town of falmouth, massachusetts $28,525,000* … · falmouth, massachusetts, and that the principal...

NOTICE OF SALE AND PRELIMINARY OFFICIAL STATEMENT DATED NOVEMBER 21, 2019

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 (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. 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. The Bonds will not be designated as “qualified tax-exempt obligations” for purposes of Section 265(b)(3) of the Code. See “Tax Exemption” herein.

TOWN OF FALMOUTH, MASSACHUSETTS $28,525,000* GENERAL OBLIGATION MUNICIPAL PURPOSE LOAN OF 2019 BONDS

DATED DUE Date of Delivery February 1

(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 1 of the years in which the Bonds mature. Interest on the Bonds will be payable February 1 and August 1 of each year, commencing August 1, 2020. 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 subject to redemption prior to their stated maturity dates as described herein.

An opinion of Bond Counsel will be delivered with the Bonds to the effect that the Bonds are valid general obligations of the Town of Falmouth, Massachusetts, and that the principal of and interest on the Bonds are payable from taxes that may be levied upon all taxable property in the Town, without limitation as to rate or amount, except as provided under Chapter 44, Section 20 of the General Laws, with respect to that portion of the principal and interest payments that the Town has voted to exempt from the limit imposed by Chapter 59, Section 21C of the General Laws, and subject to the limit imposed by Chapter 59, Section 21C of the General Laws with respect to that portion of principal and interest payments the Town has not voted to exempt from that limit.

____________________________

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

Due Principal Prices/ CUSIP Due Principal Prices/ CUSIPFebruary 1 Amount* Rate Yields 306801 February 1 Amount* Rate Yields 306801

2021 2,610,000$ % % 2031 1,040,000$ % %2022 2,530,000 2032 1,040,000 2023 2,140,000 2033 1,040,000 2024 2,130,000 2034 1,040,000 2025 2,120,000 2035 820,000 2026 2,100,000 2036 820,000 2027 2,090,000 2037 820,000 2028 1,465,000 2038 820,000 2029 1,220,000 2039 820,000 2030 1,040,000 2040 820,000

____________________________

THE BONDS ARE BEING OFFERED FOR SALE AT 11:00 A.M. (EASTERN TIME) ON WEDNESDAY, DECEMBER 4, 2019, 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 NOVEMBER 21, 2019 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 Town of Falmouth, Massachusetts, with respect to the Bonds. The Bonds in definitive form will be delivered to DTC, or its custodial agent, on or about December 12, 2019, against payment to the Town 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 ......................................................... 5 Establishment of Issue Price ........................................... 6 Exhibit 1 – Form of Issue Price Certificates ..................... 9 OFFICIAL STATEMENT: THE BONDS: Description of the Bonds ................................................. 15 Redemption Provisions.................................................... 15 Notice of Redemption ...................................................... 16 Record Date .................................................................... 16 Book-Entry Transfer System ........................................... 16 Authorization of the Bonds and Use of Proceeds ............ 17 Sources and Uses of Bond Proceeds .............................. 18 Plan of Refunding ............................................................ 18 Principal Maturities by Purpose ....................................... 18 Tax Exemption ................................................................ 19 Risk of Future Legislative and/or Court Decisions ........... 20 Security and Remedies ................................................... 20 Opinion of Bond Counsel ................................................. 22 Rating .............................................................................. 22 Financial Advisory Services of Hilltop Securities Inc. ................................................... 22 Continuing Disclosure ..................................................... 22 TOWN OF FALMOUTH, MASSACHUSETTS: General............................................................................ 23 Principal Town Officials ................................................... 23 Municipal Services .......................................................... 23 Education ........................................................................ 24 Public School Enrollments ............................................. 24 Industry and Commerce .................................................. 24 Largest Employers .......................................................... 25 Labor Force, Employment and Unemployment ............... 26 Unemployment Rates .................................................... 26 Building Permits .............................................................. 26 Transportation and Utilities .............................................. 26 Retail Sales ..................................................................... 27 Population and Income .................................................... 27 Population Trends ........................................................... 27 PROPERTY TAXATION: Tax Levy Computation .................................................... 28 State Aid .......................................................................... 29 Assessed Valuations and Tax Levies .............................. 29 Assessed Valuations and Tax Rates ............................... 29 Real Estate Assessed Valuations by Class ..................... 29 Largest Taxpayers ........................................................... 30 State Equalized Valuation ............................................... 30 Abatements and Overlay ................................................. 30 Tax Collections ................................................................ 31

Page Tax Titles and Possessions ............................................ 31 Sale of Taxes Receivables .............................................. 32 Taxation to Meet Deficits ................................................. 32 Tax Limitations ................................................................ 32 Pledged Taxes ................................................................ 33 Cape Cod Open Space Land Acquisition Excise Tax ..... 34 Community Preservation Act ........................................... 34 Levy Limit Exclusions ...................................................... 35 TOWN FINANCES: Budget and Appropriation Process .................................. 36 Operating Budget Trends ................................................ 36 Revenues ........................................................................ 36 Investment of Town Funds .............................................. 37 Summary of Significant Accounting Policies ................... 37 Audits .............................................................................. 38 Financial Statements ....................................................... 38 Estimated 2019 Fiscal Year End Results ........................ 38 Governmental Funds Balance Sheet As of June 30, 2018 .................................................. 39 Governmental Funds Balance Sheet As of June 30, 2017 .................................................. 40 Governmental Funds Balance Sheet As of June 30, 2016 .................................................. 41 Comparative Statement of Revenues and Expenditures, General Fund June 30, 2014 – 2018 .................................................. 42 Free Cash ....................................................................... 47 Stabilization Fund ............................................................ 47 Renewable Energy Stabilization Fund ............................ 47 Tax Increment Financing for Development Districts ........ 47 INDEBTEDNESS: Authorization Procedures and Limitations ....................... 48 Debt Limits ...................................................................... 48 Types of Obligations ....................................................... 48 Direct Debt Summary ...................................................... 50 Debt Ratios ..................................................................... 50 Authorized Unissued Debt and Prospective Financing ............................................ 51 Principal Payments by Purpose ...................................... 51 Debt Service Requirements ............................................ 52 Overlapping Debt ............................................................ 53 Contractual Obligations ................................................... 53 Retirement Plan .............................................................. 54 Funding Schedule ........................................................... 55 Other Post-Employment Benefits .................................... 56 Employee Relations ........................................................ 57 LITIGATION .................................................................... 57 APPENDIX A – Fiscal 2018 Audit APPENDIX B – Proposed Form of Legal Opinion APPENDIX C – 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 Town 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, December 4, 2019, 11:00 a.m. (Eastern Time).

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

Issuer: Town of Falmouth, Massachusetts.

Issue: $28,525,000* General Obligation Municipal Purpose Loan of 2019 Bonds, see "THE BONDS" herein.

Preliminary Official Statement Dated: November 21, 2019.

Dated Date of the Bonds: Date of Delivery.

Principal Due: Serially on February 1, 2021 through February 1, 2040, as set forth herein.

Interest Payable: February 1 and August 1 of each year, commencing August 1, 2020.

Purpose and Authority: Bond proceeds will finance various municipal projects as authorized by the Town under provisions of Chapter 44 and refund bonds originally issued July 15, 2009 and March 1, 2010 as detailed herein.

Redemption: The Bonds are subject to redemption prior to their stated maturity dates as described herein.

Security: The Bonds are general obligations of the Town, and the principal of and interest on the Bonds are payable from taxes that may be levied upon all taxable property in the Town, without limitation as to rate or amount, except as provided under Chapter 44, Section 20 of the General Laws, with respect to that portion of the principal and interest payments that the Town has voted to exempt from the limit imposed by Chapter 59, Section 21C of the General Laws, and subject to the limit imposed by Chapter 59, Section 21C of the General Laws with respect to that portion of principal and interest payments the Town has not voted to exempt from that limit.

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

Bond Insurance: The Town 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 $135,000 WILL BE CONSIDERED.

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

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

Bank Qualification: The Bonds will not be designated by the Town 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 December 12, 2019, against payment in federal funds.

Issuer Official: Questions concerning the Official Statement should be addressed to: Patricia O’Connell, Treasurer/Collector, Town of Falmouth, Massachusetts telephone (508) 495-7364 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

TOWN OF FALMOUTH, MASSACHUSETTS

$28,525,000* GENERAL OBLIGATION MUNICIPAL PURPOSE LOAN OF 2019 BONDS

The Town of Falmouth, Massachusetts (the “Town”) will receive sealed and electronic (as described herein) proposals until 11:00 A.M., eastern time, Wednesday, December 4, 2019, for the purchase of the following described $28,525,000* General Obligation Municipal Purpose Loan of 2019 Bonds of the Town (the "Bonds"):

$28,525,000* General Obligation Municipal Purpose Loan of 2019 Bonds payable February 1 of the years and in the amounts as follows:

Due Principal Due PrincipalFebruary 1 Amount* February 1 Amount*

2021 2,610,000$ 2031 ** 1,040,000$ 2022 2,530,000 2032 ** 1,040,000 2023 2,140,000 2033 ** 1,040,000 2024 2,130,000 2034 ** 1,040,000 2025 2,120,000 2035 ** 820,000 2026 2,100,000 2036 ** 820,000 2027 2,090,000 2037 ** 820,000 2028 1,465,000 2038 ** 820,000 2029 1,220,000 2039 ** 820,000 2030 ** 1,040,000 2040 ** 820,000

______________________ *Preliminary, subject to change.**Callable maturities. May be combined into one, two or three Term Bonds, as provided herein.

The Bonds will be dated as of their date of delivery. Principal of the Bonds will be payable on February 1 of the years in which the Bonds mature. Interest will be payable on August 1, 2020 and semi-annually thereafter on each February 1 and August 1 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 Town 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 maturing in the years 2021 through 2029 will not be subject to redemption prior to maturity. The Bonds maturing on and after February 1, 2030 shall be subject to redemption prior to maturity, at the option of the Town, on or after February 1, 2029, either in whole or in part at any time, and if in part, by lot within a maturity, at the par amount of the Bonds to be redeemed.

For Bonds maturing on February 1, 2030, and thereafter, bidders may specify that all of the principal amount of such Bonds in any two or more consecutive years may, in lieu of maturing in each such year, be combined to comprise one maturity of Term Bonds scheduled to mature in the latest of the combined years, and shall be subject to mandatory redemptions prior to maturity at par as described above, in each of the years and in the principal amounts specified in the foregoing maturity schedule. Each mandatory redemption shall be allocated to the payment of the term bond maturing in the nearest subsequent year. Bidders may specify no more than three term bonds.

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Term bonds, if any, shall be subject to mandatory redemption on February 1 of the year or years immediately prior to the stated maturity of such Term Bond (the particular Bonds of such maturity to be redeemed to be selected by lot) as indicated in the foregoing maturity schedule at the principal amount thereof, without premium.

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 $135,000 will be considered.

The current bond structure does not reflect the receipt of any premium. The Town 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, by prorating the premium and restructuring the amortization of the athletic fields and water purposes of the Bonds on an equal or declining basis and 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 Ms. Patricia O’Connell, Treasurer/Collector,Town of Falmouth, Massachusetts c/o Hilltop Securities Inc., 54 Canal Street, 3rd Floor, Boston, Massachusetts02114. Proposals by telegram delivered as specified above will be accepted. Signed blank bid forms may be faxedto (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 HilltopSecurities Inc. Hilltop Securities Inc. will act as agent for the bidder, but neither the Town 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 forthin Parity conflict with this Notice of Sale, the terms of this Notice of Sale shall control. For further information aboutParity, potential bidders may contact the Financial Advisor to the Town 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 bedeemed an offer to purchase the Bonds in accordance with the terms provided in this Notice of Sale and shall bebinding upon the bidder as if made by a signed and sealed written bid delivered to the Town.

The award of the Bonds to the winning bidder will not be effective until the bid has been approved by the Treasurer and Board of Selectmen of the Town.

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 Town of Falmouth 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 Standard and Poor’s Rating Services for a rating on the Bonds. Any such fee paid to Standard and Poor’s Rating Services would be borne by the Town.

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 B of the Preliminary Official Statement dated November 21, 2019 (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

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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 Town to levy and collect taxes to pay them, (c) a certificate of the Town Treasurer to the effect that, to the best of her knowledge and belief, as of its date and as of thedate of sale the Preliminary Official Statement did not, and as of its date and as of the date of the delivery of the Bonds, theFinal Official Statement does not, contain any untrue statement of a material fact and does not omit to state a material factnecessary to make the statements made therein, in the light of the circumstances under which they were made, notmisleading, and (d) a Continuing Disclosure Certificate in the form appearing as Appendix C of the Preliminary OfficialStatement.

Establishment of Issue Price

A successful bidder shall assist the Town in establishing the issue price of the Bonds and shall execute and deliver to the Town 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 Town and Bond Counsel. All actions to be taken by the Town under this Notice of Sale to establish the issue price of the Bonds may be taken on behalf of the Town by Hilltop Securities, Inc. (the “Financial Advisor”) and any notice or report to be provided to the Town 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 Town 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 Town has disseminated this Notice of Sale to potential underwriters in a manner that is reasonablydesigned to reach potential underwriters;

2. all bidders had an equal opportunity to bid;

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

4. the Town awarded the sale of the Bonds to the bidder who submitted a firm offer to purchase the Bonds atthe 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 Town 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 facsimile (617.619.4411), 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 Town 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 Town 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. The Town 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 Town 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 Town on or before the closing date, the certificate attached to this Notice of Sale as Exhibit 1 – Option A.

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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 retail 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 retail 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 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 retail 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 retail 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 Town (or with thelead 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 retail 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 purchaserare 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 shall 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 is 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 Town will undertake to provide annual reports and notices of certain significant events. A description of this undertaking is set forth in the Preliminary Official Statement.

The Bonds will not be designated as “qualified tax-exempt obligations” for the purpose of Section 265(b)(3) of the Code.

Additional information concerning the Town of Falmouth and the Bonds is contained in the Preliminary Official Statement dated November 21, 2019, 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 Town 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 to completion or amendment

8

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.

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 Town 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 December 12, 2019 for settlement in federal reserve funds.

___________________________

Town of Falmouth, Massachusetts /s/ Patricia O’Connell, Treasurer/Collector

November 21, 2019

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EXHIBIT 1

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

Town of Falmouth, Massachusetts $28,525,000* General Obligation Municipal Purpose Loan of 2019 Bonds dated December 12, 2019

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 Town of Falmouth, 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 Bidderare 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 thesame 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) otherthan 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. TheSale Date of the Bonds is December 4, 2019.

(d) Underwriter means (i) any person, including the Successful Bidder, that agrees pursuant to a written contract with theIssuer (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 retail 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 allcertificates, 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 Bidders 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: ______________, 2019 [NAME OF SUCCESSFUL BIDDER]

By: ________________________________ Name: Title:


10

SCHEDULE A

EXPECTED OFFERING PRICES

(To Be Attached)

SCHEDULE B

COPY OF SUCCESSFUL BIDDER’S BID

(To Be Attached)

11

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 Town of Falmouth, 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 ofthe 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 State or the Financial Advisor that it no longer needs to do so.

2. Defined Terms.



(c) Underwriter means (i) any person, including the [Successful Bidder][Representative], that agrees pursuant to a writtencontract 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 retail 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 furtheracknowledges 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: ______________, 2019 [SUCCESSFUL BIDDER][REPRESENTATIVE]

By: ________________________________ Name: Title:


12

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 Town of Falmouth, 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 ofthe 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) __________, 2019 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.



(c) Underwriter means (i) any person, including the [Successful Bidder][Representative], that agrees pursuant to a writtencontract 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 retail 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 furtheracknowledges 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: ______________, 2019 [SUCCESSFUL BIDDER][REPRESENTATIVE]

By: ________________________________ Name: Title:


14

SCHEDULE A

SALE PRICES

(To be Attached)

15

OFFICIAL STATEMENT


$28,525,000* GENERAL OBLIGATION MUNICIPAL PURPOSE LOAN OF 2019 BONDS

This Official Statement is provided for the purpose of presenting certain information relating to the Town of Falmouth, Massachusetts (the “Town”) in connection with the sale of $28,525,000* aggregate principal amount of its General Obligation Municipal Purpose Loan of 2019 Bonds (the "Bonds"). The information contained herein has been furnished by the Town, except information attributed to another governmental agency or official as the 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 1 and August 1 of each year commencing August 1, 2020. The Bonds shall mature on February 1 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.

Redemption Provisions

The Bonds are subject to redemption as described below.

Optional Redemption

The Bonds maturing in the years 2021 through 2029 will not be subject to redemption prior to maturity. The Bonds maturing on and after February 1, 2030 shall be subject to redemption prior to maturity, at the option of the Town, on or after February 1, 2029, either in whole or in part at any time, and if in part, by lot within a maturity, at the par amount of the Bonds to be redeemed.

Mandatory Redemption

Term Bonds, if any, shall be subject to mandatory redemption commencing on February 1 of the first year which has been combined to form such Term Bonds and continuing on February 1 in each year thereafter until the stated maturity date of that Term Bond. The amount redeemed or paid at maturity in any year shall be equal to the principal amount for that year set forth in the schedule contained in the Notice of Sale dated November 21, 2019. Principal amounts to be redeemed in any year by mandatory redemption shall be redeemed at par (without premium), plus accrued interest to the redemption date, and shall be selected by lot from among the Bonds then subject to mandatory redemption. The Town Treasurer may credit against any mandatory redemption requirement Term Bonds which have been purchased and cancelled by the Town or have been redeemed and not theretofore applied as a credit against any mandatory redemption requirement.

______________________ *Preliminary, subject to change

16

Notice of Redemption

So long as DTC is the registered owner of the Bonds, notice of any redemption of Bonds prior to their maturities, specifying the Bonds (or the portion thereof) to be redeemed shall be mailed to DTC, or sent in such other manner acceptable to DTC, not more than 60 days nor less than 30 days prior to the redemption date. Any failure on the part of DTC to notify the DTC Participants of the redemption or failure on the part of the DTC Participants, Indirect Participants, or of a nominee of a Beneficial Owner (having received notice from DTC Participant or otherwise) to notify the Beneficial Owner shall not affect the validity of the redemption.

Record Date

The record date for each payment of interest is the fifteenth day of the month preceding the interest payment date provided that, with respect to overdue interest, 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 (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.

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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.

Redemption notices shall be sent to DTC. If less than all of a maturity is being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed.

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 Town 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 Town believes to be reliable, but the Town takes no responsibility for the accuracy thereof.

Authorization of the Bonds and Use of Proceeds

The following table sets forth the purposes, principal amounts, total original authorizations, bond anticipation notes outstanding, statutory references, and dates of approval for the current issue of Bonds.

BondOriginal Anticipation Statutory

This Bond Notes Reference Dates of Purpose Issue* Authorization Outstanding (3) M.G.L. Approval Article No.

Wastewater Management Plan 200,000$ * 2,772,250$ (1) 200,000$ Ch.44, s.7(1) 4/6/2011 17Wastewater Management Plan 3,600,000 * 49,820,000 (1) 3,600,000 Ch.44, s.7(1) 4/9/2014 28Senior Center Design & Construction 9,500,000 * 9,500,000 (1) 9,500,000 Ch.44, s.7(1) 4/5/2017 26Synthetic Turf Athletic Fields 3,100,000 * 3,100,000 (1) 3,100,000 Ch.44, s.7(1) 4/10/2018 18Water Mains Design & Construction 3,100,000 * 3,100,000 Ch.44, s.8(5) 11/13/2018 3Refunding 9,025,000 * (2) Ch.44, s.21A

28,525,000$ * 16,400,000$

______________________ *Preliminary, subject to change.(1) The Town voted to exempt these authorizations from the limitations of Proposition 2 ½.(2) Debt service on $8,878,500 principal amount of the Refunded Bonds has been excluded from the tax limitations of Proposition 2 ½. Debt service on

the portion of the Bonds issued to refund this portion of the Refunded Bonds will likewise be excluded from such limitations.(3) Payable February 4, 2020. To be retired with Bond proceeds.

As described above, Bond proceeds will be used to current refund a portion of the Town’s $7,131,000 General Obligation Municipal Purpose Loan of 2009 Bonds dated July 15, 2009, maturing in the years 2020 through 2026 in the aggregate principal amount of $2,575,000 (the “2009 Refunded Bonds”) and a portion of the Town’s $35,912,000 General Obligation Municipal Purpose Loan of 2010 Bonds dated March 1, 2010, maturing in the years 2021 through 2028 in the aggregate principal amount of $9,280,000 (the “2010 Refunded Bonds” and together with the 2009 Refunded Bonds, the “Refunded Bonds”) and to pay costs of issuing the Refunding Bonds. The Town will receive a lump sum payment of $1,341,378 in

18

connection with the Mullen School project financed in 2010 which will be used to retire a like amount of bonds associated with the 2010 bonds.

Sources and Uses of Bond Proceeds

Proceeds of the Bonds will be applied as follows:

SOURCES:Par Amount of the Bonds $Original Issue PremiumUnamortized Bond PremiumMSBA Lump SumCash Contribution

Total Sources $

USES:Deposit to Refunding Escrow Fund $Retire Maturing NotesProject Fund DepositUnderwriter's DiscountCosts of IssuanceRounding Amount

Total Uses $

Plan of Refunding

Upon delivery of the Bonds, the Town 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. The Refunding Escrow Fund will be pledged for the benefit of the holders of the Refunded Bonds.

Principal Maturities by Purpose*

Fiscal Year

Senior Center Design &

Construction*Synthetic Turf

Field*

Wastewater Management

Plan 1*

Wastewater Management

Plan 2* Water* Refunding* Total*

2021 475,000$ 225,000$ 180,000$ 10,000$ 155,000$ 1,565,000$ 2,610,000$ 2022 475,000 225,000 180,000 10,000 155,000 1,485,000 2,530,000 2023 475,000 225,000 180,000 10,000 155,000 1,095,000 2,140,000 2024 475,000 225,000 180,000 10,000 155,000 1,085,000 2,130,000 2025 475,000 220,000 180,000 10,000 155,000 1,080,000 2,120,000 2026 475,000 220,000 180,000 10,000 155,000 1,060,000 2,100,000 2027 475,000 220,000 180,000 10,000 155,000 1,050,000 2,090,000 2028 475,000 220,000 180,000 10,000 155,000 425,000 1,465,000 2029 475,000 220,000 180,000 10,000 155,000 180,000 1,220,000 2030 475,000 220,000 180,000 10,000 155,000 1,040,000 2031 475,000 220,000 180,000 10,000 155,000 1,040,000 2032 475,000 220,000 180,000 10,000 155,000 1,040,000 2033 475,000 220,000 180,000 10,000 155,000 1,040,000 2034 475,000 220,000 180,000 10,000 155,000 1,040,000 2035 475,000 180,000 10,000 155,000 820,000 2036 475,000 180,000 10,000 155,000 820,000 2037 475,000 180,000 10,000 155,000 820,000 2038 475,000 180,000 10,000 155,000 820,000 2039 475,000 180,000 10,000 155,000 820,000 2040 475,000 180,000 10,000 155,000 820,000 Total 9,500,000$ 3,100,000$ 3,600,000$ 200,000$ 3,100,000$ 9,025,000$ 28,525,000$


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Tax Exemption

In the opinion of Locke Lord LLP, Bond Counsel to the Town (“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. 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 Bonds will not be designated as “qualified tax-exempt obligations” for purposes of Section 265(b)(3) of the Code.

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 Town 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.

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 B 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,

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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.

For example, H.R. 1, signed into law on December 22, 2017, reduces the corporate tax rate, modifies individual tax rates, eliminates many deductions, and raises the income threshold above which the individual alternative minimum tax is invoked, among other things. These changes may increase, reduce or otherwise change the financial benefits of owning state and local government bonds. 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 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

Full Faith and Credit. General obligation bonds and notes of a Massachusetts city or town constitute a pledge of its full faith and credit. Payment is not limited to a particular fund or revenue source. Except for "qualified bonds" as described below (see "Types of Obligations- Serial Bonds and Notes" under "INDEBTEDNESS" below) and setoffs of state distributions as described below (see "State Distributions" below), no provision is made by the Massachusetts statutes for priorities among bonds and notes and other general obligations, although the use of certain moneys may be restricted.

Tax Levy. 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 payment 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 total amount of a tax levy is limited by statute. However, the voters in each municipality may vote to exclude from the limitation any amounts required to pay debt service on indebtedness incurred before November 4, 1980. Local voters may also vote to exempt specific subsequent bond issues from the limitation. (See "Tax Limitations" under "PROPERTY TAXATION" below.) In addition, obligations incurred before November 4, 1980 may be constitutionally entitled to payment from taxes in excess of the statutory limit.

Except for taxes on the increased value of certain property in designated development districts which may be pledged for the payment of debt service on bonds issued to finance economic development projects within such districts, no provision is made for a lien on any portion of the tax levy or any other monies to secure particular bonds or notes or bonds and notes generally (or judgments on bonds or notes) in priority to other claims. Provision is made, however, for borrowing to pay judgments, subject to the General Debt Limit. (See "Debt Limits" under “INDEBTEDNESS” below.) Subject to the approval of the State Director of Accounts for judgments above $10,000, judgments may also be paid from available funds without appropriation and included in the next tax levy unless other provision is made.

Court Proceedings. Massachusetts cities and towns 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 or town to take lawful action to obtain the required money, including the raising of it in the next annual tax levy, within the limits prescribed by law. (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 or town and the availability and adequacy of other remedies. The Massachusetts Supreme Judicial Court has stated in the past that a judgment against a municipality

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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.

Restricted Funds. Massachusetts statutes also provide that certain water, gas and electric, community antenna television system, telecommunications, sewer, parking meter, passenger ferry, community preservation and affordable housing receipts may be used only for water, gas and electric, community antenna television system, telecommunications, sewer, parking, mitigation of ferry service impacts, and community preservation and affordable housing purposes, respectively; accordingly, moneys derived from these sources may be unavailable to pay general obligation bonds and notes issued for other purposes. A city or town that accepts certain other statutory provisions may establish an enterprise fund for a utility, health care, solid waste, recreational or transportation facility and for police or fire services; under those provisions any surplus in the fund is restricted to use for capital expenditures or reduction of user charges. In addition, subject to certain limits, a city or town may annually authorize the establishment of one or more revolving funds in connection with use of certain revenues for programs that produce those revenues; interest earned on a revolving fund is treated as general fund revenue. A city or town may also establish an energy revolving loan fund to provide loans to owners of privately-held property in the city or town for certain energy conservation and renewable energy projects, and may borrow to establish such a fund. The loan repayments and interest earned on the investment of amounts in the fund shall be credited to the fund. Also, the annual allowance for depreciation of a gas and electric plant or a community antenna television and telecommunications system is restricted to use for plant or system renewals and improvements, for nuclear decommissioning costs, and costs of contractual commitments, or, with the approval of the State Department of Telecommunications and Energy, to pay debt incurred for plant or system reconstruction or renewals. Revenue bonds and notes issued in anticipation of them may be secured by a prior lien on specific revenues. Receipts from industrial users in connection with industrial revenue financings are also not available for general municipal purposes.

State Distributions. State grants and distributions may in some circumstances be unavailable to pay general obligation bonds and notes of a city or town 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 “TYPES OF OBLIGATIONS” below) and any other sums due and payable by the city or town to The Commonwealth of Massachusetts (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 Authority, 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 Water Pollution Abatement 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 or town 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 to the city or town 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 or town.

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.

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 regional school district, however, 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, 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 regional school district. To date, no such filings have been approved or made.

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Opinion of Bond Counsel

The purchaser 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 B.

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 Town 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 Town of Falmouth, 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 Town will covenant for the benefit of owners of the Bonds to provide certain financial information and operating data relating to the Town by not later than 270 days after the end of each fiscal year (the “Annual Report”), 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 C. The Certificate will be executed by the signers of the Bonds, and incorporated by reference in the Bonds. Other than the Town, there are no obligated persons with respect to the Bonds within the meaning of the Rule.

In the past five years, the 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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General

The Town is situated on Cape Cod, 72 miles southeast of Boston and 239 miles from New York City. Located in Barnstable County, on the shoulder or southwest end of Cape Cod, it is bordered on the south by Martha’s Vineyard Sound and Nantucket Sound and on the West by Buzzards Bay. First settled in 1660, Falmouth was incorporated as a town in 1686. It occupies a land area of 45 square miles with a year round population of 31,531 (2010 federal census) and a summer population of approximately 90,000.

The Town is primarily a residential resort community with a highly stable summer population. A substantial portion of its summer residents either own property in Falmouth or are repeat visitors.

Subject to the legislative decisions made by a representative town meeting, the affairs of the Town are administered by a board of five selectman, elected for overlapping three-year terms, and a Town Manager. The Finance Director serves as the Town’s chief financial officer.

The following table sets forth the principal executive officials of the Town.

PRINCIPAL TOWN OFFICIALS

Title Name Selection/Term Term Expires

Selectman, Chair Megan English Elected/3 Yrs. 2022Selectman Susan L. Moran Elected/3 Yrs. 2020Selectman Doug Jones Elected/3 Yrs. 2021Selectman Samuel H. Patterson Elected/3 Yrs. 2020Selectman Douglas C. Brown Elected/3 Yrs. 2022Town Manager Julian M. Suso Appointed 2020Assistant Town Manager Peter Johnson-Staub Appointed IndefiniteFinance Director Jennifer Mullen Appointed IndefiniteTown Clerk Michael C. Palmer Elected/3 Yrs. 2022Town Counsel Frank K. Duffy Jr. Appointed Dec. 2021Treasurer/Collector Patricia O'Connell Appointed/3 Yrs. 2021Town Accountant Victoria Rose Appointed/3 Yrs. 2022

Municipal Services

The Town provides general governmental services for the territory within its boundaries, including police and fire protection, public education in grades kindergarten through twelve, 3 libraries, road maintenance, trash collection, curbside recycling, a sanitary landfill, and parks and recreational facilities. Water is supplied by the Town Water Department from ground and surface water sources. Technical education in grades nine through twelve is provided by the Upper Cape Cod Regional Vocational Technical School District.

The Town’s principal water supply is Long Pond, a surface water supply. In 2017 a new water filtration plant with a rated capacity of 8.4 MGD was placed into service. The Town also has four wells constructed between 1980 and 2005 that produce approximately 2.6 MGD of water. Combined these sources provide 11 MGD of water. Winter demand is 2 to 3 MGD and peak seasonal summer demand is 8 – 10 MGD. Water is distributed through 398 miles of mains. 1.6343 billion gallons of water were pumped from all sources in 2017 and were distributed to the 21,475 service accounts.

The Town’s distribution system includes 2948 hydrants and there are three elevated storage tanks and one ground level storage tank with a total storage volume of 8.0 Million Gallons.

The Town has participated in the Title V Community Septic Management Program through the Massachusetts Clean Water Trust (the “Trust”) and has borrowed money from the Trust and has lent the proceeds to homeowners who, otherwise, would not be able to replace failing septic systems. Administration of the program is supported by the Barnstable County Department of Health and Environment. A lien is placed on the homeowner’s property and the homeowner loan repayment is added to their annual real estate tax bill. On July 25, 2005, the Falmouth Board of Selectmen voted to authorize homeowners to participate in the Barnstable County Community Septic Management Program created to administer these same types of loans in lieu of the Town’s direct involvement in the future.

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Barnstable County has opened a District Court House in Falmouth which also serves the upper-cape towns of Bourne and Mashpee.

The Cape Cod Regional Transit Authority provides bus service to the Town. The principal services provided by Barnstable County are a hospital, a jail and house of correction, a registry of deeds and a judicial court system.

The Woods Hole, Martha’s Vineyard and Nantucket Steamship Authority provides ferry service to the islands of Nantucket and Martha’s Vineyard. Woods Hole is a village within the Town.

Education

The Town provides public education for grades kindergarten through twelve. The Town operates four elementary schools as well as two middle schools. One middle school houses grades five and six and another grades seven and eight. The Town also operates one high school. Total capacity at the Falmouth Elementary Schools is estimated at 2,500. Total capacity at the middle and high schools is 1,851 and 1,800, respectively. The following table sets forth the trend in enrollments for the various schools in Falmouth.

PUBLIC SCHOOL ENROLLMENTS (as of October 1)

2014 2015 2016 2017 2018 2019

Elementary (K-4) 1,550 1,470 1,436 1,546 1,395 1,227

Middle/Jr. High (5-8) 1,139 1,184 1,164 1,158 1,137 1,109

High School (9-12) 865 881 905 869 858 907

Totals 3,554 3,535 3,505 3,573 3,390 3,243

Actual

Industry and Commerce

Falmouth’s economic base is characterized by a strong retail and service sector with a growing industrial segment. Since the 1970’s, the Town’s population has grown at a rate far above state and nation-wide levels. As increasing numbers of people have chosen to live in Falmouth on a year-round basis, the Town’s retail and service sectors have expanded to meet the needs of the increase in population. Supplementing these sectors is the industrial component of Falmouth’s economy, which has traditionally centered on printing, lumberyards and construction.

Falmouth’s location between Buzzards Bay and the Atlantic Ocean has helped the Town develop into one of the largest oceanographic and marine research centers in the country. The Town is the home of such renowned institutions as the Wood’s Hole Oceanographic Institution, Marine Biological Laboratory (“MBL”), the National Marine Fisheries Service, United States Geological Survey, and the National Academy of Science. In addition, Falmouth serves as the home for the largest Coast Guard base on the continental United States.

The Otis Air National Guard Base is partially located in Falmouth and each of the adjacent towns of Mashpee, Bourne, and Sandwich, and is part of the Joint Base Cape Cod. The Joint Base Cape Cod employs an average of 1,500 people on a year-round basis, and the number of service personnel on base can reach as high as 7,000 during the summer months.

The Town’s Economic Development and Industrial Corporation (“EDIC”) continues its efforts to diversify the local economy through development of Falmouth Technology Park and Raymond Business and Technology Park. Development of Falmouth Technology Park, which consists of 22 lots on 106 acres, has been ongoing since 1979 when the Town of Falmouth set aside 114 acres for creation of a technology park. To date, all lots have been sold to Corner Fabrications which built a manufacturing facility in 2006. As reported in the EDIC’s recently completed Silver Anniversary Oral History, the park hosts close to 400 jobs at more than a dozen companies. The majority of Falmouth Technology Park residents are engaged in research and/or value added manufacturing.

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The Town of Falmouth has a substantial amount of industry. The Education and Health Services industry is the leading economic pursuit. The table below sets forth the major categories of income and employment in the Town during the following calendar years.

Industry 2014 2015 2016 2017 2018

Construction 670 676 700 735 782 Manufacturing 460 464 461 495 595 Trade, Transportation and Utilities 2,125 2,088 1,084 2,109 2,099 Information 198 204 203 189 233 Financial Activities 319 302 316 318 314 Professional and Business Services 2,363 2,329 2,348 2,328 2,314 Education and Health Services 4,059 4,087 4,036 4,101 3,916 Leisure and Hospitality 2,532 2,493 2,602 2,629 2,588 Other Services 395 399 398 386 404 Public Administration 1,384 1,396 1,422 1,421 1,407 Total Employment 14,505 14,438 13,570 14,711 14,652

Number of Establishments 1,150 1,150 1,168 1,153 1,177 Average Weekly Wages 936$ 970$ 985$ 1,006$ 1,035$ Total Wages 707,579,901$ 730,162,569$ 747,782,021$ 773,297,405$ 785,993,371$

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.

LARGEST EMPLOYERS

The following table lists the Town’s largest employers, exclusive of the Town itself.

ApproximateNo. of

Name Product/Function EmployeesWoods Hole Oceanographic Institute Oceanographic Research 4,999-1,000 Joint Base Cape Cod Military Base 1,833 (1) Woods Hole, Martha’s Vineyard and Nantucket Steamship Authority Ferry Service 999-500Falmouth Hospital General Hospital 999-500Marine Biological Laboratory (MBL) Biological Research 499-200Sea Crest Hotel & Motor Inn Convention Hotel 499-200Walmart Retail 499-200Windfall Market Market 499-200JML Care Center Rehabilitation Rehabilitation 499-200United States Geological Survey (USGA) Oceanographic Research 249-100Royal Nursing Center Nursing Center 249-100

______________________ Source: Executive Office of Labor and Workforce Development (1) The Joint Base Cape Cod is partially located in Falmouth and each of the Towns of Mashpee, Bourne and Sandwich. The

number of reserve personnel reporting on weekends ranges from 0 to 3,000.

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Labor Force, Employment and Unemployment Rate

According to the Massachusetts Division of Employment and Training, in September 2019, the Town had a total labor force of 16,285 of which 15,819 were employed and 466, or 2.9%, were unemployed, as compared with 2.9% for the Commonwealth (unadjusted). Employment levels generally increase during the summer months.

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 calendar years 2014 through 2018.

UNEMPLOYMENT RATES

Town of Falmouth Massachusetts United StatesYear Labor Force Unemployment Rate Unemployment Rate Unemployment Rate

2018 15,845 4.1 % 3.3 % 3.9 %2017 15,475 4.6 3.7 4.42016 15,254 4.5 3.9 4.92015 15,327 6.0 4.9 5.32014 15,322 6.6 5.8 6.2

______________________ SOURCE: Mass. Division 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. Monthly data are unadjusted.

Building Permits

The following table sets forth the number of building permits issued and the estimated dollar value of new construction and alterations to date. The estimated dollar values are builders’ estimates and are generally considered to be conservative. Permits are filed and estimated valuations are shown for both private construction and Town projects.

BUILDING PERMITS

New ConstructionCalendar Residential Non-Residential Additions/Alterations Totals

Year No. Value No Value No Value No Value

2019 (1) 77 57,945,355$ 14 16,461,241$ 2,036 50,214,685$ 2,127 124,621,281$ 2018 115 41,259,285 3 8,937,909 2,857 80,342,502 2,975 130,539,696 2017 85 25,604,952 6 1,095,000 1,929 94,306,811 2,020 121,006,763 2016 71 27,769,500 7 3,454,063 2,759 65,840,769 2,837 97,064,332 2015 82 34,557,243 16 137,760,225 2,981 58,236,725 3,079 230,554,193

______________________ (1) Issued through September 20, 2019.

Transportation and Utilities

The principal highways serving the Town include State Routes 28, 28A and 151. The Cape Cod Regional Transit Authority provides bus service to fourteen towns on the Cape, including Falmouth. Private bus companies provide service to Providence, Boston and New York. The Hyannis Municipal Airport, which is located in the Town of Barnstable, provides daily air service to Boston and New York City. The Woods Hole Martha’s Vineyard and Nantucket Steamship Authority provides ferry service to the islands of Nantucket and Martha’s Vineyard. Established trucking firms provide competitive service locally and to long-distance points.

Gas and electric services are provided by established private utilities.

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The table below sets forth the Town’s retail sales in comparison with the State’s for the years shown below.

RETAIL SALES

______________________ SOURCE: 2007, 2002 and 1997 U.S. Census of Retail Trade.

Population, Income and Wealth Levels

The following table shows the median age, median family income and per capita income for the Town for the last four censuses.

______________________ SOURCE: U.S. Bureau of the Census.

On the basis of the 2010 Federal census, the Town has a population density of 712 persons per square mile.

POPULATION TRENDS

2010 2000 1990 198031,531 32,660 27,960 23,640

Falmouth MassachusettsEstablishments:

2007 179 25,4692002 178 25,9321997 186 26,209

Sales(000):2007 $477,941 $88,082,9662002 421,198 75,183,8071997 296,721 58,578,048

Per Capita Sales:2007 $14,634 $13,8732002 12,896 11,8421997 10,612 9,736

Falmouth Massachusetts United StatesMedian Age:

2010 50.8 39.1 37.22000 45.0 36.5 35.31990 38.6 33.6 32.9

Median Family Income:2010 77,488$ 81,165$ 51,114$ 2000 47,500 61,664 50,046 1990 40,655 44,367 35,225

Per Capita Income:2010 38,334$ 33,966$ 27,344$ 2000 26,292 25,952 21,587 1990 17,131 17,224 14,420

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PROPERTY TAXATION

Tax Levy Computation

The principal revenue source of the Town 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 available funds. The total amount levied is subject to certain limits prescribed by law; for a description of those limits, see “Tax Limitations” herein. The estimated receipts for a fiscal year from other sources 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 available funds 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 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.

The table below illustrates the manner in which the tax levy was determined for the following fiscal years.

TAX LEVY COMPUTATION

EstimatedFiscal Fiscal Fiscal Fiscal Fiscal2016 2017 2018 2019 2020

Total Appropriations(1) $ 134,748,540 $ 138,484,870 $ 147,157,187 $ 153,876,417 $ 159,431,387 Additions: State and County Assessments 2,749,434 2,734,259 2,991,385 3,496,612 3,331,567 Overlay Reserve 636,256 689,371 510,763 553,721 450,000 Other Additions 1,859,145 852,229 939,355 752,558 885,300 Total Additions 5,244,834 4,275,859 4,441,503 4,802,891 4,666,867 Gross Amount to be Raised 139,993,374 142,760,729 151,598,690 158,679,308 164,098,254 Deductions:Local Estimated Receipts 24,589,143 22,826,570 24,291,749 24,852,015 22,251,000 State Aid(2): 10,041,235 10,654,977 10,591,043 11,180,908 11,213,580 Available Funds(3): Free Cash 7,269,150 7,724,429 9,809,099 13,733,657 14,376,910 Other 4,396,308 4,994,402 6,988,631 5,760,427 4,753,975 Total Deductions 46,295,836 46,200,377 51,680,522 55,527,007 52,595,465 Net Amount to be Raised (Tax Levy)(4) 93,697,538$ 96,560,351$ 99,918,168$ 103,152,301$ 111,502,789$

______________________ (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” (see “Free Cash”), generally made as an offset to a particularappropriation item.

(4) Includes debt service and capital outlays excluded from the constraints of Proposition 2 1/2. See “Tax Limitations –Levy Limit Exclusions”.

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State Aid

The Town of Falmouth does not heavily rely on state aid to fund local services; this source of revenue accounts for approximately 5%-7% of the Town’s total budget, which is far below the average for the Commonwealth. The net actual local aid for fiscal 2016 was $8,088,645, $9,270,079 in fiscal 2017, $8,896,333 in fiscal 2018 and $9,674,057 in fiscal 2019.

Assessed Valuations and Tax Levies

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 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”. See “DEBT LIMITS” below.

The following table sets forth the trend in the Town’s assessed valuations, tax rates, tax levies, and tax levies per capita for the following fiscal years.

ASSESSED VALUATIONS AND TAX RATES

Personal TotalFiscal Real Estate Property Assessed Tax Rate Tax LevyYear Valuation Valuation Valuation Per $1,000 Tax Levy Per Capita(2)

2019 11,812,799,808$ 237,702,590$ 12,050,502,398$ 8.56$ 103,152,301$ 3,271$ 2018 (1) 11,382,160,239 236,231,350 11,618,391,589 8.60 99,918,168 3,169 2017 11,075,706,518 244,381,580 11,320,088,098 8.53 96,560,351 3,062 2016 10,954,630,648 239,818,381 11,194,449,029 8.37 93,697,538 2,972 2015 (1) 10,852,177,611 193,320,043 11,045,497,654 8.19 90,462,626 2,869

______________________ (1) Revaluation years. (2) Based on 2010 U.S. Bureau of the Census population figure of 31,531.

The following table shows the breakdown of the real estate assessed valuation for fiscal years 2017, 2018 and 2019 by class.

REAL ESTATE ASSESSED VALUATIONS BY CLASS

Property Type Amount % of Total Amount % of Total Amount % of Total

Residential (1) 10,388,100,650$ 91.8 % 10,663,429,906$ 91.8 % 11,073,963,208$ 91.9 %Commercial 607,421,068 5.4 631,222,433 5.4 646,700,900 5.4 Industrial 80,184,800 0.7 87,507,900 0.8 92,135,700 0.8 Personal 244,381,580 2.2 236,231,350 2.0 237,702,590 2.0 Total Real Estate 11,320,088,098$ 100.0 % 11,618,391,589$ 100.0 % 12,050,502,398$ 100.0 %

20192017 2018 (2)

______________________ (1) Includes Open Space. (2) Revaluation year.

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Largest Taxpayers

The following is a list of the largest taxpayers in the Town based upon taxes assessed for fiscal 2019. All of the taxpayers listed below are current in their payments.

Total Assessed % of TotalNature of Valuation for Assessed

Name Business 2019 Valuation

Eversource Utility 113,620,860$ 0.98 %OCW Retail Falmouth, LLC Retail 32,149,600 0.28 National Grid, Colonial Gas Utility 30,443,990 0.26 WHOI Research 26,320,600 0.23 Mellon Bank Trustee Residential 25,957,000 0.22 DNC Parks & Resorts Resort 23,845,100 0.21 ParaFestas Trustee Anistasios Residential 20,980,200 0.18 Woodbrier Assisted Living 20,552,100 0.18 Fenn, Peter R. Residential 15,836,700 0.14 Drucker, Gerald Tr. Residential 13,217,700 0.11

Total 322,923,850$ 2.78 %

State Equalized Valuation and Estimated Full Value Tax Rate

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 as of January 1 of even numbered years. This is known as the “equalized value”. The following table sets forth the trend in equalized valuations of the Town.

State EqualizedJanuary 1, Valuation % Change

2018 12,342,275,400$ 3.78 %2016 11,892,819,800 2.98 2014 11,548,755,700 0.63 2012 11,476,687,700 (5.68) 2010 12,168,109,600 (7.30)

Local assessed valuations are determined annually as of January 1 and used for the fiscal year beginning on the next July 1. The Town of Falmouth’s most recent revaluation was completed for use in setting the fiscal 2011 tax rate and levy. Based on that valuation, the Town’s local tax rate for fiscal year 2011 is believed to approximate a full value tax rate for that year.

Abatements and Overlay

The Town is authorized to increase each tax levy by an amount approved by the 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 rescinding the amount of the tax and charging surplus.

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The following table sets forth the amount of the overlay reserve for the following years and actual abatements granted as of June 30, 2019.

Overlay Reserve AbatementsFiscal Net Tax Dollar As a % of Granted throughYear Levy(1) Amount Net Levy June 30, 2019

2019 102,598,580$ 553,721$ 0.54 % 491,144$ 2018 99,407,405 510,763 0.51 316,744 2017 95,870,980 689,371 0.72 269,054 2016 93,061,282 636,256 0.68 340,958 2015 (2) 89,673,710 788,916 0.88 341,505

______________________ (1) Net of overlay reserve for abatements. (2) Revaluation year. Tax Collections

In past fiscal years and in the current fiscal year, 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. Effective July 1, 2011, preliminary tax payments are due on August 1 and November 1 with payment of the actual bill (after credit is given to 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 percent per annum. Interest accrues on delinquent taxes currently at the rate of 14 percent per annum.

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). If the property has been transferred, an unenforced lien expires on the third October 1 after the first year. If the property has not been transferred by the third October 1, 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.

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 below.

The table below compares the Town’s net tax collections with its net (gross tax levy less overlay reserve for abatements) tax levies for the following fiscal years.

Collections During Collections as ofOverlay Fiscal Year Payable(1) June 30, 2019 (1)(2)

Fiscal Gross Tax Reserve for Net Dollar % of Dollar % ofYear Levy Abatements Tax Levy Amount Net Levy Amount Net Levy

2019 103,152,301$ 553,721$ 102,598,580$ 104,206,413$ 101.6 % 104,206,413$ 101.6 %

2018 99,918,168 510,763 99,407,405 98,813,110 99.4 99,365,180 100.0

2017 96,560,351 689,371 95,870,980 94,799,722 98.9 96,005,071 100.1

2016 93,697,538 636,256 93,061,282 91,510,034 98.3 92,840,478 99.8

2015 90,462,626 788,916 89,673,710 87,309,039 97.4 89,899,024 100.3 ______________________ (1) Actual dollar collections net of refunds. (2) Collections for the current fiscal year are comparable to previous fiscal years. Tax Titles and Possessions 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 non-payment of taxes thereon. In either case the property owner can redeem the property by paying the unpaid taxes, with interest (at a rate of 14% by the collector and 16% by the treasurer) 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 like any land held for municipal purposes.

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The following table sets forth the amount of tax titles and possessions as of the end of each of the last five fiscal years as well as the redemptions for those years.

Total TaxFiscal Titles andYear Possessions Redemptions

2019 1,860,691$ 279,402$ 2018 1,726,125 40,699 2017 1,247,231 416,384 2016 1,540,411 124,483 2015 1,225,245 93,951

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. The Town does not expect to utilize this option at the present time. Taxation to Meet Deficits As noted elsewhere (see “Overlay” herein) 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. 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”.

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The statute 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 capital 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 2½ 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 2½ 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. The Town of Falmouth has been in full compliance with Proposition 2 1/2 since its inception. Under the law as now written, the current and future levies may increase by up to 2 1/2% of the maximum levy limit for the previous fiscal year, plus by any amounts voted for override and debt exclusion, or “new” valuations or “real” valuation increases. The table below presents the Town’s primary levy limits, its maximum levy limits, and its actual tax levies for the following fiscal years.

Local Primary Maximum Under(over) Under(over)Fiscal Assessed Levy Levy Actual Primary MaximumYear Valuation Limit(1) Limit Tax Levy Levy Limit Levy Limit

2019 12,050,502,398$ 301,262,560$ 104,340,044$ 103,152,301$ 198,110,259$ 1,187,743$ 2018 11,618,391,589 290,459,790 101,421,304 99,918,168 190,541,622 1,503,136 2017 11,320,088,098 283,002,202 96,926,921 96,560,351 186,441,851 366,570 2016 11,194,449,029 279,861,226 93,864,383 93,697,538 186,163,688 166,845 2015 11,045,497,654 276,137,441 90,669,593 90,462,626 185,674,815 206,967

______________________ (1) Primary Levy Limit is 2.5% of Local Assessed Valuation. Pledged Taxes Taxes on the increased value of certain property in designated development districts may be pledged for the payment of costs of economic development projects within such districts and may therefore be unavailable for other municipal purposes.

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Cape Cod Open Space Land Acquisition Excise Tax An excise tax of 3% of the real estate tax levy against real property is levied by the towns on Cape Cod that have accepted the Cape Cod Open Space Land Acquisition Program authorized by Chapter 293 of the Acts of 1998, as amended ( the “Land Bank Act”). This levy is not counted in the total taxes assessed for the purpose of determining the permitted levy amount under Proposition 2 ½ (see “Tax Limitations” under “PROPERTY TAXATION” herein). The proceeds of the excise tax, together with any state matching funds, are deposited in the Land Bank Fund held by each town and may be appropriated, upon the recommendation of the designated open space committee, for the purposes of acquiring land and interests in land for the protection of public drinking water supplies, open space and conservation and the creation of walking trails, bicycling trails and recreational areas. The Land Bank Act also authorized the issuance of bonds and notes for these purposes and the payment of debt service on such bonds and notes from amounts on deposit in the Land Bank Fund. Under the terms of the Land Bank Act, the excise tax expires on January 1, 2020. Pursuant to recent legislation, towns on Cape Cod that have adopted the Land Bank Act may, by vote of its legislative body and subsequent approval by the voters at a state or municipal election, replace its Cape Cod Open Space Land Acquisition Program with a Community Preservation Program. (See “COMMUNITY PRESERVATION ACT” below.) If any such town votes to adopt the Community Preservation Act (the “CPA”) in place of the Land Bank Act, the 3% excise tax receipts previously deposited in the town’s Land Bank Fund will be deposited in a Community Preservation Fund, together with state matching funds available under the CPA. The revenues in the Community Preservation Fund will be expended pursuant to recommendations of a community preservation committee not just for open space land acquisitions, but also for affordable housing, historic preservation and recreation purposes in accordance with the CPA. Notwithstanding the minimum spending requirements for each of such purposes imposed by the CPA described in “COMMUNITY PRESERVATION ACT” below, revenues deposited in the Community Preservation Fund under the CPA will be available to pay debt service on the portion of any bonds previously authorized by the town under the Land Bank Act. Although other municipalities may set the surcharge tax under the CPA at any rate up to 3% and may revoke its acceptance of the CPA at any time after 5 years from the date of such acceptance, towns on Cape Cod that adopt the CPA as a replacement for the Land Bank Act are required to maintain the surcharge rate at 3%, and may not revoke their acceptance of the CPA until fiscal year 2020. The Town voted to replace its Cape Cod Open Space Land Acquisition Program with a Community Preservation Program as described above. The termination of the Land Bank program and the commencement of the Community Preservation Program took effect on July 1, 2005. See table of receipts and state matching funds on the following page. Community Preservation Act The Massachusetts Community Preservation Act (the “CPA”) permits cities and towns that accept its provisions to levy a surcharge on its real property tax levy, dedicate revenue (other than state or federal funds), and to receive state matching funds for (i) the acquisition, creation, preservation, rehabilitation and restoration of land for recreational use, open space, and affordable housing and (ii) the acquisition, preservation, rehabilitation and restoration of historic resources. The provisions of the CPA must be accepted by the voters of the city or town at an election after such provisions have first been accepted by either a vote of the legislative body of the city or town or an initiative petition signed by 5% of its registered voters. A city or town may approve a surcharge of up to 3% (but not less than 1% under certain circumstances) and may make an additional commitment of funds by dedicating revenue other than state or federal funds, provided that the total funds collected do not exceed 3% of the real property tax levy, less any exemptions adopted (such as an exemption for low-income individuals and families and for low and moderate-income senior citizens, an exemption for $100,000 of the value of each taxable parcel of residential real property or $100,000 of the value of each taxable parcel of class three, commercial property, and class four, industrial property as defined in Chapter 59, Section 2A of the General Laws, and an exemption for commercial and industrial properties in cities and towns with classified tax rates). In the event that the municipality shall no longer dedicate all or part of the additional funds to community preservation, the surcharge on the real property tax levy of not less than 1% shall remain in effect, provided that any such change must be approved pursuant to the same process as acceptance of the CPA. The surcharge is not counted in the total taxes assessed for the purpose of determining the permitted levy amount under Proposition 2½ (see “Tax Limitations” under “PROPERTY TAXATION” above). A city or town may revoke its acceptance of the provisions of the CPA at any time after 5 years from the date of such acceptance and may change the amount of the surcharge or the exemptions to the surcharge at any time, including reducing the surcharge to 1% and committing additional municipal funds as outlined above, provided that any such revocation or change must be approved pursuant to the same process as acceptance of the CPA. Any city or town that accepts the provisions of the CPA will receive annual state matching grants to supplement amounts raised by its surcharge and dedication of revenue. The state matching funds are raised from certain recording and filing fees of the registers of deeds. Those amounts are deposited into a state trust fund and are distributed to cities and towns that have accepted the provisions of the CPA, which distributions are not subject to annual appropriation by the state

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legislature. The amount distributed to each city and town is based on a statutory formula and the total state distribution made to any city or town may not exceed 100% of the amount raised locally by the surcharge on the real property tax levy. The amounts raised by the surcharge on taxes, the dedication of revenue and received in state matching funds are required to be deposited in a dedicated community preservation fund. Each city or town that accepts the provisions of the CPA is required to establish a community preservation committee to study the community preservation needs of the community and to make recommendations to the legislative body of the city or town regarding the community preservation projects that should be funded from the community preservation fund. Upon the recommendations of the committee, the legislative body of the city or town may appropriate amounts from the fund for permitted community preservation purposes or may reserve amounts for spending in future fiscal years, provided that at least 10% of the total annual revenues to the fund must be spent or set aside for open space purposes, 10% for historic resource purposes and 10% for affordable housing purposes. The CPA authorizes cities and towns that accept its provisions to issue bonds and notes in anticipation of the receipt of surcharge and dedicated revenues to finance community preservation projects approved under the provisions of the CPA. Bonds and notes issued under the CPA are general obligations of the city or town and are payable from amounts on deposit in the community preservation fund. In the event that a city or town revokes its acceptance of the provisions of the CPA, the surcharge shall remain in effect until all contractual obligations incurred by the city or town prior to such revocation, including the payment of bonds or notes issued under the CPA, have been fully discharged. The Town has adopted the Community Preservation Act as discussed in “Cape Cod Open Space Land Acquisition Excise Tax”. The following table sets forth the amount of Community Preservation Act and the state matching funds received in the years shown below.

Fiscal CPAYear Receipts State Match

2019 3,107,713$ 589,551$ 2018 3,377,290 508,847 2017 2,811,459 590,288 2016 2,790,774 825,746 2015 2,648,275 852,813

As of June 30, 2018, the Community Preservation Fund had a balance of $1,988,987. Levy Limit Exclusions

The following table sets forth the portion of the current and recent levies that have been excluded from Proposition 2 ½.

Cape CodFiscal Debt Capital Commission TotalYear Service Exclusion Assessment Exclusions

2019 11,237,752$ -$ 514,232$ 11,751,984$ 2018 10,297,985 - 501,690 10,799,675 2017 10,662,278 - - 10,662,278 2016 10,737,407 - 485,257 11,222,664 2015 10,446,120 - 458,794 10,904,914

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TOWN FINANCES Budget and Appropriation Process Town Meeting: The annual appropriations of the Town are ordinarily made at an annual meeting, which usually takes place in April. Appropriations may also be voted at other meetings. The Town has a finance committee which submits reports and recommendations on proposed expenditures at Town Meetings. School committees are no longer autonomous with respect to school expenditures for current purposes. The school budget is limited to the amount appropriated by the Town Meeting. The board of selectmen of a town with the concurrence of the finance committee may transfer within the last 2 months of the fiscal year any amount appropriated for the use of any department to the appropriation for any other department, provided that no such transfer may be made from any appropriation for a school department, regional school district, or municipal light department. Mandatory Items: Mandatory items, such as state and county assessments, the overlay for abatements, abatements in excess of overlays, principal and interest not otherwise provided for and final judgments are included in the tax levy whether or not included in the appropriations voted at town meeting. Revenues: Revenues are not required to be set forth in the budget but estimated non-tax revenues are taken into account by the assessors in fixing the tax levy. (See “PROPERTY TAXATION–Tax Levy Computation”.) Operating Budget Trends The following table sets forth the operating budgets for fiscal years 2016 through 2020 as voted by the Annual Town Meetings. Said budgets exclude Mandatory Items (see above) and expenditures for “non-operating” or extraordinary items authorized under “special” warrant articles at special town meetings.

BUDGET COMPARISON

Fiscal 2016 Fiscal 2017 Fiscal 2018 Fiscal 2019 Fiscal 2020

General Government 3,818,994$ 4,180,433$ 4,220,591$ 4,401,170$ 4,489,636$ Public Safety 13,493,254 13,506,487 14,222,211 14,834,047 15,642,205 Public Works 12,009,281 12,882,270 13,572,886 14,017,585 14,566,677 Community Development 1,177,459 1,428,047 1,063,436 1,627,462 1,659,991 Community Services 4,175,738 4,335,007 4,486,624 4,560,633 4,810,281 Education 46,455,890 47,746,662 49,212,121 50,718,507 52,193,357 Employee Benefits 20,815,296 21,944,216 22,641,622 23,913,832 24,916,449 Insurance & Retirement, 1,619,000 1,718,000 1,877,304 1,983,145 2,063,156 Debt Service 15,703,004 15,662,840 16,512,271 16,173,744 16,023,146 Total Expenditures 119,267,916$ 123,403,962$ 127,809,066$ 132,230,125$ 136,364,898$

Approved

Revenues Property Taxes: Property taxes are a major source of revenue for the Town. The total amount levied is subject to certain limits prescribed by law; for a description of those limits see “PROPERTY TAXATION–Tax Limitations” herein. There is litigation in the Commonwealth claiming that the system of financing public education, with its heavy reliance on the property tax, is unconstitutional because it is based on the wealth of the municipality in which the student lives. State Aid: The Town’s state aid entitlement is based upon a number of different formulas, and while said formulas might indicate that a particular amount of state aid is owed, the amount of state aid actually paid is limited to the amount appropriated by the state legislature. The state annually estimates state aid but actual payments may vary from the estimate. Water and Sewer Rates and Services: The Town’s water and sewer operations are accounted for in the general fund. In May 1992, the Water Department converted from quarterly to semi-annual billing. Operating and a portion of capital expenses are supported by the user charges. Approximately 98% of the developed property in Town is connected to the water system. A “ready-to-serve” charge of $58.00 is assessed in May and November for an allowance of 10.96 cubic feet per day. This minimum of $116.00 per year applies to standard 5/8-inch meters. Service with larger meters have a proportionally higher

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minimum and daily allowances. Usage in excess of allowable is billed at the rate of $3.37 per one hundred cubic feet. Services with larger meters have higher minimums and daily allowances. Usage in excess of allowable is billed at the rate of $3.37 per one hundred cubic feet. The Town owns and operates a main wastewater treatment facility which was originally completed in 1986 and upgraded in 2005 and again in 2016. A second, smaller treatment facility has been in operation since 2009. Operating expenses are supported by user charges. Approximately 10% of the cesspools or developed properties in Town are connected to the municipal sewer system; most other developed properties in Town have septic systems. The sewer rate was structured based upon water usage and utilizes the same “ready to serve” fee structure and excess usage structure. The “ready to serve” charge for sewer is $134.00 and is assessed in May and November for an allowance of 10.95 cubic feet per day. This minimum of $268.00 per year applies to standard 5/8-inch meters. Services with larger meters have a proportionally higher minimum and daily allowances. Usage in excess of allowable is billed at the rate of $6.70 per one hundred cubic feet. For septage or grease discharge at the Town’s main treatment facility, the Town charges $80.00 per 1,000 gallons, from October through March and $95.00 per 1,000 gallons from April through September. Water and sewer receipts are more than sufficient to provide for all water and sewer expenditures. 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. Room Occupancy Tax: Under this tax, local governments may tax the provision of hotel, motel and lodging house rooms at a rate not to exceed six percent (6%) of the cost of renting such rooms. The tax is paid by the operator of the hotel, motel or lodging house to the State Commissioner of Revenue, who in turn pays the tax back to the municipality in which the rooms are located in quarterly distributions. The Town has levied the full tax since the inception of the tax in the Town. Other: Other major General Fund sources of revenue include interest income, licenses and permits and fines, fees and penalties. Investment of Town Funds 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. A breakdown of such investments may be obtained from the Town Treasurer. Pension funds are under the jurisdiction of the Falmouth Contributory Retirement System. Investments and the retirement system are discussed in “Retirement Plan” below and in Appendix A. Summary of Significant Accounting Policies See audited financial statements attached as Appendix A.

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Audits The Town’s accounts have been audited for fiscal year 2018 by Roselli, Clark & Associates, Certified Public Accountants, a copy of which is attached hereto as Appendix A. Copies of previous audits are available upon request. A similar audit for fiscal 2019 is currently underway. The attached report 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. Financial Statements Set forth on the following pages are Governmental Funds Balance Sheets for fiscal years 2018, 2017, and 2016, a Statement of Revenues, Expenditures, and Changes in Fund Balance – General Fund for fiscal year 2018, 2017, 2016, 2015 and 2014. Such statements were extracted from the Town’s audited financial statements and then combined for purposes of this presentation. Estimated 2019 Fiscal Year End Results The Town expects actual revenues to exceed estimated revenues by approximately $8.6 million due to good fiscal policy and conservative budgeting practices.

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Sewer Nonmajor TotalCommunity Capital Capital Governmental Governmental

General Preservation Projects Project Funds Funds

Cash and cash equivalents 36,069,535$ 6,927,150$ 2,366,175$ 2,442,105$ 10,310,420$ 58,115,385$ Investments 15,050,347 - - - 2,752,970 17,803,317 Receivables, net of allowance for uncollectibles:

Real estate and personal property taxes 1,530,423 43,012 - - - 1,573,435 Tax liens and deferrals 1,822,363 41,213 - - - 1,863,576 Excise 1,302,636 - - - - 1,302,636 Special assessments 66,240 - 866,297 - 22,873,152 23,805,689 Other 934,452 - 3,972 - 97,014 1,035,438 Intergovernmental 6,442,325 - 100,047 5,385,517 689,801 12,617,690 Total Assets 63,218,321 7,011,375 3,336,491 7,827,622 36,723,357 118,117,166

- - - - - - Total Assets and Deferred Outflows of Resources 63,218,321$ 7,011,375$ 3,336,491$ 7,827,622$ 36,723,357$ 118,117,166$

Warrants and accounts payable 2,419,057$ 41,336$ -$ 114,490$ 360,054$ 2,934,937$ Accrued payroll and withholdings 3,303,742 - - - - 3,303,742 Other liabilities 7,196 - - - - 7,196

Total liabilities 5,729,995 41,336 - 114,490 360,054 6,245,875

Unavailable revenues - property taxes 3,014,061 84,225 3,972 - - 3,102,258 Unavailable revenues - excise taxes 1,302,636 - - - - 1,302,636 Unavailable revenues - special assessments 66,240 - 866,297 - 22,873,152 23,805,689 Unavailable revenues - other 934,452 - - - - 934,452 Unavailable revenues - intergovernmental 6,442,325 - - 138,093 - 6,580,418

Total Deferred Inflows of Resources 11,759,714 84,225 870,269 138,093 22,873,152 35,725,453

Nonspendable - - - - 25,000 25,000 Restricted 872,359 6,885,814 2,466,222 7,575,039 13,465,151 31,264,585 Committed 10,936,681 - - - - 10,936,681 Assigned 1,129,906 - - - - 1,129,906 Unassigned 32,789,666 - - - - 32,789,666

Total Fund Balances 45,728,612 6,885,814 2,466,222 7,575,039 13,490,151 76,145,838 Total Liabilities, Deferred Inflows of Resources and Fund Balances 63,218,321$ 7,011,375$ 3,336,491$ 7,827,622$ 36,723,357$ 118,117,166$

_______________(1) Extracted from the audited financial statements of the Town.

Deferred Outflows of Resources

Liabilities

Deferred Inflows of Resources

Fund Balances

TOWN OF FALMOUTH, MASSACHUSETTSBalance Sheet

Governmental FundsJune 30, 2018 (1)

Assets

40




Real estate and personal property taxes 2,015,033 52,784 - - - 2,067,817 Tax liens and deferrals 1,712,934 16,042 - - - 1,728,976 Excise 1,372,326 - - - - 1,372,326 Special assessments 3,378,985 - 913,316 - 71,497 4,363,798 Other 1,525,576 - - - - 1,525,576 Intergovernmental 7,523,523 - 133,421 6,026,327 124,698 13,807,969

Due from other funds 17,067 - - - - 17,067 Total Assets 63,747,013 6,093,875 3,620,622 10,391,981 12,909,377 96,762,868


Warrants and accounts payable 2,107,059$ 96,907$ 35,180$ 561,720$ 168,660$ 2,969,526$ Accrued payroll and withholdings 3,241,392 - - - - 3,241,392 Retainage payable - - - 23,800 - 23,800 Other liabilities 11,958 - - - - 11,958 Bond anticipation notes payable - - 86,700 98,300 - 185,000 Due to other funds - - - - 17,067 17,067

Total liabilities 5,360,409 96,907 121,880 683,820 185,727 6,448,743

Unavailable revenues - property taxes 3,190,887 68,826 - - - 3,259,713 Unavailable revenues - excise taxes 1,372,326 - - - - 1,372,326 Unavailable revenues - special assessments 3,378,985 - 913,316 - 71,497 4,363,798 Unavailable revenues - other 1,525,576 - - - - 1,525,576 Unavailable revenues - intergovernmental 7,523,523 - - 138,093 - 7,661,616

Total Deferred Inflows of Resources 16,991,297 68,826 913,316 138,093 71,497 18,183,029

Nonspendable - - - - 25,000 25,000 Restricted 1,115,435 5,928,142 2,585,426 9,570,068 12,627,153 31,826,224 Committed 8,045,314 - - - - 8,045,314 Assigned 1,459,796 - - - - 1,459,796 Unassigned 30,774,762 - - - - 30,774,762

Total Fund Balances 41,395,307 5,928,142 2,585,426 9,570,068 12,652,153 72,131,096 Total Liabilities, Deferred Inflows of Resources and Fund Balances 63,747,013$ 6,093,875$ 3,620,622$ 10,391,981$ 12,909,377$ 96,762,868$



Liabilities

Total Deferred Inflows of Resources

Fund Balances



Assets

41




Real estate and personal property taxes 4,000,833 48,596 - - - 4,049,429 Excise 1,257,774 - - - - 1,257,774 Special assessments 3,749,394 - 984,878 - 88,582 4,822,854 Other 1,212,785 85,906 - - - 1,298,691 Intergovernmental 8,987,671 - 283,975 2,345,793 403,468 12,020,907

Due from other funds 17,130 - - - - 17,130 Total Assets 59,800,588 6,509,847 6,728,573 14,519,064 12,377,686 99,935,758


Warrants and accounts payable 1,857,147$ 72,029$ 243,812$ 1,633,652$ 255,560$ 4,062,200$ Accrued payroll and withholdings 3,129,811 - - - - 3,129,811 Retainage payable - - - 747,153 - 747,153 Other liabilities 5,278 - - - - 5,278 Bond anticipation notes payable - - 3,000,000 18,325,950 - 21,325,950 Due to other funds - - - - 17,130 17,130

Total liabilities 4,992,236 72,029 3,243,812 20,706,755 272,690 29,287,522

Unavailable revenues - property taxes 3,248,806 134,502 - - - 3,383,308 Unavailable revenues - excise taxes 1,257,774 - - - - 1,257,774 Unavailable revenues - special assessments 3,749,394 - 984,878 - 88,582 4,822,854 Unavailable revenues - other 1,212,785 - - - - 1,212,785 Unavailable revenues - intergovernmental 8,987,671 - - 138,093 - 9,125,764

Total Deferred Inflows of Resources 18,456,430 134,502 984,878 138,093 88,582 19,802,485

Nonspendable - - - - 25,000 25,000 Restricted 1,208,751 6,303,316 2,597,717 - 11,991,414 22,101,198 Committed 9,077,570 - - - - 9,077,570 Assigned 761,367 - - - - 761,367 Unassigned 25,304,234 - (97,834) (6,325,784) - 18,880,616

Total Fund Balances 36,351,922 6,303,316 2,499,883 (6,325,784) 12,016,414 50,845,751 Total Liabilities, Deferred Inflows of Resources and Fund Balances 59,800,588$ 6,509,847$ 6,728,573$ 14,519,064$ 12,377,686$ 99,935,758$



Liabilities

Total Deferred Inflows of Resources

Fund Balances



Assets

42


General Preservation Projects Project Funds FundsRevenues

Real and personal property taxes 99,742,078$ 2,935,928$ -$ -$ -$ 102,678,006$ Intergovernmental 21,198,000 908,847 1,573,043 - 5,660,120 29,340,010 Motor vehicle and other excises 7,567,368 - - - - 7,567,368 Licenses and permits 1,902,911 - - - - 1,902,911 Departmental and other revenue 1,461,687 - - - 2,845,506 4,307,193 User charges 5,468,989 - - - - 5,468,989 Special assessments 1,000,832 - 155,430 - 1,517,523 2,673,785 Penalties and interest on taxes 609,710 11,534 - - - 621,244 Fines and forfeitures 216,884 - - - - 216,884 Investment income 75,756 29,827 - - (34,071) 71,512 Contributions and donations - - - - 93,293 93,293 Total Revenues 139,244,215$ 3,886,136$ 1,728,473$ -$ 10,082,371$ 154,941,195$

ExpendituresCurrent:

General government 8,346,826$ 814,813$ 33,596$ -$ 1,077,892$ 10,273,127$ Public safety 15,713,774 - 67,230 - 507,193 16,288,197 Education 49,857,693 - 30,733 - 4,956,587 54,845,013 Public works 11,083,077 144,505 1,590,536 2,093,329 253,110 15,164,557 Health and human services 1,520,721 - - - 181,829 1,702,550 Culture and recreation 3,125,101 184,700 - - 379,003 3,688,804 Pension and fringe benefits 31,480,427 - - - - 31,480,427 Community development - 303,282 - - - 303,282

State and county tax assessments 3,094,656 - - - - 3,094,656 Debt service:

Principal 10,184,535 - - - - 10,184,535 Interest 3,544,488 - - - - 3,544,488 Total Expenditures 137,951,298 1,447,300 1,722,095 2,093,329 7,355,614 150,569,636

Excess (Deficiency) of Revenues Over (Under) Expenditures 1,292,917$ 2,438,836$ 6,378$ (2,093,329)$ 2,726,757$ 4,371,559$

Other Financing Sources (Uses)Transfers in 3,676,474 - 86,700 98,300 94,269 3,955,743 Transfers out (636,086) (1,481,164) (212,282) - (1,983,028) (4,312,560) Total Other Financing Sources (Uses) 3,040,388 (1,481,164) (125,582) 98,300 (1,888,759) (356,817)

Net Change in Fund Balances 4,333,305$ 957,672$ (119,204)$ (1,995,029)$ 837,998$ 4,014,742$ Fund Balances, Beginning 41,395,307 5,928,142 2,585,426 9,570,068 12,652,153 72,131,096 Fund Balances, End of Year 45,728,612$ 6,885,814$ 2,466,222$ 7,575,039$ 13,490,151$ 76,145,838$

____________(1) Extracted from the audited financial statements of the Town.

TOWN OF FALMOUTH, MASSACHUSETTSStatement of Revenues, Expenditures, and Changes in Fund Balances

Governmental FundsYear Ended June 30, 2018 (1)

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Real and personal property taxes 96,455,200$ 2,886,061$ -$ -$ -$ 99,341,261$ Intergovernmental 21,275,351 590,288 2,305,931 - 5,323,388 29,494,958 Motor vehicle and other excises 7,182,338 - - - - 7,182,338 Licenses and permits 1,599,548 - - - - 1,599,548 Departmental and other revenue 1,239,110 - - - 2,864,759 4,103,869 User charges 4,981,417 - - - - 4,981,417 Special assessments 356,737 - 218,220 - - 574,957 Penalties and interest on taxes 719,701 12,048 - - - 731,749 Fines and forfeitures 173,772 - - - - 173,772 Investment income 449,622 13,630 - - 60,459 523,711 Contributions and donations - - - - 130,466 130,466 Total Revenues 134,432,796$ 3,502,027$ 2,524,151$ -$ 8,379,072$ 148,838,046$


General government 10,001,277$ -$ 1,458,619$ -$ 93,483$ 11,553,379$ Public safety 15,409,960 - 1,412 - 237,086 15,648,458 Education 47,369,740 - 3,768,021 - 5,700,400 56,838,161 Public works 10,514,503 - 1,289,324 10,875,330 50,161 22,729,318 Health and human services 1,550,722 - - - 338,199 1,888,921 Culture and recreation 2,860,932 - 6,500 - 163,561 3,030,993 Pension and fringe benefits 29,928,369 - - - - 29,928,369 Community development - 1,739,406 - - - 1,739,406

State and county tax assessments 2,852,594 - - - - 2,852,594 Debt service:

Principal 8,906,961 - - - - 8,906,961 Interest 3,684,898 - - - - 3,684,898 Total Expenditures 133,079,956 1,739,406 6,523,876 10,875,330 6,582,890 158,801,458

Excess (Deficiency) of Revenues Over (Under) Expenditures 1,352,840$ 1,762,621$ (3,999,725)$ (10,875,330)$ 1,796,182$ (9,963,412)$

Other Financing Sources (Uses)Transfers in 4,828,636 - 2,100,000 - 691,709 7,620,345 Transfers out (1,481,709) (2,137,795) (928,032) - (1,852,152) (6,399,688) Issuance of refunding bonds 3,025,000 - - - - 3,025,000 Payments to refunding escrow agent (3,276,155) - - - - (3,276,155) Premiums on bonds and notes 594,773 - - - - 594,773 Issuance of bonds and notes - - 2,913,300 26,771,182 - 29,684,482 Total Other Financing Sources (Uses) 3,690,545 (2,137,795) 4,085,268 26,771,182 (1,160,443) 31,248,757

Net Change in Fund Balances 5,043,385$ (375,174)$ 85,543$ 15,895,852$ 635,739$ 21,285,345$ Fund Balances, Beginning 36,351,922 6,303,316 2,499,883 (6,325,784) 12,016,414 50,845,751 Fund Balances, End of Year 41,395,307$ 5,928,142$ 2,585,426$ 9,570,068$ 12,652,153$ 72,131,096$




44



Real and personal property taxes 93,681,564$ 2,801,799$ -$ -$ -$ 96,483,363$ Intergovernmental 17,698,003 825,746 2,252,510 974,461 6,558,561 28,309,281 Motor vehicle and other excises 7,111,477 - - - - 7,111,477 Licenses and permits 1,586,794 - - - - 1,586,794 Departmental and other revenue 1,667,804 - - - 2,808,505 4,476,309 User charges 4,368,924 - - - - 4,368,924 Special assessments 326,271 - 269,651 - - 595,922 Penalties and interest on taxes 922,946 15,788 - - - 938,734 Fines and forfeitures 149,664 - - - - 149,664 Investment income 701,161 11,006 - - 125,709 837,876 Contributions and donations - - - - 124,845 124,845 Total Revenues 128,214,608$ 3,654,339$ 2,522,161$ 974,461$ 9,617,620$ 144,983,189$


General government 7,762,745$ -$ 191,547$ -$ 256,176$ 8,210,468$ Public safety 15,416,247 - 2,828 - 271,650 15,690,725 Education 46,891,074 - 367,095 - 5,838,637 53,096,806 Public works 10,611,130 - 2,280,905 23,544,964 374,302 36,811,301 Health and human services 1,541,735 - - - 476,330 2,018,065 Culture and recreation 2,948,334 - 35,989 - 84,565 3,068,888 Pension and fringe benefits 25,802,885 - - - - 25,802,885 Community development - 1,500,974 - - - 1,500,974 State and county tax assessments 2,668,658 - - - - 2,668,658

Debt service: - Principal 8,710,279 - - - - 8,710,279 Interest 3,737,405 - - - - 3,737,405 Total Expenditures 126,090,492 1,500,974 2,878,364 23,544,964 7,301,660 161,316,454

Excess (Deficiency) of Revenues Over (Under) Expenditures 2,124,116$ 2,153,365$ (356,203)$ (22,570,503)$ 2,315,960$ (16,333,265)$

Other Financing Sources (Uses)Transfers in 6,589,104 - 25,000 2,400,000 801,033 9,815,137 Transfers out (2,726,033) (2,121,837) (380,983) - (2,313,005) (7,541,858) Issuance of bonds and notes - - - 15,425,539 - 15,425,539 Total Other Financing Sources (Uses) 3,863,071 (2,121,837) (355,983) 17,825,539 (1,511,972) 17,698,818

Net Change in Fund Balances 5,987,187$ 31,528$ (712,186)$ (4,744,964)$ 803,988$ 1,365,553$ Fund Balances, Beginning, as restated 30,364,735 6,271,788 3,212,069 (1,580,820) 11,212,426 49,480,198 Fund Balances, End of Year 36,351,922$ 6,303,316$ 2,499,883$ (6,325,784)$ 12,016,414$ 50,845,751$




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Nonmajor TotalCommunity Capital Governmental Governmental

General Preservation Projects Funds FundsRevenues

Real and personal property taxes 90,558,125$ 2,649,807$ -$ -$ 93,207,932$ Intergovernmental 14,959,607 852,813 789,614 5,950,959 22,552,993 Motor vehicle and other excises 6,537,926 - - - 6,537,926 Licenses and permits 1,533,147 - - - 1,533,147 Departmental and other revenue 1,943,623 - - 3,426,733 5,370,356 User charges 4,454,984 - - - 4,454,984 Special assessments 364,791 - 311,499 - 676,290 Penalties and interest on taxes 861,267 8,484 - - 869,751 Fines and forfeitures 182,135 - - - 182,135 Investment income 265,099 10,028 - 28,227 303,354 Contributions and donations - - - 188,013 188,013 Total Revenues 121,660,704$ 3,521,132$ 1,101,113$ 9,593,932$ 135,876,881$


General government 7,311,198$ -$ -$ 105,464$ 7,416,662$ Public safety 14,415,604 - - 176,880 14,592,484 Education 45,300,383 - - 5,881,583 51,181,966 Public works 9,570,095 - 6,619,996 707,989 16,898,080 Health and human services 1,473,577 - - 545,139 2,018,716 Culture and recreation 2,844,488 - - 87,050 2,931,538 Pension and fringe benefits 22,724,129 - - - 22,724,129 Community development - 506,772 - - 506,772 y 2,769,084 - - - 2,769,084

Debt service: - Principal 8,324,354 - - - 8,324,354 Interest 3,975,218 - - - 3,975,218 Total Expenditures 118,708,130 506,772 6,619,996 7,504,105 133,339,003

Excess (Deficiency) of Revenues Over (Under) Expenditures 2,952,574$ 3,014,360$ (5,518,883)$ 2,089,827$ 2,537,878$

Other Financing Sources (Uses)Transfers in 5,369,960 - 300,000 392,927 6,062,887 Transfers out (3,292,927) (1,681,901) (122,207) (1,934,923) (7,031,958) Issuance of refunding bonds 21,441,445 - - - 21,441,445 Payments to refunding escrow agent (22,181,914) - - - (22,181,914) Issuance of long term debt - - 3,975,000 - 3,975,000 Refunding bond premium 1,263,542 - - - 1,263,542 Total Other Financing Sources (Uses) 2,600,106 (1,681,901) 4,152,793 (1,541,996) 3,529,002

net Change in Fund Balances 5,552,680$ 1,332,459$ (1,366,090) 547,831$ 6,066,880$ Fund Balances, Beginning, as restated 24,812,055 4,939,329 2,997,339 10,664,595 43,413,318 Fund Balances, End of Year 30,364,735$ 6,271,788$ 1,631,249$ 11,212,426$ 49,480,198$




46

Nonmajor TotalCommunity Governmental Governmental

General Preservation Funds FundsRevenues

Real and personal property taxes 87,771,130$ 2,567,208$ -$ 90,338,338$ Intergovernmental 21,960,517 1,376,543 7,164,925 30,501,985 Motor vehicle and other excises 6,226,730 - - 6,226,730 Licenses and permits 1,584,592 - - 1,584,592 Departmental and other revenue 1,495,894 - 3,531,777 5,027,671 User charges 4,432,147 - - 4,432,147 Special assessments 542,572 - 72,243 614,815 Penalties and interest on taxes 630,497 - - 630,497 Fines and forfeitures 200,551 - - 200,551 Inevestment income 557,828 11,692 121,118 690,638 Contributions and donations - - 170,668 170,668 Total Revenues 125,402,458$ 3,955,443$ 11,060,731$ 140,418,632$


General government 6,538,546$ -$ 111,842$ 6,650,388$ Public safety 13,402,141 - 805,823 14,207,964 Education 44,392,146 - 6,032,720 50,424,866 Public works 9,034,705 - 4,157,628 13,192,333 Health and human services 1,429,127 - 165,217 1,594,344 Culture and recreation 2,745,631 - 59,576 2,805,207 Pension and fringe benefits 30,123,813 - - 30,123,813 Community development - 400,016 - 400,016 State and county tax assessements 2,665,805 - - 2,665,805

Debt service: - Principal 8,801,551 - - 8,801,551 Interest 4,255,972 - - 4,255,972 Total Expenditures 123,389,437 400,016 11,332,806 135,122,259

Excess (Deficiency) of Revenues Over (Under) Expenditures 2,013,021$ 3,555,427$ (272,075)$ 5,296,373$

Other Financing Sources (Uses)Transfers in 6,790,957 - 1,841,842 8,632,799 Tansfers out (1,826,734) (1,737,575) (2,483,696) (6,048,005) Total Other Financing Sources (Uses) 4,964,223 (1,737,575) (641,854) 2,584,794

net Change in Fund Balances 6,977,244$ 1,817,852$ (913,929) 7,881,167$ Fund Balances, Beginning, as restated 17,834,811 3,121,477 14,575,863 35,532,151 Fund Balances, End of Year 24,812,055$ 4,939,329$ 13,661,934 43,413,318$



Governmental FundsYear Ended June 30, 2014(1)

47

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 undesignated fund balance adjusted to a cash basis. The following table sets forth the trend in free cash as certified by the Bureau of Accounts.

Fiscal Year Free Cash(July 1) (July 1)

2019 14,670,760$ 2018 15,588,620 2017 12,172,944 2016 10,728,544 2015 8,930,163

Stabilization Funds The Town maintains a stabilization fund, which is accounted for in the Trust Funds. Funded by an annual appropriation, the stabilization fund plus interest income may be appropriated by a two-thirds vote at an annual or special town meeting for any municipal purpose.

Fiscal Stabilization Year Fund Balance

2019 6,589,985$ 2018 5,781,136 2017 5,404,512 2016 4,849,190 2015 4,139,026

Renewable Energy Stabilization Fund At the November 9, 2009 Annual Town Meeting, the Town established a Renewable Energy Stabilization Fund, which is used to offset costs associated with operating the Town’s wind turbines. The following table sets forth the balance of this fund at the end of the fiscal years shown.

RenewableEnergy

Fiscal Stabilization Year Fund Balance

2019 6,955$ 2018 6,577 2017 6,645 2016 6,507 2015 6,126

Tax Increment Financing for Development Districts Under recent legislation, cities and towns are authorized to establish development districts to encourage increased residential, industrial and commercial activity. All or a portion of the taxes on growth in assessed value in such districts may be pledged and used solely to finance economic development projects pursuant to the city or town’s development program for the district. This includes pledging such “tax increments” for the payment of bonds issued to finance such projects. As a result of any such pledge, tax increments raised from new growth properties in development districts are not available for other municipal purposes. Tax increments are taken into account in determining the total taxes assessed for the purpose of calculating the maximum permitted tax levy under Proposition 2 ½ (see “Tax Limitations” under “PROPERTY TAXATION” herein.) The Town of Falmouth does not currently have any TIF (tax incrementing financing) agreements.

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INDEBTEDNESS Authorization Procedure and Limitations Bonds and notes are generally authorized on behalf of the Town by vote of two-thirds of all the Town Meeting Members present and voting at an annual or special town meeting, subject to a referendum vote if a petition therefore is properly filed within five days (excluding Sundays and Holidays) after the close of such meetings. Borrowings for certain purposes require state administrative approval. Temporary loans in anticipation of current revenues and certain state and county reimbursements are generally authorized by majority vote but provision is made for temporary loans in anticipation of federal grants and for other purposes in certain circumstances without town meeting authorization. Debt Limits General Debt Limit. 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 (limited to 10 percent of equalized valuation), housing, urban renewal and economic development (subject to various debt limits), and electric, gas, community antenna television systems, and telecommunications systems (subject to separate 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 “PROPERTY TAX” herein.) 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. The State Treasurer is required to pay the debt service on qualified bonds and thereafter to withhold the amount of the debt

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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. 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 or Drinking 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. This article is not intended to summarize laws relating to revenue bonds or to notes issued in anticipation of them. Industrial revenue bonds are also outside the scope of this article.

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TOWN OF FALMOUTH DIRECT DEBT SUMMARY

AS OF JUNE 30, 2019, INCLUDING SUBSEQUENT ISSUE (EXCLUDES THE EFFECTS OF THE REFUNDING)

General Obligation Bonds Outstanding as of June 30, 2019, Including Subsequent Issue: School (1) 31,741,000$ Water (2) 6,919,000 Sewer (3) 5,092,700 Other (4) 14,442,300 Land Bank 3,740,000 SRF (5) 73,458,283 Golf Course (6) 8,760,000 Total Outstanding 144,153,283$

This Issue of Bonds to be Dated December 12, 2019 28,525,000 *

Temporary Notes Outstanding:

Bond Anticipation Notes Outstanding (7) 16,400,000 Less: To Be Retired with Bond Proceeds (16,400,000) Short-Term Debt Outstanding After This Issue 0

Total Direct Debt 172,678,283$

______________________ *Preliminary, subject to change. (1) The unpaid balance of state school construction grants payable over the life of outstanding school bonds for both principal and

interest is approximately $2,056,104. The Town will receive a lump sum payment of $1,341,378 from the MSBA which represents the remaining payments for fiscal years 2021 and 2022. Said amount will be contributed to the refunding escrow, thereby reducing the size of the refunding portion of the Bonds needed to effect the refunding. Exempt from the limits of Proposition 2 ½, subject to the limitations imposed by Chapter 59, Section 21C of the General Laws.

(2) Self-Supporting. $3,040,000 is exempt from the limits of Proposition 2 ½, subject to the limitations imposed by Chapter 59, Section 21C of the General Laws and $6,849,000 is outside the Town’s debt limit.

(3) $4,796,200 is exempt from the limits of Proposition 2 ½, subject to the limitations imposed by Chapter 59, Section 21C of the General Laws.


(5) Does not reflect subsidy from MCWT. $55,239,000 is outside the Town’s debt limit and $68,945,155 is exempt from the limits of Proposition 2 ½, subject to the limitations imposed by Chapter 59, Section 21C of the General Laws.

(6) Self-Supporting and outside the Town’s debt limit. (7) Payable February 4, 2020.

Debt Ratios

The following table sets forth the ratio of debt to equalized valuation and per capita debt ratios at the end of the five most recent fiscal years. The table considers the principal amount of general obligation bonds and serial notes of the Town of Falmouth. The table does not deduct anticipated state grant payments applicable to the principal amount of outstanding bonds or debt that may be supported in whole, or part, by non-tax revenues. (See "Direct Debt Summary".)

Fiscal Year End

General Obligation Bonds

Outstanding Population (1)Equalized

Valuation (2)Per Capita

Debt

Ratio of Debt to Equalized Valuation

2019 144,153,283$ 31,531 12,342,275,400$ 4,572$ 1.17 %2018 161,744,465 31,531 11,892,819,800 5,130 1.362017 166,629,160 31,531 11,892,819,800 5,285 1.402016 132,209,148 31,531 11,548,755,700 4,193 1.142015 110,131,861 31,531 11,548,755,700 3,493 0.95

______________________ (1) 2010 Federal census used for fiscal years 2014 through 2018. (2) 2014 state equalized valuation used for fiscal years 2015 and 2016; 2016 state equalized valuation used for fiscal years 2017 and

2018; 2018 state equalized valuation used for fiscal year 2019.

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Authorized Unissued Debt and Prospective Financing Following the delivery of the Bonds, the Town will have approximately $9.7 million of bonds authorized but unissued, primarily consisting of $6.7 million for Wastewater Management Planning and the balance for various municipal purposes. Principal Payments by Purpose The following table sets forth the principal payments by purpose on outstanding general obligation bonds and serial notes of the Town of Falmouth.

GENERAL OBLIGATION BONDS AND SERIAL NOTES PRINCIPAL PAYMENTS BY PURPOSE

AS OF JUNE 30, 2019

Total Fiscal Land Outstanding Year School (1) Water (2) Sewer (3) Other (4) Bank SRF (5) Golf Course (6) 6/30/2018

2020 3,715,000$ 995,000$ 385,000$ 1,560,000$ 940,000$ 3,938,936$ 395,000$ 11,928,936$ 2021 3,702,000 759,000 385,000 1,558,000 921,000 4,011,560 420,000 11,756,560 2022 3,690,000 750,000 382,000 1,550,000 828,000 4,068,694 440,000 11,708,694 2023 2,975,000 665,000 379,000 1,520,000 516,000 4,142,676 455,000 10,652,676 2024 2,800,000 645,000 325,000 1,505,000 240,000 4,197,475 475,000 10,187,475 2025 2,795,000 635,000 325,000 1,510,000 240,000 3,408,108 495,000 9,408,108 2026 2,470,000 585,000 300,000 1,115,000 55,000 3,449,592 515,000 8,489,592 2027 2,415,000 365,000 300,000 1,100,000 - 3,469,485 525,000 8,174,485 2028 1,555,000 190,000 235,000 760,000 - 3,517,375 545,000 6,802,375 2029 1,275,000 190,000 235,000 725,000 - 3,566,169 560,000 6,551,169 2030 1,275,000 190,000 235,000 370,000 - 3,227,132 590,000 5,887,132 2031 1,275,000 190,000 230,000 225,000 - 3,097,787 615,000 5,632,787 2032 1,275,000 190,000 230,000 220,000 - 3,144,400 640,000 5,699,400 2033 105,000 190,000 230,000 220,000 - 3,191,998 670,000 4,606,998 2034 105,000 190,000 230,000 220,000 - 3,240,599 695,000 4,680,599 2035 105,000 190,000 230,000 95,000 - 3,290,224 725,000 4,635,224 2036 105,000 - 230,000 95,000 - 3,340,895 - 3,770,895 2037 104,000 - 226,700 94,300 - 2,389,838 - 2,814,838 2038 - - - - - 1,468,168 - 1,468,168 2039 - - - - - 1,479,147 - 1,479,147 2040 - - - - - 1,037,565 - 1,037,565 2041 - - - - - 1,039,123 - 1,039,123 2042 - - - - - 1,040,682 - 1,040,682 2043 - - - - - 1,042,244 - 1,042,244 2044 - - - - - 1,043,809 - 1,043,809 2045 - - - - - 1,045,375 - 1,045,375 2046 - - - - - 1,046,945 - 1,046,945 2047 - - - - - 522,282 - 522,282

Total 31,741,000$ 6,919,000$ 5,092,700$ 14,442,300$ 3,740,000$ 73,458,283$ 8,760,000$ 144,153,283$

______________________ (1) The unpaid balance of state school construction grants payable over the life of outstanding school bonds for both principal and

interest is approximately $2,056,104. The Town will receive a lump sum payment of $1,341,378 from the MSBA which represents the remaining payments for fiscal years 2021 and 2022, which will be contributed to the escrow for the current portion of the Bonds being issued for refunding purposes. Exempt from the limits of Proposition 2 ½, subject to the limitations imposed by Chapter 59, Section 21C of the General Laws.

(2) Self-Supporting. $3,040,000 is exempt from the limits of Proposition 2 ½, subject to the limitations imposed by Chapter 59, Section 21C of the General Laws and $6,849,000 is outside the Town’s debt limit.



(5) Does not reflect subsidy from MCWT. $55,239,000 is outside the Town’s debt limit and $68,945,155 is exempt from the limits of Proposition 2 ½, subject to the limitations imposed by Chapter 59, Section 21C of the General Laws.

(6) Self-Supporting and outside the Town’s debt limit.

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Debt Service Requirements The following table sets forth the required principal and interest payments on all general obligation debt of the Town of Falmouth as of June 30, 2019.

GENERAL OBLIGATION BONDS AND SERIAL NOTES DEBT SERVICE REQUIREMENTS

AS OF JUNE 30, 2019 (1)

Less Less NetFiscal MSBA MCWT Debt Year Principal Interest Payment Subsidies Service

2020 11,928,936$ 3,528,396$ (685,368)$ (210,554)$ 14,561,410$ 2021 11,756,560 3,157,947 (685,368) (2) (196,486) 14,032,653 2022 11,708,694 2,758,131 (685,368) (2) (182,084) 13,599,373 2023 10,652,676 2,322,837 - (189,819) 12,785,694 2024 10,187,475 2,013,013 - (138,696) 12,061,792 2025 9,408,108 1,778,332 - (75,285) 11,111,155 2026 8,489,592 1,528,217 - (71,911) 9,945,898 2027 8,174,485 1,302,306 - (68,556) 9,408,235 2028 6,802,375 1,100,771 - (65,094) 7,838,052 2029 6,551,169 933,419 - (61,525) 7,423,063 2030 5,887,132 778,673 - (54,902) 6,610,903 2031 5,632,787 638,219 - - 6,271,006 2032 5,699,400 501,858 - - 6,201,258 2033 4,606,998 382,594 - - 4,989,592 2034 4,680,599 285,548 - - 4,966,147 2035 4,635,224 188,502 - - 4,823,726 2036 3,770,895 109,912 - - 3,880,807 2037 2,814,838 48,134 - - 2,862,972 2038 1,468,168 13,200 - - 1,481,368 2039 1,479,147 4,431 - - 1,483,578 2040 1,037,565 - - - 1,037,565 2041 1,039,123 - - - 1,039,123 2042 1,040,682 - - - 1,040,682 2043 1,042,244 - - - 1,042,244 2044 1,043,809 - - - 1,043,809 2045 1,045,375 - - - 1,045,375 2046 1,046,945 - - - 1,046,945 2047 522,282 - - - 522,282

Total 144,153,283$ 23,374,440$ (2,056,104)$ (1,314,911)$ 164,156,708$

Outstanding

______________________ (1) Principal totaling $85,211,889 and interest totaling $14,772,324 is exempt from Proposition 2 ½, subject to the limitations

imposed by Chapter 59, Section 21C of the General Laws. (2) The Town will receive a lump sum payment of $1,341,378 from the MSBA in lieu of these payments, which will be

contributed to the escrow account in lieu of selling additional bonds for the refunding portion of the Bonds.

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Overlapping Debt The Town of Falmouth is located in Barnstable County is a member of the Cape Cod Regional Transit Authority, and is one of five members of the Upper Cape Cod Regional Vocational Technical School District. The following table sets forth the outstanding bonded debt, exclusive of temporary loans in anticipation of bonds or current revenue, of each of the overlapping entities as of June 30, 2019, the Town of Falmouth's estimated gross share of such debt, and the fiscal 2020 dollar assessment for each.

Overlapping EntityOutstanding

Debt

Falmouth's Estimated Share (1)

Fiscal 2020 Dollar

Assessment (2)

Barnstable County (3) 23,061,312$ 21.90 % 472,998$ Upper Cape Cod Regional Vocational Technical School District (4) - 19.70 3,201,356 Cape Cod Regional Transit Authority (5) - 13.70 188,059 Cape Cod Commission (6) - - 507,117

______________________ (1) Estimated share based on debt service only. (2) Estimated dollar assessment based upon total net operating expenses, inclusive (where applicable) of debt service. (3) SOURCE: Barnstable County Treasurer. County expenses including debt service on county bonds are assessed upon the cities and

town within the county in proportion to their taxable valuation as last equalized by the State Commissioner of Revenue. Estimated share and dollar assessment shown here are based on the 2010 equalized valuation.

(4) SOURCE: Upper Cape Cod Regional Vocational Technical School District. Towns may organize regional school districts to carry out general or specialized educational functions including technical and vocational training. The operating expenses and debt service of regional school districts are apportioned among the member municipalities in accordance with the agreements establishing the districts.

(5) SOURCE: Cape Cod Regional Transit Authority. Fiscal 2020 assessment. (6) SOURCE: Town Assistant Treasurer. Environmental Protection Fund.

CONTRACTUAL OBLIGATIONS

Obligations to make payments on account of municipal contracts are generally limited to currently available appropriations. A Massachusetts city or town has general statutory 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 in most cases only when funds are available for the first fiscal year; obligations for succeeding fiscal years are in those cases expressly subject to availability and appropriation of funds. Specific authority exists in relatively few cases for long-term contractual obligations that are not subject to annual appropriation, including contracts for refuse disposal (20 year maximum term) and certain contracts by municipal electric departments. Municipalities may also enter into long-term contracts in aid of housing and renewal projects. There is 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. Pursuant to the Home Rule Amendment to the Massachusetts Constitution, cities and towns may also be empowered to make other contracts and leases. The Town has a multi-year contract extending through May 31, 2022 with Republic Services for the weekly collection of household refuse. All household refuse will go to the Town of Bourne. The annual cost of this contract was $1,782,991 in fiscal year 2019 and $1,813,000 was budgeted for fiscal 2020. The Town also has a multi-year contract extending through May 31, 2022 with Republic Services for the bi-weekly curbside collection of recyclables, including paper, cardboard, glass, aluminum, tin, and HDPE plastic. The annual cost of this contract was $899,253 in fiscal 2019 and $922,000 was budgeted for fiscal 2020. The Town has one school bus contract that expires at the end of the 2021 school year. The annual cost of this contract was $1,784,155 in fiscal 2019 and $1,863,000 was budgeted for fiscal 2020.

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RETIREMENT PLAN

The Massachusetts General Laws provide for the establishment of contributory retirement systems for state employees, for teachers and for county, city and town employees other than teachers. Teachers are assigned to a separate statewide teachers’ system and not to the city and town systems. For all employees other than teachers, this law is subject to acceptance in each city and town. Substantially all employees of an accepting city or town are covered. If a town has a population of less than 10,000 when it accepts the statute, its non-teacher employees participate through the county system and its share of the county cost is proportionate to the aggregate annual rate of regular compensation of its covered employees. In addition to the contributory systems, cities and towns provide non-contributory pensions to a limited number of employees, primarily persons who entered service prior to July 1, 1937 and their dependents. The Public Employee Retirement Administration Commission (“PERAC”) provides oversight and guidance for and regulates all state and local retirement systems. The obligations of a city or town, whether direct or through a county system, are contractual legal obligations and are required to be included in the annual tax levy. If a city or town, or the county system of which it is a member, has not established a retirement system funding schedule as described below, the city or town is required to provide for the payment of the portion of its current pension obligations which is not otherwise covered by employee contributions and investment income. “Excess earnings,” or earnings on individual employees’ retirement accounts in excess of a predetermined rate, are required to be set aside in a pension reserve fund for future, not current, pension liabilities. Cities and towns may voluntarily appropriate to their system’s pension reserve fund in any given year up to five percent of the preceding year’s tax levy. The aggregate amount in the fund may not exceed ten percent of the equalized valuation of the city or town. If a city or town, or each member city and town of a county retirement system, has accepted the applicable law, it is required to annually appropriate an amount sufficient to pay not only its current pension obligations, but also a portion of its future pension liability. The portion of each such annual payment allocable to future pension obligations is required to be deposited in the pension reserve fund. The amount of the annual city or town appropriation for each such system is prescribed by a retirement system funding schedule which is periodically reviewed and approved by PERAC. Each system’s retirement funding schedule is designed to reduce the unfunded actuarial pension liability of the system to zero by not later than June 30, 2030, with annual increases in the scheduled payment amounts of not more than 4.5 percent. The funding schedule must provide that payment in any year of the schedule is not less than 95 percent of the amount appropriated in the previous fiscal year. City, town and county systems which have an approved retirement funding schedule receive annual pension funding grants from the Commonwealth for the first 16 years of such funding schedule. Pursuant to recent legislation, a system (other than the state employees’ retirement system and the teachers’ retirement system) which conducts an actuarial valuation as of January 1, 2009, or later, may establish a revised schedule which reduces the unfunded actuarial liability to zero by not later than June 30, 2040, subject to certain conditions. If the schedule is so extended under such provisions and a later updated valuation allows for the development of a revised schedule with reduced payments, the revised schedule shall be adjusted to provide that the appropriation for each year shall not be less than that for such year under the prior schedule, thus providing for a shorter schedule rather than reduced payments. City, town and county systems may choose to participate in the Pension Reserves Investment Trust Fund (the “PRIT Fund”), which receives additional state funds to offset future pension costs of participating state and local systems. If a local system participates in the PRIT Fund, it must transfer ownership and control of all assets of its system to the Pension Reserves Investment Management Board, which manages the investment and reinvestment of the PRIT Fund. Cities and towns with systems participating in the PRIT Fund continue to be obligated to fund their pension obligations in the manner described above. The additional state appropriations to offset future pension liabilities of state and local systems participating in the PRIT Fund are required to total at least 1.3 percent of state payroll. Such additional state appropriations are deposited in the PRIT Fund and shared by all participating systems in proportion to their interests in the assets of the PRIT Fund as of July 1 for each fiscal year. The Town contributes to the Town of Falmouth Contributory Retirement System (the “Plan”), a multiple employer defined benefit pension plan, established under Chapter 32 of the General Laws of the Commonwealth of Massachusetts. The Plan is administered by the Falmouth Retirement Board and is part of the reporting entity. A stand-alone financial report for the year ended December 31, 2010 was issued and is available at the Retirement Office, Main Street, Falmouth, Massachusetts and is incorporated by reference. Substantially all employees of the Town, except certain personnel employed by the School Department, participate in the Plan. The members of the retirement system do not participate in the Social Security System. Benefits paid under the Plan, referred to as “retirement allowances,” include both an annuity portion, funded principally from amounts contributed by the participants, and a pension portion, funded by the retirement system to which the Town contributes. Teachers and certain administrative employees of the School Department participate in a contributory retirement plan administered by the Massachusetts Teachers Retirement Board. Contributions to this plan are made by employees and the Commonwealth of Massachusetts, and, therefore, the Town does not contribute to this plan. Under the provisions of this

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retirement plan, employees contribute specified percentages of their annual compensation and are eligible for retirement benefits after meeting the required age and service criteria. In addition, the Town must provide annual contribution sufficient to satisfy the actuarially determined contribution requirements as directed by the Commonwealth of Massachusetts Public Employee Retirement Administration Commission. The annual contributions of the Town to fund its unfunded pension liability in recent years have been as follows:

FiscalYear Amount

2020 (budgeted) 8,451,144$ 2019 7,904,970 2018 7,450,583 2017 7,097,437 2016 6,763,310 2015 6,430,621

The Town’s funding policy is to make annual contributions to the System in amounts which approximate the normal cost and amortization of the unfunded actuarial liability by June 30, 2033. As of January 1, 2018, the Town’s estimated unfunded actuarial accrued liability of the Town's Retirement System was $75,100,259. For more information relating to the Town’s Retirement System, see Appendix A. Funding Schedule (As of January 1, 2018)

Fiscal Normal Net Amort. Of Amort. Of Total Unfunded

Year Cost 3(8)(c) 2002 ERI UAL Cost Act. Liab.

2019 2,849,174$ 80,000$ 130,404$ 5,050,368$ 8,109,946$ 77,822,643$ -2020 2,977,386 80,000 5,564,296 8,621,682 77,908,408 6.31 %2021 3,111,369 80,000 5,974,342 9,165,711 77,589,059 6.312022 3,251,380 80,000 6,412,687 9,744,067 76,806,785 6.312023 3,397,692 80,000 6,881,225 10,358,917 75,497,670 6.312024 3,550,589 80,000 7,381,977 11,012,566 73,591,137 6.312025 3,710,365 80,000 7,917,093 11,707,458 71,009,324 6.312026 3,877,331 80,000 8,488,867 12,446,198 67,666,418 6.312027 4,051,811 80,000 9,099,743 13,231,554 63,467,923 6.312028 4,234,143 80,000 9,752,322 14,066,465 58,309,873 6.312029 4,424,679 80,000 10,449,380 14,954,059 52,077,974 6.312030 4,623,790 80,000 11,193,870 15,897,660 44,646,667 6.312031 4,831,860 80,000 11,988,942 16,900,802 35,878,124 6.312032 5,049,294 80,000 12,837,949 17,967,243 25,621,148 6.312033 5,276,512 80,000 13,709,981 19,066,493 1,370,981 6.122034 5,513,955 80,000 5,593,955 - -70.66

Change in

Cost

______________________ SOURCE: January 1, 2018 Falmouth Contributory Retirement System Actuarial Valuation, PERAC.

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Other Post-Employment Benefits In addition to pension benefits, cities and towns may provide retired employees with health care and life insurance benefits. The portion of the cost of such benefits paid by cities or towns is generally provided on a pay-as-you-go basis. The Town’s pay-as-you-go costs to the Town for such benefits in recent years have been as follows:

FiscalYear Amount

2020 (budgeted) 1,847,098$ 2019 1,798,382 2018 1,318,215 2017 1,520,065 2016 1,544,789 2015 1,518,728

The Governmental Accounting Standards Board (“GASB”) Statement Nos. 43 and 45, require public sector entities to report the future costs of these 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. Cities and towns 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, cities and towns may establish a trust fund for the purpose of pre-funding other post-employment benefits (“OPEB”) liability in the same manner as traditional pension benefits. The Town implemented the reporting requirements in accordance with GASB 45 for other post-employment benefits in fiscal year 2008. The Town most recently had an actuarial valuation study of its non-pension, post-employment benefits performed by Segal Consulting, Boston, Massachusetts. As of January 30, 2018, the Town’s unfunded actuarial OPEB liability was approximately $92,319,356 (assuming a 7.0% funded discount rate) and the Town’s actuarially determined contribution (ADC) was $8,096,104. At the Town’s April 3, 2012 Special Town Meeting, an OPEB Trust Fund was created for this purpose and had a $749,853 balance as of June 30, 2019.

57

EMPLOYEE RELATIONS

The Town employs approximately 974 full and permanent part-time workers, of whom 552 are employed by the School Department, 52 by the Police Department, 56 by the Department of Public Works, 68 by the Fire Department, and the balance by other departments of the Town. Town 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. The Town also employs approximately 400 temporary and part-time workers, the majority to supply seasonal tourism services. Approximately 823 Town employees are represented by unions.

The following table sets forth the bargaining units for Town employees:

ApproximateExpiration Number of

Unit Union Date (1) Employees

Town Hall AFSCME - Unit A 6/30/2019 65 Town Hall AFSCME - Unit B 6/30/2020 7 Town Hall AFSCME - Unit C 6/30/2019 9 Library LIUNA 6/30/2020 27 Department of Public Works LIUNA 6/30/2020 56 Police Falmouth Police Federation 6/30/2020 41

Superior Officers Assoc. 6/30/2021 7 Lieutenants 6/30/2020 4

Fire IAFF 6/30/2021 68 School Teachers FEA 6/30/2019 344 Administrators FEA 6/30/2019 29 Teachers Assistants FEA 6/30/2019 85 Nurses FEA 6/30/2019 8 Food Service SEIU 7/1/2021 23 Secretaries SEIU 7/1/2021 25 Custodians Teamsters 6/30/2021 38

______________________ (1) Expired contract is currently being renegotiated.AFSCME - American Federation of State, County and Municipal EmployeesLIUNA - Laborers International Union of North AmericaIAFF - International Association of FirefightersFEA - Falmouth Educators AssociationSEIU - Service Employees International Union

LITIGATION

There are several cases pending in various courts throughout the Commonwealth where the Town of Falmouth is the defendant. In the opinion of Town Counsel there is no 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 condition. The following legal matter is noted below.

______________________________

TOWN OF FALMOUTH, MASSACHUSETTS /s/ Patricia O’Connell, Treasurer/Collector

November 21, 2019

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COMPREHENSIVE ANNUAL FINANCIAL REPORT

For the Fiscal Year

July 1, 2017 – June 30, 2018

APPENDIX A

On the cover: Sunset on Quisset Harbor. Named after the Native American equivalent of the “Star of the Sea” due to the five points of indentation on the shore, this is one of several active harbors in Falmouth. (Photo credit: Slack12)

Above: A tranquil beach scene which includes a lonely kayak on a West Falmouth beach. (Photo credit: Slack12)


COMPREHENSIVE ANNUAL FINANCIAL REPORT

For the Fiscal Year Ended June 30, 2018

Julian M. Suso, Town Manager

Prepared by the Finance Department

Jennifer Petit, Director of Finance

http://www.falmouthmass.us/index.php

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INTRODUCTORY SECTION

Placed in service during fiscal 2018, the Fire Department added a new mechanics truck to its large fleet of vehicles and equipment. The Ford 350 4x4 which carries 50 gallons of gasoline and 50 gallons of diesel in its tanks cost approximately $60,000.

TOWN OF FALMOUTH, MASSACHUSETTS COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2018

TABLE OF CONTENTS

Page(s) INTRODUCTORY SECTION

Letter of Transmittal ....................................................................................................................... A1-13 Certificate of Achievement For Excellence in Financial Reporting…………………………….....A-14 Organizational Chart ........................................................................................................................ A-15 Principal Town Officials .................................................................................................................. A-16

FINANCIAL SECTION

Independent Auditor’s Report .......................................................................................................A19-21 Management’s Discussion and Analysis ......................................................................................A23-34

Basic Financial Statements: Statement of Net Position ....................................................................................................................... A-36 Statement of Activities ............................................................................................................................ A-37

Balance Sheet – Governmental Funds ....................................................................................... A-38 Reconciliation of the Governmental Funds Balance Sheet Total Fund Balances to the Statement of Net Position ................................................................................................................. A-39 Statement of Revenues, Expenditures and Changes in Fund Balances – Governmental Funds ............................................................................................................................... A-40 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities ........................................................... A-41 Statement of Net Position – Proprietary Funds ....................................................................................... A-42 Statement of Revenues, Expenses, and Changes in Net Position – Proprietary Funds ........................... A-43 Statement of Cash Flows – Proprietary Funds ........................................................................................ A-44 Statement of Fiduciary Net Position ....................................................................................................... A-45 Statement of Changes in Fiduciary Net Position ....................................................................................A- 46

Notes to Basic Financial Statements ...................................................................................... A47-87

Required Supplementary Information: Schedule of Town’s Proportionate Share of Net Pension Liability…………………………...A-90 Schedule of Town’s Contributions to Pension Plan…………………………………………...A-90 Schedule of Commonwealth’s Collective Share of Net Pension Liability –

Massachusetts Teacher’s Retirement….…………………………………………………A-91 Schedule of Changes in Net OPEB Liability and Related Ratios……………………………...A-92 Schedule of Contributions to OPEB Plan….…………………………………………………..A-93 Schedule of Investment returns – OPEB Plan………………………………………………...A-93 Schedule of Revenues, Expenditures and Changes in Fund Balance – Budget and

Actual – General Fund…. ............................................................................................A94-101 Notes to Required Supplementary Information…………………………………………..A102-103

TOWN OF FALMOUTH, MASSACHUSETTS COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2018

TABLE OF CONTENTS

Page(s)

Combining Statements: Nonmajor Governmental Funds…………………………………………………………………..A106-107

Combining Balance Sheet – Nonmajor Governmental Funds…………………… ....A108-111 Combining Statement of Revenues, Expenditures, and Changes in Fund

Balances – Nonmajor Governmental Funds .......................................................A112-115 Fiduciary Funds ...................................................................................................................... A-116

Statement of Changes in Assets and Liabilities – Agency Fund ..................................... A-117

STATISTICAL SECTION

Narrative ..................................................................................................................................... A-121 Net Position by Component – Last Ten Fiscal Years ...................................................................... A-123 Changes in Net Position – Last Ten Fiscal Years .....................................................................A124-125 Fund Balances, Governmental Funds – Last Ten Fiscal Years ....................................................... A-126 Changes in Fund Balances, Governmental Funds – Last Ten Fiscal Years .................................... A-127 Assessed Value and Estimated Actual Value of Taxable Property By Classification

and Tax Rates – Last Ten Fiscal Years ............................................................................ A-128 Principal Taxpayers – Current Year and Nine Years Ago .............................................................. A-129 Property Tax Levies and Collections – Last Ten Fiscal Years ........................................................ A-130 Ratios of Outstanding Debt and General Obligation Debt – Last Ten Fiscal Years .................A131-132 Computation of Legal Debt Margin – Last Ten Fiscal Years ......................................................... A-133 Direct and Overlapping Governmental Activities Debt .................................................................. A-134 Demographic and Economic Statistics – Last Ten Fiscal Years ..................................................... A-135 Principal Employers (Excluding Town) – Current Year and Nine Years Ago ............................... A-136 Full-time Equivalent Town Employees by Functions – Last Ten Fiscal Years .............................. A-137 Operating Indicators by Function/Program – Last Ten Fiscal Years .............................................. A-138 Capital Asset Statistics by Function/Program – Last Ten Fiscal Years .......................................... A-139

Susan L. Moran, Chairperson Megan English Braga, Vice Chairperson Doug Jones Samuel H. PattersonDouglas C. Brown

59 Town Hall Square Falmouth, Massachusetts 02540

_________________

Telephone (508) 548-7611 Facimile (508) 457-2573

www.falmouthmass.us _________________

Julian M. Suso Town Manager

Letter of Transmittal December 4, 2018

Honorable Board of Selectmen and Citizens of the Town of Falmouth, Massachusetts:

We are pleased to acknowledge that the Town of Falmouth has completed its third Comprehensive Annual Financial Report (CAFR). The report, which was prepared by the Town’s Department of Municipal Finance, is for the fiscal year ended June 30, 2018 and we are proud to be one of only about 40 communities in Massachusetts to accomplish this. This transmission is the continuation of what we are confident will continue to be an annual endeavor.

The Town is responsible for the accuracy, completeness and fairness of the data presented in the CAFR. This letter of transmittal and the management’s discussion and analysis, located in the financial section of the CAFR, provide a comprehensive financial overview of the Town and ensure that the financial and general operations of Town government remain transparent, and therefore open for easy viewing.

The CAFR represents a complete set of financial statements prepared in conformity with generally accepted accounting principles (GAAP) in the United States of America, that are audited in accordance with generally accepted auditing standards by a firm of licensed certified public accountants. This CAFR meets and exceeds those requirements and presents itself as an informative resource for all those interested in the financial activities of the Town.

The report is designed to be used by the elected and appointed officials of the Town and others who are concerned with its management and progress such as bond analysts, banking institutions and rating agencies as well as its citizens and taxpayers. Since the report consists of management’s representations concerning the finances of the Town, management assumes full responsibility for the completeness and reliability of all of the information presented. In addition, management of the Town is responsible for establishing and maintaining an internal control structure designed to ensure the assets of the Town are protected from loss, theft or misuse and to ensure that adequate accounting data is compiled to allow for the preparation of financial statements in conformity with GAAP. Because the cost of internal controls should not outweigh their benefits, the Town of Falmouth’s comprehensive framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements will be free from material misstatement. Throughout this report the Town's water utility services are identified as an Enterprise Fund. The Town has not formally authorized its water utility services as an Enterprise Fund; however these activities meet the guidelines for such treatment under GASB 34.

Town of Falmouth, Massachusetts Comprehensive Annual Financial ReportA-1


The Town of Falmouth’s financial statements have been audited by Roselli, Clark and Associates, a firm of licensed certified public accountants. The goal of the independent audit is to provide reasonable assurance that the financial statements of the Town are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditor concluded, based upon the audit, that there was a reasonable basis for rendering an unmodified opinion that the Town’s financial statements for the fiscal year ended June 30, 2018 are fairly presented in conformity with GAAP. The independent auditor’s report is presented as the first component of the financial section of this report.

The independent audit of the financial statements of the Town is part of a broader, federally mandated “Single Audit” designed to meet the special needs of federal grantor agencies. The standards governing Single Audit engagements require the independent auditor to report not only on the fair presentation of the financial statements, but also on the audited government’s internal controls and compliance with legal requirements, with special emphasis on internal controls and legal requirements involving the administration of federal awards. These reports are available in the Town’s separately issued Single Audit Reports Pursuant to Title 2 of the US “Code of Federal Regulations” (CFR) Part 200, “Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards”.

GAAP requires that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management’s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement that analysis and should be read in conjunction with it. The MD&A can be found immediately following the report of the independent auditors.

Profile of the Town

Falmouth is situated on Cape Cod, 72 miles southeast of Boston and 239 miles northeast of New York City. Located in Barnstable County on the southwest end of Cape Cod, it is bordered on the south by both Vineyard and Nantucket Sounds and on the west by Buzzards Bay. The Towns of Bourne and Sandwich border Falmouth to the North and the Town of Mashpee borders it on the East. It occupies a total area of 54 square miles of which 45 square miles is land and is broken up into eight villages consisting of East Falmouth, Falmouth

Village, North Falmouth, Teaticket, West Falmouth, Woods Hole, Hatchville and Waquoit.


The principal highways serving the Town include State routes 28, 28A and 151. Route 28 provides a direct connection to Interstate highway 495 to Worcester, Interstate 195 to Providence and State route 3 directly to Boston. Local transportation is available through the Cape Cod Regional Transit Authority which provides bus service to fourteen towns on Cape Cod including Falmouth. Private bus companies are available for transportation off Cape Cod, primarily to Providence, Boston and New York City. The Hyannis Municipal Airport,

which is located in Barnstable, provides daily air service to Boston’s Logan Airport and New York City’s John F. Kennedy International Airport. Transportation is also available via ferry service on the Woods Hole Martha’s Vineyard and Nantucket Steamship Authority which provides water transportation to the nearby islands of Nantucket and Martha’s Vineyard.

Falmouth is primarily a residential resort community with a high stable summer population. A substantial portion of its summer residents either own property in Falmouth or are perennial visitors. The population of the Town increases from about 32,000 year round to approximately 100,000 in the summer.

Falmouth was first settled by English colonists in 1660 and was officially incorporated in 1686. The settlement was named by explorer Bartholomew Gosnold after Falmouth, Cornwall, England his home port. Early principal activities were farming, salt works, shipping, whaling, and sheep husbandry, which was very popular due to the introduction of Merino sheep. The beginnings of water-powered mills could process the wool thus making the process efficient for its time. In 1837, Falmouth averaged about 50 sheep per square mile.

By the 1870s train travel had been introduced to Falmouth, and some of the first summer homes were constructed. Shortly thereafter, cranberries were grown in commercial quantity and strawberries were raised for the Boston market. By the 20th century the beginning of large scale dairying in interior regions became popular and continued to be a significant industry until after World War II. Improvements in highways combined with the heavy use of neighboring Otis Air National Guard Base during World War II, led to significant population growth (400% from 1950 to 2000). Homebuilding booms which began in the 1970s and 1980s continue today. In fact, the Town’s aggregate equalized valuation is consistently ranked amongst the top ten in Massachusetts behind communities like Boston, Cambridge and Brookline.

The Town provides a full range of traditional municipal services including police and fire protection, education, ambulance, maintenance of streets, residential curbside trash, recycling, water and sewer services, marine environmental services, senior center, parks and recreational facilities and three libraries.

There are currently seven Town administered schools in Falmouth:

1. Falmouth High School (grades 9 – 12)2. Lawrence School (grades 7 – 8)3. Morse Pond (grades 5 – 6)4. East Falmouth Elementary (grades Pre K – 4)5. Mullen-Hall (grades K – 4)6. North Falmouth Elementary (grades K – 4)7. Teaticket Elementary (grades Pre K – 4)


https://en.wikipedia.org/wiki/Falmouth,_Cornwall

https://en.wikipedia.org/wiki/England

https://en.wikipedia.org/wiki/Sheep_husbandry

https://en.wikipedia.org/wiki/Merino

https://en.wikipedia.org/wiki/Cranberry

https://en.wikipedia.org/wiki/Strawberries

https://en.wikipedia.org/wiki/Otis_Air_National_Guard_Base

Falmouth High School

Lawrence Middle School Morse Pond

Teaticket Elementary Mullen-Hall Elementary

North Falmouth Elementary East Falmouth Elementary


Falmouth prides itself on the quality of its school system. The Mission of the Falmouth Public Schools is “to educate students so that they are engaged in their education in a way which develops their capacity to pursue their goals and fosters life-long learning”.

Since 1999, Falmouth has built or completely renovated four of its seven schools. These are state-of-the-art technology-infused schools aimed at preparing its students for the jobs of the new economy. The capstone of the school rebuilding effort was the $80 million renovation of Falmouth High School, a multi-phased project completed in 2011. Total school construction costs were over $100 million and were made possible through a partnership with the Commonwealth of Massachusetts which reimbursed the Town about 60% of eligible construction costs through the Massachusetts School Building Authority.

The executive branch of the public schools consists of a nine-member School Committee elected to three-year terms on a staggered basis. The School Committee is the policy setting board. The Superintendent of Schools acts as the Chief Executive Officer responsible for enforcing the policies of the School Committee, and the Director of Finance and Facilities acts as the Chief Financial Officer.

School enrollment for fiscal year 2018 was over 3,400 and funding for schools is provided via taxation and governmental revenues based on a minimum net school spending formula established by the Massachusetts Department of Elementary and Secondary Education (ESE). The Town currently spends above the minimum legal requirement on each student.

The Town operates under the Selectmen, Town Manager and an elected representative Town Meeting form of government. Each of the Town’s 9 precincts elects 27 members. The five elected Selectmen

make policy decisions and the Town Manager is responsible for carrying out and enforcing the policies of the Selectmen and for managing the day to day operations of the Town. The Finance Director acts as the Town’s Chief Financial Officer.

An annual operating budget is approved by Town Meeting in April. This annual budget serves as the foundation for the Town’s financial planning and control. The budget is prepared by fund, function (e.g. general government), department (e.g. finance) and category (e.g. Personnel Services, Purchase of Services, Supplies, Other Charges & Expenses) allowing the department heads to allocate resources within the department. Transfers between categories need approval from Town Meeting unless specifically exempted by State Statute.


Factors Affecting Economic Condition

Property Taxes

The growth of the Town’s main source of revenues, property taxes, is capped by Proposition 2 ½ and can only be overridden through a vote of Town Meeting and a ballot vote by the voters. While revenue increases have been limited in recent years, fixed costs, including health insurance and pension costs, have increased more proportionally. As a result, balancing the annual budget can be a challenge. Given its geographical location on Cape Cod, the Town does not have a large commercial and industrial property tax base so it relies heavily on residential property taxes. Approximately 92% of the Town’s property taxes are derived from residential taxes therefore new growth is essential to revenue growth and the ability to sustain the Town’s annual costs.

The following tables summarize the Town’s building activity growth in assessed values and tax dollars over the prior several calendar years:

CalendarYear Number Value Number Value Number Value Number Value2017 85 25,604,952$ 6 1,095,000$ 1,929 94,306,811$ 2,020 121,006,763$ 2016 71 27,769,500 7 3,454,063 2,759 65,840,769 2,837 97,064,332 2015 82 34,557,243 16 137,760,225 2,981 58,236,725 3,079 230,554,193 2014 85 41,408,041 6 3,892,941 2,785 73,345,636 2,876 118,646,618 2013 59 17,451,000 1 3,000,000 2,244 50,224,978 2,304 70,675,978 2012 69 26,628,430 3 5,309,500 2,404 50,544,530 2,476 82,482,460 2011 87 39,480,682 5 17,397,000 2,226 44,678,622 2,318 101,556,304

Total 538 212,899,848$ 44 171,908,729$ 17,328 437,178,071$ 17,910 821,986,648$

2015 increase in non-residential is attributable to water filtration, ozone building, and wastewater treatment plant

Residential Non-residential AdditionsBuilding Permits

Totals


While property taxes are capped under proposition 2 ½ the Town’s voters have periodically elected to exceed the cap and provide additional taxes to be used to offset the Town’s debt burden related to its capital projects. For fiscal year 2018, the voters provided additional taxes in the amount of $10.3 million in that regard, and total revenues provided from taxes during fiscal year 2018 were almost $99.7 million.

Tourism

Tourism represents a significant portion of the Town’s private employment as almost 2,500 jobs are devoted to leisure and hospitality, which is, the second largest industry group representing 17% of the Town’s employment base. A significant portion of the Town’s local revenues are directly tied to tourism; these include hotel and room occupancy excise, meals excise, beach charges and marine fees which in aggregate provided the Town with almost $4 million in revenues during both fiscal years 2017 and 2016.

To that end the Town has a number of attractions and events designed with entertainment, recreation and tourism as the driving factors.

Falmouth Road Race (46 straight years) Christmas Parade (55 straight years)

Independence Day Fireworks (38 straight years)

Beaches Cape Cod Summer League Baseball


Economic Development

The Town has been very active on the economic development front. Completing industrial and technological projects that produce a positive and sustainable economic impact for the Town has been a goal for a number of years.

To that end the Town’s economic development mission is to:

• Maintain strong residential values.• Sustain four season community and promote continued investment.• Maintain low vacancy rate and turnover in commercial property.• Aggressively compete with other family destinations.• Improve the appearance of property and the Town.• Stimulate future investment in the community.

The Falmouth Economic Development Industrial Corporation (Falmouth EDIC) is the Town of Falmouth’s primary agency responsible for creating and developing increased economic opportunities for both the present and the future.

The EDIC’s goal is a clean, diverse, economic climate that maintains and enhances Falmouth’s intellectual and creative capacities, work place opportunities, and natural resources.

With the support of the Town, the Falmouth EDIC has generated new, quality jobs by improving the infrastructure supporting industry in Falmouth. Its accomplishments began with the creation and development of the Falmouth Technology Park two decades ago. Currently, more than a dozen companies in the 106 acre park provide approximately 400 jobs in Falmouth.

There are currently several projects in process related to economic development:

Solar Array

In early October 2014, the Falmouth EDIC started plans to develop a solar array on the old Town landfill site off Thomas Landers Road. The initial steps of completing a feasibility study and obtaining a long-term ground lease for the site were accomplished during fiscal years 2015 and 2016. After an

RFP process, Citizens Energy was selected as the developer. As a bonus, Citizens Energy agreed to develop an additional solar array to generate electricity for 200 homes in Falmouth that qualified with low to moderate incomes.

The first phase of the solar array was completed in fiscal year 2017 producing 4.3 megawatts of clean and renewable energy saving the Town over $500,000 per year in energy

costs. The second phase when developed will generate two more megawatts. It is anticipated that once operational, this will save millions of dollars in electricity costs over the next 20 years.


Falmouth Station

The Falmouth Station is a former railroad station that is currently being used by the Cape Cod Transit Authority and Peter Pan Bus line as a bus depot. Originally built in 1872 it had undergone significant wear and tear with little renovation over the years and to the left, took on this appearance by fiscal 2015.

In 2015, the Falmouth EDIC entered into a long-term ground lease with Mass DOT to acquire and renovate the historic facility located at 59 Depot Avenue. In conjunction with the lease, Mass DOT provided the Falmouth EDIC with a $1.4 million grant to renovate the

Station. With the help of its members, local representatives, local business leaders and Mass DOT, the project was completed in the spring of 2017; below is the completed facility.

In fiscal 2018, the Station Grill, a short-order restaurant was added to the facility and is available for dining.


Raymond Park

In the fall of 2003, the EDIC invested $3 million to acquire twenty acres (including a 10,000 square-foot building) in North Falmouth. The EDIC acquired the site because it is one of the last Light-Industrial zoned properties in Falmouth. Also, a consideration was that the owner, Benthos

Corporation, needed capital to restructure to avoid moving its operation or shutting its doors. The loss of Benthos Corporation operations in North Falmouth would have resulted in the loss of over 100 jobs in the area. Since the EDIC acquired the site, Benthos Corporation has been able to reverse its fortunes and was acquired recently by Teledyne Corporation. Benthos Corporation is now expanding operations on its existing campus and plans to double employment over the next few years.

The Falmouth EDIC subdivided the aforementioned site, now known as Raymond Business and Technology Park, into ten lots and constructed a system of interior roadways and utilities. Six lots have been sold and are being developed. The EDIC has retained ownership of three lots, which are being reconfigured for maximum density prior to being marketed for sale.

Route 28 Master Plan

The Town also initiates projects outside the Falmouth EDIC through its own Planning Department in collaboration with the Department of Public Works. Most recently the Town has undertaken a Transportation Master Plan (TMP) focusing on the development of long and short-term improvements for Route 28. Route 28 is a major arterial that travels in the north/south direction through eastern Massachusetts that provides connections to Boston and Orleans. Route 28 generally runs in the east-west direction through Falmouth and provides access to a variety of land uses including residential, commercial, and the downtown area. A portion of Route 28 also runs in the north-south direction towards the Town of Bourne.

As a primary route in the Town of Falmouth, Route 28 serves both through traffic and local traffic and the efficiency of this route is critical to commerce, tourism and residents and their connectivity to the downtown.

The TMP will summarize the existing amenities available for all modes of transportation traveling through the corridor, determine deficiencies, and provide recommendations and alternatives to improve traffic operations, circulation, signage, parking and pedestrian and bicycle amenities.

This report was developed in coordination with the Town of Falmouth Planning Department and Engineering division of public works, as well as the Planning Board and Board of Selectmen, and will serve as a guide for capital planning and budgeting needs for potential future short term and long term transportation improvement projects on Route 28.


Water and Wastewater System

The Town has currently completed major improvements to its water and wastewater systems.

The Little Pond Sewer Service Area (LPSSA) Project is complete. The goal of this project is to improve water quality in Little Pond. The project includes connection of approximately 1,400 properties on the Maravista peninsula and the eastern portion of Falmouth Heights to the existing Town sewer system, construction of approximately 16 miles of sewer pipe (gravity main, low pressure main, and force main), and construction of two new sewer lift stations, one at the end of Alphonse Street and one on Spring Bars Road.

The entire Little Pond Sewer Service Area is now available for sewer connection. Although all private sewer hookups were initially required to be completed by May of 2018, this has been extended into 2019 for a limited area.

In addition to the Little Pond Sewer Service Area Project, three other related projects are also completed: construction of two new treated wastewater recharge beds north of the existing recharge beds at the Town's main Wastewater Treatment Plant at 154 Blacksmith Shop Road, construction of upgrades to the Main Wastewater Treatment Plant, and construction of upgrades at the three existing wastewater lift stations affected by the Little Pond Sewer Service Area flow.

Improvements to the Town’s wastewater system will result in increased property value and growth, expedite commercial redevelopment and expand footprints and bedrooms for homes previously restricted under Title V.

Town Meeting voted in strong support of this $50 million project, including the establishment of a 70% betterment for the cost of the collection system to be recovered from abutters whose property is directly benefiting from this project.

The Town also recently set into operation a $46.5 million water filtration system that will pump eight million of the 11 million gallons of water the Town uses daily. More specifically, in October 2017 the Long Pond Water Treatment Plant began pumping water into the distribution system. The plant takes water from Long Pond, removes the algae, ozonates the water, filters the water through activated carbon and disinfects it with sodium hypochlorite. In November Long Pond water turned over as the surface layer got colder. In past years users experienced discolored water when the pond turned over. After 60 days of operation, exceeding all performance parameters, the Town has begun to slowly reduce the amount of chlorine that is added as the system wide demand for disinfection is decreasing with the flow

of water from the new plant.

The Long Pond Water Treatment Plant received an ENR New England 2017 Best Project Award in the Water/Environment category, and an Associated Builders & Contractors of Massachusetts Eagle Award in the Public Works – Environmental category.

These major improvements to these vital services are a critical step for the Town as it continues to strive to

be on the cutting edge of the delivery of basic utility infrastructure services that are environmentally advanced with respect to other Cape Cod communities. A significant portion of the non-betterment


related funding for these projects is provided through loans from the Massachusetts Clean Water Trust at interest rates ranging from 0% to 2%.

Unassigned Fund Balances

One of the methods the Town uses to maintain reserves from year to year is to conservatively forecast revenues. This allows the Town to use free cash (surplus) for reserves, capital projects or other non-operating one-time expenses. In addition, spending controls such as monthly budget monitoring has resulted in turn-backs which also assisted the Town in this process. As a result, the Town has been able to responsibly maintain and/or increase reserves from year to year.

The Town’s unassigned fund balance trend since 2011 is illustrated below:

Long-term Financial Planning

The Town prepares rolling five-year operating budget projections. The Town believes this will (1) provide better insight when preparing annual budgets; (2) alert the Town to any potential budget issues far ahead of when these situations become real; and (3) allow the Town to determine when available financing for its capital needs can be provided or if a need for borrowing to finance projects is required.

The following represents the Town’s five-year revenue projections:

The Town expects that annual budget sources as forecasted will be sufficient to fund annual appropriations.

2019 2020 2021 2022 2022Real Estate and Personal Property Taxes 103,152,301$ 106,246,870$ 109,434,276$ 112,717,304$ 116,098,824$ Intergovernmental Revenue - Local Aid 9,563,762 9,563,762 9,563,762 9,563,762 9,563,762Intergovernmental Revenue - MSBA 962,492 685,368 685,368 685,368 685,368Local Receipts 19,717,000 22,350,000 23,000,000 23,000,000 23,000,000 Recurring transfers from special revenue 4,756,056 3,195,479 3,125,848 2,974,922 2,750,000

Total Revenues 138,151,611$ 142,041,479$ 145,809,254$ 148,941,356$ 152,097,954$


Capital Improvements

The Town continues to invest aggressively in capital improvements. Since 2005 the Town has invested approximately $250 million in improving facilities and adding much needed infrastructure.

The following were key capital initiatives:

• Library renovation - $10.0 million;• Improvements to schools; almost $80 million;• Improvements to road infrastructure: almost $11 million;• Improvements to waste water infrastructure: over $64 million;• Improvements to water infrastructure: over $48 million;• Fire Department additions: almost $4 million;• Marina infrastructure; $2.8 million;• Land purchases almost $4 million;• Public Works buildings; $6 million;• Public Works equipment and machinery; $3 million;• Recreation improvements; $1.1 million;• Police equipment and vehicles; $2 million.

Awards and Acknowledgements

The Government Finance Officers Association of the United States and Canada (GFOA) awards a Certificate of Achievement for Excellence in Financial Reporting. This is a very prestigious award and in order to be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized comprehensive annual financial report. This report must satisfy both generally accepted accounting principles and applicable legal requirements.

A Certificate of Achievement is valid for a period of one year only. We believe that our current comprehensive annual financial report will meet the Certificate of Achievement Program’s requirements, and we are submitting it to the GFOA to determine its eligibility for this certificate.

The publication of this CAFR represents an important achievement in the ability of the Town of Falmouth to provide enhanced financial information and accountability to its citizens, elected and appointed officials, and investors. The preparation of this report would not have been possible without the efficient and dedicated services of the entire staff of the Finance Office. Special thanks also go to the certified public accounting firm of Roselli, Clark and Associates for their advice and assistance in the preparation of this report.

Respectfully submitted,

Municipal Finance Director


Certificate of

Presented to

Town of Falmouth

For its Comprehensive Annual

June 30, 2017

Executive Director/CEO

Financial Reportfor the Fiscal Year Ended

Reportingin Financial

for ExcellenceAchievement

Text38: Massachusetts

Government Finance Officers Association


Falmouth Voters

Board of Selectmen

Council on Aging

Board of Assessors

Beach Commission

Conservation CommissionBoard of Health

Historical Commission

Human Services Committee

Recreation Committee

Solid Waste Advisory Committee

Waterways Committee

Zoning Board of Appeals

Veterans Council

Town

Manager

Town Accountant

Constables

Election Officers

Registrars

School Committee

Superintendent

Housing Authority

Representative Town Meeting

Finance Committee

Library

Trustees

Library

Planning

BoardModerator

Town

Clerk

Finance Director

Town Counsel

Other Department Heads


PRINCIPAL TOWN OFFICIALS As of June 30, 2018

Elected Officials

Board of Selectmen

ModeratorTown Clerk

School Committee

Susan L. Moran, ChairpersonMegan English Braga, Vice-Chairperson Doug JonesSamuel H. PattersonDouglas C. Brown

David VieiraMichael Palmer

Terri Medeiros, ChairpersonKelly Welch, Vice-Chairperson Melissa Keefe, SecretaryWalter CrottyMeghan Cummings FleckJohn FurnariWilliam RiderAndrea Thorrold

Appointed Officials

Finance Committee Mary Harris Judith P. Magnani Deborah D. Maguire James Marnell Wendy Vogel

Town ManagerAssistant Town ManagerSuperintendent of SchoolsDirector of FinanceTown CounselSchool Director of FinanceTown AccountantTreasurer/Collector

Keith Schwegel, Chairperson Nick Lowell, Vice Chairperson Susan P. Smith, Secretary Kathleen BeriauJoseph L. DroletteRon DyerPeter Hargraves

Julian M. SusoPeter Johnson-StaubLori S. DuerrJennifer PetitFrank Duffy Jr.Patrick MurphyVictoria RosePatricia O'Connell


FINANCIAL SECTION

The Fourth of July fireworks in Falmouth have been a tradition every year since 1980. Pictured above, a large crowd observes the 2018 event from one of the Town beaches.


INDEPENDENT AUDITORS' REPORT

The Honorable Members of the Board of Selectmen Town of Falmouth, Massachusetts Falmouth, Massachusetts

Report on the Financial Statements

We have audited the accompanying financial statements of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the Town of Falmouth, Massachusetts, (the “Town”) as of and for the year ended June 30, 2018, (except for the Pension Trust Fund and the Falmouth Economic Development Corporation which are as of December 31, 2017), and the related notes to the financial statements, which collectively comprise the Town’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.


Town of Falmouth, Massachusetts Page Two

Opinions

In our opinion, based on our audit, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the discretely presented component unit, each major fund and the aggregate remaining fund information of the Town as of June 30, 2018, (except for the Town of Falmouth Contributory Retirement System and the Falmouth Economic Development Corporation, which are as of December 31, 2017) and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.

Change in Accounting Principle

As disclosed in the Note III to the financial statements, the Town implemented GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions, during the fiscal year 2018. Our opinion was not modified with respect to this matter.

Restatement of Prior Year Ending Balances

As more fully described in Note IV, a restatement of prior year ending net position balances was made to the Town’s governmental activities, business-type activities and the Water Enterprise Fund. Our opinion was not modified with respect to this matter.

Other Matters

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis, and the schedules listed under the required supplementary information section in the accompanying table of contents be presented to supplement the basic financial statements. Such information, although not part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic or historical context.

We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Other Information

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Town’s basic financial statements. The introductory section, combining statements, and statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining statements are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial


Town of Falmouth Page Three

statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining statements are fairly stated, in all material respects, in relation to the basic financial statements as a whole.

The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them.

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated December 4, 2018, on our consideration of the Town’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contract, grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Town’s internal control over financial reporting and compliance.

Roselli, Clark & Associates Certified Public Accountants Woburn, Massachusetts December 4, 2018


Management’s Discussion and Analysis


MANAGEMENT’S DISCUSSION AND ANALYSIS

As the management of the Town of Falmouth, Massachusetts (The Town), we offer readers of the Town’s financial statements this narrative overview and analysis of the financial activities of the Town for the fiscal year ended June 30, 2018. We encourage readers to consider the information presented here in conjunction with their review of the basic financial statements, notes to the basic financial statements and required supplementary information found in this report.

Financial Highlights

During the year ended June 30, 2018 The Town adopted GASB Statement No. 75, Accounting andFinancial Reporting for Postemployment Benefits Other Than Pensions. Previously, OPEB wasaccounted for under GASB Statement No. 45, Accounting and Financial Reporting by Employers forPostemployment Benefits Other Than Pensions. The result of the adoption of GASB Statement No.75 was to record a prior period restatement to eliminate the net OPEB obligation recorded in the prioryear Town financial statements and record the net OPEB liability at June 30, 2018.

The assets and deferred outflows of financial resources of the Town exceeded its liabilities anddeferred inflows of financial resources at the close of the most recent fiscal year by almost $152.9million (total net position). About $97.3 million represented net position of governmental activitiesand almost $55.6 million represented net position of the business-type activities.

The government’s total net position increased by over $32.4 million after taking into account theimpact of the prior period restatement discussed above. The governmental activities increased netposition by over $31.4 million, while the business - type activities increased net position by almost$1.0 million.

The Town’s Unassigned Fund Balance reported in the General Fund was nearly $32.8 million (23.8%of General Fund expenditures), while total fund balance in the General Fund was over $45.7 million(33.1% of General Fund expenditures). Furthermore, the Town reported restricted fund balances ofapproximately $6.9 million, $2.5 million, $7.6 million and $13.5 million in the CommunityPreservation Fund, Capital Projects Fund, Sewer Capital Project Fund, and the combined NonmajorGovernmental Funds, respectively.

Total debt decreased almost $5.1 million. Detail of the transactions that contributed to this changeare summarized in the long-term debt section of this Management, Discussion and Analysis.

Overview of the Financial Statements

This discussion and analysis are intended to serve as an introduction to the Town’s basic financial statements. The Town’s basic financial statements comprise three components: 1) government-wide financial statements, 2) fund financial statements, 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves.


The layout and relationship of the financial statements and supplementary information is visually illustrated as follows:

Government-wide Financial Statements – The government-wide financial statements are designed to provide readers with a broad overview of the Town’s finances, in a manner similar to a private-sector business. The statement of net position presents information on all of the Town’s assets, deferred outflows, liabilities and deferred inflows, with the difference between the two reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the Town is improving or deteriorating. The statement of activities presents information showing how the government’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave.)

Both government-wide financial statements distinguish functions of the Town that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities).

The governmental activities of the Town include general government, public safety, highways and streets, education, health and human services, sewer services, debt service, fringe benefits and culture and


Management Discussion and Analysis

Basic Financial Statements

Government-wide Financial Statements

Governmental Fund Financial Statements

Proprietary Fund Financial Statements

Fiduciary Fund Financial Statements

Notes to the Basic Financial Statements

Required Supplementary Information –

Other than MD&A

Budgetary Reporting with Notes, Pension Schedules And Other Postemployment Benefit Schedules

Other SupplementaryInformation Combining Fund Financial Statements/Schedules


recreation. The business-type activities of the Town are comprised completely of the water utility services fund.

Fund Financial Statements – A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The Town, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the Town can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds.

Accounting guidelines distinguish fund balance between amounts that are considered nonspendable, such as fund balance associated with inventories, and other amounts that are classified based on the relative strength of the constraints that control the purposes for which specific amounts can be spent. Beginning with the most binding constraints, fund balance amounts will be reported in the following classifications:

• Restricted—amounts constrained by external parties, constitutional provision, or enablinglegislation

• Committed—amounts constrained by a government using its highest level of decision-makingauthority

• Assigned—amounts a government intends to use for a particular purpose

• Unassigned—amounts that are not constrained at all will be reported in the general fund or inother major funds if negative

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

Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government’s near-term financing decisions.

The Town maintains a number of individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the General Fund, Community Preservation Fund, Capital Projects Fund and Sewer Capital Projects Fund which are considered to be major funds. Data from the other governmental funds are combined into a single, aggregated presentation.

The Town adopts an annual appropriated budget for its General Fund. A budgetary comparison schedule has been provided for the General Fund to demonstrate compliance with this budget. This schedule has been prepared as required supplementary information and can be found along with the corresponding notes after the footnotes to the financial statements.

Proprietary Funds – The Town maintains only one type of proprietary fund. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial


statements. The Proprietary fund provides the same type of information as the government-wide financial statements, only in more detail. The Town uses a proprietary fund to account for its water utility services.

Fiduciary Funds – Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statement because the resources of those funds are not available to support the Town’s own programs. The accounting used for fiduciary funds is much like that used for proprietary funds.

The System is a Pension Trust that is a legally separate entity reported as a fiduciary fund. Because the System services almost entirely the Town, it is presented as if it were part of the primary government as a fiduciary fund due to the significance of its operations.

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

Other Information – In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the Town’s proportionate share of net pension liability, contributions to pension plan, the Commonwealth's collective share of net pension liability to the Massachusetts Teachers' Retirement System, funding progress and contribution funding of the Town’s other postemployment benefits to its employees as well as the Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual – General Fund and notes to this schedule.

Government-wide Financial Analysis

As noted earlier, net position may serve over time as a useful indicator of a government’s financial position. In the case of the Town, assets exceeded liabilities by approximately $152.9 million at the close of the most recent fiscal year.

Condensed net position data is presented as follows:

Governmental activities Business-type activities TotalJune 30, June 30, June 30, June 30, June 30, June 30,

2018 2017 2018 2017 2018 2017Assets

Currrent and other assets 118,117,166$ 96,745,801$ 3,371,550$ 4,268,920$ 121,488,716$ 101,014,721$ Capital assets, net 297,594,817 296,224,804 102,136,236 102,021,768 399,731,053 398,246,572 Total assets 415,711,983 392,970,605 105,507,786 106,290,688 521,219,769 499,261,293

Deferred Outflows of Resources 9,861,307 11,850,982 230,791 482,000 10,092,098 12,332,982

LiabilitiesLong-term liabilities 305,080,291 241,759,756 49,714,884 43,638,660 354,795,175 285,398,416 Other liabilities 7,191,123 7,594,449 35,043 6,807,412 7,226,166 14,401,861 Total liabilities 312,271,414 249,354,205 49,749,927 50,446,072 362,021,341 299,800,277

Deferred Inflows of Resources 16,000,508 937,000 420,899 42,000 16,421,407 979,000

Net PositionNet investment in capital assets 186,811,470 177,614,636 57,486,346 56,579,087 244,297,816 234,193,723 Restricted 44,740,958 29,509,733 - - 44,740,958 29,509,733 Unrestricted (134,251,060) (52,593,987) (1,918,595) (294,471) (136,169,655) (52,888,458) Net position 97,301,368$ 154,530,382$ 55,567,751$ 56,284,616$ 152,869,119$ 210,814,998$


By far, the largest portion (almost $244.3 million) of the Town’s net position reflects its investment in capital assets (e.g. land, buildings, infrastructure, machinery, and equipment); less any related debt used to acquire those assets that is still outstanding. The Town uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the Town’s investment in its capital assets is reported net of related debt, the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. An additional portion of the Town’s net position (over $44.7 million) represents resources that are subject to external restriction on how they may be used.

Unrestricted net position is reported as a deficit, of almost $136.2 million. This is due to the implementation of GASB 68 and GASB 75 related to the net pension and net OPEB liability of nearly $59.9 million and over $126.2 million respectively. This deficit is expected to increase from year to year until a time that the Town adopts an adequate funding schedule for the net OPEB liability. The net pension liability is funded by statute on an annual basis and is expected to be fully funded in less than 20 years.

The condensed statement of changes is as follows:

Governmental activities Business-type activities TotalJune 30, June 30, June 30, June 30, June 30, June 30,

2018 2017 2018 2017 2018 2017Revenues

Program revenues: Charges for services 12,105,004$ 11,171,398$ 7,086,150$ 7,720,631$ 19,191,154$ 18,892,029$ Operating grants and contributions 23,271,332 23,132,970 - - 23,271,332 23,132,970 Capital grants and contributions 25,072,885 3,071,927 39,385 383,112 25,112,270 3,455,039

General revenues: Property taxes 102,520,551 99,217,665 - - 102,520,551 99,217,665 Intergovernmental 2,123,564 2,072,280 - - 2,123,564 2,072,280 Other 8,190,434 8,552,350 (6,033) 12,337 8,184,401 8,564,687 Total Revenues 173,283,770 147,218,590 7,119,502 8,116,080 180,403,272 155,334,670

ExpensesGeneral government 11,820,927 19,773,863 - - 11,820,927 19,773,863 Public safety 23,870,579 22,810,827 - - 23,870,579 22,810,827 Education 78,668,134 78,308,426 - - 78,668,134 78,308,426 Public works 15,199,826 14,660,542 - - 15,199,826 14,660,542 Health and human services 2,911,949 3,286,793 - - 2,911,949 3,286,793 Culture and recreation 5,540,743 5,139,478 - - 5,540,743 5,139,478 Debt service 3,143,954 3,444,397 - - 3,143,954 3,444,397 Community preservation 303,282 1,739,406 - - 303,282 1,739,406 Water - - 6,523,023 6,112,808 6,523,023 6,112,808 Total Expenses 141,459,394 149,163,732 6,523,023 6,112,808 147,982,417 155,276,540

Change in net position before transfers 31,824,376 (1,945,142) 596,479 2,003,272 32,420,855 58,130

Transfers (356,817) 1,220,657 356,817 (1,220,657) - -

Change in net position 31,467,559 (724,485) 953,296 782,615 32,420,855 58,130

Net position, beginning of year 154,530,382 155,254,867 56,284,616 55,502,001 210,814,998 210,756,868

Restatement for net OPEB liability (87,896,422) - (1,670,161) - (89,566,583) - Restatement for uncollectibles (800,151) - - - (800,151) -

Net position, beginning of year, as restated 65,833,809 155,254,867 54,614,455 55,502,001 120,448,264 210,756,868

Net position, end of year 97,301,368$ 154,530,382$ 55,567,751$ 56,284,616$ 152,869,119$ 210,814,998$


Governmental Activities – The governmental activities increased net position by approximately $31.5 million (48.3% of governmental activities’ net position).

While other postemployment benefits ($8.9 million) and depreciation ($8.4 million) are as expected, the Town does not include these in their budget as the budget is prepared under a statutory (cash) basis of accounting; similar but in reverse, the Town budgets for repayments of debt ($10.2 million) but this is not included as an expense in the governmental activities’ net position. The net impact for the adjustment of these planned items is expense in excess of revenue by approximately $7.1 million.

The offset is related to positive operations due to the continued economic expansion in the northeast United States. Revenues exceeded forecast in almost all categories and expenses remained under budget due to budget monitoring controls implemented. The net favorable budget was about $10.8 million. This combined with special assessments and capital contributions which are being used to subsidize the debt related to the Town’s new wastewater treatment facility of almost $25.1 million made up the majority of the difference to arrive at the final net operating result.

Fiscal Year 2018 Expenses and Program Revenues – governmental activities are graphically presented as follows:

Major revenue sources of governmental activities consist of revenue from:

(1) Property taxes which represented 59.2% of total revenues. This was an increase of $3.3 million overthe prior year, which is reasonable under Massachusetts General Laws; communities are allowed to assesstaxes at 2 ½% of the prior year plus any new growth. The Town experienced approximately $0.9 millionincrease in new growth. Therefore, this increase met an increase that is expected from year to year.


(2) Operating grants which comprised approximately 13.4% of the total governmental activity revenues;the dollar amount is consistent with the prior year as the Town continues to be the beneficiary of

operating grants from the Federal and State Government as well as pass through pension benefits for the Town’s teachers who belong to the Massachusetts Teacher’s Retirement System.

(3) Capital grants andcontributions whichrepresented 14.5% of totalrevenue and approximately$22.0 million greater thanthe prior year. This was

due to the special assessments and capital contributions received to subsidize the Town’s waste water treatment facility.

The Town’s total expenses were $7.7 million less than the prior year; this was directly related to the prior year amounts including a write-off of capital assets due to an impairment. This was recorded in the general government classification. All other expense amounts were either consistent with the prior year or not material to the overall expenses.

Major expenses consist of the following:

Education costs represent the Town’s largest expense category as education continues to be an area in which the Town devotes substantial resources. Approximately 55.6% of the Town’s total disbursements related to education. Public Safety expenses represented approximately 16.9% of total expenses and Public Works expenses represented approximately 10.7% of total expenses. All were consistent in dollar amount with the prior year.

No other expense categories exceeded 10% of total expenses.


Business-type Activities – Net position of the business-type activities increased by almost $1.0 million (1.7% of business-type activities’ net position) over the prior year balances. Slight increases in consumption led to modest increases in revenue and expenses. Water expenses represented 100% of total business-type expenses. These also include interest expense and depreciation.

Fund-wide Financial Analysis of the Governmental Funds

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

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

As of the close of the current fiscal year, the Town’s governmental funds balance sheet reported a combined ending fund balance of over $76.1 million, an increase of over $4.0 million over the prior year. This was primarily due to an increase in the general fund driven by continued positive operations of over $4.0 million due to the continued expanding economy particularly in Barnstable County which was designated as a Metropolitan Statistical Area during the year. Sewer Capital Projects Funds decreased by almost $2.0 million as the Town began spending against a prior year bond issuance. Each of the Community Preservation Fund and the aggregate Nonmajor Funds increased almost $1.0 million and over $0.8 million respectively due to the timing of revenues and expenditures. In the remainder of the funds, revenues closely approximated expenses.

The Town’s Unassigned Fund Balance reported in the General Fund was nearly $32.8 million (23.8% of General Fund expenditures). Total Fund Balance in the General Fund was approximately $45.8 million (33.1% of General Fund expenditures). These were both the beneficiary of the operating results discussed in the previous paragraph.

The Town reported a restricted fund balance of approximately $6.9 million in the Community Preservation Major Fund, up almost $1.0 million from the prior year due to the timing of revenues and expenditures, and $2.5 million in the Capital Projects Fund, which was consistent with the prior year.


The Sewer Capital Project Fund reports a restricted fund balance of approximately $7.6 million a decrease of almost $2.0 million as discussed above.

The Nonmajor Governmental Funds restricted balance increased slightly to approximately $13.5 million as revenues exceeded expenditures and transfers by approximately $0.8 million.

Proprietary Funds – The Town’s proprietary funds consist completely of the Water Utility Services Fund which provides the same type of information found in the government-wide financial statements under Business-type activities. At the end of the year, net position of the Water Fund was approximately $55.6 million, which represents an almost $1.0 million increase from the prior year due to an increase in water rates and the capital grant previously discussed.

Fiduciary Funds – The Town’s fiduciary funds are comprised of the Town’s Private Purpose Trust Funds, its Other Postemployment Benefits Trust and its Pension Trust Fund. Total Net Position of these funds is almost $146.5 million.

The Pension Fund is used to pay pension benefits to retirees. The net position at the end of the year was almost $144.4 million or about $17.3 million greater than the prior year. This was primarily due to better than expected market conditions during the year ended December 31, 2017.

The Private Purpose Trust Funds make up almost $1.6 million of the net position balance at year-end; These assets are used strictly for purposes outside of the public domain such as scholarships and public assistance and increased by a diminimus amount due to earnings from investments exceeding distributions.

In addition, the Town has elected to establish a trust under Chapter 32B Section 20 of the MGL whose sole purpose will be to accumulate funds to reduce the Town’s unfunded net Postemployment liability. This fund increased by approximately $0.1 million to almost $0.6 million due to a contribution made by the Town in excess of premiums paid for retirees. The Town anticipates the use of an annual dedicated budget source to fund a portion of the annually determined contribution in future years.

General Fund Budgetary Highlights

The final amended budget was consistent with the original budget as amendments were not significant and in total were less than 1% of total budget.

Major budget to actual differences on the revenue side included Excise, which exceeded forecast by over $2.3 million, Real estate and personal property which exceeded forecast by approximately $0.5 million, intergovernmental which exceeded forecast by about $0.6 million and departmental, user charges and other which exceeded forecast by approximately $4.3 million. As previously discussed these were a byproduct of the continued economic expansion in the Northeast.

The Town also experienced favorable variances in almost all budget categories as budget monitoring controls implemented in the prior year were very effective.

Further detail of budget to actual comparisons may be reviewed as part of the Required Supplementary Information following the footnotes to this report.


Capital Asset and Debt Administration

Capital Assets – The Town’s investment in capital assets for its governmental and business type activities as of June 30, 2018 amounts to approximately $399.7 million (net of accumulated depreciation) an increase from the previous year’s balance of approximately $1.5 million. This investment in capital assets includes land, buildings and improvements, infrastructure, machinery, and equipment. The total increase is primarily due to two projects related to infrastructure improvement for water and sewer capital offset by depreciation.

The Town has undergone significant capital improvements over the past several years. These include major improvements and additions to infrastructure assets, more specifically roads, water distribution components and sewer infrastructure; along with vehicles and major purchases to preserve open space.

Additional information on the Town capital assets can be found in Note II. Subsection D, of this report.

Long-Term Debt – At the end of the current fiscal year, the Town had total debt outstanding, inclusive of unamortized premiums, of approximately $166.6 million ($121.9 million Governmental activities and $44.8 million Business-type activities). The entire amount comprises debt backed by the full faith and credit of the government.

The Town’s credit rating from Standard and Poor increased to “AAA”. This is the highest investment grade issued by this agency.

State statutes limit the amount of general obligation debt a governmental entity may issue to 5.0 % of its total assessed valuation. The current debt limitation for the Town is approximately $594.6 million, which is significantly in excess of the Town’s outstanding general obligation debt classified as inside the debt limit. The Town also holds a proportionate share of debt of other governmental units that provide services within the Town’s boundaries. The debt service from such arrangements is assessed annually to the Town.

The decrease in long-term debt from the prior year to the current year is summarized as follows:

Bond anticipation note payable balances outstanding at year-end amount to approximately $7.5 million and relate mostly to water infrastructure improvements.

Additions: Governmental Activities -$ Business-Type Activities 7,281,031

Regular Scheduled Maturities: Governmental Activities (10,184,535) Business-Type Activities (2,216,200)

Amortization of Bond Premium Governmental Activities (244,632) Business-Type Activities (105,104)

(5,058,852)$


Additional information on the Town’s short-term and long-term debt can be found in Note E. and F. of this report.

Economic Factors and Next Year’s Budgets and Rates

Consistent with both State and National work force trends, the Town’s unemployment rates havecontinued to improve. Rates are currently lower than pre-recession levels and the best they have beenin decades.

The Town’s real estate tax base is made up predominantly of residential taxes, which comprise nearly91.7% of the Town’s real estate tax base. The Town also relies to a lesser but moderate extent on itscommercial and industrial real estate tax base, which in aggregate comprise 6.1% of the Town’s realestate tax base. The remainder of the Town’s tax base is made up of personal property taxes. Inaddition, Chapter 580 of the Acts of 1980, more commonly referred to as Proposition 2 ½, limits theTown’s ability to increase taxes in any one year by more than two and one-half percent (2 ½%) of theprevious year tax levy.

The Town’s housing market has stabilized and housing prices in this area of the country on averagerose significantly from the downward trend that ended several years ago.

Tourism in the area remains robust and contributes to the Town operations; valuation growthengenders a strong tax base for which the Town ranks in the top 10 in the Commonwealth.

In fiscal year 2019, the Town anticipates receiving local aid of approximately $9.6 million from theCommonwealth of Massachusetts, which consistent with the amount received by the Town in fiscalyear 2018.

All of the above items were considered when the Town developed its budget for fiscal year 2019. The budget was adopted in April 2018 and the tax rate was approved on November 21, 2018.

Requests for Information

This financial report is designed to provide a general overview of the Town’s finances for all those with an interest in the government’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Office of the Finance Director, 59 Town Hall Square, Falmouth, Massachusetts 02540; or via email at [email protected].

Complete standalone financial statements of the Falmouth Contributory Retirement System can be obtained from the Retirement Office, 80 Davis Straits Suite 102, Falmouth, Massachusetts 02540.


Basic Financial Statements


Governmental Business-Type ComponentActivities Activities Total Unit

Assets Cash and cash equivalents 58,115,385$ 1,228,102$ 59,343,487$ 502,080$ Investments 17,803,317 549,324 18,352,641 - Receivables, net of allowance for uncollectibles:

Real estate and personal property taxes 1,573,435 - 1,573,435 - Tax liens and deferrals 1,863,576 - 1,863,576 - Excise 1,302,636 - 1,302,636 - User fees - 1,191,616 1,191,616 - Special assessments 23,805,689 187,563 23,993,252 - Departmental and other 1,035,438 - 1,035,438 16,667 Notes receivable - - - 51,057 Intergovernmental 12,617,690 214,945 12,832,635 -

- - - 1,033 - - - 85,763

86,675,644 50,110,854 136,786,498 - 210,919,173 52,025,382 262,944,555 - 415,711,983 105,507,786 521,219,769 656,600

3,704,682 262 3,704,944 - 5,178,266 230,529 5,408,795 -

978,359 - 978,359 -

Prepaid items Property held for sale Capital assets, not being depreciated Capital assets, net of accumulated depreciation

Total Assets

Deferred Outflows of Resources Related to net other postemployment benefits liability Related to net pension liability Related to charge on refunding

Total Deferred Outflows of Resources 9,861,307 230,791 10,092,098 -

Liabilities Warrants and accounts payable 2,934,937 35,043 2,969,980 8,503 Accrued payroll 3,303,742 - 3,303,742 - Other liabilities 7,196 - 7,196 - Interest expense 945,248 - 945,248 - Long-term liabilities:

Due within one year 10,992,475 2,364,756 13,357,231 - Due in more than one year 294,087,816 47,350,128 341,437,944 -

312,271,414 49,749,927 362,021,341 8,503

11,083,895 202,018 11,285,913 -

Total Liabilities

Deferred Inflows of Resources Related to net other postemployment benefits liability Related to net pension liability 4,916,613 218,881 5,135,494 -

Total Deferred Inflows of Resources 16,000,508 420,899 16,421,407 -

Net Position Net investment in capital assets 186,811,470 57,486,346 244,297,816 - Restricted:

Nonexpendable permanent funds 25,000 - 25,000 - Expendable permanent funds 2,747,797 - 2,747,797 - Community preservation 6,970,039 - 6,970,039 - Federal and State grants 3,608,722 - 3,608,722 - Debt service 30,884,116 - 30,884,116 - Gift funds 505,284 - 505,284 - Property held for sale - - - 85,763

Unrestricted (134,251,060) (1,918,595) (136,169,655) 562,334 Total Net Position 97,301,368$ 55,567,751$ 152,869,119$ 648,097$

See accompanying notes to basic financial statements.

Primary Government

JUNE 30, 2018STATEMENT OF NET POSITION


Town of Falmouth, Massachusetts Comprehensive Annual Financial Report

(December 31, 2017)

A-36

Program Revenues Net (Expenses) Revenues and Changes in Net PositionOperating Capital

Charges for Grants and Grants and Governmental Business-Type ComponentFunctions/Programs Expenses Services Contributions Contributions Activities Activities Total Unit

Primary Government: Governmental Activities: General government 11,820,927$ 1,718,710$ 402,813$ 400,000$ (9,299,404)$ (9,299,404)$ -$ Public safety 23,870,579 5,607,636 106,370 305,335 (17,851,238) (17,851,238) - Education 78,668,134 1,274,973 20,957,575 26,049 (56,409,537) (56,409,537) - Public works 15,199,826 1,778,774 19,494 23,832,654 10,431,096 10,431,096 - Health and human services 2,911,949 141,775 627,792 - (2,142,382) (2,142,382) - Culture and recreation 5,540,743 1,583,136 774,013 - (3,183,594) (3,183,594) - Interest expense 3,143,954 - 383,275 - (2,760,679) (2,760,679) - Community development 303,282 - - 508,847 205,565 205,565 - Total Governmental Activities 141,459,394 12,105,004 23,271,332 25,072,885 (81,010,173) (81,010,173) -

Business-Type Activities: Water 6,523,023 7,086,150 - 39,385 602,512$ 602,512 - Total Business-type Activities 6,523,023 7,086,150 - 39,385 602,512 602,512 -

Total Primary Government 147,982,417$ 19,191,154$ 23,271,332$ 25,112,270$ (81,010,173) 602,512 (80,407,661) -

Component Unit: Falmouth EDIC 1,079,895$ 183,260$ -$ 844,496$ (52,139)$

Total Component Unit 1,079,895$ 183,260$ -$ 844,496$ (52,139)

General Revenues: Real and personal property taxes 102,520,551 - 102,520,551 - Motor vehicle and other excise 7,497,678 - 7,497,678 - Grants and contributions not restricted to specific programs 2,123,564 - 2,123,564 -

Penalties and interest on taxes 621,244 - 621,244 - Unrestricted investment income 71,512 (6,033) 65,479 155 Other - - - 1,198

Transfers (net) (356,817) 356,817 - -

Total General Revenues and Transfers 112,477,732 350,784 112,828,516 1,353

Change in Net Position 31,467,559 953,296 32,420,855 (50,786)

Net Position: Beginning of year, as restated (see Note IV) 65,833,809 54,614,455 120,448,264 698,883

End of year 97,301,368$ 55,567,751$ 152,869,119$ 648,097$


YEAR ENDED JUNE 30, 2018STATEMENT OF ACTIVITIES


Town of Falmouth, Massachusetts Comprehensive Annual Financial Report

(December 31, 2017)

A-37


GOVERNMENTAL FUNDSBALANCE SHEET

JUNE 30, 2018



Assets:Cash and cash equivalents 36,069,535$ 6,927,150$ 2,366,175$ 2,442,105$ 10,310,420$ 58,115,385$ Investments 15,050,347 - - - 2,752,970 17,803,317 Receivables, net of allowance for uncollectibles: Real estate and personal property taxes 1,530,423 43,012 - - - 1,573,435 Tax liens and deferrals 1,822,363 41,213 - - - 1,863,576 Excise 1,302,636 - - - - 1,302,636 Special assessments 66,240 - 866,297 - 22,873,152 23,805,689 Other 934,452 - 3,972 - 97,014 1,035,438 Intergovernmental 6,442,325 - 100,047 5,385,517 689,801 12,617,690

63,218,321 7,011,375 3,336,491 7,827,622 36,723,357 118,117,166

- - - - - -

63,218,321$ 7,011,375$ 3,336,491$ 7,827,622$ 36,723,357$ 118,117,166$

Total Assets


Total Assets and Deferred Outflows of Resources

Liabilities:2,419,057$ 41,336$ -$ 114,490$ 360,054$ 2,934,937$ 3,303,742 - - - - 3,303,742

7,196 - - - - 7,196

Warrants and accounts payable Accrued payroll and withholdings Other liabilities

Total Liabilities 5,729,995 41,336 - 114,490 360,054 6,245,875

Deferred Inflows of Resources: Unavailable revenues - property taxes 3,014,061 84,225 3,972 - - 3,102,258 Unavailable revenues - excise taxes 1,302,636 - - - - 1,302,636 Unavailable revenues - special assessments 66,240 - 866,297 - 22,873,152 23,805,689 Unavailable revenues - other 934,452 - - - - 934,452 Unavailable revenues - intergovernmental 6,442,325 - - 138,093 - 6,580,418

Total Deferred Inflows of Resources 11,759,714 84,225 870,269 138,093 22,873,152 35,725,453

Fund Balances: Nonspendable - - - - 25,000 25,000 Restricted 872,359 6,885,814 2,466,222 7,575,039 13,465,151 31,264,585 Committed 10,936,681 - - - - 10,936,681 Assigned 1,129,906 - - - - 1,129,906 Unassigned 32,789,666 - - - - 32,789,666

Total Fund Balances 45,728,612 6,885,814 2,466,222 7,575,039 13,490,151 76,145,838

Total Liabilities, Deferred Inflows of Resources, and Fund Balances 63,218,321$ 7,011,375$ 3,336,491$ 7,827,622$ 36,723,357$ 118,117,166$




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

JUNE 30, 2018

Total Governmental Fund Balances 76,145,838$

Capital assets used in governmental activities are not financial resources and therefore are not reported in the funds. 297,594,817

Other long-term assets are not available to pay for current period expenditures and, therefore, are reported as unavailable revenue in the funds 35,725,453

In the Statement of Activities, interest is accrued on outstanding long-term debt whereas in the governmental funds, interest is not reported until due. (945,248)

Deferred outflows and inflows of resources to be recognized in future expense are not available resources and, therefore, are not reported in the funds: Deferred charge on refunding transactions 978,359 Deferred outflows related to other postemployment benefits 3,704,682 Deferred outflows related to pensions 5,178,266 Deferred inflows related to other postemployment benefits (11,083,895) Deferred inflows related to pensions (4,916,613)

Net effect of reporting deferred outflows and inflows of resources (6,139,201)

Long-term liabilities are not due and payable in the current period and therefore are not reported in the government funds: Bonds and notes payable (120,641,390) Unamortized premiums on bonds (1,243,796) Landfill monitoring (390,000) Compensated absences (1,484,050) Net pension liability (57,344,967) Net other postemployment benefits liability (123,976,088)

Net effect of reporting long-term liabilities (305,080,291)

Net Position of Governmental Activities $ 97,301,368




GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND `BALANCES

YEAR ENDED JUNE 30, 2018



Revenues: Real and personal property taxes 99,742,078$ 2,935,928$ -$ -$ -$ 102,678,006$ Intergovernmental 21,198,000 908,847 1,573,043 - 5,660,120 29,340,010 Motor vehicle and other excises 7,567,368 - - - - 7,567,368 Licenses and permits 1,902,911 - - - - 1,902,911 Departmental and other 1,461,687 - - - 2,845,506 4,307,193 User charges 5,468,989 - - - - 5,468,989 Special assessments 1,000,832 - 155,430 - 1,517,523 2,673,785 Penalties and interest on taxes 609,710 11,534 - - - 621,244 Fines and forfeitures 216,884 - - - - 216,884 Investment income 75,756 29,827 - - (34,071) 71,512 Contributions and donations - - - - 93,293 93,293

Total Revenues 139,244,215 3,886,136 1,728,473 - 10,082,371 154,941,195

Expenditures:Current: General government 8,346,826 814,813 33,596 - 1,077,892 10,273,127 Public safety 15,713,774 - 67,230 - 507,193 16,288,197 Education 49,857,693 - 30,733 - 4,956,587 54,845,013 Public works 11,083,077 144,505 1,590,536 2,093,329 253,110 15,164,557 Health and human services 1,520,721 - - - 181,829 1,702,550 Culture and recreation 3,125,101 184,700 - - 379,003 3,688,804 Pension and fringe benefits 31,480,427 - - - - 31,480,427 Community development - 303,282 - - - 303,282 State and county tax assessments 3,094,656 - - - - 3,094,656 Debt service: Principal 10,184,535 - - - - 10,184,535 Interest 3,544,488 - - - - 3,544,488

Total Expenditures 137,951,298 1,447,300 1,722,095 2,093,329 7,355,614 150,569,636

Excess (Deficiency) of Revenues Over (Under) Expenditures 1,292,917 2,438,836 6,378 (2,093,329) 2,726,757 4,371,559

Other Financing Sources (Uses) Transfers in 3,676,474 - 86,700 98,300 94,269 3,955,743 Transfers out (636,086) (1,481,164) (212,282) - (1,983,028) (4,312,560)

Total Other Financing Sources (Uses) 3,040,388 (1,481,164) (125,582) 98,300 (1,888,759) (356,817)

Net Change in Fund Balances 4,333,305 957,672 (119,204) (1,995,029) 837,998 4,014,742

Fund Balances, Beginning 41,395,307 5,928,142 2,585,426 9,570,068 12,652,153 72,131,096

Fund Balances, Ending 45,728,612$ 6,885,814$ 2,466,222$ 7,575,039$ 13,490,151$ 76,145,838$




RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGESIN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES


Net Change in Fund Balances - Total Governmental Fund Balances 4,014,742$

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. In addition, when a capital asset is disposed of, a gain or loss is calculated and reported in the Statement of Activities whereas in the governmental funds, proceeds are reported as revenues. The net amounts are reflected here as reconciling items: Capital outlays 9,800,626$ Depreciation expense (8,430,613)

Net effect of reporting capital assets 1,370,013

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 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 amortized in the Statement of Activities. The net amounts are reflected here as reconciling items: Amortization of deferred charge on refunding (61,623) Amortization of premiums on bonds and notes payable 244,632 Repayments of debt 10,184,535

Net effect of reporting long-term debt 10,367,544

Revenues in the Statement of Activities that do not provide current financial resources are unavailable in the Statement of Revenues, Expenditures and Changes in Fund Balances. Therefore, the recognition of revenue for various types of accounts receivable differ between the two statements. The amount presented represents the following differences derived . from unavailable revenue. 18,342,575

In the Statement of Activities, interest is accrued on outstanding long-term debt; whereas in governmental funds interest is not reported until due. The net amount presented here as a reconciling item represents the difference in accruals between this year and the prior year. 217,525

Some expenses reported in the Statement of Activities do not require the use of current financial resources and therefore are not reported as expenditures in the governmental funds: Compensated absences (24,672) Other postemployment benefits (2,152,854) Pension benefits (697,314) Landfill liability 30,000

Net effect of reporting long-term liabilities (2,844,840)

Change in Net Position of Governmental Activities 31,467,559$




PROPRIETARY FUNDSSTATEMENT OF NET POSITION

JUNE 30, 2018

Business-typeActivities -

Enterprise FundsWater

EnterpriseAssets: Current Assets:

Cash and cash equivalents 1,228,102$ Investments 549,324 Receivables (net) User fees 1,191,616 Special assessments 2,187 Intergovernmental 151,997

Total Current Assets 3,123,226

Noncurrent Assets: Receivables (net): Special assessments 185,376 Intergovernmental 62,948 Capital assets, not being depreciated 50,110,854 Capital assets, net of accumulated depreciation 52,025,382

Total Noncurrent Assets 102,384,560

Total Assets 105,507,786

Deferred Outflows of Resources:262 Related to net other postemployment benefits liability

Related to net pension liability 230,529 Total Deferred Outflows of Resources 230,791

Liabilities: Current Liabilities:

Warrants and accounts payable 35,043 Compensated absences 16,552 Bonds and notes payable 2,348,204

Total Current Liabilities 2,399,799

Noncurrent Liabilities: Compensated absences 49,655 Bonds and notes payable 42,487,941 Net pension liability 2,552,913 Net other postemployment benefits liability 2,259,619

Total Noncurrent Liabilities 47,350,128

Total Liabilities 49,749,927

Deferred Inflows of Resources:202,018 Related to net other postemployment benefits liability

Related to net pension liability 218,881 Total Deferred Inflows of Resources 420,899

Net Position: Net investment in capital assets 57,486,346 Unrestricted (1,918,595)

Total Net Position 55,567,751$




PROPRIETARY FUNDSSTATEMENT OF REVENUES, EXPENSES,

AND CHANGES IN NET POSITIONYEAR ENDED JUNE 30, 2018

Business-typeEnterprise Funds

WaterEnterprise

Operating Revenues: Charges for services 7,086,150$

Total Operating Revenues 7,086,150

Operating Expenses: Operating costs 3,373,023 Depreciation 2,188,980

Total Operating Expenses 5,562,003

Total Operating Income 1,524,147

Nonoperating Revenues (Expenses): Interest expense (961,020) Interest income (6,033)

Total Nonoperating Revenues (Expenses) (967,053)

Income Before Capital Contributions and Transfers 557,094

Capital contributions 39,385 Transfers in 356,817

Change in Net Position 953,296

Net Position at Beginning of Year, as restated (see Note IV) 54,614,455

Net Position at End of Year 55,567,751$




STATEMENT OF CASH FLOWS -PROPRIETARY FUNDS


Business-typeActivities -

Enterprise FundsWater

Enterprise

Cash Flows from Operating Activities: Receipts from users 7,079,802$ Payments to vendors (2,110,827) Payments to employees (1,346,933) Net Cash Provided by Operating Activities 3,622,042

Cash Flows from Noncapital Financing Activities: Transfers in 356,817 Net Cash Used for Noncapital Financing Activities 356,817

Cash Flows from Capital and Related Financing Activities: Proceeds from issuance of bond anticipation notes 1,883,622 Proceeds from capital grants 4,965 Proceeds from capital assessments 39,439 Acquisition and construction of capital assets (2,974,719) Principal payments on bonds and notes (2,211,235) Interest expense (1,066,124) Net Cash Used for Capital and Related Financing Activities (4,324,052)

CASH FLOWS FROM INVESTING ACTIVITIES: Investment of operating cash, net 6,033 Investment income (loss) (6,033) Net Cash Provided by Investing Activities -

Net Change in Cash and Cash Equivalents (345,193)

Cash and Cash Equivalents: Beginning of Year 1,573,295

End of Year 1,228,102$

Reconciliation of Operating Income (Loss) to Net Cash Provided by (Used in) Operating Activities: Operating income 1,524,147$

Adjustments to Reconcile Operating Income (Loss) to Net Cash Provided by (Used in) Operating Activities: Depreciation 2,188,980 Changes in assets, deferred outflows, liabilities and deferred inflows: User fees receivable (6,348) Deferred outflows of resources 251,209 Warrants and accounts payable (161,181) Compensated absences 6,940 Net pension liability (398,087) Net other postemployment benefits liability (162,517) Deferred inflows of resources 378,899

Net Cash Provided by Operating Activities 3,622,042$

Noncash capital and related financing activities: Amortization of bond premium 105,104$ Governmental debt subsidies 4,965




STATEMENT OF NET POSITIONFIDUCIARY FUNDS

JUNE 30, 2018

Pension and OtherEmployee Private

Benefit Purpose AgencyTrust Funds Trust Funds Funds

Assets: Cash and Cash Equivalents 6,513,645$ -$ 2,015,876$

Investments (at fair value): Equity securities 28,346,947 1,574,810 - Corporate fixed income securities 167,076 - - U.S. government securities 228,617 - - Pooled funds:

Domestic equity 28,933,546 - - International equity 15,106,333 - - Fixed income 21,455,469 - - Private equity and venture capital 14,513,050 - - Real estate 11,643,069 - - PRIT 18,194,402 - -

Total Investments 138,588,509 1,574,810 -

Total Assets 145,102,154 1,574,810 2,015,876

Liabilities: Warrants and accounts payable 168,329 - 382,052 Payroll liabilities - - 915,397 Performance bonds - - 629,720 Other - - 88,707

Total Liabilities 168,329 - 2,015,876

Net Position: Restricted for pensions 144,373,877 - - Restricted for other postemployment benefits 559,948 - - Held in trust for private purposes - 1,574,810 -

Total Net Position 144,933,825$ 1,574,810$ -$




STATEMENT OF CHANGES IN NET POSITIONFIDUCIARY FUNDS


Pension and OtherEmployee Private

Benefit PurposeTrust Funds Trust Funds

AdditionsContributions: Employer 11,807,381$ -$ Employee 3,009,593 - Transfers from other systems 330,058 - Reimbursements from other systems 296,877 - From Commonwealth of Massachusetts 37,137 - Total Contributions 15,481,046 -

Other income 10,647 -

Investment income: Interest and dividends 1,617,423 (16,375) Net appreciation in fair value of investments 18,044,397 - Less - investment management fees (1,032,893) - Net investment earnings 18,628,927 (16,375)

Total Additions (net) 34,120,620 (16,375)

DeductionsBenefit payments to pensioners and beneficiaries 15,403,161 - Member refunds 197,506 - Transfers to other systems 405,099 - Reimbursements to other systems 379,088 - Payroll expenses of the System 169,378 - Other administrative expenses 149,449 - Scholarships - 2,800 Human services - 20,878

Total Deductions 16,703,681 23,678

CHANGE IN NET POSITION 17,416,939 (40,053)

NET POSITION AT BEGINNING OF YEAR 127,516,886 1,614,863

NET POSITION AT END OF YEAR 144,933,825$ 1,574,810$




NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2018

I. Summary of Significant Accounting Policies

The accompanying basic financial statements of the Town have been prepared in conformity withgenerally accepted accounting principles (GAAP) as applied to state and local governments. GAAPis prescribed by the Governmental Accounting Standards Board (GASB), which is the primarystandard-setting body for state and local government entities. The following is a summary of themore significant policies and practices used by the Town:

A. Reporting Entity

The Town of Falmouth is situated on 44.5 square miles, located in Barnstable County,Massachusetts. Falmouth was incorporated as a town in 1686. An elected five-member Board ofSelectmen serves as the chief executive goal-setting and policy making authority of the Town andthe Town Manager serves as the Chief Administrative Officer implementing policies and goals onbehalf of the Board. The Town provides governmental services for the territory within itsboundaries, including police and fire protection, disposal of rubbish, public education in gradesK-12, water and sewer services, street maintenance, waterways oversight, parks and recreationalfacilities.

Component units, while separate entities, are in substance part of the governmental operations ifthe significance of their operations and/or financial relationship with the Town meet certaincriteria including: being financially accountable, and able to impose its will; appointing a votingmajority of the component units’ governing body and if the potential for the component unit toprovide specific financial benefits or to impose specific financial burdens on the Town.

The following component unit is included in the Town's reporting entity because of thesignificance of its operations. Data is blended with the fiduciary funds of the primarygovernment.

Falmouth Contributory Retirement System - The System was established to provide retirementbenefits to Town employees, the Falmouth Housing Authority employees and their beneficiaries.While legally separate, the System provides services almost entirely to the Town and is reportedas a pension trust fund in the fiduciary fund financial statements. A stand-alone audited financialreport for the year ended December 31, 2017, was issued and is available at the RetirementOffice, 80 Davis Straits, Suite 102, Falmouth, Massachusetts.

The following component unit is included in the Town’s reporting entity because the Town isfinancially accountable for, and can impose its will on, the organization. Data is presenteddiscretely in a separate column.


Discretely Presented Component Unit – The Falmouth Economic Development and Industrial Corporation (the EDIC) is a municipal corporation established on April 7, 1981, through Article 39 of the Annual Town Meeting called by the Town, in accordance with the provisions of Massachusetts General Law Chapter 121C. The Corporation’s purpose is to improve local economic conditions and promote private employment with Falmouth, Massachusetts. A Town appointed, volunteer Board of Directors (“the Board”) governs the Corporation. The Board may legally consist of up to seven members; currently, the Board has all seven-member positions filled. A stand-alone audit financial report for the year ended December 31, 2017, was issued and is available from the Board of Directors, Falmouth EDIC, 59 Town Hall Square, Falmouth, MA 02540.

B. Government-Wide and Fund Financial Statements

The government-wide financial statements (i.e., the statement of net position and the statement ofactivities) report information on all of the non-fiduciary activities of the primary government andits component units. For the most part, the effect of interfund activity has been removed fromthese statements. Governmental activities, which normally are supported by taxes andintergovernmental revenues, are reported separately from business-type activities, which rely to asignificant extent on fees and charges for support. Likewise the primary government is reportedseparately from the legally separate component units for which the primary government isfinancially accountable.

Separate financial statements are provided for governmental funds, proprietary funds andfiduciary funds, even though the fiduciary funds are excluded from the government-widefinancial statements. Major individual government funds and major individual enterprise fundsare reported as separate columns in the fund financial statements. Nonmajor funds are aggregatedand presented in a single column.

Major Fund Criteria – Major funds must be reported if both of the following criteria are met:

1) The total assets and deferred outflows of resources, liabilities and deferred inflows ofresources, revenues, or expenditures/expenses of an individual governmental orenterprise fund are at least ten percent of the corresponding total for all funds of thatcategory or type, and

2) The total assets and deferred outflows of resources, liabilities and deferred inflows ofresources, revenues, or expenditures/expenses of the individual governmental fund orenterprise fund are at least five percent of the corresponding element for all governmentaland enterprise funds combined.

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

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

The government-wide financial statements are reported using the economic resourcesmeasurement focus and the accrual basis of accounting. Under this method, revenues arerecorded when earned and expenses are recorded when a liability is incurred, regardless of thetiming of related cash flows. Property taxes are recognized as revenues in the fiscal year forwhich they are levied. Grants and similar items are recognized as revenue as soon as alleligibility requirements imposed by the provider are met.


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

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

The Town considers property tax revenues to be available if they are collected within 60 days after the end of the fiscal year and are material. Investment income associated with the current fiscal period is susceptible to accrual and has been recognized as revenue of the current fiscal period. All other revenue items are considered to be measurable and available only when the cash is received and are recognized as revenue at that time.

The government reports the following major Governmental Funds:

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

Community Preservation Fund – is used to account for specific activities that engender development of community housing, and recreation land as well as preservation of historic resources and open space acquisitions.

Capital Projects Fund – is used to account for all financial resources that are restricted, committed or assigned for the acquisition or construction of capital facilities and other capital assets of the governmental funds.

Sewer Capital Project Fund – is used to account for financial resources to be used for the acquisition or construction of sewer facilities and infrastructure.

Nonmajor Governmental Funds – consist of other special revenue and permanent 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 Funds are used to account for the proceeds of specific revenue sources that are restricted or committed to expenditures for specified purposes other than debt service or capital projects.


The Permanent Funds are used to account for financial resources that are restricted to the extent that only earnings, not principal, may be used for purposes that support the governmental programs.

The Proprietary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Under this method, revenues are recognized when earned and expenses are recorded when the liabilities are incurred.

Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues are user charges and fees, while operating expenses consist of salaries, ordinary maintenance, indirect costs and depreciation. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses.

The government reports the following major proprietary fund:

Water Enterprise Fund – is used to account for the operation of the water department. Cost associated with maintaining the related infrastructure and providing services to the general public on a continuing basis, including depreciation, are financed or recovered primarily through user charges.

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

The government reports the following fiduciary funds:

Pension Trust Fund – is used to account for the activities of the System, which accumulates resources for pension benefits to retired Town employees.

Other Postemployment Benefits Trust Fund – is used to accumulate funds for future payments of other postemployment benefits for retirees, such as health and life insurance.

Private-Purpose Trust Fund – is used to account for trust arrangements under which principal and income benefit individuals, private organizations or other governments. This fund is used for educational scholarships and needy citizen benefit funds.

Agency Fund – is used to account for assets held in a purely custodial capacity. This fund is primarily used for private public safety details, developer deposits and student activities. Agency funds apply the accrual basis of accounting but do not have a measurement focus.

D. Assets, Liabilities, Deferred Outflows/Inflows of Resources, and Net Position/Fund Equity

Deposits and Investments – The Town’s cash and cash equivalents are considered to be cash onhand, demand deposits, and short-term investments with original maturities of three months orless from the date of acquisition.

Investments of the Town are recorded at fair value in accordance with GASB Statement No. 72,Fair Value Measurement and Application. Accordingly, the change in fair value of investmentsis recognized as an increase or decrease to investment assets and investment income.


Receivables – Real estate and personal property taxes are assessed on January 1 every year. Bills are due in four installments on August 1, November 1, February 1, and May 1, or thirty days subsequent to the mailing date. Interest accrues on delinquent taxes at the rate of 14% per annum. Property taxes levied are recorded as receivables in the fiscal year of the levy. The Town is allowed to take delinquent taxes into tax title fourteen days subsequent to the mailing of a demand for payment of the delinquent taxes.

User fees consist of water fees. Water user fees are levied twice a year for residential user and quarterly for industrial users and are based on individual meter readings. They are subject to penalties and interest of they are not paid by the respective due date.

Real estate taxes and water and sewer user fees may be secured through a lien process and are considered 100% collectible. Accordingly, an allowance for uncollectible balances for these receivables is not reported. All personal property tax, excise tax and other departmental receivables are shown net of an allowance for uncollectible balances comprised of those outstanding amounts greater than five years old. Departmental and other receivables primarily consist of ambulance receivables and are shown net of allowance for uncollectible balances based on historical trends and specific account analysis.

Inventories and Prepaid Items – Inventories, which are not material to the basic financial statements, are considered to be expenditures at the time of purchase. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements.

Capital Assets – Capital assets which include land, buildings and improvements, machinery and equipment, vehicles, and infrastructure (e.g. roads, water and sewer mains, and similar items) are reported in the applicable governmental or business-type activities columns in the government-wide financial statements.

Capital assets are recorded at historical cost or estimated historical cost if purchased and constructed. Donated capital assets, donated works of art and similar items, and capital assets received in a service concession arrangement are reported at acquisition value rather than fair value. Net interest incurred during the construction phase of capital assets of business-type activities, if material, is included as part of the capitalized value of the assets constructed.

All purchases and construction costs in excess of $5,000 are capitalized at the date of acquisition or construction, respectively, with expected lives of greater than two years. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized.

Capital assets (excluding land and construction-in-process) are depreciated using the straight-line method over the following estimated useful lives:

Buildings and improvements 40 years Machinery and equipment 5-10 years Vehicles 5-10 years Infrastructure 40-50 years


Interfund Balances – Activity between funds that are representative of lending arrangements outstanding at the end of the fiscal year are referred to as either due to/from other funds or advances to/from other funds. All other outstanding balances between funds are reported as due to/from other funds. Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as internal balances.

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 in the individual fund statements. Transfers between and within governmental and fiduciary funds are eliminated from the governmental activities in the statement of activities. Any residual balances outstanding between the governmental activities and the business –type activities are reported in the statement of activities as transfers, net.

Investment Income – Excluding the permanent funds, investment income derived from major and nonmajor governmental funds is legally assigned to the General Fund unless otherwise directed by state law. Investment income of the proprietary fund is retained in the fund.

Compensated Absences – It is the Town’s policy to permit employees to accumulate earned but unused vacation and sick pay benefits. Compensated absence liabilities related to both governmental and business-type activities are normally paid from the funds reporting the payroll and related expenditures. Amounts related to these benefits are accrued when incurred in the government-wide and proprietary fund financial statements. A liability for these amounts is reported in Governmental Funds only if they have matured.

Long-term Obligations – Long-term debt is reported as liabilities in the government-wide and proprietary fund statement of net position. Bond premiums and discounts are amortized over the life of the bonds using the effective interest method. Bond anticipation notes payable are reported net of the applicable bond premium or discount.

In the governmental fund financial statements, the face amount of long-term debt issued is reported as other financing sources. Premiums received on a debt issuance are reported as other financing sources while discounts are reported as other financing uses. Issuance costs are exclusively reported as general government expenditures regardless of whether they are withheld from the actual proceeds.

Deferred Outflows/Inflows of Resources – In addition to assets, the statement of financial 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 Town has three types of items that are reported on the government-wide statement of net position which relate to outflows from changes in the net pension and the net other postemployment benefit liabilities and outflows which related to debt refunding’s. The deferred pensions will be recognized in pension expense in future years as more fully described in Note III, subsection A. The deferred other postemployment benefits will be recognized in employee benefits expense in future years as more fully described in Note III, subsection C. The deferred charge on refunding results from the difference in the carrying value of refunded debt and its reacquisition price and is deferred and amortized over the shorter of the life of the refunded or refunding debt.


In addition to liabilities, the statement of financial 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 Town has three items that are reported as deferred inflows of resources. The first arises only under a modified accrual basis of accounting and, accordingly, the item unavailable revenue is reported only in the governmental funds balance sheet. The governmental funds report unavailable revenues from five sources: property taxes, excise taxes, intergovernmental, special assessments and other. These amounts are deferred and recognized as an inflow of resources in the period that the amounts become available. The other items are reported on the government-wide statement of net position and relate to outflows from changes in the net pension liability and the net other postemployment benefit liability. The deferred pensions will be recognized in pension expense in future years as more fully described in Note III, subsection A. The deferred other postemployment benefits will be recognized in employee benefits expense in future years as more fully described in Note III, subsection C.

Net Position – In the government-wide financial statements, 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 related debt.

Net position are reported as restricted when amounts are not available for appropriation or are legally restricted by outside parties for a specific use. Net position has been restricted for the following:

Nonexpendable permanent funds represent the endowment portion of donor restricted trusts that support governmental programs.

Expendable permanent funds represent amounts held in trust whereby expenditures are subject to various trust agreements.

Community preservation represents assets that are restricted by State Law for the purpose of acquiring or developing open space and recreational facilities, historic resources and affordable housing associated with the Massachusetts Community Preservation Act.

Federal and State grants represent assets that have restrictions placed on them from federal and state granting agencies.

Debt service represents capital grants and contributions used to fund a portion of debt service on outstanding capital related debt of various Town functions.

Gift funds represent assets that are restricted by donors for specific governmental programs and uses.

Fund Equity – In the fund financial statements, fund balance for governmental funds is reported in classifications that comprise a hierarchy based primarily on the extent in which the Town is required to honor constraints on the specific purpose for which amounts in the funds can be spent.


Fund balance is reported in five components – nonspendable, restricted, committed, assigned, and unassigned as described below:

Nonspendable represents amounts that cannot be spent because they are either (a) not in spendable form (i.e. inventory or prepaid) or (b) legally or contractually required to be maintained intact such as the corpus of an endowment

Restricted represents amounts that have constraints placed either externally by third-parties (creditors, grantors, contributors, or laws or regulations of other governments) or by law through constitutional provisions or enabling legislation. Enabling legislation authorizes the Town to assess, levy, charge or otherwise mandate payment of resources (from external resource providers) and includes a legally enforceable requirement (compelled by external parties) that those resources be used only for the specific purposes stipulated in the legislation.

Committed represents amounts that can only be used for specific purposes pursuant to constraints imposed by formal action of the Town’s highest level of decision making authority, which consists of the Town Meeting members through Town Meeting Votes. Those committed amounts cannot be used for any other purpose unless the Town Meeting removes or changes the specified use by taking the same type of action (through Town Meeting Votes) it employed previously to commit those amounts.

Assigned represents amounts that are constrained by the Town’s intent to be used for specific purposes, but are neither restricted nor committed. The Board of Selectmen has by ordinance authorized the Town Accountant to assign fund balance. The Town Meeting may also assign fund balance as it does when appropriating fund balance to cover a gap between estimated revenue and appropriations in the subsequent year’s appropriated budget.

Unassigned represents amounts that have not been restricted, committed or assigned to specific purposes within the General Fund. The General Fund is the only fund that reports a positive unassigned fund balance amount. Other governmental funds besides the General Fund can only report a negative unassigned fund balance amount.

When both restricted and unrestricted resources are available for use, it is the Town’s policy to use restricted resources first, then unrestricted resources (committed, assigned and unassigned) as they are needed. When unrestricted resources (committed, assigned and unassigned) are available for use it is the Town’s policy to use committed resources first, then assigned, and then unassigned as they are needed.

As part of the Town’s financial policies and procedures, the Board of Selectmen annually vote to establish minimum fund balance amounts for the general and stabilization funds.

Stabilization Funds – The Town maintains a general stabilization fund which was authorized by a two-thirds vote of the Town Meeting. It may be used for any municipal purpose upon the condition of a two-thirds vote of the Town Meeting. The balance of the fund totals $5,781,137 at June 30, 2018 and is reported as unassigned fund balance in the General Fund. There are no requirements for additions.

The Town maintains a health insurance stabilization fund which was authorized by a two-thirds vote of the Town Meeting and which may be used for employee health insurance costs upon a two-thirds vote of the Town Meeting. The balance of the fund totals $394,061 at June 30, 2018


and is reported as unassigned fund balance in the General Fund. There are no requirements for additions.

The Town maintains a capital improvement stabilization fund which was authorized by a two-thirds vote of the Town Meeting and which may be used for capital outlays upon a two-thirds vote of the Town Meeting. The balance of the fund totals $4,794,575 at June 30, 2018 and is reported as unassigned fund balance in the General Fund. There are no requirements for additions.

The Town maintains a renewable energy stabilization fund which was authorized by a two-thirds vote of the Town Meeting and which may be used for constructing wind energy facilities or other renewable energy facilities upon a two-thirds vote of the Town Meeting. The balance of the fund totals $6,578 at June 30, 2018 and is reported as unassigned fund balance in the General Fund. There are no requirements for additions.

The Town maintains a special education stabilization fund which was authorized by a two-thirds vote of the Town Meeting and which may be used for providing special education services upon a two-thirds vote of the Town Meeting. The balance of the fund totals $881,169 at June 30, 2018 and is reported as unassigned fund balance in the General Fund. There are no requirements for additions.

The Town maintains a debt stabilization fund which was authorized by a two-thirds vote of the Town Meeting and which may be used for debt related activity upon a two-thirds vote of the Town Meeting. The balance of the fund totals $2,976,833 at June 30, 2018 and is reported as unassigned fund balance in the General Fund. There are no requirements for additions.

Encumbrances – The Town’s encumbrance policy regarding the General Fund is to (1) classify encumbrances that arise from normal purchasing activity approved by the Town Accountant as assigned, and (2) classify encumbrances that result from an action of the Town Meeting as committed. Encumbrances of funds already restricted or committed are included within the classification of those fund balances and not reported separately. The Town reports $1,129,906 of encumbrances from normal purchasing activity in the General Fund as assigned and $10,936,681 of encumbrances from Town Meeting votes in the General Fund as committed. There are no encumbrances reported in any other fund.


The following table reflects the Town’s fund equity categorizations:

Sewer NonmajorCommunity Capital Capital Governmental

General Preservation Projects Projects Funds Total

Nonspendable: Perpetual permanent funds -$ -$ -$ -$ 25,000$ 25,000$ Restricted: Ferry fee receipts - - - - 1,183,962 1,183,962 Title V program - - - - 276,438 276,438 Other town federal and state grants - - - - 694,510 694,510 School federal and state grants - - - - 1,462,313 1,462,313 Golf course - - - - 826,471 826,471 Waterways - - - - 768,785 768,785 Energy revolving - - - - 1,342,674 1,342,674 Parking meter receipts - - - - 327,055 327,055 Transfer station revolving fund - - - - 265,310 265,310 Other town revolving funds - - - - 437,761 437,761 School revolving funds - - - - 1,109,268 1,109,268 Town gift funds - - - - 465,968 465,968 School gift funds - - - - 39,316 39,316 Capital outlay - special assessments - - 942,239 - 1,517,523 2,459,762 Capital outlay - schools - - 261,854 - - 261,854 Capital outlay - library renovation - - 226,465 - - 226,465 Capital outlay - energy management - - 926,029 - - 926,029 Capital outlay - sewer - - - 7,575,039 - 7,575,039 Capital outlay - other purposes - - 109,635 - - 109,635 Community preservation - 6,885,814 - - - 6,885,814 Employee benefits 166,112 - - - - 166,112 Debt service 706,247 - - - - 706,247 Affordable housing trust - - - - 2,262,717 2,262,717 Conservation trust - - - - 274,100 274,100 Other trust funds - - - - 210,980 210,980 Committed: Consolidated dispatch center 172,545 - - - - 172,545 Skateboard park 299,650 - - - - 299,650 Building improvements 625,957 - - - - 625,957 Facilities maintenance 589,366 - - - - 589,366 Information technology 406,576 - - - - 406,576 Other general government articles 1,969,613 - - - - 1,969,613 Police equipment 75,913 - - - - 75,913 Police site improvements 540,143 - - - - 540,143 Fire equipment 796,365 - - - - 796,365 Marine services 629,588 - - - - 629,588 Other public safety articles 169,882 - - - - 169,882 Public works infrastructure 2,373,950 - - - - 2,373,950 Public works equipment 741,709 - - - - 741,709 Other purposes 1,545,424 - - - - 1,545,424 Assigned: Information technology 87,727 - - - - 87,727 Education 719,023 - - - - 719,023 Solid waste 70,857 - - - - 70,857 Wastewater 36,195 - - - - 36,195 Insurance 49,739 - - - - 49,739 Other purposes 166,365 - - - - 166,365 Unassigned 32,789,666 - - - - 32,789,666

Total Fund Balances 45,728,612$ 6,885,814$ 2,466,222$ 7,575,039$ 13,490,151$ 76,145,838$


E. Excess of Expenditures Over Appropriations and Deficits

During fiscal year 2018, expenditures exceeded appropriations for state and county charges by$103,271 which were funded with available funds.

F. Use of Estimates

The preparation of basic financial statements in conformity with GAAP requires management tomake estimates and assumptions that affect the reported amounts of assets and liabilities anddisclosure for contingent assets and liabilities at the date of the basic financial statements and thereported amounts of the revenues and expenditures/expenses during the fiscal year. Actual resultscould vary from estimates that were used.

II. Detailed Notes to All Funds

A. Deposits and InvestmentsA cash and investment pool is maintained that is available for use by all funds. Each fund type’sportion of this pool is displayed on the balance sheet as “cash and cash equivalents”. Thedeposits and investments of trust funds are held separately from those of other funds.State laws and regulations require the Town and System to invest funds only in pre-approvedinvestment instruments which include but are not necessarily limited to bank deposits, moneymarkets, certificates of deposit, U.S. obligations, repurchase agreements, and State Treasurer’sinvestment pool (“the Pool”). In addition, the statutes impose various limitations on the amountand length of investments and deposits. Repurchase agreements cannot be for a period of overninety days, and the underlying security must be a United States obligation.The Pool meets the criteria of an external investment pool. The Pool is administered by theMassachusetts Municipal Depository Trust (the MMDT), which was established by the Treasurerof the Commonwealth who serves as Trustee. The fair value of the position in the Pool is thesame as the value of the Pool shares.

Custodial Credit Risk: Deposits – In the case of deposits, this is the risk that in the event of abank failure, the government’s deposits may not be returned to it. The Town maintains a depositpolicy for custodial credit risk relative to cash holdings which includes the assessment of thefinancial stability of the institutions where deposits are held. At year-end, the carrying amount ofthe Town's deposits was $54,971,542 and the bank balance was $56,771,944. Of the Town's bankbalance, $13,942,920 was covered by either federal depository insurance or by the Depositors’Insurance Fund (DIF), and the remainder was collateralized. The carrying amount of cashincludes $25,000 of bank certificates of deposit with maturities of less than one year that areconsidered cash and cash equivalents.

Custodial Credit Risk: Investments – In the case of investments, this is the risk that in the eventof the invested party not being able to provide required payments to investors, ceasing to exist, orfiling of bankruptcy, the Town may not be able to recover the full amount of its principalinvestment and/or investment earnings. The Town maintains investment policies related tocustodial credit risk which includes the assessment of the financial stability of the institutionswhere investments are held.


The Town’s investments in the MMDT are not exposed to custodial credit risk because their existence is not evidenced by securities that exist in physical or book entry form. The Town’s investments in United States governmental obligations, corporate bond holdings, equity securities, and bond mutual funds are exposed to custodial credit risk because the related securities are uninsured, unregistered and are held by the counterparty. The Town’s investments in negotiable certificates of deposit are fully insured by federal depository insurance.

Fair Value of Investments – The Town reports its investments at fair value. When actively quoted observable prices are not available, the Town generally uses either implied pricing from similar investments or valuation models based on net present values of estimated future cash flows (adjusted as appropriate for liquidity, credit, market and/or other risk factors).

The Town categorizes its fair value measurements within the fair value hierarchy established by GAAP. This hierarchy is based on valuation inputs used to measure the fair value of the asset or liability. The three levels of the hierarchy are as follows:

• Level 1 – Inputs are quoted prices in active markets for identical investments at themeasurement date.

• Level 2 – Inputs (other than quoted prices included in Level 1) are either directly orindirectly observable for the investment through correlation with market data at themeasurement date and for the duration of the instrument’s anticipated life.

• Level 3 – Inputs reflect the Town’s best estimate of what market participants would usein pricing the investment at the measurement date.

The following table presents the Town’s investments carried at fair value on a recurring basis in the statement of net position at June 30, 2018:

6/30/18 Level 1 Level 2 Level 3Investments by fair value levelDebt securities: U.S. Government obligations 6,830,953$ 1,945,333$ 4,885,620$ -$ Corporate bonds 5,010,890 - 5,010,890 - Negotiable certificates of deposit 3,829,155 - 3,829,155 - Repurchase agreements 6,241,831 - 6,241,831 - Total debt securities 21,912,829 1,945,333 19,967,496 - Equity securities: Common stock 4,812,968 4,812,968 - - Total equity securities 4,812,968 4,812,968 - -

Total investments by fair value level 26,725,797$ 6,758,301$ 19,967,496$ -$

Investments measured at amortized cost MMDT 149,423 Total investments 26,875,220$

Fair Value Measurements Using


Debt and equity securities classified in Level 1 are valued using prices quoted in active markets for those securities. U.S. Government obligations, corporate fonds, negotiable certificates of deposit and repurchase agreements classified in Level 2 are valued using matrix pricing based on the securities’ relationship to benchmark quoted prices. The State Treasurer’s investment pool (MMDT) is valued at amortized cost. The MMDT’s investment advisor may value the pool using an alternative valuation method that more accurately reflects the fair value in accordance with the pools fair value pricing policies should amortized cost not approximate the fair value of the pool.

Interest Rate Risk: Investments – Debt securities are subject to interest rate risk. Such securities may be adversely affected by changes in interest rates, which may negatively affect the fair value of individual debt instruments, through fair value losses arising from increasing interest rates. The Town does not have formal investment policies related to interest rate risk.

At June 30, 2018, the Town’s investments had the following maturities:

The time until maturity for repurchase agreements and MMDT is based on the weighted average maturity of the underlying investments.

Concentration of Credit Risk – The Town does not place a limit on the amount that may be invested in any one issuer. The Town has 49% of its investments in U.S. Government or US. Government agency securities.

At June 30, 2018, the credit quality ratings of the Town’s investments were as follows:

The System

Massachusetts General Laws Chapter 32 and PERAC regulations require the System to invest funds only in pre-approved investment instruments, which include but are not necessarily limited to bank deposits, money markets, certificates of deposit, U.S. obligations, repurchase agreements, certain corporate bonds and equities and investment pools.

Investments 6/30/2018 < 1 1-5 6 - 10 Years

U.S. Government obligations 6,830,953$ 1,945,333$ 4,885,620$ -$ Corporate bonds 5,010,890 - 5,010,890 - Negotiable certificates of deposit 3,829,155 1,584,675 2,244,480 - Repurchase agreements 6,241,831 6,241,831 - - MMDT 149,423 149,423 - - Total Town Investments with Maturities 22,062,252$ 9,921,262$ 12,140,990$ -$

Time Until Maturity (Years)

Quality Ratings (Moody's)Investments Aaa Aa3 A2 A3 Baa1 Baa2 Unrated

U.S. Government obligations 6,830,953$ -$ -$ -$ -$ -$ -$ Corporate bonds - 944,442 300,673 1,647,577 1,158,837 959,361 - Negotiable certificates of deposit - - - - - - 3,829,155 Repurchase agreements 6,241,831 - - - - - - MMDT - - - - - - 149,423

Total 13,072,784$ 944,442$ 300,673$ 1,647,577$ 1,158,837$ 959,361$ 3,978,578$


Custodial Credit Risk: Deposits – Deposits are subject to the risk of bank failure. The System may be unable to recover the full amount of its deposits in any one bank institution in the event of a bank failure. The System’s policy for custodial credit risk of deposits is to rely on Federal Deposit Insurance Corporation (“FDIC”) insurance coverage for the first $250,000 of deposits held at each financial institution. At December 31, 2017, $97,567 of the System’s cash deposits were uninsured; all of which was held with State Street Bank and Trust.

Custodial Credit Risk: Investments – Custodial credit risk for investments is the risk that, in the event of a failure of the counterparty, the System will not be able to recover the value of its investments or collateral securities that are in the possession of the outside party. The System’s policy for custodial credit risk of investments intends that all investments are either insured and/or registered in the name of the System. At December 31, 2017, the System was not exposed to custodial credit risk on its investments.

Interest Rate Risk: Deposits – This is the risk that fair value losses may arise due to increasing interest rates. Such risk is reduced by the fact that the System maintains its excess funds in highly liquid bank accounts; thereby, allowing for timely reallocation should the need arise.

Interest Rate Risk: Investments – Debt securities are subject to interest rate risk. Debt securities may be adversely affected by changes in interest rates, which may negatively affect the fair value of individual debt instruments. The System does not have a formal investment policy that limits investments maturities as a means of managing its exposure to fair value losses arising from increasing interest rates.

Securities Credit Risk: Investments – In the case of investments, there is the risk that in the event of an invested party will be unable to fulfill its obligations, such as to provide required payments to investors, to meet current or future performance expectations, to abide by industry regulations and proper operational practices, ceasing to exist, or filing for bankruptcy. In those instances, the System may not be able to recover the full amount of its principal investment and/or investment earnings. As previously noted, PERAC and Massachusetts statutory regulations have been enacted to reduce this risk. In evaluating its credit risk, the System relies on credit ratings assigned by Moody’s and Standard and Poor’s. The System does voluntarily self-impose certain investment restrictions; however, those can be changed at the Board’s discretion. The System does maintain a significant portion (approximately 95%) of its monetary assets as investment holdings.

None of the System’s investments were subject to credit quality ratings from leading credit rating agencies. At December 31, 2017, uninsured short-term investment funds with fair values of $6,310,324 were reported as cash equivalents. These funds represent temporary holdings of excess cash resources. The System intends to reinvest these amounts in less than one year. Accordingly, the fair values of these amounts have been classified as cash equivalents in these financial statements.


Concentration of Credit Risk: Investments – The following investments held by the System at December 31, 2017 represent approximately 64.5% of the System’s total investments:

Discretely Presented Component Unit – Falmouth EDIC

Custodial Credit Risk: Deposits – In the case of deposits, this is the risk that in the event of a bank failure, the government's deposits may not be returned to it. The Corporation does not have a deposit policy for custodial credit risk relative to cash withholdings. At year-end, the carrying amount of the Corporation’s deposits was $502,080 and the bank balance was $497,503. The Corporation carries deposits that are fully insured by the Federal Deposit Insurance Corporation (FDIC), as well as the Depositors Insurance Fund (DIF).

Fair Value of Investments – The Corporation reports its investments at fair value. When actively quoted observable prices are not available, the Corporation generally uses either implied pricing from similar investments or valuation models based on net present values of estimated future cash flows (adjusted as appropriate for liquidity, credit, market and/or other risk factors).

The Corporation categorizes its fair value measurements within the fair value hierarchy established by GAAP. This hierarchy is based on valuation inputs used to measure the fair value of the asset or liability. As of December 31, 2017, the Corporation carried no investments which required categorization.

Interest Rate Risk: Deposits – This is the risk that fair value losses may arise due to increasing interest rates. The Corporation does not have a formal investment policy that limits investment maturity periods as a way of managing its exposure to fair value losses arising from rising interest rates.

Concentration of Credit Risk – The Corporation maintains no financial holdings that classified as investments at December 31, 2017; therefore, no concentration credit risk existed at that time.

Credit Risk –The Corporation has not adopted a formal policy related to credit risk. As of December 31, 2017, none of the Corporations monetary assets were invested in or subject to credit quality ratings or risk.

SSGA Passive Bond Market Index SL Fund 13.5%Rhumbline Russell 1000 Funds 12.9%PRIT Hedge Fund 10.5%LMCG Mid-Cap Core Fund 8.1%HGK Trinity Street International Equity Fund GP, LLC 7.3%Dimensional Fund Advisors International Core Equity Portfolio 7.2%Dimensional Fund Advisors Global Real Estate Securities Portfolio 5.0%


B. Receivables

Receivables as of year-end for the Town’s individual major and non-major governmental funds inthe aggregate, including the applicable allowances for uncollectible accounts, are as follows:

Receivables as of year-end for the Town’s proprietary funds are as follows:

Gross Allowance for NetAmount Uncollectibles Amount

Receivables:Real estate and personal property taxes 1,530,423$ -$ 1,530,423$ Tax liens and deferrals 1,867,548 - 1,867,548 Motor vehicle and boat excise 1,302,636 - 1,302,636 Ambulance user charges 1,863,968 (1,124,587) 739,381 Sewer user charges 195,071 - 195,071 Sewer assessments 22,869,247 - 22,869,247 Street assessments 866,297 - 866,297 Title V 70,145 - 70,145 Community Preservation tax 43,012 - 43,012 Solar revenues 97,014 - 97,014 Intergovernmental 12,617,690 - 12,617,690

Total 43,323,051$ (1,124,587)$ 42,198,464$

Gross Allowance for NetAmount Uncollectibles Amount

Receivables:Water user fees 1,191,616$ -$ 1,191,616$ Water assessments 187,563 - 187,563 Intergovernmental 214,945 - 214,945

Total 1,594,124$ -$ 1,594,124$


Governmental funds report deferred inflows of resources in connection with receivables for revenues that are considered unavailable to liquidate liabilities of the current period. The following identifies the components of deferred inflows of resources in the governmental funds:

Massachusetts School Building Authority – As of June 30, 2018, the Town expects to receive from the Commonwealth of Massachusetts $2,770,835 in principal and $247,760 in interest applicable to approved school construction projects completed between 1994 and 2003. Such costs are reimbursed to the Town in equal installments over the life currently estimated at fifteen years of the related bond issues and are subject to appropriation only by the State Legislature. A receivable is recorded in the general fund for the principal portion due as of June 30, 2018 and additionally, $59,888 related to school window replacements was recorded as a receivable in the capital projects major fund.

Massachusetts Clean Water Trust – The Town has entered into various loan agreements with the Massachusetts Clean Water Trust (MCWT). Under these agreements, it is expected that the Town will be subsidized by MCWT on a periodic basis for principal in the amount of $3,877,596 ($3,809,583 for governmental activities and $68,013 for business-type activities) and interest in the amount of $1,168,497 until the maturities of these agreements. GAAP requires the recognition of gross debt relative to these agreements; therefore, a receivable totaling $3,671,490 has been reported in the General Fund of the Town, a receivable of $138,093 has been reported in the Sewer Capital Project Major Fund and a receivable totaling $68,013 has been reported in the Water Enterprise Fund.

Also, as of June 30, 2018 the Town had yet to receive undrawn loan proceeds totaling $5,394,356 ($5,247,424 in the Sewer Capital Project Major Fund and $146,932 in the Water Enterprise Fund); however, since the Town is legally obligated for the total amount of the debt, which has been recorded as bond proceeds in the current and prior fiscal years, the amount not yet received has been recorded as a receivable in the accompanying basic financial statements within the Sewer Capital Projects Fund and the Water Enterprise Fund.

OtherGeneral GovernmentalFund Funds Total

Receivable type:Real estate and personal property taxes 1,191,698$ 43,012$ 1,234,710$ Tax liens 1,822,363 45,185 1,867,548 Motor vehicle and boat excise 1,302,636 - 1,302,636 Ambulance user charges 739,381 - 739,381 Sewer user charges 195,071 - 195,071 Sewer assessments 66,240 22,803,007 22,869,247 Street assessments - 866,297 866,297 Title V - 70,145 70,145 Intergovernmental 6,442,325 138,093 6,580,418

Total 11,759,714$ 23,965,739$ 35,725,453$


Discretely Presented Component Unit – Falmouth EDIC

The Corporation carries its notes receivables at the principal amount due reduced by the loan loss allowance. Interest rates charged on these notes are 1%. The notes are primarily secured by each security agreement and a UCC-1 Financing statement given by each borrower on its fixtures. This document is filed with Commonwealth of Massachusetts. The Corporation evaluates these notes based on the past payment history and credit worthiness of the borrower’s and establishes a note loss allowance if it determines that contractual payments of interest and principal on the note will not be collected in accordance with the terms of the note agreement. Amounts receivable are charged off against the allowance only if reasonable attempts at collection fail.

The following reflect the receivables for the Corporation as of December 31, 2017:

The notes receivable portion above is scheduled to mature as follows:

C. Interfund Receivables, Payables and Transfers

The composition of interfund transfers for the fiscal year ended June 30, 2018, was as follows:

Gross Allowance for NetReceivable Type Amount Uncollectibles Amount

Notes receivable 51,057$ -$ 51,057$ Rental income 16,667 - 16,667

Totals 67,724$ -$ 67,724$

Year EndingDecember 31, Amount

2018 51,057$ Total 51,057$

Sewer Nonmajor WaterGeneral Capital Capital Governmental Enterprise

Transfers Out Fund Projects Projects Funds Fund TotalGeneral Fund -$ 86,700$ 98,300$ 94,269$ 356,817$ 636,086$ (1)

Community Preservation Fund 1,481,164 - - - - 1,481,164 (2)

Capital Projects 212,282 - - - - 212,282 (3)

Nonmajor Governmental Funds 1,983,028 - - - - 1,983,028 (4)

Total 3,676,474$ 86,700$ 98,300$ 94,269$ 356,817$ 4,312,560$

(1) Transfers to capital projects major fund for BAN paydowns, transfers to nonmajor funds for waterways projects, and transfersto water enterprise to supplement operations

(2) Transfers to general fund for debt service(3) Transfers to general fund for capital outlays for roads(4) Transfers to general fund to supplement operating budgets and for capital project outlays

Transfers In


D. Capital Assets

Capital asset activity for the year ended June 30, 2018 was as follows:

Beginning Ending Balance Increases Decreases Balance

Governmental Activities:Capital assets not being depreciated: Land 84,933,383$ 1,582,404$ -$ 86,515,787$ Construction in process 34,439,980 159,857 (34,439,980) 159,857

Total capital assets not being depreciated 119,373,363 1,742,261 (34,439,980) 86,675,644

Capital assets being depreciated: Buildings and improvements 162,637,421 3,897,336 - 166,534,757 Improvements other than buildings 21,346,578 391,624 - 21,738,202 Infrastructure 113,237,316 34,412,969 - 147,650,285 Machinery and equipment 17,128,545 2,904,010 - 20,032,555 Vehicles 14,297,871 892,406 - 15,190,277

Total capital assets being depreciated 328,647,731 42,498,345 - 371,146,076

Less accumulated depreciation for: Buildings and improvements (60,464,709) (3,536,116) - (64,000,825) Improvements other than buildings (8,607,164) (675,504) - (9,282,668) Infrastructure (57,667,809) (2,526,549) - (60,194,358) Machinery and equipment (12,723,822) (1,154,796) - (13,878,618) Vehicles (12,332,786) (537,648) - (12,870,434)

Total accumulated depreciation (151,796,290) (8,430,613) - (160,226,903)

Total capital assets being depreciated, net 176,851,441 34,067,732 - 210,919,173

Governmental activities capital assets, net 296,224,804$ 35,809,993$ (34,439,980)$ 297,594,817$


Depreciation expense was charged to functions/programs as follows:

Beginning Ending Balance Increases Decreases Balance

Business-type Activities: WaterCapital assets not being depreciated: Land 1,486,126$ -$ -$ 1,486,126$ Construction in process 47,128,587 1,496,141 - 48,624,728

Total capital assets not being depreciated 48,614,713 1,496,141 - 50,110,854

Capital assets being depreciated: Buildings and improvements 163,824 - - 163,824 Improvements other than buildings 239,301 - - 239,301 Infrastructure 95,180,427 799,582 - 95,980,009 Machinery and equipment 832,492 7,725 - 840,217 Vehicles 318,869 - (318,869) - Total capital assets being depreciated 96,734,913 807,307 (318,869) 97,223,351

Less accumulated depreciation for: Buildings and improvements (163,824) - - (163,824) Improvements other than buildings (3,203) (6,406) - (9,609) Infrastructure (42,415,180) (2,146,522) - (44,561,702) Machinery and equipment (426,782) (36,052) - (462,834) Vehicles (318,869) - 318,869 - Total accumulated depreciation (43,327,858) (2,188,980) 318,869 (45,197,969)

Total capital assets being depreciated, net 53,407,055 (1,381,673) - 52,025,382

Business-type activities capital assets, net 102,021,768$ 114,468$ -$ 102,136,236$

Governmental Activities: General government 292,798$ Public safety 1,304,639 Education 2,942,707 Public works 2,889,349 Health and human services 1,845 Culture and recreation 999,275 Total Governmental Activities 8,430,613$

Business-Type Activities: Water 2,188,980$ Total Business-Type Activities 2,188,980$


E. Temporary Debt

The Town is authorized to borrow on a temporary basis to fund the following:

Current Operating Costs – Prior to collection of revenues, expenditures may be financed throughthe issuance of revenue or tax anticipation notes (RANS or TANS).

Capital Projects and Other Approved Costs – Projects may be temporarily funded through theissuance of bond anticipation notes (BANS) or grant anticipation notes (GANS). In certain cases,prior to the issuance of these temporary notes, the governing body must take the necessary legalsteps to authorize the issuance of the general obligation bonds. Temporary notes may not exceedthe aggregate amount of bonds authorized or the grant award amount and carry maturity dates thatare limited by state law. Interest expenditures and expenses for temporary borrowings areaccounted for in the general fund and enterprise funds, respectively.

Temporary notes outstanding at June 30, 2018, are payable as follows:

The Town is eligible for interim loan financing from the MCWT in anticipation of permanent financing through MCWT for costs related to the Town’s water activities. The interim loan outstanding at June 30, 2018 was permanently financed subsequent to year-end on September 12, 2018 and is reported as long-term debt in these financial statements in the Water Enterprise Fund.

F. Long–Term Obligations

The Town issues general obligation bonds and notes to provide funds for the acquisition andconstruction of major capital facilities. General obligation bonds and notes have been issued forboth governmental and business-type activities. Additionally, the Town incurs various other long-term obligations relative to associated personnel costs.

State law permits the Town, under the provisions of Chapter 44, Section 10, to authorizeindebtedness up to a limit of 5.0 percent of its equalized valuation. Debt issued in accordance withthis section of the law is designated as being “inside the debt limit.” In addition, the Town mayauthorize debt in excess of that limit for specific purposes. Such debt, when issued, is designatedas being “outside the debt limit”.

Interest Maturity Beginning EndingType Rate Date Balance Additions Retirements Balance

BAN 1.00% 8/18/17 185,000$ -$ (185,000)$ -$ Total Governmental Notes 185,000 - (185,000) -

MCWT 0.13% 9/12/18 5,939,917 1,341,114 (7,281,031) - Total Business-Type Notes 5,939,917 1,341,114 (7,281,031) -

Total Notes Payable 6,124,917$ 1,341,114$ (7,466,031)$ -$


The following reflects the current year activity in the long-term liability accounts:

The governmental activities liabilities will be liquated by the General Fund. The business-type liabilities will be liquidated by the Water Enterprise Fund.

The following is a summary of outstanding long-term debt obligations as of June 30, 2018:

Beginning Ending Due WithinBalance Additions Reductions Balance One Year

Governmental Activities Bond and note debt 130,825,925$ -$ (10,184,535)$ 120,641,390$ 10,393,255$ Unamortized bond premium 1,488,428 - (244,632) 1,243,796 198,207 Landfill closure 420,000 - (30,000) 390,000 30,000 Compensated absences 1,459,378 389,517 (364,845) 1,484,050 371,013 Net pension liability 66,260,000 13,012,714 (21,927,747) 57,344,967 - Net other postemployment benefits liability * 132,892,717 6,068,290 (14,984,919) 123,976,088 -

Total Governmental Activities 140,852,319$ 19,470,521$ (47,736,678)$ 305,080,291$ 10,992,475$

Business-type Activities: Water Bond and note debt 39,257,537$ 7,281,031$ (2,216,200)$ 44,322,368$ 2,262,255$ Unamortized bond premium 618,881 - (105,104) 513,777 85,949 Compensated absences 59,267 21,757 (14,817) 66,207 16,552 Net pension liability 2,951,000 579,307 (977,394) 2,552,913 - Net other postemployment benefits liability * 2,422,136 110,602 (273,119) 2,259,619 -

Total Business-type Activities 9,153,886$ 7,992,697$ (3,586,634)$ 49,714,884$ 2,364,756$

Total Long-term Obligations 150,006,205$ 27,463,218$ (51,323,312)$ 354,795,175$ 13,357,231$

*As restated (see Note IV)

Governmental Activities General obligation bonds 2.00 - 6.00% 48,560,000$ -$ (3,550,000)$ 45,010,000$ Refunding bonds 2.00 - 5.00% 4,007,300 - (765,000) 3,242,300 Advanced refunding bonds 2.00 - 5.00% 26,827,700 - (3,210,000) 23,617,700 MCWT notes 0% - 5.5% 51,430,925 - (2,659,535) 48,771,390 Total Governmental Activities 130,825,925 - (10,184,535) 120,641,390 Add: Unamortized bond premium 1,488,428 - (244,632) 1,243,796 Total Governmental Activities, net 132,314,353 - (10,429,167) 121,885,186

Business-type Activities - Water General obligation bonds 2.00 - 6.00% 3,420,000 - (190,000) 3,230,000 Refunding bonds 1.00 - 4.00% 2,249,000 - (366,000) 1,883,000 Advanced refunding bonds 2.00 - 5.00% 2,721,000 - (369,000) 2,352,000 MCWT notes 0% - 2.0% 30,867,537 7,281,031 (1,291,200) 36,857,368 Total Business-type Activities 39,257,537 7,281,031 (2,216,200) 44,322,368 Add: Unamortized bond premium 618,881 - (105,104) 513,777 Total Business-Type Activities 39,876,418 7,281,031 (2,321,304) 44,836,145

Total Bond and Note Debt 172,190,771$ 7,281,031$ (12,750,471)$ 166,721,331$


Payments on outstanding bonds and note balances due in future years consist of the following:

MCWT Loan Subsidies – As previously noted in Note I. B., the Town has entered into loan agreements with the MCWT. It is expected that the Town will be subsidized by MCWT on a periodic basis for principal in the amount of $3,877,596 and interest in the amount of $1,168,497 until the maturity of these agreements.

Authorized and Unissued Debt – At June 30, 2018, the Town had authorized and unissued debt as follows:

Principal InterestJune 30, Balance Subsidy Net of Subsidy Balance Subsidy Net of Subsidy Total

Governmental Activities2019 10,393,255$ (258,639)$ 10,134,616$ 2,905,674$ (233,161)$ 2,672,513$ 12,807,129$ 2020 9,787,210 (265,410) 9,521,801 2,591,132 (216,771) 2,374,361 11,896,161 2021 9,817,357 (282,931) 9,534,426 2,285,558 (187,894) 2,097,664 11,632,090 2022 9,745,342 (302,880) 9,442,462 1,947,759 (156,391) 1,791,368 11,233,830 2023 8,742,484 (387,236) 8,355,248 1,575,260 (82,852) 1,492,408 9,847,656

2024-2028 33,718,237 (1,636,072) 32,082,165 4,850,155 (231,108) 4,619,047 36,701,212 2029-2033 18,551,783 (676,415) 17,875,368 1,583,221 (59,175) 1,524,046 19,399,414 2034-2038 9,344,393 - 9,344,393 183,897 (1,145) 182,752 9,527,145 2039-2043 6,130,197 - 6,130,197 - - - 6,130,197 2044-2047 4,411,132 - 4,411,132 - - - 4,411,132

Total 120,641,390$ (3,809,583)$ 116,831,807$ 17,922,656$ (1,168,497)$ 16,754,159$ 133,585,965$

Business-type Activities: Water2019 2,262,255$ (5,065)$ 2,257,190$ 966,141$ -$ 966,141$ 3,223,331$ 2020 2,567,445 (5,168) 2,562,277 989,350 - 989,350 3,551,627 2021 2,370,133 (5,272) 2,364,861 918,233 - 918,233 3,283,094 2022 2,399,597 (5,379) 2,394,218 850,175 - 850,175 3,244,393 2023 2,351,853 (5,487) 2,346,366 781,175 - 781,175 3,127,541

2024-2028 11,637,065 (29,143) 11,607,922 2,940,879 - 2,940,879 14,548,801 2029-2033 11,337,962 (12,499) 11,325,463 1,651,548 - 1,651,548 12,977,011 2034-2038 8,962,921 - 8,962,921 461,398 - 461,398 9,424,319

2039 433,137 - 433,137 4,431 - 4,431 437,568 Total 44,322,368$ (68,013)$ 44,254,355$ 9,563,330$ -$ 9,563,330$ 53,817,685$

Project AmountWater treatment plant 741,100$ Waste Water Management 10,022,768Senior Center 9,500,000Athletic Field 3,100,000School Windows 947,636Wild Harbor Bulkhead 300,000Other 500,000 Total authorized and unissued 25,111,504$


G. Operating Lease

In 2013 the System, as lessee, entered into a ten-year, non-cancellable facility lease with a thirdparty for its office space. Future minimum annual rental expense obligations due under thisfacility lease which includes rent and common area maintenance fees as are as follows:

III. Other Information

A. Retirement System

Retirement System Description – The Town contributes to the Town of Falmouth ContributoryRetirement System (the System), a cost-sharing multiple-employer defined benefit pension planfor the Town and Falmouth Housing Authority. The System was established under Chapter 32 ofthe General Laws of the Commonwealth of Massachusetts. The System is administered by theTown of Falmouth and is part of the reporting entity. Standalone audited financial statements forthe year ended December 31, 2017 were issued and are available at the Retirement Office, 80Davis Straits, Suite 102, Falmouth, Massachusetts 02540. Disclosures applicable to the FalmouthHousing Authority are not material.

Membership – Membership in the System as of December 31, 2017, was as follows:

Retirees and beneficiaries currently receiving benefits 393 Active plan members 573 Inactive plan members 141 Total 1,107

Benefit Terms – Membership in the System is mandatory for all full-time employees and non-seasonal, part-time employees who, in general, regularly work more than twenty hours per week. Teachers and certain administrative personnel employed by the Town’s school department participate in a separate pension plan administered by the Massachusetts Teachers’ Retirement System, which is the legal responsibility of the Commonwealth of Massachusetts. Members of the System do not participate in the federal Social Security retirement system.

Massachusetts contributory retirement system benefits are uniform from retirement system to system. The System provides for retirement allowance benefits up to a maximum of 80% of a participant’s highest three-year or five-year average annual rate of regular compensation, depending on the participant’s date of hire. Benefit payments are based upon a participant’s age, length of creditable service, level of compensation and job classification.

LeaseCalendar Year Payments

2018 40,176$ 2019 40,339 2020 41,155 2021 41,323 2022 42,165 2023 32,762

237,920$


The most common benefits paid by the System include normal retirement, disability retirement and survivor benefits.

Generally, normal retirement occurs between ages 65 and 67. However, most participants with a hire date before April 2, 2012, may retire after twenty years of service or at any time after attaining age 55. For most participants hired on or after April 2, 2012, they must attain the age of 60 before they can retire. Participants with hire dates subsequent to January 1, 1978 must have a minimum of ten years’ creditable service in order to retire at age 55 or 60, as applicable. Participants become vested after ten years of service. Benefits commencing before age 65 are generally provided at a reduced rate. However, members working in certain occupations may retire with full benefits earlier than age 65.

Participants who resign from service and who are not eligible to receive a retirement allowance or are under the age of 55 may request a refund of their accumulated total contributions. In addition, depending on the number of years of creditable service, these employees may be entitled to interest that has accrued on their contributions. A vested employee under the age of 55 who elects to leave his accumulated contributions on deposit may apply for pension benefits upon reaching his eligible retirement age. The System provides for both an ordinary disability retirement, where a participant is permanently incapacitated from a cause unrelated to employment, and an accidental disability retirement, where the disability is the result of an injury or illness received or aggravated in the performance of one’s duty. The amount of benefits to be received in such cases is dependent upon several factors, including the age at which the disability retirement occurs, the years of service, average compensation and veteran status. In addition, certain provisions are in place relative to death benefits for beneficiaries of employees who die in active service.

Cost-of-living adjustments granted to members of Massachusetts retirement systems granted between 1981 and 1997 and any increases in other benefits imposed by the Commonwealth during those years have been the financial responsibility of the Commonwealth. Beginning in 1998, the funding of cost-of-living amounts became the responsibility of the participating units like the System.

The System may be amended or terminated in whole or in part at any time by the Massachusetts Legislature, provided that no such modification, amendment or termination shall be made that would deprive a current member of superannuation pension rights or benefits provided under applicable laws of Massachusetts, if such member has paid the stipulated contributions specified in sections or provisions of such laws.

Contributions Requirements – The Town has elected provisions of Chapter 32, Section 22D (as amended) of Massachusetts General Laws, which require that a funding schedule be established to fully fund the pension plan by June 30, 2040. Under provisions of this law, participating employers are assessed their share of the total retirement cost based on the entry age, normal actuarial cost method.

The Town contributed $7,450,583 to the System in fiscal year 2018, which equaled the actuarially-determined contribution requirement for the fiscal year. The Town’s contributions as a percentage of covered payroll was approximately 26.9% in fiscal year 2018.

Net Pension Liability – At June 30, 2018, the Town reported a liability of $59,897,880 for its proportionate share of the net pension liability. The net pension liability was measured as of January 1, 2016 and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. These figures were updated by the


independent actuary to December 31, 2017. The system adopted a number of changes to its actuarial assumptions and methods including a decrease in the assumed investment rate of return, or discount rate, from 7.75% to 7.50% and changes in mortality rate for pre-retirement, post-retirement and disabilities.in the most recent valuation. There were not any material changes to the System’s benefit terms since the actuarial valuation.

The Town’s proportion of the net pension liability is based on a projection of the Town’s long-term share of contributions to the System relative to the projected contributions of all employers. The Town’s proportion was approximately 97.3% at December 31, 2017, which was consistent with the proportion measured at January 1, 2016.

Fiduciary Net Position – The elements of the System’s basic financial statements (that is, all information about the System’s assets, deferred outflows of resources, liabilities, deferred inflows of resources and fiduciary net position) can be found in the fiduciary fund financial statements. The System’s full financial statements as of and for the year ended December 31, 2017 can be obtained by contacting the Retirement Board.

The System’s fiduciary net position was determined using the accrual basis of accounting. The System’s accounting records are maintained on a calendar-year basis in accordance with the standards and procedures established by PERAC. Contributions from employers and employees are recognized in the period in which they become due pursuant to formal commitments, statutory or contractual requirements. Benefit payments (including refunds of employee contributions) are recorded when incurred, regardless of the timing of payment. Investments are reported at fair value; fair value is determined as the price one would receive in an orderly transaction between market participants at a measurement date.

Pension Expense – The Town recognized $8,183,226 in pension expense in the statement of activities in fiscal year 2018.

Deferred Outflows of Resources and Deferred Inflows of Resources – At June 30, 2018, the Town reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Deferred Outflows Deferred Inflowsof Resources of Resources

Net differences between projected andactual earnings on pension plan investments -$ 4,377,527$

Differences between expected andactual experience - 757,967

Changes in assumptions 5,268,795 -

Changes in proportion and differencesbetween Town contributions andproportionate share of contributions 140,000 - Total 5,408,795$ 5,135,494$


The deferred outflows of resources and deferred inflows of resources are expected to be recognized in the Town’s pension expense as follows:

Actuarial Valuation – The measurement of the Retirement System’s total pension liability is developed by an independent actuary. The latest actuarial valuation was performed as of January 1, 2016. The significant actuarial assumptions used in the January 1, 2016 actuarial valuation included:

Actuarial cost method: Individual entry age normal

Amortization method: Top payments increase 5.86% per year until FY 2032 with a final amortization payment in FY 2033.

Remaining amortization period: 16 years

Asset valuation method: Actuarial value, 5-year smoothing

Investment rate of return: 7.5% per annum

Projected salary increases: Service based table with ultimate ranges of 4.25%, 4.50% and 4.75% for groups 1, 2 and 4, respectively

Cost of living adjustments: 3% on the first $12,000 of benefits. The funding schedule reflects a $14,000 COLA base.

Mortality rates: Pre-retirement rates reflect the RP-2000 Employees table projected generationally with Scale BB and a base year of 2009 (gender distinct). Post-retirement rates reflect the RP-2000 Healthy Annuitant table projected generationally with Scale BB and a base year of 2009 (gender distinct).

Disabled life mortality: For disabled retirees, the mortality rate is assumed to be in accordance with RP-2000 Health Annuitant Table projected generationally with Scale BB and a base year of 2012 (gender distinct). It is assumed that 55% of pre-retirement deaths are job-related for group 1and 2 members and 90% are job-related for group 4 members. For members retired under an Accidental Disability, 40% of deaths are assumed to be from the same cause as the disability.

Year ended June 30, 2019 1,280,764$ 2020 994,702 2021 (775,833) 2022 (1,226,332) Total 273,301$


The investment rate of return assumption is a long-term assumption and is based on capital market expectations by asset class, historical returns and professional judgment. The market expectations analysis used a building-block approach, which included expected returns by asset class and the target asset allocation. The target allocation and best estimates of arithmetic real returns for each major asset class are summarized in the following table:

Discount Rate – The discount rate used to measure the total pension liability in the January 1, 2016 actuarial valuation report was 7.5%, which was a reduction from the previous discount rate of 7.75%. The projection of cash flows used to determine the discount rate assumed plan member contributions were made at the current contribution rate and that employer contributions will be made at rates equal to the actuarially-determined contribution rates and the member rate. Based on those assumptions, the System’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 Analysis – The following presents the Town’s proportionate share of the net pension liability calculated using the discount rate of 7.5% as well as the Town’s proportionate share of the net pension liability using a discount rate that is one percentage point lower (6.5%) or one percentage point higher (8.5%) than the current rate (amounts in thousands):

B. Massachusetts Teachers’ Retirement System

Teachers and certain administrative employees of the Town’s school department participate in theMassachusetts Teachers’ Retirement System (“MTRS”), a cost-sharing multiple employer definedbenefit pension plan. MTRS is managed by the Commonwealth on behalf of municipal teachersand municipal teacher retirees. Like the Retirement System, MTRS was established under Chapter32 of Massachusetts General Laws. The Commonwealth’s legislature has the authority to amendor modify the MTRS’s funding policies.

TargetAsset Class Policy Range

Domestic equity 33.0% to 43.0%International equity 10.0% to 20.0%Fixed income 14.5% to 24.5%Real Estate/ Real Assets 7.5% to 12.5%Private equity 5.0% to 10.0%Hedge funds 7.5% to 12.5%Cash 0.0% to 3.0%

7.5%13.1%7.3%

nil

Long-Term Expected

Rate of Return

7.6% to 10.1%7.6%

2.6% to 8.7%

1% Decrease Current Discount 1% Increase (6.5%) (7.5%) (8.5%)

Town's proportionate share of the net pension liability 82,328$ 59,898$ 40,888$


The Commonwealth is a nonemployer contributor to the MTRS and is legally responsible by statute for all actuarially determined employer contributions and future benefit requirements of the MTRS. Therefore, the Town is considered to be in a special funding situation as defined by GASB Statement No. 68, Accounting and Financial Reporting for Pensions.

For the year ended June 30, 2018, the Commonwealth contributed $5,295,256 to the MTRS on behalf of the Town. The Town’s proportionate share of the collective MTRS net pension liability at this reporting date was 0.428587%, which was based on the actual, actuarially determined contribution made by the Commonwealth on behalf of the Town as a percentage of the total annual contribution made by the Commonwealth on behalf of all employers.

The table below presents the Town’s proportionate share of the following:

Commonwealth Portion

Paid (or assumed) On Behalf

of the Town

Town Portion

Net pension liability $ 98,083,792 $ (98,083,792) $ — Pension expense 10,237,291 (10,237,291) —

The Town has recognized intergovernmental revenue and pension expense of $10,237,291 associated with this arrangement.

C. Other Postemployment Benefits

The Town administers a single-employer defined benefit healthcare plan (the “OPEB Plan”). TheOPEB Plan provides health, dental and life insurance benefits (other postemployment benefits) tocurrent and future retirees, their dependents and beneficiaries in accordance with Section 20 ofMassachusetts General Law Chapter 32B.

Specific benefit provisions and contribution rates are established by collective bargainingagreements, state law and Town ordinance. All benefits are provided through the Town’spremium-based insurance program. The OPEB Plan does not issue a stand-alone financial reportand is presented as a fiduciary fund in the Town’s financial statements.

With respect to OPEB plan reporting, GASB issued GASB Statement No.’s 74, FinancialReporting for Postemployment Benefit Plans Other Than Pensions, and Statement No, 75,Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions, and 75.Reporting requirements for governments who administer an OPEB plan as defined under theaccounting standard are required to present disclosures under both GASB 74 and GASB 75.

GASB 74 requires specific disclosures and required supplementary information that relate directlyto the fiduciary fund in which the OPEB Plan is recorded. GASB 75 address disclosures related tothe net OPEB liability required to be recorded by the government in its applicable financialstatements. A number of these disclosures are identical, especially if the measurement date underGASB 75 is the same as the plan year-end date under GASB 74. When a year earliermeasurement date is used, differences in assumptions and calculations will result.

This footnote disclosure separately presents the required disclosures into two sections as the Townused a year earlier measurement date under GASB 75 in the Town’s fiscal 2018 reporting.


GASB Statement No. 75

OPEB Plan disclosures that impact the Town’s net OPEB liability using a measurement date of June 30, 2017 are summarized as follows:

Employees Covered by Benefit Terms – The following employees were covered by the benefit terms as of the July 1, 2016 actuarial valuation date:

Contributions – The contribution requirements of Plan members and the Town are established and may be amended by the Town, through negotiation with the Town employee unions. Retirees contribute 50-65 percent of the calculated contribution through pension benefit deductions. The remainder of the cost is funded by the Town. The Town currently contributes enough money to the Plan to satisfy current obligations on a pay-as-you-go basis plus additional contributions which vary annually. The costs of administering the Plan are paid by the Town. For the year ended July 1, 2017, (the measurement date) the Town’s average contribution rate was 6.1% of covered payroll.

Net OPEB Liability – The Town’s net OPEB liability was measured as of July 1, 2017 using an actuarial valuation as of July 1, 2016. The components of the net OPEB liability of the Town were as follows:

The total OPEB liability in the most recent actuarial valuation was determined using the following key actuarial assumptions applied to all periods included in the measurement, unless otherwise specified:

Active employees 804Inactive employees 656

Total 1,460

Total OPEB Liability 126,702,181$ Plan fiduciary net position (466,474)

Net OPEB liability 126,235,707$

Plan fiduciary net position as a percentage of the total OPEB liability 0.4%


Discount Rate – The discount rate used to measure the total OPEB liability was 3.58%. The only key change in assumptions from the prior year was the increase of this discount rate from 2.85%.

Long Term Expected Rate of Return – 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 OPEB 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.

Investment rate of return 7.0%, net of OPEB plan investment expense, including inflation.

Muncipal bond rate 3.13% as of July 1, 2017

Discount Rate 3.58%, net of OPEB plan investment expense including inflation. Using a blend of theMunicipal Bond Index Rate for unfundedperiods and the Investment Rate of Return.

Inflation 3.5% annually as of July 1, 2017 and for future periods

Health Care Trend Rate 7.0% decreasing to 4.5% at a rate of 0.5% per year

Salary Increases Group 1 and 2; 6.0% decreasing to 4.25%Group 4; 7.0% decreasing to 4.75%Teachers; 7.5% decreasing to 4.0%

Pre-Retirement Mortality RP-2000 and RP-2014 Employees Mortality Table projected with scale BB and MP-2016; base year 2009 for males and females

Post-Retirement Mortality RP-2000 and RP-2014 Employees Mortality Table projected with scale BB and MP-2016; base year 2009 for males and females

Disabled Mortality RP-2000 and RP-2014 Healthy Annuitant Table projected generationally generationally with scale BB and a base year 2012 for males and females

Actuarial Cost Method Individual entry age normal - level percentage of payroll


The target allocation and best estimates of arithmetic real rates of return were as reflected in the following table and are part of the Town’s OPEB investment policy:

Sensitivity Analyses – The following presents the Town’s net OPEB liability as well as what the Town’s net OPEB liability would be if it were calculated using a discount rate that is 1% lower or 1% higher than the current discount rate as well as if the healthcare cost trend rates are 1% lower or higher than the current healthcare cost trend rates:

ExpectedTarget Investment

Asset Class Allocation Rate of ReturnDomestic Equity 20.00% 6.44%International developed markets equity 20.00% 7.40%International emerging markets equity 5.00% 9.42%Core fixed income 10.00% 2.02%High yield fixed income 10.00% 4.43%Real estate 10.00% 5.00%Commodities 10.00% 4.43%Hedge fund, GTAA, Risk parity 10.00% 3.75%Private equity 5.00% 10.47%

100.00%Real rate of return 3.75%Inflation assumption 3.50%

Total nominal rate of return 7.25%Investment expense -0.25%Net investment return 7.00%

Current1% Decrease Discount Rate 1% Increase

Net OPEB Liability 146,176,512$ 126,235,707$ 110,195,584$

Current1% Decrease Trend Rate 1% Increase



Changes in the Net OPEB Liability – The following table summarizes the changes in the net OPEB liability:

OPEB Expense and Deferred Outflows/Inflows of Resources Related to OPEB –The Town recognized OPEB expense of $6,164,218. Deferred outflows of resources and deferred inflows of resources related to OPEB were reported as follows:

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

Employer contributions made subsequent to the measurement date are recognized as expense over one period.

Total OPEB Plan Fiduciary Net OPEBLiability Net Position Liability

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

Balances at July 1, 2017 135,671,224$ 356,371$ 135,314,853$

Changes for the year: Service cost 5,054,578 - 5,054,578 Interest 3,955,895 - 3,955,895 Difference between expected and actual experience (14,107,391) - (14,107,391) Net investment income - 10,103 (10,103) Employer contributions - 3,972,125 (3,972,125) Benefit payments withdrawn from trust - (3,872,125) 3,872,125 Benefit payments (3,872,125) - (3,872,125)

Net changes (8,969,043) 110,103 (9,079,146)

Balances at June 30, 2018 126,702,181$ 466,474$ 126,235,707$

Deferred Ouflows Deferred Inflowsof Resources of Resources

Contributions subsequent to the measurement date 3,690,270$ -$ Differences between expected and actual earnings 14,674 - Differences between actual and expected experience - 11,285,913

3,704,944$ 11,285,913$

June 30,2019 872,461$ 2020 (2,817,809) 2021 (2,817,809) 2022 (2,817,812) 2023 -

(7,580,969)$


GASB Statement No. 74

OPEB Plan disclosures that impact the Town’s net OPEB liability under GASB 74 as of June 30, 2018 are summarized in this section except disclosures under GASB 74 that are identical to GASB 75 are not repeated.

Investment Custody – In accordance with Massachusetts General Laws, the Town Treasurer is the custodian of the OPEB Plan and since the Town has not designated a Board of Trustees, the Town Treasurer is also the Trustee and as such is responsible for the general supervision of the management, investment and reinvestment of the OPEB Plan assets. OPEB Plan assets may be invested and reinvested by the custodian consistent with the prudent investor rule established in Chapter 203C and may, with the approval of the State Retiree Benefits Trust Fund Board of Trustees, be invested in the State Retiree Benefits Trust Fund established in Section 24 of Chapter 32A. OPEB Plan assets must be segregated from other funds and not be subject to the claims of any general creditor of the Town.

Investment Rate of Return – For the year ended June 30, 2018 the annual money-weighted rate of return on investments, net of investment expense, was -1.4%. The money-weighted rate of return expresses investment performance, net of investment expense, adjusted for the changing amounts actually invested.

Sensitivity Analyses – The following presents the Town’s net OPEB liability as well as what the Town’s net OPEB liability would be if it were calculated using a discount rate that is 1% lower or 1% higher than the current discount rate as well as if the healthcare cost trend rates are 1% lower or higher than the current healthcare cost trend rates:

Actuarial Assumptions – Actuarial assumptions are identical to those under GASB 75 except the Municipal Bond Rate is 3.45% and the Discount Rate is 3.87%.

Net OPEB Liability – The Town’s net OPEB liability was measured as of June 30, 2018 using an actuarial valuation as of July 1, 2016. The components of the net OPEB liability of the Town at June 30, 2018 were as follows:

Current1% Decrease Discount Rate 1% Increase


Current1% Decrease Trend Rate 1% Increase


Total OPEB Liability 126,641,194$ Plan fiduciary net position (559,948)

Net OPEB liability 126,081,246$

Plan fiduciary net position as a percentage of the total OPEB liability 0.4%


D. Pension and Other Employee Benefit Trust Funds

The Town reports two pension and other employee benefit trust funds in a single column in theStatement of Net Position and Statement of Changes in Net Position in the Fiduciary Funds. TheTown’s Other Postemployment Benefits Trust Fund does not issue stand-alone financialstatements and must be reported separately.

The Statement of Net Position of the Town’s pension and other employee benefit trust funds are asfollows:

OtherPension Postemployment

Trust Fund Benefits(December 31, 2017) Trust Fund Total

Assets: Cash and Cash Equivalents 6,510,212$ 3,433$ 6,513,645$

Investments (at fair value): Equity securities 28,186,125 160,822 28,346,947 Corporate fixed income securities - 167,076 167,076 U.S. government securities - 228,617 228,617 Pooled funds: Domestic equity 28,933,546 - 28,933,546 International equity 15,106,333 - 15,106,333 Fixed income 21,455,469 - 21,455,469 Private equity and venture capital 14,513,050 - 14,513,050 Real estate 11,643,069 - 11,643,069 PRIT 18,194,402 - 18,194,402

Total Investments 138,031,994 556,515 138,588,509

Total Assets 144,542,206 559,948 145,102,154

Liabilities: Warrants and accounts payable 168,329 - 168,329

Total Liabilities 168,329 - 168,329

Net Position: Restricted for pensions 144,373,877 - 144,373,877 Restricted for other postemployment benefits - 559,948 559,948

Total Net Position 144,373,877$ 559,948$ 144,933,825$


The Statement of Changes in Net Position of the Town’s pension and other employee benefit trust funds are as follows:

OtherPension Postemployment

Trust Fund Benefits(December 31, 2017) Trust Fund Total

AdditionsContributions: Employer 7,661,010$ 4,146,371$ 11,807,381$ Employee 3,009,593 - 3,009,593 Transfers from other systems 330,058 - 330,058 Reimbursements from other systems 296,877 - 296,877 From Commonwealth of Massachusetts 37,137 - 37,137 Total Contributions 11,334,675 4,146,371 15,481,046

Other income 10,647 - 10,647

Investment income: Interest and dividends 1,597,322 20,101 1,617,423 Net appreciation in fair value of investments 18,071,024 (26,627) 18,044,397 Less - investment management fees (1,032,893) - (1,032,893) Net investment earnings 18,635,453 (6,526) 18,628,927

Total Additions (net) 29,980,775 4,139,845 34,120,620

DeductionsBenefit payments to pensioners and beneficiaries 11,356,790 4,046,371 15,403,161 Member refunds 197,506 - 197,506 Transfers to other systems 405,099 - 405,099 Reimbursements to other systems 379,088 - 379,088 Payroll expenses of the System 169,378 - 169,378 Other administrative expenses 149,449 - 149,449

Total Deductions 12,657,310 4,046,371 16,703,681

CHANGE IN NET POSITION 17,323,465 93,474 17,416,939

NET POSITION AT BEGINNING OF YEAR 127,050,412 466,474 127,516,886

NET POSITION AT END OF YEAR 144,373,877$ 559,948$ 144,933,825$


E. Risk Financing

The Town is exposed to various risks of loss related to torts; theft of damage to and destruction ofassets; errors and omissions; natural disasters and various employee benefits including health,workers' compensation and unemployment compensation. The amount of claim settlements hasnot exceeded insurance coverage in any of the previous three years.

The Town is a part of a premium-based self-insurance group, which insures for worker'scompensation, general and personal liability, through the Massachusetts Inter-local InsuranceAssociation (MIIA). Additionally, the Town is part of a premium-based health insurance group,Cape Cod Municipal Health Group, which serves over sixty cities, towns, and school systems.The Town essentially transfers its risk through payment of its annual assessment, which is adjustedaccording to the Town's experience history.

F. Landfill Closure and Post-closure Care Costs

The Town’s landfill was closed during fiscal year 2000 and a final cover was installed inaccordance with Federal and State laws and regulations. Those laws and regulations require theTown to perform certain maintenance and monitoring functions (post-closure care) at the site for30 years after the landfill cover is installed. The liability for closure and post-closure care is basedon current costs which are subject to changes due to inflation, deflation, changes in technology orapplicable laws and regulations. In accordance with generally accepted accounting principals, theestimated cost of closure and post-closure care costs of $390,000 has been accrued in the liabilitiesof the Governmental Funds.

G. Commitments and Contingencies

A summary discussion of the Town’s exposure to commitments and contingencies follows:

Wind Turbine Litigation –

In 2010 and 2011, the Town acquired and erected two wind turbines at its wastewater treatmentplant. When the turbines began operations, homeowners in the immediate neighborhood began tocomplain that the noise and vibration of the turbines constituted a nuisance. There were severalcases filed pertaining to both zoning and nuisance claims.

The following summarizes the most recent court decisions and the Town’s current positionregarding these cases:

Wind I: Plaintiffs allege Wind I, the first of the two wind turbines owned by the Town andinstalled at the wastewater treatment plant on Blacksmith Shop Road was built in violation of theTown’s zoning-by-law. The litigation ended with a decision of the Massachusetts Appeals Courtthat the Town must obtain a special permit from the Zoning Board of Appeals to continueoperation of Wind I. The Town applied for this special permit and it was denied. Initially theTown appealed the judgment but subsequently withdrew the appeal as Wind I was determined tobe a nuisance under the zoning bylaw in a related court case. Accordingly, Wind I is not operatingpursuant to this determination made by the Court. The Building Commissioner has ordered theTown to prepare a plan to dismantle and remove Wind I.

The following key issues either resolved or remaining include:


• The Town reached a settlement agreement with the Massachusetts Clean Energy Center in theamount of $178,000 which was appropriated from a special fund specifically reserved for sucha judgment at the April 2018 Town Meeting. This settlement relates to advanced energycredits received but not earned.

• Debt service for Wind I will be partially offset from revenue generated from a major solararray built at the Town Landfill site. The remaining debt service will be appropriated at theAnnual Town Meeting in accordance with the annual amortization of the debt and interest.Outstanding debt is currently $2,310,000 and remaining interest is $513,449 and it isscheduled to mature in 2029.

• Wind 1 was determined to be impaired during fiscal year 2017 and net book value of$4,054,247 was recorded as an impairment loss in the Statement of Activities in the generalgovernment function classification at that time since this is where the capital asset anddepreciation were recorded.

• The decision to take down and decommission Wind I has been made. The ultimate deadlinefor take down is being determined by the Town’s Building Commission which is required tohave a plan in place by December 2019. No provision has been recorded for the potential costto dismantle and remove Wind 1 as it is presently unknown what that cost will be or what thenet recovery for salvage materials will generate on the secondary market.

Wind II: The second Town wind turbine was financed by a loan/grant from the Massachusetts Clean Water Trust “MCWT”, formerly the Massachusetts Water Pollution Abatement Trust with funds that originated with the United States under the American Recovery and Reinvestment Act of 2009. The original loan amount was approximately $4.9 million, and the interest rate is 0%. The loan qualifies for full principal forgiveness as long as the wind turbine continues to operate as an energy efficient project. Several neighbors of Wind II filed an application with the Town’s Zoning Board of Appeals requesting a Cease and Desist Order for Wind II on the grounds it was built without a special permit from the Zoning Board of Appeals. This application was denied by the Board. The neighbors appealed this denial to Superior Court which affirmed the Zoning Board’s decision. This case is presently under appeal in the Massachusetts Appeals Court. In a related court case the Court ruled Wind II as a nuisance under the zoning by-law and ordered it to cease operations. As a result, Wind II is currently not operating.

The following key issues either resolved or remaining include:

• The Town has fully informed the MCWT and will be able to continue to fund the financialobligation without a decrease of services.

• Wind II was determined to be impaired during fiscal year 2017 and net book value of$4,854,799 was recorded as an impairment loss in the Statement of Activities in the generalgovernment function at that time since this is where the capital asset and depreciation wererecorded.

• No provision has been recorded for the potential cost to dismantle and remove or move WindII because plans are subject to review and discussion.

Regulatory Taking Claim –

The Town was sued as the result of a regulatory taking claim. Regulatory takings arise when a local regulatory body denies a permit to build or otherwise use private property and the owner claims a loss of all economic value of the property. A jury issued a verdict against the Town in December 2016 for $660,000, which has been appealed to the Massachusetts Appeals Court, which heard oral arguments in September 2018. A liability for this judgement has not been reported in these financial statements.


The Town is also party to other certain legal claims that arise in the normal course of operations which are subject to many uncertainties. The outcome of individual litigation matters is not always predictable with assurance; although the amount of liability, if any, at June 30, 2018, cannot be ascertained, management believes that any resulting liability, if any for these other claims, should not materially affect the basic financial statements of the Town at June 30, 2018.

Grant Compliance – Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies, principally the federal and state governments. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable funds. The amount, if any, of expenditures which may be disallowed by the grantor cannot be determined at this time, although the Town expects such amounts, if any, to be immaterial.

Arbitrage – The Town is subject to certain Federal arbitrage laws in accordance with long-term borrowing agreements. Failure to comply with the rules could result in the payment of penalties. The amount of penalties, if any, cannot be determined at this time, although the Town expects such amounts, if any, to be immaterial.

H. Implementation of New GASB Pronouncements

Current Year Implementations –

In June 2015, the GASB issued GASB Statement No. 75, Accounting and Financial Reporting forPostemployment Benefits Other Than Pension Plans. GASB 75 established new accounting andfinancial reporting requirements for governments whose employees are provided with OPEB, aswell as for certain nonemployer governments that have a legal obligation to provide financialsupport for OPEB provided to the employees of other entities. The provisions of this Statementbecame effective in fiscal year 2018. The adoption of GASB No. 75 resulted in a reduction inbeginning net position of approximately $91.5 million and $1.7 million in the Town’sgovernmental and business-type activities, respectively. Refer to Note IV.

In March 2016, the GASB issued GASB Statement No. 81, Irrevocable Split-Interest Agreements.The objective of the Statement was to improve accounting and financial reporting for irrevocablesplit-interest agreements by providing recognition and measurement guidance for situations inwhich a government is a beneficiary of the agreement. The provisions of this Statement becameeffective in fiscal year 2018 and did not have a material impact on the Town’s financialstatements.

In May 2017, the GASB issued GASB Statement No. 86, Certain Debt Extinguishment Issues.The objective of the Statement was to improve consistency in accounting and financial reportingfor in-substance defeasance of debt. The provisions of this Statement became effective in fiscalyear 2018 and did not have a material impact on the Town’s financial statements.

Future Implementations –

In November 2016, the GASB issued GASB Statement No. 83, Certain Asset RetirementObligations. The objective of the Statement is to address accounting and financial reporting forcertain asset retirement obligations that have legally enforceable liability associated with theretirement of a tangible capital asset. The provisions of this Statement are effective for financialreporting periods beginning after June 15, 2018 (fiscal year 2019). The Town is currentlyevaluating whether adoption will have a material impact on the financial statements.


In January 2017, the GASB issued GASB Statement No. 84, Fiduciary Activities. The objective of the Statement is to improve guidance regarding the identification of fiduciary activities for accounting and financial reporting purposes and how these activities should be reported. The provisions of this Statement are effective for financial reporting periods beginning after December 15, 2018 (fiscal year 2020). The Town is currently evaluating whether adoption will have a material impact on the financial statements.

In June 2017, the GASB issued GASB Statement No. 87, Leases. This Statement redefines the manner in which long-term leases are accounted and reported. The provisions of this Statement are effective for financial reporting periods beginning after December 15, 2019 (fiscal year 2021). The Town is currently evaluating whether adoption will have a material impact on the financial statements.

In April 2018, the GASB issued GASB Statement No. 88, Certain Disclosures Related to Debt, Including Direct Borrowings and Direct Placements. The objective of this Statement is to improve the information that is disclosed in notes to government financial statements related to debt, including direct borrowings and direct placements. It also clarifies which liabilities governments should include when disclosing information related to debt. The provisions of this Statement are effective for financial reporting periods beginning after June 15, 2018 (fiscal year 2019). The Town is currently evaluating whether adoption will have a material impact on the financial statements.

In June 2018, the GASB issued GASB Statement No. 89, Accounting for Interest Cost Incurred Before the End of a Construction Period. This statement establishes accounting requirements for interest costs incurred before the end of a construction period. The provisions of this Statement are effective for financial reporting periods beginning after December 15, 2019 (fiscal year 2021). The Town is currently evaluating whether adoption will have a material impact on the financial statements.

In August 2018, the GASB issued GASB Statement No. 90, Majority Equity Interest – An Amendment of GASB Statements No. 14 and No. 61. The objective of this Statement is to improve the consistency and comparability of reporting a government’s majority equity interest in a legally separate organization and to improve the relevance of financial statement information for certain component units. The provisions of this Statement are effective for financial reporting periods beginning after December 15, 2018 (fiscal year 2020). The Town is currently evaluating whether adoption will have a material impact on the financial statements.

IV. Prior Period Restatements

The Town adopted GASB Statement No. 75, Accounting and Financial Reporting forPostemployment Benefits Other Than Pensions, in fiscal year 2018. Previously, OPEB wasaccounted for under GASB Statement No. 45, Accounting and Financial Reporting by Employersfor Postemployment Benefits Other Than Pensions. The result of the adoption of GASB StatementNo. 75 was to eliminate the net OPEB obligation recorded in the Town financial statements andrecord the net OPEB liability at June 30, 2017. The Town also reclassified a portion of itsambulance receivables as uncollectible. The impacts are illustrated as follows:


Governmental Business-type WaterActivities Activities Enterprise

Prior year as presented 154,530,382$ 56,284,616$ 56,284,616$ Eliminate previously recorded OPEB obligation 41,306,025 751,975 751,975 Contributions received subsequent to the measurement date 3,690,270 - - Record net OPEB liability (132,892,717) (2,422,136) (2,422,136) Record uncollectible ambulance receivables (800,151) - - As restated 65,833,809$ 54,614,455$ 54,614,455$



REQUIRED SUPPLEMENTARY INFORMATION - PENSIONSYEAR ENDED JUNE 30, 2018

SCHEDULE OF THE TOWN'S PROPORTIONATE SHARE OF THE NET PENSION LIABILITY

2018 2017 2016 2015

Town's proportion of the net pension liability (asset) 97.3% 97.1% 97.1% 96.9%

Town's proportionate share of the net pension liability (asset) 59,898$ 69,211$ 64,484$ 56,559$

Town's covered payroll 27,648$ 27,593$ 26,681$ 26,626$

Town's proportionate share of the net pension liability (asset) as a percentage of its covered payroll 216.6% 250.8% 241.7% 212.4%

Plan fiduciary net position as a percentage of the total pension liability 70.1% 64.1% 63.8% 66.9%

SCHEDULE OF THE TOWN CONTRIBUTIONS TO PENSION PLAN

2018 2017 2016 2015

Actuarially determined contribution 7,451$ 7,082$ 6,748$ 6,416$

Contributions in relation to the actuarially determined contribution 7,451 7,082 6,748 6,416

Contribution deficiency (excess) -$ -$ -$ -$

Town's covered payroll 27,648$ 27,593$ 26,681$ 26,626$

Contributions as a percentage of covered payroll 26.9% 25.7% 25.3% 24.1%

This schedule is presented to illustrate the requirement to show information for ten years. However, until a full ten-year trend is compiled, information is presented for those yearsin which information is available.

See accompanying independent auditor's report.

(dollar amounts are in thousands)


Year Ended June 30,

Year Ended June 30,



REQUIRED SUPPLEMENTARY INFORMATION - PENSIONSYEAR ENDED JUNE 30, 2018

2017 2016 2015 2014

Commonwealth's proportion of the collective net pension liability (asset) 100.0% 100.0% 100.0% 100.0%

Town's proportion of the collective net pension liability (asset) 0.0% 0.0% 0.0% 0.0%

Commonwealth's proportionate share of the net pension liability (asset) 22,885,391$ 22,357,928$ 20,489,643$ 15,896,354$

Commonwealth's actuarially determined contribution 1,235,515$ 1,124,583$ 1,021,930$ 937,379$

Contributions to MTRS are the responsibility of the Commonwealth of Massachusetts.

This schedule is presented to illustrate the requirement to show information for ten years. However, until a full ten-year trend is compiled, information is presented for those yearsin which information is available.



SCHEDULE OF THE COMMONWEALTH'S COLLECTIVE SHARE OF THE NET PENSION LIABILITYMASSACHUSETTS TEACHER'S RETIREMENT SYSTEM

Year Ended June 30,



REQUIRED SUPPLEMENTARY INFORMATION - OPEBYEAR ENDED JUNE 30, 2018

SCHEDULE OF CHANGES IN NET OPEB LIABILITY AND RELATED RATIOS

2018 2017Total OPEB liability:

Service cost 4,361,404$ 5,054,578$ Interest 4,620,284 3,955,895 Changes in assumptions (4,996,304) (14,107,391) Benefit payments (4,046,371) (3,872,125)

Net change in total OPEB liability (60,987) (8,969,043)

Total OPEB liability - beginning of year 126,702,181 135,671,224 Total OPEB liability - end of year (a) 126,641,194$ 126,702,181$

Plan fiduciary net position:Contributions - employer 4,146,371$ 3,972,125$ Net investment income (6,526) 10,103 Benefit payments (4,046,371) (3,872,125) Administrative expenses - - Other - -

Net change in Plan fiduciary net position 93,474 110,103

Plan fiduciary net position - beginning of year 466,474 356,371 Plan fiduciary net position - end of year (b) 559,948$ 466,474$

Net OPEB liability - end of year (a) - (b) 126,081,246$ 126,235,707$

Plan fiduciary net position as a percentage of the totalOPEB liability 0.44% 0.37%

Covered payroll 65,500,750$ 65,013,809$

Net OPEB liability as a percentage of covered payroll 192.49% 194.17%

Note: This schedule is presented to illustrate the requirement to show information for 10 years. However, until a full 10-year trend is compiled, information is presented for those yearsin which information is available.

Note: This schedule is presented using the optional format of combining the required schedulesin paragraph 36a and 36b.




REQUIRED SUPPLEMENTARY INFORMATION - OPEBYEAR ENDED JUNE 30, 2018

SCHEDULE OF CONTRIBUTIONS

2018 2017

Actuarially-determined contribution 6,560,565$ 8,695,228$ Contributions in relation to the actuarially-

determined contribution (4,146,371) (3,972,125)

Contribution deficiency (excess) 2,414,194$ 4,723,103$

Covered payroll 65,500,750$ 65,013,809$

Contribution as a percentage of covered payroll 6.33% 6.11%

Valuation date June 30, 2016 June 30, 2016Amortization period 30 years 30 yearsInvestment rate of return 7.00% 7.00%Municipal bond rate 3.45% 3.13%Single equivalent discount rate 3.87% 3.58%Inflation 3.50% 3.50%Healthcare cost trend rates 7.0% > 4.5% 7.0% > 4.5%Salary increases 7.5% > 4.0% 7.5% > 4.0%Actuarial Cost Method Individual Entry Age Normal (for all years presented)Asset Valuation Method Market Value of Assets as of Reporting Date (for all years presented)

SCHEDULE OF INVESTMENT RETURNS

2018 2017

-1.40% 2.25%

Note: These schedules are presented to illustrate the requirement to show information for 10 years. However, until a full 10-year trend is compiled, information is presented for those years in which information is available.


Annual money-weighted rate of return, net of investment expense

Year Ended June 30,

Year Ended June 30,



SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCEBUDGET AND ACTUAL - GENERAL FUNDYEAR ENDED JUNE 30, 2018

Budgeted Amounts Actual Actual VarianceOriginal Final Budgetary Budgetary PositiveBudget Budget Amounts Encumbrances Adjusted (Negative)

Revenues: Taxes: Real estate taxes 97,375,815$ 97,375,815$ 97,673,405$ -$ 97,673,405$ 297,590$ Personal property taxes 2,031,590 2,031,590 2,083,947 - 2,083,947 52,357 Tax title - - 183,081 - 183,081 183,081 Motor vehicle excise 3,551,103 3,551,103 5,210,553 - 5,210,553 1,659,450 Boat excise 80,000 80,000 188,538 - 188,538 108,538 Meals excise 800,000 800,000 931,395 - 931,395 131,395 Room occupancy excise 805,000 805,000 1,236,882 - 1,236,882 431,882

104,643,508 104,643,508 107,507,801 - 107,507,801 2,864,293 Intergovernmental: State aid - chapter 70 6,110,688 6,110,688 6,110,688 - 6,110,688 - State aid - state owned land 738,580 738,580 738,580 - 738,580 - State aid - unrestricted 1,384,984 1,384,984 1,384,984 - 1,384,984 - State aid - veterans benefits 316,372 316,372 342,570 - 342,570 26,198 State aid - other 305,410 305,410 319,776 - 319,776 14,366 Federal revenue through State 40,000 40,000 599,638 - 599,638 559,638 MSBA school construction reimbursement 962,492 962,492 962,492 - 962,492 -

9,858,526 9,858,526 10,458,728 - 10,458,728 600,202 User charges: Ambulance user charges 1,450,000 1,450,000 2,382,956 - 2,382,956 932,956 Town marina user charges 500,000 500,000 677,321 - 677,321 177,321 Solid waste disposal user charges 150,000 150,000 169,113 - 169,113 19,113 Sewer user charges 600,000 600,000 1,282,682 - 1,282,682 682,682 Water user charges 7,214,926 7,214,926 7,075,714 - 7,075,714 (139,212) Beach user charges 700,000 700,000 956,917 - 956,917 256,917

10,614,926 10,614,926 12,544,703 - 12,544,703 1,929,777 Departmental fees and other: Payments in lieu of taxes 150,000 150,000 171,537 - 171,537 21,537 Municipal lien fees 125,000 125,000 123,152 - 123,152 (1,848) Recreation fees 120,000 120,000 147,236 - 147,236 27,236 Rental of municipal property 100,000 100,000 94,992 - 94,992 (5,008) Police private detail charges 50,000 50,000 91,133 - 91,133 41,133 Fire inspection fees 50,000 50,000 50,080 - 50,080 80 Other fire revenue 100,000 100,000 135,099 - 135,099 35,099 Beach miscellaneous - - 91,547 - 91,547 91,547 Treasurer's miscellaneous - - 253,401 - 253,401 253,401 Other miscellaneous - - 307,598 - 307,598 307,598

695,000 695,000 1,465,775 - 1,465,775 770,775 Licenses and permits: Liquor licenses 150,000 150,000 157,490 - 157,490 7,490 Building permits 1,109,000 1,109,000 1,438,938 - 1,438,938 329,938 Board of Health licenses and permits 50,000 50,000 88,365 - 88,365 38,365 Other licenses and permits 100,000 100,000 218,118 - 218,118 118,118

1,409,000 1,409,000 1,902,911 - 1,902,911 493,911 Fines and forfeitures: Parking violations 60,000 60,000 163,412 - 163,412 103,412 Other fines 20,000 20,000 53,472 - 53,472 33,472

80,000 80,000 216,884 - 216,884 136,884

Special Assessments 400,000 400,000 1,040,271 - 1,040,271 640,271

Penalties and interest on taxes 575,000 575,000 609,710 - 609,710 34,710

Interest and investment income 40,000 40,000 231,248 - 231,248 191,248

Total Revenues 128,315,960 128,315,960 135,978,031 - 135,978,031 7,662,071





Expenditures: General Government: Town Meeting: Salary and wages 2,000 2,000 1,811 - 1,811 189 Other expenses 34,500 34,500 32,233 - 32,233 2,267

36,500 36,500 34,044 - 34,044 2,456 Town Moderator: Salary and wages 1,500 1,500 750 750 1,500 -

1,500 1,500 750 750 1,500 - Selectmen/Town Manager: Salary and wages 447,441 447,441 434,938 - 434,938 12,503 Specific departmental expenses 41,100 41,100 23,096 - 23,096 18,004 Other expenses 75,554 75,554 64,630 165 64,795 10,759 Article expenses 4,512,856 4,432,108 1,727,733 2,704,349 4,432,082 26

5,076,951 4,996,203 2,250,397 2,704,514 4,954,911 41,292 Finance Department: Salary and wages 120,457 122,457 122,387 - 122,387 70 Other expenses 3,000 3,000 2,681 - 2,681 319 Article expenses 209,138 209,138 85,156 123,982 209,138 -

332,595 334,595 210,224 123,982 334,206 389 Town Accountant: Salary and wages 156,748 159,848 159,831 - 159,831 17 Specific departmental expenses 50,000 50,000 50,000 - 50,000 - Other expenses 2,787 2,787 2,669 - 2,669 118

209,535 212,635 212,500 - 212,500 135 Assessing Department: Salary and wages 337,003 337,003 313,141 - 313,141 23,862 Other expenses 18,965 18,965 9,793 - 9,793 9,172

355,968 355,968 322,934 - 322,934 33,034 Town Treasurer: Salary and wages 314,094 322,594 322,585 - 322,585 9 Other expenses 223,083 223,083 117,164 10,000 127,164 95,919

537,177 545,677 439,749 10,000 449,749 95,928 Personnel Department: Salary and wages 221,640 243,842 234,142 - 234,142 9,700 Other expenses 65,374 65,374 44,113 700 44,813 20,561

287,014 309,216 278,255 700 278,955 30,261 Legal Department: Salary and wages 300,098 305,098 302,890 - 302,890 2,208 Specific departmental expenses 246,993 366,993 354,074 1,680 355,754 11,239 Other expenses 59,782 59,782 54,038 771 54,809 4,973

606,873 731,873 711,002 2,451 713,453 18,420 Finance Committee: Reserve fund 325,000 152,698 - - - 152,698

325,000 152,698 - - - 152,698

(continued)





Information Technology: Salary and wages 539,914 539,914 421,271 77,879 499,150 40,764 Specific departmental expenses 20,000 106,000 36,309 - 36,309 69,691 Other expenses 321,183 321,183 301,411 9,848 311,259 9,924 Article expenses 323,412 472,972 66,396 406,576 472,972 -

1,204,509 1,440,069 825,387 494,303 1,319,690 120,379 Geographical Information Systems: Salary and wages 80,325 81,625 81,619 - 81,619 6 Other expenses 17,500 17,500 16,685 - 16,685 815 Article expenses 97,012 12 - - - 12

194,837 99,137 98,304 - 98,304 833 Town Clerk: Salary and wages 222,524 228,524 228,228 - 228,228 296 Other expenses 40,940 40,940 30,876 - 30,876 10,064

263,464 269,464 259,104 - 259,104 10,360 Elections: Salary and wages 20,000 20,000 18,643 - 18,643 1,357 Other expenses 20,850 20,850 10,906 - 10,906 9,944 Article expenses 3,422 3,422 3,422 - 3,422 -

44,272 44,272 32,971 - 32,971 11,301 Conservation Commission: Salary and wages 229,624 229,624 215,053 1,900 216,953 12,671 Specific departmental expenses 6,100 8,100 7,569 - 7,569 531 Other expenses 12,350 12,350 6,954 - 6,954 5,396 Article expenses 33,321 199,321 4,256 195,065 199,321 -

281,395 449,395 233,832 196,965 430,797 18,598 Planning Department: Salary and wages 245,897 245,897 204,230 - 204,230 41,667 Other expenses 8,125 8,125 8,125 - 8,125 -

254,022 254,022 212,355 - 212,355 41,667 Zoning Board of Appeals: Salary and wages 117,949 121,649 121,600 - 121,600 49 Specific departmental expenses 600 600 100 - 100 500 Other expenses 5,550 5,550 3,397 - 3,397 2,153

124,099 127,799 125,097 - 125,097 2,702 Facilities Maintenance: Salary and wages 619,674 619,674 578,662 - 578,662 41,012 Specific departmental expenses 108,241 108,241 107,999 - 107,999 242 Capital expenses 116,892 116,892 111,501 5,391 116,892 - Other expenses 140,539 140,539 125,399 - 125,399 15,140 Article expenses 495,301 707,781 94,227 589,366 683,593 24,188

1,480,647 1,693,127 1,017,788 594,757 1,612,545 80,582 Court Judgments: Specific departmental expenses 500 500 500 - 500 -

500 500 500 - 500 - Town Insurance: Other expenses 1,504,872 1,504,872 1,294,781 49,739 1,344,520 160,352

1,504,872 1,504,872 1,294,781 49,739 1,344,520 160,352

Total General Government 13,121,730 13,559,522 8,559,974 4,178,161 12,738,135 821,387





Public Safety: Police Department: Salary and wages 5,360,032 5,411,482 5,376,328 - 5,376,328 35,154 Specific departmental expenses 7,000 7,000 7,000 - 7,000 - Capital expenses 100,000 100,000 94,008 - 94,008 5,992 Other expenses 456,494 456,494 388,606 390 388,996 67,498 Article expenses 803,111 803,111 187,055 616,056 803,111 -

6,726,637 6,778,087 6,052,997 616,446 6,669,443 108,644 Fire Department: Salary and wages 6,059,846 6,149,846 6,117,312 - 6,117,312 32,534 Specific departmental expenses 27,000 27,000 26,566 - 26,566 434 Other expenses 713,133 713,133 702,325 3,617 705,942 7,191 Article expenses 1,649,897 1,649,897 623,486 1,026,247 1,649,733 164

8,449,876 8,539,876 7,469,689 1,029,864 8,499,553 40,323 Building Department: Salary and wages 538,909 538,909 514,896 - 514,896 24,013 Other expenses 43,150 43,150 33,015 - 33,015 10,135

582,059 582,059 547,911 - 547,911 34,148 Consolidated Communication Department: Salary and wages 584,376 600,426 600,383 - 600,383 43 Other expenses 45,665 45,665 41,162 353 41,515 4,150

630,041 646,091 641,545 353 641,898 4,193 Marine and Environmental Services: Salary and wages 669,294 669,294 635,675 - 635,675 33,619 Specific departmental expenses 67,000 67,000 62,814 - 62,814 4,186 Other expenses 168,386 168,386 143,815 8,968 152,783 15,603 Article expenses 867,654 869,270 159,328 709,879 869,207 63

1,772,334 1,773,950 1,001,632 718,847 1,720,479 53,471

Total Public Safety 18,160,947 18,320,063 15,713,774 2,365,510 18,079,284 240,779

Education: School Department: Salary and other expenses 50,855,789 50,855,789 46,817,581 4,022,765 50,840,346 15,443 Article expenses 1,442,400 1,642,400 354,170 1,288,230 1,642,400 -

52,298,189 52,498,189 47,171,751 5,310,995 52,482,746 15,443 Upper Cape Vocational School: Other expenses 2,623,592 2,623,592 2,623,592 - 2,623,592 -

2,623,592 2,623,592 2,623,592 - 2,623,592 -

Total Education 54,921,781 55,121,781 49,795,343 5,310,995 55,106,338 15,443

Public Works: Admin/Engineering: Salary and wages 682,665 693,165 693,143 - 693,143 22 Specific departmental expenses 1,700 1,700 - - - 1,700 Other expenses 62,700 62,700 59,512 - 59,512 3,188 Article expenses 1,005,258 1,005,258 64,295 940,963 1,005,258 -

1,752,323 1,762,823 816,950 940,963 1,757,913 4,910

(continued)





Highway: Salary and wages 1,241,606 1,241,606 1,209,071 - 1,209,071 32,535 Specific departmental expenses 35,120 35,120 33,168 - 33,168 1,952 Other expenses 480,185 530,185 496,220 - 496,220 33,965 Article expenses 2,915,078 2,915,078 1,406,675 1,508,403 2,915,078 -

4,671,989 4,721,989 3,145,134 1,508,403 4,653,537 68,452 Snow and Ice Control: Salary and wages 80,000 85,000 72,978 - 72,978 12,022 Other expenses 95,000 540,000 539,902 - 539,902 98

175,000 625,000 612,880 - 612,880 12,120 Street Lighting: Other expenses 106,847 106,847 95,586 5,892 101,478 5,369

106,847 106,847 95,586 5,892 101,478 5,369 Vehicle Gasoline: Other expenses 350,000 350,000 270,140 17,186 287,326 62,674

350,000 350,000 270,140 17,186 287,326 62,674 Waste Management Facility: Salary and wages 153,948 154,698 154,684 - 154,684 14 Other expenses 216,317 216,317 128,396 11,130 139,526 76,791

370,265 371,015 283,080 11,130 294,210 76,805 Solid Waste Collection: Specific departmental expenses 3,564,071 3,564,071 3,266,195 70,857 3,337,052 227,019

3,564,071 3,564,071 3,266,195 70,857 3,337,052 227,019 Wastewater Utilities: Salary and wages 600,779 600,779 503,246 - 503,246 97,533 Other expenses 849,792 849,792 790,657 36,195 826,852 22,940 Article expenses 693,548 693,548 144,663 548,885 693,548 -

2,144,119 2,144,119 1,438,566 585,080 2,023,646 120,473 Water Utilities: Salary and wages 1,205,766 1,205,766 1,133,785 - 1,133,785 71,981 Specific departmental expenses 400,000 400,000 331,523 33,239 364,762 35,238 Other expenses 1,569,778 1,569,778 1,305,676 40,875 1,346,551 223,227 Article expenses 1,499,048 1,499,048 566,358 932,690 1,499,048 -

4,674,592 4,674,592 3,337,342 1,006,804 4,344,146 330,446 Renewable Energy: Other expenses 206,307 206,307 6,242 978 7,220 199,087

206,307 206,307 6,242 978 7,220 199,087 Parks: Salary and wages 849,301 849,301 800,908 - 800,908 48,393 Specific departmental expenses 11,900 11,900 11,200 - 11,200 700 Other expenses 232,000 237,000 225,139 2,936 228,075 8,925 Article expenses 228,465 228,465 111,057 117,408 228,465 -

1,321,666 1,326,666 1,148,304 120,344 1,268,648 58,018

Total Public Works 19,337,179 19,853,429 14,420,419 4,267,637 18,688,056 1,165,373





Health and Human Services: Health Inspection: Salary and wages 208,778 233,778 228,297 - 228,297 5,481 Specific departmental expenses 43,400 43,400 26,698 12,587 39,285 4,115 Other expenses 10,050 10,050 8,579 - 8,579 1,471

262,228 287,228 263,574 12,587 276,161 11,067 Clinics and Nurses: Specific departmental expenses 45,980 45,980 45,980 - 45,980 -

45,980 45,980 45,980 - 45,980 - Council on Aging: Salary and wages 219,979 219,979 212,234 - 212,234 7,745 Specific departmental expenses 16,000 16,000 - - - 16,000 Other expenses 20,800 20,800 19,568 - 19,568 1,232

256,779 256,779 231,802 - 231,802 24,977 Veterans Services: Salary and wages 121,768 125,668 125,610 - 125,610 58 Specific departmental expenses 456,200 456,200 415,654 - 415,654 40,546 Other expenses 4,500 4,500 3,828 - 3,828 672

582,468 586,368 545,092 - 545,092 41,276 Commission on Disabilities: Other expenses 250 250 211 - 211 39

250 250 211 - 211 39 Human Services: Salary and wages 338,951 338,951 306,275 - 306,275 32,676 Specific departmental expenses 93,700 93,700 89,700 - 89,700 4,000 Other expenses 38,730 38,730 38,087 - 38,087 643

471,381 471,381 434,062 - 434,062 37,319

Total Health and Human Services 1,619,086 1,647,986 1,520,721 12,587 1,533,308 114,678

Culture and Recreation: Falmouth Public Library: Salary and wages 1,482,293 1,482,293 1,469,070 - 1,469,070 13,223 Specific departmental expenses 297,723 297,723 297,723 - 297,723 - Other expenses 213,033 213,033 211,571 - 211,571 1,462 Article expenses 160,084 160,084 89,377 70,707 160,084 -

2,153,133 2,153,133 2,067,741 70,707 2,138,448 14,685 Recreation: Salary and wages 334,510 334,510 282,807 - 282,807 51,703 Specific departmental expenses 88,661 113,661 92,994 - 92,994 20,667 Other expenses 83,585 83,585 79,174 - 79,174 4,411 Article expenses 28,484 28,484 22,693 5,791 28,484 -

535,240 560,240 477,668 5,791 483,459 76,781 Beach Department: Salary and wages 555,926 555,926 514,255 - 514,255 41,671 Capital expenses 50,000 50,000 6,855 18,145 25,000 25,000 Other expenses 49,333 49,333 46,787 1,375 48,162 1,171 Article expenses 81,905 81,905 9,995 71,905 81,900 5

737,164 737,164 577,892 91,425 669,317 67,847 Bikeways Committee: Other expenses 1,860 1,860 1,800 - 1,800 60

1,860 1,860 1,800 - 1,800 60

Total Culture and Recreation 3,427,397 3,452,397 3,125,101 167,923 3,293,024 159,373

(continued)





State and County Assessments: County assessments 968,724 968,724 969,625 - 969,625 (901) State assessments and charges 378,681 378,681 378,681 - 378,681 - Transportation authorities assessments 178,997 178,997 178,997 - 178,997 - Annual charges against receipts 13,135 13,135 - - - 13,135 Tuition assessments 1,451,848 1,451,848 1,567,353 - 1,567,353 (115,505)

Total State and County Assessments 2,991,385 2,991,385 3,094,656 - 3,094,656 (103,271)

Pension and Fringe Benefits: Retirement: Non-contributory pension 15,000 15,600 12,465 - 12,465 3,135 Contributory pension 7,450,583 7,450,583 7,450,583 - 7,450,583 - Article expenses 12,869 12,869 - 12,869 12,869 -

7,478,452 7,479,052 7,463,048 12,869 7,475,917 3,135 Unemployment: Other expenses 153,000 203,000 165,426 9,085 174,511 28,489

153,000 203,000 165,426 9,085 174,511 28,489 Health Insurance: Other expenses 14,326,039 13,616,039 12,958,291 - 12,958,291 657,748

14,326,039 13,616,039 12,958,291 - 12,958,291 657,748 Life Insurance: Other expenses 9,232 9,232 7,832 - 7,832 1,400

9,232 9,232 7,832 - 7,832 1,400 Medicare Insurance: Other expenses 850,000 867,500 865,608 - 865,608 1,892

850,000 867,500 865,608 - 865,608 1,892 Other Employee Benefits: Specific departmental expenses 348,200 348,200 179,680 11,491 191,171 157,029

348,200 348,200 179,680 11,491 191,171 157,029

Total Pension and Fringe Benefits 23,164,923 22,523,023 21,639,885 33,445 21,673,330 849,693

Debt Service: Long Term Excluded Debt: Principal payments 8,301,452 8,301,452 8,300,904 - 8,300,904 548 Interest payments 3,049,677 3,049,677 3,036,952 - 3,036,952 12,725

11,351,129 11,351,129 11,337,856 - 11,337,856 13,273 Long Term Non-Excluded Debt: Principal payments 3,842,076 3,842,076 3,842,076 - 3,842,076 - Interest payments 1,318,261 1,318,261 1,318,260 - 1,318,260 1

5,160,337 5,160,337 5,160,336 - 5,160,336 1 Short Term Debt: Interest payments 1,244 1,244 1,244 - 1,244 -

1,244 1,244 1,244 - 1,244 -

Total Debt Service 16,512,710 16,512,710 16,499,436 - 16,499,436 13,274

Total Expenditures 153,257,138 153,982,296 134,369,309 16,336,258 150,705,567 3,276,729





Other Financing Sources (Uses) Transfers in 6,512,755 6,512,755 6,512,755 6,512,755 - Transfers out (1,672,079) (1,672,079) (1,766,348) (1,766,348) (94,269)

Total Other Financing Sources (Uses) 4,840,676 4,840,676 4,746,407 4,746,407$ (94,269)

Excess (Deficiency) of Revenues and OtherFinancing Sources Over Expenditures/UsesOf Prior Year Budgetary Fund Balance (20,100,502) (20,825,660) 6,355,129$ 10,844,531$

Other Budgetary ItemsUse of unassigned fund balance (free cash) 6,446,974$ 7,172,132$ Prior year encumbrances 13,653,528 13,653,528

Total Other Budgetary Items 20,100,502 20,825,660

Net budget and actual -$ -$ (Concluded)

The notes to the financial statements are an integral part of this statement.

The notes to the required supplementary information are and integral part of this statement.



NOTES TO REQUIRED SUPPLEMENTARY INFORMATION YEAR ENDED JUNE 30, 2018

I. Budgetary Basis of Accounting

Budgetary Information – An annual budget is legally adopted for the General Fund. Financial ordersare initiated by department heads, recommended by the Finance Committee and approved by thetaxpayers at the Town’s annual meeting in May. Expenditures may legally exceed appropriations atthe department level. Department heads may transfer, without Town meeting approval, appropriationbalances from one expenditure account to another within their department or budget. The Townmeeting however must approve any transfer of unencumbered appropriation balances betweendepartments or agencies. At the close of each fiscal year, unencumbered appropriation balances lapseor reverts to unassigned fund balance.

The Town adopts an annual budget for the General Fund in conformity with the guidelines describedabove. The Town Accountant has the responsibility to ensure that budgetary control is maintained inthe manner in which the appropriations were voted at Town Meeting. Budgetary control is exercisedthrough the Town’s accounting system.

Budgetary-to-GAAP Reconciliation – The Town’s General Fund is prepared on a basis of accountingother than GAAP to conform to the Uniform Municipal Accounting System basis of accounting asprescribed by the Massachusetts Department of Revenue. A reconciliation of the budgetary-basis toGAAP-basis results for the General Fund for the fiscal year ended June 30, 2018, is as follows:

Basis of FundAccounting PerspectiveDifferences Differences Total

Revenue on a budgetary basis 135,978,031$ MTRS on-behalf pension payments 10,237,291$ -$ 10,237,291 Revenue recognition differences (198,355) - (198,355) Stabilization investment income - (152,616) (152,616) Workers' compensation investment income - (2,876) (2,876) MCWT debt subsidy recognition 506,946 - 506,946 Water revenues - (7,124,206) (7,124,206)Revenue on a GAAP basis 10,545,882$ (7,279,698)$ 139,244,215$


Excess of Expenditures Over Appropriations – During fiscal year 2018, expenditures exceeded appropriations for state and county charges by $103,271 which were funded with available funds.

Basis of FundAccounting PerspectiveDifferences Differences Total

Expenditures on a budgetary basis 134,369,309$ MTRS on-behalf pension payments 10,237,291$ -$ 10,237,291 Workers' compensation expenditures - 56,647 56,647 OPEB funding contributions - 100,000 100,000 Expenditure recognition differences 62,350 185,000 247,350 MCWT debt subsidy recognition 506,946 - 506,946 Debt service contribution to other funds - (185,000) (185,000) Water expenditures - (7,381,245) (7,381,245) Expenditures on a GAAP basis 10,806,587$ (7,224,598)$ 137,951,298$

Other financing sources (uses) on a budgetary basis 4,746,407$ Stabilization fund transfers -$ (1,265,649)$ (1,265,649) Debt premium fund transfers - (98,553) (98,553) Workers' compensation fund tranfers - 100,000 100,000 OPEB funding contributions - 100,000 100,000 Debt service contribution to other funds - (185,000) (185,000) Water surplus (deficit) activity transfer - (356,817) (356,817) Other financing sources (uses) on a GAAP basis -$ (1,706,019)$ 3,040,388$


Combining Statements


Nonmajor Governmental Funds

Special Revenue Funds –

Special revenue funds are used to account for certain revenue generating activities that are legally and/or programmatically restricted to expenditures for a specific purpose. From the Town’s financial ledgers, these activities can be distinctly categorized into the following groupings:

Town Federal Grants – This fund accounts for non-school grant programs received either directly from federal or indirectly through pass-through entities.

School Federal Grants – This fund accounts for educational-based grant programs received either directly from federal agencies or indirectly through pass-through entities.

Town State Grants – This fund accounts for non-school grant programs received directly from State agencies.

School State Grants – This fund accounts for educational-based grant programs received directly from State agencies.

School Lunch Fund – This segregated revolving fund accounts for the activities of the child nutrition programs; amounts collected from services include federal and state meal reimbursements and meal charges.

Receipts Reserved For Appropriation – This fund accounts for monies received by the Town from various specific purposes that may only be used subject to appropriation by Town Meeting.

Town Revolving Funds – This fund accounts for the non-school related activity within revolving funds established in accordance with MGL Chapter 44, Section 53E ½ and other applicable statutes.

School Revolving Funds – This fund accounts for educational-based activities within revolving funds established in accordance with MGL Chapter 44, Section 53E ½ and Chapter 71.

Donations – This fund accounts for donated monies which relate to all Town activities.

Other Municipal Funds – This fund accounts for miscellaneous other monies that are not specifically categorized in any of the previous accounts.


Permanent Funds –

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

Cemetery Trust Funds – This fund accounts for contributions earmarked for the perpetual care and maintenance of cemetery facilities and property.

Affordable Housing Trust – Created under the provisions of Massachusetts General Laws Chapter 44, Section 55C, this Trust provides for the creation and preservation of affordable housing.

Conservation Trust – This fund accounts for contributions earmarked for the preservation of conservation in the Town.

Other Trust Funds – This fund accounts for all contributions including: gifts, donations and bequests for which only earnings on the original trust corpus may be expended to benefit government approved programs, other than those associated with cemetery and library activities.


NONMAJOR GOVERNMENTAL FUNDS

COMBINING BALANCE SHEETJUNE 30, 2018

Special Revenue Funds

Town School Town SchoolFederal Federal State StateGrants Grants Grants Grants

Assets:

Cash and short-term investments 67,240$ 51,660$ 689,393$ 62,438$ Investments - - - - Receivables, net of allowance for uncollectibles Special assessments - - - - Departmental and other - - - - Intergovernmental 2,101 78,464 175,714 -

Total Assets 69,341 130,124 865,107 62,438

Deferred Outflows of Resources - - - -

Total Assets and Deferred Outflows of Resources 69,341$ 130,124$ 865,107$ 62,438$

Liabilities: Warrants and accounts payable 7,029$ 21,988$ 232,909$ 19,862$

Total Liabilities 7,029 21,988 232,909 19,862

Deferred Inflows of Resources: Unavailable revenues - special assessments - - - -

Total Deferred Inflows of Resources - - - -

Fund Balances: Nonspendable - - - - Restricted 62,312 108,136 632,198 42,576

Total Fund Balances 62,312 108,136 632,198 42,576

Total Liabilities, Deferred Inflows of Resources, and Fund Balances 69,341$ 130,124$ 865,107$ 62,438$


School Receipts Town School Other Sub-totalLunch Reserved for Revolving Revolving Donation Municipal SpecialFund Appropriation Funds Funds Funds Funds Revenue Funds

119,314$ 6,255,680$ 229,021$ 2,037,221$ 509,296$ 266,150$ 10,287,413$ - - - - - - -

- 22,873,152 - - - - 22,873,152 - 97,014 - - - - 97,014

40,917 104,992 - 287,613 - - 689,801

160,231 29,330,838 229,021 2,324,834 509,296 266,150 33,947,380

- - - - - - -

160,231$ 29,330,838$ 229,021$ 2,324,834$ 509,296$ 266,150$ 33,947,380$

3,944$ -$ 6,038$ 60,252$ 4,012$ 840$ 356,874$

3,944 - 6,038 60,252 4,012 840 356,874

- 22,873,152 - - - - 22,873,152

- 22,873,152 - - - - 22,873,152

- - 25,000 - - - 25,000 156,287 6,457,686 197,983 2,264,582 505,284 265,310 10,692,354

156,287 6,457,686 222,983 2,264,582 505,284 265,310 10,717,354

160,231$ 29,330,838$ 229,021$ 2,324,834$ 509,296$ 266,150$ 33,947,380$

(Continued)


Affordable OtherCemetery Housing Conservation Trust

Funds Trust Trust Funds

Assets:

Cash and short-term investments -$ 21,351$ -$ 1,656$ Investments 144,797 2,242,890 274,100 91,183 Receivables, net of allowance for uncollectibles Special assessments - - - - Departmental and other - - - - Intergovernmental - - - -

Total Assets 144,797 2,264,241 274,100 92,839

Deferred Outflows of Resources - - - -

Total Assets and Deferred Outflows of Resources 144,797$ 2,264,241$ 274,100$ 92,839$

Liabilities: Warrants and accounts payable -$ 1,524$ -$ 1,656$

Total Liabilities - 1,524 - 1,656

Deferred Inflows of Resources: Unavailable revenues - special assessments - - - -

Total Deferred Inflows of Resources - - - -

Fund Balances: Nonspendable - - - - Restricted 144,797 2,262,717 274,100 91,183

Total Fund Balances 144,797 2,262,717 274,100 91,183

Total Liabilities, Deferred Inflows of Resources, and Fund Balances 144,797$ 2,264,241$ 274,100$ 92,839$

Permanent Funds

JUNE 30, 2018COMBINING BALANCE SHEET



Total

Sub-total NonmajorPermanent Governmental

Funds Funds

23,007$ 10,310,420$ 2,752,970 2,752,970

- 22,873,152 - 97,014 - 689,801

2,775,977 36,723,357

- -

2,775,977$ 36,723,357$

3,180$ 360,054$

3,180 360,054

- 22,873,152

- 22,873,152

- 25,000 2,772,797 13,465,151

2,772,797 13,490,151

2,775,977$ 36,723,357$

(Concluded)



COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCESYEAR ENDED JUNE 30, 2018

Special Revenue Funds

Town School Town SchoolFederal Federal State StateGrants Grants Grants Grants

Revenues: Intergovernmental 565,937$ 1,543,827$ 884,208$ 297,451$ Departmental and other 17,373 - - - Special assessments - - - - Investment income - - - - Contributions and donations - - - -

Total Revenues 583,310 1,543,827 884,208 297,451

Expenditures: General government 200,000 - 832,210 - Public safety 65,314 - 326,953 - Education - 1,437,482 9,333 270,466 Public works - - 223,752 - Health and human services - - 113,153 - Culture and recreation 303,624 - 46,365 -

Total Expenditures 568,938 1,437,482 1,551,766 270,466

Excess (Deficiency) of Revenues Over (Under) Expenditures 14,372 106,345 (667,558) 26,985

Other Financing Sources (Uses): Transfers in - - - - Transfers out - - - -

Total Other Financing Sources (Uses) - - - -

Net Change in Fund Balance 14,372 106,345 (667,558) 26,985

Fund Balances - Beginning of Year 47,940 1,791 1,299,756 15,591

Fund Balances - End of Year 62,312$ 108,136$ 632,198$ 42,576$


School Receipts Town School Other Sub-totalLunch Reserved for Revolving Revolving Donation Municipal SpecialFund Appropriation Funds Funds Funds Funds Revenue Funds

472,581$ 415,877$ -$ 1,480,239$ -$ -$ 5,660,120$ 370,004 1,469,887 158,326 836,456 - (6,540) 2,845,506

- 1,517,523 - - - - 1,517,523 - - - - - - - - - 103 2,047 80,725 - 82,875

842,585 3,403,287 158,429 2,318,742 80,725 (6,540) 10,106,024

- - 44,764 - 918 - 1,077,892 - - 85,131 - 8,355 - 485,753

714,568 - - 2,481,794 42,944 - 4,956,587 - - 6,072 - - 15,244 245,068 - - 412 - 12,511 - 126,076 - - 18,937 - 10,077 - 379,003

714,568 - 155,316 2,481,794 74,805 15,244 7,270,379

128,017 3,403,287 3,113 (163,052) 5,920 (21,784) 2,835,645

- 94,269 - - - - 94,269 - (1,983,028) - - - - (1,983,028)

- (1,888,759) - - - - (1,888,759)

128,017 1,514,528 3,113 (163,052) 5,920 (21,784) 946,886

28,270 4,943,158 219,870 2,427,634 499,364 287,094 9,770,468

156,287$ 6,457,686$ 222,983$ 2,264,582$ 505,284$ 265,310$ 10,717,354$

(Continued)


Permanent Funds

Affordable OtherCemetery Housing Conservation Trust

Funds Trust Trust Funds

Revenues: Intergovernmental -$ -$ -$ -$ Departmental and other - - - - Special assessments - - - - Investment income (6,759) (24,117) (2,827) (368) Contributions and donations 5,201 - - 5,217

Total Revenues (1,558) (24,117) (2,827) 4,849

Expenditures: General government - - - - Public safety - - - 21,440 Education - - - - Public works 8,042 - - - Health and human services - 55,753 - - Culture and recreation - - - -

Total Expenditures 8,042 55,753 - 21,440

Excess (Deficiency) of Revenues Over (Under) Expenditures (9,600) (79,870) (2,827) (16,591)

Other Financing Sources (Uses): Transfers in - - - - Transfers out - - - -

Total Other Financing Sources (Uses) - - - -

Net Change in Fund Balance (9,600) (79,870) (2,827) (16,591)

Fund Balances - Beginning of Year 154,397 2,342,587 276,927 107,774

Fund Balances - End of Year 144,797$ 2,262,717$ 274,100$ 91,183$

YEAR ENDED JUNE 30, 2018COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES



Total

Sub-total NonmajorPermanent Governmental

Funds Funds

-$ 5,660,120$ - 2,845,506 - 1,517,523

(34,071) (34,071) 10,418 93,293

(23,653) 10,082,371

- 1,077,892 21,440 507,193

- 4,956,587 8,042 253,110

55,753 181,829 - 379,003

85,235 7,355,614

(108,888) 2,726,757

- 94,269 - (1,983,028)

- (1,888,759)

(108,888) 837,998

2,881,685 12,652,153

2,772,797$ 13,490,151$

(Concluded)


Fiduciary Funds

Agency Funds –

Agency funds are used to account for assets maintained in a custodial capacity. Such activities primarily consist of performance bonds and school deposits held, as well as, monies due to Town personnel for certain services rendered that were collected from external parties on their behalf.


AGENCY FUND

STATEMENT OF CHANGES IN ASSETS AND LIABILITIESFISCAL YEAR ENDED JUNE 30, 2018

Beginning Endof Year Additions Deletions of Year

Assets: Cash and cash equivalents 2,034,021$ 29,297,168$ (29,315,313)$ 2,015,876$

Liabilities: Warrants payable 370,239$ 382,052$ (370,239)$ 382,052$ Payroll liabilities 979,405 27,168,109 (27,232,117) 915,397 Performance bonds 595,665 86,154 (52,099) 629,720 Other 88,712 1,660,853 (1,660,858) 88,707

Total Liabilities 2,034,021$ 29,297,168$ (29,315,313)$ 2,015,876$


STATISTICAL SECTION

Although Falmouth is known for its long shores, beaches, and spectacular water scenery many a visitor also enjoys the foliage in the fall. The mix of reds, oranges and yellows in the trees makes for spectacular views over the ponds nestled in the forest. (Photo credit: Slack12)


Statistical Section This part of the comprehensive annual financial report presents information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the Town’s overall financial health.

Financial Trends

These schedules contain trend information to help the reader understand how the Town’s financial performance and well-being have changed over time.

Revenue Capacity

These schedules contain information to help the reader assess the Town’s most significant local revenue source, the property tax.

Debt Capacity

These schedules present information to help the reader assess the affordability of the Town’s current levels of outstanding debt, and the Town’s ability to issue additional debt in the future.

Demographic and Economic Information

These schedules offer demographic and economic indicators to help the reader understand the environment within which the Town’s financial activities take place.

Operating Information

These schedules contain service and infrastructure data to help the reader understand how the information in the Town’s financial report relates to the services the Town provides and the activities it performs.

Sources: Unless otherwise noted, the information in these schedules is derived from the financial statements for the relevant year.


LAST TEN FISCAL YEARS

2009 2010 2011 2012 2013 (1) 2014 2015 2016 2017 2018

Governmental activities:Net investment in capital assets……….……… 136,686,969$ 141,103,283$ 145,047,349$ 144,280,809$ 155,546,100$ 163,497,623$ 165,150,084$ 176,245,491$ 177,614,636$ 186,811,470$ Restricted……………………………………… 12,191,966 11,746,175 15,428,061 15,568,624 33,525,647 32,728,890 32,735,154 31,226,719 29,509,733 44,740,958 Unrestricted…………………………………… (1,242,897) 2,018,469 (3,596,902) (3,792,371) 155,627 1,019,477 (51,201,695) (52,217,343) (52,593,987) (134,251,060)

Total governmental activities net position…………… 147,636,038$ 154,867,927$ 156,878,508$ 156,057,062$ 189,227,374$ 197,245,990$ 146,683,543$ 155,254,867$ 154,530,382$ $ 97.301,368

Business-type activities:Net investment in capital assets……….……… 78,765,850$ 83,360,571$ 81,692,038$ 80,862,158$ 52,901,489$ 52,060,305$ 53,809,467$ 57,809,742$ 56,579,087$ 57,486,346$ Restricted……………………………...……… 550,250 1,336,914 - - - - - - - - Unrestricted…………………………………… 2,004,671 2,642,154 4,495,654 3,986,890 1,684,057 1,478,901 (637,681) (2,307,741) (294,471) (1,918,595)

Total business-type activities net position…………… 81,320,771$ 87,339,639$ 86,187,692$ 84,849,048$ 54,585,546$ 53,539,206$ 53,171,786$ 55,502,001$ 56,284,616$ 55,567,751$

Primary government:Net investment in capital assets……….……… 215,452,819$ 224,463,854$ 226,739,387$ 225,142,967$ 208,447,589$ 215,557,928$ 218,959,551$ 234,055,233$ 234,193,723$ 244,297,816$ Restricted……………………………………… 12,742,216 13,083,089 15,428,061 15,568,624 33,525,647 32,728,890 32,735,154 31,226,719 29,509,733 44,740,958 Unrestricted…………………………………… 761,774 4,660,623 898,752 194,519 1,839,684 2,498,378 (51,839,376) (54,525,084) (52,888,458) (136,169,655)

Total primary government net position……………… 228,956,809$ 242,207,566$ 243,066,200$ 240,906,110$ 243,812,920$ 250,785,196$ 199,855,329$ 210,756,868$ 210,814,998$ $ 152,869,119

(1) In fiscal year 2013, the Town reclassified its Sewer, Golf Course and Harbormaster and Waterways activities from the business-type activities to the governmental activities. This resulted in a prior period restatement increasinggovernmental activities beginning net position and reducing business-type activities beginning net position by $29,345,366, as of July 1, 2012.

NET POSITION BY COMPONENT


CHANGES IN NET POSITION


2009 2010 2011 2012 2013 (1) 2014 2015 2016 2017 2018

Expenses - Governmental activities:

General government…...……………………………………… 8,058,264$ 7,802,502$ 8,383,929$ 11,418,924$ 11,390,720$ 10,641,274$ 10,301,494$ 11,462,941$ 19,773,863$ 11,820,927$ Public safety…..………………………………………………… 18,337,739 19,339,902 20,010,930 20,792,285 20,523,925 22,737,460 20,732,257 22,825,200 22,810,827 23,870,579 Education……..………………………………………………… 71,754,105 67,017,849 69,831,819 72,055,697 72,805,060 74,538,906 70,537,645 74,932,839 78,308,426 78,668,134 Public works……...…………………………………………… 10,214,883 10,266,260 10,897,155 10,626,495 13,649,198 13,796,034 15,631,092 14,355,349 14,660,542 15,199,826 Health and human services……………………………………… 2,521,467 1,905,443 1,913,830 1,937,502 2,046,004 2,140,234 3,217,921 3,348,856 3,286,793 2,911,949 Culture and recreation………...………………………………… 4,801,440 4,783,910 5,596,460 5,336,969 5,219,806 4,619,398 5,017,085 5,060,356 5,139,478 5,540,743 Interest expense………………………………………………… 3,571,857 3,652,327 3,689,160 3,981,806 4,593,289 4,193,741 3,993,134 3,612,355 3,444,397 3,143,954 Community development……………………………………… 2,064,029 2,637,258 1,426,546 1,860,257 510,508 400,016 506,772 1,500,974 1,739,406 303,282

Total government activities expenses………………………………… 121,323,784 117,405,451 121,749,829 128,009,935 130,738,510 133,067,063 129,937,400 137,098,870 149,163,732 141,459,394

Business-type activities:Water…………………………………………………………… 8,999,559 8,446,349 7,332,631 8,659,108 4,205,084 4,501,590 5,423,941 5,262,307 6,112,808 6,523,023 Golf course……………………………………………………… 628,160 923,045 912,556 901,787 - - - - - - Harbormaster and waterways…………………………………… 685,388 651,498 649,304 823,778 - - - - - -

Total business-type activities expenses……………………………… 10,313,107 10,020,892 8,894,491 10,384,673 4,205,084 4,501,590 5,423,941 5,262,307 6,112,808 6,523,023

Total primary government expenses………………………………… 131,636,891$ 127,426,343$ 130,644,320$ 138,394,608$ 134,943,594$ 137,568,653$ 135,361,341$ 142,361,177$ 155,276,540$ 147,982,417$

Program Revenues - Governmental activities:

Charges for services: General government…...……………………………………… 1,078,097$ 2,045,072$ 1,637,090$ 1,575,032$ 1,379,373$ 1,964,321$ 2,438,643$ 1,758,955$ 1,323,350$ 1,718,710$ Public safety…..……………………………………………… 2,507,767 2,109,522 2,539,101 2,504,566 3,683,305 4,341,677 4,303,971 4,423,791 4,899,474 5,607,636 Education……..……………………………………………… 1,727,321 1,015,438 2,375,648 1,876,307 1,607,491 1,634,502 1,486,248 1,551,504 1,533,283 1,274,973 Public works……...…………………………………………… 717,029 2,506,404 1,224,544 1,181,632 1,757,322 1,779,913 1,753,055 1,319,977 1,559,807 1,778,774

Health and human services…………………………………… 27,510 129,339 126,745 106,930 109,490 120,266 112,970 108,510 126,900 141,775 Culture and recreation………...……………………………… 786,543 1,179,178 194,573 1,036,320 1,404,386 1,583,277 1,531,051 1,574,057 1,728,584 1,583,136

Operating grants and contributions…………………………… 25,193,553 21,105,892 21,735,252 24,102,519 23,988,487 24,511,821 18,310,318 21,664,218 23,132,970 23,271,332 Capital grants and contributions……………………………… 6,634,144 8,915,691 3,304,485 2,632,114 3,047,080 3,783,806 2,383,721 4,581,385 3,071,927 25,072,885

Total government activities program revenues...…………………… 38,671,964 39,006,536 33,137,438 35,015,420 36,976,934 39,719,583 32,319,977 36,982,397 37,376,295 60,449,221

Business-type activities:Charges for services……………….…………………………… 8,026,339 7,941,591 8,827,041 8,368,659 6,190,729 6,040,044 6,469,282 6,678,829 7,720,631 7,086,150 Operating grants and contributions…………………………… 206,153 201,682 - 211,780 - - - - - - Capital grants and contributions……………………………… - 6,620,282 326,668 - - - - 3,153,120 383,112 39,385

Total business-type activities program revenues…………………… 8,232,492 14,763,555 9,153,709 8,580,439 6,190,729 6,040,044 6,469,282 9,831,949 8,103,743 7,125,535

Total primary government program revenues………………………… 46,904,456$ 53,770,091$ 42,291,147$ 43,595,859$ 43,167,663$ 45,759,627$ 38,789,259$ 46,814,346$ 45,480,038$ 67,574,756$

Net (Expense)/Program RevenueGovernmental activities……………………....………………… (82,651,820)$ (78,398,915)$ (88,612,391)$ (92,994,515)$ (93,761,576)$ (93,347,480)$ (97,617,423)$ (100,116,473)$ (111,787,437)$ (81,010,173)$ Business-type activities……………………....………………… (2,080,615) 4,742,663 259,218 (1,804,234) 1,985,645 1,538,454 1,045,341 4,569,642 1,990,935 602,512

Total primary government net (expense)/program revenue………… (84,732,435)$ (73,656,252)$ (88,353,173)$ (94,798,749)$ (91,775,931)$ (91,809,026)$ (96,572,082)$ (95,546,831)$ (109,796,502)$ (80,407,661)$

(1) In fiscal year 2013, the Town reclassified its Sewer, Golf Course and Harbormaster and Waterways activities from the business-type activities to the governmental activities.(continued)


CHANGES IN NET POSITION


2009 2010 2011 2012 2013 (1) 2014 2015 2016 2017 2018

General Revenues and other Changes in Net Position -Governmental activities:

Real estate and personal property taxes, net of tax refunds payable……………………………………………… 74,189,999$ 77,389,973$ 81,769,114$ 84,656,305$ 87,858,991$ 90,092,828$ 92,751,993$ 96,257,765$ 99,217,665$ 102,520,551$ Motor vehicle and other excise taxes…………………………………… 4,770,772 4,636,140 5,069,096 5,686,495 6,025,371 6,171,230 6,533,319 7,077,239 7,296,890 7,497,678 Penalties and interest on taxes…………………………………...……… 403,425 453,662 622,102 495,965 669,442 630,497 869,751 938,734 731,749 621,244 Grants and contributions not restricted to specific programs…...…….. 1,619,953 1,527,837 1,095,216 1,089,040 1,172,720 1,196,109 1,233,630 1,302,904 2,072,280 2,123,564 Unrestricted investment income………………………………………… 595,307 2,174,347 656,279 710,854 452,940 690,638 303,354 837,876 523,711 71,512 Transfers……………………………………………………………… (642,615) (703,462) 1,411,165 (465,590) 2,903,781 2,584,794 (969,071) 2,273,279 1,220,657 (356,817)

Total governmental activities………………………………………………… 80,936,841 85,478,497 90,622,972 92,173,069 99,083,245 101,366,096 100,722,976 108,687,797 111,062,952 112,477,732

Business-type activities:Unrestricted investment income………………………………………… - - - - - - 9,168 33,852 12,337 (6,033) Transfers……………………………………………………………… 642,615 703,462 (1,411,165) 465,590 (2,903,781) (2,584,794) 969,071 (2,273,279) (1,220,657) 356,817

Total business-type activities….………..………………………………….. 642,615 703,462 (1,411,165) 465,590 (2,903,781) (2,584,794) 978,239 (2,239,427) (1,208,320) 350,784

Total primary government general revenues and otherchanges in net position…………………………………………………. 81,579,456$ 86,181,959$ 89,211,807$ 92,638,659$ 96,179,464$ 98,781,302$ 101,701,215$ 106,448,370$ 109,854,632$ 112,828,516$

Changes in Net PositionGovernmental activities……………………....…………………………….. (1,714,979)$ 7,079,582$ 2,010,581$ (821,446)$ 5,321,669$ 8,018,616$ 3,105,553$ 8,571,324$ (724,485)$ 31,467,559$ Business-type activities……………………....…………………………….. (1,438,000) 5,446,125 (1,151,947) (1,338,644) (918,136) (1,046,340) 2,023,580 2,330,215 782,615 953,296

Total primary government changes in net position…………………………… (3,152,979)$ 12,525,707$ 858,634$ (2,160,090)$ 4,403,533$ 6,972,276$ 5,129,133$ 10,901,539$ 58,130$ 32,420,855$

(concluded)


2009 2010 2011 2012 2013 (1) 2014 2015 2016 2017 2018

General Fund:Nonspendable…………………… -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Restricted………………………… - - 1,256,120 1,239,725 1,185,116 984,742 1,125,122 1,208,751 1,115,435 872,359 Committed………………………… 519,539 - 917,863 2,142,426 3,534,511 5,040,876 7,768,355 9,077,570 8,045,314 10,936,681 Assigned………………………… 1,863,711 1,478,625 483,699 444,267 990,687 2,288,500 1,074,035 761,367 1,459,796 1,129,906 Unassigned……………………… 1,737,515 3,556,345 5,984,413 7,909,172 12,124,497 16,497,937 20,397,223 25,304,234 30,774,762 32,789,666

Total general fund…………………… 4,120,765$ 5,034,970$ 8,642,095$ 11,735,590$ 17,834,811$ 24,812,055$ 30,364,735$ 36,351,922$ 41,395,307$ 45,728,612$

All Other Governmental Funds:Nonspendable…………………… 175,000$ 175,000$ 175,000$ 175,000$ 25,000$ 25,000$ 25,000$ 25,000$ 25,000$ 25,000$ Restricted………………………… 12,016,966 11,571,175 13,996,941 15,994,844 17,909,959 19,744,510 20,671,283 20,892,447 30,710,789 30,392,226 Unassigned……………………… (17,902,001) (11,941,244) (1,727,559) - (237,619) (1,168,247) (1,580,820) (6,423,618) - -

Total all other governmental funds…… (5,710,035)$ (195,069)$ 12,444,382$ 16,169,844$ 17,697,340$ 18,601,263$ 19,115,463$ 14,493,829$ 30,735,789$ 30,417,226$

Note: The Town implemented GASB 54 in fiscal year 2011. All previous years (2009 - 2010) data presented were restated to conform to GASB 54 presentation.

FUND BALANCES - GOVERNMENTAL FUNDS



2009 2010 2011 2012 2013 (1) 2014 2015 2016 2017 2018

Revenues:Real estate and personal property taxes, net of tax refunds…………………………………… 73,035,670$ 77,077,234$ 81,481,045$ 83,902,790$ 87,516,351$ 90,338,338$ 93,207,932$ 96,483,363$ 99,341,261$ 102,678,006$ Intergovernmental………………………………… 34,062,883 27,691,325 27,832,805 28,264,776 29,442,086 30,501,985 22,552,993 28,309,281 29,494,958 29,340,010 Motor vehicle and boat excise………………………… 5,156,717 4,412,792 5,090,088 5,432,960 5,693,657 6,226,730 6,537,926 7,111,477 7,182,338 7,567,368 Licenses and permits……………………………… 1,190,247 1,172,147 1,400,728 1,346,154 1,326,924 1,584,592 1,533,147 1,586,794 1,599,548 1,902,911 Departmental and other………………………………… 5,544,096 8,301,663 6,528,294 6,953,249 7,092,173 5,027,671 5,370,356 4,476,309 4,103,869 4,307,193 User charges……………………………………… - - - - 1,252,472 4,432,147 4,454,984 4,368,924 4,981,417 5,468,989 Special assessments……………………………… - - - - 537,047 614,815 676,290 595,922 574,957 2,673,785 Penalties and interest on taxes……………………… 403,425 453,662 622,102 495,965 669,442 630,497 869,751 938,734 731,749 621,244 Fines and forfeitures……………………………… 184,383 166,161 157,549 180,815 167,681 200,551 182,135 149,664 173,772 216,884 Investment income……………………………… 595,307 2174347 656,279 710,854 452,940 690,638 303,354 837,876 523,711 71,512 Contributions……………………………………… 321,708 94,452 95,891 389,347 51,477 170,668 188,013 124,845 130,466 93,293 Total Revenue…………………………………… 120,494,436 121,543,783 123,864,781 127,676,910 134,202,250 140,418,632 135,876,881 144,983,189 148,838,046 154,941,195

Expenditures:General government…………………………………… 5,415,951 4,198,976 4,536,346 7,124,797 7,323,139 6,440,941 7,157,171 7,903,574 8,568,812 8,413,665 Public safety…………………………………………… 11,611,908 11,740,520 11,787,298 12,245,128 12,351,239 14,008,485 13,819,385 14,328,228 13,275,575 15,032,777 Education……………………………………………… 51,041,808 48,509,077 48,587,890 48,799,262 49,585,452 50,369,634 50,703,445 52,834,990 52,907,941 53,841,918 Public works…………………………………………… 7,149,510 7,180,438 7,627,289 7,225,393 8,824,072 9,477,696 11,735,478 10,112,969 9,755,016 10,171,488 Health and human services…………………………… 1,474,984 1,424,349 1,380,348 1,375,662 1,540,919 1,594,344 2,018,716 2,018,065 1,888,921 1,570,920 Culture and recreation………………………………… 3,012,783 2,808,150 2,989,253 3,179,105 2,885,551 2,172,736 2,884,538 2,673,272 2,581,246 3,130,854 Pension and fringe benefits…………………………… 21,809,399 24,577,158 26,873,665 28,626,931 28,561,412 30,123,813 22,724,129 25,802,885 29,928,369 31,480,427 Community development…………………………… 2,064,029 2,637,258 1,426,544 1,860,257 510,508 400,016 506,772 1,500,974 1,739,406 303,282 State and county charges……………………………… 1,965,572 2,140,141 1,988,068 2,254,336 2,498,313 2,665,805 2,769,084 2,668,658 2,852,594 3,094,656 Capital outlay and other………………………………… 16,967,695 23,039,817 11,116,998 1,461,500 3,188,075 4,811,266 6,720,713 29,025,155 22,711,719 9,800,626 Debt service: Principal……………………………………………… 4,917,695 5,252,968 6,822,288 6,765,256 8,809,879 8,801,551 8,324,354 8,710,279 8,906,961 10,184,535 Interest……………………………………………… 3,537,975 3,674,298 3,685,383 3,983,736 4,570,789 4,255,972 3,975,218 3,737,405 3,684,898 3,544,488

Total Expenditures……………………………………… 130,969,309 137,183,150 128,821,370 124,901,363 130,649,348 135,122,259 133,339,003 161,316,454 158,801,458 150,569,636

Excess of revenues over (under) expenditures………… (10,474,873) (15,639,367) (4,956,589) 2,775,547 3,552,902 5,296,373 2,537,878 (16,333,265) (9,963,412) 4,371,559

Other Financing Sources (Uses):Issuances from bonds and notes………………...……… 5,831,000 22,772,000 19,792,000 4,509,000 - - 3,975,000 15,425,539 29,684,482 - Issuances from refunding bonds………………...… - - - 5,430,800 - - 21,441,445 - 3,025,000 - Premiums from debt issuances…………………… - - - 632,381 - - 1,263,542 - 594,773 - Payments to refunded bond escrow agent………… - - - (6,063,181) - - (22,181,914) - (3,276,155) - Transfers in…………………………………………… 231,950 4,990,855 5,003,013 2,759,432 7,363,968 8,632,799 6,062,887 9,815,137 7,620,345 3,955,743 Transfers out…………………………………………… (874,565) (5,694,317) (3,591,848) (3,225,022) (4,460,187) (6,048,005) (7,031,958) (7,541,858) (6,399,688) (4,312,560)

Total other financing sources (uses)………………………… 5,188,385 22,068,538 21,203,165 4,043,410 2,903,781 2,584,794 3,529,002 17,698,818 31,248,757 (356,817)

Net change in fund balance…………………………………… (5,286,488)$ 6,429,171$ 16,246,576$ 6,818,957$ 6,456,683$ 7,881,167$ 6,066,880$ 1,365,553$ 21,285,345$ 4,014,742$

Debt service as a percentage of noncapital expenditures…… 7.42% 7.82% 8.93% 8.71% 10.50% 10.02% 9.71% 9.41% 9.25% 9.75%

(1) In fiscal year 2013, the Town reclassified its Sewer, Golf Course and Harbormaster and Waterways activities from the business-type activities to the governmental activities.


CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS


Ratio ofTotal Total State Assessed to

Fiscal Residential Open Space Commercial Industrial Personal Commercial Town Equalized Equalized Residential CommercialYear Value Value Value Value Property Value Value Value Value Tax Rate Tax Rate

2009 10,899,153,336$ 5,316,700$ 670,114,194$ 80,525,000$ 193,049,863$ 943,689,057$ 11,848,159,093$ 13,126,721,800$ 90.26% 6.08 6.08 2010 10,288,846,988 3,877,700 611,416,088 76,338,300 195,273,690 883,028,078 11,175,752,766 13,126,721,800 85.14% 6.75 6.75 2011 10,196,026,282 3,504,000 590,585,951 72,056,800 183,094,344 845,737,095 11,045,267,377 12,168,109,600 90.77% 7.20 7.20 2012 9,758,565,141 3,314,900 568,619,409 70,768,200 178,594,045 817,981,654 10,579,861,695 12,168,109,600 86.95% 7.78 7.78 2013 9,783,235,733 3,289,200 574,980,651 72,537,600 180,898,159 828,416,410 10,614,941,343 11,476,687,700 92.49% 8.04 8.04 2014 9,926,397,342 3,248,800 578,777,042 73,842,400 178,513,638 831,133,080 10,760,779,222 11,476,687,700 93.76% 8.15 8.15 2015 10,163,699,470 3,425,200 605,660,141 79,392,800 193,320,043 878,372,984 11,045,497,654 11,548,755,700 95.64% 8.19 8.19 2016 10,268,959,256 3,232,100 604,755,692 77,683,600 239,818,381 922,257,673 11,194,449,029 11,548,755,700 96.93% 8.37 8.37 2017 10,384,849,550 3,251,100 607,421,068 80,184,800 244,381,580 931,987,448 11,320,088,098 11,892,819,800 95.18% 8.53 8.53 2018 10,660,098,706 3,331,200 631,222,433 87,507,900 236,231,350 954,961,683 11,618,391,589 11,892,819,800 97.69% 8.60 8.60

Source: Official Statements, State Division of Local Services

Note: All property in the Commonwealth of Massachusetts is assessed at 100% of full and fair cash value. The State estimates this "equalized valuation" for all municipalities every two years.Chapter 59, Section 21C of the Massachusetts General Laws, known as "Proposition 2 1/2", imposes 2 separate limits on the annual tax levy of the Town. The primary limitation isthat the tax levy cannot exceed 2 1/2% of the full and fair cash value. The secondary limitation is that the tax levy cannot exceed the maximum levy limit for the preceding fiscal yearas determined by the State Commissioner of Revenue by more than 2 1/2%, subject to an exception for property added to the tax rolls and for certain valuation increases. Thissecondary limit may be exceeded in any fiscal year by majority approval of the voters, however, it cannot exceed the primary limitation.

Assessed Value Tax Rates


ASSESSED VALUE AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY BY CLASSIFICATION AND TAX RATES


PRINCIPAL TAXPAYERS

CURRENT YEAR AND NINE YEARS AGO

Percentage of Percentage ofTotal Taxable Total Taxable

Nature of Assessed Assessed Assessed AssessedTaxpayer Business Valuation Rank Value Valuation Rank Value

Eversource (Nstar Services Company) Utility 118,571,690$ 1 1.02% 49,147,910$ 1 0.41%OCW Retail Falmouth, LLC Retail 31,322,400 2 0.27% 32,917,700 2 0.28%National Grid, Keyspan Energy, Colonial Gas Utility 28,684,030 3 0.25% 22,462,070 5 0.19%Mellon Bank, Trustee Residential 25,335,200 4 0.22% 22,889,400 4 0.19%WHOI Research 24,112,400 5 0.21% 0.00%DNC Resort Resort/Development 23,514,900 6 0.20%Woodbrier Assisted Living 21,655,800 7 0.19%Anistasios Parafestas, Trustee Residential 20,327,800 8 0.17% 15,453,700 7 0.13%Fenn, Peter R. Residential 15,565,400 9 0.13%Drucker, Gerald Tr. Residential 13,065,200 10 0.11% 13,068,700 9 0.11%SCRCC Associated LTD Resort 16,468,600 6 0.14%Verizon Utility 25,277,000 3 0.21%MacDougalls' Cape Cod Marina 13,963,300 8 0.12%New England Golf Golf Course 13,063,600 10 0.11%

Totals 322,154,820$ 2.77% 224,711,980$ 1.90%

Source: Official Statements

2018 2009


Percent ofLess First Year Percent of Delinquent Total Total Tax

Fiscal Total Abatements & Net Current Net Levy Tax Tax Collections toYear Tax Levy Exemptions Tax Levy Tax Collections Collected Collections Collections Net Tax Levy

2009 72,036,807$ 522,730$ 71,514,077$ 70,033,166$ 97.93% 1,480,911$ 71,514,077$ 100.00%2010 75,436,331 603,508 74,832,823 73,281,042 97.93% 1,551,781 74,832,823 100.00%2011 79,525,925 665,148 78,860,777 76,764,485 97.34% 2,096,292 78,860,777 100.00%2012 82,311,324 709,295 81,602,029 81,602,029 100.00% - 81,602,029 100.00%2013 85,344,128 695,223 84,648,905 81,815,349 96.65% 2,833,556 84,648,905 100.00%2014 87,700,357 747,450 86,952,907 84,244,565 96.89% 2,708,342 86,952,907 100.00%2015 90,462,626 788,916 89,673,710 87,309,039 97.36% 2,364,671 89,673,710 100.00%2016 93,697,538 636,256 93,061,282 91,510,034 98.33% 1,256,434 92,766,468 99.68%2017 96,560,351 689,371 95,870,980 94,710,332 98.79% 911,135 95,621,467 99.74%2018 99,918,168 510,763 99,407,405 98,420,117 99.01% - 98,420,117 99.01%

Source: Accounting Records and Official Statements

PROPERTY TAX LEVIES AND COLLECTIONS


Tax Levy Collections


RATIOS OF OUTSTANDING DEBT BY TYPE

Governmental Business-typeActivities Activities

General General Total Percentage DebtFiscal Obligation Obligation Outstanding Personal of Personal U.S Census PerYear Bonds (1) Bonds (1) Debt Income Income Population Capita

2009 68,442,745$ 42,812,214$ 111,254,959$ 858,696,720$ 13.0% 32,660 3,406$ 2010 85,960,777 40,771,875 126,732,652 1,208,709,354 10.5% 31,531 4,019 2011 98,930,489 40,462,699 139,393,188 1,208,709,354 11.5% 31,531 4,421 2012 96,405,033 38,169,816 134,574,849 1,208,709,354 11.1% 31,531 4,268 2013 116,223,204 8,661,374 (2) 124,884,578 1,208,709,354 10.3% 31,531 3,961 2014 107,421,653 7,785,691 115,207,344 1,208,709,354 9.5% 31,531 3,654 2015 104,806,686 11,155,053 115,961,739 1,208,709,354 9.6% 31,531 3,678 2016 111,322,031 26,199,403 137,521,434 1,208,709,354 11.4% 31,531 4,361 2017 132,314,353 39,876,418 172,190,771 1,208,709,354 14.2% 31,531 5,461 2018 121,885,186 44,836,145 166,721,331 1,208,709,354 13.8% 31,531 5,288

Source: U. S. Census, State Division of Local Services

(1) Presented net of original issuance discounts and premiums.

(2) The Town reclassified its Sewer, Golf Course and Harbormaster and Waterways activities from the business-type activities to the governmental activitiesin fiscal year 2013.



RATIOS OF GENERAL BONDED DEBT OUTSTANDING

General Less: Percentage DebtFiscal Obligation Amounts Assessed of Assessed U.S Census PerYear Bonds (1) Available (2) Total Value Value Population Capita

2009 111,254,959$ (13,499,918)$ 97,755,041$ 11,848,159,093$ 0.83% 32,660 2,993$ 2010 126,732,652 (17,398,069) 109,334,583 11,175,752,766 0.98% 31,531 3,468 2011 139,393,188 (16,860,446) 122,532,742 11,045,267,377 1.11% 31,531 3,886 2012 134,574,849 (15,607,264) 118,967,585 10,579,861,695 1.12% 31,531 3,773 2013 124,884,578 (13,228,618) 111,655,960 10,614,941,343 1.05% 31,531 3,541 2014 115,207,344 (11,906,335) 103,301,009 10,760,779,222 0.96% 31,531 3,276 2015 115,961,739 (11,449,923) 104,511,816 11,045,497,654 0.95% 31,531 3,315 2016 137,521,434 (10,260,358) 127,261,076 11,194,449,029 1.14% 31,531 4,036 2017 172,190,771 (8,651,416) 163,539,355 11,320,088,098 1.44% 31,531 5,187 2018 166,721,331 (30,884,116) 135,837,215 11,618,391,589 1.17% 31,531 4,308



2009 2010 2011 2012 2013 (1) 2014 2015 2016 2017 2018

Equalized Valuation…………………… 13,126,721,800$ 13,126,721,800$ 12,168,109,600$ 12,168,109,600$ 11,476,687,700$ 11,476,687,700$ 11,548,755,700$ 11,548,755,700$ 11,892,819,800$ 11,892,819,800$

Debt Limit…………………………..… 656,336,090 656,336,090 608,405,480 608,405,480 573,834,385 573,834,385 577,437,785 577,437,785 594,640,990 594,640,990

Outstanding general obligation bonds… 111,254,959 126,732,652 139,393,188 134,574,849 124,884,578 115,207,344 115,961,739 137,521,434 172,190,771 166,721,331 Authorized and unissued debt………… 32,292,700 8,875,634 10,927,884 7,147,750 13,522,250 102,542,384 40,970,404 17,670,404 22,011,504 25,411,504 Debt not applicable to debt limit……… (38,720,437) (37,212,880) (35,213,993) (32,023,039) (30,033,662) (28,062,718) (30,437,916) (59,813,748) (91,385,312) (86,476,081)

Legal debt margin……………………… 551,508,868$ 557,940,684$ 493,298,401$ 498,705,920$ 465,461,219$ 384,147,375$ 450,943,558$ 482,059,695$ 491,824,027$ 488,984,236$

Total debt applicable to the limit as a percentage of debt limit………… 15.97% 14.99% 18.92% 18.03% 18.89% 33.06% 21.91% 16.52% 17.29% 17.77%

Source: State Division of Local Services, Accounting Records

COMPUTATION OF LEGAL DEBT MARGIN



EstimatedEstimated Share of

Debt Percentage Overlapping Outstanding Applicable Debt

Debt repaid with property taxes:Barnstable County……………………………………..………………… 22,114,734$ (a) 14.40% (b) 3,184,522$

Subtotal, overlapping debt……………………………………………………… 3,184,522

Town direct debt……………………………………………………………. 121,885,186

Total direct and overlapping debt…………………………………………… 125,069,708$

(a) Debt outstanding as of June 30, 2017.(b) Based on the 2010 equalized valuations of Town's in the County.

Source: Official Statements, Accounting Records

AS OF JUNE 30, 2018

DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT


DEMOGRAPHIC AND ECONOMIC STATISTICS


PerCapita

Fiscal Population Personal Personal Median School UnemploymentYear Estimates Income Income Age Enrollment Rate

2009 32,660 858,696,720$ 26,292$ 45.0 3,590 7.20%2010 31,531 1,208,709,354 38,334 50.8 3,550 7.90%2011 31,531 1,208,709,354 38,334 50.8 3,425 8.10%2012 31,531 1,208,709,354 38,334 50.8 3,558 7.00%2013 31,531 1,208,709,354 38,334 50.8 3,554 6.60%2014 31,531 1,208,709,354 38,334 50.8 3,554 7.00%2015 31,531 1,208,709,354 38,334 50.8 3,547 5.40%2016 31,531 1,208,709,354 38,334 50.8 3,515 4.20%2017 31,531 1,208,709,354 38,334 50.8 3,414 3.70%2018 31,531 1,208,709,354 38,334 50.8 3,414 3.20%

Source: U. S. Census, Division of Local Services, MassachusettsDepartment of Elementary and Secondary Education


Nature Approximate Percentage Approximate Percentageof Number of of Total Town Number of of Total Town

Employer Business Employees Rank Employment Employees Rank Employment

Woods Hole Oceanographic Institute Oceanographic Research 3,000 1 17.40% 1,396 2 7.22%Joint Base Cape Cod (1) Military Base 1,833 2 10.63% 1,849 1 9.57%Woods Hole, Martha's Vineyard and Nantucket Steamship Authority Ferry Service 750 3 4.35% 501 4 2.59%Falmouth Hospital General Hospital 800 4 4.64% 800 3 4.14%Sea Crest Hotel & Motor Inn. Convention Motel 350 5 2.03% 300 5 1.55%Marine Biological Laboratory Biological Research 350 5 2.03% 278 6 1.44%Wal-Mart Retail 350 5 2.03% 220 7 1.14%Coonamessett, Flying Bridge, Red Horse Inn Restaurant/Inn 200 8 1.16% 200 9 1.03%United States Geological Survey Oceanographic Research 175 9 1.01% 100 10 0.52%Royal Nursing Center Nursing Center 175 9 1.01%National Marine Fisheries Marine Research 220 7 1.14%

Totals 7,983 46.29% 5,864 30.34%

(1) The joint base is partially located in Falmouth and each of the towns of Mashpee, Bourne and Sandwich. Represents full-time positions only. The number of reservepersonnel reporting on weekends ranges from 0 to 3,000. Approximately 80% of the full-time employees live on base and the balance are residents of Falmouth or the surrounding towns.

Source: Town records and Official Statements

2018 2009

CURRENT YEAR AND NINE YEARS AGO

PRINCIPAL EMPLOYERS (EXCLUDING TOWN)


Function 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

General government…………………… 41 40 41 40 39 40 39 39 39 36 Public safety…………………………… 150 150 153 150 153 151 151 151 162 152 Education………………………………… 564 565 568 563 563 563 563 563 563 564 Public works…………………………… 67 67 70 66 68 70 70 70 71 71 Health and human services……………… 19 19 20 19 19 20 20 20 19 21 Culture and recreation…………………… 60 60 60 60 61 60 60 60 60 62

Sub-total governmental activities …… 901 901 912 898 903 904 903 903 914 906

Water…………………………………… 18 17 20 18 18 18 18 18 19 20

Sub-total business-type activities …… 18 17 20 18 18 18 18 18 19 20

Total Town employees…………….…… 919 918 932 916 921 922 921 921 933 926

Source: Town personnel records

FULL-TIME EQUIVALENT TOWN EMPLOYEES BY FUNCTION



Function 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

General Government:Town Clerk

Registered voters…………………………… 25,458 25,698 26,037 24,619 24,158 24,396 23,694 24,234 24,569 24,572

Public Safety:Police

Criminal offensesArrests………………………… 676 697 609 584 453 496 618 553 560 471 Reported crimes……………… 5,581 5,575 4,975 4,797 3,970 3,804 3,741 3,876 4,350 3,835 Motor vehicle responses……… 41 29 31 35 27 28 18 26 29 30 Incident reports………………… 4,077 3,917 3,564 3,288 3,115 2,911 3,160 3,318 3,167 2,954 Citations issued………………… 3,472 2,302 2,036 2,216 1,459 1,667 1,462 1,494 1,428 1,433

FireIncidents

Fires…………………………… 1,339 1,423 1,438 1,418 1,341 1,397 1,451 1,397 1,361 1,737 Non-fire incidents……………… 4,355 4,716 4,268 4,627 4,607 4,939 5,078 5,569 6,138 6,348 Total fire calls………………… 5,694 6,139 5,706 6,045 5,948 6,336 6,529 6,966 7,499 8,085

Inspectional ServicesNumber of building permits……………… 55,242 6,356 6,450 6,291 6,443 6,546 7,657 N/A 7,122 7,679

Education:Number of students…………………………… 3,590 3,550 3,425 3,558 3,554 3,554 3,547 3,515 3,414 3,423

Public Works:Landfill

Solid waste tonnage………………………… 10,576 11,577 11,509 10,987 11,398 10,988 10,478 9,935 10,898 11,127

Health and Human Services:Board of Health

InspectionsFood establishments…………… 426 418 428 445 441 446 438 N/A N/A N/AOther………………………….. 501 424 613 614 611 586 543 N/A N/A N/ATotal inspections……………… 927 842 1,041 1,059 1,052 1,032 981 - - -

N/A - Information not availableSource: Various Town Departments, State websites and annual Town Report.

OPERATING INDICATORS BY FUNCTION/PROGRAM



Function 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

General Government:Number of buildings………………………… 42 42 42 42 42 42 42 42 42 42

Public Safety:Police

Number of stations……………………… 1 1 1 1 1 1 1 1 1 1

FireNumber of stations……………………… 5 5 5 5 5 5 5 5 5 5

Education:Number of elementary schools……………… 4 4 4 4 4 4 4 4 4 4 Number of middle schools………………… 2 2 2 2 2 2 2 2 2 2 Number of high schools…………………… 2 2 2 2 2 2 2 2 2 2

Public Works:Road miles………………………………… 425 425 425 425 425 425 425 425 430 430 Water main miles…………………………… 383 383 383 383 383 383 383 383 383 383 Sewer main miles…………………………… 21 21 21 21 21 21 21 21 37 37

Culture and Recreation:Number of public parks…………………… 24 24 24 24 24 24 24 24 24 24 Number of libraries………………………… 5 5 5 5 5 5 5 5 5 5 Number of beaches………………………… 12 12 12 12 12 12 12 12 12 12

Source: Various Town Departments and State websites.

CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM



Above, a spectacular sunset on Eel Pond located in the Woods Hole area of Falmouth. (Photo credit: Slack12)


PROPOSED FORM OF LEGAL OPINION APPENDIX B

111 Huntington Avenue9th Floor

Boston, MA 02199-7613Telephone: 617-239-0100

Fax: 617-227-4420www.lockelord.com

B-1

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)

Patricia O’Connell, Treasurer Town of Falmouth Falmouth, Massachusetts

$28,525,000* Town of Falmouth, Massachusetts

General Obligation Municipal Purpose Loan of 2019 Bonds Dated December 12, 2019

We have acted as bond counsel to the Town of Falmouth, Massachusetts (the “Town”) in connection with the issuance by the Town 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 Town 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 Town and, except tothe extent they are paid from other sources, the principal of and interest on the Bonds are payable from taxes which may be levied upon all taxable property in the Town without limitation as to rate or amount, except as provided under Chapter 44, Section 20 of the General Laws, with respect to that portion of the principal and interest payments that the Town has voted to exempt from the limit imposed by Chapter 59, Section 21C of the General Laws, and subject to the limit imposed by Chapter 59, Section 21C of the General Laws with respect to that portion of the principal and interest payments that the Town has not voted to exempt from that limit.

2. 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

* Preliminary, subject to change.

B-2

opinions set forth in this paragraph, we have assumed compliance by the Town with all requirements of the Internal Revenue Code of 1986, as amended 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 Town has covenanted to comply with all such requirements. Failure by the Town 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. We express no opinion regarding any other federal tax consequences arising with respect to the Bonds.

3. 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.

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

C-1

APPENDIX C

PROPOSED FORM OF CONTINUING DISCLOSURE CERTIFICATE

This Continuing Disclosure Certificate (the “Disclosure Certificate”) is executed and delivered by the Falmouth, Massachusetts (the “Issuer”) in connection with the issuance of its $28,525,000* General Obligation Municipal Purpose Loan of 2019 Bonds dated December 12, 2019 (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 Person” shall mean the Issuer.

“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

* Preliminary, subject to change.

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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 daterequired in subsection (a), the Issuer shall send a notice to the MSRB in a timely manner, 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 theIssuer’s Official Statement dated December 4, 2019 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) property tax information, (v) outstanding indebtedness and overlappingdebt of the Issuer, (vi) pension obligations of the Issuer, and (vii) other post-employment benefitsliability of the Issuer, and

(b) the most recently available audited financial statements of the Issuer, 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 Issuer 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, ofthe 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.

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

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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, if material.

11. Rating changes.

12. Bankruptcy, insolvency, receivership or similar event of the Obligated Person.*

13. The consummation of a merger, consolidation, or acquisition involving an Obligated Person or the sale of all or substantially all of the assets of the 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 the Obligated Person, if material, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a financial obligation of the Obligated Person, any of which affect Owners of the Bonds, if material.†

16. Default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a financial obligation of the Obligated Person, any of which reflect financial difficulties.†

* As noted in the Rule, this event is considered to occur when any of the following occur: (i) the appointment of a receiver, fiscal agent or similar officer for the Obligated Person in a proceeding under the U.S. Bankruptcy Code or in any proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the Obligated Person, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or (ii) the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the 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 “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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(b) Upon the occurrence of a Listed Event, the Issuer shall, in a timely manner not in excess 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 prior redemption or 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 Disclosure Certificate shall be an action for specific performance of the Issuer’s obligations hereunder and not for money damages in any amount.

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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: December 12, 2019 TOWN OF FALMOUTH,MASSACHUSETTS

By: Treasurer

Selectmen

[EXHIBIT A: Filing Information for the MSRB] [EXHIBIT B: Form of Notice of Failure to File Annual Report]

PROPOSAL FOR BONDS

Ms. Patricia O’Connell, Treasurer/Collector December 4, 2019 Town of Falmouth, Massachusetts c/o Hilltop Securities Inc. 54 Canal Street, 3rd Floor Boston, MA 02114

Dear Ms. O’Connell:

For $28,525,000* Town of Falmouth, Massachusetts, General Obligation Municipal Purpose Loan of 2019 Bonds as further described in your Notice of Sale dated November 21, 2019, 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:

Due DueFebruary 1 Rate February 1 Rate

2021 ........…% 2031 ** ........…%2022 ........... 2032 ** ........…2023 ........... 2033 ** ...........2024 ........... 2034 ** ...........2025 ........... 2035 ** ...........2026 ........... 2036 ** ...........2027 ........… 2037 ** ...........2028 ........… 2038 ** ...........2029 ........… 2039 ** ...........2030 ** ........… 2040 ** ...........

**TERM BONDS (Optional – No more than three Term Bonds.)

First Year of Mandatory Redemption Year of Maturity Interest Rate

If Term Bond(s) are included in this bid, they shall be subject to the restrictions and mandatory redemption requirements set forth in Notice of Sale.

The undersigned hereby acknowledges receipt of the Preliminary Official Statement referred to in the aforementioned Notice of Sale.

Syndicate Manager

Syndicate Manager Address

Telephone:

Fax:

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 $135,000 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 or fax your signed bid form in advance and telephone figures about one-half hour before the time of sale. The Town and Hilltop Securities Inc. are not responsible for errors in bids submitted in this manner.

TELEPHONE (617) 619-4400 FAX (617) 619-4411

HILLTOP SECURITIES INC. ______________________ *Preliminary, subject to change.

town of falmouth, massachusetts $28,525,000* … · falmouth, massachusetts, and that the principal...

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