$11,315,000 MAHANOY CITY SEWER AUTHORITY Schuylkill County, Pennsylvania Guaranteed Sewer Revenue Bonds, Series of 2016

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1 OFFICIAL STATEMENT BOOK-ENTRY ONLY Rating: Insured: AA (Stable Outlook) AGM Insured In the opinion of Stevens & Lee, P.C., Reading, Pennsylvania, Bond Counsel, assuming continuing compliance by the Authority with certain covenants to comply with provisions of the Internal Revenue Code of 1986, as amended (the Code ) and any applicable regulations thereunder, interest on the Bonds is not includible in gross income under Section 103(a) of the Code and interest on the Bonds is not an item of tax preference for purposes of the federal individual and corporate alternative minimum taxes. See TAX EXEMPTION AND OTHER TAX MATTERS in this Official Statement and Appendix D Form of Opinion of Bond Counsel, to this Official Statement. Other provisions of the Code may affect the purchasers and holders of the Bonds. See TAX EXEMPTION AND OTHER TAX MATTERS herein for a brief description of these provisions. Under the laws of the Commonwealth of Pennsylvania, the Bonds and interest on the Bonds shall be free from taxation for State and local purposes within the Commonwealth of Pennsylvania, but this exemption does not extend to gift, estate, succession or inheritance taxes or any other taxes not levied or assessed directly on the Bonds or the interest thereon. Under the laws of the Commonwealth of Pennsylvania, profits, gains or income derived from the sale, exchange or other disposition of the Bonds shall be subject to State and local taxation within the Commonwealth of Pennsylvania. $11,315,000 MAHANOY CITY SEWER AUTHORITY Schuylkill County, Pennsylvania Guaranteed Sewer Revenue Bonds, Series of 2016 Due: May 15 as shown below Denominations: Integral multiples of $5,000 Interest Payable: May 15 and November 15 First Interest Payment: November 15, 2016 Form: Book- Entry Only Legal Investment for Fiduciaries in Pennsylvania: The Bonds (hereinafter defined) are a legal investment for fiduciaries in the Commonwealth of Pennsylvania under the Probate, Estate and Fiduciaries Code, Act of June 30, 1972, No. 164, P.L. 508 as amended and supplemented. Payable: The Guaranteed Sewer Revenue Bonds, Series of 2016, in the aggregate amount of $11,315,000 (the Bonds ) will be issued as fully registered bonds and, when issued, will be registered in the name of Cede & Co., as nominee for The Depository Trust Company, New York, New York ( DTC ). DTC will act as securities depository for the Bonds. Purchases of the Bonds will be made only in book-entry form, and purchasers will not receive certificates representing their interests in the Bonds. So long as DTC, or its nominee, Cede & Co., is the registered owner of the Bonds, payments of the principal and interest on the Bonds will be made by the Trustee directly to DTC. Disbursement of such payments to the DTC Participants is the responsibility of DTC, and disbursements of such payments to Beneficial Owners of the Bonds is the responsibility of the DTC Participants and the Indirect Participants. See BOOK-ENTRY ONLY SYSTEM herein. THE BONDS ARE LIMITED OBLIGATIONS OF THE AUTHORITY PAYABLE FROM AND SECURED BY THE RECEIPTS AND REVENUES FROM THE SEWER SYSTEM, AS SUCH PHRASE IS DEFINED IN THE INDENTURE. AS ADDITIONAL SECURITY, PURSUANT TO A GUARANTY AGREEMENT, DATED AS OF APRIL 15, 2016 (THE GUARANTY ), THE BOROUGH OF MAHANOY CITY, SCHUYLKILL COUNTY, PENNSYLVANIA, (THE BOROUGH ) HAS UNCONDITIONALLY GUARANTEED PAYMENT OF THE FULL AMOUNT OF THE PRINCIPAL AND INTEREST ON THE BONDS, WHEN DUE, AND FOR SUCH PAYMENT, PLEDGES ITS FULL FAITH, CREDIT AND TAXING POWER. NEITHER THE CREDIT NOR THE TAXING POWER OF SCHUYLKILL COUNTY, PENNSYLVANIA, THE COMMONWEALTH OF PENNSYLVANIA OR ANY POLITICAL SUBDIVISION THEREOF (OTHER THAN THE BOROUGH UNDER THE GUARANTY) IS PLEDGED TO PAY THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON THE BONDS; NOR SHALL THE BONDS BE DEEMED TO BE AN OBLIGATION OF THE COUNTY OF SCHUYLKILL, THE COMMONWEALTH OF PENNSYLVANIA OR ANY POLITICAL SUBDIVISION THEREOF (EXCEPT THE BOROUGH UNDER THE GUARANTY). THE AUTHORITY HAS NO TAXING POWER. Redemption: The Bonds are subject to redemption prior to their stated maturity dates as described herein. Purpose: Proceeds of the Bonds will be used (1) to currently refund the Authority s outstanding Guaranteed Sewer Revenue Bonds, Series of 2003; (2) to currently refund the Authority s outstanding Guaranteed Sewer Revenue Bonds, Series of 2007; (3) to currently refund the Authority s outstanding General Obligation Bond, Series of 2012; (4) currently refund the Authority s loan with the Pennsylvania Infrastructure Investment Authority; (5) to provide funds for capital improvements to the existing Sewer System; (6) fund a debt service reserve fund; and (7) to pay the costs of issuing and insuring the Bonds. Bond Insurance: The scheduled payment of principal of and interest on the Bonds when due is guaranteed under a municipal bond insurance policy issued concurrently with the delivery of the Bonds by Assured Guaranty Municipal Corp. The Bonds are offered for delivery when, as and if issued by the Authority and received by the Underwriter, subject to the approving legal opinion of Stevens & Lee, P.C., Reading, Pennsylvania, Bond Counsel, to be furnished upon delivery of the Bonds. Certain legal matters will be passed upon by Michael A. O Pake, Esquire, Pottsville, Pennsylvania, Solicitor for the Authority and for the Borough of Mahanoy City. It is expected that the Bonds in definitive form will be available for delivery in New York, New York on or about April 26, The date of this Official Statement is March 23, 2016.

2 $11,315,000 MAHANOY CITY SEWER AUTHORITY Schuylkill County, Pennsylvania Guaranteed Sewer Revenue Bonds, Series of 2016 Dated: April 26, 2016 Interest Payable: May 15 and November 15 Due: May 15, as shown below First Interest Payment: November 15, 2016 Denomination: Integral multiples of $5,000 Form: Book-Entry Only Maturity Schedule Principal Principal Year Amount Coupon Price Year Amount Coupon Price 2017 $310, % % 2022 $335, % % , , , , , , , , $770, % Term Bonds Due May 15, % $830, % Term Bonds Due May 15, % $1,350, % Term Bonds Due May 15, % $1,495, % Term Bonds Due May 15, % $1,670, % Term Bonds Due May 15, $1,850, % Term Bonds Due May 15, % ii

3 No dealer, broker, salesman or other person has been authorized by the Authority or the Underwriter to give any information or to make any representation, other than that given or made in this Official Statement, and if given or made, any such other information or representation may not be relied upon as having been authorized by the Authority or the Underwriter. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. This Official Statement has been approved by the Authority and, while the information set forth in this Official Statement has been furnished by the Authority and other sources which are believed to be reliable, such information is not guaranteed as to accuracy or completeness, and is not to be construed as a representation by the Underwriter or, as to information obtained from other sources, by the Authority. The information and expressions of opinion set forth in this Official Statement are subject to change without notice and neither the delivery of this Official Statement nor any sale made under this Official Statement shall, under any circumstances, create any implication that the affairs of the Authority have remained unchanged since the date of this Official Statement. Assured Guaranty Municipal Corp. ( AGM ) makes no representation regarding the Bonds or the advisability of investing in the Bonds. In addition, AGM has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding AGM supplied by AGM and presented under the heading Bond Insurance and Appendix G - Specimen Municipal Bond Insurance Policy. THE UNDERWRITER HAS PROVIDED THE FOLLOWING SENTENCE FOR INCLUSION IN THIS OFFICIAL STATEMENT. THE UNDERWRITER HAS REVIEWED THE INFORMATION IN THIS OFFICIAL STATEMENT PURSUANT TO ITS RESPONSIBILITIES TO INVESTORS UNDER THE FEDERAL SECURITIES LAWS, BUT THE UNDERWRITER DOES NOT GUARANTEE THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION. TABLE OF CONTENTS Summary Page...vi Introduction...1 The Authority...2 Future Authority Financings...2 Purpose of the Issue...2 Sources and Uses of Funds...2 Description of the Bonds...3 Redemption Provisions...4 Book-Entry Only System...5 Security for the Bonds...7 Pennsylvania Municipalities Financial Recovery Act (Act 47)...9 Bond Insurance...11 Certain Provisions of the Indenture...13 Tax Exemption and Other Tax Matters...17 Litigation...18 Legal Matters...19 Legality for Investment...19 Continuing Disclosure Undertaking...19 Miscellaneous...20 Certain Matters...22 Appendix A Description and Summaries of Financial Factors of the Sewer System... A 1 Appendix B Mahanoy City Sewer Authority Financial Statements and Independent Auditor s Report for the Year Ended December 31, B 1 Appendix C Summary of Financial Factors of the Borough of Mahanoy City... C 1 Appendix D Description of the Borough of Mahanoy City... D 1 iii

4 Appendix E Proposed Form of Bond Counsel Opinion... E 1 Appendix F Proposed Form of Joint Continuing Disclosure Certificate... F 1 Appendix G Specimen Municipal Bond Insurance Policy... G 1 Appendix H Bond Amortization Schedule... H 1 iv

5 MAHANOY CITY SEWER AUTHORITY (Schuylkill County, Pennsylvania) Authority Board Peter Gutsie Chairman Joseph P. Holland... Secretary/Treasurer Rose M. Kern... Member Mary E. Brassignton Member Dorothy M. Lewis Member BOROUGH OF MAHANOY CITY (Schuylkill County, Pennsylvania) Council Members Thomas Maziekas... President Francis Burke... Vice President Thomas R. Flamini... Member Louis Huber... Member Scott Kline... Member Diane Rachuck Member Robyn Sincavage... Member MAYOR Patricia Schnitzius BOROUGH MANAGER Daniel L. Lynch BOND COUNSEL Stevens & Lee, P.C. Reading, Pennsylvania AUTHORITY SOLICITOR Michael A. O Pake, Esquire Pottsville, Pennsylvania BOROUGH SOLICITOR Michael A. O Pake, Esquire Pottsville, Pennsylvania FINANCIAL ADVISOR Financial S&Lutions LLC Reading, Pennsylvania UNDERWRITER RBC Capital Markets, LLC Lancaster, Pennsylvania TRUSTEE The Gratz Bank Minersville, Pennsylvania AUTHORITY ADDRESS 130 East Centre Street P.O. Box 215 Mahanoy City, PA v

6 SUMMARY STATEMENT This Summary Statement is subject in all respects to more complete information set forth in this Official Statement. No person is authorized to detach this Summary Statement from this Official Statement or to otherwise use it without the entire Official Statement. Issuer... Bonds... Redemption Provisions... Form... Application of Proceeds... Security... Bond Insurance... Rating... Mahanoy City Sewer Authority, Schuylkill County, Pennsylvania. The Guaranteed Sewer Revenue Bonds, Series of 2016, will be issued in the aggregate principal amount of $11,315,000 will be dated the date of delivery of the Bonds and will mature in various principal amounts (as described herein) on May 15, 2017, and thereafter, May 15 of each of the years 2018 through and including 2042 and, with interest payable May 15 and November 15, commencing on November 15, The Bonds are subject to optional and extraordinary redemption as set forth more fully herein. See "REDEMPTION PROVISIONS. Book-Entry Only. Proceeds of the Bonds will be used (1) to currently refund the Authority s outstanding Guaranteed Sewer Revenue Bonds, Series of 2003; (2) to currently refund the Authority s outstanding Guaranteed Sewer Revenue Bonds, Series of 2007; (3) to currently refund the Authority s outstanding General Obligation Bond, Series of 2012; (4) currently refund the Authority s loan with the Pennsylvania Infrastructure Investment Authority; (5) to provide funds for capital improvements to the existing Sewer System; (6) fund a debt service reserve fund; and (7) to pay the costs of issuing and insuring the Bonds.. The Bonds are limited obligations of the Authority payable from and secured by the Receipts and Revenues from the Sewer System, as such phrase is defined in the Indenture. As additional security, pursuant to a Guaranty Agreement, dated as of April 15, 2016 (the "Guaranty"), the Borough of Mahanoy City, Schuylkill County, Pennsylvania, has unconditionally guaranteed payment of the full amount of the principal and interest on the Bonds, when due, and for such payment, pledges its full faith, credit and taxing power. Neither the credit nor the taxing power of Schuylkill County, Pennsylvania, the Commonwealth of Pennsylvania or any political subdivision thereof (other than the Borough under the Guaranty) is pledged to pay the principal of, premium, if any, or interest on the Bonds; nor shall the Bonds be deemed to be an obligation of the County of Schuylkill, the Commonwealth of Pennsylvania or any political subdivision thereof (except the Borough under the Guaranty). The Authority has no taxing power. The scheduled payment of principal of and interest on the Bonds when due is guaranteed under a municipal bond insurance policy issued concurrently with the delivery of the Bonds by Assured Guaranty Municipal Corp. See "MISCELLANEOUS - Ratings" herein. vi

7 OFFICIAL STATEMENT MAHANOY CITY SEWER AUTHORITY (Schuylkill County, Pennsylvania) $11,315,000 Guaranteed Sewer Revenue Bonds, Series of 2016 INTRODUCTION This Official Statement is furnished by the Mahanoy City Sewer Authority (the Authority ), in connection with the offering of its Guaranteed Sewer Revenue Bonds, Series of 2016, in the aggregate principal amount of $11,315,000 (the Bonds or 2016 Bonds ). The Bonds are being issued pursuant to and secured by an Amended and Restated Trust Indenture dated as of April 15, 2016 (the Indenture ), by and between the Authority and The Gratz Bank, Minersville, Pennsylvania, as trustee (the Trustee ). Pursuant to the provisions of the Indenture, the Authority previously issued its Guaranteed Sewer Revenue Bond, Series of 2013 in the original principal amount of $1,300,000 (the 2013 Bond ) to finance certain capital improvements to the Sewer System. The 2013 Bond is currently outstanding the principal amount of $1,215,000. The 2013 Bond, the 2016 Bonds and any Additional Bonds issued under the Indenture shall be ratably secured by a parity lien on the Receipts and Revenues from the Sewer System, as such phrase is defined in the Indenture. There follows in this Official Statement descriptions and summaries of the Bonds, the Indenture, the Guaranty, and the Consulting Engineers' Report. Such descriptions and summaries are only brief outlines of some of the provisions thereof and do not purport to summarize or describe all of the provisions thereof. In addition, all references to other materials not purporting to be quoted in full are only brief outlines of some of the provisions thereof. All capitalized terms and/or phrases used in this Official Statement and not otherwise defined shall have the meanings set forth in the Indenture. For a complete statement of the provisions of the Indenture, reference is made to the document in its entirety, a copy of which is on file at the principal corporate trust office of the Trustee. THE BONDS ARE LIMITED OBLIGATIONS OF THE AUTHORITY PAYABLE FROM AND SECURED BY THE RECEIPTS AND REVENUES FROM THE SEWER SYSTEM, AS SUCH PHRASE IS DEFINED IN THE INDENTURE. AS ADDITIONAL SECURITY, PURSUANT TO A GUARANTY AGREEMENT, DATED AS OF APRIL 15, 2016, THE BOROUGH OF MAHANOY CITY, SCHUYLKILL COUNTY, PENNSYLVANIA, HAS UNCONDITIONALLY GUARANTEED PAYMENT OF THE FULL AMOUNT OF THE PRINCIPAL AND INTEREST ON THE BONDS, WHEN DUE, AND FOR SUCH PAYMENT, PLEDGES ITS FULL FAITH, CREDIT AND TAXING POWER. NEITHER THE CREDIT NOR THE TAXING POWER OF SCHUYLKILL COUNTY, PENNSYLVANIA, THE COMMONWEALTH OF PENNSYLVANIA OR ANY POLITICAL SUBDIVISION THEREOF (OTHER THAN THE MAHANOY CITY BOROUGH UNDER THE GUARANTY) IS PLEDGED TO PAY THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON THE BONDS; NOR SHALL THE BONDS BE DEEMED TO BE AN OBLIGATION OF THE COUNTY OF SCHUYLKILL, THE COMMONWEALTH OF PENNSYLVANIA OR ANY POLITICAL SUBDIVISION THEREOF (EXCEPT THE BOROUGH UNDER THE GUARANTY). THE AUTHORITY HAS NO TAXING POWER. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 1

8 THE AUTHORITY The Authority was incorporated under the Act, pursuant to ordinances enacted by the Borough Council of the Borough of Mahanoy City, Schuylkill County, Pennsylvania (the Borough ). The Authority is empowered to acquire, hold, construct, improve, maintain, operate and lease, as lessor or lessee, sewer systems and sewage treatment works serving the Borough. The Board of the Authority is composed of five members appointed for five-year terms on a staggered basis. The Board is responsible for managing the business of the Authority. The current members and officers of the Authority are as follows: Members and Officers Member or Officer Title Term Expires Peter W. Gutsie Chairman April 30, 2017 Joseph P. Holland Secretary/Treasurer April 30, 2016 Rose M. Kern Member April 30, 2018 Mary E. Brassington Member April 30, 2019 Dorothy M. Lewis Member April 30, 2020 FUTURE AUTHORITY FINANCINGS The Authority does not contemplate any financing in the near future. PURPOSE OF THE ISSUE Proceeds of the Bonds will be used (1) to currently refund the Authority s outstanding Guaranteed Sewer Revenue Bonds, Series of 2003; (2) to currently refund the Authority s outstanding Guaranteed Sewer Revenue Bonds, Series of 2007; (3) to currently refund the Authority s outstanding General Obligation Bond, Series of 2012; (4) currently refund the Authority s loan with the Pennsylvania Infrastructure Investment Authority; (5) to provide funds for capital improvements to the existing Sewer System; (6) fund a debt service reserve fund; and (7) to pay the costs of issuing and insuring the Bonds. SOURCES AND USES OF FUNDS Sources of Funds Proceeds of Series of 2016 Bonds... $11,315, Existing Reserve Fund , Less: Original Issue Discount , Total Sources of Funds... $11,749, Uses of Funds Refunding Requirement... 9,418, Debt Service Reserve Fund , Capital Projects Fund... 1,050, Costs of Issuance (1) , Total Uses of Funds... $11,749, (1) Includes legal fees, underwriter s discount, trustee/paying agent fees, escrow agent fees, verification fee, municipal bond insurance premium, printing costs and other miscellaneous fees. 2

9 DESCRIPTION OF THE BONDS The Bonds are issued as fully registered bonds, without coupons, in the denominations of $5,000 principal amount or any integral multiple thereof. Principal and interest are payable as set forth below. When issued, the Bonds will be registered in the name of Cede & Co., as nominee for the Depository Trust Company ( DTC ), New York, New York. Purchasers of the Bonds (the Beneficial Owners ) will not receive any physical delivery of bond certificates and beneficial ownership of the bonds will be evidenced only by book entries. See Book-Entry Only System herein. Payment of Principal and Interest So long as Cede & Co., as nominee of DTC, is the registered owner of the Bonds, payments of principal of and interest on the Bonds, when due, are to be made to DTC, and all such payments shall be valid and effective to satisfy fully and to discharge the obligations of the Authority with respect to, and to the extent of, principal and interest so paid. If the use of the book-entry only system for the Bonds is discontinued for any reason, bond certificates will be issued to the Beneficial Owners of the Bonds and payment of principal and interest on the Bonds shall be made as described in the following paragraphs. Principal of certificated Bonds will be paid to the registered owners thereof or registered assigns, when due, upon surrender of such Bonds at the designated corporate trust office of the Trustee. Interest is payable to the registered owner of a Bond from the interest payment date next preceding the date of registration and authentication of the Bond, unless: (a) such Bond is registered and authenticated as of an interest payment date, in which event such Bond shall bear interest from said interest payment date, or (b) such Bond is registered and authenticated after a Record Date (hereinafter defined) and before the next succeeding interest payment date, in which event such Bond shall bear interest from such interest payment date, or (c) such Bond is registered and authenticated on or prior to the Record Date (hereinafter defined) preceding November 15, 2016, in which event such Bond shall bear interest from the dated date of the Bonds, or (d) as shown by the records of the Trustee, interest on such Bond shall be in default, in which event such Bond shall bear interest from the date to which interest was last paid on such Bond. Interest on each Bond shall be paid semiannually on May 15 and November 15 of each year, beginning November 15, 2016, until the principal sum is paid. Interest on each Bond is payable by check drawn on the Trustee, which shall be mailed to the registered owner whose name and address shall appear, at the close of business on the fifteenth (15 th ) day (whether or not a day on which the Trustee is open for business) next preceding each interest payment date, respectively (the "Record Date"), on the registration books maintained by the Trustee, irrespective of any transfer or exchange of the Bond subsequent to such Record Date and prior to such interest payment date, unless the Authority shall be in default in payment of interest due on such interest payment date. In the event of any such default, such defaulted interest shall be payable to the person in whose name the Bond is registered at the close of business on a special record date for the payment of such defaulted interest established by notice mailed by the Trustee to the registered owners of Bonds not less than fifteen (15) days preceding such special record date. Such notice shall be mailed to the persons in whose names the Bonds are registered at the close of business on the fifth (5th) day preceding the date of mailing. If the date for the payment of the principal of or interest on any Bonds shall be a Saturday, Sunday, legal holiday or on a day on which banking institutions in the Commonwealth are authorized or required by law or executive order to close, then the date for payment of such principal or interest shall be the next succeeding day which is not a Saturday, Sunday, legal holiday or a day on which such banking institutions are authorized or required to close, and payment on such date shall have the same force and effect as if made on the nominal date established for such payment. Transfer, Exchange and Registration of Bonds Subject to the provisions described below under Book-Entry Only System, each of the Bonds may be transferred or exchanged by the registered owner thereof upon surrender of such Bond to the Trustee, at its designated corporate trust office, accompanied by a written instrument or instruments in form, with instructions and with guaranty of signature satisfactory to the Trustee, duly executed by the registered owner of such Bond or his attorney-in-fact or legal representative. The Trustee shall enter any transfer of ownership of such Bond in the registration books and shall authenticate and deliver at the earliest practicable time in the name of the transferee or transferees a new fully registered Bond or Notes of authorized denomination of 3

10 the same series, maturity date and interest rate for the aggregate principal amount which the registered owner is entitled to receive. The Authority and the Trustee may deem and treat the registered owner of any Bond as the absolute owner thereof (whether or not a Bond shall be overdue) for the purpose of receiving payment of or on account of principal and interest and for all other purposes, and the Authority and the Trustee shall not be affected by any notice to the contrary. Bonds may be exchanged for a like aggregate principal amount of Bonds of other authorized denominations of the same series, maturity date and interest rate. The Authority and the Trustee shall not be required (a) to register the transfer of or exchange any Bonds then considered for redemption during a period beginning at the close of business on the 15th business day next preceding any date of selection of Bonds to be redeemed and ending at the close of business on the day on which the applicable notice of redemption is mailed or (b) to register the transfer of or exchange any Bond selected for redemption until after the redemption date. Optional Redemption REDEMPTION PROVISIONS The Bonds maturing on and after May 15, 2025 are subject to redemption prior to maturity at the option of the Authority, in whole, or in part, in any order of maturities, at any time, on or after May 15, 2024 at a price equal to 100% of the principal amount thereof to be redeemed together with interest accrued thereon to the date fixed for such optional redemption. In the event that less than all of The Bonds of a maturity are to be redeemed, the Bonds of such maturity to be redeemed shall be drawn by lot by the Trustee. Mandatory Redemption The Bonds maturing on May 15, 2028, May 15, 2030, May 15, 2033, May 15, 2036, May 15, 2039 and May 15, 2042 (the Term Bonds ) shall be subject to mandatory redemption prior to maturity as drawn by lot by the Trustee, at a redemption price equal to 100% of the principal amount thereof together with accrued interest thereon to the date fixed for redemption, on November 15 of each of the years and in the principal amounts as follows: Bonds Stated to Mature on: May 15, 2028 Bonds Stated to Mature on: May 15, $380, $410, * 390, * 420,000 Bonds Stated to Mature on: May 15, 2033 Bonds Stated to Mature on: May 15, $435, $485, , , * 465, * 515,000 Bonds Stated to Mature on: May 15, 2039 Bonds Stated to Mature on: May 15, $530, $590, , , * 580, * 640,000 *Principal Maturity 4

11 Notice of Redemption So long as Cede & Co., as nominee of DTC, is the registered owner of the Bonds, the Authority and the Trustee shall send redemption notices only to Cede & Co. See BOOK-ENTRY ONLY SYSTEM herein for further information regarding conveyance of notices to Beneficial Owners. Notice of any redemption shall be given by depositing a copy of the redemption notice in first class mail not less than thirty (30) days prior to the date fixed for redemption, addressed to each of the registered owners of any certificated Bonds to be redeemed, at the addresses shown on the registration books kept by the Trustee as of the date such Bonds are selected for redemption; provided, however, that failure to give such notice by mailing, or any defect therein or in the mailing thereof, shall not affect the validity of any proceeding for redemption of other Bonds so called for redemption as to which proper notice has been given. On the date designated for redemption, notice having been provided as aforesaid, and money for payment of the principal and interest being held by the Trustee, interest on the Bonds or portions thereof so called for redemption shall cease to accrue, such Bonds or portions thereof shall cease to be entitled to any benefit or security under the applicable Resolution, and registered owners thereof shall have no rights with respect thereto, except to receive payment of the principal to be redeemed and accrued interest thereon to the date fixed for redemption. If at a time of mailing of a notice of redemption the Authority has not deposited with the Trustee (or, in the case of a refunding, with another bank or depositary acting as refunding escrow agent) money sufficient to redeem all Bonds called for redemption, the notice of redemption may state that is it is conditional, i.e., that it is subject to the deposit of sufficient redemption money with the Trustee not later than the opening of business on the redemption date, and such notice shall be of no effect unless such money is so deposited. Manner of Redemption While Cede & Co., as nominee of DTC, is the registered owner of the Bonds, payment of the redemption price shall be made by Cede & Co. in accordance with the existing arrangements by and among the Authority, the Trustee and DTC and, if less than all of the Bonds in a particular maturity are to be redeemed, the amount of the interest of each DTC Participant, Indirect Participant and Beneficial Owner of such Bonds to be redeemed shall be determined by the governing arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. See BOOK-ENTRY ONLY SYSTEM herein for further information regarding redemption of Bonds registered in the name of Cede & Co. If a Bond is of a denomination larger than $5,000, a portion of such Bond may be redeemed. For the purposes of redemption, a Bond shall be treated as representing the number of Bonds that is equal to the principal amount thereof divided by $5,000, each $5,000 portion of such Bond being subject to redemption. In the case of partial redemption of a certificated Bond, payment of the redemption price shall be made only upon surrender of such Bond in exchange for certificated Bonds of authorized denominations in an aggregate principal amount equal to the unredeemed portion of the principal amount thereof. If the redemption date for any Bonds shall be a Saturday, Sunday, legal holiday or on a day on which banking institutions in the Commonwealth are authorized or required by law or executive order to close, then the date for payment of such principal, premium, if any, and interest upon such redemption shall be the next succeeding day which is not a Saturday, Sunday, legal holiday or a day on which such banking institutions are authorized or required to close, and payment on such date shall have the same force and effect as if made on the nominal date of redemption. BOOK-ENTRY ONLY SYSTEM The information under this heading has been obtained from materials provided by DTC for such purpose. The Authority (herein referred to as the Issuer ) and the Underwriter do not guaranty the accuracy or completeness of such information and such information is not to be construed as a representation of the Authority or the Underwriter. DTC, New York, New York, will act as securities depository for the Bonds. The Bonds will be issued as fullyregistered bonds registered in the name of Cede & Co. (DTC s partnership nominee) or such other name as may be requested by 5

12 an authorized representative of DTC. One fully-registered certificate will be issued for the Bonds of each separate maturity and interest rate, in the aggregate principal amount of such maturity and interest rate, and will be deposited with DTC. DTC, the world s largest depository, is a limited-purpose trust company organized under the New York Banking Law, a banking organization within the meaning of the New York Banking Law, a member of the Federal Reserve System, a clearing corporation within the meaning of the New York Uniform Commercial Code, and a clearing agency registered pursuant to the provisions of Section 17A of the Securities Exchange Act of DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-u.s. equity issues, corporate and municipal debt issues, and money market instruments from over 100 countries that DTC s participants ( Direct Participants ) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ( DTCC ). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation all of which are registered clearing agencies. DTCC is owned by the users of its registered subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ( Indirect Participants ). DTC has a Standard & Poor s rating: AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at Purchases of the Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC s records. The ownership interest of each actual purchaser of each Series of 2011 Bond ( Beneficial Owner ) is in turn to be recorded on the Direct and Indirect Participants records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Bonds, except in the event that use of the book-entry system for the Bonds is discontinued. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Redemption notices will be sent to DTC. If less than all of the Bonds of a maturity are being redeemed, DTC s practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Bonds unless authorized by a Direct Participant in accordance with DTC s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co. s consenting or voting rights to those Direct Participants to whose accounts the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Payments of principal, premium, if any, and interest on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC s practice is to credit Direct Participants accounts upon DTC s receipt of funds and corresponding detail information from the Issuer or the Trustee, on payable date in accordance with their respective holdings shown on DTC s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in street name, and will be the responsibility of such Participant and not of DTC, the Issuer or the Trustee, subject to any statutory or regulatory requirements as may be in effect from time to time. Payments of principal, premium, if any, and 6

13 interest on the Bonds to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Issuer or the Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the Issuer or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, bond certificates are required to be printed and delivered. The Issuer may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, bond certificates will be printed and delivered to DTC. The information in this section concerning DTC and DTC s book-entry system has been obtained from sources that Issuer believes to be reliable, but Issuer takes no responsibility for the accuracy thereof. Disclaimer of Liability for Failures of DTC The Authority and the Underwriter cannot and do not give any assurances that DTC, the Direct and Indirect Participants or others will distribute payments of principal, interest or premium with respect to the Bonds paid to DTC or its nominee as the owner of Bonds, or will distribute any redemption or other notices, to the Beneficial Owners, or that they will do so on a timely basis or will serve and act in the manner described in this Official Statement. The Authority and the Underwriter are not responsible or liable for the failure of DTC or any Participant to make any payment or give any notice to a Beneficial Owner with respect to the Bonds, or any error or delay relating thereto. Pledge of the Receipts and Revenues from the Sewer System SECURITY FOR THE BONDS The Authority previously issued its 2013 Bond in the original principal amount of $1,300,000 to finance certain capital improvements to the Sewer System.. The 2013 Bond is issued under and secured pursuant to the provisions of the Indenture. The 2013 Bond is currently outstanding the principal amount of $1,215,000. The Bonds are secured under the Indenture, together with any Additional Bonds, as that phrase is defined in the Indenture, issued under the Indenture by the Authority, by the assignment and pledge to the Trustee of the Receipts and Revenues from the Sewer System, as such phrase is defined in the Indenture, and by funds held by the Trustee under the Indenture. The Receipts and Revenues from the Sewer System include income from all sewer rental, rates and other charges imposed and collected by the Authority from customers served by the Sewer System. THE AUTHORITY HAS NO TAXING POWER. Capitalized terms and phrases not otherwise defined herein shall have the meanings ascribed to them in the Indenture. Debt Service Reserve Fund The Trustee shall, at the time of issuance of the 2016 Bonds, establish the Debt Service Reserve Fund for the benefit of the 2016 Bonds only, said account to be designated as the Debt Service Reserve Fund. The Debt Service Reserve Fund shall initially be funded in an amount equal to $$660,550.01, which initially, is equal to the Debt Service Reserve Fund Requirement for the 2016 Bonds. As used herein the term Debt Service Reserve Fund Requirement shall mean, with respect to the 2016 Bonds, the least of (l) ten percent of the stated principal amount (or issue price (net of pre-issuance accrued interest) if the 2016 Bonds have more than a de minimis amount of original issue discount or premium) of the 2016 Bonds; (2) the maximum annual principal and interest requirements on the 2016 Bonds; or (3) 125 percent of the average annual principal and interest requirements on the 2016 Bonds. The Trustee, without further direction from the Authority, shall apply money in the Debt Service Reserve Fund toward payment of principal and interest from time to time becoming payable on the 2016 Bonds to the extent that the Debt Service Fund shall at any time be deficient for such purpose. 7

14 Mandatory Sewer Connection Ordinances The Borough has enacted an ordinance requiring all owners of improved property abutting on or adjoining any street road, lane, court, public square or alley in which there is a sewer constituting a part of the Sewer System to connect thereto when sewer service is available. Rate Covenant The Authority has adopted a resolution or resolutions fixing and charging sewer rental rates and other charges upon owners of property connected to the Sewer System for use thereof and for services rendered by the Authority in connection therewith. The Authority covenants to keep such resolution or a subsequent similar resolution or resolutions in full force and effect continuously during the time any Bonds shall remain Outstanding. The Authority covenants that such sewer rentals and other charges imposed pursuant to the resolution or resolutions in effect at the time shall be at least such that the estimated amounts to be received by the Authority therefrom, together with other estimated Receipts and Revenues from the Sewer System to be received by the Authority, and together with money otherwise estimated to be available under provisions of the Indenture for the purposes, will be sufficient: A. To pay the reasonable Administrative Expenses of the Authority in connection with the Sewer System and in connection with all Bonds issued under the Indenture, in each Fiscal Year. B. To pay the reasonable Operating Expenses of the Authority, in each Fiscal Year. C. To provide an amount, in each Fiscal Year, so long as the Bonds shall remain Outstanding, equal to at least 110% of the Debt Service Requirements on all such Bonds then Outstanding, to the extent that such Debt Service Requirements otherwise shall not be provided for in the Indenture; and D. To provide an amount, in each Fiscal Year in which Additional Bonds shall be Outstanding, beginning with the first Fiscal Year in which Debt Service Requirements on such Additional Bonds shall be payable solely from Receipts and Revenues from the Sewer System, equal to at least 110% of Debt Service Requirements on each series of Additional Bonds then Outstanding, plus mandatory payments, if any, required to be made in such Fiscal Year to any Fund created under the Indenture (including under any supplemental thereto in accordance with provisions thereof), to the extent that such Debt Service Requirements of such mandatory payments otherwise shall no be provided for in the Indenture. The Authority will keep on file with the Trustee a copy of all resolutions imposing its rates and charges and connection fees or tapping fees then in effect and any rules and regulations relating thereto, certified to be sufficient to pay the expenses of the Authority and to provide the additional amounts required by the Indenture. If at any time rates are inadequate to satisfy the rate covenant, the Authority will immediately revise its rates and charges to remedy the inadequacy. Guaranty Agreement Under the terms of a Guaranty Agreement, dated as of April 15, 2016 (the Guaranty Agreement ), the Borough covenants that if the Authority at any time shall fail to pay the full amount of all principal of, or interest on, the 2016 Bonds when due, the Borough shall pay an amount sufficient to cure such deficiency. The Borough covenants with the registered owners of the 2016 Bonds issued and from time to time so Outstanding under the Indenture that: A. It shall include the amounts payable in respect of such Guaranty Agreement, for each Fiscal Year in which such sums are payable, in its budget for that Fiscal Year. B. It shall appropriate such amounts from its general revenues for the payment of such payment; and 8

15 C. In respect of such Guaranty Agreement, it shall duly and punctually pay or cause to be paid from any of its revenues or funds, the amount payable in respect to the Guaranty Agreement, according to the true intent and meaning thereof; and for such budgeting, appropriation and payment in respect of its guaranty, the Borough has pledged irrevocably, its full faith, credit and taxing power. The guaranty of the Borough, as set forth in the Guaranty Agreement, constitutes lease rental debt of the Borough under the Pennsylvania Local Government Unit Debt Act, Act 117, approved December 19, 1996 (the Debt Act ). The Debt Act provides a procedure whereby such lease rental debt may be excluded from the net debt of the Borough, if a qualified registered engineer, or other persons qualified by experience, estimates that anticipated revenues from the Sewer System will be sufficient, after payment of operating and ordinary repair and maintenance expenses, to pay the debt service requirements on the Bonds as and when due. The Consulting Engineers have estimated that the net revenues to be received from the Sewer System will be sufficient to pay the debt service requirements on the Bonds, when due. The Borough has filed proceedings with the Pennsylvania Department of Community and Economic Development ( DCED ) to qualify the debt represented by the Guaranty Agreement as self-liquidating debt. PENNSYLVANIA MUNICIPALITIES FINANCIAL RECOVERY ACT (ACT 47) Filing by the Borough under Act 47 In 2015 the Borough filed for a determination of financial distress pursuant to the procedures contained in the Pennsylvania Municipalities Financial Recovery Act, Act of 1987, P.L. 246, No. 47, as amended and supplemented ( Act 47 ). The Borough s filing cited each of the two following circumstances as a basis to determine that the Borough is financially distressed according to the criteria under Act 47: (1) the Borough had missed payroll for a period of thirty (30) days, and (2) the Borough had failed to make the budgeted payment of its minimum municipal obligation for its pension plan. Under Act 47 there are 11 specific criteria, only one of which need be present, in order for the Department to determine that a municipality is financially distressed. Pursuant to Act 47, within ten days of the Secretary (the Secretary ) of the Department receiving the above-referenced filing by the Borough, the Secretary shall set a time and place for a public hearing. The public hearing was held on January 21, 2016 at the Borough Hall. The hearing provided the Borough Manager, members of Borough Council and the general public the opportunity to comment on the Borough s petition for Act 47 designation. The hearing was chaired by officials representing the Department. On February 18, 2016, the Secretary officially designated the Borough as a distressed municipality pursuant to the distress requirements of Act 47. The Secretary noted the Borough, like other municipalities across the Commonwealth, was faced with widening structural deficits due to mandated expenses and revenue limitations and has failed to make the budgeted payment of its minimum municipal obligation as required by the Municipal Pension Plan Funding Standard and Recovery Act, with respect to a Borough pension fund during the fiscal year for which the payment was budgeted and has failed to take action within that time period to make required payments. The Secretary further noted that Act 47 would provide the Borough with flexibility in negotiating future labor agreements and additional taxing authority. In addition, a recovery plan would establish parameters for future revenues and expenditures. Pursuant to Act 47, the Secretary will now appoint a consultant or consulting firm to serve as the Act 47 Coordinator (the Coordinator ). Pursuant to the Act, the Coordinator is charged with the development of a Recovery Plan which provides recommendations and strategies for returning the Borough to fiscal balance, and for implementation of initiatives contained in the Recovery Plan. The status of the Borough as a distressed municipality under Act 47 does not affect the Borough s Guaranty Agreement with respect to the 2016 Bonds. General Description of Act 47 Under Act 47, a municipality can petition the Department to designate the municipality as being financial distressed. Act 47 is intended to enable municipalities to develop financial plans and to operate under them while implementing measures to restore their fiscal integrity. It is the policy of Act 47 to foster the fiscal integrity of municipalities so that they provide for the health, safety and welfare of their citizens; pay principal and interest on their debt 9

16 obligations when due; meet the financial obligations of their employees and their suppliers; and provide for proper financial accounting procedures, budgeting and taxing practices. In connection with being qualified under Act 47, the Borough obtained a determination from the Department that it met certain statutory criteria. Qualification under Act 47 entitles municipalities to receive priority in all economic and community development programs funded by the Commonwealth. Act 47 further provides the right of the municipality to petition the court for a tax increase beyond maximum rates permitted by law for earned income, real property or both. In addition, Act 47 provides assistance to municipalities through emergency loans and grant funding. Upon determination of qualification under Act 47, the Department would be required to appoint an independent coordinator to prepare and administer a plan designed to relieve the financial distress of the municipality which could include initiatives to increase revenues and/or reduce expenditures of the municipality. Act 47 provides that if an Act 47 coordinator s plan is adopted by the municipal governing body the coordinator shall initiate plan implementation and continue its implementation for at least four months. Included in the requirements of Act 47 is a requirement that the municipality have in place an adopted financial plan before it can obtain approval from the Department under the Debt Act of the incurring of long-term debt. Act 47 provides for the termination of municipal financial distress status through a process which may be initiated either by the Department or by the municipality. The process is designed to determine whether or not the conditions which led to the earlier determination of distressed status have been addressed adequately, including the elimination of accrued deficits and municipal operations for a period of at least one year under a positive current operating fund balance. Only the Secretary has statutory authority to rescind a distress determination under Act 47. Under Act 199 there is a (5) year limitation of the distressed status of a municipality, subject to an additional three (3) year exit plan extension. See Amendment to Act 47 Act 199 of 2014 below. As of the date of this Official Statement there are 28 municipalities in the Commonwealth that have been granted relief under Act 47 since Eleven of these municipalities have had their distress determinations rescinded. Plans under Act 47 The following is a summary of provisions of Act 47 relating to the contents, review, adoption and implementation of an applicable Act 47 coordinator s plan or an alternate plan adopted by the municipality. A plan formulated by the appointed coordinator shall be consistent with applicable law and shall include, among other factors, any of the following factors which are relevant to alleviating the financially distressed status of the municipality: an analysis of whether specific exclusive Federal remedies could help relieve the municipality s financial distress and whether filing a Federal bankruptcy action is deemed appropriate; an analysis of whether functional consolidation or privatization of existing municipal services is appropriate and feasible; recommendations for special audits or further studies; recommended changes in municipal ordinances or rules; possible changes in collective bargaining agreements and permanent and temporary staffing level changes or changes in organization; and an analysis of whether the municipality is no longer viable and should merge with an adjacent municipality or municipalities. Within 90 days of an executed contract between the Department and the applicable Act 47 coordinator, the applicable Act 47 coordinator shall formulate the plan which shall be filed for public inspection in the municipal office by the municipal clerk. Written comments shall be made no later than 15 days after the date of such filing for public inspection. A meeting conducted by the applicable Act 47 coordinator in the municipality shall be set for a date not later than 20 days after the date of such filing of the plan. Creditors who do not consent to the handling of their claim by the plan shall notify the applicable Act 47 coordinator of their rejection of the plan not later than 10 days before the public meeting scheduled by the governing body to consider adoption of the plan. If a creditor has rejected the plan, the applicable Act 47 coordinator shall make a written report to the governing body stating whether the timing and amount of payment or proposed resolution of the claim is the best disposition the municipality can make. Act 47, however, does not provide for the mandatory adjustment of debt or other obligations but does permit a financially distressed municipality to file under Chapter 9 of the Bankruptcy Code. The 10

17 Borough currently has no intention to file for protection under Chapter 9 of the Federal Bankruptcy Code. See Authorization of Municipal Bankruptcy Filing below. Failure to Adopt or Implement a Plan Act 47 provides that if a financially distressed municipality has failed to adopt a plan or implement an adopted plan as proposed under Act 47 or has adopted a plan which is inadequate to address the municipality s financial distress, the municipality shall not receive a grant, loan, entitlement or payment from the Commonwealth or any of its agencies and that such moneys withheld shall be held in escrow by the Commonwealth. Notwithstanding the foregoing, the following funds shall not be withheld: (1) moneys for capital projects under contract in progress, (2) moneys received subsequent to the declaration of a disaster resulting from a catastrophe and (3) pension fund disbursements made pursuant to state law. Authorization of Municipal Bankruptcy Filing Act 47 permits municipalities to file for protection under Chapter 9 of the Federal Bankruptcy Code without further authorization in the event one of the following conditions is present: (1) after recommendation by the applicable Act 47 coordinator; (2) imminent jeopardy of an action by a creditor, claimant or supplier of goods and services which is likely to substantially interrupt or restrict the continued ability of the municipality to provide health or safety services to its citizens; (3) one or more creditors of the municipality have rejected the proposed or adopted plan, and efforts to negotiate resolution of their claims have been unsuccessful for a ten-day period; (4) a condition substantially affecting the municipality s financial distress is potentially solvable only by utilizing a remedy exclusively available through the Federal Municipal Debt Readjustment Act; or (5) a majority of the current or immediately preceding governing body of a municipality determined to be financially distressed has failed to adopt a plan or carry out the recommendations of the applicable Act 47 coordinator pursuant to Act 47. This authorization to file under Chapter 9 of the Bankruptcy Code may be exercised only upon the vote by a majority of the municipality s governing body. As set forth above, the Borough currently has no intention to file for protection under Chapter 9 of the Federal Bankruptcy Code. Amendment to Act 47 Act 199 of 2014 Act 199 of 2014 ( Act 199 ) was signed into law by the Governor of the Commonwealth of Pennsylvania on October 31, 2014 and is currently effective. Act 199 amends Act 47 in several areas. Amendments to Act 47 by Act 199 include, but are not limited to: (i) allowing municipalities in Act 47 to levy a local services tax not to exceed $156 per year (currently capped at $52); (ii) authorizing the Governor s Center for Local Government Services to award annual grants to one or more municipalities up to $200,000 in the initial year of the grant award; (iii) granting authority to the Secretary of DCED, beginning July 1, 2015, to evaluate the Act 47 Coordinator s performance on an annual basis, and if this evaluation is deemed unsatisfactory, to have the option to terminate the Act 47 Coordinator s contract; (iv) requiring a municipality in Act 47 to submit its annual budget to the Act 47 Coordinator at least 75 days prior to each fiscal year end for review, and if the Act 47 Coordinator determines that the budget does not meet the requirements of the adopted Act 47 Plan, the Act 47 Coordinator will notify the Secretary of DCED and the Secretary of DCED will have the authority to take remedial actions authorized under Act 47; and (v) providing for a five (5) year limitation of the distressed status of a municipality, subject to an additional three (3) year exit plan extension. Investors should refer to Act 199 for a complete summary of the changes to Act 47. A copy of Act 199 can be found on the Pennsylvania General Assembly s website at: BOND INSURANCE BOND INSURANCE POLICY Concurrently with the issuance of the Bonds, Assured Guaranty Municipal Corp. ("AGM") will issue its Municipal Bond Insurance Policy for the Bonds (the "Policy"). The Policy guarantees the scheduled payment of principal of and interest on the Bonds when due as set forth in the form of the Policy included as an appendix to this Official Statement. 11

18 The Policy is not covered by any insurance security or guaranty fund established under New York, California, Connecticut or Florida insurance law. ASSURED GUARANTY MUNICIPAL CORP. AGM is a New York domiciled financial guaranty insurance company and an indirect subsidiary of Assured Guaranty Ltd. ( AGL ), a Bermuda-based holding company whose shares are publicly traded and are listed on the New York Stock Exchange under the symbol AGO. AGL, through its operating subsidiaries, provides credit enhancement products to the U.S. and global public finance, infrastructure and structured finance markets. Neither AGL nor any of its shareholders or affiliates, other than AGM, is obligated to pay any debts of AGM or any claims under any insurance policy issued by AGM. AGM s financial strength is rated AA (stable outlook) by Standard and Poor s Ratings Services, a Standard & Poor s Financial Services LLC business ( S&P ), AA+ (stable outlook) by Kroll Bond Rating Agency, Inc. ( KBRA ) and A2 (stable outlook) by Moody s Investors Service, Inc. ( Moody s ). Each rating of AGM should be evaluated independently. An explanation of the significance of the above ratings may be obtained from the applicable rating agency. The above ratings are not recommendations to buy, sell or hold any security, and such ratings are subject to revision or withdrawal at any time by the rating agencies, including withdrawal initiated at the request of AGM in its sole discretion. In addition, the rating agencies may at any time change AGM s long-term rating outlooks or place such ratings on a watch list for possible downgrade in the near term. Any downward revision or withdrawal of any of the above ratings, the assignment of a negative outlook to such ratings or the placement of such ratings on a negative watch list may have an adverse effect on the market price of any security guaranteed by AGM. AGM only guarantees scheduled principal and scheduled interest payments payable by the issuer of bonds insured by AGM on the date(s) when such amounts were initially scheduled to become due and payable (subject to and in accordance with the terms of the relevant insurance policy), and does not guarantee the market price or liquidity of the securities it insures, nor does it guarantee that the ratings on such securities will not be revised or withdrawn. Current Financial Strength Ratings On June 29, 2015, S&P issued a credit rating report in which it affirmed AGM s financial strength rating of AA (stable outlook). AGM can give no assurance as to any further ratings action that S&P may take. On December 8, 2015, Moody s published a credit opinion maintaining its existing insurance financial strength rating of A2 (stable outlook) on AGM. AGM can give no assurance as to any further ratings action that Moody s may take. On December 10, 2015, KBRA issued a financial guaranty surveillance report in which it affirmed AGM s insurance financial strength rating of AA+ (stable outlook). AGM can give no assurance as to any further ratings action that KBRA may take. For more information regarding AGM s financial strength ratings and the risks relating thereto, see AGL s Annual Report on Form 10-K for the fiscal year ended December 31, Capitalization of AGM At December 31, 2015, AGM s policyholders surplus and contingency reserve were approximately $3,798 million and its net unearned premium reserve was approximately $1,597 million. Such amounts represent the combined surplus, contingency reserve and net unearned premium reserve of AGM, AGM s wholly owned subsidiary Assured Guaranty (Europe) Ltd. and 60.7% of AGM s indirect subsidiary Municipal Assurance Corp.; each amount of surplus, contingency reserve and net unearned premium reserve for each company was determined in accordance with statutory accounting principles. 12

19 Incorporation of Certain Documents by Reference Portions of the following document filed by AGL with the Securities and Exchange Commission (the SEC ) that relate to AGM are incorporated by reference into this Official Statement and shall be deemed to be a part hereof: the Annual Report on Form 10-K for the fiscal year ended December 31, 2015 (filed by AGL with the SEC on February 26, 2016). All consolidated financial statements of AGM and all other information relating to AGM included in, or as exhibits to, documents filed by AGL with the SEC pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, excluding Current Reports or portions thereof furnished under Item 2.02 or Item 7.01 of Form 8-K, after the filing of the last document referred to above and before the termination of the offering of the Bonds shall be deemed incorporated by reference into this Official Statement and to be a part hereof from the respective dates of filing such documents. Copies of materials incorporated by reference are available over the internet at the SEC s website at at AGL s website at or will be provided upon request to Assured Guaranty Municipal Corp.: 31 West 52 nd Street, New York, New York 10019, Attention: Communications Department (telephone (212) ). Except for the information referred to above, no information available on or through AGL s website shall be deemed to be part of or incorporated in this Official Statement. Any information regarding AGM included herein under the caption BOND INSURANCE Assured Guaranty Municipal Corp. or included in a document incorporated by reference herein (collectively, the AGM Information ) shall be modified or superseded to the extent that any subsequently included AGM Information (either directly or through incorporation by reference) modifies or supersedes such previously included AGM Information. Any AGM Information so modified or superseded shall not constitute a part of this Official Statement, except as so modified or superseded. Miscellaneous Matters AGM makes no representation regarding the Bonds or the advisability of investing in the Bonds. In addition, AGM has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding AGM supplied by AGM and presented under the heading BOND INSURANCE. Introduction CERTAIN PROVISIONS OF THE INDENTURE The Bonds will be issued under and secured by the Indenture, as provided therein. Under the Indenture, a number of special Funds are created and provisions are made for the deposit, investment and withdrawal of money in said Funds. The Indenture also provides for the issuance of additional Bonds of the Authority, to be secured on a parity basis with the Bonds, and defines certain rights of holders of the Bonds in the event of a default on the part of the Authority. A summary of certain provisions of the Indenture follows. Such summary is qualified in all respects by specific reference to the Indenture, a copy of which may be reviewed at the offices of the Authority or the Trustee. Capitalized terms and phrases not otherwise defined herein shall have their meaning ascribed to them in the Indenture. Pledge and Security Interest in the Receipts and Revenues from the Sewer System The Indenture creates a security interest in Receipts and Revenues from the Sewer System which include all sewer rentals, rates and other charges to be collected by the Authority, including generally Receipts from Tapping Fees, from customers served or to be served by the Sewer System, and all other receipts, revenues and money derived in any manner from any source by the Authority from or in connection with the Sewer System, and all money on deposit in the Funds created by the Indenture. 13

20 The Outstanding 2013 Bond, the 2016 Bonds and any Additional Bonds shall be secured by a parity lien on the Receipts and Revenues from the Sewer System. Settlement Fund The proceeds of the Bonds shall be deposited into a Settlement Fund established under the Indenture (the Settlement Fund ) and shall be disbursed for the purposes and in the amounts as provided in the Indenture. Operating Account and Revenue Fund Under the Indenture, the Authority has agreed to deposit all Receipts and Revenues from the Sewer System, as defined in the Indenture, collected by the Authority in an operating account (the Operating Account ) by daily deposit so far as practicable. The Operating Account will be established by the Authority with a bank or trust company and will not be a Trustee held fund under the Indenture. The moneys from time to time on deposit therein shall be used by the Authority solely for the payment of Administrative Expenses and Operating Expenses and proper capital and repair costs as set forth in the annual report of the Consulting Engineer or an annual Officer s Certificate. Not less frequently than once, on or before the fifteenth day of April and October in each year, the Authority shall transfer funds from the Operating Account to the Trustee for deposit in the Revenue Fund created under the Indenture (the Revenue Fund ) so long as said funds are not required to be maintained in the Operating Account to pay or provide for Operating Expenses of the Sewer System. The Authority, from time to time, in addition to the foregoing, may make deposits into the Revenue Fund from any other legally available funds. Money from time to time in the Revenue Fund shall be held by the Trustee, in trust, shall be secured as provided in the Indenture and shall be applied for purposes set forth in the Indenture; and, pending such application, such money shall be subject to a lien and charge in favor of holders of the Bonds. Debt Service Fund The Trustee shall transfer, without direction from the Authority, from the Revenue Fund to the Debt Service Fund semiannually in each year; (a) an amount which, together with any other applicable amounts then in the Debt Service Fund, for such purpose, will be equal to the interest becoming due within six months of the Bonds; and (b) an amount equal to the principal amount of the Bonds maturing on the next November 15 or subject to mandatory redemption on the succeeding November 15. Moneys in the Debt Service Fund shall be used to pay principal of and interest on all Bonds from time to time outstanding under the Indenture. Debt Service Reserve Fund The Trustee shall, at the time of issuance of the 2016 Bonds, establish the Debt Service Reserve Fund for the benefit of the 2016 Bonds only, said account to be designated as the Debt Service Reserve Fund. The Debt Service Reserve Fund shall initially be funded in an amount equal to $660,550.01, which, initially, is equal to the Debt Service Reserve Fund Requirement for the 2016 Bonds. As used herein the term Debt Service Reserve Fund Requirement shall mean, with respect to the 2016 Bonds, the least of (l) ten percent of the stated principal amount (or issue price (net of pre-issuance accrued interest) if the 2016 Bonds have more than a de minimis amount of original issue discount or premium) of the 2016 Bonds; (2) the maximum annual principal and interest requirements on the 2016 Bonds; or (3) 125 percent of the average annual principal and interest requirements on the 2016 Bonds. 14

21 The Trustee, without further direction from the Authority, shall apply money in the Debt Service Reserve Fund toward payment of principal and interest from time to time becoming payable on the 2016 Bonds to the extent that the Debt Service Fund shall at any time be deficient for such purpose. Construction Fund The Trustee shall, at the time of issuance of the 2016 Bonds, establish the Construction Fund, which shall be held by the Trustee, in trust, and shall consist of funds deposited therein for purposes of paying Costs, Costs of Acquisition or Costs of Construction relating to the Sewer System, including Capital Additions and acquisition or construction of property in the nature of Capital Additions. Bond Redemption and Improvement Fund After making all of the transfers set forth above, on August 15 of each year the Trustee will transfer from the Revenue Fund and deposit in the Bond Redemption and Improvement Fund created under the Indenture any balance remaining in the Revenue Fund. There will also be deposited in the Bond Redemption and Improvement Fund any other money which may be available for deposit therein as provided in the Indenture. If a deficiency shall exist in the Debt Service Fund (including any sinking fund) or in the Debt Service Reserve Fund and there shall be insufficient money in the Revenue Fund to eliminate the same, the Trustee, without further direction from the Authority, will transfer a sufficient amount or amounts, as money shall be available, from the Bond Redemption and Improvement Fund to eliminate such deficiency. Money in the Bond Redemption and Improvement Fund will be used or applied by the Authority, from time to time (provided there are no deficiencies in the Funds referred to in the preceding paragraph) for any of the following purposes, in accordance with the provisions of the Indenture: 1. For or toward costs of repairs, renewals, replacements or alterations to the Sewer System; or 2. For or toward Costs of Capital Additions; or 3. For the payment of debts, liabilities and obligations of the Authority required to be paid under the Indenture and for the payment of which provision shall not have otherwise been made; or 4. For the payment of redemption of Bonds subject to the provisions of the Indenture, all of which Bonds shall thereupon be cancelled; or 5. For any other lawful purpose of the Authority. Investment of and Security for Funds Moneys in all Funds created under the Indenture shall be invested as provided in the Indenture and by law in investments having maturity dates or, in lieu of such maturity dates, being subject to redemption at the option of the holder at a price not less than the principal amount thereof or the cost of acquisition thereof, whichever is lesser, no later than such maturity dates, as restricted in the Indenture. Moneys in the Clearing Fund, Construction Fund, Debt Service Fund, Debt Service Reserve Fund, and the Bond Redemption and Improvement Fund to the fullest possible extent shall be wholly or partially deposited and redeposited by the Trustee in interest bearing deposit accounts in the banking department of the Trustee or of such other depositary as may be approved, from time to time in writing by the Authority, insured or secured as required by the Indenture and by law, or upon request of the Authority shall be wholly or partially invested or reinvested by the Trustee in investments permitted by the Indenture, all subject to respective limitations provided in the Indenture. 15

22 Additional Bonds Under the Indenture, Additional Bonds may be issued for the purposes authorized therein, including paying the cost of Capital Additions as provided for in the Indenture. However, no bonds shall be issued for such purpose unless the estimated gross revenues of the Authority, as certified by the Consulting Engineers, shall be sufficient to meet the provisions of the Rate Covenant (discussed hereinbefore), taking into account all bonds to be outstanding. Additional Bonds secured by the Indenture may also be issued for the purpose of refunding all or any part of any Bonds issued under the Indenture. Defaults and Remedies The Indenture defines events which may constitute an Event of Default and such events include, among other events, the failure to pay the principal of any Bond when due and the failure to pay an installment of interest on any Bond when due. The Act and Indenture provide remedies to the holders of Bonds upon an Event of Default. Under the Indenture, in the event of any such default as therein defined, the Trustee may enforce, and upon the written request of the holders of 25% in principal amount of the Bond then outstanding, accompanied by indemnity as provided in the Indenture, shall enforce, for the benefit of the holders of the Bonds all their rights under the laws of the Commonwealth of Pennsylvania. The Indenture further provides that, as long as the Policy is in full force and effect: (a) No waver of an event of default under the Indenture shall be granted by any party without the prior written consent of the Insurer. (b) Subject to the provisions of the Authorities Act, upon occurrence of an event of default under the Indenture, the indebtedness evidenced by the Bonds shall not be accelerated without the Insurer s prior written consent. At that time, the Insurer may, in its discretion, either direct the Trustee to accelerate payment of the Bonds or continue to pay principal and interest on the originally scheduled due dates of the Bonds. (c) Upon the occurrence and continuance of an event of default under the Indenture, the Insurer shall be entitled to control and direct the enforcement of all rights and remedies granted to the Registered Owners of the Bonds or any trustee appointed for the benefit of the Registered Owners of the Bonds. For a more complete statement of rights and remedies of holders of the Bonds and of the limitations thereon, reference is made to the Indenture. Annual Audit The Authority will employ a certified public accountant to perform the accounting functions and duties required by the Act. Said accountant shall make an annual audit of the operations, records, and accounts of the Authority, including those held by the Trustee. The Authority shall forthwith furnish copies of each annual audit to such holders of the Bonds as make written request therefore. Modifications and Amendments The Authority and the Trustee, as applicable and appropriate, may enter into supplemental indentures in connection with the issuance of Additional Bonds (see Additional Bonds ), to cure ambiguities, formal defects or omissions in the Indenture, or to grant additional rights, powers, and security for the benefit of the holders of the Bonds, without consent of the holders of the Bonds. All other supplemental indentures or any amendments or modifications to the Indenture require the consent and approval of the holders of not less than 66 ⅔% of the aggregate principal amount of all bonds then outstanding, but no such supplemental indenture shall, except as provided in the Indenture, (1) change the maturity, interest or redemption provisions on any Bond; (2) permit creation by the Authority of any lien or encumbrance prior to or on a parity with the lien described herein; (3) affect rights of Registered Owners of less than all the Bonds; or (4) amend the provision of the Indenture relating to amendments. 16

23 Covenants of Authority The Authority covenants, among other things, that it will at all times: (a) (b) (c) Maintain the Sewer System and every part thereof in good repair, working order and condition; Continuously operate the same; and Make all necessary and proper repairs, renewals, replacements and improvements thereto in order to maintain adequate service. The Authority also covenants that it will keep the Sewer System insured against such risks, including public liability and property damage, and in such amounts as are usually carried on or with respect to like properties. Discharge of the Indenture The lien of the Indenture may be terminated by the Authority by depositing with the Trustee funds sufficient for payment or redemption of the Bonds and interest thereon to the date of maturity or redemption. Such requirements may be satisfied by placement with the Trustee of either a sum of money, together with interest earned thereon in investments which constitute direct obligations of the United States of America or certificates of deposit, fully insured, or to the extent not insured, fully collateralized by direct obligations of the United States of America as to both principal and interest in the manner provided by law. Such direct obligations of the United States of America or such certificates of deposit shall mature as to principal and interest in such amounts, at such times and upon such other terms as shall assure the availability of sufficient money to provide the required sum as stated above. Federal Tax Matters TAX EXEMPTION AND OTHER TAX MATTERS Numerous provisions of the Internal Revenue Code of 1986, as amended (the Code ), affect the issuers of state and local government bonds, such as the Authority, and impair or restrict the ability of the Authority to finance projects on a taxexempt basis. Failure on the part of the Authority to comply with any one or more of such provisions of the Code, or any regulations under the Code, could render interest on the Bonds includable in the gross income of the owners thereof for purposes of federal income tax retroactively to the date of issuance of the Bonds. Among these provisions are more restrictive rules relating to: (a) investment of funds treated as proceeds of the Bonds; (b) the advance refunding of tax-exempt bonds; and (c) the use of proceeds of the Bonds to benefit private activities. In addition, under the Code, the Authority is required to file an information return with respect to the Bonds and, if applicable, to rebate to the federal government certain arbitrage profits on an ongoing basis throughout the term of the issue constituting the Bonds. Bond Counsel has not undertaken to determine (or to inform any person) whether any action taken (or not taken) or events occurring (or not occurring) after the date of issuance of the Bonds may affect the tax status of interest on the Bonds. Other provisions of the Code affect the purchasers and holders of certain state and local government bonds such as the Bonds. Prospective purchasers of the Bonds should be aware that: (i) Section 265 of the Code denies a deduction for interest on (a) indebtedness incurred or continued to purchase or carry certain state or local government bonds, such as the Bonds, or (b) in the case of a financial institution, that portion of a financial institution s interest expense allocated to interest on certain state or local government bonds, such as the Bonds, unless the issuer of the state or local government bonds designates the bonds as qualified tax-exempt obligations for the purpose and effect contemplated by Section 265(b)(3)(B) of the Code (the Authority has not designated the Bonds as qualified tax exempt obligations under Section 265(b)(3)(B) of the Code, as such phrase is defined in the Code); (ii) with respect to insurance companies subject to the tax imposed by Section 831 of the Code, Section 832(b)(5)(B)(1) of the Code reduces the deduction for loss reserves by 15% of the sum of certain items, including interest and amounts treated as such on certain state or local government bonds, such as the Bonds; (iii) interest on certain state or local government bonds, such as the Bonds, received by certain foreign corporations doing business in the United States could be subject to a branch profits tax imposed by Section 884 of the Code, (iv) if a Subchapter S corporation has passive investment income (which passive investment income will include interest on state and local government bonds such as the Bonds) exceeding 25% of such Subchapter S corporation s gross receipts and if such Subchapter S corporation has Subchapter C earnings and profits, then interest income derived from state and local government bonds, such as the Bonds, may be subject to federal income 17

24 tax under Section 1375 of the Code; and (v) Section 86 of the Code requires recipients of certain Social Security and certain Railroad Retirement benefits to take into account, in determining gross income, receipts or accruals of interest on certain state or local government bonds such as the Bonds. Tax Exemption In the opinion of Bond Counsel, assuming continuing compliance by the Authority with certain certifications and agreements relating to the use of Bond proceeds and covenants to comply with provisions of the Code and any applicable regulations thereunder, now or hereafter enacted, interest on the Bonds is not includable in the gross income of the holders of the Bonds under Section 103(a) of the Code and interest on the Bonds is not an item of tax preference for purposes of the federal individual and corporate alternative minimum taxes, except as described under the caption Federal Tax Matters above. The tax exemption described above does not extend to corporations required to include interest on the Bonds in the calculation of alternative minimum taxable income within the meaning provided in Section 56 of the Code. See Appendix D Proposed Form of Bond Counsel Opinion. Other provisions of the Code will affect certain purchasers and holders of the Bonds. See Federal Tax Matters above. In the opinion of Bond Counsel under the laws of the Commonwealth, the Bonds and interest on the Bonds shall be free from taxation for State and local purposes within the Commonwealth, but this exemption shall not extend to gift, estate, succession or inheritance taxes or any other taxes not levied directly on the Bonds or the interest thereon. Under the laws of the Commonwealth, profits, gains or income derived from the sale, exchange or other disposition of the Bonds are subject to State and local taxation within the Commonwealth of Pennsylvania. The Authority will issue its certificate regarding the facts, estimates and circumstances in existence on the date of delivery of the Bonds and regarding the anticipated use of the proceeds of the Bonds. The Authority will certify that, on the basis of the facts, estimates and circumstances in existence on the date of issuance of the Bonds, the Authority does not reasonably expect to use the proceeds of the Bonds in a manner that would cause the Bonds to be or become arbitrage bonds or private activity bonds as those terms are defined in Section 148 and Section 141 of the Code. THE ABOVE SUMMARY OF POSSIBLE TAX CONSEQUENCES IS NOT EXHAUSTIVE OR COMPLETE. ALL PURCHASERS OF THE BONDS SHOULD CONSULT THEIR TAX ADVISORS REGARDING THE POSSIBLE FEDERAL, STATE AND LOCAL INCOME TAX CONSEQUENCES OF OWNERSHIP OF THE BONDS. ANY STATEMENTS REGARDING TAX MATTERS HEREIN CANNOT BE RELIED UPON BY ANY PERSON TO AVOID TAX PENALTIES. Regulations; Future Legislation Under the provisions of the Code, the Treasury Department is authorized and empowered to promulgate regulations implementing the intent of Congress under the Code, which could affect the tax-exemption and/or tax consequences of holding tax-exempt obligations, such as the Bonds. In addition, legislation may be introduced and enacted in the future which could change the provisions of the Code relating to tax-exempt bonds of a state or local government unit, such as the Authority, or the taxability of interest in general. No representation is made or can be made by the Authority, or any other party associated with the issuance of the Bonds as to whether or not any other legislation now or hereafter introduced and enacted will be applied retroactively so as to subject interest on the Bonds to federal income taxes or so as to otherwise affect the marketability or market value of the Bonds. EACH PURCHASER OF THE BONDS SHOULD CONSULT HIS OR HER OWN TAX ADVISOR REGARDING ANY CHANGES IN THE STATUS OF PENDING OR PROPOSED FEDERAL TAX LEGISLATION. LITIGATION There is no litigation of any nature pending or, to the knowledge of Authority officials, threatened against the Authority at the date of this Official Statement seeking to restrain or enjoin the issuance, sale, execution or delivery of the Bonds, or, in any way contesting or affecting the validity of the Bonds or any proceedings of the Authority taken with respect to the issuance or the sale thereof, or the pledge or application of any moneys or security provided for the payment of the Bonds, or the existence or powers of the Authority. 18

25 LEGAL MATTERS Certain legal matters incident to the authorization, issuance and sale of the Bonds will be passed upon by Stevens & Lee, P.C., Reading, Pennsylvania, Bond Counsel. Certain legal matters will be passed upon for the Authority and for the Borough by Michael A. O Pake, Esquire, of Pottsville, Pennsylvania, Solicitor for the Authority and for the Borough. The various legal opinions to be delivered concurrently with the delivery of the Bonds express the professional judgment of the attorneys rendering the opinions as to the legal issues explicitly addressed therein. In rendering a legal opinion, the attorney does not become an insurer or guarantor of that expression of professional judgment of the transaction opined upon, or the future performance of the parties to the transaction. Nor does rendering a legal opinion guarantee the outcome of any legal dispute that may arise out of the transaction. LEGALITY FOR INVESTMENT Applicable laws of the Commonwealth of Pennsylvania provide that the Bonds are legal investments for funds held by, among others, banks, savings banks, trust companies, insurance companies or associations and fiduciaries. The Bonds are authorized security for deposits of funds of the Commonwealth of Pennsylvania and any political subdivision thereof. CONTINUING DISCLOSURE In accordance with the requirements of Rule 15c2-12 (the Rule ) promulgated by the Securities and Exchange Commission ( SEC ), the Authority and the Borough will execute and deliver a written continuing disclosure obligation with respect to the Bonds. See the form of the Joint Continuing Disclosure Certificate (the Agreement ) at Appendix F to this Official Statement. Under the terms of the Agreement, the Authority and the Borough will each undertake to file with the MSRB financial and other information concerning the Authority and the Borough (annual audited financial statements, annual budget, certain other financial and operating information and notice of certain events affecting the Authority and the Borough). The Authority s obligations and the Borough s obligations with respect to continuing disclosure shall terminate upon the prior redemption or payment in full of all of the Bonds. The MSRB has been designated by the SEC to be the central and sole repository for continuing disclosure information filed by issuers of municipal securities since July 1, Information and notices filed by municipal issuers (and other obligated persons with respect to municipal securities issues) are made available through the MSRB s Electronic Municipal Market Access (EMMA) System, which may be accessed on the internet at Under the Authority's existing annual disclosure requirements under the Rule, as discussed in the Official Statement for the 2007 Bonds, the Authority agreed to provide, inter alia, updates to its audited financial statements and certain financial and operating information. The Authority failed to timely file its audited financial statements for the fiscal year ending December 31, 2010 through and including December 31, While the information was filed, it was not timely filed. A notice regarding the Authority's failure to timely file its audited financial statements was separately filed by the Authority on EMMA. Further, the Authority failed to timely file certain financial and operating information for the fiscal year ending December 31, 2011 through and including December 31, While the information was filed, it was not timely filed. A notice regarding the Authority's failure to timely file its financial and operating information was separately filed by the Authority on EMMA. While these notices were filed, they were not timely filed. The Authority has hired DAC to act as Dissemination Agent to assist with future compliance. Under the Borough's existing annual disclosure requirements under the Rule, as discussed in the Official Statement for the 2007 Bonds, the Borough agreed to provide, inter alia, updates to its audited financial statements. The Borough failed to timely file its audited financial statements for the fiscal years ending December 31, 2010 through and including 19

26 December 31, While the information was filed, it was not timely filed. A notice regarding the Borough's failure to timely file its audited financial statements was separately filed by the Borough on EMMA. While this notice was filed, it was not timely filed. The Borough has hired DAC to act as Dissemination Agent to assist with future compliance. Rating MISCELLANEOUS Standard & Poor s Corp. ( S&P ) is expected to assign their municipal Bond rating of AA (Stable Outlook) to this issue of Bonds with the understanding that upon delivery of the Bonds, a municipal bond insurance policy insuring the payment when due of the principal of and interest on the Bonds will be issued by AGM. Currently, AGM s financial strength is rated AA (Stable Outlook) by S&P The above rating is not recommendations to buy, sell or hold the Bonds, and such rating may be subject to revision or withdrawal at any time by the rating agency. Any downward revision or withdrawal of any of the above rating may have an adverse effect on the market price of the Bonds. Underwriting RBC Capital Markets, LLC (the Underwriter ) has agreed, subject to certain conditions, to purchase the Bonds from the Authority at an aggregate discount price of $11,013, (which reflects $135, in Underwriter s discount and $165, in original issue discount) from the principal amount of the Bonds, plus accrued interest, if any. The Underwriter's obligation is subject to certain conditions precedent, and the Underwriter will be obligated to purchase all of the Bonds if any such Bonds are purchased. The Bonds may be offered and sold to certain dealers and others (including dealers depositing such Bonds into investment trusts) at prices lower than the public offering prices. Any such public offering prices may be changed, from time to time, by the Underwriter. The Underwriter has provided the following information for inclusion in this Official Statement: The Underwriter and their respective affiliates are full service financial institutions engaged in various activities, that may include securities trading, commercial and investment banking, municipal advisory, brokerage and asset management. In the ordinary course of business, the Underwriter and their respective affiliates may actively trade debt and if applicable equity securities (or related derivative securities) and provide financial instruments (which may include bank loans, credit support or interest rate swaps). The Underwriter and its affiliates may engage in transactions for its own accounts involving the securities and instruments made the subject of this securities offering or other offering of the Issuer. The Underwriter and their respective affiliates may also communicate independent investment recommendations, market color or trading ideas and publish independent research views in respect of this securities offering or other offerings of the Issuer. The Underwriter does not make a market in credit default swaps with respect to municipal securities at this time but may do so in the future. Financial Advisor Financial S&Lutions LLC, Reading, Pennsylvania, has served as financial advisor (the Financial Advisor ) to the Authority in connection with the issuance and sale of the Bonds. The Financial Advisor 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 this Official Statement. Financial S&Lutions LLC is an independent financial advisory firm and is not engaged in the business of underwriting, trading or distributing municipal securities or other public securities. Certain Relationships Among the Parties Financial S&Lutions LLC, an affiliated business of Stevens & Lee, P.C., Bond Counsel to the Authority, is serving as financial advisor to the Authority in connection with the preparation, authorization and issuance of the Bonds. 20

27 Bond Insurance Risk Factors In the event of default of the payment of principal or interest with respect to the Bonds when all or some becomes due, any owner of the Bonds shall have a claim under the applicable Bond Insurance Policy (the Policy) for such payments. However, in the event of any acceleration of the due date of such principal by reason of mandatory or optional redemption or acceleration resulting from default or otherwise, other than any advancement of maturity pursuant to a mandatory sinking fund payment, the payments are to be made in such amounts and at such times as such payments would have been due had there not been any such acceleration. The Policy does not insure against redemption premium, if any. The payment of principal and interest in connection with mandatory or optional prepayment of the Bonds by the Authority which is recovered by the Authority from the Bond owner as a voidable preference under applicable bankruptcy law is covered by the insurance policy, however, such payments will be made by the Insurer at such time and in such amounts as would have been due absence such prepayment by the Authority unless the Bond Insurer chooses to pay such amounts at an earlier date. Under most circumstances, default of payment of principal and interest does not obligate acceleration of the obligations of the Bond Insurer without appropriate consent. The Bond Insurer may direct and must consent to any remedies that the Trustee exercises and the Bond Insurer s consent may be required in connection with amendments to the applicable Agreements or Indenture. In the event the Bond Insurer is unable to make payment of principal and interest as such payments become due under the Policy, the Bonds are payable solely from the moneys received by the Trustee pursuant to the applicable Agreements. In the event the Bond Insurer becomes obligated to make payments with respect to the Bonds, no assurance is given that such event will not adversely affect the market price of the Bonds or the marketability (liquidity) for the Bonds. The long-term ratings on the Bonds are dependent in part on the financial strength of the Bond Insurer and its claim paying ability. The Bond Insurer s financial strength and claims paying ability are predicated upon a number of factors which could change over time. No assurance is given that the long-term ratings of the Bond Insurer and of the ratings on the Bonds insured by the Bond Insurer will not be subject to downgrade and such event could adversely affect the market price of the Bonds or the marketability (liquidity) for the Bonds. See description under Ratings above. The obligations of the Bond Insurer are general obligations of the Bond Insurer and in an event of default by the Bond Insurer, the remedies available to the Trustee may be limited by applicable bankruptcy law or other similar laws related to insolvency. Neither the Authority or Underwriter have made independent investigation into the claims paying ability of the Bond Insurer and no assurance or representation regarding the financial strength or projected financial strength of the Bond Insurer is given. 21

28 CERTAIN MATTERS The execution and delivery of this Official Statement has been duly authorized by the Authority. Certain information contained in this Official Statement has been obtained from sources other than the Authority. All of the summaries and references of the provisions of the Bonds contained in this Official Statement and all other summaries and references to the Act and to other materials not purporting to be quoted in full, are only brief outlines of certain provisions thereof, and do not constitute complete statements. This Official Statement is not to be construed as a contract or agreement between the Authority and the Underwriter or the purchasers or holders of any of the Bonds. Any statements made in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended merely as opinions and not as representations of fact. The information and expressions of opinion herein are subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Authority or the Borough since the date hereof. The information contained in the Official Statement that has been obtained from sources other than the Authority and the Borough is not guaranteed as to accuracy or completeness. MAHANOY CITY SEWER AUTHORITY Schuylkill County, Pennsylvania By: /s/ Peter Gutsie Chairman 22

29 APPENDIX A Description and Summaries of Financial Factors of the Sewer System

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31 DESCRIPTION OF THE SEWER SYSTEM Mahanoy City Sewer Authority 2016 The Borough of Mahanoy City is a community with a population of approximately 4,162 according to the 2010 Census. It is located just off Interstate 81 in east central Pennsylvania. Coal mining was historically the predominant industry in this area. Currently, the top employment services in the area are manufacturing, health care and social assistance, retail trade, and transportation and warehousing. Tracy Engineers designed the original wastewater collection and treatment system for Mahanoy City to alleviate the problems of raw sewage discharging directly into the Little Mahanoy Creek. It was constructed in 1980 and major upgrades at the Wastewater Treatment Plant (WWTP) were completed in The existing sewage collection system is a combination of old combined storm-sanitary sewers of various sizes and types, all of which enter into the Market Street Arch. The Market Street Arch also conveys the Little Mahanoy Creek, which flows through the Borough. The main collection system is approximately 2.8 miles in length. There is a pump station and approximately 0.8 miles of force main, which serves the State Correctional Institution (SCI) in Mahanoy Township. Except for the SCI Mahanoy prison extension, the collection system was designed as a combined sanitary-storm system. Stone culverts are in fair condition and pipe, which was installed during the construction of the plant and the conveyance troughs in the Market Street Arch, are in satisfactory condition. The original Mahanoy City Wastewater Treatment Plant ( WWTP ) was designed as a Low-load Aeration process (Schreiber Process). The plant is permitted for handling 1.38 million gallons per day ( MGD ) at 2,301 lbs./day Biological Oxygen Demand ( BOD ) organic loading. In 2008, a new dry-weather solids removal unit to remove screenings, grit, and grease from the daily flow of the WWTP was installed. This combined unit replaced the bar screens, aerated grit removal, and aerated grease removal units downstream of the combined flow screw pump station (headworks) and SCI Mahanoy influent. In addition, a new wetweather solids removal unit was installed to meet a Combined Sewage Overflow (CSO) Action Item for the WWTP. Other 2008 upgrades included a new aeration system for the treatment tanks, new aerated digestor mechanical equipment, new Schreiber treatment equipment (center bearing, headers, skimmers and pumps), new chlorination equipment, new return sludge pumps, and an updated SCADA system for monitoring, operation and regulatory compliance. Minor improvements were made to the fencing around the WWTP as well as laboratory and administrative office. The Combination Flow Pump Station at the WWTP headworks consists of one (1) 30" and two (2) 84" screw pumps. During periods of normal dry weather flow, the 36" screw pump handles the flow. The two (2) 84" screw pumps rated at 17,500 gpm each alternate during high flows. One (1) pump station exists in the system and conveys sewage from the State Correctional Institute - Mahanoy prison. At this pump station, there are two (2) 100 HP pumps each rated capacity of 1,900 gallons per minute ( GPM ) at 145 ft. of TDH. Estimated present flows are 160,000 gallons per day ( GPD ). Approximately 4,000 feet of force main and 4,500 feet of gravity sewer convey this sewage to the plant. A mechanical bar screen was installed to remove larger solids/grit prior to entering the pump station. The State Correctional Institute - Mahanoy prison is currently near its full capacity and no increase in flow is expected, therefore the pump station should not become hydraulically overloaded. Sludge is returned to the process and waste sludge flows to a thickening pit where it is pumped to a storage silo with a capacity exceeding 30 days. Six sludge drying beds are utilized to de-water the sludge. A chlorine contact tank provides final treatment, prior to the effluent being discharged into the Little Mahanoy Creek. Hydraulic Loading Projection The average monthly flow for 2015 was MGD. This is well below the permitted capacity of 1.38 MGD. The projected hydraulic flows for the next five (5) years are based upon increases of 0.02 MGD per year. The projected hydraulic flows are not expected to exceed MGD before A-1

32 Organic Loading Projection The average monthly organic loading for the plant during 2015 was 621 lbs/day. This is well below the permitted capacity of 2,301 lbs/day. The projected organic loadings for the next five (5) years are not expected to exceed 975 lbs/day. Organic loading projections are based upon the hydraulic projections of 0.02 MGD per year flow increase and a BOD concentration of 200 mg/l (common for domestic sewage). This results in an organic loading increase of 33 lbs/day. Nitrogen and Phosphorus Loading Per the Authority s NPDES permit, Chesapeake Bay annual Net Total Nitrogen and Annual Net Total Phosphorus mass load limitations (Cap Loads) must be met. The current Nitrogen cap loading is 25,205 lbs/year and Phosphorus cap loading is 3,361 lbs/year. In 2015, the WWTP produced 12,584.6 lbs of Nitrogen and 3,812.2 lbs of Phosphorus. The overage of Phosphorus was resolved through the purchase of nutrient credits. Introduction SEWER SYSTEM FINANCES Under terms of the Indenture, the Authority will operate and maintain the System, and all revenues are paid into the Clearing Fund. The Authority Board approves a budget for the System prior to the beginning of each Fiscal Year (which is the calendar year) beginning each January 1. Revenue Virtually all of the revenue of the Authority results from charges for sewer service and/or wastewater treatment. MANDATORY CONNECTION ORDINANCES The Borough has enacted an ordinance requiring all owners of improved properties located within the initial service area of the sewer system to connect with and to use the sewer system, in accordance with the terms and provisions of the Borough Code of the Commonwealth of Pennsylvania. The Borough has, by agreement with the Authority, covenanted to keep such ordinances in full force and effect and to enforce the same as permitted by law. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] A-2

33 MAHANOY CITY SEWER AUTHORITY SEWER RATES & FEE SCHEDULE EFFECTIVE: JULY 1, 2016 QUARTERLY FLAT SEWER RATES: The quarterly fee for one Equivalent Dwelling Unit (EDU), a single family residence, is $ Quarterly rates based on the type of service other than a single family residence are to be calculated based on the EDU Equivalency Chart in Exhibit I attached hereto. APPLICATION AND MISCELLANEOUS FEES (NON REFUNDABLE) Account Activation/Permit Application Fee: $50.00 Re-Connection Service Fee: $50.00 Non-sufficient Funds (NSF) Check Return Fee: $60.00 Commercial Permit Application Fee: $ Application and Plan Review Fee for Sewer Line Extensions: The application and plan review fee for each request for an extension of sewer mains shall be $ application fee (non-refundable deposit) plus $ per Equivalent Dwelling Unit. Other Agency Permit Fee: Actual cost of permit plus $25.00 administrative charge. Lateral Inspection Fee: $25.00 per hour (minimum one hour per visit) Lateral Re-inspection Fee: $25.00 per hour (minimum one hour per visit) Sewer Service Call Fee: $ per hour (minimum one hour per visit) Collection Process/Municipal Liens/Attorney Fees: At cost. Engineering Fees: Review of Plans/Applications, Field Inspections, Meeting Attendance by Authority Engineer (per hour) At cost. Collection of Deferred Payment Charge: All bills for sewer service not paid by the billing due date as stated in such bills, shall be subject to a collection or deferred payment charge of 5%. CONNETION/TAPPING FEES (NEW SERVICE) Tapping Fee: $1, per connection or Equivalent Dwelling Unit. This fee consists of the capacity, collection, special purpose, and reimbursement parts of the system imposed in accordance with PA Act 203. Connection Fee: Applicant will pay actual cost of labor and materials incurred to install the sewer service lateral from the Authority main to the curb line of the customer property or easement, including any permitting costs, administrative costs, and excavation restoration costs. A Connection Fee Deposit shall be paid at time of application for the connection to cover the anticipated cost of the Connection Fee. The deposit shall be based on the size of the connection requested. Upon completion of installation of the connection and determination of actual cost of the connection from the Authority main to the curb line, any overpayment will be refunded to applicant. If the actual cost is determined to exceed the Connection Fee Deposit amount, the difference will be billed to the applicant and must be paid before the service is activated. A Connection Fee Deposit is required at the time of application submission per the following schedule. Connection Fee Deposit: Standard Service Line (Up to 6") - $ Greater than 6" Service Lines - $1, Customer Facilities Fee: Property owner is required to provide these facilities from the Authority main at the curb/property line/service point to the structure to be serviced. The fee is to be imposed in accordance with PA Act 203 to reimburse the Authority for the costs of facilities installed between the property line and the internal plumbing of the property to receive services. Where these facilities are installed by the property owner or others, a charge reflecting the Authority s cost of inspection, administrative processing, or other costs chargeable to these facilities will be made. A-3

34 SLUDGE DISPOSAL: By separate agreement. To include a treatment/processing fee and any necessary laboratory analysis fees. Source: Authority officials. Largest Customers Firm State Correctional Institute (SCI) Mahanoy Mahanoy Elderly High Rise Mahanoy Area School District Stone Mountain Properties LLC Swartz, Helen L. ARDCO Goodman, James A. Child Development Inc. Nyakoe, Raymond Gamez & Sons LLC Sewer Fee $86,097/Month $14,880/Quarter $5,397/Quarter $840.00/Quarter $840.00/Quarter $700.00/Quarter $600.00/Quarter $588.00/Quarter $480.00/Quarter $480.00/Quarter Source: Authority officials. (1) One other commercial account is billed at $ quarterly. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] A-4

35 Account Procedures Audit Financial statements of the Authority are prepared using an accrual basis of accounting. The Authority is audited by L. Samuel Deegan, P.C., Certified Public Accountant, Pottsville, Pennsylvania. MAHANOY CITY SEWER AUTHORITY Statement of Revenues and Expenses Audited 2012 Ending December 31 Audited 2013 Audited 2014 OPERATING REVENUE: Sewer Revenue $ 1,643,581 $ 1,873,333 $ 1,949,804 Total Revenue $ 1,643,581 $ 1,873,333 $ 1,949,804 OPERATING EXPENSES: Advertising $ 3,397 $ 564 $ 2,191 Depreciation & Amortization Expenses 532, , ,227 Sludge Disposal 6,237 5, ,639 Insurance 120, , ,387 Legal and Accounting 24,170 65,102 10,666 Miscellaneous 3,473 23,533 7,130 Office Expense 19,901 10,871 14,862 Operating Supplies 71,564 62,093 71,091 Postage 0 4,273 4,425 Payroll Expense and Benefits 357, , ,318 Payroll Taxes 27,195 27,929 29,884 Collection Fees Repairs and Maintenance 729, , ,021 Subcontractors 36,920 31,145 72,349 Telephone 7,185 7,159 8,436 Utilities & Septic Service 79,574 74,263 72,257 Vehicle Expense 2,770 2,450 2,492 Office Rent 4,900 5,100 5,100 Equipment Rental 0 5,463 0 Uniforms 1, Office Equipment & Mach Repairs 0 2,956 4,196 Fees and Other Services 13,282 19,869 17,993 Engineering Fees 126, , ,206 Total Operating Expenses $ 2,168,656 $ 1,666,232 $ 2,038,762 Excess Operating Expense Over Revenue $ (525,075) $ 207,101 $ (88,958) OTHER INCOME AND EXPENSE Non-Operating Revenue Insurance Reimbursement $ 916,357 $ 0 $ 0 Grant Income 146, Sludge Removal 4, Miscellaneous Revenue 8, Interest & Dividend Revenue 2,962 3,674, 2,733 Total Non-Operating Revenue $ 1,078,685 $ 3,924 $ 2,744 Non-Operating Expense Interest Expense (455,120) (450,626) (475,272) Total Non-Operating Expense $ (455,120) $ (450,626) $ (475,272) Total Other Income and Expense $ 623,565 $ (446,702) $ (472,528) Balance, Beginning of Year (Jan. 1) $ 806,506 $ 904,996 $ 665,395 Excess Expenses Over Revenues 98,490 (239,601) (561,486) Balance, End of Year (Dec. 31) $ 904,996 $ 665,395 $ 103,909 Source: Authority financial statements. A-5

36 MAHANOY CITY SEWER AUTHORITY ORDINARY INCOME/EXPENSE INCOME Estimated 2015 Sewer Revenue $ 1,889, Total Income $ 1,889, EXPENSE Operating Expenses Advertising $ 1, Depreciation 704, Sludge Disposal 4, Insurance 140, Legal and Accounting 8, Miscellaneous 3, Office Expenses 12, Operating Supplies 38, Postage 4, Employee Benefits Life Insurance 21, Payroll Taxes 31, Subcontractors 79, Repairs and Maintenance 200, Telephone 6, Utilities 68, Vehicle Expense 2, Office Rent 5, Fees and Services 19, General Supplies Office Supplies Engineering/Lab Fees 164, Billing Expense 1, Uniforms TOTAL OPERATING EXPENSES $ 1,521, Amortization Expenses 11, Wages 9, Payroll Expenses 370, TOTAL EXPENSE $ 1,912, Net Ordinary Income (23,138.60) OTHER INCOME/EXPENSE Other Income Non-Operating Revenue Miscellaneous $ 12, Interest 1, Dividend TOTAL NON-OPERATING REVENUE $ 13, TOTAL OTHER INCOME $ 13, Balance, Beginning of Year (Jan. 1) $ 103,999 Excess Expenses Over Revenues (9,284.11) Balance, End of Year (Dec. 31) $ 94, Source: Authority. A-6

37 APPENDIX B Mahanoy City Sewer Authority Financial Statements and Independent Auditor s Report for the Year Ended December 31, 2014

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61 APPENDIX C Summaries of Financial Factors of the Borough of Mahanoy City

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63 BOROUGH OF MAHANOY CITY FINANCIAL REVIEW The following Exhibit below is a summary only and is not intended to be a complete report. For more complete information, the individual financial statements and the 2015 Budget of the Borough should be reviewed at the Offices of the Borough of Mahanoy City, Mahanoy City, Pennsylvania. Audited Financial Statements for Fiscal Years 2011 through 2014 and 2015 Budget The schedule below is a summary of the Borough s General Fund financial condition for the years ending December 31, 2011 through The figures have been arranged in a form believed to be convenient for the purposes of this Official Statement. The Borough s financial statements are audited annually by a firm of independent certified public accountants. The firm of Patton and Lettich, Certified Public Accountant, Pottsville, Pennsylvania serves as the Borough s auditor. BOROUGH OF MAHANOY CITY Summary of Government Funds, Revenues, Expenses and Fund Balance For the Years Ended December 31 Audit 2011 Audit 2012 Audit 2013 Audit 2014 REVENUES Taxes $ 1,012,579 $ 944,825 $ 1,043,964 1,032,022 Licenses and Permits 58,754 63,043 54,197 75,391 Fines and Forfeits 22,305 22,753 22,860 23,442 Interest and Rents 3,100 2,805 5,230 3,458 Intergovernmental Revenues 347, , ,501 1,140,514 Charges for Services/Fees 353, , , ,105 Miscellaneous 206, , ,208 92,495 Other 106,500 82, , ,768 TOTAL REVENUES $ 2,111,112 $ 1,962,331 $ 3,020,276 $2,973,195 EXPENDITURES General Government 272, , , ,485 Public Safety 617, , , ,262 Health and Human Services 2,950 2,950 2,950 2,950 Public Works-Sanitation 309, , , ,786 Public Works-Highways and Streets 383, , , ,170 Culture and Recreation 10,774 9,265 15,113 4,990 Conservation & Development 0 15,624 23,579 7,360 Progam Expenses 116, , , ,960 Miscellaneous Expenditures 269, , , ,140 Other 106,500 82, , ,768 TOTAL EXPENDITURES $ 1,274,120 $ 1,948,398 $ 2,821,060 $3,293,871 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (7,066) 13, ,216 (320,676) FUND BALANCE, JANUARY 1 $ 166,794 $ 159,728 $ 173,661 $ 372,877 FUND BALANCE, END OF YEAR (1) $ 159,725 $ 173,661 $ 372,877 $ 52,201 Source: Borough s Commonwealth of Pennsylvania Annual Audit and Financial Report; 2015 Budget. C-1

64 BORROWING POWER OF THE BOROUGH The Borough s borrowing limit is computed as a percentage of its Borrowing Base. The Borrowing Base is calculated as the annual arithmetic average of the Borough s total revenues for the three full fiscal years immediately preceding the date of the incurrence of new debt. Calculation of Borrowing Base Total Net Revenue Adjusted $ 1,989,363 $ 2,147,058 $ 2,098,473* Total Net Revenues for Three Years $ 6,234,894 Borrowing Base Average Net Revenues for Three-Year Period $ 2,078,298 *Unaudited Borrowing Capacity Under the Act as presently in effect, (i) new nonelectoral debt may not be incurred if the net amount of such new nonelectoral debt plus all outstanding new nonelectoral debt would cause total net nonelectoral debt to exceed 250% of the Borrowing Base and (ii) new lease rental debt or new nonelectoral debt may not be incurred if the net amount of such new debt plus all outstanding new nonelectoral debt and net lease rental would cause the total net nonelectoral plus net lease rental debt to exceed 350% of the Borrowing Base. The application of the aforesaid percentages to the Borough s Borrowing Base produces the following: Legal Limit Net Debt Outstanding Borrowing Capacity Net Nonelectoral Debt Limit (250% of Borrowing Base) $5,195,745 0 $5,195,745 Net Nonelectoral and Lease Rental Debt Limit $7,274,043 0 $7,274,043 (350% of Borrowing Base) C-2

65 TAXING POWERS OF THE BOROUGH The Borough Code of the Commonwealth provides that boroughs may levy taxes within the following limitations: Potential Tax Sources Legal Limit (1) Potential Tax Sources Legal Limit (1) GENERAL PURPOSE TAX LEVIES SPECIAL PURPOSE TAXES Real Estate 30 mills (2) Debt Service no limit Occupation 30 mills (2) Pensions and Retirement ½ mill Act 511 Taxes* Shade Trees 1/10 mills Per Capita $10 (3) Street Lighting 8 mills Occupation (Flat Rate) $10 (3) Library no limit Occupation (Millage) no limit Special Road Fund 5 mills Occupation Privilege $10 (3) Recreation no limit Earned Income 1 % (3) Fire Equipment & Firehouses 3 mills (6) Realty Transfer 1 % (3) Gas, Water, Electric Light (7) 8 mills Mechanical Devices 10 % (3) Firehouse, Lockup or Municipal Building (7) 2 mills Amusement (4) 10 % (3) Community College (8) Business Gross Receipts (5) 1 mill wholesale (3) Debt Payment (9) no limit 1 ½ mill retail (3) Ambulance and Rescue Squads ½ mill (6) no limit other businesses Open Space (real estate or earned income) (7) set by voters Distressed Pension System Recovery Program no limit Municipalities Financial Recovery Program (9) no limit Source: Taxation Manual, Pennsylvania Department of Economic and Community Development. (1) Home rule boroughs may set rates higher than the limits provided in state law for property taxes and for personal taxes levied on residents. They may not create new subjects of taxation. (2) Five additional mills available with court approval. (3) Maximum rate subject to sharing with school district. (4) For taxes first levied after December 31, 1997, maximum rate is 5%. (5) Only if enacted before December 1, (6) Higher rate may be approved by voters in referendum. (7) Must be approved by voters in referendum. (8) Local sponsors may levy any tax permitted by law to support a community college. Revenues from the tax cannot exceed 5 mills of the market price of real estate. (9) Levied only on court order. *Under Act of December 31, 1965, P.L No. 511, effective January 1, 1966 (The Local Tax Enabling Act), additional taxes may be levied by boroughs (subject to division with other political subdivisions to levy similar taxes on the same person, subject, business, transaction or privilege), subject to the following limitations: The aggregate amount of taxes under the Local Tax Enabling Act shall not, in the case of any political subdivision, including school districts of the second, third and fourth classes, exceed an amount equal to the product of twelve mills on the latest total market value of real estate as determined by the board of assessment and revision of taxes or any similar board established by the assessment laws which determined market values of real estate within the political subdivision. If no such board has determined such values, then the values as certified by the State Tax Equalization Board shall be used. Act No. 7, approved by the General Assembly of the Commonwealth of Pennsylvania on February 10, 1970, provides that tax notices be sent out by the tax collector within thirty days following receipt of the tax duplicate by the tax collector unless extended by the taxing district, but in no case later than the first day in March. A two percent discount is allowed for payment within sixty days of date of notice. Taxes are collected at face value for the next sixty days, and a penalty of ten percent is imposed thereafter. Delinquent real estate taxes are liened by filing a notice in the Lackawanna C-3

66 County Tax Claim Bureau by the last day of February in the year following the year of tax levy. The Borough levies its own taxes and is independent of any other taxing authority. Ten Largest Taxpayers in Borough Taxpayer 2015 Assessed Valuation Mahanoy Limited Partnership $1,200,310 Rite Partners LLC. 262, East Centre Street LLC 190,960 Service Electric 178,280 Dolgencorp Inc. 169,100 Penn State Geisinger Clinic 99,575 Union National Bank (M&T Bank) Individual 78,050 Individual 76,400 Elks Lodge 75,410 1,224,880 Percentage of Total 2015Assessed Tax Value: 5% Source: Borough Officials. Trends in Assessed Valuation The trend in assessed valuation of real estate in the Borough for the last six fiscal years is shown below: Year Assessed Valuation Market Value Common Level Ratio 2007 $ 24,052,185 $ 64,483, % ,345,335 61,015, ,054,040 57,822, ,770,980 50,255, ,150,705 51,825, ,081,935 48,552, ,077,745 53,985, ,894,680 42,098, Source: State Tax Equalization Board (STEB). Market Values based upon the available Common Level Ratio for Schuylkill County as reported by STEB. C-4

67 Tax Collection Record The Borough s realty tax collection record for the previous fiscal years is shown below: Fiscal Year Millage Tax Levy Total Collections Percent Collected (Total) * , , % , , , , , , Source: Borough Officials. * Does not include prior years delinquent collections Tax Rates Real Estate Taxes Borough School District (1) County Source: PA Department of Community and Economic Development (DCED). (1) School Year. Non-Realty Tax Rates Emergency & Municipal Services Realty Transfer Earned Income Occupation (mills) Borough $ % 0.5% School District % 0.5% Amusements Mechanical Devices (dollars) Per Capita Borough $0.00 $ % School District 5.00 $ % Source: PA Department of Community and Economic Development (DCED). C-5

68 Overlapping Indebtedness Residents of the Borough will be responsible for the following debt indicated below as of settlement of the Bonds. Amount Outstanding Direct Debt General Obligation Debt:... $ 0 Total Net Direct Debt... $ 0 Guaranteed Debt (1)... Guaranteed Sewer Revenue Bonds, Series of $ 1,215,000 Guaranteed Sewer Revenue Bonds, Series of $ 11,315,000 Total Guaranteed Debt... $ 12,530,000 Total Direct Debt and Self Liquidating Debt... $ 12,530,000 Less: Self Liquidating Debt... $ 12,530,000 Total Self Liquidating Debt $ 12,530,000 Total Net Debt $ 0 Overlapping Debt: Schuylkill County (2)... $ 178,695 Mahanoy Area School District (3)... 2,766,183 Total Overlapping Debt... $ 2,944,878 Total Net Direct, Indirect & Overlapping Debt $ 2,944,878 (1) Includes the Bonds herein, but not the Bonds that are being refunded. (2) The Net Direct Debt of Schuylkill County totals $18,810,000 as reported by the Department of Community and Economic Development ( DCED ) January 1, The Borough s proportionate share, 0.95%, is determined by dividing the Borough s 2014 assessed value by the 2014 assessed value of all the municipalities within the County. (3) The Net Direct Debt of the Mahanoy Area School District totals $10,990,000 as reported by DCED January 1, The Borough s proportional share, 25.17% is determined by dividing the Boroughs 2014 assessed value by the 2014 assessed value of the School District. C-6

69 Financial Factors of the Borough STEB (1) Market Value of Real Estate (2014)... $ 42,098,076 STEB (1) Assessed Value of Real Estate (2014)... $ 23,894,680 Ratio of Assessed Valuation to Market Value % Population 2010 U.S. Census... 4,162 Direct Debt General Obligation Bonds $ 0 Guaranteed Debt (2)... 12,530,000 Less: Self-Liquidating Debt (12,530,000) Total Direct Debt... $ 0 Ratio of Direct Debt to: Market Value of Real Estate... 0% Assessed Valuation of Real Estate... 0% Population (2010)... $ 0 Overlapping Debt School District General Obligation (3)... $ 2,766,183 County General Obligation (4) ,695 Total Overlapping Debt... $ 2,944,878 Total Direct and Overlapping Debt (Total Debt)... $ 2,944,878 Ratio of Total Debt to: Market Value of Real Estate % Assessed Valuation of Real Estate % Population (2010)... $ 708 Ratio of Population (2010) of: Market Value of Real Estate... $ 10,115 Assessed Valuation of Real Estate... $ 5,741 (1) State Tax Equalization Board. Valuations certified June Market Value based upon the Common Level Ratio as reported by STEB. (2) Includes the Bonds issued herein. (3) Borough s proportionate share for Mahanoy Area School District. (4) Borough s proportionate share for Schuylkill County. C-7

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71 APPENDIX D Description of the Borough of Mahanoy City

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73 DESCRIPTION OF THE BOROUGH The Borough of Mahanoy City (the Borough ), originally part of Mahanoy Township, was incorporated on December 16, The Borough is in Schuylkill County (the County ), which is located in eastern Pennsylvania, and is bounded on the north by Northumberland, Columbia and Luzerne Counties; on the east by Carbon and Lehigh Counties; on the south by Berks County; and on the west by Lebanon and Dauphin Counties. The Delaware and Susquehanna River basins extend into the County, although its largest stream is the Schuylkill River. The Borough with a land area of 0.51 square miles, is situated in the valley of Mahanoy Creek, and has an elevation of 1240 ft. above the sea; Broad Mountain (1795 ft.), a ridge extending through the County, overlooks it on the southeast. The valley is a part of the anthracite coal region of Pennsylvania. History The Borough was founded in 1859, although early resident Emmanuel Boyer of the Little Schuylkill Co. occupied the area as early as Even before that, the Borough had one of its most notable businesses the Kaier Brewery. Founded by Charles Kaier in 1862, the brewery was operated by family members until its closing in Boyer is credited with being the first permanent resident. Legend says that the first house built within Borough limits was a log home occupied by an old German hunter named Reisch. The home was situated on the east side of the old Catawissa Turnpike, now Main Street. Mahanoy is believed to be a variation of the Native American word Maghonioy, or the word mahoni, meaning salt lick. Like several county municipalities, coal played a role in the Borough's development. The rich deposits of anthracite in the Mahanoy Valley had 20 collieries producing 250 tons of coal a day in Borough and the surrounding area in the 1860 s and 1870 s. Government The Borough operates under a Council-Mayor form of local government under the Borough Code. The Borough Manager/Secretary, appointed by the Council, is responsible for the day-to-day operations of Borough. There are seven council members, who serve four-year staggered terms. The other elected Borough officials are the Mayor, Controller and Tax Collector, each serving four-year terms. The Mayor is responsible for administration of the Police Department. Demographic Characteristics Population The table below shows population comparisons for the Borough, Schuylkill County, and Pennsylvania Borough of Mahanoy City 4,162 4,647 Schuylkill County 148, ,336 Commonwealth 12,702,379 12,281,054 Source: U.S. Bureau of Census.

74 Age Composition (2010) Under or Over Borough of Mahanoy City 23.9% 19.5% Schuylkill County Commonwealth Family Income ( year estimates) Families Below Median Family Income Poverty Level Borough of Mahanoy City $45, % Schuylkill County 66, Commonwealth 61, Occupied Housing (2010) Total Occupied % Owner-Occupied % Housing Housing Occupied Housing Owner Units Units Housing Units Occupied Borough of Mahanoy City 2,414 1, % 1, % Schuylkill County 69,323 60, , Commonwealth 5,567,315 5,018, ,491, Source: U.S. Bureau of Census. Educational Facilities The Mahanoy Area School District (the School District ) provides primary and secondary public school education for the Borough. The School District has a currently enrollment of approximately 1,250 students. The demand for particular skill in the area s labor force are met through the training programs offered at the two vocational-technical schools located in the County. A constant monitoring of the needs of local industries allow the Vo- Tech schools to structure their programs to fill the demands of County industry. A school of nursing at the Ashland State Hospital and Pottsville Hospital offers a 33-month curriculum as well as specialized programs for x-ray technologists, nurse anesthetist and medical technologists. Training in administrative and business skills is available through the Schuylkill Business Institute and the McCann School of Business. The Schuylkill Campus of Penn State University offers a wide variety of undergraduate programs. An additional 81 colleges and universities are located within a 100-mile radius of Pottsville. These include Temple University, University of Pennsylvania, Lehigh University, Villanova University and Princeton University.

75 Medical Facilities There are 3 hospitals/medical centers that serve Schuylkill County. These hospitals, their licensed bed capacities and number of employees (full-time and part-time) are as follows: Institution Location Licensed Beds Staff Full-Time Part-Time Schuylkill Medical Center E. Norwegian St. Pottsville Schuylkill Medical Center South Pottsville St. Luke s Miners Memorial Medical Center Coaldale Source: Pennsylvania Department of Health, Bureau of Health Statistics; 2014 reporting period. Transportation One of the Schuylkill County s primary assets is its strategic location. Pottsville, approximately 15 miles south of the Borough, is the County seat and geographic center, is just 90 miles northwest of Philadelphia and two hours away from New York and Baltimore. Interstate 81 has nine interchanges in the County and intersects with Interstate 80 about 20 miles to the north. Air service to the County is readily available from the Wilkes-Barre-Scranton International Airport, 45 minutes to the north, and the Reading Airport, 30 minutes to the southeast. The Schuylkill County/Joe Zerbey Airport, just off I-81, accommodates charter and company aircraft. Conrail provides commuter and freight service between Pottsville and Philadelphia, with rail facilities available in the majority of the County s industrial parks. Capital Trailways buses connect daily with the metropolitan areas of Philadelphia, Baltimore, Washington and New York. Utilities The Mahanoy Township Authority provides water and the Mahanoy City Sewer Authority provides sewer treatment.

76 ECONOMY Employment Trends Most Mahanoy Area School District residents find employment in the well-diversified agricultural and industrial sectors of the Schuylkill labor market area. The trend in total employment rates in the County, compared with the same rates for Pennsylvania and the United States is shown as follows: Trends in Schuylkill County Employment and Unemployment County Civilian Total Percentage Unemployed (1) Year Labor Force Employment County Pennsylvania U.S ,200 65, ,900 66, ,500 67, ,100 69, ,900 69, ,700 66, ,000 65, ,700 65, ,900 66, ,300 66, ,700 64, (Nov) 69,500 65, Top 10 Employers in Schuylkill County Employer Wal-Mart Associates... State Government... Sapa Extrusions Inc.... Lowe s Home Centers Inc..... Schuylkill Medical Center... Schuylkill County..... Jeld-Wen, Inc.... Schuylkill Medical Center....Federal Government... Cargill Meat Solutions Corporation... Source: Center for Workforce Information and Analysis L & I, 1st Quarter 2015 data. L & I does not report employee numbers due to employer privacy.

77 Classification of Employment by Industry Schuylkill County, Pennsylvania The following is a breakdown of employment in Schuylkill County for 2013 from the Pennsylvania Department of Labor & Industry. Average annual earnings for workers are included. Industry Average Units Average Employment Total Wages (1000s) Average Annual Wage Schuylkill County 3,127 49,209 1,769,587 35,961 AGRICULTURE, FORESTRY, FISHING AND HUNTING ,278 28,408 MINING ,455 50,872 UTILITIES ,784 77,583 CONSTRUCTION 212 1,369 58,145 42,472 MANUFACTURING , ,442 46,624 WHOLESALE TRADE 134 1,119 47,422 42,379 RETAIL TRADE 456 5, ,849 22,619 TRANSPORTATION AND WAREHOUSING 127 5, ,386 34,971 INFORMATION ,882 45,901 FINANCE AND INSURANCE 148 1,024 42,196 41,207 REAL ESTATE AND RENTAL AND LEASING ,794 39,971 PROFESSIONAL AND TECHNICAL SERVICES ,398 54,016 MANAGEMENT OF COMPANIES AND ENTERPRISES ,322 59,774 ADMINISTRATIVE AND WASTE MANAGEMENT SERVICES 110 1,746 34,835 19,951 EDUCATIONAL SERVICES ,901 25,488 HEALTH CARE AND SOCIAL ASSISTANCE 572 7, ,731 35,689 ARTS, ENTERTAINMENT, AND RECREATION ,994 12,641 ACCOMMODATION AND FOOD SERVICES 275 2,807 35,548 12,664 OTHER SERVICES (EXCEPT PUBLIC ADMINISTRATION) 278 1,209 24,165 19,988 FEDERAL GOVERNMENT ,627 60,841 LOCAL GOVERNMENT 213 5, ,833 35, ,589 91,225 57,411 Source: Pennsylvania Department of Labor & Industry, report completed May * Data that might be identified with an individual employer and/or data involving fewer than twenty-five employees are not published.

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79 APPENDIX E Form of Bond Counsel Opinion

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81 STEVENS & LEE LAWYERS & CONSULTANTS 111 North 6th Street P.O. Box 679 Reading, PA (610) Fax (610) April 26, 2016 Re: Mahanoy City Sewer Authority Guaranteed Sewer Revenue Bonds, Series of 2016 TO THE REGISTERED OWNERS OF THE ABOVE-CAPTIONED BONDS: We have acted as Bond Counsel in connection with the issuance by the Mahanoy City Sewer Authority (the Authority ) of its Guaranteed Sewer Revenue Bonds, Series of 2016, dated April 26, 2016 (the Bonds ), in the aggregate principal amount of $11,315,000. The Bonds are being issued pursuant to the Pennsylvania Municipality Authorities Act of May 2, 1945, P. L. 382 (the 1945 Act ), which 1945 Act is codified and continued by Act No. 22, approved on June 19, 2001, 53 Pa.C.S.A et seq., as amended and supplemented ( Act 22 and together with the 1945 Act, collectively, the Act ), and resolutions of the Board of the Authority adopted on June 29, 2015 and January 25, 2016 (collectively, the Resolutions ). The Bonds are being issued, in fully registered form, in denominations of $5,000 and in integral multiples thereof, under and pursuant to the provisions of an Amended and Restated Trust Indenture, dated as of April 15, 2016 (the Indenture ) between the Authority and The Gratz Bank, Minersville, Pennsylvania, as trustee (the Trustee ). Proceeds of the Bonds, together with certain other funds of the Authority, will be used to finance a project (the Project ) which consists generally of the following: (a) the current refunding of the Authority s (i) Guaranteed Sewer Revenue Bonds, Series of 2003; (ii) Guaranteed Sewer Revenue Bonds, Series of 2007; (iii) Guaranteed Sewer Revenue Bond, Series of 2012; and (iv) Debt Obligation dated November 11, 2009, as amended; (b) the financing of various capital improvements to the Authority s sewer collection, transportation and treatment system; (c) the funding of necessary reserves and other funds under the Indenture; and (d) the payment of the costs associated with the issuance of the Bonds. In connection with the issuance of the Bonds, the Authority has entered into (i) a Guaranty Agreement, dated as of April 15, 2016 (the Guaranty Agreement ) with the Borough of Mahanoy City, Schuylkill County, Pennsylvania (the Borough ), as guarantor, and the Trustee; and (ii) a Reimbursement Agreement, dated as of April 15, 2016 (the Reimbursement Agreement ) with the Borough. The timely payment of the scheduled principal of and interest on the Bonds when due will be secured by a municipal bond insurance policy (the Bond Insurance Policy ) issued by Assured Guaranty Municipal Corp. (the Bond Insurer ). Philadelphia Reading Valley Forge Allentown Harrisburg Lancaster Scranton Wilkes-Barre Princeton Charleston New York Wilmington A PROFESSIONAL CORPORATION

82 STEVENS & LEE LAWYERS & CONSULTANTS April 26, 2016 Page 2 In our capacity as Bond Counsel, we have reviewed the following: (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) (m) (n) (o) (p) A certified copy of the By-Laws and Articles of Incorporation of the Authority; A copy of each of the Resolutions; The executed Indenture; The executed Guaranty Agreement; The executed Reimbursement Agreement; The opinion of General Counsel to the Bond Insurer; A specimen copy of one of the Bonds; The accepted bond purchase proposal of RBC Capital Markets, LLC (the Purchaser ), dated June 29, 2015, as amended by an Addendum thereto dated March 23, 2016, for the purchase of the Bonds; The proceedings of the Borough filed with the Department of Community and Economic Development of the Commonwealth of Pennsylvania (the Department ) under the provisions of the Local Government Unit Debt Act of the Commonwealth of Pennsylvania (the Debt Act ); The Certificate of the Department approving the incurrence of lease rental indebtedness by the Borough in the principal amount of $11,315,000; The General Certificate of the Authority; The Nonarbitrage Certificate of the Authority; An executed Certificate of the Bond Insurer delivered this day; An executed Certificate of the Underwriter delivered this day; The information return of the Authority on Form 8038-G; and The other documents, instruments, certificates, agreements and opinions (including, without limitation, the opinions of Michael A. O Pake, Esquire, Pottsville, Pennsylvania, as solicitor to the Authority and as solicitor to the Borough (collectively, the Solicitor s Opinions )) executed and delivered at, or in connection with, the closing held this day. We have also reviewed the relevant provisions of the Constitution of the Commonwealth of Pennsylvania, the Act, the

83 STEVENS & LEE LAWYERS & CONSULTANTS April 26, 2016 Page 3 Debt Act, Sections 103, and 141 through 150 of the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder (the Code ). Based and in reliance upon the foregoing, our attendance at the closing held this day and subject to the caveats, qualifications, exceptions and assumptions set forth herein, it is our opinion, as of the date hereof under existing law that: 1. The Authority has been duly incorporated and is validly existing under the laws of the Commonwealth of Pennsylvania and has full power and authority to issue and sell the Bonds. 2. The proceedings authorizing adoption of each of the Resolutions, authorizing issuance, execution, authentication and delivery of the Bonds and authorizing the sale of the Bonds to the Purchaser are valid and legally sufficient. 3. The Indenture, the Guaranty Agreement and the Reimbursement Agreement have been duly authorized, executed and delivered by and on behalf of the Authority and constitute the valid and legally binding obligations of the Authority. 4. The Guaranty Agreement and the Reimbursement Agreement have been duly authorized, executed and delivered by the Borough and constitute the valid and legally binding obligations of the Borough enforceable against the Borough in accordance with their terms. 5. The Bonds have been duly authorized and issued by the Authority. Such Bonds, upon authentication thereof by the Trustee, will constitute valid and legally binding obligations of the Authority. Upon authentication, the Bonds will be entitled to the benefit and security of the Indenture and, to the extent provided therein, the Guaranty Agreement. 6. The Borough has duly guaranteed the payment of the principal of and interest on the Bonds, to the extent provided in the Guaranty Agreement, and for such payment has pledged its full faith, credit and taxing power, which is unlimited as to rate or amount. 7. Under the laws of the Commonwealth of Pennsylvania, the Bonds and interest on the Bonds shall be free from taxation for State and local purposes within the Commonwealth of Pennsylvania, but this exemption does not extend to gift, estate, succession or inheritance taxes or any other taxes not levied directly on the Bonds or the interest thereon. Under the laws of the Commonwealth of Pennsylvania, profits, gains or income derived from the sale, exchange or other

84 STEVENS & LEE LAWYERS & CONSULTANTS April 26, 2016 Page 4 disposition of the Bonds are subject to State and local taxation within the Commonwealth of Pennsylvania. 8. Interest on the Bonds is not includable in gross income for federal income tax purposes under Section 103(a) of the Code. 9. Under the Code, interest on the Bonds held by persons other than corporations (as defined for federal tax purposes) does not constitute an item of tax preference under Section 57 of the Code and thus is not subject to alternative minimum tax for federal income tax purposes. 10. Under the Code, interest on the Bonds held by a corporation (as defined for federal tax purposes) does not constitute an item of tax preference under Section 57 of the Code, and is not an adjustment in computing alternative minimum taxable income in the manner provided in Section 56 of the Code. In connection with providing the foregoing opinions, we call to your attention the following: A. As to questions of fact material to our opinion, we have relied upon the certified proceedings and other documents, agreements, instruments, opinions, reports and certificates furnished to us at or in connection with the issuance of the Bonds (including, without limitation, certificates, agreements and representations by the Authority as to the expected use of the proceeds of the Bonds, as to continuing compliance with Section 148 of the Code, and as to its continuing compliance with Sections 148 and 141 of the Code to assure that the Bonds do not become arbitrage bonds or private activity bonds ) without undertaking to verify the same by independent investigation. We have also relied upon the accuracy of the representations and warranties and the continuing performance of the covenants and agreements of the Authority set forth in the Indenture and the various certificates and other agreements delivered at or in connection with the closing held this day. We have also assumed the genuineness of the signatures appearing upon all the certificates, documents and instruments executed and delivered at closing. B. In providing the opinions set forth in paragraphs 1, 2, 3 and 4 above, we have relied, without independent investigation, on the Solicitor s Opinions. C. In providing the opinion set forth in paragraph 8, above, we have assumed continuing compliance by the Authority with the requirements of the Code and the applicable regulations thereunder which must be met subsequent to the issuance of the Bonds in order that the interest thereon be and remain excluded

85 STEVENS & LEE LAWYERS & CONSULTANTS April 26, 2016 Page 5 from gross income for federal income tax purposes. The Authority has covenanted to comply with such requirements. Failure to comply with such requirements could cause the interest on the Bonds to be included in gross income retroactive to the date of issuance of the Bonds. We further advise you that we have not undertaken to determine (or to inform any person) whether any actions taken (or not taken) or events occurring (or not occurring) after the date of issuance of the Bonds may affect the tax status of interest on the Bonds. D. In providing the opinions set forth in paragraphs 9 and 10 above, we have assumed continuing compliance by the Authority with requirements of the Code and applicable regulations thereunder which must be met subsequent to the issuance of the Bonds in order that the interest thereon not constitute an item of tax preference under Section 57 of the Code. Failure to comply with such requirements could cause the interest on the Bonds to constitute an item of tax preference under Section 57 of the Code retroactive to the date of issuance of the Bonds. E. In connection with the opinions set forth in paragraphs 3, 4 and 5 above, we call to your attention that enforceability of the documents referred to therein may be limited by: (a) the availability or unavailability of equitable remedies including, but not limited to, specific performance and injunctive relief; (b) the effect of bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws or equitable principles generally affecting creditors rights or remedies; and (c) the effect of certain laws and judicial decisions limiting on constitutional or public policy grounds any provisions set forth in such documents purporting to waive rights of due process and legal procedure. F. Except as specifically set forth herein, we express no opinion regarding other federal income tax consequences arising with respect to the Bonds, including, without limitation, the treatment for federal income tax purposes of the gain or loss, if any, upon the sale, redemption or other disposition of the Bonds prior to maturity of the Bonds subject to original issue discount and the effects, if any, of certain other provisions of the Code which could result in collateral federal income tax consequences to certain investors as a result of adjustments in the computation of tax liability dependent on tax-exempt interest. G. The Bonds are obligations of the Authority and payment thereof is not supported by a pledge of the full faith, credit or taxing power of the Commonwealth of Pennsylvania or any political subdivision thereof, other than the Borough to the extent provided in the Guaranty Agreement. The Authority has no taxing power.

86 STEVENS & LEE LAWYERS & CONSULTANTS April 26, 2016 Page 6 H. We have not been engaged to verify, nor have we independently verified, nor do we express any opinion to the registered owners of the Bonds with respect to, the accuracy, completeness or truthfulness of any statements, certifications, information or financial statements set forth in the preliminary official statement dated March 21, 2016 (the Preliminary Official Statement ) or in the official statement dated March 23, 2016 (the Official Statement ) or otherwise used in connection with the offer and sale of the Bonds or otherwise delivered by officials of the Authority. I. We express no opinion herein with respect to whether the Authority, the Borough or the Bond Insurer, in connection with the sale of the Bonds or the preparation of the Preliminary Official Statement or the Official Statement has made any untrue statement of a material fact or omitted to state a material fact necessary in order to make any statements made not misleading. Further, we have not verified, and express no opinion as to the accuracy of, any CUSIP identification number which may be printed on any Bonds. STEVENS & LEE, P.C.

87 APPENDIX F Form of Joint Continuing Disclosure Certificate

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89 JOINT CONTINUING DISCLOSURE AGREEMENT This Joint Continuing Disclosure Agreement, dated April 26, 2016 (the Disclosure Agreement ), is executed and delivered by and among the MAHANOY CITY SEWER AUTHORITY (the Authority ), and the BOROUGH OF MAHANOY CITY, SCHUYLKILL COUNTY, PENNSYLVANIA (the Borough ) in connection with the issuance of $11,315,000 Mahanoy City Sewer Authority Guaranteed Sewer Revenue Bonds, Series of 2016, dated April 26, 2016 (the Bonds ). The Bonds are being issued pursuant to an Amended and Restated Trust Indenture, dated as of April 15, 2016 (the Indenture ), between the Authority and The Gratz Bank, as trustee (the Trustee ). Each of the Authority and the Borough covenants and agrees as follows: SECTION 1. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered by the Authority and the Borough for the benefit of the Bondholders and in order to assist the Participating Underwriter in complying with the Rule (hereinafter defined). SECTION 2. Definitions. In addition to the definitions set forth in the Indenture, which apply to any capitalized term used in this Disclosure Agreement unless otherwise defined in this Section, the following capitalized terms shall have the following meanings: Annual Report shall mean, any Annual Report provided by the Authority or the Borough pursuant to, and as described in, Sections 3 and 4, with respect to the Authority and Sections 5 and 6, with respect to the Borough, of this Disclosure Agreement. Bondholders or Holders shall mean the registered owners of the Bonds and, if registered in the name of Cede & Co., through The Depository Trust Company, New York, New York ( DTC ), any Beneficial Owners (as such term is used by DTC to define holders other than nominees) of the Bonds, unless the Rule, or an authoritative interpretation thereof by the Securities and Exchange Commission (the Commission ) or its staff, does not require this Disclosure Agreement to be for the benefit of such Beneficial Owners. Bond Insurance Company shall mean Assured Guaranty Municipal Corp., its successors and assigns. Commission shall mean the Securities and Exchange Commission. Dissemination Agent shall mean any person or entity designated from time to time in writing by the Authority or the Borough and which has filed with the Authority or the Borough a written acceptance of such designation and of the duties of the Dissemination Agent under this Disclosure Agreement. EMMA shall mean the Electronic Municipal Market Access system as described in 1934 Act Release No and maintained by the MSRB for purposes of the Rule as further described in Section 16 hereof. Filing shall mean, as applicable, any Annual Report or Listed Event filing or any other notice or report made public under this Disclosure Agreement made with each 1

90 NRMSIR or the MSRB and the SID, if any, together with a completed copy of a cover sheet in such form acceptable to each NRMSIR, the MSRB or SID, if applicable, describing the event by checking the box in said form when filing pursuant to the pertinent sections of this Disclosure Agreement. Listed Events shall mean any of the events listed in Section 7(a) of this Disclosure Agreement. MSRB shall mean the Municipal Securities Rulemaking Board, or any successor thereto for purposes of the Rule. Currently, MSRB s address, phone number and fax number for purposes of the Rule are: MSRB c/o CDINet 1900 Duke Street Suite 600 Alexandria, VA Phone: (703) Fax: (703) NRMSIR shall mean any Nationally Recognized Municipal Securities Information Repository recognized for purposes of the Rule and the MSRB, as reflected on the website of the Securities and Exchange Commission at As of the date of this Disclosure Agreement, the sole NRMSIR shall be the MSRB, through the operation of EMMA, as provided in Section 16 hereof. Participating Underwriter shall mean any of the original underwriters of the Bonds required to comply with the Rule in connection with offering of the Bonds. Repository shall mean each NRMSIR and the SID, if any. Rule shall mean Rule 15c2-12(b)(5) adopted by the Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. SID shall mean any public or private state information depositary or entity designated by the Commonwealth of Pennsylvania as a state information depositary for the purpose of the Rule, if any. As of the date of this Disclosure Agreement, no SID has been designated. SECTION 3. Provision of Annual Reports of the Authority. (a) The Authority shall not later than 270 days after the end of each fiscal year of the Authority, commencing with the fiscal year ending December 31, 2016, provide directly or through the Dissemination Agent to each Repository an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Agreement. In connection therewith, not later than fifteen (15) Business Days prior to said date, the Authority shall provide the Annual Report to the Dissemination Agent (if one has been designated by the Authority under this Disclosure Agreement). The Annual Report may be submitted as a single document 2

91 or as separate documents comprising a package, and may cross-reference other information as provided in Section 4 of this Disclosure Agreement; provided that the audited financial statements of the Authority may be submitted separately from the remainder of the Annual Report when such audited financial statements are available. If the audited financial statements are not submitted as part of the Annual Filing to each Repository pursuant to this Section 3(a), the Authority shall provide to each Repository such audited financial statements when they are available to the Authority. (b) If the Authority is unable to provide to the Repositories an Annual Report by the date required in subsection (a), the Authority shall send or cause the Dissemination Agent to send a notice to each NRMSIR and the SID in substantially the form attached as Exhibit A. (c) The Authority or the Dissemination Agent, if applicable, shall: (i) determine each year prior to the date for providing the Annual Report the name and address of each NRMSIR and the SID, if any; and (ii) if a Dissemination Agent has been designated hereunder, file a report with the Authority certifying that the Annual Report has been provided pursuant to this Disclosure Agreement, stating the date it was provided and listing all the Repositories to which it was provided. (iii) The Authority shall promptly file a notice of any change in its fiscal year and the new annual filing date with each NRMSIR and the SID. (d) If the Dissemination Agent does not receive the Annual Report from the Authority by the fifteenth Business Day specified in Section 3(a) above, the Dissemination Agent shall provide a written reminder notice to the Authority with respect to the Authority s obligations under Section 3(a) above no later than five (5) Business Days after such fifteenth Business Day. SECTION 4. Content of Annual Reports of the Authority. The Authority Annual Report shall contain or incorporate by reference the following: (a) the Authority s financial statements for the most recent fiscal year, prepared in accordance with generally accepted accounting principles for local government units; (b) a copy or summary of the Authority s budget for the current fiscal year; and (c) an update of the information contained in the following sections of Appendix A to the Official Statement dated March 23, 2016: (i) Sewer Rates and Fee Schedule, including the chart listing the Largest Customers; and (ii) Statement of Revenues and Expenses. 3

92 Any or all of the items listed above may be incorporated by reference from other documents, including official statements of debt issues of the Authority or related public entities, which have been submitted to each of the Repositories. If the document incorporated by reference is a final official statement, it must be available from the MSRB. The Authority shall clearly identify each such other document so incorporated by reference. The Authority reserves the right to modify from time to time specific types of information provided hereunder or the format of the presentation of such information, to the extent necessary or appropriate; provided, however, that any such modification will be done in a manner consistent with the Rule. SECTION 5. Provision of Annual Reports of the Borough. (a) The Borough shall not later than 270 days after the end of each fiscal year of the Borough, commencing with the fiscal year ending December 31, 2016, provide directly or through the Dissemination Agent to each Repository an Annual Report which is consistent with the requirements of Section 6 of this Disclosure Agreement. In connection therewith, not later than fifteen (15) Business Days prior to said date, the Borough shall provide the Annual Report to the Dissemination Agent (if one has been designated by the Borough under this Disclosure Agreement). The Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross-reference other information as provided in Section 6 of this Disclosure Agreement; provided that the audited financial statements of the Borough may be submitted separately from the remainder of the Annual Report when such audited financial statements are available. If the audited financial statements are not submitted as part of the Annual Filing to each Repository pursuant to this Section 5(a), the Borough shall provide to each Repository such audited financial statements when they are available to the Borough. (b) If the Borough is unable to provide to the Repositories an Annual Report by the date required in subsection (a), the Borough shall send or cause the Dissemination Agent to send a notice to each NRMSIR and the SID in substantially the form attached as Exhibit B. (c) The Borough or the Dissemination Agent, if applicable, shall: (i) determine each year prior to the date for providing the Annual Report the name and address of each NRMSIR and the SID, if any; and (ii) if a Dissemination Agent has been designated hereunder, file a report with the Borough certifying that the Annual Report has been provided pursuant to this Disclosure Agreement, stating the date it was provided and listing all the Repositories to which it was provided. (iii) The Borough shall promptly file a notice of any change in its fiscal year and the new annual filing date with each NRMSIR and the SID. (d) If the Dissemination Agent does not receive the Annual Report from the Borough by the fifteenth Business Day specified in Section 5(a) above, the Dissemination Agent shall provide a written reminder notice to the Borough with respect to the Borough s obligations under Section 5(a) above no later than five (5) Business Days after such fifteenth Business Day. 4

93 SECTION 6. Content of Annual Reports of the Borough. The Borough Annual Report shall contain or incorporate by reference the following: (a) the Borough s financial statements for the most recent fiscal year, prepared in accordance with generally accepted accounting principles for local government units; (b) a copy or summary of the Borough s budget for the current fiscal year; and (c) an update of the information contained in the following sections of Appendix C to the Official Statement dated March 23, 2016: (i) Summary of Government Funds, Revenues, Expenses and Fund Balance; (ii) (iii) Ten Largest Taxpayers in Borough; and Tax Collection Record. Any or all of the items listed above may be incorporated by reference from other documents, including official statements of debt issues of the Borough or related public entities, which have been submitted to each of the Repositories. If the document incorporated by reference is a final official statement, it must be available from the MSRB. The Borough shall clearly identify each such other document so incorporated by reference. The Borough reserves the right to modify from time to time specific types of information provided hereunder or the format of the presentation of such information, to the extent necessary or appropriate; provided, however, that any such modification will be done in a manner consistent with the Rule. SECTION 7. Reporting of Significant Events. (a) The occurrence of any of the following events with respect to a particular series of Bonds, constitutes a Listed Event only with respect to such series of Bonds. This Section 7 shall govern the giving of notices of the occurrence of any of the following events: financial difficulties; financial difficulties; to perform; (i) (ii) (iii) (iv) (v) Principal and interest payment delinquencies; Nonpayment related defaults, if material; Unscheduled draws on debt service reserves reflecting Unscheduled draws on credit enhancements reflecting Substitution of credit or liquidity providers, or their failure (vi) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS 5

94 Form 5701-TEB) or other material notices or determinations with respect to the taxexempt status of the Bonds, or other material events affecting the tax status of the Bonds; (vii) Modifications to rights of securities holders, if material; (viii) Bond calls, if material, and tender offers for the Bonds; (ix) Defeasances; (x) Release, substitution, or sale of property securing repayment of the securities, if material; (xi) Rating changes; (xii) Bankruptcy, insolvency, receivership or similar events of the Borough or the Authority; (xiii) Tender offers; (xiv) The consummation of a merger, consolidation, or acquisition involving the Borough or the Authority or the sale of all or substantially all of the assets of the Borough or the Authority, 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 to any such actions, other than pursuant to its terms, if material; (xv) Appointment of a successor or additional trustee or paying agent or the change of name of a trustee or paying agent, if material; and (xvi) Failure to provide annual financial information as required. (b) Whenever the Borough or the Authority obtains knowledge of the occurrence of a Listed Event, the Borough or the Authority shall as soon as possible (with respect to those Listed Events where a determination of materiality by the Borough or the Authority is applicable) determine if such event would constitute material information for Holders of Bonds under applicable federal securities laws. (c) If (i) a Determination of materiality by the Borough or the Authority is not relevant to the obligation to give notice of a Listed Event or (ii) the Borough or the Authority determines (with respect to those Listed Events where a determination of materiality by the Borough or the Authority is applicable) that knowledge of the occurrence of a Listed Event would be material under applicable federal securities laws, the Borough or the Authority shall promptly file in a timely manner, not in excess of ten (10) business days after the occurrence of the Listed Event, or cause the Dissemination Agent to so file (if a Dissemination Agent has been designated hereunder) a notice of such occurrence with each NRMSIR and the SID, if any, with a copy to the Trustee. 6

95 (d) For purposes of the Listed Events in Section 7(a)(xii), the Borough and the Authority and the Dissemination Agent acknowledge the following interpretive note which the Commission has set forth in the Rule: Note: for the purposes of the event identified in subparagraph (b)(5)(i)(c)(12), the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for an obligated person 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 or business of the obligated person, or if such jurisdiction has been assumed by leaving the existing governmental body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the obligated person; SECTION 8. Termination of Reporting Obligation. The Borough s and the Authority s obligations under this Disclosure Agreement shall terminate upon the defeasance, prior redemption or payment in full of all of the Bonds. In the event that any person or entity subsequent to the execution hereof becomes an obligated person, as such term is defined in the Rule, with respect to the Bonds, the Borough and the Authority covenant to use their best effort to cause such obligated person to enter into a written undertaking to comply with the provisions of the Rule or to cause this Disclosure Agreement to be amended and to cause such obligated person to join in the execution of such amendment. SECTION 9. Dissemination Agent. The Borough or the Authority may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The Borough or the Authority shall cause the Dissemination Agent appointed hereunder and any successors to execute and deliver an acknowledgment of acceptance of the designation and duties of Dissemination Agent under this Disclosure Statement. SECTION 10. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Agreement, the Borough or the Authority may amend this Disclosure Agreement, and any provision of this Disclosure Agreement may be waived, if such amendment or waiver is supported by an opinion of counsel expert in federal securities laws to the effect that such amendment or waiver would not, in and of itself, cause the undertakings herein to violate the Rule if such amendment or waiver had been effective on the date hereof but taking into account any subsequent change in or official interpretation of the Rule, as well as any change in circumstances. SECTION 11. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the Borough or the Authority from disseminating any other information, using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure 7

96 Agreement. If the Borough or the Authority chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Agreement, the Borough or the Authority shall have no obligation under this Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. SECTION 12. Default. In the event of a failure of the Borough or the Authority to comply with any provision of this Disclosure Agreement, any Bondholder may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Borough or the Authority to comply with its obligations under this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed an event of default under the Bonds or the Indenture, and the sole remedy under this Disclosure Agreement in the event of any failure of the Borough or the Authority to comply with this Disclosure Agreement shall be an action to compel performance. SECTION 13. Duties, Immunities and Liabilities of Dissemination Agent, if other than the Borough or the Authority. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Agreement, and the Borough and the Authority agree to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent s negligence or willful misconduct. The obligations of the Borough and the Authority under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. SECTION 14. Disclosure to Bond Insurance Company. As long as the municipal bond insurance policy issued by Bond Insurance Company insuring the payment when due of the principal of and interest on the Bonds is in full force and effect, the Borough and the Authority shall provide a copy of (a) each Annual Report distributed pursuant to Section 3 and Section 5 hereof and (b) each notice of the occurrence of a Listed Event distributed pursuant to Section 7 hereof to Bond Insurance Company, if any. SECTION 15. Undertaking with Respect to Certain Procedures and Policies. The Borough and the Authority agree to begin the process of establishing internal policies and procedures for the purpose of continuing disclosure compliance. Without intending to preclude the adoption of other necessary or useful policies and procedures, a single official of each of the Borough and the Authority will be designated with ultimate responsibility for continuing disclosure compliance and will oversee the process of informing and training appropriate deputies and other employees with respect to the Borough and the Authority s continuing disclosure undertakings. SECTION 16. EMMA. Filings shall be made to the continuing disclosure service portal provided through EMMA as provided at or any similar system that is acceptable to the Commission. 8

97 SECTION 17. Alternative Filing. Notwithstanding the other provisions of this Disclosure Agreement, any filing under this Disclosure Agreement, and any additional supplements hereto, may be made with such depositories and using such electronic filing systems as may be approved by the United States Securities and Exchange Commission (in lieu of the procedures currently in this Disclosure Agreement). SECTION 18. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the Borough, the Authority, the Trustee, the Dissemination Agent (if any), the Participating Underwriter, the Bond Insurance Company and the Holders from time to time of the Bonds, and shall create no rights in any other person or entity. [The remainder of this page intentionally left blank.] 9

98 IN WITNESS WHEREOF, the Authority and the Borough have caused this Disclosure Agreement to be duly executed and delivered, all as of the date first above written. ATTEST: MAHANOY CITY SEWER AUTHORITY Secretary (SEAL) By: Chairman ATTEST: BOROUGH OF MAHANOY CITY, SCHUYLKILL COUNTY, PENNSYLVANIA Secretary (SEAL) By: President [Signature page to Continuing Disclosure Agreement]

99 EXHIBIT A 1 NOTICE TO REPOSITORIES OF FAILURE TO FILE ANNUAL REPORT Name of Issuer: Name of Bond Issue: Mahanoy City Sewer Authority Schuylkill County, Pennsylvania $11,315,000 Mahanoy City Sewer Authority Guaranteed Sewer Revenue Bonds, Series of 2016, dated April 26, 2016 (the Bonds ) Date of Issuance: April 26, 2016 NOTICE IS HEREBY GIVEN that the Mahanoy City Sewer Authority (the Authority ), has not provided an Annual Report with respect to the above-named Bonds as required by Section 3 of the Joint Continuing Disclosure Agreement, dated April 26, 2016, executed by the Authority. The Authority anticipates that the Annual Report will be filed by. Dated: MAHANOY CITY SEWER AUTHORITY [OR DISSEMINATION AGENT ON BEHALF OF MAHANOY CITY SEWER AUTHORITY] cc: Trustee 1 The substantive content of this notice shall be provided in any applicable notice filing. Appropriate modifications may be made to accommodate the electronic submission format requirements of the EMMA system or other successor electronic filing system. A-1

100 EXHIBIT B 1 NOTICE TO REPOSITORIES OF FAILURE TO FILE ANNUAL REPORT Name of Issuer: Name of Bond Issue: Mahanoy City Sewer Authority Schuylkill County, Pennsylvania $11,315,000 Mahanoy City Sewer Authority Guaranteed Sewer Revenue Bonds, Series of 2016, dated April 26, 2016 (the Bonds ) Date of Issuance: April 26, 2016 NOTICE IS HEREBY GIVEN that the Borough of Mahanoy City, Schuylkill County, Pennsylvania (the Borough ), has not provided an Annual Report with respect to the above-named Bonds as required by Section 5 of the Joint Continuing Disclosure Agreement, dated April 26, 2016, executed by the Borough. The Borough anticipates that the Annual Report will be filed by. Dated: BOROUGH OF MAHANOY CITY, SCHUYLKILL COUNTY, PENNSYLVANIA [OR DISSEMINATION AGENT ON BEHALF OF BOROUGH OF MAHANOY CITY, SCHUYLKILL COUNTY, PENNSYLVANIA] cc: Trustee 1 The substantive content of this notice shall be provided in any applicable notice filing. Appropriate modifications may be made to accommodate the electronic submission format requirements of the EMMA system or other successor electronic filing system. B-1

101 APPENDIX G Specimen Municipal Bond Insurance Policy

102 [ THIS PAGE INTENTIONALLY LEFT BLANK ]

103 MUNICIPAL BOND INSURANCE POLICY ISSUER: BONDS: $ in aggregate principal amount of Policy No: -N Effective Date: Premium: $ ASSURED GUARANTY MUNICIPAL CORP. ("AGM"), for consideration received, hereby UNCONDITIONALLY AND IRREVOCABLY agrees to pay to the trustee (the "Trustee") or paying agent (the "Paying Agent") (as set forth in the documentation providing for the issuance of and securing the Bonds) for the Bonds, for the benefit of the Owners or, at the election of AGM, directly to each Owner, subject only to the terms of this Policy (which includes each endorsement hereto), that portion of the principal of and interest on the Bonds that shall become Due for Payment but shall be unpaid by reason of Nonpayment by the Issuer. On the later of the day on which such principal and interest becomes Due for Payment or the Business Day next following the Business Day on which AGM shall have received Notice of Nonpayment, AGM will disburse to or for the benefit of each Owner of a Bond the face amount of principal of and interest on the Bond that is then Due for Payment but is then unpaid by reason of Nonpayment by the Issuer, but only upon receipt by AGM, in a form reasonably satisfactory to it, of (a) evidence of the Owner's right to receive payment of the principal or interest then Due for Payment and (b) evidence, including any appropriate instruments of assignment, that all of the Owner's rights with respect to payment of such principal or interest that is Due for Payment shall thereupon vest in AGM. A Notice of Nonpayment will be deemed received on a given Business Day if it is received prior to 1:00 p.m. (New York time) on such Business Day; otherwise, it will be deemed received on the next Business Day. If any Notice of Nonpayment received by AGM is incomplete, it shall be deemed not to have been received by AGM for purposes of the preceding sentence and AGM shall promptly so advise the Trustee, Paying Agent or Owner, as appropriate, who may submit an amended Notice of Nonpayment. Upon disbursement in respect of a Bond, AGM shall become the owner of the Bond, any appurtenant coupon to the Bond or right to receipt of payment of principal of or interest on the Bond and shall be fully subrogated to the rights of the Owner, including the Owner's right to receive payments under the Bond, to the extent of any payment by AGM hereunder. Payment by AGM to the Trustee or Paying Agent for the benefit of the Owners shall, to the extent thereof, discharge the obligation of AGM under this Policy. Except to the extent expressly modified by an endorsement hereto, the following terms shall have the meanings specified for all purposes of this Policy. "Business Day" means any day other than (a) a Saturday or Sunday or (b) a day on which banking institutions in the State of New York or the Insurer's Fiscal Agent are authorized or required by law or executive order to remain closed. "Due for Payment" means (a) when referring to the principal of a Bond, payable on the stated maturity date thereof or the date on which the same shall have been duly called for mandatory sinking fund redemption and does not refer to any earlier date on which payment is due by reason of call for redemption (other than by mandatory sinking fund redemption), acceleration or other advancement of maturity unless AGM shall elect, in its sole discretion, to pay such principal due upon such acceleration together with any accrued interest to the date of acceleration and (b) when referring to interest on a Bond, payable on the stated date for payment of interest. "Nonpayment" means, in respect of a Bond, the failure of the Issuer to have provided sufficient funds to the Trustee or, if there is no Trustee, to the Paying Agent for payment in full of all principal and interest that is Due for Payment on such Bond. "Nonpayment" shall also include, in respect of a Bond, any payment of principal or interest that is Due for Payment made to an Owner by or on behalf of the Issuer which has been recovered from such Owner pursuant to the