OFFICIAL STATEMENT DATED JUNE 16, 2016
New Issue – Book-Entry-Only Rating: Standard & Poor’s: SP-1+ (See “Credit Rating” herein.)
In the opinion of Gibbons P.C., Bond Counsel to the Authority (as defined herein), assuming continuing compliance by the Authority and the Borrower (as defined herein) with certain tax covenants described herein, under existing law, interest on the Series 2016 Notes (as defined herein) is excluded from the gross income of the owners of the Series 2016 Notes for federal income tax purposes pursuant to Section 103 of the Internal Revenue Code of 1986, as amended (the “Code”), and interest on the Series 2016 Notes is not an item of tax preference under Section 57 of the Code for purposes of computing the alternative minimum tax. In the case of certain corporate holders of the Series 2016 Notes, interest on the Series 2016 Notes will be included in the calculation of the alternative minimum tax as a result of the inclusion of interest on the Series 2016 Notes in “adjusted current earnings” of certain corporations. Under existing law, interest on the Series 2016 Notes and net gains from the sale of the Series 2016 Notes are exempt from the tax imposed by the New Jersey Gross Income Tax Act. See “TAX MATTERS” herein regarding certain other tax considerations. $14,340,000 THE PASSAIC COUNTY IMPROVEMENT AUTHORITY (PASSAIC COUNTY, NEW JERSEY) GOVERNMENTAL LOAN REVENUE BOND ANTICIPATION NOTES, SERIES 2016 (PASSAIC COUNTY GUARANTEED) (CITY OF PATERSON PROJECT) Interest Rate: 2.00% Reoffering Yield: 0.82% CUSIP No. 702755BK4
Dated Date: Date of Delivery Maturity Date: June 28, 2017
The Governmental Loan Revenue Bond Anticipation Notes, Series 2016 (Passaic County Guaranteed) (City of Paterson Project) (the “Series 2016 Notes”) will be issued by The Passaic County Improvement Authority (the “Authority”) as fully-registered notes and, when issued, will be registered in the name of Cede & Co., as nominee for The Depository Trust Company (“DTC”), an automated depository for securities and clearing house transactions, which will act as securities depository for the Series 2016 Notes. Individual purchases will be made in book-entry form (without certificates) in the principal amount of $5,000 or any integral multiple thereof.
The principal of and interest on the Series 2016 Notes are payable at maturity to the registered owners thereof at their respective addresses as they appear on the registration books of The Bank of New York Mellon, Woodland Park, New Jersey, as trustee, note registrar and paying agent, and will be credited to the participants of DTC as listed on the records of DTC as of the close of business one business day prior to the maturity date set forth above. See “DESCRIPTION OF THE SERIES 2016 NOTES – DTC Book-Entry-Only System” herein. The Series 2016 Notes are not subject to redemption prior to their stated maturity.
The Series 2016 Notes are being issued pursuant to the 2016 Governmental Loan Revenue Note Resolution (City of Paterson Project) of the Authority duly adopted on May 25, 2016 (the “Resolution”), and in accordance with the County Improvement Authorities Law, constituting Chapter 183 of the Pamphlet Laws of 1960 of the State of New Jersey, as amended and supplemented (the “Act”). The Series 2016 Notes are being issued to provide funds to make a loan to the City of Paterson (the “Borrower”), in the County of Passaic (the “County”), New Jersey, to: (i) finance the reconstruction of various roads located in the Borrower, the payment of amounts owing to others for taxes levied by the Borrower and the demolition of the Armory located in the Borrower due to fire damage; and (ii) pay certain costs of issuance relating to the issuance and delivery of the Series 2016 Notes and the Borrower Notes (as hereinafter defined).
The Series 2016 Notes will be payable from and are secured by payments made on general obligation notes of the Borrower (collectively, the “Borrower Notes”). The Borrower Notes will be sold to the Authority pursuant to a Note Purchase Agreement entered into by and between the Authority and the Borrower. The Borrower Notes shall be direct and general obligations of the Borrower. In the opinion of Bond Counsel to the Borrower, the Borrower Notes are valid and legally binding obligations of the Borrower and, unless paid from other sources, are payable from ad valorem taxes levied upon all the taxable property within the jurisdiction of the Borrower, without limitation as to rate or amount. See “SECURITY FOR THE SERIES 2016 NOTES” herein.
As additional security for the Series 2016 Notes, payment of the principal of and interest on the Series 2016 Notes is fully, unconditionally and irrevocably guaranteed by the County pursuant to a guaranty resolution duly adopted by the County on May 24, 2016 (the “County Guaranty”). The County has the power and the obligation to cause the levy of ad valorem taxes upon all the taxable property within the jurisdiction of the County, without limitation as to rate or amount, for the payment of its obligation under the County Guaranty. The County Guaranty shall remain in effect until the Series 2016 Notes have been paid in full.
THE AUTHORITY HAS NO POWER TO LEVY OR COLLECT TAXES. THE SERIES 2016 NOTES ARE NEITHER A DEBT NOR A LIABILITY OF THE STATE OF NEW JERSEY, THE COUNTY (EXCEPT TO THE EXTENT OF THE COUNTY GUARANTY), THE BORROWER OR ANY OTHER POLITICAL SUBDIVISION OF THE STATE OF NEW JERSEY, OTHER THAN THE AUTHORITY.
This cover page includes certain information for quick reference only. It is not a summary of the matters set forth herein. Investors must read the entire Official Statement, including the Appendices, to obtain information essential to the making of an informed investment decision.
The Series 2016 Notes are offered when, as and if issued and delivered to the Underwriter (as defined herein), subject to the approval of legality by Gibbons P.C., Newark, New Jersey, Bond Counsel to the Authority. Certain legal matters concerning the obligations of the County will be passed upon by William J. Pascrell, III, Esq., Paterson, New Jersey, County Counsel. Certain legal matters concerning the Borrower Notes will be passed upon by Archer & Greiner P.C., Red Bank, New Jersey, Bond Counsel to the Borrower. Certain legal matters will be passed upon for the Authority by its General Counsel, Law Offices of Peter A. Tucci, Jr. LLC, Hackensack, New Jersey, and for the Underwriter by its Counsel, McManimon, Scotland & Baumann, LLC, Roseland, New Jersey. NW Financial Group, LLC, Hoboken, New Jersey, has acted as financial advisor to the Authority in connection with the issuance of the Series 2016 Notes. GB Associates LLC, Livingston, New Jersey, has acted as financial advisor to the Borrower in connection with the issuance of the Borrower Notes. It is expected that the Series 2016 Notes will be available for delivery through the facilities of DTC in New York, New York, on or about June 29, 2016. THE PASSAIC COUNTY IMPROVEMENT AUTHORITY
COMMISSIONERS
Dennis F. Marco, Chairman Wayne Alston, Vice Chairman Joseph C. Petriello, Commissioner Michael R.F. Bradley, Commissioner Ronda Casson Cotroneo, Commissioner
EXECUTIVE DIRECTOR
Nicole S. Fox
GENERAL COUNSEL
Law Offices of Peter A. Tucci, Jr. LLC Hackensack, New Jersey
INDEPENDENT AUDITOR
Ferraioli, Wielkotz, Cerullo & Cuva, P.A. Pompton Lakes, New Jersey
FINANCIAL ADVISOR
NW Financial Group, LLC Hoboken, New Jersey
BOND COUNSEL
Gibbons, P.C. Newark, New Jersey
COUNTY OF PASSAIC STATE OF NEW JERSEY
BOARD OF CHOSEN FREEHOLDERS
Theodore O. Best Jr., Director John W. Bartlett, Deputy Director Terry Duffy, Freeholder Bruce James, Freeholder Cassandra "Sandi" Lazzara, Freeholder Pasquale "Pat" Lepore, Freeholder Hector C. Lora, Freeholder
COUNTY OFFICIALS
Anthony J. De Nova III, County Administrator Louis E. Imhof, III, Clerk of the Board of Chosen Freeholders Richard Cahill, Director of Finance Kristin M. Corrado, Esq., County Clerk
COUNTY COUNSEL
William J. Pascrell, III, Esq. Paterson, New Jersey
INDEPENDENT AUDITOR
Ferraioli, Wielkotz, Cerullo & Cuva, P.A. Pompton Lakes, New Jersey
No broker, dealer, salesman or other person has been authorized by the Authority or by the Underwriter to give any information or to make any representations, other than those contained in this Official Statement, in connection with the offering of the Series 2016 Notes made hereby and, if given or made, such information or representations must not be relied upon as having been authorized by any of the foregoing. 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 Series 2016 Notes in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale.
The information set forth herein has been provided by the Authority and by other sources that are believed to be reliable by the Authority and by the Underwriter, but such information provided by such other sources is not guaranteed as to accuracy or completeness by the Authority or by the Underwriter, and is not intended to be and is not to be construed as a representation by the Authority or by the Underwriter. Certain financial, economic and demographic information concerning the County is contained in Appendices A and B to this Official Statement. Such information has been furnished by the County. Certain financial, economic and demographic information concerning the Borrower is contained in Appendices C and D to this Official Statement. Such information has been furnished by the Borrower. Neither the Authority nor the Underwriter has confirmed the accuracy or completeness of such information relating to the County and the Borrower, and the Authority and the Underwriter disclaim any responsibility for the accuracy or completeness thereof.
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 implication that there has been no change in the affairs of the Authority, the County or the Borrower since the date hereof or any earlier date as of which any information contained herein is given. This Official Statement is submitted in connection with the sale of the Series 2016 Notes referred to herein and may not be used, in whole or in part, for any other purpose.
IN CONNECTION WITH THE OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES 2016 NOTES OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME WITHOUT PRIOR NOTICE.
The Underwriter has provided the following sentence for inclusion in this Official Statement. The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as they apply to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information.
"CUSIP" is a registered trademark of the American Bankers Association. CUSIP numbers are provided by Standard & Poor's CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc. The CUSIP number listed on the cover page hereof is being provided solely for the convenience of the holders of the Series 2016 Notes only at the time of issuance of the Series 2016 Notes. The Authority does not make any representations with respect to such number or undertake any responsibility for its accuracy now or at any time in the future. The CUSIP number for the Series 2016 Notes is subject to being changed after the issuance of the Series 2016 Notes as a result of various subsequent actions, including, but not limited to, a refunding in whole or in part of the Series 2016 Notes or as a result of the procurement of secondary market portfolio insurance or other similar enhancement by investors that is applicable to all or a portion of the Series 2016 Notes.
TABLE OF CONTENTS PAGE
INTRODUCTION ...... 1 THE LOAN ...... 2 ESTIMATED SOURCES AND USES OF FUNDS ...... 3 DESCRIPTION OF THE SERIES 2016 NOTES ...... 3 General ...... 3 DTC Book-Entry-Only System...... 3 Redemption ...... 5 Additional Notes ...... 5 SECURITY FOR THE SERIES 2016 NOTES ...... 5 General ...... 5 Borrower Note Purchase Agreement ...... 6 Obligation of Borrower ...... 6 County Guaranty ...... 8 County Guaranty Agreement ...... 8 THE AUTHORITY ...... 9 SUMMARY OF CERTAIN PROVISIONS FOR THE PROTECTION OF GENERAL OBLIGATION DEBT OF NEW JERSEY MUNICIPALITIES AND COUNTIES ...... 9 General ...... 9 Local Bond Law ...... 9 Debt Limits ...... 10 SUMMARY OF CERTAIN PROVISIONS OF THE BORROWER NOTES AND BORROWER NOTE PURCHASE AGREEMENT ...... 13 Obligation of Borrower ...... 13 Events of Default of Borrower ...... 13 SUMMARY OF CERTAIN PROVISIONS OF THE RESOLUTION ...... 14 Resolution to Constitute Contract ...... 14 Pledge Effected by Resolution ...... 14 Establishment of Funds and Accounts ...... 14 Loan Fund ...... 15 Revenue Fund ...... 15 Debt Service Fund ...... 15 Rebate Fund ...... 15 Depositories ...... 15 Investment of Certain Funds ...... 15 Power to Issue Notes and Pledge Pledged Property ...... 16 Tax Covenant ...... 16 Events of Default ...... 16 Enforcement of County Guaranty ...... 17 Supplemental Resolutions Effective Upon Filing with Trustee ...... 17 Supplemental Resolutions Effective Upon Consent of Trustee ...... 18 Powers of Amendment ...... 18 Modifications by Unanimous Consent ...... 18 Defeasance ...... 18 Loan Defaults ...... 19 Payment or Prepayment of Borrower Notes ...... 19 PLEDGE OF THE STATE NOT TO LIMIT POWER OF AUTHORITY OR RIGHTS OF BONDHOLDERS ...... 19
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LEGALITY FOR INVESTMENT ...... 19 LITIGATION ...... 19 The Authority ...... 19 The Borrower ...... 20 The County ...... 20 TAX MATTERS ...... 20 Exclusion of Interest on Series 2016 Notes from Gross Income for Federal Income Tax Purposes ...... 20 Tax Treatment of Original Issue Premium ...... 20 Additional Federal Income Tax Consequences ...... 21 State Taxation ...... 21 Miscellaneous ...... 21 APPROVAL OF LEGALITY ...... 22 CREDIT RATING ...... 22 UNDERWRITING ...... 22 SECONDARY MARKET DISCLOSURE ...... 22 FINANCIAL ADVISORS ...... 24 APPENDICES ...... 24 MISCELLANEOUS ...... 25
APPENDIX A Certain Information Concerning the County ...... A-1
APPENDIX B Financial Statements of the County ...... B-1
APPENDIX C General Information Concerning the Borrower ...... C-1
APPENDIX D Financial Statements of the Borrower ...... D-1
APPENDIX E Form of Approving Legal Opinion ...... E-1
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OFFICIAL STATEMENT
of
THE PASSAIC COUNTY IMPROVEMENT AUTHORITY
Relating to its
$14,340,000 GOVERNMENTAL LOAN REVENUE BOND ANTICIPATION NOTES, SERIES 2016 (PASSAIC COUNTY GUARANTEED) (CITY OF PATERSON PROJECT)
INTRODUCTION
This Official Statement, which includes the cover page and the Appendices attached hereto, is furnished by The Passaic County Improvement Authority (the "Authority"), a public body corporate and politic of the State of New Jersey (the "State"), to provide certain information relating to the City of Paterson (the "Borrower") located within the County of Passaic (the "County"), New Jersey, as described under "THE LOAN" herein, and the $14,340,000 principal amount of the Governmental Loan Revenue Bond Anticipation Notes, Series 2016 (Passaic County Guaranteed) (City of Paterson Project) (the "Series 2016 Notes"), to be issued by the Authority. The Series 2016 Notes are being issued pursuant to the 2016 Governmental Loan Revenue Note Resolution (City of Paterson Project) of the Authority duly adopted on May 25, 2016 (the "Resolution"), and in accordance with the County Improvement Authorities Law, constituting Chapter 183 of the Pamphlet Laws of 1960 of the State of New Jersey, as amended and supplemented (the "Act").
The Series 2016 Notes constitute special and limited obligations of the Authority, and are secured only by those revenues of the Authority that are derived by the Authority from the loan repayments (the "Loan Repayments") made by the Borrower pursuant to the Borrower Notes (as hereinafter defined) purchased by the Authority pursuant to the Borrower Note Purchase Agreement as herein described. The Loan Repayments made pursuant to the Borrower Notes are pledged by the Authority for the payment of the principal of and interest on the Series 2016 Notes. The Borrower Notes shall be direct and general obligations of the Borrower. In the opinion of Bond Counsel to the Borrower, the Borrower Notes are valid and legally binding obligations of the Borrower and, unless paid from other sources, are payable from ad valorem taxes levied upon all the taxable property within the jurisdiction of the Borrower, without limitation as to rate or amount. See "SECURITY FOR THE SERIES 2016 NOTES – Obligation of Borrower" herein.
As additional security for the Series 2016 Notes, payment of the principal of and interest on the Series 2016 Notes is fully, unconditionally and irrevocably guaranteed by the County pursuant to a guaranty resolution duly adopted by the County on May 24, 2016 (the "County Guaranty"). The County has the power and the obligation to cause the levy of ad valorem taxes upon all the taxable property within the jurisdiction of the County, without limitation as to rate or amount, for the payment of its obligation under the County Guaranty. The County Guaranty shall remain in effect until the Series 2016 Notes have been paid in full.
In accordance with the Local Authorities Fiscal Control Law, constituting Chapter 313 of the Pamphlet Laws of 1983 of the State of New Jersey, the Local Finance Board, Division of Local Government Services of the Department of Community Affairs of the State (the "Local Finance Board"), has (i) reviewed the issuance of the Series 2016 Notes, the County Guaranty and the Borrower Notes and,
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by resolutions dated September 10, 2014, February 10, 2016 and May 11, 2016, made favorable findings and recommendations with regard thereto, and (ii) approved the bond ordinances of the Borrower pursuant to which the Borrower Notes will be issued on September 10, 2014 and February 10, 2016. The Bank of New York Mellon, Woodland Park, New Jersey (the "Trustee", "Paying Agent" and "Note Registrar"), has been appointed to serve as trustee, paying agent and note registrar for the Series 2016 Notes.
Copies of the Resolution, the Borrower Note Purchase Agreement, the County Guaranty and the County Guaranty Agreement (as defined herein) are on file at the offices of the Authority in Totowa, New Jersey, and at the corporate trust office of the Trustee in Woodland Park, New Jersey, and reference is made to such documents for the provisions relating to, among other things, the terms of and the security for the Series 2016 Notes, the custody and application of the proceeds of the Series 2016 Notes, the rights and remedies of the holders of the Series 2016 Notes and the rights, duties and obligations of the Authority, the Borrower and the Trustee.
This Official Statement contains brief descriptions of the Series 2016 Notes, the Resolution, the Borrower Note Purchase Agreement, the County Guaranty, the County Guaranty Agreement and the Authority. A brief description and the financial statements of the County are attached to this Official Statement as Appendices A and B, respectively. A brief description and the financial statements of the Borrower are attached to this Official Statement as Appendices C and D, respectively. The description of the County and its financial statements have been furnished by the County, and the description of the Borrower and its financial statements have been furnished by the Borrower. Neither the Authority nor the Underwriter has confirmed the accuracy or completeness of such information relating to the County and the Borrower, and the Authority and the Underwriter disclaim any responsibility for the accuracy or completeness thereof. Capitalized words and terms used herein that are not ordinarily capitalized and that are not otherwise defined herein shall have the meanings ascribed to such words and terms in the Resolution. The summaries of and references to all documents, statutes, reports and other instruments referred to herein do not purport to be complete, comprehensive or definitive, and each such summary and reference is qualified in its entirety by reference to such document, statute, report or instrument.
THE LOAN
The Series 2016 Notes are being issued to provide funds to make a loan to the Borrower (the "Borrower Loan"). The Borrower will apply the proceeds of the Borrower Loan to: (i) finance the reconstruction of various roads located in the Borrower (in the amount of $11,665,000), the payment of amounts owing to others for taxes levied by the Borrower (in the amount of $1,630,000) and the demolition of the Armory located in the Borrower due to fire damage (in the amount of $1,045,000); and (ii) pay certain costs of issuance relating to the issuance and delivery of the Series 2016 Notes and the Borrower Notes. The Borrower Loan will be made pursuant to a Note Purchase Agreement entered into by and between the Authority and the Borrower (the "Borrower Note Purchase Agreement").
Pursuant to the Borrower Note Purchase Agreement, and in accordance with applicable law, the Borrower will issue and sell (i) a Bond Anticipation Note in the amount of $11,665,000, (ii) a Tax Appeal Refunding Note in the amount of $1,630,000 and (iii) an Emergency Note in the amount of $1,045,000 (collectively, the "Borrower Notes"), to the Authority in the aggregate principal amount of $14,340,000. The Borrower Notes will be purchased by the Authority and the Loan Repayments will be pledged by the Authority to secure the Series 2016 Notes. See "SUMMARY OF CERTAIN PROVISIONS OF THE BORROWER NOTES AND BORROWER NOTE PURCHASE AGREEMENT" herein.
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ESTIMATED SOURCES AND USES OF FUNDS
Sources of Funds: Principal Amount of Series 2016 Notes $14,340,000.00 Original Issue Premium 167,347.80 Total Sources of Funds: $14,507,347.80
Uses of Funds: Deposit to Loan Fund (1) $14,340,000.00 Costs of Issuance (2) 167,347.80 Total Uses of Funds: $14,507,347.80 ______(1) Represents the purchase price of the Borrower Notes less certain costs incurred by the Authority and the Borrower in connection with the issuance and delivery of the Series 2016 Notes and the Borrower Notes that have been netted against the purchase price. (2) Includes Underwriter's discount, additional premium and all legal, printing, financial advisory and fiduciary expenses incurred in connection with the issuance of the Series 2016 Notes and the Borrower Notes.
DESCRIPTION OF THE SERIES 2016 NOTES
General
The Series 2016 Notes are to be issued in the aggregate principal amount of $14,340,000. The Series 2016 Notes shall be dated their date of delivery, shall be payable as to both principal and interest on the maturity date and shall bear interest payable at the rate per annum as set forth on the cover page of this Official Statement. Interest on the Series 2016 Notes shall be computed on the basis of a 360-day year consisting of twelve 30-day months.
The Series 2016 Notes will be issued as fully-registered book-entry bonds and will be registered in the name of Cede & Co., as nominee for The Depository Trust Company, New York, New York ("DTC"). An individual purchaser may purchase a Series 2016 Note in book-entry form (without certificates) in the principal amount of $5,000 or any integral multiple thereof. Principal of and interest due on the Series 2016 Notes will be credited to the participants of DTC as listed on the records of DTC as of the close of business one business day prior to the maturity date set forth on the cover page of this Official Statement. In the event the Series 2016 Notes are no longer subject to DTC's book-entry-only system, the principal of and interest on the Series 2016 Notes will be payable upon surrender of the Series 2016 Notes at a designated corporate trust office of the Paying Agent.
DTC Book-Entry-Only System
DTC will act as securities depository for the Series 2016 Notes. The Series 2016 Notes 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 Series 2016 Note certificate will be issued for the aggregate principal amount of the Series 2016 Notes 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 3.6 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
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DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has a Standard & Poor's rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com.
Purchases of the Series 2016 Notes under the DTC system must be made by or through Direct Participants, which will receive a credit for the Series 2016 Notes on DTC's records. The ownership interest of each actual purchaser of each Series 2016 Note ("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 Series 2016 Notes 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 the Series 2016 Notes, except in the event that use of the book-entry system for the Series 2016 Notes is discontinued.
To facilitate subsequent transfers, all Series 2016 Notes 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 the Series 2016 Notes 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 Series 2016 Notes. DTC's records reflect only the identity of the Direct Participants to whose accounts such Series 2016 Notes 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. Beneficial Owners of the Series 2016 Notes may wish to take certain steps to augment transmission to them of notices of significant events with respect to the Series 2016 Notes, such as redemptions, defaults and proposed amendments to the security documents. For example, Beneficial Owners of the Series 2016 Notes may wish to ascertain that the nominee holding the Series 2016 Notes for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of the notices be provided directly to them.
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Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Series 2016 Notes unless authorized by a Direct Participant in accordance with DTC's MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Authority as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Series 2016 Notes are credited on the record date (identified in a listing attached to the Omnibus Proxy).
Principal and interest payments on the Series 2016 Notes 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 Authority or the Paying Agent on the payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name", and will be the responsibility of such Participant and not of DTC, the Authority or the Paying Agent, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Authority or the Paying Agent, disbursement of such payments to the Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of the Direct and Indirect Participants.
DTC may discontinue providing its services as depository with respect to the Series 2016 Notes at any time by giving reasonable notice to the Authority or the Paying Agent. Under such circumstances, in the event that a successor depository is not obtained, certificated notes are required to be printed and delivered.
The Authority may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In such event, certificated notes will be printed and delivered to DTC.
The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that the Authority believes to be reliable, but the Authority takes no responsibility for the accuracy thereof.
Redemption
The Series 2016 Notes shall not be subject to redemption prior to their stated maturity date.
Additional Notes
The Authority may not issue additional notes under the Resolution.
SECURITY FOR THE SERIES 2016 NOTES
General
The Series 2016 Notes constitute direct and special obligations of the Authority. The Series 2016 Notes are solely secured by the pledge of the Pledged Property, as that term is defined in the Resolution, which includes the Borrower Notes, the Revenues and the Funds (other than the Rebate Fund), including Investment Securities held in any such Fund, which are established, created and held by the Trustee under the Resolution, together with all proceeds and revenues of any of the foregoing and all of the Authority's right, title and interest in and to the foregoing, and all other moneys, securities or funds pledged for the
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payment of the principal of and interest on the Series 2016 Notes in accordance with the terms and provisions of the Resolution. "Revenues" include (i) all Loan Repayments received by the Authority pursuant to the Borrower Notes, (ii) payments received under the County Guaranty, (iii) any other amounts received from any other source by the Authority and pledged by the Authority as security for the payment of the Series 2016 Notes, and (iv) interest or other investment earnings received or to be received on any moneys or securities held pursuant to the Resolution and paid or required to be paid into the Revenue Fund. See "SUMMARY OF CERTAIN PROVISIONS OF THE RESOLUTION" herein.
THE AUTHORITY HAS NO POWER TO LEVY OR COLLECT TAXES. THE SERIES 2016 NOTES ARE NEITHER A DEBT NOR A LIABILITY OF THE STATE OF NEW JERSEY, THE COUNTY (EXCEPT TO THE EXTENT OF THE COUNTY GUARANTY), THE BORROWER OR ANY OTHER POLITICAL SUBDIVISION OF THE STATE OF NEW JERSEY, OTHER THAN THE AUTHORITY.
The provisions of the Series 2016 Notes and the Resolution are deemed to be and do constitute contracts by and among the Authority, the Trustee and the registered owners, from time to time, of the Series 2016 Notes, and the security interest that is granted and the pledge that is made in the Resolution and the covenants and agreements that are set forth in the Resolution to be performed on behalf of the Authority shall be for the equal benefit, protection and security of the registered owners of any and all of the Series 2016 Notes, all of which, regardless of the time or times of their issue or maturity, shall be of equal rank without preference, priority or distinction of any of the Series 2016 Notes over any other thereof, except as expressly provided in or pursuant to the terms of the Resolution.
Borrower Note Purchase Agreement
The Authority has entered into a Borrower Note Purchase Agreement to secure the Borrower Loan. Pursuant to the Borrower Note Purchase Agreement, the Authority will purchase the Borrower Notes in the principal amount equal to the Borrower Loan. The Borrower will be required to make the Loan Repayments to the Authority pursuant to the Borrower Notes. The aggregate of the Loan Repayments made by the Borrower will be sufficient to enable the Authority to pay the principal of and interest on the Series 2016 Notes. See "SUMMARY OF CERTAIN PROVISIONS OF THE BORROWER NOTES AND BORROWER NOTE PURCHASE AGREEMENT" herein.
Obligation of Borrower
General
The obligation of the Borrower to repay its Borrower Loan is a direct and general obligation of the Borrower payable from its general revenues. In the opinion of Bond Counsel to the Borrower, the Borrower Notes are valid and legally binding obligations of the Borrower and, unless paid from other sources, are payable from ad valorem taxes levied upon all the taxable property within the jurisdiction of the Borrower, without limitation as to rate or amount.
For general and financial information concerning the Borrower, see Appendix C and Appendix D to this Official Statement.
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Municipal Qualified Bond Act
The bond ordinances under which the Borrower Notes are being issued have been approved by the Local Finance Board under the Municipal Qualified Bond Act, P.L. 1976, c.38, as amended (N.J.S.A. 40A:3-1 et seq.) (the "Municipal Qualified Bond Act"). While the Borrower Notes themselves are not qualified under the Municipal Qualified Bond Act, any bonds that are issued to finance the Borrower Notes on a permanent basis will be entitled to the benefits of the Municipal Qualified Bond Act. Since joining the New Jersey Qualified Bond Program, all bond ordinances adopted by the Borrower have been approved by the Local Finance Board pursuant to the Municipal Qualified Bond Act, and all bond issues of the Borrower have been issued and secured by the provisions of the Municipal Qualified Bond Act in addition to the general obligation credit of the Borrower.
Pursuant to the provisions of the Municipal Qualified Bond Act, a portion of certain State aid allocated to issuers of qualified bonds, in amounts sufficient to pay debt service on such qualified bonds, will be withheld by the State Treasurer and forwarded to the paying agent for such qualified bonds on or before the principal and interest payment dates therefor for deposit into accounts established for the purpose of paying debt service on such qualified bonds. The State Treasurer is required to withhold from the amount of business personal property tax replacement revenues, gross receipts tax revenues, municipal purposes tax assistance fund distributions, State urban aid, State revenue sharing and any other funds appropriated as State aid payable to issuers of qualified bonds and not otherwise dedicated to specific municipal programs (the "Qualified Revenues") an amount that will be sufficient to pay debt service on such qualified bonds as the same shall mature and become due.
The Municipal Qualified Bond Act provides that all such Qualified Revenues so withheld and paid or to be paid to and held by the paying agent for such qualified bonds are deemed to be held in trust and exempt from being levied upon, taken, sequestered or applied towards paying the debts of the issuers of qualified bonds, other than for the payment of debt service on such qualified bonds. The Municipal Qualified Bond Act further provides that a statutory lien and trust is created and impressed upon all such Qualified Revenues so withheld or required to be withheld by the State Treasurer, which statutory lien and trust is deemed to be paramount and superior to all other liens of any kind in favor of the holders of such qualified bonds, for the sole purpose of paying debt service on such qualified bonds. This lien is created for the benefit of the bondholders and is perfected without delivery, recording or notice.
The Municipal Qualified Bond Act does not relieve an issuer of qualified bonds of its obligation to include in its annual budget amounts necessary to pay, in each year, the principal of and interest becoming due on such qualified bonds. However, such budgeted amounts may be applied to the payment of operating expenses of such issuer of qualified bonds for the then current year to the extent that appropriated amounts have been withheld from the Qualified Revenues payable to such issuer of qualified bonds and forwarded to the paying agent for such qualified bonds. Such budgeted amounts must be used to pay debt service becoming due on such qualified bonds in any year in which sufficient Qualified Revenues are not appropriated.
The State has covenanted in the Municipal Qualified Bond Act with the holders of such qualified bonds that it will not repeal, revoke, rescind, modify or amend the provisions of the Municipal Qualified Bond Act providing for the withholding of Qualified Revenues and the payment of such Qualified Revenues to the paying agent for such qualified bonds so as to create any lien or charge on or pledge, assignment, diversion, withholding payment or other use of or deduction from such Qualified Revenues that is prior in time or superior in right to the payment of debt service on such qualified bonds.
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The Municipal Qualified Bond Act does not pledge or guaranty that any of the amounts payable to the paying agent for such qualified bonds will, in fact, be made or continued. Each such annual amount is subject to appropriation by the State Legislature. Moreover, the State is not required to continue to make appropriations of such amounts nor is the State limited or prohibited from repealing or amending any law heretofore or hereafter enacted for the payment or apportionment of such amounts or the manner, time or amount thereof. Further, the amounts payable to the paying agent for such qualified bonds do not constitute an additional source of revenues available to the issuers of qualified bonds.
County Guaranty
At the time of issuance and delivery of the Series 2016 Notes, the County, pursuant to a resolution duly adopted by the County on May 24, 2016, in accordance with the Act, will guaranty the payment, when due, of the principal of and interest on the Series 2016 Notes. The County's obligations under the County Guaranty to make the punctual payment of the principal of and interest on the Series 2016 Notes as the same shall become due and payable shall be unconditional and irrevocable. Under the Act, the County shall be obligated to pay the principal of and interest on the Series 2016 Notes in the same manner and to the same extent as if the County had issued general obligation notes or bonds under the Local Bond Law (N.J.SA. 40A:2-1 et seq.) (the "Local Bond Law"). The County's obligation to make payments under the County Guaranty is a direct and general obligation of the County payable, unless paid from some other source, from the levy of ad valorem taxes upon all the taxable property within the jurisdiction of the County, without limitation as to rate or amount. The County Guaranty shall remain in effect until the Series 2016 Notes have been paid in full.
County Guaranty Agreement
In order to establish the terms and conditions pursuant to which the County will make payments that are required to be made under the terms of the County Guaranty, the Authority, the Trustee and the County will enter into the County Guaranty Agreement (the "County Guaranty Agreement") on or before the initial delivery date of the Series 2016 Notes.
Among other things, the County Guaranty Agreement provides that if, on the fifteenth day of the month in which the Authority is obligated to pay the principal of or interest on the Series 2016 Notes, there are insufficient funds in the Debt Service Fund to provide for the payment of the principal of or interest on the Series 2016 Notes when due and payable, the Trustee shall so notify the County within one business day thereafter and the County shall acknowledge receipt thereof within one business day, and, no later than two business days prior to such principal or interest payment date on the Series 2016 Notes, the County shall make payment in immediately available funds to the Trustee of the amount of such deficiency in the Debt Service Fund, as and to the extent provided in the Resolution. Notwithstanding any other provision of the County Guaranty Agreement to the contrary, failure of the Trustee to give the County notice as provided in the County Guaranty Agreement shall not relieve the County of its obligation to make payment to the Trustee under the terms of the County Guaranty.
When notice has been provided as described above, the County shall be obligated immediately to take all necessary actions to pay such principal of and interest on the Series 2016 Notes. Such actions shall include the adoption of an emergency appropriation or an emergency temporary appropriation and the funding of such appropriation in accordance with the requirements of the Local Budget Law of the State (N.J.S.A. 40A:4-1 et seq.) (the "Local Budget Law"), or any other actions that are legally permitted to be taken to meet the requirements of the County Guaranty.
For general and financial information concerning the County, see Appendix A and Appendix B to this Official Statement.
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THE AUTHORITY
The Authority is a public body corporate and politic organized and existing under the Act and created pursuant to a resolution of the Board of Chosen Freeholders of the County duly adopted on December 31, 2002. The Authority has, among other powers, the authority to extend credit or make loans to any governmental unit for the planning, design, acquisition, construction, equipping and furnishing of public facilities, the payments with respect to which will be sufficient to pay the principal of and interest on the bonds or notes issued for that purpose by the Authority. The names and dates of expiration of the terms of the Commissioners of the Authority are as follows:
EXPIRATION OF COMMISSIONER CURRENT TERM
Dennis F. Marco, Chairman March 1, 2021 Wayne Alston, Vice Chairman March 1, 2017 Joseph C. Petriello, Commissioner March 1, 2018 Michael R.F. Bradley, Commissioner March 1, 2019 Ronda Casson Cotroneo, Commissioner March 1, 2020
Commissioners of the Authority whose terms have expired continue to serve until reappointment or until their successors are appointed and qualified.
The Executive Director of the Authority is Nicole S. Fox, who is appointed by the Commissioners of the Authority. Gibbons P.C., Newark, New Jersey, is Bond Counsel to the Authority with respect to the Series 2016 Notes. The Financial Advisor to the Authority is NW Financial Group, LLC, Hoboken, New Jersey. Law Offices of Peter A. Tucci, Jr. LLC, Hackensack, New Jersey, is General Counsel to the Authority.
SUMMARY OF CERTAIN PROVISIONS FOR THE PROTECTION OF GENERAL OBLIGATION DEBT OF NEW JERSEY MUNICIPALITIES AND COUNTIES
General
The following is a summary of certain provisions of New Jersey law relating to the protection of general obligation debt of New Jersey municipalities and counties. In the opinion of Bond Counsel to the Borrower, the Borrower Notes (which are pledged to the holders of the Series 2016 Notes) constitute general obligations of the Borrower.
This summary does not purport to be a full and complete statement of all the provisions referred to herein and the cited statutes should be read in full for a complete understanding of all of said provisions.
Local Bond Law
The Local Bond Law generally governs the issuance of bonds and notes by local units to finance certain capital improvements and appropriations. The Local Bond Law requires that bonds must mature within the statutory period of usefulness of the projects bonded and that bonds be retired in serial installments. A 5% cash down payment is generally required toward the financing of capital expenditures. All bonds and notes issued by the Borrower are general obligations.
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Debt Limits
Debt Limits. The net authorized debt of all local units that are municipalities in the State is generally limited by statute to an amount equal to 3.5% of its equalized valuation basis. The equalized valuation basis of the local unit is set by statute as the average for the last three years of the sum of the equalized value of all taxable real property and improvements and certain Class II railroad property within its boundaries, as annually determined by the State Department of the Treasury, Division of Taxation. Certain categories of debt are permitted by statute to be deducted for purposes of computing the statutory debt limit.
Exceptions to Debt Limits – Extensions of Credit. The debt limit of a local unit may be exceeded with the approval of the Local Finance Board and as permitted by other statutory exceptions. If all or any part of a proposed debt authorization would exceed its debt limit, the local unit must apply to the Local Finance Board for an extension of credit. If the Local Finance Board determines that a proposed debt authorization would not materially impair the ability of the local unit to meet its obligations or to provide essential services, and the Local Finance Board makes other statutory determinations, approval is granted.
School Debt. In the State, in a Type II school district without a Board of School Estimate, school debt authorized by the board of education must be approved by the registered voters of that school district. When the amount authorized exceeds the school district's limit, the district may use the municipality's share of available borrowing capacity upon approval of the proposed debt by the State Commissioner of Education and the Local Finance Board, and subsequently by the registered voters of the district. School debt of a Type I school district is authorized by a Board of School Estimate and the governing body of a local unit.
Local Budget Law. The foundation of the New Jersey local finance system is the annual budget. Every local unit must adopt an operating budget in the form required by the Division of Local Government Services, Department of Community Affairs, State of New Jersey (the "Division"). Items of revenue and appropriation are regulated by law and must be certified by the Director of the Division (the "Director") prior to final adoption of the budget. The Local Budget Law requires each local unit to appropriate sufficient funds for the payment of current debt service, and the Director is required to review the adequacy of such appropriations.
The Director has no authority over individual operating appropriations, unless a specific amount is required by law, but the review focusing on anticipated revenues serves to protect the solvency of all local units. The budgets of local units must be in balance; i.e., total anticipated revenues must equal total appropriations.
If in any year a local unit's expenditures exceed (or are less than) its realized revenues for that year, then such deficit (excess) must be raised (accounted for) in the succeeding year's budget.
Real Estate Taxes. The same general principle that revenue cannot be anticipated in a budget in excess of that realized in the preceding year applies to property taxes. The Local Budget Law (N.J.S.A. 40A:4-29) provides that the maximum that may be anticipated is the sum produced by the multiplication of the amount of delinquent taxes unpaid and owing to the local unit on the first day of the current fiscal year by the percentage of collection of delinquent taxes for the year immediately preceding the current fiscal year.
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The Local Budget Law (N.J.S.A. 40A:4-41) also provides with regard to current taxes that receipts from the collection of taxes levied or to be levied in the municipality, or in the case of a county for general county purposes and payable in the fiscal year, shall be anticipated in an amount that is not in excess of the percentage of taxes levied and payable during the next preceding fiscal year that was received in cash by the last day of such preceding fiscal year.
This provision requires that an additional amount (the "Reserve For Uncollected Taxes") be added to the tax levy required to balance the budget so that when the percentage collected of the prior year's tax levy is applied to the combined total, the product will at least be equal to the tax levy required to balance the budget. The Reserve For Uncollected Taxes is calculated to be the levy required to balance a local unit's budget multiplied by the prior year's percentage of uncollected taxes (or a lesser percentage).
Miscellaneous Revenues. The Local Budget Law (N.J.S.A. 40A:4-26) provides that no miscellaneous revenue from any source shall be included as an anticipated revenue in the budget in an amount in excess of the amount actually realized in cash from the same source during the next preceding fiscal year, unless the Director shall determine upon application by the governing body that the facts clearly warrant the expectation that such excess amount will actually be realized in cash during the fiscal year and shall certify such determination in writing to the local unit.
No budget or amendment thereof shall be adopted unless the Director shall have previously certified his approval thereof with the exception of the inclusion of categorical grants-in-aid contracts for their face amount with an offsetting appropriation.
CAP Limitations. Chapter 68 of the Pamphlet Laws of 1976 (N.J.S.A. 40A:4-45.1 et seq.), as amended and supplemented by P.L. 1983, c. 49, P.L. 1990, c.89, and P.L. 2004, c.74 (the "CAP Law"), imposes restrictions that limit the allowable increase in municipal appropriations over the previous year's appropriations to the lesser of 102.5% or the increase in the Implicit Price Deflator for State and Local Government Purchases of Goods and Services as published by the United States Department of Commerce (the "Cost-of-Living Adjustment"). If the Cost-of-Living Adjustment is less than or equal to 2.5%, an increase equal to 3.5% will be permitted by adoption of an ordinance. If the Cost-of Living Adjustment is greater than 2.5%, an increase in any amount above 2.5% will be permitted upon passage of a referendum. This limitation is subject to the following exceptions among others: (i) all debt service payments (the obligation of the Borrower to repay its Borrower Loan comes within this exception); (ii) the amount of revenue generated by the increase in valuations within the municipality based solely on applying the preceding year's municipal tax rate to the apportionment valuation of new construction or improvements within the municipality and such increase shall be levied in direct proportion to said valuation; (iii) capital expenditures funded by any source; (iv) an increase involving certain defined categories of emergency appropriations as approved by the Director in certain cases; (v) amounts required to be paid pursuant to any contract between the municipality and any political subdivision or public body in connection with the provision and/or financing of projects for certain public purposes such as water, sewer, parking, senior citizens' housing or any similar purpose; or (vi) that portion of the municipal tax levy that represents funding to participate in any federal or State aid program and amounts received or to be received from federal, State or other funds in reimbursement for local expenditures.
Additionally, the Legislature of the State has previously enacted P.L. 2007, c. 62 (the "Property Tax Act"), effective April 3, 2007, which imposed a 4% cap on the tax levy of a municipality, county, school district or solid waste collection district, with certain exceptions and subject to a number of adjustments. The Property Tax Act has now been amended by the provisions of P.L. 2010, c. 44, effective June 13, 2010 (the "Amendment") and applicable to the next budget year following enactment. The Amendment reduces the tax levy cap to 2% from 4% and limits exclusions only to capital expenditures, including debt service, certain increases in pension contributions and accrued liability for
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pension contributions in excess of 2%, certain healthcare cost increases in excess of 2% and extraordinary costs directly related to a declared emergency. Waivers from the Division or the Local Finance Board are no longer available under the Amendment.
For municipalities, the tax levy cap is in addition to the existing appropriation cap; both cap laws must be met.
Deferral of Current Expenses. A local unit may make emergency appropriations after the adoption of a budget and the determination of the tax rate, but only to meet unforeseen pressing needs to protect or promote public health, safety, morals or welfare, or to provide temporary housing or public assistance. With limited exceptions set forth below, such appropriations must be included in full in the following year's budget. If such emergency appropriations exceed 3% of the adopted operating budget, consent of the Director is required (N.J.S.A. 40A:4-46, -47 and -49). The exceptions are certain enumerated quasi-capital projects such as ice, snow and flood damage to streets, roads and bridges, which may be amortized over three years, and tax map preparation, revision of ordinances, master plan preparations and severance liabilities resulting from the layoff or retirement of employees, which may be amortized over five years (N.J.S.A. 40A:4-53 and -54).
Under the CAP Law, emergency resolutions aggregating less than 3% of the previous year's final current operating appropriations may be raised in that portion of the budget outside its limitations if approved by at least two-thirds of the members of the governing body and the Director. Emergency resolutions that aggregate more than 3% of the previous year's final current operating appropriations must be raised within its limitations. Emergency resolutions for debt service, capital improvements, the County's share of federal or State grants and other statutorily permitted items are outside its limitation.
Budget Transfers. Budget transfers provide a degree of flexibility and afford a control mechanism. Transfers between major appropriation accounts are prohibited until the last two months of the year. Subaccounts (line items) within an appropriation are not subject to the same year-end transfer restriction; however, they are subject to internal review and approval.
Capital Budget. In accordance with the Local Budget Law, each local unit must adopt and annually revise a capital program budget. The capital budget, when adopted, does not constitute the approval or appropriation of funds, but sets forth a plan of the possible capital expenditures that the local unit may contemplate over a period of up to six years. Expenditures for capital purposes may be made either by ordinances adopted by the governing body of a local unit setting forth the items and the method of financing or from the annual operating budget if the items were detailed.
Operation of Utilities. Municipal public utilities are supported, in addition to the general taxing power upon real property, by the revenues generated by the respective operations of the utilities.
For each utility, there is established a separate budget. The anticipated revenues and appropriations for each utility are set forth in the separate budget. The budget is required to be balanced and to provide fully for debt service. The regulations regarding anticipation of revenues and deferral of charges apply equally to the budgets of the utilities.
Deficits or anticipated deficits in utility operations that cannot be provided for from utility surplus, if any, are required to be raised in the current or operating budget.
Local Fiscal Affairs Law (N.J.S.A. 40A:5-1 et seq.). This law regulates the non-budgetary financial activities of local governments. The chief financial officer of a local unit must file annually with the Director a verified statement of the financial condition of the local unit. The statement of the Borrower is on file with its City Clerk.
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An independent examination of a local unit's financial statements must be performed annually by a licensed registered municipal accountant. The audit, conforming to the Division's "Requirements of Audit", includes recommendations for improvement of a local unit's financial procedures and must be filed with the Clerk within six months after the close of its fiscal year and, within five days thereafter, a certified duplicate copy must be filed in the office of the Director (N.J.S.A. 40A:5-6). The filing date of an audit may be extended by the Director upon a showing of good cause. A synopsis of the audit report, together with all recommendations made, must be published in a local newspaper within 30 days of its completion (N.J.S.A. 40A:5-7).
Municipal Finance Commission (N.J.S.A. 52:27-40). Any county, municipality, school district or other political subdivision of the State has the power to file a petition with any United States court or courts in bankruptcy under the federal bankruptcy act for the purpose of effecting a plan of readjustment of its debts or for the composition of its debts; provided, that the approval of the Municipal Finance Commission of New Jersey has been obtained. The powers of the Municipal Finance Commission of New Jersey have been vested in the Local Finance Board.
SUMMARY OF CERTAIN PROVISIONS OF THE BORROWER NOTES AND BORROWER NOTE PURCHASE AGREEMENT
The following is a summary of certain provisions of the Borrower Notes and the Borrower Note Purchase Agreement. This summary does not purport to be comprehensive or definitive and is qualified by reference to all of the terms and provisions of the Borrower Notes and the Borrower Note Purchase Agreement to which reference is hereby made. Capitalized words and phrases that are not defined in this heading shall have the meanings ascribed to such words or phrases in the Borrower Notes and in the Borrower Note Purchase Agreement.
Obligation of Borrower
In the opinion of Bond Counsel to the Borrower, (i) the proceedings taken by the Borrower to authorize and issue its Borrower Notes under the Local Bond Law, the authorizing resolution of the Borrower and all other proceedings taken to authorize the Borrower Notes (collectively, the "Local Proceedings") have been validly authorized, executed and delivered and are in full force and effect, (ii) the Borrower Notes are legal, valid and binding obligations of the Borrower enforceable against the Borrower in accordance with their terms and the terms of the Local Proceedings, and, unless paid from other sources, are payable from ad valorem taxes levied upon all the taxable property within the jurisdiction of the Borrower to the extent necessary to make the required payments on the Borrower Notes, and (iii) interest on the Borrower Notes is excluded from gross income for federal income tax purposes and is exempt from the tax imposed by the New Jersey Gross Income Tax Act.
Events of Default of Borrower
The Borrower has entered into the Borrower Note Purchase Agreement with the Authority, and the Authority will purchase the Borrower Notes pursuant thereto. The following are Events of Default under the Borrower Notes: (i) failure by the Borrower to make payments of principal of or interest on the Borrower Notes when due; and (ii) the occurrence of an Event of Default by the Authority under the Resolution caused by an action of the Borrower.
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SUMMARY OF CERTAIN PROVISIONS OF THE RESOLUTION
The Resolution contains various covenants and security provisions relating to the Series 2016 Notes (which are referred to as "Notes" under this heading), certain of which are summarized below. The following summary does not purport to be a full and complete statement of the provisions of the Resolution, and the Resolution should be read in full for a complete understanding of all the provisions thereof. Capitalized terms used in this heading shall have meanings ascribed thereto in the Resolution.
Resolution to Constitute Contract
The Resolution shall be deemed to be and shall constitute a contract between the Authority and the Holders from time to time of the Notes. The security interest granted and the pledge and assignment made in the Resolution and the covenants and agreements therein set forth to be performed on behalf of the Authority shall be for the equal benefit, protection and security of the Holders of any and all of the Notes, all of which, regardless of the time or times of their authentication and delivery or maturity, shall be of equal rank without preference, priority or distinction of any of the Notes over any other thereof, all except as expressly provided in or permitted by the Resolution.
Pledge Effected by Resolution
The Notes are direct and special obligations of the Authority payable solely from the Pledged Property, meaning the Borrower Notes and the Revenues and Funds other than the Rebate Fund, including Investment Securities held in any such Fund under the Resolution, together with all proceeds and revenues of the foregoing and all of the Authority's right, title and interest in and to the foregoing, and all other moneys, securities or funds pledged for the payment of the principal of and interest on the Notes. The Revenues include (i) all Loan Repayments received by the Authority pursuant to the Borrower Notes, (ii) payments received under the County Guaranty, (iii) any other amounts received from any other source by the Authority and pledged by the Authority as security for the payment of the Notes, and (iv) interest or other investment earnings received or to be received on any moneys or securities held pursuant to the Resolution and paid or required to be paid into the Revenue Fund. All of the Pledged Property is pledged and assigned as security for the payment of the principal of and interest on the Notes in accordance with their terms and the provisions of the Resolution, subject only to the provisions of the Resolution permitting the application thereof for the purposes and on the terms and conditions set forth in the Resolution.
Nothing contained in the Resolution shall be deemed a limitation upon the authority of the Authority to issue bonds, notes or other obligations under the Act secured by other income and funds other than the Pledged Property, including, without limitation, bonds, notes or other obligations secured by federal or State grants.
Establishment of Funds and Accounts
The following Funds are established under the Resolution:
(1) Loan Fund, to be held by the Trustee,
(2) Revenue Fund, to be held by the Trustee,
(3) Debt Service Fund, to be held by the Trustee, and
(4) Rebate Fund, to be held by the Authority.
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Loan Fund
There shall be paid into the Loan Fund the amounts required to be so paid by the provisions of the Resolution or any Supplemental Resolution. The Trustee shall apply moneys in the Loan Fund, at the written direction of the Authority, to the making of the Loan to the Borrower in accordance with Article XIII of the Resolution.
Revenue Fund
All Revenues shall be promptly deposited by the Trustee upon receipt thereof into the Revenue Fund. On or prior to the fifth (5th) day before each Interest Payment Date, the Trustee shall transfer to the Debt Service Fund the amount, if any, required so that the balance in said Fund shall equal the sum of the amounts of the Debt Service Requirement on all Notes for the next respective succeeding Interest Payment Date.
Debt Service Fund
On each Interest Payment Date, the Trustee shall withdraw from the Debt Service Fund an amount equal to the interest due on the Notes on such Interest Payment Date, which moneys shall be applied by the Paying Agent to the payment of such interest. On the maturity date of the Notes, the Trustee shall make available to the Paying Agent from moneys in the Debt Service Fund an amount equal to the principal of the Notes due on such date, which moneys shall be applied by the Paying Agent to the payment of such principal.
Rebate Fund
Moneys on deposit in the Rebate Fund, including earnings on or gain realized on any moneys or investments therein, shall be held by the Authority in trust and applied as provided by instructions to the Authority contained in the Tax Certificate delivered pursuant to the Resolution.
Depositories
All moneys held by the Trustee and the Authority under the provisions of the Resolution shall constitute trust funds, and the Trustee and the Authority may deposit such moneys with one or more Depositories in trust for said parties. All moneys deposited under the provisions of the Resolution with the Trustee or any Depository shall be held in trust and applied only in accordance with the provisions of the Resolution, and each of the Funds and Accounts established by the Resolution shall be a trust fund for the purposes thereof.
Investment of Certain Funds
Moneys held in the Debt Service Fund, the Loan Fund and the Revenue Fund may be invested and reinvested in Investment Securities that mature not later than such times as shall be necessary to provide moneys when needed for payments to be made from such Fund. In making any investment in any Investment Securities with moneys in any Fund established under the Resolution, the Authority may instruct in writing the Trustee or any Depository to combine such moneys with moneys in any other Fund, but solely for purposes of making such investment in such Investment Securities.
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Power to Issue Notes and Pledge Pledged Property
The Authority is duly authorized under all applicable law to create and issue the Notes, to adopt the Resolution and to pledge the Pledged Property purported to be subjected to the lien of the Resolution in the manner and to the extent provided in the Resolution. Except to the extent otherwise provided in the Resolution, the Pledged Property so pledged is and will be free and clear of any pledge, lien, charge or encumbrance thereon or with respect thereto prior to, or of equal rank with, the pledge and assignment created by the Resolution, and all action on the part of the Authority to that end has been and will be duly and validly taken. The Notes and the provisions of the Resolution are and will be the valid and legally binding obligations of the Authority. The Authority shall at all times, to the extent permitted by law, defend, preserve and protect the pledge of the Pledged Property under the Resolution and all the rights of the Noteholders under the Resolution against all claims and demands of all persons whomsoever.
Tax Covenant
The Authority covenants to maintain the exclusion from gross income for federal income tax purposes of interest on the Notes. In furtherance of the covenant contained in the preceding sentence, the Authority will, among other things, comply with the Tax Certificate. Notwithstanding any other provision of the Resolution to the contrary, so long as necessary in order to maintain the exclusion from gross income for federal income tax purposes of interest on the Notes, the covenants contained in the Resolution shall survive the payment or discharge thereof upon defeasance of such Notes pursuant to the Resolution.
Events of Default
The following events shall constitute an Event of Default under the Resolution:
(i) if default shall be made in the due and punctual payment of the principal of any Note when and as the same shall become due and payable, whether at maturity or otherwise;
(ii) if default shall be made in the due and punctual payment of any installment of interest on any Note when and as such interest installment shall become due and payable;
(iii) if default shall be made by the Authority in the performance or observance of any other of the covenants, agreements or conditions on its part in the Resolution or in the Notes contained, and such default shall continue for a period of thirty (30) days after written notice thereof to the Authority by the Trustee or to the Authority and the Trustee by the Holders of not less than ten percent (10%) in principal amount of the Notes Outstanding;
(iv) if the Authority shall commence a voluntary case or similar proceeding under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or shall make any general assignment for the benefit of creditors, or shall make a written declaration or admission to the effect that it is unable to meet its debt as such debts mature, or shall authorize or take any action in furtherance of any of the foregoing; or
(v) if a court having jurisdiction in the premises shall enter a decree or order for relief in respect of the Authority in an involuntary case or similar proceeding under any applicable bankruptcy, insolvency or other similar law, or a decree or order appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for the Authority of the Pledged Property and/or Revenues, or a decree or order for the dissolution, liquidation or winding up of the Authority and its affairs, or a decree or order finding or determining that the Authority is unable to meet its debts as such debts mature, and any
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such decree or order shall remain unstayed and in effect for a period of 60 consecutive days.
Enforcement of County Guaranty
The Trustee shall promptly enforce, and seek payment pursuant to, the County Guaranty upon the failure of the County to make timely payments under the County Guaranty.
Supplemental Resolutions Effective Upon Filing with Trustee
For any one or more of the following purposes and at any time or from time to time, a Supplemental Resolution of the Authority may be adopted, which, upon the filing with the Trustee of a copy thereof certified by an Authorized Authority Representative, shall be fully effective in accordance with its terms:
(1) To close the Resolution against, or provide limitations and restrictions in addition to the limitations and restrictions contained in the Resolution on, the authentication and delivery of Notes or the issuance of other evidences of indebtedness;
(2) To add to the covenants and agreements of the Authority in the Resolution, other covenants and agreements to be observed by the Authority that are not contrary to or inconsistent with the Resolution as theretofore in effect;
(3) To add to the limitations and restrictions in the Resolution, other limitations and restrictions to be observed by the Authority that are not contrary to or inconsistent with the Resolution as theretofore in effect;
(4) To authorize, in compliance with all applicable law, Notes to be issued in the form of Notes issued and held in book-entry form on the books of the Authority, any Fiduciary or custodian appointed for that purpose by the Authority and, in connection therewith, make such additional changes to the Resolution, not adverse to the rights of the Holders of the Notes, as are necessary or appropriate to accomplish or recognize such book-entry form Notes, substitute for any such Fiduciary or custodian, provide for in, and amend any provisions in, the Resolution relating to the giving of notice, and specify and determine the matters and things relative to the issuance of such book-entry form Notes as are appropriate or necessary;
(5) To confirm, as further assurance, any pledge or assignment under, and the subjection to any security interest, pledge or assignment created or to be created by, the Resolution of the Pledged Property and to pledge any additional revenues, moneys, securities or other agreements; and
(6) To modify any of the provisions of the Resolution in any other respect whatsoever, provided that such modification shall become effective prior to the authentication and delivery of the first Note authorized to be issued pursuant to the Resolution, such Supplemental Resolution shall be specifically referred to in the text of all Notes authenticated and delivered after the date of the adoption of such Supplemental Resolution and of Notes issued in exchange therefor or in place thereof.
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Supplemental Resolutions Effective Upon Consent of Trustee
For any one or more of the following purposes and at any time or from time to time, a Supplemental Resolution may be adopted, which, upon (i) the filing with the Trustee of a copy thereof certified by an Authorized Authority Representative and (ii) the filing with the Trustee and the Authority of instruments in writing made by the Trustee consenting thereto, shall be fully effective in accordance with its terms:
(1) To cure any ambiguity, supply any omission or cure or correct any defect or inconsistent provision in the Resolution; or
(2) To insert such provisions clarifying matters or questions arising under the Resolution as are necessary or desirable and are not contrary to or inconsistent with the Resolution as theretofore in effect.
Powers of Amendment
Any modification or amendment of the Resolution and of the rights and obligations of the Authority and of the Holders of the Notes thereunder, in any particular, may be made by a Supplemental Resolution with the written consent, given as provided in the Resolution, of the Holders of at least a majority in principal amount of the Notes Outstanding at the time such consent is given; provided, however, that if such modification or amendment will, by its terms, not take effect so long as any Notes of any specified maturity remain Outstanding, the consent of the Holders of such Notes shall not be required and such Notes shall not be deemed to be Outstanding for the purpose of any calculation of Outstanding Notes under this paragraph. No such modification or amendment shall permit a change in the maturity of the principal of any Outstanding Note or of any installment of interest thereon or a reduction in the principal amount thereof or in the rate of interest thereon without the consent of the Holder of such Note, or shall reduce the percentages or otherwise affect the classes of Notes the consent of the Holders of which is required to effect any such modification or amendment, or shall change or modify any of the rights or obligations of any Fiduciary without its written assent thereto. The Trustee may in its discretion determine whether or not, in accordance with the foregoing powers of amendment, Notes of any particular maturity would be affected by any modification or amendment of the Resolution and any such determination shall be binding and conclusive on the Authority and all Holders of Notes.
Modifications by Unanimous Consent
The terms and provisions of the Resolution and the rights and obligations of the Authority and of the Holders of the Notes thereunder may be modified or amended in any respect upon the adoption and filing by the Authority of a Supplemental Resolution and the consent of the Holders of all of the Notes then Outstanding, such consent to be given as provided in the Resolution except that no notice to Noteholders shall be required; provided, however, that no such modification or amendment shall change or modify any of the rights or obligations of any Fiduciary without the filing with the Trustee of the written assent thereto of such Fiduciary in addition to the consent of the Noteholders.
Defeasance
If the Authority shall pay or cause to be paid, or there shall otherwise be paid, to the Holders of the Outstanding Notes of a particular maturity or particular Notes within a maturity, the principal and interest due or to become due thereon, at the times and in the manner stipulated therein and in the Resolution, such Notes shall cease to be entitled to any lien, benefit or security under the Resolution, and all covenants, agreements and obligations of the Authority to the Holders of such Notes shall thereupon cease, terminate and become void and be discharged and satisfied.
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Loan Defaults
The Trustee shall diligently enforce, and take all reasonable steps, actions and proceedings necessary for the enforcement of, the Borrower Notes, including the prompt payment of all Loan Repayments.
Payment or Prepayment of Borrower Notes
Upon the payment of all sums due and to become due pursuant to the Borrower Note Purchase Agreement and on the Borrower Notes or upon the prepayment of the Borrower Notes in full by the Borrower, the Trustee (after 123 days have elapsed during which no act of bankruptcy shall have occurred with respect to the Borrower) shall cancel the Borrower Notes on behalf of the Authority and deliver them to the Borrower and shall take any other reasonable action required of the Authority or the Trustee and shall execute in its own name or in the Authority's name all relevant documents in connection with such actions. The Trustee has been appointed pursuant to the Resolution as the Authority's agent and attorney- in-fact for purposes of taking any act, including the execution and delivery of any document, required by the Resolution, all at the expense of the Borrower.
PLEDGE OF THE STATE NOT TO LIMIT POWER OF AUTHORITY OR RIGHTS OF NOTEHOLDERS
The Act sets forth the pledge and agreement of the State that it will not limit or alter the rights vested by the Act in the Authority to fulfill the terms of any agreements made with holders of obligations of the Authority or in any way impair the rights and remedies of such holders, until such obligations, together with the interest thereon, with interest on any unpaid installments of interest, and all costs and expenses in connection with any action or proceedings by or on behalf of such holders, are fully met and discharged.
LEGALITY FOR INVESTMENT
The Act provides that (1) the State and all public officers, municipalities, counties, political subdivisions and public bodies and agencies thereof; (2) all banks, trust companies, savings banks and institutions, building and loan associations, savings and loan associations, investment companies and other persons carrying on a banking business, and all insurance companies, insurance associations and other persons carrying on an insurance business, which banks, trust companies and other such institutions are organized and existing under the laws of the State; and (3) all executors, administrators, guardians, trustees and other fiduciaries acting under the laws of the State, may legally invest any sinking funds, moneys or other funds belonging to them or within their control in obligations of authorities created pursuant to the Act, and such obligations will be authorized security for any and all public deposits.
LITIGATION
The Authority
There is no litigation pending or threatened involving the Authority that would materially impair the financial stability of the Authority or affect the issuance, sale or delivery of the Series 2016 Notes or the valid execution of the Borrower Note Purchase Agreement or the performance thereunder by the Authority or the purchase of the Borrower Notes by the Authority.
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The Borrower
There is no litigation pending or threatened involving the Borrower that would materially impair the financial stability of the Borrower or affect the valid execution of the Borrower Note Purchase Agreement or the performance, both financial and otherwise, thereunder by the Borrower or the issuance and delivery of the Borrower Notes by the Borrower.
The County
There is no litigation pending or threatened involving the County that would, if successful, result in a material adverse change in the financial condition or results of operations of the County or adversely affect the enforceability of the County Guaranty.
TAX MATTERS
Exclusion of Interest on Series 2016 Notes from Gross Income for Federal Income Tax Purposes
The Internal Revenue Code of 1986, as amended (the "Code"), imposes certain requirements that must be met on the date of issuance and on a continuing basis subsequent to the issuance of the Series 2016 Notes in order to assure that interest on the Series 2016 Notes will be excluded from gross income for purposes of federal income taxation under Section 103 of the Code. Failure of the Authority and the Borrower to comply with such requirements may cause interest on the Series 2016 Notes to lose the exclusion from gross income for federal income tax purposes, retroactive to the date of the issuance of the Series 2016 Notes. The Authority and the Borrower will make certain representations in their applicable tax certificates, which will be executed on the date of issuance of the Series 2016 Notes, as to various tax requirements. The Authority and the Borrower have covenanted to comply with the provisions of the Code applicable to the Series 2016 Notes and have covenanted not to take any action or fail to take any action that would cause the interest on the Series 2016 Notes to lose the exclusion from gross income for federal income tax purposes under Section 103 of the Code or cause interest on the Series 2016 Notes to be treated as an item of tax preference under Section 57 of the Code. Gibbons P.C., Bond Counsel to the Authority, has relied upon the representations of the Authority and the Borrower made in their applicable tax certificates and has assumed continuing compliance by the Authority and the Borrower with the above covenants in rendering its federal income tax opinions with respect to the exclusion of interest on the Series 2016 Notes from gross income for federal income tax purposes and with respect to the treatment of interest on the Series 2016 Notes for the purposes of the alternative minimum tax.
Assuming the Authority and the Borrower observe their covenants with respect to continuing compliance with the Code, Gibbons P.C., Bond Counsel to the Authority, is of the opinion that, under existing law, interest on the Series 2016 Notes is excluded from gross income of the owners of the Series 2016 Notes for federal income tax purposes pursuant to Section 103 of the Code and interest on the Series 2016 Notes is not an item of tax preference under Section 57 of the Code for purposes of computing the alternative minimum tax.
Tax Treatment of Original Issue Premium
The initial public offering price of the Series 2016 Notes is greater than the principal amount of the Series 2016 Notes payable at maturity. An amount equal to the excess of the purchase price of the Series 2016 Notes over its stated redemption price at maturity constitutes premium. A purchaser of the Series 2016 Notes must amortize any premium over the term of the Series 2016 Notes using constant yield principles, based on the Series 2016 Notes' yield to maturity. As premium is amortized, the purchaser's basis of the Series 2016 Notes and the amount of tax-exempt interest received will be reduced
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by the amount of amortizable premium properly allocable to such purchaser. This will result in an increase in the gain (or decrease in the loss) to be recognized for federal income tax purposes on the sale or disposition of the Series 2016 Notes prior to maturity. Even though the purchaser's basis is reduced, no federal income tax deduction is allowed.
Purchasers of the Series 2016 Notes, whether at the time of initial issuance or subsequent thereto, should consult with their tax advisors with respect to the determination and treatment of premium for federal income tax purposes, and with respect to state and local tax consequences of owning the Series 2016 Notes.
Additional Federal Income Tax Consequences
In the case of certain corporate holders of the Series 2016 Notes, interest on the Series 2016 Notes will be included in the calculation of the alternative minimum tax as a result of the inclusion of interest on the Series 2016 Notes in "adjusted current earnings" of certain corporations.
Prospective purchasers of the Series 2016 Notes should be aware that ownership of, accrual of, receipt of, interest on or disposition of tax-exempt obligations, such as the Series 2016 Notes, may have additional federal income tax consequences for certain taxpayers, including, without limitation, taxpayers eligible for the earned income credit, recipients of certain Social Security and certain Railroad Retirement benefits, taxpayers that may be deemed to have incurred or continued indebtedness to purchase or carry tax-exempt obligations, financial institutions, property and casualty companies, foreign corporations and certain S corporations. Prospective purchasers of the Series 2016 Notes should consult with their tax advisors with respect to the need to furnish certain taxpayer information in order to avoid backup withholding.
Bond Counsel expresses no opinion regarding any federal tax consequences other than its opinions with regard to the exclusion of interest on the Series 2016 Notes from gross income pursuant to Section 103 of the Code and interest on the Series 2016 Notes not constituting an item of tax preference under Section 57 of the Code. Prospective purchasers of the Series 2016 Notes should consult their tax advisors with respect to all other tax consequences (including, but not limited to, those listed above) of holding the Series 2016 Notes.
State Taxation
Bond Counsel is of the opinion that, under existing law, interest on the Series 2016 Notes and net gains from the sale of the Series 2016 Notes are exempt from the tax imposed by the New Jersey Gross Income Tax Act.
Miscellaneous
Amendments to federal and State tax laws are proposed from time to time and could be enacted, and court decisions and administrative interpretations may be rendered, in the future. There can be no assurance that any such future amendments or actions will not adversely affect the value of the Series 2016 Notes, the exclusion of interest on the Series 2016 Notes from gross income, alternative minimum taxable income, state taxable income or any combination from the date of issuance of the Series 2016 Notes or any other date, or that such changes will not result in other adverse federal or State tax consequences.
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THE ABOVE SUMMARY OF POSSIBLE TAX CONSEQUENCES IS NOT EXHAUSTIVE OR COMPLETE. ALL PURCHASERS OF THE SERIES 2016 NOTES SHOULD CONSULT THEIR TAX ADVISORS REGARDING THE POSSIBLE FEDERAL, STATE AND LOCAL INCOME TAX CONSEQUENCES OF OWNERSHIP OF THE SERIES 2016 NOTES.
APPROVAL OF LEGALITY
All legal matters incident to the authorization, issuance, sale and delivery of the Series 2016 Notes are subject to the approval of Gibbons P.C., Newark, New Jersey, Bond Counsel to the Authority, whose approving legal opinion will be delivered with the Series 2016 Notes, substantially in the form annexed hereto as Appendix E. All legal matters incident to the authorization, issuance, sale and delivery of the Borrower Notes will be passed upon for the Borrower by its Bond Counsel, Archer & Greiner P.C., Red Bank, New Jersey. Certain legal matters will be passed upon for the Authority by its General Counsel, Law Offices of Peter A. Tucci, Jr. LLC, Hackensack, New Jersey. Certain legal matters will be passed upon for the County by its County Counsel, William J. Pascrell, III, Esq., Paterson, New Jersey. Certain legal matters will be passed upon for the Underwriter by its Counsel, McManimon, Scotland & Baumann, LLC, Roseland, New Jersey.
CREDIT RATING
Standard & Poor's Ratings Services, a Standard & Poor's Financial Services LLC business ("S&P"), has assigned the Series 2016 Notes the rating of "SP-1+". Such rating reflects only the views of S&P and an explanation of the significance of such rating may be obtained only from S&P. There is no assurance that such rating will remain in effect for any given period of time or that such rating will not be revised downward, suspended or withdrawn entirely by S&P if, in its judgment, circumstances so warrant. Any such downward revision, suspension or withdrawal of such rating may have an adverse effect on the market price or marketability of the Series 2016 Notes.
UNDERWRITING
Powell Capital Markets, Inc., Roseland, New Jersey (the "Underwriter"), pursuant to a Note Purchase Agreement by and among the Underwriter, the Authority and the County dated the date hereof, has agreed, subject to certain customary conditions precedent to closing, to purchase the Series 2016 Notes at a purchase price of $14,485,837.80. The purchase price reflects the principal amount of the Series 2016 Notes, plus an original issue premium in the amount of $167,347.80, less an Underwriter's discount in the amount of $21,510.00. The Series 2016 Notes are being offered to the public at the yield set forth on the cover page of this Official Statement, which yield may be changed from time to time by the Underwriter without notice. The Series 2016 Notes may be offered and sold to dealers, including the Underwriter and dealers acquiring the Series 2016 Notes for their own account or any account managed by them, at a yield higher than the public offering yield. The Underwriter's obligations are subject to certain conditions precedent, which, if satisfied, will obligate the Underwriter to purchase all of the Series 2016 Notes.
SECONDARY MARKET DISCLOSURE
Pursuant to the provisions of a Continuing Disclosure Agreement, dated as of June 1, 2016 (the "Authority Disclosure Agreement"), by and between the Authority and Digital Assurance Certification, L.L.C. (the "Dissemination Agent" or "DAC"), the Authority agrees to provide or cause to be provided either directly (with a copy of the Dissemination Agent) or through the Dissemination Agent to the Municipal Securities Rulemaking Board, in a timely manner not in excess of ten business days after the occurrence of the event, notice of any of the following events with respect to the Series 2016 Notes:
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(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 Series 2016 Notes, or other material events affecting the tax status of the Series 2016 Notes; (7) Modifications to the rights of holders of the Series 2016 Notes, if material; (8) Note calls, if material, and tender offers; (9) Defeasances; (10) Release, substitution or sale of property securing repayment of the Series 2016 Notes, if material; (11) Rating changes; (12) Bankruptcy, insolvency, receivership or similar event of an obligated person; (13) The consummation of a merger, consolidation or acquisition involving an obligated person or the sale of all or substantially all of the assets of an obligated person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and (14) Appointment of a successor or additional trustee or the change of name of a trustee, if material.
If the Authority shall fail to comply with any provision of the Authority Disclosure Agreement, then the Dissemination Agent or any holder of the Series 2016 Notes may enforce, for the equal benefit and protection of all holders similarly situated, by mandamus or other suit or proceeding at law or in equity, the provisions of the Authority Disclosure Agreement against the Authority and any of the officers, agents and employees of the Authority and may compel the Authority or any such officers, agents or employees to perform and carry out their duties under the Authority Disclosure Agreement; provided, that the sole and exclusive remedy for breach of the Authority Disclosure Agreement shall be an action to compel specific performance of the obligations of the Authority under the Authority Disclosure Agreement, and no person or entity shall be entitled to recover monetary damages under the Authority Disclosure Agreement under any circumstances. Failure to comply with any provision of the Authority Disclosure Agreement shall not in any manner constitute an Event of Default under the Resolution.
Without the consent of the holders of the Series 2016 Notes, the Authority and the Dissemination Agent at any time and from time to time may enter into any amendments or modifications to the Authority Disclosure Agreement for any of the following purposes: (i) to comply with or conform to any changes in Rule 15c2-12 (whether required or optional) that are applicable to the Series 2016 Notes; (ii) to add a dissemination agent for the information required to be provided by the Authority under the
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Authority Disclosure Agreement and to make any necessary or desirable amendments or modifications in connection therewith; (iii) to evidence the succession of another entity to the Authority and the assumption by any such successor of the covenants and agreements of the Authority under the Authority Disclosure Agreement; or (iv) to add to the covenants and agreements of the Authority under the Authority Disclosure Agreement for the benefit of the holders of the Series 2016 Notes, or to surrender any right or power conferred upon the Authority by the Authority Disclosure Agreement.
The Authority has entered into prior undertakings to provide continuing disclosure for certain outstanding bond issues. In connection with such bond issues, the Authority failed to timely file event notices with respect to certain rating changes. The Authority has engaged the services of DAC to assist with the Authority's ongoing continuing disclosure obligations.
FINANCIAL ADVISORS
NW Financial Group, LLC, Hoboken, New Jersey, has served as financial advisor to the Authority with respect to the issuance of the Series 2016 Notes (the "Authority Financial Advisor"). GB Associates LLC, Livingston, New Jersey, has served as financial advisor to the Borrower with respect to the issuance of the Borrower Notes (the "Borrower Financial Advisor"; and together with the Authority Financial Advisor, the "Financial Advisors"). The Financial Advisors are not obligated to undertake, and have not undertaken, either to make an independent verification of or to assume responsibility for the accuracy, completeness or fairness of the information contained in this Official Statement and the Appendices hereto. The Financial Advisors are independent firms and are not engaged in the business of underwriting, trading or distributing municipal securities or other public securities.
APPENDICES
Appendix A to this Official Statement consists of general information concerning the County that has been provided by the County from public documents of the County and from other public or official documents or publications referred to therein. Neither the Authority nor the Underwriter has confirmed the accuracy or completeness of said information, and the Authority and the Underwriter disclaim any responsibility for the accuracy and completeness thereof.
Appendix B to this Official Statement consists of certain financial information concerning the County. Neither the Authority nor the Underwriter has confirmed the accuracy or completeness of said information, and the Authority and the Underwriter disclaim any responsibility for the accuracy and completeness thereof.
Appendix C to this Official Statement consists of general information concerning the Borrower that has been provided by the Borrower from public documents of the Borrower and from other public or official documents or publications referred to therein. Neither the Authority nor the Underwriter has confirmed the accuracy or completeness of said information, and the Authority and the Underwriter disclaim any responsibility for the accuracy and completeness thereof.
Appendix D to this Official Statement consists of certain financial information concerning the Borrower. Neither the Authority nor the Underwriter has confirmed the accuracy or completeness of said information, and the Authority and the Underwriter disclaim any responsibility for the accuracy and completeness thereof.
Appendix E to this Official Statement consists of the form of approving legal opinion of Gibbons P.C., Bond Counsel to the Authority. Copies of such opinion will be available at the time of delivery of the Series 2016 Notes.
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MISCELLANEOUS
The references herein to the Act, the Resolution, the County Guaranty, the County Guaranty Agreement, the Borrower Note Purchase Agreement and the Authority Disclosure Agreement are brief outlines of certain provisions thereof. Such outlines do not purport to be complete and reference is made to the Act, the Resolution, the County Guaranty, the County Guaranty Agreement, the Borrower Note Purchase Agreement and the Authority Disclosure Agreement for full and complete statements of such provisions. These documents may be inspected at the principal corporate trust office of the Trustee.
Any statement contained in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact. All estimates and assumptions herein have been made on the best information available and are believed to be reliable, but no representations whatsoever are made that such estimates or assumptions are correct or will be realized. This Official Statement is not to be construed as a contract or agreement among the Authority, the Underwriter and the holders of the Series 2016 Notes.
The execution and delivery of this Official Statement have been duly authorized by the Authority.
THE PASSAIC COUNTY IMPROVEMENT AUTHORITY
By: /s/ Dennis F. Marco Dennis F. Marco Chairman
Dated: June 16, 2016
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APPENDIX A
CERTAIN INFORMATION CONCERNING THE COUNTY
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GENERAL INFORMATION ON THE COUNTY
Early History
The County was organized under an act of the New Jersey Legislature on February 7, 1837, more than 150 years after the first Dutch pioneers settled in the region. The creation of the County from parts of Bergen and Essex Counties ended a 15-year feud between Hackensack and Paterson residents and merchants. Paterson merchants disliked the idea of having to travel to the County Seat of Hackensack. These merchants petitioned the legislature for the establishment of a new county.
The local dispute between Paterson and Hackensack erupted on a Statewide level. Southern New Jersey legislators hesitated to create a new county that would give northern counties additional representation in the legislature. Finally, a compromise was reached by creating another southern county at the same time, and the County of Passaic became a reality.
The County is replete with legends, history and heroes of the Revolutionary Age: General Washington's Headquarters in 1780 still stands on the grounds of a County park where it was built in 1709; the exploits of the dashing General "Mad" Anthony Wayne for whom the Township of Wayne is named, are legendary; and the Great Falls of Paterson cascade daily in tribute to Alexander Hamilton, who fathered American industry through the creation of the Society of Useful Manufacturers, which harnessed the power of these great falls for sale to the manufacturers of the time.
Governmental Structure
Since 1798, counties in New Jersey have operated under the Freeholder form of County government. Originally, each municipality in the County was entitled to one Freeholder to represent it at the County level. Changes in the original law were made in 1918, which reduced the number of Passaic County Freeholders to a total of seven, elected at large.
The Freeholders, complemented by a County Administrator, function through committees and possess executive and legislative powers.
The responsibilities of the Freeholders encompass, in addition to linking the municipalities with state and other local governments, fiscal administration, the County judiciary system, law enforcement, recreation, road and bridge maintenance and construction, the County correctional and penal system, health and welfare, education and a myriad of other responsibilities.
Geographic Location
The County is located in northern New Jersey within the New York-New Jersey metropolitan area. The County borders New York State on the north and is surrounded by Sussex, Morris, Essex and Bergen Counties.
The County is shaped like a bent hourglass with the area above the neck running generally north and south and that portion below, east and west. The contrast between the two areas is striking. The upper half of the County is characterized by large lakes and watersheds and possesses a stunning topography. The lower half of the County contains more than 90% of the population in a third of the land area.
The highest point in the County is Bearfort Mountain in West Milford Township with an elevation of 1,484 feet. The County's lowest area is the tidal land along the Passaic River in Clifton and Passaic.
Within its 197.05 square miles there are 40 lakes and ponds, three state parks and two state forests.
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Population of the County of Passaic
2014 508,856 2013 505,672 2012 504,245 2011 503,508 2010 501,226 2000 490,377 1990 470,864 1980 447,585 1970 460,782 1960 406,618 1950 337,093 ______Source: United States Department of Commerce, Bureau of the Census.
Industry and Economy
During the past four decades, the economy of the County has undergone a tremendous change from its position as one of the leading textile and apparel centers of the world. The County has changed its former economic dependence upon this narrow base of employment to an economy of considerable diversification and growth with companies manufacturing food products, components for the aerospace industry, chemicals and fabricated metal products.
It should be recognized that the growth of non-manufacturing jobs in the service, retail and wholesale industries, as well as in finance and insurance, has more than made up for the loss of manufacturing employment. This growth has seen the change in the County's economy from blue collar to white collar. The labor force was 248,400 in 2014 and the annual average unemployment rate was 8.1%. The labor force was 249,100 in August 2015 and the unemployment rate was 6.9% in August 2015.
County of Passaic Labor Force Estimates
(000's Omitted)
Civilian Labor Unemployment Year Force Employment Unemployment Rate 2015* 249.1 231.8 17.3 6.9% 2014 248.4 228.3 20.2 8.1 2013 241.4 217.4 24.0 9.9 2012 243.3 216.1 27.2 11.2 2011 246.0 216.7 27.3 11.1 2010 243.0 215.7 27.3 11.3 2009 243.8 217.0 27.5 11.0 2008 240.4 224.1 16.4 6.8 2007 238.0 225.3 12.7 5.3 2006 240.3 227.0 13.4 5.6
Source: New Jersey Department of Labor and Workforce Development - Annual Averages for all Years *2015 data from August 2015
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Statistics of Income 2013: New Jersey Income Tax Returns for 2013 Summarized by County
Total Total Income Average Rank County (000's) Income 1 Bergen $46,011,761.00 $107,512 4 Essex 30,620,801.40 90,272 2 Monmouth 29,447,812.90 99,415 3 Morris 28,873,900.00 122,761 5 Middlesex 27,508,909.70 73,141 6 Union 20,829,418.50 82,753 8 Hudson 19,282,152.80 64,326 7 Somerset 19,216,923.20 124,035 9 Ocean 15,896,701.80 61,695 10 Burlington 15,439,231.70 76,301 11 Mercer 14,884,553.90 92,392 12 Camden 14,283,144.40 63,696 13 PASSAIC 13,200,038.70 56,646 14 Gloucester 8,824,895.80 69,246 15 Atlantic 6,808,885.00 52,623 16 Hunterdon 7,219,874.00 120,478 17 Sussex 5,475,670.30 79,835 18 Warren 3,389,667.10 68,693 19 Cumberland 2,963,751.20 46,258 20 Cape May 2,651,111.10 58,164 21 Salem 1,686,678.40 59,415 County Unknown 611,097.70 122,440 State Totals $335,126,980.60 $1,792,097.00 ______Source: State of New Jersey Department of the Treasury, Division of Taxation, Statistics of Income, 2013, Table 5.1: Income Tax Return Amounts Summarized by County for 2013 Tax Returns.
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Authorized Permits for New Construction - 2011 to 2014
Authorized Permits and Construction Value 2011 2012 2013 2014
Housing Units: New Construction 335 325 653 332 Office: Authorized Square Feet 178,042 355,689 121,323 112,301 Retail: Authorized Square Feet 112,884 36,043 28,344 254,294 Other Non-Residential Uses: Authorized Square Feet 550,154 514,847 1,360,190 2,297,335 Estimated Cost of Construction Authorized by Building Permits $368,582,074 $290,476.115 $360,543,168 $351,061,314 ______Source: NJ Department of Community Affairs, Building Permits Yearly Data: 2014, 2013, 2012 and, 2011 http://www.state.nj.us/dca/divisions/codes/reporter/building_permits.html#5
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Economic Outlook
According to the New Jersey Department of Labor and Workforce Development, Passaic County’s 2014 annual average labor force totaled 248,400 with an unemployment rate of 8.1% and as of August 2015 the labor force rose again to 249,100 with an unemployment rate of 6.9%, significantly lower than the 2013 unemployment number at 9.9%. The economy is highly diversified with no particular industry or sector accounting for a large percentage of the employment in the County.
Major areas of employment in 2014 include: retail trade (18%); healthcare and social assistance (18%); manufacturing (13%); wholesale trade (6%); construction (5%); administrative and waste services (8%); professional and technical services (5%); other services, excluding public administration (5%); and finance and insurance (3%).
New York financial technology company SmartAsset evaluated the Gross Domestic Product (GDP) of New Jersey counties by measuring the change in the local GDP over a four year period. Passaic County ranked number nine compared to all 21 counties in the state by experiencing strong growth and investment
The study captured the places around the country that are receiving the most incoming investments in business, real estate, government and the local economy as a whole. SmartAsset looked at four factors: business establishment growth, GDP growth, new building permits and municipal bond investment. Every county in the study was scored on these four factors, weighting each factor equally. Passaic County received a high ranking due to its business growth, $813 million in business investment, number of building permits and municipal bond activity.
According to the NJ Department of Labor and Workforce Development, Key Industries in Passaic County, NJ, published November 2014, “from 2012 to 2022, employment in Passaic County is projected to rise by 13,150 or 7.4 percent, compared to the state’s rate of 7.5 percent. Healthcare and social services is expected to add the most jobs (+4,500) and grow at a rate of 1.7 percent per year.”
For decades, financial companies have been migrating from New York City=s Lower Manhattan historic financial district to new areas such as New Jersey which remains the largest data center market in the country, according to Sean Brady, Senior Director, Cushman & Wakefield. Many of these data centers have located in Passaic County. This pattern continues with the data center built for Credit Suisse at the 284,000 square foot Hudson Communication Center located in Clifton, and the 126,000 square foot Russo Development Data Center in Totowa, NJ. In addition, Digital Totowa has broken ground on a 457,117 square foot data center along Union Boulevard, Totowa, NJ. In addition, Mountain Development Corporation has completed their Financial Data Center at 2 Peekay Drive, Clifton, NJ to house Telx Group, Inc. This 215,000 square foot, 3 story data center is a flagship site for Telx, providing cloud computing services, high-speed connections to financial exchanges and space for back-up data storage. Telx has subsequently purchased this site from Mountain Development Corporation.
The educational and health services industry, continues to be robust and able to withstand economic shifts, and will continue to see gains in the coming year. Star Academy, Clifton plans to debut a new hospitality/food service curriculum. The area’s demand for services by the aging baby boom population cohort continues to grow necessitating home health care services. Social assistance jobs may also grow due to increased need for child care facilities.
In commercial construction, Passaic County has demonstrated a particular strength in generating new construction permits. Permits for the new construction of housing totaled 332 units in 2014. New construction permits for office space totaled 112,301 square feet in 2014; and retail permits increased by 897% to 254,294 square feet in 2014 from 28,344 square feet in 2013.
Grow New Jersey Assistance Program
On September 18, 2013, the State established the Grow New Jersey Assistance Program (GrowNJ) which provides corporate business tax credits as financial incentives for the relocation and expansion of companies in the State. For each year of incentives (up to maximum of 10 years), the business must commit to maintaining the project with the minimum number of full-time job positions for 1.5 times the length of the incentive award period. The Passaic County cities of Paterson and Passaic have been designated as Garden State Growth Zones which greatly increases benefits under GrowNJ. In addition, the City of Clifton is also designated as a special location, receiving enhanced benefits.
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As a result of GrowNJ, the following companies have invested in Passaic County. Better Team USA has located their 16,500 square foot manufacturing plant in Clifton, NJ from Hong Kong, due to the receipt of a $11,250,000 incentive grant, the company invested $2,230,000 and created 150 new jobs. Jimmy’s Cookies relocated their 87,280 square foot manufacturing facility to Clifton, NJ after the receipt of a $7,537,500 GrowNJ incentive grant, creating 79 jobs and retaining 43. Metropolitan Foods aka Driscoll Foods, received a $18,487,500 GrowNJ incentive and will invest $67,600,000 as the company expands into a 562,000 square foot facility in Wayne, NJ, creating 139 jobs and retaining 215 employees. Accurate Box Company received a $39,875,000 GrowNJ incentive award to fuel their expansion in Paterson, NJ renovating and expanding their 365,000 square foot manufacturing plant as they plan to invest $19,807,551 in new construction and the creation of 51 new jobs and the retention of 229 employees. Sandy Alexander, Clifton, NJ received a $12,740,000 incentive due to their planned investment of $2,800,000 and the creation of 74 jobs and retention of 216 in their 134,000 square foot facility. Patella Woodworking received a $10,325,000 GrowNJ incentive for their investment of $5,856,884 in their new facility in the City of Passaic, relocating from Orangeburg, NY, fueling the creation of 70 new jobs in their 79,784 square foot facility. In addition MGP Manufacturing in Paterson received an award of $3,797,500 as they invested $295,000 in their 12,400 square foot facility creating 31 new jobs.
In addition, Maquet Cardiovascular LLC, a global leader in manufacturing medical devices, added new employees at its United States headquarters in Wayne (Passaic County). The Maquet Company relocated manufacturing facilities from Puerto Rico and brought 350 jobs to augment its existing New Jersey workforce of 1,100. The company has invested approximately $40 million for the construction of state-of-the-art manufacturing, education and training facilities. Kontos Foods in Paterson, NJ has purchased a new 41,000 square foot facility and is manufacturing crepes, employing an additional 40.
UPS relocated their data processing center comprised of 650 employees from Morris County to Wayne, NJ and is considering another expansion of its Paramus data center into a Rifle Camp Road office building in Woodland Park, bringing 1,000 jobs to Passaic County.
Area employment in retail trade will post gains in the coming months. One positive development is the completely leased 160,000 square feet Promenade Shops with exclusive retail space and over 17 major retailers from Chico’s to La Fitness and Coldwater Creek and Joseph A. Bank and Stew Leonard’s Wines. In addition, a new 28,000 square foot retail site has been completed along Route 3 in Clifton, Clifton Towne Center, which is occupied by Trader Joe’s and Ulta Cosmetics retailers. Plaza 46 West also added 20,000 square feet of new retail space along the corridor. Another positive sign for the industry is that more than 85 percent of the space is leased in the Paterson Center City Mall. Current tenants include The Children’s Place, Marshall’s, Shoe Factory, AT&T, Sprint, T-Mobile and The New Fabian Theater. When the remaining space is fully leased and occupied, it is estimated that 600 new jobs will be added at this location. In addition, the Willowbrook Mall, the Wayne retail Power Center has increased their retail capacity by approximately 250,000 square feet for new restaurants and retailers.
A number of major commercial and industrial projects have broken ground, completed construction or have been initiated throughout Passaic County. Examples of these projects include, but are not limited to:
Within Bloomingdale, Avalon Bay constructed a 174 unit residential expansion. In addition, companies have continued to reinvest along Main Street with the opening of River of Beer, a new tavern/restaurant and Kings Corner, a convenience store and restaurant for local residents.
The City of Paterson, home of the Great Falls, is the home of a successful $200 million downtown development project Center City Mall. The Center City Partners has built a 320,000 square foot building including retail, office and parking uses, with the potential to expand development to 600,000 square feet. Lowe’s has constructed a 136,000 square foot building in Paterson along Route 20 and a Pep Boys and Micro Computer Store also occupy an additional 50,000 square feet in the complex. A Home Depot opened in a 117,953 square foot site located along Route 20 in Paterson between 4th and 5th Avenues.
In addition MGP Manufacturing in Paterson moved its new company into Paterson investing $295,000 in their 12,400 square foot facility creating 31 new jobs. Accurate Box Company plans an extensive renovation and expansion of their 365,000 square foot manufacturing plant as they plan to invest $19,807,551 in new construction and the creation of 51 new jobs and the retention of 229 employees.
A-6 Riverside Village has completed its new construction along Route 20 in Paterson, tenants include a McDonald’s, Spanish restaurant and bank. Additional projects in Paterson include: Kessler Properties has substantially renovated a 88,375 square foot property located at 431-455 Madison Avenue and has leased space to 6 new companies; and AM Realty Associates has completed construction on a 24,633 square foot retail strip mall on Chamberlain Avenue for a Valley National Bank and a Rite-Aid Drug Store.
St. Joseph’s Hospital Regional Medical Center in Paterson has completed the $250 million expansion of their new 173,798 square foot Critical Care Facility and building renovations and has proceeded to begin construction of a new medical arts building, hotel and 1,122 car parking deck. A retail complex has been constructed totaling 20,000 square feet for a pharmacy and related retail stores.
Medical Missions for Children, headquartered at St. Joseph’s Regional Medical Center, and The Hampshire Group, based in Morristown, received a $105 million Urban Transit Hub Tax Credit from the NJ Economic Development Authority. These credits, will be used to construct two towers that will provide significant long-term benefits to St. Joseph’s Healthcare System and the surrounding community.
The first tower will be built on the corner of Main and Levine Streets to house the New York Medical College Regional Branch Campus at St. Joseph’s and physicians’ office building. The seven-story, 105,000-square-foot building will provide space for expansion of the instructional programs for the medical school as well as the allied health professions programs of Touro College and University. In addition, the physician practices will have ideal proximity to St. Joseph’s Regional Medical Center and St. Joseph’s Children’s Hospital.
The second tower will rise on the St. Joseph’s campus adjacent to the Regional Medical Center. This 19-story 175,000-square-foot structure will be the second tallest building in Paterson. It will house the Hamiltonian Conference and Banquet Center, which will consist of four commercial entities. These will include a 40,000 square-foot conference and banquet space with a main ballroom (capacity: 500 guests) featuring a domed 40-foot ceiling on the third floor. The second floor will be dedicated to conference and meeting space in a variety of configurations. A 7,000 square-foot glass enclosed rooftop space will function as a Skytop Terrace and Lounge, for private parties, with an outdoor garden and panoramic views of the New York City Skyline and the Garret Mountain Reservation.
The first floor of the hotel tower will accommodate the lobby of the hotel. The hotel’s 154 guest rooms will benefit from all the amenities, such as a pool, spa, fitness center, laundry and business center. Sharing the first floor will be Charity’s Restaurant serving breakfast, lunch and dinner, and McDonald’s Irish Pub, an authentic Irish Pub named after Lord McDonald, the famous sixteenth century Irish philosopher. Additional parking will be included in the tower project.
The expansion of the hospital has encouraged many other developments in the area including a 46,928 square foot retail/apartment complex at Buffalo and Main Avenues; a 54,977 square foot office building on Main Street by Straight Street Properties; a 15,703 square foot Walgreen’s Pharmacy opened on Main Street; and a 20,913 square foot medical arts building will be developed by Abby 2012, LLC.
Two retail facilities have also opened in Paterson by Paramount Assets on Straight Street (12,800 square feet) and on East 18th Street (13,468 square feet).
The former Barnert Hospital has been redeveloped into a 200,000 square foot medical arts facility on Broadway in Paterson, with several of the medical offices purchasing their space as condominiums.
Additional construction projects in Wayne include, but are not limited to: Driscoll Foods who purchased the former Bayer Pharmaceutical property and will be completing a 562,000 square foot warehouse distribution center and create/retain approximately 350 jobs; the former Drake’s Bakery property has been purchased and redeveloped as a warehouse distribution facility; Bimbo Bakeries have constructed a 55,456 square foot warehouse/distribution facility along Riverview Drive, Hajjar Medical Office Building constructed a 30,975 square foot medical arts building along Hamburg Turnpike; Quick Chek constructed a 13,186 square foot convenience store along Hamburg Turnpike, Walgreens will construct a 12,500 square foot pharmacy along
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Paterson Hamburg Turnpike, BD Investment Properties constructed a 24,053 square foot office building; the First Jersey Credit Union completed their new 18,644 square foot corporate headquarters building; and 68 Colfax Associates constructed a 30,949 square foot office and warehouse/distribution center in Wayne. The Atrium at Wayne has completed a 28,500 square foot addition on Alps Road. The Hilton Garden Inn has constructed a new 92,477 square foot hotel on Valley Road, Wayne, NJ. In addition, a recent approval will permit the construction of a 150 bed assisted living facility in a 251,552 square foot building in Wayne.
Projects in Hawthorne include the completion of the environmental remediation of a 10-acre tract located along Wagaraw Road. Proposals for residential and retail development are now being considered. In addition, Kohler Distribution has expanded its facility by 49,000 square feet.
In Haledon, Patriot Pickle has expanded into 15,000 square feet of warehouse and distribution space.
Development has continued in Little Falls with John Soldovari constructing a 30,000 square foot office building; and Direct Depot has completed construction on a 25,000 square foot New Jersey Kitchen and Bath Design Center.
In West Milford, the 649,044 square foot Shoprite Shopping Center added a new major retailer TJ MAXX.
Within Woodland Park, Berkeley College expanded by 19,250 square feet; and 1225 McBride Avenue associates has restructured their 153,182 medical arts facility.
Expansion projects in Totowa include: ADT Security Services, Inc. who have relocated to a 46,300 square foot office and warehouse space in the Totowa Business Center located along Riverview Drive. Kari-Out, a packaging manufacturing facility, has expanded its manufacturing facility by an additional 49,580 square feet, the third time this company has expanded at its Totowa location.
The City of Passaic is also experiencing significant development interest through the activities of their Redevelopment Agency. The City of Passaic Redevelopment Agency has designated 4 redevelopment areas for a total of 125 acres and 2 scattered sites including 585 Main Avenue and 663 Main Avenue. In addition, the Agency is working on the River Drive Redevelopment Area where a private developer will construct 138 residential units. Passaic County Community College has opened its 43,640 square foot nursing school in the City of Passaic. In addition, 585 Main LLC has completed construction on a 43,500 square foot residential and retail development. Patella Woodworking will be relocating from Orangeburg, NY into a 79,784 square facility and will create approximately 70 new jobs.
In West Milford, Twins Realty Group has increased it concrete manufacturing company by 46,433 square feet, manufacturing concrete for bridges and roads.
The cities of Paterson and Passaic are designated as Urban Enterprise Zones (UEZ) by the State of New Jersey, providing significant financial incentives to companies locating or expanding in those cities. Incentives include:
Employee Tax Credits: A one-time tax credit of $1,500 per new employee to qualifying firms subject to the Corporation Business Tax.
Sales and Use Tax: Exemptions from State sales taxes on the purchase of taxable tangible personal property and taxable services; on the sale of materials, supplies or services to a contractor, sub-contractor or repair person erecting buildings on or making improvements to the real property of a qualified business.
Reduced Sales Taxes: Retail sales of tangible personal property within the zone are reduced by up to 50% of the current rate, effectively reducing the sales tax rate to 3% in Paterson and Passaic.
Unemployment Insurance Awards: Based on the amount of unemployment insurance paid by a firm within the zone for new employees. Awards can range from 50% of an employers' unemployment insurance payment for the first four years to 10% in Year 20.
A-8 Energy Sales Tax Exemptions for Manufacturers: Sales and Use Tax Exemptions on the final sale of electricity and natural gas and their transport sales tax exemption for retail energy purchases are available for manufacturers located in an Urban Enterprise Zone. Manufacturers must have 500 or more employees, half of which must be directly employed in the manufacturing process or be a vertically integrated combination of businesses manufacturing a single product, that employ at least 500 people. Manufacturers must have a UEZ certificate.
GOVERNMENTAL SERVICES
Road and Transportation
The following major highways serve the County:
Garden State Parkway U.S. Route 46 Federal Interstate Route No. 80 New Jersey Highway Route No. 21 Federal Interstate Route No. 287 New Jersey Highway Route No. 23 New Jersey Highway Route No. 208 New Jersey Highway Route No. 3 New Jersey Highway Route No. 19 New Jersey Highway Route No.20
Within minutes of the County border are the New Jersey Turnpike, New York State Thruway and New Jersey Highway Routes No. 17 and 4.
There are approximately 236 miles of County roads crisscrossing the County.
Construction work to close a 2.1-mile gap on Route 21 was completed in 2000 linking the cities of Paterson and Passaic. This final segment provided a nine-mile freeway linking I-80 with I-280 and I-78 in Newark, and improving access to the regional highway network in lower Passaic County.
A recently completed improvement to the I-80/Route 23/Route 46 interchange has expanded capacity for the heavy traffic movement between Route 46 westbound and Route 23 northbound, greatly alleviating this chronic congestion spot. This improvement also vastly improves accessibility to a more redevelopment area immediately to the north.
The recently completed West Beltway provides a new alternate roadway link between Riverview Drive and Route 23, allowing motorists the ability to bypass the Route 46/Riverview Drive Interchange.
Projects currently being designed include improvements to the roadways, ramps & bridge decks, as well as modernization of signs and lighting at the interchange of I-80, Route 23 and Route 46; and improvements to the Route 46 interchanges at Browertown Road, Union Boulevard and Van Houten Avenue.
The Secaucus Rail Transfer Station was recently completed, providing direct accessibility to and from Passaic County and the five existing Main Line stations, permitting commuters on North Jersey rail lines to easily transfer to trains traveling directly to midtown Manhattan, New York and other destinations. In addition, the Paterson Rail Station and the Montclair Rail Connection Project were completed, linking the Boonton Line with the Morris and Essex Lines Montclair Branch, and extending electrification on this reconfigured lien to the Great Notch Station in Little Falls. These improvements have vastly improved service to New York and provide a new connection to Newark.
Major improvements currently under study or in preliminary design include improvements along the Route 3 corridor at Route 21 and the Route 3/Route 46 interchange. Other proposals include establishing a public/private partnership to create a Bergen-Passaic Cross County Light Rail transit Service and restoring commuter service on the NYS&W Railroad Line north of Hawthorne.
Freight service is provided by the Norfolk Southern Railroad, and the New York Susquehanna and Western Railroad on the Boonton and Main lines. Rail passenger service is provided by New Jersey Transit.
All the major airports, Newark International, Kennedy, LaGuardia, and Teterboro as well as New York and New Jersey ports are highly accessible to Passaic County.
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THE PASSAIC COUNTY UTILITIES AUTHORITY
General
The Passaic County Utilities Authority (the AAuthority@) is a public body corporate and politic constituting a political subdivision of the State established as an instrumentality exercising public and essential governmental functions to provide for the public health and welfare of the citizens of the County. The County created the Authority pursuant to the Municipal and County Utilities Authority Law (N.J.S.A. 40:14B-1 et seq.; the “Act”) as a county utilities authority via resolution of the Board of Chosen Freeholders of the County adopted on March 18, 1987.
The Authority has perpetual succession and has the requisite power to acquire, construct, maintain and operate facilities for the collection, treatment, recycling and disposal of solid waste in an environmentally sound manner. The Authority has, among others, the following powers under the Act: to sue and be sued; to enter into leases and contracts; to acquire property by any lawful means, including the exercise of the power of eminent domain; to hold, operate and administer its property; to issue its negotiable bonds and to secure their payment and the rights of holders thereof under a resolution; to charge and collect service charges for the use of its facilities and to revise such service charges when necessary or desirable, such that the revenues of the Authority will at all times be adequate to pay all operating and maintenance expenses including reserves, insurance, extensions and replacements; to pay punctually the principal or accreted amounts of and interest on any bonds and maintain reserves and sinking funds therefor as may be required by the terms of any contracts with bondholders; and to make and enforce rules and regulations for the management of its business and affairs.
The Authority is governed by a nine-member board, each of whom is appointed by the Board of Chosen Freeholders of the County. Successor members each shall serve a term of five years. The Authority selects officers annually. Upon the expiration of a member's term, such member continues his service until a successor has been appointed and qualified. The names of the members of the Authority, and their respective terms of office, are as follows:
Membership Term Officer Term Member and Office Expires Expires
Gary Marchese - Chairman 2/01/19 2/01/17 Michael Hanrahan, Vice Chairman 2/01/15* 2/01/17 Catherine Kazan, Secretary/Treasurer 2/01/18 2/01/17 Nada Basmouk 2/01/17 Teofilo Javier 2/01/17 Clark Okun 2/01/15* Haresh Shah 2/01/19 Mohammad Qudah - Alternate 2/01/16
______*Serving until a successor is appointed.
The Authority maintains offices at 401 Grand Street, Room 123, Paterson, New Jersey 07505.
Debt of the Authority
As of December 31, 2015, the Authority had issued and outstanding the principal amount of $55,210,000 of solid waste indebtedness that has been issued from time to time for the purpose of financing the costs relating to its Solid Waste System. The May 1, 1997 opinion and order of the Third Circuit Court of Appeals in Atlantic Coast Demolition and Recycling Co., Inc. v. Board of Chosen Freeholders of Atlantic County, 112 F. 3rd 652 (1997), ultimately resulted in the demise of the County system of regulatory waste flow controls. The Authority subsequently ceased to operate the solid waste system. As a result, all constituent municipalities within the County have independently procured solid waste collection and disposal services.
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Solid Waste Indebtedness Currently Secured by the County Landfill Agreement
The Authority has outstanding debt at December 31, 2015 of the below listed series of bonds that are secured by the County Landfill Agreement (the ASecured Bonds@).
-$33,015,000 aggregate principal amount of Solid Waste Disposal Revenue Bonds, Refunding Series 2012 (the A2012 Refunding Bonds@) outstanding in the amount of $30,895,000 consisting of $14,240,000 aggregate principal amount of Solid Waste Disposal Revenue Bonds, Refunding Series 2012A and $16,655,000 aggregate principal amount of Solid Waste Disposal Revenue Bonds, Refunding Series 2012B (Federally Taxable).
- $19,270,000 in aggregate principal amount of its Solid Waste Disposal Revenue Bonds, Refunding Series 2008 outstanding in the amount of $16,350,000.
- $8,270,000 in aggregate principal amount of its Solid Waste Disposal Revenue Bonds, Refunding Series 2014B - Taxable outstanding in the amount of $7,965,000.
Local Authorities Fiscal Control Law
The Local Authorities Fiscal Control Law (N.J.S.A. 40A:5A-1 et seq.) became effective on November 24, 1983. This law provides for AState review of project financings of local authorities and for State supervision over the financial operations of local authorities@.
The Local Finance Board prescribes the procedures for adoption and execution of annual budgets by local authorities, and Local Finance Board approval must be obtained prior to a budget=s adoption. Such budget shall also comply with the terms and provisions of any bond resolutions. On granting approval of a budget, the reasonableness and accuracy of revenue estimates shall be considered. Such revenue must be sufficient to meet all expenses, including debt service. An annual audit of each local authority shall be made and completed within four months of the close of a fiscal year by a registered municipal accountant or certified public accountant licensed in the State.
Each local authority financing program must be submitted to the Local Finance Board for a hearing and review prior to implementation. Such review generally focuses on the nature, purpose and scope of the financing, engineering or feasibility studies, terms and provisions of service contracts, bond resolutions and proposed terms and conditions of negotiated sales, and proposed or maximum debt service and operational funding requirements. Bond anticipation notes or project notes may be issued and renewed by local authorities pursuant to the provisions of the Local Authorities Fiscal Control Law.
A local authority may not be created unless the Local Finance Board so approves and a local authority may not be dissolved without providing for payment of all outstanding obligations and without approval by the Local Finance Board.
County Landfill Agreement
The County and the Authority have entered into an agreement dated as of September 1, 1987 entitled the A1987 County Landfill Agreement@, as amended and restated as of May 1, 1996 (the A1996 Amended and Restated County Landfill Agreement@), as further amended as of June 1, 1999 (the A1999 County Landfill Agreement Amendment@) and as further amended as of February 15, 2004 (the A2004 County Landfill Agreement Amendment@ and collectively referred to as the ACounty Landfill Agreement@). Pursuant to the County Landfill Agreement, the County has agreed to pay to the Authority, within the Agreement Cap (as hereinafter defined), such sums of money as may be required to provide for monetary deficits of the Authority relating to: (a) the debt service on the Authority=s bonds, (b) maintaining reserve requirements under the Landfill Bond Resolution, and (c) paying the Authority's administrative expenses pertaining to the Project (as defined in the County Landfill Agreement).
The County and the Authority have determined that the County Landfill Agreement is in the best interest of the County taxpayers, residents and ratepayers to assure the payment of debt service on the Secured Bonds (as defined in the County Landfill Agreement).
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The following is a summary of certain provisions of the County Landfill Agreement that relate to the Secured Bonds and is not a complete restatement of the County Landfill Agreement as it currently exists. Such information is qualified in its entirety by reference to the County Landfill Agreement, as amended, copies of which are on file with the Authority and the Trustee and which should be read in full for a complete understanding of all terms and provisions thereof.
County Financial Assistance
The County entered into the County Landfill Agreement in order to provide financial assistance to the Authority. Such assistance will be rendered upon the Authority's inability to pay debt service on the Secured Bonds, in amounts designed to assure the Authority will have sufficient moneys to, among other things, meet its obligations to pay the principal of and interest on the Secured Bonds.
2004 Amendment to the County Landfill Agreement
Pursuant to the 1996 Amended and Restated County Landfill Agreement, the initial maximum aggregate principal amount of Secured Bonds may not exceed $61,000,000 (the AInitial Agreement Cap@). In connection with the issuance of the Tax-Exempt 2004A Bonds and the Taxable 2004B Bonds, the County adopted a resolution on February 10, 2004, entitled, AResolution of the County of Passaic Authorizing the 2004 Amendment to the 1987 Amended and Restated County Landfill Agreement By and Between the County of Passaic, New Jersey and the Passaic County Utilities Authority@ authorizing the A2004 Amendment to the Amended and Restated 1987 County Landfill Agreement Between the County of Passaic and the Passaic County Utilities Authority@ (the A2004 Amendment@), in order to ensure said bonds would be Secured Bonds pursuant to the requirements of the County Landfill Agreement. The 2004 Amendment, in part, increased the Initial Agreement Cap to $69,500,000 (the A2004 Agreement Cap@). Under the 2004 Agreement Cap, the Secured Bonds are fully secured by the County Landfill Agreement.
Method of Payment
The County Landfill Agreement provides that if the Authority has insufficient funds to meet its financial obligations during the next year, the Authority will make and deliver to the County a certificate (the ACertificate@) stating: (a) the Authority will be unable to provide for the payments due of principal and interest on the Secured Bonds; and (b) the amount of the Authority's expected shortfall (the "Annual Charges"). The Certificate must be delivered by the Authority or the Trustee to the County on or before December 15 of each fiscal year. The County shall pay the amount of annual charges set forth in such Certificate on or before the subsequent February 15.
The County will make all budgetary and other provisions or appropriations necessary to provide for and authorize the payment by the County to the Authority of the amount stated in the Certificate delivered by the Authority as described above.
Breach of County Landfill Agreement by Authority Not to Affect County Payments Thereunder
The County Landfill Agreement provides that failure on the part of the Authority in any instance or under any circumstance to observe or fully perform any obligation assumed by or imposed on it by the County Landfill Agreement or by law, shall not relieve the County from making any payment or fully performing any other obligation required of it under the County Landfill Agreement, nor make the Authority liable in damages to the County, but the County may have and pursue any and all other remedies provided by law for compelling performance by the Authority of said obligation assumed by or imposed upon the Authority.
No Delegation
The County may not delegate its duties under the County Landfill Agreement.
Enforcement of County=s Obligation to Pay Annual Charges
Every obligation assumed by or imposed upon the County by the County Landfill Agreement shall be enforceable by the Authority by appropriate action or proceeding, and the Authority may have and pursue any and all remedies provided by law for the enforcement of such obligation, including the remedies and processes provided by the Act.
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County's Unconditional and Unqualified Obligation to Pay Annual Charges
Pursuant to the County Landfill Agreement, the County=s obligation to pay the deficiency in the debt service on the Secured Bonds as and when due to the Authority is an unconditional and unqualified obligation of the County, independent of any other obligation of the County.
Property Tax Act
The legislature of the State of New Jersey has enacted P.L. 2010, c.44, effective July 13, 2010 (the AProperty Tax Levy Cap@), which imposes a 2% cap on the tax levy of a municipality, county, fire district or solid waste collection districts, with certain exceptions and subject to a number of adjustments. One of the exceptions to the Property Tax Levy Cap's 2% limitation is the Aincreases required to be raised for capital expenditures, including debt service.@ There is no specific reference within the enumerated exceptions to payments made by a municipality or county pursuant to a service agreement with an authority used to pay debt service on authority obligations secured by such service agreement. Consequently, there is no specific exception from the 2% cap for Annual Charges payable by a local unit under the service contracts pursuant to the Property Tax Levy Cap.
However, the LFB issued Local Finance Notice 2011-36, dated December 12, 2011, which provides that amounts, if any, required to be paid by the County to the Authority pursuant to service contracts, such as the County Landfill Agreement, and necessary for the Authority to meet its debt service obligations in a timely fashion will be treated as an automatic exclusion from the 2% cap under the Property Tax Levy Cap. Consequently, the Annual Charges payable by the County under the County Landfill Agreement for debt service on the Secured Bonds, will be considered exempt from the limitations of the 2% cap imposed by the Property Tax Levy Cap.
Additional Bonds or Project Notes
The Authority currently does not intend to issue additional bonds or additional project notes under the Landfill Resolution.
The Landfill Resolution does authorize the issuance of Additional Bonds entitled to the security of the Landfill Resolution which would rank equally as to security and payment with the Secured Bonds, for the purposes and upon satisfaction of the conditions precedent to the issuance of such bonds as set forth in the Landfill Resolution.
PASSAIC COUNTY IMPROVEMENT AUTHORITY
The Passaic County Improvement Authority (PCIA) was formed in December 2002 by virtue of an approval from the Local Finance Board. The Authority is made up of five Commissioners with staggered terms of up to three years. Mr. Dennis Marco is the Chairman. Eight projects have been financed by the PCIA. The first was a co-venture with the Paterson Parking Authority which the PCIA issued $18,370,000 of its revenue bonds (of which $8,000,000 was the County=s Chapter 12 Bonds) to construct a parking garage in the City of Paterson secured by a lease agreement with the Paterson Parking Authority and by revenue to be generated by the new parking facility. The second project was the construction of an addition to Preakness Healthcare Facility, to renovate the existing facility and the PCIA issued $65,000,000 of Healthcare Facility Lease Revenue Bonds secured by a general obligation lease with the County of Passaic. These financings closed in May and June, 2005, respectively. A third project was to acquire a building for the Passaic County Prosecutor. The PCIA issued $6,000,000 of revenue bonds on December 9, 2005. A fourth project was a supplemental issue of $22,960,000 to construct an addition to the Preakness Healthcare Facility, which closed on July 28, 2006. A fifth project was to make loans to the Boroughs of Haledon and Ringwood to refinance certain of the outstanding bond anticipation notes of each Borough and the PCIA issued $8,587,000 of County Guaranteed Governmental Loan Revenue Bonds in January 2009 to effectuate same. A sixth project was to make a loan to 200 Hospital Plaza Corporation for the construction of a mixed-use parking/retail structure adjacent to the St. Joseph=s Regional Medical Center in Paterson and the PCIA issued $29,620,000 County Guaranteed Parking Revenue Bonds (200 Hospital Plaza Corporation Project), Series 2010 on October 22, 2010 to effectuate same. A seventh project was a refunding of the 2005 Preakness Healthcare Facility Lease Revenue Bonds where the Authority issued $57,425,000 Lease Revenue Refunding Bonds, Series 2012 to advance refund all bonds maturing after May 1, 2015, which closed on August 29, 2012. An eighth project was a refunding of the (a) 2005 Prosecutor's Office Building Improvements Project Lease Revenue Bonds where the Authority issued $3,510,000 Lease Revenue Refunding Bonds, Series 2015 to advance refund all bonds maturing on and after December 15, 2016 and the (b) 2006 Preakness Healthcare Center Expansion Project Lease Revenue Bonds where the Authority issued $19,550,000 Lease Revenue Refunding Bonds, Series 2015 to advance refund all bonds maturing on and after May 1, 2017, which closed on June 16, 2015. An eighth project was to make a loan to the City of Paterson for the refunding of certain short term notes and the PCIA issued $24,785,000 County Guaranteed Governmental Loan Revenue Bonds, Series 2015 on December 2, 2015.
A-13 COUNTY AND OVERLAPPING INDEBTEDNESS
Overlapping Government Units
In addition to the various municipalities and school districts within the County, the following exist within the County to provide certain governmental services: Butler-Bloomingdale Sewer Department, City of Passaic Municipal Utilities Authority, City of Paterson Municipal Utilities Authority, City of Paterson Parking Authority, Pompton Lakes Municipal Utilities Authority, Borough of Ringwood Sewerage Authority, Wanaque Municipal Utilities Authority, West Milford Municipal Utilities Authority, North Jersey District Water Supply Commission, Passaic Valley Sewerage Commission, Passaic Valley Water Commission, Passaic County Improvement Authority and the Passaic County Utilities Authority. No actual or contingent liability exists on the part of the County for the debt of these entities except as is expressly set forth herein or with respect to the Passaic County Utilities Authority.
Purposes of County Debt
The following table breaks down by purpose all direct general obligation bond and loan indebtedness of the County, for the payment of the principal and interest on which the County has pledged its full faith and credit as of December 31, 2015.
Schedule of Bond, Notes and Loan Indebtedness as of December 31, 2015
Notes $80,930,000 Loans 278,798 General County Purposes 196,084,000 Community College 31,006,000 Vocational and Special Needs School 4,874,000 Gross Bond and Loan Debt $313,172,798
Debt Incurring Capacity as of December 31, 2015
Equalized Valuation Basis (last 3 years average) $46,259,325,806 2% Borrowing Margin (1) 925,186,516 Net Debt Issued, Outstanding and Authorized 345,384,061 Remaining Borrowing Capacity $579,802,455
(1) Limited by Local Bond Law, N.J.S.A. 40A:2-1 et seq. to 2% of average equalized valuation.
Debt History
The following table shows certain ratios relating to the County's gross and net direct general obligation indebtedness.
History of Bonded Debt Ratios As of December 31,
Percentage Percentage Gross Debt of Gross of Net Average (Issued and Gross Debt to Net Debt Debt to Equalized Authorized Debt Per Equalized Per Equalized Year Valuation(1) But Not Issued) Capita(2) Valuation Net Debt Capita(2) Valuation 2015 $46,259,325,806 $384,601,557 $767.32 .83% $345,384,061 $689.08 .75% 2014 46,620,974,629 412,850,980 823.68 .89 383,548,769 765.22 .82 2013 48,062,947,082 403,227,364 804.48 .84 368,691,930 735.58 .77 2012 50,254,387,921 435,545,297 868.96 .87 368,462,629 735.12 .73 2011 52,932,585,999 409,047,118 816.09 .77 337,860,171 674.07 .64
Source: Annual Debt Statements filed with the Division of Local Government Services, New Jersey Department of Community Affairs. (1) Represents average equalized valuation for the three fiscal years ending in the corresponding year set forth in this table. (2) Based upon 2010 population of 501,226.
A-14 The following table shows the principal of all direct general obligation bond indebtedness and bond anticipation note indebtedness of the County for the last five fiscal years.
County of Passaic Schedule of Comparative Net Debt as of December 31
2015 2014 2013 2012 2011 Bonds and Notes Issued and Outstanding: Bonds $231,964,000 $254,396,000 $254,095,000 $287,481,000 $272,594,000 Notes 80,930,000 64,488,000 68,110,000 43,222,000 66,348,350 Loans 278,798 322,113 704,360 1,240,832 1,761,781 Total Issued 313,172,798 319,206,113 322,909,360 331,943,832 340,704,131
Bonds and Notes Authorized But Not Issued 71,428,759 93,644,867 80,318,004 103,602,115 68,342,987 384,601,557 412,850,980 403,227,364 435,545,947 409,047,118 Less: Statutory Deductions 39,217,496 29,302,211 34,535,461 67,083,318 71,186,947 Total Issued and Authorized But Not Issued $345,384,061 $383,548,769 $368,691,903 $368,462,629 $337,860,171
Source: Passaic County Audit Reports
Statement of Indebtedness As of December 31, 2015
GROSS DEBT Bonds, Notes and Other Loans Issued and Outstanding Bonds $231,964,000 Loans 278,798 Notes 80,930,000 313,172,798 Bonds and Notes Authorized But Not Issued 71,428,759 TOTAL GROSS DEBT 384,601,557
Statutory Deductions(1) 39,217,496
TOTAL NET DEBT $345,384,061
OVERLAPPING DEBT Passaic County Utilities Authority(2) $55,210,000
GROSS DEBT Per Capita (2010 Census - 501,226) $767.32 Percent of Average Equalized Valuation ($46,259,325,806) .83%
NET DEBT Per Capita (2010 Census - 501,226) $689.08 Percent of Average Equalized Valuation ($46,259,325,806) .75%
OVERALL DEBT (GROSS AND OVERLAPPING) Per Capita (2010 Census - 501,226) $877.47 Percent of Average Equalized Valuation (46,259,325,806) .95%
Source: County Records (1) Statutory deductions are used to determine the legal borrowing capacity of the County. The County, however, is obligated under law to repay the full amount of its gross debt. (2) Reflects debt outstanding of the Passaic County Utilities Authority as of December 31, 2015 which is covered by a County Deficiency Agreement.
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County of Passaic Combined Principal and Interest Requirements Outstanding Bonds and Loans of the County As of December 31, 2015
Year Principal Interest Total
2016 $34,814,000.00 $8,338,495.90 $43,152,495.90 2017 23,356,000.00 7,172,838.15 30,528,838.15 2018 26,348,000.00 5,242,841.65 31,590,841.65 2019 23,104,000.00 3,369,903.60 26,473,903.60 2020 20,197,000.00 2,687,217.70 22,884,217.70 2021 16,813,000.00 2,045,952.50 18,858,952.50 2022 16,215,000.00 1,587,500.50 17,802,500.50 2023 14,130,000.00 1,225,702.00 15,355,702.00 2024 14,788,000.00 889,852.00 15,677,852.00 2025 11,866,000.00 603,210.80 12,469,210.80 2026 12,274,000.00 383,386.20 12,657,386.20 2027 8,189,000.00 221,109.60 8,410,109.60 2028 7,870,000.00 126,300.00 7,996,300.00 2029 2,000,000.00 60,000.00 2,060,000.00 $231,964,000.00 $33,954,310.60 $265,918,310.60
Source: Passaic County Audit Reports
Anticipated Financings Involving County Credit
The County has in the past obligated itself to pay the principal and interest on certain debt issued by certain entities of the County. See “The Passaic County Utilities Authority” and “Passaic County Improvement Authority” above.
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THE COUNTY BUDGET
Status of County Budget
Pursuant to the Local Budget Law (N.J.S.A. 40A:4-1 et seq.), every county in the State is required to adopt a balanced budget. See "Budget Requirements" and "Budget Process" herein. The County=s budget for 2016 was adopted on March 8, 2016.
Budget Requirements
No County budget may be adopted without the approval of the Director. The Director approves the budget once he has determined that the budget meets all the requirements of the Local Budget Law (N.J.S.A. 40A:4-1 et seq.), and all regulations of the Board.
The Local Budget Law imposes various restrictions on the formulation of the County budget, the more important of which pertain to anticipation of revenues and review of adequacy of appropriations. Among other restrictions, the Local Budget Law requires that the budget be balanced and that the Director examine the Budget with reference to all estimates of revenue and the following appropriations: (a) administration, operation and maintenance of each office, department, institution or other agency of the County, (b) contingent expenses in an amount not more than 3% of the total referred to in clause (a) of this paragraph, (c) payment of interest and debt redemption charges, (d) deferred charges and statutory expenditures, (e) cash deficit of preceding year, (f) reserve for uncollected taxes and other reserves and nondisbursement items deemed advisable by the Board of Chosen Freeholders, and (g) the payment of all judgments not for capital purposes and for which bonds or notes cannot be lawfully issued. Anticipated tax revenues are limited to the same proportions as actual cash collections bore to the total levy in the previous year and a reserve amount must be factored into the budget to make up for the expected shortfall in amounts actually realized the previous year unless the Director certifies a higher figure.
A further statute limits the amount of increases in the State budget exclusive of State aid which may be appropriated to counties, municipalities and school districts. The maximum expenditure of the State cannot exceed the amount determined by multiplying the annual percentage increase in State per capita personal income by the appropriations of the State in the year prior to the current fiscal year. Adjustments are made should a transfer of functions or services occur between the State and counties or municipalities. Statewide referenda are required to authorize additional expenditures.
Anticipated non-tax revenues of the County are limited to the amount actually realized the previous year unless the Director authorizes a higher figure. Tax anticipation notes are limited in amount by law and must be paid off not later than June 30 of the succeeding fiscal year.
The Director has no authority over individual operating appropriations, unless a specific amount is required by law, but the review functions which focus on anticipated revenues serve to protect the solvency of the County. The County budget, by law and regulation of the Division, must be in balance and is a "cash basis" budget.
Pursuant to the Local Budget Law, miscellaneous revenues shall include such amounts as may reasonably be expected to be realized in cash during the fiscal year from known and regular sources or sources reasonably capable of anticipation and lawfully applicable to the appropriations made in the budget. The County's miscellaneous revenues generally consist of surplus, operating surplus from prior years, County purpose tax, State and Federal aid, interest on investments, user fees, license fees and permits.
Budget Process
Primary responsibility for the County's budget process lies with the Administrator. As prescribed by the Local Budget Law, adoption should occur by the end of February, however, an extension may be granted by the Division to any local governmental unit. In the first quarter in which the budget formulation is taking place, the County operates under a temporary budget which may not exceed 26.25% of the previous fiscal year's modified budget. Upon adoption of an annual operating budget by the Freeholders, the Board of Taxation computes a tax rate for County purposes and apportions County Purpose Tax requirements to be paid by each municipality. The tax rate for each municipality includes County tax requirements.
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Deferral of Current Expenses
Supplemental appropriations made after the adoption of the County budget and determination of the tax rate may be authorized by the Freeholders with the approval of the Director. However, with minor exceptions, such appropriations must be included in full in the following year's budget.
Budget Transfers
Budget transfers provide a degree of flexibility and afford a control mechanism. Transfers between major appropriation accounts are prohibited until the last two months of the year and, although subaccounts within an appropriation are not subject to the same year-end transfer restrictions, they are subject to internal review and approval.
Annual Financial Statement (N.J.S.A. 40A:5-12 et seq.)
A verified statement of the financial condition of the County (the "Annual Financial Statement") for the fiscal year must be filed with the Division on or before January 26, of the succeeding year. This financial statement is filed by the Chief Financial Officer of the County; it reflects the results of operations for the year of the Current Fund. If there is a cash deficit in the fund, it must be included in full in the succeeding year's budget.
While the Annual Financial Statement is not audited, the variance, if any, between the Annual Financial Statement fund balance and audited fund balance is usually immaterial.
Annual Audit
The Local Fiscal Affairs Law, Chapter 5 of Title 40A of the New Jersey Statutes, regulates the nonbudgetary financial activities of the County. An annual audit of the County's books, accounts and financial transactions for the previous year must be performed by a licensed Registered Municipal Accountant or by qualified employees of the Bureau of Financial Regulations and Assistance in the State Department of Treasury. The audit, conforming to the Division=s' "Requirements of Audit," includes recommendations for improvement of the County's financial procedures and must be filed with the Director of the Division within six months after the close of each fiscal year. A synopsis of the audit report, together with all recommendations made, must be published in a local newspaper within 30 days after receipt thereof by the Clerk of the County.
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A-18 Comparative Summary of Adopted 2016, 2015, 2014, 2013 and 2012 County of Passaic County Budgets
2016 2015 2014 2013 2012
Revenues: Surplus Anticipated $18,000,000 $17,000,000 $17,000,000 $18,000,000 $20,000,000 State and Federal Grant Programs 6,258,129 7,341,941 14,554,974 18,811,923 4,836,374 State Assumption of Costs of County 32,460,079 30,744,608 31,570,885 29,551,970 29,862,128 Miscellaneous Revenues 57,634,000 66,508,348 65,942,148 56,348,148 54,268,048 Interest on Investments 18,000 18,000 30,000 35,000 55,000 Amount to be Raised by Taxation - County Purpose Tax 341,186,222 335,458,448 319,796,781 310,795,236 305,066,953
$455,556,430 $457,071,345 $448,894,788 $433,542,277 $414,088,503
Appropriations: General Government 119,586,472 112,941,996 103,121,571 98,040,681 96,199,397 Regulation 18,666,121 17,865,131 16,310,868 15,603,621 17,405,471 Roads and Bridges 3,110,109 3,050,168 3,260,500 2,760,500 3,783,047 Correctional and Penal 58,785,111 59,597,502 59,881,649 57,052,278 53,560,823 Health and Welfare 100,398,546 98,663,993 99,158,311 97,587,469 97,420,154 Educational 21,389,973 21,154,703 21,031,480 20,907,790 20,563,382 Recreational 3,476,062 3,495,549 3,247,360 3,148,799 2,992,919 Unclassified 11,743,941 12,250,990 12,056,450 12,865,052 12,728,720 Other Public and Private Programs 9,235,442 10,337,511 17,532,287 21,789,236 7,830,601 Contingent 50,000 50,000 50,000 50,000 50,000 Capital Improvement Fund 700,000 700,000 1,700,000 700,000 700,000 Debt Service 61,169,550 62,239,550 61,394,550 58,979,452 57,004,452 Deferred Charges and Statutory Expenditures 47,245,103 54,724,252 50,149,762 44,057,399 43,849,537
$455,556,430 $457,071,345 $448,894,788 $433,542,277 $414,088,503
Capital Improvement Program
The capital budget and improvement program of the County is designed to function as a planning tool for legislators, County officials and administrators. It allows County officials to evaluate alternatives and determine priorities for projects and programs in relation to available and projected financial resources. A carefully organized program and project schedule can avoid costly improper decisions or ill-timed action in a project involving the allocation of scarce capital resources.
A capital budget is the first proposal of the financial allocation described in the five year capital improvement program. The main purpose of the capital budget is to initiate planning for ultimate authorization of capital projects for the first year of the six year plan/program. The Capital Budget (2016) and Capital Program (2016-2020) do not represent actual authorization of projects, but rather conceptual recognition of the needs of specific capital improvements.
With restrictions on current spending and new financial resources becoming limited, it is imperative that capital planning and budgeting become more responsive to public needs, both present and long range. In addition to the cost of the selection process, the impact of each project on future operating budgets must be considered. In prioritizing capital projects, a major element for recommendation of investment is the degree to which a facility will either generate revenues or significantly reduce costs.
A-19 The following schedule depicts the County Capital Plan for 2016-2020. This plan does not provide an appropriation for the purposes outlined, nor does it commit the Board of Chosen Freeholders to the project or amounts listed. The Board of Chosen Freeholders will make determinations, on a priority basis, as each program is proposed, as to the need for and method of financing.
Five Year Capital Program (2016-2020) Anticipated Project Schedule and Funding Requirements
Project Total Cost Bridge Replacement and Repairs $67,000,000 Drainage Projects 250,000 Road Improvement Projects 71,784,000 General Program 2,425,708 Traffic Safety Program 750,000 Intersection Improvements 2,485,000 Acquisition of Various Equipment 8,580,000 Road Resurfacing Program 27,686,000 Buildings and Grounds Projects 26,320,000 School Improvements 6,076,293 $213,357,001
Year Amount 2016 $56,527,001 2017 73,870,000 2018 49,370,000 2019 22,470,000 2020 11,120,000 $213,357,001
Source: 2016 Capital Budget of the County
TAX INFORMATION ON THE COUNTY
County Tax Rates
County taxes are apportioned based on equalized valuations in the County. The following table sets forth the valuations on which County taxes are apportioned.
Valuation of Real Property, Personal Property Net Valuation Taxable and County Tax Rate Base
County Tax Rate Base Assessed Valuation Assessed Valuation of Real General Valuation of of Personal Net Valuation and Personal Tax Rate Year Real Property Property Taxable Property Per $100 2015 $32,786,310,200 $34,040,195 $32,820,350,395 $45,505,119,344 $.7510 2014 35,280,703,902 33,890,547 35,314,594,449 46,694,641,422 .6968 2013 35,477,614,974 38,786,512 35,516,401,486 47,074,403,060 .6665 2012 36,051,366,476 40,161,083 36,091,527,559 49,831,673,730 .6256 2011 34,072,490,040 43,449,319 34,115,939,359 53,342,056,687 .5669
Source: Passaic County Board of Taxation, Abstract of Ratables.
A-20 Equalized Valuation of Property of Constituent Municipalities
2015 General Municipality 2015 2014 2013 2012 2011 Rate(1)
Bloomingdale $796,502,271 $784,384,124 $818,385,144 $823,105,766 $941,849,404 4.054% Clifton 9,558,441,489 9,877,196,508 9,449,850,579 9,795,029,000 10,339,521,321 5.209 Haledon 538,282,439 532,576,389 581,278,510 616,790,575 652,803,390 4.304 Hawthorne 2,309,625,963 2,266,709,734 2,355,613,294 2,498,214,325 2,785,091,603 5.604 Little Falls 1,648,964,705 1,663,010,478 1,623,729,535 1,892,934,504 1,902,086,209 3.076 North Haledon 1,302,643,635 1,291,749,483 1,329,849,962 1,285,250,966 1,417,911,637 2.780 Passaic 3,089,652,409 3,248,963,982 3,266,831,739 3,360,831,040 3,547,156,667 7.573 Paterson 5,925,172,890 6,646,031,755 6,910,599,668 7,528,078,757 8,501,229,029 4.108 Pompton Lakes 1,125,411,927 1,131,012,786 1,173,080,283 1,263,332,893 1,389,906,868 6.832 Prospect Park 264,717,261 267,990,846 253,901,232 311,957,069 349,591,017 4.716 Ringwood 1,638,586,197 1,631,134,925 1,663,039,694 1,732,676,783 1,788,226,664 3.516 Totowa 2,167,694,622 1,983,700,064 2,126,535,352 2,338,552,280 2,472,291,459 2.284 Wanaque 1,257,130,277 1,289,326,322 1,212,597,512 1,347,018,699 1,351,251,430 3.596 Wayne 9,285,439,839 9,450,966,399 9,507,827,870 10,235,424,346 10,676,280,899 5.275 West Milford 2,907,269,303 2,981,390,799 3,103,608,706 3,039,933,537 3,433,239,806 3.666 Woodland Park 1,689,584,117 1,648,496,828 1,697,673,980 1,762,543,190 1,793,619,284 2.964
$45,505,119,344 $46,694,641,422 $47,074,403,060 $49,831,673,730 $53,342,056,687
County Rate Per $100 $75.10 $69.68 $66.65 $62.56 $56.69
Source: Passaic County Board of Taxation, Abstract of Ratables (1) Includes Municipal, School and County Tax Rates - Per $100
Ten Largest Assessed Valuations in the County - 2015
Assessed Name Valuation Willow Brook Mall $156,000,000 Hoffman LaRoche 132,047,700 North Jersey District Water Supply 59,146,200 Clifton Commons, LLC 40,863,500 Toys AR@ Us, Inc. 38,527,100 Castelton Assoc., LLC 35,026,800 Rose Manor Estates 33,028,100 Wayne PSC, LLC 32,612,400 Public Service 32,535,600 Mountain View Crossing 31,970,400
Source: Passaic County Board of Taxation
A-21 Ten Largest Employers in the County - 2015
Number of Employer Employees
St. Joseph's Hospital 3,700 Passaic County Administration 2,500 International Specialty Products 2,200 City of Paterson 1,600 Reckett & Coleman 1,500 U.S. Postal Service 1,500 Berlex Labs 1,480 G.E.C. Marconi Systems 1,400 Passaic General Hospital 1,220
Source: Passaic County Economic Development Department
Tax Collection Record
The following table is the current real property tax collection record of the County for the years 2011 through 2015:
Cash Percent of Year Tax Levy Collections Collections 2015 $335,617,867 $335,617,867 100% 2014 319,796,781 319,796,781 100 2013 310,795,236 310,795,236 100 2012 304,999,886 304,999,886 100 2011 298,991,500 298,991,500 100
Source: County Records (1) Unaudited
County Taxes
County taxes are collected by the municipalities and paid to the County Treasurer. The municipal levy includes all county, school and municipal taxes.
Each municipality is required to pay to the County Treasurer its share of the County Purpose tax on the fifteenth day of February, May, August and November of each year. The County gets its share of the taxes collected from the first taxes collected by each municipality. This assures the County of 100% collection.
Tax Appeals
The Passaic County Board of Taxation (the "Taxation Board") processes all appeals of county tax assessments. The appeal process is described below:
The taxpayer remits the full payment (including any disputed amount) to the municipal tax collector. The municipality then remits the amount of county tax assessed against the municipality to the County Treasurer.
The taxpayer files an appeal with the Taxation Board, which conducts a hearing. If the appeal is granted, the municipality remits payments to the taxpayer. The county tax assessed to the municipality for the succeeding year is then reduced by the total amount of appeals granted. Therefore, the County does not remit payment to the taxpayer or the municipality for appeals granted.
If the Taxation Board does not grant the appeal or if the taxpayer is not satisfied with the amount granted, the taxpayer has a right to a hearing before the New Jersey Tax Court.
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APPENDIX B
FINANCIAL STATEMENTS OF THE COUNTY
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APPENDIXAPPENDIXA B
SELECTEDSELECTEDFINANCIALINFORMATION FINANCIAL INFORMATION FOR YEARS ENDED DECEMBER 31, 2011-2015
The selectedselected datadata presentedpresented on on pagesA-84 pages B-84 to to A-87 B-87 under under the the section section “Selected “Selected Financial Financial Information” Information” as of as and of forand each for ofeach the of years the years in the in four the year four period year period ended ended December December 31, 2013 31, are 2013 derived are derived from the from financial the financial statements statements of the County of the ofCounty Passaic. of Passaic. The financial The financial information information for the year for the ended year December ended December 31, 2015 31, is derived2015 is fromderived “Unaudited” from “Unaudited” Annual FinancialStatement.Annual Financial Statement. The excerpts The excerpts from the from financialstatementsasofDecember the financial statements as of 31,2014December and 31, the2014 IndependentAuditor’s and the Independent ReportAuditor’s thereon Report are thereon included are in included the previous in the section. previous section. B-84 B-85 B-86 B-87
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APPENDIX C
GENERAL INFORMATION CONCERNING THE BORROWER
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APPENDIX C
CERTAIN ECONOMIC AND DEMOGRAPHIC INFORMATION FOR THE CITY OF PATERSON COUNTY OF PASSAIC, NEW JERSEY
The following material presents certain economic and demographic information on the City of Paterson. Additional information is included in Appendix B and such information is derived from audits and other financial documents. Unless otherwise stated, all information has been provided by the City.
GENERAL INFORMATION
The City of Paterson (the “City”), in the County of Passaic, New Jersey, is located on the Passaic River and is part of the major business and industrial region stretching across the New York-Northern New Jersey metropolitan area. It is located approximately 12 miles from the George Washington Bridge, 13 miles from the Lincoln Tunnel and 17 miles from the Holland Tunnel. In population, Paterson is the third most populous city in New Jersey. The City was the first industrial city in America, having been founded by Alexander Hamilton in 1791. The City is 8.3 square miles in area.
There are many recreational, educational and cultural opportunities available to City residents. The free Public Library has a main location and three branches which offer a wide range of services and activities. Other cultural centers located within the City are the Paterson Museum, the Garret Mountain Reservation, Lambert Castle, the Dey Mansion, and the Great Falls Historic District.
The area has two colleges, William Paterson University (in the adjacent Township of Wayne, New Jersey) and Passaic County Community College (located in the City). There are fifteen other colleges within a twenty-mile radius. The City is served by the St. Joseph's Regional Medical Center, located in the City, the Preakness Hospital and St. Joseph’s Wayne Hospital (a division of St. Joseph’s Regional Medical Center), located in Wayne, New Jersey, and Valley Hospital, located in Ridgewood, New Jersey.
CITY GOVERNMENT AND FINANCIAL PROCEDURES
General
Until 1974 the City functioned under a form of government whereby the elected Mayor appointed three separate boards which exercised both legislative and executive powers. The form of government was changed by a charter study referendum and, effective July 1, 1974, the City adopted a Mayor-Council form of government.
The Mayor is elected to a four year term without limitation as to the number of terms he may serve. The Council consists of nine members, one from each of six wards and three elected at-large. At-large Council members are elected to four year terms at the same time as the Mayor; ward Council members are elected to four year terms in the second year after the at-large elections. All elections are held in May.
The Mayor is chief executive and administrative officer of the City and, as such, is responsible for administering local laws and for policy development. The specific powers of the Mayor include appointment of department heads (with the advice and consent of Council), preparation of the City's budget and approval or veto (which may be overridden by a 2/3 vote of the Council) of ordinances adopted by the Council. The Mayor also appoints the City's three commissioners on the Passaic Valley Water Commission, members of the Board of Library Trustees and Municipal Court Judges.
There are seven departments within the municipal government. They are: Administration, Finance, Law, Public Safety, Public Works, Human Resources, and Community Development. Principal services provided by the municipal government include police and fire protection, street maintenance and cleaning, parks, sewers, library and public health.
The Council exercises all legislative powers, including final adoption of spending legislation such as budgets and bond authorizations for both municipal and school purposes and zoning ordinances. The Council appoints the City Clerk and members of the City’s Housing Authority and Parking Authority.
C-1 The members of the City government, the dates at which their terms expire, and the dates from which they have served continuously, are as follows:
Name Term Expires Served Since
Mayor Jose Torres June 30, 2018 2014
Members of City Council
Andre Sayegh June 30, 2016 2008
Kenneth Morris - at large June 30, 2018 2002
Domingo “Alex” Mendez - at large June 30, 2018 2014
Mohammed Akhtaruzzaman - 2nd Ward June 30, 2016 2012
William McKoy - 3rd Ward June 30, 2016 2000
Ruby N. Cotton – 4th Ward June 30, 2016 2012
Council President Julio Tavarez – 5th Ward June 30, 2016 2008
Maritza Davila - at large June 30, 2018 2014
Rev. James Staton – 1ST Ward* June 30, 2016 2015
* filling unexpired term
Biographical Sketches
Following are brief biographical descriptions of the City officials with primary responsibility for financial management and economic development:
Mayor Jose Torres
In May 2014, Jose “Joey” Torres was elected as the 46th Mayor of the City of Paterson; this is his third term as Mayor, having served in that capacity from 2002-2010.
Highlights of Mayor Torres’ first terms as mayor include the development of hundreds of units of affordable housing and the establishment of twenty-one after-school programs, as well as the construction of the Center City Mall and the demolition of the Alabama Avenue housing projects.
Prior to his first term as mayor, he served on the City Council from 1990-2000.
Mayor Torres was appointed by Governor Jon S. Corzine to the New Jersey Motor Vehicles Affordability and Fairness Task Force, as well as the Council on Affordable Housing.
Mayor Torres is a recipient of the New Jersey Planning Association’s Award for Smart Growth for the City of Paterson’s Master Plan and currently serves on the Board of Directors of Preservation New Jersey.
Mayor Torres was born and raised in Paterson.
Nellie Pou
Nellie Pou was appointed as Business Administrator on July 1, 2014. Immediately prior to that appointment, she had served as Assistant Business Administrator for 13 years. In total, she has worked for the City of Paterson for 39 years, including Director of the Department of Human Resources.
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Ms. Pou has also served in the New Jersey State Legislature for 18 years, having first been elected to the State Assembly in 1997 and having served as a State Senator since 2012. Her current committee assignments include Higher Education (Vice-Chair), Budget and Appropriations, Judiciary, and the Joint Committee on Economic Justice and Equal Employment Opportunity.
She has received numerous certificates from Rutgers University, including Municipal Budget Processing, Fund Accounting, and Public Labor Relations, as well as a certificate in Program for Emerging Political Leaders from the Darden Graduate School of Business Administration.
James Ten Hoeve
James Ten Hoeve was named Acting Director of Finance by Mayor Torres on July 1, 2014. His public sector career includes more than 30 years with the Village of Ridgewood, where he served as Director of Finance, CFO, and Tax Collector for 22 years, and then was appointed Village Manager, serving in that capacity for six years.
During his tenure in Ridgewood, Mr. Ten Hoeve was an active member of the Government Finance Officers Association, including serving a term as President.
From 2009-2014, Mr. Ten Hoeve served in various consulting roles to local and county governments, working in transitional professional capacities.
Mr. Ten Hoeve is a graduate of Seton Hall University.
Dominick Stampone
Dominick Stampone, Esq. was appointed Acting Corporation Counsel by Mayor Jeffery Jones on May 13, 2013 after serving as an Assistant Corporation Counsel and Assistant Municipal Prosecutor since January 2006. Mr. Stampone is a former Hudson County Assistant Prosecutor, former Municipal Prosecutor for the City of Passaic and current Alcohol Beverage Control Board Prosecutor for the City of Passaic. Mr. Stampone is a former Councilman for the Borough of Haledon and current Mayor of the Borough of Haledon. He is a past president of both the Young Lawyers Division of the Hudson County Bar Association and the Young Lawyers Division of the New Jersey State Bar Association where he also served a term as a Trustee. Mr. Stampone is an alumnus of William Paterson University and Seton Hall University School of Law.
RECENT ECONOMIC DEVELOPMENT ACTIVITY
The City’s Department of Economic Development (within the Department of Community Development) oversees all community development activities, including planning and zoning, permitting and inspections, housing code enforcement and all development activities.
There are a number of development projects that have recently been completed or are underway throughout the City. The most significant of these are highlighted below.
• ST. JOSEPH’S REGIONAL MEDICAL CENTER (THE “CENTER”) – The Center recently completed over $250 million of improvements on site as well as in the surrounding neighborhood. The hospital features 800 beds, 6,000 employees, 2,000 doctors and approximately 1,000 to 1,500 visitors per day. In addition to the hotel and conference center, a new 104,000 square foot Medical Office Building is being constructed which will house the New Jersey campus of New York Medical School, as well as physician office space.
C-3 • HILTON GARDEN INN AND CONFERENCE CENTER – This hotel/conference center will be adjacent to the front entrance of the St. Joseph’s Regional Medical Center and on top of a new parking garage. The property is expected to open in 2016 and will feature 132 rooms, a 189 space parking garage, a full service restaurant serving breakfast, lunch and dinner, 40,000 square feet of high tech meeting, banquet and conference space, an indoor pool and whirlpool, an exercise room, a rooftop solarium with outdoor garden, a business center, a market pantry, vending areas, and a guest laundry room. To ensure efficient ongoing operations, the hotel will feature all necessary back-of-the-house space including an in-house laundry to service both the hotel and catering operations. The hotel and conference center will serve as an extension to the recent renovations and improvements at the Medical Center.
• WILLIAM STRANGE MILL CONVERSION – The former William Strange Mill of Paterson’s Silk Industry is in the midst of an adaptive reuse conversion to 340 market-rate loft residential units. While preserving the building’s historic exterior structure and character, the interiors will feature modern day materials and amenities to include high ceilings, spacious layouts on two floors, private parking, energy efficient appliances and elevators, in addition to an on-site superintendent. The first 72-unit building is open and more than 90% of the units are leased.
• McBRIDE FIRE HOUSE HEADQUARTERS – The Paterson Fire Department completed construction of a new 4 bay firehouse which opened in April 2015. This new firehouse will become Fire Headquarters and will include an Emergency Operations Center, a state of the art training facility, and a Response Center for front line Fire and Emergency Medical Service Units. The new firehouse will increase the Fire Department’s preparedness and response capabilities. This project was funded with a combination of City, State, and Federal monies.
• 5 COLT STREET OFFICE BUILDING REDEVELOPMENT – $4,000,000 rehabilitation of historic building in the downtown historic area. Redevelopment has been completed and leasing is underway.
• PASSAIC COUNTY COMMUNITY COLLEGE: Recent developments include:
MARKET STREET RENOVATION – ENROLLMENT AND STUDENT SERVICES CENTER – Passaic County Community College (“PCCC” or “College”) renovated a former furniture store into an Enrollment and Student Services Center. The Offices of Admissions, Financial Aid, Bursar, Registrar and the Center for Student Success are all now located in one convenient location for students on Market St. The total cost of this project was $4,865,000.
HAMILTON HALL RENOVATION – CENTER FOR STEM INNOVATION – PCCC’s modern STEM facility, a three-story, 15,000 square foot building, houses a new Engineering Laboratory, 14 new classrooms and interactive learning spaces, updated laboratories, and a student lounge. The facility will house programs in computer Information Systems, Engineering, and Health Information Technology. By bringing these STEM programs together under one roof, the College will encourage collaboration among faculty and students while helping students make connections across STEM disciplines. This important asset will guarantee that PCCC’s diverse and underrepresented student population gains access to high quality STEM facilities and instructional support, necessary for further education and productive employment. Consistent with the College’s new vision for improving STEM education and student success, the project will further promote the use of hands-on, project-based, and collaborative learning experiences.
C-4
MEMORIAL HALL THIRD FLOOR ADDITION – CENTER FOR EDUCATION AND WORKFORCE DEVELOPMENT – This project involved a 6,000 square foot expansion of the third floor of the Memorial Hall Building on the main campus. This project provides the College’s continuing Education and Workforce Development area with access to updated training space, thereby allowing the college to expand its capacity to conduct workforce training for Passaic County residents and businesses. This new workforce training space consists of three classroom/training rooms, a reception area, a registration area, seven private offices for workforce staff, and twelve workstations. The total project cost was $1,500,000.
• MARY ELLEN KRAMER REHABILITATION PARK PROJECT – MEK Park is adjacent to the Great Falls on Maple St., just below Hinchliffe Stadium, and affords visitors the opportunity to get close up to the face of the waterfall. Although the land was used as a public park and for leisure since 1850, it was closed during World War II for strategic reasons and remained closed until the 1970s. It is named in commemoration of Paterson’s First Lady Mary Ellen Kramer who in the 1970s was instrumental in the designation and development of the Great Falls National Historic Landmark District and for reopening the park itself to the public. Design planning, environmental review and funding for this project is now complete and construction began in the fall of 2013. Plans call for the removal of the aluminum picket fencing within the park, rehabilitation of the stone wall along the lip of the precipice, re-establishment of the walking paths, seating and picnic areas, erection of an entranceway at Maple Ave., and ample plantings and landscaping. This project is anticipated to be completed and the park fully re-opened in the summer of 2015 and will be the first improvement in the Great Falls National Historic park area since its establishment in 2011.
• AQEL MEDICAL PLAZA – This project includes the construction of a new medical lab, medical practice, apartment units and community room which is located on Crooks Ave. Aqel Medical Plaza is a subsidiary of Paterson Community Clinic PA which is an existing medical practice with two additional locations in Paterson. The new medical lab will provide the testing of blood, tissue, bodily fluids, chemicals, and other organic/medical components.
• BOYS AND GIRLS CLUB OF PATERSON – The Paterson Boys and Girls Club (the “Club”) was established in 1968. The Club will be expanding their aquatic department with a $700,000 renovation of the infrastructure of this area. The project included improvements to the public outdoor area and a new gymnasium floor, as well as a portable theatre accommodate a larger production. The Club is housed in a 38,000 sf building is located on 21st Avenue in Paterson and accommodates approximately 5,000 children per year.
• MOTOR VEHICLE COMMISSION – In 2014, the Motor Vehicle Commission expanded its offices in the Public Safety Garage Complex located on Memorial Drive from a 6,400 square foot office to an 11,000 square foot area making it one of the largest in the region. It is expanding its services to accommodate additional customers as a regional office. The site is owned by the Paterson Parking Authority and leased to the State.
• MAMA JUANA CAFÉ – Opened in 2012 and located on the Route 20 corridor, Mama Juana Café is an exciting upscale Latin Restaurant with nightly entertainment bringing a multi-cultural flair to the City.
C-5 • GIANNELLA’S MODERN BAKERY – In 2014, the new owners of Giannella’s Modern Bakery completed a $4,000,000 renovation which added 10,000 square feet to the production and retail areas.
• PATERSON COMMONS II – Paterson Commons II is the conversion of the former Reinhart Mill to apartments with parking and retail space on 21st Avenue in Paterson. The cost of this project is estimated to be $10,000,000. In 2014, the New Jersey Economic Development Authority approved a $7.8 million tax break to complete the last phase of this project. Earlier phases (which are complete) include 39 rental units and a 300-student high school.
• WALGREEN’S – A new Walgreen’s Pharmacy opened on Hine Street in 2014, with a capital investment of approximately $2 million.
• SUPER SUPERMARKET – This newly constructed 30,000 square foot supermarket along with a newly developed Auto Zone was built on Memorial Drive and incorporated design structure to address the flooding issues in that area. The estimated cost of this project was $6,000,000 and is one of four locations for this chain in New Jersey.
• 1010 SOUTH PATERSON PLAZA – Construction has been completed on this project, which will house a 25,000 square foot mixed use/medical plaza. The initial investment in this project was $2,000,000.
• WILLIAM CARLOS WILLIAMS COMMUNITY PLAZA – In 2013, a new community park was opened at the site of what was once a dilapidated lot located across the street from one of Paterson’s most heavily traveled entryways and a few blocks from the Paterson’s Great Falls National Historical Park. The space provides space for residents as well as outdoor classroom space for the Community Charter School of Paterson and other community schools.
• PENNINGTON PARK – In 2014, the City completed the construction of new soccer fields and baseball fields at the lower level of Pennington Park, including one artificial turf field.. The project is being paid for with a combination of state Green Acres, Passaic County open space and city funds.
STATE AID
Energy Receipts Taxes
The State collects various taxes for distribution to local governments. The proceeds are appropriated and distributed each year, in part through the Municipal Purposes Tax Assistance Fund according to municipal tax rates and per capita equalized valuations, but mainly accordingly to a formula based upon the value of utility property and sales. The City anticipates receipt of $21,940,424 for fiscal year 2016 and received $21,332,7612 for fiscal year 2015.
Consolidation of State Aid Programs
Beginning in 1996, the State changed the manner in which State aid is distributed. Eighteen existing aid and grant programs were combined into a single program called the Consolidated Municipal Property Tax Relief Aid (“CMPTRA”).
The timing of the distribution of State aid was also changed in 1996. Under the new timetable, the City receives all of its CMPTRA in the first half of its fiscal year, with 75% of the CMPTRA being received in the first quarter of the fiscal year.
C-6 The City anticipates receipt of $11,045,027 in CMPTRA for fiscal year 2016 and received $11,652,919 in fiscal year 2014.
The total of CMPTRA plus Energy Receipts Taxes has been level for the past six years.
Special Municipal Aid (“Transitional Aid”)
In addition to the CMPTRA, which is formulaic in nature, the City also receives Transitional Aid, which is discretionary. To be eligible for such aid, the City has entered and will continue to enter into one year memorandums of understanding (“MOU”) with the State of New Jersey, Department of Community Affairs, Division of Local Government Services (“DLGS”), under which the City agrees to limit discretionary spending in the year of the award. Under the terms of the MOU, the City must obtain prior approval of the DLGS for certain discretionary actions, such as hiring new employees, retaining additional consultants, undertaking new governmental programs and authorizing new capital projects. The City receives Transitional Aid in amounts established by the Commissioner of the Department of Community Affairs. The availability of such aid is contingent on both the discretion of the Commissioner of the Department of Community Affairs and the amounts appropriated annually by the New Jersey State Legislature. The State Legislature has no legal obligation to make any such appropriations.
The City’s Fiscal Year 2016 Budget includes Transitional Aid of $24,505,600, compared with $25,000,000 in Fiscal Year 2015 and $23,000,000 in Fiscal Year 2014.
Transitional Aid is received by the City on the following schedule: (i) not to exceed 75% of the total upon the execution of the MOU; and (ii) the balance at least two weeks prior to the end of the budget year, providing that the City is in substantial compliance with the MOU.
Other
The State maintains a variety of smaller programs of grants-in-aid to municipalities in such fields as housing, neighborhood preservation, health, and social services.
Summary of State Aid, FY 2012 – FY 2016
The chart below summarizes the City’s receipt of State aid in the Current Fund for the past five years:
Gross Supplemental Fiscal Energy Energy Transitional Year Receipts Receipts CMPTRA Aid TOTAL
2016* $21,677,773 $262,651 $11,045,027 $24,505,600 $57,491,051 2015 21,070,061 262,651 11,652,739 25,000,000 57,985,451 2014 20,875,528 262,651 11,847,272 23,000,000 55,985,451 2013 20,118,557 262,651 12,604,243 22,400,000 55,385,451 2012 18,847,496 262,651 13,875,304 21,000,000 53,985,451
NOTE: Figures for fy 2015 are unaudited
* anticipated
CITY FINANCIAL SCHEDULES
Current Fund Balances, Revenues and Expenditures
The Current Fund is used to account for the resources and expenditures for governmental operations of a general nature, including debt service for general purpose bonds and notes. The fund balance in the Current Fund for the last five fiscal years comprises cash, investments and certain receivables. Under State law, only the amount of Current Fund balance held in cash or quick assets may be included as anticipated surplus in the succeeding fiscal year's budget, unless the Director of the Division of Local Government Services gives written consent to an exception.
C-7
The City's Current Fund balances, as of the fiscal years ended June 30, 2011 through June 30, 2015 and the year-end surplus included in the budget for each succeeding year is shown below:
Surplus Used in Fiscal Current Fund Succeeding Year Balance Year Budget
2015 $ 409,749.95 $190,400
2014 2,763,552.00 $1,900,000
2013 $734,849.13 -0-
2012 $227,200.81 -0-
2011 $227,200.81 -
NOTE: Fiscal Year 2015 figures is unaudited; the fund balance was unchanged from fy 2011 – fy 2012 due to deficits in operations in those years (see “SCHEDULE OF APPROPRIATIONS AND EXPENDITURES – CURRENT FUND” on the following two pages.
The following schedules of Current Fund operations for the Fiscal Years 2011 through 2015 have been compiled from audit reports and annual financial statements in conformity with accounting principles and practices prescribed by the Division of Local Government Services, which principles and practices differ in certain respects, which in some instances may be material, from generally accepted accounting principles applicable to local government units.
C-8 SCHEDULE OF APPROPRIATIONS AND EXPENDITURES - CURRENT FUND
Fiscal Year 2015 Fiscal Year 2014 Fiscal Year 2013 Fiscal Year 2012 Fiscal Year 2011
(unaudited)
APPROPRIATION EXPENDITURE APPROPRIATION EXPENDITURE APPROPRIATION EXPENDITURE APPROPRIATION EXPENDITURE APPROPRIATION EXPENDITURE
General 54,698,735 51,891,228 47,649,660 47,014,216 43,910,661 42,522,857 Government 58,845,063 57,534,305 55,535,047 51,642,404
Administration 1,998,197 1,839,690 2,137,280 1,973,733 2,055,907 1,753,786 1,946,821 1,783,188 2,123,348 2,002,766
Finance 2,960,093 2,838,740 2,770,894 2,683,999 2,494,169 2,429,132 2,559,678 2,451,368 2,450,453 2,337,375
Law 1,243,033 1,135,567 1,190,853 1,188,845 926,897 889,057 952,583 826,585 986,546 923,032
Public Safety 77,922,908 77,335,932 75,264,074 75,183,813 74,718,426 74,532,090 75,911,805 75,688,105 76,413,198 73,773,522
Public Works 16,664,694 16,056,728 16,565,088 16,247,265 14,446,164 14,170,846 29,140,866 28,110,601 30,430,373 29,642,805
Comm. Dev. 597,028 589,616 574,458 572,659 589,326 535,599 1,177,060 1,144,699 1,395,740 1,369,479
Human 3,488,083 3,326,210 3,637,073 3,610,498 3,353,175 3,291,674 3,375,258 3,138,611 3,570,549 3,457,274 Resources
Statutory 4,849,060 4,468,638 4,630,553 4,527,949 2,157,455 2,068,764 2,239,068 2,112,475 2,245,068 2,154,223 Agencies
Contingent 5,000 2,820 5,000 0 5,000 0 5,000 0 5,000 2,211
Statutory Expend 24,202,709 24,039,410 23,607,334 22,390,712 24,639,985 24,609,395 25,397,798 25,362,779 24,208,556 24,059,640 (I)
Judgments 50,000 0 25,000 0 25,000 0 310,000 308,196 525,000 525,000
Operating Expenses
Regular 28,544,413 27,014,724 27,774,694 27,614,546 27,280,358 26,795,404 16,619,481 16,614,927 21,199,469 21,154,150
State and Fed. Programs Offset 10,800,178 10,800,178 10,730,508 10,730,508 13,409,270 13,409,270 18,856,807 18,856,807 13,025,942 13,025,942 by Revenues
Cap. Imp. Fund 340,000 340,000 340,000 340,000 340,000 321,651 500,000 300,000 400,000 400,000
C-9
Debt Service
8,583,578 8,578,557 7,397,858 7,333,209 6,724,586 6,638,312 5,700,673 5,464,032 Municipal 12,334,877 11,982,768
School Dis. 0 0 616,232 616,232 622,962 622,962 629,629 629,629 636,596 636,596
Cash Deficit- 0 0 487,751 487,751 Preceding Year 0 0 2,326,675 2,326,675 5,336,278 5,336,278 (2)
Deferred Charges 1,650,165 1,650,165 2,578,000 2,578,000 2,054,238 2,054,238 (3) 2,314,917 2,289,917 1,415,917 1,415,917
Reserve for 13,556,033 13,556,033 10,922,467 10,922,467 Uncollected 6,038,137 6,038,137 3,619,732 3,619,732 Taxes 8,567,478 8,567,478
Total General 247,225,050 244,170,345 245,340,964 242,383,078 243,847,415 238,114,861 $260,979,369 $255,439,359 238,754,445 236,675,077 Appropriations
County Taxes 43,116,884 43,116,884 47,480,252 47,480,252 39,989,835 39,989,835 47,809,103 47,809,103 49,058,103 49,058,102
School Taxes 39,461,008 $39,461,008 39,460,571 39,460,571 39,360,759 39,360,759 39,257,403 39,257,403 39,461,377 39,461,377
TOTAL $343,557,261 $338,017,251 334,165,873 331,111,168 318,105,139 316,025,671 332,407,470 329,449,584 332,366,894 326,864,340
(1) Includes employer contributions for pensions and social security. (2) Reflects Current Fund deficit incurred in the preceding year and included in the current year's expenditure appropriations. (3) Includes over expenditures of budget appropriations, deferred charges following audit adjustments of prior years' financial statements over expenditures of reserve and capital funds, and emergency authorizations.
C-10
SCHEDULE OF REVENUES - CURRENT FUND
Fiscal Year 2015 Fiscal Year 2014 Fiscal Year 2013 Fiscal Year 2012 Fiscal Year 2011 (unaudited) (unaudited)
Budget Realized Budget Realized Budget Realized Budget Realized Budget Realized
Fund Balance Utilized 0 0 0 0 0 0 0 0 0 0
Current Levy 230,786,186 235,890,313 232,243,071 234,127,864 219,237,052 218,937,192 221,990,323 221,465,040 219,635,549 218,738,118
Delinquent Taxes 2,513,100 1,999,323 2,365,000 2,075,152 1,979,700 2,521,064 4,081,700 1,513,366 5,043,993 5,147,130
Gross Receipts and Franchise 21,332,712 21,332,712 21,138,179 21,138,179 20,381,208 20,381,208 19,110,147 19,110,147 18,481,803 18,481,803 Taxes
Consolidated Municipal Property 11,652,739 11,652,739 11,847,272 11,847,272 12,604,243 12,604,243 13,875,304 13,875,304 14,503,648 14,503,648 Tax Relief Aid
Building Add Allowance for 377,176 0 377,176 377,176 381,296 381,296 385,378 385,378 389,643 389,643 Schools Sewer Charges 6,414,963 Current 8,759,711 10,732,345 7,449,300 8,759,711 6,414,000 6,449,338 7,014,900 6,540,692 6,738,400 431,666 Delinquent 758,800 968,064 412,800 758,850 412,800 423,726 431,600 412,888 437,800
```Miscellaneous (incl. 61,081,838 59,153,298 57,533,074 57,340,823 56,694,740 57,155,710 Transitional Aid) 62,601,935 61,326,687 61,906,058 62,037,837
Total Budget Revenues 337,262,262 341,738,794 333,365,872 336,425,027 318,105,039 318,853,776 329,491,287 324,629,502 327,126,894 326,144,908
C-11 FISCAL YEAR 2015 BUDGET AND UNAUDITED RESULTS OF OPERATIONS
The Budget for Fiscal Year 2015 was adopted on March 24, 2015. It provided appropriations (including expenditures of grants) of $252,613,745 and a municipal tax levy of $148,208,294. The municipal tax levy increased by 1.99% over Fiscal Year 2014.
The total CMPTRA and Energy Receipts Taxes (in the aggregate) were equal to Fiscal Year 2015 (and prior year) levels. Transitional Aid increased by $2 million (to $25 million). The City was able to generate a Current Fund balance of $2.88 million as of June 30, 2014, and $1.9 million of that balance was anticipated as revenues in the Fiscal Year 2015 budget. Most miscellaneous (non-grant) revenues were budgeted for Fiscal Year 2015 at Fiscal Year 2014 actual (realized) levels.
For the first time in several years, the City did not be issue any emergency Notes for tax appeal or sick and vacation buyouts; any payments for such purposes were included in the Fiscal Year 2015 operating budget.
However, the City did issue $4,395,000 emergency notes to fund an overexpenditure in health insurance ($3,955,000, net of certain other budgetary transfers), as well as to fund an additional pay down of $440,000 (above the amount included in the adopted budget) on the City’s Tax Appeal Refunding Bond Anticipation Notes that matured on June 3, 2015.
The City ended Fiscal Year 2015 with a General Fund balance (unaudited) of $409,749.95, reflecting the use of $1.9 million of Fund balance in the fiscal year budget and a deficit in operations of approximately $568,000. However, this deficit was due to the payment (in cash) of more than $7.6 million in tax appeal judgments and settlements (for the first time in several years, the City did not issue any debt to fund tax appeals), as well as more than $1.2 million of interfund advances on grants that are still expected to be received. Tax collections were well above budget (by approximately $5.1 million) and the City realized $2.3 million of miscellaneous revenues that were not anticipated in the budget.
FISCAL YEAR 2016 BUDGET
The Budget for Fiscal Year 2016 was adopted on March 22, 2016. It provided appropriations (including expenditures of grants) of $275,517,610 and a municipal tax levy of $156,813,075. The municipal tax levy increased by approximately 5.8% over Fiscal Year 2015.
The total CMPTRA and Energy Receipts Taxes (in the aggregate) were anticipated to be equal to Fiscal Year 2015 (and previous years’) levels. Transitional Aid decreased slightly for Fiscal Year 2016 (by approximately $500,000), but remains at a higher level than in Fiscal Year 2014 and all previous years.. The Fiscal Year 2016 Budget includes the use of $190,000 in surplus (versus $1.9 million in Fiscal Year 2015).
Most miscellaneous (non-grant) revenues were budgeted for Fiscal Year 2016 at Fiscal Year 2015 actual (realized) levels. Anticipated sewer charges are approximately $800,000 higher, reflecting a rate increase. Other increases reflect contractual arrangements, such as employee contributions to health care premiums. The budget also includes a revenue line item of approximately $3 million from capital surplus.
The City will be issuing Notes (described herein) to fund two emergencies, totaling $2,675,000: one relating to the demolition of City-owned property after a fire ($1,045,000); the other relating to the funding of tax appeal payments in excess of amounts included in the budget ($1,630,000).
C-12 ASSESSMENT AND COLLECTION OF TAXES
Tax Collection Procedure
Real property taxes are assessed locally based upon an assessment of true value. The tax bill includes a levy for City, County and school purposes. The school and County levy is remitted on a predetermined schedule. Tax bills are mailed semi-annually after certification of the tax rate by the County Tax Board and include the second half of the current year's taxes plus the preliminary estimate of the next year's taxes. Taxes are payable in four quarterly installments on February 1, May 1, August 1 and November 1. If unpaid on these dates, the amount due becomes delinquent and subject to a penalty of 8% on amounts up to $1,500 and 18% on amounts in excess of $1,500. All properties with unpaid taxes for the previous year are placed in a tax sale in accordance with the New Jersey Statutes. All new tax foreclosure proceedings are instituted to enforce the tax collection or acquisition of title to the property by the City.
TAX COLLECTIONS
FY 2015 FY 2014 FY 2013 FY 2012 FY 2011
Current Levy:
Municipal 154,188,069 151,547,419 146,120,966 139,584,337 133,719,977
School 43,116,884 39,460,570 39,360,759 39,257,403 39,461,378 School Debt -0- -0- -0- -0-
County 39,461,008 47,480,252 39,913,652 47,809,103 49,058,103
Total Levy 236,765,961 238,488,241 225,395,377 226,650,843 222,239,458
Current Levy 222,334,280 223,702,561 210,793,532 215,703,086 215,318,386 Collected
Percent 93.90% 93.80% 93.52% 95.16% 96.88% Collected Current Levy Cancelled or 8,976,191 10,481,543 10,550,118 6,517,544 3,393,234 Remitted Delinquent Taxes 1,999,323 2,075,152 2,521,064 1,513,366 5,147,130 Collected Total Current and $224,333,603 $225,777,713 $213,314,596 $217,216,452 $220,465,516 Delinquent Collected Current and Delinquent 94.75% 94.67% 94.64% 95.84% 99.20% Collected as Percentage of Levy
C-13 Delinquent Tax Balance 216,935 83,891 26,084 162,040 60,635 Current Year Prior Year's Tax Balance 17,916 40,096 13,313 17,005 3,944 Transferred to Tax Title Liens 5,448,339 4,262,707 4,130,357 4,268,173 3,467,203 Tax Title Lien Balance 16,549,116 12,285,926 9,933,237 8,606,085 5,515,355 Foreclosed Property Balance $5,107,360 $5,107,360 $5,107,360 $5,107,360 $5,107,360
CURRENT TAXES
Margin for Reserve Delinquency For Uncollected Total Tax % of Levy Actual % of Year Levy Taxes Collection FY 2015 $238,765,961 $13,556,033 5.73% 93.90%
FY 2014 $238,488,241 $10,922,467 4.58% 93.80%
FY 2013 $225,395,377 $8,567,478 3.80% 93.52% FY 2012 $226,650,843 $6,038,137 2.72% 95.16%
FY 2011 $222,239,458 $3,619,733 1.63% 96.88%
DELINQUENT TAXES AND LIENS
Delinquent Budget Anticipation of Actual Collections Year End Collections
Year Amount Amount % Amount % FY 2015 $18,079,327 $2,513,000 13.90% $1,999,323 11.06%
FY 2014 15,017,278 2,365,000 15.74% 2,075,152 13.82%
FY 2013 12,127,515 1,979,700 16.32% 2,521,064 20.74% FY 2012 9,860,123 4,081,700 77.57% 1,513,366 27.12%
FY 2011 6,502,594 5,043,993 69.67% 5,147,130 79.16%
FY 2010 2,006,401 475,000 23.67% $357,400 17.81%
C-14 Trend in Tax Rate
Following are the general and effective rates of real property taxation for the calendar years 2006 to 2015. These rates include all real estate taxes (municipal, school and county).
Year General Rate Equalization Effective Rate Per $100 Rate Per $100 Full
2015* $4.108 90.52% $3.72
2014 2.896 124.81 3.57
2013 124.75 3.38 2.744
2012 2.515 119.98 3.02
2011 2.515 109.53 2.75
2010 2.126 105.45 2.24
2009 1.931 105.01 2.03
2008 1.853 111.14 2.06
2007* 1.750 129.64 2.27
2006 26.300 9.52 2.51
______Source: County Board of Taxation - Abstract of Ratables.
* In 2007 a revaluation of real property was put into place. This was the first revaluation in 34 years; another revaluation was completed in 2015
CITY REVALUATION
The 2007 revaluation occurred at the peak of the housing market. The subsequent recession led to an extraordinary number of (successful) tax appeals over the ensuing years, which were funded through a combination of budget appropriations (in some cases leading to operating deficits) and tax appeal refunding notes.
The City has completed another revaluation that will go into effect for 2015. The total assessed valuation fell to approximately $5.7 billion (a reduction of approximately 30%). The bulk of this adjustment was on residential properties, which will have the effect of shifting the tax burden from residential to commercial properties, as many of the larger commercial properties have had their assessments adjusted since 2007 through tax appeals. The total amount to be raised through taxes is not impacted by the revaluation.
C-15 The following tables indicate the assessed valuation of taxable property in the City for the last ten years.
ASSESSED VALUATIONS
Assessed True Value of Land and Personal Total Assessed Value to Year Land Improvements Taxable Improvements Property Valuation True Property Value
2015 $1,696,029,300 $3,978,541,300 $5,674,570,600 $13,181,928 $5,687,752,528 $6,268,858,374 90.52%
2014 3,871,555,730 4,307,701,322 $,179,257,052 13,832,573 8,193,089,625 6,561,295,447 124.81
2013 4,040,860,430 4,451,292,734 8,492,153,164 13,832,753 8,505,985,737 6,818,425,440 124.75
2012 4,208,810,690 4,689,246,852 8,898,057,542 13,832,573 8,911,890,115 7,427,813,064 119.98
2011 4,309,849,790 4,854,553,852 9,164,403,642 13,832,573 9,178,236,215 8,379,655,085 109.53
2010 4,333,456,390 4,947,734,452 9,281,190,842 13,832,573 9,295,023,415 8,814,626,283 105.45
2009 4,351,790,840 4,987,396,605 9,339,187,455 13,509,374 9,352,696,819 8,898,855,203 105.10
2008 4,368,144,500 4,950,073,450 9,318,217,950 13,666,858 9,331,884,808 8,396,513,233 111.14
2007* 4,392,187,800 4,981,878,100 9,374,065,900 14,551,432 9,388,617,332 7,242,068,290 129.64
2006 102,164,225 470,669,449 572,833,674 1,344,999 574,168,673 6,031,183,539 9.52 ______Source: Division of Tax Assessments, City of Paterson.
ASSESSED VALUATIONS: LAND AND IMPROVEMENTS - BY CLASS
Apartment and Year Total Commercial Industrial Residential Vacant Land Other
2015 $5,674,570,600 $1,344,504,900 $429,150,800 $3,444,626,600 $398,528,300 $57,760,000
2014 8,179,257,052 1,568,466,875 509,862,800 5,463,095,627 482,915,300 154,916,450
2013 8,492,153,164 1,599,660,187 517,803,000 5,714,628,177 486,480,900 173,580,900
2012 8,898,057,542 1,636,794,675 534,434,500 6,055,404,407 493,569,500 177,854,460
2011 9,164,403,642 1,686,584,175 563,238,300 6,235,334,057 496,089,200 183,157,910
2010 9,281,190,842 1,700,941,875 602,582,900 6,292,039,157 505,956,200 179,670,710
2009 9,339,187,445 1,727,489,145 610,010,200 6,305,862,040 511,254,000 184,572,060
2008 9,318,217,950 1,713,639,200 629,668,600 6,301,093,300 485,494,450 188,322,400
2007* 9,374,065,900 1,736,768,700 648,880,900 6,310,285,900 491,173,100 186,957,300
2006 572,833,674 115,840,638 42,371,903 366,155,555 38,229,828 10,235,750
______Source: Division of Tax Assessments, City of Paterson.
C-16 TAX EXEMPT PROPERTIES IN THE CITY
2014 2015 Public Schools $457,367,700 $441,170,500
Schools Other Than Public 15,052,600 16,688,900
Public Property 881,327,680 710,031,800
Churches and Charities 348,785,100 356,403,100
Cemeteries 32,346,500 25,018,700
Misc. Includes Private Properties that pay PILOTs 442,916,553 339,562,200 TOTAL $2,177,796,133 $1,888,875,200
______Source: Division of Tax Assessments, City of Paterson.
LARGEST TAXPAYERS IN THE CITY – 2015
Assessed Value Center City Partners $23,738,900 Getty Industrials 22,321,700 Park East Terrace 20,034,000 Route 20 Retail Center, LLC 19,730,600 Riverview Towers II 18,474,900 Riverview Towers I 18,412,600 Okonite Co. 16,086,200 Ivy Madison Property LLC 14,392,600 NJ Bell Telephone Co 13,181,928 Great Falls Realty 10,600,000
______Source: Division of Tax Assessments, City of Paterson.
C-17
ANALYSIS OF TAX RATES AND PERCENT DISTRIBUTION RATE PER $100 ASSESSED VALUATION
Municipal School County
Year Total Tax Percent Tax Percent Tax Percent (CY) Rate Rate Rate Rate 2015 $4.108 $2.683 65.28% $0.693 16.85% $0.734 17.87% 2014 2.900 1.882 64.89 0.482 16.61 0.537 18.50 2013 2.744 1.743 63.54 0.463 16.88 0.538 19.58
2012 2.515 1.597 63.51 0.4411 17.54 0.477 18.95
2011 2.515 1.567 62.30 0.4289 17.05 0.519 20.65
2010 2.126 1.191 56.00 0.4238 19.94 0.512 4.06
2009 1.931 1.037 53.70 .413 21.39 .481 24.91
2008 1.853 0.997 53.80 .398 21.48 .458 24.72
2007 1.750* 0.980 56.00 .39 22.29 .38 21.71
2006 26.30 14.42 54.83 6.34 24.11 5.54 21.06
2005 24.99 14.18 56.74 6.30 25.21 4.51 18.05
* As a result of revaluation property values increased from $572,833,674 to $9,374,065,900.
CITY EMPLOYEES
Under the laws of New Jersey, municipal employees have certain organizational representational rights, which include the right to organize, to negotiate collectively through representatives of their choosing and to engage in lawful concerted activities for negotiating. The law prohibits strikes by public employees and there have been no strikes among municipal employees in the City since employees were granted the right to negotiate collectively in 1968. As of June 30, 2015, approximately 1,800 of these employees were organized in 19 collective bargaining units. The contracts with each of these collective bargaining units have expired.
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The following table summarizes the City’s gross payroll and number of employees (at year end) with respect to Municipal Services, Federal Programs and the City Library System.
SUMMARY OF PAYROLL AND EMPLOYMENT (As of June 30)
Municipal Services Library Total
Year Payroll Number of Payroll Number of Payroll Number of Employees Employees Employees (1)
2015 $103,836,567 1,767 $1,989,724 59 $105,826,291 1,826
2014 $104,767,257 1,785 $2,125,438 61 $106,902,695 1,846
2013 $100,559,943 1,609 $1,900,435 56 $102,460,378 1,665
2012** $104,577,260 1,509 $1,800,407 54 $106,377,667 1,563
2011 $106,602,574 1,531 $1,892,012 57 $108,494,586 1,588
2010* $119,150,455 1,926 $1,933,913 60 $121,084.368 1,986
2009 $ 93,324,910 1,971 $1,703,951 60 $ 95,028,861 2,031
2008 $ 93,336,301 1,830 $1,540,896 54 $ 94,877,197 1,884 ______Notes: (1) Number of employees is calculated as of the end of each year. Includes full and part time employees. Source: City Department of Administration. * Amount reflects $14,000,000 of retroactive payroll covering 5 years of the fire union contracts paid during Fiscal Year 2010 ** Amount reflects $5,605,376.01 of police retroactive payroll paid in April, 2011.
CITY DEBT
Debt Statements
The City must report all new authorizations of debt or changes in previously authorized debt to the Division through the filing of Supplemental and Annual Debt Statements. The Supplemental Debt Statement must be submitted to the Division before final passage of any debt authorization. Before July 31 of each year the City must file an Annual Debt Statement with the Division. This report is made under oath and states the authorized, issued and unissued debt of the City as of the previous June 30. Through the Annual and Supplemental Debt Statements, the Division monitors all local borrowing.
Several regional and City agencies have issued debt for the payment of which the City is responsible in varying degrees. A description of those agencies and the relationship of each to the City follows:
Passaic Valley Sewerage Commission. - The City is a contracting municipality with the Passaic Valley Sewerage Commission (“PVSC”) which receives and treats sewage from twenty-nine contracting municipalities. The City is responsible for payment of a portion of the annual cost of maintenance, repair and operation, including debt service, of PVSC based upon the City’s proportionate share of sewerage delivered and discharged into the system. PVSC’s bonded indebtedness as of December 31, 2014 was $316,515,886. The City’s share of system flow was approximately 9.00% and, therefore, the its share of
C-19 debt with respect to PVSC is estimated at $28,482,257. The City’s payment for PVSC’s annual expenses, including debt service, is appropriated in each year’s operating budget.
City appropriations for payment of its proportionate share of PVSC’s costs during the past five fiscal years are as follows:
Year Amount 2014 $10,373,702 2013 10,128,250 2012 10,002,847 2011 10,074,516 2010 10,334,139
Each year’s appropriation is an amount that includes the current year’s estimated charge less a credit for overcharge in the prior year or an additional amount resulting from an undercharge in the prior year.
Passaic Valley Water Commission - City residents purchase water from the Passaic Valley Water Commission (“PVWC”) on a retail basis. PVWC’s sources of supply are up to 75 million gallons a day from the Passaic River and 40 million gallons a day from Wanaque Reservoir. PVWC also owns Point View Reservoir which has a storage capacity of three billion gallons. Participation in PVWC is held by the City (4/7), the City of Passaic (2/7), and the City of Clifton (1/7). PVWC’s Board consists of seven members, three of whom are appointed by the Mayor of the City.
The PVWC bonds are secured solely by its system revenues and are not guaranteed by the City.
The City, through the PVWC, is a contracting municipality with North Jersey District Water Supply Commission (“NJDWSC”). As such, it is entitled to 20% of the water supplied by NJDWSC, and is liable for 20% of the annual operating charges, including debt service, of NJDWSC. Historically, these charges have been defrayed in their entirety by the revenues of PVWC.
Paterson Parking Authority - The City has, in the past, unconditionally guaranteed the bonds issued by the Parking Authority of the City of Paterson. However, all City-guaranteed bonds of the Parking Authority have been defeased and there is no City-guaranteed debt outstanding. The Parking Authority has no debt authorized but unissued.
Paterson Housing Authority - The Housing Authority does not have any debt outstanding.
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STATUTORY DEBT (1) AS OF JUNE 30, 2015
Gross Debt Deductions (2) Net Debt
School Purposes $ -0- $ -0- $-0-
Municipal Purposes (3) 129,850,876 2,475448 127,375,428
Total $129,850,876 $2,475,448 $127,375,428
Average Equalized Valuation of Real Property $6,816,826,441
Statutory Net Debt 1.869% Percentage
(1) The above data was abstracted from the Annual Debt Statement as filed by the City’s Director of Finance, dated as of June 30, 2015 with the Division in accordance with Section 40A:2-40 of the Local Bond Law.
(2) Deductions from gross debt are allowed in accordance with law, which allows a deduction from school purpose gross debt of an amount up to 6% of average equalized valuation and for any additional State School Buildings Aid Bonds authorized (P.L. 1968, C.177, as amended P.L. 1971, C.10, as amended and P.L. 1978, C.74). (The debt service of State School Buildings Aid Bonds is paid by the State through annual appropriations). The deductions from municipal gross debt represents bonds issued and bonds authorized but not issued to meet cash grants-in-aid for debt service reserve fund. Statutory deductions are used to determine the legal borrowing capacity of the City. However, the City is obligated under law to repay the full amount of its gross debt.
(3) Includes all outstanding Bonds, Bond Anticipation Notes, and authorized-but-unissued capital ordinances.
C-21 BORROWING CAPACITY JUNE 30, 2015
City Purposes
Average Equalized Valuation of
Taxable Property (Three-Year average) $6,816,826,441
3 1/2% Borrowing Margin 238,588,525
Net Debt Issued and Outstanding and Authorized but $127,375,428
Excess School Borrowing -0-
Excess Utility Borrowing -0-
Total Charges to Borrowing Margin 127,375,428
Borrowing Capacity Available $111,213,498
School Purposes
6% Borrowing Margin of
Average Equalized Valuation (1) $409,009,587
Net Debt Issued and Outstanding and Authorized -0-
Less Debt Issued Pursuant to Chapter Laws of 1968 -0-
Total Changes to Borrowing Margin -0-
Borrowing Capacity Available $409,009,587
______(1) Upon satisfaction of certain conditions, including approval of the Commissioner of Education and the Local Finance Board in the Division of Local Government Services, up to six percent of the average equalized valuation of taxable property in the City may be issued for school purposes.
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SCHEDULE OF COMPARATIVE BONDED DEBT As of December 31
2014 2013 2012 2011 2010
BONDS AND NOTES ISSUED AND OUTSTANDING:
BONDS:
General(1) $59,441,259 $64,345,622 $41,922,526 $43,653,615 $45,311,426
School 0 0 $604,805 1,193,900 1,768,036
Total Issued $59,441,259 64,341,622 42,527,331 44,847,515 47,079,462
NOTES:
N.J. Infrastructure Loan 14,251,184 15,461,665 16,684,446 17,874,826 21,119,471
EDA Loan 0 0 0 0 0
General (Green 1,873,198 7,367,972 28,185,879 21,337,406 10,731,568 Acres Trust and BANS)
DCA Demo Loan 0 45,000 90,000 135,000 223,250
Total Issued 16,124,382 22,873,637 44,960,325 39,347,232 32,074,289
Total Bonds and Notes 75,565,641 87,215,260 87,487,656 84,194,747 79,153,751 issued and Outstanding
BONDS AND NOTES AUTHORIZED BUT NOT ISSUED
General 36,395,953 17,430,469 10,535,406 10,784,702 13,451,132
School 0 0 0 0 0
Total Bonds and $36,395,953 17,430,469 10,535,406 10,784,702 13,451,132 Notes Authorized But Not Issued
TOTAL ISSUED AND AUTHORIZED BUT $111,961,594 104,645,729 98,023,062 94,979,449 92,604,882 NOT ISSUED
C-23 SCHEDULE OF OVERLAPPING DEBT
Paterson Overlap
Total Percent Amount December 31, 2014 Passaic Valley Water Commission $131,352,330 57.00% $ 74,870,828 Passaic Valley Sewerage Commission 275,987,482 8.60 23,734,923 North Jersey District Water Supply 19,581,146 20.00 3,916,229 Commission Passaic County 412,850,980 14.20 58,624,839 Total $839,771,998 $161,146,820 December 31, 2013
Passaic Valley Water Commission $143,355,014 57.00% $81,712,358
Passaic Valley Sewerage Commission 296,652,116 9.13 27,084,338
North Jersey District Water Supply 45,820,820 10.02 4,673,724 Commission
Passaic County 368,691,903 15.09 55,635,608
Total 854,519,853 169,106,028
December 31, 2012
Passaic Valley Water Commission $143,355,014 57.00% $81,712,358
Passaic Valley Sewerage Commission 316,515,886 9.00 28,482,257
North Jersey District Water Supply 55,448,880 9.47 5,251,332 Commission
Passaic County 376,643,401 15.09 56,835,489
Total 891,963,181 172,281,436
December 31, 2011
Passaic Valley Water Commission $150,764,661 57.00% $85,935,851
Passaic Valley Sewerage Commission 339,880,368 8.79 29,887,800
North Jersey District Water Supply 65,217,839 9.28 6,053,046 Commission
Passaic County 337,860,171 12.14 53,376,711
Total 893,723,039 175,253,414
December 31, 2010
Passaic Valley Water Commission $158,781,305 57.00% $90,505,344
Passaic Valley Sewerage Commission 355,234,494 8.64 30,673,368
North Jersey District Water Supply 73,708,854 9.08 6,693,125 Commission
Passaic County 373,883,968 15.81 59,111,055
Total $961,608,631 $186,982,892
C-24
ANNUAL PRINCIPAL REQUIREMENTS OUTSTANDING BONDS (INCLUDING THE BONDS) (IN $000's)
Year Total General School
2016 6,748 6,748 0
2017 11,804 6,894 0
2018 8,975 6,105 0
2019 8,839 6,844 0
2020 9,346 7,861 0
2021 9,386 8,336 0
2022 6,688 5,553 0
2023 6,739 5,604 0
2024 6,492 5,357 0
2025 6,473 5,338 0
2026 6,564 5,429 0
2027 1,693 558 0
2028 1,692 557 0
2029 1,704 569 0
2030 1,193 58 0
2031 1,135 1,135 0
2032 1,135 1,135 0
Totals 96,606 96,606 0
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ANNUAL INTEREST REQUIREMENT OUTSTANDING BONDS (INCLUDING THE BONDS) (IN $000's)
Fiscal Year Total General School 3,822 3,822 2016 0 4,895 4,895 2017 0 3,203 3,203 2018 0 2,878 2,878 2019 0 2,525 2,525 2020 0 2,132 2,132 2021 0 1,836 1,836 2022 0 1,546 1,546 2023 0 1,249 1,249 2024 0 950 950 2025 0 646 646 2026 0 339 339 2027 0 272 272 2028 0 206 206 2029 0 143 143 2030 0 85 85 2031 0 28 28 2032 0
Totals 26,755 26,755 0
C-26 ANNUAL COMBINED PRINCIPAL AND INTEREST REQUIREMENTS OUTSTANDING BONDS (INCLUDING THE BONDS) (IN $000's)
Fiscal Year Total General School
2016 10,570 10,570 0
2017 16,699 10,635 0
2018 12,178 8,400 0
2019 11,717 8,921 0
2020 11,871 9,672 0
2021 11,518 9,817 0
2022 8,524 6,793 0
2023 8,285 6,611 0
2024 7,741 6,124 0
2025 7,423 5,862 0
2026 7,210 5,706 0
2027 2,032 585 0
2028 1,964 574 0
2029 1,910 576 0
2030 1,336 59 0 2031 1,220 1,220 0 2032 1,163 1,163 0
Totals 123,361 123,361 0
C-27 PENSION FINANCING
Employees of the City, who are eligible for a pension plan, are enrolled in one of three pension systems administered by the Division of Pensions, Treasury Department of the State of New Jersey. A portion of the pension costs are contributed by the covered employees. The City's share of pension costs, which is based on annual billings received from the State and paid during the fiscal year, was as follows:
2015 $20,277,194 2014 19,402,796 2013 20,872,630 2012 19,840,554 2011 20,294,382
DEMOGRAPHIC INFORMATION
POPULATION TREND (Calendar Year)
Year City % Change County % Change State % Change
2010 146,199 -2.0 501,226 +2.49 8,791,894 +4.49
2000 149,222 +5.9 489,049 +7.94 8,414,350 +8.85
1990 140,890 +2.1 453,060 +1.20 7,730,185 +5.38
1980 137,970 -4.7 447,698 -2.80 7,335,808 +2.30
1970 144,824 +0.1 460,782 +13.3 7,171,112 +19.3
1960 143,663 +3.1 406,618 +20.6 6,006,782 +24.2
1950 139,336 N/A 337,093 N/A 4,835,329 N/A ______Source: State of New Jersey Department of Labor.
TOTAL SCHOOL ENROLLMENT
Year Elementary High School Adult H.S. Special Ed. Totals
2013-14 18,721 4,993 150 3,409 27,273
2012-13 18,542 4,968 543 3,666 27,719
2011-12 17,375 4,661 352 3,497 25,885
2009-10 16,195 4,258 504 3,208 24,165
2008-09 16,532 4,347 514 3,503 24,896
2007-08 18,644 5,070 76 4,786 28,576
______Source: N.J. State Department of Education and Board of Education, City of Paterson.
C-28
UNEMPLOYMENT RATE COMPARISON
City of Paterson Passaic County State of New United (1) (2) (1) (2) Jersey (1) (2) States (2)
2014 10.7% 6.9% 6.3% 5.6%
2013 14.8 9.9 8.2 7.4
2012 16.5 11.2 9.3 8.1
2011 16.2 11.1 9.3 8.9
2010 14.8 10.2 8.7 9.8
______Source: (1) New Jersey Department of Labor. (2) U.S. Bureau of Labor Statistics.
MAJOR EMPLOYERS IN PATERSON – 2015
Estimated Number of Employer Employees
Paterson Board of Education 5,980
Saint Joseph's Medical Center 4,000
County of Passaic 2,440
City of Paterson 1,665
Home Health Care Options 400
Crown Roll Leaf 300
Great Falls Healthcare 300 AMB Janitorial Services 200
Sealy Mattress Corporation 150
Home Depot 150
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APPENDIX D
FINANCIAL STATEMENTS OF THE BORROWER
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DONOHUE, GIRONDA, DORIA & TOMKINS, LLC Certified Public Accountants
Robert A. Gironda, CPA 310 Broadway Linda P. Kish, CPA, RMA Robert G. Doria, CPA (N.J. & N.Y.) Bayonne, NJ 07002 Mark W. Bednarz, CPA, RMA Frederick J. Tomkins, CPA, RMA Jason R. Gironda, CPA Matthew A. Donohue, CPA (201) 437-9000 Fax: (201) 437-1432 E-Mail: [email protected]
INDEPENDENT AUDITOR’S REPORT
The Honorable Mayor and Members of the City Council City of Paterson, New Jersey
Report on the Financial Statements
We have audited the accompanying financial statements – regulatory basis of the City of Paterson, New Jersey (the “City”), which comprise the comparative balance sheet – regulatory basis, of each fund and general fixed assets as of June 30, 2015 and 2014, and the related comparative statements of operations and changes in fund balance – regulatory basis, of the Current Fund, related statements of comparative changes in fund balance – regulatory basis, of the General Capital and Trust Funds, the statement of revenues – regulatory basis and statement of appropriations – regulatory basis, of the Current Fund, for the years then ended, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with the financial reporting provisions of the Division of Local Government Services, Department of Community Affairs, State of New Jersey (the “Division”). Management is also responsible for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to error or fraud.
Auditor’s Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America, audit requirements prescribed by the Division and the standards applicable to the financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the City’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the 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.
Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles
As described in Note A, the financial statements are prepared by the City on the basis of the financial reporting provisions of the Division, which is a basis of accounting other than accounting principles generally accepted in the United States of America, to comply with the requirements of the Division. The effects on the financial statements of the variances between the regulatory basis of accounting described in Note A and accounting principles generally accepted in the United States of America, although not reasonably determinable, are presumed to be material.
Adverse Opinion on U.S. Generally Accepted Accounting Principles
In our opinion, because of the significance of the matter discussed in the “Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles” paragraph, the financial statements referred to in the first paragraph do not present fairly, in accordance with accounting principles generally accepted in the United States of America, the financial position of the City as of June 30, 2015 and 2014, or the changes in its financial position for the years then ended.
Basis for Qualified Opinion
As described in Note F, general fixed assets were not updated by the City in accordance with the requirements of the Division. General fixed asset balances remain on the books in the same amount as at June 30, 2013. The amount by which this departure would affect the City is not reasonably determinable, however it is presumed to be material.
Qualified Opinion on Regulatory Basis Accounting
In our opinion, except for the effects of the matter described in the “Basis for Qualified Opinion” paragraph, the financial statements referred to in the first paragraph present fairly, in all material respects, the comparative financial position – regulatory basis, of each fund of the City as of June 30, 2015 and 2014, the Current Fund’s respective operations and changes in fund balance – regulatory basis, revenues – regulatory basis and appropriations – regulatory basis, and the Trust and General Capital Funds’ changes in fund balance – regulatory basis, for the years then ended, in accordance with the financial reporting provisions of the Division as described in Note A.
Emphasis of Matter Regarding Dependence on State Aid
As discussed in Note M, the City is a recipient of State Aid, the amount of which is material to funding the operations of the City. The aid is dependent on the ability of the State of New Jersey to continue to appropriate such funds. Significant reductions of State Aid, coupled with legislation capping the maximum allowable increase in tax levy, would have a material impact on the City’s operations. This aid is anticipated in the City’s fiscal 2016 and 2015 budgets.
Emphasis of Matter Regarding Dissolution of the Paterson Municipal Utilities Authority
As discussed in Notes N and O, the City dissolved the Paterson Municipal Utilities Authority (the “PMUA”) and assumed its operations, contracts, agreements and liabilities. As of the date of this report, no material liabilities have been incurred by the City as a result of this dissolution, however, the final audit of the PMUA has not yet been issued and the possibility of liabilities resulting from this transaction may potentially exist.
Other Matters
Required Supplementary Information
Management has omitted the management’s discussion and analysis that accounting principles generally accepted in the United States of America require to be presented to supplement the basic financial statements. Such missing 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. Our opinion on the basic financial statements is not affected by the missing information.
DONOHUE, GIRONDA, DORIA & TOMKINS, LLC Certified Public Accountants
FREDERICK J. TOMKINS Registered Municipal Accountant #327 Bayonne, New Jersey June 8, 2016 Exhibit A Sheet 1 of 2 CITY OF PATERSON CURRENT FUND AS OF JUNE 30, 2015 AND 2014
COMPARATIVE BALANCE SHEET - REGULATORY BASIS
2015 2014
Assets Current Fund: Cash and Cash Equivalents $ 13,739,133 $ 16,967,371 Change Fund 685 685 13,739,818 16,968,056 Intergovernmental Receivables: Due from State of NJ - Sr. Citizens' and Veterans' Deductions 129,250 152,875
Receivables and Other Assets with Full Reserves: Property Taxes Receivable 234,852 123,987 Tax Title Liens Receivable 16,549,116 12,285,926 Sewer Charges Receivable 625,536 595,458 Sewer Liens Receivable 1,036,557 1,049,087 Demolition Liens Receivable 1,309,953 962,820 Property Acquired for Taxes at Assessed Valuation 5,107,360 5,107,360 Sales Contracts Receivable 25,000 25,000 Interfunds Receivable 1,135,976 - 26,024,350 20,149,638 Deferred Charges Deficit in Operations 543,897 - Emergency Appropriations 4,395,000 800,000 Special Emergency Appropriations 5,884,000 8,462,000 10,822,897 9,262,000
Total Current Fund Assets 50,716,315 46,532,569
Federal and State Grant Fund: Cash and Cash Equivalents - 1,139,580 Federal and State Grants Receivable 17,404,843 18,170,916
Total Federal and State Grant Fund Assets 17,404,843 19,310,496
Total Assets $ 68,121,158 $ 65,843,065
See Accompanying Notes to Financial Statements Exhibit A Sheet 2 of 2 CITY OF PATERSON CURRENT FUND AS OF JUNE 30, 2015 AND 2014
COMPARATIVE BALANCE SHEET - REGULATORY BASIS
2015 2014
Liabilities and Reserves Current Fund: Appropriation Reserves $ 5,133,326 $ 3,019,682 Interfunds Payable - 122,425 Requisitions and Accounts Payable 3,455,696 5,755,160 Prepaid Taxes 91,898 130,774 Tax Overpayments 3,383,590 2,582,072 Property Tax Suspense 116,592 36,372 Prepaid Sewers 871 2,672 Sewer Overpayments 48,199 48,199 Special Emergency Notes Payable 10,279,000 8,462,000 Reserve for: Accrued Sick and Vacation Time 607,515 613,163 Deposits on Sale of City Property 6,250 6,250 State Library Aid 88,586 30,850 Library Fines and Donations 80,757 2,977 ABC License Surcharge 235,000 235,000 State Tax Appeals - 497,164 Revaluation 301,133 2,074,619 23,828,413 23,619,379 Reserve for Receivables and Other Assets 26,024,350 20,149,638 Fund Balance 863,552 2,763,552
Total Current Fund Liabilities, Reserves and Fund Balance 50,716,315 46,532,569
Federal and State Grant Fund: Interfunds Payable 1,124,299 - Requisitions and Accounts Payable 1,626,812 2,073,448 Reserve for: Federal and State Grants - Appropriated 14,589,517 17,172,122 Federal and State Grants - Unappropriated - 711 Grant Overpayments 64,215 64,215
Total Federal and State Grant Fund Liabilities and Reserves 17,404,843 19,310,496
Total Liabilities, Reserves and Fund Balance $ 68,121,158 $ 65,843,065
See Accompanying Notes to Financial Statements Exhibit A-1 Sheet 1 of 2 CITY OF PATERSON CURRENT FUND FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
COMPARATIVE STATEMENT OF OPERATIONS AND CHANGES IN FUND BALANCE - REGULATORY BASIS
2015 2014
Revenue and Other Income Realized: Fund Balance Utilized $ 1,900,000 $ - Miscellaneous Revenue Anticipated 104,099,813 100,222,011 Receipts from Delinquent Taxes 1,989,573 2,075,152 Receipts from Current Taxes (net of State Appeals Reserved) 222,314,053 223,205,397 Non-Budget Revenues 2,196,762 1,127,591 Other Credits to Income: Unexpended Appropriation Reserves 1,161,703 584,553 Cancellation of Accounts Payable 228,170 - Interfunds Credited to Operations 9,162 1,728 Sewer Overpayments Cancelled - 51,987 Credit Write-Offs: Sewer Charges - 437 Current Taxes - 229 333,899,236 327,269,085
Expenditures Budgetary and Emergency Appropriations: Appropriations within "CAPS" Operations Salaries and Wages 97,462,571 95,653,691 Other Expenses 82,481,124 80,246,199 Deferred Charges and Statutory Expenditures 24,202,135 22,896,709 Appropriations Excluded from "CAPS" Operations Salaries and Wages 1,269,521 1,269,521 Other Expenses 26,947,934 26,026,733 Capital Improvements 340,000 340,000 Municipal Debt Service 12,334,877 8,578,557 Deferred Charges 2,225,891 2,289,918 Type 1 School District Debt - 616,232 247,264,053 237,917,560 Local District School Tax 39,461,008 39,460,570 County Taxes 43,075,037 47,321,704 Prior Year Taxes Refunded due to State Tax Appeals 7,643,705 1,960,062 Interfund Advances Originating in Current Year 1,135,976 - Other Reserves 174,645 170,341 Amount Due County for Added and Omitted Taxes 41,847 158,548 Other Tax Overpayment Refunds 39,947 322,535
See Accompanying Notes to Financial Statements Exhibit A-1 Sheet 2 of 2 CITY OF PATERSON CURRENT FUND FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
COMPARATIVE STATEMENT OF OPERATIONS AND CHANGES IN FUND BALANCE - REGULATORY BASIS
2015 2014
Expenditures - continued Other Charges $ 1,915 $ - Refund of Prior Year's Revenue - 327,529 Sr. Citizens & Veterans Deductions Disallowed by State - 51,533 338,838,133 327,690,382 Deficit in Revenue 4,938,897 421,297 Adjustments to Income before Fund Balance: Expenditures Included Above Which are by Statute Deferred Charges to Budget of Succeeding Year Special Emergency Appropriations Insurance 3,955,000 - Debt Service 440,000 - Snow Removal - 800,000 Accrued Sick and Vacation Time - 1,650,000 Statutory Excess to Fund Balance 2,028,703 Deficit in Operations to be Raised in Budget of Succeeding Year $ 543,897
Fund Balance, July 1 2,763,552 734,849 2,763,552 2,763,552 Decreased by: Utilized as Anticipated Revenue 1,900,000 -
Fund Balance, June 30 $ 863,552 $ 2,763,552
See Accompanying Notes to Financial Statements Exhibit A-2 Sheet 1 of 5 CITY OF PATERSON CURRENT FUND FOR THE YEAR ENDED JUNE 30, 2015
STATEMENT OF REVENUES - REGULATORY BASIS
Anticipated Budget as N.J.S.A Excess or Adopted 40A:4-87 Realized (Deficit) SURPLUS: Surplus Anticipated $ 1,900,000 $ - $ 1,900,000 $ -
MISCELLANEOUS REVENUES: LOCAL REVENUES Licenses: Alcoholic Beverages 205,800 - 213,988 8,188 Other Licenses 145,000 - 136,984 (8,016) Fines and Costs: Municipal Court 4,813,900 - 4,141,271 (672,629) Interest and Costs on Taxes 2,009,000 - 1,965,475 (43,525) Interest on Investments and Deposits 24,900 - 12,835 (12,065) Interest on Delinquent Sewer Charges 234,200 - 330,277 96,077 Department of Public Works 113,500 - 128,490 14,990 Division of Health 753,400 - 729,930 (23,470) City-Wide Recycling Revenues 362,300 - 337,919 (24,381) Board of Adjustment 112,800 - 219,100 106,300 Sale of Copies of Public Records 30,000 - 32,396 2,396 Ambulance Fees 3,133,800 - 3,124,843 (8,957) Municipal Towing Contract Fees 105,100 - 138,068 32,968 Municipal Sewer Use Charges Current Year 8,759,711 - 9,128,344 368,633 Prior Year 758,800 - 968,064 209,264 F.D. Combustibles Inspection Revenues 482,300 - 827,436 345,136 Livery and Taxi License Fees 128,000 - 117,375 (10,625) 22,172,511 - 22,552,795 380,284
STATE AID WITHOUT OFFSETTING APPROPRIATIONS Consolidated Municipal Property Tax Relief 11,652,739 - 11,652,919 180 Energy Receipts Tax 21,070,061 - 21,070,061 - Supplemental Energy Receipts Tax 262,651 - 262,651 - Open Space PILOT Aid (Garden State Trust) 6,088 - 6,088 - Building Aid Allowance for Schools 377,176 - - (377,176) Watershed Moratorium Offset Aid 329 - 329 - Transitional Aid 25,000,000 - 25,000,000 - 58,369,044 - 57,992,048 (376,996)
DEDICATED UNIFORM CONSTRUCTION CODE FEES OFFSET WITH APPROPRIATIONS Uniform Construction Code Fees Fees and Permits: Construction Code Official 1,143,200 - 1,424,212 281,012 Other 575,600 - 655,794 80,194 1,718,800 - 2,080,006 361,206
See Accompanying Notes to Financial Statements Exhibit A-2 Sheet 2 of 5 CITY OF PATERSON CURRENT FUND FOR THE YEAR ENDED JUNE 30, 2015
STATEMENT OF REVENUES - REGULATORY BASIS
Anticipated Budget as N.J.S.A Excess or Adopted 40A:4-87 Realized (Deficit) MISCELLANEOUS REVENUES: (continued) SHARED SERVICE AGREEMENTS Life Hazard Use Fees $ 263,500 $ - $ 263,500 $ -
PUBLIC AND PRIVATE REVENUES OFFSET WITH APPROPRIATIONS US Department of Health and Human Services HIV Ryan White Program 3/1/14-2/28/15 3,097,922 3,295,222 6,393,144 - 2014 SPNS Grant US 9/1/14-8/31/17 500,000 - 500,000 - NACCHO MRC Grant 3,500 - 3,500 - US Federal Emergency Management Agency 2012 Assistance to Firefighters Grant 639,576 - 639,576 - Fire Arson Investigation Equipment 54,878 - 54,878 - NJ Department of Health and Senior Services STD Control Program 88,535 - 88,535 - Tuberculosis Control Program 208,700 - 208,700 - Public Heatlh Preparedness / Bioterror Response 226,525 - 226,525 - Childhood Lead Poisoning Control Program 230,846 - 230,846 - HIV Counseling, Testing and Referral 243,400 243,400 486,800 - Federal TB Control Grant 97,254 - 97,254 - Shaping NJ Health Community Grant - 12,000 12,000 - NJ Department of Environmental Protection: CLG Historic District Grant 23,835 - 23,835 - NJ Department of Law & Public Safety: Safe and Secure Communities Program 199,563 - 199,563 - DWI Surcharge 11,448 10,897 22,345 - Body Armor Grant 34,409 - 34,409 - Pedestrian Safety Grant 16,000 - 16,000 - NJ Department of Commerce and Economic Development (UEZ): Small Business Development Center 50,000 - 50,000 - Administration Budget 242,031 - 242,031 - NJ Department of Human Services: School Based Youth Services Program 310,190 - 310,190 - Teen Parenting Program 149,897 - 149,897 - NJ Department of Environmental Protection: NJDEP - Clean Communities Program - 193,566 193,566 - NJDEP - Recycling Tonnage Grant - 221,874 221,874 - County of Passaic: Municipal Alliance Program 15,410 46,231 61,641 - Senior Citizen Disabled Transportation 202,000 - 202,000 - Evening Reporting Program - 103,855 103,855 - Total Lifestyle Support Prog. - 86,980 86,980 -
See Accompanying Notes to Financial Statements Exhibit A-2 Sheet 3 of 5 CITY OF PATERSON CURRENT FUND FOR THE YEAR ENDED JUNE 30, 2015
STATEMENT OF REVENUES - REGULATORY BASIS
Anticipated Budget as N.J.S.A Excess or Adopted 40A:4-87 Realized (Deficit) MISCELLANEOUS REVENUES: (continued) PUBLIC AND PRIVATE REVENUES OFFSET WITH APPROPRIATIONS - continued Other: City of Passaic Byrne Memorial Equipment Grant $ 147,423 $ - $ 147,423 $ - Community Foundation of NJ Give and Receive 20,000 - 20,000 - Pinchak Pharmacy Museum Exhibit Grant 711 - 711 - Senior Farmers Market 500 - 500 - Dan Oliff Memorial Veterans Exhibition 10,000 - 10,000 - Mineral Display Grant 5,000 - 5,000 - 6,829,553 4,214,025 11,043,578 -
OTHER SPECIAL ITEMS Payments in Lieu of Taxes Aspen Hamilton 83,038 - 94,509 11,471 Colt Arms 138,111 - 186,509 48,398 Federation Apartments 171,846 - 176,278 4,432 Governor Paterson Towers 433,714 - 490,160 56,446 504 Madison Avenue 141,870 - 140,743 (1,127) Incca for Housing - Carroll Street 151,998 - 160,297 8,299 North Triangle 156,406 - 156,902 496 Cooke Building Associates 14,275 - 8,841 (5,434) Jackson Slater 199,384 - 198,214 (1,170) Riese Madison Park 72,270 - - (72,270) Essex - Phoenix Mill 238,221 - 215,949 (22,272) Brooke Sloate 135,754 - 170,275 34,521 Rosa Park - 400 Broadway 15,954 - 23,682 7,728 Garret Heights 465,094 - 61,196 (403,898) Christopher Columbus Development 112,500 - 125,431 12,931 446-460 E. 19th Street 18,030 - 18,950 920 Belmont/McBride Apartments 12,632 - 27,288 14,656 Sheltering Arms 17,624 - 12,256 (5,368) Hope 98 - North Main Scattered Sites 19,262 - 26,694 7,432 Beech Street 25,744 - 31,320 5,576 Van Houten Street 13,880 - 16,660 2,780 Rising Dove Senior Housing 27,896 - 31,388 3,492 Paterson Housing Authority 153,441 - 137,484 (15,957) 200 Godwin Avenue 23,122 - 52,032 28,910 Congdon Mill 93,312 - 69,153 (24,159) Belmont Towers 2007 Audit Adjustment 15,276 - 14,240 (1,036) Heritage - Alexander Hamilton 27,199 - 43,642 16,443
See Accompanying Notes to Financial Statements Exhibit A-2 Sheet 4 of 5 CITY OF PATERSON CURRENT FUND FOR THE YEAR ENDED JUNE 30, 2015
STATEMENT OF REVENUES - REGULATORY BASIS
Anticipated Budget as N.J.S.A Excess or Adopted 40A:4-87 Realized (Deficit) MISCELLANEOUS REVENUES: (continued) OTHER SPECIAL ITEMS - continued Payments in Lieu of Taxes - continued Brooke Sloate Audit Adjustment $ 9,163 $ - $ 9,163 $ - Aspen Hamilton Audit Adjustment 3,008 - 3,008 - Jackson Slater Audit Adjustment 3,529 - - (3,529) Congdon Mill Audit Adjustment 1,157 - - (1,157) INCCA Carroll St. Audit Adjustment 43,773 - - (43,773) Cable Communication Third Party Rent 340,000 - 255,000 (85,000) US Cable of Paterson Franchise Fees 336,727 - 336,727 - Sewer Rent - Third Party 65,500 - - (65,500) City of Paterson Parking Authority Cooperative Agreement 7/1 - 12/31 204,000 - 204,000 - Cooperative Agreement 1/1 - 6/30 204,000 - 170,000 (34,000) PVWC Fire Hydrant Testing Reimbursement 196,100 - 294,150 98,050 Trust Fund Surplus 11,000 - 11,000 - PVSC Rebate Incentive Program 48,700 - 34,551 (14,149) Private Host Benefit Fees 176,200 - 154,531 (21,669) Private Host Benefit Fees Prior Year 20,800 - 16,537 (4,263) Recycling Tire Fees 7,700 - 7,570 (130) Additional Ambulance Fees 215,400 - - (215,400) Verizon Franchise Fees 125,000 - 257,452 132,452 Passaic County Community College Rent 10,000 - 10,000 - Housing Authority Garbage Reimbursement 95,000 - 95,000 - Libby's Rent 18,081 - 15,498 (2,583) FEMA Reimbursements - 2011 Storms 464,435 - 394,755 (69,680) Classic Towing Prior Year 6,900 - 14,339 7,439 Motor Vehicle Agency Security Reimbursement Prior Year 47,900 - 47,998 98 Current Year 239,900 - 263,987 24,087 Northwest Hydro Holding 57,750 - 49,500 (8,250) Additional Fire Inspection Fees 44,200 - 44,200 - Health Contracts - Prior Year 21,184 - 21,184 - Health Contracts - Current Year 20,500 - 64,223 43,723 Health Premiums 3,816,483 - 3,896,420 79,937 Additional Sewer Fees 807,000 - 807,000 - 10,638,943 - 10,167,886 (471,057)
Total Miscellaneous Revenues 99,992,351 4,214,025 104,099,813 (106,563)
RECEIPTS FROM DELINQUENT TAXES: 2,513,100 - 1,989,573 (523,527)
Subtotal - General Revenues 104,405,451 4,214,025 107,989,386 (630,090)
See Accompanying Notes to Financial Statements Exhibit A-2 Sheet 5 of 5 CITY OF PATERSON CURRENT FUND FOR THE YEAR ENDED JUNE 30, 2015
STATEMENT OF REVENUES - REGULATORY BASIS
Anticipated Budget as N.J.S.A Excess or Adopted 40A:4-87 Realized (Deficit) AMOUNT TO BE RAISED BY TAXES FOR SUPPORT OF MUNICIPAL BUDGET: Local Tax Including Reserve for Uncollected Taxes $ 145,935,664 $ - $ 151,019,564 $ 5,083,900 Minimum Library Tax 2,272,630 - 2,272,630 - Total Amount to be Raised by Taxes 148,208,294 - 153,292,194 5,083,900
Total Budget Revenues 252,613,745 4,214,025 261,281,580 4,453,810 Non-Budget Revenues - - 2,196,762 2,196,762
Total General Revenues $ 252,613,745 $ 4,214,025 $ 263,478,342 $ 6,650,572
Budgeted $ 261,281,580 Non-budgeted 2,196,762 $ 263,478,342
See Accompanying Notes to Financial Statements Exhibit A-2a Sheet 1 of 2 CITY OF PATERSON CURRENT FUND FOR THE YEAR ENDED JUNE 30, 2015
STATEMENT OF REVENUES - REGULATORY BASIS ANALYSIS OF BUDGET REVENUES
Allocation of Current Tax Collections: Revenue from Collections Gross Cash Receipts $ 229,439,143 Refunded (8,296,440) Tax Overpayments (1,464,142) Refunds Funded by Ordinance 1,722,929 Refunds Funded by Reserve for Tax Appeals 497,164 Current Year Taxes Collected in Current Year 221,898,654 Current Year Taxes Collected in Prior Year 130,774 State Share of Sr. Citizens and Veterans Deductions 284,625 Current Taxes Realized in Cash $ 222,314,053 Add: Appropriation for "Reserve for Uncollected Taxes" 13,556,033 235,870,086 Allocated to: School Taxes 39,461,008 County Taxes 43,116,884 82,577,892 Total Amount for Support of Municipal Budget Appropriations $ 153,292,194
Receipts from Delinquent Taxes: Delinquent Taxes Collected $ 416,600 Senior Citizens and Veterans Deductions (9,750) Demolition Liens Collected 144,400 Tax Title Liens Collected 1,438,323 Total Receipts from Delinquent Taxes $ 1,989,573
See Accompanying Notes to Financial Statements Exhibit A-2a Sheet 2 of 2 CITY OF PATERSON CURRENT FUND FOR THE YEAR ENDED JUNE 30, 2015
STATEMENT OF REVENUES - REGULATORY BASIS ANALYSIS OF BUDGET REVENUES
Miscellaneous Revenues Anticipated: Current Sewer Charges: Current Year Receipts $ 9,125,672 Prepaid Applied 2,672 $ 9,128,344 Prior Year's Sewer Charges: Current Year Receipts 570,592 Sewer Lien Receipts 397,472 968,064 Additional Sewer Fees: Current Year Receipts 807,000 Accrual per Revenue Accounts Receivable $ 81,889,327 Life Hazard Use Fees - Grants 263,500 State and Federal Grants 11,043,578 Total Miscellaneous Revenues Anticipated $ 104,099,813
Surplus Anticipated $ 1,900,000
Total Realized Budget Revenues $ 261,281,580
See Accompanying Notes to Financial Statements Exhibit A-2b Sheet 1 of 2 CITY OF PATERSON CURRENT FUND FOR THE YEAR ENDED JUNE 30, 2015
STATEMENT OF REVENUES - REGULATORY BASIS ANALYSIS OF NON-BUDGET REVENUES
Increased by: Paterson Municipal Utilities Authority $ 1,033,303 Paterson Parking Authority 223,205 Board and Secure 221,100 Off-Duty Reimbursement Use of Cars 146,801 Redemption Fees 102,786 Stale Dated Checks 69,764 School Board Election 63,292 Mercantile License 48,139 DMV Inspection Fees 42,430 Water Supply Training Reimbursement 37,500 Tax Sale Premiums Forfeited 36,600 Verizon Consultant Refund 20,672 DPW Clean-up Lien 15,500 Inmate Phones 13,904 Cablevision 12,000 Bid Specifications 11,025 Health Department Contracting Towns 10,382 Garnishees Service Charges 7,783 Various Miscellaneous 8,445 Paterson Parking Authority Fuel Reimbursement 7,586 Special Class I Police Application 7,525 DPW Auction 6,400 Sr. Citizens and Veterans Deductions Administrative Payment 5,970 Payment History 5,930 Filming Permits 5,300 Forfeiture Bail 5,020 City Clerk - Loud Speaker Fee 4,910 Bad Checks Fees 4,810 Rent Court Ordinance 4,800 Child Care Service Charges 3,517 Community Provider Adjustment 3,478 Tax Search Fees 3,465 Police Confiscated Funds 3,420 $ 2,196,762
See Accompanying Notes to Financial Statements Exhibit A-2b Sheet 2 of 2 CITY OF PATERSON CURRENT FUND FOR THE YEAR ENDED JUNE 30, 2015
STATEMENT OF REVENUES - REGULATORY BASIS ANALYSIS OF NON-BUDGET REVENUES
Allocation: 2% Administrative Fee $ 5,970 Cash Receipts 2,205,049 $ 2,211,019 Less: Other Reserves $ 3,446 Cash Disbursements 10,811 14,257 $ 2,196,762
See Accompanying Notes to Financial Statements Exhibit A-3 CITY OF PATERSON Sheet 1 of 13 CURRENT FUND FOR THE YEAR ENDED JUNE 30, 2015
STATEMENT OF APPROPRIATIONS - REGULATORY BASIS
Appropriations Expended Unexpended Adopted Budget After Paid or Balance Budget Modification Charged Encumbered Reserved Canceled (A) Operations - Within "CAPS" GENERAL GOVERNMENT Office of the Mayor Salaries and Wages $ 401,758 $ 345,008 $ 343,976 $ - $ 1,032 $ - Other Expenses 15,120 15,750 14,373 1,343 34 - City Council Salaries and Wages 670,378 531,778 530,976 - 802 - Other Expenses 178,890 168,890 109,670 693 58,527 - Office of the City Clerk Salaries and Wages 424,658 350,458 348,997 - 1,461 - Other Expenses 130,705 138,705 116,610 4,801 17,294 - Elections Salaries and Wages 7,388 4,388 4,338 - 50 - Other Expenses 228,050 160,050 67,256 1,380 91,414 - Insurance Salaries and Wages 96,562 88,262 88,216 - 46 - Other Expenses 42,415,269 47,581,643 46,754,027 - 827,616 - Worker Compensation 4,900,000 4,900,000 4,028,538 843,071 28,391 - Liability 4,389,116 4,389,116 3,647,649 527,411 214,056 - Auditing Services and Costs Annual Audit 41,000 41,000 - - 41,000 - Other Audits 25,000 25,000 - - 25,000 - Cultural Affairs Salaries and Wages 85,735 84,535 82,093 2,375 67 - Other Expenses 75,940 20,480 5,862 10,650 3,968 -
See Accompanying Notes to Financial Statements Exhibit A-3 CITY OF PATERSON Sheet 2 of 13 CURRENT FUND FOR THE YEAR ENDED JUNE 30, 2015
STATEMENT OF APPROPRIATIONS - REGULATORY BASIS
Appropriations Expended Unexpended Adopted Budget After Paid or Balance Budget Modification Charged Encumbered Reserved Canceled (A) Operations - Within "CAPS" - continued DEPARTMENT OF ADMINISTRATION Office of the Business Administrator Salaries and Wages $ 643,724 $ 438,724 $ 437,699 $ - $ 1,025 $ - Other Expenses 53,000 37,000 29,246 1,204 6,550 - Division of Personnel Salaries and Wages 542,516 452,216 445,504 - 6,712 - Other Expenses 32,650 58,950 32,324 26,585 41 - Division of Purchasing Salaries and Wages 245,339 242,939 242,288 - 651 - Other Expenses 19,700 20,200 19,364 788 48 - Division of Data Processing Salaries and Wages 380,377 275,077 274,582 - 495 - Other Expenses 457,078 317,078 214,470 57,854 44,754 - Surveys and General - Other Expenses 98,000 48,000 22,567 6,872 18,561 - Public Defender (P.L. 1997, c. 256) Salaries and Wages 107,333 107,333 27,662 - 79,671 - Other Expenses 680 680 680 - - - DEPARTMENT OF FINANCE Office of the Director Salaries and Wages 214,341 186,241 173,612 5 12,624 - Other Expenses 151,550 121,550 97,505 23,718 327 - Division of Treasury Salaries and Wages 359,907 347,007 346,727 - 280 - Other Expenses 33,095 33,095 31,551 1,302 242 -
See Accompanying Notes to Financial Statements Exhibit A-3 CITY OF PATERSON Sheet 3 of 13 CURRENT FUND FOR THE YEAR ENDED JUNE 30, 2015
STATEMENT OF APPROPRIATIONS - REGULATORY BASIS
Appropriations Expended Unexpended Adopted Budget After Paid or Balance Budget Modification Charged Encumbered Reserved Canceled (A) Operations - Within "CAPS" - continued DEPARTMENT OF FINANCE - continued Division of Accounts and Control Salaries and Wages $ 433,681 $ 496,081 $ 492,679 $ - $ 3,402 $ - Other Expenses 10,743 10,743 8,820 496 1,427 - Division of Sewer Collection Salaries and Wages 171,264 161,864 161,863 - 1 - Other Expenses 32,600 28,600 25,726 1,369 1,505 - Division of Assessments Salaries and Wages 415,163 443,863 443,785 - 78 - Other Expenses 37,560 136,660 38,004 825 97,831 - Division of Revenue Collection Salaries and Wages 734,008 701,208 699,182 - 2,026 - Other Expenses 200,730 190,730 185,664 4,152 914 - Office of Internal Audit Salaries and Wages 143,743 101,243 101,238 - 5 - Other Expenses 5,708 1,208 118 400 690 - DEPARTMENT OF LAW Office of the Corporation Counsel Salaries and Wages 1,244,963 1,089,263 1,083,144 - 6,119 - Other Expenses 113,770 153,770 50,622 1,801 101,347 - DEPARTMENT OF PUBLIC SAFETY Taxicab Division Salaries and Wages 104,657 85,757 85,594 - 163 - Other Expenses 9,650 6,150 3,967 71 2,112 -
See Accompanying Notes to Financial Statements Exhibit A-3 CITY OF PATERSON Sheet 4 of 13 CURRENT FUND FOR THE YEAR ENDED JUNE 30, 2015
STATEMENT OF APPROPRIATIONS - REGULATORY BASIS
Appropriations Expended Unexpended Adopted Budget After Paid or Balance Budget Modification Charged Encumbered Reserved Canceled (A) Operations - Within "CAPS" - continued DEPARTMENT OF PUBLIC SAFETY - continued Division of Fire Salaries and Wages $ 30,040,719 $ 30,396,219 $ 30,358,139 $ - $ 38,080 $ - Other Expenses 1,482,060 1,611,360 1,498,157 39,814 73,389 - Life Hazard Use Fees 263,500 263,500 263,500 - - - Division of Police Salaries and Wages 41,998,031 42,939,451 42,600,447 - 339,004 - Other Expenses 1,653,529 1,553,529 1,088,951 339,947 124,631 - Animal Control Salaries and Wages 270,234 282,224 282,224 - - - Other Expenses 48,900 45,500 39,900 - 5,600 - DEPARTMENT OF PUBLIC WORKS Office of the Director Salaries and Wages 461,708 454,208 452,981 - 1,227 - Other Expenses 26,870 32,770 30,611 915 1,244 - Division of Engineering Salaries and Wages 245,282 222,182 222,167 - 15 - Other Expenses 510,550 510,550 464,941 752 44,857 - Division of Traffic and Lighting Salaries and Wages 328,780 372,280 369,708 - 2,572 - Other Expenses 169,650 129,650 93,938 2,160 33,552 - Division of Water and Sewers Salaries and Wages 362,362 344,162 343,502 - 660 - Other Expenses 584,900 584,900 367,159 13,619 204,122 - Sewer Repairs 15,000 15,000 - - 15,000 -
See Accompanying Notes to Financial Statements Exhibit A-3 CITY OF PATERSON Sheet 5 of 13 CURRENT FUND FOR THE YEAR ENDED JUNE 30, 2015
STATEMENT OF APPROPRIATIONS - REGULATORY BASIS
Appropriations Expended Unexpended Adopted Budget After Paid or Balance Budget Modification Charged Encumbered Reserved Canceled (A) Operations - Within "CAPS" - continued DEPARTMENT OF PUBLIC WORKS - continued Division of Streets Salaries and Wages $ 2,997,374 $ 2,807,074 $ 2,801,461 $ - $ 5,613 $ - Other Expenses 206,575 272,475 267,941 3,786 748 - Street Repair 112,000 112,000 42,130 11,518 58,352 - Snow Removal Salaries and Wages 137,127 137,127 137,127 - - - Other Expenses 307,250 442,250 401,027 39,521 1,702 - Snow Removal Emergency 800,000 800,000 800,000 - - - Division of Auto Maintenance Salaries and Wages 490,372 419,272 415,697 - 3,575 - Other Expenses 391,570 584,570 399,974 120,397 64,199 - Division of Public Properties Parks and Shade Trees Section Salaries and Wages 1,440,506 1,498,806 1,496,642 - 2,164 - Other Expenses 311,450 276,450 252,022 17,733 6,695 - Public Buildings Section Salaries and Wages 1,392,437 1,544,537 1,519,078 - 25,459 - Other Expenses 1,099,162 1,118,672 1,011,594 83,765 23,313 - Division of Recreation Salaries and Wages 2,045,055 1,838,160 1,821,777 - 16,383 - Other Expenses 442,934 515,484 373,764 72,855 68,865 - Division of Recycling Salaries and Wages 1,144,619 1,214,319 1,208,420 - 5,899 - Other Expenses 201,995 231,495 215,585 2,890 13,020 -
See Accompanying Notes to Financial Statements Exhibit A-3 CITY OF PATERSON Sheet 6 of 13 CURRENT FUND FOR THE YEAR ENDED JUNE 30, 2015
STATEMENT OF APPROPRIATIONS - REGULATORY BASIS
Appropriations Expended Unexpended Adopted Budget After Paid or Balance Budget Modification Charged Encumbered Reserved Canceled (A) Operations - Within "CAPS" - continued DEPARTMENT OF PUBLIC WORKS - continued Cable Communications Salaries and Wages $ 222,861 $ 164,681 $ 163,426 $ - $ 1,255 $ - Other Expenses 31,020 21,620 11,720 2,427 7,473 - DEPARTMENT OF COMMUNITY DEVELOPMENT Division of Planning and Zoning Salaries and Wages 328,312 307,412 306,718 - 694 - Other Expenses 14,300 9,300 8,577 312 411 - Division of Community Improvements Salaries and Wages 1,209,222 916,622 911,166 - 5,456 - Other Expenses 1,097,862 1,097,862 487,197 5,673 604,992 - Division of Economic Development Salaries and Wages 158,877 173,377 173,362 - 15 - Other Expenses 30,550 21,550 8,018 7,241 6,291 - Division of Redevelopment Salaries and Wages 20,200 - - - - - Other Expenses 11,550 - - - - - DEPARTMENT OF HUMAN SERVICES Office of the Director Salaries and Wages 362,069 287,569 287,315 - 254 - Other Expenses 7,156 7,156 4,768 668 1,720 - Office of Aging and Disabled Services Salaries and Wages 98,808 97,348 97,347 - 1 - Other Expenses 20,420 11,420 7,719 171 3,530 - Social Services 350,000 350,000 243,040 70,451 36,509 -
See Accompanying Notes to Financial Statements Exhibit A-3 CITY OF PATERSON Sheet 7 of 13 CURRENT FUND FOR THE YEAR ENDED JUNE 30, 2015
STATEMENT OF APPROPRIATIONS - REGULATORY BASIS
Appropriations Expended Unexpended Adopted Budget After Paid or Balance Budget Modification Charged Encumbered Reserved Canceled (A) Operations - Within "CAPS" - continued DEPARTMENT OF HUMAN SERVICES - continued Division of Consumer Protection Salaries and Wages $ 164,125 $ 163,125 $ 151,970 $ - $ 11,155 $ - Other Expenses 12,047 9,047 5,550 1,090 2,407 - Division of Youth Services Salaries and Wages 323,440 294,340 294,242 - 98 - Other Expenses 21,338 16,338 14,394 1,802 142 - Division of Health Salaries and Wages 2,262,040 2,042,140 1,946,981 450 94,709 - Other Expenses 293,600 209,600 162,513 35,738 11,349 - STATUTORY AGENCIES Museum Salaries and Wages 347,268 301,668 301,554 - 114 - Other Expenses 45,650 45,650 12,928 2,503 30,219 - Board of Adjustment Salaries and Wages 50,592 56,092 55,976 - 116 - Other Expenses 39,200 42,850 41,762 981 107 - Office of Emergency Management Salaries and Wages 112,090 100,890 100,866 - 24 - Other Expenses 118,421 116,421 65,509 48,466 2,446 - Planning Board Salaries and Wages 50,556 16,156 15,810 - 346 - Other Expenses 30,100 31,800 30,280 1,297 223 - Youth Guidance Council Other Expenses 27,000 17,000 8,087 2,084 6,829 -
See Accompanying Notes to Financial Statements Exhibit A-3 CITY OF PATERSON Sheet 8 of 13 CURRENT FUND FOR THE YEAR ENDED JUNE 30, 2015
STATEMENT OF APPROPRIATIONS - REGULATORY BASIS
Appropriations Expended Unexpended Adopted Budget After Paid or Balance Budget Modification Charged Encumbered Reserved Canceled (A) Operations - Within "CAPS" - continued STATUTORY AGENCIES - continued Historic Preservation Commission Salaries and Wages $ 124,943 $ 112,843 $ 112,318 $ - $ 525 $ - Other Expenses 14,500 14,500 8,854 769 4,877 - Municipal Court Salaries and Wages 1,508,617 1,425,042 1,424,958 - 84 - Other Expenses 174,340 149,340 140,116 4,432 4,792 - UNCLASSIFIED Electricity 1,115,000 1,075,000 644,476 843 429,681 - Street Lighting 2,722,000 2,572,000 2,503,916 32 68,052 - Telephone Service 468,100 438,100 340,343 26,756 71,001 - Gas 507,000 357,000 299,057 672 57,271 - Fuel Oil 19,000 9,000 4,193 1,807 3,000 - Gasoline 1,312,500 1,012,500 878,286 184 134,030 - Solid Waste 7,505,867 7,135,867 6,891,874 15,171 228,822 - (B) Contingent 5,000 5,000 2,820 - 2,180 - Total Operations Including Contingent within "CAPS" 176,403,141 179,943,695 172,729,338 2,500,858 4,713,499 - Detail: Salaries and Wages 98,126,121 97,462,571 96,787,534 2,830 672,207 - Other Expenses 78,277,020 82,481,124 75,941,804 2,498,028 4,041,292 -
See Accompanying Notes to Financial Statements Exhibit A-3 CITY OF PATERSON Sheet 9 of 13 CURRENT FUND FOR THE YEAR ENDED JUNE 30, 2015
STATEMENT OF APPROPRIATIONS - REGULATORY BASIS
Appropriations Expended Unexpended Adopted Budget After Paid or Balance Budget Modification Charged Encumbered Reserved Canceled (E) Deferred Charges and Statutory Expenditures within "CAPS" (1) DEFERRED CHARGES Prior Years' Bills $ 48,554 $ 48,554 $ 47,979 $ - $ - $ 575 (2) STATUTORY EXPENDITURES Contribution to: Public Employees Retirement System (PERS) 2,807,567 2,807,567 2,802,316 - 5,251 - Police and Firemen's Retirement System (PFRS) 17,469,627 17,469,627 17,469,627 - - - Social Security System (O.A.S.I.) 1,909,422 1,909,422 1,889,595 - 19,827 - Consolidated Police and Fire Retirement Fund 5,000 5,000 (57,948) - 62,948 - Increased Retirement Allowance: C143-L-1958 80,535 80,535 80,535 - - - Defined Contribution Retirement Program 45,000 45,000 28,153 - 16,847 - Medicare 1,420,005 1,420,005 1,409,646 - 10,359 - Unemployment Compensation Insurance 151,000 151,000 149,068 - 1,932 - State Disability 221,000 221,000 209,234 - 11,766 - Excise Tax 45,000 45,000 11,204 - 33,796 - 24,202,710 24,202,710 24,039,409 - 162,726 575 (H-1)TOTAL GENERAL APPROPRIATIONS FOR MUNICIPAL PURPOSES WITHIN "CAPS" 200,605,851 204,146,405 196,768,747 2,500,858 4,876,225 575
See Accompanying Notes to Financial Statements Exhibit A-3 CITY OF PATERSON Sheet 10 of 13 CURRENT FUND FOR THE YEAR ENDED JUNE 30, 2015
STATEMENT OF APPROPRIATIONS - REGULATORY BASIS
Appropriations Expended Unexpended Adopted Budget After Paid or Balance Budget Modification Charged Encumbered Reserved Canceled (A) Operations - Excluded From "CAPS" Passaic Valley Sewerage Commission $ 10,373,703 $ 10,788,149 $ 10,788,149 $ - $ - $ - Maintenance of Free Public Libraries 2,418,808 2,418,808 2,149,621 12,086 257,101 - Library Fringe Benefits: Social Security 107,169 107,169 107,169 - - - Medicare 25,235 25,235 25,235 - - - Insurance 1,091,368 1,091,368 1,091,368 - - - Safe and Secure - Local Share 739,218 739,218 739,218 - - - FEMA Assistance to Firefighters - Local Share 71,064 71,064 71,064 - - - 911 Salaries and Wages - Police 894,860 894,860 894,860 - - - 911 Salaries and Wages - Fire 374,661 374,661 374,661 - - - Fire Arson Investigation Equipment - Local Share 2,888 2,888 2,888 - - - Solid Waste Recycling Tax 219,756 219,756 219,756 - - - HUD Audit Repayment 439,413 439,413 439,413 - - - Paterson Station House 1,288 1,288 1,288 - - - 16,759,431 17,173,877 16,904,690 12,086 257,101 - PUBLIC AND PRIVATE PROGRAMS OFFSET BY REVENUES US Department of Health and Human Services HIV Ryan White Program 3/1/14-2/28/15 3,097,922 6,393,144 6,393,144 - - - 2014 SPNS Grant US 9/1/14-8/31/17 500,000 500,000 500,000 - - - NACCHO MRC Grant 3,500 3,500 3,500 - - - US Federal Emergency Management Agency 2012 Assistance to Firefighters Grant 639,576 639,576 639,576 - - - Fire Arson Investigation Equipment 54,878 54,878 54,878 - - -
See Accompanying Notes to Financial Statements Exhibit A-3 CITY OF PATERSON Sheet 11 of 13 CURRENT FUND FOR THE YEAR ENDED JUNE 30, 2015
STATEMENT OF APPROPRIATIONS - REGULATORY BASIS
Appropriations Expended Unexpended Adopted Budget After Paid or Balance Budget Modification Charged Encumbered Reserved Canceled (A) Operations - Excluded From "CAPS" - continued PUBLIC AND PRIVATE PROGRAMS OFFSET BY REVENUES - continued NJ Department of Health and Senior Services Sexually Transmitted Disease Control Program $ 88,535 $ 88,535 $ 88,535 $ - $ - $ - Tuberculosis Control Program 208,700 208,700 208,700 - - - Public Heatlh Preparedness / Bioterror Response 226,525 226,525 226,525 - - - Childhood Lead Poisoning Control Program 230,846 230,846 230,846 - - - HIV Counseling, Testing and Referral 243,400 486,800 486,800 - - - Federal TB Control Grant 97,254 97,254 97,254 - - - Shaping NJ Health Community Grant - 12,000 12,000 - - - New Jersey Department of Environmental Protection: CLG Historic District Grant 23,835 23,835 23,835 - - - New Jersey Department of Law & Public Safety: Safe and Secure Communities Program 199,563 199,563 199,563 - - - DWI Surcharge 11,448 22,345 22,345 - - - Body Armor Grant 34,409 34,409 34,409 - - - Pedestrian Safety Grant 16,000 16,000 16,000 - - - New Jersey Department of Commerce and Economic Development: UEZ - Small Business Development Center 50,000 50,000 50,000 - - - UEZ - Administration Budget 242,031 242,031 242,031 - - - New Jersey Department of Human Services: 2015 School Based Youth Services Program 310,190 310,190 310,190 - - - Teen Parenting Program 2015 149,897 149,897 149,897 - - - New Jersey Department of Environmental Protection: NJDEP - Clean Communities Program - 193,566 193,566 - - - NJDEP - Recycling Tonnage Grant - 221,874 221,874 - - -
See Accompanying Notes to Financial Statements Exhibit A-3 CITY OF PATERSON Sheet 12 of 13 CURRENT FUND FOR THE YEAR ENDED JUNE 30, 2015
STATEMENT OF APPROPRIATIONS - REGULATORY BASIS
Appropriations Expended Unexpended Adopted Budget After Paid or Balance Budget Modification Charged Encumbered Reserved Canceled (A) Operations - Excluded From "CAPS" - continued PUBLIC AND PRIVATE PROGRAMS OFFSET BY REVENUES - continued County of Passaic: Municipal Alliance Program $ 15,410 $ 61,641 $ 61,641 $ - $ - $ - Senior Citizen Disabled Transportation 202,000 202,000 202,000 - - - County of Passaic - Evening Reporting Program - 103,855 103,855 - - - County of Passaic - Total Lifestyle Support Prog. - 86,980 86,980 - - - Other: City of Passaic Byrne Memorial Equip. Grant 147,423 147,423 147,423 - - - Comm. Foundation of NJ Give and Receive 20,000 20,000 20,000 - - - Pinchak Pharmacy Museum Exhibit Grant 711 711 711 - - - Senior Farmers Market 500 500 500 - - - Dan Oliff Memorial Veterans Exhibition 10,000 10,000 10,000 - - - Mineral Display Grant 5,000 5,000 5,000 - - - 6,829,553 11,043,578 11,043,578 - - -
Total Operations - Excluded from "CAPS" 23,588,984 28,217,455 27,948,268 12,086 257,101 - Detail: Salaries and Wages 1,269,521 1,269,521 1,269,521 - - - Other Expenses 22,319,463 26,947,934 26,678,747 12,086 257,101 -
(C) Capital Improvements - Excluded from "CAPS" Capital Improvement Fund 291,300 291,300 291,300 - - - Ord. 14-042 Resurfacing Various Roads 48,700 48,700 48,700 - - - 340,000 340,000 340,000 - - -
See Accompanying Notes to Financial Statements Exhibit A-3 CITY OF PATERSON Sheet 13 of 13 CURRENT FUND FOR THE YEAR ENDED JUNE 30, 2015
STATEMENT OF APPROPRIATIONS - REGULATORY BASIS
Appropriations Expended Unexpended Adopted Budget After Paid or Balance Budget Modification Charged Encumbered Reserved Canceled (D) Municipal Debt Service Payment of Bond Principal $ 3,917,145 $ 3,917,145 $ 3,917,145 $ - $ - $ - NJ Environmental Infrastructure Principal 1,214,506 1,214,506 1,197,200 - - 17,306 Interest on Bonds 3,656,314 3,656,314 3,332,995 - - 323,319 Interest on Emergency Notes 126,930 126,930 126,930 - - - NJ Environmental Infrastructure Interest 230,075 230,075 221,227 - - 8,848 Interest on Bond Anticipation Notes 187,600 187,600 184,964 - - 2,636 Principal Due on BANs and Emergency Notes 2,437,000 2,877,000 2,877,000 - - - Green Trust Loan Program Payment of Principal 119,615 119,615 119,615 - - - Payment of Interest 5,692 5,692 5,692 - - - 11,894,877 12,334,877 11,982,768 - - 352,109
(E) Deferred Charges - Municipal - Excluded from "CAPS" Special Emergency Authorizations - 5 Years 2,578,000 2,578,000 2,578,000 - - -
(F) Judgments 50,000 50,000 - - - 50,000
(O)TOTAL GENERAL APPROPRIATIONS - EXCLUDED FROM "CAPS" 38,451,861 43,520,332 42,849,036 12,086 257,101 402,109
(L) Subtotal General Appropriations 239,057,712 247,666,737 239,617,783 2,512,944 5,133,326 402,684
(M) Reserve for Uncollected Taxes 13,556,033 13,556,033 13,556,033 - - -
TOTAL GENERAL APPROPRIATIONS $ 252,613,745 $ 261,222,770 $ 253,173,816 $ 2,512,944 $ 5,133,326 $ 402,684
See Accompanying Notes to Financial Statements Exhibit A-3a
CITY OF PATERSON CURRENT FUND FOR THE YEAR ENDED JUNE 30, 2015
STATEMENT OF APPROPRIATIONS - REGULATORY BASIS ANALYSIS OF MODIFIED BUDGET AND PAID OR CHARGED
Budget After Paid or Modification Charged
Budget As Adopted $ 252,613,745 $ - Added by N.J.S.A. 40A:4-87 4,214,025 - Reserve for Uncollected Taxes - 13,556,033 Cash Disbursements - 247,605,220 Qualified Bonds Paid by State - 7,250,140 Special Emergency 4,395,000 3,378,000 Interfund - Grants - 11,043,578 Interfund - Grants Match - 813,170 Life Hazard Use Fees - Grants - 263,500 Chargebacks - 3,663,868 Capital Improvement Fund - 291,300 Re-Allocated Disbursements - 1,329,539 Subtotal: Modified Budget and Paid or Charged 261,222,770 289,194,348
Less: Other Reserves - 1,915 Reserve for Uncollected Taxes 13,556,033 - Appropriations Canceled 402,684 - Cash Receipts - 34,349,109 Interfunds - Budget Reimbursements - 1,669,508 Total Paid or Charged $ 253,173,816 Net Modified Budget, Operations Expenditur $ 247,264,053
See Accompanying Notes to Financial Statements Exhibit B Sheet 1 of 2 CITY OF PATERSON TRUST FUNDS AS OF JUNE 30, 2015 AND 2014
COMPARATIVE BALANCE SHEET - REGULATORY BASIS
2015 2014
Assets Animal Control Trust Fund: Cash $ 25,952 $ 7,669 Due from Other Trust - 462 25,952 8,131
Other Trust Fund: Cash - Community Development 1,170,190 1,415,294 Cash - Other Trust 6,887,440 5,648,336 Taxes Receivable - Special Improvement Districts 3,131 3,987 Grants Receivable 11,887,108 12,206,909 Due from Municipal Utility Authority - 3,199,181 Redevelopment/CDBG Held Properties 172,930 172,930 Tax Title Lien - Special Improvement Districts 78,691 54,733 Total Other Trust Fund 20,199,490 22,701,370
Total Assets $ 20,225,442 $ 22,709,501
Liabilities and Reserves Animal Control Trust Fund: Due to State of New Jersey $ 96 $ 92 Reserve for Animal Control Fund Expenditures 15,511 8,039 Total Animal Control Trust Fund 15,607 8,131
Other Trust Fund: Due to Special Improvement Districts 71,696 74,080 Tax Overpayments - Special Improvement District - 2,639 Prepaid Revenue - Special Improvement District 49,607 56,420 Due to Animal Control Fund - 462 Due to Current Fund 11,677 - Reserve for: Off-Duty Police Officers 405,611 330,795 Off-Duty Police Officers Administration 119,020 52,153 Municipal Utility Authority Receivable - 3,199,181 Redevelopment/CDBG Held Properties 172,930 172,930 Parking Offense Adjudication Act 165,711 154,067 Weights and Measures 74,267 74,267 Public Defender Fees 11,111 11,717
See Accompanying Notes to the Financial Statements. Exhibit B Sheet 2 of 2 CITY OF PATERSON TRUST FUNDS AS OF JUNE 30, 2015 AND 2014
COMPARATIVE BALANCE SHEET - REGULATORY BASIS
2015 2014
Reserve for: Special Improvement District Taxes $ 81,822 $ 58,720 Various Reserves and Deposits 3,898,432 2,835,002 Payroll Agency 2,082,749 2,044,499 Various Grants 13,057,298 13,622,203 20,201,931 22,689,135 Fund Balance 7,904 12,235 Total Other Trust Fund 20,209,835 22,701,370
Total Liabilities, Reserves and Fund Balance $ 20,225,442 $ 22,709,501
See Accompanying Notes to the Financial Statements. Exhibit B-1
CITY OF PATERSON TRUST FUNDS FOR THE YEAR ENDED JUNE 30, 2015
COMPARATIVE STATEMENT OF CHANGES IN FUND BALANCE - REGULATORY BASIS
2015 2014
Increased by: Cash Receipts $ 268 $ 322 Cancellations 6,500 5,500 6,768 5,822 Decreased by: Cash Disbursements Applied to Anticipated Revenue 11,099 15,000
Net Decrease in Fund Balance (4,331) (9,178)
Balance: June 30, 2014 12,235 21,413
Balance: June 30, 2015 $ 7,904 $ 12,235
See Accompanying Notes to the Financial Statements. EXHIBIT C
CITY OF PATERSON GENERAL CAPITAL FUND AS OF JUNE 30, 2015 AND 2014
COMPARATIVE BALANCE SHEETS - REGULATORY BASIS
2015 2014
Assets Cash $ 18,381,734 $ 16,045,133 Grants Receivable 6,293,440 5,970,072 Interfunds Receivable - 122,425 Deferred Charges to Future Taxation: Funded 73,647,056 78,575,220 Unfunded 56,203,850 24,403,953 Due from New Jersey Environmental Infrastructure Trust Fund 8,757,606 8,757,606
Total Assets and Deferred Charges $ 163,283,686 $ 133,874,409
Liabilities and Reserves General Serial Bonds $ 57,524,477 $ 61,441,623 Bond Anticipation Notes 23,796,000 15,008,000 Improvement Authorizations: Funded 19,185,831 20,844,098 Unfunded 46,132,675 17,527,692 Capital Improvement Fund 460,413 394,113 Due to State of New Jersey: Green Acres Trust Loan Payable 2,079,666 1,876,178 Environmental Infrastructure Loan 14,042,913 15,257,419 163,221,975 132,349,123 Fund Balance 61,711 1,525,286
Total Liabilities, Reserves and Fund Balance $ 163,283,686 $ 133,874,409
Bonds and Notes Authorized But Not Issued $ 32,407,850 $ 9,395,953
See Accompanying Notes to the Financial Statements. Exhibit C-1
CITY OF PATERSON GENERAL CAPITAL FUND FOR THE YEAR ENDED JUNE 30, 2015
COMPARATIVE STATEMENT OF CHANGES IN FUND BALANCE - REGULATORY BASIS
2015 2014
Increased by: Premiums Received on Sale of Notes: Capital Fund Share of Notes Issued June 3, 2015 $ 61,425 $ - Capital Fund Share of Notes Issued June 26, 2014 - 30,090 Issued June 3, 2014 - 10,355 61,425 40,445
Decreased by: Appropriated to Fund Ordinance No. 14-042 1,525,000 - Appropriated to Fund Ordinance No. 13-043 - 1,485,000 Anticipated as Budget Revenue - 218,000 1,525,000 1,703,000
Net Decrease in Fund Balance (1,463,575) (1,662,555)
Balance: July 1 1,525,286 3,187,841
Balance: June 30 $ 61,711 $ 1,525,286
See Accompanying Notes to the Financial Statements. Exhibit D
CITY OF PATERSON GENERAL FIXED ASSETS AS OF JUNE 30, 2015 AND 2014
COMPARATIVE BALANCE SHEET - REGULATORY BASIS
2015 2014
Assets Land $ 3,257,443 $ 3,257,443
Building 39,034,660 39,034,660
Machinery & Equipment 20,197,935 20,197,935
$ 62,490,038 $ 62,490,038
Liabilities and Reserves Investment in General Fixed Assets $ 62,490,038 $ 62,490,038
See Accompanying Notes to the Financial Statements. CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REPORTING ENTITY
The City of Paterson (the “City”) is organized as a Mayor - Council municipality under the provisions of N.J.S.A. 40:69A. The City is governed by an elected Mayor and Council, and by such other officers and employees as may be duly appointed. The Council consists of nine members, three of which are elected at-large by voters of the City and serve a term of four years beginning on the first day of July next following their election. The Mayor is also elected directly by the voters of the City and also serves a term of four years beginning the first day of July following the election.
The financial statements of the City include every board, body, officer or commission supported and maintained wholly or in part by funds appropriated by the City, as required by N.J.S.A. 40A:5-5. Accordingly, the financial statements of the City do not include the operations of the Parking Authority, the Passaic Valley Water Commission, the Passaic Valley Sewerage Commission, the Bunker Hill Special Improvement District or the Downtown Paterson Special Improvement District; inasmuch as their activities are administered by separate boards.
The Governmental Accounting Standards Board (GASB) established criteria to be used to determine which component units should be included in the financial statements of the oversight entity. The State of New Jersey, Department of Community Affairs, Division of Local Government Services (the “Division”) requires the financial statements of the City to be reported separately from it component units. If the provisions of GASB had been complied with, the following financial statements of the component units would have been discretely presented with the financial statements of the City, the primary government:
Paterson Municipal Utilities Authority (Dissolved October 28, 2014) Paterson Library Paterson Parking Authority
Audit reports of the component units are available at each of the respective component units. If the report were prepared in conformity with accounting principles generally accepted in the United States of America, these component units would be included in the City’s financial statements.
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
BASIS OF PRESENTATION
The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. GASB codification establishes three fund categories to be used by general purpose governmental units when reporting financial position and results of operations in accordance with accounting principles generally accepted in the United States of America (GAAP).
The financial statements of the City have been prepared in conformity with accounting principles and practices prescribed by the Division, which differ from GAAP. The principles and practices prescribed by the Division are designed primarily for determining compliance with legal provisions and budgetary restrictions and as a means of reporting on the stewardship of public officials with respect to public funds. Under this method of accounting, the City accounts for its financial transactions through the following separate funds and account group, which differ from the fund structure required by GAAP.
DESCRIPTION OF FUNDS
The accounts of the City are maintained in accordance with the Division’s principles of fund accounting to ensure observance of limitations and restrictions on resources available. The Division’s principles of fund accounting require that resources be classified for accounting and reporting purposes into funds in accordance with activities or objectives specified for the resources. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues and expenditures. Resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled. The General Fixed Assets account group, on the other hand, is a financial reporting device designed to provide accountability for certain fixed assets and the investment in those fixed assets that are not recorded in the funds because they do not directly affect net expendable available financial resources.
Current Fund - is used to account for all resources and expenditures for governmental operations of a general nature.
Federal and State Grants Fund – is used to account for receivables due from grantor agencies and the balance of grant awards available for spending, after first having been formally adopted by Current Fund budget or subsequent insertion in the budget in accordance with N.J.S.A. 40A:4-87.
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
DESCRIPTION OF FUNDS (continued)
Trust Fund - is used to account for receipts, custodianship and disbursement of dedicated revenues in accordance with the purpose for which each reserve was created, subject to available cash in each individual trust fund reserve established pursuant to applicable state statutes or as an agent for individuals and other governmental agencies.
General Capital Fund - is used to account for the receipt and disbursement of funds for the acquisition of general capital facilities, other than those acquired in the Current Fund or other funds. Also included in this fund are general and school bonds and notes payable offset by deferred charges to future taxation.
General Fixed Assets - is not a separate fund type, but is an account group used to account for all fixed assets of the City.
BASIS OF ACCOUNTING
The City prepares its financial statements on a basis of accounting prescribed by the Division that demonstrates compliance with a modified accrual basis and the budget laws of the State of New Jersey, which is a special purpose framework of accounting other than accounting principles generally accepted in the United States of America. The current financial resources focus and modified accrual basis of accounting is generally followed with significant exceptions which are explained as follows:
Revenues – Revenues are realized when received in cash except for certain amounts which are due from other governmental units. Receipts from Federal revenue sharing funds and other Federal and State grants are realized as revenue when anticipated in the budget. Receivables for property taxes and other amounts that are due to the City are recorded with offsetting reserves on the balance sheet of the Current Fund. Such amounts are not recorded as revenue until collected. Accordingly, no provision has been made to estimate that portion of receivables that are uncollectible. Taxes and sewer charges collected in advance are recorded as cash liabilities in the financial statements. GAAP requires revenues to be recognized in the accounting period when they become measurable and available and in certain instances reduced by an allowance for doubtful accounts.
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
BASIS OF ACCOUNTING (continued)
Reserve for Uncollected Taxes – Reserve for Uncollected Taxes is required to provide assurance that cash collected for taxes in the current year will provide sufficient cash flow to meet expected obligations. The minimum amount of Reserve for Uncollected Taxes is determined on the percentage of collections experienced in the immediate preceding year, unless allowable alternative methods are utilized. A Reserve for Uncollected Taxes is not established under GAAP.
Expenditures – Expenditures are recorded on the “budgetary” basis of accounting. Generally, expenditures are recorded when an amount is encumbered for goods or services through the issuance of a purchase order in conjunction with the encumbrance accounting system. Appropriation reserves covering unexpended appropriation balances are automatically created at the end of each year and recorded as liabilities, except for amounts which may be canceled by the governing body. Appropriations for principal and interest payments on general capital indebtedness are provided on the cash basis. GAAP requires expenditures in the current (or general) fund, to be recognized in the accounting period in which the fund liability is incurred, if measurable, except for un-matured interest on general long-term debt, which should be recognized when due.
Encumbrances – Encumbrances are contractual orders outstanding at year end reported as expenditures through the establishment of an encumbrance payable. Outstanding encumbrances at year end are reported as a cash liability in the financial statements. Encumbrances do not constitute expenditures under GAAP.
Appropriation Reserves – Appropriations are available until lapsed at the close of the succeeding year to meet specific claims, commitments or contracts incurred during the preceding fiscal year. Transfers are allowed between certain line items during the first three months of the fiscal year. Lapsed appropriation reserves are recorded as other credits to income. Appropriation Reserves do not exist under GAAP.
Interfunds - Advances from the current fund are reported as interfunds receivable with offsetting reserves which are created by charges to operations. Income is recognized in the year the receivables are liquidated. Interfunds receivable in the other funds are not offset by reserves. GAAP does not require the establishment of an offsetting reserve.
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
BASIS OF ACCOUNTING (continued)
Inventories of Supplies - The costs of inventories of supplies for all funds are recorded as expenditures at the time the individual items are purchased. The costs of inventories are not included on the various balance sheets. GAAP requires the cost of inventories to be reported as a current asset and equally offset by a fund balance reserve.
Property Acquired for Taxes – Property Acquired for Taxes is recorded in the current fund at the assessed valuation when the property was acquired and is subsequently updated for revaluations. The value of the property is fully reserved. GAAP requires such property to be recorded as a fixed asset at market value on the date of acquisition.
Deferred Charges to Future Taxation (Funded and Unfunded) - Upon the authorization of general capital projects, the City establishes deferred charges for the costs of the capital projects to be raised by future taxation. Funded deferred charges relate to permanent debt issued, whereas unfunded deferred charges relate to temporary or non-funding of the authorized costs of capital projects. The City may levy taxes on all taxable property within the City to repay the debt. Annually, the City raises the debt requirements for that particular year in the current budget. As the funds are raised by taxation, the deferred charges are reduced. GAAP does not require the establishment of deferred charges to future taxation.
Improvement Authorizations – Improvement Authorizations in the general capital fund represent the unexpended balance of an ordinance appropriation and is similar to the unexpended portion of the budget in the current fund. GAAP does not recognize these amounts as liabilities.
Compensated Absences and Post-Employment Benefits - Compensated absences for vacation, sick leave and other compensated absences are recorded and provided for in the annual budget in the year in which they are paid, on a pay-as-you-go basis. Likewise, no accrual is made for post-employment benefits, if any, which are also funded on a pay-as-you-go basis. GAAP requires that the amount that would normally be liquidated with expendable financial resources to be recorded as an expenditure in the operating funds and the remaining obligations be recorded as long-term obligations.
Use of Estimates - The preparation of financial statements requires management to make estimates and assumptions that affect: the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
BASIS OF ACCOUNTING (continued)
General Fixed Assets - Accounting for Governmental Fixed Assets as promulgated by the Division differs in certain respects from GAAP, and requires the inclusion of a statement of general fixed assets as part of the City’s basic financial statements.
Fixed assets used in governmental operations (general fixed assets) are accounted for in an account group identified as “General Fixed Assets” and are not included within the records of any fund types. Purchases from these funds for fixed assets are recorded as expenditures within the fund. Public domain (infrastructure) general fixed assets consisting of certain improvements, other than improvements to buildings, such as improvements to roads, bridges, curbs and gutters, streets and sidewalks and drainage systems, are not capitalized.
All fixed assets, except land, are valued at historical cost or estimated historical cost if actual historical cost is not available. Expenditures for construction in progress are recorded in the Capital Fund against authorizations under which the project was approved until such time as the construction is completed and put into operation.
The City is required to maintain a subsidiary ledger of detailed records of fixed assets and to provide property management standards to control fixed assets. General fixed assets are defined as non- expendable personal property having a physical existence, a useful life of more than five years and an acquisition cost of $5,000 or more per unit.
Fixed assets acquired through grants in aid or contributed capital have not been accounted for separately.
No depreciation has been provided in the financial statements.
GAAP requires the recording of infrastructure assets and requires capital assets be depreciated over their estimated useful life unless they are either inexhaustible or are infrastructure assets reported using the modified approach.
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
BASIS OF ACCOUNTING (continued)
Cash and Investments - New Jersey governmental units are required to deposit public funds in a public depository. Public depositories are defined by statutes as any state or federally chartered bank, savings bank or an association located in New Jersey or a state or federally chartered bank, savings bank or an association located in another state with a branch office in New Jersey, the deposits of which are insured by the Federal Deposit Insurance Corporation (“FDIC”) and which receives or holds public funds on deposit, but does not include deposits held by the State of New Jersey Cash Management Fund. N.J.S.A. 40A:5-15.1 provides a list of securities which may be purchased by New Jersey municipal units.
The City is also required to annually adopt a cash management plan and to deposit or invest its funds pursuant to the cash management plan. The cash management plan adopted by the City requires it to deposit funds as permitted in N.J.S.A 40:5-15.1, so long as the funds are deposited in public depositories protected from loss under the provisions of the Governmental Unit Deposit Protection Act (GUDPA). GUDPA was enacted in 1970 to protect governmental units from a loss of funds on deposit with a failed banking institution in New Jersey and requires all public depositories pledge collateral, having a market value of five percent of the average daily balance of collected public funds, to secure the deposits of governmental units. If a public depository fails, the collateral it has pledged, plus the collateral of all other public depositories in the collateral pool, is available to pay the full amount of their deposits to the governmental units.
In 2009, legislation revised GUDPA to provide higher levels of security and oversight. The revised GUDPA ensures a common level of deposit risk for each bank choosing to accept local government deposits. It requires banks to fully collateralize deposits over $200 million, implements enforcement protocol which allows the Department of Banking and Insurance to institute risk-based collateral requirements promptly when a bank shows signs of stress, provides enhanced oversight by the Department of Banking and Insurance and permits GUDPA certificates to be provided through an online system.
Cash Equivalents include certificate of deposits with a maturity date of less than three (3) months.
Also see Note B - Cash and Cash Equivalents.
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
BASIS OF ACCOUNTING (continued)
Budgets and Budgetary Accounting - An annual budget is required to be adopted and integrated into the accounting system to provide budgetary control over revenues and expenditures. Budget amounts presented in the accompanying financial statements represent amounts adopted by the City and approved by the Division in accordance with the Local Budget Law. Budgets are adopted on the same basis of accounting utilized for the preparation of the City’s financial statements. The budgetary requirements herein outlined are applicable to only the Current Fund, and not the Trust Fund, Capital Fund or the General Fixed Assets account group. However, statutes require the City to adopt annually a six-year capital plan. This plan allows the governing body to expend or incur obligations for capital purposes only. Such projects under the plan must be adopted through capital ordinance.
The City must adhere to procedures for adoption of its annual budget as established by the Division. These procedures include statutory deadlines of: February 20 for introduction and approval and March 20 for adoption. These dates are subject to extension by the Division by approval of the Local Finance Board. Appropriations within the adopted budget cannot be modified until the final two months of the year at which time transfers between certain line items are allowed. Transfers from appropriations excluded from “CAPS” are prohibited unless they are between debt service appropriations. Under certain circumstances emergency authorizations and insertions of items of revenue and appropriation are allowed by authorization of the governing body, subject to approval of the Division.
The City must prepare its budgets in compliance with applicable laws capping the amounts by which both the budgeted appropriations and tax levy can be increased. A description of both “CAPS” follows:
1977 Appropriation "CAP": The 1977 Appropriation Cap is calculated using the formulas and provisions of N.J.S.A. 40A:4-45.1 through 4-45.43a. The law was originally adopted in 1976 and was most recently amended in 2003. Under this law, the City is permitted to increase its overall appropriations (with certain exceptions) by 2.5% or the “cost of living adjustment” (COLA), whichever is less. The COLA is calculated based on the traditional Federal government inflation calculation. The City can, when the COLA is less than or equal to 2.5%, increase its allowable inside-the-cap spending to 3.5%, upon passage of a COLA Rate Ordinance.
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
BASIS OF ACCOUNTING (continued)
2010 Levy "CAP": The 2010 Levy Cap is calculated using the formulas and provisions of N.J.S.A 40A:4-45.44 through 45.47. It establishes limits on the increase in the total City amount to be raised by taxation (tax levy). The core of the levy cap formula is a 2% increase to the previous year’s amount to be raised by taxation, net of any applicable cap base adjustments and emergency or special emergency appropriations.
Long-Term Obligations - General long-term debt is recognized as a liability of the General Capital Fund for the full principal amount.
Reserves (Other than Reserve for Receivables) - Reserves, other than reserve for receivables, are considered liabilities, and not as a reservation of fund balance.
Reserves for Receivables – Receivables of the City, with the exception of certain intergovernmental receivables, are offset on the balance sheet with a credit that is created to preserve the revenue recognition basis required by the Division’s accounting policies. The reserve delays the recognition of these revenues until they are received in cash.
Self-Insurance Contributions - Contributions to self-insurance funds are charged to budget appropriations. GAAP requires that payments be accounted for as an operating transfer and not as expenditure.
Advertising Costs - Advertising costs are charged against the appropriate budget line as they occur. The City does not engage in direct-response advertising.
Sale of Municipal Assets - The proceeds of the sale of municipal assets can be held until made available through a future budget appropriation. GAAP requires such proceeds to be recorded as revenue in the year of sale.
Fund Balance - Fund equity represented on the financial statements consists solely of Fund Balance, which is not further categorized with respect to reservations (portions of fund equity not available for appropriation for expenditure or legally segregated for a specific future use) or designations (plans for future use of financial resources).
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
BASIC FINANCIAL STATEMENTS
The GASB Codification also requires the financial statements of a governmental unit presented in the general purpose financial statements to be in accordance with GAAP. The City presents financial statements which are required by the Division and which differ from the financial statements required by GAAP. These financial statements are listed in the table of contents.
Comparative Data - Comparative data for the prior year has been presented in the accompanying balance sheets and statements of operations in order to provide an understanding of changes in the City’s financial position and operations. Comparative data is not presented in all statements because their inclusion would make certain statements unduly complex and difficult to understand.
Reclassifications – Certain reclassifications have been made to the prior year financial statement presentation to correspond to the current year’s format. These reclassifications had no effect on fund balance and changes in fund balance.
Reconciliation of Accounting Basis – As described throughout Note A, substantial differences exist between GAAP and the budgetary basis prescribed by the Division. Reconciliation between the two would not be meaningful or informative and therefore is not provided herein.
NOTE B. CASH AND CASH EQUIVALENTS
DEPOSITS
Cash and cash equivalents on deposit as of the years ended June 30, 2013 and 2012 are partially insured by the FDIC up to $250,000 for each depository. Deposits in excess of FDIC limits, as noted below, are insured or collateralized by a collateral pool maintained by public depositories as required by GUDPA (see Note A - Cash and Investments or are on deposit with the New Jersey Cash Management Fund.
Custodial Credit Risk - Custodial credit risk is the risk that, in the event of a bank failure, the City will not be able to recover deposits or collateral securities that are in the possession of an outside party. The City does not have a deposit policy for custodial credit risk.
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE B. CASH AND CASH EQUIVALENTS (continued)
DEPOSITS (continued)
Deposits are exposed to custodial credit risk if they are not covered by depository insurance and the deposits are:
a. Uncollateralized. b. Collateralized with securities held by the pledging financial institution. c. Collateralized with securities held by the pledging financial institution’s trust department or agent but not in the City’s name.
The City’s deposits of cash and cash equivalents at June 30, 2015 and 2014 are summarized in the following table. As of June 30, 2015, 56% of the City’s deposits were with one financial institution and the remaining 44% of deposits was distributed among five financial institutions. As of June 30, 2014, 44% of the City’s deposits were with one financial institution and 19% with another. The remaining 37% of deposits were distributed among three financial institutions.
2015 2014
FDIC Insured $ 1,250,000 $ 1,000,000 GUDPA Insured 42,616,595 32,826,001 New Jersey Cash Management Fund 3,423,450 3,421,257 $ 47,290,045 $ 37,247,258
Under GUDPA, financial institutions are not required to pledge collateral for amounts covered by FDIC insurance.
Foreign Currency Risk - Foreign currency risk is the risk that changes in exchange rates will adversely affect deposits. None of the City’s deposits as of June 30, 2015 and 2014 are known to be held in foreign currency.
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE B. CASH AND CASH EQUIVALENTS (continued)
INVESTMENTS
New Jersey statutes permit the City to purchase the following types of securities: • Bonds or other obligations of the United States of America or obligations guaranteed by the United States of America. • Government money market mutual funds. • Any obligation that a federal agency or a federal instrumentality has issued in accordance with an act of Congress, which security has a maturity date not greater than 397 days from the date of purchase, provided that such obligation bears a fixed rate of interest not dependent on any index or other external factor. • Bonds or other obligations of the local unit or bonds or other obligations of school districts of which the local unit is a part or within which the school district is located. • Bonds or other obligations having a maturity date not more than 397 days from the date of purchase, approved by the Division of Local Government Services in the Department of Community Affairs for investment by local units • Local government investment pools. • Deposits with the State of New Jersey Cash Management Fund established pursuant to section 1 of P.L. 1977, c. 281 (C.52:18A-90.4). • Certain agreements for the repurchase of fully collateralized securities, subject to certain limitations as identified in the statute.
Custodial Credit Risk - In the case of investments, custodial credit risk is the risk that, in the event of failure of the counterparty, the City will not be able to recover the value of its investments or collateral securities in the possession of an outside party. Investments are exposed to custodial credit risk if they are uninsured, are not registered in the City’s name and are held by either the counterparty or its trust department or agent, but not in the City’s name.
Foreign Currency Risk - Investments are also exposed to the same foreign currency risk as deposits. It is the risk that changes in exchange rates will adversely affect investments. The City does not have any investments denominated in foreign currency as of June 30, 2015 and 2014.
Interest Rate Risk – Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. The City does not have a formal investment policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates.
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE B. CASH AND CASH EQUIVALENTS (continued)
INVESTMENTS (continued)
Credit Risk – Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The City does not have an investment policy regarding the management of credit risk.
Concentration of Credit Risk - The City places no formal limit on the amount it may invest in any one issuer. New Jersey Statutes limit municipal investments to those specified and summarily identified in the first paragraph of the “Investments” section of this Note. Currently, the City’s only investments consist of deposits in the New Jersey Cash Management Fund, which is classified as a Government Investment Pool.
The City’s investments at June 30, 2015 are presented as follows: Investment Maturities (in Years)
Investment Type Fair Value* < 1 1 - 5 6 - 10 > 10
Government Investment Pools $ 3,423,450 $ 3,423,450 $ - $ - $ -
The City’s investments at June 30, 2014 are presented as follows: Investment Maturities (in Years)
Investment Type Fair Value* < 1 1 - 5 6 - 10 > 10
Government Investment Pools $ 3,421,257 $ 3,421,257 $ - $ - $ -
* Short-term investments are carried at cost, which approximates fair value.
Government Investment Pools consists of investments in the New Jersey Cash Management Fund. Because of their liquidity, these investments are classified as cash and cash equivalents on the financial statements of the City.
These investments are described in more detail on the following page.
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE B. CASH AND CASH EQUIVALENTS (continued)
INVESTMENTS (continued)
New Jersey Cash Management Fund - All investments in the New Jersey Cash Management Fund are governed by the regulations of the State Investment Council, which prescribe specific standards designed to insure the quality of investments and to minimize the risks related to investments. In addition to the Investment Council regulations, the Division of Investment sets further standards for specific investments and monitors the credit of all eligible securities issues on a regular basis. In all the years of the Division of Investment’s existence, it has never suffered a default of principal or interest on any short-term security held by it due to the bankruptcy of a securities issuer; nevertheless, the possibility always exists, and for this reason a reserve is being accumulated in the New Jersey Cash Management Fund as additional protection for the other-than-State participants, which includes the City. The City does not own specific identifiable securities, but instead has a net realizable interest in the joint value of the fund. There is no available credit rating for the New Jersey Cash Management Fund. The audited financial statements of the New Jersey Cash Management Fund can be obtained by contacting the State of New Jersey, Department of the Treasury, Division of Investment 50 West State Street, 9th Floor, Trenton, NJ 08608-0290 or by visiting its website. As of June 30, 2015 and 2014, the City had a balance of $3,423,450 and $3,421,257 respectively, in the New Jersey Cash Management Fund.
NOTE C. PROPERTY TAXES
PROPERTY TAX CALENDAR
Property tax revenues are collected in quarterly installments due February 1, May 1, August 1 and November 1. Property taxes unpaid on April 1 of the year following their final due date are subject to tax sale in accordance with State statutes.
The amount of tax levied includes not only the amount required in support of the City’s annual budget, but also the amounts required in support of the budget of the entities that follow:
County Taxes - The City is responsible for levying, collecting and remitting county taxes for the County of Passaic. Operations is charged for the amount due the County for the year, based upon the ratables required to be certified to the County Board of Taxation by January 10 of the current year. In addition, operations is charged for the County share of Added and Omitted Taxes certified to the County Board of Taxation by October 10 of the current fiscal year, and due to be paid to the County by February 15. As of June 30, 2015 and 2014, the City had no County taxes payable.
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE C. PROPERTY TAXES (continued)
PROPERTY TAX CALENDAR (continued)
School Taxes - The City is responsible for levying, collecting and remitting school taxes for the Board of Education. Operations are charged for the full amount required to be raised from taxation to operate the local school district. As of June 30, 2015 and 2014, the City had no school taxes payable.
PROPERTY TAXES RECEIVABLE
Reserve for Uncollected Taxes - Reserve for Uncollected Taxes is a non-spending item of appropriation required by statute to be included in the City’s annual budget. This appropriation protects the City from taxes not paid currently by providing assurance that cash collected in the current year will provide sufficient cash flow to meet obligations as they become due. The minimum amount required to be appropriated in the budget is determined on the percentage of collections experiences in the immediate preceding year, unless the three-year average option is chosen. For the years ended June 30, 2015 and 2014, the budgeted reserve for uncollected taxes was $13,556,033 and $10,922,467, respectively.
Delinquent Taxes and Tax Title Liens - As mentioned in Note A, taxes receivable and tax title liens are realized as revenue when collected. Uncollected receivables are fully reserved, so no provision is made for the uncollectible portions of these taxes. For the years ended June 30, 2015 and 2014, property taxes receivable were $234,852 and $123,987, respectively and tax title liens receivable were $16,549,116 and $12,285,926, respectively.
Property Acquired by Tax Title Lien Liquidation – The City held its annual accelerated tax sale on June 25, 2015. All properties with delinquent taxes at May 1, 2015 were subject to tax sale, with the exception of any property where the owner is bankrupt or there is a court order. The value of properties acquired by tax title liens at June 30, 2015 and 2014 were $5,107,360, each year.
Prepaid Taxes - Taxes collected in advance are recorded as cash liabilities in the financial statements. Prepaid taxes as of June 30, 2015 and 2014 were $91,898 and $130,774, respectively.
Tax Overpayments - Overpaid taxes collected during the year and due to taxpayers either as a refund or tax credit are recorded as cash liabilities in the financial statements. Tax overpayments as of June 30, 2015 and 2014 were $3,383,590 and $2,582,072, respectively.
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE D. MUNICIPAL DEBT
SUMMARY OF MUNICIPAL DEBT
The Local Bond Law governs the issuance of bonds to finance general municipal and utility capital expenditures. Most bonds are retired in serial installments within the statutory period of usefulness. Other bonds may be term bonds with sinking fund requirements. Bonds issued by the City are general obligation bonds, backed by the full faith and credit of the City. Bond Anticipation Notes, which are issued to temporarily finance capital projects, must be paid off within ten years or retired by the issuance of bonds. At June 30, 2015 and 2014, the City’s statutory debt as defined by the Local Bond Law is summarized as follows:
SUMMARY OF MUNICIPAL DEBT June 30, 2015 June 30, 2014 Statutory Debt Pursuant to Local Bond Law Issued: General: General Serial Bonds $ 57,524,477 $ 61,441,623 Bond Anticipation Notes 23,796,000 15,008,000 Green Acres Trust Loan Payable 2,079,666 1,876,178 Environmental Infrastructure Loan 14,042,913 15,257,419 Total Gross Statutory Debt Issued 97,443,056 93,583,220 Less Statutory Deductions to Debt Limit: Pension Refunding Bonds 2,475,477 3,492,623 Net Statutory Debt Issued 94,967,579 90,090,597 Authorized but not Issued: General Improvements 32,407,850 9,395,953 Net Statutory Debt Issued and Authorized but not Issued $ 127,375,429 $ 99,486,550
School Debt (Included as Obligations of the City) - The City of Paterson Board of Education is a State Operated School District, as such, bonds and notes issued are authorized by the Capital Projects Control Board and are funded by the New Jersey Schools Development Authority and included in the State of New Jersey Annual Budget. Prior to becoming a State Operated School District, Paterson Public Schools operated as a Type I School District whereby the governing body of the City authorized and issued school bonds. Such debt matured during the year ended June 30, 2014.
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE D. MUNICIPAL DEBT (continued)
SUMMARY OF MUNICIPAL DEBT (continued) In addition to the capital debt shown in the preceding schedule, the City had additional debt which, in accordance with statutes, is not included as part of the City’s statutory debt position. All such debt is recorded in the Current Fund and is as follows:
Non-Statutory Debt June 30, 2015 June 30, 2014 Issued: Current Fund Special Emergency Notes: Revaluation $ 1,260,000 $ 1,680,000 Insurance 3,955,000 - Debt Service 440,000 - Accrued Sick and Vacation Time - FY 2014 1,320,000 1,650,000 Accrued Sick and Vacation Time - FY 2013 1,362,000 1,816,000 Accrued Sick and Vacation Time - FY 2012 1,136,000 1,704,000 Accrued Sick and Vacation Time - FY 2011 806,000 1,612,000 $ 10,279,000 $ 8,462,000
Debt Refunding and Rollover During the year ended June 30, 2015, the City renewed or refunded the following notes: • Tax Refunding Notes and Bond Anticipations Notes, combined as Bond Anticipation Notes on Exhibit C. The proceeds of these notes were used to rollover $12,131,000 of existing notes. The additional $11,665,000 of new notes represents temporary funding of Ordinance Number 14-042. Such Notes are more fully discussed herein. • Special Emergency Notes, the proceeds of which were used to rollover $5,884,000 of notes issued in a prior year. The additional $4,395,000 of new notes represents temporary funding of Ordinance Number 15-041. Such Notes are more fully discussed herein.
During the year ended June 30, 2014, the City renewed or refunded the following notes: • Tax Refunding Notes and Bond Anticipations Notes, combined as Bond Anticipation Notes on Exhibit C. The proceeds of these notes were used to rollover $4,213,000 of notes issued in a prior year. The additional $10,795,000 of new notes represents temporary funding of Ordinances Numbered 13-040, 13-042 and 14-021. Such Notes are more fully discussed herein. • Special Emergency Notes, the proceeds of which were used to rollover $6,812,000 of notes issued in a prior year. The additional $1,650,000 of new notes represents temporary funding of Ordinances Numbered 14-009. Such Notes are more fully discussed herein.
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE D. MUNICIPAL DEBT (continued)
SUMMARY OF MUNICIPAL DEBT (continued)
The following is a summary of changes in long-term debt for the year ended June 30, 2015: June 30, 2014 New Issues Paid June 30, 2015 Issued: Serial Bonds $ 61,441,623 $ - $ 3,917,146 $ 57,524,477 Loans Payable: Green Acres Trust 1,876,178 323,103 119,615 2,079,666 Environmental Infrastructure Loan 15,257,419 - 1,214,506 14,042,913 Total $ 78,575,220 $ 323,103 $ 5,251,267 $ 73,647,056
The following is a summary of changes in long-term debt for the year ended June 30, 2014:
June 30, 2013 New Issues Paid June 30, 2014 Issued: Serial Bonds $ 64,341,623 $ - $ 2,900,000 $ 61,441,623 Loans Payable: Green Acres Trust 959,785 968,755 52,362 1,876,178 Economic Development Agency 604,805 - 604,805 - Demolition Loan Payable 45,000 - 45,000 - Environmental Infrastructure Loan 16,468,977 - 1,211,558 15,257,419
Total $ 82,420,190 $ 968,755 $ 4,813,725 $ 78,575,220
Qualified Bonds
Certain bonds of the City are issued pursuant to the Municipal Qualified Bond Act. Under this act, portions of State Aid revenues are withheld by the State of New Jersey and forwarded directly to paying agents for principal and interest payments of such bonds. The City is responsible to certify maturity schedules of the qualified bonds to the State. Qualified bonds are identified within each of bond schedules that follow. During the year ended June 30, 2015 and 2014, the State of New Jersey paid $7,250,140 and $4,971,459, respectively, of qualified bond interest and principal maturities directly to paying agents on behalf of the City in lieu of direct State Aid payments to the City.
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE D. MUNICIPAL DEBT (continued)
BONDS PAYABLE The City has outstanding at June 30, 2015 and 2014 various general serial bonds, which include pension, pension refunding, general refunding bonds and general improvement bonds. The following is a schedule of bond activity for the year ended June 30, 2015, and the short term liability for each issue. Balance Balance Due by Description June 30, 2014 Decrease June 30, 2015 June 30, 2016
General Improvement Bonds $ 2,900,000 $ 2,900,000 $ - $ - Issued 06/01/05 for $18,999,000 Maturing annually through Feb. 1, 2015 General Improvement Bonds 11,240,000 - 11,240,000 2,100,000 Issued 06/15/09 for $23,294,000 Maturing annually on June 15 through 2020 General Improvement Refunding Bonds 3,230,000 - 3,230,000 770,000 Issued 03/23/11 for $3,230,000 Maturing on March 15, 2016 and 2017 Bearing interest rates of 3.25-3.5% Qualified General Refunding Bonds 8,015,000 - 8,015,000 - Issued 03/20/13 for $8,015,000 Maturing in 2020 and 2021 Bearing interest rates of 3-3.1% Qualified General Improvement Bonds 22,519,000 - 22,519,000 - Issued 05/22/13 for $22,519,000 Maturing annually from 2022-2026 Bearing interest rate of 5.0% Pension Obligation Refunding 3,492,623 1,017,146 2,475,477 1,001,640 Bonds Issued 04/03/03 for $13,044,671 Maturing annually an April 1 through 2021 Bearing interest rate of 5.62-5.91% Pension Obligation Refunding 1,600,000 - 1,600,000 1,600,000 Bonds Issued 03/23/2011 for $1,600,000 Maturing on March 15, 2016 Bearing interest rate of 4.9% Pension Obligation Refunding 4,875,000 - 4,875,000 - Bonds Issued 03/30/2012 for $4,875,000 Maturing March 15, 2018 and 2019 Bearing interest rate of 5.62-5.91% Qualified Pension Refunding Bonds 3,570,000 - 3,570,000 - Issued 03/20/13 for $3,570,000 Maturing in 2019 and 2020 Bearing interest rates of 4.2-5.15%
$ 61,441,623 $ 3,917,146 $ 57,524,477 $ 5,471,640
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE D. MUNICIPAL DEBT (continued)
BONDS PAYABLE (continued) The following is a schedule of bond activity for the year ended June 30, 2014, and the short term liability for each issue. Balance Balance Due by Description June 30, 2013 Decrease June 30, 2014 June 30, 2015
General Improvement Bonds $ 5,800,000 $ 2,900,000 $ 2,900,000 $ 2,900,000 Issued 06/01/05 for $18,999,000 Maturing annually through Feb. 1, 2015 General Improvement Bonds 11,240,000 - 11,240,000 - Issued 06/15/09 for $23,294,000 Maturing annually on June 15 through 2020 General Improvement Refunding Bonds 3,230,000 - 3,230,000 - Issued 03/23/11 for $3,230,000 Maturing on March 15, 2016 and 2017 Bearing interest rates of 3.25-3.5% Qualified General Refunding Bonds 8,015,000 - 8,015,000 - Issued 03/20/13 for $8,015,000 Maturing in 2020 and 2021 Bearing interest rates of 3-3.1% Qualified General Improvement Bonds 22,519,000 - 22,519,000 - Issued 05/22/13 for $22,519,000 Maturing annually from 2022-2026 Bearing interest rate of 5.0% Pension Obligation Refunding 3,492,623 - 3,492,623 1,017,146 Bonds Issued 04/03/03 for $13,044,671 Maturing annually an April 1 through 2021 Bearing interest rate of 5.62-5.91% Pension Obligation Refunding 1,600,000 - 1,600,000 - Bonds Issued 03/23/2011 for $1,600,000 Maturing on March 15, 2016 Bearing interest rate of 4.9% Pension Obligation Refunding 4,875,000 - 4,875,000 - Bonds Issued 03/30/2012 for $4,875,000 Maturing March 15, 2018 and 2019 Bearing interest rate of 5.62-5.91% Qualified Pension Refunding Bonds 3,570,000 - 3,570,000 - Issued 03/20/13 for $3,570,000 Maturing in 2019 and 2020 Bearing interest rates of 4.2-5.15%
$ 64,341,623 $ 2,900,000 $ 61,441,623 $ 3,917,146
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE D. MUNICIPAL DEBT (continued)
LOANS PAYABLE
Green Acres Trust Loans
The City has outstanding at June 30, 2015 and 2014 various Green Acres Trust Loans. The following table is a summary of the activity for such loans during the years ended June 30, 2015, and the short term liability at that time for each: Balance Balance Due by Description June 30, 2014 Increase Decrease June 30, 2015 June 30, 2016
Park Development Program Phase II $ 30,080 $ - $ 19,953 $ 10,127 $ 10,127 Issued 07/26/94 for $315,000 Maturing semi-annually through 2016 Bearing an interest rate of 2% Eastside Park Rehabilitation 153,002 - 11,401 141,601 11,630 Issued 06/26/06 for $231,650 Maturing semi-annually through 2026 Bearing an interest rate of 2% Park Development Program Phase III 114,826 - 22,057 92,769 22,504 Issued 06/26/06 for $267,000 Maturing semi-annually through 2019 Bearing an interest rate of 2% Restoration of Pennington Park 700,000 - 35,900 664,100 35,897 Issued 12/9/13 for $700,000 Maturing semi-annually through 2033 Bearing an interest rate of -0-% Restoration of Pennington Park - Lower Field 500,000 - 30,304 469,696 30,303 Issued 12/9/13for $231,245 Maturing semi-annually through 2030 Bearing an interest rate of -0-% Mary Ellen Kramer Park Improvements Not yet amortized. 378,270 323,103 - 701,373 - Project not completed.
$ 1,876,178 $ 323,103 $ 119,615 $ 2,079,666 $ 110,461
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE D. MUNICIPAL DEBT (continued)
LOANS PAYABLE (continued)
Green Acres Trust Loans (continued)
The following table is a summary of the activity for such loans during the years ended June 30, 2014, and the short term liability at that time for each: Balance Balance Due by Description June 30, 2013 Increase Decrease June 30, 2014 June 30, 2015
Park Development Program Phase II $ 49,639 $ - $ 19,559 $ 30,080 $ 19,953 Issued 07/26/94 for $315,000 Maturing semi-annually through 2016 Bearing an interest rate of 2% Eastside Park Rehabilitation 164,179 - 11,177 153,002 11,401 Issued 06/26/06 for $231,650 Maturing semi-annually through 2026 Bearing an interest rate of 2% Park Development Program Phase III 136,452 - 21,626 114,826 22,057 Issued 06/26/06 for $267,000 Maturing semi-annually through 2019 Bearing an interest rate of 2% Restoration of Pennington Park - 700,000 - 700,000 35,900 Issued 12/9/13 for $700,000 Maturing semi-annually through 2033 Bearing an interest rate of -0-% Restoration of Pennington Park - Lower Field 231,245 268,755 - 500,000 30,304 Issued 12/9/13for $231,245 Maturing semi-annually through 2030 Bearing an interest rate of -0-% Mary Ellen Kramer Park Improvements Not yet amortized. 378,270 - - 378,270 - Project not completed.
$ 959,785 $ 968,755 $ 52,362 $ 1,876,178 $ 119,615
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE D. MUNICIPAL DEBT (continued)
LOANS PAYABLE (continued)
Demolition Loan
The City had a loan from the State of New Jersey, Department of Community Affairs, for the Demolition of Unsafe Buildings. As of June 30, 2015 and 2014, there is no balance remaining on this loan, as the final payment for this loan was made during the fiscal year ended June 30, 2014. The following table summarizes the activity for such loan during the year then ended and the short term liability: Balance Balance Due by Description June 30, 2013 Decrease June 30, 2014 June 30, 2015
Building Demolition Loan $ 45,000 $ 45,000 $ - $ - Issued 01/26/05 for $450,000 Maturing annually through 2014 Bearing an interest rate of -0-%
$ 45,000 $ 45,000 $ - $ -
Economic Development Agency (EDA) Loan
The City had a loan from the State of New Jersey Economic Development Agency. As of June 30, 2015 and 2014, there is no balance remaining on this loan, as the final payment for this loan was made during the fiscal year ended June 30, 2014. The following table summarizes the activity for such loan during the year then ended and the short term liability: Balance Balance Due by Description June 30, 2013 Decrease June 30, 2014 June 30, 2015
EDA Loans $ 604,805 $ 604,805 $ - $ - Originally Issued 10/26/93 and Revised 8/28/95, 6/8/99, 1/31/03 & 7/19/04 Maturing annually through 2014 Bearing an interest rates of 5.288% and 1.50% for school purposes
$ 604,805 $ 604,805 $ - $ -
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE D. MUNICIPAL DEBT (continued)
LOANS PAYABLE (continued)
NJ Environmental Infrastructure Trust Loan The City has outstanding at June 30, 2015 and 2014 various New Jersey Environmental Infrastructure Trust Loans. The following table summarizes the activity for such loans during the year ended June 30, 2015, and the short term liability for each loan: Balance Balance Due by Description June 30, 2014 Decrease June 30, 2015 June 30, 2016
Trust Loan Series 2003A $ 1,360,000 $ 110,000 $ 1,250,000 $ 115,000 Phase I, Issued 10/15/03 For $3,375,760 State of NJ Fund Loan 2,558,826 290,368 2,268,458 290,282 Phase I, Issued 10/15/03 For $5,554,479 Trust Loan Series 2004A 555,000 40,000 515,000 40,000 Phase II, Issued 10/13/04 For $1,286,526 State of NJ Fund Loan 1,020,653 122,059 898,594 119,047 Phase II, Issued 10/13/04 For $2,326,943 Trust Loan Series 2005A 700,000 45,000 655,000 50,000 Phase III, Issued 11/10/05 For $1,424,949 State of NJ Fund Loan 1,275,350 136,136 1,139,214 141,414 Phase III, Issued 11/10/05 For $2,622,600 Trust Loan Series 2008A 1,950,000 90,000 1,860,000 95,000 Phase IV, Issued 11/06/08 For $3,696,468 State of NJ Fund Loan 4,965,168 334,299 4,630,869 334,965 Phase IV, Issued 11/06/08 For $6,568,205 Trust Loan Series 2010A 455,000 20,000 435,000 20,000 Phase V, Issued 9/1/10 For $760,141 State of NJ Fund Loan 417,422 26,644 390,778 26,644 Phase V, Issued 3/10/10 For $524,000
$ 15,257,419 $ 1,214,506 $ 14,042,913 $ 1,232,352
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE D. MUNICIPAL DEBT (continued)
LOANS PAYABLE (continued)
NJ Environmental Infrastructure Trust Loan (continued) The following table summarizes the NJ Environmental Infrastructure Trust Loan activity during the year ended June 30, 2014, and the short term liability for each loan: Balance Balance Due by Description June 30, 2013 Decrease June 30, 2014 June 30, 2015
Trust Loan Series 2003A $ 1,465,000 $ 105,000 $ 1,360,000 $ 110,000 Phase I, Issued 10/15/03 For $3,375,760 State of NJ Fund Loan 2,849,837 291,011 2,558,826 290,368 Phase I, Issued 10/15/03 For $5,554,479 Trust Loan Series 2004A 595,000 40,000 555,000 40,000 Phase II, Issued 10/13/04 For $1,286,526 State of NJ Fund Loan 1,146,100 125,447 1,020,653 122,059 Phase II, Issued 10/13/04 For $2,326,943 Trust Loan Series 2005A 745,000 45,000 700,000 45,000 Phase III, Issued 11/10/05 For $1,424,949 State of NJ Fund Loan 1,415,617 140,267 1,275,350 136,136 Phase III, Issued 11/10/05 For $2,622,600 Trust Loan Series 2008A 2,035,000 85,000 1,950,000 90,000 Phase IV, Issued 11/06/08 For $3,696,468 State of NJ Fund Loan 5,298,357 333,189 4,965,168 334,299 Phase IV, Issued 11/06/08 For $6,568,205 Trust Loan Series 2010A 475,000 20,000 455,000 20,000 Phase V, Issued 9/1/10 For $760,141 State of NJ Fund Loan 444,066 26,644 417,422 26,644 Phase V, Issued 3/10/10 For $524,000
$ 16,468,977 $ 1,211,558 $ 15,257,419 $ 1,214,506
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE D. MUNICIPAL DEBT (continued)
DEBT SERVICE REQUIREMENTS TO MATURITY
The repayment schedule of annual debt service principal and interest for the next five years, and five- year increments there-after, for bonds and loans issued and outstanding is as follows:
Schedule of Debt Service Requirements to Maturity As of June 30, 2015 General Serial Bonds Loans Outstanding Year Total Principal Interest Total Principal Interest 2016 $ 9,073,337 5,471,640 3,601,697 $ 1,563,105 1,342,813 220,292 2017 9,144,909 5,608,837 3,536,072 1,556,881 1,351,649 205,232 2018 6,930,561 4,825,000 2,105,561 1,535,296 1,345,940 189,356 2019 7,439,772 5,535,000 1,904,772 1,547,729 1,375,391 172,338 2020 8,206,826 6,550,000 1,656,826 1,531,304 1,377,443 153,861 2021-2025 29,291,563 24,734,000 4,557,563 6,246,066 5,784,523 461,543 2026-2030 5,040,000 4,800,000 240,000 2,791,544 2,702,653 88,891 2029-2030 - - - 140,793 140,793 - Not Yet Amortized 701,374 701,374 - $ 75,126,968 $ 57,524,477 $ 17,602,491 $ 17,614,092 $ 16,122,579 $ 1,491,513
NOTES PAYABLE
Bond Anticipation Notes
The City issues bond anticipation notes to temporarily fund various capital projects prior to the issuance of serial bonds. The term of the notes cannot exceed one year, but the notes may be renewed from time to time for a period not exceeding one year. Generally, such notes may be paid no later than the close of the tenth fiscal year next following the date of the original notes. The Division also prescribes that notes cannot be renewed past the third anniversary date of the original note unless an amount equal to at least the first legally required installment is paid prior to each anniversary date.
Included as bond anticipation notes, are tax appeal refunding issued in order to finance tax refunds arising from successful appeals by property owners. Taxpayers are obligated to pay taxes owed to the City as they become due, or have their property subject to tax sale. However, taxpayers may appeal their property assessments and, if successful, be granted a refund, often in a year subsequent to when the taxes were paid. The Division has allowed the City to issue notes to finance such refunds. The tax refunding notes are one year notes, renewable annually for five to seven years.
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE D. MUNICIPAL DEBT (continued)
NOTES PAYABLE (continued)
Bond Anticipation Notes – continued The following is a schedule of bond anticipation note activity for the years ended June 30, 2015: Ordinance Original Issue: Interest Date of Balance Notes Notes Budget Balance Number Date Amount Rate % Maturity June 30, 2014 Issued Refunded Appropriation June 30, 2015 Tax Appeal Refunding 11-014 06/10/11 $ 3,250,000 1.25% 06/03/15 $ 1,300,000 $ - $ (650,000) $ 650,000 $ - 11-014 06/10/11 3,250,000 5.00% 12/15/15 - - 650,000 - 650,000 12-025 06/28/12 3,300,000 1.25% 06/03/15 1,980,000 - (1,320,000) 660,000 - 12-025 06/28/12 3,300,000 5.00% 12/15/15 - - 1,320,000 - 1,320,000 13-005 06/04/13 1,400,000 1.25% 06/03/15 933,000 - (466,000) 467,000 - 13-005 06/04/13 1,400,000 1.50% 06/04/14 - - 466,000 - 466,000 14-021 06/26/14 3,300,000 1.25% 06/03/15 3,300,000 - (2,200,000) 1,100,000 - 14-021 06/26/14 3,300,000 5.00% 12/15/15 - - 2,200,000 - 2,200,000 Various Capital Improvements 13-042 06/03/14 4,830,000 1.25% 06/03/15 4,830,000 - (4,830,000) - - 13-042 06/03/14 4,830,000 5.00% 12/15/15 - - 4,830,000 - 4,830,000 Sewer Reconstruction 13-040 06/03/14 2,665,000 1.25% 06/03/15 2,665,000 - (2,665,000) - - 13-040 06/03/14 2,665,000 5.00% 12/15/15 - - 2,665,000 - 2,665,000
Resurfacing of Various Roads 14-042 06/03/15 11,665,000 5.00% 12/15/15 - 11,665,000 - - 11,665,000
$ 15,008,000 $ 11,665,000 $ - $ 2,877,000 $ 23,796,000
The following is a schedule of bond anticipation note activity for the years ended June 30, 2014: Ordinance Original Issue: Interest Date of Balance Notes Notes Budget Balance Number Date Amount Rate % Maturity June 30, 2013 Issued Refunded Appropriation June 30, 2014 Tax Appeal Refunding 11-014 06/10/11 $ 3,250,000 1.25% 06/03/15 $ - $ - $ 1,300,000 $ - $ 1,300,000 11-014 06/10/11 3,250,000 1.50% 06/04/14 1,950,000 - (1,300,000) 650,000 - 12-025 06/28/12 3,300,000 1.25% 06/03/15 - - 1,980,000 - 1,980,000 12-025 06/28/12 3,300,000 1.50% 06/04/14 2,640,000 - (1,980,000) 660,000 - 13-005 06/04/13 1,400,000 1.25% 06/03/15 - - 933,000 - 933,000 13-005 06/04/13 1,400,000 1.50% 06/04/14 1,400,000 - (933,000) 467,000 - 14-021 06/26/14 3,300,000 1.25% 06/03/15 - 3,300,000 - - 3,300,000 Various Capital Improvements 13-042 06/03/14 4,830,000 1.25% 06/03/15 - 4,830,000 - - 4,830,000 Sewer Reconstruction 13-040 06/03/14 2,665,000 1.25% 06/03/15 - 2,665,000 - - 2,665,000
$ 5,990,000 $ 10,795,000 $ - $ 1,777,000 $ 15,008,000
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE D. MUNICIPAL DEBT (continued)
NOTES PAYABLE (continued)
Special Emergency Notes Statutes allow the City to adopt ordinances authorizing special emergency appropriations for the carrying out of certain specific purposes, including the revaluation of real property and contractually required severance liabilities resulting from the layoff or retirement of employees. Statutes further provide for the borrowing of money and the issuance of Special Emergency Notes to finance such special emergency appropriations, which may be renewed from time to time, but at least 1/5 of all such notes, and the renewals thereof, shall mature and be paid in each year, so that all notes and renewals shall have matured and have been paid not later than the last day of the fifth year following the date of the emergency resolution.
The following is a schedule of special emergency note activity for the year ended June 30, 2015: Ord. / Reso. Original Issue: Interest Date of Balance Notes Notes Budget Balance Number Date Amount Rate % Maturity June 30, 2014 Issued Refunded Appropriation June 30, 2015 Revaluation 13-011 03/26/2013 $ 2,100,000 3.750% 12/15/15 $ - $ - $ 1,260,000 $ - $ 1,260,000 13-011 03/26/2013 2,100,000 1.500% 06/03/15 1,680,000 - (1,260,000) 420,000 - Insurance 15:041 06/03/2015 3,955,000 3.750% 12/15/15 - 3,955,000 - - 3,955,000 Debt Service 15:041 06/03/2015 3,955,000 3.750% 12/15/15 - 440,000 - - 440,000 Accrued Sick and Vacation Time Tax Exempt Notes 11-011 02/08/2011 A 1,837,200 1.500% 06/03/15 664,400 - (226,000) 438,400 - 11-011 02/08/2011 1,837,200 3.750% 12/15/15 - - 226,000 - 226,000 12-012 02/14/2012 B 2,124,000 1.500% 06/03/15 1,274,400 - (849,600) 424,800 - 12-012 02/14/2012 2,124,000 3.750% 12/15/15 - - 849,600 - 849,600 12-051 12/18/2012 C 1,334,000 1.500% 06/03/15 1,067,200 - (800,400) 266,800 - 12-051 12/18/2012 1,334,000 3.750% 12/15/15 - - 800,400 - 800,400 14-009 06/03/2015 D 1,150,000 1.500% 06/03/15 1,150,000 - (920,000) 230,000 - 14-009 06/03/2015 1,150,000 3.750% 12/15/15 - - 920,000 - 920,000 Accrued Sick and Vacation Time Federally Taxable Notes 11-011 02/08/2011 A 2,192,800 1.500% 06/03/15 947,600 - (580,000) 367,600 - 11-011 02/08/2011 2,192,800 3.750% 12/15/15 - - 580,000 - 580,000 12-012 02/14/2012 B 716,000 1.500% 06/03/15 429,600 - (286,400) 143,200 - 12-012 02/14/2012 716,000 3.750% 12/15/15 - - 286,400 - 286,400 12-051 12/18/2012 C 936,000 1.500% 06/03/15 748,800 - (561,600) 187,200 - 12-051 12/18/2012 936,000 3.750% 12/15/15 - - 561,600 - 561,600 14-009 06/03/2015 D 500,000 1.500% 06/03/15 500,000 - (400,000) 100,000 - 14-009 06/03/2015 500,000 3.750% 12/15/15 - - 400,000 - 400,000
Total Ord. 11-011 $ 4,030,000 A Total Ord. 12-012 $ 2,840,000 B $ 8,462,000 $ 4,395,000 $ - $ 2,578,000 $ 10,279,000 Total Ord. 12-051 $ 2,270,000 C Total Ord. 14-009 $ 1,650,000 D
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE D. MUNICIPAL DEBT (continued)
NOTES PAYABLE (continued)
Special Emergency Notes (continued)
The following is a schedule of special emergency note activity for the year ended June 30, 2014: Ord. / Reso. Original Issue: Interest Date of Balance Notes Notes Budget Balance Number Date Amount Rate % Maturity June 30, 2013 Issued Refunded Appropriation June 30, 2014 Revaluation 13-011 03/26/2013 $ 2,100,000 2.000% 06/04/14 $ 2,100,000 $ - $ (1,680,000) $ 420,000 $ - 13-011 03/26/2013 2,100,000 1.500% 06/03/15 - - 1,680,000 - 1,680,000 Accrued Sick and Vacation Time Tax Exempt Notes 11-011 02/08/2011 A 1,837,200 1.500% 06/03/15 - - 664,400 - 664,400 11-011 02/08/2011 1,837,200 2.000% 06/04/14 1,102,800 - (664,400) 438,400 - 12-012 02/14/2012 B 2,124,000 1.500% 06/03/15 - - 1,274,400 - 1,274,400 12-012 02/14/2012 2,124,000 2.000% 06/04/14 1,699,200 - (1,274,400) 424,800 - 12-051 12/18/2012 C 1,334,000 1.500% 06/03/15 - - 1,067,200 - 1,067,200 12-051 12/18/2012 1,334,000 2.000% 06/04/14 1,334,000 - (1,067,200) 266,800 - 14-009 06/03/2015 D 1,150,000 1.500% 06/03/15 - 1,150,000 - - 1,150,000 Accrued Sick and Vacation Time Federally Taxable Notes 11-011 02/08/2011 A 2,192,800 1.500% 06/03/15 - - 947,600 - 947,600 11-011 02/08/2011 2,192,800 2.125% 06/04/14 1,315,200 - (947,600) 367,600 - 12-012 02/14/2012 B 716,000 1.500% 06/03/15 - - 429,600 - 429,600 12-012 02/14/2012 716,000 2.125% 06/04/14 572,800 - (429,600) 143,200 - 12-051 12/18/2012 C 936,000 1.500% 06/03/15 - - 748,800 - 748,800 12-051 12/18/2012 936,000 2.125% 06/04/14 936,000 - (748,800) 187,200 - 14-009 06/03/2015 D 500,000 1.500% 06/03/15 - 500,000 - - 500,000
Total Ord. 11-011 $ 4,030,000 A Total Ord. 12-012 $ 2,840,000 B $ 9,060,000 $ 1,650,000 $ - $ 2,248,000 $ 8,462,000 Total Ord. 12-051 $ 2,270,000 C Total Ord. 14-009 $ 1,650,000 D
SETTLEMENT PAYABLE
In January 2004, the State of New Jersey, Department of Environmental Protection received a judgment against the City for violation of the Water Pollution Control Act, as a result of the City’s failure to comply with the terms of its New Jersey Pollutant Discharge Elimination System Permit (“NJPDES Permit”) for discharge from its combined sewer system to surface water, by virtue of the City’s failure to complete the design and construction activities required by the NJPDES permit. As a result the City was required to pay a penalty of $7,500, an economic benefit assessment of $371,669 and an additional penalty of $40,000 for a total of $419,169. The payments are made by ten annual installments of $41,917, commencing November 1, 2004 and ending November 1, 2013. The final payment was made during the year ended June 30, 2014, leaving a balance of $-0- thereafter.
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE D. MUNICIPAL DEBT (continued)
BONDS AND NOTES AUTHORIZED BUT NOT ISSUED The following activity relates to bonds and notes authorized but not issued during the year ended June 30, 2015 in the City’s General Capital Fund: Ordinance Balance Debt Balance Number Improvement Description June 30, 2014 Authorized Issued Cancelled June 30, 2015
05-005 Combined Sewer Out Flow Phase III $ 7,405,195 $ - $ - $ - $ 7,405,195 06-001 Various Park Improvements 859,093 - - 323,103 535,990 08-021 ATP Site Park Improvements 783,665 - - - 783,665 13-041 Great Falls and Pocket Parks 348,000 - - - 348,000 14-042 Tax Appeal Refunding - 35,000,000 11,665,000 - 23,335,000
$ 9,395,953 $ 35,000,000 $ 11,665,000 $ 323,103 $ 32,407,850 The following activity relates to bonds and notes authorized but not issued during the year ended June 30, 2014 in the City’s General Capital Fund: Ordinance Balance Debt Balance Number Improvement Description June 30, 2013 Authorized Issued Cancelled June 30, 2014
05-005 Combined Sewer Out Flow Phase III $ 7,405,195 $ - $ - $ - $ 7,405,195 06-001 Various Park Improvements 859,093 - - - 859,093 08-021 ATP Site Park Improvements 783,665 - - - 783,665 08-022 Pennington Park Improvements 968,755 - 968,755 - - 13-001 Debt Restructuring 15,000 - - 15,000 - 13-040 Sewer Reconstruction - 2,665,000 2,665,000 - - 13-041 Great Falls and Pocket Parks - 348,000 - - 348,000 13-042 Various Capital Improvements - 4,830,000 4,830,000 - - 14-021 Tax Appeal Refunding - 3,300,000 3,300,000 - -
$ 10,031,708 $ 11,143,000 $ 11,763,755 $ 15,000 $ 9,395,953
SUMMARY OF STATUTORY DEBT CONDITION - ANNUAL DEBT STATEMENT The summarized statement of debt condition which follows is prepared in accordance with the required method of setting up the Annual Debt Statement.
At June 30, 2015: Net Debt of $127,375,429 divided by Equalized Valuation Basis per N.J.S.A. 40A:2-2 as amended, $6,816,826,441 = 1.869%. Gross Debt Deductions Net Debt Local School District $ - $ - $ - General Debt 129,850,906 2,475,477 127,375,429 $ 129,850,906 $ 2,475,477 $ 127,375,429
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE D. MUNICIPAL DEBT (continued)
SUMMARY OF STATUTORY DEBT CONDITION - ANNUAL DEBT STATEMENT (continued) At June 30, 2014: Net Debt of $99,486,550 divided by Equalized Valuation Basis per N.J.S.A. 40A:2-2 as amended, $7,191,684,083 = 1.383%. Gross Debt Deductions Net Debt
Local School District $ - $ - $ - General Debt 102,979,173 3,492,623 99,486,550
$ 102,979,173 $ 3,492,623 $ 99,486,550
Equalized valuation basis is the average of the equalized valuations of real estate, including improvements, and the assessed valuation of class II Railroad Property of the County for the last 3 preceding years.
BORROWING POWER UNDER N.J.S.A. 40A:2-6 AS AMENDED At June 30, 2015 2014
Three-Year Average Equalized Valuation $ 6,816,826,441 $ 7,191,684,083
3-1/2% of Equalized Valuation Basis $ 238,588,925 $ 251,708,943 Less: Net Debt 127,375,429 99,486,550 Excess Borrowing Power $ 111,213,496 $ 152,222,393
NOTE E. FUND BALANCES APPROPRIATED
Fund balance of the City consists of cash surplus and non-cash surplus. The City can anticipate fund balance to support its budget of the succeeding year, however, the use of non-cash surplus is subject to the prior written consent of the Division. Fund balances at June 30, 2015 and 2014 which were appropriated and included as anticipated revenue in the current fund budget of the succeeding year were as follows: Fund Balance Utilized in Fund Balance Utilized in June 30, 2015 FY16 Budget June 30, 2014 FY15 Budget Current Fund $ 863,552 $ 190,400 $ 2,763,552 $ 1,900,000 Capital Fund 61,711 3,110,111 (1) 1,525,286 - Trust Fund 7,904 7,904 12,235 11,000
(1) This amount includes premiums received on the sale of bonds in Fiscal Year 2016.
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE F. FIXED ASSETS
In accordance with accounting practices prescribed by the Division, and as further detailed in Note A, no depreciation has been provided for and fixed assets acquired through grants in aid or contributed capital have not been accounted for separately.
Fixed assets were not updated by the City during the years ended June 30, 2015 and 2014, therefore there is no activity to report. The City had the following investment balances in general fixed assets as of and for the years then ended: Balance, Balance, June 30, 2014 June 30, 2015 Land $ 3,257,443 $ 3,257,443 Building 39,034,660 39,034,660 Machinery and Equipment 20,197,935 20,197,935 $ 62,490,038 $ 62,490,038
NOTE G. RETIREMENT SYSTEMS AND DEFERRED COMPENSATION
Substantially all City employees participate in the Consolidated Police and Fireman’s Pension Fund (CPFPF), Public Employees Retirement System (PERS), Police and Fireman’s Retirement System of New Jersey (PFRS) or the Defined Contribution Retirement Program (DCRP), all of which are multiple employer plans sponsored and administered by the State of New Jersey, with the exception of the CPFPF, which is a single employer plan. The CPFPF, PERS and PFRS are cost sharing contributory defined benefit public employee retirement systems. The DCRP is a defined contribution plan.
In addition, certain employees participate in the City’s Deferred Compensation Plan.
STATE-MANAGED PENSION PLANS – CPFPF
The Consolidated Police and Fireman's Pension Fund (CPFPF) is a single employer contributory defined benefit plan which was established on January 1, 1952, under the provisions of N.J.S.A. 43:16 to provide retirement, death and disability benefits to county and municipal police and firemen who were appointed prior to July 1, 1944. The fund is a closed system with no active members. The City currently only makes contributions for its retirees who are enrolled in this pension fund. During the year ended June 30, 2015, the City contribution was a net reimbursement. During the years ended June 30, 2014 and 2013, the City contributed $2,019 and $4,666, respectively.
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE G. RETIREMENT SYSTEMS AND DEFERRED COMPENSATION (continued)
STATE-MANAGED PENSION PLANS - PERS
Plan Description and Eligibility
The PERS was established in January, 1955 under provisions of N.J.S.A. 43:15A and provides retirement, death, disability and post-retirement medical benefits to certain qualifying Plan members and beneficiaries. Membership is mandatory to substantially all full time employees and vesting occurs after 8 to 10 years of service for pension benefits. Significant modifications to enrollment, benefits and eligibility for benefits under the plan were made in 2007, 2008, 2010 and 2011. These changes resulted in various “tiers” which distinguish period of eligibility for enrollment. The delineation of these tiers is as follows:
• Tier 1: Employees enrolled before July 1, 2007. • Tier 2: Employees eligible for enrollment after June 30, 2007 but before November 2, 2008. • Tier 3: Employees eligible for enrollment after November 1, 2008 but before May 22, 2010. • Tier 4: Employees eligible for enrollment after May 21, 2010 but before June 28, 2011. • Tier 5: Employees eligible for enrollment after June 27, 2011.
Tier 1 and 2 employees must earn a base salary of $1,500 or more to enroll in the plan. Pensionable salaries are limited to the IRS maximum salary compensation limits for Tier 1 employees and social security maximum wage for Tier 2 employees. Tier 2 employees earning over the social security maximum wage are eligible to participate in DCRP for the excess amount. Tier 3 employees must earn a base salary that is annually adjusted. For the fiscal year ended June 30, 2015 and 2014 this base salary amount was $8,200 and $8,100, respectively. Employees earning between $5,000 and the Tier 3 minimum base salary are eligible for participation in DCRP. Pensionable salaries are limited to the social security maximum wage. Employees earning over the social security maximum wage are eligible to participate in DCRP for the excess amount. Tier 4 and 5 employees do not have a minimum salary requirement to enroll, but must work a minimum of 32 hours per week. Employees not meeting the minimum hour requirement but that make over $5,000 are eligible to enroll in DRCP. Pensionable salaries are limited to the social security maximum wage. Employees earning over the social security maximum wage are eligible to participate in DCRP for the excess amount.
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE G. RETIREMENT SYSTEMS AND DEFERRED COMPENSATION (continued)
STATE-MANAGED PENSION PLANS – PERS (continued)
Plan Benefits
Service retirement benefits of 1/55th of final average salary for each year of service credit is available to tiers 1 and 2 members upon reaching age 60 and to tier 3 members upon reaching age 62. Service retirement benefits of 1/60th of final average salary for each year of service credit is available to tier 4 members upon reaching age 62 and tier 5 members upon reaching age 64. Early retirement benefits are available to tiers 1 and 2 members before reaching age 60, tiers 3 and 4 before age 62 and tier 5 with 30 or more years of service credit before age 65. Benefits are reduced by a fraction of a percent for each month that a member retires prior to the retirement age of their respective tier. Deferred retirement is available to members who have at least 10 years of service credit and have not reached the service retirement age for the respective tier.
Each of the 5 Tiers have eligibility requirements and benefit calculations which vary for deferred retirements, early retirements, veteran retirements, ordinary disability retirements and accidental disability retirements. There is no minimum service requirement to receive these pension benefits. State-paid insurance coverage may be obtained after 25 years of service for employees in Tiers 1 through 4 and 30 years of service for Tier 5 employees.
Contributions and Liability
The contribution policy for PERS is set by N.J.S.A. 43:15A and requires contributions by active members and their employers. Such contributions may be amended by State legislation. Employers’ contribution amounts are based on an actuarially determined rate. The annual employer contributions include funding for basic retirement allowances and non-contributory death benefits. The employee contributions include funding for basic retirement allowances and contributory death benefits. Contributions made by the City and its employees for the previous three years are as follows: City Contribution Employee Contributions Amount As a Base Wages As a Year Ended Paid or Percentage of Subject to Percentage of Amount June 30, Charged Base Wages Contributions Base Wages Contributed
2015 $ 2,802,316 11.6% $ 24,123,974 6.92% $ 1,669,191 2014 2,686,259 11.6% 23,193,846 6.78% 1,572,741 2013 3,008,786 13.3% 22,631,751 6.64% 1,502,736
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE G. RETIREMENT SYSTEMS AND DEFERRED COMPENSATION (continued)
STATE-MANAGED PENSION PLANS – PERS (continued)
Contributions and Liability (continued)
The net pension liability was measured as of June 30, 2015 and 2014, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The City’s proportion of the net pension liability was based on a projection of the City’s long-term share of contributions to the pension plan relative to the projected contributions of all participating entities, actuarially determined. At June 30, 2015 and 2014, the City’s net pension liability for PERS, including the City’s proportionate share, was as follows:
Year Ended Proportionate Share Net Pension June 30, Rate Change Liability 2015 0.36024% 0.03489% $ 80,866,378 2014 0.32535% -0.01986% 60,914,907
Sensitivity of the City’s Proportionate Share of the Net Pension Liability to Changes in the Discount Rate
The following presents the City’s proportionate share of the net pension liability of the as of June 30, 2015 and 2014, calculated using the discount rate as disclosed above as well as what the collective net pension liability would be if it was calculated using a discount rate that is 1% lower or 1% higher than the current rate: 2015 2014 At: Rate Amount Rate Amount 1% Decrease 3.90% $ 100,507,013 4.39% $ 76,633,027 Current Discount Rate 4.90% 80,866,378 5.39% 60,914,907 1% Increase 5.90% 64,399,811 6.39% 47,715,686
Actuarial Assumptions
The total pension liability for the June 30, 2015 and June 30, 2014 measurement dates were determined by actuarial valuations as of July 1, 2014 and 2013, respectively, which were rolled forward to June 30, 2015 and 2014, respectively. The total pension liability for the June 30, 2013 measurement date was determined by an actuarial valuation as of July 1, 2013. These actuarial valuations used the following actuarial assumptions, applied to all periods in the measurement:
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE G. RETIREMENT SYSTEMS AND DEFERRED COMPENSATION (continued)
STATE-MANAGED PENSION PLANS – PERS (continued)
Actuarial Assumptions (continued) For Measurement Date of: June 30, 2015 June 30, 2014 Inflation Rate 3.04% 3.01% Salary Increases: 2012-2021 2.15-4.40% 2.15-4.40% based on age based on age Thereafter 3.15-5.40% 3.15-5.40% based on age based on age
Investment Rate of Return 7.90% 7.90%
Mortality - For the June 30, 2015 Measurement Date, mortality rates were based on the RP-2000 Combined Healthy Male and Female Mortality Tables (setback 1 year for males and females) for service retirement and beneficiaries of former members with adjustments for mortality improvements from the base year of 2012 based on Projection Scale AA. The RP-2000 Disabled Mortality Tables (setback 3 years for males and setback 1 year for females) are used to value disabled retirees. The actuarial assumptions used in the July 1, 2014 valuation were based on the results of an actuarial experience study for the period July 1, 2008 to June 30, 2011. It is likely that future experience will not exactly conform to these assumptions. To the extent that actual experience deviates from these assumptions, the emerging liabilities may be higher or lower than anticipated. The more the experience deviates, the larger the impact on future financial statements will be.
For the June 30, 2014 Measurement Date, mortality rates were based on the RP-2000 Combined Healthy Male and Female Mortality Tables (setback 1 year for females) with adjustments for mortality improvements from the base year of 2012 based on Projection Scale AA. The actuarial assumptions used in the July 1, 2013 valuation were based on the results of an actuarial experience study for the period July 1, 2008 to June 30, 2011.
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE G. RETIREMENT SYSTEMS AND DEFERRED COMPENSATION (continued)
STATE-MANAGED PENSION PLANS – PERS (continued)
Actuarial Assumptions (continued)
Long-Term Expected Rate of Return - In accordance with State statute, the long-term expected rate of return on plan investments (7.90% at June 30, 2015 and 2014) is determined by the State Treasurer, after consultation with the Directors of the Division of Investments and Division of Pensions and Benefits, the board of trustees and the actuaries. The long-term expected rate of return was determined using a building block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. Best estimates of arithmetic rates of return for each major asset class included in PERS target asset allocations as of June 30, 2015 and 2014 are summarized in the following table:
Long-Term Expected Target Allocation Real Rate of Return June 30, June 30, Asset Class 2015 2014 2015 2014 Cash 5.00% 6.00% 1.04% 0.80% U.S. Treasuries 1.75% * 1.64% * Investment Grade Credit 10.00% * 1.79% * Mortgages 2.10% 2.50% 1.62% 2.17% High Yield Bonds 2.00% 5.50% 4.03% 4.82% Inflation-Indexed Bonds 1.50% 9.00% 3.25% 3.51% Broad U.S. Equities 27.25% 25.90% 8.52% 8.22% Developed Foreign Equities 12.00% 12.70% 6.88% 8.12% Emerging Market Equities 6.40% 6.50% 10.00% 9.91% Private Equity 9.25% 8.25% 12.41% 13.02% Hedge Funds / Absolute Return 12.00% 12.25% 4.72% 4.92% Real Estate (Property) 2.00% 3.20% 6.83% 5.80% Commodities 1.00% 2.50% 5.32% 5.35% Global Debt ex U.S. 3.50% * -0.40% * REIT 4.25% * 5.12% * Core Bonds * 1.00% * 2.49% Intermediate-Term Bonds * 11.20% * 2.26%
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE G. RETIREMENT SYSTEMS AND DEFERRED COMPENSATION (continued)
STATE-MANAGED PENSION PLANS – PERS (continued)
Actuarial Assumptions (continued)
Discount Rate - The discount rate used to measure the total pension liability was 4.90% and 5.39% as of June 30, 2015 and 2014, respectively. This single blend discount rate was based on the long-term expected rate of return on pension plan investments of 7.9%, and a municipal bond rate of 3.80% and 4.29% as of June 30, 2015 and 2014, respectively, based on the Bond Buyer Go 20-Bond Municipal Bond Index which includes tax-exempt general obligation municipal bonds with an average rating of AA/Aa or higher. The projection of cash flows used to determine the discount rate assumed that contributions from plan members will be made at the current member contribution rates and that contributions from employers will be made based on the average of the last five years of contributions made in relation to the last five years of actuarially determined contributions.
Based on those assumptions, the plan’s fiduciary net position was projected to be available to make projected future benefit payments of current plan members through 2033. Therefore, the long-term expected rate of return on plan investments was applied to projected benefit payments through 2033, and the municipal bond rate was applied to projected benefit payments after that date in determining the total pension liability.
Deferred Outflows and Inflows of Resources
The following presents a summary of changes in the collective deferred outflows of resources and deferred inflows of resources for the years ended June 30, 2015 and 2014: June 30, 2015 June 30, 2014 Deferred Deferred Net Deferred Deferred Deferred Net Deferred Outflows Inflows Outflow / Outflows Inflows Outflow / of Resources of Resources (Inflow) of Resources of Resources (Inflow)
Changes of Assumptions $ 8,684,403 $ - $ 8,684,403 $ 1,915,492 $ - $ 1,915,492 Difference Between Expected and Actual Experience 1,929,188 - 1,929,188 - - - Net Difference Between Projected and Actual Earnings on Pension Plan Investments - 1,300,176 1,300,176 - (3,630,197) (3,630,197)
Subtotal 10,613,591 1,300,176 $ 11,913,767 1,915,492 (3,630,197) $ (1,714,705) Changes in Proportion 5,541,461 2,616,372 - (3,205,644) $ 16,155,052 $ 3,916,548 $ 1,915,492 $ (6,835,841)
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE G. RETIREMENT SYSTEMS AND DEFERRED COMPENSATION (continued)
STATE-MANAGED PENSION PLANS – PERS (continued)
Deferred Outflows and Inflows of Resources (continued)
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, 2016 $ 2,367,687 2017 2,367,687 2018 2,367,687 2019 3,275,236 2020 1,535,470 Thereafter - $ 11,913,767
STATE-MANAGED PENSION PLANS - PFRS
Plan Description and Eligibility
The PFRS was established in July, 1944, under the provisions of N.J.S.A. 43:16A to provide coverage to substantially all full time county and municipal police or firefighters and state police appointed after June 30, 1944. Membership is mandatory for such employees with vesting occurring after 10 years of membership. Significant modifications to enrollment, benefits and eligibility for benefits under the plan were made in 2010 and 2011. These changes resulted in various “tiers” which distinguish period of eligibility for enrollment. The delineation of these tiers is noted as follows:
• Tier 1: Employees enrolled before May 22, 2010. • Tier 2: Employees enrolled after May 21, 2010 but before June 29, 2011. • Tier 3: Employees enrolled after June 28, 2011.
There is no minimum salary requirement to enroll, regardless of tier. Pensionable salaries are limited to the social security maximum wage for Tier 2 and 3 employees and federal pensionable maximum for Tier 1 employees. Employees earning over the social security maximum wage are eligible to participate in DCRP for the excess amount.
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE G. RETIREMENT SYSTEMS AND DEFERRED COMPENSATION (continued)
Plan Benefits
Service retirement benefits are available at age 55 and are generally determined to be 2% of final compensation for each year of creditable service, as defined, up to 30 years plus 1% for each year of service in excess of 30 years. Members may seek special retirement after achieving 25 years of creditable service, in which benefits would equal 65% (tiers 1 and 2 members) and 60% (tier 3 members) of final compensation plus 1% for each year of creditable service over 25 years but not to exceed 30 years. Members may elect deferred retirement benefits after achieving ten years of service, in which case benefits would begin at age 55 equal to 2% of final compensation for each year of service.
Contributions and Liability
The contribution policy for PFRS is set by N.J.S.A. 43:16A and requires contributions by active members and their employers. Such contributions may be amended by State legislation. Employers’ contribution amounts are based on an actuarially determined rate which includes the normal cost and unfunded accrued liability. The annual employer contributions include funding for basic retirement allowances and non-contributory death benefits. The employee contributions include funding for basic retirement allowances and contributory death benefits. Contributions made by the City and its employees for the previous three years are as follows:
City Contribution Employee Contributions Amount As a Base Wages As a Year Ended Paid or Percentage of Subject to Percentage of Amount June 30, Charged Base Wages Contributions Base Wages Contributed
2015 $ 17,469,627 26.5% $ 65,874,442 10.00% $ 6,587,213 2014 15,196,955 23.2% 65,298,719 10.00% 6,529,802 2013 17,694,666 28.2% 62,847,572 10.00% 6,284,445
Under N.J.S.A. 43:16A-15, local participating employers are responsible for their own contributions based on actuarially determined amounts, except where legislation was passed which legally obligated the State if certain circumstances occurred. The legislation which legally obligates the State is as follows: Chapter 8, P.L. 2000, Chapter 318, P.L. 2001, Chapter 86, P.L. 2001, Chapter 511, P.L. 1991, Chapter 109, P.L. 1979, Chapter 247, P.L. 1993 and Chapter 201, P.L. 2001.
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE G. RETIREMENT SYSTEMS AND DEFERRED COMPENSATION (continued)
STATE-MANAGED PENSION PLANS – PFRS (continued)
Contributions and Liability (continued)
The amounts contributed on behalf of the City under this legislation are considered to be a special funding situation. As such, the State is treated as a non-employer contributing entity. Since the City does not contribute under this legislation directly to the plan (except for employer specified financed amounts), there is no net pension liability to report in the financial statements of the City related to this legislation. However, the notes to the financial statements of the City must disclose the portion of the State’s total proportionate share of the collective net pension liability that is associated with the City.
The net pension liability was measured as of June 30, 2015 and 2014, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The City’s proportion of the net pension liability was based on a projection of the City’s long-term share of contributions to the pension plan relative to the projected contributions of all participating entities, actuarially determined.
At June 30, 2015 and 2014, the City’s net pension liability for PFRS, including the special funding situation described above and changes in the City’s proportionate share, was as follows:
State of N.J. City (employer) (nonemployer) Year Ended Proportionate Share Net Pension On-Behalf June 30, Unit Rate Change Liability of City Total 2015 Police 1.11531% -0.00181% $ 185,772,368 $ 16,291,613 $ 202,063,981 2015 Fire 0.94849% 0.04024% 157,985,782 13,854,823 171,840,605 2015 Total * * $ 343,758,150 $ 30,146,436 $ 373,904,586
2014 Police 1.11712% 0.00997% $ 140,523,774 $ 15,132,049 $ 155,655,823 2014 Fire 0.90825% 0.04044% 114,249,110 12,302,709 126,551,819 2014 Total * * $ 254,772,884 $ 27,434,758 $ 282,207,642
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE G. RETIREMENT SYSTEMS AND DEFERRED COMPENSATION (continued)
STATE-MANAGED PENSION PLANS – PFRS (continued)
Sensitivity of the City’s Proportionate Share of the Net Pension Liability to Changes in the Discount Rate
The following presents the City’s proportionate share of the net pension liability of the as of June 30, 2015 and 2014, calculated using the discount rate as disclosed above as well as what the collective net pension liability would be if it was calculated using a discount rate that is 1% lower or 1% higher than the current rate: 2015 2014 At: Rate Amount Rate Amount 1% Decrease 4.79% $ 453,182,376 5.32% $ 343,339,224 Current Discount Rate 5.79% 343,758,150 6.32% 254,772,884 1% Increase 6.79% 254,532,470 7.32% 181,574,979
Actuarial Assumptions
The total pension liability for the June 30, 2015 and June 30, 2014 measurement dates were determined by actuarial valuations as of July 1, 2014 and 2013, respectively, which were rolled forward to June 30, 2015 and 2014, respectively. The total pension liability for the June 30, 2013 measurement date was determined by an actuarial valuation as of July 1, 2013. These actuarial valuations used the following actuarial assumptions: For Measurement Date of: June 30, 2015 June 30, 2014 Inflation Rate 3.04% 3.01% Salary Increases: 2012-2021 2.60-9.48% 3.95-8.62% based on age based on age Thereafter 3.60-10.48% 4.95-9.62% based on age based on age
Investment Rate of Return 7.90% 7.90%
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE G. RETIREMENT SYSTEMS AND DEFERRED COMPENSATION (continued)
STATE-MANAGED PENSION PLANS – PFRS (continued)
Actuarial Assumptions (continued)
Mortality - For the June 30, 2015 Measurement Date, mortality rates were based on the RP-2000 Combined Healthy Mortality Tables projected one year using Projection Scale BB for male service retirements with adjustments for mortality improvements from the base year based on Projection Scale BB. Mortality rates were based on the RP-2000 Combined Healthy Mortality Tables projected fourteen years using Projection Scale BB for female service retirements and beneficiaries with adjustments for mortality improvements from the base year 2014 based on Projection Scale BB. The actuarial assumptions used in the July 1, 2014 valuation were based on the results of an actuarial experience study for the period July 1, 2010 to June 30, 2013.
For the June 30, 2014 Measurement Date, mortality rates were based on the RP-2000 Combined Healthy Male and Female Mortality Tables with adjustments for mortality improvements from the base year of 2011 based on Projection Scale AA. The actuarial assumptions used in the July 1, 2013 valuation were based on the results of an actuarial experience study for the period July 1, 2007 to June 30, 2010.
Discount Rate - The discount rate used to measure the total pension liability was 5.79% and 6.32% as of June 30, 2015 and 2014, respectively. This single blend discount rate was based on the long-term expected rate of return on pension plan investments of 7.9%, and a municipal bond rate of 3.80% and 4.29% as of June 30, 2015 and 2014, respectively, based on the Bond Buyer Go 20-Bond Municipal Bond Index which includes tax-exempt general obligation municipal bonds with an average rating of AA/Aa or higher. The projection of cash flows used to determine the discount rate assumed that contributions from plan members will be made at the current member contribution rates and that contributions from employers will be made based on the average of the last five years of contributions made in relation to the last five years of actuarially determined contributions. Based on those assumptions, the plan’s fiduciary net position was projected to be available to make projected future benefit payments of current plan members through 2045. Therefore, the long-term expected rate of return on plan investments was applied to projected benefit payments through 2045, and the municipal bond rate was applied to projected benefit payments after that date in determining the total pension liability.
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE G. RETIREMENT SYSTEMS AND DEFERRED COMPENSATION (continued)
STATE-MANAGED PENSION PLANS – PFRS (continued)
Actuarial Assumptions (continued)
Long-Term Expected Rate of Return - In accordance with State statute, the long-term expected rate of return on plan investments (7.90% at June 30, 2015 and 2014) is determined by the State Treasurer, after consultation with the Directors of the Division of Investments and Division of Pensions and Benefits, the board of trustees and the actuaries. The long-term expected rate of return was determined using a building block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. Best estimates of arithmetic rates of return for each major asset class included in PFRS target asset allocations as of June 30, 2015 and 2014 are summarized in the following table:
Long-Term Expected Target Allocation Real Rate of Return June 30, June 30, Asset Class 2015 2014 2015 2014 Cash 5.00% 6.00% 1.04% 0.80% U.S. Treasuries 1.75% * 1.64% * Investment Grade Credit 10.00% * 1.79% * Mortgages 2.10% 2.50% 1.62% 2.17% High Yield Bonds 2.00% 5.50% 4.03% 4.82% Inflation-Indexed Bonds 1.50% 9.00% 3.25% 3.51% Broad U.S. Equities 27.25% 25.90% 8.52% 8.22% Developed Foreign Equities 12.00% 12.70% 6.88% 8.12% Emerging Market Equities 6.40% 6.50% 10.00% 9.91% Private Equity 9.25% 8.25% 12.41% 13.02% Hedge Funds / Absolute Return 12.00% 12.25% 4.72% 4.92% Real Estate (Property) 2.00% 3.20% 6.83% 5.80% Commodities 1.00% 2.50% 5.32% 5.35% Global Debt ex U.S. 3.50% * -0.40% * REIT 4.25% * 5.12% * Core Bonds * 1.00% * 2.49% Intermediate-Term Bonds * 11.20% * 2.26%
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE G. RETIREMENT SYSTEMS AND DEFERRED COMPENSATION (continued)
STATE-MANAGED PENSION PLANS – PFRS (continued)
Deferred Outflows and Inflows of Resources
The following presents a summary of changes in the collective deferred outflows of resources and deferred inflows of resources (excluding employer specific amounts) for the years ended June 30, 2015 and 2014: June 30, 2015 June 30, 2014 Deferred Deferred Net Deferred Deferred Deferred Net Deferred Outflows Inflows Outflow / Outflows Inflows Outflow / of Resources of Resources (Inflow) of Resources of Resources (Inflow) Changes of Assumptions $ 63,466,294 $ - $ 63,466,294 $ 9,565,040 $ - $ 9,565,040 Difference Between Expected and Actual Experience - (2,965,024) (2,965,024) - - - Net Difference Between Projected and Actual Earnings on Pension Plan Investments - (5,982,809) (5,982,809) - (25,998,717) (25,998,717) Subtotal $ 63,466,294 $ (8,947,833) $ 54,518,461 $ 9,565,040 $ (25,998,717) $ (16,433,677) Changes in Proportion 8,943,120 (198,529) 5,614,637 - $ 72,409,414 $ (9,146,362) $ 15,179,677 $ (25,998,717)
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, 2016 $ 10,382,095 2017 10,382,095 2018 10,382,095 2019 16,881,774 2020 6,490,402 Thereafter - $ 54,518,461
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE G. RETIREMENT SYSTEMS AND DEFERRED COMPENSATION (continued)
STATE-MANAGED PENSION PLANS - GENERAL
The State established and administers a Supplemental Annuity Collective Trust Fund (SACT) which is available to active members of several State-administered retirement systems to purchase annuities to supplement the guaranteed benefits provided by their retirement system. The State or local government employers do not appropriate funds to SACT.
The State also administers the Pension Adjustment Fund (PAF) which provides cost of living increases, equal to 60 percent of the change in the average consumer price index, to eligible retirees in all State- sponsored pension systems except SACT. The cost of living increases for PFRS and PERS are funded directly by each of the respective systems and are considered in the annual actuarial calculation of the required State contribution for that system.
According to state statutes, all obligations of PERS and PFRS will be assumed by the State of New Jersey should the PERS and PFRS be terminated.
The State of New Jersey issues publicly available financial reports that include the financial statements and required supplementary information of the PERS and PFRS. This report may be obtained by writing to the State of New Jersey, Department of the Treasury, Division of Pensions and Benefits, P.O. Box 295, Trenton, New Jersey 08625-0295.
PERS and PFRS Fiduciary Net Position
Detailed information about the pension plans’ fiduciary net position are available in the separately issued financial reports. These reports may be accessed via the New Jersey Division of Pension and Benefits website at www.state.nj.us/treasury/pensions.
STATE-MANAGED PENSION PLANS – PENSION DEFERRAL
Legislation, known as Chapter 19 of the Public Laws of 2009 (P.L. 2009, c. 19), was enacted and effective on March 17, 2009 allowing for an adjustment in the contributions that local employers, such as the City, must make to the PERS and PFRS during the year ended June 30, 2009. Under this legislation, local governments were given the option to defer exactly 50% of their required pension contribution as certified by the State of New Jersey, Department of the Treasury, Division of Pensions and Benefits or pay the full amount of the required contribution for the year ended June 30, 2009.
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE G. RETIREMENT SYSTEMS AND DEFERRED COMPENSATION (continued)
STATE-MANAGED PENSION PLANS – PENSION DEFERRAL (continued)
The City elected the 50% deferral totaling $5,603,902, consisting of $2,475,570 for PFRS and $3,128,332 for PERS. Under the terms of the pension deferral the City is obligated to commence repayment of the entire deferral in 15 amortized annual installments, commencing April 1, 2012 and ending April 1, 2026. These payments will be added to the regular pension bills. The amount of the deferral paid during the years ended June 30, 2015 and 2014, as well as the short term liability of the deferral, are as follows: Combined Interest and Principal Paid During Year Ended June 30, Due April 1, 2015 2014 2016
PERS $ 125,407 $ 122,590 $ 126,186 PFRS 841,222 824,968 843,717
Total $ 966,629 $ 947,558 $ 969,903
DEFINED CONTRIBUTION RETIREMENT PROGRAM
The DCRP was established under the provisions of P.L. 2007, Chapters 92 and 103 and expanded under the provisions of Chapter 89, P.L. 2008 and Chapter 1, P.L. 2010. It provides eligible members with a tax-sheltered, defined contribution retirement benefit, along with life insurance and disability coverage.
Individuals eligible for membership in the DCRP include (a) state or local officials elected or appointed to new office on or after July 1, 2007, (b) employees enrolled in PERS on or after July 1, 2007 or PFRS after May 21, 2010 who earn salary in excess of established maximum compensation limit and (c) employees otherwise eligible for PERS on or after November 2, 2008 or PFRS after May 21, 2010 that earn below the minimum PERS or PFRS salary but more than $5,000 annually.
Vesting occurs upon commencement of the third year of membership. Should the vesting period not be reached, contributions will be refunded to the appropriate contributing parties. Employer matching contributions and earnings are only available after the age of 55. Distributions render the member retired and ineligible for future participation in any State-administered plans. Otherwise, distributions are available at any time as lump sum, fixed term or life annuity.
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE G. RETIREMENT SYSTEMS AND DEFERRED COMPENSATION (continued)
DEFINED CONTRIBUTION RETIREMENT PROGRAM (continued)
Members are covered by employer-paid life insurance in the amount of 1 ½ times the annual base salary on which DCRP contributions was based. Members are also eligible for employer-paid long-term disability coverage after one year of participation. Eligibility occurs after six consecutive months of total disability. Members would receive a regular monthly income benefit up to 60% of the base salary on which DCRP contributions were based during the 12 months preceding the onset of the disability, offset by any other periodic benefit the member may be receiving. Benefits will be paid until the age of 70 so long as the member remains disabled and has not begun receiving retirement annuity payments.
The following table represents the City and employee contributions during the previous three years:
Employee Contributions City Contributions As a As a Year Ended Percentage of Percentage of June 30, Amount Base Payroll Amount Base Payroll 2015 $ 46,922 5.5% $ 28,153 3.0% 2014 33,632 5.5% 20,179 3.0% 2013 39,343 5.5% 23,606 3.0%
DEFERRED COMPENSATION PLAN (unaudited)
The City has established a deferred compensation program for its employees under Section 457 of the Internal Revenue Code. The deferred compensation program is a Public Employees' Deferred Compensation Plan, covering employees and elected officials who perform services for the City. The plan is underwritten by three sponsors: The Hartford, Variable Annuity Life Insurance Company and AXA Equitable Life Insurance Company.
The Plan is a tax-deferred supplemental retirement program that allows City employees to contribute a portion of their salaries, before federal taxes, to a retirement account. Contributions, or deferrals, are made through payroll deductions. Individuals are 100% vested. Distributions are not available to employees until termination, retirement, death, or unforeseeable emergency. All amounts of compensation deferred under the plan, all property and rights purchased with those amounts, and all income attributable to those amounts, property or rights are solely the property and rights of the individual contributors and are not subject to the claims of the City's general creditors.
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE H. POST RETIREMENT BENEFITS
Plan Description and Eligibility
The City currently offers postretirement medical, prescription drug and dental coverage for employees and their eligible dependents who retire on a paid pension under the following conditions: • After twenty-five years of service with the City; or • After fifteen years of service with the City at age 62 or older; or • On ordinary disability pension with not less than five years of service; or • On accidental disability upon total and permanent disability prior to age 65 and, in the case of police and fire personnel, upon permanent incapacitation from the performance of usual and available duties as a result of injury during the performance of regular duties.
Eligible City retirees and their dependents may continue health care coverage through the City for life. Medicare Part B premiums are reimbursed for Medicare eligible retirees only (not spouses).
Upon the death of the retiree, the surviving spouse and dependent children under the age of 26 shall be entitled to remain enrolled in the City’s medical, prescription drug and dental plans. Generally, coverage ceases upon spouse death, remarriage or, in the case of public employees, when the spouse reaches age 65.
Funding Policy
The City accounts for these post retirement benefits on a pay-as-you-go basis. Expenditures during the years ended June 30, 2015, June 30, 2014 and June 30, 2013, amounted to $18,554,360, $18,566,248 and $15,657,954, respectively. The number of employees eligible to receive benefits as of June 30, 2015, June 30, 2014 and June 30, 2013 were 922, 848 and 860, respectively.
Under GASB Statement 45 the City would recognize the cost of other post-employment benefits in the year when the employee services are received, report the accumulated liability from prior years, and provide information useful in assessing potential demands on the City’s future cash flows. The accumulated liability from prior years is phased in over the 30 year period beginning the year ended June 30, 2008. However, since the City is using the modified accrual basis of accounting as prescribed by the State of New Jersey, Department of Community Affairs, Division of Local Government Services, the City is not required to show any accrued liability on the face of its financial statements, only to the notes to those financial statements.
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE H. POST RETIREMENT BENEFITS (continued)
Retiree Contributions
Future retirees who do not fall under the grandfathering provisions of Chapter 78 of the 2011 Pension and Health Benefit Reforms will be required to contribute to the costs of their retiree health care. Participant contributions are based on salary level and pension benefit amounts and are phased in as a percentage based on salary or pension earnings.
Grandfathered participants include those with greater than 20 years of service as of June 28, 2011 who retire with 25 years of service with the City, or who reached age 62 as of that date with 15 years of service will receive benefits at no cost to the participant.
Per the valuation report referenced below, a 25% contribution rate was applied assumption for future retirees not grandfathered under the grandfathering clauses noted above.
Actuarial Valuation Results
The following information was obtained from the “Actuarial Valuation For GASB 45 Purposes For the Fiscal Year Ended June 30, 2015” as Prepared by HayGroup and dated June, 2016, with calculations made as of July 1, 2014.
The Unfunded Actuarial Accrued Liability was determined to be as follows: Post-Retirement Medical Valuation Actuarial Accrued Liability Retired $ 264,830,936 Active 361,595,666 Unfunded Actuarial Accrued Liability 626,426,602
Discount Rate 4.25% Normal Cost $ 24,190,201
In the above table, retired employees include their dependents, and active employees are those employees expected to receive benefits and their dependents.
The City’s Annual OPEB Cost and Annual Required Contribution, as of July 1, 2014, were $51,926,898 and $52,337,205, respectively.
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE H. POST RETIREMENT BENEFITS (continued)
Actuarial Valuation Results (continued) Development of the Net OPEB Obligation Normal Cost $ 24,190,201 Amortization of Unfunded Actuarial Accrued Liability over 30 Years 28,147,004 Annual Required Contribution 52,337,205 Interest on Unfunded Annual Required Contribution 7,168,354 Adjustments to Annual Required Contribution (7,578,661) Annual OPEB Cost 51,926,898 Actuarial Contribution Determination 18,691,613 Increase in Net OPEB Obligation 33,235,285 Net OPEB Obligation, Beginning of Year 168,667,148 Net OPEB Obligation, End of Year $ 201,902,433
Schedule of Funding Progress Actuarial Unfunded UAAL as a Actuarial Actuarial Accrued Actual Percentage of Valuation Value of Liability Liability Funded Covered Covered Date Assets (AAL) (UAAL) Ratio Payroll Payroll (a) (b) (b-a) ((b-a)/c) 7/1/2010 $ - $ 459,972,345 $ 459,972,345 0.0% $ 108,494,586 424.0% 7/1/2011 - 420,814,863 420,814,863 0.0% 106,377,667 395.6% 7/1/2012 - 420,814,863 420,814,863 0.0% 102,458,860 410.7% 7/1/2013 - 420,814,863 420,814,863 0.0% 106,783,290 394.1% 7/1/2014 - 626,426,602 626,426,602 0.0% * *
Schedule of Employer Contributions Fiscal Year Annual OPEB Actual Percentage Net OPEB Ending Cost Contribution Contributed Obligation 6/30/2011 $ 40,161,913 $ 14,042,643 35.0% $ 118,316,825 6/30/2012 32,976,600 14,587,871 44.2% 136,705,554 6/30/2013 32,976,600 15,444,032 46.8% 154,238,122 6/30/2014 32,976,600 18,547,574 56.2% 168,667,148 6/30/2015 51,926,898 18,691,613 36.0% 201,902,433
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE H. POST RETIREMENT BENEFITS (continued)
Actuarial Valuation Results (continued)
The actuarial assumptions used to value the City’s post-employment benefits are of three types, economic, medical and demographic.
Economic assumptions - include the discount rate, or rate of return on investments, and health care cost trend rates and account for changes in the costs of benefits over time and the time value of money. The actuarial valuation assumes the City will continue to pay for benefits on a pay-as-you-go basis and continue to not fund the plan. The discount rate used, 4.25%, is based on the rate of return of the City’s general assets, since there are no plan assets. Health care cost trend rates were developed using the Society of Actuaries (SOA) Long-Run Medical Cost Trend Model. Assumptions used as inputs in this model include a 2.5% rate of inflation, a 1.0% rate of growth in real income/GDP per capita, a 1.4 income multiplier for health spending, a 1.1% extra trend due to technology and other factors, a 25% health share of GDP resistance point and a the year 2075 as the year for limiting cost growth to GDP growth. Health care trend rates through the year 2080 and later assumed are: medical and prescription drug cost trend rates ranging from 4.2% to 6.1% and dental cost trend rates of 5.0%.
Medical assumptions - the valuation projects healthcare costs for employees who remain in the City with coverage after retirement. Based on the data provided for the valuation, which includes claim information for covered retirees, the valuation calculated per capital costs for the retired group under 65 and the retired group age 65 and older. Retirees generally become eligible for Medicare at age 65.
Demographic assumptions - include the following rates: mortality, retirement, withdrawal and disability. Ancillary demographic assumptions included the age of female spouses, coverage rates and participation rates.
The actuarial cost method utilized for the City’s actuarial valuation is the Projected Unit Credit method, which is an acceptable method under GASB Statement 45. Under this method, the service cost is determined for each active employee as the Actuarial Present Value of benefits allocated to the valuation year. The benefit attributed to the valuation year is that incremental portion of the total projected benefit earned during the year in accordance with the plan’s benefit formula. This allocation is based on each individual’s service between date of hire and date of full benefit eligibility.
The asset valuation method is not applicable, as the plan is currently unfunded.
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE I. RISK MANAGEMENT
Insurance Coverage
The City established a self-insurance program in 1982 in accordance with New Jersey Statute Chapter 40:10-6. The Chapter enables the governing body of any local unit to create a fund to provide insurance coverage for its exposure to a wide variety of property casualty risks as follows: • To insure against any loss or damage however caused to any property, motor vehicles, equipment or apparatus owned by the city, or under the control of any of the City’s Departments, Boards, Agencies or Commissions; • To insure against liability resulting from the use or operation of motor vehicles, equipment or apparatus owned by or controlled by the City, or owned by or under the control of any of the City’s Departments, Boards, Agencies or Commissions; • To insure against liability for the City’s negligence and that of its officers, employees and servants, whether or not compensated or part-time, who are authorized to perform any act or services, but not including an independent contractor within the limitations of the New Jersey Tort Claims Act (N.J.S.A. 59:1-1 et seq.).
The City has obtained the following coverage: • Public officials and employment practices liability insurance with $5,000,000 limit of liability, aggregate each coverage, with a public officials liability deductible of $100,000 and employment practices liability deductible of $250,000. • General liability, law enforcement activity and employee benefit liability excess coverage of $5,000,000 per occurrence, $10,000,000 aggregate, after exhaustion of a retained limit of $500,000. • Automobile excess liability coverage of $5,000,000 with various sublimits. • Excess limit of insurance, aggregate all sections of coverage, of $20,000,000 and a maximum total of $21,500,000. • Building coverage from $100,000 to $20,000,000 depending on the location insured. • Workers compensation self insured retention of $1,000,000 per each covered event and a limit of liability of $2,000,000.
The Reserve for Insurance Liability at June 30, 2015 and June 30, 2014 was $1,259,652 and $1,258,845, respectively. The City accounts for insurance claims and costs on a pay-as-you-go basis.
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE I. RISK MANAGEMENT (continued)
Disaster Recovery
The City has entered into contracts with various vendors in an effort to protect its financial processes and data in the event unforeseen disaster should occur. Included in these contracts are offsite storage of financial data tapes and payroll data offsite backup. The latter also provides the City the ability to run such process offsite if needed. An internal control and statutory/regulatory compliance review issued on April 1, 2009 recommended the off-site backup routine, overall environment and housekeeping of the data center should be improved.
NOTE J. COMPENSATED ABSENCES
Under the existing contracts and policies of the City, employees are allowed to accumulate certain levels of vacation and sick pay over the duration of their employment. As of June 30, 2015 and 2014 the total accumulated absence liability was $9,248,839 and $9,067,542, respectively. The City adopted an emergency resolution of $1,650,000 during the year ended June 30, 2014 to fund a portion of the liability. As of June 30, 2015 and 2014, the City has on $607,515 and $613,163, respectively, in its accrued sick and vacation reserves.
NOTE K. DEFERRED CHARGES TO BE RAISED IN SUCCEEDING BUDGETS
Certain expenditures are required to be deferred to budgets of succeeding years. At June 30, 2015, the following deferred charges are shown on the balance sheets of the various funds. The appropriations in the 2016 budget are not less than that required by statute, with the exception of the deferred charge required for the deficit in operations.
Insurance and Debt Service
During the year ended June 30, 2015, the City passed Emergency Resolution No. 15:041 appropriating additional funds for the payment of costs related to insurance and debt service in accordance with N.J.S.A. 40A:4-46. The total emergency was $4,395,000, including $3,955,000 for insurance and $440,000 for debt service. Such emergency appropriations are required to be appropriated in full in the budget of the succeeding fiscal year. However, the City received Local Finance Board approval to raise the $3,955,000 insurance emergency over a period of five years.
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE K. DEFERRED CHARGES TO BE RAISED IN SUCCEEDING BUDGETS (continued)
Accrued Sick and Vacation Time
A significant number of employees either retired or otherwise had their employment with the City terminated. During the years ended June 30, 2015 and 2014, the City passed special emergency appropriations of $-0- and $1,650,000, respectively, to provide for payment of the resulting severance liabilities.
Cash Deficit of Preceding Year
In accordance with state statutes, operating deficits must be raised in the succeeding fiscal year. The City had an operating deficit of $543,897 as a result of its operations for the fiscal year ended June 30, 2015. Of this amount, $529,828 was raised in the budget of the year ended June 30, 2016.
Deferred charges of the City outstanding as of June 30, 2015 and 2014, as well as the amount raised in the succeeding year’s budget, are illustrated in the following table: Less: Balance to Balance, 2015 2015 Budget Balance, 2016 Budget Succeeding June 30, 2014 Additions Appropriation June 30, 2015 Appropriation Budgets
Special Emergency Authorizations (40A:4-53.h) Accrued Sick and Vacation Time - 2011 $ 1,612,000 $ - $ 806,000 $ 806,000 $ 806,000 $ - Accrued Sick and Vacation Time - 2012 1,704,000 - 568,000 1,136,000 568,000 568,000 (2) Accrued Sick and Vacation Time - 2013 1,816,000 - 454,000 1,362,000 454,000 908,000 (2) Accrued Sick and Vacation Time - 2014 1,650,000 - 330,000 1,320,000 330,000 990,000 (2)
Special Emergency Authorizations (40A:4-53.b) Revaluation 1,680,000 - 420,000 1,260,000 420,000 840,000 (2)
Emergency Authorizations (40A:4-46) Snow Removal 800,000 - 800,000 - - - Insurance - 3,955,000 - 3,955,000 791,000 3,164,000 (3) Debt Service - 440,000 - 440,000 440,000 -
Deficit in 2015 Operations - 543,897 - 543,897 529,898 13,999
$ 9,262,000 $ 4,938,897 $ 3,378,000 $ 10,822,897 $ 4,338,898 $ 6,483,999
(2) Local Finance Board approved $3,306,000 be included in the first 3 years of the conforming maturity schedule of the $24,795,000 bonds dated December 3, 2015. (3) Local Finance Board approved $3,164,000 be included in the first 4 years of the conforming maturity schedule of the $24,795,000 bonds dated December 3, 2015.
The special emergency appropriations noted above have been financed with special emergency notes, detailed further in Note D. Further description of the above deferred charges follows.
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE L. INTERFUND ACTIVITY
The City has various transactions by and between its individual funds. Certain accounts of the Trust and Capital Funds earn interest which is required to be recorded as revenue in the Current Fund budget. Other transactions include budget appropriations in the Current Fund which are required to be turned over to the Federal and State Grant, Trust and Capital Funds. All these transfers are routine and are consistent with the activities of the funds making the transfers. Transfers by and between the City’s funds during the year ended June 30, 2015 consisted of the following: Transfers In Transfers Out
General Capital $ 44,795,166 $ 44,672,741 Federal and State Grants Fund 15,273,197 14,148,898 Other Trust Funds 13,218,228 13,206,551 Current Fund 72,028,190 73,286,591 $ 145,314,781 $ 145,314,781
Current Fund interfunds receivable are fully reserved and recognized as credits to operations in the year the interfunds are received in cash. Interfunds receivable in the Trust Funds and General Capital Fund are not reserved.
As of June 30, 2015, the City had the following interfunds on its balance sheets: Amount Due From Due To Purpose $ 1,124,299 Current Fund Current Fund Department of Transportation Grant Monies 11,677 Other Trust Current Fund Advances to Reserve
As of June 30, 2014, the City had the following interfunds on its balance sheets: Amount Due From Due To Purpose $ 122,425 Current Fund Capital Fund Department of Transportation Grant Monies 462 Other Trust Animal Control Advances to Reserve
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE M. ECONOMIC DEPENDENCY
Major Taxpayers The City does not have a significant economic dependence on any one taxpayer. However, the concentration of the City’s ten largest taxpayers of the City, as percentage of total tax net valuation taxable, increased from 2.0% in 2014 to 3.1% in 2015. Top 10 Taxpayers of 2015 Assessed Name Type of Business Valuation Center City Partners Commercial $ 23,738,900 Getty Industrials Industrial Warehousing 22,321,700 Park East Terrace Housing 20,034,000 Route 20 Retail Center, LLC Commercial 19,730,600 Riverview Towers II Housing 18,474,900 Riverview Towers I Housing 18,412,600 Okonite Company, Inc. Cable Communication 16,086,200 Ivy Madison Property, LLC Industrial Warehousing 14,392,600 New Jersey Bell Telephone Office 13,181,928 Great Falls Realty Associates, LLC Housing 10,600,000 $ 176,973,428
Percentage of Net Valuation Taxable 3.1%
Top 10 Taxpayers of 2014 Assessed Name Type of Business Valuation 297 Paterson, LLC Industrial Warehousing $ 24,093,700 Center City Partners Commercial 23,738,900 Rt 20 Retail Center, LLC Commercial 21,449,000 Okonite Company, Inc. Cable Communication 18,403,700 Great Falls Realty Associates, LLC Housing 16,500,000 HDI Realty, LLC Housing 16,255,200 Riverview Towers, LLC Housing 15,742,900 Ivy Madison Property, LLC Industrial Warehousing 14,187,100 New Jersey Bell Telephone Office 13,832,573 Park East Terrace Housing 13,498,200 $ 177,701,273
Percentage of Net Valuation Taxable 2.0%
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE M. ECONOMIC DEPENDENCY (continued)
State Aid During the years ended June 30, 2015 and 2014, State Aid accounted for 22.2% and 21.6%, respectively, of the City’s realized general revenues. Included in the City’s State Aid revenue is Transitional Aid, for which the City is required to re-apply annually. Significant changes in State Aid policy, if they were to occur, in conjunction with legislation capping increases to the tax levy, could have a material impact on the City’s operations, if any such policy modifications were to occur. The Table below illustrates the City’s reliance on State Aid for the years ended June 30, 2015 and 2014. June 30, 2015 June 30, 2014 Percent of Percent of Amount Revenue Amount Revenue State Formula Aid (4) $ 32,992,048 12.6% $ 33,369,044 12.8% Transitional Aid 25,000,000 9.6% 23,000,000 8.8% Total State Aid 57,992,048 22.2% 56,369,044 21.6% Other Budget Revenues 203,289,532 77.8% 193,115,161 73.9% Total Budget Revenues $ 261,281,580 100.0% $ 249,484,205 95.5%
(4) State Formula Aid includes Consolidated Municipal Property Tax Relief, Energy Receipts Tax, Supplemental Energy Receipts Tax, Open Space PILOT Aid (Garden State Trust), Building Aid Allowance for Schools (2014 only) and Watershed Moratorium Offset Aid.
NOTE N. CONTINGENT LIABILITIES
Tax Appeals
The City is a defendant in various tax appeals filed with the State Tax Court of New Jersey requesting a reduction of assessments for years through 2015. Any reduction in assessed valuation will result in a refund of prior years taxes in the year of settlement, which may be funded from tax revenues through the establishment of a reserve or by the issuance of refunding bonds per N.J.S.A. 40A:2-51. As of June 30, 2015 and 2014, the City has a balance in its reserve for tax appeals in the amount $-0- and $497,164, respectively. During the year ended June 30, 2014, the City issued new tax appeal refunding notes in the amount of $3,300,000 to finance such appeals as authorized by Ordinance No. 14-021, in addition to a renewal of $4,213,000 in tax appeal refunding notes previously outstanding. During the year ended June 30, 2015, the City renewed $4,636,000 of these notes. Total tax appeal refunding notes outstanding at June 30, 2015 and 2014 were $4,636,000 and $7,513,000, respectively.
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE N. CONTINGENT LIABILITIES (continued)
Grant Programs
The City receives financial assistance from the State of New Jersey and the U.S. Government in the form of grants and revenue sharing entitlements. Entitlement to the funds is generally conditional upon compliance with terms and conditions of the grant agreements and applicable regulations, including the expenditure of the funds for eligible purposes.
During the years ended June 30, 2015 and 2014, the City was subject to the requirements of the Single Audit Act of 1996, which mandates that all federal grant revenues and expenditures be audited in conjunction with the municipal audit.
In addition, substantially all State grants, entitlements and cost reimbursements are subject to these audits by the grantors. As a result of these audits, costs previously reimbursed could be disallowed and require repayment to the grantor agency. Each of the grantor agencies reserves the right to conduct additional audits of the City's grant programs for economy, efficiency and program results. However, other than the events noted below, City management does not believe such audits would result in additional material amounts of disallowed costs.
As a result of such an audit from the Department of Housing and Urban Development (HUD), the City entered into an agreement to settle and re-program $2,197,067 previously disallowed by HUD. The City appropriated $439,413 in the operating budget of each of the years ended June 30, 2015 and 2014 and will appropriate $439,412 per year through the year ended June 30, 2017. As of June 30, 2015 and 2014, the balance of the settlement due to be reprogrammed into the City’s own CDBG program was $878,824 and $1,318,237, respectively. These monies are a re-programming of funds for the City’s use, therefore no liability has been recorded.
The City received a letter dated April 30, 2015 from the Office of Inspector General – United States Department of Housing and Urban Development (OIG HUD), in which there are two findings and 27 recommendations resultant from an audit of the City’s HOME Investment Partnership Program. In summary, OIG HUD recommends that “HUD recapture $844,640 in ineligible committed funds and instruct City officials to reimburse more than $948,414 spent for ineligible costs, provide documentation to support that $561,245 was spent on supported costs and activities, remove more than $2.2 million in ineligible CHDO reserve, provide documentation for more than $1.1 million in CHDO reserve, and properly record deed restrictions and affordability requirements so that HUD’s interest in over $1.37 million is protected.”
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE N. CONTINGENT LIABILITIES (continued)
Grant Programs (continued)
In March, 2016 the City submitted a response to the Inspector General which was not accepted. HUD is currently reviewing an action plan prepared by the City, but no formal resolution has been made. The City has a call planned with HUD on June 10, 2016 with the intent of further clarifying what is expected of the City in regards to these recommendations. As of the audit report date, the amount of the City’s liability arising from the OIG HUD audit is not known.
In a letter dated May 25, 2016, the City was notified by HUD that the City is in jeopardy of not complying with the annual timeliness test for the grant year ended June 30, 2016, in which the City should have uncommitted CDBG and HOME funds of not more than 1.5 times the amount of its annual grant. Failure to meet the 1.5 standard may result in a reduction in the succeeding grant by 100% of the amount in excess of the 1.5 standard, except where HUD determines that the untimeliness resulted from factors beyond the reasonable control of the City. As of the date of this report, it is unclear by what amount, if any, the City will have its funding reduced.
Dissolution of the Paterson Municipal Utilities Authority
On October 28, 2014, the City adopted Ordinance No. 14-059 effectively dissolving the Paterson Municipal Utilities Authority (the “PMUA”). Upon dissolution, the City has assumed the PMUA’s operations, contracts, agreements and liabilities. As of the date of this report, the final audit of the PMUA was not yet issued. Although it is not expected additional material liabilities will arise from the results of this audit, the possibility remains. More detailed information about the dissolution is found in Note O.
Litigation
The City is currently named as defendant in several lawsuits/complaints, none of which is unusual for a municipality of its size and should be adequately covered by the City’s insurance program, defense program or by the City directly and which may be settled in a manner satisfactorily to the financial stability of the City. The City self-insures and also carries excess insurance for all lines of coverage. It is anticipated that any judgments in excess of the insured coverage would be paid by the City through future taxation or future debt borrowing. Some of the more significant lawsuits with potential for material exposure to the City are highlighted as follows:
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE N. CONTINGENT LIABILITIES (continued)
Litigation (continued)
Workers Compensation Claims – There are currently 134 Workers Compensation matters being handled by Counsel. Including medical care and treatment and permanency awards, Counsel estimates the City’s exposure should not exceed $2,500,000.
Alqanawi v. City - This is an excessive force matter filed under 42 USC 1983. On June 2, 2016 the Court vacated default and set a trial date for July 18, 2016. Should a jury find favor of plaintiff, exposure has the potential to exceed $500,000.
Aponte v. City - This is an excessive force matter filed under 42 USC 1983 alleging assault by City police officers on plaintiff during a traffic stop and subsequent arrest. The Passaic County Prosecutor’s Office investigated the arrest for evidence of criminality as to the police officers, but pressed no charges. This matter is in the early stages of discovery but has significant exposure of over $750,000.
Cruz et al v. City – Approximately 300 members of the City’s Police Department allege overtime was paid in violation of the Fair Labor Standards Act. The parties ultimately entered into a settlement agreement for $1.9 million, payable in six installments as follows: $200,000 by 9/1/13, $435,000 by 12/8/13 and 4 payments of $316,250 by 9/30/14, 2/28/15, 9/30/15 and 10/30/15.
Danzy v. City – This is a negligence case arising from an auto accident between a City police vehicle and plaintiff. The matter is scheduled for nonbinding arbitration, however, in the event this matter proceeds past summary judgment, the potential exposure to the City may exceed $250,000.
Deeb v. City – The plaintiff alleges that the City discriminated against here on the basis of a handicap or disability pursuant to the NJ Law Against Discrimination. This case was settled on January 21, 2016 in Federal District Court in the total amount of $400,000. The City Council met and approved the settlement on May 3, 2016. Two payments of $200,000 are due on July 1, 2016 and July 1, 2017.
Diaz v. City – In this case, the plaintiff was struck by an ambulance driven by a member of the City’s Fire Department. The City rejected an arbitrated award of $100,000; however, because of medical and employment reasons, there remains potential exposure in excess of $250,000.
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE N. CONTINGENT LIABILITIES (continued)
Litigation (continued)
Estate of Del Rosario – This case, currently in discovery, involves the death of a person shot and killed by a Paterson Police Officer. The Plaintiffs’ demand is $5,000,000. Fact discovery on the case has been extended until December 31, 2016.
H&S Construction v. City – The plaintiff filed a claim with the City for breach of contract and damages in the amount of $1,027,722 in relation to a bid awarded in 2009 for which no Notice to Proceed was issued and the project subsequently re-bid and not awarded to the plaintiff (who was not the lowest bidder). The plaintiff rejected the City’s proposed settlement amount of $150,000. The trial date has been repeatedly adjourned. The City continues to argue no valid contract was formed.
Heffernan v. City – This case went to trial in March, 2009 with a jury verdict of $105,000 rendered against the City. The case then transferred Judges, and a summary judgment was granted in favor of the City. Subsequently the case was dismissed, then petitioned for certiorari to the Supreme Court of the United States, which remanded the case to the Third Circuit. Exposure to the City in this matter may exceed $3,000,000.
Lee v. City – This suit involves a fire within the City in which there were numerous deaths. The plaintiff claims the City did not shut down the building. Trial date is scheduled for “early summer” but the matter is at the Appellate Division regarding Title 59 issues.
Makle/Pettiford v. City – This case involves prior employees of the City alleging 1983 claims and due process violations. Discovery is complete and pending court instruction. This case is potentially valued to exceed $250,000.
Ojeda v. City – This matter involves an employment-related litigation where plaintiff claims a hostile work environment, harassment and retaliation. The case will likely proceed to trial and has a potential value exceeding $500,000 with compensatory and economic damages combined with counsel fees in the event that plaintiff succeeds on retaliation claims. There is also potential for punitive damages.
Reyes v. City – This is a fall down incident where the plaintiff claims that she fell on a pothole which was partially obscured by a new falling snow. Because of injuries to plaintiff, this case may have potential to exceed $250,000. A motion for summary judgment was adjourned without date.
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE N. CONTINGENT LIABILITIES (continued)
Litigation (continued)
Rodriguez and Espinal v. City - This is an excessive force matter filed under 42 USC 1983 alleging City officers intentionally assaulted plaintiffs during their arrest. This matter is currently in the second phase of discovery. Should the matter proceed past summary judgment, a jury find in favor of plaintiff may result in potential exposure to the City of over $350,000.
Simmons v. City – This is an excessive force matter filed under 42 USC 1983 which is pending resolution of defendants’ motion for summary judgment. However, in the event this matter proceeds past summary judgment, a jury decision may create the potential for exposure in excess $250,000
Stevenson v. City – This suit is the result of an injury suffered on a City ball field. The demand is noted as $500,000, however the Judge indicated a settlement of $75,000 would be approved. Counsel notes there remains potential for material exposure.
Veal v. City – This is a Federal case which stems from allegations of excessive force matter. Because if the nature of the case, there is potential for material exposure. The last settlement offer by the City of $60,000 was rejected by opposing counsel. City Counsel anticipates a final decision on the motions for summary judgment by December, 2016.
Velarde v. Andre, et al. – This involves an incident where the plaintiff’s automobile was struck in the rear by a City vehicle. There remains potential for a jury verdict to exceed $250,000.
Warren v. City – This is an excessive force matter alleging that Paterson Auxiliary Police Officers intentionally or negligently caused their vehicle to come into contact with Plaintiff’s decedent’s motorcycle which resulted in the decedent’s death. This matter is currently in the middle stages of discovery, and the City anticipates filing for summary judgment at the conclusion of discovery. The Plaintiff has previously demanded $30 million.
Wittig v. City – Whereas a former Chief of Police and the City arrived at a retirement settlement of $255,799 on December 27, 2011, this amount was not approved by the Department of Community Affairs. In May, 2015, the former Chief of Police filed an appeal with the New Jersey Appellate Division. As of the date of this report, the parties are in the process of drafting a settlement agreement of $184,845.
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE O. DISSOLUTION OF PATERSON MUNICIPAL UTILITIES AUTHORITY
As a result of its dissolution by the City, the PMUA transferred $1,033,303 to the City, which the City realized as miscellaneous revenue not anticipated during the year ended June 30, 2015. In addition, the City assumed over $100,000 of annual lease agreements due from tenants on (former) PMUA properties. All assets and real property of the PMUA were to be assigned and/or deeded to the City, the value of which, per the most recently completed audit of the PMUA, was $2,789,260, before accumulated depreciation of $235,514. The City will assume the PMUA’s operations and maintain these acquired properties through its annual public works operating budget appropriation. At dissolution, the PMUA had no outstanding debt, but the City would assume any outstanding contracts and agreements.
As of June 30, 2014, the City had a fully reserved receivable in its Trust Fund due from the PMUA of $3,199,181, which was created as a result of City’s repayment on behalf of the PMUA for its loan obligation due to the U.S. Department of Housing and Urban Development. During the year ended June 30, 2015 this receivable was reduced by the transfer at dissolution of $1,033,303. The balance of $2,165,878 was written off against the corresponding reserve.
See also Note N regarding contingent liabilities arising from the dissolution.
NOTE P. DEFICIENCY AND GUARANTEE AGREEMENTS
Following is a description of agencies which have issued debt for which the City is potentially responsible in varying degrees.
North Jersey District Water Supply Commission
The City is a contracting municipality with North Jersey District Water Supply Commission (NJDWSC). As such, it is entitled to 20% of the water supplied by NJDWSC and is liable for 20% of the annual operating charges, including debt service of NJDWSC. Historically, these charges have been totally defrayed by the water revenues of NJDWSC.
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE Q. REGIONAL CONTRIBUTION AGREEMENTS
The New Jersey Supreme Court through its ruling in South Burlington County in 1983, referred to as the Mount Laurel Agreement, determined that a municipality may transfer up to 50% of its fair share of its regions present and prospective needs for housing for low and moderate income families to another municipality within its housing region by means of a contractual agreement into which the two municipalities voluntarily enter. The municipality who proposes the transfer enters into a Regional Contribution Agreement and obtains approval by the County Planning Board and Council on Affordable Housing. Regional Contribution Agreements entered subsequent to December 20, 2004 will be based on a new growth share approach. Under this new approach a portion of the actual growth taking place in the region will be the municipality’s affordable housing obligation.
Township of Wayne - The City entered into a Regional Contribution Agreement with the Township of Wayne on December 29, 1990, whereby the City will implement the rehabilitation and/or construction of 497 units of very low and low income housing over a five year period.
Borough of Woodland Park - The City also entered into a Regional Contribution Agreement with the Borough of Woodland Park on December 1, 1999, where the City will acquire and rehabilitate 21 vacant buildings each containing two to three units. The rehabilitated units will be sold to 21 moderate income households who will become owner-occupant and, in turn, rent the second or third unit to low income households.
Borough of Hawthorne - The City also entered into a Regional Contribution Agreement with the Borough of Hawthorne on September 14, 2005, where the City will acquire and rehabilitate 23 scattered sites within the City of Paterson. The rehabilitated units will be sold or rented by low or moderate income households. The City received $575,000 for the year ended June 30, 2007.
The table below summarizes the cumulative and current year activity for these agreements for the year ended June 30, 2015: Balance Cash Balance Cumulative June 30, 2014 Receipts June 30, 2015 Expenditures Township of Wayne $ 119,815 $ 151 $ 119,966 $ 10,200,941 Borough of Woodland Park 575,741 363 576,104 324,000 Borough of Hawthorne 97,604 40 97,644 324,000 $ 793,160 $ 554 $ 793,714 $ 10,848,941
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE Q. REGIONAL CONTRIBUTION AGREEMENTS (continued)
The table below summarizes the cumulative and current year activity for these agreements for the year ended June 30, 2014: Balance Cash Balance Cumulative June 30, 2013 Receipts June 30, 2014 Expenditures Township of Wayne $ 88,796 $ 31,019 $ 119,815 $ 10,200,941 Borough of Woodland Park 575,180 561 575,741 324,000 Borough of Hawthorne 97,510 94 97,604 324,000 $ 761,486 $ 31,674 $ 793,160 $ 10,848,941
*Balances include both Contribution and Interest Accounts.
NOTE R. SUBSEQUENT EVENTS
Subsequent events have been evaluated through June 8, 2016, the date which the financial statements were available to be issued. The following material subsequent events have been noted:
Refunding Bond Ordinance - $3,306,000 – On September 15, 2015 the City adopted Ordinance No. 15-067 providing for the funding of a Temporary Emergency Appropriation for Accrued Severance Liabilities and Revaluation of Real Property and appropriating an amount not exceeding $3,306,000 therefor and authorizing the issuance of not to exceed $3,306,000 Refunding Bonds or Notes to Finance the cost. This amount was issued as part of the $24,795,000 issuance of bonds described below.
Refunding Bond Ordinance - $1,630,000 – On February 9, 2016, the City adopted Ordinance No. 16:005 providing for the funding of a Temporary Emergency Appropriation of the City for Tax Appeals and appropriating an amount not exceeding $1,630,000 therefor and authorizing the issuance of not to exceed $1,630,000 refunding bonds or notes of the City for financing the cost thereof.
Re-appropriation Ordinance - $338,921 – On February 16, 2016, the City adopted Ordinance No. 16:004 re-appropriating $338,921 of proceeds of obligations not needed for their original purpose, so as to provide for the purchase of computer equipment and software.
Capital Improvement Ordinance - $1,100,000 – On January 19, 2016 the adopted Ordinance No. 16:001 providing for the payment of certain costs in connection with the Paterson Armory in the City of Paterson and appropriating $1,100,000 therefor, and providing for the issuance of$1,045,000 in Bonds or Notes of the City of Paterson to finance the same.
CITY OF PATERSON
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014
NOTE R. SUBSEQUENT EVENTS (continued)
Issuance of Bonds - $24,795,000 – On December 14, 2015, the City issued $24,795,000 of notes as part of the Passaic County Improvement Authority’s (PCIA’s) issuance of County-Guaranteed Governmental Loan Revenue Bonds, Series 2015 (City of Paterson Project). These bonds are due annually on August 1 from 2016 through 2031 in maturity amounts ranging from $1,135,000 to $4,910,000. The interest rates on the bonds range from 2% to 5%.
The Series 2015 Bonds are being issued by the PCIA to provide funds to make a loan to the City. The City will apply the proceeds of the loan to pay certain costs of issuance of the bonds and to refund the following: Amount of Notes: Description of Notes Funded by Bonds Funded by Paid by 2016 Payable at Type Dated Maturing Bond Proceeds Appropriation June 30, 2015 Bond Anticipation Notes 06/03/2015 12/15/2015 $ 19,160,000 $ - $ 19,160,000 Tax Appeal Refunding Notes 06/03/2015 12/15/2015 1,760,000 2,876,000 4,636,000 Subtotal: General Capital Fund Bond Anticipation Notes 20,920,000 2,876,000 23,796,000 Emergency Notes 06/03/2015 12/15/2015 3,164,000 1,231,000 4,395,000 Special Emergency Notes 06/03/2015 12/15/2015 3,306,000 2,578,000 5,884,000 Subtotal: Current Fund Emergency Notes 6,470,000 3,809,000 10,279,000 $ 27,390,000 $ 6,685,000 $ 34,075,000 Costs of Issuance 419,317 Total Uses of Funds $ 27,809,317
Principal Amount of Bonds $ 24,795,000 Premium Received 3,014,317 Total Sources of Funds $ 27,809,317
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APPENDIX E
FORM OF APPROVING LEGAL OPINION [ THIS PAGE INTENTIONALLY LEFT BLANK ]
June __, 2016
The Passaic County Improvement Authority 930 Riverview Drive Totowa, New Jersey
Dear Members:
We have examined a record of proceedings relating to the issuance of $14,340,000 Governmental Loan Revenue Bond Anticipation Notes, Series 2016 (Passaic County Guaranteed) (City of Paterson Project) (the “Notes”) of The Passaic County Improvement Authority (the “Authority”), a body corporate and politic created under and by virtue of The County Improvement Authorities Law, constituting Chapter 183 of the Laws of 1960 of the State of New Jersey, as amended and supplemented (the “Act”).
The Notes are issued under and pursuant to the Act, and under and pursuant to the 2016 Governmental Loan Revenue Note Resolution (City of Paterson Project) adopted by the Authority on May 25, 2016 (the “Note Resolution”).
The Notes are dated and shall bear interest from their date of delivery to maturity at the rate of 2.00% per annum. The Notes shall be payable as to both principal and interest on June 28, 2017.
The Notes are not subject to redemption prior to maturity. The Notes are in fully registered form without interest coupons in the denomination of $5,000 or any integral multiple thereof.
The Notes are being issued for the purpose of making a loan to the City of Paterson, New Jersey (the “Borrower”), to (i) finance the reconstruction of various roads located in the Borrower, the payment of amounts owing to others for taxes levied by the Borrower and the demolition of the Armory located in the Borrower due to fire damage; and (ii) pay certain of the costs of issuance of the Notes and Borrower notes.
The payment of the principal and interest on the Notes is fully, unconditionally and irrevocably guaranteed by the County of Passaic (the “County”) pursuant to a guaranty resolution adopted on May 24, 2016 by the County (the “County Guaranty”).
We are of the opinion that:
1. The Authority is duly created and validly existing under the provisions of the Act and has good right and lawful authority under the Act to make the loan to the Borrower in accordance with the terms and provisions of the Note Resolution.
E-1 2. The Authority has the right and power under the Act to adopt the Note Resolution, and the Note Resolution has been duly and lawfully adopted by the Authority, is in full force and effect and is valid and binding upon the Authority and enforceable in accordance with its terms, and no other authorization for the Note Resolution is required. The Note Resolution creates the valid pledge which it purports to create of the Pledged Property (as defined in the Note Resolution) subject to the application thereof as provided in the Note Resolution.
3. The Authority is duly authorized and entitled to issue the Notes and the same have been duly and validly authorized and issued by the Authority in accordance with the Constitution and statutes of the State of New Jersey, including the Act, and the Note Resolution, and constitute valid, binding, direct and special obligations of the Authority enforceable in accordance with their terms and the terms of the Note Resolution and of the Act and are entitled to the benefits of the Note Resolution and the Act.
4. The County has the full legal right and power to adopt and execute the County Guaranty. Under the County Guaranty, the County is fully, unconditionally and irrevocably obligated to pay the principal of and interest on the Notes, if necessary, from the levy of ad valorem taxes upon all the taxable property in the County, without limitation as to rate or amount.
5. Under existing law, interest on the Notes is excluded from the gross income of the owners of the Notes for federal income tax purposes pursuant to Section 103 of the Internal Revenue Code of 1986, as amended (the “Code”) and interest on the Notes is not an item of tax preference under Section 57 of the Code for purposes of computing alternative minimum tax.
6. Under existing law, interest on the Notes and net gains from the sale of the Notes are exempt from the tax imposed by the New Jersey Gross Income Tax Act.
With respect to our Federal income tax opinion, we note that the Code imposes certain requirements that must be met on the date of issuance and on a continuing basis subsequent to the issuance of the Notes in order for interest on the Notes to be excluded from gross income for Federal income tax purposes pursuant Section 103 of the Code. The Authority and the Borrower have made certain representations and covenants in their applicable tax certificates, executed on the date of issuance of the Notes, as to various tax requirements. In addition, the Authority and the Borrower have covenanted to comply with the provisions of the Code applicable to the Notes and have covenanted not to take any action or fail to take any action to be taken which would cause the interest on the Notes to lose the exclusion from gross income for Federal income tax purposes under Section 103 of the Code or cause interest on the Notes to be treated as an item of tax preference under Section 57 of the Code. With your permission, we have relied upon the representations made in the applicable tax certificates and have assumed continuing compliance by the Authority and the Borrower with the above covenants in rendering our opinion with respect to the exclusion of interest on the Notes from gross income for Federal income tax purposes and with respect to interest on the Notes not constituting an item of tax preference.
E-2 Attention is called to the fact that for purposes of this letter we have not been requested to examine and have not examined any documents or information relating to the Authority other than the certified copies of the proceedings and proofs referred to hereinabove, and no opinion is expressed as to any financial or other information, or the adequacy thereof, which has been or may be supplied to any purchaser of said Notes.
The opinions contained in paragraphs 2, 3 and 4 above are qualified to the extent that the enforceability of the Note Resolution, the Notes and the County Guaranty is subject to federal and state laws regarding bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors’ rights and remedies generally (including, without limitation, laws relating to fraudulent conveyance, and by general principles of law and equity (regardless of whether enforcement is considered or sought in proceedings at law or in equity) and by limitation on remedial rights under applicable law). Their enforcement may also be subject to the exercise of judicial discretion in appropriate cases.
The opinions expressed herein are based upon the laws and judicial decisions of the State of New Jersey and the federal laws and judicial decisions of the United States as of the date hereof and are subject to any amendment, repeal or other modification of the applicable laws or judicial decisions that served as the basis for our opinions, or laws or judicial decisions hereafter enacted or rendered. Our engagement by the Authority with respect to the opinions expressed herein does not require, and shall not be construed to constitute, a continuing obligation on our part to notify or otherwise inform the addressee hereof of the amendment, repeal or other modification of the applicable laws or judicial decisions that served as the basis for this opinion letter or of laws or judicial decisions hereafter enacted or rendered which impact on this opinion letter.
We have examined an executed Note and, in our opinion, the form of such Note and its execution are regular and proper.
This opinion letter is rendered to you in connection with the above described transaction. This opinion letter may not be relied upon by you for any other purpose, or relied upon by, or furnished to, any other person, firm or corporation without our prior written consent. This is only an opinion letter and not a warranty or guaranty of the matters discussed herein.
Very truly yours,
Gibbons P.C.
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