121,000 of the City’s $6,121,906 Temporary Note, dated and issued on July 15, 2014 and maturing on January 15, 2015, together with a $906 principal reduction payment from available funds, and (ii) provide funds for the costs associated with the authorization, sale and issuance of the Series 2014B Bonds.
Series 2014C Bonds
The Series 2014C Bonds are issued pursuant to Title 18A, Education of the New Jersey Statutes, the Local Bond Law of the State of New Jersey and Bond Ordinance #O-09-23 of the City, finally adopted October 14, 2009, and entitled, "Bond Ordinance Appropriating $7,744,750 for Improvements to Various School Facilities in the City of Bayonne, in the County of Hudson, New Jersey and Authorizing the Issuance of $7,744,750 Bonds or Notes of the City for Financing the Cost Thereof" in all respects duly approved and published as required by law and the Resolution.
The proceeds Series 2014C Bonds are being issued to (i) currently refund $1,027,000 of the City’s $1,027,469 Temporary Note, dated and issued on July 15, 2014 and maturing on January 15, 2015, together with a $469 principal reduction payment from available funds, and (ii) provide funds for the costs associated with the authorization, sale and issuance of the Series 2014C Bonds.
SECURITY FOR THE BONDS
The Bonds are valid and legally binding general obligations of the City, and the City has pledged its full faith and credit for the payment of the principal of and the interest on the Bonds. The City is required by law to levy ad valorem taxes upon all the real property taxable within the City for the payment of the principal of and the interest on the Bonds without limitation as to rate or amount. The Series 2014B Bonds and Series 2014C Bonds (together, the “School Bonds”) are additionally secured pursuant to the provisions of the New Jersey School Bond Reserve Act, P.L. 1980, c.72, as amended.
NEW JERSEY SCHOOL BOND RESERVE ACT (N.J.S.A. 18A:56-17 ET SEQ)
All School Bonds are secured by the School Bond Reserve established in the Fund for the Support of Free Public Schools of the State of New Jersey (the "Fund") in accordance with the New Jersey School Bond Reserve Act, N.J.S.A. 18A:56-17 et seq. (P.L. 1980, c. 72, approved July 16, 1980, as amended by P.L. 2003, c. 118, approved July 1, 2003 (the "School Bond Reserve Act")). Amendments to the School Bond Reserve Act provide that the Fund will be divided into two School Bond Reserve accounts. All School Bonds issued prior to July 1, 2003 shall be benefited by a School Bond Reserve account funded in an amount equal to 1- 1/2% of the aggregate issued and outstanding bonded indebtedness of counties, municipalities or school districts for school purposes issued prior to July 1, 2003 (the "Old School Bond Reserve Account") and all bonds, including the School Bonds, issued on or after July 1, 2003 shall be benefited by a School Bond Reserve account equal to 1% of the aggregate issued and outstanding bonded indebtedness of counties, municipalities or school districts for school purposes issued on or after July 1, 2003 (the "New School Bond Reserve Account"), provided such amounts do not exceed the moneys available in the Fund. If a municipality, county or school district is unable to make payment of principal of or interest on any of its School Bonds issued for school purposes, the trustees of the Fund will purchase such School Bonds at par value and will pay to the bondholders the interest due or to become due within the limits of funds available in the applicable School Bond Reserve account in accordance with the provisions of the School Bond Reserve Act.
5 The School Bond Reserve Act provides that the School Bond Reserve shall be composed entirely of direct obligations of the United States government or obligations guaranteed by the full faith and credit of the United States government. Securities representing at least one-third of the minimal market value to be held in the School Bond Reserve shall be due to mature within one year of issuance or purchase. Beginning with the fiscal year ending on June 30, 2003 and continuing on each June 30 thereafter, the State Treasurer shall calculate the amount necessary to fully fund the Old School Bond Reserve Account and the New School Bond Reserve Account as required pursuant to the School Bond Reserve Act. To the extent moneys are insufficient to maintain each account in the School Bond Reserve at the required levels, the State agrees that the State Treasurer shall, no later than September 15 of the fiscal year following the June 30 calculation date, pay to the trustees for deposit in the School Bond Reserve such amounts as may be necessary to maintain the Old School Bond Reserve Account and the New School Bond Reserve Account at the levels required by the School Bond Reserve Act. No moneys may be borrowed from the Fund to provide liquidity to the State unless the Old School Bond Reserve Account and New School Bond Reserve Account each are at the levels certified as full funding on the most recent June 30 calculation date. The amount of the School Bond Reserve in each account is pledged as security for the prompt payment to holders of School Bonds benefited by such account of the principal of and the interest on such School Bonds in the event of the inability of the issuer to make such payments. In the event the amounts in either the Old School Bond Reserve Account or the New School Bond Reserve Account fall below the amount required to make payments on School Bonds, the amounts in both accounts are available to make payments for School Bonds secured by the reserve.
The School Bond Reserve Act further provides that the amount of any payment of interest or purchase price of school bonds paid pursuant to the School Bond Reserve Act shall be deducted from the appropriation or apportionment of State aid, other than certain State aid which may be otherwise restricted pursuant to law, payable to the district, county or municipality and shall not obligate the State to make, nor entitle the district, county or municipality to receive any additional appropriation or apportionment. Any amount so deducted shall be applied by the State Treasurer to satisfy the obligation of the district, county or municipality arising as a result of the payment of interest or purchase price of School Bonds pursuant to the School Bond Reserve Act.
BOND INSURANCE
Bond Insurance Policy
Concurrently with the issuance of the Series 2014A Bonds and Series 2014B Bonds (together, the "Insured Bonds"), Build America Mutual Assurance Company ("BAM") will issue its Municipal Bond Insurance Policy for the Insured Bonds (the "Policy"). The Policy guarantees the scheduled payment of principal of and interest on the Insured Bonds when due as set forth in the form of the Policy included as an exhibit to this Official Statement.
The Policy is not covered by any insurance security or guaranty fund established under New York, California, Connecticut or Florida insurance law.
Build America Mutual Assurance Company
BAM is a New York domiciled mutual insurance corporation. BAM provides credit enhancement products solely to issuers in the U.S. public finance markets. BAM will only insure obligations of states, political subdivisions, integral parts of states or political subdivisions or entities otherwise eligible for the exclusion of income under section 115 of the U.S. Internal Revenue Code of 1986, as amended. No member of BAM is liable for the obligations of BAM.
The address of the principal executive offices of BAM is: 1 World Financial Center, 27th Floor, 200 Liberty Street, New York, New York 10281, its telephone number is: 212-235-2500, and its website is located at: www.buildamerica.com.
BAM is licensed and subject to regulation as a financial guaranty insurance corporation under the laws of the State of New York and in particular Articles 41 and 69 of the New York Insurance Law.
6 BAM’s financial strength is rated "AA/Stable" by Standard and Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business ("S&P"). An explanation of the significance of the rating and current reports may be obtained from S&P at www.standardandpoors.com. The rating of BAM should be evaluated independently. The rating reflects the S&P’s current assessment of the creditworthiness of BAM and its ability to pay claims on its policies of insurance. The above rating is not a recommendation to buy, sell or hold the Insured Bonds, and such rating is subject to revision or withdrawal at any time by S&P, including withdrawal initiated at the request of BAM in its sole discretion. Any downward revision or withdrawal of the above rating may have an adverse effect on the market price of the Insured Bonds. BAM only guarantees scheduled principal and scheduled interest payments payable by the issuer of the Insured Bonds on the date(s) when such amounts were initially scheduled to become due and payable (subject to and in accordance with the terms of the Policy), and BAM does not guarantee the market price or liquidity of the Insured Bonds, nor does it guarantee that the rating on the Insured Bonds will not be revised or withdrawn.
Capitalization of BAM
BAM’s total admitted assets, total liabilities, and total capital and surplus, as of June 30, 2014 and as prepared in accordance with statutory accounting practices prescribed or permitted by the New York State Department of Financial Services were $477.8 million, $17.9 million and $459.9 million, respectively.
BAM is party to a first loss reinsurance treaty that provides first loss protection up to a maximum of 15% of the par amount outstanding for each policy issued by BAM, subject to certain limitations and restrictions.
BAM’s most recent Statutory Annual Statement, which has been filed with the New York State Insurance Department and posted on BAM’s website at www.buildamerica.com, is incorporated herein by reference and may be obtained, without charge, upon request to BAM at its address provided above (Attention: Finance Department). Future financial statements will similarly be made available when published.
BAM makes no representation regarding the Insured Bonds or the advisability of investing in the Insured Bonds. In addition, BAM has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding BAM, supplied by BAM and presented under the heading "BOND INSURANCE".
Additional Information Available from BAM
Credit Insights Videos. For certain BAM-insured issues, BAM produces and posts a brief Credit Insights video that provides a discussion of the obligor and some of the key factors BAM’s analysts and credit committee considered when approving the credit for insurance. The Credit Insights videos are easily accessible on BAM's website at buildamerica.com/creditinsights/.
Obligor Disclosure Briefs. Subsequent to closing, BAM posts an Obligor Disclosure Brief on every issue insured by BAM, including the Insured Bonds. BAM Obligor Disclosure Briefs provide information about the gross par insured by CUSIP, maturity and coupon; sector designation (e.g. general obligation, sales tax); a summary of financial information and key ratios; and demographic and economic data relevant to the obligor, if available. The Obligor Disclosure Briefs are also easily accessible on BAM's website at buildamerica.com/obligor/.
Disclaimers. The Obligor Disclosure Briefs and the Credit Insights videos and the information contained therein are not recommendations to purchase, hold or sell securities or to make any investment decisions. Credit-related and other analyses and statements in the Obligor Disclosure Briefs and the Credit Insights videos are statements of opinion as of the date expressed, and BAM assumes no responsibility to update the content of such material. The Obligor Disclosure Briefs and Credit Insight videos are prepared by BAM; they have not been reviewed or approved by the issuer of or the underwriter for the Insured Bonds, and the issuer and underwriter assume no responsibility for their content.
7 BAM receives compensation (an insurance premium) for the insurance that it is providing with respect to the Insured Bonds. Neither BAM nor any affiliate of BAM has purchased, or committed to purchase, any of the Insured Bonds, whether at the initial offering or otherwise.
MUNICIPAL FINANCE - FINANCIAL REGULATION OF COUNTIES AND MUNICIPALITIES
Local Bond Law (N.J.S.A. 40A:2-1 et seq)
The Local Bond Law governs the issuance of bonds and notes to finance certain general municipal and utility capital expenditures. Among its provisions are requirements that bonds must mature within the statutory period of usefulness of the projects bonded and that bonds be retired in serial installments. A 5% cash down payment is generally required toward the financing of expenditures for municipal purposes. All bonds and notes issued by the City are general full faith and credit obligations.
The authorized bonded indebtedness of the City for municipal purposes is limited by statute, subject to the exceptions noted below, to an amount equal to 3½% of its average equalized valuation basis. The average for the last three years of the equalized value of all taxable real property and improvements and certain Class II railroad property within the boundaries of City, as annually determined by the State Director of Taxation is $5,360,107,444.
Certain categories of debt are permitted by statute to be deducted for purposes of computing the statutory debt limit, including school bonds that do not exceed the school bond borrowing margin and certain debt that may be deemed self-liquidating.
The City has not exceeded its statutory debt limit. As of December 31, 2013 (unaudited), the statutory net debt as a percentage of average equalized valuation was 3.272%. As noted above, the statutory limit is 3.50%.
The City may exceed its debt limit with the approval of the Local Finance Board, a State regulatory agency, and as permitted by other statutory exceptions. If all or any part of a proposed debt authorization would exceed its debt limit, the City may apply to the Local Finance Board for an extension of credit. If the Local Finance Board determines that a proposed debt authorization would not materially impair the credit of the City or substantially reduce the ability of the City to meet its obligations or to provide essential public improvements and services, or if it makes certain other statutory determinations, approval is granted. In addition, debt in excess of the statutory limit may be issued by the City to fund certain notes, to provide for self-liquidating purposes, and, in each fiscal year, to provide for purposes in an amount not exceeding 2/3 of the amount budgeted in such fiscal year for the retirement of outstanding obligations (exclusive of utility and assessment obligations).
The City may sell short-term "bond anticipation notes" to temporarily finance a capital improvement or project in anticipation of the issuance of bonds if the bond ordinance or a subsequent resolution so provides. Bond anticipation notes for capital improvements may be issued in an aggregate amount not exceeding the amount specified in the ordinance creating such capital expenditure, as it may be amended and supplemented. A local unit’s bond anticipation notes may be issued for periods not greater than one year. Generally, bond anticipation notes may not be outstanding for longer than ten years. An additional period may be available following the tenth anniversary date equal to the period from the notes’ maturity to the end of the tenth fiscal year in which the notes mature plus 4 months (May 1) in the next following fiscal year from the date of original issuance. Beginning in the third year, the amount of notes that may be issued is decreased by the minimum amount required for the first year’s principal payment for a bond issue.
Local Budget Law (N.J.S.A. 40A:4-1 et seq.)
The foundation of the New Jersey local finance system is the annual cash basis budget. Every local unit must adopt a budget in the form required by the Division of Local Government Services, Department of Community Affairs, State of New Jersey (the "Division"). Certain items of revenue and appropriation are
8 regulated by law and the proposed budget must be certified by the Director of the Division (the "Director") prior to final adoption. The Local Budget Law requires each local unit to appropriate sufficient funds for payment of current debt service, and the Director is required to review the adequacy of such appropriations.
The local unit is authorized to issue Emergency Notes and Special Emergency Notes pursuant to the Local Budget Law.
Tax Anticipation Notes are limited in amount by law and must be paid off in full within 120 days of the close of the fiscal year.
The Director has no authority over individual operating appropriations, unless a specific amount is required by law, but the review functions focusing on anticipated revenues serve to protect the solvency of all local units.
The cash basis budgets of local units must be in balance, i.e., the total of anticipated revenues must equal the total of appropriations (N.J.S.A. 40A:4-22). If in any year a local unit's expenditures exceed its realized revenues for that year, then such excess must be raised in the succeeding year's budget.
The Local Budget Law (N.J.S.A. 40A:4-26) provides that no miscellaneous revenues from any source may be included as an anticipated revenue in the budget in an amount in excess of the amount actually realized in cash from the same source during the next preceding fiscal year, unless the Director determines that the facts clearly warrant the expectation that such excess amount will actually be realized in cash during the fiscal year and certifies that determination to the local unit.
No budget or budget amendment may be adopted unless the Director shall have previously certified his approval of such anticipated revenues except that categorical grants-in-aid contracts may be included for their face amount with an offsetting appropriation. The fiscal years for such grants rarely coincide with the municipality's calendar year. However, grant revenue is generally not realized until received in cash.
The same general principle that revenue cannot be anticipated in a budget in excess of that realized in the preceding year applies to property taxes. The maximum amount of delinquent taxes that may be anticipated is limited by a statutory formula, which allows the unit to anticipate collection at the same rate realized for the collection of delinquent taxes in the previous year. Also the local unit is required to make an appropriation for a "reserve for uncollected taxes" in accordance with a statutory formula to provide for a tax collection in an amount that does not exceed the percentage of taxes levied and payable in the preceding fiscal year that was received in cash by December 31 of that year. The budget also must provide for any cash deficits of the prior year.
Emergency appropriations (those made after the adoption of the budget and the determination of the tax rate) may be authorized by the governing body of a local unit. However, with minor exceptions, such appropriations must be included in full in the following year's budget.
The exceptions are certain enumerated quasi-capital projects ("special emergencies") such as ice, snow and flood damage to streets, roads and bridges, which may be amortized over three years, and tax map preparation, re-evaluation programs, revision and codification of ordinances, master plan preparation drainage map preparation for flood control purposes, which may be amortized over five years. Of course, emergency appropriations for capital projects may be financed through the adoption of a bond ordinance and amortized over the useful life of the project.
Budget transfers provide a degree of flexibility and afford a control mechanism. Transfers between appropriation accounts may be made only during the last two months of the year. Appropriation reserves may also be transferred during the first three (3) months of the year, to the previous year’s budget. Both types of transfers require a 2/3 vote of the full membership of the governing body; however, transfers cannot be made from either the down payment account or the capital improvement fund. Transfers may be made between sub-account line items within the same account at any time during the year, subject to internal review and
9 approval. In a "CAP" budget, no transfers may be made from excluded from "CAP" appropriations to within "CAPS" appropriations nor can transfers be made between excluded from "CAP" appropriations.
A provision of law known as the New Jersey "Cap Law" (N.J.S.A. 40A:4-45.1 et seq.) imposes limitations on increases in municipal appropriations subject to various exceptions. The payment of debt service is an exception from this limitation. The Cap formula is somewhat complex, but basically, it permits a municipality to increase its overall appropriations by the lesser of 2.5% or the "Index Rate" if the index rate is greater than 2.5%. The "Index Rate" is the rate of annual percentage increase, rounded to the nearest one- half percent, in the Implicit Price Deflator for State and Local Government purchases of goods and services computed by the U.S. Department of Commerce. Exceptions to the limitations imposed by the Cap Law also exist for other things including capital expenditures; extraordinary expenses approved by the Local Finance Board for implementation of an interlocal services agreement; expenditures mandated as a result of certain emergencies; and certain expenditures for services mandated by law. Counties are also prohibited from increasing their tax levies by more than the lesser of 2.5% or the Index Rate subject to certain exceptions. Municipalities by ordinance approved by a majority of the full membership of the governing body may increase appropriations up to 3.5% over the prior year’s appropriation and counties by resolution approved by a majority of the full membership of the governing body may increase the tax levy up to 3.5% over the prior years’ tax levy in years when the Index Rate is 2.5% or less.
Additionally, legislation constituting P.L. 2010, c. 44, approved July 13, 2010 and applicable to the next local budget year following enactment, limits tax levy increases for those local units to 2% with exceptions only for capital expenditures including debt service, increases in pension contributions and accrued liability for pension contributions in excess of 2%, certain healthcare increases, extraordinary costs directly related to a declared emergency and amounts approved by a simple majority of voters voting at a special election.
Neither the tax levy limitation nor the "Cap Law" limits the obligation of the City to levy ad valorem taxes upon all taxable real property within the City to pay debt service on its bonds or notes.
In accordance with the Local Budget Law, each local unit must adopt and may from time to time amend rules and regulations for capital budgets, which rules and regulations must require a statement of capital undertakings underway or projected for a period not greater than over the next ensuing six years as a general improvement program. The capital budget, when adopted, does not constitute the approval or appropriation of funds, but sets forth a plan of the possible capital expenditures which the local unit may contemplate over the three years. Expenditures for capital purposes may be made either by ordinances adopted by the governing body setting forth the items and the method of financing or from the annual operating budget if the terms were detailed.
Tax Assessment and Collection Procedure
Property valuations (assessments) are determined on true values as arrived at by a cost approach, market data approach and capitalization of net income where appropriate. Current assessments are the results of new assessments on a like basis with established comparable properties for newly assessed or purchased properties. This method assures equitable treatment to like property owners. But it often results in a divergence of the assessment ratio to true value. Because of the changes in property resale values, annual adjustments could not keep pace with the changing values. A re-evaluation of all property in the City was last completed in 2010.
Upon the filing of certified adopted budgets by the City’s Local School District and the County, the tax rate is struck by the County Board of Taxation based on the certified amounts in each of the taxing districts for collection to fund the budgets. The statutory provision for the assessment of property, levying of taxes and the collection thereof are set forth in N.J.S.A. 54:4-1 et seq. Special taxing districts are permitted in New Jersey for various special services rendered to the properties located within the special districts.
Tax bills are mailed annually in June by the City. The taxes are due August 1 and November 1 respectively, and are adjusted to reflect the current calendar year’s total tax liability. The preliminary taxes due February 1 and May 1 of the succeeding year are based upon one-half of the current year’s total tax.
10
Tax installments not paid on or before the due date are subject to interest penalties of 8% per annum on the first $1,500.00 of the delinquency and 18% per annum on any amount in excess of $1,500.00. These interest rates and penalties are the highest permitted under New Jersey Statutes. Delinquent taxes open for one year or more are annually included in a tax sale in accordance with New Jersey Statues.
Tax Appeals
The New Jersey Statutes provide a taxpayer with remedial procedures for appealing an assessment deemed excessive. Prior to February 1 in each year, the City must mail to each property owner a notice of the current assessment and taxes on the property. The taxpayer has a right to petition the County Tax Board on or before April 1 for review. The County Board of Taxation has the authority after a hearing to decrease or reject the appeal petition. These adjustments are usually concluded within the current tax year and reductions are shown as canceled or remitted taxes for that year. If the taxpayer feels his petition was unsatisfactorily reviewed by the County Board of Taxation, appeal may be made to the Tax Court of New Jersey for further hearing. Some State Tax Court appeals may take several years prior to settlement and any losses in tax collections from prior years are charged directly to operations.
Local Fiscal Affairs Law (N.J.S.A. 40A:5-1 et seq.)
This law regulates the non-budgetary financial activities of local governments. The chief financial officer of every local unit must file annually, with the Director, a verified statement of the financial condition of the local unit and all constituent boards, agencies or commissions.
An independent examination of each local unit’s accounts must be performed annually by a licensed registered municipal accountant. The audit, conforming to the Division of Local Government Services’ "Requirements of Audit", includes recommendations for improvement of the local unit’s financial procedures and must be filed with the report, together with all recommendations made, and must be published in a local newspaper within 30 days of its submission. The entire annual audit report for the year ended December 31, 2012 for the City is on file with the Clerk and is available for review during business hours.
TAX MATTERS
Tax-Exempt Bonds
General
Section 103(a) of the Internal Revenue Code of 1986, as amended (the "Code") provides that interest on the Tax Exempt Bonds is not included in gross income for federal income tax purposes if various requirements set forth in the Code are met. The City has covenanted in its Arbitrate and Tax Certificate (the "Tax Certificate"), delivered in connection with the issuance of the Tax-Exempt Bonds, to comply with these continuing requirements and has made certain representations, certifications of fact, and statements of reasonable expectation in connection with the issuance of the Tax-Exempt Bonds to assure this exclusion. Pursuant to Section 103(a) of the Code, failure to comply with these requirements could cause interest on the Tax-Exempt Bonds to be includable in gross income for federal income tax purposes retroactive to the date of issuance of the Tax-Exempt Bonds.
In the opinion of Bond Counsel, pursuant to Section 103(a) of Code, interest on the Tax-Exempt Bonds is not included in gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the alternative minimum tax imposed on individuals and corporations. Bond Counsel is also of the opinion that interest on the Tax-Exempt Bonds held by corporate taxpayers is included in "adjusted current earnings" in calculating alternative minimum taxable income for purposes of the federal alternative minimum tax imposed on corporations. Bond Counsel’s opinions described herein are given in reliance on the representations, certifications of fact, and statements of reasonable expectation made by the City in its Tax Certificate, assume continuing compliance by the City with certain covenants set forth in its Tax
11 Certificate, and are based on existing statutes, regulations, administrative pronouncements and judicial decisions.
Certain Federal Tax Consequences Relating to the Tax-Exempt Bonds
Although, pursuant to Section 103(a) of the Code, interest on the Tax-Exempt Bonds is excluded from gross income for federal income tax purposes, the accrual or receipt of interest on the Tax-Exempt Bonds may otherwise affect the federal income tax liability of the recipient. The nature and extent of these other tax consequences will depend upon the recipient’s particular tax status or other items of income or deduction. Bond Counsel expresses no opinion regarding any such consequences.
Purchasers of the Tax-Exempt Bonds, particularly purchasers that are corporations (including S corporations and foreign corporations operating branches in the United States), property or casualty insurance companies, banks, thrifts or other financial institutions and certain recipients of Social Security benefits, are advised to consult their own tax advisors as to the tax consequences of purchasing or holding the Tax-Exempt Bonds.
Taxable Bonds
General
In the opinion of Bond Counsel, interest on the Taxable Bonds is includable in gross income for federal income tax purposes.
Certain Federal Tax Consequences Relating to the Taxable Bonds
The following is a summary of certain United States federal income tax consequences of the ownership of the Taxable Bonds as of the date hereof. Each prospective investor should consult with its own tax advisor regarding the application of United States federal income tax laws, as well as any state, local, foreign or other tax laws, to its particular situation.
This summary is based on the Code, as well as Treasury Regulations and administrative and judicial rulings and practice. Legislative, judicial and administrative changes may occur, possibly with retroactive effect, that could alter or modify the continued validity of the statements and conclusions set forth herein. This summary is intended as a general explanatory discussion of the consequences of holding the Taxable Bonds generally and does not purport to furnish information in the level of detail or with the investor’s specific tax circumstances that would be provided by an investor’s own tax advisor. For example, this summary is addressed only to original purchasers of the Taxable Bonds that are "U.S. holders" (as defined below), deals only with Taxable Bonds held as capital assets within the meaning of Section 1221 of the Code and does not address tax consequences to holders that may be relevant to investors subject to special rules. In addition, this summary does not address alternative minimum tax issues or the indirect consequences to a holder of an equity interest in the Taxable Bonds.
As used herein, a "U.S. holder" is a "U.S. person" that is a beneficial owner of a Taxable Bond. A "non-U.S. investor" is a holder (or beneficial owner) of a Taxable Bond that is not a U.S. person. For these purposes, a "U.S. person" is a citizen or resident of the United States, a corporation or partnership created or organized in or under the laws of the United States or any political subdivision thereof (except, in the case of a partnership, to the extent otherwise provided in Treasury Regulations), an estate the income of which is subject to United States federal income taxation regardless of its source or a trust if (i) a United States court is able to exercise primary supervision over the trust’s administration, and (ii) one or more United States persons have the authority to control all of the trust’s substantial decisions.
Sale or Redemption of a Taxable Bond
A bondowner’s tax basis for a Taxable Bond is the price such owner pays for the Taxable Bond plus amounts of any original issue discount included in income, reduced on account of any payments received
12 (other than "qualified periodic interest" payments) and any amortized premium. Gain or loss recognized on a sale, exchange or redemption of a Taxable Bond, measured by the difference between the amount realized and the Taxable Bond’s basis as so adjusted, will generally give rise to capital gain or loss if the Taxable Bond is held as a capital asset.
Possible Recognition of Taxable Gain or Loss Upon Defeasance of Taxable Bonds
Defeasance of any Taxable Bonds may result in a deemed exchange under Section 1001 of the Code, in which event the holder of such Taxable Bonds will recognize taxable gain or loss in an amount equal to the difference between the amount realized from the deemed exchange (less any accrued qualified stated interest which will be taxable as such) and the holder’s adjusted basis in such Taxable Bonds.
Backup Withholding
A bondowner may, under certain circumstances, be subject to "backup withholding" (currently the rate of this withholding tax is 28%, but may change in the future) with respect to interest or original issue discount on the Taxable Bonds. This withholding generally applies if the owner of a Taxable Bond (a) fails to furnish the City or the paying agent, if any, with its taxpayer identification number; (b) furnishes the City or the paying agent, if any, an incorrect taxpayer identification number; (c) fails to report properly interest, dividends or other "reportable payments" as defined in the Code; or (d) under certain circumstances, fails to provide the City or the paying agent, if any, with a certified statement, signed under penalty of perjury, that the taxpayer identification number provided is its correct number and that the holder is not subject to backup withholding. Backup withholding will not apply, however, with respect to certain payments made to bond owners, including payments to certain exempt recipients (such as certain exempt organizations) and to certain Nonresidents (as defined below). Owners of the Taxable Bonds should consult their tax advisors as to their qualification for exemption from backup withholding and the procedure for obtaining the exemption.
The amount of "reportable payments" for each calendar year and the amount of tax withheld, if any, with respect to payments on the Taxable Bonds will be reported to the bondowners and to the Internal Revenue Service ("IRS").
Foreign Bondowners
Under the Code, interest and original issue discount income with respect to a Taxable Bond held by nonresident alien individuals, foreign corporations or other non-United States persons ("Nonresidents") generally will not be subject to the United States withholding tax (or backup withholding) if the City or the paying agent, if any (or other person who would otherwise be required to withhold tax from such payments), is provided with an appropriate statement that the beneficial owner of the Taxable Bond is a Nonresident. The withholding tax may be reduced or eliminated by an applicable tax treaty, if any. Notwithstanding the foregoing, if any such payments are effectively connected with a United States trade or business conducted by a Nonresident bondowner, they will be subject to regular United States income tax, but will ordinarily be exempt from United States withholding tax.
ERISA
The Employees Retirement Income Security Act of 1974, as amended ("ERISA"), and the Code generally prohibit certain transactions between a qualified employee benefit plan under ERISA (an "ERISA Plan") and persons who, with respect to that plan, are fiduciaries or other "parties in interest" within the meaning of ERISA or "disqualified persons" within the meaning of the Code. All fiduciaries of ERISA Plans, in consultation with their advisors, should carefully consider the impact of ERISA and the Code on an investment in any Taxable Bonds.
In all events, all investors should consult their own tax advisors in determining the federal, state, local and other tax consequences to them of the purchase, ownership and disposition of the Taxable Bonds.
13 The Bonds
IRS Circular 230 Disclosure
To ensure compliance with requirements imposed by the IRS, any purchaser of a Bond is hereby informed that (i) any U.S. federal tax advice contained in this Official Statement (including any appendices) is not intended or written by Bond Counsel to the City to be used, and that it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer under the Code; (ii) such advice is written to support the promotion or marketing of the transaction(s) or matter(s) addressed by the written advice; and (iii) the taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor.
Bank Qualification
The Bonds will not be designated as qualified under Section 265 of the Code by the City for an exemption from the denial of deduction for interest paid by financial institutions to purchase or to carry tax- exempt obligations. The Code denies the interest deduction for certain indebtedness incurred by banks, thrift institutions and other financial institutions to purchase or to carry tax-exempt obligations. The denial to such institutions of one hundred percent (100%) of the deduction for interest paid on funds allocable to tax-exempt obligations applies to those tax-exempt obligations acquired by such institutions after August 7, 1986. For certain issues, which are eligible to be designated and which are designated by the issuer as qualified under Section 265 of the Code, eighty percent (80%) of such interest may be deducted as a business expense by such institutions.
New Jersey Gross Income Tax
In the opinion of Bond Counsel, the interest on the Bonds and any gain realized on the sale of the Bonds are not includable as gross income under the New Jersey Gross Income Tax Act.
Future Events
Tax legislation, administrative action taken by tax authorities, and court decisions, whether at the Federal or State level, may adversely affect the exclusion of interest on and any gain realized on the sale of the Bonds under the existing New Jersey Gross Income Tax Act, and any such legislation, administrative action or court decisions could adversely affect the market price or marketability of the Bonds.
EACH PURCHASER OF THE BONDS SHOULD CONSULT HIS OR HER OWN ADVISOR REGARDING ANY CHANGES IN THE STATUS OF PENDING OR PROPOSED FEDERAL OR STATE TAX LEGISLATION, ADMINISTRATIVE ACTION TAKEN BY TAX AUTHORITIES, OR COURT DECISIONS.
ALL POTENTIAL PURCHASERS OF THE BONDS SHOULD CONSULT WITH THEIR TAX ADVISORS IN ORDER TO UNDERSTAND THE IMPLICATIONS OF THE CODE.
LITIGATION
To the knowledge of the City Attorney, John F. Coffey, II, Esq., Bayonne, New Jersey, there is no litigation of any nature now pending or threatened, restraining or enjoining the issuance or the delivery of the Bonds, or the levy or the collection of any taxes to pay the principal of or the interest on the Bonds, or in any manner questioning the authority or the proceedings for the issuance of the Bonds or for the levy or the collection of taxes, or contesting the corporate existence or the boundaries of the City or the title of any of the present officers. Moreover, to the knowledge of the City Attorney, no litigation is presently pending or threatened that, in the opinion of the City Attorney, would have a material adverse impact on the financial condition of the City if adversely decided.
14 SECONDARY MARKET DISCLOSURE
Solely for purposes of complying with Rule 15c2-12 of the Securities and Exchange Commission, as amended and interpreted from time to time (the "Rule"), and provided that the Bonds are not exempt from the Rule and provided that the Bonds are not exempt from the following requirements in accordance with paragraph (d) of the Rule, for so long as the Bonds remain outstanding (unless the Bonds have been wholly defeased), the City shall provide for the benefit of the holders of the Bonds and the beneficial owners thereof:
(a) On or prior to 270 days from the end of each fiscal year, beginning with the fiscal year ending December 31, 2014, to the Municipal Securities Rulemaking Board through the Electronic Municipal Market Access Data Port (the "MSRB"), annual financial information with respect to the City consisting of the audited financial statements (or unaudited financial statements if audited financial statements are not then available, which audited financial statements will be delivered when and if available) of the City and certain financial information and operating data consisting of (i) City and overlapping indebtedness including a schedule of outstanding debt issued by the City, (ii) property valuation information, and (iii) tax rate, levy and collection data. The audited financial information will be prepared in accordance with modified cash accounting as mandated by State of New Jersey statutory principles in effect from time to time or with generally accepted accounting principles as modified by governmental accounting standards as may be required by New Jersey law and shall be filed electronically and accompanied by identifying information with the MSRB;
(b) in a timely manner not in excess of ten business days after the occurrence of the event, to the MSRB, notice of any of the following events with respect to the Bonds (herein "Material Events"):
(1) Principal and interest payment delinquencies; (2) Non-payment related defaults, if material; (3) Unscheduled draws on debt service reserves reflecting financial difficulties; (4) Unscheduled draws on credit enhancements reflecting financial difficulties; (5) Substitution of credit or liquidity providers, or their failure to perform; (6) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed 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 security, or other material events affecting the tax status of the security; (7) Modifications to rights of security holders, if material; (8) Bond calls, if material, and tender offers; (9) Defeasances; (10) Release, substitution, or sale of property securing repayment of the securities, if material; (11) Rating changes; (12) Bankruptcy, insolvency, receivership or similar event of the obligated person; (13) The consummation of a merger, consolidation, or acquisition involving an obligated person or the sale of all or substantially all of the assets of the obligated person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and (14) Appointment of a successor or additional trustee or the change of name of a trustee, if material.
For the purposes of the event identified in subparagraph (12) above, the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for an obligated person in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the obligated person, 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 orders 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 obligated person.
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(c) in a timely manner to the MSRB, notice of failure of the City to provide required annual financial information on or before the date specified in the Resolution.
The City shall not be liable for any monetary damages, remedy of the beneficial owners of the Bonds being specifically limited in the undertaking to specific performance of the covenants.
The undertaking may be amended by the City from time to time, without the consent of the Bondholders or the beneficial owners of the Bonds, in order to make modifications required in connection with a change in legal requirements or change in law, which in the opinion of nationally recognized bond counsel complies with the Rule.
Over the past five years, the City has failed to maintain the secondary market disclosure covenants it undertook in connection with prior bond and note issuances. In an effort to remedy such prior failures to file, in July of 2014, the City filed (i) audited financial statements for CY2012, TY2011, FY2011, FY2010, FY2009 and FY2008 together with a notice of failure to timely file such audited financial statements, (ii) municipal budgets for CY2014, CY2013, CY2012, TY2011, FY2011, FY2010 and FY2009, together with a notice of failure to timely file such municipal budgets and (iii) financial information and operating data for 2009 through 2014, inclusive, together with a notice of failure to timely file such financial information and operating data. Based upon a reasonable due diligence effort of the City, on July 18, 2014, the City filed a material events notice in connection with various ratings changes relating to certain outstanding obligations of the City, together with a notice of failure to timely file such notice for ratings changes.
Subsequent to the filings described above, the City engaged the services of a consultant to further assist the City in reviewing compliance with its various continuing disclosure obligations. As a result of that process, the City further determined that it (i) failed to file “Material Event” notices for certain ratings changes with respect to the School Bond Reserve Act, (ii) failed to file the audits, budgets, financial information and operating data and ratings changes noted herein, as an “obligated person” of certain bond and note issues of the City of Bayonne Redevelopment Agency, Bayonne Parking Authority and Hudson County Improvement Authority and (iii) failed to file a “change in fiscal year voluntary disclosure” notice in connection with the transition from a fiscal year to a calendar year. The City remedied such failures by completing the filings described in (i), (ii) and (iii) on October 21, 2014.
On July 24, 2014, the Division of Local Government Services in the Department of Community Affairs of the State of New Jersey issued Local Finance Notice 2014-9 (i) strongly recommending that local governments examine the status of compliance with their continuing disclosure contractual obligations, (ii) recommending as a best practice, that local governments undertake to file certain annual financial information and operating data, the contents of which, in many cases, exceed the requirement of the Rule and (iii) cautioning local governments that failure to compliance with their continuing disclosure contractual obligations will likely have difficulty in receiving timely approvals of the Local Finance Board or Director of the Division of Local Government Services, as applicable, and decreased scores on the future "Best Practices Questionnaires".
Upon issuance of the Bonds, the City will enter into a continuing disclosure agreement with NW Financial Group LLC, as dissemination agent, in further effort to ensure compliance with the City's continuing disclosure undertaking in connection with the Bonds.
There can be no assurance that there will be a secondary market for the sale or purchase of the Bonds. Such factors as prevailing market conditions, financial condition or market position of firms who may make the secondary market and the financial condition of the City may affect the future liquidity of the Bonds.
16 MUNICIPAL BANKRUPTCY
The undertakings of the City should be considered with reference to Chapter IX of the Bankruptcy Act, 11 U.S.C. Section 901, et seq., as amended by Public Law 94-260, approved April 8, 1976, and as further amended on November 6, 1978 by the Bankruptcy Reform Act of 1978, effective October 1, 1979, as further amended by Public Law 100-597, effective November 3, 1988, the Bankruptcy Reform Act of 1994, effective October 22, 1994 and other bankruptcy laws affecting creditor's rights and municipalities in general. The amendments of P.L. 94-260 replace former Chapter IX and permit the State or any political subdivision, public agency, or instrumentality that is insolvent or unable to meet its debts to file a petition in a court of bankruptcy for the purpose of effecting a plan to adjust its debts; directs such a petitioner to file with the court a list of petitioner's creditors; provides that a petition filed under this chapter shall operate as a stay of the commencement or continuation of any judicial or other proceeding against the petitioner; grants priority to debt owed for services or material actually provided within three months of the filing of the petition; directs a petitioner to file a plan for the adjustment of its debts; and provides that the plan must be accepted in writing by or on behalf of creditors holding at least two-thirds in amount or more than one-half in number of the listed creditors. The 1976 Amendments were incorporated into the Bankruptcy Reform Act of 1978 with only minor changes.
Reference should also be made to N.J.S.A. 52:27-40 et seq. which provides that a municipality has the power to file a petition in bankruptcy provided the approval of the Municipal Finance Commission has been obtained. The powers of the Municipal Finance Commission have been vested in the Local Finance Board. The Bankruptcy Act specifically provides that Chapter IX does not limit or impair the power of a state to control, by legislation or otherwise, the procedures that a municipality must follow in order to take advantage of the provisions of the Bankruptcy Act.
APPROVAL OF LEGAL PROCEEDINGS
All legal matters incident to the authorization, the issuance, the sale, and the delivery of the Bonds are subject to the approval of McManimon, Scotland & Baumann, LLC, Roseland, New Jersey, Bond Counsel to the City, whose approving legal opinion will be delivered with the Bonds substantially in the form set forth as Appendix "C". Certain legal matters will be passed on for the City by its Counsel, John F. Coffey, II, Esq., Bayonne, New Jersey.
UNDERWRITING
Series 2014A Bonds
The Series 2014A Bonds have been purchased from the City at a public sale by Roosevelt & Cross, Inc., New York, New York (the "Series 2014A Bonds Underwriter"), at a price of $6,322,000.00.
The Series 2014A Bonds Underwriter intends to offer the Series 2014A Bonds to the public initially at the offering yields set forth on the inside front cover pages of this Official Statement, which may subsequently change without any requirement of prior notice. The Series 2014A Bonds Underwriter reserves the right to join with dealers and other underwriters in offering the Series 2014A Bonds to the public. The Series 2014A Bonds Underwriter may offer and sell the Series 2014A Bonds to certain dealers (including dealers depositing the Series 2014A Bonds into investment trusts) at yields higher than the public offering yield set forth on the cover page, and such public offering yield may be changed, from time to time, by the Series 2014A Bonds Underwriter without prior notice.
Series 2014B Bonds
The Series 2014B Bonds have been purchased from the City at a public sale by Roosevelt & Cross, Inc., New York, New York (the "Series 2014B Bonds Underwriter"), at a price of $6,121,000.00.
The Series 2014B Bonds Underwriter intends to offer the Series 2014B Bonds to the public initially at the offering yields set forth on the inside front cover pages of this Official Statement, which may subsequently
17 change without any requirement of prior notice. The Series 2014B Bonds Underwriter reserves the right to join with dealers and other underwriters in offering the Series 2014B Bonds to the public. The Series 2014B Bonds Underwriter may offer and sell the Series 2014B Bonds to certain dealers (including dealers depositing the Series 2014B Bonds into investment trusts) at yields higher than the public offering yield set forth on the cover page, and such public offering yield may be changed, from time to time, by the Series 2014B Bonds Underwriter without prior notice.
Series 2014C Bonds
The Series 2014C Bonds have been purchased from the City at a public sale by Hutchinson, Shockey, Erley & Co., Chicago, Illinois (the "Series 2014C Bonds Underwriter"), at a price of $1,027,643.00 (consisting of the par amount of the Series 2014C Bonds, plus an original issue premium in the amount of $643.00).
The Series 2014C Bonds Underwriter intends to offer the Series 2014C Bonds to the public initially at the offering yields set forth on the inside front cover pages of this Official Statement, which may subsequently change without any requirement of prior notice. The Series 2014C Bonds Underwriter reserves the right to join with dealers and other underwriters in offering the Series 2014C Bonds to the public. The Series 2014C Bonds Underwriter may offer and sell the Series 2014C Bonds Underwriter to certain dealers (including dealers depositing the Series 2014C Bonds into investment trusts) at yields higher than the public offering yield set forth on the cover page, and such public offering yield may be changed, from time to time, by the Series 2014C Bonds Underwriter without prior notice.
RATINGS
S&P has assigned its rating of "AA/Stable" to the Insured Bonds, based upon the issuance by BAM of the Policy with respect to such Insured Bonds.
Moody’s Investors Service ("Moody's") has assigned its rating of "Aa3" to the Series 2014B Bonds and the Series 2014C Bonds based upon the applicability of the School Bond Reserve Act to such Series 2014B Bonds and such Series 2014C Bonds.
Moody's has assigned an underlying rating of "Baa1" to the Bonds.
The ratings reflect only the view of the respective rating agency and an explanation of the significance of such ratings may only be obtained from the respective rating agency. The City furnished to the rating agencies certain information and materials concerning the Bonds and the City. There can be no assurance that the ratings will be maintained for any given period of time or that the ratings may not be raised, lowered or withdrawn entirely, if in the respective rating agency's judgment, circumstances so warrant. Any downward change in, or withdrawal of such ratings, may have an adverse effect on the marketability or market price of the Bonds.
FINANCIAL ADVISOR
NW Financial Group, LLC, Hoboken, New Jersey served as financial advisor to the City (the "Financial Advisor") with respect to the issuance of the Bonds. This Official Statement has been prepared with the assistance of the Financial Advisor. Certain information set forth herein has been obtained from the City and other sources, which are deemed reliable, but no warranty, guaranty or other representation as to the accuracy or completeness is made as to such information contained herein will be realized.
18 PREPARATION OF OFFICIAL STATEMENT
The City hereby states that the descriptions and statements herein, including financial statements, are true and correct in all material respects and it will confirm to the purchasers of the Bonds, by certificates signed by the Chief Financial Officer of the City, that to his knowledge such descriptions and statements, as of the date of this Official Statement, are true and correct in all material respects and do not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements herein, in light of the circumstances under which they were made, not misleading.
Donohue, Gironda & Doria, assisted in the preparation of information contained in this Official Statement and takes responsibility for the audited financial statements to the extent specified in their Independent Auditor’s Report.
All other information has been obtained from sources which City considers to be reliable and they make no warranty, guaranty or other representation with respect to the accuracy and completeness of such information.
McManimon, Scotland & Baumann, LLC, has not participated in the preparation of the financial or statistical information contained in this official statement, nor have they verified the accuracy, completeness or fairness thereof and, accordingly, expresses no opinion with respect thereto.
ADDITIONAL INFORMATION
Inquiries regarding this Official Statement, including information additional to that contained herein, may be directed to Terrence Malloy, the City’s Chief Financial Officer, at 630 Avenue C, Bayonne, New Jersey 07002, telephone (201) 858-6357 or by email [email protected]
MISCELLANEOUS
This Official Statement is not to be construed as a contract or agreement between the City and the purchasers or holders of any of the Bonds. Any statements made in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended merely as opinions and not as representations of fact. The information and expressions of opinion contained herein are subject to change without notice and neither the delivery of this Official Statement nor any sale of Bonds 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.
CITY OF BAYONNE
/s/ Terrence Malloy Terrence Malloy Chief Financial Officer
Dated: October 30, 2014
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APPENDIX A
DEMOGRAPHICS OF THE CITY OF BAYONNE
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THE CITY OF BAYONNE GENERAL INFORMATION
Introduction
The City of Bayonne (the "City") is situated on a peninsula bounded by water on three sides - Newark Bay on the West, Upper New York Bay (the entrance to the New York metropolitan area's water front) on the east, and the Kill van Kull on the South, a narrow body of water which connects Newark and Upper New York Bays. The City of Jersey City forms the City's northern boundary.
Settled in March of 1646 as a resort center for people living in the interior parts of New Jersey and New York State, the City became a township in 1861, and was incorporated as a city on March 10, 1869. The City is 5.39 square miles in area (approximately three miles long and one mile wide, with the Peninsula at Bayonne Harbor it is at least 2.5 miles wide), or approximately 3,450 acres of which 2,524 acres is developed land area. Based on the 2010 census, the City has a population of 63,024 residents.
The City's location and availability of water frontage for loading and unloading waterborne freight, and residential use on the western side of the City provides a broad tax base for the City.
The principal retail business and shopping areas are located along Broadway, a north to south thoroughfare. Except for Broadway and J.F.K. Boulevard, the North to South thoroughfares are avenues in alphabetical order, starting with Avenue A on the western side. Cross streets are in numerical order from 1 to 63, with 63rd Street and the New Jersey Turnpike extension to the Holland Tunnel being approximately the dividing line between the City and Jersey City. The City's residential area encompasses essentially the land between Newark Bay and Avenue F from 1st Street to 58th Street, except for the concentrated area of office and retail shops on Broadway and a few other small areas.
There are a number of historic landmarks in the City, including such edifices as: St. Mary's Star of the Sea Church, a mix of Victorian and Romanesque styles; the Bayonne Public Library, an example of Classical Revival architecture; and St. Henry's Church, an example of Gothic architecture.
Cultural activities include an art center at the Bayonne Jewish Community Center, the City maintained Firehouse Museum holding firefighting memorabilia and the Bayonne Historical Society. Ten civic and fraternal groups, such as the Chamber of Commerce and the Bayonne Women's Club, provide forums for the exchange of ideas and camaraderie for those in business or over the age of eighteen. Activities for younger people are sponsored by the Bayonne Family Community Center, the Bayonne PAL, the Boy Scouts of America, the Bayonne Little League, the Cal Ripken League, Pop Warner Football,Bayonne Youth Hockey the Jewish Community Center, and the City through its thirteen parks, fifteen playgrounds, and two County operated parks (see "Recreational Facilities" herein). For those people who play golf, facilities are available on Staten Island or in Union and Middlesex Counties to the west within about thirty minutes driving time. A private golf course and miniature golf course have been built in the City.
CITY GOVERNMENT
In November of 1961, the City's voters approved a Mayor and Council Form of Government (Plan "C" of the Optional Municipal Charter Law). The City is divided into three wards, with a Council person elected from each ward and the Mayor and two Council persons elected at large by all the voters in the City for respective terms in office of four years.
Mayor Mark Smithwas elected Mayor of Bayonne on November 4, 2008. He was reelected Mayor on May 11, 2010. Mr. Smith was a member of the Bayonne Police Department for over 25 years, rising through the ranks from Patrolman to Deputy Chief. He has received countless awards, citations and honors for valor and bravery in the line of duty. While serving as a police officer he completed his studies and received a degree in Marketing and Management from Saint Peter’s College. He also graduated with honors from Seton Hall University with a Masters Degree in Human Resources.
Council President Terrence Ruane is an At-Large Councilman serving his second term. Agnes Gillespie represents the first Ward, Joseph Hurley represents the second Ward, Raymond Greaves represents the third Ward, and Deborah Czerwinski is an At-Large Councilwoman. They are all serving their first term.
The legislative power of the City is vested in the Municipal Council, which meets once every three weeks.
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The Mayor has the power to approve ordinances adopted by the Municipal Council or to return ordinances to the Municipal Council with a statement of his objections. A two thirds majority of the Municipal Council members may override the Mayor's veto. The Mayor cannot vote in proceedings of the Municipal Council except to fill a vacancy, in which case the Mayor may cast the deciding vote. The Mayor has the executive power and is responsible for enforcing the charter, ordinances and general laws of the City, and supervising all City departments. The Mayor appoints the directors of all departments with the advice and consent of the Municipal Council.
On November10, 2009, the Mayor and Council voted to approve a plan to reduce the number of city departments from nine to four in an attempt to create more accountability and improve efficiency. Under the approved plan, the existing departments were consolidated into The Department of Business Administration,directed by Stephen Gallo, the Department of Municipal Services, directed by Joseph Waks, the Department of Public Safety, directed by Jason O’ Donnell, and the Department of Public Works,Parks and Recreation directed by Gary S. Chmielewski. Each appointment is subject to the advice and consent of the municipal council.
DEPARTMENT OF BUSINESS ADMINISTRATION
Business Administrator
Stephen Gallo was appointed Business Administrator in August 2010. Mr. Gallo has worked with the City since 1996 and holds a master’s degree from Thomas Edison State College.
Director of Finance, Municipal Controller and Chief Financial Officer
Terrence Malloy is the City's Municipal Controller and Chief Financial Officer. An honors graduate of Rutgers University with a BS degree in Accounting, Mr. Malloy is a Certified Municipal Finance Officer and is a member of the Government Finance Officers Association of New Jersey. Mr. Malloy was appointed Business Administrator and Director of Finance on August 19, 1998 and has been the City's Chief Financial Officer since April of 1988. Mr. Malloy has been in the Department of Finance since June of 1980. Mr. Malloy served as Mayor from October 17, 2007 to November 4, 2008.
Municipal Treasurer
Janet Convery has been with the City since 1982 and has served as the Municipal Treasurer and Treasurer of School Monies since January 1993. Ms. Convery received a B.A. degree from Trenton State College and studied towards an M.B.A. at Seton Hall University. Ms. Convery is a Certified Municipal Finance Officer and is a member of the Government Finance Officers Association of New Jersey.
City Clerk
Robert F. Sloan has served as City Clerk since July 1978. Mr. Sloan graduated from Rutgers University with a B.A. degree in history and from Rutgers University School of Law with a Juris Doctor degree. Mr. Sloan was also formerly the City's Director of the Department of Law.
Corporation Counsel
Charles M. D’Amico, Esq., licensed to practice law in the State of New Jersey,was appointed Corporation Counsel in June of 2009. Mr. D’Amico received his Bachelor of Science, cum laude, from Northeastern University in Boston, Massachusetts and obtained his Law Degree from the University of Baltimore, School of Law. Mr. D’Amico’s professional experience includes service in both private and governmental law. Mr. D’Amico previously worked for the Hudson County Prosecutor’s Office for many years. His professional associations include the Hudson County Bar Association, North Hudson Lawyer’s Club and the District VI Ethics committee, on which he served as 2008 Chairman. Mr. D’Amico.
Tax Collector
Joanne Sisk was appointed to the office of Tax Collector in 2002, having previously served as Acting Tax Collector from 1999 through 2002. Ms. Sisk is a Certified Tax Collector and is a member of both the Essex-Hudson-Passaic Chapter of Tax Collectors and Treasurers Association and the New Jersey State Tax Collector’s and Treasurers Association.
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Tax Assessor
Mr. Joseph G. Nichols, a Certified Tax Assessor, was appointed Tax Assessor on July 1, 2000. Mr. Nichols is an honors graduate of Rutgers University and received his Juris Doctor degree from Rutgers University School of Law. Mr. Nichols has served as an adjunct professor at Rutgers University teaching courses in Business and Professional Ethics. Prior to becoming Tax Assessor, Mr. Nichols was the Director of the City’s Law Department. Mr. Nichols also serves as legal counsel to the Bayonne Municipal Utilities Authority. He also served as Executive Director of the Bayonne Local Redevelopment Authority.
DEPARTMENT OF MUNICIPAL SERVICES
Director of Municipal Services
Joseph Waks, Esq. was appointed Director of Municipal Services in August 2010. Mr. Waks oversees the Health, Planning and Zoning, Recreation and Construction Divisions as well as the Bayonne Free Public Library. Mr. Waks, a graduate of Temple University, has worked for former New Jersey Governor and Senate President Richard Codey and as an aide to U.S. Senator Frank Lautenberg.
Recreational Facilities
The County maintains two parks, the 97.6 acre Bayonne Park along Newark Bay in midtown, and the 5.5 acre Mercer Park on the City's northern border with Jersey City.
The Bayonne Parks Department maintains thirteen parks (56.9 acres) and fifteen playgrounds (2.2 acres) in various sections of the City. In addition to the park system, there is an indoor skating facility, a swimming pool facility, a skateboard park and Veterans Memorial Stadium with 4,200 permanent seats and room for a large number of temporary seats. In addition to maintaining baseball diamonds, soccer and bocce fields, basketball courts, tennis courts, and jogging and bike trails, the Bayonne Parks Department oversees Little League and Senior Citizen activities.
DEPARTMENT OF PUBLIC SAFETY
Director of Public Safety
Jason O’Donnell was appointed Director of Public Safety in August 2010. Mr. O’Donnell oversees the Police and Fire Departments. Mr. O’Donnell joined the Bayonne Fire Department in 1995. Mr. O’Donnell earned a Bachelor of Arts in Fire Science at New Jersey City University, where he graduated summa cum laude. Mr. O’Donnell also serves as Assemblyman for the 31st District.
Police Department
The Police Department is under the supervision of Police Chief Ralph Scianni. The Police Department has 1 Chief, 2 Deputy Chiefs of Police, 14 Captains, 15 Lieutenants, 37 Sergeants, 133 Uniformed Officers and 35 Civilians.
Fire Department
The Fire Department is under the supervision of Fire Chief Gregory J. Rogers. Fire Department personnel consist of 1 Fire Chief, 2 Deputy Fire Chiefs, 4 Battalion Chiefs, 42 Captains, 124 Uniformed Firemen, 3 full time civilians and 1 part- time civilian.
DEPARTMENT OF PUBLIC WORKS AND PARKS
Director of Public Works and Parks
Gary Chmielewski was appointed Director of Public Works and Parks in August 2010. Mr. Chmielewski oversees the operations of the DPW’s maintenance of roads, municipal property, collection of solid waste from street containers and collection for recyclable materials by 119 DPW personnel.
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OTHER ENTITIES
Parking Authority
Effective January 1, 2012, the Bayonne Parking Authority (the “BPA”) was officially dissolved and the Bayonne Parking Utility was created. The Bayonne Parking Utility will be accounted for as a separate Utility Fund on the books and records of the City. The City has determined to initially assume all of the outstanding debt and obligations of the Parking Authority as a means of providing the City the immediate ability to continue providing parking service while insuring the timely and efficient payment of the obligations and debt of the BPA. The operations of the Utility will continue to be funded through parking fees and ticket charges.
Public Library
The Bayonne Public Library system consists of the main library, originally built with the support of the Andrew Carnegie Foundation, and two branch libraries. In addition to 264,487 conventional volumes, there are 219 periodicals, 439 CD Rom Disks, 5,627 audio and video cassettes and thousands of microfilm reels and microfiche for current and historical newspapers and government documents.The main library sponsors academic and senior citizen programs, children's "Story Telling Hours", various cultural programs and exhibits, including annual series of jazz and classical music. The main library has facilities to accommodate up to 900 people for meetings and seminars
Economic Development
The “Special Improvement District” was created in November of 1990 to assist in the economic development of the shopping district from 19th Street to 27th Street on Broadway. In the year 2000, the Municipal Council approved the expansion of the Special Improvement District to include the area of Broadway between 17th Street and 30th Street. This district is overseen by the Bayonne Urban Enterprise Zone Corporation.
The Bayonne Office of Community Development has four programs funded by the Federal government to help provide for home and business improvements and rehabilitation through various assistance Community Block Grants. Currently, the Bayonne Office of Community Development has outstanding applications for these Federal Grants. In addition to grants for the private sector, grants are available for the City's infrastructure improvements, such as streets, playgrounds and parks.
The largest and most visible current development was the relocation and construction, completed by the State, of State Route 169 into a four lane divided limited access highway from its connection with State Route 440 at Newark Bay to the industrial districts along the Upper New York Bay waterfront and connection to the Bayonne Bridge over the Kill Van Kull.
Recently, the “Bayonne Crossing” Shopping Center, anchored by Lowe’s Home Improvement and Wal-Mart and many other restaurants and retail stores, opened as the largest shopping center in the area, with direct access from Route 440. Also on 440, an $18 million complex called “Winners”, billed as one of the nation’s most elaborate off-track wagering facilities, opened in 2012. Bayonne Crossing is an almost 400,000 square foot Power Center located as a gateway to Hudson County and the area surrounding Bayonne.
The Bayonne Urban Enterprise Zone (the”BUEZ”) was formally approved by the State of New Jersey in September 2002, which includes the entire Town Center Management/Special Improvement District, plus all other retail zones as well as the entire Military Ocean Terminal. This has a multiplier effect on the recent increase in development that the City is experiencing. Future projects planned by the BUEZ include streetscapes, parking facility improvements, and a loan program for member businesses.
Local Redevelopment Authority
The City of Bayonne Municipal Council is serving as a Local Redevelopment Authority (‘the Authority”) to oversee the development of the Peninsula at Bayonne Harbor (formerly the Military Ocean Terminal). The Authority is charged with conducting the timely and efficient development of the base in a manner that will maximize job opportunities, tax revenues and recreational usage. The Peninsula at Bayonne Harbor comprises 400 acres situated on the east side of the City jutting out into the New York harbor. In September 2001, the deed to transfer Title of Clean Parcels over to the Local Redevelopment Authority was signed. The remaining title was passed in December 2002.
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In December, 2003, the Authority and Royal Caribbean International announced an agreement to establish a cruise port. Christened the Cape Liberty Cruise Port, in May 2004, the refurbished terminal serves as a seasonal homeport for Royal Caribbean’s Voyager of the Seas. Currently, in its seventh year of operation, Cape Liberty has been responsible for the passage of over 320,000 passengers - the second largest passenger volume among northeast and mid-Atlantic coast ports.
In 2006, the Authority entered into a Redevelopment Agreement with Trammell Crow Residential for a 7.42 acre portion of the Bayonne Bay District. The Authority transferred deed to Trammell Crow on November 29, 2007. In May 2008, Trammell Crow held a groundbreaking ceremony for the start of construction of the Alexan Bayonne Bay, consisting of 544 rental properties and a residential clubhouse. The apartments became available for occupancy in the summer of 2009.
In October, 2006, the Authority entered into a Redevelopment Agreement with Atlantic Realty to develop a portion of the Bayonne Bay. The agreement governs five phases of development with a right to build approximately 1,369 units of housing covering 11 blocks.
In November 2007, the Authority sold 90 acres of the Peninsula to Port America to build a state-of-the art roll-on roll- off auto marine terminal operation. In April 2009, the Authority completed the sale and transferred deed to Port America.
In late 2007, the Authority entered into a Redeveloper Agreement/Contract for Sale with Dynamic Delivery Corporation to purchase a portion of property to construct an access road for truck traffic from the maritime District to Dynamic to construct a truck terminal. The new road represents a major infrastructure improvement for the Peninsula at Bayonne.
EDUCATIONAL FACILITIES
In addition to the public school system, there are three denominational high schools and six denominational schools for pre-high school students. Additionally, there are pre-school facilities available.
Nearby higher educational facilities consist of St. Peter's College, New Jersey City University and Hudson County Community College in Jersey City, Stevens Institute of Technology in Hoboken, St. John’s University in Staten Island and in Newark, Rutgers - the State University, University of Medicine and Dentistry, New Jersey Institute of Technology and Seton Hall University School of Law.
BOARD OF EDUCATION OF THE CITY OF BAYONNE
General Information
The School District of Bayonne (the "District") was established in 1890. Originally a Type I school district, the District changed to a Type II school district, and then in 1976 the District reverted back to a Type I school district. The Board of Education of the City of Bayonne (the "Board") governs the operations of the District, but a Board of School Estimate is responsible for approving all fiscal matters with the advice of the Municipal Council. The District's Fiscal Year begins July 1 and ends June 30 in the next calendar year.
The Board is composed of nine members, each serving for a three-year term on a staggered basis. The President and Vice President are chosen for one year terms from among the Board members.The Board is a policy-making body and has the general responsibility to provide an education program, to establish policies, to supervise the public schools in the District, and to appoint the Superintendent of Schools (the "Superintendent").
The administrative structure of the Board gives final responsibility for both the educative process and the business operation to the Superintendent. The Superintendent is the chief executive officer of the Board in charge of carrying out Board policies. The Board Secretary is the chief financial officer who must submit monthly financial reports to the Board and annual reports to the State Department of Education. State law requires a Treasurer of School Monies to hold in trust all school monies and to make a monthly report to the Board.
The Board of School Estimate consists of five members, three from the City, Mayor and two council members and two from the Board, each appointed by the Municipal Council for one year term. The Board of School Estimate is responsible for the annual school budget appropriations, and, together with the Municipal Council, approves the appropriation for and issuance of all debt. School purpose debt is issued by the City and debt service thereon is paid by the City, except for that portion paid by the State directly to a paying agent (Additional State School Aid Bonds).
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District Principal Officials
Dr. Patricia McGeehan is the Superintendent of Schools and Mr. Leo J. Smith is the School Business Administrator.
District Personnel
The following table sets forth by classification the number of personnel the District employs: Number of Classification Personnel (1) Instructional Personnel 908 Student and Instruction Related Services 96 General Administration 10 School Administration 62 Central Services 11 Plant Operation and Maintenance 127 Pupil Transportation 33 Other 1 Total Personnel 1,248
(1) For the year ended June 30, 2013 Source: The Board.
District Facilities
The Board presently operates a high school complex consisting of a high school building and separate Physical Education/Community Education Center buildings with outdoor physical facilities, eleven elementary schools and two buildings housing a garage and maintenance facilities.
Historical Student Enrollment Grades Grades Total Fiscal Year K-8 9-12 Other Enrollment
2012-2013 5,575 2,069 1,331 8,975 2011-2012 5,548 2,204 1,355 9,107 2010-2011 5,903 2,180 1,333 9,416 2009-2010 5,785 2,216 1,142 9,143 2008-2009 5,745 2,088 1,418 9,251 2007-2008 5,878 2,018 1,460 9,356 2006-2007 5,485 1,953 1,686 9,124 2005-2006 5,440 2,130 1,581 9,151 2004-2005 5,502 1,865 1,540 8,907 2003-2004 6,299 2,423 166 8,888
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School Building Facilities Addition or Construction Renovation 2012-2013 Type of Facility Date Date Enrollment (1)
High School 1923 1935/1983 2,425
Elementray Schools: 1. Henry E. Harris 1921 1973/2000 622 2. Philip Vroom 1914 412 3. Walter F. Robinson 1909 723 4. Mary J. Donohue 1920 2000 464 5. Lincoln 1919 1985 396 6. Horace Mann 1913 1924 571 8. Midtown Community 1993 1,030 9. Washington 1917 2000 640 10. Woodrow Wilson 1930 603 12. John M. Bailey 1911 2001 584 14. Nicolas Oresko 1937 2008 424
Adult High School 68 Charter School 13 8,975
(1) Includes Special Education, Adult High School and Regional Day School.
Source: The Board’s October 2013 count.
State and Federal School Aid
The District receives State and Federal aid annually, for various operating purposes. The following table sets forth on a Fiscal Year basis the General Fund Revenues, the amount of State and Federal School Aid, and the percentage of such school aid to the General Fund Revenues.
(A) (B) (B) (C) General Fund State Federal Percentage Fiscal Year Revenues School Aid School Aid of B to A
2013$ 126,153,231 $ 66,284,994 $ 335,780 52.8% 2012 122,023,932 60,980,982 2,104,351 51.7% 2011 118,408,258 57,087,479 293,792 48.5% 2010 121,627,100 53,832,724 8,396,836 51.2% 2009 116,140,685 55,762,954 98,024 48.1% 2008 107,606,959 49,085,111 102,421 45.7% 2007 100,176,473 44,553,176 54,343 44.5% 2006 98,884,770 40,660,372 3,295 41.1% 2005 88,789,887 34,207,210 8,233 38.5% 2004 80,993,418 31,773,752 19,756 39.3%
Source: The Board.
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LAND USE
Residential
There are few homogeneous areas where single family residences exist, except for a four-block area along Newark Bay just south of the County's Bayonne Park. The principal residential type of usage is multi-family which includes two family houses primarily, three to four family houses, rowhouses, townhouses, garden apartments, and mid- and high-rise apartments. Mid- and high-rise apartments are only situated on isolated sites along the southern waterfront, the northwest section of the City, and within urban renewal districts. Existing high-rise apartment structures are not considered a significant residential land use.
Commercial
The major commercial activity in the form of retail stores is concentrated along Broadway, a situation that has not changed from the City's early times. Some major commercial establishments exist on Avenue C between 24th and 27th Streets, Avenue A and North Street and Route 440, including the aforementioned “Bayonne Crossing” and “Winners” complex.
There are shopping areas at each end of the City as well as a mixture of retail shops and services, professional and commercial offices along Broadway. The City also has a number of small and mid-size industries that provide employment for area residents and enhances tax revenues for the City.
Office/Professional
This type of activity consists typically of medical or legal office space from converted single-family residences.
Mixed Use
Many of the apartment units have been converted to professional office space. There are a number of mixed use properties, located primarily along the principal north-south thoroughfares.
Industrial Districts
There are four industrial districts plus the Peninsula at Bayonne Harbor located along the City's eastern and western waterfronts.
53rd Street District
This district encompasses approximately 19 acres in the northwest portion of the City along Newark Bay, and is the newest district established. Presently, there are only six firms located in this district, two of which are small manufacturing firms. There are six acres of vacant land in this district on which development is constricted due to possible subsurface soil contamination. There is no rail access and access by road is through residential areas.
Bergen Point District
Located at the City's southwest corner on Newark Bay and the Kill Van Kull, Bergen Point covers an area of 138 acres. Firms in this district are comprised of smaller metals and chemicals manufacturing firms and light industry. Land for expansion of existing firms is limited, with the exception of a 57 acre Texaco Tract. Texaco has moved its facilities from Bayonne. Texaco is presently clearing and cleaning the area under the guidance of the Environmental Clean-up Responsibility Act prior to the sale of the 57 acres.
Road access is excellent via the Bayonne Bridge to Interstate Route 287. Access from or to the north is via the four lane divided limited access State Route 440 (formerly Route 169). Rail access is available via a branch of the Conrail owned Bayonne Industrial Track.
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Port Jersey District
Located in the City's northeast portion along the Jersey City borderline and Upper New York Bay, Port Jersey encompasses 160 acres in the City of a total of 400 acres, the balance being in Jersey City. Of the fourteen concerns located in Port Jersey, eleven are warehouse/distribution centers, and includes such firms as Todd Logistics, Global Terminal & Container Services, Unimark, Workbench, BMW Distributions and Preparation Center, and a New York and New Jersey Port Authority operated distribution center for foreign-made cars. Port Jersey is one of the major distribution centers in the New Jersey and New York areas.
Road access to Port Jersey is via Exit 14A of the New Jersey Turnpike and State Route 440 to Pulaski Street. Although not currently available, rail access to Port Jersey could be made available from the Conrail-owned Bayonne Industrial Track.
Constable Hook District
Located on Upper New York Bay along the City's eastern/central waterfront, Constable Hook (the "Hook") encompassing roughly 727 acres, is the largest and most heavily concentrated of all the districts. However, approximately 87 acres in the upland area is currently vacant. The area north of 22nd Street is comprised of various warehouse/distribution and light industrial firms.Within the Hook are 55 firms, including such corporations as Exxon, Amerada Hess, IMTT, and Coastal Oil.
Road access to the Hook is via State Route 440 to various access roads, such as the Hook Access Road. Since the completion of improvements to State Route 440, access to the Hook has been improved. Rail access is by the Conrail-owned Bayonne Industrial Track.
Peninsula at Bayonne Harbor (formerly Military Ocean Terminal)
This military facility is situated on 700 acres between the industrial districts of Port Jersey and Constable Hook on Upper New York Bay. The Peninsula at Bayonne Harbor contains a causeway, an artificial peninsula extending two miles into Upper New York Bay, with piers for ocean going vessels, railroad tracks and roadways, a drydock over 1,000 feet long capable of handling any ship afloat, storage facilities, various office-type buildings and residential buildings for military personnel and families. On an average day, between 150 and 200 trucks enter the Terminal area for unloading in addition to rail freight via the Bayonne Industrial Track. It should be noted that this military facility is closed. The City has established a Local Redevelopment Authority which is actively working to convert the military base into a viable commercial, residential and park development.
The Peninsula at Bayonne harbor is a visionary plan to transform the former Military Ocean terminal into a vibrant, mixed-use waterfront community. The peninsula calls for the creation of six different, yet integrated districts, consisting of residential, commercial, entertainment and recreation space, as well as marinas, ferry service and more than two miles of waterfront walkway. With a choice location in New York Harbor and stunning views of the Statue of Liberty and the Manhattan skyline, development of the 430 acre tract promises to be the most significant urban waterfront development in the New York/ New Jersey region since the build-out of Battery Park City in New York and the Gold Coast Waterfront communities of Hoboken, Weehawken and Jersey City in New Jersey.
Quasi-Public
This category of land use includes property owned privately yet generally operated for the public use and includes such institutions as hospitals, churches, private and denominational schools, and fraternal organizations.
Areas
The waterfront areas on the City's western and southern sides provide opportunities to integrate existing public park facilities and provide for flexible zoning for residential and business unit development with access oriented towards the water as concepted in a "Land Use Plan Element".
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Medical Facilities
Bayonne Medical Center is the major private medical facility serving the City. Other health services include the Bayonne Community Mental Health Center, the Bayonne Physical Therapy and Rehabilitation, two diagnostic laboratories - Hudson Medical Lab and Bayonne Medical Laboratories, Inc., and the Medi-Center for outpatient services. Bayonne Medical Center recently completed constructing a Renal-Dialysis Center. Ambulance service is provided by McCabe Ambulance Service which is supported by City funds.
The Bayonne Medical Center has a capacity of 278 beds. The City operates a clinic in the Municipal Building for testing of blood pressure and other types of tests.
Housing Authority of the City of Bayonne
The Housing Authority of the City of Bayonne (the "Housing Authority"), operating under the guidelines of the U.S. Department of Housing and Urban Development ("HUD"), owns and maintains 1,879 public housing and senior citizen dwelling units in 36 buildings.
NEW CONSTRUCTION AND HOUSING STATISTICS
New Construction Building Permits
Year Ended Single Two Three and Five or Dec. 31, (1) Family Family Four Family More Total 2012 19 2 3 7 31 2011 24 1 0 4 29 2010 16 8 4 18 46 2009 30 8 0 30 68 2008 23 0 0 603 626
Estimated Construction Costs
Year Ended Single Two Three and Five or Dec. 31, (1) Family Family Four Family More Total 2012$ 1,934,217 $ 412,500 $ 670,750 $ 18,595,925 $ 21,613,392 2011 2,463,430 169,171 - 2,894,376 5,526,977 2010 1,620,018 926,800 225,000 2,604,939 5,376,757 2009 3,050,753 676,685 - 4,341,565 8,069,003 2008 2,071,920 - - 87,265,462 89,337,382
(1) 2013 data not available
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Housing Statistics Housing Units Political One Unit One Unit 2-4 5-9 10 or Mobile Boat, RV, Total Division Detached Attached Units Units More Units Homes Van, etc. Units City 4,028 2,137 14,191 2,504 4,897 161 - 27,918 County 27,307 16,419 102,302 29,664 93,659 422 89 269,862 State 1,915,906 326,457 566,881 171,121 539,234 35,418 847 3,555,864
Homeowner Rental Persons Per Political Vacancy Vacancy Owner Persons Per Division Occupied Vacant Rate Rate Occupied Unit Household City 25,237 2,562 2.6% 8.9% 2.67 2.49 County 246,437 23,898 4.5% 6.6% 2.66 2.54 State 3,214,360 339,202 1.8% 7.6% 2.79 2.68
Number of Units by Owner-Specified Valuation
Political Under $100,000- $200,000- $300,000- $500,000- $1,000,000 Total Median Division $100,000 $199,999 $299,999 $499,999 $999,999 or More Units Valu e City 275 649 2,863 5,214 1,406 87 10,494 $ 339,500 County 2,424 7,353 17,835 34,671 15,772 2,681 80,736 $ 360,400 State 99,240 282,361 490,718 772,834 395,779 67,234 2,108,166 $ 337,900
Renter-Specified Monthly Contract Rent Per Unit
Political Under $200- $500- $750- $1,000- $1,500 Total Median Division $200 $499 $749 $999 $1,499 or More Units Rent City 386 1,156 1,343 3,388 6,863 1,806 14,942 $ 1,068 County 2,220 11,718 14,773 31,391 55,876 43,431 159,409 $ 1,148
State 16,517 73,564 78,668 196,888 422,839 254,718 1,043,194 $ 1,154
Source: New Jersey Department of Labor, Labor Market and Demographic Research. 2010 Federal Census Data.
TRANSPORTATION FACILITIES
Interstate, intrastate and inter-city public transportation is provided by New Jersey Department of Transportation - Bus Operations and other bus companies.
The major highways serving the City from the north are State Route 440 (formerly Route 169), and the New Jersey Turnpike Extension by egress and access ramps 14A. To the south, the Bayonne Bridge over the Kill Van Kull to Staten Island provides connection to east/west Interstate Route 287 and to Long Island via the Verrazano Narrows Bridge.
In addition to the New Jersey Turnpike Extension providing connections to north/south Interstate 95 and U.S. Routes 1 and 9, State Route 440, a four-lane limited access highway parallel to Newark Bay, provides a non-toll access across Newark Bay to U.S. Routes 1 and 9 and Interstate Route 95.
State Route 440 provides a connection to the industrial districts and the United States Military Ocean Terminal located to the east on Upper New York Bay. State Route 440 has been expanded and realigned as a four-lane divided highway, and extended to provide a connection with the Bayonne Bridge. The realignment and extension of Route 440 eliminates the movement of freight over local streets.
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In April, 2000, the first phase of the Hudson-Bergen light rail system began transporting commuters. The light rail runs parallel on the west side of State Route 440, with three stations located at 22nd Street, 34th Street and 45th Street, running through Exchange Place in Jersey City and ending in Hoboken. The extension from 22nd Street through 5th Street is currently in progress.
Movement of rail freight is by one rail line, which is the Conrail-owned Bayonne Industrial Track with branch lines serving three industrial districts. The Bayonne Industrial Track is a single line track running from the northeast corner of the City parallel to the Upper New York Bay to the City's southern point, along the Kill Van Kull. The rail line divides a portion of the residential section along the City's eastern and southern sides.
UTILITIES
General
Electricity and gas are provided by Public Service Electric and Gas Co. Telephone service is provided by Verizon. Solid waste pickup is provided to residences, offices and retail stores by a negotiated contract with outside vendors. Larger business concerns and corporations, such as Exxon, IMTT and Bayonne Medical Center must make their own provisions for the carting away of solid waste.
Water/Sewer Services
The Water/Sewer Services are provided by the Bayonne Municipal Utilities Authority (the “Authority”), an authority created by an ordinance of the City, duly adopted October 9, 1997 and approved by the Mayor on October 10, 1997. On December 20, 2012 the Authority entered into a concession agreement with the Bayonne Water Joint Venture, LLC.
Under the terms of the concession agreement, the Authority grants to Bayonne Water Joint Venture, LLC the rights to use, operate, manage, construct, maintain and improve the sewer/water systems, to provide the system services in connection therewith and to receive the revenues from the systems. Additional terms of the concession agreement include the legal defeasance of all existing debt of the Authority.
The sewer and water system Deficiency Agreements entered into by and between the City and the Authority on November 17, 1997 remain in full force and effect and have not been amended, modified or waived by any party. Under the original Deficiency Agreements, the City has agreed to make up any deficiencies in the Authority’s sewer budget for operating expense and debt service on any bonds issued by the Authority.
RETIREMENT SYSTEMS
All full-time permanent or qualified City employees who began employment after 1914 must enroll in one of two retirement systems depending upon their employment status. These systems were established by acts of the State Legislature. Benefits, contributions, means of funding and the manner of administration are set by the State. The Division of Pensions within the Treasury Department of the State is the Administrator of the funds with the benefit and contribution levels set by the State. The City is enrolled in the Public Employees' Retirement System and the Police and Firemen's Retirement System.
The Consolidated Police and Firemen's Pension System is no longer open to enrollment. However, there are City pensioners who receive benefits from this pension system, and the City is required to make annual contributions to this pension system.
Public Employees' Retirement System
The Public Employees' Retirement System ("PERS") includes approximately 402 employees. PERS is evaluated every year. Employee rates for contributions are normally determined by the rate applicable at the age of enrollment.
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Police and Firemen's Retirement System
Approximately 409 employees are covered under the Police and Firemen's Retirement System ("PFRS").
Retirement Benefit Payments
2013 System (unaudited) 2012 2011 2010 2009
PERS$ 1,799,688 $ 1,734,913 $ 1,780,906 $ 1,450,144 $ 785,488 PFRS 9,511,193 9,281,416 10,965,307 9,161,964 4,545,898 CP&F (1) 58,729 76,348 76,400 76,856 169,116 OASI (2) 1,768,670 1,666,021 1,550,000 1,472,506 1,486,679
TOTAL$ 13,138,280 $ 12,758,698 $ 14,372,613 $ 12,161,470 $ 6,987,181
(1) Consolidated Police and Fire Pension Fund - Payments to pensioners. (2) Old Age Security Income - Social Security.
Source: The City's 2009 through 2012 audited financial statements and 2013 unaudited financial records.
COLLECTIVE BARGAINING REPRESENTATION
Certain City employees are represented by bargaining agents, shown below together with termination dates of current contracts.There are several other bargaining units, but the enrollment is small in these other bargaining units.
Employee Bargaining Termination Classification Representation Date Uniformed Police Police Benevolent Association 12/31/2018 Police Superior Officers Police Superior Officers Association 12/31/2018 Uniformed Firemen Firemen's Mutual Benefit Association 12/31/2018 Fire Superior Officers Fire Superior Officers Association 12/31/2018 Crossing Guards & PEO's AFSCME Local 2261 6/30/2014 Supervisory Personnel The Bayonne Municipal Supervisory 6/30/2014 Association Hudson Council No. 2 Various Departments American Federation of State, County 6/30/2014 and Municipal Employees
INSURANCE
On August 17, 2011, the City authorized participation in and the execution of an Indemnity and Trust Agreement with the New Jersey Intergovernmental Insurance Fund (the “NJIIF”) for the provision of property and casualty insurance coverage. Prior to participation in the NJIIF, the City self-insured against liability claims pursuant to N.J.S.A. 40A:10-16.
The NJIIF is a public entity created in 1991 and offers coverage to municipalities, counties, and school districts statewide. The NJIIF is a New Jersey approved, self-insured, reinsured public entity insurance pool which offers all New Jersey public entities multiple lines of insurance.
The City has obtained the following coverage through the NJIIF: Equipment Breakdown coverage. Crime coverage including employee dishonesty, forgery, alterations, theft, robbery and fraud. Environmental Impairment coverage. Workers’ Compensation coverage.
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General, Automobile and Employee Benefits liability coverage. Public Entity Management Liability coverage, including Public Official’s Liability and Employment Practices Liability coverage. Surety bonds for the City Treasurer, Chief Financial Officer and Tax Collector.
Source: City summary of insurance coverage.
PROPOSED CAPITAL IMPROVEMENT PROGRAM
The City's introduced 2014 Fiscal Year (January 1-December 31) Six Year Capital Improvement Program annual funding requirements, as set forth in the City's Fiscal Year 2014Introduced Budget is summarized below. The schedule is a planning tool, and is on file with the State as required by the Local Budget Law. The City is not bound by these projections.
Annual Anticipated Funding Amounts
Estimated Estimated Anticipated Funding Schedule Completion Cost 2014 2015 2016 2017 2018 2019
Rehabilitation of Various Streets 2019$ 3,000,000 $ 500,000 $ 500,000 $ 500,000 $ 500,000 $ 500,000 $ 500,000 Improvemesnts to Public Facilities Damaged by Superstorm Sandy 2014 2,500,000 2,500,000 - - - - -
Total$ 5,500,000 $ 3,000,000 $ 500,000 $ 500,000 $ 500,000 $ 500,000 $ 500,000
Anticipated Funding Sources and Amounts
Gran t s in Estimated Estimated Aid and Completion Cost Other Funds
Rehabilitation of Various Streets 2019$ 3,000,000 $ 3,000,000 Improvements to Public Facilities Damaged by Superstorm Sandy 2014 2,500,000 2,500,000
Total$ 5,500,000 $ 5,500,000
Source: The City’s2014 Introduced Budget.
REPORTING PERIOD
The City has authorized changing the City fiscal year from a year ended June 30 to a year ended December 31. In order to revert to a calendar year accounting period, the State of New Jersey, Division of Local Government Services requires a six month “transition year” of the period of time between the end of the City’s final fiscal year and first calendar year. This report represents the City’s six month transition year and is for the period of July 1, 2011 to December 31, 2011. The comparative data presented is based on the preceding 12 month fiscal year ending June 30, 2011. Beginning with calendar year 2012, the City’s future accounting years will be from January 1 to December 31 of each year.
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CURRENT FUND SCHEDULE OF REVENUES LAST FIVE YEARS(000 OMITTED)
Year Ended Transition Year December 31, 2013 Year Ended (6 months) Ended Year Ended Year Ended (unaudited) December 31, 2012 December 31, 2011 June 30, 2011 June 30, 2010 Budgeted Realized Budgeted Realized Budgeted Realized Budgeted Realized Budgeted Realized
Fund Balance$ 1,785 $ 1,785 $ 695 $ 695 $ 5,975 $ 5,975 $ - $ - $ - $ -
Consolidated Municipal Property Tax Relief Fund 2,317 2,317 2,317 2,317 2,644 2,644 2,813 2,813 5,720 5,720
Energy Receipts Tax 6,513 6,513 6,513 6,513 6,011 6,011 6,017 6,017 4,976 4,976
State School Building Aid 501 501 600 600 307 307 625 625 822 822
Public and Private Revenues Offset with Appropriations 5,444 5,444 3,275 3,275 2,040 2,040 5,540 5,540 10,882 10,882
Current Tax Levy, Municipal 78,406 79,893 76,635 76,038 38,473 39,096 69,160 69,149 66,826 66,812
Delinquent Taxes 72 279 72 39 72 65 320 52 220 471
Bayonne Local Redevelopment Authority 29,812 29,812 30,588 30,588 - - 34,450 34,500 5,300 5,442
Other Budgeted Revenue Local Revenues 6,373 11,038 5,585 6,734 3,056 2,807 5,865 6,101 5,508 5,268 Shared Service Agreements 120 120 120 120 240 137 125 125 125 125 Other Special Items 1,804 1,867 2,822 3,148 1,337 1,174 3,826 3,769 34,970 35,413
Non-Budget Revenue and Other Credits - 4,590 - 4,606 - 3,418 - 3,706 - 1,290
$ 133,147 $ 144,159 $ 129,222 $ 134,673 $ 60,155 $ 63,674 $ 128,741 $ 132,397 $ 135,349 $ 137,221
Source: 2010-2012 Audited Financial Statements, 2013 unaudited City records.
CURRENT FUND SCHEDULE OF APPROPRIATIONS LAST FIVE YEARS (000 OMITTED)
Year Ended Transition Year June 30, June 30, Dec. 31, 2013 Year Ended (6 months) Ended Year Ended Year Ended (unaudited) Dec. 31, 2012 Dec. 31, 2011 June 30, 2011 June 30, 2010
Operating Expenses:
Salaries and Wages$ 56,277 $ 52,224 $ 25,451 $ 47,499 $ 46,784 Other Expenses 36,911 36,953 17,253 45,185 49,955
Pensions 13,248 12,902 942 9,515 7,294
Deferred Charges 1,970 4,057 1,000 5,099 5,075
Reserve for Uncollected Taxes 3,000 800 727 840 870 111,406 106,936 45,373 108,138 109,978
Capital Improvements 390 1,615 - 25 15
Municipal Debt Service 11,129 10,371 8,001 10,299 14,988
School Debt Service 10,638 11,939 6,757 10,210 10,351 $ 133,563 $ 130,861 $ 60,131 $ 128,672 $ 135,332
Source: 2010-2012 Audited FinancialStatements, 2013 unaudited City records.
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CURRENT FUND BALANCES AND AMOUNTS UTILIZED IN SUCCEEDING YEAR'S BUDGET
Fund Utilized in Succeeding Year Balance Years Bu d g et Ended End of Year Amount Percentage
Dec. 31, 2013 (1) 15,704,897 14,680,000 93.47% Dec. 31, 2012 8,799,684 1,785,000 20.28% Dec. 31, 2011 (2) 6,795,568 695,000 10.23% June 30, 2011 11,100,622 5,975,000 53.83% June 30, 2010 10,745,467 - 0.00% June 30, 2009 10,745,467 - 0.00% June 30, 2008 8,248,649 - 0.00% June 30, 2007 4,349,001 - 0.00% June 30, 2006 4,349,001 - 0.00% June 30, 2005 4,349,001 - 0.00%
(1) Unaudited (2) Six month “Transition Year”
Source: 2005-2012 Audited Financial Statements, 2013 unaudited Annual Financial Statement, 2014 Introduced Budget
DEMOGRAPHIC INFORMATION
Population
Political Percent Change Division 2010 2000 1990 1980 1970 2010-2000 2010-1970
City 63,024 61,842 61,444 65,047 72,743 0.19% -15.42% County 634,266 608,975 553,099 556,972 609,266 0.42% 0.39% State 8,791,894 8,414,350 7,730,188 7,365,011 7,171,112 0.45% 18.43%
Population Density
Political Area in Division Sq. Miles 2010 2000 1990 1980 1970
City 5.63 11,194 10,992 11,400 12,068 13,496 County 46.69 13,585 13,043 11,915 11,999 13,094 State 7,419.00 1,185 1,134 1,042 993 967
Source: 2010 Federal Census Information.
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MAJOR EMPLOYERS
2013 Approximate Employer Nature of Business Employment
Non-Governmental: Bayonne Medical Center Mediacal Facility 1,867 Jerhel Plasitics, Inc. Plastic Packaging 500 Royal Wine Corporation Kosher Wine Maker 220 Inserra, Inc. Supermarket 220 Bookazine Co, Inc. Books and Magazines 180 Muralo Company Water Based Paint 180 Haddad Apparel Group, Ltd Children's Apparel 155 Vertellus Specialty Chemicals 150 Season Contracting Corp Contractor 150 Ideal Window Manufacturing New Construction Windows 127
Source: Hudson County Economic Development Corp.
MAJOR REAL PROPERTY TAXPAYERS(1) 2013 Assessed Taxpayer Nature of Business Valu at io n Bayonne Industries-IMTT (2) Petrochemical $ 116,103,000 Bayonne Auto Terminal Auto Marine Terminal 23,095,700 Gordon Terminal Service co of NJ Petrochemical 15,027,100 Exxon Corporation Petrochemical 14,312,000 Texaco, Inc. (3) Oil 13,085,800 Armeda Hess Corp. Oil 10,379,000 Morris Bayonne Accoc., LLC et als. Strip Mall 9,813,700 South Cove Development, LLC Real estate 8,519,700 MPT of Bayonne, LLC Real estate 8,000,000 51-53 Hook Road, LLC Real estate 7,796,900
Total Real Property Assessed Valuation $ 226,132,900
Percent of City's Total Taxable Real Property 10.10%
Source: The City Tax Assessor.
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NET ASSESSED AND EQUALIZED PROPERTY VALUATIONS
Real Property Net Assessed Valuation by Classification
2011 Classification 2013 2012 2011 2010 2009 Use Analysis
Residential 1,435,898,149 1,470,340,949 $ 1,489,152,874 $ 1,498,604,900 $ 1,502,822,970 42.43% Apartment 102,078,700 102,495,900 105,076,200 108,041,800 119,808,310 3.02% Commercial 319,548,795 320,892,395 333,018,000 342,821,060 352,708,260 9.44% Industrial 301,011,000 302,193,500 301,330,700 333,375,800 322,712,000 8.90% Vacant Land 88,482,500 90,028,800 93,035,900 97,098,600 90,886,200 2.61%
Sub-Total 2,247,019,144 2,285,951,544 2,321,613,674 2,379,942,160 2,388,937,740 66.40%
Exempt Property:
Public (1) 309,031,500 310,695,300 309,421,900 247,509,100 246,964,400 9.13% Other (2) 827,914,025 607,287,125 592,850,800 594,614,600 597,564,900 24.47%
Total Real Property$ 3,383,964,669 $ 3,203,933,969 $ 3,223,886,374 $ 3,222,065,860 $ 3,233,467,040 100.00%
(1) Includes school, municipal, County, State and Federal property. (2) Includes private and denominational schools, church and charitable properties, and other exempt properties, plus the U.S. Military Ocean Terminal.
Source: City's tax duplicates.
Net Assessed and Equalized Property Valuations
2013 2012 2011 2010 2009 Net Assessed Valuation:
Real Property 2,247,019,144 2,285,951,544 $ 2,319,208,474 $ 2,376,981,060 $ 2,392,516,030 Personal Tangible Property 2,405,981 2,707,920 2,405,200 2,098,999 1,947,786 Total Net Assessed Valuation 2,249,425,125 2,288,659,464 2,321,613,674 2,379,080,059 2,394,463,816 Percent Increase (Decrease) over Previous Year -1.71% -1.42% -0.24% -0.64% 0.54% Equalized Valuation 5,213,320,757 5,572,966,948 5,762,588,636 6,406,764,904 6,694,809,463 Percent Increase (Decrease) over Previous Year -6.45% -3.29% -10.05% -4.30% 3.96%
(1) Net assessed valuation after deductions permitted under State Statutes. (2) As equalized by the County.
Source: County of Hudson Abstract of Ratables for years shown.
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LEVY AND COLLECTION OF TAXES(1) As of Last Ten Fiscal Years
The levy and collection of taxes are currently based upon the City's July 1 to June 30 fiscal year, for and through the years ended June 30, 2011, July 1 to December 31 for the six month transition year and calendar years thereafter . The City is the political entity responsible for the levying and collection of taxes on all taxable real property within its borders, including the tax levies for the County and the City School District.
Property taxes are based on an assessor's valuation of real property and are levied for a calendar year. The taxes for City, City School District, and County purposes are combined into one tax levy which is apportioned on the tax bill by rate and amount for taxpayer information only. Turnover of tax monies by the City to the City School District are based on school needs and are generally made on a periodic basis throughout the year. The City remits 100% of the County taxes, payable quarterly on the 15th days of February, May, August and November.
The City mails tax bills twice a year. The bill for the first two quarters, due on the first days of February and May, is mailed in October of the preceding calendar year. The bill for the final two quarters, due on the first days of August and November, is mailed in June of the current calendar year. Delinquent balances are subject to an interest penalty of 8% on the first $1,500 of the total delinquent amount, and 18% of all delinquent amounts in excess of $1,500. Any account having a delinquent balance in excess of $10,000 at the close of the fiscal year is subject to an additional penalty in the amount of 6% of the total amount of the delinquency. Any unpaid taxes as of June 30 or December 31, dependent on the year end noted above, are subject to tax sale. Any tax liens not purchased by investors revert to the municipality, and are subsequently subject to foreclosure proceedings to acquire title to the property if the delinquency is not paid promptly thereafter.
Tax Rate Apportionment (Per $1,000 of Assessed Valuation)
Special Improvement Year Municipal County School Tax Rate District (1)
2013 30.35 12.39 30.65 73.39 4.58 2012 28.53 12.46 30.15 71.14 4.58 2011 28.77 11.44 28.28 68.49 4.58 2010 26.37 11.00 25.51 62.88 4.23 2009 24.10 10.92 27.86 62.88 4.23 2008 23.04 10.19 27.29 60.52 4.20 2007 21.99 9.84 25.14 56.97 4.32 2006 19.09 9.60 23.82 52.51 4.28 2005 19.54 9.64 22.68 51.86 4.25 2004 17.79 9.37 21.36 48.52 5.39
(1)Special Improvement District is not included in the Tax Rate as the District only covers certain commercial business on Broadway.
Source: The City's 2004-2012 Audited Financial Statements, 2013 Division of Local Government Services – Property Tax Tables.
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Tax Levy Apportionment
Special Additional Improvement Tax Year Municipal County School School (1) District (2) Levy
2013$ 68,263,421 $ 27,878,958 $ 58,810,195 $ 10,142,836 $ 290,000 $ 165,385,410 2012 65,294,134 28,574,165 57,657,055 11,340,706 290,000 163,156,060 2011* 32,022,305 13,438,484 28,543,097 6,450,284 145,000 80,599,170 2011 60,525,380 26,527,183 57,086,193 8,135,513 290,000 152,564,269 2010 62,251,624 27,306,384 57,086,193 5,540,372 290,000 152,474,573 2009 60,515,374 25,033,522 57,086,193 7,619,787 290,000 150,544,876 2008 55,716,481 23,877,593 57,086,193 5,067,679 290,000 142,037,946 2007 49,190,424 22,947,089 52,521,354 4,053,148 290,000 129,002,015 2006 45,533,871 23,299,431 52,521,354 2,699,206 290,000 124,343,862 2005 45,863,866 22,490,605 49,406,431 1,571,333 290,000 119,622,235
* 6 month Transition Year (1) Addition to Local District School Tax. (2) Consists of a levy on merchants in the 27th Street area of Broadway for the improvements to stores.
Source: The City’s2005-2012 Audited Financial Statements, 2013 unaudited financial records.
Tax Collection Experience
Delinquent TaxCurrent Levy Collection Taxes Total Collection Year Levy (1) Amount Percentage Collected Amount Percentage
2013$ 165,703,306 $ 163,872,078 98.89%$ 279,390 $ 164,151,468 99.06% 2012 163,485,249 161,759,655 98.94% 68,904 161,828,559 98.99% TY2011* 81,472,499 79,547,559 97.64% 65,525 79,613,084 97.72% 2011 152,564,269 152,262,479 99.80% 51,653 152,314,132 99.84% 2010 152,265,937 151,343,410 99.39% 470,406 151,813,816 99.70% 2009 150,544,876 149,667,768 99.42% 321,666 149,989,434 99.63% 2008 142,037,946 141,516,792 99.63% 334,145 141,850,937 99.87% 2007 129,002,015 128,673,732 99.75% 20,491 128,694,223 99.76% 2006 124,343,862 123,567,029 99.38% 141,783 123,708,812 99.49% 2005 119,622,235 119,433,678 99.84% 76,469 119,510,147 99.91%
* 6 month Transition Year
(1) Includes Special Improvement District Source: 2005-2012 Audited Financial Statements, 2013 unaudited financial records.
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Municipal Purpose Tax Collection
Municipal Current Delinquent Total Reserve for Purpose Municipal Tax Municipal Tax Municipal Tax Uncollected Year Tax Levy (1) Collection (2) Collection Collection Taxes
2013$ 68,581,317 $ 63,750,089 $ 279,390 $ 64,029,479 $ 3,000,000 2012 65,623,323 63,897,729 68,904 63,966,633 800,000 TY2011* 32,895,634 30,243,694 65,525 30,309,219 727,000 2011 60,525,380 59,383,590 51,653 59,435,243 840,000 2010 62,251,624 60,250,461 470,406 60,720,867 870,000 2009 60,515,374 59,168,266 321,666 59,489,932 470,000 2008 55,716,481 54,745,327 334,145 55,079,472 450,000 2007 49,190,424 48,412,141 20,491 48,432,632 450,000 2006 45,533,871 44,332,038 141,783 44,473,821 425,000 2005 45,863,866 45,125,309 76,469 45,201,778 550,000
* 6 month Transition Year (1) Excludes the tax levy for additional school purpose. (2) Net after deductions for County, School District, Additional School District and Special Improvement District tax levies.
Source: The City's 2005-2012 Audited Financial Statements, 2013 unaudited financial records.
Delinquent Taxes and Tax Liens
Delinquent Tax Title Total Percent of Year Taxes Liens Delinquent Tax Levy
2013$ 241,657 $ 581,664 $ 823,321 0.50% 2012 562,173 546,136 1,108,309 0.68% TY2011* 402,491 511,697 914,188 1.13% 2011 350,956 495,123 846,079 0.55% 2010 44,344 463,859 508,203 0.33% 2009 1,526,562 433,261 1,959,823 1.30% 2008 1,193,876 400,111 1,593,987 1.12% 2007 1,159,203 371,417 1,530,620 1.19% 2006 990,113 345,395 1,335,508 1.07% 2005 434,689 341,507 776,196 0.65%
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Tax Title Liens
Balance Sales & Tax Liens Other Balance Year Start of Year Transfers Collected Credits End of Year
2013$ 546,136 $ 35,528 $ - $ - $ 581,664 2012 511,697 34,439 - - 546,136 TY2011* 495,124 16,573 - - 511,697 2011 463,859 31,265 - - 495,124 2010 433,261 30,598 - - 463,859 2009 400,111 33,150 - - 433,261 2008 371,417 28,694 - - 400,111 2007 345,395 26,022 - - 371,417 2006 341,507 25,105 - 21,217 345,395 2005 318,852 28,486 - 5,831 341,507
Foreclosed Property
Balance, Balance, Year End of Year Year End of Year
2013$ 6,474,000 2009 8,634,700 2012 6,474,000 2008 8,634,700 TY2011* 8,599,000 2007 8,636,400 2011 8,599,000 2006 8,636,400 2010 8,563,300 2005 8,812,800
* 6 month Transition Year
Source: The City's 2005 -2012 Audited Financial Statements, 2013 unaudited financial records.
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COMPARISON OF MUNICIPAL PURPOSE TAX LEVY TO ANNUAL DEBT SERVICE REQUIREMENT
Percent of Municipal (2) Debt Service Purpose Debt Service to Municipal Year Tax Levy (1) Requirements Tax Levy
2013$ 68,581,317 $ 11,129,098 16.23% 2012 66,116,700 10,370,815 15.69% TY2011* 32,895,634 8,001,471 24.32% 2011 60,525,380 10,298,585 17.02% 2010 62,042,988 14,988,232 24.16% 2009 60,515,375 13,262,076 21.92% 2008 55,716,481 9,222,105 16.55% 2007 49,190,424 8,193,841 16.66% 2006 45,533,871 6,961,604 15.29% 2005 45,863,866 5,304,960 11.57%
* 6 month Transition Year
(1) Excludes Additional School and Special Improvement District Tax Levies. (2) Excludes School District debt service requirements; but includes principal and interest on borrowing from the Hudson County Improvement Authority for General Capital.
Source: The City's2005-2012 Audited Financial Statements, 2013 unaudited financial records.
DEBT INFORMATION
General Information
The State has enacted certain laws and statutes regulating the authorization and issuance of debt by tax levying local governmental units of the State. The statutory gross debt must include all debt authorized plus all debt issued which remains outstanding. Debt, bonds or notes, which have been refunded, and payment for which is made from escrowed U.S. Treasury securities or other permitted investments, are considered outstanding under State statutes until such outstanding debt has matured or has been called for redemption. However, any debt which is self-supporting or which is payable from other sources or debt issued for refunding purposes may be deducted from the statutory gross debt to arrive at the amount of statutory net debt. The statutory net debt figure is the amount to determine if a local governmental unit is within the limit of its statutory borrowing power.
The debt incurring capacity is limited by statute to 3.50% of its statutory equalized valuation. The levy of taxes to pay annual debt service requirements is not limited by any State statute or law. The amount bid for a bond issue may not exceed $1,000 above the principal amount offered for sale and may not be less than the amount offered for bid.
Bond anticipation notes ("BANS") may be issued to temporarily finance a capital improvement or project. BANS may be issued in an amount not exceeding the amount specified in an ordinance, as may be supplemented, less a 5% down payment. BANS may be issued up to or for a one-year period, and may be rolled-over for not exceeding one-year periods. The final maturity of a BAN issue cannot exceed May 1 following the end of the tenth fiscal year from the BANS original issue date. Beginning with the third year of issuance, BAN principal must be decreased by an estimated amount of the first maturity of a bond issue.
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Tax anticipation notes ("TANS") are limited in amount that may be issued to 30% of the tax levy plus 30% of realized miscellaneous revenue of the next preceding fiscal year, and principal together with interest thereon must be paid in full from the current year's tax collection within three months after the close of the current fiscal year.
Capital notes ("CNS") may be issued in an amount not exceeding $200,000 or 1/2 of 1.00% of the City's equalized valuation, whichever is greater, for a fiveyear period. Twenty percent of the principal amount of CNS issued must mature each year and, together with interest due, be paid annually.
Notes issued for temporary financing of an improvement or project may be sold through negotiation. For a more complete description of the above summaries, please refer to N.J.S.A. 40A:2-8.
Under laws creating authorities, a local governmental unit may enter into a contract or agreement to borrow funds from an authority or, under a deficiency type of agreement, guarantee debt service payments on debt issued by an authority. If a local governmental unit borrows funds from an authority, such borrowing is not included in a local governmental unit's statutory gross debt. If a local governmental unit guarantees all or any part of an authority's outstanding debt, the portion of debt service not payable from an authority's revenues, and which is paid by a local governmental unit, must be included in a local governmental unit's statutory net debt amount (a "deficiency agreement").
Appropriation Not Required for Payments on Debt
It is not necessary to have an appropriation in order to release money for debt service on obligations. N.J.S.A. 40A:4-57 says "No officer, board, body or commission shall, during any fiscal year, expend money (except to pay notes, bonds or interest thereon), incur any liability, or enter into any contract which by its terms involves the expenditure of money for any purpose for which no appropriation is provided, or in excess of the amount appropriated for such purpose". N.J.S.A.40A:2-4 says "The power and obligation of a local unit to pay any or all of the bonds and notes issued by it pursuant to this chapter, or any act which in this chapter is a revision, shall be unlimited...".
The following schedules set forth information on the City's debt authorized but unissued, debt issued and outstanding, the remaining borrowing capacity and overlapping debt. After the date noted below, the debt information and statistics noted on the following pages may vary from the figures shown because of either a reduction or an increase in the amounts of debt for each of the political entities noted.
STATUTORY DEBT As of December 31, 2013
Remaining Borrowing Power
Statutory Equalized Valuation (1) 5,360,107,444 Statutory Debt Limit (2) 187,603,761 Statutory Net Debt 175,402,565 Statutory Borrowing Power 12,201,196 Net Debt to Equalized Value 3.27%
(1) Average of the immediately preceding three years (2012, 2011, 2010). (2) 3.5% of the Statutory Equalized Valuation as determined by the State.
Source: 2013 unaudited Annual Debt Statement
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TREND OF STATUTORY REMAINING BORROWING POWER AND TREND OF NET DEBT OUTSTANDING LAST TEN FISCAL YEARS
Statutory Remaining Borrowing Power Remaining Statutory Authorized Statutory Equalized Statutory Net Debt but not Borrowing Year Valuation Debt Limit Outstanding Issued Debt Power
2013$ 5,360,107,444 $ 187,603,761 $ 169,753,335 $ 5,649,230 $ 12,201,196 2012 5,512,364,667 192,932,763 102,504,336 359,230 90,069,197 TY2011* 5,885,001,025 205,975,036 106,691,358 359,230 98,924,448 2011 6,215,253,093 217,533,858 110,931,354 7,758,153 98,844,351 2010 6,392,131,807 223,724,613 111,599,019 7,758,153 104,367,441 2009 6,158,802,322 215,558,081 116,349,511 7,758,153 91,450,417 2008 5,596,676,492 195,883,677 120,450,153 8,188,153 67,245,371 2007 4,885,105,940 170,978,708 115,142,260 7,926,620 47,909,828 2006 4,184,547,417 146,459,160 61,040,518 34,920,620 50,498,022 2005 3,609,246,972 126,323,644 59,907,193 10,166,620 56,249,831
Net Debt Outstanding
Deduction For (3) Bonds Loans Notes Debt Service Pension Net Debt Parking Year Outstanding Outstanding Outstanding Reserve Refunding Outstanding Utility Debt
2013$ 110,158,211 $ 604,678 $ 75,087,041 $ 626,595 $ 15,470,000 $ 169,753,335 $ 3,180,000 2012 98,608,430 741,163 19,401,338 626,595 15,620,000 102,504,336 3,335,000 TY2011* 100,263,299 876,195 21,898,460 626,596 15,720,000 106,691,358 - 2011 101,818,000 991,552 23,991,802 150,000 15,720,000 110,931,354 - 2010 102,593,000 1,139,019 23,812,000 150,000 15,795,000 111,599,019 - 2009 105,689,000 1,284,511 92,946,000 67,775,000 15,795,000 116,349,511 - 2008 31,144,000 1,451,153 103,800,000 150,000 15,795,000 120,450,153 - 2007 33,594,000 1,638,300 95,854,960 150,000 15,795,000 115,142,260 - 2006 35,939,000 1,723,518 39,323,000 150,000 15,795,000 61,040,518 - 2005 38,189,000 557,193 36,146,000 - 15,795,000 59,097,193 - Bonds Outstanding includes debt issued by the Hudson County Improvement Authority (HCIA). Loans outstanding include Green Acres Trust and Demolition Loans. * 6 month Transition Year
(1) Average of the immediately preceding three years as computed by the State. (2) 3.50% of the statutory equalized valuation. (3) Parking Utility Debt calculated to be self-liquidating and is not included in Net Debt. Source: The City's annual debt statements.
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AUTHORIZED BUT NOT ISSUED DEBT (As of December 31, 2013)
Ordinance Authorized Number Purpose Amount
General Improvements: 0-93-33 Acquisition of Land$ 15,318 0-96-02 Refunding of Tax Appeals 560 0-99-31 Demolition of Unsafe Buildings 315,526 0-03-24 Various Capital Improvements 533 0-13-13 Refunding Tax Appeals 2,250,000 0-13-23 Dissolution of BLRA 3,040,000
Fiscal Year Adjustment Bonds: 0-01-12 Refunded Fiscal Year Adjustment Bonds 27,293
$ 5,649,230
TEMPORARY DEBT ISSUED AND OUTSTANDING (As of December 31, 2013)
Date of Ordinance Interest Original Date of Amount Number Purpose Rate Issue Maturity Outstanding
General Improvements 0-96-02 Refund Tax Appeals 2.000% 12/09/2003 07/25/2014$ 184,422 0-07-44 Refund Tax Appeals 2.000% 06/30/2008 07/25/2014 860,568 0-04-02 / 0-06-01 Acquisition of Land 2.000% 05/13/2005 07/25/2014 6,410,875 0-06-35 Citywide Communication System 2.000% 03/03/2006 07/25/2014 3,472,360 0-07-02 Various Capital Improvements 2.000% 03/06/2007 07/25/2014 1,024,816 0-07-43 Bayonne Medical Center 1.125% 11/26/2007 07/25/2014 3,025,000 0-11-02 Refund Tax Appeals 1.500% 03/31/2011 03/29/2014 1,374,000 0-13-23 LRA Project Notes 1.125% 07/25/2013 07/25/2014 43,735,000 0-13-23 LRA Project Notes 1.750% 09/20/2013 07/25/2014 15,000,000
75,087,041
School Improvements 0-09-23 Various School Improvements 2.000% 11/20/2009 07/25/2014 6,291,959 0-09-23 Various School Improvements 1.125% 11/20/2009 07/25/2014 1,056,000
7,347,959
Temporary Debt Issued and Outstanding$ 82,435,000
Source: 2013 unaudited Annual Financial Statement
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PERMANENT DIRECT AND CONTINGENT DEBT ISSUED AND OUTSTANDING (As of December 31, 2013)
Direct Debt
Final Interest Issue Maturity Amount Purpose Rate (%) Date Date Outstanding General Capital:
Pension Refunding Bonds 5.05-5.68 1/15/03 1/15/33$ 15,470,000 Fiscal Year Adjustment Refunding Bonds 4.25-5.00 4/1/03 1/5/15 1,300,000 Capital Appreciation Bonds 3.55-5.17 7/1/03 7/1/23 4,643,211 HCIA Bonds * 5.00 10/24/08 8/1/25 8,335,000 Infrastructure Bonds 4.00-5.75 6/24/09 7/1/39 67,185,000 LRA Revenue Bonds 5.400-7.625 10/1/13 4/1/38 13,225,000
Subtotal 110,158,211
School:
School Refunding Bonds 5.00 10/15/98 5/1/14 1,105,000 School Refunding Bonds 5.00-5.50 1/15/03 1/15/23 3,965,000 School Bonds (Capital Appreciation Bonds) 4.08-4.97 2/20/03 2/15/22 3,034,085 School Bonds (Capital Appreciation Bonds) 3.75-4.96 7/1/03 7/1/23 10,034,125 School Bonds 4.125-4.50 12/2/04 7/15/24 38,409,000 ERIP Bonds 4.11-6.25 5/7/09 6/1/21 8,000,000 School Bonds 6.00 10/24/08 12/15/25 15,286,000
Subtotal 79,833,210
Parking Utility:
Parking Revenue Bonds 5.00 6/15/07 6/15/27 3,180,000
Total Permanent Direct Bonds$ 193,171,421
Source: 2013 unaudited Annual Financial Statement.
*The Hudson County Improvement Authority
The City has entered into several contracts with the Hudson County Improvement Authority (the "HCIA"), under the HCIA's Pooled Government Loan Program - a variable interest rate program with interest calculated on a monthly basis. The outstanding balance as of December 31, 2013 is included in the preceding and following tables.
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ANNUAL DEBT SERVICE REQUIREMENTS TAX SUPPORTED BONDS (As of December 31, 2013)
Total Combined City (General Capital) School Total Total Principal Principal Interest Principal Interest Principal Interest and Interest
2014$ 1,930,077 $ 6,443,882 $ 6,000,826 $ 4,160,723 $ 7,930,903 $ 10,604,605 $ 18,535,508 2015 2,139,877 6,389,952 9,173,210 4,067,428 11,313,087 10,457,380 21,770,467 2016 2,159,893 6,320,535 5,960,240 3,841,204 8,120,133 10,161,739 18,281,872 2017 2,610,214 6,415,387 6,014,816 3,734,133 8,625,030 10,149,520 18,774,550 2018 2,380,234 6,325,080 6,395,362 3,747,200 8,775,596 10,072,280 18,847,876 2019 2,460,180 6,253,669 6,440,597 3,607,703 8,900,777 9,861,372 18,762,149 2020 2,569,837 6,139,147 6,649,122 3,440,410 9,218,959 9,579,557 18,798,516 2021 2,750,000 6,044,069 6,705,981 3,277,438 9,455,981 9,321,507 18,777,488 2022 2,859,944 5,936,564 5,660,629 3,096,971 8,520,573 9,033,535 17,554,108 2023 2,962,955 5,755,517 5,446,427 2,609,548 8,409,382 8,365,065 16,774,447 2024 2,320,000 4,941,724 4,200,000 873,750 6,520,000 5,815,474 12,335,474 2025 4,845,000 4,792,448 500,000 677,250 5,345,000 5,469,698 10,814,698 2026 3,515,000 4,493,905 750,000 647,250 4,265,000 5,141,155 9,406,155 2027 3,725,000 4,296,665 2,250,000 602,250 5,975,000 4,898,915 10,873,915 2028 3,930,000 4,081,155 2,500,000 467,250 6,430,000 4,548,405 10,978,405 2029 4,165,000 3,852,620 2,750,000 317,250 6,915,000 4,169,870 11,084,870 2030 4,410,000 3,608,979 2,436,000 152,250 6,846,000 3,761,229 10,607,229 2031 4,685,000 3,349,067 - - 4,685,000 3,349,067 8,034,067 2032 4,965,000 3,060,441 - - 4,965,000 3,060,441 8,025,441 2033 7,695,000 2,754,217 - - 7,695,000 2,754,217 10,449,217 2034 5,970,000 2,356,181 - - 5,970,000 2,356,181 8,326,181 2035 6,365,000 1,995,053 - - 6,365,000 1,995,053 8,360,053 2036 6,780,000 1,609,994 - - 6,780,000 1,609,994 8,389,994 2037 7,225,000 1,214,238 - - 7,225,000 1,214,238 8,439,238 2038 7,705,000 792,138 - - 7,705,000 792,138 8,497,138 2039 7,035,000 386,925 - - 7,035,000 386,925 7,421,925
Total$ 110,158,211 $ 109,609,552 $ 79,833,210 $ 39,320,008 $ 189,991,421 $ 148,929,560 $ 338,920,981
Includes Hudson County Improvement Authority (the "HCIA") bonds, with interest rates varying on a monthly basis. For the purpose of preparing this schedule, the interest on the HCIA Bonds was calculated using a 5.00% interest rate.
Source: Bond Amortization Schedules
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State Loans
On June 9, 1998, the City borrowed an additional $450,000 from the State under the Green Acres Loan Program to fund improvements to Veterans Park. On February 7, 2006 the City borrowed an additional $271,000 in two loans from the State under the Green Acres Loan program to fund improvements to the 16th Street Boat Ramp. On October 23, 2005, the City borrowed an additional $973,021 from the State under the Demolition of Unsafe Buildings Program. Under the terms of these loans, the City makes semi-annual principal and interest payments for the Green Acres loans and annual payments for the Demolition Loan, until the final maturity dates as noted below. The outstanding balances as of December 31, 2013 are as follows.
Final Interest Issue Maturity Amount Purpose Rate (%) Date Date Outstanding
Green Trust, State Loan: Veteran's Park, Phase II 2.00 6/9/98 3/9/18$ 119,849 16 th Street Boat Ramp 2.00 2/7/06 2/9/26 117,088 16 th Street Boat Ramp 2.00 2/7/06 2/10/26 68,474
Subtotal 305,411
Demolition, State Loan: Unsafe Building 4.00 10/23/05 10/23/16 299,266
$ 604,677
DIRECT AND OVERLAPPING DEBT ISSUED AND OUTSTANDING As of December 31, 2013 (Except as noted below)
Direct Debt Direct and Overlapping Debt Gro s s Net Gro s s Net Direct Debt: General$ 191,499,610 $ 175,402,565 $ 191,499,610 $ 175,402,565 Utility 3,180,000 -0- 3,180,000 -0- School 90,881,800 -0- 90,881,800 -0-
Overlapping Debt: Hudson County (1) n/a n/a 101,640,603 48,443,982 HCIA (2) n/a n/a 56,740,103 56,740,103 BMUA (3) n/a n/a -0- -0-
$ 285,561,410 $ 175,402,565 $ 443,942,116 $ 280,586,650
(1) The County of Hudson's gross and net debt at December 31, 2013 was $1,099,534,929 and $524,060,748, respectively, per the unaudited Annual Debt Statement of the County. The City's share (9.24%) is based on the City's percentage of the total county taxes apportioned for 2013 per the 2013 Abstract of Ratables. (2) This figure represents 9.24% of the HCIA's audited gross debt at December 31, 2012 of $614,070,377. (3)Per Bayonne Municipal Utilities Authority unaudited debt records as of March 31, 2014.
Source: As noted above.
A-29
DEBT RATIOS
Direct Debt Direct and Overlapping Debt Gro s s Net Gro s s Net
Per Capita (1)$ 4,530.99 $ 2,783.11 $ 7,044.02 $ 4,452.06
Equalized Valuation (2) 5.33% 3.27% 8.28% 5.23%
(1) Based on 2010 Federal Census (63,024).
(2) As equalized for year 2013by the County ($5,360,107,444).
A-30 APPENDIX B
CITY OF BAYONNE
AUDITOR'S REPORT AND 2012 AUDITED FINANCIAL STATEMENTS
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CITY OF BAYONNE
STATE OF NEW JERSEY
NEW JERSEY COMPREHENSIVE
ANNUAL FINANCIAL REPORT
FOR THE YEAR ENDED DECEMBER 31, 2012
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CITY OF BAYONNE COMPREHENSIVE ANNUAL FINANCIAL REPORT TABLE OF CONTENTS DECEMBER 31, 2012
PAGE EXHIBIT TABLE SCHED.
Introductory Section:
Letter of Transmittal ……………………………………………………………… 1 - 15 Officials in Office ………………………………………………………………… 16
Financial Section:
Independent Auditor's Report ………………………………………………………17 - 20 Management Discussion and Analysis …………………………………………… 21 - 28 Basic Financial Statements Combined Balance Sheet - Regulatory Basis - All Fund Types and Account Groups …………………………………… 29 - 30 Statement of Revenues, Expenditures and Changes in Fund Balance - Regulatory Basis - All Fund Types and Account Groups ………………… 31 - 33 Statement of Revenues, Expenditures and Changes in Fund Balance - Regulatory Basis - Budget vs. Actual - All Fund Types and Account Groups ………………………………… 34 - 35 Notes to Financial Statements …………………………………………………… 36 - 92
Supplementary Data Section:
Current Fund
Comparative Schedule of: Assets, Liabilities, Reserves and Fund Balance ……………………………… 93 - 94 A Operations and Changes in Fund Balance …………………………………… 95 - 96 A-1
Schedule of: Revenues and Other Credits to Income ……………………………………… 97 - 99 A-2 Revenues - Analysis of Budgeted Revenues ………………………………… 100 A-2a Revenues - Analysis of Non-Budget Revenues ……………………………… 101 A-2b Expenditures and Other Charges to Income ………………………………… 102 - 112 A-3 Cash and Cash Equivalents …………………………………………………… 113 A-4 Investments …………………………………………………………………… 114 A-5 Taxes Receivable and Analysis of Property Tax Levy ……………………… 115 A-6 Tax Title Liens ………………………………………………………………… 116 A-7 Intergovernmental Receivables ……………………………………………… 116 A-8 Revenue Accounts Receivable ………………………………………………… 117 A-9
i CITY OF BAYONNE COMPREHENSIVE ANNUAL FINANCIAL REPORT TABLE OF CONTENTS DECEMBER 31, 2012
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Supplementary Data Section (continued):
Current Fund (continued)
Schedule of: Other Receivables …………………………………………………………… 118 A-10 Deferred Charges ……………………………………………………………… 118 A-11 Appropriation Reserves ……………………………………………………… 119 - 124 A-12 Local District School Tax Payable …………………………………………… 125 A-13 County Taxes Payable ………………………………………………………… 125 A-14 Special Improvement District Tax Payable …………………………………… 126 A-15 Contracts Payable …………………………………………………………… 126 A-16 Prepaid Taxes ………………………………………………………………… 127 A-17 Tax Overpayments …………………………………………………………… 127 A-18 Tax Anticipation Notes Payable ……………………………………………… 128 A-19 Due to State of New Jersey - For Senior Citizens' and Veterans' Deductions … 129 A-20 Reserve for Urban Enterprise Zone Funds …………………………………… 130 A-21 Due to State of New Jersey - UEZ …………………………………………… 130 A-22 Reserves for Other ……………………………………………………………131 - 132 A-23
Federal and State Grants Fund
Schedule of: Federal and State Grants Receivable ………………………………………… 133 - 137 A-24 Reserve for Federal and State Grants - Appropriated …………………………138 - 143 A-25 Unappropriated Grant Funds ………………………………………………… 144 A-26
Trust Fund
Schedule of: Assets, Liabilities and Reserves - All Trust Funds …………………………… 145 B Cash and Cash Equivalents - All Trust Funds ………………………………… 146 B-1
Animal Control Trust Fund Schedule of: Due to State of New Jersey - Dog License Fees ……………………………… 147 B-2 Reserve for Animal Control Expenditures …………………………………… 147 B-3
ii CITY OF BAYONNE COMPREHENSIVE ANNUAL FINANCIAL REPORT TABLE OF CONTENTS DECEMBER 31, 2012
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Supplementary Data Section (continued):
Trust Fund (continued)
Insurance Trust Fund Schedule of Reserve for Insurance Expenditures ………………………………… 148 B-4
Tax Lien Redemption Trust Fund Schedule of Reserve for Tax Lien Redemption Expenditures …………………… 149 B-5
Housing and Urban Development Grant Fund Schedule of: CDBG Grants Receivable …………………………………………………… 150 B-6 Other Receivables …………………………………………………………… 150 B-7 Interfunds Payable …………………………………………………………… 151 B-8 Reserve for CDBG Grant Expenditures ……………………………………… 151 B-9 Accounts Payable ……………………………………………………………… 152 B-10
Other Trust Schedule of: Interfunds Receivable / (Payable)Accounts Payable ………………………… 153 B-11 Accounts Payable ……………………………………………………………… 154 B-12 Due to State of New Jersey …………………………………………………… 154 B-13 Miscellaneous Reserves ………………………………………………………155 - 156 B-14
General Capital Fund
Schedule of: Assets, Liabilities, Reserves and Fund Balance ……………………………… 157 C Fund Balance ………………………………………………………………… 158 C-1 Analysis of Cash and Investments ………………………………………………… 159 C-2 Analysis of Cash and Cash Equivalents Ending Balance …………………………160 - 161 C-2a Schedule of: Deferred Charges to Future Taxation - Funded ……………………………… 162 C-3 Deferred Charges to Future Taxation - Unfunded …………………………… 163 C-4 Grants Receivable …………………………………………………………… 164 C-5 General Serial Bonds Payable …………………………………………………165 - 168 C-6 Fiscal Year Adjustment Bonds Payable ……………………………………… 169 C-7
iii CITY OF BAYONNE COMPREHENSIVE ANNUAL FINANCIAL REPORT TABLE OF CONTENTS DECEMBER 31, 2012
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Supplementary Data Section (continued):
General Capital Fund (continued)
Schedule of: School Serial Bonds Payable ………………………………………………… 170 - 173 C-8 Green Trust Loans Payable ……………………………………………………174 - 176 C-9 Demolition Loan Payable ……………………………………………………… 177 C-10 General Bond Anticipation Notes Payable ……………………………………178 - 179 C-11 School Promissory Notes Payable …………………………………………… 180 C-12 Improvement Authorizations ………………………………………………… 181 C-13 Capital Improvement Fund …………………………………………………… 182 C-14 Reserve for Retirement of Debt ……………………………………………… 183 C-15 Contracts Payable …………………………………………………………… 183 C-16 Interfunds Receivable / (Payable) …………………………………………… 184 C-17 Bonds and Notes Authorized but not Issued ………………………………… 185 C-18
Parking Utility Fund
Schedule of: Assets, Liabilities, Reserves and Fund Balance - Operating and Capital Fund 186 - 187 D Operations and Changes in Fund Balance - Operating………………………… 188 D-1 Fund Balance - Capital ……………………………………………………… 189 D-2 Revenues - Operating ………………………………………………………… 190 D-3 Expenditures - Operating………………………………………………………191 - 192 D-4 Cash and Cash Equivalents - Operating and Capital ………………………… 193 D-5 Analysis of Parking Utility Capital Cash and Cash Equivalents ………………… 194 D-6 Schedule of: Accrued Interest - Operating…………………………………………………… 195 D-7 Interfunds Payable - Operating………………………………………………… 196 D-8 Fixed Capital - Capital………………………………………………………… 197 D-9 Fixed Capital Authorized and Uncompleted - Capital………………………… 198 D-10 Improvement Authorizations - Capital………………………………………… 199 D-11 Reserve for Amortization - Capital…………………………………………… 200 D-12
iv CITY OF BAYONNE COMPREHENSIVE ANNUAL FINANCIAL REPORT TABLE OF CONTENTS DECEMBER 31, 2012
PAGE EXHIBIT TABLE SCHED.
Supplementary Data Section (continued):
Parking Utility Fund (continued)
Schedule of: Deferred Reserve for Amortization - Capital………………………………… 201 D-13 Parking Revenue Serial Bonds Payable - Capital……………………………… 202 D-14
General Fixed Assets
Schedule of: General Fixed Assets ……………………………………………………… 203 E Changes in General Fixed Assets by Class ……………………………… 204 E-1
Payroll Agency
Schedule of Assets and Liabilities ………………………………………………… 205 F
Additional Information Relating to Internal Control and Compliance:
Independent Auditor's Repport on Internal Control over Financial Reporting and on Compliance and Other Matters based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards ……………………………………………206 - 208 Independent Auditor's Report on Compliance For Each Major Program and on Internal Control Over Compliance Required by OMB Circular A-133 ………………………………………………………209 - 211 Schedule of Expenditures of Federal Awards …………………………………212 - 216 ……………………… 1 Schedule of Expenditures of State Financial Assistance ………………………217 - 219 ……………………… 2 Schedule of Expenditures of Other Financial Assistance …………………… 220 - 221……………………… 3 Notes to Schedules of Expenditures of Federal Awards and State Financial Assistance ………………………… 222 - 223
Schedule of Findings and Questioned Costs Section I - Summary of Auditor's Results …………………………………224 - 225
Section II - Schedule of Financial Statement Findings ……………………226 - 227
Section III - Schedule of Federal Awards and State Financial Assistance - Findings and Questioned Costs ……………………………………… 228 - 234
Status of Prior Year Findings …………………………………………… 235
v CITY OF BAYONNE COMPREHENSIVE ANNUAL FINANCIAL REPORT TABLE OF CONTENTS DECEMBER 31, 2012
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Statistical Section: Unaudited
Ten-Year History of Governmental Expenditures …………………………… 236 …………… 1 Ten-Year History of Governmental Realized Revenues ……………………… 237 …………… 2 Comparative Schedule of Operations and Changes in Fund Balance - Current Fund ……………………………………………………………… 238 …………… 3 Ten-Year History of Tax Rate and Apportionment of Levies ………………… 239 …………… 4 Ten-Year History of Delinquent Taxes and Tax Title Liens ………………… 239 …………… 5 Ten-Year History of Tax Levies and Collections …………………………… 240 …………… 6 Ten-Year History of Property Acquired by Tax Title Lien Liquidation ……… 240 …………… 7 Ten-Year History of Percentage of Net Assessed Valuation to Estimated Full Cash Valuation ……………… 241 …………… 8 Ten-Year History of Ratio of Annual Debt Service to Operating Expenditures and Revenues ………… 242 …………… 9 Computation of Legal Debt Margin and Overlapping Debt As of December 31, 2012 ………………………………………………… 243 …………… 10 Ten-Year History of Ratio of Bonded and Bondable Debt to Equalized Value and Debt Per Capita ………………………………… 244 …………… 11 Ten-Year History of Unemployment Statistics ……………………………… 245 …………… 12
General Section
General Comments ……………………………………………………………246 - 251 Comments and Recommendations ……………………………………………252 - 254
vi
INTRODUCTORY SECTION
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------City of Bayonne
630 Avenue C, Bayonne, New Jersey, 07002 ------Tel: 201-858-6043, Fax. 201-823-9825
TO: The Honorable Mayor and Members of the City Council
RE: Comprehensive Annual Financial Report for the Year Ended December 31, 2012
The Comprehensive Annual Financial Report for the City of Bayonne, Bayonne, New Jersey, (the “City”) is submitted herewith and includes financial statements and supplementary schedules. We believe it is accurate in all material respects, that it is presented in a manner designed to set forth fairly the financial position and results of its operations of the City, as measured by the financial activity of its various funds and accounts, and that all disclosures necessary to enable the reader to gain maximum understanding of the City’s financial affairs have been included.
Organization of Report
The New Jersey Comprehensive Annual Financial Report (NJ-CAFR) is modeled on national standards for the presentation of governmental financial information. The report is presented in several sections: Introductory, Financial, Supplementary Data, Additional Information Relating to Internal Control and Compliance, Statistical and General Section. Responsibility for completeness and clarity of the report, including disclosures, rests with the Chief Financial Officer and ultimately with the Mayor and Council. By adopting the NJ-CAFR format, it is the administration’s intent to facilitate an understanding by the non-financially oriented citizen as well as provide all necessary information for the most sophisticated financial observer.
The Introductory Section includes this transmittal letter and a list of principal officials. The Financial Section includes the independent auditors’ report, combined financial statements, and the notes to financial statements. To comply with regulatory filing requirements, the Supplementary Data Section includes additional detailed schedules to supplement the basic financial statements. The Statistical Section includes selected financial, economic and demographic information, generally presented on a multi-year basis. The General Section includes general comments and recommendations.
1 Organization of Report (continued)
The City is required to undergo an annual single audit in conformity with the provisions of the Single Audit Act of 1984, and as amended thereafter, the U.S. Office of Management and Budget Circular A- 133 Audits of State, Local Governments, and Non-Profit Organizations; and New Jersey OMB Circular 04-04, Single Audit Policy for Recipients of Federal Grants, State Grants, and State Aid. Information related to this single audit, including findings and recommendations, and reporting requirements under Government Auditing Standards are included in the section of this report titled Additional Information Relating to Internal Control and Compliance.
Governmental Structure
The City operates with an elected Mayor and Council under the Mayor and Council Form of Government (Plan “C” of the Optional Municipal Charter Law). Officers and employees may be duly appointed, pursuant to the provision of the State Charters or Ordinances of the City. The City is divided into three wards, with a council person elected from each ward and the Mayor and two council persons elected at-large by all voters in the City for respective terms in office of four years. The legislative power of the City is vested in the City Council, which meets once every three weeks.
The Mayor has the power to approve ordinances adopted by the City Council or to return ordinances to the Council with a statement of his objections. A two-thirds majority of the Council Members may override the Mayor’s veto. The Mayor cannot vote in proceedings of the Council except to fill a vacancy, in which case the Mayor may cast the deciding vote. The Mayor has the executive power and is responsible for enforcing the charter, ordinances and general laws of the City, and supervising all City departments. The Mayor appoints the directors of all departments with the advice and consent of the Council.
Background
The City is situated on a peninsula bounded by water on three sides -- Newark Bay on the west; Upper New York Bay (the entrance to the New York metropolitan area’s water front) on the east; and the Kill Van Kull on the south, a narrow body of water which connects Newark and Upper New York Bays. The City of Jersey City forms the City’s northern boundary.
Settled in March of 1646 as a resort center for people living in the interior parts of New Jersey and New York State, Bayonne became a Township in 1861, and was incorporated as a City on March 10, 1869. The City is 5.39 square miles in area (approximately three miles long and one mile wide, 2.5 miles wide including the Peninsula at Bayonne Harbor, or approximately 3,450 acres of which 2,524 acres is developed land area). Based on the 2010 US Census, it has a population of 63,024 residents.
The City’s location and availability of water frontage for loading and unloading waterborne freight and residential use on the western side of the City provides a broad tax base for the City.
2 Background (continued)
The principal retail business and shopping areas are located along Broadway, a north to south thoroughfare. Except for Broadway and J.F.K. Boulevard, the North to South thoroughfares are avenues in alphabetical order, starting with Avenue A on the western side. Cross streets are in numerical order from 1 to 63, with 63rd Street and the New Jersey Turnpike extension to the Holland Tunnel being approximately the dividing line between the City and Jersey City. The City’s residential area encompasses essentially the land between Avenue A and Avenue E from 1st Street to 58th Street, except for the concentrated area of office and retail shops on Broadway and a few other small areas.
There are a number of historic landmarks in the City, including such edifices as: St. Mary’s Star of the Sea Church, a mix of Victorian and Romanesque styles; the Bayonne Public Library, an example of Classical Revival architecture; and St. Henry’s Church, a well preserved example of Gothic architecture.
Cultural activities include an art center at the Bayonne Jewish Community Center, the City-maintained Firehouse Museum holding firefighting memorabilia and the Bayonne Historical Society. The ten civic and fraternal groups, such as the Chamber of Commerce and the Bayonne Women’s Club, provide forums for the exchange of ideas and camaraderie for those in business or over the age of eighteen. Activities for younger people are sponsored by the Bayonne Family Community Center, the Bayonne PAL, the Boy Scouts of America, the Bayonne Little League, the Cal Ripken League, Pop Warner Football, Bayonne Youth Hockey, the Jewish Community Center, and the City through its thirteen parks, fifteen playgrounds, and two County operated parks. For those people who play golf, facilities are available on Staten Island or in Union and Middlesex Counties to the West within about thirty minutes driving time. Private and miniature golf courses have been built in the City.
Cooperation among business and residents in civic, religious and fraternal endeavors is part of everyday life in the City.
In 2009, the City approved a plan to reduce the number of City departments from nine to four. Under the approved plan, the existing departments were consolidated into the Department of Business Administration, Department of Municipal Services, Department of Public Safety and Department of Public Works, Parks and Recreation.
The Department of Public Safety, under supervision of Director Jason O’Donnell, consists of the Police and Fire Departments.
The Police Department is under the supervision of Police Chief Ralph Scianni. The Police Department has 1 Chief, 2 Deputy Chiefs, 14 Captains, 15 Lieutenants, 37 Sergeants, 133 Uniformed Officers and 35 Civilians.
The Fire Department is under the supervision of Chief Gregory J. Rogers. Fire Department personnel consist of 1 Chief, 2 Deputy Chiefs, 4 Battalion Chiefs, 42 Captains, 124 Uniformed Firemen, 3 full- time civilians and 1 part-time civilian.
3 Background (continued)
In addition to the public school system, the City offers its residents the services of one denominational high school and two denominational schools for pre-high school students. Several private nursery schools, day-care centers, recreation areas, a public library, and various houses of worship are located in the City.
Nearby higher educational facilities consist of St. Peter’s College, New Jersey City University and Hudson County Community College in Jersey City, Stevens Institute of Technology in Hoboken, St. John’s University in Staten Island and in Newark, Rutgers – The State University of New Jersey, University of Medicine and Dentistry, New Jersey Institute of Technology and Seton Hall University School of Law.
There are few homogeneous areas where single family residences exist, except for a four-block area along Newark Bay, just south of the County’s Bayonne Park. The principal residential type of usage is multi-family which includes two family houses primarily, three-to-four-family houses, row houses, townhouses, garden apartments, and mid and high-rise apartments. Mid- and high-rise apartments are only situated on isolated sites along the southern waterfront, the northwest section of the City, and within urban renewal districts. Existing high-rise apartment structures are not considered a significant residential land use.
The major commercial activity in the form of retail stores is concentrated along Broadway, a situation that has not changed from the City’s early times. Some major commercial establishments exist on Avenue C between 24th and 27th Streets, Avenue A and North Street, and Route 440. Office and professional activity consists typically of medical or legal office space from converted single-family residences.
There are shopping areas at each end of the City as well as a mixture of retail shops and services, and professional and commercial offices along Broadway. Recently, the “Bayonne Crossing” Shopping Center, anchored by Lowe’s Home Improvement and Wal-Mart and many other restaurants and retail stores, opened as the largest shopping center in the area, with direct access from Route 440. Also on 440, an $18 million complex called “Winners”, billed as one of the nation's most elaborate off-track wagering facilities, opened in 2012. The City also has a number of small and mid-size industries that provide employment for area residents and enhances tax revenues for the City. Public transportation through New Jersey Transit buses and other bus companies provide easy access within the area and to New York City. The City is also serviced by the Hudson Bergen Light Rail System, with stops at 8th, 22nd, 34th and 45th Streets. Bayonne Crossing is also walking distance from the Light Rail.
4 Background (continued)
There are four industrial districts plus the Peninsula at Bayonne Harbor located along the City’s eastern and western waterfronts.
53rd Street District This district encompasses approximately 19 acres in the northwest portion of the City along Newark Bay, and is the newest district established. Presently, there are only six firms located in this district, two of which are small manufacturing firms. There are six acres of vacant land in this district on which development is constricted due to possible subsurface soil contamination.
Bergen Point District Located at the City’s southwest corner on Newark Bay and the Kill Van Kull, Bergen Point covers an area of 138 acres. Firms in this district are comprised of smaller metals and chemical manufacturing firms and light industry. Land for expansion of existing firms is limited, with the exception of 57 acre Texaco Tract. Texaco has moved its facilities from Bayonne. Texaco has cleared and cleaned the area under the guidance of ECRA prior to the sale of the 57 acres.
Port Jersey District Located in the City’s northeast portion along the Jersey City borderline and Upper New York Bay, Port Jersey encompasses 160 acres in the City of a total of 400 acres, the balance being in Jersey City. Of the fourteen concerns located in Port Jersey, eleven are warehouse/distribution centers and include such firms as Todd Logistics, Global Terminal & Container Services, Unimark, Workbench, BMW Distributions and Preparation Center, and a New York and New Jersey Port Authority-operated distribution center for foreign-made cars. Port Jersey is one of the major distribution centers in the New Jersey and New York areas.
Constable Hook District Located on Upper New York Bay along the City’s eastern/central waterfront, Constable Hook (the “Hook”) encompasses roughly 727 acres, and is the largest and most heavily concentrated of all the districts. However, approximately 87 acres in the upland area are currently vacant. The area north of 22nd Street is comprised of various warehouse/ distribution and light industrial firms. Within the Hook are 55 firms, including such corporations as Exxon, Amerada Hess, IMTT and Coastal Oil.
Peninsula at Bayonne Harbor (formerly Military Ocean Terminal) This former military facility is situated on 700 acres between the industrial districts of Port Jersey and Constable Hook on Upper New York Bay. The Peninsula at Bayonne Harbor contains a causeway, an artificial peninsula extending two miles into Upper New York Bay, with piers for ocean going vessels, railroad tracks and roadways, a dry-dock over 1,000 feet long capable of handling any ship afloat, storage facilities, various office-type buildings and residential buildings for military personnel and families. On an average day, between 150 and 200 trucks enter the Terminal area for unloading in addition to rail freight via the Bayonne Industrial Track.
5 Background (continued)
Peninsula at Bayonne Harbor (formerly Military Ocean Terminal) (continued) The military facility located on the peninsula has been closed. The City has established a Local Redevelopment Authority (the “Authority”), which actively worked to convert the military base into a viable commercial, residential and park development, until it was dissolved in June, 2013, at which date such activities were taken over by the City Council.
In 2009, the first residential development at the Peninsula at Bayonne Harbor, Alexan City View, opened its leasing office and welcomed its first residents. Trammell Cove Residential, the developer of the brand new waterfront apartments within the Bayonne Bay District, has announced that it is now leasing for residency. Alexan City View features a variety of amenities including a 9,000 square-foot resident’s clubhouse with a fitness center, indoor basketball half court, gaming room and outdoor swimming pool.
Additionally, at the Northeast corner of the Peninsula, Harbor View Park, a public park is located at the northeast corridor of the Peninsula. The centerpiece of the park is the 100-foot tall monument to “the struggle against terrorism” designed and donated by world renowned artist, Zurab Tseretelli. The base of the monument is engraved with names of the victims who perished in the September 11, 2001 attacks, as well as the 1993 World Trade Center Attack. The park, which opened in the fall of 2006, is open to the public from dawn to dusk.
Golf Course Development A private, eighteen hole golf course was constructed at the site of a former municipal landfill and PSE&G property. The course was built on the eastside of the City and offer views of lower Manhattan. The course was open in the spring of 2006.
Urban Enterprise Zone In September of 2002 the City was designated an Urban Enterprise Zone by the State of New Jersey. With this designation various retailers within the Zone are allowed to charge 3 ½ % sales tax as opposed to the normal 7% sales tax rate. There are also various other benefits that accrue to members of the Zone besides the sales tax advantage. There are currently over two hundred businesses that belong to the Bayonne Urban Enterprise Zone.
Interstate, intrastate and inter-city public transportation is provided by New Jersey Department of Transportation - Bus Operations and other bus companies.
The major highways serving the City from the north are State Route 440 (formerly Route 169), and the New Jersey Turnpike Extension by egress and access ramps 14A. To the south, the Bayonne Bridge over the Kill Van Kull to Staten Island provides connection to east/west Interstate Route 287 and to Long Island via the Verrazano Narrows Bridge.
6 Background (continued)
In addition to the New Jersey Turnpike Extension providing connections to north/south Interstate 95 and U.S. Routes 1 and 9, State Route 440, a four-lane limited access highway parallel to Newark Bay, provides a non-toll access across Newark Bay to U.S. Routes 1 and 9 and Interstate Route 95.
State Route 440 provides a connection to the industrial districts and the United States Military Ocean Terminal located to the east on Upper New York Bay. State Route 440 has been expanded and realigned as a four-lane divided highway, and extended to provide a connection with the Bayonne Bridge. The realignment and extension of Route 440 eliminates the movement of freight over local streets.
In April, 2000, the first phase of the Hudson-Bergen light rail system began transporting commuters. The light rail runs parallel on the west side of State Route 440, with three stations located at 22nd Street, 34th Street and 45th Street, running through Exchange Place in Jersey City and ending in Hoboken. The extension from 22nd Street through 5th Street is currently in progress.
Movement of rail freight is by one rail line, which is the Conrail-owned Bayonne Industrial Track with branch lines serving three industrial districts. The Bayonne Industrial Track is a single line track running from the northeast corner of the City parallel to Upper New York Bay to the City’s southern point along the Kill Van Kull. The rail line divides a portion of the residential section along the City’s eastern and southern sides.
Electricity and gas is provided by Public Service Electric and Gas Co. Telephone service is provided for by Verizon. Solid waste pickup is provided to residences, offices and retail stores by a contract with Suburban Disposal Inc. Larger business concerns and corporations such as Exxon, IMTT and Bayonne Medical Center must make their own provisions for the carting of solid waste. The water/sewer services are provided by the Bayonne Municipal Utilities Authority, an Authority created by an ordinance of the City, duly adopted October 9, 1997, and approved by the Mayor on October 10, 1997.
Parking Utility
Effective January 1, 2012, the Bayonne Parking Authority (the “BPA”) was officially dissolved and the Bayonne Parking Utility was created. The Bayonne Parking Utility will be accounted for as a separate Utility Fund on the books and records of the City. The City has determined to initially assume all of the outstanding debt and obligations of the Parking Authority as a means of providing the City the immediate ability to continue providing parking service while insuring the timely and efficient payment of the obligations and debt of the BPA. The operations of the Utility will continue to be funded through parking fees and ticket charges.
7 Reporting Period
The City has reverted to a calendar fiscal year from a state fiscal year period ending June 30, annually. The City’s final state fiscal year reporting period ended June 30, 2011, and its first calendar year is 2012, the current year under audit. The interim six month period, July 1, 2011 to December 31, 2011, was known as the City’s “transition year”.
Financial Information
Accounting
The City maintains an on-line, real-time, computerized accounting system to record all financial transactions.
In developing and evaluating the City’s accounting system, consideration is given to the adequacy of internal accounting controls. Internal accounting controls are designed to provide reasonable, but not absolute, assurance regarding (1) the safeguarding of assets against loss from unauthorized use of disposition, and (2) the reliability of financial records for preparing financial statements and maintaining accountability for assets. The concept of reasonable assurance recognizes that the cost of controls should not exceed benefits expected to be derived. All internal control evaluations occur within the above framework. We believe the City’s internal accounting controls adequately safeguard assets and provide reasonable assurance for the proper recording of financial transactions. Management of the City is responsible for establishing and maintaining an adequate internal control structure.
Description of Funds
The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body establishing governmental accounting and financial reporting principles. GASB Codification establishes three fund types and two account groups to be used by general purpose governmental units when reporting financial position and results of operations in accordance with accounting principles generally accepted in the United States of America (GAAP).
The accounting policies of the City of Bayonne conform to the accounting principles and practices prescribed by the Division of Local Government Services, Department of Community Affairs, State of New Jersey (the Division). Such principles and practices are designed primarily for determining compliance with legal provisions and budgetary restrictions, and as a means of reporting on the stewardship of public officials with respect to public funds.
Under this method of accounting, the City accounts for its financial transactions through the following separate funds, which differ from the fund structure required by GAAP.
Current Fund - is used to account for all revenues and expenditures for governmental operations of a general nature, including federal and state grants.
8 Financial Information (continued)
Description of Funds (continued)
Trust Fund - are used to account for receipts, custodianship and disbursement of funds held by the City in a trustee capacity or as an agent for individuals and other governmental agencies.
General Capital Fund - receipt and disbursement of funds for the acquisition of general capital facilities, other than those acquired in the current fund. General bonds and notes payable are recorded in this fund offset by deferred charges to future taxation.
Parking Utility Fund – is used to account for operations and acquisition of capital facilities of the City owned Parking Utility. The Utility Operating Fund records revenues and expenditures applicable to the general operation of the program to provide parking management services in the City. The Utility Capital Fund is used to account for capital acquisitions and improvements used to support the City’s parking management functions, and the related debt issued to finance such acquisitions and improvements.
General Fixed Assets - is used to account for fixed assets required in general governmental operations. This account group is not considered a fund.
Budgets and Budgetary Accounting - an annual budget is required to be adopted and integrated into the accounting system to provide budgetary control over revenues and expenditures. Budget amounts presented in the accompanying financial statements represent amounts adopted by the City of Bayonne and approved by the State Division of Local Government Services per N.J.S.A. 40:4 et seq.
Basis of Accounting
The accounting principles and practices prescribed for municipalities by the State of New Jersey differ in certain respects from GAAP applicable to local government units. The more significant differences are as follows:
Grant Revenues - Federal and State Grants, and entitlements of shared revenues received for the purposes normally financed through the current fund are recognized when anticipated in the City budget. Under GAAP such revenues should be recognized in the accounting period in which they become available and measurable. GAAP defines available as collectible in the current period or soon enough thereafter to be used to pay liabilities that are owed at the end of the accounting period. Also, under GAAP, grant funds received before costs are incurred are deferred, and grant-related expenses incurred in advance of receipt of grant funds result in the recording of receivable and revenue.
9 Financial Information (continued)
Basis of Accounting (continued)
Property Taxes and Other Revenues - property taxes and other revenues are recognized on a cash basis. Receivables for property taxes and other items are recorded with offsetting reserves on the balance sheet of the City’s current fund. Under GAAP such receivables should be recognized in the current accounting period if they are expected to be collected in no more than 60 days following the end of the year.
Expenditures - unexpended or uncommitted appropriations, at year end, are reported as expenditures through the establishment of appropriation reserves unless canceled by the governing body. Under GAAP, expenditures are usually recognized when the governmental unit has received and becomes liable for payment of goods and services. Also, under GAAP, interest cost is generally recognized as an expenditure in the accounting period in which it is due, rather than when it is incurred.
Appropriation Reserves - are available until lapsed at the close of the succeeding year to meet specific claims, commitments or contracts incurred during the preceding year. Lapsed appropriation reserves are recorded as additions to income. Appropriation reserves are not established under GAAP.
Compensated Absences - expenditures relating to obligations for unused vested accumulated vacation and sick pay are not recorded until paid. GAAP requires that the amount that would normally be liquidated with expendable available financial resources recorded as an expenditure in the operating funds and the remaining obligations recorded as long-term obligations.
Encumbrances - contractual orders at year-end are reported as expenditures through the establishment of a reserve for encumbrances. Encumbrances do not constitute expenditures or liabilities under GAAP.
Property Acquired for Taxes - is recorded in the current fund at the assessed valuation when such property was acquired and is fully reserved. GAAP requires such property to be recorded in the general fixed assets account group at the lower of cost or fair-market value.
10 Financial Information (continued)
Basis of Accounting (continued)
Fixed Assets - Until 1985, property and equipment purchased by the current fund and the capital fund were recorded as expenditures at the time of purchase. The accounting principles and reporting requirements prescribed by the State of New Jersey were modified, effective for financial statements dated December 31, 1985 and thereafter, to require the inclusion of a statement of general fixed assets of the City as part of the basic financial statements. In accordance with the State’s accounting directive, the City has stated land and buildings acquired prior to January 1, 1986 at the most recent (1991) City revaluation amounts. Machinery and equipment and other fixed assets acquired prior to December 31, 1985 are stated at either historical cost, insurable value or current replacement values as allowed by the State’s accounting directive. All general fixed assets acquired beginning January 1, 1986 are valued at actual cost. Depreciation is not recorded.
Deferred Charges to Future Taxation Funded and Unfunded - Upon the authorization of capital projects, the City establishes deferred charges for the costs of the capital projects to be raised by future taxation. Funded deferred charges relate to permanent debt issued, whereas unfunded deferred charges relate to temporary funding or non-funding of the authorized cost of capital projects. According to N.J.S.A. 40A:2-4, the City may levy taxes on all taxable property within the local unit to repay the debt. Annually, the City raises the debt requirements for that particular year in the current budget. As the funds are raised by taxation, the deferred charges are reduced. Under GAAP, no deferred charges to future taxation funded or unfunded are set up when a capital project is authorized.
Fixed Capital and Fixed Capital Authorized and Uncompleted – The full amount of an authorized Utility Capital project or acquisition is recorded as Fixed Capital Authorized and Uncompleted, until that time when the authorized funds are used to purchase the acquisition or the capital project is completed, when it then is reclassified as Fixed Capital.
Reserve for Amortization and Deferred Amortization – The funded amount of authorized Utility Capital authorizations are recorded upon ordinance adoption as a Reserve for Deferred Amortization. Principal payments on bonds or pay-downs on notes issued to finance these authorizations are amortized to the reserve for amortization if the project is completed or the deferred amortization if the project is not completed. Upon the completion of capital projects or acquisition of capital assets authorized, the reserve for deferred amortization is reclassified as reserve for amortization.
11 Financial Information (continued)
Basis of Accounting (continued)
Interfunds- advances from the current fund are reported as interfund receivables with offsetting reserves that are created by charges to operations. Income is recognized in the year the receivables are liquidated. Interfund receivables in the other funds are not offset by reserves. Under GAAP, interfund receivables are not recorded through operations.
Basic Financial Statements
The GASB Codification also defines the financial statements of a governmental unit to be presented in the general-purpose financial statements to be in accordance with GAAP. The City presents the financial statements listed in the table of contents which are required by the Division, and which differ from the financial statements required by GAAP.
Budget
No municipal budget may be adopted or amended without the approval of the Director of the Division of Local Government Services (the “Director”). The Director approves the budget once he has determined the budget meets all the requirements of the Local Budget Law (N.J.S.A. 40A:4-1 et. seq.), and all the regulations of the Board.
The Local Budget Law imposes various restrictions on the formulation of the Municipal Budget, the more important of which pertain to anticipation of revenues and review of adequacy of appropriation. Among other restrictions, the Local Budget Law requires that the budget be balanced and that the Director examine the Budget with reference to all estimates of revenue and the following appropriations (a) salaries and wages and other expenses of each office, department, institution, or other agency of the City; (b) contingent expenses in an amount no more than 3% of operations; (c) payment of interest and debt redemption charges; (d) deferred charges and statutory expenditures; (e) cash deficit of preceding year; (f) other reserves and nondisbursement items deemed advisable by the Mayor and Council; and (g) the payment of all judgments not for capital purposes and for which Notes or Bonds cannot be lawfully issued.
Anticipated non-tax revenues of the municipality are limited to the amount actually realized the previous year unless the Director authorizes a higher figure. Tax Anticipation Notes are limited in amount by law and must be paid off in full within 120 days of the close of the fiscal year.
The Director has no authority over individual operating appropriations unless a specific amount is required by law, but the review functions which focus on anticipated revenues serve to protect the solvency of all local units. The Municipal Budget, by law and regulation of the Division, must be in balance and is a “cash basis” budget.
12 Budget (continued)
Pursuant to the Local Budget Law, miscellaneous revenues shall include such amounts as may reasonably be expected to be realized in cash during the fiscal year from known and regular sources, or sources reasonably capable of anticipation and lawfully applicable to the appropriations made in the budget.
The Local Budget Law further provides that no miscellaneous revenues from any source shall be included as an anticipated revenue in the budget in an amount in excess of the amount actually realized in cash, from the same source during the next preceding fiscal year, unless the Director shall determine that the facts clearly warrant the expectation that such excess amount will actually be realized in cash during the fiscal year and certified such determination to the local unit.
Property taxes cannot be anticipated in excess of amounts subject to the Tax Levy Cap Law noted below. The maximum amount of delinquent taxes that may be anticipated is limited by statutory formula, which allows the unit to anticipate collection at the same rate realized for the collection of delinquent taxes in the previous year. Also, the local unit is required to make an appropriation for a “reserve for uncollected taxes” in accordance with statutory formula to provide for a tax collection in an amount that does not exceed the percentage of taxes levied and payable in the preceding fiscal year that was received in cash by June 30 of that year. The budget also must provide for any cash deficits of the prior year.
Emergency appropriations (those made after the adoption of the budget and the determination of the tax rate) may be authorized by the governing body or a local unit. However, with minor exceptions, such appropriations must be included in full in the following year’s budget.
Appropriation “CAPS” A statute passed in 1977 as amended by N.J.S. 40A: 4-45.1a (commonly known as the “1977 Cap Law”), imposed limitations on increases in the municipal appropriations subject to various exceptions. Pursuant to N.J.S.A. 40A;40A;4-45.1a, the Director of the Division of Local Government Services must promulgate the Cost of Living Adjustment (COLA) applicable to municipal and county budgets. The COLA is based on the Implicit Price Deflator for State and Local Governments, calculated by the U.S. Department of Commerce, Bureau of Economic Analysis. Under N.J.S.A. 40A-45.2, “municipalities and counties shall be prohibited from increasing their final appropriations by more than 2.5% unless action is taken by the governing body to increase the cap to the statutorily permitted 3.5%”.
Tax Levy “CAPS” In 2007 a statute was passed which stated that starting with Fiscal Year 2008 budgets, municipalities, counties and fire districts tax levies are limited to a 4% increase. In 2010, the 2007 law was amended to a 2% increase and modified exclusions There are several general exclusions; increases in debt service and capital expenditures; weather and other ‘declared’ emergencies; pension contributions in excess of 2 % and limited by the increase in State Health Benefit rate increase.
13 Deferral of Current Expenses
Supplemental appropriations made after the adoption of the budget and determination of the tax rate may be authorized by the Mayor and Council with the approval of the Director. However, with minor exceptions, such appropriations must be included in full in the following year’s budget.
Budget Transfers
Budget transfers provide a degree of flexibility and afford a control mechanism. Transfers between major appropriation accounts are prohibited until the last two months of the year and, although sub- accounts within an appropriation are not subject to the same year-end transfer restrictions, they are subject to internal review and approval.
Budget Process
Primary responsibility for the municipality’s budget process lies with the Mayor and the Council. As prescribed by the Local Budget Law, adoption should occur by the end of August, however, extensions may be granted by the Division to any local governmental unit. In the first quarter in which the budget formulation is taking place, the municipality operates under a temporary budget which may not exceed 26.25% of the previous fiscal year’s adopted budget. Upon adoption of an annual operating budget by the Mayor and the Council, the Board of Taxation computes a tax rate for municipal purposes. The tax rate for each municipality includes municipal tax, local school requirements and county tax.
Cash Management
The City strives to keep abreast of current developments and procedures in cash management to insure efficient and profitable use of available cash resources. Cash is deposited in institutions located in New Jersey, which are insured by the Federal Deposit Insurance Corporation (FDIC), the Savings Association Insurance Fund (SAIF) or by any other agency of the United States that insures deposits; and MBIA Class Fund or the State of New Jersey Cash Management Fund, in accordance with state law. Funds not immediately needed are invested as certificates of deposit on either of the aforementioned funds.
New Jersey Statues require public depositories to maintain collateral for deposits of public funds that exceed insurance limits. All collateral must be deposited with the Federal Reserve Bank, the Federal Home Loan Bank Board, or a banking institution that is a member of the Federal Reserve System and has capital funds of not less than $25,000,000. The City has complied with all statutes and regulations applicable to deposits and investments.
14
Risk Management
The City strives continually to evaluate its risk management policies, seeking to improve its safety and loss control functions, claims management, insurance placement, and financing practices. In accordance with a resolution dated August 17, 2011, the City authorized participation in and the execution of an Indemnity and Trust Agreement with the New Jersey Intergovernmental Insurance Fund (the “NJIIF”) for the provision of property and casualty insurance coverage. The NJIIF is a State-approved, self- insured reinsured public entity insurance pool created in 1991 which offers New Jersey public entities multiple lines of insurance.
Annual Independent Audit
The Local Fiscal Affairs Law, Chapter 5 of Title 40A of the New Jersey Statutes, regulates the non- budgetary financial activities of the municipality. An annual audit for the City’s books, accounts and financial transactions for the previous year must be performed by a licensed Registered Municipal Accountant or by qualified employees of the Bureau of Financial Regulation and Assistance in the State Department of Treasury. The accounting firm of Donohue, Gironda & Doria, CPA’s was selected to fulfill this requirement, and a copy of the auditors’ report on the general-purpose financial statements and combining individual fund statements and schedules, is included in the financial section of this report. The audit, conforming to the Division’s “Requirements of Audit,” includes recommendations for improvement of the City’s financial procedures and must be filed with the Director of the Division, within six (6) months after the close of each fiscal year. The Clerk of the City must publish a synopsis of the audit report, together with all recommendations made, in a local newspaper within 30 days after receipt thereof.
Acknowledgments
The preparation of this report could not have been accomplished without the efficient and dedicated efforts of the staff of the Finance Department and City Clerk’s Office, the auditors for the City and its component units, and the cooperation of the various elected officials and appointed management. My sincere appreciation is extended to each individual for the contributions made in the preparation of this report.
Respectfully submitted,
Terrence Malloy Chief Financial Officer City of Bayonne
15 CITY OF BAYONNE ROSTER OF OFFICIALS December 31, 2012
Roster of Officials
Amount Name Title of Bond
Mark Smith Mayor
Terrence Ruane Council President / Councilmember At-Large Debbie Czerwienski Council Member At-Large Agnes Gillepsie First Ward Council Member Joseph Hurley Second Ward Council Member Raymond Greaves Third Ward Council Member
Stephen J. Gallo Business Administrator
Terrence Malloy Municipal Controller and Chief Financial Officer $150,000
Robert F. Sloan City Clerk
JoAnne Sisk Tax Collector $320,000
Janet Convery Treasurer / Comptroller $150,000
Joseph G. Nichols Tax Assessor
Joseph Waks Municipal Services Department Director
Jason O'Donnell Public Safety Director
Charles D'Amico Corporation Counsel
Frank T. Carpenter III Presiding Municipal Court Judge $150,000 Cheryl Scott Cashman Municipal Court Judge $150,000 Genevieve Michane Court Administrator
Gregory J. Rogers Fire Chief
Ralph Scianni Effective September 6, 2012
Gary Chmielewski Director of Public Works, Parks and Recreation
The City also carries the following coverage: Government Crime - Employee Theft coverage of $1,000,000 per occurrence. Public Entity Management Liability coverage, including Public Official’s Liability and Employment Practices Liability coverages, in the amount of $3,000,000.
16
FINANCIAL SECTION
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DONOHUE, GIRONDA & DORIA Certified Public Accountants
Matthew A. Donohue, CPA 310 Broadway Linda P. Kish, CPA, RMA Robert A. Gironda, CPA Bayonne, NJ 07002 Tammy L. Zucca, CPA Robert G. Doria, CPA (N.J. & N.Y.) Mark W. Bednarz, CPA, RMA Frederick J. Tomkins, CPA, RMA (201) 437-9000 Fax: (201) 437-1432 E-Mail: [email protected]
INDEPENDENT AUDITOR’S REPORT
The Honorable Mayor and Members of the City Council City of Bayonne, New Jersey
Report on the Financial Statements
We have audited the accompanying financial statements – regulatory basis of the City of Bayonne, New Jersey (the “City”), which comprise the combined balance sheets – regulatory basis, of each fund and account group as of December 31, 2012 (with comparative totals as of December 31, 2011), the related statement of revenues, expenditures and changes in fund balance – regulatory basis, of the Current Fund, General Capital Fund and Parking Utility Operating and Capital Funds, for the year ended December 31, 2012 (with comparative totals for the transition year ended December 31, 2011), and the related statement of revenues, expenditures and changes in fund balance – regulatory basis – budget and actual, of the Current Fund and Parking Utility Operating Fund for the year ended December 31, 2012 (with comparative totals for the transition year ended December 31, 2011), 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
Management is responsible for the preparation and fair presentation of these financial statements in accordance with the financial reporting provisions of the Division of Local Government Services, Department of Community Affairs, State of New Jersey (the “Division”). Management is also responsible for 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 error or fraud.
Auditor’s Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America, audit requirements prescribed by the Division and the standards applicable to the financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.
17 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 City’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City’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.
Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles
As described in Note A, the financial statements are prepared by the City on the basis of the financial reporting provisions of the Division, which is a basis of accounting other than accounting principles generally accepted in the United States of America, to comply with the requirements of the Division. The effects on the financial statements of the variances between the regulatory basis of accounting described in Note A and accounting principles generally accepted in the United States of America,
although not reasonably determinable, are presumed to be material.
Adverse Opinion on U.S. Generally Accepted Accounting Principles
In our opinion, because of the significance of the matter discussed in the “Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles” paragraph, the financial statements referred to in the first paragraph do not present fairly, in accordance with accounting principles generally accepted in the United States of America, the financial position of the City as of December 31, 2012 (with comparative totals as of December 31, 2011), or the changes in its financial position for the years then ended.
Opinion on Regulatory Basis Accounting
In our opinion, the financial statements referred to in the first paragraph present fairly, in all material respects, the financial position – regulatory basis, of each fund and account group of the City as of December 31, 2012 (with comparative totals as of December 31, 2011), and each fund’s respective revenues, expenditures and changes in fund balance – regulatory basis, and revenues, expenditures and changes in fund balance – regulatory basis – budget and actual, for the years then ended, on the basis of the financial reporting provisions of the Division as described in Note A.
18 Other Matters
Management’s Discussion and Analysis
Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis on pages 21 through 28 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 appropriate operational, economic, or historical context. This information is not required by the financial reporting provisions of the Division as described in Note A, however, it is allowable under the Division’s optional New Jersey Comprehensive Annual Financial Report (NJ-CAFR) reporting format. We have applied certain limited procedures to the management’s discussion and analysis 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 response to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
Other Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The introductory section, statistical section, schedule of expenditures of state financial assistance and schedule of expenditures of other financial assistance are presented for purposes of additional analysis and are not a required part of the basic financial statements. The supplementary data section and general section are presented for purposes of additional analysis as required by the Division. The schedule of expenditures of federal awards is presented for purposes of additional analysis as required by the U.S. Office of Management and budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. The supplementary data section, general section and schedule of expenditures of federal awards are also not required parts of the basic financial statements.
The supplementary data section, general section and schedule of expenditures of federal awards are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America and audit requirements prescribed by the Division. In our opinion, the supplementary data section, general section and schedule of expenditures of federal awards are fairly stated in all material respects in relation to the basic financial statements as a whole.
19 The introductory section, statistical section, schedule of expenditures of state financial assistance and schedule of expenditures of other financial assistance have not been subjected to the auditing procedures as applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated November 21, 2013, on our consideration of the City’s internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control over financial reporting and compliance.
Restriction on Use
This report is intended solely for the information and use of management, Mayor and City Council, others within the City, the Division and applicable federal and state awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
DONOHUE, GIRONDA & DORIA Certified Public Accountants
FREDERICK J. TOMKINS Registered Municipal Accountant #327
Bayonne, New Jersey November 21, 2013
20
MANAGEMENT DISCUSSION AND ANALYSIS
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CITY OF BAYONNE MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2012
This discussion and analysis of the financial performance of the City of Bayonne provides an overall review of the City’s financial activities for the year ended December 31, 2012. The intent of this discussion and analysis is to look at the City’s financial performance as whole. Readers should also review the basic financial statements and notes to enhance their understanding of the City’s financial performance.
OVERVIEW OF THE FINANCIAL STATEMENTS
The City uses accounting practices as prescribed by the State of New Jersey, Division of Local Government Services which defines the financial statements of a governmental unit to be presented on a modified accrual basis of accounting. The following financial statements offer financial information about the activities and operations of the City.
FINANCIAL HIGHLIGHTS
Key financial highlights for the year ended December 31, 2012 and the transition year ended December 31, 2011 are as follows:
• Fund balance in the Current Fund was $8,799,684 and $6,795,568, respectively, as of December 31, 2012 and 2011. The City’s Current Fund operations resulted in a net increase to fund balance of $2,004,116 for the year ended December 31, 2012 and a net decrease to fund balance of $4,305,054 for the transition year ended December 31, 2011.
• Total realized revenues and credits to income to the City’s Current Fund amounted to $221,194,792 for the year ended December 31, 2012 and $105,800,582 for the transition year ended December 31, 2011. Net of County, School and Special Improvement District taxes collected and non-revenue credits to income, realized revenues to the Current Fund amounted to $132,113,629 for the year ended December 31, 2012 and $60,293,034 for the transition year ended December 31, 2011.
• Budgeted Current Fund appropriations, net of cancellations, for the year ended December 31, 2012 and the transition year ended December 31, 2011 were $130,861,459 and $60,131,168, respectively. During the current year, appropriations that were not paid or charged and which remained from the adopted budget of the transition year ended December 31, 2011 lapsed to operations in the amount of $262,500. Unexpended budget appropriations from the budget of the year ended December 31, 2012 will not lapse to operations until the year ended December 31, 2013, but are set aside in the current year as appropriation reserves in the amount of $3,911,688.
21 CITY OF BAYONNE MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2012
FINANCIAL HIGHLIGHTS (continued)
• Included in the budgeted, or anticipated, revenues for the year ended December 31, 2012 and the transition year ended December 31 2011 is the amount to be raised by taxation in support of the municipal budget in the amounts of $76,634,839 and $38,472,589, respectively. In addition to the support of the local municipal budget, the City collected and was obligated to remit the following taxes to the appropriate agencies, as per the Hudson County Board of Taxation Abstract of Ratables and Taxes Added or Omitted for the year ended December 31, 2012 and the transition year ended December 31, 2011: local school district taxes in the amount of $28,574,165 and $13,438,484, respectively, County of Hudson taxes in the amount of $57,657,055 and $28,543,097, respectively and Special Improvement District taxes in the amount of $290,000 and $145,000, respectively.
• On January 1, 2012, the City added the Parking Utility Fund to the books and records of the City. Prior to this date, the entity operated as a separate corporate body named the Bayonne Parking Authority. Parking Utility Operating Fund balance at December 31, 2012 was $112,446, an increase of $66,632 over the opening fund balance of $45,814 upon transfer from the Bayonne Parking Authority.
• During the year ended December 31, 2012, the City’s Parking Utility Operating Fund realized total revenues of $1,396,221, or $1,347,184 net of non-revenue credits to income.
• Budgeted Parking Utility Operating Fund appropriations, net of cancellations, for the year ended December 31, 2012 was $1,315,626. During the current year, appropriations that were not paid or charged and which remained from the adopted budget of the transition year ended December 31, 2011 lapsed to operations in the amount of $-0-. As the Bayonne Parking Authority, records were maintained on accounting principles generally accepted in the United States of America, therefore no appropriation reserves were maintained. Unexpended budget appropriations from the budget of the year ended December 31, 2012 will not lapse to operations until the year ended December 31, 2013, but are set aside in the current year as appropriation reserves in the amount of $401,130.
22 CITY OF BAYONNE MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2012
BASIC FINANCIAL STATEMENTS
The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles and defines the financial statements of a governmental unit to be presented in accordance with accounting principles generally accepted in the United States of America (GAAP). The City presents the financial statements listed in the table of contents which are required by the Division of Local Government Services, Department of Community Affairs, State of New Jersey, herein referred to as the “Division”, and which differ from the financial statements required by GAAP. A description of funds and basis of accounting, including differences as compared to GAAP, can be found in Note A of the Notes to Financial Statements.
FINANCIAL POSITION AS A WHOLE
The following table is a summary of the assets, liabilities, reserves and fund balance for all funds of the City for the year ended December 31, 2012 and the transition year ended December 31, 2011.
Current Fund Parking Utility Fund (incl. State & Fed Grant Fund) Trust Fund General Capital Fund (Combined Operating and Capital) 2012 2011 2012 2011 2012 2011 2012 2011 Assets:
Cash and Cash Equivalents $ 35,667,669 $ 24,038,242 $ 6,515,747 $ 9,789,192 $ 2,155,022 $ 1,125,929 $ 1,805,011 $ 1,657,420 Investments - 3,500,000 ------Taxes and Liens Receivable 1,108,309 914,188 ------Property Acquired for Taxes at Assessed Valuation 6,474,000 8,599,000 ------Grants and Other Intergovernmental Receivables 17,402,448 18,888,519 2,734,729 2,565,086 1,118,347 1,118,347 - - Other Receivables 3,044,047 5,794,972 31,268 724,046 161,867 - 48,020 31,775 Unamortized Debt Issuance ------81,925 87,575 Deferred Charges 1,970,000 4,056,748 - - 212,528,767 224,203,151 - - Fixed Capital ------5,354,861 5,354,861 Fixed Capital Authorized and Uncompleted ------1,445,483 1,445,483
Total Assets $ 65,666,473 $ 65,791,669 $ 9,281,744 $ 13,078,324 $ 215,964,003 $ 226,447,427 $ 8,735,300 $ 8,577,114
Liabilities, Reserves and Fund Balance: Bonds, Notes and Loans Payable $ 15,000,000 $ 12,000,000 $ - $ - $ 212,168,907 $ 223,843,290 $ 3,335,000 $ 3,480,000 Other Liabilities and Special Funds 31,240,433 35,448,447 9,281,744 13,078,324 2,326,834 1,144,067 1,250,995 983,416 Improvement Authorizations - - - - 1,295,310 1,287,118 489,590 659,965 Reserve for Certain Receivables 10,626,356 11,547,654 ------Reserve for Amortization - - - - - 2,019,861 1,874,861 Reserve for Deferred Amortization - - - - - 1,445,483 1,445,483 Fund Balance 8,799,684 6,795,568 - - 172,952 172,952 194,371 133,389
Total Liabilities, Reserves and Fund Balance $ 65,666,473 $ 65,791,669 $ 9,281,744 $ 13,078,324 $ 215,964,003 $ 226,447,427 $ 8,735,300 $ 8,577,114
Bonds and Notes Authorized But Not Issued $ 359,860 $ 359,860
23 CITY OF BAYONNE MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2012
FINANCIAL POSITION AS A WHOLE
In addition to the funds noted in the chart on the preceding page, the City maintains a separate accounting of fixed assets in accordance with accounting practices prescribed by the Division. As of December 31, 2012 and 2011, the City has fixed assets, recorded at historical cost, of $90,350,992 and $86,380,829, respectively.
CURRENT FUND FINANCIAL ANALYSIS
Current Fund Expenditures and Charges by Function Year Ended December 31, Change Increase (Decrease) 2012 2011 (6 months) Dollar Percentage General Government $ 32,207,148 $ 14,294,926 $ 17,912,222 125.3 % Sanitation, Health and Welfare 6,370,300 3,069,000 3,301,300 107.6 Public Safety 41,458,000 20,210,500 21,247,500 105.1 Public Works, Parks and Recreation 7,444,500 3,846,945 3,597,555 93.5 Contingent, Deferred Charges & Statutory 12,902,800 942,206 11,960,594 1269.4 Shared Service Agreements 1,990,800 41,888 1,948,912 4652.7 Public and Private Programs 208,201 242,000 (33,799) (14.0) Other Special Items 3,554,199 1,997,889 1,556,310 77.9 Capital Improvements 1,615,000 - 1,615,000 Debt Service 22,310,511 14,758,814 7,551,697 51.2 Reserve for Uncollected Taxes 800,000 727,000 73,000 10.0 Total Budgeted Appropriations 130,861,459 60,131,168 70,730,291 117.6 Non-Budget Expenditures 3,082,997 1,872,887 1,210,110 64.6 Total Expenditures and Charges $ 133,944,456 $ 62,004,055 $ 71,940,401 116.0
Significant changes from the prior year, as identified above, are as follows:
• The chart above compares the expenditures and charges of a full year accounting period, 2012, to a six month transition year, July 1, 2011 through December 31, 2011, therefore, total expenditures and charges more than doubled.
• There were no capital improvements budgeted in the transition year.
• 2012 other special items includes a special emergency appropriation passed by ordinance to fund unforeseeable expenses related to Superstorm Sandy, so declared a State and Federal emergency.
• Contingent, Deferred Charges and Statutory Expenditures increased almost 14 times the transition year budgeted amount due to the timing of annual pension obligations. The public employees retirement system and police and fire retirement system payments are payable on April 1 of each year. Therefore, there were no costs due in the six month transition period.
24 CITY OF BAYONNE MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2012
CURRENT FUND FINANCIAL ANALYSIS (continued)
Current Fund Realized Revenues and Other Credits to Income by Source Year Ended December 31, Change Increase (Decrease) 2012 2011 Dollar Percentage Budgeted Operating Revenues: Fund Balance $ 695,000 $ 5,975,000 $ (5,280,000) (88.4) % Local Revenues 6,734,222 2,807,541 3,926,681 139.9 State Aid 9,429,879 8,961,605 468,274 5.2 Shared Service Agreements 208,201 136,576 71,625 52.4 Public and Private Programs 3,274,999 2,039,777 1,235,222 60.6 Other Special Items 33,648,318 1,174,400 32,473,918 2765.1 Delinquent Taxes 38,660 65,525 (26,865) (41.0) Local Tax for Municipal Purposes 76,038,435 39,095,801 36,942,634 94.5 Subtotal 130,067,714 60,256,225 69,811,489 115.9 Non-Budget Revenues 2,045,915 36,809 2,009,106 5458.2 Total Realized Revenues 132,113,629 60,293,034 71,820,595 Other Credits to Income 2,297,443 2,207,254 90,189 4.1 Lapsed Appropriation Reserves 262,500 1,173,713 (911,213) (77.6) Total Realized Revenues and Other Credits to Income $ 134,673,572 $ 63,674,001 $ 70,999,571 111.5
Significant changes from the prior year, as identified above, are as follows:
• The chart above compares the realized revenues and other credits to income of a full year accounting period, 2012, to a six month transition year, July 1, 2011 through December 31, 2011, therefore, total realized revenues and other credits to income more than doubled.
• State Aid increased modestly due to State regulations which allowed the City to recognize a full year of State Aid in the six month transition year.
• The lapse in appropriation reserves decreased significantly. This is because the reserve lapse is from the prior year budget appropriation. Therefore, the 2012 lapse is from the remaining transition year budget, whereas the lapse in the transition year is from the appropriations of the final full fiscal year ended June 30, 2011.
• The increase in Other Special Items of nearly 30-fold is due entirely to the timing of receipts as per the City’s agreement with the Bayonne Local Redevelopment Authority. The City received $30,500,000 in 2012 on the agreement, and $-0- in the transition year ended December 31, 2011.
• The use of surplus decreased due to management decisions of the City.
25 CITY OF BAYONNE MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2012
CURRENT FUND FINANCIAL ANALYSIS (continued)
A summary of the result of operations in the Current Fund, per the revenue and expenditure tables preceding, is as follows:
Results of Current Fund Operations Total Revenues $ 134,673,572 Less: Fund Balance Utilized as Budget Revenues 695,000 Total Revenues, Net of Fund Balance Utilized 133,978,572 Less: Total Expenditures and Charges 133,944,456 Results of Current Year Operations 34,116 Add: Emergencies to be Raised in Future Budgets 1,970,000 Fund Balance at December 31, 2011 6,795,568 Fund Balance at December 31, 2012 $ 8,799,684
ANALYSIS OF BUDGET VS. ACTUAL
The following table represents revenues anticipated and budgeted appropriations for the year ended December 31, 2012, as well as the actual results for all items budgeted. Non-budgeted revenues and expenditures are not included on the following table.
Comparison of Budget vs. Actual Budgeted Actual Variance Budg eted Approriations : Operations within "CAPS" $ 94,401,000 $ 91,268,552 $ 3,132,448 Operations excluded from "CAPS" Other Operations 7,951,748 7,300,558 651,190 Shared Service Agreements 208,201 88,201 120,000 Offset by Revenues - - - Public and Private Programs 3,574,999 3,566,949 8,050 Capital Improvements 1,615,000 1,615,000 - Debt Service 22,641,241 22,310,511 330,730 Deferred Charges - - - Judgments - - - Reserve for Uncollected Taxes 800,000 800,000 - $ 131,192,189 $ 126,949,771 $ 4,242,418 Appropriations Cancelled 330,730 - 330,730 $ 130,861,459 $ 126,949,771 $ 3,911,688 (1)
The item noted as “(1)” in the above budget table represent amounts “reserved”, or budgeted appropriations that will be available for expenditure in 2013. The difference between appropriations budgeted, before cancellations of $131,192,189 and anticipated revenues of $129,222,189 is the amount of emergency appropriations adopted during 2012 for Superstorm Sandy-related expenditures of $1,970,000.
26 CITY OF BAYONNE MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2012
ANALYSIS OF BUDGET VS. ACTUAL (continued)
Comparison of Budget vs. Actual Budgeted Actual Variance Anticipated Revenues: Fund Balance Utilized $ 695,000 $ 695,000 $ - Miscellaneous Revenue Anticipated 51,820,350 53,295,619 1,475,269 Receipts from Delinquent Taxes 72,000 38,660 (33,340) Local Tax for Municipal Purposes 76,634,839 76,038,435 (596,404) Total Anticipated Revenues $ 129,222,189 $ 130,067,714 $ 845,525
Miscellaneous revenue collections exceeded amounts anticipated by $845,525. Local revenues exceeded amounts anticipated by $1,149,456 and other special items realized exceeded budgeted amounts by $325,813. Major contributors included $449,222, $478,047 and $311,732 collected for fees and permits, Housing Authority PILOTs and parking tax, respectively, over the amounts anticipated to support the budget.
Collections of current taxes were short of budgeted amounts by $596,404.
MUNICIPAL DEBT ADMINISTRATION
The following table summarizes the changes in capital debt for the year ending December 31, 2012:
2012
Debt Issued and Outstanding $ 215,503,907 Authorized but not Issued 359,860 Total Debt Issued and Authorized but not Issued $ 215,863,767
The City’s outstanding debt consists of Bond Anticipation Notes of $19,401,338, School Promissory Notes of $7,546,166, General Capital Bonds of $98,608,429, School Bonds of $85,871,811, Parking Revenue Bonds of $3,335,000, Green Trust Loans of $343,564 and Demolition Loans of $397,599. All such debt is described in further detail in Note D of the notes to financial statements.
The City also has outstanding at December 31, 2012 Tax Anticipation Notes totaling $15,000,000. This classification of debt does not affect the City’s available Debt Margin.
27 CITY OF BAYONNE MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2012
MUNICIPAL DEBT ADMINISTRATION (continued)
In addition, the City still has on its books debt authorized but not issued of $359,860. The purpose of these authorizations are for various purposes, including fiscal year adjustment bonds, school improvements, acquisition of land, refunding tax appeals, demolition of unsafe buildings and various capital improvements.
COMPONENT UNITS
Had this report been prepared in conformity with GAAP, the financial statements of the Bayonne Board of Education, Bayonne Housing Authority, Bayonne Municipal Utilities Authority and Bayonne Local Redevelopment Agency would have been discretely presented with the financial statements of the City, the primary government or oversight entity. These financial statements are prepared in accordance with accounting practices as prescribed by the Division and, accordingly, do not include the financial statements of its component units.
CONTACTING THE CITY’S CHIEF FINANCIAL OFFICER
This financial report is designed to provide the citizens and taxpayers of the City of Bayonne with a general overview of the City’s finances and to demonstrate the City’s accountability for the appropriations it budgets and grants, state aid and taxes levied that it receives. If you have any questions about this report or need additional information, you may contact the Chief Financial Officer at 630 Avenue C, Bayonne, New Jersey, 07002 or at (201) 858-6047.
28
BASIC FINANCIAL STATEMENTS
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CITY OF BAYONNE ALL FUND TYPES AND ACCOUNT GROUPS AS OF DECEMBER 31, 2012 (WITH COMPARATIVE TOTALS AS OF DECEMBER 31, 2011)
COMBINED BALANCE SHEETS - REGULATORY BASIS
Compartive Totals (2011 Restated) Federal and General General (Memorandum Only) Current State Grants Trust Capital Fixed Payroll Parking Utility Fund December 31, December 31, Fund Fund Funds (1) Fund Assets Agency Operating Capital 2012 2011 Assets: Cash and Cash Equivalents $ 35,667,669 $ - $ 6,515,747 $ 2,155,020 $ - $ 2,475 $ 577,923 $ 1,227,088 $ 46,145,922 $ 36,610,783 Investments ------3,500,000 Intergovernmental Receivables 3,438,533 ------3,438,533 3,357,695 Grants Receivable - 13,963,915 2,734,729 1,118,347 - - - - 17,816,991 19,214,257 Other Receivables - - 31,268 - - - - - 31,268 122,196 Interfunds Receivable (Unreserved) - - - 161,867 - - - 48,020 209,887 4,394,131 Receivables with Full Reserves: Delinquent Property Taxes 562,173 ------562,173 402,491 Tax Title Liens 546,136 ------546,136 511,697 Property Acquired for Taxes at Assessed Valuation 6,474,000 ------6,474,000 8,599,000 Revenue Accounts Receivable 1,674,545 ------1,674,545 1,644,680 29 Interfunds Receivable 1,369,502 ------1,369,502 150,017 Other Receivables ------239,769 Unamortized Debt Issuance ------81,925 81,925 87,575 Deferred Charges 1,970,000 - - 212,528,767 - - - - 214,498,767 228,259,899 Fixed Capital ------5,354,861 5,354,861 5,354,861 Fixed Capital Authorized and Uncompleted ------1,445,483 1,445,483 1,445,483 Fixed Assets: Land - - - - 54,542,400 - - - 54,542,400 52,503,600 Building - - - - 10,233,265 - - - 10,233,265 10,273,265 Improvements - - - - 4,817,988 - - - 4,817,988 4,817,988 Machinery, Equipment and Other - - - - 20,416,310 - - - 20,416,310 18,785,976 Total Assets $ 51,702,558 $ 13,963,915 $ 9,281,744 $ 215,964,001 $ 90,009,963 $ 2,475 $ 577,923 $ 8,157,377 $ 389,659,956 $ 400,275,363
(1) Includes Animal Control Fund, Insurance Trust Fund, Tax Lien Redemption Fund, Housing and Urban Development Grant Fund and Other Trust Funds.
2011 totals were restated to include the Parking Utility Fund, which was added January 1, 2012.
See Accompanying Notes to Financial Statements CITY OF BAYONNE ALL FUND TYPES AND ACCOUNT GROUPS AS OF DECEMBER 31, 2012 (WITH COMPARATIVE TOTALS AS OF DECEMBER 31, 2011)
COMBINED BALANCE SHEETS - REGULATORY BASIS
Compartive Totals (2011 Restated) Federal and General General (Memorandum Only) Current State Grants Trust Capital Fixed Payroll Parking Utility Fund December 31, December 31, Fund Fund Funds (1) Fund Assets Agency Operating Capital 2012 2011 Liabilities, Reserves and Fund Balance: Current Liabilities and Reserves: Notes Payable $ 15,000,000 $ - $ - $ 26,947,504 $ - $ - $ - $ - $ 41,947,504 $ 41,643,210 Bonds Payable - Current Portion - - - 7,713,819 - - - 155,000 7,868,819 8,988,645 Loans Payable - Current Portion - - - 136,486 - - - - 136,486 135,032 Prepaid Taxes and Overpayments 4,204,738 ------4,204,738 3,407,765 Contracts and Accounts Payable 26,420 - 34,810 159,610 - - - - 220,840 526,313 Intergovernmental Payables: Bayonne Board of Education ------450,000 450,000 450,000 State of New Jersey 742 - 21,604 - - - - - 22,346 4,680,677 Other Payables and Accruals ------6,787 - 6,787 15,854 Taxes Payable: County of Hudson 50,832 ------50,832 1,304 30 Special Improvement Districts 83,169 ------83,169 72,500 Interfunds Payable - 1,143,001 725,597 49 - 2,475 48,267 - 1,919,389 4,544,148 Appropriation Reserves 3,911,688 - - - - - 401,130 - 4,312,818 2,950,599 Improvement Authorizations - - - 1,295,310 - - - 489,590 1,784,900 1,947,083 Reserve for: Encumbrances 746,613 2,724,240 - - - - 9,293 - 3,480,146 881,477 Other Expenditures 8,252,316 - 6,570,749 1,540,577 - - - 335,518 16,699,160 11,230,244 Grant Expenditures - 10,096,674 1,928,984 - - - - - 12,025,658 21,266,777 Retirement of Debt - - - 626,596 - - - - 626,596 626,596 Receivables and Other Assets 10,626,356 ------10,626,356 11,547,654 Noncurrent Liabilities: Loans Payable - - - 604,677 - - - - 604,677 741,163 Bonds Payable - - - 176,766,421 - - - 3,180,000 179,946,421 187,815,240 Total Liabilities and Reserves 42,902,874 13,963,915 9,281,744 215,791,049 - 2,475 465,477 4,610,108 287,017,642 303,472,281 Reserve for Amortization - - - - - 2,019,861 2,019,861 1,874,861 Reserve for Deferred Amortization - - - - - 1,445,483 1,445,483 1,445,483 Investments in Fixed Assets - - - - 90,009,963 - - - 90,009,963 86,380,829 Fund Balance 8,799,684 - - 172,952 - - 112,446 81,925 9,167,007 7,101,909 Total Liabilities, Reserves and Fund Balance $ 51,702,558 $ 13,963,915 $ 9,281,744 $ 215,964,001 $ 90,009,963 $ 2,475 $ 577,923 $ 8,157,377 $ 389,659,956 $ 400,275,363 Bonds and Notes Authorized But Not Issued $ 359,860 $ 359,860
(1) Includes Animal Control Fund, Insurance Trust Fund, Tax Lien Redemption Fund, Housing and Urban Development Grant Fund and Other Trust Funds.
2011 totals were restated to include the Parking Utility Fund, which was added January 1, 2012.
See Accompanying Notes to Financial Statements CITY OF BAYONNE ALL FUND TYPES AND ACCOUNT GROUPS FOR THE YEAR ENDED DECEMBER 31, 2012 (WITH COMPARATIVE TOTALS FOR THE TRANSITION YEAR ENDED DECEMBER 31, 2011) STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - REGULATORY BASIS
Current Fund General Capital Fund Parking Utility Fund (1) Transition Transition Operating Capital Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Dec. 31, 2012 Dec. 31, 2011 Dec. 31, 2012 Dec. 31, 2011 Dec. 31, 2012 Dec. 31, 2012 Revenue and Other Income Realized Fund Balance Utilized $ 695,000 $ 5,975,000 $ - $ - $ - $ - Miscellaneous Revenues Anticipated 53,295,619 15,119,899 - - 1,347,184 - Receipts from Delinquent Taxes 38,660 65,525 - - - - 31 Receipts from Current Taxes 162,559,655 81,222,382 - - - - Non-Budget Revenues 2,045,915 36,809 - - - - Other Credits to Income: Unexpended Balance of Appropriation Reserves 262,500 1,173,713 - - - - Improvement Authorizations Cancelled - - - 172,952 - - Prior Year Receivables Realized 1,884,449 1,683,206 - - - - Prior Year Interfunds Returned 150,017 28 - - - - Cancellation of Reserves - 14,017 - - - - Grant Adjustments - 395,825 - - - - Adjustment to County Tax Payable - 19,411 - - - - Sr. Citizens' and Veterans' Administrative Payments of Prior Years - 94,767 - - - - Other Credits to Income 262,977 - - - 49,037 - 221,194,792 105,800,582 - 172,952 1,396,221 -
See Accompanying Notes to Financial Statements CITY OF BAYONNE ALL FUND TYPES AND ACCOUNT GROUPS FOR THE YEAR ENDED DECEMBER 31, 2012 (WITH COMPARATIVE TOTALS FOR THE TRANSITION YEAR ENDED DECEMBER 31, 2011) STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - REGULATORY BASIS
Current Fund General Capital Fund Parking Utility Fund (1) Transition Transition Operating Capital Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Dec. 31, 2012 Dec. 31, 2011 Dec. 31, 2012 Dec. 31, 2011 Dec. 31, 2012 Dec. 31, 2012 Expenditures Budget and Emergency Appropriations: Operations: Salaries and Wages $ 52,223,800 $ 25,450,445 $ - $ - $ 610,000 $ -
32 Other Expenses 41,010,348 18,253,203 - - 595,000 - Deferred Charges & Statutory Expenditures 12,901,800 941,706 - - 111,000 - Capital Improvements 1,615,000 - - - - - Debt Service 22,310,511 14,758,814 - - (374) - Reserve for Uncollected Taxes 800,000 727,000 - - - - Special District Taxes 290,000 145,000 - - - - County Taxes 28,574,165 13,437,180 - - - - Amount Due County for Added and Omitted Taxes 50,832 1,304 - - - - Local District School Tax 57,606,223 28,543,097 - - - - Interfund Advances 1,369,502 150,017 - - 247 - Expenditures (continued) Revenue Accounts Receivable Reserved 1,674,545 1,644,680 - - - - Other Receivable Reserved - 63,697 - - - - Refund of Prior Year Revenues 1,872 5,538 - - - - Other Charges to Income 37,078 8,955 - - 13,716 5,650 220,465,676 104,130,636 - - 1,329,589 5,650
See Accompanying Notes to Financial Statements CITY OF BAYONNE ALL FUND TYPES AND ACCOUNT GROUPS FOR THE YEAR ENDED DECEMBER 31, 2012 (WITH COMPARATIVE TOTALS FOR THE TRANSITION YEAR ENDED DECEMBER 31, 2011) STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - REGULATORY BASIS
Current Fund General Capital Fund Parking Utility Fund (1) Transition Transition Operating Capital Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Dec. 31, 2012 Dec. 31, 2011 Dec. 31, 2012 Dec. 31, 2011 Dec. 31, 2012 Dec. 31, 2012
Excess in Revenue $ 729,116 $ 1,669,946 $ - $ 172,952 $ 66,632 $ - Deficit in Revenue - - - - - 5,650
33 Adjustments to Income before Fund Balance: Expenditures Included Above Which are by Statute Deferred Charges to Budget of Succeeding Year Special Emerg. Appropriation - Superstorm Sandy 1,970,000 - - - - - Statutory Excess to Fund Balance 2,699,116 1,669,946 - 172,952 66,632 - Fund Balance, Beginning 6,795,568 11,100,622 172,952 - 45,814 87,575 9,494,684 12,770,568 172,952 172,952 112,446 87,575 Decreased by: Utilized as Anticipated Revenue 695,000 5,975,000 - - - -
Fund Balance, Ending $ 8,799,684 $ 6,795,568 $ 172,952 $ 172,952 $ 112,446 $ 87,575
(1) The Parking Utility Fund was added effective January 1, 2012, therefore, the prior year statement of revenues, expenditures and changes in fund balance is not applicable and not available on the basis of accounting described in Note A to the financial statements.
See Accompanying Notes to Financial Statements CITY OF BAYONNE ALL FUND TYPES AND ACCOUNT GROUPS FOR THE YEAR ENDED DECEMBER 31, 2012 STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - REGULATORY BASIS - BUDGET VS. ACTUAL
Current Fund Parking Utility Operating Fund Modified Budget Actual Variance Modified Budget Actual Variance Revenue and Other Income Realized Fund Balance Utilized $ 695,000 $ 695,000 $ - $ - $ - $ - Miscellaneous Revenues Anticipated 51,820,350 53,295,619 1,475,269 1,644,000 1,347,184 (296,816) Receipts from Delinquent Taxes 72,000 38,660 (33,340) - - - Receipts from Current Taxes - Net of Taxes for County, School District and Special Improvement District 76,634,839 76,038,435 (596,404) - - -
34 Non-Budget Revenues - 2,045,915 2,045,915 - - - Other Credits to Income: Unexpended Balance of Appropriation Reserves - 262,500 262,500 - - - Prior Year Receivables Realized - 1,884,449 1,884,449 - - - Prior Year Interfunds Returned - 150,017 150,017 - - - Other Credits to Income - 262,977 262,977 - 49,037 49,037 $ 129,222,189 134,673,572 5,451,383 $ 1,644,000 1,396,221 (247,779) Expenditures Budget and Emergency Appropriations: Operations: Salaries and Wages $ 52,223,800 52,223,800 - $ 610,000 610,000 - Other Expenses 39,040,348 41,010,348 1,970,000 595,000 595,000 - Deferred Charges & Statutory Expenditures 12,901,800 12,901,800 - 111,000 111,000 - Capital Improvements 1,615,000 1,615,000 - - - - Debt Service 22,641,241 22,310,511 (330,730) 328,000 (374) (328,374) Reserve for Uncollected Taxes 800,000 800,000 - - - - 129,222,189 130,861,459 1,639,270 1,644,000 1,315,626 (328,374)
See Accompanying Notes to Financial Statements CITY OF BAYONNE ALL FUND TYPES AND ACCOUNT GROUPS FOR THE YEAR ENDED DECEMBER 31, 2012 STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - REGULATORY BASIS - BUDGET VS. ACTUAL
Current Fund Parking Utility Operating Fund Modified Budget Actual Variance Modified Budget Actual Variance Expenditures (continued) Interfund Advances $ - $ 1,369,502 $ 1,369,502 $ - $ 247 $ 247 Revenue Accounts Receivable Reserved - 1,674,545 1,674,545 - - - Other Receivables Reserved ------Refund of Prior Year Revenues - 1,872 1,872 - - - Other Charges to Income - 37,078 37,078 - 13,716 13,716
35 $ 129,222,189 133,944,456 4,722,267 $ 1,644,000 1,329,589 (314,411) Excess in Revenue $ 729,116 $ 729,116 $ 66,632 $ 66,632 Adjustments to Income before Fund Balance: Expenditures Included Above Which are by Statute Deferred Charges to Budget of Succeeding Year Special Emergency Appropriation - Superstorm Sandy 1,970,000 1,970,000 - - Statutory Excess to Fund Balance 2,699,116 2,699,116 66,632 66,632 Fund Balance, January 1 6,795,568 6,795,568 45,814 45,814 9,494,684 9,494,684 112,446 112,446 Less: Utilized as Anticipated Revenue 695,000 695,000 - - Fund Balance, December 31 $ 8,799,684 $ 8,799,684 $ 112,446 $ 112,446
See Accompanying Notes to Financial Statements
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NOTES TO FINANCIAL STATEMENTS
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CITY OF BAYONNE NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REPORTING ENTITY
The City of Bayonne (the “City”) is a general-purpose government that is governed by a separately elected governing body. It is legally separate and fiscally independent of other state and local governments. The City is organized as a Mayor – Council municipality under the provisions of N.J.S.A. 40:69A. The City is governed by an elected Mayor and Council, and by such other officers and employees as may be duly appointed. The Council consists of five members, two of which are elected at-large by voters of the City and serve a term of four years beginning on the first day of July next following their election. The Mayor is also elected directly by the voters of the City and also serves a term of four years beginning the first day of July following the election.
The financial statements of the City include every board, body, officer or commission supported and maintained wholly or in part by funds appropriated by the City, as required by N.J.S.A. 40A:5-5. The Governmental Accounting Standards Board (herein referred to as “GASB”) establishes criteria to be used to determine which component units should be included in the financial statements of the primary government (the City). The State of New Jersey, Department of Community Affairs, Division of Local Government Services (the “Division”) requires the financial statements of the City to be reported separately from its component units. If the provisions of GASB had been complied with, the financial statements of the following component units would have been discretely presented with the financial statements of the City:
Bayonne Board of Education Bayonne Housing Authority Bayonne Municipal Utilities Authority Bayonne Local Redevelopment Agency
Audit reports of the component units are available at the offices of each of the respective component units.
BASIS OF PRESENTATION
The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. GASB codification establishes three fund categories to be used by general purpose governmental units when reporting financial position and results of operations in accordance with accounting principles generally accepted in the United States of America (GAAP).
36 CITY OF BAYONNE NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
BASIS OF PRESENTATION (continued)
The financial statements of the City have been prepared in conformity with accounting principles and practices prescribed by the Division, which differ from GAAP. The principles and practices prescribed by the Division are designed primarily for determining compliance with legal provisions and budgetary restrictions and as a means of reporting on the stewardship of public officials with respect to public funds. Under this method of accounting, the City accounts for its financial transactions through the following separate funds and account group, which differ from the fund structure required by GAAP.
DESCRIPTION OF FUNDS
Current Fund - is used to account for all resources and expenditures for governmental operations of a general nature. The Federal and State Grant Fund is presented with the Current Fund.
Trust Funds - are used to account for receipts, custodianship and disbursement of dedicated revenues in accordance with the purpose for which each reserve was created, subject to available cash in each individual trust fund reserve established pursuant to state statutes or as an agent for individuals and other governmental agencies.
General Capital Fund - is used to account for the receipt and disbursement of funds for the acquisition of general capital facilities, other than those acquired in the Current Fund or other funds. Also included in this fund are bonds and notes payable offset by deferred charges to future taxation.
Parking Utility Fund – is used to account for operations and acquisition of capital facilities of the City owned Parking Utility. The Utility Operating Fund records revenues and expenditures applicable to the general operation of the program to provide parking management services in the City. The Utility Capital Fund is used to account for capital acquisitions and improvements used to support the City’s parking management functions, and the related debt issued to finance such acquisitions and improvements.
General Fixed Assets - is not a separate fund type, but is an account group used to account for all fixed assets of the City.
37 CITY OF BAYONNE NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
DESCRIPTION OF FUNDS (continued)
The accounts of the City are maintained in accordance with the Division’s principles of fund accounting to ensure observance of limitations and restrictions on the resources available. The Division’s principles of fund accounting require that resources be classified for accounting and reporting purposes into funds in accordance with activities or objectives specified for the resources. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues and expenditures. Resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled. The General Fixed Assets account group, on the other hand, is a financial reporting device designed to provide accountability for certain fixed assets and the investment in those fixed assets that are not recorded in the funds because they do not directly affect net expendable available financial resources.
BASIS OF ACCOUNTING
The City prepares its financial statements on a basis of accounting prescribed by the Division that demonstrates compliance with a modified accrual basis and the budget laws of the State of New Jersey, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America. The current financial resource focus and modified accrual basis of accounting is generally followed with significant exceptions which are explained as follows:
Revenues – Revenues are realized when received in cash except for certain amounts which are due from other governmental units. Receipts from Federal revenue sharing funds and other Federal and State grants are realized as revenue when anticipated in the budget. Receivables for property taxes and other amounts that are due to the City are recorded with offsetting reserves on the balance sheet of the Current Fund. Such amounts are not recorded as revenue until collected. Accordingly, no provision has been made to estimate that portion of receivables that are uncollectible. GAAP requires revenues to be recognized in the accounting period when they become measurable and available and in certain instances reduced by an allowance for doubtful accounts.
Reserve for Uncollected Taxes – Reserve for Uncollected Taxes is the minimum amount of which is determined on the percentage of collections experienced in the immediate preceding year. It is required to provide assurance that cash collected for taxes in the current year will provide sufficient cash flow to meet expected obligations. A Reserve for Uncollected Taxes is not established under GAAP.
38 CITY OF BAYONNE NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
BASIS OF ACCOUNTING (continued)
Expenditures – Expenditures are recorded on the “budgetary” basis of accounting. Generally, expenditures are recorded when an amount is encumbered for goods or services through the issuance of a purchase order in conjunction with the encumbrance accounting system. Appropriation reserves covering unexpended appropriation balances are automatically created at the end of each year and recorded as liabilities, except for amounts which may be canceled by the governing body. Appropriations for principal and interest payments on general capital indebtedness are provided on the cash basis. GAAP requires expenditures in the current (or general) fund, to be recognized in the accounting period in which the fund liability is incurred, if measurable, except for un-matured interest on general long-term debt, which should be recognized when due.
Encumbrances – Encumbrances are contractual orders outstanding at year end reported as expenditures through the establishment of an encumbrance payable. Outstanding encumbrances at year end are reported as a cash liability in the financial statements. Encumbrances do not constitute expenditures under GAAP.
Appropriation Reserves – Appropriations are available until lapsed at the close of the succeeding year to meet specific claims, commitments or contracts incurred during the preceding fiscal year. Transfers are allowed between certain line items during the first three months of the fiscal year. Lapsed appropriation reserves are recorded as other credits to income. Appropriation Reserves do not exist under GAAP.
Interfunds - Advances from the current fund are reported as interfunds receivable with offsetting reserves which are created by charges to operations. Income is recognized in the year the receivables are liquidated. Interfunds receivable in the other funds are not offset by reserves. GAAP does not require the establishment of an offsetting reserve.
Inventories of Supplies - The costs of inventories of supplies for all funds are recorded as expenditures at the time the individual items are purchased. The costs of inventories are not included on the various balance sheets. GAAP requires the cost of inventories to be reported as a current asset and equally offset by a fund balance reserve.
Property Acquired for Taxes – Property Acquired for Taxes is recorded in the current fund at the assessed valuation when such property was acquired and is subsequently updated for revaluations. The values of the properties are fully reserved. GAAP requires such property to be recorded as a fixed asset at market value on the date of acquisition.
39 CITY OF BAYONNE NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
BASIS OF ACCOUNTING (continued)
Deferred Charges to Future Taxation - Funded and Unfunded - Upon the authorization of general capital projects, the City establishes deferred charges for the costs of the capital projects to be raised by future taxation. Funded deferred charges relate to permanent debt issued, whereas unfunded deferred charges relate to temporary or non-funding of the authorized costs of capital projects. The City may levy taxes on all taxable property within the City to repay the debt. Annually, the City raises the debt requirements for that particular year in the current budget. As the funds are raised by taxation, the deferred charges are reduced. GAAP does not require the establishment of deferred charges to future taxation.
Fixed Capital and Fixed Capital Authorized and Uncompleted – The full amount of an authorized Utility Capital project or acquisition is recorded as Fixed Capital Authorized and Uncompleted, until that time when the authorized funds are used to purchase the acquisition or the capital project is completed, when it then is reclassified as Fixed Capital.
Reserve for Amortization and Deferred Amortization – The funded amount of authorized Utility Capital authorizations are recorded upon ordinance adoption as a Reserve for Deferred Amortization. Principal payments on bonds or pay-downs on notes issued to finance these authorizations are amortized to the reserve for amortization if the project is completed or the deferred amortization if the project is not completed. Upon the completion of capital projects or acquisition of capital assets authorized, the reserve for deferred amortization is reclassified as reserve for amortization.
Compensated Absences and Post-Employment Benefits - Compensated absences for vacation, sick leave and other compensated absences are recorded and provided for in the annual budget in the year in which they are paid, on a pay-as-you-go basis. Likewise, no accrual is made for post-employment benefits, if any, which are also funded on a pay-as-you-go basis. GAAP requires that the amount that would normally be liquidated with expendable financial resources to be recorded as an expenditure in the operating funds and the remaining obligations be recorded as long-term obligations.
Improvement Authorizations – Improvement Authorizations in the general capital fund represent the unexpended balance of an ordinance appropriation and is similar to the unexpended portion of the budget in the current fund. GAAP does not recognize these amounts as liabilities.
40 CITY OF BAYONNE NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
BASIS OF ACCOUNTING (continued)
General Fixed Assets - Accounting for Governmental Fixed Assets as promulgated by the Division differs in certain respects from GAAP, and requires the inclusion of a statement of general fixed assets as part of the City’s basic financial statements.
Fixed assets used in governmental operations (general fixed assets) are accounted for in an account group identified as “General Fixed Assets” and are not included within the records of any fund types. Purchases from these funds for fixed assets are recorded as expenditures within the fund. Public domain (infrastructure) general fixed assets consisting of certain improvements, other than improvements to buildings, such as improvements to roads, bridges, curbs and gutters, streets and sidewalks and drainage systems, are not capitalized.
All fixed assets, except land, are valued at historical cost or estimated historical cost if actual historical cost is not available. Expenditures for construction in progress are recorded in the Capital Fund against authorizations under which the project was approved until such time as the construction is completed and put into operation.
The City is required to maintain a subsidiary ledger of detailed records of fixed assets and to provide property management standards to control fixed assets. General fixed assets are defined as non- expendable personal property having a physical existence, a useful life of more than five years and an acquisition cost of $5,000 or more per unit.
Fixed assets acquired through grants in aid or contributed capital have not been accounted for separately.
No depreciation has been provided in the financial statements.
GAAP requires the recording of infrastructure assets and requires capital assets be depreciated over their estimated useful life unless they are either inexhaustible or are infrastructure assets reported using the modified approach.
Use of Estimates - The preparation of financial statements requires management to make estimates and assumptions that affect: the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
41 CITY OF BAYONNE NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
BASIS OF ACCOUNTING (continued)
Cash and Investments - New Jersey governmental units are required to deposit public funds in a public depository. Public depositories are defined by statutes as any State or federally chartered bank, savings bank or an association located in New Jersey or a state or federally chartered bank, savings bank or an association located in another state with a branch office in this State, the deposits of which are insured by the Federal Deposit Insurance Corporation (“FDIC”) and which receives or holds public funds on deposit, but does not include deposits held by the State of New Jersey Cash Management Fund. N.J.S.A. 40A:5-15.1 provides a list of securities which may be purchased by New Jersey municipal units.
The City is also required to annually adopt a cash management plan and to deposit or invest its funds pursuant to the cash management plan. The cash management plan adopted by the City requires it to deposit funds as permitted in N.J.S.A 40:5-15.1, so long as the funds are deposited in public depositories protected from loss under the provisions of the Governmental Unit Deposit Protection Act (GUDPA). GUDPA was enacted in 1970 to protect governmental units from a loss of funds on deposit with a failed banking institution in New Jersey and requires all public depositories pledge collateral, having a market value of five percent of the average daily balance of collected public funds, to secure the deposits of governmental units. If a public depository fails, the collateral it has pledged, plus the collateral of all other public depositories in the collateral pool, is available to pay the full amount of their deposits to the governmental units.
In 2009, legislation revised GUDPA to provide higher levels of security and oversight appropriate to contemporary banking conditions. Among the increased protections and oversight, the revised GUDPA ensures a common level of deposit risk by each bank choosing to accept local government deposits, requires banks to fully collateralize deposits over $200 million, implements enforcement protocol which allows the Department of Banking and Insurance to institute risk-based collateral requirements promptly when a bank shows signs of stress, provides enhanced oversight by the Department of banking and insurance and permits GUDPA certificates to be provided through an online system.
Cash Equivalents include certificate of deposits with a maturity date of less than three (3) months.
Also see Note B - Cash and Cash Equivalents.
42 CITY OF BAYONNE NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
BASIS OF ACCOUNTING (continued)
Budgets and Budgetary Accounting - An annual budget is required to be adopted and integrated into the accounting system to provide budgetary control over revenues and expenditures. Budget amounts presented in the accompanying financial statements represent amounts adopted by the City and approved by the Division in accordance with the Local Budget Law. Budgets are adopted on the same basis of accounting utilized for the preparation of the City’s financial statements. The budgetary requirements herein outlined are applicable to only the Current Fund, and not the Trust Fund, General Capital Fund or the General Fixed Assets account group. However, statutes require the City to adopt annually a six-year capital plan. This plan allows the governing body to expend or incur obligations for capital purposes only. Such projects under the plan must be adopted through capital ordinance.
The City must adhere to procedures for adoption of its annual budget as established by the Division. As described in more detail later in this section, the City will revert to a Calendar Year beginning in 2012. As such, going forward, these procedures include statutory deadlines of: February 20 for introduction and approval and March 20 for adoption. The current period under audit known as the Transition Year was subject procedures for adoption applicable only to the one-time Transition Year. These dates are subject to extension by the Division by approval of the Local Finance Board. Appropriations within the adopted budget cannot be modified until the final two months of the year at which time transfers between certain line items are allowed. Under certain circumstances emergency authorizations and insertions of items of revenue and appropriation are allowed by authorization of the governing body, subject to approval of the Division.
The City must prepare its budgets in compliance with applicable laws capping the amounts by which both the budgeted appropriations and tax levy can be increased. A description of both “CAPS” follows:
1977 Appropriation "CAP": The 1977 Appropriation Cap is calculated using the formulas and provisions of N.J.S.A. 40A:4-45.1 through 4-45.43a. The law was originally adopted in 1976 and was most recently amended in 2003. Under this law, the City is permitted to increase its overall appropriations (with certain exceptions) by 2.5% or the “cost of living adjustment” (COLA), whichever is less. The COLA is calculated based on the traditional federal government inflation calculation. The City can, when the COLA is less than or equal to 2.5%, increase its allowable inside-the-cap spending to 3.5%, upon passage of a COLA Rate Ordinance. During the six month transition year ended December 31, 2011, this Cap was modified to limit appropriations to half of 95%-125% of the budget of the fiscal year ended June 30, 2011, except whereas otherwise approved by the Division.
43 CITY OF BAYONNE NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
BASIS OF ACCOUNTING (continued)
2010 Levy "CAP": The 2010 Levy Cap is calculated using the formulas and provisions of N.J.S.A 40A:4-45.44 through 45.47. It establishes limits on the increase in the total City amount to be raised by taxation (tax levy). The core of the levy cap formula is a 2% increase to the previous year’s amount to be raised by taxation, net of any applicable cap base adjustments and emergency or special emergency appropriations. During the six month transition year ended December 31, 2011, this Cap was modified to limit the levy to 95% - 105% of the levy of the fiscal year ended June 30, 2011.
Long-Term Obligations - General long-term debt is recognized as a liability of the General Capital Fund for the full amount.
Reserves (Other than Reserve for Receivables) - Reserves, other than reserves for receivables, are considered liabilities, and not as a reservation of fund balance.
Reserves for Receivables – Receivables of the City, with the exception of certain intergovernmental receivables, are offset on the balance sheet with a credit that is created to preserve the revenue recognition basis required by the Division’s accounting policies. The reserve delays the recognition of these revenues until they are received in cash.
Advertising Costs - Advertising costs are charged against the appropriate budget line as they occur. The City does not engage in direct-response advertising.
Sale of Municipal Assets - The proceeds of the sale of municipal assets can be held until made available through a future budget appropriation. GAAP requires such proceeds to be recorded as revenue in the year of sale.
Fund Balance - Fund equity represented on the financial statements consists solely of Fund Balance, which is not further categorized with respect to reservations (portions of fund equity not available for appropriation for expenditure or legally segregated for a specific future use) or designations (plans for future use of financial resources).
44 CITY OF BAYONNE NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
BASIC FINANCIAL STATEMENTS
The GASB Codification also requires the financial statements of a governmental unit to be presented in the general purpose financial statements to be in accordance with GAAP. The City presents the financial statements listed in the table of contents which are required by the Division and which differ from the financial statements required by GAAP.
Total Columns on Combined Statements - Total columns are captioned “memorandum only” to indicate that they are presented only to facilitate financial analysis. Data in these columns do not present financial position, results of operations, or changes in financial position in conformity with accounting principles generally accepted in the United States of America. Neither is such data comparable to a consolidation. Interfund eliminations have not been made in the aggregation of this data.
Comparative Data - Comparative data for the prior year has been presented in the accompanying financial statements in order to provide an understanding of changes in the City’s financial position and operations. Comparative data is not presented in all statements because their inclusion would make certain statements unduly complex and difficult to understand.
Reclassifications - Certain reclassifications have been made to the prior year financial statement presentation to correspond to the current year’s format. These reclassifications had no effect on fund balance or changes in fund balance.
On January 1, 2012, the Parking Utility Fund was added to the City’s books and records. Additional reclassifications were made to the 2011 column of the combined balance sheet to account for the fund and to prevent the financial statements from being misleading.
Reconciliation of Accounting Basis - As described throughout Note A, substantial differences exist between GAAP and the budgetary basis prescribed by the Division. Reconciliation between the two would not be meaningful or informative and therefore is not provided herein.
45 CITY OF BAYONNE NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
REPORTING PERIOD
The City has authorized changing its fiscal year from a year ended June 30 to a year ended December 31. In order to revert to a calendar year accounting period, the Division requires a six month “transition year” of the period of time between the end of the City’s final fiscal year and first calendar year. The City’s final state fiscal year reporting period ended June 30, 2011, and its first calendar year is 2012, the current year under audit. The interim six month period, July 1, 2011 to December 31, 2011, was known as the City’s “transition year”, and is included as comparative information in the basic financial statements.
COMPREHENSIVE ANNUAL FINANCIAL REPORT
The City has elected to utilize the Comprehensive Annual Financial Report (“CAFR”) format for presentation of its audited financial statements. Where necessary, this format was modified to comply with reporting requirements prescribed by the Division. Some of the differences not already noted in the previous sections are described as follows:
All funds are reported as major. No distinction between major and non-major funds is required by the Division, therefore related information such as combining statements are not required. GAAP requires this distinction. No government-wide statements as required under GAAP are presented, instead, combined statements of fund types and account groups are presented which better represents the basis of account prescribed by the Division.
Certain information, including pension and other post-employment benefits, typically required by GAAP to be included in a “Required Supplementary Information” section is instead included in the Notes to Financial Statements.
The City’s CAFR includes a section titled supplementary information. This section incorporates budgetary comparison schedules similar to those required by GAAP, but also includes other detailed schedules which comply with accounting practices prescribed by the Division.
46 CITY OF BAYONNE NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE B. CASH, CASH EQUIVALENTS AND INVESTMENTS
DEPOSITS
Cash and cash equivalents on deposit as of the year ended December 31, 2012 and the transition year ended December 31, 2011 are partially insured by the FDIC up to $250,000 for each depository. Deposits in excess of FDIC limits, as noted below, are entirely insured or collateralized by a collateral pool maintained by public depositories as required by the GUDPA (see Note A - Cash and Investments) or are on deposit with the MBIA Government Investment Pool, New Jersey Asset and Rebate Management Program (NJARM) and New Jersey Cash Management Fund.
Custodial Credit Risk - Custodial credit risk is the risk that, in the event of a bank failure, the City will not be able to recover deposits or collateral securities that are in the possession of an outside party. The City does not have a deposit policy for custodial credit risk. Deposits are exposed to custodial credit risk if they are not covered by depository insurance and the deposits are:
a. Uncollateralized. b. Collateralized with securities held by the pledging financial institution. c. Collateralized with securities held by the pledging financial institution’s trust department or agent but not in the City’s name.
As of December 31, 2012, 43.9% of the City’s deposits were with one financial institution and 38.4% with another, for a total of 82.3% of the City’s deposits with two financial institutions. The City’s deposits of cash and cash equivalents at December 31, 2012 are summarized in the following table.
Insured - FDIC $ 1,158,185 Insured - GUDPA 43,023,790 MBIA Government Investment Pool 2,771,687 New Jersey Asset and Rebate Management Program 3,256 New Jersey Cash Management Fund 5,789 $ 46,962,707
Under GUDPA, financial institutions are not required to pledge collateral for amounts covered by FDIC insurance. For the period of December 1, 2010 to December 31, 2012, noninterest-bearing transaction accounts are insured by the Dodd-Frank Deposit Insurance Provision of the FDIC. The amount noted as “GUDPA Insured” above includes deposits covered by the Dodd-Frank Provision as well as GUDPA.
Foreign Currency Risk - Foreign currency risk is the risk that changes in exchange rates will adversely affect deposits. None of the City’s deposits as of December 31, 2012 are known to be held in foreign currency.
47 CITY OF BAYONNE NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE B. CASH, CASH EQUIVALENTS AND INVESTMENTS (continued)
INVESTMENTS
New Jersey statutes permit the City to purchase the following types of securities when authorized by the cash management plan (described in note A): . Bonds or other obligations of the United States of America or obligations guaranteed by the United States of America. . Government money market mutual funds. . Any obligation that a federal agency or a federal instrumentality has issued in accordance with an act of Congress, which security has a maturity date not greater than 397 days from the date of purchase, provided that such obligation bears a fixed rate of interest not dependent on any index or other external factor. . Bonds or other obligations of the local unit or bonds or other obligations of school districts of which the local unit is a part or within which the school district is located. . Bonds or other obligations having a maturity date not more than 397 days from the date of purchase, approved by the Division of Investment of the Department of the Treasury for investment by local units. . Local government investment pools. . Deposits with the State of New Jersey Cash Management Fund. . Agreements for the repurchase of fully collateralized securities if (a) the underlying securities are permitted investments pursuant to the first and third bullets of this section, (b) the custody of collateral is transferred to a third party, (c) the maturity of the agreement is not more than 30 days, (d) the underlying securities are purchased through a public depository and (e) a master repurchase agreement providing for the custody and security of collateral is executed.
Custodial Credit Risk - In the case of investments, custodial credit risk is the risk that, in the event of failure of the counterparty, the City will not be able to recover the value of its investments or collateral securities in the possession of an outside party. Investments are exposed to custodial credit risk if they are uninsured, are not registered in the City’s name and are held by either the counterparty or its trust department or agent, but not in the City’s name.
Foreign Currency Risk - Investments are also exposed to the same foreign currency risk as deposits. It is the risk that changes in exchange rates will adversely affect investments. The City does not have any investments known to be denominated in foreign currency as of December 31, 2012 and 2011.
48 CITY OF BAYONNE NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE B. CASH, CASH EQUIVALENTS AND INVESTMENTS (continued)
INVESTMENTS (continued)
Interest Rate Risk – Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. The City does not have a formal investment policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates.
Credit Risk – Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The City does not have an investment policy regarding the management of credit risk.
Concentration of Credit Risk - The City places no formal limit on the amount it may invest in any one issuer. New Jersey Statutes limit municipal investments to those specified, and as summarily identified in the first paragraph of the “Investments” section of this Note. Currently, the City’s only investments consist of deposits in the MBIA Government Investment Pool, the NJARM Program, the New Jersey Cash Management Fund and Temporary Funding Notes of the Bayonne Municipal Utilities Authority.
The City’s investments at December 31, 2012 are presented as follows:
Investment Maturities (in Years) Investment Type Fair Value* < 1 1 - 5 6 - 10 > 10
Government Investment Pools $ 2,780,732 $ 2,780,732 $ - $ - $ -
$ 2,780,732 $ 2,780,732 $ - $ - $ -
* Short-term investments are carried at cost, which approximates fair value.
Government Investment Pools investments consist of investments in the New Jersey Cash Management Fund, NJARM Program and MBIA Government Investment Pool. Because of their liquidity, these investments are classified as cash and cash equivalents on the financial statements of the City.
The above investments are described in more detail in the pages that follow.
49 CITY OF BAYONNE NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE B. CASH, CASH EQUIVALENTS AND INVESTMENTS (continued)
INVESTMENTS (continued)
New Jersey Cash Management Fund - All investments in the New Jersey Cash Management Fund are governed by the regulations of the State Investment Council, which prescribe specific standards designed to insure the quality of investments and to minimize the risks related to investments. In addition to the Investment Council regulations, the Division of Investment sets further standards for specific investments and monitors the credit of all eligible securities issues on a regular basis. In all the years of the Division of Investment’s existence, it has never suffered a default of principal or interest on any short-term security held by it due to the bankruptcy of a securities issuer; nevertheless, the possibility always exists, and for this reason a reserve is being accumulated in the New Jersey Cash Management Fund as additional protection for the other-than-State participants, which includes the City. The City does not own specific identifiable securities, but instead has a net realizable interest in the joint value of the fund. There is no credit rating available for the New Jersey Cash Management Fund. As of December 31, 2012 and 2011, the City had balances of $5,789, and $1,341,532, respectively, in the New Jersey Cash Management Fund. These balances represent less than 1% and 3.4%, respectively, of total deposits and investments at December 31, 2012 and 2011.
MBIA Municipal Investors Service Corporation – The State of New Jersey provides oversight for this government investment pool, whereas all securities purchased are required to be in compliance with New Jersey State Statutes and held in a third party custody account. MBIA uses the amortized cost method of reporting investments. The City does not own specific, identifiable securities, but instead has a net realizable interest in the joint value of the pool. There is no credit rating available for the MBIA government investment pool. As of December 31, 2012 and 2011, the City had balances of $2,771,687 and $4,859,453, respectively, in the MBIA Government Investment Pool. These balances represent 5.9% and 12.2%, respectively, of total deposits and investments at December 31, 2012 and 2011.
New Jersey Asset and Rebate Management Program – The NJARM is a financial organization created exclusively for New Jersey local governments. The Program was designed to help achieve excellence in the governmental unit’s investment program. Created as a joint investment trust under the Interlocal Services Act, NJARM provides participants with investment and arbitrage compliance services for both bond proceeds and general operating funds. There is no credit rating available for the NJARM. As of December 31, 2012 and 2011, the City had balances of $3,255 and $3,254, respectively, in the NJARM Program. These balances represent less than 1%, each year, of total deposits and investments at December 31, 2012 and 2011.
50 CITY OF BAYONNE NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE B. CASH, CASH EQUIVALENTS AND INVESTMENTS (continued)
INVESTMENTS (continued)
Notes of the Bayonne Municipal Utilities Authority – The City entered into an agreement to purchase $4,000,000 of “Authority Temporary Funding Notes” of the Bayonne Municipal Utilities Authority (BMUA). There is no credit rating available for the BMUA Notes. The BMUA is a component unit of the City. The BMUA paid these notes in full in accordance with the terms of maturity noted as follows:
Description Purchase Date Maturity Date Interest Rate Amount
Sewer System, Series 2010 January 11, 2011 January 10, 2012 2.00%$ 1,968,750
Water System, Series 2010A January 11, 2011 January 10, 2012 2.00% 1,531,250 $ 3,500,000
As of December 31, 2012 and 2011, the City had investments of $-0- and $3,500,000, respectively, in BMUA Notes, which represented -0-% and 8.8%, respectively, of the City’s total deposits and investments for the years then ended.
Money Market Accounts – As of December 31, 2012, the City’s Parking Utility Fund invested $1,227,088 in FDIC-insured money market “buckets”. Due to their liquidity, these funds are considered cash and cash equivalents on the City’s financial statements.
NOTE C. PROPERTY TAXES
PROPERTY TAX CALENDAR
Property tax revenues are collected in quarterly installments due February 1, May 1, August 1 and November 1. Property taxes unpaid on April 1 of the year following their final due date are subject to tax sale in accordance with State statutes. The amount of tax levied includes not only the amount required in support of the City’s annual budget, but also the amounts required in support of the budget of the entities that follow:
School Taxes - The City is responsible for levying, collecting and remitting school taxes for the local school district. Monies are forwarded to the school district monthly. Operations is charged for the full amount due to operate the local school district, and is based upon the annual County certification of apportionment of levies. As of December 31, 2012 and 2011, the City had no school taxes payable. The school tax levy collected by the City during the year ended December 31, 2012 and the transition year ended December 31, 2011, amounted to $57,657,055 and $28,543,097, respectively.
51 CITY OF BAYONNE NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE C. PROPERTY TAXES (continued)
PROPERTY TAX CALENDAR (continued)
County Taxes - The City is responsible for levying, collecting and remitting county taxes for the County of Hudson. Operations is charged for the amount due the County for the year, based upon the ratables required to be certified to the County Board of Taxation by January 10 of the current year. Monies are forwarded to the County on a quarterly basis. In addition, operations is charged for the County share of Added and Omitted Taxes certified to the County Board of Taxation by October 10 of the current year, and due to be paid to the County by February 15 of the following year. As of December 31, 2012 and 2011, the City had County taxes payable of $50,832 and $1,304, respectively. The total County tax levied to City taxpayers during the year ended December 31, 2012 and the transition year ended December 31, 2011 amounted to $28,574,165 and $13,438,484, respectively.
Special Improvement District - The City is responsible for levying, collecting and remitting Special Improvement District (SID) taxes. The SID taxes are derived from assessments made upon the members within the SID and billed through the quarterly property tax bills as noted above. Monies are forwarded to the SID on a quarterly basis. As of December 31, 2012 and 2011, the City had Special Improvement District taxes payable of $83,169 and $72,500, respectively. The amount of Special Improvement District Tax levied and collected by the City amounted to $290,000 and $145,000, respectively, during the year ended December 31, 2012 and the transition year ended December 31, 2011.
PROPERTY TAXES RECEIVABLE
Reserve for Uncollected Taxes - Reserve for Uncollected Taxes is a non-spending item of appropriation required by statute to be included in the City’s annual budget. This appropriation protects the City from taxes not paid currently by providing assurance that cash collected in the current year will provide sufficient cash flow to meet obligations as they become due. The minimum amount required to be appropriated in the budget is determined by the percentage of collections experienced in the immediate preceding year, unless the three-year average option is chosen. For the year ended December 31, 2012 and the transition year ended December 31, 2011, the budgeted reserve for uncollected taxes was $800,000 and $727,000, respectively.
52 CITY OF BAYONNE NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE C. PROPERTY TAXES (continued)
PROPERTY TAXES RECEIVABLE (continued)
Delinquent Taxes and Tax Title Liens - As described Note A, taxes receivable and tax title liens are realized as revenue when collected. Uncollected receivables are fully reserved, so no provision is made for the uncollectible portions of these taxes. As of December 31, 2012 and 2011, property taxes receivable were $562,173 and $402,491, respectively and tax title liens receivable were $546,136 and $511,697, respectively.
Property Acquired by Tax Title Lien Liquidation – In lieu of a traditional tax sale, the City once again conducted a bulk levy sale and sold the balance due of its tax levy for the fiscal year ended December 31, 2012 to a third party purchaser. The sale included all properties except those which were in bankruptcy or subject to an existing municipal lien. The City received the full value of the balance due plus a premium of $5,000. The City continues to collect the taxes and any interest due and forwards those amounts weekly to the purchaser. There were no additional properties acquired by tax title lien liquidation during the year ended December 31, 2012 and the transition year ended December 31, 2011. The value of properties acquired by tax title lien liquidation as of December 31, 2012 and 2011 was $6,474,000, each year.
Prepaid Taxes - Taxes collected in advance are recorded as cash liabilities in the financial statements. Prepaid taxes as of December 31, 2012 and 2011 were $571,935 and $552,064, respectively.
Tax Overpayments - Overpaid taxes collected during the year and due to taxpayers either as a refund or tax credit are recorded as cash liabilities in the financial statements. Tax overpayments as of December 31, 2012 and 2011 were $3,632,803 and $2,855,701, respectively.
NOTE D. MUNICIPAL DEBT
SUMMARY OF MUNICIPAL DEBT
The Local Bond Law governs the issuance of bonds to finance general municipal and utility capital expenditures. Most bonds are retired in serial installments within the statutory period of usefulness. Other bonds may be term bonds with sinking fund requirements. Bonds issued by the City are general obligation bonds, backed by the full faith and credit of the City. Bond Anticipation Notes, which are issued to temporarily finance capital projects, must be paid off within ten years or retired by the issuance of bonds.
53 CITY OF BAYONNE NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE D. MUNICIPAL DEBT (continued)
SUMMARY OF MUNICIPAL DEBT (continued)
School Debt (Included as Obligations of the City) - The City of Bayonne Board of Education is a Type I School District, as such, bonds and notes issued and authorized by the Board of Education are general obligations of the City. These obligations are accordingly reported on the balance sheet of the City’s General Capital Fund and are accordingly included in the summary of municipal debt.
At December 31, 2012 and 2011, the City’s statutory debt is summarized as follows:
SUMMARY OF MUNICIPAL DEBT Dec. 31, 2012 Dec. 31, 2011 Issued: General: Fiscal Year Adjustment Bonds $ 1,905,000 $ 2,490,000 General Serial Bonds 96,703,429 97,773,299 Green Acres Trust Loan 343,564 380,965 Demolition Loan 397,599 495,230 Bond Anticipation Notes 19,401,338 21,898,460 Self-Liquidating Purposes: Parking Revenue Bonds 3,335,000 - School: School Serial Bonds 85,871,811 93,060,586 School Promissory Notes 7,546,166 7,744,750 Gross Statutory Debt Issued 215,503,907 223,843,290
Less Statutory Deductions to Debt Limit: Bonds and Notes for School Purposes (93,417,977) (100,805,336) NJSA 40:2-52 Refunding Bonds - Pension Refunding (15,620,000) (15,720,000) Self-Liquidating Purposes (3,335,000) - Funds Held to Pay Bonds and Notes (626,596) (626,596)
Net Debt Issued 102,504,334 106,691,358
Authorized but not Issued: General: Fiscal Year Adjustment Bond Refunding 27,293 27,293 General Improvements 331,937 331,937 General Refunding Bonds - - School Improvements 630 630 Gross Authorized but not Issued 359,860 359,860
Less Statutory Deductions: Applicable for School Purposes (630) (630)
Net Debt Authorized but Not Issued 359,230 359,230
Net Bonds and Notes Issued and Authorized but not Issued $ 102,863,564 $ 107,050,588
54 CITY OF BAYONNE NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE D. MUNICIPAL DEBT (continued)
SUMMARY OF MUNICIPAL DEBT (continued)
In addition to the capital debt shown in the preceding schedule, the City had additional debt which, in accordance with statutes, is not included as part of the City’s statutory debt position. All such debt is recorded in the Current Fund and is as follows:
Issued: Current Fund - Tax Anticipation Notes $ 15,000,000 $ 12,000,000
The City’s long-term debt is summarized below:
Transfer from Balance Parking Balance Due by Dec. 31, 2011 Authority Retirements Dec. 31, 2012 Dec. 31, 2013
General Capital Fund: Fiscal Year Adjustment Bonds $ 2,490,000 $ - $ 585,000 $ 1,905,000 $ 605,000 General Serial Bonds 97,773,299 - 1,069,870 96,703,429 1,070,218 School Serial Bonds 93,060,586 - 7,188,775 85,871,811 6,038,601 Green Acres Trust Loan 380,965 - 37,401 343,564 38,153 Demolition Loan 495,230 - 97,631 397,599 98,333
Parking Utility Capital Fund: Parking Revenue Bonds - 3,480,000 145,000 3,335,000 155,000
$ 194,200,080 $ 3,480,000 $ 9,123,677 $ 188,556,403 $ 8,005,305
Debt Refunding
During the year ended December 31, 2012, the City renewed or refunded School Promissory Notes and Bond Anticipation Notes, the proceeds of which were used to pay the principal of the maturing notes less statutory minimum payments appropriated through the Current Fund budget. School Promissory Notes and Bond Anticipation Notes are more fully discussed herein.
55 CITY OF BAYONNE NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE D. MUNICIPAL DEBT (continued)
SUMMARY OF MUNICIPAL DEBT (continued)
Qualified Bonds
Certain bonds of the City are issued pursuant to the Municipal Qualified Bond Act. Under this act, portions of State Aid revenues are withheld by the State of New Jersey and forwarded directly to paying agents for principal and interest payments of such bonds. The City is responsible to certify maturity schedules of the qualified bonds to the State. During the year ended December 31, 2012 and the transition year ended December 31, 2011, the State of New Jersey paid $7,142,081 and $4,414,856, respectively of qualified bond interest and principal maturities directly to paying agents on behalf of the City in lieu of State Aid.
BONDS PAYABLE
Fiscal Year Adjustment Refunding Bonds Payable
The City has outstanding at December 31, 2012 a fiscal year adjustment refunding bond. The following table is a summary of the activity for such debt during the year ended December 31, 2012 and the short term liability for each issue:
Summary of Fiscal Year Adjustment Refunding Bond Activity Balance Balance Due by Description Dec. 31, 2011 Decrease Dec. 31, 2012 Dec. 31, 2013 Fiscal Year Adjustment Refunding Bonds Issued 4/1/2003 for $4,100,000 Maturing annually from 2009 to 2015 Bearing variable interest rates ranging from 4.0% to 5.0% $ 2,490,000 $ 585,000 $ 1,905,000 $ 605,000 $ 2,490,000 $ 585,000 $ 1,905,000 $ 605,000
56 CITY OF BAYONNE NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE D. MUNICIPAL DEBT (continued)
BONDS PAYABLE (continued)
General Serial Bonds Payable
The City has outstanding at December 31, 2012 various general serial bond debt issues. The following table is a summary of the activity for such debt during the year ended December 31, 2012 and the short term liability for each issue:
Summary of General Serial Bonds Activity Balance Balance Due by Description Dec. 31, 2011 Decrease Dec. 31, 2012 Dec. 31, 2013 Employee Retirement Incentive Refunding Bonds Issued 1/15/2003 for $15,795,000 Maturing annually from 2011 to 2033 Bearing variable interest rates ranging from 5.05% to 5.68% $ 15,720,000 $ 100,000 $ 15,620,000 $ 150,000 Capital Appreciation Bonds Issued 7/3/2003 for $6,123,000 Maturing annually from 2011 to 2023 Bearing variable interest rates ranging from 3.55% to 5.17% 5,613,299 494,870 5,118,429 475,218 Hudson County Improvement Authority Issued 10/24/2008 for $10,000,000 Maturing annually from 2011 to 2025 Bearing an interest rates of 7.5% 9,000,000 350,000 8,650,000 315,000 General Improvement Infrastructure Bond Issued 6/24/2009 for $67,625,000 Maturing annually from 2010 to 2039 Bearing variable interest rates ranging from 4.0% to 5.75% 67,440,000 125,000 67,315,000 130,000 $ 97,773,299 $ 1,069,870 $ 96,703,429 $ 1,070,218
In a prior year, the City elected to participate in the Early Retirement Incentive (ERI) Program for employees covered by PERS, PFRS and TPAF. On February 6, 2003, the City issued Federally Taxable Pension Refunding Bonds, Series 2003, in the amount of $15,795,000, the proceeds of which were used to pay the pension liabilities. These bonds are included in the above general serial bonds payable.
57 CITY OF BAYONNE NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE D. MUNICIPAL DEBT (continued)
BONDS PAYABLE (continued)
School Serial Bonds Payable
The City has outstanding at December 31, 2012 various school serial bond debt issues. The following table is a summary of the activity for such debt during the year ended December 31, 2012 and the short term liability for each issue:
Summary of School Serial Bonds Activity Balance Balance Due by Description Dec. 31, 2011 Decrease Dec. 31, 2012 Dec. 31, 2013 School Refunding Bonds Issued 10/15/1998 for $13,225,000 Refinanced in 2010 for 2,275,000 Maturing in 2010 and 2014 Bearing variable interest rates ranging from 4.25% to 5.0% $ 1,105,000 $ - $ 1,105,000 $ - School Refunding Bonds Issued 4/1/2003 for $3,965,000 Maturing annually from 2016 to 2023 Bearing variable interest rates ranging from 5.0% to 5.5% 3,965,000 - 3,965,000 - Capital Appreciation Bonds Issued 2/15/2003 for $4,753,739 Maturing annually from 2010 to 2022 Bearing variable interest rates ranging from 4.075% to 4.974% 3,854,489 420,342 3,434,147 400,062 Capital Appreciation Bonds Issued 7/3/2003 for $12,381,097 Maturing annually from 2012 to 2023 Bearing variable interest rates ranging from 3.75% to 4.96% 12,381,097 1,198,433 11,182,664 1,148,539 School Bonds Issued 12/2/2004 for $55,309,000 Maturing annually from 2006 to 2024 Bearing variable interest rates ranging from 4.125% to 4.5% 43,009,000 2,300,000 40,709,000 2,300,000 School Bonds (NJ School Bond Reserve Act) Issued 10/24/2008 for $15,636,000 Maturing annually from 2009 to 2030 Bearing variable interest rates ranging from 6.0% to 6.25% 15,461,000 75,000 15,386,000 100,000 Early Retirement Incentive Refunding Bonds Issued 5/7/2009 for $10,920,000 Maturing annually from 2010 to 2021 Bearing variable interest rates ranging from 3.0% to 6.25% 9,530,000 750,000 8,780,000 780,000 School Refunding Bonds Issued 2010 for $8,880,000 Maturing annually from 2010 to 2013 Bearing variable interest rates ranging from 1.5% to 3.0% 3,755,000 2,445,000 1,310,000 1,310,000 $ 93,060,586 $ 7,188,775 $ 85,871,811 $ 6,038,601
58 CITY OF BAYONNE NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE D. MUNICIPAL DEBT (continued)
BONDS PAYABLE (continued)
Parking Utility Capital Fund - Revenue Bonds Payable
On June 15, 2007, the Bayonne Parking Authority issued $4,000,000 of Parking Revenue Bonds, Series 2007 to provide funds to refund and redeem the a $4,000,000 project note, fund a bond service fund and pay costs of issuance and deliver of the bonds. The following table is a summary of the activity for such debt during the year ended December 31, 2012 and the short term liability for each issue:
Summary of Parking Revenue Bond Activity Balance Balance Due by Description Dec. 31, 2011 Decrease Dec. 31, 2012 Dec. 31, 2013 Parking Revenue Bonds Issued 6/15/2007 for $4,000,000 Maturing annually from 2007 to 2027 Bearing an interest rate of 5% $ 3,480,000 $ 145,000 $ 3,335,000 $ 155,000 $ 3,480,000 $ 145,000 $ 3,335,000 $ 155,000
The Parking Utility Fund had an excess in revenues for the year ended December 31, 2012 and therefore qualifies as self-liquidating. That calculation is provided below. An excess in revenues allows the entire amount of Parking Revenue Bonds outstanding, $3,335,000, to be deducted from the gross debt of the City.
Self-Liquidating Utility Calculation
Total Cash Receipts from Fees, Rents or Other Charges $ 1,347,184
Operating and Maintenance Cost $ 914,870
Debt Service: Interest 170,375 Principal 145,000 1,230,245
Excess in Revenues $ 116,939
59 CITY OF BAYONNE NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE D. MUNICIPAL DEBT (continued)
LOANS PAYABLE
Demolition Loans Payable
The City has outstanding at December 31, 2012 a loan agreement with the NJ Department of Community Affairs for the demolition of unsafe buildings. The following table is a summary of the activity for such debt during the year ended December 31, 2012 and the short term principal liability:
Summary of Demolition Loan Activity Balance Balance Due by Description Dec. 31, 2011 Decrease Dec. 31, 2012 Dec. 31, 2013 Demolition Loan Issued 10/23/2006 for $973,021 Maturing annually from 2007 to 2016 Bearing an interest rate of 0.720% $ 495,230 $ 97,631 $ 397,599 $ 98,333 $ 495,230 $ 97,631 $ 397,599 $ 98,333
Green Trust Loans Payable
The City has outstanding at December 31, 2012 various Green Trust Loans. The following table is a summary of the activity for such debt during the year ended December 31, 2012 and the short term principal liability for each issue:
Summary of Green Trust Loans Activity Balance Balance Due by Description Dec. 31, 2011 Decrease Dec. 31, 2012 Dec. 31, 2013 1983 Green Trust Issued 1998 for $450,000 Maturing annually from 1999 to 2018 Bearing variable interest rates $ 169,766 $ 24,710 $ 145,056 $ 25,207 1995 GFB Issued 2006 for $171,000 Maturing annually from 2007 to 2026 Bearing variable interest rates 133,265 8,008 125,257 8,169 95GT Issued 2006 for $100,000 Maturing annually from 2007 to 2026 Bearing variable interest rates 77,934 4,683 73,251 4,777 $ 380,965 $ 37,401 $ 343,564 $ 38,153
60 CITY OF BAYONNE NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE D. MUNICIPAL DEBT (continued)
DEBT SERVICE REQUIREMENTS TO MATURITY
The repayment schedule of annual debt service principal and interest for the next five years, and five year increments there-after, for bonds issued and outstanding is as follows:
Schedule of Debt Service Requirements to Maturity - Bonds Issued and Outstanding Year Ended Fiscal Year Adj. Bonds General Serial Bonds School Serial Bonds Parking Revenue Bonds Dec. 31, Principal Interest Principal Interest Principal Interest Principal Interest 2013$ 605,000 $ 89,050 $ 1,070,218 $ 5,429,057 $ 6,038,601 $ 4,284,085 $ 155,000 $ 162,875 2014 635,000 61,825 1,085,077 5,414,731 6,000,826 4,160,723 160,000 155,000 2015 665,000 33,250 1,254,877 5,402,059 9,173,210 4,067,428 170,000 146,750 2016 - - 1,924,893 5,380,395 5,960,240 3,841,204 180,000 138,000 2017 - - 2,360,214 5,490,706 6,014,817 3,734,133 190,000 128,750 2018-2022 - - 11,485,195 26,357,545 31,851,691 17,169,721 1,090,000 489,500 2023-2027 - - 15,207,955 20,591,134 13,146,426 5,410,048 1,390,000 180,500 2028-2032 - - 19,075,000 15,223,405 7,686,000 936,750 - - 2033-2037 - - 29,600,000 8,615,323 - - - - 2038-2040 - - 13,640,000 1,137,125 - - - - $ 1,905,000 $ 184,125 $ 96,703,429 $ 99,041,480 $ 85,871,811 $ 43,604,092 $ 3,335,000 $ 1,401,375
The repayment schedule of annual debt service principal and interest for the next five years, and five year increments there-after, for loans outstanding is as follows:
Schedule of Debt Service Requirements to Maturity - Loans Outstanding Year Ended Green Trust Loans Demolition Loan Dec. 31, Principal Interest Principal Interest 2013 $ 38,153 $ 6,681 $ 98,333 $ 2,861 2014 38,920 5,915 99,041 2,153 2015 39,701 5,132 99,754 1,441 2016 40,499 4,334 100,471 723 2017 41,314 3,520 - - 2018-2022 88,286 9,963 - - 2023-2026 56,691 2,290 - - $ 343,564 $ 37,835 $ 397,599 $ 7,178
61 CITY OF BAYONNE NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE D. MUNICIPAL DEBT (continued)
NOTES PAYABLE
Bond Anticipation Notes
The City issues bond anticipation notes to temporarily fund various capital projects prior to the issuance of serial bonds. The term of the notes cannot exceed one year, but the notes may be renewed from time to time for a period not exceeding one year. Generally, such notes may be paid no later than the close of the tenth fiscal year next following the date of the original notes. The Division also prescribes that notes cannot be renewed past the third anniversary date of the original note unless an amount equal to at least the first legally required installment is paid prior to each anniversary date.
The purposes for which these notes were issued as well as more detailed information of the above- referenced information can be found in the table that follows:
DETAIL OF BOND ANTICIPATION NOTES December 31, 2011 December 31, 2012 Original Issue Interest Maturity Paid Maturity Interest Date Amount Rate Date Balance Down Balance Date Rate Refunding of Tax Appeals: 12/9/2003$ 3,248,000 2.00% 8/17/2012 $ 782,139 $ 377,430 $ 404,709 8/7/2013 1.50% 6/30/2008 2,800,000 2.00% 8/17/2012 1,660,570 400,001 1,260,569 8/7/2013 1.50% 3/31/2011 2,290,000 2.75% 3/30/2012 2,290,000 458,000 1,832,000 3/30/2012 2.75% Acquisition and of Easement of Land: - 5/13/2005 7,000,000 2.00% 8/17/2012 6,588,093 88,609 6,499,484 8/7/2013 1.50% Passive Waterfront Development: - 12/9/2004 500,000 2.00% 8/17/2012 204,986 17,242 187,744 8/7/2013 1.50% Citywide Communication Systems: - 3/9/2007 5,075,000 2.00% 8/17/2012 4,273,678 267,106 4,006,572 8/7/2013 1.50% Various Capital Improvements: - 3/9/2007 1,690,000 2.00% 8/17/2012 1,423,994 88,734 1,335,260 8/7/2013 1.50% Bayonne Medical Center: - 11/26/2007 6,200,000 1.43% 8/17/2012 4,675,000 800,000 3,875,000 8/7/2013 1.86% $ 21,898,460 $ 2,497,122 $ 19,401,338
62 CITY OF BAYONNE NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE D. MUNICIPAL DEBT (continued)
NOTES PAYABLE (continued)
School Promissory Notes
The purposes for which these notes were issued as well as more detailed information of the above- referenced information can be found in the table that follows:
DETAIL OF SCHOOL PROMISSORY NOTES December 31, 2011 December 31, 2012 Original Issue Interest Maturity Paid New Maturity Interest Date Amount Rate Date Balance Down Issues Date Rate Various School Improvements: 11/20/2009$ 6,632,065 2.00% 8/17/2012$ 6,632,065 $ 170,053 $ 6,462,012 8/7/2013 1.50% 11/20/2009 1,112,685 1.43% 8/17/2012 1,112,685 28,531 1,084,154 8/7/2013 1.86% $ 7,744,750 $ 198,584 $ 7,546,166
Tax Anticipation Notes
Tax anticipation notes were issued for interim financing of Current Fund operations. The local budget law allows the City to issue notes in anticipation of the collection of taxes or other revenues of such year for the purposes provided for in the current operating budget. These notes cannot exceed 30% of the tax levy of the previous fiscal year plus 30% of the miscellaneous revenues realized in cash of the previous fiscal year. All notes must be paid within 120 days of the beginning of the next fiscal year. The following is a summary of changes in tax anticipation notes for the year ended December 31, 2012:
Balance at December 31, 2011 $ 12,000,000 Less: Paid During Year 12,000,000 Subtotal - Add: Issued During year 15,000,000 Balance at December 31, 2012 $ 15,000,000
The balance of the tax anticipation notes at year end consists of one issue at 1.96% with a maturity date of February 15, 2013.
63 CITY OF BAYONNE NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE D. MUNICIPAL DEBT (continued)
BONDS AND NOTES AUTHORIZED BUT NOT ISSUED
At December 31, 2012 and 2011, the City has authorized but not issued bonds and notes of $359,860, each year, in the General Capital Fund. The following activity relates to bonds and notes authorized but not issued that occurred during the year ended December 31, 2012:
Balance Balance Dec. 31, 2011 Dec. 31, 2012
General Improvements $ 331,937 331,937 Fiscal Year Adjustment Bonds 27,293 27,293 School Improvements 630 630
$ 7,758,783 $ 7,758,783
SUMMARY OF STATUTORY DEBT CONDITION – ANNUAL DEBT STATEMENT
The summarized statement of debt condition which follows is prepared in accordance with the required method of setting up the Annual Debt Statement.
Gross Debt Deductions Net Debt
School Purposes $ 93,418,607 $ 93,418,607 $ - Self-Liquidating Purposes 3,335,000 3,335,000 - General Bonds and Notes 119,110,160 16,246,596 102,863,564
$ 215,863,767 $ 113,000,203 $ 102,863,564
Net debt of $102,863,564 divided by the equalized valuation basis per N.J.S.A. 40A:2-2 as amended, $5,512,364,667 equals 1.87%.
Equalized valuation basis is the average of the equalized valuations of real estate, including improvements, and the assessed valuation of class II Railroad Property of the County for the last 3 preceding years.
BORROWING POWER UNDER N.J.S.A. 40A:2-6 AS AMENDED
3 1/2% of Equalized Valuation Basis $ 192,932,763 Less: Net Debt 102,863,564
Excess Borrowing Power $ 90,069,199
64 CITY OF BAYONNE NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE E. FUND BALANCES APPROPRIATED
Fund balance of the City consists of cash surplus and non-cash surplus. The City can anticipate fund balance to support its budget of the succeeding year, however, the use of non-cash surplus is subject to the prior written consent of the Division. Fund balances at December 31, 2012 and 2011 which were appropriated and included as anticipated revenue in the Current Fund and Parking Utility Operating Fund budgets of the succeeding year were as follows:
Fund Balance Utilized in Fund Balance Utilized in Dec. 31, 2011 2012 Budget Dec. 31, 2012 2013 Budget
Current Fund $ 6,795,568 $ 695,000 $ 8,799,684 $ - Capital Fund 172,952 - 172,952 - Parking Utility Fund: Operating 45,814 - 112,446 60,000 Capital 87,575 - 81,925 -
NOTE F. RETIREMENT SYSTEMS AND DEFERRED COMPENSATION
Substantially all City employees participate in one of the following contributory defined benefit public employee retirement systems which have been established by State statute: the Consolidated Police and Fireman’s Pension Fund, a single employer plan, the Public Employees Retirement System and the Police and Fireman’s Retirement System of New Jersey, multiple employer plans, or the Defined Contribution Retirement Program (DCRP), which is a defined contribution plan. These systems are sponsored and administered by the State of New Jersey.
In addition, certain employees participate in the City’s Deferred Compensation Plan.
STATE-MANAGED PENSION PLANS - CPFPF
The Consolidated Police and Fireman's Pension Fund (CPFPF) is a single employer contributory defined benefit plan which was established on January 1, 1952, under the provisions of N.J.S.A. 43:16 to provide retirement, death and disability benefits to county and municipal police and firemen who were appointed prior to July 1, 1944. The fund is a closed system with no active members. The City currently only makes contributions for its retirees who are enrolled in this pension fund.
65 CITY OF BAYONNE NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE F. RETIREMENT SYSTEMS AND DEFERRED COMPENSATION (continued)
STATE-MANAGED PENSION PLANS - PERS
The PERS was established in January, 1955 under provisions of N.J.S.A. 43:15A and provides retirement, death, disability and post-retirement medical benefits to certain qualifying Plan members and beneficiaries. Membership is mandatory to substantially all full time employees and vesting occurs after 8 to 10 years of service for pension benefits. Significant modifications to enrollment, benefits and eligibility for benefits under the plan were made in 2007, 2008, 2010 and 2011. These changes resulted in various “tiers” which distinguish period of eligibility for enrollment. The delineation of these tiers is noted below:
• Tier 1: Employees enrolled before July 1, 2007. • Tier 2: Employees eligible for enrollment after June 30, 2007 but before November 2, 2008. • Tier 3: Employees eligible for enrollment after November 1, 2008 but before May 22, 2010. • Tier 4: Employees eligible for enrollment after May 21, 2010 but before June 28, 2011. • Tier 5: Employees eligible for enrollment after June 27, 2011.
Tier 1 and 2 employees must earn a base salary of $1,500 or more to enroll in the plan. Pensionable salaries are limited to the IRS maximum salary compensation limits for Tier 1 employees and social security maximum wage for Tier 2 employees. Tier 2 employees earning over the social security maximum wage are eligible to participate in DCRP for the excess amount. Tier 1 and 2 employees who retire at or after age 60 are entitled to a retirement benefit determined by the formula “years of service” divided by 55 times the average of the highest three years salary.
Tier 3 employees must earn a base salary that is annually adjusted. For the year ended December 31, 2012 and the transition year ended December 31, 2011, this base salary amount was $7,800 and $7,700, respectively. Employees earning between $5,000 and the Tier 3 minimum base salary are eligible for participation in DCRP. Pensionable salaries are limited to the social security maximum wage. Employees earning over the social security maximum wage are eligible to participate in DCRP for the excess amount. Employees who retire at or after age 62 are entitled to a retirement benefit determined by the formula “years of service” divided by 55 times the average of the highest three years salary.
66 CITY OF BAYONNE NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE F. RETIREMENT SYSTEMS AND DEFERRED COMPENSATION (continued)
STATE-MANAGED PENSION PLANS – PERS (continued)
Tier 4 and 5 employees do not have a minimum salary requirement to enroll, but must work a minimum of 32 hours per week. Employees not meeting the minimum hour requirement but that make over $5,000 are eligible to enroll in DRCP. Pensionable salaries are limited to the social security maximum wage. Employees earning over the social security maximum wage are eligible to participate in DCRP for the excess amount. Employees who retire at the minimum age; 62 and 65 for Tier 4 and Tier 5, respectively, are entitled to a retirement benefit determined by the formula “years of service” divided by 60 times the average of the highest five years salary.
Each of the 5 Tiers have eligibility requirements and benefit calculations which vary for deferred retirements, early retirements, veteran retirements, ordinary disability retirements and accidental disability retirements. There is no minimum service requirement to receive the pension benefits outlined above. However, to receive state-paid insurance coverage upon retirement, a minimum of 25 years of service is required for employees in Tiers 1 through 4 and 30 years of service for Tier 5 employees.
STATE-MANAGED PENSION PLANS - PFRS
The PFRS was established in July, 1944, under the provisions of N.J.S.A. 43:16A to provide coverage to substantially all full time county and municipal police or firefighters and state police appointed after June 30, 1944. Membership is mandatory for such employees with vesting occurring after 10 years of membership. Significant modifications to enrollment, benefits and eligibility for benefits under the plan were made in 2010 and 2011. These changes resulted in various “tiers” which distinguish period of eligibility for enrollment. The delineation of these tiers is noted below:
• Tier 1: Employees enrolled before May 22, 2010. • Tier 2: Employees enrolled after May 21, 2010 but before June 29, 2011. • Tier 3: Employees enrolled after June 28, 2011.
Tier 1, 2 and 3 employees do not have a minimum salary requirement to enroll. Pensionable salaries are limited to the social security maximum wage for Tier 2 and 3 employees and ‘federal pensionable maximum’ for Tier 1 employees. Employees earning over the social security maximum wage are eligible to participate in DCRP for the excess amount. Employees who retire either at or after the age of 55 are entitled to a retirement benefit dependent on years of service. In addition, Tier 1 employees can retire with 20 years of service with no minimum age requirement.
67 CITY OF BAYONNE NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE F. RETIREMENT SYSTEMS AND DEFERRED COMPENSATION (continued)
STATE-MANAGED PENSION PLANS – PFRS (continued)
If the employee retires with less than 20 years of service, the benefit is calculated as 2% times the “final compensation”* times years of service. If the employee retires with more than 20 but less than 25 years of service, the benefit is calculated as 50% of “final compensation”*. If the employee retires with more than 25 but less than 30 years of service, the benefit is calculated as 60% of the “final compensation”* salary plus 1% times “final compensation”* for each year between 25 and 30. If the employee retires with at least 30 years of service, the benefit is calculated as 2% times the “final compensation”* times years of service plus 1% of “final compensation”* for each year over 30. In addition, if a Tier 1 employee retires at age 65 with 20 or more years of service, the benefit is calculated as 50% of the “final compensation”* plus 3% of the “final compensation”* times the number of years served over 20, to a maximum of 25.
*Note: “Final Compensation” refers to the final 12 months of pensionable salary for Tier 1 employees and the average of the highest three years of pensionable salary for Tier 2 and 3 employees.
STATE-MANAGED PENSION PLANS - GENERAL
The State established and administers a Supplemental Annuity Collective Trust Fund (SACT) which is available to active members of several State-administered retirement systems to purchase annuities to supplement the guaranteed benefits provided by their retirement system. The State or local government employers do not appropriate funds to SACT.
The State also administers the Pension Adjustment Fund (PAF) which provides cost of living increases, equal to 60 percent of the change in the average consumer price index, to eligible retirees in all State- sponsored pension systems except SACT. The cost of living increases for PFRS and PERS are funded directly by each of the respective systems and are considered in the annual actuarial calculation of the required State contribution for that system.
According to state statutes, all obligations of PERS and PFRS will be assumed by the State of New Jersey should the PERS and PFRS be terminated.
The State of New Jersey issues publicly available financial reports that include the financial statements and required supplementary information of the PERS and PFRS. This report may be obtained by writing to the State of New Jersey, Department of the Treasury, Division of Pensions and Benefits, P.O. Box 295, Trenton, New Jersey 08625-0295.
68 CITY OF BAYONNE NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE F. RETIREMENT SYSTEMS AND DEFERRED COMPENSATION (continued)
STATE-MANAGED PENSION PLANS - CONTRIBUTIONS
The contribution policy for PFRS and PERS is set by laws of the State of New Jersey, and requires contributions by active members and their employers. Plan member and employer contributions may be amended by legislation of the State of New Jersey. Contributions made by employees for the previous three years are as follows:
Summary of Employee Contributions Year As a Percentage of Base Wages Amount Ended PFRS PERS PFRS PERS Dec. 31, 2012 10.00% (1) 6.64% $ 1,009,942 $ 3,643,570 Dec. 31, 2011* 10.00% (2) 6.50% 1,624,472 437,912 June 30, 2011 8.50% 5.50% 2,994,279 785,803
*Six-month transition year.
(1) 2012 rates for PERS were 6.5% until July, 2012, after which the rate noted above took effect. (2) 2011 rates for PFRS and PERS were 8.5% and 5.5%, respectively, until the first payroll in October, 2011, after which the rates noted above took effect.
Employers are required to contribute at an actuarially determined rate in all three systems. During the previous three years, the City made the following contributions:
City PFRS Contribution City PERS Contribution City CPFPF Contribution Amount As a Amount As a Amount As a Paid or Percentage of Paid or Percentage of Paid or Percentage of Year Ended Charged Covered Payroll Charged Covered Payroll Charged Covered Payroll Dec. 31, 2012 $ 9,281,416 25.5% $ 1,734,913 11.3% $ 76,348 n/a Dec. 31, 2011 (2) (2) (2) (2) 83,796 n/a June 30, 2011 10,963,105 31.1% 1,780,460 12.5% 76,013 n/a
(3) The year ended December 31, 2011 is a six month “transition” year for which no PERS and PFRS payments were due.
69 CITY OF BAYONNE NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE F. RETIREMENT SYSTEMS AND DEFERRED COMPENSATION (continued)
STATE-MANAGED PENSION PLANS – DEFERRAL
Legislation, known as Chapter 19 of the Public Laws of 2009 (P.L. 2009, c. 19), was enacted and effective on March 17, 2009 allowing for an adjustment in the contributions that local employers, such as the City, must make to the PERS and PFRS during the year ended June 30, 2009. Under this legislation, local governments were given the option to defer exactly 50% of their required pension contribution as certified by the State of New Jersey, Department of the Treasury, Division of Pensions and Benefits or pay the full amount of the required contribution for the year ended June 30, 2009.
The City elected the 50% deferral in the amount of $4,568,624. Under the terms of the pension deferral the City is obligated to commence repayment of the entire deferral in 15 amortized annual installments, commencing with the year ended December 31, 2012. These payments will be added to the regular pension bills. The short term liability of the deferral, payable on April 1, 20123, is $655,794, consisting of $572,771 on the PFRS deferral and $83,023 on the PERS deferral.
DEFINED CONTRIBUTION RETIREMENT PROGRAM
The Defined Contribution Retirement Program (DCRP) was established under the provisions of P.L. 2007, Chapters 92 and 103 and expanded under the provisions of Chapter 89, P.L. 2008 and Chapter 1, P.L. 2010. It provides eligible members with a tax-sheltered, defined contribution retirement benefit along with life insurance and disability coverage.
Individuals eligible for membership in the DCRP include (a) state or local officials elected or appointed or elected to new office on or after July 1, 2007, (b) employees enrolled in PERS on or after July 1, 2007 or PFRS after May 21, 2010 who earn salary in excess of established maximum compensation limits and (c) employees otherwise eligible for PERS on or after November 2, 2008 or PFRS after May 21, 2010 that earn below the minimum PERS or PFRS salary but more than $5,000 annually. Participation in DCRP can be irrevocably waived if an official earns less than $5,000.
Vesting occurs upon commencement of the third year of membership. Should the vesting period not be reached, contributions will be refunded to the appropriate contributing parties. Employer matching contributions and earnings are only available after the age of 55. Distributions render the member retired and ineligible for future participation in any State-administered plans. Otherwise, distributions are available at any time as lump sum, fixed term or life annuity.
70 CITY OF BAYONNE NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE F. RETIREMENT SYSTEMS AND DEFERRED COMPENSATION (continued)
DEFINED CONTRIBUTION RETIREMENT PROGRAM (continued)
Members are covered by employer-paid life insurance in the amount of 1 ½ times the annual base salary on which DCRP contributions were based. Members are also eligible for employer-paid long-term disability coverage after one year of participation. Eligibility occurs after six consecutive months of total disability. Members would receive a regular monthly income benefit up to 60% of the base salary on which DCRP contributions were based during the 12 months preceding the onset of the disability, offset by any other periodic benefit the member may be receiving. Benefits will be paid until the age of 70 so long as the member remains disabled and has not begun receiving retirement annuity payments.
The following table represents the City and employee contributions during the previous three years:
Year Employees Employee Contributions City Contribution Ended Enrolled Amount Rate Amount Rate Dec. 31, 2012 11 $ 9,167 5.5% $ 5,000 3.0% Dec. 31, 2011 2 4,083 5.5% 2,227 3.0% June 30, 2011 2 4,994 5.5% 2,724 3.0%
DEFERRED COMPENSATION PLAN (unaudited)
The City has established a deferred compensation program (the “plan”) for its employees under Section 457 of the Internal Revenue Code. The plan is comprised of several separate plans, all of which are Public Employees' Deferred Compensation Plans, covering employees and elected officials who perform services for the City. One plan is underwritten by The Hartford Financial Services Group, Inc., the other by Variable Annuity Life Insurance Company (“VALIC”) and the Metropolitan Life Insurance
Company.
The Plans are a tax-deferred supplemental retirement program that allows City employees to contribute a portion of their salaries, before federal taxes, to a retirement account. Contributions, or deferrals, are made through payroll deductions. Individuals are 100% vested. Distributions are not available to employees until termination, retirement, death, or unforeseeable emergency. All amounts of compensation deferred under the plan, all property and rights purchased with those amounts, and all income attributable to those amounts, property or rights are solely property and rights of the individual contributors and are not subject to the claims of the City's general creditors.
71 CITY OF BAYONNE NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE G. POST-EMPLOYMENT BENEFITS
POST-EMPLOYMENT BENEFITS PLAN
Plan Description – The City contributes to the State Health Benefits Program (SHBP), a cost-sharing, multiple-employer defined benefit post-employment healthcare plan administered by the State of New Jersey Division of Pensions and Benefits. SHBP was established in 1961 under N.J.S.A. 52:14-17.25 et seq., to provide health benefits to State employees, retirees and their dependents. Rules governing the operation and administration of the program are found in Title 17, Chapter 9 of the New Jersey Administrative Code. SHBP provides medical, prescription drugs, mental health/substance abuse, and Medicare Part B reimbursement to retirees and their covered dependents.
The SHBP was extended to employees, retirees and dependents of participating local public employers in 1964. Local employers must adopt a resolution to participate in the SHBP. In 1964, the City authorized participation in the SHBP’s post-retirement benefit program. The City currently provides lifetime medical benefits to City employees who retire from the City under the following conditions: (a) after twenty five years of service with the City, or (b) upon a disability retirement. Coverage is also provided for eligible family members of the employee and paid by the City for the life of the retiree.
The State Health Benefits Commission is the executive body established by statute to be responsible for the operation of the SHBP. The State of New Jersey Division of Pensions and Benefits issues a publicly available financial report that includes financial statements and required supplementary information for the SHBP. That report may be obtained by writing to: State of New Jersey Division of Pensions and Benefits, P.O. Box 295, Trenton, NJ 08625-0295 or by visiting their website at www. state.nj.us/treasury/pensions.
Funding Policy – Participating employers are contractually required to contribute based on the amount of premiums attributable to their retirees. Post-retirement medical benefits under the plan have been funded on a pay-as-you-go basis since 1994. Prior to 1994, medical benefits were funded on an actuarial basis. Contributions to pay for the health premiums of participating retirees in the SHBP are billed to the City on a monthly basis.
72 CITY OF BAYONNE NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE G. POST-EMPLOYMENT BENEFITS (continued)
POST-EMPLOYMENT BENEFITS PLAN (continued)
Significant Legislation - Chapter 78, P.L. 2011, effective June 28, 2011, established new employee contribution requirements towards the cost of employer-provided health benefit coverage. Employees are required to contribute a certain percentage of the cost of coverage. The rate of contribution is determined based on the employee’s annual salary and the selected level of coverage. The increased employee contributions will be phased in over a 4-year period for those employed prior to Chapter 78’s effective date with a minimum contribution required to be at least 1.5% of salary. For those employed on or after June 28, 2011, the 4-year phase-in does not apply and contributions based on the full percentage rate of contribution are required. Under Chapter 78, certain future retirees eligible for employee-paid health care coverage at retirement will also be required to pay a percentage of the cost of their medical coverage determined on the basis of their annual retirement benefit.
Chapter 2, P.L. 2010, effective May 21, 2010, requires a minimum contribution of 1.5% of base salary toward the cost of health benefits coverage by all active public employees. Employees who become a member on or after the law’s effective date would be required to pay in retirement 1.5% of their pension benefit toward the cost of health care coverage under the SHBP.
NOTE H. COMPENSATED ABSENCES
Employees may accumulate unlimited sick time. Upon retirement, union employees with a minimum of 100 accrued sick days may receive a cash payment of one-third of accumulated sick time up to a maximum of $12,500. Employees may carry vacation over for only one year. Upon termination or retirement, employees may receive a cash payment for the full value of their accumulated vacation time.
As of December 31, 2012 and 2011, the total accumulated absence liability was $6,443,874 and $6,847,917, respectively. No funds are reserved for accumulated absences, however, the City budgets compensated absence appropriations annually in the applicable department line items.
73 CITY OF BAYONNE NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE I. RISK MANAGEMENT
Insurance Coverage
The City is exposed to various property and casualty risks including: property damage caused to any of the City’s property, motor vehicles, equipment or apparatus; liability resulting from the use or operation of such motor vehicles, equipment apparatus; liability from the City’s negligence, including that of its officers, employees and servants; and workers’ compensation obligations.
The City established a self-insurance program in accordance with New Jersey Statute Chapter 40:10-6. The Chapter enables the governing body of any local unit to create a fund to provide insurance coverage for its exposure to a wide variety of property casualty risks, including property damage caused to any of the unit's property, motor vehicles, equipment or apparatus; liability resulting from the use or operation of such motor vehicles, equipment or apparatus; liability for the unit's negligence, including that of its officers, employees and servants and workers' compensation obligations.
On August 17, 2011, the City authorized participation in and the execution of an Indemnity and Trust Agreement with the New Jersey Intergovernmental Insurance Fund (the “NJIIF”) for the provision of property and casualty insurance coverage for the one year period commencing September 1, 2011. The NJIIF is a public entity created in 1991 and offers coverage to municipalities, counties, and school districts statewide. The NJIIF is a New Jersey approved, self-insured, reinsured public entity insurance pool which offers all New Jersey public entities multiple lines of insurance.
The City has obtained the following coverage through the NJIIF: • Equipment Breakdown coverage in the amount of $100,000,000. • Crime coverage including employee dishonesty, forgery, alterations, theft, robbery and fraud in the amount of $1,000,000. • Environmental Impairment coverage in the amount of $20,000,000. • Workers’ Compensation coverage in the amount of $2,000,000. • General, Automobile and Employee Benefits liability coverage in the amount of $15,000,000. • Public Entity Management Liability coverage, including Public Official’s Liability and Employment Practices Liability coverages, in the amount of $3,000,000. • Surety bonds for the City Treasurer, Chief Financial Officer, Tax Collector and Municipal Court Judges.
Disaster Recovery The City does not have a formal disaster recovery plan in place, however, all financial data is backed up to hard disks daily.
74 CITY OF BAYONNE NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE J. STATE AID RECEIVABLE – QUALIFIED BONDS
The City reverted from a state fiscal year ending June 30 to a calendar year beginning in 2012. The City’s final state fiscal year was the year ended June 30, 2011. The interim period, July 1, 2011 to December 31, 2011, was the City’s six month transition year.
The Division required municipalities reverting to a calendar year to anticipate a full year of State Aid during the six month transition year. The City receives State Aid in two forms: cash payments and qualified bond payments in lieu of direct aid in cash. Qualified bonds are State Aid payments withheld by the State and forwarded directly to paying agents for principal and interest payments on the bonds. During the transition year ended December 31, 2011, the City certified qualified bond maturity schedules for the twelve month period of July 1, 2011 to June, 30, 2012, six months beyond the end of the transition year. As a result, the City recognized State Aid revenues in the amount of $3,357,695 for debt service payments of the succeeding year, resulting in prepaid debt service at year end.
The following schedule summarizes the State Aid received, qualified bond payments applied and the prepaid amounts as of December 31, 2012 and 2011.
STATE AID RECEIVABLE - QUALIFIED BONDS
Year Ended Dec. 31, 2012 Transition Year ended Dec. 31, 2011 Beginning Balance $ 3,357,695 $ -
Add: State Aid (1) 9,429,879 8,961,605 12,787,574 8,961,605 Les s Received in Cash $ 2,206,960 $ 1,189,054 Qualified Bond Payments 7,142,081 4,414,856 9,349,041 5,603,910
Ending Balance $ 3,438,533 $ 3,357,695
NOTE K. CLEARING ACCOUNT
The City maintains a claims account, or a cash clearing bank account, from which bills are paid for various funds.
75 CITY OF BAYONNE NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE L. FIXED ASSETS
The City had the following investment balance and activity in general fixed assets for and as of the year ended December 31, 2012:
Balance, Activity During Current Year Balance, Dec. 31, 2011 Additions Deletions Dec. 31, 2012
Land $ 52,503,600 $ 2,253,800 $ 215,000 $ 54,542,400 Buildings 10,273,265 - 40,000 10,233,265 Improvements 4,817,988 - - 4,817,988 Machinery, Equipment and Other 18,785,976 1,952,274 321,940 20,416,310 $ 86,380,829 $ 4,206,074 $ 576,940 $ 90,009,963
In accordance with accounting practices prescribed by the Division, and as further detailed in Note A, no depreciation has been provided for and fixed assets acquired through grants in aid or contributed capital have not been accounted for separately.
NOTE M. DEFERRED CHARGES TO BE RAISED IN SUCCEEDING BUDGETS
Certain expenditures are required to be deferred to budgets of succeeding years. The City had a deficit in operations in 2007 of $24,841,584. The Director of the Division of Local Government Services allowed the City to fund this deficit over a period of several budget years. The appropriations in the budget for the year ended December 31, 2012 are not less than that required by the Director of the Division of Local Government Services. The City also has a deferred charge from the Bayonne Board of Education of $3,028,762. On November 17, 2012, the City adopted a resolution under N.J.S.A 40A:4-46, approving a special emergency appropriation in the amount of $1,970,000 to provide for extensive damages caused by Superstorm Sandy for which no provision was made in the 2012 budget. As of December 31, 2012, the following deferred charges are shown on the balance sheets of the Current Fund:
Less: Add: Balance, 2012 Budget Results of Succeeding Dec. 31, 2011 Appropriation Current Year Budgets
Deficit in Operations 2007 Operations $ 1,027,986 $ 1,027,986 $ - $ - Bayonne Board of Education 3,028,762 3,028,762 - -
Emergency Authorizations (40A:4-46) Superstorm Sandy - - 1,970,000 1,970,000
$ 4,056,748 $ 4,056,748 $ 1,970,000 $ 1,970,000
76 CITY OF BAYONNE NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE N. INTERFUND TRANSACTIONS
The City has various transactions by and between its individual funds. Certain accounts of the Trust and Capital Funds earn interest which is required to be recorded as revenue in the Current Fund budget. Other transactions include budget appropriations in the Current Fund which are required to be turned over to the Federal and State Grant, Trust and Capital Funds. All these transfers are routine and are consistent with the activities of the funds making the transfers.
Current Fund and Parking Utility Operating interfunds receivable are fully reserved and recognized as credits to operations in the year the interfunds are received in cash. Interfunds receivable in the Trust Funds, General Capital Fund and Parking Utility Operating Fund are not reserved.
The City expects all balances to be repaid by year-end with the exception of the interfund between the Current Fund and Federal and State Grants Fund. The Federal and State Grants Fund does not have its own bank account, therefore, the activity of the Fund is run through the Current Fund.
As of and during the year ended December 31, 2012, the Current Fund had the following interfund activity and receivable balances at year end:
General HUD Gran t s Other Utility Payroll Capital Grant Fund Fund Trust Operating Agency Interest $ 177 $ - $ - $ - $ - $ - Bank Fees, Overages and Other - - - - - 2,475 Chargebacks 251,807 - (638) 2,751,561 - - Current Fund Appropriations (1,615,000) - (3,554,199) (117,383) - - Current Fund Anticipated Revenues - - 3,261,699 90,000 - - Paid from (to) Current Fund 1,213,048 440 5,196,645 (1,867,263) 247 - (149,968) 440 4,903,507 856,915 247 2,475 Due from Current Fund at Dec. 31, 2011 - - (3,760,506) (633,625) - - Due to Current Fund at Dec. 31, 2011 150,017 - - - - - Due to Current Fund at Dec. 31, 2012 $ 49 $ 440 $ 1,143,001 $ 223,290 $ 247 $ 2,475
Detail of Balance: Interest $ 49 $ - $ - $ - $ - $ - Void Checks - 440 - - - 2,475 Net Grant Activity - - 1,143,001 - - - Chargebacks - - - 223,290 - - Loans and Advances - - - - 247 - $ 49 $ 440 $ 1,143,001 $ 223,290 $ 247 $ 2,475
77 CITY OF BAYONNE NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE N. INTERFUND TRANSACTIONS (continued)
In addition to the Current Fund interfund activity noted on the previous page, the City also had the following interfund activity and balances as of and for the year ended December 31, 2012.
General Other Trust Capital Fund Due to HUD Grants Fund at Dec. 31, 2011 $ - $ - Line of Credit Reimbursement 161,867 - Paid from to HUD Grants Fund - 340,000 Due to HUD Grants Fund at Dec. 31, 2012 $ 161,867 $ 340,000
Utility Capital Due to Utility Operating Fund at Dec. 31, 2011 $ - Paid to Utility Operating Fund 48,020 Due to Utility Operating Fund at Dec. 31, 2012 $ 48,020
NOTE O. RELATED PARTY TRANSACTIONS
SHARED SERVICE AGREEMENTS
The Water/Sewer System
The City created the Bayonne Municipal Utilities Authority (the “BMUA”) by virtue of an ordinance adopted on October 9, 1997. Prior to the creation of the BMUA, the City operated the Water System together with the Sewer System throughout the City as a combined utility within the City’s Budget. As described in Note A, the BMUA is considered a component unit of the City.
On November 17, 1997, the BMUA and the City executed an Interlocal Agreement as amended and supplemented by Amendment No.1 dated August 1, 2000, and Amendment No. 2 dated April 11, 2001 (hereinafter referred to collectively as the “Interlocal Agreement”), which agreement provided for among other things, the leasing of the Water/Sewer System to the BMUA for a term of up to 50 years. In accordance with the terms of the Interlocal Agreement, the BMUA acquired the Water/Sewer System from the City pursuant to a long-term lease for lease payments equal to $23,500,000 (the “Lease Payments”) plus sufficient funds to retire all of the City’s outstanding Water/Sewer System debt of $15,343,219 and reimburse the City for certain other costs incurred by the City with respect to the Water/Sewer System. In addition, the water and sewer accounts receivable previously due to the City were assigned to the BMUA.
78 CITY OF BAYONNE NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE O. RELATED PARTY TRANSACTIONS (continued)
SHARED SERVICE AGREEMENTS (continued)
The Water/Sewer System (continued)
On April 11, 2001, the City sold the water system assets and the sewer system assets to the BMUA for consideration of $1.00 each system. Also on April 11, 2001, the City leased the aqueduct to the BMUA for $28,000,000. The aqueduct consists of a force main that beings at the intersection of Kearny Avenue and Belleville Turnpike in Kearny, New Jersey, including the pump house, garage and vault at Porte Avenue, and interconnects with other systems at Kearny Avenue and Schuyler Avenue in Kearny, and North Arlington, New Jersey and extends past the City’s border at Avenue B and West 56th Street to the point where it connects with the Bayonne pump station. In accordance with the terms of the Interlocal agreement, the lease term is for 50 years with an option for the BMUA to purchase a fee simple interest in the aqueduct from the City for $1.00 at any time on or after the 20th anniversary of the agreement, April 11, 2021.
As described in Note B, the City also held investments in the form of notes receivable from the BMUA. The amount of notes receivable due from the BMUA at December 31, 2012 and 2011 was $-0- and $3,500,000, respectively. The City also has a receivable due from the BMUA at December 31, 2012 and 2011 of $-0- and $125,000, respectively, for anticipated expense reimbursements. This receivable is part of the revenue accounts receivable identified on the balance sheet and has been fully reserved.
The City also has a “Deficiency Agreement” with the BMUA, which is further described in Note S.
On August 6, 2012 the Bayonne Municipal Utilities Authority (the “BMUA”), approved the execution of a concession agreement between the BMUA and Bayonne Water Joint Venture, LLC, a joint venture between United Water and Kohlberg, Kravis, Roberts and Company (the “concessionaire”). Under the terms of the agreement, the concessionaire will undertake all of the obligations for the operations, maintenance and management of the BMUA’s water and sewer systems in accordance with applicable law, provide for annual capital improvements, adhere to a schedule of rate increases and provide compensation to the BMUA in amount sufficient to defease all of the outstanding debt of the BMUA and pay for certain stranded costs. In exchange, the concessionaire shall retain all revenues from the systems.
79 CITY OF BAYONNE NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE O. RELATED PARTY TRANSACTIONS (continued)
SHARED SERVICE AGREEMENTS (continued)
Local Redevelopment Authority
In September 1998, the City created a Local Redevelopment Authority (the “BLRA”) to oversee the development of the Military Ocean Terminal. The Authority consists of seven members from various segments of the Bayonne community, including two City Council members. The Military Ocean Terminal was an Army base that was closed in September, 1999. The City assumed the role of caretaker for the facility under a cooperative agreement with the Department of Defense as of October 1, 1999. As described in Note A, the BLRA is considered a component unit of the City.
On October 1, 2001, the BLRA assumed ownership of the “clean” portions of the facility. On December 18, 2002, the remaining portion of the facility was turned over to the City. The BLRA has been awarded a grant to “clean” this portion. The BLRA is in the process of marketing the facility for future development. The site is now currently known as the Peninsula at Bayonne Harbor. In 2009, the first residential development at the Peninsula at Bayonne Harbor, Alexan City View, opened its leasing office and welcomed its first residents.
On May 25, 2005, the City passed a $20,000,000 Bond Ordinance providing for various infrastructure improvements at the Peninsula. The BLRA, in turn, entered into a loan arrangement with the developer of the Military Ocean Terminal to borrow $21,500,000 to pay the City for use by the City to fund an ongoing structural budget deficit. The loan will be repaid by the BLRA upon the sale to the developer of individual parcels of land in the redevelopment area. This financing structure allows the City, through the BLRA, to effectively use the anticipated proceeds from the sale of the property for budget relief while funding the infrastructure improvements over the useful life of such improvements. These improvements are all to be made at the Peninsula at Bayonne Harbor and are being overseen by the Bayonne Local Redevelopment Authority. The Authority has reimbursed the City the $20,000,000 for the issuance of Bond Anticipation Notes.
During the year ended December 31, 2012 and the transition year ended December 31, 2011, the City received $30,500,000 and $34,500,000, respectively, from the BLRA for police, fire and other municipal services for the Peninsula at Bayonne Harbor. These amounts were anticipated as revenues in the City’s respective annual budgets. The City’s dependency on these revenues is further described in Note Q.
The City also has a “Subsidy Agreement” with the BLRA, which is further described in Note S.
80 CITY OF BAYONNE NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE O. RELATED PARTY TRANSACTIONS (continued)
SHARED SERVICE AGREEMENTS (continued)
Parking Authority
The Bayonne Parking Authority (the “BPA”) was created by an ordinance of the City on December 17, 1958 pursuant to the provisions of the Parking Authority Laws, N.J.S.A. 40:11A et seq. As described in Note A, the BPA is considered a component unit of the City.
Under the terms of the shared service agreement, as amended on June 30, 2011, the City shall furnish various levels of parking enforcement officers who will, at the direction of the Chief of Police, perform patrols of all public and City premises and enforce all parking laws, ordinances and regulations of the City and the State of New Jersey.
The BPA was responsible to reimburse the City, on a quarterly basis or as otherwise agreed, for all payroll, social security, withholding, unemployment, medical benefits and pension if applicable, liability insurance, workers’ compensation insurance, disability insurance and any and all other expenses related to employee compensation and benefits for those City personnel assigned to enforcement of parking regulations. The BPA must also share with the City $5 for each adjudicated summons in violations of the residential permit parking ordinances, overtime meter ordinances and street sweeper ordinances.
Effective January 1, 2012, the BPA was officially dissolved and the Bayonne Parking Utility was created.
Other Shared Service Agreements
The City has an agreement with the Bayonne Housing Authority (the “BHA”) in which the City is to receive reimbursement for garbage contracts, dumpster fees and forestry expenses. During the year ended December 31, 2012 and the transition year ended December 31, 2011, the City received $120,000 and $85,000, respectively, for such reimbursements. As of December 31, 2012 and 2011, the City has receivables from the BHA of $420,400 and $250,400, respectively, for prior year accrued budget revenues. This receivable is part of the revenue accounts receivable identified on the balance sheet and has been fully reserved. As described in Note A, the BHA is considered a component unit of the City.
81 CITY OF BAYONNE NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE O. RELATED PARTY TRANSACTIONS (continued)
BAYONNE BOARD OF EDUCATION
As described in Note D, the Bayonne Board of Education is a Type I School District, therefore, bonds and notes authorized by the Board of Education are general obligations of the City and are reported on the balance sheet of the City’s General Capital Fund and are accordingly included in the summary of municipal debt. The City budgets the principal and interest payments of the Board of Education’s obligations as they become due. These obligations are funded by the City through an amount to be raised by taxation called “addition to local district school tax”, less any regular school debt service aid received from the State of New Jersey. For the year ended December 31, 2012 and the transition year ended December 31, 2011, the City’s budget included the following debt service requirements of the Board of Education and corresponding anticipated revenues:
Year Ended Dec. 31, 2012 Dec. 31, 2011 Debt Service Requirements of the Board of Education: Payment of Bond Principal $ 7,189,000 $ 4,680,000 Payment of School Promissory Note Principal 198,585 198,585 Interest on Bonds 4,404,200 4,404,200 Interest on Notes 149,000 149,000 11,940,785 9,431,785 Less: Applicable Revenues Anticipated Regular School Debt Service Aid 600,078 307,060 Balance for Support of Board of Education: Addition to Local District School Tax $ 11,340,707 $ 9,124,725
As described in Note M, the City carried a deferred charge of the Bayonne Board of Education in the amount of $3,028,762. This deferred charge was raised in full in the 2012 City budget, leaving balances of $-0- and $3,028,762, respectively as of December 31, 2012 and 2011. In addition, the City has a receivable due from the Board of Education of $1,137,500, as of December 31, 2012 and 2011. This receivable is part of the revenue accounts receivable identified on the balance sheet and has been fully reserved. Finally the City’s newly acquired Parking Utility Fund has a payable due to the Board of Education of $450,000 for the acquisition of a parking lot.
82 CITY OF BAYONNE NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE P. REVENUE ACCOUNTS RECEIVABLE
Revenue accounts receivable are fully reserved receivables due from entities for revenues anticipated in support of the City’s budget. The following table illustrates activity of the beginning and ending revenue accounts receivable balances for the transition year ended December 31, 2012:
Balance Current Year Balance Dec. 31, 2011 Accruals Collections Dec. 31, 2011 Fines and Costs - Municipal Court $ 131,780 $ 1,822,176 $ 1,837,311 $ 116,645 Reimbursement from: Bayonne Housing Authority (1): Garbage Contract 120,000 120,000 - 240,000 Dumpsters 5,400 - - 5,400 Other 100,000 - - 100,000 Forestry Expenses 25,000 50,000 - 75,000 Bayonne Board of Education (1) 1,137,500 - - 1,137,500 Bayonne Municipal Utilities Authority (1) 125,000 62,500 187,500 -
$ 1,644,680 $ 2,054,676 $ 2,024,811 $ 1,674,545 (1) The receivables are further discussed in Note O.
NOTE Q. ECONOMIC DEPENDENCY
Major Taxpayers
The City does not have significant economic dependence on any one taxpayer. However, the ten largest taxpayers of the City as listed in the following table comprise 10% of the City’s total tax assessment.
Top 10 Taxpayers Name Assessment Bayonne Industries Inc / IMTT $ 116,103,000 Bayonne Auto Terminal, LLC 23,095,700 Gordon Terminal Service Company of NJ, Inc 15,027,100 Exxon Corporation 15,001,500 Texaco Downstream Properties, Inc. 13,085,800 Hess Corporation 10,379,000 Morris Bayonne Association I, LLC 9,813,700 99 Hook Road, LLC 9,500,000 South Cove Development, LLC 8,519,700 MPT of Bayonne, LLC 8,000,000
$ 228,525,500
83 CITY OF BAYONNE NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE Q. ECONOMIC DEPENDENCY (continued)
Peninsula at Bayonne Harbor
As described in Note O, during the year ended December 31, 2012 and the transition year ended December 31, 2011, the City received funds totaling $30,500,000 and $-0-, respectively, from the BLRA. These revenues represented 24% and -0-% of the support of the City’s budgets for the year ended December 31, 2012 and the transition year ended December 31, 2011.
The BLRA funds these payments to the City primarily through the proceeds of various land sales on the Peninsula at Bayonne Harbor. Based on the terms of the BLRA land sales contracts, the City anticipates revenues from the BLRA, for support of the City budget, of $29,800,000 in 2013 and annual payments of $5,000,000 from 2014 through 2033, a reduction in funding of $25,500,000 and $24,800,000, respectively, in support of the City’s operating budgets.
The City plans to make use of new funding from Spectra Energy, Bayonne Energy Center, new Port Authority PILOTs, fund balance, revenues from the long term lease of the water/sewer system and the continued sale of property and development at the Peninsula at Bayonne Harbor to provide replacement revenues.
Taking into consideration legislation capping the City’s ability to increase its tax levy, the impact on the City’s operations would be significant should the City be unable to obtain adequate replacement revenues.
State Aid
The City is also a recipient of State Aid. During the year ended December 31, 2012 and the transition year ended December 31, 2011, State Aid accounted for 7.4% and 14.9%, respectively, of the support the City’s budget. Significant changes in State Aid policy, in conjunction with legislation capping increases to the tax levy, could further impact the City’s operations.
84 CITY OF BAYONNE NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE R. LEASE COMMITMENTS
In 2004, the City entered into a financing lease with the Hudson County Improvement Authority in the amount of $10,000,000 to fund improvements to the City’s public works garage. The minimum future lease payments are as follows:
Year Ended December 31, Principal Interest 2013 $ 200,000 $ 535,647 2014 210,000 524,032 2015 225,000 511,645 2016 235,000 498,417 2017 250,000 484,227 2018-2022 1,495,000 2,165,773 2023-2027 2,015,000 1,625,986 2028-2032 2,730,000 883,603 2033-2034 1,350,000 86,995 $ 8,710,000 $ 7,316,325
NOTE S. CONTINGENT LIABILITIES
Deficiency Agreement
The City’s Interlocal Agreement with the BMUA described in Note O authorizes a Deficiency Agreement, which was executed on November 17, 1997. The BMUA is a component unit of the City as described in Note A.
The BMUA and the City have entered into the Deficiency Agreement in order to, among other things, provide security to the holders of the obligations of the BMUA, which were issued for or with respect to the Water/Sewer System. Pursuant to its terms, the Deficiency Agreement will remain in full force and effect as long as any obligations of the Authority, which are entitled to the benefits thereof, remain outstanding. The BMUA shall impose and collect annual charges from the City in an amount which is sufficient to provide for, after taking into account all other moneys of the BMUA, deficiencies in funds of the BMUA which are needed to pay for the BMUA’s expenses of (i) operation and maintenance of the Water/ Sewer System, and the principal of and interest on all Bonds as the same shall be due, (ii) maintenance of reserve or sinking funds as may be required by the terms of any contract of the BMUA or any Bond Resolution or as may be necessary or desirable by the BMUA, and (iii) compliance with the terms of any Bond Resolution and with the Act.
From its inception through December 31, 2012, the agreement has never been called upon by the BMUA.
85 CITY OF BAYONNE NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE S. CONTINGENT LIABILITIES (continued)
Subsidy Agreement
The City’s Interlocal Agreement with the BLRA described in Note O authorizes a Subsidy Agreement, which was executed in June of 2003. The BLRA is a component unit of the City as described in Note A.
Pursuant to the terms of the Subsidy Agreement the City agrees to pay to the BLRA, prior to each fiscal year an amount, if any, which shall be equal to the excess, as specified in an Accountant’s certificate, of:
(A) The sum of all the amounts necessary in the succeeding fiscal year: (1) to pay or provide for the expenses of operation and maintenance of the Redevelopment Projects; (2) to pay or provide for the principal or redemption premium of any Bonds; (3) to pay or provide for any interest becoming due on any Bonds; (4) to maintain such reserves or sinking funds to provide for expenses of operation and maintenance of the Redevelopment Projects or principal or redemption premium of and interest on any Bonds; and (5) to provide other amounts as may be required by the terms of any contract of the Agency or Bond Resolution or as deemed necessary or desirable by the Authority; over
(B) The sum of the following amounts to the extent available for operating expenses of the BLRA or Debt Service on any Bonds: (1) all revenues of the BLRA; (2) the proceeds of any Bonds; (3) the proceeds of insurance; (4) interest received on investments funds held for the benefit or security of the BLRA or the holders of any Bonds; (5) contributions and grants for the account of the BLRA; and (6) reserves on hand.
In addition to the amounts required to be paid by the City to the BLRA as described above, the City shall pay the BLRA, upon 15 days notice, any amount needed to pay the principal and redemption premium and/or interest on any Bonds to the extent such funds are not otherwise available from the BLRA with respect thereto.
If any payment due to the BLRA from the City remains unpaid for 30 days following its due date, the City shall be charged with and will pay to the BLRA interest on the amount unpaid from its due date until paid, at a rate per annum equal to 1% in excess of the highest rate of interest per annum which the BLRA is then paying with respect to any of its Bonds unless waived by the BLRA.
From its inception through December 31, 2012, the agreement has never been called upon by the BLRA.
86 CITY OF BAYONNE NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE S. CONTINGENT LIABILITIES (continued)
City Guarantee of BLRA Debt
On September 15, 2009, the Hudson County Improvement Authority (the “HCIA”) adopted a resolution authorizing it to act as an applicant for a loan application with the New Jersey Environmental Infrastructure Trust Fund on behalf of the BLRA for the acquisition of land and various infrastructure improvements associated with the Bayonne Shopping Center Project. On September 29, 2009, the City entered into a Guarantee Agreement with the HCIA on the loan. The BLRA is responsible for the repayment of the loan by certain payments-in-lieu-of taxes (Annual Service Changes) made by Cameron Bayonne Urban Renewal, LLC. The debt is further guaranteed by the County of Hudson pursuant to an agreement with the HCIA dated September 10, 2009. The obligations are not a debt or liability of the City (except to the extent of the City guarantee. As of December 31, 2011, $18,726,295 remains outstanding. Neither the Bonds nor the proceeds therefore are reflected on the accompanying financial statements.
Tax Appeals
The City is a defendant in various tax appeals that they are defending vigorously. The tax appeals it is currently defending are not unusual for a municipality of its size. In the past, the City has funded these appeals through various means, including utilizing the reserve for tax appeals account, which is funded through budget appropriations, issuing refunding notes to pay for the appeals, direct appropriations and charges to operations. The Local Finance Board has allowed the City to issue tax refunding obligations to finance the tax refunds. They are renewable annually for five to seven years after their date of issuance, with the amortization schedule approved by the Local Finance Board.
During the year ended December 31, 2012, the City renewed previously issued tax refunding notes. Also during the year ended December 31, 2012, the City funded additional appeals by appropriating and expending $1,570,000 in the current budget and charging $251,807 to improvement authorizations in the general capital fund.
Arbitrage Rebate
The City is subject Section 148 of Internal Revenue Code, which was enacted to minimize the arbitrage benefits from investing gross proceeds of tax-exempt bonds in higher yielding investments and to remove the arbitrage incentives to issue more bonds, to issue bonds earlier, or to leave bonds outstanding longer than is otherwise reasonably necessary to accomplish the governmental purposes for which the bonds were issued.
87 CITY OF BAYONNE NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE S. CONTINGENT LIABILITIES (continued)
Affordable Housing
The State has passed legislation which would seize uncommitted affordable housing funds from municipalities. After rounds of appeals and court orders, the Appellate Division has ruled that the State can seize such funds, assuming proper notice and the ability for municipalities to contest the State’s findings are provided. The extent of the City’s Affordable Housing funds subject to seizure by the State, if any, is uncertain. As of December 31, 2012 and 2011, the City had balances of $1,039,224 and $3,247,572, respectively, in its Affordable Housing Trust.
Grant Programs
The City participates in several federal and state financial assistance grant programs. Entitlement to the funds is generally conditional upon compliance with terms and conditions of the grant agreements and applicable regulations, including the expenditures of funds for eligible purposes. The state and federal grants received and expended in the year ended December 31, 2012 and the transition year ended December 31, 2011 were subject to the Single Audit Act Amendments of 1996 and State of New Jersey OMB Circular 04-04 which mandates that grant revenues and expenditures be audited in conjunction with the City’s annual audit. In addition, these programs are also subject to compliance and financial audits by the grantors or their representatives. These grantor agencies reserve the right to conduct additional audits of the City’s grant programs for economy, efficiency and program results. As a result of these audits, costs previously reimbursed could become disallowed and require repayment by the City to the grantor.
As the result of an audit of the City’s Community Development Block Grant (CDBG), the U.S. Department of Housing and Urban Development (HUD) notified the City during the transition year ended December 31, 2011 that certain costs of the program would be disallowed. The City was required to re-program an amount equal to the disallowed costs, $515,601, from the City’s own resources and operations.
In addition, documentation supporting the costs of CDBG program’s 2012 expenditures were not available for audit review as said documents were seized by federal law enforcement agencies for confidential investigation. As such, our audits questioned $2,411,226 of combined CDBG and emergency shelter grant expenditures. As of the date of this audit, the City’s liability, if any, cannot be determined.
88 CITY OF BAYONNE NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE S. CONTINGENT LIABILITIES (continued)
Litigation
The City is a defendant in various lawsuits, none of which is unusual for a municipality of its size and should be adequately covered by the City's insurance program, defense program or by the City directly and which may be settled in a manner satisfactory to the financial stability of the City. It is anticipated that any judgments in excess of insured coverage would be paid by the City through future taxation or future debt borrowing.
The following cases have been noted by both outside and City Counsel as having potentially material exposure to the City.
Rios v. City of Bayonne, et al - Plaintiff claims excessive use of force by members of the Bayonne Police Department. The City believes it has a viable defense. The matter is in the preliminary discovery stage with several pending motions, including one for dismissal which has been pending the court’s decision for a year. Another is a motion to stay the matter pending the conclusion of a federal investigation arising from the same underlying incident. The City has placed a settlement value on the case. The demand on the case is $1.6 million.
Statham v. City of Bayonne, et al - A civil rights matter which includes Title 1983 counts venued in Hudson County. This matter is 1/3 of the way through discovery. The City has taken no pay position, however a verbal demand of $750,000 has been made by the plaintiff.
Passaic River Litigation: The City is one of numerous entities named as third parties in an environmental contamination suit, whereas the NJDEP and the NJ Spill Compensation Fund filed original suit with private entities for the release of dioxins in the Passaic River. These private entities in turn filed suit alleging the City, and other public entities along the Passaic River, contributed to the Passaic River and Newark Bay contamination through their alleged release of sewerage containing hazardous substances.
On March 21, 2013 the City approved consent judgment whereby the City would be dismissed from the case for the payment of $95,000 to the NJDEP. However, this settlement must undergo an administrative and legal process subject to objections. If the settlement is not approved, outside Counsel notes it is still too early in the proceedings to accurately engage the amount or range of potential loss. The NJDEP has claimed billions of dollars in damages against the private entities; however, the City is one of many public entities named in the related third party suit. There is also the potential that the USEPA or other parties not involved in this NJDEP suit may seek additional litigation.
89 CITY OF BAYONNE NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE S. CONTINGENT LIABILITIES (continued)
Litigation (continued)
Bayonne Bay Developers v. City of Bayonne: An entity that has development rights to a tract of land at the peninsula in Bayonne filed suit seeking lost profit. Motions to dismiss on behalf of the City are currently pending before the Court.
This suit was filed against the BLRA, formerly a component unit of the City dissolved by the City in June, 2013. The plaintiff, Bayonne Bay Developers, was the designated developer of certain parcels of the peninsula. Upon the City’s sale of certain other parcels of the peninsula to the Port Authority of New York and New Jersey, the plaintiff filed this suit alleging that the BLRA violated New Jersey’s Local Redevelopment and Housing Law and breached various provisions of its agreement with the plaintiff by selling the property to the Port Authority. The plaintiff’s original suit seeks rescission of the Port Authority Sale, specific performance by the City and compensatory damages, costs and attorney fees, as well as the return of its $14,000,000 deposit. In turn, the City filed a counterclaim alleging breach of contract, among other things.
In addition, the City, its officers and employees are defendants in a number of lawsuits including, but not limited to, lawsuits alleging employment discrimination and alleged violations of civil rights.
NOTE T. SUBSEQUENT EVENTS
Subsequent events have been evaluated through November 21, 2013, the date which the financial statements were available to be issued. Material events are disclosed as follows:
Bayonne Municipal Utilities Authority
On August 6, 2012 the Bayonne Municipal Utilities Authority (the “BMUA”), approved the execution of a concession agreement between the BMUA and Bayonne Water Joint Venture, LLC, a joint venture between United Water and Kohlberg, Kravis, Roberts and Company (the “concessionaire”). Under the terms of the agreement, the concessionaire will undertake all of the obligations for the operations, maintenance and management of the BMUA’s water and sewer systems in accordance with applicable law, provide for annual capital improvements, adhere to a schedule of rate increases and provide compensation to the BMUA in amount sufficient to defease all of the outstanding debt of the BMUA and pay for certain stranded costs. In exchange, the concessionaire shall retain all revenues from the systems.
90 CITY OF BAYONNE NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE T. SUBSEQUENT EVENTS (continued)
Dissolution Bayonne Local Redevelopment Authority and Assumption of Related Debt
On August 14, 2013, an ordinance was passed dissolving the Bayonne Local Redevelopment Authority (the “BLRA”) pursuant to N.J.S.A. 40A:12A-24 and N.J.S.A. 40A:5A-20. In furtherance of the dissolution, the City adopted an ordinance appropriating $75,000,000 therefore and authorized not to exceed $75,000,000 principal amount of bonds in connection therewith. Further, also on August 14, 2013, the City passed a resolution making certain determination in connection with the assumption of certain outstanding obligations of the BLRA.
Issuance of Notes
On March 20, 2013, the City passed a resolution authorizing the issuance of not exceeding $15,000,000 tax anticipation notes. Subsequent to this authorization, on April 1, 2013, the City sold $8,000,000 of Tax Anticipation Notes at 1.93%.
On March 28, 2013, the City sold $1,374,000 of Tax Appeal Refunding Notes at 1.5%.
On July 25, 2013, the City sold the following notes: • $10,908,051 of Bond Anticipation Notes at 2.00% • $1,044,900 of Refunding Bond Anticipation Notes at 2.00% • $3,025,000 of Refunding Bond Anticipation Notes (Federally Taxable) at 1.125% • $1,065,000 of Temporary Notes (Federally Taxable) at 1.125%
Refunding Ordinance
On February 20, 2013, the City adopted an ordinance providing for the refunding of all or a portion of certain school bonds, dated December 15, 2004, appropriating $33,000,000 therefor and authorizing the issuance of not to exceed $33,000,000 School Refunding Bonds pursuant to the N.J. School Bond Reserve Act, P.L. 1980, C.72 (as amended) in one or more series .
91 CITY OF BAYONNE NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2012
NOTE T. SUBSEQUENT EVENTS (continued)
Capital Ordinances
On March 20, 2013, the City adopted a capital improvement ordinance to provide funding for various capital improvements to the Donald X. Ahern Veteran’s Memorial Stadium in the amount of $1,100,000.
On May 22, 2013, the City adopted a refunding bond ordinance providing for payment of amounts owing to others for taxes levied in and by the City, appropriating $2,250,000 therefor and authorizing the issuance of $2,250,000 bonds or notes of the City for financing the cost thereof.
On July 17, 2013, the City adopted a Special Assessment Bond Ordinance in the amount of $3,200,000.00 for reconstruction of LeFante Way.
On August 14, 2013, the City adopted a capital ordinance to provide funding for the reconstruction and repaving of various streets in the amount of $403,480.00, to be funded by a NJDOT grant.
On September 18, 2013, the City adopted a capital improvement ordinance to provide funding for the paving of various streets in the amount of $200,000.
Local Finance Board Applications
On August 14, 2013, the City authorized the following debt service applications: the following: • To the Local Finance Board for non-recourse financing to the Royal Caribbean Terminal Project. • To the Hudson County Improvement Authority for participation in the pooled note financing program.
Bulk Levy Tax Sale
On November 13, 2013, a resolution was adopted awarding the sale by the City of its property tax levy for the fiscal year ending December 31, 2013 and ratifying, confirming and authorizing certain actions in connection therewith to ORIX Public Finance, LLC in the amount of $172,250.
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APPENDIX C
CITY OF BAYONNE
AUDITOR'S 2013 UNAUDITED FINANCIAL STATEMENTS
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APPENDIX D-1
FORM OF SERIES 2014A BONDS LEGAL OPINION
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75 Livingston Avenue, Roseland, NJ 07068 (973) 622-1800
______, 2014
City Council of the City of Bayonne, in the County of Hudson, New Jersey
Dear Council Members:
We have acted as bond counsel to the City of Bayonne, in the County of Hudson, New Jersey (the “City”) in connection with the issuance by the City of $6,322,000 Special Assessment Bonds, Series 2014A (the “Series 2014A Bonds”). In order to render the opinions herein, we have examined laws, documents and records of proceedings, or copies thereof, certified or otherwise identified to us, as we have deemed necessary.
The Series 2014A Bonds are issued pursuant to the Local Bond Law of the State of New Jersey, a resolution of the City adopted October 15, 2014, pursuant to N.J.S.A. 40A:2-26(f) in all respects duly approved and Bond Ordinance #O-04-02, finally adopted January 21, 2004, in all respects duly approved and published as required by law.
In our opinion, except insofar as the enforcement thereof may be limited by any applicable bankruptcy, moratorium or similar laws or application by a court of competent jurisdiction of legal or equitable principles relating to the enforcement of creditors' rights, the Series 2014A Bonds are valid and legally binding general obligations of the City, and the City has the power and is obligated to levy ad valorem taxes upon all the taxable real property within the City for the payment of the Series 2014A Bonds and the interest thereon without limitation as to rate or amount.
On the date hereof, the City has covenanted in its Arbitrage and Tax Certificate (the “Certificate”) to comply with certain continuing requirements that must be satisfied subsequent to the issuance of the Series 2014A Bonds in order to preserve the tax-exempt status of the Series 2014A Bonds pursuant to Section 103(a) of the Internal Revenue Code of 1986, as amended (the "Code"). Pursuant to Section 103(a) of the Code, failure to comply with these requirements could cause interest on the Series 2014A Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Series 2014A Bonds. In the event that the City continuously complies with its covenants and in reliance on representations, certifications of fact and statements of reasonable expectations made by the City in the Certificate, it is our opinion that, pursuant to Section 103(a) of the Code, interest on the Series 2014A Bonds is not included in gross income for purposes of federal income tax and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. It is also our opinion that interest on the Series 2014A Bonds held by a corporate taxpayer is included in “adjusted current earnings” in calculating alternative minimum taxable income for purposes of the federal alternative minimum tax imposed on corporations. We express no opinion regarding other federal tax consequences arising with respect to the Series 2014A Bonds. Further, in our opinion, interest on the Series 2014A Bonds and any gain on the sale thereof are not included in gross income under the New Jersey Gross Income Tax Act. These opinions are based on existing statutes, regulations, administrative pronouncements and judicial decisions.
This opinion is issued as of the date hereof. We assume no obligation to update, revise or supplement this opinion to reflect any facts or circumstances that may come to our attention or any changes in law or interpretations thereof that may occur after the date of this opinion or for any reason whatsoever.
Very truly yours,
McManimon, Scotland & Baumann, LLC Newark - Roseland - Trenton
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APPENDIX D-2
FORM OF SERIES 2014B BONDS LEGAL OPINION
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75 Livingston Avenue, Roseland, NJ 07068 (973) 622-1800
______, 2014
City Council of the City of Bayonne, in the County of Hudson, New Jersey
Dear Council Members:
We have acted as bond counsel to the City of Bayonne, in the County of Hudson, New Jersey (the “City”) in connection with the issuance by the City of $6,121,000 School Bonds, Series 2014B (School Bond Reserve Act, P.L. 1980, c.72, as Amended) (the “Series 2014B Bonds”). In order to render the opinions herein, we have examined laws, documents and records of proceedings, or copies thereof, certified or otherwise identified to us, as we have deemed necessary.
The Series 2014B Bonds are issued pursuant to the Title 18A, Education of the New Jersey Statutes and the Local Bond Law of the State of New Jersey, a resolution of the City adopted October 15, 2014, and Bond Ordinance #O-09-23, finally adopted October 14, 2009, in all respects duly approved and published as required by law.
In our opinion, except insofar as the enforcement thereof may be limited by any applicable bankruptcy, moratorium or similar laws or application by a court of competent jurisdiction of legal or equitable principles relating to the enforcement of creditors' rights, the Series 2014B Bonds are valid and legally binding general obligations of the City, and the City has the power and is obligated to levy ad valorem taxes upon all the taxable real property within the City for the payment of the Series 2014B Bonds and the interest thereon without limitation as to rate or amount.
On the date hereof, the City has covenanted in its Arbitrage and Tax Certificate (the “Certificate”) to comply with certain continuing requirements that must be satisfied subsequent to the issuance of the Series 2014B Bonds in order to preserve the tax-exempt status of the Series 2014B Bonds pursuant to Section 103(a) of the Internal Revenue Code of 1986, as amended (the "Code"). Pursuant to Section 103(a) of the Code, failure to comply with these requirements could cause interest on the Series 2014B Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Series 2014B Bonds. In the event that the City continuously complies with its covenants and in reliance on representations, certifications of fact and statements of reasonable expectations made by the City in the Certificate, it is our opinion that, pursuant to Section 103(a) of the Code, interest on the Series 2014B Bonds is not included in gross income for purposes of federal income tax and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. It is also our opinion that interest on the Series 2014B Bonds held by a corporate taxpayer is included in “adjusted current earnings” in calculating alternative minimum taxable income for purposes of the federal alternative minimum tax imposed on corporations. We express no opinion regarding other federal tax consequences arising with respect to the Series 2014B Bonds. Further, in our opinion, interest on the Series 2014B Bonds and any gain on the sale thereof are not included in gross income under the New Jersey Gross Income Tax Act. These opinions are based on existing statutes, regulations, administrative pronouncements and judicial decisions.
This opinion is issued as of the date hereof. We assume no obligation to update, revise or supplement this opinion to reflect any facts or circumstances that may come to our attention or any changes in law or interpretations thereof that may occur after the date of this opinion or for any reason whatsoever.
Very truly yours,
McManimon, Scotland & Baumann, LLC Newark - Roseland - Trenton
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APPENDIX D-3
FORM OF SERIES 2014C BONDS LEGAL OPINION
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75 Livingston Avenue, Roseland, NJ 07068 (973) 622-1800
______, 2014
City Council of the City of Bayonne, in the County of Hudson, New Jersey
Dear Council Members:
We have acted as bond counsel to the City of Bayonne, in the County of Hudson, New Jersey (the “City”) in connection with the issuance by the City of $1,027,000 School Bonds, Series 2014C (Federally Taxable) (School Bond Reserve Act, P.L. 1980, c.72, as Amended) (the “Series 2014C Bonds”). In order to render the opinions herein, we have examined laws, documents and records of proceedings, or copies thereof, certified or otherwise identified to us, as we have deemed necessary.
The Series 2014C Bonds are issued pursuant to the Title 18A, Education of the New Jersey Statutes and the Local Bond Law of the State of New Jersey, a resolution of the City adopted October 15, 2014, and Bond Ordinance #O-09-23, finally adopted October 14, 2009, in all respects duly approved and published as required by law.
In our opinion, except insofar as the enforcement thereof may be limited by any applicable bankruptcy, moratorium or similar laws or application by a court of competent jurisdiction of legal or equitable principles relating to the enforcement of creditors' rights, the Series 2014C Bonds are valid and legally binding general obligations of the City, and the City has the power and is obligated to levy ad valorem taxes upon all the taxable real property within the City for the payment of the Series 2014C Bonds and the interest thereon without limitation as to rate or amount.
Further, in our opinion, interest on the Series 2014C Bonds and any gain on the sale thereof are not included in gross income under the New Jersey Gross Income Tax Act. These opinions are based on existing statutes, regulations, administrative pronouncements and judicial decisions.
This opinion is issued as of the date hereof. We assume no obligation to update, revise or supplement this opinion to reflect any facts or circumstances that may come to our attention or any changes in law or interpretations thereof that may occur after the date of this opinion or for any reason whatsoever.
Very truly yours,
McManimon, Scotland & Baumann, LLC Newark - Roseland - Trenton
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APPENDIX E
SPECIMEN MUNICIPAL BOND INSURANCE POLICY
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MUNICIPAL BOND INSURANCE POLICY
ISSUER: [NAME OF ISSUER] Policy No: _____
MEMBER: [NAME OF MEMBER]
BONDS: $______in aggregate principal Effective Date: ______amount of [NAME OF TRANSACTION] [and maturing on] Risk Premium: $______Member Surplus Contribution: $ ______Total Insurance Payment: $______
BUILD AMERICA MUTUAL ASSURANCE COMPANY (“BAM”), for consideration received, hereby UNCONDITIONALLY AND IRREVOCABLY agrees to pay to the trustee (the “Trustee”) or paying agent (the “Paying Agent”) for the Bonds named above (as set forth in the documentation providing for the issuance and securing of the Bonds), for the benefit of the Owners or, at the election of BAM, directly to each Owner, subject only to the terms of this Policy (which includes each endorsement hereto), that portion of the principal of and interest on the Bonds that shall become Due for Payment but shall be unpaid by reason of Nonpayment by the Issuer.
On the later of the day on which such principal and interest becomes Due for Payment or the first Business Day following the Business Day on which BAM shall have received Notice of Nonpayment, BAM will disburse (but without duplication in the case of duplicate claims for the same Nonpayment) to or for the benefit of each Owner of the Bonds, the face amount of principal of and interest on the Bonds that is then Due for Payment but is then unpaid by reason of Nonpayment by the Issuer, but only upon receipt by BAM, in a form reasonably satisfactory to it, of (a) evidence of the Owner’s right to receive payment of such principal or interest then Due for Payment and (b) evidence, including any appropriate instruments of assignment, that all of the Owner’s rights with respect to payment of such principal or interest that is Due for Payment shall thereupon vest in BAM. A Notice of Nonpayment will be deemed received on a given Business Day if it is received prior to 1:00 p.m. (New York time) on such Business Day; otherwise, it will be deemed received on the next Business Day. If any Notice of Nonpayment received by BAM is incomplete, it shall be deemed not to have been received by BAM for purposes of the preceding sentence, and BAM shall promptly so advise the Trustee, Paying Agent or Owner, as appropriate, any of whom may submit an amended Notice of Nonpayment. Upon disbursement under this Policy in respect of a Bond and to the extent of such payment, BAM shall become the owner of such Bond, any appurtenant coupon to such Bond and right to receipt of payment of principal of or interest on such Bond and shall be fully subrogated to the rights of the Owner, including the Owner’s right to receive payments under such Bond. Payment by BAM either to the Trustee or Paying Agent for the benefit of the Owners, or directly to the Owners, on account of any Nonpayment shall discharge the obligation of BAM under this Policy with respect to said Nonpayment.
Except to the extent expressly modified by an endorsement hereto, the following terms shall have the meanings specified for all purposes of this Policy. “Business Day” means any day other than (a) a Saturday or Sunday or (b) a day on which banking institutions in the State of New York or the Insurer’s Fiscal Agent (as defined herein) are authorized or required by law or executive order to remain closed. “Due for Payment” means (a) when referring to the principal of a Bond, payable on the stated maturity date thereof or the date on which the same shall have been duly called for mandatory sinking fund redemption and does not refer to any earlier date on which payment is due by reason of call for redemption (other than by mandatory sinking fund redemption), acceleration or other advancement of maturity (unless BAM shall elect, in its sole discretion, to pay such principal due upon such acceleration together with any accrued interest to the date of acceleration) and (b) when referring to interest on a Bond, payable on the stated date for payment of interest. “Nonpayment” means, in respect of a Bond, the failure of the Issuer to have provided sufficient funds to the Trustee or, if there is no Trustee, to the Paying Agent for payment in full of all principal and interest that is Due for Payment on such Bond. “Nonpayment” shall also include, in respect of a Bond, any payment made to an Owner by or on behalf of the Issuer of principal or interest that is Due for Payment, which payment has been recovered from such Owner pursuant to the United States Bankruptcy Code in accordance with a final, nonappealable order of a court having competent jurisdiction. “Notice” means delivery to BAM of a notice of claim and certificate, by certified mail, email or telecopy as set forth on the attached Schedule or other acceptable electronic delivery, in a form satisfactory to BAM, from and signed by an Owner, the Trustee or the Paying Agent, which notice shall specify (a) the person or entity making the claim, (b) the Policy Number, (c) the claimed amount, (d) payment instructions and (e) the date such claimed amount becomes or became Due for Payment. “Owner” means, in respect of a Bond, the person or entity who, at the time of Nonpayment, is entitled under the terms of such Bond to payment thereof, except that “Owner” shall not include the Issuer, the Member or any other person or entity whose direct or indirect obligation constitutes the underlying security for the Bonds.
BAM may appoint a fiscal agent (the “Insurer’s Fiscal Agent”) for purposes of this Policy by giving written notice to the Trustee, the Paying Agent, the Member and the Issuer specifying the name and notice address of the Insurer’s Fiscal Agent. From and after the date of receipt of such notice by the Trustee, the Paying Agent, the Member or the Issuer (a) copies of all notices required to be delivered to BAM pursuant to this Policy shall be simultaneously delivered to the Insurer’s Fiscal Agent and to BAM and shall not be deemed received until received by both and (b) all payments required to be made by BAM under this Policy may be made directly by BAM or by the Insurer’s Fiscal Agent on behalf of BAM. The Insurer’s Fiscal Agent is the agent of BAM only, and the Insurer’s Fiscal Agent shall in no event be liable to the Trustee, Paying Agent or any Owner for any act of the Insurer’s Fiscal Agent or any failure of BAM to deposit or cause to be deposited sufficient funds to make payments due under this Policy.
To the fullest extent permitted by applicable law, BAM agrees not to assert, and hereby waives, only for the benefit of each Owner, all rights (whether by counterclaim, setoff or otherwise) and defenses (including, without limitation, the defense of fraud), whether acquired by subrogation, assignment or otherwise, to the extent that such rights and defenses may be available to BAM to avoid payment of its obligations under this Policy in accordance with the express provisions of this Policy. This Policy may not be canceled or revoked.
This Policy sets forth in full the undertaking of BAM and shall not be modified, altered or affected by any other agreement or instrument, including any modification or amendment thereto. Except to the extent expressly modified by an endorsement hereto, any premium paid in respect of this Policy is nonrefundable for any reason whatsoever, including payment, or provision being made for payment, of the Bonds prior to maturity. THIS POLICY IS NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE NEW YORK INSURANCE LAW. THIS POLICY IS ISSUED WITHOUT CONTINGENT MUTUAL LIABILITY FOR ASSESSMENT.
In witness whereof, BUILD AMERICA MUTUAL ASSURANCE COMPANY has caused this Policy to be executed on its behalf by its Authorized Officer.
BUILD AMERICA MUTUAL ASSURANCE COMPANY
By: ______Authorized Officer
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Notices (Unless Otherwise Specified by BAM)
Email: [email protected] Address: 1 World Financial Center, 27th floor 200 Liberty Street New York, New York 10281 Telecopy: 212-962-1524 (attention: Claims)
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