[1] contains following assertions:

If LocalVariableType is var, then let E be derived from the type of the Expression, as follows:

    If the Expression has an array type, then E is the component type of the array type.
    Otherwise, if the Expression has a type that is a subtype of Iterable<X>, for some type X, then E is X.
    Otherwise, the Expression has a type that is a subtype of raw Iterable and E is Object.

The type of the local variable is the upward projection of T with respect to all synthetic type variables mentioned by T (4.10.5).

It seems that the last assertion should mention E instead of T, like:

The type of the local variable is the upward projection of E with respect to all synthetic type variables mentioned by E (4.10.5).

[1] http://cr.openjdk.java.net/~dlsmith/local-var-inference.html