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TOWN OF MANSFIELD, MASSACHUSETTS
General Purpose Financial Statements
Year Ended June 30, 1990
(With Independent Auditors' Report Thereon)
TOWN OF MANSFIELD, MASSACHUSETTS
General Purpose Financial Statements
Year Ended June 30, 1990
Table of Contents
Page
Independent Auditors' Report 1-2
General Purpose Financial Statements:
Combined Balance Sheet - All Fund Types and Account Group 3
Combined Statement of Revenues, Expenditures and Changes in
Fund Equity - All Governmental Fund Types and Expendable
Trust Funds 4
Statement of Revenues and Expenditures - Budgetary Basis 5
Combined Statement of Revenues, Expenses and Changes in
Fund Equity - Mansfield Electric Department and Nonexpendable
Trust Funds 6
Statement of Cash Flows - Mansfield Electric Department 7
Statement of Cash Flows - Nonexpendable Trust Funds 8
Notes to General Purpose Financial Statements 9-30
Certified Public Accountants
One Boston Place
Boston, MA 02108
Telephone 617 723 7700
Telex 617 443 0082 PMMBOST
INDEPENDENT AUDITORS' REPORT
To the Board of Selectmen
Town of Mansfield, Massachusetts:
Telecopier 617 723 6864
We have audited the general purpose financial statements of the Town of
Mansfield, Massachusetts, as of and for the year ended June 30, 1990, as listed
in the accompanying table of contents. These general purpose financial
statements are the responsibility of the Town's management. Our responsibility
is to express an opinion on these general purpose financial statements based on
our audit. We did not audit the financial statements of the Mansfield Electric
Department, which are as of and for the year ended December 31, 1989. Those
financial statements were audited by other auditors whose report thereon has
been furnished to us and our opinion expressed herein, insofar as it relates to
the amounts included for the Mansfield Electric Department, is based solely upon
the report of the other auditors.
The other auditors were not able to perform auditing procedures to determine the
propriety of the original cost of utility plant in service, since the accounting
records supporting the original cost of utility plant in service were destroyed
in a fire, and they were unable to satisfy themselves regarding the original
cost of utility plant in service by means of other auditing procedures.
We conducted our audit in accordance with generally accepted auditing standards
and the standards for financial audits contained in the Government Auditing
Standards, issued by the U.S. General Accounting Office. Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the general purpose financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the general purpose financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
The Town has not maintained records of the cost of its general fixed assets and,
therefore, a general fixed assets account group is not presented in the
accompanying general purpose financial statements as required by generally
accepted accounting principles.
1
Member Firm of
Klyeveld Peat Marwick Goerdeler
Peat Marwick
To the Board of Selectmen
Town of Mansfield, Massachusetts
Page Two
In our opinion, based upon our audit and the report of the other auditors,
except that the omission of a general fixed asset group of accounts results in
an incomplete presentation, as discussed in the preceding paragraph, and had the
scope of work performed by the other auditors regarding the original cost of
utility plant in service been sufficient to enable them to express an opinion on
the financial statements of the Mansfield Electric Department, the general
purpose financial statements referred to above present fairly, in all material
respects, the financial position of the Town of Mansfield, Massachusetts, at
June 30, 1990, and the results of its operations and cash flows of the Mansfield
Electric Department and nonexpendable trust funds for the applicable years then
ended, in conformity with generally accepted accounting principles.
October 12, 1990
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TOWN OF MANSFIELD, MASSACHUSETTS
Statement of Cash Flows - Mansfield Electric Department
Year ended December 31, 1989
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation
Changes in assets and liabilities:
Decrease in depreciation fund
Increase in customers' meter deposits
Decrease in customers' accounts receivable
Decrease in other accounts receivable
Decrease in materials and supplies
Decrease in prepayments
Decrease in accumulated provision for rate refunds
Increase in accounts payable
Increase in customer deposits
Decrease in reserve for uncollectible accounts
Increase in miscellaneous current and accrued
liabilities
Decrease in employee pensions and benefits reserve
Net cash provided by operating activities
Cash flows from investing activities:
Net additions to utility plant
Cash flows from financing activities:
Principal payments on debt
Net cash used by financing activities
Net (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash'and cash equivalents, end of year
See accompanying notes to general purpose financial statements.
$ 31,219
362,761
5,000
(19,302)
666,606
172,988
13,518
157,305
(872,998)
149,545
19,302
(70,639)
102,423
(74,252)
643,476
(579,034)
(64,899)
(64,899)
(457)
306,470
$ 306,01�
7
TOWN OF MANSFIELD, MASSACHUSETTS
Statement of Cash Flows - Nonexpendable Trust Funds
Year ended June 30, 1990
Cash flows from noncapital financing activities:
Net transfer from other funds $ 2,000
Net cash provided by noncapital financing
activities 2,000
Cash flows from investing activities:
Interest on investments 173
Net cash provided by investing activities 173
Net increase in cash and cash equivalents 2,173
Cash and cash equivalents, beginning of year 92,807
Cash and cash equivalents, end of year
See accompanying notes to general purpose financial statements.
91
TOWN OF MANSFIELD, MASSACHUSETTS
Notes to General Purpose Financial Statements
June 30, 1990
(1) Reporting Entity
The Town's general purpose financial statements include the operations of
all organizations for which the Board of Selectmen exercises oversight
responsibility. Oversight responsibility is demonstrated by financial
interdependency, selection of governing authority, designation of
management, ability to significantly influence operations, and
accountability for fiscal matters.
Based on the aforementioned oversight criteria, the operations of the
following entities have been included in or excluded from the
accompanying general purpose financial statements:
Entity included in the general purpose financial statements:
The Mansfield Electric Department ("Department") under the direction of
the Board acting as the Mansfield Electric Commission, which appoints
the Mansfield Electric Department Manager, functions as an autonomous
entity. The Town processes all bill payments, borrowings and debt
repayments for the Department which provides the funds for these
payments and repayments. All funds are collected by the Town and the
Department's cash is in the custody of the Town of Mansfield Treasurer
and is commingled with other Town funds.
Entity excluded from the general purpose financial statements:
• Mansfield Housing Authority. The Board members are elected by the
Town electorate. The Town has no oversight responsibility for the
Authority's operations and no responsibility for the Authority's
deficits or debt.
(2) Summary of Significant Accounting Policies -
(a) Basis of Presentation
The financial condition and results of operations of the Town's funds are
presented as of and for the year ended June 30, 1990, except for the
Mansfield Electric Department, which is presented as of and for the
year ended December 31, 1989. The accounting policies of the Town
conform with generally accepted accounting principles ("GAAP"), except
that the Town does not maintain, and therefore does not report, a
general fixed assets account group in accordance with generally
accepted accounting principles. Such departure from GAAP is
permissible under the Massachusetts Uniform Municipal Accounting
System. Additionally, the Town has adopted Statement No. 9 of the
Governmental Accounting Standards Board for reporting cash flows of its
nonexpendable trust funds and the Department implemented Statement of
Financial Accounting Standards No. 95, "Statement of Cash Flows."
(Continued)
C
TOWN OF MANSFIELD, MASSACHUSETTS
Notes to General Purpose Financial Statements
(b) Fund Accounting
The operations of the Town are recorded in the following fund types and
account group:
• Governmental Fund Types
Governmental funds are used to account for the Town's expendable
financial resources and related liabilities (except those accounted
for in proprietary and similar trust funds). The measurement focus
is upon determination of changes in financial position. The
following are the Town's governmental fund types:
General Fund - The general fund is the general operating fund of
the Town. It is used to account for all financial resources
except those required to be accounted for in another fund.
Special Revenue Funds - Special revenue funds are used to account
for the proceeds of specific revenue sources (other than special
assessments, expendable trusts or major capital projects) that
are legally restricted to specified purposes.
Capital Project Funds - Capital project funds are used to account
for financial resources to be used for the acquisition or
construction of major capital facilities (other than those
financed by proprietary funds and trust funds).
• Proprietary Fund Type
Proprietary funds are used to account for activities that are
similar to those often found in the private sector. The measurement
focus is upon determination of net income and capital maintenance.
Following is the Town's proprietary fund type.
Enterprise Funds - Enterprise funds are used to account for
operations (a) that are financed primarily through user charges,
or (b) where the governing body has decided that determination of
net income is appropriate.
• Fiduciary Fund Types
Trust and Agency Funds - Fiduciary funds are used to account for
assets held by the Town in a trustee capacity or as an agent. Trust
funds include expendable trust funds and nonexpendable trust funds.
Expendable trust funds are accounted for similar to governmental
funds. Nonexpendable trust funds are accounted for similar to
proprietary funds. Agency funds are custodial in nature and do not
involve measurement of results of operations.
(Continued)
10
TOWN OF MANSFIELD, MASSACHUSETTS
Notes to General Purpose Financial Statements
• Account Group
General Long-term Obligations Account Group - This account group is
used to account for all long-term obligations of the Town except
those accounted for in proprietary funds.
(c) Basis of Accounting
The modified accrual basis of accounting is followed by governmental
funds, expendable trust funds, and agency funds. Under the modified
accrual basis of accounting, revenues are recorded when they become
measurable and available to pay liabilities of the current period.
Revenues not considered available are recorded as deferred revenues.
Expenditures are recorded when the liability is incurred except for
interest on general long-term obligations, which is recorded when due.
In applying the susceptible to accrual concept to intergovernmental
revenues, there are essentially two types of revenues. In one, moneys
must be expended on the specific purpose or project before any amounts
will be paid to the Town; therefore, revenues are recognized based upon
the expenditures incurred. In the other, moneys are virtually
unrestricted and are usually revocable only for failure to comply with
prescribed compliance requirements. These resources are reflected as
revenues at the time of receipt or earlier if the susceptible to
accrual criteria are met.
Property taxes are recognized as revenue in the year for which taxes have
been levied, provided they are collected within 60 days after
year-end. Special assessments are recorded as revenue in the year the
individual installments are due. Licenses and permits, fines and
forfeitures, and miscellaneous revenues are recorded as revenues when
received in cash because they are generally not measurable until
actually received. Investment earnings are recorded as earned.
The accrual basis of accounting is used by proprietary funds and
nonexpendable trust funds. Unbilled service revenue is accrued in the
proprietary funds.
(d) Cash Equivalents
For purposes of the statements of cash flows, the nonexpendable trust
funds consider certificates of deposit to be cash equivalents and the
Department considers amounts due from other funds as cash equivalents
because the Department's cash is in the custody of the Town Treasurer.
(e) Encumbrances and Continuing Appropriations
Encumbrance accounting, under which purchase orders, contracts, and other
commitments for the expenditure of funds are recorded in order to
reserve that portion of the applicable appropriation, is employed in
governmental funds. Open encumbrances at year-end are reported as
reservations of fund balances. Encumbrances do not constitute
expenditures or liabilities, except for budgetary purposes (see note 4).
(Continued)
TOWN OF MANSFIELD, MASSACHUSETTS
Notes to General Purpose Financial Statements
Certain unexpended and unencumbered appropriations for incompleted
projects are carried over to succeeding years. Such continuing
appropriations are accounted for similarly to encumbrances.
(f) Accrued Sick and Vacation
Employees, including those of the Mansfield Electric Department, are
granted sick leave and vacation in varying amounts. Unused sick leave
accumulates for non -union employees to one hundred forty-three (143)
days and for union employees to a maximum number of days as specified
in their respective union contracts. Upon the termination, retirement
or death of an employee, all unused accumulated sick leave is
cancelled. Except for very limited situations, vacation pay does not
accumulate from year to year, but may be taken as a payment with the
approval of the Town Manager and the Board. Upon the termination,
retirement or death of an employee, an amount equivalent to his or her
unused vacation for the year would be paid. Therefore, all amounts of
sick leave and vacation costs are due and payable in the current fiscal
year.
(g) Fixed Assets
The provision for depreciation of the Department utility plant is computed
on a straight-line basis at 5% of the cost of utility plant in service
at the beginning of the year, exclusive of land and land rights.
Although depreciation by statute is computed at a rate of 3%, under
Commonwealth of Massachusetts General Law, a greater amount may be
accrued upon receiving approval from the Department of Public Utilities
(DPU). The DPU has not yet authorized the 5% rate for 1989. If the
DPU determines that the Department's depreciation for 1989 should be
3%, the financial statements will be restated to reflect the change.
The accounting records supporting the
service were destroyed in a fire at
are necessary to assure that:
original cost of utility plant in
the Town Hall in 1970. The records
Utility plant in service is fairly presented in the Department's
balance sheet;
Depreciation expense is properly computed; and
Net income does not exceed a maximum amount permitted by the General
Laws of the Commonwealth, which maximum is a function of utility plant
in service.
The Department maintains a depreciation fund into which cash in an amount
equivalent to annual depreciation expense is transferred each year.
Cash in the fund may be used only to pay for additions to utility plant
or to repay debt issued to finance utility plant additions.
(h) Mansfield Electric Department - Rates
The Department is subject to regulation by the DPU with respect to its
rates.
(Continued)
12
TOWN OF MANSFIELD, MASSACHUSETTS
Notes to General Purpose Financial Statements
(i) Self-insurance Program
The Town has established a workmen's compensation self-insurance program
for the police and fire departments which is accounted for in the
general fund.
(j) Total Columns
Total columns on the general purpose financial statements are captioned
"Memorandum only" to indicate that they are presented only to
facilitate financial analysis. Data in these columns do not present
financial position, results of operations or changes in financial
position in conformity with generally accepted accounting principles.
Such data are not comparable to a consolidation since interfund
eliminations have not been made.
(3) Property Taxes
Real and personal property taxes are based on values assessed as of each
January 1 and are normally due on the subsequent November 1 and May 1.
By law, all taxable property in the Commonwealth must be assessed at
100% of fair cash value. Taxes due and unpaid after the respective due
dates are subject to interest and penalties. The Town has an ultimate
right to foreclose on property for which taxes have not been paid.
Property taxes levied are recorded as receivables in the fiscal year of
the levy.
A statewide tax limitation statute known as "Proposition 2-1/2" limits the
property tax levy to an amount equal to 2-1/2% of the value of all
taxable property in the Town. A secondary limitation is that no levy
in a fiscal year may exceed the preceding year's allowable tax levy by
more than 2-1/2%, plus taxes levied on certain property newly added to
the tax rolls. Certain Proposition 2-1/2 taxing limitations can be
overridden by a Town -wide referendum vote.
(4) Budgetary Basis of Accounting
The Town must establish its property tax rate each year so that the
resulting property tax levy will comply with the limits required by
Proposition 2-1/2 and also constitute that amount which will equal the
sum of (a) the aggregate of all annual appropriations for expenditures
and transfers, plus (b) provision for the prior fiscal year's deficits,
if any, less (c) the aggregate of all non -property tax revenue and
transfers projected to be received by the Town, including available
surplus funds.
The budgets for all departments and operations of the Town, except that of
public schools, are prepared under the direction of the Town Manager.
The School Department budget is prepared under the direction of the
School Committee. Original and supplemental appropriations are acted
upon by the Town meeting vote.
(Continued)
13
TOWN OF MANSFIELD, MASSACHUSETTS
Notes to General Purpose Financial Statements
The Town's General Fund budget is prepared on a basis other than generally
accepted accounting principles ("GAAP"). The "actual" results column
of the Statement of Revenues and Expenditures - Budgetary Basis is
presented on a "budget basis" to provide a meaningful comparison with
the budget. The major differences between the budget and GAAP bases
are that:
(a) Budgeted revenues are recorded when cash is received, except for real
estate and personal property taxes, which are recorded as revenue when
levied (budget), as opposed to when susceptible to accrual (GAAP).
(b) Encumbrances and continuing appropriations are recorded as the
equivalent of expenditures (budget), as opposed to a reservation of
fund balance (GAAP).
(c) Certain activities and transactions are presented in separate funds
(GAAP), rather than as a component of the General Fund (budget).
In addition, there are certain differences in classifications between
revenues, expenditures and transfers.
The following reconciliation summarizes the differences between budget and
GAAP basis accounting principles for the year ended June 30, 1990:
Other financing
sources
Revenue Expenditures (uses), net
As reported on a budgetary basis $ 23,405,747 23,268,976
Adjustment of property tax
revenues to a modified
accrual basis
Reclassification of Water
and Sewer Fund operations
to Special Revenue Fund
Adjustment for encumbrances
and continuing
appropriations
As reported on a GAAP basis
(588,451) -
(2,476,159) (2,021,125)
$ 2 .341.137
32,859
387,810
475,052
(Continued)
14
TOWN OF MANSFIELD, MASSACHUSETTS
Notes to General Purpose Financial Statements
(5) Cash
State and local statutes place certain limitations on the nature of deposits
available to the Town. Deposits (including demand deposits, term deposits and
certificates of deposit) in any one financial institution may not exceed
certain prescribed levels without collateralization by the financial
institutions involved.
Deposits
The following summary presents the amount of Town deposits which are fully insured
or collateralized with securities held by the Town or its agent in the Town's
name (Category 1), those deposits which are collateralized with securities held
by the pledging financial institution's trust department or agent in the Town's
name (Category 2), and those deposits which are not collateralized (Category 3)
at June 30, 1990. Amounts in MMDT, a pooled fund, are not categorized.
Bank Balance Total
Category Not Bank Carrying
1 2 3 Categorized Balance Amount
Cash $ 2,156,720 - 4,892,699 - 049.419 7,981.506
(6) Pension Plan
(a) Plan Description
The Town provides retirement benefits to employees through a contributory
retirement system administered by the Bristol County Retirement System
("System"), a cost -sharing, multiple -employer public employee retirement
system. Each participating employer's share of the total annual contribution
is determined on the basis of active payroll. The Town's payroll for employees
covered by the System for the year ended December 31, 1989, was $4,935,662; the
Town's total payroll was $13,539,647. Public school teachers are covered by
the Commonwealth of Massachusetts Teachers' Retirement System (IRS) to which
the Town of Mansfield, Massachusetts, does not contribute. The Town's payroll
for teachers covered by the TRS for the year ended June 30, 1990, was
$7,432,120.
The System and the TRS are contributory defined benefit plans covering all Town
employees and teachers deemed eligible. The System is a member of the
Massachusetts Contributory System and is governed by Chapter 32 of the
Massachusetts General Laws. Membership in the System and the TRS is mandatory
immediately upon the commencement of employment for all permanent, full-time
employees.
(Continued)
15
TOWN OF MANSFIELD, MASSACHUSETTS
Notes to General Purpose Financial Statements
(6) Pension Plan (Continued)
Both systems provide for retirement allowance benefits up to a maximum of
80% of a member's highest three—year average annual rate of regular
compensation. Benefit payments are based upon a member's age, length
of creditable service, level of compensation and group classification.
Members joining the System after January 1, 1979, are subject to a cap
of $30,000 on the level of compensation upon which their benefits are
calculated.
Members of both systems become vested after 10 years of creditable
service. A retirement allowance may be received upon reaching age 65
or upon attaining 20 years of service. The systems also provides for
early retirement at age 55 if the Participant (1) has a record of 10
years of creditable service, (2) was on the Town payroll on January 1,
1978, (3) voluntarily left Town employment on or after that date, and
(4) left accumulated annuity deductions in the Fund. Active members
contribute either 5, 7 or 8% of their gross regular compensation
depending on the date upon which their membership began. The Town is
required to contribute the remaining amounts necessary to pay benefits
when due.
The systems also provide death and disability benefits.
(b) Funding Status and Progress
The amount shown below as the "Pension Benefit Obligation" for the System
is a standardized disclosure measure of the present value of pension
benefits, adjusted for the effects of projected salary increases and
step —rate benefits, estimated to be payable in the future as a result
of employee service to date. The measure is intended to help users
assess the funding status of the System on a going —concern basis,
assess progress made in accumulating sufficient assets to pay benefits
when due, and make comparisons among employers. The measure is the
actuarial present value of credited projected benefits and is
independent of the funding method used to determine contributions to
the System.
The pension benefit obligation was computed as part of an actuarial
valuation performed as of January 1, 1987. Significant actuarial
assumptions used in the valuation include (a) a rate of return on the
investment of present and future assets of 8% a year compounded
annually, (b) projected salary increases of 4.5% a year compounded
annually, attributed to inflation, (c) additional projected salary
increases of 1.5% a year, attributable to seniority/merit, (d) no
post —retirement benefit increases, and (e) .$30,000 salary cap on
employees hired after January 1, 1979.
(Continued)
16
TOWN OF MANSFIELD, MASSACHUSETTS
Notes to General Purpose Financial Statements
(6) Pension Plan (Continued)
The total unfunded pension benefit obligation applicable to the System was
$56,152,000 at January 1, 1987, as follows (in thousands):
Pension benefit obligation:
Retirees and beneficiaries currently
receiving benefits and terminated
employees not yet receiving benefits $ 45,985
Current employees:
Accumulated employee contributions,
including allocated investment earnings 52,383
Total pension benefit obligation 98,368
Net assets available for benefits, at market value 42,216
Unfunded pension benefit
obligation $ 52
(c) Contribution Requirements and Contribution Made
The System assesses participating employers for their share of pension
benefits (less certain interest credits) expected to be paid during the
year ("pay-as-you-go" method). This amount is determined in advance by
the Public Employee Retirement Administration (PERA) and is based in
part on the previous year's benefit payout. The Commonwealth of
Massachusetts currently reimburses the System on a quarterly basis for
the portion of benefit payments owing to cost -of -living increases
granted after the implementation of Proposition 2-1/2.
The Town's contribution to the System for 1990 of $574,430 was made in
accordance with the funding policy described above and represented
approximately 9.2% of System -wide employer contributions.
(d) Trend Information
Trend information showing the System's progress in accumulating sufficient
assets to pay benefits when due is presented in the System's December
31st, annual financial report. Trend information showing the System's
progress in accumulating sufficient assets to pay benefits when due is
required by GAAP to be included in the System's annual financial
report. It is not known whether this report will contain the required
historical trend information.
(Continued)
17
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TOWN OF MANSFIELD, MASSACHUSETTS
Notes to General Purpose Financial Statements
(7) Long-term Debt (Continued)
The annual requirements to amortize all general obligation bonds outstanding
as of June 30, 1990, including interest, are as follows:
Principal Interest Total
Year ending June 30,
1991
$ 947,100 615,138 1,562,238
1992
912,100 550,800 1,462,900
1993
807,100 491,919 1,299,019
1994
802,100 436,501 1,238,601
1995
647,100 386,357 1,033,457
Thereafter
52436,200 2,580,434 82016,634
$ ,5� 5,061,149 14,612,849
The Commonwealth of Massachusetts has approved school construction
assistance to the Town.
The assistance program which is administered by
the School Building Assistance Bureau (SBAB) provides resources for
future debt service of
general obligation school bonds outstanding.
These resources are
subject to annual appropriation by the state
legislature and the
Town's compliance with certain reporting
requirements. During
1990, the Town received $102,713 of such
assistance. Assuming
satisfactory audit results and annual
appropriations by the
state legislature, $102,713 will be received for
fiscal year 1991 and $82,662 will be received for fiscal year 1992.
The Town is subject to a dual level general debt limit; the normal debt
limit and the double debt limit. Such limits are equal to 5% and 10%,
respectively, of the valuation of taxable property in the Town as last
equalized by the Commonwealth's Department of Revenue. Debt may be
authorized up to the normal debt limit without state approval.
Authorizations under the double debt limit, however, require the approval
of the Commonwealth's Emergency Finance Board. Additionally, there are
many categories of general obligation debt which are exempt from the debt
limit but are subject to other limitations.
Authorized and unissued debt at June 30, 1990, is as follows:
Schools
Library
Landfill
Department equipment
Water
Industrial
As of June 30, 1990, the
obligation debt under the
$6,006,700 of debt exempt
$ 19,000,000
200,000
1,450,000
325,000
1,450,000
1.600.000
$ 24,025,000
Town may issue $51,485,850 additional general
normal debt limit. The Town has approximately
from the debt limit.
(Continued)
19
TOWN OF MANSFIELD, MASSACHUSETTS
Notes to General Purpose Financial Statements
(7) Long-term Debt (Continued)
The Town pays assessments which include debt service payments to other local
governmental units providing services within the Town's boundaries
(commonly referred to as overlapping debt). The primary overlapping debt
relates to Bristol County. The following summary sets forth the
long-term debt of Bristol County at June 30, 1990, the estimated share of
such debt being serviced by the Town, and the total of its share of
estimated indirect debt.
Town's
Long-term Town's Estimated
Debt Estimated Indirect
Outstanding Share Debt
Bristol County $ 4,320,000 5.34% $ 230,688
Capital Lease Obligations of the Electric Department
Obligations under capital lease represent financing arrangements for the
purchase of trucks, computer equipment and computer upgrades.
The following is a schedule, by years, of future minimum lease payments
together with the present value of the net minimum lease payments as of
December 31, 1989:
1990
$ 56,179
1991
40,867
1992
28,523
1993
9,402
Net minimum lease payments
134,971
Less: Amount representing interest
(15,112)
Present value of net minimum
lease payments
$ 112,859
(8) Temporary Borrowings
Under state law and by authorization of the Board of Selectmen, the Town is
authorized to borrow on a temporary basis to fund the following:
• Current operating costs prior to the collection of revenues through
issuance of revenue or tax anticipation notes (RAMS or TANS)
(Continued)
20
TOWN OF MANSFIELD, MASSACHUSETTS
Notes to General Purpose Financial Statements
• Capital project costs incurred prior to obtaining permanent
financing through issuance of bond anticipation notes (BANS)
• Federal and state aided capital projects and other program
expenditures prior to receiving reimbursement through issuance of
federal and state aid anticipation notes (FANS and SAANs)
Temporary loans are general obligations of the Town and carry maturity
dates which are limited by statute. Interest expenditures for
temporary borrowings were approximately $99,100 and are accounted for
in the General Fund. At June 30, 1990, $190,000 of BANS with rates
ranging from 6.31% to 6.79% and $170,620 of SAANS with rates of 6.28%
were outstanding.
(9) Fund Deficits
The following funds had deficit equity balances as of June 30, 1990:
Special revenue funds:
Federal grants $ 81,783
Capital project fund:
Water main $ 12,130
Pumping station 16,343
Emergency communication 20,122
$ 48,595
The deficits in these funds will be eliminated through future bond issues
or federal and state grants.
(10) Interfund Receivable and Payable Balances
Individual fund interfund receivable and payable balances at June 30,
1990, were as follows:
Fund
General
Special Revenue:
Municipal outside and school details
Electric Department
Agency:
Municipal outside and school details
Interfund
Interfund
Receivables
Payables
$ 33,272
-
23,655
-
306,013
-
-
23,655
(Continued)
21
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TOWN OF MANSFIELD, MASSACHUSETTS
Notes to General Purpose Financial Statements
MMWEC is a coordinating and planning agency for the development of bulk
power supply requirements of its Members and Project Participants.
MMWEC is authorized to purchase ownership interests in, and to issue
revenue bonds to finance generating units (Projects). MMWEC sells the
capability of each of its Projects to its Members and other utilities
(Project Participants) under Power Sales Agreements. The Power Sales
Agreement for each Project requires each Project Participant to pay
its share of MMWEC's costs related to the Project which include debt
service on bonds issued by MMWEC to finance the Project, plus 10% of
debt service to be paid into a Reserve and Contingency Fund. In
addition, should any Project Participant fail to make any payment,
which failure constitutes a default under the Power Sales Agreement
(or other applicable agreements), other Project Participants could be
required to provide the defaulting Participant's payments in an amount
up to 25% of the continuing Participant's payments, as determined
before any such increase is effected, for the Project. In addition,
MMWEC has entered into long-term take -or -pay power purchase contracts
for which it has corresponding resale agreements with certain of its
members and other utilities. The Project and power purchase contract
amounts are payable from each Participant's electric system revenues
and each Project Participant is unconditionally obligated to make
payments whether or not the Project is completed or a unit is
operating and notwithstanding the suspension or interruption of output
of the unit, in accordance with the covenants to fix, revise and
collect rates at least sufficient to meet its obligations under the
Power Sales Agreement.
A substantial portion of MMWEC's power supply and financing program
consists of its 11.59% ownership interest in the Seabrook Station, the
construction and licensing of which is being conducted by New
Hampshire Yankee (NH Yankee), currently a division of Public Service
Company of New Hampshire (PSNH). Seabrook Station consisted of two
units. Construction of Seabrook Unit 1 was completed in 1986; Unit 2
was effectively cancelled in 1984. The Nuclear Regulatory Commission
(NRC) granted a full power license for Unit 1 on March 1, 1990.
In May 1989, the NRC issued a low power operating license for Seabrook
Unit 1 which limited the operation of the unit up to five percent of
full power. In June 1989, an incident involving a malfunctioning
steam valve and a subsequent delay in the shutdown of the plant
resulted in an agreement between the NRC and plant management to cease
the testing until further NRC approval. The Seabrook project
management implemented new procedures, and issues relating to the
incident have been resolved.
(Continued)
23
TOWN OF MANSFIELD, MASSACHUSETTS
Notes to General Purpose Financial Statements
The NRC issued a rule change in 1987 that allows owners of completed
nuclear plants to obtain an operating license upon NRC approval of
utility -sponsored emergency response plans in cases where states of
localities have refused to participate in formulating such plans. In
January 1989, subsequent to public hearings, emergency response plans
for New Hampshire communities within the ten -mile radius of Seabrook
Station were approved by the Atomic Safety & Licensing Board (ASLB).
NY Yankee has prepared and submitted emergency response plans for the
Massachusetts municipalities located within the ten -mile radius of
Seabrook Station for which plans have not been submitted by
Massachusetts officials. These plans were demonstrated in a full
scale graded emergency preparedness exercise in June 1988. In a
November 1989 report, the ASLB concluded that the two day drill of the
New Hampshire, Massachusetts and on -site plans, proved Seabrook
Station meets the NRC requirements, and the plant qualifies to receive
a full -power operating license.
In September 1988, the NRC issued a ruling requiring NH Yankee to
demonstrate its financial ability to decommission the plant after
low -power testing in the event the plant does not obtain a full -power
license. In December 1988, the NRC decided on all pending financial
qualification questions which were brought to its attention relating
to Seabrook. The NRC ruled, among other things, that $72.1 million be
provided for decommissioning prior to low -power testing. The joint
owners have purchased a surety bond to meet the above condition.
Seabrook Station experienced persistent and substantial cost increases
and significant schedule delays during its construction and licensing
phases. It has been the source of continuing controversy and
opposition from government officials, regulators, intervenors and
others and has created financial problems for many of its joint
owners, including MMWEC.
PSNH, as a result of the continued delay in commercial operation of
Seabrook Unit 1 and its inability to secure cost recovery prior to
commercial operation of the Unit, has experienced substantial
difficulty in sustaining its financial obligations for its 35.6% share
of the Seabrook project. PSNH challenged the constitutionality of New
Hampshire's anti-CWIP law, which prohibited from charging customers
for construction work in progress on projects that are not yet in
operation, at the state and federal courts. In January 1989, the
United States Supreme Court rejected the appeal due to the lack of a
"properly presented federal question."
(Continued)
24
TOWN OF MANSFIELD, MASSACHUSETTS
Notes to General Purpose Financial Statements
In January 1988, PSNH filed for protection from its creditors under
Chapter 11 of the Federal Bankruptcy Code. Several utilities
including PSNH and the State of New Hampshire has potential takeover
PSNH plans. Northeast Utilities (NU) submitted various proposals and
emerged as the entity most likely to re -organize PSNH and assume
PSNH's ownership share of the Seabrook Project. NU's plan has been
accepted by PSNH creditors, PSNH equity holders, PSNH and the State of
New Hampshire. NU is currently seeking regulatory review of the
proposed acquisition at the state and federal levels. MMWEC and other
utilities have intervened at the Federal Energy Regulatory Commission
and the Securities and Exchange Commission to protect, among other
things, various transmission positions which may be impaired as a
result of the proposed NU takeover of PSNH.
On June 1, 1988, MMWEC's Board of Directors adopted a strategic plan of
action relating to its 11.6 percent Seabrook joint ownership
interest. The plan of action evidenced, among other things, an
intention not to pay any future direct obligations to the Seabrook
project. Accordingly, no additional payments have been made since May
1988 for construction, maintenance or nuclear fuel under the Seabrook
Project Disbursing Agent agreement. MMWEC's prepayments were
exhausted on or about July 24, 1988. Certain of the Seabrook joint
owners have made-up the shortfall in the Seabrook projectes cash flow
caused by MMWEC's nonpayment. The Connecticut Light and Power
Company, through a power sales arrangement with the other joint
owners, furnished funds to the Seabrook project in lieu of MKWEC's
payments for the July 24 to November 30, 1988 period. Connecticut
Light and Power Company released any claims it may have had against
MMWEC as a result of making payments to the Seabrook Project.
On June 10, 1988, PSNH gave notice under a provision of the Seabrook
Joint Ownership Agreement that MMWEC was in default in its joint
ownership obligations. Pursuant to the same Joint Ownership
Agreement, MMWEC had five months after such notice to cure any
default. MMWEC did not agree with such notice that a default occurred
on June 10, 1988. On November 4, 1988, MMWEC and PSNH entered into a
Memorandum of Understanding whereby MMWEC retains its full ownership
in Seabrook Station. MMWEC, PSNH and other current and past joint
owners of Seabrook executed a Settlement Agreement, which provides for
various consideration listed below. Upon the effective date, the
Memorandum and the Settlement Agreement provide, among other things,
that all notices of default will be rescinded and covenants not to sue
among the major joint owners of Seabrook will be effective. The
Settlement Agreement also calls for PSNH to be responsible for MKWEC's
portion of the Seabrook Station pre -operational costs, commencing
December 1, 1988, to the commercial operation of the unit or up to $30
million, whichever comes first. The $30 million of construction funds
are projected to be exhausted in the spring of 1990. The Settlement
(Continued)
25
TOWN OF MANSFIELD, MASSACHUSETTS
Notes to General Purpose Financial Statements
Agreement requires that MMWEC make up any shortfalls in payments
within seven days of the commercial operation or cancellation of the
unit. The Settlement Agreement also provides the Seabrook joint
owners with the right to obtain equitable relief, but not to reduce
MMWEC's ownership share, after sixty days written notice, for non
payment by MMWEC before commercial operation or cancellation. The
Settlement Agreement calls for a $3.5 million payment on the effective
date and for a $2 million annual payment for eight years, after
commercial operation of the unit. As part of the Settlement
Agreement, MMWEC and PSNH agree to cancel the Sellback Agreement which
called for PSNH to purchase Seabrook capacity from MMWEC at cost. In
addition, the Settlement Agreement calls for extension of an existing
transmission contract and limits MMWEC's exposure for decommissioning
or cancellation costs to $10 million. The PSNH bankruptcy court has
accepted the Comprehensive Seabrook Settlement with August 1, 1989, as
the effective date.
In 1985, certain residents of the Town of Groton brought suit against the
Town of Groton Municipal Light Department, the Town of Groton and
MMWEC, challenging the validity of the Nuclear Mix No. 1, Nuclear
Project Nos. 3, 4 and 5 and Project No. 6 Power Sales Agreements. In
1989, the Massachusetts Superior Court granted the defendants' motions
for summary judgement and upheld the validity of Groton's Power Sales
Agreements with MMWEC. The Supreme Judicial Court affirmed the lower
court's ruling in July 1988.
MMWEC's Project No. 6 includes seven out-of-state participants who have
ceased making their payments under the related Power Sales Agreement.
The Vermont Electric Cooperative which had a 7.25% participants' share
stopped making payments in Febraury 1986, while Washington Electric
Cooperative with a 1.96% participants' share has been withholding its
monthly payments since January 1988. The Ludlow, Lyndonville,
Morrisville and Northfield, Vermont, municipal electric systems,
comprising a 5.75% participants' share in Project No. 6, ceased making
payments in October 1988. Eastern Maine Electric Cooperative stopped
payments in May 1987.
The Vermont Public Service Department brought action against MMWEC in a
Superior Court of Vermont in October 1985 challenging the validity of
the Project No. 6 Power Sales Agreements as entered into by the
Vermont Participants. In November 1986, the Superior Court Judge
ruled that the Power Sales Agreements for Project No. 6 between MMWEC
and several consumer -owned utilities in Vermont are valid under
Vermont law. The ruling rejected contentions by the Vermont
Department of Public Service, Vermont Electric Cooperative and the
Village of Stowe Water & Light Department that the contracts were
invalid and, therefore, not binding agreements. The plaintiffs
(Continued)
a
TOWN OF MANSFIELD, MASSACHUSETTS
Notes to General Purpose Financial Statements
appealed this ruling to the Vermont Supreme Court, which heard
arguments in April 1987. In September 1988, the Vermont Supreme Court
reversed the lower court and ruled that the Project No. 6 Power Sales
Agreements with the Vermont utilities are invalid since inception
(void ab initio) because the utilities lacked both the statutory
authority to enter into the contracts and to delegate certain
authorities to MMWEC. MMWEC filed a motion and was denied a rehearing
of the case. MMWEC filed a writ of certiorari with the United States
Supreme Court to review the decision of the Vermont Supreme Court,
which voided the Power Sales Agreements between MMWEC and the Vermont
Project No. 6 Participants. The writ of certiorari was denied in
October 1989.
In as much as the Stony Brook Intermediate project has approximately 8.2%
of the Project Capability under Power Sales Agreements with Vermont
entities, which Power Sales Agreements are virtually identical to the
Project No. 6 Power Sales Agreement, the Vermont Supreme Court
Decision on Project No. 6 Power Sales Agreement could apply equally to
the Stony Brook Intermediate Power Sales Agreement. The Vermont
legislature enacted legislation seeking to validate the Stony Brook
Intermediate Power. Sales Agreement in light of the Vermont Supreme
Court Decision. MMWEC is seeking a declaration of the validity of the
Stony Brook Intermediate Power Sales Agreement, as well as a curative
legislation, in the matter of MMWEC vs. State of Vermont et al.
currently pending the Supreme Court in Washington County, Vermont.
Due to the Vermont Supreme Court decision declaring the Project No. 6
Vermont Participant contracts void ab initio, certain Massachusetts
Project No. 6 Participants have raised issues relating to the validity
of the Project No. 6 Power Sales Agreements. These participants
allege that 100% participation is a condition precedent to the
validity of the Project Power Sales Agreements. On April 14, 1989,
the Hingham Municipal Lighting Plant and the Shrewsbury Electric Light
Plant both filed identical but separate actions in the Superior Court
of Suffolk County in Massachusetts. The basis for the complaints are
whether the Project No. 6 Power Sales Agreements are valid and binding
as to them, since as alleged in the complaints, a condition precedent
to the validity of all the Project No. 6 Power Sales Agreements is
100% participation in said Agreement, and if the Vermont Participant's
contracts are void ab initio, then this condition precedent has not
been met. Further, the complaint alleges that any increase in Project
No. 6 billings as a result of the nonpayment by the Vermont Project
No. 6 Participants is unlawful on the basis that the Project No. 6
Power Sales Agreements failed to have 100% participation and MMWEC's
use of Project No. 6 funds to cover the shortfall in receipts
constitutes a breach of the Power Sales Agreements. MMWEC filed an
original action in the Supreme Judicial Court for the Commonwealth of
Massachusetts against two Massachusetts Project No. 6 Participants. A
(Continued)
27
TOWN OF MANSFIELD, MASSACHUSETTS
Notes to General Purpose Financial Statements
single justice of the Court accepted MMWEC's motion to have the Court
transfer to the Supreme Judicial Court other cases with Project No. 6
participants pending the Superior Judicial Court other cases with
Project No. 6 Participants pending in the Superior Court.
Furthermore, the justics granted MMWEC's request for preliminary
injunctions ordering the non-paying participants to pay their
obligations. MMWEC also filed a motion for summary judgment with the
single justice. MMWEC also filed a motion for summary judgment with
the single justice. MMWEC has filed oppositions to the participants'
motion to stay the proceedings and to compel arbitration. The single
justice allowed for discovery to take place prior to scheduling a
hearing on the summary judgment motions. The Danvers, Hudson and
Peabody light departments filed a motion asking the justice to rescue
himself due to a potential conflict. In January 1990, the Justice
recused himself sending the case back to the Superior Court for
Suffolk County, Massachusetts.
The Town of Hudson Light & Power Department and the City of Peabody
Municipal Light Plant filed, in November 1988, a lawsuit against MMWEC
in Suffolk County Superior Court which, among other things, sought to
enjoin the MMWEC Board of Directors from acting upon the Memorandum of
Understanding with PSNH. In November 1988, the Massachusetts Superior
Court denied the Hudson/Peabody injunction request, which denial was
upheld by the Massachusetts Appeals Court. In December 1988, the Town
of Hudson Light & Power Department and the City of Peabody Municipal
Light Plant amended their complaint against MMWEC to include
challenges to the validity of 'the Project No. 6 Power Sales Agreement
on the 100% participation issue, as previously discussed within the
context of the Vermont Supreme Court decision. MMWEC moved to compel
arbitration of this dispute and the Superior Court granted MMWEC's
motion in accordance with the terms of the Power Sales Agreements.
The arbitration is currently on hold pending the outcome of the cases
discussed above.
In March 1989, Washington Electric Cooperative of Vermont filed suit
against MMWEC in the Washington County Superior Court in Vermont for
restitution from MMWEC for payments made under the Project No. 6 Power
Sales Agreements. Washington Electric Cooperative received an ex
parte trustee process against other Vermont utilities which are making
payments under MMWEC's Stony Brook Intermediate Unit contracts. MMWEC
has removed this case to the United States District Court for the
District of Vermont, where hearings were held and an order issued to
dissolve the trustee process contingent on MMWEC giving notice of any
intent to take away the Vermont Participants Intermediate Unit
capacity. On October 27, 1989, the Vermont Department of Public
Service filed, a motion to intervene in this case, and a claim against
MMWEC seeking restitution of approximately $6.2 million of payments
made by Vermont Utilities to MMWEC under the Project No. 6 Power Sales
Agreement. MMWEC has filed a response to the DPS's intervention
stating that the DPS does not have standing to raise those issues on
behalf of the Vermont ratepayers. The DPS has responded to MMWEC's
pleadings. A hearing on this item is scheduled for February 1990.
(Continued)
TOWN OF MANSFIELD, MASSACHUSETTS
Notes to General Purpose Financial Statements
In July 1989, MMWEC successfully defended against the Washington Electric
Cooperative's motion to remand this case to a Vermont state court.
Also in July 1989, MMWEC filed both a counterclaim against the
Washington Electric Cooperative in the amount of $16 million and a
third -party claim in the amount of at least $10 million against the
officers, directors and attorneys of Washington Electric Cooperative
upon whose opinions which MMWEC issued bonds for Project No. 6.
On August 31, 1987, Eastern Maine Electric Cooperative (EMEC), a 3.6%
Participant in MMWEC's Project No. 6, filed for protection under
Chapter 11 of the Federal Bankruptcy Code. In its petition, EMEC is
asking the court to reject its Power Sales Agreement with MMWEC. EMEC
has failed to make payments relating to its Power Sales Agreement
contract with MMWEC since May 1987. In October 1988, EMEC's petition
for rejection of the contract was denied by the U.S. Bankruptcy
Court. The judge concluded that MMWEC has a claim against EMEC
stemming from EMEC's payment default under the contract prior to
EMEC's entering into Chapter 11. MMWEC has formally filed a claim in
the proceedings in an amount present valued in excess of $30 million.
Other Project No. 6 Participants have likewise filed claims for the
money debt service due and other amounts. EMEC responded to the claim
with a counterclaim alleging, among other things, that its Project No.
6 Power Sales Agreement with MMWEC is void as a result of the Vermont
Supreme Court decision. Trial was to begin on the adversarial claim
on January 16, 1990. However, because the two parties agreed to
discuss settlement, the trial was postponed. An outline of a proposed
settlement was presented to the Court on January 23, 1990. On January
31, 1990, EMEC filed an unsigned settlement agreement with the court.
On February 7th, the MMWEC Board of Directors voted to reject the
settlement agreement filed by EMEC's bankruptcy counsel with the
Bankruptcy court. A hearing was held on February 20th at which the
Bankruptcy Judge remitted certain settlement issues to MMWEC for
consideration. The parties are to report to the bankruptcy judge on
March 1, 1990.
In January 1986, the Hull Municipal Lighting Plant filed suit against
MMWEC seeking a declaration that its Power Sales Agreements for
Nuclear Mix 1, Nuclear Projects Nos. 4 and 5 and Project No. 6
relating to Seabrook were invalid, and an injunction against MMWEC
collecting any amounts from Hull under the agreements, and monetary
damages. The suit challei:ged the validity of these Power Sales
Agreements on various grounds and alleges, among other things,
misrepresentations, breaches and imprudences by MMWEC. In March 1986,
the Massachusetts Superior Court granted MMWEC's motions to stay the
legal proceedings and compel arbitration of the suit, and for a
preliminary injunction requiring Hull to pay its share of monthly
power costs as required by the Power Sales Agreements. In March 1986,
a single justice of the Massachusetts Appeals Court denied Hull's
(Continued)
29
TOWN OF MANSFIELD, MASSACHUSETTS
Notes to General Purpose Financial Statements
petition for relief from the orders of the Superior Court, and the
matter went to arbitration. In August 1987, the arbitrator ruled that
the contracts signed by Hull's light board with MMWEC were valid. The
arbitrator has yet to rule on the other alleged breaches, imprudencies
and misrepresentations claimed against MMWEC by Hull. After
withholding payments, Hull is currently making payments, under
protest, in accordance with the court order, which it appealed. In
the fall of 1989, the arbitrator in January 1990. Discovery in this
case is expected to be completed by the summer of 1990.
As of December 31, 1989, for projects under construction, accumulated
construction expenditures amounted to $1,022,413,000, of which
$71,704,000 represents the amount attributable to the Department.
Debt outstanding for projects under construction included Power Supply
System Revenue bonds totaling $967,414,000, of which $67,415,000 is
attributable to the Power Sales Agreements of the Department. As of
December 31, 1989, the total future debt service requirement on
outstanding bonds issued for projects under construction is
$2,911,153,000, of which $210,174,000 is attributable to the
Department.
In addition, for projects in operation, MMWEC has expended and
capitalized $392,856,000. $476,041,000 of bonds are outstanding for
these operating projects, with a total debt service requirement over
future years of $1,065,531,000. The Department's portion of the
expenditures, bonds outstanding and debt service on these projects is
$17,810,000, $19,855,000 and $41,005,000, respectively.
Mansfield Light Department has entered into power purchase contracts or
power sales agreements with MMWEC. Under these agreements, the
Department is required to make capacity or debt service payments to
MMWEC. The aggregate amount of such required payments, exclusive of
reserve and contingency fund billings, on bonds outstanding and
significant power purchase contracts through MMWEC at December 31,
1989 is shown below.
Annual Cost
For years ended December 31, 1990 $ 10,376,000
1991 $ 10,624,000
1992 $ 11,047,000
1993 $ 10,993,000
1994 $ 10,374,000
Later fiscal years $ 204,129.000
$ 2 7.543.000
In addition the Division is required to pay its share of the operation
and maintenance costs of the units in which it participates. The
Department's total operation and maintenance costs including debt
service under the agreements were $13,757,000 and $12,692,000 for the
years ended December 31, 1989 and 1988, respectively.
30
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