Preliminary Official Statement dated June 10, 2013

Transcription

1 This Preliminary Official Statement and the information contained herein are subject to completion or amendment. These securities may not be sold nor may offers to buy be accepted prior to the time the Official Statement is delivered in final form. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction. Preliminary Official Statement dated June 10, 2013 NEW ISSUES BOOK ENTRY ONLY RATINGS: 2013 Senior Lien Bonds Moody s: Aa3 Fitch: AA2013 Subordinate Lien Bonds Moody s: A1 Fitch: A+ (See RATINGS herein) In the opinion of Bass, Berry & Sims PLC, Bond Counsel, based on existing law and assuming compliance with certain tax covenants of the City of Clarksville, Tennessee, interest on the Series 2013 Bonds (as defined below) will be excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; however, for purposes of computing the alternative minimum tax imposed on certain corporations, such interest is taken into account in determining adjusted current earnings under the federal corporate alternative minimum tax. For a more detailed explanation of certain tax consequences under federal law which may result from the ownership of the Series 2013 Bonds, see the discussion under the heading TAX MATTERS herein. Under existing law, the Series 2013 Bonds and the income therefrom will be exempt from all state, county and municipal taxation in the State of Tennessee, except inheritance, transfer and estate taxes, and Tennessee franchise and excise taxes. (See TAX MATTERS herein). CITY OF CLARKSVILLE, TENNESSEE $44,790,000* Water, Sewer and Gas Revenue Refunding Bonds, Series 2013 $21,395,000* Subordinate Lien Water, Sewer and Gas Revenue Refunding Bonds, Series 2013 Dated: Date of Delivery Due: February 1, as shown on the inside front cover The Bonds The City of Clarksville, Tennessee (the Municipality ) is issuing its $44,790,000* Water, Sewer and Gas Revenue Refunding Bonds, Series 2013 (the 2013 Senior Lien Bonds ) and its $21,395,000* Subordinate Lien Water, Sewer and Gas Revenue Refunding Bonds, Series 2013 (the 2013 Subordinate Lien Bonds ). The 2013 Senior Lien Bonds and the 2013 Subordinate Lien Bonds are collectively referred to herein as the Series 2013 Bonds. The Series 2013 Bonds will bear interest semi-annually from their date payable on the first day of February and August of each year, commencing on February 1, Denominations are $5,000 or any integral multiple thereof. The Series 2013 Bonds are subject to optional redemption as described herein. See DESCRIPTION OF THE SERIES 2013 BONDS-Optional Redemption herein. Purpose The Municipality is issuing the 2013 Senior Lien Bonds to (i) prepay that certain Loan Agreement dated December 23, 2010, by and between the Municipality and The Public Building Authority of the City of Clarksville, Tennessee, (ii) fund a debt service reserve fund, and (iii) pay costs of issuing the 2013 Senior Lien Bonds. The Municipality is issuing the 2013 Subordinate Lien Bonds to (i) prepay certain prior loans with the State of Tennessee, and (ii) pay costs of issuing the 2013 Subordinate Lien Bonds. See PLAN OF FINANCE herein. Book-Entry Only System The Depository Trust Company. See BOOK-ENTRY ONLY SYSTEM herein. Security The 2013 Senior Lien Bonds are payable solely from and secured by a senior pledge of and lien on the Net Revenues on a parity and equality of lien with the Series 2002 Bonds, the Series 2007 Bonds, the Series 2011 Bonds, and any parity bonds or notes hereafter issued (the Senior Parity Bonds ) (collectively, the Senior Lien Bonds ). The 2013 Subordinate Lien Bonds and any parity bonds or notes hereafter issued (the Subordinate Parity Bonds ) (collectively, the Subordinate Lien Bonds ) are payable solely from and secured by a pledge of and lien on the Net Revenues that is subordinate to the Senior Lien Bonds. See SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2013 BONDS herein. Tax Matters Interest on the Series 2013 Bonds is excludable from gross income for Federal income tax purposes to the extent and subject to the conditions, limitations and continuing compliance with tax covenants as described herein. The Series 2013 Bonds and the interest thereon are exempt from Tennessee taxes, subject to certain exceptions. See Tax Matters herein. Bond Counsel Bass, Berry & Sims PLC, Nashville, Tennessee. Delivery Date It is expected that the Series 2013 Bonds will be available for delivery in New York, New York, through the facilities of The Depository Trust Company on or about June 27, This cover page contains certain information for quick reference only. It is not a summary of the issue. Investors must read the entire Official Statement to obtain information essential to making an informed investment decision. The Series 2013 Bonds are offered, subject to prior sale, when, as and if issued and received by the Underwriter and subject to certain conditions, including the issuance of the approving opinions of Bass, Berry & Sims PLC, Bond Counsel. Certain legal matters will be passed upon for the Underwriters by their counsel Adams and Reese LLP, Nashville, Tennessee, and for the Municipality by its counsel, Lance Baker, Esq., Clarksville, Tennessee. Morgan Stanley PIPER JAFFRAY & CO. RAYMOND JAMES Official Statement Dated June, 2013 * Preliminary, subject to change.

2 CITY OF CLARKSVILLE, TENNESSEE $44,790,000* Water, Sewer and Gas Revenue Refunding Bonds, Series 2013 Maturing (February 1) Principal Amount* Interest Rate 2020 $ 2,165, ,795, ,985, ,880, ,730, ,595, ,675, ,755, ,845, ,935, ,035, ,135, ,245, ,355,000 Yield / Price CUSIP No. ** $13,660,000 [ ] % Term Bond Due February 1, 2038, Yield [ ]% (CUSIP No. ) $21,395,000* Subordinate Lien Water, Sewer and Gas Revenue Refunding Bonds, Series 2013 Maturing (February 1) Principal Amount* Interest Rate 2014 $ 4,105, ,945, ,030, ,155, ,275, ,435, ,450,000 Yield / Price CUSIP No. ** *Preliminary, subject to change. ** These CUSIP numbers have been assigned by Standard & Poor's CUSIP Service Bureau, a Division of The McGraw-Hill Companies, Inc., and are included solely for convenience of the Bondholders. The Municipality is not responsible for the selection or use of these CUSIP numbers, nor is any representation made as to their correctness on the Series 2013 Bonds or as indicated herein.

3 CITY OF CLARKSVILLE, TENNESSEE MAYOR AND COUNCIL Honorable Kim McMillan, Mayor David Allen Jeff Burkhart Geno Grubbs Valerie Guzman Marc Harris Kaye Jones James R. Lewis Deanna M. Mclaughlin Wallace Redd Nick Steward Bill Summers Joel Wallace ADMINISTRATION Sylvia Skinner, City Clerk Debbie Frazier, Interim Chief Financial Officer WATER, SEWER AND GAS DEPARTMENT Pat Hickey, General Manager Fred Klein, Chief Financial Officer CITY ATTORNEY Lance Baker, Esq. Clarksville, Tennessee BOND COUNSEL Bass, Berry & Sims PLC Nashville, Tennessee UNDERWRITERS COUNSEL Adams and Reese LLP Nashville, Tennessee FINANCIAL ADVISOR Public Financial Management, Inc. Memphis, Tennessee

4 No dealer, broker, salesman or other person has been authorized to give any information or to make any representations, other than those contained in this Official Statement in connection with the offering contained herein, and if given or made, such other information or representations must not be relied upon. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Series 2013 Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. The information contained in this Official Statement has been obtained from representatives of the Municipality, public documents, records and other sources considered to be reliable, but is not guaranteed as to accuracy or completeness by, and is not to be construed as a representation by, the Underwriter. The delivery of this Official Statement at any time does not imply that any information herein is correct as of any time subsequent to its date. Any statements in this Official Statement involving estimates, assumptions and matters of opinion, whether or not so expressly stated, are intended as such and not representations of fact. NO REGISTRATION STATEMENT RELATING TO THE SERIES 2013 BONDS HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ( SEC ) OR ANY STATE SECURITIES AGENCY. THE SERIES 2013 BONDS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC OR ANY STATE SECURITIES AGENCY, NOR HAS THE SEC OR ANY STATE SECURITIES AGENCY PASSED UPON THE ACCURACY OR ADEQUACY OF THIS OFFICIAL STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. In making an investment decision, investors must rely on their own examination of the Municipality, the System (as hereinafter defined) and the terms of the offering, including the merits and risks involved.

5 TABLE OF CONTENTS INTRODUCTION... 1 General... 1 Legal Authority for Issuance... 2 Offering and Delivery of the Series 2013 Bonds... 2 Other Information... 2 DESCRIPTION OF THE SERIES 2013 BONDS... 3 General... 3 Optional Redemption... 4 Selection of Bonds to be Redeemed... 4 Mandatory Redemption... 4 Notice of Redemption... 4 PLAN OF FINANCE... 4 FUTURE FINANCING PLANS... 5 BOOK-ENTRY ONLY SYSTEM... 5 CONTINUING DISCLOSURE... 5 SOURCES AND USES OF FUNDS... 6 DEBT SERVICE REQUIREMENTS... 7 SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2013 BONDS... 8 Limited Obligations... 8 Pledge of Revenues... 8 Flow of Funds... 8 Rate Covenant... 9 Additional Bonds... 9 Reserve Fund... 9 Prospective Amendments to the Senior Lien Bond Resolution LEGAL MATTERS Pending Litigation TDEC Consent Order TAX MATTERS Closing Certificates MISCELLANEOUS Ratings Financial Advisor Underwriting Audited Financial Statements Additional Information Appendix A - The Water, Sewer and Gas System Appendix B - Certain Provisions of the Senior Lien Bond Resolution Appendix C - Certain Provisions of the Subordinate Lien Bond Resolution Appendix D - Annual Financial Statements of the System for the Years ended June 30, 2012 and June 30, 2011 Appendix E - The City of Clarksville, Tennessee General Information Appendix F - Form of Continuing Disclosure Certificate Appendix G - Form of Bond Counsel Opinion 2013 Senior Lien Bonds Appendix H - Form of Bond Counsel Opinion 2013 Subordinate Lien Bonds Appendix I - Book-Entry Only System i

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7 CITY OF CLARKSVILLE, TENNESSEE $44,790,000* Water, Sewer and Gas Revenue Refunding Bonds, Series 2013 $21,395,000* Subordinate Lien Water, Sewer and Gas Revenue Refunding Bonds, Series 2013 General INTRODUCTION This Official Statement, which includes the cover page and the Appendices hereto, sets forth certain information concerning the City of Clarksville, Tennessee (the Municipality ), its water, sewer and gas systems (collectively, the System ) and its proposed Water, Sewer and Gas Revenue Refunding Bonds, Series 2013 in the aggregate principal amount of $44,790,000* (the 2013 Senior Lien Bonds ) and its proposed Subordinate Lien Water, Sewer and Gas Revenue Refunding Bonds, Series 2013 in the aggregate principal amount of $21,395,000* (the 2013 Subordinate Lien Bonds ). The 2013 Senior Lien Bonds and the 2013 Subordinate Lien Bonds are collectively referred to herein as the Series 2013 Bonds. Definitions of certain terms used in this Official Statement and not otherwise defined herein are set forth in Appendix B and Appendix C. This Introduction is not a summary of this Official Statement and is intended only for quick reference. It is only a brief description of and guide to, and is qualified in its entirety by reference to, more complete and detailed information contained in the entire Official Statement, including the cover page and the Appendices, and the documents summarized or described herein. Investors should fully review the entire Official Statement. The offering of the Series 2013 Bonds to potential investors is made only by means of the entire Official Statement, including the Appendices hereto. The Municipality, the issuer of the Series 2013 Bonds, is a municipal corporation of the State of Tennessee created by the laws of the State of Tennessee. The Municipality is located in Montgomery County, Tennessee, approximately 45 miles northwest of Nashville, Tennessee. See Appendix E for general information regarding the Municipality. The Municipality previously issued its Water, Sewer and Gas Revenue Refunding Bonds, Series 2002 in the original aggregate principal amount of $22,040,000 (the Series 2002 Bonds ), its Water, Sewer and Gas Revenue Bonds, Series 2007 in the original principal amount of $60,150,000 (the Series 2007 Bonds ), and its Water, Sewer and Gas Revenue Refunding Bonds, Series 2011 in the original principal amount of $67,645,000 (the Series 2011 Bonds ). The Municipality is issuing the 2013 Senior Lien Bonds to (i) prepay that certain Loan Agreement dated December 23, 2010 (the PBA Loan ), by and between the Municipality and The Public Building Authority of the City of Clarksville, Tennessee, (ii) fund a debt service reserve fund, and (iii) pay costs of issuing the 2013 Senior Lien Bonds. The Senior Lien Bonds are payable solely from and secured by a senior pledge of and lien on the Net Revenues on a parity and equality of lien with the Series 2002 Bonds, the Series 2007 Bonds, the Series 2011 Bonds, and any parity bonds or notes hereafter issued (the Senior Parity Bonds ) (collectively, the Senior Lien Bonds ). In addition, the Municipality previously incurred state revolving fund loans in the respective maximum principal amounts of $5,200,000, $13,500,000, and $37,000,000 (the SRF Loans ) from the Tennessee Department of Environment and Conservation. The Municipality is issuing the 2013 Subordinate Lien Bonds to (i) prepay the SRF Loans, and (ii) pay costs of issuing the 2013 Subordinate Lien Bonds. The 2013 Subordinate Lien Bonds and any parity bonds or notes hereafter issued (the Subordinate Parity Bonds ) (collectively, the Subordinate Lien Bonds ) are payable solely * Preliminary, subject to change. 1

8 from and secured by a pledge of and lien on the Net Revenues that is subordinate to the Senior Lien Bonds. See SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2013 BONDS herein. The Series 2013 Bonds do not constitute a debt, liability, general or moral obligation, or pledge of the faith and credit or taxing power of the Municipality. No governmental entity, including the Municipality, is obligated to levy any tax for the payment of the Series 2013 Bonds. The pledge of and lien on Net Revenues securing the Series 2013 Bonds does not create a legal or equitable pledge, charge, lien, or encumbrance upon any of the Municipality s property or income, receipts, or revenues, except the Net Revenues and the amounts on deposit in the funds held under the hereinafter described Series 2013 Resolutions. The Series 2013 Bonds will be issued in fully registered form. When in book-entry form, ownership of Series 2013 Bonds held by The Depository Trust Company, New York, New York ( DTC ) or its nominee, Cede & Co., on behalf of the beneficial owners thereof (the Beneficial Owners ), may be transferred or exchanged in accordance with the rules of DTC. When not in book-entry form, ownership of any Series 2013 Bond may be transferred upon surrender of such Series 2013 Bond to U.S. Bank National Association (the Registration Agent ) together with an assignment duly executed by the registered owner or his attorney or legal representative. When not in book-entry form, the Series 2013 Bonds are exchangeable for a like aggregate principal amount of Series 2013 Bonds of the same maturity in denominations of $5,000 or any integral multiple thereof. See BOOK-ENTRY ONLY SYSTEM herein. The Series 2013 Bonds will be issued in book-entry form. When in book-entry form, payment of the principal of and interest on the Series 2013 Bonds will be made by the Registration Agent directly to Cede & Co., as nominee of DTC, and will subsequently be disbursed to DTC Participants and thereafter to Beneficial Owners of the Series 2013 Bonds. See Book-Entry Only System. When not in book-entry form, the principal or redemption price of the Series 2013 Bonds will be payable by check in lawful money of the United States of America at the principal corporate trust office of the Registration Agent. When not in book-entry form, payment of the interest on the Series 2013 Bonds will be made by wire transfer in immediately available funds to an account within the United States of America designated by the Registration Agent. Legal Authority for Issuance The 2013 Senior Lien Bonds are issued by the Municipality pursuant to Chapter 21 of Title 9 and Chapter 34 of Title 7 of the Tennessee Code Annotated, as amended, and other applicable provisions of law and subject to the terms and conditions contained in the resolution of the City Council of the Municipality adopted on June 6, 2013, supplementing and amending the resolution of the City Council of the Municipality adopted on February 7, 1985, as supplemented and amended on February 1, 1991, November 7, 1991, October 1, 1992, May 1, 1997, November 5, 1998, and June 7, 2001, as amended and restated on May 6, 2004, as further supplemented and amended on March 29, 2007 and April 7, 2011 (collectively, the Senior Lien Bond Resolution ). The 2013 Subordinate Lien Bonds are issued by the Municipality pursuant to Chapter 21 of Title 9 and Chapter 34 of Title 7 of the Tennessee Code Annotated, as amended, and other applicable provisions of law and subject to the terms and conditions contained in the Subordinate Lien Water, Sewer, and Gas Bond Resolution of the City Council of the Municipality adopted on June 6, 2013, as supplemented by the First Supplemental Series 2013 Subordinate Lien Water, Sewer and Gas Bond Resolution of the City Council of the Municipality adopted on June 6, 2013 (collectively, the Subordinate Lien Bond Resolution ). The Senior Lien Bond Resolution and the Subordinate Lien Bond Resolution are herein collectively referred to as the Series 2013 Resolutions. Offering and Delivery of the Series 2013 Bonds The Series 2013 Bonds are offered, subject to prior sale, when, as, and if issued by the Municipality and accepted by the Underwriter. The Series 2013 Bonds in definitive form are expected to be delivered through DTC in New York, New York, on or about June 27, Other Information This Official Statement speaks only as of its date, and the information contained herein is subject to change without notice. The information contained in this Official Statement does not purport to be comprehensive or definitive. All references herein to, or summaries of, the Series 2013 Resolutions, the Series 2013 Bonds or any other document 2

9 are qualified in their entirety by reference to the definitive forms thereof and the provisions with respect thereto included in the Series 2013 Resolutions, the Series 2013 Bonds or such other document. Copies of such documents may be obtained from the Municipality by contacting Clarksville Gas and Water Department, 2215 Madison Street, Clarksville, Tennessee 37043, Attention: General Manager, Telephone: (931) General DESCRIPTION OF THE SERIES 2013 BONDS The Series 2013 Bonds will be issued in fully registered form without coupons in denominations of $5,000 and authorized integral multiples thereof. The Series 2013 Bonds will be dated as of their date of delivery. Interest on the Series 2013 Bonds will be payable semi-annually on the first day of February and August in each year, commencing February 1, Interest will be computed on the basis of a 360-day year composed of twelve 30-day months. The Series 2013 Bonds mature on February 1 of each year in the amounts and shall bear interest at the rates as set forth on the inside cover page hereof. The Municipality is issuing the 2013 Senior Lien Bonds to (i) prepay the PBA Loan, (ii) fund a debt service reserve fund, and (iii) pay costs of issuing the 2013 Senior Lien Bonds. The Municipality is issuing the 2013 Subordinate Lien Bonds to (i) prepay the SRF Loans, and (ii) pay costs of issuing the 2013 Subordinate Lien Bonds. The Registration Agent will make all interest payments with respect to the Series 2013 Bonds on each interest payment date directly to the registered owners as shown on the Bond registration records maintained by the Registration Agent as of the close of business on the fifteenth day of the month next preceding the interest payment date (the "Regular Record Date") by check or draft mailed to such owners at their addresses shown on said registration records, without, except for final payment, the presentation or surrender of such registered Bonds, and all such payments shall discharge the obligations of the Municipality in respect of such Bonds to the extent of the payments so made. Payment of principal of the Bonds shall be made upon presentation and surrender of such Bonds to the Registration Agent as the same shall become due and payable. In the event the Bonds are no longer registered in the name of DTC or its successor or assigns, if requested by the owner of at least $1,000,000 in aggregate principal amount of the Bonds, payment of interest on such Bonds shall be paid by wire transfer to a bank within the continental United States or deposited to a designated account if such account is maintained with the Registration Agent and written notice of any such election and designated account is given to the Registration Agent prior to the record date. Any interest on any Bond which is payable but is not punctually paid or duly provided for on any interest payment date (hereinafter Defaulted Interest ) shall forthwith cease to be payable to the registered owner on the relevant Regular Record Date; and, in lieu thereof, such Defaulted Interest shall be paid by the Municipality to the persons in whose names the Bonds are registered at the close of business on a date (the Special Record Date ) for the payment of such Defaulted Interest, which shall be fixed in the following manner: The Municipality shall notify the Registration Agent in writing of the amount of Defaulted Interest proposed to be paid on each Bond and the date of the proposed payment, and at the same time the Municipality shall deposit with the Registration Agent an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Registration Agent for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the persons entitled to such Defaulted Interest. Thereupon, not less than ten (10) days after the receipt by the Registration Agent of the notice of the proposed payment, the Registration Agent shall fix a Special Record Date for the payment of such Defaulted Interest which date shall not be more than fifteen (15) nor less than ten (10) days prior to the date of the proposed payment to the registered owners. The Registration Agent shall promptly notify the Municipality of such Special Record Date and, in the name and at the expense of the Municipality, not less than ten (10) days prior to such Special Record Date, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefore to be mailed, first class postage prepaid, to each registered owner at the address thereof as it appears in the Bond registration records maintained by the Registration Agent as of the date of such notice. Nothing contained in the Series 2013 Resolutions or in the Series 2013 Bonds shall impair any statutory or other rights in law or in equity of any registered owner arising as a result of the failure of the Municipality to punctually pay or duly provide for the payment of principal of and interest on the Series 2013 Bonds when due. 3

10 Optional Redemption The 2013 Senior Lien Bonds maturing on or before February 1, 2023 may not be redeemed prior to their maturities. The Municipality may redeem 2013 Senior Lien Bonds maturing on or after February 1, 2024 at any time, in whole or in part, on or after February 1, 2023, at a price of par plus accrued interest to the redemption date. The 2013 Subordinate Lien Bonds are not subject to optional redemption prior to maturity. Selection of Bonds to be Redeemed If less than all the Series 2013 Bonds shall be called for redemption, the maturities to be redeemed shall be designated by the City Council. If less than all of the Series 2013 Bonds within a single maturity shall be called for redemption, the interests within the maturity to be redeemed shall be selected as follows: (i) if the Series 2013 Bonds are being held under a book-entry system by DTC, or a successor depository, the Bonds to be redeemed shall be determined by DTC, or such successor depository, by lot or such other manner as DTC, or such successor depository, shall determine; or (ii) if the Series 2013 Bonds are not being held under a book-entry system by DTC, or a successor depository, the Bonds within the maturity to be redeemed shall be selected by the Registration Agent by lot or such other random manner as the Registration Agent in its discretion shall determine. Mandatory Redemption The 2013 Senior Lien Bonds maturing on February 1, 2038 are subject to scheduled mandatory redemption prior to maturity in part (as selected by DTC or its successor) at a redemption price equal to 100% of the principal amount thereof, plus accrued interest to the redemption date, in the following principal amounts and on the dates set forth below: Redemption Date (February 1) Principal Amount 2034 $ 2,475, ,595, ,725, ,860, * (Maturity) 3,005,000 Notice of Redemption Notice of call for redemption of the Series 2013 Bonds or portions thereof to be redeemed, is to be given by the Registration Agent in accordance with the Series 2013 Resolutions by mailing a copy of the redemption notice not more than 60 calendar days and not less than 20 calendar days prior to the date fixed for redemption to the registered owner (Cede & Co., so long as it is the registered owner in the book-entry-only system) of the Series 2013 Bonds. Each Beneficial Owner may desire to make arrangements with its related DTC Participant or Indirect Participant to have all notices of redemption or other communications to DTC, which may affect such persons, to be forwarded in writing by such DTC Participant or Indirect Participant to the Beneficial Owner. Any notice mailed as provided above shall be conclusively presumed to have been duly given, whether or not the Beneficial Owner of the Series 2013 Bonds or such other intended recipient receives such notice. PLAN OF FINANCE The Municipality is issuing the 2013 Senior Lien Bonds to (i) prepay the PBA Loan, (ii) fund a debt service reserve fund, and (iii) pay costs of issuing the 2013 Senior Lien Bonds. The Municipality is issuing the 2013 Subordinate Lien Bonds to (i) prepay the SRF Loans, and (ii) pay costs of issuing the 2013 Subordinate Lien Bonds. Preliminary, subject to change. 4

11 FUTURE FINANCING PLANS The Municipality has the capacity to borrow up to $50,000,000 under a 2013 Loan Agreement with The Public Building Authority of the City of Clarksville, Tennessee (the Loan Agreement ), and has drawn a de minimis amount as of the date hereof. The Loan Agreement is secured by ad valorem taxes and not by a pledge of System revenues; however, the indebtedness is expected to be payable from the revenues of the System. The Municipality expects to draw most, if not all, of this loan capacity over the next three years to fund System improvements. The Loan Agreement matures in 2016, and the Municipality anticipates issuing additional Senior Lien Bonds and/or Subordinate Lien Bonds to refinance the Loan Agreement on a long-term basis. The Municipality has no other future borrowing plans for the System at this time. BOOK-ENTRY ONLY SYSTEM Upon initial issuance, the Series 2013 Bonds will be available only in book-entry form. DTC, will act as securities depository for the Series 2013 Bonds. The ownership of one fully registered Series 2013 Bond for each maturity of the Series 2013 Bonds bearing interest at each interest rate, each in the aggregate principal amount of such maturity and bearing interest at such rate, will be registered in the name of Cede & Co. (DTC s partnership nominee) and deposited with DTC. Beneficial owners of Series 2013 Bonds will not receive physical delivery of bond certificates, except under limited circumstances. For a description of DTC and its book-entry only system, see Appendix I. CONTINUING DISCLOSURE The Municipality will, at the time the Series 2013 Bonds are delivered, execute a Continuing Disclosure Certificate under which it will covenant for the benefit of the holders and Beneficial Owners of the Bonds to provide certain financial information and operating data relating to the Municipality, notice of the occurrence of certain enumerated events and notice of failure of the Municipality to provide any required financial information. The information, data and notices described above will be filed or caused to be filed by the Municipality with the Municipal Securities Rulemaking Board ( MSRB ) at and with any state information depository which may hereafter be established in Tennessee. The specific nature of the information contained in the Annual Report and notices can be found in the form of Continuing Disclosure Certificate attached hereto as Appendix F. These covenants have been made in order to assist the Underwriter in complying with Securities and Exchange Commission Rule 15c2-12(b), as it may be amended from time to time. The Municipality has previously undertaken to provide continuing disclosure pursuant to the Rule and has continuously filed its Comprehensive Annual Financial Report ( CAFR ) with the Electronic Municipal Market Access ( EMMA ) system. The Municipality failed to file all of its required annual financial information on time for the fiscal years ended June 30, 2011, 2010, 2009 and Although it has continuously filed its CAFR, the Municipality inadvertently failed to file certain items of supplemental information for its Water, Sewer and Gas Revenue Bonds and Electric System Revenue Bonds. In addition, while the Municipality s CAFR was filed in connection with a series of its general obligation bonds additionally payable from revenues of the 911 Emergency Communications District of Montgomery County, Tennessee (the District ), the Municipality inadvertently failed to file the District s audit. The Municipality has filed a notice of failure to file with respect to the outstanding water, sewer and gas revenue bonds and its electric system revenue bonds and submitted for filing the supplemental information for its water, sewer and gas revenue bonds and electric system revenue bonds for all relevant fiscal years. In addition, to ensure compliance going forward, the Municipality has hired DAC to provide dissemination agent services to the Municipality. [Remainder of Page Intentionally Left Blank] 5

12 SOURCES AND USES OF FUNDS The table below sets forth the estimated sources and uses of funds in connection with the issuance of the Series 2013 Bonds. SOURCES Par Amount Net Original Issue Premium Municipality Contribution Total Sources USES Prepayment of PBA Loan Prepayment of SRF Loans Deposit to Reserve Fund Costs of Issuance (1) Underwriters Discount 2013 Senior Lien Bonds 2013 Subordinate Lien Bonds Total Uses (1) Includes legal fees, financial advisory fees, rating agencies fees, printing and mailing expenses and other miscellaneous expenses. [Remainder of Page Intentionally Left Blank] 6

13 DEBT SERVICE REQUIREMENTS The following table sets forth the annual debt service requirements on the debt payable from Net Revenues of the System. Fiscal Prior Senior Lien Bonds 2013 Senior Lien Bonds Senior Lien Bonds 2013 Subordinate Lien Bonds Additional Subordinate Lien Bonds Year Total Principal* Interest (1) Total Total Principal* Interest (2) Total Total (3), (4) Total Total Subordinate Lien Bonds Net Debt Service 2014 $11,670,840 $ - $1,331,258 $1,331,258 $13,002,098 $4,105,000 $490,922 $4,595,922 $3,316,100 $7,912,022 $20,914, ,654,185-2,239,500 2,239,500 13,893,685 2,945, ,750 3,688,750 3,387,186 7,075,936 20,969, ,588,395-2,239,500 2,239,500 14,827,895 3,030, ,400 3,685,400 2,519,581 6,204,981 21,032, ,579,925-2,239,500 2,239,500 14,819,425 3,155, ,200 3,689,200 2,557,849 6,247,049 21,066, ,566,850-2,239,500 2,239,500 14,806,350 3,275, ,000 3,683,000 2,598,031 6,281,031 21,087, ,569,300-2,239,500 2,239,500 14,808,800 3,435, ,250 3,679,250 2,640,221 6,319,471 21,128, ,557,563 2,165,000 2,239,500 4,404,500 16,962,063 1,450,000 72,500 1,522,500 2,684,521 4,207,021 21,169, ,536,719 3,795,000 2,131,250 5,926,250 18,462, ,731,036 2,731,036 21,194, ,620,569 3,985,000 1,941,500 5,926,500 18,547, ,779,877 2,779,877 21,326, ,239,969 1,880,000 1,742,250 3,622,250 18,862, ,831,160 2,831,160 21,693, ,136,806 1,730,000 1,648,250 3,378,250 18,515, ,885,007 2,885,007 21,400, ,016,438 1,595,000 1,561,750 3,156,750 18,173, ,941,546 2,941,546 21,114, ,963,844 1,675,000 1,482,000 3,157,000 5,120, ,000,913 3,000,913 8,121, ,960,625 1,755,000 1,398,250 3,153,250 5,113, ,063,247 3,063,247 8,177, ,962,900 1,845,000 1,310,500 3,155,500 5,118, ,128,699 3,128,699 8,247, ,962,025 1,935,000 1,218,250 3,153,250 5,115, ,197,422 3,197,422 8,312, ,963,000 2,035,000 1,121,500 3,156,500 5,119, ,269,583 3,269,583 8,389, ,965,600 2,135,000 1,019,750 3,154,750 5,120, ,345,351 3,345,351 8,465, ,964,600 2,245, ,000 3,158,000 5,122, ,424,907 3,424,907 8,547, ,355, ,750 3,155,750 3,155, ,155, ,475, ,000 3,158,000 3,158, ,158, ,595, ,250 3,154,250 3,154, ,154, ,725, ,500 3,154,500 3,154, ,154, ,860, ,250 3,153,250 3,153,250 3,153, ,005, ,250 3,155,250 3,155, ,155,250 Total $170,480,151 $44,790,000 $35,172,508 $79,962,508 $250,442,661 $21,395,000 $3,149,022 $24,544,022 $52,073,964 $80,846,259 $331,288,920 (1) Assumes TIC of 3.73% (2) Assumes TIC of 1.42% (3) Does not include SRF Loans (4) Assumes variable rate interest at 2.50% * Preliminary, subject to change. 7

14 Limited Obligations SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2013 BONDS The Series 2013 Bonds are special limited obligations of the Municipality payable solely from the revenues of the System. The Series 2013 Bonds are not payable from and are not secured by a charge, lien, or other encumbrance upon any funds or assets of the Municipality other than the revenues of the System and the funds created and held under the Series 2013 Resolutions. The Series 2103 Bonds do not constitute a debt, liability, general or moral obligation, or pledge of the faith and credit or taxing power of the Municipality. No governmental entity, including the Municipality, is obligated to levy any tax for the payment of the Series 2013 Bonds. The pledge of and lien on Net Revenues is securing the Series 2013 Bonds does not create a legal or equitable pledge, charge, lien, or encumbrance upon any of the Municipality s property or income, receipts or revenues, except System revenues and the amounts on deposit in the funds held under the Series 2013 Resolutions. Pledge of Revenues 2013 Senior Lien Bonds. Under the terms of the Senior Lien Bond Resolution, the punctual payment of principal of, premium, if any, and interest on the Series 2002 Bonds, the Series 2007 Bonds, the Series 2011 Bonds, the 2013 Senior Lien Bonds and any Senior Parity Bonds hereafter issued (collectively, the Senior Lien Bonds ) shall be payable solely from and secured by a senior pledge of and lien on the Net Revenues of the System. Net Revenues are defined by the Senior Lien Bond Resolution to mean Gross Earnings of the System (generally, all revenues of the System from whatever source) minus Operating Expenses (generally, all operating expenses other than depreciation and interest expense). See Appendix A for information regarding the System. See Appendix B for certain provisions of the Senior Lien Bond Resolution Subordinate Lien Bonds. Under the terms of the Subordinate Lien Bond Resolution, the punctual payment of principal of, premium, if any, and interest on the 2013 Subordinate Lien Bonds and any Subordinate Parity Lien Bonds hereafter issued (collectively, the Subordinate Lien Bonds ) shall be solely payable from and secured by a pledge of and lien on the Revenues of the System, subject only to the prior pledge thereof in favor of the Senior Lien Bonds. The Subordinate Lien Bond Resolution defines Revenues generally to mean all System revenues from whatever source. The Senior Lien Bond Resolution requires Revenues to be applied to the payment of operating expenses prior to the payment of debt service. As a result, the pledge of Revenues under the Subordinate Lien Resolution is the functional equivalent of the pledge of Net Revenues under the Senior Lien Bond Resolution. See Appendix C for certain provisions of the Subordinate Lien Bond Resolution. Flow of Funds The Senior Lien Bond Resolution requires all System revenues to be deposited to the Revenue Fund. Amounts on deposit in the Revenue Fund are then disbursed for the following purposes and in the following order: Payment of System operating expenses Funding of the Bond Fund to provide payment of debt service on Senior Lien Bonds, including the 2013 Senior Lien Bonds Funding of a Reserve Fund for the Senior Lien Bonds, including the 2013 Senior Lien Bonds Funding other legal purposes, including the payment of debt service and the funding of reserves for subordinate indebtedness, including the 2013 Subordinate Lien Bonds, and payments in lieu of taxes to the Municipality See Appendix B, Article II for more information regarding the application of the System revenues. 8

15 Rate Covenant 2013 Senior Lien Bonds. The Municipality covenants in the Senior Lien Bond Resolution to charge sufficient rates for the System to produce Net Revenues equal to (i) 110% of the Debt Service Requirement on the Senior Lien Bonds, the Subordinate Lien Bonds and all other indebtedness of the System in such Fiscal Year, plus (ii) 100% of the sum of (a) the amounts required to be paid during such Fiscal Year into the Reserve Fund established under the Senior Lien Bond Resolution, (b) the amounts required to be paid during such Fiscal Year into the Debt Service Reserve Fund under the Subordinate Lien Bond Resolution, if any, and (c the amount of all other charges whatsoever payable out of System Revenues during such Fiscal Year. See Appendix B Subordinate Lien Bonds. The Municipality covenants in the Subordinate Lien Bond Resolution to charge sufficient rates for the System to produce Net Revenues equal to the greater of (i) 110% of the Debt Service Requirement on the Senior Lien Bonds and the Subordinate Lien Bonds in such Fiscal Year, or (ii) 100% of the sum of (a) the Debt Service Requirement on the Senior Lien Bonds, the Subordinate Lien Bonds and other System indebtedness in such Fiscal Year, (b) the amounts required to be paid during such Fiscal Year into the Debt Service Reserve Fund established under the Senior Lien Bond Resolution, (c) the amounts required to be paid during such Fiscal Year into the Debt Service Reserve Fund under the Subordinate Lien Bond Resolution, if any, and (d) the amount of all other charges whatsoever payable out of System Revenues during such Fiscal Year. See Appendix C. Additional Bonds Additional Senior Lien Bonds. The Municipality has covenanted that it will issue no additional bonds or obligations of any kind or nature payable from or enjoying a lien on the Revenues of the System having a priority over the Senior Lien Bonds. Senior Parity Bonds are payable solely from and secured by a pledge of and lien on the Net Revenues on a parity and equality of lien with the Senior Lien Bonds, in accordance with the Senior Lien Bond Resolution. In order for Senior Parity Bonds to be issued, the Senior Lien Bond Resolution requires generally that historic Net Revenues be at least equal to 120% of the maximum annual debt service on the outstanding Senior Lien Bonds and the proposed Senior Parity Bonds. See Appendix B for a more detailed description of the Additional Bonds test of the Senior Lien Bond Resolution. Additionally, the Subordinate Lien Bond Resolution restricts the issuance of Senior Parity Bonds unless historic Net Revenues are at least equal to 110% of the maximum annual debt service on the outstanding Senior Lien Bonds and Subordinate Lien Bonds and the proposed Senior Parity Bonds. See Appendix C. Additional Subordinate Lien Bonds. The Municipality may issue Subordinate Parity Bonds under the Subordinate Lien Bond Resolution. Subordinate Parity Bonds are payable solely from and secured by a pledge of and lien on System Revenues on a parity and equality of lien with the Subordinate Lien Bonds, including the 2013 Subordinate Lien Bonds. In order for Subordinate Parity Bonds to be issued, the Subordinate Lien Bond Resolution requires generally that historic Net Revenues be at least equal to 110% of the maximum annual debt service on the outstanding Senior Lien Bonds and Subordinate Lien Bonds and the proposed Subordinate Parity Bonds. Additionally, the Subordinate Lien Bond Resolution restricts the issuance of Senior Parity Bonds as described in the preceding paragraph. See Appendix C for a more detailed description of the Additional Bonds tests of the Subordinate Lien Bond Resolution. Reserve Fund 2013 Senior Lien Bonds. The Municipality has established a common Reserve Fund for the Senior Lien Bonds. The money on deposit in the Reserve Fund will be used to pay the principal of and interest on the Senior Lien Bonds, including the 2013 Senior Lien Bonds, in the event that Net Revenues of the System are insufficient. The Reserve Fund is required to be funded with cash or a Reserve Fund Credit Facility in an amount equal to the Reserve Fund Requirement for the Senior Lien Bonds. The increase in the Reserve Fund Requirement resulting from the issuance of the 2013 Senior Lien Bonds will be funded with the proceeds of the 2013 Senior Lien Bonds. See Appendix B for a further description of the Reserve Fund for the Senior Lien Bonds Subordinate Lien Bonds. The Subordinate Lien Resolution permits the Municipality to fund a debt service reserve fund for one or more series of Subordinate Lien Bonds, but does not require that it do 9

16 so. The Municipality has elected not to establish a debt service reserve fund for the 2013 Subordinate Lien Bonds. Prospective Amendments to the Senior Lien Bond Resolution By resolution adopted by the City Council of the Municipality on June 6, 2013, the Municipality has approved certain modifications to the Senior Lien Bond Resolution. Purchasers and holders of the 2013 Subordinate Lien Bonds will be deemed to have consented to these modifications. The modifications will become effective when the outstanding par amount of the 2013 Senior Lien Bonds and additional Senior Parity Bonds equals two-thirds (2/3) of the outstanding par amount of all Senior Lien Bonds. Attached hereto at the end of Appendix B is a summary of the Senior Lien Bond Resolution, as modified. The modifications include, but are not limited to, the following: Rate Covenant increased to require 120% coverage of the Debt Service Requirement on Senior Lien Bonds Additional Bonds Test revised to incorporate the additional restrictions on the issuance of Senior Parity Bonds set forth in the Subordinate Lien Bond Resolution (see above) Reserve Fund requirement to fund the Reserve Fund replaced with the option of the Municipality to fund the Reserve Fund on an issue-by-issue basis Flow of funds System revenues will be applied from the Revenue Fund in the following order: o o o o o o o Operating Expenses Bond Fund for payment of debt service on Senior Lien Bonds Reserve Fund for Senior Lien Bonds Debt service and related reserves on subordinated indebtedness, including the Subordinate Lien Bonds Payments in lieu of taxes to the Municipality Deposits to the Rate Stabilization Fund, which can be used by the Municipality to satisfy up to 20% of the annual rate covenant coverage on the Senior Lien Bonds and 10% of the annual rate covenant coverage on the Subordinate Lien Bonds Balance deposited to Surplus Fund, which can be used for any legal purpose Reduction in the percentage of Senior Lien Bondholders required to approve further modifications to the Senior Lien Bond Resolution (this modification will not be effective until all Series 2002, 2007, and 2011 Senior Lien Bonds have been discharged). The foregoing is not intended to be a thorough description of the modifications approved by the Municipality. Prospective purchasers of the Series 2013 Bonds should review Appendix B in its entirety for such a description. 10

17 Pending Litigation LEGAL MATTERS The Municipality, like other similar governmental bodies, is subject to a variety of suits and proceedings arising in the ordinary conduct of its affairs. The Municipality, after reviewing the current status of all pending and threatened litigation, believes that, while the outcome of litigation cannot be predicted, the final settlement of all lawsuits which have been filed and of any actions or claims pending or threatened against the Municipality or its officials in such capacity are adequately covered by insurance or will not have a material adverse effect upon the financial position of the Municipality. There is no controversy or litigation of any nature now pending against the Municipality restraining or enjoining the issuance or delivery of the Series 2013 Bonds or questioning or affecting the validity of the Series 2013 Bonds or the proceedings and authority under which they are issued. There is no litigation pending which in any manner questions the power of the Municipality to issue the Series 2013 Bonds and to secure the Series 2013 Bonds in accordance with the provisions of the Series 2013 Resolutions by the pledge of Net Revenues, nor is there now pending any litigation which in any manner questions the power of the Municipality. TDEC Consent Order On February 23, 2012, the Municipality received a Tennessee Department of Environment and Conservation (TDEC) Commissioner issued consent order. From the period September 1, 2010 through November 30, 2011, the Sewer Department s wastewater discharges exceeded TDEC National Pollutant Discharge Elimination System Permit limits and provisions. The Commissioner of TDEC ordered the Municipality to: (i) submit and implement a Corrective Action Plan and Engineering Report on its collection system; (ii) submit annual reports detailing its yearly progress ending March 2018; (iii) submit a Management, Operation, and Maintenance Plan ( MOM Plan ); (iv) prepare and submit a Sanitary Sewer Overflow Evaluation Report annually ending in the year 2018; (v) submit a combined sewer overflow ( CSO ) long-term control plan; (vi) submit a comprehensive assessment of the collection system; and (vii) take additional corrective actions related to rehabilitating or replacing certain specified equipment and pump stations. To date, the Municipality has satisfied items (iii) and (vii). In addition, the Commissioner assessed a total civil penalty of $287,300, which will only become due and payable if the Municipality fails to comply with listed items above. Noncompliance with each item listed above will trigger the Municipality s obligation to pay a specified portion of the civil penalty. Further, noncompliance with the order could be a factor in future enforcement actions. The Municipality does not anticipate noncompliance with the order. TAX MATTERS Federal Taxes General. Bass, Berry & Sims PLC, Nashville, Tennessee, is Bond Counsel for the Series 2013 Bonds. Forms of their opinions are attached as Appendices G and H. Their opinion under existing law, relying on certain statements by the Municipality and assuming compliance by the Municipality with certain covenants, is that interest on the Series 2013 Bonds: is excluded from a bondholder's federal gross income under the Internal Revenue Code of 1986, is not a preference item for a bondholder under the federal alternative minimum tax, and is taken into account in determining the adjusted current earnings of a corporation under the federal corporate alternative minimum tax. The Code imposes requirements on the Series 2013 Bonds that the Municipality must continue to meet after the Series 2013 Bonds are issued. These requirements generally involve the way that Series 2013 Bond proceeds must be invested and ultimately used. If the Municipality does not meet these requirements, it is possible that a bondholder may have to include interest on the Series 2013 Bonds in its federal gross income on a retroactive basis to the date of issue. The Municipality has covenanted to do everything necessary to meet these requirements of the Code. 11