City of Lawrence Financial Statement-2010-11

8/8/2019 City of Lawrence Financial Statement-2010-11

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PRELIMINARY OFFICIAL STATEMENT AND NOTICE OF SALE DATED NOVEMBER 11, 2010

Ratings:Moody’s:Standard & Poor’s:

In the opinion of Edwards Angell Palmer & Dodge LLP, Bond Counsel, based upon an analysis of existing law andassuming, among other matters, compliance with certain covenants, interest on the Notes is excluded from gross incomefor federal income tax purposes under the Internal Revenue Code of 1986. Interest on the Notes is not a specificpreference item for purposes of the federal individual or corporate alternative minimum taxes, and such interest is not

included in adjusted current earnings when calculating corporate alternative minimum taxable income. Under existinglaw, interest on the Notes is exempt from Massachusetts personal income taxes, and the Notes are exempt fromMassachusetts personal property taxes. Bond Counsel expresses no opinion regarding any other tax consequencesrelated to the ownership or disposition of, or the accrual or receipt of interest on, the Notes. The Notes will NOT bedesignated as “qualified tax-exempt obligations” for purposes of Section 265(b)(3) of the Code. See “Tax Exemptionherein.

CITY OF LAWRENCE, MASSACHUSETTS

STATE QUALIFIED

GENERAL OBLIGATION DEFICIT FINANCING BOND ANTICIPATION NOTES

The City of Lawrence, Massachusetts (the “City”) will receive telephone and electronic bids at First Southwest Company(617-619-4400) in case of telephone bids and via PARITY in case of electronic bids until 11:00 A.M., Local Time

Thursday, November 18, 2010, for the purchase of the following described issues of State Qualified General ObligationDeficit Financing Bond Anticipation Notes, dated December 1, 2010:

$6,000,000 State Qualified General Obligation Deficit Financing Bond Anticipation Notes payable December1, 2011. Interest on these Notes will be calculated on a 30 day month/360 day year basis(360/360).

Bids may be submitted electronically via PARITY pursuant to this Notice until 11:00 A.M., local time, but no bid will bereceived after the time for receiving bids specified above. To the extent any instructions or directions set forth in PARITY

conflict with this Notice, the terms of this Notice shall control. For further information about PARITY , potential biddersmay contact PARITY at (212) 849-5021.

Bids may be for all or part of each issue at a single or multiple rates of interest in a multiple of one-hundredth (1/100) ofone percent (1%). No bid of less than par and accrued interest to the date of delivery will be considered on this issue

and bids must include a premium of at least $2.50 per $1,000 bid. The right is reserved to reject any or all bids and toreject any bid not complying with this Notice of Sale and, so far as permitted by law, to waive any irregularity with respectto any bid. The Notes will be awarded on the basis of lowest net interest cost to the City after deduction of premium, iany. Such cost will be determined by computing the total amount of interest payable on the Notes, at the rate or ratesstated, from December 1, 2010 until the maturity of the Notes and deducting therefrom the sum, if any, by which theamount bid for the Notes exceeds the aggregate principal amount of the Notes. In the event a bidder offering a premiumfor the Notes is awarded a lesser amount of Notes than bid, the premium shall be reduced proportionately.

An electronic bid made in accordance with this Notice of Sale shall be deemed an offer to purchase the Notes inaccordance with the terms provided in this Notice of Sale and shall be binding upon the bidder as if made by a signed andsealed written bid delivered to the City.

Any bidder who submits a winning bid by telephone in accordance with this Notice of Sale shall be required to providewritten confirmation of the terms of the bid by faxing or e-mailing a completed, signed bid form to First SouthwestCompany by not later than Noon, Eastern Time, on the date of sale.

The award of the Notes to the winning bidder or bidders will not be effective until the bid has been approved by the Mayorand the City Treasurer.

The Notes will be issued by means of a book-entry system, evidencing ownership of the Notes in principal amounts o$1,000, or integral multiples thereof, with transfers of ownership effected on the records of The Depository TrusCompany (DTC) and its participants pursuant to rules and procedures adopted by DTC. (See "Book-Entry-TransfeSystem.")

Principal and interest on the Notes will be payable upon maturity in federal reserve funds by the Treasurer and Receiver-General of The Commonwealth of Massachusetts, as Paying Agent. The disbursement of such payments to the DTC



Participants is the responsibility of DTC, and the disbursement of such payments to the Beneficial Owners is theresponsibility of the DTC Participants and the Indirect Participants, as more fully described herein.

The Notes are not subject to redemption prior to maturity.

The successful bidder(s) for the Notes may request that the Notes be issued in the form of one fully registered physicacertificate, rather then in book-entry form through the facilities of The Depository Trust Company. The successful biddeseeking the issuance of the Notes in this manner shall bear any and all costs of any re-registration or transfer of Notesfrom time to time. Any bidder seeking to have the Notes issued in the form of fully registered physical certificates, rathethan in book-entry form, shall indicate this preference to the City at the time of the submission of the winning bid. The Cityreserves the right to decline any request to issue the Notes in non-book entry form if it should determine, in its solediscretion, that issuing the Notes in this manner is not in its best interests.

The Notes will be accompanied by the opinion of Edwards Angell Palmer & Dodge LLP of Boston, Massachusetts,approving the legality of the Notes. (See "Tax Exemption"). The opinion will also indicate that the Notes and theenforceability thereof may be subject to bankruptcy and other laws affecting creditor's rights and that their enforceabilitymay also be subject to the exercise of judicial discretion in appropriate cases. Payment of the principal of and interest onthe Notes is not limited to a particular fund or source of revenue nor is any lien or pledge for such payment created withrespect to any such fund or source. The Notes will be valid general obligations of the City of Lawrence and, except to theextent they are paid from the sale of State Qualified bonds in anticipation of which they are issued, or from any otheravailable moneys, the principal of and interest on the Notes are payable from taxes which may be levied upon all taxableproperty in the City, subject to the limit imposed by Chapter 59, Section 21C of the General Laws.

In order to assist the successful bidder or bidders in complying with the requirements of paragraph (b)(5)(i)(c) of Rule15c2-12 promulgated by the Securities and Exchange Commission, the City will undertake to provide notices of certainsignificant events. A description of this undertaking is set forth in the Preliminary Official Statement.

It is anticipated that CUSIP identification numbers will be used in connection with the Notes. All expenses in relation tothe printing of CUSIP numbers on said Notes shall be paid for by the City, however, the City assumes no responsibilityfor any CUSIP Service Bureau or other charges that may be imposed for the assignment of such number.

Additional information concerning the City of Lawrence and the Notes is contained in the Preliminary Official Statementdated November 11, 2010. The Preliminary Official Statement is provided for informational purposes and is not a part ofthis Notice of Sale. The Preliminary Official Statement has been deemed to be final by the City except for the omission ofthe reoffering prices, interest rates and other terms of the Notes depending on such matters, but is subject to changewithout notice and to completion or amendment in a Final Official Statement. Copies of the Preliminary Official Statement

may be obtained from the First Southwest Company, 54 Canal Street, Suite 320, Boston, Massachusetts 02114(Telephone: 617-619-4400). Within seven business days following the award of the Notes, 5 copies of the Final OfficialStatement will be made available. Upon request, additional copies will be provided.

The Notes will be delivered to The Depository Trust Company or its custodial agent, against payment to the City in federalreserve funds on or about December 1, 2010.

CITY OF LAWRENCE, MASSACHSUETTS /s/ Patricia Cook, Treasure

November 11, 2010



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TABLE OF CONTENTSPage Page

OFFICIAL STATEMENT ........................................... 3Authorization of the Bonds and

Use of Proceeds ..................................................... 3State Qualified Notes ................................................ 3Book-Entry Only System ........................................... 4Securities and Remedies .......................................... 5Tax Exemption .......................................................... 6Opinion of Bond Counsel .......................................... 8Financial Advisory Services ofFirst Southwest Company. ....................................... 8Continuing Disclosure ............................................... 8

CITY OF LAWRENCE:General...................................................................... 10Principal Executive Officers ...................................... 10Current Financial Challenges .................................... 10History ....................................................................... 10Municipal Services .................................................... 11Education .................................................................. 11

Public School Enrollments ..................................... 11Industry and Commerce ............................................ 11Employment and Payrolls ....................................... 12

Largest Employers .................................................... 12Labor Force, Employment and Unemployment ........ 13Economic Developments .......................................... 13Sigificant Announcements ........................................ 13Public Sector Developments ..................................... 15Building Permits ........................................................ 18Transportation and Utilities ....................................... 18Population, Income and Wealth Levels ..................... 19Population Trends ..................................................... 19

PROPERTY TAXATION:

Tax Levy Computation .............................................. 20Reduction of State Aid .............................................. 20Assessed Valuations and Tax Levies ....................... 21Assessed Valuation ................................................... 21Classification of Property .......................................... 21Tax Rates .................................................................. 22Largest Taxpayers .................................................... 22State Equalized Valuation ......................................... 22Abatements and Overlay........................................... 23Tax Collections .......................................................... 23Taxes Titles and Possessions .................................. 24

Sale of Tax Receivables ........................................... 24Taxation to Meet Deficits ........................................... 24Property Tax Limitation ............................................. 25Tax Levy Limits ......................................................... 26Pledged Taxes .......................................................... 26Community Preservation Act .................................... 26

CITY FINANCES:

Budget and Appropriation Process ............................. 28History of Prior Financial Problems (1989-1997) ....... 28History of More Recent Financial Problems ............... 29Special Legislation Pertaining to the City’s

Fiscal Stability .......................................................... 29Initial Plan of Correction .............................................. 30Subsequent Accomplishments ................................... 30Deficit Financing ......................................................... 31Budget Trends ............................................................ 32Revenues .................................................................... 32State School Building Assistance Program ................ 33Investments of City Funds .......................................... 34Significant Accounting Policies ................................... 34Annual Audits .............................................................. 34Financial Statements .................................................. 34Fiscal 2010 Estimated Operating Results .................. 35Combined Balance Sheet June 30, 2009 ................... 36

Combined Balance Sheet June 30, 2008 ................... 37Combined Balance Sheet June 30, 2007 ................... 38Comparative Statement of Receipts and

Expenditures and Changes in Fund Balance – General Fund, June 30, 2005 - 2009 ...................... 39

Free Cash ................................................................... 40Tax Increment Financing for Development Districts .. 40

INDEBTEDNESS:

Authorization Procedure and Limitations .................... 41Types of Obligations ................................................... 41Direct Debt Summary ................................................. 42

Debt Ratios ................................................................. 43Debt Service Requirements ........................................ 43Principal Payments by Purpose .................................. 44Authorized Unissued Debt and

Prospective Financing ............................................. 44Coverage of Qualified Debt Service ........................... 45Overlapping Debt ........................................................ 46Contractual Obligations .............................................. 46RETIREMENT PLAN .................................................. 47Other Post-Employment Benefits ............................... 48EMPLOYEE RELATIONS ........................................... 49LITIGATION ................................................................ 49APPENDIX A: City of Lawrence - Fiscal 2009

Audited Financial StatementsAPPENDIX B: Proposed Form of Legal Opinion

_____________________________ The Official Statement is not to be construed as a contract or agreement between the City and the purchasers or holders of any of theNotes. Any statements made in this Official Statement involving matters of opinion, whether or not expressly so stated, are intendedmerely as opinion and not as representations of fact. The information and expressions of opinion herein are subject to change withounotice and neither the delivery of this Official Statement nor any sale of the Notes described herein shall, under any circumstances,create any implication that there has been no change in the affairs of the City of Lawrence, since the date hereof.



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Chapter 44A further provides that nothing therein shall be construed to relieve the City of the obligation imposed on it bylaw to appropriate and to include in its annual tax levy amounts necessary to pay, in each year, the principal and interesmaturing and becoming due on any qualified notes issued by the City; provided, however, that to the extent of theamounts of distributable aid or other amounts payable to the City which have been or are to be forwarded to the payingagent for such qualified notes, the State Treasurer shall certify to the City Auditor the amounts so withheld and thereaftersuch amounts shall be credited to the appropriations of the City for the current fiscal year, and provided, further that to theextent to which distributable aid is not appropriated by the Commonwealth in any fiscal year, such appropriated amountsof the City shall be used to pay the debt service maturing and becoming due in such year on such qualified notes of theCity.

Nothing in Chapter 44A shall be construed to pledge the credit and assets of the Commonwealth to the support of anyqualified notes or to guarantee payment or stand as surety for the payment of any qualified notes.

The City may issue other bonds and notes in addition to the Notes as qualified bonds and notes on a parity with the Notespursuant to Chapter 44A. In addition to this issue, the City has issued the following qualified notes and bonds$12,000,000 qualified notes dated April 23, 2010, payable December 1, 2010 ($6,000,000) and March 1, 2011($6,000,000), $6,000,000 qualified bonds dated March 15, 1997, $1,500,000 of which are currently outstanding$46,570,000 qualified bonds dated February 1, 2001, $2,015,000 of which are currently outstanding; $43,430,000qualified bonds dated March 15, 2002, $9,080,000 of which are currently outstanding; $22,605,000 qualified bonds datedAugust 12, 2003, $8,600,000 of which are currently outstanding; $6,000,000 qualified bonds dated June 15, 2004$3,600,000 of which are currently outstanding; $9,000,000 qualified bonds dated August 15, 2005, $7,750,000 of whichare currently outstanding; $8,000,000 qualified bonds dated August 1, 2006, $6,770,000 of which are currentlyoutstanding; $48,355,000 qualified bonds dated December 1, 2006, $48,210,000 of which are currently outstanding

$18,000,000 qualified bonds dated October 1, 2007, $17,500,000 of which are currently outstanding; and $2,305,460qualified bonds dated April 1, 2009, $2,150,000 of which are currently outstanding. See "INDEBTEDNESS--Coverage oQualified Debt Service" for a discussion of the projected coverage of qualified debt service by state aid.

Book-Entry Transfer System

The Depository Trust Company ("DTC"), New York, NY, will act as securities depository for the Notes. The Notes will beissued as fully-registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such othername as may be requested by an authorized representative of DTC. One-fully registered Note certificate will be issued foeach interest rate, each in the aggregate principal amount bearing such interest rate, and will be deposited with DTC.

DTC, the world's largest 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 assetservicing for over 3.5 million issues of U.S. and non-U.S. equity, corporate and municipal debt issues, and money marketinstruments (from over 100 countries) that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitatesthe post-trade settlement among Direct Participants of sales and other securities transactions in deposited securitiesthrough electronic computerized book-entry transfers and pledges between Direct Participants' accounts. This eliminatesthe need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securitiesbrokers 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 DTCNational Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearingagencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to otherssuch as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations thatclear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("IndirectParticipants"). DTC has Standard & Poor's highest rating: AAA. 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 andwww.dtc.org.

Purchases of Notes under the DTC system must be made by or through Direct Participants, which will receive a credit fothe Notes on DTC's records. The ownership interest of each actual purchaser of each Note ("Beneficial Owner") is in turnto be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation fromDTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of thetransaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which theBeneficial Owner entered into the transaction. Transfers of ownership interests in the Notes are to be accomplished byentries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners willnot receive certificates representing their ownership interests in the Notes, except in the event that use of the book-entrysystem for the Notes is discontinued.



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To facilitate subsequent transfers, all Notes deposited by Direct Participants with DTC are registered in the name oDTC's partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative oDTC. The deposit of Notes with DTC and their registration in the name of Cede & Co. or such other DTC nominee do noteffect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Notes; DTC'srecords reflect only the identity of the Direct Participants to whose accounts such Notes are credited, which may or maynot be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of theiholdings on behalf of their customers.

Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to IndirectParticipants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangementsamong them, subject to any statutory or regulatory requirements as may be in effect from time to time.

Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote with respect to the Notes unlessauthorized by a Direct Participant in accordance with DTC's MMI Procedures. Under its usual procedures, DTC mails anOmnibus Proxy to the [Issuer] as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'sconsenting or voting rights to those Direct Participants to whose accounts the Notes are credited on the record date(identified in a listing attached to the Omnibus Proxy).

Principal and interest payments on the Notes will be made to Cede & Co., or such other nominee as may be requested byan authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of fundsand corresponding detail information from the City or the Paying Agent, on the payable date in accordance with theirespective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed bystanding instructions and customary practices, as is the case with securities held for the accounts of customers in beare

form or registered in "street name," and will be the responsibility of such Participant and not of DTC (nor its nominee), theCity or the 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 authorizedrepresentative of DTC) is the responsibility of the City or the Paying Agent, disbursement of such payments to DirectParticipants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be theresponsibility of Direct and Indirect Participants.

DTC may discontinue providing its services as depository with respect to the Notes at any time by giving reasonablenotice to the City or the Paying Agent. Under such circumstances, in the event that a successor depository is notobtained, Note certificates are required to be printed and delivered to Beneficial Owners.

The City may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securitiesdepository). In that event, Note certificates will be printed and delivered to Beneficial Owners.

The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that theCity believes to be reliable, but the City takes no responsibility for the accuracy thereof.

Security and Remedies

Full Faith and Credit. General obligation bonds and notes of a Massachusetts city or town constitute a pledge of its full faithand credit. Payment is not limited to a particular fund or revenue source. Except for “qualified bonds” as described above (see“Serial Bonds and Notes” under “TYPES OF OBLIGATIONS” above) 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 andother 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 fiscayear “all debt and interest charges matured and maturing during the next fiscal year and not otherwise provided for [and] allamounts necessary to satisfy final judgments”. Specific provision is also made for including in the next tax levy payments orebate amounts not otherwise provided for and payment of notes in anticipation of federal or state aid, if the aid is no longerforthcoming.

The total amount of a tax levy is limited by statute. However, the voters in each municipality may vote to exclude from thelimitation any amounts required to pay debt service on indebtedness incurred before November 4, 1980. Local voters mayalso vote to exempt specific subsequent bond issues from the limitation. (See “Tax Limitations” Under “PROPERTY TAXbelow.) In addition, obligations incurred before November 4, 1980 may be constitutionally entitled to payment from taxes inexcess of the statutory limit.



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Except for taxes on the increased value of certain property in designated development districts which may be pledged for thepayment of debt service on bonds issued to finance economic development projects within such districts, no provision is madefor a lien on any portion of the tax levy to secure particular bonds or notes or bonds and notes generally (or judgments onbonds or notes) in priority to other claims. Provision is made, however, for borrowing to pay judgments, subject to the GeneraDebt Limit. (See “DEBT LIMITS” 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 otheprovision is made.

Court Proceedings. Massachusetts cities and towns are subject to suit on their general obligation bonds and notes and courtsof competent jurisdiction have power in appropriate proceedings to order payment of a judgment on the bonds or notes fromlawfully available funds or, if necessary, to order the city or town to take lawful action to obtain the required money, includingthe raising of it in the next annual tax levy, within the limits prescribed by law. (See “Tax Limitations” under “PROPERTY TAXbelow.) In exercising their discretion as to whether to enter such an order, the courts could take into account all relevanfactors including the current operating needs of the city or town and the availability and adequacy of other remedies. TheMassachusetts Supreme Judicial Court has stated in the past that a judgment against a municipality can be enforced by thetaking and sale of the property of any inhabitant. However, there has been no judicial determination as to whether this remedyis constitutional under current due process and equal protection standards.

Restricted Funds. Massachusetts statutes also provide that certain water, gas and electric, community antenna televisionsystem, telecommunications, sewer, parking meter and passenger ferry fee, community preservation and affordable housingreceipts may be used only for water, gas and electric, community antenna television system, telecommunications, sewer,parking, mitigation of ferry service impacts, community preservation and affordable housing purposes, respectivelyaccordingly, moneys derived from these sources may be unavailable to pay general obligation bonds and notes issued fo

other purposes. A city or town that accepts certain other statutory provisions may establish an enterprise fund for a utilityhealth care, solid waste, recreational or transportation facility and for police or fire services; under those provisions any surplusin the fund is restricted to use for capital expenditures or reduction of user charges. In addition, subject to certain limits, a cityor town may annually authorize the establishment of one or more revolving funds in connection with use of certain revenues foprograms that produce those revenues; interest earned on a revolving fund is treated as general fund revenue. A city or townmay also establish an energy revolving loan fund to provide loans to owners of privately-held property in the city or town forcertain energy conservation and renewable energy projects, and may borrow to establish such a fund. The loan repaymentsand interest earned on the investment of amounts in the fund shall be credited to the fund. Also, the annual allowance fodepreciation of a gas and electric plant or a community antenna television and telecommunications system is restricted to usefor plant or system renewals and improvements, for nuclear decommissioning costs, and costs of contractual commitments, orwith the approval of the State Department of Telecommunications and Energy, to pay debt incurred for plant or systemreconstruction or renewals. Revenue bonds and notes issued in anticipation of them may be secured by a prior lien on specificrevenues. Receipts from industrial users in connection with industrial revenue financings are also not available for genera

municipal purposes.

State Distributions. State grants and distributions may in some circumstances be unavailable to pay general obligation bondsand notes of a city or town in that the State Treasurer is empowered to deduct from such grants and distributions the amount oany debt service paid on “qualified bonds” (See “Serial Bonds and Notes” under “TYPES OF OBLIGATIONS” above) and anyother sums due and payable by the city or town to the Commonwealth or certain other public entities, including any unpaidassessments for costs of any public transportation authority (such as the Massachusetts Bay Transportation Authority or aregional transit authority) of which it is a member, for costs of the Massachusetts Water Resources Authority if the city or townis within the territory served by the Authority, for any debt service due on obligations issued to the Massachusetts SchooBuilding Authority, or for charges necessary to meet obligations under the Commonwealth’s Water Pollution Abatement orDrinking Water Revolving Loan Programs, including such charges imposed by another local governmental unit that provideswastewater 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 theState Commissioner of Revenue. The Commissioner shall in turn, after verifying the inability, certify the inability to the StateTreasurer. The State Treasurer shall pay the due or overdue amount to the paying agent for the bonds or notes, in trust, withinthree days after the certification or one business day prior to the due date (whichever is later). This payment is limitedhowever, to the estimated amount otherwise distributable by the Commonwealth to the city or town during the remainder of thefiscal year (after the deductions mentioned in the foregoing paragraph). If for any reason any portion of the certified sum hasnot 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 theextent of the estimated distributions for that fiscal year. The sums so paid shall be charged (with interest and administrativecosts) against the distributions to the city or town.



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The foregoing does not constitute a pledge of the faith and credit of the Commonwealth. The Commonwealth has not agreedto maintain existing levels of state distributions, and the direction to use estimated distributions to pay debt service may besubject to repeal by future legislation. Moreover, adoption of the annual appropriation act has sometimes been delayedbeyond the beginning of the fiscal year and estimated distributions which are subject to appropriation may be unavailable topay 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 subjecto the applicable provisions of Federal bankruptcy laws and to the provisions of other statutes, if any, hereafter enacted by theCongress or the State legislature extending the time for payment or imposing other constraints upon enforcement insofar asthe same may be constitutionally applied. Massachusetts municipalities are not currently authorized by the MassachusettsGeneral Laws to file a petition for bankruptcy under Federal Bankruptcy laws. In cases involving significant financial difficultiesfaced by a single city, town or regional school district, the Commonwealth has enacted special legislation to permit theappointment of a fiscal overseer, finance control board or, in the most extreme cases, a state receiver. In a limited number othese situations, such special legislation has also authorized the filing of federal bankruptcy proceedings, with the priorapproval of the Commonwealth. In each case where such authority was granted, it expired at the termination of theCommonwealth’s oversight of the financially distressed city, town or regional school district. To date, no such filings had beenapproved or made.

Tax Exemption

In the opinion of Edwards Angell Palmer & Dodge LLP, Bond Counsel to the City (“Bond Counsel”), based upon ananalysis of existing laws, regulations, rulings, and court decisions, and assuming, among other matters, compliance withcertain covenants, interest on the Notes is excluded from gross income for federal income tax purposes under Section

103 of the Internal Revenue Code of 1986 (the “Code”). Bond Counsel is of the further opinion that interest on the Notesis not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes, and suchinterest is not included in adjusted current earnings when calculating corporate alternative minimum taxable income. Theforegoing reflects the enactment of the American Recovery and Reinvestment Act of 2009 which includes provisions thatmodify the treatment under the alternative minimum tax of interest on certain state and local government entities and thatmodify Section 265(b)(3) of the Code. Bond Counsel expresses no opinion regarding any other federal tax consequencesarising with respect to the ownership or disposition of, or the accrual or receipt of interest on, the Notes.

The Code imposes various requirements relating to the exclusion from gross income for federal income tax purposes ofinterest on obligations such as the Notes. Failure to comply with these requirements may result in interest on the Notesbeing included in gross income for federal income tax purposes, possibly from the date of original issuance of the Notes.The City has covenanted to comply with such requirements to ensure that interest on the Notes will not be included infederal 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 Notes is exempt from Massachusetts personaincome taxes, and the Notes are exempt from Massachusetts personal property taxes. Bond Counsel has not opined asto other Massachusetts tax consequences arising with respect to the Notes. Prospective Noteholders should be awarehowever, that the Notes are included in the measure of Massachusetts estate and inheritance taxes, and the Notes andthe interest thereon are included in the measure of certain Massachusetts corporate excise and franchise taxes. BondCounsel has not opined as to the taxability of the Notes or the income therefrom under the laws of any state other thanMassachusetts.

To the extent the issue price of the Notes is less than the amount to be paid at maturity of such Notes (excluding amountsstated to be interest and payable at least annually over the term of such Notes), the difference constitutes “original issuediscount,” the accrual of which, to the extent properly allocable to each owner thereof, is treated as interest on the Noteswhich is excluded from gross income for federal income tax purposes and is exempt from Massachusetts persona

income taxes. For this purpose, the issue price of the Notes is the first price at which a substantial amount of such Notesis sold to the public (excluding note houses, brokers, or similar persons or organizations acting in the capacity ofunderwriters, placement agents or wholesalers). The original issue discount with respect to the Notes accrues daily ovethe term to maturity of such Notes on the basis of a constant interest rate compounded semiannually (with straight-lineinterpolations between compounding dates). The accruing original issue discount is added to the adjusted basis of suchNotes to determine taxable gain or loss upon disposition (including sale, redemption, or payment on maturity) of suchNotes. Noteholders should consult their own tax advisors with respect to the tax consequences of ownership of Noteswith original issue discount, including the treatment of purchasers who do not purchase such Notes in the original offeringto the public at the first price at which a substantial amount of such Notes is sold to the public.



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Notes purchased, whether at original issuance or otherwise, for an amount greater than the stated principal amount to bepaid at maturity of such Notes, or, in some cases, at the earlier redemption date of such Notes ("Premium Notes"), will betreated as having amortizable note premium for federal income tax purposes and Massachusetts personal income taxpurposes. No deduction is allowable for the amortizable note premium in the case of obligations, such as the PremiumNotes, the interest on which is excluded from gross income for federal income tax purposes. However, a Noteholder’sbasis in a Premium Note will be reduced by the amount of amortizable note premium properly allocable to suchNoteholder. Holders of Premium Notes should consult their own tax advisors with respect to the proper treatment oamortizable note premium in their particular circumstances.

Bond Counsel has not undertaken to determine (or to inform any person) whether any actions taken (or not taken) orevents occurring (or not occurring) after the date of issuance of the Notes may adversely affect the value of, or the taxstatus of interest on, the Notes. Further, no assurance can be given that pending or future legislation, includingamendments to the Code, if enacted into law, or any proposed legislation, including amendments to the Code, or anyfuture judicial, regulatory or administrative interpretation or development with respect to existing law, will not adverselyaffect the value of, or the tax status of interest on, the Notes. Prospective Noteholders are urged to consult their own taxadvisors with respect to proposals to restructure the federal income tax.

Although Bond Counsel is of the opinion that interest on the Notes is excluded from gross income for federal income taxpurposes and is exempt from Massachusetts personal income taxes, the ownership or disposition of, or the accrual orreceipt of interest on, the Notes may otherwise affect the federal or state tax liability of a Noteholder. Among otherpossible consequences of ownership or disposition of, or the accrual or receipt of interest on, the Notes, the Coderequires recipients of certain social security and certain railroad retirement benefits to take into account receipts oraccruals of interest on the Notes 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 Noteholder or theNoteholder’s other items of income or deduction. Except as indicated in the following paragraph, Bond Counseexpresses no opinion regarding any such other tax consequences, and Noteholders should consult with their own taxadvisors with respect to such consequences.

Opinion of Bond Counsel

The unqualified approving opinion as to the validity of the Notes will be rendered by Edwards Angell Palmer & DodgeLLP, Boston, Massachusetts, Bond Counsel. The opinion will be dated the date of the original delivery of the Notes andwill speak only as of such date.

Other than as to matters expressly set forth herein as the opinion of Bond Counsel, Bond Counsel are not passing uponand do not assume any responsibility for the accuracy or adequacy of the statements made in this Official Statement and

make no representation that they have independently verified the same.

Financial Advisory Services of First Southwest Company

First Southwest Company, Boston, Massachusetts serves as financial advisor to the City of Lawrence. The City hasconsented to the participation by the Firm in the public bidding on the Notes if it so desires.

Disclosure of Significant Events

In order to assist underwriters in complying with the requirements of paragraph (b)(5)(i)(C) of Rule 15c2-12 promulgatedby the Securities and Exchange Commission (the “Rule”) applicable to municipal securities having a stated maturity of

18 months or less, the City will covenant for the benefit of the owners of the Notes to file with the Municipal SecuritiesRulemaking Board (the “MSRB”), notices of the occurrence of any of the following events with respect to the Notes withinten business days of such occurrence: (a) principal and interest payment delinquencies; (b) non-payment relateddefaults, if material; (c) unscheduled draws on debt service reserves reflecting financial difficulties; (d) unscheduleddraws on credit enhancements reflecting financial difficulties; (e) substitution of credit or liquidity providers, or their failureto perform; (f) adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determination oftaxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect tothe tax status of the Notes, or other material events affecting the tax status of the Notes; (g) modifications to rights ofowners of the Notes, if material; (h) optional contingent or unscheduled calls of bonds, if material; (i) defeasances; (j)release, substitution or sale of property securing the repayment of the Notes, if material; (k) ratings changes on theNotes; (l) bankruptcy, insolvency, receivership or similar event of the City; (m) the consummation of a merger,consolidation, or acquisition involving the City or the sale of all or substantially all of the assets of the City, other than in



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the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of adefinitive agreement relating to any such actions, other than pursuant to its terms, if material; and (n) appointment of asuccessor or additional trustee or the change of name of a trustee, if material.

The covenant will be included in a Significant Events Disclosure Certificate to be executed by the signers of the Notesand incorporated by reference in the Notes. The sole remedy available to the owners of the Notes for the failure of theCity to comply with any provision of the certificate shall be an action for specific performance of the City’s obligationsunder the certificate and not for money damages; no other person shall have any right to enforce any provision of thecertificate. The City has never failed to comply in all material respects with any previous undertakings to provideannual reports or notices of material events in accordance with the Rule.



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General

Lawrence is located in Essex County and is 26 miles north of Boston. It is bordered on the north by the Town of Methuenon the west and southwest by the Town of Andover, and on the east and southeast by the Town of North Andover. It isalso 5 miles south of the State of New Hampshire. Incorporated as a city in 1853, Lawrence has a population of 72,043(2000 U. S. Bureau of the Census) and occupies a land area of approximately 6.75 square miles. The Cities of Lawrenceand Haverhill are the population centers of a Primary Metropolitan Statistical Area (PMSA) of approximately 230,000persons. The City is governed by a mayor and nine-member City Council. The Mayor and all Council members are

elected on a non-partisan basis. City Councilors are elected for a two-year term, and the Mayor is elected for a four-yeaterm. All executive officers are appointed.

Principal Executive Officers

City Title Name First Entered Office Term Expires

Mayor William Lantigua 2010 2014Budget and Finance Director Currently Vacant (1) - IndefiniteComptroller David Camasso 2007 IndefiniteTreasurer/Collector Patricia M. Cook 1989 IndefiniteCity Clerk William J. Maloney 2004 Indefinite

__________________ (1) The City is in the middle of conducting a national search for candidates to fill the position full-time. Prior to June 30

2010 the City had retained personnel from the University of Massachusetts, Boston, to provide the services of thisposition on an interim basis.

Current Financial Challenges

In recent years, the City has experienced a number of financial problems, resulting in a cumulative deficit estimated a$24 million through the end of fiscal 2010. A regular pattern of overestimating revenues, under budgeting expendituresincluding under budgeting collective bargaining agreements by the prior administration, combined with significant cuts inlocal aid from The Commonwealth of Massachusetts, led to the enactment of Chapter 58 of the Acts of 2010 (“Chapter58”). Chapter 58 authorized the City to amortize its deficit over a period of years, while requiring the appointment by theState of a fiscal overseer of the City. The fiscal overseer is charged with working in consultation with the City’s financiamanagement team, to assist the City’s return to financial stability. The fiscal overseer also has the ability to trigger theappointment of a finance control board that would assume day-to-day management of the City, if the fiscal overseer

determines that a timely return to financial stability is not likely. For a more complete discussion of the City’s financiachallenges and powers of the fiscal overseer, see “Special Legislation Pertaining to City’s Fiscal Stability, “Initial Plan ofCorrection”, and “Deficit Financing” herein.

On April 23, 2010, the Commonwealth’s Secretary of Administration and Finance appointed Robert G. Nunes fiscaoverseer of the City of Lawrence. Mr. Nunes is currently also serving as the Deputy Commissioner of Revenue managingthe Division of Local Services for the Commonwealth of Massachusetts Department of Revenue. He is also the Directoof Municipal Affairs. Mr. Nunes has 25 years of local and state government experience and previously served as thelongest-serving mayor in Taunton’s history. Mr. Nunes is a past president of the Massachusetts Mayors’ Association anda former member of the Massachusetts Municipal Association Board of Directors and the Local Government AdvisoryCommission.

History

In 1845, a group of Boston entrepreneurs led by Abbott Lawrence formed the Essex Company to harness the power ofBodwell's Falls in the Merrimack River in order to run their commercial concerns. The pace of development rapidlytransformed Lawrence from a rural farming community into a major industrial center. Within three years, the EssexCompany completed a dam, constructed two canals and a reservoir, organized gas works, and erected fifty brickbuildings, a boarding house, a machine shop for building locomotives, and plants which housed the Atlantic Cotton,Pemberton, Upper Pacific and Duck Mills. In 1847, the Boston and Maine Railroad introduced passenger train serviceand in 1853, Lawrence was incorporated as a city. Lawrence quickly achieved prominence as one of the major centers owoolen textile development in the United States and some of the original mills remain, underscoring the City's continuedimportance as a textile manufacturing center. In recent years, the City has sought to diversify its economic base byattracting industries which manufacture products other than textiles.



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Municipal Services

The City provides general governmental services for the territory within its limits, including police and fire protection, solidwaste collection and disposal, public education, street maintenance, park and recreation facilities, water services and alibrary. Public housing is provided by the Lawrence Housing Authority.

Wastewater treatment is provided by the Greater Lawrence Sanitary District (the "District"), which serves the City through137 miles of sewer mains and sewer stations. The system serves essentially all residences and businesses in the CityThe District also serves Andover, North Andover, Methuen and Salem, New Hampshire.

Education

The City's public school facilities include twenty one elementary schools and one high school which have a combined totalcapacity of approximately 13,000 students. Over the past decade, the City embarked upon a program to rebuild and/oreplace many of its school facilities. The first phase of this program involved the building of three new elementary schoolsto replace obsolete smaller structures. These were financed with bond issues in 2001 and 2002 and have beencompleted. The City receives annual grant reimbursement payments for approximately 90% of construction costs andinterest on the bonds and notes issued for this purpose. The second phase included the building of a new high school aan estimated cost of $110 million. The City issued temporary notes to fund said project, all of which have been retiredwith grant proceeds received from the Massachusetts School Building Association (MSBA), and also issued $11,000,000bonds of the City dated October 1, 2007, and $2,305,460 bonds dated April 1, 2009, to fund its share (approximately

10%) of project costs. The City has entered into a Project Funding Agreement with the MSBA and has been receivinggrant payments for the MSBA’s portion of some additional project costs as such costs are incurred, pursuant to theAgreement. All negative adjustments to MSBA reimbursements have been made, though the City continues to pursuepositive adjustments to school construction projects, including restoration of previously disqualified MSBAreimbursements and surety bond payments from the first contractor hired to build Lawrence High School. See“PROPERTY TAXATION - Tax Levy Computation “ and “INDEBTEDNESS – Authorized Unissued Debt and ProspectiveFinancing” below.

The following chart sets forth the trend in school enrollments as of October 1 for the last five school years.

Public School Enrollments - October 1

2006 2007 2008 2009 2010

Preschool - - - 391 417Elementary (K-8) 10,145 10,145 9,609 8,588 9,026High School (9-12) 2,900 2,950 3,008 3,439 3,461Totals 13,045 13,095 12,617 12,418 12,904

__________________ SOURCE: Lawrence School Department.

Lawrence is a member of the Greater Lawrence Regional Vocational Technical High School District which also serves thetowns of Andover, Methuen and North Andover. As of October 1, 2010 there were 1,226 students enrolled in the GreateLawrence Regional Vocational Technical High School District, 970 of whom were residents of Lawrence. The capacity othe school district is estimated to be 1,600 students.

Industry and Commerce

Lawrence was originally planned and laid out as a commercial and industrial center and it maintains this character to thepresent day. Industrialization began in the mid-nineteenth century when a dam was built across the Merrimack River totake advantage of its great water power potential.

Today, Lawrence is a diversified industrial city. Services are the primary economic pursuit followed by manufacturingThe following table sets forth the major categories of income and employment for the City of Lawrence.



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Employment and Payrolls

Industry 2005 2006 2007 2008 2009

Construction 624 636 624 620 577 Manufacturing 4,746 4,895 5,035 4,990 4,699 Trade, Transportation and Utilities 3,012 2,909 2,893 2,762 2,636 Information 333 348 367 397 384

Financial Activities 460 443 234 497 503

Professional and Business Services 2,514 2,820 2,745 2,667 2,631 Education and Health Services 7,126 6,913 7,216 7,380 7,307 Leisure and Hospitality 823 805 888 968 978 Other Services 1160 1,526 1,619 1,690 1,806

Public Administration 1,369 1,373 1,404 1,396 1,390 Total Employment 22,167 22,668 23,025 23,367 22,911

Number of Establishments 1,426 1,511 1,562 1,608 1,680 Average Weekly Wages 732$ 746$ 769$ 784$ 824

Total Wages 884,194,739$ 879,454,505$ 930,497,632$ 952,621,471$ 981,928,350$

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.

The following table sets forth the largest employers in Lawrence, excluding the City which is the largest employer.

Largest Employers – 2010Approximate

Name Production/Function No. of Employees

Lawrence General Hospital Hospital 1,268

Malden Mills Textile Manufacturer 900

Home Health VNA Social Service Agency 750

New Balance Shoe Manufacturer 500

The Gem Group Novelty Manufacturer 400

Microsemi Manufacturer 400

M.I. Residential Nursing Home 325

Northern Essex Community College College 300

Action Council (GLCAC) Human Services 290

Staples Corporation Office Supplier 175

Commonwealth Motors Auto Dealership 165

Charm Sciences Chemical Testing 150

Bank of America Bank 150

Crown, Cork and Seal Manufacturer 130

Lupoli Companies Restaurant/Corporate Office 119

Pentucket Medical Medical Office 110Robert Abel Co. Equipment Manufacturer 110

Lawrence Pumps, Inc. Pump Manufacturer 80

Bagel Boy Wholesale Pastry Manufacturer 80

Merrimack Valley Credit Union Bank 66

__________________ SOURCE: The individual employers listed as of September 2010.



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Labor Force, Employment and Unemployment

According to the Massachusetts Department of Employment and Training's preliminary data, in August 2010, the City hada total estimated labor force of 31,270 of which 26,045 were employed and 5,225 or 16.7% were unemployed ascompared to 8.3% for the Commonwealth. (Note: Monthly data is unadjusted.) The following table sets forth the City'saverage labor force and unemployment rates as well as the unemployment rates for the Commonwealth and the UnitedStates, for calendar years 2005 through 2009.

Unemployment Rates

Calendar City of Lawrence Massachusetts United States

Year LaborForce Unemployment Rate Unemployment Rate Unemployment Rate

2009 30,007 17.8 % 9.1 % 9.7 %2008 30,301 17.1 5.3 5.82007 30,159 16.9 4.5 4.62006 29,516 9.6 5.2 4.52005 28,979 10.1 4.8 4.62004 29,458 11.3 5.2 5.4

__________________

SOURCE: The Massachusetts Department of Employment and Training, the Federal Reserve Bank of Boston andthe U.S. Bureau of Labor Statistics. Data based upon place of residence, not place of employment.

Economic Development

Private Sector Developments:

The City is strategically located in the center of the Merrimack Valley. Its historic mill buildings along the Merrimack Riveoffer accessible office space and adaptable manufacturing space at reasonable rates. Its people offer a diverse highquality labor force, many within walking distance of the compact, industrially planned downtown. As the City movesforward, businesses are benefiting from its renewed commitment to infrastructure, including better access to Routes 495and 93, upgrading of major arterials within the City, as well as improvements to its schools, parks, and water lines. Thefollowing are some of the major projects in the City that were completed in recent years or are currently underway.

Significant Announcements

Union Crossing is a bold and innovative redevelopment project that will transform a complex 19th century textile mill intoa dynamic new Lawrence neighborhood, bringing investment, housing, and jobs to the historic heart of the city. Theproject will create 360,000 square feet of renovated space, including family, workforce housing, commercial officecommunity facilities, as well as new green space and public access to the Merrimack River. The Union Crossing Projecrepresents the first time that the “people of Lawrence” will become Mill Owners, led by Lawrence Community Works andits 4,000 members. Phase One of Union Crossing began in May 2010 and upon completion will provide 60 units ohealthy, energy-efficient and affordable housing for working families and a state of the art child care center servicing 200children. At the conclusion of this project over 200 permanent jobs will be created. It is estimated that 100 construction

jobs will also be created during development. This project has received local, state and federal funding and is considereda catalyst for other green design and technology projects not only in Lawrence, but across the Commonwealth.

Lupoli Companies/Riverwalk Properties continues to grow in the City of Lawrence. In 2003, Salvatore Lupolpurchased several old, abandon and condemned mill buildings on thirty-five acres of contiguous property, considered thelargest real estate holding in the Merrimack Valley. Lupoli Companies not only moved its corporate headquarters toLawrence, but also recruited over 200 companies with over 2,000 employees in total to this renovated site. Thisrenovation also includes the opening of Salvatore’s Restaurant an upscale family style Italian restaurant which employs astaff of 86 people in Lawrence. Lupoli Companies in total employs 119 people from the City of Lawrence. During Phase of the project over $65 million has been invested, including acquisition and redevelopment of Riverwalk Properties.Phase II, which began in the winter of 2010, and Phase III will be another $80 million investment to the site, bringing thetotal well over $145 million. The success of this project has been a direct result of close partnerships with the City oLawrence and the Commonwealth of Massachusetts.



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Malden Mills/PolarTEC was purchased by College Street Management Company and is partnering with WinnDevelopment to rehab the historic Malden Mill site at 550 Broadway into a 156 unit mixed-income rental community.Seventy two of the units will be deemed affordable housing and represent a $32 million investment in the City ofLawrence. The financing consists of state and federal historic tax credits and low income housing tax credits, along withHOME funding through the City of Lawrence. Phase I of three phases of the project began in August 2010.

Mainstream Global/Yepez Properties opened its corporate headquarters in Lawrence in 2007. The company is a globadistributor of new, refurbished, and off lease computer equipment. They receive, inspect and ship globally, approximately70% overseas. The owners Juan and Luis Yepez have recently invested over $15 million in the acquisition and rehab oold mill buildings in the historic downtown area including 25 Marston Street, 215 Canal Street and 60 Island Street (BellTower site). There recent rehab which is ongoing includes the renovation of an existing parking garage, electrical repairsheating, roofing and tenant build-outs. The 60 Island Street location also includes Cambridge College satellite campusAll of the Yepez properties represent a total of 600 employees for the area. The Yepez Brothers were honored inPresident Obama’s recent State of the Union Speech for their work in Lawrence and ongoing community involvement.

Peabody Properties LLC, purchased a vacant city owned neighborhood elementary school building (Saunders School)located at 243 South Broadway in May 2009 for $500,000 to rehab and create 16 apartments, providing permanent,affordable and supportive housing for families. Construction of this site began in July 2010 and represents financing fromstate and local resources including low-income tax credits allocated by Massachusetts Department of Housing andCommunity Development. A total investment amount is estimated at $4.4 million.

Beacon Communities/Sacred Heart LLC purchased a vacant, private neighborhood elementary school building (oldSacred Heart School) in 2009 to rehab and create 44 affordable apartments. The approved financing consists of federa

and state low-income housing credits and historic tax credits. The total investment is estimated at $14.8 million andconstruction began in June 2010.

Lawrence General Hospital is a state of the art facility providing full service health care to all. The hospital juscompleted a $20 million emergency center expansion which is one of the most premiere facilities north of Boston. Thehospital is also completing a new $5 million imaging center before the end of December 2010. The hospital is a strongpartner in the City and employees 1,286 people.

Merrimack Valley Federal Credit Union (MVFCU) is one of the area’s largest financial institutions, which moved itscorporate headquarters in September 2007 to the City of Lawrence after residing in North Andover for over fifty yearsThe company provides low or no cost financial services to residents of Merrimack Valley and Lawrence, and has 66employees located in the City, and a total of 105 throughout Massachusetts and New Hampshire. The MVFCU also buila new branch location abutting its corporate headquarters on the site in 2007.

Home Health VNA Inc., which moved into the City from Haverhill, is a social services agency located in the Riverwalkfacility on Merrimack Street, with 550 employees located in Lawrence and 750 employees in Massachusetts. HomeHealth VNA Inc. provides in-home medical care and support and has four regional offices, including the Merrimack ValleyHospice House.

Elder Services, is a health and service organization for the elderly which has over 175 employees located in Lawrenceand 200 employees throughout Massachusetts.

Pentucket Medical, has been providing health care to the residents of Merrimack Valley for over forty years. With thelatest diagnostics, technology, and research they offer unparalleled acute, chronic, and wellness care to their patientsPentucket Medical moved their main offices to the City of Lawrence in May 2008 and employ 110 people.

Little Sprouts Early Education and Leadership and Literacy Foundation, an early education provider, opened in theCity of Lawrence in the summer of 2005 and currently has 61 employees. Little Sprouts Early Education and Leadershipand Literacy Foundation promotes itself as one of the largest of its kind in Massachusetts.

Tallman Eye Associates is one of the largest optometry practices in New England. It employs a staff of 92 in Lawrence,and a staff of 105 among five regional offices in Massachusetts. Tallman Eye Associates recently spent $1.2 million tobuild and expand at the Riverwalk office location.



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Significant Announcements

JSB Industries dba/ Muffin Town:Muffin Town is a Chelsea-based bakery with national sales. The company hosted a ground breaking on a $12.5 millioninvestment in the City June 29, 2010 and is planning its grand opening in January 2011. The company has retained itscurrent location and employees and is redeveloping an 80,000 square foot vacant building in Lawrence in which toexpand production. Through an EDIP Investment Tax Credit award of almost $115,000 and a Tax Increment FinancingAgreement from the City of Lawrence, an additional 220 jobs will be created in Lawrence over a five year period tosupport the $12.5 million investment in the city of Lawrence and will generate $50,000 in taxes annually.

GB NewEngland2, LLC/ CVS Pharmacy DevelopmentLocated at 266 Broadway/Rt. 28 in the heart of downtown Lawrence. The developer has purchased several lots andcombined them to create a 47,000 square foot parcel to develop a CVS Pharmacy and Marketplace. The proposalincludes a drive-thru pharmacy and is expected to create 25-30 new jobs for the City. The total value of the site isapproximately $6 million dollars and will generate more than $100,000.00 a year in new taxes. Construction set to beginin October 2010.

RiverBankOfficially headquartered in North Andover, MA opened its newest branch location in Lawrence,MA in January 2010 onSouth Broadway/Rt. 28. This new branch features onsite-parking, self-service coin machine, drive-up teller and ATMservices, and Saturday hours. This is a significant multi-million dollar investment in the City of Lawrence.

Public Sector Developments:

The City of Lawrence is a Community Development Block Grant Entitlement Community and receives an annuaallocation of approximately $2.8 million from the U.S. Department of Housing and Urban Development (HUD) toimplement community improvements and economic development projects. The City’s annual CDBG allocation is $1.7million and HOME allocation is $1.1 million.

Based upon the compelling data presented within the Community Profile, the City’s single greatest communitydevelopment need is to create economic opportunity for its residents. Housing policies and programs alone cannot solvethe problems facing Lawrence and its residents, thus a comprehensive economic and human-resource developmentstrategy is essential. Economic empowerment is therefore a requirement for Lawrence to achieve its overarching goal obeing a healthy, vibrant community where it makes economic sense for people to invest their time, money and energy.

The City of Lawrence has established four core objectives toward increasing economic empowerment. The goals are tocreate and retain jobs, support neighborhood based economic development, create competitive workforce throughincreased educational attainment and improving the physical environment and streetscape appearance of the city.

The City of Lawrence is committed to funding community economic development services in the following categories:

Business Assistance in the form of improvements to the physical conditions, the provision of technical assistance tobusinesses located or seeking to expand in Lawrence, and support for projects that will lead to the creation of jobs for thelow- and moderate-income residents. The City will continue to seek lending partners to reinitiate its small businessrevolving loan fund, which provides working capital and funding for leasehold improvements. Exterior buildingimprovement helps both the businesses and the neighborhoods. The City will continue its Business Facade ImprovementProgram over the next five years to address the need for exterior building improvements to improve “curb appeal” and

create jobs by expanding business.

Targeted Neighborhood Commercial Area Assistance to revitalize neighborhood commercial corridors and shoppingareas and reestablish their historic roles as central places to shop, work and meet neighbors. The City may designatespecific commercial corridors for targeted assistance, and:

focus planning and data analysis on strengthening corridors; align and leverage resources;

make neighborhood commercial corridors more welcoming places; and develop systems to attract and retain businesses along corridors



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Before investment can take root and growth can occur, certain impediments must be removed. In the case ofneighborhood development, one of the greatest impediments is blight in all its forms—vacant buildings, trash-strewnvacant lots, abandoned automobiles, litter, graffiti and unkempt streetscapes. Attractive amenities such as parks,streetscapes, libraries, and recreation centers make neighborhoods more desirable. To address these impediments andtransform neighborhoods, the City will coordinate the following capital investments:

Public Facilities and Improvements to community facilities, including senior centers, providing “community space” andfurther improving the image of the community. Furthermore, senior facilities, community facilities, and recreational centersprovide direct service and service referral for diverse needs and provide necessary support to vulnerable households

Often, community organizations just do not have the capital or fundraising resources to maintain these facilities thaprovide a source of community pride and activities. In all facility improvements, the City will insure that handicappedaccessibility is a key component.

Streetscape Improvements/Beautification to public streets including putting in new curbs, sidewalks, lighting and treesso these areas will be appealing places for residents to shop and work. The selection of streets/sidewalks will beundertaken in a systematic process that will give priority to the following:

The Neighborhood Revitalization Strategy Areas; Streets surrounding public facilities; and

Streets/sidewalks adjacent to other public investments, including targeted business assistanceand affordable housing production.

Open Space/Parks Improvements are extremely important given that Lawrence is one of the youngest communities in

the Commonwealth; the demand in the City for parks, open space and recreational amenities is high. The challenges ofmany vacant properties, abandoned alleyways, Brownfield sites, and underutilized riverfront areas are opportunities forcreative and innovative open space development. CDBG funds will be utilized to support a number of activities that:

Increase pedestrian and biking activity by encouraging walking and biking for exercise andenhancing safety and connectivity between schools, neighborhoods, and parks;

Reclaim vacant lots and other abandoned and underutilized land; and

Increase access to waterfront resources (i.e. rivers, canals) through enhancement and protection

The improvement of parks and open space has been identified as a high priority in the Park and Open Space Plan for theCity of Lawrence. The Plan identified the critical need for passive park space and active recreation areas to providerecreational and visual relief from the dense building configuration throughout the City. The Plan indicated that Lawrencehas only 3.7 acres of parkland for every 1,000 residents, compared to a place like the City of Boston with 9.3 acres per

1,000 residents.

The Community Development Program will implement key elements of the Park and Open Space Plan over the next fiveyears. The City will partner with Groundwork Lawrence (Groundwork). Groundwork receives some financial support fromthe U.S. Park Service and raises resources from local fundraising and foundations. In all facility and infrastructureimprovements, handicapped accessibility will be a component. This would include curb cuts and ramps for improvedupdated park access. Handicapped signage for vehicular access and parking will also be prioritized.

Land and Building Reuse is an important responsibility of the City. In older, densely populated neighborhoodsdeteriorated buildings and vacant lots can be both a blighting influence and an opportunity. The City will continue toevaluate vacant building reuse with a priority for homeownership opportunity development where appropriate. For largervacant properties, commercial reuse with a residential component - potentially as live/work space - will be considered.

The City intends to continue its conversion of empty lots. Building lots will be evaluated for housing reuses whileundersized lots will be evaluated as potential side-yards for abutters or as community gardens under the PARC grantThe City will use CDBG resources to support activities related to planning and improvement of community garden in low-and moderate-income neighborhoods.

A key component of the Economic Development Strategy is the creation of jobs and job training for low-income residents.The City will make affirmative action and employment and training for neighborhood residents an integral part of itsoperations. Federal Section 3 guidelines require that 30% of all construction and construction-related new hires beresidents of the local area where the project occurs. The proposed capital investments will provide opportunities to meetor exceed the federal mandate. In support of this objective, the City is compiling a data base of local businesses tofacilitate local job opportunities.



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In addition to community and economic development initiatives, progress is also being made in the area of publicinvestment. The following are some of the public investments in the City.

Lawrence Gateway Project is a rather complex multi-million public/private partnership with the City of LawrenceMassachusetts Highway Department, U.S. Environmental Protection Agency, Massachusetts Department oEnvironmental Protection, Army Corps of Engineers, Massachusetts Attorney General’s Office, Mass Development and ahost of other federal, state and local agencies, as well as private mill owners in the historic downtown area. This multimillion dollar endeavor will result in the creation of a new “gateway” to the industrial area and commercial heart ofLawrence from Interstate 495, generating 960 surface parking spaces needed for mill expansion and development in thearea. The site will also create new passive recreation areas for the downtown area. This site has been underutilized due

to serious environmental issue for decades. The anticipated project completion is July 2010.

Northern Essex Community College is currently expanding from its existing Franklin Street location in downtownLawrence. Through the acquisition of a former city-owned parking garage/in-town mall site, the College, working inpartnership with the Commonwealth of Massachusetts, Department of Capital Asset Management is set to beginconstruction in the Fall 2010 on what will be a state of the art technology and nursing facility in the downtown areaboasting a café and Barnes and Nobles bookstore. The college currently employees over 300 people and with thisexpansion will continue to grow.

Designation as “Renewal Community” in 2003 by the Federal Government. Companies continue to benefit inemployment tax credits and community revitalization deductions by utilizing this designation. The City of Lawrence seesthis designation as a significant tool to attracting new business to the community. Since taking office Mayor Lantigua hasaggressively recruited new companies to Lawrence through these incentives.

Lawrence Airport is utilized by over 80 local and national firms use for business travel. The Airport's many corporatecustomers represent huge amounts of economic activity in the Greater Lawrence area. International companiesincluding Aetna, Corning, Forbes Magazine, Inc. and Laidlaw are using the airport to make their investments in theregional economy.

Groundwork Lawrence, Inc. is a non-profit organization that partners with City of Lawrence making change happensince 2001. Through its environmental and open space improvements, community food programs, youth education andemployment initiatives, and community programming and events, Groundwork Lawrence creates the building blocks of ahealthy community, and empowers Lawrence residents to improve their quality of life. Groundwork Lawrence achievesresults by engaging the whole community – residents, non-profit organizations, city government and businesses – in theplanning and realization of its projects. With this collaborative approach, Groundwork ensures that all stakeholders aremutually invested in its outcomes, the key to stable neighborhoods and sustainable change. In partnership with the Cityof Lawrence, Groundwork Lawrence has provided design and construction management services for over $6 million of

capital improvements to parks and public spaces, with over $1 million in new projects in the pipeline. To date,Groundwork has helped to improve more than 375 acres of public parkland with new signage, play equipment, amenitiesand plantings, representing approximately 75 percent of the City’s total inventory of green space. Groundwork has alsobuilt five parks, created four new community gardens, cleaned up and improved more than five miles of wooded trailsand planted nearly 520 trees, 492 shrubs, and 3,250 bulbs and perennials in public spaces throughout the city. The Cityof Lawrence continues to partner with Groundwork Lawrence for the improvement of its public parks.

Lawrence Community Works (LCW) is a partner in the revitalization of the City of Lawrence since its rebirth in 1999. Agrowing network of almost 4,000 members committed to Lawrence’s revitalization, many of whom volunteer in everythingfrom community outreach to youth development. Some of their most recent accomplishments as a result of strongpartnership with the City of Lawrence include completion of the following:

The Summer Street Project - an affordable home-ownership and playground development projectthat has substantially revitalized an entire one-block section of CommunityWorks’ primary targetarea, the North Common neighborhood.

Our House Campus – The Center for Design and Technology and the Hennigan Center, a $4million community educational and economic development campus, which now houses all ofLawrence Community Works’ programs and administrative offices.

Reviviendo Family Housing Project - a 17-unit scattered site, affordable rental project that isrenovating four key historic and abandoned houses in the North Common.

Union and Mechanic Homeownership Project - This initiative created 5 new homeownershipunits for first time Lawrence homeowners.



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Reviviendo Playground and the Scarito Park - together almost 3 acres of new parks, playgroundsand community gardens built with partner Groundwork Lawrence on formerly abandoned andcontaminated land in the North Common Neighborhood.

Scarito Homes - 10 new homeownership units for first time homebuyers. Lawrence CommunityWorks continues to partner with the City of Lawrence on an ongoing basis.

Major projects initiated since 2006 include:

Merrimack Federal Credit Union, located at 500 Merrimack Street - $600,000 investment Central Catholic High School additions and renovations - $4.8 million investment

Washington Mills condominium conversion - $40 million investment Wood Mill/Monarch on the Merrimack condominium/retail conversion - $2.9 million invested to date

(project on hold) Former St. Lawrence O’Toole Grammar School rehabilitation for Lawrence Community

Works - $3 million investment

Bell Tower Mills 60 Island Street to house Cambridge College - $500,000 investment Additions to the emergency/triage facility at Lawrence General Hospital - $25 million investment New facility to house the Greater Lawrence Boys Club - $8.5 million investment (employs 19 full-time and

20 part-time employees between both Lawrence facilities)

Building Permits

The following table sets forth the number of building permits issued as well as the estimated dollar value of new

construction and alterations for the last five calendar years. The estimated dollar values shown are builders' estimateswhich are generally considered to be conservative. The number of permits granted and estimated valuations are shownfor both private construction as well as for City projects. The issuance of a permit does not necessarily result inconstruction.

Building Permits

Calendar Additions/Alterations Totals

Year No. Value No. Value No. Value

2010 (1) 18 2,680,000$ 816 13,192,806$ 834 15,872,806$2009 12 14,321,000 788 30,595,512 800 44,916,512 2008 21 9,031,000 851 17,905,433 872 26,936,433 2007 26 31,533,000 802 341,056,000 828 372,589,000 2006 32 41,629,000 306 151,790,000 338 193,419,000 2005 45 12,633,000 893 41,460,472 938 54,093,472

New Construction

__________________ (1) Through September 30, 2010.

Transportation and Utilities

The City is served by Interstate Routes 495 and 93 and State Route 28, which provide convenient access to all points inMassachusetts and northern New England. Commuter bus service is provided to Boston, and the Boston and MaineRailroad provides commuter and freight service. Bus service within the City and throughout the Greater Lawrence area isprovided by the Merrimack Valley Regional Transit Authority (MVRTA).

Lawrence also has a 500-acre municipal airport which is located in the Town of North Andover and is self-supporting.This airport has two runways: one is 3,900 feet in length and the other is 5,000 feet in length. Established in 1934, theairport is located minutes from both the Ward Hill and Lawrence Industrial Parks, providing air transport services to the

region’s employers for over 70 years. The airport also has the potential to facilitate development of its own, on-siteindustrial park. Major companies in the tele-communications and defense industries consider the airport an integral parof their business operations. The airfield can accommodate a full range of aircraft, from single and multi-engine planes tosmaller jets and helicopters. The airport currently has over 200 based aircraft.

Gas and electric services are provided by established private utilities.



19

Population, Income and Wealth Levels

Lawrence Massachusetts United StatesMedian Age:

20001990

29.528.7

36.533.6

35.332.9

1980 29.6 31.2 30.01970 32.3 29.0 28.1

Median Family Income:

2000 $31,809 $61,664 $50,0461990 26,398 44,367 35,2251980 15,457 21,166 19,9081970 9,507 10,835 9,867

Per Capita Income:2000 $13,360 $25,952 $21,5871990 9,686 17,224 14,4201980 5,485 7,459 7,3131970 2,930 3,425 3,139

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

As previously mentioned, Lawrence occupies a land area of approximately 6.75 square miles. On the basis of the 2000U.S. Bureau of the Census, the City has a population density of approximately 10,673 people per square mile.

Population Trends

1960 1970 1980 1990 2000

70,933 66,915 63,175 70,207 72,043 __________________ SOURCE: U.S. Bureau of the Census.



20

PROPERTY TAXATION

Tax Levy Computation

The principal revenue source of the City is the tax on real and personal property. The amount to be levied in each year isthe amount appropriated or required by law to be raised for municipal expenditures less estimated receipts from othesources and less appropriations voted from funds on hand. The total amount levied is subject to certain limits prescribedby law; for a description of those limits, see "Tax Limitations" below. The estimated receipts for a fiscal year from sourcesother than the property tax may not exceed the actual receipts during the preceding fiscal year from the same sources

unless approved by the State Commissioner of Revenue. Excepting special funds the use of which is otherwise providedfor by law, the deduction for appropriations voted from funds on hand for a fiscal year cannot exceed the "free cash" as othe beginning of the prior fiscal year as certified by the State Director of Accounts plus up to nine months' collections andreceipts on account of earlier years' taxes after that date. Subject to certain adjustments, free cash is surplus revenueless uncollected overdue property taxes from earlier years. Although an allowance is made in the tax levy for abatements(see "Overlay" below) no reserve is generally provided for uncollectible real property taxes. Since some of the levy isinevitably not collected, this creates a cash deficiency which may or may not be offset by other items (See "Taxation toMeet Deficits").

The table below illustrates the manner in which the tax levy was determined for the following fiscal years. The tax rateand levy for the current fiscal year are expected to be set in December, 2010, and property tax bills mailed on time beforeyear end.

Tax Levy Computation

EstimatedFiscal 2007 Fiscal 2008 Fiscal 2009 Fiscal 2010 Fiscal 2011

Total Appropriations(1)(2) $212,166,466 $218,349,193 $245,734,968 $241,727,266 $226,522,228Additions:

State Assessments(2) 15,386,703 16,412,368 436,564 2,105,929 17,371,113Overlay for Abatements - 439,071 5,021 486,921 490,357

Other Additions(3)(4) 427,490 3,902,105 2,738,628 15,216,114 183,323Gross Amount to be Raised 227,980,659 239,102,737 248,915,181 259,536,230 244,567,021

Deductions:Estimated Receipts from State(5) 157,903,988 163,737,960 171,394,868 160,564,537 161,539,353

Local Estimated Receipts(6) 30,061,196 27,365,547 31,198,830 26,804,955 28,246,249Other Available Funds 1,000,000 5,125,079 1,308,609 828,594 1,776,618 Proceeds of Deficit Financing Notes(3) - - - 24,000,000 3,362,450

Total Receipts 188,965,184 196,228,586 203,902,307 212,198,086 194,924,670Net Amount to be Raised $39,015,475 $42,874,151 $45,012,874 $47,338,144 $49,642,351

__________________

(1) Additional appropriations from taxation may be voted either prior or subsequent to the adoption of the annual budget.(2) In fiscal years 2004 through 2007, charter and choice school charges were included as an assessment on the cherry sheet, thus

shifting the cost from the appropriations for the City budget to state assessments.(3) For fiscal 2010, see “History of More Recent Financial Problems,” “Special Legislation Pertaining to City’s Fiscal Stability,” “Plan

of Correction,” and “Deficit Financing” herein.

(4) Includes court judgments, overlay deficits, cherry sheet offsets, snow and ice deficits, the reserve for fiscal stability and otheitems not requiring appropriation, and for fiscal 2010, see footnote (3) above.

(5) Estimated by the State Department of Revenue and required by law to be used in setting of the tax rate. Actual State aidpayments may vary from said estimates, and the State may withhold payments pending receipt of State and Countyassessments.



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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 otaxable property: (1) residential real property, (2) open space land, and (3) all other (commercial, industrial and personaproperty). Within limits, cities and towns are given the option of determining the share of the annual levy to be borne by eachof the three categories. The share required to be borne by residential real property is at least 50 per cent of its share of thetotal taxable valuation; the effective rate for open space must be at least 75 per cent of the effective rate for residential reaproperty; and the share of commercial, industrial and personal property must not exceed 175 percent of their share of the totavaluation. A city or town may also exempt up to 20 percent of the valuation of residential real property (where used as thetaxpayer’s principal residence) and up to 10 percent of the valuation of commercial real property (where occupied by certainsmall businesses). Property may not be classified in a city or town until the State Commissioner of Revenue certifies that aproperty in the city or town has been assessed at its fair cash value. Such certification must take place every three years, opursuant 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 thesepurposes) and recreational land (assessed on the basis of its use at a maximum of 25 percent of its fair cash value) areall to be taxed at the rate applicable to commercial property. Land classified as forest land is valued for this purpose afive percent of fair cash value but not less than ten dollars per acre.

The City completed revaluations of all real and personal property for fiscal 2006 and fiscal 2009. The next revaluation isplanned for fiscal 2012.

Assessed Valuation

The table below sets forth the trend in the City's assessed valuations for all real and personal property, as well as thetrend in the City's equalized valuations for the following years. Local assessed valuations are determined annually as oJanuary 1 and used for the fiscal year beginning on the next July 1.

FiscalYear

Real PropertyValuation

Personal PropertyValuation

Total AssessedValuation

State EqualizedValuation (1)

2011 (Est.) 2,708,113,100$ 149,199,370$ 2,857,312,470$ 3,185,035,900$ (proposed)2010 2,835,958,600 143,970,790 2,979,929,390 4,168,300,000

2009 (2) 3,355,925,000 126,229,660 3,482,154,660 4,168,300,000 2008 3,536,474,200 116,703,220 3,653,177,420 3,829,403,900

2007 3,484,594,900 96,765,040 3,581,359,940 3,829,403,900 __________________ (1) The 2006 equalized valuation is used for 2007 and 2008, the 2008 equalized valuation is used for 2009 and 2010

and the proposed 2010 equalized valuation is used for 2011.(2) Revaluation year.

Classification of Property

The following table sets forth the breakdown of the City's assessed real estate and personal property valuations for fiscayear 2009, 2010 and 2011 and the corresponding percentage per category.

2009 (1) 2010 2011 (2)

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

Residential $2,831,666,497 81.3 % $2,331,181,389 78.2 % $2,193,228,846 76.8 %Commercial 324,058,403 9.3 309,899,311 10.4 311,487,554 10.9

Industrial 200,200,100 5.7 194,877,900 6.5 203,376,700 7.1

Personal 126,229,660 3.6 143,970,790 4.8 149,199,370 5.2

Total Real Estate $3,482,154,660 100.0 % $2,979,929,390 100.0 % $2,857,292,470 100.0 %

__________________

(1) Revaluation year.(2) Estimated.



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Tax Rates

The following table sets forth the trend in the City's tax rates: Tax Rate Per $1,000 Valuation

Fiscal Year Residential Commercial/Industrial2011 (Est.) $ 13.43 $ 30.402010 12.57 27.802009 10.70 22.622008 10.01 20.542007 9.23 19.942006 8.86 20.31

Largest Taxpayers

The following table sets forth the City's largest taxpayers during fiscal 2011.

Total Assesed % ofNature of Valuation for Total

Name Business Fiscal 2011 Valuation

Verizon New England Utility 34,683,900$ 1.21 %

Mass Electric Utility 28,865,000 1.01

Bay State Gas Utility 28,527,850 1.00 Jefferson at Den Rock Housing 24,645,820 0.86 Lincoln Andover LLC Housing 19,393,700 0.68

Hampton on Beacon Housing 18,103,900 0.63 Chi Energy Inc. Hydro Electric 13,743,140 0.48 New Balance Athletic Shoe Shoe Manufacturer 11,886,400 0.42

Lawrence/Methuen Properties Housing 11,334,100 0.40 Princeton Andover Housing 10,039,800 0.35

Jackson Street Housing Housing 9,405,300 0.33 HJ Brooks LLC Comm/Indust. 9,146,200 0.32 TOTAL $219,775,110 7.69 %

__________________

SOURCE: City Assessor.

State Equalized Valuation

In order to determine appropriate relative values for the purposes of certain distributions to, and assessments upon cities andtowns, the Commissioner of Revenue biennially makes a determination of the fair cash value of the taxable property in eachmunicipality as of January 1 of even-numbered years. This is known as the "equalized value". The following table sets forth theequalized valuations of the City over the last decade and the percentage increase or (decrease).

State EqualizedJanuary 1, Valuation

2010 (proposed) 3,185,035,900$2008 4,168,300,000 2006 3,750,838,800 2004 2,879,962,100 2002 2,022,345,300

__________________ SOURCE: Massachusetts Department of Revenue Bureau of Local Assessment. Revised 2010 Equalization Study, July

20, 2010.



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Abatements and Overlay

The City 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 resultant "overlay deficitis required to be added to the next tax levy. An abatement granted after a tax payment has been made is accounted foas a refund on the books of the City. Abatements are granted where exempt real or personal property has beenassessed or where taxable real or personal property has been overvalued or disproportionately valued. The assessorsmay also abate uncollectible personal property taxes. They may abate real and personal property taxes on broadgrounds (including inability to pay) with the approval of the State Commissioner of Revenue.

The following table sets forth the amount of the overlay reserve for each of the last five fiscal years and actual abatementsand refunds granted against each levy as of June 30, 2010.

Over lay Reserve Cumulative Abatements & ExemptionsFiscal Net Tax Dollar As a % of Granted Against Each Levy ThroughYear Levy(1) Amount Net Levy

2010 46,851,223$ 486,921$ 1.04 % 286,330$2009 44,507,853 505,021 1.13 210,087 2008 42,435,080 439,071 1.03 139,608 2007 38,544,947 470,528 1.22 191,922 2006 35,326,057 857,755 2.43 234,134

June 30, 2010

__________________ (1) Tax levy prior to addition of overlay reserve.

Tax Collections

Property tax bills are payable quarterly on August 1, November 1, February 1, and May 1 of each fiscal year. Interestaccrues on delinquent taxes at the rate of 14 percent per annum. Real property (land and buildings) is subject to a lienfor the taxes assessed upon it, subject to any paramount federal lien and subject to bankruptcy and insolvency laws. (Inaddition, real property is subject to a lien for certain unpaid municipal charges or fees). If the property has beentransferred, an unenforced lien expires on the fourth December 31 after the end of the fiscal year to which the tax relatesIf the property has not been transferred by the fourth December 31, an unenforced lien expires upon a later transfer of theproperty. Provision is made, however, for continuation of the lien where it could not be enforced because of a lega

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 extinguishedby sale or taking of the property as described below.

The following table compares the City’s net tax collections with its net tax levies (gross tax levy minus the overlay reservefor abatements) for the current and last four fiscal years.

Collections During Cumulative Collections as of

Fiscal Year Payable(2) October 6, 2010 (2)Fiscal Gross Tax Net Dollar % of Dollar % ofYear Levy Overlay Tax Levy(1) Amount Net Levy Amount Net Levy

2011 (Est.) 49,642,351$ 490,357$ 49,151,994$ N.A. N.A. 11,034,552$ 22.45 %2010 47,338,144 486,921 46,851,223 43,331,901$ 92.49 % 43,331,901 92.49

2009 45,012,874 505,021 44,507,853 42,206,396 94.83 43,802,089 98.41 2008 (3) 42,874,151 439,071 42,435,080 39,312,949 92.64 41,884,452 98.70 2007 39,015,475 470,528 38,544,947 35,887,874 93.11 38,238,361 99.20

__________________

(1) Net after deduction of overlay for abatements.(2) Actual dollar collections, net of refunds. Does not include abatements or other non-cash credits.(3) Revaluation year.



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Tax Titles and Possessions

Massachusetts law permits a municipality either to sell by public sale (at which the municipality may become thepurchaser) or to take real property for non-payment of taxes. In either case the property owner can redeem the propertyby paying the unpaid taxes, with interest and other charges, but if the right of redemption is not exercised within sixmonths (which may be extended an additional year in the case of certain installment payments) it can be foreclosed bypetition to the Land Court.

Upon such foreclosure, a tax title purchased or taken by the municipality becomes a "tax possession" and may be heldand disposed of in the same manner as other land held for municipal purposes. Uncollectible 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 thetax is written off in full by reserving the amount of tax and charging surplus.

Fiscal Tax Titles & Tax TitleYear Possessions Redemptions

201020092008200720062005

$10,341,55212,353,37512,323,5839,259,590

12,730,66210,348,375

$163,741220,237104,842130,409529,896540,839

Sale of Tax Receivables

Legislation enacted in 1996 authorizes public sales by cities and towns of delinquent property tax receivables, individuallyor in bulk. The City contracted with Plymouth Park Services in 2008 for the sale of its tax liens and delinquents, and isworking diligently to bring its accounts up to date. To date, the City has received $4,181,194 from the sale of its 2003 to2009 receivables. The City is also currently liened through 2007 and is in the process of liening 2008 through 2010receivables by January 2011.

Municipal Tax Amnesty

Pursuant to recent legislation, a municipality may establish a municipal tax amnesty program expiring not later than June 302011. Under such program, the municipality may waive, during the amnesty period, certain penalties, fees, charges and

accrued interest, provided the taxpayer pays the amount of the tax to which such penalties, fees, charges, and accrued interestrelates.

Taxation to Meet Deficits

As noted elsewhere (see "Abatements and Overlay" above) overlay deficits, i.e., tax abatements in excess of the overlayincluded in the tax levy to cover abatements, are required to be added to the next tax levy. It is generally understood tharevenue deficits, i.e., those resulting from non-property tax revenues being less than anticipated, are also required to beadded to the next tax levy (at least to the extent not covered by surplus revenue). Amounts lawfully expended since theprior tax levy and not included therein are also required to be included in the annual tax levy. The circumstances undewhich this can arise are limited since municipal departments are generally prohibited from incurring liabilities in excess ofappropriations except for major disasters, mandated items, contracts in aid of housing and renewal projects and otherlong-term contracts. In addition, utilities must be paid at established rates and certain established salaries, e.g., civi

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 causessuch as "free cash" deficits arising from a failure to collect taxes. This is not generally understood, however, and it hasnot been the practice to levy taxes to cover free cash deficits. Except to the extent that such deficits have been reducedor eliminated by subsequent collections of uncollected taxes (including sales of tax titles and tax possessions), lapsedappropriations, non-property tax revenues in excess of estimates, other miscellaneous items or funding loans authorizedby special act, they remain in existence. See "City FINANCES – Deficit Financing", herein.



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Property Tax Limitation

Chapter 59, Section 21C of the General Laws, also known has Proposition 2 ½, imposes two separate limits on theannual tax levy of a city or town.

The primary limitation is that the tax levy cannot exceed 2 1/2 percent of the full and fair cash value. If a city or townexceeds the primary limitation, it must reduce its tax levy by at least 15 percent annually until it is in compliance, providedthat the reduction can be reduced in any year to not less than 7 1/2 percent by majority vote of the voters, or to less than7 1/2 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 maximumlevy limit for the preceding fiscal year as determined by the State Commissioner of Revenue by more than 2 1/2 percent,subject to exceptions for property added to the tax rolls or property which has had an increase, other than as part of ageneral revaluation, in its assessed valuation over the prior year's valuation. This "growth" limit on the tax levy may beexceeded in any year by a majority vote of the voters, but an increase in the secondary or growth limit under thisprocedure does not permit a tax levy in excess of the primary limitation, since the two limitations apply independently. Inaddition, if the voters vote to approve taxes in excess of the “growth” limit for the purpose of funding a stabilization fundsuch increased amount may only be taken into account for purposes of calculating the maximum levy limit in eachsubsequent year if the board of selectmen of a town or the city council of the city votes by a two-thirds vote to appropriatesuch 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, nonrecurring events which occurred during the base year."

Proposition 2 ½ further provides that the voters may exclude from the taxes subject to the tax limits and from thecalculation of the maximum tax levy (a) the amount required to pay debt service on bonds and notes issued beforeNovember 4, 1980, if the exclusion is approved by a majority vote of the voters, and (b) the amount required to pay debservice on any specific subsequent issue for which similar approval is obtained. Even with voter approval, the holders othe obligations for which unlimited taxes may be assessed do not have a statutory priority or security interest in theportion of the tax levy attributable to such obligations. It should be noted that Massachusetts General Laws Chapter 44Section 20 requires that the taxes excluded from the levy limit to pay debt service on any such bonds and notes be calculatedbased on the true interest cost of the issue. Accordingly, the Department of Revenue limits the amount of taxes which may belevied in each year to pay debt service on any such bonds and notes to the amount of such debt service, less a pro rata portionof 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 2 1/2 limits the amount required to pay specified capital outlay expendituresor for the city or town’s apportioned share for certain capital outlay expenditures by a regional governmental unit. Inaddition, the city council of a city, with the approval of the mayor if required, or the board of selectmen or the town counciof a town may vote to exclude from the Proposition 2 1/2 limits taxes raised in lieu of sewer or water charges to pay debtservice on bonds or notes issued by the municipality (or by an independent authority, commission or district) for water orsewer purposes, provided that the municipality's sewer or water charges are reduced accordingly.

In addition, Proposition 2 ½ limits the annual increase in the total assessment on cities and towns by any county, districtauthority, the Commonwealth or any other governmental entity (except regional school districts, the MWRA and certaindistricts for which special legislation provides otherwise) to the sum of (a) 2 1/2 percent of the prior year's assessmentsand (b) "any increases in costs, charges or fees for services customarily provided locally or for services subscribed to atlocal 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 thelocal 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). UndeProposition 2 ½ any state law to take effect on or after January 1, 1981 imposing a direct service or cost obligation on acity or town will become effective only if accepted or voluntarily funded by the city or town, or if state funding is providedSimilarly, state rules or regulations imposing additional costs on a city or town or laws granting or increasing local taxexemptions are to take effect only if adequate state appropriations are provided. These statutory provisions do not applyto costs resulting from judicial decisions.



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The table below sets forth the City's tax levies and levy limits under Proposition 2 1/2 for the following five fiscal years.

Current Estimate for

2011 2010 2009 2008 2007

Primary Levy Limit (2) 71,432,812$ 74,498,235$ 87,053,867$ 91,329,436$ 89,533,999$

Prior Fiscal Year Levy Limit 47,370,629 45,028,814 42,889,982 40,826,728 39,238,633

2.5% Levy Growth 1,184,266 1,125,720 1,072,250 1,020,668 980,966

New Growth (3) 1,097,493 1,216,095 1,066,582 1,042,586 607,129

Overrides - - - - -

Growth Levy Limit 49,652,388 47,370,629 45,028,814 42,889,982 40,826,728 Debt Exclusions - - - - -

Capital Expenditure Exclusions - - - - -

Other Adjustments - - - - -

Tax Levy Limit 49,652,388 47,370,629 45,028,814 42,889,982 40,826,728

Tax Levy 49,642,351 47,338,144 45,012,874 42,874,151 39,015,475

Unused Levy Capacity (4) 10,037 32,485 15,940 15,831 1,811,253

Unused Primary Levy Capacity (5) 21,780,424$ 27,127,606$ 42,025,053$ 48,439,454$ 48,707,271$

_______________

(1) Source: Massachusetts Department of Revenue.

(2) 2.5% of assessed valuation.

(3) Allowed increase for new valuations (or required reduction) - certified by the Department of Revenue.

(4) Tax Levy Limit less Tax Levy.

(5) Primary Levy Limit less Growth Levy Limit.

Pledged Taxes

Taxes on the increased value of certain property in designated development districts may be pledged for the payment ofcosts of economic development projects within such districts and may therefore be unavailable for other municipapurposes. (See “Tax Increment Financing for Development Districts” below.)

Community Preservation Act

The Massachusetts Community Preservation Act (the “CPA”), permits cities and towns that accept its provisions to levy asurcharge on its real property tax levy and to receive state matching funds for the acquisition, creation, preservation,rehabilitation and restoration of open space, historic resources and affordable housing. The provisions of the CPA musbe 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% of the real property tax levy, and it may accept one or moreexemptions to the surcharge under the CPA, including an exemption for low-income individuals and families and for lowand moderate-income senior citizens, an exemption for $100,000 of the value of each taxable parcel of residential reaproperty, and an exemption for commercial and industrial properties in cities and towns with classified tax rates. Thesurcharge is not counted in the total taxes assessed for the purpose of determining the permitted levy amount undeProposition 2½ (see “Tax Limitations” under “PROPERTY TAX” above). A city or town may revoke its acceptance of theprovisions of the CPA at any time after 5 years from the date of such acceptance and may change the amount of thesurcharge or the exemptions to the surcharge at any time, provided that any such revocation or change must be approvedpursuant 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 on the real property tax levy. The state matching funds are raised from certain recording and filingfees of the registers of deeds. Those amounts are deposited into a state trust fund and are distributed to cities and townsthat have accepted the provisions of the CPA, which distributions are not subject to annual appropriation by the statelegislature. The amount distributed to each city and town is based on a statutory formula which requires that 80% of theamount in the state trust fund be used to match an equal percentage of the amount raised locally by each city and townand that the remaining 20% of the amount in the fund be distributed only to those cities and towns that levy the maximum3% surcharge based on a formula which takes into account equalized property valuation and population, resulting inlarger distributions to those communities with low valuations and small populations. The total state distribution made toany city or town may not, however, exceed 100% of the amount raised locally by the surcharge on the real property taxlevy.



27

The amounts raised by the surcharge on real property taxes and received in state matching funds are required to bedeposited in a dedicated community preservation fund. Each city or town that accepts the provisions of the CPA isrequired to establish a community preservation committee to study the community preservation needs of the communityand to make recommendations to the legislative body of the city or town regarding the community preservation projectsthat should be funded from the community preservation fund. Upon the recommendations of the committee, thelegislative body of the city or town may appropriate amounts from the fund for permitted community preservation purposesor may reserve amounts for spending in future fiscal years, provided that at least 10% of the total annual revenues to thefund must be spent or set aside for open space purposes, 10% for historic resource purposes and 10% for affordablehousing purposes.

The CPA authorizes cities and towns that accept its provisions to issue bonds and notes in anticipation of the receipt ofsurcharge revenues to finance community preservation projects approved under the provisions of the CPA. Bonds andnotes issued under the CPA are general obligations of the city or town and are payable from amounts on deposit in thecommunity preservation fund. In the event that a city or town revokes its acceptance of the provisions of the CPA, thesurcharge 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 City has not adopted the CPA.



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CITY FINANCESBudget and Appropriation Process

The budget process begins with the Mayor's submission of a proposed budget for the ensuing fiscal year to the CityCouncil within 170 days after the annual organization of the city government (which is ordinarily in early January). TheCouncil may make appropriations for the recommended purposes and may reduce or reject any item. Without arecommendation of the Mayor, the Council may not make an appropriation for a purpose not included in the proposedbudget except by a two thirds vote in case of the failure of the Mayor to recommend an appropriation for such a purposewithin 7 days after a request from the Council. The Council may not increase an item without the recommendation of theMayor except as provided by legislation, subject to local acceptance, under which the school budget or Regional SchoolDistrict assessment can be increased upon recommendation of the School Committee or Regional District SchoolCommittee and by a two thirds vote of the Council, provided that such increase does not cause the total annual budgetto exceed the property tax limitation. If the Council fails to act on any item of the proposed budget within 45 days, thatitem takes effect.

If the Mayor does not make a timely budget submission, provision is made for preparation of a budget by the Council.Provision is also made for supplementary appropriations upon recommendation of the Mayor. Water and sewerdepartment expenditures are required to be included in the budget adopted by the City Council. Under certain legislationany city or town which accepts the legislation may provide that the appropriation for the operating costs of anydepartment may be offset, in whole or in part, by estimated receipts from fees charged for services provided by thedepartment. It is assumed that this general provision does not alter the pre-existing power of an electric or gasdepartment to appropriate its own receipts. As a result of an initiative law adopted in November 1980, SchoolCommittees are no longer autonomous with respect to school expenditures for current purposes. The school budget is

limited to the amount appropriated by the City Council, but the school committee retains full power to allocate the fundsappropriated. State legislation known as the Education Reform Act of 1993, as amended, imposes certain minimumexpenditure requirements on municipalities with respect to funding for education. The requirements are determined onthe basis of formulas affected by various measures of wealth and income, enrollments, prior levels of local spending andstate aid, and other factors. The City has funded its school operations at the level mandated by the Act.

Under certain circumstances and subject to certain limits and requirements, the City Council, upon the recommendationof the Mayor, may transfer amounts appropriated for the use of one department (except for a municipal light departmentor a school department) to another appropriation for the same department or for the use of any other department.

City department heads are generally required to submit their budget requests to the Mayor between November 1 andDecember 1. School department budgets, expenditures, and other financial matters requiring action by the City Councilshall be submitted to the Mayor for review and comment after they have been acted upon by the School Committee and

in time for the Mayor to include them in his submission to the Council.

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 includedin the budget. Revenues are not required to be set forth in the budget but estimated non-tax revenues are taken intoaccount by the assessors in fixing the tax levy.

History of Prior Financial Problems (1989 - 1997)

Due to a series of budgetary shortfalls in fiscal years 1989 through 1993 caused by a slumping economy and decreasedstate aid, special legislation was enacted to assist the City’s return to financial health. This legislation authorized the Cityto capitalize certain sums, which resulted from extraordinary costs incurred in fiscal years 1989 and 1990, over a period offive years beginning in fiscal year 1991. This special legislation also created a seven-member Fiscal Oversight Board

(the "Board") which consisted of four State officials and three City officials. Board approval was required for all Citybudgets, appropriations, loan orders and transfers. A budget allotment system was put in place to monitor and controspending. In addition, the City issued $13,000,000 in 10-year deficit financing bonds dated September 15, 1993 tocapitalize all past deficits and deferrals to improve the City's cash position and provide part of a long term relief plan to theCity's past financial problems. These bonds were retired on September 15, 2003.

In fiscal 1994, the City began a return to fiscal health. The 1993 deficit bonds eliminated all past deficits, including twoyears of teacher summer salary deferrals. In December 1997, the Fiscal Oversight Board was dissolved as the Citycontinued to demonstrate financial improvement. The Department of Revenue continued to monitor the City financesthrough its authority to approve the tax rate.



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History of More Recent Financial Problems

The City of Lawrence has experienced varying degrees of fiscal stress for an extended period of time. These challengeshave generally been manageable at the local level. In recent years, however, mismanagement of certain capital projectsand municipal finances in general created a sizeable deficit for the 2010 fiscal year. The City addressed the Fiscal Yea2010 portion of that deficit through the issuance of deficit notes. The City reduced operating costs in Fiscal Year 2010and Fiscal Year 2011 to establish recurring budget balance and to provide sufficient surplus to repay the deficit notes, andin its efforts to develop appropriate reserve fund balances and finance ongoing capital investments.

The operating portion of the Fiscal Year 2010 deficit was largely the result of overstated revenues and expenditures madein excess of sustainable levels. Details regarding the City’s work to address these issues can be found under “Plan oCorrection” below.

Special Legislation Pertaining to the City’s Fiscal Stability

In response to the City’s worsening financial position, on December 31, 2009, the Governor introduced legislation thatwould permit the City to borrow up to $35 million to address anticipated deficits in fiscal years 2010 and 2011. So long asany of this debt is outstanding, no additional debt for any purpose may be issued without the approval of the Director ofAccounts of the Massachusetts Department of Revenue. This legislation was enacted on March 31, 2010 as Chapter 58of the Acts of 2010.

The legislation requires the Commonwealth’s Secretary of Administration and Finance (the “Secretary”) to appoint a fiscaoverseer for the City. The fiscal overseer is charged with, among other things, assessing the ability of the City to manage

through its fiscal challenges. To that end, the fiscal overseer must approve the City’s annual and supplemental budgetsincluding the budget of the City’s school department. In addition, the fiscal overseer will supervise all financial servicesand activities, make recommendations with regard to sound financial policies, advise department heads of key financiadepartments, assist in budget development, review all contracts in excess of one year, monitor all expenditures from alfunds and accounts of the City, and report monthly to the Secretary and the House and Senate Committees on Ways andMeans on the City’s progress made toward reducing its capital and structural deficits. Within 120 days of his or heappointment, the overseer is required to develop a 3-year operating and a 5-year capital plan to achieve fiscal stability. Inthe event that the fiscal overseer reports to the Secretary at any time that the City is (i) unable to achieve a balancedbudget; (ii) faces a fiscal crisis that poses a danger to public health or safety, or (iii) cannot achieve fiscal stability withoutthe assistance of a finance control board, then the Secretary shall immediately abolish the overseer and appoint a financecontrol board.

If a finance control board is established, it would consist of 5 members, including three appointed by the Governor, the

Mayor and the City Council President. The pending legislation provides that until a finance control board ceases to existno appropriation, borrowing authorization, transfer, or other municipal spending authority shall take effect until approvedby the board. In addition, the board must approve all appropriations, borrowing authorizations, transfers and othemunicipal spending authorizations, in whole or in part. The board would also be empowered to hire and fire any and alemployees of the City, whether elected or unelected, and to make any other necessary changes in their terms andconditions of employment. The board would also have broad powers to reorganize, consolidate and eliminate Cityservices and to establish, increase or decrease any fees, rates or charges for any municipal services. No City employeewould be permitted to hire, fire or transfer or alter the compensation or benefits of a City employee except with the writtenapproval of the board.

Once fiscal stability is restored and any finance control board is abolished, the legislation provides for the creation of aDepartment of Administration to oversee all financial affairs of the City, with an initial chief officer appointed by the Mayor,with the approval of the Secretary, from a list of candidates provided by the Secretary. The City’s board of assessors

treasurer-collector, budget director, comptroller, director of information technology, purchasing agent, director of humanresources, and labor relations director shall all report to and be under the supervision of the Department of Administration

If a finance control board determines that its powers are not sufficient to restore fiscal stability to the City, the Secretary isto recommend to the Governor that legislation be filed for the appointment of a receiver. Any legislation would berequired to contain provisions granting the receiver the powers of the control board, and the authority to exercise anyfunction or power of any municipal officer or employee in the City. In addition, any such legislation is to provide that thereceiver be empowered to file a petition in the City’s name under Chapter 9 of the Federal Bankruptcy Code. With theappointment of a receiver, the position of Mayor in the City would be abolished and all other elected officials wouldcontinue to serve, but only in an advisory capacity to the receiver.



30

Initial Plan of Correction

The City has taken and continues to take a number of steps, in addition to the Commonwealth’s adoption of the legislationdescribed above, to restore budgetary balance. Initial steps included:

Hiring key staff to manage municipal operations, pushing reform and cost reduction throughout municipagovernment.

Examining financial and other records to determine the depth and nature of the City’s financial difficulties. Conducting select internal audits and other reviews to ensure accountability, prevent continued financial losses

and recover funding, where possible. Implement cost-saving changes to the City’s health insurance program. Though required of the Fiscal Overseer

the City completed a study of cost-savings options, determining that the Group Insurance Commission healthplans will save the City in excess of $5 million per year in the first year of implementation.

Implement mandatory Medicaid substation for retirees. Though required by the Fiscal Overseer, the City initiateda study of the potential of implementing this change to reduce costs for the City and retirees.

Collecting unpaid water/sewer bills and property taxes totaling in excess of $6 million. Developing financial policies that will stipulate procedures for estimating revenues; publish an annual revenue

budget as part of the annual operating budget to ensure transparency and reduce the likelihood of futureproblems in revenue estimation.

Establishing monthly revenue and expenditure reports for the Mayor and City Council to ensure appropriate fiscaoversight.

Establishing a performance-based budget that communicates priorities, operating results and other important

information to policymakers and the public. Full implementation will require multiple fiscal years, though changesfor Fiscal Year 2011 will improve the budget process and financial policymaking decisions. Preparing for union contract negotiations, focusing on improving contract provisions and reducing the costs for

the taxpayers. Enacting a variety of reforms to reduce costs and improve governmental performance. Working collaboratively with local and state agencies to focus efforts on continued economic development to

generate new tax revenue and improve community development in Lawrence.

Subsequent Accomplishments

Produced a balanced budget for fiscal 2011 assuming realistic revenue assumptions and shared expenditurereductions, passed by the City Council on June 25, 2010. $3,362,450 additional deficit financing is expected midDecember to cover one-time non-recurring costs of transitioning to the GIC, other transitional one time costs, and

to cover costs of infrastructure improvements expected to produce ongoing revenues beginning in fiscal 2012. Adoption of local option taxes on April 20, 2010, effective for fiscal 2011: .75% local option meals tax expected to

generate $300,000 new revenue annually, and increase of 2% to existing 4% tax on room occupancy taxexpected to generate an additional $30,000 per year.

Executive order May 19, 2010 restricting over-time pay, establishing procedures for required overtime and weeklyreporting.

Implemented tighter enforcement of solid waste pickup practices not permitted under the existing solid wastecontract and eliminating certain types of pickups, estimated to generate cost savings greater than $250,000 infiscal 2010 and 2011.

Fiscal overseer exercised authority under Section 4 of Chapter 58 of the Acts of 2010, transfering the City’shealth care subscribers to the GIC on November 1, 2010.

On June 17, 2010 the fiscal overseer initiated steps to transfer eligible municipal retirees into Medicare. Undefederal rules regarding the timeline for moving eligible municipal retirees into Medicare, the City cannot implement

the change and realize the savings until fiscal 2012. In fiscal 2011, the additional planned deficit borrowing wilcover the savings from moving retired employees to Medicare that cannot be realized under federal law until fisca2012.

In partnership with the Division of Local Services, initiated the process of consolidating certain business andfinancial operations and functions of the school department, with those of the City. This consolidation will yieldstreamlined operations, cost efficiencies and the benefit to both the city and school of professional expertise.

Exploring regionalization opportunities and initiatives. Adopted M.G.L. Chapter 43C, sections 11 and 14 relating to the establishment of a consolidated Department of

Finance, adopted by the City Council November 3, 2010. Closed fiscal 2010 with draft audit results showing significant improvement in fiscal operations. See excerpts

from the fiscal 2010 draft audit, subject to revision and change, contained herein.



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Deficit Financing

On April 23, 2010, the City issued $24 million State Qualified General Obligation Deficit Financing Bond AnticipationNotes (of which this issue will pay a like amount of such notes maturing December 1, 2010) to fund the followingpreviously accumulated and fiscal year 2010 deficits:

Items Financed with April 2010 $24 Million Deficit Financing Note Proceeds

Unbudgeted Expenses FY 2010

Debt and Interest Charges 2,181,341$Cherry Sheet Offsets - School Lunch & Library 197,172 Overlay Shortfall 500,000 (estimated)Underfunded Health Insurance Appropriation 900,000 (estimated)Accrual Buyouts per Union Contracts 740,000 (estimated)Net Underfunded Appropriations 1,144,794 (estimated)

Total FY 2010 Unbudgeted Expenses 5,663,307$

Overestimated Revenues FY 2010

Cherry Sheet Assessment Variances 2,105,929$Cherry Sheet Revenue Shortfalls 4,140,579

Overestimated MSBA Reimbursement 74,312 Overestimated Local Receipts 3,090,986 Overestimated Water Receipts (General Fund to Subsidize) 800,000

Total FY 2010 Overestimated Revenues 10,211,806$

FY 2009 Deficits

Snow and Ice 1,465,471$Overexpenditure of Operating Budget 1,028,238

Total FY 2009 Deficits 2,493,709$

FY 2008 Deficits

Health Insurance 1,665,614$

Capital Projects Deficit

High School Construction Project 3,965,564$

TOTAL 24,000,000$



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Budget Trends

The table below sets forth the trend in general fund budgets for the following fiscal years. The budgets summarizedbelow exclude expenditures for "non-operating" or extraordinary items and do not reflect final budget results.

The enacted fiscal year 2011 budget includes a number of reforms and efficiencies including: review of solid waste feesand initiatives, aggressive sale of tax title properties, increase in parking tickets and a review of all fees, implemention ofparking meters, combining sewer and water enterprise funds, moving eligible municipal retirees to Medicare, continuingaggressive pursuit of delinquent real estate, personal property and excise taxes and outstanding water bills, andtransitioning to the City to GIC for health insurance. In addition, a proposed initiative to privatize payroll is under review.

Additionally the budget reflects approximately 80 layoffs in City departments, and approximately 24 layoffs in the schooldeparment.

Operating Budget Comparison (1)

Fi sc al 20 07 F is c al 20 08 Fis c al 20 09 F is ca l 2010 F is c al 2011

G ener a l Gov ernm e nt 7 ,3 66,147$ 6 , 633 , 197$ 6 , 297 , 161$ 5 , 914 , 917$ 5,657,46 9$

P ublic Sa fe ty 25 ,0 12,610 25 ,98 9,719 24 ,94 7,461 24,236 ,81 7 21,278 ,13 9

E duc at ion (2 ) 131 ,7 03,751 139 ,64 3,326 148 ,55 7,787 1 47,964 ,96 8 1 36,827 ,91 3

P ublic W o rk s 8 ,2 99,711 10 ,62 5,586 10 ,22 2,509 8,947 ,23 2 8,601 ,50 0

H um an S erv ic es 1 ,5 44,791 58 0,345 91 5,608 847 ,68 7 917 ,78 0

C ul tur e a nd R ec reat ion 2 ,2 24,855 1 ,54 7,415 1 ,27 6,472 1,177 ,22 0 1,020 ,34 6D eb t Se rvic e 12 ,1 20,447 12 ,34 2,858 11 ,06 1,385 11,250 ,37 3 13,424 ,38 1

E mp loy ee Be nef its 17 ,9 08,605 16 ,53 5,466 8 ,01 4,000 9,048 ,60 0 9,840 ,12 0

Intergo ve rnm enta l 4 ,1 49,445 4 ,69 6,330 5 ,39 6,342 5,551 ,54 7 24 ,00 0

O the r (3) 2 ,6 80,870 4 ,12 1,307 9 ,96 2,304 9,822 ,48 0 10,452 ,25 1

T ota l Ex pe nditure s 213 ,0 11,232$ 222 , 715 , 549$ 226 , 651 , 029$ 224 , 761 , 841$ 208 , 043 , 899$

__________________ (1) Excludes supplemental budget appropriations.(2) Includes the assessment for Greater Lawrence Technical Vocational High School District.(3) Includes transfer to debt service trust for school bonds, intergovernmental expenditures, prior year revenue deficits, contributions to the Cit

stabilization fund and other reserves and amortization of prior year deferrals.

Revenues

Property Taxes: Property taxes are a major source of revenue for the City. The total amount levied is subject to certainlimits prescribed by law. For a description of those limits see "PROPERTY TAXATION--Property Tax Limitation" above.

State Aid: The City's state aid entitlement is based upon a number of different formulas, and while said formulas mighindicate that a particular amount of state aid is owed, the amount of state aid actually paid is limited to the amountappropriated by the state legislature. The state annually estimates state aid but actual payments may vary from theestimate.

Motor Vehicle Excise: An excise tax is imposed on the registration of motor vehicles (subject to exemptions) at a rate o$25 per $1,000 of valuation. The excise is collected by and for the benefit of the municipality in which the vehicle iscustomarily kept. Valuations are determined by a statutory formula based on manufacturer's list price and year omanufacture. Bills not paid when due bear interest at 12% per annum. Provision is also made for the nonrenewal oregistration and operating license by the Registrar of Motor Vehicles.

Water and Sewer Rates and Services: As of July 1, 1998 the City’s water services, which previously were accounted foin a special revenue fund, were converted into an enterprise fund. As of July 1, 2010 the City’s sewer operationspreviously accounted for as a Special Revenue Fund, were converted into the newly created Water and Sewer EnterpriseFund. The City's Water Department provides water to all commercial, industrial, and residential users in the City. TheWater Department can provide water to users outside of the City on a contractual basis but does not do so at the presenttime. The water charge, which was increased most recently effective July 2009, is $3.10 per hundred cubic feet (hcf) ometered water consumption. The City's Sewer Department provides service to all users in the City. The sewer chargewhich was increased most recently effective July 1, 2009, is $3.35 per hundred cubic feet “hcf” of metered waterconsumption. At this time, the City’s Water Department is looking to raise revenues without increasing rates by institutingan automatic meter reading system that can raise water and sewer revenues by approximately 10%. The City hassubmitted a State Revolving Fund loan request in order to fund this project at very low interest cost.



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Room Occupancy Tax: Under Chapter 64G, Section 3A, of the Massachusetts General Laws, local governments may taxthe provision of hotel, motel, and lodging house rooms at a rate not to exceed four percent (6%) of the cost of rentingsuch rooms. The tax is paid by the operator of the hotel, motel, or lodging house to the State Commissioner of Revenuewho in turn pays the tax back to the municipality in which the rooms are located. The City adopted the 6% maximumroom occupancy tax on April 20, 2010, effective for fiscal 2011, estimated to produce an additional $30,000 per year.

Meals Tax: State Legislature recently added a new chapter to the General Laws, chapter 64L: “Local Option MealsExcise.” Under this chapter, a city or town that accepts the provisions of this chapter may impose a local sales tax on thesale of restaurant meals originating within the city or town by a vendor at the rate of .75 percent of the gross receipts ofthe vendor from the sale of restaurant meals. The tax is paid by the vendor to the State Commissioner of Revenue, whoin turn pays the tax to the city or town in which the meal was sold. The City adopted the local option meals tax on Apri20, 2010, effective for fiscal 2011, estimated to produce an as much as $300,000 annually.

State School Building Assistance Program

Under its school building assistance program, the Commonwealth of Massachusetts provides grants to towns, cities andregional school districts for school construction projects. Until July 26, 2004, the State Board of Education wasresponsible for approving grants for school projects and otherwise administering the program. Grant amounts rangedfrom 50% to 90% of approved project costs. Municipalities generally issued bonds to finance the entire project cost, andthe Commonwealth disbursed the grants in equal annual installments over the term of the related bonds.

Pursuant to legislation which became effective on July 26, 2004, the state legislature created the Massachusetts SchooBuilding Authority (the “Authority”) to finance and administer the school building assistance program. The Authority hasassumed all powers and obligations of the Board of Education with respect to the program. In addition to certain otheamounts, the legislation dedicates a portion of Commonwealth sales tax receipts to the Authority to finance the program.

Projects previously approved for grants by the State Board of Education are entitled to receive grant payments from theAuthority based on the approved project cost and reimbursement rate applicable under the prior law. The Authority haspaid and is expected to continue to pay the remaining amounts of the grants for such projects either in annuainstallments to reimburse debt service on bonds issued by the municipalities to finance such projects, or lump sumpayments to contribute to the defeasance of such bonds.

Projects on the priority waiting list as of July 1, 2004 are also entitled to receive grant payments from the Authority basedon the eligible project costs and reimbursement rates applicable under the prior law. With limited exceptions, the

Authority is required to fund the grants for such projects in the order in which they appear on the waiting list. Grants foany such projects that have been completed or substantially completed have been paid and are expected to continue tobe paid by the Authority in lump sum payments, thereby eliminating the need for the Authority to reimburse interestexpenses that would otherwise be incurred by the municipalities to permanently finance the Authority’s share of suchproject costs. Interest on debt issued by municipalities prior to July 1, 2004 to finance such project costs, and interest ontemporary debt until receipt of the grant, is included in the approved costs of such projects. Grants for any such projectsthat have not yet commenced or that are underway have been and are expected to continue to be paid by the Authority asproject costs are incurred by the municipality pursuant to a project funding agreement between the Authority and themunicipality, eliminating the need for the municipality to borrow even on a temporary basis to finance the Authority’s shareof the project costs in most cases.

The range of reimbursement rates for new project grant applications submitted to the Authority on or after July 1, 2007has been reduced to between 40% and 80% of approved project costs. The Authority promulgated new regulations with

respect to the application and approval process for projects submitted after July 1, 2007. The Authority expects to paygrants for such projects as project costs are incurred pursuant to project funding agreements between the Authority andthe municipalities. None of the interest expense incurred on debt issued by municipalities to finance their portion of thecosts of new projects will be included in the approved project costs eligible for reimbursement.



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Investment of City Funds

Investments of funds of cities and towns, except for trust funds, are generally restricted by Massachusetts General LawsChapter 44, §55. That statute permits investments of available revenue funds and bond and note proceeds in term depositsand certificates of deposits of banks and trust companies, in obligations issued or unconditionally guaranteed by the federagovernment or an agency thereof with a maturity of not more than one year, in repurchase agreements with a maturity of notmore than 90 days secured by federal or federal agency securities, in participation units in the Massachusetts MunicipaDepository Trust (“MMDT”), or in shares in SEC-registered money market funds with the highest possible rating from at leasone nationally recognized rating organization.

MMDT is an investment pool created by the Commonwealth. The State Treasurer is the sole trustee, and the funds aremanaged under contract by an investment firm under the supervision of the State Treasurer’s office. According to the StateTreasurer the Trust’s investment policy is designed to maintain an average weighted maturity of 90 days or less and is limitedto high-quality, readily marketable fixed income instruments, including U.S. Government obligations and highly-rated corporatesecurities 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 abroader range of investments than §55, including any bonds or notes that are legal investments for savings banks in theCommonwealth. The restrictions imposed by §§54 and 55 do not apply to city and town retirement systems.

A breakdown of City investments may be obtained from the City Treasurer.

Significant Accounting Policies

See Appendix A.

Annual Audits

The fiscal 2009 audited financial statements are included herein as Appendix A, prepared by Powers and Sullivan,certified public accountants, Wakefield, Massachusetts. A similar audit for fiscal 2010 is nearing completion (draft auditinformation, subject to change, is contained herein) and is expected to be available in early December, 2010. Prior auditsfor the City were prepared annually by Melanson Health Company, PC, Certified Public Accountants, AndoverMassachusetts, and are available upon request.

Financial Statements

Set forth on the following pages are Combined Balance Sheets - All Funds for the fiscal years ended June 30, 2010(Draft), June 30, 2009, 2008, and 2007 and a Comparative Statement of Revenues, Expenditures, and Changes in FundBalance - General Fund, for the fiscal years ended June 30, 2006 through 2010 (2010 is draft audit information, subject tochange). All of these statements are extracted from the City's audited financial statements with the exception of fisca2010 which are excerpts from the draft audit and are subject to change and revision.



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Nonmajor Total

Governmental Governmental

General Funds Funds

ASSETS

Cash and short-term investments 20,099,289$ 5,534,919$ 25,634,208$

Investments - 677,518 677,518

Receivables, net of uncollectibles:Real estate and personal property taxes 5,178,996 - 5,178,996

Motor vehicle and other excise taxes 793,909 - 793,909

Departmental and other 1,404 69,704 71,108

Special assessments 14,770 - 14,770

Intergovernmental 46,566,475 3,506,506 50,072,981

Loans - 3,111,453 3,111,453

TOTAL ASSETS 72,654,843$ 12,900,100$ 85,554,943$

LIABILITIES AND FUND BALANCES

Liabilities:

Accounts payable 2,219,036$ 1,451,277$ 3,670,313$

Accrued payroll 1,933,840 - 1,933,840

Tax refunds payable 102,000 - 102,000

Payroll withholdings 1,436 - 1,436

Other liabilities 524,636 - 524,636

Deferred revenues 51,122,080 1,130,533 52,252,613

Total Liabilities 55,903,028 2,581,810 58,484,838

Fund Balances

Reserved for:

Encumbrances and continuing appropriations 4,533,971 - 4,533,971

Loans - 3,111,453 3,111,453

Reserve for fiscal stability 3,893,044 - 3,893,044

Perpetual permanent funds - 1,457,455 1,457,455

Unreserved:

Undesignated, reported in:General fund 8,324,800 - 8,324,800

Special revenue funds - 5,015,240 5,015,240

Capital projects funds - 392,982 392,982

Permanent funds - 341,160 341,160

TOTAL FUND BALANCES 16,751,815 10,318,290 27,070,105

TOTAL LIABILITIES AND FUND BALANCES 72,654,843$ 12,900,100$ 85,554,943$

_________________

(1) Extracted from the draft audited financial statements of the City, subject to revision and change.

Governmental Funds


Balance Sheet June 30, 2010 (1)



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Nonmajor Total

Home Governmental Governmental

General Fund Funds Funds

ASSETS

Cash and short-term investments 12,762,217$ 25,808$ 2,794,029$ 15,582,054$

Investments - - 586,658 586,658

Receivables, net of uncollectibles:Real estate and personal property taxes 3,587,412 - - 3,587,412

Motor vehicle and other excise taxes 827,590 - - 827,590

Departmental and other 7,518 - 5,861 13,379

Special assessments 14,770 - - 14,770

Intergovernmental 51,480,158 51,871 1,657,465 53,189,494

Loans - - 813,943 813,943

TOTAL ASSETS 68,679,665$ 77,679$ 5,857,956$ 74,615,300$


Liabilities:

Accounts payable 2,239,055$ 40,155$ 1,852,411$ 4,131,621$

Accrued payroll 1,226,327 - - 1,226,327

Tax refunds payable 319,000 - - 319,000

Payroll withholdings 289,202 - - 289,202

Other liabilities 450,960 - - 450,960

Deferred revenues 54,842,374 - 1,824,235 56,666,609

Total Liabilities 59,366,918 40,155 3,676,646 63,083,719

Fund Balances

Reserved for:

Encumbrances and continuing appropriations 2,988,620 - - 2,988,620

Reserve for fiscal stability 3,733,728 - - 3,733,728

Perpetual permanent funds - - 1,338,981 1,338,981

Unreserved:

Undesignated, reported in:

General fund 2,590,399 - - 2,590,399 Special revenue funds - 37,524 4,372,640 4,410,164

Debt service fund - - 86,385 86,385

Capital projects funds - - (4,008,596) (4,008,596)

Permanent funds - - 391,900 391,900

TOTAL FUND BALANCES 9,312,747 37,524 2,181,310 11,531,581

TOTAL LIABILITIES AND FUND BALANCES 68,679,665$ 77,679$ 5,857,956$ 74,615,300$

_________________

(1) Extracted from the audited financial statements of the City.

Governmental Funds





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Nonmajor Total

Home Governmental Governmental

General Fund Funds Funds

ASSETS

Cash and short-term investments 11,142,807$ 15,021$ 8,856,548$ 20,014,376$

Investments - - 1,529,029 1,529,029

Receivables:Property taxes 11,933,487 - - 11,933,487

Excises 1,532,074 - - 1,532,074

Departmental and other 20,869 - 578,862 599,731

Intergovernmental 676,365 28,911 1,160,783 1,866,059

Loans - 8,849,403 8,098,738 16,948,141

Total Assets 25,305,602$ 8,893,335$ 20,223,960$ 54,422,897$


Liabilities:

Accounts payable 2,748,529$ 29$ 2,774,184$ 5,522,742$

Accrued liabilities 1,655,700 - - 1,655,700

Deferred revenues 12,602,458 8,849,403 8,301,781 29,753,642

Other liabilities 1,692,415 - - 1,692,415

Total Liabilities 18,699,102 8,849,432 11,075,965 38,624,499

Fund Balances

Reserved for:

Encumbrances and continuing appropriations 3,745,879 - - 3,745,879

Perpetual (nonexpendable) permanent funds - - 1,360,087 1,360,087

Other reserved (fiscal stability) 3,586,541 - -


General fund (725,920) - - (725,920)

Special revenue funds - 43903 4,319,027 4,362,930

Debt service fund - - 3,421,758 3,421,758

Capital projects funds - - (275,053) (275,053)

Permanent funds - - 322,176 322,176

TOTAL FUND BALANCES 6,606,500 43,903 9,147,995 15,798,398

TOTAL LIABILITIES AND FUND BALANCES 25,305,602$ 8,893,335$ 20,223,960$ 54,422,897$

_________________


Governmental Funds





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2006 2007 2008 2009 2010 (2)

REVENUES:

Property Taxes 35,571,799$ 39,055,441$ 41,452,395$ 46,714,326$ 45,980,760$

Intergovernmental Revenue 164,386,933 172,792,816 180,807,910 172,615,227 178,611,353

Excise Taxes 3,887,934 3,716,935 3,344,085 4,860,312 3,721,543

Licenses and Fines 991,399 2,475,728 860,542 2,731,335 2,600,447

Charges for Services 791,709 732,520 701,682 - -

Interest, penalties and other taxes 2,747,533 1,325,464 2,473,793 1,441,104 1,775,899

Investment income 1,338,266 1,486,081 1,179,583 716,972 159,226

Miscellaneous 431,016 270,529 939,928 1,648,374 1,120,991

Total Revenues 210,146,589$ 221,855,514$ 231,759,918$ 230,727,650$ 233,970,219$

EXPENDITURES:

General Government 4,899,110 5,213,286 5,706,415 6,477,229 6,311,367

Education 138,280,790 148,067,027 154,965,682 145,384,038 159,467,480

Public Works 10,455,483 10,962,000 10,249,560 11,309,889 9,922,535

Public Safety 25,316,820 25,872,837 25,314,897 27,152,745 24,411,233

Debt Service 13,984,668 11,799,456 12,061,637 13,161,385 13,124,680

Culture and Recreation 1,396,107 1,392,612 1,320,301 1,219,590 1,319,261

Employee Benefits 17,795,446 17,991,776 19,191,378 19,673,763 23,799,629

Intergovernmental 3,279,192 4,132,921 4,618,362 5,270,650 5,524,507

Health and human services 600,675 789,860 863,474 895,501 956,930

Miscellaneous 391,433 536,610 377,993 - -

Total Expenditures 216,399,724 226,758,385 234,669,699 230,544,790 244,837,622

Other Financing Sources (Uses):

Proceeds from bonds and notes - - - - 24,000,000

Proceeds from issuance of bonds - - - - 6,715

Transfers in - deficit borrowing - - - - (6,095,305)

Operating Transfers In (Out) 5,879,148 118,114 2,057,115 2,516,179 1,684,315

Miscellaneous - - - 7,208 (1,289,255)

Total Sources (Uses) 5,879,148 118,114 2,057,115 2,523,387 18,306,470

Excess (Deficiency) of Revenues and Other

Sources Over Expenditures and Other Uses (373,987) (4,784,757) (852,666) 2,706,247 7,439,067

Fund Balance - Beginning of Year 12,617,910 12,243,923 7,459,166 6,606,500 9,312,747

Fund Balance - End of Year 12,243,923$ 7,459,166$ 6,606,500$ 9,312,747$ 16,751,814$

________________


(1) Extracted from the draft financial statements of the City, subject to revision and change.

CITY OF LAWRENCE , MASSACHUSETTS

Combined Statement of Revenues, Expenditures and

Changes in Fund Balances (1)

June 30



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Free Cash

Subject to certain adjustments, free cash is surplus revenue less accumulated uncollected and overdue property taxesthrough the current fiscal year. Surplus revenue and free cash are calculated without regard to any overlay deficit (fromtax abatements in excess of the overlay) or revenue deficit (generally a result of non-property tax receipts being less thanestimates), both of which are added to the next tax levy.

The following table sets forth the City's audited unreserved fund balance (for the general fund) and free cash at the end offiscal years 2002 through 2009.

General FundUnreserved

June 30 Fund Balance Free Cash

2010 $8,324,800 (draft audit estimate)(1) $ 5,443,483 (2)2009 2,590,390 (3)2008 (725,920) (3)2007 (1,066,350) (12,098,339)2006 3,519,666 (15,112,680)

2005 (3,596,123) (2,940,350)2004 4,029,250 3,255,8132003 5,048,679 4,217,1622002 8,791,544 8,645,665

__________________

(1) Preliminary, subject to change.

(2) Certified Free cash at July 1, 2010 in the Water and Sewer Enterprise Fund was certified at $407,214 for wateoperations and $3,441,600 for sewer operations. The City expects to appropriate an as yet undetermined amount ocertified free cash to cover one-time expenses and capital.

(3) Certifications of free cash for July 1, 2008 and July 1, 2009 were not performed by the Department of Revenue.

Fiscal Stability Reserve Fund Balance

In accordance with Chapter 41 of the Acts of 1990, the City is required to maintain a reserve fund in an amount equal to1.5% of the prior fiscal year’s tax levy. Said reserve is maintained as a reservation of fund balance in the General FundAt June 30, 2010, the balance of the Fiscal Stability Reserve was $3,893,044.

Tax Increment Financing for Development Districts

Under recent legislation, cities and towns are authorized to establish development districts to encourage increasedresidential, industrial and commercial activity. All or a portion of the taxes on growth in assessed value in such districtsmay be pledged and used solely to finance economic development projects pursuant to the city or town’s developmenprogram for the district. This includes pledging such “tax increments” for the payment of bonds issued to finance suchprojects. As a result of any such pledge, tax increments raised from new growth properties in development districts arenot 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 “Property Tax Limitation” under“PROPERTY TAXATION” above.) The City has established designated “Economic Opportunity Areas” andcorresponding Tax Increment Financing (TIF) agreements with several businesses in Lawrence.



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INDEBTEDNESS

Authorization Procedure and Limitations

Serial bonds and notes are authorized by vote of two-thirds of all the members of the City Council. Provision is made foa referendum on the filing of a petition bearing the requisite number of signatures. Borrowings for certain purposesrequire state administrative approval. When serial bonds or notes have been authorized, bond anticipation notes may beissued by the officers authorized to issue the serial bonds or notes. Temporary loans in anticipation of the revenues othe fiscal year in which debt is incurred, or in anticipation of state and federal grants generally can be incurred by theMayor without City Council authorization.

The general debt limit of the City of Newburyport consists of a normal debt limit and a double debt limit. The normal deblimit is 5 percent of the valuation of taxable property as last equalized by the State Department of Revenue. The City canauthorize debt up to this amount without State approval. It can authorize debt up to twice this amount (the double deblimit) with the approval of the State Municipal Finance Oversight Board composed of the State Treasurer, the StateAuditor, 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 debtlimit. Among others, these exempt categories include revenue anticipation notes and grant anticipation notes, emergencyloans, loans exempted by special laws, certain school bonds, sewer bonds, solid waste disposal facility bonds, andeconomic 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 variousdebt limits), and electric, gas, community antenna television systems, and telecommunications systems (subject to a

separate limit). Revenue bonds are not subject to these debt limits. The general debt limit and the special debt limit fowater bonds apply at the time debt is authorized. The other special debt limits generally apply at the time the debt isincurred.

Types of Obligations

General Obligations. Massachusetts cities and towns are authorized to issue general obligation indebtedness of thesetypes:

Serial Bonds and Notes. These are generally required to be payable in annual principal amounts beginning no later than theend of the next fiscal year commencing after the date of issue and ending within the terms permitted by law. A level debservice schedule, or a schedule that provides for a more rapid amortization of principal than level debt service, is permittedThe 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 andnotes vary from one year to 40 years, depending on the purpose of the issue. The maximum terms permitted are set forth inthe statutes. In addition, for many projects, the maximum term may be determined in accordance with useful life guidelinespromulgated by the State Department of Revenue (“DOR”). Serial bonds and notes may be issued for the purposes set forthin the statutes. In addition, serial bonds and notes may be issued for any other public work improvement or asset nospecifically listed in the Statutes that has a useful life of at least 5 years. Bonds or notes may be made callable and redeemedprior to their maturity, and a redemption premium may be paid. Refunding bonds or notes may be issued subject to themaximum applicable term measured from the date of the original bonds or notes and must produce present value savings overthe debt service of the refunded bonds. Generally, the first required annual payment of principal of the refunding bonds cannobe later than the first principal payment of any of the bonds or notes being refunded thereby, however, principal paymentsmade 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 andlimitations (including restrictions on future indebtedness) as may be required by the Board. Qualified bonds may mature noless 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 debtservice paid by the State from state aid or other state payments; administrative costs and any loss of interest income to theState 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 maydesignate any duly authorized issue of bonds or notes as “tax credit bonds” to the extent such bonds and notes are otherwisepermitted to be issued with federal tax credits or other similar subsidies for all or a portion of the borrowing costs. Tax credibonds may be made payable without regard to the annual installments required by any other law, and a sinking fund may be



42

established for the payment of such bonds. Any investment that is part of such a sinking fund may mature not later than thedate 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 berefunded from time to time for a period not to exceed five years from their original dates of issuance, provided that for eachyear that the notes are refunded beyond the second year they must be paid in part from revenue funds in an amount at leastequal to the minimum annual payment that would have been required if the bonds had been issued at the end of the secondyear. For certain school projects, however, notes may be refunded from time to time for a period not to exceed seven yearswithout having to pay any portion of the principal of the notes from revenue funds. The maximum term of bonds issued torefund bond anticipation notes is measured (except for certain school projects) from the date of the original issue of the notes.

Revenue Anticipation Notes. The amount borrowed in each fiscal year by the issue of revenue anticipation notes islimited to the tax levy of the prior fiscal year, together with the net receipts in the prior fiscal year from the motor vehicleexcise and certain payments made by the Commonwealth in lieu of taxes. The fiscal year ends on June 30. Notes maymature in the following fiscal year, and notes may be refunded into the following fiscal year to the extent of theuncollected, unabated current tax levy and certain other items, including revenue deficits, overlay deficits, final judgmentsand lawfully unappropriated expenditures, which are to be added to the next tax levy, but excluding deficits arising from afailure to collect taxes of earlier years. (See "Taxation to Meet Deficits" under "PROPERTY TAX" above.) In any eventthe period from an original borrowing to its final maturity cannot exceed one year. The City has not issued any revenueanticipation notes during the current or the last five fiscal years.

Grant Anticipation Notes. These are issued for temporary financing in anticipation of federal grants and state and countyreimbursements. 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 and for projects financedunder the Commonwealth Water Pollution Abatement or Drinking Water Revolving Loan Programs and for certaineconomic development projects supported by tax increment financing. In addition to general obligation bonds and notescities and towns having electric departments may issue revenue bonds, and notes in anticipation of such bonds, subjectto the approval of the State Department of Telecommunications and Energy.

CITY OF LAWRENCE

Direct Debt Summary

as of June 30, 2010

General Obligation Bonds Outstanding:

General (1) 24,920,000$School (2)(3) 80,755,000 Urban Renewal/Development (4) 1,500,000 Water (5) 33,843,843 Total Outstanding as of June 30, 2010 141,018,843$

Deficit Financing Bond Anticipation Notes After This Issue (6) 24,000,000

Total Direct Debt 165,018,843$

__________________ (1) Subject to the City's General Debt Limit.(2) Not subject to the City’s General Debt Limit

(3) In addition to the state reimbursement, the City has established a debt service reserve fund authorized by Section44 of Chapter 319 of the Massachusetts Acts of 1998 and Section 208 of Chapter 184 of the Acts of 2000. As oJune 30, 2010, the balance in the debt service reserve was $0.

(4) Not subject to the City’s General Debt Limit.(5) Water Bonds issued through the State Revolving Fund. The City expects to receive subsidies from the State

Revolving Fund in the amount of $5,588,388. Debt service on these loans will be paid from revenues of the selfsupporting water enterprise fund.

(6) Includes this issue payable December 1, 2011 ($6,000,000) and notes payable March 1, 2011 ($6,000,000), June1, 2011 ($6,000,000) and September 1, 2011 ($6,000,000). Said notes will be renewed annually as they mature fo20 years, with annual paydowns of principal commencing in fiscal 2012 in accordance with a level debt schedule tobe approved by the State Department of Revenue, in accordance with the special legislation providing the authorityfor their issuance.



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Debt Ratios

The table below sets forth the City's general obligation bonds outstanding, population, local assessed valuations, per capita deband debt as a percentage of local assessed valuations, at the end of each of the following fiscal years. The table considers theprincipal amount of general obligation bonds of the City only and does not deduct the principal amount of outstanding bondswhich may be supported in whole, or in part, by non-tax revenues.

2000 Local Debt as a % of Net Net

Fiscal Bonds Federal Census Assessed Per Capita Assessed Debt Per Debt as a %

Year End Outstanding Population Valuation Debt Valuation Capita (1) of Valuation (1)

2010 141,018,843$ 72,043 2,979,929,390$ 1,957$ 4.73 % 1,957$ 4.73 %

2009 150,688,304 72,043 3,482,154,660 2,092 4.33 2,092 4.33

2008 152,454,577 72,043 3,653,177,420 2,116 4.17 2,116 4.17

2007 142,770,774 72,043 3,581,359,940 1,982 3.99 1,982 3.99

2006 138,729,420 72,043 3,385,768,450 1,926 4.10 743 1.58

__________________ Debt minus 90% school state aid.

Debt Service Requirements

The following table sets forth the required principal and interest payments on the City's outstanding general obligationbonds as of June 30, 2010 and debt service subsidies the City expects to receive from the Massachusetts SchooBuilding Authority and from the Massachusetts Water Pollution Abatement Trust (the State Revolving Fund).

General Obligation BondsDebt Service Requirements

as of June 30, 2010

Fiscal

Year Principal Interest MSBA Subsidy

MWPAT

Subsidy

Net Debt

Service

2011 10,054,131$ 6,114,937$ (7,075,032)$ (586,252)$ 8,507,784$

2012 10,811,480 5,698,866 (7,075,032) (566,782) 8,868,532

2013 11,178,121 5,235,634 (7,075,032) (534,414) 8,804,309

2014 11,546,259 4,788,694 (7,075,032) (526,212) 8,733,710

2015 9,826,139 4,309,415 (5,596,431) (504,828) 8,034,295 2016 9,779,983 3,879,544 (5,596,431) (485,583) 7,577,513

2017 10,109,781 3,432,836 (5,596,431) (462,454) 7,483,732

2018 10,839,978 2,952,463 (5,596,431) (440,646) 7,755,364

2019 11,230,584 2,441,539 (5,596,431) (419,994) 7,655,698

2020 10,986,606 1,914,837 (5,596,431) (399,436) 6,905,576

2021 11,403,053 1,399,249 (5,596,431) (364,533) 6,841,339

2022 4,044,933 885,372 - (91,085) 4,839,220

2023 4,167,255 719,710 - (81,689) 4,805,276

2024 4,265,027 549,346 - (71,895) 4,742,478

2025 4,353,261 382,000 - (52,584) 4,682,677

2026 3,676,963 240,535 - - 3,917,498

2027 1,982,798 103,100 - - 2,085,898

2028 378,433 18,415 - - 396,848

2029 384,058 7,841 - - 391,899

141,018,843$ 45,074,333$ (67,475,143)$ (5,588,388)$ 113,029,646$



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Principal Payments by Purpose

The following table sets forth the principal payments by purpose on outstanding general obligation bonds of the City as ofJune 30, 2010. As indicated in the table, of the total $141,018,843 of bonds to be outstanding, $53,416,130 or 37.9%, areto be paid by the end of fiscal 2015 and $106,363,062 or 75.4%, are to be paid by the end of fiscal 2020.

Principal Payments by Purposeas of June 30, 2010

Fiscal Urban Renewal/ Total

Year General School Developm ent Water Outs tanding

2011 1,175,000$ 6,675,000$ 300,000$ 1,904,131$ 10,054,131$

2012 1,360,000 7,195,000 300,000 1,956,480 10,811,480

2013 1,390,000 7,480,000 300,000 2,008,121 11,178,121

2014 1,415,000 7,765,000 300,000 2,066,259 11,546,259

2015 1,510,000 5,895,000 300,000 2,121,139 9,826,139

2016 1,580,000 6,025,000 - 2,174,983 9,779,983

2017 1,625,000 6,245,000 - 2,239,781 10,109,781

2018 1,805,000 6,720,000 - 2,314,978 10,839,978

2019 1,850,000 7,000,000 - 2,380,584 11,230,584

2020 1,390,000 7,145,000 - 2,451,606 10,986,606

2021 1,445,000 7,450,000 - 2,508,053 11,403,053

2022 1,485,000 760,000 - 1,799,933 4,044,933

2023 1,545,000 775,000 - 1,847,255 4,167,255

2024 1,595,000 775,000 - 1,895,027 4,265,027

2025 1,595,000 825,000 - 1,933,261 4,353,261

2026 1,655,000 825,000 - 1,196,963 3,676,963

2027 500,000 1,000,000 - 482,798 1,982,798

2028 - 100,000 - 278,433 378,433

2029 - 100,000 - 284,058 384,058

24,920,000$ 80,755,000$ 1,500,000$ 33,843,843$ 141,018,843$

Authorized Unissued Debt and Prospective Financing

The City has $41,387,154 of authorized unissued debt, consisting of $25,000,000 for deficit financing, $15,603,000 foschool construction and $784,154 for water purposes. The City expects to authorize an additional $3,362,450 deficifinancing bonds, against which it expects to issue notes for delivery in mid to late December, 2010. Such notes areexpected to be used to balance one-time expenses in fiscal 2011 that will either provide transition costs (until such timeas the City can enter the State’s group health plan) or costs associated with producing revenues for fiscal 2012 andbeyond. Such notes will be issued pursuant to special legislation providing the statutory authority for the City to issue upto $35 million of deficit financing against which, to date, it has issued $24 million including the current issue of Notes.



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Coverage of Qualified Debt Service

It is projected that state aid distributions from the Commonwealth of Massachusetts to the City of Lawrence will provideample coverage of qualified bond debt service throughout the term of the Bonds. The following table presents totaqualified debt service, projected state aid, and the percentage of qualified debt service of total projected state aid. Stateaid is subject to annual appropriation by the Commonwealth, and no assurance can be given that state aid will beappropriated in any year, or if appropriated, will be appropriated in the amounts shown in these tables.

Qualified Projected Debt Total

Fiscal Bond Service on Projected Coverage

Year Debt Service This Issue State Aid (1) Ratio

2011 13,138,214$ 24,280,917$ 154,538,665$ 4.13

2012 13,496,388 23,765,000 157,629,438 4.23

2013 13,444,822 22,751,350 160,782,027 4.44

2014 13,362,250 21,706,800 163,997,668 4.68

2015 11,185,866 20,631,350 167,277,621 5.26

2016 10,730,897 19,525,000 170,623,173 5.64

2017 10,644,327 18,382,750 174,035,637 6.00

2018 10,907,883 17,209,450 177,516,350 6.31

2019 10,808,883 16,000,250 181,066,677 6.75

2020 10,053,133 14,755,000 184,688,010 7.442021 9,987,994 13,473,700 188,381,770 8.03

2022 2,898,967 12,151,350 192,149,406 12.77

2023 2,866,966 10,792,800 195,992,394 14.35

2024 2,807,410 9,393,200 199,912,242 16.39

2025 2,745,422 7,947,400 203,910,487 19.07

2026 2,687,660 6,460,250 207,988,696 22.74

2027 1,587,022 4,926,900 212,148,470 32.57

2028 109,950 3,347,200 216,391,440 62.59

2029 105,000 1,721,150 220,719,268 120.87

2030 - 48,750 225,133,654 4,618.13

143,569,053$ 269,270,567$ 3,754,883,092$

__________________ (1) Includes total state aid expected to be available for coverage. State aid for fiscal 2011 is based on the estimated FY 2011 Cherry Sheet and is

increased at a rate of 2% for FY 2012 and each year thereafter. The State aid figures above no longer include school building assistance grantsas such grants are no longer paid by the Commonwealth; they are now paid by the Massachusetts School Building Authority. Therefore, suchpayments no longer constitute “distributable aid” of the Commonwealth under the Qualified Bond Act.



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Overlapping Debt

The City is a member of the Merrimack Valley Regional Transit Authority, the Greater Lawrence Regional VocationalTechnical School District and the Greater Lawrence Sanitary District. The following table sets forth the outstandingbonded debt, exclusive of temporary loans in anticipation of bonds or current revenue, of the Merrimack Valley RegionaTransit Authority, the Greater Lawrence Regional Vocational Technical School District, and the Greater LawrenceSanitary District and the City's estimated gross share of such debt as of June 30, 2010 and the fiscal 2011 dollarassessment for each:

Outstanding Lawrence'sOverlapping Entity Debt as of

6/30/10EstimatedShare (1)

Fiscal 2011Assessment (2)

Greater Lawrence Regional $32,195,000 85.4% $1,311,467Vocational Technical SchoolDistrict(3)Merrimack Valley Regional Transit 0 N/A 632,066Authority(4)Greater Lawrence Sanitary District(5) 27,192,973 53.2 5,592,715

__________________ (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: Greater Lawrence Regional Vocational Technical High School District. Towns may organize regionaschool districts to carry out general or specialized educational functions. Pursuant to special laws a number of citiesmay also participate in regional school district, primarily for vocational education. The operating expenses and debservice of regional school districts are apportioned among the member municipalities in accordance with theagreements establishing the district. The municipal share is based on the ratio of that member's pupil enrollment tothe total pupil enrollment from all the member municipalities in the regional school district as of October 1 of the yearpreceding the year for which the apportionment is being determined. The District has authorized and issued $51million for additions and renovations to its facilities. The project has been approved by the State Board of Educationfor a state reimbursement for 85% of construction costs and interest on the notes and bonds. The annual paymentsof $3,488,430 began in fiscal 2002 and continue for twenty years to match the debt service on the bonds.

(4) SOURCE: Merrimack Valley Regional Transit Authority. The municipal share, of any debt outstanding, is based ona percentage furnished by the Authority as that used in the most recent assessment of the net cost of service of theAuthority, including debt service and operating expenses. Shares vary from year to year. Although the

Commonwealth is not bound to do so, it is anticipated that the Commonwealth will from year to year provide contractassistance to the Authority absorbing up to 50 percent of the aggregate net cost of service. The Authority has noauthorized unissued debt.

(5) SOURCE: Greater Lawrence Sanitary District. Each member community pays for its proportionate share of theDistrict's operating costs based upon the percent of wastewater received from each respective community. Membecommunities include Andover, Lawrence, Methuen and North Andover and Salem, N.H.

Contractual Obligations

Municipal contracts are generally limited to currently available appropriations. A city or town generally has authority toenter into contracts for the exercise of any of its corporate powers for any period of time deemed to serve its best interest,but generally only when funds are available for the first fiscal year; obligations for succeeding fiscal years generally are

expressly subject to availability and appropriation of funds. Municipalities have specific authority in relatively few casesfor long-term contractual obligations that are not subject to annual appropriation, including contracts for refuse disposaand sewage treatment and disposal. Municipalities may also enter into long-term contracts in aid of housing and renewaprojects. There may be implied authority to make other long-term contracts required to carry out authorized municipafunctions, such as contracts to purchase water from private water companies.

Municipal contracts relating to solid waste disposal facilities may contain provisions requiring the delivery of minimumamounts of waste and payments based thereon and requiring payments in certain circumstances without regard to theoperational status of the facilities.



47

Municipal electric departments have statutory power to enter into long-term contracts for joint ownership and operation ogenerating and transmission facilities and for the purchase or sale of capacity, including contracts requiring paymentswithout regard to the operational status of the facilities.

Pursuant to the Home Rule Amendment to the Massachusetts Constitution, cities and towns may also be empowered tomake other contracts and leases.

The City of Lawrence has only one long-term contractual obligation of significance, a refuse disposal contract withCovanta Haverhill, Inc., a refuse disposal facility company, commencing January 1, 2010 and terminating June 30, 2011The City pays Covanta Haverhill, Inc., a direct tipping fee at a price of $58.39 for each ton of City waste delivered to andaccepted by the facility, subject to annual adjustments on the basis of the Consumer Price Index. The estimated cost fothis service in fiscal year 2011 is $1,400,000.

RETIREMENT PLAN

The Massachusetts General Laws provide for the establishment of contributory retirement systems for state employees, foteachers and for county, city and town employees other than teachers. Teachers are assigned to a separate statewideteachers’ system and not to the city and town systems. For all employees other than teachers, this law is subject toacceptance in each city and town. Substantially all employees of an accepting city or town are covered. If a town has apopulation of less than 10,000 when it accepts the statute, its non-teacher employees participate through the county systemand its share of the county cost is proportionate to the aggregate annual rate of regular compensation of its coveredemployees. In addition to the contributory systems, cities and towns provide non-contributory pensions to a limited number o

employees, primarily persons who entered service prior to July 1, 1937 and their dependents. The Public EmployeeRetirement Administration Commission (“PERAC”) provides oversight and guidance for and regulates all state and locaretirement systems.

The obligations of a city or town, whether direct or through a county system, are contractual legal obligations and are requiredto 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 aretirement system funding schedule as described below, the city or town is required to provide for the payment of the portion ofits current pension obligations which is not otherwise covered by employee contributions and investment income. “Excessearnings,” or earnings on individual employees’ retirement accounts in excess of a predetermined rate, are required to be seaside in a pension reserve fund for future, not current, pension liabilities. Cities and towns may voluntarily appropriate to theisystem’s pension reserve fund in any given year up to five percent of the preceding year’s tax levy. The aggregate amount inthe 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 toannually appropriate an amount sufficient to pay not only its current pension obligations, but also a portion of its future pensionliability. The portion of each such annual payment allocable to future pension obligations is required to be deposited in thepension reserve fund. The amount of the annual city or town appropriation for each such system is prescribed by a retiremensystem funding schedule which is periodically reviewed and approved by PERAC. Each system’s retirement funding scheduleis designed to reduce the unfunded actuarial pension liability of the system to zero by not later than June 30, 2030, with annualincreases in the scheduled payment amounts of not more than 4.5 percent. The funding schedule must provide that paymenin any year of the schedule is not less than 95 percent of the amount appropriated in the previous fiscal year. City, town andcounty systems which have an approved retirement funding schedule receive annual pension funding grants from theCommonwealth for the first 16 years of such funding schedule. Pursuant to recent legislation, a system (other than the stateemployees’ retirement system and the teachers’ retirement system) which conducts an actuarial valuation as of January1, 2009, or later, may establish a revised schedule which reduces the unfunded actuarial liability to zero by not later thanJune 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 beadjusted to provide that the appropriation for each year shall not be less than that for such year under the prior schedulethus 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 systemparticipates in the PRIT Fund, it must transfer ownership and control of all assets of its system to the Pension ReservesInvestment Management Board, which manages the investment and reinvestment of the PRIT Fund. Cities and towns withsystems participating in the PRIT Fund continue to be obligated to fund their pension obligations in the manner describedabove. The additional state appropriations to offset future pension liabilities of state and local systems participating in the PRITFund are required to total at least 1.3 percent of state payroll. Such additional state appropriations are deposited in the PRIT



48

Fund and shared by all participating systems in proportion to their interests in the assets of the PRIT Fund as of July 1 for eachfiscal year. The City joined PRIT in the Fall of 2009.

Cost-of-living increases for each local retirement system may be granted and funded only by the local system, and only if it hasestablished a funding schedule. Those statutory provisions are subject to acceptance by the local retirement board andapproval by the local legislative body, which acceptance may not be revoked.

Recent legislation provides that upon local acceptance and subject to certain conditions and limitations, a municipality mayestablish and implement an early retirement incentive program. Any plan for such program must be submitted to PERAC bySeptember 27, 2010.

The City has adopted the repeal of the $30,000 limit on pensions, ten year vesting for ordinary disability retirement andcontinued deductions for those employees working beyond the age of 70 who so elect. In addition, the City currently hasadopted a funding schedule, approved by Public Employee Retirement Administration, to fully fund the system by 2028.Legislation was recently passed allowing for the amortization of the unfunded pension liability through the year 2040. The Cityrecently approved extending the amortization of the unfunded pension liability to 2040.

In addition to pension benefits, cities and towns may provide retired employees with payments for a portion of their health careand life insurance benefits. These benefit payments are generally provided on a pay-as-you-go basis. The City pays 75% of thepremiums for retirees and 50% for surviving spouses if applicable.

The annual general fund contributions of the City to the Retirement Board for the current and the last four fiscal years is asfollows:

Non-Fiscal Contributory Contributory

2011 (budgeted) $8,279,406 $206,7522010 8,053,247 267,7502009 7,774,276 205,4042008 7,782,493 269,9122007 7,475,168 285,5272006 6,606,960 432,187

Investments of system assets in bonds are valued at amortized cost and equity investments are valued in the mannerdetermined by the State Commissioner of Insurance. The assets of the system were approximately $120,292,096 as of January1, 2010.

The estimated unfunded actuarial liability of the contributory retirement system as of January 1, 2010 is approximately$187,333,544. No estimated unfunded actuarial liability is available for the non-contributory retirement system.

Other Post-Employment Benefits

In addition to pension benefits, cities and towns may provide retired employees with health care and life insurance benefitsThe portion of the cost of such benefits paid by cities or towns is generally provided on a pay-as-you-go basis.

The Governmental Accounting Standards Board (“GASB”) recently promulgated its Statement Nos. 43 and 45, which will fothe first time require public sector entities to report the future costs of these non-pension, post-employment benefits in theirfinancial statements. These new accounting standards do not require pre-funding the payment of these costs as the liability fosuch costs accrue, 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 accrualsthan if such benefits were pre-funded in a trust fund in the same manner as traditional pension benefits. Cities and towns thachoose to self-insure all or a portion of the cost of the health care benefits they provide to employees and retirees mayestablish a trust fund for the purpose of paying claims. In addition, cities and towns may establish a trust fund for the purposeof pre-funding other post-employment benefits liability in the same manner as traditional pension benefits.

The City was required to implement the new GASB reporting requirements for other post-employment benefits beginning infiscal year 2009. The City performed an actuarial valuation of its non-pension, post-employment benefit liability as of July 12008, at which time the estimate of the unfunded actuarial accrued liability was estimated at $164,725,000. The City currentlyhas no plans to advance fund this liability. As of January 1, 2009, it was estimated at $165.7 million. Estimates of the AnnuaRequired Contribution (“ARC”), based on a 30-year amortization period designed to increase over time as payroll grows, forfiscal 2009 was $17.5 million based on a discount rate of 8.0%.



49

EMPLOYEE RELATIONS

The City employs approximately 2,481 people, 2,013 of whom are employed by the School Department, 78 by thedepartment of Public Works, 132 by the Police Department and 96 by the Fire Department. The balance are employed byvarious other departments. City employees, other than confidential employees, are entitled to join labor organizationsand engage in collective bargaining. There are currently 13 unions representing municipal employees and 10 unionsrepresenting employees of the School Department.

The following table sets forth the status of the City’s various labor contracts.

# of ContractUnion Members Expiration Date(1)

Inspectors’ Union -AFSCME ..................................................................... 10 6-30-10Lawrence Municipal Classified Foreman Association ............................... 4 6-30-10Firefighters IAI Local 146 .......................................................................... 94 6-30-10Lawrence Patrolmen’s Association .. ........................................................ 81 6-30-10Lawrence Superior Officers Association .................................................. 29 6-30-10Massachusetts Nurses Association .......................................................... 1 6-30-10Clerical Union (LACE) .............................................................................. 44 6-30-10Laborers Union (SEIU) ............................................................................. 43 6-30-10Water Department (SEIU) ........................................................................ 16 6-30-10Supervisors and Administrators Unit (SEIU) ............................................. 24 6-30-10

Tradesmen ............................................................................................... 5 6-30-11Lawrence Public Library. .......................................................................... 14 6-30-10Carpenters’ and Joiners’ Union ................................................................ 18 6-30-11Cafeteria Workers .................................................................................... 64 6-30-10Clerical Union ........................................................................................... 70 6-30-11Int’l Brotherhood of Fireman & Oilers, Local 3 (Custodian) ...................... 79 6-30-11Lawrence Administrators Association ....................................................... 47 6-30-11Lawrence Federation of Paraprofessionals .............................................. 354 6-30-10Lawrence Teacher's Union, Local 1019 .................................................... 1,089 8-27-10Nurses of Lawrence Association .............................................................. 30 6-30-09Security Officers ....................................................................................... 33 6-30-09United Food and Commercial Workers Union, Local 1445, AFL-CIO ....... 14 6-30-11SEIU Local 888 ........................................................................................ 19 6-30-10

_______________ (1) Negotiations relative to expired contracts are underway.

LITIGATION

At present, there are numerous cases pending in various courts throughout the Commonwealth in which the City is adefendant. In the opinion of the City, none of the pending litigation is likely to result, either individually or in the aggregate, infinal judgments against the City that would materially impact its financial position.

_________________________


/s/ Patricia M. Cook, City Treasurer




REPORT ON EXAMINATION OF

BASIC FINANCIAL STATEMENTS

FISCAL YEAR ENDED JUNE 30, 2009




REPORT ON EXA MINATION OF BASIC FINANCIAL STATEMENTS

JUNE 30, 2009

TABLE OF CONTENTS

Independent Auditors’ Report..........................................................................................................................................1 Management’s Discussion and Analysis .........................................................................................................................3 Basic Financial Statements ...........................................................................................................................................12

Statement of Net Assets ............................................................................................................................................13 Statement of Activities ...............................................................................................................................................14 Governmental funds – balance sheet ........................................................................................................................16 Reconciliation of the governmental funds balance sheet total fund balances to the statement of net assets ..........17 Governmental funds – statement of revenues, expenditures and changes in fund balances...................................18 Reconciliation of the statement of revenues, expenditures, and changes in fund balances of governmental

funds to the statement of activities.............................................................................................................................19 Proprietary funds – statement of net assets ..............................................................................................................20 Proprietary funds – statement of revenues, expenses and changes in fund net assets ...........................................21 Proprietary funds – statement of cash flows..............................................................................................................22 Fiduciary funds – statement of fiduciary net assets...................................................................................................23 Fiduciary funds – statement of changes in fiduciary net assets ................................................................................24

Required Supplementary Information............................................................................................................................50 General fund – statement of revenues, expenditures and changes in fund balance – budget and actual................52 Other Post-Employment Benefits Plan Schedules ....................................................................................................54

Other post employment benefit plan schedule of funding progress.......................................................................55 Other post employment benefit plan actuarial methods and assumptions ............................................................56

Notes to Required Supplementary Information..........................................................................................................57



1

Independent Auditors’ Report

To the Honorable Mayor and City Council

City of Lawrence, Massachusetts

We have audited the accompanying financial statements of the governmental activities, the business-type

activities, each major fund, and the aggregate remaining fund information of the City of Lawrence, Massachusetts,

as of and for the fiscal year ended June 30, 2009 (except for the Lawrence Contributory Retirement System which

is as of and for the year ended December 31, 2008), which collectively comprise the City’s basic financial

statements as listed in the table of contents. These financial statements are the responsibility of the City of

Lawrence, Massachusetts' management. Our responsibility is to express an opinion on these financial

statements based on our audit. We did not audit the City of Lawrence, MA Contributory Retirement System Trust

Funds at December 31, 2008 and for the year then ended (a component unit of the City of Lawrence). Those

statements and required supplementary information were audited by another auditor whose report has been

furnished to us, and our opinion, insofar as it relates to the Contributory Retirement System Trust Fund, is based

on the report of the other auditors.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America

and the standards applicable to financial audits contained in Government Auditing Standards , issued by the

Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain

reasonable assurance about whether the financial statements are free of material misstatement. An audit

includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.

An audit also includes assessing the accounting principles used and significant estimates made by management,

as well as evaluating the overall financial statement presentation. We believe that our audit provides a

reasonable basis for our opinion.

In our opinion, based on our report and the report of other auditors, the financial statements referred to above

present fairly, in all material respects, the respective financial position of the governmental activities, the

business-type activities, each major fund, and the aggregate remaining fund information of the City of Lawrence,

Massachusetts, as of June 30, 2009 (except for the Lawrence Contributory Retirement System which is as of and

for the year ended December 31, 2008), and the respective changes in financial position and cash flows, where

applicable, thereof for the fiscal year then ended in conformity with accounting principles generally accepted in the

United States of America.

In accordance with Government Auditing Standards , we have also issued our report dated January 9, 2010, on

our consideration of the City of Lawrence, Massachusetts’ internal control over financial reporting and our tests of

its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters.

The purpose of that report is to describe the scope of our testing of internal control over financial reporting and

compliance and the results of that testing, and not to provide an opinion on the internal control over financial

reporting or on compliance. That report is an integral part of an audit performed in accordance with Government

Auditing Standards and should be read in conjunction with this report in considering the results of our audit.

Management’s discussion and analysis, located on the following pages, and the schedule of revenues,

expenditures and changes in fund balance – general fund – budgetary basis, other post-employment benefit plan

schedule of funding progress and, other post-employment benefit plan actuarial methods and assumptions

located after the notes to the basic financial statements are not a required part of the basic financial statements



2

but are supplementary information required by the accounting principals generally accepted in the United States

of America. We have applied certain limited procedures, which consisted principally of inquiries of management

regarding the methods of measurement and presentation of the required supplementary information. However,

we did not audit the information and express no opinion on it.

As discussed in Note 15 to the accompanying financial statements, on December 31, 2009, the Governor of the

Commonwealth of Massachusetts proposed legislation “An Act Providing For The Financial Stability of The City ofLawrence” (Act). Under this Act, there will be the establishment of a Fiscal Overseer appointed by the Secretary

of Administration and Finance (Secretary) vested with comprehensive authority over all of the City’s finances,

including appropriations, borrowings, transfers of funds, and municipal spending authorizations. The Act

establishes a City of Lawrence Fiscal Stability Fund, into which will be deposited up to $35 million of borrowing,

to maintain and operate the City for fiscal years beginning July 1, 2009, and July 1, 2010. Amounts may be

disbursed from this fund under conditions approved by the Commissioner of Revenue. The Act also provides that

if the Fiscal Overseer concludes at any time after January 31, 2011, that the City is unable to achieve a balanced

budget and fiscal stability, the Secretary may terminate the existence of the Fiscal Overseer and appoint a

Finance Control Board (Board). Under the Act, the Board would not only have all of the powers of the Fiscal

Overseer, but also the power to exercise any function or power of any municipal officer or employee, whether

elected or otherwise, including certain powers to approve or disapprove contracts and have control over all

personnel matters.

January 9, 2010



City of Lawrence, Massachusetts 3 Management’s Discussion and Analysis

Management’s Discussion and Analysis



City of Lawrence, Massachusetts 4 Basic Financial Statements

Management’s Discussion and Analysis

As management of the City of Lawrence (the “City”), we offer readers of these basic financial statements this

narrative overview and analysis of the financial activities for the fiscal year ended June 30, 2009. We encourage

readers to consider the information presented in this report.

Overview of the Financial Statements

This discussion and analysis is intended to serve as an introduction to the City’s basic financial statements.

These basic financial statements comprise of three components: 1) government-wide financial statements, 2)

fund financial statements, and 3) notes to the financial statements. The government-wide financial statements

provide both long-term and short-term information about the City as a whole. The fund financial statements focus

on the individual components of the City government, reporting the City’s operations in more detail than the

government-wide statements. Both presentations (government-wide and fund) allow the user to address relevant

questions, broaden the basis of comparison and enhance the City’s accountability. An additional part of the basic

financial statements are the notes to the financial statements. This report also contains other required

supplementary information in addition to the basic financial statements themselves.

Government-wide financial statements - The government-wide financial statements are designed to provide

readers with a broad overview of finances, in a manner similar to private-sector business.

The statement of net assets presents information on all assets and liabilities, with the difference between the two

reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of

whether the financial position is improving or deteriorating.

The statement of activities presents information showing how the government’s net assets changed during the

most recent fiscal year. All changes in net assets 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 andearned but unused vacation leave).

Both of the government-wide financial statements distinguish functions 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 or charges (business-type activities ). The governmental

activities include general government, public safety, education, public works, human services, culture and

recreation, interest, and state and county charges. The business type activities include costs relating to the water

and sewer activities.

The government-wide financial statements include not only the City itself (known as the primary government ), but

also a legally separate public employee retirement system for which the City is financially accountable. Financial

information for this component unit is reported separately within the fiduciary fund statements.

Fund financial statements - A fund is a grouping of related accounts that is used to maintain control over

resources that have been segregated for specific activities or objectives. Fund accounting is used to ensure and

demonstrate compliance with finance-related legal requirements. All of the funds can be divided into two

categories: governmental funds and fiduciary funds.




Governmental funds - Governmental funds are used to account for essentially the same functions reported as

governmental activities in the government-wide financial statements. However, unlike the government-wide

financial statements, governmental fund statements focus on near-term inflows 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 thegovernment-wide financial statements. By doing so, readers may better understand the long-term impact of the

government’s near-term financing decisions. Both the governmental fund balance sheet and the governmental

fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this

comparison between governmental funds and governmental activities.

The City maintains approximately 40 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. Data from the other funds are combined into a single, aggregate

presentation under the caption non-major governmental funds .

The City adopts an annual appropriated budget for its general fund. A budgetary comparison statement has been

provided for the general fund to demonstrate compliance with this budget.

Proprietary funds – The City maintains two types of proprietary funds.

Enterprise funds are used to report the same functions presented as business-type activities in the government-

wide financial statements. The City uses the enterprise funds to account for its water and sewer operations.

Internal service funds are an accounting device used to accumulate and allocate costs internally among various

functions. The City uses internal service funds to account for self-insured employee health programs. Because

these services primarily benefit governmental rather than business-type activities, they have been included within

governmental activities in the government-wide financial statements.

Fiduciary funds - Fiduciary funds are used to account for resources held for the benefit of parties outside thegovernment. Fiduciary funds are not reflected in the government-wide financial statement because the resources

of those funds are not available to support the City’s own programs. The accounting used for fiduciary funds is

much like that used for propriety funds.

The fiduciary fund financial statements provide separate information for the pension trust fund of the City. All

other fiduciary funds are combined into a single, aggregate presentation in the fiduciary fund financial statements

under the caption private purpose trust funds.

Notes to the basic financial statements - The notes provide additional information that is essential to a full

understanding of the data provided in the government-wide and fund financial statements.

Government-wide Financial Analysis

As noted earlier, net assets may serve over time as a useful indicator of a government’s financial position. The

City’s assets exceeded liabilities by $170.5 million at the close of Fiscal 2009, a decrease of $30.7 million from

the prior year.




Net assets of $204.6 mill ion reflects its investment in capital assets (e.g., land, buildings, infrastructure,

machinery, and equipment), less any related debt used to acquire those assets that are still outstanding. The City

uses these capital assets to provide services to citizens; consequently, these assets are not available for future

spending. Although the investment in its capital assets is reported net of its related debt, it should be noted that

the resources needed to repay this debt must be provided from other sources, since the capital assets

themselves cannot be used to liquidate these liabilities.

An additional portion of the City’s net assets, $14.3 million, represents resources that are subject to external

restrictions on how they may be used. The remaining balance of unrestricted net assets has a negative amount

of $48.4 million.

At the end of the current fiscal year the City is able to report positive balances in two of the three categories of net

assets for the City as a whole. Unrestricted net assets are a negative due primarily to the impact of the

recognition of a post employment liability of $51.1 million.

Details related to the City’s governmental and business-type activities follow.

Governmental Activities

As noted earlier net assets may serve, over time, as a useful indicator of a government’s financial position. The

assets of governmental activities exceeded liabilities by $147.1 million at the close of the FY2009. Components

of the City’s governmental financial position are listed below.

FY2009 FY2008

Assets:

Current assets……………………………………………………… $ 34,284,838 $ 46,430,376

Noncurrent assets (excluding capital)…………………………… 47,648,943 56,490,703

Capital assets………………………………………………………… 261,876,104 260,954,000

Total assets…………………………………………………… 343,809,885 363,875,079

Liabilities:

Current liabilities (excluding debt)………………………………… 19,402,504 16,272,772 Noncurrent liabilities (excluding debt)…………………………… 62,377,266 43,774,096

Current debt………………………………………………………… 7,795,460 7,195,000

Noncurrent debt……………………………………………………… 107,175,000 112,665,000

Total liabilties…………………………………………………… 196,750,230 179,906,868

Net Assets:

Capital assets net of related debt………………………………… 193,730,048 196,536,946

Restricted…………………………………………………………… 14,330,217 12,778,439

Unrestricted…………………………………………………………… (61,000,610) (25,347,174)

Total net assets………………………………………………… $ 147,059,655 $ 183,968,211

A significant portion of the City’s governmental activities net assets, $193.7 million, reflects its investment in

capital assets less any related debt used to acquire those assets that is still outstanding.

The City uses these capital assets to provide services to citizens; therefore, these assets are not available for

future spending. Although the City’s investment in capital assets is reported net of related debt it should be noted

that the resources to repay debt must be provided from other sources since capital assets themselves cannot be

used to liquidate these liabilities.




An additional portion of the net assets of $14.3 million represents resources that are subject to external

restrictions on how they may be used. The remaining deficit balance of unrestricted net assets in the amount of

($61.0) million is due primarily to the implementation of GASB 45. It indicates that the City does not have enough

reserves to meet it’s ongoing, both short-term and long-term, obligations to citizens and creditors.

Included within the governmental activities noncurrent assets, unrelated to capital assets, are $50.8 million in

future year school construction reimbursement grants.

Governmental activity liabilities include $114.9 million in general obligation bonds and $16.1 million in

compensated absence liabilities for unused vacation, special leave, and enhanced longevity benefits payable.

The following summarizes the current and prior year governmental activities:

FY2009 FY2008

Program Revenues:

Charges for services………………………………………………… $ 4,446,304 $ 2,459,791

Operating grants and contributions……………………………… 179,806,552 172,369,965

Capital grants and contributions…………………………………… 6,199,168 24,985,948

Total program revenues……………………………………… 190,452,024 199,815,704

General Revenues:

Real estate and personal property taxes………………………… 43,113,060 38,964,277

Tax liens……………………………………………………………… 220,237 104,842

Motor vehicle and other excise taxes……………………………… 4,607,540 3,488,448

Penalties and interest on taxes…………………………………… 916,374 1,264,758

Payments in lieu of taxes…………………………………………… 524,730 622,884

Grants and contributions not restricted

to specific programs…………………………………………… 40,606,316 41,832,734

Unrestricted investment income…………………………………… 859,810 1,636,973

Other…………………….…………………………………………… 7,208 -

Total general revenues………………………………………… 90,855,275 87,914,916

Transfers, net…………………………………………………………… (476,829) (2,616,024)

Expenses:

General government………………………………………………… 22,127,688 13,048,013

Public safety………………………………………………………… 27,840,364 29,737,171

Education…………………………………………………………… 187,704,517 186,718,994

Public works………………………………………………………… 13,269,753 12,211,741

Human services……………………………………………………… 1,088,300 3,230,889

Culture and recreation……………………………………………… 1,561,783 1,692,450

Pension benefits…………………………………………………… 12,294,907 11,949,701

Employee benefits…………………………………………………… 40,380,731 32,479,677

Interest………………………………………………………………… 6,200,333 5,540,707

State and county charges…………………………………………… 5,270,650 5,040,246

Total expenses………………………………………………… 317,739,026 301,649,589

Change in net assets…………………………………………………… $ (36,908,556) $ (16,534,993)




The governmental activities net assets decreased in the current year by $36.9 million. The reduction in net assets

is due to primarily to three factors.

The first is the implementation of GASB Statement #45, Accounting and Financial Reporting by Employers for

Postemployment Benefits Other Than Pensions . This statement requires a systematic, accrual-basis

measurement and recognition of other post employment benefits (OPEB) costs over a period that approximates

employees’ years of service. In fiscal 2009 the City, based on its actuarial valuation, recognized an expense of$25.8 million for its portion of the liability that was not paid. Second, depreciation exceeded principal payments

on debt by $2.2 million. Finally, the internal service fund decrease by $7.1 million due to reduced revenues and

higher than anticipated claims.

Business-Type Activities

The following summarizes the financial components of the City’s Business-Type Activities:

FY2009 FY2008

Assets:

Current assets……………………………………………………… $ 13,656,942 $ 11,607,548

Capital assets………………………………………………………… 46,591,074 46,130,376 Total assets……………………………………………………… 60,248,016 57,737,924

Liabilities:

Current liabilities (excluding debt)………………………………… 993,823 5,503,184 Noncurrent liabilities (excluding debt)……………………………… 43,859 200,039 Current debt………………………………………………………… 1,874,001 1,622,537 Noncurrent debt……………………………………………………… 33,843,843 30,972,040

Total liabilties…………………………………………………… 36,755,526 38,297,800

Net Assets:

Capital assets net of related debt………………………………… 10,873,230 12,555,526 Unrestricted…………………………………………………………… 12,619,260 6,884,598

Total net assets………………………………………………… $ 23,492,490 $ 19,440,124

Program Revenues:

Charges for services………………………………………………… $ 17,132,325 $ 12,915,057 Operating grants and contributions………………………………… 620,896 632,478

Total program revenues……………………………………… 17,753,221 13,547,535

General Revenues:

Tax liens……………………………………………………………… 1,989,610 934,844

Penalties and interest on taxes…………………………………… 189,549 144,150 Grants and contributions not restrictedUnrestricted investment income…………………………………… - 5,808

Total general revenues………………………………………… 2,179,159 1,084,802

Transfers, net…………………………………………………………… 476,829 2,616,024

Expenses:

Water………………………………………………………………..… 7,499,474 6,074,919

Sewer………………………………………………………………..… 6,728,326 6,891,527 Total expenses………………………………………………… 14,227,800 12,966,446

Change in net assets…………………………………………………… $ 6,181,409 $ 4,281,915




The water and sewer enterprise funds net assets increased by $2.3 million and $3.8 million, respectively, during

the current fiscal year. Most of the change is attributable to an adjustment to rates to better reflect the cost of

providing services.

Total business type activities assets exceeded liabilities by $23.5 million at the close of fiscal year 2009.

Net assets of $10.9 million reflect the investment in capital assets less any debt used to acquire those assets thatare still outstanding. The remaining balance of unrestricted net assets of $12.6 million may be used to meet

ongoing obligations.

Financial Analysis of the Government’s Funds

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

requirements.

Governmental funds - The focus of governmental funds is to provide information on near-term inflows, outflows,

and balances of spendable resources. Such information is useful in assessing financing requirements. In

particular, unreserved 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 end of the fiscal year, governmental funds reported combined ending fund balances of $11.5 million, a

decrease of $4.3 million from the prior year. The decrease is attributable to approximately $10.3 million of

expenditures related to capital projects of which a significant portion was funded by prior year borrowings.

The general fund is the chief operating fund. At the end of the current fiscal year, unreserved fund balance of the

general fund equaled $2.6 million, while total fund balance was $9.3 million. As a measure of the general fund’s

liquidity, it may be useful to compare both unreserved fund balance and total fund balance to total fund

expenditures. Unreserved fund balance represents about 1.1% of general fund expenditures while total fund

balance represents about 4.3% of general fund expenditures. The general fund increased by $2.4 million during

fiscal 2009. This was attributed to better than anticipated revenue collections in most revenue categories, with

real estate and motor vehicle and other excise revenues contributing the majority of the balance.

The state fiscal stabilization grant fund is used to account for federal funds that were received through the

American Recovery and Reinvestment Act. During the last two months of the fiscal year, the City’s state aid was

reduced by approximately $14.3 million. However, the state aid payment was replaced with a like amount of

federal funds. The City’s general fund budget was not adjusted for the late reduction in state funding; rather,

eligible expenditures were transferred from the general fund to the state fiscal stabilization grant fund where an

equal amount of federal revenues were also recorded.

General Fund Budgetary Highlights

The difference between the original budget of $230.5 million and the final amended budget of $232.4 million

amounted to a net increase of $1.8 million. This increase was due to increases in debt service, culture and

recreation, and the public safety budgets.




As previously discussed, the City’s general fund budget was not adjusted for the Chapter 70 reduction that was

funded with state fiscal stabilization funds. Instead, eligible expenditures were transferred from the general fund

to the state fiscal stabilization grant fund where the revenues were also recorded. The revenues recorded in the

general fund were under budgeted and expenditures reported in the general fund were also under budgeted to

compensate for the change in revenue. This created an unfavorable variance in intergovernmental revenues,

which was offset by a favorable variance in the education appropriation.

Capital Asset and Debt Administration

Capital Assets - The City’s investment in capital assets for governmental activities as of June 30, 2009, amounts

to $261.9 million, net of accumulated depreciation. The investment in capital assets includes land; buildings;

systems; improvements; machinery and equipment; park facilities; streets, sidewalks, and storm drains; and water

systems. Additional information on the City’s capital assets may be found in Note 4 to the basic financial

statements.

The City’s investment in capital assets for business type activities as of June 30, 2009 amounts to $46.6 million,

net of accumulated depreciation. The investment in capital assets for the business type activities predominately

relates to water and sewer infrastructure.

Long-term debt - At June 30, 2009, the City had total governmental bonded debt of $114.9 million. The City

issued $4.7 million of new MWPAT bonds and $2.3 million of State Qualified Bonds during fiscal year 2009.

The water enterprise fund has $35.7 million in long-term debt that is supported by the water rates and future

MWPAT principal and interest subsidies totaling $6.2 million. Currently the City has $15.7 million in authorized

and unissued long-term debt relating to future projects.

Fiscal Overseer

The City has been experiencing serious financial stress over the last several years and by the end of FY2009

faced a financial crisis. It has been determined that the City needs the Commonwealth to provide short and long

term financial resources in order to obtain fiscal stability.

On December 31, 2009, the Governor of the Commonwealth of Massachusetts proposed legislation “An Act

Providing For The Financial Stability of The City of Lawrence.” (Act) Under this Act, there will be the

establishment of a Fiscal Overseer appointed by the Secretary of Administration and Finance (Secretary) vested

with comprehensive authority over all of the City’s finances, including appropriations, borrowings, transfers of

funds, and municipal spending authorizations. The Act also establishes a the City of Lawrence Fiscal Stability

Fund, into what will be deposited up to $35 million of borrowing, to maintain and operate the City for fiscal years

beginning July 1, 2009, and July 1, 2010. Amounts may be disbursed from this fund under conditions approved

by the Commissioner of Revenue.

The Act provides that if the Fiscal Overseer concludes ay any time after January 31, 2011 that the City is unable

to achieve a balanced budget and fiscal stability, the Secretary may terminate the existence of the Fiscal

Overseer and appoint a Finance Control Board (Board). Under the Act, the Board would not only have all of the

powers of the Fiscal Overseer, but also the power to exercise any function or power of any municipal officer or

employee, whether elected or otherwise, including certain powers to approve or disapprove contracts and have

control over all personnel matters.




Financial Condition

The current focus on resolving the deteriorating financial condition is with the City’s General Fund, Health

Insurance Internal Service Fund, and School Construction Fund. The Special Revenue Funds are self-supporting

through charges for services, grants and contributions and therefore do not create deficits in their operations. The

other Capital Projects Funds are supported by grants and long-term bond issues but can create deficits due to the

uncertainty of the final costs incurred during construction.

In order for long-term stability to be obtained the City needed to solve its short-term term budget problems for

fiscal 2010 and fiscal 2011. For fiscal 2010 a $9.5 million operating deficit and a capital project deficit of $8

million is projected. The fiscal 2011 deficit has not been clearly identified at this time.

Requests for Information

This financial report is designed to provide a general overview of the City of Lawrence’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 Budget and Finance Director,

City Hall, 200 Common Street, Lawrence, MA 01840.




Basic Financial Statements



STATEMENT OF NET ASSETS

JUNE 30, 2009

Governmental Business-type

Activities Activities Total

ASSETSCURRENT:

Cash and cash equiva lents…………………………………… $ 21,765,235 $ 2,341,363 $ 24,106,598

Investments……………………………………………………… 586,658 - 586,658

Receivables, net of allowance for uncollectibles:

Real estate and personal property taxes………………… 3,587,412 - 3,587,412

Water and sewer liens……………………………………… - 1,383,257 1,383,257

Motor vehicle and other excise taxes…………………… 827,590 - 827,590

User fees…………………………………………………… - 6,189,315 6,189,315

Departmental and other…………………………………… 13,379 - 13,379

Special assessments……………………………………… 14,770 - 14,770

Intergovernmental…………………………………………… 7,170,494 3,743,007 10,913,501

Working capital deposit………………………………………… 158,800 - 158,800

Deferred loss on refunding…………………………………… 160,500 - 160,500

NONCURRENT:


Intergovernmental…………………………………………… 46,019,000 - 46,019,000

Loans.………………………………………………………… 813,943 - 813,943

Deferred loss on refunding…………………………………… 816,000 - 816,000

Capital assets, not being depreciated………………………… 6,250,751 29,428,545 35,679,296

Capital assets, net of accumulated depreciation…………… 255,625,353 17,162,529 272,787,882

TOTAL ASSETS…………………………………………………… 343,809,885 60,248,016 404,057,901

LIABILITIES

CURRENT:

Warrants payable……………………………………………… 7,391,756 362,644 7,754,400

Accrued payroll………………………………………………… 1,226,327 - 1,226,327

Health claims payable………………………………………… 2,502,524 - 2,502,524

Tax refunds payable…………………………………………… 319,000 - 319,000

Accrued interest………………………………………………… 1,905,368 482,053 2,387,421

Payroll withholdings…………………………………………… 289,202 - 289,202

Other liabilities………………………………………………… 450,960 147 451,107

Compensated absences……………………………………… 5,276,740 148,979 5,425,719

Unamortized premium on bonds and notes payable……… 40,627 - 40,627

Bonds and notes payable……………………………………… 7,795,460 1,874,001 9,669,461

NONCURRENT:

Compensated absences……………………………………… 10,775,899 43,859 10,819,758

Other post-employment benefits……………………………… 51,056,000 - 51,056,000

Bonds and notes payable……………………………………… 107,175,000 33,843,843 141,018,843

Unamortized premium on bonds and notes payable……… 545,367 - 545,367

TOTAL LIABILITIES……………………………………………… 196,750,230 36,755,526 233,505,756

NET ASSETS

Invested in capital assets, net of related debt…………………… 193,730,048 10,873,230 204,603,278

Restricted for:

Debt service…………………………………………………… 86,385 - 86,385

Loans…………………………………………………………… 813,943 - 813,943

Fiscal stability…………………………………………………… 3,733,728 3,733,728

Permanent funds:

Expendable……….………………………………………… 1,338,981 - 1,338,981

Nonexpendable……………………………………………… 391,900 - 391,900 Other purposes………………………………………………… 7,965,280 - 7,965,280

Unrestricted………………………………………………………… (61,000,610) 12,619,260 (48,381,350)

TOTAL NET ASSETS……………………………………………… $ 147,059,655 $ 23,492,490 $ 170,552,145

See notes to basic financial statements.

Primary Government




STATEMENT OF ACTIVITIES


Operating Capital

Charges for Grants and Grants and Net (Expense)Functions/Programs Expenses Services Contributions Contributions Revenue

Primary Government:

Governmental Activities:

General government……………………………… $ 22,127,688 $ 963,136 $ 13,333,737 $ 34,232 $ (7,796,583)

Public safety……………………………………… 27,840,364 1,205,761 3,084,711 - (23,549,892)

Education…………………………………………… 187,704,517 953,636 159,773,483 - (26,977,398)

Massachusetts School Building Authority……… - - - 1,756,333 1,756,333

Public works………………………………………… 13,269,753 1,277,112 397,112 2,218,571 (9,376,958)

Human services…………………………………… 1,088,300 - 270,042 - (818,258)

Culture and recreation…………………………… 1,561,783 46,659 187,311 - (1,327,813)

Pension benefits…………………………………… 12,294,907 - - - (12,294,907)

Employee benefits………………………………… 40,380,731 - 2,760,156 - (37,620,575)

Interest……………………………………………… 6,200,333 - - 2,190,032 (4,010,301)

State and county charges………………………… 5,270,650 - - - (5,270,650)

Total Governmental Activities………………… 317,739,026 4,446,304 179,806,552 6,199,168 (127,287,002)

Business-Type Activities:

Water……………………………………………….. 7,499,474 7,618,124 620,896 - 739,546

Sewer……………………………………….……… 6,728,326 9,514,201 - - 2,785,875

Total Business-Type Activities………………… 14,227,800 17,132,325 620,896 - 3,525,421

Total Primary Government……………………… $ 331,966,826 $ 21,578,629 $ 180,427,448 $ 6,199,168 $ (123,761,581)

See notes to basic financial statements. (Continued)

Program Revenues




STATEMENT OF ACTIVITIES (Continued)


Governmental Business-Type

Activities Activities Total

Changes in net assets:

Net (expense) revenue from previous page………… $ (127,287,002) $ 3,525,421 $ (123,761,581)

General revenues:

Real estate and personal property taxes,

net of tax refunds payable………………………… 43,113,060 - 43,113,060

Tax liens……………………………………………… 220,237 1,989,610 2,209,847

Motor vehicle and other excise taxes……………… 4,607,540 - 4,607,540

Penalties and interest on taxes…………………… 916,374 189,549 1,105,923

Payments in lieu of taxes…………………………… 524,730 - 524,730

Grants and contributions not restricted to

specific programs………………………………… 40,606,316 - 40,606,316 Unrestricted investment income…………………… 859,810 - 859,810

Other………….……………………………………… 7,208 - 7,208

Transfers, net …………………………………………… (476,829) 476,829 -

Total general revenues and transfers………………… 90,378,446 2,655,988 93,034,434

Change in net assets……………………………… (36,908,556) 6,181,409 (30,727,147)

Net Assets:

Beginning of year (as restated)…………………… 183,968,211 17,311,081 201,279,292

End of year…………………………………………… $ 147,059,655 $ 23,492,490 $ 170,552,145

(Concluded)

Primary Government




JUNE 30, 2009

Nonmajor Total

Home Governmental GovernmentalASSETS General Fund Funds Funds

Cash and cash equivalents…………………………………………… $ 12,762,217 $ 25,808 $ 2,794,029 $ 15,582,054

Investments……………………………………………………………… - - 586,658 586,658

Receivables, net of uncollectibles:

Real estate and personal property taxes………………………… 3,587,412 - - 3,587,412

Motor vehicle and other excise taxes……………………………… 827,590 - - 827,590

Departmental and other……………………………………………… 7,518 - 5,861 13,379

Special assessments………………………………………………… 14,770 - - 14,770

Intergovernmental…………………………………………………… 51,480,158 51,871 1,657,465 53,189,494

Loans………………………………………………………………… - - 813,943 813,943

TOTAL ASSETS………………………………………………………… $ 68,679,665 $ 77,679 $ 5,857,956 $ 74,615,300


LIABILITIES:

Warrants payable…………………………………………………… $ 2,239,055 $ 40,155 $ 1,852,411 $ 4,131,621

Accrued payroll……………………………………………………… 1,226,327 - - 1,226,327

Tax refunds payable………………………………………………… 319,000 - - 319,000

Payroll withholdings………………………………………………… 289,202 - - 289,202

Other liabilities………………………………………………………… 450,960 - - 450,960

Deferred revenues…………………………………………………… 54,842,374 - 1,824,235 56,666,609

TOTAL LIABILITIES…………………………………………………… 59,366,918 40,155 3,676,646 63,083,719

FUND BALANCES:

Reserved for:

Encumbrances and continuing appropriations………………… 2,988,620 - - 2,988,620

Reserve of fiscal stability………………………………………… 3,733,728 - - 3,733,728

Perpetual permanent funds……………………………………… - - 1,338,981 1,338,981

Unreserved:


General fund…………………………………………………… 2,590,399 - - 2,590,399

Special revenue funds………………………………………… - 37,524 4,372,640 4,410,164

Debt service fund……………………………………………… - - 86,385 86,385

Capital projects funds………………………………………… - - (4,008,596) (4,008,596)

Permanent funds……………………………………………… - - 391,900 391,900

TOTAL FUND BALANCES……………………………………………… 9,312,747 37,524 2,181,310 11,531,581

TOTAL LIABILITIES AND FUND BALANCES……………………… $ 68,679,665 $ 77,679 $ 5,857,956 $ 74,615,300


GOVERNMENTAL FUNDS

BALANCE SHEET




RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TOTAL FUND BALANCES TO THE STATEMENT OF NET ASSETS

JUNE 30, 2009

Total governmental fund balances………………………………………………………………… $ 11,531,581

Capital assets (net) used in governmental activities are not financial resources

and, therefore, are not reported in the funds………………………………………………… 261,876,104

Accounts receivable are not available to pay for current-period

expenditures and, therefore, are deferred in the funds…………………………………… 56,666,609

The assets and liabilities of the internal service funds are included in

the governmental activities in the statement of net assets…………………………… 579,322

In the statement of activities, interest is accrued on outstanding long-term debt,

whereas in governmental funds interest is not reported until due………………………… (1,905,368)

Long-term liabilities are not due and payable in the current period and, therefore,

are not reported in the governmental funds

Bonds and notes payable…………………………………………………………………… (114,970,460)

Unamortized premiums on bonds and notes payable…………………………………… (585,994)

Other post employment benefits liability…………………………………………………… (51,056,000)

Compensated absences……………………………………………………………………… (16,052,639)

Net effect of reporting long-term liabilities…………………………………………… (182,665,093)

In the statement of activities, deferred losses are reported for refundings of

debt, which are amortized over the shorter of the remaining life of the

refunding bonds or refunded bonds. In governmental funds, defeasances

of debt are expensed when the refunding bonds are issued……………………………… 976,500

Net assets of governmental activities……………………………………………………………… $ 147,059,655





GOVERNMENTAL FUNDS

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES


Nonmajor Total

Home State Fiscal Governmental Governmental

General Fund Stabilization Funds FundsREVENUES:


net of tax refunds………………………………………………………… $ 46,714,326 $ - $ - $ - $ 46,714,326

Tax liens……………………………………………………………………… 220,237 - - - 220,237

Motor vehicle and other excise taxes……………………………………… 4,640,075 - - - 4,640,075

Penalties and interest on taxes…………………………………………… 916,374 - - - 916,374

Payments in lieu of taxes…………………………………………………… 524,730 - - - 524,730

Licenses and permits……………………………………………………… 1,266,590 - - - 1,266,590

Fines and forfeitures………………………………………………………… 1,464,745 - - - 1,464,745

Intergovernmental…………………………………………………………… 172,615,227 1,322,612 14,308,148 38,075,457 226,321,444

Departmental and other…………………………………………………… 1,648,374 20,920 - 4,493,955 6,163,249

Contributions………………………………………………………………… - - - 310,575 310,575

Investment income…………………………………………………………… 716,972 4,081 - 96,459 817,512

TOTAL REVENUES………………………………………………… 230,727,650 1,347,613 14,308,148 42,976,446 289,359,857

EXPENDITURES:Current:

General government…………………………………………………… 6,477,229 1,353,992 - 17,170,468 25,001,689

Public safety……………………………………………………………… 27,152,745 - - 3,386,163 30,538,908

Education………………………………………………………………… 145,384,038 - 14,308,148 25,562,065 185,254,251

Public works……………………………………………………………… 11,309,889 - - 2,776,007 14,085,896

Human services………………………………………………………… 895,501 - - 217,063 1,112,564

Culture and recreation…………………………………………………… 1,219,590 - - 143,817 1,363,407

Pension benefits………………………………………………………… 12,294,907 - - - 12,294,907

Employee benefits……………………………………………………… 7,378,856 - - - 7,378,856

State and county charges…………………………………………………… 5,270,650 - - - 5,270,650

Debt service:

Principal…………………………………………………………………… 7,195,000 - - - 7,195,000

Interest…………………………………………………………………… 5,966,385 - - - 5,966,385

TOTAL EXPENDITURES…………………………………………… 230,544,790 1,353,992 14,308,148 49,255,583 295,462,513

EXCESS (DEFICIENCY) OF REVENUES

OVER EXPENDITURES…………………………………………………… 182,860 (6,379) - (6,279,137) (6,102,656)

OTHER FINANCING SOURCES (USES):

Proceeds from bonds and notes…………………………………………… - - - 2,305,460 2,305,460

Premium from issuance of bonds………………………………………… 7,208 - - - 7,208

Transfers in…………………………………………………………………… 3,619,411 - - 386,403 4,005,814

Transfers out………………………………………………………………… (1,103,232) - - (3,379,411) (4,482,643)

TOTAL OTHER FINANCING SOURCES (USES)………………… 2,523,387 - - (687,548) 1,835,839

NET CHANGE IN FUND BALANCES………………………………………… 2,706,247 (6,379) - (6,966,685) (4,266,817)

FUND BALANCES AT BEGINNING OF YEAR……………………………… 6,606,500 43,903 - 9,147,995 15,798,398

FUND BALANCES AT END OF YEAR……………………………………… $ 9,312,747 $ 37,524 $ - $ 2,181,310 $ 11,531,581





RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES,

AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS

TO THE STATEMENT OF ACTIVITIES


Net change in fund balances - total governmental funds………………………………………………… $ (4,266,817)

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

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

estimated useful lives and reported as depreciation expense.

Capital outlay………………………………………………………………………………………… 10,275,448

Depreciation expense……………………………………………………………………………… (9,353,343)

Net effect of reporting capital assets……………………………………………………… 922,105

Revenues in the Statement of Activities that do not provide current financial

resources are fully deferred in the Statement of Revenues, Expenditures and

Changes in Fund Balances. Therefore, the recognition of revenue for various

types of accounts receivable (i.e., real estate and personal property, motor

vehicle excise, etc.) differ between the two statements. This amount represents

the net change in deferred revenue………………………………………………………………… (8,102,064)

The issuance of long-term debt (e.g., bonds and leases) provides current financial

resources to governmental funds, while the repayment of the principal of long-

term debt consumes the financial resources of governmental funds. Neither

transaction, however, has any effect on net assets. Also, governmental funds

report the effect of premiums, discounts, and similar items when debt is

first issued, whereas these amounts are deferred and amortized in the

Statement of Activities.

Capital lease financing………………………………………………………………………………

Proceeds from bonds and notes…………………………………………………………………… (2,305,460)

Premium from issuance of bonds………………………………………………………………… (7,208)

Debt service principal payments…………………………………………………………………… 7,195,000

Net effect of reporting long-term debt……………………………………………………… 4,882,332

Some expenses reported in the Statement of Activities do not require the use of

current financial resources and, therefore, are not reported as expenditures

in the governmental funds.

Net change in compensated absences accrual………………………………………………… 2,842,205

Net change in other post employment benefits accrual………………………………………… (25,818,000)

Net change in accrued interest on long-term debt……………………………………………… (114,075)

Amortization of bond premiums…………………………………………………………………… 47,835

Amortization of deferred charge on refunding…………………………………………………… (160,500)

Net effect of recording long-term liabilities and amortizing deferred losses…………… (23,202,535)

Internal service funds are used by management to account for health

insurance and workers' compensation activities.

The net activity of internal service funds is reported with Governmental Activities………… (7,141,577)

Change in net assets of governmental activities…………………………………………………………… $ (36,908,556)





Business-type Activities - Enterprise Funds

GovernmentalActivities -

Internal Service

Water Sewer Total Funds

ASSETS

CURRENT:

Cash and cash equivalents……………………………… $ 483,337 $ 1,858,026 $ 2,341,363 $ 6,183,181


User fees……………………………………………… 2,870,297 3,319,018 6,189,315 -

Water and sewer liens………………………………… 208,812 1,174,445 1,383,257 -

Intergovernmental……………………………………… 3,743,007 - 3,743,007 -

Working capital deposit…………………………………… - - - 158,800

Total current assets……………………………… 7,305,453 6,351,489 13,656,942 6,341,981

NONCURRENT:


Capital assets, not being depreciated………………… 29,428,545 - 29,428,545 -

Capital assets, net of accumulated depreciation……… 14,536,754 2,625,775 17,162,529 -

Total noncurrent assets…………………………… 43,965,299 2,625,775 46,591,074 -

TOTAL ASSETS……………………………………………… 51,270,752 8,977,264 60,248,016 6,341,981

LIABILITIES

CURRENT:

Warrants payable………………………………………… 326,496 36,148 362,644 3,260,135

Health claims payable…………………………………… - - - 2,502,524

Accrued interest…………………………………………… 482,053 - 482,053 -

Other liabilities…………………………………………… 147 - 147 -

Compensated absences………………………………… 78,667 70,312 148,979 -

Bonds and notes payable………………………………… 1,874,001 - 1,874,001 -

Total current liabilities……………………………… 2,761,364 106,460 2,867,824 5,762,659

NONCURRENT:

Compensated absences………………………………… 27,621 16,238 43,859 -

Bonds and notes payable………………………………… 33,843,843 - 33,843,843 -

Total noncurrent liabilities………………………… 33,871,464 16,238 33,887,702 -

TOTAL LIABILITIES………………………………………… 36,632,828 122,698 36,755,526 5,762,659

NET ASSETS

Invested in capital assets, net of related debt…………… 8,971,879 2,625,775 11,597,654 -

Unrestricted…………………………………………………… 5,666,045 6,228,791 11,894,836 579,322

TOTAL NET ASSETS………………………………………… $ 14,637,924 $ 8,854,566 $ 23,492,490 $ 579,322


PROPRIETARY FUNDS

STATEMENT OF NET ASSETS

JUNE 30, 2009




PROPRIETARY FUNDS

STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS



Governmental

Activities -

Internal Service


OPERATING REVENUES:

Employer and employee contributions …………………… $ - $ - $ - $ 31,314,029

Charges for services ……………………………………… 7,618,124 9,514,201 17,132,325 -

Utility liens…………………………………………………… 903,913 1,085,697 1,989,610 -

Penalties and interest……………………………………… 85,567 103,982 189,549 -

TOTAL OPERATING REVENUES …………………… 8,607,604 10,703,880 19,311,484 31,314,029

OPERATING EXPENSES:

Cost of services and administration ……………………… 5,492,761 1,057,586 6,550,347 - Intergovernmental assessments…………………………… 29,605 5,485,945 5,515,550 -

Depreciation………………………………………………… 492,840 69,596 562,436 -

Employee benefits ………………………………………… 272,500 115,199 387,699 38,497,904

TOTAL OPERATING EXPENSES …………………… 6,287,706 6,728,326 13,016,032 38,497,904

OPERATING INCOME (LOSS)………………………… 2,319,898 3,975,554 6,295,452 (7,183,875)

NONOPERATING REVENUES (EXPENSES):

Investment income………………………………………… - - - 42,298

Interest expense…………………………………………… (1,211,768) - (1,211,768) -

Intergovernmental…………………………………………… 620,896 - 620,896 -

TOTAL NONOPERATING

REVENUES (EXPENSES), NET……………………… (590,872) - (590,872) 42,298

INCOME (LOSS) BEFORE

TRANSFERS…………………………………………… 1,729,026 3,975,554 5,704,580 (7,141,577)

TRANSFERS:

Transfers in…………………………………………………… 716,829 - 716,829 -

Transfers out………………………………………………… (120,000) (120,000) (240,000) -

TOTAL OPERATING TRANSFERS…………………… 596,829 (120,000) 476,829 -

CHANGE IN NET ASSETS…………………………… 2,325,855 3,855,554 6,181,409 (7,141,577)

NET ASSETS AT BEGINNING OF YEAR (as restated)…… 12,312,069 4,999,012 17,311,081 7,720,899

NET ASSETS AT END OF YEAR…………………………… $ 14,637,924 $ 8,854,566 $ 23,492,490 $ 579,322





PROPRIETARY FUNDS

STATEMENT OF CASH FLOWS



GovernmentalActivities -

Internal Service


CASH FLOWS FROM OPERATING ACTIVITIES:

Receipts from customers and users……………………………………………… $ 7,780,292 $ 7,970,194 $ 15,750,486 $ 31,314,029

Receipts from interfund services provided……………………………………… - -

Payments to other governments…………………………………………………… (29,605) (5,485,945) (5,515,550)

Payments to vendors……………………………………………………………… (5,427,532) (1,138,364) (6,565,896) (37,519,298)

Payments for interfund services used…………………………………………… (272,500) (115,199) (387,699) -

NET CASH FROM OPERATING ACTIVITIES……………………………………… 2,050,655 1,230,686 3,281,341 (6,205,269)

CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES:

Transfers in…………………………………………………………………………… 716,829 - 716,829 -

Transfers out………………………………………………………………………… (120,000) (120,000) (240,000) -

Intergovernmental subsidy………………………………………………………… 871,557 - 871,557 -

NET CASH FROM NONCAPITAL FINANCING ACTIVITIES……………………… 1,468,386 (120,000) 1,348,386 -

CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES:

Acquisition and construction of capital assets…………………………………… (1,023,134) - (1,023,134) -

Principal payments on bonds and notes………………………………………… (1,622,537) - (1,622,537) -

Interest expense…………………………………………………………………… (1,030,092) - (1,030,092) -

Intergovernmental revenue………………………………………………………… 620,896 - 620,896 -

NET CASH FROM CAPITAL AND RELATED FINANCING ACTIVITIES………… (3,054,867) - (3,054,867) -

CASH FLOWS FROM INVESTING ACTIVITIES:

Investment income………………………………………………………………… - - - 42,298

NET CHANGE IN CASH AND CASH EQUIVALENTS……………………………… 464,174 1,110,686 1,574,860 (6,162,971)

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR…………………… 19,163 747,340 766,503 12,346,152

CASH AND CASH EQUIVALENTS AT END OF YEAR…………………………… $ 483,337 $ 1,858,026 $ 2,341,363 $ 6,183,181

RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH

FROM OPERATING ACTIVITIES:

Operating income ( loss)…………………………………………………………… $ 2,319,898 $ 3,975,554 $ 6,295,452 $ (7,183,875)

Adjustments to reconcile operating income (loss) to net

cash from operating activities:

Depreciation……………………………………………………………………… 492,840 69,596 562,436 -

Changes in assets and liabilities:

User fees……………………………………………………………………… (790,516) (1,559,241) (2,349,757) -

Water and sewer liens……………………………………………………… (36,796) (1,174,445) (1,211,241) -

Inventory……………………………………………………………………… 83,600 2,265 85,865 -

Working capital deposit……………………………………………………… - - (158,800)

Warrants payable…………………………………………………………… 26,959 (110,643) (83,684) 1,358,001

Health claims payable……………………………………………………… - - (220,595)

Accrued compensated absences…………………………………………… (45,330) 27,600 (17,730) -

Total adjustments………………………………………………………… (269,243) (2,744,868) (3,014,111) 978,606

NET CASH FROM OPERATING ACTIVITIES……………………………………… $ 2,050,655 $ 1,230,686 $ 3,281,341 $ (6,205,269)





FIDUCIARY FUNDS

STATEMENT OF FIDUCIARY NET ASSETS

JUNE 30, 2009

PensionTrust Fund Private

(as of December Purpose Agency

31, 2008) Trust Funds Funds

ASSETS

CURRENT:

Cash and cash equivalents………………………………… $ 2,219,623 $ 584,633 $ 212,268

Investments…………………………………………………… 94,067,236 - -


Intergovernmental………………………………………… 7,237,313 - -

TOTAL ASSETS………………………………………………… 103,524,172 584,633 212,268

LIABILITIES

Warrants payable…………………………………………… 516,665 - -

Liabilities due depositors…………………………………… - - 212,268

TOTAL LIABILITIES……………………………………………… 516,665 - 212,268

NET ASSETS

Held in trust for pension benefits and other purposes…… $ 103,007,507 $ 584,633 $ -





FIDUCIARY FUNDS

STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS


Pension

Trust Fund Private

(as of December Purpose

31, 2008) Trust Funds

ADDITIONS:

Contributions:

Employer……………………………………………………………… $ 14,022,192 $ -

Employee……………………………………………………………… 5,498,796 -

Private donations……………………………………………………… - 2,478

Total contributions………………………………………………… 19,520,988 2,478

Net investment income (loss):Net change in fair value of investments…………………………… (41,589,379) -

Interest………………………………………………………………… 4,153,494 8,319

Total investment income (loss)………………………………… (37,435,885) 8,319

Less: investment expense…………………………………………… (952,137) -

Net investment income (loss)……………………………………… (38,388,022) 8,319

Intergovernmental…………………………………………………… 1,258,722 -

Transfers from other systems……………………………………… 251,714 -

TOTAL ADDITIONS……………………………………………… (17,356,598) 10,797

DEDUCTIONS:

Transfers to other systems…………………………………………… 740,701 -

Retirement benefits and refunds…………………………………… 18,644,793 -

Educational scholarships…………………………………………… - 31,691

TOTAL DEDUCTIONS…………………………………………… 19,385,494 31,691

CHANGE IN NET ASSETS……………………………………… (36,742,092) (20,894)

NET ASSETS AT BEGINNING OF YEAR…………………………… 139,749,599 605,527

NET ASSETS AT END OF YEAR……………………………………… $ 103,007,507 $ 584,633





Notes to Basic Financial Statements Fiscal Year Ended June 30, 2009


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying basic financial statements of the City of Lawrence, Massachusetts (City) have been prepared

in accordance with accounting principles generally accepted in the United States of America (GAAP). The

Governmental Accounting Standards Board (GASB) is the recognized standard-setting body for establishing

governmental accounting and financial reporting principles. The significant City accounting policies are described

herein.

A. Reporting Entity

The City is a municipal corporation governed by an elected Mayor and a nine member City Council.

For financial reporting purposes, the City has included all funds, organizations, account groups, agencies, boards,

commissions and institutions. The City has also considered all potential component units for which it is financially

accountable as well as other organizations for which the nature and significance of their relationship with the City

are such that exclusion would cause the basic financial statements to be misleading or incomplete. As required

by GAAP, these basic financial statements present the City (the primary government) and its component units.

One entity has been included as a component unit in the reporting entity, because of the significance of its

operational and/or financial relationship.

Blended Component Units – Blended component units are entities that are legally separate from the City, but are

so related that they are, in substance, the same as the City or entities providing services entirely or almost entirely

for the benefit of the City. The following component unit is blended within the primary government:

The Lawrence Contributory Retirement System (System) was established to provide retirement benefits to City

employees and their beneficiaries. The System is presented using the accrual basis of accounting and is reported

as a pension trust fund in the fiduciary fund financial statements. Additional financial information of the System

can be obtained by contacting the System located at Retirement Board, 599 Canal Street, Lawrence,

Massachusetts, 01840.

Availability of Financial Information for Component Units

The System issues a separate audited financial statement. That report may be obtained by contacting the

System located at 354 Merrimack Street, Lawrence, Massachusetts, 01840.

B. Government-Wide and Fund Financial Statements

Government-Wide Financial Statements

The government-wide financial statements (i.e., statement of net assets and the statement of changes in net

assets) report information on all of the non-fiduciary activities of the primary government and its component units.

Governmental activities , which are primarily supported by taxes and intergovernmental revenues, are reported

separately from business-type activities , which are supported primarily by user fees and charges.

Fund Financial Statements

Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even

though fiduciary funds are excluded from the government-wide financial statements. Major individual

governmental funds and major individual enterprise funds are reported as separate columns in the fund financial

statements. Nonmajor funds are aggregated and displayed in a single column.





Major Fund Criteria

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

• If the total assets, liabilities, revenues, or expenditures/expenses of an individual governmental or

enterprise fund are at least 10 percent of the corresponding element (assets, liabilities, etc.) for all

funds of that category or type (total governmental or total enterprise funds), and

• If the total assets, liabilities, revenues, or expenditures/expenses of the individual governmental

fund or enterprise fund are at least 5 percent of the corresponding element for all governmental

and 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.

Internal service funds and fiduciary funds are reported by fund type.

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


The government-wide financial statements are reported using the economic resources measurement focus and

the accrual basis of accounting. Under this method, revenues are recorded when earned and expenses are

recorded when the liabilities are incurred. Real estate and personal property taxes are recognized as revenues in

the fiscal year for which they are levied. Grants and similar items are recognized as revenue as soon as all

eligibility requirements imposed by the provider have been met.

The statement of activities demonstrates the degree to which the direct expenses of a particular function or

segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific

function or segment. Program revenues include the following:

• Charges to customers or applicants who purchase, use, or directly benefit from goods, services, or

privileges provided by a given function or segment.

• Grants and contributions that are restricted to meeting the operational requirements of a particular

function or segment.

• Grants and contributions that are restricted to meeting the capital requirements of a particular function or

segment.

Taxes and other items not identifiable as program revenues are reported as general revenues.

For the most part, the effect of interfund activity has been removed from the government-wide financialstatements. However, the effect of interfund services provided and used between functions is not eliminated as

the elimination of these charges would distort the direct costs and program revenues reported for the functions

affected.






Governmental fund financial statements are reported using the flow of current financial resources measurement

focus and the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues

are recognized when susceptible to accrual (i.e., measurable and available). Measurable means the amount of

the transaction can be determined and available means collectible within the current period or soon enough

thereafter to pay liabilities of the current period. Expenditures are recorded when the related fund liability isincurred, except for unmatured interest on general long-term debt which is recognized when due, and certain

compensated absences, claims and judgments which are recognized when the obligations are expected to be

liquidated with current expendable available resources.

Real estate and personal property tax revenues are considered available if they are collected within 60 days after

fiscal year-end. Investment income is susceptible to accrual. Other receipts and tax revenues become

measurable and available when the cash is received and are recognized as revenue at that time.

Entitlements and shared revenues are recorded at the time of receipt or earlier if the susceptible to accrual criteria

is met. Expenditure driven grants recognize revenue when the qualifying expenditures are incurred and all other

grant requirements are met.

The following major governmental funds are reported:

The general fund is the primary operating fund. It is used to account for all financial resources, except those that

are required to be accounted for in another fund.

The home fund is used to account for the Housing of Urban Development HOME program.

The nonmajor governmental funds consist of special revenue, capital projects 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 fund is used to account for the proceeds of specific revenue sources (other than permanentfunds or capital projects funds) that are restricted by law or administrative action to expenditures for specified

purposes.

The capital projects fund is used to account for financial resources to be used for the acquisition or construction of

major capital facilities (other than those financed by Enterprise and Trust Funds).

The permanent fund is used to account for financial resources that are legally restricted to the extent that only

earnings, not principal, may be used for purposes that support the governmental programs.

Proprietary fund financial statements are reported using the flow of economic resources measurement focus and

use the accrual basis of accounting. Under this method, revenues are recorded when earned and expenses are

recorded when the liabilities are incurred.

Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues

and expenses generally result from providing services and producing and delivering goods in connection with the

proprietary funds principal ongoing operations. All revenues and expenses not meeting this definition are

reported as nonoperating revenues and expenses.





The major proprietary funds reported are the water enterprise fund, which is used to account for water activities;

and the sewer enterprise fund, which is used to account for sewer activities.

Additionally, the internal service fund is reported as a proprietary fund type, which is designed to account for the

financing of services provided by one department to other departments or governmental units. The internal

service fund is used to account for risk financing activities related to employees’ health insurance.

Fiduciary fund financial statements are reported using the flow of economic resources measurement focus and

use the accrual basis of accounting. Fiduciary funds are used to account for assets held in a trustee capacity for

others that cannot be used to support the governmental programs.

The following fiduciary fund types are reported:

The pension trust fund is used to account for the activities of the System, which accumulates resources to provide

pension benefits to eligible retirees and their beneficiaries.

The private-purpose trust fund is used to account for trust arrangements, other than those properly reported in the

pension trust fund or permanent fund, under which principal and investment income exclusively benefit

individuals, private organizations, or other governments.

The agency fund is used to account for assets held in a purely custodial capacity.

Government-Wide and Fund Financial Statements

For the government-wide financial statements, and proprietary and fiduciary fund accounting, all applicable

Financial Accounting Standards Board (FASB) pronouncements issued on or prior to November 30, 1989, are

applied, unless those pronouncements conflict with or contradict GASB pronouncements.

D. Cash and Investments


Cash and cash equivalents are considered to be cash on hand, demand deposits and short-term investments with

an original maturity of three months or less from the date of acquisition. Investments are carried at fair value.

E. Accounts Receivable


The recognition of revenue related to accounts receivable reported in the government-wide financial statements

and the proprietary funds and fiduciary funds financial statements are reported under the accrual basis of

accounting. The recognition of revenue related to accounts receivable reported in the governmental funds

financial statements are reported under the modified accrual basis of accounting.

Real Estate, Personal Property Taxes and Tax Liens

Real estate and personal property taxes are levied and based on values assessed on January 1st of every year.

Assessed values are established by the Board of Assessor’s for 100% of the estimated fair market value. Taxes

are due on August 1st, November 1

st, February 1

stand May 1

stof each fiscal year and are subject to penalties and

interest if they are not paid by the respective due date. Real estate and personal property taxes levied are

recorded as receivables in the fiscal year of the levy.





Real estate tax liens are processed during the fourth quarter of every fiscal year on delinquent properties and are

recorded as receivables in the fiscal year they are processed.

Real estate receivables are secured via the tax lien process and are considered 100% collectible. Accordingly,

an allowance for uncollectibles is not reported.

Personal property taxes cannot be secured through the lien process. The allowance of uncollectibles is estimatedbased on historical trends and specific account analysis.

Motor Vehicle Excise

Motor vehicle excise taxes are assessed annually for each vehicle registered in the City and are recorded as

receivables in the fiscal year of the levy. The Commonwealth is responsible for reporting the number of vehicles

registered and the fair values of those vehicles. The tax calculation is the fair value of the vehicle multiplied by

$25 per $1,000 of value.

The allowance for uncollectibles is estimated based on historical trends and specific account analysis.

Water

Water user fees are levied quarterly based on individual meter readings and are subject to penalties and interest

if they are not paid by the respective due date. Water liens are processed in December of every year and

included as a lien on the property owner’s tax bill. Water charges and liens are recorded as receivables in the

fiscal year of the levy.

Since the receivables are secured via the lien process, these accounts are considered 100% collectible and

therefore do not report an allowance for uncollectibles.

Sewer

Sewer user fees are levied quarterly based on individual water meter readings and are subject to penalties andinterest if they are not paid by the respective due date. Sewer liens are processed in December of every year and

included as a lien on the property owner’s tax bill. Sewer charges and liens are recorded as receivables in the

fiscal year of the levy.

Since the receivables are secured via the lien process, these accounts are considered 100% collectible and

therefore do not report an allowance for uncollectibles.

Departmental and Other

Departmental and other receivables consist primarily of outstanding parking tickets and are recorded as

receivables in the fiscal year accrued. The allowance of uncollectibles is estimated based on historical trends and

specific account analysis.

Intergovernmental

Various federal and state grants for operating and capital purposes are applied for and received annually. For

non-expenditure driven grants, receivables are recorded as soon as all eligibility requirements imposed by the

provider have been met. For expenditure driven grants, receivables are recorded when the qualifying

expenditures are incurred and all other grant requirements are met.





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

Loans

The Department of Planning and Development administers loan programs that provide housing assistance to

residents and capital needs assistance for small businesses. Upon issuance, a receivable is recorded for the

principal amount of the loan.

The allowance of uncollectibles is estimated based on historical trends and specific account analysis.

F. Inventories


Inventories are recorded as expenditures at the time of purchase. Such inventories are not material in total to the

government-wide and fund financial statements, and therefore are not reported.

G. Capital Assets

Government-Wide and Proprietary Fund Financial Statements

Capital assets, which include land, land improvements, buildings, machinery and equipment, and infrastructure

(e.g., roads, water mains, sewer mains, and similar items), are reported in the applicable governmental or

business-type activity column of the government-wide financial statements, and the proprietary fund financial

statements. Capital assets are recorded at historical cost, or at estimated historical cost, if actual historical cost is

not available. Donated capital assets are recorded at the estimated fair market value at the date of donation.

Except for the capital assets of the governmental activities column in the government-wide financial statements,

construction period interest is capitalized on constructed capital assets.

Capital assets (excluding land) are depreciated on a straight-line basis. The estimated useful lives of capitalassets are as follows:

EstimatedUseful

Life(in years)

Buildings………………………………………… 40Building Improvements………………………… 20Infrastructure……………………………………. 30-75Vehicles………………………………………… 5

Office Equipment……………………………… 5Computer Equipment…………………………… 5

Capital Asset Type

All purchases and construction costs in excess of $25,000 are capitalized at the date of acquisition or

construction, respectively, with expected useful lives of greater than one year.

The cost of normal maintenance and repairs that do not add to the value of the assets or materially extend asset

lives are not capitalized and are treated as expenses when incurred. Improvements are capitalized.





Governmental Fund Financial Statements

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

H. Interfund Receivables and Payables

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


Transactions of a buyer/seller nature between and within governmental funds and internal service funds are

eliminated from the governmental activities in the statement of net assets. Any residual balances outstanding

between the governmental activities and business-type activities are reported in the statement of net assets as

“internal balances”.


Transactions of a buyer/seller nature between and within funds are not eliminated from the individual fundstatements. Receivables and payables resulting from these transactions are classified as “Due from other funds”

or “Due to other funds” on the balance sheet.

I. Interfund Transfers

During the course of its operations, resources are permanently reallocated between and within funds. These

transactions are reported as operating transfers in and operating transfers out.


Operating transfers between and within governmental funds and internal service funds are eliminated from the

governmental activities in the statement of net assets. Any residual balances outstanding between thegovernmental activities and business-type activities are reported in the statement of activities as “Transfers, net”.


Operating transfers between and within funds are not eliminated from the individual fund statements and are

reported as operating transfers in and operating transfers out.

J. Deferred Revenue

Deferred revenue at the governmental fund financial statement level represents billed receivables that do not

meet the available criterion in accordance with the current financial resources measurement focus and the

modified accrual basis of accounting. Deferred revenue is recognized as revenue in the conversion to thegovernment-wide (full accrual) financial statements.

K. Net Assets and Fund Equity

Government-Wide Financial Statements (Net Assets)

Net assets are reported as restricted when amounts that are not available for appropriation or are legally

restricted by outside parties for a specific future use.





Net assets reported as “invested in capital assets, net of related debt” includes capital assets, net of accumulated

depreciation, less the principal balance of outstanding debt used to acquire capital assets. Unspent proceeds of

capital related debt are not considered to be capital assets. Outstanding debt related to future reimbursements

from the state’s school building program is not considered to be capital related debt.

Net assets have been “restricted for” the following:

“Debt service” represents funds set aside for debt service on bonds issued to fund the direct costs of Department

of Education approved school construction.

“Loans” represents home and community development outstanding loans receivable balances.

“Fiscal stability” represents amounts accumulated that can be used for unforeseen expenditures pursuant to

Chapter 41 of the Acts of 1990, as amended by chapter 377 of the Acts of 1992. This amount is equal to 1.5% of

the prior fiscal year’s amount to be raised.

“Permanent funds - expendable” represents amounts held in trust for which the expenditures are restricted by

various trust agreements.

“Permanent funds - nonexpendable” represents amounts held in trust for which only investment earnings may be

expended.

“Other specific purposes” represents restrictions placed on assets from outside parties such as federal and state

grants.

Fund Financial Statements (Fund Balances)

Fund balances are reserved for amounts that are not available for appropriation or are legally restricted by outside

parties for a specific future use. Designations of fund balance represent tentative management plans that are

subject to change.

Fund balances have been “reserved for” the following:

“Encumbrances and continuing appropriations” represents amounts obligated under purchase orders, contracts

and other commitments for expenditures that are being carried over to the ensuing fiscal year.

“Loans” represents home and community development outstanding loans receivable balances.

“Fiscal stability” represents amounts accumulated that can be used for unforeseen expenditures pursuant to

Chapter 41 of the Acts of 1990, as amended by chapter 377 of the Acts of 1992. This amount is equal to 1.5% of

the prior fiscal year’s amount to be raised.

“Perpetual permanent funds” represents amounts held in trust for which only investment earnings may beexpended.





L. Long-term debt


Long-term debt is reported as liabil ities in the government-wide and proprietary fund statement of net assets.

Material bond premiums and discounts are deferred and amortized over the life of the bonds using the effective

interest method. Bonds payable are reported net of the applicable bond premium or discount.


The face amount of governmental funds long-term debt is reported as other financing sources. Bond premiums

and discounts, as well as issuance costs, are recognized in the current period. Bond premiums are reported as

other financing sources and bond discounts are reported as other financing uses. Issuance costs, whether or not

withheld from the actual bond proceeds received, are reported as general government expenditures.

M. Investment Income

Excluding the permanent funds and internal service funds, investment income derived from major nonmajor

governmental funds and enterprise funds is legally assigned to the general fund unless otherwise directed byMassachusetts General Law (MGL).

N. Compensated Absences

Employees are granted vacation and sick leave in varying amounts based on collective bargaining agreements,

state laws and executive policies.


Vested or accumulated vacation and sick leave are reported as liabilities and expensed as incurred.


Vested or accumulated vacation and sick leave, which will be liquidated with expendable available financial

resources, are reported as expenditures and fund liabilities.

O. Use of Estimates


The preparation of basic financial statements in conformity with GAAP requires management to make estimates

and assumptions that affect the reported amounts of assets and liabilities and disclosure for contingent assets

and liabilities at the date of the basic financial statements and the reported amounts of the revenues and

expenditures/expenses during the fiscal year. Actual results could vary from estimates that were used.

P. Individual Fund Deficits

At year end the High School Building Project had a deficit of approximately $5 million. This deficit is anticipated to

be funded by future grant receipts. Additionally, there are several individual fund deficits within the Special

Revenue Funds. These deficits will be funded through grants and available fund balances.





Q. Total Column


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

information.


The total column on the fund financial statements is presented only to facilitate financial analysis. Data in this

column is not the equivalent of consolidated financial information.

NOTE 2 - CASH AND INVESTMENTS

A cash and investment pool is maintained that is available for use by all funds. Each fund type's portion of this

pool is displayed on the balance sheet as "Cash and Short-term Investments". The deposits and investments of

the trust funds are held separately from those of other funds.

Statutes authorize the investment in obligations of the U.S. Treasury, agencies, and instrumentalities, certificates

of deposit, repurchase agreements, money market accounts, bank deposits and the State Treasurer's Investment

Pool (the Pool). The Treasurer may also invest trust funds in securities, other than mortgages or collateral loans,

which are legal for the investment of funds of savings banks under the laws of the Commonwealth.

The Pool meets the criteria of an external investment pool. The Pool is administered by the Massachusetts

Municipal Depository Trust (MMDT), which was established by the Treasurer of the Commonwealth who serves

as Trustee. The fair value of the position in the Pool is the same 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 a bank failure, the government’s deposits may not bereturned to it. The government does not have a deposit policy for custodial credit risk. At fiscal year-end, the

carrying amount of deposits totaled $19,393,809 and the bank balance totaled $29,620,467. Of the bank

balance, $1,545,911 was covered by Federal Depository Insurance, $27,460,384 is collateralized and $614,172 is

uncollateralized and subject to custodial credit risk.

At December 31, 2008, carrying amount of deposits for the system totaled $2,219,623 and the bank balance

totaled $2,390,600. All of the bank balance was covered by the Federal Depository Insurance and none of the

funds were exposed to custodial risk.





Investments

As of June 30, 2009, the City had the following investments:

Investment Type Fair Value Over 10 Years

Debt Securities

Corporate Bonds…………………………………………………… $ 586,658 $ 586,658

Other Investments

MMDT……………………………………………………………………… 5,509,690

Total Investments............................................................................. $ 6,096,348

Maturity

As of December 31, 2008, the System had the following investments:

Pension Reserve Investment Trust (PRIT) …………………… $ 94,067,236

Custodial Credit Risk – Investments

For an investment, this is the risk that, in the event of a failure by the counterparty, the City will not be able to

recover the value of its investments or collateral security that are in the possession of an outside party. Of the

City’s investments, $586,658 in corporate bonds have custodial credit risk exposure because the related

securities are uninsured, unregistered and are not held in the City’s name.

Interest Rate Risk

The City does not have a formal investment policy that limits investment maturities as a means of managing its

exposure to fair value losses arising from increasing interest rates.

The System does not have a formal policy that limits investment maturities as a means of managing its exposure

to fair value losses arising from increasing interest rates. However, when managing assets the System at all

times must be in accordance with the provisions of the Public Employee Retirement Administration Commission

(PERAC), the Employee Retirement Income Security Act (ERISA), and Department of Labor regulations.

Credit Risk

The City has not adopted a formal policy related to credit risk. At June 30, 2009, all of the City’s investments

were rated by Moody’s Investment Services (Moody’s) and/or an equivalent national rating organization and the

ratings are presented below using the Moody’s rating scale.

Fair

Rated Debt Investments Value A2 AA2 A3 BA1 BA2 BAA1 BAA2 BAA3

Corporate Bonds……… $ 586,658 $ 118,780 $ 64,020 $ 183,126 $ 22,350 $ 21,300 $ 30,075 $ 55,050 $ 91,957

Ratings

The System has not adopted a formal policy related to credit risk. At December 31, 2008 the System does not

have any rated investments.





Concentration of Credit Risk

The City has not adopted a formal policy related to the amount that may be invested in any one issuer. At June

30, 2009 the City’s investment in any one issuer did not exceed 5% of the total amount invested.

The System has not adopted a formal policy related to the amount that may be invested in any one issuer. At

December 31, 2008 the System’s investment in any one issuer did not exceed 5% of the total amount invested.

NOTE 3 - RECEIVABLES

At June 30, 2009, receivables for the individual major governmental funds and nonmajor, internal service, and

fiduciary funds in the aggregate, including the applicable allowances for uncollectible accounts, are as follows:

Allowance

Gross for Net

Amount Uncollectibles Amount

Real estate and personal property taxes………… $ 4,117,166 $ (529,754) $ 3,587,412 Motor vehicle and other excise taxes……………… 1,534,590 (707,000) 827,590

Departmental and other……………………………… 13,379 - 13,379

Special assessments………………………………… 14,770 - 14,770

Intergovernmental…………………………………… 53,189,494 - 53,189,494

Loans………………………………………………… 813,943 - 813,943

Total ……………………………………………… $ 59,683,342 $ (1,236,754) $ 58,446,588

At June 30, 2009, receivables for the water and sewer enterprise consist of the following:

Allowance

Gross for NetAmount Uncollectibles Amount

User fees……………………………………………… $ 6,189,315 $ - $ 6,189,315

Liens…………………………………………………… 1,383,257 1,383,257

Intergovernmental…………………………………… 3,743,007 - 3,743,007

Structured settlement contracts……………………

Total ……………………………………………… $ 11,315,579 $ - $ 11,315,579





Governmental funds report deferred revenue in connection with receivables for revenues that are not considered

to be available to liquidate liabilities of the current period. At the end of the current fiscal year, the various

components of deferred revenue reported in the governmental funds were as follows:

General Governmental

Fund Funds Total

Receivable type:Real estate and personal property taxes…………… $ 3,159,496 $ - $ 3,159,496

Motor vehicle and other excise taxes……………… 827,590 - 827,590

Departmental and other……………………………… 7,518 - 7,518

Special assessments……………………………… 14,770 - 14,770

Intergovernmental…………………………………… 50,833,000 1,010,292 51,843,292

Loans…………………………………………………… - 813,943 813,943

Total…………………………………………………… $ 54,842,374 $ 1,824,235 $ 56,666,609

NOTE 4 - CAPITAL ASSETS

Capital asset activity for the fiscal year ended June 30, 2009, was as follows:

Beginning EndingGovernmental Activities: Balance Increases Decreases Balance

Capital assets not being depreciated:Land…………………………………………………… $ 6,250,751 $ - $ - $ 6,250,751 Construction in progress…………………………… 107,770,752 - - (107,770,752) -

.Total capital assets not being depreciated…… 114,021,503 - (107,770,752) 6,250,751

Capital assets being depreciated:Buildings and improvements………………………… 151,673,679 111,801,914 - 263,475,593 Machinery, Equipment, and Furnishings…………… 18,165,069 4,815,818 - 22,980,887 Vehicles……………………………………………… 2,049,902 - 2,049,902 Infrastructure………………………………………… 15,010,073 1,428,468 - 16,438,541

Total capital assets being depreciated………… 186,898,723 118,046,200 - 304,944,923

Less accumulated depreciation for:Buildings and improvements………………………… (23,735,413) (6,636,444) - (30,371,857) Machinery, Equipment, and Furnishings…………… (12,351,657) (1,964,910) - (14,316,567) Vehicles……………………………………………… (1,031,523) (341,025) - (1,372,548) Infrastructure………………………………………… (2,847,634) (410,964) - (3,258,598)

- Total accumulated depreciation………………… (39,966,227) (9,353,343) - (49,319,570)

Total capital assets being depreciated, net…………… 146,932,496 108,692,857 - 255,625,353

Total governmental activi ties capital assets, net……… $ 260,953,999 $ 108,692,857 $ (107,770,752) $ 261,876,104





Water Enterprise Balance Increases Decreases Balance

Capital assets not being depreciated:Land…………………………………………………… $ 9,335 $ - $ - $ 9,335 Construction in progress…………………………… 28,396,076 1,023,134 - 29,419,210

Total capital assets not being depreciated…… 28,405,411 1,023,134 - 29,428,545

Capital assets being depreciated:Buildings and improvements………………………… 4,656,182 - - 4,656,182 Machinery, Equipment, and Furnishings…………… 580,505 - - 580,505 Vehicles……………………………………………… 204,283 - - 204,283 Infrastructure………………………………………… 16,535,525 - - 16,535,525

Total capital assets being depreciated………… 21,976,495 - - 21,976,495

Less accumulated depreciation for:Buildings and improvements………………………… (1,984,668) (90,506) - (2,075,174) Machinery, Equipment, and Furnishings…………… (189,624) (69,656) (259,280) Vehicles……………………………………………… (195,821) (3,385) (199,206) Infrastructure………………………………………… (4,576,788) (329,293) - (4,906,081)

Total accumulated depreciation………………… (6,946,901) (492,840) - (7,439,741)

Total capital assets being depreciated, net…………… 15,029,594 (492,840) - 14,536,754

Total water activities capital assets, net……………… $ 43,435,005 $ 530,294 $ - $ 43,965,299

Beginning EndingSewer Enterprise Balance Increases Decreases Balance

Capital assets being depreciated:Machinery and equipment…………………………… 144,581 - - 144,581

Vehicles……………………………………………… 268,257 - - 268,257

Infrastructure………………………………………… 5,551,562 - - 5,551,562

Total capital assets being depreciated………… 5,964,400 - - 5,964,400

Less accumulated depreciation for:

Machinery and equipment…………………………… (91,137) (4,292) - (95,429) Vehicles……………………………………………… (185,756) (21,893) - (207,649) Infrastructure………………………………………… (2,993,136) (43,411) - (3,036,547)

Total accumulated depreciation………………… (3,270,029) (69,596) - (3,339,625)

Total sewer activities capital assets, net……………… $ 2,694,371 $ (69,596) $ - $ 2,624,775





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

Governmental Activities:

General government…………………………………………………………… $ 1,915,730 Public safety……………………………………………………………………… 527,600 Education………………………………………………………………………… 5,748,010

Public works……………………………………………………………………… 901,763 Human services………………………………………………………………… 4,683 Culture and recreation…………………………………………………………… 255,557

Total depreciation expense - governmental activities…………………………… $ 9,353,343

Business-Type Activities:

Water……………………………………………………………………………… $ 492,840 Sewer……………………………………………………………………………… 69,596

Total depreciation expense - business-type activities…………………………… $ 562,436

NOTE 5 - INTERFUND TRANSFERS

Interfund transfers for the fiscal year ended June 30, 2009, are summarized as follows:

Nonmajor Water

General Governmental Enterprise

Operating Transfers Out: Fund Funds Fund Total

General Fund………………………….. $ - $ 386,403 $ 716,829 $ 1,103,232

Nonmajor Governmental Funds……… 3,379,411 - - 3,379,411

Water Enterprise Fund………………… 120,000 - - 120,000

Sewer Enterprise Fund………………. 120,000 - - 120,000

Total……………...…………………… $ 3,619,411 $ 386,403 $ 716,829 $ 4,722,643

Operating Transfers In:

Transfers out of the General Fund represent budget transfers voted to fund fiscal year 2009 operations.

NOTE 6 - SHORT-TERM FINANCING

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

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

• Capital project costs and other approved expenditures incurred prior to obtaining permanent financing through

issuance of bond anticipation notes (BANS) or grant anticipation notes (GANS).





• Current project costs and other approved expenditures incurred, that are approved to be reimbursed by the

Commonwealth, through the issuance of state anticipation notes (SANS).

Short-term loans are general obligations and carry maturity dates that are limited by statute. Interest

expenditures and expenses for short-term borrowings are accounted for in the general fund.

Details related to the short-term debt activity for the fiscal year ended June 30, 2009, is as follows:

Balance at Balance atMaturity Rate June 30 Renewed/ Retired/ June 30

Type Description Date % 2008 Issued Redeemed 2009

BAN Water enterprise……… 12/31/08 1.46 4,745,804$ -$ 4,745,804$ -$

NOTE 7 - LONG-TERM DEBT

Under the provisions of Chapter 44, Section 10, Municipal Law authorizes indebtedness up to a limit of 5% of the

equalized valuation. Debt issued in accordance with this section of the law is designated as being "inside thedebt limit". In addition, however, debt may be authorized in excess of that limit for specific purposes. Such debt,

when issued, is designated as being "outside the debt limit".

In previous fiscal years, certain general obligation bonds and enterprise fund bonds were defeased by placing the

proceeds of bonds in an irrevocable trust to provide for all future debt service payments on the refunded bonds.

Accordingly, the trust account’s assets and liabilities for the defeased bonds are not included in the basic financial

statements. At June 30, 2009, $15,868,000 and $31,655,000 of bonds outstanding from these advance

refundings are considered defeased in relation to the governmental funds and the enterprise funds, respectively.

Details related to the outstanding indebtedness as of June 30, 2009, and the debt service requirements are as

follows:

Bonds and Notes Payable Schedule – Governmental Funds

Interest Outstanding OutstandingRate at June 30, at June 30,

Project (%) 2008 Issued Redeemed 2009

Elementary School Bonds…………… 4-5 $ 5,815,000 $ - $ 1,865,000 $ 3,950,000 School Construction………………… 4.1-5 13,020,000 - 1,925,000 11,095,000 New High School Loan……………… 4-5 11,000,000 - 120,000 10,880,000 Land Acquisition……………………… 4.5-5.6 2,150,000 - 350,000 1,800,000 New Refunding Loan………………… 2.5-5 12,400,000 - 1,865,000 10,535,000

Capital Improvement Bonds………… 3-5 4,400,000 - 400,000 4,000,000 Capital Improvement Bonds………… 3.5-5 8,400,000 - 320,000 8,080,000 Capital Improvement Bonds………… 4.5-5 7,320,000 - 270,000 7,050,000 Capital Improvement Bonds………… 4-5 7,000,000 - 80,000 6,920,000 New High School Refunding………… 4-5 48,355,000 - - 48,355,000 State Qualified Bonds……………… 3.25-5 - 2,305,460 - 2,305,460

Total…………………………………………………… $ 119,860,000 $ 2,305,460 $ 7,195,000 $ 114,970,460





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

follows:

Fiscal Year Principal Interest Total

2010………… 7,795,460 5,329,224 13,124,684

2011………… 8,150,000 4,987,650 13,137,6502012………… 8,855,000 4,640,668 13,495,6682013………… 9,170,000 4,273,768 13,443,7682014………… 9,480,000 3,880,862 13,360,8622015………… 7,705,000 3,479,144 11,184,1442016………… 7,605,000 3,125,620 10,730,6202017………… 7,870,000 2,773,496 10,643,4962018………….. 8,525,000 2,381,496 10,906,4962019………… 8,850,000 1,956,746 10,806,7462020………… 8,535,000 1,505,246 10,040,246

2021………… 8,895,000 1,089,494 9,984,4942022………… 2,245,000 649,856 2,894,856

2023………….. 2,320,000 542,244 2,862,2442024………… 2,370,000 432,062 2,802,0622025………… 2,420,000 319,450 2,739,4502026…………. 2,480,000 203,562 2,683,562

2027…………. 1,500,000 84,800 1,584,8002028…………. 100,000 9,950 109,9502029………… 100,000 5,000 105,000

Total………… $ 114,970,460 $ 41,670,338 $ 156,640,798

The Commonwealth has approved school construction assistance for the City. The assistance program, which is

administered by the Massachusetts School Building Authority, provides resources for construction costs and debt

service interest of general obligation school bonds outstanding. During fiscal year 2009, $7,075,032 of suchassistance was received. Approximately $73,658,000 will be received in future fiscal years. Of this amount,

approximately $22,825,000 represents reimbursement of long-term interest costs, and $50,833,000 represents

reimbursement of approved construction costs. Accordingly, a $50,833,000 intergovernmental receivable and

corresponding deferred revenue has been recorded in the fund based financial statements and the change in the

receivable has been recognized as revenue in the conversion to the government-wide financial statements.





Bonds and Notes Payable Schedule – Enterprise Funds

Interest Outstanding OutstandingRate at June 30, at June 30,

Project (%) 2008 Issued Redeemed 2009

MWPAT……………………………… 0.00 $ 4,272,122 $ - $ 267,568 $ 4,004,554 MWPAT……………………………… 0.00 2,162,293 - 134,980 2,027,313 MWPAT……………………………… 0.00 1,753,014 - 109,347 1,643,667

MWPAT……………………………… 2.00 10,006,680 - 449,096 9,557,584 MWPAT……………………………… 2.00 11,049,664 - 515,120 10,534,544 MWPAT……………………………… 2.00 3,350,804 - 146,426 3,204,378 MWPAT……………………………… 2.00 - 4,745,804 - 4,745,804

Total…………………………………………………… $ 32,594,577 $ 4,745,804 $ 1,622,537 $ 35,717,844

Debt service requirements for principal and interest for enterprise fund bonds and notes payable in future fiscal

years are as follows:

Fiscal Year Principal Interest Total

2010…………. 1,874,001 1,187,367 3,061,368 2011…………. 1,904,131 1,142,369 3,046,500 2012………… 1,956,480 1,073,124 3,029,604 2013…………. 2,008,121 976,459 2,984,580 2014………… 2,066,259 922,092 2,988,351 2015………… 2,121,139 844,198 2,965,337 2016………… 2,174,983 976,459 3,151,442 2017…………. 2,239,781 683,433 2,923,214

2018………… 2,314,978 594,455 2,909,433 2019………… 2,380,584 507,026 2,887,610 2020………… 2,451,606 420,916 2,872,522 2021………… 2,508,053 329,085 2,837,138 2022…………. 1,799,933 253,530 2,053,463 2023…………. 1,847,255 195,833 2,043,088 2024…………. 1,895,027 136,436 2,031,463 2025…………. 1,933,261 75,577 2,008,838

2026………… 1,196,963 32,875 1,229,838 2027………… 482,798 16,078 498,876 2028………… 278,433 8,466 286,899 2029………… 284,058 2,841 286,899

Total………… $ 35,717,844 $ 10,378,619 $ 46,096,463

The City is scheduled to be subsidized by the Massachusetts Water Pollution Abatement Trust (MWPAT) on a

periodic basis for principal in the amount of $2,580,147 and interest costs for $3,611,020. Thus, net MWPAT loan

repayments, including interest, are scheduled to be $39,905,296. The principal subsidies are guaranteed. The

interest subsidies are supported through future investment income and are expected to be made, although not

guaranteed. Since the City is legally obligated for the total amount of the debt, such amounts have been reported





in the accompanying basic financial statements. The fiscal year 2009 principal and interest subsidies totaled

approximately 142,000 and $479,000, respectively.

Authorized and Unissued Debt

The City is subject to various debt limits by statute and may issue additional general obligation debt under the

normal debt limit. At June 30, 2009, the City had the following authorized and unissued debt:

Purpose Amount

Water……………………………………………… 49,453 School Construction…………………………… 15,603,000

Total……………………………………………… $ 15,652,453

Changes in Long-term Liabilities

During the fiscal year ended June 30, 2009, the following changes occurred in long-term liabilities:

Governmental Activities: FY 2008 FY 2009Beginning Ending CurrentBalance Additions Reductions Balance Portion

Bonds and notes payable………$ 119,860,000 $ 2,305,460 $ (7,195,000) $ 114,970,460 $ 7,795,460 Compensated absences……… 18,894,844 - (2,842,205) 16,052,639 5,276,740 Post retiremetment benefits…… 25,238,000 - 25,818,000 51,056,000 - Unamortized premium………… 626,621 (40,627) 585,994 40,627

Total governmental activity

long-term liabilities…………… $ 164,619,465 $ 2,305,460 $ 15,740,168 $ 182,665,093 $ 13,112,827

Business-Type Activities: FY 2008 FY 2009Beginning Ending CurrentBalance Additions Reductions Balance Portion

Bonds and notes payable………$ 32,594,577 $ 4,745,804 $ (1,622,537) $ 35,717,844 $ 1,874,001 Compensated absences……… 210,568 - (17,730) 192,838 148,979

Total business type activitylong-term liabilities…………… $ 32,805,145 $ 4,745,804 $ (1,640,267) $ 35,910,682 $ 2,022,980





NOTE 8 - RISK FINANCING

The City is self-insured for its workers’ compensation and its health insurance activities. The health insurance

activities are accounted for in the internal service fund and the workers’ compensation activities are accounted for

in the general fund where revenues are recorded when earned and expenses are recorded when the liability is

incurred.

Liabilities are reported when it is probable that a loss has occurred and the amount of the loss can be reasonably

estimated. Liabilities include an amount for claims that have been incurred but not reported (IBNR). The result of

the process to estimate the claims liability is not an exact amount as it depends on many factors. Accordingly,

claims are reevaluated periodically to consider the effects of inflation, recent claims settlement trends, and other

economic and social factors.

(a) Health Insurance - The City estimates its’ Incurred But Not Reported (IBNR) claims based on an average

of 1.5 month claims paid average. The City purchases individual stop loss insurance for claims in excess

of the $200,000 coverage provided by the City. At June 30, 2009, the amount of the liability for health

insurance claims totaled $2,502,524.

Changes in the reported liability since July 1, 2007, are as follows:

Current YearBalance at Claims and Balance at

Beginning of Changes in Claims FiscalFiscal Year Estimate Payments Year-End

Fiscal Year 2008……… 2,468,888 34,610,539 (34,356,308) 2,723,119 Fiscal Year 2009……… 2,723,119 38,277,309 (38,497,904) 2,502,524

NOTE 9 - PENSION PLAN

Plan Description - The City contributes to the System, a cost-sharing multiple-employer defined benefit pension

plan administered by the Lawrence Contributory Retirement Board. Substantially all employees are members of

the System, except for public school teachers and certain administrators who are members of the Massachusetts

Teachers Retirement System, to which the City does not contribute. Pension benefits and administrative

expenses paid by the Teachers Retirement Board are the legal responsibility of the Commonwealth. The amount

of these on-behalf payments totaled approximately $15,320,000 million for the fiscal year ended June 30, 2009,

and, accordingly, are reported in the general fund as intergovernmental revenues and pension expenditures.

The System provides retirement, disability and death benefits to plan members and beneficiaries. Chapter 32 of

the MGL assigns authority to establish and amend benefit provisions of the plan. Cost-of-living adjustments

granted between 1981 and 1997 and any increase in other benefits imposed by the Commonwealth’s state law

during those years are borne by the Commonwealth and are deposited into the pension fund. Cost-of-livingadjustments granted after 1997 must be approved by the Lawrence Contributory Retirement Board and are borne

by the System. The System issues a publicly available unaudited financial report in accordance with guidelines

established by the Commonwealth’s PERAC. That report may be obtained by contacting the System located at





375 Merrimack Street, Lawrence, Massachusetts, 01852. At December 31, 2008, the System’s membership

consists of the following:

Active members…………………………………………………. 1,424 Inactive members……………………………………………… 403 Retirees and beneficiaries currently receiving benefits……… 916

Total……………………………………………………………… 2,743

Funding Policy - Plan members are required to contribute to the System at rates ranging from 5% to 11% of

annual covered compensation. The City is required to pay into the System its share of the system-wide actuarial

determined contribution that is apportioned among the employers based on active current payroll. Administrative

expenses are funded through investment earnings. The current and two preceding fiscal years apportionment of

the annual pension cost between the two employers required the City to contribute 91% of the total. Chapter 32

of the MGL governs the contributions of plan members and the City.

Annual Pension Cost - The City’s contributions to the System for the fiscal years ended June 30, 2009, 2008, and

2007 were $12,586,552, $12,166,683, and $11,529,350, respectively, which equaled its required contribution for

each fiscal year. At June 30, 2009, the City did not have a net pension obligation. The required contribution wasdetermined as part of the January 1, 2008 actuarial valuation using the entry age normal actuarial cost method.

The actuarial assumptions included an 8.00% investment rate of return and projected salary increases of 4.75%

The actuarial value of the System's assets was determined using the fair value of the assets. The System's

unfunded actuarial accrued liability is being amortized as a level percentage of projected payroll. The remaining

amortization period at January 1, 2009, was 13 years.

Schedule of Funding Progress

Actuarial UAAL as aActuarial Accrued Unfunded Percentage

Actuarial Value of Liability (AAL) AAL Funded Covered of Covered

Valuation Assets Entry Age (UAAL) Ratio Payroll PayrollDate (A) (B) (B-A) (A/B) (C) ((B-A)/C)

01/01/08 $ 139,749,000 $ 285,982,000 $ 146,233,000 $ 48.9% $ 59,578,000 245.4%01/01/07 128,728,000 272,947,000 144,219,000 47.2% 59,178,000 243.7%01/01/04 103,202,000 236,420,000 133,218,000 43.7% 50,355,000 264.6%01/01/03 86,299,000 222,640,000 136,341,000 38.8% 53,621,000 254.3%01/01/00 107,953,000 183,229,000 75,276,000 58.9% 46,092,000 163.3%

Non-contributory Retirement Allowance – City employees with military veteran status and at least 30 years of

service to the City, who began work prior to July 1, 1939, and others meeting eligibility criteria are entitled to a

non-contributory pension benefit equal to 72% of their highest rate of pay. Employees covered by this section of

the plan are not included in the actuarial valuation and there is no available estimate of the related actuarialliability. The City funds these benefits from an annual general fund appropriation. The general fund expenditure

for fiscal year 2009 was $227,060.





NOTE 10 – POST-EMPLOYMENT BENEFITS OTHER THAN PENSIONS

Fiscal year 2009 is the initial year that the City has implemented GASB Statement 45, Accounting and Financial

Reporting by Employers for Post-employment Benefits Other Than Pensions (GASB 45). As allowed by GASB

45, the City has established the net OPEB obligation at zero at the beginning of the transition year and has

applied the measurement and recognition requirements of GASB 45 on a prospective basis.

Plan Description - The City of Lawrence administers a single-employer defined benefit healthcare plan (“the

Retiree Health Plan”). The plan provides lifetime healthcare, dental and life insurance for eligible retirees and

their spouses through the City’s health insurance plan, which covers both active and retired members, including

teachers. Chapter 32b of the MGL assigns authority to establish and amend benefit provisions of the plan.

Benefit provisions are negotiated between the City and the unions representing City employees and are

renegotiated each bargaining period. The Retiree Health Plan does not issue a publicly available financial report.

Funding Policy - The contribution requirements of plan members and the City are established and may be

amended through collective bargaining. The required contribution is based on projected pay-as-you-go financing

requirements. The City contributes 75 percent of the cost of current-year premiums for eligible retired plan

members and their spouses. Plan members receiving benefits contribute the remaining 25 percent of their

premium costs.

Annual OPEB Cost and Net OPEB Obligation - The City's annual other post employment benefit (OPEB) cost

(expense) is calculated based on the annual required contribution of the employer (ARC), an amount actuarially

determined in accordance with the parameters of GASB Statement 45. The ARC represents a level of funding

that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial

liabilities (or funding excess) over a period not to exceed thirty years. The components of the City's annual OPEB

cost for the year, the amount actually contributed to the plan, and changes in the City's net OPEB obligation are

summarized in the following table:

Normal Cost………………………………………………… $ 21,585,000

Amortization of unfunded actuarial accrued liability…… 12,076,000

Annual OPEB cost (expense)…………………………… 33,661,000

Contributions made………………………………………… (7,843,000)

Increase/Decrease in net OPEB obligation……………… 25,818,000

Net OPEB obligation - beginning of year………………… 25,238,000

Net OPEB obligation - end of year……………………… $ 51,056,000

The City's annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB

obligation for 2009 and the preceding year is as follows:

Fiscal YearEnded

Annual OPEBCost

Percentage of Annual OPEBCost Contributed

Net OPEBObligation

6/30/08 $32,405,000 22.1% $25,238,000

6/30/09 $33,661,000 23.3% $51,056,000





Funded Status and Funding Progress - As of January 1, 2009, the most recent actuarial valuation date, the

actuarial liability for benefits was $165.7 million, all of which was unfunded. The covered payroll (annual payroll of

active employees covered by the plan) was not available at year end.

Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions

about the probability of occurrence of events far into the future. Examples include assumptions about future

employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of theplan and the annual required contributions of the employer are subject to continual revision as actual results are

compared with past expectations and new estimates are made about the future. The schedule of funding

progress, presented as required supplementary information following the notes to the financial statements,

presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing

over time relative to the actuarial accrued liabilities for benefits.

Actuarial Methods and Assumptions - Projections of benefits for financial reporting purposes are based on the

substantive plan (the plan as understood by the employer and the plan members) and include the types of

benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the

employer and plan members to that point. The actuarial methods and assumptions used include techniques that

are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of

assets, consistent with the long-term perspective of the calculations.

In the January 1, 2009, actuarial valuation, actuarial liabilities were determined using the projected unit credit cost

method was used. The actuarial assumptions included a 4.0 percent investment rate of return net of investment

expenses, and an annual healthcare cost trend rate of 10 percent initially, graded to 5 percent after five years.

Both rates included a 4.5 percent inflation assumption. The actuarial value of assets was determined using

techniques that spread the effects of short-term volatility in the market value of investments over a five-year

period. The UAAL is being amortized as a level percentage of projected payroll on an closed basis. The

remaining amortization period at June 30, 2009, was thirty years.

NOTE 11 - COMMITMENTS

The City has entered into, or is planning to enter into, contracts totaling approximately $15.6 million for school

construction. These projects will be funded through the issuance of long-term debt.

NOTE 12 - CONTINGENCIES

The City participates in a number of federal award programs. Although the grant programs have been audited in

accordance with the provisions of the Single Audit Act Amendments of 1996 through June 30, 2009, these

programs are still subject to financial and compliance audits. The amount, if any, of expenditures which may be

disallowed by the granting agencies cannot be determined at this time, although it is expected such amounts, if

any, to be immaterial.

Various other legal actions and claims are pending. Litigation is subject to many uncertainties, and the outcome

of individual litigated matters is not always predictable. Although the amount of liability, if any, at June 30, 2009,

cannot be ascertained, management believes any resulting liability should not materially affect the financial

position at June 30, 2009.





NOTE 13 - IMPLEMENTATION OF NEW GASB PRONOUNCEMENTS

During fiscal year 2009, the following GASB pronouncements were implemented:

• The GASB issued Statement #55, The Hierarchy of GAAP for State and Local Governments. The

standards in this statement did not impact the basic financial statements.

• The GASB issued Statement # 56, Codification of Accounting and Financial Reporting Guidance

Contained in the AICPA Statement of Auditing Standards.

Future Implementation of GASB Pronouncements:

• The GASB issued Statement #51, Accounting and Financial Reporting for Intangible Assets, which is

required to be implemented in fiscal year 2010. Management believes this pronouncement will not impact

the financial statements

• .The GASB issued Statement #54, Fund Reporting and Governmental Fund Type Definitions, which is

required to be implemented in fiscal year 2011.

NOTE 14 – BEGINNING BALANCE ADJUSTMENTS

Certain adjustments made to beginning net assets are detailed below.

Governmental WaterActivities Enterprise

Net assets as previously reported………………………………………..……… $ 143,096,211 $ 14,441,112

Recognition of receivable from Massachusetts School Building Authority...… 55,718,000 -

Adjustment for previously reported MWPAT receivable………….…………… - (2,129,043)

Understatement of previously reported OPEB liability………………………… (14,846,000) -

Net assets at beginning of year - as restated…………………………………… $ 183,968,211 12,312,069

NOTE 15 – FISCAL OVERSEER

On December 31, 2009, the Governor of the Commonwealth of Massachusetts proposed legislation “An Act

Providing For The Financial Stability of The City of Lawrence.” (Act) Under this Act, there will be the

establishment of a Fiscal Overseer appointed by the Secretary of Administration and Finance (Secretary) vestedwith comprehensive authority over all of the City’s finances, including appropriations, borrowings, transfers of

funds, and municipal spending authorizations. The Act also establishes a the City of Lawrence Fiscal Stability

Fund, into what will be deposited up to $35 million of borrowing, to maintain and operate the City for fiscal years

beginning July 1, 2009, and July 1, 2010. Amounts may be disbursed from this fund under conditions approved

by the Commissioner of Revenue.





The Act provides that if the Fiscal Overseer concludes ay any time after January 31, 2011 that the City is unable

to achieve a balanced budget and fiscal stability, the Secretary may terminate the existence of the Fiscal

Overseer and appoint a Finance Control Board (Board). Under the Act, the Board would not only have all of the

powers of the Fiscal Overseer, but also the power to exercise any function or power of any municipal officer or

employee, whether elected or otherwise, including certain powers to approve or disapprove contracts and have

control over all personnel matters.



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Required Supplementary Information



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Amounts Current YearCarried forward Initial Original Final

From Prior Year Budget Budget Budget

REVENUES:


net of tax refunds…………………………………………………………… $ - $ 43,195,181 $ 43,195,181 $ 45,007,853

Tax liens………………………………………………………………………… - -

Motor vehicle and other excise taxes……………………………………….. - 3,228,895 3,228,895 3,228,895

Penalties and interest on taxes……………………………………………… - 620,000 620,000 620,000

Payments in lieu of taxes……………………………………………………… - 400,000 400,000 400,000

Licenses and permits…………………………………………………………… - 776,987 776,987 776,987

Fines and forfeitures…………………………………………………………… - 1,203,900 1,203,900 1,203,900

Intergovernmental……………………………………………………………… - 172,911,266 172,911,266 172,911,266

Departmental and other……………………………………………………… - 2,010,072 2,010,072 2,010,072

Investment income……………………………………………………………… - 1,125,000 1,125,000 1,125,000

TOTAL REVENUES…………………………………………………… - 225,471,301 225,471,301 227,283,973

EXPENDITURES:

Current:

General government………………………………………………………… 552,995 6,748,379 7,301,374 7,264,841

Public safety………………………………………………………………… 99,150 24,947,460 25,046,610 26,426,390

Education…………………………………………………………………… 2,222,778 148,557,787 150,780,565 146,841,001

Public works………………………………………………………………… 517,631 9,677,618 10,195,249 10,680,194

Human services…………………………………………………………… 5,893 915,608 921,501 916,364

Culture and recreation……………………………………………………… 48,581 1,276,472 1,325,053 1,379,144

Pension benefits…………………………………………………………… - 205,404 205,404 12,000,180

Employee benefits………………………………………………………… 510 16,243,494 16,244,004 7,160,882

State and county charges……………………………………………………… - 5,832,906 5,832,906 5,396,342

Debt service:

Principal……………………………………………………………………… - 7,195,000 7,195,000 7,195,000

Interest……………………………………………………………………… - 4,366,385 4,366,385 5,966,385

TOTAL EXPENDITURES……………………………………………… 3,447,538 225,966,513 229,414,051 231,226,723

EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES………… (3,447,538) (495,212) (3,942,750) (3,942,750)

OTHER FINANCING SOURCES (USES):

Premium from issuance of bonds…………………………………………… - - - -

Transfers in……………………………………………………………………… - 3,619,411 3,619,411 3,619,411

Transfers out…………………………………………………………………… - (1,172,394) (1,172,394) (1,172,394)

TOTAL OTHER FINANCING SOURCES (USES)…………………… - 2,447,017 2,447,017 2,447,017

NET CHANGE IN FUND BALANCE……………………………………………… (3,447,538) 1,951,805 (1,495,733) (1,495,733)

BUDGETARY FUND BALANCE, Beginning of year…………………………… 7,935,199 7,935,199 7,935,199 7,935,199

BUDGETARY FUND BALANCE, End of year…………………………………… $ 4,487,661 $ 9,887,004 $ 6,439,466 $ 6,439,466

See notes to required supplementary informaton.

GENERAL FUND

SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -

Budgeted Amounts

BUDGET AND ACTUAL



52Required Supplementary Information



Actual AmountsBudgetary Carried Forward Variance

Amounts To Next Year Over/(Under)

$ 45,830,142 $ - $ 822,289

220,237 - 220,237

4,640,075 - 1,411,180

916,374 - 296,374

524,730 - 124,730

1,266,590 - 489,603

1,464,745 - 260,845

157,295,227 - (15,616,039)

1,448,374 - (561,698)

716,972 - (408,028)

214,323,466 - (12,960,507)

6,282,910 358,878 623,053

27,152,745 79,891 (806,246)

129,444,318 2,466,870 14,929,813

11,273,616 198,254 (791,676)

895,501 13,404 7,459

1,219,590 219 159,335

12,294,907 - (294,727)

7,378,856 - (217,974)

5,270,650 - 125,692

7,195,000 - -

5,966,385 - -

214,374,478 3,117,516 13,734,729

(51,012) (3,117,516) 774,222

7,208 - 7,208

3,619,411 - -

(1,103,232) - 69,162

2,523,387 - 76,370

2,472,375 (3,117,516) 850,592

7,935,199 - -

$ 10,407,574 $ (3,117,516) $ 850,592


53Required Supplementary Information



City of Lawrence, Massachusetts 54 Required Supplementary Information

Other Post-Employment Benefits Plan

Schedules Other Post-Employment Benefits Plan Schedules

The Schedule of Funding progress compares, over time, the actuarial accrued liability for benefits with theactuarial value of accumulated plan assets.

The Schedule of Actuarial Methods and Assumptions presents factors that significantly affect the identification of

trends in the amounts reported.



SCHEDULE OF FUNDING PROGRESS

Actuarial UAAL as aActuarial Accrued Unfunded Percentage

Actuarial Value of Liability (AAL) AAL Funded Covered of Covered

Valuation Assets Projected Unit Credit (UAAL) Ratio Payroll Payroll

Date (A) (B) (B-A) (A/B) (C) ((B-A)/C)

7/1/2008 $ - $ 164,725,000 $ 164,725,000 0% $ N/A N/A

The City implemented GASB Statement No. 45 for the fiscal year ended June 30, 2008

Information for prior years is not available.

See notes to required supplementary information.

OTHER POST-EMPLOYMENT BENEFIT PLAN

JUNE 30, 2009




ACTUARIAL METHODS AND ASSUMPTIONS

Actuarial Methods:

Valuation date July 1, 2008Actuarial cost method Projected Unit CreditAmortization method Amortization payments increasing at 4.0%

Remaining amortization period 28 years as of July 1, 2009

Actuarial Assumptions:

Investment rate of return 4.00%, pay-as-you-go scenarioMedical/drug cost trend rate 10% grading down to 5% over 10 years

Plan Membership:

Current retirees, beneficiaries, and dependents 401 Current active members 665

Total 1,066

See notes to required supplementary information.

OTHER POST-EMPLOYMENT BENEFIT PLAN





Notes to Required Supplementary Information Fiscal Year Ended June 30, 2009


NOTE A - STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY

Notes to Required Supplementary Information

A. Budgetary Information

Municipal Law requires the City to adopt a balanced budget that is approved by the City Council (the “Council”).

The Mayor presents an annual budget to the Council, which includes estimates of revenues and other financing

sources and recommendations of expenditures and other financing uses. The Council, which has full authority toamend and/or reject the budget or any line item, adopts the expenditure budget by majority vote.

Increases or transfers between and within departments subsequent to the approval of the annual budget, requires

two-thirds vote or a majority Council, respectively, and the Mayor’s approval via a supplemental appropriation or

Council order.

The majority of appropriations are non-continuing which lapse at the end of each fiscal year. Others are

continuing appropriations for which the governing body has authorized that an unspent balance from a prior fiscal

year be carried forward and made available for spending in the current fiscal year. These carry forwards are

included as part of the subsequent fiscal year’s original budget.

Generally, expenditures may not exceed the legal level of spending (salaries, expenses and capital) authorizedfor an appropriation account. However, the payment of debt service is statutorily required, regardless of whether

such amounts are appropriated. Additionally, expenditures for disasters, natural or otherwise, and final judgments

may exceed the level of spending authorized by two-thirds majority vote of the Council.

An annual budget is adopted for the general fund in conformity with the guidelines described above. The original

fiscal year 2009 approved budget authorizing approximately $227.0 million in current year appropriations, other

financing uses, and other amounts to be raised and approximately $3.4 million in encumbrances and

appropriations carried over from previous fiscal years. During fiscal year 2009, the Council approved

supplemental appropriations totaling approximately $1.8 million.

The City Office of Budget and Finance has the responsibility to ensure that budgetary control is maintained on an

individual line item appropriation account basis. Budgetary control is exercised through the City’s accountingsystem.

B. Budgetary - GAAP Reconciliation

For budgetary financial reporting purposes, the Uniform Municipal Accounting System basis of accounting

(established by the Commonwealth) is followed, which differs from the GAAP basis of accounting. A

reconciliation of budgetary-basis to GAAP-basis results for the general fund for the fiscal year ended June 30,

2009, is presented below:



Notes to Required Supplementary Information Fiscal Year Ended June 30, 2009


Net change in fund balance - budgetary basis…………………………… $ 2,472,375

Basis of accounting differences:

Net change in recording 60-day receipts accrual……………………… (456,055) Net change in recording tax refunds payable…………………………… 564,355 Net change in accrued payroll…………………………………………… (212,920)

Increase in revenues due to on-behalf payments..…….……………… 15,320,000 Decrease in expenditures due to accruals…………………………..…. 587,942.00 Increase in expenditures due to unrecorded liabilities………………… (249,450) Increase in expenditures due to on-behalf payments…………………… (15,320,000)

Net change in fund balance - GAAP basis………………………………… $ 2,706,247

C. Appropriation Deficits

During fiscal year 2009 expenditures exceeded budgeted appropriations for general government and public

works. These deficits will be funded through the tax levy and available funds in fiscal year 2009.

NOTE B – OTHER POST-RETIREMENT BENEFITS

The City of Lawrence administers a single-employer defined benefit healthcare plan (“the Retiree Health Plan”).

The plan provides lifetime healthcare, dental and life insurance for eligible retirees and their spouses through the

City’s health insurance plan, which covers both active and retired members, including teachers.

The City currently finances its other post-employment benefits (OPEB) on a pay-as-you-go basis. As a result, the

funded ratio (actuarial value of assets expressed as a percentage of the actuarial accrued liability) is 0%. In

accordance with Governmental Accounting Standards, the City has recorded its OPEB cost equal to the actuarial

determined annual required contribution (ARC) which includes the normal cost of providing benefits for the year

and a component for the amortization of the total unfunded actuarial accrued liability of the plan.

The Schedule of Funding Progress presents multi-year trend information which compares, over time, the actuarial

accrued liability for benefits with the actuarial value of accumulated plan assets. Since this is the City’s initial year

of implementation of GASB Statement 45, information for prior years is not available.

Projections of benefits for financial reporting purposes are based on the substantive plan and include the types of

benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the

employer and plan members to that point. The actuarial methods and assumptions used include techniques that

are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of

assets, consistent with the long-term perspective of the calculations.

The Schedule of Actuarial Methods and Assumptions presents factors that significantly affect the identification of

trends in the amounts reported.



PROPOSED FORM OF LEGAL OPINION APPENDIX B

(Date of Delivery)

Patricia Cook, City TreasurerCity of LawrenceLawrence, Massachusetts

$_____________City of Lawrence, Massachusetts

State Qualified General Obligation Deficit Financing Bond Anticipation Note

We have acted as bond counsel to the City of Lawrence, Massachusetts (the “City”) inconnection with the issuance by the City of the above-referenced Note (the “Note”) dated as of the date hereof and payable ____________. In such capacity, we have examined the law andsuch 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 andcovenants of the City contained in the certified proceedings and other certifications of publicofficials 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 Note is a valid and binding general obligation of the City and, except to theextent it is paid from the proceeds of the bonds in anticipation of which it is issued or from anyother available moneys, the principal of and interest on the Note are payable from taxes which

may be levied upon all taxable property in the City, subject to the limit imposed by Chapter 59,Section 21C of the General Laws.

2. The Note is a qualified note as defined in Chapter 44A of the General Laws andare entitled to the benefits of the provisions thereof.

3. Interest on the Note is excluded from the gross income of the owners of the Notefor federal income tax purposes. In addition, interest on the Note is not a specific preferenceitem for purposes of the federal individual or corporate alternative minimum taxes and intereston the Note is not included in adjusted current earnings when calculating corporate alternativeminimum taxable income. In rendering the opinions set forth in this paragraph, we have

assumed compliance by the City with all requirements of the Internal Revenue Code of 1986 thatmust be satisfied subsequent to the issuance of the Note in order that interest thereon be, andcontinue to be, excluded from gross income for federal income tax purposes. The City hascovenanted to comply with all such requirements. Failure by the City to comply with certain of such requirements may cause interest on the Note to become included in gross income for federalincome tax purposes retroactive to the date of issuance of the Note. We express no opinionregarding any other federal tax consequences arising with respect to the Note.



4. Interest on the Note is exempt from Massachusetts personal income taxes and theNote is exempt from Massachusetts personal property taxes. We express no opinion regardingany other Massachusetts tax consequences arising with respect to the Note or any tax

consequences arising with respect to the Note under the laws of any state other thanMassachusetts.

This opinion is expressed as of the date hereof, and we neither assume nor undertake anyobligation to update, revise, supplement or restate this opinion to reflect any action taken oromitted, or any facts or circumstances or changes in law or in the interpretation thereof, that mayhereafter arise or occur, or for any other reason.

The rights of the holder of the Note and the enforceability of the Note may be subject tobankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors’rights heretofore or hereafter enacted to the extent constitutionally applicable, and theirenforcement may also be subject to the exercise of judicial discretion in appropriate cases.

Edwards Angell Palmer & Dodge LLP

BOS111 12511589.1

City of Lawrence Financial Statement-2010-11

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Transcript of City of Lawrence Financial Statement-2010-11