City of Waterbury, Connecticut $50000000*

PRELIMINARY OFFICIAL STATEMENT DATED NOVEMBER 8, 2017 t r n o

i New Money / Refunding Issue: Book-Entry-Only RATINGS: S&P Global Ratings: AA- e r p m

l Fitch Ratings: AA- e t u f a t Kroll: AA- w S a l l n a In the opinion of Bond Counsel, rendered in reliance upon and assuming the material accuracy of and continuing compliance i u c i e f with certain representations statements of intention and reasonable expectations and certifications of fact contained in the Tax Compliance f b

O Agreement and continuing compliance with the covenants set forth in the Tax Compliance Agreement relating to the applicable d

l y u r requirements of the Internal Revenue Code of 1986, as amended (the "Code"), under existing statutes and court decisions, interest on the o a w n Bonds is excludable from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal i e l m

i alternative minimum tax; however, with respect to certain corporations subject to the federal alternative minimum tax, such interest may l a s e

r be taken into account in computing the federal alternative minimum tax. In the opinion of Bond Counsel, under existing statutes, interest r P o

on the Bonds is excluded from Connecticut taxable income for purposes of the Connecticut income tax on individuals, trusts and estates s n i o

h and is excluded from amounts on which the net Connecticut minimum tax is based in the case of individuals, trusts and estates required to i t t l a

l pay the federal alternative minimum tax. Bond Counsel expresses no opinion regarding any other tax consequences related to the t i a c i h ownership or disposition of, or the accrual or receipt of interest on, the Bonds. See "Tax Exemption" herein. l s o

s s

, e r c City of Waterbury, Connecticut e f n f a o t s h $50,000,000* c m u u s c r i General Obligation Bonds, Issue of 2017, Series A h c c

i o h Dated: Date of Delivery Due: Serially on November 15, n w

n as detailed inside the front cover e i d n n

o Interest on the Series A Bonds will be payable May 15, 2018 and semiannually thereafter on November 15 and i U t

. May 15 in each year until maturity. The Series A Bonds will be issued in book-entry-only form whereby the beneficial t d s n i owners of the Series A Bonds will not receive physical delivery of bond certificates. Principal of, and interest payments on, r e u j m

the Series A Bonds will be made by the City of Waterbury (the “City”) to The Depository Trust Company, New York, New d y n n York ("DTC"), or its nominee, as registered owner of the Series A Bonds. DTC will credit its participants in accordance e a m n

i with their respective holdings shown in the records of DTC. It is anticipated that the beneficial owners of the Series A a

s r Bonds will receive payment or credit from DTC participants and other nominees of the beneficial owners. Ownership of e o i

t i n r the Series A Bonds may be in principal amounts of $5,000 or integral multiples thereof. (See "Book-Entry-Only Transfer o u i t c System" herein.) e e l s p e m h o t c f $13,590,000*

o o t e

l t General Obligation Refunding Bonds, Issue of 2017, Series B a c s e j y b Dated: Date of Delivery Due: Serially on September 1, n u a s as detailed inside the front cover

. e e n b r o i a

t Interest on the Series B Bonds will be payable March 1, 2018 and semiannually thereafter on September 1 and e

r c i n e i

d March 1 in each year until maturity. The Series B Bonds will be issued in book-entry-only form whereby the beneficial e h t s r i

l r e

l owners of the Series B Bonds will not receive physical delivery of bond certificates. Principal of, and interest payments on, u h a j

d the Series B Bonds will be made by the City to The Depository Trust Company, New York, New York ("DTC"), or its h s e c r n u nominee, as registered owner of the Series B Bonds. DTC will credit its participants in accordance with their respective i o s a n t

, holdings shown in the records of DTC. It is anticipated that the beneficial owners of the Series B Bonds will receive payment n n y o a u c or credit from DTC participants and other nominees of the beneficial owners. Ownership of the Series B Bonds may be in f b

o n

o principal amounts of $5,000 or integral multiples thereof. (See "Book-Entry-Only Transfer System" herein.) t o s i t r w a e a f l f The General Obligation Bonds, Issue of 2017, Series A (the “Series A Bonds”), and General Obligation Refunding m r o s o e f n Bonds, Issue of 2017, Series B (the “Series B Bonds” and together with the Series A Bonds, the “Bonds”) will be general i t n a i i

r f obligations of the City and the City will pledge its full faith and credit to pay the principal of and the interest on the Bonds u o e

c h n t e when due (see “Security and Remedies” herein).

s o i d t e n a t h

a The Bonds are subject to redemption prior to maturity as more fully described herein. (See “Optional Redemption” i t

c t r i l n

e and “Mandatory Sinking Fund Redemption” herein). o e d s

n m e u e

The Registrar, Transfer Agent, Paying Agent and Certifying Agent for the Bonds and Escrow Agent for the Series t h t n a t r o

i B Bonds will be U.S. Bank National Association of Hartford, Connecticut. t o S

l a l l c a i e i f i s c l i f a o f t u

O r q

r The Bonds are offered for delivery when, as and if issued, subject to the approving opinion of Pullman & Comley, f y f r o

o a

LLC, Bond Counsel, of Bridgeport and Hartford, Connecticut. Certain legal matters will be passed upon for the Underwriter n n n i o i a t

m by Day Pitney LLP, of Hartford, Connecticut. It is expected that delivery of the Bonds in book-entry-only form will be i a l e r t t e made to The Depository Trust Company in New York, New York on or about November 28, 2017. r u s t i i P t g ______s e s i r n

h * Preliminary, subject to change. o o T c t City of Waterbury, Connecticut $50,000,000* General Obligation Bonds, Issue of 2017, Series A

Dated: Date of Delivery Due: Serially on November 15, as detailed below: Year Principal* Coupon Yield CUSIP 1 Year Principal* Coupon Yield CUSIP 1 2018 $ 1,670,000 _.__% _.__% 941247___ 2028 $ 1,665,000 _.__% _.__% 941247___ 2019 1,670,000 _.__% _.__% 941247___ 2029 1,665,000 _.__% _.__% 941247___ 2020 1,670,000 _.__% _.__% 941247___ 2030 1,665,000 _.__% _.__% 941247___ 2021 1,670,000 _.__% _.__% 941247___ 2031 1,665,000 _.__% _.__% 941247___ 2022 1,670,000 _.__% _.__% 941247___ 2032 1,665,000 _.__% _.__% 941247___ 2023 1,670,000 _.__% _.__% 941247___ 2033 1,665,000 _.__% _.__% 941247___ 2024 1,670,000 _.__% _.__% 941247___ 2034 1,665,000 _.__% _.__% 941247___ 2025 1,670,000 _.__% _.__% 941247___ 2035 1,665,000 _.__% _.__% 941247___ 2026 1,670,000 _.__% _.__% 941247___ 2036 1,665,000 _.__% _.__% 941247___ 2027 1,670,000 _.__% _.__% 941247___ 2037 1,665,000 _.__% _.__% 941247___

$8,325,000* __.___% Term Bond due November 15, 2042* – Yield __.___% CUSIP1: 941247___

$8,325,000* __.___% Term Bond due November 15, 2047* – Yield __.___% CUSIP1: 941247___

$13,590,000* General Obligation Refunding Bonds, Issue of 2017, Series B

Dated: Date of Delivery Due: Serially on September 1, as detailed below: Year Principal* Coupon Yield CUSIP 1 Year Principal* Coupon Yield CUSIP 1 2018 $ 1,395,000 _.__% _.__% 941247___ 2024 $ 1,380,000 _.__% _.__% 941247___ 2019 1,370,000 _.__% _.__% 941247___ 2025 885,000 _.__% _.__% 941247___ 2020 1,140,000 _.__% _.__% 941247___ 2026 890,000 _.__% _.__% 941247___ 2021 1,125,000 _.__% _.__% 941247___ 2027 895,000 _.__% _.__% 941247___ 2022 1,355,000 _.__% _.__% 941247___ 2028 895,000 _.__% _.__% 941247___ 2023 1,365,000 _.__% _.__% 941247___ 2029 895,000 _.__% _.__% 941247___

______* Preliminary, subject to change.

1 Copyright, American Bankers Association. CUSIP® is a registered trademark of the American Bankers Association. CUSIP numbers have been assigned by an independent company not affiliated with the City and are included solely for the convenience of the holders of the Bonds. The City is not responsible for the selection or use of these CUSIP numbers, does not undertake any responsibility for their accuracy, and makes no representation as to their correctness on the Bonds or as indicated above. The CUSIP number for a specific maturity is subject to being changed after the issuance of the Bonds as a result of various subsequent actions including, but not limited to, a refunding in whole or in part of such maturity or as a result of the procurement of secondary market portfolio insurance or other similar enhancement by investors that is applicable to all or a portion of certain maturities of the Bonds. No dealer, broker, salesman or other person has been authorized by the City to give any information or to make any representations not contained in this Official Statement or any supplement, which may be issued hereto, and if given or made, such other information or representations must not be relied upon as having been authorized. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale.

This Official Statement has been prepared only in connection with the initial offering and sale of the Bonds and may not be reproduced or used in whole or in part for any other purpose. The information, estimates and expressions of opinion in this Official Statement are subject to change without notice. Neither the delivery of this Official Statement nor any sale of the Bonds shall, under any circumstances, create any implication that there has been no material change in the affairs of the City since the date of this Official Statement.

The independent auditors for the City are not passing upon and do not assume responsibility for the accuracy or completeness of the financial information presented in this Official Statement (other than matters expressly set forth in their opinion in Appendix A), and they make no representation that they have independently verified the same.

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 applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information.

Other than as to matters expressly set forth herein as the opinion of Bond Counsel, Bond Counsel is not passing on and does not assume any responsibility for the accuracy or adequacy of the statements made in this Official Statement and makes no representation that it has independently verified the same.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT LEVELS ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

(Remainder of page intentionally left blank) Table of Contents

Page Page I. Bond Information……………………………………………………………………………1 IV. Tax Base Data……………………………………………………………………………………….32 Introduction………………………………………………………………….1 Property Tax- Assessments…………………………………………………………32 Municipal Advisor………………………………………………………………….1 Property Tax- Levy…………………………………………………………………………………32 Description of the Series A Bonds……………………………………………………2 Comparative Assessed Valuations…………………………………………………..33 Description of the Series B Bonds……………………………………………………2 Property TaxLevies and Collections……………………………………………..33 Optional Redemption ……………………………….…………………….2 Ten Largest Taxpayers……………………………………………………………….33 Mandatory Sinking Fund Redemption ……………………………….…………………….3 V. Debt Summary…………………………………………………………………………34 Authorization and Purpose…………………………………………………..4 Principal Amount of Indebtedness……………………………………………………..34 Use of Proceeds …………………………………………………………………4 Coverage History of TaxRevenue Intercept Secured Bonds……………………………………………………..35 Plan of Refunding …………………………………………………………………5 Short Term Debt………………………………………………………………………….35 Verification of Mathematical Computations …………………………5 Annual Bonded Debt Maturity Schedule………………………...... 36 Sources and Uses of Proceeds …………………………………………………………………6 Revenue Supported Bond Debt Maturity Schedule………………………...... 36 Book-Entry-Only Transfer System…………………………………………6 Overlapping/Underlying Debt……………………………………………..……...... 37 DTC Practices……………………………..……………………………………7 Debt Statement……………………………………………………………………………………………………37 Replacement Bonds………………………………………………………7 Current Debt Ratios……………………………………………………………………………………………………………………………37 Security and Remedies…………………………………………………………..8 Bond Authorization…………………………………………..…..………………………38 Qualification for Financial Institutions……………………………………………8 Temporary Financing……………………………………………………………………..38 Availability of Continuing Information…………………………………………9 Limitation of Indebtedness…………………………………………………………………38 Ratings……………………………………………………………………………….9 Statement of Debt Limitation…………………………………………………………..39 TaxExemption ……………………………………………………………………………….9 Authorized But Unissued Debt…………………………………………………………..40 Leagl Opinion ……………………………………………………………………………….11 Ratios of Net Long-TermDebt to Valuation Underwriting ………………………………………………………………………….11 Population and Income……………………………………………………………..41 II. The Issuer……………………………………………………………………..12 Ratio of Total General Fund Debt Service Expenditures Description of the Municipality……………………………………………12 To Total General Fund Expenditures and Transfers Out………………………………41 Form of Government………………………………..………………………14 VI. Financial Administration…………………………………………………………………………………42 Principal Municipal Officials ………………………………………………………….14 Fiscal Year……………………………………………………………………………….42 Municipal Services………………………………………………………………..14 Annual Audit…………………………………………………………………………………………42 Boards and Commissions………………………………………………………………..16 Auditor's Disclaimer…………………………………………………………………………………………42 Mayor's Administration………………………………………………………………..17 Accounting…………………………………………………………………………42 Economic Development………………………………………………………………..17 Budget Adoption…………………………………………………………………………….42 Debt Management………………………………………………………………..24 Capital Budget Planning………………………………………………………………..43 Budget………………………………………………………………..24 Significant Financial Policies………………………………………………………………………..44 Finance……………………………………………………………..25 Investment Policy………………………………………………………………………..44 Educational Services……………………………………………………………25 Pension Programs……………………………………………………………………………………….44 School Enrollment……………………………………………………………..25 Other Post Employment Benefits…………………………………………………….46 Employee Relations and Collective Bargaining………..………………….26 Internal Service Funds ………………………………………………………………………..47 Municipal Employees………………………………………………………..26 General Fund Revenues and Expenditures…………………………………………..48 Employee Relations…………………………………………………………….26 Comparative Balance Sheet……………………………………………………………………………………….49 III. Economic andDemographic Information…………………………………………………….27 Government Fund Balance Reserves………………………………………………………………………..50 Population and Density………………………………………………………27 VII. Legal and Other Information……………………………………………………………51 Age Distribution of the Population…………………………………………27 Legal Matters…………………………………………………………………………………51 Income Distribution……………………………………………………………27 Litigation…………………………………………………………………………………51 Income Levels………………………………………………………………….28 Documents Furnished at Delivery…………………………………………………………..51 Educational Attainment……………………………………………………..28 Concluding Statement…………………………………………..…………………………52 Major Employers………………………………………………………………28 Appendix A: 2016 Financial Statements Excerpted from Employment by Industry…………………………………………………….29 the City's Comprehensive Annual Financial Report Employment Data…………………………………………………………..29 Appendix B-1: Form of Opinion of Bond Counsel Age Distribution of Housing………………………………………………..30 for Series A Bonds Housing Inventory……………………………………………………………30 Appendix B-2: Form of Opinion of Bond Counsel Owner Occupied Housing Values……………………………………………..30 for Series B Bonds Building Permits………………………………………………………………….31 Appendix C-1: Form of Continuing Disclosure Agreement Land Use Summary…………………………………………………………..31 for Series A Bonds City Zoning Districts…………………………………………………………..31 Appendix C-2: Form of Continuing Disclosure Agreement for Series B Bonds I. Bond Information Introduction This Official Statement, including the cover page, inside cover page and appendices, is provided for the purpose of presenting certain information relating to the City of Waterbury, Connecticut (the "City") in connection with the issuance and sale of $50,000,000* General Obligation Bonds, Issue of 2017, Series A (the “Series A Bonds”), and $13,590,000* General Obligation Refunding Bonds, Issue of 2017, Series B (the “Series B Bonds” and together with the Series A Bonds, the “Bonds”) of the City.

This Official Statement is not to be construed as a contract or agreement between the City and the purchasers or holders of any of the Bonds. Any statement made in this Official Statement involving matters of opinion or estimates are not intended to be representations of fact, and no representation is made that any such opinion or estimate will be realized. No representation is made that past experience, as might be shown by financial or other information herein, will necessarily continue or be repeated in the future. Neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City since the date hereof.

All quotations from and summaries and explanations of provisions of statutes, charters, or other laws and acts and proceedings of the City contained herein do not purport to be complete and are qualified in their entirety by reference to the original official documents; and all references to the Bonds and the proceedings of the City relating thereto are qualified in their entirety by reference to the definitive form of the Bonds and such proceedings.

The City deems this Official Statement to be “final” for purposes of Securities and Exchange Commission Rule 15c2-12(b)(1), but it is subject to revision or amendment.

Bond Counsel is not passing on and does not assume any responsibility for the accuracy or adequacy of the statements made in this Official Statement other than matters expressly set forth as its opinion and makes no representation that is has independently verified the same.

In accordance with the requirements of Rule 15c2-12(b)(5) promulgated by the Securities and Exchange Commission, the City will agree to provide, or cause to be provided, financial information and operating data and notices of certain events with respect to the Bonds pursuant to Continuing Disclosure Agreements to be executed substantially in the forms of Appendix C-1 and Appendix C-2 to this Official Statement.

Municipal Advisor Phoenix Advisors, LLC, of Milford, Connecticut has served as municipal advisor to the City with respect to the issuance of the Bonds (the "Municipal Advisor"). The information in this Official Statement has been prepared by the City with the help of the Municipal Advisor. The Municipal Advisor is not obligated to undertake, and has not undertaken, either to make an independent verification of or to assume responsibility for the accuracy, completeness, or fairness of the information contained in the Official Statement and the appendices hereto.

The Municipal Advisor is an independent firm and is not engaged in the business of underwriting, trading or distributing municipal securities or other public securities.

______* Preliminary, subject to change.

1 Description of the Series A Bonds The $50,000,000* principal amount of the Series A Bonds will be payable as set forth on the inside cover page of this Official Statement. The Series A Bonds will be dated on the date of delivery and will pay interest on May 15, 2018 and semiannually thereafter on November 15 and May 15 in each year until maturity. Interest will be calculated on the basis of twelve thirty-day months and a 360-day year. Interest is payable to the registered owner as of the close of business on the last day, or preceding day if such day is not a business day, of April and October in each year by check mailed to the registered owner or, so long as the Series A Bonds are registered in the name of Cede & Co., as nominee of DTC, by such other means as DTC and the City shall agree. The Series A Bonds will be issued as fully registered bonds in denominations of $5,000 or any integral multiple thereof. The Series A Bonds will be payable at the principal office of U.S. Bank National Association, Goodwin Square, 23rd Floor, 225 Asylum Street, Hartford, Connecticut 06103.

Description of the Series B Bonds The $13,590,000* principal amount of the Series B Bonds will be payable as set forth on the inside cover page of this Official Statement. The Series B Bonds will be dated on the date of delivery and will pay interest on March 1, 2018 and semiannually thereafter on September 1 and March 1 in each year until maturity. Interest will be calculated on the basis of twelve thirty-day months and a 360-day year. Interest is payable to the registered owner as of the close of business on the fifteenth day, or preceding day if such day is not a business day, of February and August in each year by check mailed to the registered owner or, so long as the Series B Bonds are registered in the name of Cede & Co., as nominee of DTC, by such other means as DTC and the City shall agree. The Series B Bonds will be issued as fully registered bonds in denominations of $5,000 or any integral multiple thereof. The Series B Bonds will be payable at the principal office of U.S. Bank National Association, Goodwin Square, 23rd Floor, 225 Asylum Street, Hartford, Connecticut 06103.

Optional Redemption The Series A Bonds maturing on or before November 15, 2027 are not subject to redemption prior to maturity. The Series A Bonds maturing on November 15, 2028 and thereafter are subject to redemption prior to maturity, at the election of the City, on or after November 15, 2027 at any time, in whole or in part and by lot within a maturity, in such amounts and in such order of maturity as the City may determine, at the price (expressed as a percentage of the principal amount of Series A Bonds to be redeemed), set forth in the following table, plus interest accrued and unpaid to the redemption date: Redemption Period During Which Redeemed Price November 15, 2027 and thereafter ...... 100%

The Series B Bonds maturing on or before September 1, 2027 are not subject to redemption prior to maturity. The Series B Bonds maturing on September 1, 2028 and thereafter are subject to redemption prior to maturity, at the election of the City, on or after September 1, 2027 at any time, in whole or in part and by lot within a maturity, in such amounts and in such order of maturity as the City may determine, at the price (expressed as a percentage of the principal amount of Series B Bonds to be redeemed), set forth in the following table, plus interest accrued and unpaid to the redemption date: Redemption Period During Which Redeemed Price September 1, 2027 and thereafter...... 100%

Notice of redemption shall be given by the City or its agent by mailing a copy of the redemption notice by first-class mail at least thirty (30) days prior to the date fixed for redemption to the registered owner of such Bonds at the address of such registered owner as the same shall last appear on the registration books for the Bonds kept for such purpose. Failure to give such notice by mailing to any registered owner, or any defect therein, shall not affect the validity of the redemption of any other Bonds. Upon the giving of such notice, if sufficient funds available solely for redemption are on deposit with the Paying Agent, the Bonds or portions thereof so called for redemption will cease to bear interest after the specified redemption date.

If less than all the Bonds of any one maturity shall be called for redemption, the particular Bonds, or portions of the Bonds, of such maturity to be redeemed shall be selected by lot in such manner as the City in its discretion may determine; provided, however, that the portion of any Bonds to be redeemed shall be in the principal amount of $5,000 or a multiple thereof and that, in selecting Bonds for redemption, each Bond shall be considered as representing that number of Bonds, which is obtained by dividing the principal amount of such Bond by $5,000.

2 The City, so long as a book-entry system is used for the Bonds, will send any notice of redemption only to DTC (or its successor securities depository) or its nominee. Any failure of DTC to advise any DTC Participant, or of any DTC Participant or Indirect Participant to notify any Indirect Participant or Beneficial Owner, of any such notice and its content or effect will not affect the validity of the redemption of such Bonds called for redemption. Redemption of portions of the Bonds of any maturity by the City will reduce the outstanding principal amounts of Bonds of such maturity held by DTC. In such event it is the current practice of DTC to allocate by lot, through its book-entry system, among the interest held by DTC Participants in the Bonds to be redeemed, the interest to be reduced by such redemption in accordance with its own rules or other agreements with DTC Participants. The DTC Participants and Indirect Participants may allocate reductions of the interests in the Bonds to be redeemed held by the Beneficial Owners. Any such allocations of reductions of interests in the Bonds to be redeemed will not be governed by the determination of the City authorizing the issuance of the Bonds and will not be conducted by or be the responsibility of the City, the Registrar or Paying Agent.

Mandatory Sinking Fund Redemption

The Series A Bonds maturing November 15, 2042* and November 15, 2047* are subject to mandatory sinking fund redemption in part on November 15 of the respective years shown below in the principal amount shown below, without premium, from sinking fund installments deposited with the Paying Agent which are required to be made in amounts sufficient to redeem such Series A Bonds (or to pay such Series A Bonds at maturity in the case of the final sinking fund installment for the Series A Bonds) in the principal amounts shown below:

$8,325,000 Series A Bond $8,325,000 Series A Bond Maturing November 15, 2042* Maturing November 15, 2047* Sinking Fund Sinking Fund Due* Installments* Due* Installments* 2038 $ 1,665,000 2043 $ 1,665,000 2039 1,665,000 2044 1,665,000 2040 1,665,000 2045 1,665,000 2041 1,665,000 2046 1,665,000 2042 1 1,665,000 2047 1 1,665,000 1 1 Final Maturity Final Maturity

______* Preliminary, subject to change.

(Remainder of page intentionally left blank)

3 Authorization and Purpose

The Bonds are being issued pursuant to Title 7 of the Connecticut General Statutes (“CGS”), as amended, the City Charter and various resolutions adopted by the Board of Alderman to finance certain capital needs of the City and to refund certain of the City’s outstanding general obligation bonds. (See “Plan of Refunding” herein).

Use of Proceeds Amount Series A* Series B* Project Authorized Bonds Bonds Road Milling/Repaving…………………………………………………………………$ 3,000,000 $ 3,000,000 $ - City-Wide Energy Savings Project …………………………………………………………………30,000,000 15,000,000 - W.A.T.E.R. - TIGER Project …………………………………………………………………19,500,000 3,000,000 - Demolition of Abandoned Properties …………………………………………………………………750,000 750,000 - Public Works - Vehicle Replacements …………………………………………………………………540,000 500,000 - Acquisition of Rose Hill Campus …………………………………………………………………3,000,000 1,800,000 - Pearl Lake Road Reconstruction …………………………………………………………………7,000,000 300,000 - Municipal Stadium Phase III …………………………………………………………………4,800,000 2,250,000 - Waterbury Industrial Commons & Centralized DPW Facility …………………………………………………………………85,420,000 16,000,000 - Sidewalk and Curb Improvements …………………………………………………………………600,000 400,000 - Crosby High School - Gym Floor …………………………………………………………………260,000 250,000 - Kennedy High School Additions & Alterations …………………………………………………………………25,232,000 750,000 - Wallace Middle School Addition …………………………………………………………………15,758,000 400,000 - Carrington Pre-k to 8 School …………………………………………………………………37,043,326 1,000,000 - Waterbury Career Academy Technical School …………………………………………………………………68,190,000 300,000 - Wilby High School …………………………………………………………………6,700,000 500,000 - Special Education Facility …………………………………………………………………14,635,000 500,000 - School Facilities Plan …………………………………………………………………101,500,000 1,300,000 - Water Plant, Equipment System Renewal & Replacement …………………………………………………………………17,700,000 800,000 - Water Meter Reading Program …………………………………………………………………2,500,000 500,000 - Water Billing Technology …………………………………………………………………750,000 700,000 - Refunding ………………………………………………………………… - - 13,590,000 Total ……………………………………………………………………….…………$ 444,878,326 $ 50,000,000 $ 13,590,000

______* Preliminary, subject to change.

(Remainder of page intentionally left blank)

4 Plan of Refunding* The Series B Bonds are being issued to refund at or prior to maturity all or a portion of certain maturities of certain of the outstanding series of general obligation bonds of the City as set forth below (the “Refunded Bonds”). The list of Refunded Bonds may be changed by the City in its sole discretion due to market factors or other factors considered relevant by the City at the time of pricing the Series B Bonds and no assurance can be given that any particular bonds listed or any particular maturity will be refunded. The refunding is contingent upon delivery of the Series B Bonds.

Dated Maturity Interest Par Redemption Redemption Issue Date Date Rate Amount* Date Price CUSIP 2009 9/2/2009 9/01/2018 4.000% $ 1,600,000 n/a n/a 941247K80 9/01/2019 4.000% 1,600,000 n/a n/a 941247K98 9/01/2020 5.000% 1,400,000 9/1/2019 100.00% 941247L22 9/01/2021 4.000% 1,400,000 9/1/2019 100.00% 941247L30 9/01/2022 4.000% 1,400,000 9/1/2019 100.00% 941247L48 9/01/2023 4.000% 1,400,000 9/1/2019 100.00% 941247L55 9/01/2024 4.250% 1,400,000 9/1/2019 100.00% 941247L63 9/01/2025 4.375% 900,000 9/1/2019 100.00% 941247L71 9/01/2026 4.375% 900,000 9/1/2019 100.00% 941247L89 Term Bond 9/01/2029 4.800% 2,700,000 9/1/2019 100.00% 941247L97 Total …………………………………………………………………$ 14,700,000 ______* Preliminary, subject to change.

Upon delivery of the Series B Bonds, a portion of the Series B Bond proceeds will be deposited in an irrevocable escrow fund (the “Escrow Deposit Fund”) established with U.S. Bank National Association, as escrow agent (the “Escrow Agent”) under an Escrow Agreement (the “Escrow Agreement”) dated as of the date of delivery between the Escrow Agent and the City. The Escrow Agent will use such proceeds to purchase a portfolio of non- callable direct obligations of, or obligations guaranteed by the government of the United States of America, including, United States Treasury securities, United States Treasury State and Local Government Series securities (“SLGS”), Federal National Mortgage Association (“FNMA”) and Federal Home Loan Mortgage Corporation (“FHLMC”) securities and any other securities permitted by Section 7-400 of the Connecticut General Statutes, all of which shall not be callable or prepayable at the option of the issuer thereof (the “Escrow Securities”) and needed to pay the principal, interest payments, and redemption prices of the Refunded Bonds. All investment income on and the maturing principal of the Escrow Securities held in the Escrow Deposit Fund will be irrevocably deposited by the City for payment of the Refunded Bonds.

Verification of Mathematical Computations The accuracy of the mathematical computations regarding (i) the adequacy of maturing principal of and interest earned on the escrow securities deposited with the Escrow Agent to pay, when due, the principal of, accrued interest and redemption premium on the Refunded Bonds on the redemption dates and (ii) the yield on the Bonds and the securities and moneys in the Escrow Deposit Fund will be verified by AMTEC of Avon, Connecticut (the “Verification Agent”). Such verification of the accuracy of the mathematical computations will be based upon information and assumptions supplied to the Verification Agent by the Underwriter.

(Remainder of page intentionally left blank)

5 Sources and Uses of Bond Proceeds

Sources: Series A Series B Total Par Amount of the Bonds……………………………….$ - $ - $ - Net Original Issue Premium …………………………… - - - Total Sources ……………………………………………$ - $ - $ -

Uses: Deposit to Capital Projects Fund - City ……………………………$ - $ - $ - Deposit to Capital Projects Fund - WPCA……………………………- - - Deposit to EscrowDeposit Fund …………………………… - - - Costs of Issuance …………………………………… - - - Underwriter’s Discount …………………………………… - - - Total Uses ……………………………………………..$ - $ - $ -

Book-Entry-Only Transfer System

The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the securities (the “Securities”). The Securities 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 Security certificate will be issued for each maturity of the Securities in the aggregate principal amount of such maturity and will be deposited with DTC. DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, 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 S&P Global 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 Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Securities on DTC’s records. The ownership interest of each actual purchaser of each Security (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. 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 Securities 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 Securities, except in the event that use of the book-entry system for the Securities is discontinued. To facilitate subsequent transfers, all Securities deposited by 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 Securities 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 Securities; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Securities are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

6 Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Securities unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the City as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy). Redemption proceeds, distributions, and dividend payments with respect to the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the City or Agent, on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, Agent, or the City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the City or Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as depository with respect to the Securities at any time by giving reasonable notice to the City or Agent. Under such circumstances, in the event that a successor depository is not obtained, Security certificates are required to be printed and delivered. The City may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Security certificates 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 City believes to be reliable, but the City takes no responsibility for the accuracy thereof.

DTC Practices The City can make no assurances that DTC, Direct Participants, Indirect Participants or other nominees of the Beneficial Owners of the Bonds will act in a manner described in this Official Statement. DTC is required to act according to rules and procedures established by DTC and its participants which are on file with the Securities and Exchange Commission. NEITHER THE CITY, AGENT, NOR THE UNDERWRITER WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO DIRECT PARTICIPANTS, TO INDIRECT PARTICIPANTS OR TO ANY BENEFICIAL OWNER WITH RESPECT TO (1) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC, ANY DIRECT PARTICIPANT OR ANY INDIRECT PARTICIPANT; (2) THE PAYMENT BY DTC, ANY DIRECT PARTICIPANT OR ANY INDIRECT PARTICIPANT OF ANY AMOUNT WITH RESPECT TO THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON THE BONDS; (3) ANY NOTICE WHICH IS PERMITTED OR REQUIRED TO BE GIVEN TO BONDHOLDERS OR NOTEHOLDERS; AND (4) ANY CONSENT GIVEN BY DTC OR OTHER ACTION TAKEN BY DTC AS BONDHOLDER.

Replacement Bonds In the event that: (a) DTC determines not to continue to act as securities depository for the Bonds, and the City fails to identify another qualified securities depository for the Bonds to replace DTC; or (b) the City determines to discontinue the book-entry system of evidence and transfer of ownership of the Bonds, the City will issue fully registered Bond certificates directly to the Beneficial Owner. A Beneficial Owner of the Bonds, upon registration of certificates held in such Beneficial Owner’s name, will become the registered owner of the Bonds.

7 Security and Remedies General

The Bonds will be general obligations of the City, and the City will pledge its full faith and credit to pay the principal of and interest on the Bonds when due. Unless paid from other sources, the Bonds are payable from general property tax revenues. The City has the power under the Connecticut General Statutes to levy ad valorem taxes on all taxable property in the City without limit as to rate or amount, except as to certain classified property such as certified forest land taxable at a limited rate, and dwelling houses of qualified elderly persons of low income or of qualified disabled persons taxable at limited amounts.

Bondholder Remedies

The City is subject to suit on its bonds and notes, and a court of competent jurisdiction has the power in appropriate proceedings to render a judgment against the City. Courts of competent jurisdiction also have the power in appropriate proceedings to order the payment of a judgment on such bonds and notes from funds lawfully available therefor or, in the absence thereof, to order the City to take all lawful action to obtain the same, including the raising of the required amount in the next annual tax levy. In exercising their discretion as to whether to enter such an order, the courts may take into account all relevant factors, including the current operating needs of the City and the availability and adequacy of other remedies.

Enforcement of a claim for payment of principal of or interest on such bonds and notes would also be subject to the applicable provisions of Federal bankruptcy laws and to provisions of other statutes, if any, hereafter enacted by Congress or the Connecticut General Assembly extending the time for payment or imposing other constraints upon enforcement insofar as the same may be constitutionally applied. Connecticut General Statutes Section 7-566 provides that no Connecticut municipality shall file a petition to become a debtor under Chapter 9 of the Federal Bankruptcy Code, without the express prior written consent of the Governor.

Tax Revenue Intercept Bonds

After the issuance of the Bonds, the City will have outstanding approximately $25,580,000 of bonds (the “Intercept Bonds”) secured by a tax revenue intercept mechanism established under the Indenture (as, hereinafter defined). All tax revenues payable to the City are paid directly to the Trustee and are deposited into the Tax Revenue Fund held under the Indenture. The tax revenues are then transferred to the Debt Service Fund until the applicable debt service requirements are satisfied for the benefit of the holders of the Intercept Bonds. Only after the applicable debt service requirements are satisfied are remaining amounts paid to the City for the payment of other City expenditures, including the payment of the principal and interest on the Bonds. See “Coverage History of Tax Revenue Intercept Secured Bonds” herein. THE CITY OF WATERBURY HAS NEVER DEFAULTED IN THE PAYMENT OF PRINCIPAL OR INTEREST ON ITS BONDS OR NOTES

Qualification for Financial Institutions

The Bonds shall not be designated by the City as qualified tax-exempt obligations under the provisions of Section 265(b) of the Internal Revenue Code of 1986, as amended, for purposes of the deduction by financial institutions for certain interest expense allocable to the Bonds.

8 Availability of Continuing Disclosure Information

The City prepares, in accordance with State law, annual audited financial statements and files such annual audits with the State of Connecticut, Office of Policy and Management within six months of the end of its fiscal year. The City provides, and will continue to provide, to the Municipal Securities Rulemaking Board’s (“MSRB”) Electronic Municipal Market Access System ongoing disclosure in the form of the Comprehensive Annual Financial Report, recommended and adopted budgets, and other materials relating to its management and financial condition, as may be necessary or requested.

In accordance with the requirements of Rule 15c2-12(b)(5) promulgated by the Securities and Exchange Commission, in connection with the issuance of the Bonds, the City will agree to provide or cause to be provided, (i) annual financial information and operating data, (ii) notice of the occurrence of certain events within 10 business days of the occurrence of such events with respect to the Bonds, and (iii) timely notice of a failure of the City to provide the required annual financial information on or before the date specified in the Continuing Disclosure Agreements to be executed in substantially the forms attached as Appendix C-1 and Appendix C-2 to this Official Statement.

The City has previously undertaken in continuing disclosure agreements entered into for the benefit of holders of certain of its general obligation bonds and notes to provide certain annual financial information and event notices pursuant to Rule 15c2-12(b)(5). The City has not failed in any material respect to meet any of its undertakings under such agreements during the past 5 years, except for a failure to timely file notice of the March 18, 2014 rating change to Assured Guaranty, the bond insurer of the City’s Series 2009, Series 2010 and Series 2011 Bonds. The failure to file was remedied on September 25, 2017.

Ratings S&P Global Ratings (“S&P”) has assigned a rating of “AA-” with a stable outlook to the Bonds, and affirmed its “AA-” rating on the City’s currently outstanding general obligation bonds.

Fitch Ratings (“Fitch”) has assigned a rating of “AA-” with a stable outlook to the Bonds, and upgraded the City’s outstanding general obligation bonds from “A+” to “AA-”.

Kroll Bond Rating Agency (“Kroll”) has assigned a rating of “AA-” with a stable outlook to the Bonds, and upgraded the City’s outstanding general obligation bonds from “A+” to “AA-”.

The City furnished to the rating agencies certain information and materials, some of which may not have been included in this Official Statement. The ratings reflect only the views of the rating agencies and will be subject to revision or withdrawal, which could affect the market price of the Bonds. The rating agencies should be contacted directly for its rating on the Bonds and an explanation of such rating. No application was made to any other rating agencies for the purpose of obtaining ratings on outstanding securities of the City.

The City expects to furnish to the rating agencies information and materials that the rating agencies may request. However, the City may issue short-term or other debt for which a rating is not required.

Tax Exemption

Federal Taxes. In the opinion of Pullman & Comley, LLC, Bond Counsel, under existing statutes and case law, interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax; however, with respect to certain corporations subject to the federal alternative minimum tax, such interest is taken into account in computing the federal alternative minimum tax.

Bond Counsel’s opinion with respect to the Bonds will be rendered in reliance upon and assuming the material accuracy of and continuing compliance by the City with its representations statements of intention and reasonable expectations and certification of fact contained in the Tax Compliance Agreement (the “Agreement”) and continuing compliance with the covenants set forth in the Agreement relating to certain requirements of the Internal Revenue Code of 1986, as amended (the “Code”). The Code and regulations promulgated thereunder establish certain requirements which must be satisfied at and subsequent to the issuance of the Bonds in order that interest on the Bonds be and remain excludable from gross income for federal income tax purposes. Failure to comply with such requirements may cause interest on the Bonds to be included in gross income for federal income tax purposes retroactively to the date of issuance of the Bonds irrespective of the date on which such noncompliance occurs. In the Agreement, which will be delivered concurrently with the issuance of the Bonds, the City will covenant to comply

9 with certain provisions of the Code and will make certain representations designed to assure compliance with such requirements of the Code including, but not limited to, investment restrictions, periodic payments of arbitrage profits to the United States, requirements regarding the proper use of Bond proceeds and certain other matters. The opinion of Bond Counsel delivered on the date of issuance of the Bonds is conditioned upon compliance by the City with such requirements.

No other opinion is expressed by Bond Counsel regarding the federal tax consequences of the ownership of, or the receipt or accrual of interest on, the Bonds.

Original Issue Discount. The initial public offering prices of the Bonds of certain maturities may be less than the stated principal amount. Under existing law, the difference between the stated principal amount and the initial offering price of each maturity of the Bonds will constitute original issue discount. The offering prices relating to the yields set forth on the cover page of this Official Statement for such Bonds is expected to be the initial offering prices to the public (excluding bond houses and brokers) at which a substantial amount of the Bonds are sold. Under existing law, original issue discount on the Bonds accrued and properly allocable to the owners thereof under the Code is excludable from gross income for federal income tax purposes if interest on the Bonds is excludable from gross income for federal income tax purposes.

Under the Code, for purposes of determining an owner’s adjusted basis in a Bond purchased at an original issue discount, original issue discount is treated as having accrued while the owner holds such Bond and will be added to the owner’s basis. Original issue discount will accrue on a constant-yield-to-maturity method based on regular compounding. The owner’s adjusted basis will be used to determine taxable gain or loss upon the sale or other disposition (including redemption or payment at maturity) of such a Bond. For certain corporations (as defined for federal income tax purposes), a portion of the original issue discount that accrues in each year to such Bond will be included in the calculation of the corporation’s federal alternative minimum tax liability. As a result, ownership of such a Bond by such a corporation may result in an alternative minimum tax liability even though such owner has not received a corresponding cash payment.

Prospective purchasers of Bonds at an original issue discount should consult their own tax advisors as to the calculation of accrued original issue discount, the accrual of original issue discount in the case of Bondowners purchasing such Bonds after the initial offering and sale, and the state and local tax consequences of owning or disposing of such Bonds.

Original Issue Premium. The initial public offering prices of certain maturities of the Bonds may be more than their stated principal amounts. An owner who purchases a Bond at a premium to its principal amount must amortize the original issue premium as provided in the applicable Treasury Regulations, and amortized premium reduces the owner’s basis in the Bond for federal income tax purposes. Prospective purchasers of the Bonds should consult their tax advisors regarding the amortization of premium and the effect upon basis.

Other Federal Tax Matters. Prospective purchasers of the Bonds should be aware that ownership of the Bonds may result in collateral federal income tax consequences to certain taxpayers, including, without limitation, financial institutions, certain insurance companies, recipients of Social Security or Railroad Retirement benefits, certain S corporations, foreign corporations subject to the branch profits tax, taxpayers eligible for the earned income credit, and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry tax-exempt obligations. Bond Counsel does not express any opinion regarding such collateral tax consequences. Prospective purchasers of the Bonds should consult their tax advisors regarding collateral federal income tax consequences.

State Taxes. In the opinion of Bond Counsel, under existing statutes, interest on the Bonds is excluded from Connecticut taxable income for purposes of the Connecticut income tax on individuals, trusts and estates and is excluded from amounts on which the net Connecticut minimum tax is based for individuals, trusts and estates required to pay the federal alternative minimum tax.

Interest on the Bonds is included in gross income for purposes of the Connecticut corporation business tax.

Accrued original issue discount on a Bond is also excluded from Connecticut taxable income for purposes of the Connecticut income tax on individuals, trusts and estates and is excluded from amounts on which the net Connecticut minimum tax is based for individuals, trusts and estates required to pay the federal alternative minimum tax.

10 Owners of the Bonds should consult their own tax advisors with respect to the determination for state and local income tax purposes of original issue discount or original issue premium accrued upon sale or redemption thereof, and with respect to the state and local tax consequences of owning or disposing of such Bonds.

Owners of the Bonds should consult their tax advisors with respect to other applicable state and local tax consequences of ownership of the Bonds and the disposition thereof.

Proposed Legislation and Other Matters. Tax legislation and administrative actions taken by tax authorities (whether currently proposed, proposed in the future, or enacted) and court decisions, whether at the federal or state level, may adversely affect the tax-exempt status of interest on the Bonds under federal or state law or otherwise prevent beneficial owners of the Bonds from realizing the full current benefit of the tax status of such interest. In addition, such legislation, actions or decisions could affect the market price for, or the marketability of, the Bonds.

Prospective purchasers of the Bonds should consult their own tax advisers regarding the foregoing matters.

General. The opinion of Bond Counsel is rendered as of its date, and Bond Counsel assumes no obligation to update or supplement their opinion to reflect any facts or circumstances that may come to their attention or any changes in law that may occur after the date of their opinion. Bond Counsel’s opinions are based on existing law, which is subject to change. Such opinions are further based on factual representations made to Bond Counsel as of the date of issuance. Moreover, Bond Counsel’s opinions are not a guarantee of a particular result, and are not binding on the Internal Revenue Service or the courts; rather, such opinions represent Bond Counsel’s professional judgment based on its review of existing law, and in reliance on the representations and covenants that it deems relevant to such opinions.

The discussion above does not purport to deal with all aspects of federal or state or local taxation that may be relevant to a particular owner of the Bonds. Prospective owners of the Bonds, particularly those who may be subject to special rules, are advised to consult their own tax advisors regarding the federal, state and local tax consequences of owning and disposing of the Bonds.

Legal Opinion

The legal opinions for the Bonds will be rendered by Pullman & Comley, LLC in substantially the forms set forth in Appendix B-1 and Appendix B-2 to this Official Statement.

Underwriting The Bonds are being purchased by Piper Jaffray & Co. (the “Underwriter”). The Underwriter has agreed, subject to certain conditions, to purchase the Series A Bonds from the City at the net aggregate purchase price of $______(consisting of the principal amount of $______plus net original issue premium of $______, less underwriter’s discount of $______). The Underwriter has agreed, subject to certain conditions, to purchase the Series B Bonds from the City at the net aggregate purchase price of $______(consisting of the principal amount of $______plus net original issue premium of $______, less underwriter’s discount of $______).

The Underwriter will be obligated to purchase all of the Bonds, if any such Bonds are purchased. The Underwriter intends to offer the Bonds to the public initially at the offering prices or yields set forth on the inside cover page of this Official Statement, which may subsequently change without any requirement of prior notice. The Bonds may be offered and sold to certain dealers (including unit investment trusts and other affiliated portfolios of certain dealers depositing the Bonds into investment trusts) at prices lower than the public offering prices and such public offering prices may be changed, from time to time, by the Underwriter.

The Underwriter has entered into a distribution agreement (the “CS&Co. Distribution Agreement”) with Charles Schwab & Co., Inc. (“CS&Co.”) for the retail distribution of certain securities offerings including the Bonds, at the original issue prices. Pursuant to the CS&Co. Distribution Agreement, CS&Co. will purchase the Bonds from the Underwriter at the original issue price less a negotiated portion of the selling concession applicable to any Bonds that CS&Co. sells.

11 II. The Issuer

Description of the Municipality

The City of Waterbury was founded in 1674, incorporated as a village in 1686 and as a city in 1853. Located in west-central Connecticut at the heart of a 19-town area known as the Central Naugatuck Valley Region, the City is 21 miles north of New Haven, 29 miles southwest of Hartford, and 24 miles east of Danbury.

The City is conveniently located at the crossroads of two major expressways, Interstate 84 and Connecticut Route 8. To the east, I-84 provides direct access to Hartford and joins the Massachusetts Turnpike for travel to Boston and northern New England. Heading west, 1-84 passes through Danbury and crosses the states of New York and Pennsylvania, with connections to the New York Thruway and Interstate 80. Route 8 south meets the Connecticut Turnpike (1-95) in Bridgeport, making all of southern Connecticut and Fairfield County easily accessible. To the north, Route 8 ultimately leads to the Massachusetts Turnpike.

The City is home to a passenger rail station and a regional bus terminal. Rail, passenger and freight service in the area are operated by Metro North and Conrail, respectively. Metro North offers daily passenger round trips between Waterbury and New York City, and freight service via New Haven makes shipments possible to any point in the country. The deep water ports of New Haven and Bridgeport are within 30 miles of the City. Bradley International Airport, New England’s second largest airport, is located 45 miles northeast of the City while Westchester County (N.Y.) Airport is 60 minutes southeast of Waterbury. In addition, Tweed-New Haven Airport has regularly scheduled commuter flights to Newark, Philadelphia, Chicago and Washington D.C.

The City maintains a diverse and growing business environment as evidenced by the enclosed listing of major employers and major taxpayers. Manufacturing, healthcare, higher education, financial services, utilities and retail all have significant representation within the City providing employment opportunities and offering goods and services locally, regionally and globally. Waterbury continues to advance a comprehensive economic development strategy with both public and private investments that are producing solid returns. This strategy is complemented by a partnership with the State to identify and remediate brownfield sites to repurpose former manufacturing facilities into new manufacturing facilities and mixed-use development projects. This strategy is further complemented by a workforce development collaboration between the City’s new technical career high school, Naugatuck Valley 12 Community College, the Northwest Regional Workforce Investment Board and the Manufacturing Alliance of Connecticut. This collaborative effort is geared towards producing employment results through the training and placement of individuals (students, residents, etc.) into unfilled high wage, high tech advanced manufacturing jobs.

The City serves as a regional center of higher education, being the home of Post University, Naugatuck Valley Community College, and an expanding downtown branch of the University of Connecticut (UCONN). Graduate school needs are met by the Waterbury extensions of the University of New Haven and the University of Bridgeport. UCONN’s Waterbury campus offers a Master of Business Administration (MBA) program and the Teachers Certification Program. Graduate programs leading to a Master’s of Social Work (MSW) and a Master’s Degree in Nursing (MS) are also available. Post University’s offerings include a comprehensive online degree program.

The City is also a regional center for medical and mental health services available to Waterbury’s 110,000 residents and the surrounding region. The City is home to Waterbury Hospital and Saint Mary’s Hospital, the City’s largest and second largest private employers, respectively. Both hospitals are equipped with trauma centers, have emergency helicopter pads and are affiliated with Yale University School of Medicine. In addition to the two hospitals, Waterbury is home to the Harold Leever Regional Cancer Center, a collaborative venture of Waterbury Hospital and Saint Mary's Hospital committed to bringing the best possible cancer care to the local community. There are also several hospital-affiliated health and wellness centers and walk-in clinics throughout the City and more than 20 certified convalescent homes and rehabilitation facilities.

The City provides its residents with a variety of housing options in all price ranges. Single-family dwellings from modest to luxurious, multi-family homes, apartments and condominiums meet the needs of workers and residents. The City provides special housing for senior citizens and for low- and middle-income families and assisted living facilities.

The City’s public school facilities serving approximately 18,800 students include four high schools, four middle schools (one of which is a magnet school for grades 6-12), twenty elementary schools, and two alternative schools. There are eleven private or parochial elementary schools, three private or parochial high schools and one vocational-technical high school. The City’s schools are considered “racially balanced” by the State of Connecticut Department of Education. The City and its school system are strongly committed to pre-kindergarten to twelfth grade education.

Public parks and recreation facilities offering tennis, swimming pools, ball fields, ice skating, and recreational programs are located throughout the City. The City continues renovations to several parks including the installation of new playscapes, splash pads, benches and handball courts along with the replacement of bathroom facilities. The City offers bathing, boating, and fishing facilities at Lakewood Park within the City and at Lake Quassapaug and Hitchcock Lake just outside the City limits. Two 18-hole City-owned golf courses and an acclaimed 18-hole private course are located in Waterbury, and several 9-hole golf courses are situated immediately adjacent to the City. Mattatuck State Forest with its many trails and campsites is only four miles from the center of the City. Black Rock State Park, with swimming and picnic facilities available, is a short drive away.

The City’s downtown area is home to the fully restored Palace Theater, the Waterbury Symphony Orchestra, Seven Angels Theater, Waterbury Ballet, and the Mattatuck Museum. These are just a few of the many cultural institutions available to Waterbury residents and the surrounding region. The Silas Bronson Library, the public library of the City located adjacent to City Hall, was established in 1869 by an endowment from Silas Bronson. There are over 240,000 volumes and 120 computer workstations in the main library available to the public, while a branch library operates in the Bunker Hill section of the City.

13 Form of Government

The City is governed by a Mayor elected for a four-year term and a Board of Aldermen made up of 15 members elected for two-year terms. Also elected are the City Clerk, Town Clerk, Sheriff, and the ten-member Board of Education. Other officials are appointed by the Mayor.

Principal Municipal Officials

Manner of Years of Office Name Selection/Term Service Mayor ………………………………………………………….Neil M. O'Leary Elected/4 years 5 years President, Board of Aldermen………………………Paul Pernerewski Jr. Elected/2 years 7 years President, Board of Education………………………Elizabeth C. Brown Elected/4 years 2 years Superintendent of Schools………………………..Kathleen M. Ouelette Appointed 6 years Director of Finance ……………………………..Michael LeBlanc Appointed 8 years Corporation Counsel………………………………Linda Wihbey Appointed 5 years

Municipal Services

Fire Department

The Waterbury Fire Department is a professional fire department providing a wide range of emergency services including fire suppression, hazardous materials mitigation, technical rescue and emergency medical dispatch. The Department also provides non-emergency services including public fire education, Connecticut fire code and licensing building inspections and plan review. Emergency services are provided by nine engine companies (with one also functioning as a rescue/hazmat company), three truck companies, and three chief officers operating from ten fire stations. The Fire Department is responsible for “First Responder” duties.

Police Department

When at full capacity, the Waterbury Police Department operates with a complement of 285 sworn officers and 90 civilian employees. Located at 255 East Main Street, Police Headquarters is a 34,200-square-foot facility housing administrative, uniformed and investigative services. Specialized units include K-9, Emergency Response Team, Bicycle Patrol, Polygraph Services, Traffic Engineering, Victim Services, Blight Enforcement, Crimes Analysis, Hostage Negotiation Team, Crisis Intervention Team, School Resource Officers, and a full-service Forensic Laboratory capable of ballistics analysis/comparison and DNA collection. The Department utilizes a fleet of approximately-marked and unmarked police cruisers. Off-site facilities include Animal Control, Traffic Division, Parking, Training Division, Community Relations Division and a Police Academy.

Public Health

The Waterbury Department of Public Health is a full-time health department dedicated to the protection and promotion of good health for the citizens of the City. The Nursing Services Division provides both nursing expertise and nurse aide support to over 20,000 public, private and parochial students as well as public health nursing. The Environmental Health Division provides wide-ranging activities from investigation and inspection of food establishments, response to housing code complaints, litter and blight complaints and enforcement of the public health code. Efforts of the Department of Public Health continue to address the need for improved access to health services for all citizens through innovative programs and wide ranging grants (HIV Prevention and Case Management, Lead Prevention and Hazard Control, Immunizations, WIC, Healthy Choices, Injury Prevention and Public Health Emergency Preparedness).

Education

The City’s school system serves grades pre-kindergarten through twelve and is governed by the local Board of Education. Waterbury has a 10-member Board of Education elected to four year staggered terms. The primary function of the Board is to establish policy. Some of the areas for which such policies are set include curriculum, budget requests submission, ensuring funds for education as appropriated by the City are properly expended, implementation of both State and Federal laws, and planning for facilities needed by the system, including construction and renovation. The City has twenty (20) elementary schools, four (4) middle schools and four (4) high schools (including one magnet school for grades 6-12) and two (2) alternative schools for grades K-12.

14 Solid Waste & Recycling

The City provides municipal solid waste collection and recycling pick-up services to its residents. The City closed its landfill in September 1999 pursuant to a closure order negotiated with the Connecticut Department of Environmental Protection and began hauling its municipal solid waste to a contracted facility for incineration. The City currently has a contract with Covanta Energy to provide disposal services. The contract with Covanta Energy does not include a “put-or-pay” provision or any other guarantees obligating the City. The initial contract term with Covanta Energy is for 5 years through June 2018 with an option for an additional 5-year term. A $4,000,000 capital appropriation and bond resolution for the City of Waterbury Recycling Project (the “Project”) was approved in October 2016. The Project will include the purchase of 32,000 single stream recycling carts, seven (7) automated recycling trucks and other program implementation costs. The goal of this Project is to increase the City’s recycling rate to at least 25% within three (3) years providing for projected savings of $435,000 annually. The current recycling rate is 6%. In addition to the MSW cost savings for disposal, there will be an increase in revenue derived from recycling rebates. Implementation of the single stream recycling program will begin this fall.

Public Works

The Department of Public Works has nine core functional areas staffed by approximately 180 full-time and 215 part-time/seasonal employees. The functional areas consist of engineering and traffic, street maintenance, central vehicle maintenance, municipal solid waste collection, leisure activities, golf, and public building and park grounds maintenance, overseen by a centralized administrative office of the Director. The construction of a 125,000 square foot consolidated public works facility that will additionally house the City’s central vehicle and fire apparatus maintenance operations began this past May with a targeted completion date of December 2018. Upon completion, the Department of Public Works will centralize all of its operations currently disbursed throughout the City into the new facility. In addition to vastly improving working conditions and efficiency of operations, it is anticipated that substantial annual savings will be realized be exiting costly leases for space and by extending the useful lives of costly vehicles and equipment.

Recreation

The City has almost 1,000 acres dedicated to recreation including 31 parks, 4 recreation centers, two municipal-owned 18-hole golf courses, 22 playgrounds, 3 outdoor swimming pools, one lake facility, 16 spray pools and one municipal multi-sport field stadium complex. There are over 120 athletic fields available to the public, which include activities such as basketball, soccer, tennis and croquet. The City continually appropriates capital funds and is awarded State grants to fund the upkeep, maintenance and restoration of the City’s recreational parks, playgrounds and athletic facilities.

Water

The City has the largest municipally-owned water system in the State. It encompasses 7,000 acres of City- owned watershed and has sufficient capacity to provide 38 million gallons of water per day. The system consists of two inactive and five active reservoirs with a total capacity of 7.54 billion gallons of water. The water treatment plant was completed in 1987 at a cost of approximately $35 million. Average daily consumption is approximately 16.0 million gallons. The system serves customers located in Waterbury and neighboring communities and is a self- supporting enterprise fund of the City. A $17.7 million capital appropriation and bond authorization was approved in May 2015 for plant, equipment and system renewal capital costs anticipated to be incurred over the next five years.

Water Pollution Control

The City has approximately 320 miles of sanitary sewers and 20 pump stations. The City’s upgraded 27.05 MGD advanced Sewage Treatment Facility was put into operation in April of 2000 in accordance with a consent order between the City and the State of Connecticut Department of Environmental Protection. The planning, design and construction phases of this upgrade were funded through the State of Connecticut Clean Water Fund Program. Though the City is ultimately responsible to the State for repayment of the total cost of each phase of the upgrade, the City entered into agreements with municipal users of the Sewage Treatment Facility (Watertown, Wolcott, Cheshire and Prospect), whereby the municipal users are obligated to pay their allocable share of the costs for each phase of the upgrade. Pursuant to the State Clean Water Fund Program, the City has adopted a Sewer User Charge System to pay the costs of operating its collection and treatment system, including capital improvements and debt service on outstanding sewer bonds and Clean Water Fund notes.

The EPA has mandated that all New England states establish limitations on phosphorous in all wastewater discharge permits. The State Department of Energy and Environmental Projection (“DEEP”) has established proposed 15 limits that would require significant capital investment including the installation of effluent filter equipment along with chemical phosphorous removal and operational changes to reduce phosphorous nutrient loads to achieve a 0.2 mg/level. Preliminary capital cost projections to meet the 0.2 mg/level are estimated at $45 million with the State offering 50% grant reimbursement towards construction costs. In October 2013, the State DEEP agreed to give Waterbury more time to comply with the strictest of its new phosphorus reduction requirements allowing for two phases (short-term and long-term) with 0.7 mg/level set as the first interim target limit. Achieving the short-term target of 0.7 mg/level can be accomplished with the addition of chemical additives and limited capital investment. The lower target limit of 0.2 mg/level will be required in eight (8) years allowing Waterbury the time needed to study and evaluate options for what will likely be a complicated and costly strategy to reach the 0.2 mg/level. A $10.3 million capital appropriation and bond authorization was approved in May 2015 for plant, equipment and system capital expenses, including investments to achieve lower phosphorus levels.

The City has leveraged its award of low-emission renewable energy tax credits to enter into an Energy Supply and Service Agreement with Doosan Fuel Cell America, Inc. As part of a 20-year purchase power agreement, Doosan will be install, own and maintain a fuel cell at the sewage treatment facility capable of generating 12.1 mWh per year. Based on the terms of the purchase power agreement it is anticipated that energy costs will be reduced conservatively by $155,000 per year once the fuel cell is operational. It is anticipated that the fuel cell will be fully operational later this fall.

Utilities

Gas is supplied by the Yankee Gas Services Company for households and businesses. Electricity is furnished by The Connecticut Light and Power Company for households and businesses. Both companies are now under one entity called Eversource Energy.

Boards and Commissions

The following Boards and Commissions are created by Charter and the Board of Aldermen has adopted ordinances setting forth the organizational structure and powers of such Boards and Commissions:

• Board of Commissioners of Public Health • Board of Park Commissioners • City Plan Commission • Board of Police Commissioners • Board of Fire Commissioners • The Zoning Commission • Board of Assessment Appeals • Board of Commissioners of Public Works • The Retirement Board

Among the terms of the Code of Ordinances relating to Boards and Commissions are the following: (i) number of Board and Commission members (and, alternates, in the case of the Zoning Commission and the Board of Assessment Appeals), except as otherwise provided by the General Statutes, which number shall always be odd; (ii) terms of office, which may be staggered and shall not exceed four years; (iii) provision for the appointment of a Chair; (iv) standards for the keeping of records; (v) Aldermanic and minority party representation; (vi) public participation (including, but not limited to, public speaking); and (vii) frequency of meetings of all Boards and Commissions.

The Charter also specifically authorizes the establishment of departments and agencies of the City that deal with key functions such as the legal department, government administration, public safety, health and community services, government operations and development and constables.

Finance and Audit Review Commission

Chapter 6 of the Charter established the Finance and Audit Review Commission (“FARC”). The first members were appointed on January 1, 2003. The FARC has the authority to examine all matters relating to the financial and budgetary efficiency, efficacy, and condition of the City. Notwithstanding the provisions of the Charter pertaining to the executive powers of the Mayor, the Department of Audit is under the direct supervision of the FARC. The FARC is authorized to audit and examine or cause to be audited and examined the books and accounts of all of the departments and officials of the City, including the Department of Education. The FARC is to review the contents of the annual audit and make recommendations to the Mayor regarding the manner and means of improving the administrative processes pertaining to the operations of the City. The FARC is responsible for the general supervision

16 of the Department of Audit and shall give due consideration to requests from the Mayor or the Board of Aldermen in establishing and modifying the work plan of the FARC or its staff. Each officer and employee of any department, institution, board, commission or agency of the City is obligated to assist the FARC and the Department of Audit in carrying out its powers and duties as provided in the Charter.

Mayor’s Administration

Mayor Neil M. O’Leary was sworn into office in December 2011 and re-elected to the City’s first four-year term as Mayor in November 2015. The Mayor has spent his time in office spearheading multiple initiatives with the common goal of improving the quality of life for Waterbury citizens, growing the City’s taxable grand list and increasing the City’s employer base. The Mayor aims to transform the City into a multifaceted locale for advanced technology, niche manufacturing, healthcare, educational opportunities and cultural venues. The Mayor and his administrative and economic development teams continue a multifaceted effort to build a sustainable future for the City that makes the links between transportation, housing and the environment so that the City remains a great place to live and work and to solidify a foundation for continued growth. The Mayor believes that with the presence of a skilled and educated workforce, affordable real estate, and the convenience and culture of city life balanced by the nearby rural beauty of the countryside, the City will continue to draw interest from investors and developers who see Waterbury as a center for business, education and quality of life. The Mayor serves as the Chairman of the Naugatuck Valley Council of Governments (NVCOG) and is currently serving his second term as Vice Chair of the U.S. Conference of Mayors Advanced Manufacturing Task Force.

Economic Development

The Mayor, since coming into office on December 1, 2011 has made economic development one of the major core functions of his Administration. The Mayor’s focused efforts on economic development included the establishment of a full-time Economic Development Director’s position within the Mayor’s executive cabinet. The Economic Development Director’s core functions include the recruitment of new business, maintaining the stability and retention of existing business and the pursuit of investors, developers and companies looking to invest in Waterbury. The Mayor’s Economic Development team meets weekly to ensure that updates are communicated timely along with extensive discussions on all ongoing initiatives and potential new opportunities. The economic development program encompasses recruitment of new business, stability and expansion of existing business, remediation and repurposing of brownfield sites, downtown investment and development, housing, education and transportation along with public infrastructure improvements including recreation facilities and parks.

Building and maintaining alliances between all local education institutions, local workforce investment agencies, Waterbury’s two major hospital institutions and local and State manufacturing alliances are seen as critical steps to enhancing workforce skills and new employment opportunities.

The Mayor and Economic Development Director work in close collaboration with the technical ability and resources of the Waterbury Development Corporation. Waterbury Development Corporation (WDC) is the City’s designated economic and community development agency. WDC was founded in May 2004 as a partnership of the public and private sectors and works collaboratively with City and state officials to stimulate development opportunities by assessing and repurposing contaminated properties (brownfields), eliminating urban blight and decay, and managing various construction and capital improvement projects. This team approach has proven beneficial and has been further supported with establishing and maintaining strong relationships and collaborative efforts involving the Connecticut Department of Economic and Community Development (DECD) and Connecticut Department of Transportation (CDOT).

The City continues to aggressively further its economic development strategy through both public and private investments. In the past two years alone, 28 new business have opened representing the addition of 765 new full and part-time jobs to the Waterbury labor market. Recent new business openings are highlighted by the opening of Car Max, a car buying and selling dealership with 175 locations nationally creating 160 positions and Sarracco Mechanical Services creating 140 HVAC, plumbing, and electrical positions. Additionally, MacDermid and Luvata corporations have expanded existing footprints in Waterbury. MacDermid Performance Solutions, a subsidiary of Platform Specialty Products Corporation, announced this past spring the creation of 80 new jobs at its Waterbury headquarters on Freight Street. These positions include accountants, clericals, human resources, researchers, engineers and executives with salaries ranging from $50,000 to $250,000. Luvata, an anchor tenant of the City’s Waterbury Industrial Commons manufacturing superconductive wires used in medical-diagnostic systems, recently added 40 new employees as part of an expansion of its Waterbury plant. New businesses openings and expansions include manufacturing, retail, restaurant and professional businesses, allowing for continued expansion and diversification of the City’s employment base.

17 The City continues to see significant activity in the manufacturing portion of its economic base resulting in the creation of new jobs. Waterbury Construction Career Initiative, a program run by the Northwest Regional Workforce Investment Board (NRWIB), allows residents to attend orientation sessions to learn about construction career opportunities. Many of those residents return and are enrolled in formal job training programs. In the resurgent area of manufacturing, significant employment openings remain as a result of a skills gap. Through a partnership with Naugatuck Valley Community College and the NRWIB, the City is training and placing its residents into high wage, high tech advanced manufacturing jobs.

The unemployment rates of the City of Waterbury and the Waterbury labor market as a whole continue to trend lower further representing the positive impact of local efforts over the past few years to create new job opportunities complemented by an improved labor market. Waterbury’s unemployment rate was 9.0 percent in August 2015 down significantly from a peak of 16 percent in February 2010. Over the past two years Waterbury has seen a continued reduction in its unemployment rate, down to 7.7 percent as of July 2017.

Programs expanding after-school academic and manufacturing training for City students have been implemented as well. In the summer of 2013, the Mayor requested an expansion of after-school academic and manufacturing training for City students. The offerings focus on manufacturing and S.T.E.M. (science, technology, engineering and math) opportunities. In October 2016, Porter and Chester Institute opened a career training center in Waterbury offering 10 carefully designed career-focused programs.

Downtown Revitalization

Downtown Waterbury is proud to be the operations center for City and Education government services, Waterbury Superior Court, St. Mary’s Hospital, Webster Bank headquarters, MacDermid Inc., UCONN Waterbury, Waterbury Arts Magnet School, the Palace Theatre and well over 150 other businesses. These include professional offices, restaurants, museums, entertainment venues, educational facilities, retail establishments and others. The downtown area offers elegantly refurbished brownstones and turn-of-the-century architecture with affordable office, retail and housing space. Parking is plentiful and strategically located throughout downtown. In furthering growth and investment within downtown, the Mayor, the Economic Development Director and the Waterbury Development Corporation actively reach out to existing downtown businesses and new private investors and developers to engage them in reinvestment opportunities and programs to further advance downtown revitalization. Securing State and Federal grants along with private investment is an integral component of the City’s economic development efforts. The following announcements highlight the progress and transformational opportunities that continue in downtown Waterbury:

In September 2014, the United States Department of Transportation announced that the City of Waterbury was selected as a recipient of a $14.4 million Transportation Investment Generating Economic Recovery Grant (TIGER) that will fund the Waterbury Active Transportation and Economic Resurgence (WATER) Project, comprising an integrated system of downtown transportation improvements including the reconstruction and expansion of a network of local streets to enhance development opportunities. The TIGER Grant will fund the transformation of the City’s Freight Street and Naugatuck River transportation corridors. The Project’s goals are to catalyze redevelopment of 60 acres of under-utilized downtown land on Freight Street and adjacent to the City’s train station. This major project together with the following downtown initiatives, represents the most comprehensive and far-reaching plan to stimulate the City’s economy and position Waterbury to capture a greater proportion of the region’s future economic growth.

In January 2016, the City completed renovation of a vacant, City-owned 22,500 square foot downtown building adjacent to the Waterbury Palace Theater. Upon completion the building was leased to the University of Connecticut (UCONN) allowing for further expansion of UCONN’s Waterbury campus in downtown Waterbury. The UCONN-Waterbury branch originally located downtown in 2003 into a new state of the art $30 million facility. The downtown branch is now educating far more students than originally planned. The upper floors of the leased facility offers UCONN expanded space including six 50-student classrooms, a student lounge and a large meeting space directly across the street from its main downtown branch. Located at street level in the fully renovated, historic, City- owned building now leased by UCONN is Waterbury’s latest Starbucks. The site is located directly across the street from UCONN-Waterbury and next door to the Palace Theatre. A $500,000 interior renovation project began August 7, 2017 and is currently on time for a scheduled completion date of November 1, 2017.

In June 2016, Green Hub Developers committed to acquiring the upper two floors of the historic downtown “Brown Building”. Over the past year the 63,000 square foot historic building on East Main Street was renovated, with an approximate $7 million investment, into 28 suites specifically designed to provide downtown housing to 90 students. Green Hub Developers indicated that they were attracted to the downtown's antique architecture and the 18 easy access to bus, rail and highway transportation. This September 2017, UCONN students are now occupying housing available to them in the historic Brown Building located in the heart of downtown Waterbury. The newly renovated luxury suites less than 100 feet from the UCONN campus are designed exclusively for students. Each floor is designed with laundry facilities, study room, recreational lounge, and state of the art security.

In June 2017, a $2.5 million State funded renovation of the City’s beautiful Green in Downtown Waterbury came to fruition. This facelift provided for the installation of new walkways, lighting, irrigation, benches, trash receptacles, and free Wi-Fi, all contributing to great pride and enjoyment along with garnering new downtown interest.

The State has previously committed $5 million to support the redevelopment of the historic downtown Howland Hughes Building located at 114-116 Bank Street believing that an investment in modern upgrades to the building’s interior and facades would attract a significant commercial tenant. The beautiful historic 100,000 square foot Howland Hughes Building is currently under a signed sales agreement with a private developer with a closing a few months out following an extended due diligence period.

Multiple initiatives are underway to support the redevelopment of additional historical downtown buildings and gateway locations into market rate housing to help meet projected demand for downtown housing and contribute to the overall downtown revitalization initiative.

Health Care Services

The City and the surrounding region are currently served by two large Waterbury based hospitals, Waterbury Hospital and Saint Mary’s Hospital, the largest and second largest private employers respectively in the City. Waterbury Hospital is located in the upper west end of the City and Saint Mary’s Hospital is located downtown. The long-term viability and anticipated future investment and growth of these two Waterbury hospitals was solidified during the past year. On October 1, 2016, Waterbury Hospital was acquired by Prospect Holdings, Inc. On August 1, 2016, Saint Mary’s Hospital joined Trinity Health New England. The acquisition of Waterbury Hospital by Prospect Holdings, Inc. comes with a capital investment commitment of $55 million over seven years along with a conversion from a not-for-profit entity to a for-profit taxable entity adding to the City’s taxable grand list. Saint Mary’s Hospital’s joining with Trinity Health New England comes with a capital investment commitment of $275 million for capital projects and other programmatic investments benefitting the five-hospitals comprising Trinity Health New England. The acquisition, merger and committed capital investments sets the stage for both the long-term viability and expanded regional health care service growth potential of both major institutions benefitting the City, its residents, supporting business and the region.

East End Corridor and Adjacent I-84 Commercial and Retail Development

Commercial and retail development continues to rapidly expand in the City’s East End, a direct beneficiary of the first phase of the I-84 lane widening project several years ago and from the current final phase of the I-84 widening project that when completed will provide for three driving lanes for both east and westbound travelers from Hartford through downtown Waterbury. Both phases of the highway widening project involve significant cross-over bridge replacements and improvements along with comprehensive on and off ramp reconfigurations for additional ease of access on and off the highway.

• The East End is home to Kohl’s and Costco, known to be high sales performing locations. • Last year (2016), a new retail plaza in close proximity to Kohl’s and Costco with multiple business units opened with immediate leasing of all available units. • The construction of an East End medical building has also been announced by the developer on a site directly across from Kohl’s and Costco. • The former East End Coco Key’s and hotel conference center was acquired during the past year with both facilities being immediately demolished to provide for the construction of a Restaurant Depot retailer along with establishing 10 acres of land for new development. • Car Max, a car buying and selling dealership with 175 locations nationally, has constructed a new facility on a highly visible site from I-84. The new facility includes an operations center, showroom and vehicle maintenance service center. Car Max opened this past summer 2017. • Existing and new retail and restaurant establishments adjacent to I-84 are doing very well. • A developer is currently seeking plan approval to develop a large undeveloped rock and wooded site adjacent to BJ’s and I-84 to provide for 240,000 square foot of new commercial/retail space readily accessible from I-84. • It is anticipated that over the next two years approximately 500,000 square feet of retail/commercial space will be available in this area contributing to the City’s tax base and employment growth.

19 Local and Regional Transportation Upgrades and Enhancements

Easy access to, from and through the City of Waterbury is seen as a critical component of economic development growth. Several large scale projects are underway that upon completion will further enhance Waterbury as a great location for business growth development and so much more. Along I-84, currently mid-way through a multi-year widening project, several new businesses have opened, most notably Car Max – the used car superstore, and developers are securing space for additional retail investment. The following projects speak to efforts underway to vastly improve the efficiency of travel in and out of Waterbury:

Interstate 84 Widening Project, In April 2015, the State of Connecticut Department of Transportation (CDOT) began a $330 million project to widen the east and west lanes of Interstate 84 through Waterbury, and replace aging infrastructure with new exit and entrance ramps, new bridges and sidewalks, and new utilities such as sewer and water lines. Although not yet completed, it has already spurred increases in land values along the I-84 corridor. Upon completion, Waterbury will enjoy a faster and safer flow of vehicular traffic while opening more opportunities for new and existing businesses. Although originally scheduled for a June 2020 completion date, the project is currently ahead of schedule, as incentives exist for a 2019 completion date.

Metro-North Waterbury Branch, In April 2015, CDOT began work on the design of a new signalization system for the Waterbury Branch of the New Haven Line that will enhance safety and allow for more daily trains and improved service between Waterbury, Devon, and Bridgeport. Project funding of $6 million to $7 million is being provided by CDOT. The project remains on schedule for a 2020 completion date.

Express Bus Service, The State recently implemented an express bus service that connects Waterbury with the City of Torrington to the north. The new service has exceeded ridership expectations and provides much needed connections to the train station and the Waterbury Branch of the University of Connecticut.

Waterbury Train Station, The concept of developing a multi-modal transportation center to serve the City and the surrounding Central Naugatuck Valley Region has been discussed for several years. A multi-modal transportation center is envisioned to house and link a variety of transportation services including commuter rail, inter and intra city buses, taxis, shuttles (downtown, hotels, airport, etc.), commuter travel, and rail tourism activities. The Waterbury Development Corporation (WDC) is facilitating a long-term phased approach to the ultimate goal of creating the multi-modal transportation center. Phase I resulted in the demolition of a long vacant building owned by the Connecticut Department of Transportation (CDOT) located adjacent to the City’s active rail-line station in downtown. With funding assistance of CDOT, a former baggage area of the original train station (the clock tower building) is being re-purposed to provide a comfort station for commuter rail ridership. WDC has procured architectural plans for the site and as of September 1, 2017 is awaiting approval by the CDOT to implement work for the interior demolition and construction of the commuter comfort station. WDC is hopeful of gaining CDOT approval during spring 2018. Immediately following the completion of the commuter comfort station will be a redesign, expansion and improvement of the commuter parking facilities at the train station area.

Waterbury Development Corporation (WDC) – Business Growth Group (BGG) Initiatives

WDC Business Growth Group (BGG) administers business loans, tax abatements, and façade improvement loans and grants to existing City businesses and to businesses looking to open in the City. The availability of loans and other business incentives has made the BGG Waterbury’s clearinghouse for business development inquiries. In addition, the BGG works in partnership with the City’s Economic Development Office on business retention, expansion, and recruitment.

As of July 31, 2017, WDC managed an $8.4 million loan portfolio. Currently fifty-eight small businesses have sixty-one outstanding loans totaling over $4.5 million. Twenty-six percent of the loan portfolio is related to manufacturing enterprises with the balance spread across the retail, service and food and beverage industries.

State and local enterprise zone tax abatement programs are available to qualifying businesses. If the owners of a manufacturing operation are considering Waterbury with other towns offering lower tax rates, the availability of tax abatement programs can help “level the playing field”. The awarded tax abatements reduce annual taxes for qualifying projects that are undertaken by local business owners for a period of 5 to 7 years. The City, through legislation, also offers two incentive programs for manufacturing and certain industrial projects. Such incentives provide an advantage to local business owners and attract private investment for the expansion and rehabilitation of Waterbury properties.

20 WDC also administers the Enterprise Zone Program and the Urban Jobs Tax Abatement Program. Both of these programs continue to result in business retention, business creation, job creation and the enhancement of neighborhoods. Over 176 companies undertook projects and received tax abatements for the October 1, 2016 Grand List Year.

Waterbury Development Corporation (WDC) - Brownfield Redevelopment Program

Brownfield redevelopment is seen as an integral component of current and future economic development within the City. A combination of federal, state, and City funds are presently being used for the assessment and cleanup of many contaminated sites across the City. Brownfields have been the City’s biggest obstacle to the provision of pad ready properties to support: manufacturing and processing; wholesaling, distribution operations, warehousing and freight handling; sub-assembly operations; and industrial services. The City and the Waterbury Development Corporation continue to leverage funds for the preparation of shovel-ready sites. The following is a summary of active brownfield projects that speak to the importance, continued commitment and significance of this initiative towards the City’s sustainability and economic development strategy:

Anamet Property, Located at 698 South Main Street is a 17.5 acre site along the banks of the Naugatuck River that for over one hundred years hosted an America Brass manufacturing facility. On April 28, 2017, WDC purchased the site using grant funding provided by the State of Connecticut Department of Economic and Community Development. WDC is currently managing a multi-year, two-phase project that will demolish the crumbling structures on the premises, clean and remediate the lot, and remodel an existing 220,000 square foot building located on the site that is in good structural condition. Phase I consists of vegetation clearing that is scheduled to begin in fall 2017, followed by demolition and debris removal in spring 2018. Phase II consists of sub-surface site cleaning and enhancements to the 220,000 square foot building.

Freight Street Redevelopment Project, Parcels located at 130 Freight Street were originally the site of the American Brass Company (1867-1974) followed by EWR and Phoenix Soil (1974-1998). They are currently abandoned and are awaiting redevelopment. The brownfield sites along Freight Street are large, flat, and have an ideal location along the river, making them particularly suitable for redevelopment. Freight Street has been identified in the recently commissioned update of the City’s Plan of Conservation and Development and its Downtown Strategic Plan as the last viable opportunity to expand the core of downtown Waterbury and connect it with the Naugatuck River. In September 2017, the U.S. Department of Environmental Protection – Boston Office - completed a $1,775,000 hazardous waste removal action. This provided for the removal of tens of thousands of gallons, as well as thousands of pounds of toxic waste, storage tanks, and various containers, at no cost to the City. WDC is currently managing environmental studies of the area along with obtaining cost estimates for the demolition and debris removal of the remaining structures at the site. WDC continues to seek grant-funding opportunities as well as meet with potential developers in furtherance of WDC’s attempts to clean and re-purpose the area.

Mad River Redevelopment Project, In November 2016, the State Bond Commission approved $1.7 million in funding for the construction of Phase I of the three phase Brass Harvest Regional Food Hub on a 1.3-acre lot located on the banks of the Mad River owned by the City of Waterbury. WDC is the project manager. The Food Hub will allow for the remediation of the land and construction of a 6,000 square foot facility to provide a “farmers market” in this densely populated inner-city area. Lot clearing and remediation are currently scheduled for spring 2018, followed immediately by construction of the wash building facility. Upon completion of all three phases of the project, a total of 3.5 acres of former brownfields along the banks of the Mad River will be remediated. WDC continues to pursue its course of environmental testing of various other sites adjacent to the Mad River. WDC also continues to purse grant funding opportunities to continue the cleanup and remediation of this geographic area.

Risdon Property, Located at 2100 South Main Street across the street from the Naugatuck River is the 3.1-acre site of the former Risdon Manufacturing. For over one hundred years, this was the site of a metals manufacturing and finishing facility for the cosmetics industry. On December 31, 2016, a massive fire destroyed much of the facility. WDC is in receipt of a $135,000 grant from the State Department of Economic and Community Development (DECD) to perform environmental testing of the site. In July 2017, WDC was named as a finalist for $2 million in DECD grant funding for the demolition, debris removal, and remediation of the site. If awarded the funds, work will begin in spring 2018 and should be completed by fall 2018. Based upon WDC’s presentation to DECD, WDC remains highly optimistic that this grant funding opportunity will be awarded in the very near future.

21 Waterbury Development Corporation (WDC) - Industrial Development

Waterbury Industrial Commons Site Remediation and Redevelopment, On July 19, 2010 the City approved a $60.4 million bonding and grant financing appropriation for the acquisition, clean-up/remediation and renovation of the Waterbury Industrial Commons Property located at 1875 Thomaston Avenue. In the fall of 2011, demolition began on the southern portion of the “Mile Long Mill” facility formerly the site of the Chase Brass and Copper manufacturing plant. Approximately 186,000 square feet of the northern portion of the facility has been rehabilitated and expanded to accommodate growth by existing tenants resulting in over 200,000 square feet of industrial space. The end result of this phase of the project is a remediated site that the City has leased to large-scale industrial tenants resulting in increased lease income, tax revenue and employment opportunities. The project, funded with $15 million in federal Department of Defense grant funds and local bond authorization commitments, has resulted in one of the largest remediated industrial or manufacturing ready sites in New England. Long-term lease agreements are in place with three major tenants. Among them is LUVATA, an international company whose Waterbury plant, due to recent onsite expansion, has become the world’s single-largest manufacturer of superconducting wire used in the health-care industry.

In 2014, Mayor Neil M. O’Leary and Richard S. King signed closing documents on King Industry’s acquisition of 10.75 acres of a remediated brownfield industrial site at Waterbury Industrial Commons for $750,000. King Industries plans to invest $50 million for the construction of an 80,000 square foot manufacturing complex projected to create an estimated 180 construction jobs and upon completion over 200 permanent manufacturing jobs. Site development has been completed and the footings for the first of multiple buildings to be constructed were poured in September 2017.

Waterbury-Naugatuck Industrial Park, The City of Waterbury currently is the owner of a 107-acre parcel of land in an area known as the Naugatuck Industrial Park. A portion of Waterbury’s land is actually located within the confines of the Borough of Naugatuck. Past attempts at developing the site have always failed due to the significant development costs associated with accessing the site through Waterbury due to issues with the terrain, thus leaving the Waterbury parcel landlocked. WDC is currently engaged in a joint venture with the Borough of Naugatuck to unlock and develop Waterbury’s parcel through the purchase a privately owned lot through which a new access road will be constructed. Currently, this project has the support of the State Department of Economic and Community Development, the Naugatuck Valley Council of Governments, and area stakeholders. WDC is also currently working with outside legal counsel, environmental consultants, architects, and zoning officials on this project. Upon completion, this project plans to allow a single lot to host a building of over 800,000 square feet, or six to ten smaller lots hosting structures of various sizes. WDC plans to finalize the purchase of the lot by November 2017.

Education – School Construction and Renovation Program

The City and its school system are strongly committed to pre-kindergarten to twelfth grade education. The City embarked on an aggressive school construction program focused on meeting the needs of student enrollment and satisfying various deficiencies within the public school system nearly 10 years ago. Since then, two new pre-K through eighth grade neighborhood schools, Gilmartin and Duggan, were opened in August 2010 and August 2011, respectively. A third new pre-K through eighth grade school, Jonathan E. Reed, was opened in August 2012. A fourth new pre-K through eighth grade school, Carrington, along with a new technical high school, Waterbury Career Academy, were opened in August 2013. The new Waterbury Career high school, opened in August 2013, has relieved enrollment pressures on the City’s three comprehensive high schools and have provided Waterbury students with an alternative to the traditional high school curriculum with a focus on manufacturing, computer technology and human services. A $15 million project for a new media center and additional classroom space at the Wallace Middle school was completed in August 2015. A $25 million addition and alteration project to the Kennedy High School was completed in 2016.

Recent school building projects have focused on interior and exterior improvements. The Board of Education has received over $3 million in Alliance Capital grants from the State that has been used to replace lockers and to repave parking lots and entrances at several schools. Additionally, the Board of Education has received approval and 78% funding commitments from the State for new installation of elevators in four (4) elementary schools. The roof at West Side Middle School was replaced this past summer with 78% project funding provided by the State.

In the summer of 2016, the City’s Board of Aldermen and Board of Education approved a $29.1 million Energy Savings Performance Contract with NORESCO, LLC. Fourteen (14) comprehensive energy savings measures are being completed over a 24-month period that will provide for guaranteed annual energy use savings currently valued at $1.6 million in the year following substantial completion. Additionally, these energy conservation measures have qualified for $3.7 million in energy efficiency incentives offered by Eversource that will directly reduce the project’s capital cost amount to be financed. Project scope highlights include reductions of 22% of electric 22 consumption and 27% reduction in fuel consumption; comprehensive interior and exterior LED lighting upgrades encompassing retrofitting and re-lamping of over 34,000 fixtures; installation of thirty (30) new gas-fired boilers; city- wide upgrade of building energy management systems (EMS) to direct digital control (DDC) – over 4,800 control points installed; and installation of 94 kW of solar photovoltaics.

Having a strong, vibrant school system that additionally offers career directed course curriculum options at the high school level are considered a critical part of the City’s overall sustainability and economic development strategies.

Blight Demolition Program

In January 2012, the Mayor announced an anti-blight campaign concentrated in inner city neighborhoods in the north and south ends of the City. The City and the WDC maintain this aggressive Anti-Blight/Demolition Program. The City’s blight taskforce consisting of the Building Official, Fire Marshal, and representatives from the Health Department, City Planning Department, Police Department, Mayor’s Office and the WDC meets weekly. The taskforce meets to discuss and prioritize properties slated for demolition. The City has a large number of properties that are vacant or that contain vacant and dilapidated buildings. The existence of these vacant and blighted properties/buildings contributes to the decline of our City’s neighborhoods. It is further evident that the existence of these properties adversely affects the economic wellbeing of the City and is detrimental to the health, safety and welfare of City residents. The City utilizes the emergency powers of the Building Official for condemnation purposes to effect demolition of these rundown structures. Vacant/abandoned/foreclosed units are purchased, rehabilitated and put back into active use on the City’s Grand List as part of this program or committed to open space for the benefit of the neighborhood. The City has committed $1.7 million under two separate bond authorizations approved by the City to continue this initiative.

Community Development Block Grant Program (CDBG)

The City annually allocates a portion of its CDBG award to upgrade and improve parks and other community based facilities.

The following projects were completed during this past year: • Fire Station # 6, improvements $259,000 • Washington Park Community Center, new window and doors $220,912 • Lakewood Park parking lot project $383,407 • Lakewood Park bathhouse roof and carousel $139,455 • Berkeley Warner and Hopeville Park splash pads $165,527

The following projects are currently underway: • Silas Bronson Library Plaza entry project $441,952 • Lakewood Park new double handball court $129,134 • New public restrooms for City Mills Park and Waterville Park $440,000 • Fulton Park wading pool improvements $281,397

The following projects received allocations in the (2017-2018) Annual Action Plan: • North End Recreation Center air conditioning for gym $227,799 • River Baldwin Recreation Center air conditioning for gym $162,338 • Huntingdon Park new public bathrooms $292,971 • Curtin Park new splash pad $102,618 • Martin Luther King Park new splash pad $102,618 • Hamilton Park new splash pad $102,618 • Police Activity League Recreation Center new generator $137,618

23 Recreation and Cultural Development

Municipal Stadium, Municipal Stadium is the main athletic facility for the City with multiple baseball fields and a 130,000-square-foot synthetic football field. The City, with the assistance of DECD, completed a $4.5 million renovation of the facility in January 2016 to meet the growing needs of City athletes including the installation of a 1,800-person capacity aluminum grandstand. The project consisted of the installation of the aluminum decking system, the completion of the repointing (restoration) of the granite façade, the installation of parapet capstones atop the main wall, and the restoration of the main entrance, egress lighting and site lighting. The renovated facility has hosted the Roberto Clemente Word Series, the Mickey Mantle World Series and the Stan Musial World Series the past two summers attracting teams, parents and relatives from all over New England to Waterbury, benefiting local lodging and restaurant establishments. Plans to further utilize the renovated facility and grandstand include adding outdoor concert performances with the first scheduled for October 7, 2017.

Naugatuck River Greenway Project, Significant grant money has been awarded to the City for the physical construction of Phase I of a Greenway along the banks of the Naugatuck River. It is believed that the Greenway Project will reconnect residents of the City and the region with the Naugatuck River, encourage the use of alternate means of transportation, foster significant riverfront redevelopment and further Brownfield remediation, as well as promote healthier lifestyles and an improved quality of life. The Project includes the planning, final design and engineering, right-of-way acquisition, and construction of a greenway approximately 2.2 miles long along the Naugatuck River. Federal and State grants secured for the Phase I construction of the Greenway are anticipated to fund $7.4 million or nearly 80% of the estimated project cost of $9.5 million. Construction of the Greenway is expected to begin in 2018.

Debt Management

The City is strongly committed to attaining the right balance of capital renewal and reinvestment within the City over time. Each and every bond authorization submitted for approval by the City’s governing body is critically evaluated beforehand by the City’s Administration. All merits of the project are evaluated to ensure the project fully warrants committing the City’s bonding capacity for the identified purpose. The City aggressively seeks grant assistance to reduce local support needed for project authorizations. The level of grant assistance is part of the approval evaluation process. Additionally, a return on investment in the form of annual operating cost reductions or new operating revenue sources are considered in the approval evaluation process of each bond authorization. The City’s bond authorization and debt issuance program is designed to manage in increases to the City’s annual debt service commitment over the next 5 years, then leveling off at an annual debt service cost in the 5%-6% range of total budget. A level annual debt service commitment in that 5%-6% range of total budget will provide for continual capital investment opportunities in education facilities, infrastructure and economic development initiatives for the long-term betterment of the City, its residents and businesses and to provide long-term sustainability of the City for generations to come.

Budget

The budget development process begins with City departments submitting estimates of expenditures to the Mayor no later than the second Friday in January each year. The Mayor submits a general and capital budget to the Board of Aldermen on or before April 1, which is subject to at least two required public hearings and final action not later than midnight of the second business day following the first Wednesday after the first Monday in June.

The Mayor’s proposed budget for FY2018 was submitted to the Board of Aldermen on March 29, 2017. Two public hearings were held and the Board of Aldermen conducted several budget subcommittee meetings to review the Mayor’s proposed budget with the Mayor, the Director of Budget and each Department Head. The FY2018 budget was adopted on June 8, 2017.

Current budget performance is monitored on a weekly basis encompassing budget to actual analysis on all General Fund revenue and expenditure accounts. A Cost Containment and Oversight Committee (CCOC) meets weekly to review the budget performance results presented by the Budget Office. The close monitoring of budget performance and regular meetings of the CCOC allow for additional budget control measures to be implemented timely when deemed necessary. For more than ten years running, the City has produced fiscal year end budget surpluses while at the same time not drawing upon any designation of fund balance built into the budget. Generating budgetary surpluses each year is a testament to the efforts of the Budget Office, the CCOC and the fact that the City’s adopted budget is based on sound principals, reasonable expectations and is not reliant upon one-time revenues.

24 Finance

The Finance Department, overseen by the Director of Finance, is comprised of several divisions including Tax, Assessment, Purchasing, Risk Management, Treasury, Accounts Payable, Payroll and Pension and Benefits. The City’s management is responsible for establishing and maintaining an internal control structure designed to ensure that its assets are protected from loss, theft or misuse, and to ensure that adequate accounting data is compiled to manage spending within prescribed budget limitations and for the preparation of financial statements in conformity with generally accepted accounting principles. The internal control structure is designed to provide reasonable, but not absolute, assurance that these objectives are met.

Comprehensive Annual Financial Report (CAFR) - The Finance Department submitted the City’s Comprehensive Annual Financial Report for the fiscal year ending June 30, 2016 to the Government Finance Officers Association for certification. For the tenth (10) consecutive year the City’s Comprehensive Annual Financial Report was awarded the “Certificate of Achievement for Excellence in Financial Reporting.” The Certificate of Achievement is the highest form of recognition in the area of governmental accounting and financial reporting, and its attainment represents a significant accomplishment of the Department of Finance. In order to receive the Certificate of Achievement, the Department of Finance published an easily readable and efficiently organized comprehensive annual financial report. The 2016 Comprehensive Annual Financial Report satisfies both accounting principles generally accepted in the United States of America and applicable legal requirements.

Financial Statement Audit - On December 16, 2016 the City’s Independent Auditor issued an unqualified opinion on the City’s 2016 Comprehensive Annual Financial Report (CAFR) representing that in their opinion, “The financial statements present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information of the City of Waterbury, Connecticut, as of June 30, 2016”. The Independent Auditor did not identify any deficiencies in the City’s internal controls over financial reporting. Additionally, the Independent Auditor did not identify any instances of noncompliance or other matters that would be required to be reported under Governmental Auditing Standards. The audit of the City’s financial statements for the fiscal year ended June 30, 2017 is currently being performed.

Educational Services School Enrollment Historical Elementary Middle High School Year K - 5 & Pre-K 6 - 8 9 - 12 Total 2007-2008 9,583 4,219 4,482 18,284 2008-2009 9,591 4,307 4,326 18,224 2009-2010 9,438 4,176 4,526 18,140 2010-2011 9,321 4,147 4,681 18,149 2011-2012 9,282 4,050 4,730 18,062 2012-2013 9,501 4,077 4,809 18,387 2013-2014 9,720 4,026 4,876 18,622 2014-2015 9,761 4,099 4,938 18,798 2015-2016 9,637 4,206 4,912 18,755 2016-2017 9,750 4,308 4,952 19,010

School Year Projected Total 2017-2018 9,785 4,341 4,968 19,094 2018-2019 9,805 4,421 4,976 19,202 2019-2020 9,825 4,479 5,025 19,329

Source: City ofWaterbury, Board ofEducation

25 Employee Relations and Collective Bargaining

Municipal Employees 1

2017 2016 2015 2014 2013 General Government……………….. 1,044 1,052 1,058 1,073 1,070 Board of Education………………… 2,196 2,215 2,273 2,287 2,240 Grant Funded…………………………. 403 414 414 416 382 Total Municipal Employees………………………………3,643 3,681 3,745 3,776 3,692

1 As ofJuly 1 each fiscal year Employee Relations

Positions Current Contract General Government Organization Covered Expiration Date Blue Collar Unit ………………………………………………...Local 353 458 6/30/2018 White Collar Unit ……………………………………Employee Association 712 6/30/2017 1 Police ……………………………………………..Local 1237 257 6/30/2017 1 Fire………………………………………………..Local 1339 219 6/30/2017 1 Supervisors/Management ………………………………Local 2090 79 6/30/2018 Nurses……………………………………………………CT Health Care 44 6/30/2020 Nurses Supervisors …………………………………….CT Health Care 3 6/30/2017 1 Total General Government Employees……………………..……………………………..……1,772

Positions Current Contract Board of Education Organization Covered Expiration Date Teachers…………………………………………………Teachers CEA-NEA 1,613 6/30/2019 School Administration…………………………………………………S.A.W. Local 80 97 6/30/2018 Secretarial/Clerical…………………………………………………UPSEU Local 424 54 6/30/2018 Food Service, Library Pages, Office Aides CSEA Local 2001 215 6/30/2019 Crossing Guards…………………………………………………Unaffiliated 63 6/30/2016 1 Classroom & Transportation Assistants………………………………UPSEU Local 424 64 6/30/2018 Total Board of Education Employees……………………….……………………………..……2,106 Total General Government & Board of Education Employees……………………….……………………………..……3,878

1 In Negotiation. Source: City ofWaterbury

Section 7-473c and 7-474 of the Connecticut General Statutes, as amended, provides a procedure for binding arbitration of collective bargaining agreements between municipal employers and organizations representing municipal employees, except certified teachers and administrative personnel.

Section 10-153f of the Connecticut General Statutes, as amended, provides a procedure for binding arbitration of collective bargaining agreements between local or regional boards of education and the exclusive representative of a bargaining unit of teachers or administrators.

26 III. Economic and Demographic Information

Population and Density Actual Year Population 1 % Increase Density 2 2015 3 109,551 -0.4% 3,884.8 2010 109,941 2.5% 3,898.6 2000 107,271 -1.6% 3,803.9 1990 108,961 5.5% 3,863.9 1980 103,266 -4.4% 3,661.9 1970 108,033 - 3,831.0

1 U.S. Department ofCommerce, Bureau of Census. 2 Per square mile: 28.2 square miles. 3 American Community Survey 2011-2015

Age Distribution of the Population

City of Waterbury State of Connecticut Age Number Percent Number Percent Under 5 years ………………………………191,445 5.3% 7,887 7.2% 5 to 9 years ………………………………214,983 6.0 7,148 6.5 10 to 14 years ………………………………231,075 6.4 7,925 7.2 15 to 19 years ………………………………255,286 7.1 7,995 7.3 20 to 24 years ………………………………237,578 6.6 8,185 7.5 25 to 34 years ………………………………436,678 12.2 15,367 14.0 35 to 44 years ………………………………448,840 12.5 14,618 13.3 45 to 54 years ………………………………556,454 15.5 15,004 13.7 55 to 59 years ………………………………259,565 7.2 6,185 5.6 60 to 64 years ………………………………219,040 6.1 5,824 5.3 65 to 74 years ………………………………291,955 8.1 7,174 6.5 75 to 84 years ………………………………162,332 4.5 3,739 3.4 85 years and over ………………………………87,991 2.4 2,500 2.3 Total……………………………… 3,593,222 100% 109,551 100%

Median Age (Years) 2015……………. 35.2 40.4 1 Median Age (Years) 2010……………. 34.7 40.0

1 U.S. Department ofCommerce, Bureau of Census, 2010. Source: American Community Survey 2011-2015

Income Distribution City of Waterbury State of Connecticut Income Families Percent Families Percent $ 0 - $ 9,999………………………………..2,522 9.9% 30,926 3.5% 10,000 - 14,999………………………1,437 5.7 18,063 2.0 15,000 - 24,999………………………3,259 12.8 46,085 5.1 25,000 - 34,999………………………2,476 9.8 55,715 6.2 35,000 - 49,999………………………3,309 13.0 83,173 9.3 50,000 - 74,999…………………………4,831 19.0 139,724 15.6 75,000 - 99,999…….……………………3,249 12.8 126,557 14.1 100,000 - 149,999………………………2,820 11.1 183,030 20.4 150,000 - 199,999……………………….945 3.7 94,575 10.6 200,000 and over………………………..525 2.1 117,791 13.2 Total………………….…………… 25,373 100.0% 895,639 100.0% Source: American Community Survey 2011-2015

27 Income Levels City of State of Waterbury Connecticut Per Capita Income, 2015……………………………….…..$ 20,685 $ 38,803 Per Capita Income, 2010……………………………….…..$ 21,545 $ 36,775

Median Family Income, 2015……………………………….…..…….$ 48,177 $ 89,031 Median Family Income, 2010 ……………………………….…..…….$ 47,077 $ 84,170

Source: American Community Survey 2011-2015

Educational Attainment Persons 25 Years and Older

City of Waterbury State of Connecticut Number Percent Number Percent Less than 9th grade………………………………………..……..105,725 4.3% 6,607 9.4% 9th to 12th grade…………………………………………………..……..144,132 5.9 …. 8,097 11.5 High School graduate…………………………………………..……..673,973 27.4 …….. 25,716 36.5 Some college, no degree………………………………………..……..430,129 17.5 …….. 13,680 19.4 Associate's degree ……………………………………………..……..183,289 7.4 ……... 5,625 8.0 Bachelor's degree………………………………………………..……..516,001 21.0 ……. 6,671 9.5 Graduate or professional degree……………………………………..……..409,606 16.6 4,015 5.7 Total………………………………………………………2,462,855 100.0% 70,411 100.0%

Total high school graduate or higher (%)………………. 78.8% 89.2% Total bachelor's degree or higher (%)…………………… 16.1% 36.5% Source: American Community Survey 2011-2015

Major Employers As of September 2017

Employer Nature of Business Employees City of Waterbury…………………………………………..Government Services 3,643 Waterbury Hospital…………………………………………..Medical & Mental Health Services 2,000 St Mary’s Hospital…………………………………………..Medical Services 1,903 Naugatuck Valley Community College…………………………………………..Higher Education 951 POST University…………………………………………..Higher Education 530 Stop & Shop Companies…………………………………………..Grocery 441 Wal-Mart…………………………………………..Household Retail 318 Webster Bank…………………………………………..Banking/Financial Services 235 Village Green of Waterbury…………………………………………..Assisted Living 229 MacDermid, Inc.…………………………………………..Manufacturing 200 Clydel Mfg. & Co.…………………………………………..Manufacturing 194 Source: City of Waterbury, Economic Development.

28 Employment by Industry

City of Waterbury State of Connecticut Sector Number Percent Number Percent Agriculture, forestry, fishing and hunting, and mining…………………………………. 7,214 0.4% 143 0.3% Construction…………………………………. 100,593 5.6 2,373 5.2 Manufacturing………………………………… 191,286 10.7 6,646 14.6 Wholesale trade………………………………. 44,581 2.5 1,218 2.7 Retail trade……………………………………..193,799 10.9 5,816 12.8 Transportation warehousing, and utilities………………………………...…….66,850 3.8 2,029 4.5 Information………………………………..…… 41,486 2.3 732 1.6 Finance, insurance, real estate, and leasing…. 163,822 9.2 2,104 4.6 Professional, scientific, management, administrative, and waste management………199,942 11.2 3,125 6.9 Education, health and social services………. 471,587 26.5 12,740 28.0 Arts, entertainment, recreation, accommodation and food services………. 153,516 8.6 4,066 8.9 Other services (except public admin.)…… 79,998 4.5 2,401 5.3 Public Administration………………………… 66,743 3.7 2,170 4.8 Total Labor Force, Employed……………. 1,781,417 100.0% 45,563 100.0% Source: American Community Survey 2011-2015

Employment Data Percentage Unemployed City of Waterbury City of Waterbury State of Period Employed Unemployed Waterbury Labor Market Connecticut July 2017 ……………………………48,238 4,038 7.7 6.0 5.0 Annual Average 2016………………………..46,547 4,272 8.4 6.5 5.3 2015………………. 47,026 4,787 9.2 7.1 5.6 2014………………………..45,010 5,490 10.9 8.9 6.7 2013………………. 43,445 6,402 12.8 10.5 7.9 2012………………. 44,962 6,735 13.0 10.9 8.3 2011………………. 43,770 7,050 13.9 11.5 8.8 2010………………. 45,404 7,545 14.2 12.4 9.0 2009………………. 43,790 6,821 13.5 11.1 8.2 2008………………. 45,191 4,547 9.1 7.5 5.7 2007……………………45,796 3,680 7.4 5.7 4.6 Source: State ofConnecticut, Department ofLabor.

(The remainder of this page intentionally left blank)

29 Age Distribution of Housing City of Waterbury State of Connecticut Year Built Units Percent Units Percent 1939 or earlier……………………….………15,048 31.8% 331,829 22.2% 1940 to 1969……………………….……………15,892 33.6 536,501 36.0 1970 to 1979………………….…………………5,940 12.5 199,447 13.4 1980 to 1989…………………….………………6,233 13.2 193,595 13.0 1990 to 1999………………….……….. 2,886 6.1 115,076 7.7 2000 or 2009………………….……….. 1,331 2.8 103,911 7.0 2010 or later………………….……….. 26 0.1 11,427 0.8 Total …………………………………47,356 100.0% 1,491,786 100.0% Source: American Community Survey 2011-2015

Housing Inventory

City of Waterbury State of Connecticut Housing Units Units Percent Units Percent 1-unit, detached………………………..………………………..17,524 37.0% 882,941 59.2% 1-unit, attached………………………..………………………..1,621 3.4 80,636 5.4 2 units………………………..………………………..5,362 11.3 121,410 8.1 3 or 4 units………………………..………………………..9,762 20.6 132,512 8.9 5 to 9 units………………………..………………………..4,777 10.1 82,727 5.5 10 to 19 units………………………..………………………..3,055 6.5 55,826 3.7 20 or more units………………………..………………………..5,147 10.9 123,561 8.3 Mobile home………………………..………………………..77 0.2 11,898 0.8 Boat, RV, van, etc.………………………..………………………31 0.1 275 0.0 Total Inventory………………………………………………………………47,356 100.0% 1,491,786 100.0% Source: American Community Survey 2011-2015

Owner Occupied Housing Values

City of Waterbury State of Connecticut Specified Owner-Occupied Units Number Percent Number Percent Less than $50,000………..……………….…1,005 5.4% 24,620 2.7% $50,000 to $99,000………………………….…3,516 19.0 28,771 3.2 $100,000 to $149,999………………………..…6,610 35.8 78,066 8.6 $150,000 to $199,000……………………….…4,643 25.1 140,544 15.5 $200,000 to $299,999……………………….…2,091 11.3 251,106 27.7 $300,000 to $499,999……………………...……412 2.2 235,670 26.0 $500,000 or more……………………...…… 140 0.8 106,965 11.8 $1,000,000 or more……………………………….49 0.3 40,485 4.5 Total……………………………………………18,466 100.0% 906,227 100.0%

Median Value……………………………. $134,500 $270,500

Source: American Community Survey 2011-2015

30 Building Permits

The following is a schedule of building permits and their estimated values over the last ten years:

Fiscal Year Residential Commercial Total Ended 6/30 No. Value No. Value No. Value 2017 941 $19,337,500 182 $25,593,000 1,123 $44,930,500 2016 1,111 19,861,000 217 24,796,000 1,328 44,657,000 2015 935 15,025,000 204 30,140,000 1,139 45,165,000 2014 1,012 16,280,000 191 38,976,000 1,203 55,256,000 2013 966 13,881,000 230 14,047,000 1,196 27,928,000 2012 879 13,542,800 225 64,372,366 1,104 77,915,166 2011 879 10,885,800 205 40,507,000 1,084 51,392,800 2010 904 10,344,656 191 58,217,446 1,095 68,562,102 2009 863 11,646,573 206 35,520,576 1,069 47,167,149 Source: City of Waterbury - Building Department

Land Use Summary

Type Acres Percent Residential…………………………………………………..6,622 35.5 Commercial/Office…………………………………..1,048 5.6 Industrial ………………………………………………………1,042 5.6 Institutional …………………………………………………1,115 6.0 Vacant Land ………………………………………………..3,361 18.0 Open Space ……………………………………………..2,104 11.3 Other (resource extraction, water, etc.)……………………..3,348 18.0 Total……………………………………. 18,640 100.0 Source: City of Waterbury, Economic Development.

City Zoning Districts

Type Acres Percent Arterial Commercial District…………………………………………………..1,633 8.8 Central Business District…………………………………..304 1.6 General Commercial District………………………………………………………320 1.7 Neighborhood shopping district …………………………………………………52 0.3 Commercial Office District ………………………………………………..253 1.4 General Industrial District ………………………………..584 3.1 Limited Industrial District………………………………716 3.9 Industrial Park District………………………………………670 3.6 High Density Residential District………………………..123 0.7 Low Density Residential District…………………………5,322 28.7 Moderate Density Residential District…………………..2,264 12.2 Residential Office District………………………………87 0.5 Single-Family Residential District…………………….2,861 15.4 Large Lot Single-Family Residential District … 3,370 18.2 Total…………………………………………………………………………….18,559 100.0 Source: City of Waterbury, Zoning Commission.

31 IV. Tax Base Data

Property Tax - Assessments

The maintenance of an equitable tax base and the location and appraisal of all real and personal property within the City for inclusion onto the Grand List are the responsibilities of the Assessor’s Office. The Grand List represents the total assessed values for all taxable real and personal property and motor vehicles located within the City as of October 1. Each year the Board of Assessment Appeals determines whether adjustments to the Assessor’s list on assessments under appeal are warranted. Assessments for real property are computed at 70% of the estimated market value at the time of the last general revaluation while assessments for motor vehicles and personal property are computed at 70% of their present market values.

In accordance with Connecticut General Statutes, the City conducted a full revaluation of real property effective as of October 1, 2012 (commencing tax fiscal year 2013-2014). The next full general revaluation will be on October 1, 2017 (commencing tax fiscal year 2018-2019). Section 12-62 of the Connecticut General Statutes establishes the revaluation cycle for Connecticut municipalities. Generally, Section 12-62, as amended, requires a revaluation every five years and requires the Assessor to fully inspect each parcel, including measuring or verifying the exterior dimensions of a building and entering and examining the interior of the building, once every ten assessment years. Section 12-62 also imposes a penalty on municipalities that fail to effect revaluations as required, with certain exceptions. Municipalities may choose to phase-in real property assessment increases resulting from a revaluation, but such phase-in must be implemented in less than five years. The City did not utilize the phase-in option for real property increases on the October 1, 2012 revaluation.

When a new structure, or modification to an existing structure, is undertaken, the Assessor’s Office receives a copy of the permit issued by the Building Official. A physical appraisal is then completed and the structure is classified and priced from a schedule developed at the time of the last general revaluation. Property depreciation and obsolescence factors are also considered when arriving at an equitable value.

All personal property (furniture, fixtures, equipment, supplies and machinery) is revalued annually. An Assessor’s check and audit is completed periodically.

Motor vehicle lists are furnished to the City by the State of Connecticut Department of Motor Vehicles and appraisals of motor vehicles are accomplished in accordance with an automobile price schedule recommended by the State Office of Policy and Management in cooperation with the Connecticut Association of Assessing Officials. Connecticut General Statutes Section 12-71b, as amended, provides that motor vehicles that are registered with the Commissioner of Motor Vehicles after the October 1 assessment date but before the next August 1 are subject to a property tax as if the motor vehicle has been included on the October Grand List. The tax is prorated and the proration is based on the number of months of ownership between October 1 and the following July 31. Motor vehicles purchased in August and September are not taxed until the next October 1 Grand List. The tax is not due until January 1st, a year and three months after the Grand List date.

Property Tax - Levy

Property taxes are levied on all taxable assessed property on the Grand List of October 1 prior to the beginning of the fiscal year. Real and personal property taxes and motor vehicle taxes are payable in two installments on July 1 and January 1, except that taxes under $200 are payable in one installment on July 1. Motor vehicle supplemental bills are payable on January 1. A modest estimate for outstanding interest and lien fees anticipated to be collected during the fiscal year is normally included as a revenue item in the budget. Payments not received within one month after the due date become delinquent, with interest charged at the rate of one and one-half percent per month from the due date on the tax. In accordance with State law, the oldest outstanding tax is credited first. Outstanding real estate tax accounts are liened each year prior to June 30 with legal demands and alias tax warrants used in the collection of personal property and motor vehicle tax bills. Tax accounts are written off 15 years after the due date in accordance with State statutes.

Property tax revenues are recognized when they become available. Available means due or past due and receivable within the current period or expected to be collected, but within 60 days, to be used to pay liabilities of the current period. Property taxes receivable not expected to be collected during the available period are reflected as deferred revenue.

Section 12-165 of the Connecticut General Statutes, as amended, requires each municipality to suspense, on an annual basis, the property taxes, which are deemed to be uncollectible.

32 Comparative Assessed Valuations (Exclusive of Supplemental Motor Vehicles)

Exemptions, Grand Commercial Gross Veterans Net List Residential & Industrial Taxable Relief and Taxable As Of Real Real Other Personal Motor Grand List Disabled Grand List Percent 10/1 Property Property Land Property Vehicle (000's) (000's) (000's) Growth 2016 52.9 21.6 1.2 14.1 10.2 $ 4,352,411 $ 202,005 $ 4,150,406 1.4% 2015 52.7 21.6 1.1 15.1 9.5 4,364,715 270,934 4,093,781 0.5% 2014 53.0 21.8 1.1 14.9 9.2 4,355,136 280,288 4,074,848 1.6% 2013 54.7 23.5 1.2 11.0 9.6 4,189,743 178,221 4,011,522 -0.1% 2012 1 54.5 23.3 1.2 11.7 9.3 4,207,939 191,507 4,016,432 -24.3% 2011 60.8 22.2 1.3 8.7 7.0 5,524,610 216,808 5,307,802 0.1% 2010 60.7 22.8 1.3 8.6 6.6 5,537,416 237,271 5,300,145 0.4% 1 Revaluation. Source: City of Waterbury, Assessor’s Office.

Property Tax Levies and Collections

Percent of Percent of Percent of Fiscal Net Annual Levy Annual Levy Annual Levy Grand Year Taxable Adjusted Collected at Uncollected Uncollected List of Ending Grand List Mill Annual Levy End of at End of as of 10/1 6/30 (000's) Rate (000's) Fiscal Year Fiscal Year 6/30/2017 2016 2018 $ 4,150,406 60.21 $ 242,885 In Collection 2015 2017 4,093,781 60.21 239,100 97.4% 2.6% 1.5% 2014 2016 4,074,848 58.22 240,019 97.0 3.0 0.6 2013 2015 4,011,522 58.22 232,261 97.4 2.6 0.2 2012 1 2014 4,016,432 56.98 225,554 95.8 4.2 0.2 2011 2013 5,307,802 41.82 219,431 95.9 4.1 0.1 2010 2012 5,300,145 41.82 220,537 95.9 4.1 0.1 1 Revaluation. Source: City ofWaterbury, Tax Collector

Ten Largest Taxpayers Percent of Taxable Net Taxable Name of Taxpayer Nature of Business Assessed Value Grand List 1 Yankee Gas Services Company………………………………..Utility $ 159,389,690 3.84% Conn. Light & Power Co.………………………………..Utility 102,854,160 2.48% Brass Mill Center, LLC………………………………..Retail 67,860,410 1.64% Prospect Waterbury, Inc………………………………..Hospital 58,760,769 1.42% Waterbury Generation, LLC………………………………..Power Generation 46,803,980 1.13% BRE DDR BR Naugatuck CT LLC………………………………..Retail 29,770,860 0.72% Brass Mill Commons.………………………………..Retail 17,150,000 0.41% POST University Inc.………………………………..Higher Education 14,388,310 0.35% Brixmore GA Waterbury LLC………………………………..Retail 13,326,910 0.32% Waterbury MZL, LLC………………………………..Retail 13,241,510 0.32% Total……………………………………………………………………………………………..….$ 523,546,599 12.61% 1 Based on the Net Taxable Grand List ofOctober 1, 2016 of$4,150,406,000. Source: City of Waterbury, Assessor’s Office.

33 V. Debt Summary Principal Amount of Indebtedness As of November 28, 2017 (Pro Forma) Long-Term Debt

GENERAL OBLIGATION Long-Term Debt: Fiscal Original Amount Year of Purpose Date Interest Rate % Issue Outstanding 1 Maturity General Fund Debt Series 2007 Bonds 2/15/2007 3.80-4.50 $ 27,055,000 $ 25,580,000 2022 Series 2009, Pension Obligation Bonds 9/17/2009 2.71-7.09 313,145,000 255,045,000 2038 Series 2010 Bonds, Subseries B 9/1/2010 2.88-3.94 8,000,000 2,000,000 2018 Series 2010 Bonds, Subseries C 9/1/2010 4.19-6.10 24,175,000 24,175,000 2030 Series 2010 Bonds, Subseries D 9/1/2010 5.63 4,700,000 4,700,000 2027 Series 2011 Bonds 8/31/2011 2.00-5.00 28,700,000 21,442,000 2031 Series 2012ABonds 6/26/2012 3.00-5.00 20,000,000 15,630,000 2032 Series 2013 Bonds, Lot A 12/5/2013 4.00-5.00 16,500,000 16,500,000 2033 Series 2013 Taxable Bonds, Lot B 12/5/2013 1.178-4.591 9,000,000 8,000,000 2024 Series 2013 Refunding Bonds, Lot C 12/5/2013 2.00-5.00 10,776,300 4,451,400 2020 Series 2015 Bonds, Lot A 12/2/2015 3.00-5.00 22,000,000 23,000,000 2039 Series 2015 Bonds, Lot B 12/2/2015 1.929-3.605 8,000,000 7,000,000 2039 Series 2017ABonds* 11/28/2017 tbd 48,000,000 48,000,000 2048 Series 2017B Bonds* 11/28/2017 tbd 13,590,000 13,590,000 2030 Total General Fund Bonds……………………………………………………… $ 553,641,300 $ 469,113,400

Self-Liquidating Debt Sewer Bonds Series 2013 Refunding Bonds, Lot C 12/5/2013 2.00-5.00 $ 928,700 $ 383,600 2020 Total Sewer Bonds Sub-Total……………………………………………………… $ 928,700 $ 383,600 Water Bonds Series 2011 Bonds 8/31/2011 2.00-5.00 $ 1,300,000 $ 958,000 2031 Series 2012ABonds 6/26/2012 3.00-5.00 1,500,000 1,120,000 2032 Series 2017ABonds* 11/28/2017 tbd 2,000,000 2,000,000 2048 Total Water Bonds Sub-Total……………………………………………………… $ 4,800,000 $ 4,078,000 Total Self-Liquidating Bonds ……………………………………………………………………………………$ 5,728,700 $ 4,461,600 Total General Obligation Bonds……………………………………………………… $ 559,370,000 $ 473,575,000 1 Excludes bonds refunded or defeased.

REVENUE SECURED ONLY Long-Term Debt: Fiscal Original Amount Year of Purpose Date Interest Rate % Issue Outstanding1 Maturity Sewer Bonds WWTP State loan (CWF 201-C1) 12/31/2000 2.00 $ 80,563,282 $ 11,199,248 2020 WWTP State loan (CWF 344C) 10/30/2002 2.00 11,547,353 2,986,249 2022 WWTP State loan (CWF 351C) 10/31/2003 2.00 2,423,923 781,757 2023 WWTP State loan (CWF 351C1) 4/30/2004 2.00 2,953,070 972,919 2023 WWTP State loan (CWF 201CD1) 6/30/2004 2.00 1,137,959 221,375 2021 WWTP State loan (CWF) 11/30/2005 2.00 543,882 192,572 2023 WWTP State loan (CWF) 6/30/2007 2.00 225,929 52,517 2021 Total Sewer Bonds ………………………………………………………………………………………$ 99,395,398 $ 16,406,638 1 Excludes bonds refunded or defeased.

______* Preliminary, subject to change.

34 Coverage History of Tax Revenue Intercept Secured Bonds

The City’s outstanding bond series 2007 (the “Parity Bonds”) are secured by a tax revenue intercept mechanism established under an Indenture of Trust dated August 12, 1993 by and between the City and U.S. Bank National Association, as successor to Fleet National Bank, as trustee (the “Trustee”), as amended and supplemented (the “Intercept Indenture”). All tax revenues payable to the City are paid directly to the Trustee and are deposited into the Tax Revenue Fund. The tax revenues are then transferred to the Debt Service Fund and the Special Capital Reserve Fund until the applicable debt service and reserve requirements are satisfied for the benefit of the holders of the Parity Bonds. Only after the applicable debt service and reserve requirements are satisfied are remaining amounts paid to the City for the payment of other City expenditures, including the payment of the principal and interest on the Bonds. However, the City will pledge its full faith and credit to pay the principal of and interest on the Bonds, as described in “Security and Remedies” herein. The following outlines the historical debt service coverage on the Parity Bonds.

Current Property Intercept Tax Collected Coverage Ratio Date Annual Fiscal Debt Service within the Fiscal of Intercept Debt Service Year (000s) Year of Levy (000s) Debt Service Requirement Satisfied 2017 $ 2,139 $ 239,027 111.7x 7/06/16 and 1/13/17 2016 1,371 232,813 169.8x 7/03/15 and 1/04/16 2015 1,248 228,808 183.3x 7/01/14 and 1/12/15 2014 3,991 221,936 55.6x 7/02/13 and 1/03/14 2013 6,944 214,662 30.9x 7/05/12 and 1/03/13 2012 11,005 213,522 19.4x 7/07/11 and 1/16/12 2011 11,274 213,055 18.9x 7/06/10 and 1/25/11

Short-Term Debt As of November 28, 2017 (Pro Forma) The City has no outstanding short term debt as of the date of this official statement.

(The remainder of this page intentionally left blank)

35 Annual Bonded Debt Maturity Schedule 1 As of November 28, 2017 (Pro Forma)

Fiscal Year Total This Issue Cumulative Ended Principal Interest Debt Series A Series B Total Principal 6/30 Payments Payments Service Bonds* Bonds* Principal* Retired % 2018 2 $ 18,405,000 $ 21,739,580 $ 40,144,580 $ - $ - $ 18,405,000 3.9% 2019 22,785,000 23,507,586 46,292,586 1,670,000 1,395,000 25,850,000 9.3% 2020 23,325,000 22,280,714 45,605,714 1,670,000 1,370,000 26,365,000 14.9% 2021 22,980,000 20,995,649 43,975,649 1,670,000 1,140,000 25,790,000 20.4% 2022 24,110,000 19,687,140 43,797,140 1,670,000 1,125,000 26,905,000 26.0% 2023 20,475,000 18,295,676 38,770,676 1,670,000 1,355,000 23,500,000 31.0% 2024 20,475,000 17,097,021 37,572,021 1,670,000 1,365,000 23,510,000 36.0% 2025 20,475,000 15,885,381 36,360,381 1,670,000 1,380,000 23,525,000 40.9% 2026 20,475,000 14,635,152 35,110,152 1,670,000 885,000 23,030,000 45.8% 2027 20,325,000 13,366,494 33,691,494 1,670,000 890,000 22,885,000 50.6% 2028 20,425,000 12,117,181 32,542,181 1,670,000 895,000 22,990,000 55.5% 2029 20,525,000 10,851,709 31,376,709 1,665,000 895,000 23,085,000 60.4% 2030 20,525,000 9,570,048 30,095,048 1,665,000 895,000 23,085,000 65.2% 2031 20,525,000 8,291,168 28,816,168 1,665,000 - 22,190,000 69.9% 2032 18,025,000 7,091,325 25,116,325 1,665,000 - 19,690,000 74.1% 2033 15,855,000 6,012,845 21,867,845 1,665,000 - 17,520,000 77.8% 2034 15,855,000 4,974,515 20,829,515 1,665,000 - 17,520,000 81.5% 2035 13,980,000 3,982,760 17,962,760 1,665,000 - 15,645,000 84.8% 2036 13,480,000 3,050,380 16,530,380 1,665,000 - 15,145,000 88.0% 2037 12,480,000 2,155,500 14,635,500 1,665,000 - 14,145,000 91.0% 2038 12,480,000 1,285,620 13,765,620 1,665,000 - 14,145,000 94.0% 2039 12,000,000 425,340 12,425,340 1,665,000 - 13,665,000 96.8% 2040 - - - 1,665,000 - 1,665,000 97.2% 2041 - - - 1,665,000 - 1,665,000 97.5% 2042 - - - 1,665,000 - 1,665,000 97.9% 2043 - - - 1,665,000 - 1,665,000 98.2% 2044 - - - 1,665,000 - 1,665,000 98.6% 2045 - - - 1,665,000 - 1,665,000 98.9% 2046 - - - 1,665,000 - 1,665,000 99.3% 2047 - - - 1,665,000 - 1,665,000 99.6% 2048 - - - 1,665,000 - 1,665,000 100.0% Total……………………$ 409,985,000 $ 257,298,784 $ 667,283,784 $ 50,000,000 $ 13,590,000 $ 473,575,000

1 Excludes Refunded Bonds. 2 Excludes $4,450,000 in principal payments and $3,036,539 in interest payments made or coming due between July 1,2017 and November 28, 2017.

Revenue Supported Bond Debt Maturity Schedule 1

Fiscal Year Total Cumulative Ended Principal Interest Debt Principal 6/30 Payments Payments Service Retired % 2018 2 $ 3,459,569 $ 198,625 $ 3,658,194 21.1% 2019 5,276,544 210,748 5,487,291 53.2% 2020 5,383,047 104,258 5,487,305 86.1% 2021 1,041,017 36,163 1,077,180 92.4% 2022 937,493 15,405 952,897 98.1% 2023 308,968 2,839 311,808 100.0% Total……………………$ 16,406,638 $ 568,037 $ 16,974,675

1 Excludes Refunded Bonds.

2 Excludes $1,712,578 in principal payments and $116,519 in interest payments made or coming due between July 1, 2017 and November 28, 2017. ______* Preliminary, subject to change.

36 Overlapping/Underlying Debt

The City has no overlapping debt and as of the date of this Official Statement.

THE CITY HAS NEVER DEFAULTED IN THE PAYMENT OF PRINCIPAL OR INTEREST ON ITS BONDS OR NOTES

Debt Statement As of November 28, 2017 (Pro Forma) Long-Term Debt Outstanding: General Purpose (Includes this issue) *…………………………………………………...………………...…….$ 154,312,500 Schools (Includes this issue) *………………………………………………………………………….46,165,900 Sewers & Water …………………..………………………………………………………………………….4,461,600 Pension Bonds …………………………………………………………………………………………….255,045,000 Total Long-Term Debt………….…………………………………………………………………………….459,985,000 Short-Term Debt ……………………………………………………………………………………………. - Direct Debt……….…………….…..…………………………………………………………………………..459,985,000 Less: Self-Supporting Debt ………………………………………………………………………………………………………………(4,461,600) Direct Net Debt……….…………….…..…………………………………………………………………………..455,523,400 Overlapping / Underlying Debt ..…………….…..…………………………………………………………………………..- Total Overall Net Debt………………………………………………………………………………………..$ 455,523,400

Current Debt Ratios* As of November 28, 2017 (Pro Forma)

Population (2015) 1………………………………………………………....109,551 Net Taxable Grand List (10/1/16) ………………………...……$4,150,406,000 Estimated Full Value (70%)…………………….……………...…..$5,929,151,429 Equalized Grand List (10/1/14) 2…………………………...…$5,554,511,500 Money Income per Capita (2015) 1……………………….…………$20,685

Total Total Net Direct Debt Direct Debt Per Capita………………………………………………………$4,198.82 $4,158.09 Ratio to Net Taxable Grand List……………………………. 11.08% 10.98% Ratio to Estimated Full Value……………………………… 7.76% 7.68% Ratio to Equalized Grand List……………………………… 8.28% 8.20% Debt per Capita to Money Income per Capita (2015)…. 20.30% 20.10% 1 American Community Survey 2011-2015 2 Office ofPolicy and Management, State ofConnecticut.

______* Preliminary, subject to change.

37 Bond Authorization In accordance with Chapter 10 of the City Charter, the City has the power to incur indebtedness by authorizing the issuance of its bonds and notes for such purposes, upon such terms, in such form and to such extent as is authorized and permitted by Connecticut General Statutes and applicable Special Acts of the State. Unless otherwise provided by the General Statutes (as is the case for refunding bonds which are authorized solely by vote of the Board of Alderman) or applicable Special Acts, bonds and notes shall be authorized by the affirmative vote of at least 10 members of the Board of Aldermen following the holding of a public hearing. The authorization must be approved by the Mayor. However, if the Mayor fails to take action on it within 10 days, the authorization is deemed operative. If the Mayor vetoes the authorization, the veto may be overridden by a succeeding affirmative vote of at least 10 members of the Board of Aldermen. No bonds or notes shall be issued until 30 days after publication of a notice of the adoption of the bond authorization. If, during such 30 day period, a petition requesting a referendum is signed by at least 5% of the voters of the City and filed with the City Clerk, the Board of Aldermen shall either repeal the bond resolution or hold the referendum, at which a majority of voters must approve the bond authorization. Temporary Financing When general obligation bonds have been authorized, bond anticipation notes may be issued maturing in not more than two years (CGS Sec. 7-378). Temporary notes may be renewed up to ten years from their original date of issue as long as all project grant payments are applied toward payment of temporary notes when they become due and payable and the legislative body schedules principal reductions by the end of the third year and for all subsequent years during which such temporary notes remain outstanding in an amount equal to a minimum of 1/20th (1/30th for sewer projects and certain school building projects) of the estimated net project cost. The term of the bond issue is reduced by the amount of time temporary financing exceeds two years, or, for school and sewer projects, by the amount of time temporary financing has been outstanding.

Temporary notes must be permanently funded no later than ten years from the initial borrowing date, except for sewer notes issued in anticipation of state and/or federal grants. If a written commitment exists, the municipality may renew the notes from time to time in terms not to exceed six months until such time that the final grant payments are received (CGS Sec. 7-378b).

Temporary notes may also be issued for up to 15 years for certain capital projects associated with the operation of a waterworks system (CGS Sec. 7-244a) or a sewage system (CGS Sec. 7-264a). In the first year following the completion of the project(s), or in the sixth year following the issuance of such notes (whichever is sooner), and in each year thereafter, the notes must be reduced by at least 1/15 of the total amount of the notes issued by funds derived from certain sources of payment. Temporary notes may be issued in one year maturities for up to 15 years in anticipation of sewer assessments receivable, such notes to be reduced annually by the amount of assessments received during the preceding year (CGS Sec. 7-269a). Limitation of Indebtedness

Municipalities shall not incur indebtedness through the issuance of bonds which will cause aggregate indebtedness by class to exceed the following: General Purposes: 2.25 times annual receipts from taxation School Purposes: 4.50 times annual receipts from taxation Sewer Purposes: 3.75 times annual receipts from taxation Urban Renewal Purposes: 3.25 times annual receipts from taxation Unfunded Past Pension Purposes: 3.00 times annual receipts from taxation

“Annual receipts from taxation” (the “base”) are defined as total tax collections, including interest and penalties, late payment of taxes and state payments under CGS Section 12-129d and 7-528. In no case shall total indebtedness exceed seven times the base.

The statutes also provide for exclusion from the debt limit calculation debt issued (i) in anticipation of taxes; (ii) for the supply of water, gas, electricity; for the construction of subways for cables, wires and pipes; the construction of underground conduits for cables, wires and pipes; and for two or more of such purposes; (iii) in anticipation of the receipt of proceeds from assessments levied upon property benefited by any public improvement; (iv) in anticipation of the receipt of proceeds from State or federal grants evidenced by a written commitment, an allocation from the State Bond Commission or contract but only to the extent such indebtedness can be paid from such proceeds; (v) for certain water pollution control projects; and (vi) upon placement in escrow of the proceeds of refunding bonds or notes.

38 Statement of Debt Limitation As of November 28, 2017 (Pro Forma) Total Tax Collections (including interest and lien fees) received by the Treasurer for the year ended June 30, 2016………………………………………………………………………………………………………………..$ 239,027,000 Reimbursement For Revenue Loss (Tax relief for elderly)………………………………………………………………………… 2,000 Base for Debt Limitation Computation………………………………………………………………………………………………………………………$ 239,029,000

General Urban Unfunded Debt Limitation: Purpose Schools Sewers Renewal Pension 1 2 /4 times base…………………………………………$ 537,815,250 $ - $ - $ - $ - 1 4 /2 times base………………………………………… - 1,075,630,500 - - - 3 3 /4 times base………………………………………… - - 896,358,750 - - 1 3 /4 times base…………………………………………...………- - - 776,844,250 - 3 times base………………………………………… - - - - 717,087,000 Total Debt Limitation………………………………. $ 537,815,250 $ 1,075,630,500 $ 896,358,750 $ 776,844,250 $ 717,087,000

Indebtedness: Bonds Outstanding .…………………………………….$ 111,312,500 1 $ 41,165,900 $ 2,461,600 $ - $ 255,045,000 Bonds – This Issue*………………………………………43,000,000 5,000,000 2,000,000 - - Overlapping/Underlying Debt………………………………………- - - - - Debt Authorized But Unissued…………………………85,143,515 72,523,486 29,575,000 - - Total Indebtedness…………………………………. $ 239,456,015 $ 118,689,386 $ 34,036,600 $ - $ 255,045,000 Less: Self-Supporting Debt 1 ………………………………………………$ - $ - $ 4,461,600 $ - $ - Less: Federal Department of Defense Grant ………………………………………………15,362,650 - - - - Less: Expected School Construction Grants 2 ………………………………………………………………- 56,568,319 - - - Less: Expected State & Federal Grants 3 ………………………………………………………………23,450,000 - - - - Total Net Indebtedness………………………………….$ 200,643,365 $ 62,121,067 $ 29,575,000 $ - $ 255,045,000 DEBT LIMITATION IN EXCESS OF OUTSTANDING INDEBTEDNESS…………….$ 337,171,885 $ 1,013,509,433 $ 866,783,750 $ 776,844,250 $ 462,042,000 1 Represents Self-Supporting Sewer Bonds and Clean Water Fund notes.

2 The City expects to be reimbursed approximately 78% ofeligible project costs fromthe State in the formofprogress payments, thus reducing the need for borrowing by that amount for the project.

3 The City expects to receive $14.1 million from the Federal TIGER Grant Program, 80% reimbursement for the Waterbury Greenway -Phase I project, and 50% ofthe East Liberty Bridge Replacement project, thus reducing the need for borrowing by that amount. Note:In no case shall total indebtedness exceed seven times annual receipts from taxation or $1,673,203,000

______* Preliminary, subject to change.

(The remainder of this page intentionally left blank)

39 Authorized but Unissued Debt As of November 28, 2017 (Pro Forma) Received This Issue: Authorized Date Amount Previously Grants & Series A* But Unissued 1 Project Description Authorized Authorized Issued Paydowns Bonds Debt General Purpose: Waterbury Greenway - Phase I ……………………………………………………………………6 09/11/17 $ 9,500,000 $ - $ - $ - $ 9,500,000 Road Milling/Repaving ………………………………………………………………………………………………………09/11/17 2,000,000 - - - 2,000,000 Demolition of Abandoned Properties ………………………………………………………………………………………………………09/11/17 1,000,000 - - - 1,000,000 East Liberty Bridge Replacement7 ……………………………………………………………………09/11/17 3,500,000 - - - 3,500,000 Increased Recycling Project ……………………………………………………………………10/24/16 4,000,000 - 2,523,000 - 1,477,000 Road Milling/Repaving…………………………………………………………………08/22/16 3,000,000 - - 3,000,000 - City-Wide Energy Savings Project …………………………………………………………………07/18/16 30,000,000 - 774,872 15,000,000 14,225,128 W.A.T.E.R. - TIGER Project5 …………………………………………………………………02/17/15 19,500,000 - 1,263,242 3,000,000 15,236,758 Demolition of Abandoned Properties …………………………………………………………………10/20/14 750,000 - - 750,000 - Public Works - Vehicle Replacements …………………………………………………………………10/20/14 540,000 - - 500,000 40,000 Mobile & Portable Radios …………………………………………………………………10/20/14 3,550,000 3,300,000 - - 250,000 Acquisition of Rose Hill Campus …………………………………………………………………09/22/14 3,000,000 - 1,000,000 1,800,000 200,000 Fire Apparatus …………………………………………………………………01/28/14 500,000 400,000 - - 100,000 Road Milling/Repaving & Sidewalks …………………………………………………………………01/28/14 2,000,000 1,000,000 - - 1,000,000 Great Brook Culvert Replacement …………………………………………………………………11/25/13 3,100,000 - - - 3,100,000 Road Milling/Repaving & Sidewalks …………………………………………………………………03/11/13 3,000,000 2,700,000 - - 300,000 Pearl Lake Road Reconstruction …………………………………………………………………03/11/13 7,000,000 5,000,000 - 300,000 1,700,000 Public Safety Radio System Upgrade to P25 …………………………………………………………………06/25/12 4,500,000 4,100,000 - - 400,000 Municipal Stadium Phase III …………………………………………………………………02/06/12 4,800,000 1,500,000 1,029,721 2,250,000 20,279 Police Parking Garage …………………………………………………………………02/07/11 3,950,000 3,100,000 - - 850,000 Waterbury Industrial Commons & Centralized DPW Facility …………………………………………………………………07/19/10 85,420,000 25,500,000 15,362,650 16,000,000 28,557,350 Chase Avenue Reconstruction …………………………………………………………………09/03/08 8,205,000 6,770,000 - - 1,435,000 Sidewalk and Curb Improvements …………………………………………………………………09/03/08 600,000 - 80,000 400,000 120,000 Underground Tank Removal …………………………………………………………………07/21/08 282,000 150,000 - - 132,000

Education: 2 Elevators - Washington & Bunker Hill ………………………………………………………………………………………………09/11/17 1,185,000 - - - 1,185,000 Partial Roof Replacement - Sprague School ………………………………………………………………………………………………09/11/17 280,000 - - - 280,000 Elevators - Sprague, Chase, Kingsbury & Hopeville …………………………………………………………………08/22/16 1,700,000 - - - 1,700,000 Wendell Cross E.S. - Renovation & Addition …………………………………………………………………06/20/16 46,250,000 - - - 46,250,000 West Side Middel School Roof Replacement …………………………………………………………………10/20/14 3,040,000 - - - 3,040,000 Crosby High School - Football Field & Track …………………………………………………………………10/20/14 2,700,000 2,500,000 - - 200,000 Crosby High School - Gym Floor …………………………………………………………………10/20/14 260,000 - - 250,000 10,000 Kennedy High School Additions & Alterations …………………………………………………………………06/25/12 25,232,000 4,000,000 16,565,978 750,000 3,916,022 Wallace Middle School Addition …………………………………………………………………06/20/11 15,758,000 2,700,000 10,543,761 400,000 2,114,239 Carrington Pre-k to 8 School …………………………………………………………………05/20/13 37,043,326 7,300,000 26,524,971 1,000,000 2,218,355 Waterbury Career Academy Technical School …………………………………………………………………06/09/08 68,190,000 14,000,000 47,955,843 300,000 5,934,157 Wilby High School …………………………………………………………………06/09/08 6,700,000 1,000,000 3,735,437 500,000 1,464,563 Special Education Facility …………………………………………………………………11/19/07 14,635,000 2,500,000 9,660,424 500,000 1,974,576 School Facilities Plan …………………………………………………………………06/25/04 101,500,000 24,500,000 73,463,426 1,300,000 2,236,574

Bureau of Water - Enterprise: 3 Water Plant, Equipment System Renewal & Replacement …………………………………………………………………05/11/15 17,700,000 - - 800,000 16,900,000 Weater Filter Media Replacement WTP …………………………………………………………………10/20/14 840,000 - - - 840,000 Water - Rehabilitation of Water Mains …………………………………………………………………10/20/14 960,000 - - - 960,000 Water Meter Reading Program …………………………………………………………………10/11/11 2,500,000 1,500,000 - 500,000 500,000 Water Billing Technology …………………………………………………………………09/06/11 750,000 - - 700,000 50,000

Water Pollution Control - Enterprise: 4 WPC Plant, Equipment & Infrastructure Renewal & Replacement …………………………………………………………………05/11/15 10,325,000 - - - 10,325,000 Total...... $ 561,245,326 $ 113,520,000 $ 210,483,325 $ 50,000,000 $ 187,242,001 1 Date oforiginal authorization. Some authorizations have been amended. 2 The City expects to be reimbursed approximately 78% ofeligible project costs fromthe State in the formofprogress payments, thus reducing the need for borrowing by that amount for the project. 3 Water - Self-liquidating. Debt service to be paid by Water Enterprise Fund. 4 WPC -Self-liquidating. Debt service to be paid by WPC Enterprise Fund. 5 The City expects to receive $14.1 million from the Federal TIGER Grant Program, thus reducing the need for borrowing by that amount for the project. 6 The City expects to be reimbursed approximately 80% ofprojects costs from both State and Federal funding awarded to the Project. 7 The City expects to be reimbursed approximately 50% ofprojects costs from State funding awarded to the Project.

______* Preliminary, subject to change.

(The remainder of this page intentionally left blank)

40 Ratio of Net Long-Term Debt to Valuation, Population and Income

Ratio of Net Ratio of Net Ratio of Net Long-Term Long-Term Fiscal Long-Term Debt to Net Debt per Year Net Net Debt to Estimated Long-Term Capita to Ended Assessed Estimated Long-Term Assessed Full Debt per Per Capita 6/30 Value Full Value Debt 1 Value (%) Value (%) Population 2 Capita Income 3 2017 4 $ 4,093,781 $ 5,848,259 $ 431,271 10.53% 7.37% 109,551 3.94 0.02% 2016 4,074,848 5,821,211 450,233 11.05% 7.73% 109,551 4.11 0.02% 2015 4,011,522 5,730,746 441,631 11.01% 7.71% 109,551 4.03 0.02% 2014 4,016,432 5,737,760 461,824 11.50% 8.05% 109,551 4.22 0.02% 2013 5,307,802 7,582,574 456,735 8.60% 6.02% 109,551 4.17 0.02% 2012 5,300,145 7,571,636 476,544 8.99% 6.29% 109,551 4.35 0.02%

1 Long-Term debt does not include compensated absences or capital lease obligations. 2 Bureau ofCensus. 3 American Community Survey (2011-2015), Money Income Per Capita $20,685. 4 Subject to audit. Source: City ofWaterbury Audited Financial Reports 2012-2016.

Ratio of Total General Fund Debt Service Expenditures to Total General Fund Expenditures and Transfers Out Last Five Fiscal Years

Total Ratio of Total Debt Fiscal Year Total Debt General Fund Service to General Ended 6/30 Service Expenditures 1 Fund Expenditures 2018 3 $ 49,423 $ 437,722 11.29% 2017 2 48,670 432,791 11.25% 2016 47,194 417,045 11.32% 2015 46,661 413,267 11.29% 2014 47,226 410,122 11.52% 2013 46,104 403,098 11.44% 2012 46,172 399,051 11.57% 2011 43,018 390,413 11.02% 1 Includes transfers out. 2 Subject to audit. 3 Budgeted. Source: City's Audited Financial Statements.

(The remainder of this page intentionally left blank)

41 VI. Financial Administration

Fiscal Year

The City’s fiscal year begins July 1 and ends June 30.

Annual Audit

Pursuant to the Municipal Auditing Act (Chapter 111 of the Connecticut General Statutes), the City is obligated to undergo an annual examination by an independent certified public accountant. The audit must be conducted under the guidelines issued by the State of Connecticut, Office of Policy and Management, and a copy of said audit report must be filed with the Office of Policy and Management. The City is in compliance with said provisions.

For the fiscal year ended June 30, 2016, the financial statements of the various funds of the City were audited by Blum, Shapiro & Company, PC, Certified Public Accountants, West Hartford, Connecticut. The fiscal year ending 2016 Comprehensive Annual Financial Report (“CAFR”), including the Auditors' opinion, the Federal and State Single Audit Reports and the Report on Compliance and Internal Control over Financial Reporting were filed with the City Clerk on December 29, 2016. The City is currently preparing the CAFR for the fiscal year ending June 30, 2017.

Auditor’s Disclaimer

Blum, Shapiro & Company, PC, Certified Public Accountants, West Hartford, Connecticut, the City’s independent auditors, are not passing upon and do not assume responsibility for the sufficiency, accuracy or completeness of the financial information presented in this Official Statement (other than matters expressly set forth in Appendix A, "Financial Statements" herein), and make no representation that they have independently verified the same. The auditors have not been engaged nor performed audit procedures regarding the post audit period. The auditors have not been asked to nor have they provided their written consent to include their Independent Auditors' Report in this Official Statement.

Accounting

The City's accounting system is organized on a fund basis and uses funds and account groups to report on its financial position and results of operations. The City's accounting records are maintained on a modified accrual basis, with major revenues recorded when earned and expenditures recorded when incurred. The City's accounting policies conform to generally accepted accounting principles as applied to governmental units. The independent auditors issued an unqualified opinion for the fiscal year ended June 30, 2016. The City’s 2016 Comprehensive Annual Financial Report (“CAFR”) has again received the Certificate of Achievement in excellence in Financial Reporting by the Government Finance Officers Association of the United States. The Certificate of Achievement is the highest form of recognition in the area of governmental accounting and financial reporting and its attainment represents a significant accomplishment by the City and its management.

Budget Adoption

City departments submit estimates of expenditures to the Mayor no later than the second Friday in January. The Mayor, with the assistance of a designated budget subcommittee consisting of the City’s Director of Budget, Director of Finance and Mayoral Chief of Staff, evaluate in detail the amounts required by the departments of the City for the ensuing year. These estimated expenditures, accompanied by an estimate of the income necessary to meet such expenditures, are reviewed by the Mayor and once approved become the basis for the “Mayor’s Proposed Budget”.

On or before the first day of April of each year, the Mayor submits a budget to the Board of Aldermen (the “Mayor’s Proposed Budget”) which consists of:

1. An annual or current expenditure budget, which shall be a complete financial plan for the ensuing fiscal year, consisting of the budget proper and the budget message; and 2. A capital budget.

Pursuant to the Charter, the budget must disclose the following:

1. A general executive summary of its content set forth in plain language;

42 2. An estimate of all revenue cash receipts anticipated from sources other than the tax levy of the ensuing fiscal year; 3. An estimate of the General Fund cash surplus at the end of the current fiscal year or of the deficit to be made up by appropriation; 4. The estimated expenditures necessary for the operation of the several departments, offices and agencies of the City; 5. Debt service requirements for the ensuing fiscal year; 6. An estimate of the sum required to be raised by the tax levy for the ensuing fiscal year, assuming a rate of current levy year collections not greater than the average rate of collection in the year of levy for the last three completed fiscal years. The Mayor may deviate from said assumed collection average. In the event the Mayor submits a budget containing such a deviation in the rate of collection in excess of (i) the three- year average or (ii) a rate of collection of 93 percent, whichever is lesser, said budget submission shall be accompanied by a certification by the Finance, Audit and Review Commission asserting that the assumption is a reasonable estimate upon which the Board of Aldermen may rely; 7. A balanced relation between the total estimated expenditures and total anticipated revenue cash receipts, taking into account the estimated General Fund cash surplus or deficit at the end of the current fiscal year; and 8. The anticipated income and expense as well as profit and loss for the ensuing fiscal year for each utility or other enterprise fund operated by the City.

The Board of Aldermen considers and acts upon and may amend the estimates of the Mayor's proposed budget (except that it may not increase the Mayor’s estimate of receipts) and make appropriations upon the basis of such estimates as may be necessary and proper to meet such expenses and shall levy a tax necessary to meet such expenses. The Board of Aldermen shall conduct at least two (2) public hearings. After its deliberations, it adopts a budget.

Capital Budget Planning

On an annual basis the City adopts a five-year Capital Plan. This Plan covers proposed capital funding needs to be funded through either one or a combination of funding sources, including contributions from the City’s General Fund, proposed authorizations and State and federal grants. The Capital Plan is another critical planning tool for the City. The General Fund has made contributions from its previous year’s surplus to the Capital Reserve/Equipment account. The City revisits the five-year Capital Plan on an annual basis prior to adoption of the next fiscal year’s Capital Budget. The 2018-19 Capital Budget was adopted on June 8, 2017 and 2019-22 Capital Budgets were submitted as part of the adopted capital budget and are outlined on the following table.

Fiscal Fiscal Fiscal Fiscal Fiscal Sources of Funds 2017-18 2018-19 2019-20 2020-21 2021-22 Total Local Funding ………………………………………………………………………………$ 1,622,500 $ - $ - $ - $ - $ 1,622,500 Estimated Grants …………………………………………………………………15,237,055 - - - - 15,237,055 Bonds to be Authorized ……………………………………………………6,393,000 - - - - 6,393,000 Enterprise Bonds Authorized ……………………………………………………3,525,000 - - - - 3,525,000 Enterprise CWF Grants/Loans……………………………………………………45,000,000 - - - - 45,000,000 Enterprise Sinking Funds ……………………………………………………820,000 - - - - 820,000 To be Determined ……………………………………………………- 27,686,469 14,444,000 31,367,000 16,516,000 90,013,469 Total …………………………………………………………$ 72,597,555 $ 27,686,469 $ 14,444,000 $ 31,367,000 $ 16,516,000 $ 162,611,024

Fiscal Fiscal Fiscal Fiscal Fiscal Use of Funds 2017-18 2018-19 2019-20 2020-21 2021-22 Total Governmental Purposes: Public Works Infrastructure …………………………………………………$ 18,987,833 $ 17,952,169 $ 9,190,000 $ 25,301,000 $ 12,010,000 $ 83,441,002 Vehicle Replacement …………………………………………………1,096,000 3,636,000 1,896,000 1,521,000 1,486,000 9,635,000 Information Technology …………………………………………………308,472 121,800 - - - 430,272 Public Safety …………………………………………………303,250 131,000 - - - 434,250 Education …………………………………………………1,465,000 200,000 - - - 1,665,000 Other …………………………………………………1,092,000 125,500 378,000 50,000 50,000 1,695,500 Self-Sustaining Enterprise Purposes: Water Pollution Control2 …………………………………………………46,370,000 800,000 800,000 800,000 800,000 49,570,000 Bureau of Water …………………………………………………2,975,000 4,720,000 2,180,000 3,695,000 2,170,000 15,740,000 Total Funding Sources…………………………$ 72,597,555 $ 27,686,469 $ 14,444,000 $ 31,367,000 $ 16,516,000 $ 162,611,024

1 Grant availability in subsequent years will significantly impact the City's decision to adopt project authorizations. 2 The 2017-18 Water Pollution Control capital improvement plan includes a $45,000,000 appropriation for a phosphorus removal plant upgrade project deemed necessary to become compliant with EPA's mandated lower phosphorus discharge limit of0.2mg/l. The State ofConnecticut will provide 50% grant assistance and 50% low interest loan financing through the Clean Water Fund program.

43 Significant Financial Policies

Financial Reporting: Financial operating statements are available to each department on a real-time basis. The Director of Budget prepares and distributes to the Mayor and Board of Aldermen projections of current fiscal operations for review and comment.

Investment Funds: The City invests its available cash from various activities on a competitive basis with local institutions strictly in accordance with the General Statutes of Connecticut. The City participates in a combination of fully insured and fully collateralized funds and other funds in order to diversify the City's investment portfolio risk. Deposits are protected against loss under the Public Deposits Protection Act only when deposits are with a qualified public depository in the State of Connecticut. Investments are stated at fair value.

Basis of Accounting: The accounts of the City Governmental Funds and Expendable Trust Funds are maintained on the modified accrual basis. Proprietary Fund and Pension Trust Funds are accounted for using the accrual basis of accounting.

Litigation Liabilities: The City has established a special reserve fund in which funds are contributed from appropriate sources and maintained to meet liabilities in excess of budgeted funds. The City is self-insured for various general liability claims.

Encumbrances: Encumbrance accounting, under which purchase orders, contracts and other commitments are recorded in order to reserve that portion of the applicable appropriation, is employed as an extension of formal budgeting interaction in the Governmental Funds.

Investment Policy

Eligible investments for Connecticut municipalities are governed by the Connecticut General Statutes, Sections 7-400 and 7-402. Refer to APPENDIX A – “AUDITORS’ REPORT” under “Notes to the Financial Statements”, Note 3, regarding the City’s cash and cash equivalent investments and investment policies. The City’s investments do not include derivative products.

Pension Programs

City of Waterbury Retirement System

A. Plan Description

The City is the administrator of the City of Waterbury Retirement System, a defined benefit single-employer public employee retirement system (the “PERS”) established and administered by the City to provide pension benefits for its non-teacher employees. The PERS is considered to be part of the City’s financial reporting entity and is included in the City’s financial reports as a pension trust fund. Membership as of July 1, 2016 of the PERS consisted of the following:

Pension Plan – Participant Profile as of July 1, 2016

Retirees and Beneficiaries Currently Receiving Benefits ...... 2,163 Terminated Employees Due Refund of Contributions...... 188 Terminated Employees Not Yet Receiving Benefits ...... 48 Current Active Members: Vested ...... 992 Non-Vested ...... 663 TOTAL ...... 4,054

Members are required to contribute to the Pension Plan and the City is required to contribute the remaining amounts necessary to finance the coverage for its employees. Benefits and contributions are established by the City and may be amended only by the City Charter and Union negotiation.

Currently hired teachers and school administrators are covered by the State Teachers’ Retirement System.

44 B. Significant Accounting Policies and System Assets

Issuance of Taxable General Obligation Pension Bonds

Pursuant to Section 7-374c of the Connecticut General Statutes (the “Act”), the City issued general obligation pension bonds in September 2009 in the amount of $313,145,000 to fund a majority of the unfunded past benefit obligation of the PERS. The City paid debt service totaling $27,197,300 in fiscal year 2017 on the outstanding pension bonds. The debt service obligation is $27,166,248 in fiscal year 2018 and is included in the fiscal year 2017-2018 adopted budget.

Annual Required Contribution (ARC)

The City’s ARC contribution for fiscal year 2017 was $17,418,066. The valuation completed as of July 1, 2015 recommends a required contribution of $17,742,418 in Fiscal 2018, which has been included in the City’s adopted budget for fiscal year 2018. The July 1, 2016 valuation recommends a required contribution of $20,234,860 for fiscal year 2019 which will be included in the Mayor’s proposed budget to be submitted in March 2018. The increase in the annual required contribution in Fiscal 2019 is largely attributable to the lowering of the Plan’s investment return assumption from 8.20% down to 8.00% factored into the July 1, 2016 valuation.

Contribution Actuarially as a % Fiscal Determined Actual Covered of Covered Year Contribution Contribution Employee Payroll Employee Payroll 6/30/2018 1 $ 17,742 $ 17,742 $ 74,581 23.8% 6/30/2017 2 17,418 17,509 75,502 23.2% 6/30/2016 17,003 17,003 78,534 21.7% 6/30/2015 16,649 16,649 76,246 21.8% 6/30/2014 16,085 16,085 82,045 19.6% 6/30/2013 16,062 16,062 78,512 20.5% 6/30/2012 15,961 15,961 81,668 19.5% 1 Budgeted. 2 Subject to audit.

Plan Funding Status

The actuarial accrued liability for active and retired plan members is $616,034,215 as of July 1, 2016. The actuarial accrued asset value in the Pension Trust is $422,755,563, representing a plan funding status of 68.6 percent. The fiscal year 2017 pension plan contribution included the seventh year of a thirty-year amortization period (established in fiscal year 2010) to amortize the remaining unfunded portion of the actuarial accrued liability following the City’s issuance of pension obligations bonds in September 2009. Given the City’s policy to prepare an actuarial pension plan valuation annually, adjustments to the planned funding strategy, comprising normal cost and amortization of the unfunded liability, can be made prospectively to take into account factors that ultimately affect the continued growth in the funded ratio.

The following is a summary of the Defined Benefit Single Employer Pension Funding Status:

Actuarial Actuarial ValueActuarial Accrued Over (Under) Funded AAL Valuation Date of Assets Liability (AAL) Funded AAL Ratio July 1 (a) (b) (a-b) (a/b) 2016 $ 422,755,563 $ 616,034,215 $ 193,278,652 68.6% 2015 422,407,103 590,907,583 168,500,480 71.5% 2014 416,914,656 584,894,830 167,980,174 71.3% 2013 405,147,693 570,776,721 165,629,028 71.0% 2012 398,637,511 563,274,752 164,637,241 70.8% 2011 394,484,000 551,209,000 156,725,000 71.6%

45 The following presents the net pension liability, calculated using the discount rate of 8.20%, as well as what the net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower or 1- percentage-point higher than the current rate. Current 1 % Decrease Discount 1 % Increase (7.20)% (8.20)% (9.20)% City Plan's Net Pension Liability as of June 30, 2016 (millions)………………………………………………………………………$ 279,753 $ 221,690 $ 171,924

Other Post-Employment Benefits

GASB #43 and 45, Accounting and Financial Reporting by Employers for Post-employment Benefits Other than Pensions (“OPEB”)

The City, in accordance with various collective bargaining agreements, is committed to provide health and other benefits to eligible retirees and their spouses. Actuarial valuations involve estimates of the value of reported amounts and assumptions about the probability of occurrence of future events. Assumptions include future employment, mortality, and healthcare and other benefit cost trends. The Government Accounting Standards Board (“GASB”) has issued statements to establish financial reporting, liability calculation, along with the requirement to disclose the government’s funding strategy and progress.

The following is the July 1, 2016 census of City benefit participants:

Active Member 3,289 Retirees 2,669 Total 5,958

The following is a summary of the Other Post-Employment Benefits Cost and contributions:

Fiscal Year Annual Annual Percentage Net Pension Ending OPEB Cost Contribution Contributed Obligation 6/30/2017 1 $ 72,270 $ 33,729 46.7% $ 323,251 6/30/2016 71,919 44,674 62.1% 284,710 6/30/2015 72,028 44,706 62.1% 257,465 6/30/2014 71,601 38,030 53.1% 230,143 6/30/2013 67,690 37,723 55.7% 196,572 6/30/2012 68,577 34,930 50.9% 166,605 1 Subject to audit.

The following reflects the results of an actuarial valuation of postemployment benefits as of July 1, 2016:

Unfunded AAL Actuarial Accrued as a % of Actuarial Value Liability (AAL) Funded Covered Covered Actuarial of Assets Projected Unit Credit Ratio Payroll Payroll Valuation Date (a) (b) (000s) (a/b) (c) ((b-a)/c) 7/1/2016 $ - $ 894,014 0.0% $ 183,905 486.1% 7/1/2014 - 987,693 0.0% 173,188 570.3% 7/1/2012 - 889,578 0.0% 179,665 495.1%

OPEB Funding and Liability Reduction

The City continues its commitment to meeting its obligations for medical benefits of both its active employees and benefit eligible retired employees, on a pay-as-you go basis, through the annual adoption of General Fund contributions to the City’s Health Benefits internal service fund. In 2017, the City budgeted for and contributed $80 million to the Health Benefits Fund.

46 In 2003, with an understanding of the long-term implications of the existing OPEB benefit program, the City, via the powers of the State Oversight Board at the time, modified collective bargaining agreements to significantly curtail the OPEB benefits for those employees hired after the contract modification date (2004 time frame). In addition, future retiree co-share requirements were established for those current employees grandfathered into the previous benefit program. At that time, all but one collective bargaining unit contract was modified for the comprehensive OPEB benefit reduction modifications. In the fall of 2011, the City successfully won those OPEB benefit reductions, via an arbitration award, on the last collective bargaining contract not previously subject to the OPEB benefit reductions. Over time the elimination and/or significant curtailment of post-employment medical coverage will begin to reduce the OPEB accrued liability and eventually significantly reduce the compounded cost impact of funding medical coverage for both actives employees and retirees. In the past few years the City has negotiated the adoption of a consumer driven high-deductible health plan for all active employees with few exceptions. At this time the City is evaluating the implementation of benefit utilization management programs to eliminate wasteful spending, improve care and protect employees high-deductible costs that they are responsible for.

The unfunded actuarial accrued liability for active and retired plan members is $894,014,031 as of July 1, 2016, representing a $94 million reduction from the July 1, 2014 liability of $987,693,900. The long-term savings benefits from the City’s Medicare Enrollment Initiative was valued at $240 million or 22.4% of the OPEB liability. On an actuarial basis those savings were reduced to $94 million as a result of the discount rate being lowered from 4.50% down to 4.00% along with updating retirement, turnover, inflation and medical trends. The “Medicare Enrollment Initiative” was developed to leverage Medicare as the primary payer to reduce costs for the City all while preserving and maintaining the integrity of the benefits that have been promised to retirees through their Collective Bargaining Agreements (CBA). With a plan enrollment effective date of July 1, 2016, following successful enrollment of all retirees in the prior fiscal year, the City was positioned to save significant sums of money with transitioning first-party payer obligation to Medicare for City retirees over age 65 that were not previously enrolled in Medicare A and B. Without Medicare’s position as primary payer the City had the sole responsibility for the total financial burden to pay retiree medical claims. The results after the first 12 months with Medicare positioned as primary payer have been spectacular and have far exceeded preliminary estimates. The realized savings are summarized below:

• Health benefit claim costs reduced by $16.8 million or 16.1% (July 1, 2016 to June 30, 2017); • Net health benefit program costs reduced by $10.2 million or 9.0%. Net of Medicare premium reimbursements (July 1, 2016 to June 30, 2017). Internal Service Funds Internal Service Funds are used to account for the sources of program funding derived from the City’s General Fund and other funding sources including employee contributions, grants and enterprise fund contributions necessary to fund associated program expenses and accrued claim reserves. The City has established Internal Service Funds for its Health Benefits, General Liability, Workers’ Compensation and Heart and Hypertension self-insured risk management programs. The following presents a statement of the Internal Service Funds revenues, expenses and changes in fund net position over the past five years and additionally presents an analysis of the current net assets available to fund the net present value of the long-term accrued claims liability. Due to the cost savings derived from the above referenced Medicare Enrollment Initiative along with a budgeted increase in the General Fund’s contribution, the estimated net present value of the accrued claims liability of $42.3 million is again fully funded. Internal Service Funds – Self Insured Programs Revenues, Expenses and Changes in Funds Net Position Estimated Actual Actual Actual Actual 2017 2016 2015 2014 2013 Unrestricted Net Assets, July 1st ………………………………………………………………………………………………$ (3,007,000) $ 7,327,000 $ 15,255,000 $ 21,874,000 $ 22,452,000

City Contributions ………………………………………………………………………………………………………………92,850,000 86,019,000 87,210,000 81,232,000 80,592,000 Employee Contributions & Other ………………………………………………………………………………………………………21,371,000 22,052,000 17,586,000 16,058,000 14,189,000 Benefits, Claims & Admin. Expenses ………………………………………………………………………………………………………(110,927,000) (119,966,000) (114,023,000) (110,644,000) (100,108,000) Investment Income (Loss) ………………………………………………………………………………………………………2,422,000 1,561,000 1,299,000 6,735,000 4,749,000

Change in Net Assets ………………………………………………………………………………………………………5,716,000 (10,334,000) (7,928,000) (6,619,000) (578,000)

Unrestricted Net Assets, June 30th ………………………………………………………………………………………………………$ 2,709,000 $ (3,007,000) $ 7,327,000 $ 15,255,000 $ 21,874,000

Funding Status of Long-Term Accrued Claims Liability Current Net Assets (Cash & Investments, Net of A/P) - June 30th ………………………………………………………………………………………………………$ 45,046,000 $ 38,565,000 $ 50,132,000 $ 56,827,000 $ 60,356,000

Net Present Value of Long-Term Accrued Claims Liability ………………………………………………………………………………………………………$ 42,337,000 $ 41,572,000 $ 42,805,000 $ 41,572,000 $ 38,482,000

Contingency Reserves Above Accrued Claims Liability - June 30th ………………………………………………………………………………………………………$ 2,709,000 $ (3,007,000) $ 7,327,000 $ 15,255,000 $ 21,874,000

Accrued Claim Loss Reserve - Percent Funded - June 30th ………………………………………………………………………………………………………106.4% 92.8% 117.1% 136.7% 156.8%

47 General Fund Revenues and Expenditures Summary of Audited Revenues and Expenditures (GAAP Basis), Estimated, and Budget (Budgetary Basis)

Adopted Budget Estimated Actual Actual Actual Actual Revenues: 2017-18 1,2,3 2016-17 1 2015-16 2014-15 2013-14 2012-13 Property taxes ………………………………………………………………$ 240,070 $ 238,981 $ 238,780 $ 237,112 $ 230,789 $ 224,710 Intergovernmental ………………………………………………………………174,567 172,183 156,610 156,592 160,392 159,594 Investment income………………………………………..………………………….500 615 453 381 107 189 Charges for services …………………………………………….6,203 7,966 7,292 6,619 6,108 5,836 Reimbursements………………………………………12,757 12,866 13,365 12,213 12,162 12,111 Other ………………………………………………………………625 609 571 523 604 679 Total Revenues ………………………………. 434,722 433,220 417,071 413,440 410,162 403,119 Expenditures: Current: General government……………………………………..10,650 9,513 9,684 9,659 9,623 9,619 Public works……………………………………………………………….18,915 17,219 17,066 17,982 17,671 18,755 Public safety……………………………………………………………….50,499 49,652 45,643 44,828 45,033 43,837 Development and community affairs…………. 1,185 1,112 1,130 1,052 1,034 1,041 Human Services………………………………………3,907 3,587 3,474 3,415 3,138 3,091 Education………………………………………….183,497 182,251 178,411 174,838 180,634 174,373 Culture and recreation ………………………………………………………1,907 1,881 1,713 1,701 1,700 1,715 General financial……………………………………….119,996 114,979 110,549 110,280 102,307 101,947 Total Expenditures ………………………………………………………………390,556 380,194 367,670 363,755 361,140 354,378 Revenues over (under) expenditures ………………………………………………………………44,166 53,026 49,401 49,685 49,022 48,741

Other Financing Sources Uses: Operating Transfers In ………………………………………………………………------Operating Transfers (Out) ………………………………………………………………(47,166) (52,597) (49,375) (49,512) (48,982) (48,720) Total other Financing Sources (uses) ………………………………………………………………(47,166) (52,597) (49,375) (49,512) (48,982) (48,720) Revenues and other financing sources over (under) expenditures and other financing (uses) ……….………….$ (3,000) $ 429 $ 26 $ 173 $ 40 $ 21

Fund Balance, July 1……………………………$ 23,090 $ 22,661 $ 22,635 $ 22,462 $ 22,422 $ 22,401 Fund Balance, June 30……………………………$ 20,090 $ 23,090 $ 22,661 $ 22,635 $ 22,462 $ 22,422

1 GAAP basis, subject to audit. 2 Adopted 2017-18 Budget includes $3 million designated use offund balance for working capital restriction purposes only. Actual use offund balance is not anticipated. 3 Adopted 2017-18 Budget includes larger contingent appropriation within General Financial to account for impact ofarbitrated contract awarded after budget adoption.

The City's Fiscal Year 2018 General Fund adopted budget totals $434,722,000 for estimated revenues and $437,722,000 for expenditures and operating transfers. Budgeted revenue sources in Fiscal Year 2018 include $240,070,000 for property taxes, $174,567,000 in Intergovernmental Revenues and $20,085,000 in other reimbursements and revenues.

The amount and timing of Fiscal Year 2018 State aid is dependent on many factors, including the negotiation and adoption of the State's Fiscal Year 2018 budget. On October 26, 2017 the State of Connecticut’s Senate and House both passed a bipartisan veto-proof Fiscal Year 2018 and 2019 2-year State Budget. The Governor signed the $41.3 billion State Budget Bill on October 31, 2017 resulting in full implementation of the State Budget Bill with the exception of one section of the Bill being vetoed due to concerns with the hospital provider tax language contained in the Bill approved by the Senate and House. As of the date hereof, the Governor and Legislative leaders have both indicated a desire to fix any issues surrounding the hospital provider tax language designed to provide increased Medicaid funding to the State.

Under this approved State Budget, the City anticipates receiving $5.6 million less in State Aid during Fiscal Year 2018 than was projected in the City’s Fiscal Year 2018 General Fund Budget, adopted on June 8, 2017. An anticipated $5.4 million increase in the City’s Educational Cost Sharing Grant, as part of a recalibration of State Aid to assist inner city districts, did not materialize during final budget negotiations. The City’s Fiscal Year 2018 adopted budget included $4 million in budgeted contingencies specifically designed to protect the City’s General Fund Budget against reductions in State Aid. The City will continue various expense control measures that have been in place since the start of the current fiscal year, which it anticipates will offset or exceed the $1.6 million balance of State Aid reduction.

48 For Fiscal Year 2019 beginning on July 1, 2018, the City anticipates an additional reduction of $2.1 million in State Aid compared with Fiscal Year 2018. The State imposed motor vehicle property tax mill rate cap will be increased from 39 mills to 45 mills in Fiscal Year 2019. This mill rate cap increase will allow the City to generate additional local property tax revenues from motor vehicles to more than offset the anticipated reduction in State Aid in Fiscal Year 2019.

Comparative Balance Sheet Estimated Actual Actual Actual Actual Actual Assets: 6/30/2017 1 6/30/2016 6/30/2015 6/30/2014 6/30/2013 6/30/2012 Cash and cash equivalents……………………………………………………………………………………………$ - $ 1,215 $ - $ 1,022 $ 32,845 $ 15,414 Investments……………………………………………… 27,131 24,237 24,852 17,610 3,461 12,511 Receivables, net…………………………………………. 9,029 11,271 12,601 13,817 19,520 23,246 Due from other funds……………………………………………………………………………………………22,380 24,479 23,638 23,562 2,612 5,989 Other………………………………………………………. - - - - - 18 Total Assets ………………………………. 58,540 61,202 61,091 56,011 58,438 57,178

Liabilities: Accounts payable and accrued liabilities……………………………………………………………………………………………26,935 27,860 27,079 20,503 19,985 15,860 Due to other funds……………………………………………………………………………………………------Unearned Revenue…………………………………….. ------Deferred revenue………………………………… - - - 13,046 16,031 18,917 Total Liabilities ……………………………………………………………………$ 26,935 $ 27,860 $ 27,079 $ 33,549 $ 36,016 $ 34,777 Deferred inflows of resources: Unavailable revenue - property taxes …………………………………………7,265 9,799 10,518 - - - Unavailable revenue - loans receivable …………………………………………------Unavailable revenue - other receivable …………………………………………846 650 664 - - - Advanced property tax collections …………………………………………404 232 195 - - - Total Deferred Inflows of Resources …………………………………………………………$ 8,515 $ 10,681 $ 11,377 $ - $ - $ -

Fund Balances: Nonspendable………………………………………………………………………………………………………………$ - $ - $ - $ - $ - $ 18 Restricted………………………………………………. ------Committed……………………………………………. ------Assigned…………………………………………………………………………………………………………………………………3,000 3,000 3,000 3,000 3,000 3,000 Unassigned…………………………………………………………………………………………………………………………………20,090 19,661 19,635 19,462 19,422 19,383 Total Fund Balances...... $ 23,090 $ 22,661 $ 22,635 $ 22,462 $ 22,422 $ 22,401

Total Liabilities, Deffered Inflows of Resources and Fund Balances...... $ 58,540 $ 61,202 $ 61,091 $ 56,011 $ 58,438 $ 57,178 Operating revenues …………………………………$ 433,220 $ 417,071 $ 413,440 $ 410,162 $ 403,119 $ 399,066 Fund balance as percent of operating revenues …………………………….5.33% 5.43% 5.47% 5.48% 5.56% 5.61% 1 GAAP basis, subject to audit.

(The remainder of this page intentionally left blank)

49 Governmental Fund Balance Reserves

The following presents a summary of General Fund balance reserves along with other governmental fund balance reserves over the past five years. To the extent these fund balances have not been formally committed or expended, they represent additional reserves available for transfer if necessary to meet the City’s payment obligations under the Bonds.

Governmental Fund Balance Reserves Last Five Fiscal Years

Estimated Actual Actual Actual Actual 2017 2016 2015 2014 2013 General Fund ………………………………………………………………………………………………………………$ 23,090,000 $ 22,661,000 $ 22,635,000 $ 22,462,000 $ 22,422,000 Debt Service Fund ………………………………………………………2,190,000 3,991,000 1,086,000 1,845,000 2,463,000 Health Benefits Fund ………………………………………………………2,928,000 (4,064,000) 6,094,000 (4,581,000) 3,291,000 General Liability Fund ………………………………………………………2,485,000 3,107,000 2,726,000 1,304,000 500,000 Workers' Compensation Fund ………………………………………………………(2,755,000) (3,672,000) (1,775,000) (2,075,000) (486,000) Heart & Hypertension Fund ………………………………………………………1,551,000 1,622,000 781,000 2,834,000 2,573,000 Other Capital & Special Revenue Funds ………………………………………………………12,078,000 8,722,000 7,647,000 4,606,000 5,656,000 Governmental Fund Balance Reserves………………………………………………………$ 41,567,000 $ 32,367,000 $ 39,194,000 $ 26,395,000 $ 36,419,000

General Fund Revenues ………………………………………………………$ 433,220,000 $ 417,071,000 $ 413,440,000 $ 410,162,000 $ 403,119,000

Governmental Fund Balance Reserves as a Percent of General Fund Revenues ………………………………………………………9.6% 7.8% 9.5% 6.4% 9.0%

(The remainder of this page intentionally left blank)

50 VII. Legal and Other Information

Legal Matters Pullman & Comley, LLC is serving as Bond Counsel with respect to the authorization and issuance of the Bonds and will render its opinions in substantially the forms included in this Official Statement as Appendix B-1 and Appendix B-2.

Litigation The City of Waterbury, its officers and employees are defendants in numerous lawsuits. The ultimate disposition and fiscal consequences of these lawsuits are not presently determinable.

With respect to general liability claims, the City currently remains liable for the first $1.5 million in monetary damages but it also carries excess general liability insurance coverage, currently ten million dollars, beyond that. The applicability of excess liability coverage, or lack thereof, and the determination of the dollar limits applicable are dependent upon the timing of the incident giving rise to a given claim. The Corporation Counsel, after consultation with the City’s Director of Finance, believes that the aggregate balances in the City’s self-insurance reserve funds, and various insurance policies covering claims against the City, are adequate to meet its potential loss exposure in the aggregate for existing lawsuits.

The City’s Corporation Counsel has reviewed the status of pending lawsuits, and, where appropriate, has received the advice of independent counsel with respect to the status of certain of those pending lawsuits. Corporation Counsel is of the opinion that, as of the date of this Official Statement and given her knowledge of the circumstances as set forth in the preceding two paragraphs, there are no claims or litigation pending, or to her knowledge threatened, which could reasonably be expected to, individually or in the aggregate, result in final judgments against the City which would either have a material adverse effect on the finances of the City or impact the validity of its Bonds or the power of the City to levy and collect taxes to pay the principal and interest on its Bonds.

Documents Furnished At Delivery Upon delivery of the Bonds, the Underwriter will be furnished with the following: 1. Certificates on behalf of the City, signed by the Mayor and Director of Finance which will be dated the date of delivery and which will certify, to the best of said officials' knowledge and belief, that at the time the Contract of Purchase was executed and as of the closing date, the descriptions and statements in the Official Statement relating to the City and its finances were true and correct in all material respects and did not contain any untrue statement of a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and that there has been no material adverse change in the financial condition of the City from that set forth in or contemplated by the Official Statement; 2. A signed copy of the Official Statement; 3. Signature and No Litigation Certificates stating that at the time of delivery, no litigation is pending or threatened affecting the validity of the Bonds or the levy or collection of taxes to pay them; 4. Certificates evidencing execution, delivery and receipt of payment for the Bonds; 5. The approving opinions of Pullman & Comley, LLC, Bond Counsel, of Bridgeport and Hartford, Connecticut, in substantially the forms attached hereto as Appendix B-1 and Appendix B-2; 6. Executed Continuing Disclosure Agreements for the Bonds in substantially the forms attached hereto as Appendix C-1 and Appendix C-2; 7. An executed Escrow Agreement; and 8. Any other documents required by the Contract of Purchase.

A transcript of the proceedings taken by the City with respect to the Bonds will be kept on file at the offices of U.S. Bank National Association and will be available for examination upon reasonable notice.

51 Concluding Statement To the extent that any statements made in this Official Statement involve matters of opinion or estimates such statements are made as such and not as representations of fact or certainty, and no representation is made that any of such statements will be realized. Information herein has been derived by the City from official and other sources and is believed by the City to be reliable, but such information other than that obtained from official records of the City has not been independently confirmed or verified by the City and its accuracy is not guaranteed.

Additional information may be obtained upon request from the City of Waterbury Department of Finance, Attention Michael LeBlanc, Director of Finance, 235 Grand Street, Waterbury, Connecticut, telephone (203) 574- 6840.

This Official Statement has been duly prepared and delivered by the City, and executed for and on behalf of the City by the following officials:

CITY OF WATERBURY, CONNECTICUT

By: /s/ Neil M. O’Leary By: /s/ Michael LeBlanc NEIL M. O’LEARY, Mayor MICHAEL LEBLANC, Director of Finance

November ___, 2017

52 Appendix A

2016 General Purpose Financial Statements Excerpted from the City’s Annual Financial Report

The following includes the General Purpose Financial Statements of the City of Waterbury, Connecticut for the fiscal year ended June 30, 2016. The supplemental data which was a part of that report has not been reproduced herein. A copy of the complete report is available upon request from Barry J. Bernabe, Managing Director, Phoenix Advisors, 53 River Street, Suite #1, Milford, Connecticut 06460. Telephone (203) 283-1110. 29 South Main Street Tel 860.561.4000 P.O. Box 272000 Fax 860.521.9241 West Hartford, CT 06127-2000 blumshapiro.com

Independent Auditors’ Report

To the Honorable Mayor and Board of Aldermen City of Waterbury, Connecticut

Report on the Financial Statements

We have audited the accompanying financial statements of the governmental activities, the business- type activities, each major fund and the aggregate remaining fund information of the City of Waterbury, Connecticut, as of and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise the City of Waterbury, Connecticut’s basic financial statements as listed in the table of contents.

Management’s Responsibility for the Financial Statements

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

Auditors’ Responsibility

Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

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

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

A-1 Blum, Shapiro & Company, P.C. An independent member of Baker Tilly International Opinions

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information of the City of Waterbury, Connecticut, as of June 30, 2016 and the respective changes in financial position and, where applicable, cash flows thereof, for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Change in Accounting Principle

As discussed in Note 3 to the financial statements, during the fiscal year ended June 30, 2016, the City adopted new accounting guidance, GASB Statement No. 72, Fair Value Measurement and Application. Our opinion is not modified with respect to this matter.

Other Matters

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis on pages A-3 through A-16, the budgetary comparison information on pages A-67 through A-70 and the pension schedules on pages A-71 through A-74 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, which considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

West Hartford, Connecticut December 16, 2016

A-2 CITY OF WATERBURY, CONNECTICUT MANAGEMENT’S DISCUSSION AND ANALYSIS JUNE 30, 2016

This discussion and analysis of the City of Waterbury, Connecticut’s (the City) financial performance is provided by management to provide an overview of the City’s financial activities for the fiscal year ended June 30, 2016. Please read this MD&A in conjunction with the transmittal letter and the City’s financial statements, Exhibits I to IX.

Overview of the Financial Statements

The discussion and analysis is intended to serve as an introduction to the City’s basic financial statements. The basic financial statements are comprised of three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. The report also contains other supplementary information. The government-wide statement of net position and the statement of activities (Exhibits I and II, respectively) provide information about the activities of the City as a whole and present a longer-term view of the City’s finances, similar to the private-sector. Fund financial statements are presented in Exhibits III to IX. For governmental activities, these statements tell how these services were financed in the short term as well as what remains for future spending. Fund financial statements also report the City’s operations in more detail than the government-wide statements by providing information about the City’s most significant funds. The remaining statements provide financial information about activities for which the City acts solely as a trustee or agent for the benefit of those outside of the government.

Financial Highlights

 The City’s net position, on a government-wide full accrual basis, decreased $26.3 million as a result of this year’s operations. Net position of our governmental activities decreased $24.7 million. Net position of our business-type activities decreased $1.6 million (Table 2).  During the year, the City had government-wide expenses of $584.4 million compared with $558.1 million in government-wide program revenues, operating & capital grants, property taxes and other general revenues.  The City’s governmental activities $24.7 million decrease in net position is attributable to the recognition of expenses & deferred outflows that do not require the use of current financial resources but are recognized in the governmental statement of activities as a change in net position. Those recognized expenses & deferred outflows include a $27.2 million current year expense to account for the increase in the City’s net OPEB Obligation, a $30.4 million current year expense to account for the increase in the City’s Net Pension Liability and a $19.7 million net current year revenue to account for the change in deferred pension outflows (difference between projected and actual pension earnings). These three items combined for a net $37.9 reduction in the City’s governmental activities Net Position and represents all but $8.2 million of the $46.9 million reduction when reconciling the $22.2 million governmental funds increase in fund balances with the $24.7 million decrease in Net Position. The Notes to the Financial Statements contain informative disclosures on the funding status & funding policy for the City’s Pension & OPEB Liabilities that should be referred to.  The Net position in the City’s Internal Service Funds reported a combined $10.3 million decrease when factoring in all sources of revenues against benefits, claims and administrative expenses. The long-term accrued risk management claims liability of $45.4 million as of June 30, 2016 is 94% funded with $42.8 million held in investments. It is anticipated that the $6.9 million increased budgeted contribution in fiscal year 2017 to the Internal Service Funds in addition to several major cost containment measures, fully implemented for fiscal year 2017, will address the annual operating loss and set the stage for re-establishing excess reserves over next few years.

A-3  Governmental Funds conversion activity also included the capitalization of expenses totaling $29.3 million, depreciation on previously capitalized assets of $15.3 million, bond principal repayments of $21.4 million, and proceeds from $30 million in issued general obligation bonds to permanently finance ongoing capital project expenses.  In the City’s business-type activities, expenses of $32.4 million, including depreciation expense of $6.5 million were supported by revenues of $30.8 million generated in user fees, other service revenue, capital grants and investment income. The $1.6 million reduction in the business type activities Net Position includes $1.2 million attributable to the increase in the net pension liability allocated to the City’s Bureau of Water and Water Pollution Control enterprise funds, net of pension deferred outflows.  The General Fund reported a total fund balance this year of $22.7 million representing an increase of $26 thousand following the year-end transfer out of $2.1 million to allocate budgetary surpluses to the City’s internal service funds and to other funds to provide funding for various other capital and program initiatives not provided for in the General Fund budget. The General Fund unassigned component of fund balance is $19.7 million with $3 million assigned to the fiscal year 2017 budget as a fund balance designation to limit tax levy growth.  The General Fund’s revenue resources available for appropriation were $2.1 million more than anticipated. Expenditures were $3.0 million less than appropriated. The net budgetary surplus of $5.1 million avoided any drawdown of the prior year’s $3.0 million designation of fund balance for mil rate relief, and provided for $2.1 million in year-end budgetary surplus transfers.

Government-Wide Financial Statements

The analysis of the City as a whole begins on Exhibits I and II. The Statement of Net Position and the Statement of Activities report information about the City as a whole and about its activities for the current period. These statements include all assets and liabilities using the accrual basis of accounting. All of the current year’s revenues and expenses are taken into account regardless of when cash is received or paid. These two statements report the City’s net position and the changes within. The City’s net position, the difference between assets and liabilities, is one way to measure the City’s financial health, or financial position. Over time, increases or decreases in the City’s net position are one indicator of whether its financial health is improving or deteriorating. The reader needs to consider other nonfinancial factors, however, such as the accounting standards applied to the recognition of long-term OPEB & Pension obligations, changes in the City’s property tax base and the condition of the City’s capital assets, to assess the overall health of the City.

In the statement of net position and the statement of activities the City reports the following activities:

 Governmental activities - Most of the City’s basic services are reported here, including education, public safety, public works, human services, culture, and general administration. Property taxes, charges for services, and state and federal grants finance most of these activities.

 Business-type activities - The City charges a fee to customers to help it cover all or most of the cost of certain services it provides. The City’s Bureau of Water Enterprise Fund and Water Pollution Control Enterprise Funds are reported here.

A-4 Fund Financial Statements

The fund financial statements begin with Exhibit III and provide detailed information about the most significant funds - not the City as a whole. Some funds are required to be established by Charter. However, the City establishes many other funds to help control and manage financial activities for particular purposes to show that it is meeting legal responsibilities for using grants and other money. The City’s funds are divided into three categories: governmental, proprietary and fiduciary.

 Governmental Funds (Exhibits III and IV) - Most of the City’s basic services are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at year-end that are available for spending. These funds are reported using an accounting method called modified accrual accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the City’s general government operations and the basic services it provides. Governmental fund information helps you determine whether there are more or fewer financial resources that can be spent in the near future to finance the City’s programs. The relationship (or differences) between governmental activities (reported in the statement of net position and the statement of activities) and governmental funds is described in a reconciliation included with the fund financial statements.

 Proprietary Funds (Exhibits V, VI and VII) - When the City charges customers for the services it provides, whether to outside customers or to other units of the City, these services are generally reported in proprietary funds. Proprietary funds are reported in the same way that all activities are reported in the statement of net position and the statement of activities. In fact the City’s enterprise funds (a component of proprietary funds) are the same as the business-type activities reported in the government-wide statements, but provide more detail and additional information, such as cash flows, for proprietary funds. Internal service funds (the other component of proprietary funds) are used to report activities that provide supplies and services for the City’s other programs and activities - such as the City’s Self Insured Internal Service Funds.

 Fiduciary Funds (Exhibits VIII and IX) - The City is the trustee, or fiduciary, for its employees’ pension plan. All of the City’s fiduciary activities are reported in separate statements of fiduciary net position and changes in fiduciary net position. These activities are excluded from the City’s other financial statements because the City cannot use these assets to finance its operations. The City is responsible for ensuring that the assets reported in these funds are used for their intended purposes.

A-5 Government-Wide Financial Analysis

The analysis below focuses on the net position (Table 1) and changes in net position (Table 2) of the City’s governmental and business-type activities.

TABLE 1 NET POSITION (In Thousands) Governmental Business-Type Activities Activities Total 2016 2015 2016 2015 2016 2015

Current and other assets $ 140,229 $ 129,303 $ 22,271 $ 25,345 $ 162,500 $ 154,648 Capital assets 643,954 630,016 173,274 177,892 817,228 807,908 Total assets 784,183 759,319 195,545 203,237 979,728 962,556

Deferred charge on refunding 1,001 1,475 1,001 1,475 Differences between expected and actual experience 180 245 9 12 189 257 Changes in assumptions 1,473 2,006 77 97 1,550 2,103 Difference between projected and actual pension earnings 39,949 19,697 2,098 950 42,047 20,647 Total deferred outflows 42,603 23,423 2,184 1,059 44,787 24,482

Long-term liabilities: Long-term debt 457,048 445,515 26,841 33,076 483,889 478,591 Employee benefit obligations 531,612 474,694 11,822 9,417 543,434 484,111 Risk management and other 46,423 43,855 46,423 43,855 Other liabilities 39,450 41,800 769 1,298 40,219 43,098 Total liabilities 1,074,533 1,005,864 39,432 43,791 1,113,965 1,049,655

Advance property tax collections 232 195 232 195 Unavailable revenue-other charges 2,332 2,907 2,332 2,907 Total deferred inflows 232 195 2,332 2,907 2,564 3,102

Net Position: Net investment in capital assets 487,171 494,650 144,101 141,909 631,272 636,559 Restricted 2,588 2,422 2,588 2,422 Unrestricted (737,738) (720,389) 11,864 15,689 (725,874) (704,700)

Total Net Position $ (247,979) $ (223,317) $ 155,965 $ 157,598 $ (92,014) $ (65,719)

Net position of the City’s governmental activities decreased by $24.7 million (negative net position of $248.0 million compared to last year’s restated negative net position of $223.3 million). The City’s governmental activities Unrestricted net position - the part of net position that can be used to finance day-to-day operations without constraints established by debt covenants, enabling legislation or other legal requirements is a deficit of $737.7 million at the end of this year compared with last year’s negative net position of $720.4 million. The $737.7 million deficit encompasses a Net Pension Liability of $210.6 million, a Net OPEB Obligation of $284.7 million and Pension Obligation Bonds outstanding of $264.0 million. The $17.4 million increase in the City’s governmental activities unrestricted negative net position is most driven by three major components. The first major component being the increase in the City’s OPEB obligation accruing onto the statement of net position to the tune of $27.2 million which represents the difference between the actuarially recommended OPEB cost contribution of $71.9 million and the City’s pay-as-you go contribution of $44.7 million. The second major component being the increase in the City’s governmental activities net pension liability (NPL) accruing to the statement of

A-6 net position to the tune of $30.4 million. The City’s Total Pension Liability increased by $7.1 million and the Plan’s Fiduciary Net Position decreased by $25.7 million during fiscal year 2016 resulting in a $32.8 million increase in the accrued net pension liability. Of the $32.8 million accrued expense, $30.4 million is allocated to governmental activities with $2.4 million allocated to business-type activities. A $19.7 million net change in deferred pension outflows (representing the deferred recognition of the difference between projected and actual pension earnings) offsets the $30.4 million increase in the NPL. The third major component offsetting the increase in the City’s unrestricted net deficit position is the City’s pay down on outstanding bonds issued previously for non-capital financing purposes. During fiscal year 2016, a combined $12.8 million was paid down on the City’s outstanding (2009) pension obligation bonds and (2002) special reserve financing bonds.

The governmental activities $487.2 million net investment in capital assets excludes $29.5 million of outstanding general obligation bonds previously issued for special capital reserve financing purposes. The 2002 special reserve bonds provided for deficit financing and the establishment of other special reserves unrelated to the City’s capital assets. Additionally, the net investment in capital assets excludes pension obligation bonds outstanding of $264.0 million as of June 30, 2016. Outstanding general obligation bonds for capital asset construction purposes totaled $156.8 million as of June 30, 2016.

Fund balances in the City’s General & Education Capital Improvement funds reflect a combined increase of $15.2 million. In November 2015, the City issued $30 million in capital project general obligation bonds with a significant portion of the bond proceeds being used to replenish the temporary use of the City’s general cash reserves used to finance ongoing capital projects. The fund balance in the City’s Debt Service fund increased $2.9 million derived from a $3.4 bond premium realized on the November 2015 bond sale. The proceeds of the bond premium will be used in the next couple of years to assist with the phase-in of projected increases in annual debt service costs associated with the City’s capital & infrastructure improvement program.

The net position in the City’s Internal Service Funds reported a combined $10.3 million decrease when factoring in all sources of revenues against benefits, claims and administrative expenses. The accrued risk management claims liability of $45.4 million as of June 30, 2016 is 94% funded with $42.8 million held in investments. It is anticipated that the $6.9 million General Fund increased budgeted contribution in fiscal year 2017 to the Internal Service Funds in addition to several major cost containment measures, fully implemented for fiscal year 2017, will address the annual operating loss and set the stage for re-establishing excess reserves over next few years.

The total net position of the City’s business-type activities decreased by $1.6 million in 2016 (positive net position of $156.0 million compared to last year’s positive net position of $157.6 million). The decrease in net position was driven largely by the $1.2 million accrued increase in the net pension liability allocated to the City’s Bureau of Water and Water Pollution Control enterprise funds, net of deferred pension outflows. All other capital and operating activity provided for a net decrease of approximately $400 thousand in total net position. The City generally can only use this positive net position to finance the continuing operations of the Bureau of Water and Water Pollution Control Enterprise Funds. Changes in net position, included the capitalization of $1.9 million in capital expenses, depreciation of $6.5 million on previously capitalized assets and $5.6 million of principal repayments on outstanding capital financing bonds.

A-7 TABLE 2 CHANGES IN NET POSITION (In Thousands) Governmental Business-Type Activities Activities Total 2016 2015 2016 2015 2016 2015 Revenues: Program revenues: Charges for services $ 12,040 $ 10,288 $ 29,381 $ 29,466 $ 41,421 $ 39,754 Operating grants and contributions 239,201 229,515 239,201 229,515 Capital grants and contributions 16,870 23,957 690 1,005 17,560 24,962 General revenues: Property taxes 238,060 236,121 238,060 236,121 Grants and contributions not restricted to specific purposes 17,730 18,610 17,730 18,610 Unrestricted investment earnings 2,118 1,878 35 26 2,153 1,904 Other general revenues 1,300 1,237 666 579 1,966 1,816 Total revenues 527,319 521,606 30,772 31,076 558,091 552,682

Expenses: General government 129,249 128,749 129,249 128,749 Public works 28,854 27,721 28,854 27,721 Public safety 62,895 60,538 62,895 60,538 Development and community affairs 4,399 4,118 4,399 4,118 Human services 7,312 6,714 7,312 6,714 Education 284,774 272,121 284,774 272,121 Culture and recreation 8,061 6,115 8,061 6,115 Interest on long-term debt 26,437 26,430 26,437 26,430 Bureau of Water 13,219 12,944 13,219 12,944 Water Pollution Control 16,892 15,747 16,892 15,747 Utility Administrative Division 2,294 2,170 2,294 2,170 Total program expenses 551,981 532,506 32,405 30,861 584,386 563,367

Change in Net Position (24,662) (10,900) (1,633) 215 (26,295) (10,685)

Net Position at Beginning of Year (223,317) (212,417) 157,598 157,383 (65,719) (55,034)

Net Position at End of Year $ (247,979) $ (223,317) $ 155,965 $ 157,598 $ (92,014) $ (65,719)

Governmental Activities

The City’s total governmental revenues were $527.3 million as compared with $521.6 million in the prior year. Operating grants and contributions increased by $9.7 million as state & federal assistance for targeted for educational improvement purposes increased by $8.5 million. Capital grants decreased by $7.1 million as the City expended less on capital outlays subject to State and Federal project cost reimbursements in fiscal year 2016 as compared with fiscal year 2015. Approximately 75% of eligible school construction project costs are reimbursed by the State as costs are incurred. The City expended $11.4 million on school construction, renovation and addition capital expenditures in fiscal year 2016 as reported in the Education Capital Improvement Fund, down from $20.1 million in fiscal year 2015. The City saw an increase in charges for service as improved activity was seen in transactions generating conveyance tax and permit fees.

A-8 The total cost of all governmental programs and services was $552.0 million as compared with $532.5 million reported last year representing an $19.5 million or 3.66% increase. The General Fund’s expenses and transfers totaled $417.0 million in fiscal year 2016 as compared with $413.3 million in fiscal year 2015 representing a $3.7 million or .09% increase. This supports the conclusion that the increased expense of $19.5 million in the City’s governmental activities is largely attributable to the recognition of expenses & deferred outflows that do not require the use of current financial resources but are recognized in the governmental statement of activities as an expense in the current year. The recognition of these expenses is allocated against all programs. Table 3 presents the cost of each of the City’s five largest programs - general government, public works, public safety, human services and education - as well as each program’s net cost (total cost less revenues generated by the activities). The $3.3 million reduction in Public Works net cost of services is the result of increased capital grant revenues associated with public works capital projects. The net cost shows the financial burden that was placed on the City’s taxpayers by each of these functions on the full accrual basis of accounting.

TABLE 3 GOVERNMENTAL ACTIVITIES (In Thousands)

Total Cost of Services Net Cost of Services 2016 2015 2016 2015

General government $ 129,249 $ 128,749 $ 126,652 $ 126,405 Public works 28,854 27,721 15,500 18,802 Public safety 62,895 60,538 57,495 53,785 Human services 7,312 6,714 4,291 3,881 Education 284,774 272,121 47,928 36,377 All others 38,897 36,663 32,004 29,496

Totals $ 551,981 $ 532,506 $ 283,870 $ 268,746

Business-Type Activities

User fee revenues (charges for services) in the City’s business-type activities (see Table 2) remained stable, reporting an $85 thousand reduction from $29.5 million in fiscal year 2015 to $29.4 million in fiscal year 2016. Capital grants and contributions decreased $315 thousand as grant funding capital costs were lower than the prior fiscal year. Operating expenses increased $1.5 million from $30.9 million to $32.4 million. In prior fiscal year 2015, the expense recognition or the increase in the accrued net pension liability, net of deferred outflows was $158 thousand. In the current fiscal year 2016, that expense recognition increased to $1.2 million accounting for $1 million of the $1.5 million increase in operating expenses year-over-year.

In the City’s business-type activities, a Utility Administrative Division enterprise fund exists to consolidate the accounting, billing and collection activities of the Bureau of Water and Water Pollution Control under one Division. Premium cost allocations are included in the Bureau of Water and Water Pollution Control’s operating budgets to fund the Administrative Division. Corresponding actual costs removed from the operating budgets have been replaced with a premium cost allocation expense.

A-9 City Funds Financial Analysis

Governmental Funds

As the City completed the year, its governmental funds (as presented in the balance sheet - Exhibit III) reported a combined fund balance of $39.0 million as compared with $16.8 million last year. The City’s General Fund reported a total fund balance this year of $22.7 million representing an increase of $26 thousand over the prior year. The increase of $26 thousand in fund balance followed the year-end transfer out of $2.1 million to allocate budgetary surpluses to the City’s internal service funds and to other funds to provide funding for various other capital and program initiatives not provided for in the General Fund budget. The allocation of budgetary surpluses at year-end is a specific action taken by the City in order to remain in compliance with an Internal Revenue Service (IRS) working capital bond covenant restriction established with the City’s issuance of special capital reserve fund deficit financing bonds in 2002. That restriction limits the City’s build-up of working capital funds in its General Fund. The IRS working capital restriction will expire when all of the City’s special capital reserve fund bonds have been redeemed. The General Fund’s unassigned component of fund balance is $19.7 million with $3 million assigned to the fiscal year 2017 Budget as a fund balance designation to limit tax levy growth and remain compliant with the working capital restriction. The General Fund’s revenue resources available for appropriation were $2.1 million more than anticipated. Expenditures were $3.0 million less than appropriated. The net budgetary surplus of $5.1 million avoided any drawdown of the prior year’s $3.0 million designation of fund balance for mil rate relief, and provided for $2.1 million in the aforementioned year-end budgetary surplus transfers.

The fund balance in the City’s Debt Service fund increased $2.9 million driven by a $3.4 million bond premium realized on the November 2015 bond sale. The proceeds of the bond premium will be used in the next couple of years to assist with the phase-in of projected increases in annual debt service costs associated with the City’s capital & infrastructure improvement program. Debt service expenditures, including debt service on the 2009 pension obligations bonds, was $47.2 million in fiscal year 2016 as compared with $46.7 million in fiscal year 2015.

Fund balances in the City’s General & Education Capital Improvement funds reflect a combined increase of $15.2 million. In November 2015, the City issued $30 million in capital project general obligation bonds with a significant portion of the bond proceeds being used to replenish the temporary use of the City’s general cash reserves used to finance ongoing capital projects. The $20 million of the bond proceeds were recorded in the General Capital Improvement Fund with $10 million allocated to the Education Capital Improvement Fund. Fiscal 2016 general purpose capital expenditures of $25.8 million and educational purpose capital expenditures of $11.5 million are further detailed by project in Exhibit B-3 & B-4, respectively.

Proprietary Funds

The City’s self-insured programs for Health Benefits, General Liability, Workers’ Compensation and Heart and Hypertension are reported as internal service funds of the City. The combined excess net position in the City’s self-insured internal service funds is a negative $3.0 million following a $10.3 reduction in net position during fiscal year 2016. Assets of $48.4 million, including $44.5 million in cash and investments are offset by short & long-term accrued loss liabilities totaling $51.4 million. The net position decrease of $10.3 million reflects a continuation of health trend cost increases compounded by poor claims experience that again outpaced the City’s employer and employee benefit contributions in fiscal year 2016. To stabilize the operations of these funds, the City has increased its General Fund contribution for internal service fund benefit and risk management programs by $6.9 million for a total General Fund budgeted contribution of $89.4 million in fiscal year 2017. The City has aggressively focused on reversing the increased costs in its health benefit & worker compensation programs through the implementation of benefit & program cost control measures, collectively bargaining for larger cost participation by employees and implementing a restructuring of retiree plans to enable the shifting of primary coverage to Medicare. The cost shift derived by the enrollment of all over age 65 covered

A-10 retirees & spouses in Medicare effective July 1, 2016 is now evidenced by the trending reduction in the City’s weekly funding draw to cover paid claims to date in fiscal year 2017. We are confident at this time that the General Fund’s $6.9 million budgeted increase in contributions to the Internal Service Funds in addition to several major cost containment measures, fully implemented for Fiscal 2017, will address the annual operating loss and set the stage for re-establishing excess reserves over next few years.

General Fund Budgetary Highlights

General Fund revenues came in $2.1 million more than budgetary revenue estimates. Total property taxes came in $3.3 million more than budgeted as the impacts of the City’s expanded delinquent collection efforts continue to be realized. The City now utilizes a collection agency to pursue delinquent motor vehicle taxes, has implemented a scoff-law booting program and has expanded the pool of properties that will be subject to collection of property taxes through tax sale auction. Current collections are also benefitting by the increased steps being taken to collect on delinquent taxes. The budgeted current taxes collection rate of 96.0% was exceeded by 1.0%. Revenue derived from State & Federal grant assistance missed budgetary estimates by $1.6 million as the State eliminated funding during the year for an elderly housing grant abatement program, reduced the reimbursement percentage on state property exempt from local property taxes and reduced reimbursement levels on special education costs incurred by the Board of Education. Fringe benefit reimbursements from grants and other funds exceeded budget estimates by $921 thousand as that amount is conservatively budgeted for each year due the complexities in projecting out reimbursements.

The City’s General Fund expenditures were $3.0 million less than budgeted. In October 2012, the Administration established a Cost Containment and Oversight Committee (CCOC) to regularly meet with City department heads to discuss current budget status, to closely monitor expenditure requests and to implement cost saving measures necessary to close any revenue estimate shortfalls prior to close of the fiscal year. The CCOC continued to meet regularly during fiscal year 2016 and continues to meet in this current 2017 fiscal year with the ongoing charge of monitoring spending, meeting regularly with department heads, and taking actions necessary to ensure the realization of a budgetary surplus at year-end. The CCOC efforts during fiscal year 2016 and the cooperation and support of the City’s department heads allowed for budgetary savings in all functions of government with the largest budgetary savings realized in the Department of Public Works and the Department of Education.

The General Fund’s total fund balance as of June 30, 2016 is $22.7 million. An assigned portion of $3 million exists as the fiscal year 2017 adopted budget includes a designation of fund balance for mill rate relief as has been consistently designated for several years. To the extent that the $3 million designation is not drawn upon during the current fiscal year it remains available for designation in the subsequent fiscal year.

Capital Asset and Debt Administration

Capital Assets

At June 30, 2016 the City had $817.2 million invested in a broad range of capital assets, including land, buildings, park facilities, vehicles and equipment, roads and bridges, and water and sewer facilities and lines - Table 4. This amount represents a net increase (including additions, deductions and depreciation) of $9.3 million over last year.

A-11 TABLE 4 CAPITAL ASSETS AT YEAR-END (Net of Depreciation) (In Thousands)

Governmental Business-Type Activities Activities Total 2016 2015 2016 2015 2016 2015

Land and land improvements $ 19,025 $ 18,514 $ 1,773 $ 1,773 $ 20,798 $ 20,287 Buildings, utility plant and improvements 467,482 353,921 67,925 70,330 535,407 424,251 Infrastructure 41,281 36,171 61,847 63,186 103,128 99,357 Machinery and equipment 17,306 16,166 39,493 39,846 56,799 56,012 Vehicles 3,490 2,772 591 845 4,081 3,617 Construction in progress 95,370 202,472 1,645 1,912 97,015 204,384

Totals $ 643,954 $ 630,016 $ 173,274 $ 177,892 $ 817,228 $ 807,908

Major capital activities during the year included the capitalization of $31.2 million in school construction and renovation capitalized costs, general building improvements and infrastructure improvements. More detailed information about the City’s capital assets is presented in Note 5 to the financial statements.

Long-Term Debt

At June 30, 2016 the City had $476.4 million in bonds and notes outstanding versus $473.4 million last year - as shown in Table 5.

TABLE 5 OUTSTANDING DEBT, AT YEAR-END (In Thousands)

Governmental Business-Type Activities Activities Total 2016 2015 2016 2015 2016 2015

General obligation bonds $ 450,233 $ 441,631 $ 2,356 $ 2,487 $ 452,589 $ 444,118 Serial notes payable 23,813 29,277 23,813 29,277

$ 450,233 $ 441,631 $ 26,169 $ 31,764 $ 476,402 $ 473,395

The City is strongly committed to attaining the right balance of capital renewal and reinvestment within the City over time. Each and every bond authorization submitted for approval by the City’s governing body is critically evaluated beforehand by the City’s Administration. All merits of the project are evaluated to ensure the project fully warrants committing the City’s bonding capacity for the identified purpose. The City’s bond authorization and debt issuance program is designed to manage in increases to the City’s annual debt service commitment over the next 5-years, then leveling off at an annual debt service cost in the 5%-6% range of total budget. A level annual debt service commitment in that 5%- 6% range of total budget will provide for continual capital investment opportunities in education facilities, infrastructure and economic development initiatives for the long-term betterment of the City, its residents & businesses and to provide long-term sustainability of the City for generations to come.

A-12 For educational capital improvement purposes since 2004, the City has approved $323.5 million in bond authorizations for construction of new schools, school additions and school renovation “as new” projects. All schools have maintained their accreditation. Approximately 78 percent of the total school project authorizations will be funded through the State of Connecticut’s school construction reimbursement program. The City anticipates permanently financing a total of $80.9 million for approved school bond authorizations. As of November 2015, $59 million of the projected $80.9 million local bonding commitment for school projects has occurred.

For capital improvement purposes, there are current active bonds authorizations totaling $186.3 million that have been appropriated to support a continual commitment of funding for infrastructure improvements including road reconstructions, sidewalks and road restoration, funding public safety vehicle & large equipment purchases, construction of a centralized DPW Facility, remediation and repurposing of a decades closed manufacturing facility, blight remediation, comprehensive energy savings measures and many other productive initiatives supporting continual reinvestment into the City. The City anticipates permanently financing a total of $139.7 million for approved general purpose bond authorizations, net of grants awarded to the projects. As of November 2015, $58 million of the projected $139.7 million bonding commitment has been permanently financed. The City aggressively seeks grant assistance on these general purpose projects as evidenced by a $15.7 million award from the U.S. Department of Defense and a $14.4 million T.I.G.E.R. Grant awarded to the City from the U.S. Department of Transportation.

In October 2015, in preparation for the November 2015 bond sale, City representatives including Mayor Neil M. O’Leary, Budget Director Ofelia Matos and Director of Finance Michael LeBlanc met with three credit rating agencies to present the City’s current financial condition and outlook including a comprehensive overview of current economic development activities and financial management policies. Following those meetings the credit rating agencies issued updated ratings on the City’s outstanding long-term debt and ratings for the November 2015 bond sale. Standard and Poor’s reaffirmed the City’s “AA-” bond rating, with a stable outlook, highlighting the City’s very strong management, strong budgetary performance, and budget flexibility. The stable outlook reflects the City’s growing economic base and rather predictable operating profile. Fitch Ratings and the Kroll Bond Rating Agency reaffirmed the City’s prior ratings of “A+” & “A+” respectively and also reported a continued stable outlook for the City.

On November 12, 2015, the Mayor & Finance Director authorized the sale of $23.0 million, Series 2015 - Lot A tax-exempt General Obligation Bonds and $7.0 million, Series 2015 – Lot B taxable General Obligation bonds to provide financing for ongoing capital and infrastructure improvements in accordance with previously approved bond authorizations. The combination of the reaffirmation of the City’s credit rating, continued stable outlook and still favorable market conditions allowed the City to permanently finance the $30.0 million in general obligation bonds at a true interest cost of 3.54% with lower borrowing rate spreads to the AAA Municipal Market Data index when compared to the borrowing rate spreads when the City previously sold bonds in November 2013.

Included in the outstanding debt as of June 30, 2016 are outstanding pension obligation bonds in the amount of $264.0 million and outstanding special capital reserve deficit bonds in the amount of $29.5 million. The Water Pollution Control (WPC) enterprise fund has self-supporting bond and clean water fund serial note outstanding debt totaling $23.8 million on June 30, 2016. The Bureau of Water enterprise fund has $2.4 million in self-supporting general obligation debt obligations outstanding as of June 30, 2016.

A-13 A $17.7 million capital appropriation and bond authorization was approved in May 2015 for water plant, equipment and system renewal capital costs anticipated to be incurred over the next five years. A $10.3 million capital appropriation and bond authorization was approved in May 2015 for water pollution control plant, equipment and system capital expenses, including investments to achieve lower phosphorus levels. As planning, design and initial implementation of these capital improvements progresses, the Management of the Bureau of Water and Water Pollution Control Authority are actively pursuing grants and 2% fixed loan funding from the State of Connecticut to reduce the debt service impact on these capital authorizations.

The State of Connecticut limits the amount of general obligation debt that cities can issue based on formula determined under State Statutes based on type of debt and tax base. The City’s outstanding general obligation debt is significantly below this $1.7 billion state-imposed limit.

Other obligations include accrued vacation pay and sick leave. More detailed information about the City’s long-term liabilities is presented in Note 8 to the financial statements.

Economic Factors and Next Year’s Budgets and Rates

The City’s annual budget setting process avoids the utilization of unreasonable assumptions to project revenues and appropriations. Ongoing budget monitoring systems are in place to allow the City to react timely to unanticipated revenue shortfalls or unplanned costs with controlled use of the budgeted contingency account for non-recurring expenses. The budget appropriation process is precise in its detail yet considers variables that may be encountered in the course of operations. The fiscal year 2017 budget was crafted in a manner which took into consideration the projected results for fiscal year end 2016 in the City’s General Fund and Internal Service Funds. Revenue estimates were developed on the basis of achievable objectives and realism as a means to limit income deficiencies and thereby strengthening the likelihood of maintaining undesignated fund balance objectives.

The City’s current mill rate is significantly higher than surrounding towns and can serve as a detriment to home ownership & business development within the City. Any increase in the mill rate is considered a negative factor to the Administration’s economic development and residential re-use/redevelopment efforts. However, increases in the mill rate are proposed when deemed necessary to maintain the financial stability of the City and the maintenance of services. The 2017 adopted budget included a tax levy increase of 1.99 mills. The 1.99 mill rate increase was necessary to fund a budgeted $6.9 million increase in the General Fund’s contribution to the City’s internal service funds, to provide additional local funding of $2.75 million to the Board of Education and to provide additional funding for anticipated general wage increases. The State of Connecticut established a motor vehicle mill rate cap of 37 mills to provide local property tax relief to residents and businesses effective July 1, 2016. The motor vehicle mill rate is now 23.21 mills below the real estate & personal property mill rate of 60.21. The State has provided full reimbursement in fiscal year 2017 for the reduced motor vehicle property taxes resulting from the mill rate cap. The increased cost of health benefits continued to be the City’s largest budgetary challenge as industry costs for medical services and prescription drug costs continued to escalate. The City has aggressively addressed this issue through the implementation of benefit cost control measures, collectively bargaining for larger cost participation by employees and the restructuring or retiree plans to enable the shifting of primary coverage to Medicare effective July 1, 2016. The implementation of Federal Health Care Reforms has resulted in continued increases to the cost of the City’s self-insured medical benefits programs as minimum benefit requirements have been expanded and requirements to fund Federal program management administrative fees and reinsurance protection fees for private insurers are required of major plan sponsors. Federal health care reforms have yet to reduce industry wide health care costs. This past year saw an over 25% increase in the cost of prescription drug pharmacy benefit costs.

A-14 The fiscal year 2017 adopted budget calls for $406.6 million in revenues which includes a $700 thousand increase in general property tax revenue net of the $11.8 million shift of motor vehicle property taxes to State grants as part of the adoption of a statewide motor vehicle mill rate cap. The fiscal year 2017 appropriated expenditure budget of $406.6 million has been increased by $13.7 million with $2.75 million in additional local funding to education, $6.9 million more allocated to internal service program funds including health benefits, workers compensation and general liability and $4.1 million allocated to cover all other general wage increases and service cost increases within all other general government functions. A mill rate of 60.21 mills is applied to a net taxable grand list of $4.085 billion. Property taxes are projected to provide 57.7% or $234.8 million of all revenues needed compared with 60.3% or $236.6 million in the prior year. The reduction in the percentage of revenues derived from local property taxes is directly a result of the implementation of the motor vehicle mill rate cap with approximately $11.8 million in revenue shifted to State aid. The annual property tax collection rate continues to exceed 97%. The high rate of tax collection is a credit to the taxpaying residents of the City of Waterbury coupled with the use of appropriate methods of delinquent tax collection including tax sale auctions and engaging the services of a collection agency to pursue delinquent motor vehicle accounts. A budgeted collection rate of 96% allows for the realization of property tax revenue surpluses to buffer against any unanticipated shortfalls in other revenue categories in order to avoid use of fund balance designated to the subsequent budget. The adopted budget includes a $3 million designated use of fund balance in accordance with the City’s fund balance policy.

The City utilizes bond financing as a preferred funding mechanism for larger infrastructure capital costs including road milling and repaving as well as for large capital equipment purchases. The bond financing of larger infrastructure projects is accounted for in the City’s long-term capital debt issuance financing plan.

The City’s Economic Development Team continues to engage and provide assistance to companies both large and small, including those entities already located in the City and to those entities looking to come to the City. The City continues to advance its economic development strategy with both public and private investments as evidenced by the opening of nearly 50 new businesses and expansions since January 2014, providing for nearly 1,600 new full and part-time employment opportunities within the City. The new businesses include manufacturing, retail, restaurant and professional businesses, allowing for continued expansion and diversification of the City’s employment base. Future business development and employment growth is strong as evidenced by nearly 20 businesses known to be in the final stages of site acquisition or underway with site construction. Businesses that have started construction or are scheduled to start construction in 2017 will bring an estimated 900 new jobs to Waterbury along with beneficial grand list growth.

The City’s economic development team continues to leverage new loans and grant programs established by and offered through the State Department of Economic and Community Development. These low interest loans combined with tax abatement programs continue to produce activity which is enhanced by Waterbury’s location at the intersection of Route 8 and I-84 in the center of Connecticut.

The unemployment rates of the City of Waterbury and the Waterbury labor market as a whole continue to trend lower representing the positive impact of local efforts over the past few years to create new job opportunities complemented by a steadily improving labor market. Waterbury’s unemployment rate peaked at 16 percent in February 2010 – the height of the Great Recession. By April 2015, it was 9.5 percent and by June 2016, it was down to 8.7 percent.

Through October of this 2017 fiscal year, early revenue projections are showing the potential for a year end shortfall of $823 thousand and an expenditure shortfall of $1.1 million. The current projections assume full utilization of the $4.6 million contingency account by year end and also incorporate several worst case scenario assumptions. These estimates speak to the reality in current budgets that revenues are always subject to unanticipated reductions and therefore controlling costs is paramount to achieving a balanced budget by year end. Police overtime during the first quarter of this fiscal year had trended significantly above budget estimates and is the main reason for the projected $1.1 million

A-15 expenditure shortfall. The Mayor, a special advisor and the CCOC worked collaboratively with the Police Department administration to implement steps to reduce weekly overtime. Reductions in weekly overtime ranging from 50%-75% during November have been realized that will result in a substantial lowering of the year-end projected expenditure shortfall. To help improve the likelihood of achieving a balanced budget by year end, the Mayor has kept the Cost Containment & Oversight Committee (CCOC) in place to closely monitor and scrutinize department expenditure requests and position requests.

As the City begins to prepare its fiscal year 2018 budget, it does so with the knowledge that there will again be intensified pressure on controlling increases to the expenditure budget by virtue of limited grand list growth and the every growing risk of reductions in State aid. Published reports are highlighting significant State budget deficits for the next two-year State budget (7.1.2017 to 6.30.2019) to be adopted by June 30, 2017. The outlook for the 2018 budget development and adoption process presents a continued daunting task of balancing the governmental service needs of the taxpayers and holding the line on property taxes in contrast to the risk of State aid reductions as part of the next two- year State budget development and adoption process.

In the City’s business-type activities, a five-year structured increase in user rates was adopted for the fiscal year beginning July 1, 2015 to support the repayment of financing for a comprehensive $28 million infrastructure and capital renewal and replacement capital investment approved in May 2015. A $17.7 million capital appropriation and bond authorization was approved in May 2015 for Water plant, equipment and system renewal capital costs anticipated to be incurred over the next five years. A $10.3 million capital appropriation and bond authorization was approved in May 2015 for plant, equipment and system capital expenses, including short-term capital improvements to begin to lower phosphorus levels. The State Department of Energy & Environmental Projection (“DEEP”) has established proposed limits that will require significant capital investment including the installation of effluent filter equipment along with chemical phosphorous removal and operational changes to reduce phosphorous nutrient loads to achieve a 0.2 mg/level. Preliminary capital cost projections to meet the 0.2 mg/level are estimated at $45 million with the State offering 30% reimbursement towards construction costs. In October 2013, the State DEEP agreed to give Waterbury more time to comply with the strictest of its new phosphorus reduction requirements allowing for two phases (short-term & long-term) with 0.7 mg/level set as the first interim target limit. Achieving the short-term target of 0.7 mg/level can be accomplished with the addition of chemical additives and limited capital investment. The lower target limit of 0.2 mg/level will be required in eight (8) years allowing Waterbury the time needed to study and evaluate options to reach the 0.2 mg/level.

Contacting the City’s Financial Management

This financial report is designed to provide citizens, taxpayers, customers, investors and creditors with a general overview of the City’s finances and to show the City’s accountability for the money it receives. If you have questions about this report or need additional financial information, please contact the Finance Department, City of Waterbury, 235 Grand Street, Waterbury, Connecticut 06702.

A-16 EXHIBIT I CITY OF WATERBURY, CONNECTICUT STATEMENT OF NET POSITION JUNE 30, 2016 (In Thousands)

Governmental Business-Type Activities Activities Total

Assets: Cash and cash equivalents $ 20,639 $ 12,423 $ 33,062 Investments 68,248 68,248 Receivables, net 49,906 9,368 59,274 Internal balances 611 (611) - Other current assets 825 1,091 1,916 Capital assets: Assets not being depreciated 108,281 3,418 111,699 Assets being depreciated, net 535,673 169,856 705,529 Total assets 784,183 195,545 979,728

Deferred Outflows of Resources: Deferred charge on refunding 1,001 1,001 Differences between expected and actual pension experience 180 9 189 Changes in actuarial assumptions 1,473 77 1,550 Difference between projected and actual pension earnings 39,949 2,098 42,047 Total deferred outflows of resources 42,603 2,184 44,787

Liabilities: Accounts payable and accrued expenses 38,739 769 39,508 Unearned revenue 711 711 Noncurrent liabilities: Due within one year 47,159 6,268 53,427 Due in more than one year 987,924 32,395 1,020,319 Total liabilities 1,074,533 39,432 1,113,965

Deferred Inflows of Resources: Advance property tax collections 232 232 Unavailable revenue - other charges 2,332 2,332 Total deferred inflows of resources 232 2,332 2,564

Net Position: Net investment in capital assets 487,171 144,101 631,272 Restricted for trust purposes: Trust purposes - nonexpendable 122 122 Trust purposes - expendable 2,466 2,466 Unrestricted (737,738) 11,864 (725,874)

Total Net Position $ (247,979) $ 155,965 $ (92,014)

The accompanying notes are an integral part of the financial statements A-17 EXHIBIT II CITY OF WATERBURY, CONNECTICUT STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2016 (In Thousands)

Net (Expense) Revenue and Program Revenues Changes in Net Position Operating Capital Charges for Grants and Grants and Governmental Business-Type Functions/Programs Expenses Services Contributions Contributions Activities Activities Total

Governmental activities: General government $ 129,249 $ 2,597 $ $ $ (126,652) $ $ (126,652) Public works 28,854 1,457 4,282 7,615 (15,500) (15,500) Public safety 62,895 3,920 1,427 53 (57,495) (57,495) Development and community affairs 4,399 1,881 3,185 5 672 672 Human services 7,312 208 2,813 (4,291) (4,291) Education 284,774 368 227,281 9,197 (47,928) (47,928) Culture and recreation 8,061 1,609 213 (6,239) (6,239) Interest on long-term debt 26,437 (26,437) (26,437) Total governmental activities 551,981 12,040 239,201 16,870 (283,870) - (283,870)

Business-type activities: Bureau of Water 13,219 11,896 (1,323) (1,323) Waste Treatment 16,892 17,485 690 1,283 1,283 Utility Administrative Division 2,294 (2,294) (2,294) Total business-type activities 32,405 29,381 - 690 - (2,334) (2,334)

Total $ 584,386 $ 41,421 $ 239,201 $ 17,560 (283,870) (2,334) (286,204)

General revenues: Property taxes 238,060 238,060 Grants and contributions not restricted to specific programs 17,730 17,730 Unrestricted investment earnings 2,118 35 2,153 Miscellaneous 1,300 666 1,966 Total general revenues 259,208 701 259,909

Change in Net Position (24,662) (1,633) (26,295)

Net Position, July 1, 2015 (223,317) 157,598 (65,719)

Net Position, June 30, 2016 $ (247,979) $ 155,965 $ (92,014)

The accompanying notes are an integral part of the financial statements

A-18 EXHIBIT III CITY OF WATERBURY, CONNECTICUT BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2016 (In Thousands)

General Education Housing and Nonmajor Total Debt Capital Capital Educational Development Governmental Governmental General Service Improvement Improvement Grants Programs Funds Funds

ASSETS

Cash and cash equivalents $ 1,215 $ 3,994 $ 2,585 $ $ 7,491 $ 381 $ 3,332 $ 18,998 Investments 24,237 1,200 25,437 Receivables, net 11,271 2,803 14,955 2,054 13,255 2,272 46,610 Due from other funds 24,479 24,479 Other 197 197

Total Assets $ 61,202 $ 3,994 $ 5,388 $ 14,955 $ 9,545 $ 13,636 $ 7,001 $ 115,721

LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES

Liabilities: Accounts payable and accrued liabilities $ 27,860 $ 3 $ 2,481 $ 1,642 $ 1,420 $ 916 $ 193 $ 34,515 Due to other funds 17,768 185 17,953 Unearned revenue 3 139 285 284 711 Total liabilities 27,860 3 2,484 19,549 1,705 916 662 53,179

Deferred inflows of resources: Unavailable revenue - property taxes 9,799 9,799 Unavailable revenue - loans receivable 12,337 12,337 Unavailable revenue - other receivables 650 481 1,131 Advanced property tax collections 232 232 Total deferred inflows of resources 10,681 - - - - 12,337 481 23,499

Fund balances: Nonspendable 319 319 Restricted 2,904 2,466 5,370 Committed 3,991 7,840 383 3,402 15,616 Assigned 3,000 3,000 Unassigned 19,661 (4,594) (329) 14,738 Total fund balances 22,661 3,991 2,904 (4,594) 7,840 383 5,858 39,043

Total Liabilities, Deferred Inflows of Resources and Fund Balances $ 61,202 $ 3,994 $ 5,388 $ 14,955 $ 9,545 $ 13,636 $ 7,001 $ 115,721

(Continued on next page)

A-19 EXHIBIT III CITY OF WATERBURY, CONNECTICUT BALANCE SHEET - GOVERNMENTAL FUNDS (CONTINUED) JUNE 30, 2016 (In Thousands)

Reconciliation of the Balance Sheet - Governmental Funds to the Statement of Net Position: Amounts reported for governmental activities in the statement of net position (Exhibit I) are different because of the following:

Fund balances - total governmental funds $ 39,043

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

Governmental capital assets $ 938,139 Less accumulated depreciation (294,185) Net capital assets 643,954

Other long-term assets are not available to pay for current-period expenditures and, therefore, are not recorded in the funds:

Property tax receivables greater than 60 days 6,741 Interest receivable on property taxes 3,058 Other receivables and deferred amounts 1,131 Housing loans 12,337 Deferred outflows related to differences between expected and actual pension experience 180 Deferred outflows related to changes in actuarial assumptions 1,473 Deferred outflows related to difference between projected and actual pension earnings 39,949

Internal service funds are used by management to charge the costs of risk management to individual funds. The assets and liabilities of the internal service funds are reported with governmental activities in the statement of net position. (3,007)

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

Bonds and notes payable (450,233) Deferred charge on refunding 1,001 Unamortized bond premium (6,815) Interest payable on bonds and notes (4,199) Accrued compensated absences (30,899) Retired employee obligations (5,375) Net OPEB obligation (284,710) Net pension liability (210,628) Landfill post-closure (980)

Net Position of Governmental Activities (Exhibit I) $ (247,979)

The accompanying notes are an integral part of the financial statements

A-20 EXHIBIT IV CITY OF WATERBURY, CONNECTICUT STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2016 (In Thousands)

Debt General Education Housing and Nonmajor Total Service Capital Capital Educational Development Governmental Governmental General Fund Improvement Improvement Grants Programs Funds Funds Revenues: Property taxes $ 238,780 $ $ $$$$ $238,780 Intergovernmental 156,610 8,902 9,343 73,300 3,282 15,061 266,498 Investment income 453 11 3 108 575 Charges for services 7,292 30 4,252 11,574 Reimbursements 13,365 13,365 Other 571 792 3,588 85 263 92 510 5,901 Total revenues 417,071 792 12,501 9,428 73,593 3,377 19,931 536,693

Expenditures: Current: General government 9,684 55 9,739 Public works 17,066 17,066 Public safety 45,643 3,741 49,384 Development and community affairs 1,130 3,381 4,511 Human services 3,474 2,825 6,299 Education 178,411 72,722 10,999 262,132 Culture and recreation 1,713 2,049 3,762 General financial 110,549 110,549 Capital outlay 25,802 11,446 37,248 Debt service: Principal 21,398 21,398 Interest 25,796 25,796 Total expenditures 367,670 47,194 25,802 11,446 72,722 3,381 19,669 547,884

Excess (Deficiency) of Revenues Over Expenditures 49,401 (46,402) (13,301) (2,018) 871 (4) 262 (11,191)

Other Financing Sources (Uses): Issuance of bonds 20,000 10,000 30,000 Bond premium 3,396 3,396 Transfers in 45,911 567 2,920 144 49,542 Transfers out (49,375) (167) (49,542) Total other financing sources (uses) (49,375) 49,307 20,567 10,000 2,920 - (23) 33,396

Net Change in Fund Balances 26 2,905 7,266 7,982 3,791 (4) 239 22,205

Fund Balance, July 1, 2015 22,635 1,086 (4,362) (12,576) 4,049 387 5,619 16,838

Fund Balance, June 30, 2016 $ 22,661 $ 3,991 $ 2,904 $ (4,594) $ 7,840 $ 383 $ 5,858 $ 39,043

(Continued on next page) A-21 EXHIBIT IV CITY OF WATERBURY, CONNECTICUT STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2016 (In Thousands)

Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities:

Amounts reported for governmental activities in the statement of activities (Exhibit II) are different because:

Net change in fund balances - total governmental funds (Exhibit IV) $ 22,205

Governmental funds report capital outlays as expenditures. In the statement of activities, the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense:

Capital outlay 29,295 Depreciation expense (15,341)

In the statement of activities, the loss on the sale or disposal of capital assets is reported. However, in the governmental funds, the transaction is not reported. Thus the change in net position differs from the change in fund balance by the loss on assets disposed. (16)

Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds, and revenues recognized in the funds are not reported in the statement of activities:

Property tax receivable - accrual basis change (35) Property tax interest and lien revenue - accrual basis change (685) Housing assistance loans receivable - accrual basis change (24) Other receivables - accrual basis change 106 Change in deferred outflows related to differences between expected and actual pension experience (65) Change in deferred outflows related to changes in actuarial assumptions (533) Change in deferred outflows related to difference between projected and actual pension earnings 20,252

The issuance of long-term debt (e.g., bonds, leases) provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction has any effect on net position. Also, governmental funds report the effect of issuance costs, premiums, discounts and similar items when debt is first issued, whereas these amounts are amortized and deferred in the statement of activities. The details of these differences in the treatment of long-term debt and related items are as follows:

General obligation bonds issued (30,000) Bond premiums issued (3,396) Bond principal payments 21,398 Amortization of deferred charge on refunding (474) Amortization of premiums and discounts 465

Some expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in the governmental funds. The details of the changes in other recorded obligations are as follows:

Net OPEB benefit obligation (27,245) Compensated absences 541 Retired employee obligations 156 Accrued interest (632) Landfill post closure care 70 Change in net pension liability (30,370)

Internal service funds are used by management to charge costs to individual funds. The net revenue of certain activities of internal services funds is reported with governmental activities. (10,334)

Change in Net Position of Governmental Activities (Exhibit II) $ (24,662) The accompanying notes are an integral part of the financial statements A-22 EXHIBIT V CITY OF WATERBURY, CONNECTICUT STATEMENT OF NET POSITION PROPRIETARY FUNDS JUNE 30, 2016 (In Thousands)

Assets: Current assets: Cash and cash equivalents $ 357 $ 11,512 $ 554 $ 12,423 $ 1,640 Investments - 42,811 Receivables, net 3,816 5,552 9,368 3,296 Prepaid expenses - 628 Inventories 1,091 1,091 Total current assets 5,264 17,064 554 22,882 48,375

Noncurrent assets: Capital assets, net 55,348 117,296 630 173,274

Total assets 60,612 134,360 1,184 196,156 48,375

Deferred Outflows of Resources: Differences between expected and actual experience 5 4 9 Changes in assumptions 39 38 77 Difference between projected and actual pension earnings 1,072 1,026 2,098 Total deferred outflows of resources 1,116 1,068 - 2,184 -

Liabilities: Current liabilities: Accounts payable and accrued expenses 225 458 86 769 24 Due to other funds 611 611 5,915 Capital lease obligations 672 672 Bonds and serial notes payable 134 5,310 5,444 Compensated absences 75 48 29 152 Risk management claims - 17,251 Total current liabilities 434 6,488 726 7,648 23,190

Noncurrent liabilities: Bonds and notes payable 2,222 18,503 20,725 Compensated absences 302 192 114 608 Risk management claims - 28,192 Net pension liability 5,653 5,409 11,062 Total noncurrent liabilities 8,177 24,104 114 32,395 28,192

Total liabilities 8,611 30,592 840 40,043 51,382

Deferred Inflows of Resources: Other charges 2,332 2,332

Net Position: Net investment in capital assets 52,992 90,479 630 144,101 Unrestricted 125 12,025 (286) 11,864 (3,007)

Total Net Position $ 53,117 $ 102,504 $ 344 $ 155,965 $ (3,007)

The accompanying notes are an integral part of the financial statements A-23 EXHIBIT VI CITY OF WATERBURY, CONNECTICUT STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET POSITION PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2016 (In Thousands)

Business-Type Activities Major Funds Nonmajor Fund Water Pollution Utility Bureau of Water Control Administrative Internal Enterprise Fund Enterprise Fund Division Total Service Funds

Operating Revenues: Operations $ 11,896 $ 17,485 $ $ 29,381 $ Employer premiums - 86,019 Charges for services - 12,912 Other 502 164 666 9,140 Total operating revenues 12,398 17,649 - 30,047 108,071

Operating Expenses: Operations 6,219 9,466 15,685 Administration and general 5,274 1,981 2,289 9,544 Depreciation 1,632 4,886 5 6,523 Benefits, claims and administration - 119,966 Total operating expenses 13,125 16,333 2,294 31,752 119,966

Operating Income (Loss) (727) 1,316 (2,294) (1,705) (11,895)

Nonoperating Income (Expense): Investment income 35 35 1,561 Interest expense (94) (555) (649) Loss on disposal of assets (4) (4) Net nonoperating income (expense) (94) (524) - (618) 1,561

Income (Loss) Before Grants, Contributions and Transfers (821) 792 (2,294) (2,323) (10,334)

Capital Grants and Contributions 690 690

Transfers In 2,344 2,344 Transfers Out (1,172) (1,172) (2,344)

Change in Net Position (1,993) 310 50 (1,633) (10,334)

Total Net Position, July 1, 2015 55,110 102,194 294 157,598 7,327

Total Net Position, June 30, 2016 $ 53,117 $ 102,504 $ 344 $ 155,965 $ (3,007)

The accompanying notes are an integral part of the financial statements A-24 EXHIBIT VII CITY OF WATERBURY, CONNECTICUT STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2016 (In Thousands)

Governmental Business-Type Activities Activities Major Funds Nonmajor Fund Water Pollution Utility Bureau of Water Control Administrative Internal Enterprise Fund Enterprise Fund Division Total Service Funds Cash Flows from Operating Activities: Cash received from operations $ 12,403 $ 18,808 $ $ 31,211 $ City’s contribution - 86,019 Cash received from employees and other 502 164 666 19,802 Cash paid to employees for services (5,447) (4,449) (1,713) (11,609) Cash paid to vendors (5,400) (6,868) (12,268) (112,291) Net cash provided by (used in) operating activities 2,058 7,655 (1,713) 8,000 (6,470)

Cash Flows from Capital and Related Financing Activities: Capital grants 690 690 Acquisition and construction of capital assets (1,297) (535) (77) (1,909) Principal payment - bonds, notes and leases (131) (6,679) (6,810) Interest paid on bonds and notes (94) (558) (652) Net cash provided by (used in) capital and related financing activities (1,522) (7,082) (77) (8,681) -

Cash Flows from Noncapital Financing Activities: Transfer from other funds 2,344 2,344 Transfer to other funds (1,172) (1,172) (2,344) Net cash provided by (used in) noncapital financing activities (1,172) (1,172) 2,344 - -

Cash Flows from Investing Activities: Income on investments 35 35 1,131 Purchases of investments - (1,437) Sales of investments - 5,560 Net cash provided by (used in) investing activities - 35 - 35 5,254

Net Increase (Decrease) in Cash and Cash Equivalents (636) (564) 554 (646) (1,216)

Cash and Cash Equivalents, July 1, 2015 993 12,076 13,069 2,856

Cash and Cash Equivalents, June 30, 2016 $ 357 $ 11,512 $ 554 $ 12,423 $ 1,640

Reconciliation of Operating Income (Loss) to Net Cash Provided by (Used in) Operating Activities: Operating income (loss) $ (727) $ 1,316 $ (2,294) $ (1,705) $ (11,895) Adjustments to reconcile operating income (loss) to net cash provided by (used in) operating activities: Depreciation expense 1,632 4,886 5 6,523 (Increase) decrease in receivables 506 1,323 1,829 (2,253) (Increase) decrease in inventory 98 98 (Increase) decrease in prepaid expenses - (191) Increase (decrease) in accounts payable and accrued expenses (59) (545) 78 (526) 6 Increase (decrease) in due to other funds 501 501 5,225 Increase (decrease) in compensated absences 46 (6) (3) 37 Increase (decrease) in risk management claim liabilities - 2,638 Increase (decrease) in net pension liability 1,127 1,241 2,368 Increase (decrease) in deferred outflows of resources (565) (560) (1,125)

Total adjustments 2,785 6,339 581 9,705 5,425

Net Cash Provided by (Used in) Operating Activities $ 2,058 $ 7,655 $ (1,713) $ 8,000 $ (6,470)

Noncash Investing, Capital and Financing Activities: Amortization of Other Charges $ 575 Increase (Decrease) in Value of Investments $ 430

The accompanying notes are an integral part of the financial statements A-25 EXHIBIT VIII CITY OF WATERBURY, CONNECTICUT FIDUCIARY FUNDS STATEMENT OF FIDUCIARY NET POSITION JUNE 30, 2016 (In Thousands)

Pension Trust Agency Fund Funds Assets: Cash and cash equivalents $ 12,058 $ 1,799 Investments: Corporate bonds 34,762 U.S. treasury obligations 25,138 Asset backed securities 8,046 Managed futures 26,501 Common stock and equities 272,689 Preferred stock 10,696

Total assets 389,890 $ 1,799

Liabilities: Deposits held for others $ 1,799

Net Position: Restricted for pensions $ 389,890

The accompanying notes are an integral part of the financial statements

A-26 EXHIBIT IX CITY OF WATERBURY, CONNECTICUT FIDUCIARY FUNDS STATEMENT OF CHANGES IN PLAN NET POSITION PENSION TRUST FUND FOR THE YEAR ENDED JUNE 30, 2016 (In Thousands)

Additions: Contributions: Employer $ 17,003 Plan members 6,476 Total contributions 23,479

Investment income: Net change in fair value of investments $ (7,320) Interest and dividends 9,820 Less: Investment management fees (2,652) Total investment income (loss) (152)

Total additions 23,327

Deductions: Benefits 48,414 Refunds 586 Total deductions 49,000

Change in Net Position (25,673)

Net Position Restricted for Pension Benefits, July 1, 2015 415,563

Net Position Restricted for Pension Benefits, June 30, 2016 $ 389,890

The accompanying notes are an integral part of the financial statements

A-27 CITY OF WATERBURY, CONNECTICUT NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2016 (Amounts expressed in thousands)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The financial statements of the City of Waterbury (the City) have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) as applied to government units. The Governmental Accounting Standards Board (GASB) is the accepted standard- setting body for establishing governmental accounting and financial reporting principles. The more significant policies of the City are described below.

A. Reporting Entity

Waterbury was founded in 1674, incorporated as a village in 1686 and became a City in 1853. The City operates under a Mayor-Board of Aldermen form of government. Included in the services provided by the City are public safety, highways and streets, sanitation, health and social services, culture, recreation, education, public improvement, planning and zoning, and general administrative services.

Blended Component Unit

Waterbury Development Agency

The Waterbury Development Agency (WDA) was established in 1949 to administer various programs including urban renewal and economic development, central relocation and housing development. The WDA’s sole remaining purpose of existence is to represent the City as its designated redevelopment agency, allowing for the performance of certain activities on behalf of the City that only a designated redevelopment agency can perform such as acquiring properties that will then be owned by the City. The WDA is included as part of the Housing and Development Programs Fund (Nonmajor Special Revenue Fund).

Related Organizations

The City has designated the Waterbury Development Corporation (the Corporation), among other designations, as the City’s economic development agency, housing site development agency and community development agency. Under a subrecipient agreement between the City and the Corporation, the Corporation has assumed certain City responsibilities and obligations to administer grants and programs on behalf of the City. The City provides pass-through grant reimbursements to the Corporation from the City’s Community Development Block Grant. The Mayor sits on the Board of the Corporation and is responsible for the ultimate appointment of 10 members of the 25 member Board.

The Mayor is responsible for appointing board members to the City’s Housing Authority and the Naugatuck Valley Development Corporation (NVDC). The City’s accountability for these organizations extends beyond making these appointments. The City has provided for certain guarantees in the event a future environmental liability associated with NVDC’s Brass Mill Center Project was to occur.

B. Government-Wide and Fund Financial Statements

The government-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all of the nonfiduciary activities of the City and its component units. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. Likewise, the City is reported separately from certain legally separate component units for which the primary government is financially accountable.

A-28 CITY OF WATERBURY, CONNECTICUT NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2016 (Amounts expressed in thousands)

The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use or directly benefit from goods, services or privileges provided by a given function or segment, and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues.

Separate financial statements are provided for governmental funds, proprietary funds and fiduciary funds, even though the latter are excluded from the government-wide financial statements. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements.

C. Measurement Focus, Basis of Accounting and Financial Statement Presentation

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

Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the City considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due.

Property taxes, charges for services, licenses and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Only the portion of special assessments receivable due within the current fiscal period is considered to be susceptible to accrual as revenue of the current period. All other revenue items are considered to be measurable and available only when cash is received.

The City reports the following major governmental funds:

The General Fund is the City’s primary operating fund. It accounts for all financial resources of the City, except those required to be accounted for in another fund.

The Debt Service Fund accounts for financial resources transferred in from other funds to fund debt service obligations.

The General Capital Improvement Fund accounts for all the financial resources including transfers from the General Fund and bond proceeds used to finance the City’s general capital improvement projects.

A-29 CITY OF WATERBURY, CONNECTICUT NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2016 (Amounts expressed in thousands)

The Education Capital Improvement Fund accounts for all the financial resources including school construction grants, bond proceeds and transfers from the General Fund to finance the City’s school building construction, addition and renovation projects.

The Educational Grants Fund accounts for all the educational grants administered by the Board of Education.

The Housing and Development Programs Fund accounts for the financial resources dedicated primarily for housing loan assistance and economic development initiatives.

The City reports the following major proprietary funds:

The Bureau of Water Enterprise Fund accounts for the operation of the City’s water distribution system.

The Water Pollution Control Enterprise Fund accounts for the operation of the sewage treatment plant and collection systems.

Additionally, the City reports the following fund types:

The Internal Service Funds account for the City’s risk management function.

The Pension Trust Fund accounts for the activities of the City of Waterbury Retirement System, which accumulates resources for pension benefit payments to qualified City employees.

The Agency Funds account for monies held by the City in an agent capacity for student groups and developer funds.

As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are payments in lieu of taxes and other charges between certain City functions because the elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned.

Amounts reported as program revenues include 1) charges to customers or applicants for goods, services or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions, including special assessments. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include property taxes.

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

When both restricted and unrestricted resources are available for use, it is the City’s policy to use restricted resources first, then unrestricted resources as they are needed. Unrestricted resources are used in the following order: committed, assigned then unassigned.

A-30 CITY OF WATERBURY, CONNECTICUT NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2016 (Amounts expressed in thousands)

D. Deposits and Investments

The City’s cash and cash equivalents are considered to be cash on hand, demand deposits and short- term investments with original maturities of three months or less from the date of acquisition.

State statutes authorize the City and the component units to invest in obligations of the U.S. Treasury, commercial paper, corporate bonds, repurchase agreements and certain other investments as described in Note 3.

Investments for the City, as well as for its component units, are reported at fair value.

E. Receivables and Payables

Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either “due to/from other funds” (i.e., the current portion of interfund loans) or “advances to/from other funds” (i.e., the noncurrent portion of interfund loans). All other outstanding balances between funds are reported as “due to/from other funds.” Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as “internal balances.” All trade and property tax receivables, including those for component units, are shown net of an allowance for uncollectibles. The property tax receivable allowance of $2,625 is equal to 26.4% of outstanding property taxes at June 30, 2016.

Real, personal and motor vehicle property taxes are levied on the assessed value at the rate enacted by the Board of Aldermen in the annual budget ordinance.

Property taxes are levied on all assessed property on the Grand List of October 1 prior to the beginning of the fiscal year and are billed on the following July 1 and January 1. Taxes are overdue on August 1 and February 1. Interest at the rate of 1-1/2% per month accrues on all overdue taxes. If taxes are unpaid as of June 30, following the payable date, a lien is placed on the real property. Property assessments are made at 70% of the market value.

Property tax revenues are recognized when they become measurable and available. Available means due, or past due and collectible within 60 days of the end of the current period. The amount of property taxes receivable but not recorded as revenue is recorded as a deferred inflow of resources. Deferred inflows resulting from the accounting for property taxes is $9,799.

F. Inventories and Prepaid Items

All inventories are valued at cost using the first-in/first-out (FIFO) method. Inventories of governmental funds are recorded as expenditures when consumed rather than when purchased.

Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements.

G. Capital Assets

Capital assets, which include property, plant, equipment and infrastructure assets (e.g., roads, bridges, sidewalks and similar items), are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets are defined by the government as assets with an initial, individual cost of more than $10,000 (amount not rounded). Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. A-31 CITY OF WATERBURY, CONNECTICUT NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2016 (Amounts expressed in thousands)

The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized.

Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business-type activities is included as part of the capitalized value of the assets constructed.

Property, plant and equipment of the primary government, as well as the component units, is depreciated using the straight-line method over the following estimated useful lives:

Assets Years

Land improvements 20 Buildings 50 Other structures 25 Infrastructure 10-65 Machinery and equipment 5-20 Vehicles 5

H. Deferred Outflows/Inflows of Resources

In addition to assets, the statement of net position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position or fund balance that applies to a future period or periods and so will not be recognized as an outflow of resources (expense/expenditure) until then. The City reports a deferred charge on refunding and deferred outflows related to pension in the government-wide statement of net position. A deferred charge on refunding results from the difference in the carrying value of refunded debt and its reacquisition price. This amount is deferred and amortized over the shorter of the life of the refunded or refunding debt. A deferred outflow of resources related to pension results from differences between expected and actual experience, changes in assumptions or other inputs. These amounts are deferred and included in pension expense in a systematic and rational manner over a period equal to the average of the expected remaining service lives of all employees that are provided with benefits through the pension plan (active employees and inactive employees).

In addition to liabilities, the statement of net position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position or fund balance that applies to a future period or periods and so will not be recognized as an inflow of resources (revenue) until that time. The City reports advanced property tax collections and other charges in the government-wide statement of net position. For governmental funds, the City reports unavailable revenue, which arises only under the modified accrual basis of accounting. The governmental funds report unavailable revenues from several sources: property taxes, loans receivable, other receivables and advanced property tax collections. These amounts are deferred and recognized as an inflow of resources (revenue) in the period in which the amounts become available.

I. Compensated Absences

Employees are granted sick and vacation leave in varying amounts. Upon retirement, termination or death, eligible employees are compensated for unused sick and vacation leave (subject to certain limitations) at specified payment rates established by contract, regulation or policy. The General Fund generally liquidates this liability. A-32 CITY OF WATERBURY, CONNECTICUT NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2016 (Amounts expressed in thousands)

Accumulated vacation and sick time is recognized as a liability of the City.

J. Net Pension Liability

The net pension liability is measured as the portion of the actuarial present value of projected benefits that is attributed to past periods of employee service (total pension liability), net of the pension plan’s fiduciary net position. The pension plan’s fiduciary net position is determined using the same valuation methods that are used by the pension plan for purposes of preparing its statement of fiduciary net position. The net pension liability is measured as of a date (measurement date) no earlier than the end of the employer’s prior fiscal year, consistently applied from period to period.

K. Net OPEB Obligations

The net OPEB obligation represents the cumulative difference between the annual OPEB cost and the City’s contributions to the plan. These amounts are calculated on an actuarial basis and are recorded as noncurrent liabilities in the government-wide financial statements.

L. Long-Term Obligations

In the government-wide financial statements, and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities or proprietary fund type statement of net position. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of any significant applicable bond premium or discount. Significant bond issuance costs are reported as deferred charges and amortized over the term of the related debt.

In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures.

M. Fund Equity

In the government-wide financial statements and in proprietary fund types, net position is classified in the following categories:

Net Investment in Capital Assets This category groups all capital assets, including infrastructure, into one component of net position. Accumulated depreciation and the outstanding balances of debt that are attributable to the acquisition, construction or improvement of these assets reduces this category.

Restricted Net Position This category represents the net position of the City that is restricted by externally imposed constraints placed on the net position by grantors, contributors or laws and regulations of other governments.

Unrestricted Net Position This category represents the net position of the City that is not restricted for any project or other purpose. A-33 CITY OF WATERBURY, CONNECTICUT NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2016 (Amounts expressed in thousands)

In the fund financial statements, fund balances of governmental funds are classified in five separate categories. The five categories, and their general meanings, are as follows:

Nonspendable Fund Balance This represents amounts that cannot be spent due to form (e.g., inventories and prepaid amounts).

Restricted Fund Balance This represents amounts constrained for a specific purpose by external parties, such as grantors, creditors, contributors or laws and regulations of their governments.

Committed Fund Balance This represents amounts constrained for a specific purpose by a government using its highest level of decision-making authority (Board of Aldermen). An approval of a resolution by the Board of Aldermen is required to establish, modify or rescind a commitment of fund balance.

Assigned Fund Balance This balance represents amounts constrained for the intent to be used for a specific purpose by a governing board or a body or official that has been delegated authority to assign amounts by the City Charter. The assignment of fund balance requires formal approval of the City’s Board of Aldermen. The City’s Mayor or designee (Budget Director or Finance Director) are authorized to submit resolutions to the Board of Aldermen for assignment consideration. The City’s Fund Balance Policy limits the assignment of fund balance as a revenue source for the subsequent year’s budget to no more than 1% of the prior year’s budgetary based actual expenditures. An approval of a resolution by the Board of Aldermen is required to establish, modify or rescind an assignment of fund balance.

Unassigned Fund Balance This represents fund balance in the General Fund in excess of nonspendable, restricted, committed and assigned fund balance. If another governmental fund has a fund balance deficit, it is reported as a negative amount in unassigned fund balance.

N. Fund Balance Flow Assumptions

Sometimes the government will fund outlays for a particular purpose from both restricted and unrestricted resources (the total of committed, assigned and unassigned fund balance). In order to calculate the amounts to report as restricted, committed, assigned and unassigned fund balance in the governmental fund financial statements, a flow assumption must be made about the order in which the resources are considered to be applied. It is the government’s policy to consider restricted fund balance to have been depleted before using any of the components of unrestricted fund balance. Further, when the components of unrestricted fund balance can be used for the same purpose, committed fund balance is depleted first, followed by assigned fund balance.

O. Estimates

The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities including disclosures of contingent assets and liabilities and reported revenues expenditures during the fiscal year.

A-34 CITY OF WATERBURY, CONNECTICUT NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2016 (Amounts expressed in thousands)

2. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY

A. Budgetary Information

A budget for the General Fund is authorized annually by the Board of Aldermen. The procedures for establishing the budgetary data reflected in the basic financial statements are as follows:

• The Mayor submits to the Board of Aldermen a proposed operating budget for the fiscal year commencing July 1. The operating budget includes proposed expenditures and the means of financing them.

• The Board of Aldermen holds two public hearings and adjusts the proposed budget to incorporate taxpayer comments, as considered necessary.

• The budget is legally enacted through a Board of Aldermen resolution.

• At any time, in any fiscal year, upon recommendation of the Mayor and approval of the Board of Aldermen, the City may transfer any unexpended balance or any part thereof of any specific appropriation as made for that year to such other department or for such other purposes as the Board of Aldermen may designate.

• At any time, in any fiscal year, upon recommendation of the Mayor and approval of the Board of Aldermen, the City may increase the amount of any specific appropriation as made for that year to such department or for such purpose as the Board of Aldermen may designate. Any increased appropriation must be reconciled by an accompanying increase in revenue.

Formal budgetary integration is employed as a management control device in the General Fund during the year. Formal budgetary integration is not employed in Capital Projects and Special Revenue Funds because budgetary control is alternately achieved by constraints imposed by the project authorization or grant awards related to these funds.

Except for encumbrance accounting and budgeting for year-end accrued payroll, the budget is prepared on the modified accrual basis of accounting. The legal level of control, the level at which expenditures may not exceed appropriations, is at the department level.

Generally, all unencumbered appropriations lapse at year end except those for capital project funds. Appropriations for capital projects are continued until completion of applicable projects even when projects extend more than one fiscal year.

Encumbrance accounting is employed in governmental funds. Encumbrances (e.g., purchase orders, contracts) outstanding at year end are reported as reservations of fund balances and do not constitute expenditures or liabilities because the commitments will be re-appropriated and honored during the subsequent year.

During fiscal year 2016 there were additional appropriations of $2,125 from fund balance.

A-35 CITY OF WATERBURY, CONNECTICUT NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2016 (Amounts expressed in thousands)

B. Deficit Fund Equity

The following funds had deficit net position balances as of June 30, 2016:

Amount

Major Fund: Education Capital Improvement $ 4,594 * Nonmajor and Other Funds: Internal Service Funds: Health Benefits 4,064 ** Workers’ Compensation 3,672 ** Special Revenue Funds: Recreational Programs 260 ***

* Deficit balance will be funded by the issuance of bonds to permanently finance capital expenditures incurred on school construction projects.

** Deficit balances in the Health Benefits and Workers’ Compensation funds will be systematically funded by maintaining consistent levels of employer premiums along with the continued implementation of cost shift and risk reduction programs designed to reduce program costs.

*** Deficit will be reduced in futures years through revenue enhancement initiatives and operational program cost reductions.

3. CASH, CASH EQUIVALENTS AND INVESTMENTS

The deposit of public funds is controlled by the Connecticut General Statutes (Section 7-402). Deposits may be made in a “qualified public depository” as defined by Statute or, in amounts not exceeding the Federal Deposit Insurance Corporation insurance limit, in an “out of state bank” as defined by the Statutes, which is not a “qualified public depository.”

The Connecticut General Statutes (Section 7-400) permit municipalities to invest in: 1) obligations of the United States and its agencies, 2) highly rated obligations of any state of the United States or of any political subdivision, authority or agency thereof, and 3) shares or other interests in custodial arrangements or pools maintaining constant net position values and in highly rated no-load open end money market and mutual funds (with constant or fluctuating net position values) whose portfolios are limited to obligations of the United States and its agencies, and repurchase agreements fully collateralized by such obligations. Other provisions of the Statutes cover specific municipal funds with particular investment authority. The provisions of the Statutes regarding the investment of municipal pension funds do not specify permitted investments. Therefore, investment of such funds is generally controlled by the laws applicable to fiduciaries and the provisions of the applicable plan.

A-36 CITY OF WATERBURY, CONNECTICUT NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2016 (Amounts expressed in thousands)

The Statutes (Sections 3-24f and 3-27f) also provide for investment in shares of the State Short-Term Investment Fund (STIF) and the State Tax Exempt Proceeds Fund (TEPF). These investment pools are under the control of the State Treasurer, with oversight provided by the Treasurer’s Cash Management Advisory Board, and are regulated under the State Statutes and subject to annual audit by the Auditors of Public Accounts. Investment yields are accounted for on an amortized-cost basis with an investment portfolio that is designed to attain a market-average rate of return throughout budgetary and economic cycles. Investors accrue interest daily based on actual earnings, less expenses and transfers to the designated surplus reserve, and the fair value of the position in the pool is the same as the value of the pool shares.

Deposits

Deposit Custodial Credit Risk Custodial credit risk is the risk that, in the event of a bank failure, the City’s deposit will not be returned. The City’s formal deposit policy includes sections regarding safekeeping and custody of deposits to mitigate custodial credit risk. The deposit of public funds is controlled by the Connecticut General Statutes. Deposits may be placed with any qualified public depository that has its main place of business in the State of Connecticut. Connecticut General Statutes require that each depository maintain segregated collateral (not required to be based on a security agreement between the depository and the municipality and, therefore, not perfected in accordance with federal law) in an amount equal to a defined percentage of its public deposits based upon the depository’s risk-based capital ratio.

Based on the criteria described in GASB Statement No. 40, Deposits and Investment Risk Disclosures, $11,901 of the City’s bank balance of $30,573 was exposed to custodial credit risk as follows:

Uninsured and uncollateralized $ 8,908 Uninsured and collateral held by the pledging bank’s trust department, not in the City’s name 2,993

Total Amount Subject to Custodial Credit Risk $ 11,901

Cash Equivalents

At June 30, 2016, the City’s cash equivalents amounted to $22,159. The following table provides a summary of the City’s cash equivalents (excluding U.S. government guaranteed obligations) as rated by nationally recognized statistical rating organizations. The pools all have maturities of less than one year.

Standard & Poor’s

State Short-Term Investment Fund (STIF) AAAm Wells Fargo*

*Not Rated

A-37 CITY OF WATERBURY, CONNECTICUT NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2016 (Amounts expressed in thousands)

Investments

As of June 30, 2016, the City had the following investments:

Investment Maturities (Years) Fair Value Less Than 1 1 - 10 More Than 10 Interest-bearing investments: Certificate of Deposit $ 11,510 $ 4,735 $ 6,775 $ U.S. Government Securities 45,027 8,438 25,768 10,821 U.S. Government Agencies 23,360 3,016 8,072 12,272 Corporate Bonds 38,936 300 28,761 9,875

Total 118,833 $ 16,489 $ 69,376 $ 32,968

Other investments: Mutual Funds 2,522 Common Stock 287,528 Preferred Stock 10,696 Managed Futures 26,501

Total Investments $ 446,080

Presented below is the rating of investments for each debt investment type:

U.S. U.S. Average Corporate Government Certificate Government Rating Bonds Securities of Deposit Agencies

Aaa $ 7,139 $ 39,425 $ 100 Aa1 208 504 Aa2 446 821 Aa3 295 5,020 A1 4,235 A2 2,611 3,117 A3 3,139 508 Baa1 663 Baa2 174 Ba1 511 Ba2 392 Ba3 1,214 B1 1,473 B2 2,497 B3 4,362 Caa1 1,910 Caa2 1,448 Caa3 226 Ca 40 Unrated 5,953 5,602 11,510 13,290

$ 38,936 $ 45,027 $ 11,510 23,360

A-38 CITY OF WATERBURY, CONNECTICUT NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2016 (Amounts expressed in thousands)

The City adopted new accounting guidance, GASB Statement No. 72, Fair Value Measurement and Application. The new disclosure is presented below:

The City categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements); followed by quoted prices in inactive markets or for similar assets or with observable inputs (Level 2 measurements); and the lowest priority to unobservable inputs (Level 3 measurements). The City has the following recurring fair value measurements as of June 30, 2016:

Fair Value Level 1 Level 2 Level 3 Investments by fair value level: U.S. Government Securities $ 45,027 $ 45,027 $ $ Corporate Bonds 38,936 38,936 Common Stock 287,528 287,528 U.S. Government Agencies 23,360 10,971 12,389 Preferred Stock 10,696 10,696 Mutual Funds 2,522 2,522 Managed Futures 26,501 26,501

Total investments by fair value level 434,570 $ 356,744 $ 77,826 $ -

Investments not recorded at fair value: Certificate of Deposit 11,510

Total Investments $ 446,080

Interest Rate Risk The City’s formal investment policy limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. To the extent possible, the City will attempt to match its investments with anticipated cash flow requirements.

Credit Risk - Investments As indicated above, State Statutes limit the investment options of cities and towns. The City’s investment policy further limits its investment choices including prohibiting investments in derivatives.

Concentration of Credit Risk The City’s pension fund investment policy is to maintain a diversified portfolio to minimize the risk of loss resulting from over concentration of assets in a specific maturity. Information regarding concentration of the investments that represent more than 5% of the investments in the City of Waterbury Retirement System is detailed in Note 13.

A-39 CITY OF WATERBURY, CONNECTICUT NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2016 (Amounts expressed in thousands)

Custodial Credit Risk Custodial credit risk for an investment is the risk that, in the event of the failure of the counterparty (the institution that pledges collateral or repurchase agreement securities to the City or that sells investments to or buys them for the City), the City will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. The City’s formal investment policy includes sections regarding safekeeping and custody of investments to mitigate custodial credit risk. The City’s individual investments in equities, corporate bonds, corporate asset backed securities and U.S. government agencies are uninsured and unregistered securities held by a counterparty or by its trust department or agent that are not in the City’s name.

4. RECEIVABLES

Receivables as of year end for the City’s individual major funds and nonmajor, internal service and fiduciary funds in the aggregate, including the applicable allowances for uncollectible accounts, are as follows:

Housing and Bureau Water Nonmajor General Education Educational Development of Pollution and Other General Capital Capital Grants Programs Water Control Funds Total

Receivables: Taxes $ 9,942 $ $ $ $ $ $ $ $ 9,942 Accrued interest on taxes 6,097 6,097 Service fees 3,199 3,610 6,809 Unbilled revenue 1,841 2,206 4,047 Intermunicipal fees 376 376 Intergovernmental 2,803 14,955 2,054 918 192 1,728 22,650 Loans 12,337 12,337 Accounts and other 3,482 160 1,136 3,872 8,650 Gross receivables 19,521 2,803 14,955 2,054 13,255 5,200 7,520 5,600 70,908

Less allowance for uncollectibles: Taxes (2,625) (2,625) Accrued interest on taxes (3,039) (3,039) Service fees (1,384) (1,968) (3,352) Accounts and other (2,586) (32) (2,618) Total allowance (8,250) - - - - (1,384) (1,968) (32) (11,634)

Net Total Receivables $ 11,271 $ 2,803 $ 14,955 $ 2,054 $ 13,255 $ 3,816 $ 5,552 $ 5,568 $ 59,274

A-40 CITY OF WATERBURY, CONNECTICUT NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2016 (Amounts expressed in thousands)

5. CAPITAL ASSETS

Capital asset activity for the year ended June 30, 2016 was as follows:

Beginning Ending Balance Transfers Increases Decreases Balance

Governmental activities: Capital assets not being depreciated: Land $ 12,911 $ $ $ $ 12,911 Construction in progress 202,472 (136,302) 29,200 95,370 Total capital assets not being depreciated 215,383 (136,302) 29,200 - 108,281

Capital assets being depreciated: Land improvements 15,284 1,048 16,332 Buildings and improvements 478,273 123,747 602,020 Infrastructure 136,760 7,093 143,853 Machinery and equipment 50,095 2,972 (43) 53,024 Vehicles 13,155 1,442 95 (63) 14,629 Total capital assets being depreciated 693,567 136,302 95 (106) 829,858

Less accumulated depreciation for: Land improvements (9,681) (537) (10,218) Buildings and improvements (124,352) (10,186) (134,538) Infrastructure (100,589) (1,983) (102,572) Machinery and equipment (33,929) (1,832) 43 (35,718) Vehicles (10,383) (803) 47 (11,139) Total accumulated depreciation (278,934) - (15,341) 90 (294,185)

Total capital assets being depreciated, net 414,633 136,302 (15,246) (16) 535,673

Governmental Activities Capital Assets, Net $ 630,016 $ - $ 13,954 $ (16) $ 643,954

Business-type activities: Capital assets not being depreciated: Land $ 1,773 $ $ $ 1,773 Construction in progress 1,912 (2,066) 1,799 1,645 Total capital assets not being depreciated 3,685 (2,066) 1,799 - 3,418

Capital assets being depreciated: Utility plant 108,644 108,644 Infrastructure 107,066 107,066 Machinery and equipment 79,841 2,066 110 (242) 81,775 Vehicles 3,643 3,643 Total capital assets being depreciated 299,194 2,066 110 (242) 301,128

Less accumulated depreciation for: Utility plant (38,314) (2,405) (40,719) Infrastructure (43,880) (1,339) (45,219) Machinery and equipment (39,995) (2,525) 238 (42,282) Vehicles (2,798) (254) (3,052) Total accumulated depreciation (124,987) - (6,523) 238 (131,272)

Total capital assets being depreciated, net 174,207 2,066 (6,413) (4) 169,856

Business-Type Activities Capital Assets, Net $ 177,892 - $ (4,614) $ (4) $ 173,274

A-41 CITY OF WATERBURY, CONNECTICUT NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2016 (Amounts expressed in thousands)

Depreciation expense was charged to functions/programs as follows:

Governmental activities: General government $ 1,179 Public works (including parks) 2,582 Public safety 2,506 Education 7,705 Culture and recreation 1,369

Total Depreciation Expense - Governmental Activities $ 15,341

Business-type activities: Bureau of Water $ 1,632 Water Pollution Control 4,886 Utility Admin Division 5

Total Depreciation Expense - Business-Type Activities $ 6,523

Construction Commitments

The City has authorized capital projects for the improvement and expansion of the City’s facilities, infrastructure and other capital items. The following is a summary of the City’s authorized capital projects by major program and the related commitments as of June 30, 2016:

Project Cumulative Balance Program Authorization Expenditures Encumbered June 30, 2016

General Capital Improvement $ 242,476 $ 148,819 $ 11,021 $ 82,636 Education Capital Improvement 356,214 332,907 7,779 15,528 Water Enterprise Improvement 36,090 14,772 853 20,465 WPC Enterprise Improvement 26,670 8,978 262 17,430 Utility Admin Enterprise Improvement 750 683 49 18

$ 662,200 $ 506,159 $ 19,964 $ 136,077

A-42 CITY OF WATERBURY, CONNECTICUT NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2016 (Amounts expressed in thousands)

6. INTERFUND RECEIVABLES, PAYABLES AND TRANSFERS

During the course of operations, transactions are processed through a fund on behalf of another fund. Additionally, revenues received in one fund are transferred to another fund. A summary of interfund balances as of June 30, 2016 is presented below:

Receivable Fund Payable Fund Amount

General Fund Nonmajor Governmental $ 185 General Fund Internal Service 5,915 General Fund Utility Administrative Division 611 General Fund Education Capital Improvement 17,768

Total $ 24,479

A summary of interfund transfers is presented below:

Transfers In Utility Nonmajor Debt General Educational Administrative Governmental Service Capital Grants Division Funds Total

Transfers out: General Fund $ 45,911 $ 400 $ 2,920 $ $ 144 $ 49,375 Nonmajor Governmental Funds 167 167 Bureau of Water 1,172 1,172 Water Pollution Control 1,172 1,172

Total $ 45,911 $ 567 $ 2,920 $ 2,344 144 $ 51,886

Transfers from the General Fund to the Debt Service and Nonmajor Governmental Funds are in accordance with budgetary appropriations authorizing the transfer of funds for designated purposes. Transfers from the General Fund to the General and Education Capital Improvement Funds are designed to locally fund portions of capital activities to reduce future bonding requirements.

A-43 CITY OF WATERBURY, CONNECTICUT NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2016 (Amounts expressed in thousands)

7. DEFERRED CREDITS - WATER POLLUTION CONTROL ENTERPRISE FUND

The State of Connecticut Department of Environmental Protection has provided Clean Water Financing in the form of serial notes for the City’s sewage treatment plant. Pursuant to certain inter-municipal agreements, a portion of the plant financing agreement will be paid for by other municipalities in exchange for guaranteed capacity for those towns. The serial notes are not reflected on the City’s statement of net position since the obligations are directly financed by the participating municipalities. Deferred credits are reflected as deferred inflows of resources as of June 30, 2016 amounting to $2,332 and will be amortized and recorded as revenue as the contributing municipalities make payments to the State of Connecticut.

Deferred Credit Fiscal Year Ending June 30, Amortization

2017 $ 578 2018 581 2019 585 2020 588

Total $ 2,332

8. LONG-TERM DEBT

Governmental Activities

Changes in Long-Term Liabilities Long-term liability activity for the year ended June 30, 2016 was as follows:

Beginning Ending Due Within Balance Additions Reductions Balance One Year

Bonds payable $ 441,631 $ 30,000 $ 21,398 $ 450,233 $ 22,104 Add unamortized premiums 3,884 3,396 465 6,815 Total bonds payable 445,515 33,396 21,863 457,048 22,104

Accrued compensated absences 31,440 5,747 6,288 30,899 6,180 Retired employee obligations 5,531 1,482 1,638 5,375 1,554 Net OPEB obligation 257,465 27,245 284,710 Landfill post-closure 1,050 70 980 70 Risk management 42,805 2,638 45,443 17,251 Net pension liability 180,258 30,370 210,628

Total Governmental Activities Long-Term Liabilities $ 964,064 $ 100,878 $ 29,859 $ 1,035,083 $ 47,159

The risk management claims accounted for in the Internal Service Funds are reported in the long-term liabilities as part of the above totals for governmental activities. All governmental long-term liabilities are generally liquidated by the General Fund.

A-44 CITY OF WATERBURY, CONNECTICUT NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2016 (Amounts expressed in thousands)

A schedule of governmental activities bonds and serial notes outstanding at June 30, 2016 is presented below:

Amount of Balance Date of Interest Original Outstanding Description Issue Rate (%) Issue June 30, 2016

General purpose bonds payable: Refunding Bond - 1998 and 2000 12/05/13 2.0-5.0 $ 7,000 $ 4,665 Refunding Bond - Special Capital Reserves 02/15/07 3.8-4.5 27,000 2,975 Taxable Refunding Bond - Special Capital Reserves 06/26/12 0.7-2.1 21,000 26,530 Capital Acquisition & Infrastructure Improvements 09/01/09 3.0-5.0 20,000 12,300 Capital Acquisition & Infrastructure Improvements 09/01/10 2.0-6.1 40,000 33,000 Capital Acquisition & Infrastructure Improvements 08/31/11 2.0-5.0 10,000 8,492 Capital Acquisition & Infrastructure Improvements 06/26/12 2.0-5.0 8,000 6,315 Waterbury Industrial Commons 12/05/13 1.2-4.6 10,000 9,000 Capital Acquisition & Infrastructure Improvements 12/05/13 4.0-5.0 12,000 11,500 Waterbury Industrial Commons 12/02/15 1.2-4.6 7,000 7,000 Capital Acquisition & Infrastructure Improvements 12/02/15 3.0-5.0 13,000 13,000 Total general purpose 134,777

School bonds payable: Refunding Bond - 1998 and 2000 12/05/13 2.0-5.0 4,000 2,249 School Construction 09/01/09 3.0-5.0 8,000 5,600 School Construction 09/01/10 2.0-6.1 5,000 1,875 School Construction 08/31/11 2.0-5.0 19,000 15,727 School Construction 06/26/12 2.0-5.0 13,000 11,060 School Construction 12/05/13 4.0-5.0 5,000 5,000 School Construction 12/02/15 3.0-5.0 10,000 10,000 Total school 51,511

Pension deficit bonds payable: Pension Obligation 09/17/09 2.7-7.1 313,145 263,945

Total $ 450,233

A-45 CITY OF WATERBURY, CONNECTICUT NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2016 (Amounts expressed in thousands)

A schedule of governmental activities bonds outstanding at June 30, 2016 is presented below:

Due During Fiscal Year Ending June 30, Principal Interest Total

2017 $ 22,104 $ 26,566 $ 48,670 2018 24,088 25,335 49,423 2019 24,157 24,023 48,180 2020 24,694 22,740 47,434 2021 24,231 21,399 45,630 2022-2026 111,744 86,826 198,570 2027-2031 105,140 54,436 159,576 2032-2036 77,115 25,110 102,225 2037-2039 36,960 3,866 40,826

Total $ 450,233 $ 290,301 $ 740,534

Compensated Absences

Employees can accumulate unused vacation and sick leave (as determined by individual union contracts) until termination of their employment. At termination, pay-out provisions as determined by individual union contract provide for payments to vested employees net of provisions to exchange selected amounts of accumulated sick time for pension service years. The amount recorded represents 20% of the total accumulated time of employees to account for the estimated percentage of employees that will never vest and to account for those employees who have accrued days in excess of that, which will be paid by contract.

Retired Employee Obligations

Obligations to retired employees consist of amounts due to retired employees for unused compensated absences. The retired employee obligation at June 30, 2016 consisted of $5,067 due to retired Board of Education employees and $308 to retired Fire Department employees. The obligation will be amortized over various years as follows:

Fiscal Year Ending June 30, Amount

2017 $ 1,554 2018 1,139 2019 1,108 2020 766 2021 405 2022-2024 403

Total $ 5,375

A-46 CITY OF WATERBURY, CONNECTICUT NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2016 (Amounts expressed in thousands)

Landfill Post Closure Care Costs

The City received a consent order from the State of Connecticut Department of Environmental Protection requiring as of October 9, 1994 that its landfill no longer accept any solid waste and that by October 31, 1996 the facility be capped. The City has closed and capped the landfill and is in the seventh year of a thirty (30) year required post closure monitoring period. GASB Statement No. 18, Accounting for Municipal Solid Waste Landfill Closure and Postclosure Care Costs, requires a liability related to closure and post closure care to be estimated and recorded based on landfill capacity used to date. The City has estimated $980 for the post closure monitoring liability as of June 30, 2016. However, due to changes in technology, laws or regulations, these costs may change in the future.

Business-Type Activities

Changes in Long-Term Liabilities Long-term liability activity for the year ended June 30, 2016 was as follows:

Beginning Ending Due Within Balance Additions Reductions Balance One Year

Bond and serial notes payable $ 31,764 $ $ 5,595 $ 26,169 $ 5,444 Capital leases 1,312 640 672 672 Net pension liability 8,694 2,368 11,062 Accrued compensated absences 723 181 144 760 152

Total Business-Type Activities Long-Term Liabilities $ 42,493 $ 2,549 $ 6,379 $ 38,663 $ 6,268

All business-type liabilities are generally liquidated by the Water and WPC user fees.

A-47 CITY OF WATERBURY, CONNECTICUT NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2016 (Amounts expressed in thousands)

A schedule of business-type activities bonds and serial notes outstanding at June 30, 2016 is presented below:

Amount of Balance Date of Interest Original Outstanding Description Issue Rate (%) Issue June 30, 2016

Business Type Activities: Bureau of Water: Infrastructure Improvements 08/31/11 2.0-5.0 $ 1,300 $ 1,081 Infrastructure Improvements 06/26/12 2.0-5.0 1,500 1,275 Water Pollution Control: Bonds payable: Refunding Bond - 1998 and 2000 12/05/13 2.0-5.0 929 596 Serial notes payable - State of Connecticut: Clean Water Act 07/31/97 2.0 6,448 28 Clean Water Act 12/31/00 2.0 69,647 16,579 Clean Water Act 10/30/02 2.0 11,547 3,821 Clean Water Act 11/30/03 2.0 2,424 958 Clean Water Act 05/30/04 2.0 22,953 1,193 Clean Water Act 06/30/04 2.0 1,138 325 Clean Water Act 11/30/05 2.0 544 236 Clean Water Act 06/29/07 2.0 226 77

Total $ 26,169

A schedule of business-type activities bonds and serial notes outstanding at June 30, 2016 is presented below:

Due During Fiscal Year Ending June 30, Principal Interest Total

2017 $ 5,444 $ 538 $ 5,982 2018 5,539 419 5,958 2019 5,505 298 5,803 2020 5,613 183 5,796 2021 1,190 104 1,294 2022-2026 2,013 340 2,353 2027-2031 785 138 923 2032-2035 80 7 87

Total $ 26,169 $ 2,027 $ 28,196

A-48 CITY OF WATERBURY, CONNECTICUT NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2016 (Amounts expressed in thousands)

Capital Leases

The City entered into a twenty-year capital lease agreement for a sewage sludge incinerator facility that became operational in January 1997 and is operated by Synagro Technologies, Inc. The gross value of assets acquired through capital leases is $6,224 all of which is recorded as machinery and equipment. The assets are amortized over the life of the lease and are included as part of annual depreciation expense. The City’s annual sludge disposal fee includes a capital cost component payable through 2017.

The following is a schedule of future capital lease payments together with the net present value as of June 30, 2016.

Year Ending June 30, Amount

2017 $ 706

Minimum lease payments 706 Less: Amount representing interest at the City's incremental borrowing rate of interest (34)

Present Value of Minimum Lease Payments $ 672

A-49 CITY OF WATERBURY, CONNECTICUT NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2016 (Amounts expressed in thousands)

Bonds Authorized/Unissued

Bonds authorized/unissued outstanding are as follows:

Date Total Bonds Grants Authorized Project Description Authorized Authorized Issued Received Unissued

General Purpose: W.A.T.E.R. - TIGER Project**** 02/17/15 $ 19,500 $ $ $ 19,500 Demolition of Abandoned Properties 10/20/14 750 750 Public Works - Vehicle Replacements 10/20/14 540 540 Mobile & Portable Radios 10/20/14 3,550 3,300 250 Acquisition of Rose Hill Campus 09/22/14 3,000 1,000 2,000 Fire Apparatus 01/28/14 500 400 100 Road Milling/Repaving & Sidewalks 01/28/14 2,000 1,000 1,000 Great Brook Culvert Replacement 11/25/13 3,100 3,100 St. Patrick's Hall / Rectory Building Restoration*** 10/07/13 8,100 4,000 1,798 2,302 Road Milling/Repaving & Sidewalks 03/11/13 3,000 2,700 300 Fire Apparatus 03/11/13 500 500 - Pearl Lake Road Reconstruction 03/11/13 7,000 5,000 2,000 Public Safety Radio System Upgrade to P25 06/25/12 4,500 4,100 400 Municipal Stadium Phase III 02/06/12 4,800 1,500 894 2,406 Police Parking Garage 02/07/11 3,950 3,100 850 Waterbury Industrial Commons & Centralized DPW Facility** 07/19/10 60,420 25,500 15,363 19,557 Chase Avenue Reconstruction 09/03/08 8,205 6,770 1,435 Sidewalk and Curb Improvements 09/03/08 600 600 Underground Tank Removal 07/21/08 282 150 132

Education: Wendell Cross Elementary School Renovation & Addition* 06/20/16 46,250 46,250 West Side Middle School Roof Replacement* 10/20/14 3,040 3,040 Crosby High School - Football Field & Track 10/20/14 2,700 2,500 200 Crosby High School - Gym Floor 10/20/14 260 260 School Improvements 03/11/13 500 500 - Kennedy High School Additions & Alterations* 06/25/12 25,232 4,000 16,174 5,058 Wallace Middle School Addition* 06/20/11 15,758 2,700 10,544 2,514 Carrington Pre-k to 8 School* 05/20/13 37,043 7,300 26,344 3,399 Waterbury Career Academy Technical School* 06/09/08 68,190 14,000 47,956 6,234 Wilby High School* 06/09/08 6,700 1,000 3,735 1,965 Special Education Facility* 11/19/07 14,635 2,500 9,405 2,730 School Facilities Plan* 06/25/04 101,500 24,500 73,114 3,886

Bureau of Water: Water Plant, Equipment System Renewal & Replacement 05/11/15 17,700 17,700 Water Filter Media Replacement WTP 10/20/14 840 840 Water - Rehabilitation of Water Mains 10/20/14 960 960 Water Meter Reading Program 10/11/11 2,500 1,500 1,000 Water Billing Technology 09/06/11 750 750

Water Pollution Control Authority: WPC Plant, Equipment & Infrastructure Renewal & Replacement 05/11/15 10,325 10,325

Total $ 489,180 $ 118,520 $ 206,327 $ 164,333

* The City expects to receive approximately 78% of eligible project costs from the State in the form of progress payments. ** The City expects to receive $15,345 from U.S. DOD & other State grants for site remediation and demolition. *** The City expects to receive $2,100 from State grants for building restoration. **** The City expects to receive $14,100 from U.S. DOT TIGER Grant

A-50 CITY OF WATERBURY, CONNECTICUT NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2016 (Amounts expressed in thousands)

Debt Limitations

The City’s indebtedness does not exceed the legal debt limitations as required by the Connecticut General Statutes as reflected in the following schedule:

Debt Net Category Limit Indebtedness Balance

General purpose $ 538,173 $ 165,509 $ 372,664 Schools 1,076,346 60,052 1,016,294 Sewers 896,955 23,813 873,142 Urban renewal 777,361 777,361 Pension deficit 717,564 263,945 453,619

The total of the City’s net statutory indebtedness of $513.3 million does not exceed the legal debt limitation of $1.7 billion (seven times the base for debt limitation computation).

Bonds authorized and unissued represents bond authorizations for projects which have bond anticipation notes outstanding or for which bonds have been authorized and partially issued. In addition, authorized and unissued amounts have been reduced for grants received to date for applicable bond authorizations.

Pursuant to Public Act 97-11, an amount of $17.4 million will be received from the State in the form of proportional progress payments for eligible construction costs during certain construction phases of the projects applicable to bonds authorized and unissued.

The net indebtedness excludes water bonds payable of $2.4 million and water bonds authorized and unissued of $21.2 million.

9. RISK MANAGEMENT

The City is self-insured in most areas of risk. Self-insured risks include general and auto liability, workers’ compensation, unemployment and employee health claims. The City’s Legal Counsel defends the City in any lawsuits that arise from the normal course of operations.

The City purchases commercial insurance for excess coverage for self-insured general liability claims set at $10 million with a City retention of $1.5 million. Settlements over the last three years have not exceeded the insured coverage limits maintained by the City. The City purchases commercial insurance for excess coverage for self-insured workers’ compensation with a City retention of $1.5 million.

The City provides self-insured medical plans for which payments are based upon actual claims (versus premium payments). A third party acts as a claims processor and a transfer of risk does not occur. All funds of the City participate in the program and make payments to the Self-Insurance Internal Service Fund to pay claims, claim reserves and administrative costs of the program. During the fiscal year ended June 30, 2016, $107.2 million in health care benefits and administrative costs were paid. Incurred but not reported health claims of $8.4 million have been accrued as a liability based upon information supplied by the City’s Health Care Administrator. Actuarial estimated liability for claims incurred but not reported is not available.

A-51 CITY OF WATERBURY, CONNECTICUT NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2016 (Amounts expressed in thousands)

An actuarial study estimates the present value of general liability outstanding losses including case reserves for known claims and incurred but not reported claims at $3.3 million as of June 30, 2016.

An actuarial study estimates the present value of workers’ compensation claims liabilities, including case reserves for known claims and incurred but not reported claims, at $26.7 million as of June 30, 2016.

The present value of future costs to current eligible recipients subject to Heart and Hypertension benefits is estimated at $7.1 million as of June 30, 2016. The actuarial estimate is based on the present value of seven times current year paid benefits.

Changes in the reserve amounts in fiscal years 2016 and 2015 were as follows:

2016 2015

Beginning of year $ 42,805 $ 41,572 Fiscal year claims incurred and changes in prior years’ estimates 119,966 114,023 Fiscal year claims payments (117,328) (112,790)

End of Year $ 45,443 $ 42,805

10. OPERATING LEASES

Lease Agreements as Lessor

The City completed the full remediation, renovation and expansion of a former ammunitions plant acquired by the City for the purposes of redevelopment which now houses three tenant manufacturers under long-term lease agreements with the City. Additionally, the City has completed the renovation of a vacant City owned building that is now leased to Waterbury UCONN under a 10-year lease agreement for expanded classroom space in addition to the main UCONN branch across the street. The City has additional leases for use and occupancy of several other City owned properties throughout the City. The income for such leases was $714 for the fiscal year ended June 30, 2016. Future minimum lease payments to the City over the next five years are projected as follows:

Year Ending June 30,

2017 $ 1,049 2018 1,144 2019 1,070 2020 1,113 2021 1,116

Total $ 5,492

A-52 CITY OF WATERBURY, CONNECTICUT NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2016 (Amounts expressed in thousands)

Lease Agreements as Lessee

The City has entered into various operating leases related to the rental of property for office space, storage and Board of Education instructional use. In addition, the Waterbury Board of Education uses the Waterbury Palace Theater for its programs for an annual contribution of $250 in accordance with the City’s theater lease agreement with the Palace Theater Group. The operating leases consist of both non-cancelable long-term operating leases and month-to-month lease arrangements. The costs for such leases were $1,172 for the fiscal year ended June 30, 2016. Future minimum long-term lease payments are projected as follows:

Year Ending June 30,

2017 $ 605 2018 294 2019 294 2020 294 2021 294

Total $ 1,781

11. FUND EQUITY

The components of fund balance at June 30, 2016 are as follows:

Housing and Nonmajor General Debt General Education Educational Development Governmental Fund Service Capital Capital Grants Programs Funds Total Fund balances: Nonspendable: Inventory $ $ $ $ $ $ $ 128 $ 128 Prepaid assets 69 69 Trust 122 122 Restricted for: Trust 2,466 2,466 Capital improvements 2,904 2,904 Committed to: Debt service 3,991 3,991 Public safety 580 580 Human services 63 63 Development and community affairs 383 383 General government 387 387 Education 7,840 2,372 10,212 Assigned to: Subsequent year budget 3,000 3,000 Unassigned 19,661 (4,594) (329) 14,738

Total Fund Balances $ 22,661 $ 3,991 $ 2,904 $ (4,594) $ 7,840 $ 383 $ 5,858 $ 39,043

A-53 CITY OF WATERBURY, CONNECTICUT NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2016 (Amounts expressed in thousands)

12. OTHER POST EMPLOYMENT BENEFITS (OPEB)

The City, in accordance with various collective bargaining agreements, is committed to provide health and other benefits to eligible retirees and their spouses. Benefits are established and amended through negotiations between the City and the various unions representing City employees. The City pays the full cost of life insurance premiums. The percentage contribution of employees and retirees for medical benefits are negotiated with the various unions representing the employees. Retired plan members and beneficiaries currently receiving benefits are required to contribute specified percentages towards the cost of receiving benefits under the City’s self-insured medical benefits program.

The post employment benefit plan is a single-employer defined benefit plan and is considered to be part of the City’s financial reporting entity. Plan benefit payments are included in the City’s medical benefits fund. There are no stand-alone financial statements available for the plan.

OPEB Benefits Funding Policy

The City continues its commitment to meeting its obligations for health benefits provided to its active employees and benefit eligible retired employees, on a pay-as-you go basis, through the annual adoption of General Fund contributions to the City’s Health Benefits internal service fund. In 2003, with an understanding of the long-term implications of the existing OPEB benefit program, the City, via the powers of the State Oversight Board at the time, modified collective bargaining agreements to significantly curtail the OPEB benefits for those employees hired after the contract modification date (2004 time frame). In addition, future retiree co-share requirements were established for those current employees grandfathered into the previous benefit program. The elimination and/or significant curtailment of post-employment health benefit coverage will over time reduce the City’s OPEB liability and significantly reduce the compounded cost impact of funding heath benefit coverage for both active employees and retirees.

The successful reductions to OPEB benefits for current employees will reduce the City’s long-term health benefit obligations but will have a marginal impact on addressing the current year-over-year medical & pharmacy cost trend increases for existing retirees and active employees still eligible for City funded health benefits upon retirement. With concerns that this continued and growing cost exposure would become unsustainable, the City implemented a major cost saving “Medicare Enrollment Initiative” during the past year establishing Medicare as the primary payer of medical claims on all retirees and spouses age 65 and older with an effective date of coverage beginning July 1, 2016. The Medicare Enrollment Initiative requires the enrollment of all covered retirees and retiree spouses into Medicare A & B upon turning 65 and additionally required all retirees and retiree spouses, over age 65 and not previously enrolled in Medicare, to enroll in Medicare A & B during the January 1, 2016 to March 31, 2016 General Enrollment Period. The Medicare Enrollment Initiative is projected to conservatively save the City $5-7 million annually in retiree health costs beginning in July 2016 (fiscal year 2017) by transferring all Medicare eligible medical costs over to Medicare as primary payer, net of applicable deductibles and premiums. The City’s OPEB liability is conservative projected to be reduced by $125 million in the next actuarial valuation due to the projected cost savings derived from the Medicare Enrollment Initiative.

A-54 CITY OF WATERBURY, CONNECTICUT NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2016 (Amounts expressed in thousands)

The following is the current census of City benefit participants as of July 1, 2014:

(not in thousands)

Active members 3,255 Retirees 3,667

Total 6,922

Post employment retiree benefit payments for the year ended June 30, 2016, net of retiree and other contributions, amounted to approximately $44,674. For the year ended June 30, 2016, retirees contributed $1,563.

Annual OPEB Cost and Net OPEB Obligations

The City’s annual OPEB cost is calculated based on the annual required contribution (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement No. 45. Actuarial valuations involve estimates of the value of reported amounts and assumptions about the probability of occurrence of future events. Assumptions include future employment, mortality, and healthcare and other benefit cost trends. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as accrual results are compared with past expectations and new estimates are made about the future.

The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years. The following table shows the components of the City’s annual OPEB cost for the year, the amount actually contributed to the plan and changes in the City’s net OPEB obligation: