Baltimore County, Maryland; (Ii) Under Existing Law, the Bans and the Interest NEW ISSUES–Book-Entryonly

This Preliminary Official Statement and the information contained herein are subject to completion or amendment and approval by the County. These securities may not be sold nor may offers to buy be accepted prior to the time the Official Statement is delivered in final form. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. redeemable priortomaturity. BANs. BaltimoreCounty,MarylandwillactasPayingAgentandNoteRegistrar.TheBANs are not day months.InterestontheBANswillbepayableSeptember18,2018andmaturitydate ofthe delivery to the maturity date of the BANs, computed on the basis of a year consisting of twelve 30- as Cede&Co.istheregisteredownerofBANs.TheBANswillbearinterestfrom date of New York (“DTC”), to whichprincipalandinterestpayments on theBANs will bemadesolong registered inthenameofCede&Co.,asnomineeTheDepositoryTrustCompany,New York, OF THEBANS-Book-EntryOnlySystem,”theBANswillinitiallybeissuedinbook-entryform and denomination of$5,000eachoranyintegralmultiplethereof.Asdescribedunder“DESCRIPTION Dated: DateofDelivery herein speaksonly asofthat date. March 16,2018. in theNoticesofSale.The BANsindefinitiveformwillbeavailablefor deliverytoDTConorabout McKennon Shelton&Henn LLP,Baltimore,Maryland,BondCounsel, andotherconditionsspecified the purposeofdeterminingbranchprofits taximposedoncertainforeigncorporations. adjustment andinterestearnedontheBANs willbeincludableintheapplicabletaxablebasefor minimum taxableincomeofindividualsasan enumerateditemoftaxpreferenceorotherspecific interest earnedontheBANs,forfederalincome taxpurposes,isnotincludedinthealternative from gross income for federal income tax purposes. As described herein under“TAX MATTERS,” and underexistingstatutes,regulations decisions,interestontheBANswillbeexcludable or theinterestthereon;and(iii)assumingcompliance withcertaincovenantsdescribedherein as toestateorinheritancetaxes,anyother taxesnotleviedorassesseddirectlyontheBANs payable on them are exempt from State of Maryland and local taxation; no opinion is expressed obligations of Baltimore County, Maryland; (ii) under existing law, the BANs and the interest NEW ISSUES–Book-EntryOnly

$246,000,000 BaltimoreCountyConsolidatedPublicImprovementBondAnticipationNotes–2018Series The BondAnticipationNotes(“BANs”)willbeissuableasfullyregisterednotesinthe The dateof thisOfficialStatement isMarch__,2018 andtheinformation contained The BANsareofferedfor deliverywhen,asandifissued,subjecttothe approvingopinionsof In theopinionofBondCounsel,(i)BANswillbevalidandlegallybindinggeneral $245,000,000 BaltimoreCountyMetropolitanDistrictBondAnticipationNotes–2018Series PRELIMINARY OFFICIAL STATEMENT DATED FEBRUARY 21, 2018 General ObligationBondAnticipationNotes BALTIMORE COUNTY, MARYLAND

Relating totheIssuanceof

Official Statement $491,000,000 Moody’s InvestorsService: S&P GlobalRatings: See “Ratings” Fitch Ratings: Due: March18,2019

AMOUNTS, INTEREST RATES AND PRICES OR YIELDS

$245,000,000 Baltimore County Metropolitan District Bond Anticipation Notes – 2018 Series

Interest Rate*: Price or Yield*: CUSIP No.:

$246,000,000 Baltimore County Consolidated Public Improvement Bond Anticipation Notes – 2018 Series

Interest Rate*: Price or Yield*: CUSIP No.:

*The interest rates shown above are the interest rates payable by the County resulting from the successful bids for the BANs on March 1, 2018 by groups of banks and investment banking firms. The prices or yields shown above were furnished by the successful bidders for the BANs. Other information concerning the terms of reoffering of the BANs should be obtained from the successful bidders, and not from the County. See “SALE AT COMPETITIVE BIDDING.”

The CUSIP numbers listed above are provided by CUSIP Global Services and the County does not take any responsibility for the accuracy thereof. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP Global Services information.

BALTIMORE COUNTY, MARYLAND

CERTAIN ELECTED OFFICIALS

COUNTY EXECUTIVE

Kevin Kamenetz

COUNTY COUNCIL

Julian Earl Jones, Jr., Fourth District, Chairman Tom Quirk, First District Vicki Almond, Second District Wade Kach, Third District David Marks, Fifth District Cathy A. Bevins, Sixth District Todd Crandell, Seventh District ______

CERTAIN APPOINTED OFFICIALS

Fred Homan, County Administrative Officer Keith Dorsey, Director of Budget and Finance Michael E. Field, County Attorney Will Anderson, Director of Economic and Workforce Development ______

BOND COUNSEL

McKennon Shelton & Henn LLP 401 East Pratt Street, Suite 2600 Baltimore, Maryland 21202

______

FINANCIAL ADVISOR

Public Resources Advisory Group 39 Broadway, Suite 1210 New York, New York 10006

iii

No dealer, broker, salesman or other person has been authorized by the County to give any information or to make any representations with respect to Baltimore County, Maryland, or the BANs issued thereby, other than those contained in this Official Statement, and, if given or made, such other information or representations must not be relied upon as having been authorized by the County. 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 BANs by any person, in any jurisdiction in which it is unlawful for such person to make such offer, solicitation, or sale.

TABLE OF CONTENTS

Page Page SUMMARY OF OFFICIAL STATEMENT ...... v General Fund Revenues and Expenditures ...... 28 SECTION I − THE ISSUES ...... 1 Baltimore County’s 25 Largest Taxpayers ...... 30 Description of the BANs ...... 1 Metropolitan District Enterprise Fund ...... 33 Application of Proceeds ...... 4 Budgetary Procedure...... 34 Tax Matters ...... 5 Pension and Retirement Plans ...... 36 Ratings ...... 7 SECTION IV − ECONOMIC AND DEMOGRAPHIC Sale at Competitive Bidding ...... 7 INFORMATION ...... 39 Continuing Disclosure ...... 8 Location and Size...... 39 Approval of Legal Proceedings ...... 8 Population ...... 39 Approval of Official Statement ...... 8 Population by Age Group...... 39 SECTION II − DEBT SUMMARY ...... 9 Income Levels ...... 40 Issuance and Authorization of Bonded Indebtedness...... 9 Per Capita Personal Income...... 40 Legal Debt Margin ...... 9 Distribution of Households by Effective Buying Income...... 40 Short Term Borrowing ...... 9 Employment ...... 40 Net Tax-Supported Debt Outstanding ...... 10 Average Annual Employment ...... 41 Metropolitan District Debt Outstanding...... 10 Employment by Industry Profile ...... 41 No Overlapping Debt ...... 10 Labor Market Characteristics ...... 42 Debt Information ...... 10 Private and Public Sector Employers ...... 43 Key Debt Ratios ...... 10 Commercial and Residential Growth ...... 44 Rapidity of Principal Retirement ...... 11 New Business and Real Estate Activity ...... 44 Ratio of Debt Service to General Fund Revenues ...... 11 New Business Formation...... 48 Summary of Debt Service Charges Until Maturity ...... 12 Transportation Facilities...... 48 General Obligation Debt Approved and Unissued ...... 13 Major Business Parks ...... 50 Leases ...... 13 Industrial Redevelopment...... 52 Other Agreements and Commitments ...... 15 Technology Locations ...... 53 Capital Improvement Program Overview ...... 18 Enterprise Zones...... 54 Capital Budget and Five Year Capital Program ...... 19 Housing ...... 55 SECTION III − FINANCIAL INFORMATION ...... 20 SECTION V − COUNTY GOVERNMENT AND Measurement Focus and Basis of Accounting ...... 20 ADMINISTRATION...... 56 Fund Financial Statements ...... 20 Description of the County Government Structure ...... 56 Awards ...... 21 Biographies ...... 56 Revenue Stabilization Reserve and General Fund Surplus ... 21 Government Organization Chart of Baltimore County...... 59 Investment of Operating and Capital Funds ...... 21 Description of Services and Agency Functions ...... 60 Five Year Summary of General Fund Revenues and Labor Relations ...... 62 Expenditures ...... 22 Litigation...... 62 General Fund Comparative Statement of Revenues, Auditors...... 63 Expenditures and Changes in Fund Balance ...... 23 Appendix A−Financial Statements Five Year Summary of General Fund Budget and Actual Table of Contents for Financial Statements ...... A-1 Results ...... 24 Appendix B−Proposed Forms of Opinion of Bond Counsel...... B-1 Five Year Summary of General Fund Balance ...... 25 Appendix C−Continuing Disclosure Agreement ...... C-1 Fiscal Year 2018 Operating Budget ...... 25 Appendix D−Notice of Sale Metropolitan District BANs ...... D-1 General Fund Estimated Revenues and Budgeted Appendix E−Notice of Sale Consolidated Public Imp. BANs .. E-1 Expenditures FY2017 and FY2018 ...... 26 Appendix F-1−Form Qualified Bid Issue Price Certificate ...... F-1 Fiscal Years 2017 and 2018 Interim Budget Comparison .... 27 Appendix F-2−Form Nonqualified Bid Issue Price Certificate . F-2

This Official Statement is not to be construed as a contract or agreement between the County and the purchasers or holders of any of the BANs.

All quotations from and summaries and explanations of provisions of laws and documents herein do not purport to be complete and reference is made to such laws and documents for full and complete statements of their provisions. Any statements made in this Official Statement involving estimates or matters of opinion, whether or not expressly so stated, are intended merely as estimates or opinion and not as representations of fact. The information and expressions of opinion herein are subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implications that there has been no change in the affairs of the County since the respective dates as of which information is given herein.

SUMMARY OF OFFICIAL STATEMENT

The Issuer ...... Baltimore County is a body corporate and politic that performs all local governmental functions within its jurisdiction. It has no incorporated towns, villages, municipalities or other political subdivisions with separate taxing authority. There is no overlapping debt within the County. Baltimore County and Baltimore City are separate and independent corporate and political units.

The BANs ...... The $245,000,000 Baltimore County Metropolitan District Bond Anticipation Notes – 2018 Series and the $246,000,000 Baltimore County Consolidated Public Improvement Bond Anticipation Notes − 2018 Series (collectively, the “BANs”).

Maturity Date ...... The BANs mature on March 18, 2019.

Interest Payment Dates ...... The BANs will bear interest from the date of delivery to the maturity date of the BANs, computed on the basis of a year consisting of twelve 30-day months. Interest on the BANs will be payable on September 18, 2018 and the maturity date of the BANs.

Redemption ...... The BANs are not redeemable prior to maturity.

Application of Proceeds ...... The BANs are being issued for the purpose of providing interim funding for the County’s Capital Program.

Security for BANs...... The BANs will be obligations of the County for the payment and performance of which the full faith and credit and unlimited taxing power of the County are pledged. The principal source of repayment for the BANs will be the proceeds of the sale of additional bond anticipation notes or the bonds for which the BANs were issued in anticipation.

Maryland and Federal Income Tax ...... Under existing law, the BANs and the interest payable on them are exempt from State of Maryland and local taxation; no opinion is expressed as to estate or inheritance taxes, or any other taxes not levied or assessed directly on the BANs or the interest thereon; and, assuming compliance with certain covenants described herein, and under existing statutes, regulations and decisions, interest on the BANs will be excludable from gross income for federal income tax purposes. As described herein under “TAX MATTERS,” interest earned on the BANs, for federal income tax purposes, is not included in the alternative minimum taxable income of individuals as an enumerated item of tax preference or other specific adjustment and interest earned on the BANs will be includable in the applicable taxable base for the purpose of determining the branch profits tax imposed on certain foreign corporations.

Book-Entry Only System ...... The BANs will initially be issued in book-entry form and registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York, which will act as securities depository for the BANs. As long as the book-entry system is maintained, beneficial owners of the BANs will not receive certificates representing their ownership interests in the BANs.

Continuing Disclosure ...... The County has covenanted for the benefit of the owners of the BANs to provide certain financial information and operating data at least annually, and to provide notice of certain events.

The information set forth in the Summary of the Official Statement is qualified in its entirety by the detailed information contained elsewhere in this document.

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Official Statement Relating to the Issuance of $491,000,000 Baltimore County, Maryland General Obligation Bond Anticipation Notes $245,000,000 Baltimore County Metropolitan District Bond Anticipation Notes – 2018 Series $246,000,000 Baltimore County Consolidated Public Improvement Bond Anticipation Notes – 2018 Series

SECTION I: THE ISSUES

The purpose of this Official Statement, including the cover page and appendices, is to provide information for prospective purchasers and others who may become holders of any of the $245,000,000 Baltimore County Metropolitan District Bond Anticipation Notes – 2018 Series (the “Metropolitan District BANs”) and $246,000,000 Baltimore County Consolidated Public Improvement Bond Anticipation Notes – 2018 Series (the “Consolidated Public Improvement BANs,” together with the Metropolitan District BANs, hereinafter referred to as the “BANs”) issued by Baltimore County, Maryland (the “County”). This Official Statement has been approved and authorized by the County for use in connection with the sale of the BANs. Financial and other information contained in this Official Statement have been prepared by the County from its records (except where other sources are noted). The information is not intended to indicate future or continuing trends in the financial or economic position of the County.

DESCRIPTION OF THE BANS

General

The Consolidated Public Improvement BANs will be issued in the aggregate principal amount of $246,000,000, and the Metropolitan District BANs will be issued in the aggregate principal amount of $245,000,000. The BANs will be dated the date of delivery, will mature on March 18, 2019 and bear interest at the interest rates set forth on the inside cover page of this Official Statement. The BANs will bear interest from the date of delivery to the maturity date of the BANs, computed on the basis of a year consisting of twelve 30-day months. Interest on the BANs will be payable on September 18, 2018 and the maturity date of the BANs. The BANs are not redeemable prior to maturity.

The BANs will be obligations of the County for the payment and performance of which the full faith and credit and unlimited taxing power of the County are pledged (see “Sources of Payment” below). So long as Cede & Co. is the registered owner of the BANs, the interest payments due under the BANs shall be made to Cede & Co. as nominee of The Depository Trust Company, New York, New York (“DTC”).

The principal of the BANs will be payable at the offices of the Director of Budget and Finance, Baltimore County, Maryland (the “Paying Agent” and “Note Registrar”). The County may designate another entity as Note Registrar and Paying Agent upon 30 days’ prior written notice to the registered owners of the BANs. Interest on the BANs will be payable by check or draft of the Paying Agent mailed to the registered owners thereof. So long as Cede & Co. is the registered owner of the BANs, the principal of the BANs may be paid at a location agreed upon by the County and DTC and may also be made by wire transfer of funds. The principal of and interest on the BANs will be paid in lawful money of the United States of America in the manner and at the places herein above prescribed.

Authorization

The BANs are being issued under the authority of Section 19-212 of the Local Government Article of the Annotated Code of Maryland (2013 Replacement Volume and 2017 Supplement) (the “Local Government Article”), the Baltimore County Charter (the “Charter”), with respect to the Metropolitan District BANs, Chapter 539 of the Acts of the General Assembly of Maryland of 1924, as amended, and with respect to the Consolidated Public Improvements BANs, Section 19-101 of the Local Government Article, and certain borrowing plan ordinances enacted by the County Council of Baltimore County, Maryland, as authorized by Bill No. 65-17 of the County Council of Baltimore County, Maryland, adopted on November 20, 2017.

Sources of Payment

The principal source of repayment of the BANs will be proceeds from the County’s issuance and sale of additional bond anticipation notes in the form of notes, commercial paper or other obligations or bonds in anticipation of the sale of which the BANs are issued. The County has covenanted to issue, upon its full faith and credit, bonds in anticipation of the sale of which the

BANs are issued, when, and as soon as, the reason for deferring the issuance thereof no longer exists, and to pay the principal of and interest on the BANs from the proceeds of such bonds. If the County shall not, for any reason, issue and sell its bonds as aforesaid, or if the proceeds from the sale of such bonds shall be insufficient to pay the principal of and interest on the BANs, then the revenues from taxes and other sources intended for application to debt service on such bonds will be applied to the payment of the principal of and interest on the BANs. In such event, with respect to the Consolidated Public Improvement BANs, the County shall levy or cause to be levied ad valorem taxes upon all the assessable property within the corporate limits of the County in rate and amount sufficient to provide for the payment, when due, of the principal of and interest on all such Consolidated Public Improvement BANs. In the event the proceeds from the taxes so levied in any such fiscal year shall prove inadequate for such purposes, additional taxes shall be levied in the succeeding fiscal year to make up any such deficiency. With respect to the Metropolitan District BANs, the principal of and interest on the Metropolitan District BANs will be paid from time to time, as and when due, from the funds held by the County realized from the levy and collection of special assessments and charges within the Metropolitan District of the County (the “Metropolitan District”). In the event of a deficiency of such funds from special assessments and charges at any time while any of the Metropolitan District BANs are outstanding, for the purpose of paying the principal of and interest on the Metropolitan District BANs, the County will promptly levy upon all legally assessable property within the Metropolitan District a tax or taxes in an amount or amounts sufficient to make up any deficiency. Further, in the event the proceeds of such tax or taxes so levied prove insufficient, the County will levy a tax or taxes upon all of the legally assessable property within the entire corporate limits of the County in rates and amounts sufficient to provide for payment of the balance of the principal of and interest on the Metropolitan District BANs. Repayment of the principal of and the interest on the BANs is guaranteed by the irrevocable pledge of the full faith and credit and unlimited taxing power of the County.

Noteholders’ Remedies

It is the opinion of Bond Counsel that the County may be sued in the event that it fails to perform its obligations under the BANs to the holders thereof and that any judgments resulting from such suits would be enforceable against the County. Nevertheless, a holder of a BAN who has obtained any such judgment may be required to seek additional relief to compel the County to assess, levy and collect such taxes as may be necessary to provide the funds from which such judgment may be paid. Although there is no Maryland law with respect to this issue, it is the opinion of Bond Counsel that the appropriate courts of Maryland have jurisdiction to grant additional relief, such as a mandatory injunction, if necessary, to enforce the levy and collection of such taxes and payment of the proceeds thereof to the holders of general obligation notes, pari passu, subject to the inherent constitutional limitations referred to below.

It is also the opinion of Bond Counsel that, while remedies would be available to noteholders and while general obligation notes of the County are entitled to constitutional protection against the impairment of the obligation of contracts, such constitutional protection and the enforcement of such remedies would not be absolute. Enforcement of a claim for payment of the principal of or interest on the BANs could be made subject to the provisions of Chapter 9 of the federal bankruptcy laws or of any statutes that may hereafter be constitutionally enacted by the United States Congress or the Maryland General Assembly extending the time of payment or imposing other constraints upon enforcement.

Redemption

The BANs are not subject to redemption prior to maturity.

Form and Denomination

The BANs will be issuable in fully registered form in the denomination of $5,000 or any integral multiple thereof. The BANs will initially be issued in book-entry form without physical distribution of certificates made to the public. DTC will act as securities depository for the BANs, and the BANs will be registered in the name of Cede & Co., as nominee of DTC.

One certificate for each of the Consolidated Public Improvement BANs and the Metropolitan District BANs will be issued to DTC and held in its custody. The book-entry system will evidence ownership of the BANs in the principal amount of $5,000 or any integral multiple thereof, with transfers of ownership effected on the records of DTC and its participants.

Book-Entry Only System – General

DTC will act as securities depository for the BANs. The BANs will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered certificate for each of the Consolidated Public Improvement BANs and the Metropolitan District BANs will be issued, each in the aggregate principal amount of such BAN, 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, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com.

Purchases of the BANs under the DTC system must be made by or through Direct Participants, which will receive a credit for the BANs on DTC’s records. The ownership interest of each actual purchaser of each BAN (“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 BANs 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 BANs, except in the event that use of the book-entry system for the BANs is discontinued.

To facilitate subsequent transfers, all BANs 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 BANs 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 BANs; DTC’s records reflect only the identity of the Direct Participants to whose accounts such BANs 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 BANs unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the County as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts BANs are credited on the record date (identified in a listing attached to the Omnibus Proxy).

Distributions on the BANs 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 County or the Registrar and Paying Agent, on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, the Registrar and Paying Agent, or the County, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the County or the Registrar and Paying Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

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

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

Book-Entry Only System − Miscellaneous

The information in the Section “Book-Entry Only System − General” has been obtained by the County from DTC. The County takes no responsibility for the accuracy or completeness thereof. The County will not have any responsibility or obligations to DTC Participants or the persons for whom they act as nominees with respect to the payments to or the providing of notice to the DTC Participants, or the Indirect Participants, or Beneficial Owners. The County cannot and does not give any assurance that DTC Participants will distribute principal and interest payments paid to DTC or its nominees, as the registered owner, or any notices, to the Beneficial Owners, or that they will do so on a timely basis or that DTC will serve and act in the manner described in this Official Statement.

Discontinuation of Book-Entry Only System

In the event that the book-entry only system is discontinued, the BANs will be delivered by DTC to the Note Registrar and such BANs will be exchanged for BANs registered in the names of DTC Participants or the Beneficial Owners identified to the Note Registrar. In such event, certain provisions of the BANs pertaining to ownership of the BANs will be applicable to the registered owners of the BANs as described below.

Interest on the BANs will be payable by check mailed by the note registrar and paying agent designated by the County (the “Designated Note Registrar”) to the persons in whose names the BANs are registered as of the close of business on the Regular Record Date (being the 15th day of the month immediately preceding the month in which the interest payment dates of the BANs occur) at the addresses shown on the registration books of the County maintained by the Designated Note Registrar; provided, however, that any such interest not punctually paid or duly provided for shall cease to be payable to the registered owner on such Regular Record Date, and may be paid to the persons in whose names such BANs are registered as of the close of business on a date to be fixed by the Designated Note Registrar for the payment of such defaulted interest (the “Special Record Date”), notice of which will be given by letter mailed first class, postage prepaid, to such persons, not less than 30 days prior to such Special Record Date, at the addresses of such persons appearing on the registration books of the County maintained by the Designated Note Registrar, or may be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the BANs may be listed and upon such notice as may be required by such exchange. The principal of and premium, if any, on the BANs will be payable at the principal corporate trust office of the Designated Note Registrar.

The BANs in fully certificated form will be issued as fully registered BANs without coupons in the denomination of $5,000 each or any integral multiple thereof. Such BANs will be transferable only upon the registration books kept at the principal corporate trust office of the Designated Note Registrar, by the registered owner thereof in person, or by an attorney duly authorized in writing, upon surrender thereof together with a written instrument of transfer in the form attached thereto and satisfactory to the Designated Note Registrar, and duly executed by the registered owner or a duly authorized attorney. The County may deem and treat the person in whose name a BAN is registered as the absolute owner thereof for the purpose of receiving payment of or on account of the principal thereof and interest due thereon and for all other purposes.

The BANs may be transferred or exchanged at the principal corporate trust office of the Designated Note Registrar. Upon any such transfer or exchange, the County shall execute and the Designated Note Registrar shall authenticate and deliver a new registered BAN or BANs without coupons of any of the authorized denominations in an aggregate principal amount equal to the principal amount of the BAN exchanged or transferred, and maturing on the same date and bearing interest at the same rate. In each case, the Designated Note Registrar may require payment by any holder of BANs requesting exchange or transfer of BANs of any tax, fee or other governmental charge, shipping charges and insurance that may be required to be paid with respect to such exchange or transfer, but otherwise no charge shall be made to the holder of BANs for such exchange or transfer.

APPLICATION OF PROCEEDS

Baltimore County Metropolitan District Bond Anticipation Notes – 2018 Series

The $245,000,000 aggregate principal amount of proceeds from the sale of the Metropolitan District BANs will be utilized for interim funding of the design and construction, purchase or acquisition of the water supply, sewerage, and drainage systems.

Baltimore County Consolidated Public Improvement Bond Anticipation Notes − 2018 Series

The $246,000,000 aggregate principal amount of proceeds from the sale of the Consolidated Public Improvement BANs will be utilized for interim funding for Public Works, Operational Buildings, Parks Preservations and Greenways, Refuse Disposal, Agricultural Preservation, Community Improvements, Community College, and Public Schools.

TAX MATTERS

The following is only a general summary of certain provisions of the Internal Revenue Code of 1986, as amended (the “Code”) as enacted and in effect on the date hereof and does not discuss all aspects of federal income taxation that may be relevant to a particular holder of BANs in light of such holder’s particular circumstances and income tax situation. Each holder of BANs should consult such holder’s tax advisor as to the specific tax consequences to such holder of the ownership and disposition of the BANs, including the application of state, local, foreign and other tax laws.

Maryland Income Taxation

In the opinion of Bond Counsel, under existing law, the BANs and the interest payable on them are exempt from the State of Maryland and local taxation. No opinion is expressed as to estate or inheritance taxes, or any other taxes not levied or assessed directly on the BANs or the interest thereon. Interest on the BANs may be subject to state or local income taxes in jurisdictions other than the State of Maryland under applicable state or local tax laws. Purchasers of the BANs should consult their own tax advisors with respect to the taxable status of the BANs in jurisdictions other than Maryland.

Federal Income Taxation

In the opinion of Bond Counsel, assuming compliance with certain covenants described herein and under existing statutes, regulations and decisions, the interest on the BANs will be excludable from gross income for federal income tax purposes.

Under the provisions of the Code, there are certain restrictions that must be met subsequent to the delivery of the BANs, including restrictions that must be complied with throughout the term of the BANs, in order that the interest thereon be excludable from gross income. These include the following: (i) a requirement that certain earnings received from the investment of the proceeds of the BANs be rebated to the United States of America under certain circumstances (or that certain payments in lieu of rebate be made); (ii) other requirements applicable to the investment of the proceeds of the BANs; and (iii) other requirements applicable to the use of the proceeds of the BANs and the facilities financed or refinanced with such proceeds. Failure to comply with one or more of these requirements could result in the inclusion of the interest payable on the BANs in gross income for federal income tax purposes, effective from the date of their issuance. The County has covenanted to regulate the investment of the proceeds of the BANs and to take such other actions as may be required to maintain the excludability from gross income for federal income tax purposes of interest on the BANs.

Further, under existing statutes, regulations and decisions, Bond Counsel is of the opinion that interest on the BANs is not included in the alternative minimum taxable income of individuals as an enumerated item of tax preference or other specific adjustment. For taxable years that began before January 1, 2018, for purposes of calculating the corporate alternative minimum tax, a corporation subject to such tax will be required to increase its alternative minimum taxable income by 75% of the amount by which its “adjusted current earnings” exceed its alternative minimum taxable income (computed without regard to this current earnings adjustment and the alternative tax net operating loss deduction). For such purposes, “adjusted current earnings” may include, among other items, interest income from the BANs. The alternative minimum tax on corporations has been repealed for taxable years beginning on or after January 1, 2018. In addition, interest income on the BANs will be includable in the applicable taxable base for the purpose of determining the branch profits tax imposed by the Code on certain foreign corporations engaged in trade or business in the United States.

In rendering its opinions with respect to the BANs, Bond Counsel will rely without investigation on certifications provided by the County with respect to certain material facts within the knowledge of the County relevant to the tax-exempt status of interest on the BANs.

Certain Other Federal Tax Consequences

There are other federal tax consequences of ownership of obligations such as the BANs under certain circumstances, including the following: (i) deductions are disallowed for certain expenses of taxpayers allocable to interest on tax-exempt obligations, as well as interest on indebtedness incurred or continued to purchase or carry tax-exempt obligations and interest expense of financial institutions allocable to tax-exempt interest; (ii) for property and casualty insurance companies, the amount of the deduction for losses incurred must be reduced by 25% of the sum of tax-exempt interest income and the deductible portion of dividends received by such companies; (iii) interest income that is exempt from tax must be taken into account for the purpose of determining whether, and what amount of, Social Security or railroad retirement benefits are includable in gross income for federal income tax purposes; (iv) for S corporations having Subchapter C earnings and profits, the receipt of certain levels of passive investment income, which includes interest on tax-exempt obligations such as the BANs, can result in the imposition of tax on such passive investment income and, in some cases, loss of S corporation status; (v) net gain realized upon the sale or other disposition of the BANs must be taken into account when computing the 3.8% Medicare tax with respect to investment income imposed on certain higher income individuals and specified trusts and estates; and (vi) receipt of certain investment income,

including interest on the BANs, is considered when determining qualification limits for obtaining the earned income credit provided by Section 32(a) of the Code.

Tax Accounting Treatment of Discount BANs

The BANs may be issued at an initial public offering price, which is less than the amount payable on such BANs at maturity (the “Discount BANs”). The difference between the initial offering price (including accrued interest, if any) at which a substantial amount of the Discount BANs was sold and the stated redemption price (principal and interest) of such Discount BANs payable at maturity constitutes original issue discount. In the case of any holder of Discount BANs, the amount of such original issue discount which is treated as having accrued with respect to such Discount BANs is added to the original cost basis of the holder in determining, for federal income tax purposes, gain or loss upon disposition (including sale or repayment at maturity). For federal income tax purposes (a) any holder of a Discount BAN will recognize gain or loss upon the disposition of such security (including sale or payment at maturity) in an amount equal to the difference between (i) the amount received upon such disposition and (ii) the sum of (1) the holder's original cost basis in such Discount BAN, and (2) the amount of original issue discount attributable to the period during which the holder held such Discount BAN, and (b) the amount of the basis adjustment described in clause (a)(ii)(2) will not be included in the gross income of the holder.

Original issue discount on Discount BANs will be attributed to permissible compounding periods during the life of any Discount BANs in accordance with a constant rate of interest accrual method. The yield to maturity of the Discount BANs is determined using permissible compounding periods. In general, the length of a permissible compounding period cannot exceed one year and a compounding period must end on the maturity date. Such yield then is used to determine an amount of accrued interest for each permissible compounding period. For this purpose, interest is treated as compounding periodically at the end of each applicable compounding period. The amount of original issue discount which is treated as having accrued in respect of a Discount BAN for any particular compounding period is equal to the excess of (a) the product of (i) the yield for the Discount BAN (adjusted as necessary for an initial short period) divided by the number of compounding periods in a year multiplied by (ii) the amount that would be the tax basis of such Discount BAN at the beginning of such period if held by an original purchaser who purchased at the initial public offering price, over (b) the amount actually payable as interest on such Discount BAN during such period. For purposes of the preceding sentence the tax basis of a Discount BAN, if held by an original purchaser, can be determined by adding to the initial public offering price of such Discount BAN the original issue discount that is treated as having accrued during all prior compounding periods. If a Discount BAN is sold or otherwise disposed of between compounding dates, then interest which would have accrued for that compounding period for federal income tax purposes is to be apportioned in equal amounts among the days in such compounding period.

The yield (and related prices) furnished by the successful bidders for the BANs as shown on the inside cover of this Official Statement may not reflect the initial issue price for the purposes of determining the original issue discount for federal income tax purposes.

The foregoing summarizes certain federal income tax consequences of original issue discount with respect to the Discount BANs but does not purport to deal with all aspects of federal income taxation that may be relevant to particular investors or circumstances, including those set out above. Prospective purchasers of Discount BANs should consider possible state and local income, excise or franchise tax consequences arising from original issue discount on Discount BANs. In addition, prospective corporate purchasers should consider possible federal tax consequences arising from original issue discount on such Discount BANs under the branch profits tax. The amount of original issue discount considered to have accrued may be reportable in the year of accrual for state and local tax purposes or for purposes of the branch profits tax without a corresponding receipt of cash with which to pay any tax liability attributable to such discount. Purchasers with questions concerning the detailed tax consequences of transactions in the Discount BANs should consult their tax advisors.

Purchase, Sale and Retirement of BANs

Except as noted below in the case of market discount, the sale or other disposition of a BAN will normally result in capital gain or loss to its holder. A holder's initial tax basis in a BAN will be its cost. Upon the sale or retirement of a BAN, for federal income tax purposes, a holder will recognize capital gain or loss upon the disposition of such security (including sale or payment at maturity) in an amount equal to the difference between (a) the amount received upon such disposition and (b) the tax basis in such BAN, determined by adding to the original cost basis in such BAN the amount of original issue discount that is treated as having accrued as described under “TAX MATTERS – Tax Accounting Treatment of Discount BANs.” Such gain or loss will be a long-term capital gain or loss if at the time of the sale or retirement the BAN has been held for more than one year. Present law taxes both long and short-term capital gains of corporations at the rates applicable to ordinary income. For noncorporate taxpayers, however, short-term capital gains are taxed at the rates applicable to ordinary income, while net capital gains are taxed at lower rates. Net capital gains are the excess of net long-term capital gains (gains on capital assets held for more than one year) over net short-term capital losses.

Market Discount

If a holder acquires a BAN after its original issuance, at a discount below its stated redemption price at maturity (or in the case of a BAN issued at an original issue discount, at a price that produces a yield to maturity higher than the yield to maturity at which such bond anticipation note was first issued), the holder will be deemed to have acquired the BAN at “market discount,” unless the amount of market discount is de minimis, as described in the following paragraph. If a holder that acquires a BAN with market discount subsequently realizes a gain upon the disposition of the BAN, such gain shall be treated as taxable interest income to the extent such gain does not exceed the accrued market discount attributable to the period during which the holder held such BAN, and any gain realized in excess of such market discount will be treated as capital gain. Potential purchasers should consult their tax advisors as to the proper method of accruing market discount.

In the case of a BAN not issued at an original issue discount, market discount will be de minimis if the excess of the BAN’s stated redemption price at maturity over the holder's cost of acquiring the BAN is less than 0.25% of the stated redemption price at maturity multiplied by the number of complete years between the date the holder acquires the BAN and its maturity date. In the case of a BAN issued with original issue discount, market discount will be de minimis if the excess of the BAN’s revised issue price over the holder's cost of acquiring the BAN is less than 0.25% of the revised issue price multiplied by the number of complete years between the date the holder acquires the BAN and its stated maturity date. For this purpose, a BAN’s “revised issue price” is the sum of (i) its original issue price and (ii) the aggregate amount of original issue discount that is treated as having accrued with respect to the BAN during the period between its original issue date and the date of acquisition by the holder.

Amortizable Bond Anticipation Note Premium

A BAN will be considered to have been purchased at a premium if, and to the extent that, the holder's tax basis in the BAN exceeds the stated redemption price at maturity. The holder will be required to reduce his tax basis in the BAN for purposes of determining gain or loss upon disposition of the BAN by the amount of amortizable bond anticipation note premium that accrues, determined in the manner prescribed in the regulations. Generally, no deduction (or other tax benefit) is allowable in respect of any amount of amortizable bond anticipation note premium on the BANs.

Legislative Developments

Legislative proposals recently under consideration or proposed after issuance and delivery of the BANs could adversely affect the market value of the BANs. Further, if enacted into law, any such proposal could cause the interest on the BANs to be subject, directly or indirectly, to federal income taxation and could otherwise alter or amend one or more of the provisions of federal tax law described above or their consequences. Prospective purchasers of the BANs should consult with their tax advisors as to the status and potential effect of proposed legislative proposals, as to which Bond Counsel expresses no opinion.

RATINGS

Moody's Investors Services, Inc., S&P Global Ratings and Fitch Ratings have given the BANs the ratings of _____, _____ and ___, respectively. An explanation of the significance of such ratings may be obtained only from the rating agency furnishing the same. The County furnished to such rating agencies the information contained in a preliminary form of this Official Statement and certain publicly available materials and information respecting the County. Generally, rating agencies base their ratings on such materials and information, as well as investigations, studies and assumptions of the rating agencies. Such ratings may be changed at any time (including on, or before the settlement of the BANs) and no assurance can be given that they will not be revised downward or withdrawn entirely by any or all such rating agencies if, in the judgment of any or all, circumstances so warrant. Such circumstances may include, without limitation, changes in or unavailability of information relating to the County. Any such downward revision or withdrawal of any of said ratings may have an adverse effect on the market price of the BANs.

SALE AT COMPETITIVE BIDDING

The BANs will be offered by the County at competitive bidding on March 1, 2018, in accordance with the Notices of Sale, the forms of which are attached to this Official Statement as Appendix D and Appendix E. The interest rates shown on the inside front cover of this Official Statement are the interest rates resulting from the award of the BANs at competitive bidding.

The yields or prices shown on the inside front cover of this Official Statement are based on information supplied to the County by the successful bidder(s) respecting the resale prices (not including concessions) of the BANs established on the date hereof. Any other information concerning the terms of reoffering of the BANs, if any, including yields or prices, should be obtained from the successful bidder(s) therefor and not from the County.

CONTINUING DISCLOSURE

The County will execute a Continuing Disclosure Agreement (the “Disclosure Agreement”) prior to or simultaneously with the issuance of the BANs. In the Disclosure Agreement, the County will covenant for the benefit of the Beneficial Owners of the BANs from time to time to provide certain financial information and operating data relating to the County (the “Annual Report”) within 275 days after the end of the County’s fiscal year, commencing 275 days after the end of the County’s fiscal year ended June 30, 2017, and to provide notices of the occurrence of certain enumerated events. The Annual Report is filed by the County and is expected to be made publicly available by the Municipal Securities Rulemaking Board (“MSRB”) through its Electronic Municipal Market Access (“EMMA”) repository accessible through the MSRB’s website at http://www.emma.msrb.org. The notices of events, if any, are filed by the County with the MSRB through EMMA. The County has made these covenants in order to assist the underwriters of the BANs in complying with SEC Rule 15c2-12(b)(5) (the “Rule”). The form of the Continuing Disclosure Agreement is set forth in Appendix C.

Except as otherwise disclosed herein, during the prior five years, the County has not failed to comply in any material respect with any prior continuing disclosure undertaking made pursuant to Rule 15c2-12. Although the County has timely filed complete information required by its continuing disclosure undertakings, the County had not associated the relevant CUSIP numbers will all its filings. The County has remedied the foregoing.

APPROVAL OF LEGAL PROCEEDINGS

All legal matters incident to the authorization, issuance and sale of the BANs are subject to the approval of McKennon Shelton & Henn LLP, Baltimore, Maryland, Bond Counsel. Delivery of the BANs is conditioned upon the delivery by Bond Counsel of opinions substantially in the forms attached hereto as Appendix B.

APPROVAL OF OFFICIAL STATEMENT

This Official Statement has been approved and authorized by the County for use in connection with the sale of the BANs.

Financial and other information contained in this Official Statement has been prepared by the County from its records (except where other sources are noted). The information is not intended to indicate future or continuing trends in the financial or economic position of the County.

BALTIMORE COUNTY, MARYLAND

By: ______County Executive

SECTION II: DEBT SUMMARY

ISSUANCE AND AUTHORIZATION OF BONDED INDEBTEDNESS

According to the terms of the Charter, no bond or other evidence of indebtedness may be issued prior to approval by voter referendum except for emergency or tax anticipation notes or other evidences of indebtedness having a maturity not in excess of twelve months and self-liquidating obligations including obligations of the Metropolitan District (such obligations referred to in this Section II as “Metropolitan District Bonds” or “Metropolitan District Debt”). Bonded debt must be issued with maturities no longer than the probable useful life of the improvements or undertakings with respect to which they are issued; bonded debt other than Metropolitan District Bonds may not in any event be issued with maturities longer than 40 years. Under the terms of the Metropolitan District Act, Metropolitan District Bonds are not subject to the referendum requirements of the Charter or to the requirement that bonded debt must be issued in serial form.

Metropolitan District Bonds are issued for the purpose of providing funds for financing or refinancing the design and construction, purchase or acquisition of the water supply, sewerage, and drainage systems within the Metropolitan District, as provided for by Article 20 of the County Code. The principal source of repayment for the Metropolitan District Bonds is special assessments and charges levied against all property in the Metropolitan District of the County. See “FINANCIAL INFORMATION – Water Supply and Sewerage Revenues.” In the event of a deficiency of such funds from special assessments and charges, the Metropolitan District Bonds are payable as to both principal and interest, as general obligations, ultimately from ad valorem taxes, unlimited in rate and amount, which the County is empowered to levy upon real and tangible personal property and certain intangible personal property subject to assessment for unlimited County taxation.

Approved and unissued Consolidated Public Improvement general obligation bonded debt totaled $798,088,347 as of January 31, 2018. Metropolitan District debt issuances are not subject to referendum requirements. Appropriated and unissued Metropolitan District bonded debt totaled $1,208,399,990 as of January 31, 2018.

LEGAL DEBT MARGIN

In accordance with Section 10-3-111 of the Baltimore County Code, the aggregate amount of the County bonds and other evidences of indebtedness outstanding at any one time may not exceed 4.0% of the assessable basis of the County. As of January 31, 2018, the County’s Legal Debt Margin was $1,474,946,000 based on a legal limitation of $3,284,073,000 less outstanding debt of $1,809,127,000. In accordance with Section 20-4-103 of the County Code, at no time shall the total issue of Metropolitan District Bonds outstanding exceed 3.2% of the total assessable basis for County taxation purposes within the Metropolitan District. As of January 31, 2018, the County’s Metropolitan District Legal Debt Margin was $984,357,000 based on a legal limitation of $2,333,883,000 less outstanding Metropolitan District Debt of $1,349,526,000.

SHORT-TERM BORROWING

The County has never issued revenue and tax anticipation notes and currently has no plans to do so. The County’s debt issuance policies include a commitment to manage operations so that such borrowings will not be necessary.

As of January 31, 2018, the County had outstanding $346,000,000 Bond Anticipation Notes consisting of $121,000,000 Consolidated Public Improvement Bond Anticipation Notes and $225,000,000 Metropolitan District Bond Anticipation Notes, maturing March 16, 2018. The Bond Anticipation Notes are general obligations of the County, to the payment of which its full faith and credit and unlimited taxing power are pledged. The County issued the Bond Anticipation Notes as interim funding for a portion of its Capital Program (see “CAPITAL IMPROVEMENT PROGRAM OVERVIEW”) in order to achieve lower short- term interest rates and greater borrowing flexibility. The County intends to issue on or about March 16, 2018 its general obligation bonds in the aggregate principal amount of $346,000,000 consisting of metropolitan district bonds in the aggregate principal amount of $225,000,000 and consolidated public improvement bonds in the aggregate principal amount of $121,000,000. The County intends to use the proceeds of these general obligation bonds to pay the principal of the currently outstanding Bond Anticipation Notes on March 16, 2018, the maturity date of such Bond Anticipation Notes.

NET TAX-SUPPORTED DEBT OUTSTANDING As of January 31, 2018

Consolidated Public Improvement Bonds (Net of $65,709,000 held in escrow) ...... $1,253,736,000 Consolidated Public Improvement Bond Anticipation Notes ...... 121,000,000 Pension Obligation Bonds ...... 368,682,000 Certificates of Participation ...... 112,214,000 Single Stream Recycling Facility Loan ...... 4,375,000 Capital Leases ...... 16,271,000 Total Net Tax-Supported Debt ...... $1,876,278,000

METROPOLITAN DISTRICT DEBT OUTSTANDING As of January 31, 2018

Metropolitan District Bonds (Net of $35,600,000 held in escrow) ...... $908,000,000 Metropolitan District Bonds – Maryland Water Quality Revolving Loan Fund...... 165,563,000 Metropolitan District Bond Anticipation Notes ...... 225,000,000 Metropolitan District Pension Obligation Bonds ...... 15,363,000 Metropolitan District Certificates of Participation ...... 6,186,000 Total Metropolitan District Debt ...... $1,320,112,000

NO OVERLAPPING DEBT

The County is autonomous from any city, town or political subdivision of the State of Maryland. There are no jurisdictions with overlapping debt or taxing power.

DEBT INFORMATION

Information on the County’s indebtedness is presented in the following tables. Included is information on key debt ratios, rapidity of principal retirement, debt service to revenue ratios, summary of debt service charges and schedule of bonds authorized, issued and unissued.

KEY DEBT RATIOS FISCAL YEARS 2013 TO 2017

Net Tax-Supported Indebtedness Net Tax-Supported Indebtedness Including Pension Funding Bonds Excluding Pension Funding Bonds Estimated Per Per Market Capita Capita Value of Taxable as a % as a % Per Property Balance % of of Per % of of Per Fiscal Capita Fiscal Year as of Per Market Capita Balance as of Per Market Capita Year Population Income Ended June 30 June 30* Capita Value Income June 30 * Capita Value Income

2013 823,295 $51,569 $80,894,772,000 $1,826,030,000 $2,218 2.26% 4.30% $1,552,020,000 $1,885 1.92% 3.66% 2014 826,518 53,224 78,535,220,000 1,865,889,000 2,258 2.38 4.24 1,598,804,000 1,934 2.04 3.63 2015 829,209 54,648 78,313,024,000 1,871,623,000 2,257 2.39 4.13 1,622,541,000 1,957 2.07 3.58 2016 831,026 56,273 79,824,301,000 1,761,473,000 2,120 2.21 3.77 1,522,545,000 1,832 1.91 3.26 2017 835,019 58,804 82,101,821,000 1,968,633,000 2,358 2.40 4.01 1,591,892,000 1,906 1.94 3.24 ______* Includes General Obligation Bonds, Bond Anticipation Notes, Certificates of Participation and Capital Leases. Sources: Per Capita Income Data: 2013-2016 U.S. Bureau of Economic Analysis. 2017 estimate based on growth rate from Moody’s Analytics. Population: 2013-2016 U.S. Census Bureau; 2017 Maryland Department of Planning (Interpolated).

RAPIDITY OF PRINCIPAL RETIREMENT As of January 31, 2018

Net Tax- Supported Debt Net Tax- Excluding Metropolitan Maturing Supported % of Debt Pension Funding % of Debt District % of Debt Within Debt (1) Retired Bonds (1) Retired Debt (2) Retired 5 years $641,002,000 36.5% $590,531,000 42.6% $282,358,000 25.8% 10 years 1,130,314,000 64.4 1,023,727,000 73.8 539,978,000 49.3 15 years 1,480,190,000 84.3 1,308,596,000 94.4 770,392,000 70.3 20 years 1,635,341,000 93.2 1,386,596,000 100.0 945,695,000 86.4 25 years 1,727,591,000 98.4 1,055,401,000 96.4 30 years 1,755,278,000 100.0 1,095,112,000 100.0 ______(1) Does not include $121 million Consolidated Public Improvement Bond Anticipation Notes outstanding. See “Short-Term Borrowing.” (2) Does not include $225 million Metropolitan District Bond Anticipation Notes outstanding. See “Short-Term Borrowing.”

RATIO OF DEBT SERVICE ON NET TAX-SUPPORTED DEBT TO GENERAL FUND REVENUES FISCAL YEARS 2013 TO 2017

Debt Service Debt Service Including Excluding Fiscal General Fund Pension % of Pension % of Year Revenues Funding Bonds Revenues Funding Bonds Revenues 2013 ...... $1,701,812,000 $124,972,000 7.34% $116,896,000 6.87% 2014 ...... 1,750,110,000 141,231,000 8.07 124,712,000 7.13 2015 ...... 1,820,656,000 157,201,000 8.63 141,190,000 7.75 2016 ...... 1,887,247,000 167,158,000 8.86 149,385,000 7.92 2017 ...... 1,972,182,000 181,570,000 9.21 167,901,000 8.51

BALTIMORE COUNTY, MARYLAND SUMMARY OF DEBT SERVICE CHARGES UNTIL MATURITY* JANUARY 31, 2018 (In Thousands)

Consolidated Public Pension Funding Capital Leases, Total Net Tax-Supported Debt Improvement Bonds Bonds COPs, Other Service Metropolitan District Debt

Fiscal Year Principal Interest Principal Interest Principal Interest Principal Interest Total Principal Interest Total 2018 $30,000 $23,988 $0 $3,701 $6,800 $527 $36,800 $28,216 $65,016 $28,053 $16,952 $45,005 2019 99,755 48,894 9,787 11,325 27,039 2,636 136,581 62,855 199,436 57,797 35,054 92,851 2020 97,355 46,332 9,916 11,197 19,815 3,153 127,086 60,682 187,768 55,835 39,683 95,518 2021 95,310 43,127 10,071 11,039 22,325 3,582 127,706 57,748 185,454 54,687 37,978 92,665 2022 95,460 38,868 10,248 10,854 16,026 2,429 121,734 52,151 173,885 55,605 35,956 91,561 2023 94,375 34,619 10,449 10,646 14,571 1,678 119,395 46,943 166,338 53,202 33,892 87,094 2024 87,630 30,633 10,675 10,413 6,571 1,150 104,876 42,196 147,072 51,297 31,751 83,048 2025 87,390 26,890 10,925 10,156 6,571 821 104,886 37,867 142,753 51,406 29,723 81,129 2026 82,587 23,240 11,198 9,877 6,571 493 100,356 33,610 133,966 51,367 27,701 79,068 2027 77,135 19,821 11,500 9,577 6,571 164 95,206 29,562 124,768 51,435 25,727 77,162 2028 73,170 16,620 11,818 9,257 84,988 25,877 110,865 50,090 23,824 73,914 2029 66,680 13,655 12,173 8,896 78,853 22,551 101,404 50,091 21,967 72,058 2030 66,489 10,434 12,566 8,493 79,055 18,927 97,982 50,136 20,113 70,249 2031 59,200 7,930 12,984 8,073 72,184 16,003 88,187 49,831 18,233 68,064 2032 46,200 5,753 13,412 7,636 59,612 13,389 73,001 42,962 16,603 59,565 2033 36,200 3,795 13,872 7,181 50,072 10,976 61,048 39,011 14,771 53,782 2034 25,200 2,502 14,362 6,700 39,562 9,202 48,764 36,549 13,023 49,572 2035 17,200 1,374 14,875 6,191 32,075 7,565 39,640 35,520 11,445 46,965 2036 11,200 716 15,408 5,662 26,608 6,378 32,986 33,880 9,922 43,802 2037 5,200 208 15,960 5,110 21,160 5,318 26,478 33,752 8,503 42,255 2038 16,546 4,531 16,546 4,531 21,077 30,398 7,087 37,485 2039 17,145 3,925 17,145 3,925 21,070 24,476 5,753 30,229 2040 17,774 3,297 17,774 3,297 21,071 24,504 4,598 29,102 2041 18,427 2,646 18,427 2,646 21,073 21,032 3,545 24,577 2042 19,104 1,971 19,104 1,971 21,075 16,861 2,701 19,562 2043 19,800 1,271 19,800 1,271 21,071 14,091 1,962 16,053 2044 6,586 806 6,586 806 7,392 11,541 1,388 12,929 2045 6,802 585 6,802 585 7,387 9,407 855 10,262 2046 7,032 356 7,032 356 7,388 6,593 471 7,064 2047 7,267 120 7,267 120 7,387 3,703 141 3,844 Total 1,253,736 399,399 368,682 191,492 132,860 16,633 1,755,278 607,524 2,362,802 1,095,112 501,322 1,596,434

*Includes interest on the Bond Anticipation Notes outstanding. Does not include $65,709,000 CPI bonds and $35,600,000 Metro bonds held in escrow for future principal repayments.

BALTIMORE COUNTY, MARYLAND GENERAL OBLIGATION DEBT APPROVED AND UNISSUED AS OF JANUARY 31, 2018

Purpose Amount Consolidated Public Improvement: Agricultural Land Preservation ...... $9,102,000 Community College ...... 28,939,570 Community and Economic Improvements ...... 14,059,000 Elderly & Affordable Housing ...... 150,000 Operational Buildings ...... 73,776,396 Parks, Preservation and Greenways ...... 10,815,000 Public Schools ...... 418,745,881 Public Works ...... 186,581,500 Refuse Disposal ...... 18,905,000 Waterway Improvements ...... 37,014,000 Total Consolidated Public Improvement ...... $798,088,347

Metropolitan District ...... $1,208,399,990

Consolidated Public Improvement represents authority approved by voter referendum. Metropolitan District represents authority approved by County Council appropriation.

LEASES Operating Leases

The County is a party to numerous operating leases of facilities and equipment. The total rental expenditures for the year ended June 30, 2017, for all leases except those with terms of a month or less that were not renewed, were approximately $6.3 million for the primary government and $40.0 million for the component units. These leases include various office space rentals, parking facility rentals and telephone rentals.

The following is a schedule by fiscal years of future minimum rental payments for facilities and equipment under operating leases that have initial or remaining non-cancelable lease terms in excess of one year as of June 30, 2017:

Year Ending Primary Component June 30 Government Units 2018 $579,000 $38,924,000 2019 487,000 31,401,000 2020 393,000 18,343,000 2021 229,000 2,742,000 2022 85,000 1,741,000 2023-2027 345,000 8,781,000 2028-2032 266,000 284,000 2033-2037 266,000 - 2038-2042 216,000 - Total $2,866,000 $102,216,000

Contract Commitments

Contract commitments in the Consolidated Public Improvement Construction Fund, the Metropolitan District Enterprise Fund and the Gifts and Grants Fund amounted to $64.6 million, $201.2 million and $15.5 million, respectively, at June 30, 2017. Such amounts will be funded by future bond proceeds, approved federal and state grants, and future assessments.

Capital Leases

The following is a schedule by fiscal years of the future minimum lease payments under the County’s capital lease agreements and the present value of the minimum lease payments at June 30, 2017. Any capital leases used to finance energy performance contracts where the energy savings are guaranteed by the contractor are not included below as they are not considered tax-supported debt under Maryland law. The lease agreements below are for the purchase of school buses and other vehicles for the Board of Education.

Minimum Year Ending June 30 Lease Payments 2018 ...... $6,994,000 2019 ...... 5,742,000 2020 ...... 2,922,000 2021 ...... 981,000 Total minimum lease payments ...... $16,639,000 Less amount representing interest ...... (368,000) Present value of future minimum lease payments...... $16,271,000

During FY2014, the Board of Education entered into a long-term capital lease to finance energy saving improvements in various schools. As of June 30, 2017, $22,404,000 of lease payments under this capital lease remain outstanding. The chart above does not include lease payments under this capital lease because the energy savings guaranteed by the contractor equal or exceed the capital lease payments on an annual basis.

Conditional Purchase Agreements

The County has entered into several conditional purchase agreements for the purchase of facilities and equipment. The County’s obligation to make purchase installments under such agreements in any fiscal year is contingent upon the County Council making an appropriation for such purpose in such year. In the event that the County Council does not appropriate moneys to make such purchase installments in any fiscal year, the County is required to return the equipment to the seller without any additional financial liability. The obligations of the County under the respective conditional purchase agreements do not constitute a pledge of the full faith and credit or of the taxing powers of the County.

On December 18, 2001, the County entered into a twenty-year conditional purchase agreement to acquire, renovate and improve an office building (the “Facility”) and the real property on which the office building is constructed to be used as office space for the Health and Social Services departments. The County uses approximately 30% of the Facility as office space for County employees. The balance of the Facility is being leased to the State of Maryland for use as office space for State employees. The conditional purchase agreement was financed through the sale of Certificates of Participation in the aggregate principal amount of $22,000,000. The lease payments made by the State are not pledged to the payment of the Certificates of Participation, and a default under the State lease will not constitute a default under the Purchase Agreement or otherwise excuse the payment of Purchase Installments by the County. On February 6, 2013, the County issued $11,830,000 to refund outstanding Certificates of Participation. As of January 31, 2018, the balance of the outstanding principal of the Certificates of Participation was $5,575,000.

On August 12, 2008, the County entered into a ten-year Conditional Purchase Agreement for the purchase of equipment. The equipment consists of the acquisition of (i) heavy equipment and vehicles for use primarily in the County’s public works department, (ii) fire trucks, medic units, and public safety equipment, and (iii) information technology hardware for various departments including 911 equipment. The Conditional Purchase Agreement was financed through the sale of Certificates of Participation in the aggregate principal amount of $36,700,000. As of January 31, 2018, the balance of the outstanding principal was $4,700,000.

On June 19, 2012, the County entered into a ten-year Conditional Purchase Agreement for the purchase of equipment. The equipment consists of the acquisition of (i) heavy equipment and vehicles for use primarily in the County’s public works and recreation and parks departments, (ii) fire trucks, medic units, and public safety equipment, and (iii) information technology hardware for various departments including 911-equipment. The Conditional Purchase Agreement was financed through the sale of Certificates of Participation in the aggregate principal amount of $82,680,000. As of January 31, 2018, the balance of the outstanding principal was $45,125,000.

On December 11, 2012, the County entered into a loan agreement with the Employees’ Retirement System of Baltimore County for a line of credit not to exceed $21,508,651 to finance the costs of upgrading an existing transfer station and procuring and installing a single stream recyclables processing system at the Baltimore County Resource Recovery Facility in Cockeysville, Maryland. On August 15, 2013, the County repaid the loan in full to the Employees’ Retirement System and entered a conditional purchase agreement with the Baltimore County Police, Fire and Widows Plan to finance and refinance the County’s acquisition of

the project up to a maximum purchase price of $18,625,000. The term of the agreement is from August 15, 2013 through June 30, 2018. Interest on the loan is payable on the last business day of each and every month and commencing September 30, 2013 at a rate of 7.875% per annum on the unpaid principal balance. On September 20, 2017, the County and the Baltimore County Police, Fire and Widows’ Pension Plan amended the agreement so that the remaining principal of the Loan will be repaid on June 30, 2021 in the amount of $4,374,709. The interest component of the loan will continue to be repaid monthly through June 30, 2021 at an annual rate of 7.875%.

On September 27, 2016, the County entered into a ten-year Conditional Purchase Agreement for the purchase of equipment. The equipment consists of the acquisition of (i) heavy equipment and vehicles for use primarily in the County’s public works and recreation and parks departments, (ii) fire trucks, medic units, and public safety equipment, and (iii) information technology hardware for various departments including 911 equipment. The Conditional Purchase Agreement was financed through the sale of Certificates of Participation in the aggregate principal amount of $63,715,000. As of January 31, 2018, the balance of the outstanding principal was $63,000,000.

OTHER AGREEMENTS AND COMMITMENTS

Maryland Water Quality Financing Administration

The County participates in the Maryland Water Quality Revolving Loan Fund that is administered by the Maryland Water Quality Financing Administration (“MWQFA”). The fund provides low interest loans to local jurisdictions for eligible water and sewer capital projects. Metropolitan District Bonds are issued to MWQFA to evidence the County’s full faith and credit pledge to repay the loans. Loans are repaid over 20 and 30 years from the Metropolitan District Operating Fund. Loans consist of a combination of proceeds from Bonds issued by MWQFA and certain grant funds. As of January 31, 2018, the outstanding balance of Metropolitan District Water Quality Bonds was $165,563,000.

Waste Disposal Agreements

Wheelabrator Baltimore, L.P. (formerly known as Baltimore Refuse Energy Systems Company, L. P.) (“Wheelabrator”)

The County entered into a waste disposal agreement in December 2009 with Wheelabrator to deliver residential solid waste to Wheelabrator’s refuse-to-energy disposal facility in Baltimore City, Maryland. The term of this contract is from December 7, 2009 through December 31, 2021 with three 5-year renewal options. The contract was amended in December 2011 to reduce the rate and enhance the benefits for the County. The amendment establishes a Guaranteed Annual Tonnage (GAT) of 215,000 tons per calendar year to be delivered to Wheelabrator’s refuse-to-energy disposal facility in Baltimore City, Maryland. The rate in effect at January 1, 2018 was $53.61 per ton. The rate increases during the term to $57.74 per ton. The County is responsible for the transport of the solid waste to Wheelabrator’s site (see “WB Services, LLC” below). The amendment provided for a one-time incentive payment of $2,150,000 paid to the County at the end of the first year to encourage the delivery of waste tonnage at or above the GAT. In addition, for delivering waste tonnage at or above the GAT, Wheelabrator will provide a $1 per ton rebate annually. The amendment also provided that the County receive an annual Guaranteed Ash Disposal payment for the right of Wheelabrator to bring up to 60,200 tons of ash into the County’s Eastern Sanitary Landfill. The initial year’s payment of $1,083,000 is based upon the service charge per ton in effect at January 1, 2012 of $18.00 per ton. The rate increases during the term to $22.48 per ton, or a payment of $1,353,296 in the final year of the contract. Wheelabrator is responsible for transport of the ash to the County’s landfill.

Harford County Municipal Solid Waste and Recyclables

The County entered into an agreement in August 2013 with Harford County to begin the transfer of Harford County’s Municipal Solid Waste delivered to the Eastern Sanitary Landfill beginning on or about March 17, 2016. In consideration, Harford County has agreed to pay the County an amount equal to Baltimore County’s actual debt service for the design and construction of a transfer station building (not to exceed $11,733,000) necessary to accommodate the increased transfer tonnage levels. This would be paid back in 20 annual installments, commencing July 1, 2014. These installments would equal the actual debt service divided by 20 or $588,650, whichever is less. Harford County also pays the cost of disposal via Waste Management at a rate starting at $56 per ton (adjusted for CPI and Fuel Surcharges) with the County receiving a $1.40 per ton host fee. Additionally, as part of this agreement, Harford County agreed, beginning January 1, 2014, to provide its single stream recyclables to Baltimore County. The County is required to cover transportation costs of the recyclables to its Single Stream Processing Facility in Cockeysville; however, the County can retain all revenue from the sale of said recyclables.

Republic Services of Pennsylvania, LLC (“Republic”)

The County entered into a long-term contract effective December 7, 2009 with this contractor to provide for disposal of residential solid waste deposited at various County facilities by the County’s curbside haulers and residents. This is a ten-year contract with three 5-year renewal options. The contract was amended in October 2016 for a new pricing structure – up to 100 tons per day (TPD) at $35.50 per ton; 100 TPD to 175 TPD at $34.50 per ton; 175 TPD to 200 TPD at $33.50 per ton; greater than 200 TPD at $33.00 per ton. The County is responsible for the transport of the solid waste to the contractor’s landfill in York, Pennsylvania (see “WB Services, LLC” below).

WB Services, LLC

The County entered into a contract to transport municipal solid waste from various County transfer facilities to their final destination sites effective September 5, 2012. The contract continues through June 30, 2019 with three 5-year renewal options. Pursuant to such transport agreement, the County pays a set transportation fee based upon the County facility where the waste is picked up and the disposal destination (see Wheelabrator, Harford County, and Republic above), type of trailer, fuel supplier and cost. The rates in effect at October 1, 2017 range from $11.44 to $20.65 per ton. The contract contains a yearly escalation clause linked to the CPI.

Baltimore County, Maryland (CAF & WAF)

Effective July 1, 2017, the County terminated its contract with Maryland Environmental Service. The County is now operating the Central Acceptance Facility (CAF) and Western Acceptance Facility (WAF). The Single Stream Recyclable Processing Facility (completed November 2013) at CAF allows the County to process its own collected recyclables into marketable commodities. Additionally, in 2013, the County entered into an agreement with Harford County to receive and process that County’s recyclables through the Single Stream Processing Facility beginning January 1, 2014 (see “Harford County Municipal Solid Waste and Recyclables”). Revenues generated from the processing of the annual estimated 85,000 tons of recyclables are anticipated to be approximately $8.5 million.

Waste Management of Pennsylvania (“WMPA”) - Single Stream Recycling and Commercial Transfer

The County entered into a contract effective February 1, 2010 with WMPA for the use of the CAF and the Eastern Sanitary Landfill (ESL) for the transfer of commercial refuse. WMPA pays an $8 per ton fee for use of the facilities to transfer commercial refuse. In FY2017, WMPA transferred a combined 331,003 tons through these facilities generating $2.65 million in revenue for the County. The contract was amended in August 2016 to provide for the hauling and disposal of Baltimore County municipal solid waste out of Eastern Sanitary Landfill. This is a ten-year contract with three 5-year renewal options.

BFI Waste Services – Commercial Transfer

The County entered into a contract effective July 1, 2017 with BFI Waste Services for the use of the Western Acceptance Facility (WAF) for the transfer of commercial refuse. BFI pays an $8 per ton fee for use of the facilities to transfer commercial refuse. It is estimated that BFI will transfer 88,000 tons through this facility generating $704,000 in revenue for the County. This contract is in effect until December 31, 2020.

Residential Refuse Collections

In FY2017, the County collected 396,000 tons of residential refuse including tons collected through an extensive curbside recyclable materials collection program. This material was processed or disposed of in the following manner (figures are approximate):

• 213,000 tons or 54% was incinerated at Wheelabrator. This facility converts refuse into electricity and steam and recovers ferrous metals.

• 40,000 tons or 10% was transferred out of the Eastern Sanitary Landfill under a contract with Waste Management of Pennsylvania.

• 81,000 tons or 20% was delivered to various recycling facilities, constituting paper and plastic/metal containers, yard material (including Christmas trees) picked up on a weekly basis from single family dwellings, town homes and multi-family units. Also included are recyclables (including electronics recycling, white ferrous metals and yard materials) delivered directly to county facilities by county residents.

• 62,000 tons or 16% was disposed of at the Eastern Sanitary Landfill (see below).

Through recycling, source reduction efforts and export of residential and commercial refuse, the useful life of the County’s only operating landfill, Eastern Sanitary Landfill in White Marsh, Maryland, is expected to last 30-40 years based on the current usage. The estimated useful life of the Eastern Sanitary Landfill is predicated on the long-term availability of out-of- County disposal facilities.

Metro Centre at Owings Mills Project

In April 2014, the Maryland Economic Development Corporation, a body corporate and politic and a public instrumentality of the State of Maryland (“Medco”), issued $33,050,000 aggregate principal amount of special obligation bonds to finance a parking garage located at Metro Centre at Owings Mills (see SECTION IV – “ECONOMIC AND DEMOGRAPHIC INFORMATION – New Business and Real Estate Activity – Metro Centre at Owings Mills”). The County has entered into a Contribution Agreement with Medco wherein the County has agreed to contribute County incremental tax revenues on the real property within a 45 acre (more or less) tract (the “District”) to provide for payment of debt service on the bonds and certain administrative costs and, as needed, to levy and collect an additional special tax on a portion of the District to pay debt service on the bonds and certain other costs. The bonds were issued initially as variable rate bonds and, with the consent of the County were subject to conversion to fixed rate bonds. The bonds mature in 2043. Medco reoffered the bonds in June 2017 as fixed rate bonds. County ordinances authorize the County to provide tax increment revenue and special tax support for up to $135 million in Medco special obligation bonds for public infrastructure relating to the District.

Risk Management

The County’s Office of Budget and Finance administers the risk management program. In addition, the County has retained actuaries to conduct analyses of the Self-Insurance Fund covering its exposure for health care, general and automotive liability, and workers’ compensation claims. Each year the County appropriates and pays to the fund an amount, which is projected to fully fund, on a present value basis, all liabilities expected to occur during the upcoming fiscal year.

CAPITAL IMPROVEMENT PROGRAM OVERVIEW

The Capital Improvement Program (“CIP”) consists of the Capital Budget and the Capital Program. The Capital Budget is the County’s plan to receive and expend funds for capital projects during the ensuing fiscal year. The Capital Program is the County’s plan to receive and expend funds for capital projects during the five fiscal years thereafter. The primary source of funding for the CIP is borrowed funds in the form of General Obligation Bonds. Other sources of funding include General Fund appropriations, intergovernmental aid and developer payments. The CIP is divided into two areas. The Metropolitan District Construction Fund includes all water and sewer projects and the Consolidated Public Improvement Construction Fund includes all other capital projects. General Obligation Bonds are comprised of Consolidated Public Improvement Bonds and Metropolitan District Bonds.

Before Consolidated Public Improvement Bonds may be appropriated, a borrowing referendum must be voted upon and approved. Metropolitan District Bonds do not require voter approval. Every two years at each general election, a borrowing referendum is placed on the ballot. The County Council establishes the borrowing referendum that appears on the ballot when adopting the CIP. The funding authorized through voter approval of the borrowing referendum is appropriated to capital projects beginning in the ensuing fiscal year after approval of the referendum. However, if approved in the referendum, funding may be appropriated in the current fiscal year.

The CIP is generally formulated on a biennial basis. For the even-numbered fiscal years, the County Executive will conduct a full-scale review of capital improvement needs. For the odd-numbered fiscal years, a cursory review is made, any urgent funding issues are addressed and any outside funding not previously anticipated is recognized.

The CIP is initiated by the preparation of an itemized list of the proposed capital projects in the ensuing fiscal year and the next five fiscal years thereafter from each office, department, institution, board, commission and other agency of the County government. After consideration by the Planning Board, the Director of Planning and Community Conservation transmits the recommended list of projects to be undertaken in such periods and corresponding cost estimates to the Director of Budget and Finance. The County Administrative Officer, with the assistance of the Director of Budget and Finance, considers such recommendations with the other budget proposals and submits to the County Executive, together with the operating budget, a complete CIP. The proposed CIP clearly sets forth the plan of proposed capital projects to be undertaken in the ensuing fiscal year and in each of the next five fiscal years, and also the proposed means of financing the same. The Capital Budget includes a statement of the receipts anticipated during the ensuing fiscal year from all borrowing and from other sources for capital projects. The County Executive submits the CIP together with the operating budget not later than seventy-five days prior to the end of the fiscal year.

The County utilizes “PAYGO” financing in the CIP. In doing so, the County finances the construction of certain capital projects by appropriating revenues from operating funds of the County. Through these appropriations of current revenues, the County has reduced the aggregate amount of general obligation indebtedness associated with the construction of capital projects. Effective in FY2014, Total PAYGO was defined to include funding provided to the Capital Budget from a variety of sources. Prior to FY2014, PAYGO included only funding from the General Fund. The FY2018 budgeted total PAYGO contribution of $31,992,751 includes general fund contributions of $31,457,751, agricultural transfer tax of $460,000 and local open space waiver fees of $75,000. The County’s General Fund PAYGO Contributions and Total PAYGO contributions are as follows for the past ten fiscal years:

General Fund Contribution Total PAYGO Contribution to the Capital Budget to the Capital Budget Fiscal Year (In Millions) (In Millions) FY2009 $138.5 NA FY2010 $33.1 NA FY2011 $2.6 NA FY2012 $0.6 NA FY2013 $13.9 NA FY2014 $43.8 $67.1 FY2015 $51.2 $91.3 FY2016 $101.4 $123.3 FY2017 $136.3 $166.3 FY2018 Budget $31.5 $32.0

In FY2010 and FY2011, the County performed comprehensive reviews of existing capital projects to identify projects that could be closed out, eliminated as not essential, or delayed due to actual project timetables. As a result of these reviews, the County was able to revert $169 million of PAYGO financing back to the General Fund.

Fiscal Year 2018 Capital Budget and Program

The County Council adopted the FY2018 Capital Budget and Five Year Program on May 25, 2017. The CIP includes $202,852,736 from the 2016 Borrowing Referendum Plan, $315,227,789 from the 2018 Borrowing Referendum Plan, and $265,500,000 from the 2020 Borrowing Referendum Plan. The following tables set forth the different classes of capital projects and the amounts included in the Capital Budget for FY2018 and the amounts included in the Capital Program for the five fiscal years indicated.

CAPITAL BUDGET AND FIVE YEAR CAPITAL PROGRAM (Dollars expressed in 000s)

BUDGET FIVE YEAR CAPITAL PROGRAM FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 APPROPRIATIONS Metropolitan Sewer and Water $470,835 $0 $484,025 $0 $476,525 $0 Public Works 80,249 10,000 81,784 0 65,320 0 Refuse Disposal 8,126 0 2,616 0 2,500 0 Community College 22,705 10,500 26,450 0 24,375 0 Operational Buildings 40,558 8,202 53,538 8,332 29,000 9,000 Parks, Preservations and Greenways 10,468 0 11,400 0 11,400 0 Schools 115,985 0 167,000 0 150,000 0 Land Preservation 2,460 0 2,460 0 2,460 0 Community Improvements 4,320 3,300 4,300 3,300 5,300 3,300 Waterway Improvements 22,212 0 10,000 0 10,000 0 $777,918 $32,002 $843,573 $11,632 $776,880 $12,300

RESOURCES Metropolitan District Funding (1) $470,835 $0 $484,025 $0 $476,525 $0 General Obligation Bonds (2) 220,617 0 315,228 0 265,500 0 General Funds (3) 53,474 21,502 11,610 11,632 12,300 12,300 Other County Funds 3,521 0 710 0 710 0 Non County Funds 29,471 10,500 32,000 0 21,845 0 $777,918 $32,002 $843,573 $11,632 $776,880 $12,300

(1) Includes funds/bonds reallocated from prior year appropriations of $50,000,000 for FY2018. (2) Includes bonds reallocated and rereleased from prior year appropriations of $17,765,000 for FY2018. (3) Includes funds reallocated from prior year appropriations of $22,016,000 for FY2018.

SECTION III: FINANCIAL INFORMATION

MEASUREMENT FOCUS AND BASIS OF ACCOUNTING

The governmental funds financial statements are reported using the modified accrual basis of accounting. The measurement focus of these funds is the determination of financial position and changes in financial position ("current financial resources" focus). Under the modified accrual basis of accounting, revenues are recorded when they are both measurable and available. "Measurable" means the amount of the transaction can be determined and “available” means collectable within the current period or soon thereafter to pay liabilities of the current period. The County considers sales and income taxes, interest income and various intergovernmental revenues available if they are collected within 60 days after the fiscal year-end. Property tax revenue is recognized on receipts within 30 days of the fiscal year-end. Revenue related to expenditure driven grants is recognized when the applicable eligibility requirements have been met and to the extent that cash is expected to be received within one year of the fiscal year-end. Licenses and permits, charges for services, fines and forfeitures, and miscellaneous revenues are recorded when received in cash because they are generally not measurable until actually received. Expenditures, other than principal and interest on long-term debt and compensated absences, are recorded when the liability is incurred. Principal and interest on general long-term debt are recorded in the governmental funds as liabilities when due.

Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues of enterprise and internal service funds are charges to customers for sales and services. Operating expenses for enterprise funds and internal service funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. Revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses.

The pension trust funds and the other postemployment benefit trust fund use the accrual basis of accounting. Member contributions are recognized in the period when due. Employer contributions are recognized when due and a formal contribution commitment has been made. Benefits and refunds are recognized when due and payable in accordance with the terms of the plan. Investment purchases and sales are recorded on a trade-date basis. These transactions are not finalized until settlement date, which occurs approximately three business days after the trade date.

The County reports unearned revenue in the governmental funds and proprietary fund financial statements when cash is received prior to being earned. Deferred inflows are recognized in the governmental fund statements when revenue is unavailable.

FUND FINANCIAL STATEMENTS

Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds. Major individual governmental funds, major individual proprietary funds and three combined non-major governmental (Liquor License, Owings Mills Tax District and Stormwater Management) funds are reported as separate columns in the fund financial statements.

The County reports on the following major governmental funds:

The General Fund is the County’s general operating fund. It is used to account for all financial resources except those required to be accounted for in another fund.

The Gifts and Grants Fund accounts for a number of gifts and grants awarded to the County that are not accounted for in another fund.

The Consolidated Public Improvement Construction Fund accounts for the acquisition or construction and related financing sources for capital facilities of the primary government and for capital contributions made to the County’s component units for their capital facilities.

The County reports on the following major enterprise fund:

The Metropolitan District Fund accounts for the operation of the Metropolitan District, which provides water supply and sewerage systems to County residents within the Metropolitan District.

The County also reports on the following fund types:

Internal Service Funds account for the operation of a motor pool of passenger vehicles and light duty trucks, a printing facility and a self-insurance program for workers’ compensation; general and auto liability insurance; and employee health insurance.

Benefits Trust Funds, which include the following:

Pension Trust Funds account for the accumulation of assets to be used for pension benefit payments to qualified employees.

Other Post-Employment Benefits Trust Fund accounts for the accumulation of assets to be used for healthcare and life insurance benefit payments to qualified employees.

AWARDS

The Government Finance Officers Association of the United States and Canada (“GFOA”) awarded a Certificate of Achievement for Excellence in Financial Reporting to the County for its Comprehensive Annual Financial Report (“CAFR”) for the fiscal year ended June 30, 2016. In order to be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized CAFR with contents that conform to program standards. Such CAFR must satisfy both Generally Accepted Accounting Principles (GAAP) and applicable legal requirements.

A Certificate of Achievement is valid for a period of one year. The County has received a Certificate of Achievement for the last 38 consecutive years (fiscal years ended June 30, 1979-2016). The County plans to submit the CAFR for the fiscal year ended June 30, 2017 to GFOA for consideration and believes that it will continue to conform to the Certificate of Achievement program requirements.

REVENUE STABILIZATION RESERVE ACCOUNT AND GENERAL FUND SURPLUS

The County’s Revenue Stabilization Account was established to protect the County from unforeseen emergencies and future economic downturns which result in major revenue shortfalls. At the close of any fiscal year, the Director of Budget and Finance must transfer to the Revenue Stabilization Reserve Account any unreserved General Fund surplus equal to 5 percent of the budgeted General Fund revenue. Funds in the account may not be utilized for any other purpose without the specific recommendation of the County Executive and a majority plus one approval of the County Council.

To protect the County from unforeseen emergencies and future economic downturns, the County took the fiscally prudent step of raising its target level for unreserved General Fund balances. Rather than the long-term policy level of 5% of the revenue budget, the County will try to produce unreserved General Fund balances near 10% of General Fund revenues each year.

INVESTMENT OF OPERATING AND CAPITAL FUNDS

County funds held for operating and capital purposes are managed by the Office of Budget and Finance with strict guidelines as to investment vehicles. State of Maryland law and the County’s investment policy govern investments. The County is in full compliance with such laws. The County is permitted to invest in obligations of the United States Government, its agencies or instrumentalities, collateralized savings deposits, collateralized certificates of deposit, repurchase agreements, bankers' acceptances, money market funds and the Maryland Local Government Investment Pool. Deposits and repurchase agreements are collateralized by United States Government treasuries, agencies and instrumentalities, held by an independent third party custodian and marked to market daily. The County does not invest in leveraged products or reverse repurchase agreements.

FIVE YEAR SUMMARY OF GENERAL FUND REVENUES AND EXPENDITURES

From FY2013 through FY2017, the County realized an excess of revenues over expenditures. Through a planned drawdown, the County’s Unassigned General Fund Balance decreased from $295 million at the end of FY2013 to $205 million at the end of FY2017. The Unreserved General Fund Balance, which includes funds designated for subsequent year’s expenditures, represents 10.6% of general fund revenues at the end of FY2017 using the budgetary basis of accounting.

From FY2013 through FY2017, total revenues increased from $1.69 billion to $1.96 billion. During this period, general property tax revenues increased by 8% or $65 million. Income tax revenues increased by 12% or $74 million. Other significant revenue increases during this period include sales and service taxes, up 24% or $31 million, driven by higher recordation and title transfer taxes. Charges for Services increased by 322% or $33 million primarily due to the implementation of EMS Transport Fees, which generated $22 million in FY2017. Intergovernmental aid also increased by 27% or $10 million.

Total expenditures increased by $128 million over the period. The County has a history of using excess revenues to fund one-time capital expenditures. Transfers to the capital budget (pay-as-you-go funding) from the General Fund totaled $347 million over the five-year period from FY2013 through FY2017 and increased by $122 million from $14 million in FY2013 to $136 million in FY2017. In FY2013, general government staffing levels decreased 7.1% compared with FY2012 due to the Retirement Incentive Program that was offered to eligible employees during the winter of 2012. A stipulation of the program was that the department must be willing to abolish the vacant position and not rehire. All told, 310 government employees qualified for this program, saving the County an estimated $21 million each year.

The following statement presents the County’s actual revenues, expenditures and fund balance for the General Fund in accordance with generally accepted accounting principles. The revenues are presented according to source and the expenditures are presented according to major purpose for each of the last five fiscal years ending June 30. Contributions to the capital budget for public schools have been classified under “Operating Transfers to Capital Budget.”

GENERAL FUND COMPARATIVE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE FISCAL YEARS 2013 TO 2017 (Dollars expressed in 000s)

2013 2014 2015 2016 2017 Revenues: General Property Taxes ...... $853,860 $853,317 $870,115 $892,906 $919,193 Income Taxes ...... 624,060 667,924 696,335 709,377 697,694 Sales and Service Taxes ...... 128,039 124,409 137,031 157,551 159,048 Licenses & Permits ...... 4,970 4,925 5,306 5,194 5,767 Intergovernmental ...... 37,717 43,473 43,739 46,609 47,764 Charges for Services ...... 10,378 11,118 12,544 22,404 43,822 Fines & Forfeitures...... 4,844 5,066 6,033 7,099 7,056 Interest on Investments ...... 1,205 1,048 684 1,101 985 Miscellaneous ...... 27,861 28,837 40,072 33,576 58,307 Total Revenues ...... 1,692,934 1,740,117 1,811,859 1,875,817 1,939,636 Expenditures: General Government ...... 108,813 109,055 107,010 104,375 109,778 Public Safety ...... 324,201 332,145 340,410 345,365 355,322 Public Works ...... 100,540 114,481 112,309 117,531 117,566 Health and Human Services ...... 34,188 34,600 36,327 37,752 39,909 Culture and Leisure Services ...... 16,377 17,237 17,654 18,361 19,453 Economic Development ...... 1,287 1,129 1,079 1,169 1,317 Pension Plan Contributions ...... 320,818* 71,791 95,585 92,550 247,707* Healthcare Contributions ...... 92,311 99,447 99,924 126,386 102,742 Public Schools ...... 725,928 753,592 781,070 794,640 810,795 Community College ...... 38,463 39,043 39,876 41,653 44,573 Libraries ...... 33,925 35,875 33,563 32,764 32,850 Debt Service ...... 94,834 110,137 117,461 128,369 135,701 Miscellaneous ...... 16,067 16,532 17,571 17,852 18,458 Total Expenditures ...... 1,907,752 1,735,064 1,799,839 1,858,767 2,036,171 Excess (Deficiency) of Revenues Over Expenditures ...... (214,818) 5,053 12,020 17,050 (96,535) Other Financing Sources (Uses): Bond Issued ...... 256,290 0 0 0 144,000 Certificates of Participation Proceeds ...... 0 0 0 0 59,810 Refunding Bonds Issued ...... 94,080 39,530 117,365 0 0 Refunding COPs Issued ...... 11,830 0 0 0 0 Payment to Refunding Escrow Agents ...... (122,342) (44,190) (137,501) 0 0 Premiums on Debt ...... 54,994 20,659 44,998 25,010 26,882 Reversion of Fund Balance from Comp. Units... 0 0 0 0 20,000 Op. Transfers In ...... 457 275 273 1,179 2,362 Op. Transfers to Capital Budget ...... (13,938) (43,805) (51,224) (101,385) (136,318) Op. Transfers to Other Funds ...... (6,652) (5,673) (14,323) (12,072) (25,885) Total Other Financing Sources (Uses) ...... 274,719 (33,204) (40,412) (87,268) 90,851 Net Change in Fund Balances ...... 59,901 (28,151) (28,392) (70,218) (5,684) Fund Balance at Beginning of Year ...... 402,232 462,133 433,982 405,590 335,372 Fund Balance at End of Year ...... $462,133 $433,982 $405,590 $335,372 $329,688

*Includes Pension Obligation Bond Issuances of $255,000,000 in FY2013 and $143,118,000 in FY2017.

See “Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds” in the County’s Comprehensive Annual Financial Report.

FIVE YEAR SUMMARY OF GENERAL FUND BUDGET AND ACTUAL RESULTS

The following statement presents a comparison of budget versus actual revenues, expenditures and encumbrances and changes in fund balance in the County’s General Fund using the budgetary basis of accounting for each of the past five fiscal years ending June 30.

GENERAL FUND BUDGETARY COMPARISON FISCAL YEARS 2013 TO 2017 (Dollars expressed in 000s)

2013 2014 2015 2016 2017 Budget Actual Budget Actual Budget Actual Budget Actual Budget Actual Revenues: General Property Taxes ...... $850,132 $853,860 $860,143 $853,317 $866,858 $870,115 $884,330 $892,906 $916,283 $919,192 Income Taxes ...... 561,372 624,060 604,293 667,924 687,771 696,335 718,940 709,377 739,105 697,694 Sales and Service Taxes ...... 109,478 128,039 120,140 124,409 124,208 137,031 143,320 157,551 155,799 159,049 Licenses and Permits...... 3,688 4,970 4,559 4,925 4,854 5,306 4,842 5,194 5,263 5,767 Intergovernmental ...... 37,881 37,717 42,791 43,473 42,947 43,739 45,226 46,609 47,256 47,764 Charges for Services ...... 9,928 10,378 10,909 11,118 11,546 12,544 11,802 22,404 47,790 43,822 Fines and Forfeitures...... 4,210 4,844 4,612 5,066 4,901 6,033 5,927 7,099 6,080 7,056 Reimbursement from Other Funds ..... 7,662 8,202 8,502 8,637 8,727 10,107 11,021 12,115 11,335 12,850 Interest on Investments ...... 1,052 1,324 1,350 1,022 568 650 2,762 1,110 3,319 1,652 Operating Transfers In ...... 323 323 275 275 273 273 306 306 252 252 Miscellaneous ...... 22,170 28,095 27,385 29,944 34,171 38,523 33,659 32,576 54,715 77,084 Total Revenues ...... 1,607,896 1,701,812 1,684,959 1,750,110 1,786,824 1,820,656 1,862,135 1,887,247 1,987,197 1,972,182 Expenditures and Encumbrances: General Government ...... 105,189 102,135 106,578 103,973 113,272 109,697 117,990 113,437 121,115 119,786 Public Safety ...... 325,995 323,636 329,196 324,374 336,505 334,171 341,122 340,701 353,363 352,432 Public Works ...... 94,281 89,235 107,419 104,495 112,200 110,129 114,621 113,532 114,218 113,328 Health and Human Services ...... 35,140 34,311 35,930 34,837 37,728 36,448 38,616 37,936 40,996 40,076 Culture and Leisure Services ...... 18,044 16,684 18,078 17,289 18,509 17,940 19,162 18,307 19,636 19,514 Economic/Community Development . 1,345 1,295 1,249 1,170 1,230 1,015 1,196 1,192 1,285 1,285 Pension Plan Contributions ...... 65,857 65,856 71,810 71,807 95,891 95,618 92,598 92,598 104,594 104,589 Healthcare Contributions ...... 92,434 92,294 99,772 99,500 126,408 99,987 126,606 126,447 104,082 102,764 Public Schools ...... 725,066 723,040 730,398 730,302 776,990 776,989 789,656 788,619 805,451 805,450 Community College ...... 38,463 38,463 38,463 38,463 39,363 39,363 41,428 41,428 44,329 44,329 Libraries ...... 33,925 33,925 35,264 35,264 33,563 33,563 32,764 32,764 32,850 32,850 Debt Service ...... 84,376 81,835 95,959 95,922 109,674 109,664 119,600 118,692 125,898 125,568 Op. Transfers to Capital Budget ...... 13,938 13,938 43,805 43,805 51,224 51,224 101,385 101,385 136,318 136,318 Transfers to Other Funds ...... 6,652 6,652 5,673 5,673 6,073 6,073 6,183 6,183 6,672 6,672 Miscellaneous ...... 16,776 16,066 16,897 16,532 17,612 17,572 18,606 17,851 18,658 18,458 Total Expenditures & Encumbrances 1,657,481 1,639,365 1,736,491 1,723,406 1,876,242 1,839,453 1,961,533 1,951,072 2,029,465 2,023,419 Excess of Revenues over Expenditures and Encumbrances .... ($49,585) 62,447 ($51,532) 26,704 ($89,418) ($18,797) ($99,398) ($63,825) ($42,268) ($51,237) Other Financing Source - COPs Adjustments required under GAAP: Net Change in Res. for Encumbrances 1,519 445 653 (2,314) 2,229 Unbudgeted Equip. Finance Activity . (30,438) (34,380) (17,537) (12,913) 55,425 Unbudgeted Bond Escrow Payment ... 87 128 138 618 443 Net Change in Reserve for Inventories Imprest Funds and Other Programs . 24,820 (22,596) 6,179 5,205 (13,822) Prior Year Encumbrance Liquidations 1,466 1,548 972 3,011 1,278 Net Change in Fund Balance 59,901 (28,151) (28,392) (70,218) (5,684) Fund Balance at Beginning of Year .... 402,232 462,133 433,982 405,590 335,372 Fund Balance at End of Year ...... $462,133 $433,982 $405,590 $335,372 $329,688

See “Budgetary Comparison Statement – General Fund” in the County’s Comprehensive Annual Financial Report.

FIVE YEAR SUMMARY OF GENERAL FUND BALANCE

GASB Statement No. 54 requires governments to use fund balance classifications of “Nonspendable”, “Restricted for”, “Assigned to”, and “Unassigned.” The following table presents a comparison of the County’s Revenues and General Fund balance for the past five fiscal years based on the new classifications of fund balance presented under GASB Statement No. 54. At the end of FY2017, the Unassigned General Fund Balance and Designated for Subsequent Years Expenditures totaled $208,695,000 or 10.6% of General Fund revenues using the budgetary basis of accounting. The Unassigned General Fund Balance and Designated for Subsequent Years Expenditures was referred to as “Unreserved General Fund Balance” prior to the implementation of GASB Statement No. 54.

GENERAL FUND BALANCE FISCAL YEARS 2013 TO 2017 (Dollars expressed in 000s)

Fiscal Year Ended June 30, 2013 2014 2015 2016 2017 Nonspendable: Inventories ...... $6,772 $5,574 $6,998 $7,489 $9,251 Restricted for: Equipment Financing ...... 68,821 34,441 16,904 3,991 59,416 Bond Escrow ...... 319 448 586 1,203 1,646 Restricted General Fund Balance ...... ………… 69,140 34,889 17,490 5,194 61,062 Assigned to: Encumbrances ...... 5,210 5,655 6,308 3,995 6,223 Imprest Funds ...... 69 69 74 75 75 Designated for Subsequent Year’s Expenditures ...... 39,532 78,056 89,648 19,124 3,304 Retirement of Long-term Debt ...... 46,475 25,075 29,826 34,540 18,955 Disputed Taxes ...... 0 0 25,427 25,427 25,427 Assigned General Fund Balance ...... ………… 91,286 108,855 151,283 83,161 53,984 Unassigned: Designated for Revenue Stabilization ...... 85,034 85,187 89,341 93,107 99,360 Undesignated ...... 209,901 199,477 140,478 146,421 106,031 Unassigned General Fund Balance ...... $294,935 $284,664 $229,819 $239,528 $205,391 Total General Fund Balance ...... $462,133 $433,982 $405,590 $335,372 $329,688

General Fund Revenues (Budgetary Basis) ...... $1,701,812 $1,750,110 $1,820,656 $1,887,247 $1,972,182

Unassigned General Fund Balance and Designated for Subsequent Year’s Expenditures as a % of GF Revenues ..... 19.7% 20.7% 17.5% 13.7% 10.6%

FISCAL YEAR 2018 OPERATING BUDGET

On May 25, 2017, the County Council adopted the FY2018 budget. The General Fund Operating Budget of $1,993,257,862 represents a decrease of 1.58% or $32.0 million from the adjusted FY2017 operating budget of $2,025,260,368.

The budget’s on-going spending fell within the guideline established by the Spending Affordability Committee (“SAC”). Under SAC guidelines, the budget (excluding capital and one-time items as well as matching funds for grants) could grow by 3.78%. The basic growth factor allowed under the SAC guidelines reflects estimated personal income growth in the County.

There are no new taxes levied to fund the General Fund budget. The County’s income tax rate of 2.83% remained unchanged and the real property tax rate remained at $1.10 per $100 of assessed value. The personal property rate remained at $2.75 and the Homestead Assessment Growth Cap continued at 4%.

As in previous years, the FY2018 operating budget funds all eligible salary increments and longevities. The budget also includes a 2% Cost of Living Adjustment (COLA) for County employees effective July 1, 2017. COLA recipients include general government, Board of Education, Library, and Community College employees.

The chart below presents the General Fund estimated revenues and budgeted expenditures for FY2017 and FY2018 and the percentage change by category.

GENERAL FUND ESTIMATED REVENUES AND BUDGETED EXPENDITURES

FY2017 FY2018 Revised Original Revenue Revenue % Estimate Estimate Change Revenues: Property Taxes ...... $921,909,507 $943,514,489 2.3% Income Taxes ...... 700,648,986 731,670,286 4.4 Sales and Service Taxes ...... 156,766,796 152,733,182 -2.6 Intergovernmental Aid ...... 47,255,616 49,074,683 3.8 Charges for Services ...... 43,023,404 46,361,770 7.8 Reimbursements from Other Funds ...... 12,060,500 12,198,435 1.1 Fines and Forfeitures ...... 6,698,700 6,762,000 0.9 Licenses and Permits ...... 5,509,073 5,115,864 -7.1 Interests on Investments ...... 2,033,000 4,409,972 116.9 Miscellaneous ...... 79,075,697 38,113,674 -51.8 Total Revenues ...... 1,974,981,279 1,989,954,355 0.8 Available from Surplus ...... 50,279,089 3,303,507 -93.4 Total Resources ...... $2,025,260,368 $1,993,257,862 -1.6%

FY2017 FY2018 Revised Adopted % Budget Budget Change Appropriations: Public Schools (Excludes PAYGO) ...... $805,691,200 $843,101,384 4.6% Public Safety ...... 349,138,216 357,593,408 2.4 Debt Service (Includes College Debt Service) ...... 126,408,605 133,465,264 5.6 General Government ...... 120,675,047 128,356,940 6.4 Public Works ...... 113,369,285 115,578,933 1.9 Pension Plan Contributions ...... 104,554,099 115,012,378 10.0 Healthcare Contributions ...... 104,079,882 99,086,347 -4.8 Community College (Excludes Debt Service) ...... 44,329,043 46,929,217 5.9 Health and Human Services ...... 40,841,029 43,125,822 5.6 Libraries ...... 32,849,950 33,370,743 1.6 Capital Budget Contribution (Includes Schools) ...... 136,318,023 31,457,751 -76.9 Social Security ...... 18,623,000 19,180,000 3.0 Culture and Leisure Services ...... 19,950,256 17,245,221 -13.6 Grants ...... 6,606,335 7,453,730 12.8 Economic and Community Development ...... 1,284,508 1,300,724 1.3 Reserve for Contingencies ...... 541,890 1,000,000 84.5 Total Appropriations ...... $2,025,260,368 $1,993,257,862 -1.6%

FISCAL YEARS 2017 AND 2018 INTERIM BUDGET COMPARISON

The following statement compares the County’s actual revenues and actual expenditures and encumbrances for the first six months of FY2017 and FY2018 using the budgetary basis of accounting. The columns entitled, “% of Budget” calculate the percentage of estimated revenues received and the percentage of budgeted expenditures paid through the first six months of each fiscal year. The last column computes the percentage of increase or decrease of actual revenues and expenditures for the first six months of FY2018 over the first six months of FY2017.

BALTIMORE COUNTY, MARYLAND INTERIM STATEMENT OF REVENUES, EXPENDITURES AND ENCUMBRANCES – GENERAL FUND FIRST SIX MONTHS ACTUAL FY2017 AND FY2018 COMPARED WITH TOTAL BUDGET FY2017 AND FY2018 ($ in 000's)

Fiscal Year 2017 Fiscal Year 2018 % Increase (Decrease) Actual Actual Actual Through % of Through % of FY2018 vs 12/31/16 Budget* 12/31/17 Budget* FY2017 Revenues: Property Taxes ...... $917,185 100.1 % $946,714 100.3 % 3.2 % Income Taxes ...... 202,315 27.4 182,668 25.0 -9.7 Sales and Service Taxes ...... 70,826 45.5 73,893 48.4 4.3 Intergovernmental ...... 24,734 52.3 25,921 52.8 4.8 Charges for Services ...... 18,332 38.4 20,663 44.6 12.7 Reimbursements from Other Funds ...... 4,635 40.9 3,401 27.9 -26.6 Fines and Forfeitures ...... 2,915 47.9 2,789 41.2 -4.3 Licenses and Permits ...... 2,244 42.6 2,252 44.0 0.4 Interest on Investments ...... 961 28.9 2,140 48.5 122.7 Miscellaneous ...... 34,525 62.8 31,461 82.5 -8.9 $1,278,672 64.3 % 1,291,902 64.9 % 1.0 %

Expenditures and Encumbrances: Public Schools (Excludes PAYGO) ...... $457,745 56.8 % $443,177 52.6 % -3.2 % Public Safety ...... 180,041 51.6 184,493 51.6 2.5 Pension Plan Contributions ...... 104,470 99.9 114,873 99.9 10.0 Debt Service (Includes Coll. Debt Svc) ..... 84,975 67.2 89,354 66.9 5.2 Public Works ...... 75,601 66.7 72,312 62.6 -4.4 General Government ...... 63,867 52.9 70,164 54.7 9.9 Healthcare Contributions ...... 64,793 62.3 41,301 41.7 -36.3 Community College (Excludes Debt Svc) . 37,978 85.7 35,635 75.9 -6.2 Capital Budget Contribution (PAYGO) ..... 136,318 100.0 31,458 100.0 -76.9 Health and Human Services ...... 20,438 50.0 21,116 49.0 3.3 Libraries ...... 16,198 49.3 15,053 45.1 -7.1 Recreation and Culture ...... 12,970 65.0 10,861 63.0 -16.3 Social Security ...... 9,094 48.8 9,212 48.0 1.3 Grants ...... 6,531 98.9 7,454 100.0 14.1 Economic and Workforce Development .... 612 47.7 624 47.9 2.0 Reserve for Contingencies...... 0 0.0 0 0.0 -- Total Expenditures and Encumbrances ...... $1,271,631 62.8 % 1,147,087 57.5 % -9.8 %

*Includes budget revisions through December of each year.

GENERAL FUND REVENUES AND EXPENDITURES

The General Fund is the primary operating fund maintained by the County to account for revenue derived from property taxes, income taxes, sales and service taxes, intergovernmental aid and other sources. General Fund expenditures include categories such as public schools, public safety, and other essential functions of government. The following is a discussion of the General Fund revenue structure and major classifications of General Fund expenditures.

Revenues

The County maintains a diversified and stable revenue system to shelter it from short-term fluctuations in any individual revenue source. The County follows an aggressive policy of collecting revenues. The County has established user charges and fees to cover the full cost of providing the service and reviews these charges and fees annually. General Fund revenues support most of the services provided by the County. The General Fund is comprised of taxes and other revenue sources. Taxes, the greatest source of revenues to the General Fund, provided the County with 90% of total revenue in FY2017. Other revenue sources include intergovernmental aid, interest on investments, charges for services, reimbursements from other funds, fines and forfeitures, licenses and permits, and miscellaneous revenues. General Fund revenue for FY2017 was $1,972,182,000, which is $85 million higher than the FY2016 General Fund revenues. The real property tax rate remained at $1.10 per $100 of assessed value in the FY2018 budget.

Taxes

The three categories of taxes include property taxes, income taxes and sales and service taxes and represented 52%, 39% and 9%, respectively, of the County’s total tax revenue for FY2017. The following table shows the County’s principal tax revenues by source for each of the ten most recent fiscal years.

General Sales and Fiscal Total Property Income Service Year Taxes Taxes Taxes Taxes 2008...... $1,499,041,000 $713,116,000 $640,985,000 $144,940,000 2009...... 1,518,367,000 765,573,000 640,176,000 112,618,000 2010...... 1,414,148,000 814,099,000 495,656,000 104,393,000 2011...... 1,448,849,000 837,056,000 514,715,000 97,078,000 2012...... 1,545,610,000 845,238,000 593,204,000 107,168,000 2013...... 1,605,959,000 853,860,000 624,060,000 128,039,000 2014...... 1,645,650,000 853,317,000 667,924,000 124,409,000 2015...... 1,703,481,000 870,115,000 696,335,000 137,031,000 2016...... 1,759,834,000 892,906,000 709,377,000 157,551,000 2017...... 1,775,935,000 919,192,000 697,694,000 159,049,000 ______Note: “General Property Taxes” represent net collections, which include interest on delinquent taxes, discounts allowance, interest refunds and real property tax credits for aged and disabled. “Sales and Service Taxes” include title transfer tax, recordation tax, electricity tax, telephone tax, admissions and amusement tax, motel and hotel occupancy tax, 911 fees, and auto trailer camp tax.

General Property Taxes

The County levies taxes on both real and personal property. The value of the two classes of property is determined by the State Department of Assessments and Taxation and is assessed at 100% of full cash value. One-third of the real property base is physically inspected and revalued once every three years. Any increase in full cash value arising from such reassessment is phased in over the ensuing three taxable years in equal annual installments, although a decline in assessed valuation becomes fully effective in the first year. The total assessed value of all tangible property in the County for FY2017 was $82.1 billion. The County collected general property taxes of $919 million in FY2017 and estimated collections of $944 million in the budget in FY2018.

The major portion of the County’s property tax is levied each July 1 on the assessed value listed as of that date for all real and personal property located in the County. Bills paid during July are granted a 1% discount and bills paid in August are granted a 0.5% discount. Taxes are considered delinquent and interest accrues at 1% per month from October 1 to the date of payment. Delinquent real properties are sold in June at the annual tax sale at which time the property owner has six months to pay tax and penalty in full before foreclosure proceedings begin. County taxpayers are billed on a semi-annual basis with payments due September 30 and December 31 but retain the option to pay in full on or before September 30.

Maryland law authorizes counties to establish a separate cap no higher than 10% on the annual growth in residential property assessments. The County has established a homestead property tax credit that capped assessment growth on residential

property at 4%. The revenue loss due to the homestead property tax credit is estimated at $12.8 million in FY2018 compared with $12.2 million in FY2017 and $13.0 million in FY2016. Along with the homestead credit, a homeowner’s credit (Circuit breaker) program acts to lower a taxpayer’s tax liability based on the ability of the homeowners to pay property taxes. The homeowner’s credit program is expected to reduce property taxes by $8.5 million in FY2018 but most were reimbursed through a state grant-in aid.

Most tangible personal property is assessed at cost less 10% depreciation for each year held, subject to a minimum assessment of 25% of original cost. In addition to the standard assessment rate, items which are specifically listed in the State of Maryland, Department of Assessments and Taxation “Depreciation Rate Chart” are subject to varying assessment rates. Commercial and manufacturing inventory of business is assessed at cost, with no inflation allowance and is determined from annual reports filed with the State Department of Assessments and Taxation. In the County, commercial and manufacturing inventory, manufacturing machinery, farm implements and livestock are exempt from the personal property tax.

The following table sets forth the estimated full value of all taxable property in the County for each of the past ten fiscal years. Real and personal property were assessed at 100% of estimated full value. Tax-exempt properties owned by federal, state and county governments, churches, schools, fraternal organizations, cemeteries, disabled veterans, and the blind of approximately $8.2 billion are not included in the table.

Real Property Percentage Personal Property Percentage Total Percentage Estimated Change From Estimated Change from Estimated Change From Fiscal Year Full Value Prior Year Full Value Prior Year Full Value Prior Year 2008 ...... $69,346,671,000 15.5% 3,067,834,000 0.0% $72,413,505,000 14.7% 2009 ...... 78,882,654,000 13.8 3,117,528,000 1.6 82,000,182,000 13.2 2010 ...... 86,262,930,000 9.4 3,110,576,000 (0.2) 89,373,506,000 9.0 2011 ...... 86,234,670,000 (0.0) 2,944,780,000 (5.3) 89,179,450,000 (0.2) 2012 ...... 81,448,482,000 (5.6) 3,024,342,000 2.7 84,472,824,000 (5.3) 2013 ...... 77,870,032,000 (4.4) 3,024,740,000 0.0 80,894,772,000 (4.2) 2014 ...... 75,548,498,000 (3.0) 2,986,722,000 (1.3) 78,535,220,000 (2.9) 2015 ...... 75,289,712,000 (0.3) 3,023,312,000 1.3 78,313,024,000 (0.3) 2016 ...... 76,579,861,000 1.7 3,244,439,000 7.3 79,824,300,000 1.9 2017 ...... 78,767,138,000 2.9 3,334,683,000 2.8 82,101,821,000 2.9

The following table sets forth real and personal property tax rates and tax levies for the County for each of the past ten fiscal years. The real property tax rate for the County was set at $1.10 per $100 of assessed value in FY2007 through FY2016 and was also set at that level in the FY2017 budget.

County Tax Rates per $100 of Assessed Valuation Real Personal Fiscal Year Property Property Tax Levies 2008 ...... $1.100 $2.7500 $711,785,000 2009 ...... 1.100 2.7500 763,191,000 2010 ...... 1.100 2.7500 808,956,000 2011 ...... 1.100 2.7500 838,282,000 2012 ...... 1.100 2.7500 849,559,000 2013 ...... 1.100 2.7500 854,900,000 2014 ...... 1.100 2.7500 858,621,000 2015 ...... 1.100 2.7500 872,635,000 2016 ...... 1.100 2.7500 897,668,000 2017 ...... 1.100 2.7500 921,713,000

In the opinion of the County, the tax rate established by it for each fiscal year when applied to the assessed value of the real and personal property subject thereto is sufficient to provide revenues to discharge the County’s obligations to pay maturing principal of and interest on its issued and outstanding general obligation indebtedness for each such fiscal year.

The following table sets forth information concerning the County’s property tax levies and collections for each of the past ten fiscal years ($s in 000’s).

Collected within the Fiscal Year of the Levy Total Collections FY Prior Year Total Percentage Collections- Percentage Ended Original Adjusted Adjusted of Original Subsequent of Original June 30 Tax Levy Levy Levy Amount Levy Years Amount Levy 2008 $711,785 ($1,955) $709,830 $709,242 99.6% $869 $710,111 99.8% 2009 763,191 (1,461) 761,730 758,977 99.4 886 759,863 99.6 2010 808,956 (881) 808,075 805,384 99.6 1,985 807,369 99.8 2011 838,282 (1,899) 836,383 834,831 99.6 1,334 836,165 99.7 2012 849,559 (2,925) 846,634 841,983 99.4 3,398 845,381 99.8 2013 854,900 (1,560) 853,340 851,115 99.7 895 852,010 99.8 2014 858,621 (3,217) 855,404 854,254 99.9 357 854,612 99.5 2015 872,635 (1,757) 870,878 869,303 99.6 2,698 872,271 99.9 2016 897,668 (1,823) 895,845 886,008 98.7 2,256 888,264 98.9 2017 921,713 (2,882) 918,831 918,421 99.6 459 918,880 99.6

The following table sets forth the County’s 25 largest taxpayers in respect of ad valorem property taxes, the assessed valuation of property owned by each such taxpayer and the taxes levied by the County against each such taxpayer during FY2017.

BALTIMORE COUNTY’S 25 LARGEST TAXPAYERS FISCAL YEAR 2017

Total Assessed Total County Name of Taxpayer* Valuation Tax** 1 BGE...... $993,069,130 $27,134,688 2 Verizon ...... 242,260,180 6,657,202 3 Merritt Management Corp ...... 589,851,231 6,509,064 4 Home Properties ...... 261,724,086 2,895,064 5 Comcast ...... 94,782,380 2,606,515 6 Towson Town Center ...... 264,437,770 2,209,647 7 Tradepoint Atlantic LLC...... 183,269,557 2,113,215 8 Walmart ...... 156,599,560 1,943,318 9 White Marsh Mall...... 147,899,004 1,636,582 10 Oak Campus Partners, LLC...... 137,240,867 1,509,650 11 TRP Suburban ...... 135,426,953 1,492,751 12 Hunt Valley Towne Center LLC ...... 128,363,600 1,412,000 13 Cellco Partnership ...... 52,681,967 1,376,455 14 Maryland Health and Higher Education ...... 118,154,000 1,299,694 15 MCI Worldcom ...... 41,997,010 1,154,918 16 Security Land and Development Co...... 95,831,183 1,055,593 17 Avenue at White Marsh ...... 91,583,933 1,007,423 18 Columbia Gas Transmission LLC ...... 34,105,690 937,906 19 Mercy Ridge ...... 84,389,968 928,290 20 Baltimore MD Green II LLC ...... 82,934,900 912,284 21 Becton Dickinson and Co ...... 69,671,780 882,305 22 Bonnie Ridge ...... 72,478,600 797,265 23 Towson LLC ...... 71,533,100 790,164 24 Lakeside Financial Center LLC ...... 70,673,500 777,408 25 Home Depot ...... 61,192,207 767,808 $4,282,152,156 $70,807,209

* The information set forth above was compiled from tax rolls on which the names of owners are not always recorded in the same manner. ** Represents only County tax levied on assessed value of real and personal property; does not include State taxes or any other taxes or charges.

Income Tax

The County's income tax rate has been set at 2.83% from 2002 through 2017. The County collected income tax revenue of $698 million in FY2017 and estimated collections of $732 million in the budget in FY2018.

Sales and Service Taxes

The County imposes excise taxes on certain activities. The County collected sales and service tax revenue of $159 million in FY2017 and estimated collections of $153 million in the budget in FY2018. The most notable of these is the title transfer tax estimated at $72 million for FY2018 levied upon the transfer or sale of property and the recordation tax estimated at $34 million for FY2018 that is applied to deeds and other such documents conveying title to property. Other sales and service taxes include electricity tax, telephone tax, motel and hotel occupancy tax, admissions and amusement tax, local 911 tax, and auto trailer camp tax.

Intergovernmental Aid

Intergovernmental aid from the State and Federal Government is the largest source of revenue to the County outside of taxes. Intergovernmental aid is comprised of state shared revenues, state grant aid and federal revenues. State shared revenues are generated from a Highway User tax on gasoline and motor vehicles and license fees on County businesses. State grant aid is generally for health and public safety. Federal revenues are partial reimbursements of Department of Social Services activities and payments for participation in federal law enforcement cases. The County collected $48 million in intergovernmental aid in FY2017 and estimated collections of $49 million in the budget in FY2018.

Charges for Current Services

User fees and charges for County services can be divided into major groupings of General Government, Recreation and Health and Human Services. General Government includes a new charge for EMS Transport Fees, Fire Inspection Fees, Development Fees, and Lien Certificates. Recreation fees are collected at the County’s two beaches, the fishing center at Loch Raven Reservoir and the Oregon Ridge Lodge. Health and Human Services includes single stream recycling revenues and tipping fees paid by commercial haulers at the County landfill, Medicare reimbursements for services provided by the County Health Department, and various other health service fees. The County collected $43 million in Charges for Current Services in FY2017 and estimated collections of $46 million in the budget in FY2018.

Expenditures

The County pays the costs of general government functions from the General Fund. These costs include those of public safety, recreation and parks, economic development, environmental protection, governmental administration, retirement and debt service. The Public Works Department is funded through a combination of General Fund and Metropolitan District Fund appropriations. In addition, General Fund appropriations are merged with State and Federal gifts and grants to fund education, the Community College, libraries, health and welfare, and community development programs.

Funding of education through the Baltimore County Public Schools is the largest single area of expenditure. The school systems in Maryland do not exist as independent tax districts and therefore rely totally on governmental support. The County has increased its school spending by $37.4 million or 4.6% in the FY2018 budget, exclusive of the capital budget contribution. The Public School budget comprises 42% of the County’s FY2018 General Fund budget.

The responsibility for public safety is shared by four agencies: Police Department, Fire Department, the Bureau of Corrections and the Central Communications Center. Covering a large geographical area with no incorporated municipalities, the Baltimore County Police Department is one of the largest county departments in the nation. The Fire Department, with an integrated career and volunteer system, is also one of the largest departments in the nation. Public Safety comprises 18% of the FY2018 General Fund budget.

The County provides a variety of medical and social services through its departments of Health, Social Services, Aging, and Environmental Protection and Resource Management. The Department of Social Services, which has a separate and larger State operated component, also has responsibility for administering emergency shelter and housing programs.

Payments to Component Units

The following chart shows appropriations for Component Units in the FY2018 budget:

Public Schools $843,101,000 Community College 57,105,000 Library 33,371,000 Total $933,577,000

Appropriations from the County’s General Fund represent 51% of funding for the Public Schools, 23% of funding for the Community College and 82% of funding for the Libraries. The remainder of the funding for these agencies is principally provided through state and federal funds that are distributed directly to these agencies. The Community College is also funded through tuitions. The General Fund appropriation for these three component units in the FY2018 budget equates to 47% of the County’s total General Fund operating budget. The County disburses operating funds to the agencies periodically throughout the fiscal year.

Recent Federal Tax Law Changes

On December 22, 2017, the United States Congress passed the Tax Cuts and Jobs Act of 2017 which, among other things, modified the allowance of certain federal income tax deductions for individuals. Maryland income tax is based, in part, on measures of income determined for federal income tax purposes. Due to these federal tax law changes, the Maryland Bureau of Revenue Estimates has projected in its 60-Day Report – A Review of Tax Cuts and Jobs Act of 2017 that the income tax revenue received by the State of Maryland will increase, assuming Maryland income tax law remains unchanged. This increase in income tax revenue to the State of Maryland, in turn, will impact the income tax revenue received by the County. There are several legislative proposals in the General Assembly of the State of Maryland that would modify the impact of recent federal tax law changes on the income tax revenues ultimately received by the State of Maryland. These proposals would also impact the income tax revenues received by the County. It cannot be determined whether any future legislative changes will be enacted or, if enacted, the impact that any such legislative changes would have on income tax revenues received by the County.

METROPOLITAN DISTRICT ENTERPRISE FUND

The Metropolitan District Enterprise Fund was established in FY2002 as a result of Governmental Accounting Standards Board (GASB) Statement No. 34, as amended by GASB Statement No. 37, requiring new financial reporting standards for state and local governments. The Metropolitan District Enterprise Fund combines the Metropolitan District Operating and Metropolitan District Capital Projects funds.

Five Year Summary of Metropolitan District Enterprise Fund – Operating Portion

The operating portion of the Metropolitan District Enterprise Fund is segregated for comparison purposes. The revenues are presented according to source and the expenditures are presented according to major purpose for each of the past five fiscal years ended June 30.

METROPOLITAN DISTRICT ENTERPRISE FUND – OPERATING PORTION COMPARATIVE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE FISCAL YEARS 2013-2017

FY2013 FY2014 FY2015 FY2016 FY2017

Revenues: Licenses and Permits ...... $978,000 $1,080,000 $985,000 $1,092,000 $1,022,000 Charges for Services ...... 162,235,000 157,978,000 152,852,000 178,793,000 191,628,000 Assessments ...... 13,060,000 12,766,000 12,826,000 12,085,000 11,964,000 Investments income ...... 320,000 192,000 98,000 50,000 0 Intergovernmental ...... 3,216,000 2,958,000 2,922,000 2,900,000 2,857,000 Miscellaneous ...... 456,000 241,000 93,000 15,000 44,000 Total ...... 180,265,000 175,215,000 169,776,000 194,935,000 207,515,000 Expenditures: General Government ...... 1,331,000 1,441,000 1,462,000 1,500,000 1,616,000 Public Works ...... 113,978,000 117,128,000 123,855,000 119,252,000 91,283,000 Debt Service: Principal Retirement ...... 43,533,000 44,274,000 44,276,000 49,137,000 53,059,000 Interest and Fiscal Charges ...... 36,646,000 37,379,000 38,789,000 39,051,000 42,329,000 Total Expenditures ...... 195,488,000 200,222,000 208,382,000 208,940,000 188,287,000 Excess (Deficiency) of Revenues over Expenditures...... (15,223,000) (25,007,000) (38,606,000) (14,005,000) 19,228,000 Other Financing Sources (Uses): Bond Premium ...... 4,353,000 4,592,000 16,531,000 17,765,000 14,946,000 Transfer Out ...... 0 0 0 (3,378,000) (4,894,000) Total Other Financing Sources (Uses) ...... 4,353,000 4,592,000 16,531,000 14,387,000 10,052,000 Excess (Deficiency) of Revenues and Other Sources over Expenditures and Other Uses ...... (10,870,000) (20,415,000) (22,075,000) 382,000 29,280,000 Beginning of Year Fund Balance ...... 96,488,000 85,618,000 65,203,000 43,128,000 43,510,000 End of Year Fund Balance ...... $85,618,000 $65,203,000 $43,128,000 $43,510,000 $72,790,000

Water Supply and Sewerage Revenues

The Metropolitan District receives revenues from the net receipts on the sale of water, water service, and sewer service. Such revenues are expended for the maintenance and operation of the water and sewerage system. All rates are reviewed annually on a funds-needs basis and revisions are recommended to the County Executive. The authority for setting water consumption rates rests with Baltimore City’s Board of Estimates, based on recommendations submitted by the Baltimore County Director of Public Works. The County increased rates 15% on July 1, 2007, 7.5% on July 1, 2008, 5% on July 1, 2009, 10% on July 1, 2010, 15% on July 1, 2015 and 12% on July 1, 2016. On July 1, 2017 the County increased rates to reflect usage by property type as follows: Residential 8.4%; Churches, Government and Schools 10.2%; Businesses and Apartments 12.2%; and Industrial 14.2%. The rate increases offset projected increases in the County’s share of expenditures as estimated by Baltimore City. The authority for setting other Metropolitan District rates lies with the County’s executive branch by Executive Order. The County has the right to appeal water and sewer rates to the Public Service Commission of Maryland.

The Metropolitan District also receives the annual front foot assessment charges for water and sewer mains installed that abut properties within the Metropolitan District and charges for connection to the system. The majority of these charges are used to

pay debt service on Metropolitan District Bonds outstanding. Representative rates in FY2018 for the Metropolitan District are set out below.

Front Foot Assessments (Assessed over 40 years)

Property Type Water Sewer Subdivision @$1.20 @$2.00 Agriculture (150 ft. maximum) 1.20 2.00 Small Acreage (Up to 200 ft.) 1.20 2.00 (Next 200 ft.) 0.80 1.35 (Remainder) 0.40 0.65 Industrial or Commercial 2.30 3.10

For the taxable year beginning July 1, 2017, the Metropolitan Service Charge shall be determined by a calculation of the water distribution charge and the sewer service charge billed on the July 1, 2016 tax bill, as adjusted, along with a rate increase.

BUDGETARY PROCEDURE

The formulation of the County’s budget is the responsibility of the Director of Budget and Finance who is subject to the supervision of the County Administrative Officer. The County Administrative Officer serves as the chief fiscal officer for the County. In addition to formulating the budget, the Director of Budget and Finance is responsible for the study of the organization, methods and procedures of each office, department, board, commission, institution and agency of the County government; the submission to the County Administrative Officer of periodic reports on their efficiency and economy; and such other duties and functions as may be assigned by the County Administrative Officer.

Proposal of the Budget

The Operating Budget (the “Budget”), which in accordance with the Charter must be balanced, is prepared and submitted for approval to the County Executive by the County Administrative Officer and is based upon estimated revenues and expenditures of operations for the ensuing fiscal year.

In the fall of each year, revenues are estimated for the entire County by the Office of Budget and Finance. At this time, agencies submit their projected fixed costs for the upcoming fiscal year and, combined with estimated revenues, each agency will be provided with a Maximum Adjusted Request Ceiling (MARC) that their General Fund Budget request must not exceed unless there is adequate justification. The Budgets are then subject to review by the Director of Budget and Finance. The County Executive, after approving the Budget, submits the Budget along with a Budget Message to the County Council (the Budget Message”). In addition to a summary of the Budget, the Budget Message indicates any major changes in financial policy and in expenditures, appropriations and revenues as compared with the fiscal year then ending, as well as the reasons for such changes. With respect to the Capital Budget, the Budget Message includes an explanation of changes made by the County Executive in the Capital Program recommended by the Baltimore County Planning Board. The Capital Budget is proposed each two-year period. The County Executive shall submit the budget not later than 75 days prior to the end of the fiscal year.

The Planning Board, which provides input from the community and neighborhood perspective, is charged with the responsibility of recommending a Capital Improvement Program (CIP) to the County Executive. The Planning Board hears testimony from each of the County agencies that have capital budget requests. In even numbered calendar years, the Planning Board makes recommendations for the amount and allocation of the bond referendum by programming funds for the appropriate two fiscal years, the budget year, and the rest of the capital program. In odd numbered calendar years, the Planning Board reviews requests for changes to the Budget and the capital program due to emergencies or other compelling reasons. Nothing precludes the Planning Board from making major changes to the Budget and the capital program in the odd numbered calendar years. However, the most recently passed referendum provides a fiscal parameter and the previous CIP provides a guideline for capital project scheduling. The County Executive is free to change the CIP recommended by the Planning Board, but any change must be pointed out to the County Council in the Budget Message.

The Master Plan, which is adopted at the start of each decade, is an important tool for ensuring that the growth of the County is managed in an orderly and rational manner. Community plans are prepared cooperatively by residents, landowners, business representatives and County staff. Many of the activities of government, such as the capital improvement program, require or recommend conformance with the Master Plan.

Adoption of the Budget

The County Council may decrease or delete any items in the Budget except those required by the public general laws of the State of Maryland and except any provision for debt service on obligations then outstanding or for estimated cash deficits. The County Council has no power to change the form of the Budget as submitted by the County Executive, to alter the revenue estimates (except to correct mathematical errors), or to increase any expenditure recommended by the County Executive for operating or capital purposes. The Budget must be adopted by the affirmative vote of not less than four members of the County Council. The Budget shall be adopted by the County Council on or before the first day of the last month of the fiscal year.

In its deliberations, the County Council will consider the recommendations of the Spending Affordability Committee (SAC). The SAC consists of five members, three of whom are members of the County Council. The remaining members may be from an area of specialty, such as finance or organized labor. The Chairperson of the County Council appoints the SAC members and may appoint an advisory committee of citizens to assist the SAC. On or before February 15 in each year, the SAC submits to the County Council and the County Executive a report with recommendations on fiscal goals for the upcoming budget. The goal of those spending guidelines is to limit the rate of growth in the Budget to a level that does not exceed the rate of growth of the County’s economy. The County Executive is free to propose a budget that exceeds that spending limit. If the County Council decides to adopt a budget that exceeds the SAC recommendations, then it must explain its rationale for exceeding the recommendations.

Amending the Budget

Transfers of funds from the Operating Budget to the Capital Budget or between specific projects contained in the Capital Budget may be authorized by the County Administrative Officer only with the approval of the County Executive and at least four members of the County Council. Operating budget inter-program transfers of no more than 10% of either program’s budget may be authorized by the Administrative Officer. However, transfers of greater than 10% or transfers between agencies require approval by the County Executive and at least four members of the County Council. Inter-agency transfers may be made during the last quarter of the fiscal year.

To meet a public emergency affecting life, health or property, the County Council may, by ordinance, make emergency appropriations from contingent funds, from revenues received from anticipated sources but in excess of the Budget estimates, or from revenues received from sources not anticipated in the Budget for the current fiscal year.

PENSION AND RETIREMENT PLANS

Employees' Retirement System of Baltimore County

Plan History

Established January 1, 1945, by County ordinance, the Employees’ Retirement System of the County (the “System”) is a defined benefit plan. The authority to establish and maintain the System is specified in Section 5-1-101 of the County Code. Membership in the System is open to employees in both the Merit and Non-Merit service of Baltimore County, employees of the Revenue Authority and employees of the Baltimore County Board of Education, the Baltimore County Board of Library Trustees and the Community College of Baltimore County who are not eligible to participate in the Maryland State Retirement and Pension Systems. Direct appointees of the Governor of Maryland, temporary employees and employees for whom there are existing pension provisions are excluded. System membership is compulsory for general County Merit employees after two years of service. Immediate membership is mandatory for police officers and fire fighters as a condition of employment. Membership is optional for Non-Merit employees. System assets are well diversified, in domestic and international equities, fixed income, private equity, hedge funds, and real estate. The County Council passed Bill No. 65-12 on October 15, 2012 that formally closed the System for members hired before July 1, 2007, now known as “Plan A.” Members hired on or after July 1, 2007 are considered members of “Plan B.” As of June 30, 2017, the System had a combined market value of $2.69 billion covering 9,580 active members and 7,966 retirees and beneficiaries.

Benefits Provided

The System provides normal service retirement and discontinued service retirement benefits for members who attain the age and service requirements. Coverage for occupational disability benefits is immediate upon entry into the System. Disability benefits for non-occupational related injury or illness are provided after five years of creditable service for public safety or 10 years of creditable service for general employees. Occupational death benefits are provided upon membership for any member whose death results from an injury occurring in the actual performance of their job. Non-occupational related death benefits are available to public safety members after one year of service and to general members after ten years of creditable service. Members are vested after five or ten years of service, depending upon whether the member was hired before or after July 1, 2007, and are also eligible for benefits at the normal or discontinued service retirement date. DROP benefits are provided to qualifying members. Cost-of-living adjustments are granted to qualifying members only if sufficient reserves have accumulated in the Post Retirement Increase Fund. Benefit payments totaled $273 million for the fiscal year ended June 30, 2017.

Administrative Authority

The Board of Trustees of the System (the “Board”) is empowered to invest the System's assets and to take appropriate action regarding the investment, management and custodianship of plan assets. The Board of Trustees is comprised of eleven members, five ex-officio members, two active elected members, one retired elected member, two County Council appointees and one County executive appointee that is currently vacant. A pension investment consultant has been appointed to advise and consult with the Board, prepare recommendations on investment policies, investment management structure and asset allocation, and to monitor and evaluate the performance of the investment managers and the asset custodian. The administration of the System is vested in the Director of Budget and Finance who has the responsibility to implement policies of the Board as they pertain to the System and to ensure the System operates within the guidelines as set forth in those policies.

Summary of Changes to the Retirement System since July 1, 2007

Through the labor negotiation process, the following changes have been made since July 1, 2007 in order to strengthen the Employees’ Retirement System.

• Increased member contributions • Reduced benefit structure for general employees hired on or after July 1, 2007 • Increased retirement eligibility requirements for all members hired on or after July 1, 2007 • Reduced post-retirement cost-of-living adjustments • Increased vesting requirements to 10 years for members hired on or after July 1, 2007 • Increased disability and death benefit requirements for general employees

In addition, the Retirement Board has lowered the valuation rate from 7.875% to 6.375% since July 1, 2012 primarily through the issuance of Pension Obligation Bonds.

Employee Contribution Rates

The County has negotiated contribution rates with all labor groups, based on hiring date, as follows:

Contribution Rate Contribution Rate Member Group Effective 7/1/17 Effective 7/1/18 General employees 6.75-7.25% 7.00-7.25% Sworn Police Officers and Firefighters 9.00-10.00% TBD-10.00% Correctional Officers and Deputy Sheriffs 7.00-10.00% 7.50-10.00% Department Heads 9.25-10.50% 10.00-10.50% Elected Officials 13.85% 13.85%

Contribution History

The County has fully funded its contribution in accordance with the actuary’s contribution recommendation in each and every fiscal year. The following table sets forth the contributions for the County and the employees for each of the ten most recent fiscal years ended June 30.

Fiscal County Employee Total Year Contribution Contribution Contribution 2008 $44,168,000 $29,962,000 $74,130,000 2009 49,763,000 31,423,000 81,186,000 2010 57,976,000 33,236,000 91,212,000 2011 58,340,000 36,567,000 94,907,000 2012 65,127,000 39,481,000 104,608,000 2013 73,362,000 37,682,000 111,044,000 2014 80,454,000 37,844,000 118,298,000 2015* 108,191,000 39,725,000 147,916,000 2016* 105,742,000 40,812,000 146,554,000 2017 118,156,000 43,244,000 161,400,000

* In FY2015, the County prefunded $4,819,000 of the recommended FY2016 County contribution of $110,561,000.

Actuarial Valuation

Actuarial valuations of the System are performed annually. The latest actuarial valuation of the System was prepared as of July 1, 2016. The actuarial cost method utilized is Projected Unit Credit. The actuarial asset valuation method is a ten-year smoothed market value without a corridor. Based on that method, the actuarial value of the System assets was $2,698,257,000 as of June 30, 2016. The actuarial accrued liability is the present value of benefits accumulated to date under the System's funding method and reflects future pay increases for active employees. As of June 30, 2016, the actuarial accrued liability of the System was $4,147,509,000. The System's actuarial funded status is measured by comparing the actuarial value of assets with the actuarial accrued liability. On this basis, the System's funded ratio as of June 30, 2016 was 65.1%.

System Financial Report

The Office of Budget and Finance prepares a separate CAFR for the System. The GFOA awarded a Certificate of Achievement for Excellence in Financial Reporting to the Employees' Retirement System of Baltimore County for its CAFR for the fiscal year ended June 30, 2016. The Certificate of Achievement is a prestigious national award, recognizing conformance with the highest standards for preparation of state and local government financial reports. In order to be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized comprehensive financial report with contents that conform to program standards. Such CAFR must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. The Employees' Retirement System of Baltimore County has received a Certificate of Achievement for each of its reports (fiscal years ended June 30, 1994-2016). The County submitted the CAFR for the fiscal year ended June 30, 2017 to GFOA to determine its eligibility for another Certificate of Achievement and believes that it will continue to conform to the program requirements.

Police, Fire and Widows' Pension Plan

The County is the administrator of a frozen defined benefit pension plan (the “Plan”) providing benefits to County firefighters and police officers hired prior to October 1, 1959 and their spouses. The pension allowance for retired firefighters and police officers is one-half of the base salary of an active firefighter or police officer, respectively, of the same rank the pensioner held at the time of retirement. The pension allowance to the surviving spouse is one-half of the pension allowance of the retiree.

The County deposited to an escrow fund moneys derived from the issuance of General Obligation Pension Funding Bonds in order to provide funding for the Plan. The County maintains responsibility for amounts payable under the Plan if, and to the extent that, investments acquired with the proceeds of the bonds provide insufficient funds to satisfy the County’s liabilities under the Plan.

As of June 30, 2017, the Plan had 179 retirees and beneficiaries. The market value of the escrow fund investments was $27.9 million, comprised of a diversified portfolio of equities and fixed income investments. As of June 30, 2017, the date of the latest actuarial report, the plan fiduciary net position as a percentage of the total pension liability was 60.3% assuming an investment rate of return of 3.91%.

Other Post Employment Benefit Plan (OPEB)

The County has adopted GASB 45 and administers an OPEB trust fund that provides for payment of healthcare and life insurance benefits to eligible retirees of Baltimore County Government, the Baltimore County Board of Education, the Community College of Baltimore County, the Board of Library Trustees for Baltimore County and the Baltimore County Revenue Authority (BCRA). The assets of the OPEB plan are invested in the same manner as the Employees’ Retirement System. As of June 30, 2017, the OPEB Plan covered a projected 32,999 members, consisting of 19,440 active plan members and 13,559 retirees. The June 30, 2017 OPEB actuarial valuation shows a funded ratio of 21.6% based on the actuarial value of assets of $396 million and an actuarial accrued liability of $1.83 billion.

Compensated Absences

County employees are granted vacation, personal, and sick leave in varying amounts. In the event of termination, an employee is reimbursed for accumulated vacation and personal leave days up to a certain maximum depending on years of service. Employees are not reimbursed for accumulated sick leave. However, accumulated sick leave can be added to the calculation of retirement benefits. As of June 30, 2017, the County’s total compensated absences liability was $70,087,000 for the primary government and $31,704,000 for the component units.

Published Financial Information

The County prepares an Annual Budget, a Comprehensive Annual Financial Report (CAFR), and an Employees’ Retirement System Comprehensive Annual Financial Report (ERS CAFR). • The Annual Budgets may be found online at www.baltimorecountymd.gov/Agencies/budfin/budget/. • The CAFRs may be found online at www.baltimorecountymd.gov/Agencies/budfin/. • The ERS CAFRs may be found online at www.baltimorecountymd.gov/Agencies/budfin/retirement/.

SECTION IV: ECONOMIC AND DEMOGRAPHIC INFORMATION

LOCATION AND SIZE

The County is situated in the geographic center of Maryland, surrounding the City of Baltimore almost entirely. The County is the largest jurisdiction in the Baltimore metropolitan area, which has a population in excess of 2.7 million. The City of Baltimore and the County are entirely separate political units.

The County is the third largest land area of any political subdivision in the State of Maryland. Within its 612 square miles (plus an additional 28 square miles of water with over 200 miles of shoreline) are situated at least 29 identifiable, unincorporated communities which, as of 2010, ranged in population from approximately 4,300 to 63,000.

Healthcare and education, the sectors that generally report job stability and growth despite economic downturns, are well represented in Baltimore County by five regional medical centers and five major colleges and universities. BD Diagnostic Systems shares a zip code with one of the largest concentrations of computer game developers on the East Coast. Headquarters for the Social Security Administration and Centers for Medicare and Medicaid Services and a core of IT contractors form the Woodlawn Federal Center, the epicenter of national health care reform implementation. Major operations of T. Rowe Price, Toyota Financial Services, Euler Hermes, Zurich America, Baltimore Life, and Bank of America form a powerful finance-insurance community. Manufacturing holds its place with General Motors, McCormick, Stanley Black & Decker, Lockheed Martin, AAI Textron, Middle River Aircraft and Coty (formerly Procter & Gamble Beauty).

POPULATION

The County, the largest jurisdiction in the Baltimore Metropolitan Area, experienced an increase in population of 6.7% from 2000 to 2010. The 2017 population for Baltimore County is 835,019. Today, the County has the third highest population in the State of Maryland and the second highest number of jobs.

New population growth in the County is being directed toward the targeted growth areas – White Marsh to the northeast and Owings Mills, to the northwest. Designated as growth areas in a 1979 master land use plan, each town center is adjacent to major transportation networks and anchored by a regional shopping center. White Marsh, which includes over 12,000 acres, has an estimated population of 73,903. The Owings Mills community, which consists of 13,282 acres, has an estimated population of 75,597. The I-83 corridor, a traditional center of corporate and residential strength that includes Hunt Valley, Cockeysville and Timonium, has an estimated 5-mile radius population of 76,295 with 62,767 in the corridor’s labor force. The chart below compares the population growth for the County, the Baltimore Metropolitan Area and the State of Maryland.

Baltimore % Baltimore % State of % Year County Change Metro Area* Change Maryland Change 1980...... 655,615 – 2,174,023 – 4,216,975 – 1990...... 692,134 5.6% 2,382,172 9.6% 4,781,461 13.4% 2000...... 754,292 9.0 2,552,994 7.2 5,296,486 10.8 2010 ...... 805,029 6.7 2,710,489 6.2 5,773,552 9.0

* Includes Baltimore City, Anne Arundel, Baltimore, Carroll, Harford, Howard and Queen Anne's Counties (Queen Anne’s County population figures not a part of MSA totals until 1986). SOURCE: Maryland Department of Planning March 2010; Bureau of Census base for 2000.

The following chart compares population by age group for the County, the State of Maryland and the United States.

POPULATION BY AGE GROUP

Baltimore State of United County Maryland States Percent under 5 years ...... 6.0% 6.6% 6.9% Percent school age (5-19 years)...... 19.0 20.4 20.5 Percent working age (20-64 years)...... 60.0 61.1 59.9 Percent 65 years and older ...... 14.5 11.8 12.6

SOURCE: U.S. Census Bureau, 2010 American Community Survey.

INCOME LEVELS

Personal Income

Personal income per capita for the County residents has traditionally been above that of the Baltimore Region, the State, and the United States. In 2016, the per capita personal income for County residents exceeded the nation’s per capita personal income by 14.3%.

PER CAPITA PERSONAL INCOME

Baltimore Baltimore State of United Year County Region* Maryland States 2007...... $48,192 $46,364 $47,365 $39,821 2008...... 49,265 48,012 49,428 41,082 2009...... 48,430 47,623 48,845 39,376 2010...... 49,234 48,568 49,880 40,277 2011...... 50,281 50,681 52,089 42,461 2012……………………………………………………… 51,874 51,971 53,341 44,282 2013……………………………………………………… 51,569 51,833 52,666 44,493 2014……………………………………………………… 53,224 53,588 54,063 46,494 2015……………………………………………………… 54,648 55,468 56,249 48,451 2016……………………………………………………… 56,273 57,189 58,052 49,246

* Includes Baltimore City, Anne Arundel, Baltimore, Carroll, Harford, and Howard Counties. SOURCE: Maryland Department of Planning and U.S. BEA new estimates, November 2017.

DISTRIBUTION OF ESTIMATED HOUSEHOLDS BY EFFECTIVE BUYING INCOME* CALENDAR YEAR 2017

Distribution Baltimore County Baltimore Metro Area State of Maryland United States Less than $15,000 8.7% 10.2% 8.9% 12.5% $15,000-$34,999 18.7 17.5 16.9 23.3 $35,000-$49,999 16.2 14.4 14.4 16.3 $50,000 or more 56.4 57.9 59.8 47.9

SOURCE: Nielsen Data 2017, Demographic Updated Estimates. * Effective Buying Income (EBI) is a classification developed exclusively by Sales & Marketing Management to distinguish it from other sources reporting income statistics, and is defined as all money income less personal tax and non-tax payments. The latter includes fines, fees, penalties, and personal contributions to social insurance.

EMPLOYMENT

The County’s diverse business base employed a total work force of 373,120 in 2016. From 2010 to 2016 average annual employment for Baltimore County increased by 11,691 jobs, representing a 3.2% growth rate. The high point of job growth in Baltimore County was achieved in 2007, when the County recorded 376,715 jobs. Between 2007 and 2010, as the full effects of the national recession hit Maryland, the County lost 15,286 jobs (4%), compared to a national job loss of 5.6%.

The County's largest employers anchor over 65,000 jobs in the most concentrated business areas of White Marsh, Owings Mills, Woodlawn and the I-83 corridor. At the same time, new land and redevelopment opportunities allow for strategic growth elsewhere in the County.

In keeping with national trends, the manufacturing sector continues to contract in terms of employment, even as the average manufacturing wages in the County increase, reflecting the loss of low-end manufacturing jobs. The County continues to maintain a solid regional manufacturing base, traditionally centralized in the eastern, southwestern and north central areas of the County. Industry initiatives focus on retraining and upgrading of skill levels and improving capability and product linkages across the manufacturing spectrum. Important sectors of the County’s manufacturing employment are biotechnology, with companies such as BD Diagnostic Systems and Pharmaceutics International, and defense/high technology with companies such as Lockheed Martin, Textron, and GE Middle River Aircraft Systems.

AVERAGE ANNUAL EMPLOYMENT

2006 2016 Change Baltimore County ...... 375,368 373,120 -0.6% Baltimore Metropolitan Area...... 1,244,987 1,309,632 5.2% State of Maryland...... 2,530,129 2,626,510 3.8% United States...... 136,452,750 144,305,833 5.8%

SOURCE: “Employment and Payrolls,” Maryland Department of Labor, Licensing and Regulation, 2006 and 2016 Annual Averages; “Employees on nonfarm payrolls by major industry sector,” 1960 to date, BLS.

EMPLOYMENT BY INDUSTRY PROFILE

The chart below shows employment by industry profile for the County, the Baltimore MSA and the State of Maryland using the North American Industry Classification System. Included are all workers covered by the Unemployment Insurance (UI) Law of Maryland and the unemployment compensation for federal employees (UCFE) program.

2006 ANNUAL AVERAGES 2016 ANNUAL AVERAGES

Baltimore State of Baltimore State of County Maryland United States County Maryland United States % of % of % of % of Number Number % of Number Number Number % of Number Private Sector Employed Total Employed Total Employed Total Employed Total Employed Total Employed Total Goods Producing: Nat'l Res & Mining 532 * 6,836 * 684,583 1% 530 * 6,431 * 677,833 * Construction 27,200 7% 188,420 7% 7,689,583 6% 23,134 6% 160,868 6% 6,710,500 5% Manufacturing 25,700 7% 136,334 5% 14,156,500 10% 13,707 4% 103,592 4% 12,348,250 9%

Total Goods Prod 53,432 14% 331,590 13% 22,530,666 17% 37,371 10% 270,891 10% 19,736,583 14% Service Providing: Trade, Trans, Util 71,446 19% 470,271 19% 26,276,917 19% 66,986 18% 461,148 18% 26,736,250 19% Information 6,384 2% 50,726 2% 3,038,000 2% 4,968 1% 37,695 1% 2,772,250 2% Financial Activities 30,778 8% 157,729 6% 8,366,417 6% 30,934 8% 139,872 5% 8,534,833 6% Prof & Business 51,270 14% 394,518 16% 17,571,750 13% 60,392 16% 442,057 17% 20,381,167 14% Education & Health 60,145 16% 349,136 14% 18,151,750 13% 70,193 19% 425,693 16% 22,616,250 16% Leisure & Hosp 31,212 8% 229,694 9% 13,109,000 10% 34,849 9% 272,346 10% 15,614,833 11% Other Services 11,865 3% 89,703 4% 5,437,583 4% 12,021 3% 90,685 3% 5,685,250 4% Total Service Providing 263,100 70% 1,741,777 69% 91,951,417 67% 280,343 75% 1,869,496 71% 102,340,833 71%

Unclassified 4 * 1,270 * 0 * 0 * 22 * 0 * Total Private Sector 316,536 84% 2,074,637 82% 114,482,083 84% 317,714 85% 2,140,409 81% 122,077,416 85% Public Sector Local 30,064 8% 232,795 9% 14,167,500 10% 29,290 8% 242,364 9% 14,342,667 10% State 12,172 3% 97,519 4% 5,074,917 4% 11,067 3% 97,937 4% 5,089,417 4% Federal 16,596 4% 125,178 5% 2,732,583 2% 15,049 4% 145,800 6% 2,796,000 2%

Total Public Sector 58,832 16% 455,492 18% 21,975,000 16% 55,406 15% 486,101 19% 22,228,084 15% TOTAL EMPLOYMENT: 375,368 100% 2,530,129 100% 136,457,083 100% 373,120 100% 2,626,510 100% 144,305,500 100%

* Less than 1%. Individual totals may not add to 100%. SOURCE: “Employment and Payrolls,” 2006 and 2016 Annual Averages, Maryland Department of Labor, Licensing and Regulation. U.S. Department of Labor, Bureau of Labor Statistics, Employees on Nonfarm Payrolls by Industry.

LABOR MARKET CHARACTERISTICS

Below is a comparison of the unemployment rate among the County, the Baltimore Metropolitan Area, the State of Maryland, and the United States.

Baltimore County ______%Unemployed______Calendar Civilian Total Baltimore Baltimore State of United Year Labor Force Employment County Metro Area Maryland States 2007 ...... 427,026 411,968 3.5% 3.6% 3.5% 4.6% 2008 ...... 430,124 411,253 4.4 4.4 4.2 5.8 2009 ...... 432,708 400,615 7.4 7.4 7.0 9.3 2010 ...... 431,512 395,902 8.3 8.1 7.7 9.6 2011 ...... 435,544 402,056 7.7 7.6 7.2 8.9 2012 ...... 440,254 407,889 7.0 7.2 7.0 8.1 2013 ……… ...... 441,916 411,376 6.0 6.9 6.6 7.4 2014 ……… ...... 441,394 414,510 5.4 6.0 5.8 6.2 2015 ……… ...... 445,857 422,214 4.6 5.3 5.1 5.3 2016 ……… ...... 448,934 428,795 4.1 4.4 4.3 4.9 2017 (December) ……… ...... 451,850 433,936 4.0 3.9 3.8 4.1

SOURCES: Maryland Department of Labor, Licensing and Regulation. United States Department of Labor, Bureau of Labor Statistics. NOTE: Labor market information refers to employment activity of people who live within a jurisdiction, whereas, employment by sector refers to activity by place of work. Data vary for each level of government due to reporting differences.

PRIVATE AND PUBLIC SECTOR EMPLOYERS

Private Sector Employment

The County is Maryland’s second largest jurisdiction in terms of jobs and is home to more than 21,000 employer establishments. Private sector jobs make up a larger share of the total in the County than they do in the State of Maryland and several neighboring counties. The County's economy is extremely diverse with strong representation across sectors. This diversity is reflected in the following table, which presents available information on current employment numbers for 32 of the County’s largest manufacturing, research and development, health care, utilities, education and financial services firms. In recent years, as firms have sought to increase productivity by adopting labor-saving technologies, in some cases the number of employees may have decreased even as a company’s overall strength and profitability increased. The following table presents available information on current employment levels, as voluntarily self-reported by employers to the Baltimore County Department of Economic and Workforce Development either in response to periodic written and telephone inquiries, or provided in the context of ongoing business outreach by department staff.

LARGEST PRIVATE EMPLOYERS Exclusive of retail Company Name Employees Business T. Rowe Price Associates, Inc. 4,200 Financial Services & Investments Greater Baltimore Medical Center 3,900 Hospital MedStar Franklin Square Hospital Center 3,900 Hospital University of Maryland, Baltimore County 3,612 University Towson University 3,476 University University of Maryland St. Joseph Medical Center 2,250 Hospital CareFirst BlueChoice, Inc. 2,220 Health insurance Sheppard Pratt Health System 1,913 Hospital McCormick & Company, Inc. 1,900 Spices and food flavorings LifeBridge Health/Northwest Hospital Center 1,800 Hospital Stanley Black & Decker Global Tools & Storage Headquarters 1,600 Power tools / small appliances BD Life Science, Diagnostic Systems 1,580 Microbiology/medical, diagnostic equipment Lockheed Martin 1,519 Defense Textron (formerly AAI) 1,500 Aerospace / Defense United Parcel Service 1,140 Parcel distribution Stevenson University 1,094 University Element Fleet Management (formerly PHH) 1,000 Corporate vehicle / fleet mgmt. Verizon — Maryland 978 Telecommunications (finance/billing) Coty (formerly Procter & Gamble Beauty) 940 Cosmetic manufacturing Bank of America 841 Credit card center/financial services Quest Diagnostics 768 Medical Laboratories Goucher College 700 University Stella Maris 700 Healthcare Whiting Turner 679 General building contractor TESSCO Technologies 668 Communications equipment General Dynamics Information Technology(GDIT) 600 Healthcare software ADP 500 Business services KCI Technologies 400 Engineering MarquipWard United 350 High-speed manufacturing equipment Pharmaceutics International, Inc. 350 Pharmaceutical formulation U.S. Filter – Pall Corporation 285 Filtration devices General Motors Baltimore Operations 274 Vehicle and hybrid transmissions

SOURCE: Latest available information as reported by employers to Baltimore County Department of Economic and Workforce Development – January 2018.

NOTE: There is no legal requirement for private companies to share employment data with local governments. Although they do report this data to the Maryland Department of Labor Licensing and Regulation and U.S. Bureau of Labor Statistics as part of the unemployment insurance system, the data is held in strict confidence by the collecting agencies and any individually-identifiable data may be used by those agencies only for statistical purposes. As a result, data on the number of employees individual firms have in a jurisdiction is not available from one centralized source and must be requested of companies individually. Companies sometimes fail to respond or decline to participate in such surveys. In other cases, it is difficult to reach the person with access to the correct figure and the authority to release it. This table reflects the best information currently available, recognizing these limitations.

Public Sector Employment

The two largest government institutions in the County, headquarters for the Social Security Administration and Centers for Medicare & Medicaid Services, total more than 15,000 jobs on the County’s west side in Woodlawn. The following measures employment by place of work and is compiled from quarterly contributions reports submitted by employers subject to the Maryland Unemployment Insurance Law.

Government Employers

2006 Average 2016 Average Number of Employees Number of Employees Baltimore State of Baltimore State of County Maryland County Maryland Local Government ...... 30,064 232,795 29,290 242,364 State Government ...... 12,172 97,519 11,067 97,937 Federal Government ...... 16,596 125,178 15,049 145,800 Total ...... 58,832 455,492 55,406 486,101

SOURCE: “Employment & Payrolls,” 2006 and 2016 Annual Averages, Maryland Department of Labor, Licensing and Regulation.

COMMERCIAL AND RESIDENTIAL GROWTH

The following table presents the number and value of commercial and residential construction permits issued for each of the past 10 years. Construction Permits Issued

Commercial Residential Total Value Value Value Year No. (in 000’s) No. (in 000’s) No. (in 000’s) 2008 ...... 1,617 $333,214 2,604 $402,555 5,001 $735,770 2009 ...... 1,305 573,406 1,937 234,266 3,242 807,672 2010 ...... 1,295 423,187 2,235 252,906 3,530 865,187 2011 ...... 1,615 384,933 2,116 179,761 3,731 564,694 2012 ...... 1,344 574,100 2,149 227,604 3,493 801,704 2013……………………... 1,322 384,380 2,223 261,535 3,545 645,916 2014...... 1,316 338,774 2,373 282,377 3,689 621,151 2015 ...... 1,773 498,153 2,498 263,175 4,271 761,329 2016 ...... 1,593 797,021 2,726 342,555 4,319 1,139,576 2017 ...... 1,636 956,583 2,279 360,637 3,915 1,137,221

* Total No. and Value of commercial permits includes a new mixed-use permit classification beginning July 2012.

Commercial no. and value includes permits issued for new commercial construction and those for additions, alterations and repairs (AAR) valued over $10,000. Residential no. and value includes permits issued for new single-family, new multi-family and those for AAR data tabulated valued over $10,000. Source: Building Permit Data System (BPDS), Baltimore Metropolitan Council Regional Construction Report 2007-2016

NEW BUSINESS AND REAL ESTATE ACTIVITY

The following list highlights a selection of business and real estate activity in Baltimore County from January 2017 to January 2018. Towson Square – Towson Square includes a 75,000 square foot, 3,400 seat, 15 screen multiplex cinema atop a three story, 850 space garage. Seven restaurants are open. The pedestrian friendly plaza includes a traffic circle with a European style fountain, bistro style outdoor dining areas and landscaping. The County invested $6.2 million toward the parking garage and $2 million for infrastructure improvements, which is leveraging $85 million in private investment. The project has brought an estimated 1,530 jobs to the area, 660 construction jobs and another 870 jobs related to the completed project. The project owner, Retail Properties of America, is now redeveloping the former Towson Circle building and the site across the street into Towson Circle East. The two projects will be integrated in design and street level amenities.

Towson Circle East – is a $30 million mixed-use development planned for the traffic circle at York and Joppa Roads. The project will include 371 mid- and high-rise apartments and over 240,000 square feet of new and refurbished retail space. The project, currently in the design review and permitting stages, is expected to be completed in 2020. Some existing retail operations have closed or have been relocated to accommodate the project, which will include underground parking for the retail space.

Towson Residential - Since 2008, over 1,200 new luxury apartment units in three major projects have been completed. A $60 million, 611-bed, 248-unit student housing project with first floor retail is planned at 101 York Road. Federal Realty Investment Trust’s project, The Flats at 703, a new 105-unit apartment project located at 703 Washington Avenue, recently opened. Evergreene Homes is constructing Towson Mews, 34 luxury townhomes to be built on two acres bounded by East Pennsylvania, Jefferson and Virginia Avenues.

Towson Row - Towson Row is a 1.2 million square foot mixed-use development situated at downtown Towson’s southern gateway - bounded by York Road, Towsontown Boulevard, Chesapeake Avenue, and Susquehanna Avenue. When fully developed, the $350 million project will offer roughly 145,000 square feet of Class A office space, 250 market rate apartments and condominiums, 220 limited service and extended stay hotel rooms, 985 beds of student housing, and roughly 140,000 square feet of commercial space, including shops, restaurants, and a grocery store. The hotel portion of the development is projected to be completed Fall 2020. Stanley Black & Decker Global Tools & Storage – The company has signed a lease for an additional 92,000 square feet of space in the Greenleigh development in Middle River and will hire 400 new employees by December 31, 2020. Six hundred total employees will be located at Greenleigh; 200 of those employees will move there from Towson. Investment in the new space is expected to be $8.5 million, including real property improvements, furniture, fixtures and equipment. The new space is necessary to accommodate projected employment growth as a result of two major purchases in the past year - the recently-completed acquisition of Newell Brands’ tool business and the acquisition of the Craftsman line of tools from Sears. These purchases help SB&D push deeper into consumer and industrial equipment and extend its reach into retail markets with a household name brand. Towson will continue to be the headquarters for Stanley Black & Decker's Global Tools and Storage business - the company currently occupies a total of 565,000 square feet in the Towson area, split between the 31 acre campus they own at 701 E. Joppa Road and several nearby leased properties. They currently employ 1600 full-time employees (and 350 private contractors).

The Shops at Kenilworth - Greenberg Gibbons is completing work on a $20 million renovation to The Shops at Kenilworth, a landmark shopping destination in Towson, originally built in 1979. Stebbins Anderson’s new store is now located on the lower level and Trader Joe’s opened on the upper level in March. New shops include Amaryllis, Kenilworth Wine & Spirits, Liza Byrd Boutique, Lou Lou Boutiques, Quiet Storm Surf Shop, TAC @ Kenilworth (Summer Gallery), Wilkes & Riley, ZenLife Yoga Boutique & Juice Bar and long-time local boutique Ruth Shaw. Towson Commons Retail - Affiliates of MFI and Woodmont Properties II have taken control of, and are redeveloping 115,000 square feet of retail space along York Road and Pennsylvania Avenue. Four new retailers, Boho Nation, CVS Pharmacy, Chipotle, Hair Cuttery, Brown Rice and First National Bank have opened and renovations are underway for several others, including – Insomnia Cookies and C&R Pub. The CPA firm, Rosen, Sapperstein & Friedlander moved its offices from Owings Mills to Towson Commons in December 2017. Eatalian Bistro – opened Summer 2017 in the former Strapazza space at 8 West Allegheny Avenue. The Point at Towson - opened Fall 2017 at 523 York Road in a building that had long been vacant. The 6400 square-foot restaurant has two bars and 116 seats. Mill Station – the former Owings Mills Mall site will be redeveloped as an outdoor shopping center called Mill Station, a $108 million project to be anchored by a new Costco warehouse store. Kimco Realty Corp., the property’s owner, plans to start construction on the project in 2018, and it should be completed by early 2019. A 148,000 square-foot Costco, the retailer’s fifth Baltimore-area location, will anchor the 575,000 square-foot Mill Station, which will also feature up to 30 other retailers and restaurants. Plans also call for extensive renovations to the existing AMC Theatre. Metro Centre at Owings Mills - Metro Centre at Owings Mills is a $550 million mixed use, transit oriented special taxing district that is being developed by Owings Mills Transit, LLC. At completion, the project will support more than 1.2 million square feet of commercial office space, 300,000 square feet of complementary retail space and 700 residential units and a full-service 225-room hotel amenity. The project adjoins the Owings Mills Metro stop and two commuter parking garages with a total of 5,277 spaces. The project already completed a 120,000 square foot County Campus that includes a County library, community college branch, and two five story upscale buildings with 232 apartments that are 85% leased and ground floor retail and restaurant space that is 60% leased. World of Beer, Club Pilates, Metro Wine and Spirits and Hammer & Nails are the newest tenants. CareFirst - has renewed their leases in six buildings in Owings Mills and are keeping 2,200 employees in 655,000 square feet there. The company conducted an RPF for space in the region and was considering other options before electing to stay in Baltimore County. Foundry Row – This $140 million mixed-use development in Owings Mills, anchored by a Wegman’s grocery store, includes 356,000 square feet of retail space and 48,000 square feet of office space. Businesses including LifeBridge Health, LA Fitness, DSW, Ulta Beauty, Bagby Pizza, Panera Bread, Zoe's Kitchen, Smashburger, Nally Fresh, Bar Louie, Mission BBQ, Chipotle, La- Z-Boy Furniture, Old Navy, Floyd's 99 Barbershop, Hair Cuttery, Sleep Number, Palio, Muse Paint Bar, Amazing Lash and Home Goods have all joined Wegmans as tenants.

Hunt Valley Towne Centre - Avalon Hunt Valley, a $70 million upscale apartment complex on the eastern end of Hunt Valley Towne Centre, is 95% occupied. The Class A apartment building offers a variety of amenities, including a dog park, a gym, and a game room. The new apartment community sits above 30,000 square feet of retail. McCormick & Company – The international spice manufacturer, currently located in Sparks, will consolidate 900 office employees from several area locations into a 340,000 square foot headquarters at 99 Shawan Road, to be completed in 2018. A former telephone company building on the site will be completely redone, creating a state of the art corporate campus for McCormick. The building will house corporate functions, the company’s US consumer and industrial divisions and a health and wellness center. MedStar Health Timonium – MedStar Health is consolidating several of its orthopedic offices into a 48,000 square foot building at 2118 Greenspring Drive, off Interstate 83 in Timonium. The $10 million renovation, will also add 8,000 square feet to the second and third floors of the building. The new Timonium offices will hold orthopedic surgeons, some occupational therapy and physical therapy services, as well as X-ray and imaging services. The building will also be home to MedStar's sports medicine services, where it often works with Ravens and Orioles players.

Johnson, Mirmiran & Thompson (JMT) – This nationally ranked employee-owned architectural and engineering firm has occupied its new headquarters building in Hunt Valley. Five hundred employees moved in March 2017 to the five-story 130,000 square foot building on Wight Avenue. Sinclair Broadcast Group has announced plans to expand the company’s national headquarters in Hunt Valley as it moves to complete its $3.9 billion planned takeover of Tribune Media Co. Sinclair plans to invest $12 million to accommodate an expansion into two additional buildings that would add 376 new employees by 2024. Mouth Party Caramels – This manufacturer and wholesaler of handmade caramels signed an 8,000 square foot lease at 1946 Greenspring Avenue, in Timonium. The company will move from Baltimore City and occupy the new space in 2018.

Mobtown Fermentation - The startup, founded in 2014, moved into a 4,000 square foot space at 9 West Aylesbury Road in Timonium and employs four people. In FY17, Baltimore County provided Mobtown with both a business expansion loan and Boost Loan. The loans aided the company in purchasing an automated bottling line, which will help them bottle more product to increase revenue and profitability. U.S. Lacrosse Headquarters – The 450,000-member national lacrosse organization has moved its headquarters to Sparks. The $15 million project includes a 45,000 square-foot headquarters building, an outdoor training facility for the U.S. National men’s and women’s teams, the national lacrosse museum and the National Lacrosse Hall of Fame, and classrooms and offices for 89 staff. The economic impact of this project is over $6 million. Tradepoint Atlantic – Formerly Sparrows Point LLC, Tradepoint Atlantic recently acquired the 3,100-acre former steel production facility at Sparrows Point. The new owners agreed to $48 million in assurances to pay for the environmental clean-up. The property is being redeveloped for industrial and distribution use. For more information about current tenants at Tradepoint Atlantic, see Industrial Redevelopment section.

Lockheed Martin - Lockheed Martin’s contract with the U.S. Navy was renewed for $235 million to manufacture missile-firing systems used on warships at Lockheed’s facility in Middle River. The deal extends through 2022 and could be worth as much as $356 million if the Navy adds optional orders. The flexible missile system can launch a variety of missiles.

Aging Barns LLC, - Part of Sagamore Development, Aging Barns purchased the parcel at 4611 North Point Boulevard to transform it into five aging barns to store up to 80,000 barrels of Sagamore Spirit Rye Whiskey. The first building was made available March 2017.

Greenleigh at Crossroads - Greenleigh at Crossroads broke ground in May 2016 on a $750 million mixed-use community of offices, shops, apartments, single-family homes and a hotel. The project will occupy 250 acres of the 1,000 acre Baltimore Crossroads and is expected to build out over 10 to 15 years. Greenleigh plans currently include 1,800 detached homes and townhouses, three midrise office buildings totaling 300,000 square feet, another 350,000 square feet in single-story office buildings, 116,000 square feet of retail, and a 120-room Springhill Suites by Marriott hotel.

Eisai Inc. - The US pharmaceutical subsidiary of Tokyo-based Eisai Co, Ltd., signed a 40,000 square foot building lease within Greenleigh at Crossroads. The company plans to relocate approximately 55 employees from its existing location in Baltimore City in 2019, after construction at the site is completed.

MedStar Franklin Square Hospital – The hospital opened a new $7.8 million neonatal intensive care unit. The 16,000 square foot newly constructed facility has 23 beds. In May 2017, Franklin Square Medical Center opened the new High-Risk Assessment and Cancer Prevention Clinic, dedicated to identifying and caring for individuals who have an increased risk of cancer due to family history, medical and genetic factors, and/or lifestyle influences. In July 2017, MedStar Franklin Square Medical Center was approved by the Maryland Health Care Commission to move forward with a $70 million project to replace old surgical facilities with a new two-story 75,000 square foot building and 14 operating rooms to be constructed on the hospital's Rosedale campus. The work began in October 2017 with the demolition of an old building that currently sits on the site. About $40 million for the project

will come from tax-exempt debt financing, $10 million cash will come from hospital operations and the other $20 million will come from several private and public investments. The project is intended to replace Franklin Square's current surgical facilities and will be constructed over the next two years.

Pro Transport Inc. – A leading national trucking and transportation provider has signed a 51,100 square foot lease to expand at 11630 Crossroads Circle in Crossroads @95 Business Park. In 2017, the company leased the entire building, which features 16- foot ceiling heights and drive-in loading capabilities.

Ruxton Chocolates - the maker of Mary Sue, Naron and Glauber’s candies began construction in November 2016 of a new 100,000 square foot, $8 million headquarters and manufacturing plant facility at 1412 Tangier Drive in Middle River, MD. The facility opened in Summer 2017 and brought 43 new jobs to Baltimore County. Baltimore County helped Ruxton reduce the cost of borrowing by supporting an $8 million industrial revenue bond.

Host Terminals – In April, 2017, Tradepoint Atlantic announced a 10-year agreement with Host Terminals to oversee marine cargo operations at the Baltimore County site, which includes $30 million in combined investment toward infrastructure improvements to the site. It is expected to bring 9,500 jobs to the region. The International Union of Operating Engineers' Local 37 will provide union labor for the facility.

Fed Ex Ground – FedEx Ground secured a long-term lease and in July 2017, opened a new 300,000 square foot distribution center at Tradepoint Atlantic that employs up to 300 employees.

Under Armour – signed a deal with Tradepoint Atlantic to build a one million square foot distribution warehouse that will employ 1,000 people, and be part of an overall $175 million capital investment. The facility is scheduled to open in 2018 and will serve as the company's national hub to fulfill consumers' online orders.

Amazon – In 2017, Amazon announced plans to construct an 855,000 square-foot fulfillment center at Tradepoint Atlantic and bring 1,500 new jobs to the region. Associates at the new facility will pick, pack, and ship customer items such as electronics, books, housewares and toys.

Hollins Ferry Logistics Center – Completed construction on a 285,000 square-foot, class A warehouse and logistics center. Located at 4803 Hollins Ferry Rd, Halethorpe, this new facility attracted LKQ Corporation to Baltimore County in 2017 and they are expected to occupy the space by early 2018.

ATI Performance – In 2017, ATI Performance purchased 6747 Whitestone Rd for $3 million to remain in Baltimore County and expand their business.

Amethyst Technologies – A provider of quality program development and comprehensive compliance services, Amethyst expanded their Bwtech space to include a new 3,000 square foot lab and increased their line of services to include Advent Laboratories.

Social Security Administration (SSA) – Social Security headquarters in Woodlawn announced that they will receive a $150 million Congressional Appropriation for major renovations of their main administrative building. SSA employs approximately 11,000 at this site and this significant investment ensures that Baltimore County remains home to the Social Security Administration for decades to come.

Diageo – In 2017, Diageo began work on their Relay Campus to produce and ship Guinness Blonde. It is expected to create 70 jobs and be a $50M investment. The tap room opened in 2017 with full brewing operations expected in Spring 2018. iCyberCenter@bwtech – located at UMBC’s business incubator, the iCyberCenter is the first global cyber incubator that will attract international companies to the Maryland market, and offer connections with existing organizations.

Rolling Run Tech Park - located at 2270 Rolling Run Road, this 58,000 square foot Class A office building is next to the headquarters for the Center for Medicare Medicaid Services. With construction completed at the end of 2017, this project is almost fully leased with tenants moving in Spring 2018.

NEW BUSINESS FORMATION

The following table presents the number of business locations as reported to the Maryland Department of Labor Licensing and Regulation for the past 10 years.

Business Establishments Fiscal Year Establishments 2007 22,180 2008 21,793 2009 21,466 2010 21,309 2011 21,143 2012 21,371 2013 21,498 2014 21,263 2015 21,344 2016 21,398

SOURCE: Maryland Department of Labor, Licensing and Regulation. Employment and Payrolls – County Industry Series 2007-2016.

TRANSPORTATION FACILITIES

The County's central location in the Baltimore Metropolitan Region, the State of Maryland and the eastern seaboard of the United States offers access to an inter-connected air, sea, rail, and road transportation system.

Capital Improvements

The availability of convenient access and public infrastructure is critical to business location decisions. The County and State have moved forward aggressively to construct several road projects to enable key development opportunity sites. One such project, Baltimore Crossroads @95 (“Crossroads”), is one of the largest development ready land opportunities between Philadelphia and Richmond along I-95. Crossroads has seen significant speculative and tenanted construction of office, flex and industrial buildings. Of the 1.6 million square feet proposed for the business park, 1.1 million square feet has been constructed, housing 1,250 employees and 30 businesses.

The Maryland Transportation Authority (MDTA) constructed two additional lanes on the most congested 10-mile portion of I-95 north of Baltimore City to White Marsh in the County. These two express toll lanes (ETLs) will facilitate both regional commuting and interstate commercial and personal travel. The ETLs are fully operational. The Maryland State Highway Administration is making major bridge and interchange improvements along the southwest portion of the Baltimore Beltway, I-695, to accommodate planned future widening.

Baltimore County has included $4,000,000 in its FY2016 capital program to design and construct a half-mile extension of Security Boulevard, which currently terminates at the national headquarters of the U.S. Centers for Medicare and Medicaid, to provide access to 160 acres of undeveloped land zoned for commercial and residential development. It is anticipated that this project will be a catalyst for new job-creating economic development on the west side of the County.

In response to an earlier feasibility study jointly funded by the County and the State of Maryland, the State Highway Administration initiated a formal project planning study for the I-795/Dolfield Boulevard area, including a potential interchange at the Pleasant Hill Road/Dolfield Boulevard overpass, to provide improved access to the major employment corridor along Red Run Boulevard on the west side of I-795. The preferred alignment for the intersection has been chosen and the project remains in the State Highway Administration’s Development and Evaluation Program. Due to a recent revenue enhancement, the State will restart its project and environmental planning on the project.

The $8 million Dolfield Boulevard Bridge over Red Run was opened to traffic in May 2010. This bridge provides a key east-west connection between the Red Run Boulevard employment corridor and the residential growth area in Owings Mills New Town, an important piece of transportation infrastructure supporting the Owings Mills growth area.

In August 2012, a new extension of Owings Mills Boulevard opened to traffic. This segment from Lyons Mill Road to Winands Road is the first phase of a two-phase project that provides a direct connection between the Owings Mills Growth Area and Liberty Road. Owings Mills Boulevard South, Phase II, which extends from Winands Road to Liberty Road was completed in 2015.

The Campbell Boulevard extension connecting Pulaski Highway (Route 40) to Bird River Road opened in November 2015. The extension project will help alleviate traffic as the Middle River area continues to grow. The new road is part of a larger design that will eventually link Philadelphia Road with White Marsh Boulevard. Once the project is complete, Campbell Boulevard will run for three miles. The project will include three bridges, water utilities, improved stormwater management, sidewalks and numerous intersection improvements.

As part of the implementation of the 1996 Eastern Baltimore County Revitalization Strategy, the County extended Kelso Drive in Rosedale, Maryland, enabling the development of the Marshfield Business Park. The Park now has 1.3 million square feet of space generating 500 jobs, with tenants such as U.S. Can, Restoration Hardware, and DAP. A second extension of Kelso Drive to open up more than 100 acres of additional land for business development is possible in the future.

Mass Transit

Baltimore County residents and businesses have access to a growing regional mass transit system. The Baltimore Metro, a 15-mile heavy rail line, provides a fast, direct connection from Owings Mills Town Center in the northwest part of the County to the Johns Hopkins medical campus in downtown Baltimore. A 30-mile light rail line runs from a northern terminus in Baltimore County’s Hunt Valley south through Baltimore City past Oriole Park at Camden Yards, to BWI Airport.

One of three MARC (Maryland Area Regional Commuter) lines runs through the County, providing access to Baltimore and Washington, D.C. to the south and Harford County to the north. With support from the County, the State Department of Transportation completed a study in September 2010 assessing the feasibility of relocating the Middle River MARC station to create greater transit synergies with the future redevelopment of a 1.9 million square foot Middle River Station (former GSA Depot).

Air

BWI Marshall Airport, located in Anne Arundel County (adjacent to the County), has maintained a steady flow of traffic year over year since its record peak of 22 million passengers in July 2011. The 25,120,000 commercial passengers who flew through the facility in CY 2016 increased by 5.5% from that record peak. Annual cargo shipments increased at BWI Marshall in 2015. Total cargo for CY 2016 year reached 260 million pounds, an increase of 1.3% over CY 2015.

Martin State Airport, just a congestion-free 10-minute drive along MD43 from I-95, is one of the nation’s largest general aviation facilities. Martin State Airport provides a convenient home for corporate jets.

Port

Located 150 miles inland, the Port of Baltimore (the "Port") is the closest East Coast port to the Midwest. It is accessible to several major interstate highways located within minutes of its terminals. By truck, cargo leaving the Port is within an overnight drive to two-thirds of America's population. Business at the Port of Baltimore generates about 13,650 direct jobs, while about 127,000 jobs in Maryland are linked to Port activities. The Port is responsible for $3 billion in personal wages and salary and more than $310 million in state and local taxes. It serves over 50 ocean carriers making nearly 1,800 annual visits. In the first quarter of 2017, the Port handled a record-setting 2.56 million tons of general cargo, up from 2.44 million tons handled during the first three months of 2016. Car and container shipments increased 6% and 8% respectively. Cargo volume at the Port’s public marine terminals handled a record 10.1 million tons of general cargo for 2016, a 5% increase from 9.62 million tons in 2015. In 2016 the Port ranked first in the nation in handling automobiles, light trucks, farm and construction machinery as well as imported aluminum, gypsum and sugar. The Port handled 567,895 automobiles, the most of any U.S. port for the sixth straight year, including a record 418,651 import autos. For overall dollar value of cargo, Baltimore is ranked 9th, and for cargo tonnage for all U.S. ports, 13th. In 2009, the State of Maryland announced a 50-year public-private partnership with Ports America that will allow the port to better compete in a global market. Ports America is investing in a new crane at the Sea Girt Marine Terminal. The 50-year lease also included immediate payment in excess of $100 million to MDTA to pay for needed system preservation of its roads, tunnel, and bridge facilities. As a result, the Port of Baltimore is one of only two U.S. East Coast ports with a 50’ deep channel, and berth. Four 400-foot tall cranes have been installed at the berth and are already operational, ready to accommodate the supersized Panamax container ships. In July 2016, the Ever Lambent, a 1,095-foot Taiwanese cargo-carrier was the first supersized container ship to call on the port after transiting the newly expanded Panama Canal. The cargo carrier brought in 8,452 20-foot shipping containers. The new, modern cruise passenger facility located at the South Locust Point Terminal includes easy access on and off I- 95, over 1,500 parking spaces, a short 2.5 mile trip to Baltimore's Inner Harbor and availability to more than 40 million people that live within a six-hour drive.

MAJOR BUSINESS PARKS

The following represents major office and industrial parks completed or with additional acreage suitable for expansion and future development in the County.

Business Parks in Baltimore County

Name and Location Total Acres Total S.F. Use Baltimore Crossroads@95 Middle River MD 21220 1,000 5,500,000 Office, Retail, Light and Heavy Industrial Beltway Business Center Halethorpe MD 21227 63 562,500 Office, R&D, Lt. Industry Benson Business Park Arbutus MD 21227 9 285,000 Office, R&D, Lt. Industry

Business Center at Owings Mills 123 620,600 Office, R&D, Lt. Industry Owings Mills MD 21117 bwtech@UMBC Catonsville MD 21228 41 350,000 R&D, business incubator

Colgate Business Park 89 890,000 Lt. & Heavy Industry, Distribution Rosedale MD 21224

Eastport Industrial Center 32 621,000 Lt. & Heavy Industry, Distribution Rosedale MD 21237

Franklin Square Professional Center 7.7 120,000 Medical, Office Space (Proposed)

Golden Ring Industrial Park 16 185,000 Office, R&D, Lt. Industry Rosedale MD 21237 Greenspring Station Lutherville MD 21093 30 282,100 Office Hollins End Corporate Park Halethorpe, MD 21227 51 700,000 Warehouse, Industrial Hollins End-East Corporate Park Halethorpe, MD 21227 24 517,000 Warehouse, Industrial The Highlands Sparks MD 21052 140 232,826 Office, R&D, Lt. Industry Hunt Valley Business Community Hunt Valley MD 21031 435 2,100,000 Office, R&D Hunt Valley Executive Plaza Hunt Valley MD 21031 30 517,000 Office Longview Executive Park Hunt Valley MD 21030 30 370,000 Office Loveton Center Sparks MD 21152 246 1,400,000 Office, R&D, Lt. Industry Marshfield Business Park Rosedale MD 21237 73 1,500,000 Lt. & Heavy Industry

Business Parks in Baltimore County, continued

Name and Location Total Acres Total S.F. Use McDonogh Crossroads Owings Mills MD 21117 42 500,000 Office Meadows Business Park Woodlawn MD 21207 475 1,080,000 Office, R&D, Lt. Industry North Park Hunt Valley MD 21030 28 320,150 Office North Point Industrial Center Dundalk MD 21222 36 220,000 Lt. & Heavy Industry Owings Mills Corporate Campus Owings Mills MD 21117 250 438,320 Office Pulaski Business Park Middle River MD 21220 42 300,400 Lt. Industry

Pulaski Industrial Park 150 1,441,200 Office, R&D, Lt. & Heavy Industry Middle River, MD 21220 Radio Park Towson MD 21286 15 250,000 Office

Red Brook Financial Center 68 600,000 Office, R&D Owings Mills MD 21117

Red Run Corporate Center 11 200,000 Office Owings Mills MD 21117 Riparius Center at Owings Mills Owings Mills MD 21117 160 2,500,000 Office, R&D Rolling Heights Business Center Woodlawn, MD 21244 80 931,000 Office, R&D, Lt. Industry

Rosewood Technology Park 35 Owings Mills MD 21117 110,000 R&D, Lt. Industry Rossville Industrial Park Rossville MD 21237 156 1,562,285 Office, R&D, Lt. Industry Route 7 Commercial Center White Marsh MD 21220 30 340,000 Office, R&D, Lt. Industry Rutherford Business Center Woodlawn MD 21244 289 1,500,000 Office, R&D, Lt. Industry

Seven Square Corporate Park - 191,226 Office, Medical Space Shawan Center Hunt Valley MD 21030 36 316,000 Office techcenter@UMBC Catonsville MD 21227 30 170,000 R&D, incubator White Marsh Business Community White Marsh MD 21236 2,000 4,475,000 Office, R&D, Lt. Industry Windsor Corporate Park Woodlawn MD 21244 82 390,000 Office, R&D, Lt. Industry

INDUSTRIAL REDEVELOPMENT

Sparrows Point/Dundalk

The Sparrows Point peninsula was the location of a major integrated steel mill for more than 100 years. In May 2012, the final steel mill operator, RG Steel, declared bankruptcy and announced plans to close the facility and lay off all 2,000 workers. For two years, Baltimore County worked aggressively both to define and pursue a new vision for this valuable 3,100 acres of land with deep water, freight rail and interstate access, and to help the dislocated steelworkers acquire the training and support services they need to enable them to move into new careers. The Sparrows Point Partnership, an advisory group of private-sector port, logistics and real estate professionals, was established by the County Executive in 2012 to recommend how best to position Sparrows Point and the surrounding area for long term job growth. In May 2013, the Partnership released its first-year report, which highlighted the area’s exceptional assets: • A massive land product: 5.3 square miles, with more than 3,300-acres zoned for industrial use; • Deepwater access near the growing Port of Baltimore; • Interconnected transportation, including direct connection to two Class One railroads and interstate highways; • Exceptional natural gas and electricity supplies; • A large supply of treated water flowing directly to the site; and • A highly capable, motivated workforce. The report also outlined the County’s vision for growth at Sparrows Point, driven by several key principles: • Expand maritime use on the peninsula in partnership with the Maryland Port Administration; • Retain the current zoning for industrial use; • Encourage private ownership to rebuild the aging infrastructure on the site; and • Manage a long-term strategy that includes active participation and guidance from Baltimore County, the State of Maryland and the Port of Baltimore Formerly Sparrows Point LLC, Tradepoint Atlantic acquired the 3,100-acre former steel production facility at Sparrows Point in 2014. The new owners agreed to $48 million in assurances to pay for the site’s environmental clean-up. The property will be redeveloped for industrial use. • In May 2017, Maryland's Public Service Commission (PSC) approved two development companies, U.S. Wind Inc. and Skipjack Offshore Wind LLC, to build offshore wind projects off the coast of Ocean City, Maryland. As part of its project approval order, the PSC set certain conditions for the developers including the use of port facilities in Greater Baltimore and Ocean City, and collectively invest at least $39.6 million to support port upgrades at Tradepoint Atlantic and $76 million in a steel fabrication plant in Maryland. • In April 2017, Tradepoint Atlantic announced a 10-year agreement with Host Terminals to oversee marine cargo operations at the Baltimore County site, which includes $30 million in combined investment toward infrastructure improvements to the site. It is expected to bring 9,500 jobs to the region. The International Union of Operating Engineers' Local 37 will provide union labor for the facility. • FedEx Ground secured a long term lease and in July 2017 opened a new 300,000 square foot distribution center at Tradepoint Atlantic that employs 150 and up to 300 long-term package handlers, drivers, and office workers. • Under Armour signed a deal with Tradepoint Atlantic to build a one million square foot distribution warehouse that will employ 1,000 people, and be part of an overall $175 million capital investment. The facility is scheduled to open in 2018 and will serve as the company's national hub to fulfill consumers' online orders. • In November 2017, Amazon announced plans to construct an 855,000 square-foot fulfillment center at Tradepoint Atlantic and bring 1,500 new jobs to the region. Associates at the new facility will pick, pack, and ship customer items such as electronics, books, housewares and toys. • In November 2017, Tradepoint Atlantic announced Royal Farms as the first tenant to occupy 70-acre retail development, The Shoppes at Tradepoint Atlantic. The Baltimore-based convenience store chain has signed a long-term lease. The Shoppes at Tradepoint Atlantic is a planned retail development comprising more than 70 acres of Tradepoint Atlantic. The Royal Farms development includes retail gas and diesel fueling, a convenience store, and car wash.

Essex/Middle River

The U.S. General Services Administration (GSA) auctioned the 1.9 million square foot former GSA Depot facility in Middle River in 2006 for a record $37.5 million. This higher-than-expected sale price was evidence of the success of the County's waterfront revitalization efforts over the previous ten years. Now known as Martin’s Landing, the complex is strategically located near the waterfront and just minutes from I-95 along MD43, and across the street from Martin State Airport, a general aviation facility that handles a significant level of corporate air travel. The County is working with the owners, a New York based investment team, to encourage a quality redevelopment that will incorporate a mix of business, residential and commercial uses. In the County’s 2012 comprehensive rezoning process, the 53 acre property was rezoned from heavy industrial to a classification that allows a mix of uses.

TECHNOLOGY LOCATIONS bwtech@UMBC The bwtech@UMBC Research & Technology Park is a 71-acre community engaged in research, entrepreneurship, and economic development. The bwtech@UMBC Research & Technology Park contains eight buildings, including multi- and single- tenant buildings and 3 incubators. Over 40 Cyber Security companies currently reside and do business in the Park. The Research Park is adjacent to the main UMBC campus with direct access to the innovative research and amenities, of a major university.

The bwtech@UMBC Research & Technology Park includes 130 tenants and 1,500 employees, including mature, emerging and incubator companies. bwtech@UMBC operates these distinct business incubators with specific industry orientation. bwtech@UMBC companies have access to UMBC campus amenities and enjoy the strategic location only minutes away from BWI Thurgood Marshall Airport, downtown Baltimore, and the federal agencies located in the Washington, D.C. corridor. The location, coupled with the opportunity to collaborate with the talented students and faculty of UMBC's nationally recognized science and engineering programs, makes bwtech@UMBC an ideal location for technology, bioscience and research organizations at all stages of development.

Bwtech@UMBC recently announced the establishment of a new international cybersecurity center called iCyberCenter. The iCyberCenter will provide an executive training session, a 12-month incubator program, and other support to companies from the United Kingdom and other nations, to help them establish a foothold in the U.S. market. The new iCyberCenter connects to mentors, thought-leaders, potential customers, investors and partners while being part of an unparalleled cybersecurity ecosystem. Companies in the iCyberCenter’s incubation program benefit from expert mentoring by highly experienced international cyber business experts and a continuous program of training, events, networking, and new business opportunities designed to help them accelerate entry into the US market.

UMBC intends to invest in a RISE Zone in the Catonsville-Arbutus area of southwestern Baltimore County by doubling or tripling the size of bwtech@UMBC. The expansion would add hundreds of new jobs to the park as well as increase opportunities for local businesses.

UMBC has significant resources and expertise in the areas of economic development and community relations that it expects to apply to these goals. Senior officials in charge of bwtech@UMBC, corporate relations, and community relations will lead planning for the zone. The success of bwtech@UMBC—currently virtually all the park’s 525,000 square feet are leased and the park generated nearly $500 million in income and business sales in 2014—speaks to UMBC’s economic development ability.

The following list highlights new tenants at bwtech@UMBC Research & Technology Park as of FY2017: Up Therapeutics – A startup biotech company focusing on a new type drug development to treat cancers.

Unit Cell Diamond – Synthesizes diamonds from “tetrahedranoidal” molecules, which approximate the tetrahedral diamond unit cell, the smallest assembly of carbon atoms that make up diamond.

LCG Technologies – LCG delivers technology-based solutions that help companies strategically develop, integrate, and align technology to improve their business.

Surevine – Surevine’s flagship product, is a next generation cyber-security information sharing platform designed for secure cross-organizational collaboration and intelligence analysis.

Swain Techs – As an Enterprise Systems Integrator, Swain Tech are CMMi ML3 Development & Services appraised and ISO 9001 certified providing strategic technology solutions in Engineering, Managed Services, and Cyber Security.

New Paradigm Consulting – New Paradigm Consulting is an IT company specializing in cybersecurity, data transformation, and business and management consulting providing services and solutions to the intelligence community and commercial vendors.

DynaMed Solutions – They offer solutions in the field of Health Information Technology, offering services and software solutions to meet today’s healthcare challenges, while helping to shape the healthcare of tomorrow.

Silobreaker – Silobreaker helps security and intelligence professionals make sense of the overwhelming amount of open source data available on the web.

4S - Silversword Software and Services, LLC - Provides technology solutions and technical management practices to federal clients.

Booker DiMaio - Offers a comprehensive suite of end-to-end Big Data ecosystem services focusing around Visualization/Analytics, DevOps/Cloud Computing, Health IT and Cybersecurity.

MILVETS Systems Technology – Disabled veteran-owned business specializing in Information Technology solutions for government agencies and government contractors.

ENTERPRISE ZONES

An enterprise zone is a tool the State of Maryland offers to local jurisdictions for promoting economic development in certain qualifying areas. The County has three Enterprise Zones - the Chesapeake Zone (formerly known as the North Point Zone), located along the industrial North Point corridor in eastern Baltimore County; the Southwest Zone, located in the Washington Boulevard/Hollins Ferry Road industrial corridor; and the Federal Center at Woodlawn Zone. These three areas contain over 10,000 acres of industrial and office-zoned land, and over 700 businesses. Since the approval of the first zone in December 1995, more than 130 businesses in the North Point and Southwest enterprise zones have committed to investing over $315 million in real property improvements and $270 million in machinery and equipment. In addition, approximately 3,700 new jobs have been created. The Halethorpe-Arbutus area in the Southwest Enterprise Zone has seen dramatic growth, with almost 600 new jobs in a four-year period. The Southwest Enterprise Zone was amended and redesignated in June 2013. The North Point Zone expired and was replaced in 2015 by the Chesapeake Zone, a larger area that now includes the entire Sparrows Point peninsula, now known as Tradepoint Atlantic.

The program offers two primary benefits to businesses in the designated zone that make new investments or hire new employees:

1. Property Tax Credits. The local jurisdiction provides an annual property tax credit that is phased out over a ten-year period. For the first five years, the credit is equal to 80% of the increase in property tax resulting from the new investment in real property. In the subsequent five years, the credit decreases 10% annually until it is phased-out entirely in the eleventh year.

2. Income Tax Credits. For each new, full-time job created in an enterprise zone, the State grants a $1,000, one-time State income tax credit to the employer. If a worker who is certified as economically disadvantaged fills the new job, the credit can total as much as $6,000 over three years.

The local property tax credit is applied only to the increased tax liability resulting from the new investment. Therefore, the County experiences no loss in property tax revenue as a result of the program; it simply foregoes a portion of the increase in property tax revenue that results from the new investment. Additionally, the State of Maryland reimburses the County for 50% of the property tax credits to businesses.

HOUSING

The following table shows the number of residential housing units sold, total sold dollar volume, average and median price of a residential unit sold in the County in December 2017 compared with December 2016.

December 2017 December 2016 % Change Total Sold Dollar Volume: $240,179,327 $224,677,839 6.90% Average Sold Price: $283,565 $253,016 12.07% Median Sold Price: $235,000 $224,675 4.60% Total Units Sold: 847 888 -4.62% Average Days on Market: 66 70 -5.71% Average List Price for Sold Units: $292,714 $260,533 12.35% Average Sale Price as a percentage of Average List Price: 94.5% 94.5% 0.00%

SOURCE: Metropolitan Regional Information Systems, Inc., December 2017.

SECTION V: COUNTY GOVERNMENT AND ADMINISTRATION

DESCRIPTION OF THE COUNTY GOVERNMENT STRUCTURE

The County’s seat of government is located in Towson, Maryland. The County performs all local government functions within its jurisdiction, as there are no incorporated towns, villages, municipalities or other political subdivisions with separate taxing authority. Under home rule since 1957, an elected County Executive and a seven-member County Council, with each serving separate executive and legislative functions, govern the County.

The County Council members are elected from each of seven contiguous and equally populated council districts. The County Executive and the County Council serve contemporaneous four-year terms in office with the current term ending December 2018. There is no term limitation for County Council members. However, the County Executive may only serve two consecutive terms in office.

Each member of the County Council has one vote, and a simple majority of the County Council is sufficient to pass legislation in the absence of higher voting requirements. Emergency bills and County Council actions to override a veto by the County Executive require the vote of five members of the County Council. The citizens of the County may petition to referendum any law or any appropriation increase approved by the Council. The County Council elects its own chairperson annually.

The Executive Branch is comprised of the County Executive and the County Administrative Officer. The County Executive is the chief executive officer of the County and the official head of the County government. The County Executive appoints the County Administrative Officer subject to the County Council's approval. The County Administrative Officer oversees the daily operations of the County Government. The Legislative Branch is comprised of the County Council, the County Auditor and the Board of Appeals.

County operating agencies include the following departments: Environmental Protection and Sustainability, Economic Development, Police, Fire, Health, Aging, Recreation and Parks, Corrections, Permits Approvals and Inspections, and Public Works. County staff agencies include the following offices: Budget and Finance, Information Technology, Human Resources, Law and Planning. Agencies subject to control by charter and/or County funding include the following: Department of Education, Circuit Court, Public Libraries, State’s Attorney, Social Services, County Sheriff, Community College, Orphan’s Court, Board of Elections, Liquor License Commissioners, and the University of Maryland Extension. A chart of the County governmental organization is set forth following this section. Biographical descriptions of elected officials and key administrative officials follow.

BIOGRAPHIES

County Executive

KEVIN KAMENETZ, Baltimore County Executive, earned his Bachelor's degree from Johns Hopkins University and law degree from the University of Baltimore School of Law. He is a former Assistant State's Attorney for Baltimore City and a three- term elected member of the Democratic Central Committee. He has served as President of Safety First, a crime fighting coalition and Vice President of B’nai B’rith (Menorah Lodge). Mr. Kamenetz was elected to the County Council in 1994, 1998, 2002 and 2006. He served as Chairman of the County Council in 1996, 1999, 2003, and 2008. Mr. Kamenetz was elected County Executive in 2010 and 2014. He currently serves as the President of the Maryland Association of Counties and is past president of the Baltimore Metro Council. He also serves on the Board of Directors for the Economic Alliance of Greater Baltimore and the Board of Visitors for the University of Maryland Shock Trauma Center.

County Council

TOM QUIRK, Councilman, First District. Mr. Quirk is a Certified Financial Planner practitioner, Chartered Retirement Planning Counselor and small business owner in Catonsville. A graduate of Western Maryland (now McDaniel) College where he tripled majored in Economics, Business Administration, and Political Science; he has been active within his community and in politics since his early teens. Mr. Quirk was elected to the County Council in 2010 and 2014, served as Chairman in 2013 and 2017.

VICKI ALMOND, Councilwoman, Second District. Prior to becoming Councilwoman, Mrs. Almond was employed as Chief of Staff for a State Senator. She has served as Vice-President on the Police Community Relations Council, President for Franklin Middle and High School PTAs from 1986-1994, on the Reister’s Towne Festival from 1996-1998, and the Reisterstown, Owings Mills, Glyndon Coordinating Council from 1994-97 and 2002-04. She was appointed to the Rosewood Citizen’s Advisory Council and the Baltimore County Commission for Women. She is currently serving as the community representative for the

School Resource Officer Program. Mrs. Almond was elected to the County Council in 2010 and 2014 and served as Chairwoman in 2012 and 2015.

WADE KACH, Councilman, Third District. Born in West Baltimore, Wade Kach attended Baltimore City Public Schools, graduating from The Baltimore Polytechnic Institute (Poly) and Western Maryland College (now McDaniel College), earning a B.A. in Mathematics in 1970. Given his penchant for math, Wade taught middle school math in the Baltimore County Public Schools from 1970 to 1992 before moving into the Audit Office of the County School System after more than two decades in the classroom. Active in the Republican Party throughout his legislative career as well, Wade was elected as a delegate to the Republican Party National Convention in 1988 and 2000. Wade was first elected to the Maryland House of Delegates in 1975, continuously serving large portions of Baltimore County until 2014. Upon election to the County Council, Wade retired tied as the longest-serving member of the Maryland House of Delegates. Wade has received numerous honors, including an award from the Maryland Society of Accountants in 1999 and the Casper R. Taylor, Jr., Founder's Award, from the House of Delegates in 2006. Mr. Kach was elected to the County Council in 2014.

JULIAN EARL JONES, JR., Councilman, Fourth District. Mr. Jones is a Division Chief in the Anne Arundel County Fire Department with 29 years of experience. He has held many positions in the Fire Department including Executive Board member of the International Association of Fire Fighters, Local 1563, President of the Anne Arundel County Professional Black Firefighter Association, President of the Anne Arundel County Professional Fire Chiefs Association, United Way Chairperson and has commanded several divisions in the fire department including the Communication, Logistics and Operations Division. Mr. Jones is a member of the Maryland Fire Service Personnel Qualification Board and has attained the highest professional certifications in many disciplines including Fire, Hazardous Materials, Instruction, Management and Rescue. Mr. Jones led Maryland Fire and EMS forces on a rescue mission to New Orleans after the devastation of Hurricane Katrina. Mr. Jones graduated from the University of Maryland, Baltimore County with a Bachelors of Science Degree in Information Systems Management. Mr. Jones is a licensed Real Estate Agent and Business Owner. His company specializes in real estate rehabilitation and renovation and was established in 1988. Mr. Jones is a community leader, former PTA President of Hernwood Elementary School, member of the Caucus of African American Leaders and a two term member of the Baltimore County Democratic Central Committee. Mr. Jones was elected to the County Council in 2014 and is currently serving as Chairman in 2018.

DAVID MARKS, Councilman, Fifth District. Earned a B.A. degree in government and politics (high honors) from the University of Maryland at College Park and a Master of Arts in public policy from the Johns Hopkins University in 1997. Mr. Marks worked for 14 years in various positions at the U.S. Department of Transportation and the Maryland Department of Transportation, where he was Chief of Staff to the Secretary. A former nine-term President of the Perry Hall Improvement Association, he also served on the Baltimore County Republican Central Committee and the Executive Board for the Baltimore County Historical Trust. Mr. Marks was elected to the County Council in 2010 and 2014.

CATHY A. BEVINS, Councilwoman, Sixth District. Councilwoman Bevins was born and raised on the Eastside of Baltimore County. Councilwoman Bevins has served her community for over 25 years through her children’s PTA groups, church based outreach, homeless outreach and community advocacy. Prior to her election to the Baltimore County Council, she served as a Constituent Services Coordinator for six years, assisting the residents of the eastside of Baltimore County resolving issues on the local, state and federal levels. She was recently appointed to serve as Liaison to the Maryland Association of Counties for Baltimore County. Mrs. Bevins was elected to the County Council in 2010 and 2014 and served as Chairwoman in 2014.

TODD CRANDELL, Councilman, Seventh District. He was born and raised in Dundalk where he currently resides. The son, grandson, and nephew of steelworkers, Councilman Crandell attended Gilman School and was a Division I wrestler at Rider University. As a consultant and entrepreneur, he has over twenty years of experience in the manufacturing, aerospace, and internet industries. Mr. Crandell is a former high school wrestling coach, has led workshops for the Future Business Leaders of America and has served on advisory boards for Baltimore Healthcare for the Homeless, the MIT Enterprise Forum, Content Clothing, and is a former District Chairman for the Baltimore Area Council of the Boy Scouts of America. Mr. Crandell was elected to the County Council in 2014.

Administrative Officials

FRED HOMAN, County Administrative Officer, holds a B.A. degree in Political Science from East Stroudsburg State University and a J.D. from the University of Baltimore. He is also a member of the Maryland Bar. Mr. Homan has been employed by the County since 1978 and was appointed County Administrative Officer on June 1, 2007. From July 1996 through May 2007, Mr. Homan served as Director of Budget and Finance. Prior to the merger of the Budget and Finance offices on July 1, 1996, Mr. Homan served as the Director of the Budget from December 1989 to June 1996. Prior to 1989, Mr. Homan served as Deputy Director of the Budget and the Investment Administrator in the Office of Budget and Finance.

KEITH DORSEY, Director of Budget and Finance, holds a B.A degree in Economics from the University of Maryland, Baltimore County. Mr. Dorsey has been employed by the County since 1983 and was appointed Director of Budget and Finance on

July 3, 2007. From February 12, 2005 through July 3, 2007, Mr. Dorsey served as Deputy Director of Budget and Finance. Prior to February 2005, Mr. Dorsey served as a Budget Analyst for Baltimore County.

MICHAEL E. FIELD, County Attorney for Baltimore County was admitted to the Maryland Bar in 1994 after receiving his law degree from the University of Maryland School of Law. Mr. Field received his undergraduate degree in 1983 from the University of Maryland. Prior to his service as County Attorney, Mr. Field was an Assistant County Attorney for Baltimore County and a Legislative Analyst in the Department of Legislative Services of the Maryland General Assembly.

WILL ANDERSON, Director of the Department of Economic and Workforce Development, earned his B.A. degree from Rutgers University in 1989 and an M.S. in Interdisciplinary Science from The Johns Hopkins University in 1996. Previously, he served as Chief Technology Officer for the Maryland Business Roundtable for Education (MBRT) where he led the organization's business partnerships and convened-executive level advisory groups in industry, education and the public sector. He also served in leadership roles -- in corporate, small business, public sector and not-for-profit organizations -- from sales, marketing, management, software, technology, to community and public relations, and served as founding partner and lead business developer of a Maryland-based web development provider.

VOTERS BALTIMORE COUNTY, MARYLAND COUNTY GOVERNMENT ORGANIZATION CHART

LEGISLATIVE BRANCH EXECUTIVE BRANCH

COUNTY COUNTY COUNCIL EXECUTIVE

COUNTY BOARD OF COUNTY ADMINISTRATIVE APPEALS AUDITOR OFFICER

AGENCIES SUBJECT TO OPERATING STAFF CONTROL BY CHARTER AGENCIES AGENCIES &/OR COUNTY FUNDING

59 DEPARTMENT DEPT. OF ENVIRONMENTAL OF ECONOMIC OFFICE OF BUDGET OFFICE OF DEPARTMENT CIRCUIT PROTECTION AND AND AND INFORMATION OF COURT SUSTAINABILITY WORKFORCE FINANCE TECHNOLOGY EDUCATION DEVELOPMENT

DEPARTMENT POLICE FIRE OFFICE OF HUMAN OFFICE OF STATE’S OF DEPARTMENT DEPARTMENT RESOURCES LAW ATTORNEY LIBRARIES

DEPARTMENT DEPARTMENT OF DEPARTMENT OF HEALTH COUNTY OF PLANNING SOCIAL DEPARTMENT SHERIFF AGING SERVICES

DEPARTMENT OF DEPARTMENT COMMUNITY ORPHAN’S RECREATION OF COLLEGE COURT AND PARKS CORRECTIONS

DEPARTMENT OF PERMITS, DEPARTMENT SUPERVISOR LIQUOR LICENSE APPROVALS, AND OF PUBLIC OF ELECTIONS COMMISSIONERS INSPECTIONS WORKS

UNIVERSITY OF

MARYLAND EXTENSION

DESCRIPTION OF SERVICES AND AGENCY FUNCTIONS

The following list highlights some of the services of the County government and provides a brief description of the services provided, as well as current updates. For more information on all services of the County, visit the County’s website at www.baltimorecountymd.gov.

Public Schools

Overseen by an eleven member Board of Education and administered by a superintendent, the Department of Education is responsible for the overall operation of the County’s 173 schools, centers and programs. The majority of education funding is provided by the County with the balance derived from a combination of federal, state and other funds.

The following table provides actual and projected public school enrollment for school years 2011/12 – 2020/21:

Enrollment: School Years 2011/12 – 2020/21 Actual Actual Actual Actual Actual Actual Projected Projected Projected Projected 2011- 2012- 2013- 2014- 2015- 2016- 2017- 2018- 2019- 2020- Grades 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Elementary 50,757 52,499 53,873 55,278 55,933 56,193 56,438 56,060 55,867 55,551 Middle 22,411 22,391 22,632 23,233 23,737 24,325 24,899 25,685 26,307 26,864 High 30,554 30,573 30,359 30,541 30,571 30,736 31,001 31,649 32,464 33,500 Alt & Special 858 861 851 798 770 771 781 781 781 781 Other 735 709 661 134 115 114 122 122 122 122 Grand Totals 105,315 107,033 108,376 109,984 111,126 112,139 113,241 114,297 115,541 116,818

Source: BCPS FY17 Operating Budget, Executive Summary

Police

Under the direction of the Chief of Police, the Department has the general duty to safeguard the lives and safety of all persons within the County, to protect property, and to assist in securing to all persons the equal protection of the laws. It is divided into 8 precincts with its headquarters located in Towson. The Department also maintains a K9 training center, a marine unit, an aviation unit, and a crime laboratory.

Fire

Under the direction of the Fire Chief, the Fire Department is responsible for the protection of persons and property in the County. It is composed of 25 career and 33 volunteer companies. The Department’s 29 advanced life support medic units and several fire engines staffed with paramedics are equipped to provide emergency cardiac rescue services. The Department also has responsibility for the Emergency Operations Center and provides for response to natural and man-made disasters.

Economic and Workforce Development

The Department’s responsibilities include the promotion of an economic development program, especially the solicitation of new business and investment, as well as other activities necessary to reach that goal. As of 2011, the Office of Workforce Development became part of Economic Development and provides training, career consultation and job placement services to unemployed and underemployed County residents so they can meet the County's workforce needs and obtain and retain long-term employment with good wages and benefits.

Community College of Baltimore County (CCBC)

CCBC comprises the largest community college system in the State of Maryland with campuses at Catonsville, Dundalk and Essex and various centers throughout the County. CCBC offers a broad array of general education, career programs, and training related to economic and community development activities.

Libraries

Overseen by a Board of Library Trustees appointed by the County Executive and administered by a director accountable to the Board, the Department of Libraries provides general public library services to the County through its 15 branches.

Environmental Protection and Sustainability

The Department of Environmental Protection and Sustainability is responsible for administering and enforcing environmental laws, regulations, programs and activities for the purpose of conserving, enhancing and perpetuating the natural resources of the County. The sustainability component was added in 2011 and is responsible for a number of resource management programs including forest sustainability and environmental education including Green Schools, County energy grant coordination, a sustainability network, and intergovernmental coordination for reservoir, coastal zone, and master plan policy. The Department is also responsible for the oversight and management of the Stormwater Management Fund established in Fiscal Year 2014 to mitigate state and federal stormwater runoff regulations.

Planning

The Department of Planning is responsible for preparation of the master plan for adoption by the Planning Board and the County Council, recommending to the Director of Budget and Finance a six-year capital program, reviewing and making recommendations on plans for all development in the County, recommending zoning map amendments to the County Council or the County Board of Appeals, and administering Community Development Block Grant funds. Planning also includes the Office of Administrative Hearings which serves as an independent, judicial body comprised of administrative law judges who hear cases and issue decisions on a variety of matters including, but not limited to, zoning, land use and related matters. Water Supply and Sewerage

Under the Metropolitan District Act, the Metropolitan District was created as a separate and financially self- supporting entity under the jurisdiction of the County to supply water and to provide sewerage and drainage systems to residents of the County living within certain prescribed areas. The extension of these boundaries is subject to the approval of the County Council with the consent and approval of the Mayor and City Council of Baltimore (the “City”). The Public Works Department administers the Metropolitan District Fund under the direction of the County Executive and County Administrative Officer. The Metropolitan District has its own revenue and bond issuance powers, subject to authorization by the County Council. The Metropolitan District Act requires the City to provide water to the Metropolitan District at cost. Although the Metropolitan District constructs water facilities within its boundaries, under an agreement between the City and the Metropolitan District, the City operates and maintains the facilities at cost, including billing and collecting water rents. Under said agreement, the City and County have also agreed to pay for certain new capital projects and the repair and enlargement of additions or improvements to certain existing water facilities on a specified pro-rata basis. In addition, the County, from time to time, has entered into agreements with Anne Arundel County and Howard County under which, among other things, certain of the County's water distribution facilities are made available to each of said counties. For use of the County's water distribution facilities, Anne Arundel County and Howard County have respectively agreed to pay for part of the cost of certain new capital projects and for the repair to and the enlargement of additions or improvements to certain existing facilities on a specified pro-rata basis.

Long-range planning for major water facilities is accomplished through a joint office staffed full-time by both City and County personnel. Such planning is subject to the approval of both the City and the County. Water, principally from sources located within the County, is treated, delivered and distributed by the City to County residents and the City bills for these services at rates designed to reimburse the City at cost. At each fiscal year's end, any excess of revenues received by the City over its costs is remitted to the Metropolitan District, and any deficit is paid by the Metropolitan District to the City.

The Metropolitan District constructs, operates, and maintains all sewerage collection and transmission facilities located within the County. County-generated sanitary sewerage is treated and disposed of at cost by two City-owned and operated treatment plants, one of which is located in the County; the other plant is located in Baltimore City. Under an agreement between the City and the County, the City's sewerage facilities are made available to the County, and the City and County have agreed to pay for certain new capital projects and the repair and the enlargement of additions or improvements to certain existing sewerage facilities on specified pro-rata bases. The County has entered into agreements with Anne Arundel County and Howard County, respectively, under which, among other things, certain of the County's sewerage facilities are made available to each of said counties. The agreements also provide for the payment to the County by Anne Arundel County and Howard County, respectively, of an operating charge for the use of the County's sewerage facilities as well as the payment for certain new capital projects and the repair to and the enlargement of additions or improvements to certain existing sewerage facilities on specific pro-rata bases.

The County residents served by the sewerage facilities are billed by the County for annual service charges and front foot benefit assessments. When a new connection is made, connection charges are levied.

Solid Waste

The County is responsible for collecting and disposing of residential solid waste and recyclable materials. Collection is performed by private haulers who make one solid waste and one recycle pickup per week. The disposal function is carried out in a variety of methods. (SEE SECTION II: DEBT SUMMARY -- Other Agreements and Commitments -- Waste Disposal Agreements.)

LABOR RELATIONS

The County has a classified service that includes all jobs (except exempt positions) in the County career system; these positions number 5,689 employees. All other employees (elected officials, department heads, and various non-merit full-time and part-time positions) are collectively known as the exempt service; these positions number 1,773 employees.

On July 13, 1977, Baltimore County enacted the Employee Relations Act, which permits employees of the County, with certain exceptions, to join and be represented by labor unions and other employee organizations. The Employee Relations Act defines six representation units within the classified service; provides a procedure for recognition of employee organizations as the exclusive representative of employees in an appropriate representation unit; establishes a procedure and time limits for negotiating with recognized employee organizations matters pertaining to wages and other conditions of employment; provides procedures for settling disputes and grievances; and prohibits strikes, work stoppages, lockouts and secondary boycotts, with penalties for violations of such prohibitions. Labor agreements have been signed into effect with the following representative organizations:

A three-year agreement with the American Federation of State, County and Municipal Employees, Local 921, Council 67, AFL-CIO, has been ratified and will remain in effect through June 30, 2019. This organization represents 661 hourly employees. These employees are primarily Public Works employees; however, this union also represents employees in other offices and departments of the County.

A three-year agreement with the Baltimore County Federation of Public Employees, the American Federation of Teachers (“AFT”), AFL-CIO has been reached and is expected to be ratified, and will remain in effect through June 30, 2019. This organization represents 1,471 salaried employees in various offices and departments of the County.

A three-year agreement with the Baltimore County Federation of Public Health Nurses, AFT, AFL-CIO, has been ratified and will remain in effect through June 30, 2019. This organization represents 67 full-time and 23 part-time nurses in the Health Department.

A three-year agreement with the Baltimore County Professional Fire Fighters Association, International Association of Firefighters Local 1311, AFL-CIO, has been reached and is expected to be ratified, and will remain in effect through June 30, 2019. This organization represents 990 sworn personnel in the Fire Department up to and including the rank of Captain.

A three-year agreement with the Fraternal Order of Police Lodge 25, has been ratified and will remain in effect through June 30, 2019. The Lodge represents 72 sworn deputy sheriffs in the Sheriff’s Office up to and including the rank of Lieutenant.

A one-year agreement with the Fraternal Order of Police Lodge 4 effective July 1, 2017 through June 30, 2018. This organization represents 1,843 sworn personnel in the Police Department up to and including the rank of Lieutenant.

LITIGATION

On May 18, 2015, the Supreme Court of the United States decided against the State of Maryland in Comptroller of the Treasury of Maryland v. Wynne Et Ux. Under state law, residents who pay income tax to another state for income earned in that other state are allowed a credit against their Maryland state income tax but not against the so-called piggy-back tax of the county or municipality where they reside. Plaintiffs argued that not granting a credit against the local income tax is a violation of the U.S. Constitution. By a 5 to 4 vote, the Supreme Court found for the plaintiffs holding generally that the state law violates what is known as the Dormant Commerce Clause. This decision means that Maryland counties, including Baltimore County, must prepare to fund refund claims by certain taxpayers (particularly S corporation shareholders) dating back to Tax Year 2007. The County anticipates the total obligation will be approximately $50 million and the County will begin making quarterly payments of $2.5 million beginning May 2019. The County has assigned $25.4 million in fund balance. The County estimates that future loss of revenues may amount to approximately $8 million per year and will be absorbed through the normal budgeting process.

Under Maryland law, taxpayers are generally eligible for interest on certain tax refunds calculated at an annual rate of interest equal to the greater of (i) three percentage points above the average prime rate of interest or (ii) 13%. In 2014, the Maryland General Assembly adopted legislation that set the annual interest rate for an income tax refund that is a result of the final decision under the Wynne case to a percent equal to the average prime rate of interest. This legislation substantially lowers the interest rate on tax refunds due as a result of the Wynne decision. Further, the legislation was intended to be effective retroactively. On November 13, 2015, lawyers for Michael J. Holzheid filed a class action complaint, Michael J. Holzheid v. Comptroller of the Treasury of Maryland, et al, in the Circuit Court for Baltimore City challenging the state legislation. On January 16, 2018, the Circuit Court dismissed the complaint having determined that the Circuit Court lacked jurisdiction over the matter based upon the plaintiffs’ failure to exhaust administrative remedies. Other taxpayers may also file claims or appeals challenging the state legislation. If such claims or appeals are successful, the estimated amount of interest on refunds owed by the County would increase.

There is one significant outstanding claim against Baltimore County that has the potential to impact members’ contributions to the Employees’ Retirement System of Baltimore County. The U.S. Equal Employment Opportunity Commission (EEOC) has sued Baltimore County and six (6) County Unions claiming that they violated the Age Discrimination in Employment Act (ADEA) by requiring employees who join the retirement system as older workers to contribute more than workers who joined at a younger age. The United States District Court for the District of Maryland granted Baltimore County’s Motion for Summary Judgment on January 21, 2009. The Fourth Circuit Court of Appeals reversed and remanded the case to the District Court. By Order entered on October 17, 2012, the District Court reversed itself and found the County liable for age discrimination. After the District Court granted the County permission to file an interlocutory appeal, the Fourth Circuit affirmed the liability determination of the District Court on March 31, 2014. The Supreme Court denied the County’s Petition for Writ of Certiorari on November 3, 2014 and the case has been remanded to the District Court for a determination of damages. The County filed a separate action in federal court seeking a declaration that its long-term actuary, Buck Consultants, LLC (Buck), is contractually obligated to defend, indemnify and hold the County harmless in the underlying EEOC action. On March 29, 2016, the District Court granted Buck’s Motion to Dismiss the claim for indemnification and hold harmless, but denied it as to Buck’s duty to defend the County. On May 5, 2016, the District Court stayed the declaratory action for six (6) months. In addition, the County filed in the underlying EEOC action a Motion for Leave to file a third-party Complaint against Buck for common law indemnification and contribution in that action. Before the District Court ruled on that motion, the County and Buck filed a Stipulation and Order dismissing the Buck case and terminating all other possible actions regarding this matter, which was signed by the district Court on October 13, 2016. On April 27, 2016, the court entered a Joint Consent Order Regarding Injunctive Relief, which resolved EEOC’s claim for injunctive relief. On that same day, the court ordered the parties to submit briefs on the question of whether EEOC was entitled to any retroactive or prospective damages for claimed “excess contributions” by older members. The court conducted a hearing on July 29, 2016 to determine that issue. EEOC’s claim for “excess contributions” by older workers was previously estimated to be $17 million to $19 million. On August 24, 2016, the Court issued an order denying EEOC's Motion for Determination on Availability of Retroactive and Prospective Monetary Relief for the "excess contributions," and held specifically that "[n]either retroactive nor prospective monetary relief is available in this case," and closed the case. The EEOC filed an appeal from the order to the United States Court of Appeals for the Fourth Circuit. The appeal was heard on October 26, 2017 and a decision is pending.

In September 2016, a complaint was filed in the Baltimore County Circuit Court against the County and an individual County police officer, as defendants. The complaint was subsequently amended to add additional individual County police officers as additional defendants. The amended complaint alleged, among other things, the excessive use of force by County police officers resulting in the wrongful death of the decedent in violation of her constitutional rights under federal and Maryland law and injury to one of the decedent’s issue. The amended complaint sought compensatory and punitive damages against the defendants. On February 16, 2018, the jury awarded damages to the plaintiffs in the amount of approximately $38.3 million. No punitive damages were awarded. The County intends to vigorously contest this judgement.

There are other miscellaneous claims against the County including claims now in litigation. In the opinion of the County Attorney, none of these claims would materially affect the County's financial position. The County Attorney is of the opinion that there is no litigation pending or threatened in either Maryland or Federal courts which would in any way affect the validity of the BANs or the right of the County to levy and collect ad valorem taxes, without limitation as to rate or amount, for payment of the BANs and interest thereon.

AUDITORS

The financial statements in Appendix A have been prepared by the Office of Budget and Finance and audited by CliftonLarsonAllen LLP, independent certified public accountants. Such statements have been included in reliance upon such report and given upon the authority of such firm as experts in accounting and auditing.

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APPENDIX A

BALTIMORE COUNTY, MARYLAND COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2017

TABLE OF CONTENTS

Financial Section Independent Auditors’ Report ...... A-2

Baltimore County, Maryland Management’s Discussion and Analysis ...... A-5

Basic Financial Statements

Statement of Net Position ...... A-17

Statement of Activities ...... A-18

Balance Sheet – Government Funds ...... A-19

Statement of Revenues, Expenditures, and Changes in Fund Balances – Governmental Funds ...... A-20

Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities ...... A-21

Budgetary Comparison Statement – General Fund ...... A-22

Statement of Net Position – Proprietary Funds ...... A-23

Statement of Revenues, Expenses, and Changes in Fund Net Position – Proprietary Funds ...... A-24

Statement of Cash Flows – Proprietary Funds ...... A-25

Statement of Fiduciary Net Position – Fiduciary Funds ...... A-26

Statement of Changes in Fiduciary Net Position – Fiduciary Funds ...... A-27

Statement of Net Position - Component Units ...... A-28

Statement of Activities - Component Units ...... A-29

Notes to Basic Financial Statements ...... A-30

Required Supplementary Information ...... A-82

A-1

CliftonLarsonAllen LLP CLAconnect.com

INDEPENDENT AUDITORS' REPORT

The Honorable County Executive and Members of the County Council Baltimore County, Maryland Towson, Maryland

Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business- type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of Baltimore County, Maryland (the County), as of and for the year ended June 30, 2017, and the related notes to the financial statements, which collectively comprise the County’s basic financial statements as listed in the table of contents.

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

Auditors’ 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 and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

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

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

A-2 The Honorable County Executive and Members of the County Council Baltimore County, Maryland

Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the County as of June 30, 2017, and the respective changes in financial position and, where applicable, cash flows thereof and the respective budgetary comparison for the general fund for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis on pages 4 - 13 and the schedule of the County’s proportionate share of the net pension liability and schedule of county contributions for the Employees’ Retirement System, the schedule of changes in the County’s net pension liability and related ratios, schedule of County contributions, and schedule of investment returns for the Police, Fire and Widow’s Pension Plan and schedule of funding progress, employers’ contributions, schedule of changes in total liability and related ratios for the OPEB Trust on pages 82 - 86 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the County’s basic financial statements. The combining and individual fund statements and schedules-supplementary information, as listed in the table of contents are presented for purposes of additional analysis and are not a required part of the basic financial statements.

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

A-3 The Honorable County Executive and Members of the County Council Baltimore County, Maryland

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

Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 22, 2017, on our consideration of the County's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the result of that testing, and not to provide an opinion on the effectiveness of the County’s 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 County’s internal control over financial reporting and compliance. a

CliftonLarsonAllen LLP

Baltimore, Maryland December 22, 2017

A-4 BALTIMORE COUNTY, MARYLAND MANAGEMENT’S DISCUSSION AND ANALYSIS

Baltimore County, Maryland management is providing this narrative overview and analysis of the financial activities of the primary government (the County) as of and for the fiscal year ended June 30, 2017. Readers are to consider the data presented here in conjunction with the information presented in the transmittal letter at the front of this report and with all the County’s financial statements and accompanying notes to those financial statements, which follow this section.

FinancialU Highlights

Government-wide: • The County’s assets and deferred outflows of resources were $5.122 billion and its liabilities and deferred inflows were $5.897 billion, resulting in negative net position of $.775 billion. • The County’s total net position decreased by $367.231 million.

Fund Level: • The County’s governmental funds have combined fund balances of $258.649 million. • The General Fund’s fund balance is $329.688 million of which $205.391 million is unassigned fund balance inclusive of $99.360 million in a Revenue Stabilization account.

Long-term Debt: • The County’s total bond and note debt increased by $448.568 million during the current year. The key factors in this increase were the issuance of $559.715 million in general obligation bonds, bond anticipation notes, and certificates of participation, in addition to a $51.064 million draw on the Maryland Water Quality Revolving Loan Fund. These issuances and draws were offset by debt service payments of $162.211 million.

OverviewU of the Financial Statements

This discussion and analysis is an introduction to the County’s basic financial statements, which comprise three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the basic financial statements. This report also contains other supplementary information in addition to the basic financial statements.

Government-wide Statements (Reporting the County as a Whole) The Statement of Net Position and the Statement of Activities are two financial statements that report information about the County’s activities that should serve as a useful indicator of whether the County, as a whole, is better or worse off as a result of this year’s activities. These statements include all non-fiduciary assets and liabilities using the accrual basis of accounting. The current year’s revenues and expenses are taken into account regardless of when cash is received or paid.

The Statement of Net Position on page 16 presents all of the County’s non-fiduciary assets, liabilities and deferred inflows/outflows of resources, with the difference reported as net position. Over time, increases and decreases in net position measure whether the County’s financial position is improving or deteriorating.

The Statement of Activities on page 17 presents information showing how the County’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying events giving rise to the change occur, regardless of the timing of related cash flows. Therefore, revenues and expenses are reported in these statements for some items that will only result in cash flows in future fiscal periods (e.g. uncollected taxes and earned but unused vacation leave).

A-5

The focus of the statements is clearly on the primary government and the presentation allows the user to address the relative relationship with the component units. Both statements report three activities, which include the governmental activities and business-type activities of the primary government and separate reporting for the County’s component units.

• Governmental Activities – Most of the County’s basic services are reported under this category. Taxes and intergovernmental revenues generally fund these services. The general government, public safety, public works, health and human services, culture and leisure services, economic and community development, and education functions fall within the governmental activities. • Business-type Activities – The County charges fees to customers to help it cover all or most of the costs of certain services it provides. The Metropolitan District water and sewer services are the only business-type activity reported. • Discretely Presented Component Units – Component units are legally separate organizations for which the primary government is financially accountable or for which the nature and significance of their relationship with the primary government is such that exclusion would cause the reporting entity’s financial statements to be misleading or incomplete. The County reports three component units that are described in the notes to the basic financial statements.

This report includes two summary reconciliations (pages 18 and 20) between the governmental fund financial statements (modified accrual accounting) and the governmental activities (full accrual accounting) reflected on the government-wide financial statements. Note 2 of the notes to the basic financial statements also provides more detail as to the transactions that impact the conversion from the modified accrual basis of accounting to the full accrual basis of accounting.

Fund Financial Statements (Reporting the County’s Major Funds) Traditional users of governmental financial statements will find the fund financial statements presentation more familiar. The focus is on major funds. A fund is a fiscal and accounting entity with a self-balancing set of accounts that the County uses to keep track of specific sources of funding and spending for a particular purpose. The County’s funds are divided into three categories – governmental, proprietary, and fiduciary – and use different accounting approaches.

• Governmental funds – Most of the County’s basic services are reported in the governmental funds, which focus on how money flows into and out of those funds and the balances left at year-end that are available for future spending. The governmental fund financial statements provide a detailed short-term view of the County’s general government operations and the basic services it provides. Governmental fund information helps determine whether there are more or fewer financial resources that can be spent in the near future to finance the County’s programs. These funds are reported using modified accrual accounting, which measures cash and all other financial assets that can readily be converted to cash. The County reports the General Fund, Gifts and Grants Fund, and the Consolidated Public Improvement Construction Fund as major funds. • Proprietary funds – When the County charges customers for the services it provides, whether to outside customers or to other agencies within the County, these services are generally reported in proprietary funds. Proprietary funds (enterprise and internal service) utilize accrual accounting; the same method used by private sector businesses. Enterprise funds report activities that provide supplies and services to the general public. The County reports the Metropolitan District Fund as a major fund. Internal service funds report activities that provide supplies and services to the County’s other programs and activities. Internal service funds are primarily reported as governmental activities on the government-wide statements. • Fiduciary funds – The County is the trustee for its employee pension plans and the post employment healthcare benefits plan. These funds are reported using accrual accounting. The government-wide statements exclude fiduciary fund activities and balances because these assets are restricted in purpose and do not represent discretionary assets of the County to finance its operations.

A-6

Notes to Basic Financial Statements The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the basic financial statements can be found starting on page 29.

Other Information Required supplementary information includes schedules concerning the County’s pension plans and its post-employment healthcare benefits provided to its employees. These schedules can be found starting on page 82. Other supplementary information includes combining and individual fund financial statements and schedules for the General Fund, Liquor License Fund, Stormwater Management Fund, internal service funds and fiduciary funds. These statements and schedules can be found starting on page 88.

FinancialU Analysis of the County as a Whole

The County’s combined net position decreased $367.231 million in FY 2017. The net position of the governmental activities decreased $276.581 million and business-type activities decreased $90.650 million. The schedule below presents the net position of the County’s governmental and business-type activities as of June 30, 2017.

The largest component of the County’s net position reflects its investment in capital assets (e.g., land, buildings, equipment, and infrastructure), less any related outstanding debt used to acquire the assets. The County uses these capital assets to provide services to citizens. Consequently, these assets are not liquid or available for future spending or liquidation of any liabilities. It is important to note that counties in the State of Maryland issue debt for the construction of schools, yet the school buildings are owned by each public school system. The County also funds projects for the Community College of Baltimore County. Therefore, the County’s financial statements include this outstanding debt, without the addition of the corresponding assets, which is a major reason for the governmental activities negative unrestricted net position. The County has a similar situation where it issues debt to finance capital contributions for Baltimore City owned assets. This is what causes the negative unrestricted net position in the business- type activities. These situations are described in more detail in Note 8.

Net Position as of June 30 (in thousands)

Governmental Business-type Total Primary Activities Activities Government Assets: 2017 2016 2017 2016 2017 2016 Current and other noncurrent assets $ 643,558 $ 502,182 160,572$ 123,015$ $ 804,130 $ 625,197 Capital assets 2,519,411 2,461,309 1,350,174 1,298,842 3,869,585 3,760,151 Total assets 3,162,969 2,963,491 1,510,746 1,421,857 4,673,715 4,385,348

Total deferred outflow of resources 412,468 286,309 35,398 29,366 447,866 315,675

Liabilities: Current liabilities 541,633 410,382 368,100 307,687 909,733 718,069 Long-term liabilities 3,748,659 3,220,803 1,178,354 1,051,989 4,927,013 4,272,792 Total liabilities 4,290,292 3,631,185 1,546,454 1,359,676 5,836,746 4,990,861

Total deferred inflow of resources 57,613 114,502 2,272 3,479 59,885 117,981

Net position: Net investment in capital assets 1,602,876 1,529,027 538,172 614,609 2,141,048 2,143,636 Restricted 49,922 42,647 - - 49,922 42,647 Unrestricted (deficit) (2,425,266) (2,067,561) (540,754) (526,541) (2,966,020) (2,594,102) Total net position $ (772,468) $ (495,887) (2,582)$ 88,068$ $ (775,050) $ (407,819)

A-7

The following condensed financial information was derived from the government-wide Statement of Activities and reflects how the County’s net position changed during the fiscal year.

Governmental Business-type Total Primary Activities Activities Government Revenues 2017 2016 2017 2016 2017 2016 Program revenues Charges for services $ 354,793 $ 297,400 $ 246,175 237,071$ $ 600,968 $ 534,471 Operating grants 176,028 172,931 2,850 2,893 178,878 175,824 Capital grants 36,021 35,781 21,602 16,186 57,623 51,967 General revenues Property taxes 916,768 891,823 - - 916,768 891,823 Income taxes 689,515 663,510 - - 689,515 663,510 Public service taxes 176,124 174,239 - - 176,124 174,239 Unrestricted grants and contributions 8,926 8,966 - - 8,926 8,966 Investment earnings 2,068 1,392 34 56 2,102 1,448 Total revenues 2,360,243 2,246,042 270,661 256,206 2,630,904 2,502,248

Expenses General government 864,527 615,205 - - 864,527 615,205 Public safety 372,623 368,337 - - 372,623 368,337 Public w orks 185,743 178,728 - - 185,743 178,728 Health and human services 167,861 164,430 - - 167,861 164,430 Culture and leisure services 64,520 64,165 - - 64,520 64,165 Economic and community development 12,598 12,449 - - 12,598 12,449 Education 956,006 943,217 - - 956,006 943,217 Interest on long-term debt 33,651 26,648 - - 33,651 26,648 Water and sew er services - - 361,069 356,593 361,069 356,593 Total expenses 2,657,529 2,373,179 361,069 356,593 3,018,598 2,729,772 Increase(decrease) in net position before transfers (297,286) (127,137) (90,408) (100,387) (387,694) (227,524) Reversion of fund balance from 20,463 - - - 20,463 - component units Transfers 242 738 (242) (738) - - Increase (decrease) in net position (276,581) (126,399) (90,650) (101,125) (367,231) (227,524) Net position - beginning (495,887) (369,488) 88,068 189,193 (407,819) (180,295) Net position - ending $ (772,468) $ (495,887) $ (2,582) 88,068$ $ (775,050) $ (407,819)

A-8 The following graphs and charts depict the expenses and revenues of the governmental activities and business-type activities for the fiscal year which are derived from the government-wide Statement of Activities.

Expenses & Program Revenues-Governmental Activities

$1,200,000 Expenses (thousands)

$1,000,000 Program revenues (thousands)

$800,000

$600,000

$400,000

$200,000

$- General Public safety Public works Health & Culture & Economic & Education Interest on government human leisure community long-term debt services services development

Revenues by Source-Governmental Activities

Investment earnings 0.09% Transfers & Reversions Unrestricted grants/contributions 0.87% 0.37% Charges for services 14.90% Public service taxes 7.40% Operating grants & contributions 7.39%

Income taxes 28.96% Capital grants & contributions 1.51%

Property taxes 38.51%

A-9 Expenses and Program Revenues-Business-type Activities

$370,000

$360,000

$350,000

$340,000 Expenses $330,000 (thousands) $320,000 Program revenues $310,000 (thousands)

$300,000

$290,000

$280,000

$270,000

$260,000

$250,000

$240,000

$230,000

$220,000

$210,000 Water & sewer services

Revenues by Source-Business-type Activities

Capital contributions Investment earnings 7.98% 0.01%

Operating grants & contributions 1.05%

Charges for services 90.96%

A-10

Governmental Activities The net position of governmental activities decreased $276.581 million during FY17. Key elements affecting the net position include:

• General revenues increased $53.471 million over the prior fiscal year. Income tax revenue increased $26.005 million after adjusting for the County’s portion of income tax reserves held by the State that was recognized under full accrual accounting. Property taxes provided 38.5% of total revenue with an increase of $24.945 million due from new construction county-wide and from higher reassessed values on real property in the Western third of the County. • A reversion of fund balance from component units was reported to reflect a $20 million payment from the Board of Education and a $.463 million payment from the Board of Library Trustees. • General Fund miscellaneous revenue increased by $24.731 million because of an $18.555 million settlement related to 2007 investments in residential mortgage backed securities. • General government expenses increased $250.715 million primarily because of increases in pension plan related expenses. • Education expenses increased $12.789 million from FY17 due to additional funding of operational costs for the Board of Education. • The outstanding debt for the Board of Education and the Community College capital projects (see previous discussion) increased by $38.70 million.

Business-type Activities The net position of business-type activities decreased $90.650 million during FY17. The key elements of the Metropolitan District operations that affect net position are as follows:

• The consent decree with the U.S. Environmental Protection Agency continues to drive expenditures. In FY17, the County’s cost sharing contribution of $130.736 million to Baltimore City for capital facilities was an increase of $20.294 million from the previous year. The Enhanced Nutrient Removal at the Back River Wastewater Treatment Plant Project, Improvements to Guilford Reservoir and the Design and Procurement of the City’s Automatic Meter Reading Project amounted to a combined $54.527 million in cost sharing expenditures. • Front foot assessments that are billed over 40 years to County homeowners to recover costs for County construction of water and sewer lines showed a continuing decline of $5.839 million due to developers assuming the responsibility for construction of these lines. • The County’s charges for services increased $9.104 million due to a 12% rate increase in FY17 for sewer service, water distribution and water consumption charges.

FinancialU Analysis of the County’s Funds

The County uses fund accounting to ensure and demonstrate compliance with finance related legal requirements.

Governmental Funds The governmental funds provide data on near-term inflows, outflows and balances of spendable resources. This data is useful in assessing the County’s financing requirements. The unassigned fund balance serves as a useful measure of the County’s financial resources available for appropriation at the end of the fiscal year.

The County’s governmental funds reported combined ending fund balances of $258.649 million as of June 30, 2017, an increase of $30.429 million. Unassigned fund balance of the General Fund, as stated below, is available at the County’s discretion. The remaining positive fund balance of $188.217 million is not available for new spending because of varying constraints set on them.

The General Fund is the County’s chief operating fund. At the end of FY17, unassigned fund balance of the General Fund was $205.391 million, while total fund balance was $329.688 million. Unassigned fund balance represents 10.92% of total budgetary expenditures, while total fund balance represents 17.53% of total budgetary expenditures. These ratios are typically useful as a measure of the General Fund’s liquidity.

A-11

The County has $99.360 million in a Revenue Stabilization account and has assigned $3.304 million to finance, in part, the FY18 operating budget.

The General Fund fund balance decreased by $5.684 million during the current fiscal year. Board of Education expenditures, including PAYGO contributions for school projects, increased $67.930 million which reflects the County’s continued funding commitment to address rising enrollment and to modernize schools. The General Fund also had a $9.957 million increase in public safety expenditures as a result of the County’s continued focus on safe communities. Employer contributions to OPEB decreased by $21.241 million. A reversion of fund balance from component units in addition to a favorable law suit settlement regarding mortgage backed securities increased general fund revenues by a combined $39.018 million.

The Gifts and Grants Fund fund balance of $39.36 million consists primarily of $16.740 million of earned revenue in excess of grant expenditures restricted for various grant activities administered by the County. Specifically, the Asset Forfeiture, Speed Camera, Housing Choice Voucher grants and Environmental Protection grants amounted to a combined $14.3 million in excess revenue. In addition, $11.780 million of earned revenue was restricted for the Affordable Housing Program.

The Consolidated Public Improvement Construction Fund fund balance increased $36.866 million. Major fluctuations in fund balance are primarily the result of the timing of cash inflows from bond sale proceeds and capital expenditure outflows. The County issued $121 million in new debt to fund capital projects in FY17. Capital expenditures for various County projects increased $7.457 million to $139.167 million.

Proprietary Funds The County’s proprietary funds provide more detailed data of the information reported in the government- wide financial statements.

The Metropolitan District Fund net position decreased $91.081 million. The main factors concerning this decrease have already been addressed in the discussion of the County’s business-type activities.

General Fund Budgetary Highlights The County had multiple supplemental appropriations during fiscal year 2017 including the following: a $38.940 million Pay-go supplemental appropriation for school air conditioning as mentioned above; a $.500 million supplemental to the Department of Corrections for additional correctional officers; a $.850 million supplemental to the Emergency Communication Center for salary and callback; a $2.7 million supplemental to the Fire Department for salary and callback, and a $.155 million supplemental to the Department of Environmental Protection for salary.

Significant differences between the final budget and actual amounts are summarized as follows:

• Title transfer taxes were $3.294 million more than budget due to an increase in high dollar commercial property transactions and increased sales and higher property values from the slowly recovering real estate market. • The County had $4.782 million in salary savings across the board from the continuation of position vacancy control. • An unfavorable revenue variance of $41.611 million in County income tax revenue resulted because of the lack in growth of personal income, mainly from capital gains. In addition, the County has assumed some additional loss in revenue due to the Wynne Case, which held that Maryland violated the Commerce Clause because it did not permit a taxpayer to take a credit against the County portion of the personal property income tax for taxes paid to other states. • A $21.668 million favorable revenue variance in miscellaneous revenue as a result of an $18.555 million settlement stemming from mortgage backed securities.

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Capital Asset and Debt Administration

Capital Assets The County’s investment in capital assets for its governmental and business-type activities totaled $3.870 billion net of accumulated depreciation. The investment in capital assets includes land, buildings, machinery, vehicles and infrastructure assets.

Capital Assets as of June 30, net of accumulated depreciation (in thousands)

Governmental Business-type Total Primary Activities Activities Government 2017 2016 2017 2016 2017 2016 Land $ 290,961 $ 290,144 $ 1,317 $ 1,317 $ 292,278 $ 291,461 Buildings and improvements 347,383 326,914 106,566 109,082 453,949 435,996 Vehicles and equipment 97,448 103,624 4,269 5,237 101,717 108,861 Infrastructure 1,173,396 1,192,095 1,001,891 952,330 2,175,287 2,144,425 Construction in progress 610,223 548,532 236,131 230,876 846,354 779,408 Total $ 2,519,411 $ 2,461,309 $ 1,350,174 $ 1,298,842 $ 3,869,585 $ 3,760,151

The County added $8.7 million for new or improved roads, $13 million for storm drains, and $43.5 million for water and sewer lines as a major part of its infrastructure assets for FY17.

Selected capital asset events during the current year were as follows:

• The County completed new and existing updates to County owned buildings at a cost of $25.8 million • The County completed repairs and renovations to the Bread & Cheese, Hawthorn, Marlyn Avenue and Valley Village pumping stations at a cost of $11.1 million • The County completed renovations and upgrades to County bridges totaling $4.9 million

Additional capital asset information can be found in Note 7.

Long-term Debt At the end of the current fiscal year, the County had general obligation debt outstanding of $3.153 billion. This includes Consolidated Public Improvement bonds and notes of $1.444 billion, Pension Funding bonds of $.392 billion and Metropolitan District bonds and notes of $1.317 billion. The bonds and notes are backed by the full faith and credit of the County.

Outstanding General Obligation Debt as of June 30 (in thousands)

Governmental Business-type Total Primary Activities Activities Government 2017 2016 2017 2016 2017 2016 General obligation bonds$ 1,700,096 $ 1,550,668 1,107,298$ $ 1,003,368 $ 2,807,394 $ 2,554,036 General obligation BANs 121,000 99,800 225,000 99,300 346,000 199,100 Total $ 1,821,096 $ 1,650,468 1,332,298$ $ 1,102,668 $ 3,153,394 $ 2,753,136

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The County’s general obligation debt increased in 2017 by $400.258 million (considering new borrowing and debt retirement).

The County maintains an “AAA” rating from both Standard & Poor’s and Fitch Investor’s Service, and a “Aaa” rating from Moody’s Investor’s Service for general obligation bonds.

The County Charter limits the amount of general obligation debt that the County may issue for Consolidated Public Improvements to 4% of the County’s assessable property base. Metropolitan District debt may be issued up to debt limit of 3.2% of the District’s assessable property base. The County’s debt is significantly below the respective limits of $3.284 billion and $2.334 billion. Additional information on the County’s long- term debt can be found in Note 8.

Economic Factors and Next Years Budgets and Rates

• The Spending Affordability Committee’s consultant, Sage Policy Group, Inc. predicts that the County and State personal income will grow 4.08% and 4.30% respectively, in FY18. • Employment increased by 1.65% among Baltimore County residents, by 1.57% among Maryland residents, and by 1.75% nationally on an annual average basis from calendar year (CY)15 to CY16. County and State unemployment rates were 4.1% and 3.8% respectively, in December 2016 and averaged 4.6% and 4.4%, respectively, for all FY16. For CY17, Sage policy group, Inc. predicts that the County employment will grow 0.9%, compared to population growth of 0.2%, while State employment growth is expected to be 1.0% compared to population growth of 0.4%.

These and other economic indicators were considered when preparing the FY18 General Fund budget, which estimates revenues at $1.99 billion. General Fund appropriations for FY18 of $1.993 billion reflects a 1.78% decrease from the FY17 adjusted budget. The FY18 budget for Baltimore County Public Schools (BCPS) includes an increase of $40.5 million or 2.8% over FY17 funding levels. The budget exceeds Maintenance of Effort by $19.9 million. The FY18 budget reflects the second full year of the County’s new emergency medical transport billing initiated with the cooperation of the Baltimore County Volunteer Firemen Association. With projected FY18 revenue of $24.6 million, a broader, deeper commitment has been made to the Baltimore County’s volunteer fire and EMS companies including a 12% increase in funding over last year. The County expects to fund $31.5 million PAYGO to support the FY18 capital budget. The difference between estimated revenue and appropriations of $3.3 million is covered by fund balance reserves. The projected unassigned fund balance at the end of FY18 is $205.3 million or 10.3% of the estimated FY18 total revenues.

The income tax rate of 2.83% is unchanged. The respective real property and personal property tax rates remain at $1.10 and $2.75 per $100 of assessed value. The Homestead Assessment Growth Cap remains at 4%, excluding home sales, new construction, and non-principle residences.

Information Requests

This financial report is designed to provide a general overview of Baltimore County’s finances for all those with an interest in good government. The report seeks to demonstrate the County’s accountability for the monies it receives and for the services it provides. Requests for information regarding this report or additional financial information can be sent to the Baltimore County Office of Budget and Finance, 400 Washington Avenue, Room 149 Towson, Maryland 21204-4665.

The County’s component units issue their own separately audited financial statements. These statements may be obtained by directly contacting the component unit (see Note 1).

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Basic Financial Statements

Government-wide financial statements combine all of Baltimore County’s governmental and business-type activities, as well as its discretely presented components.

Fund financial statements show the financial position and the operating results by fund.

Notes to the Basic Financial Statements are an integral part of the financial statements.

A-16 Baltimore County, Maryland Statement of Net Position June 30, 2017 (In Thousands)

Primary Government Governmental Business-type Component Activities Activities Total Units ASSETS Cash and investments (Note 3) $ 314,711 $ 36,058 $ 350,769 $ 120,212 Receivables, net (Note 5) 255,054 115,690 370,744 36,936 Due from primary government (Note 6) - - - 82,283 Inventories 9,693 605 10,298 1,824 Prepaid costs 1,135 - 1,135 434 Restricted assets: Cash and investments (Note 3) 62,965 8,219 71,184 4,276 Capital assets (Note 7) Not being depreciated 901,184 237,448 1,138,632 288,859 Depreciable (net of accumulated depreciation) 1,618,227 1,112,726 2,730,953 1,629,923 Total assets 3,162,969 1,510,746 4,673,715 2,164,747

DEFERRED OUTFLOWS OF RESOURCES Deferred charge on refunding 17,843 19,437 37,280 - Retirement plans 394,625 15,961 410,586 44,243 Total deferred outflows of resources 412,468 35,398 447,866 44,243

LIABILITIES Accounts payable 45,067 65,720 110,787 81,877 Accrued payroll 16,153 1,182 17,335 23,230 Accrued interest payable 30,025 17,620 47,645 - Internal balances 2,923 (2,923) - - Due to component units (Note 6) 60,707 - 60,707 - Other liabilities 40,215 6,364 46,579 6,661 Unearned revenue (Note 5) 4,339 - 4,339 8,384 Liabilities payable from restricted assets - - - 4,276 Noncurrent liabilities (Note 8) Due within one year 342,204 280,137 622,341 35,010 Due in more than one year 3,748,659 1,178,354 4,927,013 228,339 Total liabilities 4,290,292 1,546,454 5,836,746 387,777

DEFERRED INFLOWS OF RESOURCES Retirement plans 57,613 2,272 59,885 20,274

NET POSITION Net investment in capital assets 1,602,876 538,172 2,141,048 1,879,156 Restricted for: Public works 19,756 - 19,756 - Economic development 11,780 - 11,780 - Education - - - 21,412 Grant projects 16,740 - 16,740 - Debt service 1,646 - 1,646 - Expendable endowments - - - 6,963 Unrestricted (deficit) (2,425,266) (540,754) (2,966,020) (106,592) Total net position (deficit) $ (772,468) $ (2,582) $ (775,050) $ 1,800,939

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

A-17 Baltimore County, Maryland Statement of Activities For the Year Ended June 30, 2017 (In Thousands)

Program Revenues Net (Expense) Revenue and Changes in Net Position Operating Capital Primary Government Charges for Grants and Grants and Governmental Business-type Component Functions/Programs Expenses Services Contributions Contributions Activities Activities Total Units PRIMARY GOVERNMENT Governmental activities: General government $ 864,527 $ 309,123 $ 2,996 $ - $ (552,408) $ - $ (552,408) $ - Public safety 372,623 11,802 18,163 - (342,658) - (342,658) - Public works 185,743 13,920 4,826 36,021 (130,976) - (130,976) - Health and human services 167,861 15,231 129,450 - (23,180) - (23,180) - Culture and leisure services 64,520 4,260 4,294 - (55,966) - (55,966) - Economic and community development 12,598 457 11,220 - (921) - (921) - Education 956,006 - - - (956,006) - (956,006) - Interest on long-term debt 33,651 - 5,079 - (28,572) - (28,572) - Total governmental activities 2,657,529 354,793 176,028 36,021 (2,090,687) - (2,090,687) -

Business-type activities: Water and sewer services 361,069 246,175 2,850 21,602 - (90,442) (90,442) - Total business-type activities 361,069 246,175 2,850 21,602 - (90,442) (90,442) - A-18 Total primary government $ 3,018,598 $ 600,968 $ 178,878 $ 57,623 (2,090,687) (90,442) (2,181,129) - COMPONENT UNITS Board of Education $ 1,717,211 $ 13,372 $ 193,939 $ 191,652 - - - (1,318,248) Community College 214,212 72,147 90,534 6,223 - - - (45,308) Board of Library Trustees 44,139 3,095 6,990 - - - - (34,054) Total component units $ 1,975,562 $ 88,614 $ 291,463 $ 197,875 - - - (1,397,610)

General revenues: Taxes: Property taxes 916,768 - 916,768 - Income taxes 689,515 - 689,515 - Public service taxes 176,124 - 176,124 - Grants and contributions not restricted to specific programs: Baltimore County - - - 834,732 State of Maryland 8,926 - 8,926 639,959 Unrestricted investment earnings 2,068 34 2,102 1,128 Other - - - 5,643 Reversion of fund balance from component units 20,463 - 20,463 (20,463) Transfers 242 (242) - - Total general revenues and transfers 1,814,106 (208) 1,813,898 1,460,999 Change in net position (276,581) (90,650) (367,231) 63,389 Net position (deficit) at beginning of the year (495,887) 88,068 (407,819) 1,737,550 Net position (deficit) at end of the year $ (772,468) $ (2,582) $ (775,050) $ 1,800,939

The accompanying notes are an integral part of these financial statements. Baltimore County, Maryland Balance Sheet Governmental Funds June 30, 2017 (In Thousands)

Consolidated Gifts Public Nonmajor Total and Improvement Governmental Governmental General Grants Construction Funds Funds ASSETS Cash and investments $ 190,723 $ 25,976 $ - $ 4,755 $ 221,454 Cash and investments - restricted 62,965 - - - 62,965 Receivables, net 185,856 61,039 4,745 158 251,798 Due from other funds 43,626 - - - 43,626 Inventories 9,251 - - - 9,251 Total assets $ 492,421 $ 87,015 $ 4,745 $ 4,913 $ 589,094

LIABILITIES Accounts payable $ 18,642 $ 6,059 $ 16,945 $ 61 $ 41,707 Accrued expenditures 14,533 1,449 - 48 16,030 Due to other funds - - 43,626 - 43,626 Due to component units 22,433 - 38,274 - 60,707 Other liabilities 21,321 484 18,410 - 40,215 Unearned revenue - other (Note 5) 691 3,648 - - 4,339 Total liabilities 77,620 11,640 117,255 109 206,624

DEFERRED INFLOWS OF RESOURCES Unavailable revenue (Note 5) 85,113 36,015 2,693 - 123,821 Total deferred inflows of resources 85,113 36,015 2,693 - 123,821

FUND BALANCES (DEFICITS) (NOTE 15) Nonspendable 9,251 - - - 9,251 Restricted 61,062 28,520 19,756 - 109,338 Assigned 53,984 10,840 - 4,804 69,628 Unassigned 205,391 - (134,959) - 70,432 Total fund balances (deficit) 329,688 39,360 (115,203) 4,804 258,649 Total liabilities,deferred inflows of resources, and fund balances $ 492,421 $ 87,015 $ 4,745 $ 4,913

Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources and therefore are not reported in the funds. 2,505,089 Other long-term assets are not available to pay for current-period expenditures and, therefore, are deferred inflows in the funds. 123,821 Internal service funds are used by management to charge the costs of self insurance, fleet management and reproduction to individual funds. The assets and liabilities of the internal service funds are included in governmental activities in the statement of net position. 39,927 Long-term liabilities, including bonds payable, are not due and payable in the current period and therefore are not reported in the funds (Note 2). (4,036,966) The net effect of the deferred outflows and deferred inflows of resources recorded in conjunction with the recognition of the County pension liability is shown in the governmental activites but not included in the governmental statements. 337,012 Net position of governmental actitivies $ (772,468)

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

A-19 Baltimore County, Maryland Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds For the Year Ended June 30, 2017 (In Thousands)

Consolidated Gifts Public Nonmajor Total and Improvement Governmental Governmental General Grants Construction Funds Funds REVENUES Taxes $ 1,775,935 -$ $ - $ 940 $ 1,776,875 Licenses and permits 5,767 - - 11,982 17,749 Intergovernmental 47,764 136,290 18,641 - 202,695 Repayment of loans - 1,270 - - 1,270 Charges for services 43,822 12,530 500 110 56,962 Assessments - - 2,177 - 2,177 Fines and forfeitures 7,056 - - - 7,056 Investment income 985 334 - 206 1,525 Miscellaneous 58,307 712 3,130 - 62,149 Total revenues 1,939,636 151,136 24,448 13,238 2,128,458

EXPENDITURES Current: General government 109,778 3,851 - 2,586 116,215 Public safety 355,322 12,273 - - 367,595 Public works 117,566 104 - - 117,670 Health and human services 39,909 127,059 - - 166,968 Culture and leisure services 19,453 3,498 - - 22,951 Economic and community development 1,317 15,088 - - 16,405 Pension plan contributions 247,707 - - - 247,707 Healthcare contributions 102,742 - - - 102,742 Miscellaneous 18,458 141 - - 18,599 Capital projects - - 139,167 - 139,167 Payments to component units 888,218 - 132,282 - 1,020,500 Debt service: Principal retirement 83,421 - - - 83,421 Interest 49,925 - - - 49,925 Fiscal charges 2,355 - - - 2,355 Total expenditures 2,036,171 162,014 271,449 2,586 2,472,220 Excess (deficiency) of revenues over expenditures (96,535) (10,878) (247,001) 10,652 (343,762)

OTHER FINANCING SOURCES (USES) Bonds issued 144,000 - 99,800 - 243,800 Bond anticipation notes - - 121,000 - 121,000 Bond anticipation notes - refunding - - (99,800) - (99,800) Certificates of participation issued 59,810 - - - 59,810 Premiums on debt 26,882 - - - 26,882 Reversion of fund balance from component units 20,000 - 463 - 20,463 Loans - - 1,091 - 1,091 Transfers in 2,362 11,080 166,315 - 179,757 Transfers out (162,203) (372) (5,002) (11,235) (178,812) Total other financing sources (uses) 90,851 10,708 283,867 (11,235) 374,191 Net change in fund balances (5,684) (170) 36,866 (583) 30,429 Fund balances (deficit) at beginning of the year 335,372 39,530 (152,069) 5,387 228,220 Fund balances (deficit) at end of the year $ 329,688 39,360$ $ (115,203) $ 4,804 $ 258,649

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

A-20 Baltimore County, Maryland Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities For the Year Ended June 30, 2017 (In Thousands)

Net change in fund balances-total governmental funds $ 30,429

Amounts reported for governmental activities in the statement of activities are different because:

Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital outlays exceeded depreciation in the current period (Note 2). 45,308

The net effect of various transactions involving capital assets (I.e., sales, trade-ins, and donations) is to increase net position (Note 2). 11,173

Some revenues will not be collected for several months after the fiscal year ends. As such these revenues are not considered "available" revenues and are deferred in the governmental funds. Deferred inflows decreased this year. (4,507)

The issuance of long-term debt provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net position. This amount is the net effect of these differences in the treatment of long-term debt and related items (Note 2). (237,718)

Some expenses reported in the statement of activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds (Note 2). (32,890)

The net effect of the expenses for recording the County's pension liability from employee retirement plans. (101,724)

Internal service funds are used by management to charge the costs of self insurance, fleet management, and reproduction services to individual funds. The net income of these internal service funds is reported with governmental activities. 15,224

The recognition of a long-term liability for disputed taxes that was not reported in the governmental funds decreases net position. (1,876)

Change in net position of governmental activities $ (276,581)

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

A-21 Baltimore County, Maryland Budgetary Comparison Statement - General Fund For the Year Ended June 30, 2017 (In Thousands)

Variance with Budgeted Amounts Actual Amounts Final Budget- Original Final (Budgetary Basis) Positive (Negative) REVENUES Taxes $ 1,811,187 $ 1,811,187 $ 1,775,935 $ (35,252) Licenses and permits 5,263 5,263 5,767 504 Intergovernmental 47,256 47,256 47,764 508 Charges for services 47,790 47,790 43,822 (3,968) Fines and forfeitures 6,080 6,080 7,056 976 Reimbursement from other funds 11,335 11,335 12,850 1,515 Interest on investments 3,319 3,319 1,652 (1,667) Miscellaneous 34,715 54,715 77,084 22,369 Total revenues 1,966,945 1,986,945 1,971,930 (15,015)

EXPENDITURES Current: General government 120,675 121,115 119,786 1,329 Public safety 349,138 353,363 352,432 931 Public works 113,368 114,218 113,328 890 Health and human services 40,383 40,996 40,076 920 Culture and leisure services 19,809 19,636 19,514 122 Economic and community development 1,285 1,285 1,285 - Pension plan contributions 104,554 104,594 104,589 5 Healthcare contributions 104,082 104,082 102,764 1,318 Miscellaneous 19,698 18,658 18,458 200 Payments to component units 882,870 882,630 882,629 1 Debt service: Principal retirement 83,521 83,471 83,421 50 Interest 42,203 41,993 41,835 158 Fiscal charges 684 434 312 122 Total expenditures 1,882,270 1,886,475 1,880,429 6,046 Excess (deficiency) of revenues over expenditures (budgetary basis) 84,675 100,470 91,501 (8,969)

OTHER FINANCING SOURCES (USES) Transfers in 252 252 252 - Transfers out (104,050) (142,990) (142,990) - Total other financing sources (uses) (103,798) (142,738) (142,738) - Excess (deficiency) of revenues and other financing sources over expenditures and other financing uses (budgetary basis) $ (19,123) $ (42,268) $ (51,237) $ (8,969) Adjustments required under generally accepted accounting principles: Net change during year in reserve for encumbrances 2,229 Unbudgeted equipment financing activity 55,425 Unbudgeted bond escrow payment 443 Net change in reserve for inventories, imprest funds and other programs (13,822) Prior year encumbrances liquidations 1,278 Net change in fund balance-GAAP (5,684) Fund balance at beginning of the year 335,372 Fund balance at end of the year $ 329,688

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

A-22 Baltimore County, Maryland Statement of Net Position Proprietary Funds June 30, 2017 (In Thousands)

Metropolitan District Internal Enterprise Service Fund Funds ASSETS Current assets: Cash and investments $ 36,058 93,257$ Cash and investments - restricted 8,219 - Receivables, net (Note 5) 21,327 3,256 Inventories 605 442 Prepaid costs - 1,135 Total current assets 66,209 98,090

Noncurrent assets: Assessments receivable (Note 5) 94,363 - Capital assets: (Note 7) Non-depreciable 237,448 705 Depreciable (net of accumulated depreciation) 1,112,726 13,617 Total noncurrent assets 1,444,537 14,322 Total assets 1,510,746 112,412

DEFERRED OUTFLOWS OF RESOURCES Deferred charge on refunding 19,437 - Retirement plans 15,961 - Total deferred outflows of resources 35,398 -

LIABILITIES Current liabilities: Accounts payable 65,720 3,360 Accrued payroll 1,182 123 Accrued interest payable 17,620 - Compensated absences (Note 8) 1,749 225 Claims and judgments (Note 8) - 36,506 General obligation debt (Note 8) 277,383 - Pension funding bonds (Note 8) 336 - Certificates of participation (Note 8) 669 - Other liabilities 6,364 - Total current liabilities 371,023 40,214

Noncurrent liabilities (Note 8): Compensated absences 77 - Claims and judgments - 29,348 General obligation debt 1,106,806 - Pension funding bonds 15,363 - Net pension liability 49,034 - Certificates of participation 7,074 - Total noncurrent liabilities 1,178,354 29,348 Total liabilities 1,549,377 69,562

DEFERRED INFLOWS OF RESOURCES Retirement plans 2,272 - Total deferred inflows of resources 2,272 -

NET POSITION Net investment in capital assets 541,353 14,322 Unrestricted (deficit) (546,858) 28,528 Total net position (5,505) 42,850$ Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds 2,923 Net position of business-type activities $ (2,582)

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

A-23 Baltimore County, Maryland Statement of Revenues, Expenses, and Changes in Net Position Proprietary Funds For the Year Ended June 30, 2017 (In Thousands)

Metropolitan District Internal Enterprise Service Fund Total Funds OPERATING REVENUES Licenses and permits $ 1,022 $ 1,022 $ - Charges for services 238,984 238,984 332,050 Assessments 6,125 6,125 - Intergovernmental 2,850 2,850 - Miscellaneous 44 44 47 Total operating revenues 249,025 249,025 332,097

OPERATING EXPENSES Personal services 23,308 23,308 2,876 Business and travel 104 104 - Contractual services 67,269 67,269 741 Rents and utilities 4,131 4,131 246 Supplies and maintenance 54,313 54,313 9,784 Insurance claims and expenses - - 299,543 Equipment 361 361 - Fringe benefits and overhead 21,581 21,581 - Depreciation expense 31,066 31,066 2,743 Other 49 49 683 Total operating expenses 202,182 202,182 316,616 Operating income 46,843 46,843 15,481

NONOPERATING REVENUES (EXPENSES) Interest on investments 34 34 877 Interest expense (22,582) (22,582) - Capital contributions to other subdivisions (130,736) (130,736) - Total nonoperating revenues (expenses) (153,284) (153,284) 877 Income/(loss) before transfers and capital contributions (106,441) (106,441) 16,358 Capital contributions from external parties 21,602 21,602 - Transfers out (242) (242) (703) Employer contribution to pension system (6,000) (6,000) - Change in net position (91,081) (91,081) 15,655 Net position at beginning of the year 85,576 27,195 Net position at end of the year $ (5,505) $ 42,850 Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds 431 Change in net position of business-type activities $ (90,650)

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

A-24 Baltimore County, Maryland Statement of Cash Flows Proprietary Funds For the Year Ended June 30, 2017 (In Thousands)

Metropolitan District Internal Enterprise Service Fund Funds CASH FLOWS FROM OPERATING ACTIVITIES Receipts from external customers $ 256,525 $ 229,958 Receipts for interfund services - 102,109 Payments to suppliers (123,520) (11,168) Payments to employees (40,613) (2,901) Payment for interfund services used - (683) Claims paid - (291,750) Other receipts - 47 Net cash provided by operating activities 92,392 25,612

CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Proceeds from Pension Funding Bonds 6,000 - Employer contribution to the Pension System (6,000) - Transfers out (242) (703) Capital contributions paid to other subdivisions (151,089) - Repayment of advance (52,642) - Net cash (used for) noncapital financing activities (203,973) (703)

CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Proceeds from capital debt 394,994 - Retirement of bond anticipation notes (99,300) - Capital contributions from external parties 9,921 - Acquisition and construction of capital assets (60,194) (4,553) Principal paid on capital debt (53,059) - Interest paid on capital debt (40,557) - Sales of capital assets - 189 Net cash provided by (used for) capital and related financing activities 151,805 (4,364)

CASH FLOWS FROM INVESTING ACTIVITIES Interest on investments 34 877 Net cash provided by investing activities 34 877 Net increase in cash and cash equivalents 40,258 21,422 Cash and cash equivalents at beginning of the year 4,019 71,835 Cash and cash equivalents at end of the year $ 44,277 $ 93,257

RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED BY OPERATING ACTIVITIES Operating income $ 46,843 $ 15,481 Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation expense 31,066 2,743 Effect of changes in operating accounts Receivables, net 5,697 17 Inventories 18 103 Deferred outflows (10,115) - Accounts and other payables 4,388 (264) Accrued expenses 14,495 (25) Claims and judgements - 7,557 Net cash provided by operating activities $ 92,392 $ 25,612

NONCASH CAPITAL AND NONCAPITAL FINANCING ACTIVITIES Capital assets acquired through contributions from developers. $ 8,668 $ -

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

A-25 Baltimore County, Maryland Statement of Fiduciary Net Position Fiduciary Funds June 30, 2017 (In Thousands)

Benefits Trust Funds ASSETS Cash and cash equivalents (Note 3) $ 41,301 Collateral for loaned securities (Note 3) 25,269 Receivables: Accrued interest & dividend income 4,132 Receivable for investments sold 16,277 Receivables other 2,857 Total receivables 23,266 Investments, at fair value (Note 3): U.S. Government and Agency securities 153,066 Municipal bonds 7,622 Foreign bonds 14,219 Corporate bonds 138,279 Stocks 630,108 Bond mutual funds 448,642 Stock mutual funds 966,284 Real estate equity funds 161,398 Hedge funds 831 Private equity funds 137,866 Global asset allocation 462,951 Total investments 3,121,266 Total assets 3,211,102

LIABILITIES Securities lending payable 25,269 Investments purchased 29,249 Investment expenses payable 4,087 Refunds payable 1,940 Other 13,169 Total liabilities 73,714

NET POSITION Net position restricted for benefits $ 3,137,388

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

A-26 Baltimore County, Maryland Statement of Changes in Fiduciary Net Position Fiduciary Funds For the Year Ended June 30, 2017 (In Thousands)

Benefits Trust Funds ADDITIONS Contributions: Employer $ 333,884 Employees 79,653 Other 15,121 Total contributions 428,658

Investment earnings: Net increase in the fair value of plan assets 355,602 Interest and dividends 51,988 Investment expenses (20,332) Net investment gain 387,258 Net income from securities lending: Securities lending income 259 Borrower rebates 66 Agent fees (89) Net income from securities lending 236 Total net investment gain 387,494 Total additions 816,152

DEDUCTIONS Benefits 424,508 Refunds 5,128 Administrative expense 2,393 Total deductions 432,029 Change in net position 384,123 Net position at beginning of the year 2,753,265 Net position at end of the year $ 3,137,388

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

A-27 Baltimore County, Maryland Statement of Net Position Component Units June 30, 2017 (In Thousands)

Board of Board of Community Library Education College Trustees Total ASSETS Cash and investments (Note 3) $ 80,205 31,962$ 8,045$ $ 120,212 Receivables 30,420 6,156 360 36,936 Due from primary government 80,201 2,082 - 82,283 Inventories 1,736 - 88 1,824 Prepaid costs and other assets 301 126 7 434 Cash restricted for lease purchase 4,276 - - 4,276 Capital assets (Note 7) Non-depreciable 276,625 12,234 - 288,859 Depreciable (net of accumulated depreciation) 1,456,162 164,936 8,825 1,629,923 Total assets 1,929,926 217,496 17,325 2,164,747

DEFERRED OUTFLOWS OF RESOURCES Retirement plans 41,694 1,812 737 44,243

LIABILITIES Accounts payable 73,238 7,314 1,325 81,877 Accrued payroll 18,958 2,785 1,487 23,230 Other liabilities 3,722 1,631 1,308 6,661 Unearned revenue 3,106 5,251 27 8,384 Liabilities payable from restricted assets 4,276 - - 4,276 Noncurrent liabilities (Note 8) Due within one year 29,414 4,500 1,096 35,010 Due in more than one year 211,673 12,244 4,422 228,339 Total liabilities 344,387 33,725 9,665 387,777

DEFERRED INFLOWS OF RESOURCES Retirement plans 18,126 1,570 578 20,274

NET POSITION Net investment in capital assets 1,694,111 176,220 8,825 1,879,156 Restricted for: Education 13,813 7,599 - 21,412 Expendable endowments - 6,413 550 6,963 Unrestricted (98,817) (6,219) (1,556) (106,592) Total net position $ 1,609,107 $ 184,013 $ 7,819 $ 1,800,939

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

A-28 Baltimore County, Maryland Statement of Activities Component Units For the Year Ended June 30, 2017 (In Thousands)

Net (Expense) Revenue Program Revenues and Changes in Net Position Operating Capital Board of Charges for Grants and Grants and Board of Community Library Expenses Services Contributions Contributions Education College Trustees Total BOARD OF EDUCATION Public education $ 1,502,421 $ 300 $ 157,118 $ 191,652 $ (1,153,351) $ - $ - $ (1,153,351) Facilities operations 166,515 - 1,159 - (165,356) - - (165,356) Food service 48,275 13,072 35,662 - 459 - - 459 Total Board of Education 1,717,211 13,372 193,939 191,652 (1,318,248) - - (1,318,248) COMMUNITY COLLEGE Educational and general expenses 178,451 66,146 90,534 - - (21,771) - (21,771) Facilities operations 27,999 - - 6,223 - (21,776) - (21,776) Auxiliary enterprises 7,762 6,001 - - - (1,761) - (1,761) A-29 Total Community College 214,212 72,147 90,534 6,223 - (45,308) - (45,308) BOARD OF LIBRARY TRUSTEES Culture and leisure services 44,139 3,095 6,990 - - - (34,054) (34,054) Total component units $ 1,975,562 $ 88,614 $ 291,463 $ 197,875 (1,318,248) (45,308) (34,054) (1,397,610)

General Revenues: Baltimore County 757,552 44,329 32,851 834,732 State of Maryland 639,959 - - 639,959 Unrestricted investment earnings - 1,128 - 1,128 Other 5,643 - - 5,643 Reversion of fund balance to Baltimore County (20,000) - (463) (20,463) Total general revenues 1,383,154 45,457 32,388 1,460,999 Change in net position 64,906 149 (1,666) 63,389 Net position at beginning of the year 1,544,201 183,864 9,485 1,737,550 Net position at end of the year $ 1,609,107 $ 184,013 $ 7,819 $ 1,800,939

The accompanying notes are an integral part of these financial statements. BALTIMORE COUNTY, MARYLAND NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

The accounting and reporting policies of the County conform in all material respects to generally accepted accounting principles as applicable to governmental entities in the United States (GAAP). The following is a summary of significant policies.

Financial Reporting Entity Baltimore County, Maryland (the "County") is a corporate polity, performing all local governmental functions within its jurisdiction. Under home rule charter since 1957, the County is governed by an elected County Executive and a seven-member County Council, with each serving executive and legislative functions, respectively.

In accordance with GAAP, the accompanying financial statements include the various departments and agencies governed by the County Executive and County Council (the primary government) and the County's component units. Discretely presented component units are reported separately from the primary government to emphasize that they are legally separate from the County. The component units are included as part of the County's reporting entity because of the significance of their operational or financial relationships with the County. The component units are fiscally dependent on the County because the County approves budget requests providing a significant amount of funding for each of these units, levies taxes to provide the majority of their fiscal support, and issues debt for construction of their capital facilities.

Discretely Presented Component Units

The discretely presented component units are all governed by individual boards. The Board of Education of Baltimore County and the Board of Trustees of the Community College of Baltimore County are appointed by the Governor of Maryland. The Board of Library Trustees is appointed by the County Executive. A brief description of the component units follows.

1. The Board of Education of Baltimore County operates all public schools (grades K through 12) within the County. 2. The Board of Library Trustees operates all public libraries within the County. 3. The Board of Trustees of the Community College of Baltimore County operates a two-year college program at three campuses: Catonsville, Dundalk and Essex.

Annual financial reports can be obtained from the respective administrative offices listed below:

Baltimore County Public Schools Community College of Baltimore County Department of Fiscal Services Office of Finance 6901 N. Charles St. 7200 Sollers Point Road Towson, Maryland 21204 Baltimore, Maryland 21222

Board of Library Trustees 320 York Road Towson, Maryland 21204

Related Organizations

The County Executive is also responsible for appointing the members of numerous boards, but the County's accountability for these organizations does not extend beyond making appointments. These boards include:

Adult Public Guardianship Review Board Advisory Commission on Environmental Quality Advisory Arbitration Panel Agricultural Land Preservation Advisory Board Animal Hearing Board Board of Appeals Board of Architectural Review Board of Health Board of Liquor License Commissioners Board of Recreation and Parks

A-30 BALTIMORE COUNTY, MARYLAND NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017

Board of Social Services Child Protection Panel Commission for Women Commission on Aging Commission on Arts and Sciences Commission on Disabilities Commission on Veterans’ Affairs Conference and Tourism Advisory Council Criminal Justice Coordinating Council Design Review Panel Drug and Alcohol Abuse Advisory Council Electrical Administrative Board Ethics Commission Ethnic Diversity Advisory Council Human Relations Commission Landmarks Preservation Commission Library Board of Trustees Local Management Board Mental Health Advisory Council Minority and Women Business Pedestrian and Bicycle Advisory Committee Enterprise Commission Personnel and Salary Advisory Board Planning Board Plumbing Board Professional Services Selection Committee Revenue Authority Soil Conservation District Board Workforce Development Council

The amounts that the County appropriated to these organizations during the fiscal year ended June 30, 2017 were immaterial to the basic financial statements taken as a whole.

Government-Wide and Fund Financial Statements

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and deferrals and 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 those estimates.

Government-Wide Financial Statements

The statement of net position and statement of activities report information on all non-fiduciary activities of the primary government and its component units. Primary government activities are distinguished between governmental and business-type activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange revenues. Business-type activities are financed in whole or in part by fees charged to external parties for goods or services. Interfund activity within the governmental activities and within the business-type activities have been eliminated from these statements.

The Statement of Net Position presents the reporting entity’s non-fiduciary assets, liabilities and deferred inflows/outflows of resources, with the difference reported as net position. Net position is reported in three categories:

Net investment in capital assets, consists of capital assets, net of accumulated depreciation and reduced by outstanding balances for bonds, notes, and other debt that are attributed to the acquisition, construction, or improvement of those assets.

Restricted net position results when constraints placed on net position use are either externally imposed by law through constitutional provisions or enabling legislation.

Unrestricted net position consists of net position which does not meet the definition of the two preceding categories. Unrestricted net position often is assigned to indicate that management does not consider it to be available for general operations. Unrestricted net position often has constraints on resources which are imposed by management, but can be removed or modified.

The Statement of Activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable within a specific function.

A-31 BALTIMORE COUNTY, MARYLAND NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017

Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function. Taxes and other items not meeting the definition of program revenues are reported as general revenue.

Fund Financial Statements

Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds. Major individual governmental funds, major individual proprietary funds and three combined nonmajor governmental (Liquor License, Owings Mills Tax District and Stormwater Management) funds are reported as separate columns in the fund financial statements.

The County reports the following major governmental funds:

The General Fund is the County’s general operating fund. It is used to account for all financial resources except those required to be accounted for in another fund.

The Gifts and Grants Fund accounts for a number of gifts and grants awarded to the County that are not accounted for in another fund.

The County reports the following major enterprise fund:

The Metropolitan District Fund accounts for the operation of the Metropolitan District, which provides water supply and sewerage systems to County residents within the District.

The County also reports the following fund types:

Benefits Trust Funds, which include the following:

Pension Trust Funds account for the accumulation of assets to be used for pension benefit payments to qualified employees.

Other Post Employment Benefits Trust Fund accounts for the accumulation of assets to be used for healthcare and life insurance benefit payments to qualified employees.

Measurement Focus and Basis of Accounting

The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary funds and fiduciary funds financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements have been met.

A-32 BALTIMORE COUNTY, MARYLAND NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017 they are both measurable and available. "Measurable" means the amount of the transaction can be determined and “available” means collectable within the current period or soon thereafter to pay liabilities of the current period. The County considers sales and income taxes, interest income and various intergovernmental revenues available if they are collected within 60 days after year-end. Property tax revenue is recognized on receipts within 30 days of year-end. Revenue related to expenditure driven grants is recognized when the applicable eligibility requirements have been met and to the extent that cash is expected to be received within one year of year-end. Licenses and permits, charges for services, fines and forfeitures, and miscellaneous revenues are recorded when received in cash because they are generally not measurable until actually received. Expenditures, other than principal and interest on long-term debt and compensated absences as described below, are recorded when the liability is incurred. Principal and interest on general long-term debt are recorded in the governmental funds as liabilities when due.

Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues of Enterprise and Internal Service Funds are charges to customers for sales and services. Operating expenses for Enterprise and Internal Service Funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. Revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses

The County reports unearned revenue in the government-wide, governmental funds and proprietary fund financial statements when cash is received prior to being earned. Deferred inflows are recognized in the governmental fund statements when revenue is unavailable.

Budgetary Data

As required by Article VII of the Baltimore County Charter, the annual operating budget and the capital budget are prepared by the County Executive and submitted to the County Council for adoption. Such budgets are generally prepared on the modified accrual basis of accounting described above and reflect encumbrance accounting. Prior to adoption of the budgets, the County Council may decrease or delete any item with the exception of those required by the general laws of the State of Maryland, provisions for debt service on outstanding obligations and provisions to eliminate any estimated cash deficits. Requests for supplementary and emergency appropriations may be prepared during the year by the County Executive and adopted by the County Council. There were $43.145 million in supplementary and emergency appropriations adopted for the General Fund operating budget during fiscal year 2017.

Annual budgets are adopted for the General Fund and the nonmajor Special Revenue Funds - Liquor License Fund and the Stormwater Management Fund. The nonmajor Special Revenue Fund – Owings Mills Tax District Fund has no adopted budget. All other governmental funds have an adopted project-length budget. The operating budget reflects appropriations for the General Fund and the Special Revenue Funds on a function/agency/program basis. Expenditures and encumbrances of such funds may not legally exceed appropriations at the program level. Inter- program transfers of no more than ten percent of appropriations may be authorized by the County Administrative Officer. Inter-program transfers in excess of ten percent of appropriations require the approval of the County Executive and the County Council. Inter-agency transfers between County offices, departments or agencies may be made during the last quarter of the fiscal year only on the recommendation of the County Executive with the approval of the County Council. All unencumbered appropriations of annual budgets lapse at the end of the fiscal year.

A-33 BALTIMORE COUNTY, MARYLAND NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017

The County presents its General Fund budgetary comparison statement as part of the basic financial statements. Unbudgeted equipment financing activity in the General Fund comparison consists of $71.298 million in new proceeds, $0.219 million of interest income, $0.242 million in transfers from the Metropolitan District Fund and decreased by $16.334 million of equipment purchases. The unspent equipment financing proceeds of $59.416 million are reported as a restriction of fund balance at fiscal year-end.

The capital budget reflects appropriations for the Consolidated Public Improvement Construction Fund at the individual project level. Expenditures and encumbrances may not legally exceed appropriations at that level and unencumbered appropriations lapse at the completion or abandonment of individual projects. Transfers of appropriations between projects must be approved by the County Executive and the County Council.

Pooled Cash, Cash Equivalents and Investment Income

The County maintains a cash and investment income pool for all funds except for the fiduciary funds. Based on the availability of cash in various funds, marketable securities are purchased and income on investments is credited to the General, Metropolitan District, and Self-Insurance Program Funds.

For purposes of the statements of cash flows, the County defines cash equivalents to include the following: all highly liquid, unrestricted investments with a maturity of three months or less when purchased; all cash and investment pools that are used essentially as demand accounts; all cash with fiscal agents; and all restricted cash and investments that have been determined to be cash equivalents.

Debt Retirement

General obligation long-term debt retirements are paid from the General and Metropolitan District Funds. The Metropolitan District Fund includes $78.0 million of receivables for future billings of assessments for water and sewer lateral pipe abutting properties within the District. These assessments, which are levied on individual properties for a period of forty years from the date of installation, represent a significant cash stream that is designated to retire the Metropolitan District long-term debt.

Investments

Money market investments and participating interest-earning investment contracts are carried at amortized cost, which approximates fair value. Other investment securities are carried at fair value. Securities traded on national or international exchanges are valued at the last reported sales price at the prevailing exchange rates as of June 30, 2017. The fair value of mutual funds is based on the fair values of the underlying securities. The fair value of real estate equity funds is based on independent appraisals. Private equity funds and hedge funds are valued based on information provided by the respective fund managers.

Inventories

Inventories are valued at cost. They are accounted for using the purchases method in the General Fund. Under the purchases method, inventories are recorded as expenditures when purchased; however, material amounts of inventories are reported as assets. Non-spendable fund balance for the amount of General Fund inventories has been reported in the governmental fund statements to reflect the non-availability of those amounts for appropriation or expenditure.

Capital Assets

Capital assets of governmental funds are recorded in the statement of net position at historical cost or at estimated historical cost if actual historical cost is not available. Donated capital assets are recorded at the acquisition value at the date of donation. The County’s capitalization levels are $5,000 for individual vehicles, machinery and equipment, and $25,000 for buildings and infrastructure. The costs of normal maintenance and repairs that do not add value to the asset or materially extend the asset’s life are not capitalized. An allowance for depreciation has

A-34 BALTIMORE COUNTY, MARYLAND NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017 been provided using the straight-line method over the estimated useful life. The estimated useful lives range from two to fifteen years for vehicles, machinery and equipment, twenty to fifty years for buildings, and twenty to seventy- five years for infrastructure. Major outlays for the construction of buildings and infrastructure are capitalized as constructed. Interest is capitalized during the construction of business-type activities capital assets as it is incurred.

Deferred Outflows/Inflows of Resources

A deferred outflow of resources represents a consumption of net position that applies to a future period and so will not be recognized as an outflow of resources (expense) until the future period. At June 30, 2017, the County had deferred outflows of resources for deferred charges on bond refundings and for changes in activity, experience, assumptions and contributions related to the County Employees Retirement System and Police, Fire and Widow Pension Plan.

A deferred inflow of resources represents an acquisition of net position that applies to a future period and so will not be recognized as an inflow of resources (revenue) until that time. At June 30, 2017, the County had deferred inflows of resources related to the difference between actual and expected experience and the difference between projected and actual earnings on investments of the County pension plans.

Outstanding Claims

The outstanding claims liability includes estimates for all known workers' compensation, personal injury, property damage and health claims and an estimate for claims incurred but not reported at June 30, 2017.

Compensated Absences

County employees are granted vacation, personal, and sick leave in varying amounts. In the event of termination, an employee is reimbursed for accumulated vacation and personal leave days up to a certain maximum depending on employment classification. Employees are not reimbursed for accumulated sick leave. Payments made to terminated employees for accumulated leave are charged as expenditures/expenses, primarily in the General Fund, Special Revenue Funds, and Proprietary Funds, when paid. Accumulated vacation, personal leave and compensatory time benefits at year-end are recorded as obligations in the statement of net position and proprietary fund statements.

Restricted Net Position

The government-wide statement of net position reports $49.922 million of restricted net position, of which $19.756 million is restricted by enabling legislation.

Governmental Funds’ Fund Balance

Fund balance classifications comprise a hierarchy based primarily on the extent to which the County is bound to observe constraints imposed upon the use of the resources reported in governmental funds. Fund balance amounts are properly reported within one of the fund balance categories listed below:

Non-spendable – Includes fund balance amounts that cannot be spent because they are either (1) not in spendable form or (2) legally or contractually required to be maintained intact, such as a permanent fund. Not in spendable form includes items that are not expected to be converted to cash, such as inventories and prepaid items.

Restricted – Includes amounts that are restricted to a specific purpose when constraints are placed on the use of resources by constitution, external resource providers, or through enabling legislation.

Committed – Includes fund balance amounts that can be used only for the specific purposes determined by formal action of the County’s highest level of decision-making authority. The County Council is the

A-35 BALTIMORE COUNTY, MARYLAND NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017

highest level of decision-making authority for the County that can commit fund balance by adoption of a Council bill prior to fiscal year end. Similar action of the County Council is required to modify or rescind such commitments.

Assigned – Includes fund balance amounts that are intended to be used by the County for specific purposes as determined by the County Executive or County Administrative Officer in accordance with County Charter. Additionally, in accordance with Section 715 of the County Charter on certification of funds availability, the Director of Budget & Finance may assign fund balance for contractual commitments encumbered prior to year-end. Constraints imposed on the use of assigned amounts do not rise to the level required to be classified as either restricted or committed.

Unassigned – Represents the residual classification for the County’s funds and includes all spendable amounts not contained in the four classifications described above. Unassigned fund balance can only be used in the General fund or, if negative, in other governmental funds.

Order of Fund Balance Spending Policy

The County has established a fund balance spending policy for those instances where an expenditure is incurred for a purpose for which amounts in any of the restricted or unrestricted fund balance classifications (committed, assigned, or unassigned) could be used. The County will apply expenditures against restricted amounts first, followed by the committed, assigned and unassigned amounts.

Amounts reported as encumbrances may be classified as either restricted, committed or assigned depending on the constraints and approval in place at year end. Encumbrances outstanding at year-end are reported as assignments of fund balance in the General Fund and Special Revenue Funds and do not constitute expenditures or liabilities because the obligation will be honored during the subsequent year.

Revenue Stabilization Account

Section 10-8-101 of the County Code gives the County the authority to establish and maintain a Revenue Stabilization Account (the Account) to provide financial resources for unanticipated decreases in revenues, primarily intergovernmental revenues. The General Fund Unassigned Fund Balance includes $99.360 million that the County has set aside in the Account. Revenues in excess of estimates and any unexpended appropriations at the close of the fiscal year shall be transferred to the Account if the Account balance does not exceed five percent of the current fiscal year General Fund budgeted revenue after interest is credited to the Account. The Director of Budget and Finance shall notify the County Executive and County Council that a funds availability deficit exists in the General Fund at the end of any fiscal year and request that sufficient monies to the extent available be transferred from the Account to eliminate the deficit. Funds in the Account are not to be used for any other purpose except upon the recommendation of the County Executive and approval of a majority plus one of the County Council.

Pensions

For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions and pension expense, information about the fiduciary net position of the County’s pension plans (Employees’ Retirement System Plan and Police, Fire and Widows’ Pension Plan) and additions to/deductions from their respective fiduciary net position have been determined on the same basis as they are reported by each pension plan. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value.

A-36 BALTIMORE COUNTY, MARYLAND NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017

2. RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS (expressed in thousands):

Explanation of certain differences between the governmental fund balance sheet and the government-wide statement of net position.

The governmental fund balance sheet includes a reconciliation between fund balance – total governmental funds and net position – governmental activities as reported in the government-wide statement of net position. One element of the reconciliation explains that “Long-term liabilities, including bonds payable, are not due and payable in the current period and therefore are not reported in the funds.” The details of this $4,036,966 difference are as follows:

General obligation debt $ 1,821,096 Certificates of participation and loan payable 132,911 Add: Issuance premium (to be amortized as a reduction to interest expense) 122,600 Less: Issuance discount (to be amortized as interest expense) (1,313) Less: Deferred charge on refunding (to be amortized as interest expense) (17,843) Accrued interest payable 30,025 Compensated absences 68,031 Other post employment benefits liability 228,018 Net pension liability 1,585,895 Disputed taxes 49,969 Estimated landfill closing costs 17,577 Net adjustment to reduce fund balance - total funds to arrive at net position of governmental activities $ 4,036,966

Explanation of certain differences between the governmental fund statement of revenues, expenditures, and changes in fund balances and the government-wide statement of activities.

The governmental fund statement of revenues, expenditures, and changes in fund balances includes a reconciliation between net changes in fund balances – total governmental funds and changes in net position of governmental activities as reported in the government-wide statement of activities. One element of the reconciliation explains that “Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense.” The details of this $45,308 difference are as follows:

Capital outlay $ 125,292 Depreciation expense (79,984)

Net adjustment to increase net changes in fund balances - total governmental funds to arrive at changes in net position of governmental activities $ 45,308

Another element of the reconciliation states that “The net effect of various transactions involving capital assets (i.e., sales, trade-ins, and donations) is to increase net position.” The details of this $11,173 difference are as follows:

A-37 BALTIMORE COUNTY, MARYLAND NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017

In the statement of activities, only the gain/(loss) on the sale or disposal of capital assets is reported. However, in the governmental funds, the proceeds from the sale increases financial resources. Thus, the change in net position differs from the change in fund balance by the net book value of the capital assets sold. $ (425)

Donations and transfers in of capital assets increase net position in the statement of activities, but do not appear in the governmental funds because they are not financial resources. 11,598

Net adjustment to increase net changes in fund balances - total governmental funds to arrive at changes in net position of governmental activities. $ 11,173

Another element of the reconciliation states that “The issuance of long-term debt (e.g., bonds, certificates of participation) provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net position. Also, governmental funds report the effect of issuance costs, premiums, discounts, and similar items when debt is first issued, whereas these amounts are deferred and amortized in the statement of activities.” The details of this $(237,718) difference are as follows:

Debt issued or incurred: General obligation debt $ (364,800) Certificates of participation and loans (60,901) Add: premium (26,882) Principal repayments: General obligation debt 194,172 Certificates of participation and loans 20,693 Net adjustment to decrease net changes in fund balances - total governmental funds to arrive at changes in net position of governmental activities $ (237,718)

Another element of the reconciliation states that “Some expenses reported in the statement of activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds.” The details of this $(32,890) difference are as follows:

A-38 BALTIMORE COUNTY, MARYLAND NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017

Increase in compensated absences (2,579)$ Increase in accrued interest (5,553) Increase in other post employment benefits liability (45,801) Increase in landfill closure and post-closure costs (784) Amortization of deferred charge on refunding (2,044) Amortization of premiums 23,984 Amortization of discounts (113)

Net adjustment to decrease net changes in fund balances - total governmental funds to arrive at changes in net position of governmental activities (32,890)$

3. CASH, INVESTMENTS AND SECURITIES LENDING:

The County maintains a cash and investment pool that is available for use by all funds, except for the fiduciary funds. Each fund’s portion of this pool is reported on the statement of net position as “Cash and investments.” The fiduciary funds investments are held and managed separately from those of other County funds.

Deposits The County maintains cash balances, which are covered by FDIC insurance and collateral held at the Federal Reserve in the County’s name. The component units’ cash in banks are covered either by FDIC insurance or the County’s blanket collateral coverage. At June 30, 2017, the carrying amounts of cash for the primary government and its component units were $(0.950) million and 18.662 million respectively.

Investments Internal Investment Pool (the “Pool”) - The County has adopted an investment policy to invest public funds in a manner which will provide the highest investment return with the maximum security while meeting the cash flow demands of the County and conforming to all state and local statutes governing the investment of public funds. Permissible investments include U.S. Government obligations, U.S. Government agency obligations, money market mutual funds, repurchase agreements, banker’s acceptances, commercial paper (no more than 10% of the portfolio) and the Maryland Local Government Investment Pool (MLGIP) that is administered by the State Treasurer. Repurchase agreements are collateralized according to Maryland State Investment Code and marked to market daily.

The MLGIP was established under the Annotated Code of Maryland and is rated AAAm by Standard and Poors, their highest rating for money market funds. MLGIP is a 2a7 like pool, which is not registered with the Securities and Exchange Commission (SEC), but generally operates in a manner consistent with the SEC’s Rule 2a7 of the Investment Company Act of 1940 (Rule 2a7). Unit value is computed using the amortized cost method and maintains a $1 per share value.

Pension Trust Funds and Other Post Employment Benefits (“OPEB Plan”) – As provided in Article 5, Title 1 and § 10-14-106 of the Baltimore County Code, the Board of Trustees of the Employees’ Retirement System (the “System”) is empowered to invest the System’s and the OPEB Plan’s assets jointly and to take appropriate action regarding the investment, management and custodianship of the System’s and the OPEB Plan’s assets. The System’s and the OPEB Plan’s investment policy targets 27% in U.S. equities, 22% in international equities, 24% in core-plus fixed income investments, 5% in real estate equity, 7% in private equities and 15% in Global Asset Allocation Funds. Certain System and the OPEB Plan’s investment managers have invested in the following types of instruments: asset backed securities, warrants, variable rate securities and interest rate swaps, U.S. Treasury interest and principal strips, U.S. Treasury futures and options, and collateralized mortgage obligations. The System’s and the OPEB Plan’s fixed income managers primarily acquire these types of instruments to increase

A-39 BALTIMORE COUNTY, MARYLAND NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017 investment yield and/or decrease investment risk. The Police, Fire and Widows’ Pension Plan (the "Pension Plan") invests 70% in fixed income securities and 30% in equities.

Investments for the primary government as of June 30, 2017 are as follows (in thousands):

The System Total Primary Government Pension Primary Investments The Pool Plan A Plan B OPEB Plan Plan Government

U.S. securities and agencies Not on securities loan $ 71,548 $ 124,678 $ 3,802 $ 19,935 -$ $ 219,963 On securities loan for securities or cash collateral - 3,907 119 625 - 4,651 MLGIP 275,888 - - - - 275,888 Municipal bonds - 2,021 62 323 5,216 7,622 Foreign bonds - 6,095 186 974 6,964 14,219 Corporate bonds Not on securities loan - 115,795 3,532 18,515 - 137,842 On securities loan for securities or cash collateral - 367 11 59 - 437 Bond mututal funds - 372,232 11,352 59,517 5,541 448,642 Money market funds 69,580 32,760 999 5,238 6 108,583 Real estate equity funds - 135,584 4,135 21,679 - 161,398 Stocks Not on securities loan - 472,208 14,402 75,502 - 562,112 On securities loan for securities or cash collateral - 57,121 1,742 9,133 - 67,996 Stock mutual funds - domestic - 417,788 12,742 66,801 6,832 504,163 Stock mutual funds - international - 385,450 11,755 61,630 3,286 462,121 Hedge funds - 698 21 112 - 831 Private equity funds - 115,816 3,532 18,518 - 137,866 Global Asset Allocation fund - 388,907 11,861 62,183 - 462,951 Securities lending short-term collateral investment pool - 21,227 648 3,394 - 25,269 Total $ 417,016 $ 2,652,654 $ 80,901 $ 424,138 $ 27,845 $ 3,602,554

Component units’ investments of $105.826 million include $90.534 million of MLGIP and $15.292 million of money market funds.

Securities Lending Transactions - The System’s, the OPEB Plan’s and the Pension Plan’s policies authorize the lending of their securities to broker-dealers and other entities with a simultaneous agreement to return the collateral for the same securities in the future. The System’s, the OPEB Plan’s and the Pension Plan’s custodian may lend U.S. government and agency securities, corporate bonds and stocks for collateral in the form of cash, other securities and irrevocable bank letters of credit. Collateral securities, letters of credit and cash are initially pledged at 102% of the fair value of the securities lent. Additional collateral is to be provided by the next business day if the collateral value falls to less than 100% of the fair value of the securities lent. The System, the OPEB Plan and the Pension Plan did not impose any restrictions during the fiscal year on security loans the custodian made on its behalf. The System, the OPEB Plan and the Pension Plan at year-end had no credit risk exposure to borrowers because the amounts owed to borrowers exceed the amounts the borrowers owe. The System, the OPEB Plan, the Pension Plan or the borrower can terminate securities loans on demand. Cash collateral is invested in the lending agent’s short-term investment pool, which at year-end had a weighted average maturity of 4 days. The System, the OPEB Plan and the Pension Plan cannot pledge or sell collateral securities received unless the borrower defaults. The collateral held and the fair value of securities on loan as of June 30, 2017 totaled $74.713 million and $73.085 million, respectively.

A-40 BALTIMORE COUNTY, MARYLAND NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017

The following is a listing of the Pool’s, the OPEB Plan’s and the Pension Trust Funds’ fixed income investments of bonds, short-term investments and related maturity schedule (in thousands):

Investment Maturities (in years)

Investment Type Fair Value Less than 1 1 - 4.9 5 - 9.9 10 - 19.9 20 - 30 More than 30 The Pool U.S. Government Obligations$ 347,436 345,789$ -$ 1,621$ $ 26 -$ -$

The System - Plan A U.S. Government Obligations$ 52,289 $ 2,788 10,896$ $ 12,286 $ 2,367 $ 20,514 $ 3,438 U.S. Agency Securities 76,296 8,868 12,508 21,648 14,290 10,948 8,034 Municipal Bonds 2,021 - - - 319 1,702 - Corporate Debt 116,162 25,922 53,916 15,582 4,598 7,728 8,416 Bond Mutual Funds 372,232 - 80,789 291,443 - - - Foreign Debt 6,095 3,964 541 551 216 772 51 Total 625,095 41,542 158,650 341,510 21,790 41,664 19,939

The System - Plan B U.S. Government Obligations 1,595 85 332 375 72 626 105 U.S. Agency Securities 2,326 270 381 660 436 334 245 Municipal Bonds 62 - - - 10 52 - Corporate Debt 3,543 791 1,644 475 140 236 257 Bond Mutual Funds 11,352 - 2,464 8,888 - - - Foreign Debt 186 121 15 17 7 24 2 Total 19,064 1,267 4,836 10,415 665 1,272 609

OPEB Plan U.S. Government Obligations 8,360 446 1,742 1,964 378 3,280 550 U.S. Agency Securities 12,200 1,418 2,000 3,461 2,285 1,751 1,285 Municipal Bonds 323 - - - 51 272 - Corporate Debt 18,574 4,145 8,621 2,491 735 1,236 1,346 Bond Mutual Funds 59,517 - 12,918 46,599 - - - Foreign Debt 974 634 86 88 35 123 8 Total 99,948 6,643 25,367 54,603 3,484 6,662 3,189

Pension Plan Loan 5,216 5,216 - - - - - Bond Mutual Funds 5,541 - - 5,541 - - - Foreign Debt 6,964 - 2,478 - - - 4,486 Total 17,721 5,216 2,478 5,541 - - 4,486 Total Primary Government$ 1,109,264 $ 400,457 191,331$ $ 413,690 $ 25,965 $ 49,598 $ 28,223

Interest Rate Risk – To the extent possible, the Pool attempts to match investments with anticipated cash flow requirements. Unless matched to specific cash flow, the Pool will not directly invest in securities maturing more than one year from the date of purchase. The Pension Trust Funds’ and the OPEB Plan’s policy guidelines do not address limits on investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates.

Credit Risk – The Pool’s, the Pension Trust Funds’ and the OPEB Plan’s investment policies are to apply the prudent-person rule: Investments are made as a prudent person would be expected to act with discretion and

A-41 BALTIMORE COUNTY, MARYLAND NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017 intelligence, to seek reasonable income, preserve capital and in general, avoid speculative investments. As of June 30, 2017, the Pension Trust Funds’ and the OPEB Plan’s fixed income investments had the following risk characteristics:

The System - Plan A The System - Plan B OPEB Plan Pension Plan Moody's Percent of Fair Value Percent of Fair Value Percent of Fair Value Percent of Fair Value Rating or Total (in Total (in Total (in Total (in Comparible Investments thousands) Investments thousands) Investments thousands) Investments thousands) AAA 22.7% 142,143$ 22.7%$ 4,335 22.7%$ 22,728 0.0% -$ AA 1.4% 9,003 1.4% 275 1.4% 1,439 0.0% - A 6.7% 42,074 6.7% 1,283 6.7% 6,727 0.0% - BBB 6.2% 38,861 6.2% 1,185 6.2% 6,214 0.0% - BB 0.7% 4,431 0.7% 135 0.7% 709 0.0% - B 0.2% 1,177 0.2% 36 0.2% 188 0.0% - CCC 0.2% 964 0.2% 29 0.2% 154 0.0% - CC 0.2% 1,368 0.2% 42 0.2% 219 0.0% - Not Rated 61.7% 385,074 61.7% 11,744 61.7% 61,570 100.0% 17,721 Total 100.0% 625,095$ 100.0%$ 19,064 100.0%$ 99,948 100.0% 17,721$

The Pool’s fixed income investments of $347,436 were invested 100% in AAA rated investments.

Foreign Currency Risk – The System’s and the OPEB Plan’s exposure to foreign currency risk is derived from its positions in foreign currency-denominated common stock and fixed asset investments. Managers are allowed to use derivatives to hedge out foreign currency, however, there is no formal policy regarding foreign currency risk. The System’s and the OPEB Plan’s exposure to foreign currency risk is as follows:

Fair Value (in thousands) The System Currency Plan A Plan B OPEB Plan Total Australian Dollar $ 7,225 $ 220 $ 1,155 $ 8,600 Brazil Real 686 21 110 817 Canadian Dollar 1,936 59 310 2,305 Danish Krone 4,167 127 666 4,960 Euro Currency Unit 74,371 2,268 11,891 88,530 Hong Kong Dollar 12,808 391 2,048 15,247 Israeli Shekel 792 25 126 943 Japanese Yen 49,800 1,519 7,963 59,282 New Taiwan Dollar 1,530 47 245 1,822 New Zealand Dollar 336 10 54 400 Norwegian Krone 1,366 42 218 1,626 Pound Sterling 21,680 661 3,466 25,807 Singapore Dollar 3,507 107 561 4,175 South African Rand 240 7 38 285 South Korean Won 7,280 222 1,164 8,666 Swedish Krona 4,602 140 736 5,478 Swiss Franc 13,947 425 2,230 16,602 Thailand Baht 267 8 43 318 Turkish Lira 623 19 100 742 $ 207,163 $ 6,318 $ 33,124 $ 246,605

A-42 BALTIMORE COUNTY, MARYLAND NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017

Futures contracts are standardized, exchange-traded contracts to purchase or sell a specific financial instrument at a predetermined price. Gains and losses on futures contracts are settled daily based on a notional (underlying) principal value and do not involve an actual transfer of the specific instrument. The System and the OPEB Plan entered into certain futures contracts of which the notional value at June 30, 2017 was $16.009 million.

The System and the OPEB Plan utilizes certain derivative instruments for the purpose of obtaining income or profit. The derivatives are subject to credit risks, interest rate risk, and foreign currency risk. The fair value balances and notional amounts of derivative instruments outstanding at June 30, 2017, classified by type and the changes in fair value of such derivative instruments for the year then ended are as follows:

Changes in Fair Value (expressed in Fair Value as of June 30, 2017 (expressed thousands) in thousands)

Investment Derivatives Classification Amount Amount Notional Value The System - Plan A Futures Investment revenue -$ $ (8) $ 13,448 Options Investment revenue 61 60 (6,208) Swaps Investment revenue 169 196 (6,164) Mortgage Derivatives Investment revenue (177) 776 776 TBA Transactions Investment revenue (44) 9,827 9,827

The System - Plan B Futures Investment revenue -$ $ - $ 410 Options Investment revenue 2 2 (189) Swaps Investment revenue 6 6 (188) Mortgage Derivatives Investment revenue (5) 24 24 TBA Transactions Investment revenue (1) 300 300

OPEB Plan Futures Investment revenue -$ $ (1) $ 2,151 Options Investment revenue 10 10 (993) Swaps Investment revenue 26 31 (985) Mortgage Derivatives Investment revenue (28) 124 124 TBA Transactions Investment revenue (7) 1,571 1,571

Rationale for derivative strategies: The purpose of using futures and options is to hedge the portfolio to reduce risk and adjust exposure along the yield curve. A short position in total options reduces the portfolio's convexity in exchange for higher yield. A long position increases convexity in exchange for lower yields. The effect of long and short treasury notes and bond futures is to shift the portfolio's duration to its target position. The combined effect of Eurodollar and Euribor futures and options is to adjust exposure to the front portion of the yield curve. Long and short call and put options on notes and bond futures are used to adjust portfolio convexity in exchange for higher yields. Credit default indices and credit default swaps on individual names are used as an efficient, low cost way of adjusting credit exposure on the margin.

Interest rate swaps are used to adjust interest rate exposure and/or as a substitute for the physical security.

A-43 BALTIMORE COUNTY, MARYLAND NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017

Foreign currency futures, forwards or options are purchased or sold to gain or increase exposure to various currency markets and/or to hedge against foreign currency fluctuations.

Fair Value Measurement - Investments measured and reported at fair value are classified according to the following hierarchy: Level 1 – Investments reflect prices quoted in active markets for identical assets or liabilities. Level 2 – Investments reflect prices that are observable for the asset or liability, whether directly or indirectly, which may include inputs in markets that are not considered to be active. Level 3 – Investments reflect prices based upon unobservable sources, where there is little, if any market activity.

A-44 BALTIMORE COUNTY, MARYLAND NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017

The following table presents the primary government’s recurring fair value measurements as of June 30, 2017

INVESTMENT VALUATION (in Thousands) Fair Value Measurement Using Quoted Prices in Significant Active Markets Other Significant for Identical Observable Unobservable 6/30/2017 Assets Inputs Inputs Investments by Fair Value Level Fair Value Level 1 Level 2 Level 3 Fixed Income: U.S. Government Obligations $ 131,371 $ 119,960 $ 11,411 $ - U.S. Securities and Agencies 80,778 889 79,889 - Municipal bonds 7,622 - 7,622 - Corporate bonds 138,131 - 130,474 7,657 Foreign bonds 13,914 - 9,198 4,716 Total Debt Securities 371,816 120,849 238,594 12,373

Equity Securities: Domestic 382,399 382,399 - - International 247,709 247,709 - - Total Equity Securities: 630,108 630,108 - -

Securities Lending Cash Collateral 25,269 - 25,269 - Total Investments by Fair Value Level 1,027,193 750,957 263,863 12,373

Investments Measured at the Net Asset Value (NAV): Commingled Fixed Income Funds 448,642 Commingled Domestic Equity 504,163 Commingled International Equity 462,121 Real Estate Funds 161,398 Hedge Fund of Funds 831 Private Equity Funds 137,866 Global Asset Allocation 462,951 Total Investments Measured at the NAV 2,177,972

Investments Derivative Instruments: Futures (9) (9) - - Options 72 72 - - Swaps 233 - 233 - Mortgage Derivatives 924 - 924 - TBAs 11,698 - 11,698 - Total Investments Derivative Instruments$ 12,918 $ 63 $ 12,855 $ -

Total Investments by Fair Value Level$ 3,218,083

The categorization of investments within the hierarchy is based upon the pricing transparency of the instrument and should not be perceived as the particular investment’s risk.

Debt, equities, and investment derivatives classified in Level 1 of the fair value hierarchy are valued based on prices quoted in active markets for those securities, such as the New York Stock Exchange or the Nasdaq stock market. Investments classified in Level 2 of the fair value hierarchy are valued using a matrix pricing technique, which is based on the securities’ relationship to benchmark quoted prices. Derivative instruments classified in Level 2 of the fair value hierarchy are valued using a market approach that considers benchmark interest rates and foreign exchange rates. Securities classified in Level 3 of the fair value hierarchy are valued using unobservable inputs for the asset or liability.

A-45 BALTIMORE COUNTY, MARYLAND NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017

Investments in Entities That Calculate Net Asset Value Per Share - The fair values of investments in certain equity, fixed income, and marketable alternatives funds are based on the investments’ net asset value (NAV) per share (or its equivalent) of the Pool’s, the System’s and the OPEB Plan’s ownership interest in the partners’ capital provided by the investee. The fair values of investments in certain private equity funds have been determined using recent observable transaction information for similar investments and nonbinding bids received from potential buyers of the investments.

The following table presents the primary government’s unfunded commitments, redemption terms and investments measured at the NAV as of June 30, 2017.

Redemption Investments Measured at the Unfunded Redemption Notice NAV (expressed in thousands) Fair Value Strategy Type Commitments Frequency Period

Loomis Sayes Strategic Alpha $ 96,171 Absolute Return - Semi-monthly 15 days Loomis Sayes Credit Asset 34,501 High Yield Debt - Semi-monthly 15 days Pimco Diversified Income 188,073 Global, High Yield , Emg. Mkt. - Daily 1 day Pimco Total Return Fund 5,541 Core Plus - Daily 1 day Stone Harbor Local Market 124,356 Emerging Market Debt - Daily 1 day (a) Commingled Fixed Income Funds 448,642

Benchmark 41,336 Portable Alpha - Annually 90 days Blackrock US Equity 462,827 Wilshire 5000 Index - Daily 3 days (b) Commingled Domestic Equity 504,163

Blackrock ACWI Ex-US 142,087 All Country World Ex US Index - Daily 5 days Mondrian Emerging Markets 284,994 Emerging Market Equity - Monthly 15 days Strategic Global Advisors 35,040 MSCI World ex USA Small Cao - Daily 5 days (c) Commingled International Equity 462,121

Aslan Realty Partners 156 Opportunistic Real Estate - N/A N/A JP Morgan 47,569 Value Added Real Estate - Monthly 15 days Clarion Lion 56,917 Core Real Estate - Quarterly 90 days UBS Real Estate 56,756 Core Real Estate - Quarterly 60 days (d) Real Estate Funds 161,398

EIM Management Alternative 641 Hedge Fund-of-Funds - N/A N/A Federal Street Offshore 190 Hedge Fund-of-Funds - N/A N/A (e) Hedge Fund of Funds 831

(f) Private Equity 137,866 Private Equity 72,238 N/A N/A

Bridgewater All Weather 155,890 Risk Parity - Monthly 5 days Mellon EB DV Global Alpha 1 138,473 Global Asset Allocation - Daily 3 days Wellington WTC-CIF Opportunistic 168,588 Global Asset Allocation - Monthly 30 days (g) Global Asset Allocation 462,951

Total Investments Measured at NAV$ 2,177,972

A-46 BALTIMORE COUNTY, MARYLAND NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017

Investments measured at the NAV above comprise of the following:

(a) Commingled Fixed Income Funds – This type includes investments in five funds, utilizing a variety of strategies which include Absolute Return, High Yield Debt and Emerging Market Debt. Three of the funds may be redeemed daily and the other two funds may be redeemed semi-monthly. The fair value of the investments in this type has been determined using the NAV per share (or its equivalent) of the investments.

(b) Commingled Domestic Equity Funds – This type includes two funds with investments in U.S. common stocks. The strategy type employed are Portable Alpha and the Wilshire 5000 index. The fund utilizing the Portable Alpha strategy may only be redeemed annually with a redemption notice period of ninety days. The fund utilizing the Wiltshire 5000 index strategy may be redeemed daily with a redemption notice period of three days. The fair value of the investments in this type has been determined using the NAV per share (or its equivalent) of the investments.

(c) Commingled International Equity Funds – This type includes two funds. One of the funds utilizes the All Country World Ex-US Index, with a daily redemption frequency and a redemption notice period of five days. The second fund utilizes an Emerging Market Equity strategy with a monthly redemption frequency and a redemption notice period of fifteen days. The fair value of the investments in this type has been determined using the NAV per share (or its equivalent) of the investments.

(d) Real Estate Funds – This type includes four funds that invest primarily in U.S. commercial real estate. The fund utilizing the Opportunistic Real Estate strategy is a closed fund. It is expected the assets will be liquidated over five to ten years. The strategy type for two of these funds is Core Real Estate and the fourth fund employs a Value Added Real Estate strategy. The fair value of the investments in this type has been determined using the NAV per share (or its equivalent) of the investments.

(e) Hedge Fund of Funds – This type includes two funds. These funds are in liquidation. The fair value of the investments in this type has been determined using the NAV per share (or its equivalent) of the investments.

(f) Private Equity Funds – This type includes thirty two funds whose investments are not publicly traded on a stock exchange. These investments cannot be redeemed with the funds. Instead, the nature of the investments in this type is that distributions are received through the liquidation of the underlying assets of the fund. If these investments were held, it is expected that the underlying assets of the fund would be generally liquidated over ten years. The fair values of the investments in this type have been determined using the NAV per share (or its equivalent) of the Plan’s ownership interest in partners’ capital.

(g) Global Asset Allocation – This type includes three funds. One fund utilizes the Risk Parity strategy and the other two funds employ Global Tactical Asset Allocation (GTAA). GTAA is designed to balance risk by investing in a variety of asset classes through active management. Funds may be invested in global equities, bonds and commodities. One fund allows daily redemptions with a redemption notice period of three days. The other two funds allow only monthly redemptions. The redemption period is five and thirty days, respectively. The fair value of the investments in this type has been determined using the NAV per share (or its equivalent) of the investments.

4. PROPERTY TAX:

The major portion of the County's property tax is levied each July 1 on the assessed value listed as of that date for all real and personal property located in the County.

Assessed values are established by the Maryland Department of Assessments and Taxation at one hundred percent of estimated market value. The assessed value of taxable real and personal property in the County for fiscal year 2017 was $82.1 billion.

The property tax rate for the year ended June 30, 2017 was $1.10 for real property and $2.75 for personal property

A-47 BALTIMORE COUNTY, MARYLAND NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017 per $100 of assessed valuation. The current tax collections for the year were 99.6% of the tax levied. Property taxes are recorded as receivables in the General Fund at the levy date with appropriate allowances for estimated uncollectible amounts as described in Note 5.

The full year property tax calendar is as follows: *July 1 - Full year levy assessed for current fiscal year. *July 31 - Bills paid during July are granted a 1% discount. August 31 - Bills paid during August are granted a ½% discount. September 30 - First semiannual installment is due if eligible property owners elect the semiannual payment option for real property taxes. October-April - Delinquent taxes accrue interest at the rate of 1% a month from October 1 to date of payment December 1 - Second installment due on real property taxes if paying on a semiannual basis. June - Delinquent real properties are sold at the annual tax sale.

*A 1% discount is granted if paid within 30 days, for bills dated other than July.

5. RECEIVABLES (in thousands):

Receivables as of June 30, 2017 for the County’s major funds and Internal Service Funds in the aggregate, including the applicable allowances for uncollectible accounts, are as follows:

Governmental Activities Gifts Consolidated Nonmajor and Public Improvement and Internal Metropolitan Total General Grants Construction Service District Receivables Property taxes $ 9,879 -$ $ - -$ $ - $ 9,879 Accounts 43,412 - - 3,256 1,176 47,844 Intergovernmental 134,446 25,021 2,038 - 6,281 167,786 Assessments 164 - 2,707 158 108,233 111,262 Loans 599 67,738 - - - 68,337 Interest 77 - - - - 77 Total receivables 188,577 92,759 4,745 3,414 115,690 405,185 Allowance for uncollectible accounts (2,721) (31,720) - - - (34,441) Net total receivables $ 185,856 $ 61,039 $ 4,745 $ 3,414 $ 115,690 $ 370,744 Amounts not scheduled for collection during the subsequent year $ 73 $ 34,864 $ 1,990 -$ $ 94,363 $ 131,290

At June 30, 2017, the County has recorded $67.738 million of outstanding loans receivable in the Gifts and Grants Fund. Of these receivables, $56.815 million are for loans made to residents and developers to acquire, rehab, or repair low-income housing units or to provide funds for settlement costs to qualified first-time home buyers under various federally funded financial assistance programs. Approximately $31.720 million of these loans are offset by an allowance for uncollectible accounts because collections are highly uncertain. In many cases, the loan repayment is forgiven if the resident/developer complies with certain federal requirements, which may include residing in the property for a stated number of years.

Governmental funds report deferred inflows of resources in connection with receivables for revenues that are not considered to be available to liquidate liabilities of the current period. Governmental funds also defer revenue recognition in connection with resources that have been received, but not earned. The various components of deferred inflows and unearned revenue reported in the governmental funds as of June 30, 2017 were as follows:

A-48 BALTIMORE COUNTY, MARYLAND NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017

Unavailable Unearned Total Property taxes $ 7,573 691$ 8,264$ Income taxes 75,937 - 75,937 Interest subsidy 840 - 840 Economic and community development loans 36,614 - 36,614 Special assessments not yet due 2,857 - 2,857 Grant funds received prior to meeting all eligibility requirements - 3,648 3,648 Total $ 123,821 4,339$ 128,160$

6. INTERFUND RECEIVABLES, PAYABLES, AND TRANSFERS (in thousands):

The composition of interfund balances as of June 30, 2017 is as follows:

Receivable fund Payable fund Purpose Amount General Consolidated Public Improvement Construction Deficit cash balance 43,626$ Total 43,626$

Interfund transfers for the fiscal year ended June 30, 2017 were as follows:

Transferred to

Consolidated Gifts Public and Improvement Transferred from General Grants Construction Total General -$ 6,673$ $ 155,530 $ 162,203 Gifts and Grants 372 - - 372 Consolidated Public Improvement Construction 1,045 3,957 - 5,002 Nonmajor Governmental Funds - 450 10,785 11,235 Metropolitan District 242 - - 242 Internal Service Funds 703 - - 703 Total transfers $ 2,362 $ 11,080 $ 166,315 $ 179,757

The transfers from the General Fund to the Consolidated Public Improvement Construction Fund (CPI) are pay-as- you-go funding for capital projects. Net transfers of $6.301 million between the General Fund and the Gifts and Grants Fund are County matching funds for grant funded programs. A transfer of $10.785 million from the Stormwater Management Fund to CPI is allocated for capital improvements to reduce stormwater runoff into the Chesapeake Bay. Transfers totaling $3.957 million from CPI to the Gifts and Grants Fund are contributions for loans and grants. The remaining transfers are various funding contributions for designated grant programs.

As of June 30, 2017, receivable and payable balances remained between the primary government and its discretely presented component units. These balances and transactions are a result of the primary government’s ongoing funding of the component units’ capital and operating costs. Receivables and payables between the primary government and the component units do not equal due to timing differences.

A-49 BALTIMORE COUNTY, MARYLAND NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017

7. CAPITAL ASSETS (in thousands):

A summary of the primary government’s changes in capital assets for the year ended June 30, 2017 is reported below:

Beginning Ending Balance Increases Decreases Balance Governmental activities Capital assets not being depreciated: Land $ 290,144 $ 1,109 $ (292) $ 290,961 Construction in progress 548,532 125,530 (63,839) 610,223 Total capital assets not being depreciated 838,676 126,639 (64,131) 901,184

Capital assets being depreciated: Buildings and improvements 527,036 34,250 - 561,286 Machinery and equipment 121,279 3,450 (5,232) 119,497 Vehicles 128,225 8,345 (5,277) 131,293 Infrastructure 2,531,117 32,598 (44) 2,563,671 Total capital assets being depreciated 3,307,657 78,643 (10,553) 3,375,747

Less accumulated depreciation for: Buildings and improvements (200,122) (13,781) - (213,903) Machinery and equipment (64,693) (8,571) 5,124 (68,140) Vehicles (81,187) (9,121) 5,106 (85,202) Infrastructure (1,339,022) (51,254) 1 (1,390,275) Total accumulated depreciation (1,685,024) (82,727) 10,231 (1,757,520)

Total capital assets being depreciated, net 1,622,633 (4,084) (322) 1,618,227

Governmental activities capital assets, net $ 2,461,309 $ 122,555 $ (64,453) $ 2,519,411

Beginning Ending Balance Increases Decreases Balance Business-type activites Capital assets not being depreciated: Land $ 1,317 -$ -$ $ 1,317 Construction in progress 230,876 64,321 (59,066) 236,131 Total capital assets not being depreciated 232,193 64,321 (59,066) 237,448

Capital assets being depreciated: Buildings and improvements 197,436 3,320 - 200,756 Machinery and equipment 1,309 - - 1,309 Vehicles 11,009 - (367) 10,642 Infrastructure 1,333,756 73,823 - 1,407,579 Total capital assets being depreciated 1,543,510 77,143 (367) 1,620,286

Less accumulated depreciation for: Buildings and improvements (88,354) (5,836) - (94,190) Machinery and equipment (650) (69) - (719) Vehicles (6,431) (899) 367 (6,963) Infrastructure (381,426) (24,262) - (405,688) Total accumulated depreciation (476,861) (31,066) 367 (507,560)

Total capital assets being depreciated, net 1,066,649 46,077 - 1,112,726

Business-type activities capital assets, net $ 1,298,842 $ 110,398 $ (59,066) $ 1,350,174

A-50 BALTIMORE COUNTY, MARYLAND NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017

Depreciation expense was charged to primary government functions as follows:

Governmental activities: General government $ 12,713 Public safety 6,077 Public works, which includes the depreciation of infrastructure assets 50,952 Health and human services 1,246 Culture and leisure services 8,979 Economic and community development 17 Capital assets held by the County's internal service funds is charged to the various activites based on their usage of the assets. 2,743 Total depreciation expense - governmental activities $ 82,727

Business-type activities: Water and sewer services, which include the depreciation of infrastructure assets $ 31,066 Total depreciation expense - business-type activities $ 31,066

A summary of the component units’ changes in capital assets is reported below:

Beginning Ending Balance Increases Decreases Balance Board of Education of Baltimore County Capital assets not being depreciated: Land 30,526$ -$ -$ 30,526$ Construction in progress 355,944 185,326 (295,171) 246,099 Total capital assets not being depreciated 386,470 185,326 (295,171) 276,625

Capital assets being depreciated: Buildings 1,752,489 288,969 - 2,041,458 Improvements other than buildings 98,512 3,202 - 101,714 Equipment and vehicles 154,597 13,368 (3,874) 164,091 Total capital assets being depreciated 2,005,598 305,539 (3,874) 2,307,263

Less accumulated depreciation (781,692) (73,112) 3,703 (851,101)

Total capital assets being depreciated, net 1,223,906 232,427 (171) 1,456,162

Board of Education capital assets, net 1,610,376$ 417,753$ (295,342)$ 1,732,787$

A-51 BALTIMORE COUNTY, MARYLAND NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017

Beginning Ending Balance Increases Decreases Balance The Community College of Baltimore County Capital assets not being depreciated: Land 4,798$ -$ -$ 4,798$ Construction in progress 3,286 7,544 (3,394) 7,436 Total capital assets not being depreciated 8,084 7,544 (3,394) 12,234

Capital assets being depreciated: Buildings and improvements 246,298 3,029 - 249,327 Infrastructure 27,814 366 - 28,180 Equipment and vehicles 25,595 2,167 (11) 27,751 Library materials 5,996 86 (2,961) 3,121 Total capital assets being depreciated 305,703 5,648 (2,972) 308,379

Less accumulated depreciation (133,243) (13,172) 2,972 (143,443)

Total capital assets being depreciated, net 172,460 (7,524) - 164,936

The Community College of Baltimore County capital assets, net 180,544$ 20$ (3,394)$ 177,170$

Beginning Ending Balance Increases Decreases Balance Board of Library Trustees for Baltimore County Capital assets being depreciated: Equipment and vehicles 8,633$ 57$ -$ 8,690$ Circulation materials 16,477 5,089 (5,620) 15,946 Total capital assets being depreciated 25,110 5,146 (5,620) 24,636

Less accumulated depreciation (15,488) (5,943) 5,620 (15,811)

Board of Library Trustees for Baltimore County capital assets, net 9,622$ (797)$ -$ 8,825$

8. LONG-TERM OBLIGATIONS:

The County’s principal long-term obligations are general obligation bonds and commercial paper bond anticipation notes (BANs) issued to finance the construction of county-wide public capital projects, water and sewer facilities within the County's Metropolitan District, and to finance pension obligations of the System and the Pension Plan. The County’s full faith, credit and unlimited taxing power are irrevocably pledged to the payment of the principal and interest of these bonds and notes.

Other long-term obligations include the accrued liability for vested compensated absences, estimated landfill closing costs, certificates of participation and loans payable. The County considers all non-proprietary funds vested compensated absences to be long-term debt. Of the primary government's general long-term debt, only the redemption of the BANs and the liability for landfill closing costs are expected to be paid with bond proceeds.

The County Charter authorizes the County Council by appropriate resolution to issue bonds, other than

A-52 BALTIMORE COUNTY, MARYLAND NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017

Metropolitan District bonds, up to a debt limit of 4% of the County’s assessable property base, and Metropolitan District bonds up to a debt limit of 3.2% of the District’s assessable property base. Information related to these limitations are as follows:

(in thousands) General Metropolitan Bonds District Legal limitation for the borrowing of funds and issuance of bonds$ 3,284,073 $ 2,333,883 General obligation debt outstanding applicable to debt limit 1,821,096 1,332,298

General obligation debt issuances require approval by voter referendum. Approved and unissued general obligation bonded debt totaled $798,088,347 as of June 30, 2017, comprised of $418,745,881 for public schools, $350,402,896 for public facilities and 28,939,570 for the Community College. Appropriated and unissued Metropolitan District bonded debt totaled $817,729,190 as of June 30, 2017.

General Obligation Bonds

On August 3, 2016, the County settled the issuance of $150 million Taxable General Obligation Pension Funding Bonds – 2016 Series. The Bonds are being issued to fund the present value of the increased liabilities of the portion of the Employees’ Retirement System of Baltimore County (the “System”) closed to new membership effective as of July 1, 2007 (Plan A) resulting from the reduction of the valuation rate by the Board of Trustees of the System from 6.75% to 6.375%. The proceeds of the Bonds were used to purchase investments for the benefit of the Plan A and to pay the underwriter’s discount and the cost of issuance of the Bonds. The Bonds are due July 1, in each of the years 2017 to 2036, inclusive, and 2046. The interest rates range from 0.600% to 3.303%. The Bonds are subject to redemption as a whole or in part, at any time, in any order of maturities, at the option of the County. The Bonds maturing July 1, 2046 are subject to mandatory sinking fund redemption in each of the years 2037 through 2046 inclusive.

On March 15, 2017, the County sold $199,100,000 General Obligation Bonds, consisting of $99,300,000 Metropolitan District Bonds – 78th Issue, for the payment of Baltimore County Metropolitan District Bond Anticipation Notes and $99,800,000 Consolidated Public Improvement Bonds 2017 Series, for the payment of Baltimore County Consolidated Public Improvement Bond Anticipation Notes. The Metropolitan District Bonds are due March 1, in each of the years 2019 to 2047, inclusive, and bear a true interest cost of 3.40%. The Consolidated Public Improvement Bonds are due March 1, in each of the years 2019 to 2037, inclusive, and bear a true interest cost of 2.96%.

General Obligation Bond Anticipation Notes (BANs)

On March 15, 2017, the County issued $346 million Fixed Rate (FR) BANs for the purpose of providing funds for capital improvement projects. Of the $346 million FR BANs, $121 million were issued as Consolidated Public Improvement (CPI) FR BANs, and $225 million were issued as Metropolitan District (MD) FR BANs, maturing on March 16, 2018. The true interest cost for the CPI FR BANs and the MD FR BANs was 0.90% and 0.85%, respectively.

Maryland Water Quality Financing Agreement

During fiscal year 2017, the County issued $51,063,684 in Metropolitan District Bonds through the Maryland Water Quality Revolving Loan Fund. The Fund subsidizes the interest rate on sewer and water projects. As of June 30, 2017, the balance outstanding was $154,703,541.

A-53 BALTIMORE COUNTY, MARYLAND NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017

General Obligation Bonds Defeasance

In prior years, the County defeased certain general obligation bonds by placing the proceeds of new bonds in an irrevocable trust to provide for all future debt service payments on the old bonds. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the County’s financial statements. As of June 30, 2017, $206,000,000 of bonds were refunded and are considered defeased.

Single Stream Recycling Loan

The County has a conditional purchase agreement with the Baltimore County Police, Fire and Widows Pension Plan that was used to finance a waste transfer station upgrade and to procure and install a single stream recyclables processing system at the County’s Resource Recovery Facility in Cockeysville, Maryland. The principal component of the loan is to be repaid monthly commencing July 1, 2014 through June 30, 2018. The interest component of the loan has been paid monthly at an annual rate of 7.875%. As of June 30, 2017, the balance of outstanding principal was $5,215,834.

Certificates of Participation

The County entered into a ten-year conditional equipment purchase agreement on September 27, 2016. The equipment consists of the acquisition of (i) heavy equipment and vehicles for use primarily in the County’s Public Works department, (ii) fire trucks, medic units, and public safety equipment, and (iii) information technology hardware for various departments including 911 equipment. The conditional purchase agreement was financed through the sale of certificates of participation in the aggregate principal of $63,715,000. The certificates of participation are due October 1, in each of the years 2017 to 2026, inclusive, and bear a true interest cost of 1.58%.

Other

The County issues debt to finance the construction of certain capital facilities of its component units and for major water and sewer projects done in conjunction with the City of Baltimore (the “City”), which decreases the “Unrestricted” net position component in the statement of net position. The following summarizes these situations where the County is reporting the debt in its financial statements, while the corresponding assets are reported by the other reporting entity.

• The Board of Education and the Community College have no authority to issue bonded debt. That authority rests with the County subject to voter approval. The County had $676.62 million of its net Consolidated Public Improvement general obligation bonds outstanding (net of unamortized premiums and deferred charges) that is related to capital facilities of the component units as of June 30, 2017.

• The Metropolitan District Act requires the City to provide water to the County’s Metropolitan District. The City also treats sewage from the Metropolitan District at cost. The County has agreed to pay the City on a pro-rata basis for construction of certain City owned sewer and water capital projects that serve the Metropolitan District. The County’s contributions towards these City owned facilities are funded primarily with bond proceeds. The County estimates 40.7% of its net Metropolitan District general obligation bonds outstanding or $555.454 million is related to these facilities as of June 30, 2017.

At June 30, 2017, the County has accrued $17.58 million of estimated closure and postclosure care costs for its one active landfill. State and federal laws require the County to place a final cover on its open landfill when it stops accepting waste in approximately 2052 and to perform certain maintenance and monitoring functions at the site for thirty years after closure. Although closure and postclosure costs generally will be paid only near or after the date that the landfill stops accepting waste, the County reports a portion of these costs as a liability in the Governmental Activities of the Statement of Net Position based on the landfill capacity used as of the end of the fiscal year. The amount included in the landfill closure and postclosure care costs liability at June 30, 2017 represents the

A-54 BALTIMORE COUNTY, MARYLAND NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017 cumulative unspent amount reported to date based on the use of 58.0% of the estimated landfill capacity. The County will recognize the remaining estimated cost of closure and postclosure care of $12.72 million as the remaining estimated capacity is filled. The actual cost may differ due to inflation, changes in technology, or changes in regulations. The County intends to finance these costs primarily with bond proceeds in its Consolidated Public Improvement Construction Fund.

Financial assurance provisions of federal regulations require owners and operators of municipal solid waste landfills to demonstrate that adequate funds will be readily available for the costs of closure, post closure care, and corrective action associated with their facilities. The County had demonstrated that it met the local government financial test assurance mechanism as of December 31, 2016 and has placed appropriate documents in the operating record of its active landfill.

The County has participated in the issuance of economic development revenue bonds to provide financial assistance to private sector entities for the acquisition and construction of industrial and commercial facilities. The County is not obligated in any manner for repayment of the bonds, and therefore they are not reported as liabilities in the financial statements. The aggregate outstanding principal amount as of June 30, 2017 for bonds issued prior to July 1, 1996 could not be determined, however, the original issue amounts approximate $418.87 million. The aggregate principal amount payable for bonds issued after July 1, 1996 was 203.28 million at June 30, 2017.

The State of Maryland allows Maryland residents who earn personal income in jurisdictions outside Maryland to take a credit against their Maryland State income taxes for the income taxes paid to other jurisdictions. Maryland has not allowed this credit against Maryland County or Municipal income taxes. A suit was brought against the State, the Wynne Case, asserting that this unequal treatment violated the Federal Commerce Clause. The State lost the case before the Maryland Court of Appeals and the U.S. Supreme Court has upheld that ruling. As a result, the State must allow credits against county income taxes. The impact to the County will be a loss of current revenues, as well as refunds of overpayments for the prior tax years which the state will recoup from income tax revenue distributions to the County over 20 quarters starting in May 2019. The County has recognized an estimated $49.969 million liability in its government-wide statements and has assigned $25.427 million of its General Fund fund balance for these refunds.

A-55 BALTIMORE COUNTY, MARYLAND NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017

Long-term liability activity for the year ended June 30, 2017 is as follows (in thousands):

Balance Balance Due Within July 1, 2016 Increases Decreases June 30, 2017 One Year Primary Government: Governmental activities: General obligation debt Consolidated public improvement bonds $ 1,311,740 $ 99,800 $ (88,185) $ 1,323,355 $ 94,040 Pension funding bonds 238,928 144,000 (6,187) 376,741 8,059 Bond anticipation notes 99,800 121,000 (99,800) 121,000 121,000 1,650,468 364,800 (194,172) 1,821,096 223,099 Add remaining original issue premium 113,801 14,932 (20,643) 108,090 - Less remaining original issue discount (1,426) - 113 (1,313) - Total general obligation debt 1,762,843 379,732 (214,702) 1,927,873 223,099

Certificates of participation 82,665 59,810 (14,780) 127,695 15,481 Add remaining original issue premium 5,901 11,950 (3,341) 14,510 - Total certificates of participation 88,566 71,760 (18,121) 142,205 15,481

Other long-term liabilities Loan payable 10,038 1,091 (5,913) 5,216 841 Compensated absences 65,734 59,130 (56,608) 68,256 66,277 Claims payable 58,297 284,381 (276,824) 65,854 36,506 Other post employment benefits 182,217 61,801 (16,000) 228,018 - Net pension liability 1,299,079 286,816 * - 1,585,895 - Disputed taxes 48,093 1,876 - 49,969 - Estimated landfill closing costs 16,793 784 - 17,577 - Total other long-term liabilities 1,680,251 695,879 (355,345) 2,020,785 103,624

Total governmental activities long-term liabilities $ 3,531,660 $ 1,147,371 $ (588,168) $ 4,090,863 $ 342,204

Business-type activities: General obligation debt Metropolitan District bonds $ 993,411 $ 150,364 $ (52,176) $ 1,091,599 $ 52,383 Pension funding bonds 9,957 6,000 (258) 15,699 336 Bond anticipation notes 99,300 225,000 (99,300) 225,000 225,000 1,102,668 381,364 (151,734) 1,332,298 277,719 Add remaining original issue premium 61,482 14,945 (8,837) 67,590 - Total general obligation debt 1,164,150 396,309 (160,571) 1,399,888 277,719

Certificates of participation 3,575 3,905 (625) 6,855 669 Add remaining original issue premium 300 780 (192) 888 - Total certificates of participation 3,875 4,685 (817) 7,743 669

Compensated absences 1,746 1,128 (1,048) 1,826 1,749 Net pension liability 36,236 12,798 * - 49,034 - Total business-type activities long-term liabilities $ 1,206,007 $ 414,920 $ (162,436) $ 1,458,491 $ 280,137

* Net increase is shown

A-56 BALTIMORE COUNTY, MARYLAND NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017

Balance Balance Due Within July 1, 2016 Increases Decreases June 30, 2017 One Year Component Units: Board of Education: Compensated absences $ 24,184 $ 14,746 $ (15,091) $ 23,839 $ 14,745 Capital leases 42,650 5,052 (9,026) 38,676 8,269 Caims payable 12,797 8,137 (7,407) 13,527 6,400 Net OPEB obligation 20,074 64,699 (44,068) 40,705 - Net pension liability 126,832 - (2,492) 124,340 - Total Board of Education 226,537 92,634 (78,084) 241,087 29,414 Community College: Compensated absences 6,753 16 - 6,769 4,189 Capital leases - 1,256 (306) 950 311 Net OPEB obligation 2,628 829 - 3,457 - Net pension liability 6,803 - (1,235) 5,568 - Total Community College 16,184 2,101 (1,541) 16,744 4,500 Board of Library Trustees: Compensated absences 1,062 34 - 1,096 1,096 Net OPEB obligation 2,003 246 - 2,249 - Net pension liability 2,478 - (305) 2,173 - Total Board of Library Trustees 5,543 280 (305) 5,518 1,096

Total component unit long-term liabilities $ 248,264 $ 95,015 $ (79,930) $ 263,349 $ 35,010

A-57 BALTIMORE COUNTY, MARYLAND NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017

General long-term debt currently outstanding as of June 30, 2017 is as follows:

Governmental Activities: ( in thousands) General Obligation Debt: Bonds Original Unamortized Carrying Maturity Interest Rate Issue Balance Premium/ Value Dated Range Range Amount 6/30/2017 (Discount) 6/30/2017 01/03/08 2009-2028 4.000 - 5.000 140,000 7,000 50 7,050 02/24/09 2009-2018 2.000 - 5.000 26,880 * 10,355 196 10,551 11/05/09 2010-2025 6.150 - 6.150 19,400 19,400 (1,313) 18,087 11/10/09 2010-2029 0.650 - 5.650 155,570 104,600 215 104,815 08/10/10 2011-2022 2.500 - 4.000 13,565 * 13,535 602 14,137 11/09/10 2012-2017 5.000 - 5.000 70,050 14,000 151 14,151 11/09/10 2012-2029 3.110 - 4.900 19,950 19,950 - 19,950 11/09/10 2018-2030 4.970 - 4.970 177,000 177,000 - 177,000 11/30/11 2013-2032 3.000 - 5.000 170,000 135,000 10,923 145,923 12/12/12 2013-2024 2.000 - 5.000 94,080 * 61,160 4,711 65,871 12/12/12 2013-2032 3.000 - 5.000 193,000 169,000 16,485 185,485 12/13/12 2013-2042 0.416 - 3.739 246,077 ** 232,741 - 232,741 02/20/14 2016-2034 3.000 - 5.000 140,000 131,000 7,617 138,617 06/26/14 2015-2020 4.000 - 5.000 39,530 * 23,455 1,194 24,649 07/15/14 2015-2025 3.000 - 4.500 48,235 * 48,225 3,808 52,033 12/23/14 2015-2038 2.000 - 5.000 116,000 108,750 16,407 125,157 06/30/15 2016-2027 2.000 - 5.000 69,130 * 69,125 9,859 78,984 03/08/16 2018-2036 5.000 - 5.000 112,000 112,000 21,426 133,426 08/03/16 2017-2036 0.600 3.303 144,000 ** 144,000 - 144,000 03/15/17 2019-2037 4.000 - 4.000 99,800 99,800 11,854 111,654 2,094,267 1,700,096 104,185 1,804,281 Bond Anticipation Notes 03/15/17 2017-2018 3.000 - 3.000 121,000 121,000 2,592 123,592 121,000 121,000 2,592 123,592

Total General Obligation Debt $ 2,215,267 $ 1,821,096 106,777$ $ 1,927,873

Certificates of Participation 08/12/08 2009-2018 3.250 - 5.000$ 34,700 $ 9,000 54$ $ 9,054 06/19/12 2013-2022 3.000 - 5.000 78,430 52,000 3,822 55,822 02/06/13 2013-2021 1.500 - 3.000 11,830 * 6,885 237 7,122 09/27/16 2017-2026 5.000 - 5.000 59,810 59,810 10,397 70,207 Total Certificates of Participation $ 184,770 $ 127,695 14,510$ $ 142,205

Loan Payable 08/15/13 2014-2021 7.875 - 7.875$ 18,617 $ 5,216 -$ $ 5,216 Total Loan Payable $ 18,617 $ 5,216 -$ $ 5,216 * Refunding issue ** Taxable Issue

A-58 BALTIMORE COUNTY, MARYLAND NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017

Business-type Activities: (in thousands) General Obligation Debt: Bonds Original Carrying Maturity Interest Issue Balance Unamortized Value Dated Range Rate Range Amount 6/30/2017 Premium 6/30/2017 03/22/00 2001-2020 2.600 - 2.600 14,417 2,767 - 2,767 06/22/01 2003-2022 2.300 - 2.300 14,105 4,321 - 4,321 06/26/02 2004-2023 2.000 - 2.000 7,006 2,074 - 2,074 03/11/03 2004-2023 1.100 - 1.100 8,638 2,732 - 2,732 07/16/04 2005-2025 1.200 - 1.200 8,501 1,738 - 1,738 09/12/05 2006-2024 1.000 - 1.000 21,146 7,999 - 7,999 07/31/07 2008-2027 1.000 1.000 16,794 9,126 - 9,126 01/03/08 2009-2038 4.250 - 5.000 200,000 7,000 50 7,050 02/24/09 2009-2018 3.000 - 5.000 24,515 * 3,335 49 3,384 11/10/09 2010-2039 0.650 - 5.600 106,600 81,400 157 81,557 12/18/09 2011-2032 1.000 - 1.000 15,625 12,258 - 12,258 08/10/10 2011-2030 2.000 - 4.500 61,720 * 60,720 2,297 63,017 11/09/10 2012-2018 2.000 - 5.000 30,100 8,600 142 8,742 11/09/10 2019-2040 2.000 - 5.050 93,900 93,900 - 93,900 11/30/11 2013-2042 3.000 - 5.000 85,000 70,500 3,448 73,948 05/31/12 2014-2032 1.800 - 1.800 43,161 36,377 - 36,377 12/12/12 2013-2032 2.250 - 5.000 18,005 * 8,245 53 8,298 12/12/12 2013-2042 2.000 - 5.000 60,000 52,000 1,539 53,539 12/13/12 2015-2042 0.416 - 3.739 10,213 ** 9,699 - 9,699 09/10/13 2013-2034 2.200 - 2.200 9,052 7,604 - 7,604 02/20/14 2016-2034 3.000 - 5.000 60,000 55,800 1,988 57,788 02/20/14 2015-2020 4.000 - 5.000 30,325 * 27,135 1,264 28,399 06/26/14 2015-2020 4.000 - 5.000 20,790 * 11,885 487 12,372 07/15/14 2015-2025 3.000 - 4.500 26,370 * 26,360 1,735 28,095 12/23/14 2015-2038 2.000 - 5.000 84,000 78,400 12,568 90,968 06/30/15 2016-2017 2.000 - 5.000 101,765 * 101,760 10,084 111,844 09/25/15 2016-2035 1.600 - 1.600 64,113 60,212 - 60,212 03/08/16 2017-2038 2.000 - 4.000 65,705 * 65,555 1,330 66,885 03/08/16 2017-2046 5.000 - 5.000 88,000 85,000 15,798 100,798 07/29/16 2017-2046 1.300 1.300 8,495 7,496 - 7,496 08/03/16 2017-2036 0.600 - 3.303 6,000 ** 6,000 - 6,000 03/15/17 2019-2047 4.000 - 5.000 99,300 99,300 9,691 108,991 1,503,361 1,107,298 62,680 1,169,978 Bond Anticipation Notes 03/15/17 2017-2018 0.020 - 0.480 225,000 225,000 4,910 229,910 225,000 225,000 4,910 229,910

Total General Obligation Debt $ 1,728,361 $ 1,332,298 67,590$ $ 1,399,888

Certificates of Participation 08/12/08 2009-2018 3.250 - 5.000 $ 2,000 $ 400 2$ $ 402 06/19/12 2013-2022 3.000 - 5.000 4,250 2,550 207 2,757 09/27/16 2017-2026 5.000 - 5.000 3,905 3,905 679 4,584 Total Certificates of Participation $ 10,155 $ 6,855 888$ $ 7,743 * Refunding issue ** Taxable issue

A-59 BALTIMORE COUNTY, MARYLAND NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017

The following is a schedule of the primary government’s debt service payments for certain long-term debt as of June 30, 2017:

Fiscal Year Governmental Activities Ended General Obligation Debt COPs & Other Long-term Debt Total Debt Service June 30 Principal Interest Principal Interest Principal Interest 2018 $ 223,099 61,862$ 16,322$ 729$ $ 239,421 62,591$ 2019 108,537 60,219 21,411 2,178 129,948 62,397 2020 105,761 58,199 16,941 2,761 122,702 60,960 2021 104,086 55,450 21,356 3,225 125,442 58,675 2022 103,923 50,888 16,026 2,429 119,949 53,317 2023-2027 493,952 189,692 40,855 4,307 534,807 193,999 2028-2032 375,778 97,478 - - 375,778 97,478 2033-2037 169,477 30,844 - - 169,477 30,844 2038-2042 88,996 16,370 - - 88,996 16,370 2043-2047 47,487 1,271 - - 47,487 1,271 Total $ 1,821,096 622,273$ 132,911$ 15,629$ $ 1,954,007 637,902$

Fiscal Year Business-type Activities Ended General Obligation Debt COPs Total Debt Service June 30 Principal Interest Principal Interest Principal Interest 2018 $ 277,719 31,827$ 669$ 15$ $ 278,388 31,842$ 2019 56,602 34,941 1,054 101 57,656 35,042 2020 54,834 39,570 854 151 55,688 39,721 2021 54,305 37,836 854 192 55,159 38,028 2022 54,273 35,783 854 150 55,127 35,933 2023-2027 257,750 148,334 2,570 279 260,320 148,613 2028-2032 240,129 99,877 - - 240,129 99,877 2033-2037 175,459 56,758 - - 175,459 56,758 2038-2042 116,249 23,089 - - 116,249 23,089 2043-2047 44,978 4,605 - - 44,978 4,605 Total $ 1,332,298 512,620$ 6,855$ 888$ $ 1,339,153 513,508$

A-60 BALTIMORE COUNTY, MARYLAND NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017

9. COMMITMENTS:

Leases

The following is a schedule by years of future minimum rental payments for facilities and equipment under operating leases that have initial or remaining non-cancelable lease terms in excess of one year as of June 30, 2017 (in thousands):

Year ending Primary Component June 30 Government Units 2018 $ 579 $ 38,924 2019 487 31,401 2020 393 18,343 2021 229 2,741 2022 85 1,741 2023-2027 345 8,781 2028-2032 266 284 2033-2037 266 - 2038-2042 216 - $ 2,866 $ 102,215

The total rental expenditures for the year ended June 30, 2017, for all leases except those with terms of a month or less that were not renewed were approximately $6.3 million for the primary government and $42.6 million for the component units.

Contracts and Commitments

Contract commitments in the Consolidated Public Improvement Construction Fund, the Metropolitan District Enterprise Fund, and the Gifts and Grants Fund amounted to approximately $65.8 million, $201.2 million, and $15.5 million, respectively, at June 30, 2017. Such amounts will be funded by future bond proceeds, approved federal and state grants, and future assessments.

10. LITIGATION:

The County is a defendant in various suits claiming damages for personal injury and property damage in automobile and general liability cases, and various personnel actions. In addition, there are various other tort suits alleging violations of individual civil rights pending against the County as well as miscellaneous other litigation, mostly contract claims. Amounts claimed in some of these matters are substantial. In the opinion of the County Attorney, the County should prevail in most of said various tort suits, suits alleging violations of individual civil rights and in miscellaneous other litigation (although the outcome of litigation cannot be predicted with certainty). It is the further opinion of the County Attorney that the likelihood of the County incurring aggregate liability arising from such litigation in an amount that would be material in relation to its financial position is remote.

Litigation against the Employees’ Retirement System of Baltimore County is addressed in its separate Comprehensive Annual Financial Report (CAFR). See note 13 for CAFR availability.

A-61 BALTIMORE COUNTY, MARYLAND NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017

11. CONTINGENCIES:

The County receives significant financial assistance from the U. S. Government and the State of Maryland in the form of grants. Entitlement to grant resources is generally conditioned upon compliance with terms and conditions of the grant agreements and applicable federal and state regulations, including the expenditure of the resources for eligible purposes. Substantially all grants are subject to financial and compliance audits in accordance with grantor requirements. Any disallowances as a result of these audits become a liability of the County. The County estimates that no material liabilities will result from such audits.

The County is contingently liable for loans guaranteed in the Gifts & Grants Fund that aggregate approximately $0.849 million as of June 30, 2017. A restriction of fund balance has been made for this amount.

12. RISK MANAGEMENT:

The County is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; employee health and accident; and natural disasters. The County manages its risks internally and sets aside assets for claims settlement in an Internal Service Fund, the Self-Insurance Program Fund (SIPF). The County services all claims for risk of loss to which the County is exposed except as noted below. The SIPF allocates County claims payments by charging a “premium” to each fund, or component unit, based on the actuarially determined liability and SIPF net assets.

The County purchases commercial insurance for claims that exceed 120% of projected health care claims and associated administrative expenses, and for real and personal property losses subject to policy deductibles. Settled claims have not exceeded this commercial health care excess coverage for the past three fiscal years.

SIPF liabilities are reported when it is probable that a loss has occurred and the amount of that loss can be reasonably estimated. Liabilities include an amount for claims that have been incurred but not reported. Since actual claim liabilities depend on complex factors such as inflation, changes in legal doctrines, and damage awards, the process used in computing claim liability results in an estimate. Certain liabilities are reevaluated periodically to take into consideration recently settled claims, the frequency of claims, and other economic and social factors. Liabilities for incurred losses to be settled by fixed or reasonably determinable payments over a long period of time are reported at their actual value and are not discounted.

Changes in the balances of claim liabilities during fiscal years 2016 and 2017 were as follows (in thousands):

Balance at Claims and Balance at Fiscal Beginning Changes in Claim Fiscal Year of Year Estimates Payments Year End

2016 54,927 290,845 (287,475) 58,297 2017 58,297 284,381 (276,824) 65,854

13. BENEFIT PLANS (in thousands):

Employees’ Retirement System

Plan Description: The Employees’ Retirement System of Baltimore County (the “System”) is a cost-sharing multiple- employer defined benefit public employee retirement system that acts as a common investment and administrative agent serving five entities including the County and certain employees of the Baltimore County Board of Education, Baltimore County Board of Library Trustees, the Community College of Baltimore County and the Baltimore County

A-62 BALTIMORE COUNTY, MARYLAND NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017

Revenue Authority. The System is not an employer. The System provides retirement and disability benefits, cost- of-living adjustments and death benefits to plan members and beneficiaries. The authority to establish and maintain the System is specified in Section 5-1-101 of the Baltimore County Code (the “Code”).

On October 15, 2012, the County Council passed Bill No. 65-12 that formally closed the System for members hired prior to July 1, 2007, now known as members of “Plan A”. Members hired on or after July 1, 2007 are considered members of “Plan B”. Plan A and Plan B are unitized plans of the System. The System is considered part of the County’s reporting entity and its financial statements are included in the County’s basic financial statements as a benefit trust fund. Separate Plan A and Plan B financial statements are included in the combining fiduciary fund statements in the supplementary information section of this report. The County is obligated for the payment of all pensions, annuities, retirement allowances, refunds, reserves and other benefits. The System is fiscally dependent on the County by virtue of the legislative and executive controls exercised with respect to its operations, policies and administrative budget. In accordance with Section 5-1-238 of the Code, responsibility for the proper operation of the System is vested in an eight-member Board of Trustees (the “Board”), the majority of which are appointed by the County Executive. The general administration of the System is vested in the Director of Budget and Finance.

The System issues a separately prepared Comprehensive Annual Financial Report that includes financial statements, note disclosures and required supplementary information. The report may be obtained by writing to the Office of Budget and Finance, Mezzanine, Historic Court House, 400 Washington Avenue, Towson, Maryland 21204, or online at http://www.baltimorecountymd.gov.

Funding Policy: Per Section 5-1-203 of the County Code, contribution requirements of the plan members and the participating employers are established and may be amended by the Board. System members contribute a percentage of their salary to the System. The contribution rates for members are based on employee classification.

Participating employers are required to make contributions on an actuarially determined basis. Level percentages of payroll employer contribution rates are determined using the projected unit credit actuarial funding method. The employer contributions to the System for the fiscal years ended June 30, 2017, 2016 and 2015, were $118,156 $105,742, $108,191, respectively, which were equal to or greater than the required contributions for each year. The primary government’s contributions for the three aforementioned fiscal years were $108,549, $96,042, and $98,315, respectively.

Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions

Net Pension Liability: At June 30, 2017 the County reported a liability of $1,610,549 for its proportionate share of the net pension liability of the System. The net pension liability was measured as of June 30, 2016, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The County’s proportion of the net pension liability was based on a projection of the County’s long-term share of contributions to the pension plan relative to the projected contributions of all the participating agencies, actuarially determined. At June 30, 2016 the County’s proportion was 92.23 percent, which is an increase of 1.78 percent from its proportion as of June 30, 2015.

There have been no changes in the benefit terms that would affect the measurement of the total pension liability since the last measurement date.

Pension Expense: For the year ended June 30, 2017 the County recognized pension expense of $210,929. At June 30, 2017 the County reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

A-63 BALTIMORE COUNTY, MARYLAND NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017

Deferred Deferred Outflows Inflows of Resources of Resources

Net difference between projected and actual experience $ 37,170 $ 46,348 Changes in assumptions 84,501 - Net difference between projected and actual earnings on pension plan investments 161,254 - Changes in proportion and differences between County contributions and proportionate share of contributions 19,112 12,405 County contributions subsequent to the measurement date 108,549 - Total $ 410,586 $ 58,753

Deferred outflows of $108,549 are reported as resources related to pensions resulting from County contributions subsequent to the measurement date and will be recognized as a reduction of the net pension liability in the year ended June 30, 2018. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows:

Year ended June 30: 2018 $ 68,254 2019 68,255 2020 78,858 2021 33,970 2022 (937) Thereafter (5,116)

Actuarial Assumptions: The total pension liability in the June 30, 2016 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement:

Inflation 3 percent Salary increases Rates vary by participant service Investment rate of return 6.75 percent, net of pension plan investment expense, including inflation Actuarial cost method Entry Age Normal Asset valuation method Ten-year moving market

Mortality rates were based on RP-200 Combined Mortality Table for males and females, as appropriate, with adjustments for mortality improvements based on Scale AA. The actuarial assumptions used in the June 30, 2016 valuation were based on the results of an actuarial experience study for the period July 1, 2006 through June 30, 2011. As a result of this experience study the following actuarial assumptions and method changes were made:

• Salary increase assumptions were updated to reflect recent experience and long-term anticipated inflation.

A-64 BALTIMORE COUNTY, MARYLAND NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017

• The mortality tables for health and disabled pensioners were updated to reflect future expected increases in life expectancy. • The rates of withdrawal from active service due to termination of employment, death and accidental death, ordinary disability, and accidental disability were updated to reflect recent plan experience.

The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long- term expected rate of return by weighing the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. Best estimates of geometric rates of return for each major asset class included in the System’s target asset allocation as of June 30, 2016 are summarized in the table below:

Schedule of Long-term expected rate of return.

Long-Term Expected Target asset Asset Class Rate of Return Allocation Cash (0.25)% 0.00% Large Cap Equities 4.25% 19.00% Small/Mid Cap Equities 4.50% 8.00% International Equities (Unhedged) 4.75% 13.00% Emerging International Equities 6.25% % 9.00% Core Bonds 0.64% 9.00% High-Yield Bonds 2.50% 1.00% EMD (Local Currency) 3.25% 4.00% Diversified Fixed Income 2.09% 10.00% Private Equity 6.25% 7.00% Real Estate (Core) 3.25% 5.00% Hedge Funds 3.25% 0.00% Global Asset Allocation 3.88% 10.00% Risk Parity 3.60% 5.00% Commodities 2.25% 0.00%

Discount Rate: The discount rate used to measure the total pension liability was the funding valuation interest rate of 6.75 percent. The projection of cash flows used to determine the discount rate assumed that employee contributions will continue to follow the current funding policy. Based on those assumptions, the System’s fiduciary net position was projected to make all future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability.

Sensitivity of the County’s proportionate share of the net pension liability to changes in the discount rate: The following presents the County’s proportionate share of the net pension liability calculated using the discount rate of 6.75 percent, as well as what the County’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower (5.75 percent) or 1-percentage-point higher (7.75 percent) than the current rate:

A-65 BALTIMORE COUNTY, MARYLAND NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017

Current 1.00% Decrease Discount Rate 1.00% Increase (5.75%) (6.75%) (7.75%) County's proportionate share of the net pension liability $ 2,074,279 $ 1,610,549 $ 1,237,123

Pension Plan Fiduciary Net Position: Detail information about the System’s fiduciary net position is available in its separately issued financial report.

Police, Fire and Widows’ Pension Plan

Plan Description: The County administers the Police, Fire, and Widow’s Pension Plan (Pension Plan) which is a single-employer defined benefit pension plan that provides pensions for policemen and firemen hired prior to October 1, 1959 and for their widows. The Pension Plan has been closed and frozen. The Pension Plan valuation was based on the plan provisions as described in the Baltimore County Code for Pensions and Retirements, Article III for Fire and Police Departments, Section 23-141 through Section 23-204. The pension allowance for retired firefighters and police officers is one-half of the salary of a current employee with the same rank the pensioner held at the time of his retirement. The pension allowance to a widow of a deceased pensioner is one-fourth of the base salary of an active member of the County Police and Fire departments.

Funding Policy: The County intends to fund the Pension Plan on a pay-as-you-go basis if Pension Plan assets are depleted. Management of the Pension Plan is vested in an eight-member Board of Trustees, comprised of ex- officio and elected representatives. The general administration of the Pension Plan is vested in the Director of Budget and Finance.

At June 30, 2016, pension plan membership consisted of 211 inactive plan members or beneficiaries currently receiving benefits with no other inactive members or beneficiaries entitled to receive benefits.

Investments: For the year ended June 30, 2016, the annual money-weighted rate of return on pension plan investments, net of pension plan investment expense, was 3.4%. The money-weighted rate of return expresses investment performance, net of investment expense, adjusted for the changing amounts actually invested.

Net Pension Liability: At June 30, 2017, the County reported a liability of $24,380 for the Pension Plan. The net pension liability was measured as of June 30, 2016 and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date.

The components of the net pension liability of the County at June 30, 2017, were as follows:

Total pension liability $ 56,229 Plan fiduciary net position (31,849) County's net pension liability $ 24,380

Plan fiduciary net position as a percentage of the total pension liability 56.64%

A-66 BALTIMORE COUNTY, MARYLAND NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017

Inflation 3.0% Salary increases Not applicable Investment rate of return 3.3% blended rate Health Mortality RP-2000 projected by Scale AA. Cost of living adjustments 3.0%

The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighing the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. Best estimates of geometric rates of return for each major asset class included in the pension plan's target asset allocation as of June 30, 2016 are summarized in the table below.

Schedule of Long-term expected rate of return

Long-Term Expected Target Asset Asset Class Rate of Return Allocation Domestic equity 4.25% 19% International equity 4.75% 10% Fixed Income 0.64% 9% Cash (0.25%) 0%

Discount Rate: The discount rate used to measure the total pension liability was 3.30%. The projection of cash flows used to determine the discount rate assumed that County contributions will continue to follow the current funding policy. Based on those assumptions, the Plan's fiduciary net position was projected to be available to make all projected future benefit payments of current plan members until the year 2021. A municipal bond rate of 2.85% was used in the development of the blended GASB discount rate after that point. The 2.85% rate is based on the S&P Municipal Bond 20 Year High Grade Rate Index as of June 30, 2016. Based on the long-term rate of return of 5.00% and the municipal bond rate of 2.85%, the blended GASB discount rate would be 3.30%. The assumed discount rate has been determined in accordance with the method prescribed by GASB Statement No. 67.

A-67 BALTIMORE COUNTY, MARYLAND NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017

Changes in the Net Pension Liability

Increase (Decrease) Total Pension Plan Fiduciary Net Pension Liability Net Position Liability (a) (b) (a) - (b) Balances at 6/30/16 $ 59,208 $ 39,028 $ 20,180 Changes for the year: Interest 2,255 - 2,255 Differences between expected and actual experience 620 - 620 Changes of assumptions 2,356 - 2,356 Net investment income - 1,017 (1,017) Benefit payments, including refunds of member contributions (8,210) (8,210) - Other - 14 (14) Net Changes (2,979) (7,179) 4,200 Balances at 6/30/17 $ 56,229 $ 31,849 $ 24,380

Sensitivity of the net pension liability to changes in the discount rate: The following presents the net pension liability, calculated using the discount rate of 3.30%, as well as what the County’s net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower (2.30%) or 1-percentage-point higher (4.30%) than the current rate:

Current 1.00% Decrease Discount Rate 1.00% Increase (2.30%) (3.30%) (4.30%) County's net pension liability $ 27,645 $ 24,380 $ 21,436

Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions

Pension Expense: For the year ended June 30, 2017, the County recognized pension expense of $3,222. At June 30, 2017, the County reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Deferred Deferred Outflows Inflows of Resources of Resources

Net difference between projected and actual earnings on pension plan investments $ - $ 1,132 Total $ - $ 1,132

Deferred outflows and deferred inflows of resources resulting from the difference between projected and actual earnings on pension plan investments will be recognized in pension expense as follows:

A-68 BALTIMORE COUNTY, MARYLAND NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017

Year ended June 30: 2018 $ (565) 2019 (565) 2020 (85) 2021 83

The condensed financial statements as of and for the year ended June 30, 2017 are as follows:

Statement of Fiduciary Net Position Police, Fire, and Widows' Pension Plan As of June 30, 2017

Assets Cash and cash equivalents $ 5 Investment securities 27,839 Interest and dividends receivable 9 Total assets 27,853

Liabilities Accounts payable 4 Total liabilities 4

Net position restricted for pensions $ 27,849

Statement of Changes in Fiduciary Net Position Police, Fire and Widows' Pension Plan For the year ended June 30, 2017

Additions Contributions: Other $ 13 Total contributions 13 Investment earnings: Net decrease in the fair value of plan assets (2,365) Interest and dividends 5,736 Investment expenses (31) Net investment gain 3,340 Total additions 3,353

Deductions Benefits 7,353 Total deductions 7,353 Net decrease in net position (4,000)

Net position restricted for pensions Beginning of the year 31,849 End of the year $ 27,849

A-69 BALTIMORE COUNTY, MARYLAND NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017

Other Pension Plans

The County provides supplemental pension benefits through General Fund appropriations to certain judges, judges’ widows and families of members of volunteer fire and ambulance companies killed in the line of duty. The respective costs and related net pension liability of these plans are not significant.

Substantially all employees of the component units who do not participate in the System participate in the State of Maryland Teachers’ Retirement and Pension Systems. Employer contributions to these systems for the years ended June 30, 2017, 2016, 2015, of approximately $98,351, $93,240 and $95,460, respectively, were made directly by the State of Maryland on behalf of the component units according to State statute. The contributions have been recognized as a revenue and an expense in the component unit statement of activities. Additionally, some professional employees of the Community College participate in an optional private retirement system.

14. OTHER POST EMPLOYMENT BENEFIT PLAN:

Plan Description and Contribution Information

Plan Description: The County’s Other Post Employment Benefit Plan (OPEB Plan) is an agent multiple-employer defined benefit postemployment healthcare plan that covers retired employees of the primary government, the Baltimore County Board of Education, the Community College of Baltimore County, the Board of Library Trustees for Baltimore County and the Baltimore County Revenue Authority. The OPEB Plan was established and is maintained by the County as a trust fund as specified in Article 10, Title 14 of the County Code. The trust fund is included in these financial statements as an Other Post-Employment Benefits Trust Fund. Separate financial statements are not issued for the OPEB Plan. The OPEB Plan provides healthcare and life insurance benefits to eligible retirees and their beneficiaries who receive retirement benefits either from the Employees’ Retirement System of Baltimore County under Article 5, Title 1 of the County Code or the State Retirement and Pension System of Maryland. Retiree benefits are in accordance with bargaining unit agreements negotiated between each employer’s governing body/board and each employee’s representative labor organization. At June 30, 2017, the date of the latest available valuation, the OPEB Plan covered a projected 32,999 members; 19,440 active plan members and 13,559 retirees receiving benefits. County employees covered at June 30, 2017 included a projected 11,285 members; 6,180 active plan members, 4,186 inactive plan members receiving benefits and 919 inactive plan members entitled to but not receiving benefits. The OPEB Plan does not have any required contributions from active employees.

Contributions: Retired plan members and beneficiaries currently receiving benefits are required to contribute specified amounts monthly toward healthcare based on their hire date, years of active service, the medical plan chosen and whether they are Medicare eligible (age 65). The County receives Prescription Drug Plan reimbursements on Medicare eligible retirees. Each employer is required to contribute its annual OPEB cost (AOC), an amount actuarially determined in accordance with the parameters of GASB Statement 45. The annual required contribution represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and to amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed 30 years. Article 10, Title 14 of the County Code gives the Director of Budget and Finance the authority to determine the annual contribution to the trust fund based on the results of the actuarial valuation of the AOC. The AOC was calculated based on the ARC and the net OPEB liability. The following table shows the components of the AOC for the year, the amount actually contributed to the plan, and changes in the net OPEB obligation (in thousands):

A-70 BALTIMORE COUNTY, MARYLAND NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017

All Employers The County Annual required contribution (ARC) $ 134,061 $ 61,938 Interest on net OPEB liability 13,149 11,616 Adjustment to ARC (13,303) (11,753) Annual OPEB cost (expense) 133,907 61,801 Contributions made (65,729) (16,000) Increase (decrease) in net OPEB liability 68,178 45,801 Net OPEB obligation beginning of year 206,251 182,217 Net OPEB obligation end of year $ 274,429 $ 228,018

The annual OPEB cost, the percentage of annual OPEB cost contributed to the plan and the net OPEB obligation for the fiscal year 2016 and the two preceding fiscal years were as follows (dollars in thousands):

Fiscal Year Ended % of Annual OPEB June 30 Annual OPEB Cost Cost Contributed Net OPEB Obligation 2015 105,067 110.78 185,854 2016 107,367 81.00 206,251 2017 133,907 49.09 274,429

Funded Status and Funding Progress

The funded status of the OPEB Plan as of the most recent actuarial valuation date is as follows (dollars in thousands):

Schedule of Funding Progress

Actuarial UAAL as a Actuarial Actuarial Accrued % of Valuation Value of Liability Unfunded Funded Covered Covered Date Assets (AAL) AAL (UAAL) Ratio Payroll Payroll June 30 (a) (b) (b-a) (a/b) (c) ((b-a)/c) 2017 395,955$ $ 1,832,728 $ 1,436,773 21.60 $ 1,332,066 107.86

Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about future employment, mortality and healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual OPEB cost of the employers are subject to continual revision as actuarial results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multiyear trend information that will show whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits.

Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of the valuation and the historical pattern of sharing benefit costs between employers and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of the assets, consistent with the long-term perspective of the calculations. An implicit subsidy amount is factored into the valuation for blended rates charged to retirees who should be contributing at rates much higher than active employees.

A-71 BALTIMORE COUNTY, MARYLAND NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017

The June 30, 2017 actuarial valuation used the projected unit credit method under which the benefits of each individual included in an actuarial valuation are allocated by a consistent formula to all valuation years. The method used to determine the actuarial value of assets was fair value. The actuarial assumptions applied were future salary increases of 3% per year and the interest was assumed to have a discount rate of 6.375%. The discount rate is the rate used to determine the present value of the future cash flows. The unfunded actuarial accrued liability is being amortized over a period of 30 years on a closed basis using level percentage of projected payroll. The remaining amortization period at June 30, 2017 was twenty one years. The initial medical trend assumption is 5.3% decreasing gradually to an ultimate rate of 3.9% after 2080. The medical trend assumption was developed using the Society of Actuaries Long-Run Medical Cost Trend Model baseline assumptions. The following assumptions were used as input variables into this model:

Rate of inflation 2.2% Rate of growth in real income/GDP per Capita 1.6% Extra trend due to technology and other factors 1.4% Health share of GDP resistance point 25.0% Year for limiting cost growth to GDP growth 2075

A-72 BALTIMORE COUNTY, MARYLAND NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017

The condensed financial statements as of and for the year ended June 30, 2017 are as follows (in thousands):

Statement of Fiduciary Net Position OPEB Plan As of June 30, 2017

Assets Cash and cash equivalents $ 6,947 Investments, at fair value 415,506 Collateral for loaned securities (net of unrealized loss) 3,394 Receivables: Accrued interest & dividend income 554 Receivable for investments sold 2,186 Receivables other 1,680 Total assets 430,267

Liabilities Payable for collateral for loaned securities 3,394 Investments purchased 3,929 Other 887 Total liabilities 8,210

Net position Net position restricted for benefits $ 422,057

Statement of Changes in Fiduciary Net Position OPEB Plan For the year ended June 30, 2017

Additions Contributions: Employer $ 65,729 Employee 36,409 On-behalf 15,108 Total contributions 117,246 Investment earnings: Net decrease in the fair value of plan assets 48,065 Interest and dividends 8,010 Securities lending net income 33 Investment expenses (2,700) Net investment gain 53,408 Total additions 170,654

Deductions Benefits 144,496 Administrative expenses - Total deductions 144,496 Change in net position 26,158 Net position at beginning of the year 395,899 Net position at end of the year $ 422,057

A-73 BALTIMORE COUNTY, MARYLAND NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017

Investments: Per Section 10-14-106 of the County Code, Other Post-Employment Benefits Trust Fund money identified by the Director of Budget and Finance as available for investment shall be jointly invested with retirement funds as per Section 5-1-247. Pursuant to Section 5-1-247 of the Baltimore County Code, the Board of Trustees utilizes the “prudent person” standard for managing the assets of the System. The Board has established the following policies:

1) Assure that the System’s investment policy has been designed to provide broad diversification among asset classes in order to maximize return at an appropriate level of risk and minimize the risk of large losses to the System.

2) Employ a diversity of investment managers with different investment styles on how to obtain their investment objective.

3) Closely monitor the performance of all investment managers not only in relation to specific objectives, but also in relation to other fund managers following the same investment objectives.

The System is currently invested in stocks (domestic and foreign), fixed income securities, private equity funds, real estate funds, and global asset allocation funds. During FY 2016, the Board phased out the allocations to hedge fund-of-funds and eliminated the allocation of real assets. The Code provides for full power to hold, purchase, sell, assign, transfer and dispose of any of the securities and investments in any of the System’s funds. For the year ended June 30, 2017, the System has operated in all material respects in accordance with the System’s investment policy.

The System’s investment policy as of June 30, 2017, is shown below for the broad investment categories:

Asset Class Allocation Target Allocation Range U. S. Equities 27% 22 - 32% International Equities 22% 17 - 27% Private Equities 7% 0 - 9% Fixed Income 24% 19 - 29% Real Estate 5% 0 - 7% Global Asset Allocation 15% 10 - 20% Cash and Cash equivalents 0% 0 - 5% Total 100%

Rate of Return: For the year ended June 30, 2017, the annual money-weighted rate of return on OPEB plan investments, net of OPEB investment expense, was 13.6%.The money-weighted rate of return expresses investment performance, net of investment expense, adjusted for the changing amounts actually invested.

Net OPEB Liability (including component units): At June 30, 2017, the County has a net OPEB liability of $1,637,692. The net OPEB liability was measured as of June 30, 2017 and the total OPEB liability used to calculate the net OPEB liability was determined by an actuarial valuation as of that date.

A-74 BALTIMORE COUNTY, MARYLAND NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017

The components of the net OPEB liability at June 30, 2017, were as follows:

Total OPEB liability $ 2,059,749 Fiduciary net position (422,057) County's net OPEB liability $ 1,637,692

Plan fiduciary net position as a percentage of the total OPEB liability 20.49%

Actuarial Assumptions: The total OPEB liability in the June 30, 2017 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement:

Inflation 3.0% Salary increases Not applicable Investment rate of return 3.3% blended rate Health Mortality RP-2000 projected by Scale AA. Cost of living adjustments 3.0%

The long-term expected rate of return on OPEB investments was determined using a building-block method in which best estimate ranges of expected future real rates of return (expected returns, net of OPEB investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighing the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. Best estimates of geometric rates of return for each major asset class included in the pension plan's target asset allocation as of June 30, 2017 are summarized in the table below.

A-75 BALTIMORE COUNTY, MARYLAND NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017

FY 2017 Long-Term Expected Rate of Target Asset Asset Class Return Allocation Cash 0.25% 0.00% Large Cap Equities 4.75 19.00 Small/Mid Cap Equities 5.00 8.00 International Equities (Unhedged) 5.00 13.00 Emerging International Equities 6.75 9.00 Core Bonds 1.255 8.00 Bank Loans 3.25 3.00 High-Yield Bonds - - EMD (Local Currency) 3.75 4.00 Diversified Fixed Income 2.65 9.00 Private Equity 6.75 7.00 Real Estate (Core) 3.75 5.00 Hedge Funds - - Global Asset Allocation 4.35 10.00 Risk Parity 3.43 5.00 Commodities - -

Discount Rate: The discount rate used to measure the total OPEB liability was the funding valuation interest rate of 6.375% as of June 30, 2017. The projection of cash flow used to determine the discount rate assumed that employer contributions will continue to follow the current funding policy. Based on those assumptions, the System’s fiduciary net position was projected to make all future benefit payments of current plan members. Therefore, the long-term expected rate of return on OPEB investments was applied to all periods of projected benefit payments to determine the total OPEB liability, in accordance with the method prescribed by GASB Statement No. 74. In the event of benefit payments not covered by the System’s fiduciary net position, a municipal bond rate of 3.13% for FY17, would be used to discount the benefit payments not covered by the System’s fiduciary net position. The 3.13% rate equals the S&P Municipal Bond 20-Year High Grade Rate index at June 30, 2017 and 2016, respectively.

Sensitivity of the net OPEB liability to changes in the discount rate: The following presents the net OPEB liability, calculated using the discount rate of 6.375%, as well as what the County’s net OPEB liability would be if it were calculated using a discount rate that is 1-percentage-point lower (5.375%) or 1-percentage-point higher (7.375%) than the current rate:

1.00% Decrease Current Discount 1.00% Increase (5.375%) Rate (6.375%) (7.375%) Net OPEB Liability $ 1,924,634 $ 1,637,692 $ 1,400,492

Sensitivity of the net OPEB liability to changes in the healthcare cost trend rates: The following presents the net OPEB liability, calculated using the healthcare trend rate of 5.30% and a trend rate that is 1-percentage-point lower (4.30%) and 1-percentage-point higher (6.30%) than the current rate:

A-76 BALTIMORE COUNTY, MARYLAND NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017

Healthcare Cost 1.00% Decrease Trend Rate 1.00% Increase (4.30%) (5.30%) (6.30%) Net OPEB Liability $ 1,402,322 $ 1,637,692 $ 1,929,429

15. INDIVIDUAL FUND DISCLOSURES:

Details of Fund Balances

The details of the Governmental Funds balances at June 30, 2017 are shown as follows (in thousands):

Consolidated Gifts Public Nonmajor Total and Improvement Governmental Governmental General Grants Construction Fund Funds Fund balances Nonspendable: Inventories $ 9,251 -$ $ - $ - $ 9,251 Total Nonspendable 9,251 - - - 9,251 Restricted for: Equipment financing 59,416 - - - 59,416 Bond escrow 1,646 - - - 1,646 Loans, guarantees and grants - 28,520 - - 28,520 In lieu of fee arrangements - - 19,756 - 19,756 Total Restricted 61,062 28,520 19,756 - 109,338 Assigned to: Encumbrances for: Contractual services 3,793 - - - 3,793 Supplies & materials 650 - - - 650 Equipment & other 1,780 - - - 1,780 Imprest funds 75 - - - 75 Loans & grants - 10,840 - - 10,840 Subsequent year's expenditures 3,304 - - - 3,304 Retirement of long-term debt 18,955 - - - 18,955 Disputed taxes 25,427 - - - 25,427 Stormwater remediation - - - 4,651 4,651 Liquor license regulation - - - 153 153 Total Assigned 53,984 10,840 - 4,804 69,628 Unassigned: Revenue stabilization 99,360 - - - 99,360 Other 106,031 - (134,959) - (28,928) Total Unassigned 205,391 - (134,959) - 70,432 Total fund balances(deficit) $ 329,688 $ 39,360 $ (115,203) $ 4,804 $ 258,649

Deficit Fund Balance

At June 30, 2017, the Consolidated Public Improvement Construction Fund had an unassigned fund deficit of $134.959 million. This deficit will be eliminated by pay-as-you-go contributions from the General Fund and from bond proceeds.

A-77 BALTIMORE COUNTY, MARYLAND NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017

16. TAX ABATEMENTS:

As of June 30, 2017, the County provides tax abatements through four programs – Payment in Lieu of Taxes (PILOT), Historical Property County Tax Credit, Enterprise Zone Tax Credit, and Conservation Land Tax Credit. The Payment in Lieu of Taxes Program provides property tax abatements to encourage an increase in the number of senior and low income housing and is authorized under Maryland State Law, Tax – Property Article Section 7- 502. Abatements are obtained through contract between property owner and the County; under the agreement, the owner pays the County a negotiated amount in lieu of property tax. The amount of abatement is deducted from the recipient’s tax bill.

Historical Property Tax Credit provides property tax abatements to encourage the renovation or rehabilitation of properties listed in a historical register or in a historic district and is authorized under County Code Section 11-2- 201. Abatements are obtained through application by the property owner, including proof that the improvements have been made. Commercial property tax abatements are based on the increase of the assessed value as a result of the improvements made. Residential property tax abatements are 20% of actual approved renovation or rehabilitation expenses. Both commercial and residential properties must not be altered so that it no longer complies with the rehabilitation standards by which the property obtained eligibility. The amount of abatement is deducted from the recipient’s tax bill.

Enterprise Zone Tax Credit provides property tax abatements to encourage economic growth in distressed areas of the County and is authorized under Maryland State Law, Tax – Property Article Section 9-103. Abatements are obtained through an application process. Taxpayer submits application to the Baltimore County Department of Economic and Workforce Development which is forwarded to the Maryland State Department of Commerce for review and approval. Approved applications are returned to the County; award letters are sent to the taxpayer and the State Department of Assessments and Taxation (SDAT). SDAT then certifies the credit base to Baltimore County Office of Budget and Finance. Eligible companies that make improvements to real property in one of the Enterprise Zones can benefit from property tax credits over a 10 year period. For the first 5 years, the tax credit is equal to 80% of the increase in property tax owed resulting from the new investment. The tax credit declines in the remaining five years by 10% annually. The amount of abatement is deducted from the recipient’s tax bill. (See page XI for more information.)

Conservation Land Tax Credit provides property tax abatements to encourage preservation of natural areas and agricultural land under County Code Section 11-2-110. Abatements are obtained through application by the property owner, accompanied by proof that the property meets the definition of “conservation land”. Conservation land is defined as real property that is subject to a perpetual conservation easement that was donated to a land trust on or after July 1, 1991. Conservation land also includes real property that is owned in fee by a qualified land trust and was acquired by the trust on or after July 1, 1991. The credit is for 100% of the property tax obligation and has a duration of five years. If the property is transferred to an entity other than a government agency or another qualified trust, the credit will lapse and the property owner will become liable for all the property taxes had the credit not been granted, as well as interest on those taxes. The amount of abatement is deducted from the recipient’s tax bill.

A-78 BALTIMORE COUNTY, MARYLAND NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017

Property Taxes Abated Fiscal Year 2017 (in thousands)

Payment in Lieu of Taxes 2,879 Historical Property Tax Credit 265 Enterprise Zone Tax Credit 1,228 Conservation Land Tax Credit 12 Total 4,384

17. NEW ACCOUNTING PRONOUNCEMENTS:

The County has adopted the provisions of Governmental Accounting Standard Board (GASB) Statement No. 74, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans. The statement replaces Statement No. 43, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, as amended, and No. 57, OPEB Measurement by Agent Employers and Agent Multiple-Employer Plans. The adoption of Statement No. 74 had no impact on the County’s governmental fund financial statements. The adoption also resulted in no changes to the presentation of the financial statements of the County’s Pension and Other Employee Benefit Trust Funds. Certain changes in Note disclosures and Required Supplementary Information (RSI) were incorporated to comply with Statement No. 74

The County has adopted the provisions of Governmental Accounting Standard Board (GASB) Statement No. 77 Tax Abatement Disclosures. Statement No. 77 has no material effect on the financial statements. Additional Note disclosures were provided in order to comply with this statement.

The County has adopted the provisions of Governmental Accounting Standard Board (GASB) Statement No. 78 Pensions Provided through Certain Multiple-Employer Defined Benefit Pension Plans. This Statement amends the scope and applicability of Statement 68. There is no material impact to the County as a result of the implementation of this standard.

The County has adopted the provisions of Governmental Accounting Standard Board (GASB) Statement No.82 Pensions Issues – an amendment of GASB Statement No. 67, No. 68 and no. 73. This Statement addresses issues regarding the presentation of payroll-related measures in required supplementary information, the selection of assumptions and the treatment of deviations from the guidance in an Actuarial Standard of Practice for financial reporting purposes, and the classification of payments made by employers to satisfy employee (plan member) contribution requirements .There is no material impact to the County as a result of the implementation of this standard.

18. SUBSEQUENT EVENTS:

On September 15, 2017, the County and the Baltimore County Police, Fire and Widows’ Pension Plan amended the Single Stream Recycling Loan Agreement so that the remaining principal of the loan will be repaid on June 30, 2021 in the amount of $4,374,709. The interest component of the loan will continue to be repaid monthly through June 30, 2021 at an annual rate of 7.875%.

On November 16, 2017, the County sold $31,035,000 General Obligation Metropolitan District Refunding Bonds 2017 Refunding Series (2019 Crossover) and $60,130,000 Consolidated Public Improvement Bonds 2017 Refunding Series (2019 Crossover). The Metropolitan District Bonds were issued for the refunding of $35,600,000

A-79 BALTIMORE COUNTY, MARYLAND NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017 principal amount of Baltimore County Metropolitan District Bonds (72nd Issue – Series B) (Federally Taxable – Issuer Subsidy – Build America Bonds). The Consolidated Public Improvement Bonds were issued for the refunding of $63,000,000 principal amount of Baltimore County Consolidated Public Improvement Bonds (2009 – Series B) (Federally Taxable – Issuer Subsidy – Build America Bonds). The net proceeds of the refunding were invested in State and Local Government Securities (SLGS) and deposited in an irrevocable trust with an escrow agent to provide for future debt service payments. As a result of the refunding, the aggregate difference between the refunding debt and the refunded debt was $6,881,946 or an economic gain of $5,943,924. The refunded bonds will be considered defeased and the liability for those bonds will be removed from the government-wide statement of net position on the Crossover Date of November 1, 2019.

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Required Supplementary Information

A-82 BALTIMORE COUNTY, MARYLAND REQUIRED SUPPLEMENTARY INFORMATION JUNE 30, 2017

Employees’ Retirement System (dollars in thousands):

Schedule of the County's Proportionate Share of the Net Pension Liability and Related Ratios

2017 2016 2015 County's proportionate share of the net pension liability 92.23% 90.45% 91.96%

County's proportionate share of the net pension liability $ 1,610,549 $ 1,315,135 $ 1,088,771

County's covered employee payroll $ 435,266 $ 418,026 $ 411,453

County's proportionate share of the net pension liability as a percentage of its covered employee payroll 370.02% 314.61% 264.62%

Plan fiduciary net position as a percentage of the total pension liability 57.1% 62.8% 68.2%

Notes to the Schedule:

The amounts presented for fiscal year 2017 were determined as of July 1 of two years prior, using membership data as of that day, projected to June 30 of the previous year. The County implemented GASB 68 in fiscal year 2015. Additional years will be presented as the information becomes available.

Schedule of County Contributions The last 4 fiscal years are presented only

2017 2016 2015 2014

Actuarially determined contribution 108,549$ 101,927$ 93,495$ 73,586$ Contributions in relation to the actuarially determined contribution 108,549 97,108 93,495 73,586 Prefunding of the FY2016 contribution in FY2015 - - 4,819 - Contribution deficiency (excess) -$ 4,819$ (4,819)$ -$

Covered-employee payroll 454,797$ 435,266$ 418,026$ 411,453$

Contributions as a percentage of covered employee payroll 23.87% 22.31% 23.52% 17.88%

A-83 BALTIMORE COUNTY, MARYLAND REQUIRED SUPPLEMENTARY INFORMATION JUNE 30, 2017

Notes to the Schedule:

Valuation date: Actuarially determined contribution amounts are calculated as of the beginning of the fiscal year (July 1) for the year immediately following the fiscal year. Actuarial valuations are performed every year.

Methods and assumptions used to determine contribution:

Actuarial cost method Projected Unit Credit Amortization method Level Percentage of Payroll Amortization period 30 year layered amortization Asset valuation method 10-year smoothed market Inflation 3.0% Salary increases Rates vary by participant age and service Investment rate of return 7.0%, net of investment expense and gain sharing, and including inflation Retirement age Rates vary by participant age and service Mortality For healthy participants and beneficiaries: For males 108% of the RP-2000 Combined Healthy male table projected to 2027 by Scale AA and for females 100% of the RP-2000 Combined Healthy female table projected to 2027 by Scale AA. For disabled members, RP-2000 Disabled Annuitant Tables projected to 2027 with Scale AA.

A-84 BALTIMORE COUNTY, MARYLAND REQUIRED SUPPLEMENTARY INFORMATION JUNE 30, 2017

Police, Fire and Widow’s Pension Plan (dollars in thousands):

The following schedules are presented for three years. Additional years will be presented as the information becomes available.

Schedule of Changes in County's Net Pension Liability and Related Ratios

2016 2015 2014 Total pension liability Interest $ 2,255 $ 2,597 $ 3,341 Differences between expected and actual experience 620 (3,272) - Changes of assumptions 2,356 (186) 3,425 Benefit payments (8,210) (8,657) (9,622) Net change in total pension liability (2,979) (9,518) (2,856) Beginning total pension liability 59,208 68,726 71,582 Ending total pension liability: (a) $ 56,229 $ 59,208 $ 68,726

Plan fiduciary net position Net investment income 1,017 2,486 4,671 Benefit payments (8,210) (8,657) (9,622) Other income 14 15 14 Net change in plan fiduciary net position (7,179) (6,156) (4,937) Beginning Plan fiduciary net position 39,028 45,184 50,121 Ending Plan fiduciary net position: (b) $ 31,849 $ 39,028 $ 45,184 Ending County’s net pension liability: (a) - (b) $ 24,380 $ 20,180 $ 23,542

Plan fiduciary net position as a percentage of the total pension liability 56.64% 65.92% 65.74%

Covered-employee payroll Not applicable Not applicable Not applicable Net pension liability as a percentage of covered- employee payroll Not applicable Not applicable Not applicable

Schedule of County Contributions

2016 2015 2014 Actuarially determined contribution Not calculated Not calculated Not calculated Contributions related to the actuarially determined contribution $ - $ - $ - Contribution deficiency (excess) Not applicable Not applicable Not applicable

Note to Schedule: County contributions were not calculated because the Pension Plan has been closed since October 1, 1959 and

A-85 BALTIMORE COUNTY, MARYLAND REQUIRED SUPPLEMENTARY INFORMATION JUNE 30, 2017 the County intends to fund the Pension Plan on a pay-as-you-go basis if the Pension Plan assets are depleted. Also, the number of pension recipients was considered insignificant and the recipients’ ages are at the higher end of the mortality tables.

Schedule of Investment Returns

2016 2015 2014 Annual money-weighted rate of return, net of investment expenses 3.36% 5.70% 10.31%

Schedule of Funding Progress OPEB Trust (dollars in thousands):

Three year historical trend information about the OPEB Plan will be presented herewith as required supplementary information. This information is intended to help users assess the OPEB Plan’s funding status on a going concern basis, assess progress made in accumulating assets to pay benefits when due and make comparisons with other public employee retirement systems’ OPEB Plans.

Actuarial UAAL as a Actuarial Actuarial Accrued % of Valuation Value of Liability Unfunded Funded Covered Covered Date Assets (AAL) AAL (UAAL) Ratio Payroll Payroll June 30 (a) (b) (b-a) (a/b) (c) ((b-a)/c) 2015 378,135 1,522,538 1,144,403 24.83 1,247,241 91.75 2016 434,839 1,571,367 1,136,528 27.67 1,277,980 88.93 2017 395,955 1,832,728 1,436,773 21.60 1,332,066 107.86

Schedule of Employers’ Contributions

Fiscal Year Annual Ended Required Percentage June 30 Contribution Contributed 2015 103,893 112.03 2016 106,599 81.59 2017 134,061 49.03

A-86 BALTIMORE COUNTY, MARYLAND REQUIRED SUPPLEMENTARY INFORMATION JUNE 30, 2017

Schedule of Changes in Total Liability and Related Ratios

Total OPEB Liability 2017

Service Cost $ 34,938 Interest Cost 124,086 Difference of Expected and Actual Experience 766 Benefit Payments (92,979) Net Change in Total OPEB Liability 66,811 Total OPEB Liability - Beginning of Year 1,992,938 Total OPEB Liability - End of Year $ 2,059,749

Plan Fiduciary Net Position 2017

Contributions Employer $ 65,729 Net Investment Income 53,408 Benefit Payments (92,979) Net Change in Fiduciary net Position 26,158 Fiduciary Net Position - Beginning of Year 395,899 Fiduciary Net Position - End of Year $ 422,057

Net OPEB Liability 1,637,692 Fiduciary Net Position as a percentage of Total OPEB Liability 20.49%

Covered-Employee Payroll Not Applicable Net OPEB Liability as a percentage of Payroll Not Applicable (OPEB benefits do not depend on salary; therefore, salary information is not applicable)

Expected Average Remaining Service Years of All Participants 7

Money-Weighted Rate of Return 13.60%

Notes to Schedule Amounts in the schedule represent totals for the County, BCPS, CCBC and BCPL. Individual amounts are not available and therefore not reported. The County implemented GASB 74 during Fiscal Year 2017. Therefore, only one year information is available. There were no benefit changes or changes in assumptions.

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APPENDIX B

PROPOSED FORMS OF OPINION OF BOND COUNSEL

Baltimore County Metropolitan District Bond Anticipation Notes – 2018 Series

County Executive and County Council of Baltimore County, Maryland Historic Courthouse Towson, Maryland 21204

Dear County Executive and Council Members:

We have examined a record of proceedings relating to the issuance of $245,000,000 Baltimore County Metropolitan District Bond Anticipation Notes – 2018 Series (the “BANs”) by Baltimore County, Maryland (the “County”), which are described as follows:

Dated the date of delivery, interest payable on September 18, 2018 and the date of maturity of the BANs; fully registered in form in the denomination of $5,000 each or any integral multiple thereof; issued under the authority of Section 19-212 of the Local Government Article of the Annotated Code of Maryland (2013 Replacement Volume and 2017 Supplement) (the “Enabling Law”), and the Baltimore County Charter (the “Charter”), and Chapter 539 of the Acts of the General Assembly of Maryland of 1924, as amended, (the “Act”); authorized to be issued by Bill No. 65-17 of the County Council of Baltimore County, Maryland, adopted on November 20, 2017 (the “Ordinance”) and issued and awarded pursuant to the Ordinance by Order of the County Executive.

In rendering this opinion, we have relied without investigation on the County’s Tax and Section 148 Certificate dated this date made on behalf of the County by officers thereof with respect to certain material facts within the knowledge of the County relevant to the tax-exempt status of interest on the BANs.

With respect to the executed and authenticated BAN that we have examined and BANs similarly executed and authenticated and identical thereto in form except for numbers, interest rates, denominations and maturities, and, under existing statutes, regulations and decisions, we are of the opinion that:

(a) The County is a validly created and existing body politic and corporate of the State of Maryland, possessing authority under the Enabling Law, the Charter, the Act and the Ordinance to issue the BANs.

(b) The County is duly authorized to issue the BANs. The BANs are valid and legally binding obligations of the County to which its full faith and credit and taxing power are pledged.

(c) The BANs and the interest payable on them are exempt from State of Maryland and local taxation; no opinion is expressed as to estate or inheritance taxes, or any other taxes not levied or assessed directly on the BANs or the interest thereon.

(d) Interest on the BANs will be excludable from gross income for federal income tax purposes. It is noted that under the provisions of the Internal Revenue Code of 1986, as amended, (the “Code”) there are certain restrictions that must be met subsequent to the delivery of the BANs, including restrictions that must be complied with throughout the term of the notes of the issue of notes that the BANs are a part, in order that the interest thereon be excludable from gross income. These include the following: (i) a requirement that certain investment earnings received from the investment of the proceeds of the notes of the issue of notes that the BANs are a part, be rebated to the United States of America under certain circumstances (or that certain payments in lieu of rebate be made); (ii) other requirements applicable to the investment of the proceeds of the notes of the issue of notes that the BANs are a part; and (iii) other requirements applicable to the use of the proceeds of the notes of the issue of notes that the BANs are a part, and the facilities financed or refinanced with such proceeds. Failure to comply with one or more of these requirements could result in the inclusion of the interest payable on the BANs in gross income for federal income tax purposes, effective from the date of their issuance. The County has covenanted to regulate the investment of the proceeds of the notes of the issue of notes that the BANs are a part, and to take such other actions as may be required to maintain the excludability from gross income for federal income tax purposes of interest on the BANs. It is our opinion that, assuming compliance with such covenants, the interest on the BANs will remain excludable from gross income for federal income tax purposes under the provisions of the Code.

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(e) Interest on the BANs is not includable in the alternative minimum taxable income of individuals as an enumerated item of tax preference or other specific adjustment. Interest income on the BANs will be includable in the applicable taxable base for the purpose of determining the branch profits tax imposed by the Code on certain foreign corporations engaged in a trade or business in the United States.

The opinions expressed above are limited to the matters set forth above, and no other opinions should be inferred beyond the matters expressly stated. We assume no obligation to supplement this opinion if any applicable laws or interpretations thereof change after the date hereof or if we become aware of any facts or circumstances that might change the opinions expressed herein after the date hereof.

Very truly yours,

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Baltimore County Consolidated Public Improvement Bond Anticipation Notes – 2018 Series

County Executive and County Council of Baltimore County, Maryland Historic Courthouse Towson, Maryland 21204

Dear County Executive and Council Members:

We have examined a record of proceedings relating to the issuance of $246,000,000 Baltimore County Consolidated Public Improvement Bond Anticipation Notes – 2018 Series (the “BANs”) by Baltimore County, Maryland (the “County”), which are described as follows:

Dated the date of delivery, interest payable on September 18, 2018 and the date of maturity of the BANs; fully registered in form in the denomination of $5,000 each or any integral multiple thereof; issued under the authority of Section 19-212 of the Local Government Article of the Annotated Code of Maryland (2013 Replacement Volume and 2017 Supplement) (the “Enabling Law”), and the Baltimore County Charter (the “Charter”), certain borrowing plan ordinances enacted by the County Council of Baltimore County, Maryland (the “Acts”) and Section 19-101 of the Local Government Article of the Annotated Code of Maryland (2013 Replacement Volume and 2017 Supplement) (the “Consolidating Act”); authorized to be issued by Bill No. 65-17 of the County Council of Baltimore County, Maryland, adopted on November 20, 2017 (the “Ordinance”) and issued and awarded pursuant to the Ordinance by Order of the County Executive.

With respect to the executed and authenticated BAN that we have examined, and BANs similarly executed and authenticated and identical thereto in form, we are of the opinion that, under existing statutes, regulations and decisions:

(a) The County is a validly created and existing body politic and corporate of the State of Maryland, possessing authority under the Enabling Law, the Charter, the Acts, the Consolidating Act and the Ordinance to issue the BANs.

(b) The County is duly authorized to issue the BANs. The BANs are valid and legally binding obligations of the County to which its full faith and credit and taxing power are pledged.

(d) Interest on the BANs will be excludable from gross income for federal income tax purposes. It is noted that under the provisions of the Internal Revenue Code of 1986, as amended, (the “Code”) there are certain restrictions that must be met subsequent to the delivery of the BANs, including restrictions that must be complied with throughout the term of the notes of the issue of notes that the BANs are a part, in order that the interest thereon be excludable from gross income. These include the following: (i) a requirement that certain investment earnings received from the investment of the notes of the issue of notes that the BANs are a part; be rebated to the United States of America under certain circumstances (or that certain payments in lieu of rebate be made); (ii) other requirements applicable to the investment of the proceeds of the notes of the issue of notes that the BANs are a part; and (iii) other requirements applicable to the use of the proceeds of the notes of the issue of notes that the BANs are a part, and the facilities financed or refinanced with such proceeds. Failure to comply with one or more of these requirements could result in the inclusion of the interest payable on the BANs in gross income for federal income tax purposes, effective from the date of their issuance. The County has covenanted to regulate the investment of the proceeds of the notes of the issue of notes that the BANs are a part, and to take such other actions as may be required to maintain the excludability from gross income for federal income tax purposes of interest on the BANs. It is our opinion that, assuming compliance with such covenants, the interest on the BANs will remain excludable from gross income for federal income tax purposes under the provisions of the Code.

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applicable taxable base for the purpose of determining the branch profits tax imposed by the Code on certain foreign corporations engaged in a trade or business in the United States.

Very truly yours,

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APPENDIX C

CONTINUING DISCLOSURE AGREEMENT

This Continuing Disclosure Agreement, dated as of ______, 2018 (the “Disclosure Agreement”), is executed and delivered by Baltimore County, Maryland (the “County”) in connection with the issuance of its $245,000,000 Baltimore County Metropolitan District Bond Anticipation Notes – 2018 Series and its $246,000,000 Baltimore County Consolidated Public Improvement Bond Anticipation Notes – 2018 Series (collectively, the “BANs”). The County hereby covenants and agrees as follows:

Section 1. Purpose of this Disclosure Agreement.

This Disclosure Agreement is being executed and delivered by the County for the benefit of the beneficial owners of the BANs and in order to assist the Participating Underwriters in complying with Rule 15c2-12(b)(5) of the United States Securities and Exchange Commission (the “SEC”).

Section 2. Definitions.

In addition to the definitions set forth above, which apply to any capitalized term used in this Disclosure Agreement unless otherwise defined in this Section, the following capitalized terms shall have the following meanings:

“EMMA” shall mean the Electronic Municipal Market Access System established pursuant to the MSRB. For more information on EMMA, see www.emma.msrb.org.

“Listed Event” shall mean any of the events listed in Section 4(a) of this Disclosure Agreement.

“MSRB” shall mean the Municipal Securities Rulemaking Board established pursuant to Section 15B(b)(1) of the Securities Exchange Act of 1934, as amended.

“Participating Underwriter” shall mean any of the original underwriters of the BANs required to comply with the Rule in connection with the offering of the BANs.

“Rule” shall mean Rule 15c2-12(b)(5) adopted by the SEC under the Securities Exchange Act of 1934, as the same may be amended from time to time.

Section 3. Provision of Annual Financial Information, Operating Data and Audited Information.

(a) The County shall provide to the MSRB in an electronic format as prescribed by the MSRB annual financial information and operating data set forth in Section III of the Official Statement under the headings “Five Year Summary of General Fund Revenues and Expenditures,” “Five Year Summary of General Fund Budget and Actual Results,” “Five Year Summary of General Fund Balance,” “Fiscal Year 2018 Operating Budget,” “General Fund Revenues and Expenditures,” “Metropolitan District Enterprise Fund,” and “Pension and Retirement Plans” each updated as of the end of the immediately preceding fiscal year, utilizing the same accounting standards as were used in preparing such information for the Official Statement, such information to be made available within 275 days after the end of the County’s fiscal year.

(b) The County shall provide to the MSRB in an electronic format as prescribed by the MSRB annual audited financial statements for the County, such information to be made available within 275 days after the end of the County’s fiscal year, unless the audited financial statements are not available on or before such date, in which event said financial statements will be provided promptly when and if available. In the event that audited financial statements are not available within 275 days after the end of the County's fiscal year, the County will provide unaudited financial statements within said time period.

(c) The presentation of the financial information referred to in paragraph (a) and in paragraph (b) of this Section shall be made in accordance with the same accounting principles as utilized in connection with the presentation of applicable comparable financial information included in the final official statement for the BANs, provided that the County may modify the accounting principles utilized in the presentation of financial information by amending this Disclosure Agreement pursuant to the provisions of Section 7 hereof. Changes in Generally Accepted Accounting Principles, where applicable to financial information to be provided by the County, shall not require the County to amend this Disclosure Agreement.

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(d) If the County is unable to provide the annual financial information and operating data within the applicable time periods specified in (a) and (b) above, the County shall send in a timely manner a notice of such failure to the MSRB in an electronic format as prescribed by the MSRB.

Section 4. Reporting of Significant Events.

(a) This Section 4 shall govern the giving of notices of the occurrence of any of the following events with respect to the BANs:

(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 BANs or other material events affecting the tax status of the BANs;

(7) modifications to rights of Noteholders, if material;

(8) bond anticipation note calls, if material, and tender offers;

(9) defeasances;

(10) release, substitution or sale of property securing repayment of the BANs, if material;

(11) rating changes;

(12) bankruptcy, insolvency, receivership or similar event of the County;

(13) the consummation of a merger, consolidation, or acquisition involving the County or the sale of all or substantially all of the assets of the County, 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.

(b) In a timely manner, not in excess of ten business days after the occurrence of an event listed in Section 4(a) above, the County shall file a notice of such occurrence with the MSRB.

Section 5. Filing with EMMA

Unless otherwise required by the MSRB, all filings with the MSRB shall be made with EMMA and shall be accompanied by identifying information as prescribed by the MSRB.

Section 6. Termination of Reporting Obligation.

The County’s obligations under this Disclosure Agreement shall terminate upon the payment in full of all of the BANs at their maturity. In addition, the County may terminate its obligations under this Disclosure Agreement if and when the County no longer remains an obligated person with respect to the BANs within the meaning of Securities and Exchange Commission Rule 15c2-12.

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Section 7. Amendment.

The County may provide further or additional assurances that will become part of the County's obligations under this Disclosure Agreement. In addition, this Disclosure Agreement may be amended by the County in its discretion provided that (i) the amendment may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of the County as the obligated person with respect to the BANs, or type of business conducted; (ii) this Disclosure Agreement, as amended, would have complied with the requirements of the Rule at the time of the issuance of the BANs, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances, as determined by counsel selected by the County that is expert in federal securities law matters; and (iii) the amendment does not materially impair the interests of holders of the BANs, as determined either by counsel selected by the County that is expert in federal securities law matters or by an approving vote of the holders of 25% of the outstanding aggregate principal amount of BANs. The reasons for the County agreeing to provide any further or additional assurances or for any amendment and the impact of the change in the type of operating data or financial information being provided will be explained in information provided with the annual financial information containing the additional or amended operating data or financial information.

Section 8. Additional Information.

Nothing in this Disclosure Agreement shall be deemed to prevent the County from disseminating any other information, using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any disclosure made pursuant to Section 3(a) or (b) hereof or notice of occurrence of a Listed Event in addition to that which is required by this Disclosure Agreement. If the County chooses to include any information in any disclosure made pursuant to Section 3(a) or (b) hereof or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Agreement, the County shall have no obligation under this Disclosure Agreement to update such information or include it in any future disclosure made pursuant to Section 3(a) or (b) hereof or notice of occurrence of a Listed Event.

Section 9. Law of Maryland.

This Disclosure Agreement, and any claim made with respect to the performance by the County of its obligations hereunder, shall be governed by, subject to, and construed according to the laws of the State of Maryland.

Section 10. Limitation of Forum.

Any suit or other proceeding seeking redress with regard to any claimed failure by the County to perform its obligations under this Disclosure Agreement must be filed in the Circuit Court for Baltimore County, Maryland.

Section 11. Limitation on Remedies.

The County shall be given written notice at the address set forth below of any claimed failure by the County to perform its obligations under this Disclosure Agreement, and the County shall be given 15 days to remedy any such claimed failure. Any suit or other proceeding seeking further redress with regard to any such claimed failure by the County must be filed in the Circuit Court for Baltimore County, Maryland and any party maintaining such suit shall be limited to specific performance as the adequate and exclusive remedy available in connection with such action. Written notice to the County shall be given to the Office of Budget and Finance, 400 Washington Avenue, Mezzanine, Towson, Maryland 21204 or at such alternate address as shall be specified by the County with disclosures made pursuant to Section 3(a) or 3(b) hereof or a notice of occurrence of a Listed Event.

Section 12. Relationship to BANs.

This Disclosure Agreement constitutes an undertaking by the County that is independent of the County's obligations with respect to the BANs; any breach or default by the County under this Disclosure Agreement shall not constitute or give rise to a breach or default under the BANs.

Section 13. Beneficiaries.

This Disclosure Agreement shall inure solely to the benefit of the beneficial owners from time to time of the BANs, and shall create no rights in any other person or entity.

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IN WITNESS WHEREOF this Continuing Disclosure Agreement is being executed on behalf of Baltimore County, Maryland by the County Executive and the seal of the County is being impressed hereon attested to by the Executive Secretary to the County Executive, as of this ___day of ______, 2018.

(SEAL) BALTIMORE COUNTY, MARYLAND

ATTEST: By______

______

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APPENDIX D

NOTICE OF SALE

$245,000,000 BALTIMORE COUNTY, MARYLAND GENERAL OBLIGATION BOND ANTICIPATION NOTES

$245,000,000 BALTIMORE COUNTY METROPOLITAN DISTRICT BOND ANTICIPATION NOTES - 2018 SERIES

ELECTRONIC BIDS, via BiDCOMP/PARITY Competitive Bidding System (BiDCOMP/Parity) only, will be received by the County Executive of Baltimore County, Maryland or by the County Administrative Officer acting with the authority of the County Executive on behalf of Baltimore County, Maryland (the “County”) for the purchase of all, but not less than all, of the County’s $245,000,000 Metropolitan District Bond Anticipation Notes – 2018 Series (the “BANs”), until 10:15 a.m., local Baltimore, Maryland time, on March 1, 2018.

The BANs

Authorization and Security

The BANs are being issued under the authority of Section 19-212 of the Local Government Article of the Annotated Code of Maryland (2013 Replacement Volume and 2017 Supplement), the Baltimore County Charter, Chapter 539 of the Acts of the General Assembly of Maryland of 1924, as amended, and certain borrowing plan ordinances enacted by the County Council of Baltimore County, Maryland, as authorized by Bill No. 65-17 of the County Council of Baltimore County, Maryland, adopted on November 20, 2017 (“Bill No. 65-17”).

The BANs herein described will constitute an irrevocable pledge of the full faith and credit and unlimited taxing power of Baltimore County, Maryland.

Book-Entry Only

Initially, one bond anticipation note will be issued to and registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”), as registered owner of the BANs and each such bond anticipation note shall be immobilized in the custody of DTC. DTC will act as securities depository for the BANs. Individual purchases will be made in book-entry form only, in the principal amount of $5,000 or any integral multiple thereof. Purchasers will not receive physical delivery of certificates representing their interest in the bond anticipation notes purchased. The winning bidder of the BANs, as a condition to delivery of the BANs, will be required to deposit the bond anticipation note certificates with DTC.

So long as the BANs are in book-entry only form, the County will serve as Registrar and Paying Agent for the bond anticipation notes. The County reserves the right to designate a successor Registrar and Paying Agent for the BANs if the BANs at any time cease to be in book-entry only form.

Description of the BANs and Interest Payment Date

The BANs shall be in fully registered form in the denomination of $5,000 each or any integral multiple thereof, shall be dated the date of delivery (expected to be March 16, 2018) and shall bear interest payable on September 18, 2018 and the maturity date of the BANs, computed on the basis of a year consisting of twelve 30-day months.

Maturity; Redemption

The BANs mature on March 18, 2019. The BANs are not redeemable prior to maturity.

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Electronic Bidding and Bidding Procedures

Registration to Bid

All prospective bidders must be contracted customers of BiDCOMP/Parity Competitive Bidding System. If you do not have a contract with BiDCOMP, call (212) 806-8304 to become a customer. By submitting a bid for the BANs, a prospective bidder represents and warrants to the County that such bidder’s bid for the purchase of the BANs (if a bid is submitted in connection with the sale) is submitted for and on behalf of such prospective bidder by an officer or agent who is duly authorized to bind the prospective bidder to a legal, valid and enforceable contract for the purchase of the BANs.

If any provisions of this Notice of Sale shall conflict with information provided by BiDCOMP/Parity as approved provider of electronic bidding services, this Notice of Sale shall control. Further information about BiDCOMP/Parity, including any fee charged, may be obtained from BiDCOMP/Parity at (212) 806-8304.

Disclaimer

Each prospective bidder shall be solely responsible to register to bid via BiDCOMP/Parity. Each qualified prospective bidder shall be solely responsible to make necessary arrangements to access BiDCOMP/Parity for purposes of submitting its bid in a timely manner and in compliance with the requirements of this Notice of Sale. Neither the County nor BiDCOMP/Parity shall have any duty or obligation to undertake such registration to bid for any prospective bidder or to provide or assure such access to any qualified prospective bidder, and neither the County nor BiDCOMP/Parity shall be responsible for a bidder’s failure to register to bid or for proper operation of, or have any liability for any delays or interruptions of, or any damages caused by BiDCOMP/Parity. The County is using BiDCOMP/Parity as a communication mechanism, and not as the County’s agent, to conduct the electronic bidding for the BANs. The County is not bound by any advice and determination of BiDCOMP/Parity to the effect that any particular bid complies with the terms of this Notice of Sale and in particular the “Bid Specifications” hereinafter set forth. All costs and expenses incurred by prospective bidders in connection with their registration and submission of bids via BiDCOMP/Parity are the sole responsibility of the bidders; and the County is not responsible, directly or indirectly, for any such costs or expenses. If a prospective bidder encounters any difficulty in registering to bid or submitting, modifying or withdrawing a bid for the BANs, it should telephone BiDCOMP/Parity and notify the Office of Budget and Finance of the County by facsimile at (410) 887-8297.

Bidding Procedures

Bids must be submitted electronically for the purchase of the BANs (all or none) by means of the Baltimore County AON Bid Forms (the “Bid Forms”) via BiDCOMP/Parity by 10:15 a.m., local Baltimore, Maryland time, on March 1, 2018 unless postponed as described herein (see “Change of Bid Date and Closing Date”). Prior to that time, a prospective bidder may input and save proposed terms of its bid in BiDCOMP. Once the final bid has been saved in BiDCOMP, the bidder may select the final bid button in BiDCOMP to submit the bid to BiCOMP/Parity. Once the bids are communicated electronically via BiDCOMP/Parity to the County Executive, each bid will constitute an irrevocable offer to purchase the BANs on the terms therein provided. For purposes of the electronic bidding process, the time as maintained on BiDCOMP shall constitute the official time. For information purposes only, bidders are requested to state in their bids the true interest cost to the County, as described under “Award of the BANs” below, represented by the rate or rates of interest and the bid price specified in their respective bids.

No bids will be accepted in written form, by facsimile transmission or in any other medium or on any system other than by means of the Bid Form via BiDCOMP. No bid will be received after the time for receiving such bids specified above.

Bid Specifications

Each proposal for the BANs must specify the amount bid for such BANs (not less than 100% of the aggregate par value of the BANs) and must specify in multiples of one-eighth (1/8) or one-twentieth (1/20) of one percent (1%) the rate of interest per annum that BANs are to bear. No interest rate bid may exceed four percent (4%).

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Good Faith Deposit

A good faith deposit in the amount of $2,450,000 (the “Deposit”) is required in connection with the sale and bid for the BANs. The Deposit may be provided for by (i) a certified check, bank cashier’s, treasurer’s or official check drawn upon or certified by a responsible banking institution and made payable to the order of the County delivered at or prior to the time of bid, or (ii) a Federal funds wire transfer to be submitted to the County by the successful bidder not later than 4:00 p.m., local Baltimore, Maryland time, on the date of sale (the “Wire Transfer Deadline”) as set forth below under “Wire Transfers.” The Deposit of the successful bidder will be collected and the proceeds thereof retained by the County to be applied in partial payment for the BANs and no interest will be allowed or paid upon the amount thereof, but in the event the successful bidder shall fail to comply with the terms of the respective bid, the proceeds thereof will be retained as and for full liquidated damages. Checks of unsuccessful bidders will be returned promptly after the BANs are awarded.

Wire Transfers

If the successful bidder chooses to deliver its good faith deposit by Federal funds wire transfer, the County will distribute wiring instructions for the Deposit to the successful bidder upon verification of the bids submitted by the bidders and prior to the Wire Transfer Deadline. If the Deposit is not received by the Wire Transfer Deadline, the award of the sale of the BANs to the successful bidder may be cancelled by the County in its discretion without any financial liability of the County to the successful bidder or any limitation whatsoever on the County’s right to sell the BANs to a different purchaser upon such terms and conditions as the County shall deem appropriate.

Award of the BANs

The County Executive of Baltimore County, Maryland, or the County Administrative Officer acting with the authority of the County Executive, will not accept and will reject any bid for less than all of the above described BANs. One bidder will be awarded all of the BANs. The right is reserved to reject any and all bids and to waive any irregularities in any of the bids. The judgment of the County shall be final and binding upon all bidders with respect to the form and adequacy of any proposal received and as to its conformity with the terms of this Notice of Sale.

The award of the BANs, if made, will be made as promptly as possible after the bids are opened to the bidder offering the lowest interest rate to the County for the BANs. The lowest interest rate shall be determined in accordance with the true interest cost (TIC) method. In the event two or more bidders offer to purchase the BANs at the same lowest true interest cost to the County, the BANs may be apportioned between such bidders, but if this shall not be acceptable to the County, the County shall have the right to award all of the BANs to one bidder.

Issue Price Determination

The County expects and intends that the bid for the BANs will satisfy the federal tax requirements for a qualified competitive sale of BANs, including, among other things, receipt of bids for the BANs from at least three underwriters, who have established industry reputations for underwriting new issuances of municipal bonds (a “Qualified Competitive Bid”). The County Executive of the County, or the County Administrative Officer of the County acting with the authority of the County Executive, will advise the successful bidder as promptly as possible after the bids are opened whether the bid constitutes a Qualified Competitive Bid, or, in the alternative, a bid that fails to satisfy such requirements (a “Nonqualified Competitive Bid”).

If the bid is a Qualified Competitive Bid, as promptly as possible after the bids are opened, the County Executive of the County, or the County Administrative Officer of the County acting with the authority of the County Executive, will notify the successful bidder, and such bidder, upon such notice, shall advise the County Executive of the County, or the County Administrative Officer of the County acting with the authority of the County Executive, of the reasonably expected initial offering price to the public of the BANs. In addition, the winning bidder shall be required to provide to the County information to establish the initial expected offering price for the BANs for federal income tax purposes by completing a certificate acceptable to Bond Counsel to the County, on or before the date of issuance of the BANs, substantially in the form set forth in Appendix F-1 to the Preliminary Official Statement, with appropriate completions, amendments and attachments.

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If the bid is a Nonqualified Competitive Bid, as promptly as possible after the bids are opened, the County Executive of the County, or the County Administrative Officer of the County acting with the authority of the County Executive, will notify the successful bidder, and such bidder, upon such notice, shall advise the County Executive of the County, or the County Administrative Officer of the County acting with the authority of the County Executive, of the initial sale price or initial offering price to the public, as applicable, of the BANs. In addition, the winning bidder shall be required to provide to the County information and assurances to establish the initial sale price or the initial offering price to the public, as applicable, for federal income tax purposes by completing a certification acceptable to Bond Counsel in substantially the form set forth in Appendix F-2 to the Preliminary Official Statement, with appropriate completions, omissions and attachments. It is noted that procedures for a Nonqualified Competitive Bid may require the winning bidder and, if applicable, other underwriters of the BANs, to hold the initial offering price for the BANs for up to five business days after the sale date, as further specified in the form of such certification.

Change of Bid Date and Closing Date

The County reserves the right to postpone, from time to time, the date established for the receipt of bids and will undertake to notify registered prospective bidders via notification published on Thomson Municipal Market Monitor (“TM3”) (www.tm3.com). Prospective bidders may request notification by facsimile transmission of any such changes in the date or time for the receipt of bids by so advising, and furnishing their telecopier numbers to Public Resources Advisory Group at (212) 566-7800 by 12:00 Noon, Baltimore time, on the day prior to the announced date for receipt of bids. In addition, the County reserves the right to make changes to this Notice of Sale. Such changes will be announced on TM3.

A postponement of the bid date will be announced via TM3 not later than 9:15 a.m., Baltimore time, on the announced date for receipt of bids, and an alternative sale date and time will be announced via TM3 by 12:00 Noon, Baltimore time, two business days prior to such alternative date for receipt of bids.

On any such alternative date and time for receipt of bids, the County will accept electronic bids for the purchase of the BANs, such bids to conform in all respects to the provisions of this Notice of Sale, except for the changes in the date and time for receipt of bids and any other changes announced via TM3 at the time the date and time for receipt of bids are announced.

Official Statement

Not later than seven (7) business days after the award of the BANs to the successful bidder on the day of sale, the County will deliver to the successful bidder an Official Statement, which is expected to be substantially in the form of the Preliminary Official Statement referred to below. If so requested by the successful bidder at or before the close of business on the date of the sale, the County will include in the Official Statement such pricing and other information with respect to the terms of the reoffering of the BANs by the successful bidder (“Reoffering Information”), if any, as may be specified and furnished in writing by the successful bidder. If no Reoffering Information is specified and furnished by the successful bidder, the Official Statement will include the interest rates on the BANs resulting from the bid of the successful bidder and the other statements with regard to reoffering contained in the Preliminary Official Statement. The successful bidder shall be responsible to the County and its officials for the Reoffering Information, and for all decisions made by the successful bidder with respect to the use or omission of the Reoffering Information in any reoffering of the BANs, including the presentation or exclusion of any Reoffering Information in any documents, including the Official Statement. The successful bidder for the BANs will also be furnished, without cost, a reasonable number of copies of the Official Statement for the BANs (and any amendment or supplement thereto).

Delivery of the BANs

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effective as of the date of delivery, stating that there is no litigation pending affecting the validity of any of the BANs included in these issues. It shall be a condition to the obligation of the successful bidder to accept delivery of and pay for the BANs that, simultaneously with or before delivery and payment for the BANs, the bidder shall be furnished a certificate or certificates of the County Executive, the County Administrative Officer and the Director of Budget and Finance to the effect that, to the best of their knowledge and belief, the Official Statement (and any amendment or supplement thereto except for the Reoffering Information as to which no view will be expressed) as of the date of sale and as of the date of delivery of the BANs does not contain any untrue statement of a material fact and does not omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and that between the date of sale and the date of delivery of the bond anticipation notes there has been no material adverse change in the financial condition or revenues of the County, except as reflected or contemplated in the Official Statement (and any amendment or supplement thereto).

Legal Opinion

The issuance of the BANs will be subject to legal approval by McKennon Shelton & Henn LLP, Baltimore, Maryland, and copies of their opinions will be delivered upon request, without charge, to the successful bidder for the BANs. Such opinions shall be substantially in the forms included in Appendix B to the Preliminary Official Statement referred to below.

CUSIP Numbers

It is anticipated that CUSIP identification numbers will be printed on the BANs, but neither the failure to print any such number on any bond anticipation note nor any error with respect thereto shall constitute cause for a failure or refusal by the successful bidder to accept delivery of and pay for the BANs in accordance with the terms of this Notice of Sale. All expenses in relation to the printing of the CUSIP identification numbers on the BANs shall be paid by the County. However, the CUSIP Service Bureau charge for the assignment of such numbers shall be the responsibility of and shall be paid by the successful bidder.

Continuing Disclosure

In order to assist the successful bidder with its obligation under the SEC Rule 15c2-12(b)(5), the County has covenanted to provide certain ongoing disclosure with respect to the BANs. The County’s continuing disclosure agreement is more fully described in the Preliminary Official Statement.

Additional Information

The Preliminary Official Statement of Baltimore County, Maryland, in respect to the BANs may be accessed via the internet at www.MuniOS.com. Bill No. 65-17 may be accessed via the internet at www.baltimorecountymd.gov/countycouncil/legislation/index.html. Such Preliminary Official Statement is deemed final by the County as of its date for purposes of SEC Rule 15c2-12 but is subject to revision, amendment and completion in the Official Statement referred to above.

KEVIN KAMENETZ County Executive of Baltimore County, Maryland

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APPENDIX E

NOTICE OF SALE

$246,000,000 BALTIMORE COUNTY, MARYLAND GENERAL OBLIGATION BOND ANTICIPATION NOTES

$246,000,000 BALTIMORE COUNTY CONSOLIDATED PUBLIC IMPROVEMENT BOND ANTICIPATION NOTES – 2018 SERIES

ELECTRONIC BIDS, via BiDCOMP/PARITY Competitive Bidding System (BiDCOMP/Parity) only, will be received by the County Executive of Baltimore County, Maryland or by the County Administrative Officer acting with the authority of the County Executive on behalf of Baltimore County, Maryland (the “County”) for the purchase of all, but not less than all, of the County’s $246,000,000 Consolidated Public Improvement Bond Anticipation Notes – 2018 Series (the “BANs”), until 10:45 a.m., local Baltimore, Maryland time, on March 1, 2018.

The BANs

Authorization and Security

The BANs are being issued under the authority of Sections 19-101 and 19-212 of the Local Government Article of the Annotated Code of Maryland (2013 Replacement Volume and 2017 Supplement), the Baltimore County Charter and certain borrowing plan ordinances enacted by the County Council of Baltimore County, Maryland, as authorized by Bill No. 65-17 of the County Council of Baltimore County, Maryland, adopted on November 20, 2017 (“Bill No. 65-17”).

The BANs herein described will constitute an irrevocable pledge of the full faith and credit and unlimited taxing power of Baltimore County, Maryland.

Book-Entry Only

Initially, one bond anticipation note will be issued to and registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”), as registered owner of the BANs and each such bond anticipation note shall be immobilized in the custody of DTC. DTC will act as securities depository for the BANs. Individual purchases will be made in book-entry form only, in the principal amount of $5,000 or any integral multiple thereof. Purchasers will not receive physical delivery of certificates representing their interest in the BANs purchased. The winning bidder of the BANs, as a condition to delivery of the BANs, will be required to deposit the bond anticipation note certificates with DTC.

Description of the BANs and Interest Payment Date

Maturity; Redemption

The BANs mature on March 18, 2019. The BANs are not redeemable prior to maturity.

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Electronic Bidding and Bidding Procedures

Registration to Bid

Disclaimer

Bidding Procedures

Bids must be submitted electronically for the purchase of the BANs (all or none) by means of the Baltimore County AON Bid Forms (the “Bid Forms”) via BiDCOMP/Parity by 10:45 a.m., local Baltimore, Maryland time, on March 1, 2018 unless postponed as described herein (see “Change of Bid Date and Closing Date”). Prior to that time, a prospective bidder may input and save proposed terms of its bid in BiDCOMP. Once the final bid has been saved in BiDCOMP, the bidder may select the final bid button in BiDCOMP to submit the bid to BiCOMP/Parity. Once the bids are communicated electronically via BiDCOMP/Parity to the County Executive, each bid will constitute an irrevocable offer to purchase the BANs on the terms therein provided. For purposes of the electronic bidding process, the time as maintained on BiDCOMP shall constitute the official time. For information purposes only, bidders are requested to state in their bids the true interest cost to the County, as described under “Award of the BANs” below, represented by the rate or rates of interest and the bid price specified in their respective bids.

Bid Specifications

Good Faith Deposit

A good faith deposit in the amount of $2,460,000 (the “Deposit”) is required in connection with the sale and bid for the BANs. The Deposit may be provided for by (i) a certified check, bank cashier’s, treasurer’s or official check drawn upon or certified by a responsible banking institution and made payable to the order of the County delivered at or prior to the time of bid, or (ii) a Federal funds wire transfer to be submitted to the County by the successful bidder not later than 4:00 p.m., local Baltimore, Maryland time, on the date of sale (the “Wire Transfer Deadline”) as set forth below under “Wire E-2

Transfers.” The Deposit of the successful bidder will be collected and the proceeds thereof retained by the County to be applied in partial payment for the BANs and no interest will be allowed or paid upon the amount thereof, but in the event the successful bidder shall fail to comply with the terms of the respective bid, the proceeds thereof will be retained as and for full liquidated damages. Checks of unsuccessful bidders will be returned promptly after the BANs are awarded.

Wire Transfers

Award of the BANs

Issue Price Determination

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Change of Bid Date and Closing Date

A postponement of the bid date will be announced via TM3 not later than 9:45 a.m., Baltimore time, on the announced date for receipt of bids, and an alternative sale date and time will be announced via TM3 by 12:00 Noon, Baltimore time, two business days prior to such alternative date for receipt of bids.

Official Statement

Delivery of the BANs

It is anticipated that delivery will be on or about March 16, 2018 upon due notice and at the expense of the successful bidder, at the offices of DTC, upon payment of the amount of the successful bid (including any premium), less the deposit theretofore made. Such payment shall be made in Federal Reserve Bank Funds (“Fed Funds”). The BANs will be accompanied by the customary closing documents, including a no-litigation certificate, effective as of the date of delivery, stating that there is no litigation pending affecting the validity of any of the bond anticipation notes included in these issues. It shall be a condition to the obligation of the successful bidder to accept delivery of and pay for the BANs that, simultaneously with or before delivery and payment for the BANs, the respective bidder shall be furnished a certificate or certificates of the County Executive, the County Administrative Officer and the Director of Budget and Finance to the effect that, to the best of their knowledge and belief, the Official Statement (and any amendment or supplement thereto except for the Reoffering Information as to which no view will be expressed) as of the date of sale and as of the date of delivery of the bond anticipation notes does not contain any untrue statement of a material fact and does not omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and that between the date of sale and the date of delivery of the BANs there has been no material adverse change in the financial condition or revenues of the County, except as reflected or contemplated in the Official Statement (and any amendment or supplement thereto).

Legal Opinion

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CUSIP Numbers

Continuing Disclosure

Additional Information

KEVIN KAMENETZ County Executive of Baltimore County, Maryland

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APPENDIX F-1

FORM OF ISSUE PRICE CERTIFICATE FOR QUALIFIED COMPETITIVE BID

$______Baltimore County, Maryland General Obligation Bond Anticipation Notes

[$______Baltimore County Metropolitan District Bond Anticipation Notes – 2018 Series/ $______Baltimore County Consolidated Public Improvement Bond Anticipation Notes – 2018 Series]

ISSUE PRICE CERTIFICATE

The undersigned, on behalf of [NAME OF WINNING BIDDER] (the “[SHORT FORM NAME OF WINNING BIDDER]”), hereby certifies as set forth below with respect to the sale of the above-captioned obligations (the “BANs”).

1. Reasonably Expected Initial Offering Price.

(a) As of the Sale Date, the reasonably expected initial offering price [of each series] of the BANs to the Public by [SHORT FORM NAME OF WINNING BIDDER] is the price listed in Schedule A (the “Expected Offering Price”). The Expected Offering Price is the price for [each series of] the BANs used by [SHORT FORM NAME OF WINNING BIDDER] in formulating its bid to purchase the BANs. Attached as Schedule B is a true and correct copy of the bid provided by [SHORT FORM NAME OF WINNING BIDDER] to purchase the BANs.

(b) [SHORT FORM NAME OF WINNING BIDDER] was not given the opportunity to review other bids prior to submitting its bid.

2. Defined Terms.

(a) Issuer means Baltimore County, Maryland.

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

(c) Sale Date means the first day on which there is a binding contract in writing for the sale or exchange the BANs. The Sale Date of the BANs is Thursday, March 1, 2018.

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

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The undersigned understands that the foregoing information will be relied upon by the Issuer with respect to certain of the representations set forth in the Tax and Section 148 Certificate and with respect to compliance with the federal income tax rules affecting the BANs, and by McKennon Shelton & Henn LLP, as Bond Counsel to the Issuer in connection with rendering its opinion that the interest on the BANs is excluded from gross income for federal income tax purposes, the preparation of the Internal Revenue Service Form 8038-G, and other federal income tax advice that they may give to the Issuer from time to time relating to the BANs.

[NAME OF WINNING BIDDER], By: ______Title: ______Dated: ______, 2018

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SCHEDULE A Expected Initial Offering Price of the BANs

[Insert]

F-1-3

SCHEDULE B Copy of Bid

[See Attached]

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APPENDIX F-2

FORM OF ISSUE PRICE CERTIFICATE FOR NONQUALIFIED COMPETITIVE BID

$______Baltimore County, Maryland General Obligation Bond Anticipation Notes

[$______Baltimore County Metropolitan District Bond Anticipation Notes – 2018 Series/ $______Baltimore County Consolidated Public Improvement Bond Anticipation Notes – 2018 Series]

ISSUE PRICE CERTIFICATE

The undersigned, on behalf of [NAME OF WINNING BIDDER] (the “[SHORT FORM NAME OF WINNING BIDDER]”), [on behalf of itself and [NAMES OF MEMBERS OF THE UNDERWRITING SYNDICATE] (together, the “Underwriting Syndicate”),] hereby certifies as set forth below with respect to the sale and issuance of the above-captioned obligations (the “BANs”).

1. Sale of the General Rule BANs. As of the date of this Certificate, the first price at which 10% of [each series of] the BANs were sold by [SHORT FORM NAME OF WINNING BIDDER] [THE UNDERWRITING SYNDICATE] to the Public is the [respective] price listed in Schedule A.

2. Initial Offering Price of the Hold-the-Offering-Price BANs.

(a) [SHORT FORM NAME OF WINNING BIDDER] [THE MEMBERS OF THE UNDERWRITING SYNDICATE] offered the Hold-the-Offering Price BANs to the Public for purchase at the [respective] initial offering prices listed in Schedule A (the “Initial Offering Price”) on or before the Sale Date. A copy of the pricing wire or equivalent communication for the BANs is attached to this Certificate as Schedule B.

(b) As set forth in the Notice of Sale and bid award, the [SHORT FORM NAME OF WINNING BIDDER] [MEMBERS OF THE UNDERWRITING SYNDICATE] [has] [have] agreed in writing that, (i) with respect to the Hold-the-Offering-Price BANs, [it] [they] would neither offer nor sell any of the BANs to any person at a price that is higher than the [respective] Initial Offering Price during the Holding Period (the “hold-the-offering-price rule”), and (ii) any selling group agreement shall contain the agreement of each dealer who is a member of the selling group, and any retail distribution agreement shall contain the agreement of each broker-dealer who is a party to the retail distribution agreement, to comply with the hold-the-offering-price rule. Pursuant to the foregoing, no Underwriter has offered or sold the Hold-the- Offering Price BANs at a price that is higher than the [respective] Initial Offering Price for the BANs during the Holding Period.

3. Defined Terms.

(a) General Rule BANs means the BANs shown in Schedule A hereto as the “General Rule BANs.”

(b) Hold-the-Offering-Price BANs means the BANs listed in Schedule A hereto as the “Hold-the- Offering-Price BANs.”

(c) Holding Period means, with respect to the Hold-the-Offering-Price BANs, the period starting on the Sale Date and ending on the earlier of (i) the close of the fifth business day after the Sale Date, or (ii) the date on which [SHORT FORM NAME OF WINNING BIDDER] [the Underwriters] [has] [have] sold at least 10% of such Hold-the- Offering-Price BANs to the Public at prices that are no higher than the Initial Offering Price for such Hold-the-Offering-Price BANs.

(d) Issuer means Baltimore County, Maryland.

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

(f) Sale Date means the first day on which there is a binding contract in writing for the sale of the BANs. The Sale Date of the BANs is Thursday, March 1, 2018.

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

The undersigned understands that the foregoing information will be relied upon by the Issuer with respect to certain of the representations set forth in the Tax and Section 148 Certificate and with respect to compliance with the federal income tax rules affecting the BANs, and by McKennon Shelton & Henn LLP, as Bond Counsel to the Issuer, in connection with rendering its opinions that the interest on the BANs is excluded from gross income for federal income tax purposes, the preparation of the Internal Revenue Service Form 8038-G, and other federal income tax advice that they may give to the Issuer from time to time relating to the BANs.

[NAME OF WINNING BIDDER], as [______]

By: ______Title: ______

Dated: ______, 2018

F-2-2

SCHEDULE A

Sale Price of the General Rule BANs

[Insert]

Initial Offering Price of the Hold-The-Offering-Price BANs

[Insert]

F-2-3

SCHEDULE B

Pricing Wire or Equivalent Communication

[See Attached]

F-2-4

BALTIMORE COUNTY, MARYLAND • Metropolitan District Bond Anticipation Notes – 2018 Series and Consolidated Public Improvement Bond Anticipation Notes – 2018 Series