Discussion work accounting

Comprehensive Annual Financial Report

City of Middletown Connecticut

Fiscal Year Ended June 30, 2015

Office of the Director of Finance

Comprehensive Annual Financial Report

of the

City of Middletown

Connecticut

FISCAL YEAR ENDED JUNE 30, 2015

Carl Erlacher, CPA Director of Finance and Revenue Services

CITY OF MIDDLETOWN, CONNECTICUT COMPREHENSIVE ANNUAL FINANCIAL REPORT TABLE OF CONTENTS JUNE 30, 2015

Introductory Section Page List of Principal Officials i Organization of Middletown Government ii Letter of Transmittal iii-xi Certificate of Achievement for Excellence in Financial Reporting xii

Financial Section Independent Auditors’ Report 1-3 Management’s Discussion and Analysis 4-11

Basic Financial Statements

Exhibit Government-Wide Financial Statements: I Statement of Net Position 12 II Statement of Activities 13 Fund Financial Statements: Governmental Funds: III Balance Sheet 14-15 IV Statement of Revenues, Expenditures and Changes in Fund Balances 16-17 Proprietary Funds: V Statement of Net Position 18 VI Statement of Revenues, Expenses and Changes in Fund Net Position 19 VII Statement of Cash Flows 20 Fiduciary Funds VIII Statement of Net Position 21 IX Statement of Changes in Plan Net Position - Pension Trust Funds 22 Notes to the Financial Statements 23-59

Required Supplementary Information

General Fund: RSI-1 Schedule of Revenues and Other Financing Sources 60 RSI-2 Schedule of Expenditures and Other Financing Uses 61-62 Pension Trust Fund: RSI-3 Schedule of Changes in Net Pension Liability and Related Ratios 63 RSI-4 Schedule of Employer Contributions 64 RSI-5 Schedule of Investment Returns 65 RSI-6 Schedule of the City’s Proportionate Share of Net Pension Liability -

Teachers Retirement Plan

66

Exhibit Page Supplemental, Combining and Individual Fund Statements and Schedules

General Fund: A-1 Comparative Balance Sheet 67 A-2 Report of Tax Collector 68 Nonmajor Governmental Funds: B-1 Combining Balance Sheet 69-71 B-2 Combining Statement of Revenues, Expenditures and Changes in Fund Balances 72-74 B-3 Special Revenue Funds: Combining Schedule of Revenues and Expenditures - Actual and Budget 75-77 Capital Projects Fund: C Schedule of Project Authorizations and Expenditures 78 Internal Service Funds: D-1 Combining Statement of Net Position 79 D-2 Combining Statement of Revenues, Expenses and Changes in Net Position 80 D-3 Combining Statement of Cash Flows 81 Agency Funds: E Combining Statement of Changes in Assets and Liabilities 82

Statistical Section Table Financial Trends: 1 Net Position by Component 83 2 Change in Net Position 84 3 Fund Balances, Governmental Funds 85 4 Changes in Fund Balances, Governmental Funds 86 Revenue Capacity: 5 Assessed Value and Estimated Actual Value of Taxable Property 87 6 Direct and Overlapping Property Tax Rates 88 7 Principal Property Taxpayers 89 8 Property Tax Levies and Collections 90 Debt Capacity: 9 Ratios of Outstanding Debt by Type 91 10 Schedule of Debt Limitation 92 11 Legal Debt Margin Information 93 Demographic and Economic Statistics: 12 Demographic Statistics 94 13 Principal Employers 95 Operating Information: 14 Miscellaneous Statistical Data 96-98

Introductory Section

PRINCIPAL OFFICIALS City of Middletown, Connecticut

ELECTED OFFICIALS

Daniel T. Drew, Mayor

Quentin Phipps, Treasurer Elizabeth Santangelo (D) Janice A. Gionfriddo (R) Registrar of Voters Registrar of Voters

COMMON COUNCIL Eugene P. Nocera Robert Blanchard Thomas J. Serra Grady L. Faulkner, Jr. Mary A. Bartolotta Sebastian N. Giuliano Gerald E. Daley Philip J. Pessina Robert P. Santangelo Deborah A. Kleckowski Carl R. Chisem Linda Salafia

BOARD OF EDUCATION Vincent Loffredo, Chairman

Sheila C. Daniels, Vice-Chair Franca Biales, Secretary Anita Dempsey White Marilyn S. Dunkley Christopher Drake Linda Szynkowica Deborah Cain Cheryl A. P. McClellan

Dr. Patricia Charles, Superintendent of Schools

DIRECTORS Town Clerk Linda Bettencourt Director of Finance and Revenue Services Carl Erlacher Chief of Fire Robert Kronenberger Chief of Police William McKenna Director of Health Joseph A. Havlicek, MD Acting Director Recreation and Community Services Deborah Stanley Director of Public Works William Russo Director of Water and Sewer Guy P. Russo Director of Human Resources Kathy Morey Director of Human Relations Faith M. Jackson Director of Parking Geen Thazhampallath General Counsel Brigham Smith Tax Assessor Damon Braasch Planning Conservation and Development Michiel Wackers Russell Library Director Arthur S. Meyers

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City Org Chart Rev. 12-7-2015 ii

City of Middletown Organization of Governance

Electors

Registrars of Voters 2

Board of Assessment Appeals (3)

Treasurer Mayor Common Council 12

Board of Ed. 9

P&Z Commission

Probate Judge

Commissions and Committees Commissions, Boards, and Committees with Council Members Only with Council Members

Staff Units/ Department

Deputy Mayor

Boards, Commissions, Committees, and Agencies

Arts & Culture Central Communications Emergency Management Finance and Revenue Services Fire Health Human Relations

Information Systems General Counsel Library Recreation and Community Services Parking Department Human Resources Planning, Conservation, and Development

Police Public Works Tax Assessor Town Clerk Water and Sewer

Economic Development Finance and Government Operations Insurance and Claims Middletown Resource Recovery Commission to ECRRA General Counsel Commission Public Safety Public Works & Facilitates Commission

Board of Health Citizens Advisory Committee Clean Energy Taskforce Contract Compliance Board Harbor Improvement Agency IT Advisory Committee Melilli Task Force Middletown Commission on Arts and Culture Recreation & Community Services Parking Advisory Retirement Board Youth Services Bureau Advisory Board Water Pollution Control Authority

Affirmative Action Monitoring Committee Board of Ethics Board of Health Cable Advisory Committee Clean Energy Task Force Committee Concerning People with Disabilities Connecticut River Valley Planning Commission Conservation Commission Contract Compliance Board Enterprise Zone Harbor Improvement Agency Housing Authority Human Relations Commission Housing Code Citation Hearing Officer

IT Advisory Committee Juvenile Review Board Long Hill Estate Melilli Task Force Middletown Commission on the Arts Middletown Housing Partnership Trust Middletown Preservations and Design Review Middletown School Readiness Committee Municipal Agent for the Elderly Recreation & Community Services Parking Commission Parking Violation Hearing Officers Planning & Zoning Citation Hearing Officer Public Safety Telecommunications

Records Management Commission Redevelopment Agency Resource Recycling Advisory Council Retirement Board Riverfront Development Committee Russell Library Board of Trustees Sanitary Disposal District Commission Standardization & Specification Committee Transit District Urban Forestry Commission Walter C. Jones Fund Water Pollution Control Authority Youth Services Advisory Board Zoning Board of Appeals

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December 29, 2015 Honorable Mayor and Common Council City of Middletown Middletown, Connecticut I am pleased to submit the Comprehensive Annual Financial Report (CAFR) of the City of Middletown (the City) for the fiscal year ended June 30, 2015. Responsibility for both the accuracy of the data and the completeness and fairness of the presentation, including all disclosures, rests with the City. To the best of our knowledge and belief, the enclosed data are accurate in all material respects; and are reported in a manner to present fairly the financial position and results of operations of the City. All disclosures necessary to enable the reader to gain an understanding of the City’s financial activities have been included. The CAFR is presented in three sections: introductory, financial and statistical. The introductory section includes this transmittal letter, the City’s organizational chart and a list of principal officials. The financial section includes the management’s discussion and analysis (MD&A), basic financial statements, required supplementary information, and the combining and individual fund statements and schedules, as well as the auditors’ report. The statistical section includes selected financial and demographic information, generally presented on a multi-year basis. The City is required to undergo an annual single audit in conformity with the provisions of the Federal Single Audit Act and U.S. Office of Management and Budget Circular A-133, “Audits of States, Local Governments and Non-Profit Organizations.” Information related to this single audit, including the schedule of expenditures of federal awards, findings and recommendations, and auditors’ reports on the internal control over financial reporting and compliance with applicable laws and regulations are issued under separate cover and are not included in this report. The City is also required to undergo a State single audit. Information related to this State single audit will be issued separately. The Eastern Connecticut Regional Resource Recovery Authority (ECRRA) and Long Hill Estate Authority have been included as discretely presented component units in the City’s report in accordance with generally accepted accounting principles. As more fully explained in Note 12, ECRRA is a regional authority formed to provide solid waste disposal and resource recovery system. At June 30, 2015, Middletown is the only member. The Long Hill Estate Authority was established by ordinance to operate and maintain the former Wadsworth/Cenacle property. The Authority is a public body politic and corporate formed in accordance with Connecticut General Statutes.

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GAAP requires that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the MD&A. This letter of transmittal is designed to complement MD&A and should be read in conjunction with it. The City of Middletown’s MD&A can be found immediately following the report of the independent auditors. Profile of the City Middletown was settled in 1650 and incorporated as a Town in 1651. The City and Town were consolidated in 1923 and the 1st and 2nd taxing districts and two school districts were consolidated in 1959. The City covers an area of 42.9 square miles located on the west bank of the Connecticut River, fifteen miles south of Hartford. The City is traversed by Interstate 91 and State Highways Number 9, 17, 66, 72, 155, 157 and 217. Bus transportation linking Middletown with other communities is provided by commercial companies as is an intra-city bus service. Freight service is provided by Conrail, light shipping up the Connecticut River and various motor common carriers. The City operates under a Charter first granted in 1874 and subsequently revised. The most recent revision became effective November 4, 2014. The City is governed by a strong Mayor and twelve- member Common Council. The Mayor is the chief executive officer of the City. In addition to the City’s line departments, there is a Sanitary District Commission, Water and Sewer Commission, a Parking Authority and a Housing Authority. A director of Finance administers the financial affairs of the City. The City provides a full range of services, which include; general government services such as finance, personnel, City and Town clerk, legal; public safety, which includes fire and police protection; public works for the management, care and maintenance of all public buildings, public roadways, City vehicles and various construction activities; water treatment and distribution; sanitary sewer for the collection and treatment of wastewater, sanitation for the solid waste disposal, which includes recycling; and education, which is under the control of the elected Board of Education, operates the eleven school elementary and secondary education system with a capacity of 6,029. City of Middletown Economic Development The City of Middletown economic development division exists within the Department of Planning, Conservation and Development. Its mission is to stimulate development in the City, assist City businesses in expanding, attracting businesses from outside of Middletown all in an effort to grow the tax base, facilitate job creation and generally improve the quality of life for Middletown residents and businesses. Approach Economic development is built on relationships and partnerships. The City’s efforts are supported by engaging partners such as:

 The Middlesex County Chamber of Commerce, Connecticut’s largest

 Downtown Business District

 Middletown Small Business Development Center

 State of Connecticut Department of Economic and Community Development

 State of Connecticut Department of Labor

 Workforce Alliance

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 Wesleyan University

 Middlesex Community College

 Eversource Energy

 Commercial Brokers, Property Owners and Developers

 Connecticut Economic Resources Center

The City also builds relationships by being members of professional groups such as the Connecticut Planning Association and the Connecticut Economic Developers Association among others. These partnerships help us by providing services to City businesses that help them grow. They also bring in leads for businesses considering moving into Middletown. Business Retention and Expansion National surveys show the vast majority of new investment and jobs in any community come from existing businesses, entrepreneurs and start-ups. Few come from outside the community (Chart 1).

Given these data, City staff invests most of its time with existing businesses and start-ups. Staff visits existing businesses on a continuing basis to determine how the City can help them grow. For entrepreneurs, staff works with our partners to help them with typical start-up issues such as business plans, hiring and marketing. The City uses its service provider network to help businesses with utility, real estate and training, among others. Middletown owns a former factory building which serves as a low-cost incubator for small businesses. The 165,000 sf building currently houses 25 businesses which, together, have 100 employees. In the FY ending June 30, 2015, rents from the building totaled more than $402,000, of which $200,000 is returned to the General Fund.

Existing 84%

Starts Ups 9%

Outside Co.s 7%

New Investment and Jobs

Source: Conway Data, Various surveys

Chart 1

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Business Recruitment The City also engages in recruiting businesses from outside the region. Our partners like the Chamber of Commerce, State agencies and commercial brokers and property owners bring businesses to the City where we actively try to address their location needs. Once they have decided to invest in Middletown, we make our land use approval processes as easy as possible to give them a smooth transition here. The staff regularly reaches out to site selection consultants, corporate real estate professionals and brokers to inform them of development opportunities in Middletown. Easy Development Processes Middletown has built a reputation across the State for being a community which it is easy to work with. To that end, on our website, for example, we have:

 Nearly all development related applications and procedures

 Link to our GIS system

 Link to the Tax Assessor’s database

 Studies and reports of the City of Middletown for public reading

 A business guide published bi-annually

 Records of City proceedings going back decades

 Information on City development incentives

 Links to partners and assistance providers

 Links to available commercial and industrial properties Staff from all departments that approve projects meets as a team with project developers prior to their submitting applications to show them how their project can get approved.

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Growing the Tax Base The City of Middletown continues to grow the tax base through marketing available land and buildings and reclaiming brownfields for redevelopment. The City of Middletown leverages Federal, State and Foundation grants with City and private sector financing to fund various economic development initiatives such as environmental assessments, brownfield clean and open space purchasing. This is a list of grants and their source since 2005. Most are for planning, environmental assessment and remediation. Year Total Federal State Other

2014 $3,828,225 $414,475 $3,413,750

2013 $573,004 $419,044 $154,000

2012 $598,165 $598,165

2011 $880,276 $380,276 $450,000 $50,000

2010 $875,228 $854,428 $10,000 $10,800

2009 $20,468,342 $19,933,942 $530,000 $4,400

2008 $927,345 $407,345 $520,000

2007 $487,490 $487,490

2006 $682,094 $417,094 $265,000

2005 $661,146 $658,989 $2,157.80

Over the last ten years, the City has invested, or will invest, $24.6M, $5.2M, $221,000, in Federal, State and Foundation grants respectively. Results The City’s economic development efforts have yielded positive results over the last 11 years as seen in the following charts.

 Positive growth in new square footage

 2.2% CAGR in new taxable grand list

 3.5% CAGR in property tax revenues

 Minimal increases in the mill rate

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Major projects over the last several years include: WinWholesale: 200,000 sf, warehouse Electrical Wholesalers: 30,000 sf, office ModSpace: 15,100 sf, office/warehouse A&A Office Supply: 12,000 sf, Corporate HQ, distribution Jarvis Products: 20,000 sf, manufacturing expansion FedEx Ground Package Systems, Inc. has proposed and received all local approvals for a 535,000 sf distribution hub on the former site of Aetna’s office building. The company proposes to create more than 500 new jobs.

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50000

100000

150000

200000

250000

300000

350000

400000

450000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Res

Comm

Ind

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500

1000

1500

2000

2500

3000

3500

4000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Net Taxable Grand List (000s)

2.3% Compound Annual Growth Rate Reval. Yr.

New Construction (Sq Ft) by Year

Reval. Yr.

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Note: These do not include Nonmajor Governmental Funds. The steady growth in the grand list has kept mill rate increases to a minimum.

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20000

40000

60000

80000

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2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Property Tax Revenues (000s)

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5

10

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20

25

30

35

40

45

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

0.3% Compound Annual Growth RateReval. Yr. Reval. Yr.

3.3% Compound Annual Growth Rate

Mill Rate

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Major Projects/Studies The City of Middletown continues to uncover new development opportunities. They include:

 Riverfront: The State of Connecticut awarded the City $2.6 million to assess and clean up property along the Connecticut River. The goal is to create a 1.5 mile long riverfront park with amenities and housing. The park will bring in visitors from all over the region.

 Downtown: The City approved a 93-unit, market rate apartment and commercial project in downtown. Construction has started and is scheduled to be complete late in 2016.

 Downtown sites: The City is facilitating discussions between developers and owners of underutilized properties downtown. The plan is to create more housing, population and income downtown.

 Recruiting: Businesses continue to find Middletown an attractive place to invest. The City has successfully recruited several new businesses. They include a mix of retailers and restaurants downtown, start-ups and manufacturers.

Department Focus The Department of Finance and Revenue Service has completed the process of implementing an ADMINS Unified Community software system for all City departments including the Board of Education. This system has been implemented over time and includes programs for budgeting, purchasing, payables, receivables, payroll and general ledger. The staff continues to strive to automate many aspects of the department and continues to work with user departments to implement positive changes which will benefit the entire City. Financial Information The Department of Finance is organized into six divisions: Administration, Accounting and Budgeting, Purchasing, Payroll, Tax Collection, Debt and Cash Management. The City’s accounting system is an automated, integrated financial management system comprising payroll, accounts payable, general ledger, and budgetary control. It is organized and operated on a fund basis. Each fund is a distinct and self-balancing accounting entity. Internal Controls All financial transactions are subject to pre-audit before processing as well as to an annual post-audit by an independent auditing firm selected by the City Council. Financial policies and procedures prescribed by the Director of Finance for the various departments are monitored by the Accounting and Budgeting Division of the Department. All internal control evaluations occur within the above framework. We believe that the City’s internal accounting controls adequately safeguard assets and provide reasonable assurance of proper recording of financial transactions. Budgetary Controls In addition, the City maintains budgetary controls. The objective of these budgetary controls is to ensure compliance with legal provisions embodied in the annual appropriated budget approved by the City Council.

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Activities of the general fund and certain special revenue funds are included in the annual appropriated budget. Project-length financial plans are adopted for the other special revenue funds and capital projects funds. The level of budgetary control (that is, the level at which expenditures cannot legally exceed the appropriated amount) is made at the sub-function level by the encumbrance of estimated purchase amounts prior to the release of purchase orders to vendors. Purchase orders which result in an overrun of sub-function balances are not released until additional appropriations are made available. Open encumbrances are reported in funds statements as reservation of fund balance at June 30, 2015. Other Information Independent Audit The City Charter requires an annual audit of the books of account, financial records and transactions of all administrative departments of the City by independent certified public accountants selected by the City Council. This requirement has been complied with and the auditors’ report has been included in this report. Certificate of Achievement The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Middletown for its comprehensive annual financial report for the fiscal year ended June 30, 2014. In order to be awarded a Certificate of Achievement, a government unit must publish an easily readable and efficiently organized comprehensive annual financial report, whose contents conform to program standards. This report must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe that our current comprehensive annual financial report continues to meet the Certificate of Achievement Program’s requirements and we are submitting it to the GFOA to determine its eligibility for another certificate. Acknowledgment The preparation of this report on a timely basis could not be accomplished without the efficient and dedicated services of the entire staff of the Finance Department. I should like to express my appreciation to all members of the Department who assisted and contributed to its preparation. I should also like to thank the Mayor, the Finance and Government Operations Commission, the members of the City Council, and the Finance Department’s Staff for their interest and support in planning and conducting the financial operations of the City in a responsible and progressive manner. Respectfully submitted, Carl R. Erlacher, CPA Director of Finance and Revenue Services

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Financial Section

Blum, Shapiro & Company, P.C.

29 South Main Street P.O. Box 272000 West Hartford, CT 06127-2000

Tel 860.561.4000 Fax 860.521.9241 blumshapiro.com

An independent member of Baker Tilly International

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Independent Auditors’ Report

To the Honorable Mayor and Members of the Common Council City of Middletown, Connecticut

Report on the Financial Statements

We have audited the accompanying financial statements of the governmental activities, the discretely presented component units, each major fund and the aggregate remaining fund information of the City of Middletown, Connecticut, as of and for the year ended June 30, 2015, and the related notes to the financial statements, which collectively comprise the City of Middletown, Connecticut’s basic financial statements as listed in the table of contents.

Management’s Responsibility for the Financial Statements

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

Auditors’ Responsibility

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

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

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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 discretely presented component units, each major fund and the aggregate remaining fund information of the City of Middletown, Connecticut, as of June 30, 2015 and the respective changes in financial position and, where applicable, cash flows thereof, for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Change in Accounting Principle

As discussed in Note 15 to the financial statements, during the fiscal year ended June 30, 2015, the City adopted new accounting guidance, GASB Statement No. 68, Accounting and Financial Reporting for Pensions. The net position of the City has been restated to recognize the net pension asset required in implementing GASB No. 68. Our opinion is not modified with respect to this matter.

Other Matters

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis on pages 4 through 11, the budgetary comparison information on pages 60 through 62 and the pension schedules on pages 63 through 66 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, which considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Other Information

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Middletown, Connecticut’s basic financial statements. The introductory section, combining and individual nonmajor fund financial statements and schedules, 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 and schedules 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 and schedules are fairly stated in all material respects in relation to the basic financial statements as a whole.

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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.

We also previously audited, in accordance with auditing standards generally accepted in the United States of America, the basic financial statement of the City of Middletown, Connecticut as of and for the year ended June 30, 2014 (not presented herein), and have issued our report thereon dated December 23, 2014, which contained unmodified opinions on the respective financial statements of the governmental activities, the discretely presented component units, each major fund and the aggregate remaining fund information. The accompanying General Fund balance sheet and Internal Service Fund statements as of June 30, 2014 are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and related directly to the underlying accounting and other records used to prepare the 2014 financial statements. The accompanying General Fund balance sheet and Internal Service Fund statements have been subjected to the auditing procedures applied in the audit of the 2014 basic financial statements and certain additional procedures including comparing and reconciling such information directly to the underlying accounting and other records used to prepare those financial statements or to those financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the General Fund balance sheet and Internal Service Fund statements are fairly stated in all material respects in relation to the basic financial statements as a whole for the year ended June 30, 2014.

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated December 29, 2015 on our consideration of the City of Middletown, Connecticut’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is 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 internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City of Middletown, Connecticut’s internal control over financial reporting and compliance.

West Hartford, Connecticut December 29, 2015

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CITY OF MIDDLETOWN, CONNECTICUT

MANAGEMENT’S DISCUSSION AND ANALYSIS

JUNE 30, 2015 This discussion and analysis of the City of Middletown, Connecticut’s (City) financial performance is provided by management to provide an overview of the City’s financial activities for the fiscal year ended June 30, 2015. Please read this MD&A in conjunction with the transmittal letter and the City’s financial statements, Exhibits I to IX. FINANCIAL HIGHLIGHTS

 Net position of the City’s governmental activities increased by $4.2 million, or 1.2 percent.  During the year, the City had expenses that were $4.2 million less than the $204.0 million

generated in tax and other revenues for governmental programs.  Total cost of all of the City’s programs was $199.8 million with no new programs added this

year.  The General Fund reported a fund balance this year of $26.6 million.  The resources available for appropriation exceeded budgetary estimates by $12.7 million for

the General Fund. Expenditures were kept within spending limits. OVERVIEW OF THE FINANCIAL STATEMENTS This annual report consists of a series of financial statements. The statement of net position and the statement of activities (Exhibits I and II, respectively) provide information about the activities of the City as a whole and present a longer-term view of the City’s finances. Fund financial statements are presented in Exhibit III to IX. For governmental activities, these statements tell how these services were financed in the short term as well as what remains for future spending. Fund financial statements also report the City’s operations in more detail than the government-wide statements by providing information about the City’s most significant funds. The remaining statements provide financial information about activities for which the City acts solely as a trustee or agent for the benefit of those outside of the government. Government-Wide Financial Statements The analysis of the City as a whole begins on Exhibit I and II. The statement of net position and the statement of activities report information about the City as a whole and about its activities for the current period. These statements include all assets and liabilities using the accrual basis of accounting, which is similar to the accounting used by most private-sector companies. All of the current year’s revenues and expenses are taken into account regardless of when cash is received or paid. These two statements report the City’s net position and changes in them. The City’s net position, the difference between assets and liabilities, are one way to measure the City’s financial health, or financial position. Over time, increases or decreases in the City’s net position is one indicator of whether its financial health is improving or deteriorating. The reader needs to consider other non-financial factors, however, such as changes in the City’s property tax base and the condition of the City’s capital assets, to assess the overall health of the City.

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In the statement of net position and the statement of activities, we divide the City into two types of activities:

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

 Component units - The City includes two separate legal entities in its report; the Eastern

Connecticut Resource Recovery Authority (ECRRA), and the Long Hill Estate Authority. Although legally separate, these “component units” are important because the City is financially accountable for them.

Fund Financial Statements The fund financial statements begin with Exhibit III and provide detailed information about the most significant funds - not the City as a whole. Some funds are required to be established by Charter. However, the City Council establishes many other funds to help control and manage financial activities for particular purposes (like the Fire District, Water Fund, Sewer Fund and Sanitation Fund) or to show that it is meeting legal responsibilities for using grants, and other money (like grants received from the Clean Water Fund, Block Grants and Special Education Grants). The City’s funds are divided into three categories; governmental, proprietary and fiduciary.

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

 Proprietary funds (Exhibits V, VI and VII) - When the City charges customers for the services it

provides, whether to outside customers or to other units of the City, these services are generally reported in proprietary funds. Proprietary funds are reported in the same way that all activities are reported in the statement of net position and the statement of activities. Internal service funds (the component of proprietary funds) are used to report activities that provide services for the City’s other programs and activities - such as the City’s Medical, Workers Compensation and Property and Liability Funds.

 Fiduciary funds (Exhibits VIII and IX) - The City is the trustee, or fiduciary, for its employees’

pension plans. All of the City’s fiduciary activities are reported in separate statements of fiduciary net position and changes in fiduciary net position. These activities are excluded from the City’s other financial statements because the City cannot use these assets to finance its operations. The City is responsible for ensuring that the assets reported in these funds are used for their intended purposes.

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GOVERNMENT-WIDE FINANCIAL ANALYSIS The City’s combined net position increased from a year ago from $347.7 million to $351.9 million. The analysis below focuses on the net position (Table 1) and changes in net position (Table 2) of the City’s governmental activities. TABLE 1 NET POSITION (In Thousands)

Governmental Activities

2015 2014

Current assets $ 142,848 $ 120,749 Capital assets, net of accumulated depreciation 371,940 364,966

Total assets 514,788 485,715

Difference between projected and actual earnings for pensions 14,462

Long-term liabilities outstanding 156,730 126,401 Other liabilities 18,111 11,587

Total liabilities 174,841 137,988

Difference of assumption changes for pensions 577 Difference between expected and actual experiences for pensions 1,890

Total deferred inflows of resources 2,467 -

Net Position: Net investment in capital assets 267,645 289,881 Restricted 1,289 1,323 Unrestricted 83,008 56,523

Total Net Position $ 351,942 $ 347,727

Net position of the City’s governmental activities increased by 1.2 percent ($351.4 million compared to $347.7 million). Capital assets increased by $6.9 million while long-term liabilities increased by $30.3 million. The City’s aggressive debt repayment philosophy results in the rapid payment for capital asset additions.

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TABLE 2 CHANGE IN NET POSITION (In Thousands)

Governmental Activities

2015 2014 Revenues:

Program revenues: Charges for services $ 20,915 $ 17,905 Operating grants and contributions 48,566 44,949 Capital grants and contributions 3,101 1,965

General revenues: Property taxes 116,763 106,714 Grants and contributions not restricted to specific programs 9,828 9,284 Unrestricted investment earnings 143 302 Other general revenues 4,701 5,932

Total revenues 204,017 187,051

Program expenses: General government 18,740 19,747 Public safety 26,917 29,048 Public works 10,128 11,758 Health and human services 1,502 802 Culture and recreation 5,740 5,809 Employee benefits and insurance 14,908 16,586 Education 109,091 106,256 Sewer 4,885 4,778 Water 4,038 4,445 Sanitation 1,685 1,857 Interest on long-term debt 2,168 2,347

Total program expenses 199,802 203,433

Increase (Decrease) in Net Position 4,215 (16,382)

Net Position at Beginning of Year, as Restated 347,727 364,109

Net Position at End of Year $ 351,942 $ 347,727

The City’s total revenues were $204.0 million. The total cost of all programs and services was $199.8 million. Our analysis below considers the operations of governmental activities. Governmental Activities More than 57.2 percent of the revenues were derived from property taxes, followed by 23.8 percent from operating grants, then 10.2 percent from charges for services.

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Major revenue factors included:

 Property tax revenues recorded for fiscal year 2015 reflects an increase in the City’s tax rate and virtually no change in the total assessed value of all taxable property.

 Operating Grants and contributions increased by 3.6 million mainly attributable to increased

education grants received from the State of Connecticut.

 Capital grants increased by 1.1 million, which is mainly due to the Clean Water Projects under construction.

For governmental activities, more than 54.6 percent of the City’s expenses relate to education, 13.5 percent relate to public safety, general government (9.4 percent), employee benefits and insurance (7.5 percent), and public works (5.1 percent). Major expense factors include:

 Decreases in total program expenses is attributable to a decrease in public safety expenses mainly due to a decrease in accruals for various liabilities including pensions.

 The cost of education services increased due to accrual basis changes in compensated absences, other post-employment benefits.

CITY FUNDS FINANCIAL ANALYSIS Governmental Funds As the City completed the year, its governmental funds (as presented in the balance sheet - Exhibit III) reported a combined fund balance of $45.8 million, which is an increase from last year’s total of $22.0 million. The fund balance for the Capital Project’s Fund increased by $14.9 million dollars due to bond issuance of 32.3 million in the current fiscal year. General Fund Budgetary Highlights Tax collections were favorable by $2.6 million primarily due to increased delinquent tax collections. Charges for services were favorable by $921 thousand with the majority of this coming from increased activity with police extra duty. Under the intergovernmental section, the City experienced a favorable revenue variance of $3.6 million which included larger than budgeted receipts from various state and federal agencies. One of the areas of unfavorable budget variances was in interest revenues by $22 thousand due to lower than expected interest rates. The aforementioned items, when combined with the planned use of fund balance to minimize the annual tax impact to City residents, resulted in completing the June 30, 2015 year with an unassigned fund balance of $21.8 million. The City continues to experience a variety of favorable events, most related to a planned expenditure cut back, that favorably impacted expenses during the fiscal year.

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These events include:

(in thousands) General government $ 508 Public safety 100 Public works 56 Parks and recreation 182 Other 266 Total $ 1,112

The City’s General Fund balance of $26.6 million reported on Exhibit III differs from the General Fund’s budgetary fund balance of $25.7 million. This is principally because budgetary fund balance includes $.9 million of outstanding encumbrances at year end which are reported as expenditures for budgetary purposes. CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets At June 30, 2015, the City had $371.9 million invested in a broad range of capital assets, including land, buildings, park facilities, vehicles and equipment, roads, bridges, and water and sewer lines - Table 3. TABLE 3 CAPITAL ASSETS AT YEAR-END (Net of Depreciation) (In Millions)

Governmental Activities

2015 2014

Land $ 18.7 $ 18.2 Infrastructure 135.2 139.5 Buildings and improvements 146.6 153.2 Machinery, equipment and building contents 11.9 12.0 Construction in progress 59.5 42.1

Total $ 371.9 $ 365.0

The City capital assets increase for 2015 is mainly attributable to clean water projects and other various projects throughout the City. More detailed information about the City’s capital assets is presented in Notes 1 and 5 to the financial statements.

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Long-Term Debt At June 30, 2015, the City had $90.6 million in bonds outstanding versus $70.9 million last year, an increase of 27.8 percent - as shown in Table 4. TABLE 4 OUTSTANDING DEBT, at Year-End (In Millions)

Governmental Activities

2015 2014

General Obligation Bonds $ 90.6 $ 70.9

The City’s general obligation bond rating continues to carry a AA+ rating with Standard & Poor’s Rating Services. The State limits the amount of general obligation debt that towns can issue based on formula determined under State Statutes based on type of debt and tax base. The City’s outstanding general obligation debt is significantly below this $787 million state-imposed limit. Other obligations include accrued vacation pay and sick leave. More detailed information about the City’s long-term liabilities is presented in Note 7 to the financial statements. ECONOMIC FACTORS AND NEXT YEAR’S BUDGETS AND RATES The unemployment rate for the City is currently 5.7 percent compared with the prior year of 5.8 percent. The appropriation for expenditures totaled $173.8 million in the adopted budget for the 2015-2016 fiscal year representing an increase of 3.81 percent compared to the final amended budget for fiscal year ended June 30, 2015. The City is anticipating using $3.8 million of assigned General Fund fund balance to balance budgeted operations for the 2015-2016 fiscal year. The City’s elected and appointed officials considered many factors when establishing the tax mill rate of 39.6 for the adopted budget for the 2015-2016 fiscal year. There was an increase of .4% from the mill rate established for the 2015-2016 fiscal year. The City, while cautiously optimistic, is quite concerned about the State of Connecticut budget and the impact balancing the State budget may have on the City. Approximately one-fourth of the City’s budget revenues are derived from revenues received from the State of Connecticut. The vast majority of the State revenues come to the City in the form of Educational Cost Sharing Grants (ECS) which provide a direct subsidy to the local school system. This is a difficult year for the State of Connecticut due to shortfalls in State revenues resulting from the current state of our economy. Section 52 of Public Act 02-1 allows the Governor, on or after October 1, 2002, to reduce certain allotments, including grants to municipalities, by up to 5 percent. Any State reduction over $750,000 would result in a budget revenue shortfall and would reduce the City’s undesignated General Fund fund balance and/or increase the property tax rate in the fiscal year 2015.

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CONTACTING THE CITY’S FINANCIAL MANAGEMENT This financial report is designed to provide citizens, taxpayers, customers, investors and creditors with a general overview of the City’s finances and to show the City’s accountability for the money it receives. If you have questions about this report or need additional financial information, contact the Finance Department, City of Middletown, 245 DeKoven Drive, Middletown, Connecticut 06457.

Basic Financial Statements

EXHIBIT I CITY OF MIDDLETOWN, CONNECTICUT STATEMENT OF NET POSITION JUNE 30, 2015 (In Thousands)

Primary Government Component Units

Governmental Long Hill Activities ECRRA Estate

Assets: Cash and cash equivalents $ 67,781 $ 3,022 $ 519 Investments 1,215 115 Receivables, net 17,470 4,016 2 Inventories 32 Net pension asset 56,350 Other assets 310 Restricted assets:

Cash and cash equivalents 7,399 Investments 11,134

Capital assets: Assets not being depreciated 78,153 Assets being depreciated, net 293,787 48,715

Total assets 514,788 74,596 636

Deferred Outflows of Resources: Difference between projected and actual earnings for pensions 14,462

Liabilities: Accounts and other payables 10,728 7,245 24 Unearned revenue 2,489 249 Note payable 4,894 Noncurrent liabilities:

Due within one year 17,605 9,689 Due in more than one year 139,125 49,253

Total liabilities 174,841 66,187 273

Deferred Inflows of Resources: Difference of assumption changes for pensions 577 Difference between expected and actual experiences for pensions 1,890

Total deferred inflows of resources 2,467 - -

Net Position: Net investment in capital assets 267,645 907 Restricted for:

Debt service 7,399 Trust purposes:

Expendable 74 Nonexpendable 1,215

Unrestricted 83,008 103 363

Total Net Position $ 351,942 $ 8,409 $ 363

The accompanying notes are an integral part of the financial statements

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EXHIBIT II CITY OF MIDDLETOWN, CONNECTICUT STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2015 (In Thousands)

Net (Expense) Revenue and Changes In Net Assets

Primary Program Revenues Governmental Component Units

Operating Capital Charges For Grants And Grants And Governmental Long Hill

Functions/Programs Expenses Services Contributions Contributions Activities ECRRA Estate

Primary Government: Governmental activities:

General government $ 18,740 $ 3,011 $ $ $ (15,729) $ $ Public safety 26,917 2,013 1,183 28 (23,693) Public works 10,128 320 7 3,031 (6,770) Health and human resources 1,502 49 (1,453) Culture and recreation 5,740 703 864 42 (4,131) Employee benefits and insurance 14,908 (14,908) Education 109,091 619 46,463 (62,009) Sewer 4,885 5,994 1,109 Water 4,038 6,430 2,392 Sanitation 1,685 1,825 140 Interest on long-term debt 2,168 (2,168)

Total Primary Government - Governmental Activities $ 199,802 $ 20,915 $ 48,566 $ 3,101 (127,220) - -

Component Units: ECRRA $ 24,242 $ 29,708 $ $ 5,466 Long Hill Estate 578 557 6 (15)

Total Component Units $ 24,820 $ 30,265 $ - $ 6 - 5,466 (15)

General revenues: Property taxes 116,763 Grants and contributions not restricted to specific programs 9,828 Unrestricted investment earnings 143 623 1 Miscellaneous 4,701

Total general revenues 131,435 623 1

Change in net position 4,215 6,089 (14) Net Position at Beginning of Year, as Restated 347,727 2,320 377

Net Position at End of Year $ 351,942 $ 8,409 $ 363

The accompanying notes are an integral part of the financial statements

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EXHIBIT III CITY OF MIDDLETOWN, CONNECTICUT BALANCE SHEET - GOVERNMENTAL FUNDS JUNE 30, 2015 (In Thousands)

Nonmajor Total Debt Capital Governmental Governmental

General Service Projects Funds Funds

ASSETS

Cash and cash equivalents $ 22,583 $ 81 $ 7,149 $ 21,871 $ 51,684 Investments 1,215 1,215 Receivables, net 5,103 4,604 5,255 14,962 Due from other funds 8,166 8,166 Inventories 32 32

Total Assets $ 35,852 $ 81 $ 11,753 $ 28,373 $ 76,059

LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES

Liabilities: Accounts and other payables $ 4,915 $ $ 2,460 $ 2,477 $ 9,852 Due to other funds 7,810 356 8,166 Note payable 4,894 4,894 Unearned revenue 2,489 2,489

Total liabilities 4,915 - 15,164 5,322 25,401

Deferred Inflows of Resources: Unavailable revenue - property taxes 4,370 469 4,839

Fund Balances: Nonspendable 32 32 Restricted 81 3,724 3,805 Committed 18,972 18,972 Assigned 4,741 4,741 Unassigned 21,826 (3,411) (146) 18,269

Total fund balances 26,567 81 (3,411) 22,582 45,819

Total Liabilities, Deferred Inflows of Resources and Fund Balances $ 35,852 $ 81 $ 11,753 $ 28,373 $ 76,059

(Continued on next page)

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EXHIBIT III CITY OF MIDDLETOWN, CONNECTICUT BALANCE SHEET - GOVERNMENTAL FUNDS (CONTINUED) JUNE 30, 2015 (In Thousands)

Reconciliation of the Balance Sheet - Governmental Funds to the Statement of Net Position:

Amounts reported for governmental activities in the statement of net position (Exhibit I) are different because of the following:

Fund balances - total governmental funds $ 45,819

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

Governmental capital assets $ 622,015 Less accumulated depreciation (250,075) Net capital assets 371,940

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

Net pension asset 56,350 Property tax receivables greater than 60 days 4,839 Interest receivable on property taxes 1,953 Interest receivable on water, sewer and sanitation 555 Change in deferred outflows related to expected and actual experience 14,462

Internal service funds are used by management to charge the costs of risk management to individual funds. The assets and liabilities of the internal service funds are reported with governmental activities in the statement of net position. 8,444

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

Bonds and notes payable (90,559) Interest payable on bonds and notes (862) Compensated absences (7,220) OPEB obligation (42,470) Bond premium (8,842) Change in deferred inflows related to assumption changes (577) Change in deferred inflows related to investment gains or losses (1,890)

Net Position of Governmental Activities (Exhibit I) $ 351,942

The accompanying notes are an integral part of the financial statements

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EXHIBIT IV CITY OF MIDDLETOWN, CONNECTICUT STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2015 (In Thousands)

Nonmajor Total Debt Capital Governmental Governmental

General Service Projects Funds Funds

Revenues: Property taxes $ 106,476 $ $ $ 9,255 $ 115,731 Licenses and permits 652 652 Intergovernmental 34,947 1,530 24,454 60,931 Charges for services 4,769 14,942 19,711 Investment income 52 124 176 Miscellaneous 3,926 286 1,508 5,720

Total revenues 150,822 - 1,816 50,283 202,921

Expenditures: Current:

General government 9,233 105 1,026 10,364 Public safety 14,337 10,378 24,715 Public works 5,020 5,020 Health and human resources 1,495 48 1,543 Culture and recreation 5,283 418 5,701 Employee benefits and insurance 17,380 17,380 Education 82,531 20,988 103,519 Sewer 4,876 4,876 Water 4,014 4,014 Sanitation 1,672 1,672

Capital outlay 19,131 3,612 22,743 Debt service:

Principal retirement 12,647 12,647 Interest and fiscal charges 2,543 2,543

Total expenditures 135,279 15,295 19,131 47,032 216,737 Excess (Deficiency) of Revenues over Expenditures 15,543 (15,295) (17,315) 3,251 (13,816)

Other Financing Sources (Uses): Bond and serial notes 32,302 32,302 Bond premium 5,287 5,287 Transfers in 553 15,298 1,155 17,006 Transfers out (14,680) (67) (2,180) (16,927)

Total other financing sources (uses) (8,840) 15,298 32,235 (1,025) 37,668

Net Change in Fund Balances 6,703 3 14,920 2,226 23,852

Fund Balances at Beginning of Year 19,864 78 (18,331) 20,356 21,967

Fund Balances at End of Year $ 26,567 $ 81 $ (3,411) $ 22,582 $ 45,819

(Continued on next page)

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EXHIBIT IV CITY OF MIDDLETOWN, CONNECTICUT STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2015 (In Thousands)

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

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

Net change in fund balances - total governmental funds (Exhibit IV) $ 23,852 Governmental funds report capital outlays as expenditures. In the statement of activities, the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense:

Capital outlay 20,426 Depreciation expense (13,392)

The statement of activities reports losses arising from the trade-in of existing capital assets to acquire new capital assets. Conversely governmental funds do not report any gain or loss on a trade-in of capital assets. (60)

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

Property tax receivable - accrual basis change 751 Property tax interest and lien revenue - accrual basis change 282 Water, sewer, sanitation interest receivable - accrual change 92 Change in deferred outflows related to expected and actual experience 14,462 Change in deferred inflows related to assumption changes (577) Change in deferred inflows related to investment gains or losses (1,890)

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

Bond principal payments 12,646 Issuance of bonds and notes (32,300) Premium on bonds (5,287)

Change in net pension asset (12,025)

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

Compensated absences (258) OPEB obligation (5,330) Bond premium amortization 625 Accrued interest (250)

Internal service funds are used by management to charge costs to individual funds. The net revenue of certain activities of internal services funds is reported with governmental activities. 2,448

Change in Net Position of Governmental Activities (Exhibit II) $ 4,215

The accompanying notes are an integral part of the financial statements

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EXHIBIT V CITY OF MIDDLETOWN, CONNECTICUT STATEMENT OF NET POSITION - PROPRIETARY FUND JUNE 30, 2015 (In Thousands)

Governmental Activities Internal

Service Fund

Assets: Cash and cash equivalents $ 16,097

Liabilities: Current liabilities:

Accounts and other payables 14 Unpaid claims - current 2,877 Total current liabilities 2,891

Noncurrent liabilities: Unpaid claims - noncurrent 4,762

Total liabilities 7,653

Net Position: Unrestricted $ 8,444

The accompanying notes are an integral part of the financial statements

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EXHIBIT VI CITY OF MIDDLETOWN, CONNECTICUT STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET POSITION - PROPRIETARY FUND FOR THE YEAR ENDED JUNE 30, 2015 (In Thousands)

Governmental Activities Internal

Service Fund

Operating Revenues: Charges for services $ 29,122 Other 2,279

Total operating revenues 31,401

Operating Expenses: Benefit payments 7,385 Administration 1,055 Insurance 20,460

Total operating expenses 28,900

Operating Income 2,501

Nonoperating Revenue: Income on investments 26

Income Before Transfers 2,527

Transfers Out (79)

Change in Net Position 2,448

Net Position at Beginning of Year 5,996

Net Position at End of Year $ 8,444

The accompanying notes are an integral part of the financial statements

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EXHIBIT VII CITY OF MIDDLETOWN, CONNECTICUT STATEMENT OF CASH FLOWS - PROPRIETARY FUND FOR THE YEAR ENDED JUNE 30, 2015 (In Thousands)

Governmental Activities Internal

Service Fund

Cash Flows from Operating Activities: Interfund services provided or used $ 29,122 Cash received for insurance reimbursements 2,279 Cash paid to vendors (28,490)

Net cash used in operating activities 2,911

Cash Flows from Noncapital Financing Activities: Transfers to other funds (79)

Cash Flows from Investing Activities: Income on investments 26

Net Increase in Cash and Cash Equivalents 2,858

Cash and Cash Equivalents at Beginning of Year 13,239

Cash and Cash Equivalents at End of Year $ 16,097

Reconciliation of Operating Income to Net Cash Provided by Operating Activities:

Operating income $ 2,501 Adjustments to reconcile operating loss to net cash used in operating activities:

Increase in vouchers and other payables 410

Net Cash Provided by Operating Activities $ 2,911

The accompanying notes are an integral part of the financial statements

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EXHIBIT VIII CITY OF MIDDLETOWN, CONNECTICUT STATEMENT OF NET POSITION - FIDUCIARY FUNDS JUNE 30, 2015 (In Thousands)

Trust Agency Funds Funds

Assets: Cash and cash equivalents $ 8,219 $ 2,656 Investments:

Certificate of deposits 37 U.S. government bonds and securities 107,715 Corporate bonds 52,538 Common stock 167,418 Mutual funds 51,958

Receivables: Accrued investment income 503

Total assets 388,351 $ 2,693

Liabilities: Vouchers and other payables 256 $ Due to student groups and others 2,693

Total liabilities 256 $ 2,693

Net Position: Held in Trust for Employee Benefits $ 388,095

The accompanying notes are an integral part of the financial statements

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EXHIBIT IX CITY OF MIDDLETOWN, CONNECTICUT STATEMENT OF CHANGES IN NET POSITION - FIDUCIARY FUNDS PENSION TRUST FUNDS FOR THE YEAR ENDED JUNE 30, 2015 (In Thousands)

Trust Funds

Additions: Contributions:

Employer $ 11,019 Plan members 2,609 Other 190

Total contributions 13,818

Investment income: Net appreciation in fair value of investments 4,276 Interest and dividends 7,297

Total investment gain 11,573 Investment fees (1,092)

Net investment income 10,481

Total additions 24,299

Deductions: Benefits 22,998 Other 10

Total deductions 23,008

Net Increase 1,291

Net Position at Beginning of Year 386,804

Net Position at End of Year $ 388,095

The accompanying notes are an integral part of the financial statements

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CITY OF MIDDLETOWN, CONNECTICUT NOTES TO FINANCIAL STATEMENTS June 30, 2015 (IN THOUSANDS)

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1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

A. Reporting Entity

The City was incorporated in 1651. Its legal authority is derived from a Charter granted in 1874 that has been subsequently revised, most recently in 2008. The City operates under a Council-Mayor form of government. Services provided include education, water, sewer, refuse, streets and drainage, recreation and parks, police and fire, planning and zoning, community development and human resources.

Discretely Presented Component Units

The Eastern Connecticut Resource Recovery Authority (ECRRA) has been included in the City’s reporting as a proprietary fund type in accordance with GAAP. As more fully explained in Note 11, ECRRA is a regional authority formed to provide solid waste disposal and a resource recovery system. At June 30, 2015, the City is the only member and accordingly, ECRRA is fiscally dependent because the City is responsible for paying ECRRA’s debt and it is under the City’s control. Additionally, ECRRA’s financial position and operations are material to the financial statements of the City. Separate financial statements of ECRRA are available from the City’s Office of the Mayor.

The Long Hill Estate Authority (Authority) has been included in the City’s reporting as a governmental fund type in accordance with GAAP. The Authority was established by ordinance to operate and maintain the former Wadsworth/Cenacle property. The City will maintain ownership of the facility and retire the debt issued to make renovations. The City Council appoints the Authority’s nine-member board and, although the Authority is legally separate from the City, it is fiscally dependent upon the City because the City is responsible for paying the Authority’s debt. Separate financial statements of the Authority are available from the Authority’s offices, 421 Wadsworth Street.

B. Government-Wide and Fund Financial Statements

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

CITY OF MIDDLETOWN, CONNECTICUT NOTES TO FINANCIAL STATEMENTS June 30, 2015 (IN THOUSANDS)

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

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

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

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

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

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

The City reports the following major governmental funds:

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

The Debt Service Fund accounts for the payment of principal and interest on long-term debt of the City.

The Capital Project Fund accounts for financial resources to be used for the acquisition or construction of major capital assets.

Additionally, the City reports the following fund types:

The Internal Service Fund accounts for the risk management activity of the City.

CITY OF MIDDLETOWN, CONNECTICUT NOTES TO FINANCIAL STATEMENTS June 30, 2015 (IN THOUSANDS)

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The Trust Funds account for the activities of the defined benefit pension plans and Other Post Employment Benefits Trust Fund, which accumulate resources for pension and health benefit payments to qualified employees upon retirement.

The Agency Funds are used to account for assets held by the City in an agent capacity for individuals, private organizations or other governments. These funds are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations. The Agency Funds include Escrow Account Fund and Board of Education Activity Fund.

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

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

Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues of the internal service funds are charges to customers for risk management. Operating expenses for internal service funds include the cost of services and administrative expenses. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses.

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

D. Deposits and Investments

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

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

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

E. Receivables and Payables

Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either “due to/from other funds” (i.e., the current portion of interfund loans) or “advances to/from other funds” (i.e., the noncurrent portion of interfund loans). All other outstanding balances between funds are reported as “due to/from other funds.” All trade and property tax receivables, including those for the component units, are shown net of an allowance for uncollectibles. Allowances for uncollectibles are computed based on historical data. Property taxes allowance represents 2.4% of outstanding amounts.

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

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

Property tax revenues are recognized when they become measurable and available. Available means then due, or past due and collectible within 60 days of the end of the current period.

F. Inventories and Prepaid Items

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

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

G. Restricted Assets

Because of certain bond covenants, ECRRA is required to establish and maintain prescribed amounts of resources (consisting of cash and cash equivalents) that can be used only for servicing outstanding debt and other indenture requirements.

H. Capital Assets

Capital assets, which include property, plant, equipment and infrastructure assets (e.g., roads, bridges, sidewalks and similar items), are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets are defined by the government as assets with an initial, individual cost of more than $10,000 (amount not rounded) and an estimated useful life in excess of 5 years. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation.

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

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

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

Assets Years Buildings 50 Building improvements 25 Infrastructure 35-70 Equipment 15 Vehicles 7 Office equipment 7 Computer equipment 7

I. Deferred Outflows/Inflows of Resources

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

In addition to liabilities, the statement of net position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position or fund balance that applies to a future period or periods and so will not be recognized as an inflow of resources (revenue) until that time. The City reports a deferred inflow of resources related to pensions. A deferred inflow of resources related to pension results from differences between expected and actual experience, changes in assumptions or other inputs. These amounts are deferred and included in pension expense in a systematic and rational manner over a period equal to the average of the expected remaining service lives of all employees that are provided with benefits through the pension plan (active employees and inactive employees). For governmental funds, the City reports unavailable revenue, which arises only under the modified accrual basis of accounting. The governmental funds report unavailable revenues from property taxes. These amounts are deferred and recognized as an inflow of resources (revenue) in the period in which the amounts become available.

J. Net Pension Asset

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

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K. Termination Benefits

Sick Leave and Vacation Benefits

Employees may accumulate a limited amount of vested vacation and unused sick leave. At year end, accumulated vacation and unused sick leave was valued at $7,220. The General Fund generally funds the cost associated with compensated absences.

L. Long-Term Obligations

In the government-wide financial statements, and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, or proprietary fund type statement of net position. Bond premiums and discounts are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of any significant applicable bond premium or discount. Bond issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditure.

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

M. Fund Equity

Equity in the government-wide financial statements is defined as “net position” and is classified in the following categories:

Net Invested in Capital Assets This component of net position consists of capital assets, net of accumulated depreciation and reduced by the outstanding balances of any bonds, notes or other borrowings that are attributable to the acquisition, construction or improvement of those assets.

Restricted Net position is restricted because they are externally imposed by creditors (such as through debt covenants), grantors, contributors or laws or regulations of other governments or imposed by law through constitutional provisions or enabling legislation.

Unrestricted This component consists of net position that does not meet the definition of “restricted” or “net investment in capital assets.”

The equity of the fund financial statements is defined as “fund balance” and is classified in the following categories:

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

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

Committed Fund Balance This represents amounts constrained for a specific purpose by a government using its highest level of decision-making authority (City of Middletown Town Council). A commitment of fund balance and any subsequent modifications or rescission requires a resolution of the City of Middletown Town Council.

Assigned Fund Balance This represents amounts constrained for the intent to be used for a specific purpose by the Board of Finance, which has been delegated authority to assign amounts by City Charter.

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

2. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY

A. Budgetary Information

The City has an annual operating budget for the General Fund and budgets for certain Special Revenue Funds: Fire District Fund, Sanitary Disposal District Fund, Water Fund and Sewage Disposal Fund.

The City Charter requires the Mayor to submit a recommended operating budget for the General Fund and selected Special Revenue Funds to the Common Council by April 1. The budget provides a financial plan for the year and contains estimates of anticipated revenues and proposed expenditures. After public hearings a final budget is adopted by the Common Council by May 15.

The budget allocations among the various organizational units, as revised by the Common Council through year-end, are included in the budget-to-actual comparisons. Total budgeted expenditures in the budget-to-actual comparison agree with the Common Council appropriations. These budgetary comparisons are made at the sub-function level by the encumbrance of estimated purchase amounts prior to the release of purchase orders to vendors. Purchase orders which result in an overrun of sub- function balances are not released until additional appropriations are made available.

Any revisions that alter the total expenditures of any department of the General Fund must be approved by the City Council. In addition, any revisions that alter the total budget of Special Revenue funds must be approved by the City Council. During the year General Fund appropriations increased in the amount of $1,535. All budget amendments were processed in accordance with Charter provisions.

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

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B. Deficit Fund Equity

The City has the following fund deficits at June 30, 2015:

Amount

$ 3,411

114

* Deficit will be eliminated with future bond proceeds ** Deficit will be eliminated through future appropriations

Nonmajor Governmental Funds: Special Revenue Funds:

School Cafeteria Fund **

Capital Projects Fund*

3. CASH, CASH EQUIVALENTS AND INVESTMENTS

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

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

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

Deposits

Deposit Custodial Credit Risk Custodial credit risk is the risk that, in the event of a bank failure, the City’s deposit will not be returned. The City does not have a deposit policy for custodial credit risk. The deposit of public funds is controlled by the Connecticut General Statutes. Deposits may be placed with any qualified public depository that has its main place of business in the State of Connecticut. Connecticut General Statutes require that each depository maintain segregated collateral (not required to be based on a

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security agreement between the depository and the municipality and, therefore, not perfected in accordance with federal law) in an amount equal to a defined percentage of its public deposits based upon the depository’s risk based capital ratio.

City

Based on the criteria described in GASB Statement No. 40, Deposits and Investment Risk Disclosures, $56,433 of the City’s bank balance of $58,977 was exposed to custodial credit risk as follows:

Uninsured and uncollateralized $ 50,590 Uninsured and collateral held by the pledging bank’s trust department, not in the City’s name 5,843

Total Amount Subject to Custodial Credit Risk $ 56,433

Long Hill Estate Authority

Based on the criteria described in GASB Statement No. 40, Deposits and Investment Risk Disclosures, all of the Authority’s bank balance of $645 was uninsured and uncollateralized.

Cash Equivalents

City

At June 30, 2015, the City’s cash equivalents amounted to $21,975. The following table provides a summary of the City’s cash equivalents (excluding U.S. government guaranteed obligations) as rated by nationally recognized statistical rating organizations. The pools all have maturities of less than one year.

Standard Fitch & Poor’s Ratings

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

*Not rated ECRRA

Cash equivalents are short-term, highly liquid investments that are both readily convertible to known amounts of cash and purchased within 90 days of maturity. At June 30, 2015, ECRRA’s cash equivalents amounted to $10,421. ECRRA’s cash equivalents are primarily bank and government instruments that are not rated by nationally recognized statistical rating organizations.

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Investments

City

As of June 30, 2015, the City had the following investments:

Credit Fair Less More Investment Type Rating Value Than 1 1-10 Than 10

Interest-bearing investments: Government bonds AAA to A- $ 116,157 $ 1,402 $ 60,326 $ 54,429 Government bonds BBB+ to B- 205 205 Government bonds CC+ to CCC- 18 18 Corporate bonds AAA to A- 34,655 32,618 2,037 Corporate bonds BBB+ to B- 8,042 41 7,372 629 Corporate bonds CC+ to CCC- 1,176 1,176 Certificates of deposit * 37 37

Total 160,290 $ 1,480 $ 101,697 $ 57,113

Other Investments: Common stock 167,418 Mutual funds 53,173

Total Investments $ 380,881

Investment Maturities (Years)

*Subject to coverage by Federal Depository Insurance and collateralization.

Long Hill Estate Authority

As of June 30, 2015, the Authority had the following investments:

Credit Fair Less More Investment Type Rating Value Than 1 1-10 Than 10

Interest-bearing investments: Certificates of Deposit * $ 115 $ 115 $ - $ -

* Subject to coverage by Federal Depository Insurance and collateralization.

Investment Maturities (Years)

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ECRRA

As of June 30, 2015, ECRRA had the following investments:

Credit Fair Less More Investment Type Rating Value Than 1 1-10 Than 10

Interest-bearing investments: MBIA Investment Agreements * $ 11,134 $ $ 11,134 $ -

* Subject to coverage by Federal Depository Insurance and collateralization.

Investment Maturities (Years)

Interest Rate Risk The City does not have a formal investment policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates.

Credit Risk - Investments As indicated above, State Statutes limit the investment options of cities and towns. The City has no investment policy that would further limit its investment choices. The following table provides a summary of the City’s investments (excluding U.S. government guaranteed obligations) as rated by nationally recognized statistical rating organizations.

Concentration of Credit Risk The City’s investment policy does not allow for an investment in any one issuer that is in excess of five percent of the City’s total investments.

Custodial Credit Risk Custodial credit risk for an investment is the risk that, in the event of the failure of the counterparty (the institution that pledges collateral or repurchase agreement securities to the City or that sells investments to or buys them for the City), the City will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. At June 30, 2015, the City’s investments, other than open-end mutual funds and other pooled accounts that are not categorized as to custodial credit risk, were uninsured and unregistered securities held by the counterparty, or by its trust department or agent, and were not in the City’s name.

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4. RECEIVABLES

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

Nonmajor Capital and Other

General Projects Funds Total

Receivables: Taxes $ 5,023 $ $ 561 $ 5,584 Interest* 503 503 Accounts and other 200 3,133 3,333 Intergovernmental 4,604 1,592 6,196

Gross receivables 5,223 4,604 5,789 15,616

Less allowance for uncollectibles 120 31 151

Net Total Receivables $ 5,103 $ 4,604 $ 5,758 $ 15,465

* Does not include interest on property taxes $1,953 and interest on water, sewer and

sanitation receivables $555.

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5. CAPITAL ASSETS

Capital asset activity for the year ended June 30, 2015 was as follows:

Primary Government

Beginning Ending Balance Increases Decreases Balance

Governmental activities: Capital assets not being depreciated:

Land $ 18,179 $ 474 $ $ 18,653 Construction in progress 42,100 19,131 (1,731) 59,500

Total capital assets not being depreciated 60,279 19,605 (1,731) 78,153

Capital assets being depreciated: Buildings 238,193 96 238,289 Machinery, equipment and building contents 30,277 1,762 (430) 31,609 Infrastructure 273,270 694 273,964

Total capital assets being depreciated 541,740 2,552 (430) 543,862

Less accumulated depreciation for: Buildings (84,968) (6,718) (91,686) Machinery, equipment and building contents (18,325) (1,690) 370 (19,645) Infrastructure (133,760) (4,984) (138,744)

Total accumulated depreciation (237,053) (13,392) 370 (250,075)

Total capital assets being depreciated, net 304,687 (10,840) (60) 293,787

Governmental Activities Capital Assets, Net $ 364,966 $ 8,765 $ (1,791) $ 371,940

Depreciation expense was charged to functions/programs of the primary government as follows:

Governmental activities: General government $ 3,302 Public safety 747 Public works 5,069 Education 4,274

Total Depreciation Expense - Governmental Activities $ 13,392

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Construction Commitments

The City has active construction projects as of June 30, 2015. The projects include roads, bridges, water and sewer lines and school building improvements. At year end the City’s commitments with contractors are as follows:

Spent-to-Date Project Balance

Technology Systems Land Records $ 123 $ City Public Parking Improvements 731 8 Water Wellfield Shoreline Protection 694 6 City Pub Parking Imp, Const & Infastruct 23 573 Parking Public Safety/Security Improve 85 515 Plan, Design, Cons, Portable Water Infrastr 557 192 MDTWN Youth Soccer 353 2 Fire Truck & Related Equipment 489 5 Eckersley Hall 683 19 Rehab Main St. Water Main N of Wash 1,406 212 CSO 2007 BI Sewer/Separation 4,771 3,248 Remediation of OMO Manuf. Site 2,826 174 Acquire Propty/Constr Park King & Clinton 448 97 Design Acquire/Constr W/Mattabassett 9,621 14,314 Eckersley Hall-Plan, Impr,Const, Restore 3,874 687 2007 Road Improv. Bond 8,369 1,458 Water and Sewer Improvements 3,745 748 Water Planning Improvements 198 3 Installation of Water System (SCADA) 142 10 John S. Roth Treatment Plant Improvements 50 241 Sewer System Pump Station 220 99 Charles Bacon Plant Improvements Water 420 288 Integrated Public Safety Software 665 2 Information Technology Infrastructure 741 4 Acquisition/Implement Technology Project 225 (6) Information Technology System & Devices 528 81 Pur/Install Telephone System City BLDGS 634 51 City Info Technology Storage Infrastructure 558 146 CNR Ordinance 2012-2013 494 58 CNR Ordinance 13/14 735 3 CNR Ordinance 2014-2015 327 257 Citywide Streets Poles & Equip 1,083 52 2013 Road, Sidewalk & PW Facilities 807 13,534 Standby Generator for City Hall 133 362 Keigwin Middle Sch Parking Lot 357 90 Keigwin Middle Sch Fire Alarm System 152 5 Asbestos Abatement/Woodrow Wilson Middle 64 370 Woodrow Wilson Middle 6 742 Wired & Wireless Network MHS 295 48 Powerschool Info Sys Mdtwn Schools 134 1 Jackson Street Bridge 122 158 Renovation & Improve Russell Library 622 118 Physical Inspect & Reval Real Property 529 74 Sanitary Sewers 1,663 780 Road Improvement Bond 2005 8,851 879 Mill Street Bridge 1,386 261 2011 Road Improvement Bond 8,000 5,169 Mdtwn Mattabassett District Membership 13,178 22 Plan, Design, Const, Repl, Sani Sewer Infras 272 228 BI Force Main & Pump Station w/Mattabasset 3 2,997 Combined Sewer Overflow Separation 2 7,748 Waterline Improv. Arrigoni Bridge 311 (5) CSO Road Improvement 7,334 2,549 2001 Road Improvement Bond 6,594 50 Open Space 2,983 17 Middletown High School BI 106,347 126 Security Measures at City Hall 53 369 Web Base Security Sys School Citywide 2 748 2003 Road Improvement Bond 8,030 70

Total $ 214,048 $ 61,057

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The commitments are being financed as follows:

School projects are financed by bonds and grants from the State Department of Education.

Sewer projects are financed by grants and 2% loans from the State Department of Environmental Protection.

Other projects are primarily funded by City general obligation bonds.

Discretely Presented Component Units

Activity for ECRRA for the year ended June 30, 2015 was as follows:

Beginning Balance Increases Decreases

Ending Balance

Capital assets, being depreciated: Buildings and systems $ 109,901 $ $ $ 109,901

Less accumulated depreciation for: Buildings and systems (58,043) (3,143) (61,186)

ECRRA Capital Assets, Net $ 51,858 $ (3,143) $ - $ 48,715

6. INTERFUND RECEIVABLES, PAYABLES AND TRANSFERS

At June 30, 2015, the amounts due to and from other funds were as follows:

Due From Other Funds

Due to Other Funds

General Fund $ 8,166 $ Nonmajor - Special Revenue Funds:

Special Grants 356 Capital Projects Fund 7,810

Total $ 8,166 $ 8,166

The above balances represent temporary advances for operating cash requirements.

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Interfund transfers:

General Fund

Debt Service Fund

Nonmajor Governmental Total

Transfers out: General Fund $ $ 13,525 $ 1,155 $ 14,680

Nonmajor Governmental 474 1,706 2,180 Capital Projects 67 67 Internal Service Funds 79 79

Total Transfers Out $ 553 $ 15,298 $ 1,155 $ 17,006

Transfers In

Transfers are for regularly recurring operational transfers. Interfund transfers are used to 1) to move revenues from the General Fund, Nonmajor Governmental Funds and Capital Project Funds to the Debt Service Fund to pay for principal and interest on debt, and 2) to supplement revenues to other funds such as General Fund and Nonmajor Governmental Funds as approved by Town Council.

7. LONG-TERM DEBT

Changes in Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2015 was as follows:

Beginning Ending Due Within Balance Additions Reductions Balance One Year

Governmental Activities: Bonds payable:

General obligation bonds $ 70,905 $ 32,300 $ 12,646 $ 90,559 $ 11,205 Unamortized bond premium 4,180 5,287 625 8,842 996 Total bonds payable 75,085 37,587 13,271 99,401 12,201

Compensated absences 6,962 2,695 2,437 7,220 2,527 OPEB obligation 37,140 5,330 42,470 Risk management 7,214 2,545 2,120 7,639 2,877

Total Governmental Activities Long-Term Liabilities $ 126,401 $ 48,157 $ 17,828 $ 156,730 $ 17,605

Compensated absences are generally liquidated by the General Fund. OPEB obligation is generally paid by the OPEB Trust fund.

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Note Payable

The City has a note payable at June 30, 2015 of $4,894, which was issued for the construction of the Mattabassett Project. The note carries a 2% interest rate and the principal becomes payable upon the permanent refinancing of the note payable.

The annual requirements to amortize bonds payable as of June 30, 2015, are as follows:

Due Fiscal Year Ending June 30, Principal Interest Total

2016 $ 11,205 $ 3,539 $ 14,744 2017 12,713 3,173 15,886 2018 12,571 2,721 15,292 2019 9,773 2,201 11,974 2020 8,468 1,889 10,357 2021-2025 31,877 4,652 36,529 2026-2030 3,728 209 3,937 2030-2033 224 5 229

Total $ 90,559 $ 18,389 $ 108,948

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Bonds payable at June 30, 2015 are comprised of the following:

Date Purpose Rate % Original Issue Debt

Outstanding Date of Fiscal Year Maturity

10/31/1997 Clean Water Fund 2% $ 2,074 $ 190 2017 4/30/1998 Clean Water Fund 2% 1,832 193 2018 4/30/2002 Clean Water Fund 2% 3,526 1,097 2022 4/15/2005 General Purpose 3.75-5% 5,370 537 2016 4/15/2005 Water 3.75-5% 275 27 2016 4/15/2005 Sewer 3.75-5% 1,137 114 2016 4/15/2005 Schools 3.75-5% 10,218 1,022 2016 6/30/2006 Clean Water Fund 2% 1,574 787 2025 3/15/2007 General Purpose 3.875-4% 7,741 2,322 2018 3/15/2007 Water 3.875-4% 800 240 2018 3/15/2007 Sewer 3.875-4% 2,309 693 2018 3/15/2007 Schools 3.875-4% 16,850 5,055 2018 3/15/2008 General Purpose 3.25-4.5% 3,814 1,526 2019 3/15/2008 Water 3.25-4.5% 36 14 2019 3/15/2008 Sewer 3.25-4.5% 860 344 2019 3/15/2008 Schools 3.25-4.5% 8,340 3,336 2019 8/31/2008 Clean Water Fund 2% 1,975 1,168 2025 4/15/2010 General Purpose 3-5% 6,248 3,749 2021 4/15/2010 Water 3-5% 2,708 1,625 2021 4/15/2010 Sewer 3-5% 892 535 2021 4/15/2010 Schools 3-5% 1,052 631 2021 4/1/201 General Purpose 2-4% 7,712 5,398 2022 4/1/2011 Water 2-4% 1,056 739 2022 4/1/2011 Sewer 2-4% 132 93 2022 4/10/2013 General Purpose 2-4% 24,323 21,884 2024 4/10/2013 Water 2-4% 1,787 1,610 2024 4/10/2013 Sewer 2-4% 1,030 927 2024 4/10/2013 Schools 2-4% 760 684 2024 9/30/2013 Clean Water Fund 2% 1,993 1,719 2033 3/18/2015 General Purpose 2-5% 22,837 22,837 2026 3/18/2015 Water 2-5% 4,013 4,013 2026 3/18/2015 Sewer 2-5% 2,992 2,992 2026 3/18/2015 Schools 2-5% 2,458 2,458 2026

$ 150,724 $ 90,559

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Bonds authorized and unissued amounted to $37.1 million at June 30, 2015.

The total of the City’s indebtedness does not exceed the legal debt limitation of $851 million. The limitation is seven times the base of annual receipts from taxation as defined.

Category Debt Limit Net Indebtedness Balance

General purpose $ 273,538 $ 84,232 $ 189,306 Schools 547,076 14,020 533,056 Sewer 455,897 21,148 434,749 Urban Renewal 395,111 395,111 Pension deficit 364,718 364,718

ECRRA long-term liability activity for the year ended June 30, 2015 was as follows:

Beginning Ending Due Within Balance Additions Reductions Balance One Year

Business-type activities: Bonds payable:

Revenue bonds $ 68,439 $ $ 8,910 $ 59,529 $ 9,820 Less deferred amounts for issuance discounts (718) (131) (587) (131)

Business-Type Activity Long-Term Liabilities $ 67,721 $ $ 8,779 $ 58,942 $ 9,689

ECRRA bonded debt at June 30, 2015 amounted to $59,529. The following schedule reflects debt service requirements for each 12-month period ending January 1:

Due Fiscal Year Ending June 30, Principal Interest Total

2016 $ 9,820 $ 3,399 $ 13,219 2017 10,780 2,839 13,619 2018 11,825 2,224 14,049 2019 12,935 1,549 14,484 2020 14,169 810 14,979

Total $ 59,529 $ 10,821 $ 70,350

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8. RESTRICTED ASSETS

The balances of the restricted asset accounts for ECRRA are as follows:

Construction Funds $ 433 Debt Service Reserve Fund 11,134 Interest Funds 2,283 Sinking Fund 3,864 Special Reserve Fund 819

Total Restricted Assets $ 18,533

9. FUND BALANCE

The component of fund balance for the governmental funds at June 30, 2015 are as follows:

Debt Capital Nonmajor General Service Projects Governmental

Fund Fund Fund Funds Total Fund balances:

Nonspendable: Inventory $ $ $ $ 32 $ 32

Restricted for: Grants 2,435 2,435 Permanent funds 1,289 1,289 Debt service 81 81

Committed to: Fire District 1,129 1,129 Sanitary Disposal District 1,346 1,346 Water distribution operations 5,498 5,498 Landfill waste and recycling 384 384 Sewer operations 3,186 3,186 Public safety encumbrances 1 1 Sewage disposal 4,744 4,744 Police benevolence 3 3 Library 17 17 Parking District 238 238 Capital projects 2,426 2,426

Assigned to: General government encumbrances 44 44 Public safety encumbrances 122 122 Public works encumbrances 90 90 Health and human resources encumbrances 58 58 Culture and recreation encumbrances 76 76 Education encumbrances 506 506 Assigned for subsequent year's budget 3,845 3,845

Unassigned 21,826 (3,411) (146) 18,269

Total Fund Balances $ 26,567 $ 81 $ (3,411) $ 22,582 $ 45,819

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10. RISK MANAGEMENT

The City is exposed to various risks of loss including, but not limited to claims for personal injury and property damage; theft of, damage to City property; errors and omissions claims; employee injuries and illnesses, both work-related and non-work-related. The City’s comprehensive insurance program including property and liability, workers’ compensation and employee health benefits is overseen by the Office of the General Counsel.

Property and Casualty Insurance Program

The City maintains property coverage (amounts not rounded) as listed below:

Automobile Physical Damage coverage includes actual cash value, subject to a $25,000 deductible for both comprehensive and collision and $125,000 for catastrophic loss.

Property Insurance totaling an amount equal to the replacement cost value of city-owned property including contents, subject to a $50,000 deductible. Said coverage also includes specific sub-limits for fine arts, flood, earthquake, and other potential property related losses. Vacant city owned property is insured on an actual cash value basis.

Boiler and Machinery coverage with a limit of $100,000,000 per accident is subject to a $50,000 deductible.

With respect to liability coverage, the City’s current program provides:

$3,000,000 general aggregate - $1,000,000 per occurrence General Liability; $1; $1,000,000 per occurrence Automobile Liability; and $1,000,000 each claim Employee Benefits Liability (claims made). This coverage is not subject to a deductible, except for Employee Benefits Liability which is subject to a $1,000 deductible. Automobile liability uninsured/underinsured motorist coverage with a limit of $40,000 each occurrence.

Excess Liability (excess over General Liability, Automobile Liability, Law Enforcement Liability, Public Officials, School Board Legal Liability and Employers’ Liability) with a limit of $10,000,000 each occurrence and aggregate.

School Leaders Legal (claims made) with a limit each wrongful act/aggregate of $1,000,000 subject to a $50,000 deductible.

Public Officials Liability (claims made) with a limit each wrongful act/aggregate of $1,000,000 subject to a $50,000 deductible.

Law Enforcement Liability (claims made) with a limit each wrongful act/aggregate of $1,000,000 subject to a $50,000 deductible.

The City further maintains the required bonding for the Tax Collector in the amount of $400,000.

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Workers’ Compensation Insurance

The City self-insured its Workers’ Compensation Program, which is comprised of two parts: third party claims administration and managed medical care, both of which are administered by an outside vendor hired by the City.

Workers’ Compensation and Employers’ Liability coverage (amounts not rounded), subject to self- insured retentions of $650,000 for Police and Fire and $500,000 for all other employees, for each accident and each employee for disease with statutory limits for Workers’ Compensation and $1,000,000 Employers Liability.

Employee Health Benefits

The City’s current employee/retiree medical benefit program is self-insured with stop-loss insurance limits (amounts not rounded) of $125,000 per individual and 120% aggregate.

The City further provides employees and retirees with dental prescription drug coverage, both of which are self-insured. There is no stop-loss insurance that applies.

Employees and retirees also receive life insurance which is fully insured.

Outstanding Liabilities

Property and Liability At the close of June 30, 2015, the City reported an outstanding liability of $1,100 for claims incurred during the 2014-15 fiscal year, as well as prior years’ claims within the deductible and self-insured retentions.

Workers’ Compensation At the close of June 30, 2015, the City reported an outstanding liability of $3,662 for claims incurred during the 2014-15 fiscal year, as well as claims pending from prior years.

Employee Health Benefits At the close of June 30, 2015, the City reported an outstanding liability of $2,877 (medical/ dental/prescription drug) for claims incurred but not reported during the 2014-15 fiscal year.

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The following schedule reflects the change in the estimated liability for the last two fiscal years:

Current Year Claims Claims and Claims Payable Changes in Claims Payable July 1 Estimates Paid June 30

Health Benefits Fund: 2013-14 $ 2,033 $ 7,925 $ 7,838 $ 2,120 2014-15 2,120 16,699 15,942 2,877

Property and Casualty Fund: 2013-14 950 449 259 1,140 2014-15 1,140 447 487 1,100

Workers’ Compensation Fund: 2013-14 3,748 2,475 2,269 3,954 2014-15 3,954 1,507 1,799 3,662

11. CONTINGENT LIABILITIES

In December 1990, ECRRA was formed. ECRRA is a public body politic and corporate of the State of Connecticut, organized and existing pursuant to the Connecticut General Statutes and an Ordinance adopted by the Common Council of the City of Middletown. ECRRA was created for the purpose of developing and implementing a solid waste disposal system, including the acquisition and ownership of a solid waste resource recovery system. At June 30, 2015, the City was the only member of ECRRA. ECRRA is empowered to issue bonds and use the proceeds to acquire and construct such systems upon approval of each member’s governing body. On June 17, 1993, the Common Council of the City approved the issuance of $150 million of bonds for the cost of a solid waste facility. In October 1993, revenue bonds amounting to $128,150 were issued by the Authority.

ECRRA has entered into an agreement, with an indirect, wholly owned subsidiary of Wheelabrator Technologies Inc., for design, installation, and equipage of a 500-ton per day solid waste disposal, electric power generation, and resource recovery facility in Lisbon, Connecticut. Under a Municipal Waste Disposal Agreement, the City is required to provide minimum amounts of acceptable waste to the project and to pay disposal fees to ECRRA. The City and Wheelabrator Connecticut (the Company), as the users of the facility, are obligated to make monthly disposal fee payments that together equal ECRRA’s net cost of operations, including debt service.

The City’s commitment is 23,273 tons per year, effective July 1, 1995, which may be assigned to other towns, cities or other political subdivisions, under certain conditions. Any such assignment would not relieve the City of its obligation to make payments. ECRRA and the Company have further agreed that, so long as the City delivers at least 6,718 tons per year, the Company will deliver the shortfall below 23,273 tons.

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The City has pledged its full faith and credit to the payment of all amounts due under the agreement and shall appropriate funds and levy taxes in an amount sufficient, together with other available revenues, to make such payments. The agreement is not a debt of the City and does not obligate the City to pay the principal of or interest on the revenue bonds.

12. POST EMPLOYMENT BENEFITS

A. Plan Description

The City, in accordance with various collective bargaining agreements, provides retiree medical benefits for the lifetime of the retired member and covered dependents. The plan covers City, Board of Education, Police and Fire employees as further defined in collective bargaining agreements and other written materials. Eligibility and premium sharing information is detailed in the various collective bargaining agreements. The City does not issue separate stand-alone financial statements for the plan.

At July 1, 2014, plan membership consisted of the following:

Active plan members 972 Retired and spouses members 806 Total Participants 1,778

B. Funding Policy

The contribution requirements of plan members and the City are also negotiated with the various unions representing the employees. Generally, retirees and their dependents are covered for those City employees who have 15 years of service. Eligible retirees may either commence benefits immediately or defer coverage to a future date. Retired plan members and beneficiaries currently receiving benefits are required to contribute specified amounts monthly towards the cost of health insurance premiums.

City employees must elect one of two pension options; the options that apply vary dependent upon their union affiliation and the health insurance benefits to which they are entitled are determined based on their selected pension option. Depending on which pension option is selected, City employees who are members of Local 466, Teamsters, Police and Fire will pay the same the cost-share percentage as actives for health insurance benefits, capped at 25% for life, or pay a premium cost-share percentage for health insurance benefits based on age at retirement.

New members of the bargaining units, upon retirement, have the same pension options, however the health insurance benefits to which they are entitled are reduced and vary by union group.

All pre-2005 retirees are under different funding rules. In addition, subject to the same premium cost- sharing contribution as active employees, a surviving spouse is covered until death or remarriage. Dental coverage is provided for all retirees, including eligible surviving spouses.

The waiver of contribution offering that applied to retirees electing coverage in the City’s point-of- service plan option was discontinued as of March 1, 2009. All retirees, regardless of plan choice, now make a contribution toward the cost of coverage.

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The Board of Education employees are eligible at the same time they are eligible for benefits under the plan with the State of Connecticut Teachers Retirement Board (TRB). Teachers contribute 100% of the premium less the TRB subsidy. Teachers over the age of 65 who are not eligible for Medicare, shall be allowed to purchase the coverage at no cost to the Board and are given the TRB subsidy; nonunion administration have no contribution up to the age of 65 and 20% after age 65, and union administration, pre-65 retiree pays excess over board payment. TRB subsidy is applied. If over 65 and not eligible for Medicare, retiree pays 100% of premium less the TRB subsidy.

C. Annual OPEB Cost and Net OPEB Obligations

The City of Middletown’s annual other post employment benefit (OPEB) cost is calculated based on the annual required contribution (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years. The following table shows the components of the City’s annual OPEB cost for the year, the amount actually contributed to the plan, and changes in the City’s net OPEB obligation (asset):

Annual required contribution (ARC) $ 13,577 Interest on net OPEB obligation 2,643 Adjustment to annual required contribution (2,061)

Annual OPEB cost 14,159 Contributions made 8,829

Increase in net OPEB obligation 5,330 Net OPEB obligation at beginning of year 37,140

Net OPEB Obligation at End of Year $ 42,470

The City’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation (asset) for the last three fiscal years is presented below.

Annual Net Fiscal OPEB Percentage OPEB Year Cost Actual of AOC Obligation

Ended (AOC) Contribution Contributed (Asset)

6/30/2013 $ 12,926 $ 8,134 62.93 % $ 33,335 6/30/2014 13,523 9,718 71.86 37,140 6/30/2015 14,159 8,829 62.36 42,470

Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about the future employment, mortality and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as accrual results are compared with past expectations and

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new estimates are made about the future. The following schedule of funding progress presents multi- year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits.

Schedule of Funding Progress

Actuarial Actuarial Accrued Underfunded UAAL as a

Actuarial Value of Liability AAL Funded Covered Percentage of Valuation Assets (AAL) (UAAL) Ratio Payroll Covered Payroll

Date (a) (b) (b-a) (a/b) (c) ((b-a)/c)

7/1/2009 $ 3,770 $ 167,196 $ 167,196 2.25 % $ 65,342 256 % 7/1/2010 5,300 168,910 168,910 3.14 64,603 261 7/1/2011 5,799 142,921 137,122 4.06 65,631 209 7/1/2012 5,850 151,468 145,618 3.86 68,290 213 7/1/2014 8,748 183,479 174,731 4.77 70,422 248

Schedule of Employer Contributions

Annual Fiscal Required Percentage

Year Ended Contribution Contributed

6/30/2010 $ 13,867 49.0 % 6/30/2011 13,722 77.9 6/30/2012 12,023 57.2 6/30/2013 12,338 65.9 6/30/2014 12,984 74.8 6/30/2015 13,577 65.0

Projections for benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing benefit cost between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations.

In the July 1, 2014 actuarial valuation, the projected unit credit actuarial cost method was used. The actuarial assumptions include a 7.4% rate of return for the City and 4% for the Board of Education, which is the rate of the expected long-term investment returns of plan assets calculated based on the funding policy of the plan at the valuation date. The annual healthcare cost trend rate is 8% for fiscal year 2013-14, decreasing .5% per year to 5% for year 2019-200 and later. Projected salary increases were 3.5%, and an inflation rate of 3%. The Unfunded Accrued Liability is amortized each year over a constant 30 year period, as a level dollar amount, open.

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13. EMPLOYEE RETIREMENT SYSTEMS AND PENSION PLANS

Middletown Retirement System Fund

A. Plan Description and Benefits Provided

The City is the administrator of the Middletown Retirement System Fund, a single-employer defined benefit Public Employee Retirement System (PERS) established and administered by the City to provide pension benefits for its non-teacher employees. The PERS provides retirement disability, and death benefits to plan members and beneficiaries. The Charter provides the City Council with the authority to establish and amend benefit provisions, by ordinance, through the Retirement Board. The PERS is considered to be part of the City of Middletown’s financial reporting entity and is included in the City’s financial reports as a pension trust fund. Stand-alone financial statements are not issued.

Under the plan, all full-time employees are eligible to join. Firemen are 100% vested after 20 years of continuous service, all other employees are 100% vested after 10 years of continuous service. Employees who retire at normal retirement, (20 years for police and 22 years of service for fire and general government employees at any age, or after 15 years of service having attained age 65), receive a retirement benefit of 2 1/4% (Police and Fire 2 1/2%) of average annual pay during 4 (Police 3) consecutive highest-paid years times number of years of service. The maximum benefit is 70% of pay; the minimum benefit for 20 years of service is $100 per month.

The retirement system of the City is vested in a Retirement Board consisting of eight members, not more than five of whom shall belong to any one political party, as follows: two members of the City Council (a representative from each political party); the City Director of Finance; four citizens of the City of Middletown, one of whom shall be a member of the retirement system elected by the members thereof; and the Mayor, ex officio. All members, except the Director of Finance, the Mayor and the member of the retirement system, shall be appointed by the Mayor with the advice and consent of the City Council.

At July 1, 2014, PERS membership consisted of:

Retirees, disabled and beneficiaries currently receiving benefits 455 Terminated employees entitled to benefits but not yet receiving them 20 Active plan members 541 Total 1,016

B. Summary of Significant Accounting Policies and Plan Asset Matters

Basis of Accounting PERS financial statements are prepared using the accrual basis of accounting. Employee and employer contributions are recognized when due, pursuant to Plan provisions and contractual requirements. Benefit payments and refunds are payable when due and payable in accordance with terms of the Plan. Administrative costs are funded through investment earnings.

Method Used to Value Investments Investments are reported at fair value. Investment income is recognized as earned.

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C. Funding Status and Progress

Employees are required to contribute 6% of their earnings to the PERS. If an employee leaves employment or dies before meeting the vesting requirements, accumulated employee contributions and interest are refunded. The City is required to contribute the remaining amounts necessary to finance the benefits for its employees as determined by its actuaries; the current rate is 0% - General Government, 3.6% - Firefighters, and 3.1% - Police, of annual covered payroll. Benefits and employee contributions are fixed by contract and may be amended by the City Council subject to union negotiations. Effective July 1, 2003, police employees contribute 6.5% of their earnings to the PERS. Compensation is expanded by including longevity pay (effective July 1, 2002) and holiday pay (effective July 1, 2004).

D. Investments

Investment Policy The pension plan’s policy in regard to the allocation of invested assets is established and may be amended by the PERS Board by a majority vote of its members. It is the policy of the PERS Board to pursue an investment strategy that reduces risk through the prudent diversification of the portfolio across a broad selection of distinct asset classes. The pension plan’s investment policy discourages the use of cash equivalents, except for liquidity purposes, and aims to refrain from dramatically shifting asset class allocations over short time spans. The following was the Board’s adopted asset allocation policy as of June 30, 2015:

Asset Class Target Allocation

Custom Fixed Income 42% Large Cap Domestic Equity 19 International Equity Developed 15 Mid Cap Domestic Equity 7.5 Small Cap Domestic Equity 7.5 Emerging Markets Equity 6 High Yield Fixed Income 3

Total 100%

Rate of Return For the year ended June 30, 2015, the annual money-weighted rate of return on pension plan investments, net of pension plan investment expense, was 2.74%. The money-weighted rate of return expresses investment performance, net of investment expense, adjusted for the changing amounts actually invested.

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E. Net Pension Asset of the City

The components of the net pension liability of the City at June 30, 2015 were as follows:

Total pension liability $ 321,620 Plan fiduciary net position 377,970

Net Pension Asset $ (56,350)

Plan fiduciary net position as a percentage of the total pension liability 117.52%

Actuarial Assumptions The total pension liability was determined by an actuarial valuation and measurement date as of June 30, 2015, using the following actuarial assumptions, applied to all periods included in the measurement:

Inflation 2.8% Salary increases Rates vary by age Investment rate of return 7.40%, net of pension plan investment expense,

including inflation

Mortality rates were based on the RP-2000 Mortality for Employees, Healthy Annuitants, and Disabled Annuitants Table projected to 2020 per Scale AA.

The actuarial assumptions used in the valuation were based on standard tables modifies for certain plan features such as eligibility for full and early retirement where applicable and input from the plan sponsor. A full actuarial experience study has not been completed

The long-term expected rate of return on pension plan investments was determined using a building- block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. Best estimates of arithmetic real rates of return for each major asset class included in the pension plan’s target asset allocation as of June 30, 2015 (see the discussion of the pension plan’s investment policy) are summarized in the following table:

Asset Class Long-Term Expected Real Rate of Return

Custom Fixed Income 1.0% Large Cap Domestic Equity 6.5 International Equity Developed 6.5 Mid Cap Domestic Equity 7.5 Small Cap Domestic Equity 8.3 Emerging Markets Equity 9.3 High Yield Fixed Income 4.5

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Discount Rate The discount rate used to measure the total pension liability was 7.4%. The projection of cash flows used to determine the discount rate assumed that plan member contributions will be made at the current contribution rate and that City contributions will be made at rates equal to the difference between actuarially determined contribution rates and the member rate. Based on those assumptions, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability.

Employees' Pension Plan

Total Pension Plan Fiduciary Net Pension Liability Net Position Asset

(a) (b) (a)-(b)

Balances as of June 30, 2014 $ 309,463 $ 377,838 $ (68,375)

Changes for the year: Service cost 6,840 6,840 Interest on total pension liability 23,472 23,472 Differences between expected and actual experience (2,268) (2,268) Effect of assumptions changes or inputs (692) (692) Benefit payments (15,195) (15,195) - Employer contributions 2,794 (2,794) Member contributions 2,282 (2,282) Net investment income 10,261 (10,261) Administrative (10) 10

Net changes 12,157 132 12,025

Balances as of June 30, 2015 $ 321,620 $ 377,970 $ (56,350)

Increase (Decrease)

Sensitivity of the Net Pension Asset to Changes in the Discount Rate The following presents the net pension asset of the City, calculated using the discount rate of 7.40%, as well as what the City’s net pension asset would be if it were calculated using a discount rate that is 1 percentage point lower (6.40%) or 1 percentage point higher (8.40%) than the current rate:

Current 1% Decrease Discount Rate 1% Increase

6.40% 7.40% 8.40%

Net Pension Asset $ 14,903 $ 56,350 $ 90,598

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Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions

For the year ended June 30, 2015, the City recognized pension expense of $2,824. At June 30, 2015, the City reported deferred outflows of resources and deferred inflows of resources related to pension from the following sources:

Deferred Deferred Outflows of Inflows of Resources Resources

Differences between expected and actual experience $ $ 1,890 Changes of assumptions 577 Net difference between projected and

actual earning on pension plan investments 14,462

Total $ 14,462 $ 2,467

Employees' Pension Plan

Amounts reported as deferred outflows of resources and deferred inflows of resources related to pension will be recognized in pension expense as follows:

Year Ending June 30,

2016 $ 3,122 2017 3,122 2018 3,122 2019 3,122 2020 (493)

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Trust Fund Financial Statements

COMBINING STATEMENT OF NET POSITION - TRUST FUNDS JUNE 30, 2015

Pension OPEB Trust Trust Fund Fund Total

Assets: Cash and cash equivalents $ 6,828 $ 1,391 $ 8,219 Investments:

U.S. government bonds and securities 107,715 107,715 Corporate bonds 52,538 52,538 Common stock 163,174 4,244 167,418 Mutual funds 47,463 4,495 51,958

Receivables: Accrued investment income 503 503

Total assets 378,221 10,130 388,351

Liabilities: Vouchers and other payables 251 5 256

Net Position: Held in Trust for Employee Benefits $ 377,970 $ 10,125 $ 388,095

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COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION - TRUST FUNDS FOR THE YEAR ENDED JUNE 30, 2015

Pension OPEB Trust Fund Trust Fund Total

Additions: Contributions:

Employer $ 2,794 $ 8,225 $ 11,019 Plan members 2,282 327 2,609 Other 190 190

Total contributions 5,076 8,742 13,818

Investment income (loss): Net appreciation (depreciation) in fair value of investments 4,345 (69) 4,276 Interest and dividends 6,988 309 7,297

Total investment gain 11,333 240 11,573 Investment fees (1,073) (19) (1,092)

Net investment income 10,260 221 10,481

Total additions 15,336 8,963 24,299

Deductions: Benefits 15,195 7,803 22,998 Administrative 10 10

Total deductions 15,205 7,803 23,008

Net Increase 131 1,160 1,291

Net Position at Beginning of Year 377,839 8,965 386,804

Net Position at End of Year $ 377,970 $ 10,125 $ 388,095

Teachers Retirement

A. Plan Description

Teachers, principals, superintendents or supervisors engaged in service of public schools are provided with pensions through the Connecticut State Teachers’ Retirement System, a cost sharing multiple- employer defined benefit pension plan administered by the Teachers Retirement Board. Chapter 167a of the State Statutes grants authority to establish and amend the benefit terms to the Teachers Retirement Board. The Teachers Retirement Board issues a publicly available financial report that can be obtained at www.ct.gov.

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B. Benefit Provisions

The plan provides retirement, disability and death benefits. Employees are eligible to retire at age 60 with 20 years of credited service in Connecticut, or 35 years of credited service including at least 25 years of service in Connecticut.

Normal Retirement Retirement benefits for employees are calculated as 2% of the average annual salary times the years of credited service (maximum benefit is 75% of average annual salary during the 3 years of highest salary).

Early Retirement Employees are eligible after 25 years of credited service including 20 years of Connecticut service, or age 55 with 20 years of credited service including 15 years of Connecticut service with reduced benefit amounts.

Disability Retirement Employees are eligible for service-related disability benefits regardless of length of service. Five years of credited service is required for nonservice-related disability eligibility. Disability benefits are calculated as 2% of average annual salary times credited service to date of disability, but not less than 15% of average annual salary, nor more than 50% of average annual salary.

C. Contributions

Per Connecticut General Statutes Section 10-183z (which reflects Public Act 79-436 as amended), contribution requirements of active employees and the State of Connecticut are approved, amended and certified by the State Teachers Retirement Board and appropriated by the General Assembly.

Employer (School Districts)

School District employers are not required to make contributions to the plan.

The statutes require the State of Connecticut to contribute 100% of each school districts’ required contributions, which are actuarially determined as an amount that, when combined with employee contributions, is expected to finance the costs of the benefits earned by employees during the year, with any additional amount to finance any unfunded accrued liability.

Employees

Effective July 1, 1992, each teacher is required to contribute 6% of salary for the pension benefit.

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D. Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions

At June 30, 2015, the City reports no amounts for its proportionate share of the net pension liability, and related deferred outflows and inflows, due to the statutory requirement that the State pay 100% of the required contribution. The amount recognized by the City as its proportionate share of the net pension liability, the related state support, and the total portion of the net pension liability that was associated with the City were as follows:

City's proportionate share of the net pension liability $ -

State’s proportionate share of the net pension liability associated with the City 86,839 Total $ 86,839

The net pension liability was measured as of June 30, 2014, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. At June 30, 2015, the City has no proportionate share of the net pension liability.

For the year ended June 30, 2015, the City recognized pension expense and revenue of $6,515 in Exhibit II for on-behalf amounts for the benefits provided by the State.

E. Actuarial Assumptions

The total pension liability was determined by an actuarial valuation as of June 30, 2014, using the following actuarial assumptions, applied to all periods included in the measurement:

Inflation 3.00% Salary increase 3.75-7.00%, including inflation Investment rate of return 8.50%, net of pension plan investment expense, including inflation

Mortality rates were based on the RP-2000 Combined Mortality Table projected 19 years using scale AA, with a two-year setback for males and females for the period after service retirement and for dependent beneficiaries.

The actuarial assumptions used in the June 30, 2014 valuation were based on the results of an actuarial experience study for the period July 1, 2005 - June 30, 2010.

Future cost-of-living increases for members who retire on or after September 1, 1992 are assumed to be an annual cost-of-living adjustment of 2%.

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The long-term expected rate of return on pension plan investments was determined using a log-normal distribution analysis in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target asset allocation and best estimates of arithmetic real rates of return for each major class are summarized in the following table:

Target Long-Term Expected Asset Class Allocation Real Rate of Return Large Cap U.S. equities 21.0% 7.3% Developed non-U.S. equities 18.0% 7.5% Emerging markets (non-U.S.) 9.0% 8.6% Core fixed income 7.0% 1.7% Inflation linked bond fund 3.0% 1.3% Emerging market bond 5.0% 4.8% High yield bonds 5.0% 3.7% Real estate 7.0% 5.9% Private equity 11.0% 10.9% Alternative investments 8.0% 0.7% Liquidity fund 6.0% 0.0.% Total 100.0%

F. Discount Rate

The discount rate used to measure the total pension liability was 8.50%. The projection of cash flows used to determine the discount rate assumed that plan member contributions will be made at the current contribution rate and that State contributions will be made at the actuarially determined contribution rates in the future years. Based on those assumptions, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability.

G. Sensitivity of the Net Pension Liability to Changes in the Discount Rate

The City’s proportionate share of the net pension liability is $-0- and, therefore, the change in the discount rate would only impact the amount recorded by the State of Connecticut.

H. Pension Plan Fiduciary Net Position

Detailed information about the pension plan’s fiduciary net position is available in the separately issued financial statements available at www.ct.gov.

I. Other Information

Additional information is included in the required supplementary information section of the financial statements. A schedule of contributions is not presented as the City has no obligation to contribute to the plan.

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14. LITIGATION

There are a number of suits and claims pending against the City, none of which, individually or in the aggregate is believed by counsel to result in a judgment or judgments that would materially affect the City’s financial position.

15. PRIOR PERIOD ADJUSTMENT AND RESTATEMENT

The following restatements were recorded to the beginning of net position of the governmental activities as a result of implementation of GASB Statement No. 68, Accounting and Financial Reporting for Pensions - an amendment of GASB Statement No. 27:

Primary Government: Governmental Activities:

Net position balance at June 30, 2014, as previously reported $ 278,561

Adjustments: Eliminate net pension liability reported per GASB No. 27 791 Record starting net pension asset per GASB No. 68 68,375

Net Position Balance at July 1, 2014, as Restated $ 347,727

Required Supplementary Information

RSI-1 CITY OF MIDDLETOWN, CONNECTICUT GENERAL FUND SCHEDULE OF REVENUES AND OTHER FINANCING SOURCES BUDGET AND ACTUAL (NON-GAAP BUDGETARY BASIS) FOR THE YEAR ENDED JUNE 30, 2015 (In Thousands)

Budgeted Amounts Variance Favorable

Original Final Actual (Unfavorable)

Revenues: Taxes:

General property taxes $ 103,260 $ 103,260 $ 105,562 $ 2,302 Penalties and interest on delinquent taxes 607 607 914 307

Total 103,867 103,867 106,476 2,609

Licenses and permits: Business licenses and permits 26 26 43 17 Non-business licenses and permits 599 599 609 10

Total 625 625 652 27

Intergovernmental revenues 28,544 24,844 28,431 3,587

Charges for services: General government 2,228 2,228 2,421 193 Public safety 1,312 1,312 1,966 654 Culture and recreation 308 308 382 74

Total 3,848 3,848 4,769 921

Miscellaneous revenue: Interest 75 75 53 (22) Other 3,712 3,712 3,926 214

Total 3,787 3,787 3,979 192

Total revenues 140,671 136,971 144,307 7,336

Other financing sources: Premium on bond 5,287 5,287 Transfers in 522 522 553 31

Total 522 522 5,840 5,318

Total $ 141,193 $ 137,493 150,147 $ 12,654

Budgetary revenues are different than GAAP revenues because: State of Connecticut “on-behalf” contributions to the Connecticut State Teachers’

Retirement System for City teachers are not budgeted 6,515

Total Revenues and Other Financing Sources as Reported on the Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds - Exhibit IV $ 156,662

60

RSI-2 CITY OF MIDDLETOWN, CONNECTICUT GENERAL FUND SCHEDULE OF EXPENDITURES AND OTHER FINANCING USES BUDGET AND ACTUAL (NON-GAAP BUDGETARY BASIS) FOR THE YEAR ENDED JUNE 30, 2015 (In Thousands)

Variance Favorable

Original Final Actual (Unfavorable)

Expenditures: General government:

Mayor’s Office $ 563 $ 584 $ 576 $ 8 Finance 2,846 2,928 2,674 254 Town Clerk 293 312 308 4 City Attorney 639 720 666 54 Tax Collector 386 414 408 6 Registrar of Voters 223 227 201 26 Tax Assessor 383 385 369 16 Councilmen 178 183 181 2 Planning Conservation and Development 594 610 609 1 Personnel Department 265 269 224 45 Municipal Building 221 267 266 1 Other 100 100 98 2 P.C. Network 781 781 692 89

Total 7,472 7,780 7,272 508

Public safety: Police 11,730 12,269 12,269 - Office of Emergency Management 62 92 79 13 Canine Control 148 144 144 - Parking Authority 743 846 763 83 Fire Alarms 171 171 167 4 Central Communications 1,616 1,750 1,750 -

Total 14,470 15,272 15,172 100

Public works: Administration 365 393 389 4 Inspections and permits 278 296 293 3 Garage, highway and engineering 2,933 3,661 3,628 33 Building 101 112 111 1 Sanitation landfill 168 145 140 5 Traffic paint 154 164 162 2 Recycling 141 130 122 8

Total 4,140 4,901 4,845 56

(Continued on next page)

Budgeted Amounts

61

RSI-2 CITY OF MIDDLETOWN, CONNECTICUT GENERAL FUND SCHEDULE OF EXPENDITURES AND OTHER FINANCING USES BUDGET AND ACTUAL (NON-GAAP BUDGETARY BASIS) (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2015 (In Thousands)

Variance Favorable

Original Final Actual (Unfavorable)

Expenditures (continued): Health $ 660 $ 728 $ 727 $ 1

Parks and recreation 2,211 2,282 2,165 117

Russell Library 2,798 2,910 2,909 1

Education 76,150 76,150 76,012 138

Sundry municipal services: Transit District 270 270 270 - Senior affairs 456 470 458 12 Youth services 217 217 206 11 Human relations 153 164 164 - Reserve for salaries 1,000 25 25 Contingency Fund 4 - Total 2,100 1,146 1,098 48

Special accounts 1,040 1,407 1,286 121

Employee benefits 14,435 14,435 14,413 22

Insurance - bonds 2,987 2,987 2,987 -

Total expenditures 128,463 129,998 128,886 1,112

Other financing uses: Transfers out 14,730 14,730 14,730 -

Total $ 143,193 $ 144,728 143,616 $ 1,112

Budgetary expenditures are different than GAAP expenditures because: State of Connecticut on-behalf payments to the Connecticut State Teachers’

Retirement System for City teachers are not budgeted 6,515 Encumbrances for purchases and commitments ordered but not received are

reported in the year the order is placed for budgetary purposes, but in the year received for financial reporting purposes (172)

Total Expenditures and Other Financing Uses as Reported on the Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds - Exhibit IV $ 149,959

Budgeted Amounts

62

RSI-3 CITY OF MIDDLETOWN, CONNECTICUT SCHEDULE OF CHANGES IN NET PENSION LIABILITY AND RELATED RATIOS LAST TWO FISCAL YEARS (In Thousands)

2015 2014

Total pension liability: Service cost $ 6,840 $ 6,577 Interest 23,472 22,384 Changes of benefit terms Differences between expected and actual experience (2,268) Changes of assumptions (692) Benefit payments, including refunds of member contributions (15,195) (14,626)

Net change in total pension liability 12,157 14,335 Total pension liability - beginning 309,463 295,129

Total pension liability - ending 321,620 309,464 Plan fiduciary net position:

Contributions - employer 2,794 2,418 Contributions - member 2,282 2,269 Net investment income 10,260 53,223 Benefit payments, including refunds of member contributions (15,195) (14,626) Administrative expense (10) (1)

Net change in plan fiduciary net position 131 43,283 Plan fiduciary net position - beginning 377,839 334,556

Plan fiduciary net position - ending 377,970 377,839 Net Pension Liability (Asset) - Ending $ (56,350) $ (68,375)

Plan fiduciary net position as a percentage of the total pension liability (asset) 117.52% 122.09%

Covered-employee payroll $ 36,908 $ 34,606

Net pension liability (asset) as a percentage of covered-employee payroll -152.68% -197.58%

63

RSI-4 CITY OF MIDDLETOWN, CONNECTICUT SCHEDULE OF EMPLOYER CONTRIBUTIONS LAST TEN FISCAL YEARS (In Thousands)

2015 2014 2013 2012 2011 2010 2009 2008 2007 2006

Actuarially determined contribution $ 2,794 $ 2,418 $ 2,205 $ 22,777 $ 1,933 $ 1,066 $ 585 $ 722 $ 525 $ 200 Contributions in relation to the actuarially

determined contribution 2,794 2,418 1,388 22,777 1,933 1,066 585 722 525 200

Contribution Deficiency (Excess) $ - $ - $ 817 $ - $ - $ - $ - $ - $ - $ -

Covered-employee payroll $ 36,908 $ 34,606 $ 35,560 $ 35,327 $ 34,256 $ 33,664 $ 30,629 $ 29,625 $ 28,430 $ 25,951

Contributions as a percentage of covered-employee payroll 7.57% 6.99% 3.90% 64.47% 5.64% 3.17% 1.91% 2.44% 1.85% 0.77%

Notes to Schedule

Valuation date: July 1, 2014 Measurement date: June 30, 2015 Valuation timing Actuarially determined contribution rates are calculated as of June 30, two years prior to the end of the fiscal year in which

contributions are reported Methods and assumptions used to determine contribution rates: Actuarial cost method Entry Age Cost Method Amortization method Level dollar, open Remaining amortization period 15 years Asset valuation method Over 4 year period, at 25% per year Inflation 2.80% Salary increases Graded salary growth with an ultimate rate of 3.0% Investment rate of return 7.40% Cost of living adjustment 2.5% per year Retirement age Rates based on age and service Turnover Rates based on age Mortality RP-2000 Mortality for Employees and Healthy Annuitant Mortality Table with generational projection per Scale AA

64

RSI-5 CITY OF MIDDLETOWN, CONNECTICUT SCHEDULE OF INVESTMENT RETURNS LAST TWO FISCAL YEARS

2015 2014

Annual money-weighted rate of return, net of investment expense 2.74% 16.09%

65

RSI-6 CITY OF MIDDLETOWN, CONNECTICUT SCHEDULE OF THE CITY’S PROPORTIONATE SHARE OF NET PENSION LIABILITY TEACHERS' RETIREMENT PLAN LAST FISCAL YEAR

2015

0.00%

$ -

associated with the City 86,839 Total $ 86,839

$ 34,168

0.00%

61.51%

Notes to Schedule

Changes in benefit terms None Changes of assumptions During 2011, rates of withdrawal, retirement and assumed

rates of salary increases were adjusted to reflect actual and anticipated experience. These assumptions were recommended as part of the Experience Study for the System for the five-year period ended June 30, 2010.

Actuarial cost method Entry age Amortization method Level percent of salary, closed Remaining amortization period 22.4 years Asset valuation method 4-year smoothed market

Plan fiduciary net position as a percentage of the total pension liability

City’s proportion of the net pension liability

City’s proportionate share of the net pension liability

State’s proportionate share of the net pension liability

City’s proportionate share of the net pension liability as a percentage of its covered-employee payroll

City’s covered-employee payroll

66

Combining and Individual Fund Statements and Schedules

General Fund

GENERAL FUND

The General Fund is the principal fund of the City and is used to account for all activities of

the City not included in other specified funds. The General Fund accounts for the normal

recurring activities of the City (i.e., education, police, recreation, public works, general

government, etc.). These activities are funded principally by property taxes on individuals

and businesses and grants from other governmental units.

EXHIBIT A-1 CITY OF MIDDLETOWN, CONNECTICUT GENERAL FUND COMPARATIVE BALANCE SHEET JUNE 30, 2015 AND 2014 (In Thousands)

2015 2014

ASSETS

Cash and cash equivalents $ 22,583 $ 2,585 Taxes receivable 4,903 4,264 Accounts receivable 200 116 Due from other funds 8,166 21,774

Total Assets $ 35,852 $ 28,739

LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES

Liabilities: Vouchers and other payables $ 4,915 $ 5,169

Deferred Inflows of Resources: Unavailable revenue - property taxes 4,370 3,706

Fund Balances: Assigned 4,741 3,068 Unassigned 21,826 16,796

Total fund balances 26,567 19,864

Total Liabilities, Deferred Inflows of Resources and Fund Balances $ 35,852 $ 28,739

67

EXHIBIT A-2 CITY OF MIDDLETOWN, CONNECTICUT GENERAL FUND REPORT OF TAX COLLECTOR FOR THE YEAR ENDED JUNE 30, 2015 (In Thousands)

Uncollected Transfers Net Collections Uncollected Grand Taxes To Amount Lien Taxes

List July 1, 2013 Additions Deductions Abatements Suspense Collectible Taxes Interest Fees Suspense Total June 30, 2015

2013 $ 116,604 $ 566 $ 1,617 $ 90 $ $ 115,463 $ 112,779 $ 388 $ 4 $ $ 113,171 $ 2,684 2012 2,378 169 183 4 2,360 1,242 243 4 1,489 1,118 2011 969 121 119 20 951 286 116 1 403 665 2010 516 1 26 489 102 68 5 175 387 2009 318 1 33 286 52 36 10 98 234 2008 188 1 30 157 19 24 10 53 138 2007 269 30 239 7 26 10 43 232 2006 111 26 85 7 21 13 41 78 2005 42 16 26 7 28 12 47 19 2004 15 5 10 4 17 7 28 6 2003 20 2 18 10 7 3 20 8 2002 8 2 6 6 3 9 6 2001 6 1 5 6 2 8 5 2000 2 2 3 1 4 2 1999 1 1 2 1 3 1 1998 1 1 1 1 1

Total $ 121,448 $ 857 $ 1,921 $ 90 $ 195 $ 120,099 $ 114,515 $ 992 $ 9 $ 77 $ 115,593 $ 5,584

Applicable to: General Fund $ 5,023 Fire District Fund 561

Total $ 5,584

Lawful Corrections

68

Nonmajor Governmental Funds

NONMAJOR GOVERNMENTAL FUNDS

Special Revenue Funds

The Special Revenue Funds account for resources legally restricted to expenditures for specified current operating purposes. These activities are funded principally by property taxes on individuals and businesses, grants from other governmental units and user fees.

Fund

Funding Source

Function

Fire District Taxes - central district Fire protection Sanitary Disposal District User fees Collection of refuse from both

residents and businesses in the central City area

Dog Fund Licensing of dogs, contributions of the General Fund, fines, fees and a State Grant

Operation of a dog pound and a portion of the salary of a dog warden

Economic Development Grants and contributions Community development programs and activities

Middletown Business Improvement Taxes-special services district Economic revitalization and development of Central Business District

Water Charges for services Water distribution operations Educational Grants State and federal grants Special education programs Health Grants State, Federal and contributions Health programs Landfill, Waste and Recycling User fees Bulky waste operation School Cafeteria Sale of food and grants School lunch programs General Sewer Improvement User fees Operation of sewer system Parking District Fees from parking Parking improvements Librarian's Fees and trust income Library support services Special Grants Intergovernmental and other

grants Various special purpose programs

Sewage Disposal User fees Operation and maintain the sewerage disposal system

Police Benevolence Trust income Relief of sick, injured and disabled policemen

Community Development Block Grant Federal grant Community improvements Walter C. Jones Trust Trust income Care and support of the poor

Permanent Funds

Permanent funds are used to report resources that are legally restricted to the extent that only earnings, not principal, may be used for purposes that support the reporting government’s programs.

Walter B. Hubbard Trust Contributions and trust income Maintain parks and cemeteries Luther S. Hull Trust Contributions and trust income Education Frank B. Weeks Trust Contributions and trust income City parks Russell Library Fund Contributions and trust income City library uses

Capital Projects Funds

The Capital Projects Funds are used to account for financial resources to be used for acquisition or construction of major capital facilities.

General Government General Fund budget and

special revenue funds Capital improvements and equipment purchase for General Government

School District General Fund budget and special revenue funds

Capital improvements and equipment purchase for School District

Fire General Fund budget and special revenue funds

Capital improvements and equipment purchase for Fire Department

Sanitation General Fund budget and special revenue funds

Capital improvements and equipment purchase for Sanitation Department

Sewer General Fund budget and special revenue funds

Capital improvements and equipment purchase for Sewer Department

Water General Fund budget and special revenue funds

Capital improvements and equipment purchase for Water Department

Kleen Water General Fund budget and special revenue funds

Capital improvements and equipment purchase for Kleen Water Plant

CITY OF MIDDLETOWN, CONNECTICUT COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS JUNE 30, 2015 (In Thousands)

EXHIBIT B-1

Special Revenue Funds Middletown Landfill,

Sanitary Kleen Economic Business Health Waste, School Fire Disposal Water Dog Development Improvement Water Educational Grants Recycling Cafeteria

District District Fund Fund Fund Fund Fund Grants Fund Fund Fund ASSETS

Cash and cash equivalents $ 1,084 $ 1,127 $ 799 $ 24 $ 309 $ 12 $ 3,321 $ 1,719 $ 11 $ 403 $ 1 Investments Receivables:

Accounts receivable 247 1,476 Taxes receivable - delinquent 530 Intergovernmental 618 418

Due from other funds 565 Inventories, at cost 32

Total Assets $ 1,614 $ 1,374 $ 799 $ 24 $ 309 $ 12 $ 4,797 $ 2,902 $ 11 $ 403 $ 451

LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES

Liabilities:

Vouchers and other payables $ 16 $ 28 $ 55 $ 23 $ $ 12 $ 43 $ 1,334 $ 2 $ 19 $ Due to other funds 565 Deferred revenue 995 Total liabilities 16 28 55 23 - 12 43 2,329 2 19 565

Deferred Inflows of Resources: Unavailable revenue - property taxes 469

Fund Balances: Nonspendable 32 Restricted 309 573 9 Committed 1,129 1,346 744 1 4,754 384 Unassigned (146)

Total fund balances 1,129 1,346 744 1 309 - 4,754 573 9 384 (114)

Total Liabilities, Deferred Inflows of Resources and Fund Balances $ 1,614 $ 1,374 $ 799 $ 24 $ 309 $ 12 $ 4,797 $ 2,902 $ 11 $ 403 $ 451

(Continued on next page)

69

CITY OF MIDDLETOWN, CONNECTICUT COMBINING BALANCE SHEET (CONTINUED) NONMAJOR GOVERNMENTAL FUNDS JUNE 30, 2015 (In Thousands)

EXHIBIT B-1

ASSETS

Cash and cash equivalents Investments Receivables:

Accounts receivable Taxes receivable - delinquent Intergovernmental

Due from other funds Inventories, at cost

Total Assets

LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES

Liabilities: Vouchers and other payables

Due to other funds Deferred revenue Total liabilities

Deferred Inflows of Resources: Unavailable revenue - property taxes

Fund Balances: Nonspendable Restricted Committed Unassigned

Total fund balances

Total Liabilities, Deferred Inflows of Resources and Fund Balances

Special Revenue Funds General Community Walter B. Luther S. Sewer Sewage Police Development Walter C. Hubbard Hull

Improvement Parking Librarian’s Special Disposal Benevolence Block Jones Trust Trust Fund District Fund Grants Fund Fund Grant Fund Fund Fund Fund

$ 3,006 $ 238 $ 17 $ 3,155 $ 3,607 $ 3 $ 262 $ 173 $ 10 $ 1

183 1,227

456 100

$ 3,189 $ 238 $ 17 $ 3,611 $ 4,834 $ 3 $ 362 $ 173 $ 10 $ 1

$ 3 $ $ $ 652 $ 90 $ $ 100 $ $ $ 356

1,494 3 - - 2,502 90 - 100 - - -

1,109 262 173 10 1 3,186 238 17 4,744 3

3,186 238 17 1,109 4,744 3 262 173 10 1

$ 3,189 $ 238 $ 17 $ 3,611 $ 4,834 $ 3 $ 362 $ 173 $ 10 $ 1

(Continued on next page)

Permanent Funds

70

CITY OF MIDDLETOWN, CONNECTICUT COMBINING BALANCE SHEET (CONTINUED) NONMAJOR GOVERNMENTAL FUNDS JUNE 30, 2015 (In Thousands)

EXHIBIT B-1

ASSETS

Cash and cash equivalents Investments Receivables:

Accounts receivable Taxes receivable - delinquent Intergovernmental

Due from other funds Inventories, at cost

Total Assets

LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES

Liabilities: Vouchers and other payables

Due to other funds Deferred revenue Total liabilities

Deferred Inflows of Resources: Unavailable revenue - property taxes

Fund Balances: Nonspendable Restricted Committed Unassigned

Total fund balances

Total Liabilities, Deferred Inflows of Resources and Fund Balances

Total Frank B. Russell Nonmajor Weeks Library General School Kleen Interfund Governmental Fund Fund Government District Fire Sanitation Sewer Water Water Eliminations Funds

$ 64 $ $ 360 $ 37 $ 59 $ 100 $ 558 $ 274 $ 1,137 $ $ 21,871 1,215 1,215

3,133 530 1,592

(565) - 32

$ 64 $ 1,215 $ 360 $ 37 $ 59 $ 100 $ 558 $ 274 $ 1,137 $ (565) $ 28,373

$ 1 $ $ 43 $ 21 $ $ $ 11 $ $ 24 $ $ 2,477 (565) 356

2,489 1 - 43 21 - - 11 - 24 (565) 5,322

469

32 63 1,215 3,724

317 16 59 100 547 274 1,113 18,972 (146)

63 1,215 317 16 59 100 547 274 1,113 - 22,582

$ 64 $ 1,215 $ 360 $ 37 $ 59 $ 100 $ 558 $ 274 $ 1,137 $ (565) $ 28,373

Capital Project FundsPermanent Funds

71

CITY OF MIDDLETOWN, CONNECTICUT COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2015 (In Thousands)

EXHIBIT B-2

Special Revenue Funds Middletown Landfill,

Sanitary Kleen Economic Business Health Waste, School Fire Disposal Water Dog Development Improvement Water Educational Grants Recycling Cafeteria

District District Fund Fund Fund Fund Fund Grants Fund Fund Fund

Revenues: Taxes $ 9,105 $ $ $ $ $ 150 $ $ $ $ $ Intergovernmental revenues 868 18,356 83 1,470 Investment income 3 62 7 1 Charges for services 1,761 25 6,371 314 619 Miscellaneous 180 9 312 92 9 189

Total revenues 10,156 1,832 - 25 312 150 6,470 18,356 92 315 2,278

Expenditures: Current:

General government 36 366 Public safety 9,868 16 155 51 Health and human services 48 Culture and recreation Education 16,914 2,280 Sewer, water and sanitation 1,672 564 3,450

Capital outlay 128 Total expenditures 9,868 1,672 564 16 164 155 3,450 16,914 99 366 2,280

Excess (Deficiency) of Revenues over Expenditures 288 160 (564) 9 148 (5) 3,020 1,442 (7) (51) (2)

Other Financing Sources (Uses): Transfers in 17 1,582 30 Transfers out (358) (154) (274) (8) (3,236) (22)

Total other financing sources (358) (137) 1,308 (8) - - (3,236) - (22) 30 -

Net Change in Fund Balances (70) 23 744 1 148 (5) (216) 1,442 (29) (21) (2)

Fund Balances at Beginning of Year 1,199 1,323 - - 161 5 4,970 (869) 38 405 (112)

Fund Balances at End of Year $ 1,129 $ 1,346 $ 744 $ 1 $ 309 $ - $ 4,754 $ 573 $ 9 $ 384 $ (114)

(Continued on next page)

72

CITY OF MIDDLETOWN, CONNECTICUT COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES (CONTINUED) NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2015 (In Thousands)

EXHIBIT B-2

Revenues: Taxes Intergovernmental revenues Investment income Charges for services Miscellaneous

Total revenues

Expenditures: Current:

General government Public safety Health and human services Culture and recreation Education Sewer, water and sanitation

Capital outlay Total expenditures

Excess (Deficiency) of Revenues over Expenditures

Other Financing Sources (Uses): Transfers in Transfers out

Total other financing sources

Net Change in Fund Balances

Fund Balances at Beginning of Year

Fund Balances at End of Year

Special Revenue Funds Permanent Funds General Community Walter B. Luther S. Sewer Sewage Police Development Walter Hubbard Hull

Improvement Parking Librarian’s Special Disposal Benevolence Block Jones Trust Trust Fund District Fund Grants Fund Fund Grant Fund Fund Fund Fund

$ $ $ $ $ $ $ $ $ $ 56 2,948 673

27 4 82 5,770

23 427 186 16 65 27 - 161 3,375 5,960 - 689 65 - -

102 31 419 72 288

198 220 1,794

147 4,729 1,476 302

147 102 198 3,809 4,729 - 721 72 - -

(120) (102) (37) (434) 1,231 - (32) (7) - -

31 49 602 (36) (989)

31 - 49 566 (989) - - - - -

(89) (102) 12 132 242 - (32) (7) - -

3,275 340 5 977 4,502 3 294 180 10 1

$ 3,186 $ 238 $ 17 $ 1,109 $ 4,744 $ 3 $ 262 $ 173 $ 10 $ 1

(Continued on next page)

73

CITY OF MIDDLETOWN, CONNECTICUT COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES (CONTINUED) NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2015 (In Thousands)

EXHIBIT B-2

Revenues: Taxes Intergovernmental revenues Investment income Charges for services Miscellaneous

Total revenues

Expenditures: Current:

General government Public safety Health and human services Culture and recreation Education Sewer, water and sanitation

Capital outlay Total expenditures

Excess (Deficiency) of Revenues over Expenditures

Other Financing Sources (Uses): Transfers in Transfers out

Total other financing sources

Net Change in Fund Balances

Fund Balances at Beginning of Year

Fund Balances at End of Year

Permanent Funds Total

Frank B. Russell Nonmajor Weeks Library General School Kleen Interfund Governmental Fund Fund Government District Fire Sanitation Sewer Water Water Eliminations Funds

$ $ $ $ $ $ $ $ $ $ $ 9,255 24,454

16 1 1 2 124 14,942

1,508 - 16 1 - - - 1 - 2 - 50,283

1,026 10,378

48 418

20,988 10,562

617 77 67 66 235 644 3,612 - - 617 77 67 66 235 - 644 - 47,032

- 16 (616) (77) (67) (66) (234) - (642) - 3,251

450 56 76 70 300 274 565 (2,947) 1,155 (1) (49) 2,947 (2,180) (1) (49) 450 56 76 70 300 274 565 - (1,025)

(1) (33) (166) (21) 9 4 66 274 (77) - 2,226

64 1,248 483 37 50 96 481 - 1,190 - 20,356

$ 63 $ 1,215 $ 317 $ 16 $ 59 $ 100 $ 547 $ 274 $ 1,113 $ - $ 22,582

Capital Project Funds

74

CITY OF MIDDLETOWN, CONNECTICUT COMBINING SCHEDULE OF REVENUES AND EXPENDITURES - ACTUAL AND BUDGET SPECIAL REVENUE FUNDS FOR THE YEAR ENDED JUNE 30, 2015 (In Thousands)

EXHIBIT B-3

Fire District Fund Adjustment Adjustment

Actual to Actual on a Variance Actual to Actual on a Variance on a Budgetary Budgetary Favorable on a Budgetary Budgetary Favorable

GAAP Basis Basis Basis Budget (Unfavorable) GAAP Basis Basis Basis Budget (Unfavorable)

Revenues: Property taxes $ 9,105 $ $ 9,105 $ 9,155 $ (50) $ $ $ $ $ Intergovernmental 868 868 834 34 Charges for services - 1,761 1,761 1,735 26 Interest 3 3 7 (4) 62 62 10 52 Miscellaneous 180 180 70 110 9 9 1 8

Total revenues 10,156 - 10,156 10,066 90 1,832 - 1,832 1,746 86

Expenditures: Public safety 9,868 5 9,873 9,881 8 Sewer, water and sanitation 1,672 (101) 1,571 1,786 215

Total expenditures 9,868 5 9,873 9,881 8 1,672 (101) 1,571 1,786 215

Excess (Deficiency) of Revenues Over Expenditures 288 (5) 283 185 98 160 101 261 (40) 301

Transfers In (Out) (358) (358) (358) - (137) (137) (137) -

Excess (Deficiency) of Revenues and Transfers In Over Expenditures and Transfers Out $ (70) $ (5) $ (75) $ (173) $ 98 $ 23 $ 101 $ 124 $ (177) $ 301

(Continued on next page)

Sanitary Disposal District Fund

75

CITY OF MIDDLETOWN, CONNECTICUT COMBINING SCHEDULE OF REVENUES AND EXPENDITURES - ACTUAL AND BUDGET (CONTINUED) SPECIAL REVENUE FUNDS FOR THE YEAR ENDED JUNE 30, 2015 (In Thousands)

EXHIBIT B-3

Revenues: Property taxes Intergovernmental Charges for services Interest Miscellaneous

Total revenues

Expenditures: Public safety Sewer, water and sanitation

Total expenditures

Excess (Deficiency) of Revenues Over Expenditures

Transfers In (Out)

Excess (Deficiency) of Revenues and Transfers In Over Expenditures and Transfers Out

Water Fund Sewage Disposal Fund Adjustment Adjustment

Actual to Actual on a Variance Actual to Actual on a Variance on a Budgetary Budgetary Favorable on a Budgetary Budgetary Favorable

GAAP Basis Basis Basis Budget (Unfavorabl GAAP Basis Basis Budget (Unfavorable)

$ $ $ $ $ $ $ $ $ $

6,371 6,371 5,078 1,293 5,770 5,770 5,155 615 7 7 25 (18) 4 4 10 (6)

92 92 133 (41) 186 186 7 179 6,470 - 6,470 5,236 1,234 5,960 - 5,960 5,172 788

3,450 74 3,524 4,413 889 4,729 125 4,854 5,161 307 3,450 74 3,524 4,413 889 4,729 125 4,854 5,161 307

3,020 (74) 2,946 823 2,123 1,231 (125) 1,106 11 1,095

(3,236) (3,236) (3,236) - (989) (989) (989) -

$ (216) $ (74) $ (290) $ (2,413) $ 2,123 $ 242 $ (125) $ 117 $ (978) $ 1,095

(Continued on next page)

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CITY OF MIDDLETOWN, CONNECTICUT COMBINING SCHEDULE OF REVENUES AND EXPENDITURES - ACTUAL AND BUDGET (CONTINUED) SPECIAL REVENUE FUNDS FOR THE YEAR ENDED JUNE 30, 2015 (In Thousands)

EXHIBIT B-3

Revenues: Property taxes Intergovernmental Charges for services Interest Miscellaneous

Total revenues

Expenditures: Public safety Sewer, water and sanitation

Total expenditures

Excess (Deficiency) of Revenues Over Expenditures

Transfers In (Out)

Excess (Deficiency) of Revenues and Transfers In Over Expenditures and Transfers Out

Totals Adjustment

Actual to Actual on a Variance on a Budgetary Budgetary Favorable

GAAP Basis Basis Basis Budget (Unfavorable)

$ 9,105 $ - $ 9,105 $ 9,155 $ (50) 868 - 868 834 34

13,902 - 13,902 11,968 1,934 76 - 76 52 24

467 - 467 211 256 24,418 - 24,418 22,220 2,198

9,868 5 9,873 9,881 8 9,851 98 9,949 11,360 1,411

19,719 103 19,822 21,241 1,419

4,699 (103) 4,596 979 3,617

(4,720) - (4,720) (4,720) -

$ (21) $ (103) $ (124) $ (3,741) $ 3,617

77

Capital Projects Fund

CAPITAL PROJECTS FUND This fund accounts for the purchase, construction or renovation of major capital assets. These activities are funded principally by bond issues and intergovernmental revenues.

EXHIBIT C CITY OF MIDDLETOWN, CONNECTICUT CAPITAL PROJECTS FUND SCHEDULE OF PROJECT AUTHORIZATIONS AND EXPENDITURES FOR THE YEAR ENDED JUNE 30, 2015 (In Thousands)

Project Project Amended Cumulative Available Number Description Budget Expenditures Encumbrances Budget

4010 Technology Systems Land Records $ 123 $ 123 $ $ 4016 City Public Parking Improvements 740 731 1 8 4017 Water Wellfield Shoreline Protection 700 694 6 4018 City Pub Parking Imp, Const & Infastruct 599 23 3 573 4019 Parking Public Safety/Security Improve 600 85 515 4021 Plan, Design, Cons, Portable Water Infrastr 750 557 1 192 4025 MDTWN Youth Soccer 355 353 2 4044 Fire Truck & Related Equipment 494 489 5 4049 Eckersley Hall 750 683 48 19 4105 Rehab Main St. Water Main N of Wash 1,930 1,406 312 212 4150 CSO 2007 BI Sewer/Separation 8,620 4,771 601 3,248 4159 Remediation of OMO Manuf. Site 3,000 2,826 174 4164 Acquire Propty/Constr Park King & Clinton 550 448 5 97 4165 Design Acquire/Constr W/Mattabassett 37,000 9,621 13,065 14,314 4166 Eckersley Hall-Plan, Impr,Const, Restore 4,850 3,874 289 687 4180 2007 Road Improv. Bond 9,975 8,369 148 1,458 4250 Water and Sewer Improvements 4,500 3,745 7 748 4271 Water Planning Improvements 250 198 49 3 4272 Installation of Water System (SCADA) 250 142 98 10 4273 John S. Roth Treatment Plant Improvements 310 50 19 241 4274 Sewer System Pump Station 470 220 151 99 4275 Charles Bacon Plant Improvements Water 725 420 17 288 4276 Integrated Public Safety Software 745 665 78 2 4277 Information Technology Infrastructure 745 741 4 4279 Acquisition/Implement Technology Project 456 225 237 (6) 4281 Information Technology System & Devices 625 528 16 81 4282 Pur/Install Telephone System City BLDGS 685 634 51 4283 City Info Technology Storage Infrastructure 736 558 32 146 4284 CNR Ordinance 2012-2013 585 494 33 58 4285 CNR Ordinance 13/14 750 735 12 3 4286 CNR Ordinance 2014-2015 723 327 139 257 4458 Citywide Streets Poles & Equip 1,150 1,083 15 52 4459 2013 Road, Sidewalk & PW Facilities 15,200 807 859 13,534 4463 Standby Generator for City Hall 495 133 362 4464 Keigwin Middle Sch Parking Lot 450 357 3 90 4465 Keigwin Middle Sch Fire Alarm System 165 152 8 5 4466 Asbestos Abatement/Woodrow Wilson Middle 435 64 1 370 4467 Woodrow Wilson Middle 749 6 1 742 4468 Wired & Wireless Network MHS 343 295 48 4469 Powerschool Info Sys Mdtwn Schools 135 134 1 4510 Jackson Street Bridge 280 122 158 4562 Renovation & Improve Russell Library 749 622 9 118 4563 Physical Inspect & Reval Real Property 750 529 147 74 4570 Sanitary Sewers 2,500 1,663 57 780 4580 Road Improvement Bond 2005 9,850 8,851 120 879 4600 Mill Street Bridge 1,737 1,386 90 261 4615 2011 Road Improvement Bond 14,170 8,000 1,001 5,169 4617 Mdtwn Mattabassett District Membership 13,200 13,178 22 4618 Plan, Design, Const, Repl, Sani Sewer Infras 500 272 228 4619 BI Force Main & Pump Station w/Mattabasset 3,000 3 2,997 4621 Combined Sewer Overflow Separation 7,750 2 7,748 4654 Waterline Improv. Arrigoni Bridge 350 311 44 (5) 4700 CSO Road Improvement 9,900 7,334 17 2,549 4710 2001 Road Improvement Bond 6,800 6,594 156 50 4730 Open Space 3,000 2,983 17 4740 Middletown High School BI 106,650 106,347 177 126 4746 Security Measures at City Hall 750 53 328 369 4747 Web Base Security Sys School Citywide 750 2 748 4750 2003 Road Improvement Bond 8,100 8,030 70

Total $ 293,499 $ 214,048 $ 18,394 $ 61,057

78

Internal Service Funds

INTERNAL SERVICE FUNDS

Internal Service Funds are used for the financing of goods or services provided by one

department or agency to other departments or agencies of the City, or to other governments, on

a cost reimbursement basis. The City has three such funds.

Health Benefits Fund - established on July 1, 1991 to account for self-insurance activity of the

City relating to providing health benefits to current and retired employees.

Property and Casualty Fund - to account for self-insurance activity relating to providing property

and casualty insurance benefits to the City of Middletown.

Workers’ Compensation Fund - to account for self-insurance activity relating to providing

workmen’s compensation benefits to eligible recipients.

EXHIBIT D-1 CITY OF MIDDLETOWN, CONNECTICUT COMBINING STATEMENT OF NET POSITION INTERNAL SERVICE FUNDS JUNE 30, 2015 WITH COMPARATIVE TOTALS FOR 2014 (In Thousands)

Property Health and Workers’ Totals

Benefits Casualty Compensation Fund Fund Fund 2015 2014

Assets: Cash and cash equivalents $ 8,042 $ 2,782 $ 5,273 $ 16,097 $ 13,239

Liabilities: Current liabilities

Accounts and other payables 1 10 3 14 29 Unpaid claims - current 2,877 2,877 2,120

Total current liabilities 2,878 10 3 2,891 2,149

Noncurrent liabilities: Unpaid claims - noncurrent 1,100 3,662 4,762 5,094

Total liabilities 2,878 1,110 3,665 7,653 7,243

Net Position $ 5,164 $ 1,672 $ 1,608 $ 8,444 $ 5,996

79

EXHIBIT D-2 CITY OF MIDDLETOWN, CONNECTICUT COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION INTERNAL SERVICE FUNDS FOR THE YEAR ENDED JUNE 30, 2015 WITH COMPARATIVE TOTALS FOR 2014 (In Thousands)

Property Health and Workers’ Totals

Benefits Casualty Compensation Fund Fund Fund 2015 2014

Operating revenues: Charges for services $ 24,568 $ 2,505 $ 2,049 $ 29,122 $ 13,405 Other 2,196 6 77 2,279 2,311

Total operating revenues 26,764 2,511 2,126 31,401 15,716

Operating expenses: Benefit payments 5,431 447 1,507 7,385 6,697 Administration 875 21 159 1,055 737 Insurance 18,781 1,529 150 20,460 9,973

Total operating expenses 25,087 1,997 1,816 28,900 17,407

Operating Income (Loss) 1,677 514 310 2,501 (1,691)

Nonoperating revenue: Interest income 14 4 8 26 19

Income (Loss) Before Transfers 1,691 518 318 2,527 (1,672)

Transfers Out (79) (79) (38)

Net Income (Loss) 1,691 439 318 2,448 (1,710)

Net Position at Beginning of Year 3,473 1,233 1,290 5,996 7,706

Net Position at End of Year $ 5,164 $ 1,672 $ 1,608 $ 8,444 $ 5,996

80

EXHIBIT D-3 CITY OF MIDDLETOWN, CONNECTICUT COMBINING STATEMENT OF CASH FLOWS INTERNAL SERVICE FUNDS FOR THE YEAR ENDED JUNE 30, 2015 WITH COMPARATIVE TOTALS FOR 2014 (In Thousands)

Property Health and Workers’ Totals

Benefits Casualty Compensation Fund Fund Fund 2015 2014

Cash Flows from Operating Activities: Interfund services provided or used $ 24,568 $ 2,505 $ 2,049 $ 29,122 $ 13,405 Cash received from insurance reimbursements 2,196 6 77 2,279 2,311 Cash paid to vendors (24,357) (2,028) (2,105) (28,490) (16,940)

Net cash provided by (used in) operating activities 2,407 483 21 2,911 (1,224)

Cash Flows from Noncapital Financing Activities: Transfers to other funds (79) (79) (38)

Cash Flows from Investing Activities:

Interest income 14 4 8 26 19

Net Increase (Decrease) in Cash and Cash Equivalents 2,421 408 29 2,858 (1,243)

Cash and Cash Equivalents at Beginning of Year 5,621 2,374 5,244 13,239 14,482

Cash and Cash Equivalents at End of Year $ 8,042 $ 2,782 $ 5,273 $ 16,097 $ 13,239

Reconciliation of Operating Income (Loss) to Net Cash Provided by (Used in) Operating Activities:

Operating income (loss) $ 1,677 $ 514 $ 310 $ 2,501 $ (1,691) Adjustments to reconcile operating income (loss) to net

cash provided by (used in) operating activities: Decrease (Increase) in vouchers and other payable 730 (31) (289) 410 467

Net Cash Provided by (Used in) Operating Activities $ 2,407 $ 483 $ 21 $ 2,911 $ (1,224)

81

Fiduciary Funds

FIDUCIARY FUNDS

AGENCY FUNDS

Agency Funds are custodial in nature and are used to account for various school activities, and escrow accounts.

EXHIBIT E CITY OF MIDDLETOWN, CONNECTICUT AGENCY FUNDS COMBINING STATEMENT OF CHANGES IN ASSETS AND LIABILITIES FOR THE YEAR ENDED JUNE 30, 2015 (In Thousands)

Balance Balance July 1, 2014 Additions Deductions June 30, 2015

Board of Education Activity Fund

Assets: Cash and cash equivalents $ 410 $ 1,116 $ 1,054 $ 472 Investments 37 37

Total $ 447 $ 1,116 $ 1,054 $ 509

Liabilities: Due to student groups $ 447 $ 1,116 $ 1,054 $ 509

Escrow Account Fund

Assets: Cash and cash equivalents $ 1,913 $ 998 $ 727 $ 2,184

Liabilities: Due to contract liabilities $ 1,913 $ 998 $ 727 $ 2,184

Total All Funds

Assets: Cash and cash equivalents $ 2,323 $ 2,114 $ 1,781 $ 2,656 Investments 37 37

Total $ 2,360 $ 2,114 $ 1,781 $ 2,693

Liabilities: Due to student and other groups $ 2,360 $ 2,114 $ 1,781 $ 2,693

82

Statistical Section

Statistical Section Information

The objectives of statistical section information are to provide financial statement users with additional historical perspective, context and detail to assist in using the information in the financial statements, notes to financial statements and required supplementary information to understand and assess economic condition.

Statistical section information is presented in the following categories:

 Financial trends information is intended to assist users in understanding and assessing how financial position has changed over time.

 Revenue capacity information is intended to assist users in understanding and assessing the factors affecting the ability to generate own-source revenues (property taxes, charges for services, etc.).

 Debt capacity information is intended to assist users in understanding and assessing debt burden and the ability to issue additional debt.

 Demographic and economic information is intended 1) to assist users in understanding the socioeconomic environment and 2) to provide information that facilitates comparisons of financial statement information over time and among governments.

 Operating information is intended to provide contextual information about operations and resources to assist readers in using financial statement information to understand and assess economic condition.

The accompanying tables are presented in the above order. Refer to the Table of Contents for applicable page number locations.

Sources: Unless otherwise noted, the information in the tables is derived from the comprehensive annual financial reports for the relevant year.

TABLE 1 CITY OF MIDDLETOWN, CONNECTICUT NET POSITION BY COMPONENT LAST TEN FISCAL YEARS (In Thousands)

2015 2014* 2013 2012 2011 2010 2009 2008 2007 2006

Governmental Activities: Net investment in capital assets $ 267,645 $ 289,881 $ 284,417 $ 297,304 $ 285,332 $ 287,765 $ 284,755 $ 261,139 $ 236,816 $ 211,186 Restricted 1,289 1,323 1,217 1,120 1,143 1,089 996 821 895 891 Unrestricted 83,008 56,523 9,309 3,040 13,887 19,626 19,138 31,177 35,386 33,312

Total Governmental Activities Net Position $ 351,942 $ 347,727 $ 294,943 $ 301,464 $ 300,362 $ 308,480 $ 304,889 $ 293,137 $ 273,097 $ 245,389

*Restated for the implementation of GASB 68

Notes: (1) Schedule prepared on the accrual basis of accounting

FISCAL YEAR

83

TABLE 2 CITY OF MIDDLETOWN, CONNECTICUT CHANGE IN NET POSITION LAST TEN FISCAL YEARS (In Thousands)

2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 Expenses:

Governmental activities: General government $ 18,740 $ 19,747 $ 18,308 $ 17,088 $ 14,690 $ 15,572 $ 16,449 $ 23,392 $ 10,447 $ 11,164 Public safety 26,917 29,048 26,064 24,013 22,667 22,483 23,518 14,236 18,434 17,794 Public works 10,128 11,758 11,166 9,041 11,980 10,562 12,566 10,638 8,718 8,334 Health and human services 1,502 802 803 683 744 724 745 1,214 620 687 Culture and recreation 5,740 5,809 6,115 5,359 5,301 5,328 5,096 5,728 5,625 5,383 Employee benefits and insurance 14,908 16,586 15,115 14,037 17,879 9,443 10,184 10,760 12,989 9,563 Education 109,091 106,256 99,317 97,737 101,084 96,996 92,346 106,334 82,002 76,775 Sewer 4,885 4,778 4,432 3,810 3,556 3,523 3,702 3,593 3,752 3,914 Water 4,038 4,445 4,274 3,468 3,771 4,020 4,677 5,461 4,360 4,305 Sanitation 1,685 1,857 1,814 1,527 1,588 1,583 1,864 1,801 1,639 1,527 Interest on long-term debt 2,168 2,347 2,152 2,442 2,703 2,471 2,837 2,871 2,412 2,523

Total governmental activities expenses 199,802 203,433 189,560 179,205 185,963 172,705 173,984 186,028 150,998 141,969

Program revenues: Governmental activities:

Charges for services General government 3,011 2,887 3,075 2,666 1,494 1,437 1,606 1,793 1,889 2,144 Public safety 2,013 1,379 1,528 1,604 1,804 2,223 1,440 1,613 1,450 1,049 Public works 320 341 309 323 908 908 1,338 1,865 1,383 1,440 Health and human resources 50 152 194 157 160 108 109 Culture and recreation 703 474 368 349 259 400 451 335 228 373 Education 619 698 753 763 592 1,623 3,151 1,945 1,514 1,216 Sewer 5,994 5,114 5,411 5,244 4,870 4,435 4,495 4,174 3,806 3,719 Water 6,430 5,172 5,297 5,193 4,921 4,615 4,826 4,467 4,113 4,392 Sanitation and other 1,825 1,840 1,823 1,847 1,940 1,935 1,678 1,698 1,838 2,509

Operating grants and contributions 48,566 44,949 42,591 42,487 41,723 40,194 39,951 58,951 35,985 34,843 Capital grants and contributions 3,101 1,965 1,828 2,651 2,851 5,709 15,765 20,782 19,880 6,958

Total governmental activities program revenues 72,582 64,819 62,983 63,177 61,514 63,673 74,858 97,783 72,194 58,752

Net expense: Governmental activities (127,220) (138,614) (126,577) (116,028) (124,449) (109,032) (99,126) (88,245) (78,804) (83,217)

General revenues and other changes in net position: Governmental activities:

Property taxes 116,763 106,714 104,253 101,495 102,329 96,453 96,059 90,931 91,109 84,160 Grants and contributions not restricted to specific purposes 9,828 9,284 9,703 10,370 10,085 10,656 12,458 12,660 11,782 11,166 Unrestricted investment earnings 143 302 403 295 606 631 1,529 3,049 3,423 2,823 Miscellaneous 4,701 5,932 5,697 4,970 3,311 4,883 832 185 198 20

Total governmental activities 131,435 122,232 120,056 117,130 116,331 112,623 110,878 106,825 106,512 98,169

Changes in net position: Governmental activities $ 4,215 $ (16,382) $ (6,521) $ 1,102 $ (8,118) $ 3,591 $ 11,752 $ 18,580 $ 27,708 $ 14,952

Notes: (1) Schedule prepared on the accrual basis of accounting

FISCAL YEAR

84

TABLE 3 CITY OF MIDDLETOWN, CONNECTICUT FUND BALANCES, GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (In Thousands)

2015 2014 2013 2012 2011 2010 2009 2008 2007 2006

General Fund: Reserved $ $ $ $ $ $ 2,111 $ 2,108 $ 1,435 $ 1,667 $ 1,033 Unreserved 13,849 13,742 17,491 16,656 12,169 Assigned 4,741 3,068 6,363 2,649 2,675 Unassigned 21,826 16,796 15,055 14,209 12,772

Total General Fund $ 26,567 $ 19,864 $ 21,418 $ 16,858 $ 15,447 $ 15,960 $ 15,850 $ 18,926 $ 18,323 $ 13,202

All Other Governmental Funds: Reserved $ $ $ $ $ $ 4,777 $ 7,802 $ 23,342 $ 44,330 $ 40,636 Unreserved, reported in:

Special revenue funds 14,326 12,939 12,967 12,723 10,498 Capital projects funds 1,831 (8,748) (17,511) (36,208) (32,614)

Permanent funds 979 897 717 792 739 Nonspendable 32 32 32 32 32 Restricted 3,805 3,051 2,945 2,882 2,901 Committed 18,972 18,364 18,380 16,715 18,357 Unassigned (3,557) (19,344) (4,424) (6,485) (1,024)

Total all other governmental funds $ 19,252 $ 2,103 $ 16,933 $ 13,144 $ 20,266 $ 21,913 $ 12,890 $ 19,515 $ 21,637 $ 19,259

Note 1: Schedule prepared on the modified accrual basis of accounting

FISCAL YEAR

85

TABLE 4 CITY OF MIDDLETOWN, CONNECTICUT CHANGES IN FUND BALANCES, GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (In Thousands)

2015 2014 2013 2012 2011 2010 2009 2008 2007 2006

Revenues: Property taxes $ 115,731 $ 106,818 $ 103,727 $ 100,932 $ 101,808 $ 96,401 $ 95,323 $ 89,396 $ 90,188 $ 83,027 Licenses and permits 652 659 769 586 557 667 574 1,313 973 994 Intergovernmental 60,931 56,197 54,122 55,558 54,485 53,456 67,214 91,764 67,221 52,506 Charges for services 19,711 17,204 17,701 17,416 16,608 16,978 17,652 14,563 13,977 14,469 Investment income 176 283 371 244 527 479 1,201 2,463 2,848 2,359 Miscellaneous 5,720 5,933 5,697 4,970 3,309 8,239 2,952 4,298 2,970 2,692

Total revenues 202,921 187,094 182,387 179,706 177,294 176,220 184,916 203,797 178,177 156,047

Expenditures: General government 10,364 8,651 8,390 8,252 8,174 7,330 7,456 12,804 5,303 4,990 Public safety 24,715 23,415 22,673 21,646 21,140 19,990 20,851 11,158 17,858 17,093 Public works 5,020 4,552 4,515 4,299 4,556 4,226 4,269 5,068 4,746 4,568 Health and human services 1,543 694 702 720 734 707 722 1,177 683 657 Culture and recreation 5,701 4,976 5,317 5,415 5,270 5,276 5,079 5,233 5,018 4,840 Employee benefits and insurance 17,380 14,895 13,550 12,970 13,757 13,231 12,763 11,612 10,885 9,590 Education 103,519 100,511 93,683 93,225 93,445 90,688 88,441 103,590 79,977 74,558 Sewer 4,876 4,050 3,855 3,808 3,556 3,522 3,477 3,367 3,106 3,692 Water 4,014 3,855 3,586 3,463 3,764 3,688 3,569 3,516 3,363 3,252 Sanitation 1,672 1,596 1,577 1,545 1,593 1,575 1,819 1,663 1,553 1,520 Other 4,042 5,363 3,383 4,112 3,555 4,435 5,491 4,145 5,485 Capital outlay 22,743 21,406 29,263 13,840 15,646 10,616 28,348 40,405 49,415 23,206 Debt service:

Principal retirement 12,647 9,908 10,850 10,085 10,064 11,724 12,169 10,292 10,426 9,069 Interest and fiscal charges 2,543 2,958 2,299 2,804 3,001 2,741 3,228 3,144 2,482 2,878

Total expenditures 216,737 205,509 205,623 185,455 188,812 178,869 196,626 218,520 198,960 165,398

Excess of Revenue Under Expenditures (13,816) (18,415) (23,236) (5,749) (11,518) (2,649) (11,710) (14,723) (20,783) (9,351)

Other financing sources (uses): Bonds and serial notes 32,302 1,993 27,900 8,900 10,900 1,975 13,050 27,700 1,574 Transfers in 17,006 14,685 14,526 14,288 14,617 16,047 17,082 15,773 15,211 13,929 Transfers out (16,927) (14,647) (14,488) (14,250) (14,579) (16,010) (17,048) (15,742) (15,180) (13,909) Premium on bonds 5,287 3,647 420 845 122 551

Total Other Financing Sources 37,668 2,031 31,585 38 9,358 11,782 2,009 13,203 28,282 1,594

Net Change in Fund Balances $ 23,852 $ (16,384) $ 8,349 $ (5,711) $ (2,160) $ 9,133 $ (9,701) $ (1,520) $ 7,499 $ (7,757)

Debt Service as a Percentage of Noncapital Expenditures 7.74% 6.68% 7.17% 7.49% 7.45% 8.48% 8.99% 7.50% 8.60% 8.40%

Notes: (1) Schedule prepared on the modified accrual basis of accounting

FISCAL YEAR

86

TABLE 5 CITY OF MIDDLETOWN, CONNECTICUT ASSESSED VALUE AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY LAST TEN FISCAL YEARS (In Thousands)

Taxable Assessed Total Estimated Assessed Value

Less Taxable Total Actual As a Percentage Fiscal Personal Motor Tax Exempt Assessed Direct Tax Taxable of Actual Year Residential Commercial Industrial Property Vehicle Property Value Rate Value Taxable Value

2015 $ 1,787,946 $ 649,062 $ 222,798 $ 557,213 $ 279,664 $ 200,859 $ 3,295,824 32.6 $ 4,708,318 70.00%

2014 2,063,276 708,280 171,978 550,100 280,619 176,613 3,314,642 32.7 4,735,202 70.00%

2013 2,168,527 594,807 178,193 526,227 270,335 165,054 3,573,042 26.9 5,104,345 70.00%

2012 2,163,664 592,993 177,581 531,480 273,174 156,839 3,740,746 26.1 5,343,923 70.00%

2011 2,156,261 674,531 160,305 495,696 257,351 165,498 3,578,647 26.4 5,112,353 70.00%

2010 2,133,848 675,127 158,153 471,796 250,561 182,522 3,506,963 25.5 5,009,947 70.00%

2009 2,124,835 680,546 125,966 447,513 249,295 125,555 3,502,601 25.5 5,003,716 70.00%

2008 2,105,671 676,704 112,077 427,347 259,633 103,494 3,477,939 31.8 4,968,484 70.00%

2007 1,450,553 495,840 88,577 426,008 255,437 82,351 2,634,065 31.8 3,762,950 70.00%

2006 1,430,443 492,756 86,300 423,674 255,519 63,277 2,625,415 29.8 3,840,988 68.35%

Source: City of Middletown Office of Tax Assessor

Notes: (1) The latest revaluation as completed and became effective October 1, 2013 for fiscal year 2014-2015. (2) Exemptions now include new machinery. (3) Assessed value of Kleen Energy Systems LLC power plant as per PILOT agreement is included in total assessment

Real Property

87

TABLE 6 CITY OF MIDDLETOWN, CONNECTICUT DIRECT AND OVERLAPPING PROPERTY TAX RATES LAST TEN YEARS (rate per $1,000 of assessed value)

FISCAL YEAR 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006

City: General 32.6 32.7 26.9 26.1 26.4 25.5 25.5 31.8 31.8 29.8

Districts: Fire Fund 7 7.3 5.8 5.5 5.5 5 5 6.4 5.9 5.9 Westfield Fire 1.416 1.326 1.237 1.237 1.179 1.145 0.99 1.15 1.15 0.99 South Fire 4.468 3.648 3.648 3.574 3.486 3.486 3.38 4.381 4.38 3.57 Middletown Business 2.41 2.41 2.4 2.4 2.4 2.4 2.4 3 3 3

88

TABLE 7 CITY OF MIDDLETOWN, CONNECTICUT PRINCIPAL PROPERTY TAX PAYERS 2014 and 2004 (In Thousands)

October 1, 2014 October 1, 2004 Percentage Percentage of Total City of Total City

Taxable Taxable Taxable Taxable Assessed Assessed Assessed Assessed

Taxpayer Value Rank Value Value Rank Value

Aetna Life and Casualty $ 114,506 1 3.53% $ 199,263 1 8.20% Connecticut Light & Power Co. 104,102 2 3.21% 25,332 4 1.06% Kleen Energy Systems, LLC 65,367 3 2.02% Middletown Power LLC 42,433 4 1.31% 86,237 3 5.48% United Technologies 34,733 5 1.07% 133,057 2 4.01% Northwood Apt Assoc LLC 26,398 6 0.81% Chestnut Hill Apt Assoc LLC 25,448 7 0.79% Fairfield Midtown Brook LP 20,281 8 0.63% Fairfield Midtown Ridge LP 20,085 9 0.62% Yankee Gas Service Company 17,975 10 0.55% Carabetta Enterprises 22,275 5 0.89% Windsor Brooke, LLC 14,175 8 0.63% Midfield Corporation 14,539 7 0.58% Middletown-Oxford 15,763 6 0.53% Conn-Colony 13,421 9 0.54% Windsor Ridge, LLC 12,871 10 0.49%

$ 471,328 14.54% $ 536,933 22.41%

Source: City of Middletown, Office of Tax Assessor

89

TABLE 8 CITY OF MIDDLETOWN, CONNECTICUT PROPERTY TAX LEVIES AND COLLECTIONS LAST TEN FISCAL YEARS (In Thousands)

Collected Within the Fiscal Year of Levy Total Collections to Date

Fiscal Taxes Levied Collections Year Ended Tax Rate For This Percentage In Subsequent Percentage

June 30, In Mills Fiscal Year Amount of Levy Years Amount of Levy

2015 32.6 $ 116,604 $ 112,779 96.72 % $ 1,738 $ 114,517 98.21 %

2014 32.7 106,360 103,804 97.60 % 1,904 105,708 99.39

2013 32.7 105,112 100,977 96.07 1,586 102,563 97.57

2012 31.6 101,532 99,672 98.17 1,797 101,469 99.94

2011 31.9 101,860 99,118 97.31 1,829 100,947 99.10

2010 30.5 96,320 93,394 96.96 1,878 95,272 98.91

2009 30.5 95,637 92,382 96.60 1,669 94,051 98.34

2008 31.8 90,838 88,446 97.37 752 89,198 98.19

2007 31.8 89,919 87,601 97.42 1,732 89,333 99.35

2006 29.8 83,661 81,151 97.00 1,269 82,420 98.52

Source: Tax Collector’s Report; Comprehensive Annual Financial Report

90

TABLE 9 CITY OF MIDDLETOWN, CONNECTICUT RATIOS OF OUTSTANDING DEBT BY TYPE LAST TEN FISCAL YEARS (In Thousands, except per capita ratio)

General Total Ratio of Bonded Debt as Debt Fiscal Obligation Capital Primary Debt to Taxable Percentage of Per Year Bonds Leases Government Assessed Value Personal Income Capita

2015 $ 99,401 $ - $ 99,401 3.02 5.94 $ 1,927

2014 75,085 - 75,085 2.27 4.65 1,509

2013 83,534 - 83,534 2.21 5.21 1,677

2012 61,770 - 61,770 1.72 4.96 1,287

2011 71,855 - 71,855 2.01 5.77 1,497

2010 73,024 - 73,024 2.08 5.91 1,520

2009 73,846 - 73,846 2.11 6.04 1,554

2008 84,039 - 84,039 2.42 6.87 1,768

2007 81,280 - 81,280 3.09 6.68 1,718

2006 64,054 - 64,054 2.40 5.28 1,359

Note: Details regarding the City’s outstanding debt can be found in the notes to the financial statements.

Governmental Activities

91

TABLE 10 CITY OF MIDDLETOWN, CONNECTICUT SCHEDULE OF DEBT LIMITATION JUNE 30, 2015 (In Thousands)

(taxes are levied for General Fund, Fire Districts and Special Parking District Fund) $ 121,569 Reimbursement for loss of revenue:

4

$ 121,573

General Urban Pension Purpose Schools Sewers Renewal Deficit

Debt limitation: 2-1/4 times base $ 273,538 $ $ $ $ 4-1/2 times base 547,076 3-3/4 times base 455,897 3-1/4 times base 395,111 3 times base 364,718

Total debt limitation 273,538 547,076 455,897 395,111 364,718

Indebtedness: Bonds payable 58,253 13,186 5,698 Bonds authorized and

unissued 25,979 834 10,296 Clean water fund loans 5,154 Grant commitments

Total indebtedness 84,232 14,020 21,148 - -

Debt limitation in excess of outstanding and authorized debt $ 189,306 $ 533,056 $ 434,749 $ 395,111 $ 364,718

Note 1: In no case shall total indebtedness exceed seven times annual receipts from taxation. The maximum amount permitted would be $851 million.

Note 2: Bonds authorized and unissued represent bond authorizations for which bonds have been issued to partially finance the project or bond anticipation notes have been issued.

Note 3: Bonds payable do not included Water bonds of $8,268,275. which are considered to be self-funding. Additionally, water bonds authorized and unissued of $1,798,200 are not included.

Tax relief for elderly - freeze

Base

Total tax collections, including interest and lien fees, received during last completed fiscal year

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TABLE 11 CITY OF MIDDLETOWN, CONNECTICUT LEGAL DEBT MARGIN INFORMATION LAST TEN FISCAL YEARS (In Thousands)

FISCAL YEAR 2015 2014 2012 2011 2010 2009 2008 2007 2006 2005

Debt limitation $ 851,007 $ 787,112 $ 763,993 $ 755,189 $ 750,305 $ 707,027 $ 698,295 $ 662,716 $ 664,004 $ 607,623

Total net debt applicable to limit 119,401 165,234 151,352 119,238 91,891 97,928 105,728 103,651 97,263 122,950

Legal debt margin $ 731,606 $ 621,878 $ 612,641 $ 635,951 $ 658,414 $ 609,099 $ 592,567 $ 559,065 $ 566,741 $ 484,673

Total net debt applicable to the limit as a percentage of debt limit 14% 21% 20% 16% 12% 14% 15% 16% 15% 20%

Source: Comprehensive Annual Financial Report - Schedule of Debt Limitation

Note: See Table 10 for calculation of current year debt limitation

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TABLE 12 CITY OF MIDDLETOWN, CONNECTICUT DEMOGRAPHIC STATISTICS LAST TEN FISCAL YEARS

Total Personal Per Public Income Capita Median School Unemployment

Year Population(1) (in thousands) Income (1) Age (2) Enrollment (3) Rate (4)

2015 47,489 $ 1,590,454 $ 33,491 37.2 4,827 5.7%

2014 47,333 1,524,359 32,205 37.0 4,773 6.6%

2013 47,510 1,513,193 31,850 36.6 5,107 8.2%

2012 48,383 1,244,411 25,720 36.3 4,967 8.3%

2011 48,383 1,244,411 25,720 36.3 5,263 8.9%

2010 48,030 1,235,332 25,720 36.3 5,190 8.8%

2009 47,528 1,222,420 25,720 36.3 5,146 7.0%

2008 47,528 1,222,420 25,720 36.3 4,984 4.3%

2007 47,302 1,216,607 25,720 36.3 5,156 4.2%

2006 47,141 1,212,467 25,720 36.3 5,078 4.2%

Sources: (1) State of Connecticut Department of Health

(2) U.S. Census Bureau, Census 2000

(3) Middletown Board of Education

(4) State of Connecticut, Department of Labor

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TABLE 13 CITY OF MIDDLETOWN, CONNECTICUT PRINCIPAL EMPLOYERS 2015 AND 2005

Percentage Percentage of Total City of Total City

Employer Nature of Business Employees Rank Employment Employees Rank Employment

United Technologies Aircraft Engines 2,400 1 9.78% 2,700 2 11.97%

Middlesex Hospital Private Hospital 1,000 2 4.08% 2,543 3 11.27%

Connecticut Valley Hospital State Hospital 1,000 3 4.08% 1,340 4 5.94%

Middletown Board of Education Education 803 4 3.27%

Wesleyan University Higher Education 800 5 3.26% 900 6 3.99%

Liberty Bank Financial Banking 600 6 2.45%

City of Middletown Government 567 7 2.31% 1,186 5 5.26%

Kamen Aerospace Electronics System 400 8 1.63% 200 9 0.89%

Jarvis Products Power Tool Manufacturer 300 9 1.22% 200 10 0.89%

Dattco Transportation 150 10 0.61% Citizens Bank Financial Banking

Aetna Insurance 4,300 1 19.06%

Mortgage Lenders Mortgage Company 400 7 1.77%

Middlesex Mutual Assurance Co. Insurance 243 8 1.08%

8,020 14,012

Source: City of Middletown, Chamber of Commerce. Department of Labor, State of Connecticut

2015 2005

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TABLE 14 CITY OF MIDDLETOWN, CONNECTICUT MISCELLANEOUS STATISTICAL DATA JUNE 30, 2015

Date of incorporation 1651 Date City Charter adopted 1874 Date present Charter adopted 2000 Form of government Council-Mayor Area of City 42.9 square miles Population:

1930 25,143 1940 27,214 1950 29,711 1960 33,250 1970 36,924 1980 39,040 1990 42,762 2000 43,217 2010 47,510

Public education: Schools: High 1 Middle school complex 2 Elementary 8 Administrative personnel 29 Teachers 438 Other 234 Local enrollment 4,827

Municipal employees: (Permanent-exclusive of library) Education 701 Police and Fire 175 Municipal and other 256 Fire volunteers 40 Fire protection: Fire stations 4 Employees: Fire fighting 106 Civilian 8 Volunteer 40 Number of hydrants 1,479

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TABLE 14 CITY OF MIDDLETOWN, CONNECTICUT MISCELLANEOUS STATISTICAL DATA (CONTINUED) JUNE 30, 2015

Police protection: Police station 1 Employees: Law enforcement 108 Civilian 16 School crossing guards 10

Elections: Number of registered voters 21,214 Number of votes cast in: Last general election 12,528 Last municipal election 7,172 Percentage of registered voters voting in: Last general election 64% Last municipal election 34% Municipal parking: Metered 530 Municipal garage 360 Other 386 Library: Main building 1 Employees: Regular 36 Part-time 45 Number of items owned 201,968 Registered borrowers 26,158 Total annual circulation 433,600 Total annual visits 275,542

Miles of streets and alleys: Streets - paved 196.9 Streets - unpaved 6.19 Alleys 2.1 Sidewalks 91.5

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TABLE 14 CITY OF MIDDLETOWN, CONNECTICUT MISCELLANEOUS STATISTICAL DATA (CONTINUED) JUNE 30, 2015

Miles of sewers: Storm sewers 219.36 Sanitary sewers 179 Water Department: Gallons of water per day 3,740,000 Number of meters 11,624 Miles of water mains 194 Building permits: Permits issued 2,058 Permits value 32,570,889 Number of street lights 5,200

Parks and recreation: Number of parks 30 Acres of parks 727.51 Number of playgrounds 5 Number of swimming pools: Indoor - Outdoor: Olympic-size 1 Wading pool 1 Lake 1 Ponds 5 Skating facilities - outdoor 4 Tennis courts 4 Ball diamonds (3 lighted) 23 Basketball courts - outdoor (1 lighted) 1 Skateboard/BMX Bike Park 1 Soccer Fields 25 Football Fields 1

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