$62,685,000 CITY OF GREENVILLE, NORTH CAROLINA Greenville Utilities Commission Combined Enterprise System Revenue Bonds Series 2016

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1 New Issue/Book-Entry-Only Ratings: Moody s: Aa2 Fitch: AA(See RATINGS herein) In the opinion of Bond Counsel, under current law and assuming continuing compliance with the provisions of the Internal Revenue Code of 1986, as amended (the Code ), as described herein, and subject to conditions described in TAX TREATMENT herein, interest on the 2016 Bonds will not be includable in the gross income of the owners thereof for federal income tax purposes. In the opinion of Bond Counsel, under current law, interest on the 2016 Bonds will not be included in the taxable income of individuals or the net income of C corporations for purposes of the income tax imposed by the State of North Carolina. See TAX TREATMENT herein for certain provisions regarding the Code that may affect the treatment of interest on the Series 2016 Bonds for certain bondholders. $62,685,000 CITY OF GREENVILLE, NORTH CAROLINA Greenville Utilities Commission Combined Enterprise System Revenue Bonds Series 2016 Dated: Date of Delivery Due: April 1, as shown on inside cover The bonds offered hereby (the 2016 Bonds ) will be special obligations of the City of Greenville, North Carolina (the City ), solely secured by and payable from the Net Receipts of the Greenville Utilities Commission (the Utilities Commission ) from the City s ownership and the Utilities Commission s operation of the Combined Enterprise System. The 2016 Bonds are being issued to (a) finance additional improvements to the Combined Enterprise System as more particularly described herein, (b) refund certain of the City s bonds as more particularly described herein, (c) pay a portion of the interest on the 2016 Bonds during the construction of the Additional Improvements (as defined herein), and (d) pay financing costs. Neither the faith and credit nor the taxing power of the City is pledged for the payment of principal of, premium, if any, or interest on the 2016 Bonds, and no registered owner of the 2016 Bonds has the right to compel the exercise of the taxing power by the City or the forfeiture of any of its property other than Net Receipts and certain other moneys in connection with any default on the 2016 Bonds. The 2016 Bonds initially will be issued as fully registered bonds and when delivered will be registered in the name of Cede & Co., as registered owner and nominee for The Depository Trust Company, Jersey City, New Jersey ( DTC ). DTC will act as the initial securities depository for the 2016 Bonds. Individual purchases of the 2016 Bonds by the beneficial owners will be made in denominations of $5,000 or any integral multiple thereof. So long as Cede & Co. is the registered owner of the 2016 Bonds, as nominee for DTC, references herein to registered owners or Owners shall mean Cede & Co., as aforesaid, and shall not mean the beneficial owners of the 2016 Bonds. So long as Cede & Co. is the registered owner of the 2016 Bonds as aforesaid, the principal of and interest on the 2016 Bonds are payable by the Bond Registrar to Cede & Co., as nominee for DTC, which will in turn remit such principal and interest to the DTC participants for subsequent disbursement to the beneficial owners. See Appendix G hereto. The 2016 Bonds are subject to optional and mandatory sinking fund redemption as described herein. The 2016 Bonds are offered subject to prior sale, when, as and if issued and accepted by the Underwriters, subject to the approval of their validity and certain other matters by Norton Rose Fulbright US LLP, Washington, D.C., Bond Counsel. Certain legal matters will be passed upon for the City by David A. Holec, Esq., Greenville, North Carolina, City Attorney, for the Utilities Commission by Phillip R. Dixon, Esq., Greenville, North Carolina, counsel to the Utilities Commission, and for the Underwriters by Womble Carlyle Sandridge & Rice, LLP, Raleigh, North Carolina, counsel to the Underwriters. Black and Veatch International Company, Kansas City, Missouri, and Raftelis Financial Consultants, Inc., Charlotte, North Carolina, have prepared the financial feasibility evaluations included in Appendices D and E hereto, respectively. FirstSouthwest, a Division of Hilltop Securities Inc., Charlotte, North Carolina, is acting as financial advisor to the City and the Utilities Commission in connection with the sale and issuance of the 2016 Bonds. It is expected that the 2016 Bonds will be available for delivery through the facilities of DTC on or about June 14, Wells Fargo Securities May 26, 2016 FTN Financial Capital Markets

2 MATURITY SCHEDULE Combined Enterprise System Revenue Bonds, Series 2016 $41,635,000 Serial 2016 Bonds Due April 1 Principal Amount Interest Rate Yield CUSIP* 2017 $ 455, % 0.65% CA , CB ,095, CC ,550, CD ,425, CE , CF ,850, CZ ,255, CG ,370, CH ,485, CJ ,620, CK ,215, C CL ,320, C CM ,450, C CN ,560, C CP ,695, C CQ ,830, C CR ,970, C CS ,110, C CT ,565, C CU0 $3,305, % Term 2016 Bonds Due April 1, Yield 3.08% CUSIP CV8 $3,505, % Term 2016 Bonds Due April 1, Yield 3.09% CUSIP CW6 $3,715, % Term 2016 Bonds Due April 1, Yield 3.11% CUSIP CX4 $10,525, % Term 2016 Bonds Due April 1, 2046 Yield C % CUSIP CY2 C Yield calculation based on assumption that the applicable 2016 Bonds will be redeemed on April 1, 2026 at a price of 100% plus accrued interest to the date of redemption. * Copyright 2016, American Bankers Association. CUSIP numbers herein are provided by CUSIP Global Services, managed by Standard & Poor s Financial Services LLC on behalf of the American Bankers Association, and are set forth herein for the convenience of reference only. Neither the City nor the Underwriters take any responsibility for the selection or accuracy of such numbers set forth herein.

3 CITY OF GREENVILLE City Council Allen M. Thomas Mayor Kandie D. Smith Mayor Pro Tempore P. J. Connelly Council Member Rose H. Glover Council Member McLean Godley Council Member Calvin R. Mercer Council Member Rick Smiley Council Member City Staff Barbara Lipscomb Bernita W. Demery David A. Holec City Manager Director of Financial Services City Attorney Greenville Utilities Commission John Minges Don Mills Dennis Mitchell Rebecca Blount Joel Butler Barbara Lipscomb Parker Overton Tommy Stoughton Chair Chair-Elect Secretary Commissioner Commissioner Commissioner Commissioner Commissioner Utilities Commission Staff Anthony C. Cannon Christopher N. Padgett Jeff W. McCauley Phillip R. Dixon General Manager/CEO Chief Administrative Officer Chief Financial Officer General Counsel i

4 No dealer, broker, salesman or other person has been authorized to give any information or to make any representation other than those contained in this Official Statement in connection with the offering described herein, and, if given or made, such other information or representation must not be relied upon as having been authorized. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy any securities other than the 2016 Bonds offered hereby, nor shall there be any offer or solicitation of such offer or sale of the 2016 Bonds in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. Neither the delivery of this Official Statement nor the sale of any of the 2016 Bonds implies that the information herein is correct as of any date subsequent to the date thereof. The information contained herein has been obtained from the City, the Utilities Commission and other sources believed to be reliable. The information contained herein is subject to change after the date of this Official Statement, and this Official Statement speaks only as of its date. The Underwriters have provided the following sentence for inclusion in this Official Statement. The Underwriters have reviewed the information in this Official Statement in accordance with, and as part of, their respective responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriters do not guarantee the accuracy or completeness of such information. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVERALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE 2016 BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. Neither the 2016 Bonds, the Bond Order nor the Series Resolution (each as defined herein) have been registered with the Securities and Exchange Commission by reason of the provisions of Section 3(a)(2) of the Securities Act of 1933, as amended, and Section 304(a)(4) of the Trust Indenture Act of 1939, as amended. Any registration or qualification of the 2016 Bonds, the Bond Order or the Series Resolution in accordance with applicable provisions of securities laws of the states in which the 2016 Bonds, the Bond Order or the Series Resolution have been registered or qualified, if so required, and the exemption from registration or qualification in other states, shall not be regarded as a recommendation thereof. References to web site addresses presented herein are for informational purposes only and may be in the form of a hyperlink solely for the reader s convenience. Unless specified otherwise, such web sites and the information or links contained therein are not incorporated into, and are not part of, this Official Statement for purposes of, and as that term is defined in, Rule 15c2-12 (as defined herein). This Official Statement is deemed to be a final official statement with respect to the 2016 Bonds within the meaning of Rule 15c2-12, except, when it is in preliminary form, for the omission of certain pricing and other information authorized to be omitted by Rule 15c2-12. Certain statements included or incorporated by reference in this Official Statement constitute forward-looking statements. Such statements are generally identifiable by the terminology used such as plan, expectations, estimate, project, budget or other similar words. The achievement of certain results or other expectations contained in such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements described to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. No assurance is given that actual results will ii

5 meet the expectations of the City in any way, regardless of the level of optimism communicated in the information. The City is not obligated to issue, nor does it plan to issue any updates or revisions to the forward-looking statements. iii

6 TABLE OF CONTENTS Introduction... 1 The 2016 Bonds... 3 Authorization... 3 General... 3 Book-Entry-Only System... 3 Redemption Provisions... 4 Security and Sources of Payment... 5 General... 5 Pledge of Net Receipts... 6 Rate Covenant... 6 Construction Fund... 7 Collection and Safekeeping of Receipts... 7 Parity Indebtedness Service Fund... 7 Parity Indebtedness Reserve Fund... 8 Application of Moneys... 8 Repayment of Any Transfer from City; Required Transfer to City Parity, Subordinate and Additional Indebtedness General Obligation Bonds Disposition and Additions of Certain Property and/or Systems The Plan of Finance Additional Improvements Refunding Estimated Sources and Uses of Funds Annual Debt Service Requirements Projected Operating Results The Combined Enterprise System Organization and Management The Electric System The Water System The Sanitary Sewer System The Natural Gas System Billing and Collection Procedures Operating and Capital Budget Procedures History of Capital Expenditures Future Capital Expenditures and Debt Outlook Historical Operating Results Pension Plans Other Post-Employment Benefits The City General Description Demographic Characteristics Commerce and Industry Employment Pension Plans Other Post-Employment Benefits Litigation Legal Matters Page iv

7 Tax Treatment General Original Issue Discount Bond Premium Backup Withholding Other Tax Consequences Future Tax Developments Continuing Disclosure Legality for Investment Ratings Verification of Mathematical Computations Financial Advisor Underwriting Miscellaneous Appendix A Audited Financial Statements of the Utilities Commission Appendix B Definitions and Summary of Certain Provisions of the Bond Order Appendix C Proposed Form of Bond Counsel s Opinion Appendix D Report of Black & Veatch International Company Appendix E Report of Raftelis Financial Consultants Inc. Appendix F The North Carolina Local Government Commission Appendix G The Depository Trust Company v

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9 State of North Carolina Department of State Treasurer JANET COWELL State and Local Government Finance Division GREGORY C. GASKINS Treasurer and the Local Government Commission Deputy Treasurer Official Statement of the North Carolina Local Government Commission Concerning $62,685,000 CITY OF GREENVILLE, NORTH CAROLINA Greenville Utilities Commission Combined Enterprise System Revenue Bonds Series 2016 INTRODUCTION The purpose of this Official Statement, which includes the cover, inside cover and Appendices, is to provide certain information in connection with the issuance of $62,685,000 Greenville Utilities Commission Combined Enterprise System Revenue Bonds, Series 2016 (the 2016 Bonds ) by the City of Greenville, North Carolina (the City ). The 2016 Bonds are being issued pursuant to The State and Local Government Revenue Bond Act, Article 5 of Chapter 159, as amended, of the General Statutes of North Carolina (the Act ), a bond order adopted by the City Council of the City on August 11, 1994, and amended and restated as of April 13, 2000 (the Bond Order ), and a series resolution (the Series Resolution ) which the Greenville Utilities Commission (the Utilities Commission ) approved and recommended to the City Council of the City (the City Council ) for adoption and the City Council adopted on April 14, This introduction provides certain limited information to serve as a guide to the Official Statement and is expressly qualified by the Official Statement as a whole. Investors should review the entire Official Statement and the documents summarized or described herein. For the definition of certain terms used herein and a summary of certain provisions of the Bond Order and the Series Resolution, see Definitions and Summary of Certain Provisions of the Bond Order in Appendix B. Capitalized terms used herein and not otherwise defined shall have the same meanings given such terms in the Bond Order and the Series Resolution unless otherwise indicated. Security. The 2016 Bonds will be special obligations of the City, solely secured by and payable from the Net Receipts derived by or for the account of the Utilities Commission from the City s ownership and the Utilities Commission s operation of the City s electric system, water system, sanitary sewer system and natural gas system (the Combined Enterprise System ), except to the extent payable from proceeds of the 2016 Bonds, investment earnings and certain other moneys, pledged to the payment of the principal of and interest on the 2016 Bonds and any other Parity Indebtedness to the extent herein described. Pursuant to the Bond Order, the City has heretofore issued several series of bonds that are no longer outstanding. In addition, the City has heretofore issued (i) $25,085,000 Greenville Utilities Commission Combined Enterprise System Revenue Bonds, Series 2001 (the 2001 Bonds ), of which

10 $1,975,000 is currently outstanding, (ii) $8,000,000 Greenville Utilities Commission Combined Enterprise System Revenue Bond, Series 2005 (the 2005 Bond ), of which $5,060,000 is currently outstanding; (iii) $47,325,000 Greenville Utilities Commission Combined Enterprise System Revenue Bonds, Series 2008A (the 2008A Bonds ), of which $31,825,000 is currently outstanding, (iv) $4,130,000 Greenville Utilities Commission Combined Enterprise System Revenue Bonds, Series 2008B (Taxable) (the 2008B Bonds ), of which $1,490,000 is currently outstanding, (v) $11,005,000 Greenville Utilities Commission Combined Enterprise System Revenue Bond, Series 2010 (the 2010 Bond ), of which $6,8350,000 is currently outstanding and (vi) $19,647,700 Greenville Utilities Commission Combined Enterprise System Revenue Refunding Bond, Series 2013 (the 2013 Bond ), of which $13,051,000 is currently outstanding. The pledge, lien and charge of the 2016 Bonds on the Net Receipts will be on a parity with that of the outstanding 2001 Bonds, 2008A Bonds, 2008B Bonds, 2010 Bond, 2013 Bond and any additional Bonds and Parity Debt (collectively, Parity Indebtedness ) and superior to the provision for payment of debt service on the City s outstanding general obligation bonds issued for the benefit of the enterprises included in the Combined Enterprise System. In the future, the City may elect to issue general obligation bonds for the benefit of the Combined Enterprise System as Parity Debt or as Other Indebtedness subordinate to Parity Indebtedness in its right to payment from Net Receipts. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE CITY IS PLEDGED TO THE PAYMENT OF PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON THE 2016 BONDS, AND NO OWNER OF THE 2016 BONDS HAS THE RIGHT TO COMPEL THE EXERCISE OF THE TAXING POWER BY THE CITY OR THE FORFEITURE OF ANY OF ITS PROPERTY OTHER THAN NET RECEIPTS AND CERTAIN OTHER MONEYS IN CONNECTION WITH ANY DEFAULT ON THE 2016 BONDS. See SECURITY AND SOURCES OF PAYMENT herein and Appendix B hereto. Purpose. The 2016 Bonds are being issued for the purpose of providing funds, together with any other available funds, to (1) pay the cost of acquiring and constructing improvements (the Additional Improvements ) to the Combined Enterprise System as more particularly described herein, (2) refund certain of the City s 2005 Bond and 2008A Bonds as described under THE PLAN OF FINANCE Refunding, (3) pay a portion of the interest on the 2016 Bonds during the construction of the Additional Improvements and (4) pay certain financing costs. Tax Status. See TAX TREATMENT herein. Professionals. Wells Fargo Bank, National Association, Charlotte, North Carolina and FTN Financial Capital Markets, Memphis, Tennessee (collectively, the Underwriters ) are underwriting the 2016 Bonds. Norton Rose Fulbright US LLP, Washington, D.C., is serving as Bond Counsel. David A. Holec, Esq., Greenville, North Carolina, is the City Attorney and Phillip R. Dixon, Esq., Greenville, North Carolina, is the Utilities Commission Attorney. Womble Carlyle Sandridge & Rice, LLP, Raleigh, North Carolina, is serving as counsel to the Underwriters. FirstSouthwest, a Division of Hilltop Securities Inc. Charlotte, North Carolina, is serving as Financial Advisor to the City and the Utilities Commission. Black and Veatch International Company, Kansas City, Missouri, and Raftelis Financial Consultants, Inc., Charlotte, North Carolina, have prepared the financial feasibility evaluations included in Appendices D and E hereto, respectively. The Bank of New York Mellon Trust Company, N.A., Jacksonville, Florida, is serving as Trustee and Bond Registrar for the 2016 Bonds and the Escrow Agent. The Preliminary Official Statement for the 2016 Bonds, dated May 16, 2016, refers to Sidley Austin LLP, Washington D.C., as Bond Counsel. On June 2, 2016, the professionals at that firm serving as Bond Counsel relocated their practice to Norton Rose Fulbright US LLP. All legal opinions to be provided by Bond Counsel will be provided by Norton Rose Fulbright US LLP. 2

11 THE 2016 BONDS Authorization The 2016 Bonds will be issued pursuant to the Act, the Order and the Series Resolution. The City s issuance of the 2016 Bonds received the required approval of the North Carolina Local Government Commission (the LGC ) on May 3, The LGC is a division of the State Treasurer s office charged with general oversight of local government finance in the State of North Carolina (the State ). The LGC s approval is required for all bond issues and substantially all other local government financing arrangements in the State. In determining whether to allow bonds to be issued under the Act, the LGC has been given wide statutory discretion to consider the need for and feasibility of the projects to be financed, the local government s capability to repay the amount financed from the pledged revenue sources and the local government s general compliance with State budget and finance laws. Under the Act, the LGC is also responsible, with the issuing unit s approval, for selling bonds issued pursuant to the Act. See Appendix F for additional information on the LGC and its powers and duties. General The 2016 Bonds will be dated their date of delivery. The 2016 Bonds will bear interest from their date payable on October 1, 2016, and thereafter semiannually on each April 1 and October 1 at the rates shown on the inside cover of this Official Statement, and will mature, subject to prior redemption, as described herein, on April 1 in the years and amounts shown on the inside cover of this Official Statement. Individual purchases of the 2016 Bonds by the beneficial owners will be made in denominations of $5,000 or any integral multiple thereof. Book-Entry-Only System The Depository Trust Company, Jersey City, New Jersey ( DTC ), will act as securities depository for the 2016 Bonds. The 2016 Bonds will be issued as fully-registered 2016 Bonds registered in the name of Cede & Co., DTC s partnership nominee. One fully-registered 2016 Bond certificate will be issued for each maturity of the 2016 Bonds, as set forth on the inside cover of this Official Statement, each in the aggregate principal amount of such maturity, and will be deposited with DTC. SO LONG AS CEDE & CO. IS THE REGISTERED OWNER OF THE 2016 BONDS, AS DTC S PARTNERSHIP NOMINEE, REFERENCE HEREIN TO THE HOLDERS OR REGISTERED OWNERS OF THE 2016 BONDS SHALL MEAN CEDE & CO. AND SHALL NOT MEAN THE BENEFICIAL OWNERS OF THE 2016 BONDS. For a more complete description of DTC and the book-entry-only system, see Appendix G hereto. 3

12 Redemption Provisions Optional Redemption of 2016 Bonds. The 2016 Bonds maturing on or after April 1, 2027 shall be subject to redemption prior to maturity, at the option of the City, in whole or in part on any date, from moneys that may be made available for such purpose, on or after April 1, 2026, and at a redemption price not to exceed 100%, plus accrued interest thereon to the date fixed for redemption. Mandatory Sinking Fund Redemption. (a) The 2016 Bonds maturing on April 1, 2037 will be subject to mandatory sinking fund redemption on April 1, 2036 and on each April 1 thereafter, at a redemption price equal to 100% of the principal amount of the 2016 Bonds being redeemed, plus interest accrued to the redemption date, as follows: * Maturity Year Amount 2036 $1,630, * 1,675,000 (b) The 2016 Bonds maturing on April 1, 2039 will be subject to mandatory sinking fund redemption on April 1, 2038 and on each April 1 thereafter, at a redemption price equal to 100% of the principal amount of the 2016 Bonds being redeemed, plus interest accrued to the redemption date, as follows: * Maturity Year Amount 2038 $1,725, * 1,780,000 (c) The 2016 Bonds maturing on April 1, 2041 will be subject to mandatory sinking fund redemption on April 1, 2040 and on each April 1 thereafter, at a redemption price equal to 100% of the principal amount of the 2016 Bonds being redeemed, plus interest accrued to the redemption date, as follows: * Maturity Year Amount 2040 $1,830, * 1,885,000 4

13 (d) The 2016 Bonds maturing on April 1, 2046 will be subject to mandatory sinking fund redemption on April 1, 2042 and on each April 1 thereafter, at a redemption price equal to 100% of the principal amount of the 2016 Bonds being redeemed, plus interest accrued to the redemption date, as follows: * Maturity Year Amount 2042 $1,945, ,020, ,100, ,185, * 2,275,000 Notice of Redemption, Selection of 2016 Bonds for Redemption and the Effect of Call for Redemption. Not more than ninety (90) days and at least thirty (30) days before the redemption date of any 2016 Bonds, the Bond Registrar shall cause a notice of any such redemption, either in whole or in part, signed by the Bond Registrar, to be mailed, first-class, postage prepaid, to the North Carolina Local Government Commission and all registered owners of 2016 Bonds to be redeemed at their addresses as they appear on the registration books of the City kept by the Bond Registrar; provided, however, that, so long as the 2016 Bonds are held by DTC, any notice of redemption will be made in accordance with DTC s procedures. If less than all of the 2016 Bonds are called for redemption, the maturities of the 2016 Bonds or portions thereof to be redeemed shall be selected by the City in its discretion. The selection of the particular 2016 Bonds to be redeemed will be made in accordance with DTC s procedures. On the date designated for redemption, the 2016 Bonds or portions of 2016 Bonds called for redemption shall become and be due and payable at the Redemption Price provided for the redemption of such 2016 Bonds or portions of 2016 Bonds on such date plus accrued interest to such date, and, if moneys or Defeasance Obligations, or a combination of both, sufficient for payment of the Redemption Price and the accrued interest are held in separate accounts by the Trustee or the Bond Registrar in trust for the Owners of the 2016 Bonds or portions thereof are to be redeemed, as provided in the Bond Order, interest on the 2016 Bonds or portions of 2016 Bonds so called for redemption shall cease to accrue, such 2016 Bonds or portions of 2016 Bonds shall cease to be entitled to any benefit or security under the Bond Order or be deemed Outstanding, and the Owners of such 2016 Bonds or portions of 2016 Bonds shall have no rights in respect thereof except to receive payment of the redemption price thereof and the accrued interest and, to the extent provided in the Bond Order, to receive new 2016 Bonds for any unredeemed portions of 2016 Bonds. Any notice of optional redemption of the 2016 Bonds may state that it is conditioned upon there being available an amount of money sufficient to pay the redemption price plus interest accrued and unpaid to the redemption date, and any conditional notice so given may be rescinded at any time before the payment of the redemption price if any such condition so specified is not satisfied. If a redemption does not occur after a conditional notice is given due to an insufficient amount of funds on deposit under the terms of the Bond Order, the corresponding notice of redemption will be deemed to be revoked. General SECURITY AND SOURCES OF PAYMENT The 2016 Bonds will be special obligations of the City, solely secured by and payable from the Net Receipts of the Combined Enterprise System, except to the extent paid from proceeds of 2016 Bonds, investment earnings and certain other moneys. Neither the faith and credit nor the taxing power of 5

14 the City is pledged to the payment of principal of, premium, if any, or interest on the 2016 Bonds, and no Owner of the 2016 Bonds has the right to compel the exercise of the taxing power by the City or the forfeiture of any of its property other than Net Receipts and certain other moneys in connection with any default on the 2016 Bonds. The Combined Enterprise System is currently composed of the electric system, water system, sanitary sewer system and the natural gas system owned by the City and operated by the Utilities Commission, including improvements thereto financed by Bonds and Receipts (the Existing Facilities ). The Bond Order authorizes additions or improvements to the Combined Enterprise System ( Additional Improvements ) which, together with the Existing Facilities and the Additional Improvements, will comprise the Combined Enterprise System. See THE COMBINED ENTERPRISE SYSTEM herein. The City may also add to and remove from the Combined Enterprise System entire enterprise systems. See Appendix B DEFINITIONS AND SUMMARY OF CERTAIN PROVISIONS OF THE BOND ORDER Adding or Deleting an Enterprise System. Pledge of Net Receipts The Net Receipts of the Combined Enterprise System are pledged to the payment of, and as security for, the 2016 Bonds and all other Indebtedness secured by the Bond Order. Net Receipts consist of Receipts after payment of Current Expenses or making provision for the payment of Current Expenses from Receipts. Receipts generally include all payments, proceeds, fees, charges, rents and all other moneys received by or for the account of the Utilities Commission from the ownership by the City and operation by the Utilities Commission of the Combined Enterprise System and all rights to receive the same, whether in the form of accounts receivable, contract rights or other rights, and the proceeds of such rights whether now owned or held or hereafter coming into existence. Current Expenses generally include the reasonable and necessary current expenses of operation, maintenance and repair of the Combined Enterprise System as determined in accordance with generally accepted accounting principles. In particular, the City and the Utilities Commission are obligated to pay as an operating expense of the electric system monthly payments to the North Carolina Eastern Municipal Power Agency (the Power Agency ) for the City s all requirements electric bulk power supply. The City s payment obligations to the Power Agency for its all requirements electric bulk power supply are contained in certain agreements between the City and the Power Agency. See THE COMBINED ENTERPRISE SYSTEM The Electric System North Carolina Eastern Municipal Power Agency. See Definitions of Certain Terms in Appendix B for complete definitions of Receipts and Current Expenses. Rate Covenant The rates, fees and charges for the use of and for the services and facilities furnished or to be furnished by the Combined Enterprise System shall be determined by the Rate Resolution of the Utilities Commission as it may be amended from time to time. In the Bond Order, the City covenants that the Utilities Commission will revise such rates, fees and charges from time to time and as often as it appears necessary in order that: (a) the Receipts, together with any other available funds excluding any transfers from the City, will be sufficient to permit the deposit to the credit of the appropriate operating funds under the Bond Order in each Fiscal Year of a sum equal to the total of the Current Expenses to be paid or provided for in such Fiscal Year and the amounts needed for making the cash deposits or transfers in such Fiscal Year required under the Bond Order to make the payments as described by (a) through (i) under Application of Moneys herein; and 6

15 (b) (i) the Net Revenues in each Fiscal Year will not be less than 125% of the Principal and Interest Requirements for such Fiscal Year on account of the Parity Indebtedness constituting Long-Term Indebtedness then Outstanding and (ii) the Net Revenues for such Fiscal Year, less an amount equal to 100% of the Principal and Interest Requirements for such Fiscal Year on account of the Parity Indebtedness constituting Long-Term Indebtedness then Outstanding, will not be less than 100% of the Principal and Interest Requirements for such Fiscal Year on account of the Subordinate Indebtedness and the Other Indebtedness constituting Long-Term Indebtedness then Outstanding. As defined in the Bond Order, Revenues, generally, means all income, excluding certain extraordinary items, derived by or for the account of the Utilities Commission from the ownership by the City and operation by the Utilities Commission of the Combined Enterprise System, determined in accordance with generally accepted accounting principles. Net Revenues means, for a given period, the excess of Revenues over Current Expenses, determined in accordance with generally accepted accounting principles, during that period. See Appendix B Definitions of Certain Terms for the complete definition of such term. Construction Fund The proceeds of the 2016 Bonds (less amounts to be applied to refund the Bonds to be Refunded (hereinafter defined) will be deposited in the Series 2016 Bonds Construction Account as created under the Series Resolution within the Construction Fund created under the Bond Order and held by the Trustee. Amounts deposited in the account of the Construction Fund, including interest earnings thereon, will be used to pay the Cost of the Additional Improvements and costs of issuance related to the 2016 Bonds. Interest earned or other income derived from the investment or deposit of moneys held for the credit of the account of the Construction Fund may also be applied, upon the written direction of the General Manager/Chief Executive Officer of the Utilities Commission or his designee, to the principal or interest payments of the 2016 Bonds. Amounts on deposit in the respective accounts of the Construction Fund are, to the extent permitted by law, subject to a pledge, charge and lien in favor of the Owners of the 2016 Bonds pending the application of such amounts to paying the Cost of the Additional Improvements. Collection and Safekeeping of Receipts The Utilities Commission will deposit all Receipts as received on a daily basis, to the extent practicable, with an appropriate depositary. The Utilities Commission will pay Current Expenses from such Receipts as due, and will cause transfers of the Receipts to be made to the Trustee and others as described below under Application of Moneys. After an event of default under the Bond Order, however, or if the Receipts or the Net Revenues are less than the amounts required by the rate covenant as set forth under Rate Covenant above for two consecutive Fiscal Years, the Utilities Commission will deposit all Receipts, as received, with the Trustee until such time as the event of default has been cured or the Receipts and the Net Revenues for one Fiscal Year are not less than the amounts required by the rate covenant. The Trustee first will apply such Receipts in such amounts as it shall determine to pay Current Expenses and thereafter will make the transfers or deposits to each of the accounts and funds as prescribed by the Bond Order to make the payments as described under Application of Moneys herein. Parity Indebtedness Service Fund The Parity Indebtedness Service Fund, which is established with the Trustee, contains three separate accounts: the Interest Account, the Principal Account and the Sinking Fund Account. Moneys on deposit in the Parity Indebtedness Service Fund, and the three accounts contained therein, will be used to pay the scheduled payments of principal of and interest on the Bonds and any additional Bonds and 7

16 other Parity Indebtedness, including amounts payable pursuant to mandatory Sinking Fund Requirements. Moneys on deposit in the Parity Indebtedness Service Fund will be held in trust and, pending application as provided for in the Bond Order, will be subject to a pledge, charge and lien in favor of the Owners of the Bonds issued and Outstanding under the Bond Order and the Holders of Parity Debt for the further security of such Owners and Holders. Parity Indebtedness Reserve Fund The Bond Order establishes a Parity Indebtedness Reserve Fund, which is pledged as security for the Bonds and any Parity Indebtedness incurred or assumed under the Bond Order unless the Series Resolution or other resolution of the City Council authorizing such Parity Indebtedness provides that such Parity Indebtedness will not be secured by the Parity Indebtedness Reserve Fund or will be secured by a separate account in the Parity Indebtedness Reserve Fund. The 2001 Bonds, the 2008A Bonds and the 2008B Bonds are secured by the Parity Indebtedness Reserve Fund. The 2016 Bonds will not be secured by the Parity Indebtedness Reserve Fund. See Appendix B DEFINITIONS AND SUMMARY OF CERTAIN PROVISIONS OF THE BOND ORDER Application of Moneys in Parity Indebtedness Reserve Fund for additional information relating to the Parity Indebtedness Reserve Fund. Application of Moneys Except as described below, the Utilities Commission will withdraw Receipts from the Operating Checking Account and transfer the following amounts, for application in the following manner and order, provided that (i) the Utilities Commission will withdraw only amounts representing Receipts for the purpose of making the transfers or deposits pursuant to (a) through (i) below, (ii) payment or the provision for payment of Current Expenses has been made and (iii) in making such withdrawals the Utilities Commission will not reduce the balance of moneys held for the credit of any Fund under the Bond Order to less than the reserve amounts required to be maintained therein: (a) To the Trustee for deposit to the credit of the Interest Account on the dates specified in the applicable Series Resolution, such amount as is sufficient to make full and timely payment of the interest to become due and payable on each Series of Bonds then Outstanding. In the case of the 2016 Bonds, the transfers to the Interest Account are to be made on or before the 25 th day of the month preceding each April 1 and October 1 in an amount equal to the interest due and payable on the 2016 Bonds on such dates (after taking into account any amounts transferred from the Construction Fund for the payment of such interest). (b) To the Trustee for deposit to the credit of the Principal Account on the dates specified in the applicable Series Resolution, such amount as is sufficient to make full and timely payment of the principal to become on the next ensuing principal payment date due and payable on each Series of Bonds then Outstanding. In the case of the 2016 Bonds, the transfers to the Principal Account are to be made on or before the 25 th day of the month preceding each April 1 in an amount equal to the principal to become due and payable on the next ensuing April 1. (c) To the Trustee for deposit to the credit of the Sinking Fund Account, such amount as is equal to the Sinking Fund Requirements and amortization requirements, if any, as specified in the applicable Series Resolution, for each Series of Bonds then Outstanding and to be retired on the next ensuing sinking fund redemption date, plus the premiums, if any, on such principal amount of the Term Bonds to be redeemed. 8

17 (d) (i) To the Trustee for deposit to the credit of the Parity Indebtedness Reserve Fund, a portion of such amount as is required to make the amount in the Parity Indebtedness Reserve Fund, including each account which separately secures any Series of Bonds or Parity Debt, equal to the amount required to be therein as provided for in the Bond Order or in the applicable Series Resolution or other applicable resolutions of the City Council of the City authorizing the incurrence or assumption of Parity Debt. (ii) To the Trustee or to the issuer of a Qualified Reserve Fund Substitute, such amount as is required to reimburse such issuer with respect to a draw on such Qualified Reserve Fund Substitute; provided that the City Council may provide that the transfers described in this paragraph (ii) may be made prior to or at the same time as the transfers described in paragraph (d)(i) above. (e) To the Trustee for deposit to the credit of such funds and accounts as shall be established by each resolution of the City Council authorizing the incurrence or assumption of Subordinate Indebtedness, such amount as is equal to the amount of interest on and principal of Subordinate Indebtedness then Outstanding and the funding of any related debt service reserve then required pursuant to such resolution. (f) To the City or such other person or persons as may be appropriate for deposit to the credit of such funds and accounts as shall be established by each resolution of the City Council authorizing the incurrence or assumption of Other Indebtedness (which includes the City s outstanding general obligation bonds issued for the benefit of the enterprise systems included in the Combined Enterprise System), such amount as is equal to the amount of interest on and principal of Other Indebtedness then Outstanding and the funding of any related debt service reserve pursuant to such resolution. (g) To the City such amount as is equal to the amount representing any transfer received by the Utilities Commission from the City in the preceding Fiscal Year pursuant to the Utilities Commission Charter (as hereinafter defined) with interest thereon which is then to be repaid as provided in the Annual Budget or as otherwise agreed to by the City and the Utilities Commission. (h) To the City such amount as is equal to the amount representing the transfers required to be made by the Utilities Commission to the City in the current Fiscal Year pursuant to the Utilities Commission Charter as provided in the Annual Budget or otherwise agreed to by the City and the Utilities Commission. (i) To the credit of any applicable capital projects fund or reserve such amounts as are equal to the amounts then required to be so transferred as provided in the Annual Budget. The Bond Order permits the City to provide for a disposition of Receipts in addition to the transfers or deposits described under (a) through (i) above and prior to the transfers or deposits mentioned in (f) through (i) above but only after the transfers or deposits described in (a) through (e) above. Moneys on deposit in the accounts and funds set forth in (a) through (c) above will be used to pay the scheduled payments of principal of and interest on the 2016 Bonds, including amounts payable pursuant to mandatory sinking fund redemptions. The Trustee will hold the Parity Indebtedness Service Fund (and the three accounts therein). The Parity Indebtedness Service Fund is pledged as security for the 2016 Bonds. 9

18 Repayment of Any Transfer from City; Required Transfer to City If there are available moneys remaining from the Receipts after making the required transfers or deposits described in (a) through (f) under Application of Moneys above, then (i) the Utilities Commission will repay to the City, with interest, the amount of any transfer made by the City to the Utilities Commission to be applied to the necessary expenses of the Utilities Commission if charges and rentals are insufficient to pay such necessary expenses as provided for in Chapter 861 of the 1991 Session Laws of North Carolina (the Utilities Commission Charter ) and (ii) the Utilities Commission will thereafter transfer annually to the City, unless such transfer is reduced by the City Council of the City, an amount equal to 6% of the difference between the electric and natural gas systems net fixed assets and total bonded indebtedness plus an amount equal to 50% of the Utilities Commission s retail cost of service for the City s public lighting as required by the Utilities Commission Charter. For year ended June 30, 2015, the transfer from the Utilities Commission to the City as described in (ii) above was $6,505,043, which was 8.49% of the City s budgeted revenues for the fiscal year. The City and the Utilities Commission do not anticipate that any transfer by the City to the Utilities Commission as described in (i) above will be necessary, and the requirement that such a transfer be made is in no way a part of the security for the 2016 Bonds, nor will the Owners of the 2016 Bonds have any right to require or enforce such a transfer from the City to the Utilities Commission. Parity, Subordinate and Additional Indebtedness The outstanding Bonds are secured by a pledge, charge and lien upon Net Receipts on a parity with the 2016 Bonds. Under the conditions described in the Bond Order, and without the approval or consent of the Owners of the 2016 Bonds or any other Parity Indebtedness then Outstanding, the City may incur or assume additional Parity Indebtedness (including additional Bonds), Subordinate Indebtedness or Additional Indebtedness. Parity Indebtedness and Subordinate Indebtedness are both secured by a lien on Net Receipts. Additional Indebtedness is not secured by a lien on Net Receipts but is payable from Net Receipts as provided in the Bond Order. Parity Indebtedness, Subordinate Indebtedness and Additional Indebtedness may be incurred or assumed to pay costs (including costs of issuance) of (1) completing the Additional Improvements, (2) constructing and acquiring Additional Improvements to the Combined Enterprise System and (3) refunding Parity Indebtedness, Subordinate Indebtedness or Additional Indebtedness. Parity Indebtedness other than Bonds, Subordinate Indebtedness and Additional Indebtedness may also be incurred or assumed for any other lawful purpose of the City related to the ownership or operation of the Combined Enterprise System. See ANNUAL DEBT SERVICE REQUIREMENTS herein. General Obligation Bonds Subject to compliance with the applicable provisions of North Carolina law, the City is authorized to issue general obligation bonds, secured by the taxing power of the City, to finance the costs of improvements to the various components of the Combined Enterprise System. Certain of the components of the existing Combined Enterprise System were financed with the proceeds of general obligation bonds; however, such general obligation bonds are no longer outstanding. The City may in the future issue general obligation bonds to finance improvements to the Combined Enterprise System. The City and the Utilities Commission, however, do not anticipate any such issue of general obligation bonds in the next five years. Pursuant to the Bond Order, any such general obligation bonds would not be secured by a pledge and lien upon the Net Receipts, but would be payable from Net Receipts following the payment of the Bonds and other Parity Indebtedness, Subordinated Indebtedness and any required transfers to reserve funds. 10

19 Disposition and Additions of Certain Property and/or Systems The Bond Order authorizes the sale, exchange, lease or other disposal of or encumbrance of property comprising the Combined Enterprise System, including a component part of the Combined Enterprise System, under the conditions set forth in the Bond Order. See Appendix B DEFINITIONS AND SUMMARY OF CERTAIN PROVISIONS OF THE BOND ORDER Covenant Against Sale or Encumbrance and Exceptions Thereto. The City may also add to and remove from the Combined Enterprise System entire enterprise systems. See Appendix B DEFINITIONS AND SUMMARY OF CERTAIN PROVISIONS OF THE BOND ORDER Adding or Deleting an Enterprise. Additional Improvements THE PLAN OF FINANCE The Additional Improvements consist of various improvements to the Combined Enterprise System at a total estimated cost of $43,000,000. Water system improvements included in the Additional Improvements consist of modifications to existing water facilities to accommodate the replacement of a culvert stormwater system, dredging of a presettling impoundment at the water treatment plant and finance and information technology improvements. Electric system improvements included in the Additional Improvements consist of the purchase of a natural gas fired peaking generator, construction of a transmission line and fiber optic cable, the purchase of land for and design of a new substation, various substation modernization projects and finance and information technology improvements. Gas system improvements included in the Additional Improvements consist of installation of two additional natural gas tanks, installation of a steel pipeline and two regulator stations, relocation and installation of gate stations and finance and information technology improvements. Sewer system improvements included in the Additional Improvements consist of upgrading an interceptor, capacity improvements, replacement of piping at the treatment plant, modifications to the existing sewer facilities to accommodate the replacement of a culvert stormwater system and finance and information technology improvements. All of the Additional Improvements are part of the Utilities Commission s five year capital improvement program. For a discussion of the Combined Enterprise System s Capital Improvement Program, see THE COMBINED ENTERPRISE SYSTEM Future Capital Expenditures and Debt Outlook herein. Refunding The City is refunding (a) the 2005 Bond with principal installments maturing September 1, 2016 to September 1, 2025, inclusive (the 2005 Bond to be Refunded ), and (b) the 2008A Bonds maturing November 1, 2019 to 2025, inclusive, 2028 and 2033 (the 2008A Bonds to be Refunded and collectively with the 2005 Bond to be Refunded, the Bonds to be Refunded ). To accomplish the refunding of the 2008A Bonds to be Refunded, proceeds from the sale of a portion of the 2016 Bonds, together with any other available funds, will be deposited in an escrow fund (the Escrow Fund ) held by The Bank of New York Mellon Trust Company, N.A., as escrow agent (the Escrow Agent ), in trust pursuant to the terms and conditions of an Escrow Deposit Agreement, dated as of June 1, 2016 (the Escrow Deposit Agreement ), between the City and the Escrow Agent. Funds on deposit in the Escrow Fund will be used to purchase certain non-callable defeasance obligations maturing at times and in amounts sufficient to provide funds, together with other funds deposited in the Escrow Fund and remaining uninvested, to pay the principal of, premium, if any, and interest on the 2008A Bonds to be Refunded as the same become due and payable. The 2008A Bonds to be Refunded will be 11

20 irrevocably called for redemption on November 1, 2018 at a redemption price equal to 100% of the principal amount of the 2008A Bonds to be Refunded plus accrued interest to the redemption date. Upon the execution of the Escrow Deposit Agreement and the deposit of funds with the Escrow Agent as described above, the 2008A Bonds to be Refunded will no longer be secured by the Bond Order, but will be secured solely by such defeasance obligations, cash and other monies which may be deposited from time to time under the Escrow Deposit Agreement. The 2005 Bond to be Refunded will be redeemed on or about the issuance date of the 2016 Bonds at a redemption price equal to 103% of the principal amount of the 2005 Bond to be Refunded plus accrued interest to the redemption date. [Remainder of page intentionally left blank.] 12

21 ESTIMATED SOURCES AND USES OF FUNDS The City estimates the sources and uses of the proceeds to be received from the sale of the 2016 Bonds and certain other funds to be as follows: Sources: Par Amount of 2016 Bonds $62,685,000 Release from Debt Service Reserve Fund relating to Bonds to be Refunded 378,171 Contribution of Debt Service Funds relating to Bonds to be Refunded 22 Net Original Issue Premium 9,738,285 Uses: Total $72,801,478 Cost of Additional Improvements $42,952,782 Capitalized Interest 1,308,082 Deposit to Escrow Fund 23,008,007 Redemption of 2005 Bond to be Refunded 4,860,902 Costs of Issuance (1) 671,705 Total $72,801,478 (1) Includes underwriters discount, legal fees, financial advisor fees, printing costs, rating agency fees, fees and expenses of the Trustee, the Bond Registrar, the Escrow Agent, the verification agent and miscellaneous fees and expenses. 13

22 ANNUAL DEBT SERVICE REQUIREMENTS The following table sets forth the amounts required in each Fiscal Year for payment of the principal of and interest on debt relating to the Combined Enterprise System. Specifically, the table sets forth principal and interest requirements for the City s Additional Indebtedness and State Revolving Fund Loans which constitute Subordinate Indebtedness relating to the Combined Enterprise System (collectively referred to below as Junior Indebtedness ), all of the outstanding 2001 Bonds, 2008A Bonds, 2008B Bonds, 2010 Bond, 2013 Bond (collectively referred to below as Existing Revenue Bonds ) and the 2016 Bonds. Totals may not foot due to rounding. [Remainder of page intentionally left blank.] 14

23 Fiscal Year Ending June 30, Debt Service on Existing Revenue Bonds 1 Combined Enterprise Fund Indebtedness Parity Indebtedness 2016 Bonds Principal Interest 2 Debt Service Bonds Total Revenue Bonds Debt Service Junior Indebtedness 3 Total Debt Service 2017 $8,500,987 $ 455,000 $ 870,208 $ 1,325,208 $ 9,826,195 $3,350,161 $ 13,176, ,408, ,000 2,723,250 3,183,250 10,591,596 3,294,859 13,886, ,459,181 1,095,000 2,709,450 3,804,450 10,263,631 3,239,556 13,503, ,107,512 1,550,000 2,654,700 4,204,700 8,312,212 3,184,254 11,496, ,365,308 3,425,000 2,577,200 6,002,200 8,367,508 3,128,951 11,496, ,829,986 2,205,000 2,405,950 4,610,950 6,440,936 3,073,649 9,514, ,772 2,255,000 2,343,350 4,598,350 5,193,122 3,018,346 8,211, ,744 2,370,000 2,230,600 4,600,600 5,180,344 2,767,814 7,948, ,808 2,485,000 2,112,100 4,597,100 5,166,908 2,694,209 7,861, ,872 2,620,000 1,987,850 4,607,850 5,167,722 2,642,599 7,810, ,936 2,215,000 1,856,850 4,071,850 4,621,786 2,590,989 7,212, ,320,000 1,746,100 4,066,100 4,066,100 2,539,378 6,605, ,450,000 1,630,100 4,080,100 4,080,100 2,487,768 6,567, ,560,000 1,507,600 4,067,600 4,067,600 2,436,157 6,503, ,695,000 1,379,600 4,074,600 4,074,600 1,415,192 5,489, ,830,000 1,244,850 4,074,850 4,074,850 1,384,146 5,458, ,970,000 1,103,350 4,073,350 4,073, ,920 4,984, ,110, ,850 4,064,850 4,064, ,913 4,169, ,565, ,350 2,364,350 2,364, ,913 2,469, ,630, ,750 2,366,750 2,366, ,913 2,471, ,675, ,850 2,362,850 2,362,850 2,362, ,725, ,600 2,362,600 2,362,600 2,362, ,780, ,850 2,365,850 2,365,850 2,365, ,830, ,450 2,362,450 2,362,450 2,362, ,885, ,550 2,362,550 2,362,550 2,362, ,945, ,000 2,366,000 2,366,000 2,366, ,020, ,200 2,363,200 2,363,200 2,363, ,100, ,400 2,362,400 2,362,400 2,362, ,185, ,400 2,363,400 2,363,400 2,363, ,275,000 91,000 2,366,000 2,366,000 2,366,000 TOTAL $33,525,453 $62,685,000 $39,791,358 $102,476,358 $136,001,811 $44,473,687 $180,475, Principal and interest requirements. Excludes debt service on the Bonds to be Refunded. A portion of the proceeds of the 2016 Bonds will be used to pay a portion of the interest on the 2016 Bonds through April 1, The interest shown here is net of such proceeds. Principal and interest requirements on the outstanding Additional Indebtedness and State Revolving Fund Loans relating to the Combined Enterprise System. Such indebtedness is payable from the Net Receipts after the payment of debt service on the Parity Indebtedness. See SECURITY AND SOURCES OF PAYMENT Parity, Subordinate and Additional Indebtedness and General Obligation Bonds above. Requirements on State Revolving Fund Loans are based on estimated draw down schedules for such loans. 15

24 PROJECTED OPERATING RESULTS Appendix D hereto sets forth the Feasibility Evaluation of Black & Veatch International Company of the financial projections prepared by the Utilities Commission for the operation of its electric and gas utility systems for the six fiscal years ending June 30, 2016 through June 30, Appendix E sets forth the Evaluation of Raftelis Financial Consultants Inc. of the Forecast Statements of Revenues, Expenses, Debt Service, and Debt Service Coverage of the Commission for the operation of its water and sewer systems for such fiscal years. Each of such reports were prepared in accordance with the industry guidelines and procedures referred to therein. Each of such reports were based upon certain factual matters and assumptions as to the occurrence of future events that are referenced in the reports. Each of such reports should be read in their entirety. Each such report presents debt service coverage ratios on a system-by-system basis whereby the indebtedness allocated to each individual system is measured against the net revenues of such system. These ratios are presented for informational purposes only. The rate covenant imposed by the Bond Order as described under SECURITIES AND SOURCES OF PAYMENT Rate Covenant above applies to the rates, fees and charges for the entire Combined Enterprise System and not on a system-bysystem basis. The following table sets forth a summary compilation of the financial projections of the Commission for the operation of the electric, gas, water and sewer systems for the six fiscal years ending June 30, Such compilation was prepared by the Utilities Commission and is derived from the data set forth in the reports referenced in the preceding paragraph, and should be read in light of the entire reports from which such data is taken. [Remainder of page intentionally left blank.] 16

25 Forecast Forecast Forecast Forecast Forecast Forecast Line # STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS (000 s) Operating Revenues Charges for Service $254,190 $252,333 $256,777 $261,967 $267,521 $273,454 1 Other Operating Revenues ,011 1,031 1,052 1,074 2 Total Revenues 255, , , , , ,528 3 Operating Expenses Administration and General 21,867 24,429 24,070 24,780 25,511 26,266 4 Operations and Maintenance 38,158 41,103 42,235 42,270 43,542 44,853 5 Purchased Power and Gas 148, , , , , ,408 6 Depreciation 18,839 19,403 19,986 20,584 21,204 21,839 7 Total Operating Expenses 226, , , , , ,366 8 Operating Income (Loss) 28,246 18,240 20,867 24,247 25,582 24,162 9 Nonoperating Revenues (Expenses) Interest Income, Operating Fund Interest Income, Capital Project Fund Debt Interest Expense and Services Charges (4,194) (4,018) (5,038) (5,620) (6,283) (7,488) 12 Other, net 1,823 2,079 2,298 1,059 1,080 1, Total Nonoperating Revenues (Expenses) (2,045) (1,617) (2,418) (4,239) (4,881) (6,065) 14 Income before contributions and transfers 26,201 16,623 18,449 20,008 20,701 18, Contributions and Transfers: Capital Contributions Transfer to City of Greenville, General Fund (6,592) (5,723) (6,557) (6,812) (7,177) (6,320) 17 Transfer to City of Greenville, Street Lighting (753) (775) (799) (823) (847) (873) 18 Total Operating Transfers (7,345) (6,498) (7,356) (7,635) (8,024) (7,193) 19 Changes in Net Assets 18,856 10,125 11,093 12,373 12,677 10, Net Assets, Beginning of Year 341, , , , , , Net Assets, End of Year $360,526 $370,651 $381,744 $394,117 $ 406,794 $417,

26 2016 Forecast 2017 Forecast 2018 Forecast 2019 Forecast 2020 Forecast 2021 Forecast Line # DEBT COVERAGE CALCULATION (000 s) Revenues Revenues (1) $256,822 $255,403 $260,086 $264,057 $269,653 $275, Less Capacity/Acreage Fees (2) (435) (444) (453) (462) (471) (480) 24 Plus Interest Income (3) Total Revenues 256, , , , , , Current Expenses Operations 59,407 64,889 65,635 66,353 68,329 70, Purchased Power and Gas 148, , , , , , Total Current Expenses 207, , , , , , Net Revenues/Funds available for debt service $49,253 $40,243 $43,690 $ 46,447 $48,441 $47, Debt Service Parity Debt (4) $10,079 $9,916 $11,359 $12,592 $11,056 $13, Subordinate and Additional Debt (5) 3,959 3,351 3,833 3,883 3,823 3, Total debt service $14,038 $13,267 $15,192 $16,475 $14,879 $17, Parity Debt Service Coverage, Requirement = 1.25 (6) Total Debt Service Coverage, Requirement = 1.00 (7) Debt Service Coverage after Transfers (8) UNRESTRICTED CASH AND INVESTMENTS (9) $87,548 $94,291 $98,906 $102,996 $106,968 $108, DAYS CASH ON HAND UNAPPROPRIATED FUND BALANCE $50,153 $52,778 $55,872 $59,387 $62,957 $66, FUND BALANCE AS % OF EXPENDITURES 19% 21% 22% 23% 23% 24% 40 (1) Line 3 plus Line 13 less gain on disposal of fixed assets and grants (2) (3) (4) (5) (6) (7) (8) (9) The capacity/acreage fees are restricted funds and are not included in the unrestricted cash and investment (line 37) or the unappropriated fund balance (line 39). Line 10. Includes principal and interest requirements on the 2001 Bonds, the 2005 Bond, the 2008A Bonds, the 2010 Bond, the 2013 Bond, the 2016 Bonds and two additional bond issues anticipated in fiscal years 2018 and The forecast, however, takes into account the refunding of the 2005 Bond and a portion of the 2008A Bonds in June 2016 as described in THE PLAN OF FINANCE above. For purposes of the forecast, the 2016 Bonds are assumed to be issued in the principal amount of $64,550,000 and to bear interest at an assumed all-in true interest cost of 3.41%. The bonds to be issued in 2018 and 2020 are assumed to be issued in the aggregate principal amounts of $31,052,507 and $49,555,680, respectively, to bear interest at an assumed rate of 5%, each with a 25 year amortization assuming level debt service. Includes principal and interest requirements relating to outstanding Additional Indebtedness and State Revolving Fund Loans relating to the Combined Enterprise System. Such indebtedness is payable from the Net Receipts after the payment of debt service on the Parity Indebtedness. Line 30 divided by Line 31. Line 30 divided by Line 33. Line 30 plus Line 17 plus Line 18 and then divided by Line 33. Unrestricted cash and investment includes the below-described Electric Rate Stabilization Fund. 18

27 THE COMBINED ENTERPRISE SYSTEM The Utilities Commission operates the Combined Enterprise System, serving over 152,000 connections almost entirely within Pitt County, North Carolina (the County ). Established in 1905, the Utilities Commission operates under a separate charter issued by the North Carolina General Assembly (the Utilities Commission Charter ). In compliance with Chapter 159 of the General Statutes of North Carolina and the Utilities Commission Charter, the Utilities Commission prepares and submits to the City Council, for its approval, the coming year s budget. In addition, the City Council must approve the issuance of any debt for the Utilities Commission and the debt is then issued through the City. Under the provisions of the Utilities Commission Charter, the Utilities Commission has the authority and responsibility to supervise and manage the operation, maintenance, improvement and extension of water, sewer, electric and natural gas facilities in the City and surrounding service area (the extension of sewer facilities outside the City limits must be approved by the City Council). The Utilities Commission is governed by an eight-member Board of Commissioners responsible for approving rates, development plans and the annual budget and for setting policy that is carried out by the Utilities Commission s General Manager. All eight board members (including the City Manager of the City who serves as a full voting member) are appointed by the City Council, with two such board members being nominated by the Pitt County Board of Commissioners. All board members are appointed to serve three-year staggered terms with a maximum of two consecutive terms. The Board of Commissioners is also responsible for employing and approving the pay plan of the Utilities Commission s General Manager, as well as approving the pay plan for all Utilities Commission employees. Real property of the Utilities Commission is held in the name of the City, and most litigation (including condemnation) must also be in the name of the City. Rules and regulations of the Utilities Commission are adopted into the City Code of the City by reference. The Bond Order authorizes the sale, exchange, lease or other disposal of or encumbrance of property comprising the Combined Enterprise System, including a component part of the Combined Enterprise System, under the conditions set forth in the Bond Order. See Appendix B DEFINITIONS AND SUMMARY OF CERTAIN PROVISIONS OF THE BOND ORDER Covenant Against Sale or Encumbrance and Exceptions Thereto. The City may also add to and remove from the Combined Enterprise System entire enterprise systems. See Appendix B DEFINITIONS AND SUMMARY OF CERTAIN PROVISIONS OF THE BOND ORDER Adding or Deleting an Enterprise. Organization and Management The Utilities Commission has three operating departments: (1) electric system, (2) water resources (water and sewer) and (3) gas system. The Utilities Commission, through its electric system department, water resources department and gas system department, together with administrative and support personnel, currently employs approximately 435 employees. Anthony C. Cannon has served as General Manager/CEO of the Utilities Commission since As General Manager/CEO, Mr. Cannon is responsible for overall operations of the Utilities Commission. Prior to his appointment as General Manager/CEO, Mr. Cannon served as Assistant General Manager for six years. Mr. Cannon has been employed at the Utilities Commission since Mr. Cannon received a Master s degree in Organizational Management and a Bachelor s degree in Business Administration from Southern Wesleyan University. 19

28 Chris N. Padgett has served as Chief Administrative Officer of the Utilities Commission since As Chief Administrative Officer, Mr. Padgett is responsible for directing strategic initiatives throughout the Utilities Commission including Customer Relations, Information Technology and Human Resources. Mr. Padgett has been employed at the Utilities Commission since Mr. Padgett received a Master s degree in Public Administration and a Bachelor s degree in Urban Regional Planning from East Carolina University. Jeff W. McCauley joined the Utilities Commission as Chief Financial Officer in December As Chief Financial Officer, Mr. McCauley is responsible for overseeing the overall financial management of the Utilities Commission. Mr. McCauley has served in the government financial sector field for 26 years joining the Utilities Commission from the City of Raleigh. Mr. McCauley holds a Bachelor of Arts degree in Accounting, Business Management, and Economics from North Carolina State University and is a licensed Certified Public Accountant in the State of North Carolina. Roger G. Jones, P.E., has served as Director of Electric Systems since Mr. Jones has been employed at the Utilities Commission since Mr. Jones is a graduate of North Carolina State University with a Bachelor of Science degree in Electrical Engineering and is a registered Professional Engineer in North Carolina. Randall D. Emory, P.E. has served as Director of Water Resources since Mr. Emory has been employed at the Utilities Commission since Mr. Emory received a Bachelor of Science degree in Civil Engineering, Construction Option, from North Carolina State University and is a registered Professional Engineer in North Carolina. Anthony L. Miller has served as Director of Gas Systems since Mr. Miller has been employed at the Utilities Commission since A graduate of North Carolina State University, Mr. Miller holds a Bachelor of Science degree in Aerospace Engineering. The Electric System The Utilities Commission operates an electric distribution system serving the City and approximately seventy-five percent (75%) of the rural portion of the County with approximately 65,344 connections. The Utilities Commission s electric system is the second largest municipal electric system in the State, both in terms of number of customers served and quantity of electricity purchased and distributed. The Utilities Commission s electric system service area runs north close to the Town of Robersonville, south to the Town of Ayden, east to the Town of Grimesland and west beyond the Town of Falkland. Neighboring areas are primarily served by North Carolina Power or Duke Energy Progress ( DEP ). The electric system consists of 77 miles of high voltage transmission lines at 115,000 and 34,500 volts, as well as over 1,180 miles of overhead distribution lines, 1,627 miles of underground distribution lines at 12,470 volts and 84 miles of fiber optic lines. The electric system consists of 19 distribution substations with a combined base rating capacity of 560 MVA (megavolt amps), as well as two 115 kv transmission substations with a combined base load capacity of 480 MVA. The Utilities Commission is a leader in the State in residential load management and has device controls for an estimated 41,429 appliances including customer heat pumps, air conditioners, water heaters and electric furnaces. Approximately thirty percent (30%) of the Utilities Commission s residential customers currently participate in this program. 20

29 Electric Service Rates. Electric service rates are the same for customers inside and outside the City limits. Electric service rates (residential service and general service) in effect since August 1, 2015 are set forth below. All rates are currently subject to a 7% State sales tax. Residential Service Base facilities charge per billing month: $13.00 Energy charges (per kwh): $ Residential Time of Use with Demand Net Metering (1) Base facilities charge (per billing month): $19.47 Demand charge (per kw): $7.94 Energy charges (per kwh): 1. all on-peak kwh $ all off-peak kwh $ Small General Service (2) Base facilities charge (per billing month): $21.00 Energy charges (per kwh): 1. first 1,000 kwh $ next 5,000 kwh $ all additional kwh $ Medium General Service (3) Base facilities charge (per billing month): $50.00 Demand charges (per kw): 1. first 35 kw No charge 2. all additional kw $4.17 Energy charges (per kwh): 1. first 12,500 kwh $ all additional kwh $ Medium General Service Coincident Peak (4) Base facilities charge (per billing month): $50.00 kw demand charges (per kw): 1. all coincident peak demand (5) $ allocated non-coincident peak demand $ all non-coincident peak demand in excess of allocation $5.38 rkva demand charges (6) (per rkva) $0.25 Energy charges (per kwh): $ Large General Service (7) Base facilities charge (per billing month): $ kw demand charges (per kw): 1. all coincident peak demand (5) $ allocated non-coincident peak demand $ all non-coincident peak demand in excess of allocation $6.82 rkva demand charges (6) (per rkva) $0.25 Energy charges (per kwh): $ (1) (2) Experimental rate for customers with solar energy facilities. Small general service customers are typically less than 35 kw. 21

30 (3) (4) (5) (6) (7) Medium general customers are typically greater than 35 kw but less than 750 kw. Medium general service coincident peak customers are typically greater than 35 kw but less than 750 kw with some form of demand control capability, such as peaking generators, that operate in conjunction with the Utilities Commission s load management program. Coincident peak demand is the charge for customer s portion (in kw) of the Utilities Commission s 60 minute peak demand during each billing cycle. rkva is a charge by the Utilities Commission to certain large customers based upon a measurement of the amount of electric energy flowing alternatively to the customer and away from the customer. Large general service coincident peak customers are typically greater than 750 kw. All retail electric rates are subject to a purchased power adjustment ( PPA ), which was authorized in 2015, that provides for increases and decreases in customer rates as commodity costs for purchased electricity change. Number of Connections. The table below shows the number of electric system connections by class served at the end of each of the most recent five fiscal years ended June 30: Fiscal Year Residential Commercial Industrial Total ,993 7, , ,117 7, , ,602 7, , ,880 7, , ,532 7, ,344 Kilowatt Hours Sales and Peak Demand. The table below sets forth sales in kilowatt hours and annual peak demand in kilowatts for each of the most recent five fiscal years ended June 30: Fiscal Year Residential (000 kwh) Class of Account Commercial (000 kwh) Industrial (000 kwh) Total Sales (000 kwh) Peak Demand (000 kwh) , , ,294 1,712, , , , ,829 1,632, , , , ,145 1,656, , , , ,349 1,684, , , , ,374 1,709, ,154 Major Users. The following table presents information on the ten major users of the electric system (by revenues) during the fiscal year ended June 30, 2015: 22

31 Customer Product/Service Revenues % of Total Annual kwh Patheon Pharmaceuticals $ 6,974, % 88,838, Vidant Health (1) Health Care 5,372, ,588, DSM Dyneema, LLC High Performance Fibers 4,612, ,277, Attends Healthcare Products Medical Products 3,573, ,725, East Carolina University (1) Education 3,435, ,521, East Carolina University (1) Education 3,349, ,224, East Carolina University (1) Education 3,307, ,974, ASMO of Greenville Motors 1,869, ,716, Vidant Health (1) Health Care 1,700, ,764, Hyster-Yale Group, Inc. Fork Lift Trucks 1,322, ,722, % of Total Total $35,519, % 431,354, % (1) Customers having separate accounts for different locations are listed separately. History of Rate Changes. The Utilities Commission considers rate changes annually and as needed if circumstances change. The Utilities Commission has endeavored to keep rates high enough to provide for a strong financial position yet low enough to be rate competitive. The following table presents historical information on residential electric rate charges made by the Utilities Commission. Effective Date Electric Charge (1) Increase/(Decrease) January 1, 2006 $ % January 1, (1.0) August 1, October 1, April 1, August 1, (7.0) (1) Electric charge based on 1,000 kwh/month. Electric Rate Study. The Utilities Commission finalized a rate study in July 2015 which was performed by an outside consultant. This study ensured that revenues are sufficient to meet the current and future costs associated with providing electric service to customers and accommodating the growth of the system. North Carolina Eastern Municipal Power Agency. The Utilities Commission and 31 other North Carolina municipalities are members ( Participants ) of the North Carolina Eastern Municipal Power Agency (the Power Agency ), a joint agency created by the Participants pursuant to the laws of the State. During the late 1970s and 1980s, the Power Agency entered into arrangements with an investor owned utility and others under which the Power Agency had a joint ownership interest in three nuclear and two coal-fired generating facilities. The Power Agency financed its ownership interest through the issuance of its revenue bonds, which were mostly payable from revenues from the sale by the Power Agency of power to the Participants. The Power Agency and the Participants entered into a series of agreements under which the Power Agency became the wholesale power provider to the Participants. In July 2015, the Power Agency completed arrangements for the sale of substantially all of its electric generating assets to DEP for approximately $1.25 billion. The proceeds from the sale were used, together with certain reserves held by Power Agency and the proceeds of a new $421,430,000 bond issue by the Power Agency to defease the debt related to the generating assets. 23

32 In connection with the sale by the Power Agency of the generating assets, the Power Agency and each Participant entered into two new agreements. First, the Power Agency and each Participant entered into a Full Requirements Power Sales Agreement, under which the Participant will purchase its full requirements bulk power supply, net of certain other resources, from the Power Agency. Second, the Power Agency and each Participant entered into a Debt Service Support Contract, under which the Participant agreed to pay its share of the amount necessary for the Power Agency to pay all debt service payments on the new bonds issued by the Power Agency to fund the balance of the defeasance costs of the Power Agency s prior bonds. Payments under the Debt Service Support Contracts are due through July In order to have the electric power resources to meet its obligations to the Participants under the Full Requirements Power Sales Agreements, the Power Agency entered into an additional agreement with DEP for DEP to sell to the Power Agency, and the Power Agency to purchase from DEP, power and energy in the amounts required by the Power Agency to serve the current and future electrical loads of the Participants. The new Full Requirements Power Sales Agreements are take and pay contracts, and the direct liability associated with the operation and decommissioning of the nuclear and coal generation assets have been eliminated. The transaction by the Power Agency reduced the Power Agency s debt allocable to the Utilities Commission s from approximately $277.8 million to $85 million. Under the new arrangements, part of the reduction in debt service payments on its bonds by the Power Agency will be replaced by payments to be paid to DEP under the Full Requirements Power Sales Agreements, which will be passed to the Participants in wholesale power costs. Nevertheless, the reduced debt service costs and the lower costs of wholesale power allowed the Utilities Commission to reduce its electric retail rates by 7% effective August 1, 2015 with a further 4% reduction in electric retail rates anticipated to become effective on July 1, The Utilities Commission, together with the other 31 Participants, is also a member of Electricities of North Carolina, Inc. ( Electricities ), a joint municipal agency serving the interests of municipal electrical systems. There are currently 91 members of Electricities, including municipalities and university systems from North Carolina, South Carolina and Virginia. Electric Rate Stabilization Fund. The Utilities Commission has implemented a strategy to maintain electric retail rates constant at current rates from 2015 through In connection with the above-described the Power Agency sale of assets, the Utilities Commission reduced retail power rates to customers in August A portion of the wholesale rate decrease is being used to create an electric rate stabilization fund with a targeted balance of approximately $20 million dollars. Beginning in 2021, if future wholesale rates increase, the Utilities Commission will rely, in part, on the rate stabilization fund to offset any rate increases received. All revenues are recorded in the financial statements when earned and future uses of the rate stabilization fund will not increase revenues but will provide operating cash to offset any retail rate increases. Factors Affecting the Electric Utility Industry. The electric utility industry is undergoing pervasive and fundamental changes. One such change is increased competition, in both wholesale and retail markets, for the sale of electricity generation services. In large measure, this increase in competition is the outgrowth of statutory changes and regulatory initiatives at the federal and state levels. It is manifested in a number of ways, including the following: inter-fuel competition; municipal and industrial self-generation; the availability of open access wholesale transmission services under standardized tariffs; the emergence of independent power producers and other merchant generators; and the greater use of alternative and renewable energy resources and demand response. In many areas of the United States, electric utilities no longer have a monopoly in power generation in their service areas, and are no longer the sole power supply option for at least some of their customers. In many instances, electric utilities that serve retail loads have found it necessary to grant rate concessions to larger commercial or industrial 24

33 customers, sometimes with corresponding adverse effects on the rates paid by residential and other customers. Utilities with comparatively high-cost power supply resources often find it difficult to retain customers and recover through rates the full cost of their resources. Electric utilities also are subject to increasing federal, state and local statutory and regulatory requirements affecting a broad range of matters, including the following: the siting and construction of new generation and transmission facilities; mandatory reliability standards for the bulk electric power system; homeland security, including protection of critical infrastructure facilities from damage or attack; employee safety; renewable resource mandates; and air, water quality, land use and other environmental factors. Neither the Utilities Commission nor the City can predict what effects these factors may have on the business operations and financial condition of the electric system. Coal Ash. In September 2014, the Coal Ash Management Act ( CAMA ) became law in the State. CAMA was the first state-level legislation in the country to address the handling, disposal and remediation of Coal Combustion Residuals ( CCRs ) or, as more commonly known, coal ash, at coal fired electric generating facilities. Subsequent to the passage of CAMA, the federal Environmental Protection Agency (the EPA ) in October 2015 issued its own regulations relating to CCRs. The EPA regulations and CAMA require Duke Energy Corporation ( Duke Energy ) and certain of its affiliated entities, including DEP, to take certain remedial actions related to its plants producing CCRs. As described under North Carolina Eastern Municipal Power Agency above, the Utilities Commission purchases wholesale electricity from the Power Agency as a Participant. The Power Agency purchases power and energy from DEP to serve the current and future electrical loads of Participants such as the Utilities Commission. It is uncertain at this time what the total remedial costs will be for Duke Energy and its affiliated entities to comply with CAMA and the EPA regulations. Duke Energy has indicated that it will petition (a) the North Carolina Utilities Commission for recovery of a portion of these costs from retail customers and (b) the Federal Energy Regulatory Commission ( FERC ) to recover the applicable share of costs from all wholesale customers, including the Power Agency. Under applicable law, the Power Agency would be given an opportunity to object to the inclusion of these costs in its wholesale rates. If FERC permits inclusion of a portion of these costs in Duke Energy s wholesale rates, any costs incurred by the Power Agency would be passed through by the Power Agency to the Participants, including the Utilities Commission. The Utilities Commission cannot predict the outcome of Duke Energy s petition with FERC. The Utilities Commission believes that any remedial costs for CCRs that the Utilities Commission would ultimately bear in the form of future wholesale electric costs increases would not likely have a material adverse impact on the financial condition or operations of the electric system. The Utilities Commission currently maintains funds in its electric rate stabilization fund and other reserves that could be used to pay any such remedial costs and to buffer against any future electric rate increases or surcharges that might be required to be levied against the Utilities Commission s electric customers to recoup amounts for allocable remedial costs that are passed on to the Utilities Commission as a Participant of the Power Agency. Any costs that are not covered by such fund and other reserves could be passed through to the Utilities Commission s electric customers through electric rates if necessary. The Water System The Utilities Commission operates a water supply and distribution system that serves the City and a portion of the County. Such distribution system currently consists of approximately 627 miles of line 25

34 with approximately 35,179 connections. Raw water is supplied by the Tar River and eight deep wells. The current average daily withdrawal from the Tar River is million gallons per day ( MGD ). River modeling indicates that the Tar River s maximum withdrawal capacity for the Utilities Commission is 128 MGD. Treatment is accomplished through a modern water treatment plant placed in operation in 1983 and expanded in 2002 with a present capacity of 22.5 MGD. With the 2.0 MGD peaking capacity of the supplemental supply from the eight deep wells, the total peak day capacity of the water system is 24.5 MGD. Average daily water use in the fiscal year ended June 30, 2015 was approximately MGD, with a maximum daily usage of approximately MGD. Approximately 84.6% of the water system s 35,179 connections are located within the City limits. The water system s rate structure is designed to generate sufficient revenues to allow the water system to cover costs of water operations and the portion of the debt incurred to finance water system improvements. The North Carolina Department of Environmental Quality ( NCDEQ ), formerly the North Carolina Department of Environment and Natural Resources, regulates the quality of water sold by the Utilities Commission to its customers, and the water treatment plant operates in compliance with NCDEQ regulations. The water system meets the current standards of the Federal Safe Drinking Water Act. NCDEQ has implemented rules restricting water use from certain aquifers in areas of eastern North Carolina. Although the Utilities Commission s water supply is not affected by these restrictions, several neighboring communities are mandated to reduce their aquifer withdrawals and are seeking supplemental water supplies. Foresight and long range planning in the areas of water treatment and aquifer storage have positioned the Utilities Commission to form partnerships with these neighboring communities to provide water service to areas outside the traditional service area. The Utilities Commission has entered into contracts to deliver water to the neighboring communities of Bethel, Farmville, Stokes, Winterville and Greene County. Water Service Rates. Commercial and industrial base charges are the same as residential customers. Water rates in effect since July 1, 2015 are set forth below based on meter size and volume: Monthly Base Charge Meter Size Inside City Outside City ¾ $ 7.46 $ ½ , N/A 1,

35 Volume Charge (per thousand gallons) Type of Service Inside City Outside City (a) Residential $3.78 $5.86 (b) Commercial (c) Industrial (d) Irrigation (Residential) (d) Irrigation (Commercial) (e) Irrigation (Industrial) Volume Charge (Wholesale Rates for Municipalities) Winterville Base kgal Cost $1.860 Peak kgal Volume Peak kgal Cost $2.850 Capital Charge $6, Stokes Base kgal Cost $1.660 Facility Charge $ Farmville Base kgal Cost $1.610 Facility Charge $1, Bethel Base kgal Cost $1.724 Facility Charge $ Water Service Connection Fees. The Utilities Commission charges a one-time Water Service Connection Fee. This fee consists of two components, a Water Tap Fee and a Water Capacity Fee. The purpose of the Water Tap Fee is to recover the cost of services, including the installation of water meters. The purpose of the Water Capacity Fee is to recover a proportionate share of the cost of capital facilities constructed to provide service capacity for new development or new customers connecting to the water system. The amount of the Water Capacity Fee component is based on the size of the water meter to be installed. The Water Service Connection Fee schedule set forth below is the same for locations inside and outside the City limits. The fees are reviewed annually by the Utilities Commission s Board and reviewed periodically by an outside consultant. The fee schedule currently in effect is set forth below. 27

36 Tier 1 (1) Meter Size Tap Fee Capacity Fee Total Connection Fee Tier 2 (2) Meter Size Tap Fee Capacity Fee Total Connection Fee ¾ $ 695 $ 394 $1, ,613 1 ½ 1,577 2,145 3, ,626 3,445 5,071 ¾ $2,131 $ 394 $2, , ,184 1 ½ 3,026 2,145 5, ,075 3,445 6,520 (1) (2) Tier 1 - Service Connection Fee applies to those services for which the service lines are existing (service lateral and meter box). Tier 2 - Service Connection Fee shall apply to those services which require the Utilities Commission to provide the service connection from the main water pipeline. All new irrigation services must have a separate water meter. The customer may choose a meter size and are billed at the Tier 2 price. The Water Tap Fee for all water services larger than 2, which are installed by the Utilities Commission, are billed at the total cost of labor and materials to install. The Water Capacity Fee for all water services larger than 2 is set forth below: Water Capacity Fee (for services larger than 2 ) Meter Size Capacity Fee 3 $ 4, , , , , ,145 Water Rate Study. The water system s rate structure is designed to generate sufficient revenues to allow the water system to cover costs of water maintenance and operations of the debt incurred to finance water system improvements. Water rates are set to recover costs from each class of customers. Periodically, the Utilities Commission contracts with an outside firm to review revenue requirements, rates and rate structure to ensure adequate recovery of costs. The most recent study was completed in the fall of Number of Connections. The table below shows the number of water connections at the end of each of the last five fiscal years and the millions of gallons of water sold: 28

37 At June 30 Number of Connections Water Sold (Millions of Gallons) ,419 3, ,514 3, ,742 3, ,959 3, ,179 3,918 The City has a mandatory water service connection policy in effect within the City limits. The City does not provide free water service to any customers. Substantially all developed areas within the City limits have City water service available. Major Users. The following table provides information on the largest users of the Utilities Commission s water system (by revenues) for the fiscal year ended June 30, 2015: Customer Product/Service Revenues % of Total Total k/gallons % of Total Town of Farmville Government $ 667, % 405, % Patheon Pharmaceuticals 652, , Town of Winterville Government 286, , Vidant Health (1) Health Care 256, , DSM Dyneema, LLC* High Performance 132, , Fibers Vidant Health (1) Health Care 82, , Fuji Silysia Chemical USA, Ltd. Silica Gel 78, , DSM Dyneema, LLC (1) High Performance 73, , Fibers Stokes Regional Water Water Utility 70, , Corporation Vidant Health (1) Health Care 66, , Total $2,368, % 1,043, % (1) Customers having separate accounts for different locations are listed separately. History of Rate Changes. The Utilities Commission considers rate changes annually and as needed if circumstances change. The following table presents historical information on residential water rate changes made by the Utilities Commission. Effective Date Water Charge (1) Increase May 1, 2008 $ % July 1, April 1, May 1, July 1, (1) Water charge based on 6,000 gallons/month. The Utilities Commission has preliminarily approved a 5.5% rate increase to become effective July 1, Such increase, however, remains subject to final approval in June

38 The Sanitary Sewer System The Utilities Commission operates a wastewater collection and treatment system that serves the City as well as some adjacent areas. The collection system consists of approximately 471 miles of lines with over 28,885 connections. The wastewater treatment plant, placed on line in 1985 and expanded in 1995, is rated to biologically treat a 30 day average of 17.5 million gallons per day (MGD) with a 30 day average of 35 MGD hydraulic capacity. The annual average daily biological flow during the fiscal year ended June 30, 2015 was million gallons with a single day hydraulic maximum of MGD. During the fiscal year ended June 30, 2015, million gallons of wastewater were treated on an average day, with a permitted maximum daily treatment of approximately million gallons. The sanitary sewer system s rate structure is designed to allow the system to be self-supporting. Mandatory connection is required by Utilities Commission rules and regulations which are incorporated into the City code by reference. All areas within the City limits have Utilities Commission sewer service available. Treated wastewater is discharged into the Tar River. The Utilities Commission operates an Industrial Pretreatment program, which has six participants: Hyster-Yale Group, Inc., Patheon (formerly DSM Pharmaceuticals, Inc.), DSM Dyneema, Inc., The Hammock Source, Fuji Silysia and Metrics Contract Services (a subsidiary of Mayne Pharma Group Limited). The wastewater treatment plant is regulated by the NCDEQ, which enforces federal standards through the National Pollutant Discharge Elimination system as defined in the Clean Water Act. The treatment plant routinely meets all federal and state regulatory standards. The Utilities Commission has entered into sanitary sewer interlocal agreements with the neighboring communities of Bethel and Grimesland. Sewer Service Rates. The Utilities Commission does not charge higher rates for users outside the City limits, however higher rates are charged for users who are provided water service by a water provider other than the Utilities Commission. The sewer volume charge is based on 93.5% of the monthly water usage billed by the provider. When the customer has provided a wastewater metering facility, the volume charge is based on 100 percent of the monthly metered wastewater discharged into the Utilities Commission s sewer system and billed monthly at $6.49 per thousand gallons. Sewer rates in effect since July 1, 2015 are set forth below based on meter size and volume discharge: Meter Size Monthly Base Charge All Classes of Water and Sewer Customers Sewer Only ¾ $10.96 $ ½ , , ,

39 Volume Charge (per thousand gallons) Type of Service Monthly Charge (a) Residential $5.32 (b) Commercial/Industrial 5.89 (c) Metered wastewater 6.49 (d) Municipalities 5.60 (1) (1) Added to this charge are any other applicable charges, including charges in any interlocal agreement with another municipality, charges in other sewer charge schedules or charges in the Utilities Commission s regulations. Volume Charge (Wholesale Rates for Municipalities) Bethel Base kgal Cost $5.60 Grimesland Base kgal Cost $5.60 Sewer Service Connection Fees. The Utilities Commission charges a one-time Sewer Service Connection Fee. This fee consists of two components, a Sewer Tap Fee and a Sewer Capacity Fee. The purpose of the Water Tap Fee is to recover the cost of services, including the installation of water meters. These fees are applicable to all customers who connect to the sanitary sewer system and is intended to recover the cost of services (including the installation of sewer cleanouts) and a proportionate share of the cost of capital facilities constructed to provide service capacity for new development. As indicated in the schedule below, the typical 4 sewer connection is available with several different water meter sizes with a sliding rate schedule. Tier 1 (1) Meter Size Tap Fee Capacity Fee Total Connection Fee 4 w/ ¾ $695 $ 510 $1,205 4 w/ ,653 4 w/ 1 ½ 785 2,013 2,798 4 w/ ,233 4,059 Tier 2 (2) Meter Size Tap Fee Capacity Fee Total Connection Fee 4 w/ ¾ $3,604 $ 510 $4,114 4 w/ 1 3, ,562 4 /6 w/ 1 ½ 3,694 2,013 5,707 4 /6 w/ 2 3,735 3,233 6,968 (1) (2) Tier 1 - Service Connection Fee shall apply to those services for which the service lines are existing (service lateral and cleanout). Tier 2 - Service Connection Fee shall apply to those services which require the Utilities Commission forces to provide the service connection from the main sewer pipeline. 31

40 The Sewer Tap Fee for all water services larger than 2, which are installed by the Utilities Commission, are billed at the total cost of labor and materials to install. The Sewer Capacity Fee for all water services larger than 2 is set forth below: Meter Size Capacity Fee 3 $ 7, , , , , ,413 Sewer Acreage Fee. These fees are intended to recover the costs of providing sewer pipeline extensions and minor pumping stations, with a capacity of less than 1 MGD, constructed to serve a limited geographical area and is in addition to Sewer Service Connection Fee. This fee is typically paid by a developer. The Sewer Acreage Fee to be charged shall depend upon the location from which sewer service is provided. The Sewer Acreage Fee is $1,800 per acre except for any parcel which receives service through the Southwest Sewer Service Area Sewer System. Those parcels are charged at a rate of $2,900 per acre. Sewer Rate Study. The sewer system s rate structure is designed to generate sufficient revenues to allow the sewer system to cover costs of sewer maintenance and operations and the debt incurred to finance sewer system improvements. Sewer rates are set to recover costs from each class of customers. Periodically, the Utilities Commission contracts with an outside consultant to review the sewer system s revenue requirements, rates and rate structure to ensure adequate recovery of costs. The most recent rate study was completed in the fall of Number of Connections. The table below shows the number of sewer connections at the end of each of the last five fiscal years: At June 30, Number of Accounts , , , , ,885 Major Users: The following table provides information on the largest users of the Utilities Commission s sewer system (by revenues) during the fiscal year ended June 30, 2015: 32

41 Customer Product/Service Revenues % of Total Patheon Pharmaceuticals $ 831, % Town of Bethel Government 640, Vidant Health (1) Health Care 454, DSM Dyneema, LLC High Performance Fibers 306, Fuji Silysia Chemical USA, LTD Silica Gel 146, Vidant Health (1) Health Care 142, Vidant Health (1) Health Care 118, East Carolina University Education 87, Attends Healthcare Products Medical Products 66, Greenville Housing Authority Apartments 64, Total $2,859, % (1) Customers having separate accounts for different locations are listed separately. History of Rate Changes. The Utilities Commission considers rate changes annually and as needed if circumstances change. The following table presents historical information on residential sewer rate changes made by the Utilities Commission. Effective Date Sewer Charge (1) Increase July 1, 2009 $ % July 1, April 1, May 1, July 1, (1) Sewer charge shown is based on average residential water bill. The Utilities Commission has preliminarily approved a 6.5% rate increase to become effective July 1, Such increase, however, remains subject to final approval in June The Natural Gas System The Utilities Commission operates a natural gas distribution system that services the City as well as some adjacent areas. The natural gas system consists of 613 miles of pipeline and 438 miles of service lines with 22,837 connections. During the fiscal year ended June 30, 2015, the Utilities Commission moved 3,416,230 dekatherms of natural gas through their distribution system. The Utilities Commission entered a ten-year gas services agreement effective January 5, 2010 with Piedmont Natural Gas ( PNG ) that provides Firm Transportation, Excess Redelivery and Bundled Sales Peaking Services. The Utilities Commission secures its natural gas supplies through various marketers and transports the natural gas on a daily basis through the Transcontinental Gas Pipe Line Corporation s transmission pipeline to PNG s gas system. The Utilities Commission routinely uses marketing firms to buy and sell natural gas contracts on its behalf. A Natural Gas Risk Management Policy, which includes a Hedging Plan and Credit Risk Policy, was developed by the Utilities Commission to mitigate the risks associated with purchasing natural gas on the New York Mercantile Exchange. 33

42 The Utilities Commission entered into a Supplemental Service and Construction Agreement with PNG effective November 1, 2014 for a period of five years. Under the terms of the contract, the Utilities Commission will pay additional demand charges to cover the costs of upgrades to the Utilities Commission s system completed by PNG. The initial amount of the contractual payment was $470,000 per year. Effective June 2015, the amount was increased to $593,093 per year to reflect the actual costs of the upgrades. These additional demand charges are payable through October The Utilities Commission entered a fifteen year agreement with Patriots Energy Group (PEG) effective February 1, 2007 to purchase 20% of the Utilities Commission s firm volumes (2,000 dekatherms per day during the winter period, November through March). The Utilities Commission receives a price discount projected to be between $0.42 and $0.47 per dekatherm and pays an administrative fee of $0.015 per dekatherm to PEG to cover the administrative costs of the agreement. The Utilities Commission utilizes liquefied natural gas ( LNG ) as a supply source for the peak day natural gas requirements. The utilization of LNG as a natural gas supply for peak day requirements is part of a long range plan to enhance the natural gas system s reliability, control natural gas costs and offer additional services to the Utilities Commission's customers. The Utilities Commission completed a permanent facility that stores and vaporizes LNG into gas in December An expansion of that facility, which doubled storage capacity, was substantially completed in the fall of 2001 and enhancements to the security features at the site were completed in A second expansion, completed in December 2006, doubled the send out capacity as well as adding redundancy and reliability to the operations of the facility. During fiscal year 2015, two additional storage tanks were installed at the facility, bringing the total storage capacity to 330,000 gallons. The volume of LNG stored at the facility would supply the Utilities Commission s customers for more than a week should the gas supply be cut off due to an emergency. The policy of the Utilities Commission is to set natural gas system rates at a level to generate sufficient revenue to allow the natural gas system to be self-supporting. To achieve such result, the Utilities Commission has adopted a purchased gas adjustment clause as a rate change mechanism to provide that all purchased gas costs incurred by the Utilities Commission are passed along to natural gas customers. Natural Gas Rates. Natural gas rates in effect since September 1, 2015 are set forth below: 34

43 Residential Service: A. Basic Facilities Charge: $8.00 per billing month B. Plus Commodity Charge: First 20 ccf $ per ccf Over 20 ccf per ccf Residential Service Heat Only: A. Basic Facilities Charge: $10.00 per billing month B. Plus Commodity Charge: First 20 ccf $ per ccf Over 20 ccf per ccf Commercial Service: A. Basic Facilities Charge: $22.00 per billing month B. Plus Commodity Charge: First 50 ccf $ per ccf ccf per ccf Over 500 ccf per ccf Industrial Service: A. Basic Facilities Charge: $ per billing month B. Plus Commodity Charge: First 500 ccf $ per ccf Over 500 ccf per ccf Interruptible Service: A. Basic Facilities Charge: $ per billing month B. Plus Commodity Charge: Negotiable Seasonal Service A. Basic Facilities Charge: $36.00 per billing month B. Plus Commodity Charge: First 100 ccf $ per ccf Over 100 ccf per ccf Storage Service: A. Reservation Charge: Per month $ per mcf B. Daily Demand Charge: Per month per mcf C. Commodity Charge: Per mcf per mcf All firm natural gas rates are subject to a purchased gas adjustment ( PGA ) schedule which provides for increases and decreases in customer rates commensurate with increases and decreases in commodity costs. Actual commodity costs are evaluated monthly to determine necessary changes to the PGA. The last adjustment that was made was a 6.7% decrease in September The rates in the above table are reflective of such decrease. 35

44 Number of Connections. The table below shows the number of gas connections by class at the end of the last five fiscal years: At June 30, Residential Commercial Industrial Interruptible Total ,106 2, , ,164 2, , ,343 2, , ,455 2, , ,714 2, ,837 Gas Consumption. The table below sets forth natural gas consumption for the last five fiscal years in hundreds of cubic feet (ccf): Fiscal Year Ended June 30, Residential Commercial Industrial Interruptible Total ,204,734 6,211,886 1,452,745 15,535,877 32,405, ,446,047 5,072,241 1,286,999 15,440,944 28,246, ,770,015 6,076,666 1,305,580 15,267,893 31,420, ,480,133 6,618,187 1,517,889 15,344,473 32,960, ,568,069 6,847,867 1,891,424 15,104,558 33,411,918 Major Users. The following table presents information on the largest users of the Utilities Commission s natural gas system (by revenues) during the fiscal year ended June 30, 2015: Customer Name Product/Service Revenues % of Total Total Usage (ccf s) % of Total Patheon Pharmaceuticals $3,204, % 4, % East Carolina University (1) Education 2,660, ,301, Vidant Health (1) Health Care 1,864, ,107, DSM Dyneema, LLC (1) High Performance Fibers 1,060, ,274, East Carolina University (1) Education 844, ,148, Vidant Health (1) Health Care 672, , DSM Dyneema, LLC (1) High Performance Fibers 667, , Hyster-Yale Group, Inc. Fork Lift Trucks 601, , S. T. Wooten Construction Corp. Asphalt 593, , Metrics, Inc. Pharmaceuticals Manufacturing 486, , Total $12,656, % 15,279, % (1) Customers having separate accounts for different locations are listed separately. History of Rate Changes. The Utilities Commission considers rate changes annually and as needed if circumstances change. The following table presents historical information on residential natural gas rate changes made by the Utilities Commission. 36

45 Effective Date (1) Natural Gas Charge (2) Increase (3) December 1, 2012 $ % April 1, (1.4) January 1, March 1, May 1, (7.9) September 1, (6.7) (1) (2) (3) Further changes may occur between the date of the Official Statement and the date of delivery of the 2016 Bonds. Natural gas based on monthly usage of 50 ccf. Natural gas increases/decreases generally reflect seasonal changes in the market price for natural gas. Billing and Collection Procedures The Utilities Commission uses electronic meter recording devices and an automated meter reading system to read water, electric, and gas meters for billing purposes. The Utilities Commission s meter reading and billing processes are divided into 16 cycles, which accordingly take 16 working days per month to complete. After each day s cycle is read, the readings are uploaded at night and an exception report is generated, which is analyzed the next day. All meters are read and billed on a monthly basis, and bills are mailed within two working days of the meter being read. Currently, bills are considered delinquent on the sixteenth day after billing. Seven days later a delinquent notice is mailed to the customer and a 1% fee is added to delinquent bills over $75. On the thirty-second day, if the bill remains unpaid, the customer s electric service is disconnected and seven days later if the bill still is unpaid any additional services are disconnected. Furthermore, in an effort to reduce bad debt losses, if any account is terminated for nonpayment more than once during a twelvemonth period, the customer is charged an additional security deposit of up to two months average billing. All accounts are reviewed for turnover to a collection agency once service has been discontinued on account of non-payment. Before establishing service, utility customers must make an application. During the application process, a security deposit is established based on the services provided as well as the customer s credit standing. The security deposits in effect for residential service are as follows: Water Only $ 50 Sewer Only 50 Gas Only 100 Electric Only 100 Electric & Water 150 Electric & Gas 200 Electric, Water & Gas 250 Operating and Capital Budget Procedures The Utilities Commission s operating and capital budgets are developed in accordance with local and State laws. Annual budgets are developed and approved by the Utilities Commission and adopted by the City Council by June 30 of each year. The Utilities Commission develops a five-year capital project plan each year. The five-year capital project plan is used to estimate the dollar amount of work that will be completed in any given year. Possible projects to be financed are often rolled from one year to the 37

46 next until a decision is made by staff and/or developers to proceed with the particular project. Capital project budgets are developed as needed as project time schedules dictate. History of Capital Expenditures The following tables provide information on capital improvements to the Combined Enterprise System funded from operations and from debt for the fiscal years ended June 30, 2012 through 2016, with respect to the electric, water, sanitary sewer and natural gas systems: Total Capital Expenditures ($000s) (budget) Electric $ 6,218 $ 9,946 $ 9,464 $11,476 $15,740 Water 2,144 2,759 1,340 2,319 5,238 Sanitary Sewer 9,370 13,082 7,334 4,352 7,765 Natural Gas 824 2,548 2,495 8,126 13,060 Total $18,556 $28,335 $20,633 $26,273 $41,803 Future Capital Expenditures and Debt Outlook The Utilities Commission has an annual budget process and a five-year capital project planning process to identify needed system changes. The Utilities Commission s plans for improvements to the Combined Enterprise System are designed to foster constant growth and rehabilitation of facilities and systems. Rates are modified and expenses changed to accommodate these objectives. The Utilities Commission s current five-year capital plan is summarized below. Total Projected Capital Expenditures ($000s) Electric $14,412 $11,534 $ 7,580 $ 8,893 $ 8,713 Water 4,446 9,790 9,040 18,775 13,145 Sanitary Sewer 14,079 9,847 1,906 8,969 11,923 Natural Gas 5,058 5,235 6,106 6,181 3,110 Total $37,995 $36,406 $24,632 $42,818 $36,891 The Utilities Commission expects to fund a significant portion of the projected capital expenditures set forth above from internally generated funds on a pay-as-you-go basis. The balance will be financed from a combination of revenue bonds, special reserves, special revenues and other third party contributions. Approximately $28.1 million of the proceeds of the 2016 Bonds are expected to be used to pay for projects set forth in the capital improvement plan. The Utilities Commission expects to issue approximately $30.4 million and $48.6 million of additional revenue bonds in fiscal years 2018 and 2020, respectively. No assurance can be given as to which, if any, of the capital expenditures will be recommended for approval nor can assurances be given as to the method of finance to be employed to fund approved capital projects. Historical Operating Results Management s Discussion. For the fiscal year ended June 30, 2015, the assets and deferred outflows of resources of the Utilities Commission exceeded its liabilities and deferred inflows of resources at the close of the most recent fiscal year by $341,670,494 (net position). Of this amount, 38

47 $69,457,759 (unrestricted net position) may be used to meet the Utilities Commission s ongoing obligations to its customers and creditors. Operating revenues increased by $1,214,575 or 0.4 percent and total revenues increased by $972,951 or 0.4 percent due primarily to increases in utility rates. The Utilities Commission s total net position increased by $13,214,047 primarily due to positive operating income. The Utilities Commission s total debt decreased by $10,773,677 (9.7 percent) during the current fiscal year. The key factor in this decrease was the retirement of $11,476,429 of existing debt, which exceeded the addition of new debt totaling $811,442 and the net decrease in discounts and premiums totaling $108,691. Through February 29, 2016, electric fund revenues exceed budgeted revenues by $948,612 or slightly less than 1%. Actual electric fund expenditures are $3,129,741 or 2.5% less than budget. The Utilities Commission currently expects electric revenues to exceed expenditures by an estimated $4.1 million at the end of the current fiscal year. The Electric Fund also includes a rate stabilization fund which has a current balance of $15.5 million. The rate stabilization fund is available to offset volatility in wholesale electric costs while maintaining current retail electric rates. Through February 29, 2016, water fund revenues are $129,000 or 1% less than budgeted revenues. Actual water fund expenditures are $904,000 or 7.4% less than budget. The Utilities Commission currently expects water fund revenues to exceed expenditures by an estimated $800,000 at the end of the current fiscal year. Through February 29, 2016, sewer revenues exceed budgeted revenues by 2% or $293,000. Actual sewer fund expenditures are 4.3% or $596,000 less than budgeted expenditures. The Utilities Commission currently expects operating sewer fund revenues to exceed expenditures by an estimated $1.9 million at the end of the current fiscal year. Through February 29, 2016, gas fund revenues and expenditures are approximately $10 million less than budget due to current commodity prices much lower than expected due to global supply and demand. The Utilities Commission currently expects operating gas revenues to exceed expenditures by an estimated $560,000 at the end of the current fiscal year. Summary Financial Information. The following table presents information on the financial performance of the Utilities Commission s four utilities for the past five fiscal years. This information has been drawn from the Utilities Commission s audited financial statements and adjusted to correspond to definitions in the Bond Order. Information for the fiscal year ended June 30, 2015, should be read in conjunction with the Utilities Commission s audited financial statements and notes thereto in Appendix A hereto. 39

48 HISTORICAL OPERATING RESULTS STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS (000 S) Line # Operating Revenues Charges for Service $270,573 $255,943 $260,272 $269,776 $270,859 1 Other Operating Revenues ,128 2 Total Operating Revenues 271, , , , ,987 3 Operating Expenses Administrative and General 14,756 15,456 15,916 17,493 17,711 4 Operations and Maintenance 33,784 36,433 33,916 33,915 35,032 5 Purchased Power and Gas 188, , , , ,031 6 Depreciation 16,744 16,962 17,565 18,181 18,140 7 Total Operating Expenses 253, , , , ,914 8 Operating Income (Loss) 17,504 11,885 14,507 13,073 21,073 9 Nonoperating Revenues (Expenses) Interest Income Debt Interest Expense and Services Charges (4,330) (3,984) (4,091) (3,574) (3,683) 11 Other nonoperating revenues 2,382 4,945 3,033 1,761 1, Other nonoperating expenses - (268) (311) Total Nonoperating Revenues (Expenses) (1,311) 1,028 (1,143) (1,605) (1,955) 14 Income Before Operating Transfers 16,193 12,913 13,364 11,468 19, Operating Transfers Capital Contributions 1, Transfer to City of Greenville, General Fund (4,765) (5,039) (5,038) (5,360) (5,748) 17 Transfer to City of Greenville, Street Lighting (678) (696) (696) (721) (757) 18 Total Operating Transfers (4,381) (5,735) (5,734) (5,513) (5,903) 19 Changes in Net Assets 11,812 7,178 7,630 5,955 13, Net Assets, Beginning of Year, Previously Reported 299, , , , , Restatement (3,310) 22 Net Assets, Beginning of Year, Restated 299, , , , , Net Assets, End of Year $311,003 $318,181 $325,811 $331,766 $341, DEBT COVERAGE CALCULATION (000 S) Revenues Operating Revenues $271,373 $256,728 $261,045 $270,772 $271, Interest Income Miscellaneous Revenues 2,382 4,945 3,033 1,761 1, Revenues Not Available for Debt Service (1) (456) (427) (826) (387) (507) 28 Total Revenues Available for Debt Service 273, , , , , Current Expenses Operations 48,540 51,889 49,832 51,408 52, Purchased Power and Gas 188, , , , , Other Nonoperating Expenses Unfunded OPEB and Pension Expense (1,023) (1,297) (906) (890) 1, Total Current Expenses 236, , , , , Net Revenues/Funds Available for Debt Service $37,786 $34,705 $35,100 $33,726 $39, Debt Service Parity Indebtedness 9,396 9,120 10,134 10,388 10, Subordinate, Additional and G.O. Indebtedness 4,968 4,001 3,283 4,746 4, Total Debt Service (2) $14,364 $13,121 $13,417 $15,134 $15, Coverage Ratios Parity Debt Service Coverage Requirement = 1.25x (3)

49 Total Debt Service Coverage, Requirement = 1.00x (4) Debt Service Coverage after Transfers (5) OPERATING CASH $75,255 $79,473 $75,452 $77,657 $79, DAYS CASH ON HAND UNAPPROPRIATED FUND BALANCE $49,295 $54,341 $41,481 $54,678 $44, Fund Balance as % of Total Expenditures 19% 21% 16% 20% 17% 45 (1) (2) (3) (4) (5) Includes interest earnings on revenue bond funds and other restricted revenues. Line 36 plus Line 37. Line 35 divided by Line 36. Line 35 divided by Line 38. (Line 35 plus Line 17 plus Line 18) divided by Line 38. Pension Plans The following information on the pension plans is presented on the calendar year basis, whereas the information in the independent auditor s footnotes included in Appendix A to this Official Statement is presented on the fiscal year basis. The Utilities Commission participates in the North Carolina Local Governmental Employees Retirement System (the System ). The System is a service agency administered through a board of trustees by the State for public employees of counties, cities, boards, commissions and other similar governmental entities. While the State Treasurer is the custodian of System funds, administrative costs are borne by the participating employer governmental entities. The State makes no contributions to the System. The System provides, on a uniform System-wide basis, retirement and, at each employer s option, death benefits from contributions made by employers and employees. Employee members contribute 6% of their individual compensation. Each new employer makes a normal contribution plus, where applicable, a contribution to fund any accrued liability over a 24-year period. The employer contribution rate was 7.07% and 7.41% for general and law enforcement officers, respectively, effective June 30, The accrued liability contribution rate is determined separately for each employer and covers the liability of the employer for benefits based on employees service rendered prior to the date the employer joins the System. Members qualify for a vested deferred benefit at age 50 with at least 20 years of service or at age 60 after at least five years of creditable service to the unit of local government. Unreduced benefits are available: at age 65, with at least five years of creditable service; at age 60, with at least 25 years of creditable service; or after 30 years of creditable service, regardless of age. Benefit payments are computed by taking an average of the annual compensation for the four consecutive years of membership service yielding the highest average. This average is then adjusted by a percentage formula, by a total years of service factor and by an age service factor if the individual is not eligible for unreduced benefits. Contributions to the System are determined on an actuarial basis. For information concerning the Utilities Commission s participation in the North Carolina Local Governmental Employees Retirement System and the Supplemental Retirement Income Plan of North Carolina, see the Notes to the Utilities Commission s audited financial statements included in Appendix A to this Official Statement. 41

50 Financial statements and required supplementary information for the North Carolina Local Governmental Employees Retirement System are included in the Comprehensive Annual Financial Report ( CAFR ) for the State. Please refer to the State s CAFR for additional information. Other Post-Employment Benefits The Utilities Commission provides certain post-employment health care and other benefits ( OPEB ) as part of the total compensation package offered to attract and retain the services of qualified employees. These benefits are available to retirees who participate in the System and who, at the time of their retirement, meet certain service requirements. To meet the post-employment health care and other benefits reporting requirements of GASB Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits other Than Pensions, the Utilities Commission obtained an actuarial valuation of its OPEB based on data for December 31, The actuarial valuation quantified an actuarial accrued liability of $23,219,147 million to be amortized over 27 remaining years and an annual required contribution ( ARC ) of $2,050,401. The valuation was completed using a 7% discount rate. The Utilities Commission largely funds OPEB on an annual pay-as-you-go basis under a selfinsured plan, with actual benefits paid of approximately $1,297,207, net of retiree contributions, for the fiscal year ended June 30, 2015, including a $450,000 contribution to the Utilities Commission s OPEB Trust administered by the State Treasurer s Office. The Utilities Commission has $1,898,152 on deposit in the OPEB Trust as of June 30, For additional information concerning OPEB and the Utilities Commission s requirements, see the Notes to the Utilities Commission s audited financial statements included in Appendix A to this Official Statement. General Description THE CITY The City is situated on the Tar River in the central coastal plain of North Carolina. It was founded by English settlers in 1774 and named Martinsborough. It was soon named and continues to serve as the seat of Pitt County (the County ). In 1786, the residents changed the name to Greenville to honor revolutionary war hero and fellow North Carolinian, Nathaniel Greene. The City covers an area of approximately 35 square miles. On December 31, 1992, the United States Department of Housing and Urban Development classified the City as a Metropolitan Statistical Area ( MSA ). 42

51 Demographic Characteristics The United States Department of Commerce, Bureau of the Census, has recorded the population of the City to be as follows: ,972 62,432 84,554 The North Carolina Office of State Budget and Management has estimated the 2014 population of the City to be 87, Per capita income data for the County and the State are presented in the following table: Year County 1 State 2010 $31,736 $35, ,582 36, ,042 38, ,216 37, ,410 39,171 Separate data for the City are not available. Source: United States Department of Commerce, Bureau of Economic Analysis (latest data available). Commerce and Industry The City is a commercial, educational and medical hub for eastern North Carolina. The area is one of the fastest growing urban centers in the State. The area is also a leading retail center in the eastern part of the State and is one of only a dozen billion dollar retail markets in the State. The local economy is well diversified with government, wholesale/retail trade and manufacturing each accounting for approximately 25% of total employment. Agriculture is also a strong contributor to the economy; tobacco, corn, soybeans, wheat, peanuts, eggs, livestock, poultry and vegetables are the primary agricultural products. The Pitt County Development Commission, created by voter referendum in 1957, continues to recruit new business and industry to the area, primarily from the northeast and mid-west. The diversity, quality and availability of the human resources in the City are among the primary reasons many large corporations locate in the area. Major industries and employers in the area include: East Carolina University ( ECU ) is the third largest university in the State with approximately 27,500 students and 5,500 employees. ECU is a member of the 17-campus University of North Carolina system and is accredited by the Southern Association of Colleges and Schools. The University began as a two-year Teacher Training School in 1909 and has grown to include 11 colleges/schools plus the Graduate School. ECU has 16 doctoral degree programs, 5 professional degree programs and 77 departmental certificate programs. ECU has also undertaken several major construction projects in recent years. New Gateway East and West Residence Hall was completed in the summer of 2015, creating a new streetscape along 14 th street in the City. The Howell Science Complex also completed a $1.84 million renovation project in the summer of Construction has begun on the $122.2 million, 210,000 square foot student union building and adjacent 700-car parking garage. On ECU s Health Sciences Campus, work has begun to complete the fourth floor of the School of Dental Medicine Building. This $7.5 million project will create additional research, office and support space. The new 77,000 square foot Health Sciences Student Services Building is expected to be 43

52 completed and open in December This $34 million project will provide a recreation center, convenience store, and three dining options. Vidant Health operates Vidant Medical Center in the City. Vidant Medical Center is one of four academic medical centers in the State and is the teaching hospital for ECU s Brody School of Medicine. The 909 bed medical center offers a regional heart center and a level one trauma center which serves over 1.4 million residents in the region. Vidant Medical Center employs over 6,500 employees. Construction has begun on a $170 million dollar six-story, 96 bed cancer center at Vidant Medical Center which is expected to open in Patheon, a pharmaceuticals manufacturing company, operates a pharmaceuticals manufacturing facility in the City. DSM Pharmaceuticals operated the facility until it merged with Patheon in Under the name Patheon, it is expected that by the end of 2019, the pharmaceuticals company will invest $159 million in plant expansion in the City. It is anticipated that the expansion will result in nearly 500 new jobs at the City site, with average annual wages estimated at $54,100, plus benefits. The Patheon facility is being refitted to handle additional sterile products, injectables and bioprocessed products. DSM Dyneema, LLC, an entity affiliated with Patheon, manufactures a proprietary medical-grade ultra-high molecular weight polyethylene fiber known as Dyneema, which is used in medical applications, such as orthopedic implants. Dyneema is also used in safety gloves for the metalworking industry and in fine yarns for applications in sporting goods and the medical sector. In addition, DSM Dyneema s products are used in bullet resistant armor and clothing for police and military personnel and are an important component in ropes, cables and nets in the fishing, shipping and offshore industries. DSM Dyneema employs over 300 people. Hyster-Yale Group, Inc. designs, engineers, and manufactures materials handling equipment, including warehouse trucks, counterbalanced trucks, and large capacity cargo and container handling trucks. Hyster-Yale Group, Inc. formerly known as NACCO Materials Handling Group, Inc., employs approximately 1,000 employees. Alliance One International purchases leaf tobacco from North Carolina farmers and processes, packs, stores, and ships the tobacco to cigarette makers worldwide. In certain developing markets, the company provides agronomy expertise and financing for the growing of leaf tobacco. Alliance One International neither manufactures nor sells cigarettes or other consumer tobacco products. The company employs approximately 850 people. The Roberts Company is a fully integrated fabrication, construction and plant services company designed to work specifically with heavy and light industrial clients. The company provides services to the following industries: chemical, specialty chemical, mining, power port facilities/terminals, pulp and paper, oil and gas, light industrial pharmaceutical and manufacturing. The company employs approximately 650 people. The City and the County are also an educational center for the eastern part of the State. In addition to the higher education opportunities available at ECU, Pitt Community College ( PCC ) offers associate degree programs, certificate programs, diploma programs and college transfer programs. It is a member of the North Carolina Community College system. PCC is the sixth largest community college in the State and is accredited by the Commission on Colleges of the Southern Association of Colleges and Schools to award associate degrees. The college serves over 24,000 students and employs over 950 people. Pitt County Public Schools serves over 23,000 students and employs approximately 3,500 employees. The student-teacher ratio is approximately 20 to 1. 44

53 The following table indicates the total taxable sales for the County (1) during the five fiscal years ended June 30, 2015 and the six-month period ended December: Fiscal Year Ended June 30, Total Taxable Sales Increase over Previous Year 2011 $1,763,283,579 N/A ,817,942, % ,846,032, ,851,120, ,021,702, (2) 1,059,500,813 - (1) Separate data for the City are not available. (2) Represents a six-month period. During the comparable six-month period in 2015, the sales were $1,002,856,335. Source: North Carolina Department of Revenue. The following table lists the major employers in or within a few miles of the City: Company/Institution Product/Service Approximate Number of Employees Vidant Health Health Care 6,895 East Carolina University Education 5,564 Pitt County Public Schools Education 2,814 Hyster-Yale Group, Inc. Lift Trucks 1,000 Pitt Community College Education 953 County of Pitt Government Administration 910 Patheon Pharmaceuticals 900 Alliance One International Tobacco Sales 850 City of Greenville Government Administration 764 The Roberts Company, Inc. Metal Fabrication 650 Source: Pitt County Development Commission (December 2015). The following table indicates construction activity in the City, including the type, number and value of building permits issued by the City: Commercial Residential Calendar Year Number Value Number Value Total Value $15,794, $43,725,906 $59,520, ,041, ,397,070 97,438, ,497, ,737,885 60,235, ,610, ,773,445 86,384, ,315, ,939, ,255,727 Source: City Inspections Department. 45

54 Employment The North Carolina Department of Commerce, Labor & Economic Analysis Division, has estimated the percentage of unemployment in the County to be as follows: January 9.5% 9.3% 6.6% 6.0% 5.9% July 9.2% 8.8% 7.4% 7.0% February August March September April N/A October May N/A November June December Pension Plans The City participates in the North Carolina Local Governmental Employees Retirement System (the System ). The System is a service agency administered through a board of trustees by the State for public employees of counties, cities, boards, commissions and other similar governmental entities. While the State Treasurer is the custodian of System funds, administrative costs are borne by the participating employer governmental entities. The State makes no contributions to the System. The System provides, on a uniform System-wide basis, retirement and, at each employer s option, death benefits from contributions made by employers and employees. Employee members are required to contribute six percent of their annual covered salary. The City s contractually required contribution rate for the year ended June 30, 2015 was 7.07% for general employees and firefighters and 7.41% for law enforcement officers, respectively, of annual covered payroll. The accrued liability contribution rate is determined separately for each employer and covers the liability of the employer for benefits based on employees service rendered prior to the date the employer joins the System. Members qualify for a vested deferred benefit at age 50 with at least 20 years of service or at age 60 after at least five years of creditable service to the unit of local government. Unreduced benefits are available: at age 65, with at least five years of creditable service; at age 60, with at least 25 years of creditable service; or after 30 years of creditable service, regardless of age. Benefit payments are computed by taking an average of the annual compensation for the four consecutive years of membership service yielding the highest average. This average is then adjusted by a percentage formula, by a total years of service factor and by an age service factor if the individual is not eligible for unreduced benefits. Contributions to the System are determined on an actuarial basis. Financial statements and required supplementary information for the System are included in the Comprehensive Annual Financial Report ( CAFR ) for the State. Please refer to the State s CAFR for additional information. The City also participates in the (1) Law Enforcement Officers' Special Separation Allowance, (2) Supplemental Retirement Income Plan for Law Enforcement Officers and (3) Supplemental Retirement Income Plan for all Other Employees. 46

55 Other Post-Employment Benefits The City provides certain post-employment health care and other benefits ( OPEB ) as part of the total compensation package offered to attract and retain the services of qualified employees (excluding employees of the Utilities Commission). These benefits are available to retirees who participate in the System and who, at the time of their retirement, meet certain service requirements. Members hired prior to July 1, 2011 who retire with at least 20 years of service contribute 5% of the estimated cost for pre-65 healthcare coverage for the retiree. Members hired prior to July 1, 2011 who retire with less than 20 years of service contribute 100% of the estimated cost for pre-65 healthcare coverage for the retiree. Retirees who elect to have dependent healthcare coverage contribute 100% of the estimated cost of coverage. Participating retired employees hired prior to July 1, 2011 with a minimum of 20 years of service shall have their coverage transferred to a Medicare Supplemental plan after qualifying for Medicare, with the City continuing to pay the same dollars towards the premium cost as it pays for retirees under the base plan. For retired employees hired on or after July 1, 2011 with a minimum of 20 years of service, the contribution rate for post-65 benefits consists of a $250 monthly stipend defined contribution amount. The City pays 50% of the total life insurance premium cost for those retirees who have that benefit. Members hired on or after July 1, 2011 who retire with less than 20 years of service will not be eligible for post retirement coverage. The City currently funds its OPEB on an annual pay-as-you-go basis. The City s funding for retiree health benefits for the fiscal year ended June 30, 2015 was $1,381,521. The City implemented GASB Statement No. 45 Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions in fiscal year ended June 30, In response to GASB Statement No. 45, the City engaged an actuarial firm to prepare a study establishing the City s unfunded OPEB liability and annual required contribution ( ARC ). The City s latest study reported on December 31, 2013 that the City s Unfunded Actuarial Accrued Liability was $33,585,805 for all eligible participants and the Annual Required Contribution for the fiscal year ended June 30, 2015 needed to meet such a liability was $3,074,540. The study was done under an assumption that the plan is funded on a pay-as-you-go basis. LITIGATION No litigation is now pending or, to the best of the City s or Utilities Commission s knowledge, threatened against or affecting the City or the Utilities Commission seeking to restrain or enjoin the adoption, approval, authorization, execution or delivery of the 2016 Bonds, the Bond Order or the Series Resolution or contesting the validity or the authority or proceedings for the adoption, approval, authorization, execution or delivery of the 2016 Bonds, the Bond Order or the Series Resolution or the City s or Utilities Commission s creation, organization or existence, or the title of any of the City s or Utilities Commission s present officers to their respective offices or the authority or proceedings for the City s or Utilities Commission s adoption, approval, authorization, execution and delivery of the 2016 Bonds, the Bond Order or the Series Resolution or the City s or Utilities Commission s authority to carry out its obligations thereunder, or which would have a material adverse impact on the City s or Utilities Commission s condition, financial or otherwise. LEGAL MATTERS Legal matters related to the authorization, execution, sale and delivery of the 2016 Bonds are subject to the approval of Norton Rose Fulbright US LLP, Washington, D.C., Bond Counsel. Certain legal matters will be passed upon for the City by David A. Holec, Esq., Greenville, North Carolina, City Attorney, for the Utilities Commission by Phillip R. Dixon, Esq., Greenville, North Carolina, Counsel to 47

56 the Utilities Commission, and for the Underwriters by Womble Carlyle Sandridge & Rice, LLP, Raleigh, North Carolina, counsel to the Underwriters. General TAX TREATMENT The City and the Utilities Commission have covenanted to comply with applicable provisions of the Internal Revenue Code of 1986, as amended (the Code ), relating to the exclusion from gross income of the interest on the 2016 Bonds for purposes of federal income taxation. In the opinion of Norton Rose Fulbright US LLP, Bond Counsel, under current law and assuming continuing compliance by the City and the Utilities Commission with such covenants and requirements of the Code regarding, among other matters, the use, expenditure and investment of 2016 Bond proceeds and the timely payment of certain investment earnings to the United States Treasury, interest on the 2016 Bonds will not be included in the gross income of the owners thereof for federal income tax purposes. Failure by the City or the Utilities Commission to comply with such covenants and requirements may cause interest on the 2016 Bonds to be includable in the gross income of the owners thereof retroactive to the date of issue of the 2016 Bonds. No opinion is rendered by Bond Counsel as to the effect on the exclusion from gross income of the interest on the 2016 Bonds for federal income tax purposes of any action taken or not taken without the approval of Bond Counsel or in reliance upon the advice or opinion of counsel other than Bond Counsel. Interest on the 2016 Bonds will not be an item of tax preference for purposes of the federal individual or corporate alternative minimum tax under the Code. Interest on the 2016 Bonds will, however, be included in the calculation of alternative minimum tax liability imposed on corporations by the Code. The Code contains other provisions (some of which are noted below) that could result in tax consequences, as to which no opinion will be rendered by Bond Counsel, as a result of ownership of the Bonds or the inclusion in certain computations of interest that is excluded from gross income. Original Issue Discount The excess, if any, of the amount payable at maturity of any maturity of the 2016 Bonds purchased as part of the initial public offering over the issue price thereof constitutes original issue discount. The amount of original issue discount that has accrued and is properly allocable to an owner of any maturity of the 2016 Bonds with original issue discount (a Discount Bond ) will be excluded from gross income for federal income tax purposes to the same extent as interest on the 2016 Bonds. In general, the issue price of a maturity of the 2016 Bonds is the first price at which a substantial amount of 2016 Bonds of that maturity was sold (excluding sales to bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters, placement agents, or wholesalers) and the amount of original issue discount accrues in accordance with a constant yield method based on the compounding of interest. A purchaser s adjusted basis in a Discount Bond is to be increased by the amount of such accruing discount for purposes of determining taxable gain or loss on the sale or other disposition of such Discount Bonds for federal income tax purposes. A portion of the original issue discount that accrues in each year to an owner of a Discount Bond which is a corporation will be included in the calculation of the corporation s federal alternative minimum tax liability. In addition, original issue discount that accrues in each year to an owner of a Discount Bond is included in the calculation of the distribution requirements of certain regulated investment companies and may result in some of the collateral federal income tax consequences discussed herein. Consequently, an owner of a Discount Bond should be aware that the accrual of original issue discount in each year may result in an alternative minimum tax liability, additional distribution requirements or other 48

57 collateral federal income tax consequences although the owner of such Discount Bond has not received cash attributable to such original issue discount in such year. The accrual of original issue discount and its effect on the redemption, sale, or other disposition of a Discount Bond that is not purchased in the initial offering at the first price at which a substantial amount of such 2016 Bonds is sold to the public may be determined according to rules that differ from those described above. Owners of Discount Bonds should consult their tax advisors with respect to the determination for federal income tax purposes of the amount of original issue discount with respect to such Discount Bonds and with respect to state and local tax consequences of owning and disposing of such Discount Bonds. Bond Premium The excess, if any, of the tax basis of 2016 Bonds purchased as part of the initial public offering to a purchaser (other than a purchaser who holds such 2016 Bonds as inventory, stock in trade, or for sale to customers in the ordinary course of business) over the amount payable at maturity is Bond Premium. Bond Premium is amortized over the term of such 2016 Bonds for federal income tax purposes (or, in the case of a bond with bond premium callable prior to its stated maturity, the amortization period and yield may be required to be determined on the basis of an earlier call date that results in the lowest yield on such bond). Owners of such 2016 Bonds are required to decrease their adjusted basis in such 2016 Bonds by the amount of amortizable Bond Premium attributable to each taxable year such 2016 Bonds are held. The amortizable bond premium on such 2016 Bonds attributable to a taxable year is not deductible for federal income tax purposes; however Bond Premium on such 2016 Bonds is treated as an offset to qualified stated interest received on such 2016 Bonds. Owners of such 2016 Bonds should consult their tax advisors with respect to the determination for federal income tax purposes of the treatment of Bond Premium upon sale, redemption or other disposition of such 2016 Bonds and with respect to state and local income tax consequences of owning and disposing of such 2016 Bonds. Backup Withholding Interest paid on the 2016 Bonds is subject to information reporting in a manner similar to interest paid on taxable obligations. While this reporting requirement does not by itself, affect the excludability of interest on the 2016 Bonds from gross income for federal income tax purposes, the reporting requirement causes the payment of interest on the 2016 Bonds to be subject to backup withholding if such interest is paid to beneficial owners who (i) are not exempt recipients, and (ii) either fail to provide certain identifying information (such as the beneficial owner s taxpayer identification number) in the required manner or have been identified by the Internal Revenue Service as having failed to report all interest and dividends required to be shown on their income tax returns. Generally, individuals are not exempt recipients, whereas corporations and certain other entities generally are exempt recipients. Amounts withheld under the backup withholding rules from a payment to a beneficial owner would be allowed as a refund or a credit against such beneficial owner s federal income tax liability provided the required information is furnished to the Internal Revenue Service. Other Tax Consequences Under current law, the interest on the 2016 Bonds will not be included in the taxable income of individuals or the net income of C corporations for purposes of the income tax imposed by the State of North Carolina on individuals and corporations. The Code contains other provisions (some of which are noted below) that could result in tax consequences, upon which Bond Counsel expresses no opinion, as a result of ownership of the

58 Bonds or the inclusion in certain computations of interest on the 2016 Bonds that is excluded from gross income for purposes of federal income taxation. PROSPECTIVE PURCHASERS OF THE 2016 BONDS SHOULD CONSULT THEIR TAX ADVISORS AS TO THE APPLICABILITY AND IMPACT OF ANY SUCH COLLATERAL TAX CONSEQUENCES. Ownership of tax-exempt obligations may result in collateral federal income tax consequences to certain taxpayers, including, without limitation, financial institutions, property and casualty insurance companies, certain foreign corporations doing business in the United States, certain S Corporations with excess passive income, individual recipients of Social Security or Railroad Retirement benefits, taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry tax-exempt obligations and taxpayers who may be eligible for the earned income tax credit. Future Tax Developments Future or pending legislative proposals, if enacted, regulations, rulings or court decisions may cause interest on the 2016 Bonds to be subject, directly or indirectly, to federal income taxation or to State or local income taxation, or may otherwise prevent beneficial owners from realizing the full current benefit of the tax status of such interest. Legislation or regulatory actions and future or pending proposals may also affect the economic value of the federal or state tax exemption or the market value of the 2016 Bonds. Prospective purchasers of the 2016 Bonds should consult their tax advisors regarding any future, pending or proposed federal or State tax legislation, regulations, rulings or litigation as to which Bond Counsel expresses no opinion. For example, various proposals have been made in Congress and by the President that would subject interest on bonds that is otherwise excludable from gross income for federal income tax purposes, including interest on the 2016 Bonds, to federal income tax payable by certain bondholders with adjusted gross income in excess of specified thresholds. Prospective purchasers should consult their tax advisors as to the effect of such proposals on their individual situations. CONTINUING DISCLOSURE In the Series Resolution, the City and the Utilities Commission have undertaken, for the benefit of the beneficial owners of the 2016 Bonds, to provide: (A) by not later than seven months from the end of each Fiscal Year, commencing with the Fiscal Year ending June 30, 2016, to the Municipal Securities Rulemaking Board via The Electronic Municipal Market Access system ( EMMA ) and to the state information depository for the State of North Carolina ( SID ), if any, audited financial statements of the Utilities Commission for such Fiscal Year, if available, prepared in accordance with Section of the General Statutes of North Carolina, as it may be amended from time to time, or, if such audited financial statements of the Utilities Commission are not available by seven months from the end of such Fiscal Year, unaudited financial statements of the Utilities Commission for such Fiscal Year to be replaced subsequently by audited financial statements of the Utilities Commission to be delivered within 15 days after such audited financial statements become available for distribution; (B) by not later than seven months from the end of each Fiscal Year, commencing with the Fiscal Year ending June 30, 2016, to EMMA, and to the SID, if any, (i) the financial and statistical data as of a date not earlier than the end of the preceding Fiscal Year for the type of information included under the following headings to the Official Statement (1) The Combined Enterprise System - The Electric 50

59 System (capacity and consumption figures) - Electric Service Rates, Number of Connections and - Major Users and power purchases from the Power Agency; (2) The Combined Enterprise System - The Water System (capacity and consumption figures) -- Water Service Rates, - Water Service Connection Fees, - Number of Connections and - Major Users; (3) The Combined Enterprise System - The Sanitary Sewer System (capacity figures); Sewer Service Rates, - Sewer Service Connection Fees, - Number of Connections and - Major Users ; (4) The Combined Enterprise System - The Natural Gas System (capacity and consumption figures) - Natural Gas Rates, - Number of Connections, Gas Consumption and - Major Users ; and (5) The Combined Enterprise System - Billing and Collection Procedures in the Official Statement relating to the 2016 Bonds, to the extent such items are not included in the audited financial statements referred to in (A) above; (C) within 10 business days, to EMMA, and to the SID, if any, notice of any of the following events with respect to the 2016 Bonds: (1) principal and interest payment delinquencies; (2) non-payment related defaults; if material (3) unscheduled draws on debt service reserves reflecting financial difficulties; (4) unscheduled draws on credit enhancements reflecting financial difficulties; (5) substitution of credit or liquidity providers, or their failure to perform; (6) adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 570-TEB) or other material notices or determinations with respect to or events affecting the tax-exempt status of the 2016 Bonds; (7) modification to the rights of security holders; if material offers; (8) bond calls, other than mandatory sinking fund redemption, if material, and tender (9) defeasances; (10) release, substitution or sale of property securing repayment of the securities, if material; (11) rating changes; (12) bankruptcy, insolvency, receivership or similar event of the City or the Utilities Commission; which event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for the City or the Utilities Commission in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets of business of the City or the Utilities Commission, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court of governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental 51

60 authority having supervision or jurisdiction over substantially all of the assets or business of the City or the Utilities Commission; (13) the consummation of a merger, consolidation, or acquisition involving the City or the Utilities Commission or the sale of all or substantially all of the assets of the City or the Utilities Commission, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating any such actions, other than pursuant to its terms, if material; and (14) appointment of a successor or additional paying agent or the change of name of a paying agent, if material. (D) in a timely manner, to EMMA, and to the SID, if any, notice of a failure of the City or the Utilities Commission to provide required annual financial information described in (a) or (b) above on or before the date specified. If the City or the Utilities Commission fails to comply with the undertaking described above, the Trustee or any beneficial owner of the 2016 Bonds then Outstanding may take action to protect and enforce the rights of beneficial owners with respect to such undertaking, including an action for specific performance; provided, however, that failure to comply with such undertaking shall not be an event of default under the Order and shall not result in any acceleration of payment of the 2016 Bonds. The City and the Utilities Commission reserve the right to modify from time to time the information to be provided to the extent necessary or appropriate in the judgment of the City and the Utilities Commission, provided that: (a) any such modification may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of the City or the Utilities Commission; and (b) the information to be provided, as modified, would have complied with the requirements of Rule 15c2-12 issued under the Securities Exchange Act of 1934 ( Rule 15c2-12 ) as of the date of the Official Statement, after taking into account any amendments or interpretations of Rule 15c2-12, as well as any changes in circumstances; and (c) any such modification does not materially impair the interests of the beneficial owners, as determined either by parties unaffiliated with the City or the Utilities Commission (such as Bond Counsel), or by approving vote of the registered owners of not less than a majority in principal amount of the 2016 Bonds then Outstanding pursuant to the terms of the Bond Order, as it may be amended from time to time. The City and the Utilities Commission agree that any such modification shall not take effect except upon thirty (30) days prior written notice to the Senior Manager, unless waived in writing by such Senior Manager. The City and the Utilities Commission also agree that the annual financial information containing the amended operating data or financial information will explain, in narrative form, the reasons for the amendments and the impact of the change in the type of operating data or financial information being provided. 52

61 With respect to certain of the City s undertakings pursuant to Rule 15c2-12, the City did not file certain annual financial information on a timely basis. The audited financial statements for the fiscal year ended June 30, 2011 and certain budget information for the fiscal years ended June 30, 2011, 2012, 2013 and 2014 were filed on November 10, Additionally, the audited financial statements for the fiscal year ended June 30, 2013 were filed on February 11, In addition, in the last five years, there have been changes to the credit ratings on certain of the bonds of the Commission and City, both resulting from underlying credit rating upgrades and also on account of changes to the credit rating of credit enhancers providing bond insurance for such bonds. The City and the Commission filed notices of such rating changes with the MSRB; however, the period within which such notices were filed following the occurrence of the rating change varied from four weeks to six months. Except as described above, in the last five years, the City and the Utilities Commission have materially complied with their undertakings under Rule 15c2-12. LEGALITY FOR INVESTMENT Section of the General Statutes of North Carolina provides that the 2016 Bonds are securities in which all public officers and public bodies of the State of North Carolina and its political subdivisions and agencies and all insurance companies, trust companies, investment companies, banks, savings banks, building and loan associations, savings and loan associates, credit unions, pension or retirement funds, other financial institutions engaged in business in the State of North Carolina, executors, administrators, trustees and other fiduciaries may properly and legally invest funds, including capital in their control or belonging to them, and the 2016 Bonds are securities which may properly and legally be deposited with and received by any State of North Carolina or municipal officer or any agency or political subdivision of the State for any purpose for which the deposit of bonds, notes or obligations of the State is now or may hereafter be authorized by law. RATINGS Moody s Investors Service ( Moody s ) and Fitch Ratings, Inc. ( Fitch ) have given the 2016 Bonds the respective ratings set forth on the front cover. Further explanation of the significance of such ratings may be obtained from Moody s and Fitch. The Utilities Commission has provided to Moody s and Fitch certain information that has not been included in this Official Statement. The ratings are not a recommendation to buy, sell or hold the 2016 Bonds and should be evaluated independently. There is no assurance that such ratings will continue for any given period of time or that the ratings will not be revised or withdrawn entirely by Moody s or Fitch, if, in the judgment of Moody s or Fitch, circumstances so warrant. Any such downward revision or withdrawal of such ratings may have an adverse effect on the market price of the 2016 Bonds. Neither the City, the Utilities Commission, nor the Underwriters have undertaken any responsibility after the issuance of the 2016 Bonds to assure maintenance of the ratings or to oppose any such proposed revision or withdrawal. VERIFICATION OF MATHEMATICAL COMPUTATIONS The arithmetical accuracy of certain computations included in the schedules provided by Wells Fargo Bank, National Association, as the senior managing underwriter, on behalf of the City relating to (a) computation of forecasted receipts of principal and interest on the defeasance obligations and the forecasted payments of principal and interest to redeem the 2008A Bonds to be Refunded and (b) computation of the yields on the 2016 Bonds and the defeasance obligations was examined by Bingham Arbitrage Rebate Services, Inc. Such computations were based solely upon assumptions and information supplied by Wells Fargo Bank, National Association, as the senior managing underwriter, on behalf of the City. Bingham Arbitrage Rebate Services, Inc. has restricted its procedures to examining the arithmetical accuracy of certain computations and has not made any study or evaluation of the assumptions and 53

62 information upon which the computations are based and, accordingly, has not expressed an opinion on the data used, the reasonableness of the assumptions, or the achievability of the forecasted outcome. Bond counsel to the City will rely upon the accuracy of these calculations in supporting its conclusion that the 2016 Bonds are not arbitrage bonds within the meaning of the Code. FINANCIAL ADVISOR FirstSouthwest, a Division of Hilltop Securities Inc. ( FirstSouthwest ), is serving as financial advisor in connection with the issuance and sale of the 2016 Bonds. Although FirstSouthwest has assisted in the preparation of the Official Statement, FirstSouthwest is not obligated to undertake, and has not undertaken to make, an independent verification or to assume responsibility for the accuracy, completeness or fairness of the information contained in the Official Statement or any of the other legal documents, and further FirstSouthwest does not assume any responsibility for the information, covenants and representations with respect to the federal income tax status of the 2016 Bonds, or the possible impact of any present, pending or future actions taken by any legislative or judicial bodies or rating agencies. UNDERWRITING The Underwriters have entered into a Bond Purchase Agreement to purchase all of the 2016 Bonds, if any of the 2016 Bonds are to be purchased, at a purchase price equal to 100% of the principal amount thereof, plus a net original issue premium of $9,738, and less an underwriters discount of $290, The obligation of the Underwriters to pay for the 2016 Bonds is subject to certain terms and conditions set forth in the Bond Purchase Agreement. The Underwriters may offer and sell the 2016 Bonds to certain dealers (including dealers depositing the 2016 Bonds into investment trusts) and others at prices lower than the initial public offering prices stated on the inside cover page hereof. The public offering prices may be changed from time to time by the Underwriters. Wells Fargo Securities is the trade name for certain securities-related capital markets and investment banking services of Wells Fargo & Company and its subsidiaries, including Wells Fargo Bank, National Association, acting through its Municipal Products Group. Wells Fargo Bank, National Association, acting through its Municipal Products Group ( WFBNA ), one of the underwriters of the 2016 Bonds, has entered into an agreement (the Distribution Agreement ) with its affiliate, Wells Fargo Advisors, LLC ( WFA ), for the distribution of certain municipal securities offerings, including the 2016 Bonds. Pursuant to the Distribution Agreement, WFBNA will share a portion of its underwriting or remarketing agent compensation, as applicable, with respect to the 2016 Bonds with WFA. WFBNA also utilizes the distribution capabilities of its affiliate Wells Fargo Securities, LLC ( WFSLLC ) for the distribution of municipal securities offerings, including the 2016 Bonds. In connection with utilizing the distribution capabilities of WFSLLC, WFBNA pays a portion of WFSLLC s expenses based on its municipal securities transactions. WFBNA, WFSLLC and WFA are each wholly-owned subsidiaries of Wells Fargo & Company. FTN Financial Capital Markets is a division of First Tennessee Bank National Association and FTB Advisors, Inc. is a wholly owned subsidiary of First Tennessee Bank National Association. FTN Financial Capital Markets has entered into a distribution agreement with FTB Advisors, Inc. for the distribution of the 2016 Bonds at the original issue prices. Such arrangement generally provides that FTN Financial Capital Markets will share a portion of its underwriting compensation or selling concession with FTB Advisors, Inc. 54

63 MISCELLANEOUS Members of the LGC staff have participated in the preparation of this Official Statement and other documents related to the issuance of the 2016 Bonds, but the LGC and its staff assume no responsibility for the accuracy or completeness of any representation or statement in this Official Statement, other than those used in Appendix F. The LGC, the City and the Utilities Commission have each duly authorized the execution and delivery of this Official Statement. LOCAL GOVERNMENT COMMISSION OF NORTH CAROLINA By: /s/ Greg C. Gaskins Secretary CITY OF GREENVILLE, NORTH CAROLINA By: /s/ Barbara Lipscomb City Manager GREENVILLE UTILITIES COMMISSION By: /s/ Jeff W. McCauley Chief Financial Officer 55

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65 APPENDIX A AUDITED FINANCIAL STATEMENTS OF THE UTILITIES COMMISSION

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67 APPENDIX A Management Discussion and Analysis The following is Management s Discussion and Analysis of the financial activities of the Utilities Commission, lifted from the Comprehensive Annual Financial Report for the Utilities Commission for the fiscal year ended June 30, Management s Discussion and Analysis provides an objective and easily readable short and long-term analysis of the Utilities Commission s financial activities based on currently known facts, decisions or conditions. Management s Discussion and Analysis is not a required part of the basic financial statements but is supplementary information required by the Governmental Accounting Standards Board. The independent auditors of the Utilities Commission have applied certain limited procedures, which consist primarily of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, they did not audit this information and did not express an opinion on it. A-1

68 MANAGEMENT S DISCUSSION & ANALYSIS Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2015 Connected To Our Customers Utility decisions are made to benefit our customers because local citizens determine policies and set rates to provide you the best service at the lowest reasonable price. People rarely think of their monthly utility bill as an investment. But in our community, that s what it is. Because Greenville Utilities is a publicly-owned, not-for-profit utility, utility dollars stay right here at home. They don t benefit out-of-town stockholders. We live and work in this community, and want the best for it. We re a hometown utility, community-owned and locally controlled. We invest in our systems... in the infrastructure that s the lifeblood of our community. We also invest in our people. GUC hires top quality employees to manage and operate our highly technical utility systems. GUC is a community asset that contributes to the well-being of citizens by providing safe and reliable utilities, excellent local customer service and economic development opportunities. As your hometown utility provider, we take pride in delivering safe, reliable services; maintaining stable, competitive rates; and supporting the economic growth of Greenville-Pitt County. We appreciate your continued support. A-2

69 Management sdiscussionandanalysis As management of the Greenville Utilities Commission (Utilities Commission), we offer readers of the UtilitiesCommission sfinancialstatementsthisnarrativeoverviewandanalysisofthefinancialactivities oftheutilitiescommissionforthefiscalyearendedjune30,2015.weencouragereaderstoconsiderthe informationpresentedhereinconjunctionwithadditionalinformationinthisreport. FinancialHighlights TheassetsanddeferredoutflowsofresourcesoftheUtilitiesCommissionexceededitsliabilitiesand deferred inflows of resources at the close of the most recent fiscal year by $341,670,494 (net position).ofthisamount,$69,457,759(unrestrictednetposition)maybeusedtomeettheutilities Commission songoingobligationstoitscustomersandcreditors. Operatingrevenuesincreasedby$1,214,575or0.4percentandtotalrevenuesincreasedby$972,951 or0.4percentdueprimarilytoincreasesinutilityrates. The Utilities Commission s total net position increased by $13,214,047 primarily due to positive operatingincome. TheUtilitiesCommission stotaldebtdecreasedby$10,773,677(9.7percent)duringthecurrentfiscal year. The key factor in this decrease was the retirement of $11,476,429 of existing debt, which exceeded the addition of new debt totaling $811,442 and the net decrease in discounts and premiumstotaling$108,691. The Utilities Commission s bond rating was upgraded by Moody s Investors Services to Aa2 with a stableoutlookandbyfitchratingstoaawithastableoutlook. OverviewoftheFinancialStatements ThisdiscussionandanalysisareintendedtoserveasanintroductiontotheUtilitiesCommission sbasic financial statements. The Utilities Commission s basic financial statements are comprised of three components:(1)commissionwidefinancialstatements,(2)individualfundfinancialstatements,and(3) notestothefinancialstatements.thisreportalsocontainsothersupplementaryinformationinaddition tothebasicfinancialstatementsthemselves. CommissionWide Financial Statements The commissionwide financial statements are designed to providereaderswithabroadoverviewof theutilitiescommission sfinances,inamannersimilartoa privatesectorbusiness.thecommissionwidestatementsprovideshortandlongterminformationabout thefinancialstatusoftheutilitiescommissionasawhole. TheStatementofNetPositionpresentsthedifferencebetweentheUtilityCommission stotalassetsand deferredoutflowsofresourcesandtotalliabilitiesanddeferredinflowsofresources.overtime,increases anddecreasesinnetpositionmayserveasausefulindicatorofwhetherthefinancialconditionofthe UtilitiesCommissionisimprovingordeteriorating. TheStatementofRevenues,ExpensesandChangesinFundNetPositionpresentsinformationshowing howtheutilitiescommission snetpositionchangedduringthemostrecentfiscalyear.allchangesinnet positionarereportedassoonastheunderlyingeventgivingrisetothechangeoccurs,regardlessofthe timingofrelatedcashflows.thus,revenuesandexpensesarereportedinthisstatementforsomeitems thatwillonlyresultincashflowsinfuturefiscalperiods(e.g.uncollectedbillingsandearnedbutunused vacationleave). All of the activities of the Utilities Commission are of a businesstype (as compared to governmental activities).theutilitiescommissionhasnocomponentunitstoreport. FundFinancialStatements Afundisagroupingofrelatedaccountsthatisusedtomaintaincontrolover resources that have been segregated for specific activities or objectives. The Utilities Commission, like other local governments and special districts, uses fund accounting to ensure and demonstrate A-3

70 compliancewithfinancerelatedlegalrequirements.allofthefundsoftheutilitiescommissioncanbe dividedintotwocategories:proprietaryfundsandfiduciaryfunds. ProprietaryFunds TheUtilitiesCommissionmaintainsonlyonetypeofproprietaryfund theenterprise fundtype.enterprisefundsareusedtoreportthesamefunctionspresentedasbusinesstypeactivitiesin thecommissionwidefinancialstatements.theutilitiescommissionusesenterprisefundstoaccountfor itselectric,water,sewerandnaturalgasbusinessoperations,allofwhichareconsideredmajorfunds. FiduciaryFunds Fiduciaryfundsareusedtoaccountforresourcesheldforthebenefitofpartiesoutside the Utilities Commission. Fiduciary funds are not reflected in the commissionwide financial statement because the resources of those funds are not available to support the Utilities Commission s own activities. The accounting used for fiduciary funds is much like that used for proprietary funds. The UtilitiesCommissionhastwofiduciaryfunds,oneofwhichisapensiontrustfundandoneofwhichisan agencyfund. Notestothefinancialstatements Thenotesprovideadditionalinformationthatisessentialtoafull understandingofthedataprovidedinthecommissionwideandfundfinancialstatements. Otherinformation Inadditiontothebasicfinancialstatementsandaccompanyingnotes,thisreport alsopresentscertainrequiredsupplementaryinformationconcerningtheutilitiescommission sprogress infundingitsobligationtoprovidepostemploymentbenefitstoitsemployees. CommissionWideFinancialAnalysis GreenvilleUtilitiesCommissionNetPosition Currentandotherassets $ 117,422,840 $ 118,219,809 Capitalassets 367,717, ,582,633 Deferredoutflowsofresources 2,842,873 1,166,979 Totalassetsanddeferredoutflowsofresources 487,983, ,969,421 Currentliabilities 37,998,896 35,571,638 Noncurrentliabilities 102,267, ,630,917 Deferredinflowsofresources 6,046,670 Totalliabilitiesanddeferredinflowsofresources 146,313, ,202,555 Netposition: Netinvestmentincapitalassets 272,212, ,842,610 Unrestricted 69,457,759 77,924,256 Totalnetposition $ 341,670,494 $ 331,766,866 As noted earlier, net position may serve over time as a useful indicator of an enterprise s financial condition. The assets and deferred outflows of resources of the Utilities Commission exceeded the liabilities and deferred inflows of resources by $341,670,494 as of June 30, The Utilities Commission snetpositionincreasedby$13,214,047duringthefiscalyearendedjune30,2015. ThelargestportionoftheUtilitiesCommission snetposition(79.7percent)reflectsitsnetinvestmentin capitalassets(e.g.plants,distributionsystems,equipment,land,machinery).theutilitiescommission usesthesecapitalassetstoprovideelectric,water,sewerandgasservicestocustomers,consequently theseassetsarenotavailableforfuturespending.althoughtheutilitiescommission snetinvestmentin itscapitalassetsisreportednetofoutstandingrelateddebt,itshouldbenotedthattheresourcesneeded to repay this debt must be provided from other sources, since the capital assets themselves cannot practicallybeusedtoliquidatetheseliabilities. A-4

71 The remaining balance of unrestricted net position ($69,457,759) may be used to meet the Utilities Commission songoingobligationstocitizensandcreditors.thisbalancedecreased$8,466,497fromfiscal year2014duetoanincreaseininvestmentincapitalassets. TheUtilitiesCommissionimplementedGASBStatementNo.68 AccountingandFinancialReportingfor Pensions AnAmendmentofGASBStatementNo.27 andgasbstatementno.71 PensionTransition forcontributionsmadesubsequenttothemeasurementdate AnAmendmentofGASBStatementNo. 68 duringfiscalyearendedjune30,2015.withthenewreportingchange,theutilitiescommissionis allocated its proportionate share of the North Carolina Local Governmental Employees Retirement System snetpensionasset,deferredoutflowsofresources,deferredinflowsofresources,andpension expense. A restatement to record the effects of the new reporting guidance decreased beginning net positionby$3,310,419.decisionsregardingtheallocationsaremadebytheadministratorsofthepension plan,notbytheutilitiescommission smanagement. The$13,214,047increaseinnetpositionisduetototalrevenuesthatincreased0.4%andexceededtotal expenses,whichdecreasedby2.6%.rateincreasesweretheprimaryreasonrevenuesincreasedanda 4.3%decreaseinpurchasedcommoditieswastheprimaryreasonthetotalexpensesdecreased. GreenvilleUtilitiesCommissionChangesinNetPosition Revenues: Operatingrevenues: Chargesforservice $ 270,858,924 $ 269,776,171 Otheroperatingrevenues 1,127, ,765 Nonoperatingrevenues: Interestincome 283, ,075 Othernonoperatingrevenues 1,443,875 1,761,191 Totalrevenues 273,714, ,741,202 Expenses Operatingexpenses 250,914, ,699,930 Nonoperatingexpenses 3,682,673 3,573,520 Totalexpenses 254,596, ,273,450 Increaseinnetpositionbeforecontributionsandtransfers 19,117,290 11,467,752 Contributions 601, ,728 Transfers (6,505,043) (6,080,280) Increaseinnetposition 13,214,047 5,955,200 Netposition,July1(previouslyreported) 331,766, ,811,666 Restatement (3,310,419) Netposition,July1,restated 328,456,447 Netposition,June30 $ 341,670,494 $ 331,766,866 A-5

72 SourcesofRevenues Fees& Charges 0.7% Other 0.9% Interest 0.1% Rates& Charges 98.0% Capital Contributions 0.2% Depreciation 6.6% UsesofRevenues Interest 1.3% Transfersto thecity 2.4% Reinvestedin NetPosition 4.8% Purchased PowerandGas 65.6% Administration &General 6.5% Operations& Maintenance 12.8% Charges for services increased by $1,082,753 or 0.4 percent. Transfers from the Utilities Commission Electric and Gas operations to the City of Greenville are authorized and defined by the charter, as amended,whichestablishedtheutilitiescommissionin1905.therearenotransfersfromthewateror SeweroperationstotheCity. FinancialAnalysisoftheUtilitiesCommission sfunds Asnotedearlier,theUtilitiesCommissionusesfundaccountingtoensureanddemonstratecompliance withfinancerelatedlegalrequirements. ProprietaryFunds TheUtilitiesCommissionhasaseparatefundfortheElectric,Water,SewerandGas operations.thetotalincreaseinnetpositionforallfundswas$13,214,047.netpositionattheendofthe fiscalyearfortheelectricfundwas$121,708,746,$68,174,145forthewaterfund,$99,459,750forthe SewerFund,and$52,327,853fortheGasFund. A-6

73 CapitalAssetsandDebtAdministration Capital assets The Utilities Commission s investment in capital assets as of June 30, 2015 totals $367,717,958 (net of accumulated depreciation). This investment in capital assets includes plants, distributionandcollectionsystems,land,buildings,improvements,machineryandequipment.thetotal change in the Utilities Commission s investment in capital assets for the current fiscal year was a 2.3 percentincrease.additionalinformationontheutilitiescommission scapitalassetscanbefoundinnote 2.Aofthisreport. Majorcapitalasseteventsduringthecurrentfiscalyearincludethefollowingadditions(therewereno significantdemolitions): InvestmentinEnterpriseResourcePlanningsoftwareconfigurationtotaling$7,837,809 Electricdistributionlineimprovementsandextensionstotaling$4,952,854 Electricdistributionsubstationsimprovementstotaling$552,496 Watertreatmentplantimprovementstotaling$381,536 Watermainimprovementsandextensionstotaling$188,279 Wastewatertreatmentplantimprovementstotaling$1,227,845 ConstructionactivitiesfortheSterlingPointeandWestsidewastewaterpumpstationsandforce mainstotaling$1,142,184 Naturalgasmainimprovementsandextensionstotaling$621,620 Constructionactivitiesattheliquefiednaturalgasplanttotaling$2,757,118 Constructionactivitiesatthenaturalgasvehiclefuelingstationtotaling$1,794,825 GreenvilleUtilitiesCommissionCapitalAssets Land $ 3,628,897 $ 3,595,641 Easements 36,792 51,382 Landimprovements 1.803,327 1,754,016 Generalplant 6,566,794 6,802,061 Utilityplant 73,800,522 73,725,250 Computersoftware 980, ,477 Vehiclesandequipment 4,362,419 3,063,890 Distributionsystems 207,453, ,527,321 Transmissionsystem 12,204,225 13,065,228 Computerhardware 318, ,830 Fiberoptics 1,104,230 1,157,298 Constructioninprogress 55,459,062 46,330,239 Totalcapitalassets $ 367,717,958 $ 359,582,633 Longterm debt At the end of the current fiscal year, the Utilities Commission had total debt outstanding of $100,740,358. Of this amount, $728,533 is secured by the equipment financed andthe remaining debt is secured by the Utilities Commission s net revenues. Additional information on the UtilitiesCommission slongtermdebtcanbefoundinnote2.bofthisreport. GreenvilleUtilitiesCommissionOutstandingDebt Revenuebonds $ 64,400,999 $ 72,136,399 Loans 35,559,334 38,488,921 Unamortizedbonddiscount/premium 780, ,716 Totaloutstandingdebt $ 100,740,358 $ 111,514,036 A-7

74 Ofthetotaldebt,$10,311,616isthecurrentportion. EconomicFactorsandNextYear sbudgetsandrates TheUtilitiesCommissionserviceareaincludesadiverselocaleconomyincludingasolidmanufacturing base,the3rdlargestuniversityinthestateandan861bedteachinghospital.theutilitiescommission provides services in the Greenville metropolitan statistical area which continues to expand and is experiencingincreasingemploymentandrisingwagesforworkers.theutilitiescommission sbudgetfor fiscal year 2016 was developed anticipating modest economic growth and a 9% increase in capital expenditures,comparedtothepreviousyear sbudget,tomaintainandexpandutilityinfrastructure.the UtilitiesCommission sgoalremainstobetheregionalutilityproviderofchoiceandthatgoalisreflected inthefinancialplanningfornextfiscalyear. RequestsforInformation ThisfinancialreportisdesignedtoprovideageneraloverviewoftheUtilitiesCommission sfinancesforall thosewithaninterestintheutilitiescommission sfinances.questionsconcerninganyoftheinformation providedinthisreportorrequestsforadditionalfinancialinformationshouldbeaddressedtotheoffice ofthechieffinancialofficer,greenvilleutilitiescommission,p.o.box1847,greenville,nc A-8

75 Financial Information The financial statements of the Utilities Commission have been audited by certified public accountants for the fiscal year ended June 30, Copies of these financial statements containing the unqualified report of the independent certified public accountant are available in the Office of the Chief Financial Officer, Greenville Utilities Commission, P.O. Box 1847, Greenville, NC 27835, (252) The following financial statements are the Basic Financial Statements of the Utilities Commission and the notes thereto, lifted from the Comprehensive Annual Financial Report of the Utilities Commission for the fiscal year ended June 30, A-9

76 BASIC FINANCIAL STATEMENTS Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2015 Connected To Our Customers Over the next five years, it s going to take nearly $160 million to fund projects designed to ensure our customers continue to receive safe, reliable utility services. It is essential for GUC to plan with a longterm perspective. Not only do we want to provide safe and reliable services to our customers today, we also want to ensure we are able to meet their needs tomorrow, while always being positioned to take advantage of opportunities for growth and economic development. Such an approach requires constant investments in our systems and the people who operate them. These investments will be funded with a combination of reserves, current revenues, revenue bonds, installment financing and grants. It s a huge investment that requires prudent, often complex, financial planning. For a utility, the amount of cash we have in reserve also impacts our credit ratings with bond rating agencies. Because of GUC s sound financial management, Greenville Utilities credit ratings were upgraded in 2015 by global rating agencies Moody s Investor Services and Fitch Ratings. GUC s rating with Moody s improved from an Aa3 to Aa2 and with Fitch from A+ to AA-. These higher credit ratings allow us to borrow for capital projects at lower interest rates, which ultimately means lower utility rates for our customers. As your hometown utility provider, we take pride in delivering safe, reliable services; maintaining stable, competitive rates; and supporting the economic growth of Greenville-Pitt County. We appreciate your continued support. A-10

77 GreenvilleUtilitiesCommission ofthecityofgreenville,northcarolina StatementofNetPosition June30,2015 Total BusinessType Activities Assets Currentassets: Cashandcashequivalents $57,425,218 Accountsreceivable,net 28,835,525 Duefromothergovernments 2,075,234 DuefromCityofGreenville 129,648 Inventories 6,408,435 Prepaidexpensesanddeposits 240,455 Restrictedcashandcashequivalents 3,737,305 Totalcurrentassets 98,851,820 Exhibit1 Noncurrentassets: Restrictedassets: Restrictedcashandcashequivalents: Bondproceeds 4,261,850 Capacityfees 2,467,957 Totalrestrictedcashandcashequivalents 6,729,807 Netpensionasset 2,480,945 Totalrestrictedassets 9,210,752 Investments 8,946,246 Notesreceivable 414,022 Capitalassets: Land,easementsandconstructioninprogress 59,124,751 Othercapitalassets,netofdepreciation 308,593,207 Totalcapitalassets 367,717,958 Totalnoncurrentassets 386,288,978 TotalAssets 485,140,798 DeferredOutflowsofResources Pensiondeferrals 1,869,587 Unamortizedbondrefundingcharges 973,286 Totaldeferredoutflowsofresources 2,842,873 Liabilities Currentliabilities: Accountspayableandaccruedexpenses 21,166,282 Customerdepositspayablefromrestrictedassets 3,737,305 Accruedinterestpayable 656,784 DuetoCityofGreenville 304,342 Unearnedrevenue 283,471 Currentportionofcompensatedabsences 1,539,096 Currentmaturitiesoflongtermdebt 10,311,616 Totalcurrentliabilities 37,998,896 Noncurrentliabilities: Compensatedabsences 393,529 Longtermdebt,excludingcurrentportion 90,428,743 Otherpostemploymentbenefits 11,445,339 Totalnoncurrentliabilities 102,267,611 Totalliabilities 140,266,507 DeferredInflowsofResources Pensiondeferrals 6,046,670 Totaldeferredinflowsofresources 6,046,670 NetPosition Netinvestmentincapitalassets 272,212,735 Unrestricted 69,457,759 Totalnetposition $341,670,494 Thenotestothefinancialstatementsareanintegralpartofthisstatement. A-11

78 GreenvilleUtilitiesCommission ofthecityofgreenville,northcarolina StatementofNetPosition June30,2015 Exhibit2 Total MajorFunds BusinessType ElectricFund WaterFund SewerFund GasFund Activities Assets Currentassets: Cashandcashequivalents $ 30,882,977 $2,642,955 $3,241,738 $20,657,548 $ 57,425,218 Accountsreceivable,net 23,240,744 1,839,791 2,105,409 1,649,581 28,835,525 Duefromothergovernments 1,060, , , ,687 2,075,234 DuefromCityofGreenville 129, ,648 Inventories 4,911, , , ,146 6,408,435 Prepaidexpensesanddeposits 40, ,883 77,033 19, ,455 Restrictedcashandcashequivalents 2,814, ,239 1, ,911 3,737,305 Totalcurrentassets 63,079,668 6,187,332 5,929,630 23,655,190 98,851,820 Noncurrentassets: Restrictedassets: Restrictedcashandcashequivalents: Bondproceeds 878,979 1,764,756 1,090, ,298 4,261,850 Capacityfees 1,147,363 1,320,594 2,467,957 Totalrestrictedcashandcashequivalents 878,979 2,912,119 2,411, ,298 6,729,807 Netpensionasset 1,111, , , ,002 2,480,945 Totalrestrictedassets 1,990,728 3,401,720 2,878, ,300 9,210,752 Investments 4,892, , ,411 3,200,997 8,946,246 Notesreceivable 414, ,022 Capitalassets: Land,easementsandconstructioninprogress 14,609,515 3,687,843 30,891,201 9,936,192 59,124,751 Othercapitalassets,netofdepreciation 82,508,927 85,676, ,953,923 26,453, ,593,207 Totalcapitalassets 97,118,442 89,364, ,845,124 36,389, ,717,958 Totalnoncurrentassets 104,001,826 93,586, ,169,539 40,530, ,288,978 TotalAssets 167,081,494 99,774, ,099,169 64,186, ,140,798 DeferredOutflowsofResources Pensiondeferrals 837, , , ,230 1,869,587 Unamortizedbondrefundingcharges 303, , , , ,286 Totaldeferredoutflowsofresources 1,140, , , ,340 2,842,873 Liabilities Currentliabilities: Accountspayableandaccruedexpenses 16,758, ,671 1,168,072 2,485,571 21,166,282 Customerdepositspayablefromrestrictedassets 2,814, ,239 1, ,911 3,737,305 Accruedinterestpayable 129, , ,458 47, ,784 DuetoCityofGreenville 104, ,883 77,033 19, ,342 Unearnedrevenue 111, , ,471 Currentportionofcompensatedabsences 695, , , ,392 1,539,096 Currentmaturitiesoflongtermdebt 2,420,378 2,668,804 4,095,260 1,127,174 10,311,616 Totalcurrentliabilities 22,923,594 4,684,392 6,113,276 4,277,634 37,998,896 Noncurrentliabilities: Compensatedabsences 97,546 91,415 89, , ,529 Longtermdebt,excludingcurrentportion 15,382,048 24,025,426 45,841,523 5,179,746 90,428,743 Otherpostemploymentbenefits 5,400,930 2,317,500 1,963,833 1,763,076 11,445,339 Totalnoncurrentliabilities 20,880,524 26,434,341 47,895,347 7,057, ,267,611 Totalliabilities 43,804,118 31,118,733 54,008,623 11,335, ,266,507 DeferredInflowsofResources Pensiondeferrals 2,709,604 1,193,278 1,137,201 1,006,587 6,046,670 Totaldeferredinflowsofresources 2,709,604 1,193,278 1,137,201 1,006,587 6,046,670 NetPosition Netinvestmentincapitalassets 80,498,179 64,778,473 96,153,949 30,782, ,212,735 Unrestricted 41,210,567 3,395,672 3,305,801 21,545,719 69,457,759 Totalnetposition $121,708,746 $ 68,174,145 $ 99,459,750 $52,327,853 $341,670,494 Thenotestothefinancialstatementsareanintegralpartofthisstatement. A-12

79 Exhibit3 GreenvilleUtilitiesCommission ofthecityofgreenville,northcarolina StatementofRevenues,ExpensesandChangesinFundNetPosition FortheYearEndedJune30,2015 MajorFunds Total Electric Water Sewer Gas Fund Fund Fund Fund Operatingrevenues: Chargesforservices $198,169,890 $17,030,567 $19,176,564 $36,481,903 $270,858,924 Otheroperatingrevenues 822,672 96, ,570 96,431 1,127,587 Totaloperatingrevenues 198,992,562 17,127,481 19,288,134 36,578, ,986,511 Operatingexpenses: Administrationandgeneral 9,132,610 2,843,672 2,843,954 2,890,746 17,710,982 Operationsandmaintenance 13,588,902 8,422,205 8,233,533 4,786,970 35,031,610 Purchasedpowerandgas 157,930,812 22,100, ,031,396 Depreciation 7,677,763 3,892,751 4,863,901 1,705,787 18,140,202 Totaloperatingexpenses 188,330,087 15,158,628 15,941,388 31,484, ,914,190 Operatingincome 10,662,475 1,968,853 3,346,746 5,094,247 21,072,321 Nonoperatingrevenues(expenses): Interestincome 130,041 44,763 26,822 82, ,767 Interestexpenseandservicecharges (680,057) (1,042,492) (1,725,815) (234,309) (3,682,673) Othernonoperatingrevenues 718, , , ,851 1,443,875 Netnonoperatingrevenues(expenses) 168,583 (660,245) (1,421,052) (42,317) (1,955,031) Incomebeforecontributionsandtransfers 10,831,058 1,308,608 1,925,694 5,051,930 19,117,290 Contributionsandtransfers: CapitalContributions 600,000 TransfertoCityofGreenville,GeneralFund (4,386,679) TransfertoCityofGreenville,streetlightingreimb. (757,210) Totalcontributionsandtransfers (4,543,889) 1, ,800 (1,361,154) (5,747,833) (757,210) (1,359,354) (5,903,243) Changesinnetposition 6,287,169 1,308,608 1,925,694 3,692,576 13,214,047 Netposition,beginningofyear,previouslyreported 116,905,026 67,518,830 98,156,649 49,186, ,766,866 Restatement (1,483,449) (653,293) (622,593) (551,084) (3,310,419) Netposition,beginningofyear,restated 115,421,577 66,865,537 97,534,056 48,635, ,456,447 Netposition,endofyear $121,708,746 $68,174,145 $99,459,750 $52,327,853 $341,670,494 Thenotestothefinancialstatementsareanintegralpartofthisstatement. A-13

80 GreenvilleUtilitiesCommission Exhibit4 ofthecityofgreenville,northcarolina StatementofCashFlows FortheYearEndedJune30,2015 MajorFunds Total Electric Water Sewer Gas Fund Fund Fund Fund Cashflowsfromoperatingactivities: Receiptsfromcustomersandusers $198,151,965 $17,196,034 $19,203,154 $36,785,796 $271,336,949 Otheroperatingreceipts 90,183 (11,956) (90,917) (195,574) (208,264) Paymentsforgoodsandservices (170,421,854) (6,609,807) (6,417,936) (26,010,467) (209,460,064) Paymentstoemployees (9,975,633) (4,877,863) (4,803,417) (3,885,507) (23,542,420) Paymentsreceivedonloans 32,050 32,050 Netcashprovidedbyoperatingactivities 17,844,661 5,728,458 7,890,884 6,694,248 38,158,251 Cashflowsfromnoncapitalfinancingactivities: TransferstoCityofGreenville,GeneralFund (5,142,959) (1,361,154) (6,504,113) Noncapitalcontributions 11,350 6,350 6,350 6,350 30,400 Netcashprovided(used)bynoncapitalfinancingactivities (5,131,609) 6,350 6,350 (1,354,804) (6,473,713) Cashflowsfromcapitalandrelatedfinancingactivities: Proceedsfromissuanceofdebt 811, ,442 Capitalgrants/cashcapitalcontributions 1,000, ,518 1,146,518 Capitalrelatedreceiptsfromcustomers 168, , ,408 Principalpaymentsondebtobligations (2,745,501) (2,910,306) (4,646,312) (1,174,310) (11,476,429) Acquisitionandconstructionofcapitalassets (11,359,840) (2,301,432) (3,664,096) (7,067,070) (24,392,438) Paymentofinterestandservicechargesondebtobligations (663,346) (1,069,718) (1,721,099) (216,724) (3,670,887) Netcashusedbycapitalandrelatedfinancingactivities (13,768,687) (6,113,184) (8,846,411) (8,458,104) (37,186,386) Cashflowsfrominvestingactivities: Purchaseofinvestments (2,425,352) (2,581,876) (3,563,869) (3,878,903) (12,450,000) Proceedsfromsaleandmaturityofinvestments 2,624,461 2,802,127 3,868,087 4,205,326 13,500,001 Interestreceivedoninvestments 142,054 45,730 28,017 86, ,591 Netcashprovidedbyinvestingactivities 341, , , ,213 1,352,592 Netdecreaseincashandcashequivalents (714,472) (112,395) (616,942) (2,705,447) (4,149,256) Cashandcashequivalents,beginningofyear 35,291,158 6,220,708 6,271,516 24,258,204 72,041,586 Cashandcashequivalents,endofyear $34,576,686 $6,108,313 $5,654,574 $21,552,757 $67,892,330 Otherdisclosures: Interestincurred $ 644,296 $1,034,315 $1,712,111 $206,947 $3,597,669 Interestpaid $663,346 $1,069,718 $1,721,099 $216,724 $3,670,887 Contributionsofcapitalassets $ $ $ $1,800 $1,800 Reconciliationofoperatingincometonetcashprovidedbyoperatingactivities: OperatingIncome $10,662,475 $1,968,853 $3,346,746 $5,094,247 $21,072,321 Adjustmentstoreconcileoperatingincometonetcash providedbyoperatingactivities Depreciation 7,677,763 3,892,751 4,863,901 1,705,787 18,140,202 Pensionexpense 78,660 34,641 33,013 29, ,535 Changesinassetsandliabilities Accountsreceivable (972,276) 33,381 (72,959) 176,579 (835,275) Notesreceivable 32,050 32,050 Duefromothergovernment (554,513) (174,887) (132,769) (292,860) (1,155,029) DuefromCityofGreenville (11,486) (11,486) Inventories (222,821) (105,975) 1,619 56,226 (270,951) Prepaidexpensesanddeposits (40,222) (103,883) (77,033) (19,317) (240,455) Deferredoutflowsofresourcesforpensions (802,044) (353,211) (336,612) (297,950) (1,789,817) Accountspayableandaccruedexpenses 919, ,019 64,162 (23,176) 1,074,303 Customerdeposits 80,612 43,732 (223) 24, ,789 DuetoCityofGreenville 29,315 86,384 59,534 19, ,550 Compensatedabsences 30,354 (8,780) (1,356) 18,344 38,562 UnearnedRevenue (8,490) (14,400) (22,890) OPEBPayable 267, , ,806 99, ,314 Miscellaneousincome(expense) 701, ,863 44, ,501 1,012,528 Totaladjustments 7,182,186 3,759,605 4,544,138 1,600,001 17,085,930 Netcashprovidedbyoperatingactivities $17,844,661 $5,728,458 $7,890,884 $6,694,248 $38,158,251 Thenotestothefinancialstatementsareanintegralpartofthisstatement. A-14

81 GreenvilleUtilitiesCommission ofthecityofgreenville,northcarolina StatementofFiduciaryNetPosition FiduciaryFunds June30,2015 Exhibit5 OPEBTrust Fund AgencyFund Assets Cashandcashequivalents $ 459,797 $ 997,546 Accountsreceivable 205 1,509,841 Investmentsatfairvalue: Russell3000AlphaTiltsB 956,008 GlobalEXUSAlphaB 295,369 NCLongTermInvestmentPlan 186,773 Totalassets 1,898,152 2,507,387 Liabilities Accountspayable 5,619 2,507,387 Totalliabilities 5,619 2,507,387 NetPosition Assetsheldintrustforotherpostemploymentbenefits $1,892,533 $ Thenotestothefinancialstatementsareanintegralpartofthisstatement. A-15

82 GreenvilleUtilitiesCommission ofthecityofgreenville,northcarolina StatementofChangesinFiduciaryNetPosition FiduciaryFunds FortheYearEndedJune30,2015 Exhibit6 OPEBTrust Fund Additions Contributions: Employercontributions $1,297,207 Retireecontributions 215,885 Totalcontributions 1,513,092 Investmentearnings: Interest 9,805 Dividends 24,191 Netincreaseinthefairvalueofinvestments 49,877 Totalinvestmentearnings 83,873 Lessinvestmentexpense 4,425 Netinvestmentincome 79,448 Totaladditions 1,592,540 Deductions Benefits 1,113,094 Totaldeductions 1,113,094 Changeinnetposition 479,446 NetpositionheldintrustforOPEBbenefits,beginningofyear 1,413,087 NetpositionheldintrustforOPEBbenefits,endofyear $1,892,533 Thenotestothefinancialstatementsareanintegralpartofthisstatement. A-16

83 NOTES TO THE FINANCIAL STATEMENTS Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2015 Connected To Our Customers GUC is a separately-chartered entity, operated as a public service with the mission of providing utilities in a business-like manner at a reasonable cost. GUC is a not-for-profit, publicly owned utility chartered by the State of North Carolina. Our Charter provides that Greenville Utilities has responsibility for the entire supervision and control of the management, operation, maintenance, improvement, and extension of the public utilities both in the City and outside the corporate limits, and is empowered to fix uniform rates for all services rendered. We work closely with the City of Greenville for the betterment of our community, but we are not a department of the City. Over the years, regulatory requirements and economies of scale have guided GUC more and more in a regional direction. Currently, GUC has nearly 66,000 electric connections, with 31% located outside the City limits. More than 28% of natural gas customers and 15% of water customers also live outside City limits. We have wholesale water contracts with Farmville, Greene County, Winterville, Bethel, and Stokes Regional Water Corporation; and we provide wholesale sewer services to Grimesland and Bethel, and natural gas to Ayden. Because of this regional shift, two of GUC s eight Board members are now nominated by the County Commissioners. Other communities rely on partnerships with us as a cost-effective option. As a result, GUC is playing a critical role in providing regional solutions to utility challenges in Eastern North Carolina. As your hometown utility provider, we take pride in delivering safe, reliable services; maintaining stable, competitive rates; and supporting the economic growth of Greenville-Pitt County. We appreciate your continued support. A-17

84 GREENVILLEUTILITIESCOMMISSION OFTHECITYOFGREENVILLE,NORTHCAROLINA NotestotheFinancialStatements FortheYearEndedJune30,2015 Note1SummaryofSignificantAccountingandReportingPolicies The accounting policies of the Greenville Utilities Commission (Utilities Commission) conform to generally accepted accountingprinciplesasapplicabletogovernments.thefollowingisasummaryofthemoresignificantaccountingpolicies: A.ReportingEntity The Utilities Commission, which is governed by an eightmember board of commissioners, was established in 1905 to operateandadministertheutilityenterprisefundsofthecityofgreenville,northcarolina. The Utilities Commission's financial data is incorporated into the Comprehensive Annual Financial Report of the City of GreenvilleandisanintegralpartoftheCity'sfinancialstatements. TheUtilitiesCommissionprovideselectric,water,sewer,andnaturalgasutilitiestotheCityandresidentsofsurrounding areas.theelectricandgasfundsaredistributionsystems.electricityispurchasedfromnorthcarolinaeasternmunicipal PowerAgencyandgasispurchasedfromPiedmontNaturalGasCorporationandgasmarketers. B.BasisofPresentation GovernmentwideStatements:Thestatementofnetpositiondisplaysinformationabouttheprimarygovernment(Utilities Commission).Thisstatementincludesthefinancialactivitiesoftheoverallgovernment,exceptfiduciaryactivities.Business typeactivitiesarefinancedinwholeorinpartbyfeeschargedtoexternalparties. Fund Financial Statements: The fund financial statements provide information about the Utilities Commission s funds, includingitsfiduciaryfunds.separatestatementsforeachfundcategory proprietaryandfiduciary arepresented. Proprietaryfundoperatingrevenues,suchaschargesforservices,resultfromexchangetransactionsassociatedwiththe principalactivityofthefund.exchangetransactionsarethoseinwhicheachpartyreceivesandgivesupessentiallyequal values. Nonoperating revenues, such as subsidies and investment earnings, result from nonexchange transactions or ancillaryactivities. TheUtilitiesCommissionreportsthefollowingmajorenterprisefunds: Electric,Water,SewerandGas.Thesefundsaccountforthoseoperations(a)thatarefinancedandoperatedinamanner similar to private business enterprises, where the intent of the governing body is that costs (expenses, including depreciation)ofprovidinggoodsorservicestothegeneralpubliconacontinuingbasisbefinancedorrecoveredprimarily throughusercharges;or(b)wherethegoverningbodyhasdecidedthattheperiodicdeterminationofrevenuesearned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management control, accountability,orotherpurposes. TheUtilitiesCommissionreportsthefollowingfiduciaryfundtypes: Pension Trust Fund. The Utilities Commission maintains one Pension Trust Fund the Other Postemployment Benefits (OPEB)TrustFund.Pensiontrustfundsareusedtoreportresourcesthatarerequiredtobeheldintrustforthemembers andbeneficiariesofdefinedbenefitpensionplans,definedcontributionplans,orotherpostemploymentbenefitsplans. The OPEB Trust Fund accounts for the Utilities Commission s contributions for healthcare benefits provided to qualified retirees. AgencyFunds.Agencyfundsarecustodialinnatureanddonotinvolvethemeasurementofoperatingresults.Agencyfunds areusedtoaccountforassetstheutilitiescommissionholdsonbehalfofothers.theutilitiescommissionmaintainstwo agencyfunds:therefusecollectionfundandthestormwatercollectionfund,whichaccountforrefuseandstormwater feesthatarebilledandcollectedbytheutilitiescommissionforthecityofgreenville. A-18

85 GREENVILLEUTILITIESCOMMISSION OFTHECITYOFGREENVILLE,NORTHCAROLINA NotestotheFinancialStatements FortheYearEndedJune30,2015 C.MeasurementFocus,BasisofAccounting InaccordancewithNorthCarolinaGeneralStatutes,allfundsoftheUtilitiesCommissionaremaintainedduringtheyear usingthemodifiedaccrualbasisofaccounting. Governmentwide,Proprietary,andFiduciaryFundFinancialStatements.Thegovernmentwide,proprietary,andfiduciary fund financial statements are reported using the accrual basis of accounting and the economic resources measurement focus,exceptfortheagencyfundswhichhavenomeasurementfocus.revenuesarerecordedwhenearnedandexpenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions,inwhichtheutilitiescommissiongives(orreceives)valuewithoutdirectlyreceiving(orgiving)equalvaluein exchange,includegrants,entitlements,anddonations.revenuefromgrants,entitlements,anddonationsisrecognizedin thefiscalyearinwhichalleligibilityrequirementshavebeensatisfied. Proprietaryfundsdistinguishoperatingrevenuesandexpensesfromnonoperatingitems.Operatingrevenuesandexpenses generally result from providing services and producing and delivering goods in connection with a proprietary fund s principalongoingoperations.theprincipaloperatingrevenuesoftheutilitiescommissionenterprisefundsarechargesto customers for sales and services. The Utilities Commission also recognizes as operating revenues tap fees which are intended to recover the cost of connecting new customers to the water or sewer systems. Operating expenses for enterprise funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenuesandexpensesnotmeetingthisdefinitionarereportedasnonoperatingrevenuesandexpenses. D.BudgetaryData The Utilities Commission s budgets are adopted as required by the North Carolina General Statutes. The Utilities Commission operates under an annual budget ordinance that provides for revenues and appropriations of the electric operation,wateroperation,seweroperation,andgasoperation.allannualappropriationslapseatthefiscalyearend.the budgetordinancemustbeadoptedbyjuly1ofthefiscalyearorthegoverningboardmustadoptaninterimbudgetthat coversthattimeuntiltheannualordinancecanbeadopted. Budgetarycontrolisexercisedatthefundlevel.Thebudgetsarepreparedonthemodifiedaccrualbasisasrequiredby NorthCarolinalaw,exceptthatbaddebtexpenseandchangesinaccruedvacationarealsobudgeted.Amendmentsare requiredforanyrevisionsthataltertotalexpendituresofanyfund.allamendmentsmustbeapprovedbytheboardof CommissionersandtheGreenvilleCityCouncil.DuringthefiscalyearendedJune30,2015,oneamendmenttotheoriginal budgetwasnecessary. Forbudgetingpurposes,theUtilitiesCommissionadoptsordinancesforcapitalprojectsfundsintheenterprisefundsto segregatemoniesusedfortheconstructionofcapitalassets,iffundingisfromexternalsources(debtproceeds,federaland State grants), or if the project construction period will extend over multiple fiscal years. The capital projects funds are consolidatedwiththeenterpriseoperatingfundsforreportingpurposes. E.Assets,Liabilities,DeferredOutflows/InflowsofResourcesandFundEquity DepositsandInvestments AlldepositsoftheUtilitiesCommissionaremadeinboarddesignatedofficialdepositoriesandaresecuredasrequiredby G.S The Utilities Commission may designate, as an official depository, any bank or savings association whose principal office is located in North Carolina. Also, the Utilities Commission may establish time deposit accounts such as NOWandSuperNOWaccounts,moneymarketaccounts,andcertificatesofdeposit. Statelaw[G.S.15930(c)]authorizestheUtilitiesCommissiontoinvestinobligationsoftheUnitedStatesorobligations fullyguaranteedbothastoprincipalandinterestbytheunitedstates;obligationsofthestateofnorthcarolina;bondsand notesofanynorthcarolinalocalgovernmentorpublicauthority;obligationsofcertainnonguaranteedfederalagencies; A-19

86 GREENVILLEUTILITIESCOMMISSION OFTHECITYOFGREENVILLE,NORTHCAROLINA NotestotheFinancialStatements FortheYearEndedJune30,2015 certain high quality issues of commercial paper and bankers' acceptances; and the North Carolina Capital Management Trust(NCCMT),anSECregisteredmoneymarketmutualfund.TheUtilitiesCommission sinvestmentsarereportedatfair valueasdeterminedbyquotedmarketprices.thesecuritiesofthenccmtcashportfolio,asecregistered(2a7)money marketmutualfund,arevaluedatfairvalue,whichisthenccmt sshareprice.thenccmttermportfolio ssecuritiesare valuedatfairvalue. InaccordancewithStatelaw,theUtilitiesCommissionhasinvestedinsecuritieswhicharecallableandwhichprovidefor periodic interest rate increases in specific increments until maturity. These investments are reported at fair value as determinedbyquotedmarketprices. GeneralStatute authorizestheUtilitiesCommissiontoestablishanOtherPostemploymentBenefit(OPEB)Trust andg.s.15930(g)authorizestheutilitiescommissiontomakecontributionstothetrust.g.s stipulatesthatthe assetsoftheutilitiescommission sopebtrustfundmaybeinvestedasprovideding.s.15930(c)ordepositedwiththe State Treasurer for investment pursuant to G.S (b)(16) and (8). Funds submitted to the State Treasurer are managed in three different subfunds, the State Treasurer s Short Term Investment Fund (STIF) consisting of short to intermediatetreasuries,agenciesandcorporateissuesauthorizedbyg.s ;thelongterminvestmentfund(ltif) consistingofinvestmentgradecorporatesecurities,treasuries,andagencies;andblackrock sglobalexusalphatiltsfund BandBlackRock srussell3000alphatiltsfundbauthorizedunderg.s (b)(8). CashandCashEquivalents Cash and cash equivalents and investments of the individual funds are combined to form several pools of cash and investments.allcashequivalentsareaccountedforatcost,whichapproximatesmarket.investmentsarereportedatfair value.interestearnedasaresultofpoolingisdistributedtotheappropriatefundsbasedontheirequityinthepool. For purposes of the statements of cash flows, the Utilities Commission considers all highly liquid investments with an originalmaturityofthreemonthsorlesswhenpurchasedtobecashequivalents.investments,aspresentedinthefinancial statements,consistofsecuritiesauthorizedbystatelawwithanoriginalmaturitygreaterthanthreemonths. RestrictedAssets The Utilities Commission requires customers to pay deposits on utility accounts as security against nonpayment. These depositsarerestrictedtotheserviceforwhichthedepositwascollected. TheUtilitiesCommissionissuesRevenueBondstofundcapitalprojects.Theproceedsfromtheseissuancesareplacedwith atrusteeforsafekeepinganddispersionasneeded.theamountofunspentbondproceeds,includinginterestearnings,is shownasarestrictedassetbecausetheiruseiscompletelyrestrictedtothepurposeforwhichthebondswereoriginally issued. The Utilities Commission charges customers requesting water and/or sewer service a onetime Capacity Fee, which is intendedtorecoveraproportionalshareofthecostofcapitalfacilitiesconstructedtoprovideservicecapacityfornew development,ornewcustomersconnectingtothewater/sewersystem.theamountofunspentcapacityfeerevenueis shown as a restricted asset because its use is completely restricted to capacity related capital investment and/or debt serviceoncapacityrelatedcapitalfinancing. UtilitiesCommissionRestrictedCash Customerdeposits $3,737,305 Unexpendedbondproceeds 4,261,850 Unexpendedcapacityfees 2,467,957 $10,467,112 A-20

87 GREENVILLEUTILITIESCOMMISSION OFTHECITYOFGREENVILLE,NORTHCAROLINA NotestotheFinancialStatements FortheYearEndedJune30,2015 TheUtilitiesCommission snetpensionassetisclassifiedasarestrictedassetbecauseitsuseisrestrictedtotheprovisionof pensionbenefitstoretiredemployees. AllowanceforDoubtfulAccounts Allreceivablesthathistoricallyexperienceuncollectibleaccountsareshownnetofanallowancefordoubtfulaccounts.The Utilities Commission provides allowances for uncollectible utility receivables for all balances outstanding more than 150 days. InventoriesandPrepaidExpenses Inventories of materials, supplies and natural gas stored for future resale are reported at the lower of cost (weighted average) or market, which approximates the firstin, firstout (FIFO) method. The materials and supplies inventories are beingheldforfutureuseandnotresaleandareexpensedwhenconsumedratherthanwhenpurchased. Certainpaymentstovendorsreflectcostsapplicabletofutureaccountingperiodsandarerecordedasprepaiditemsinboth governmentwideandfundfinancialstatementsandexpensedastheitemsareused. CapitalAssets CapitalassetsaredefinedbytheUtilitiesCommissionasassetswithaninitialcostofmorethan$5,000andanestimated usefullifeinexcessofatleasttwoyears.capitalassetspurchasedorconstructedarerecordedatcost.contributedcapital assetsarerecordedatestimatedfairmarketvalueatthetimetheassetisreceived.maintenanceandrepairsarechargedto expenseasincurredandrenewalsandbettermentsarecapitalizedatcostasincurred.capitalassetsaredepreciatedover theirestimatedusefullivesunlesstheyareinexhaustibleorareintangibleassetswithindefiniteusefullives.capitalassets are depreciated using a method which approximates the straightline method. Interest expense is capitalized on constructioninprogresstotheextentthatitexceedsinterestincome.capitalizedassetsoftheutilitiescommissionare depreciatedoverthefollowingestimatedusefullives: Landimprovements10years Buildings33years Furnitureandofficeequipment10years EnterpriseResourcePlanningsoftware15years Othercomputersoftware3years Vehiclesandequipment3to20years Distributionsystems20to50years Transmissionsystems20to25years DeferredOutflows/InflowsofResources In addition to assets, the statement of net position will sometimes report a separate section for deferred outflows of resources.thisseparatefinancialstatementelement,deferredoutflowsofresources,representsaconsumptionofnet positionthatappliestoafutureperiodandsowillnotberecognizedasanexpenseorexpenditureuntilthen.theutilities Commissionhastwoitemsthatmeetthiscriterion,contributionsmadetothepensionplaninthe2015fiscalyear,resulting from the implementation of GASB Statement 71, and unamortized losses on bond defeasance for refunding bonds. In addition to liabilities, the statement of net position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, Deferred Inflows of Resources, represents an acquisition of net positionthatappliestoafutureperiodandsowillnotberecognizedasrevenueuntilthen.theutilitiescommissionhas oneitemthatmeetsthecriterion,deferralsofpensionexpensethatresultfromtheimplementationofgasbstatement68. A-21

88 GREENVILLEUTILITIESCOMMISSION OFTHECITYOFGREENVILLE,NORTHCAROLINA NotestotheFinancialStatements FortheYearEndedJune30,2015 LongTermObligations In the governmentwide financial statements and the fund financial statements, longterm debt and other longterm obligations are reported as liabilities in the statement of net position. Bond premiums and discounts are deferred and amortizedoverthelifeofthebondsusingthestraightlinemethodthatapproximatestheeffectiveinterestmethod.bonds payablearereportednetoftheapplicablebondpremiumsordiscount.bondissuancecosts,exceptforprepaidinsurance costs,areexpensedinthereportingperiodinwhichtheyareincurred.prepaidinsurancecostsareexpensedoverthelifeof thedebt. CompensatedAbsences The vacation policy of the Utilities Commission provides for accumulation of earned vacation leave to fulltime and designated parttime employees based upon the number of years of service with such leave being fully vested when earned.thecostofvacationleaveisrecordedwhenearned.compensatedabsencesareaccountedforonafirstin,first out(fifo)basisandareliquidatedintheenterprisefunds.theportionofthevacationleavethatisestimatedtobeusedin thenextfiscalyearhasbeendesignatedasacurrentliability. TheUtilitiesCommission'ssickleavepolicyprovidesforanunlimitedaccumulationofearnedsickleave.Sickleavedoesnot vest, but any unused sick leave accumulated at the time of retirement may be used in the determination of length of serviceforretirementbenefitpurposes.sincetheutilitiescommissionhasnoobligationfortheaccumulatedsickleave untilitisactuallytaken,noaccrualforsickleavehasbeenmade. NetPosition Net position in the governmentwide and fund financial statements is classified as net investment in capital assets; restricted(ifany);andunrestricted.restrictednetpositionrepresentsconstraintsonresourcesthatareeitherexternally imposedbycreditors,grantors,contributors,orlawsorregulationsofothergovernmentsorimposedbylawthroughstate statute. Pensions Forpurposesofmeasuringthenetpensionasset,deferredoutflowsofresourcesanddeferredinflowsofresourcesrelated to pensions, and pension expense, information about the fiduciary net position of the Local Governmental Employees RetirementSystem(LGERS)andadditionsto/deductionsfromLGERS fiduciarynetpositionhavebeendeterminedonthe samebasisastheyarereportedbylgers.forthispurpose,planmembercontributionsarerecognizedintheperiodin which the contributions are due. The Utilities Commission s employer contributions are recognized when due and the UtilitiesCommissionhasalegalrequirementtoprovidethecontributions.Benefitsandrefundsarerecognizedwhendue andpayableinaccordancewiththetermsoflgers.investmentsarereportedatfairvalue. Note2 DetailNotesonAllFunds A.Assets Deposits All the deposits of the Utilities Commission are either insured or collateralized under the pooling method. The pooling method is a collateral pool under which all uninsured deposits are collateralized with securities held by the State Treasurer's agent in the name of the State Treasurer. Since the State Treasurer is acting in a fiduciary capacity for the Utilities Commission, these deposits are considered to be held by the Utilities Commission's agent in the Utilities Commission's name. The amount of the pledged collateral is based on an approved averaging method for noninterest bearingdepositsandtheactualcurrentbalanceforinterestbearingdeposits.depositoriesusingthepoolingmethodreport tothestatetreasurertheadequacyoftheirpooledcollateralcoveringuninsureddeposits.thestatetreasurerdoesnot A-22

89 GREENVILLEUTILITIESCOMMISSION OFTHECITYOFGREENVILLE,NORTHCAROLINA NotestotheFinancialStatements FortheYearEndedJune30,2015 confirmthisinformationwiththeutilitiescommissionorwiththeescrowagent.becauseoftheinabilitytomeasurethe exact amount of collateral pledged for the Utilities Commission under the pooling method, the potential exists for undercollateralization, and this risk may increase in periods of high cash flows. However, the State Treasurer of North Carolina enforces strict standards of financial stability for each depository that collateralizes public deposits under the pooling method. The State Treasurer enforces standards of minimum capitalization for all pooling method financial institutionsandmonitorsthemforcompliance.theutilitiescommissioncomplieswiththeprovisionsofg.s.15931when designating official depositories and verifying that deposits are properly secured. The Utilities Commission's investment policyspecifiesthatdeposittypesecurities(i.e.certificatesofdepositandcheckingaccounts)are100%collateralizedas requiredbynorthcarolinageneralstatutes. At June 30, 2015, the Utilities Commission's deposits had a carrying amount of $64,289,771 and a bank balance of $65,105,672.Ofthebankbalance,$1,275,554wascoveredbyFederaldepositoryinsurance,and$63,830,118wascovered bycollateralheldunderthepoolingmethod.theutilitiescommission sdepositsincludecheckingaccounts,moneymarket accounts and $500,000 in certificates of deposit which are reported as longterm investments on the statement of net position.theutilitiescommission'scashonhandatjune30,2015consistedofvariouspettycashfundstotaling$4,300. Investments AtJune30,2015,theUtilitiesCommissionhadthefollowinginvestmentsandmaturities. LessThan InvestmentType FairValue Months Months 1 5Years BankCertificatesofDeposit $ 500,000 $ $ $ 500,000 USGovernmentAgencies 8,446,246 8,446,246 NCCapitalManagementTrust CashPortfolio 4,495,128 4,495,128 NCCapitalManagementTrust TermPortfolio 600, ,678 Total $ 14,042,052 $ $5,095,806 $ $ 8,946,246 Interest Rate Risk. As a means of limiting its exposure to fair value losses arising from rising interest rates, the Utilities Commission sinvestmentpolicylimitsinvestmentswithmaturitiesexceedingthreeyearstoustreasuries,usagenciesand InstrumentalitiesunlessexpresslyapprovedbytheUtilitiesCommissionBoard.Also,theUtilitiesCommission'sinvestment policy advocates purchasesof securities to be laddered with staggered maturitydates and limits all securities to a final maturityofnomorethanfiveyears. Credit Risk. The Utilities Commission's investment policy limits the securities available for purchase to the following:us Treasuries; US Agencies; NC Capital Management Trust; Money Market Accounts; Certificates of Deposit; Banker's Acceptances; Commercial Paper; and NC and Local Government Securities with AAA rating or better. The Utilities Commission'sinvestmentpolicyexpresslyprohibitsinvestmentin:repurchaseagreements;commingledinvestmentpools establishedbygs160a464;participatingsharesinamutualfundforlocalgovernment;andevidencesofownershipof futureinterestandprincipalpaymentsofdirectobligationsoftheusgovernment.theutilitiescommission sinvestments inthenccapitalmanagementtrustcashportfoliocarriedacreditratingofaaambystandard&poor sasofjune30, The Utilities Commission s investment in the NC Capital Management Trust Term Portfolio is unrated. The Term Portfolio is authorized to invest in obligations of the U.S. government and agencies, and in high grade money market instrumentsaspermittedundernorthcarolinageneralstatutes15930asamended. Custodial Credit Risk. For an investment, the custodial credit risk is the risk that in the event of the failure of the counterparty,theutilitiescommissionwillnotbeabletorecoverthevalueofitsinvestmentsorcollateralsecuritiesthat areinthepossessionofanoutsideparty.theutilitiescommission'sinvestmentpolicydoesnotallowinvestmentinany securitythatwouldnotbeheldintheutilitiescommission'sname. ConcentrationofCreditRisk.TheUtilitiesCommission'sinvestmentpolicylimitstheamountofthetotalportfoliothatcan beinvestedinanyonetypeofinvestmenttothefollowingpercentages:ustreasuries 100%;USAgencies 100%;Capital A-23

90 GREENVILLEUTILITIESCOMMISSION OFTHECITYOFGREENVILLE,NORTHCAROLINA NotestotheFinancialStatements FortheYearEndedJune30,2015 ManagementTrust 100%;MoneyMarketAccounts 100%;CertificatesofDeposit 70%;Banker'sAcceptances 45%; CommercialPaper 50%;NCandLocalGovernmentSecuritieswithAAAratingorbetter 20%.Inaddition,theUtilities Commission'sinvestmentpolicylimitsthetotalamountthatcanbeinvestedinanyoneagency,institution,orentity. AtJune30,2015theUtilitiesCommissionOPEBTrusthad$1,897,947investedintheStateTreasurer slocalgovernment OtherPostEmploymentBenefits(OPEB)TrustpursuanttoG.S TheStateTreasurer sopebtrustmayinvestin publicequitiesandbothlongtermandshorttermfixedincomeobligationsasdeterminedbythestatetreasurerpursuant tothegeneralstatutes.atyearend,theutilitiescommission sopebtrustwasinvestedasfollows:statetreasurer sshort TermInvestmentFund(STIF)24%,whichisreportedascashandcashequivalents;StateTreasurer slongterminvestment Fund(LTIF)10%andBlackRock sglobalexusalphatiltsfundbandblackrock srussell3000alphatiltsfundb66%(the equitiesweresplitwith75%indomesticsecuritiesand25%ininternationalsecurities). InterestRateRisk.TheUtilitiesCommissiondoesnothaveaformalinvestmentinterestratepolicyfortheOPEBTrustFund that manages its exposure to fair value losses arising from increasing interest rates. The State Treasurer s Short Term InvestmentFund(STIF)isunratedandhadaweightedaveragematurityof1.5yearsatJune30,2015.TheStateTreasurer s LongTermInvestmentFund(LTIF)isunratedandhadaweightedaveragematurityof18.0yearsatJune30,2015. CreditRisk.TheUtilitiesCommissiondoesnothaveaformalinvestmentpolicyregardingcreditriskfortheOPEBTrustFund. TheSTIFisunratedandauthorizedunderNCGeneralStatute TheStateTreasurer sstifisinvestedinhighlyliquid fixedincomesecuritiesconsistingprimarilyofshorttointermediatetreasuries,agencies,andmoneymarketinstruments. TheLTIFisunratedandauthorizedunderNCGeneralStatute and TheStateTreasurer sltifisinvested intreasuries,agenciesandcorporatebondswithlongertermmaturities. Receivables ReceivablesatthegovernmentwidelevelforthebusinesstypeactivitiesatJune30,2015,wereasfollows: 2015 Billedcustomeraccounts $24,409,441 Estimatedunbilledcustomerservices 13,883,247 Otherreceivables 320,521 Totalaccountsreceivable 38,613,209 Allowanceforuncollectibleaccounts (9,777,684) Netaccountsreceivable $28,835,525 The allowance for uncollectible accounts is a cumulative amount of all utility balances outstanding more than 150 days regardlessoftheoriginalbillingdate.duringfiscalyear2015theallowanceincreasedby$461,240,toatotaloutstanding amountof$9,777,684. TheduefromothergovernmentsthatisowedtotheUtilitiesCommissionatJune30,2015consistsofthefollowing: 2015 Salestaxrefund $2,021,974 Utilitiessalestaxrefunds 32,050 EnvironmentalProtectionAgencygrant 21,210 Totalduefromothergovernments $2,075,234 The Commission has entered into an agreement to supply supplemental water to Stokes Regional Water Corporation (SRWC).TheagreementrequiredtheCommissiontoconstructawatertransmissionmaintoconnectwithSRWCandto finance a portion of the project s cost. At the end of the fiscal year the note receivable due from SRWC was $414,022 payableinmonthlyinstallmentsfor15yearsata5.25%interestrate. A-24

91 GREENVILLEUTILITIESCOMMISSION OFTHECITYOFGREENVILLE,NORTHCAROLINA NotestotheFinancialStatements FortheYearEndedJune30,2015 CapitalAssets CapitalassetactivityfortheyearendedJune30,2015,wasasfollows: June30, June30, 2014 Additions Deletions Transfers 2015 Capitalassetsnotbeingdepreciated: Land $3,595,641 $1,800 Easements 51,382 Constructioninprogress 46,330,239 17,094,270 Totalcapitalassetsnotbeingdepreciated: 49,977,262 17,096,070 $ $ 31,456 $3,628,897 (14,590) 36,792 (7,965,447) 55,459,062 (7,948,581) 59,124,751 Capitalassetsbeingdepreciated: Landimprovements 2,720, ,480 Generalplant 12,690,606 97,132 Utilityplant 124,910, ,328 Computersoftware 7,059,040 92,205 (16,866) 2,854,344 12,787,738 5,420, ,985,398 1,100,007 8,251,252 Vehiclesandequipment 22,110,192 2,591,253 (591,603) 400,982 24,510,824 Distributionsystems 410,108,927 5,413,884 Transmissionsystems 33,097,055 74,885 Computerhardware 2,867,034 52,318 Fiberoptics 2,067,818 52, , ,422,137 33,171, ,991 3,064,343 2,120,790 Totalcapitalassetsbeingdepreciated: 617,632,331 9,179,457 (591,603) 7,948, ,168,766 Lessaccumulateddepreciationfor: Landimprovements 966,714 84,303 1,051,017 Generalplant 5,888, ,398 6,220,943 Utilityplant 51,185,679 4,004,548 1,994,649 57,184,876 Computersoftware 6,871, ,487 7,271,050 Vehiclesandequipment 19,046,302 1,708,205 (591,603) (14,499) 20,148,405 Distributionsystems 200,581,606 10,381,898 (1,994,649) 208,968,855 Transmissionsystems 20,031, ,888 20,967,715 Computerhardware 2,544, ,435 14,499 2,746,138 Fiberoptics 910, ,040 1,016,560 Totalaccumulateddepreciation 308,026,960 18,140,202 (591,603) 325,575,559 Totalcapitalassetsbeingdepreciated,net 309,605, ,593,207 NetCapitalAssets $359,582,633 $367,717,958 DepreciationexpenseischargedtotheElectric,Water,Sewer,andGasFunds.Amountschargedtothefourfundsforthe yearendedjune30,2015totaled$7,677,763,$3,892,751,$4,863,901,and$1,705,787,respectively. A-25

92 GREENVILLEUTILITIESCOMMISSION OFTHECITYOFGREENVILLE,NORTHCAROLINA NotestotheFinancialStatements FortheYearEndedJune30,2015 CapitalassetactivitybyfundfortheyearendedJune30,2015,wasasfollows: ElectricFund June30, June30, 2014 Additions Deletions Transfers 2015 Capitalassetsnotbeingdepreciated: Land $1,077,581 Easements 20,891 $ Constructioninprogress 10,871,376 5,569,810 Totalcapitalassetsnotbeingdepreciated: 11,969,848 5,569,810 $ $ $1,077,581 20,891 (2,930,143) 13,511,043 (2,930,143) 14,609,515 Capitalassetsbeingdepreciated: Landimprovements 201,954 Generalplant 5,552,193 24,283 Computersoftware 3,479, ,954 5,576, ,606 4,168,549 Vehiclesandequipment 10,385,899 1,388,280 (362,160) 29,140 11,441,159 Distributionsystems 181,503,003 4,323,825 Transmissionsystems 33,097,055 74,885 Computerhardware 2,227,807 41,854 Fiberoptics 1,677,551 52,972 2,105, ,931,872 33,171, ,994 2,385,655 1,730,523 Totalcapitalassetsbeingdepreciated: 238,125,405 5,906,099 (362,160) 2,938, ,608,128 Lessaccumulateddepreciationfor: Landimprovements 201, ,954 Generalplant 3,140, ,729 3,264,831 Computersoftware 3,433, ,003 3,591,231 Vehiclesandequipment 8,668, ,267 (362,160) (2,958) 9,242,238 Distributionsystems 118,623,564 5,281, ,905,399 Transmissionsystems 20,031, ,888 20,967,715 Computerhardware 1,965, ,515 11,599 2,128,469 Fiberoptics 710,838 86, ,364 Totalaccumulateddepreciation 156,774,957 7,677,763 (362,160) 8, ,099,201 Totalcapitalassetsbeingdepreciated,net 81,350,448 82,508,927 NetCapitalAssets $93,320,296 $97,118,442 A-26

93 GREENVILLEUTILITIESCOMMISSION OFTHECITYOFGREENVILLE,NORTHCAROLINA NotestotheFinancialStatements FortheYearEndedJune30,2015 WaterFund June30, June30, 2014 Additions Deletions Transfers 2015 Capitalassetsnotbeingdepreciated: Land $579,832 Easements 14,590 $ Constructioninprogress 3,554,117 1,452,064 Totalcapitalassetsnotbeingdepreciated: 4,148,539 1,452,064 $ $ $579,832 14,590 (1,912,760) 3,093,421 (1,912,760) 3,687,843 Capitalassetsbeingdepreciated: Landimprovements 2,369,419 Generalplant 2,463,980 24,283 Utilityplant 50,358, ,224 Computersoftware 1,237,794 44,450 2,369,419 2,488,263 4,940,141 55,483, ,167 1,423,411 Vehiclesandequipment 3,675, ,264 (17,709) 108,791 4,050,826 Distributionsystems 83,272, ,563 Computerhardware 186,570 2,616 Fiberoptics 186,487 (3,305,042) 80,295,168 7, , ,487 Totalcapitalassetsbeingdepreciated: 143,751, ,400 (17,709) 1,892, ,493,154 Lessaccumulateddepreciationfor: Landimprovements 632,269 69, ,524 Generalplant 920,587 72, ,372 Utilityplant 20,910,779 1,676,863 1,994,649 24,582,291 Computersoftware 1,237,759 37,158 1,274,917 Vehiclesandequipment 3,288, ,067 (17,709) (21,178) 3,486,022 Distributionsystems 29,688,581 1,782,241 (1,994,649) 29,476,173 Computerhardware 171,167 9, ,948 Fiberoptics 111,679 9, ,004 Totalaccumulateddepreciation 56,961,663 3,892,751 (17,709) (20,454) 60,816,251 Totalcapitalassetsbeingdepreciated,net 86,789,494 85,676,903 NetCapitalAssets $90,938,033 $ 89,364,746 A-27

94 GREENVILLEUTILITIESCOMMISSION OFTHECITYOFGREENVILLE,NORTHCAROLINA NotestotheFinancialStatements FortheYearEndedJune30,2015 SewerFund June30, June30, 2014 Additions Deletions Transfers 2015 Capitalassetsnotbeingdepreciated: Land $1,633,818 Easements 14,590 $ Constructioninprogress 28,718,832 3,364,079 Totalcapitalassetsnotbeingdepreciated: 30,367,240 3,364,079 $ $ 31,456 $1,665,274 (14,590) (2,856,984) 29,225,927 (2,840,118) 30,891,201 Capitalassetsbeingdepreciated: Landimprovements 109,570 Generalplant 2,060,552 24,283 Utilityplant 65,785, ,351 Computersoftware 1,009,656 47,755 (16,866) 92,704 2,084, ,000 66,592, ,167 1,198,578 Vehiclesandequipment 5,269, ,453 (190,621) 124,246 5,594,492 Distributionsystems 109,992, ,850 Computerhardware 166,889 2,616 Fiberoptics 101,889 2,099, ,288,010 7, , ,889 Totalcapitalassetsbeingdepreciated: 184,496, ,308 (190,621) 2,835, ,129,579 Lessaccumulateddepreciationfor: Landimprovements 92,704 92,704 Generalplant 752,102 60, ,533 Utilityplant 26,676,282 2,017,950 28,694,232 Computersoftware 1,009,622 37,819 1,047,441 Vehiclesandequipment 4,592, ,884 (190,621) (5,723) 4,715,625 Distributionsystems 36,189,092 2,413,666 38,602,758 Computerhardware 151,486 9, ,268 Fiberoptics 44,001 5,094 49,095 Totalaccumulateddepreciation 69,507,374 4,863,901 (190,621) (4,998) 74,175,656 Totalcapitalassetsbeingdepreciated,net 114,989, ,953,923 NetCapitalAssets $145,356,638 $144,845,124 A-28

95 GREENVILLEUTILITIESCOMMISSION OFTHECITYOFGREENVILLE,NORTHCAROLINA NotestotheFinancialStatements FortheYearEndedJune30,2015 GasFund June30, June30, 2014 Additions Deletions Transfers 2015 Capitalassetsnotbeingdepreciated: Land $304,410 $1,800 Easements 1,311 Constructioninprogress 3,185,914 6,708,317 Totalcapitalassetsnotbeingdepreciated: 3,491,635 6,710,117 $ $ $306,210 1,311 (265,560) 9,628,671 (265,560) 9,936,192 Capitalassetsbeingdepreciated: Landimprovements 39, ,480 Generalplant 2,613,881 24,283 Utilityplant 8,766, ,753 Computersoftware 1,331, ,267 2,638,164 8,909, ,067 1,460,714 Vehiclesandequipment 2,779, ,256 (21,113) 138,805 3,424,347 Distributionsystems 35,340, ,646 Computerhardware 285,768 5,232 Fiberoptics 101,891 35,907,087 14, , ,891 Totalcapitalassetsbeingdepreciated: 51,258,997 1,417,650 (21,113) 282,371 52,937,905 Lessaccumulateddepreciationfor: Landimprovements 39,787 15,048 54,835 Generalplant 1,075,754 74,453 1,150,207 Utilityplant 3,598, ,735 3,908,353 Computersoftware 1,190, ,507 1,357,461 Vehiclesandequipment 2,497, ,987 (21,113) 15,360 2,704,520 Distributionsystems 16,080, ,156 16,984,525 Computerhardware 256,196 17,806 1, ,453 Fiberoptics 44,002 5,095 49,097 Totalaccumulateddepreciation 24,782,966 1,705,787 (21,113) 16,811 26,484,451 Totalcapitalassetsbeingdepreciated,net 26,476,031 26,453,454 NetCapitalAssets $29,967,666 $ 36,389,646 A-29

96 GREENVILLEUTILITIESCOMMISSION OFTHECITYOFGREENVILLE,NORTHCAROLINA NotestotheFinancialStatements FortheYearEndedJune30,2015 Asummaryofcapitalassets,byfund,atJune30,2015isasfollows: Electric Water Sewer Gas Total AtJune30,2015 Land $1,077,581 $579,832 $1,665,274 $306,210 $3,628,897 Easements 20,891 14,590 1,311 36,792 Landimprovements 201,954 2,369,419 92, ,267 2,854,344 Generalplant 5,576,476 2,488,263 2,084,835 2,638,164 12,787,738 Utilityplant 55,483,145 66,592,317 8,909, ,985,398 Computersoftware 4,168,549 1,423,411 1,198,578 1,460,714 8,251,252 Vehiclesandequipment 11,441,159 4,050,826 5,594,492 3,424,347 24,510,824 Distributionsystems 187,931,872 80,295, ,288,010 35,907, ,422,137 Transmissionsystems 33,171,940 33,171,940 Computerhardware 2,385, , , ,499 3,064,343 Fiberoptics 1,730, , , ,891 2,120, ,706, ,087, ,794,853 53,245, ,834,455 Lessaccumulateddepreciation (164,099,201) (60,816,251) (74,175,656) (26,484,451) (325,575,559) 83,607,399 86,271, ,619,197 26,760, ,258,896 Constructioninprogress 13,511,043 3,093,421 29,225,927 9,628,671 55,459,062 NetCapitalAssets $97,118,442 $ 89,364,746 $144,845,124 $36,389,646 $367,717,958 ConstructionCommitments The Utilities Commission has active construction projects as of June 30, At yearend, the Utilities Commission s commitmentswithcontractorsareasfollows: Remaining Commitments ProjectName Spenttodate Electricdistributionsystem $4,213,830 $4,292,069 Watertreatmentanddistributionsystem 199,958 1,519,671 Sewertreatmentandcollectionsystem 25,281,077 2,708,715 Naturalgasdistributionsystem 5,909, ,514 Totals $35,604,648 $9,406,969 B.Liabilities AccountsPayableandAccruedExpenses AccountspayableandaccruedexpensesatthegovernmentwidelevelatJune30,2015,wereasfollows: Salariesand Benefits Other Total Businesstypeactivities: Vendors Electric $16,307,750 $434,327 $16,891 $16,758,968 Water 460, ,467 6, ,671 Sewer 898, ,367 2,815 1,168,072 Gas 2,239, ,669 4,554 2,485,571 Total $19,906,149 $1,229,830 $30,303 $21,166,282 A-30

97 GREENVILLEUTILITIESCOMMISSION OFTHECITYOFGREENVILLE,NORTHCAROLINA NotestotheFinancialStatements FortheYearEndedJune30,2015 LongtermObligations PensionPlanandPostemploymentObligations LocalGovernmentalEmployees RetirementSystem PlanDescription TheUtilitiesCommissionisaparticipatingemployerinthestatewideLocalGovernmentalEmployees RetirementSystem (LGERS),acostsharingmultipleemployerdefinedbenefitpensionplanadministeredbytheStateofNorthCarolina.LGERS membership is comprised of general employees and local law enforcement officers (LEOs) of participating local governmentalentities.article3ofg.s.chapter128assignstheauthoritytoestablishandamendbenefitprovisionstothe NorthCarolinaGeneralAssembly.ManagementoftheplanisvestedintheLGERSBoardofTrustees,whichconsistsof13 members nine appointed by the Governor, one appointed by the State Senate, one appointed by the State House of Representatives, and the State Treasurer and State Superintendent, who serve as exofficio members. The Local Governmental Employees Retirement System is included in the Comprehensive Annual Financial Report (CAFR) for the StateofNorthCarolina.TheState scafrincludesfinancialstatementsandrequiredsupplementaryinformationforlgers. That report may be obtained by writing to the Office of the State Controller, 1410 Mail Service Center, Raleigh, North Carolina ,bycalling(919) ,oratwww.osc.nc.gov. BenefitsProvided LGERSprovidesretirementandsurvivorbenefits.Retirementbenefitsaredeterminedas1.85%ofthemember saverage finalcompensationtimesthemember syearsofcreditableservice.amember saveragefinalcompensationiscalculatedas theaverageofamember sfourhighestconsecutiveyearsofcompensation.planmembersareeligibletoretirewithfull retirementbenefitsatage65withfiveyearsofcreditableservice,atage60with25yearsofcreditableservice,oratany agewith30yearsofcreditableservice.planmembersareeligibletoretirewithpartialretirementbenefitsatage50with 20yearsofcreditableserviceoratage60withfiveyearsofcreditableservice(age55forfirefighters).Survivorbenefitsare availabletoeligiblebeneficiariesofmemberswhodiewhileinactiveserviceorwithin180daysoftheirlastdayofservice and who have either completed 20 years of creditable service regardless of age (15 years of creditable service for firefightersandrescuesquadmemberswhoarekilledinthelineofduty)orhavecompletedfiveyearsofserviceandhave reachedage60.eligiblebeneficiariesmayelecttoreceiveamonthlysurvivor salternatebenefitforlifeorareturnofthe member s contributions. The plan does not provide for automatic postretirement benefit increases. Increases are contingentuponactuarialgainsoftheplan. Contributions ContributionprovisionsareestablishedbyGeneralStatute12830andmaybeamendedonlybytheNorthCarolinaGeneral Assembly.UtilitiesCommissionemployeesarerequiredtocontribute6%oftheircompensation.Employercontributions are actuarially determined as an amount that, when combined with employee contributions, is expected to finance the costsofbenefitsearnedbyemployeesduringtheyear,andaresetannuallybythelgersboardoftrustees.theutilities Commission scontractuallyrequiredcontributionratefortheyearendedjune30,2015was7.07%forgeneralemployees. ContributionstothepensionplanfromtheUtilitiesCommissionwere$1,789,817fortheyearendedJune30,2015. Refunds of Contributions Utilities Commission employees who have terminated service as a contributing member of LGERS,mayfileanapplicationforarefundoftheircontributions.Bystatelaw,refundstomemberswithatleastfiveyears ofserviceinclude4%interest.statelawrequiresa60daywaitingperiodafterserviceterminationbeforetherefundmay bepaid.theacceptanceofarefundpaymentcancelstheindividual srighttoemployercontributionsoranyotherbenefit providedbylgers. A-31

98 GREENVILLEUTILITIESCOMMISSION OFTHECITYOFGREENVILLE,NORTHCAROLINA NotestotheFinancialStatements FortheYearEndedJune30,2015 Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions AtJune30,2015,theUtilitiesCommissionreportedanassetof$2,480,945foritsproportionateshareofthenetpension asset.the net pension asset was measured as of June 30, 2014.The total pension liability used to calculate the net pensionassetwasdeterminedbyanactuarialvaluationasofdecember31,2013.thetotalpensionliabilitywasthenrolled forwardtothemeasurementdateofjune30,2014utilizingupdateproceduresincorporatingtheactuarialassumptions. TheUtilitiesCommission sproportionofthenetpensionassetwasbasedonaprojectionoftheutilitiescommission slong termshareoffuturepayrollcoveredbythepensionplan,relativetotheprojectedfuturepayrollcoveredbythepension planofallparticipatinglgersemployers,actuariallydetermined.atjune30,2014,theutilitiescommission sproportion was0.421%,whichwasanincreaseof0.001%fromitsproportionmeasuredasofjune30,2013. FortheyearendedJune30,2015,theUtilitiesCommissionrecognizedpensionexpenseof$175,535.AtJune30,2015,the UtilitiesCommissionreporteddeferredoutflowsofresourcesanddeferredinflowsofresourcesrelatedtopensionsfrom thefollowingsources: Deferred Outflowsof Resources Deferred Inflowsof Resources Differencesbetweenexpectedandactualexperience $ $ 271,087 Net difference between projected and actual earnings on pension plan investments 5,775,583 Changes in proportion and differences between employer contributions and 79,770 proportionateshareofcontributions Employercontributionssubsequenttothemeasurementdate 1,789,817 Total $ 1,869,587 $ 6,046,670 $1,789,817 reported as deferred outflows of resources related to pensions resulting from Utilities Commission contributionssubsequenttothemeasurementdatewillberecognizedasanincreaseofthenetpensionassetintheyear endedjune30,2016.otheramountsreportedasdeferredoutflowsandinflowsofresourcesrelatedtopensionswillbe recognizedinpensionexpenseasfollows: YearendedJune30: Deferred Outflowsof Resources Deferred Inflowsof Resources 2016 $ 19,993 $ (1,511,837) ,993 (1,511,837) ,993 (1,511,837) ,791 (1,511,159) $ 79,770 $ (6,046,670) ActuarialAssumptions The total pension liability in the December 31, 2013 actuarial valuation was determined using the following actuarial assumptions,appliedtoallperiodsincludedinthemeasurement: Inflation 3.0percent Salaryincreases 4.25to8.55percent,includinginflationandproductivityfactor Investmentrateofreturn 7.25percent,netofpensionplaninvestmentexpense,includinginflation A-32

99 GREENVILLEUTILITIESCOMMISSION OFTHECITYOFGREENVILLE,NORTHCAROLINA NotestotheFinancialStatements FortheYearEndedJune30,2015 Theplancurrentlyusesmortalitytablesthatvarybyage,gender,employeegroup(i.e.general,lawenforcementofficer) and health status (i.e. disabled and healthy).the current mortality rates are based on published tables and based on studiesthatcoversignificantportionsoftheu.s.population.thehealthymortalityratesalsocontainaprovisiontoreflect futuremortalityimprovements. TheactuarialassumptionsusedintheDecember31,2013valuationwerebasedontheresultsofanactuarialexperience studyfortheperiodjanuary1,2005throughdecember31,2009. Future ad hoc COLA amounts are not considered to be substantively automatic and are therefore not included in the measurement. The projected longterm investment returns and inflation assumptions are developed through review of current and historical capital markets data, sellside investment research, consultant whitepapers, and historical performance of investment strategies.fixed income return projections reflect current yields across the U.S. Treasury yield curve and market expectations of forward yields projected and interpolated for multiple tenors and over multiple year horizons. Globalpublicequityreturnprojectionsareestablishedthroughanalysisoftheequityriskpremiumandthefixedincome return projections.other asset categories and strategies return projections reflect the foregoing and historical data analysis.these projections are combined to produce the longterm expected rate of return by weighting the expected futurerealratesofreturnbythetargetassetallocationpercentageandbyaddingexpectedinflation.thetargetallocation andbestestimatesofarithmeticrealratesofreturnforeachmajorassetclassasofjune30,2014aresummarizedinthe followingtable: LongTermExpected AssetClass TargetAllocation RealRateofReturn FixedIncome 36.0% 2.5% GlobalEquity 40.5% 6.1% RealEstate 8.0% 5.7% Alternatives 6.5% 10.5% Credit 4.5% 6.8% InflationProtection 4.5% 3.7% Total 100.0% Theinformationaboveisbasedon30yearexpectationsdevelopedwiththeconsultingactuaryforthe2013assetliability andinvestmentpolicystudyforthenorthcarolinaretirementsystems,includinglgers.thelongtermnominalratesof returnunderlyingtherealratesofreturnarearithmeticannualizedfigures.therealratesofreturnarecalculatedfrom nominalratesbymultiplicativelysubtractingalongterminflationassumptionof3.19%.allratesofreturnandinflationare annualized. AnewassetallocationpolicywasfinalizedduringthefiscalyearendedJune30,2014tobeeffectiveJuly1,2014.Thenew asset allocation policy utilizes different asset classes, changes in the structure of certain asset classes, and adopts new benchmarks.usingtheassetclasscategoriesintheprecedingtable,thenewlongtermexpectedarithmeticrealratesof returnare:fixedincome2.2%,globalequity5.8%,realestate5.2%,alternatives9.8%,credit6.8%andinflationprotection 3.4%. DiscountRate Thediscountrateusedtomeasurethetotalpensionliabilitywas7.25%.Theprojectionofcashflowsusedtodetermine thediscountrateassumedthatcontributionsfromplanmemberswillbemadeatthecurrentcontributionrateandthat contributions from employers will be made at statutorily required rates, actuarially determined. Based on these assumptions,thepensionplan sfiduciarynetpositionwasprojectedtobeavailabletomakeallprojectedfuturebenefit paymentsofthecurrentplanmembers.therefore,thelongtermexpectedrateofreturnonpensionplaninvestmentswas appliedtoallperiodsofprojectedbenefitpaymentstodeterminethetotalpensionliability. A-33

100 GREENVILLEUTILITIESCOMMISSION OFTHECITYOFGREENVILLE,NORTHCAROLINA NotestotheFinancialStatements FortheYearEndedJune30,2015 SensitivityoftheCity sproportionateshareofthenetpensionassettochangesinthediscountrate ThefollowingpresentstheCity sproportionateshareofthenetpensionassetcalculatedusingthediscountrateof7.25 percent,aswellaswhatthecity sproportionateshareofthenetpensionassetornetpensionliabilitywouldbeifitwere calculatedusingadiscountratethatisonepercentagepointlower(6.25percent)oronepercentagepointhigher(8.25 percent)thanthecurrentrate: 1%Decrease (6.25%) DiscountRate (7.25%) 1%Increase (8.25%) Utilities Commission s proportionate share of the net $8,421,399 ($2,480,943) ($11,660,365) pensionliability(asset) Pensionplanfiduciarynetposition Detailedinformationaboutthepensionplan sfiduciarynetpositionisavailableintheseparatelyissuedcomprehensive AnnualFinancialReport(CAFR)fortheStateofNorthCarolina. Otherpostemploymentbenefits PlanDescription The Utilities Commission administers a singleemployer defined benefit plan for postretirement health care and life insurancebenefitsforretiredordisabledemployees.anemployeeiseligibleforretirementwhenhe/shereaches50years ofageandhascompleted20yearsofserviceorreachesage60andhascompleted5yearsofservice.also,anemployeeis eligiblefordisabilityretirementwhenhe/shehascompleted5yearsofservice.uponservice,earlyordisabilityretirement as approved by the North Carolina Local Governmental Employees Retirement System and upon meeting the criteria established by the Utilities Commission, employees with a minimum of 5 continuous years of service with the Utilities CommissionifhiredbeforeJuly1,2011orwithaminimumof20continuousyearsofservicewiththeUtilitiesCommission ifhiredonorafterjuly1,2011areeligibletocontinueinsurancecoverage.healthcareandprescriptiondrugsareprovided intheutilitiescommission sretireehealthcareplan.aretireelifeinsurancebenefitof$7,000isprovidedtothoseretirees whowerehiredpriortoaugust1,1975.theutilitiescommissionobtainspost65healthcarecoverageandlifeinsurance coveragethroughaprivateinsurerandselffundsthehealthcarecoverageforpre65retireesupto$200,000perperson peryear.aseparatereportwasnotissuedfortheplan. MembershipofthepostretirementbenefitplanconsistedofthefollowingatDecember31,2014,thedateofthelatest actuarialvaluation: Retireesanddependentsreceivingbenefits 160 Activemembers FundingPolicy TheUtilitiesCommission sobligationtocontributetothepostretirementbenefitplanisestablishedandmaybeamended bytheboardofcommissioners.membershiredpriortojuly1,2011whoretirewithatleast20yearsofservicecontribute 5%oftheestimatedcostforpre65healthcarecoveragefortheretiree.MembershiredpriortoJuly1,2011whoretire withlessthan20yearsofservicecontribute100%oftheestimatedcostforpre65healthcarecoveragefortheretiree. Retirees who elect to have dependent health care coverage contribute 100% of the estimated cost of coverage. ParticipatingretiredemployeeshiredpriortoJuly1,2011withaminimumof20yearsofserviceshallhavetheircoverage transferredtoamedicaresupplementalplanafterqualifyingformedicare,withtheutilitiescommissioncontinuingtopay thesamedollarstowardthepremiumcostasitpaysforretireesunderthebaseplan.forretiredemployeeshiredonor A-34

101 GREENVILLEUTILITIESCOMMISSION OFTHECITYOFGREENVILLE,NORTHCAROLINA NotestotheFinancialStatements FortheYearEndedJune30,2015 after July 1, 2011 with a minimum of 20 years of service the contribution rate for post65 benefits consists of a $250 monthlystipenddefinedcontributionamount.theutilitiescommissionpays50%ofthetotallifeinsurancepremiumcost for those retirees who have thatbenefit.members hired on orafterjuly 1, 2011 who retire with less than20years of servicewillnotbeeligibleforpostretirementcoverage.thecontributionratesforpre65benefitsformembershiredonor afterjuly1,2011willbebasedonthemember sageatretirementandtheirlengthofserviceasdetailedbelow: AgeatRetirement % 65% YearsofService % 95% Thecurrentannualrequiredcontributionrate(ARC)is7.67%ofannualcoveredpayroll.Forfiscalyear2015,theUtilities Commissioncontributed$1,297,207,or5.7%ofannualcoveredpayroll.Contributionsbymembersforthefiscalyearended June 30, 2015 were $215,885 and included dependent coverage and a portion of member coverage. The Utilities Commissionisrequiredtocontributetheprojectedpayasyougofinancingrequirements,withanadditionalamountto prefundbenefitsasdeterminedannuallybytheboard. SummaryofSignificantAccountingPolicies The plan s financial statements are prepared using the accrual basis of accounting. Plan member contributions are recognizedintheperiodinwhichthecontributionsaredue.benefitsandrefundsarerecognizedwhendueandpayablein accordancewiththetermsofeachplan.theactuarialmethodsandassumptionsusedincludetechniquesthataredesigned toreducetheeffectsofshorttermvolatilityinactuarialaccruedliabilitiesandtheactuarialvalueassets,consistentwiththe longterm perspective of the calculations. Shortterm money market debt instruments, deposits, and repurchase agreements, are reported at cost or amortized cost, which approximates fair value. Certain longer term United States GovernmentandUnitedStatesAgencysecuritiesarevaluedatthelastreportedsalesprice.Administrationcostsoftheplan arefinancedthroughinvestmentearnings. AnnualOPEBCostandNetOPEBObligation The Utilities Commission s annual 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 representsaleveloffundingthat,ifpaidonanongoingbasisisprojectedtocovernormalcosteachyearandamortizeany unfundedactuarialliabilities(orfundingexcess)overaperiodnottoexceedthirtyyears.thefollowingtableshowsthe componentsoftheutilitiescommission sannualopebcostfortheyear,theamountactuallycontributedtotheplan,and changesintheutilitiescommission snetopebobligationforthepostretirementbenefits: Annualrequiredcontribution $1,751,427 InterestonnetOPEBobligation 759,502 Adjustmenttoannualrequiredcontribution (618,408) AnnualOPEBcost(expense) 1,892,521 Contributionsmade (1,297,207) Increase(decrease)innetOPEBobligation 595,314 NetOPEBobligation,beginningofyear 10,850,025 NetOPEBobligation,endofyear $11,445,339 A-35

102 GREENVILLEUTILITIESCOMMISSION OFTHECITYOFGREENVILLE,NORTHCAROLINA NotestotheFinancialStatements FortheYearEndedJune30,2015 TheUtilitiesCommission sannualopebcost,thepercentageofannualopebcostcontributedtotheplan,andthenetopeb obligationforthefiscalyearsendedjune30,2013,2014and2015wereasfollows: ForYearEnded PercentageofAnnualOPEBCost NetOPEB June30 AnnualOPEBCost Contributed Obligation 2013 $1,906, % $9,959, $1,920, % $10,850, $1,892, % $11,445,339 FundedStatusandFundingProgress AsofDecember31,2014,themostrecentactuarialvaluationdate,theplanwaspartiallyfunded.Theactuarialaccrued liabilityforbenefitsand,thus,theunfundedactuarialaccruedliability(uaal)was$23,219,147.thecoveredpayroll(annual payrollofactiveemployeescoveredbytheplan)was$24,675,093,andtheratiooftheuaaltothecoveredpayrollwas 94.1%.Actuarialvaluationsofanongoingplaninvolveestimatesofthevalueofreportedamountsandassumptionsabout the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality,andhealthcaretrends.amountsdeterminedregardingthefundedstatusoftheplanandtheannualrequired contributionsoftheemployeraresubjecttocontinualrevisionasactualresultsarecomparedwithpastexpectationsand 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 actuarialvalueofplanassetsisincreasingordecreasingovertimerelativetotheactuarialaccruedliabilitiesforbenefits. ActuarialMethodsandAssumptions Projectionsofbenefitsforfinancialreportingpurposesarebasedonthesubstantiveplan(theplanasunderstoodbythe employerandtheplanmembers)andincludethetypesofbenefitsprovidedatthetimeofeachvaluationandthehistorical pattern of sharing of benefit costs between the employer and plan members at that point. The actuarial methods and assumptionsusedincludetechniquesthataredesignedtoreducetheeffectsofshorttermvolatilityinactuarialaccrued liabilitiesandtheactuarialvalueassets,consistentwiththelongtermperspectiveofthecalculations.inthedecember31, 2014actuarialvaluation,theprojectedunitcreditactuarialcostmethodwasused.Theactuarialassumptionsincluded(a) 7.00% investment rate of return, which included an inflation component of3.00%, and (b) 7.50%5.00% premedicare medicalcosttrendrateand5.50%5%postmedicaremedicalcosttrendratewith2020theyearofultimatetrendrate. The actuarial value of assets was determined using the market value of assets. The unfunded actuarial accrued liability (UAAL)isbeingamortizedaslevelpercentageofprojectedpayrollonaclosedbasis.Theremainingamortizationperiodat December31,2014was27years. LongtermDebt TheCityofGreenvilleissuesanydebtrequiredbytheUtilitiesCommission.ThelegaldebtmarginisdisclosedintheCity's ComprehensiveAnnualFinancialReport. DebtservicedbytheElectricFund: RevenueBonds The Utilities Commission issues revenue bonds to provide financing for extension, expansion and improvement projects withintheelectricfund.theutilitiescommissionhaspledgedfutureelectriccustomerrevenuesandotherunrestricted revenuesincludingrevenuesofthewater,sewerandgasfunds,netofspecifiedoperatingexpenses,torepayrevenue bonds,ofwhich$17,229,720iscurrentlyoutstanding.thebondsarepayablesolelyfromnetrevenuesandarepayable throughfiscalyear2034.annualprincipalandinterestpaymentsonthebondsareexpectedtorequirelessthan14percent ofnetrevenues,orlessthan2percentoftotalrevenues.thetotalprincipalandinterestremainingtobepaidonthebonds A-36

103 GREENVILLEUTILITIESCOMMISSION OFTHECITYOFGREENVILLE,NORTHCAROLINA NotestotheFinancialStatements FortheYearEndedJune30,2015 is $21,114,632. Principal and interest paid for the current year, total customer net revenues and total revenues were $2,512,366,$17,884,691and$199,754,873,respectively.Revenuebondsoutstandingatyearendareasfollows: Description Amount Series2001RefundingRevenueBondswithanoriginalissueamountof$2,840,154,issuedtorefunda portionoftheseries1994revenuebonds,dueinannualinstallmentswithvaryinginterestratesfrom 4.25%to6.0%,finalpaymentwillbemadeonSeptember1,2016 Series2005RevenueBondswithanoriginalissueamountof$2,607,909,dueinannualinstallments withaninterestrateof3.43%,finalpaymentwillbemadeonseptember1,2025 Series2008ARevenueBondswithanoriginalissueamountof$3,903,762,dueinannualinstallments withvaryinginterestratesfrom4.0%to5.0%,finalpaymentwillbemadeonnovember1,2033 Series2008ARefundingRevenueBondswithanoriginalissueamountof$1,084,583,issuedtorefund aportionoftheseries1998revenuebonds,dueinannualinstallmentswithvaryinginterestrates from3.5%to5.0%,finalpaymentwillbemadeonnovember1,2018 Series2008ARefundingRevenueBondswithanoriginalissueamountof$605,347,issuedtorefunda portionoftheseries2000arevenuebonds,dueinannualinstallmentswithvaryinginterestrates from3.5%to5.0%,finalpaymentwillbemadeonnovember1,2020 Series2008BTaxableRevenueBondswithanoriginalissueamountof$4,130,000, dueinannual installmentswithvaryinginterestratesfrom5.3%to5.78%,finalpaymentwillbemadeonnovember 1,2018 Series2010RefundingRevenueBondswithanoriginalissueamountof$3,902,210,issuedtorefunda portionoftheseries2001revenuebonds,dueinannualinstallmentswithaninterestrateof2.51%, finalpaymentwillbemadeonseptember1,2021 Series2013RefundingRevenueBondswithanoriginalissueamountof$283,932,issuedto refundthe Series2003BRevenueBonds,dueinannualinstallmentswithaninterestrateof1.84%,finalpayment willbemadeonmay1,2018 Series2013RefundingRevenueBondswithanoriginalissueamountof$6,182,959,issuedtorefund theseries2007revenuebonds,dueinannualinstallmentswithaninterestrateof1.84%,final paymentwillbemadeonmay1,2027 $676,635 1,649,502 3,903, , ,715 1,930,000 2,794, ,156 5,235,766 $17,229,720 AnnualdebtservicerequirementstomaturityfortheUtilitiesCommission'sElectricFundrevenuebondsareasfollows: YearEndingJune30 Principal Interest Total 2016 $1,926,491 $571,821 $2,498, ,998, ,807 2,493, ,699, ,946 2,123, ,699, ,065 2,060, ,239, ,090 1,549, ,962,832 1,084,927 6,047, ,381, ,091 2,891, ,322, ,165 1,450,588 Total $17,229,720 $3,884,912 $21,114,632 A-37

104 GREENVILLEUTILITIESCOMMISSION OFTHECITYOFGREENVILLE,NORTHCAROLINA NotestotheFinancialStatements FortheYearEndedJune30,2015 OtherTypesofDebt TheUtilitiesCommissionutilizesinstallmentpurchasecontractstoprovidefinancingfortheacquisitionofheavyequipment for the Electric Fund. Installment purchase contracts are secured by the equipment financed. Installment purchase contractsoutstandingatyearendareasfollows: Description Amount Series2011installmentpurchasecontractwithanoriginalloanamountof$848,231 andaninterest $176,101 rateof1.97%,dueinannualinstallmentswithafinalpaymentdueonapril18,2016 Series2013installmentpurchasecontractwithanoriginalloanamountof$945,064 andaninterest 317,786 rateof0.88%,dueinannualinstallmentswithafinalpaymentdueonmay16,2016 $493,887 AnnualdebtservicerequirementstomaturityfortheUtilitiesCommission'sElectricFundinstallmentpurchasecontracts areasfollows: YearEndingJune30 Principal Interest Total 2016 $493,887 $6,297 $500,184 Total $493,887 $6,297 $500,184 TakeorPayContract AsofJune30,2015theUtilitiesCommissionhadalongtermtakeorpayallrequirementscontract withthenorthcarolinaeasternmunicipalpoweragency(ncempa)forthedeliveryofwholesaleelectricpower.ncempais ajointagencyformedby32municipalentities,includingtheutilitiescommission,whichhadownershipinterestsintwo coalfiredandthreenuclearfueledgenerationplants(initialproject).theutilitiescommission,throughitsagreementwith NCEMPA,hadtherightto %ofinitialprojectoutputandwasobligatedtopayitsrelativeshareofoperatingcosts anddebtservicefortheinitialproject.theutilitiescommissionwasobligatedtopayitsshareoftheoperatingcostsand debt service regardless of the ability of NCEMPA to provide electricity or to meet the Utilities Commission s need for electricity. This contract constituted an obligation of the Electric Enterprise Fund to make payments from operating revenues.theelectricenterprisefund sshareofthisobligationisnotrecordedasaliabilityontheaccompanyingbasic financialstatements;however,itisincludedasacomponentofitspowersupplyexpenses.theutilitiescommission sshare of initial project s debt obligations at June 30, 2015 was approximately $277.8 million. As of the date of this report, NCEMPAissatisfyingitsobligationsfromitsownoperationsandaccordingly,noprovisionforcontingentliabilityisreported intheutilitiescommission sfinancialstatements. TheUtilitiesCommission,togetherwiththeother31membersofNCEMPA,enteredintonegotiationswithDukeEnergy Progressregardingthesaleofitsownershipinterestinthegeneratingplants.Theintentofthenegotiationswastodivest NCEMPAofitsownershipinterestsinthegeneratingplantsandtousetheproceedstooffsetthedebtassociatedwiththe generating assets. The sale of ownership interest in the generating plants was finalized on July 31, Additional information regarding the sale and the impact on the Utilities Commission is provided in Note 8 SignificantEffects of SubsequentEvents. DebtservicedbytheWaterFund: RevenueBonds The Utilities Commission issues revenue bonds to provide financing for extension, expansion and improvement projects within the Water Fund. The Utilities Commission has pledged future water customer revenues and other unrestricted revenuesincludingrevenuesoftheelectric,sewerandgasfunds,netofspecifiedoperatingexpenses,torepayrevenue bonds,ofwhich$20,389,681iscurrentlyoutstanding.thebondsarepayablesolelyfromnetrevenuesandarepayable A-38

105 GREENVILLEUTILITIESCOMMISSION OFTHECITYOFGREENVILLE,NORTHCAROLINA NotestotheFinancialStatements FortheYearEndedJune30,2015 throughfiscalyear2034.annualprincipalandinterestpaymentsonthebondsareexpectedtorequirelessthan54percent ofnetrevenues,orlessthan18percentoftotalrevenues.thetotalprincipalandinterestremainingtobepaidonthe bondsis$26,639,320.principalandinterestpaidforthecurrentyear,totalcustomernetrevenuesandtotalrevenueswere $3,349,368,$5,658,044and$17,332,931,respectively.Revenuebondsoutstandingatyearendareasfollows: Description Amount Series2001RefundingRevenueBondswithanoriginalissueamountof$1,538,624,issuedtorefunda portionoftheseries1994revenuebonds,dueinannualinstallmentswithvaryinginterestratesfrom 4.25%to6.0%,finalpaymentwillbemadeonSeptember1,2016 Series2005RevenueBondswithanoriginalissueamountof$1,356,029,dueinannualinstallments withaninterestrateof3.43%,finalpaymentwillbemadeonseptember1,2025 Series2008ARevenueBondswithanoriginalissueamountof$10,641,133,dueinannualinstallments withvaryinginterestratesfrom3.5%to5.0%,finalpaymentwillbemadeonnovember1,2033 Series2008ARefundingRevenueBondswithanoriginalissueamountof$2,378,250, issuedtorefund aportionoftheseries1998revenuebonds,dueinannualinstallmentswithvaryinginterestrates from3.5%to5.0%,finalpaymentwillbemadeonnovember1,2018 Series2008ARefundingRevenueBondswithanoriginalissueamountof$11,924,653,issuedto refundaportionoftheseries2000arevenuebonds,dueinannualinstallmentswithvaryinginterest ratesfrom3.5%to5.0%,finalpaymentwillbemadeonnovember1,2020 Series2010RefundingRevenueBondswithanoriginalissueamountof$1,695,666,issuedtorefunda portionoftheseries2001revenuebonds,dueinannualinstallmentswithaninterestrateof2.51%, finalpaymentwillbemadeonseptember1,2021 Series2013RefundingRevenueBondswithanoriginalissueamountof$141,966,issuedtorefundthe Series2003BRevenueBonds,dueinannualinstallmentswithaninterestrateof1.84%,finalpayment willbemadeonmay1,2018 Series2013RefundingRevenueBondswithanoriginalissueamountof$1,204,100,issuedtorefund the2.87%drinkingwaterstaterevolvingfundloan,dueinannualinstallmentswithaninterestrate of1.84%,finalpaymentwillbemadeonmay1,2018 $366, ,689 9,068,076 1,149,132 7,066,284 1,214,162 78, ,200 $20,389,681 AnnualdebtservicerequirementstomaturityfortheUtilitiesCommission'sWaterFundrevenuebondsareasfollows: YearEndingJune30 Principal Interest Total 2016 $2,236,868 $869,547 $3,106, ,327, ,015 3,101, ,230, ,347 2,902, ,104, ,800 2,674, ,887, ,534 2,362, ,211,090 1,626,790 5,837, ,747, ,926 3,737, ,644, ,680 2,916,939 Total $20,389,681 $6,249,639 $26,639,320 A-39

106 GREENVILLEUTILITIESCOMMISSION OFTHECITYOFGREENVILLE,NORTHCAROLINA NotestotheFinancialStatements FortheYearEndedJune30,2015 OtherTypesofDebt TheSafeDrinkingWaterAct(SDWA)wasoriginallypassedbyCongressin1974toprotectpublichealthbyregulatingthe nation's public drinking water supply. The law was amended in 1986 and 1996 and requires many actions to protect drinkingwaterandresources,rivers,lakes,reservoirs,springs,andgroundwaterwells.congressestablishedthedrinking WaterStateRevolvingFundloanprograminthe1996amendmentstoprovidefinancialassistancetopublicwatersystems tocomplywiththesdwa.tofunddrinkingwatercapitalprojectsthatprotectpublichealth,thestateofnorthcarolina makesloansatonehalfofthemarketrateforaperiodofupto20years.theutilitiescommission sdrinkingwaterloans outstandingatyearendareasfollows: Description Amount 2.205%DrinkingWaterStateRevolvingFundloan issuedin2004tofinanceaninterbasintransfer analysisandtheconstructionofamajorwatermain,$4,014,597authorizedand$3,884,913drawnto date,dueinannualinstallmentsof$194,246withafinalpaymentonmay1, %DrinkingWaterStateRevolvingFundloanissuedin2009tofinanceimprovementstotheraw waterpumpstationofthewatertreatmentplant,$460,425authorizedand$460,425drawntodate, dueinannualinstallmentsof$23,021withafinalpaymentonmay1, %DrinkingWaterStateRevolvingFundloanissuedin2010tofinancetheconstructionofanew watermain,$300,055authorizedand$269,492drawntodate,dueinannualinstallmentsof$13,475 withafinalpaymentonmay1, %DrinkingWaterStateRevolvingFundloanissuedin2009 tofinanceimprovementstotheraw waterpumpstationofthewatertreatmentplant,$1,442,000authorizedand$1,291,496drawnto date,dueinannualinstallmentsof$64,575withafinalpaymentonmay1,2033 $2,913, , ,120 1,162,346 $4,692,534 AnnualdebtservicerequirementstomaturityfortheUtilitiesCommission'sWaterFundDrinkingWaterStateRevolving Fundloansareasfollows: YearEndingJune30 Principal Interest Total 2016 $295,316 $103,022 $398, ,316 96, , ,316 90, , ,316 83, , ,316 77, , ,476, ,841 1,764, ,476, ,504 1,602, ,790 11, ,031 Total $4,692,534 $874,764 $5,567,298 The American Recovery and Reinvestment Act of 2009 (ARRA) was passed by Congress to create and save jobs, spur economic activity and invest in longterm economic growth, and to foster unprecedented levels of accountability and transparency in government spending. A portion of the Recovery funds were distributed to states based on funding formulas.thenorthcarolinadepartmentofenvironmentandnaturalresourcesreceivedover$65milliontofunddrinking water capital projects that protect public health. The State of North Carolina has made these funds available to local governmentsintheformofprincipalforgivenessloansandzeropercentinterestloansthroughthestaterevolvingfund program.theutilitiescommission sarraloansoutstandingatyearendareasfollows: A-40

107 GREENVILLEUTILITIESCOMMISSION OFTHECITYOFGREENVILLE,NORTHCAROLINA NotestotheFinancialStatements FortheYearEndedJune30,2015 Description Amount ARRAloanissuedin2009tofinanceimprovementstotherawwaterpumpstation ofthewater $1,103,307 treatmentplant,$2,942,152authorizedand$2,942,152drawntodate,onehalfoftheprincipalhas beenforgivenandtheremainderisdueinannualinstallmentsof$73,554withafinalpaymenton May1,2030 ARRAloanissuedin2009topartiallyfinanceimprovementstoawaterstoragetank,$48,982 17,912 authorizedand$44,782drawntodate,onehalfoftheprincipalhasbeenforgivenandtheremainder isdueinannualinstallmentsof$1,120withafinalpaymentonmay1,2031 $1,121,219 AnnualdebtservicerequirementstomaturityfortheUtilitiesCommission'sWaterFundARRAloansareasfollows: YearEndingJune30 Principal Interest Total 2016 $74,673 $0 $74, , , , , , , , , , , , , , ,120 Total $1,121,219 $0 $1,121,219 TheUtilitiesCommissionutilizesinstallmentpurchasecontractstoprovidefinancingfortheacquisitionofheavyequipment forthewaterfund.installmentpurchasecontractsaresecuredbytheequipmentfinanced.installmentpurchasecontracts outstandingatyearendareasfollows: Description Amount Series2011installmentpurchasecontractwithanoriginalloanamountof$98,022 andaninterest $20,350 rateof1.97%,dueinannualinstallmentswithafinalpaymentdueonapril18,2016 Series2013installmentpurchasecontractwithanoriginalloanamountof$123,706 andaninterest 41,597 rateof0.88%,dueinannualinstallmentswithafinalpaymentdueonmay16,2016 $61,947 AnnualdebtservicerequirementstomaturityfortheUtilitiesCommission'sWaterFundinstallmentpurchasecontractare asfollows: YearEndingJune30 Principal Interest Total 2016 $61,947 $771 $62,718 Total $61,947 $771 $62,718 A-41

108 GREENVILLEUTILITIESCOMMISSION OFTHECITYOFGREENVILLE,NORTHCAROLINA NotestotheFinancialStatements FortheYearEndedJune30,2015 DebtservicedbytheSewerFund: RevenueBonds The Utilities Commission issues revenue bonds to provide financing for extension, expansion and improvement projects within the Sewer Fund. The Utilities Commission has pledged future sewer customer revenues and other unrestricted revenuesincludingrevenuesoftheelectric,waterandgasfunds,netofspecifiedoperatingexpenses,torepayrevenue bonds,ofwhich$20,607,322iscurrentlyoutstanding.thebondsarepayablesolelyfromnetrevenuesandarepayable throughfiscalyear2034.annualprincipalandinterestpaymentsonthebondsareexpectedtorequirelessthan41percent ofnetrevenues,orlessthan17percentoftotalrevenues.thetotalprincipalandinterestremainingtobepaidonthe bondsis$26,580,160.principalandinterestpaidforthecurrentyear,totalcustomernetrevenuesandtotalrevenueswere $3,277,237,$8,019,854and$19,364,309,respectively.Revenuebondsoutstandingatyearendareasfollows: Description Amount Series2001RefundingRevenueBondswithanoriginalissueamountof$1,667,119,issuedtorefunda portionoftheseries1994revenuebonds,dueinannualinstallmentswithvaryinginterestratesfrom 4.25%to6.0%,finalpaymentwillbemadeonSeptember1,2016 Series2005RevenueBondswithanoriginalissueamountof$4,036,062,dueinannualinstallments withaninterestrateof3.43%,finalpaymentwillbemadeonseptember1,2025 Series2008ARevenueBondswithanoriginalissueamountof$10,300,362,dueinannualinstallments withvaryinginterestratesfrom3.5%to5.0%,finalpaymentwillbemadeonnovember1,2033 Series2008ARefundingRevenueBondswithanoriginalissue amountof$4,219,963,issuedtorefund aportionoftheseries1998revenuebonds,dueinannualinstallmentswithvaryinginterestrates from3.5%to5.0%,finalpaymentwillbemadeonnovember1,2018 Series2010RefundingRevenueBondswithanoriginalissueamountof$2,172,644,issuedtorefunda portionoftheseries2001revenuebonds,dueinannualinstallmentswithaninterestrateof2.51%, finalpaymentwillbemadeonseptember1,2021 Series2013RefundingRevenueBondswithanoriginalissueamountof$2,235,254,issuedtorefund theseries2003brevenuebonds,dueinannualinstallmentswithaninterestrateof1.84%,final paymentwillbemadeonmay1,2018 Series2013RefundingRevenueBondswithanoriginalissueamountof$6,292,200,issuedtorefund the2.57%cleanwaterstaterevolvingfundloan,dueinannualinstallmentswithaninterestrateof 1.84%,finalpaymentwillbemadeonMay1,2020 $397,172 2,552,809 8,743,033 2,249,597 1,555,696 1,237,215 3,871,800 $20,607,322 AnnualdebtservicerequirementstomaturityfortheUtilitiesCommission'sSewerFundrevenuebondsareasfollows: YearEndingJune30 Principal Interest Total 2016 $2,514,104 $741,179 $3,255, ,573, ,905 3,234, ,419, ,353 3,001, ,046, ,601 2,552, ,584, ,509 2,034, ,838,889 1,731,488 5,570, ,959,681 1,015,169 3,974,850 A-42

109 GREENVILLEUTILITIESCOMMISSION OFTHECITYOFGREENVILLE,NORTHCAROLINA NotestotheFinancialStatements FortheYearEndedJune30,2015 YearEndingJune30 Principal Interest Total $2,671,866 $283,634 $2,955,500 Total $20,607,322 $5,972,838 $26,580,160 OtherTypesofDebt The1987amendmentstotheFederalCleanWaterActreplacedtheConstructionGrantsprogramwiththeCleanWater State Revolving Fund Program (CWSRF). Under the CWSRF, Congress provides the states with grant funds to establish revolvingloanprogramstoassistinthefundingofwastewatertreatmentfacilitiesandprojectsassociatedwithestuaryand nonpointsourceprograms.innorthcarolina,thesefundsaremadeavailabletounitsoflocalgovernmentatonehalfofthe market rate for a period ofupto twentyyears. The Utilities Commission s CWSRF loans outstandingatyearend are as follows: Description Amount 2.48%CleanWaterStateRevolvingFundloanissuedin2008tofinanceupgradestotheelectricaland SCADAsystemsatthewastewatertreatmentplant,$13,851,680authorizedand$13,761,629drawnto date,dueinannualinstallmentsof$688,081withafinalpaymentonmay1, %CleanWaterStateRevolvingFundloanissuedin2011tofinancetheconstructionofaregional pumpstationandforcemain,$9,241,586authorizedand$7,982,868drawntodate,dueinannual installmentsof$399,143withafinalpaymentonmay1, %CleanWaterStateRevolvingFundloanissuedin2011tofinancetheconstructionofaregional pumpstationandforcemain,$13,987,369authorizedand$12,286,880drawntodate,dueinannual installmentsof$614,344withafinalpaymentonmay1,2033 $10,321,222 6,596,630 10,888,143 $27,805,995 AnnualdebtservicerequirementstomaturityfortheUtilitiesCommission'sSewerFundCleanWaterStateRevolvingFund loansareasfollows: YearEndingJune30 Principal Interest Total 2016 $1,342,712 $542,066 $1,884, ,701, ,082 2,353, ,701, ,136 2,311, ,701, ,191 2,269, ,701, ,245 2,227, ,507,844 2,002,043 10,509, ,507, ,405 9,461, ,641, ,890 2,761,209 Total $27,805,995 $5,974,058 $33,780,053 TheUtilitiesCommissionenteredintoaninterlocalagreementwiththeTownofBetheltoprovidewastewatertreatment servicesforthetown,whichhasitsownwastewatercollectionsystem.theutilitiescommissionandthetownofbethel eachfinancedportionsoftheinfrastructureconstructedtoconnectthetownofbethel scollectionsystemtotheutilities Commission s system. Under the terms of the interlocal agreement, ownership of the portion of the infrastructure financedbythetownofbethelwastransferredtotheutilitiescommissionatthetimethetreatmentservicebeganandthe UtilitiesCommissionispayingtheTownofBethelfortheassetoveratermof20years.AtJune30,2015,$1,211,053ofthe interlocalagreementremainedoutstanding.theinterlocalagreementcarriesaneffectiveinterestrateof5.53%andis payableinannualinstallmentsof$151,382withafinalprincipalpaymentonmay1,2023. A-43

110 GREENVILLEUTILITIESCOMMISSION OFTHECITYOFGREENVILLE,NORTHCAROLINA NotestotheFinancialStatements FortheYearEndedJune30,2015 Annual debt service requirements to maturity for the Utilities Commission's Sewer Fund interlocal agreement are as follows: YearEndingJune30 Principal Interest Total 2016 $151,382 $95,379 $246, ,382 91, , ,382 87, , ,382 84, , ,382 80, , , , ,817 Total $1,211,053 $681,649 $1,892,702 TheUtilitiesCommissionutilizesinstallmentpurchasecontractstoprovidefinancingfortheacquisitionofheavyequipment forthesewerfund.installmentpurchasecontractsaresecuredbytheequipmentfinanced.installmentpurchasecontracts outstandingatyearendareasfollows: Description Amount Series2011installmentpurchasecontractwithanoriginalloanamountof$180,653andaninterest $37,505 rateof1.97%,dueinannualinstallmentswithafinalpaymentdueonapril18,2016 Series2013installmentpurchasecontractwithanoriginalloanamountof$147,377 andaninterest 49,557 rateof0.88%,dueinannualinstallmentswithafinalpaymentdueonmay16,2016 $87,062 AnnualdebtservicerequirementstomaturityfortheUtilitiesCommission'sSewerFundinstallmentpurchasecontractare asfollows: YearEndingJune30 Principal Interest Total 2016 $87,062 $1,182 $88,244 Total $87,062 $1,182 $88,244 DebtservicedbytheGasFund: RevenueBonds The Utilities Commission issues revenue bonds to provide financing for extension, expansion and improvement projects withinthegasfund.theutilitiescommissionhaspledgedfuturegascustomerrevenuesandotherunrestrictedrevenues includingrevenuesoftheelectric,waterandsewerfunds,netofspecifiedoperatingexpenses,torepayrevenuebonds,of which$6,174,276iscurrentlyoutstanding.thebondsarepayablesolelyfromnetrevenuesandarepayablethroughfiscal year Annual principal and interest payments on the bonds are expected to require less than 18 percent of net revenues,orlessthan4percentoftotalrevenues.thetotalprincipalandinterestremainingtobepaidonthebondsis $7,094,107. Principal and interest paid for the current year, total customer net revenues and total revenues were $1,224,643,$6,630,966and$36,755,604,respectively.Revenuebondsoutstandingatyearendareasfollows: Description Amount Series2001RefundingRevenueBondswithanoriginalissueamountof$2,244,103,issuedtorefunda portionoftheseries1994revenuebonds,dueinannualinstallmentswithvaryinginterestratesfrom 4.25%to6.0%,finalpaymentwillbemadeonSeptember1,2016 $534,632 A-44

111 GREENVILLEUTILITIESCOMMISSION OFTHECITYOFGREENVILLE,NORTHCAROLINA NotestotheFinancialStatements FortheYearEndedJune30,2015 Description Amount Series2008ARevenueBondswithanoriginalissueamountof$1,029,743,dueinannualinstallments $737,755 withvaryinginterestratesfrom3.5%to5.0%,finalpaymentwillbemadeonnovember1,2033 Series2008ARefundingRevenueBondswithanoriginalissueamountof$1,237,204,issuedtorefund 704,592 aportionoftheseries1998revenuebonds,dueinannualinstallmentswithvaryinginterestrates from3.5%to5.0%,finalpaymentwillbemadeonnovember1,2018 Series2010RefundingRevenueBondswithanoriginalissueamountof$3,234,480,issuedtorefunda 2,316,011 portionoftheseries2001revenuebonds,dueinannualinstallmentswithaninterestrateof2.51%, finalpaymentwillbemadeonseptember1,2021 Series2013RefundingRevenueBondswithanoriginalissueamountof$1,123,849,issuedtorefund 622,051 theseries2003brevenuebonds,dueinannualinstallmentswithaninterestrateof1.84%,final paymentwillbemadeonmay1,2018 Series2013RefundingRevenueBondswithanoriginalissueamountof$1,487,041,issuedtorefund 1,259,235 theseries2007revenuebonds,dueinannualinstallmentswithaninterestrateof1.84%,final paymentwillbemadeonmay1,2027 $6,174,276 AnnualdebtservicerequirementstomaturityfortheUtilitiesCommission'sGasFundrevenuebondsareasfollows: YearEndingJune30 Principal Interest Total 2016 $1,041,537 $178,175 $1,219, ,077, ,270 1,218, , , , ,602 86, , ,221 70, , ,427, ,080 1,636, ,840 97, , ,452 25, ,849 Total $6,174,276 $919,831 $7,094,107 OtherTypesofDebt TheUtilitiesCommissionutilizesinstallmentpurchasecontractstoprovidefinancingfortheacquisitionofheavyequipment forthegasfund.installmentpurchasecontractsaresecuredbytheequipmentfinanced.installmentpurchasecontracts outstandingatyearendareasfollows: Description Amount Series2011installmentpurchasecontractwithanoriginalloanamountof$180,474andaninterest $37,468 rateof1.97%,dueinannualinstallmentswithafinalpaymentdueonapril18,2016 Series2013installmentpurchasecontractwithanoriginalloanamountof$143,251 andaninterest rateof0.88%,dueinannualinstallmentswithafinalpaymentdueonmay16, ,169 $85,637 A-45

112 GREENVILLEUTILITIESCOMMISSION OFTHECITYOFGREENVILLE,NORTHCAROLINA NotestotheFinancialStatements FortheYearEndedJune30,2015 AnnualdebtservicerequirementstomaturityfortheUtilitiesCommission'sGasFundinstallmentpurchasecontractareas follows: YearEndingJune30 Principal Interest Total 2016 $85,637 $1,169 $86,806 Total $85,637 $1,169 $86,806 RateCovenants: TheUtilitiesCommission sdebtissuancesareauthorizedandsecuredbythebondorderadoptedonaugust11,1994,and amendedandrestatedasofapril13,2000.section501ofthebondordercontainscovenantsastorates,feesandcharges andrequiresthedebtservicecoverageratiotobenolessthan125%forparityindebtedness(revenuebonds)andnoless than 100% for other types of debt. The Utilities Commission has been in compliance with the covenants contained in Section501oftheBondOrdersinceitsadoption.ThedebtservicecoverageratiocalculationforthefiscalyearendedJune 30,2015isasfollows: Operatingrevenues $271,986,511 Operatingexpenses 1 (233,792,956) Operatingincome 38,193,555 Nonoperatingrevenues(expenses) Miscellaneousrevenues 2 909,981 Interestincome 2 311,225 Incomeavailablefordebtservice $39,414,761 Paritydebtservice(principalandinterestpaid) $10,363,614 Paritydebtservicecoverageratio 380% Subordinateandotherdebtservice(principalandinterestpaid) $4,783,702 Subordinateandotherdebtservicecoverageratio 607% 1 In accordance with rate covenants operating expenses excludes depreciation expense of $18,140,202; unfunded OPEB expense of $595,314; and the change in pension expense of ($1,614,282) promulgated by the implementation of GASB StatementNo.68andGASBStatementNo Inaccordancewithratecovenantsmiscellaneousrevenuesandinterestincomeexcludesrestrictedrevenuesandrevenues receivedinthecapitalprojectsfunds. Arbitrage: InaccordancewithSection148oftheInternalRevenueCodeof1986,asamended,andSections to of the related Treasury Regulations, the Utilities Commission must rebate to the federal government arbitrage profits earnedongovernmentalbondsissuedafteraugust31,1986.arbitrageprofitsaretheexcessoftheamountearnedon investmentsovertheinterestpaidontheborrowings.atjune30,2015,theutilitiescommissionhadnoarbitrageliabilities. UnearnedRevenue: Unearnedrevenuetotaling$111,691intheWaterFundand$171,780intheSewerFundconsistsofconnectionfeesthat werepaidinadvanceforservicesthathavenotyetbeeninstalled.thefeespaidinadvancewillberecognizedasrevenue bytheutilitiescommissionatthetimetheserviceisinstalled. A-46

113 GREENVILLEUTILITIESCOMMISSION OFTHECITYOFGREENVILLE,NORTHCAROLINA NotestotheFinancialStatements FortheYearEndedJune30,2015 ChangesinLongtermLiabilities: ThefollowingisasummaryofchangesinlongtermliabilitiesfortheyearendedJune30,2015: Businesstypeactivities: June30,2014 Additions Retirements June30,2015 CurrentPortion Revenuebonds $72,136,399 $0 ($7,735,400) $64,400,999 $7,719,000 Othertypesofdebt 38,488, ,442 (3,741,029) 35,559,334 2,592,616 Discountsandpremiums 888,716 (108,690) 780,026 Compensatedabsences 1,894,063 1,679,619 (1,641,057) 1,932,625 1,539,096 Otherpostemploymentbenefits 10,850, ,314 11,445,339 Netpensionliability(LGERS) 5,066,229 (5,066,229) Unearnedrevenue 306,361 (22,890) 283, ,471 Totallongtermliabilities $129,630,714 $3,086,375 ($18,315,295) $114,401,794 $12,134,183 ChangesinlongtermliabilitiesbyfundfortheyearendedJune30,2015areasfollows: ElectricFund: June30,2014 Additions Retirements June30,2015 CurrentPortion Revenuebonds $19,097,782 $0 ($1,868,062) $17,229,720 $1,926,491 Othertypesofdebt 1,371,326 (877,439) 493, ,887 Discountsandpremiums 88,843 (10,024) 78,819 Compensatedabsences 763, ,741 (731,387) 793, ,887 Otherpostemploymentbenefits 5,133, ,837 5,400,930 Netpensionliability(LGERS) 2,270,254 (2,270,254) ElectricFundlongtermliabilities: $28,724,377 $1,029,578 ($5,757,166) $23,996,789 $3,116,265 WaterFund June30,2014 Additions Retirements June30,2015 CurrentPortion Revenuebonds $22,781,832 $0 ($2,392,151) $20,389,681 $2,236,868 Othertypesofdebt 6,393,855 (518,155) 5,875, ,936 Discountsandpremiums 491,544 (62,695) 428,849 Compensatedabsences 410, ,007 (330,787) 401, ,569 Otherpostemploymentbenefits 2,202, ,010 2,317,500 Netpensionliability(LGERS) 999,793 (999,793) Unearnedrevenue 120,181 (8,490) 111, ,691 WaterFundlongtermliabilities: $33,400,459 $437,017 ($4,312,071) $29,525,405 $3,091,064 A-47

114 GREENVILLEUTILITIESCOMMISSION OFTHECITYOFGREENVILLE,NORTHCAROLINA NotestotheFinancialStatements FortheYearEndedJune30,2015 SewerFund June30,2014 Additions Retirements June30,2015 CurrentPortion Revenuebonds $23,070,373 $0 ($2,463,051) $20,607,322 $2,514,104 Othertypesofdebt 30,475, ,442 (2,183,261) 29,104,110 1,581,156 Discountsandpremiums 253,971 (28,620) 225,351 Compensatedabsences 393, ,848 (321,204) 392, ,248 Otherpostemploymentbenefits 1,851, ,806 1,963,833 Netpensionliability(LGERS) 952,809 (952,809) Unearnedrevenue 186,180 (14,400) 171, ,780 SewerFundlongtermliabilities: $57,183,884 $1,244,096 ($5,963,345) $52,464,635 $4,569,288 GasFund June30,2014 Additions Retirements June30,2015 CurrentPortion Revenuebonds $7,186,412 $0 ($1,012,136) $6,174,276 $1,041,537 Othertypesofdebt 247,811 (162,174) 85,637 85,637 Discountsandpremiums 54,358 (7,351) 47,007 Compensatedabsences 326, ,023 (257,679) 344, ,392 Otherpostemploymentbenefits 1,663,415 99,661 1,763,076 Netpensionliability(LGERS) 843,373 (843,373) GasFundlongtermliabilities: $10,321,994 $375,684 ($2,282,713) $8,414,965 $1,357,566 TheLGERSplanhadanetpensionassetasofJune30,2015;however,theplanhadanetpensionliabilityatthebeginning ofthefiscalyear. C.NetInvestmentinCapitalAssets Capitalassets $367,717,958 plus:unexpendedbondproceeds 4,261,850 plus:unamortizedbondrefundingcharges 973,286 less:longtermdebt 100,740,359 Netinvestmentincapitalassets $272,212,735 Note3 Supplementalretirementincomeplan Allpermanent,fulltimeandcertaindesignatedparttimeemployeesoftheUtilitiesCommissionareeligibletoparticipate inthesupplementalretirementincomeplan,adefinedcontributionpensionplanauthorizedbyarticle5ofg.s.chapter 135.TheSupplementalRetirementIncomePlanisadministeredbytheDepartmentoftheStateTreasurerandaBoardof Trustees.TheSupplementalRetirementIncomePlanisincludedintheComprehensiveAnnualFinancialReport(CAFR)for thestateofnorthcarolina.thestate scafrincludesthepensiontrustfundfinancialstatementsfortheinternalrevenue CodeSection401(k)planthatincludestheSupplementalRetirementIncomePlan.Thatreportmaybeobtainedbywriting totheofficeofthestatecontroller,1410mailservicecenter,raleigh,northcarolina ,orbycalling(919) Participation begins at the date of employment. In a defined contribution plan, benefits depend solely on the amounts contributed to the plan plus investment earnings. Employer contributions are established and may be amended by the BoardofCommissioners. TheUtilitiesCommission'scontributionsfortheyearsendedJune30,2015,2014and2013were$444,480,$441,080,and $440,920,respectively.Thesecontributionsrepresent1.7%,1.8%and1.8%,respectively,ofcoveredpayroll. A-48

115 GREENVILLEUTILITIESCOMMISSION OFTHECITYOFGREENVILLE,NORTHCAROLINA NotestotheFinancialStatements FortheYearEndedJune30,2015 Note4Otheremploymentbenefits TheUtilitiesCommissionhaselectedtoprovidedeathbenefitstoemployeesthroughtheDeathBenefitPlanformembers ofthelocalgovernmentalemployees'retirementsystem("deathbenefitplan"),amultipleemployer,stateadministered, costsharingplanfundedonaoneyeartermcostbasis.thebeneficiariesofthoseemployeeswhodieinactiveserviceafter oneyearofcontributingmembershipinthesystem,orwhodiewithin180daysafterretirementorterminationofservice andhaveatleastoneyearofcontributingmembershipserviceinthesystematthetimeofdeath,areeligiblefordeath benefits. Lumpsumdeathbenefitpaymentstobeneficiariesareequaltotheemployee's12highestmonthssalaryinarowduring the24monthspriortohis/herdeath,butthebenefitisnolessthan$25,000butnomorethan$50,000.alldeathbenefit paymentsaremadefromthedeathbenefitplan.theutilitiescommissionhasnoliabilitybeyondthepaymentofmonthly contributions. The contributions to the Death Benefit Plan cannot be separated between the postemployment benefit amountandtheotherbenefitamount.contributionsaredeterminedasapercentageofmonthlypayrollbaseduponrates establishedannuallybythestate.theutilitiescommissionconsidersthesecontributionstobeimmaterial. Note5TransferactivitywiththeCityofGreenville Balancesdueto/fromtheCityofGreenville BalancesduetotheCityofGreenvilleatJune30,2015consistofthefollowing: Streetlightingreimbursement $63,887 Streetrepairs 171,615 M/WBEProgram 7,402 Wellnessprogram 57,144 Dumpstercollection 2,550 Landfilluserfees 1,544 Parkinglotsweeping 200 Total $304,342 BalancesduefromtheCityofGreenvilleatJune30,2015consistofthefollowing: Streetlightservice $119,138 Blackdecorativelanternsandpoles 10,510 Total $129,648 Transfersto/fromtheCityofGreenville TransferstotheCityofGreenville sgeneralfundduringfiscalyear2015consistofthefollowing: ElectricFundgeneraltransfer $4,386,679 GasFundgeneraltransfer 1,361,154 ElectricFundstreetlightingreimbursement 757,210 Total $6,505,043 ThetransferstotheCity sgeneralfundof$6,505,043includedthegeneralandstreetlightingreimbursementtransfers. Thegeneraltransferswerecomputedbasedon6%oftheElectricandGasFunds capitalassets,netofrelateddebt.the street lighting reimbursement represents 50% of current fiscal year street lighting revenues. The computation of the transfers is consistent with the method specified in Chapter 861 of Senate Bill 1069, An Act to Amend and Restate the CharteroftheGreenvilleUtilitiesCommissionoftheCityofGreenville. A-49

116 GREENVILLEUTILITIESCOMMISSION OFTHECITYOFGREENVILLE,NORTHCAROLINA NotestotheFinancialStatements FortheYearEndedJune30,2015 Note6 RiskManagement TheUtilitiesCommissionisexposedtovariousrisksoflossesrelatedtotorts;theftof,damageto,anddestructionofassets; errors and omissions; injuries to employees; and natural disasters. Management of these risks is maintained through a combinationofselfinsuranceandcommercialinsurancecoverage. The Utilities Commission is selfinsured with respect to workers compensation up to $100,000 per claim and carries commercialcoverageforclaimsinexcessof$100,000. TheUtilitiesCommissionandtheCityofGreenvilleselffundajointmedicalbenefitplanupto$200,000perpersonper year. The Utilities Commission and the City of Greenville contracted with CIGNA Healthcare of North Carolina, Inc. to administerthebenefitsoftheplan,includingdenials.themedicalbenefitplanisapointofserviceopenaccess(posoa) product.theopenaccess(oa)featureallowscoveredemployeesandtheircovereddependentstoseekcaredirectlyfrom any provider, so there is no referral authorization neededfromprimary Care Physicians (PCP)to access carefrom Specialists. ChangesinthebalancesofmedicalclaimsliabilitiesduringthefiscalyearsendedJune30,2015and2014areasfollows: Unpaidclaims,beginning $596,152 $766,000 Incurredclaims 5,218,561 4,479,634 Claimpayments (5,237,021) (4,649,482) Unpaidclaims,ending $577,692 $596,152 TheCityofGreenvilleandtheUtilitiesCommissionselffundadentalbenefitplanforeligibleemployeeswithamaximum benefitof$1,000percalendaryearinadditiontoalifetimemaximumof$2,000fororthodontia.thedentalbenefitplanis apreferredproviderorganizationandthecityofgreenvilleandtheutilitiescommissioncontractedwithcignahealthcare ofnorthcarolina,inc.toadministerthebenefitsoftheplan,includingdenials. ChangesinthebalancesofdentalclaimsliabilitiesduringthefiscalyearsendedJune30,2015and2014areasfollows: Unpaidclaims,beginning $39,248 $116,000 Incurredclaims 316, ,351 Claimpayments (320,083) (306,103) Unpaidclaims,ending 35,308 39,248 TheUtilitiesCommissioncarriesfloodinsuranceoncertainpropertiesconsideredtobeatriskforlossduetoflooding.This coverageisunderwrittenbythenationalfloodinsuranceprogram. InaccordancewithG.S.15929,theUtilitiesCommission saffectedemployees(thosehavingaccessto$100ormoreatany giventimeoftheutilitiescommission sfunds)arebondedunderablanketbondfor$500,000.thechieffinancialofficeris individuallybondedfor$50,000. The Utilities Commission carries commercial coverage for all other risks of loss. Through this coverage, the Utilities Commission obtains general liability coverage of $1 million per occurrence with a general aggregate of $3 million, auto liabilitycoverageof$1millionperoccurrence,propertycoverageupto$227millionforrealandpersonalproperty,and umbrellaliabilitycoverageof$10million.noaccrualforpossiblelossesattributabletoincidentsthatmayhaveoccurred butthathavenotbeenidentifiedhasbeenmadebecausetheamountisnotreasonablyestimated.further,aliabilityfor outstandingclaimsatjune30,2015,otherthanthemedicalanddentalbenefitprograms,hasnotbeenaccruedasthe amountofoutstandingclaimsisnotmaterialtothefinancialstatements. A-50

117 GREENVILLEUTILITIESCOMMISSION OFTHECITYOFGREENVILLE,NORTHCAROLINA NotestotheFinancialStatements FortheYearEndedJune30,2015 Therehavebeennosignificantreductionsininsurancecoverageintheprioryearandsettledclaimshavenotexceeded coverageinanyofthepastthreefiscalyears. Note7Summarydisclosureofsignificantcommitmentsandcontingencies FederalandStateAssistedPrograms TheUtilitiesCommissionhasreceivedproceedsfromseveralfederalandStategrants.Periodicauditsofthesegrantsare requiredandcertaincostsmaybequestionedasnotbeingappropriateexpendituresunderthegrantagreements.such auditscouldresultintherefundofgrantmoniestothegrantoragencies.managementbelievesthatanyrequiredrefunds willbeimmaterial.noprovisionhasbeenmadeintheaccompanyingfinancialstatementsfortherefundofgrantmonies. NaturalGasContracts OnNovember1,2005,theUtilitiesCommissionenteredintoanagreementwithPiedmontNaturalGas(PNG)thatallows theutilitiescommissiontopurchaseallitsnaturalgasrequirementsontheopenmarket.thetermsofthecontractrequire PNG to transport natural gas through its pipeline to the Utilities Commission in exchange for annual payments of $2,987,328.ThecontractwasrenewedeffectiveJanuary5,2010foraperiodof10yearswithaMaximumDailyQuantity (MDQ)of20,000decathermsandanannualpaymentof$3,698,544.TheUtilitiesCommissionmaybeallowedtoexceedits MDQ to accommodate interruptible demand as capacity is available, and the Utilities Commission has the option to purchasefirmpeakingservicesduringtimeswhendemandfornaturalgasishigh. TheUtilitiesCommissionenteredintoaSupplementalServiceandConstructionAgreementwithPNGeffectiveNovember1, 2014foraperiodof5years.UnderthetermsofthecontracttheUtilitiesCommissionwillpayadditionaldemandcharges tocoverthecostsofupgradestotheutilitiescommission ssystemcompletedbypng.theinitialamountofthecontractual paymentwas$470,000peryear.effectivejune2015theamountwasincreasedto$593,093peryeartoreflecttheactual costsoftheupgrades.theseadditionaldemandchargesarepayablethroughoctober2019. The Utilities Commission entered a 15year agreement with Patriots Energy Group (PEG), effective February 1, 2007 to purchase 20 percent of the Utilities Commission s firm volumes (2,000 dekatherms per day during the winter period, NovemberthroughMarch).TheUtilitiesCommissionreceivesapricediscountprojectedtobebetween$0.42and$0.47per dekathermandpaysafeeof$0.015perdekathermtopegtocovertheadministrativecostsoftheagreement. Litigation The Utilities Commission is presently involved in certain litigation matters that have arisen in the normal course of conductingitsoperations.managementoftheutilitiescommission believesthesecasesarenotexpectedtoresultina materialadversefinancialimpacttotheutilitiescommission. Note8 SignificantEffectsofSubsequentEvents On July 31, 2015, the North Carolina Eastern Municipal Power Agency (NCEMPA) completed the sale of its electric generatingassetstodukeenergyprogressforapproximately$1.25billion.theproceedsfromthesalewereusedtoreduce outstanding debt on those assets. The Utilities Commission s share of NCEMPA s outstanding debt was reduced from approximately$277.8millionto$85million.additionally,dukeenergyprogresshasenteredintoa30yearagreementto providewholesalepowertoncempa.thereduceddebtservicecostsandthelowercostsofwholesalepowerallowedthe UtilitiesCommissiontoreduceelectricretailratesby7%effectiveAugust1,2015. Note9 ChangeinAccountingPrinciples/Restatement TheUtilitiesCommissionimplementedGovernmentalAccountingStandardsBoard(GASB)StatementNo.68 Accounting andfinancialreportingforpensions AnAmendmentofGASBStatementNo.27,andGASBStatementNo.71 Pension A-51

118 GREENVILLEUTILITIESCOMMISSION OFTHECITYOFGREENVILLE,NORTHCAROLINA NotestotheFinancialStatements FortheYearEndedJune30,2015 TransitionforContributionsMadeSubsequenttotheMeasurementDate AnAmendmentofGASBStatementNo.68,in thefiscalyearendingjune30,2015.theimplementationofthestatementrequiredtheutilitiescommissiontorecord beginningnetpensionliabilityandtheeffectsonnetpositionofcontributionsmadebytheutilitiescommissionduringthe measurementperiod(fiscalyearendingjune30,2014).asaresult,netpositiondecreasedby$3,310,419. Note10 PronouncementsIssuedButNotYetEffective The GASB has issued several pronouncements prior to June 30, 2015 that have effective dates that may impact future financialpresentations. Managementhasnotcurrentlydeterminedwhat,ifany,impactimplementationofthefollowingstatementsmayhaveon thefinancialstatementsoftheutilitiescommission. GASBStatementNo.72, FairValueMeasurementandApplication.ThisStatementaddressesaccountingand financialreportingissuesrelatedtofairvaluemeasurements.thedefinitionoffairvalueisthepricethatwouldbe receivedtosellanassetorpaidtotransferaliabilityinanorderlytransactionbetweenmarketparticipantsatthe measurement date. This Statement provides guidance for determining a fair value measurement for financial reporting purposes. This Statement also provides guidance for applying fair value to certain investments and disclosuresrelatedtoallfairvaluemeasurements.therequirementsofthisstatementareeffectiveforfinancial statementsforreportingperiodsbeginningafterjune15,2015.earlierapplicationisencouraged. GASBStatementNo.73, AccountingandFinancialReportingforPensionsandRelatedAssetsThatAreNotWithin thescopeofgasbstatementno.68,andamendmentstocertainprovisionofgasbstatementsno.67andno. 68. This Statement establishes requirements for defined benefit pensions that are not within the scope of Statement No. 68, Accounting and Financial Reporting for Pensions, as well as for the assets accumulated for purposesofprovidingthosepensions.inaddition,itestablishesrequirementsfordefinedcontributionpensions thatarenotwithinthescopeofstatementno.68.italsoamendscertainprovisionsofstatementno.67,financial ReportingforPensionPlans,andStatementNo.68forpensionplansandpensionsthatarewithintheirrespective scopes. The provisions in Statement No.73 are effectivefor fiscal years beginningafter June 15,2015 except thoseprovisionsthataddressemployersandgovernmentalnonemployercontributingentitiesforpensionsthat arenotwithinthescopeofstatementno.68,whichareeffectiveforfiscalyearsbeginningafterjune15,2016. Earlierapplicationisencouraged. GASBStatementNo.74, FinancialReportingforPostemploymentBenefitPlansOtherThanPensionPlans.This StatementreplacesStatementsNo.43,FinancialReportingforPostemploymentBenefitPlansOtherThanPension Plans,asamended,andNo.57,OPEBMeasurementsbyAgentEmployersandAgentMultipleEmployerPlans.It also includes requirements for defined contribution OPEB plans that replace the requirements for those OPEB plansinstatementno.25,financialreportingfordefinedbenefitpensionplansandnotedisclosuresfordefined ContributionPlans,asamended,StatementNo.43,andStatementNo.50,PensionDisclosures.Theprovisionsin StatementNo.74areeffectiveforfiscalyearsbeginningafterJune15,2016.Earlierapplicationisencouraged. GASBStatementNo.75, AccountingandFinancialReportingforPostemploymentBenefitsOtherThanPensions. ThisStatementreplacestherequirementsofStatementsNo.45,AccountingandFinancialReportingbyEmployers for Postemployment Benefits Other Than Pensions, as amended, and No. 57, OPEB Measurements by Agent Employers and Agent MultipleEmployer Plans, for OPEB. Statement No. 74, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, establishes new accounting and financial reporting requirementsforopebplans.theprovisionsinstatementno.75areeffectiveforfiscalyearsbeginningafterjune 15,2017.Earlierapplicationisencouraged. GASB Statement No. 76, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments. This Statement supersedes Statement No. 55, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments. The requirements of this Statement are effective for financial A-52

119 GREENVILLEUTILITIESCOMMISSION OFTHECITYOFGREENVILLE,NORTHCAROLINA NotestotheFinancialStatements FortheYearEndedJune30,2015 statementsforperiodsbeginningafterjune15,2015,andshouldbeappliedretroactively.earlierapplicationis permitted. GASBStatementNo.77, TaxAbatementDisclosures.ThisStatementrequiresgovernmentsthatenterintotax abatementagreementstodisclosethefollowinginformationabouttheagreements: Briefdescriptiveinformation,suchasthetaxbeingabated,theauthorityunderwhichtaxabatementsare provided,eligibilitycriteria,themechanismbywhichtaxesareabated,provisionsforrecapturingabated taxes,andthetypesofcommitmentsmadebytaxabatementrecipients Thegrossdollaramountoftaxesabatedduringtheperiod Commitmentsmadebyagovernment,otherthantoabatetaxes,aspartofataxabatementagreement. TherequirementsofthisStatementareeffectiveforreportingperiodsbeginningafterDecember15,2015.Earlier applicationisencouraged. A-53

120 REQUIRED SUPPLEMENTARY INFORMATION Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2015 Connected To Our Customers There When They Need Us When compared to area investor-owned utilities, Greenville Utilities electric customers experience: 47% fewer outages Outages lasting only one-third as long Power restoration about 55 minutes faster when outages occur Economists estimate the value of this higher level of reliability to customers is $3 million per year. Greenville Utilities Commission is a not-for-profit, publicly-owned utility, one of about 2,000 such utilities across the country that have been created as community-owned, hometown enterprises. An important advantage to public ownership is our record of reliability. GUC continually reinvests in its systems, ensuring consistent, reliable service for all customers and quick restoration should a storm occur. In contrast, privately-owned utilities focus more on profit for stockholders, and may not invest in their systems like publicly-owned utilities do. As a result, response time during storms/emergencies can suffer. It takes a lot of time, expertise and money to provide safe, reliable electric, water, sewer and natural gas services. We do all we can to make sure that no matter what kind of weather Mother Nature brings our way, you have the services you depend on. To that end, we have long-range plans to maintain, improve and expand our systems. We have replaced older, less efficient facilities and upgraded others with new technology and advanced environmental controls. Our comprehensive tree trimming program keeps the trees near our power lines cut to help prevent outages. These efforts pay off. In electric, our overall system availability is %. Our record of reliability has also been recognized on a national level. GUC is one of 184 of the nation s more than 2,000 public power utilities to earn Reliable Public Power Provider (RP3 ) recognition from the American Public Power Association (APPA) for providing customers with the highest degree of reliable and safe electric service. The RP3 designation recognizes public power utilities that demonstrate proficiency in four key disciplines: reliability, safety, workforce development and system improvement. As your hometown utility provider, we take pride in delivering safe, reliable services; maintaining stable, competitive rates; and supporting the economic growth of Greenville-Pitt County. We appreciate your continued support. A-54