Net debt $25,143,504 divided by equalized valuation basis per N.J.S.A. 40A:2-2 as amended of $1,762,842,958 equals 1.43%.

(A) The Township guarantees bonds of Mercer County Improvement Authority to finance school facilities for lease to the Ewing Township School Board.

Borrowing Power under N.J.S.A. 40A:2-6 as Amended

3 1/2% of equalized valuation basis (municipal)	$ 61,699,504
New Debt	25,143,504
Remaining borrowing power	$ 36,556,000

The following is a schedule of annual debt service for principal and interest on general bonded debt (excluding bond anticipation notes), and green trust loan issued and outstanding to maturity:

Green Trust Program Loans - The Township has contracted with the State of New Jersey, Department of Environmental Protection for Green Trust Program Loans to fund a portion of the costs incurred in the construction of Banchoff Park, Municipal Complex projects and Moody Park/Fasolino Field.

New Jersey Environmental Infrastructure Trust Loan - The Township has contracted with the state of New Jersey, Department of Transportation to fund a portion of the costs incurred in the reconstruction of various roads and the stabilization of Shabakunk Creek.

NOTE D - PRIOR YEAR'S DEBT DEFEASANCE

In 1998, the Township defeased various bond issues by creating separate irrevocable trust funds. New debt was issued and the proceeds have been used to purchase U.S. government securities that were placed in the trust funds. The investments and fixed earnings from the investments are sufficient to fully service the defeased debt until the debt matures. For financial reporting purposes, the debt has been considered defeased and therefore removed as a liability from the Township's financial statements. As of June 30, 2001, the amount of defeased debt outstanding but removed from the General Capital Fund amounted to $725,000.

Current fund balances were appropriated and included as anticipated revenue in the succeeding year's budget for the past five years as follows:

Trust Fund Balances were appropriated and included as anticipated revenue in the succeeding year's Current Fund Budget as follows:

General capital fund balances were appropriated and included as anticipated in the succeeding year's Current Fund Budget as follows:

NOTE F - PROPERTY & SEWER TAXES

Assessment of Tax:

New Jersey statutes require that taxable valuation of real property be prepared by the Township Tax Assessor as of October 1 in each year and filed with the County Board of Taxation by January 10 of the following year. Upon the filing of certified adopted budgets by the Township of Ewing, Local School District and County, the tax rate is struck by the Board based on the certified amounts in each of the taxing districts. Pursuant to statute, this process is to be completed on or before May 3, with a completed duplicate of the tax rolls to be delivered to the Township of Ewing Tax Collector on or before May 13th.

Collection of Tax:

Taxes become a lien on property as of January 1. The tax bills are prepared and mailed by the Collector of Taxes of the Township of Ewing semi-annually in January and July. The January tax bill, which is payable in equal installments on February 1 and May 1, is an estimated bill based on amounts due to the various taxing districts during the first six months of the calendar year. The municipal portion of the tax is based on the municipal rate for the current fiscal year.

The July tax bill, which is due in equal installments on August 1 and November 1, represents the actual total tax for the year less the amount billed in January. A complete breakdown of the tax levy for each taxing district is included on the July bill.

Taxes become delinquent if not paid on the installment dates and become subject to interest penalties of 8% to 18% of the amount delinquent. If taxes are delinquent on or after April 1st of the succeeding year, the delinquent amount is subject to "Tax Sale" which places a tax lien on the property allowing the holder to enforce the tax lien by collection or foreclosure. New Jersey property tax laws establish a tax lien on real estate as of January 1st of the current tax year even though the amount due is not known.

Beginning in January 2001, the Township issued separate bills for sewer usage charges. Previously, such charges were included in the property tax bills. The sewer usage charges are based on the water consumption for the previous year as reported to the Township by the City of Trenton.

NOTE G - SCHOOL TAXES

The Local District Tax Levy for SFY 2001 was $34,767,792.

NOTE H - COUNTY TAXES

The Tax Levy for SFY 2001 for county taxes was $11,321,775.

NOTE I - PENSIONS

Employees who are eligible for a pension plan, are enrolled in one of three pension systems administered by the Division of Pensions, Department of the State of New Jersey. The three State-administered plans are: (1) the Public Employees' Retirement System; (2) the Consolidated Police and Firemens' Pension Fund, and (3) the Police and Firemens' Retirement System. The division annually charges municipalities and other participating governmental units for their respective contributions to the plans based upon actuarial calculations. A portion of the cost is contributed by the employees. The Township's share of pension costs for all three plans amounted to $845,791 and $1,054,682 for the years ended June 30, 2001 and 2000, respectively. Employees are also covered by the Federal Insurance Contribution Act.

NOTE J - UNEMPLOYMENT COMPENSATION INSURANCE

Effective January 1, 1978, most municipal employees became eligible for unemployment compensation insurance (N.J.S. 43:21-3 et seq.). The Township had elected to provide a self-insured plan whereby the municipal cost and employee contributions are deposited in a trust fund from which claims are paid. However, as of April 1, 1994, the Township has discontinued its policy of self-insuring for unemployment compensation insurance and all contributions are remitted directly to the State of New Jersey. Any claims by former employees are prorated for payment based on time served prior and subsequent to April 1, 1994. Claims totaling $966 were paid during the year ended June 30, 2001. As of June 30, 2001, the fund balance totaled $31,316.

NOTE K -WORKER'S COMPENSATION INSURANCE

The Township maintains a self-insurance plan for worker's compensation insurance which is administered as a trust by an insurance agency. An annual current fund appropriation is made to the trust and claims are paid from the trust. Interest earned is also added to the trust. As of June 30, 2001, there was a deficit of $139,391 in the trust fund. The 2001 appropriation was $400,000. Claim payments amounted to $435,439, net of refunds. In fiscal year 2002, $540,000 was appropriated to cover future payments on existing claims and to provide for the deficit at June 30, 2001.

The following information was obtained from the insurance agency's reports:

NOTE L - PENDING LITIGATION

The Township has been named in several suits. It is counsel's opinion that any liability resulting from these lawsuits would be covered by insurance and existing Township reserves.

NOTE M - GENERAL CASUALTY AND LIABILITY INSURANCE

The Township is self-insured for both casualty and liability insurance. As of June 30, 2001 the Self-Insurance Trust totaled $146,423. During the year ended June 30, 2001, $100,000 was appropriated in the current budget and claims, net of recoveries, amounted to $51,047.

NOTE N - TAX APPEALS

At June 30, 2001, properties with assessed taxes aggregating $220,500 were pending tax appeal. Based on prior experience of the percentage lost on tax appeals, management believes the reserve for tax appeals is adequate to cover any potential losses. The Township had a reserve for tax appeals at June 30, 2001 in the amount of $25,000.

NOTE O - UNUSED SICK LEAVE. VACATION BENEFITS AND POST RETIREMENT BENEFITS

The Township has permitted employees to accrue sick leave pay which may be taken as time off or paid at a later date. Each year a provision is made in the budget to cover the estimated annual cost of such payments. In 2001, $14,000 was appropriated. Budget expenditures were $14,000 in SFY 2001.

The Townships policy with respect to unused vacation is to permit employees to carry-over such vacation for one year unless approved otherwise by the council.

The total balance of unused sick and vacation time benefits amounts to approximately $1,955,696 and $1,074,659 respectively, at June 30, 2001. Such amounts are not included in accrued liabilities at June 30, 2001.

The Township provides post retirement health benefits for retired Township employees who served the Township for 25 or more years, permanent Township employees retired on a disability pension, and their dependents pursuant to State of New Jersey Statute Chapter 88. During the year ended June 30, 2001, $27,500 was appropriated. Budget expenditures were $27,456 in SFY 2001. The Township funds the benefits on a pay-as-you-go basis. At June 30, 2001, 61 retired employees were eligible for such benefits.

NOTE P - COMMITMENTS

The majority of the Township employees are represented through the following collective
bargaining units:

All contracts are presently under negotiation.

MERCER COUNTY IMPROVEMENT AUTHORITY

As of June 30, 2001 the Township of Ewing has an outstanding obligation to the Mercer County Improvement Authority (MCIA) in the amount of $1,447,377. The fiscal year 2002 municipal budget has allocated sufficient funds to liquidate this indebtedness and obligations arising from fiscal year 2002 operations.

EWING LAWRENCE SEWERAGE AUTHORITY

As of June 30, 2001 the Township of Ewing has an outstanding obligation to the Ewing Lawrence Sewerage Authority (ELSA) in the amount of $1,465,596. The fiscal year 2002 municipal budget has allocated sufficient funds to liquidate this indebtedness. However, the fiscal year 2002 budget has not allocated sufficient funds for the obligation to ELSA that will arise out of operations during fiscal year 2002.

It is the intention of the Township of Ewing to liquidate all indebtedness to ELSA in future budgets.

NOTE Q- DEFERRED CHARGES TO BE RAISED IN SUCCEEDING BUDGETS

Certain expenditures are required to be deferred to budgets of succeeding years. At June 30, the following deferred charges are shown on the balance sheets of the various funds.

NOTE R - SUBSEQUENT EVENTS

The Township assumed new debt in fiscal year 2002:

• Bond Anticipation Note of $1,673,250 dated August 2, 2001, maturing August 2, 2002 and bearing interest at the rate of 2.79% per annum payable at maturity.