COMPREHENSIVEANNUAL FINANCIAL REPORTof theTOWN OF VERNON,CONNECTICUTFOR THE YEAR ENDEDJUNE 30, 2010PREPARED BY:THE FINANCE DEPARTMENTJAMES LUDDECKE, FINANCE OFFICER/TREASURERTOWN OF VERNON, CONNECTICUTCOMPREHENSIVE ANNUALFINANCIAL REPORTAS OF AND FORTHE YEARENDED JUNE 30, 2010TABLE OF CONTENTSINTRODUCTORY SECTIONLIST OF PRINCIPAL OFFICIALS .ORGANlZATIONALCHART..................................................................................................................................... 2LETTER OF TRANSMITTAL 3CERTIFICATE OF ACHIEVEMENT FOR EXCELLENCE IN FINANCIALREPORTING FORTHE YEARENDED JUNE 30, 2009............................................................................. 18FINANCIAL SECTIONINDEPENDENT AUDITORS' REPORT..................................................................................................................... 19MANAGEMENT DISCUSSION AND ANALYSIS 21BASIC FINANCIAL STATEMENTSGOVERNMENT-WIDE FINANCIAL STATEMENTS:EXHIBITSA STATEMENT OF NET ASSETS...................................................................................................... 36B STATEMENT OF ACTIVITIES 38FUND FINANCIAL STATEMENTS:C BALANCE SHEET AND RECONCILIATION OF FUND BALANCETONETASSETS OF GOVERNMENTAL ACTIVITIES - GOVERNMENTAL FUNDS 39D STATEMENT OF REVENUES, EXPENDITURES AND CHANGESIN FUND BALANCES - GOVERNMENTAL FUNDS............................................................. 41E RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURESAND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TOSTATEMENT OF ACTIVITIES.................................................................................................. 42F STATEMENT OF NET ASSETS-PROPRIETARYFUNDS........................................................ 44G STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUNDNET ASSETS -PROPRIETARYFUNDS 45TOWN OF VERNON, CONNECTICUTTABLE OF CONTENTS (CONTINUED)EXHIBITSFUND FINANCIAL STATEMENTS: (CONTINUED)H STATEMENT OF CASH FLOWS - PROPRIETARY FUNDS...................................................... 46I STATEMENT OF FIDUCIARYNET ASSETS............................................................................... 47J STATEMENT OF CHANGES IN FIDUCIARYNET ASSETS..................................................... 48NOTES TO BASIC FINANCIAL STATEMENTS:K NOTES TO BASIC FINANCIAL STATEMENTS.......................................................................... 49REQUIRED SUPPLEMENTARYINFORMATION:RSI 1 SCHEDULE OF REVENUES AND OTHERFINANCING SOURCES -BUDGET AND ACTUAL................................................ 92RSI2 SCHEDULE OF EXPENDITURES AND OTHER FINANCINGUSES -BUDGET AND ACTUAL............................................... 96RSI 3 SCHEDULE OF FUNDINGPROGRESS - VERNONRETIREMENT SySTEM........................ 102RSI4 SCHEDULE OF FUNDINGPROGRESS - VERNONOTHER POST EMPLOYMENTBENEFIT PLANS 104RSI5 SCHEDULE OF EMPLOYER CONTRIBUTIONS - VERNON RETIREMENT SYSTEMAND OTHER POST EMPLOYMENT BENEFIT SYSTEM 105SCHEDULESSUPPLEMENTALSCBEDULESGENERAL FUND1 COMPARATIVE BALANCE SHEET 1062 REPORT OF THE TAX COLLECTOR........................................... 107NONMAJORGOVERNMENTAL FUNDS3 COMBININGBALANCE SHEET.................................................................................................... 1084 COMBINING STATEMENT OF REVENUES, EXPENDITURES ANDCHANGES IN FUND BALANCES 113TOWN OF VERNON, CONNECTICUTTABLE OF CONTENTS (CONTINUED)SCHEDULESINTERNAL SERVICE FUNDS5 COMBINING STATEMENT OF NET ASSETS 1186 COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES INFUNDNET ASSETS 1197 COMBINING STATEMENT OF CASH FLOWS 120FIDUCIARYFUNDS8 COMBINING STATEMENT OF NET ASSETS-AGENCYFUNDS.......................................... 1219 AGENCY FUNDS - COMBINING STATEMENT OF CHANGES INASSETS AND LIABILITIES....................................................................................................... 122CAPITAL ASSETS USED IN THE OPERATION OF GOVERNMENTAL FUNDS10 SCHEDULE BY FUNCTION AND ACTIVITy............................................................................. 12311 SCHEDULE OF CHANGES BY FUNCTION AND ACTIVITY 124TABLESTATISTICAL SECTIONNET ASSETS BY COMPONENT 1252 CHANGES INNET ASSETS............................................................................................................ 1263 FUND BALANCES, GOVERNMENTAL FUNDS......................................................................... 1284 CHANGES IN FUND BALANCES, GOVERNMENTAL FUNDS............................................... 1295 CHANGES IN NET ASSETS - PENSION TRUST FUND 1316 BALANCE SHEETS - GENERAL FUND 1327 REVENUES BY SOURCE AND OTHER FINANCING SOURCES -GENERAL FUND................................................................................................................... 1338 EXPENDITURES BY FUNCTION AND OTHER FINANCING USES -GENERAL FUND................................................................................................................... 1349 TAXABLE ASSESSED VALUE AND ESTIMATED ACTUAL VALUEOF TAXABLE PROPERTY 13510 NET TAXABLE GRAND LIST AND PERCENTAGE CHANGE............................................ 13611 PRINCIPAL PROPERTY TAXPAYERS............................................................ 13712 PROPERTY TAX LEVIES AND COLLECTIONS 138TOWN OF VERNON, CONNECTICUTTABLE OF CONTENTS (CONTINUED)TABLESTATISTICAL SECTION (CONTINUED)13 SEWER ASSESSMENTS BILLING AND COLLECTIONS 13914 RATIO OF OUTSTANDING DEBT BY TYPE 14015 RATIO OF NET GENERAL BONDED DEBT OUTSTANDING 14116 RATIO OF ANNUAL DEBT SERVICE EXPENDITURES FOR GENERAL DEBTTO GENERAL FUND EXPENDITURES 14217 SCHEDULE OF DEBT LIMITATION ;.................................................... 14318 SCHEDULE OF LEGAL DEBT LIMITATION 14419 DEMOGRAPHIC AND ECONOMIC DATA............................................................................. 14520 U.S. BUREAU OF CENSUS STATISTICS 14621 MAJOR EMPLOYERS 14722 PROPERTY VALUES, CONSTRUCTION AND BANKDEPOSITS 14823 LAND USE STATISTICS...... 14924 SCHOOL FACILITIES AND ENROLLMENT DATA............................................................... 15025 MUNICIPAL FULL-TIME EMPLOYMENT BY FUNCTIONIPROGRAM 15126 MUNICIPAL EMPLOYMENT, BY BARGAINING UNIT 15227 OPERATING INDICATORS BY FUNCTIONIPROGRAM...................................................... 15328 CAPITAL ASSET STATISTICS BY FUNCTIONIPROGRAM................................................. 154IntroductorySectionTOWN OF VERNON. CONNECTICUTPRINCIPAL OFFICIALSJUNE 30, 2010MAYORJason L. McCoyTOWN COUNCILDaniel E. AndersonBill F. CampbellDaniel A. ChampagneMarkS. EtreJudyM. HanyMarie A. HerbstTOWN OFFICIALSTown AdministratorFinance Officer / TreasurerTown ClerkChief, PoliceCaptain, PoliceChief, Fire / AmbulanceDirector, Data ProcessingDirector, Emergency ManagementDirector, Human Resources / Assistant Town AdministratorDirector, Public WorksDirector, RecreationDirector, Senior CenterDirector, Social ServicesDirector, Waste TreatmentDirector, Youth ServicesAmbulance CoordinatorAnimal Control OfficerAssessorBuilding InspectorBusiness Manager, Waste TreatmentCemetery Superintendent / ForemanCollector of RevenueControllerFire MarshalRegistrar (D)Registrar (R)Town AttorneyTown EngineerTown PlannerAssistant Town Planner / Economic Development CoordinatorBOARD OF EDUCATIONGeorge F. ApelLaura B. BushAnne H. Fisher, ChairpersonSusan N. HesnanDean A. HouleEDUCATION OFFICIALSSuperintendent of SchoolsAssistant Superintendent of SchoolsDirector of Business and FinanceINDEPENDENT AUDITORSKostin, Ruffkess &Company, LLC1James E. KrupinskiBrian R. MotolaSean O'SheaPauline A. SchaeferHarry D. ThomasMichael A. WinklerJohnD. WardJames M. LuddeckeBernice K. DixonJames KennyStephen ClarkWilliam M. CallArthurBeirnMichael J. PurcaroPeter GraczykowskiRobert KleinhansBruce W. DinniePenelope A. RandPaula ClaydonDavid R. IgnatowiczAlan M. SlobodienJean GauthierCraig P. SegarDavid A. WheelerBasil HobbsGeorge RostkowskiAlanB. WestTerry A. HjarneFrank J. ZitkusRaymond A. WalkerJudith A. BeaudreauPatricia S. NobletHarold R. CummingsTerry D. McCarthyLeonard TundermannMarina RodriguezDavid G. KempKyle W. PercyVicky A. RispoliPaul M. StanselRichard Paskiewicz, InterimDeborah MurassoStanley KarasinskiTOWN OF VERNON, CTORGANIZATION CHARTElectorsII IBoard of Education Mavor I I Town Council Reoistrar of VotersISuperintendentof SchoolsI I I IAll Other Boards, Committees & Authorities, BoardsSchool Personnel Commissions Health &Welfare &Committees Administration Mavor Pro TemooreCapital Improvements Animal Control Officer Board of Assessment Appeals Town Clerk and AssistantsCommittee Municipal Agent for Elderly Risk Management Committee Town TreasurerEconomic Development Tree Warden Fire Marshal and DeputiesCommission Indeoendent AuditorYouth Services Advisory BoardI I I I IAuthorities, Boards, Department Department HealthCommissions & of of Department of Public Works &Committees" Administration" Finance" Public Safety" and Cemeteries" Welfare"Authorities: Town Administrator Finance Officer Chief of Police Director of Public Works Building Official &AssistantsHousing Authority Assistant Town Administrator Controller Police Captain Superintendent of Cemeteries Director of Health ..Traffic Authority Director of Data Processing Assessor and Deputy Emergency Management Director of Social ServicesWater Pollution Control Economic Develop Coordinator I Tax Collector and Assistant Director and Deputy Director of Parks &RecreationBoards: Assistant Town Planner Fire Chief and Assistants and AssistantBuilding Code of Appeals Town Attorney Director of Water PollutionEthics Town Engineer Control and AssistantPension Town Planner Director of Youth ServicesZoning Board of Appeals Zoning Enforcement OfficerCommissions:ArtsCemeteryConservationHuman Services AdvisoryInland Wetlands RegulatoryHistoric PropertiesPlanning and ZoningCommittees:Design Review AdvisoryJuryPennanent Municipal BuildingSenior Citizens AdvisoryOther ad hoc/advisory Boards,Commissions &Committees" Mayor recommended, Town Council approved."The Town isa member of the North Central District Health Department.OFFICE OF THEFINANCE DEPARTMENTTOWN OF VERNON14 PARK PLACE, VERNON, CT 06066Tel: (860) 870-3690Fax: (860) 870-3587E-mail: jluddecke@vemon-ct.govDecember 27,2010To the Honorable Mayor,Members of the Town Council, and Residents of theTown of Vernon, ConnecticutI ampleasedtosubmit the ComprehensiveAnnual Financial Report (CAFR) of theTownof Vernon,Connecticut, for theyear endedJune30, 2010. Thisreport was preparedinitsentiretybytheTown'sFinance Department and consists of management's representationsconcerning the financesof the Town ofVernon. Consequently, responsibility for both the accuracy of the data and the completeness and fairness ofthe presentation, including all disclosures, rests with the Town. As management, we assert that, to the bestof our knowledge and belief, this financial report is complete and reliable in all material respects;that it ispresented in a manner designed to fairly set forth the financial position and results of operations of the Townasmeasured by thefinancial activity of its variousfunds; and thatall disclosuresnecessary toenable thereadertogainmaximumunderstandingof theTown'sfinancial conditionandthefinancial resultsof itsoperations have been made. To provide a reasonable basis for making these representations, management oftheTownof Vernonhas establishedaninternal control frameworkthat is designedbothtoprotect thegovernment's assets from loss, theft, or misuse and to compile sufficient reliable accounting information forthe preparation ofthe Townof Vernon's financial statements in conformity with generally acceptedaccountingprinciplesforgovernmental unitsaspromulgated by variousauthoritativebodiesthrough theirpublications, statementsof position, andotherpronouncements. ThesebodiesincludetheGovernmentalAccounting Standards Board (GASB), the American Institute of Certified Public Accountants, and the Stateof Connecticut Office of Policy and Management. The internal controls are designed to provide reasonable,but not absolute, assurance that these objectives are met. The concept of reasonable assurancerecognizesthat: the cost of control should not exceed the benefits likely to be derived and; the valuation of costs and benefits requires estimates and judgments by management.The purpose of the CAFR extends beyond accepted requirements in an effort to present all the informationnecessary to meet the needs of many persons and groups with legitimate interests in the financialaffairs ofthe Town.TheTownof VernonCharter requires anannual audit of thebooks ofaccount, financial records, andtransactions ofall administrative departments of theTownbyindependent certifiedpublic accountantsselectedbythe Town Council. This requirement has beencompliedwith and the Town's financialstatementshavebeenaudited by Kostin, RuffkessandCompany, LLC, a firmof licensedcertified publicaccountants. Thegoal of theindependent audit was toprovidereasonableassurancethat thefinancialstatements of the Town for the fiscal year ended June 30, 2010, are free of material misstatement.3The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosuresinthefinancial statements; assessingtheaccountingprinciples usedandsignificant estimates madebymanagement; and evaluating the overall financial statement presentations. The independent auditorconcluded, based upon the audit, that there was a reasonable basis for rendering an unqualified opinion thatthe Town'sfinancialstatementsforthefiscalyear ended June 30, 2010, are fairly presented in conformitywith GAAP. The independent auditor's report is presented as the first component of the financial section ofthis report.The independentaudit of thefinancial statements of the Town waspart of a broader, federallymandated"Single Audit"designedtomeetthespecialneedsof federal grantoragencies. ThestandardsgoverningSingle Audit engagements require the independent auditor to report not only. on the fair presentation of thefinancial statements, but alsoonthe auditedgovernment's internal controls andcompliancewithlegalrequirements, with special emphasis on internal controls and legal requirements involving the administrationof federal awards. The statesingleaudit, inconformity with legalrequirementsandinternalcontrolsforstateassistancewas alsoperformed. ThesereportsareavailableintheTown'sseparatelyissuedSingleAudit Report.Generally accepted accounting principles (GAAP) require that management provide a narrative introduction,overview, and analysis to accompany the basic financial statements in the form of Management's Discussionand Analysis (MD&A). This letter of transmittal is designed to complement MD&A and should be read inconjunction with it. The Town of Vernon's MD&A can be found immediately following the report of theindependent auditors.ProiIIe of the TownThe Town of Vernon, located in the northeast part of the state, wasoriginally part of Bolton, Connecticut,was incorporated as a separate township in October 1808. In 1965, the Town of Vernon, in its current form,was created when the Town, the City of Rockville and the Vernon Fire District were consolidated. At thattime, the Town of Vernonassumedall assetsand liabilities of each of thegovernmental unitsanda newtown charter was adopted. Since 1970, when the charter was revised, Vernon has operated under a Mayor-Town Council form of government witha full time professional Town Administrator. Policy-making andlegislative authority are vested in the Town Council consisting of twelve council members, with the Mayorpresiding over meetings and eligible to vote in the event of a tie. The Town Council is responsible, amongother things, for passingordinances, approvingthebudget, appointingcommittees, thetown attorney,auditing firms,and hiring the Town Administrator and other department heads. The Town Administrator isresponsible for implementingthe approvedpolicies andordinances, andfor overseeingthe day-to-dayoperations of the government. The Mayor and the Town Council are elected at large on a partisan basis toserve two-year terms. The maximum amount of seats for one political delegation is eight.TheTownof Vernonprovidesafull rangeof services, includingpoliceandfireprotection, ambulanceservices, construction and maintenance of streets and other infrastructure, solid waste and recycling services,buildingmaintenance, offers andsupports avarietyof humanservices, andrecreational activities andcultural events. The Town owns and operates an advanced wastewater treatment facility that servesapproximately 80% of the Town's residents. With the capability of treating an average flow of 7.1milliongallons per day, the facility alsoaccepts sanitary waste from portions of the surrounding towns of Tolland,Ellington, ManchesterandSouthWindsorinaccordancewiththeprovisionsof Intergovernmental SewerAgreementsbetweeneachof thosecommunitiesandtheTown. TheTown'seducational systemfor itsresidentsconsists of fiveelementary schools, one middle school, and one senior high school. In addition,Vernon has two K-8 parochial schools.4Theannual operatingbudget serves as thefoundationfor theTownof Vernon's financial planningandcontrol. Exhibit K, section ILA, in the Notes to the Basic Financial Statements (Notes) describes the budgetprocess used by the Town. The appropriated budget is prepared by fund, function(e.g., public safety)anddepartment (e.g. police). Department heads may request transfers of appropriations within accountclassifications tothe Finance Officer. Other transfers within a department and between other departments,however, require the approval of the Town Council. Budget to actual comparisons are provided in this reportfor the general fund, the only legally adopted budget as prescribed by the Town Charter.In additionto budget preparation and amendments, the Town maintains extensive budgetary controls. Theobjective of these budgetary controls is toensure compliance with legal provisions embodied in the annualappropriated budget adopted for the General Fund and as may be amended by the Town Council during theyear. To aidinbudgetarycontrol, the Townmaintains anencumbranceaccountingsystemtorecordobligationsby line item. Certification of fundsavailableisrequiredprior toissuance of purchaseorders,which are recorded as encumbrances in the budgetary accounting system.Thevariousfundsutilized by theTown of VernonarefurtherdescribedinExhibit K, section LA, of theNotes. Asdemonstrated by thestatementsandschedulesin the financial section of thisreport, the Towncontinues to meet its responsibility for sound financial management.Local Economy and Major InitiativesLocal EconomyThe Town of Vernon isa residential community of 18.6 square miles located14 mileseast of Hartford onInterstate 84 in north central Connecticut. Interstate 84, traverses the Town, having four interchanges withinthe Town's borders, and connects with 1-90,1-384,1-91 and 1-291, which provide convenient highway accessto all areas of Connecticut, Massachusetts and New York. Additional accessibility is provided by U. S. Route44andStateRoutes 30, 31, 74, and83. National andinternational air serviceisprovidedbyBradleyInternational Airport, whichis onlythirtyminutes fromVernon. Thewell-situatedaccess providedbyInterstate84withintheGreater Hartfordareahas contributedtoVernon's development as aresidentialsuburban community and a regional commercial center for neighboring towns.The economicbase for Connecticut, as well as for Vernon, has had an overall change fromthat ofmanufacturing to retailcommerce and professional services.. Of the top fifteenfirmsin Vernon, 91.8% areemployed in services while only 8.2% are employed in manufacturing and printing. Approximately 41.4%of this employment is with non-profit and public organizations. The largest Vernon employer is the Town ofVernon, which has835employees. Thesecond largest employer isRockvilleGeneralHospitalwith 559employees, followed by Visiting Nurse and Health Services with 458employees, Ticket Network with 260,PriceChopper with250, theState of Connecticut with227, NewEngland Mechanical Serviceswith200employees, Stop andShop with184 employees, Fox Hill Nursing and Rehabilitation with180 and VernonManor with 178.In Vernon, the number of individuals employed by the top ten companies increased by 136 or 4.2% duringthe past year. Some of the decreases in employment included (9) for the Town of Vernon, (26) at RockvilleGeneral Hospital, (28) atNewEnglandMechanical, (22) at Stop&Shop, (16) at FoxHill and(17) forVernon Manor. Increases in employment included 110 at Visiting Nurse and Health Services, 59 for TicketNetwork, 54 for Price Chopper and 31at the State of Connecticut.5Vernon's population for the year ended June 30,2010, was 30,182 compared with 29,839 on June 30,2009,anincrease of 343or 1.15%. Thisincrease of 343residentsfollowsanincreaseinpopulation of 219or0.73% during the previous one-year period.Approximately82%of Vernon's labor force is employedoutside thetown. Onaregional basis, ourresidents' income is derived from major insurance firms,defense industries, financial institutions and capitalgoods producers. The town's unemployment rate at June 30,2010 was 8.4%, an increase of 1.1% from June30,2009 unemployment rate of 7.3%. In recent history, the unemployment rate was 5.5% in 2008,4.3% in2007, 4.2% in 2006, and 4.9% in 2005. The increase in the unemployment rate is influenced by the recentdownturn in the overall economy, however, Vernon's unemployment rate compares favorably to that of theStateof Connecticut, 8.8%, andfor thenation, 9.6%. TheTownof Vernongenerallyshares thesameeconomic health astheState of Connecticut and the Hartford region, therefore experiencing theeconomiceffect of aslowdowninthefinancial andinsurancesector; and businessinvestmentin newconstruction.Looking forward, a continuation of policies directed to enhance the financial sector, generally are not labordriven. In addition, a decline in federal stimulus funding to the state and municipalities raises concern aboutthefuture employment trend. Locally, the composureofour community's resources indicates that anyunemployment increase in the near future will be modest.Vernon completed a town wide revaluation of property as of October1, 2006, which waseffective for the2007-08fiscal year. Our taxbasefortheOctober 1, 2009grandlistgrew by.21%, inclusive of a.13%increase in the real estate portion.Property taxes have been supported by strong collection rates, averaging 98.2 % over the past ten years. Thenumber of building permitsincreasedfrom1,466 to1,850, and thevalue of those permitsincreased from$21,322,371 to $23,378,948.The 2010-2011operating budget was approved by the Town Council and sent to the annual Town Meetingfor adoption. The budget was instead petitioned to a referendum vote, held on May 11, 2010, and the votersadopted the budget. The mil rate increased by 1.60 mils, from 28.42 to 30.02. We will continue to providethevoterswith informationtomakeknowledgeabledecisions, aswe havea responsibility toeducateourresidents on the programs and services presently provided, as well as those proposed.The local economic base serves the region as a commercial, governmental, legal, and medical center. Localemployment in manufacturing has been replaced by employment in these service areas. This shift is revealedin the additions to the tax base as planned development and new construction are related to retail commerceand professional services.InOctober2008, thePlanningandZoningCommissionadoptedzoningregulationsfor acomprehensivemulti-familydevelopment zone. It is anticipatedthat oncemarket conditions improvewithaboost inlending, applications will be submitted to rezone certain areas in town for developments of this type.The economic areas for new development are downtown Rockville, Vernon Circle, Lafayette Square, the 1-84 corridor, and the Gerber Farm area.6Rockville Section:The former Rockville mills section has made a transition from being primarily an industrial and commercialcenter tobeing a professionalandgovernmental center. It isthesite of local government, education, andState of Connecticut administrative offices and courthouses. The initial development of downtownRockville occurredover one hundred years ago, creatingits distinctive Victorianurban character andinvaluable architecture. However, this also creates the need for reinvestment and modernization. In additionto improvements to municipal and state buildings, the following recent advancements have been made.TheTownofVernonhas activelysupportedthe redevelopment of the Village Street area adjacent toRockville General Hospital in supporting the Vernon Nonprofit Housing Corporation's (VNHC)rehabilitation of eleven structures on the street, by providing Community Development Block Grant (CDBG)funds toassist first timehomebuyers. Thehouses controlledbyVNHChavereceivedenvironmentalremediationandnewroofs. TheVNHChas renovatedandsold4units onVillageStreet, is currentlyrenovating 7 others and has erected an additional 3 units on vacant lots. To further this effort to reinforce theneighborhood rehabilitation activities, Village and Orchard Streets have recently been reconstructed.The Rockville Public Library at 52 Union Street received approval in April 2009fora new addition totheexistingfacility. InAugust 2009, aspecial permit was issuedtoconvert anexistingvacant residentialproperty to a professional medical office at 94 Union St. This work has been was completed and has made asignificant visual improvement to this property. At One Ellington Avenue, an existing abandoned mansionwithguesthouse is beingconvertedto apartment buildings. The guesthouse has beenrenovated andrestoration of the Main House is anticipated to occur in the near future. This property had been for sale for alengthy period of time.In October 2010, the Vernon Planning and Zoning Commission revised an adaptive re-use zoning regulationoriginallydevelopedfor conversionof obsoletemill buildingsandmadeit applicabletoanystructureinRockville built nolater than1910andcontaininga minimum of 5,000squarefeet. Thisamendment willallow old buildings that have outlived their original uses to be returned to economically viable uses.Vernon Circle / Route 30 - Hartford Turnpike / Route 83 - Talcottville Road:The Vernon Circle area continues to make a positive adjustment to the regional shopping center developmentin the Buckland Hillssection of Manchester, and Evergreen Park in South Windsor, just one highway exitwest on 1-84. The Tri-City Plaza has a very successful retail mix of value-oriented stores.TheK-MartPlaza, locatedon Pitkin RoadandRoute30, andtheGoodyear TirePlaza, 378Kelly Road,althoughbothexperience transitionphases ofbusinesses closingand newbusinesses opening, remainenduringandattractivedevelopmentsinpromising locations. DunkinDonuts, andtheSunocoandCitgoservice stations,all on Talcottville Road, as wellas Johnnie's Mobil on WestStreet, have all been recentlyrenovated.In the Talcottville section of Vernon, 167 Hartford Turnpike, a Volkswagen dealership has been constructed.The Colony Banquet Hall and Restaurant closed in December 2007. Presently, plans have been approved fora120-room MarriotSpring Hill Suite Hotelin placeof theColony Restaurant. Completion of the recentdevelopment has strengthened the Vernon Circle area overall. There is a clear pattern that as the vacanciesin Vernon Circle become occupied, the available space on the periphery is being filled and is becoming moreattractive for extended development. In addition an enhancement project was initiated along Main Street andElm Hill Road in the historic section of Talcottville. Improvements underway include the development of awalking trail with informationalsignage, period lighting, theconstruction of an informationcenter Kiosk,selective plantings, and entrance signage to the area. The project is 100% funded by the two federal grants.7The State of Connecticut continued the reconstruction and safety improvements along a section of Route 83(Talcottville Road). This project extends from the I-84 off ramp, northerly to Pitkin Street and provides forimprovedoperationsandsafety, by theaddition of acenter landscaped median, laneadditionsandtrafficsignal additions andmodifications. Thisproject, 100%fundedbytheState, supports andenhancesthecommercial and retail developments in the area.Also on Route 83, three vacant parcels at 360 Talcottville Road were combined into two parcels to constructthe 16,000 square foot Aldi'sSupermarket. Additional development on the site was approved including an8,400 square footday care facility and a 4,000 square foot retail building, toestablish the "The Shoppes atVernonValley". The35-acreparcel locatedat 243TalcottvilleRoadsoldfor $3,400,000. Zonedforcommercial use, this parcel will be developed by Boston / Manchester II, LLC; however, for the present, theparcel has been classified, for assessment purposes, as Open Space land in the 2009grand list. Additionaldevelopment wasalsoapproved along Hockanum Boulevard including a new12,000 square footindustrialbuilding and support structures.The new owners of the former Heartland Plaza at 425 Talcottville Road continue restoration improvementsand are making a remarkable visualchange tothe property. This highly visible and long time vacant andblighted commercial structure is undergoing a vibrant and aesthetically pleasing overhaul. The property willsoon be a lively commercial destination along Route 83.A new gas station / convenience store is currently under construction at 229 Talcottville Road, the site of anexisting gas station, with attached repair areas. This new facility will include new underground gas storagetanks that will provide improvedenvironmental protections. Thenewowners of the former GottierFurnitureStoreat 48Windsor Avenuereceivedapproval inMay2009for anoutdoorlawnandgardenmerchandise display for their newly opened "Lots &More" store. A new 8,372 square foot Liquor Store iscurrently under construction at 482 Talcottville Road. A spring 2011completion is anticipated.Lafayette Square:The Lafayette Square commercial area has been experiencing steady development. The 28,000 square footcomplex at 10 Hyde Avenue, known as 30 Lafayette Square, was purchased and the new owners rejuvenatedthe property, both interior and exterior,inclusive of architectural improvements tothe building fayade. InJune 2010, the owners receivedapproval toadda building containing a1,800 square foot restaurant and a2,800squarefoot area of retailspacewithin theplaza. The building isunderconstructionandwill openearly in 2011. Two proposals for assisted living elderly facilities of approximately 100 units each have beenapproved by the Planning and Zoning Commission (PZC), but no action has occurred. At 75 Hyde Avenue,construction is ongoing for the 76 private condominiums for the new Bridlewood development. As part ofthis approval, the developer has offered to construct sidewalks from the new development along Route 30 tothe Northeast School to safely accommodate school children.1-84 Corridor:TheI-84corridorofferspotentialforoffice parkdevelopmentaroundtheExit#66interchangeandretaildevelopmentaroundthe Exit #67interchange. A proposal toreplace the New EnglandSportplexathleticfields with a 132,973 square foot Home Depot and Garden Center was advanced by a negotiated agreementwith the PlanningandZoningCommission. Theagreementstipulatesasmaller buildingand parking lot;sewer hookup; thewideningof theroad; andenvironmental concessions. AlthoughHomeDepot hasabandoned its plan to build on thissite, the approval will stand with the anticipated court ruling upholdingthenegotiatedsettlement. Thesite may then be marketed with theapprovalplan in place. The Town isconsidering a Tax Increment Financing District that would bring water and sewer lines up to the sites.8On the north side of Exit 67, the Planning and Zoning Commission eliminated a setback requirement withinthe mixed-use zone that substantially expands the buildable area within the zone.The industrial park off Exit 66 continues to undergo development. A bulk propane distribution facility wasapproved late in 2009, and its construction is expected to occur in 2011. A small addition was approved in2010 for a vacant building in the park, recently purchased for the relocation of a business from a neighboringtown.Gerber Farm:With co-investments from the Town of Vernon, a bridge and access road for the new Hockanum Boulevardwasconstructed. The bridge and road provides access to the approximately 275-acre Gerber Farm area fordevelopment. The PZCadoptedtheareaasaMixed Use Development (MUD)district. Thisallowsformixed-usedevelopment baseduponacomprehensiveplanandaneconomicfiscal impact analysis thatdemonstratesnetpositivetaxrevenuefortheTown. Thedeveloperconstructeda424-luxury rental unitcomplex, the MansionsatHockanumCrossing, and three industrial buildingsamounting to64,000squarefeet. Subsequently,the construction of Mansion 2 occurred, a 270luxury apartment complex. The rentalproject total assessment is estimated at $42,130,000.Mill Properties:Industrial development has proven to be the most difficult economic challenge for municipalities inConnecticut as manufacturers leave the state and available employment declines. The decline of industry inVernonrelatestothelack of industrial landandtheobsolescence of existingfacilities, aswell astothegeneral diminishing of manufacturing employment. With only 8.3% of the town zoned for commercial andindustrial use, thetownis aggressivelypursuingthe availabilityof largeparcels of landfor industrialdevelopment while facing the additional task of addressing the redevelopment of older mill properties.The crafting of a new stimulus package in Washington D.C., will be most effective with a concentration ofpublic infrastructure, local and state aid, and a philosophy of ''bottom to top" recovery. The seriousness of awell-planned economic recovery package, with prudent regulatory controls, inclusive of stabilizing energyprices, food, andhealth carecosts, inconjunction withtheFederal ReserveQuantitative Easing policy, isessential to long-termfinancial health. If the federal government responds accordingly, thencautiousoptimism of a strengthenedeconomy, with modest improvementsin unemployment andGDPgainsat theend of thenext twelve monthscan be realized. The creation of jobs through clean energy,infrastructure,small business capital, technology, nanotechnology, infrastructure investment, and local and state aid, needsto be packaged in a multi-year plan to accomplish steady progress. For three decades, the erosion of federaldomestic spending has placed a serious burden on the budgets of state and municipal governments,and thespending pressures of global terrorist security and military operations, has exacerbated the situation. Furtherdomestic reductions to fund federal tax decreases and the new found effort to tame the growth in the deficit,willmost likely becounter-productive. Thecontinuation of stimulusfundingisan opportunity toreversethat trend.For the Town of Vernon, successful and continued pursuit of the economic development cited in this sectionenables the town to take advantage of any gradual business expansion and demand for developmental sites,thus greeting the future with a tax base strengthened by those objectives.9Major InitiativesGeneral Government:The towncompletedextensive renovationstothe thirdfloorof the Town Hall last fiscal year ata cost of$1,864,873. These improvements included an expanded Town Council Chambers and administrative office.Fundingwasprimarilysupportedbythreestategrants. TheTownwas awardeda$50,000CommunityInvestment Act state grant to fund renovations to its second floor finance office and mezzanine. A $90,000designation of available Town Capital Nonrecurring fundsfor these renovationswasalsoapproved. Also,$24,690wasauthorized toreplace theroof atthe Town HallAnnexbuilding utilizingstateLOCIPgrantfunds.Americanswith DisabilitiesAct (ADA)improvementstotown facilitiescontinued, andwillproceed withavailable funds of $102,272. There were renovations to the Town Clerk's office vault. For the future, thereis anallocationof $19,745for current modifications; and$190,000is availablemajorimprovements toincrease storage space by expanding the vault.A$60,000appropriationtoprovidefor theacquisitionanddevelopment of aGeographical InformationSystem(GIS) has been completed and complementedby a $23,000 recent appropriation to purchasecompatibleequipment. TheTownCouncil alsoauthorizedanappropriationof $200,000fromavailableTown Capital Nonrecurring fundstofundan optical fiber infrastructure project that was completed shortlyafter year-end.Community Development:Inits continue effort to support andinitiate interest ineconomic development intown, $90,881 wasappropriated to the Economic Development special revenue fund during the year to finance an update to thetown's Plan of Conservation and Development (POCD), provide funding to its Downtown Association andfor targeted advertising. Annual appropriations tothisFund commenced in1999and have fundedseveralproperty reuse studies, retail fac;ade improvements and the most recent POCD.The Town receiveda $125,000state grant toconduct an engineering and architecturalfeasibilitystudy todetermine the most effective buildingimprovements Amerbelle Mill, a local industrial employer. Inaddition, thetownsecuredanadditional $196,000federal granttocomplementtheseimprovementswithfunding for a roof replacement and additional building improvements. The $125,000 project was completedlast year and the $196,000 project was recently completed.The Town has received state grants totaling $1,200,000 to provide funding for selective site demolition andenvironmental remediation at the currently vacant Roosevelt Mill located at 215East Main Street. Thesegrant fundswerepreceded bya prioryear receiptof federal Brownfieldcleanupfundsutilizedforasiteevaluation and remediation project recently completed. It is envisioned that the property will be redevelopedfor future mixed use. To facilitate this project, the Town established the RMRP Corporation, a separate non-profit entity, towhich property liens were assigned, and in tum, LoomCity Lofts, a developer secured theliens and obtained title to the property. This work was initiated in January of 2010 and is anticipated to becompleted in December of2010.10The Town was awarded a $20,000 state grant tofunda feasibility study of the Citizens Block. The town-owned Citizens Block is a primarily vacant commercial and mixed use1879 building, adjacent to the1867seniorcenter building, located next toTown Hall. Thisstudy, requiring the use of $17,303of EconomicDevelopment Funds was completed during the fiscal year.TheTownisintheseventhyear of a newhousingrehabilitationgrant / loan programthatutilizesfundsderived fromformer programs that produced loan programincome. Participants that meet incomerequirementsare eligiblefor projectsinvolving owner occupied housing. A total of $4,694 wasexpendedthis past fiscal year, with$307,471 as theavailablebalance. InMay2006, $250,000of this availableprogram income wasdesignated by the Town Councilfor home ownershipactivitiesin the VillageStreetneighborhood. Of the $250,000 designation, $7,265wasexpended todate, leaving$242,735 unexpended.On June 1,2010, the Town Council reclassified this unexpended designation to fund phase III reconstructionimprovements to Prospect Street.The Town Council approved funding totaling $182,050 for the demolition of certain foreclosed, blighted orfiredamagedpropertiesatWard, LawrenceandHighStreets, dueprimarily topublicsafetyconcerns; inaddition to assisting the properties return to a collectable tax status.Public Safety:Thefiredepartment's 161members, the largest volunteerforcein thestate, enable the towntoapply thesavings from personnel costs to equipment needs. Although the members are not employees, the Town hasrecognizedtheircommitmenttoprotectingthelivesandproperty of our residents, andhasestablishedaLengthof Service Award Program(LOSAP). This is a non-qualified employer retirement planthatcommenced on January 1, 2000. To attain normal retirement, a minimum often years of credited service isrequired,with maximum credited service of thirty years. Since inception, the Town has made its employercontribution to an investment fund set up exclusively for this program as follows:Year2000 through 2007December 31, 2008December 31, 2009EmployerContribution$720,791$83,206$120,129Roof replacement and bathroom renovations at the Hartford Turnpike company #1fire station were recentlycompleted at a cost of $35,535. The fire department also utilized an additional appropriation of $45,000 for"jaws of life' andrelatedequipment. Thisequipment hasalready proven invaluable in recentemergencyrescues.The Town has recently received several federal grants totaling $149,309 for two police department vehicles,digital video equipment and in-car laptops and cameras; as well as partial grant funding for a hybrid vehiclepurchased in the prior year. The Town wasalso recently awarded a $300,000COPS Tech grant to fundadigital Policeradiosystem. Inaddition, EmergencyManagementhasfullyexpendedafederallyfundedequipment grants totaling $17,500.11For the animal control facility, there is aremaining allocationof$15,410fromaprior year $58,000appropriation to enclose the dog runs and expand the shelter; as well as a $48,100 appropriation to constructan incinerator and $17,000 for animal control shelter caging.Recent prior year completed public safety projectsinclude townfundingfora police departmentevidenceroom and photo lab, replacement of its emergency generator and installation of digital time clocks. Recentprior year grants have funded firefighter and ambulance equipment, fire station improvements andemergency management equipment.Maintenance and development:On November 2, 2004 voters approveda public improvement bond authorization, and since then the Townhasissuedthreegeneral obligation bonds: $10,300,000on February15, 2007, $5,000,000on February1,2008and $720,000 on February 12, 2009. Bond anticipation notes of $740,000 were issued on February 3,2010, andmatured June15, 2010. Anewnoteof $740,000wasissuedonJune15, 2010, andwill bepermanently financed in January 2011. The authorizations / expenditures are as follows:Amount Expended ExpendedProject Authorized Current Year CumulativeRoads; sidewalks; and bridge reconstruction $ 19,103,000 $ 1,268,919 $ 15,934,613Improvements to waste treatment plant 1,295,000Improvements to sewer system 1,211,000 1,055,536Issuance costs 8,301 155,946Accrued note interest 14,398 704,910Total: $ 21,609,000 $ 1,291,618 $ 17,851,005The roadway improvements include the reconstruction / repaving of 22 town roads, replacement ofsidewalks, installation of a storm drainage system at the Bolton Lake shores and the renovation of three (3)bridges at Dart Hill Road, West Main Street and Bolton Road. Sidewalks have been constructed at PetersonRoad at a cost of$165,583. The sewer improvement projects have been completed and consist of relining acritical sewer line on Route 30; sewer repairsat twenty (20) various roads;and the replacement of the DartHill pumpstationequipment. Theupgradeof thewastetreatment plant, tomeet orsurpass designatednitrogen limits, isintheearly stagesof designand hasyettocommence. Asof thewinter of 2010, theroadway improvement program is 95% complete. To address the rising pavement costs, the Town continuesto apply for offsetting grants, and has been awarded a $500,000 DECD CDBG grant to upgrade High Streetand two $500,000 DECD CDBG grants to upgrade Prospect Street. The efforts from the Vernon Departmentof Public Works to complete several road projects, has saved the Town considerable costs.Inadditiontotheroadwayimprovement expenditures incurredbythePublicBondImprovements Fundabove, thetown's TownAidRoadspecial revenuefundexpended$160,784duringtheyear, including$36,127for paving of PhoenixStreet and Dobson Road. In the Town'sCapital Nonrecurring ExpenditureFund, current year roadway improvement authorizations totaled $941,000. Of this amount, $141,000 will befunded by a state LOCIP grant and $800,000 will be funded by an additional appropriation approved at fiscalyear-end. The State of Connecticut also provided most of the funding for roadway and sidewalkimprovements on a portion of Vernon Avenue; the project was completed in the summer of2009.12Construction work, funded by federal andstategrants, continuedforthe River Street and Spring StreetBridges. A $1,950,000, 80% federal / 20% state grant, funded the replacement of the Spring Street Bridgethat has just beencompletedatanapproximate cost of $1.9 million. The $2,220,000RiverStreet Bridgereconstruction project, funded by an 80% federal / 20% state grant, commenced in the Fall of 2009,and hasjust been completed at a cost of approximately $1.5 million.The Bolton Road Bridge reconstruction, completed at $986,754, was partially grant funded, while fundingof $1,182,000for thereplacement of thePhoenixStreetBridgewas approvedbyreferendumvoteinNovember 2008. Ofthis amount, $44,000oflocal funding is available, andit is anticipatedthat a$1,251,000, 10%stateand80%federal grant will fundtheremainder, avoidingtheneedtoissuedebt.Redesign costs of $24,464 for this bridge were incurred during the year, with reconstruction anticipated for2011.The Vernon Avenue Bridge was completed during 2010, with final design costs of $144,227 andconstructioncostsof $1,256,886. The projectwasfundedby two80%reimbursablefederal grants, withlocal funds required for the 20% match.Design costs,estimated at $240,000, for the West Main Street Bridge are 80% federally fundedand 20%locallyfundedthroughthePublicBondImprovementsFund. $83,267hasbeenexpendedtodate. Thereconstruction costs are estimated at $2,160,000; there is an 80%federal grant, and the $845,000authorization included in the Public Bond Improvements Fund for design and reconstruction costs will coverthe local portion. Construction is anticipated for 2012.The estimated cost for the replacement ofthe MainStreet Bridge over the Tankerhoosen River is$3,247,000. Funding for the replacement will be by an 80% federal grant, with the remaining 20% locallyfunded. Local funds currentlyappropriatedtotal $250,000, with the remaining sources for the localappropriation to be identified, as a November 2008 referendum to authorize such funding was unsuccessful.During the fiscal year several appropriations funded the purchase of new refuse and recycling tote containersfor the Town's newly implemented automated refuse and single stream recycling program. Available fundsin the Town Capital Nonrecurring Fund were utilized to fund the $279,000 purchase ofrefuse totecontainers;and the $170,740 purchase of recycling tote containers. These costs are to be reimbursed totheFund fromthe General Fund in ensuing fiscalyears. In addition, a federal grant was obtained tofundthe$108,756 purchase of additional recycling containers. Tosupport this new program, the Town Council re-designated $100,000 of available funds in the Town Capital Nonrecurring Fund to fund the purchase of twoused automated side-loading refuse / recycling trucks; and authorized the use of Town Capital NonrecurringFunds tofundthe$214,839purchaseof anewautomatedside-loadingrefusetruck. Anadditional re-designationof $60,000wasusedtoconstruct anewtransfer stationcompactortohandletheadditionalrecyclable collections.Also during the fiscalyear, $90,036 was expended for eleven GPSchemical control units for use in snow /ice removal. There areseveralappropriationsavailable in the Town Capital Nonrecurring Fund including$25,000 for sidewalk renovations and $40,000 for design of the Dart Hill Road bridge reconstruction project.The Town continues toaddress major rolling stock demands in an effort to replace equipment and vehiclesthat have met their useful life. Besides being better equipped to serve the residents ofVernon, a favorableresult of this effort is the reduction to overall maintenance budgets for the subsequent year.13In fiscal year2009-2010, the Town purchasedanAnimal Control vehicle($19,898), a usedback hoeforParksand Recreation ($44,725), three police cruisers($67,500); a used fire department vehicle ($2,495); afiredepartmenttrailer($3,633); anda trailerforparkandrecreation($3,789). Alsoanappropriation of$27,700isavailable fora new Public Workspickuptruck. Also, debt service payments of $207,114and$386,535, respectively, were made to prepay the entire balance oflease payments for the acquisition of three(3) new dump trucks and one (1) refuse packer; and for a sweeper, vac-all and a recycling truck. The cost ofthese items was incorporated into lease purchase agreements of $476,280 and $470,000, respectively.The ambulance services account is in the Special Revenue Fund and a reserve to periodically replace each ofthe three ambulances is maintained. Reserves, accumulated over the past several years,were used tofundthe replacement of all three ambulances. The current reserve balance in the Fund is $40,000.Bolton Lakes Wastewater Disposal: The Town of Vernon and the neighboring Town of Bolton entered intoaconsentorderwiththeConnecticutDepartment of Environmental Protection(CTDEP) onOctober 14,1999, requiringthetownstotakethenecessarystepstoaddresswastewaterdisposal alternativesfortheBolton Lakesarea. The design and construction costs of a sewer systemareestimated to be $21,959,000,with 29%or $6,368,000attributable toVernonand the remainder toBolton. Federalandstategrantsareestimated to offset approximately 52% of the costs, reducing Vernon's share to $3,066,750, prior to the levyof assessments. Voters in both towns approved a special referendum held on September 27,2005, regardingordinances that guarantee funding for the project. Plans andfunding applications arenowcomplete.Construction, which is to be phased in over a five-year period to maximize grant-funding sources,commenced in the Bolton area in the spring of 2009, and continued during the current year. Project work isnot anticipated to commence in Vernon until 2012.Parks and Recreation:Recreation programsremainvery popular withour residentsasdemandand participation increases. Thetown has570acresdedicatedtorecreation, whichconsist of 23parks, 35milesof trails, twopools, twobeaches onlakes providingswimming, acamp, boat launch, picnicareas, andfishingandiceskating.Additionally, theTown hasateencenter, numerousplaygrounds, baseball andsoftball diamonds, soccerfields, and tennis and basketball courts. The department is also responsible for maintaining the athletic fieldsthroughout the public school system, which includes a lighted football field and track.ImprovementstoRockville CentralPark were recentlycompletedat a cost of $715,112. The project wasfunded by federaland state grants. In addition, a $90,800 federalgrant to fund design enhancements in theTalcottville section of town was completed, as did park improvements at Valley Falls Park. Renovations toHorowitzPool werecompletedat acumulativecost of $61,233todate. A$300,000stateContingencyNeeds grant to fund renovations at the Community Arts Center commenced last fiscal year with cumulativedesign costs incurred of $68,968. An additional $1,500,000 state Urban Act grant was recently awarded forconstructionrenovationstotheArtsCenter. ThestatealsograntedtheTowna$283,000grant tofundrestoration of the Vernon Historical Society Grange that was completed during the year. Work continued onthe Rockville Downtown and Train Depot and Mill rails-to-trails projects, which are funded by two federalgrantstotaling$51,870. Threetreegrants totaling$6,368werereceivedduringthefiscal yeartofundreplacement of historictrees atTalcott andHenryParks. TheTownCouncil approved$4,800fromtheDownstreamFundtofinanceaBaselineAquaticStudy of theDobsonville, Talcottville, Valley FallsandEckersPondsand WalkersReservoir; andanadditional$6,000wasapprovedtofundan invasiveaquaticweeds treatment at Lower Bolton Lake and neighboring water bodies.14Recent prior years' park improvements include replacement ofrestrooms at Valley Falls Park, renovations toValley Falls Barn, trail improvements, improvements at Talcott Park, and sandblasting, painting andreplacing the filter system at the Community Pool. In FY 2011, the Parks Department expended $11,400 fornew refuse and recycling receptacles.Education:On March 29, 2005,votersapproved three referenda questionsforthe renovationstoschool buildingsandfacilities and since then the Townhas issued three school b o n d ~ : $2,515,000 on February 15, 2007;$16,040,000onFebruary 1, 2008; and$10,155,000onFebruary12, 2009. Bondanticipationnotes of$2,970,000were issuedon February 3, 2010, and matured June15, 2010. Anew note of $2,970,000 wasissuedonJune 15, 2010, andwill bepermanentlyfinanced inJanuary, 2011. The authorizations andexpenditures are as follows:Amount Expended ExpendedProject Authorized Current Year CumnlativeRockville High School - Additions & renovations $ 34,657,000 $ 1,171,833 $ 28,247,857Vernon Center Middle School- Renovations 11,519,000 30,391 10,727,053Center Road School 4,420,600 2,724,935 4,245,802Lake Street School 5,828,800 23,442 4,953,588Maple Street School 3,743,200 1,897,026 2,626,236Northeast School 3,556,000 1,718,964 2,921,312Skinner Road School 4,597,400 21,831 4,007,687Total Elementary Schools - Additions andrenovatio 22,146,000 6,386,198 18,754,625Issuance costs 35,297 254,466Accrued note interest 28,502 1,014,030Total: $ 68,322,000 $ 7,652,221 $ 58,998,031Aschool building commission that wasformedas of December 6, 2005,hasoversight of the projects, andworks closely with the architect, a construction management firm, and the administration. The recorded stateprogress payment reimbursements received as of June 30, 2010, is $23,776,223.In addition to the school bondimprovement authorization, a $333,000prior year appropriationintheEducation Capital Nonrecurring Expenditure Fund to repair and repoint the Board of Educationadministrationbuildingcontinued during the year andis nearly completed. Project costs to date are$272,878. Ayear-end transfer of $394,000 fromthe fiscal year 2009/10 education operating budget totheEducation Capital Nonrecurring Fund provides current available resources in this Fund for future educationprojectstotaling$527,779. TheTownCapital NonrecurringFund provided$39,625tofundtherecentlycompleted Lake Street School ADA playscape project.15Long-Term Financial PlanningTheTowndidnot issueanylong-tenndebt duringthefiscal year, but intends topennanentlyfinance$6,270,000ofshort-tennoutstandingdebt in January2011. This is intendedtobe the final generalobligation bondissuetofundandcompletetheremaining publicandschoolbondimprovementprojects,which commenced in fiscal year 2005. The Town Council authorized the prepayment of three capital leasesby utilizing $701,298 of available funds in the Town Capital Nonrecurring Fund.We will continue to revise the six-year capital improvement plan to address community demands,understanding that the budgetary constraints imposed by varied economic factors requires the diligent pursuitof grants and alternative resources to fund capital needs.Relevant Financial PoliciesThe Town's financial policies have been applied consistently with the prior year and had no notable currentyeareffect onthefinancial statements. TherewerenodevelopmentsattheState level thatimpactedthecurrent year financial statements.AwardsThe Government Finance Officers Association ofthe United States and Canada (GFOA) awarded aCertificate of Achievement for Excellence in Financial Reporting to the Town of Vernon for itscomprehensive annual financial report (CAFR) for the year endedJune 30, 2009. The CertificateofAchievement is a prestigious national award recognizing confonnance with the highest standards forpreparationofstate and local government financial reports. Inorder tobe awarded a CertificateofAchievement, agovernment unit must publish aneasily readable andefficiently organizedcomprehensiveannual financial report, whose contents confonnto programstandards. The CAFRmust satisfybothgenerally accepted accounting principles and applicable legal requirements.ACertificate of Achievement isvalid fora period of one year only. Vernon has received a Certificate ofAchievement for the last fifteen consecutive years. We believe that our current report continues to meet theCertificate of Achievement program's requirements, and we are submitting it tothe GFOA todetennine itseligibility for another certificate.AcknowledgementsThe preparation of this report on a timely basis could not have been accomplished without the professional,efficient services of the dedicated members of the Finance Department. The preparation of a ComprehensiveAnnual Financial Report requires a major effort and I would like to extend special recognition toFrank J. Zitkus, Controller; andtoexpressmyappreciationfor eachof thefollowingmembersof thedepartment who assisted and contributed to the preparation of this report:Penny Calcasola Payroll CoordinatorDiane Luddecke Budget AnalystRaelene Phillips AccountantBeverly States Assistant Treasurer16I would also like to thank the staff of Kostin, Ruffkess & Company, LLC,for their assistance and review ofthe document. Andfinally, weacknowledge the Mayor, the Town Administrator, and the members of theTown Council for their continued interest and support in planning and conducting the financial operations ofthe Town in a responsible and progressive manner.. Respectfully submitted,~ ~ ~ P & t B P. James M. Luddecke .Finance Officer and Treasurer17Certificate ofAchievementfor Excellencein FinancialReportingPresented toTown ofVemonConnecticutFor its Comprehensive AnnualFinancial Reportfor the Fiscal Year EndedJune 30, 2009A Certificate of Achievement for Excellence in FinancialReporting is presented by the Government Finance OfficersAssociation of the United States and Canada togovernment units and public employee retirementsystems whose comprehensive annual fmancialreports (CAFRs) achieve the higheststandards in government accountingand fmancial reporting.PresidentaL.. ... x'..JI .. - R#. ~ .'..,""7' i ~Executive Director18FinancialSectionPondViewCorporateCenter76BattersonPark RoadFarmington, CT06032-2571b:OSTIN,R - ~ ~Business Advisors andCertifiedPublic AccountantsFarmington,CT New London, CTSpringfield, MAMainLine:Toll Free:Fax:Web:(860) 678-6000(800) 286-KRCO(860) 678-6110www.kostin.comINDEPENDENT AUDITORS' REPORTTown CouncilTown of Vernon, ConnecticutWehave auditedtheaccompanyingfinancial statements of the governmental activities, thebusiness-typeactivities, each major fund, and the aggregate remaining fund information of the Town of Vemon, Connecticut,as of and for the year ended June 30, 2010, which collectively comprise the Town's basic financial statementsas listedinthe table ofcontents. Thesebasicfinancial statements aretheresponsibilityoftheTown'smanagement. Our responsibility is to express opinions on these financial statements based on our auditWeconductedour audit inaccordancewithauditingstandards generallyacceptedintheUnitedStatesofAmericaandthestandards applicabletofmancial audits containedinGovernment AuditingStandards,issued by the Comptroller General of the United States. Those standards require that we plan and perform theaudit to obtain reasonable assurance about whether the basic financial statements are free ofmaterialmisstatement. An auditincludes examining, on a test basis, evidence supporting the amounts and disclosures inthebasicfinancial statements. Anaudit also includes assessingthe accountingprinciples usedandthesignificant estimates made bymanagement, as well as evaluating the overall basic financial statementpresentation. We believe that our audit provides a reasonable basis for our opinions.In our opinion, the financialstatements referred to above present fairly, in all material respects, the respectivefmancial position of the governmental activities, the business-type activities, each major fund, and the aggregateremainingfundinformationof theTownof Vemon, Connecticut, as of June30, 2010, andtherespectivechanges in financial position and cash flows, where applicable, thereof for the year then ended in conformitywith accounting principles generally accepted in the United States of America.In accordance with Government Auditing Standards, we have also issued our report dated December 27,2010,on our consideration of the Town's internal control over financial reporting and on our tests of its compliancewith certain provisions of laws, regulations, contracts, grant agreements and other matters. The purpose of thatreport is to describe the scope of our testing of internal control over financial reporting and compliance and theresultsof that testing, andnot toprovideanopinionontheinternal control overfinancial reportingoroncompliance. That report isanintegral part of anaudit performed inaccordance withGovernment AuditingStandards and should be considered in assessing the results of our audit.The Management Discussion and Analysis,on pages21through 35the General Fund Budgetary comparisoninformation, Scheduleof FundingProgress andScheduleof EmployerContributions -VemonRetirementSystem, and Other Postemployment Benefit Plan on pages 92 through 105, respectively, are not a required partof thebasicfmancial statementsbut aresupplementaryinformationrequiredbyGovernmental AccountingStandards Board. Wehaveappliedcertainlimitedprocedures, whichconsistedprincipallyof inquiriesofmanagement regarding the methods of measurement and presentation of the required supplementaryinformation. However, we did not audit the information and express no opinion on it.19Members of:Leading Edge Alliance Kreston International Amencan Instltule of Certified Public AccountantsAn Equal Opporlunlly Employer

& COMPANY. LLCTown ofVemon, ConnecticutPage TwoOuraudit was conductedfor thepurposeof fonningopinions onthefinancial statementsthat collectivelycomprisetheTownof Vernon, Connecticut'sbasicfmancial statements. Theintroductory sectionandtheaccompanying fmancial infonnation listed as supplemental schedules in the table of contents are presented forpurposesof additional analysisand are not a required part of the basic financial statements. The combiningfundfinancial statementsandotherschedules aslistedinthetableof contentshavebeensubjectedtotheauditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated inall material respects in relation to the basic financial statements taken as a whole. The introductory section andstatistical section have not been subjected to the auditing procedures applied in the audit of the basic financialstatements and, accordingly, we express no opinion on them.Farmington, ConnecticutDecember 27,201020OFFICE OF THEFINANCE DEPARTMENTTOWN OF VERNON14 PARK PLACE, VERNON, CT 06066Tel: (860) 870-3690Fax: (860) 870-3587E-mail: jluddecke@vemon-ct.govMANAGEMENT'S DISCUSSION AND ANALYSISFOR THE YEAR ENDED JUNE 30, 2010This discussionandanalysis of theTownof Vernon, Connecticut's (Town) financial perfonnanceisprovided by management toprovideanoverviewof theTown'sfinancial activitiesfor thefiscal yearended June 30, 2010. Please read thisMD&Ai ~ conjunction with the transmittalletter and the Town'sfinancial statements, Exhibits A to J.FINANCIAL HIGHLIGHTS The Town's total net assets increased as a result of this year's operations. Net assets of our business-type activities increased by $556 thousand, or 3.73%; while net assets of our governmental activitiesincreased by $3.682 million, or 3.62%. Duringtheyear, theTowngeneratedtaxes and revenuesthat were$3.682millionmorethanthe$91.494 million in expenses and transfers for governmental activities. IntheTown's business-type activities, revenues increasedto $6.24million(or by5.1%) whileexpenses decreased to $5.69 million (or by 4.5%). "Total combined cost of Town governmentaland business activities decreased by $2.21million from$99.39 million to $97.18 million. ." TheGeneral Fundreportedafundbalancethis year of $10.43million, inclusiveof unreserved,undesignated fund balance in the amount of $8.27 million. On June15, 2010, bond anticipation notes of $3.710 million were issued,allocated as follows: $740thousand for public improvements and $2.970 million for improvements to school facilities. The resources available were $521thousand more than expenditures for the General Fund. This wasaccomplishedbyeffectivelymanagingappropriations bymeans of spendingandhiringcontrols,increased collection of service charges and the collection of current and prior taxes. The tax collection rate against the original levy was 98.7%.21OVERVIEWOF THE FINANCIAL STATEMENTSThis annual report consists of aseries offinancial statements. The statement of net assets andthestatement of activities (ExhibitsAandB, respectively)provideinformationabout theactivitiesof theTownasa wholeand present a longer-term view of theTown'sfinances. Fund financial statementsarepresented in ExhibitsC toJ. For governmental activities, thesestatements tellhow these services werefinancedin theshort-termaswell aswhat remainsforfuturespending. Fundfinancial statementsalsoreport the Town's operations in more detail than the government-wide statements by providinginformation about the Town's most significant funds. The remaining statements provide financialinformation about activitiesfor which the Town actssolely asa trustee or agent for the benefit of thoseoutside of the government.Government-Wide Financial StatementsThe analysis of the Town as a whole begins with Exhibit A and B, found in the Basic Financial Statementssection of this report. The statement of net assets and the statement .of activities report information aboutthe Town as a whole and about its activities for the current period. These statements include all assets andliabilities using the accrual basis of accounting,which issimilar to the accounting used by most private-sectorcompanies. All of thecurrentyear'srevenuesandexpensesaretaken intoaccountregardlessofwhen cash is received or paid.Thesetwostatementsreport theTown'snet assets andchangesinthem. TheTown'snet assets, thedifference between assets and liabilities, are one way to measure the Town's financial health, or financialposition. Overtime, increasesordecreasesintheTown'snet assets areoneindicator of whetheritsfinancial health isimproving or deteriorating. The reader needstoconsider other non-financial factors,however, such as changes in the Town's property tax base and the condition of the Town's capital assets,to assess the overall health of the Town.Inthestatement of net assets andthestatement of activities, wedividetheTownintotwotypes ofactivities: Governmental activities - Most of the Town's basic services are reported here, includingeducation, public safety, maintenance and development of streets and buildings, sanitation, humanservices, recreation, publicimprovements, communityplanninganddevelopment, andgeneraladministration. Property taxes, chargesforservices, and state and federal grants finance most ofthese activities. Business - type activities - The Town charges a fee to customers to help it cover all or most of thecost of certain services it provides. The Town's operation of the wastewater treatment facility andrentals at Center 375 are reported here.22Fund Financial StatementsThefundfinancial statementsbeginwithExhibit Candprovidedetailedinfonnationabout themostsignificantfunds- not theTownas a whole. Somefunds arerequiredtobeestablished byCharter.However, the Town Council establishes many other funds to help control and manage financial activitiesfor particular purposes (liketheAmbulance Services Fund, Sewer Assessments Fund, andCemeteryOperations) or to show that it is meeting legal responsibilities for using funds for those purposes, and othermoney (like grants received foreducation fromtheState and Federalgovernmentsand accounted forinthe Special Revenue Fund). The Town's funds are divided into three categories; governmental,proprietary and fiduciary. Governmental funds (Exhibits C, Dand E) - Most of the Town's basic servicesare reported ingovernmental funds, which focus on how money flows into and out of those funds and the balancesleft at year-endthat areavailablefor spending. Thesefunds arereportedusinganaccountingmethod called modified accrual accounting, which measures cash and all other financial assets thatcan readily be converted to cash. The governmental fund statements provide a detailed short-tennview of the Town's general government operations and the basic services it provides.Governmental fundinfonnationhelpsyoudetenninewhether therearemoreorfewer financialresources that can be spent in the near future to finance the Town's programs. The relationship (ordifferences) betweengovernmental activities (reportedinthe statement ofnet assets andthestatement of activities) and governmental funds is described in a reconciliation at the bottom of thefund financial statements. Proprietary funds(ExhibitsF, G and H) When the Town charges customers for the services itprovides, whether to outside customers or toother units of the Town, these services are generallyreported in proprietary funds. Proprietary fundsare reported in the same way that all activities arereported in the statement of net assets and the statement of activities. In fact, the Town's enterprisefunds(a component of proprietary funds) are the same asthe business-typeactivities reported inthe government-wide statements, but provide more detail and additional infonnation, such as cashflows,for proprietary funds. Internal service funds(the other component of proprietary funds)areusedtoreport activitiesthat providesupplies andservicesfor theTown'sotherprogramsandactivities - such as the Town's Data Processing Internal Service Fund. Fiduciary funds (ExhibitsI and J) - TheTownisthetrustee, orfiduciary, foritsemployees'pension plans. It isalsoresponsible for other assets that, because of a trust arrangement, can beused only for the trust beneficiaries. All of the Town's fiduciary activities are reported in separatestatements of fiduciary net assets and changes in fiduciary net assets. These activities are excludedfrom the Town's other financial statements because the Town cannot use these assets to finance itsoperations. The Town is responsible for ensuring that the assets reported in these fundsare usedfor their intended purposes.23GOVERNMENT-WIDE FINANCIAL ANALYSISThe Town'scombined net assetsincreased froma year agofrom$116.6 million to$120.8million. Theanalysisbelowfocuses onthenet assets(Table 1) andchangesinnet assets (Table2) of theTown'sgovernmental and business-type activities.TABLE 1NET ASSETSJUNE 30, 2010 AND 2009In ThousandsGovernmentalActivitiesBusiness-TypeActivities Total2010 2009 2010 2009 2010 2009Current and other assets $ 27,439 $ 36,453Capital assets, net of accumulated$ 5,312 $ 4,703 $ 32,751 $ 41,156195,285154,129196,316163,565 10,69415,397 16,65611,344 143,435179,888 Total assets 179,660---'------'---depreciation, as restated 152,221

59,954 __15,511 15,07275,465 78,672 887427460 7654371,20263,14014,64577,785Non-current liabilities outstandinl 59,189---'------'---IOther liabilities 15,074 Total liabilities 74,263---'--'-'-----'---Net assets:Invested in capital assets,net of related debtRestrictedUnrestricted, 2009 as restated93,2727,9614,16481,07410,8279,81411,3444,11010,6944,204104,6167,9618,27491,76810,82714,018Total Net Assets $ 105,397 $ 101,715 $ 15,454 $ 14,898 $ 120,851 $ 116,613Governmental ActivitiesNet assets of the Town's governmental activities increased by $3.682 million or 3.62%, ($105.397 millioncompared to$101.715million, as restated). Unrestricted netassets - the part of netassetsthatcan beused to finance day-to-day operations without constraints established by debt covenants, enablinglegislation, or other legal requirements - changed from$9.814 million, as restatedat June30, 2009, to$4.164 million at the end of this year.The change in governmental net assets resulted primarily because of the following factors:1) Thedecrease of $9.014millionincurrent andotherassetsisprimarily duetothepurchaseandconstruction of capital assets of$13.058 million during the year.24Governmental Activities2) Capital assets, net of accumulated depreciation, increased by $8.786 million and that change is acombination of the addition of current year capital purchases and construction in progress, againstthe depreciation expense of existing assets.3) Long-term liabilitiesdecreased by $3.951million, including the retirement of long-term debt of$4.112 million and a net decrease of $331 thousand to retirement I compensated employeeabsences liabilities, offset by an increase in the Net Other Post Employment Benefit Obligation of$454 thousand and an increase in long-term claims payable of$38 thousand.4) Current liabilitiesincreasedby$429thousand, duemostlytoa$700thousandincreaseinthecurrent portionoflong-termdebt, offset partially by a $390 thousand decrease inyear-endaccounts payable.Thelargestportionof theTown'snet assets, $93.272millionor 88.5%, reflectsitsinvestment incapital assets, less any related debt used to acquire those assets that is still outstanding. The Town usesthesecapital assetstoprovideservicestoresidents; consequently, theseassetsarenotavailableforfuturespending. An additional portion of the Town's netassets, $7.961million or 7.5%, representsresources that are subject to restrictions on how they may be used.Business Type ActivitiesIn 2010, the net assets of business-type activities increased by $556 thousand or 3.73%, ($15.454 millioncompared to $14.898 million,as restated). The majority of this change includes an increase in sewer usecharges of $367 thousand, due primarily to a 7.6% increase in sewer use rates, and a reduction of expensesfromthe prior year of $222thousand. Center 375rentalratesincreased by $2thousand fromthe prioryear,yet the Fund experienced a $24 thousand decrease in net assets. Although there are unrestricted netassets of $4.110 million, these fundshowever, cannot be used tomake upforany decreases reported ingovernmental activities. TheTowngenerallycanonly usethesenet assetstofinancethecontinuingoperations ofthe wastewater treatment facility and Center 375.The Town's total revenues (including transfers of $36 thousand) were $101.417 million. The total cost ofall programs and services (including transfers of $36 thousand) was $97.179 million. Our analysis belowseparately considers the operations of governmental and business-type activities.25TABlE2CHANGES INNEr ASSETSInThousandsGovernmental Business-TypeActivities Activities Total2010 2009 2010 2009 2010 2009Revenres:Program revenres: $ - $Cbarges for services 4,562 4,355 6,195 5,827 10,757 10,182Operating grants andcontributions 30,313 28,579 30,313 28,579Capital grants andcontributiorn 3,850 3,771 3,850 3,771General revenues:Property taxes 54,100 51,723 54,100 51,723Grants and contributions rotrestricted to specific program; 1,259 1,606 75 1,259 1,681Investment income 192 213 10 39 202 252Msce1laneous 900 965 900 965Transfers 36 36Total revenues 95,176 91,212 6,241 5,941 101,417 97,153Programexpenses:General govmnnent 6,003 5,544 6,003 5,544Commmityani developrrert 1,632 874 1,632 874Public safety 12,144 12,569 12,144 12,569Maintenance anddevelopment 9,435 10,285 9,435 10,285HUilllnservices 1,446 1,463 1,446 1,463Park, recreation, and culture 2,487 2,332 2,487 2,332Education 56,255 58,265 56,255 58,265Interest on long-tenndebt 2,056 2,098 2,056 2,098Sewer 5,488 5,710 5,488 5,710Rental 197 245 197 245Transfers 36 36Total programexpenses 91,494 93,430 5,685 5,955 97,179 99,385Increase (decease) innet assets $ 3,682 $ (2,218) $ 556 $ (14) $ 4,238 $ (2,232)26Governmental ActivitiesAs noted earlier, net assets from governmental activities increased $3.682 million. Since the Town beganpreparing a statement of net assets as of June 30,2003, this is the fifth increase in the eight-year period.On the revenue side, key factors to the overall increase were as follows: Propertytax revenues, which comprises 56.8 percent ofthe Town's governmental activitiesrevenues,includes the current levy,prior year levies, and interest, increased by $2.377 million or4.60%. This is attributed to growth in the grand list;and an "effective" increase in the mil rate of3.83%, when factoring the final year of a three-year phase-in. Chargesfor servicesincreasedby$207thousand, duetoincreasedtownclerkreceiptsof $129thousand, ambulance emergency medical service fees of $52 thousand, recreation program receipts of$24 thousand and cafeteria food sales of $41 thousand, offset partiallyby decreases to sewerconnections of $45 thousand and various town services. Operating grants and contributions increased by $1.734 million, including increased specialeducation grants of $866 thousand and increased cafeteria grants of $98 thousand. Grants and contributions not restricted to specific programs decreased by $347 thousand. Capital grants and contributions increased by $79 thousand. Unrestrictedinvestment earningsdecreasedby$21 thousand, reflectingthedecreaseinoverallinterest rates.For governmental activities, expenses decreased $1.936 million, or 2.07%, from the previous year. Of thetotal expenditures of $91.494 million, 61.5% are for educational services; 13.3% for public safety; 10.3%for maintenance and development; and 6.6% for general government.Major expense factors include: The cost ofeducational services decreasedby$2.010milliondueprimarilytothedisposal ofequipment inthe prior year of approximately 1.767 million. General government costsincreasedby$459thousand, dueprimarilytowageadjustments andincreased health insurance costs. PublicSafetycosts decreasedby$425thousandfor police, fire andambulancecoverageduepartially to reduced pension costs and reduced health insurance costs, the result of vacancies; offsetby cost increases due to wage adjustments. Maintenance and development costs decreased by $850 thousand due to decreased equipment andbuildingmaintenance costs, a lesser amount ofroad repairs and decreasedrefuse collectionexpenses. Interest on long-term debt decreased by $42 thousand.27Table 3 presents the cost of each of the Town'sfivelargest programs - education, public safety, townwide, (which includesitemssuchasbenefitsand property insurance), maintenanceanddevelopment ofstreets andbuildings, general government administration, andall other services - as well as eachprogram's net cost (total cost'less revenues generated by the activities). The net cost shows the financialburden that was placed on the Town's taxpayers by each of these functions.TABLE 3GOVERNMENTAL ACTIVITIESIn ThousandsTotal Cost of Services Net Cost of Services2010 2009 2010 2009Education $ 56,255 $ 58,265 $ 25,552 $ 27,884Public safety 12,144 12,568 10,832 11,342Maintenance and development 9,435 10,285 6,274 9,051General government 6,003 5,544 4,661 3,326Interest on long-term debt 2,056 2,098 1,698 1,741All others 5,601 4,670 3,716 3,382Totals $ 91,494 $ 93,430 $ 52,733 $ 56,726 Revenues of the Town's business-type activities (see Table 2) increased by 5.1percent, or $300 thousand,($6.24 million in 2010 compared to $5.94 million in 2009) and expenses decreased by 4.5 percent or $270thousand. Thefactors influencingtheseresults: Therewasanincreaseinsewer usechargesof $367thousand, theresult of a7.6%increaseinsewerrates onOctober 1, 2009, rental fees at Center 375increased by $2 thousand and there was a decrease of $29 thousand in investment income.The decrease in expenses of $270 thousand is affected by an increase in utility costs of $35 thousand andan increase in depreciation expense of $27 thousand; offset by a reduction in wage and benefit costs of $72thousandand of $232thousand inother operating costsincluding repairand maintenance, suppliesandmaterials and general and administrative.28TOWN FUNDS FINANCIAL ANALYSISGovernmental FundsAs the Town completed the year, itsgovernmental funds(as presented in the balance sheet - Exhibit C)reported a combined fund balance of$14.52 million, which is a decrease of$7.26 million from last year'stotal. Of total fundbalance, $12.22millionis reservedbecauseit has beencommittedtoliquidatepurchase orders, is set aside for capital projects and equipment, trust funds, special assessment debt serviceand inventory.Included in this year's total change in fund balance is an increase of$521 thousand in the Town's GeneralFund. The unreserved and undesignated fund balance, which committed $295 thousand for encumbrancesmore than the prior year, reflects an overall increase of $226 thousand. The unreserved and undesignatedfundbalanceofthe General Fundat June 30, 2010is $8.271 million, whichrepresents 10.51%ofestimatedrevenuesfortheensuingyear. Maintainingadequatefundbalance reservesallowsthe Townflexibilitywhenbudgetsarerestrictedandpreventscashflowproblemsandtherelatedcoststhat canresult. It is essential to have reserves available to provide funding support for major capital projects thatawait reimbursement fromgrant or bond proceeds. Also, income earned by keeping thefundsinvestedassists in limiting the need for future tax increases.The primary reasons for the General Fund's increaseincludesome of theareasdiscussed in thegovernmentalactivitiesanalysis, highlightson the followingpage, and as reported in Exhibit D.The decrease in fund balance of the town's other major governmental funds, the Public BondImprovement and School Bond Improvement Funds, totaled $7,622,644 for the fiscalyear due to projectexpenditures exceeding bond and other proceeds. The resulting fund balance deficit totaling $4,088,842(School Bond Improvement Fund) will be funded by future bonding and intergovernmental proceeds. TheDebt Service Fundcollectsannual contributionsfromarea municipalitiesequaltotheirshare of annualdebtservice paymentsrelativetothelatest upgradetothe WasteTreatment Plant (WTP) facility. TheTown'sannual contribution of the WTPdebt service is transferred in from the General Fund. The DebtService Fund receivable balance represents area municipality future debt service contributions.Inaddition, otherchangesinfundbalancesinNonmajorGovernmental Fundsshould benoted: intheSpecial RevenueFundthere was anincrease of$193 thousand, withgains of$12thousandintheAmbulanceMedical Services, $87thousandintheSewerConnection, $46thousandintheTownAidRoad, $85thousand in Adult Educationand $32thousand in the Parksand Recreation ProgramsFundsand losses of $4 thousand in the Cafeteria, $35 thousand in the Economic Development, $25 thousand inthe Special Education Grants, $15 thousand in the Sewer Assessments and $17 thousand in MiscellaneousGrants Funds. The Nonmajor Capital Projects Fund had a decrease of $460 thousand including a gain inthe EducationCapital Non-RecurringFundof$130thousandandaloss intheTownCapital Non-Recurring Fund of $591thousand. Design and construction costs of the other Nonmajor capital projectsfundswerefullyfundedbyfederal andstategrants; andthePermanent TrustFundincreased by$107thousand due primarily to investment performance in the cemetery and school memorial trusts.29Proprietary FundsThe Town accounts for five proprietary funds, two as Business-Type activities and three as GovernmentalActivities - Internal Service Funds, which are reported in Exhibits F, G and H. The Sewer User Fund andCenter 375 are established as self-supporting Business-Type activities that reported a change in assets thatamountedtoa$557thousandincrease. TheSewerUserFundis establishedfor theoperationandmaintenanceof thewastewater treatmentplant. Quarterly billsforsewer usageandinterest earnedoninvestments generate its resources. The net increase to the Sewer User Fund net assets is $581thousand.Thisincreaseisa result of increasedfeesof $169thousand, a $36thousandcapital contribution, andareductionof expensesof $223thousand, includingreducedwagesandbenefitsof $82thousand. Thesewer user rates increased on October 1, 2009 by 7.6%, from $5.29 to $5.69 per 1,000 gallons of meteredwater, yieldinganadditional $198thousandin revenue. TheOctober1, 2010sewer userratewasnotincreased. The plant is in the thirteenth year of operation since major renovations, and the facility itself isreported in the General Government activities.Center 375 is a former elementary school renovated for the rental of office space to private firmsand toTown departments. The renovation was conducted in a manner that would enable the Town to restore thebuilding backtoaschoolif enrollmentssodemanded. Theresultof theyear's activitydecreasednetassets by $24 thousand.The Internal Service Fund is supported by department budgets. The Data Processing Fund serves boththe Town and schooladministrations, which equally support its operating expenses. The future needs ofthedepartment requirecontinual upgrades tothevarious computersystems, as well asmaintaininganetwork for sharing common software and databases. Net assets decreased by $31thousand as a result ofoperations. The Workers' Compensation Fundprovidesforself-insurance of workers' compensationand is supported by contributions from the General and Sewer User Funds, as well as investment income.Forfiscal year-endJune30, 2010, expensesexceeded revenuesby$100thousand, increasing theprioryear net assets deficit from $966 thousand to a deficit of $1.066 million. Claims incurred for fiscalyear200911 0 decreased significantly from the prior year from $1.285 million to $431thousand. The allocationof adequate contributions in the next year to meet financialdemands is based on actual experience. TheMedical Self-Insurance Fund, which becameeffective January1, 2006, providesmedicalprescriptioncoveragefor employees andretirees. EffectiveJuly1, 2007, dental coveragefor general governmentemployeesandretireesbecameself-insured. Thefundis supported bycontributionsfromall coveredparticipantsandemployer contributions. Contributionamountsare based upon historical experience ofclaims incurred and paid, and'third-party administrators process the claims. At June 30, 2010, net assetswere $31 thousand, a reduction of $57 thousand from the prior year.General Fund Budgetary HighlightsDifferences between the original budget and the finalamended budget amounted to an increase of $4.073million. Included in thisamount is$1.465million of encumbrancescarriedforwardfromthe previousfiscal year and $2.608 million of current year budget amendments that can be classified as follows:30Pass-throughadditional appropriationsare those supported by revenueand other sources, amounting to$1.209 million during the year, with the majority of that amount, $876 thousand related to excess specialeducation grants and school use activities; $151 thousand for collections remitted to the state ofConnecticut bytheTownClerkforthefarmlandandhistoric preservationact; $21thousandforyouthservice part-time wages; $6 thousand for permit refunds; and $101 thousand in police special services pay.Althoughtheseadditional appropriationshadarevenuefundingsource, theywerelegallyappropriatedfrom fund balance.Other additional appropriations amounting to $1.400 million were taken from net assets for items such asroadwayimprovements, $800thousand; other capital improvements, $255 thousand (including$172thousandfor landacquisitionand$61 for demolition) legal fees, $147thousand; policevehicles, $72thousand;park maintenancecosts, $48thousand; snow removal costs, $65thousand; and miscellaneouscosts, $13 thousand.Actual final expenditures totaled$76.81 millionandcanbesummarizedas follows. Thebudgetaryunexpended, unencumberedresultedinafavorableamount of $1.516million. Containedwithinthisamount is $801 thousandreturnedfromthe school systemcomprisedmainlyofsavings in specialeducation program costs;building / plant operations;wages for overtime and temporary help, along withvacancies due toretirements; andpurchasingrefinements. Policeandrefusecollectionserviceshadfavorable variances of $204 thousand and $110 thousand, respectively, due primarily to hiring deferrals ofvacancies. At mid-year the Town was facing costs in excess of the planned resources due toa projectedshortfall of $509thousand in State aid and investment income, in addition toa proposal by theState ofConnecticut to reduce operating grants to municipalities. The Town's General Government implementeda conditional spending freezeand did not replace vacancies. Although theState resolvednot toreducegrants, the Town continued the freeze through the end of the fiscal year to address items referred to in theadditional appropriations section and to provide for road projects, the retirement of capital leases, and anadditional contribution to the defined benefit pension plan. This produced a net savings of $244 thousandin wages, which was complemented by $471thousand from non-wage budgets, most significantly medicalinsurance, social security, refuse and recycling fees,diesel fuel, streetlights, legal notices, and other townwide accounts.On the revenue side, final actual revenues exceeded the original budget by $1.244 million due to favorable(unfavorable) variancesinthefollowingcategories: special educationexcessgrantsof $971thousand;with all other intergovernmental revenue below original estimates by ($441) thousand. Other revenues inexcess of estimates include $276 thousand in tax collections due toeffective pursuit of current and priortaxes; charges for serviceswereaboveestimatesby$479thousanddueinmost part tothefarmlandpreservation surcharge, $168thousand,police specialservices, $185thousand, andschool use fees, $60thousand,which in turn are appropriated tocover the respective costs. Town Clerk recording