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2013 Comprehensive Annual Financial Report (PDF)
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TOWN OF CANTON, MASSACHUSETTS
COMPREHENSIVE ANNUAL FINANCIAL REPORT
For the Fiscal Year Ended
June 30, 2013Source page 2
On the cover: The flagpole located at the William J. Armando Jr. Recreation Center was dedicated to Ada V. Goodrich, who dedicated 30 years to the Town as a member of the Recreation Commission. DEDICATED TO ADA V. GOODRICH IN RECOGNITION OF 30 YEARS OF SERVICE TO THE CANTON PLAYGROUND AND RECREATION COMMISSION Lye 2008 IN APPRECIATION FOR HER COMMITMENT TO THE TOWN OF CANTON AND ITS YOUTH IN THE SPIRIT OF COMMUNITY AND RECREATION CANTON BOARD OF SELECTMEN SEPTEMBER 29, 2013 [Original embedded text, retained for comparison] On the cover: The flagpole located at the William J. Armando Jr. Recreation Center was dedicated to Ada V. Goodrich, who dedicated 30 years to the Town as a member of the Recreation Commission.
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Town of Canton, Massachusetts
Comprehensive Annual Financial Report
For the Fiscal Year
July 1, 2012 through June 30, 2013
Prepared by the Finance DepartmentSource page 4
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Introductory Section Construction of the four classroom addition to the John F. Kennedy Elementary School added necessary capacity while enabling children to attend school in their neighborhood.
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TOWN OF CANTON, MASSACHUSETTS
COMPREHENSIVE ANNUAL FINANCIAL REPORT
YEAR ENDED JUNE 30, 2013
TABLE OF CONTENTS
Page(s)
INTRODUCTORY SECTION
Letter of Transmittal ....................................................................................................................... 1-11
Organizational Chart ........................................................................................................................ 12
Principal Town Officials .................................................................................................................. 13
Certificate of Achievement For Excellence in Financial Reporting................................................. 14
FINANCIAL SECTION
Independent Auditor’s Report ....................................................................................................... 15-17
Management’s Discussion and Analysis ....................................................................................... 19-32
Basic Financial Statements:
Statement of Net Position .......................................................................................................... 35
Statement of Activities ............................................................................................................... 36
Balance Sheet – Governmental Funds ....................................................................................... 37
Reconciliation of the Governmental Funds Balance Sheet Total Fund Balances to
the Statement of Net Position ............................................................................................ 38
Statement of Revenues, Expenditures and Changes in Fund Balances –
Governmental Funds ........................................................................................................... 39
Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund
Balances of Governmental Funds to the Statement of Activities ..................................... 40
Statement of Net Position – Proprietary Funds .......................................................................... 41
Statement of Revenues, Expenses, and Changes in Net Position – Proprietary Funds.............. 42
Statement of Cash Flows – Proprietary Funds ........................................................................... 43
Statement of Fiduciary Net Position .......................................................................................... 44
Statement of Changes in Fiduciary Net Position ....................................................................... 45
Notes to Basic Financial Statements ....................................................................................... 46-71
Required Supplementary Information:
Schedules of Funding Progress .................................................................................................. 75
Schedules of Contribution Funding ........................................................................................... 75
Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and
Actual – General Fund .................................................................................................. 76-78
Notes to Required Supplementary Information .................................................................... 79-80
Combining Statements:
Nonmajor Governmental Funds ............................................................................................ 83-84
Combining Balance Sheet – Nonmajor Governmental Funds ........................................ 86-89
Combining Statement of Revenues, Expenditures, and Changes in Fund
Balances – Nonmajor Governmental Funds ........................................................... 92-93
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TOWN OF CANTON, MASSACHUSETTS
COMPREHENSIVE ANNUAL FINANCIAL REPORT
YEAR ENDED JUNE 30, 2013
TABLE OF CONTENTS
Page(s)
Internal Service Funds ............................................................................................................ 95
Combining Statement of Net Position – Internal Service Funds ...................................... 97
Combining Statement of Revenues, Expenses and Changes in Net Position –
Internal Service Funds .............................................................................................. 98
Combining Statement of Cash Flows – Internal Service Funds ........................................ 99
Fiduciary Funds ...................................................................................................................... 100
Statement of Changes in Assets and Liabilities – Agency Fund ..................................... 101
STATISTICAL SECTION
Narrative ..................................................................................................................................... 102
Net Position by Component – Last Ten Fiscal Years...................................................................... 104
Changes in Net Position – Last Ten Fiscal Years ....................................................................... 105-106
Fund Balances, Governmental Funds – Last Ten Fiscal Years ....................................................... 107
Changes in Fund Balances, Governmental Funds – Last Ten Fiscal Years .................................... 108
Assessed Value and Estimated Actual Value of Taxable Property By Classification
and Tax Rates – Last Ten Fiscal Years............................................................................ 109
Principal Taxpayers – Current Year and Nine Years Ago .............................................................. 110
Property Tax Levies and Collections – Last Ten Fiscal Years........................................................ 111
Ratios of Outstanding Debt by Type – Last Ten Fiscal Years ........................................................ 112
Ratios of General Bonded Debt Outstanding .................................................................................. 113
Computation of Legal Debt Margin – Last Ten Fiscal Years ......................................................... 114
Direct and Overlapping Governmental Activities Debt .................................................................. 115
Demographic and Economic Statistics – Last Ten Fiscal Years ..................................................... 116
Principal Employers (Excluding Town) – Current Year and Nine Years Ago ............................... 117
Full-time Equivalent Town Employees by Functions – Last Ten Fiscal Years .............................. 118
Operating Indicators by Function/Program – Last Ten Fiscal Years .............................................. 119
Capital Asset Statistics by Function/Program – Last Ten Fiscal Years .......................................... 120
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Letter of Transmittal November 4, 2013 Honorable Board of Selectmen and Citizens of the Town of Canton, Massachusetts: I am pleased to acknowledge that the Town of Canton has completed its eighth Comprehensive Annual Financial Report (CAFR). The report is for the fiscal year ended June 30, 2013, and I am proud that we have continued this annual tradition of preparing a report that communicates to our constituents and investors the highest degree of transparency in financial reporting for municipalities. The Town is responsible for the accuracy, completeness and fairness of the data presented in the CAFR. This letter of transmittal and the management’s discussion and analysis, located in the financial section of the CAFR, provide a comprehensive financial overview of the Town and ensure that the financial and general operations of Town government remain open for easy viewing. The CAFR represents a complete set of financial statements in conformity with generally accepted accounting principles in the United States of America (GAAP), that are audited in accordance with generally accepted auditing standards by a firm of licensed certified public accountants. This CAFR meets and exceeds those requirements and presents itself as an informative resource for all those interested in the financial activities of the Town. The report is designed to be used by the elected and appointed officials of the Town and others who are concerned with its management and progress such as bond analysts, banking institutions and rating agencies as well as the citizens and taxpayers of the Town of Canton. Since the report consists of management’s representations concerning the finances of the Town, management assumes full responsibility for the completeness and reliability of all of the information presented. In addition, management of the Town is responsible for establishing and maintaining an internal control structure designed to ensure the assets of the Town are protected from loss, theft or misuse and to ensure that adequate accounting data is compiled to allow for the preparation of financial statements in conformity with GAAP. Because the cost of internal controls should not outweigh their benefits, the Town of Canton’s comprehensive framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements will be free from material misstatement. Town of Canton, Massachusetts Page 1 of 120 Comprehensive Annual Financial Report
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The Town of Canton’s financial statements have been audited by Roselli, Clark and Associates, a firm of
licensed certified public accountants. The goal of the independent audit is, to on an annual basis, provide
reasonable assurance that the financial statements of the Town of Canton are free of material
misstatement. The independent audit involved examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements; assessing the accounting principles used and
significant estimates made by management; and evaluating the overall financial statement presentation.
The independent auditor concluded, based upon the audit, that there was a reasonable basis for rendering
an unqualified opinion that the Town of Canton’s financial statements for the fiscal year ended June 30,
2013 are fairly presented in conformity with GAAP. The independent auditor’s report is presented as the
first component of the financial section of this report.
The independent audit of the financial statements of the Town of Canton was part of a broader, federally
mandated “Single Audit” designed to meet the special needs of federal grantor agencies. The standards
governing Single Audit engagements require the independent auditor to report not only on the fair
presentation of the financial statements, but also on the audited government’s internal controls and
compliance with legal requirements, with special emphasis on internal controls and legal requirements
involving the administration of federal awards. These reports are available in the Town of Canton’s
separately issued Single Audit Reports Pursuant to OMB Circular A-133.
GAAP requires that management provide a narrative introduction, overview, and analysis to accompany
the basic financial statements in the form of Management’s Discussion and Analysis (MD&A). This letter
of transmittal is designed to complement that analysis and should be read in conjunction with it. The
Town of Canton’s MD&A can be found immediately following the report of the independent auditors.
Profile of the Town
Canton was incorporated as a Town in 1797. The Town is located in eastern Massachusetts,
approximately 18 miles southwest of Boston, has a population of approximately 21,000 and a land area of
approximately 19 square miles. It is situated at the junction of Interstates 95 and 93, with access to Routes
24 and 138, providing an excellent location for residents, businesses and commuters.
Town of Canton, Massachusetts Page 2 of 120 Comprehensive Annual Financial ReportSource page 11
MBTA commuter rail trains on the Providence/Stoughton Line pass through Canton. Some stop at Canton Junction. This line crosses the Neponset River on the Canton Viaduct, a prominent local landmark. Route 128 Station in neighboring Westwood also carries many Canton commuters into Boston. Amtrak trains (including the Acela Express high-speed trains) also stop at Route 128, but pass through Canton without stopping. Another line branches into Stoughton, stopping at Canton Center. Bus service is available to Mattapan Station in the MBTA system, and Canton’s close proximity to Boston also places it within a reasonable distance from Logan International Airport, the largest transportation center in New England. The Town has a rich and varied industrial heritage, serving as the location of Paul Revere’s copper rolling mills in post-Colonial times, and as the site of rubber, chemical and woolen manufacturing in more recent times. Present commercial enterprises play a key role in the Town’s fiscal stability and are considered a major asset to the community. The prime commercial areas are well located so as to allow direct highway access without affecting the community’s small town charm. Many of the Town’s lakes, ponds and wetlands have been protected and preserved for present enjoyment and future generations. Among the protected areas are the Eleanor Cabot Bradley Reservation, an 82 acre estate that blends open fields, woodlands and gardens in the shadow of Great Blue Hill and Pequitside Farm, a town-owned 38 acre conservation and recreation area which offers playing fields, picnicking, hiking and cross country skiing. The Town offers a full range of traditional municipal services including police and fire protection, ambulance and rescue services, education, maintenance of streets and infrastructure, solid waste collection and disposal, health and human services, cultural and recreational, administrative and financial services. The Town is a member community of the Massachusetts Water Resources Authority (MWRA) for its water and sewer services. Canton prides itself on its quality school system. Canton students consistently perform well on national and state tests and over 95% of students graduating from the high school go on to higher education. The Town is the location of the Blue Hills Regional Technical School which provides expanded vocational education opportunities for high school students of Canton and eight other area communities. Canton is also home to one of the two campuses of Massasoit Community College. The campus is a multi-level facility with specialized labs and art studios that support the technical and visual arts programs of the College. The campus also includes the Milton Art Museum, Akillian Gallery and the College’s Professional Development Center. Several years ago, the Town reached its 10% affordable housing requirement mandated by the Commonwealth of Massachusetts (Commonwealth), which is an important milestone as communities under the 10% threshold are subject to an appeals process that can overturn local zoning board decisions. This will allow the Town to maintain its commitment to developing much needed affordable housing units in areas of the Town that can accommodate the growth. The Town operates under the Selectmen, Town Administrator, and Open Town Meeting form of government. The five elected Selectmen make policy decisions, and the Town Administrator is responsible for carrying out the policies of the Selectmen and for managing the day-to-day operations of Town of Canton, Massachusetts Page 3 of 120 Comprehensive Annual Financial Report
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the Town. The policies and procedures of the Board of Selectmen are detailed in the
administrative Code that will continue to evolve and be created over time to best serve the community.
An elected, five-member School Committee appoints a School Superintendent who administers the public
school system of the Town. School Committee members, like the Selectmen, are elected at-large to three-
year staggered terms.
An annual operating budget is approved by Town Meeting two months prior to the start of the fiscal year.
This annual budget serves as the foundation for the Town’s financial planning and control. The budget is
prepared by fund, function (e.g. general government) and department (e.g. finance) allowing the
department heads to allocate resources within the department as they see fit. Transfers between
departments, however, need special approval by Town Meeting unless specifically exempted by state
statute.
Factors Affecting Economic Condition
Canton continues to take a pro-active approach encouraging well planned economic development. The
Town fully appreciates the significance of commercial and industrial growth and development (and
redevelopment) especially in terms of long term fiscal stability. The Town continues its focus on future
growth, which is sustainable and “complimentary” for economic development including employment
opportunities for our residents.
Municipal officials continue to work closely with and receive valuable support from the State Office of
Business Development as well as regional planning support from the Metropolitan Area Planning Council
(MAPC). In addition business advocacy organizations, such as Canton Association of Business and
Industry (CABI) play a vital role. The Town strives to take full advantage of the latest initiatives and
incentives made available to it notably under Chapter 43D for expedited permit approvals and Tax
Incremental Financing (TIF).
The Town’s Economic Development Committee (EDC) is also a special resource. The Town regularly
takes advantage of local talent from the community who specialize in finance, banking, development and
real estate.
The Town continues to update and publish an economic development recruitment guide which includes
pertinent information sought by private company CEO’s when making siting and expansion decisions.
Recently, the Board of Selectmen published a new business and community guide and has made that
information available online as well.
As previously discussed, the Town surpassed its required l0% affordable housing goal as required by
State regulation. The Town has incorporated a continued affordable housing unit goal, within the Housing
Action Plan, to ensure the Town keeps pace with any new market rate unit starts. This year the
construction by Avalon Development of additional affordable housing will commence on Randolph Street
and further increase the Town’s 40B compliance.
The Town’s commitment to sound economic development is further demonstrated by creating
partnerships with (MAPC) Metropolitan Area Planning Council and Neponset Valley Chamber of
Commerce to ensure that the coordination and resource allocation on key planning issues facing the
Town. The Town reactivated the Economic Development Committee and created, with Town Meeting,
the Permit Advisory Committee both of which provide technical assistance to new businesses to Canton.
Town of Canton, Massachusetts Page 4 of 120 Comprehensive Annual Financial ReportSource page 13
The Town has instituted a Google-based web search device, which identifies Canton as a business friendly community. The web product highlights, via a series of videos, the Town of Canton as a solid and desirable business and family destination. The Town’s continued status as a 43D Expedited Permitting Community has benefitted the Town greatly and has led to the actual designation of many new priority development sites. This 43D designation, which was granted to the Town in 2008, came with a $150,000 grant to hire a permit specialist who has completed the administrative and organizational work necessary to implement the issuance of permits via an integrated and automated town wide permit system which better serves the public and the Town in terms of real time tracking of permits. The Town has available a permit guidebook, which lays out the Town’s permitting requirements in an easy to use format. The goal is to identify key requirements and improve communications, saving applicants time and money. The Permit Advisory Committee has been a successful endeavor by bringing together key permit granting agency representatives to counsel and guide any proponent of a proposed commercial endeavor. Participation and results continue to be overwhelmingly positive. The Town has also published a Tax Incremental Financing Evaluation Policy document designed to provide a rational and consistent intake evaluation of TIF requests. The new approach allows the Town to quantify and better evaluate any request to reduce taxes for a business seeking to locate or expand. Also, the Town launched a Payment in Lieu of Taxes Program (PILOT) that encourages non-taxable property owners to voluntarily participate in the support of public services. The Town has completed construction of the downtown revitalization project commonly referred to as the Streetscape Improvement Project. This work was funded as a result of a $2.6 million dollar Commonwealth grant received due to the Town’s Smart Growth efforts and rezoning of the Downtown. The Town has also completed safety and efficiency improvement work on two key intersections ($2.2 million dollar Commonwealth grant) located in the heart of the Route 138 business district. These intersections are located at the Randolph and Washington Street Intersections with Route 138. These projects have improved both the safety and efficiency of this commercial roadway. In addition, the Board of Selectmen has also empanelled a multi-disciplined group of volunteers who have completed a visioning process which has led to a variety of re-zoning recommendations with a goal of improving the business climate and enhance zoning flexibility to spur additional economic development potential along this vital commercial roadway. Town of Canton, Massachusetts Page 5 of 120 Comprehensive Annual Financial Report
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The Town was also a participant in a regional planning study to evaluate the effects of new growth in both residential and commercial construction. The study’s focus was to identify growth related problems such as transportation, infrastructure, environmental, and economic development issues. In addition, a build-out analysis was completed to assist and improve public policy decision-making with regard to growth and development related to educational planning. These studies have been coordinated with other immediate area communities. The Town is in the process of evaluating the opportunities and or impacts of the South Coast Rail Project which is advancing through preliminary and environmental design. The State initiative would provide rail service from Boston to Fall River/New Bedford via a route now determined by the State, known as the Stoughton Alternative, which will include impacts in Canton. The Town had submitted approximately $76,000,000 in requests as part of the Federal Stimulus Funding Initiative with a goal to benefit overall capacity and infrastructure. In 2010 the Town received a MORE grant in the amount of $850,000 and completed infrastructure improvements along Dan Road, an important commercial area of Town. After much effort, the Town secured the commitment of Organogenesis, a bio tech firm, now located on Dan Road, which was contemplating relocation. Their commitment to stay in Canton and expand was an important part of the Town’s success in obtaining this new funding. Canton’s Master Plan Initiative required a careful review and analysis of existing conditions balanced with a vision for the future. The work program is designed to enlist public interest and participation in shaping the Town’s future. Workshops, neighborhood meetings, leadership interviews and community surveys were conducted. The Town has conducted an extensive public outreach campaign to better assure good attendance at workshops and neighborhood focus groups. Existing planning, engineering reports and documents have been reviewed and a written report, which summarizes their major issues and relevant recommendations were prepared and remains available. The overall objective of the Master Plan initiative was to develop a sustainable residential and business development strategy for the Town. Another objective of the Master Plan Initiative was to address the often-conflicting goals of economic development and resource protection. Sustainable development providing for economic growth that is compatible with resource protection remains an important Town focus. The Town’s approach includes Town of Canton, Massachusetts Page 6 of 120 Comprehensive Annual Financial Report
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promoting economic development that is supported by adequate infrastructure. Thus, the dual objectives of the Master Plan Initiative remain to provide for economic growth which is (1) compatible with resource protection and (2) supported by adequate infrastructure. To ensure this, the Town embarked on a four-town regional planning initiative, which is still ongoing. The Towns of Canton, Dedham, Norwood and Westwood share a common watershed and an interlinked highway system. The Towns continue to work together and meet regularly to discuss economic development on a regional basis. This regional planning initiative encourages and reminds area towns that, despite borders, what happens in another neighboring community may have an impact, both positive and potentially negative, on one another. The Towns plan and communicate to shape growth, protect water resources, transportation infrastructure and to insure support and advocacy for growth in the region - to everyone’s benefit. This group continues to pursue State and Federal funding for the replacement of the Interstate 95 and Interstate 93 Interchange, a source of safety concerns and traffic tie-ups. Residential developments such as Windsor Woods, Indian Woods, Pequit View and Blue Hill Commons are complimented by commercial developments such as Dunkin Brands with their worldwide corporate headquarters along with other top Canton companies such as Meditech, Network Engines, One Beacon, Boston Mutual, Computershare, LoJack and Pepsi. The Town’s planning focus also includes improvements to the highway system that serves the Town and the region. Now underway is the Route 128 Add-a-Lane Project, which is federally funded with expected completion by the end of 2013. The Town recently entered into a long-term lease of its capped landfill to be used by a private entity to install solar panels on fifteen acres of the site at no cost to Canton. The lease provides the Town with guaranteed payments of $20,000 per acre, per year, while allowing the Town the ability to purchase all the electricity generated by this 5.6 megawatt facility at a substantial savings. The Pine Street Solar Facility went online August 15, 2012 (one of the largest in the Northeast) and will provide an estimated $46,000 in net metering credits savings to the Town, as well as, the first lease payment totaling $300,000 in new recurring operating revenue increasing annually by 2.5%. In summary, Town leaders recognize the importance of maintaining a stable tax situation for its residents. Development on the commercial side helps accomplish this goal and the Town continues to seek out the means to maintain vigilance in this area. Property Taxes The growth of the Town’s main source of revenues, property taxes, is capped by Proposition 2 ½ and can only be overridden through a ballot by the voters. While revenue increases have Town of Canton, Massachusetts Page 7 of 120 Comprehensive Annual Financial Report
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been limited in recent years, fixed costs, including health insurance and pension costs, have increased
more proportionally. As a result, balancing the annual budget is a challenge without an appropriation
from free cash. The Town attempts to mitigate this impact by conservatively forecasting revenues thus
creating free cash in the subsequent year.
Several years ago, the Town’s management made the difficult choice to cut services and raise fees in
order to balance the budget. With more cuts looming in future years, the Town’s voters approved a $4.5
million Proposition 2 ½ tax override for fiscal year 2009 that allowed for the restoration of most of the
budget cuts from the prior years. The tax override was planned to be phased in over a three year period
with an annual cost to the average residential homeowner of $450. In addition, effective fiscal year
2013, the Town negotiated changes to its health insurance plans that required higher out of pocket costs
from its employees and retirees but stabilized rates. These initiatives have allowed the Town to maintain a
consistent level of reserves from year to year and continue to make contributions to its OPEB Trust Fund.
The following illustrates the Town’s unassigned fund balance trend since 2009:
Unassigned Fund Balances (Millions)
10.0
8.0
6.0
4.0
2.0
0.0
2009 2010 2011 2012 2013
As a result of the Proposition 2 ½ tax override, and strong reserve levels, Standard and Poor’s upgraded
the Town’s bond rating from ‘AA+’ to ‘AAA’, their highest rating given. The override and the resulting
revenue flexibility to restore lost services and stabilize budgets in future fiscal years were cited as
prominent factors in the upgrade. Standard and Poor’s also cited the Town’s strong wealth and income
levels.
The Town is committed to maintaining its reserves at a level expected from communities that engender
the highest bond rating.
Long-term Financial Planning
Several years ago, the Town implemented a policy of preparing rolling projections. The Town believes
this will provide better insight when preparing annual budgets and will also alert the Town to any
potential budgeting issues far ahead of when these situations become real issues.
Town of Canton, Massachusetts Page 8 of 120 Comprehensive Annual Financial ReportSource page 17
The following represents the Town’s summarized budgets for each of the next five years:
Revenues and Other Sources 2014 2015 2016 2017 2018
Real and personal property $ 60,602,472 $ 63,812,739 $ 65,602,175 $ 67,371,814 $ 69,128,311
Intergovernmental 8,151,749 8,046,725 8,028,278 8,010,754 7,993,230
Local receipts 5,574,543 5,689,907 5,695,405 5,701,040 5,706,816
Transfers and other sources 2,258,581 2,395,881 2,409,260 2,466,980 2,527,762
Total sources $ 76,587,345 $ 79,945,252 $ 81,735,117 $ 83,550,588 $ 85,356,119
Expenditures and Other Uses
Municipal budget 16,674,371 17,174,371 17,415,708 17,507,644 17,612,143
Education Budget 33,320,505 34,320,505 34,802,782 34,986,503 35,195,329
Fixed costs 24,679,189 25,937,680 27,423,102 28,838,077 30,204,824
Capital 966,000 1,000,000 1,100,000 1,200,000 1,300,000
State and County 947,280 969,293 993,526 1,018,364 1,043,823
$ 76,587,345 $ 79,401,849 $ 81,735,117 $ 83,550,588 $ 85,356,119
Graphically by fiscal year in millions:
Annual Budget $ millions
90
80
70
60
2014 2015 2016 2017 2018
Capital Improvements and Financing
The Town continues to invest in infrastructure improvements such as roads, sewers, and water
supply facilities, as well as various municipal and school facility upgrades. These include: Town
Hall, Library, Public Safety Facilities, Public Works and School building improvement projects.
Town of Canton, Massachusetts Page 9 of 120 Comprehensive Annual Financial ReportSource page 18
This year the Town has begun the planning and design of a new Senior Center located at 500 Pleasant Street to address the growing aging population in need of expanded and updated senior services. As part of the annual budget process, the Capital Planning Committee (CPC) recommends the capital budget for the upcoming year and prepares a five-year plan to address the long-term capital needs of the Town. The capital spending plan for the five year period from fiscal year 2014 through fiscal year 2018 has an estimated cost of $23.5 million, with $5.2 million to be funded from estimated revenues with the remainder to be funded from the issuance of bonds. The CPC’s capital plan has allocated $4.9 million for municipal departments, $3.9 million for the school department, $10.3 million for the water enterprise fund, $4.2 million for the sewer enterprise fund, and $235,000 for the rink enterprise fund. The Town’s target set aside to finance its capital plan is 5% to 6% of recurring revenues. A portion of its annual capital plan funds smaller capital projects on a pay-as-you-go basis through recurring revenues while larger capital projects are financed through borrowing. In addition, the Town has completed the construction of three important water/sewer projects - the Greenlodge Street Interceptor Rehabilitation Project and two (2) new water filtration plants. These water filtration plants will provide state of the art water filtration capabilities and allow for the use of local source water to reduce operating costs, improve water availability (including redundancy) and filtrate water for customers with the most technologically advanced system available today. The sewer project will be both environmentally and financially beneficial to the Town, by reducing MWRA treatment costs and by limiting sewer overflows in environmentally sensitive areas. These projects are necessary to support new economic development and community growth as well as minimize operational costs resulting from deferred maintenance and inefficient building “infrastructure” including HVAC systems. These projects will improve safety conditions for the users of municipal and school facilities. Awards and Acknowledgements The Government Finance Officers Association of the United States and Canada (GFOA) awards a Certificate of Achievement for Excellence in Financial Reporting. This is a very prestigious award and in order to be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized comprehensive annual financial report. This report must satisfy both generally accepted accounting principles and applicable legal requirements. The GFOA awarded this Certificate of Achievement for Excellence in Financial Reporting to the Town of Canton for its comprehensive annual financial report for the fiscal year ended June 30, 2012. This was the seventh year that the Town has achieved this prestigious award. A Certificate of Achievement is valid for a period of one year only. We believe that our current comprehensive annual financial report will meet the Certificate of Achievement Program’s requirements, and we are submitting it to the GFOA to determine its eligibility for this certificate. The publication of this CAFR represents an important achievement in the ability of the Town of Canton to provide enhanced financial information and accountability to its citizens, elected and appointed officials, and investors. The preparation of this report would not have been possible without the efficient Town of Canton, Massachusetts Page 10 of 120 Comprehensive Annual Financial Report
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and dedicated services of the entire staff of the Finance Office. Special thanks also go to the certified public accounting firm of Roselli, Clark and Associates for their advice and assistance in the preparation of this report. Respectfully submitted, William T. Friel Town Administrator James R. Murgia Finance Director Town of Canton, Massachusetts Page 11 of 120 Comprehensive Annual Financial Report
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TOWN OF CANTON, MASSACHUSETTS ORGANIZATIONAL CHART Ti Board of Selectm: Town Board Planning ~~ Board Board Housing | |Board of Library See a, tee ge a Clerks Tiustees Appointed Multiple Meeting of Health Board Office of Selectmen | |of Assessors || Authority hemnfie Rides Canton Director Town Town Town Director of “Register of Voters Town -Comm. on Disability Moderator | | Representative || Public Health Planner Clerk Administrator Assessing -Zoning Board.of Appeals -Water/Sewer Rate Policy Finance Commission Committee Executive z x arise Coast ce . Town Counsel -Historical Commission —_— Assistant -Fair Housing Committee Personnel Cable Advisory Committee Adv. Board Beautification Committee —— s ; -Conservation Commission Buildin: A sees Council on Aging ig Sealer of Weights pee [Renovations| -Industrial Develop. 7 and Measures Secretary Financing Authority Committee -Local Emergency Planning Capital Committee Outlay -Traffic Study Committee . -Industrial Development [Committee _| Commission Building & Veteran's Building Police Fire Dept. of Human Department Council Recreation Conservation Zoning Maintenance Denatast ss ae Resource of Finance ‘ “oR ave Desiaitment Office Department oP Department | | Public Works | | nenartment on Aging Commission Commission Building Veteran's Police Fire Superintendent} Human Finance COA Recreation Conservation GaSe chased 5 y . of Resource 2 2 . Commission Director Chief Chief Public Works | | Administrator Director Director Director Agent Town of Canton, Massachusetts Page 12 of 120 Comprehensive Annual Financial Report [Original embedded text, retained for comparison] Town of Canton, Massachusetts Page 12 of 120 Comprehensive Annual Financial Report
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PRINCIPAL TOWN OFFICIALS
Elected Officials
Board of Selectmen Gerald A. Salvatori Jr., Chairman
Avril T. Elkort, Vice Chairman
Robert E. Burr Jr., Clerk
Victor D. Del Vecchio, Member
John J. Connolly, Member
School Committee John Bonnanzio
David Emhardt
Robert Golledge
Cynthia Thomas
Reuki B. Schutt
Principal Executive Officers
Town Administrator William T. Friel
Finance Director James R. Murgia
Town Accountant Kathy Dooley Butters
Superintendent of Schools Jeffrey W. Granatino
School Business Adminstrator Kenneth Leon
Police Chief Kenneth N. Berkowitz
Fire Chief Charles E. Doody
DPW Superintendent Michael T. Trotta
Town of Canton, Massachusetts Page 13 of 120 Comprehensive Annual Financial ReportSource page 22
Government Finance Officers Association
Certificate of
Achievement
for Excellence
in Financial
Reporting
Presented to
Town of Canton
Text38:
Massachusetts
For its Comprehensive Annual
Financial Report
for the Fiscal Year Ended
June 30, 2012
Executive Director/CEO
Town of Canton, Massachusetts Page 14 of 120 Comprehensive Annual Financial ReportSource page 23
Financial Section The Town leased fifteen acres of its former landfill to Southern Sky Renewable Energy for installation of a 5.6 megawatt solar panel facility. This facility started to generate electricity for municipal and school buildings in the first quarter of fiscal 2013. The net financial benefit to the town exceeded $300,000 for this first year of operation.
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INDEPENDENT AUDITOR’S REPORT Honorable Board of Selectmen Town of Canton, Massachusetts 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 Town of Canton, Massachusetts, (the “Town”) as of and for the year ended June 30, 2013 which collectively comprise the Towns’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. Auditor’s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in 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 out audit opinions. Town of Canton, Massachusetts Page 15 of 120 Comprehensive Annual Financial Report
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Town of Canton Page Two 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 Town, as of June 30, 2013, 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 described in Note B, the Town implemented Governmental Accounting Standards Board (GASB) Statement No. 63, Financial Reporting of Deferred Outflow of Resources, Deferred Inflow of Resources and Net Position. Our opinion was not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that management’s discussion and analysis, the funding and contribution progress for pension benefits and other post- employment benefits information and budgetary comparison information as listed in the table of contents, be presented to supplement the basic financial statements. Such information, although not part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Town’s basic financial statements. The introductory section, combining and individual nonmajor fund financial statements, and statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual nonmajor fund financial statements are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual nonmajor fund financial statements are fairly stated, in all material respects, in Town of Canton, Massachusetts Page 16 of 120 Comprehensive Annual Financial Report
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Town of Canton Page Three relation to the basic financial statements as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. Other Reporting Required By Government Auditing Standards In accordance with Government Auditing Standards, we have also issued a report dated November 4, 2013, on our consideration of the Town of Canton, Massachusetts’ internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. Roselli, Clark and Associates Certified Public Accountants Woburn, Massachusetts 01801 November 4, 2013 Town of Canton, Massachusetts Page 17 of 120 Comprehensive Annual Financial Report
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Management’s Discussion and Analysis Town of Canton, Massachusetts Page 19 of 120 Comprehensive Annual Financial Report
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MANAGEMENT’S DISCUSSION AND ANALYSIS
As the management of the Town, we offer readers of the accompanying financial statements this narrative
overview and analysis of the financial activities of the Town for the fiscal year ended June 30, 2013.
Financial Highlights
The assets of the Town exceeded its liabilities at the close of the most recent fiscal year by
approximately $78.2 million (total net position).
The government’s total net position decreased by approximately $4.1 million (5.0%). This consisted
primarily of a decrease in governmental activities’ net position by approximately $ 4.1 million (6.7%
of total governmental activities’ net position) Business - type activities’ net position remained
relatively flat when compared to the prior year.
The Town’s Unassigned Fund Balance reported in the General Fund was approximately $8.3 million
(10.1% of General Fund expenditures). Total Fund Balance in the General Fund was approximately
$14.3 million (17.4% of General Fund expenditures). The Town reported total fund balances of
approximately $8.7 million in the Combined Nonmajor Governmental Funds. $8.7 million in
Restricted Fund Balances, combined with $0.4 million in Nonspendable Fund Balances was offset by
Unassigned Fund Deficits of $0.5 million.
The Town’s total debt decreased by approximately $0.3 million during the fiscal year. Detail of this
net decrease is illustrated as follows:
Regular scheduled maturities:
Governmental Activities $ (4,385,178)
Business-Type Activities (1,942,226)
Amortization of premium:
Governmental Activities (42,142)
Amortization of deferred refunding charges:
Governmental Activities 28,567
Issuance of debt
Governmental Activities 2,603,159
Business-Type Activities 3,438,800
$ (299,020)
Overview of the Financial Statements
This discussion and analysis are intended to serve as an introduction to the Town’s basic financial
statements. The Town’s basic financial statements comprise three components: 1) government-wide
financial statements, 2) fund financial statements, 3) notes to the financial statements. This report also
contains other supplementary information in addition to the basic financial statements themselves.
Town of Canton, Massachusetts Page 21 of 120 Comprehensive Annual Financial ReportSource page 32
The layout and relationship of the financial statements and supplementary information is visually illustrated as follows: Government-wide Financial Statements – The government-wide financial statements are designed to provide readers with a broad overview of the Town’s finances, in a manner similar to a private-sector business. The statement of position presents information on all of the Town’s assets and liabilities, with the difference between the two reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the Town is improving or deteriorating. The statement of activities presents information showing how the government’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave.) The government-wide financial statements consist of two classifications; (1) those whose activities are principally supported by taxes and intergovernmental revenue (governmental activities), and (2) those whose activities are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the Town include general government, public safety, highways and streets, sanitation, education, economic development, debt service, fringe benefits and culture and recreation. The business-type activities of the Town are comprised of water, sewer and rink enterprise funds. Town of Canton, Massachusetts Page 22 of 120 Comprehensive Annual Financial Report
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Fund Financial Statements - A fund is a grouping of related accounts that is used to maintain control
over resources that have been segregated for specific activities or objectives. The Town, like other state
and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related
legal requirements. All of the funds of the Town can be divided into three categories: governmental
funds, proprietary funds, and fiduciary funds.
Accounting guidelines distinguish fund balance between amounts that are considered nonspendable, such
as fund balance associated with inventories, and other amounts that are classified based on the relative
strength of the constraints that control the purposes for which specific amounts can be spent. Beginning
with the most binding constraints, fund balance amounts will be reported in the following classifications:
• Restricted—amounts constrained by external parties, constitutional provision, or enabling
legislation
• Committed—amounts constrained by a government using its highest level of decision-making
authority
• Assigned—amounts a government intends to use for a particular purpose
• Unassigned—amounts that are not constrained at all will be reported in the general fund or in
other major funds if negative
Governmental funds – Governmental funds are used to account for essentially the same functions
reported as governmental activities in the government-wide financial statements. However, unlike the
government-wide financial statements, governmental fund financial statements focus on near-term
inflows and outflows of spendable resources, as well as on balances of spendable resources available at
the end of the fiscal year. Such information may be useful in evaluating a government’s near-term
financing requirements.
Because the focus of governmental funds is narrower than that of the government-wide financial
statements, it is useful to compare the information presented for governmental funds with similar
information presented for governmental activities in the government-wide financial statements. By doing
so, readers may better understand the long-term impact of the government’s near-term financing
decisions.
The Town maintains 18 individual governmental funds. Information is presented separately in the
governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and
changes in fund balances for the General Fund, which is considered to be a major fund. Data from the
other 17 governmental funds are combined into a single, aggregated presentation. Individual fund data
for each of these Nonmajor governmental funds is provided in the form of combining statements.
The Town adopts an annual appropriated budget for its general fund and its enterprise fund. A budgetary
comparison schedule has been provided for the general fund to demonstrate compliance with this budget.
Proprietary funds – The Town maintains two types of proprietary funds. Enterprise funds are used to
report the same functions presented as business-type activities in the government-wide financial
statements. The Town uses an enterprise fund to account for its water, sewer and rink enterprise funds.
Internal service funds are used to report activities that service all other Town Departments. The Town
uses internal service funds to account for self-insured health insurance claims.
Town of Canton, Massachusetts Page 23 of 120 Comprehensive Annual Financial ReportSource page 34
Fiduciary funds – Fiduciary funds are used to account for resources held for the benefit of parties outside
the government. Fiduciary funds are not reflected in the government-wide financial statement because
the resources of those funds are not available to support the Town’s own programs. The accounting used
for fiduciary funds is much like that used for proprietary funds.
Notes to the Financial Statements - The notes provide additional information that is essential to a full
understanding of the data provided in the government-wide and fund financial statements.
Other Information - In addition to the basic financial statements and accompanying notes, this report
also presents certain required supplementary information concerning the Town’s progress in funding its
obligation to provide pension benefits and other post-employment benefits to its employees as well as the
Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual – General Fund.
Government-wide Financial Analysis
As noted earlier, net position may serve over time as a useful indicator of a government’s financial
position. In the case of the Town, assets exceeded liabilities by approximately $78.2 million at the close
of the most recent fiscal year.
Condensed net position data is presented as follows:
Governmental Activities Business-Type Activities Total
June 30, June 30, June 30, June 30, June 30, June 30,
2013 2012 2013 2012 2013 2012
Assets
Currrent and other assets $ 40,350,898 $ 37,903,410 $ 7,000,676 $ 6,894,939 $ 47,351,574 $ 44,798,349
Capital assets, net 101,894,990 103,798,321 45,989,428 45,385,865 147,884,418 149,184,186
Total assets 142,245,888 141,701,731 52,990,104 52,280,804 195,235,992 193,982,535
Liabilities
Long-term liabilities 71,525,895 65,399,684 28,266,054 26,548,102 99,791,949 91,947,786
Other liabilities 12,914,629 14,362,011 4,311,860 5,336,540 17,226,489 19,698,551
Total liabilities 84,440,524 79,761,695 32,577,914 31,884,642 117,018,438 111,646,337
Net Position
Invested in capital assets,
net of related debt 61,957,511 63,962,326 16,381,614 16,033,950 78,339,125 79,996,276
Restricted 10,768,853 6,774,650 - - 10,768,853 6,774,650
Unrestricted (14,921,000) (8,796,940) 4,030,576 4,362,212 (10,890,424) (4,434,728)
Total Net Position $ 57,805,364 $ 61,940,036 $ 20,412,190 $ 20,396,162 $ 78,217,554 $ 82,336,198
By far, the largest portion (approximately $78.3 million) of the Town’s net position reflects its investment
in capital assets (e.g. land, buildings, infrastructure, machinery, and equipment) less any related debt used
to acquire those assets that is still outstanding. The Town uses these capital assets to provide services to
citizens; consequently, these assets are not available for future spending. Although the Town’s
investment in its capital assets is reported net of related debt, it should be noted that the resources needed
to repay this debt must be provided from other sources, since the capital assets themselves cannot be used
to liquidate these liabilities.
An additional portion, approximately $10.8 million, of the Town’s net position represents resources that
are subject to external restrictions on how they may be used. Unrestricted net position is reported as a
deficit, of approximately $10.9 million due to the recognition of other post-employment benefits of
approximately $36.0 million since the implementation of GASB 45 in 2009.
Town of Canton, Massachusetts Page 24 of 120 Comprehensive Annual Financial ReportSource page 35
Condensed changes in net position data is presented as follows:
Governmental Activities Business-Type Activities Total
June 30, June 30, June 30, June 30, June 30, June 30,
2013 2012 2013 2012 2013 2012
Revenues
Program revenues:
Charges for services $ 6,292,650 $ 5,494,415 $ 12,479,038 $ 12,346,943 $ 18,771,688 $ 17,841,358
Operating grants and contributions 16,961,153 16,776,734 - - 16,961,153 16,776,734
Capital grants and contributions 550,999 1,659,561 - - 550,999 1,659,561
General revenues:
Property taxes and tax liens 58,966,309 56,726,252 - - 58,966,309 56,726,252
Unrestricted grants and contributions 2,202,728 2,026,227 - - 2,202,728 2,026,227
Other 5,734,700 4,171,371 16,768 - 5,751,468 4,171,371
Total Revenues 90,708,539 86,854,560 12,495,806 12,346,943 103,204,345 99,201,503
Expenses
General government 5,809,111 5,896,806 - - 5,809,111 5,896,806
Public safety 16,060,024 15,483,546 - - 16,060,024 15,483,546
Education 61,782,205 58,626,025 - - 61,782,205 58,626,025
Public works 6,286,770 5,701,625 - - 6,286,770 5,701,625
Health and human services 1,314,086 1,221,514 - - 1,314,086 1,221,514
Culture and recreation 2,985,722 2,943,818 - - 2,985,722 2,943,818
Debt service 1,668,538 1,664,859 - - 1,668,538 1,664,859
Water - - 5,853,408 5,456,431 5,853,408 5,456,431
Sewer - - 5,173,053 5,084,191 5,173,053 5,084,191
Rink - - 390,072 431,144 390,072 431,144
Total Expenses 95,906,456 91,538,193 11,416,533 10,971,766 107,322,989 102,509,959
Change in net position before transfers (5,197,917) (4,683,633) 1,079,273 1,375,177 (4,118,644) (3,308,456)
Transfers 1,063,245 1,166,968 (1,063,245) (1,166,968) - -
Change in net position (4,134,672) (3,516,665) 16,028 208,209 (4,118,644) (3,308,456)
Net position, beginning of year, as
restated (See Note III. C.) 61,940,036 65,456,701 20,396,162 20,187,953 82,336,198 85,644,654
Net position, end of year $ 57,805,364 $ 61,940,036 $ 20,412,190 $ 20,396,162 $ 78,217,554 $ 82,336,198
Town of Canton, Massachusetts Page 25 of 120 Comprehensive Annual Financial ReportSource page 36
Governmental Activities – The governmental activities decreased net position by approximately $ 4.1
million (6.7% of governmental activities’ net position).
The following are the primary causes for the net decrease in governmental activities:
Expenses:
Provision for other post employment benefits $ (7,394,722)
Positive expense to budget results 282,939
Provision for compensated absences (154,537)
Depreciation (4,035,881)
$ (11,302,201)
Revenues:
Local receipts exceeding forecast 2,154,517
$ 2,154,517
Other Items:
Forecasted revenue surplus $ 5,013,012
Total Change $ (4,134,672)
Net position of the business-type activities was flat when compared with the prior year. This
was primarily due to results meeting expectations.
Fiscal Year 2013 Expenses and Program Revenues – governmental activities are graphically presented as
follows:
$70,000,000
$60,000,000
$50,000,000
$40,000,000
$30,000,000
Functional expenses
$20,000,000
Program Revenues
$10,000,000
$0
Town of Canton, Massachusetts Page 26 of 120 Comprehensive Annual Financial ReportSource page 37
Major revenue sources of governmental activities consist of revenue from; (1) Operating grants which
comprised approximately 18.7% of the total governmental activity revenues; down slightly from 19.3% in
the prior year; and (2) Property taxes which represented 65.0% of total revenues, down slightly from
65.3% in the prior year. No other revenue sources exceeded 10% of total revenues in either fiscal 2013 or
2012.
Revenues
2%
1% 6%
7%
Property taxes
19% Operating grants and contributions
Capital grants and contributions
65% Charges for services
Other
Intergovernmental (unrestricted)
Major operating expenses were consistent with the prior year as the Town devoted over 80% of its efforts
to education and public safety. More specifically, educational expenses, whose level is driven by
minimum per pupil spending requirements under State law was up slightly to 64.4% as compared to
64.0% in the prior year, and public safety expenses were down slightly at 16.7% as compared to 16.9% in
the prior year. No other expenses represented greater than 10.0% of total expenses in either fiscal 2013
or 2012.
Expenses
1% 3% 2%
6%
7%
17% General government
Public safety
Education
Public works
Health and human services
64% Culture and recreation
Interest expense
Town of Canton, Massachusetts Page 27 of 120 Comprehensive Annual Financial ReportSource page 38
Business-type Activities – Business-type activities were flat as compared to the prior year as changes in
Net Position for all three enterprise funds were consistent from year to year. Predominantly all business-
type activities revenues were from user charges.
Business – type activities
13
12
11
User charges Expenses and indirect
charges
Fund-wide Financial Analysis of the Government’s Funds
As noted earlier, the Town uses fund accounting to ensure and demonstrate compliance with finance-
related legal requirements.
Governmental funds – The focus of the Town’s governmental funds is to provide information on near-
term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the
Town’s financing requirements. In particular, unassigned fund balance may serve as a useful measure of
a government’s net resources available for spending at the end of the fiscal year.
As of the close of the current fiscal year, the Town’s governmental funds balance sheet reported a
combined ending fund balance of approximately $22.9 million, an increase of approximately $3.9 million
over the prior year.
$3.0 million of this increase occurred in the Combined Nonmajor Fund due primarily to the issuance of
bonds to replace bond anticipation notes in the amount of $2.6 million.
$0.9 million of this increase occurred in the General Fund and can be analyzed as follows:
Use of unassigned fund balance used for budget $ (1,880,000)
Other revenues exceeding forecast 2,154,517
Favorable actual expenditures as compared to budget 282,939
Premium on issuance of bonds payable 101,385
Other net minor items 223,883
$ 882,724
Town of Canton, Massachusetts Page 28 of 120 Comprehensive Annual Financial ReportSource page 39
Unassigned fund balance in the general fund was approximately $8.3 million or 10.1% of general fund
expenditures. This is available for spending at the government’s discretion. Assigned fund balance, as a
result of encumbrances of approximately $0.4 million, committed fund balance for carryover articles of
approximately $0.5 million and restricted fund balances due to accumulated amounts received from the
Massachusetts School Building Authority of approximately $5.1 million, bring total fund balance in the
general fund to approximately $14.3 million or 17.4% of general fund expenditures.
The remainder of governmental fund balances are included as Combined Nonmajor Fund Balances and
are classified as either (1) non-spendable, due to being the corpus of an endowment in the amount of
approximately $0.4 million; (2) restricted due to constraints placed externally by third-parties in the
amount of approximately $8.7 million, or (3) unassigned as they reflect negative balances due to the use
of short-term notes as funding sources for construction of approximately $0.5 million. These are
expected to be funded in future years through permanent financing.
Proprietary funds – The Town’s proprietary funds are made up of (1) the Water, Sewer and Rink
Enterprise Funds which provides the same type of information found in the government-wide financial
statements under business-type activities, but in more detail; and (2) the Town’s Internal Service Fund
which accounts for the Town’s Health Claims Fund.
The Health Claims Fund has a Net Position balance of approximately $3.8 million. This represents a
decrease of approximately $0.8 million over the prior year as claims exceeded contributions by the
employee and employer. The Net Position balance represented approximately 26% of claims for the year,
which is still above the industry standard of 20%.
Health Claims Fund
15
14
13
12
11
10
Revenues Expenses
Town of Canton, Massachusetts Page 29 of 120 Comprehensive Annual Financial ReportSource page 40
General Fund Budgetary Highlights Differences between the original budget and the final amended budget included revisions to the following line items: Approximately $0.3 million in decreases allocated to pension and other fringes. Approximately $0.2 million in increases allocated to public safety. Approximately $0.6 million in decreases allocated to general government. Approximately $0.5 million in increases allocated to public works. Approximately $0.1 million in increases to education. Approximately $0.1 million in increases to other areas combined. All of the amendments were between operating line items in the original budget and were for operating purposes. The overall bottom line final budget did not vary significantly from the original budget. Major budget to actual differences on the revenue side included property tax and excise, which exceeded budget by approximately $1.2 million, local receipts which exceeded budget by $0.6 million and state aid which exceeded budget by $0.3 million. On the expenditure side, numerous minor favorable results which in total approximated $0.3 million were experienced. Further detail of budget to actual comparisons may be reviewed as part of the Required Supplementary Information following the footnotes to the report. Capital Asset and Debt Administration Capital Assets – The Town’s investment in capital assets for its governmental and business type activities as of June 30, 2013 amounts to approximately $147.9 million (net of accumulated depreciation) a decrease from the previous year’s balance of approximately $1.3 million. This investment in capital assets includes land, buildings and improvements, infrastructure, machinery, equipment, and software. The total decrease is due to depreciation exceeding capital investments. Additional information on the Town’s capital assets can be found in Note II subsection D. Long-term Debt – State statutes limit the amount of general obligation debt a governmental entity may issue to 5.0 % of its total assessed valuation. The current debt limitation for the Town is approximately $206.5 million, which is significantly in excess of the Town’s outstanding general obligation debt classified as inside the debt limit. At the end of the current fiscal year, the Town had total debt outstanding of approximately $69.0 million. The entire amount comprises debt backed by the full faith and credit of the government. The Town’s most recent credit evaluation resulted in an “AAA” rating from Standard and Poor‘s Investment Services for general obligation debt. Town of Canton, Massachusetts Page 30 of 120 Comprehensive Annual Financial Report
Source page 41
The Town’s total debt decreased by approximately $0.3 million during the fiscal year; detail of this net
decrease is illustrated as follows:
Regular scheduled maturities:
Governmental Activities $ (4,385,178)
Business-Type Activities (1,942,226)
Amortization of premium:
Governmental Activities (42,142)
Amortization of deferred refunding charges:
Governmental Activities 28,567
Issuance of debt
Governmental Activities 2,603,159
Business-Type Activities 3,438,800
$ (299,020)
The Town’s most recent credit evaluation resulted in an “AAA” rating from Standard and Poor‘s
Investment Services for general obligation debt.
The Town also holds a proportionate share of debt of other governmental units that provide services
within the Town’s boundaries. The debt service from such arrangements is assessed annually to the
Town.
Bond anticipation note payable balances outstanding at year-end amount to approximately $2.2 million
and relate to departmental equipment, school improvements, and water and sewer infrastructure.
Additional information on the Town’s short-term and long-term debt can be found in Note II under
subsections F and G.
Economic Factors and Next Year’s Budgets and Rates
Consistent with both State and National work force trends, the Town’s unemployment rates have
improved over the last 12 months. While this trend is expected to continue in fiscal 2014 the extent,
timing or certainty of any full economic rebound cannot be reasonably estimated at this time.
The Town’s real estate tax base is made up predominantly of residential taxes, which comprise nearly
63.0% of the Town’s property tax base. The Town also relies heavily on its commercial and
industrial property tax base, which in aggregate comprise 37.0 % of the Town’s property tax base.
The Town uses a split rate in assessing taxes, thus commercial, industrial and personal property tax
rates are just over double the residential rate. In addition, Chapter 580 of the Acts of 1980, more
commonly referred to as Proposition 2 ½, limits the Town’s ability to increase taxes in any one year
by more than two and one-half percent (2 ½%) of the previous year tax levy.
Consistent with both State and National indices, the Town’s housing market experienced a downward
trend from 2005 – 2010. Housing prices began to stabilize during fiscal year 2011 and recently are
beginning to see an upward trend. Subsequent to year-end, houses in the Town began selling at
Town of Canton, Massachusetts Page 31 of 120 Comprehensive Annual Financial ReportSource page 42
greater than their assessed values, as a result, the Town expects its housing market to continue to
maintain or slightly outpace National indices. In addition, The Town has residential developments in
various stages of completion. These are expected to be completed in the near future.
The Town has responded well to the recent economic challenges. Reductions in local revenue,
primarily interest income and other reductions in revenue have caused the Town to aggressively seek
other revenue producing initiatives in order to maintain appropriations in ways that preserved local
service levels. The Town has been very successful in that regard.
All of the above items were considered when the Town developed its budget for fiscal year 2014. The
budget was adopted in May 2013 and the Town expects its tax rate to be certified in December 2013.
Requests for Information
This financial report is designed to provide a general overview of the Town’s finances for all those with
an interest in the government’s finances. Questions concerning any of the information provided in this
report or request for additional financial information should be addressed to the Office of the Finance
Director, 801 Washington Street, Canton, Massachusetts 02021.
Town of Canton, Massachusetts Page 32 of 120 Comprehensive Annual Financial Report