MANCHESTER ESSEX REGIONAL SCHOOL DISTRICT, MASSACHUSETTS … · Bank National Association, Boston,...

NOTICE OF SALE AND PRELIMINARY OFFICIAL STATEMENT DATED JULY 8, 2020

Rating: See “Rating” herein. S&P Global Ratings:

New Issue

In the opinion of Locke Lord LLP, Bond Counsel, based upon an analysis of existing law and assuming, among other matters, compliance with certain covenants, interest on the Bonds is excluded from gross income for federal income tax purposes under the Internal Revenue Code of 1986, as amended (the “Code”). Interest on the Bonds will not be included in computing the alternative minimum taxable income of individuals. Under existing law, interest on the Bonds is exempt from Massachusetts personal income taxes, and the Bonds are exempt from Massachusetts personal property taxes. The Bonds will be designated as “qualified tax-exempt obligations” for purposes of Section 265(b)(3) of the Code. Bond Counsel expresses no opinion regarding any other tax consequences related to the ownership or disposition of, or the accrual or receipt of interest on, the Bonds. See “Tax Exemption” herein.

MANCHESTER ESSEX REGIONAL SCHOOL DISTRICT, MASSACHUSETTS $2,205,000* GENERAL OBLIGATION REFUNDING BONDS OF 2020

DATED DUE Date of Delivery February 15

(as shown below)

The Bonds are issuable only in fully registered form registered in the name of Cede & Co., as Bondowner and nominee for The Depository Trust Company ("DTC"), New York, New York. DTC will act as securities depository for the Bonds. Purchases of the Bonds will be made in book-entry form, in denominations of $5,000 or any integral multiple thereof. (See "THE BONDS - Book-Entry Transfer System" herein.)

Principal of the Bonds will be payable February 15 of the years in which the Bonds mature. Interest on the Bonds will be payable February 15 and August 15 of each year, commencing February 15, 2021. Principal and semiannual interest on the Bonds will be paid by U.S. Bank National Association, Boston, Massachusetts, as Paying Agent. So long as DTC or its nominee, Cede & Co., is the Bondowner, such payments will be made directly to such Bondowner. Disbursement of such payments to the DTC Participants is the responsibility of DTC and disbursement of such payments to the Beneficial Owners is the responsibility of the DTC Participants and Indirect Participants, as more fully described herein.

The Bonds are not subject to redemption prior to their stated maturity dates.

An opinion of Bond Counsel will be issued with respect to the Bonds to the effect that the Bonds are valid general obligations of the Manchester Essex Regional School District, Massachusetts (the “District”), and that the District is authorized to apportion annually the amounts of principal and interest falling due in the ensuing fiscal year between the Member Towns of Manchester-by-the-Sea and Essex, Massachusetts (the “Member Towns”) in accordance with the agreement establishing the District, and that each Member Town’s share of such apportionment is payable from taxes which may be levied upon all taxable property in each respective Member Town without limitation as to rate or amount, except as provided under Chapter 44, Section 20 of the General Laws.

____________________________

MATURITIES, PRINCIPAL AMOUNTS*, RATES, PRICES, YIELDS AND CUSIPS

Due Principal Prices/ CUSIPFebruary 15 Amount* Rate Yields 562158

2021 265,000$ % %2022 210,000 2023 215,000 2024 215,000 2025 215,000 2026 215,000 2027 215,000 2028 215,000 2029 220,000 2030 220,000

____________________________

THE BONDS ARE BEING OFFERED FOR SALE AT 11:00 A.M. (EASTERN TIME) ON WEDNESDAY, JULY 15, 2020, AT HILLTOP SECURITIES INC., 54 CANAL STREET, 3RD FLOOR, BOSTON, MASSACHUSETTS, IN THE CASE OF SEALED PROPOSALS AND IN THE CASE OF ELECTRONIC PROPOSALS, VIA PARITY, IN THE MANNER SET FORTH IN THE NOTICE OF SALE. REFERENCE IS MADE TO THE NOTICE OF SALE DATED JULY 8, 2020 FOR THE CONDITIONS OF SUCH SALE.

The Bonds are offered subject to the final approving opinion of Locke Lord LLP, Boston, Massachusetts, Bond Counsel, as aforesaid, and to certain other conditions referred to herein and in the Notice of Sale (see “The Bonds - Opinion of Bond Counsel.”) Hilltop Securities Inc., Boston, Massachusetts has acted as Financial Advisor to the Manchester Essex Regional School District, Massachusetts, with respect to the Bonds. The Bonds in definitive form will be delivered to DTC, or its custodial agent, on or about July 30, 2020, against payment to the District in federal reserve funds. ______________________ *Preliminary, subject to change.

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TABLE OF CONTENTS

Page SUMMARY STATEMENT ............................................... 3 NOTICE OF SALE ........................................................... 4 Bidding Parameters ......................................................... 4 Establishment of Issue Price ........................................... 6 Exhibit 1 – Form of Issue Price Certificates ..................... 9 OFFICIAL STATEMENT: THE BONDS: Description of the Bonds ................................................. 15 Record Date .................................................................... 15 Book-Entry Transfer System ........................................... 15 Authorization of the Bonds and Use of Proceeds ............ 17 Sources and Uses of Bond Proceeds .............................. 17 Plan of Refunding ............................................................ 17 Tax Exemption ................................................................ 17 Risk of Future Legislative and/or Court Decisions ........... 18 Security and Remedies ................................................... 19 Opinion of Bond Counsel ................................................. 20 Rating .............................................................................. 20 Financial Advisory Services of Hilltop Securities Inc. ................................................... 20 Continuing Disclosure ..................................................... 20 MANCHESTER ESSEX REGIONAL SCHOOL DISTRICT, MASSACHUSETTS: General............................................................................ 21 Principal Executive Officers ............................................. 21 District Facilities .............................................................. 21 Corona Virus (COVID-19) Disclosure .............................. 21 District Enrollments ......................................................... 22 Apportionment of Costs ................................................... 22 Education Reform ............................................................ 23 Payments of Apportioned Costs ...................................... 24 Trend in Operating and Capital Costs ............................. 24 Amendments to District Agreement ................................. 24 Withdrawal Provisions ..................................................... 24

Page DISTRICT FINANCES: Budget Process ............................................................... 25 Budget Trends................................................................. 26 State Aid ......................................................................... 27 Investments ..................................................................... 27 Annual Audits .................................................................. 28 Summary of Significant Accounting Policies ................... 28 Financial Statements ....................................................... 28 Governmental Funds Balance Sheet As of June 30, 2019 .................................................. 29 Governmental Funds Balance Sheet As of June 30, 2018 .................................................. 30 Governmental Funds Balance Sheet As of June 30, 2017 .................................................. 31 Comparative Statement of Revenues and Expenditures, General Fund June 30, 2015 – 2019 .................................................. 32 INDEBTEDNESS: Authorization Procedures and Limitations ....................... 37 Direct Debt Summary ...................................................... 38 Debt Service Requirements ............................................ 38 Authorized Unissued Debt and Prospective Financing ............................................. 39 Revenue Anticipation Borrowing ..................................... 39 Retirement Plan .............................................................. 39 Current Funding Schedule for Essex Regional Retirement System ....................................................... 39 Other Post-Employment Benefits .................................... 40 Contractual Obligation ..................................................... 40 Employee Relations ........................................................ 41 LITIGATION .................................................................... 41 APPENDIX A – Fiscal 2019 Audit APPENDIX B – Member Towns APPENDIX C – Proposed Form of Legal Opinion APPENDIX D – Proposed Form of Continuing Disclosure Certificate

_________________ The information and expressions of opinion in this Preliminary Official Statement are subject to change without notice. Neither the delivery of this Preliminary Official Statement nor any sale of the Bonds shall, under any circumstances, create any implication that there has been no material change in the affairs of the District since the date of this Preliminary Official Statement.

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SUMMARY STATEMENT

The information set forth below is qualified in its entirety by the information and financial statements appearing elsewhere in the Official Statement.

Date of Sale: Wednesday, July 15, 2020, 11:00 a.m. (Eastern Time).

Location of Sale: Hilltop Securities Inc., 54 Canal Street, 3rd Floor, Boston, Massachusetts 02114.

Issuer: Manchester Essex Regional School District, Massachusetts.

Issue: $2,205,000* General Obligation Refunding Bonds of 2020, see "THE BONDS" herein.

Preliminary Official Statement Dated: July 8, 2020.

Dated Date of the Bonds: Date of Delivery.

Principal Due: Serially on February 15, 2021 through February 15, 2030, as set forth herein.

Interest Payable: February 15 and August 15 of each year, commencing February 15, 2021.

Purpose and Authority: Bond proceeds will refinance a school project authorized by the District under provisions of Chapters 70B and 71 and refund bonds originally issued December 15, 2009 as detailed herein.

Redemption: The Bonds are not subject to redemption prior to their stated maturity dates.

Security: The Bonds will be valid general obligations of the Manchester Essex Regional School District, and the District is authorized to apportion annually the amounts of principal and interest falling due in the ensuing fiscal years between the Member Towns in accordance with the agreement establishing the District, and each Member Town’s share of such apportionment is payable from taxes which may be levied upon all taxable property in each respective Member Town without limitation as to rate or amount, except as provided under Chapter 44, Section 20 of the General Laws.

Credit Rating: The District has applied to S&P Global Ratings for a rating on the Bonds.

Bond Insurance: The District has not contracted for the issuance of any policy of municipal bond insurance or any other credit enhancement facility.

Basis of Award: Lowest True Interest Cost (TIC), as of the dated date. NO BID OF LESS THAN PAR PLUS A PREMIUM OF AT LEAST $55,000 WILL BE CONSIDERED.

Tax Exemption: Refer to "THE BONDS - Tax Exemption" herein and Appendix C, "Proposed Form of Legal Opinion".

Continuing Disclosure: Refer to "THE BONDS - Continuing Disclosure" herein and Appendix D, "Proposed Form of Continuing Disclosure Certificate".

Bank Qualification: The Bonds will be designated by the District as "qualified tax-exempt obligations" for purposes of Section 265(b)(3) of the Internal Revenue Code of 1986, as amended.

Paying Agent/Escrow Agent: U.S. Bank National Association, Boston, Massachusetts.

Legal Opinion: Locke Lord LLP, Boston, Massachusetts. See “THE BONDS – Opinion of Bond Counsel”.

Financial Advisor: Hilltop Securities Inc., Boston, Massachusetts.

Delivery and Payment: It is expected that delivery of the Bonds in book-entry only form will be made to The Depository Trust Company, New York, New York, or to its custodial agent, on or about July 30, 2020, against payment in federal funds.

Issuer Official: Questions concerning the Official Statement should be addressed to: Mr. Charles F. Lane, Treasurer, Manchester Essex Regional School District, Massachusetts telephone (978) 526-2020 or Cinder McNerney, Managing Director, Hilltop Securities Inc., Boston, Massachusetts Telephone (617) 619-4408.

______________________ *Preliminary, subject to change.

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NOTICE OF SALE

MANCHESTER ESSEX REGIONAL SCHOOL DISTRICT, MASSACHUSETTS

$2,205,000* GENERAL OBLIGATION REFUNDING BONDS OF 2020 The Manchester Essex Regional School District, Massachusetts (the “District”) will receive sealed and electronic (as described herein) proposals until 11:00 A.M., eastern time, Wednesday, July 15, 2020, for the purchase of the following described $2,205,000* General Obligation Refunding Bonds of 2020 of the District (the "Bonds"):

$2,205,000* General Obligation Refunding Bonds of 2020 payable February 15 of the years and in the amounts as follows:

Due Principal

February 15 Amount*

2021 265,000$ 2022 210,000 2023 215,000 2024 215,000 2025 215,000 2026 215,000 2027 215,000 2028 215,000 2029 220,000 2030 220,000

______________________ *Preliminary, subject to change. The Bonds will be dated as of their date of delivery. Principal of the Bonds will be payable on February 15 of the years in which the Bonds mature. Interest will be payable semi-annually on February 15 and August 15 commencing February 15, 2021 until maturity. The Bonds will be issued by means of a book-entry system with no physical distribution of the Bonds made to the public. One certificate for each maturity of the Bonds will be issued to The Depository Trust Company, New York, New York ("DTC"), and immobilized in its custody. Ownership of the Bonds in principal amounts of $5,000 or integral multiples thereof, will be evidenced by a book-entry system with transfers of ownership effected on the records of DTC and its Participants pursuant to rules and procedures established by DTC and its Participants. The winning bidder, as a condition to delivery of the Bonds, shall be required to deposit the Bonds with DTC, registered in the name of Cede & Co. Interest and principal on the Bonds will be payable to DTC or its nominee as registered owner of the Bonds. Transfer of principal and interest payments to participants of DTC will be the responsibility of DTC. Transfer of principal and interest payments to beneficial owners will be the responsibility of such participants and other nominees of beneficial owners. The District will not be responsible or liable for maintaining, supervising or reviewing the records maintained by DTC, its participants or persons acting through such participants. The Bonds are not subject to redemption prior to maturity dates. Principal and semiannual interest on the Bonds will be paid by U.S. Bank National Association, Boston, Massachusetts as Paying Agent. So long as DTC or its nominee, Cede & Co., is the Bondowner, such payments will be made directly to DTC. Disbursement of such payments to the DTC Participants is the responsibility of DTC and disbursements of such payments to the Beneficial Owners is the responsibility of the DTC Participants and the Indirect Participants, as more fully described herein. Bidding Parameters Bidders shall state the rate or rates of interest per annum which the Bonds are to bear in a multiple of 1/20 or 1/8 of one percent, but shall not state (a) more than one interest rate for any Bonds having a like maturity, (b) any interest rate which exceeds the interest rate stated for any other Bonds by more than 3 percent or (c) any interest rate in excess of 5.0%. No bid of less than par plus a premium of $55,000 will be considered.

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The current bond structure does not reflect the receipt of any premium. The District reserves the right to decrease the aggregate principal amount of the Bonds and to change the maturity schedule after determination of the winning bid and the net premium to be received, and to restructure the refunding bonds to mirror the bonds to be refunded. The dollar amount bid for the Bonds by the winning bidder will be adjusted, if applicable, to reflect changes in the dollar amount of the amortization schedule. Any price that is adjusted will reflect changes in the dollar amount of the underwriter’s discount and original issue premium, if any, but will not change the per bond underwriter’s discount (net of insurance premium, if any) provided in such bid. Nor will it change the interest rate specified for each maturity. Any such adjustments will be communicated to the winning bidder for the Bonds by 4 p.m. (eastern time) on the day of the sale.

Bids must be submitted either:

(a) In a sealed envelope marked “Proposal for Bonds” and addressed to Mr. Charles F. Lane, Treasurer, Manchester Essex Regional School District, Massachusetts c/o Hilltop Securities Inc., 54 Canal Street, 3rd Floor, Boston, Massachusetts 02114. Signed blank bid forms may be faxed to (617) 619-4411 prior to submitting bids, and actual bids may be telephoned to Hilltop Securities Inc., telephone (617) 619-4400 at least one-half hour prior to the 11:00 a.m. sale and after receipt of the faxed bid form by Hilltop Securities Inc. Hilltop Securities Inc. will act as agent for the bidder, but neither the District nor Hilltop Securities Inc. shall be responsible for any errors in connection with bids submitted in this manner.

(b) Electronically via Parity in accordance with this Notice of Sale. To the extent any instructions or directions set forth in Parity conflict with this Notice of Sale, the terms of this Notice of Sale shall control. For further information about Parity, potential bidders may contact the Financial Advisor to the District or I-deal at 40 West 23rd Street, 5th Floor, New York, NY 10010 (212) 404-8102. An electronic bid made in accordance with this Notice of Sale shall be deemed an offer to purchase the Bonds in accordance with the terms provided in this Notice of Sale and shall be binding upon the bidder as if made by a signed and sealed written bid delivered to the District.

The award of the Bonds to the winning bidder will not be effective until the bid has been approved by the Treasurer and School Committee of the District.

As between proposals which comply with this Notice of Sale, the award will be to the bidder who offers to purchase all of the Bonds at the lowest net effective interest rate to the District. Such interest rate shall be determined on a true interest cost (TIC) basis, which shall mean that rate which, as of July 30, 2020, discounts semi-annually all future payments on account of principal and interest to the price bid, not including interest accrued, if any, which accrued interest shall be paid by the successful bidder. The award of the Bonds to the successful bidder will not be effective until the bid has been approved by the Select Board and the Treasurer of the District. In the event that two or more bidders submit the same lowest true interest cost for the Bonds, the District Treasurer shall determine the successful bidder by lot from among all such proposals.

The right is reserved to reject all bids and to reject any bid not complying with this Notice of Sale and, so far as permitted by law, to waive any irregularity with respect to any proposal.

The Manchester Essex Regional School District has not contracted for the issuance of any policy of municipal bond insurance for the Bonds. If the Bonds qualify for issuance of any such policy or commitment therefor, any purchase of such insurance or commitment shall be at the sole option and expense of the bidder. Proposals shall not be conditioned upon the issuance of any such policy or commitment. Any failure of the Bonds to be so insured or of any such policy or commitment to be issued shall not in any way relieve the purchaser of its contractual obligations arising from the acceptance of its proposal for the purchase of the Bonds. Should the bidder purchase municipal bond insurance, all expenses associated with such policy or commitment will be borne by the bidder, except for the fee paid to S&P Global Ratings for a rating on the Bonds. Any such fee paid to S&P Global Ratings would be borne by the District.

It shall be a condition to the obligation of the successful bidder to accept delivery of and pay for the Bonds that it shall be furnished, without cost, with (a) the approving opinion of the firm of Locke Lord LLP, Boston, Massachusetts, substantially in the form appearing as Appendix C of the Preliminary Official Statement dated July 8, 2020 (see “THE BONDS – Opinion of Bond Counsel”), (b) a certificate in the form satisfactory to Bond Counsel dated as of the date of delivery of the Bonds and receipt of payment therefor to the effect that there is no litigation pending or, to the knowledge of the signers thereof, threatened which affects the validity of the Bonds or the power of the District and the Member Towns to procure the means of payment of the Bonds through the levy and collection of taxes, (c) a certificate of the District Treasurer to the effect that, to the best of his knowledge and belief, as of its date and as of the date of sale the Preliminary Official Statement did not, and as of its date and as of the date of the delivery of the Bonds, the Final Official Statement does not, contain any untrue statement of a material fact and does not omit to state a material fact necessary to make the statements made therein, in the light of the circumstances under which they were made, not misleading, and (d) a Continuing Disclosure Certificate of the District in the form appearing as Appendix D of the Preliminary Official Statement.

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Establishment of Issue Price

A successful bidder shall assist the District in establishing the issue price of the Bonds and shall execute and deliver to the District on the Closing Date an “issue price” or similar certificate, in the applicable form set forth in Exhibit 1 to this Notice of Sale, setting forth the reasonably expected initial offering prices to the public or the sales price of the Bonds together with the supporting pricing wires or equivalent communications, or, if applicable, the amount bid, with such modifications as may be appropriate or necessary, in the reasonable judgment of the successful bidder, the District and Bond Counsel. All actions to be taken by the District under this Notice of Sale to establish the issue price of the Bonds may be taken on behalf of the District by Hilltop Securities, Inc. (the “Financial Advisor”) and any notice or report to be provided to the District may be provided to the Financial Advisor.

Competitive Sale Requirements. If the competitive sale requirements (“competitive sale requirements”) set forth in Treasury Regulation § 1.148-1(f)(3)(i) (defining “competitive sale” for purposes of establishing the issue price of the Bonds) have been satisfied, the District will furnish to the successful bidder on the Closing Date a certificate of the Financial Advisor, which will certify each of the following conditions to be true:

1. the District has disseminated this Notice of Sale to potential underwriters in a manner that is reasonably designed to reach potential underwriters;

2. all bidders had an equal opportunity to bid;

3. the District received bids from at least three underwriters of municipal bonds who have established industry reputations for underwriting new issuances of municipal bonds; and

4. the District awarded the sale of the Bonds to the bidder who submitted a firm offer to purchase the Bonds at the highest price (or lowest interest cost), as set forth in this Notice of Sale.

Any bid submitted pursuant to this Notice of Sale shall be considered a firm offer for the purchase of the Bonds, as specified in the bid. Unless a bidder notifies the District prior to submitting its bid by contacting the Financial Advisor via telephone at 617.619.4400 or email: [email protected] and affirming in writing via email, or in its bid submitted via Parity, that it will NOT be an “underwriter” (as defined below) of the Bonds, by submitting its bid, each bidder shall be deemed to confirm that it has an established industry reputation for underwriting new issuances of municipal bonds. Unless the bidder has notified the District that it will not be an “underwriter” (as defined below) of the Bonds, in submitting a bid, each bidder is deemed to acknowledge that it is an “underwriter” that intends to reoffer the Bonds to the public.

In the event that the competitive sale requirements are not satisfied, the District shall so advise the successful bidder.

Failure to Meet the Competitive Sale Requirements – Option A – The Successful Bidder Intends to Reoffer the Bonds to the Public and the 10% Test to Apply. If the competitive sale requirements are not satisfied and the successful bidder intends to reoffer the Bonds to the public, the Successful Bidder will use the first price at which 10% of a maturity of the Bonds (the “10% test”) is sold to the public as the issue price of that maturity, applied on a maturity-by-maturity basis, of the Bonds. The successful bidder shall advise the Financial Advisor if any maturity of the Bonds satisfies the 10% test as of the date and time of the award of the Bonds. If this option is chosen, the District will not require bidders to comply with the “hold-the-offering price rule” set forth in the applicable Treasury Regulations and therefore does not intend to use the initial offering price to the public as of the Sale Date of any maturities of the Bonds as the issue price of that maturity.

If the competitive sale requirements are not satisfied, then until the 10% test has been satisfied as to each maturity of the Bonds or all of the Bonds are sold to the public, the successful bidder agrees to promptly report to the Financial Advisor the prices at which the unsold Bonds of each maturity have been sold to the public, which reporting obligation shall continue, whether or not the Closing Date has occurred, until the 10% test has been satisfied for each maturity of the Bonds or until all the Bonds of a maturity have been sold. The successful bidder shall be obligated to report each sale of Bonds to the Financial Advisor until notified in writing by the District or the Financial Advisor that it no longer needs to do so. If the successful bidder uses Option A the Successful Bidder shall provide to the District on or before the closing date, the certificate attached to this Notice of Sale as Exhibit 1 – Option A.

By submitting a bid and if the competitive sale requirements are not met, each bidder confirms that: (i) any agreement among underwriters, any selling group agreement and each third-party distribution agreement (to which the bidder is a party) relating to the initial sale of the Bonds to the public, together with the related pricing wires, contains or will contain language obligating each underwriter, each dealer who is a member of the selling group, and each broker-dealer that is a party to such third-party distribution agreement, as applicable, to report the prices at which it sells to the public the unsold Bonds of each maturity allotted to it until it is notified by the successful bidder that either the 10% test has been satisfied as to the Bonds of that maturity or all Bonds of that maturity have been sold to the public, if and for so long as directed by the successful bidder and as set forth in the related pricing wires and (ii) any agreement among underwriters relating to the

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initial sale of the Bonds to the public, together with the related pricing wires, contains or will contain language obligating each underwriter that is a party to a third-party distribution agreement to be employed in connection with the initial sale of the Bonds to the public to require each broker-dealer that is a party to such third-party distribution agreement to report the prices at which it sells to the public the unsold Bonds of each maturity allotted to it until it is notified by the successful bidder or such underwriter that either the 10% test has been satisfied as to the Bonds of that maturity or all Bonds of that maturity have been sold to the public if and for so long as directed by the successful bidder or such underwriter and as set forth in the related pricing wires.

Sales of any Bonds to any person that is a related party to an underwriter shall not constitute sales to the public for purposes of this Notice of Sale. Further, for purposes of this Notice of Sale:

1. “public” means any person other than an underwriter or a related party,

2. “underwriter” means (A) any person that agrees pursuant to a written contract with the District (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Bonds to the public and (B) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (A) to participate in the initial sale of the Bonds to the public (including a member of a selling group or a party to a third-party distribution agreement participating in the initial sale of the Bonds to the public), and

3. a purchaser of any of the Bonds is a “related party” to an underwriter if the underwriter and the purchaser are subject, directly or indirectly, to (i) more than 50% common ownership of the voting power or the total value of their stock, if both entities are corporations (including direct ownership by one corporation of another), (ii) more than 50% common ownership of their capital interests or profits interests, if both entities are partnerships (including direct ownership by one partnership of another), or (iii) more than 50% common ownership of the value of the outstanding stock of the corporation or the capital interests or profit interests of the partnership, as applicable, if one entity is a corporation and the other entity is a partnership (including direct ownership of the applicable stock or interests by one entity of the other).

Failure to Meet the Competitive Sale Requirements – Option B – The Successful Bidder Intends to Reoffer the Bonds to the Public and Agrees to Hold the Price of Maturities of Bonds for Which the 10% Test in Option A is Not Met as of the Sale Date. The successful bidder may, at its option, notify the Financial Advisor in writing, which may be by email (the “Hold the Price Notice”), not later than 4:00 p.m. on the Sale Date, that it has not sold 10% of the maturities of the Bonds listed in the Hold the Price Notice (the “Unsold Maturities”) and that the successful bidder will not offer the Unsold Maturities to any person at a price that is higher than the initial offering price to the public during the period starting on the Sale Date and ending on the earlier of (i) the close of the fifth business day after the Sale Date or (ii) the date on which the successful bidder has sold at least 10% of the applicable Unsold Maturity to the public at a price that is no higher than the initial offering price to the public. If the successful bidder delivers a Hold the Price Notice to the Financial Advisor, the successful bidder must provide to the Issuer on or before the Closing Date, in addition to the certification described in Option A above, evidence that each underwriter of the Bonds, including underwriters in an underwriting syndicate or selling group, has agreed in writing to hold the price of the Unsold Maturities in the manner described in the preceding sentence.

Failure to Meet the Competitive Sale Requirements and/or the Successful Bidder Does Not Intend to Reoffer the Bonds to the Public – Option C. If the successful bidder has purchased the Bonds for its own account and will not distribute or resell the Bonds to the public, then, whether or not the competitive sale requirements were met, the reoffering price certificate will recite such facts and identify the price or prices at which the purchase of the Bonds was made.

In order to assist bidders in complying with Rule 15c2-12 (b)(5) promulgated by the Securities and Exchange Commission, the District will undertake to provide annual reports and notices of certain significant events. A description of this undertaking is set forth in Appendix D to the Preliminary Official Statement.

The Bonds will be designated as “qualified tax-exempt obligations” for the purpose of Section 265(b)(3) of the Code.

Additional information concerning the Manchester Essex Regional School District and the Bonds is contained in the Preliminary Official Statement dated July 8, 2020, to which prospective bidders are directed. The Preliminary Official Statement is provided for informational purposes only and is not a part of this Notice of Sale. Said Preliminary Official Statement is deemed final by the District except for the omission of the reoffering price(s), interest rate(s), the identity of the underwriter(s), and any other pertinent terms of the Bonds depending on such matters, but is subject to change without notice and to completion or amendment in a Final Official Statement. Copies of the Preliminary Official Statement may be obtained from Hilltop Securities Inc., 54 Canal Street, Boston, Massachusetts 02114 (Telephone: 617-619-4409). Within seven (7) business days following the award of the Bonds in accordance herewith, 5 copies of the Final Official Statement will be available from the Hilltop Securities Inc. to the successful bidder for use in reoffering the Bonds. Upon request, additional copies will be provided at the expense of the requester.

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It is anticipated that CUSIP identification numbers will be printed on the Bonds, but neither the failure to print such numbers on any Bond, nor any error with respect thereto, shall constitute a cause for a failure or refusal by the purchaser thereof to accept delivery and pay for the Bonds. The District assumes no responsibility for any CUSIP Service Bureau or other charges that may be imposed for the assignment of such numbers.

The Bonds, in definitive form, will be delivered to DTC, or its custodial agent, on or about July 30, 2020 for settlement in federal reserve funds.

___________________________

Manchester Essex Regional School District, Massachusetts

/s/ Charles F. Lane, Treasurer July 8, 2020

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EXHIBIT 1

[Issue Price Certificate for Use If the Competitive Sale Requirements Are Met]

Manchester Essex Regional School District, Massachusetts $2,205,000* General Obligation Refunding Bonds of 2020 dated July 30, 2020

ISSUE PRICE CERTIFICATE AND RECEIPT

The undersigned, on behalf of _______________________ (the “Successful Bidder”), hereby certifies as set forth below with respect to the sale of the above-captioned obligations (the “Bonds”) of the Manchester Essex Regional School District, Massachusetts (the “Issuer”).

1. Reasonably Expected Initial Offering Prices.

(a) As of the Sale Date, the reasonably expected initial offering prices of the Bonds to the Public by the Successful Bidder are the prices listed in Schedule A (the “Expected Offering Prices”). The Expected Offering Prices are the prices for the Maturities of the Bonds used by the Successful Bidder in formulating its bid to purchase the Bonds. Attached as Schedule B is a true and correct copy of the bid provided by the Successful Bidder to purchase the Bonds.

(b) The Successful Bidder was not given the opportunity to review other bids prior to submitting its bid.

(c) The bid submitted by the Successful Bidder constituted a firm offer to purchase the Bonds.

2. Defined Terms.

(a) Maturity means Bonds with the same credit and payment terms. Bonds with different maturity dates, or Bonds with the same maturity date but different stated interest rates, are treated as separate Maturities.

(b) Public means any person (including an individual, trust, estate, partnership, association, company, or corporation) other than an Underwriter or a related party to an Underwriter. The term “related party” for purposes of this certificate generally means any two or more persons who have greater than 50 percent common ownership, directly or indirectly.

(c) Sale Date means the first day on which there is a binding contract in writing for the sale of a Maturity of the Bonds. The Sale Date of the Bonds is July 15, 2020.

(d) Underwriter means (i) any person, including the Successful Bidder, that agrees pursuant to a written contract with the Issuer (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Bonds to the Public, and (ii) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (i) of this paragraph to participate in the initial sale of the Bonds to the Public (including a member of a selling group or a party to a third-party distribution agreement participating in the initial sale of the Bonds to the Public).

3. Receipt. The Successful Bidder hereby acknowledges receipt of the Bonds and further acknowledges receipt of all certificates, opinions, and other documents required to be delivered to the Successful Bidder, before or simultaneously with the Bonds, which certificates, opinions, and other documents are satisfactory to the Successful Bidder.

The representations set forth in this certificate are limited to factual matters only. Nothing in this certificate represents the Successful Bidder’s interpretation of any laws, including specifically Sections 103 and 148 of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations thereunder. The undersigned understands that the foregoing information will be relied upon by the Issuer with respect to certain of the representations set forth in the Tax Certificate and with respect to compliance with the federal income tax rules affecting the Bonds, and by Locke Lord LLP in connection with rendering its opinion that the interest on the Bonds is excluded from gross income for federal income tax purposes, the preparation of the Internal Revenue Service Form 8038-G, and other federal income tax advice that it may give to the Issuer from time to time relating to the Bonds.

Dated: ______________, 2020 [NAME OF SUCCESSFUL BIDDER]

By: ________________________________ Name: Title:


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SCHEDULE A

EXPECTED OFFERING PRICES

(To Be Attached)

SCHEDULE B

COPY OF SUCCESSFUL BIDDER’S BID

(To Be Attached)

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EXHIBIT 1 – OPTION A

[Issue Price Certificate for Use If the Competitive Sale Requirements Are Not Met and the Hold the 10% Test to Apply]



The undersigned, on behalf of ______________________, (the “[Successful Bidder][Representative]”), on behalf of itself [and [NAMES OF OTHER UNDERWRITERS]] hereby certifies as set forth below with respect to the sale and issuance of the above-captioned obligations (the “Bonds”) of the Manchester Essex Regional School District, Massachusetts (the “Issuer”).

1. Sale of the Bonds. As of the date of this certificate, [except as set forth in following paragraph,] for each Maturity of the Bonds, the first price at which at least 10% of such Maturity of the Bonds was sold to the Public is the respective price listed in Schedule A.

[Only use the next paragraph if the 10% test has not been met or all of the Bonds have not been sold for one or more Maturities of Bonds as of the Closing Date.]

For each Maturity of the Bonds as to which no price is listed in Schedule A, as set forth in the Notice of Sale for the Bonds, until at least 10% of each such Maturity of the Bonds is sold to the Public (the “10% test”) or all of the Bonds are sold to the Public, the [Successful Bidder][Representative] agrees to promptly report to the Issuer’s financial advisor, Hilltop Securities Inc. (the “Financial Advisor”) the prices at which the unsold Bonds of each Maturity have been sold to the Public, which reporting obligation shall continue after the date hereof until the 10% test has been satisfied for each Maturity of the Bonds or until all the Bonds of a Maturity have been sold. The [Successful Bidder][Representative] shall continue to report each sale of Bonds to the Financial Advisor until notified by email or in writing by the Issuer or the Financial Advisor that it no longer needs to do so.

2. Defined Terms.


(b) Public means any person (including an individual, trust, estate, partnership, association, company, or corporation) other than an Underwriter or a related party to an Underwriter. The term “related party” for purposes of this certificate generally means any two or more persons who have greater than 50 percent common ownership, directly or indirectly.

(c) Underwriter means (i) any person, including the [Successful Bidder][Representative], that agrees pursuant to a written contract with the Issuer (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Bonds to the Public, and (ii) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (i) of this paragraph to participate in the initial sale of the Bonds to the Public (including a member of a selling group or a party to a third-party distribution agreement participating in the initial sale of the Bonds to the Public).

3. Receipt. The [Successful Bidder][Representative] hereby acknowledges receipt of the Bonds and further acknowledges receipt of all certificates, opinions, and other documents required to be delivered to the [Successful Bidder][Representative], before or simultaneously with the Bonds, which certificates, opinions, and other documents are satisfactory to the [Successful Bidder][Representative].

The representations set forth in this certificate are limited to factual matters only. Nothing in this certificate represents the [Successful Bidder][Representative]’s interpretation of any laws, including specifically Sections 103 and 148 of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations thereunder. The undersigned understands that the foregoing information will be relied upon by the Issuer with respect to certain of the representations set forth in the Tax Certificate and with respect to compliance with the federal income tax rules affecting the Bonds, and by Locke Lord LLP in connection with rendering its opinion that the interest on the Bonds is excluded from gross income for federal income tax purposes, the preparation of the Internal Revenue Service Form 8038-G, and other federal income tax advice that it may give to the Issuer from time to time relating to the Bonds. Dated: ______________, 2020 [SUCCESSFUL BIDDER][REPRESENTATIVE]

By: ________________________________ Name:

Title: ______________________ *Preliminary, subject to change.

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SCHEDULE A

SALE PRICES

(To be Attached)

13

EXHIBIT 1 – OPTION B

[Issue Price Certificate for Use If the Competitive Sale Requirements Are Not Met and the Hold the Price Rule Is Used]



The undersigned, on behalf of ______________________ (the (“[Successful Bidder][Representative]”), on behalf of itself [and [NAMES OF OTHER UNDERWRITERS] ]hereby certifies as set forth below with respect to the sale and issuance of the above-captioned obligations (the “Bonds”) of the Manchester Essex Regional School District, Massachusetts (the “Issuer”).

1. Sale of the Bonds. As of the date of this certificate, [except as set forth in following paragraph,] for each Maturity of the Bonds, the first price at which at least 10% of such Maturity of the Bonds was sold to the Public is the respective price listed in Schedule A.

[Only use the next paragraph if the 10% test has not been met as of the Sale Date.]

For each Maturity of the Bonds as to which no price is listed in Schedule A (the “Unsold Maturities”), as set forth in the Notice of Sale for the Bonds, the [Successful Bidder][Representative] and any other Underwriter did not [and will not] reoffer the Unsold Maturities to any person at a price that is higher than the initial offering price to the public until the earlier of (i) __________, 2020 or (ii) the date on which the [Successful Bidder][Representative] or any other Underwriter sold at least 10% of each Unsold Maturity at a price that is no higher than the initial offering price to the Public.

2. Defined Terms.


(b) Public means any person (including an individual, trust, estate, partnership, association, company, or corporation) other

than an Underwriter or a related party to an Underwriter. The term “related party” for purposes of this certificate generally means any two or more persons who have greater than 50 percent common ownership, directly or indirectly.

(c) Underwriter means (i) any person, including the [Successful Bidder][Representative], that agrees pursuant to a written

contract with the Issuer (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Bonds to the Public, and (ii) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (i) of this paragraph to participate in the initial sale of the Bonds to the Public (including a member of a selling group or a party to a third-party distribution agreement participating in the initial sale of the Bonds to the Public).

3. Receipt. The [Successful Bidder][Representative] hereby acknowledges receipt of the Bonds and further acknowledges receipt of all certificates, opinion and other documents required to be delivered to the [Successful Bidder][Representative], before or simultaneously with the delivery of the Bonds, which certificates, opinions and other documents are satisfactory to the [Successful Bidder][Representative].

The representations set forth in this certificate are limited to factual matters only. Nothing in this certificate represents the [Successful Bidder’s][Representative’s] interpretation of any laws, including specifically Sections 103 and 148 of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations thereunder. The undersigned understands that the foregoing information will be relied upon by the Issuer with respect to certain of the representations set forth in the Tax Certificate and with respect to compliance with the federal income tax rules affecting the Bonds, and by Locke Lord LLP in connection with rendering its opinion that the interest on the Bonds is excluded from gross income for federal income tax purposes, the preparation of the Internal Revenue Service Form 8038-G, and other federal income tax advice that it may give to the Issuer from time to time relating to the Bonds. Dated: ______________, 2020 [SUCCESSFUL BIDDER][REPRESENTATIVE]

By: ________________________________ Name: Title:


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SCHEDULE A

SALE PRICES

(To be Attached)

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OFFICIAL STATEMENT


$2,205,000* GENERAL OBLIGATION REFUNDING BONDS OF 2020 This Official Statement is provided for the purpose of presenting certain information relating to the Manchester Essex Regional School District, Massachusetts (the “District”) in connection with the sale of $2,205,000* aggregate principal amount of its General Obligation Refunding Bonds of 2020 (the "Bonds"). The information contained herein has been furnished by the District, except information attributed to another source.

THE BONDS Description of the Bonds The Bonds will be dated as of their date of delivery and will bear interest payable semiannually on February 15 and August 15 of each year commencing February 15, 2021. The Bonds shall mature on February 15 of the years and in the principal amounts as set forth on the first page of this Official Statement. The Bonds are issuable only as fully registered Bonds without coupons, and, when issued, will be registered in the name of Cede & Co., as Bondowner and nominee for The Depository Trust Company ("DTC"), New York, New York. DTC will act as securities depository for the Bonds. Purchases of the Bonds will be made in book-entry form, in the denomination of $5,000 or any integral multiple thereof. Purchasers will not receive certificates representing their interest in Bonds purchased. So long as Cede & Co. is the Bondowner, as nominee of DTC, references herein to the Bondowners or registered owners shall mean Cede & Co., as aforesaid, and shall not mean the Beneficial Owners (as defined herein) of the Bonds. (See "Book-Entry Transfer System" herein.) Principal and semiannual interest on the Bonds will be paid by U.S. Bank National Association, Boston, Massachusetts as Paying Agent. So long as DTC or its nominee, Cede & Co., is the Bondowner, such payments will be made directly to DTC. Disbursement of such payments to the DTC Participants is the responsibility of DTC and disbursements of such payments to the Beneficial Owners is the responsibility of the DTC Participants and the Indirect Participants, as more fully described herein. The Bonds are not subject to redemption prior to maturity. Record Date The record date for each payment of interest on the Bonds (the “Record Date”) is the last business day of the month preceding the interest payment date provided that, under certain circumstances, the Paying Agent may establish a special record date. The special record date may not be more than twenty (20) days before the date set for payment. The Paying Agent will mail notice of a special record date to the Bondowners at least ten (10) days before the special record date. Book-Entry Transfer System The Depository Trust Company ("DTC"), New York, NY, will act as securities depository for the Bonds. The Bonds will be issued in fully-registered form registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One-fully registered Bond certificate will be issued for each maturity of each series of the Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC. DTC, the world's largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity, corporate and municipal debt issues, and money market instruments ______________________ *Preliminary, subject to change

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(from over 100 countries) that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has a AA+ rating from S&P Global Ratings. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com. Purchases of securities deposited with DTC must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC's records. The ownership interest of each actual purchaser of each security deposited with DTC ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in securities deposited with DTC are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in securities deposited with DTC, except in the event that use of the book-entry system for the Bonds is discontinued. To facilitate subsequent transfers, all securities deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of securities with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the securities deposited with it; DTC's records reflect only the identity of the Direct Participants to whose accounts such securities are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote with respect to securities deposited with it unless authorized by a Direct Participant in accordance with DTC's MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the issuer of such securities or its paying agent as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the securities are credited on the record date (identified in a listing attached to the Omnibus Proxy). Principal and interest payments on securities deposited with DTC will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from the issuer of such securities or its paying agent, on the payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC (nor its nominee), the issuer of such securities or its paying agent, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the issuer of such securities or its paying agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as depository with respect to securities held by it at any time by giving reasonable notice to the issuer of such securities or its paying agent. Under such circumstances, in the event that a successor depository is not obtained, physical certificates are required to be printed and delivered. The District may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, physical certificates will be printed and delivered. The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that the District believes to be reliable, but the District takes no responsibility for the accuracy thereof.

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Authorization of the Bonds and Use of Proceeds The following table sets forth the purpose, principal amount and statutory reference for the current issue of Bonds.

StatutoryThis Reference

Purpose Issue* M.G.L.

Refunding 2,205,000$ Ch.44, s.21A2,205,000$ *

______________________ *Preliminary, subject to change. (1) The District’s Member Towns voted to exempt their respective portions of debt service on the Bonds from the limitations of Proposition 2 ½. As described above, Bond proceeds will be used to current refund a portion of the District’s $5,000,000 General Obligation School Bonds dated December 15, 2009, maturing in the years 2021 through 2030 in the aggregate principal amount of $2,500,000 (the “2009 Refunded Bonds” or the “Refunded Bonds”) and to pay costs of issuing the Bonds. Sources and Uses of Bond Proceeds

Proceeds of the Bonds will be applied as follows:

SOURCES:Par Amount of the Bonds $Original Issue Premium

Total Sources $

USES:Deposit to Refunding Escrow Fund $Costs of IssuanceRounding Amount

Total Uses $ Plan of Refunding

Upon delivery of the Bonds, the District will enter into a Refunding Escrow Agreement (the “Refunding Escrow Agreement”) with U.S. Bank National Association, as Refunding Escrow Agent, to provide for the refunding of the Refunded Bonds. Upon receipt of the portion of the proceeds of the Bonds necessary to refund the Refunded Bonds, the Refunding Escrow Agent will deposit in the Refunding Escrow Fund established under the Refunding Escrow Agreement an amount which will be held in cash to pay when due, interest on, and upon redemption, the outstanding principal of the Refunded Bonds, including accrued interest thereon. The Refunding Escrow Fund will be pledged for the benefit of the holders of the Refunded Bonds.

Tax Exemption

In the opinion of Locke Lord LLP, Bond Counsel to the District (“Bond Counsel”), based upon an analysis of existing laws, regulations, rulings, and court decisions, and assuming, among other matters, compliance with certain covenants, interest on the Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986, as amended (the “Code”). Bond Counsel is of the further opinion that interest on the Bonds will not be included in computing the alternative minimum taxable income of Bondholders who are individuals. The Bonds will be designated as “qualified tax-exempt obligations” for purposes of Section 265(b)(3) of the Code. Bond Counsel expresses no opinion regarding any other federal tax consequences arising with respect to the ownership or disposition of, or the accrual or receipt of interest on the Bonds.

The Code imposes various requirements relating to the exclusion from gross income for federal income tax purposes of interest on obligations such as the Bonds. Failure to comply with these requirements may result in interest on the Bonds being included in gross income for federal income tax purposes, possibly from the date of original issuance of the Bonds. The District has covenanted to comply with such requirements to ensure that interest on the Bonds will not be included in federal gross income. The opinion of Bond Counsel assumes compliance with these requirements.


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Bond Counsel is also of the opinion that, under existing law, interest on the Bonds is exempt from Massachusetts personal income taxes, and the Bonds are exempt from Massachusetts personal property taxes. Bond Counsel has not opined as to other Massachusetts tax consequences arising with respect to the Bonds. Prospective Bondholders should be aware, however, that the Bonds are included in the measure of Massachusetts estate and inheritance taxes, and the Bonds and the interest thereon are included in the measure of certain Massachusetts corporate excise and franchise taxes. Bond Counsel expresses no opinion as to the taxability of the Bonds or the income therefrom or any other tax consequences arising with respect to the Bonds under the laws of any state other than Massachusetts. A complete copy of the proposed form of opinion of Bond Counsel is set forth in Appendix C hereto.

To the extent the issue price of any maturity of the Bonds is less than the amount to be paid at maturity of such Bonds (excluding amounts stated to be interest and payable at least annually over the term of such Bonds), the difference constitutes “original issue discount,” the accrual of which, to the extent properly allocable to each owner thereof, is treated as interest on the Bonds which is excluded from gross income for federal income tax purposes and is exempt from Massachusetts personal income taxes. For this purpose, the issue price of a particular maturity of the Bonds is either the reasonably expected initial offering price to the public or the first price at which a substantial amount of such maturity of the Bonds is sold to the public, as applicable. The original issue discount with respect to any maturity of the Bonds accrues daily over the term to maturity of such Bonds on the basis of a constant interest rate compounded semiannually (with straight-line interpolations between compounding dates). The accruing original issue discount is added to the adjusted basis of such Bonds to determine taxable gain or loss upon disposition (including sale, redemption, or payment on maturity) of such Bonds. Bondholders should consult their own tax advisors with respect to the tax consequences of ownership of Bonds with original issue discount, including the treatment of purchasers who do not purchase such Bonds in the original offering to the public at the reasonably expected initial offering price or, if applicable, the first price at which a substantial amount of such Bonds is sold to the public.

Bonds purchased, whether at original issuance or otherwise, for an amount greater than the stated principal amount to be paid at maturity of such Bonds, or, in some cases, at the earlier redemption date of such Bonds (“Premium Bonds”), will be treated as having amortizable bond premium for federal income tax purposes and Massachusetts personal income tax purposes. No deduction is allowable for the amortizable bond premium in the case of obligations, such as the Premium Bonds, the interest on which is excluded from gross income for federal income tax purposes. However, a Bondholder’s basis in a Premium Bond will be reduced by the amount of amortizable bond premium properly allocable to such Bondholder. Holders of Premium Bonds should consult their own tax advisors with respect to the proper treatment of amortizable bond premium in their particular circumstances.

Bond Counsel has not undertaken to determine (or to inform any person) whether any actions taken (or not taken) or events occurring (or not occurring) after the date of issuance of the Bonds may adversely affect the value of, or the tax status of interest on, the Bonds.

Although Bond Counsel is of the opinion that interest on the Bonds is excluded from gross income for federal income tax purposes and is exempt from Massachusetts personal income taxes, the ownership or disposition of, or the accrual or receipt of interest on, the Bonds may otherwise affect the federal or state tax liability of a Bondholder. Among other possible consequences of ownership or disposition of, or the accrual or receipt of interest on, the Bonds, the Code requires recipients of certain social security and certain railroad retirement benefits to take into account receipts or accruals of interest on the Bonds in determining the portion of such benefits that are included in gross income. The nature and extent of all such other tax consequences will depend upon the particular tax status of the Bondholder or the Bondholder’s other items of income, deduction, or exclusion. Bond Counsel expresses no opinion regarding any such other tax consequences, and Bondholders should consult with their own tax advisors with respect to such consequences.

Risk of Future Legislative Changes and/or Court Decisions

Legislation affecting tax-exempt obligations is regularly considered by the United States Congress and may also be considered by the Massachusetts legislature. Court proceedings may also be filed, the outcome of which could modify the tax treatment of obligations such as the Bonds. There can be no assurance that legislation enacted or proposed, or actions by a court, after the date of issuance of the Bonds will not have an adverse effect on the tax status of interest on the Bonds or the market value or marketability of the Bonds. These adverse effects could result, for example, from changes to federal or state income tax rates, changes in the structure of federal or state income taxes (including replacement with another type of tax), or repeal (or reduction in the benefit) of the exclusion of interest on the Bonds from gross income for federal or state income tax purposes for all or certain taxpayers.

Additionally, Bondholders should be aware that future legislative actions (including federal income tax reform) may retroactively change the treatment of all or a portion of the interest on the Bonds for federal income tax purposes for all or certain taxpayers. In all such events, the market value of the Bonds may be affected and the ability of Bondholders to sell their Bonds in the secondary market may be reduced. The Bonds are not subject to special mandatory redemption, and the

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interest rates on the Bonds are not subject to adjustment, in the event of any such change in the tax treatment of interest on the Bonds.

Investors should consult their own financial and tax advisors to analyze the importance of these risks.

Security and Remedies

The Bonds will be general obligations of the Manchester Essex Regional School District, and, to the extent not paid from other sources, will be payable as to both principal and interest from sums which are annually apportioned to its Member Towns in accordance with an agreement (the "District Agreement") between the Towns of Manchester and Essex, Massachusetts (the “Member Towns”). (A copy of the District Agreement is available upon request).

To pay amounts apportioned to and appropriated by the Member Towns to pay the principal of and interest on the Bonds, the Member Towns have the power to levy ad valorem taxes upon all the property situated within their respective territorial limits and taxable by them, without limitation as to rate or amount, except as provided under Chapter 44, Section 20 of the General Laws.

No Member Town is liable for payment of the sums apportioned to and assessed upon any other Member Town. To the extent that the sums apportioned to and appropriated by a Member Town are not paid when due, the Manchester Essex Regional School District, through its Treasurer, has the power to borrow in anticipation of any and all unpaid amounts sufficient to pay the principal and interest falling due on the Bonds.

Court Proceedings. Massachusetts cities, towns and school districts are subject to suit on their general obligation bonds and notes and courts of competent jurisdiction have power in appropriate proceedings to order payment of a judgment on the bonds or notes from lawfully available funds or, if necessary, to order the city, town or school district to take lawful action to obtain the required money. (See “Tax Limitations” under “PROPERTY TAXATION” below.) In exercising their discretion as to whether to enter such an order, the courts could take into account all relevant factors including the current operating needs of the city, town or school district and the availability and adequacy of other remedies. The Massachusetts Supreme Judicial Court has stated in the past that a judgment against a municipality can be enforced by the taking and sale of the property of any inhabitant. However, there has been no judicial determination as to whether this remedy is constitutional under current due process and equal protection standards.

State Distributions. State grants and distributions may in some circumstances be unavailable to pay general obligation bonds and notes of a city, town or school district in that the State Treasurer is empowered to deduct from such grants and distributions the amount of any debt service paid on “qualified bonds” (See “Serial Bonds and Notes” under “INDEBTEDNESS-TYPES OF OBLIGATIONS” below) and any other sums due and payable by the city, town or school district to the Commonwealth or certain other public entities, including any unpaid assessments for costs of any public transportation authority (such as the Massachusetts Bay Transportation Authority (“MBTA”) or a regional transit authority) of which it is a member, for costs of the Massachusetts Water Resources Authority (“MWRA”) if the city or town is within the territory served by the MWRA, for any debt service due on obligations issued to the Massachusetts School Building Authority (“MSBA”), or for charges necessary to meet obligations under the Commonwealth’s Clean Water or Drinking Water Revolving Loan Programs, including such charges imposed by another local governmental unit that provides wastewater collection or treatment services or drinking water services to the city or town.

If a city, town or school district is (or is likely to be) unable to pay principal or interest on its bonds or notes when due, it is required to notify the State Commissioner of Revenue. The Commissioner shall in turn, after verifying the inability, certify the inability to the State Treasurer. The State Treasurer shall pay the due or overdue amount to the paying agent for the bonds or notes, in trust, within three days after the certification or one business day prior to the due date (whichever is later). This payment is limited, however, to the estimated amount otherwise distributable by The Commonwealth of Massachusetts (the “Commonwealth”) to the city, town or school district during the remainder of the fiscal year (after the deductions mentioned in the foregoing paragraph). If for any reason any portion of the certified sum has not been paid at the end of the fiscal year, the State Treasurer shall pay it as soon as practicable in the next fiscal year to the extent of the estimated distributions for that fiscal year. The sums so paid shall be charged (with interest and administrative costs) against the distributions to the city, town or school district.

The foregoing does not constitute a pledge of the faith and credit of the Commonwealth. The Commonwealth has not agreed to maintain existing levels of state distributions, and the direction to use estimated distributions to pay debt service may be subject to repeal by future legislation. Moreover, adoption of the annual appropriation act has sometimes been delayed beyond the beginning of the fiscal year and estimated distributions which are subject to appropriation may be unavailable to pay local debt service until they are appropriated.

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Bankruptcy. Enforcement of a claim for payment of principal or interest on general obligation bonds or notes would be subject to the applicable provisions of Federal bankruptcy laws and to the provisions of other statutes, if any, hereafter enacted by the Congress or the State legislature extending the time for payment or imposing other constraints upon enforcement insofar as the same may be constitutionally applied. Massachusetts municipalities are not generally authorized by the Massachusetts General Laws to file a petition for bankruptcy under Federal Bankruptcy laws. In cases involving significant financial difficulties faced by a single city, town or school district, the Commonwealth has enacted special legislation to permit the appointment of a fiscal overseer, finance control board or, in the most extreme cases, a state receiver. In a limited number of these situations, however such special legislation has also authorized the filing of federal bankruptcy proceedings, with the prior approval of the Commonwealth. In each case where such authority was granted, it expired at the termination of the Commonwealth’s oversight of the financially distressed city, town or school district. To date, no such filings have been approved or made.

Opinion of Bond Counsel

The successful bidder will be furnished the legal opinion of the firm of Locke Lord LLP, Boston, Massachusetts (“Bond Counsel”). The opinion will be dated and given on and will speak only as of the date of original delivery of the Bonds to the successful bidder. The opinion will be substantially in the form presented in Appendix C.

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

Rating

The District has applied to S&P Global Ratings for a rating on the Bonds. Said rating, if obtained, will only reflect the rating agency's views and will be subject to revision or withdrawal, which could affect the market price of the Bonds.

Financial Advisory Services of Hilltop Securities Inc.

Hilltop Securities Inc., Boston, Massachusetts serves as financial advisor to the Manchester Essex Regional School District, Massachusetts.

Continuing Disclosure

In order to assist the underwriters in complying with Rule 15c2-12(b)(5) promulgated by the Securities and Exchange Commission (the “Rule”), the District will covenant for the benefit of owners of the Bonds to provide certain financial information and operating data relating to the District by not later than 270 days after the end of each fiscal year, and to provide notices of the occurrence of certain significant events. The covenants will be contained in a Continuing Disclosure Certificate, the proposed form of which is provided in Appendix D. The Certificate of the District will be executed by the signers of the Bonds, and incorporated by reference in the Bonds.

In addition to the District, the “obligated persons” within the meaning of the Rule, are the towns of Manchester-by-the-Sea and Essex, Massachusetts (the “Member Towns”). In the past five years, the District and each Member Town believes it has complied, in all material respects, with its previous undertakings to provide annual reports or notices of significant events in accordance with the Rule.

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THE DISTRICT General The Manchester Essex Regional School District (the “District”) was formed in May, 2000 under Chapter 71 of the Massachusetts General Laws, as amended and supplemented, and an Agreement as amended (the "Agreement"), between the Towns of Manchester-by-the-Sea and Essex, Massachusetts (the “Member Towns”) and provides public education for pupils from the Member Towns in grades kindergarten through twelve. The powers and duties of the District are vested in and exercised by the Manchester Essex Regional School District Committee (the "Committee"). The Committee consists of 7 members, four from Manchester-by-the-Sea, and three from Essex. Members of the Committee are elected for terms of three years by voters of the Member Towns on a staggered basis.

Principal Executive Officers The following sets forth the principal officials of the District:

Manner of TermTitle Name Selection Expires

School Committee: Shannon Erdmann, Chair Elected 2021Anne Cameron, Vice Chair Elected 2021Eric Burke Elected 2022Ken Warnock Elected 2022Sarah Wolfe Elected 2022Theresa Whitman Elected 2023Matthew Harrington Elected 2023

District Superintendent Pamela Beaudoin Appointed June 30, 2024District Treasurer Charles F. Lane Appointed June 30, 2020Business Manager Avi Urbas Appointed June 30, 2022

District Facilities Manchester Essex Regional School District is comprised of two K-5 elementary schools and one middle school/high school. Elementary students from Manchester-by-the-Sea attend the Manchester Memorial Elementary School. Elementary students in Essex attend the Essex Elementary School. Middle School and High School students from Manchester-by-the-Sea and Essex attend the Manchester Essex Regional Middle High School. Corona Virus (COVID-19) Disclosure COVID-19 is a new respiratory disease caused by a novel coronavirus that has not previously been seen in humans. On March 10, 2020, the Governor of The Commonwealth of Massachusetts declared a state of emergency to support the Commonwealth’s response to the outbreak of the virus. On March 11, 2020 the World Health Organization declared COVID-19 a pandemic. On March 13, 2020, the President declared a national emergency due to the outbreak, which has enabled disaster funds to be made available to states to fight the pandemic. On March 15, 2020, the Governor announced emergency actions to help address the spread of the virus, and as a result the District closed all school and implemented remote learning for the remainder of the fiscal 2019-20 school year. Pursuant to M.G.L. Chapter 44, Section 31, the District can set up a fund specifically related to COVID-19 expenses. This fund should capture all costs related to the COVID-19 pandemic and deficit spend for these costs, including but not limited to, overtime, cleaning and medical supplies, and IT equipment. At this time, the District has not created such fund but is tracking COVID related expenses for potential FEMA reimbursement. The virus and the resulting actions by national, state and local governments is altering the behavior of businesses and people in a manner that will have negative impacts on global and local economies. There can be no assurances regarding the extent to which COVID-19 will impact the national and state economies and, accordingly, how it will adversely impact municipalities, including the District. These negative impacts are likely to include reduced collections of property taxes and other revenues, including local meals and rooms tax revenue, motor vehicle excise taxes and other fees and charges collected by each member town. The Member Towns and District may also be affected by any reductions in state aid resulting from reduced revenues collected at the State level from such sources as income, sales, meals, hotel and capital

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gains taxes, among others. In addition, stock markets in the United States and globally have seen significant recent declines largely attributable to coronavirus concerns and will likely adversely affect the funding status of the pension funds and resulting funding schedules. The District cannot quantify these effects at this time. Furthermore, the rapid economic changes associated with the COVID-19 pandemic are likely to have negatively impacted the most recent employment, income, and related statistics presented herein. The District expects to close out fiscal 2020 with an operating surplus generated from the savings related to remote operations and continued interest income from the Memorial School project. In May 2020, the school committee fiscal 2021 budget, which was previously adopted in February 2020, by was reduced by $360,000 to account for a potential 10% state aid reduction. The fiscal 2021 budget does not include any layoffs but the District has developed scenarios for up to $1 million in reductions, which would involve limited layoffs, if needed. The revised fiscal 2021 budget has been approved by both Member Towns. District Enrollments The following table sets forth the trend in school enrollments for the school years indicated.

School Enrollments - October 1

2015 2016 2017 2018 2019 2020

Manchester Elementary 378 361 343 326 311 311 Essex Elementary 249 225 228 221 218 218 Middle High School 816 812 814 839 839 839 Total Enrollment 1,443 1,398 1,385 1,386 1,368 1,368

ProjectedActual

The total capacity of the District schools is approximately 1,500-1,600 students. The Middle-High School building, for which the District issued $25,000,000 bonds dated January 15, 2008, $5,000,000 bonds dated December 15, 2009 and $1,964,000 bonds dated August 2, 2012, was designed to alleviate then overcrowded conditions, upgrade and improve educational spaces and eliminate the need for modular classrooms. The Middle-High School opened in September, 2009. Apportionment of Costs Classification of Costs For the purpose of apportioning assessments levied by the District against the member towns, costs are divided into three categories: capital costs, special operating costs and operating costs. Capital Costs Capital Costs include the cost of acquiring land, the cost of constructing and reconstructing and adding to and equipping school buildings, the cost of remodeling or making extraordinary repairs to school buildings, the cost of constructing sewerage systems and sewerage treatment and disposal facilities or the cost of the purchase or use of such systems with a municipality, the cost of leasing, with an option to purchase, equipment for educational purposes and the cost of any other item of a capital nature for which the District is authorized to borrow. Capital costs also include payment of principal of and interest on bonds, notes, or other obligations issued by the District to finance capital costs. Special Operating Costs Special Operating Costs include the cost of evening, graduate, and extension courses or any other types of courses, including vocational educational programs but excluding summer school programs, that are offered by the District to persons other than pupils attending a regular District comprehensive school program in any of the grades kindergarten through twelve, inclusive. Operating Costs Operating Costs of the District include all costs not included in capital costs and special operating costs as defined above, but including interest on temporary notes issued by the District in anticipation of revenue.

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Apportionment of Capital Costs Capital costs are apportioned as follows:

(i) Fifty percent (50%) on the basis that the equalized valuation of the member towns pursuant to the latest equalized valuation of such towns, or any later equalized valuation as may be enacted by the Commonwealth next preceding each bond issue; and

(ii) Fifty percent (50%) on the basis that the respective populations of each member town on October 1 of the

year in which the apportionment is determined bears to the total combined populations of all member towns on the same date.

Apportionment of Special Operating Costs Special operating costs shall be apportioned to the member towns on the basis that the enrollment of pupil hours of residents of each member town in courses described in the definition of such costs as described above for the fiscal year next preceding the fiscal year for which the apportionment is determined bears to the total enrollment of pupil hours in such courses from residents of both member towns on such date. Enrollment in such courses shall be determined on the basis of those pupils enrolled in each of said courses as of the first Tuesday after the first Monday of the week that said courses commence. Apportionment of Operating Costs Operating costs shall be expressed as “instructional costs” and “non-instructional costs”, and the categorization of costs into either of these sub-categories are to be determined by the Regional School District School Committee.

A. Non instructional operational costs shall currently be apportioned to the member towns as follows:

(i) Twenty-five percent (25%) on the basis that the “Average Equalized Valuation” (as defined in the District Agreement) of each member town bears to the “Total Equalized Valuation” (as defined in the District Agreement) of all the member towns; and

(ii) Seventy-five percent (75%) on the basis that the respective populations of each member town

according to the most recent Federal Census bears to the combined populations of all member towns according to the same Federal Census.

B. Instructional operating costs shall currently be apportioned to the member towns as follows:

(i) Twenty-five percent (25%) on the basis that the “Average Equalized Valuation” (as defined in the District Agreement) of each member town bears to the “Total Equalized Valuation” (as defined in the District Agreement) of all the member towns and;

(ii) Seventy-five percent (75%) on the basis of the “Average Respective Pupil Enrollments” (as defined in

the District Agreement) in each member town in all District Schools bears to the “Total Pupil Enrollment” (as defined in the District Agreement).

Education Reform Legislation passed in 1993 provides that operating costs shall be appropriated to the member towns of a regional school district according to a statutory mechanism, notwithstanding any provision to the contrary in the District Agreement. Therefore, it is likely that operating costs for future fiscal years will be apportioned on a basis that varies from that provided for in the District Agreement. Capital costs will continue to be apportioned pursuant to the Agreement.

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Payments of Apportioned Costs

(1) Capital costs: At least fifteen (15) days prior to the date on which any indebtedness (consisting of interest or principal and interest on bonds and notes) incurred by the District to finance capital costs is payable, each Member Town shall pay to the District its respective share of the amount that is so payable by the District on said date. All other capital costs incurred by the District not consisting of payments on account of indebtedness as aforesaid shall be paid in the same manner as operating costs.

(2) Special Operating Costs and Operating Costs: Each Member Town shall pay to the District in each fiscal year

its proportionate share of the special operating costs and operating costs. The annual share of each Member Town shall be paid in twelve (12) equal installments at such times that each installment except the first shall be paid on or before the first day of each month of the fiscal year, and the first such installment shall be paid on or before the fifteenth (15th) day of the first month of the fiscal year.

Trend in Operating and Capital Costs

Fiscal Total Manchester-by-the-Sea % of Essex % ofYear Assessments Assessment Total Assessment Total

2021 27,864,767$ 18,047,868$ 64.77 % 9,816,899$ 35.23 %2020 27,209,426 17,661,747 64.91 9,547,679 35.09 2019 24,204,231 15,678,579 64.78 8,525,653 35.22 2018 23,543,609 15,242,817 64.74 8,300,791 35.26 2017 22,928,378 14,781,245 64.47 8,147,133 35.53

Amendments to District Agreement The District Agreement provides that "no amendment shall be made that shall substantially impair the rights of the holders of the bonds or notes or other evidences of indebtedness of the District then outstanding, or the rights of the District to procure the means for payment thereof, provided that nothing in this provision shall prevent the admission of a new town or towns to the District and the reapportionment accordingly of capital costs of the District represented by bonds or notes of the District then outstanding and of interest thereon." Withdrawal Provisions Provisions for the withdrawal of a member town from the District are also included in the District Agreement. Any member town seeking to withdraw shall, by vote at an annual or special town meeting, request the Committee to draw up an amendment to the District Agreement setting forth the terms by which such town may withdraw from the District, provided:

(a) that the town seeking to withdraw shall remain liable for any unpaid operating costs which have been certified by the District treasurer to the treasurer of the withdrawing town, including the full amount so certified for the fiscal year in which such withdrawal takes effect; and

(b) that said town shall remain liable to the District for its share of the indebtedness, other than temporary debt

in anticipation of revenue, of the District outstanding at the time of such withdrawal, and for interest thereon, to the extent and in the same manner as though the town had not withdrawn from the District, except that such liability shall be reduced by any amount that such town has paid over at the time of withdrawal and which has been applied to the payment of indebtedness.

Such amendment shall take effect upon its acceptance by all of the Member Towns, acceptance by each Member Town to be a majority vote at a town meeting. The withdrawing town’s annual share of any future installment of principal and interest on bonds or notes outstanding on the effective date of its withdrawal shall be fixed at the percentage prevailing for such town at the last annual apportionment made next prior to the effective date of withdrawal. Money received by the District from the withdrawing town for payment of funded indebtedness or interest thereon shall be used only for such purpose and until so used shall be deposited in trust in the name of the District.

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DISTRICT FINANCES

Budget Process The Regional District School Committee annually prepares a tentative maintenance and operating budget for the ensuing fiscal period, including therein provisions for any installment of principal or interest to become due in such fiscal year on any bonds, notes or other obligations of the District. The budget shall be in reasonable detail, including the amounts payable under the classification of expenses recommended by the Manchester Department of Education. Copies of such tentative budget shall be mailed to the chairperson of the finance committee and to the chairperson of the board of selectmen of each Member Town. Not later than fifteen (15) days following the date on which copies of the tentative budget are so mailed, the Committee shall hold a public hearing within the District, after posting in at least two (2) public places in each Member Town at least seven (7) days in advance of the hearing, a notice stating the time, place, and purpose of the hearing, and giving such further notice as may be required by law. At such hearing, the Committee shall present the tentative budget and shall answer any reasonable inquiries with respect thereto. The Committee then adopts by a two thirds vote an annual maintenance and operating budget for the ensuing fiscal year. The annual maintenance and operating budget shall include debt and interest charges as separate items, and the Committee shall apportion the amounts necessary to be raised in order to meet this budget. The amount so apportioned to each Member Town shall be certified by the district treasurer to the treasurers of the Member Towns within thirty days from the date on which the annual maintenance and operating budget is adopted by the Committee, but not later than April 30, and each such town shall, at its next annual town meeting, appropriate the amounts so certified to it. Chapter 71, Section 16B, of the General Laws requires that the annual budget shall be adopted by a two-thirds vote of all the members of the Committee and the net amount to be raised by the Member Towns apportioned to them. In the event that either Member Town fails to appropriate its apportioned share the Committee shall amend and recertify the budget to the Member Towns who shall hold town meetings within 45 days from the date the amended budget was adopted. If the amended budget is rejected by one or both of the Member Towns, the School Committee shall convene a special district-wide meeting, open to all the registered voters in both towns, at which the amended budget submitted by the Committee shall be considered and a budget shall be approved by the affirmative vote of at least a majority of those present and voting on the question. The budget so approved shall be apportioned between the Member Towns and paid by them in accordance with the District Agreement. The District budget so approved must reflect the provision of the Education Reform Act that the Member Towns contribute to the District their minimum regional contributions for the fiscal year and shall be apportioned between the Member Towns and paid by them in accordance with the provisions of the Education Reform Act. The law further provides that in the event a budget is not approved by the beginning of a fiscal year the District shall notify the Department of Education of lack of a budget. The Commissioner of Education, or his designee, shall then certify an amount sufficient to operate the schools and order the Member Towns to appropriate not less than 1/12 of the total budget for the previous fiscal year for each month until a budget is adopted and approved by the Member Towns. If a school budget is not approved by December 1, the Department of Education shall assume operation of the District and deduct funds for such operation from local aid distributed to the Member Towns. Money in the excess and deficiency account (unreserved and undesignated fund balance) in excess of 5% of the operating and capital budget will be used to reduce the Towns’ assessments for the next fiscal year. The following table sets forth the trend in the Unassigned General Fund Balance at the end of the following fiscal years.

UnassignedFiscal year General Fund

Ended June 30 Balance (1)

2020 (estimate) 2,600,000$ (2)2019 1,928,890 2018 1,487,288 2017 1,139,368 2016 695,771 2015 378,088

______________________ (1) Source: Audited financial statements, except as footnoted below. (2) The District expects approximately $235,000 savings related to remote operations (transportation, utilities, supplies), net of planned

investments in technology and approximately $480,000 unbudgeted interest income.

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Other reserves of the District include the year end cash balance for School Choice, the recent trend of which follows:

School ChoiceCash

Fiscal Year Balance2020 1,488,000$ 2019 1,489,177 2018 1,621,558 2017 1,727,535 2016 1,621,389

Following is a five-year history of the Stabilization Fund balances:

Fiscal YearStabilization

Fund Balance

2020 481,109$ (1)2019 - (2)2018 - (2)2017 151,948 2016 161,448

______________________ (1) In fiscal 2019, the District earned $318,826 in interest income on the Memorial School project and $170,8236 insurance

settlement resulted in the end of the year Undesignated Fund Balance to increase over the prior year. (2) Following usage of the remaining stabilization balance in FY18 to address a fire alarm upgrade at Essex Elementary,

the District has elected to consolidate reserve deposits and spending (in excess of the Undesignated Fund Balance) into the School Choice fund.

Budget Trends The following table shows the budgeted appropriations and estimated receipts for fiscal years 2017 through 2021:

Category Fiscal 2017 Fiscal 2018 Fiscal 2019 Fiscal 2020 Fiscal 2021

Salaries 15,608,471$ 16,054,042$ 16,294,545$ 16,851,441$ 17,371,980$ Expenses 8,399,485 8,842,802 9,324,362 9,538,505 9,768,734 Construction Debt 2,199,862 2,156,188 2,108,338 4,483,000 4,415,328 Stabilization - - - 481,109 - Total 26,207,818$ 27,053,032$ 27,727,245$ 31,354,055$ 31,556,042$

RevenueChapter 70 2,850,168$ 2,926,838$ 2,970,741$ 3,033,748$ 2,774,413$ School Choice Out (60,000) (60,000) (55,000) (55,000) (85,000) School Choice In 325,000 430,000 375,000 325,000 325,000 Transportation 96,000 125,000 130,000 140,000 207,000 Medicaid 20,000 35,000 50,000 50,000 50,000 Bank Interest 5,000 5,000 12,000 25,000 40,000 Other - - - - - User Fees 28,000 28,000 25,000 29,500 29,500 Assessment 22,943,650 23,563,194 24,219,503 27,224,698 27,880,039 Reserve Fund - - - 581,109 335,000 Total 26,207,818$ 27,053,032$ 27,727,244$ 31,354,055$ 31,555,952$

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State Aid The District receives quarterly distributions of state aid for various purposes including general educational needs as part of the Chapter 70 program, pupil transportation, and for non-resident students attending district schools through the state’s School Choice program. The following table indicates the actual receipts of state aid for fiscal years 2016 through 2020 and an estimate for fiscal 2021.

Fiscal Year State Aid

2021 (est.) 3,221,413$ 2020 (est.) 3,558,009 2019 3,565,981 2018 3,377,905 2017 3,448,125 2016 3,394,212

The District’s Chapter 70 funding is set to increase by $40,380 or 1.4% in fiscal year 2019, reflective of flat enrollment and minimum aid increases in the State funding formula. School Choice receipts, net of charges for resident students attending other districts, are expected to increase slightly in 2019 to compensate for special education out-of-district tuition funds outlaid by the District in 2018 for School Choice students, which are repaid by the sending district in the subsequent year. The District maintains a policy of attempting to replace graduating School Choice students in most fiscal years. Investments Investments of funds of cities, towns and districts, except for trust funds, are generally restricted by Massachusetts General Laws Chapter 44, section 55. That statute permits investments of available revenue funds and bond and note proceeds in term deposits and certificates of deposits of banks and trust companies, in obligations issued or unconditionally guaranteed by the federal government or an agency thereof with a maturity of not more than one year, in repurchase agreements with a maturity of not more than 90 days secured by federal or federal agency securities, in participation units in the Massachusetts Municipal Depository Trust (“MMDT”), or in shares in SEC-registered money market funds with the highest possible rating from at least one nationally recognized rating organization.

MMDT is an investment pool created by the Commonwealth. The State Treasurer is the sole trustee, and the funds are managed under contract by an investment firm under the supervision of the State Treasurer’s office. According to the State Treasurer the Trust’s investment policy is designed to maintain an average weighted maturity of 90 days or less and is limited to high-quality, readily marketable fixed income instruments, including U.S. Government obligations and highly-rated corporate securities with maturities of one year or less. Trust funds, unless otherwise provided by the donor, may be invested in accordance with section 54 of Chapter 44, which permits a broader range of investments than section 55, including any bonds or notes that are legal investments for savings banks in the Commonwealth. The restrictions imposed by sections 54 and 55 do not apply to municipal retirement systems.

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Annual Audits The District’s accounts are annually audited by an independent certified public accounting firm. Attached as Appendix A is the District’s fiscal 2019 audit as prepared by Powers & Sullivan, Certified Public Accountants. Prior audits are available upon request from the District. The attached audit speaks only as of its date, and only to the matters expressly set forth therein. The auditors have not been engaged to review this Official Statement or to perform audit procedures regarding the post-audit period, nor have the auditors been requested to give their consent to the inclusion of their report in Appendix A. Except as stated in their report, the auditors have not been engaged to verify the financial information set out in Appendix A and are not passing upon and do not assume responsibility for the sufficiency, accuracy or completeness of the financial information presented in that appendix. Summary of Significant Accounting Policies See Appendix A attached. Financial Statements Set forth on the following pages are Governmental Funds Balance Sheets for fiscal years 2019, 2018 and 2017 and Statements of Revenues, Expenditures and Changes in Fund Balance for fiscal years 2019 through 2015. Said statements were extracted from the District’s audited financials.

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Manchester Essex Regional School District, MassachusettsGovernmental Funds Balance Sheet as of June 30, 2019 (1)

School Memorial Nonmajor TotalChoice School Governmental Governmental

General Fund Construction Funds FundsASSETSCash and cash equivalents 1,704,777$ 1,341,142$ 33,158,680$ 466,556$ 36,671,155$ Receivables, net of uncollectablesIntergovernmental 932,244 148,035 1,332,906 441,541 2,854,726 TOTAL ASSETS 2,637,021$ 1,341,142$ 34,491,586$ 908,097$ 39,525,881$

LIABILITIES:Warrants payable 269,092$ -$ 1,573,203$ 65,501$ 1,907,796$ Accrued payroll 33,841 - - - 33,841 Other liabilities 1,787 - - - 1,787

TOTAL LIABILITIES 304,720 - 1,573,203 65,501 1,943,424

FUND BALANCES:Restricted 179,338$ 1,489,177$ 32,918,383$ 983,918$ 35,570,816$ Assigned 224,073 - - - 224,073 Unassigned 1,928,890 - - (141,322) 1,787,568

TOTAL FUND BALANCES 2,332,301 1,489,177 32,918,383 842,596 37,582,457 TOTAL LIABILITIES AND FUND BALANCES 2,637,021$ 1,489,177$ 34,491,586$ 908,097$ 39,525,881$ _________________(1) Extracted from the District's audited financial statements.

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General Fund Construction Funds FundsASSETSCash and cash equivalents 1,837,490$ 1,591,040$ 180,185$ 279,722$ 3,888,437$ Receivables, net of uncollectables

Departmental and other 242,905 39,101 - 418,806 700,812 TOTAL ASSETS 2,080,395$ 1,591,040$ 180,185$ 698,528$ 4,589,249$

LIABILITIES:Warrants payable 285,194$ 8,584$ 45,893$ 183,463$ 523,134$ Accrued payroll 24,695 - - 264 24,959 Other liabilities 1,787 - - - 1,787

TOTAL LIABILITIES 311,676 8,584 45,893 183,727 549,880

FUND BALANCES:Restricted 194,610$ 1,621,557$ 134,292$ 706,324$ 2,656,783$ Assigned 86,821 - - - 86,821 Unassigned 1,487,288 - - (191,523) 1,295,765

TOTAL FUND BALANCES 1,768,719 1,621,557 134,292 514,801 4,039,369 TOTAL LIABILITIES AND FUND BALANCES 2,080,395$ 1,630,141$ 180,185$ 698,528$ 4,589,249$ _________________(1) Extracted from the District's audited financial statements.

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School Nonmajor TotalChoice Governmental Governmental

General Fund Funds FundsASSETSCash and cash equivalents 2,223,089$ 1,727,535$ 777,796$ 4,728,420$ Receivables, net of uncollectables

Departmental and other - - 59,634 59,634 TOTAL ASSETS 2,223,089$ 1,727,535$ 837,430$ 4,788,054$

LIABILITIES:Warrants payable 483,476$ -$ 121,402$ 604,878$ Accrued payroll 15,026 - 411 15,437 Other liabilities 1,787 - - 1,787

TOTAL LIABILITIES 500,289 - 121,813 622,102

FUND BALANCES:Restricted 366,142$ 1,727,535$ 837,393$ 2,931,070$ Assigned 217,290 - - 217,290 Unassigned 1,139,368 - (121,776) 1,017,592

TOTAL FUND BALANCES 1,722,800 1,727,535 715,617 4,165,952 TOTAL LIABILITIES AND FUND BALANCES 2,223,089$ 1,727,535$ 837,430$ 4,788,054$

_________________(1) Extracted from the District's audited financial statements.

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Manchester Essex Regional School District, MassachusettsStatement of Revenues, Expenditures and Changes in Fund Balance

Governmental FundsAs of June 30, 2019 (1)

School Memorial Nonmajor Total Choice School Governmental Governmental

General Fund Construction Funds FundsREVENUES

Member Town Assessments 24,204,232$ -$ -$ -$ 24,204,232$ Intergovernmental 3,093,793 436,331 1,442,679 987,019 5,959,822 Intergovernmental - teachers retirement 4,631,779 - - - 4,631,779 Departmental and other 46,156 - - 1,104,648 1,150,804 Contributions - - - 37,864 37,864 Investment Income 411,373 - - 68 411,441 Miscellaneous revenue - - - 170,533 170,533

TOTAL REVENUES 32,387,333$ 436,331$ 1,442,679$ 2,300,132$ 36,566,475$

EXPENDITURESCurrent: Salaries:

Administration 624,452 - - - 624,452 Instructional Services 14,634,315 - - 545,040 15,179,355 Other Student Services 728,244 - - 259,644 987,888 Operation and Maintenance 292,562 - - 6,593 299,155

Other Operating Expenditures: Administration 218,106 131,760 82,040 7,682 439,588

Instructional Services 823,406 - - 262,525 1,085,931 Other Student Services 842,606 - - 792,720 1,635,326 Operation and Maintenance 1,272,940 - - 17,672 1,290,612 Employee benefits and other fixed charges 4,638,034 325,000 - 108,201 5,071,235 Pension benefits - teachers' retirement 4,631,779 - - - 4,631,779 Programs with Other School Districts 813,453 111,951 - 167,776 1,093,180

Capital Outlay - - 3,813,160 - 3,813,160 Debt service:

Maturing debt 1,455,000 - - - 1,455,000 Interest 653,338 - - - 653,338

TOTAL EXPENDITURES 31,628,235 568,711 3,895,200 2,167,853 38,259,999

EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES 759,098 (132,380) (2,452,521) 132,279 (1,693,524)

OTHER FINANCING SOURCES (USES)Issuance of bonds - - 32,290,000 - 32,290,000 Premium from issuance of bonds - - 2,946,612 - 2,946,612 Transfers in - - - 195,516 195,516 Transfers out (195,516) - - - (195,516)

TOTAL OTHER FINANCING SOURCES (USES) (195,516) - 35,236,612 195,516 35,236,612

NET FUND BALANCES 563,582 (132,380) 32,784,091 327,795 33,543,088

FUND BALANCES AT BEGINNING OF YEAR 1,768,719 1,621,557 134,292 514,801 4,039,369 FUND BALANCES AT END OF YEAR 2,332,301$ 1,489,177$ 32,918,383$ 842,596$ 37,582,457$ ________________(1) Extracted from the District's audited financial statements.

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School Memorial Nonmajor Total Choice School Governmental Governmental

General Fund Construction Funds FundsREVENUES

Member Town Assessments 23,543,608$ -$ 450,000$ -$ 23,993,608$ Intergovernmental 7,702,645 344,244 - 887,376 8,934,265 Departmental and Other 42,996 - - 1,025,198 1,068,194 Contributions - - - 78,426 78,426 Investment Income 37,318 - - - 37,318

TOTAL REVENUES 31,326,567$ 344,244$ 450,000$ 1,991,000$ 34,111,811$


Administration 587,559 - - - 587,559 Instructional Services 14,398,845 - - 451,478 14,850,323 Other Student Services 700,029 - - 236,519 936,548 Operation and Maintenance 371,584 - - 8,061 379,645 Fixed Charges 20,000 - - - 20,000

Other Operating Expenditures: Administration 230,933 84,138 - 5,103 320,174

Instructional Services 943,076 - - 319,512 1,262,588 Other Student Services 803,332 - - 726,452 1,529,784 Operation and Maintenance 1,408,729 - 479,336 13,339 1,901,404 Fixed Charges 4,456,110 300,000 - 69,475 4,825,585 Pension benefits - teachers' retirement 4,579,496 - - - 4,579,496 Programs with Other School Districts 624,767 66,084 - 198,249 889,100

Debt service:Maturing debt 1,455,000 - - - 1,455,000 Interest 701,188 - - - 701,188

TOTAL EXPENDITURES 31,280,648 450,222 479,336 2,028,188 34,238,394

EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES 45,919 (105,978) (29,336) (37,188) (126,583)

FUND BALANCES AT BEGINNING OF YEAR 1,722,800 1,727,535 163,628 551,989 4,165,952 FUND BALANCES AT END OF YEAR 1,768,719$ 1,621,557$ 134,292$ 514,801$ 4,039,369$ ________________(1) Extracted from the District's audited financial statements.

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School Nonmajor Total Choice Governmental Governmental

General Fund Funds FundsREVENUES

Member Town Assessments 22,928,378$ -$ -$ 22,928,378$ Intergovernmental 7,394,805 431,146 718,868 8,544,819 Departmental and Other 27,393 - 1,147,645 1,175,038 Contributions - - 45,407 45,407 Investment Income 15,309 - - 15,309

TOTAL REVENUES 30,365,885$ 431,146$ 1,911,920$ 32,708,951$


Administration 526,879 - - 526,879 Instructional Services 14,013,211 - 440,840 14,454,051 Other Student Services 654,981 - 257,815 912,796 Operation and Maintenance 402,092 - 22,163 424,255 Fixed Charges 20,000 - 22,250 42,250

Other Operating Expenditures: Administration 216,253 - 14,036 230,289

Instructional Services 1,126,406 - 142,815 1,269,221 Other Student Services 592,714 - 821,592 1,414,306 Operation and Maintenance 1,263,012 - 116,054 1,379,066 Fixed Charges 7,987,330 325,000 68,452 8,380,782 Programs with Other School Districts 829,415 - 180,487 1,009,902

Debt service:Maturing debt 1,575,000 - - 1,575,000 Interest 624,862 - - 624,862

TOTAL EXPENDITURES 29,832,155 325,000 2,086,504 32,243,659

EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES 533,730 106,146 (174,584) 465,292

OTHER FINANCING SOURCES (USES)Transfers In - - 200,000 200,000 Transfers Out (200,000) - - (200,000) Total Other Financing sources (Uses) (200,000) - 200,000 -

Net Change in Fund Balances 333,730 106,146 25,416 465,292

FUND BALANCES AT BEGINNING OF YEAR 1,389,070 1,621,389 690,201 3,700,660 FUND BALANCES AT END OF YEAR 1,722,800$ 1,727,535$ 715,617$ 4,165,952$ ________________(1) Extracted from the District's audited financial statements.

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Member Town Assessments 22,423,395$ -$ -$ 22,423,395$ Intergovernmental 6,100,090 457,298 719,438 7,276,826 Departmental and Other 29,963 - 1,090,417 1,120,380 Contributions - - 88,167 88,167 Investment Income 13,491 - - 13,491

TOTAL REVENUES 28,566,939$ 457,298$ 1,898,022$ 30,922,259$


Administration 520,230 - - 520,230 Instructional Services 13,242,621 - 467,939 13,710,560 Other Student Services 653,426 - 288,107 941,533 Operation and Maintenance 350,273 - 35,028 385,301 Fixed Charges 20,001 - 5,856 25,857


Instructional Services 1,086,028 - 145,315 1,231,343 Other Student Services 701,541 - 619,958 1,321,499 Operation and Maintenance 1,041,945 340,946 - 1,382,891 Fixed Charges 7,090,467 - 52,236 7,142,703 Programs with Other School Districts 838,731 - 153,673 992,404



EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES 451,455 116,352 113,728 681,535

OTHER FINANCING SOURCES (USES):Proceeds from refunding bonds 14,835,000 - - 14,835,000 Premium from issuance of refunding bonds 1,309,703 - - 1,309,703 Payments to refunded bond escrow agent (16,029,726) - - (16,029,726)

TOTAL OTHER FINANCING SOURCES (USES) 114,977 - - 114,977

NET CHANGE IN FUND BALANCES 566,432 116,352 113,728 796,512

FUND BALANCES AT BEGINNING OF YEAR 822,638 1,505,037 576,473 2,904,148 FUND BALANCES AT END OF YEAR 1,389,070$ 1,621,389$ 690,201$ 3,700,660$ ________________(1) Extracted from the District's audited financial statements.

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Member Town Assessments 20,816,189$ -$ -$ 20,816,189$ Intergovernmental 5,012,623 359,525 761,588 6,133,736 Departmental and Other 36,955 - 1,069,031 1,105,986 Contributions - - 63,990 63,990 Investment Income 6,795 - 132 6,927

TOTAL REVENUES 25,872,562$ 359,525$ 1,894,741$ 28,126,828$


Administration 508,372 - 882 509,254 Instructional Services 12,693,811 - 441,853 13,135,664 Other Student Services 691,895 - 308,752 1,000,647 Operation and Maintenance 362,191 - 45,310 407,501 Fixed Charges 20,000 - - 20,000


Instructional Services 924,956 - 142,806 1,067,762 Other Student Services 710,133 - 696,199 1,406,332 Operation and Maintenance 1,249,525 - 5,000 1,254,525 Fixed Charges 5,529,186 150,000 59,389 5,738,575 Programs with Other School Districts 792,470 - 279,334 1,071,804



EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (165,727) 209,525 (181,887) (138,089)

FUND BALANCES AT BEGINNING OF YEAR 988,365 1,295,512 758,360 3,042,237 FUND BALANCES AT END OF YEAR 822,638$ 1,505,037$ 576,473$ 2,904,148$

________________(1) Extracted from the District's audited financial statements.

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INDEBTEDNESS Authorization Procedure and Limitations The District may issue bonds or notes for acquiring land, for constructing, reconstructing, adding to and equipping school buildings, for remodeling and making extraordinary repairs to such buildings, for sewerage purposes, for purchasing equipment and for constructing, reconstructing and improving outdoor playground, athletic and recreational facilities, roadways and parking areas. Within seven days after the date on which the Regional District School Committee authorizes the incurring of debt, other than temporary debt in anticipation of revenue to be received from the Member Towns, the Committee shall cause written notice of the date of said authorization, the amount authorized, and the general purpose or purposes for authorizing such debt, to be given to the board of selectmen of each Member Town. Under the District Agreement no such debt shall be incurred until the amount of the proposed debt has been specifically approved by a two-thirds vote at the next annual or special town meeting of each Member Town, to be held within the sixty (60) days from the date on which the Committee votes to authorize such debt. Serial Bonds and Notes. These are generally required to be payable in equal or diminishing annual principal amounts beginning no later than the end of the next fiscal year commencing after the date of issue and ending within the terms permitted by law. Level debt service is permitted for bonds or notes issued for certain purposes, including certain state-aided school projects and for those projects for which debt service has been exempted from property tax limitations. The maximum terms vary from five to twenty-five years. Bonds or notes may be callable and redeemed prior to their maturity, and a redemption premium may be paid. Refunding bonds or notes may be issued subject to the maximum applicable term measured from the date of the original bonds or notes and must produce present value savings over the debt service of the refunded bonds. Generally, the first principal payment of the refunding bonds cannot be later than the first principal payment of any of the bonds or notes being refunded thereby, however, principal payments made before the first principal payment of any bonds or notes being refunded thereby may be in any amount. Serial bonds may be issued as “qualified bonds” with the approval of the state Municipal Finance Oversight Board, subject to such conditions and limitations (including restrictions on future indebtedness) as may be required by the Board. Qualified bonds may mature not less than 10 nor more than 30 years from their dates and are not subject to the amortization requirements described above. The State Treasurer is required to pay the debt service on qualified bonds and thereafter to withhold the amount of the debt service paid by the State from state aid and other state payments. Administrative costs and any loss of interest income to the State are to be assessed upon the District. Revenue Anticipation Notes. These may be issued in anticipation of revenue to be received from any source and must mature within one year from original date. Bond Anticipation Notes. These may be renewed up to two years from their original dates of issuance without paydown. The notes may be renewed up to ten years from the date of original issue, if paydowns equaling the minimum annual payment specified for the purpose by law are made annually following the second anniversary of the original issue date. The minimum annual payment is the principal payment that would be made if the purpose is financed over its maximum term. For certain school projects, however, notes may be refunded from time to time for a period not to exceed seven years without having to pay any portion of the principal of the notes from revenue funds. The maximum term of a like amount of anticipated bonds is measured, except for certain school projects, from the date of the original issue of the notes.

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Manchester Essex Regional School District Direct Debt Summary As of June 30, 2020

G enera l O b liga tion Bonds: C urrently O utstand ing To ta l Long Term D ebt O utstand ing (1) 46,970 ,000$

To ta l D irect D ebt 46,970 ,000$

______________________ (1) Exempt from the limits of Proposition 2 ½. Debt Service Requirements The following table sets forth the required principal and interest payments on outstanding general obligation bonds of the District.

General Obligation Debt Debt Service Requirements as of June 30, 2020

Total Principal

Fiscal Year Principal (1) Interest (1) and Interest (1)

2021 2,525,000$ 1,890,238$ 4,415,238$ 2022 2,525,000 1,782,338 4,307,338 2023 2,525,000 1,674,438 4,199,438 2024 2,330,000 1,568,488 3,898,488 2025 2,330,000 1,464,488 3,794,488 2026 2,330,000 1,360,488 3,690,488 2027 2,330,000 1,256,488 3,586,488 2028 2,305,000 1,167,488 3,472,488 2029 2,290,000 1,076,788 3,366,788 2030 2,275,000 986,500 3,261,500 2031 2,015,000 894,250 2,909,250 2032 2,000,000 812,300 2,812,300 2033 1,990,000 728,488 2,718,488 2034 1,075,000 655,750 1,730,750 2035 1,075,000 612,750 1,687,750 2036 1,075,000 569,750 1,644,750 2037 1,075,000 526,750 1,601,750 2038 1,075,000 483,750 1,558,750 2039 1,075,000 440,750 1,515,750 2040 1,075,000 397,750 1,472,750 2041 1,075,000 354,750 1,429,750 2042 1,075,000 311,750 1,386,750 2043 1,075,000 268,750 1,343,750 2044 1,075,000 231,125 1,306,125 2045 1,075,000 193,500 1,268,500 2046 1,075,000 155,875 1,230,875 2047 1,075,000 116,906 1,191,906 2048 1,075,000 77,938 1,152,938 2049 1,075,000 38,969 1,113,969 Total 46,970,000$ 22,099,588$ 69,069,588$

______________________ (1) Exempt from the limits of Proposition 2 ½.

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Authorized Unissued Debt and Prospective Financing Currently the District has approximately $16,022,399 of authorized but unissued debt outstanding for the Manchester Memorial Elementary School project. Revenue Anticipation Borrowing The District has never borrowed for operating purposes.

RETIREMENT PLAN

All District teachers and administrators are members of the Massachusetts Teachers Retirement System. The pensions of teachers and other members of the Massachusetts Teachers Retirement System will be paid by the Commonwealth. Other District employees are members of the Essex Regional Retirement System. The District meets its share of costs by making an annual contribution set by the Essex Regional Retirement System in order to achieve full funding of the liability by 2035. As of January 1, 2018, the unfunded actuarial liability for the System was $393,498,781. The District’s estimated share of this liability is approximately 1.37%. Estimates of actuarial liabilities depend on the underlying actuarial assumptions. Current Funding Schedule for Essex Regional Retirement System as of January 1, 2018

______________________ Source: January 1, 2018 Actuarial Valuation Report of the Essex Regional Retirement System, Stone Consulting.

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The trend in annual contributions of the District to the Essex Regional Retirement System is shown below. Fiscal Year Amount

2021 $586,500 2020 511,014 2019 519,656 2018 531,381 2017 684,581 2016 494,914 Other Post-Employment Benefits In addition to pension benefits, Districts may provide retired employees with health care and life insurance benefits. The Governmental Accounting Standards Board (“GASB”) Statement Nos. 43 and 45 require public sector entities to report the future costs of non-pension, post-employment benefits in their financial statements. These accounting standards do not require pre-funding such benefits, but the basis applied by the standards for measurement of costs and liabilities for these benefits is conservative if they continue to be funded on a pay-as-you-go basis and will result in larger yearly cost and liability accruals than if such benefits were pre-funded in a trust fund in the same manner as traditional pension benefits. Districts that choose to self-insure all or a portion of the cost of the health care benefits they provide to employees and retirees may establish a trust fund for the purpose of paying claims. In addition Districts may establish a trust fund for the purpose of pre-funding this liability in the same manner as traditional pension benefits. The District performed an actuarial valuation study of its non-pension, post-employment benefits. As of June 30, 2019, the total OPEB liability for benefits was $25,830,377 and the fiduciary net position was $1,900,265, resulting in a net OPEB liability of $23,930,265, assuming a 7.5% investment rate of return. The District voted to establish an OPEB trust fund and committed $50,000 as an initial deposit in the fiscal 2015 budget. The balance of the OPEB Trust Fund as of June 30, 2019 was $1,900,265, and the District plans to appropriate $540,000 in fiscal 2020. Of this amount, $1,217,029 has been invested with the Pension Reserves Investment Management (PRIM) Board through the State Retirees Benefits Trust Fund. The projected OPEB Trust Fund balance as of June 30, 2020 is approximately $2,450,000. The School Committee adopted Chapter 32B Section 18 which states that the District require all retirees, their spouses and dependants shall be required to transfer to a Medicare extension plan offered by the District provided that benefits under said plan and Medicare part A and B together shall be of comparable actuarial value to those under the retiree’s existing coverage effective fiscal 2012.

CONTRACTUAL OBLIGATIONS

The District appropriates annually those amounts necessary for transportation of its students. For the fiscal years ending June 30, 2015, June 30, 2016, June 30, 2017, June 30, 2018, June 30, 2019 and June 30, 2020, expenditures for these purposes totaled $603,993, $544,023, $489,846, $682,393, $734,149 and $662,307, respectively. The amount budgeted for this purpose in fiscal year 2021 is $710,874. These figures include SPED Transportation.

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EMPLOYEE RELATIONS The District employs approximately 230 full and part-time workers, of which approximately 154 are teachers. District employees (other than managerial and confidential employees) are entitled to join unions and to bargain collectively on questions of wages, hours and other terms and conditions of employment. Approximately 151 District employees are represented by the Manchester Essex Teachers Association. The existing Teachers Contract expires August 31, 2022. The School Committee has recognized Paraprofessionals as a new bargaining unit. Negotiations for an introductory contract have not yet commenced. Other non-managerial and confidential employees are generally given the same wage increase as the teachers.

LITIGATION

In the opinion of Counsel to the District, there is no litigation pending or, to his knowledge threatened, which is likely to result, either individually or in the aggregate, in final judgments against the District that would materially affect its financial position.

_________________

MANCHESTER ESSEX REGIONAL SCHOOL DISTRICT, MASSACHUSETTS /s/ Charles F. Lane, Treasurer

July 8, 2020

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MANCHESTER ESSEX REGIONAL SCHOOL DISTRICT

REPORT ON EXAMINATION OF BASIC FINANCIAL STATEMENTS

YEAR ENDED JUNE 30, 2019

APPENDIX A

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MANCHESTER ESSEX REGIONAL SCHOOL DISTRICT

REPORT ON EXAMINATION OF BASIC FINANCIAL STATEMENTS

JUNE 30, 2019

TABLE OF CONTENTS

Independent Auditor’s Report .......................................................................................................................................... A-1

Management’s Discussion and Analysis ......................................................................................................................... A-3

Basic Financial Statements ............................................................................................................................................. A-9

Statement of net position .......................................................................................................................................... A-11

Statement of activities .............................................................................................................................................. A-12

Governmental funds – balance sheet....................................................................................................................... A-14

Reconciliation of the governmental funds balance sheet total fund balance to the statement of net position ......... A-15

Governmental funds – statement of revenues, expenditures and changes in fund balances ................................. A-16

Reconciliation of the statement of revenues, expenditures, and changes in fund balances of governmental

funds to the statement of activities ...................................................................................................................... A-17

Fiduciary funds – statement of fiduciary net position ............................................................................................... A-18

Fiduciary funds – statement of changes in fiduciary net position ............................................................................. A-19

Notes to basic financial statements .......................................................................................................................... A-20

Required Supplementary Information ............................................................................................................................ A-42

Schedule of revenues, expenditures and changes in fund balance – general fund – budget and actual ................ A-44

Pension plan schedules ............................................................................................................................................ A-46

Schedule of the District’s proportionate share of the net pension liability .......................................................... A-47

Schedule of the District’s contributions ............................................................................................................... A-48

Schedule of special funding amounts ................................................................................................................. A-49

Other postemployment benefits plan schedules ...................................................................................................... A-50

Schedule of changes in the District’s net OPEB liability and related ratios ........................................................ A-51

Schedule of the District’s contributions ............................................................................................................... A-52

Schedule of investment returns .......................................................................................................................... A-53

Notes to required supplementary information .......................................................................................................... A-54

Independent Auditor’s Report

To the Honorable School Committee Manchester Essex Regional School District Manchester-by-the-Sea, Massachusetts 01944

Report on the Financial Statements

We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the Manchester Essex Regional School District as of and for the year ended June 30, 2019, and the related notes to the financial statements, which collectively comprise the Manchester Essex Regional School District’s basic financial statements as listed in the table of contents.

Management’s Responsibility for the Financial Statements

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

Auditor’s Responsibility

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

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in 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.

Opinions

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the Manchester Essex Regional School District, as of June 30, 2019, and the respective changes in financial position for the year then ended in accordance with accounting principles generally accepted in the United States of America.

A-1

Other Matters

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis and required supplementary information, as listed in the table of contents, 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 who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated July 1, 2020, on our consideration of the Manchester Essex Regional School District’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 the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Manchester Essex Regional School District’s internal control over financial reporting and compliance.

July 1, 2020

A-2

Manchester Essex Regional School District Management’s Discussion and Analysis

Management’s Discussion and Analysis

A-3

Management’s Discussion and Analysis

As management of the Manchester Essex Regional School District (District), we offer readers of these basic financial statements this narrative overview and analysis of the financial activities for the year ended June 30, 2019. The District complies with financial reporting requirements issued by the Governmental Accounting Standards Board (GASB).

The Governmental Accounting Standards Board (GASB) is the authoritative standard setting body that provides guidance on how to prepare financial statements in conformity with generally accepted accounting principles (GAAP). Users of these financial statements (such as investors and rating agencies) rely on the GASB to establish consistent reporting standards for all governments in the United States. This consistent application is the only way users (including citizens, the media, legislators and others) can assess the financial condition of one government compared to others.

Overview of the Basic Financial Statements

This discussion and analysis are intended to serve as an introduction to the Manchester Essex Regional School District’s basic financial statements. These basic financial statements comprise three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This approach focuses on both the District as a whole (government-wide) and the fund financial statements. The government-wide financial statements provide both long-term and short-term information about the District as a whole. The fund financial statements focus on the individual parts of the District’s operations, reporting the District’s operations in more detail than the government-wide statements. Both presentations (government-wide and fund) allow the user to address relevant questions, broaden the basis of comparison and enhance the District’s accountability. An additional part of the basic financial statements are the notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves.

Government-wide financial statements. The government-wide financial statements are designed to provide readers with a broad overview of finances, in a manner similar to private-sector business.

The statement of net position presents information on all assets, liabilities, and deferred outflows/inflows, with the difference reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position is improving or deteriorating.

The statement of activities presents information showing how the government’s net position changed during the most recent year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future periods (e.g., uncollected revenues and earned but unused vacation leave).

Both of the government-wide financial statements distinguish functions that are principally supported by member town assessments and intergovernmental revenues (governmental activities). The governmental activities include administration, instructional services, other student services, operations and maintenance, employee benefits and other fixed charges, programs with other school districts, interest and depreciation.

Fund financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. Fund accounting is used to ensure and demonstrate compliance with finance-related legal requirements. All of the funds can be divided into two categories: governmental funds and fiduciary funds.

Manchester Essex Regional School District Management’s Discussion and Analysis A-4


Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund statements focus on near-term inflows of spendable resources, as well as on balances of spendable resources available at the end of the year. Such information may be useful in evaluating a government’s near-term financing requirements.

Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government’s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities.

The Manchester Essex Regional School District adopts an annual appropriated budget for its general fund. A budgetary comparison statement has been provided for the general fund to demonstrate compliance with this budget.

Fiduciary funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statement because the resources of those funds are not available to support the District’s own programs.

Notes to the basic financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements.

Other information. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the District’s budgetary basis of accounting, pension and other postemployment benefits.

Government-wide Financial Analysis

Net position may serve over time as a useful indicator of a government’s financial position. For the governmental activities, the Manchester Essex Regional School District’s liabilities and deferred inflows of resources exceeded the assets and deferred outflows of resources by $5.2 million at the close of 2019.

Net position of $23.2 million reflects its net investment in capital assets (e.g., buildings, vehicles, equipment and textbooks), less any related debt used to acquire those assets that is still outstanding. The District uses these capital assets to provide services to pupils; consequently, these assets are not available for future spending. Although the investment in its capital assets is reported net of its related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities.

Restricted net position of $181,000 represents the unexpended balances of state and federal grants and gifts.

The remaining balance of unrestricted net position reports a deficit balance totaling $28.5 million that is due to the recognition of a $23.9 million net other postemployment benefits (OPEB) liability and a $6.3 million net pension liability.

A-5


The following table reflects the key elements of net position:

2019 2018Assets:

Current assets………………………………………… $ 39,525,881 $ 4,589,249 Capital assets, nondepreciable……………………… 4,292,496 479,336 Capital assets, net of accumulated depreciation…… 38,576,625 39,904,131

Total assets………………………………………… 82,395,002 44,972,716

Deferred outflows of resources……………………… 4,649,997 5,381,628

Liabilities:Current liabilities (excluding debt)…………………… 2,769,421 858,595 Noncurrent liabilities (excluding debt)……………… 30,692,001 30,050,254 Current debt…………………………………………… 2,758,526 1,483,227 Noncurrent debt………………………………………… 49,852,435 17,374,349

Total liabilities…………………………………… 86,072,383 49,766,425

Deferred inflows of resources………………………… 6,150,011 7,168,088

Net position:Net investment in capital assets…………………… 23,176,543 21,525,891 Restricted……………………………………………… 180,704 198,639 Unrestricted…………………………………………… (28,534,642) (28,304,699)

Total net position…………………………………$ (5,177,395) $ (6,580,169)

Governmental activities increased the District’s net position by $1.4 million. The following table shows the key elements of this increase:

2019 2018Program Revenues:

Charges for services…………………………………………$ 1,224,387 $ 1,094,704 Operating grants and contributions……………………… 4,631,779 4,579,496 Capital grants and contributions…………………………… 1,442,679 -

General Revenues:Member town assessments……………………………… 24,204,232 23,993,608 Unrestricted investment income…………………………… 411,441 37,296 Nonrestricted grants………………………………………… 4,481,424 4,406,707 Miscellaneous……………………………………………… 170,533 -

Total revenues………………………………………… 36,566,475 34,111,811

Expenses:Administration……………………………………………… 1,064,040 879,485 Instructional services……………………………………… 16,348,906 16,076,194 Other student services……………………………………… 2,623,214 2,479,074 Operations and maintenance……………………………… 1,578,917 1,594,183 Employee benefits and other fixed charges……………… 9,974,695 9,834,843 Programs with other districts……………………………… 1,093,180 889,100 Interest……………………………………………………… 1,142,393 632,856 Depreciation………………………………………………… 1,338,356 1,370,731

Total expenses………………………………………… 35,163,701 33,756,466

Change in net position……………………………………… 1,402,774 355,345

Net position, beginning of year…………………………… (6,580,169) (6,935,514)

Net position, end of year…………………………………… $ (5,177,395) $ (6,580,169)

A-6


Total revenue increased by $2.5 million (7.2%) from 2018. This increase was primarily due to the recognition of $1.4 million of capital grants from the Massachusetts School Building Authority (MSBA), a $374,000 increase in unrestricted investment income, a $211,000 increase in member assessments, and $171,000 from insurance reimbursements.

Total expenses increased by $1.4 million (4.2%) during the year. This increase was primarily due to an increase in interest expense that relates to new long-term debt, an increase in the operating budget and an increase in the net OPEB liability.

The District contributed $499,000 to the “other postemployment benefit trust fund” (OPEB) in 2019 to fund future health care costs. The balance in this fund at the close of 2019 was $1.9 million.

Financial Analysis of the Government’s Funds

As noted earlier, the District uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements.

Governmental funds. The focus of governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing financing requirements. In particular, unassigned fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the year.

As of the end of the current year, governmental funds reported a combined ending fund balance of $37.6 million, an increase of $33.5 million from the prior year.

The general fund is the chief operating fund. At the end of the current year, unassigned fund balance of the general fund was $1.9 million while total fund balance was $2.3 million. As a measure of the general fund’s liquidity, it may be useful to compare both unassigned fund balance and total fund balance to total fund expenditures. Unassigned fund balance represents 6% of total general fund expenditures while total fund balance represents 7% of that same amount.

The general fund increased by $564,000 in 2019. The increase is primarily because budgeted expenditures were $319,000 lower than anticipated and budgeted revenues were $419,000 higher than anticipated.

The school choice fund accounts for the activities related to the state’s school choice program. At the end of the current year, the fund balance totaled $1.5 million.

The memorial school construction fund is used to account for expenditures related to the elementary school building project. The District recorded expenditures of $3.9 million, received MSBA revenue of $1.4 million and issued bonds with principal and premiums totaling $35.2 million, resulting in a fund balance of $32.9 million at year-end.

Capital Asset and Debt Administration

The District has $52.6 million in long-term debt outstanding at year-end, which is related to the middle/high school construction project and the memorial school construction project.

The District has been approved for a $12.3 million capital grant from the Commonwealth school building assistance program for the Memorial School construction project. Under this program, assistance is paid to support construction costs and reduce the total debt service of the District. Through the end of 2019, the District

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has received $110,000 of capital grant reimbursements from the MSBA, which is equal to approximately 35% of approved construction costs incurred to date. The District anticipates receiving an additional $1.3 million of grant proceeds in 2020, which has been recognized as a receivable at June 30, 2019.

Capital asset additions totaled $3.8 million, the majority of which relates to the memorial school construction project.

Please refer to notes 4, 6 and 7 for more information on capital and debt activity.

Requests for Information

This financial report is designed to provide a general overview of the Manchester Essex Regional School District’s finances for all those with an interest in the government’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to Business Manager, Manchester Essex Regional School District, 36 Lincoln Street, Manchester, MA 01944.

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Manchester Essex Regional School District Basic Financial Statements

Basic Financial Statements

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Primary Government

Governmental

Activities

ASSETS

CURRENT:

Cash and cash equivalents………………………………………… $ 36,671,155

Receivables, net of allowance for uncollectibles:

Intergovernmental………………………………………………… 2,854,726

Total current assets…………………………………………… 39,525,881

NONCURRENT:

Capital assets, net of accumulated depreciation:

Nondepreciable…………………………………………………… 4,292,496

Depreciable………………………………………………………… 38,576,625

Total noncurrent assets……………………………………… 42,869,121

TOTAL ASSETS………………………………………………………… 82,395,002

DEFERRED OUTFLOWS OF RESOURCES

Deferred outflows related to pensions……………………………… 675,267

Deferred outflows related to other postemployment benefits…… 3,974,730

TOTAL DEFERRED OUTFLOWS OF RESOURCES……………… 4,649,997

LIABILITIES

CURRENT:

Warrants payable…………………………………………………… 1,907,796

Accrued payroll……………………………………………………… 33,841

Accrued interest……………………………………………………… 805,997

Other liabilities………………………………………………………… 1,787

Compensated absences……………………………………………… 20,000

Bonds payable………………………………………………………… 2,758,526

Total current liabilities………………………………………… 5,527,947

NONCURRENT:

Compensated absences……………………………………………… 429,653

Net other postemployment benefits liability………………………… 23,930,112

Net pension liability…………………………………………………… 6,332,236

Bonds payable………………………………………………………… 49,852,435

Total noncurrent liabilities…………………………………… 80,544,436

TOTAL LIABILITIES……………………………………………………… 86,072,383

DEFERRED INFLOWS OF RESOURCES

Deferred inflows related to pensions……………………………… 823,697

Deferred inflows related to other postemployment benefits……… 5,326,314

TOTAL DEFERRED INFLOWS OF RESOURCES…………………… 6,150,011

NET POSITION

Net investment in capital assets………………………………..……… 23,176,543

Restricted for:

Gifts and grants……………………………………………………… 180,704

Unrestricted………………………………………………………………… (28,534,642)

TOTAL NET POSITION………………………………………………… $ (5,177,395)

See notes to basic financial statements.

STATEMENT OF NET POSITION

JUNE 30, 2019

Manchester Essex Regional School District Basic Financial StatementsA-11

Operating Capital

Charges for Grants and Grants and Net (Expense)

Functions/Programs Expenses Services Contributions Contributions Revenue

Primary Government:

Governmental Activities:

Administration……………………………………$ 1,064,040 $ 73,600 $ - $ - $ (990,440)

Instructional services…………………………… 16,348,906 55,457 - - (16,293,449)

Other student services………………………… 2,623,214 1,095,330 - - (1,527,884)

Operations and maintenance………………… 1,578,917 - - - (1,578,917)

Employee benefits and other fixed charges… 9,974,695 - 4,631,779 - (5,342,916)

School construction assistance……………… - - - 1,442,679 1,442,679

Programs with other districts………………… 1,093,180 - - - (1,093,180)

Interest…………………………………………… 1,142,393 - - - (1,142,393)

Depreciation…………………………………… 1,338,356 - - - (1,338,356)

Total Governmental Activities……………… $ 35,163,701 $ 1,224,387 $ 4,631,779 $ 1,442,679 $ (27,864,856)

See notes to basic financial statements. (Continued)

STATEMENT OF ACTIVITIES


Program Revenues


Primary Government

Governmental

Activities

Changes in net position:

Net (expense) revenue from previous page…………………… $ (27,864,856)

General revenues:

Member town assessments…………………………………… 24,204,232

Unrestricted investment income……………………………… 411,441

Grants and contributions not restricted to

specific programs…………………………………………… 4,481,424

Miscellaneous…………………………………………………… 170,533

Total general revenues…………………………………………… 29,267,630

Change in net position……………………………………… 1,402,774

Net position:

Beginning of year………………………….…………………… (6,580,169)

End of year……………………………………………………… $ (5,177,395)

See notes to basic financial statements. (Concluded)

STATEMENT OF ACTIVITIES



School Memorial Nonmajor Total

Choice School Governmental Governmental

General Fund Construction Funds Funds

ASSETS

Cash and cash equivalents………………………… $ 1,704,777 $ 1,341,142 $ 33,158,680 $ 466,556 $ 36,671,155

Receivables, net of uncollectibles:

Intergovernmental………………………………… 932,244 148,035 1,332,906 441,541 2,854,726

TOTAL ASSETS………………………………………$ 2,637,021 $ 1,489,177 $ 34,491,586 $ 908,097 $ 39,525,881

LIABILITIES

Warrants payable………………………………… $ 269,092 $ - $ 1,573,203 $ 65,501 $ 1,907,796

Accrued payroll…………………………………… 33,841 - - - 33,841

Other liabilities…………………………………… 1,787 - - - 1,787

TOTAL LIABILITIES………………………………… 304,720 - 1,573,203 65,501 1,943,424

FUND BALANCES

Restricted………………………………………… 179,338 1,489,177 32,918,383 983,918 35,570,816

Assigned…………………………………………… 224,073 - - - 224,073

Unassigned………………………………………… 1,928,890 - - (141,322) 1,787,568

TOTAL FUND BALANCES………………………… 2,332,301 1,489,177 32,918,383 842,596 37,582,457

TOTAL LIABILITIES AND FUND BALANCES…… $ 2,637,021 $ 1,489,177 $ 34,491,586 $ 908,097 $ 39,525,881


GOVERNMENTAL FUNDS

BALANCE SHEET

JUNE 30, 2019


Total governmental fund balances………………………………………………………………… $ 37,582,457

Capital assets (net) used in governmental activities are not financial resourcesand, therefore, are not reported in the funds………………………………………………… 42,869,121

The statement of net position includes certain deferred inflows of resourcesand deferred outflows of resources that will be amortized over future periods.In governmental funds, these amounts are not deferred…………………………………… (1,500,014)

In the statement of activities, interest is accrued on outstanding long-term debt,whereas in governmental funds interest is not reported until due………………………… (805,997)

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

Bonds payable……………………………………………………………………………… (52,610,961) Net pension liability………………………………………………………………………… (6,332,236) Net other postemployment benefits liability……………………………………………… (23,930,112) Compensated absences…………………………………………………………………… (449,653)

Net effect of reporting long-term liabilities…………………………………………… (83,322,962)

Net position of governmental activities…………………………………………………………… $ (5,177,395)


RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEETTOTAL FUND BALANCES TO THE STATEMENT OF NET POSITION

JUNE 30, 2019


School Memorial Nonmajor Total

Choice School Governmental Governmental


REVENUES:

Member town assessments……………………………………… $ 24,204,232 $ - $ - - $ 24,204,232

Intergovernmental………………………………………………… 3,093,793 436,331 1,442,679 987,019 5,959,822

Intergovernmental - teachers' retirement……………………… 4,631,779 - - - 4,631,779

Departmental and other…………………………………………… 46,156 - - 1,104,648 1,150,804

Contributions……………………………………………………… - - - 37,864 37,864

Investment income………………………………………………… 411,373 - - 68 411,441

Miscellaneous revenue…………………………………………… - - - 170,533 170,533

TOTAL REVENUES…………………………………… 32,387,333 436,331 1,442,679 2,300,132 36,566,475

EXPENDITURES:

Current:

Salaries:

Administration……………………………………………… 624,452 - - - 624,452

Instructional services……………………………………… 14,634,315 - - 545,040 15,179,355

Other student services…………………………………… 728,244 - - 259,644 987,888

Operation and maintenance……………………………… 292,562 - - 6,593 299,155

Other operating expenditures:

Administration……………………………………………… 218,106 131,760 82,040 7,682 439,588

Instructional services……………………………………… 823,406 - - 262,525 1,085,931

Other student services…………………………………… 842,606 - - 792,720 1,635,326

Operations and maintenance……………………………… 1,272,940 - - 17,672 1,290,612

Employee benefits and other fixed charges……………… 4,638,034 325,000 - 108,201 5,071,235

Pension benefits - teachers' retirement………………… 4,631,779 - - - 4,631,779

Programs with other school districts……………………… 813,453 111,951 - 167,776 1,093,180

Capital outlay……………………………………………………… - - 3,813,160 - 3,813,160

Debt service:

Maturing debt……………………………………………… 1,455,000 - - - 1,455,000

Interest……………………………………………………… 653,338 - - - 653,338

TOTAL EXPENDITURES……………………………… 31,628,235 568,711 3,895,200 2,167,853 38,259,999

EXCESS (DEFICIENCY) OF REVENUESOVER (UNDER) EXPENDITURES……………………………… 759,098 (132,380) (2,452,521) 132,279 (1,693,524)

OTHER FINANCING SOURCES (USES):Issuance of bonds………………………………………………… - - 32,290,000 - 32,290,000 Premium from issuance of bonds………………………………… - - 2,946,612 - 2,946,612 Transfers in………………………………………………………… - - - 195,516 195,516 Transfers out……………………………………………………… (195,516) - - - (195,516)

TOTAL OTHER FINANCING SOURCES (USES)… (195,516) - 35,236,612 195,516 35,236,612

NET CHANGE IN FUND BALANCES……………………………… 563,582 (132,380) 32,784,091 327,795 33,543,088

FUND BALANCES AT BEGINNING OF YEAR…………………… 1,768,719 1,621,557 134,292 514,801 4,039,369

FUND BALANCES AT END OF YEAR…………………………… $ 2,332,301 $ 1,489,177 $ 32,918,383 $ 842,596 $ 37,582,457


GOVERNMENTAL FUNDS

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES



Net change in fund balances - total governmental funds………………………………………………………… $ 33,543,088

Governmental funds report capital outlays as expenditures. However, in the

Statement of Activities the cost of those assets is allocated over their

estimated useful lives and reported as depreciation expense.

Capital outlay………………………………………………………………………………………………… 3,824,010

Depreciation expense……………………………………………………………………………………… (1,338,356)

Net effect of reporting capital assets……………………………………………………………… 2,485,654

The issuance of long-term debt provides current financial resources to governmental

funds, while the repayment of the principal of long-term debt consumes the

financial resources of governmental funds. Neither transaction has any effect

on net position. Also, governmental funds report the effect of premiums,

discounts, and similar items when debt is first issued, whereas these amounts

are unavailable and amortized in the Statement of Activities.

Issuance of bonds…………………………………………………………………………………………… (32,290,000)

Premium from issuance of bonds………………………………………………………………………… (2,946,612)

Net amortization of premium from issuance of bonds…………………………………………………… 28,227

Debt service principal payments…………………………………………………………………………… 1,455,000

Net effect of reporting long-term debt……………………………………………………………… (33,753,385)

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.

Net change in compensated absences accrual………………………………………………………… (83,620)

Net change in accrued interest on long-term debt……………………………………………………… (517,282)

Net change in deferred outflow/(inflow) of resources related to pensions…………………………… (86,451)

Net change in net pension liability………………………………………………………………………… 89,568

Net change in deferred outflow/(inflow) of resources related to other postemployment benefits… 372,897

Net change in net other postemployment benefits liability……………………………………………… (647,695)

Net effect of recording long-term liabilities………………………………………………………. (872,583)

Change in net position of governmental activities………………………………………………………………… $ 1,402,774


RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES,

AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS

TO THE STATEMENT OF ACTIVITIES



Other

Postemployment Private

Benefit Purpose Agency

Trust Fund Trust Funds Funds

ASSETS

Cash and cash equivalents…………………………………………$ 66,112 $ 19,102 $ 286,948

PRIT Investments…………………………………………………… 1,834,153 - -

TOTAL ASSETS………………………………………………………… 1,900,265 19,102 286,948

LIABILITIES

Other liabilities……………………………………………………… - - 286,948

NET POSITION

Restricted for OPEB………………………………………………… 1,900,265 - -

Held in trust for other purposes…………………………….……… - 19,102 -

TOTAL NET POSITION……………………………………………… $ 1,900,265 $ 19,102 $ -


FIDUCIARY FUNDS

STATEMENT OF FIDUCIARY NET POSITION

JUNE 30, 2019


Other

Postemployment Private

Benefit Purpose

Trust Fund Trust Funds

ADDITIONS:

Contributions:

Employer contributions……………………………………………………… $ 498,605 $ -

Employer contributions to pay benefit payments………………………… 1,089,097 -

Private donations……………………………………………………………… - 1,612

Total contributions………………………………………………………… 1,587,702 1,612

Net investment income:

Investment income…………………………………………………………… 56,489 -

Less: investment expense…………………………………………………… (5,832) -

Net investment income (loss)………………………………………………… 50,657 -

TOTAL ADDITIONS……………………………………………………… 1,638,359 1,612

DEDUCTIONS:

Benefit payments……………………………………………………………… 1,089,097 -

Educational scholarships…………………………………………………… - 2,625

TOTAL DEDUCTIONS…………………………………………………… 1,089,097 2,625

NET INCREASE (DECREASE) IN NET POSITION…………………… 549,262 (1,013)

NET POSITION AT BEGINNING OF YEAR…………………………………… 1,351,003 20,115

NET POSITION AT END OF YEAR…………………………………………… $ 1,900,265 $ 19,102


FIDUCIARY FUNDS

STATEMENT OF CHANGES IN FIDUCIARY NET POSITION



Notes to Basic Financial Statements Year Ended June 30, 2019


NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Notes to basic financial statements The accompanying basic financial statements of the Manchester Essex Regional School District (District) have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The Governmental Accounting Standards Board (GASB) is the recognized standard-setting body for establishing governmental accounting and financial reporting principles. The significant accounting policies are described herein.

A. Reporting Entity

The District was formed in 2001 under Chapter 71 of the Massachusetts General Laws that, by agreement, serves the Towns of Manchester-by-the-Sea and Essex (Member Towns). A seven-member School Committee governs the District, which consists of elected members from the Member Towns.

For financial reporting purposes, the District has included all funds, organizations, agencies, boards, commissions and institutions. The District has also considered all potential component units for which it is financially accountable as well as other organizations for which the nature and significance of their relationship with the District are such that exclusion would cause the basic financial statements to be misleading or incomplete. As required by GAAP, these basic financial statements present the District (the primary government) and its component units. The District has no component units that require inclusion in these basic financial statements.

B. Government-Wide and Fund Financial Statements

Government-Wide Financial Statements

The government-wide financial statements (i.e., statement of net position and statement of activities) report information on all of the non-fiduciary activities of the primary government. Governmental activities are primarily supported by member town assessments and intergovernmental revenues.

Fund Financial Statements

Separate financial statements are provided for governmental funds and fiduciary funds even though fiduciary funds are excluded from the government-wide financial statements. Major individual governmental funds are reported as separate columns in the fund financial statements. Nonmajor funds are aggregated and displayed in a single column.

Major Fund Criteria

Major funds must be reported if the following criteria are met:

If total assets and deferred outflows of resources, liabilities and deferred inflows of resources,revenues, or expenditures/expenses of an individual governmental fund are at least 10 percent ofthe corresponding element (assets and deferred outflows of resources, liabilities and deferredinflows or resources, etc.) for all funds of that category, and

If the total assets and deferred outflows of resources, liabilities and deferred inflows of resources,revenues, or expenditures/expenses of the individual governmental fund are at least 5 percent ofthe corresponding element for all governmental and enterprise funds combined.

Additionally, any other governmental fund that management believes is particularly significant to the basic financial statements may be reported as a major fund.

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Fiduciary funds are reported by fund type.

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. Under this method, revenues are recorded when earned and expenses are recorded when the liabilities are incurred. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met.

The statement of activities demonstrates the degree to which the direct expenses of a particular function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment.

Other items not identifiable as program revenues are reported as general revenues.

The effect of interfund activity has been removed from the government-wide financial statements.


Governmental fund financial statements are reported using the flow of current financial resources measurement focus and the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recognized when susceptible to accrual (i.e., measurable and available). Measurable means the amount of the transaction can be determined and available means collectible within the current period or soon enough thereafter to pay liabilities of the current period. Expenditures are recorded when the related fund liability is incurred, except for unmatured interest on general long-term debt which is recognized when due, and certain compensated absences, claims and judgments which are recognized when the obligations are expected to be liquidated with current expendable available resources.

Investment income is susceptible to accrual. Other receipts and revenues become measurable and available when the cash is received and are recognized as revenue at that time.

Entitlements and shared revenues are recorded at the time of receipt or earlier if the susceptible to accrual criteria is met. Expenditure driven grants recognize revenue when the qualifying expenditures are incurred and all other grant requirements are met.

The following major governmental funds are reported:

The general fund is the primary operating fund. It is used to account for all financial resources, except those that are required to be accounted for in another fund.

The school choice fund is a special revenue fund used to account for activities related to the state’s school choice program.

The Memorial school construction fund is a capital project fund used to account for the construction of the new Memorial elementary school.

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The nonmajor governmental funds consist of other special revenue and capital projects funds that are aggregated and presented in the nonmajor governmental funds column on the governmental funds financial statements. The following describes the general use of these fund types:

The special revenue fund is used to account for and report the proceeds of specific revenue sources that are restricted or committed to expenditure for specified purposes other than permanent funds or capital projects.

The capital projects fund is used to account for and report financial resources that are restricted, committed, or assigned to expenditure for capital outlays, including the acquisition or construction of capital facilities and other capital assets of the governmental funds.

Fiduciary fund financial statements are reported using the flow of economic resources measurement focus and use the accrual basis of accounting. Fiduciary funds are used to account for assets held in a trustee capacity for others that cannot be used to support the governmental programs.

The following fiduciary funds are reported:

The agency fund is used to account for payroll deductions that are held in a purely custodial capacity.

The other postemployment benefit trust fund is used to accumulate resources to provide funding for future other postemployment benefits (OPEB) liabilities.

The private purpose trust funds are used to account for trust arrangements that exclusively benefit other individuals.

D. Cash and Investments

Government-Wide and Fund Financial Statements

Cash and cash equivalents are considered to be cash on hand, demand deposits and short-term investments with an original maturity of three months or less from the date of acquisition. Investments are carried at fair value.

E. Fair Value Measurements

The District reports required types of financial instruments in accordance with the fair value standards. These standards require an entity to maximize the use of observable inputs (such as quoted prices in active markets) and minimize the use of unobservable inputs (such as appraisals or valuation techniques) to determine fair value. Fair value standards also require the government to classify these financial instruments into a three-level hierarchy, based on the priority of inputs to the valuation technique or in accordance with net asset value practical expedient rules, which allow for either Level 2 or Level 3 depending on lock up and notice periods associated with the underlying funds.

Instruments measured and reported at fair value are classified and disclosed in one of the following categories:

Level 1 – Quoted prices are available in active markets for identical instruments as of the reporting date. Instruments, which are generally included in this category, include actively traded equity and debt securities, U.S. government obligations, and mutual funds with quoted market prices in active markets.

Level 2 – Pricing inputs are other than quoted in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models or other valuation methodologies.

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Certain fixed income securities, primarily corporate bonds, are classified as Level 2 because fair values are estimated using pricing models, matrix pricing, or discounted cash flows.

Level 3 – Pricing inputs are unobservable for the instrument and include situations where there is little, if any, market activity for the instrument. The inputs into the determination of fair value require significant management judgment or estimation.

In some instances, the inputs used to measure fair value may fall into different levels of the fair value hierarchy and is based on the lowest level of input that is significant to the fair value measurement.

Market price is affected by a number of factors, including the type of instrument and the characteristics specific to the instrument. Instruments with readily available active quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value. It is reasonably possible that change in values of these instruments will occur in the near term and that such changes could materially affect amounts reported in these financial statements. For more information on the fair value of the District’s financial instruments, see Note 2 – Cash and Investments.

F. Accounts Receivable


The recognition of revenue related to accounts receivable reported in the government-wide financial statements and fiduciary funds financial statements are reported under the accrual basis of accounting. The recognition of revenue related to accounts receivable reported in the governmental funds financial statements are reported under the modified accrual basis of accounting.

Intergovernmental

Various federal and state grants for operating and capital purposes are applied for and received annually. For non-expenditure driven grants, receivables are recorded as soon as all eligibility requirements imposed by the provider have been met. For expenditure driven grants, receivables are recorded when the qualifying expenditures are incurred and all other grant requirements are met.

These receivables are considered 100% collectible and therefore do not report an allowance for uncollectibles.

G. Inventories


Inventories are recorded as expenditures at the time of purchase. Such inventories are not material in total to the government-wide and fund financial statements, and therefore are not reported.

H. Capital Assets


Capital assets, which include buildings and improvements, vehicles and equipment, text and library books, and modular classrooms, are reported in the government-wide financial statements. Capital assets are recorded at historical cost, or at estimated historical cost, if actual historical cost is not available. Donated capital assets; donated works of art, historical treasures and similar assets; and capital assets received in service concession arrangements are recorded at acquisition value. Except for the capital assets of the governmental activities

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column in the government-wide financial statements, construction period interest is capitalized on constructed capital assets.

All purchases and construction costs in excess of $10,000 are capitalized at the date of acquisition or construction, respectively, with expected useful lives of greater than one year.

Capital assets are depreciated on a straight-line basis. The estimated useful lives of capital assets are as follows:

EstimatedUseful Life

Capital Asset Type (in years)

Buildings and improvements…………………………… 40Vehicles and equipment………………………………… 7-15Text books and library books…………………………… 3-10Modular classrooms……………………………………… 10

The cost of normal maintenance and repairs that do not add to the value of the assets or materially extend asset lives are not capitalized and are treated as expenses when incurred. Improvements are capitalized.

Governmental Fund Financial Statements

Capital asset costs are recorded as expenditures in the acquiring fund in the year of the purchase.

I. Deferred Outflows/Inflows of Resources

Government-Wide Financial Statements (Net Position)

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 that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. The District reported deferred outflows of resources related to pensions and other postemployment benefits in this category.

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 that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The District reported deferred inflows of resources related to pensions and other postemployment benefits in this category.

Governmental Fund Financial Statements

In addition to liabilities, the governmental funds balance sheet will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents assets that have been recorded in the governmental fund financial statements but the revenue is not available and so will not be recognized as an inflow of resources (revenue) until it becomes available. The District did not have any elements that qualified for reporting in this category.

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J. Interfund Receivables and Payables

During the course of its operations, transactions occur between and within individual funds that may result in amounts owed between funds.


Transactions of a buyer/seller nature between and within governmental funds are eliminated from the governmental activities in the statement of net position. Any residual balances outstanding between the governmental activities are reported in the statement of net position as “internal balances”.


Transactions of a buyer/seller nature between and within funds are not eliminated from the individual fund statements. Receivables and payables resulting from these transactions are classified as “Due from other funds” or “Due to other funds” on the balance sheet.

K. Interfund Transfers

During the course of its operations, resources are permanently reallocated between and within funds. These transactions are reported as transfers in and transfers out.


Transfers between and within governmental funds are eliminated from the governmental activities in the statement of net position. Any residual balances outstanding between the governmental activities are reported in the statement of activities as “Transfers, net”.


Transfers between and within funds are not eliminated from the individual fund statements and are reported as transfers in and transfers out.

L. Net Position and Fund Equity

Government-Wide Financial Statements (Net Position)

Net position reported as “Net investment in capital assets” includes capital assets, net of accumulated depreciation, less the principal balance of outstanding debt used to acquire capital assets. Unspent proceeds of capital related debt are not considered to be capital assets. Outstanding debt related to future reimbursements from the state’s school building program is not considered to be capital related debt.

Net position is reported as restricted when amounts are not available for appropriation or are legally restricted by outside parties for a specific future use.

Net position has been restricted for “gifts and grants” which represent assets that have restrictions placed on them from outside parties.

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Sometimes the School District will fund outlays for a particular purpose from both restricted (e.g., restricted bond or grant proceeds) and unrestricted resources. In order to calculate the amounts to report as restricted – net position and unrestricted – net position in the government-wide financial statements, a flow assumption must be made about the order in which the resources are considered to be applied. It is the School District’s policy to consider restricted – net position to have been depleted before unrestricted – net position is applied.

Fund Financial Statements (Fund Balances)

Governmental fund balances are classified as nonspendable, restricted, committed, assigned, or unassigned based on the extent to which the government is bound to honor constraints on the specific purposes for which amounts in those funds can be spent.

The governmental fund balance classifications are as follows:

“Nonspendable” fund balance includes amounts that cannot be spent because they are either not in spendable form or they are legally or contractually required to be maintained intact.

“Restricted” fund balance includes amounts subject to constraints placed on the use of resources that are either externally imposed by creditors, grantors, contributors, or laws or regulations of other governments; or that are imposed by law through constitutional provisions or enabling legislation.

“Committed” fund balance includes amounts that can only be used for specific purposes pursuant to constraints imposed by formal action of the government’s highest level of decision-making authority.

“Assigned” fund balance includes amounts that are constrained by the District’s intent to be used for specific purposes but are neither restricted nor committed.

“Unassigned” fund balance includes the residual classification for the general fund. This classification represents fund balance that has not been assigned to other funds and that has not been restricted, committed, or assigned to specific purposes within the general fund.

The District’s spending policy is to spend restricted fund balance first, followed by committed, assigned and unassigned fund balance. Most governmental funds are designated for one purpose at the time of their creation. Therefore, any expenditure from the fund will be allocated to the applicable fund balance classifications in the order of the aforementioned spending policy. The general fund and certain other funds may have more than one purpose.

M. Investment Income

Investment income derived from major and nonmajor governmental funds is legally assigned to the general fund unless otherwise directed by Massachusetts General Law (MGL).

N. Pensions

For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of both the Essex Regional Retirement System (ERRS) and the Massachusetts Teachers Retirement System (MTRS) and additions to/deductions from the Systems fiduciary net position have been determined on the same basis as they are reported by the Systems. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value.

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O. Use of Estimates


The preparation of basic financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure for contingent assets and liabilities at the date of the basic financial statements and the reported amounts of the revenues and expenditures/expenses during the year. Actual results could vary from estimates that were used.

P. Total Column


The total column presented on the government-wide financial statements represents consolidated financial information.


The total column on the fund financial statements is presented only to facilitate financial analysis. Data in this column is not the equivalent of consolidated financial information.

Q. Fund Deficits

Individual fund deficits exist at June 30, 2019, within the special revenue funds. These deficits will be funded with available funds in subsequent years.

NOTE 2 – CASH AND INVESTMENTS

The District maintains a cash and investment pool that is available for use by all funds. Each fund type’s portion of this pool is displayed on the balance sheet as “Cash and Cash Equivalents”. The deposits and investments of the trust funds are held separately from those of other funds.

Statutes authorize the investment in obligations of the U.S. Treasury, agencies and instrumentalities, certificates of deposit, repurchase agreements, money market accounts, bank deposits and the State Treasurer's Investment Pool (Pool). The Treasurer may also invest trust funds in securities, other than mortgages or collateral loans, which are legal for the investment of funds of savings banks under the laws of the Commonwealth. In addition, there are various restrictions limiting the amount and length of deposits and investments.

The OPEB trust fund is invested in the Pension Reserve Investment Trust (PRIT), which meets the criteria of an external investment pool. PRIT is administered by the Pension Reserves Investment Management Board (PRIM), which was established by the Treasurer of the Commonwealth of Massachusetts who serves as a Trustee. The fair value of the position in the PRIT is the same as the value of the PRIT shares. The District does not have the ability to control any of the investment decisions relative to its funds in PRIT.

As of June 30, 2019, $66,112 from the OPEB trust fund is included within the District’s cash and cash equivalents balances and $1,834,153 is invested in PRIT; which are included in the following disclosures.

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Custodial Credit Risk – Deposits

In the case of deposits, this is risk that in the event of a bank failure, the government’s deposits may not be returned to it. The District’s policy for custodial credit risk allows deposits in excess of Federal Depository Insurance (FDIC). To mitigate the risk of uninsured deposits, the District requires banks to be SEC or state/federal bank regulated, of good reputation and have their long-term debt highly rated by national rating agencies. The District will also diversify its deposits by institution in order to minimize the impact of potential losses from any one institution. Collateralization will be required on certificates of deposit. In order to anticipate market changes and provide a level of security for all funds, the collateralization level will be (100%) market value of principal. At year-end, the carrying amount of deposits totaled $2,319,191 and the bank balance totaled $2,747,052. Of the bank balance, $506,396 was covered by Federal Depository Insurance, $2,103,954 was collateralized, and $136,702 was exposed to custodial credit risk because it was uninsured and uncollateralized.

Credit Risk

As of June 30, 2019, the District had $1,834,153 in PRIT Investments and $34,724,126 of MMDT deposits, which are unrated.

Custodial Credit Risk – Investments

For an investment, this is the risk that, in the event of a failure by the counterparty, the District will not be able to recover the value of its investments or collateral security that are in possession of an outside party. The District’s investments in PRIT are not subject to custodial credit risk.

Interest Rate Risk

The effective weighted duration rate for PRIT investments ranged from 0.18 to 15.31 years.

Concentration of Credit Risk

The District did not have any investments that were subject to concentration of credit risk.

Fair Market Value of Investments

PRIT investments are valued using the net asset value (NAV) method. This investment pool was established by the Treasurer of the Commonwealth of Massachusetts, who serves as Trustee. PRIT is administered by the Pension Reserves Investment Management Board (PRIM). The fair values of the positions in each investment Pool are the same as the value of each Pool’s shares. The District does not have the ability to control any of the investment decisions relative to its funds in PRIT.

MMDT investments are valued at amortized cost. Under the amortized cost method, an investment is valued initially at its cost and adjusted for the amount of interest income accrued each day over the term of the investment to account for any difference between the initial cost and the amount payable at its maturity. If amortized cost is determined not to approximate fair value, the value of the portfolio securities will be determined under procedures established by the Advisor.

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NOTE 3 – RECEIVABLES

At June 30, 2019, receivables for the individual major and nonmajor governmental funds totaled $2,854,726. Of the receivable balance, $932,244 relates to state aid payments, $148,035 relates to school choice reimbursements, $1,332,906 relates to school construction assistance and $441,541 relates to various education grants. These receivables are considered to be 100% collectible.

NOTE 4 – CAPITAL ASSETS

Capital asset activity for the year ended June 30, 2019, was as follows:

Beginning EndingBalance Increases Decreases Balance

Governmental Activities:Capital assets not being depreciated:

Construction in progress……………………………$ 479,336 $ 3,813,160 $ - $ 4,292,496

Capital assets being depreciated:Buildings and improvements……………………… 50,532,628 10,850 - 50,543,478 Vehicles and equipment…………………………… 221,560 - - 221,560 Text books and library books……………………… 166,728 - (52,741) 113,987 Modular classrooms………………………………… 439,297 - - 439,297

Total capital assets being depreciated……… 51,360,213 10,850 (52,741) 51,318,322

Less accumulated depreciation for:Buildings and improvements……………………… (10,761,808) (1,295,109) - (12,056,917) Vehicles and equipment…………………………… (135,409) (18,462) - (153,871)Text books and library books……………………… (119,568) (24,785) 52,741 (91,612) Modular classrooms………………………………… (439,297) - - (439,297)

Total accumulated depreciation……………… (11,456,082) (1,338,356) 52,741 (12,741,697)

Total capital assets being depreciated, net………… 39,904,131 (1,327,506) - 38,576,625

Total governmental activities capital assets, net…… $ 40,383,467 $ 2,485,654 $ - $ 42,869,121

Depreciation expense was not allocated to governmental functions and appears unallocated on the statement of activities.

NOTE 5 – INTERFUND TRANSFERS

Interfund transfers for the year ended June 30, 2019, totaled $195,516 and consisted of budgeted transfers including a $18,314 transfer from the general fund to the Athletic fund and $177,202 transfer from the general fund to the School Lunch fund.

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NOTE 6 – SHORT-TERM FINANCING

Short-term debt may be authorized and issued to fund the following:

Current operating costs prior to the collection of revenues through issuance of revenue or tax anticipationnotes (RANS or TANS).

Capital project costs and other approved expenditures incurred prior to obtaining permanent financing throughissuance of bond anticipation notes (BANS) or grant anticipation notes (GANS).

Short-term loans are general obligations and carry maturity dates that are limited by statute. Interest expenditures and expenses for short-term borrowings are accounted for in the general fund.

At June 30, 2019, the District had no short-term debt outstanding.

NOTE 7 – LONG-TERM DEBT

State law permits the District, under the provisions of Chapter 71, Section 16, to authorize indebtedness for capital acquisition and construction. Furthermore, written notice of the amount of debt authorized and the general purpose of the debt must be given to the Board of Selectmen in each of the member Town’s comprising the District.

Details related to the outstanding indebtedness at June 30, 2019, and the debt service requirements are as follows:

Original Interest Outstanding

Maturities Loan Rate at June 30,

Project Through Amount (%) 2019

School construction………………………………… 2030 $ 5,000,000 3.40 $ 2,750,000

School construction………………………………… 2023 1,964,000 1.39 780,000

Refunding bonds of 2016 ………………………… 2033 14,835,000 2.00-4.00 13,685,000

Memorial school construction …………………… 2049 32,290,000 3.63-5.00 32,290,000

Total Bonds Payable…………….………………………………………………………………… 49,505,000

Add: Unamortized premium on bonds…………………………………………………………… 3,105,961

Total Bonds Payable, net…………….………………………………………………………………$ 52,610,961

The District has been approved for a $12.3 million capital grant from the Commonwealth school building assistance program for the Memorial School construction project. Under this program, assistance is paid to support construction costs and reduce the total debt service of the District. Through the end of 2019, the District has received $109,773 of capital grant reimbursements from the MSBA, which is equal to approximately 35% of approved construction costs incurred to date. The District anticipates receiving an additional $1,332,906 of grant proceeds in 2020, which has been recognized as a receivable at June 30, 2019.

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Debt service requirements for principal and interest for Governmental bonds payable in future years are as follows:

Year Principal Interest Total

2020……………$ 2,535,000 $ 1,948,001 $ 4,483,001 2021…………… 2,525,000 1,890,238 4,415,238 2022…………… 2,525,000 1,782,338 4,307,338 2023…………… 2,525,000 1,674,438 4,199,438 2024…………… 2,330,000 1,568,488 3,898,488 2025…………… 2,330,000 1,464,488 3,794,488 2026…………… 2,330,000 1,360,488 3,690,488 2027…………… 2,330,000 1,256,488 3,586,488 2028…………… 2,305,000 1,167,488 3,472,488 2029…………… 2,290,000 1,076,788 3,366,788 2030…………… 2,275,000 986,500 3,261,500 2031…………… 2,015,000 894,250 2,909,250 2032…………… 2,000,000 812,300 2,812,300 2033…………… 1,990,000 728,488 2,718,488 2034…………… 1,075,000 655,750 1,730,750 2035…………… 1,075,000 612,750 1,687,750 2036…………… 1,075,000 569,750 1,644,750 2037…………… 1,075,000 526,750 1,601,750 2038…………… 1,075,000 483,750 1,558,750 2039…………… 1,075,000 440,750 1,515,750 2040…………… 1,075,000 397,750 1,472,750 2041…………… 1,075,000 354,750 1,429,750 2042…………… 1,075,000 311,750 1,386,750 2043…………… 1,075,000 268,750 1,343,750 2044…………… 1,075,000 231,125 1,306,125 2045…………… 1,075,000 193,500 1,268,500 2046…………… 1,075,000 155,875 1,230,875 2047…………… 1,075,000 116,906 1,191,906 2048…………… 1,075,000 77,938 1,152,938 2049…………… 1,075,000 38,969 1,113,969

Total……………$ 49,505,000 $ 24,047,594 $ 73,552,594

Changes in Long-term Liabilities

During the year ended June 30, 2019, the following changes occurred in long-term liabilities:

Bonds and Bonds andBeginning Notes Notes Other Other Ending Due WithinBalance Issued Redeemed Increases Decreases Balance One Year

Governmental Activities:Long-term bonds payable…………………$ 18,670,000 $ 32,290,000 $ (1,455,000) $ - $ - $ 49,505,000 $ 2,535,000

Add: Unamortized premium on bonds… 187,576 2,946,612 - - (28,227) 3,105,961 223,526 Total bonds payable……………………… 18,857,576 35,236,612 (1,455,000) - (28,227) 52,610,961 2,758,526 Compensated absences………………… 366,033 - - 103,620 (20,000) 449,653 20,000 Net pension liability……………………… 6,421,804 - - 430,088 (519,656) 6,332,236 - Net other postemployment

benefits liability………………………… 23,282,417 - - 2,286,054 (1,638,359) 23,930,112 -

Total governmental activitylong-term liabilities….......................…$ 48,927,830 $ 35,236,612 $ (1,455,000) $ 2,819,762 $ (2,206,242) $ 83,322,962 $ 2,778,526

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NOTE 8 – GOVERNMENTAL FUND BALANCE CLASSIFICATIONS

The District classifies fund balances according to the constraints imposed on the uses of those resources. There are two major types of fund balances, which are nonspendable and spendable. Nonspendable fund balances are balances that cannot be spent because they are not expected to be converted to cash or they are legally or contractually required to remain intact. Examples of this classification are prepaid items, inventories, and principal (corpus) of an endowment fund.

In addition to the nonspendable fund balance, accounting standards have provided a hierarchy of spendable fund balances, based on a hierarchy of spending constraints.

Restricted: fund balances that are constrained by external parties, constitutional provisions, or enablinglegislation.

Committed: fund balances that contain self-imposed constraints of the government from its highest levelof decision making authority.

Assigned: fund balances that contain self-imposed constraints of the government to be used for aparticular purpose.

Unassigned: fund balance of the general fund that is not constrained for any particular purpose.

As of June 30, 2019, the governmental fund balances consisted of the following:



Fund Balances:Restricted for:

School choice……………………………$ - $ 1,489,177 $ - $ - $ 1,489,177 Memorial school construction………… - - 32,918,383 - 32,918,383 Gifts and private grant funds…………… - - - 98,836 98,836 State and federal grant funds………… - - - 117,234 117,234 Student activity funds…………………… - - - 211,116 211,116 MS/HS maintenance funds…………… - - - 21,135 21,135 Other special revenue funds…………… - - - 522,064 522,064 Other capital project funds……………… - - - 13,533 13,533 Debt service……………………………… 179,338 - - - 179,338

Assigned to:Encumbrances:

Instructional services…………………… 33,970 - - - 33,970 Programs with other districts………… 90,103 - - - 90,103

Excess and deficiency used for subsequent year budget………………… 100,000 - - - 100,000

Unassigned……………………………………… 1,928,890 - - (141,322) 1,787,568

Total Fund Balances…………….………………… $ 2,332,301 $ 1,489,177 $ 32,918,383 $ 842,596 $ 37,582,457

NOTE 9 – RISK FINANCING

The District is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; errors and omissions; and natural disasters for which the District carries commercial insurance. The District participates in premium-based health care plans for its active employees and its retirees.

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NOTE 10 – PENSION PLAN

Plan Descriptions – The District is a member of the Essex Regional Retirement System (ERRS), a cost-sharing multiple-employer defined benefit pension plan covering eligible employees of the member units. The system is administered by five board members (Board) on behalf of all current employees and retirees except for current teachers and retired teachers. Chapter 32 of the MGL assigns authority to establish and amend benefit provisions of the plan.

The District is a member of the Massachusetts Teachers’ Retirement System (MTRS), a cost-sharing multi-employer defined benefit plan. MTRS is managed by the Commonwealth of Massachusetts (Commonwealth) on behalf of municipal teachers and municipal teacher retirees. The Commonwealth is a nonemployer contributor and is responsible for 100% of the contributions and future benefit requirements of the MTRS. The MTRS covers certified teachers in cities (except Boston), towns, regional school districts, charter schools, educational collaboratives and Quincy College. The MTRS is part of the Commonwealth’s reporting entity and the audited financial report may be obtained by visiting http://www.mass.gov/osc/publications-and-reports/financial-reports/.

Special Funding Situation – The Commonwealth is a nonemployer contributor and is required by statute to make 100% of all actuarially determined employer contributions on behalf of the District to the MTRS. Therefore, the District is considered to be in a special funding situation as defined by GASB Statement No. 68, Accounting and Financial Reporting for Pensions and the Commonwealth is a nonemployer contributor in MTRS. Since the District does not contribute directly to MTRS, there is no net pension liability to recognize. The total of the Commonwealth provided contributions have been allocated based on each employer’s covered payroll to the total covered payroll of employers in MTRS as of the measurement date of June 30, 2018. The District’s portion of the collective pension expense, contributed by the Commonwealth, of $4,631,779, is reported in the general fund as intergovernmental revenue and pension expense in the current fiscal year. The portion of the Commonwealth’s collective net pension liability associated with the District is $45,707,364, as of the measurement date.

Benefits Provided – Both Systems provide retirement, disability, survivor and death benefits to plan members and beneficiaries. Massachusetts Contributory Retirement System benefits are, with certain minor exceptions, uniform from system to system. The System provides for retirement allowance benefits up to a maximum of 80% of a member's highest three-year average annual rate of regular compensation. For persons who became members on or after April 2, 2012, average salary is the average annual rate of regular compensation received during the five consecutive years that produce the highest average, or, if greater, during the last five years (whether or not consecutive) preceding retirement. Benefit payments are based upon a member's age, length of creditable service, level of compensation, and group classification. Members become vested after ten years of creditable service.

Employees who resign from service and who are not eligible to receive a retirement allowance or are under the age of 55 are entitled to request a refund of their accumulated total deductions. Survivor benefits are extended to eligible beneficiaries of members whose death occurs prior to or following retirement.

Cost-of-living adjustments granted between 1981 and 1997 and any increase in other benefits imposed by the Commonwealth’s state law during those years are borne by the Commonwealth and are deposited into the pension fund. Cost-of-living adjustments granted after 1997 must be approved by the Board and are borne by the System.

Contributions – Chapter 32 of the MGL governs the contributions of plan members and member units. Active plan members are required to contribute to the System at rates ranging from 5% to 9% of gross regular compensation with an additional 2% contribution required for compensation exceeding $30,000. The percentage rate is keyed to the date upon which an employee's membership commences. The member units are required to pay into the ERRS a legislatively mandated actuarially determined contribution that is apportioned among the employers

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based on active current payroll. The District’s proportionate share of the required contribution equaled its actual contribution for the year ended December 31, 2018, and totaled $519,656, 28.15% of covered payroll, actuarially determined as an amount that, when combined with plan member contributions, is expected to finance the costs of benefits earned by plan members during the year, with an additional amount to finance any unfunded accrued liability.

Pension Liabilities – At June 30, 2019, the District reported a liability of $6,332,236, for its proportionate share of the net pension liability. The net pension liability was measured as of December 31, 2018, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of January 1, 2018. Accordingly, update procedures were used to roll forward the total pension liability to the measurement date. The District’s proportion of the net pension liability was based on a projection of the District’s long-term share of contributions to the pension plan relative to the projected contributions of all participating members. At December 31, 2018, the District’s proportion was 1.499%, which decreased by 0.207% from its proportion measured at December 31, 2017.

Pension Expense – For the year ended June 30, 2019, the District recognized pension expense of $516,539, deferred outflows of resources related to pensions of $675,267 and deferred inflows of resources related to pensions of $823,697.

The balances of deferred outflows/(inflows) at June 30, 2019, consist of the following:

Deferred DeferredOutflows of Inflows of

Deferred Category Resources Resources Total

Differences between expected and actual experience………………$ - $ (54,922) $ (54,922) Difference between projected and actual earnings, net…………… 325,691 - 325,691 Changes in assumptions……………………………………………… 335,708 - 335,708 Changes in proportion and proportionate share of contributions… 13,868 (768,775) (754,907)

Total deferred outflows/(inflows) of resources……………………… $ 675,267 $ (823,697) $ (148,430)

The District’s deferred outflows/(inflows) of resources related to pensions will be recognized in pension expense as follows:

Year ended June 30:

2020……………………………………………$ 6,724 2021…………………………………………… (73,733) 2022…………………………………………… (68,114) 2023…………………………………………… (13,307)

Total……………………………………………$ (148,430)

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Actuarial Assumptions

The total pension liability in the January 1, 2018, actuarial valuation was determined using the actuarial assumptions, applied to all periods included in the measurement date that was updated to December 31, 2018:

Valuation date………………………… January 1, 2018

Salary increases……………………… Based on years of service, ranging from 7.50% at 0 yearsof service decreasing to 3.75% after 5 years of service.

Net investment return/Discount rate… 7.50%

Inflation rate………………………..…… 2.75%

Cost of living adjustments…………… 3% of first $14,000

Mortality rates:Pre-Retirement……… RP-2000 Employee Mortality Table projected generationally

with Scale BB.

Healthy Retiree……… RP-2000 Healthy Annuitant Mortality Table projectedgenerationally with Scale BB.

Disabled Retiree…… RP-2000 Healthy Annuitant Mortality Table, set forward twoyears projected generationally with Scale BB.

Investment Policy – The pension plan’s policy in regard to the allocation of invested assets is established and may be amended by the Board. Plan assets are managed on a total return basis with a long-term objective of achieving a fully funded status for the benefits provided through the pension plan.

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 January 1, 2018, are summarized in the following table:

Long-Term Expected Long-Term ExpectedAsset Class Asset Allocation Real Rate of Return

Domestic equity…………………………… 21.00% 6.16%International developed markets equity… 13.00% 6.69%International emerging markets equity… 5.00% 9.47%Core fixed income………………………… 15.00% 1.89%High-yield fixed income…………………… 8.00% 4.00%Real estate………………………………… 10.00% 4.58%Commodities……………………………… 4.00% 4.77%Hedge fund, GTAA, Risk parity………… 11.00% 3.68%Private equity……………………………… 13.00% 10.00%

Total………………………………………… 100.00%

Rate of Return – For the year ended December 31, 2018, the annual money-weighted rate of return on pension plan investments, net of pension plan investment expense, was -2.43%. The money-weighted rate of return

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expresses investment performance, net of investment expense, adjusted for the changing amounts actually invested.

Discount rate – The discount rate used to measure the total pension liability was 7.50% as of December 31, 2018 and December 31, 2017. The projection of cash flows used to determine the discount rate assumed plan member contributions will be made at the current contribution rate and that contributions will be made at rates equal to the actuarially determined contribution 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.

Sensitivity of the net pension liability to changes in the discount rate – The following presents the net pension liability, calculated using the discount rate of 7.50%, as well as what the net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower (6.50%) or 1-percentage-point higher (8.50%) than the current rate:

Current1% Decrease Discount 1% Increase

(6.50%) (7.50%) (8.50%)

The District's proportionate share of thenet pension liability……………………… $ 7,828,622 $ 6,332,236 $ 5,073,295

December 31, 2018 Measurement Date

Changes of Assumptions – None.

Changes in Plan Provisions – None.

NOTE 11 – POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS

Plan Description – The Manchester Essex Regional School District administers a single-employer defined benefit healthcare plan (Plan). The Plan provides lifetime healthcare insurance for eligible retirees and their spouses through the District’s group health insurance plan, which covers both active and retired members. Chapter 32B of the MGL assigns authority to establish and amend benefit provisions of the plan. Benefit provisions are negotiated between the District and the unions representing District employees and are renegotiated each bargaining period. The Plan does not issue a publicly available financial report.

Summary of Significant Accounting Policies – For purposes of measuring the net OPEB liability, deferred outflows of resources and deferred inflows of resources related to OPEB, and OPEB expense, information about the fiduciary net position of the Plan and additions to/deductions from the Plan’s fiduciary net position have been determined on the same basis as they are reported by the Plan. For this purpose, the Plan recognizes benefit payments when due and payable in accordance with the benefit terms. Investments are reported at fair value, except for money market investments that have a maturity at the time of purchase of one year or less, which are reported at cost.

Funding Policy – Contribution requirements are negotiated between the District and union representatives. The required contribution is based on a pay-as-you-go financing requirement. All retirees and beneficiaries pay a 20% share of their postretirement medical costs for MEDEX and HMO plans. Participants electing the PPO plan pay the difference between 80% of the HMO plan and the full cost of the PPO plan.

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During 2019, the District pre-funded future OPEB liabilities by contributing $498,605 to the OPEB trust fund in excess of the pay-as-you-go required contribution. As of June 30, 2019, the balance of this fiduciary fund totaled $1,900,265. The District has formally adopted a policy of pre-funding future OPEB liabilities.

The Commonwealth of Massachusetts passed special legislation that has allowed the District to establish a postemployment benefit trust fund and has enabled the District to raise funds necessary to begin pre-funding its OPEB liabilities. The District has named the Health Care Security Board of Trustees (HCSBT) as Trustees of the OPEB trust fund and as such has authorized the OPEB trust funds to be invested entirely in the State Retirement Benefits Trust Fund (SRBT Fund). Massachusetts General Law directs the HCSBT to invest the SRBT Fund in the Pension Reserves Investment Trust (PRIT) Fund. The Trustees have adopted a trust agreement detailing their duties and responsibilities as Trustees. The PRIT Fund is subject to oversight by the Pension Reserves Investment Management (PRIM) Board. A nine member Board of Trustees governs the PRIM Board. The Board of Trustees has the authority to employ an Executive Director, outside investment managers, custodians, consultants, and others as it deems necessary to formulate policies and procedures and to take such other actions as necessary and appropriate to manage the assets of the PRIT Fund.

Investment policy – The District’s policy in regard to the allocation of invested assets is established and may be amended by a majority vote of the School Committee. The OPEB plan’s assets are managed on a total return basis with a long-term objective of achieving and maintaining a fully funded status for the benefits provided through the OPEB plan. The long-term real rate of return on OPEB investments was determined using PRIM’s investment policy.

Employees Covered by Benefit Terms – The following table represents the Plan’s membership at July 1, 2018:

Active members………………………………………… 210 Inactive members currently receiving benefits……… 165

Total……………………………………………………… 375

Components of the net OPEB Liability – The following table represents the components of the Plan’s net OPEB liability as of June 30, 2019:

Total OPEB liability…………………………………$ 25,830,377 Less: OPEB plan's fiduciary net position……… (1,900,265)

Net OPEB liability………………………………… $ 23,930,112

The OPEB plan's fiduciary net positionas a percentage of the total OPEB liability…… 7.36%

Significant Actuarial Methods and Assumptions – The total OPEB liability in the July 1, 2018, actuarial valuation was determined by using the following actuarial assumptions, applied to all periods included in the measurement date that was rolled forward to June 30, 2019:

Valuation date………………………………… July 1, 2018

Actuarial cost method……………………… Entry Age Normal

Participation…………………………………… 85% of future retirees are assumed to participate in the retiree medical plan and 75% of future retirees are expected to elect life insurance.

Health care trend rate………………………… 5.50% initially with an ultimate rate of 4.50%.

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Discount rate………………………………… 7.50%, net of investment expense.

Mortality - Teachers………………………… It is assumed that mortality is represented by the RP-2014 White Collar Mortality Table with Scale MP-2017, fully generational. Generational adjusting is based on Scale MP-2017.

Mortality - Non-teachers…………………… It is assumed that both pre-retirement mortality and beneficiary mortality is represented by the RP-2014 Blue Collar Mortality Table with Scale MP-2015, fully generational. Mortality for retired members for Group 1 and 2 is represented by the RP-2014 Blue Collar Mortality Table set forward five years for males and 3 years for females, fully generational. Mortality for disabled members for Group 1 and 2 is represented by the RP-2000 Mortality Table set forward six years. Generational adjusting is based on Scale MP-2015.

Rate of return – The annual money-weighted rate of return on OPEB plan investments was 3.73%. The money-weighted rate of return expresses investment performance, net of OPEB plan investment expense, adjusted for the changing amounts actually invested.

The long-term expected rate of return on OPEB 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. The Plan’s expected future real rate of return is added to the expected inflation to produce the long-term expected nominal rate of return.

Best estimates of arithmetic real rates of return for each major asset class included in the OPEB plan’s target asset allocation as of June 30, 2019, are summarized in the following table.

Long-Term Expected Long-Term ExpectedAsset Class Asset Allocation Real Rate of Return

Domestic equity…………………………… 13.00% 7.62%International developed markets equity… 13.00% 7.80%International emerging markets equity… 5.00% 9.31%Hedged equity……………………………… 8.00% 6.89%Core bonds………………………………… 6.00% 4.37%Short term fixed income………………… 2.00% 4.01%20+ Year Treasury STRIPS……………… 3.00% 3.50%TIPS………………………………………… 4.00% 4.00%Value-added fixed income………………… 8.00% 7.58%Private equity……………………………… 13.00% 11.15%Real estate………………………………… 10.00% 6.43%Timberland………………………………… 4.00% 7.00%Portfolio completion……………………… 11.00% 6.76%

Total………………………………………… 100.00%

Discount rate - The discount rate used to measure the total OPEB liability was 7.50% as of June 30, 2019, and June 30, 2018. The projection of cash flows used to determine the discount rate assumed plan member

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contributions will be made at the current contribution rate and that contributions will be made at rates equal to the actuarially determined contribution rate. Based on those assumptions, the OPEB 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 OPEB plan investments was applied to all periods of projected benefit payments to determine the total OPEB liability.

Changes in Net OPEB Liability

PlanTotal OPEB Fiduciary Net OPEB

Liability Net Position Liability(a) (b) (a) - (b)

Balances at June 30, 2018……………………………$ 24,633,420 $ 1,351,003 $ 23,282,417

Changes for the year:Service cost………………………………………… 440,954 - 440,954 Interest……………………………………………… 1,845,100 - 1,845,100 Benefit payments………………………………… (1,089,097) (1,089,097) - Employer contributions…………………………… - 498,605 (498,605) Employer contributions for OPEB payments…… - 1,089,097 (1,089,097) Net investment income………………………...… - 50,657 (50,657)

Net change……………………………………… 1,196,957 549,262 647,695

Balances at June 30, 2019……………………………$ 25,830,377 $ 1,900,265 $ 23,930,112

Increase (Decrease)

Sensitivity of the Net OPEB Liability to Changes in the Discount Rate – The following table presents the net other postemployment benefit liability and service cost, calculated using the discount rate of 7.50%, as well as what the net other postemployment benefit liability and service cost would be if it were calculated using a discount rate that is 1-percentage-point lower or 1-percentage-point higher than the current rate.

Current

1% Decrease Discount Rate 1% Increase

(6.50%) (7.50%) (8.50%)

Net OPEB liability……………………… $ 26,086,160 $ 23,930,112 $ 19,972,942

Sensitivity of the Net OPEB Liability to Changes in the Healthcare Trend Rate – The following table presents the net other postemployment benefit liability and service cost, calculated using the current healthcare trend rate, as well as what the net other postemployment benefit liability and service cost would be if it were calculated using a healthcare trend rate that is 1-percentage-point lower or 1-percentage-point higher.

1% Decrease Current Trend 1% Increase

Net OPEB liability……………………… $ 19,748,617 $ 23,930,112 $ 26,407,161

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OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB – For the year ended June 30, 2019, the Town recognized OPEB expense of $1,983,631. At June 30, 2019, the Town reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources:

Deferred Deferred

Outflows of Inflows of

Deferred Category Resources Resources Total

Differences between expected and actual experience……$ 3,881,835 $ - $ 3,881,835

Difference between projected and actual earnings, net… 92,895 - 92,895

Changes in assumptions…………………………………… - (5,326,314) (5,326,314)

Total deferred outflows/(inflows) of resources…………… $ 3,974,730 $ (5,326,314) $ (1,351,584)

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

Measurement date year ended June 30:

2020………………………………………… $ (309,936) 2021………………………………………… (309,938) 2022………………………………………… (309,579) 2023………………………………………… (324,190) 2024………………………………………… (97,941)

Total………………………………………… $ (1,351,584)



NOTE 12 – CONTINGENCIES

The District participates in a number of federal award programs. Although the grant programs have been audited in accordance with the provisions of the Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, these programs are still subject to financial and compliance audits. The amount, if any, of expenditures which may be disallowed by the granting agencies cannot be determined at this time, although it is expected such amounts, if any, to be immaterial.

Various legal actions and claims are pending. Litigation is subject to many uncertainties, and the outcome of individual litigated matters is not always predictable. Although the amount of liability, if any, at June 30, 2019, cannot be ascertained, management believes any resulting liability should not materially affect the financial position at June 30, 2019.

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NOTE 13 – SUBSEQUENT EVENTS

Management has evaluated subsequent events through July 1, 2020, which is the date the financial statements were available to be issued.

NOTE 14 – IMPLEMENTATION OF NEW GASB PRONOUNCEMENTS

During 2019, the following GASB pronouncements were implemented:

GASB Statement #83, Certain Asset Retirement Obligations. This pronouncement did not impact thebasic financial statements.

GASB Statement #88, Certain Disclosures Related to Debt, including Direct Borrowings and DirectPlacements. This pronouncement did not impact the basic financial statements.

The following GASB pronouncements will be implemented in the future:

The GASB issued Statement #84, Fiduciary Activities, which is required to be implemented in 2021.

The GASB issued Statement #87, Leases, which is required to be implemented in 2022.

The GASB issued Statement #89, Accounting for Interest Cost Incurred before the End of a ConstructionPeriod, which is required to be implemented in 2022.

The GASB issued Statement #90, Majority Equity Interests – an amendment of GASB Statements #14and #61, which is required to be implemented in 2021.

The GASB issued Statement #91, Conduit Debt Obligations, which is required to be implemented in2023.

The GASB issued Statement #92, Omnibus 2020, which is required to implemented in 2022.

The GASB issued Statement #93, Replacement of Interbank Offered Rates, which is required to beimplemented in 2021.

Management is currently assessing the impact the implementation of these pronouncements will have on the basic financial statements.

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Manchester Essex Regional School District Required Supplementary Information

Required Supplementary Information

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A-43

Amounts Current Year

Carried Forward Initial Original Final

From Prior Year Budget Budget Budget

REVENUES:

Member town assessments……………………………………… $ - $ 24,204,232 $ 24,204,232 $ 24,204,232

Intergovernmental…………………………………………………… - 3,095,741 3,095,741 3,095,741

Departmental and other…………………………………………… - 25,000 25,000 25,000

Investment income………………………………………………… - 12,000 12,000 12,000

TOTAL REVENUES……………………………… - 27,336,973 27,336,973 27,336,973

EXPENDITURES:

Current:

Salaries:

Administration………………………………………………… - 618,549 618,549 619,500

Instructional services………………………………………… - 14,644,482 14,644,482 14,719,936

Other student services……………………………………… - 718,532 718,532 724,032

Operation and maintenance……………………………… - 340,233 340,233 290,233

Other operating expenditures:

Administration………………………………………………… - 253,200 253,200 235,200

Instructional services………………………………………… 13,376 1,048,633 1,062,009 979,296

Other student services……………………………………… - 900,614 900,614 942,827

Operations and maintenance……………………………… - 1,213,000 1,213,000 1,290,000

Employee benefits and other fixed charges……………… - 4,892,959 4,892,959 4,640,553

Programs with other school districts……………………… 73,445 613,704 687,149 889,149

Debt service:

Maturing debt………………………………………………… - 1,455,002 1,455,002 1,455,000

Interest………………………………………………………… - 653,338 653,338 653,338

TOTAL EXPENDITURES………………………… 86,821 27,352,246 27,439,067 27,439,064

EXCESS (DEFICIENCY) OF REVENUES

OVER (UNDER) EXPENDITURES……………………………… (86,821) (15,273) (102,094) (102,091)

OTHER FINANCING SOURCES (USES):Transfers out………………………………………………………… - - - (195,516)

NET CHANGE IN FUND BALANCE………………………………… (86,821) (15,273) (102,094) (297,607)

FUND BALANCES AT BEGINNING OF YEAR……………………. - 1,768,719 1,768,719 1,768,719

FUND BALANCES AT END OF YEAR……………………………… $ (86,821) $ 1,753,446 $ 1,666,625 $ 1,471,112

See notes to required supplementary information.

Budgeted Amounts

GENERAL FUND

SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -

BUDGET AND ACTUAL


Manchester Essex Regional School District Required Supplementary InformationA-44

Actual Amounts Variance

Budgetary Carried Forward to Final

Amounts To Next Year Budget

$ 24,204,232 $ - $ -

3,093,793 - (1,948)

46,156 - 21,156

411,373 - 399,373

27,755,554 - 418,581

624,452 - (4,952)

14,634,315 - 85,621

728,244 - (4,212)

292,562 - (2,329)

218,106 - 17,094

823,406 33,970 121,920

842,606 - 100,221

1,272,940 - 17,060

4,638,034 - 2,519

813,453 90,103 (14,407)

1,455,000 - -

653,338 - -

26,996,456 124,073 318,535

759,098 (124,073) 737,116

(195,516) - -

563,582 (124,073) 737,116

1,768,719 - -

$ 2,332,301 $ (124,073) $ 737,116



Pension Plan Schedules Pension plan schedules

The Schedule of the District’s Proportionate Share of the Net Pension Liability presents multi-year trend information on the District’s net pension liability and related ratios.

The Schedule of the District’s Contributions presents multi-year trend information on the District’s required and actual contributions to the pension plan and related ratios.

The Schedule of the Special Funding Amounts of the Net Pension Liability for the Massachusetts Teachers Contributory Retirement System presents multi-year trend information on the liability and expense assumed by the Commonwealth of Massachusetts on behalf of the District along with related ratios.

These schedules are intended to present information for ten years. Until a ten year trend is compiled, information is presented for those years for which information is available.

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Net pension Plan fiduciary

Proportionate liability as a net position as

Proportion of share of the percentage of a percentage of

the net pension net pension covered the total

Year liability (asset) liability (asset) Covered payroll payroll pension liability

December 31, 2018………… 1.50% $ 6,332,236 $ 1,845,976 343.03% 51.89%

December 31, 2017………… 1.71% 6,421,804 1,771,429 362.52% 55.40%

December 31, 2016………… 1.72% 6,643,169 2,202,134 301.67% 51.12%

December 31, 2015………… 1.80% 6,545,348 2,474,424 264.52% 51.01%

December 31, 2014………… 1.78% 6,041,480 2,375,119 254.37% 52.27%

Note: this schedule is intended to present information for 10 years.

Until a 10-year trend is compiled, information is presented for those years for which information is available.


SCHEDULE OF THE DISTRICT'S PROPORTIONATE SHARE

OF THE NET PENSION LIABILITYESSEX REGIONAL RETIREMENT SYSTEM


Contributions in

relation to the Contributions as

Actuarially actuarially Contribution a percentage of

determined determined deficiency Covered covered

Year contribution contribution (excess) payroll payroll

June 30, 2019………………… $ 519,656 $ (519,656) $ - $ 1,882,896 27.60%

June 30, 2018………………… 531,381 (531,381) - 1,806,858 29.41%

June 30, 2017………………… 499,581 (499,581) - 2,246,177 22.24%

June 30, 2016………………… 494,914 (494,914) - 2,523,912 19.61%

June 30, 2015………………… 456,811 (456,811) - 2,422,621 18.86%




SCHEDULE OF THE DISTRICT'S CONTRIBUTIONSESSEX REGIONAL RETIREMENT SYSTEM


Year

Commonwealth's 100% Share of the

Associated Net Pension Liability

Expense and Revenue

Recognized for the Commonwealth's

Support

Plan Fiduciary Net Position as a

Percentage of the Total Liability

2019…………………$ 45,707,364 $ 4,631,779 54.84%2018………………… 43,876,284 4,579,496 54.25%2017………………… 42,805,996 4,366,492 52.73%2016………………… 38,894,127 3,154,660 55.38%2015………………… 30,541,499 2,121,865 61.64%

Note: this schedule is intended to present information for 10 years.Until a 10-year trend is compiled, information is presented for those years for which information is available.


SCHEDULE OF THE SPECIAL FUNDING AMOUNTS

OF THE NET PENSION LIABILITYMASSACHUSETTS TEACHERS' RETIREMENT SYSTEM

The Commonwealth of Massachusetts is a nonemployer contributor and is required by statute to make all actuarially determined employer contributions on behalf of the member employers which creates a special funding situation. Therefore, there is no net pension liability to recognize. This schedule discloses the Commonwealth's 100% share of the associated collective net pension liability; the portion of the collective pension expense as both a revenue and pension expense recognized; and the Plan's fiduciary net position as a percentage of the total liability.



Other Postemployment Benefit Plan Schedules

Other postemployment benefits plan schedules

The Schedule of Changes in the District’s Net Other Postemployment Benefit Liability and Related Ratios presents multi-year trend information on changes in the Plan’s total OPEB liability, changes in the Plan’s net position, and ending net OPEB liability. It also demonstrates the Plan’s net position as a percentage of the total liability and the Plan’s net other postemployment benefit liability as a percentage of covered employee payroll.

The Schedule of the District’s Contributions presents multi-year trend information on the District’s actual contributions to the other postemployment benefit plan and related ratios.

The Schedule of Investment Returns presents multi-year trend information on the money-weighted investment return on the Plan’s other postemployment assets, net of investment expense.

These schedules are intended to present information for ten years. Until a ten year trend is compiled, information is presented for those years for which information is available.

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June 30, June 30, June 30,2017 2018 2019

Total OPEB LiabilityService Cost………………………………………………… $ 1,175,114 $ 1,227,994 $ 440,954 Interest………………………………………………………… 1,091,736 1,152,138 1,845,100 Differences between expected and actual experience…… - 5,691,547 - Changes of assumptions…………………………………… - (7,809,935) - Benefit payments…………………………………………… (740,289) (1,158,113) (1,089,097)

Net change in total OPEB liability…………………………… 1,526,561 (896,369) 1,196,957

Total OPEB liability - beginning……………………………..… 24,003,228 25,529,789 24,633,420

Total OPEB liability - ending (a)……………………………… $ 25,529,789 $ 24,633,420 $ 25,830,377

Plan fiduciary net positionEmployer contributions……………………………..……… $ 417,059 $ 466,537 $ 498,605 Employer contributions for OPEB payments……………… 740,289 1,158,113 1,089,097 Net investment income………………………...…………… 27,209 40,654 50,657 Benefit payments……………………………...……………… (740,289) (1,158,113) (1,089,097)

Net change in plan fiduciary net position…………………… 444,268 507,191 549,262

Plan fiduciary net position - beginning of year……………… 399,544 843,812 1,351,003

Plan fiduciary net position - end of year (b)………………… $ 843,812 $ 1,351,003 $ 1,900,265

Net OPEB liability - ending (a)-(b)………………………… $ 24,685,977 $ 23,282,417 $ 23,930,112

Plan fiduciary net position as a percentage of the total OPEB liability………………………..…………… 3.31% 5.48% 7.36%

Covered-employee payroll………………………………..……$ 15,510,239 $ 15,014,891 $ 15,540,412

Net OPEB liability as a percentage ofcovered-employee payroll…………………………..… 159.16% 155.06% 153.99%

Note: this schedule is intended to present information for 10 years.Until a 10-year trend is compiled, information is presented for those years for which information is available.


SCHEDULE OF CHANGES IN THE DISTRICT'S NET OPEB LIABILITY AND RELATED RATIOS

OTHER POSTEMPLOYMENT BENEFIT PLAN


Contributions in

relation to the Contributions as

Actuarially actuarially Contribution a percentage of

determined determined deficiency Covered- covered-

Year contribution contribution (excess) employee payroll employee payroll

June 30, 2019………………$ 1,685,816 $ (1,587,702) $ 98,114 $ 15,540,412 10.22%

June 30, 2018……………… 1,828,904 (1,624,650) 204,254 15,014,891 10.82%

June 30, 2017……………… 1,750,600 (1,157,348) 593,252 15,510,239 7.46%




SCHEDULE OF THE DISTRICT'S CONTRIBUTIONSOTHER POSTEMPLOYMENT BENEFIT PLAN


Annual money-weighted

rate of return,

Year net of investment expense

June 30, 2019…………………………… 3.73%

June 30, 2018…………………………… 3.20%

June 30, 2017…………………………… 6.81%


Until a 10-year trend is compiled, information is presented for those

years for which information is available.


SCHEDULE OF INVESTMENT RETURNSOTHER POSTEMPLOYMENT BENEFIT PLAN


Notes to Required Supplementary Information Year Ended June 30, 2019


NOTE A – STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY Notes to required supplementary information 1. Budgetary Information

The District adopts a balanced budget that is approved by the Committee. The Superintendent of Schools presents an annual budget to the Committee, which includes estimates of revenues and other financing sources and recommendations of expenditures and other financing uses. The Committee, which has full authority to amend and/or reject the budget or any line item, adopts the expenditure budget by majority vote. Increases in the budget subsequent to the approval of the annual budget require majority Committee approval.

The majority of the District’s appropriations are non-continuing which lapse at the end of the year.

The District adopts an annual budget for the General Fund in conformity with the guidelines described above. The original 2019 approved budget for the General Fund authorized $27.4 million in appropriations. The District approved supplemental appropriations totaling $196,000 to fund deficits in the athletic and cafeteria revolving funds.

The District’s accounting office has the responsibility to ensure that budgetary control is maintained on a bottom line, total budget basis. Budgetary control is exercised through the District’s accounting system.

2. Budgetary - GAAP Reconciliation

For budgetary financial reporting purposes, the Uniform Municipal Accounting System basis of accounting (established by the Commonwealth) is followed, which differs from the GAAP basis of accounting. A reconciliation of budgetary-basis to GAAP-basis results for the general fund for the year ended June 30, 2019, is presented below:

Net change in fund balance - budgetary basis…………………………… $ 563,582

Basis of accounting differences:Recognition of revenue for on-behalf payments……………………… 4,631,779Recognition of expenditures for on-behalf payments………………… (4,631,779)

Net change in fund balance - GAAP basis…………………………………$ 563,582

NOTE B – PENSION PLAN

Schedule of the District’s Proportionate Share of the Net Pension Liability

The Schedule of the District’s Proportionate Share of the Net Pension Liability details the District’s allocated percentage of the net pension liability (asset), the District’s proportionate share of the net pension liability, and the District’s covered payroll. It also demonstrates the District’s net position as a percentage of the District’s pension liability and the District’s net pension liability as a percentage of the District’s covered payroll.

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Schedule of the District’s Contributions

Governmental employers are required to pay an annual appropriation as established by PERAC. The District’s appropriation includes the amounts to pay the pension portion of each member’s retirement allowance, an amount to amortize the actuarially determined unfunded liability to zero in accordance with the system’s funding schedule, and additional appropriations in accordance with adopted early retirement incentive programs. The District’s appropriations are payable on July 1 and January 1. The District may choose to pay the entire appropriation in July at a discounted rate. Accordingly, actual District contributions may be less than the “total appropriation”. The pension fund appropriation is allocated to the District based on covered payroll.

Schedule of the Special Funding Amounts of the Net Pension Liability

The Commonwealth of Massachusetts is a nonemployer contributor and is required by statute to make all actuarially determined employer contributions on behalf of the member employers which creates a special funding situation. Since the District does not contribute directly to MTRS, there is no net pension liability to recognize. This schedule discloses the Commonwealth's 100% share of the collective net pension liability that is associated with the District; the portion of the collective pension expense as both a revenue and pension expense recognized by the District; and the Plan's fiduciary net position as a percentage of the total liability.



NOTE C – OTHER POSTEMPLOYMENT BENEFITS PLAN

The District administers a single-employer defined benefit healthcare plan (Plan). The plan provides lifetime healthcare insurance for eligible retirees and their spouses through the District’s group health insurance plan, which covers both active and retired members.

The Other Postemployment Benefit Plan

The Schedule of Changes in the District’s Net Other Postemployment Benefit Liability and Related Ratios

The Schedule of Changes in the District’s Net Other Postemployment Benefit Liability and Related Ratios presents multi-year trend information on changes in the Plan’s total OPEB liability, changes in the Plan’s net position, and ending net OPEB liability. It also demonstrates the Plan’s net position as a percentage of the total liability and the Plan’s net other postemployment benefit liability as a percentage of covered employee payroll.

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Schedule of the District’s Contributions

The Schedule of the District’s Contributions includes the District’s annual required contribution to the Plan, along with the contribution made in relation to the actuarially determined contribution and the covered employee payroll. The District is not required to fully fund this contribution. It also demonstrates the contributions as a percentage of covered-employee payroll. 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 are as follows:

Valuation date………………………………… July 1, 2018

Actuarial cost method……………………… Entry Age Normal

Participation…………………………………… 85% of future retirees are assumed to participate in the retiree medical plan and 75% of future retirees are expected to elect life insurance.

Health care trend rate………………………… 5.50% initially with an ultimate rate of 4.50%.

Discount rate………………………………… 7.50%, net of investment expense.

Mortality - Teachers………………………… It is assumed that mortality is represented by the RP-2014 White Collar Mortality Table with Scale MP-2017, fully generational. Generational adjusting is based on Scale MP-2017.

Mortality - Non-teachers…………………… It is assumed that both pre-retirement mortality and beneficiary mortality is represented by the RP-2014 Blue Collar Mortality Table with Scale MP-2015, fully generational. Mortality for retired members for Group 1 and 2 is represented by the RP-2014 Blue Collar Mortality Table set forward five years for males and 3 years for females, fully generational. Mortality for disabled members for Group 1 and 2 is represented by the RP-2000 Mortality Table set forward six years. Generational adjusting is based on Scale MP-2015.

Schedule of Investment Returns

The Schedule of Investment Returns includes the money-weighted investment return on the Plan’s other postemployment assets, net of investment expense.



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APPENDIX B

TABLE OF CONTENTS

Certain Information Relating to the Member Towns of the District B-1

Town of Manchester B-7Town of Essex B-25

B-1

APPENDIX B

MEMBER MUNICIPALITIES

General

This Appendix contains certain information regarding the Towns of Manchester and Essex, Massachusetts. The information was obtained from the Towns and, where indicated, from certain other sources. The District does not guarantee the accuracy of the information although it has no reason to believe that it is materially inaccurate or misleading.

The following summarizes certain information regarding municipal finance and taxation in general as it relates to the member municipalities.

Debt Limits

The General Debt Limit of a city or town consists of a Normal Debt Limit and a Double Debt Limit. The Normal Debt Limit is 5 percent of the valuation of taxable property as last equalized by the State Department of Revenue. A city or town can authorize debt up to this amount without state approval. It can authorize debt up to twice this amount (the Double Debt Limit) with the approval of the state Municipal Finance Oversight Board composed of the State Treasurer, the State Auditor, the Attorney General and the Director of Accounts.

There are many categories of general obligation debt which are exempt from and do not count against the General Debt Limit. Among others, these exempt categories include revenue anticipation notes and grant anticipation notes; emergency loans; loans exempted by special laws; certain school bonds, sewer bonds, solid waste disposal facility bonds and economic development bonds supported by tax increment financing; and subject to special debt limits, bonds for water, gas, electric and telecommunication systems, housing, urban renewal and economic development (subject to various debt limits). Revenue bonds are not subject to these debt limits. The General Debt Limit and the special debt limit for water bonds apply at the time the debt is authorized. The other special debt limits generally apply at the time the debt is incurred.

Revenue Anticipation Notes The amount borrowed in each fiscal year by the issue of revenue anticipation notes is limited to the tax levy of the prior fiscal year, together with the net receipts in the prior fiscal year from the motor vehicle excise and certain payments made by the Commonwealth in lieu of taxes. The fiscal year ends on June 30. Notes may mature in the following fiscal year, and notes may be refunded into the following fiscal year to the extent of the uncollected, unabated current tax levy and certain other items, including revenue deficits, overlay deficits, final judgments and lawful unappropriated expenditures, which are to be added to the next tax levy, but excluding deficits arising from a failure to collect taxes of earlier years. (See “Taxation to Meet Deficits” under “Tax Levies” below.) In any event, the period from an original borrowing to its final maturity cannot exceed one year.

Types of Obligations

General Obligations. Massachusetts cities and towns are authorized to issue general obligation indebtedness of these types:

Serial Bonds and Notes. These are generally required to be payable in annual principal amounts beginning no later than the end of the next fiscal year commencing after the date of issue and ending within the terms permitted by law. A level debt service schedule, or a schedule that provides for a more rapid amortization of principal than level debt service, is permitted. The principal amounts of certain economic development bonds supported by tax increment financing may be payable in equal, diminishing or increasing amounts beginning within 5 years after the date of issue. The maximum terms of serial bonds and notes vary from one year to 40 years, depending on the purpose of the issue. The maximum terms permitted are set forth in the statutes. In addition, for many projects, the maximum term may be determined in accordance with useful life guidelines promulgated by the State Department of Revenue (“DOR”). Serial bonds and notes may be issued for the purposes set forth in the statutes. In addition, serial bonds and notes may be issued for any other public work improvement or asset not specifically listed in the Statutes that has a useful life of at least 5 years. Bonds or notes may be made callable and redeemed prior to their maturity, and a redemption premium may be paid. Refunding bonds or notes may be issued subject to the maximum applicable term measured from the date of the original bonds or notes and must produce present value savings over the debt service of the refunded bonds. Generally, the first required annual payment of principal of the refunding bonds cannot be later than the first principal payment of any of the bonds or notes being refunded thereby, however, principal payments made before the first principal payment of any of the bonds or notes being refunded thereby may be in any amount.

Serial bonds may be issued as “qualified bonds” with the approval of the state Municipal Finance Oversight Board composed of the State Treasurer, the State Auditor, the Attorney General and the Director of Accounts, subject to such conditions and limitations (including restrictions on future indebtedness) as may be required by the Board. Qualified bonds may mature not less than 10 nor more than 30 years from their dates and are not subject to the amortization requirements described above.

B-2

The State Treasurer is required to pay the debt service on qualified bonds and thereafter to withhold the amount of the debt service paid by the State from state aid or other state payments; administrative costs and any loss of interest income to the State are to be assessed upon the city or town. Tax Credit Bonds or Notes. Subject to certain provisions and conditions, the officers authorized to issue bonds or notes may designate any duly authorized issue of bonds or notes as “tax credit bonds” to the extent such bonds and notes are otherwise permitted to be issued with federal tax credits or other similar subsidies for all or a portion of the borrowing costs. Tax credit bonds may be made payable without regard to the annual installments required by any other law, and a sinking fund may be established for the payment of such bonds. Any investment that is part of such a sinking fund may mature not later than the date fixed for payment or redemption of the applicable bonds. Bond Anticipation Notes. These generally must mature within two years of their original dates of issuance but may be refunded from time to time for a period not to exceed ten years from their original dates of issuance, provided that for each year that the notes are refunded beyond the second year they must be paid in part from revenue funds in an amount at least equal to the minimum annual payment that would have been required if the bonds had been issued at the end of the second year. For certain school projects, however, notes may be refunded from time to time for a period not to exceed seven years without having to pay any portion of the principal of the notes from revenue funds. The maximum term of bonds issued to refund bond anticipation notes is measured (except for certain school projects) from the date of the original issue of the notes. Revenue Anticipation Notes. These are issued to meet current expenses in anticipation of taxes and other revenues. They must mature within one year but, if payable in less than one year, may be refunded from time to time up to one year from the original date of issue. Grant Anticipation Notes. These are issued for temporary financing in anticipation of federal grants and state and county reimbursements. Generally, they must mature within two years but may be refunded from time to time as long as the municipality remains entitled to the grant or reimbursement. Revenue Bonds. Cities and towns may issue revenue bonds for solid waste disposal facilities, for projects financed under the Commonwealth’s Clean Water Revolving Loan Programs and for certain economic development projects supported by tax increment financing. In addition, cities and towns having electric departments may issue electric revenue bonds, and notes in anticipation of such bonds, subject to the approval of the State Department of Telecommunications and Energy. Contracts Municipal contracts are generally limited to currently available appropriations. A city or town generally has authority to enter into contracts for the exercise of any of its corporate powers for any period of time deemed to serve its best interests, but generally only when funds are available for the first fiscal year; obligations for succeeding fiscal years generally are expressly subject to availability and appropriation of funds. Municipalities have specific authority in relatively few cases to enter long-term contractual obligations that are not subject to annual appropriation, including contracts for refuse disposal and sewage treatment and disposal. Municipalities may also enter into long-term contracts in aid of housing and renewal projects. There may be implied authority to make other long-term contracts required to carry out authorized municipal functions, such as contracts to purchase water from private water companies. Municipal contracts relating to solid waste disposal facilities may contain provisions requiring the delivery of minimum amounts of waste and payments based thereon and requiring payments in certain circumstances without regard to the operational status of the facilities. Municipal electric departments have statutory power to enter into long-term contracts for joint ownership and operation of generating and transmission facilities and for the purchase or sale of capacity, including contracts requiring payments without regard to the operational status of the facilities. Pursuant to the Home Rule Amendment to the Massachusetts Constitution, cities and towns may also be empowered to make other contracts and leases. Property Taxation and Valuation Tax Rate and Valuation – General. Property is classified for the purpose of taxation according to its use. The legislature has in substance created three classes of taxable property: (1) residential real property, (2) open space land, and (3) all other (commercial, industrial and personal property). Within limits, cities and towns are given the option of determining the share of the annual levy to be borne by each of the three categories. The share required to be borne by residential real property is at least 50 per cent of its share of the total taxable valuation; the effective rate for open space must be at least 75 per cent of the effective rate for residential real property; and the share of commercial, industrial and personal property must not exceed 175

B-3

percent of their share of the total valuation. A city or town may also exempt up to 20 percent of the valuation of residential real property (where used as the taxpayer’s principal residence) and up to 10 percent of the valuation of commercial real property (where occupied by certain small businesses). Property may not be classified in a city or town until the State Commissioner of Revenue certifies that all property in the city or town has been assessed at its fair cash value. Such certification must take place every three years, or pursuant to a revised schedule as may be issued by the Commissioner. Related statutes provide that certain forest land, agricultural or horticultural land (assessed at the value it has for these purposes) and recreational land (assessed on the basis of its use at a maximum of 25 percent of its fair cash value) are all to be taxed at the rate applicable to commercial property. Land classified as forest land is valued for this purpose at five percent of fair cash value but not less than ten dollars per acre. In order to determine appropriate relative values for the purposes of certain distributions to and assessments upon cities and towns, the Commissioner of Revenue biennially makes a redetermination of the fair cash value of the taxable property in each municipality. This is known as the "equalized value". Tax Levies Levy - General. The principal tax of Massachusetts cities and towns is the tax on real and personal property. The amount to be levied in each year is the amount appropriated or required by law to be raised for municipal expenditures less estimated receipts from other sources and less appropriations voted from funds on hand. The total amount levied is subject to certain limits prescribed by law; for a description of those limits see Tax Limitations below. The Massachusetts statutes direct the municipal assessors to include annually in the tax levy for the next fiscal year “all debt and interest charges matured and maturing during the next fiscal year and not otherwise provided for (and) all amounts necessary to satisfy final judgments”. Specific provision is also made for including in the next tax levy payments of rebate amounts not otherwise provided for and payment of notes in anticipation of federal or state aid, if the aid is no longer forthcoming. The estimated receipts for a fiscal year from sources other than the property tax may not exceed the actual receipts during the preceding fiscal year from the same sources unless approved by the State Commissioner of Revenue. Excepting special funds the use of which is otherwise provided for by law, the deduction for appropriations voted from funds on hand for a fiscal year cannot exceed the "free cash" as of the beginning of the prior fiscal year as certified by the State Director of Accounts plus up to nine months' collections and receipts on account of earlier years' taxes after that date. Subject to certain adjustments, free cash is surplus revenue less uncollected overdue property taxes from earlier years. Although an allowance is made in the tax levy for abatements (see “Abatements and Overlay” below) no reserve is generally provided for uncollectible real property taxes. Since some of the levy is inevitably not collected, this creates a cash deficiency which may or may not be offset by other items (see “Taxation to Meet Deficits” below). Taxation to Meet Deficits. As noted elsewhere (see “Abatements and Overlay” below) overlay deficits, i.e. tax abatements in excess of the overlay included in the tax levy to cover abatements, are required to be added to the next tax levy. It is generally understood that revenue deficits, i.e. those resulting from non-property tax revenues being less than anticipated, are also required to be added to the tax levy (at least to the extent not covered by surplus revenue). Amounts lawfully expended since the prior tax levy and not included therein are also required to be included in the annual tax levy. The circumstances under which this can arise are limited since municipal departments are generally prohibited from incurring liabilities in excess of appropriations except for major disasters, mandated items, contracts in aid of housing and renewal projects and other long-term contracts. In addition, utilities must be paid at established rates and certain established salaries, e.g. civil service, must legally be paid for work actually performed, whether or not covered by appropriations. Cities and towns are authorized to appropriate sums, and thus to levy taxes, to cover deficits arising from other causes, such as "free cash" deficits arising from a failure to collect taxes. This is not generally understood, however, and it has not been the practice to levy taxes to cover free cash deficits. Except to the extent that such deficits have been reduced or eliminated by subsequent collections of uncollected taxes (including sales of tax titles and tax possessions), lapsed appropriations, non-property tax revenues in excess of estimates, other miscellaneous items or funding loans authorized by special act, they remain in existence.

B-4

Tax Limitations Chapter 59, Section 21C of the General Laws, also known as Proposition 2½, imposes two separate limits on the annual tax levy of a city or town. The primary limitation is that the tax levy cannot exceed 2½ percent of the full and fair cash value. If a city or town exceeds the primary limitation, it must reduce its tax levy by at least 15 percent annually until it is in compliance, provided that the reduction can be reduced in any year to not less than 7½ percent by majority vote of the voters, or to less than 7½ percent by two-thirds vote of the voters. For cities and towns at or below the primary limit, a secondary limitation is that the tax levy cannot exceed the maximum levy limit for the preceding fiscal year as determined by the State Commissioner of Revenue by more than 2½ percent, subject to exceptions for property added to the tax rolls or property which has had an increase, other than as part of a general revaluation, in its assessed valuation over the prior year’s valuation. This “growth” limit on the tax levy may be exceeded in any year by a majority vote of the voters, but an increase in the secondary or growth limit under this procedure does not permit a tax levy in excess of the primary limitation, since the two limitations apply independently. In addition, if the voters vote to approve taxes in excess of the “growth” limit for the purpose of funding a stabilization fund, such increased amount may only be taken into account for purposes of calculating the maximum levy limit in each subsequent year if the board of selectmen of a town or the city council of a city votes by a two-thirds vote to appropriate such increased amount in such subsequent year to the stabilization fund. The applicable tax limits may also be reduced in any year by a majority vote of the voters. The State Commissioner of Revenue may adjust any tax limit “to counterbalance the effects of extraordinary, non-recurring events which occurred during the base year”. Proposition 2 ½ further provides that the voters may exclude from the taxes subject to the tax limits and from the calculation of the maximum tax levy (a) the amount required to pay debt service on bonds and notes issued before November 4, 1980, if the exclusion is approved by a majority vote of the voters, and (b) the amount required to pay debt service on any specific subsequent issue for which similar approval is obtained. Even with voter approval, the holders of the obligations for which unlimited taxes may be assessed do not have a statutory priority or security interest in the portion of the tax levy attributable to such obligations. It should be noted that Massachusetts General Laws Chapter 44, Section 20 requires that the taxes excluded from the levy limit to pay debt service on any such bonds and notes be calculated based on the true interest cost of the issue. Accordingly, the Department of Revenue limits the amount of taxes which may be levied in each year to pay debt service on any such bonds and notes to the amount of such debt service, less a pro rata portion of any original issue premium received by the city or town that was not applied to pay costs of issuance. Voters may also exclude from the Proposition 2½ limits the amount required to pay specified capital outlay expenditures or for the city or town’s apportioned share for certain outlay expenditures by a regional governmental unit. In addition, the city council of a city, with the approval of the mayor if required, or the board of selectmen or the town council of a town may vote to exclude from the Proposition 2½ limits taxes raised in lieu of sewer or water charges to pay debt service on bonds or notes issued by the municipality (or by an independent authority, commission or district) for water or sewer purposes, provided that the municipality’s sewer or water charges are reduced accordingly. In addition, Proposition 2 ½ limits the annual increase in the total assessments on cities and towns by any county, district, authority, the Commonwealth or any other governmental entity (except regional school districts, the MWRA and certain districts for which special legislation provides otherwise) to the sum of (a) 2½ percent of the prior year’s assessments and (b) “any increases in costs, charges or fees for services customarily provided locally or for services subscribed to at local option”. Regional water districts, regional sewerage districts and regional veterans districts may exceed these limitations under statutory procedures requiring a two-thirds vote of the district’s governing body and either approval of the local appropriating authorities (by two-thirds vote in districts with more than two members or by majority vote in two-member districts) or approval of the registered voters in a local election (in the case of two-member districts). Under Proposition 2 ½ any State law to take effect on or after January 1, 1981 imposing a direct service or cost obligation on a city or town will become effective only if accepted or voluntarily funded by the city or town or if State funding is provided. Similarly, State rules or regulations imposing additional costs on a city or town or laws granting or increasing local tax exemptions are to take effect only if adequate State appropriations are provided. These statutory provisions do not apply to costs resulting from judicial decisions.

B-5

Tax Collections and Abatements Payment Dates. The taxes for each fiscal year are due in two installments on November 1 (subject to deferral if tax bills are sent out late) and May 1, unless the city or town accepts a statute providing for quarterly tax payments. Under that statute, preliminary tax payments are due on August 1 and November 1 with payment of the actual tax bill (after credit is given for the preliminary payments) in installments on February 1 and May 1 if actual tax bills are mailed by December 31. Interest accrues on delinquent taxes at the rate of l4 percent per annum. Lien. Real property (land and buildings) is subject to a lien for the taxes assessed upon it, subject to any paramount federal lien and subject to bankruptcy and insolvency laws. (In addition, real property is subject to a lien for certain unpaid municipal charges or fees.) If the property has been transferred, an unenforced lien expires on the fourth December 31 after the end of the fiscal year to which the tax relates. If the property has not been transferred by the fourth December 31, an unenforced lien expires upon a later transfer of the property. Provision is made, however, for continuation of the lien where it could not be enforced because of a legal impediment. Personal Liability. The persons against whom real or personal property taxes are assessed are personally liable for the tax (subject to bankruptcy and insolvency laws.) In the case of real property, this personal liability is effectively extinguished by sale or taking of the property as described in “Taking and Sale” below. Abatements and Overlay. A city or town is authorized to increase each tax levy by an amount approved by the State Commissioner of Revenue as an "overlay" to provide for tax abatements. If abatements are granted in excess of the applicable overlay, the excess is required to be added to the next tax levy. Abatements are granted where exempt real or personal property has been assessed or where taxable real or personal property has been overvalued or disproportionately valued. The assessors may also abate uncollectible personal property taxes. They may abate real and personal property taxes on broad grounds (including inability to pay) with the approval of the State Commissioner of Revenue. But uncollected real property taxes are ordinarily not written off until they become municipal "tax titles" by purchase at the public sale or by taking, at which time the tax is written off in full by reserving the amount of the tax and charging surplus. Taxes Outstanding Taking and Sale. Massachusetts law permits a municipality either to sell by public sale (at which the municipality may become the purchaser) or to take real property for nonpayment of taxes. In either case the property owner can redeem the property by paying the unpaid taxes, with interest and other charges, but if the right of redemption is not exercised within six months (which may be extended an additional year in the case of certain installment payments), it can be foreclosed by petition to the Land Court. Upon foreclosure, a tax title purchased or taken by the municipality becomes a "tax possession" and may be held and disposed of in the same manner as other land held for municipal purposes. Sale of Tax Receivables. Cities and towns are authorized to sell delinquent property tax receivables by public sale or auction, either individually or in bulk. Motor Vehicle Excise An excise is imposed on the registration of motor vehicles (subject to exemptions) at the rate of $25 per $1,000 of valuation. The excise is collected by and for the benefit of the municipality in which the motor vehicle is customarily kept. Valuations are determined by a statutory formula based on manufacturers’ list price and year of manufacture. Bills not paid when due bear interest at 12 percent per annum. Provision is also made, after notice to the owner, for suspension of the owner’s operating license or registration by the registrar of motor vehicles. Surplus Revenue and Free Cash Under Massachusetts law an amount known as "free cash" is certified as of the beginning of each fiscal year by the State Bureau of Accounts and this, together with certain subsequent tax receipts, is used as the basis for subsequent appropriations from available funds, which are not required to be included in the annual tax levy. Subject to certain adjustments, free cash is surplus revenue less uncollected and overdue property taxes from prior years. The Town accountant may certify as available for appropriation an adjusted free cash figure by adding back those uncollected and overdue property taxes which are subsequently collected between July 1 and the following March 31 of any year.

B-6

Investments Investments of funds of cities and towns, except for trust funds, are generally restricted by Massachusetts General Laws Chapter 44, §55. That statute permits investments of available revenue funds and bond and note proceeds in term deposits and certificates of deposits of banks and trust companies, in obligations issued or unconditionally guaranteed by the federal government or an agency thereof with a maturity of not more than one year, in repurchase agreements with a maturity of not more than 90 days secured by federal or federal agency securities, in participation units in the Massachusetts Municipal Depository Trust (“MMDT”), or in shares in SEC-registered money market funds with the highest possible rating from at least one nationally recognized rating organization. MMDT is an investment pool created by the Commonwealth. The State Treasurer is the sole trustee, and the funds are managed under contract by an investment firm under the supervision of the State Treasurer’s office. According to the State Treasurer the Trust’s investment policy is designed to maintain an average weighted maturity of 90 days or less and is limited to high-quality, readily marketable fixed income instruments, including U.S. Government obligations and highly-rated corporate securities with maturities of one year or less. Trust funds, unless otherwise provided by the donor, may be invested in accordance with §54 of Chapter 44, which permits a broader range of investments than §55, including any bonds or notes that are legal investments for savings banks in the Commonwealth. The restrictions imposed by §54 and 55 do not apply to city and town retirement systems.

B-7

TOWN OF MANCHESTER-BY-THE-SEA, MASSACHUSETTS

Manchester-by-the-Sea is a residential community encompassing 7.7 square miles in Essex County on the northeastern Massachusetts coast. It is bordered on the west by Beverly and Wenham, on the northwest by Hamilton, on the north by Essex, on the east by Gloucester, and on the south by the Atlantic Ocean. Located 32 miles from Boston, the town’s chief access roads are state highways 128 and 127. Frequent train service is provided by the Massachusetts Bay Transportation Authority (MBTA). Employment and Payrolls

Industry 2014 2015 2016 2017 2018

Construction & Manufacturing 165 89 119 149 131 Trade, Transportation and Utilities 239 234 227 212 208 Financial Activities 73 77 80 82 88 Professional and Business Services 142 133 126 128 135 Education and Health Services 435 432 421 414 435 Leisure and Hospitality 451 465 463 481 505 Other Services 88 88 88 94 84 Total Employment 1,593 1,518 1,614 1,599 1,599

Number of Establishments 219 223 220 221 221 Average Weekly Wages 962$ 959$ 938$ 976$ 979$ Total Wages 84,481,607$ 80,493,004$ 78,521,664$ 81,180,416$ 84,085,720$

Calendar Year Average

______________ Source: Massachusetts Department of Education and Training. Data based upon place of employment, not place of

residence. Due to the reclassification the U.S. Department of Labor now uses the North American Industry Classification System (NAICS) as the basis for the assignment and tabulation of economic data by industry.

Labor Force, Employment and Unemployment Rate

The following table sets forth the Town's average labor force and unemployment rates, as well as the unemployment rates for the Commonwealth and the United States, for following calendar years.

UNEMPLOYMENT RATES

Town of Manchester-By-the-Sea Massachusetts United StatesYear Labor Force Unemployment Rate Unemployment Rate Unemployment Rate

2019 2,865 2.4 % 2.8 % 3.5 %2018 2,847 2.7 3.3 3.9 2017 2,740 2.9 3.7 4.4 2016 2,703 3.2 3.9 4.9 2015 2,652 3.8 5.0 5.3

______________________ SOURCE: Mass. Department of Employment and Training, Federal Reserve Bank of Boston and U.S. Bureau of Labor

Statistics. Data based upon place of residence, not place of employment.

B-8

Population

Year Number Number Number

2010 5,136 (1.80) % 743,159 2.70 % 6,547,629 3.10 %2000 5,228 (1.10) 723,419 8.00 6,349,097 5.501990 5,286 (2.50) 670,080 5.80 6,016,425 4.901980 5,424 5.30 633,632 (0.70) 5,737,037 0.801970 5,151 637,887 5,689,170

% ChangeMassachusetts

% ChangeManchester-By-the-Sea

% ChangeEssex County

______________________ Source: U.S. Department of Commerce for actuals, Massachusetts Institute for Social & Economic Research for projections. Population Density


2010 5,136 654.7 743,159 1,492.1 6,547,629 835.4 2000 5,228 666.4 723,419 1,452.4 6,349,097 810.0 1990 5,286 673.8 670,080 1,345.4 6,016,425 767.6 1980 5,424 691.4 633,632 1,272.2 5,737,037 732.0 1970 5,151 656.6 637,887 1,280.7 5,689,170 725.8

DensityMassachusetts

Density (1)Manchester-By-the-Sea

DensityEssex County

______________________ Source: U.S. Department of Commerce. (1) Based on 7.8 square miles. Population Composition 2000

AgeNumber Number Number

Under 5 Years 225 4.9 % 48,254 6.7 % 397,268 6.3 %5 Years to 19 Years 1,075 20.6 151,038 20.8 1,277,845 20.1 20 Years to 64 Years 3,039 58.1 423,821 58.6 3,813,822 60.1 65 Years and Over 859 16.4 100,306 13.9 860,162 13.5 Total 5,198 100.0 % 723,419 100.0 % 6,349,097 100.0 %

Median Age 43.7 37.5 36.5 Median Age (1990) 39.4 34.5 33.6

PercentMassachusetts

PercentManchester-By-the-Sea

PercentEssex County

______________________ Source: U.S. Department of Commerce.

B-9

Income Levels

Year Amount Amount Amount

Per Capita-Personal1999 47,910$ 62.9 % 26,358$ 49.9 % 25,952$ 50.7 %1989 29,417 144.5 17,586 129.2 17,224 131.0 1979 12,032 N.A. 7,673 N.A. 7,457 N.A.1969 N.A. N.A. N.A. N.A. N.A. N.A.1959 N.A. N.A. N.A. N.A. N.A. N.A.

Median Family Income (1999) 93,609$ 63,746$ 61,664$ Median Household Income (1999) 73,467$ 51,576$ 50,502$ % Below Poverty Level (2000) 4.8% 8.9% 9.3%

Previous Census

Massachusetts

Previous Census

Manchester-By-the-Sea

Previous Census

Essex County% Change from % Change from % Change from

______________________ Source: U.S. Department of Commerce. Family Income Distribution 1999

Income for FamiliesFamilies Families Families

Less than $10,000 42 2.9 % 8,075 4.3 % 71,198 4.5 %$10,000 - $24,999 89 6.1 20,022 10.8 175,120 11.0 $25,000 - $49,999 159 10.9 41,277 22.2 368,418 23.2 $50,000 - $74,999 273 18.7 40,776 21.9 359,202 22.6 $75,000 - $99,999 218 14.9 30,224 16.2 251,231 15.8 $100,000 - $149,999 288 19.7 27,479 14.8 222,234 14.0 $150,000 or more 390 26.8 18,190 9.8 140,134 8.9 Total 1,459 100.0 % 186,043 100.0 % 1,587,537 100.0 %



PercentEssex County

______________________ Source: U.S. Department of Commerce. Household Income Distribution 1999

Income for HouseholdsHouseholds Households Households




PercentEssex County


B-10

Value Distribution of Specified Owner-Occupied housing Units 2000

UnitsNumber Number Number

Less than $100,000 10 0.7 % 6,159 4.4 % 113,263 9.5 %$100,000 - $149,999 - - 22,028 15.7 277,571 23.4 $150,000 - $199,999 35 2.6 32,305 23.1 273,542 23.0 $200,000 - $299,999 168 12.6 42,625 30.5 286,599 24.1 $300,000 - $499,999 599 44.8 28,043 20.0 170,536 14.4 $500,000 or more 524 39.3 8,771 6.3 66,360 5.6 Total 1,336 100.0 % 139,931 100.0 % 1,187,871 100.0 %



PercentEssex County

______________________ Source: U.S. Department of Commerce. Age Distribution Housing Units 2000

Year BuiltNumber Number Number

1990 to March 2000 112 4.8 % 21,706 7.6 % 218,407 8.3 %1980 to 1989 133 5.7 31,301 10.9 292,701 11.2 1940 to 1979 924 39.7 124,424 43.3 1,205,183 46.0 1939 or Earlier 1,158 49.8 109,713 38.2 905,698 34.5 Total 2,327 100.0 % 287,144 100.0 % 2,621,989 100.0 %



PercentEssex County

______________________ Source: U.S. Department of Commerce. Housing Unit Inventory 2000

Units in Structure Number Number Number1, Detached 1,634 70.2 % 149,666 52.1 % 1,374,479 52.4 %1, Attached 22 0.9 13,755 4.8 104,129 4.0 2 to 4 446 19.2 70,039 24.4 603,917 23.0 5 to 9 180 7.8 15,840 5.5 156,135 6.0 10 to 19 45 1.9 11,735 4.1 113,697 4.3 20 or More - - 24,127 8.4 244,892 9.4 Mobil Home, Trailer, Other - - 1,982 0.7 24,740 0.9 Total 2,327 100.0 % 287,144 100.0 % 2,621,989 100.0 %



PercentEssex County

______________________ Source: U.S. Department of Commerce. Educational Attainment 2000

Years of School Completed Number Number NumberLess than 9th Grade 34 0.9 % 28,862 5.9 % 247,556 5.8 %9th to 12th Grade, No Diploma 115 3.1 46,105 9.5 403,537 9.4 High School Graduate 680 18.4 136,744 28.1 1,165,489 27.3 Some College, No Degree 498 13.4 86,102 17.7 730,135 17.1 Associate's Degree 303 8.2 37,065 7.6 308,263 7.2 Bachelor's Degree 1,257 33.9 95,184 19.5 834,554 19.5 Graduate or Professional Degree 817 22.1 57,041 11.7 583,741 13.7 Total 3,704 100.0 % 487,103 100.0 % 4,273,275 100.0 %

High School Graduate or Higher 3,555 96.0 412,136 84.6 3,622,182 84.8Bachelor's Degree or Higher 2,074 56.0 152,225 31.3 1,418,295 33.2



PercentEssex County

B-11

PROPERTY TAXATION The following table shows the details of the calculation of the tax levies for the most recent fiscal years:

Fiscal Fiscal Fiscal Fiscal Fiscal2016 2017 2018 2019 2020

Gross Amount to be RaisedTotal Appropriations(1) 31,066,837$ 32,148,450$ 32,674,807$ 33,355,310$ 37,904,642$ Other Local Expenditures 181,309 96,567 34,209 364,602 353,049 State and County Charges 158,300 163,226 161,280 166,752 171,948 Overlay Reserve 200,408 224,747 199,489 197,371 210,144

Total Gross Amount to be Raised 31,606,854 32,632,990 33,069,785 34,084,035 38,639,783 Less Estimated Receipts and Other Revenue

Estimated Receipts from State(2) 220,150 228,248 237,524 258,046 267,189 Estimated Local Receipts 5,419,096 4,969,233 4,912,278 5,002,081 6,636,397 Available Funds Appropriated(3)Free Cash 671,750 726,845 671,814 808,011 1,885,811 Other Available Funds 436,451 811,887 809,215 575,768 495,242 Free Cash & Other Revenue Used to Reduce the Tax Rate - - - - -

Total Estimated Receipts and Other Revenue 6,747,447 6,736,213 6,630,831 6,643,906 9,284,639 Tax Levy 24,859,407$ 25,896,777$ 26,438,954$ 27,440,129$ 29,355,144$

______________________ (1) Includes annual appropriations from taxation voted subsequent to adoption of the annual budget but prior to setting the

tax rate. (2) Estimated by the State Department of Revenue and required by law to be used in setting of the tax rate. Actual state

aid payments may vary upward or downward from said estimates, and the State may withhold (generally monthly) payments pending receipt of State and County assessments.

(3) Transfers from available funds, including “Free Cash”, generally made as an offset to a particular appropriation item.

B-12

Classification of Property The following table shows the breakdown of assessed valuations for fiscal years 2018, 2019 and 2020 by property type.

Property Type Amount % of Total Amount % of Total Amount % of Total

Residential 2,238,369,780$ 93.38 % 2,279,712,840$ 93.30 % 2,343,011,245$ 93.38 %Commercial 97,448,467 4.07 101,712,296 4.16 103,227,703 4.11 Industrial 7,046,900 0.29 7,046,900 0.29 7,027,400 0.28 Personal 54,138,870 2.26 54,994,520 2.25 55,720,290 2.22

Total 2,397,004,017$ 100.00 % 2,443,466,556$ 100.00 % 2,508,986,638$ 100.00 %

2018 20202019

______________________ (1) Revaluation year. Tax Rates The following shows the actual tax rates per $1,000 of assessed valuation for the following fiscal years:

Fiscal Year Tax Rate

2020 11.70$ 2019 11.23 2018 11.03 2017 11.00 2016 11.07

Largest Taxpayers The following is a list of the largest taxpayers for fiscal 2020, all of which are current in their tax payments:

Total Assessed Percent

Nature of Valuation for of TotalTaxpayers Business 2020 Tax Levy

Mass. Electric Co. Utility 27,454,710$ 321,220$ 1.09 %Bolena, LLC Residence/Commercial 23,082,100 270,061 0.92 Essex Country Club Golf Course 22,910,630 268,054 0.91 Sea Rock Estates (Colburn) Residence/apts. 19,714,750 230,663 0.79 Algonquin Gas Gas Line 18,614,900 217,794 0.74 Von Metzsch, Ernst Residence 18,479,160 216,206 0.74 Moore, Stuart (Eaglis) Residence 17,514,470 204,919 0.70 The Eleanor Trust Residence 14,276,600 167,036 0.57 Melden, Kurt A. Residence 13,053,100 152,721 0.52 Warren/Paumier Residence 12,116,080 141,758 0.48

187,216,500$ 2,190,433$ 5.45 %

B-13

Tax Collections The following shows the total tax levy, the reserve for abatements, the net levy and the amounts collected during each fiscal year and as of a more recent date for the most recent fiscal years:

2019 2018 2017 2016 2015

Total Tax Levy $27,440,129 $26,438,954 $25,896,777 $24,859,407 $23,613,808Overlay Reserve for Abatements 197,371 199,489 224,747 200,408 214,272Net Tax Levy (1) $27,242,758 $26,239,465 $25,672,030 $24,658,999 $23,399,536

Amount Collected Through June 30, 2019 (2)(3) $27,137,438 $26,307,707 $25,557,010 $24,579,952 $23,516,701Percent of Net Tax Levy 99.6% 100.3% 99.6% 99.7% 100.5%

For Fiscal Year

______________________ (1) Net after deduction of overlay reserve for abatements. (2) Actual collections of levy less refunds and amounts refundable but including proceeds of tax titles and tax possessions attributed to such levy but not

including abatements or other credits. (3) Collections for fiscal 2020 were comparable to previous fiscal years. Unused Levy Capacity The following shows the calculation of levy limits for the most recent fiscal years:

2020 2019 2018 2017 2016

Primary Levy Limit (1) 62,724,666$ 61,086,664$ 59,925,100$ 58,856,311$ 56,141,390$

Prior Fiscal Year Levy Limit 24,583,099 23,714,112 22,866,037 21,962,468 20,645,545 Amended Prior Year New Growth - - 290 - - 2.5% Levy Growth 614,577 592,853 571,658 549,062 516,139 New Growth (2) 166,271 276,134 276,127 354,507 307,992 Overrides - - - - 492,792 Growth Levy Limit 25,363,947 24,583,099 23,714,112 22,866,037 21,962,468 Debt Exclusions 3,974,240 2,501,953 2,429,049 3,053,875 2,899,600 Capital Expenditure Exclusions 565,000 400,000 300,000 - - Maximum Tax Levy Limit 29,903,187 27,485,052 26,443,161 25,919,912 24,862,068 Tax Levy 29,355,144 27,440,129 26,438,954 25,896,777 24,859,407 Unused Levy Capacity (3) 548,043$ 44,923$ 4,207$ 23,135$ 2,661$ Unused Primary Levy Capacity (4) 37,360,719$ 36,503,565$ 36,210,988$ 35,990,274$ 34,178,922$

Fiscal Year

______________________ (1) 2.5% of assessed valuation. (2) Allowed addition for new valuations certified by the Department of Revenue. (3) Maximum Tax Levy Limit less Tax Levy. (4) Primary Levy Limit less Growth Levy Limit.

B-14

BUDGET COMPARISON

2021 2020 2019 2018 2017

General Government 4,647,168$ 4,623,749$ 4,552,472$ 4,341,043$ 4,258,542$ Public Safety 3,540,942 3,493,175 3,410,562 3,311,894 3,184,083 Human Services 352,213 338,965 338,735 298,475 293,386 Department of Public Works(1) 2,142,576 2,069,921 1,988,027 1,938,517 1,689,006 Education (2) 18,216,912 17,815,856 15,776,267 15,312,100 14,872,181 Culture and Informational Services 501,232 488,810 476,920 465,764 449,917 Recreation (1)(3) 360,512 355,600 347,685 334,731 447,142 Other Environmental 83,903 81,532 72,870 72,132 70,084 Debt Service 1,174,802 1,234,763 1,574,229 1,648,888 1,968,816 Enterprise Funds (4) 1,612,256 1,589,425 1,584,306 1,543,316 1,458,949 Total 32,632,516$ 32,091,796$ 30,122,073$ 29,266,860$ 28,692,106$

______________________ (1) Buildings and grounds department moved from Department of Public Works to Recreation in FY2017, then moved

back to Department of Public Works in FY2018. (2) Annual Town Meeting of April 2015 authorized an override of Proposition 2 ½ for $492,792 for the Manchester-Essex

Regional School District. (3) The user fee and nonresident parking fee system at singing beach offset the operating costs of maintaining the beach

operation. (4) Water and sewer funds. Corona Virus (COVID-19) Disclosure The Town put spending restrictions in place quickly at the onset of the pandemic, resulting in a FY20 operating budget surplus at year-end. As a community heavily reliant on residential real estate revenue, any reductions in state are not anticipated to harshly impact operations. A high collection rate and low unemployment percentage, combined with a reduced FY21 budget passed at the annual town meeting, forecasts a stable economic environment for the foreseeable future.

Financial Statements Set forth on the following pages are the Governmental Funds Balance Sheet for the fiscal year ended June 30, 2019, June 30, 2018 and June 30, 2017 and Statements of Revenues and Expenditures and Changes in General Fund Balances for the fiscal years ending June 30, 2019, June 30, 2018, June 30, 2017, June 30, 2016 and June 30, 2015. All such financial statements have been compiled or extracted from the Town’s annual audited financial statements.

B-15

Town of Manchester-by-The-Sea, MassachusettsGovernmental Funds

Balance Sheet June 30, 2019 (1)

Nonmajor TotalCommunity Governmental Governmental

General Preservation Funds FundsASSETS Cash and cash equivalents 9,013,605$ 457,374$ 2,381,301$ 11,852,280$ Investments 1,295,065 438,581 513,153 2,246,799 Receivables, net of uncollectibles: - Real estate and personal property taxes 171,886 2,164 - 174,050 Tax liens 329,505 - - 329,505 Motor vehicle and other excise taxes 98,030 - - 98,030 Departmental and other 121,232 - - 121,232 Intergovernmental - 40,495 90,191 130,686 Special Assessments 91,505 - - 91,505 Tax foreclosures 11,792 - - 11,792 TOTAL ASSETS 11,132,620$ 938,614$ 2,984,645$ 15,055,879$

LIABILITIES Warrants payable 150,023$ 9,126$ 35,387$ 194,536$ Accrued payroll 277,577 - - 277,577 Other liabilities 38,153 - - 38,153 TOTAL LIABILITIES 465,753 9,126 35,387 510,266

DEFERRED INFLOWS OF RESOURCES Unavailable revenues 787,820 2,164 90,191 880,175

FUND BALANCES: Nonspendable - - 405,278 405,278 Restricted - 927,324 2,453,789 3,381,113 Committed 2,350,326 - - 2,350,326 Assigned 145,225 - - 145,225 Unassigned 7,383,496 - - 7,383,496 TOTAL FUND BALANCES 9,879,047 927,324 2,859,067 13,665,438 TOTAL LIABILITIES, DEFERRED INFLOWS 11,132,620$ 938,614$ 2,984,645$ 15,055,879$

OF RESOURCES AND FUND BALANCES_________________(1) Extracted from the Town's audited financial statements.

B-16




General Preservation Funds FundsASSETS Cash and cash equivalents 7,774,099$ 359,404$ 1,872,187$ 10,005,690$ Investments 1,196,218 406,009 476,385 2,078,612 Receivables, net of uncollectibles: Real estate and personal property taxes 133,432 1,662 - 135,094 Real estate tax deferrals 299,268 - - 299,268 Tax liens 77,404 - - 77,404 Motor vehicle and other excise taxes 143,299 - - 143,299 Departmental and other - 39,606 10 39,616 Intergovernmental - - 43,530 43,530 Tax foreclosures 11,792 - - 11,792 Due from other funds 43,540 - - 43,540 TOTAL ASSETS 9,679,052$ 806,681$ 2,392,112$ 12,877,845$

LIABILITIES Warrants payable 195,807$ 3,160$ 45,675$ 244,642$ Tax refunds payable 286,036 - - 286,036 Payroll witholdings 80,010 - - 80,010 Other liabilities - - 43,540 43,540 Due to other funds 33,573 - - 33,573 TOTAL LIABILITIES 595,426 3,160 89,215 687,801

DEFERRED INFLOWS OF RESOURCES Unavailable revenues 654,978 1,662 - 656,640

FUND BALANCES: Nonspendable - - 383,078 383,078 Restricted - 801,859 1,919,819 2,721,678 Committed 2,114,792 - - 2,114,792 Assigned 136,144 - - 136,144 Unassigned 6,177,712 - - 6,177,712 TOTAL FUND BALANCES 8,428,648 801,859 2,302,897 11,533,404 TOTAL LIABILITIES, DEFERRED INFLOWS 9,679,052$ 806,681$ 2,392,112$ 12,877,845$


B-17



Nonmajor TotalCommunity Highway Governmental Governmental

General Preservation Improvements Funds FundsASSETS Cash and cash equivalents 8,120,690$ 1,131,824$ -$ 2,484,193$ 11,736,707$ Receivables, net of uncollectibles: Real estate and personal property taxes 117,865 1,461 - - 119,326 Real estate tax deferrals 57,149 - - - 57,149 Tax liens 186,100 - - - 186,100 Motor vehicle and other excise taxes 88,800 - - - 88,800 Departmental and other 101,191 - - - 101,191 Intergovernmental - 51,800 606,160 - 657,960 Tax foreclosures 11,792 - - - 11,792 Due from other funds 66,888 - - - 66,888 TOTAL ASSETS 8,750,475$ 1,185,085$ 606,160$ 2,484,193$ 13,025,913$

LIABILITIES Warrants payable 443,842$ 44,924$ -$ 90,618$ 579,384$ Tax refunds payable 80,010 - - - 80,010 Payroll witholdings 25,543 - - - 25,543 Other liabilities 18,583 - - - 18,583 Due to other funds - - 66,888 - 66,888 TOTAL LIABILITIES 567,978 44,924 66,888 90,618 770,408

DEFERRED INFLOWS OF RESOURCES Unavailable revenues 551,619 1,461 539,272 - 1,092,352

FUND BALANCES: Nonspendable - - - 373,427 373,427 Restricted - 1,138,700 - 2,020,148 3,158,848 Committed 1,445,799 - - - 1,445,799 Assigned 435,759 - - - 435,759 Unassigned 5,749,320 - - - 5,749,320 TOTAL FUND BALANCES 7,630,878 1,138,700 - 2,393,575 11,163,153 TOTAL LIABILITIES, DEFERRED INFLOWS 8,750,475$ 1,185,085$ 606,160$ 2,484,193$ 13,025,913$


B-18

TOWN OF MANCHESTER-BY-THE-SEA, MASSACHUSETTSSTATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES

GOVERNMENTAL FUNDS AS OF JUNE 30, 2019 (1)


General Preservation Funds FundsREVENUES:

Real estate and personal property taxes, net of tax refunds 27,409,147$ -$ -$ 27,409,147$ Motor vehicle and other excise taxes 1,110,761 - 15,816 1,126,577 Charges for services 553,315 - - 553,315 Penalties and interest on taxes 73,883 567 - 74,450 Payments in lieu of taxes 4,753 - - 4,753 Intergovernmental - state aid 246,325 - - 246,325 Intergovernmental - other - - 840,903 840,903 Departmental and other 1,137,133 - 1,275,413 2,412,546 Community preservation taxes - 365,149 - 365,149 Community preservation state match - 67,954 - 67,954 Contributions and donations - - 271,479 271,479 Investment Income 271,218 35,631 40,995 347,844

TOTAL REVENUES 30,806,535$ 469,301$ 2,444,606$ 33,720,442$

EXPENDITURES:Current:

General government 1,451,488$ -$ 137,798$ 1,589,286$ Public safety 3,294,568 - 881,650 4,176,218 Education 15,774,922 - - 15,774,922 Public works 3,420,044 - 461,635 3,881,679 Environmental 73,722 - - 73,722 Health and human services 310,886 - 27,221 338,107 Library and recreation 892,764 - 360,132 1,252,896 Community preservation - 343,836 - 343,836 Pension benefits 1,062,465 - - 1,062,465 Property and liability insurance 98,628 - - 98,628 Employee benefits 1,610,500 - - 1,610,500

State and county charges 166,752 - - 166,752 Debt service:

Principal 805,015 - - 805,015 Interest 273,534 - - 273,534


Excess (deficiency) of Revenues Over expenditures 1,571,247 125,465 576,170 2,272,882

Other Financing Sources (Uses):Transfers in 55,000 - 384,877 439,877 Transfers out (175,848) - (404,877) (580,725) Total Other Financing Sources (Uses) (120,848) - (20,000) (140,848)

Net change in fund balance 1,450,399 125,465 556,170 2,132,034

FUND BALANCE AT BEGINNING OF YEAR 8,428,648 801,859 2,302,897 11,533,404 FUND BALANCES AT END OF YEAR 9,879,047$ 927,324$ 2,859,067$ 13,665,438$

_______________(1) Extracted from the Town's audited financial statements.

B-19





Real estate and personal property taxes, net of tax refunds 26,330,103$ -$ -$ 26,330,103$ Motor vehicle and other excise taxes 1,163,167 - 16,625 1,179,792 Charges for services 539,479 - - 539,479 Penalties and interest on taxes 70,013 509 - 70,522 Intergovernmental - State aid 231,555 - - 231,555 Intergovernmental - Other - - 1,770,849 1,770,849 Departmental and other 1,008,397 - 1,032,525 2,040,922 Community preservation taxes - 351,621 - 351,621 Community preservation state match - 47,030 - 47,030 Contributions and donations - - 144,230 144,230 Investment Income 38,548 (13,846) (12,381) 12,321

TOTAL REVENUES 29,381,262$ 385,314$ 2,951,848$ 32,718,424$


General government 1,318,397$ -$ 75,003$ 1,393,400$ Public safety 3,619,730 - 1,031,698 4,651,428 Education 15,610,457 - - 15,610,457 Public works 2,781,332 - 1,436,813 4,218,145 Environmental 73,816 - - 73,816 Health and human services 294,486 - 129,848 424,334 Library and recreation 787,212 - 324,164 1,111,376 Community preservation - 722,155 - 722,155 Pension benefits 1,049,336 - - 1,049,336 Property and liability insurance 118,271 - - 118,271 Employee benefits 1,797,973 - - 1,797,973

State and county charges 161,280 - - 161,280 Debt service: -



Excess (deficiency) of Revenues Over expenditures 896,881 (336,841) (45,678) 514,362

Other Financing Sources (Uses):Issuance of bonds 2,848,500 - - 2,848,500 Premium from issuance of bonds 253,519 - - 253,519 Transfers in 487,162 - 151,969 639,131 Transfers out (586,273) - (196,969) (783,242) Capital Transfer (3,102,019) - - (3,102,019) Total Other Financing Sources (Uses) (99,111) - (45,000) (144,111)

Net change in fund balance 797,770 (336,841) (90,678) 370,251

FUND BALANCE AT BEGINNING OF YEAR 7,630,878 1,138,700 2,393,575 11,163,153 FUND BALANCES AT END OF YEAR 8,428,648$ 801,859$ 2,302,897$ 11,533,404$


B-20





Real estate and personal property taxes, net of tax refunds 26,002,305$ -$ -$ 26,002,305$ Motor vehicle and other excise taxes 1,133,682 - 17,604 1,151,286 Community preservation taxes - 343,627 - 343,627 Charges for services 468,257 - - 468,257 Penalties and interest on taxes 65,149 495 - 65,644 Intergovernmental 227,477 58,264 373,052 658,793 Departmental and other 1,168,253 - 955,488 2,123,741 Contributions - - 120,306 120,306 Investment Income 49,851 6,375 9,186 65,412

TOTAL REVENUES 29,114,974$ 408,761$ 1,475,636$ 30,999,371$


General government 1,304,033$ -$ 183,959$ 1,487,992$ Public safety 3,303,192 - 716,770 4,019,962 Education 14,866,246 - - 14,866,246 Public works 2,450,138 - 336,307 2,786,445 Environmental 67,269 - - 67,269 Human services 274,291 - 25,577 299,868 Community preservation - 484,895 - 484,895 Library and recreation 905,233 - 594,295 1,499,528 Pension benefits 998,386 - - 998,386 Property and liability insurance 114,797 - - 114,797 Employee benefits 1,757,905 - - 1,757,905

State and county charges 158,906 - - 158,906 Debt service: -



Excess (deficiency) of Revenues Over expenditures 1,796,868 (76,134) (381,272) 1,339,462

Other Financing Sources (Uses):Issuance of debt - - 1,440,000 1,440,000 Transfers in 328,684 - 314,015 642,699 Transfers out (660,738) - (289,015) (949,753)

- - (1,440,000) (1,440,000) Total Other Financing Sources (Uses) (332,054) - 25,000 (307,054)

Net change in fund balance 1,464,814 (76,134) (356,272) 1,032,408

FUND BALANCE AT BEGINNING OF YEAR 6,166,064 1,214,834 2,749,847 10,130,745 FUND BALANCES AT END OF YEAR 7,630,878$ 1,138,700$ 2,393,575$ 11,163,153$


B-21



Nonmajor TotalCommunity Highway Governmental Governmental

General Preservation Improvements Funds FundsREVENUES:

Real estate and personal property taxes, net of tax refunds 24,766,875$ -$ -$ -$ 24,766,875$ Motor vehicle and other excise taxes 1,057,849 - - 17,564 1,075,413 Community preservation taxes - 332,909 - - 332,909 Charges for services 438,929 - - - 438,929 Penalties and interest on taxes 92,451 1,008 - - 93,459 Intergovernmental 221,505 190,095 206,006 500,587 1,118,193 Departmental and other 1,023,875 - - 1,084,349 2,108,224 Contributions - - - 178,454 178,454 Investment Income 103,896 47,327 - 36,416 187,639

TOTAL REVENUES 27,705,380$ 571,339$ 206,006$ 1,817,370$ 30,300,095$


General government 1,273,403$ -$ -$ 411,724$ 1,685,127$ Public safety 3,123,800 - - 782,206 3,906,006 Education 14,496,087 - - - 14,496,087 Public works 1,838,768 - 206,006 165,656 2,210,430 Enviromental 62,998 - - - 62,998 Human services 266,299 - - 19,086 285,385 Community preservation - 643,448 - - 643,448 Library and recreation 796,935 - - 415,805 1,212,740 Pension benefits 945,454 - - - 945,454 Property and liability insurance 105,425 - - - 105,425 Employee benefits 1,823,119 - - - 1,823,119

State and county charges 158,300 - - - 158,300 Debt service: -

Principal 1,082,100 - - - 1,082,100 Interest 200,739 - - - 200,739

TOTAL EXPENDITURES 26,173,427 643,448 206,006 1,794,477 28,817,358

Excess (deficiency) of Revenues Over expenditures 1,531,953 (72,109) - 22,893 1,482,737

Other Financing Sources (Uses):Transfers in 257,348 - - 396,451 653,799 Transfers out (491,952) - - (349,563) (841,515) Total Other Financing Sources (Uses) (234,604) - - 46,888 (187,716)

Net change in fund balance 1,297,349 (72,109) - 69,781 1,295,021

FUND BALANCE AT BEGINNING OF YEAR 4,868,715 1,286,943 - 2,680,066 8,835,724 FUND BALANCES AT END OF YEAR 6,166,064$ 1,214,834$ -$ 2,749,847$ 10,130,745$


B-22

GeneralCommunity Preservation

Pine Street Acquisition

Nonmajor Governmental

Funds

Total Governmental

FundsREVENUES

Real estate and persoal property taxes, net of tax refunds 23,427,308$ -$ -$ -$ 23,427,308$ Motor vehicle and other excise taxes 1,033,937 - - 18,070 1,052,007 Community preservation taxes - 627,379 - - 627,379 Charges for services 462,978 - - - 462,978 Penalties and interest on taxes 69,739 1,569 - - 71,308 Intergovernmental 792,830 137,821 - 175,009 1,105,660 Departmental and other 882,313 - - 1,063,819 1,946,132 Contributions - - - 160,050 160,050 Investment income 25,916 6,023 - 4,391 36,330 TOTAL REVENUES 26,695,021$ 772,792$ -$ 1,421,339$ 28,889,152$

EXPENDITURESCurrent: General government 1,256,540$ -$ 1,218,407$ 77,369$ 2,552,316$ Public safety 3,096,971 - - 607,220 3,704,191 Education 13,442,173 - - - 13,442,173 Public works 2,676,275 - - 387,213 3,063,488 Environmental 62,107 - - 62,107 Human services 245,394 - - 25,717 271,111 Community Preservation - 223,376 - - 223,376 Culture and recreation 733,262 - - 387,648 1,120,910 Pension benefits 1,396,859 - - - 1,396,859 Property and liability insurance 120,508 - - - 120,508 Employee benefits 1,758,738 - - - 1,758,738 State and county charges 156,371 - - - 156,371 Debt Service: - - - - Principal 1,142,800 - - - 1,142,800 Interest 228,250 - - - 228,250 TOTAL EXPENDITURES 26,316,248 223,376 1,218,407 1,485,167 29,243,198

EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES 378,773 549,416 (1,218,407) (63,828) (354,046)

OTHER FINANCING SOURCES (USES) Proceeds from bonds and notes - - - - - Premium from issuance of bonds - - - - - Transfers in 345,550 - - 455,916 801,466 Transfers out (481,355) - - (494,849) (976,204) TOTAL OTHER FINANCING SOURCES (USES) (135,805) - - (38,933) (174,738)

NET CHANGE IN FUND BALANCES 242,968 549,416 (1,218,407) (102,761) (528,784) FUND BALANCES - BEGINNING OF YEAR 4,625,747 737,527 1,703,935 2,297,299 9,364,508 FUND BALANCES - END OF YEAR 4,868,715$ 1,286,943$ 485,528$ 2,194,538$ 8,835,724$

(1) Extracted from the audited Financial Statements of the Town.

TOWN OF MANCHESTER-BY-THE-SEA, MASSACHUSETTSSTATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES

AS OF JUNE 30, 2015 (1)

B-23

Unassigned Fund Balance and Free Cash

Unassigned FreeFund Balance Cash

Year June 30 (1) July 1

2019 7,383,496$ 3,886,033$ 2018 6,177,712 3,864,370 2017 5,749,320 3,658,047 2016 4,732,730 2,524,774 2015 4,182,478 2,683,364

______________________ (1) Source: Audited Financial Statements.

Direct Debt Summary

As of June 30, 2020 (1)

Long-Term Indebtedness

Within General Debt LimitSewer 2,206,815$ General 1,634,000

3,840,815$ Outside General Debt Limit

Water 4,120,428 General 132,000 Land Clean-Up 1,200,000

5,452,428

Total Indebtedness 9,293,243$

______________________ (1) Principal amount only. Excludes lease and installment purchase obligations, overlapping debt, unfunded pension liability and other

unfunded post-employment benefits liability. Bonded Debt vs. Population, Valuations and Income

2020 2019 2018 2017 2016

Amount (1) $9,293,243 $10,195,920 $11,271,307 $6,949,450 $6,773,627Per Capita (2) $1,809.43 $1,985.19 $2,194.57 $1,353 $1,319Percent of Assessed Valuation (3) 0.39% 0.42% 0.47% 0.30% 0.30%Percent of Equalized Valuation (4) 0.37% 0.40% 0.47% 0.29% 0.30%Per Capita as a percent of Personal Income per Capita (2) 3.78% 4.14% 4.58% 2.82% 2.75%

As of June 30,

______________________ (1) Excludes lease and installment purchase obligations, overlapping debt, unfunded pension liability and other unfunded

post-employment benefits liability. (2) Source: U.S. Department of Commerce, Bureau of the Census - Latest applicable actuals or estimates. (3) Source: Board of Assessors - Assessed valuation as of the prior January 1. (4) Source: Massachusetts Department of Revenue - Equalized valuation in effect for that fiscal year (equalized valuations

are established for January 1 of each even-numbered year).

B-24

Annual Debt Service (1)

Outstanding as of June 30, 2020 (1)(2)

Fiscal Year Principal Interest Debt Service

Cumulative % Principal

Retired

2021 850,018$ 322,746$ 1,172,764$ 9.1 %2022 822,409 295,646 1,118,055 18.02023 764,861 268,998 1,033,859 26.22024 651,270 242,200 893,470 33.22025 672,710 217,000 889,710 40.52026 649,182 190,546 839,728 47.52027 645,686 164,156 809,842 54.42028 662,222 137,573 799,795 61.52029 678,792 110,210 789,002 68.82030 700,395 88,459 788,854 76.42031 712,034 65,526 777,560 84.02032 613,708 42,236 655,944 90.62033 530,419 23,024 553,443 96.32034 82,167 6,791 88,958 97.22035 83,952 5,147 89,099 98.12036 85,777 3,468 89,245 99.12037 87,641 1,753 89,394 100.0

9,293,243$ 2,185,480$ 11,478,723$

______________________ (1) Excludes short term debt, lease and installment purchase obligations, overlapping and underlying debt, unfunded

pension liability and other unfunded post-employment benefits liability. (2) Principal totaling $9,179,243 and interest totaling $2,159,027 has been voted exempt from the provisions of Proposition

2 ½, subject to the limitations imposed by Chapter 44, Section 20 of the General Laws.

LITIGATION

At present there is one case pending in various courts throughout the Commonwealth where the Town of Manchester-by-the-Sea is a defendant. In the opinion of the Town, none of the pending litigation is likely to result, either individually or in the aggregate, in final judgment against the Town that would materially affect its financial position.

B-25

TOWN OF ESSEX, MASSACHUSETTS The Town of Essex is located in Essex County, approximately 30 miles northeast of Boston on Cape Ann. It is bordered on the west by the Towns of Ipswich and Hamilton, on the south by the Town of Manchester-by-the-Sea, on the east by the City of Gloucester, and on the north by the Atlantic Ocean. Essex occupies a land area of 14.16 square miles, and according to the 2010 Federal Census, has a population of 3,504. Incorporated as a town in 1819, Essex is governed by an open town meeting form of government and a three member Board of Selectmen. Employment and Payrolls

Industry 2014 2015 2016 2017 2018

Construction 113 120 125 121 117 Manufacturing 145 150 148 147 148 Trade, Transportation and Utilities 132 119 144 146 152 Financial Activities 28 25 23 27 24 Professional and Business Services 215 218 204 197 187 Leisure and Hospitality 444 440 519 157 428 Other Services 63 72 76 526 81 Total Employment 1,140 1,144 1,239 1,321 1,137

Number of Establishments 179 180 192 183 178 Average Weekly Wages 852$ 895$ 915$ 945$ 981$ Total Wages 62,223,456$ 65,894,999$ 71,020,957$ 71,422,358$ 74,130,924$

Calendar Year Average

______________________ Source: Massachusetts Department of Education and Training. Data based upon place of employment, not place of

residence. Due to the reclassification the U.S. Department of Labor now uses the North American Industry Classification System (NAICS) as the basis for the assignment and tabulation of economic data by industry.

Labor Force, Employment and Unemployment Rate The following table sets forth the Town's average labor force and unemployment rates, as well as the unemployment rates for the Commonwealth and the United States, for following calendar years.

UNEMPLOYMENT RATES

Town of Essex Massachusetts United StatesYear Labor Force Unemployment Rate Unemployment Rate Unemployment Rate

2019 2,334 2.4 % 2.8 % 3.5 %2018 2,303 2.8 3.1 3.9 2017 2,193 2.9 3.7 4.4 2016 2,167 3.3 3.9 4.9 2015 2,144 4.4 5.0 5.3

______________________ SOURCE: Mass. Department of Employment and Training, Federal Reserve Bank of Boston and U.S. Bureau of Labor Statistics. Data based upon place of residence, not place of employment.

B-26

Population


2010 3,504 7.30 % 743,159 2.70 % 6,547,629 3.10 %2000 3,267 0.20 723,419 8.00 6,349,097 5.501990 3,260 5.90 670,080 5.80 6,016,425 4.901980 3,079 15.30 633,632 (0.70) 5,737,037 0.801970 2,670 N.A. 637,887 N.A. 5,689,170 N.A.

% ChangeMassachusetts

% ChangeEssex

% ChangeEssex County

______________________ Source: U.S. Department of Commerce for actuals, Massachusetts Institute for Social & Economic Research for projections. Population Density


2010 3,504 247.4 743,159 1,492.1 6,547,629 835.4 2000 3,267 230.7 723,419 1,452.4 6,349,097 810.0 1990 3,260 230.2 670,080 1,345.4 6,016,425 767.6 1980 3,079 217.4 633,632 1,272.2 5,737,037 732.0 1970 2,670 188.5 637,887 1,280.7 5,689,170 725.8

DensityMassachusetts

Density (1)Essex

DensityEssex County

______________________ Source: U.S. Department of Commerce. (1) Based on 7.8 square miles. Population Composition 2010

Age Number Number Number

Under 5 Years 79 5.5 % 43,451 5.9 367,252 5.6 %5 Years to 19 Years 666 20.3 149,387 20.2 1,262,333 19.4 20 Years to 64 Years 2,247 60.6 442,904 59.9 3,991,339 61.3 65 Years and Over 478 13.6 103,763 14.0 891,303 13.7 Total 3,470 100.0 % 739,505 100.0 % 6,512,227 100.0 %

Median Age (2010) 47.3 40.2 38.5 Median Age (2000) 40.2 37.5 36.5


PercentEssex

PercentEssex County


B-27

Income Levels

Year Amount Amount Amount

Per Capita-Personal Income2012 40,996$ 29.7% 35,369$ 34.2% 35,485$ 36.7%1999 31,613 64.6 26,358 49.9 25,952 50.7 1989 19,211 164.5 17,586 129.2 17,224 131.0 1979 7,264 7,673 7,457

Median Family Income2012 103,041$ 84,083$ 84,380$

Median Household Income2012 82,009$ 66,918$ 66,658$

% Below Poverty Level2012 2.8% 11.0% 11.0%

% Change from Previous

Massachusetts% Change from

Previous Census

Essex% Change

from Previous

Essex County

______________________ Source: U.S. Department of Commerce. 2012 represents 5-year estimates. Family Income Distribution 2012

Income for Families Families Families Families

Less than $10,000 - - % 6,701 3.5 % 57,204 3.6 %$10,000 - $24,999 - - 16,733 8.8 132,790 8.3 $25,000 - $49,999 183 19.5 31,014 16.4 260,930 16.3 $50,000 - $74,999 114 12.1 29,416 15.5 257,973 16.1 $75,000 - $99,999 165 17.6 27,982 14.8 235,746 14.7 $100,000 - $149,999 225 23.9 38,374 20.3 331,738 20.7 $150,000 or more 253 26.9 39,167 20.7 327,825 20.4 Total 940 100.0 % 189,387 100.0 % 1,604,206 100.0 %


PercentEssex

PercentEssex County

______________________ Source: U.S. Department of Commerce. 2012 represents 5-year estimates. Household Income Distribution 2012

Income for Households Families Families Families



PercentEssex

PercentEssex County

______________________ Source: U.S. Department of Commerce. 2012 represents 5-year estimates.

B-28

Value Distribution of Specified Owner-Occupied Housing Units 2012 (1)

Units Number Number Number

Less than $10,000 40 4.4 % 5,466 3.0 % 55,908 3.5 %$100,000 - $199,000 10 1.1 16,152 8.8 201,702 12.6 $200,000 - $299,000 58 6.4 43,572 23.8 402,530 25.2 $300,000 - $499,000 355 39.0 75,734 41.4 603,907 37.8 $500,000 - $999,999 374 41.1 36,400 19.9 276,805 17.3 $1,000,000 or more 73 8.0 5,754 3.1 55,107 3.5 Total 910 100.0 % 183,078 100.0 % 1,595,959 100.0 %

Median Value 495,800$ 354,700$ 355,500$


PercentEssex

PercentEssex County

______________________ (1) Source: U.S. Department of Commerce. 2012 represents 5-year estimates.

Age Distribution Housing Units 2012 (1)

Year Built Number Number Number

2000 or later 59 3.6 % 20,696 6.8 % 199,233 7.1 %1980 to 1999 186 11.5 52,534 17.1 508,334 18.1 1940 to 1979 712 44.0 112,462 36.7 1,115,159 39.8 1939 or Earlier 663 40.9 120,630 39.4 981,480 35.0 Total 1,620 100.0 % 306,322 100.0 % 2,804,206 100.0 %


PercentEssex

PercentEssex County


Housing Unit Inventory 2012 (1)

Units in Structure Number Number Number

1, Detached 1,111 68.6 % 154,742 50.5 % 1,471,460 52.5 %1, Attached 63 3.9 18,593 6.1 141,098 5.0 2 to 4 245 15.1 70,491 23.0 596,892 21.3 5 to 9 129 8.0 16,842 5.5 168,231 6.0 10 to 19 72 4.4 12,774 4.2 120,233 4.3 20 or More - - 30,916 10.1 281,775 10.0 Mobile Home, Trailer, or Other - - 1,964 0.6 24,517 0.9 Total 1,620 100.0 % 306,322 100.0 % 2,804,206 100.0 %


PercentEssex

PercentEssex County


Educational Attainment 2012 (1)

Units in Structure Number Number Number

Less than 9th Grade 68 2.6 % 27,408 5.4 % 216,669 4.9 %9th to 12th Grade, No Diploma 119 4.6 29,693 5.9 268,218 6.0 High School Graduate 540 20.8 134,289 26.5 1,156,650 25.9 Some College, No Degree 452 17.4 89,435 17.6 739,171 16.6 Associate's Degree 288 11.1 41,700 8.2 344,724 7.7 Bachelor's Degree 708 27.3 109,985 21.7 989,299 22.2 Graduate or Professional Degree 418 16.1 74,986 14.8 751,167 16.8 Total 2,593 100.0 % 507,496 100.0 % 4,465,898 100.0 %

High School Graduate or Higher 2,406 92.8 % 450,395 88.7 % 3,981,011 89.1 %Bachelor's Degree or Higher 1,126 43.4 184,971 36.4 1,740,466 39.0


PercentEssex

PercentEssex County


B-29

PROPERTY TAXATION The following table shows the details of the calculation of the tax levies for the most recent fiscal years.

F isca l F isca l F isca l F isca l F isca l2016 2017 2018 2019 2020

T ota l A ppropria tions(1) 22 ,101,275$ 19 ,635,459$ 18,707,612$ 19,872,604$ 25 ,316,233$ A dditions: S ta te and C ounty A ssess. 89 ,811 90,039 88 ,838 90,321 32 ,455 O verlay R eserve 86,585 81,259 90 ,957 77,781 80 ,000 O ther A dd itions 3,478 1 ,505 3 ,505 3 ,736 4 ,028 T ota l A dditions 179,874 172,803 183 ,300 171,838 116 ,483 G ross A m ount to be R aised 22,281,149 19 ,808,262 18,890,912 20,044,442 25 ,432,716 D eductions:Loca l E stim ated R ece ip ts: Loca l 4 ,429,277 4 ,537,169 4 ,648,132 4 ,488,588 4 ,858,275 S ta te A id (2 ): 271,209 282,067 307 ,348 300,139 299 ,830 A va ilab le Funds(3):F ree C ash 978,098 1 ,283,198 926 ,228 944,440 1 ,718,198 O ther 4 ,529,594 1 ,234,607 171 ,269 1 ,002,555 4 ,039,483 F ree C ash and O ther R evenue - - - - - T ota l D eductions 10,208,178 7 ,337,041 6 ,052,977 6 ,735,722 10 ,915,786 N et A m ount to be R aised (T ax Levy) 12 ,072,971$ 12 ,471,221$ 12,837,935$ 13,308,720$ 14 ,516,930$

______________________ (1) Includes annual appropriations from taxation voted subsequent to adoption of the annual budget but prior to setting the tax rate. (2) Estimated by the State Department of Revenue and required by law to be used in setting of the tax rate. Actual state aid payments

may vary upward or downward from said estimates, and the State may withhold (generally quarterly) payments pending receipt of State and County assessments.

(3) Transfers from available funds, including "Free Cash", generally made as an offset to a particular appropriation item. Classification of Property The following is a breakdown of the Town's assessed valuation of real estate for the following fiscal years:

% of % of % ofProperty Type Amount Total Amount Total Amount Total

Residential 811,420,113$ 93.7 % 787,436,361$ 90.9 % 741,073,253$ 91.6 %Commercial 54,055,963 6.2 53,176,516 6.1 52,300,832 6.5 Industrial 14,741,845 1.7 14,323,445 1.7 14,374,100 1.8 Personal 10,938,020 1.3 10,953,046 1.3 940,255 0.1 Total Real Estate 891,155,941$ 102.9 % 865,889,368$ 100.0 % 808,688,440$ 100.0 %

2020 2019 2018

B-30

Tax Rates The following shows the actual tax rates per $1,000 of assessed valuation based on the assessed or equalized valuation, whichever was greater, for the current and last four fiscal years:

Fiscal ActualYear Tax Rate

2020 16.29$ 2019 15.37 2018 15.68 2017 15.32 2016 15.77

Largest Taxpayers The following is a list of the largest taxpayers for fiscal 2020, all of which are current in their tax payments:

Total Assessed Percent

Nature of Valuation for of TotalTaxpayers Business 2020 Tax Levy

Coughlin, John T Residential/Commercial 9,323,300$ 151,877$ 1.05 %Coughlin, John E Residential/Commercial 6,406,405 104,360 0.72 Dewitt, Trescott Residential/Commercial 5,233,900 85,260 0.59 Solombrino, Scott Residential/Land 4,899,300 79,810 0.55 Emerson, J.H. Company Residential/Land 4,070,400 66,307 0.46 Zide, Lenard B Tr Residential 3,286,900 53,544 0.37 Woodman's Commercial 2,993,970 48,772 0.34 Pratt, Elizabeth Residential 2,680,831 43,671 0.30 221 Western Avenue LLC Commercial 2,569,900 41,864 0.29 Ansara, James S Residential 2,563,400 41,758 0.29

44,028,306$ 717,223$ 4.94 %

Tax Collections

2019 2018 2017 2016 2015

Total Tax Levy $13,308,720 $12,837,035 $12,521,221 $12,072,971 $11,527,905Overlay Reserve for Abatements 77,781 90,057 81,259 86,585 155,426Net Tax Levy (1) $13,230,939 $12,746,978 $12,439,962 $11,986,386 $11,372,479

Amount Collected During Fiscal Year Payable (2)(3) $13,085,479 $12,684,229 $12,356,185 $11,872,409 $11,298,144Percent of Net Tax Levy 98.9% 99.5% 99.3% 99.0% 99.3%

For Fiscal Year

______________________ (1) Net after deduction of overlay reserve for abatements. (2) Actual collections of levy less refunds and amounts refundable but including proceeds of tax titles and tax possessions attributed to

such levy but not including abatements or other credits. (3) Collections for fiscal 2020 were comparable to previous fiscal years.

B-31

Unused Levy Capacity The following shows the calculation of levy limits for the most recent fiscal years:

2020 2019 2018 2017 2016

Primary Levy Limit (1) 22,278,899$ 21,647,234$ 20,467,211$ 20,432,803$ 19,139,142$

Prior Fiscal Year Levy Limit 12,240,486 11,850,598 11,476,838 11,102,697 10,753,350 2.5% Levy Growth 306,012 296,265 286,921 277,691 268,891 New Growth (2) 119,406 93,263 86,639 91,522 78,159 Overrides - - - 4,928 2,297 Growth Levy Limit 12,665,904 12,240,126 11,850,398 11,476,838 11,102,697 Debt Exclusions 1,874,387 1,085,454 1,106,464 1,134,818 1,216,009 Capital Expenditure Exclusions - - - - - Tax Levy Limit 14,540,291 13,325,580 12,956,862 12,611,656 12,318,706 Tax Levy 14,516,930 13,308,720 12,837,035 12,521,221 12,072,971 Unused Levy Capacity (3) 23,361$ 16,860$ 119,827$ 90,435$ 245,735$ Unused Primary Levy Capacity (4) 9,612,995$ 9,407,108$ 8,616,813$ 8,955,965$ 8,036,445$

Fiscal Year

______________________ (1) 2.5% of assessed valuation. (2) Allowed addition for new valuations certified by the Department of Revenue. (3) Tax Levy Limit less Tax Levy. (4) Primary Levy Limit less Growth Levy Limit. Budget Comparison

2021 2020 2019 2018 2017

General Government 1,604,256$ 1,623,760$ 1,572,399$ 1,506,875$ 1,503,107$ Public Safety 1,907,926 1,882,571 1,819,241 1,767,295 1,688,156 Public Health & Sanitation 163,770 160,691 143,977 141,821 138,926 Public Works 2,543,699 2,507,196 2,469,497 2,436,849 2,323,570 Schools (Regional Assessment) 8,602,952 8,356,236 8,160,027 7,953,921 7,750,602 Libraries 190,248 165,364 163,117 156,029 142,362 Employee Benefits (1) 1,568,200 1,531,028 1,463,755 1,409,346 1,336,975 Debt and Interest (2) 3,416,161 2,855,009 2,071,367 2,099,971 2,137,387 Total 19,997,212$ 19,081,855$ 17,863,380$ 17,472,107$ 17,021,085$

Fiscal Year

______________________ (1) Regional schools as well as Water and Sewer Enterprise are self-supporting entities. Employee benefits for those

entities are not included here. (2) Approximately $50,000 of debt and interest is budgeted from Water rates with the remainder from taxation and

betterments. Corona Virus (COVID-19) Disclosure The Town expects an operating surplus for fiscal 2020. As a community heavily reliant on residential real estate revenue, any reductions in state are not anticipated to negatively impact operations. For fiscal 2021, the Town did not use reserves to balance its budget and reduced its expected motor vehicle excise revenue assumptions by 50%. Financial Statements Set forth on the following pages are the Governmental Funds Balance Sheet for the fiscal year ended June 30, 2019, June 30, 2018 and June 30, 2017 and Statements of Revenues and Expenditures and Changes in General Fund Balances for the fiscal years ending June 30, 2019, June 30, 2018, June 30, 2017, June 30, 2016, and June 30, 2015. All such financial statements have been compiled or extracted from the Town’s annual audited financial statements.

B-32

______________________ SOURCE: Extracted from the Town’s audited financial statements.

B-33

General Conomo PointTown Hall Repairs


Funds

Total Governmental

Funds

ASSETS

Cash and cash equivalents 3,850,808$ -$ -$ -$ 3,850,808$


Real estate and personal property taxes 442,688 - - - 442,688

Tax liens 3,865 - - - 3,865

Motor vehicle and other excise taxes 44,037 - - - 44,037

Community preservation surcharges - - - 2,568 2,568

Departmental and other 28,803 - - 31,253 60,056

Intergovernmental - - - 103,309 103,309

Loans - - - 110,295 110,295

Installment sales - 380,000 - - 380,000

Due from Agency Funds 13,761 - - - 13,761

Tax foreclosures 446,634 - - - 446,634

Restricted assets: -

Cash and cash equivalents 498,559 237,572 113 1,523,400 2,259,644

Investments - 7,352,226 3,506 - 7,355,732

TOTAL ASSETS 5,329,155$ 7,969,798$ 3,619$ 1,770,825$ 15,073,397$

LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES

LIABILITIES

Warrants payable 219,975$ -$ -$ 3,111$ 223,086$

Accrued payroll 89,603 - - - 89,603

Other liabilities 26,368 - - - 26,368

TOTAL LIABILITIES 335,946 - - 3,111 339,057

DEFERED INFLOWS OF RESOURCES

Unavailable Revenue 894,711 380,000 - 33,820 1,308,531

FUND BALANCES

Nonspendable - - - 230,079 230,079

Restricted 598,515 7,589,798 3,619 1,503,855 9,695,787

Committed 813,062 - - - 813,062

Assigned 22,204 - - - 22,204

Unassigned 2,664,717 - - - 2,664,717

TOTAL FUND BALANCES 4,098,498 7,589,798 3,619 1,733,934 13,425,849 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES 5,329,155 7,969,798 3,619 1,770,865 15,073,437

(1) Extracted from the Town's audited financial statements.

TOWN OF ESSEX, MASSACHUSETTS

BALANCE SHEET

AS OF JUNE 30, 2018 (1)

B-34

General Conomo PointTown Hall Repairs


Funds

Total Governmental

Funds

ASSETS

Cash and cash equivalents 3,260,433$ -$ -$ -$ 3,260,433$


Real estate and personal property taxes 407,548 - - - 407,548

Tax and utility liens 1,376 - - - 1,376

Motor vehicle and other excise taxes 53,988 - - - 53,988

Community preservation surcharges - - - 2,248 2,248

Departmental and other 43,093 - - 20,982 64,075

Loans - - - 126,101 126,101

Installment sales - 380,000 - - 380,000

Due from Agency Funds 8,685 - - - 8,685

Tax foreclosures 446,634 - - - 446,634

Restricted assets: -

Cash and cash equivalents 476,507 1,492,142 31,000 1,414,045 3,413,694

Investments - 6,084,318 35,559 - 6,119,877

TOTAL ASSETS 4,698,264$ 7,956,460$ 66,559$ 1,563,376$ 14,284,659$

LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES

LIABILITIES

Warrants payable 144,059$ -$ 22,530$ 7,708$ 174,297$

Accrued payroll 86,206 - - - 86,206

Other liabilities 25,376 - - - 25,376

TOTAL LIABILITIES 255,641 - 22,530 7,708 285,879

DEFERED INFLOWS OF RESOURCES

Unavailable Revenue 917,672 380,000 - 23,230 1,320,902

FUND BALANCES

Nonspendable - - - 221,979 221,979

Restricted 476,507 7,576,460 44,029 1,310,459 9,407,455

Committed 828,975 - - - 828,975

Assigned 25,868 - - - 25,868

Unassigned 2,193,601 - - - 2,193,601

TOTAL FUND BALANCES 3,524,951 7,576,460 44,029 1,532,438 12,677,878 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES 4,698,264 7,956,460 66,559 1,563,376 14,284,659



BALANCE SHEET

AS OF JUNE 30, 2017 (1)

B-35

______________________ SOURCE: Extracted from the Town’s audited financial statements.

B-36

Nonmajor TotalConomo Town Hall Governmental Governmental

General Point Repairs Funds FundsREVENUES: Real Estate and Personal Property Taxes 12,753,677$ -$ -$ -$ 12,753,677$ Motor Vehicle and Other Excise Taxes 961,100 - - - 961,100 Hotel/motel tax 17,038 17,038 Tax Liens 41,559 - - - 41,559 Community Preservation Surcharges - - - 155,188 155,188 Charges for Services 176,862 - - 95,455 272,317 Intergovernmental 299,951 - - 500,464 800,415 Special Assessments - - - 2,523 2,523 Penalties and Interest on Taxes 30,449 - - - 30,449 Licenses and Permits 248,767 - - - 248,767 Fines and Forfeitures 11,171 - - - 11,171 Lease Revenue 476,735 - - - 476,735 Departmental and Other 92,273 - - 84,932 177,205 Contributions - - - 119,965 119,965 Investment Income 135,269 - - 2,195 137,464

TOTAL REVENUES 15,244,851 - - 960,722 16,205,573

EXPENDITURES:Current: General Government 1,144,983 - 40,410 146 1,185,539 Public Safety 1,810,790 - - 240,746 2,051,536 Education 8,794,173 - - - 8,794,173 Public Works 1,005,373 - - 153,716 1,159,089 Health and Human Services 280,475 - - 16,663 297,138 Culture and Recreation 150,157 - - 176,686 326,843 Pension Benefits 467,522 - - - 467,522 Employee Benefits 573,759 - - - 573,759 Property and Liability Insurance 85,643 - - - 85,643 State and County Charges 88,838 - - - 88,838 Debt Service: Principal 86,194 - - - 86,194 Interest 13,000 - - - 13,000 TOTAL EXPENDITURES 14,500,907 0 40,410 587,957 15,129,274

Excess (Deficiency) of Revenues Over Expenditures 743,944 - (40,410) 372,765 1,076,299

Other Financing Sources (Uses) Transfers In 171,269 - - - 171,269 Transfers Out (341,666) - - (171,269) (512,935)

THER FINANCING SOURCES (USES) (170,397) - - (171,269) (341,666)

Special Item - Sale of Lots - 13,338 - - 13,338

NET CHANGE IN FUND BALANCES 573,547 13,338 (40,410) 201,496 747,971

FUND BALANCES AT BEGINNING OF YEAR 3,524,951 7,576,460 44,029 1,532,438 12,677,878FUND BALANCES AT END OF YEAR 4,098,498$ 7,589,798$ 3,619$ 1,733,934$ 13,425,849$


TOWN OF ESSEX, MASSACHUSETTSSTATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE

GOVERNMENTAL FUNDS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 (1)

B-37

Nonmajor TotalConomo Town Hall Governmental Governmental

General Point Repairs Funds FundsREVENUES: Real Estate and Personal Property Taxes 12,330,882$ -$ -$ -$ 12,330,882$ Motor Vehicle and Other Excise Taxes 893,008 - - - 893,008 Hotel/motel tax 13,721 13,721 Tax Liens 61,615 - - - 61,615 Payments in Lieu of Taxes 14,328 - - - 14,328 Community Preservation Surcharges - - - 149,767 149,767 Charges for Services 162,720 - - 103,511 266,231 Intergovernmental 281,620 - - 271,954 553,574 Special Assessments - - - 2,613 2,613 Penalties and Interest on Taxes 43,620 - - - 43,620 Licenses and Permits 190,947 - - - 190,947 Fines and Forfeitures 10,758 - - - 10,758 Lease Revenue 490,874 - - - 490,874 Departmental and Other 188,626 - - 25,203 213,829 Contributions - - - 46,409 46,409 Investment Income 90,078 - - 820 90,898

TOTAL REVENUES 14,772,797 - - 600,277 15,373,074

EXPENDITURES:Current: General Government 1,188,007 - 3,087,923 119,354 4,395,284 Public Safety 1,664,008 - - 136,117 1,800,125 Education 8,467,184 - - - 8,467,184 Public Works 1,178,611 - - 100,713 1,279,324 Health and Human Services 273,794 - - 15,262 289,056 Culture and Recreation 134,912 - - 299,081 433,993 Pension Benefits 424,644 - - - 424,644 Employee Benefits 536,441 - - - 536,441 Property and Liability Insurance 99,900 - - - 99,900 State and County Charges 88,659 - - - 88,659 Debt Service: Principal 98,894 - - - 98,894 Interest 12,394 - - - 12,394 TOTAL EXPENDITURES 14,167,448 0 3,087,923 670,527 17,925,898

Excess (Deficiency) of Revenues Over Expenditures 605,349 - (3,087,923) (70,250) (2,552,824)

Other Financing Sources (Uses) Proceeds from Capital Leases 120,193 - - - 120,193 Transfers In 118,274 - 175,000 57,520 350,794 Transfers Out (497,884) (175,000) - (98,274) (771,158)

THER FINANCING SOURCES (USES) (259,417) (175,000) 175,000 (40,754) (300,171)

Special Item - Sale of Lots - 4,836,257 - - 4,836,257

NET CHANGE IN FUND BALANCES 345,932 4,661,257 (2,912,923) (111,004) 1,983,262

FUND BALANCES AT BEGINNING OF YEAR 3,179,019 2,915,203 2,956,952 1,643,442 10,694,616FUND BALANCES AT END OF YEAR 3,524,951$ 7,576,460$ 44,029$ 1,532,438$ 12,677,878$




B-38

Nonmajor TotalCommunity Conomo Town Hall Governmental Governmental

General Preservation Point Repairs Funds FundsREVENUES: Real Estate and Personal Property Taxes 11,998,887$ -$ -$ -$ -$ 11,998,887$ Motor Vehicle and Other Excise Taxes 883,884 - - - - 883,884 Tax Liens 40,398 - - - - 40,398 Payments in Lieu of Taxes 14,328 - - - - 14,328 Community Preservation Surcharges - 47,905 - - - 47,905 Charges for Services 159,088 - - - 104,964 264,052 Intergovernmental 292,013 13,494 - - 392,908 698,415 Special Assessments 7,397 - - - 2,835 10,232 Penalties and Interest on Taxes 29,934 - - - - 29,934 Licenses and Permits 264,924 - - - - 264,924 Fines and Forfeitures 14,320 - - - - 14,320 Lease Revenue 606,714 - - - - 606,714 Departmental and Other 69,612 - - - 33,771 103,383 Contributions - - - - 32,358 32,358 Investment Income 38,722 273 - - 550 39,545

TOTAL REVENUES 14,420,221 61,672 - - 567,386 15,049,279

EXPENDITURES:Current: General Government 1,078,314 - - 1,618,218.00 18,711 2,715,243 Public Safety 1,868,540 - - - 93,579 1,962,119 Education 8,216,310 - - - - 8,216,310 Public Works 943,695 - - - 263,719 1,207,414 Health and Human Services 258,747 - - - 14,761 273,508 Culture and Recreation 133,807 103,831 - - 19,366 257,004 Pension Benefits 395,111 - - - - 395,111 Employee Benefits 498,532 - - - - 498,532 Property and Liability Insurance 79,388 - - - - 79,388 State and County Charges 89,811 - - - - 89,811 Debt Service: Principal 121,194 - - - - 121,194 Interest 14,679 - - - - 14,679 TOTAL EXPENDITURES 13,698,128 103,831 - 1,618,218 410,136 15,830,313

Excess (Deficiency) of Revenues Over Expenditures 722,093 (42,159) - (1,618,218) 157,250 (781,034)

Other Financing Sources (Uses) Sale of capital Assets 2,302 - - - - 2,302 Transfers In 122,094 - - 368,521 483,187 973,802 Transfers Out (561,218) - (818,521) - (122,594) (3,139,375)

THER FINANCING SOURCES (USES) (436,822) - (818,521) 368,521 360,593 (2,163,271)

Special Item - Sale of Lots - - 237,336 - -

NET CHANGE IN FUND BALANCES 285,271 (42,159) (581,185) (1,249,697) 517,843 (1,069,927)

FUND BALANCES AT BEGINNING OF YEAR 2,893,748 201,472 3,496,388 4,206,649 966,286 11,764,543FUND BALANCES AT END OF YEAR 3,179,019$ 159,313$ 2,915,203$ 2,956,952$ 1,484,129$ 10,694,616$




B-39

General

Community

Preservation

Conomo

Point

Town Hall

Repairs

Nonmajor

Governmental

Funds

Total

Governmental

Funds

REVENUES

Real estate and personal property taxes 11,418,579$ ‐$ ‐$ ‐$ ‐$ 11,418,579$

Motor vehicle and other excise taxes 793,368 ‐ ‐ ‐ ‐ 793,368$

Tax liens 76,750 ‐ ‐ ‐ ‐ 76,750$

Payments in lieu of taxes 7,761 ‐ ‐ ‐ ‐ 7,761$

Community preservation surcharges ‐ 45,577 ‐ ‐ ‐ 45,577$

Charges for services 155,041 ‐ ‐ ‐ 82,236 237,277$

Intergovernmental 277,069 13,594 ‐ ‐ 302,498 593,161$

Special assesments 6,406 ‐ ‐ ‐ 3,108 9,514$

Penalties and interest on taxes 41,630 ‐ ‐ ‐ ‐ 41,630$

Licenses and permits 173,205 ‐ ‐ ‐ ‐ 173,205$

Fines and forfeitures 12,753 ‐ ‐ ‐ ‐ 12,753$

Lease revenue 639,684 ‐ ‐ ‐ ‐ 639,684$

Departmental and other 74,245 ‐ ‐ 780 26,897 101,922$

Contributions ‐ ‐ ‐ ‐ 37,390 37,390$

Investment income 40,277 379 14,942 ‐ 587 56,185$

TOTAL REVENUES 13,716,768$ 59,550$ 14,942$ 780$ 452,716$ 14,244,756$

EXPENDITURES

Current:

General government 1,318,132$ 94,213$ ‐$ 360,741$ 53,426$ 1,826,512$

Public safety 1,599,401 ‐ ‐ ‐ 42,089 1,641,490

Education 7,579,877 ‐ ‐ ‐ ‐ 7,579,877

Public works 1,036,720 ‐ ‐ ‐ 221,732 1,258,452

Health and Human services 205,357 ‐ ‐ ‐ 8,662 214,019

Culture and recreation 117,070 88,864 ‐ ‐ 10,618 216,552

Pension benefits 364,427 ‐ ‐ ‐ ‐ 364,427

Employee benefits 486,955 ‐ ‐ ‐ ‐ 486,955

Property and liability insurance 79,516 ‐ ‐ ‐ ‐ 79,516

Claims and assessments 212,000 ‐ ‐ ‐ ‐ 212,000

State and county charges 89,196 ‐ ‐ ‐ ‐ 89,196

Debt Service:

Principal 126,291 ‐ ‐ ‐ ‐ 126,291

Interest 16,050 ‐ ‐ ‐ ‐ 16,050

TOTAL EXPENDITURES 13,230,992 183,077 ‐ 360,741 336,527 14,111,337

EXCESS (DEFICIENCY) OF REVENUES OVER

EXPENDITURES 485,776 (123,527) 14,942 (359,961) 116,189 133,419

OTHER FINANCING SOURCES (USES)

Proceeds from capital leases 66,205 ‐ ‐ ‐ ‐ 66,205

Premium from issuance of bonds and notes 32,454 ‐ ‐ ‐ ‐ 32,454

Sale of capital assets 7,330 ‐ ‐ ‐ ‐ 7,330

Transfers in 350,301 ‐ ‐ 4,200,000 41,366 4,591,667

Transfers out (370,277) ‐ (4,200,000) ‐ (350,301) (4,920,578)

TOTAL OTHER FINANCING SOURCES (USES) 86,013 ‐ (4,200,000) 4,200,000 (308,935) (222,922)

Special Item ‐ Sale of lots ‐ ‐ 1,618,500 ‐ ‐ 1,618,500

NET CHANGE IN FUND BALANCES 571,789 (123,527) (2,566,558) 3,840,039 (192,746) 1,528,997

FUND BALANCES ‐ BEGINNING OF YEAR 2,321,959 324,999 6,062,946 366,610 1,159,032 10,235,546

FUND BALANCES ‐ END OF YEAR 2,893,748$ 201,472$ 3,496,388$ 4,206,649$ 966,286$ 11,764,543$

(1) Extracted from the audited Financial Statements of the Town.

AS OF JUNE 30, 2015 (1)


STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES

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Unassigned Fund Balance and Free Cash

Unassigned FreeFund Balance Cash

Year June 30 (1) July 1

2019 3,354,732$ 2,024,857$ 2018 2,664,717 1,652,578.0 2017 2,193,601 1,315,735 2016 2,130,533 1,283,768 2015 1,893,316 1,276,644 2014 1,767,279 1,001,971

______________________ (1) SOURCE: Audited financial statements, except as footnoted below.

Direct Debt Summary

As of June 30, 2020 (1)

Long-Term Indebtedness

Within General Debt LimitOther Buildings 12,000,000$

12,000,000$ Outside General Debt Limit

Sewer 7,095,641 Other General 137,155 Water 69,000

7,301,796

Total Indebtedness 19,301,796$

______________________ (1) Principal amount only. Excludes lease and installment purchase obligations, overlapping debt, unfunded pension liability and other

unfunded post-employment benefits liability. Bonded Debt vs. Population, Valuations and Income

2020 2019 2018 2017 2016

Amount (1) $19,301,796 $9,103,040 $10,589,284 $12,055,527 $13,514,470Per Capita (2) $5,081 $2,598 $3,022 $3,441 $3,857Percent of Assessed Valuation (3) 2.17% 1.05% 1.31% 1.48% 1.77%Percent of Equalized Valuation (4) 2.23% 1.05% 1.29% 1.47% 1.76%Per Capita as a percent of Personal Income per Capita (2) 12.39% 6.34% 7.37% 8.39% 9.41%

As of June 30,

______________________ (1) Excludes lease and installment purchase obligations, overlapping debt, unfunded pension liability and other unfunded

post-employment benefits liability. (2) Source: U.S. Department of Commerce, Bureau of the Census - Latest applicable actuals or estimates. (3) Source: Board of Assessors - Assessed valuation as of the prior January 1. (4) Source: Massachusetts Department of Revenue - Equalized valuation in effect for that fiscal year (equalized valuations

are established for January 1 of each even-numbered year).

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Annual Debt Service (1)

Outstanding as of June 30, 2020 (1)(2)

Fiscal Year Principal Interest Debt Service

Cumulative % Principal

Retired

2021 1,865,909$ 392,929$ 2,258,838$ 9.7 %2022 1,870,953 454,110 2,325,063 19.42023 1,890,953 392,673 2,283,626 29.22024 1,898,945 330,700 2,229,645 39.02025 1,123,945 316,000 1,439,945 44.82026 983,945 294,400 1,278,345 49.92027 491,458 274,900 766,358 52.52028 435,688 255,400 691,088 54.72029 390,000 235,900 625,900 56.72030 390,000 216,400 606,400 58.82031 400,000 196,900 596,900 60.82032 400,000 180,900 580,900 62.92033 400,000 168,900 568,900 65.02034 400,000 160,900 560,900 67.02035 400,000 152,900 552,900 69.12036 400,000 144,900 544,900 71.22037 400,000 136,900 536,900 73.32038 400,000 128,400 528,400 75.32039 400,000 119,900 519,900 77.42040 400,000 111,400 511,400 79.52041 400,000 102,400 502,400 81.62042 400,000 93,400 493,400 83.62043 400,000 83,900 483,900 85.72044 400,000 74,400 474,400 87.82045 400,000 64,900 464,900 89.82046 400,000 53,900 453,900 91.92047 390,000 42,900 432,900 93.92048 390,000 32,175 422,175 96.02049 390,000 21,450 411,450 98.02050 390,000 10,725 400,725 100.0

19,301,796$ 5,245,562$ 24,547,358$

______________________ (1) Excludes short term debt, lease and installment purchase obligations, overlapping and underlying debt and unfunded pension liability.(2) Principal totaling $12,431,484 and interest totaling $4,979,096 has been exempted from the provisions of Proposition 2 1/2.

LITIGATION

Town Counsel is not aware of any litigation, either pending or threatened, that is likely to result, either individually or in the aggregate, in final judgment against the Town that would materially affect its financial position.

PROPOSED FORM OF LEGAL OPINION APPENDIX C

111 Huntington Avenue9th Floor

Boston, MA 02199-7613Telephone: 617-239-0100

Fax: 617-227-4420www.lockelord.com

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Atlanta | Austin | Boston | Brussels | Chicago | Cincinnati | Dallas | Hartford | Hong Kong | Houston | London | Los Angeles Miami | New Orleans | New York | Princeton | Providence | San Francisco | Stamford | Washington DC | West Palm Beach

(Date of Delivery)

Charles F. Lane, Treasurer Manchester Essex Regional School District Manchester-by-the-Sea, Massachusetts

$2,205,000* Manchester Essex Regional School District, Massachusetts

General Obligation Refunding Bonds of 2020 Dated July 30, 2020

We have acted as bond counsel to the Manchester Essex Regional School District, Massachusetts (the “District”) in connection with the issuance by the District of the above-referenced bonds (the “Bonds”). In such capacity, we have examined the law and such certified proceedings and other papers as we have deemed necessary to render this opinion.

As to questions of fact material to our opinion we have relied upon representations and covenants of the District contained in the certified proceedings and other certifications of public officials furnished to us, without undertaking to verify the same by independent investigation.

Based on our examination, we are of the opinion, under existing law, as follows:

1. The Bonds are valid and binding general obligations of the District, a bodycorporate and politic, organized and existing under and pursuant to Chapter 71 of the Massachusetts General Laws, as amended and supplemented, and an Agreement, as amended (the “District Agreement”), between the Towns of Manchester-by-the-Sea and Essex, Massachusetts (together, the “Member Towns”).

2. The District Agreement made under the applicable provisions of Chapter 71,provides for the annual apportionment between the Member Towns of the budgeted expenses of the District for the ensuing year, including principal and interest payments on the Bonds (to the extent such expenses are not paid from other sources).

* Preliminary; subject to change.

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3. Under existing law, including Section 16B of Chapter 71, the amounts soapportioned to and appropriated by the Member Towns shall be paid by each Member Town to the District in accordance with the terms of the District Agreement.

4. To pay amounts apportioned to and appropriated by the Member Towns to paytheir respective shares of the principal of and interest on the Bonds, each Member Town has power to levy ad valorem taxes upon all the property situated within its respective territorial limits and taxable by it, without limitation as to rate or amount, except as provided under Chapter 44, Section 20 of the General Laws.

5. Interest on the Bonds is excluded from the gross income of the owners of theBonds for federal income tax purposes. In addition, interest on the Bonds is not a specific preference item for purposes of the federal individual alternative minimum tax. In rendering the opinions set forth in this paragraph, we have assumed compliance by the District with all requirements of the Internal Revenue Code of 1986, as amended (the “Code”), that must be satisfied subsequent to the issuance of the Bonds in order that interest thereon be, and continue to be, excluded from gross income for federal income tax purposes. The District has covenanted to comply with all such requirements. Failure by the District to comply with certain of such requirements may cause interest on the Bonds to become included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. Except as expressed in paragraph 7 below, we express no opinion regarding any other federal tax consequences arising with respect to the Bonds.

6. Interest on the Bonds is exempt from Massachusetts personal income taxes andthe Bonds are exempt from Massachusetts personal property taxes. We express no opinion regarding any other Massachusetts tax consequences arising with respect to the Bonds or any tax consequences arising with respect to the Bonds under the laws of any state other than Massachusetts.

7. The Bonds are qualified tax-exempt obligations within the meaning of Section265(b)(3) of the Code.

This opinion is expressed as of the date hereof, and we neither assume nor undertake any obligation to update, revise, supplement or restate this opinion to reflect any action taken or omitted, or any facts or circumstances or changes in law or in the interpretation thereof, that may hereafter arise or occur, or for any other reason.

The rights of the holders of the Bonds and the enforceability of the Bonds may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors’ rights heretofore or hereafter enacted to the extent constitutionally applicable, and their enforcement may also be subject to the exercise of judicial discretion in appropriate cases.

LOCKE LORD LLP

APPENDIX D

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PROPOSED FORM OF CONTINUING DISCLOSURE CERTIFICATE

This Continuing Disclosure Certificate (the “Disclosure Certificate”) is executed and delivered by the Manchester Essex Regional School District, Massachusetts (the “Issuer”) in connection with the issuance of its $2,205,000* General Obligation Refunding Bonds of 2020 dated July 30, 2020 (the “Bonds”). The Issuer covenants and agrees as follows:

SECTION 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the Issuer for the benefit of the Owners of the Bonds and in order to assist the Participating Underwriters in complying with the Rule.

SECTION 2. Definitions. For purposes of this Disclosure Certificate the following capitalized terms shall have the following meanings:

“Annual Report” shall mean any Annual Report provided by the Issuer pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate.

“Listed Events” shall mean any of the events listed in Section 5(a) of this Disclosure Certificate.

“MSRB” shall mean the Municipal Securities Rulemaking Board as established pursuant to Section 15B(b)(1) of the Securities Exchange Act of 1934, or any successor thereto or to the functions of the MSRB contemplated by this Disclosure Certificate. Filing information relating to the MSRB is set forth in Exhibit A attached hereto.

“Obligated Persons” shall mean the Issuer and the other obligated persons with respect to the Bonds within the meaning of the Rule, which are the Towns of Manchester-by-the-Sea and Essex, Massachusetts being all of the Issuer’s member towns.

“Owners of the Bonds” shall mean the registered owners, including beneficial owners, of the Bonds.

“Participating Underwriter” shall mean any of the original underwriters of the Bonds required to comply with the Rule in connection with offering of the Bonds.

“Rule” shall mean Rule 15c2-12 adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time.

SECTION 3. Provision of Annual Reports.

(a) The Issuer shall, not later than 270 days after the end of each fiscal year, provide tothe MSRB an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Certificate. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross-reference other information as provided in


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Section 4 of this Disclosure Certificate; provided that the audited financial statements of the Issuer may be submitted when available separately from the balance of the Annual Report.

(b) If the Issuer is unable to provide to the MSRB an Annual Report by the date required in subsection (a), the Issuer shall send a notice to the MSRB, in substantially the form attached as Exhibit B.

SECTION 4. Content of Annual Reports. The Issuer’s Annual Report shall contain or incorporate by reference the following:

(a) quantitative information for the preceding fiscal year of the type presented in the Issuer’s Official Statement dated July 15, 2020 relating to the Bonds regarding (i) the revenues and expenditures of the Issuer relating to its operating budget, (ii) capital expenditures, (iii) fund balances, (iv) outstanding indebtedness of the Issuer, (v) the allocation of operating and capital costs of the Issuer among the member towns, (vi) pension obligations of the Issuer and (vii) other post-employment benefits liability of the Issuer;

(b) the most recently available audited financial statements of the Obligated Persons

prepared in accordance with generally accepted accounting principles, with certain exceptions permitted by the Massachusetts Uniform Municipal Accounting System promulgated by the Department of Revenue of the Commonwealth. If audited financial statements for the preceding fiscal year are not available when the Annual Report is submitted, the Annual Report will include unaudited financial statements for the preceding fiscal year and audited financial statements for such fiscal year shall be submitted when available; and

(c) quantitative information for the preceding fiscal year of the type presented in

Appendix B of such Official Statement relating to the Obligated Persons other than the Issuer regarding (i) revenues and expenditures of such Obligated Persons relating to their operating budgets, (ii) fund balances, (iii) property tax information, (iv) outstanding indebtedness and overlapping debt of such Obligated Persons, (v) pension obligations of such Obligated Persons, and (vi) other post-employment benefits liability of such Obligated Persons.

Any or all of the items listed above may be incorporated by reference from other documents, including official statements of debt issues of an Obligated Person or related public entities, which (i) are available to the public on the MSRB internet website or (ii) have been filed with the Securities and Exchange Commission. The Issuer shall clearly identify each such other document so incorporated by reference.

SECTION 5. Reporting of Significant Events.

(a) The Issuer shall give notice, in accordance with the provisions of this Section 5, of the occurrence of any of the following events with respect to the Bonds:

1. Principal and interest payment delinquencies.

2. Non-payment related defaults, if material.

3. Unscheduled draws on debt service reserves reflecting financial difficulties.

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4. Unscheduled draws on credit enhancements reflecting financial difficulties.

5. Substitution of credit or liquidity providers, or their failure to perform.

6. Adverse tax opinions, the issuance by the Internal Revenue Service of proposed orfinal determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds.

7. Modifications to rights of the Owners of the Bonds, if material.

8. Bond calls, if material, and tender offers.

9. Defeasances.

10. Release, substitution or sale of property securing repayment of the Bonds, ifmaterial.

11. Rating changes.

12. Bankruptcy, insolvency, receivership or similar event of an Obligated Person.*

13. The consummation of a merger, consolidation, or acquisition involving anObligated Person or the sale of all or substantially all of the assets of an Obligated Person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material.

14. Appointment of a successor or additional trustee or the change of name of a trustee,if material.

15. Incurrence of a financial obligation of an Obligated Person, if material, oragreement to covenants, events of default, remedies, priority rights, or other similar terms of a financial obligation of an Obligated Person, any of which affect Owners of the Bonds, if material.†

* As noted in the Rule, this event is considered to occur when any of the following occur: (i) the appointment of areceiver, fiscal agent or similar officer for an Obligated Person in a proceeding under the U.S. Bankruptcy Code orin any proceeding under state or federal law in which a court or governmental authority has assumed jurisdictionover substantially all of the assets or business of an Obligated Person, or if such jurisdiction has been assumed byleaving the existing governing body and officials or officers in possession but subject to the supervision and ordersof a court or governmental authority, or (ii) the entry of an order confirming a plan of reorganization, arrangement orliquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assetsor business of an Obligated Person.

† For purposes of event numbers 15 and 16 in Section 5(a) of this Disclosure Certificate, the term “financial obligation” means a (i) debt obligation; (ii) derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation; or (iii) guarantee of (i) or (ii). The term

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16. Default, event of acceleration, termination event, modification of terms, or othersimilar events under the terms of a financial obligation of an Obligated Person, any of which reflect financial difficulties.†

(b) Upon the occurrence of a Listed Event, the Issuer shall, in a timely manner not inexcess of ten (10) business days after the occurrence of the event, file a notice of such occurrence with the MSRB.

SECTION 6. Transmission of Information and Notices. Unless otherwise required by law, all notices, documents and information provided to the MSRB shall be provided in electronic format as prescribed by the MSRB and shall be accompanied by identifying information as prescribed by the MSRB.

SECTION 7. Termination of Reporting Obligation. The Issuer’s obligations under this Disclosure Certificate shall terminate upon the payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the Issuer shall give notice of such termination in the same manner as for a Listed Event under Section 5(b).

SECTION 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the Issuer may amend this Disclosure Certificate and any provision of this Disclosure Certificate may be waived if such amendment or waiver is permitted by the Rule, as evidenced by an opinion of counsel expert in federal securities law (which may include bond counsel to the Issuer), to the effect that such amendment or waiver would not cause the Disclosure Certificate to violate the Rule. The first Annual Report filed after enactment of any amendment to or waiver of this Disclosure Certificate shall explain, in narrative form, the reasons for the amendment or waiver and the impact of the change in the type of information being provided in the Annual Report.

If the amendment provides for a change in the accounting principles to be followed in preparing financial statements, the Annual Report for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison shall include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information in order to provide information to investors to enable them to evaluate the ability of the Issuer to meet its obligations. To the extent reasonably feasible, the comparison shall also be quantitative. A notice of the change in the accounting principles shall be sent to the MSRB.

SECTION 9. Default. In the event of a failure of the Issuer to comply with any provision of this Disclosure Certificate any Owner of the Bonds may seek a court order for specific performance by the Issuer of its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not constitute a default with respect to the Bonds, and the sole remedy under this Disclosure Certificate in the event of any failure of the Issuer to comply with this

“financial obligation” excludes municipal securities for which a final official statement has been provided to the MSRB consistent with the Rule.

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Disclosure Certificate shall be an action for specific performance of the Issuer’s obligations hereunder and not for money damages in any amount.

SECTION 10. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the Owners of the Bonds from time to time, and shall create no rights in any other person or entity.

Date: July 30, 2020 MANCHESTER ESSEX REGIONAL SCHOOL DISTRICT, MASSACHUSETTS

By: ______________________________ District Treasurer

By: ______________________________ Chair, Regional School District School Committee

[Exhibit A – MSRB Filing Information] [Exhibit B – Notice of Failure to File Annual Report]

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TOWN OF [MANCHESTER-BY-THE-SEA][ESSEX], MASSACHUSETTS

PROPOSED FORM OF CONTINUING DISCLOSURE CERTIFICATE

This Continuing Disclosure Certificate (the “Disclosure Certificate”) is executed and delivered by the Town of [Manchester-by-the-Sea][Essex], Massachusetts (the “Town”) in connection with the issuance by the Manchester Essex Regional School District, Massachusetts (the “Issuer”) of its $2,205,000* General Obligation Refunding Bonds of 2020 dated July 30, 2020 (the “Bonds”). The Town covenants and agrees as follows:

SECTION 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the Town for the benefit of the Owners of the Bonds and in order to assist the Participating Underwriters in complying with the Rule.

SECTION 2. Definitions. For purposes of this Disclosure Certificate the following capitalized terms shall have the following meanings:

“Annual Report” shall mean any Annual Report provided by the Town pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate.

“Listed Events” shall mean any of the events listed in Section 5(a) of this Disclosure Certificate.

“MSRB” shall mean the Municipal Securities Rulemaking Board as established pursuant to Section 15B(b)(1) of the Securities Exchange Act of 1934, or any successor thereto or to the functions of the MSRB contemplated by this Disclosure Certificate. Filing information relating to the MSRB is set forth in Exhibit A attached hereto.

“Owners of the Bonds” shall mean the registered owners, including beneficial owners, of the Bonds.

“Participating Underwriter” shall mean any of the original underwriters of the Bonds required to comply with the Rule in connection with offering of the Bonds.

“Rule” shall mean Rule 15c2-12 adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time.

SECTION 3. Provision of Annual Reports.

(a) The Town, or the Issuer on behalf of the Town, shall, not later than 270 days afterthe end of each fiscal year, provide to the MSRB an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Certificate. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross-reference other information as provided in Section 4 of this Disclosure Certificate; provided that the audited financial statements of the Town may be submitted when available separately from the balance of the Annual Report.


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(b) If the Town is unable to provide to the MSRB an Annual Report by the daterequired in subsection (a), the Town shall send a notice to the MSRB, in substantially the form attached as Exhibit B, unless the Issuer files such a notice with respect to the Town’s annual report.

SECTION 4. Content of Annual Reports. The Town’s Annual Report shall contain or incorporate by reference the following:

(a) quantitative information for the preceding fiscal year of the type presented inAppendix B of the Issuer’s Official Statement dated July 15, 2020 relating to the Bonds regarding (i) revenues and expenditures of the Town relating to its operating budget, (ii) fund balances, (iii) property tax information, (iv) outstanding indebtedness and overlapping debt of the Town, (v) pension obligations of the Town, and (vi) other post-employment benefits liability of the Town, and

(b) the most recently available audited financial statements of the Town, prepared inaccordance with generally accepted accounting principles, with certain exceptions permitted by the Massachusetts Uniform Municipal Accounting System promulgated by the Department of Revenue of the Commonwealth. If audited financial statements for the preceding fiscal year are not available when the Annual Report is submitted, the Annual Report will include unaudited financial statements for the preceding fiscal year and audited financial statements for such fiscal year shall be submitted when available.

Any or all of the items listed above may be incorporated by reference from other documents, including official statements of debt issues of the Town, the other obligated persons with respect to the Bonds, or related public entities, which (i) are available to the public on the MSRB internet website or (ii) have been filed with the Securities and Exchange Commission. The Town shall clearly identify each such other document so incorporated by reference.

SECTION 5. Reporting of Events.

(a) The Town shall give notice, in accordance with the provisions of this Section 5, ofthe occurrence of any of the following events with respect to the Bonds, unless the Issuer files such a notice with respect to the following events with respect to the Bonds:

1. Bankruptcy, insolvency, receivership or similar event of the Town.*

2. The consummation of a merger, consolidation, or acquisition involving the Townor the sale of all or substantially all of the assets of the Town, other than in the ordinary course of

* As noted in the Rule, this event is considered to occur when any of the following occur: (i) the appointment of areceiver, fiscal agent or similar officer for the Town in a proceeding under the U.S. Bankruptcy Code or in anyproceeding under state or federal law in which a court or governmental authority has assumed jurisdiction oversubstantially all of the assets or business of the Town, or if such jurisdiction has been assumed by leaving theexisting governing body and officials or officers in possession but subject to the supervision and orders of a court orgovernmental authority, or (ii) the entry of an order confirming a plan of reorganization, arrangement or liquidationby a court or governmental authority having supervision or jurisdiction over substantially all of the assets orbusiness of the Town.

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business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material.

3. Incurrence of a financial obligation of the Town, if material, or agreement tocovenants, events of default, remedies, priority rights, or other similar terms of a financial obligation of the Town, any of which affect Owners of the Bonds, if material.**

4. Default, event of acceleration, termination event, modification of terms, or othersimilar events under the terms of a financial obligation of the Town, any of which reflect financial difficulties.**

(b) Upon the occurrence of a Listed Event, the Town shall, in a timely manner not inexcess of ten (10) business days after the occurrence of the event, file a notice of such occurrence with the MSRB with respect to the Bonds, unless the Issuer files such a notice with respect to such occurrence.

SECTION 6. Transmission of Information and Notices. Unless otherwise required by law, all notices, documents and information provided to the MSRB shall be provided in electronic format as prescribed by the MSRB and shall be accompanied by identifying information as prescribed by the MSRB.

SECTION 7. Termination of Reporting Obligation. The Town’s obligations under this Disclosure Certificate shall terminate upon the [prior redemption or] payment in full of all of the Bonds.

SECTION 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the Town may amend this Disclosure Certificate and any provision of this Disclosure Certificate may be waived if such amendment or waiver is permitted by the Rule, as evidenced by an opinion of counsel expert in federal securities law (which may include bond counsel to the Issuer), to the effect that such amendment or waiver would not cause the Disclosure Certificate to violate the Rule. The first Annual Report filed after enactment of any amendment to or waiver of this Disclosure Certificate shall explain, in narrative form, the reasons for the amendment or waiver and the impact of the change in the type of information being provided in the Annual Report.

If the amendment provides for a change in the accounting principles to be followed in preparing financial statements, the Annual Report for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison shall include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information in order to provide information to investors to enable them to evaluate the

** For purposes of event numbers 3 and 4 in Section 5(a) of this Disclosure Certificate, the term “financial obligation” means a (i) debt obligation; (ii) derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation; or (iii) guarantee of (i) or (ii). The term “financial obligation” excludes municipal securities for which a final official statement has been provided to the MSRB consistent with the Rule.

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ability of the Town to meet its obligations. To the extent reasonably feasible, the comparison shall also be quantitative. A notice of the change in the accounting principles shall be sent to the MSRB.

SECTION 9. Default. In the event of a failure of the Town to comply with any provision of this Disclosure Certificate any Owner of the Bonds may seek a court order for specific performance by the Town of its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not constitute a default with respect to the Bonds, and the sole remedy under this Disclosure Certificate in the event of any failure of the Town to comply with this Disclosure Certificate shall be an action for specific performance of the Town’s obligations hereunder and not for money damages in any amount.

SECTION 10. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the Owners of the Bonds from time to time, and shall create no rights in any other person or entity.

Date: July 30, 2020 TOWN OF [MANCHESTER-BY-THE-SEA][ESSEX], MASSACHUSETTS

By: ______________________________ Treasurer

[Exhibit A – MSRB Filing Information] [Exhibit B – Notice of Failure to File Annual Report]

PROPOSAL FOR BONDS

Mr. Charles F. Lane, Treasurer July 15, 2020 Manchester Essex Regional School District, Massachusetts c/o Hilltop Securities Inc. 54 Canal Street, 3rd Floor Boston, MA 02114

Dear Mr. Lane:

For $2,205,000* Manchester Essex Regional School District, Massachusetts, General Obligation Refunding Bonds of 2020 as further described in your Notice of Sale dated July 8, 2020, which Notice of Sale is hereby made a part of this proposal, we bid.........................and accrued interest to date of delivery for each $100 par value of bonds, bearing interest at the rate or rates per annum as follows:

DueFebruary 15 Rate

2021 ........…%2022 ...........2023 ...........2024 ...........2025 ...........2026 ...........2027 ........…2028 ........…2029 ........…2030 ........…

The undersigned hereby acknowledges receipt of the Preliminary Official Statement referred to in the aforementioned Notice of Sale.

S yn d ic a te M a n a g e r

S yn d ic a te M a n a g e r A d d re s s

T e le p h o n e :

F a x :

The following is our computation of the net interest cost and percent true interest cost calculated in accordance with the Notice of Sale, is for informational purposes only, and is subject to verification prior to award.

Gross Interest Cost $______________________________

Underwriter's Premium $______________________________NO BID OF LESS THAN PAR PLUS A PREMIUM OF ATLEAST $55,000 WILL BE CONSIDERED.

Net Interest Cost $______________________________Percent True Interest Cost ______________________________ %

(four decimals)

Hilltop Securities Inc. would be pleased to assist you in entering your bid on these Bonds if you will mail your signed bid form in advance and telephone figures about one-half hour before the time of sale. The District and Hilltop Securities Inc. are not responsible for errors in bids submitted in this manner.

TELEPHONE (617) 619-4400 HILLTOP SECURITIES INC.


MANCHESTER ESSEX REGIONAL SCHOOL DISTRICT, MASSACHUSETTS … · Bank National Association, Boston,...

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Transcript of MANCHESTER ESSEX REGIONAL SCHOOL DISTRICT, MASSACHUSETTS … · Bank National Association, Boston,...