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 and
assuming, among other matters, compliance with certain covenants, interest on the Notes is excluded from gross income
for federal income tax purposes under the Internal Revenue Code of 1986. Interest on the Notes is not a specific
preference 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 existing
law, interest on the Notes is exempt from Massachusetts personal income taxes, and the Notes are exempt from
Massachusetts personal property taxes. Bond Counsel expresses no opinion regarding any other tax consequences
related to the ownership or disposition of, or the accrual or receipt of interest on, the Notes. The Notes will NOT be
designated as “qualified tax-exempt obligations” for purposes of Section 265(b)(3) of the Code. See “Tax Exemption”
herein.
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 Obligation
Deficit Financing Bond Anticipation Notes, dated December 1, 2010:
$6,000,000 State Qualified General Obligation Deficit Financing Bond Anticipation Notes payable December
1, 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 be
received 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 bidders
may 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) of
one 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 to
reject any bid not complying with this Notice of Sale and, so far as permitted by law, to waive any irregularity with respect
to any bid. The Notes will be awarded on the basis of lowest net interest cost to the City after deduction of premium, if
any. Such cost will be determined by computing the total amount of interest payable on the Notes, at the rate or rates
stated, from December 1, 2010 until the maturity of the Notes and deducting therefrom the sum, if any, by which the
amount bid for the Notes exceeds the aggregate principal amount of the Notes. In the event a bidder offering a premium
for 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 in
accordance with the terms provided in this Notice of Sale and shall be binding upon the bidder as if made by a signed and
sealed written bid delivered to the City.

Any bidder who submits a winning bid by telephone in accordance with this Notice of Sale shall be required to provide
written confirmation of the terms of the bid by faxing or e-mailing a completed, signed bid form to First Southwest
Company 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 Mayor
and the City Treasurer.

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

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 the
responsibility 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 physical
certificate, rather then in book-entry form through the facilities of The Depository Trust Company. The successful bidder
seeking the issuance of the Notes in this manner shall bear any and all costs of any re-registration or transfer of Notes
from time to time. Any bidder seeking to have the Notes issued in the form of fully registered physical certificates, rather
than in book-entry form, shall indicate this preference to the City at the time of the submission of the winning bid. The City
reserves the right to decline any request to issue the Notes in non-book entry form if it should determine, in its sole
discretion, 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 the
enforceability thereof may be subject to bankruptcy and other laws affecting creditor's rights and that their enforceability
may also be subject to the exercise of judicial discretion in appropriate cases. Payment of the principal of and interest on
the Notes is not limited to a particular fund or source of revenue nor is any lien or pledge for such payment created with
respect to any such fund or source. The Notes will be valid general obligations of the City of Lawrence and, except to the
extent they are paid from the sale of State Qualified bonds in anticipation of which they are issued, or from any other
available moneys, the principal of and interest on the Notes 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.

In order to assist the successful bidder or bidders in complying with the requirements of paragraph (b)(5)(i)(c) of Rule
15c2-12 promulgated by the Securities and Exchange Commission, the City will undertake to provide notices of certain
significant 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 to
the printing of CUSIP numbers on said Notes shall be paid for by the City, however, the City assumes no responsibility
for 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 Statement
dated November 11, 2010. The Preliminary Official Statement is provided for informational purposes and is not a part of
this Notice of Sale. The Preliminary Official Statement has been deemed to be final by the City except for the omission of
the reoffering prices, interest rates and other terms of the Notes depending on such matters, but is subject to change
without notice and to completion or amendment in a Final Official Statement. Copies of the Preliminary Official Statement
may be obtained from 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 Official
Statement 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 federal
reserve funds on or about December 1, 2010.

CITY OF LAWRENCE, MASSACHSUETTS

/s/ Patricia Cook, Treasurer

November 11, 2010

 TABLE OF CONTENTS
Page Page

OFFICIAL STATEMENT ........................................... 3 CITY FINANCES:

Authorization of the Bonds and
Use of Proceeds ..................................................... 3 Budget and Appropriation Process ............................. 28
State Qualified Notes ................................................ 3 History of Prior Financial Problems (1989-1997) ....... 28
Book-Entry Only System ........................................... 4 History of More Recent Financial Problems ............... 29
Securities and Remedies .......................................... 5 Special Legislation Pertaining to the City’s
Tax Exemption .......................................................... 6 Fiscal Stability .......................................................... 29
Opinion of Bond Counsel .......................................... 8 Initial Plan of Correction.............................................. 30
Financial Advisory Services of Subsequent Accomplishments ................................... 30
First Southwest Company. ....................................... 8 Deficit Financing ......................................................... 31
Continuing Disclosure ............................................... 8 Budget Trends ............................................................ 32
Revenues .................................................................... 32
CITY OF LAWRENCE: State School Building Assistance Program ................ 33
General...................................................................... 10 Investments of City Funds .......................................... 34
Principal Executive Officers ...................................... 10 Significant Accounting Policies ................................... 34
Current Financial Challenges .................................... 10 Annual Audits .............................................................. 34
History ....................................................................... 10 Financial Statements .................................................. 34
Municipal Services .................................................... 11 Fiscal 2010 Estimated Operating Results .................. 35
Education .................................................................. 11 Combined Balance Sheet June 30, 2009 ................... 36
Public School Enrollments ..................................... 11 Combined Balance Sheet June 30, 2008 ................... 37
Industry and Commerce ............................................ 11 Combined Balance Sheet June 30, 2007 ................... 38
Employment and Payrolls ....................................... 12 Comparative Statement of Receipts and
Largest Employers .................................................... 12 Expenditures and Changes in Fund Balance –
Labor Force, Employment and Unemployment ........ 13 General Fund, June 30, 2005 - 2009 ...................... 39
Economic Developments .......................................... 13 Free Cash ................................................................... 40
Sigificant Announcements ........................................ 13 Tax Increment Financing for Development Districts .. 40
Public Sector Developments ..................................... 15
Building Permits ........................................................ 18 INDEBTEDNESS:
Transportation and Utilities ....................................... 18
Population, Income and Wealth Levels..................... 19 Authorization Procedure and Limitations .................... 41
Population Trends ..................................................... 19 Types of Obligations ................................................... 41
Direct Debt Summary ................................................. 42
PROPERTY TAXATION: Debt Ratios ................................................................. 43
Debt Service Requirements ........................................ 43
Tax Levy Computation .............................................. 20 Principal Payments by Purpose .................................. 44
Reduction of State Aid .............................................. 20 Authorized Unissued Debt and
Assessed Valuations and Tax Levies ....................... 21 Prospective Financing ............................................. 44
Assessed Valuation................................................... 21 Coverage of Qualified Debt Service ........................... 45
Classification of Property .......................................... 21 Overlapping Debt ........................................................ 46
Tax Rates .................................................................. 22 Contractual Obligations .............................................. 46
Largest Taxpayers .................................................... 22 RETIREMENT PLAN .................................................. 47
State Equalized Valuation ......................................... 22 Other Post-Employment Benefits ............................... 48
Abatements and Overlay........................................... 23 EMPLOYEE RELATIONS........................................... 49
Tax Collections .......................................................... 23 LITIGATION ................................................................ 49
Taxes Titles and Possessions .................................. 24 APPENDIX A: City of Lawrence - Fiscal 2009
Sale of Tax Receivables ........................................... 24 Audited Financial Statements
Taxation to Meet Deficits........................................... 24 APPENDIX B: Proposed Form of Legal Opinion
Property Tax Limitation ............................................. 25
Tax Levy Limits ......................................................... 26
Pledged Taxes .......................................................... 26
Community Preservation Act .................................... 26
_____________________________
The Official Statement is not to be construed as a contract or agreement between the City and the purchasers or holders of any of the
Notes. Any statements made in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended
merely as opinion and not as representations of fact. The information and expressions of opinion herein are subject to change without
notice 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.

2
 CITY OF LAWRENCE, MASSACHUSETTS
OFFICIAL STATEMENT

The purpose of this Official Statement is to furnish certain information regarding the City of Lawrence, Massachusetts
(hereafter referred to as "the City") in connection with the sale of $6,000,000 aggregate renewal State Qualified General
Obligation Deficit Financing Bond Anticipation Notes (hereafter referred to as the “Notes”). The information contained
herein has been furnished by the City except information attributed to another governmental agency of official as the
source.

Authorization and Use of Proceeds

The Notes are being issued pursuant to a $25 million loan order of the City Council (Order # 7-2010) approved by the
Mayor on February 17, 2010 and Chapter 58 of the Acts of 2010. See “Special Legislation Pertaining to the City’s Fiscal
Stability” herein. The legislation provides the statutory authority for the current issues of Notes.

The Notes are being issued to pay a like amount of notes maturing December 1, 2010 originally issued as part of an
aggregate amount of $24 million notes issued to cover previous and fiscal 2010 estimated accumulated deficits discussed
herein under “CITY FINANCES” in the sections “Special Legislation Pertaining to the City’s Fiscal Stability”, “Initial Plan of
Correction”, and “Deficit Financing”.

The Notes are general obligations of the City and are being issued as State Qualified Notes to mature December 1, 2011.
Additionally, the City has notes maturing March 1, 2011 ($6 million), June 1, 2011 ($6 million), and September 1, 2011 ($6
million) which when combined with this issue of notes totals the aggregate $24 million original issuance. The Notes will
be renewed annually as they mature for 20 years, with annual paydowns of principal commencing in Fiscal 2012, in
accordance with a level debt schedule to be approved by the Department of Revenue. The Notes are structured to
mature quarterly, just prior to quarterly state aid distribution payments, so that the intercept of state aid for their payment
not interrupt the City’s cash flow position throughout the course of the year.

Payment of the principal and interest due upon the respective maturity dates of the Notes will be paid by the
Treasurer and Receiver-General of The Commonwealth of Massachusetts, as Paying Agent, through an intercept
of the City’s quarterly state aid distribution payments. See “INDEBTEDNESS – Coverage of Qualified Debt
Service”, herein, for estimated state aid coverage of the Notes, and other qualified bond debt service of the City.

State Qualified Notes

The Notes constitute “qualified notes” pursuant to Chapter 44A of the Massachusetts General Laws. Pursuant to Chapter
44A the City Treasurer shall at the delivery date of qualified notes certify to the State Treasurer the maturity schedule,
interest rate, and dates of payment of debt service on qualified notes. The State Treasurer shall pay such debt service for
the qualified notes and after payment shall withhold from the distributable aid (as defined in Chapter 44A) payable to the
City an amount which will be sufficient to pay the debt service on the qualified notes or, if the amount of such distributable
aid in any year is insufficient for the purpose, from any other amounts payable by the Commonwealth to the City under
any provision of law. From the time withheld by the State Treasurer, all such distributable aid or amounts so withheld and
paid shall be exempt from being levied upon, taken, sequestered, or applied toward paying the debts of the City other
than for payment of debt service on such qualified notes.

The Commonwealth covenants in Section 8 Chapter 44A with the purchasers, holders and owners, from time to time, of
qualified notes that it will not repeal, revoke, rescind, modify, or amend the above described provisions so as to create
any lien or charge on or pledge, assignment, diversion, withholding of payment, or other use of or deduction from any
distributable aid or other amounts to be paid to any holder of qualified notes which is prior in time or superior in right to the
payment required by said provisions; provided, however, that nothing therein contained shall be deemed or construed to
require the Commonwealth to continue to make payments of distributable aid or other amounts or to limit or prohibit the
Commonwealth from repealing or amending any law heretofore or hereafter enacted for the payment or apportionment of
such aid or other amounts, or of the manner, time, or amount thereof.

Chapter 44A also provides that the certification to the State Treasurer as to the amount payable in any year for debt
service on qualified notes shall be fully conclusive as to such qualified notes from and after the time of issuance of such
qualified notes, notwithstanding any irregularity, omission, or failure as to compliance with any of the provisions of
Chapter 44A with respect such qualified notes.

3
Chapter 44A further provides that nothing therein shall be construed to relieve the City of the obligation imposed on it by
law to appropriate and to include in its annual tax levy amounts necessary to pay, in each year, the principal and interest
maturing and becoming due on any qualified notes issued by the City; provided, however, that to the extent of the
amounts of distributable aid or other amounts payable to the City which have been or are to be forwarded to the paying
agent for such qualified notes, the State Treasurer shall certify to the City Auditor the amounts so withheld and thereafter
such amounts shall be credited to the appropriations of the City for the current fiscal year, and provided, further that to the
extent to which distributable aid is not appropriated by the Commonwealth in any fiscal year, such appropriated amounts
of the City shall be used to pay the debt service maturing and becoming due in such year on such qualified notes of the
City.

Nothing in Chapter 44A shall be construed to pledge the credit and assets of the Commonwealth to the support of any
qualified 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 Notes
pursuant 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; $43,430,000
qualified bonds dated March 15, 2002, $9,080,000 of which are currently outstanding; $22,605,000 qualified bonds dated
August 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 which
are currently outstanding; $8,000,000 qualified bonds dated August 1, 2006, $6,770,000 of which are currently
outstanding; $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 $2,305,460
qualified bonds dated April 1, 2009, $2,150,000 of which are currently outstanding. See "INDEBTEDNESS--Coverage of
Qualified 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 be
issued as fully-registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other
name as may be requested by an authorized representative of DTC. One-fully registered Note certificate will be issued for
each 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 asset
servicing for over 3.5 million issues of U.S. and non-U.S. equity, corporate and municipal debt issues, and money market
instruments (from over 100 countries) that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates
the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities,
through electronic computerized book-entry transfers and pledges between Direct Participants' accounts. This eliminates
the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities
brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-
owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC is the holding company for DTC,
National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing
agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others
such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that
clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect
Participants"). DTC has 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 and
www.dtc.org.
Purchases of Notes under the DTC system must be made by or through Direct Participants, which will receive a credit for
the Notes on DTC's records. The ownership interest of each actual purchaser of each Note ("Beneficial Owner") is in turn
to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from
DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the
transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the
Beneficial Owner entered into the transaction. Transfers of ownership interests in the Notes are to be accomplished by
entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will
not receive certificates representing their ownership interests in the Notes, except in the event that use of the book-entry
system for the Notes is discontinued.

4
To facilitate subsequent transfers, all Notes deposited by Direct Participants with DTC are registered in the name of
DTC's partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of
DTC. The deposit of Notes with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not
effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Notes; DTC's
records reflect only the identity of the Direct Participants to whose accounts such Notes are credited, which may or may
not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their
holdings on behalf of their customers.

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

Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote with respect to the Notes unless
authorized by a Direct Participant in accordance with DTC's MMI Procedures. Under its usual procedures, DTC mails an
Omnibus Proxy to the [Issuer] as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s
consenting or voting rights to those Direct Participants to whose accounts the 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 by
an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds
and corresponding detail information from the City or the Paying Agent, on the payable date in accordance with their
respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by
standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer
form or registered in "street name," and will be the responsibility of such Participant and not of DTC (nor its nominee), the
City 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 authorized
representative of DTC) is the responsibility of the City or the Paying Agent, disbursement of such payments to Direct
Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the
responsibility of Direct and Indirect Participants.

DTC may discontinue providing its services as depository with respect to the Notes at any time by giving reasonable
notice to the City or the Paying Agent. Under such circumstances, in the event that a successor depository is not
obtained, 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 securities
depository). 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 the
City 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 faith
and 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 and
other general obligations, although the use of certain moneys may be restricted.

Tax Levy.. The Massachusetts statutes direct the municipal assessors to include annually in the tax levy for the next fiscal
year “all debt and interest charges matured and maturing during the next fiscal year and not otherwise provided for [and] all
amounts necessary to satisfy final judgments”. Specific provision is also made for including in the next tax levy payments of
rebate amounts not otherwise provided for and payment of notes in anticipation of federal or state aid, if the aid is no longer
forthcoming.

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

5
Except for taxes on the increased value of certain property in designated development districts which may be pledged for the
payment of debt service on bonds issued to finance economic development projects within such districts, no provision is made
for a lien on any portion of the tax levy to secure particular bonds or notes or bonds and notes generally (or judgments on
bonds or notes) in priority to other claims. Provision is made, however, for borrowing to pay judgments, subject to the General
Debt Limit. (See “DEBT LIMITS” below.) Subject to the approval of the State Director of Accounts for judgments above
$10,000, judgments may also be paid from available funds without appropriation and included in the next tax levy unless other
provision is made.

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

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

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

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

6
The foregoing does not constitute a pledge of the faith and credit of the Commonwealth. The Commonwealth has not agreed
to maintain existing levels of state distributions, and the direction to use estimated distributions to pay debt service may be
subject to repeal by future legislation. Moreover, adoption of the annual appropriation act has sometimes been delayed
beyond the beginning of the fiscal year and estimated distributions which are subject to appropriation may be unavailable to
pay local debt service until they are appropriated.

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

Tax Exemption

In the opinion of Edwards Angell Palmer & Dodge LLP, Bond Counsel to the City (“Bond Counsel”), based upon an
analysis of existing laws, regulations, rulings, and court decisions, and assuming, among other matters, compliance with
certain covenants, interest on the 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 Notes
is not a specific preference 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. The
foregoing reflects the enactment of the American Recovery and Reinvestment Act of 2009 which includes provisions that
modify the treatment under the alternative minimum tax of interest on certain state and local government entities and that
modify Section 265(b)(3) of the Code. Bond Counsel expresses no opinion regarding any other federal tax consequences
arising with respect to the ownership or disposition of, or the accrual or receipt of interest on, the Notes.

The Code imposes various requirements relating to the exclusion from gross income for federal income tax purposes of
interest on obligations such as the Notes. Failure to comply with these requirements may result in interest on the Notes
being 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 in
federal gross income. The opinion of Bond Counsel assumes compliance with these requirements.

Bond Counsel is also of the opinion that, under existing law, interest on the Notes is exempt from Massachusetts personal
income taxes, and the Notes are exempt from Massachusetts personal property taxes. Bond Counsel has not opined as
to other Massachusetts tax consequences arising with respect to the Notes. Prospective Noteholders should be aware,
however, that the Notes are included in the measure of Massachusetts estate and inheritance taxes, and the Notes and
the interest thereon are included in the measure of certain Massachusetts corporate excise and franchise taxes. Bond
Counsel has not opined as to the taxability of the Notes or the income therefrom under the laws of any state other than
Massachusetts.

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

7
Notes purchased, whether at original issuance or otherwise, for an amount greater than the stated principal amount to be
paid at maturity of such Notes, or, in some cases, at the earlier redemption date of such Notes ("Premium Notes"), will be
treated as having amortizable note premium for federal income tax purposes and Massachusetts personal income tax
purposes. No deduction is allowable for the amortizable note premium in the case of obligations, such as the Premium
Notes, the interest on which is excluded from gross income for federal income tax purposes. However, a Noteholder’s
basis in a Premium Note will be reduced by the amount of amortizable note premium properly allocable to such
Noteholder. Holders of Premium Notes should consult their own tax advisors with respect to the proper treatment of
amortizable 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) or
events occurring (or not occurring) after the date of issuance of the Notes may adversely affect the value of, or the tax
status of interest on, the Notes. Further, no assurance can be given that pending or future legislation, including
amendments to the Code, if enacted into law, or any proposed legislation, including amendments to the Code, or any
future judicial, regulatory or administrative interpretation or development with respect to existing law, will not adversely
affect the value of, or the tax status of interest on, the Notes. Prospective Noteholders are urged to consult their own tax
advisors 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 tax
purposes and is exempt from Massachusetts personal income taxes, the ownership or disposition of, or the accrual or
receipt of interest on, the Notes may otherwise affect the federal or state tax liability of a Noteholder. Among other
possible consequences of ownership or disposition of, or the accrual or receipt of interest on, the Notes, the Code
requires recipients of certain social security and certain railroad retirement benefits to take into account receipts or
accruals 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 the
Noteholder’s other items of income or deduction. Except as indicated in the following paragraph, Bond Counsel
expresses no opinion regarding any such other tax consequences, and Noteholders should consult with their own tax
advisors 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 & Dodge
LLP, Boston, Massachusetts, Bond Counsel. The opinion will be dated the date of the original delivery of the Notes and
will 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 upon
and 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 has
consented 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 promulgated
by 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 Securities
Rulemaking Board (the “MSRB”), notices of the occurrence of any of the following events with respect to the Notes within
ten business days of such occurrence: (a) principal and interest payment delinquencies; (b) non-payment related
defaults, if material; (c) unscheduled draws on debt service reserves reflecting financial difficulties; (d) unscheduled
draws on credit enhancements reflecting financial difficulties; (e) substitution of credit or liquidity providers, or their failure
to perform; (f) adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determination of
taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to
the tax status of the Notes, or other material events affecting the tax status of the Notes; (g) modifications to rights of
owners 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 the
Notes; (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

8
the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a
definitive agreement relating to any such actions, other than pursuant to its terms, if material; and (n) appointment of a
successor 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 Notes
and incorporated by reference in the Notes. The sole remedy available to the owners of the Notes for the failure of the
City to comply with any provision of the certificate shall be an action for specific performance of the City’s obligations
under the certificate and not for money damages; no other person shall have any right to enforce any provision of the
certificate. The City has never failed to comply in all material respects with any previous undertakings to provide
annual reports or notices of material events in accordance with the Rule.

9
 CITY OF LAWRENCE, MASSACHUSETTS
General
Lawrence is located in Essex County and is 26 miles north of Boston. It is bordered on the north by the Town of Methuen,
on the west and southwest by the Town of Andover, and on the east and southeast by the Town of North Andover. It is
also 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 Lawrence
and Haverhill are the population centers of a Primary Metropolitan Statistical Area (PMSA) of approximately 230,000
persons. 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-year
term. All executive officers are appointed.
Principal Executive Officers
City Title Name First Entered Office Term Expires
Mayor William Lantigua 2010 2014
Budget and Finance Director Currently Vacant (1) - Indefinite
Comptroller David Camasso 2007 Indefinite
Treasurer/Collector Patricia M. Cook 1989 Indefinite
City 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 this
position 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 at
$24 million through the end of fiscal 2010. A regular pattern of overestimating revenues, under budgeting expenditures,
including under budgeting collective bargaining agreements by the prior administration, combined with significant cuts in
local aid from The Commonwealth of Massachusetts, led to the enactment of Chapter 58 of the Acts of 2010 (“Chapter
58”). Chapter 58 authorized the City to amortize its deficit over a period of years, while requiring the appointment by the
State of a fiscal overseer of the City. The fiscal overseer is charged with working in consultation with the City’s financial
management team, to assist the City’s return to financial stability. The fiscal overseer also has the ability to trigger the
appointment 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 financial
challenges and powers of the fiscal overseer, see “Special Legislation Pertaining to City’s Fiscal Stability, “Initial Plan of
Correction”, and “Deficit Financing” herein.

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

History

In 1845, a group of Boston entrepreneurs led by Abbott Lawrence formed the Essex Company to harness the power of
Bodwell's Falls in the Merrimack River in order to run their commercial concerns. The pace of development rapidly
transformed Lawrence from a rural farming community into a major industrial center. Within three years, the Essex
Company completed a dam, constructed two canals and a reservoir, organized gas works, and erected fifty brick
buildings, 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 service
and in 1853, Lawrence was incorporated as a city. Lawrence quickly achieved prominence as one of the major centers of
woolen textile development in the United States and some of the original mills remain, underscoring the City's continued
importance as a textile manufacturing center. In recent years, the City has sought to diversify its economic base by
attracting industries which manufacture products other than textiles.

10
Municipal Services

The City provides general governmental services for the territory within its limits, including police and fire protection, solid
waste collection and disposal, public education, street maintenance, park and recreation facilities, water services and a
library. 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 through
137 miles of sewer mains and sewer stations. The system serves essentially all residences and businesses in the City.
The 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 total
capacity of approximately 13,000 students. Over the past decade, the City embarked upon a program to rebuild and/or
replace many of its school facilities. The first phase of this program involved the building of three new elementary schools
to replace obsolete smaller structures. These were financed with bond issues in 2001 and 2002 and have been
completed. The City receives annual grant reimbursement payments for approximately 90% of construction costs and
interest on the bonds and notes issued for this purpose. The second phase included the building of a new high school at
an estimated cost of $110 million. The City issued temporary notes to fund said project, all of which have been retired
with grant proceeds received from the Massachusetts School Building Association (MSBA), and also issued $11,000,000
bonds 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 receiving
grant payments for the MSBA’s portion of some additional project costs as such costs are incurred, pursuant to the
Agreement. All negative adjustments to MSBA reimbursements have been made, though the City continues to pursue
positive adjustments to school construction projects, including restoration of previously disqualified MSBA
reimbursements 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 Prospective
Financing” 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 - - - 391 417
Elementary (K-8) 10,145 10,145 9,609 8,588 9,026
High School (9-12) 2,900 2,950 3,008 3,439 3,461
Totals 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 the
towns of Andover, Methuen and North Andover. As of October 1, 2010 there were 1,226 students enrolled in the Greater
Lawrence Regional Vocational Technical High School District, 970 of whom were residents of Lawrence. The capacity of
the 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 the
present day. Industrialization began in the mid-nineteenth century when a dam was built across the Merrimack River to
take advantage of its great water power potential.

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

11
 Employment and Payrolls

Calendar Year Average

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

__________________
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 – 2010

Approximate
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 110
Robert 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.

12
Labor Force, Employment and Unemployment

According to the Massachusetts Department of Employment and Training's preliminary data, in August 2010, the City had
a total estimated labor force of 31,270 of which 26,045 were employed and 5,225 or 16.7% were unemployed as
compared to 8.3% for the Commonwealth. (Note: Monthly data is unadjusted.) The following table sets forth the City's
average labor force and unemployment rates as well as the unemployment rates for the Commonwealth and the United
States, for calendar years 2005 through 2009.
Unemployment Rates
Calendar City of Lawrence Massachusetts United States
Year Labor
Force Unemployment Rate Unemployment Rate Unemployment Rate

2009 30,007 17.8 % 9.1 % 9.7 %

2008 30,301 17.1 5.3 5.8
2007 30,159 16.9 4.5 4.6
2006 29,516 9.6 5.2 4.5
2005 28,979 10.1 4.8 4.6
2004 29,458 11.3 5.2 5.4
__________________
SOURCE: The Massachusetts Department of Employment and Training, the Federal Reserve Bank of Boston and
the 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 River
offer accessible office space and adaptable manufacturing space at reasonable rates. Its people offer a diverse high
quality labor force, many within walking distance of the compact, industrially planned downtown. As the City moves
forward, businesses are benefiting from its renewed commitment to infrastructure, including better access to Routes 495
and 93, upgrading of major arterials within the City, as well as improvements to its schools, parks, and water lines. The
following 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 into
a dynamic new Lawrence neighborhood, bringing investment, housing, and jobs to the historic heart of the city. The
project will create 360,000 square feet of renovated space, including family, workforce housing, commercial office,
community facilities, as well as new green space and public access to the Merrimack River. The Union Crossing Project
represents the first time that the “people of Lawrence” will become Mill Owners, led by Lawrence Community Works and
its 4,000 members. Phase One of Union Crossing began in May 2010 and upon completion will provide 60 units of
healthy, energy-efficient and affordable housing for working families and a state of the art child care center servicing 200
children. 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 considered
a 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 Lupoli
purchased several old, abandon and condemned mill buildings on thirty-five acres of contiguous property, considered the
largest real estate holding in the Merrimack Valley. Lupoli Companies not only moved its corporate headquarters to
Lawrence, but also recruited over 200 companies with over 2,000 employees in total to this renovated site. This
renovation also includes the opening of Salvatore’s Restaurant an upscale family style Italian restaurant which employs a
staff of 86 people in Lawrence. Lupoli Companies in total employs 119 people from the City of Lawrence. During Phase I
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 the
total well over $145 million. The success of this project has been a direct result of close partnerships with the City of
Lawrence and the Commonwealth of Massachusetts.

13
Malden Mills/PolarTEC was purchased by College Street Management Company and is partnering with Winn
Development 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 of
Lawrence. The financing consists of state and federal historic tax credits and low income housing tax credits, along with
HOME 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 global
distributor of new, refurbished, and off lease computer equipment. They receive, inspect and ship globally, approximately
70% overseas. The owners Juan and Luis Yepez have recently invested over $15 million in the acquisition and rehab of
old mill buildings in the historic downtown area including 25 Marston Street, 215 Canal Street and 60 Island Street (Bell
Tower site). There recent rehab which is ongoing includes the renovation of an existing parking garage, electrical repairs,
heating, roofing and tenant build-outs. The 60 Island Street location also includes Cambridge College satellite campus.
All of the Yepez properties represent a total of 600 employees for the area. The Yepez Brothers were honored in
President 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 from
state and local resources including low-income tax credits allocated by Massachusetts Department of Housing and
Community Development. A total investment amount is estimated at $4.4 million.

Beacon Communities/Sacred Heart LLC purchased a vacant, private neighborhood elementary school building (old
Sacred Heart School) in 2009 to rehab and create 44 affordable apartments. The approved financing consists of federal
and state low-income housing credits and historic tax credits. The total investment is estimated at $14.8 million and
construction began in June 2010.

Lawrence General Hospital is a state of the art facility providing full service health care to all. The hospital just
completed a $20 million emergency center expansion which is one of the most premiere facilities north of Boston. The
hospital is also completing a new $5 million imaging center before the end of December 2010. The hospital is a strong
partner 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 its
corporate headquarters in September 2007 to the City of Lawrence after residing in North Andover for over fifty years.
The company provides low or no cost financial services to residents of Merrimack Valley and Lawrence, and has 66
employees located in the City, and a total of 105 throughout Massachusetts and New Hampshire. The MVFCU also built
a 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 Riverwalk
facility on Merrimack Street, with 550 employees located in Lawrence and 750 employees in Massachusetts. Home
Health VNA Inc. provides in-home medical care and support and has four regional offices, including the Merrimack Valley
Hospice House.

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

Pentucket Medical, has been providing health care to the residents of Merrimack Valley for over forty years. With the
latest diagnostics, technology, and research they offer unparalleled acute, chronic, and wellness care to their patients.
Pentucket 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 the
City of Lawrence in the summer of 2005 and currently has 61 employees. Little Sprouts Early Education and Leadership
and 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 to
build and expand at the Riverwalk office location.

14
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 million
investment in the City June 29, 2010 and is planning its grand opening in January 2011. The company has retained its
current location and employees and is redeveloping an 80,000 square foot vacant building in Lawrence in which to
expand production. Through an EDIP Investment Tax Credit award of almost $115,000 and a Tax Increment Financing
Agreement from the City of Lawrence, an additional 220 jobs will be created in Lawrence over a five year period to
support the $12.5 million investment in the city of Lawrence and will generate $50,000 in taxes annually.

GB NewEngland2, LLC/ CVS Pharmacy Development

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

RiverBank
Officially headquartered in North Andover, MA opened its newest branch location in Lawrence,MA in January 2010 on
South Broadway/Rt. 28. This new branch features onsite-parking, self-service coin machine, drive-up teller and ATM
services, 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 annual
allocation of approximately $2.8 million from the U.S. Department of Housing and Urban Development (HUD) to
implement community improvements and economic development projects. The City’s annual CDBG allocation is $1.7
million and HOME allocation is $1.1 million.

Based upon the compelling data presented within the Community Profile, the City’s single greatest community
development need is to create economic opportunity for its residents. Housing policies and programs alone cannot solve
the problems facing Lawrence and its residents, thus a comprehensive economic and human-resource development
strategy is essential. Economic empowerment is therefore a requirement for Lawrence to achieve its overarching goal of
being 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 to
create and retain jobs, support neighborhood based economic development, create competitive workforce through
increased 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 to
businesses located or seeking to expand in Lawrence, and support for projects that will lead to the creation of jobs for the
low- and moderate-income residents. The City will continue to seek lending partners to reinitiate its small business
revolving loan fund, which provides working capital and funding for leasehold improvements. Exterior building
improvement helps both the businesses and the neighborhoods. The City will continue its Business Facade Improvement
Program 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 shopping
areas and reestablish their historic roles as central places to shop, work and meet neighbors. The City may designate
specific 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

15
Before investment can take root and growth can occur, certain impediments must be removed. In the case of
neighborhood development, one of the greatest impediments is blight in all its forms—vacant buildings, trash-strewn
vacant 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 and
transform neighborhoods, the City will coordinate the following capital investments:

Public Facilities and Improvements to community facilities, including senior centers, providing “community space” and
further improving the image of the community. Furthermore, senior facilities, community facilities, and recreational centers
provide 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 that
provide a source of community pride and activities. In all facility improvements, the City will insure that handicapped
accessibility is a key component.

Streetscape Improvements/Beautification to public streets including putting in new curbs, sidewalks, lighting and trees
so these areas will be appealing places for residents to shop and work. The selection of streets/sidewalks will be
undertaken 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 assistance
and 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 of
many vacant properties, abandoned alleyways, Brownfield sites, and underutilized riverfront areas are opportunities for
creative 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 and
enhancing 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 the
City of Lawrence. The Plan identified the critical need for passive park space and active recreation areas to provide
recreational and visual relief from the dense building configuration throughout the City. The Plan indicated that Lawrence
has 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 five
years. The City will partner with Groundwork Lawrence (Groundwork). Groundwork receives some financial support from
the U.S. Park Service and raises resources from local fundraising and foundations. In all facility and infrastructure
improvements, handicapped accessibility will be a component. This would include curb cuts and ramps for improved,
updated 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 neighborhoods,
deteriorated buildings and vacant lots can be both a blighting influence and an opportunity. The City will continue to
evaluate vacant building reuse with a priority for homeownership opportunity development where appropriate. For larger
vacant 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 while
undersized lots will be evaluated as potential side-yards for abutters or as community gardens under the PARC grant.
The 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 its
operations. Federal Section 3 guidelines require that 30% of all construction and construction-related new hires be
residents of the local area where the project occurs. The proposed capital investments will provide opportunities to meet
or exceed the federal mandate. In support of this objective, the City is compiling a data base of local businesses to
facilitate local job opportunities.

16
In addition to community and economic development initiatives, progress is also being made in the area of public
investment. 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 Lawrence,
Massachusetts Highway Department, U.S. Environmental Protection Agency, Massachusetts Department of
Environmental Protection, Army Corps of Engineers, Massachusetts Attorney General’s Office, Mass Development and a
host of other federal, state and local agencies, as well as private mill owners in the historic downtown area. This multi-
million dollar endeavor will result in the creation of a new “gateway” to the industrial area and commercial heart of
Lawrence from Interstate 495, generating 960 surface parking spaces needed for mill expansion and development in the
area. 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 downtown
Lawrence. Through the acquisition of a former city-owned parking garage/in-town mall site, the College, working in
partnership with the Commonwealth of Massachusetts, Department of Capital Asset Management is set to begin
construction in the Fall 2010 on what will be a state of the art technology and nursing facility in the downtown area
boasting a café and Barnes and Nobles bookstore. The college currently employees over 300 people and with this
expansion will continue to grow.

Designation as “Renewal Community” in 2003 by the Federal Government. Companies continue to benefit in
employment tax credits and community revitalization deductions by utilizing this designation. The City of Lawrence sees
this designation as a significant tool to attracting new business to the community. Since taking office Mayor Lantigua has
aggressively 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 corporate
customers represent huge amounts of economic activity in the Greater Lawrence area. International companies,
including Aetna, Corning, Forbes Magazine, Inc. and Laidlaw are using the airport to make their investments in the
regional economy.

Groundwork Lawrence, Inc. is a non-profit organization that partners with City of Lawrence making change happen
since 2001. Through its environmental and open space improvements, community food programs, youth education and
employment initiatives, and community programming and events, Groundwork Lawrence creates the building blocks of a
healthy community, and empowers Lawrence residents to improve their quality of life. Groundwork Lawrence achieves
results by engaging the whole community – residents, non-profit organizations, city government and businesses – in the
planning and realization of its projects. With this collaborative approach, Groundwork ensures that all stakeholders are
mutually invested in its outcomes, the key to stable neighborhoods and sustainable change. In partnership with the City
of 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, amenities
and plantings, representing approximately 75 percent of the City’s total inventory of green space. Groundwork has also
built five parks, created four new community gardens, cleaned up and improved more than five miles of wooded trails,
and planted nearly 520 trees, 492 shrubs, and 3,250 bulbs and perennials in public spaces throughout the city. The City
of 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. A
growing network of almost 4,000 members committed to Lawrence’s revitalization, many of whom volunteer in everything
from community outreach to youth development. Some of their most recent accomplishments as a result of strong
partnership with the City of Lawrence include completion of the following:
 The Summer Street Project - an affordable home-ownership and playground development project
that has substantially revitalized an entire one-block section of CommunityWorks’ primary target
area, the North Common neighborhood.
 Our House Campus – The Center for Design and Technology and the Hennigan Center, a $4
million community educational and economic development campus, which now houses all of
Lawrence Community Works’ programs and administrative offices.
 Reviviendo Family Housing Project - a 17-unit scattered site, affordable rental project that is
renovating four key historic and abandoned houses in the North Common.
 Union and Mechanic Homeownership Project - This initiative created 5 new homeownership
units for first time Lawrence homeowners.

17
  Reviviendo Playground and the Scarito Park - together almost 3 acres of new parks, playgrounds
and community gardens built with partner Groundwork Lawrence on formerly abandoned and
contaminated land in the North Common Neighborhood.
 Scarito Homes - 10 new homeownership units for first time homebuyers. Lawrence Community
Works 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' estimates,
which are generally considered to be conservative. The number of permits granted and estimated valuations are shown
for both private construction as well as for City projects. The issuance of a permit does not necessarily result in
construction.
Building Permits
Calendar New Construction 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
__________________
(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 in
Massachusetts and northern New England. Commuter bus service is provided to Boston, and the Boston and Maine
Railroad provides commuter and freight service. Bus service within the City and throughout the Greater Lawrence area is
provided 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, the
airport 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-site
industrial park. Major companies in the tele-communications and defense industries consider the airport an integral part
of their business operations. The airfield can accommodate a full range of aircraft, from single and multi-engine planes to
smaller jets and helicopters. The airport currently has over 200 based aircraft.

Gas and electric services are provided by established private utilities.

18
Population, Income and Wealth Levels

Lawrence Massachusetts United States

Median Age:
2000 29.5 36.5 35.3
1990 28.7 33.6 32.9
1980 29.6 31.2 30.0
1970 32.3 29.0 28.1
Median Family Income:
2000 $31,809 $61,664 $50,046
1990 26,398 44,367 35,225
1980 15,457 21,166 19,908
1970 9,507 10,835 9,867
Per Capita Income:
2000 $13,360 $25,952 $21,587
1990 9,686 17,224 14,420
1980 5,485 7,459 7,313
1970 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 2000
U.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.

19
 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 is
the amount appropriated or required by law to be raised for municipal expenditures less estimated receipts from other
sources and less appropriations voted from funds on hand. The total amount levied is subject to certain limits prescribed
by law; for a description of those limits, see "Tax Limitations" below. The estimated receipts for a fiscal year from sources
other than the property tax may not exceed the actual receipts during the preceding fiscal year from the same sources
unless approved by the State Commissioner of Revenue. Excepting special funds the use of which is otherwise provided
for by law, the deduction for appropriations voted from funds on hand for a fiscal year cannot exceed the "free cash" as of
the beginning of the prior fiscal year as certified by the State Director of Accounts plus up to nine months' collections and
receipts on account of earlier years' taxes after that date. Subject to certain adjustments, free cash is surplus revenue
less uncollected overdue property taxes from earlier years. Although an allowance is made in the tax levy for abatements
(see "Overlay" below) no reserve is generally provided for uncollectible real property taxes. Since some of the levy is
inevitably not collected, this creates a cash deficiency which may or may not be offset by other items (See "Taxation to
Meet Deficits").

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

Tax Levy Computation

Estimated
Fiscal 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 $226,522,228

Additions:
State Assessments(2) 15,386,703 16,412,368 436,564 2,105,929 17,371,113
Overlay for Abatements - 439,071 5,021 486,921 490,357
Other Additions(3)(4) 427,490 3,902,105 2,738,628 15,216,114 183,323
Gross 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 28,246,249
Other 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 188,965,184 196,228,586 203,902,307 212,198,086 194,924,670
Net 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 other
items 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 aid
payments may vary from said estimates, and the State may withhold payments pending receipt of State and County
assessments.

20
Assessed Valuations and Tax Levies

Property is classified for the purpose of taxation according to its use. The legislature has in substance created three classes of
taxable property: (1) residential real property, (2) open space land, and (3) all other (commercial, industrial and personal
property). Within limits, cities and towns are given the option of determining the share of the annual levy to be borne by each
of the three categories. The share required to be borne by residential real property is at least 50 per cent of its share of the
total taxable valuation; the effective rate for open space must be at least 75 per cent of the effective rate for residential real
property; and the share of commercial, industrial and personal property must not exceed 175 percent of their share of the total
valuation. A city or town may also exempt up to 20 percent of the valuation of residential real property (where used as the
taxpayer’s principal residence) and up to 10 percent of the valuation of commercial real property (where occupied by certain
small businesses). Property may not be classified in a city or town until the State Commissioner of Revenue certifies that all
property in the city or town has been assessed at its fair cash value. Such certification must take place every three years, or
pursuant to a revised schedule as may be issued by the Commissioner.

Related statutes provide that certain forest land, agricultural or horticultural land (assessed at the value it has for these
purposes) and recreational land (assessed on the basis of its use at a maximum of 25 percent of its fair cash value) are
all to be taxed at the rate applicable to commercial property. Land classified as forest land is valued for this purpose at
five percent of fair cash value but not less than ten dollars per acre.

The City completed revaluations of all real and personal property for fiscal 2006 and fiscal 2009. The next revaluation is
planned 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 the
trend in the City's equalized valuations for the following years. Local assessed valuations are determined annually as of
January 1 and used for the fiscal year beginning on the next July 1.

Fiscal Real Property Personal Property Total Assessed State Equalized

Year Valuation Valuation Valuation Valuation (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 fiscal
year 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.

21
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/Industrial
2011 (Est.) $ 13.43 $ 30.40
2010 12.57 27.80
2009 10.70 22.62
2008 10.01 20.54
2007 9.23 19.94
2006 8.86 20.31

Largest Taxpayers

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

Total Assesed % of
Nature of Valuation for Total
N ame Business Fiscal 2011 Valuation

Verizon N ew 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 Roc k Housing 24,645,820 0.86
Lincoln Andover LLC Housing 19,393,700 0.68
H ampton on Beacon Housing 18,103,900 0.63
C hi Energy Inc. Hydro Electric 13,743,140 0.48
N ew 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 H ousing Housing 9,405,300 0.33
H J 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 and
towns, the Commissioner of Revenue biennially makes a determination of the fair cash value of the taxable property in each
municipality as of January 1 of even-numbered years. This is known as the "equalized value". The following table sets forth the
equalized valuations of the City over the last decade and the percentage increase or (decrease).

State Equalized
Januar y 1, V aluation

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.

22
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 deficit"
is required to be added to the next tax levy. An abatement granted after a tax payment has been made is accounted for
as a refund on the books of the City. Abatements are granted where exempt real or personal property has been
assessed or where taxable real or personal property has been overvalued or disproportionately valued. The assessors
may also abate uncollectible personal property taxes. They may abate real and personal property taxes on broad
grounds (including inability to pay) with the approval of the State Commissioner of Revenue.

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

Overlay Reserve Cumulative Abatements & Exemptions

Fiscal Net Tax Dollar As a % of Granted Against Each Levy Through
Year Levy(1) Amount Net Levy June 30, 2010

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
__________________
(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. Interest
accrues on delinquent taxes at the rate of 14 percent per annum. Real property (land and buildings) is subject to a lien
for the taxes assessed upon it, subject to any paramount federal lien and subject to bankruptcy and insolvency laws. (In
addition, real property is subject to a lien for certain unpaid municipal charges or fees). If the property has been
transferred, an unenforced lien expires on the fourth December 31 after the end of the fiscal year to which the tax relates.
If the property has not been transferred by the fourth December 31, an unenforced lien expires upon a later transfer of the
property. Provision is made, however, for continuation of the lien where it could not be enforced because of a legal
impediment. The persons against whom real or personal property taxes are assessed are personally liable for the tax
(subject to bankruptcy and insolvency laws). In the case of real property, this personal liability is effectively extinguished
by sale or taking of the property as described below.

The following table compares the City’s net tax collections with its net tax levies (gross tax levy minus the overlay reserve
for 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 % of
Year 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.

23
Tax Titles and Possessions

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

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

Fiscal Tax Titles & Tax Title

Year Possessions Redemptions

2010 $10,341,552 $163,741

2009 12,353,375 220,237
2008 12,323,583 104,842
2007 9,259,590 130,409
2006 12,730,662 529,896
2005 10,348,375 540,839

Sale of Tax Receivables

Legislation enacted in 1996 authorizes public sales by cities and towns of delinquent property tax receivables, individually
or in bulk. The City contracted with Plymouth Park Services in 2008 for the sale of its tax liens and delinquents, and is
working diligently to bring its accounts up to date. To date, the City has received $4,181,194 from the sale of its 2003 to
2009 receivables. The City is also currently liened through 2007 and is in the process of liening 2008 through 2010
receivables by January 2011.

Municipal Tax Amnesty

Pursuant to recent legislation, a municipality may establish a municipal tax amnesty program expiring not later than June 30,
2011. 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 interest
relates.

Taxation to Meet Deficits

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

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

24
Property Tax Limitation

Chapter 59, Section 21C of the General Laws, also known has Proposition 2 ½, imposes two separate limits on the
annual 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 town
exceeds the primary limitation, it must reduce its tax levy by at least 15 percent annually until it is in compliance, provided
that the reduction can be reduced in any year to not less than 7 1/2 percent by majority vote of the voters, or to less than
7 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 maximum
levy 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 a
general revaluation, in its assessed valuation over the prior year's valuation. This "growth" limit on the tax levy may be
exceeded in any year by a majority vote of the voters, but an increase in the secondary or growth limit under this
procedure does not permit a tax levy in excess of the primary limitation, since the two limitations apply independently. In
addition, if the voters vote to approve taxes in excess of the “growth” limit for the purpose of funding a stabilization fund,
such increased amount may only be taken into account for purposes of calculating the maximum levy limit in each
subsequent year if the board of selectmen of a town or the city council of the city votes by a two-thirds vote to appropriate
such increased amount in such subsequent year to the stabilization fund.

The applicable tax limits may also be reduced in any year by a majority vote of the voters.

The State Commissioner of Revenue may adjust any tax limit "to counterbalance the effects of extraordinary, non-
recurring events which occurred during the base year."

Proposition 2 ½ further provides that the voters may exclude from the taxes subject to the tax limits and from the
calculation of the maximum tax levy (a) the amount required to pay debt service on bonds and notes issued before
November 4, 1980, if the exclusion is approved by a majority vote of the voters, and (b) the amount required to pay debt
service on any specific subsequent issue for which similar approval is obtained. Even with voter approval, the holders of
the obligations for which unlimited taxes may be assessed do not have a statutory priority or security interest in the
portion of the tax levy attributable to such obligations. It should be noted that Massachusetts General Laws Chapter 44,
Section 20 requires that the taxes excluded from the levy limit to pay debt service on any such bonds and notes be calculated
based on the true interest cost of the issue. Accordingly, the Department of Revenue limits the amount of taxes which may be
levied in each year to pay debt service on any such bonds and notes to the amount of such debt service, less a pro rata portion
of any original issue premium received by the city or town that was not applied to pay costs of issuance.

Voters may also exclude from the Proposition 2 1/2 limits the amount required to pay specified capital outlay expenditures
or for the city or town’s apportioned share for certain capital outlay expenditures by a regional governmental unit. In
addition, the city council of a city, with the approval of the mayor if required, or the board of selectmen or the town council
of a town may vote to exclude from the Proposition 2 1/2 limits taxes raised in lieu of sewer or water charges to pay debt
service on bonds or notes issued by the municipality (or by an independent authority, commission or district) for water or
sewer purposes, provided that the municipality's sewer or water charges are reduced accordingly.

In addition, Proposition 2 ½ limits the annual increase in the total assessment on cities and towns by any county, district,
authority, the Commonwealth or any other governmental entity (except regional school districts, the MWRA and certain
districts for which special legislation provides otherwise) to the sum of (a) 2 1/2 percent of the prior year's assessments
and (b) "any increases in costs, charges or fees for services customarily provided locally or for services subscribed to at
local option." Regional water districts, regional sewerage districts and regional veterans' districts may exceed these
limitations under statutory procedures requiring a two-thirds vote of the district's governing body and either approval of the
local appropriating authorities (by two-thirds vote in districts with more than two members or by majority vote in two-
member districts) or approval of the registered voters in a local election (in the case of two-member districts). Under
Proposition 2 ½ any state law to take effect on or after January 1, 1981 imposing a direct service or cost obligation on a
city or town will become effective only if accepted or voluntarily funded by the city or town, or if state funding is provided.
Similarly, state rules or regulations imposing additional costs on a city or town or laws granting or increasing local tax
exemptions are to take effect only if adequate state appropriations are provided. These statutory provisions do not apply
to costs resulting from judicial decisions.

25
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 of
costs of economic development projects within such districts and may therefore be unavailable for other municipal
purposes. (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 a
surcharge 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 must
be accepted by the voters of the city or town at an election after such provisions have first been accepted by either a vote
of the legislative body of the city or town or an initiative petition signed by 5% of its registered voters.

A city or town may approve a surcharge of up to 3% of the real property tax levy, and it may accept one or more
exemptions to the surcharge under the CPA, including an exemption for low-income individuals and families and for low
and moderate-income senior citizens, an exemption for $100,000 of the value of each taxable parcel of residential real
property, and an exemption for commercial and industrial properties in cities and towns with classified tax rates. The
surcharge is not counted in the total taxes assessed for the purpose of determining the permitted levy amount under
Proposition 2½ (see “Tax Limitations” under “PROPERTY TAX” above). A city or town may revoke its acceptance of the
provisions of the CPA at any time after 5 years from the date of such acceptance and may change the amount of the
surcharge or the exemptions to the surcharge at any time, provided that any such revocation or change must be approved
pursuant to the same process as acceptance of the CPA.

Any city or town that accepts the provisions of the CPA will receive annual state matching grants to supplement amounts
raised by its surcharge on the real property tax levy. The state matching funds are raised from certain recording and filing
fees of the registers of deeds. Those amounts are deposited into a state trust fund and are distributed to cities and towns
that have accepted the provisions of the CPA, which distributions are not subject to annual appropriation by the state
legislature. The amount distributed to each city and town is based on a statutory formula which requires that 80% of the
amount in the state trust fund be used to match an equal percentage of the amount raised locally by each city and town,
and that the remaining 20% of the amount in the fund be distributed only to those cities and towns that levy the maximum
3% surcharge based on a formula which takes into account equalized property valuation and population, resulting in
larger distributions to those communities with low valuations and small populations. The total state distribution made to
any city or town may not, however, exceed 100% of the amount raised locally by the surcharge on the real property tax
levy.

26
The amounts raised by the surcharge on real property taxes and received in state matching funds are required to be
deposited in a dedicated community preservation fund. Each city or town that accepts the provisions of the CPA is
required to establish a community preservation committee to study the community preservation needs of the community
and to make recommendations to the legislative body of the city or town regarding the community preservation projects
that should be funded from the community preservation fund. Upon the recommendations of the committee, the
legislative body of the city or town may appropriate amounts from the fund for permitted community preservation purposes
or may reserve amounts for spending in future fiscal years, provided that at least 10% of the total annual revenues to the
fund must be spent or set aside for open space purposes, 10% for historic resource purposes and 10% for affordable
housing purposes.

The CPA authorizes cities and towns that accept its provisions to issue bonds and notes in anticipation of the receipt of
surcharge revenues to finance community preservation projects approved under the provisions of the CPA. Bonds and
notes issued under the CPA are general obligations of the city or town and are payable from amounts on deposit in the
community preservation fund. In the event that a city or town revokes its acceptance of the provisions of the CPA, the
surcharge shall remain in effect until all contractual obligations incurred by the city or town prior to such revocation,
including the payment of bonds or notes issued under the CPA, have been fully discharged.

The City has not adopted the CPA.

27
 CITY FINANCES
Budget and Appropriation Process

The budget process begins with the Mayor's submission of a proposed budget for the ensuing fiscal year to the City
Council within 170 days after the annual organization of the city government (which is ordinarily in early January). The
Council may make appropriations for the recommended purposes and may reduce or reject any item. Without a
recommendation of the Mayor, the Council may not make an appropriation for a purpose not included in the proposed
budget except by a two thirds vote in case of the failure of the Mayor to recommend an appropriation for such a purpose
within 7 days after a request from the Council. The Council may not increase an item without the recommendation of the
Mayor except as provided by legislation, subject to local acceptance, under which the school budget or Regional School
District assessment can be increased upon recommendation of the School Committee or Regional District School
Committee and by a two thirds vote of the Council, provided that such increase does not cause the total annual budget
to exceed the property tax limitation. If the Council fails to act on any item of the proposed budget within 45 days, that
item 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 sewer
department expenditures are required to be included in the budget adopted by the City Council. Under certain legislation
any city or town which accepts the legislation may provide that the appropriation for the operating costs of any
department may be offset, in whole or in part, by estimated receipts from fees charged for services provided by the
department. It is assumed that this general provision does not alter the pre-existing power of an electric or gas
department to appropriate its own receipts. As a result of an initiative law adopted in November 1980, School
Committees are no longer autonomous with respect to school expenditures for current purposes. The school budget is
limited to the amount appropriated by the City Council, but the school committee retains full power to allocate the funds
appropriated. State legislation known as the Education Reform Act of 1993, as amended, imposes certain minimum
expenditure requirements on municipalities with respect to funding for education. The requirements are determined on
the basis of formulas affected by various measures of wealth and income, enrollments, prior levels of local spending and
state 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 recommendation
of the Mayor, may transfer amounts appropriated for the use of one department (except for a municipal light department
or 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 and
December 1. School department budgets, expenditures, and other financial matters requiring action by the City Council
shall 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 included
in the budget. Revenues are not required to be set forth in the budget but estimated non-tax revenues are taken into
account by the assessors in fixing the tax levy.

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 decreased
state aid, special legislation was enacted to assist the City’s return to financial health. This legislation authorized the City
to capitalize certain sums, which resulted from extraordinary costs incurred in fiscal years 1989 and 1990, over a period of
five 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 City
budgets, appropriations, loan orders and transfers. A budget allotment system was put in place to monitor and control
spending. In addition, the City issued $13,000,000 in 10-year deficit financing bonds dated September 15, 1993 to
capitalize all past deficits and deferrals to improve the City's cash position and provide part of a long term relief plan to the
City'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 two
years of teacher summer salary deferrals. In December 1997, the Fiscal Oversight Board was dissolved as the City
continued to demonstrate financial improvement. The Department of Revenue continued to monitor the City finances
through its authority to approve the tax rate.

28
History of More Recent Financial Problems

The City of Lawrence has experienced varying degrees of fiscal stress for an extended period of time. These challenges
have generally been manageable at the local level. In recent years, however, mismanagement of certain capital projects
and municipal finances in general created a sizeable deficit for the 2010 fiscal year. The City addressed the Fiscal Year
2010 portion of that deficit through the issuance of deficit notes. The City reduced operating costs in Fiscal Year 2010
and Fiscal Year 2011 to establish recurring budget balance and to provide sufficient surplus to repay the deficit notes, and
in 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 made
in excess of sustainable levels. Details regarding the City’s work to address these issues can be found under “Plan of
Correction” 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 that
would permit the City to borrow up to $35 million to address anticipated deficits in fiscal years 2010 and 2011. So long as
any of this debt is outstanding, no additional debt for any purpose may be issued without the approval of the Director of
Accounts of the Massachusetts Department of Revenue. This legislation was enacted on March 31, 2010 as Chapter 58
of the Acts of 2010.

The legislation requires the Commonwealth’s Secretary of Administration and Finance (the “Secretary”) to appoint a fiscal
overseer 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 budgets,
including the budget of the City’s school department. In addition, the fiscal overseer will supervise all financial services
and activities, make recommendations with regard to sound financial policies, advise department heads of key financial
departments, assist in budget development, review all contracts in excess of one year, monitor all expenditures from all
funds and accounts of the City, and report monthly to the Secretary and the House and Senate Committees on Ways and
Means on the City’s progress made toward reducing its capital and structural deficits. Within 120 days of his or her
appointment, the overseer is required to develop a 3-year operating and a 5-year capital plan to achieve fiscal stability. In
the event that the fiscal overseer reports to the Secretary at any time that the City is (i) unable to achieve a balanced
budget; (ii) faces a fiscal crisis that poses a danger to public health or safety, or (iii) cannot achieve fiscal stability without
the assistance of a finance control board, then the Secretary shall immediately abolish the overseer and appoint a finance
control 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 exist,
no appropriation, borrowing authorization, transfer, or other municipal spending authority shall take effect until approved
by the board. In addition, the board must approve all appropriations, borrowing authorizations, transfers and other
municipal spending authorizations, in whole or in part. The board would also be empowered to hire and fire any and all
employees of the City, whether elected or unelected, and to make any other necessary changes in their terms and
conditions of employment. The board would also have broad powers to reorganize, consolidate and eliminate City
services and to establish, increase or decrease any fees, rates or charges for any municipal services. No City employee
would be permitted to hire, fire or transfer or alter the compensation or benefits of a City employee except with the written
approval of the board.

Once fiscal stability is restored and any finance control board is abolished, the legislation provides for the creation of a
Department 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 human
resources, 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 is
to recommend to the Governor that legislation be filed for the appointment of a receiver. Any legislation would be
required to contain provisions granting the receiver the powers of the control board, and the authority to exercise any
function or power of any municipal officer or employee in the City. In addition, any such legislation is to provide that the
receiver be empowered to file a petition in the City’s name under Chapter 9 of the Federal Bankruptcy Code. With the
appointment of a receiver, the position of Mayor in the City would be abolished and all other elected officials would
continue to serve, but only in an advisory capacity to the receiver.

29
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 legislation
described above, to restore budgetary balance. Initial steps included:

 Hiring key staff to manage municipal operations, pushing reform and cost reduction throughout municipal
government.
 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 health
plans 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 initiated
a 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 future
problems in revenue estimation.
 Establishing monthly revenue and expenditure reports for the Mayor and City Council to ensure appropriate fiscal
oversight.
 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 changes
for 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 expenditure
reductions, passed by the City Council on June 25, 2010. $3,362,450 additional deficit financing is expected mid-
December 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 tax
expected to generate an additional $30,000 per year.
 Executive order May 19, 2010 restricting over-time pay, establishing procedures for required overtime and weekly
reporting.
 Implemented tighter enforcement of solid waste pickup practices not permitted under the existing solid waste
contract and eliminating certain types of pickups, estimated to generate cost savings greater than $250,000 in
fiscal 2010 and 2011.
 Fiscal overseer exercised authority under Section 4 of Chapter 58 of the Acts of 2010, transfering the City’s
health 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. Under
federal 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 will
cover the savings from moving retired employees to Medicare that cannot be realized under federal law until fiscal
2012.
 In partnership with the Division of Local Services, initiated the process of consolidating certain business and
financial operations and functions of the school department, with those of the City. This consolidation will yield
streamlined 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.

30
Deficit Financing

On April 23, 2010, the City issued $24 million State Qualified General Obligation Deficit Financing Bond Anticipation
Notes (of which this issue will pay a like amount of such notes maturing December 1, 2010) to fund the following
previously 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

31
Budget Trends

The table below sets forth the trend in general fund budgets for the following fiscal years. The budgets summarized
below 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 fees
and initiatives, aggressive sale of tax title properties, increase in parking tickets and a review of all fees, implemention of
parking meters, combining sewer and water enterprise funds, moving eligible municipal retirees to Medicare, continuing
aggressive pursuit of delinquent real estate, personal property and excise taxes and outstanding water bills, and
transitioning 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 school
deparment.

Operating Budget Comparison (1)

Fi sc a l 2 0 0 7 F is c a l 2 0 0 8 Fis c a l 2 0 0 9 F is ca l 2 0 1 0 F is c a l 2 0 1 1

G e ne r a l G o v e rn m e n t $ 7 ,3 6 6 , 1 4 7 $ 6 ,6 3 3 , 1 97 $ 6 ,29 7 , 16 1 $ 5 , 9 1 4 ,9 1 7 $ 5 , 65 7 ,4 6 9
P u b lic S a fe ty 2 5 ,0 1 2 , 6 1 0 2 5 ,9 8 9 , 7 19 2 4 ,94 7 , 46 1 2 4 , 2 3 6 ,8 1 7 2 1 , 27 8 ,1 3 9
E d u c a t ion (2 ) 1 3 1 ,7 0 3 , 7 5 1 1 3 9 ,6 4 3 , 3 26 1 4 8 ,55 7 , 78 7 1 4 7 , 9 6 4 ,9 6 8 1 3 6 , 82 7 ,9 1 3
P u b lic W o rk s 8 ,2 9 9 , 7 1 1 1 0 ,6 2 5 , 5 86 1 0 ,22 2 , 50 9 8 , 9 4 7 ,2 3 2 8 , 60 1 ,5 0 0
H u m a n S e rv ic es 1 ,5 4 4 , 7 9 1 5 8 0 , 3 45 91 5 , 60 8 8 4 7 ,6 8 7 9 17 ,7 8 0
C u l tu r e a nd R e c re a t io n 2 ,2 2 4 , 8 5 5 1 ,5 4 7 , 4 15 1 ,27 6 , 47 2 1 , 1 7 7 ,2 2 0 1 , 02 0 ,3 4 6
D e b t S e rvic e 1 2 ,1 2 0 , 4 4 7 1 2 ,3 4 2 , 8 58 1 1 ,06 1 , 38 5 1 1 , 2 5 0 ,3 7 3 1 3 , 42 4 ,3 8 1
E mp lo y ee B e n e f it s 1 7 ,9 0 8 , 6 0 5 1 6 ,5 3 5 , 4 66 8 ,01 4 , 00 0 9 , 0 4 8 ,6 0 0 9 , 84 0 ,1 2 0
I n t e rg o ve rn m e n t a l 4 ,1 4 9 , 4 4 5 4 ,6 9 6 , 3 30 5 ,39 6 , 34 2 5 , 5 5 1 ,5 4 7 24 ,0 0 0
O th e r (3 ) 2 ,6 8 0 , 8 7 0 4 ,1 2 1 , 3 07 9 ,96 2 , 30 4 9 , 8 2 2 ,4 8 0 1 0 , 45 2 ,2 5 1
T ot a l E x p e nd it u re s $ 2 1 3 ,0 1 1 , 2 3 2 $ 2 2 2 ,7 1 5 , 5 49 $ 2 2 6 ,65 1 , 02 9 $ 2 2 4 , 7 6 1 ,8 4 1 $ 2 0 8 , 04 3 ,8 9 9

__________________
(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 City
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 certain
limits 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 might
indicate that a particular amount of state aid is owed, the amount of state aid actually paid is limited to the amount
appropriated by the state legislature. The state annually estimates state aid but actual payments may vary from the
estimate.

Motor Vehicle Excise: An excise tax is imposed on the registration of motor vehicles (subject to exemptions) at a rate of
$25 per $1,000 of valuation. The excise is collected by and for the benefit of the municipality in which the vehicle is
customarily kept. Valuations are determined by a statutory formula based on manufacturer's list price and year of
manufacture. Bills not paid when due bear interest at 12% per annum. Provision is also made for the nonrenewal of
registration 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 for
in a special revenue fund, were converted into an enterprise fund. As of July 1, 2010 the City’s sewer operations,
previously accounted for as a Special Revenue Fund, were converted into the newly created Water and Sewer Enterprise
Fund. The City's Water Department provides water to all commercial, industrial, and residential users in the City. The
Water Department can provide water to users outside of the City on a contractual basis but does not do so at the present
time. The water charge, which was increased most recently effective July 2009, is $3.10 per hundred cubic feet (hcf) of
metered water consumption. The City's Sewer Department provides service to all users in the City. The sewer charge,
which was increased most recently effective July 1, 2009, is $3.35 per hundred cubic feet “hcf” of metered water
consumption. At this time, the City’s Water Department is looking to raise revenues without increasing rates by instituting
an automatic meter reading system that can raise water and sewer revenues by approximately 10%. The City has
submitted a State Revolving Fund loan request in order to fund this project at very low interest cost.

32
Room Occupancy Tax: Under Chapter 64G, Section 3A, of the Massachusetts General Laws, local governments may tax
the provision of hotel, motel, and lodging house rooms at a rate not to exceed four percent (6%) of the cost of renting
such rooms. The tax is paid by the operator of the hotel, motel, or lodging house to the State Commissioner of Revenue,
who in turn pays the tax back to the municipality in which the rooms are located. The City adopted the 6% maximum
room 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 Meals
Excise.” Under this chapter, a city or town that accepts the provisions of this chapter may impose a local sales tax on the
sale of restaurant meals originating within the city or town by a vendor at the rate of .75 percent of the gross receipts of
the vendor from the sale of restaurant meals. The tax is paid by the vendor to the State Commissioner of Revenue, who
in turn pays the tax to the city or town in which the meal was sold. The City adopted the local option meals tax on April
20, 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 and
regional school districts for school construction projects. Until July 26, 2004, the State Board of Education was
responsible for approving grants for school projects and otherwise administering the program. Grant amounts ranged
from 50% to 90% of approved project costs. Municipalities generally issued bonds to finance the entire project cost, and
the 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 School
Building Authority (the “Authority”) to finance and administer the school building assistance program. The Authority has
assumed all powers and obligations of the Board of Education with respect to the program. In addition to certain other
amounts, 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 the
Authority based on the approved project cost and reimbursement rate applicable under the prior law. The Authority has
paid and is expected to continue to pay the remaining amounts of the grants for such projects either in annual
installments to reimburse debt service on bonds issued by the municipalities to finance such projects, or lump sum
payments 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 based
on 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 for
any such projects that have been completed or substantially completed have been paid and are expected to continue to
be paid by the Authority in lump sum payments, thereby eliminating the need for the Authority to reimburse interest
expenses that would otherwise be incurred by the municipalities to permanently finance the Authority’s share of such
project costs. Interest on debt issued by municipalities prior to July 1, 2004 to finance such project costs, and interest on
temporary debt until receipt of the grant, is included in the approved costs of such projects. Grants for any such projects
that have not yet commenced or that are underway have been and are expected to continue to be paid by the Authority as
project costs are incurred by the municipality pursuant to a project funding agreement between the Authority and the
municipality, eliminating the need for the municipality to borrow even on a temporary basis to finance the Authority’s share
of 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, 2007
has 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 pay
grants for such projects as project costs are incurred pursuant to project funding agreements between the Authority and
the municipalities. None of the interest expense incurred on debt issued by municipalities to finance their portion of the
costs of new projects will be included in the approved project costs eligible for reimbursement.

33
Investment of City Funds

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

MMDT is an investment pool created by the Commonwealth. The State Treasurer is the sole trustee, and the funds are
managed under contract by an investment firm under the supervision of the State Treasurer’s office. According to the State
Treasurer the Trust’s investment policy is designed to maintain an average weighted maturity of 90 days or less and is limited
to high-quality, readily marketable fixed income instruments, including U.S. Government obligations and highly-rated corporate
securities with maturities of one year or less.

Trust funds, unless otherwise provided by the donor, may be invested in accordance with §54 of Chapter 44, which permits a
broader range of investments than §55, including any bonds or notes that are legal investments for savings banks in the
Commonwealth. The restrictions imposed by §§54 and 55 do not apply to city and town retirement systems.

A breakdown of 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 audit
information, subject to change, is contained herein) and is expected to be available in early December, 2010. Prior audits
for the City were prepared annually by Melanson Health Company, PC, Certified Public Accountants, Andover,
Massachusetts, 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 Fund
Balance - General Fund, for the fiscal years ended June 30, 2006 through 2010 (2010 is draft audit information, subject to
change). All of these statements are extracted from the City's audited financial statements with the exception of fiscal
2010 which are excerpts from the draft audit and are subject to change and revision.

34
 CITY OF LAWRENCE, MASSACHUSETTS
Governmental Funds
Balance Sheet June 30, 2010 (1)
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.

35
 CITY OF LAWRENCE, MASSACHUSETTS
Governmental Funds
Balance Sheet June 30, 2009 (1)
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 AND FUND BALANCES

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.

36
 CITY OF LAWRENCE, MASSACHUSETTS
Governmental Funds
Balance Sheet June 30, 2008 (1)
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 AND FUND BALANCES
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 - -
Undesignated, reported in:
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
_________________
(1) Extracted from the audited financial statements of the City.

37
 CITY OF LAWRENCE, MASSACHUSETTS
Governmental Funds
Balance Sheet June 30, 2007 (1)
Nonmajor Total
Debt Service High School Home Governmental Governmental
General Fund Construction Fund Funds Funds Funds
ASSETS
Cash and short-term investments $ 13,484,022 $ 13,344,608 $ 853,193 $ 25,757 $ 9,109,395 $ 36,816,975
Investments - - - - 1,607,070 1,607,070
Receivables:
Property Taxes 14,295,688 - - - - 14,295,688
Excises 2,650,189 - - - - 2,650,189
Departmental and other 21,762 - - - 158,033 179,795
Intergovernmental - - - 13,364 1,047,838 1,061,202
Loans - - - 8,444,758 7,938,723 16,383,481
TOTAL ASSETS $ 30,451,661 $ 13,344,608 $ 853,193 $ 8,483,879 $ 19,861,059 $ 72,994,400

LIABILITIES AND FUND BALANCES

Liabilities:
Accounts Payable $ 3,269,145 $ - $ 3,907,854 $ 9,034 $ 1,853,054 $ 9,039,087
Accrued Liabilities 1,678,630 - - - - 1,678,630
Deferred revenues 16,333,275 - - 8,444,758 8,096,756 32,874,789
Notes payable - - 15,397,000 - - 15,397,000
Other Liabilities 1,711,445 - - - - 1,711,445
Total Liabilities 22,992,495 - 19,304,854 8,453,792 9,949,810 60,700,951
Fund Balances
Reserved for:
Encumbrances and continuing appropriations 5,105,161 - - - - 5,105,161
Perpetual permanent funds - - - - 1,434,717 1,434,717
Other reserved (fiscal stability) 3,420,355 - - - - 3,420,355
Undesignated, reported in:
General fund (1,066,350) - - - - (1,066,350)
Special revenue funds - - - 30,087 6,409,331 6,439,418
Debt service fund - 1,344,608 - - - 1,344,608
Capital projects funds - - (18,451,661) - 1,834,079 (16,617,582)
Permanent funds - - - - 233,122 233,122

TOTAL FUND BALANCES 7,459,166 1,344,608 (18,451,661) 30,087 9,911,249 293,449

TOTAL LIABILITIES AND FUND BALANCES $ 30,451,661 $ 1,344,608 $ 853,193 $ 8,483,879 $ 19,861,059 $ 60,994,400
_________________
(1) Extracted from the audited financial statements of the City.

38
 CITY OF LAWRENCE , MASSACHUSETTS
Combined Statement of Revenues, Expenditures and
Changes in Fund Balances (1)

June 30
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 audited financial statements of the City.
(1) Extracted from the draft financial statements of the City, subject to revision and change.

39
Free Cash

Subject to certain adjustments, free cash is surplus revenue less accumulated uncollected and overdue property taxes
through the current fiscal year. Surplus revenue and free cash are calculated without regard to any overlay deficit (from
tax abatements in excess of the overlay) or revenue deficit (generally a result of non-property tax receipts being less than
estimates), 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 of
fiscal years 2002 through 2009.

General Fund
Unreserved
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 3,255,813
2003 5,048,679 4,217,162
2002 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 water
operations and $3,441,600 for sewer operations. The City expects to appropriate an as yet undetermined amount of
certified 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 to
1.5% of the prior fiscal year’s tax levy. Said reserve is maintained as a reservation of fund balance in the General Fund.
At 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 increased
residential, industrial and commercial activity. All or a portion of the taxes on growth in assessed value in such districts
may be pledged and used solely to finance economic development projects pursuant to the city or town’s development
program for the district. This includes pledging such “tax increments” for the payment of bonds issued to finance such
projects. As a result of any such pledge, tax increments raised from new growth properties in development districts are
not available for other municipal purposes. Tax increments are taken into account in determining the total taxes assessed
for the purpose of calculating the maximum permitted tax levy under Proposition 2 ½ (see “Property Tax Limitation” under
“PROPERTY TAXATION” above.) The City has established designated “Economic Opportunity Areas” and
corresponding Tax Increment Financing (TIF) agreements with several businesses in Lawrence.

40
 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 for
a referendum on the filing of a petition bearing the requisite number of signatures. Borrowings for certain purposes
require state administrative approval. When serial bonds or notes have been authorized, bond anticipation notes may be
issued by the officers authorized to issue the serial bonds or notes. Temporary loans in anticipation of the revenues of
the fiscal year in which debt is incurred, or in anticipation of state and federal grants generally can be incurred by the
Mayor 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 debt
limit is 5 percent of the valuation of taxable property as last equalized by the State Department of Revenue. The City can
authorize debt up to this amount without State approval. It can authorize debt up to twice this amount (the double debt
limit) with the approval of the State Municipal Finance Oversight Board composed of the State Treasurer, the State
Auditor, the Attorney General and the Director of Accounts.

There are many categories of general obligation debt which are exempt from and do not count against the general debt
limit. Among others, these exempt categories include revenue anticipation notes and grant anticipation notes, emergency
loans, loans exempted by special laws, certain school bonds, sewer bonds, solid waste disposal facility bonds, and
economic development bonds supported by tax increment financing, and subject to special debt limits, bonds for water
(limited to 10 percent of equalized valuation), housing, urban renewal, and economic development (subject to various
debt limits), and electric, gas, community antenna television systems, and telecommunications systems (subject to a
separate limit). Revenue bonds are not subject to these debt limits. The general debt limit and the special debt limit for
water bonds apply at the time debt is authorized. The other special debt limits generally apply at the time the debt is
incurred.

Types of Obligations

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

Serial Bonds and Notes. These are generally required to be payable in annual principal amounts beginning no later than the
end of the next fiscal year commencing after the date of issue and ending within the terms permitted by law. A level debt
service schedule, or a schedule that provides for a more rapid amortization of principal than level debt service, is permitted.
The principal amounts of certain economic development bonds supported by tax increment financing may be payable in equal,
diminishing or increasing amounts beginning within 5 years after the date of issue. The maximum terms of serial bonds and
notes vary from one year to 40 years, depending on the purpose of the issue. The maximum terms permitted are set forth in
the statutes. In addition, for many projects, the maximum term may be determined in accordance with useful life guidelines
promulgated by the State Department of Revenue (“DOR”). Serial bonds and notes may be issued for the purposes set forth
in the statutes. In addition, serial bonds and notes may be issued for any other public work improvement or asset not
specifically listed in the Statutes that has a useful life of at least 5 years. Bonds or notes may be made callable and redeemed
prior to their maturity, and a redemption premium may be paid. Refunding bonds or notes may be issued subject to the
maximum applicable term measured from the date of the original bonds or notes and must produce present value savings over
the debt service of the refunded bonds. Generally, the first required annual payment of principal of the refunding bonds cannot
be later than the first principal payment of any of the bonds or notes being refunded thereby, however, principal payments
made before the first principal payment of any of the bonds or notes being refunded thereby may be in any amount.

Serial bonds may be issued as “qualified bonds” with the approval of the state Municipal Finance Oversight Board composed
of the State Treasurer, the State Auditor, the Attorney General and the Director of Accounts, subject to such conditions and
limitations (including restrictions on future indebtedness) as may be required by the Board. Qualified bonds may mature not
less than 10 nor more than 30 years from their dates and are not subject to the amortization requirements described above.
The State Treasurer is required to pay the debt service on qualified bonds and thereafter to withhold the amount of the debt
service paid by the State from state aid or other state payments; administrative costs and any loss of interest income to the
State are to be assessed upon the city or town.

Tax Credit Bonds or Notes. Subject to certain provisions and conditions, the officers authorized to issue bonds or notes may
designate any duly authorized issue of bonds or notes as “tax credit bonds” to the extent such bonds and notes are otherwise
permitted to be issued with federal tax credits or other similar subsidies for all or a portion of the borrowing costs. Tax credit
bonds may be made payable without regard to the annual installments required by any other law, and a sinking fund may be

41
established for the payment of such bonds. Any investment that is part of such a sinking fund may mature not later than the
date fixed for payment or redemption of the applicable bonds.

Bond Anticipation Notes. These generally must mature within two years of their original dates of issuance but may be
refunded from time to time for a period not to exceed five years from their original dates of issuance, provided that for each
year that the notes are refunded beyond the second year they must be paid in part from revenue funds in an amount at least
equal to the minimum annual payment that would have been required if the bonds had been issued at the end of the second
year. For certain school projects, however, notes may be refunded from time to time for a period not to exceed seven years
without having to pay any portion of the principal of the notes from revenue funds. The maximum term of bonds issued to
refund bond anticipation notes is measured (except for certain school projects) from the date of the original issue of the notes.

Revenue Anticipation Notes. The amount borrowed in each fiscal year by the issue of revenue anticipation notes is
limited to the tax levy of the prior fiscal year, together with the net receipts in the prior fiscal year from the motor vehicle
excise and certain payments made by the Commonwealth in lieu of taxes. The fiscal year ends on June 30. Notes may
mature in the following fiscal year, and notes may be refunded into the following fiscal year to the extent of the
uncollected, unabated current tax levy and certain other items, including revenue deficits, overlay deficits, final judgments
and lawfully unappropriated expenditures, which are to be added to the next tax levy, but excluding deficits arising from a
failure to collect taxes of earlier years. (See "Taxation to Meet Deficits" under "PROPERTY TAX" above.) In any event,
the period from an original borrowing to its final maturity cannot exceed one year. The City has not issued any revenue
anticipation 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 county
reimbursements. Generally they must mature within two years but may be refunded from time to time as long as the
municipality remains entitled to the grant or reimbursement.

Revenue Bonds. Cities and towns may issue revenue bonds for solid waste disposal facilities and for projects financed
under the Commonwealth Water Pollution Abatement or Drinking Water Revolving Loan Programs and for certain
economic development projects supported by tax increment financing. In addition to general obligation bonds and notes,
cities and towns having electric departments may issue revenue bonds, and notes in anticipation of such bonds, subject
to 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 Section
44 of Chapter 319 of the Massachusetts Acts of 1998 and Section 208 of Chapter 184 of the Acts of 2000. As of
June 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 self-
supporting water enterprise fund.
(6) Includes this issue payable December 1, 2011 ($6,000,000) and notes payable March 1, 2011 ($6,000,000), June
1, 2011 ($6,000,000) and September 1, 2011 ($6,000,000). Said notes will be renewed annually as they mature for
20 years, with annual paydowns of principal commencing in fiscal 2012 in accordance with a level debt schedule to
be approved by the State Department of Revenue, in accordance with the special legislation providing the authority
for their issuance.
42
Debt Ratios
The table below sets forth the City's general obligation bonds outstanding, population, local assessed valuations, per capita debt
and debt as a percentage of local assessed valuations, at the end of each of the following fiscal years. The table considers the
principal amount of general obligation bonds of the City only and does not deduct the principal amount of outstanding bonds
which 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 obligation
bonds as of June 30, 2010 and debt service subsidies the City expects to receive from the Massachusetts School
Building Authority and from the Massachusetts Water Pollution Abatement Trust (the State Revolving Fund).

General Obligation Bonds

Debt Service Requirements
as of June 30, 2010

Fiscal MWPAT Net Debt

Year Principal Interest MSBA Subsidy Subsidy 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

43
Principal Payments by Purpose

The following table sets forth the principal payments by purpose on outstanding general obligation bonds of the City as of
June 30, 2010. As indicated in the table, of the total $141,018,843 of bonds to be outstanding, $53,416,130 or 37.9%, are
to 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 Purpose

as of June 30, 2010

Fis cal 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 for
school construction and $784,154 for water purposes. The City expects to authorize an additional $3,362,450 deficit
financing bonds, against which it expects to issue notes for delivery in mid to late December, 2010. Such notes are
expected to be used to balance one-time expenses in fiscal 2011 that will either provide transition costs (until such time
as the City can enter the State’s group health plan) or costs associated with producing revenues for fiscal 2012 and
beyond. Such notes will be issued pursuant to special legislation providing the statutory authority for the City to issue up
to $35 million of deficit financing against which, to date, it has issued $24 million including the current issue of Notes.

44
Coverage of Qualified Debt Service

It is projected that state aid distributions from the Commonwealth of Massachusetts to the City of Lawrence will provide
ample coverage of qualified bond debt service throughout the term of the Bonds. The following table presents total
qualified debt service, projected state aid, and the percentage of qualified debt service of total projected state aid. State
aid is subject to annual appropriation by the Commonwealth, and no assurance can be given that state aid will be
appropriated 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 7.44
2021 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 grants
as such grants are no longer paid by the Commonwealth; they are now paid by the Massachusetts School Building Authority. Therefore, such
payments no longer constitute “distributable aid” of the Commonwealth under the Qualified Bond Act.

45
Overlapping Debt

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

Outstanding Lawrence's
Overlapping Entity Debt as of Estimated Fiscal 2011
6/30/10 Share (1) Assessment (2)

Greater Lawrence Regional $32,195,000 85.4% $1,311,467

Vocational Technical School
District(3)
Merrimack Valley Regional Transit 0 N/A 632,066
Authority(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 regional
school districts to carry out general or specialized educational functions. Pursuant to special laws a number of cities
may also participate in regional school district, primarily for vocational education. The operating expenses and debt
service of regional school districts are apportioned among the member municipalities in accordance with the
agreements establishing the district. The municipal share is based on the ratio of that member's pupil enrollment to
the total pupil enrollment from all the member municipalities in the regional school district as of October 1 of the year
preceding the year for which the apportionment is being determined. The District has authorized and issued $51
million for additions and renovations to its facilities. The project has been approved by the State Board of Education
for a state reimbursement for 85% of construction costs and interest on the notes and bonds. The annual payments
of $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 on
a percentage furnished by the Authority as that used in the most recent assessment of the net cost of service of the
Authority, 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 contract
assistance to the Authority absorbing up to 50 percent of the aggregate net cost of service. The Authority has no
authorized unissued debt.
(5) SOURCE: Greater Lawrence Sanitary District. Each member community pays for its proportionate share of the
District's operating costs based upon the percent of wastewater received from each respective community. Member
communities 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 to
enter 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 cases
for long-term contractual obligations that are not subject to annual appropriation, including contracts for refuse disposal
and sewage treatment and disposal. Municipalities may also enter into long-term contracts in aid of housing and renewal
projects. There may be implied authority to make other long-term contracts required to carry out authorized municipal
functions, such as contracts to purchase water from private water companies.

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

46
Municipal electric departments have statutory power to enter into long-term contracts for joint ownership and operation of
generating and transmission facilities and for the purchase or sale of capacity, including contracts requiring payments
without regard to the operational status of the facilities.

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

The City of Lawrence has only one long-term contractual obligation of significance, a refuse disposal contract with
Covanta Haverhill, Inc., a refuse disposal facility company, commencing January 1, 2010 and terminating June 30, 2011.
The City pays Covanta Haverhill, Inc., a direct tipping fee at a price of $58.39 for each ton of City waste delivered to and
accepted by the facility, subject to annual adjustments on the basis of the Consumer Price Index. The estimated cost for
this 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, for
teachers and for county, city and town employees other than teachers. Teachers are assigned to a separate statewide
teachers’ system and not to the city and town systems. For all employees other than teachers, this law is subject to
acceptance in each city and town. Substantially all employees of an accepting city or town are covered. If a town has a
population of less than 10,000 when it accepts the statute, its non-teacher employees participate through the county system
and its share of the county cost is proportionate to the aggregate annual rate of regular compensation of its covered
employees. In addition to the contributory systems, cities and towns provide non-contributory pensions to a limited number of
employees, primarily persons who entered service prior to July 1, 1937 and their dependents. The Public Employee
Retirement Administration Commission (“PERAC”) provides oversight and guidance for and regulates all state and local
retirement systems.

The obligations of a city or town, whether direct or through a county system, are contractual legal obligations and are required
to be included in the annual tax levy. If a city or town, or the county system of which it is a member, has not established a
retirement system funding schedule as described below, the city or town is required to provide for the payment of the portion of
its current pension obligations which is not otherwise covered by employee contributions and investment income. “Excess
earnings,” or earnings on individual employees’ retirement accounts in excess of a predetermined rate, are required to be set
aside in a pension reserve fund for future, not current, pension liabilities. Cities and towns may voluntarily appropriate to their
system’s pension reserve fund in any given year up to five percent of the preceding year’s tax levy. The aggregate amount in
the fund may not exceed ten percent of the equalized valuation of the city or town.

If a city or town, or each member city and town of a county retirement system, has accepted the applicable law, it is required to
annually appropriate an amount sufficient to pay not only its current pension obligations, but also a portion of its future pension
liability. The portion of each such annual payment allocable to future pension obligations is required to be deposited in the
pension reserve fund. The amount of the annual city or town appropriation for each such system is prescribed by a retirement
system funding schedule which is periodically reviewed and approved by PERAC. Each system’s retirement funding schedule
is designed to reduce the unfunded actuarial pension liability of the system to zero by not later than June 30, 2030, with annual
increases in the scheduled payment amounts of not more than 4.5 percent. The funding schedule must provide that payment
in any year of the schedule is not less than 95 percent of the amount appropriated in the previous fiscal year. City, town and
county systems which have an approved retirement funding schedule receive annual pension funding grants from the
Commonwealth for the first 16 years of such funding schedule. Pursuant to recent legislation, a system (other than the state
employees’ retirement system and the teachers’ retirement system) which conducts an actuarial valuation as of January
1, 2009, or later, may establish a revised schedule which reduces the unfunded actuarial liability to zero by not later than
June 30, 2040, subject to certain conditions. If the schedule is so extended under such provisions and a later updated
valuation allows for the development of a revised schedule with reduced payments, the revised schedule shall be
adjusted to provide that the appropriation for each year shall not be less than that for such year under the prior schedule,
thus providing for a shorter schedule rather than reduced payments.

City, town and county systems may choose to participate in the Pension Reserves Investment Trust Fund (the “PRIT Fund”),
which receives additional state funds to offset future pension costs of participating state and local systems. If a local system
participates in the PRIT Fund, it must transfer ownership and control of all assets of its system to the Pension Reserves
Investment Management Board, which manages the investment and reinvestment of the PRIT Fund. Cities and towns with
systems participating in the PRIT Fund continue to be obligated to fund their pension obligations in the manner described
above. The additional state appropriations to offset future pension liabilities of state and local systems participating in the PRIT
Fund are required to total at least 1.3 percent of state payroll. Such additional state appropriations are deposited in the PRIT

47
Fund and shared by all participating systems in proportion to their interests in the assets of the PRIT Fund as of July 1 for each
fiscal year. The 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 has
established a funding schedule. Those statutory provisions are subject to acceptance by the local retirement board and
approval 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 may
establish and implement an early retirement incentive program. Any plan for such program must be submitted to PERAC by
September 27, 2010.

The City has adopted the repeal of the $30,000 limit on pensions, ten year vesting for ordinary disability retirement and
continued deductions for those employees working beyond the age of 70 who so elect. In addition, the City currently has
adopted 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 City
recently 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 care
and life insurance benefits. These benefit payments are generally provided on a pay-as-you-go basis. The City pays 75% of the
premiums 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 as
follows:
Non-
Fiscal Contributory Contributory

2011 (budgeted) $8,279,406 $206,752

2010 8,053,247 267,750
2009 7,774,276 205,404
2008 7,782,493 269,912
2007 7,475,168 285,527
2006 6,606,960 432,187

Investments of system assets in bonds are valued at amortized cost and equity investments are valued in the manner
determined by the State Commissioner of Insurance. The assets of the system were approximately $120,292,096 as of January
1, 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 benefits.
The portion of the cost of such benefits paid by cities or towns is generally provided on a pay-as-you-go basis.

The Governmental Accounting Standards Board (“GASB”) recently promulgated its Statement Nos. 43 and 45, which will for
the first time require public sector entities to report the future costs of these non-pension, post-employment benefits in their
financial statements. These new accounting standards do not require pre-funding the payment of these costs as the liability for
such 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 accruals
than if such benefits were pre-funded in a trust fund in the same manner as traditional pension benefits. Cities and towns that
choose to self-insure all or a portion of the cost of the health care benefits they provide to employees and retirees may
establish a trust fund for the purpose of paying claims. In addition, cities and towns may establish a trust fund for the purpose
of pre-funding other post-employment benefits 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 in
fiscal year 2009. The City performed an actuarial valuation of its non-pension, post-employment benefit liability as of July 1,
2008, at which time the estimate of the unfunded actuarial accrued liability was estimated at $164,725,000. The City currently
has no plans to advance fund this liability. As of January 1, 2009, it was estimated at $165.7 million. Estimates of the Annual
Required Contribution (“ARC”), based on a 30-year amortization period designed to increase over time as payroll grows, for
fiscal 2009 was $17.5 million based on a discount rate of 8.0%.
48
 EMPLOYEE RELATIONS

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

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

# of Contract
Union Members Expiration Date(1)
Inspectors’ Union -AFSCME ..................................................................... 10 6-30-10
Lawrence Municipal Classified Foreman Association ............................... 4 6-30-10
Firefighters IAI Local 146.......................................................................... 94 6-30-10
Lawrence Patrolmen’s Association .. ........................................................ 81 6-30-10
Lawrence Superior Officers Association .................................................. 29 6-30-10
Massachusetts Nurses Association .......................................................... 1 6-30-10
Clerical Union (LACE) .............................................................................. 44 6-30-10
Laborers Union (SEIU) ............................................................................. 43 6-30-10
Water Department (SEIU) ........................................................................ 16 6-30-10
Supervisors and Administrators Unit (SEIU) ............................................. 24 6-30-10
Tradesmen ............................................................................................... 5 6-30-11
Lawrence Public Library. .......................................................................... 14 6-30-10
Carpenters’ and Joiners’ Union ................................................................ 18 6-30-11
Cafeteria Workers .................................................................................... 64 6-30-10
Clerical Union ........................................................................................... 70 6-30-11
Int’l Brotherhood of Fireman & Oilers, Local 3 (Custodian) ...................... 79 6-30-11
Lawrence Administrators Association ....................................................... 47 6-30-11
Lawrence Federation of Paraprofessionals .............................................. 354 6-30-10
Lawrence Teacher's Union, Local 1019.................................................... 1,089 8-27-10
Nurses of Lawrence Association .............................................................. 30 6-30-09
Security Officers ....................................................................................... 33 6-30-09
United Food and Commercial Workers Union, Local 1445, AFL-CIO ....... 14 6-30-11
SEIU 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 a
defendant. In the opinion of the City, none of the pending litigation is likely to result, either individually or in the aggregate, in
final judgments against the City that would materially impact its financial position.

_________________________

CITY OF LAWRENCE, MASSACHUSETTS

/s/ Patricia M. Cook, City Treasurer

49
CITY OF LAWRENCE, MASSACHUSETTS

REPORT ON EXAMINATION OF
BASIC FINANCIAL STATEMENTS

FISCAL YEAR ENDED JUNE 30, 2009

 CITY OF LAWRENCE, MASSACHUSETTS

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
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

1
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 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
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

2
 Management’s Discussion and Analysis

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

 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 and
earned 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.

City of Lawrence, Massachusetts 4 Basic Financial Statements

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 the
government-wide financial statements. By doing so, readers may better understand the long-term impact of the
government’s near-term financing decisions. Both the governmental fund balance sheet and the governmental
fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this
comparison between governmental funds and governmental activities.

The 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 the
government. Fiduciary funds are not reflected in the government-wide financial statement because the resources
of those funds are not available to support the 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.

City of Lawrence, Massachusetts 5 Basic Financial Statements

Net assets of $204.6 million 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.

City of Lawrence, Massachusetts 6 Basic Financial Statements

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)

City of Lawrence, Massachusetts 7 Basic Financial Statements

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 restricted
Unrestricted 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

City of Lawrence, Massachusetts 8 Basic Financial Statements

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 that
are 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.

City of Lawrence, Massachusetts 9 Basic Financial Statements

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.

City of Lawrence, Massachusetts 10 Basic Financial Statements

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.

City of Lawrence, Massachusetts 11 Basic Financial Statements

 Basic Financial Statements

City of Lawrence, Massachusetts 12 Basic Financial Statements

 STATEMENT OF NET ASSETS

JUNE 30, 2009

Primary Government

Governmental Business-type
Activities Activities Total
ASSETS
CURRENT:
Cash and cash equivalents……………………………………… $ 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:
Receivables, net of allowance for uncollectibles:
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.

City of Lawrence, Massachusetts 13 Basic Financial Statements

 STATEMENT OF ACTIVITIES

FISCAL YEAR ENDED JUNE 30, 2009

Program Revenues

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)

City of Lawrence, Massachusetts 14 Basic Financial Statements

 STATEMENT OF ACTIVITIES (Continued)

FISCAL YEAR ENDED JUNE 30, 2009

Primary Government

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)

City of Lawrence, Massachusetts 15 Basic Financial Statements

 GOVERNMENTAL FUNDS
BALANCE SHEET

JUNE 30, 2009

Nonmajor Total
Home Governmental Governmental
ASSETS 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 AND FUND BALANCES

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:
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

See notes to basic financial statements.

City of Lawrence, Massachusetts 16 Basic Financial Statements

 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

See notes to basic financial statements.

City of Lawrence, Massachusetts 17 Basic Financial Statements

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

FISCAL YEAR ENDED JUNE 30, 2009

Nonmajor Total
Home State Fiscal Governmental Governmental
General Fund Stabilization Funds Funds
REVENUES:
Real estate and personal property taxes,
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

See notes to basic financial statements.

City of Lawrence, Massachusetts 18 Basic Financial Statements

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

FISCAL YEAR ENDED JUNE 30, 2009

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)

See notes to basic financial statements.

City of Lawrence, Massachusetts 19 Basic Financial Statements

 PROPRIETARY FUNDS
STATEMENT OF NET ASSETS

JUNE 30, 2009

Business-type Activities - Enterprise Funds

Governmental
Activities -
Internal Service
Water Sewer Total Funds
ASSETS
CURRENT:
Cash and cash equivalents………………………………… $ 483,337 $ 1,858,026 $ 2,341,363 $ 6,183,181
Receivables, net of allowance for uncollectibles:
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:
Receivables, net of allowance for uncollectibles:
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

See notes to basic financial statements.

City of Lawrence, Massachusetts 20 Basic Financial Statements

 PROPRIETARY FUNDS
STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS

FISCAL YEAR ENDED JUNE 30, 2009

Business-type Activities - Enterprise Funds

Governmental
Activities -
Internal Service
Water Sewer Total Funds
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

See notes to basic financial statements.

City of Lawrence, Massachusetts 21 Basic Financial Statements

 PROPRIETARY FUNDS
STATEMENT OF CASH FLOWS

FISCAL YEAR ENDED JUNE 30, 2009

Business-type Activities - Enterprise Funds

Governmental
Activities -
Internal Service
Water Sewer Total Funds

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)

See notes to basic financial statements.

City of Lawrence, Massachusetts 22 Basic Financial Statements

 FIDUCIARY FUNDS
STATEMENT OF FIDUCIARY NET ASSETS

JUNE 30, 2009

Pension
Trust 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 - -
Receivables, net of allowance for uncollectibles:
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 $ -

See notes to basic financial statements.

City of Lawrence, Massachusetts 23 Basic Financial Statements

 FIDUCIARY FUNDS
STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS

FISCAL YEAR ENDED JUNE 30, 2009

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

See notes to basic financial statements.

City of Lawrence, Massachusetts 24 Basic Financial Statements

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.

City of Lawrence, Massachusetts 25 Basic Financial Statements

Notes to Basic Financial Statements Fiscal Year Ended June 30, 2009

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

Government-Wide Financial Statements

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 financial
statements. 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.

City of Lawrence, Massachusetts 26 Basic Financial Statements

Notes to Basic Financial Statements Fiscal Year Ended June 30, 2009

Fund Financial Statements

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

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 permanent
funds 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.

City of Lawrence, Massachusetts 27 Basic Financial Statements

Notes to Basic Financial Statements Fiscal Year Ended June 30, 2009

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

Government-Wide and Fund Financial Statements

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

E. Accounts Receivable

Government-Wide and Fund Financial Statements

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 1st, February 1st and May 1st of 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.

City of Lawrence, Massachusetts 28 Basic Financial Statements

Notes to Basic Financial Statements Fiscal Year Ended June 30, 2009

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 estimated
based 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 and
interest 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.

City of Lawrence, Massachusetts 29 Basic Financial Statements

Notes to Basic Financial Statements Fiscal Year Ended June 30, 2009

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

Government-Wide and Fund Financial Statements

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 capital
assets are as follows:

Estimated
Useful
Life
Capital Asset Type (in years)

Buildings…………………………………………… 40
Building Improvements………………………… 20
Infrastructure……………………………………. 30-75
Vehicles…………………………………………… 5
Office Equipment………………………………… 5
Computer Equipment…………………………… 5

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.

City of Lawrence, Massachusetts 30 Basic Financial Statements

Notes to Basic Financial Statements Fiscal Year Ended June 30, 2009

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 in
amounts owed between funds.

Government-Wide Financial Statements

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”.

Fund Financial Statements

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

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.

Government-Wide Financial Statements

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 the
governmental activities and business-type activities are reported in the statement of activities as “Transfers, net”.

Fund Financial Statements

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 the
government-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.

City of Lawrence, Massachusetts 31 Basic Financial Statements

Notes to Basic Financial Statements Fiscal Year Ended June 30, 2009

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 be
expended.

City of Lawrence, Massachusetts 32 Basic Financial Statements

Notes to Basic Financial Statements Fiscal Year Ended June 30, 2009

L. Long-term debt

Government-Wide and Proprietary Fund Financial Statements

Long-term debt is reported as liabilities 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.

Governmental Fund Financial Statements

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 by
Massachusetts 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.

Government-Wide and Proprietary Fund Financial Statements

Vested or accumulated vacation and sick leave are reported as liabilities and expensed as incurred.

Governmental Fund Financial Statements

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

Government-Wide and Fund Financial Statements

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.

City of Lawrence, Massachusetts 33 Basic Financial Statements

Notes to Basic Financial Statements Fiscal Year Ended June 30, 2009

Q. Total Column

Government-Wide Financial Statements

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

Fund Financial Statements

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 be
returned 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.

City of Lawrence, Massachusetts 34 Basic Financial Statements

Notes to Basic Financial Statements Fiscal Year Ended June 30, 2009

Investments

As of June 30, 2009, the City had the following investments:

Maturity
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

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 Ratings
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

The System has not adopted a formal policy related to credit risk. At December 31, 2008 the System does not
have any rated investments.

City of Lawrence, Massachusetts 35 Basic Financial Statements

Notes to Basic Financial Statements Fiscal Year Ended June 30, 2009

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 Net
Amount 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

City of Lawrence, Massachusetts 36 Basic Financial Statements

Notes to Basic Financial Statements Fiscal Year Ended June 30, 2009

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 Ending
Governmental 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 activities capital assets, net……… $ 260,953,999 $ 108,692,857 $ (107,770,752) $ 261,876,104

City of Lawrence, Massachusetts 37 Basic Financial Statements

Notes to Basic Financial Statements Fiscal Year Ended June 30, 2009

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 Ending
Sewer 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

City of Lawrence, Massachusetts 38 Basic Financial Statements

Notes to Basic Financial Statements Fiscal Year Ended June 30, 2009

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:

Operating Transfers In:

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

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 anticipation
notes (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).

City of Lawrence, Massachusetts 39 Basic Financial Statements

Notes to Basic Financial Statements Fiscal Year Ended June 30, 2009

• 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 at
Maturity 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 the
debt 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 Outstanding

Rate 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

City of Lawrence, Massachusetts 40 Basic Financial Statements

Notes to Basic Financial Statements Fiscal Year Ended June 30, 2009

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 13,137,650
2012…………… 8,855,000 4,640,668 13,495,668
2013…………… 9,170,000 4,273,768 13,443,768
2014…………… 9,480,000 3,880,862 13,360,862
2015…………… 7,705,000 3,479,144 11,184,144
2016…………… 7,605,000 3,125,620 10,730,620
2017…………… 7,870,000 2,773,496 10,643,496
2018………….. 8,525,000 2,381,496 10,906,496
2019…………… 8,850,000 1,956,746 10,806,746
2020…………… 8,535,000 1,505,246 10,040,246
2021…………… 8,895,000 1,089,494 9,984,494
2022…………… 2,245,000 649,856 2,894,856
2023………….. 2,320,000 542,244 2,862,244
2024…………… 2,370,000 432,062 2,802,062
2025…………… 2,420,000 319,450 2,739,450
2026…………. 2,480,000 203,562 2,683,562
2027…………. 1,500,000 84,800 1,584,800
2028…………. 100,000 9,950 109,950
2029…………… 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 such
assistance 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.

City of Lawrence, Massachusetts 41 Basic Financial Statements

Notes to Basic Financial Statements Fiscal Year Ended June 30, 2009

Bonds and Notes Payable Schedule – Enterprise Funds

Interest Outstanding Outstanding

Rate 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

City of Lawrence, Massachusetts 42 Basic Financial Statements

Notes to Basic Financial Statements Fiscal Year Ended June 30, 2009

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 2009

Beginning Ending Current
Balance 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 2009

Beginning Ending Current
Balance 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 activity

long-term liabilities…………… $ 32,805,145 $ 4,745,804 $ (1,640,267) $ 35,910,682 $ 2,022,980

City of Lawrence, Massachusetts 43 Basic Financial Statements

Notes to Basic Financial Statements Fiscal Year Ended June 30, 2009

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 Year
Balance at Claims and Balance at
Beginning of Changes in Claims Fiscal
Fiscal 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-living
adjustments 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

City of Lawrence, Massachusetts 44 Basic Financial Statements

Notes to Basic Financial Statements Fiscal Year Ended June 30, 2009

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 was
determined 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 a
Actuarial Accrued Unfunded Percentage
Actuarial Value of Liability (AAL) AAL Funded Covered of Covered
Valuation Assets Entry Age (UAAL) Ratio Payroll Payroll
Date (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 actuarial
liability. The City funds these benefits from an annual general fund appropriation. The general fund expenditure
for fiscal year 2009 was $227,060.

City of Lawrence, Massachusetts 45 Basic Financial Statements

Notes to Basic Financial Statements Fiscal Year Ended June 30, 2009

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 Year Annual OPEB Percentage of Annual OPEB Net OPEB

Ended Cost Cost Contributed Obligation
6/30/08 $32,405,000 22.1% $25,238,000
6/30/09 $33,661,000 23.3% $51,056,000

City of Lawrence, Massachusetts 46 Basic Financial Statements

Notes to Basic Financial Statements Fiscal Year Ended June 30, 2009

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 the
plan 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.

City of Lawrence, Massachusetts 47 Basic Financial Statements

Notes to Basic Financial Statements Fiscal Year Ended 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 Water
Activities 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) 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.

City of Lawrence, Massachusetts 48 Basic Financial Statements

Notes to Basic Financial Statements Fiscal Year Ended June 30, 2009

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.

City of Lawrence, Massachusetts 49 Basic Financial Statements

Required Supplementary Information

50
This page intentionally left blank.

51
 GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -
BUDGET AND ACTUAL

FISCAL YEAR ENDED JUNE 30, 2009

Budgeted Amounts

Amounts Current Year

Carried forward Initial Original Final
From Prior Year Budget Budget Budget
REVENUES:
Real estate and personal property taxes,
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.

52
City of Lawrence, Massachusetts Required Supplementary Information
 Actual Amounts
Budgetary 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

53
City of Lawrence, Massachusetts 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 the
actuarial 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.

City of Lawrence, Massachusetts 54 Required Supplementary Information

 OTHER POST-EMPLOYMENT BENEFIT PLAN
SCHEDULE OF FUNDING PROGRESS

JUNE 30, 2009

Actuarial UAAL as a
Actuarial 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.

City of Lawrence, Massachusetts 55 Required Supplementary Information

 OTHER POST-EMPLOYMENT BENEFIT PLAN
ACTUARIAL METHODS AND ASSUMPTIONS

FISCAL YEAR ENDED JUNE 30, 2009

Actuarial Methods:

Valuation date July 1, 2008

Actuarial cost method Projected Unit Credit
Amortization 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 scenario

Medical/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.

City of Lawrence, Massachusetts 56 Required Supplementary Information

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 to
amend 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) authorized
for 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 accounting
system.

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:

City of Lawrence, Massachusetts 57 Required Supplementary Information

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.

City of Lawrence, Massachusetts 58 Required Supplementary Information

 PROPOSED FORM OF LEGAL OPINION APPENDIX B

(Date of Delivery)

Patricia Cook, City Treasurer

City of Lawrence
Lawrence, 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”) in
connection 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 and
such certified proceedings and other papers as we have deemed necessary to render this opinion.

As to questions of fact material to our opinion we have relied upon representations and
covenants of the City contained in the certified proceedings and other certifications of public
officials furnished to us, without undertaking to verify the same by independent investigation.

Based on our examination, we are of the opinion, under existing law, as follows:

1. The Note is a valid and binding general obligation of the City and, except to the
extent it is paid from the proceeds of the bonds in anticipation of which it is issued or from any
other 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 and
are entitled to the benefits of the provisions thereof.

3. Interest on the Note is excluded from the gross income of the owners of the Note
for federal income tax purposes. In addition, interest on the Note is not a specific preference
item for purposes of the federal individual or corporate alternative minimum taxes and interest
on the Note is not included in adjusted current earnings when calculating corporate alternative
minimum 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 that
must be satisfied subsequent to the issuance of the Note in order that interest thereon be, and
continue to be, excluded from gross income for federal income tax purposes. The City has
covenanted 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 federal
income tax purposes retroactive to the date of issuance of the Note. We express no opinion
regarding any other federal tax consequences arising with respect to the Note.
 4. Interest on the Note is exempt from Massachusetts personal income taxes and the
Note is exempt from Massachusetts personal property taxes. We express no opinion regarding
any 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 than
Massachusetts.

This opinion is expressed as of the date hereof, and we neither assume nor undertake any
obligation to update, revise, supplement or restate this opinion to reflect any action taken or
omitted, or any facts or circumstances or changes in law or in the interpretation thereof, that may
hereafter arise or occur, or for any other reason.

The rights of the holder of the Note and the enforceability of the Note may be subject to
bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors’
rights heretofore or hereafter enacted to the extent constitutionally applicable, and their
enforcement may also be subject to the exercise of judicial discretion in appropriate cases.

Edwards Angell Palmer & Dodge LLP

BOS111 12511589.1

B-2