$7,420,000 SPRING MESA METROPOLITAN DISTRICT (IN THE CITY OF ARVADA) JEFFERSON COUNTY, COLORADO GENERAL OBLIGATION REFUNDING BONDS, SERIES 2015

Transcription

1 TM NEW ISSUE BOOK-ENTRY ONLY BANK QUALIFIED RATING: Standard & Poor s AA INSURANCE: Assured Guaranty Municipal Corp. UNDERLYING RATING: Moody s A3 See RATINGS In the opinion of Spencer Fane LLP, Bond Counsel, assuming continuous compliance with certain covenants described herein, interest on the Bonds is excluded from gross income under federal income tax laws pursuant to Section 103 of the Internal Revenue Code of 1986, as amended to the date of delivery of the Bonds (the Tax Code ), interest on the Bonds is excluded from alternative minimum taxable income as defined in Section 55(b)(2) of the Tax Code except that such interest is required to be included in calculating the adjusted current earnings adjustment applicable to corporations for purposes of computing the alternative minimum taxable income of corporations, and interest on the Bonds is excluded from Colorado taxable income and Colorado alternative minimum taxable income under Colorado income tax laws in effect on the date of delivery of the Bonds as described herein. See TAX MATTERS. The District has designated the Bonds as qualified tax-exempt obligations for purposes of Section 265(b)(3) of the Tax Code. See FINANCIAL INSTITUTION INTEREST DEDUCTION. $7,420,000 SPRING MESA METROPOLITAN DISTRICT (IN THE CITY OF ARVADA) JEFFERSON COUNTY, COLORADO GENERAL OBLIGATION REFUNDING BONDS, SERIES 2015 Dated: Day of Delivery Due: December 1, as shown below The Spring Mesa Metropolitan District (the District ) General Obligation Refunding Bonds, Series 2015 (the Bonds ) are issued as fully registered bonds in denominations of $5,000, or any integral multiple of $1,000 in excess thereof, pursuant to an Indenture of Trust between the District and UMB Bank, n.a., Denver, Colorado, as Trustee. The Bonds initially will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ( DTC ), securities depository for the Bonds. Purchases of the Bonds are to be made in book-entry form only. Purchasers will not receive certificates representing their beneficial ownership interests in the Bonds. See THE BONDS Book-Entry Only System. The Bonds bear interest at the rates set forth below semiannually on June 1 and December 1 of each year, commencing on June 1, 2016, to and including the maturity dates shown below, unless the Bonds are redeemed earlier, by check or draft mailed to the registered owner of the Bonds, initially Cede & Co. The principal of, and premium, if any, on the Bonds will be payable upon presentation and surrender at the principal office of the Trustee, or its successor, as the paying agent for the Bonds. See THE BONDS. MATURITY SCHEDULE Maturity Principal Interest CUSIP (December 1) Amount Rate Yield Number 2016 $150, % 0.700% 84986P AA , P AB , P AC , P AD , P AE , P AF , P AG1 $ 780, % Term Bonds Due December 1, Yield: 2.320% (CUSIP Number : 84986P AH9) $ 905, % Term Bonds Due December 1, Yield: 2.740% (CUSIP Number : 84986P AJ5) $1,360, % Term Bonds Due December 1, Yield: 3.280% (CUSIP Number : 84986P AK2) $2,240, % Term Bonds Due December 1, Yield: 3.920% (CUSIP Number : 84986P AL0) $1,000, % Term Bonds Due December 1, Yield: 3.550% (CUSIP Number : 84986P AM8) The Bonds constitute general obligations of the District. All of the taxable property in the District is subject to the levy of an ad valorem tax to pay the principal of, interest, and premium, if any, on the Bonds without limitation as to rate and in an amount sufficient to pay the Bonds when due, subject to the limitations imposed at the election authorizing the issuance of the Bonds. See SECURITY FOR THE BONDS and LEGAL MATTERS - Certain Constitutional Limitations. The Bonds are not obligations of the City of Arvada, Jefferson County or the State of Colorado. The Bonds are subject to redemption prior to maturity at the option of the District and are also subject to mandatory sinking fund redemption as described in THE BONDS - Prior Redemption. The Bonds are being issued for the purpose of: (i) paying the costs of refunding the Refunded Bonds (defined herein); and (ii) paying costs in connection with the issuance of the Bonds. See USES OF PROCEEDS. The scheduled payment of the principal of and interest on the Bonds when due will be guaranteed under an insurance policy to be issued concurrently with the delivery of the Bonds by Assured Guaranty Municipal Corp. See SECURITY FOR THE BONDS - Bond Insurance. This cover page contains certain information for quick reference only. It is not a summary of the issue. Investors must read the entire Official Statement to obtain information essential to making an informed investment decision. The Bonds are offered when, as, and if issued by the District and accepted by the Underwriter subject to the approval of legality of the Bonds by Spencer Fane LLP, Denver, Colorado, Bond Counsel, and the satisfaction of certain other conditions. Sherman & Howard L.L.C., Denver, Colorado, has acted as Underwriter s counsel. Certain legal matters will be passed upon for the District by its general counsel, Spencer Fane LLP. It is expected that the Bonds will be available for delivery through the facilities of DTC on or about December 11, This Official Statement is dated December 2, Copyright 2015, American Bankers Association. CUSIP data is provided by Standard & Poor s, CUSIP Services Bureau, a division of The McGraw-Hill Companies, Inc. The CUSIP numbers are provided for convenience only and the District takes no responsibility for them.

2 USE OF INFORMATION IN THIS OFFICIAL STATEMENT This Official Statement, which includes the cover page and the appendices, does not constitute an offer to sell or the solicitation of an offer to buy any of the Bonds in any jurisdiction in which it is unlawful to make such offer, solicitation, or sale. No dealer, salesperson, or other person has been authorized to give any information or to make any representations other than those contained in this Official Statement in connection with the offering of the Bonds, and if given or made, such information or representations must not be relied upon as having been authorized by the District or the Underwriter. The information set forth in this Official Statement has been obtained from the District, from the sources referenced throughout this Official Statement and from other sources believed to be reliable. No representation or warranty is made, however, as to the accuracy or completeness of information received from parties other than the District. In accordance with its responsibilities under federal securities laws, the Underwriter has reviewed the information in this Official Statement but does not guarantee its accuracy or completeness. This Official Statement contains, in part, estimates and matters of opinion which are not intended as statements of fact, and no representation or warranty is made as to the correctness of such estimates and opinions, or that they will be realized. The information, estimates, and expressions of opinion contained in this Official Statement are subject to change without notice, and neither the delivery of this Official Statement nor any sale of the Bonds shall, under any circumstances, create any implication that there has been no change in the affairs of the District, or in the information, estimates, or opinions set forth herein, since the date of this Official Statement. This Official Statement has been prepared only in connection with the original offering of the Bonds and may not be reproduced or used in whole or in part for any other purpose. The Bonds have not been registered with the Securities and Exchange Commission due to certain exemptions contained in the Securities Act of 1933, as amended. In making an investment decision, investors must rely on their own examination of the District, the Bonds and the terms of the offering, including the merits and risks involved. The Bonds have not been recommended by any federal or state securities commission or regulatory authority, and the foregoing authorities have neither reviewed nor confirmed the accuracy of this document. THE PRICES AT WHICH THE BONDS ARE OFFERED TO THE PUBLIC BY THE UNDERWRITER (AND THE YIELDS RESULTING THEREFROM) MAY VARY FROM THE INITIAL PUBLIC OFFERING PRICES OR YIELDS APPEARING ON THE COVER PAGE HEREOF. IN ADDITION, THE UNDERWRITER MAY ALLOW CONCESSIONS OR DISCOUNTS FROM SUCH INITIAL PUBLIC OFFERING PRICES TO DEALERS AND OTHERS. IN ORDER TO FACILITATE DISTRIBUTION OF THE BONDS, THE UNDERWRITER MAY ENGAGE IN TRANSACTIONS INTENDED TO STABILIZE THE PRICE OF THE BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. Assured Guaranty Municipal Corp. (the Bond Insurer or 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 SECURITY FOR THE BONDS - Bond Insurance and Appendix E - Specimen Bond Insurance Policy.

3 SPRING MESA METROPOLITAN DISTRICT (IN THE CITY OF ARVADA) JEFFERSON COUNTY, COLORADO Board of Directors Mark Entman, President Sharon Miner, Vice President Richard Wallace, Treasurer Devon Ostendorf, Secretary Don Sikkema, Assistant Secretary Trustee, Registrar, Paying Agent and Escrow Agent UMB Bank, n.a. Denver, Colorado General Counsel to the District Spencer Fane LLP Denver, Colorado Bond Counsel Spencer Fane LLP Denver, Colorado Underwriter s Counsel Sherman & Howard L.L.C. Denver, Colorado Underwriter D.A. Davidson & Co. Denver, Colorado

4 TABLE OF CONTENTS INTRODUCTION... 1 i Page General... 1 Changes from Preliminary Official Statement... 1 The Issuer... 1 Purpose... 2 Security... 2 Bond Insurance... 2 The Bonds; Prior Redemption... 3 Authority for Issuance... 3 Book-Entry Registration... 3 Tax Status... 3 Professionals... 4 Continuing Disclosure Undertaking... 4 Delivery Information... 5 Additional Information... 5 FORWARD-LOOKING STATEMENTS... 5 USES OF PROCEEDS... 6 THE BONDS... 7 Description... 7 Authorized Denomination of the Bonds... 7 Payment of Principal and Interest; Record Date... 7 Prior Redemption... 8 Tax Covenant Defeasance Book-Entry Only System SECURITY FOR THE BONDS General Ad Valorem Property Tax Pledge Events of Default and Remedies Bond Resolution Irrepealable Future Changes in Law Additional Bonds Supplemental Indentures Not Requiring Consent Supplemental Indentures Requiring Consent Bond Insurance Information Disclaimer Bond Insurance DEBT SERVICE REQUIREMENTS PROPERTY TAXATION, ASSESSED VALUATION AND OVERLAPPING DEBT Ad Valorem Property Taxes Ad Valorem Property Tax Data Mill Levies Affecting Property Owners Within the District... 31

5 Estimated Overlapping General Obligation Debt DISTRICT DEBT STRUCTURE Required Elections General Obligation Debt Authorized but Unissued Debt Revenue and Other Financial Obligations Selected Debt Ratios THE DISTRICT Organization and Description Development in the District Inclusion, Exclusion, Consolidation and Dissolution District Powers Governing Board Conflicts of Interest Administration District Agreements Insurance Coverage DISTRICT FINANCIAL INFORMATION Sources of District Revenues Budget Process Financial Statements District Funds History of District Revenue and Expenditures Budget Summary and Comparison ECONOMIC AND DEMOGRAPHIC INFORMATION Population and Age Distribution Income Employment Retail Sales Building Permit Activity Foreclosure Activity TAX MATTERS FINANCIAL INSTITUTION INTEREST DEDUCTION LEGAL MATTERS Litigation Sovereign Immunity Approval of Certain Legal Proceedings Certain Constitutional Limitations Police Power RATINGS UNDERWRITING ii

6 INDEPENDENT AUDITORS VERIFICATION OF MATHEMATICAL COMPUTATIONS OFFICIAL STATEMENT CERTIFICATION APPENDIX A Audited Financial Statements of the District for the Fiscal Year Ending December 31, A 1 APPENDIX B Book-Entry Only System... B 1 APPENDIX C Form of Continuing Disclosure Agreement... C 1 APPENDIX D Form of Bond Counsel Opinion... D 1 APPENDIX E Specimen Bond Insurance Policy... E 1 iii

7 INDEX OF TABLES Tables marked with an asterisk (*) are required to be updated by the District pursuant to the Continuing Disclosure Agreement set forth in Appendix C hereto (in addition to additional information described in Exhibit B to the Continuing Disclosure Agreement). Table Page Sources and Uses of Funds... 6 Debt Service Requirements *History of Assessed Valuations and Mill Levies for the District *Property Tax Collections in the District *Ten Largest Owners of Taxable Property within the District *2015 Assessed Valuation of Classes of Property in the District Sample Mill Levies Affecting Property Owners Within the District Estimated Overlapping General Obligation Indebtedness *Selected Debt Ratios of the District as of the Date of this Official Statement (Unaudited)(1).. 35 *Statement of Revenue, Expenditures and Changes in Fund Balance General Fund *Statement of Revenue, Expenditures and Changes in Fund Balance Debt Service Fund *Budget Summary and Comparison General Fund *Budget Summary and Comparison Debt Service Fund *Budget Summary and Comparison Capital Projects Fund Population Age Distribution Median Household Effective Buying Income Estimates Percent of Households by Effective Buying Income Groups 2016 Estimates Per Capita Personal Income Labor Force and Employment Average Number of Employees Within Selected Industries Jefferson County Average Number of Employees Within Selected Industries Denver-Aurora MSA Major Employers in Jefferson County Retail Sales Building Permits Issued for New Structures in City of Arvada Building Permit Issuance for New Structures in Unincorporated Jefferson County History of Foreclosures Jefferson County (1) Only those portions of the table pertaining to the direct debt of the District are required to be updated. iv

8 DISTRICT BOUNDARY MAP v

9 OFFICIAL STATEMENT $7,420,000 SPRING MESA METROPOLITAN DISTRICT (IN THE CITY OF ARVADA) JEFFERSON COUNTY, COLORADO GENERAL OBLIGATION REFUNDING BONDS SERIES 2015 INTRODUCTION General This Official Statement, which includes the cover page and the appendices, provides information in connection with the offer and sale of the Spring Mesa Metropolitan District General Obligation Refunding Bonds, Series 2015 (the Bonds ), issued by Spring Mesa Metropolitan District (the District ), a political subdivision of the State of Colorado (the State ), in the total aggregate principal amount of $7,420,000. The Bonds will be issued pursuant to a resolution (the Bond Resolution ) adopted by the Board of Directors of the District (the Board ) prior to the issuance of the Bonds and pursuant to an Indenture of Trust (the Indenture ) dated as of December 1, 2015, between the District and UMB Bank, n.a., Denver, Colorado (the Trustee ). The offering of the Bonds is made only by way of this Official Statement, which supersedes any other information or materials used in connection with the offer or sale of the Bonds. The following introductory material is only a brief description of and is qualified by the more complete information contained throughout this Official Statement. A full review should be made of the entire Official Statement and the documents summarized or described herein. Detachment or other use of this INTRODUCTION without the entire Official Statement, including the cover page and appendices, is unauthorized. Undefined capitalized terms have the meanings given in the Indenture. Changes from Preliminary Official Statement This Official Statement includes certain information which was not available for inclusion in the Preliminary Official Statement dated November 23, 2015 (the POS ), including the final use of proceeds of the Bonds and the maturity dates, interest rates, prices, redemption provisions, and other final terms of the Bonds. Additionally, the POS provided the 2015 preliminary assessed valuation for the District in the amount of $14,405,086, subject to change on or before December 10, Since the date of the POS, the County has certified the 2015 assessed valuation for the District in the same amount. The Issuer General. The District is a special district formed pursuant to Title 32, Article 1, Colorado Revised Statutes ( C.R.S. ) (the Special District Act ) for the purpose of financing and constructing public improvements benefiting the inhabitants and taxpayers of the District. 1

10 The District was formed pursuant to an Order and Decree of the Jefferson County District Court issued on June 14, Formation of the District was preceded by approval by the Board of County Commissioners of Jefferson County, Colorado (the County ) of a Service Plan for the District on October 9, 1990, as amended and restated March 2003 (as amended and restated, the Service Plan ) consisting of a financial plan, including proposed funding therefor, and a preliminary engineering survey detailing the proposed improvements within the District. The District was initially organized with the name Eldorado Hills Metropolitan District, which was subsequently changed to Spring Mesa Metropolitan District in 2003 when the property within the District s boundaries was annexed into the City of Arvada, Colorado (the City ). The District contains approximately 305 acres. The 2014 certified assessed valuation of the property in the District is $12,232,820 and the 2015 certified assessed valuation is $14,405,086. See PROPERTY TAXATION, ASSESSED VALUATION AND OVERLAPPING DEBT Ad Valorem Property Tax Data. The District consists of approximately 305 acres of property located west of Quaker Road, south of 80th Avenue and north of 70th Avenue in the City. See THE DISTRICT. Development in the District. The property in the District has been developed for single family residential use and comprises the Spring Mesa development (the Development ). The Development contains approximately 175 acres of open space and parks and approximately 130 acres which have been platted into 272 lots. Single family detached homes were constructed on the lots from 2006 and 2014, and the Development is now fully built out. See THE DISTRICT Development in the District for more information on the Development. Purpose The Bonds are being issued for the purpose of: (i) paying the costs of refunding the Refunded Bonds (defined herein); and (ii) paying costs in connection with the issuance of the Bonds. See USES OF PROCEEDS. Security The Bonds constitute general obligations of the District. All of the taxable property in the District is subject to the levy of an ad valorem tax to pay the principal of, interest on, and premium, if any, on the Bonds without limitation as to rate and in an amount sufficient to pay the Bonds when due, subject to the limitations contained in the election question authorizing the issuance of the Bonds at an election held on November 4, 2003 (the Election ). The District will covenant in the Indenture to levy such taxes in an amount which, together with other legally available funds of the District, if any, is sufficient to pay debt service on the Bonds. See SECURITY FOR THE BONDS and LEGAL MATTERS - Certain Constitutional Limitations. The Bonds are not obligations of the City of Arvada, Jefferson County or the State. Bond Insurance Concurrently with the issuance of the Bonds, Assured Guaranty Municipal Corp. (the Bond Insurer or AGM ) will issue its Municipal Bond Insurance Policy for the Bonds 2

11 (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 E to this Official Statement. See SECURITY FOR THE BONDS Bond Insurance. Beneficial Owners of the Bonds should be aware that issuance of the Policy gives the Bond Insurer certain rights, including but not limited to the sole right to direct remedies with respect to the Bonds in the event of a default, certain rights regarding the waiver of Events of Default, and certain rights relating to supplemental indentures requiring consent as set forth in the Indenture. See SECURITY FOR THE BONDS Events of Default and Remedies and Supplemental Indentures Requiring Consent. Additionally, the Indenture provides that to the extent that the Indenture confers upon or gives or grants to the Bond Insurer any right, remedy or claim under or by reason of the Indenture, the Bond Insurer is explicitly recognized as being a third-party beneficiary thereunder and may enforce any such right, remedy or claim conferred, given or granted thereunder The Bonds; Prior Redemption The Bonds are issued solely as fully registered certificates in the denomination of $5,000, or any integral multiple of $1,000 in excess thereof. The Bonds mature and bear interest (calculated based on a 360-day year consisting of twelve 30-day months) as set forth on the cover page hereof. The payment of principal and interest on the Bonds is described in THE BONDS Payment of Principal and Interest; Record Date. The Bonds are subject to redemption prior to maturity at the option of the District and also are subject to mandatory sinking fund redemption as described in THE BONDS Prior Redemption. Authority for Issuance The Bonds are issued in full conformity with the constitution and laws of the State of Colorado, particularly the Special District Act, Title 11, Article 56, C.R.S., Title 11, Article 57, Part 2, C.R.S. (the Supplemental Public Securities Act ), and pursuant to the Bond Resolution and the Indenture. Book-Entry Registration The Bonds initially will be registered in the name of Cede & Co., as nominee for The Depository Trust Company, New York, New York ( DTC ), the securities depository for the Bonds. Purchases of the Bonds are to be made in book-entry form only. Purchasers will not receive certificates representing their beneficial ownership interest in the Bonds. See THE BONDS Book-Entry Only System. Tax Status In the opinion of Spencer Fane LLP ( Bond Counsel ), assuming continuous compliance with certain covenants described herein, interest on the Bonds is excluded from gross income under federal income tax laws pursuant to Section 103 of the Internal Revenue Code of 1986, as amended to the date of delivery of the Bonds (the Tax Code ), interest on the Bonds is 3

12 excluded from alternative minimum taxable income as defined in Section 55(b)(2) of the Tax Code except that such interest is required to be included in calculating the adjusted current earnings adjustment applicable to corporations for purposes of computing the alternative minimum taxable income of corporations, and interest on the Bonds is excluded from Colorado taxable income and Colorado alternative minimum taxable income under Colorado income tax laws in effect on the date of delivery of the Bonds as described herein. See TAX MATTERS. The District has designated the Bonds as qualified tax-exempt obligations for purposes of Section 265(b)(3) of the Tax Code. See FINANCIAL INSTITUTION INTEREST DEDUCTION. Professionals Spencer Fane LLP, Denver, Colorado, has acted as Bond Counsel to the District in connection with the Official Statement. Spencer Fane LLP also represents the District as general counsel. D.A. Davidson & Co., Denver, Colorado will act as the underwriter for the Bonds (the Underwriter ). See UNDERWRITING. Sherman & Howard L.L.C., Denver, Colorado has acted as counsel to the Underwriter. UMB Bank, n.a., Denver, Colorado, will act as the trustee, paying agent and registrar for the Bonds (the Trustee ) and will also act as escrow agent under the Escrow Agreement dated as of December 1, 2015 (the Escrow Agreement ) between the District and UMB Bank, n.a., as escrow agent (the Escrow Agent ). The District s general purpose financial statements have been audited by L. Paul Goedecke, P.C., Certified Public Accountants, Lakewood, Colorado, to the extent and for the period indicated in their report thereon. See DISTRICT FINANCIAL INFORMATION Financial Statements, INDEPENDENT AUDITORS, and Appendix A. Certain mathematical computations regarding the Escrow Account will be verified by the District s accountants, Simmons & Wheeler P.C., Centennial, Colorado. See VERIFICATION OF MATHEMATICAL COMPUTATIONS. Continuing Disclosure Undertaking The District will enter into a Continuing Disclosure Agreement (the Disclosure Agreement ) with UMB Bank, n.a., Denver, Colorado, as dissemination agent (the Dissemination Agent ), at the time of the closing for the Bonds. The Disclosure Agreement will be executed and delivered for the benefit of the beneficial owners of the Bonds and in order to assist the Underwriter in complying with Securities and Exchange Commission Rule 15c2-12 (the Rule ). The Disclosure Agreement will provide that so long as the Bonds remain outstanding, the District will annually provide the following information to the Municipal Securities Rulemaking Board, through the Electronic Municipal Market Access ( EMMA ) system: (i) certain financial information and operating data; and (ii) notice of certain material events, as specified in the Disclosure Agreement. The form of the Disclosure Agreement is attached hereto as Appendix C. The District has never entered into such an undertaking, and therefore has never failed to materially comply with any prior undertaking entered into pursuant to the Rule. 4

13 Delivery Information The Bonds are offered when, as, and if issued by the District and accepted by the Underwriter, subject to: prior sale, the approving legal opinion of Bond Counsel (a form of which is attached hereto as Appendix D), and certain other matters. It is expected that the Bonds will be available for delivery through the facilities of DTC on or about December 11, Additional Information All references herein to the Indenture, Bond Resolution and other documents are qualified in their entirety by reference to such documents. Additional information and copies of the documents referred to herein are available from: Spring Mesa Metropolitan District c/o CliftonLarsonAllen LLP 8390 E. Crescent Circle, Suite 500 Greenwood Village, Colorado Telephone: (303) D.A. Davidson & Co Market Street Suite 300 Denver, Colorado Telephone: (303) FORWARD-LOOKING STATEMENTS This Official Statement contains statements relating to future results that are forward-looking statements. When used in this Official Statement, the words estimate, intend, expect, anticipate, plan, and similar expressions identify forward-looking statements. Any forward-looking statement is subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward-looking statements. Inevitably, some assumptions used to develop the forward-looking statement will not be realized and unanticipated events and circumstances will occur. Therefore, it can be expected that there will be differences between forward-looking statements and actual results, and those differences may be material. 5

14 USES OF PROCEEDS The net proceeds of the Bonds will be used for the purposes of: (i) paying the costs of advance refunding the District s Limited Tax General Obligation Bonds, Series 2006 (which are convertible capital appreciation bonds), originally issued in the aggregate principal amount of $5,702, and outstanding as of the date of issuance of the Bonds in the aggregate principal amount of $6,865,000 (the Refunded 2006 Bonds ); and (ii) paying the costs of current refunding the District s Subordinate Limited Tax General Obligation Bonds, Series 2010, originally issued and currently outstanding in the aggregate principal amount of $640,000 (the Refunded 2010 Bonds and together with the Refunded 2006 Bonds, the Refunded Bonds ). The Refunded 2006 Bonds will be defeased upon the issuance of the Bonds by depositing a portion of the proceeds of the Bonds, together with other legally available monies, into an Escrow Account (the Escrow Account ) established pursuant to the Escrow Agreement. Except for an initial cash deposit, monies in the Escrow Account will be invested in federal securities maturing at such times and in such amounts as are required to pay (i) the interest due on the Refunded 2006 Bonds on June 1, 2016 in the amount of $205,950.00, and (ii) the principal of the Refunded 2006 Bonds upon prior redemption on June 1, The Refunded 2010 Bonds will be defeased upon the issuance of the Bonds by depositing a portion of the proceeds of the Bonds, together with other legally available monies, into the Escrow Account. Monies in the Escrow Account will be in such amounts as are required to pay (i) the interest due on the Refunded 2010 Bonds on December 15, 2015 in the amount of $214,562.24, and (ii) the principal of the Refunded 2010 Bonds upon prior redemption on December 15, The sources and uses of funds for the Bonds are anticipated to be as follows: Sources and Uses of Funds Sources: Amount Bond par amount... $7,420, Net original issue premium , Funds on hand related to Refunded Bonds , TOTAL... $8,145, Uses: Refunding Escrow Deposits: Cash Deposit... $ 854, SLGS Purchases... 7,058, Costs of issuance, rating and insurance fees, and underwriting discount , TOTAL... $8,145, Source: The Underwriter 6

15 THE BONDS Description The Bonds are general obligations issued by the District. The Bonds will be issued in the principal amount, will be dated and will mature as indicated on the cover page of this Official Statement. For a complete statement of the details and conditions of the Bond issue, reference is made to the Indenture and the Bond Resolution, copies of which are available from the District prior to delivery of the Bonds. See INTRODUCTION Additional Information. Authorized Denomination of the Bonds The Bonds are being issued in Authorized Denominations, defined generally in the Indenture as $5,000, or any integral multiple of $1,000 in excess thereof, provided that: (a) no individual Bond may be in an amount which exceeds the principal amount coming due on any maturity date; and (b) in the event a Bond is partially redeemed and the unredeemed portion is less than $5,000, such unredeemed portion of such Bond may be issued in the largest possible denomination of less than $5,000, in integral multiples of not less than $1,000 each or any integral multiple thereof. Payment of Principal and Interest; Record Date The principal of and premium, if any, on the Bonds are payable in lawful money of the United States of America to the Owner of each Bond upon maturity or prior redemption and presentation at the principal office of the Trustee. The interest on any Bond is payable to the person in whose name such Bond is registered, at his address as it appears on the registration books maintained by or on behalf of the District by the Trustee, at the close of business on the Record Date (defined in the Indenture as the fifteenth (15th) day of the calendar month next preceding each interest payment date), irrespective of any transfer or exchange of such Bond subsequent to such Record Date and prior to such interest payment date; provided that any such interest not so timely paid or duly provided for shall cease to be payable to the person who is the Owner thereof at the close of business on the Record Date and shall be payable to the person who is the Owner thereof at the close of business on a Special Record Date (defined in the Indenture as the record date for determining Bond ownership for purposes of paying unpaid interest, as such date may be determined pursuant to the Indenture) for the payment of any such unpaid interest. Such Special Record Date shall be fixed by the Trustee whenever moneys become available for payment of the unpaid interest, and notice of the Special Record Date shall be given to the Owners of the Bonds not less than ten (10) days prior to the Special Record Date by first-class mail to each such Owner as shown on the registration books kept by the Trustee on a date selected by the Trustee. Such notice shall state the date of the Special Record Date and the date fixed for the payment of such unpaid interest. Interest payments shall be paid by check or draft of the Trustee mailed on or before the interest payment date to the Owners. The Trustee may make payments of interest on any Bond by such alternative means as may be mutually agreed to between the Owner of such Bond and the Trustee; provided that the District shall not be required to make funds available to 7

16 the Trustee prior to the dates on which such interest would otherwise be payable under the Indenture, nor to incur any expenses in connection with such alternative means of payment. To the extent principal of any Bond is not paid when due, such principal shall remain outstanding until paid and shall continue to bear interest at the rate then borne by the Bond. To the extent interest on any Bond is not paid when due, such interest shall compound semiannually on each interest payment date, at the rate then borne by the Bond; provided however, that notwithstanding anything herein to the contrary, the District shall not be obligated to pay more than the amount permitted by law and its electoral authorization in repayment of the Bonds, including all payments of principal, premium if any, and interest, and all Bonds will be deemed defeased and no longer outstanding upon the payment by the District of such amount. In addition, the principal of, premium if any, and interest on the Bonds shall be paid in accordance with the terms of the Indenture and the Letter of Representations with DTC. See Book-Entry Only System below. Prior Redemption Optional Redemption. The Bonds maturing on and after December 1, 2026 are subject to redemption prior to maturity, at the option of the District, as a whole or in integral multiples of $5,000, in any order of maturity and in whole or partial maturities, on December 1, 2025, and on any date thereafter, upon payment of the principal amount to be redeemed, plus accrued interest thereon to the redemption date. Mandatory Sinking Fund Redemption. The Bonds maturing on December 1, 2026 also are subject to mandatory sinking fund redemption prior to the maturity date of such Bonds by lot upon payment of par and accrued interest, without redemption premium, on December 1 in the years and amounts set forth below: Year of Redemption Redemption Amount 2023 $ 185, , , * 205,000 *final maturity, not a sinking fund redemption The Bonds maturing on December 1, 2030 also are subject to mandatory sinking fund redemption prior to the maturity date of such Bonds by lot upon payment of par and accrued interest, without redemption premium, on December 1 in the years and amounts set forth below: Year of Redemption Redemption Amount 2027 $ 215, , , * 240,000 *final maturity, not a sinking fund redemption 8

17 The Bonds maturing on December 1, 2035 also are subject to mandatory sinking fund redemption prior to the maturity date of such Bonds by lot upon payment of par and accrued interest, without redemption premium, on December 1 in the years and amounts set forth below: Year of Redemption Redemption Amount 2031 $ 250, , , , * 295,000 *final maturity, not a sinking fund redemption The Bonds maturing on December 1, 2044 which bear interest at the rate of 3.750% per annum also are subject to mandatory sinking fund redemption prior to the maturity date of such Bonds by lot upon payment of par and accrued interest, without redemption premium, on December 1 in the years and amounts set forth below: Year of Redemption Redemption Amount 2036 $ 215, , , , , , , , * 285,000 *final maturity, not a sinking fund redemption The Bonds maturing on December 1, 2044 which bear interest at the rate of 4.250% per annum also are subject to mandatory sinking fund redemption prior to the maturity date of such Bonds by lot upon payment of par and accrued interest, without redemption premium, on December 1 in the years and amounts set forth below: Year of Redemption Redemption Amount 2036 $ 95, , , , , , , , * 135,000 *final maturity, not a sinking fund redemption 9

18 With respect to each maturity of the Bonds subject to mandatory sinking fund redemption, on or before forty-five (45) days prior to each sinking fund installment date for such maturity as set forth above, the Trustee shall select for redemption, by lot in such manner as the Trustee may determine, from the Outstanding Bonds of that maturity, a principal amount of such Bonds equal to the applicable sinking fund installment. The amount of the applicable sinking fund installment for any particular date and maturity may be reduced by the principal amount of any Bonds of that maturity which prior to said date have been redeemed (otherwise than through the operation of the sinking fund) and cancelled and not theretofore applied as a credit against a sinking fund installment. Such reductions, if any, shall be applied in such year or years as may be determined by the District. Redemption Procedure. If less than all of the Bonds within a maturity are to be redeemed on any prior redemption date, the Bonds to be redeemed shall be selected by lot prior to the date fixed for redemption, in such manner as the Trustee shall determine. The Bonds shall be redeemed only in integral multiples of $5,000. In the event a Bond is of a denomination larger than $5,000, a portion of such Bond may be redeemed, but only in the principal amount of $5,000 or any integral multiple thereof. Such Bond shall be treated for the purpose of redemption as that number of Bonds which results from dividing the principal amount of such Bond by $5,000. In the event a portion of any Bond is redeemed, the Trustee shall, without charge to the Owner of such Bond, authenticate and deliver a replacement Bond or Bonds for the unredeemed portion thereof. Notice of Redemption. In the event any of the Bonds or portions thereof are called for redemption as aforesaid, notice thereof identifying the Bonds or portions thereof to be redeemed will be given by the Trustee by mailing a copy of the redemption notice by first class mail (postage prepaid), not less than thirty (30) days prior to the date fixed for redemption, to the Bond Insurer (so long as the Bond Insurer is not then in default under the Policy) and to the Owner of each Bond to be redeemed in whole or in part at the address shown on the registration books maintained by or on behalf of the District by the Trustee. Failure to give such notice by mailing to any Owner, or any defect therein, shall not affect the validity of any proceeding for the redemption of other Bonds as to which no such failure or defect exists. The redemption of the Bonds may be contingent or subject to such conditions as may be specified in the notice, and if funds for the redemption are not irrevocably deposited with the Trustee or otherwise placed in escrow and in trust prior to the giving of notice of redemption, the notice shall be specifically subject to the deposit of funds by the District. All Bonds so called for redemption will cease to bear interest after the specified redemption date, provided funds for their redemption are on deposit at the place of payment at that time. Tax Covenant In the Indenture, the District covenants for the benefit of the Owners that it will not take any action or omit to take any action with respect to the Bonds, any funds of the District, or any facilities financed with the proceeds of the Bonds, if such action or omission (i) would cause the interest on the Bonds to lose its exclusion from gross income for federal income tax purposes under Section 103 of the Code, (ii) would cause interest on the Bonds to lose its exclusion from alternative minimum taxable income as defined in Section 55(b)(2) of the Code except to the extent such interest is required to be included in the adjusted current earnings 10

19 adjustments applicable to corporations under Section 56 of the Code in calculating corporate alternative minimum taxable income, or (iii) would cause interest on the Bonds to lose its exclusion from Colorado taxable income or Colorado alternative minimum taxable income under present Colorado law. In the event that at any time the District is of the opinion that for purposes of this paragraph it is necessary to restrict or to limit the yield on the investment of any moneys held by the Trustee or held by the District under the Indenture, the District shall so restrict or limit the yield on such investment or shall so instruct the Trustee in a detailed certificate, and the Trustee shall take such action as may be necessary in accordance with such instructions. The District specifically covenants to comply with the provisions and procedures of the Tax Certificate. The tax covenants contained in the Indenture shall remain in full force and effect until the date on which all obligations of the District in fulfilling such covenants under the Code and Colorado law have been met, notwithstanding the payment in full or defeasance of the Bonds. In the Indenture, the District has designated the Bonds as qualified tax-exempt obligations for purposes of Section 265(b)(3) of the Code. Defeasance The Indenture provides that any Bond shall, prior to the maturity or prior redemption thereof, be deemed to have been paid within the meaning and with the effect expressed in the Indenture if, for the purpose of paying such Bond (i) there shall have been deposited with the Trustee an amount sufficient, without investment, to pay the principal of, premium if any, and interest on such Bond as the same becomes due at maturity or upon one or more designated prior redemption dates, or (ii) there shall have been placed in escrow and in trust with a commercial bank exercising trust powers, an amount sufficient (including the known minimum yield from Federal Securities in which such amount may be invested) to pay the principal of, premium if any, and interest on such Bond, as the same becomes due at maturity or upon one or more designated prior redemption dates. The Federal Securities in any such escrow shall not be subject to redemption or prepayment at the option of the issuer, and shall become due at or prior to the respective times on which the proceeds thereof shall be needed, in accordance with a schedule established and agreed upon between the District and such bank at the time of the creation of the escrow, or the Federal Securities shall be subject to redemption at the option of the holders thereof to assure such availability as so needed to meet such schedule. The sufficiency of any such escrow funded with Federal Securities shall be determined by a Certified Public Accountant. Book-Entry Only System The Bonds will be available only in book-entry form in the principal amount of $5,000 and any integral multiples thereof. DTC will act as the initial securities depository for the Bonds. The ownership of one fully registered Bond for each maturity, as set forth on the cover page of this Official Statement, in the aggregate principal amount of such maturity coming due thereon, will be registered in the name of Cede & Co., as nominee for DTC. See Appendix B Book-Entry Only System. SO LONG AS CEDE & CO, AS NOMINEE OF DTC, IS THE REGISTERED OWNER OF THE BONDS, REFERENCES IN THIS OFFICIAL STATEMENT TO THE 11

20 REGISTERED OWNERS WILL MEAN CEDE & CO. AND WILL NOT MEAN THE BENEFICIAL OWNERS. Neither the District nor the Registrar and Paying Agent will have any responsibility or obligation to DTC s Direct Participants or Indirect Participants, or the persons for whom they act as nominees, with respect to the payments to or the providing of notice for the Direct Participants, the Indirect Participants or the beneficial owners of the Bonds as further described in Appendix B to this Official Statement. 12

21 General Ad Valorem Property Tax Pledge SECURITY FOR THE BONDS The Bonds are general obligations of the District secured by a pledge of the full faith and credit of the District and payable from general ad valorem taxes which may be levied without limitation of rate and in an amount necessary to pay the Bonds when due against all taxable property within the District, except as limited by the Election and state law. See LEGAL MATTERS - Certain Constitutional Limitations. The Bonds are not secured directly by any lien on property located within the District; rather they are secured by the District s covenant to certify to the to the board or boards of county commissioners of each county in which taxable real or personal property of the District is located (currently Jefferson County) a rate of ad valorem property tax levy sufficient, together with other available revenues, to meet debt service on the Bonds. Such annual levy for debt service creates a statutory tax lien which may be enforced to the extent that taxes are delinquent in a given year. Neither the City, the County nor the State has any responsibility to pay the debt service on the Bonds. The District s ability to pay principal and interest on the Bonds from general ad valorem taxes is partly dependent upon the maintenance of an adequate tax base. The tax base is reflected by the assessed valuation certified to the District annually by the County Assessor. Typically, increases in valuation attributable to construction are not reflected in the certified assessed valuation until one to two years after the construction takes place, and tax collections would reflect the construction activity one year after the assessed valuation increased. This results in a delay of two to three years between construction and increased tax collections attributable to the construction. For a history of the District s assessed valuation and property tax collections, see PROPERTY TAXATION, ASSESSED VALUATION AND OVERLAPPING DEBT. Pursuant to the Indenture, the District has irrevocably covenanted each year to levy on all of the taxable property in the District, in addition to all other taxes, direct annual taxes in each of the years 2015 through 2043 (for collection in the years 2016 through 2044), sufficient to pay the principal of and interest on or in connection with the Bonds as the same become due and payable, respectively, to the extent other funds are not made available for such payments. The Indenture provides that the District shall deposit with the Trustee and the Trustee shall credit to the Bond Fund (which is created and established therein) each Bond Year amounts which, when combined with other legally available moneys in the Bond Fund will be sufficient to pay the principal of, premium if any, and interest on the Bonds which has or will become due in the Bond Year in which the credit is made. Moneys in the Bond Fund (including any moneys transferred thereto from other funds pursuant to the terms of the Indenture) shall be used by the Trustee solely to pay the principal of, premium if any, and interest on the Bonds, in the following order: (a) first, to the payment of interest due in connection with the Bonds (including without limitation current interest, accrued but unpaid interest, and interest due as a result of compounding, if any); and (b) second, to the extent any moneys are remaining in the Bond Fund after the payment of such interest, to the payment of the principal of, and premium, if any, on the Bonds, whether due at maturity or upon prior redemption. In the event that available moneys in the Bond Fund are insufficient for the payment of the principal of, premium if any, 13

22 and interest due on the Bonds on any due date, the Trustee shall apply such amounts on such due date as follows: (A) first, the Trustee shall pay such amounts as are available, proportionally in accordance with the amount of interest due on each Bond; and (B) second, the Trustee shall apply any remaining amounts to the payment of the principal of and premium, if any, on as many to be in increments of $5,000 or any integral multiple thereof, plus any premium. Bonds or portions thereof to be redeemed pursuant to such partial payment shall be selected by lot from the Bonds the principal of which is due and owing on the due date. The payment of property taxes does not constitute a personal obligation of the property owners within the District. Instead, these obligations are tied to the properties taxed, and if timely payment is not made the obligations constitute a lien against the specific properties. The District will not have recourse to any assets of any property owners for the payment of property taxes. To enforce the liens, the County Treasurer has the power to cause the sale of the property that is subject to the delinquent taxes or fees, as provided by law. However, selling property at a tax sale is a time-consuming remedy and proceeds realized from the sale, if any, may not be sufficient to cover the delinquent taxes or fees. Because property taxes do not constitute personal obligations of the owners of land in the District, in the event of a tax sale in which less than the amount of the delinquent taxes is realized, no deficiency judgment could be taken against the property owner who failed to pay taxes. The remedies available to the owners of the Bonds upon an event of default under the Indenture are in many respects dependent upon judicial actions which are often subject to discretion and delay under existing constitutional and statutory law and judicial decisions, including specifically the United States Bankruptcy Code. The various legal opinions to be delivered concurrently with delivery of the Bonds will be qualified as to enforceability of the various legal instruments by limitations imposed by bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors generally. See Limitations on Remedies Available to Owners of the Bonds below. Events of Default and Remedies This section contains summaries of certain provisions of the Indenture relating to Events of Default and remedies. Events of Default. The occurrence of any one or more of the following events or the existence of any one or more of the following conditions shall constitute an Event of Default under the Indenture (whatever the reason for such event or condition and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree, rule, regulation, or order of any court or any administrative or governmental body), and there shall be no default or Event of Default thereunder except as provided below: (a) Payment of the principal of or redemption premium on any Bond is not made by the District when due; (b) Payment of interest on any Bond is not made by the District when due; 14

23 (c) The District defaults in the performance or observance of any of the covenants, agreements, or conditions on the part of the District in the Indenture or the Bond Resolution, and fails to remedy the same after notice thereof pursuant to the Indenture; or (d) The District files a petition under the federal bankruptcy laws or other applicable bankruptcy laws seeking to adjust the obligation represented by the Bonds. Remedies on Occurrence of Event of Default. Upon the occurrence and continuance of an Event of Default, the Trustee shall have the following rights and remedies which may be pursued: (a) Receivership. Upon the filing of a bill in equity or other commencement of judicial proceedings to enforce the rights of the Trustee and of the Owners, the Trustee shall be entitled as a matter of right to the appointment of a receiver or receivers of the Trust Estate, and of the revenues, income, product, and profits thereof pending such proceedings, subject however, to constitutional limitations inherent in the sovereignty of the District; but notwithstanding the appointment of any receiver or other custodian, the Trustee shall be entitled to the possession and control of any cash, securities, or other instruments at the time held by, or payable or deliverable under the provisions of the Indenture to, the Trustee. (b) Suit for Judgment. The Trustee may proceed to protect and enforce its rights and the rights of the Owners under the Act, the Bonds, the Bond Resolution, the Indenture, and any provision of law by such suit, action, or special proceedings as the Trustee, being advised by Counsel, shall deem appropriate. (c) Mandamus or Other Suit. The Trustee may proceed by mandamus or any other suit, action, or proceeding at law or in equity, to enforce all rights of the Owners. Remedies on Occurrence of Event of Default. No recovery of any judgment by the Trustee shall in any manner or to any extent affect the lien of the Indenture or any rights, powers, or remedies of the Trustee thereunder, or any lien, rights, powers, and remedies of the Owners of the Bonds, but such lien, rights, powers, and remedies of the Trustee and of the Owners shall continue unimpaired as before. If any Event of Default under subparagraphs (a) or (b) of the Events of Default provisions above shall have occurred and if requested by the Owners of not less than twenty-five percent (25%) in aggregate principal amount of the Bonds then Outstanding, the Trustee shall be obligated to exercise such one or more of the rights and powers conferred by the Indenture as the Trustee, being advised by Counsel, shall deem most expedient in the interests of the Owners; provided that the Trustee at its option shall be indemnified as provided in the Indenture. Notwithstanding anything herein to the contrary, acceleration of the Bonds shall not be an available remedy for an Event of Default. Bond Insurer s Control of Proceedings. So long as the Bond Insurer is not then in default under the Policy, the Bond Insurer shall have the right to direct all proceedings with respect to the exercise of any and all remedies under the Indenture and the Trustee shall not 15

24 exercise any remedy or take any other action it is authorized to take under the Indenture without the prior written consent of the Bond Insurer. Majority of Owners May Control Proceedings. The Owners of a majority in aggregate principal amount of the Bonds then Outstanding shall have the right, at any time, to the extent permitted by law, by an instrument or instruments in writing executed and delivered to the Trustee, to direct the time, method, and place of conducting all proceedings to be taken in connection with the enforcement of the terms and conditions of the Indenture, or for the appointment of a receiver, and any other proceedings hereunder; provided that such direction shall not be otherwise than in accordance with the provisions hereof; and provided further that at its option the Trustee shall be indemnified as provided in the Indenture. Rights and Remedies of Owners. No Owner of any Bond shall have any right to institute any suit, action, or proceeding in equity or at law for the enforcement of the Indenture or for the execution of any trust thereof or for the appointment of a receiver or any other remedy thereunder, unless a default has occurred of which the Trustee has been notified as provided in the Indenture, or of which under the Indenture it is deemed to have notice, and unless such default shall have become an Event of Default and the Owners of not less than twenty-five percent (25%) in aggregate principal amount of Bonds then Outstanding shall have made written request to the Trustee and shall have offered reasonable opportunity either to proceed to exercise the powers granted under the Indenture or to institute such action, suit, or proceedings in their own name, nor unless they have also offered to the Trustee indemnity as provided in the Indenture, nor unless the Trustee shall thereafter fail or refuse to exercise the powers granted to it under the Indenture, or to institute such action, suit, or proceeding in its own name; and such notification, request, and offer of indemnity are declared in every case at the option of the Trustee to be conditions precedent to any action or cause of action for the enforcement of the Indenture, or for the appointment of a receiver or for any other remedy thereunder; it being understood and intended that no one or more Owners of Bonds shall have any right in any manner whatsoever to affect, disturb, or prejudice the lien of the Indenture by his, her, its, or their action, or to enforce any right thereunder except in the manner therein provided and that all proceedings at law or in equity shall be instituted, had, and maintained in the manner therein provided and for the equal benefit of the Owners of all Bonds then Outstanding. Waivers of Events of Default. The Trustee may in its discretion waive any Event of Default under the Indenture and its consequences, and shall do so upon the written request of the Consent Parties (defined in the Indenture as the Owner of a Bond or, if such Bond is held in the name of Cede, the Participant (as determined by a list provided by DTC) with respect to such Bond; provided, however, that so long as the Bond Insurer is not in default under the Policy, Bond Insurer s consent shall be required in lieu of the consent of Owners, when required, for the initiation or approval of any action which requires such consent of Owners) with respect to not less than a majority in aggregate principal amount of all the Bonds then Outstanding; provided however, that there shall not be waived without the consent of the Consent Parties with respect to one hundred percent (100%) of the Bonds then Outstanding as to which the Event of Default exists any Event of Default under subparagraphs (a) or (b) of the Events of Default provisions above. In case of any such waiver, or in case any proceedings taken by the Trustee on account of any such default shall have been discontinued or abandoned or determined adversely to the Trustee, then in every such case the District, the Trustee, and the Owners shall be restored to 16

25 their former positions and rights hereunder respectively, but no such waiver or rescission shall extend to any subsequent or other default, or impair any right consequent thereon. Bond Resolution Irrepealable The Bond Resolution provides that after any of the Bonds are issued, the Bond Resolution will constitute a contract between the owners of the Bonds and the District, and shall remain irrepealable, (but amendable as described above), until the Bonds and the interest accruing thereon shall have been fully paid, satisfied, and discharged in accordance with the Indenture. Future Changes in Law Various Colorado laws and constitutional provisions apply to the imposition, collection, and expenditure of ad valorem property taxes and the operation of the District. There is no assurance that there will not be any change in, interpretation of, or addition to the applicable laws, provisions, and regulations which would have a material effect, directly or indirectly, on the affairs of the District and the imposition, collection, and expenditure of ad valorem property taxes. Additional Bonds The Indenture generally defines Additional Bonds to include (a) all obligations of the District for borrowed money and reimbursement obligations, (b) all obligations of the District payable from or constituting a lien or encumbrance upon ad valorem tax revenues of the District, (c) all obligations of the District evidenced by bonds, debentures, notes, or other similar instruments, (d) all obligations of the District to pay the deferred purchase price of property or services, (e) all obligations of the District as lessee under capital leases, and (f) all obligations of others guaranteed by the District; provided that notwithstanding the foregoing, the term Additional Bonds does not include: (1) obligations issued solely for the purpose of paying operations and maintenance costs of the District, the repayment of which is contingent upon the District s annual determination to appropriate moneys therefor, other than capital leases as set forth in (e) above, so long as no amounts due or to become due on such obligations are payable from the District s debt service mill levy; (2) obligations issued for any purpose, the repayment of which is contingent upon the District s annual determination to appropriate moneys therefor, other than capital leases as set forth in (e) above, so long as (i) such obligations are payable only to the extent the District has excess moneys on hand, (ii) such obligations are payable in any fiscal year only after the last scheduled payment of principal or interest on the Bonds in such fiscal year, and (iii) the District makes no promise to impose any tax, fee, or other governmental charge for the payment of such obligations; (3) obligations which are payable solely from the proceeds of Additional Bonds, when and if issued; 17

26 (4) obligations which refund or refinance any obligations of the District, so long as (i) such refunding obligations do not increase the District s debt service in any year in which both the refunding obligations and any Bonds are outstanding; (ii) such refunding obligations are payable on the same date or dates as the obligations being refunded or refinanced, and are not subject to acceleration, (iii) such refunding obligations are payable from the same or fewer revenue sources, with the same or a subordinate lien priority, as the obligations being refunded or refinanced; and (iv) the remedies for defaults under such refunding or refinancing obligations are substantially the same as the remedies applicable to the obligations being refunded or refinanced; (5) obligations payable solely from periodic, recurring service charges imposed by the District for the use of any District facility or service, which obligations do not constitute a debt or indebtedness of the District or an obligation required to be approved at an election under Colorado law; (6) obligations to reimburse any person in respect of surety bonds, financial guaranties, letters of credit, or similar credit enhancements so long as (i) such surety bonds, financial guaranties, letters of credit, or similar credit enhancements guarantee payment of all principal and interest on any issue of District obligations, and (ii) such reimbursement obligations are payable from the same or fewer revenue sources, with the same or a subordinate lien priority as the District obligations supported by the surety bonds, financial guaranties, letters of credit, or similar credit enhancements; and (7) any operating leases, payroll obligations, accounts payable, or taxes incurred or payable in the ordinary course of business of the District. The Indenture provides that the District may issue Additional Bonds if each of the following conditions are met, as of the date of issuance of the Additional Bonds: (A) the District is in substantial compliance with all of the covenants of the Indenture; (B) the District is current in the accumulation of all amounts required to be then accumulated in the Bond Fund, as required by the Indenture; and (C) upon issuance of the general obligation Additional Bonds, the Debt to Assessed Ratio of the District (defined in the Indenture as the ratio derived by dividing the then-outstanding principal amount of all general obligation debt of the District by the assessed valuation of the taxable property of the District, as such assessed valuation is certified from time to time by the appropriate county assessor) will be fifty percent (50%) or less. A written certificate by the President or Treasurer of the District that the conditions set forth in this paragraph are met shall conclusively determine the right of the District to authorize, issue, sell, and deliver Additional Bonds in accordance with the Indenture. Nothing in the Indenture shall affect or restrict the right of the District to issue or incur obligations which are not Additional Bonds thereunder. Pursuant to the Indenture, so long as the Bond Insurer is not in default under the Policy, in connection with the execution and delivery of Additional Bonds, the Trustee shall request to be delivered or deliver, upon receipt thereof by the Trustee, to the Bond Insurer a copy of the offering or placement document, if any, circulated with respect to such Additional Bonds. 18

27 Supplemental Indentures Not Requiring Consent The Indenture provides that, subject to the provisions contained in this paragraph, the District and the Trustee may, without the consent of or notice to the Owners or Consent Parties, enter into such indentures supplemental to the Indenture, which supplemental indentures shall thereafter form a part of the Indenture, for any one or more of the following purposes: (a) to cure any ambiguity, to cure, correct, or supplement any formal defect or omission or inconsistent provision contained in the Indenture, to make any provision necessary or desirable due to a change in law, to make any provisions with respect to matters arising under the Indenture, or to make any provisions for any other purpose if such provisions are necessary or desirable and do not materially adversely affect the interests of the Owners of the Bonds; (b) to subject to the Indenture additional revenues, properties, or collateral; (c) to grant or confer upon the Trustee for the benefit of the Owners any additional rights, remedies, powers, or authority that may lawfully be granted to or conferred upon the Owners or the Trustee; and (d) to qualify the Indenture under the Trust Indenture Act of Supplemental Indentures Requiring Consent General. The Indenture contains the following provisions relating to supplemental indentures for which consent is required. Pursuant to the Indenture, so long as the Bond Insurer is not in default under the Policy, the Bond Insurer s consent shall be required in lieu of the consent of Owners, when required, for the initiation or approval of any action which requires such consent of Owners and for the execution and delivery of any amendment of or supplement to the Indenture as provided in the Indenture. (a) Except for supplemental indentures delivered pursuant to the provisions of the Indenture relating to supplemental indentures not requiring consent, and subject to the following provisions, the Consent Parties with respect to not less than a majority in aggregate principal amount of the Bonds then Outstanding, shall have the right, from time to time, to consent to and approve the execution by the District and the Trustee of such indenture or indentures supplemental to the Indenture as shall be deemed necessary or desirable by the District for the purpose of modifying, altering, amending, adding to, or rescinding, in any particular, any of the terms or provisions contained in the Indenture; provided however, that without the consent of the Consent Parties with respect to all the Outstanding Bonds affected thereby, nothing in the Indenture contained shall permit, or be construed as permitting: (i) a change in the terms of the maturity of any Outstanding Bond, in the principal amount of any Outstanding Bond, in the optional or mandatory redemption provisions applicable thereto, or the rate of interest thereon; (ii) an impairment of the right of the Owners (defined below) to institute suit for the enforcement of any payment of the principal of or interest on the Bonds when due; (iii) a privilege or priority of any Bond or any interest payment over any other Bond or interest payment; or 19

28 (iv) a reduction in the percentage in principal amount of the Outstanding Bonds, the consent of whose Owners or Consent Parties is required for any such supplemental indenture. (b) Upon the execution of any supplemental indenture pursuant to these provisions, the Indenture shall be deemed to be modified and amended in accordance therewith, and the respective rights, duties, and obligations under the Indenture of the District, the Trustee, and all Owners of Bonds then Outstanding shall thereafter be determined, exercised, and enforced thereunder, subject in all respects to such modifications and amendments. (c) If at any time the District shall request the Trustee to enter into such supplemental indenture requiring consent for any of the purposes set forth above, the Trustee shall, upon being satisfactorily indemnified with respect to fees and expenses, cause notice of the proposed execution of such supplemental indenture to be given to the Bond Insurer (so long as the Bond Insurer is not then in default under the Policy) and to each Owner of a Bond at the address shown on the registration books of the Trustee prior to the proposed date of execution and delivery of any such supplemental indenture. If, within sixty (60) days or such longer period as shall be prescribed by the District following the giving of such notice, the Consent Parties with respect to not less than the required percentage in aggregate principal amount of the Bonds then Outstanding at the time of the execution of any such supplemental indenture as the case may be, shall have consented to and approved the execution thereof as provided in the Indenture, no Owner of any Bond shall have any right to object to any of the terms and provisions contained therein, or the operation thereof, or in any manner to question the propriety of the execution thereof, or to enjoin or restrain the Trustee or the District from executing the same or from taking any action pursuant to the provisions thereof. Bond Insurer s Rights. Any provision of the Indenture expressly recognizing or granting rights in or to the Bond Insurer may not be amended in any manner which affects the rights of the Bond Insurer under the Indenture without the prior written consent of the Bond Insurer. Bond Insurance Information Disclaimer The following information contained in Bond Insurance below has been furnished by Assured Guaranty Municipal Corp. (the Bond Insurer or AGM ) for use in this Official Statement. Reference is made to Appendix E for a specimen of the Municipal Bond Insurance Policy for the Bonds (the Policy ). Such information has not been independently confirmed or verified by the District. No representation is made as to the accuracy, completeness or adequacy of such information or as to the absence of material adverse changes in such information subsequent to the date hereof, or that the information contained and incorporated herein by reference is correct. No assurance can be given by the District that the Bond Insurer will be able to meet its obligations under the Policy. 20

29 Bond Insurance Bond Insurance Policy. Concurrently with the issuance of the Bonds, the Bond Insurer will issue 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 Appendix E to this Official Statement. 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 November 13, 2014, KBRA assigned an insurance financial strength rating of AA+ (stable outlook) to AGM. AGM can give no assurance as to any further ratings action that KBRA may take. 21

30 On July 2, 2014, Moody s issued a rating action report stating that it had affirmed AGM s insurance financial strength rating of A2 (stable outlook). On February 18, 2015, Moody s published a credit opinion under its new financial guarantor ratings methodology maintaining its existing rating and outlook on AGM. AGM can give no assurance as to any further ratings action that Moody s 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 September 30, 2015, AGM s policyholders surplus and contingency reserve were approximately $3,769 million and its net unearned premium reserve was approximately $1,603 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. Incorporation of Certain Documents by Reference Portions of the following documents 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: (i) the Annual Report on Form 10-K for the fiscal year ended December 31, 2014 (filed by AGL with the SEC on February 26, 2015); (ii) the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2015 (filed by AGL with the SEC on May 8, 2015); (iii) the Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2015 (filed by AGL with the SEC on August 6, 2015); and (iv) the Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2015 (filed by AGL with the SEC on November 6, 2015). 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 52nd Street, New York, New York 10019, Attention: 22

31 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 SECURITY FOR THE BONDS 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 SECURITY FOR THE BONDS Bond Insurance. 23

32 DEBT SERVICE REQUIREMENTS Set forth in the following chart are the debt service requirements for the Bonds. This table does not include payments required, if any, pursuant to the District agreements listed in THE DISTRICT District Agreements. Debt Service Requirements Year Principal(1) Interest Total Debt Service(2) 2016 $ 150, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,000 89, , ,000 75, , ,000 61, , ,000 47, , ,000 32, , ,000 16, , TOTAL $7,420,000 $5,150, $12,570, (1) The principal amounts shown assume mandatory sinking fund payments are made, but assume that no optional redemptions will be made prior to maturity. See THE BONDS Prior Redemption. (2) Includes the payment of interest on June 1 and December 1 of each year, and the payment of principal on December 1 of each year indicated. Source: the Underwriter. 24

33 PROPERTY TAXATION, ASSESSED VALUATION AND OVERLAPPING DEBT Ad Valorem Property Taxes Property Subject to Taxation. Subject to the limitations imposed by Article X, Section 20 of the State constitution (the Taxpayers Bill of Rights or TABOR, described in LEGAL MATTERS Certain Constitutional Limitations ), the Board of Directors of the District has the power to certify to the Board of County Commissioners (the Commissioners ) a levy for collection of ad valorem taxes against all taxable property within the District. Property taxes are uniformly levied against the assessed valuation of all property subject to taxation by the District. Both real and personal property are subject to taxation, but there are certain classes of property which are exempt. Exempt property includes, but is not limited to: property of the United States of America; property of the State and its political subdivisions; public libraries; public school property; property used for charitable or religious purposes; nonprofit cemeteries; irrigation ditches, canals, and flumes used exclusively to irrigate the owner s land; household furnishings and personal effects not used to produce income; intangible personal property; inventories of merchandise and materials and supplies which are held for consumption by a business or are held primarily for sale; livestock; agricultural and livestock products; and works of art, literary materials and artifacts on loan to a political subdivision, gallery or museum operated by a charitable organization. The State Board of Equalization supervises the administration of all laws concerning the valuation and assessment of taxable property and the levying of property taxes. Assessment of Property. Taxable property is first appraised by the Jefferson County assessor (the County Assessor ) to determine its statutory actual value. This amount is then multiplied by the appropriate assessment percentage to determine each property s assessed value. The mill levy of each taxing entity is then multiplied by this assessed value to determine the amount of property tax levied upon such property by such taxing entity. Each of these steps in the taxation process is explained in more detail below. Determination of Statutory Actual Value. The County Assessor annually conducts appraisals in order to determine, on the basis of statutorily specified approaches, the statutory actual value of all taxable property within the County based upon its condition on January 1. In addition, pursuant to State law, the County is allowed to value new construction which occurs between January 1 and July 1 because the Commissioners have determined that the County is substantially impacted by new residential development. Most property is valued using a market approach, a cost approach or an income approach. Residential property is valued using the market approach, and agricultural property, exclusive of building improvements thereon, is valued by considering the earning or productive capacity of such lands during a reasonable period of time, capitalized at a statutory rate. The statutory actual value of a property is not intended to represent its current market value, but, with certain exceptions, is determined by the County Assessor utilizing a level of value ascertained for each two-year reassessment cycle from manuals and associated data published by the State Property Tax Administrator for the statutorily-defined period preceding the assessment date. Real property is reappraised by the County Assessor s office 25

34 every odd numbered year. The statutory actual value is based on the level of value for the period one and one-half years immediately prior to the July 1 preceding the beginning of the two-year reassessment cycle (adjusted to the final day of the data-gathering period). For example, values for levy year 2015 / collection year 2016 are based on an analysis of sales and other information for the period January 1, 2013 to June 30, The following table sets forth the State Property Appraisal System for property tax levy years 2011 through 2015: Collection Year Levy Year Value Calculated As Of Based on the Market Period July 1, 2010 Jan. 1, 2009 to June 30, July 1, 2010 Jan. 1, 2009 to June 30, July 1, 2012 Jan. 1, 2011 to June 30, July 1, 2012 Jan. 1, 2011 to June 30, July 1, 2014 Jan. 1, 2013 to June 30, 2014 The County Assessor may consider market sales from more than one and one-half years immediately prior to July 1 if there were insufficient sales during the stated market period to accurately determine the level of value. Oil and gas leaseholds and lands, producing mines and other lands producing nonmetallic minerals are valued based on production levels rather than by the base year method. Public utilities are valued by the State Property Tax Administrator based upon the value of the utility s tangible property and intangibles (subject to certain statutory adjustments), gross and net operating revenues and the average market value of its outstanding securities during the prior calendar year. Determination of Assessed Value. Assessed valuation, which represents the value upon which ad valorem property taxes are levied, is calculated by the County Assessor as a percentage of statutory actual value. The percentage used to calculate assessed valuation differs depending upon the classification of each property. Residential Property. To avoid extraordinary increases in residential real property taxes when the base year level of value is changed, the State constitution requires the Colorado General Assembly to adjust the assessment rate of residential property for each year in which a change in the base year level of value occurs. This adjustment is constitutionally mandated to maintain the same percentage of the aggregate statewide valuation for assessment attributable to residential property which existed in the previous year (although, notwithstanding the foregoing, TABOR prohibits any valuation for assessment ratio increase for a property class without prior voter approval). Pursuant to the adjustment process described above, the residential assessment rate is adjusted every two years, resulting in the following history of residential assessment rates since levy year 1989: 15.00% of statutory actual value (levy years ); 14.34% of statutory actual value (levy years ); 12.86% of statutory actual value (levy years ); 10.36% of statutory actual value (levy years ); 9.74% of statutory actual value (levy years and ); 9.15% of statutory actual value (levy years ); and 7.96% of statutory actual value (levy years ). In December 2014, the Colorado Legislative Council (the research division of the Colorado General Assembly) projected that the residential 26

35 assessment rate will remain at 7.96% through levy year This projection is only an estimate, however, and is subject to change. The residential assessment rate cannot increase without the approval of Colorado voters. Non-residential property. All non-residential taxable property, with certain specified exceptions, is assessed at 29% of its statutory actual value. Producing oil and gas property is generally assessed at 87.5% of the selling price of the oil and gas. Protests, Appeals, Abatements and Refunds. Property owners are notified of the valuation of their land or improvements, or taxable personal property and certain other information related to the amount of property taxes levied, in accordance with statutory deadlines. Property owners are given the opportunity to object to increases in the statutory actual value of such property, and may petition for a hearing thereon before the County Board of Equalization. Upon the conclusion of such hearings, the County Assessor is required to complete the assessment roll of all taxable property and, no later than August 25th each year, prepare an abstract of assessment therefrom. The abstract of assessment and certain other required information is reviewed by the State Property Tax Administrator prior to October 15th of each year and, if necessary, the State Board of Equalization orders the County Assessor to correct assessments. The valuation of property is subject to further review during various stages of the assessment process at the request of the property owner, by the State Board of Assessment Appeals, the State courts or by arbitrators appointed by the Commissioners. On the report of an erroneous assessment, an abatement or refund must be authorized by the Commissioners; however, in no case will an abatement or refund of taxes be made unless a petition for abatement or refund is filed within two years after January 1 of the year in which the taxes were levied. Refunds or abatements of taxes are prorated among all taxing entities which levied a tax against the property. Statewide Review. The Colorado General Assembly is required to cause a valuation for assessment study to be conducted each year in order to ascertain whether or not county assessors statewide have complied with constitutional and statutory provisions in determining statutory actual values and assessed valuations for that year. The final study, including findings and conclusions, must be submitted to the Colorado General Assembly and the State Board of Equalization by September 15th of the year in which the study is conducted. Subsequently, the Board of Equalization may order a county to conduct reappraisals and revaluations during the following property tax levy year. Accordingly, the District s assessed valuation may be subject to modification following any such annual assessment study. Taxation Procedure. The County Assessor is required to certify to the District the assessed valuation of property subject to the District s mill levy no later than August 25th of each year. Subject to the limitations of TABOR, based upon the valuation certified by the County Assessor, the Board computes a rate of levy which, when levied upon every dollar of the valuation for assessment of property subject to the District s property taxes, and together with other legally available revenues of the District, will raise the amount required by the District in its upcoming fiscal years. The District subsequently certifies to the Commissioners the rate of levy sufficient to produce the needed funds. Such certification must be made no later than December 15th of the property tax levy year for collection of taxes in the ensuing year. The property tax rate is expressed as a mill levy, which is the rate equivalent to the amount of tax per 27

36 one thousand dollars of assessed valuation. For example, a mill levy of 25 mills would impose a $250 tax on a parcel of property with an assessed valuation of $10,000. The Commissioners levy the tax on all property subject to taxation by the District. By December 22nd of each year, the Commissioners must certify to the County Assessor the levy for all taxing entities within the County. If the Commissioners fail to so certify, it is the duty of the County Assessor to extend the levies of the previous year. Further revisions to the assessed valuation of property may occur prior to the final step in the taxing procedure, which is the delivery by the County Assessor of the tax list and warrant to the County s treasurer (the County Treasurer ). Adjustment of Taxes to Comply with Certain Limitations. Section , C.R.S., contains a statutory restriction limiting the property tax revenues which may be levied for operational purposes to an amount not to exceed the amount of such revenue levied in the prior year plus 5.5% (subject to certain statutorily authorized adjustments). At an election held on November 4, 2003, the District s electors approved questions which exempt the District from this restriction. Property Tax Collections. Taxes levied in one year are collected in the succeeding year. Thus, taxes certified in December 2015 will be collected in Taxes are due on January 1st in the year of collection; however, they may be paid in either one installment (not later than the last day of April) or in two equal installments (not later than the last day of February and June 15th) without interest or penalty. Interest accrues on unpaid first installments at the rate of 1% per month from March 1 until the date of payment unless the whole amount is paid by April 30. If the second installment is not paid by June 15, the unpaid installment will bear interest at the rate of 1% per month from June 16 until the date of payment. Notwithstanding the foregoing, if the full amount of taxes is to be paid in a single payment after the last day of April and is not so paid, the unpaid taxes will bear penalty interest at the rate of 1% per month accruing from the first day of May until the date of payment. The County Treasurer collects current and delinquent property taxes, as well as any interest or penalty, and after deducting a statutory fee for such collection, remits the balance to the District on a monthly basis. The payments to the District must be made by the tenth of each month, and shall include all taxes collected through the end of the preceding month. All taxes levied on property, together with interest thereon and penalties for default, as well as all other costs of collection, constitute a perpetual lien on and against the property taxed from January 1st of the property tax levy year until paid. Such lien is on a parity with the tax liens of other general taxes. It is the County Treasurer s duty to enforce the collection of delinquent real property taxes by tax sale of the tax lien on such realty. Delinquent personal property taxes are enforceable by distraint, seizure, and sale of the taxpayer s personal property. Tax sales of tax liens on realty are held on or before the second Monday in December of the collection year, preceded by a notice of delinquency to the taxpayer and a minimum of four weeks of public notice of the impending public sale. Sales of personal property may be held at any time after October 1st of the collection year following notice of delinquency and public notice of sale. There can be no assurance that the proceeds of tax liens sold, in the event of foreclosure and sale by the County Treasurer, would be sufficient to produce the amount required with respect to property taxes levied by the District and property taxes levied by 28

37 overlapping taxing entities, as well as any interest or costs due thereon. Further, there can be no assurance that the tax liens will be bid on and sold. If the tax liens are not sold, the County Treasurer removes the property from the tax rolls and delinquent taxes are payable when the property is sold or redeemed. When any real property has been stricken off to the County and there has been no subsequent purchase, the taxes on such property may be determined to be uncollectible after a period of six years from the date of becoming delinquent and they may be canceled by the Commissioners after that time. Potential for Creation of Tax Increment Entity. Various Colorado statutes allow the formation of tax increment entities, such as urban renewal authorities, downtown development authorities and transportation authorities. Upon the inclusion of any property in the District within any such entity, the assessed valuation of such property in the District would not increase beyond the amount existing at the time of such inclusion (other than by means of the general reassessment). Any increase above this amount would be paid to the tax increment entity. The District is unaware of any plans to include the property within its boundaries in a tax increment entity; however, the District is located within the City of Arvada which has created the Arvada Urban Renewal Authority (the AURA ). Although it is not expected, it is possible that the AURA could create tax increment areas affecting the property in the District. Ad Valorem Property Tax Data A five-year history of the District s certified assessed valuations and mill levies is set forth in the following table. History of Assessed Valuations and Mill Levies for the District Levy/ Collection Year Assessed Valuation Percent Change Mill Levy 2010/2011 $10,172, / ,618, % / ,730, / ,937, / ,232, / ,405, n/a(1) (1) The 2015 mill levy for collection of taxes in 2016 will not be certified until mid-december Sources: State of Colorado, Department of Local Affairs, Division of Property Taxation, Annual Reports, , and Jefferson County Assessor Office. 29

38 The following table sets forth the history of the District s ad valorem property tax collections for the time period indicated. Property Tax Collections in the District Levy/Collection Year Taxes Levied(1) Current Tax Collection(2) Collection Rate 2009/2010 $340,075 $340, % 2010/ , , / , , / , , / , , /2015(3) 422, , (1) Levied amounts do not reflect abatements or other adjustments. (2) The County Treasurer s collection fee has not been deducted from these amounts. Figures do not include interest, fees and penalties. (3) Collection distributions through September 30, Sources: State of Colorado, Department of Local Affairs, Division of Property Taxation, Annual Reports, ; and Jefferson County Treasurer s Office. Based upon the most recent information available from the County Assessor s Office, the following table represents the ten largest taxpayers within the District. No independent investigation has been made of and consequently there can be no representation as to the financial conditions of the taxpayers listed below or that such taxpayers will continue to maintain their status as major taxpayers in the District. 30

39 Ten Largest Owners of Taxable Property within the District Assessed Valuation Percentage of Total Assessed Valuation(1) Taxpayer Name Public Service Co. of Colorado nka Xcel Energy(2) $168, % Private Homeowner #1 66, Private Homeowner #2 65, Private Homeowner #3 65, Private Homeowner #4 62, Private Homeowner #5 62, Private Homeowner #6 61, Private Homeowner #7 61, Private Homeowner #8 61, Private Homeowner #9 61, Total $737, % (1) Based on a 2015 certified assessed valuation of $14,405,086. (2) Xcel taxable property currently consists of transmission lines within the District. Source: Jefferson County Assessor s Office. The following table sets forth the assessed valuation of specific classes of real and personal property within the District based upon the District s 2015 certified assessed valuation. As shown below, residential property accounts for the largest percentage of the District s assessed valuation, and therefore it is anticipated that owners of residential property will pay the largest percentage of ad valorem property taxes levied by the District Assessed Valuation of Classes of Property in the District Property Class Total Assessed Valuation Percentage of Total Assessed Valuation Residential $14,234, % State Assessed(1) 168, Commercial 1, Natural Resources Total $14,405, % (1) Consists of the transmission lines owned by Xcel referred to in the preceding table. Source: Jefferson County Assessor s Office. Mill Levies Affecting Property Owners Within the District In addition to the District s ad valorem property tax levy, owners of property within the District are obligated to pay taxes to other taxing entities in which their property is located. As a result, property owners within the District s boundaries may be subject to different mill levies depending upon the location of their property. The following table sets forth sample mill levies that may be imposed on certain properties within the District and is not intended to portray the mills levied against all properties within the District.

40 Sample Mill Levies Affecting Property Owners Within the District 2014(1) Taxing Entity(2) Mill Levy(3) Jefferson County School District No. R Jefferson County Arvada Fire Protection District Apex Park & Recreation District City of Arvada Urban Drainage & Flood Control District Urban Drainage & Flood Control District S. Platte Total Overlapping Sample Mill Levy The District Total Sample Mill Levy (1) These entities will certify their 2015 mill levies in mid-december 2015, for collection of taxes in (2) Regional Transportation District also overlaps the District, but does not assess a mill levy. (3) One mill equals 1/10 of one percent. Mill levies certified in 2014 result in the collection of property taxes in Source: Jefferson County Assessor s Office. Estimated Overlapping General Obligation Debt In addition to the general obligation indebtedness of the District, other taxing entities overlap or partially overlap the boundaries of the District. The following table sets forth those taxing entities which currently pay their general obligation debt directly from a mill levy assessed against property within the District boundaries. The table reflects the outstanding general obligation debt of the other taxing entities as of the date of this Official Statement. 32

41 Estimated Overlapping General Obligation Indebtedness Entity(1) 2015 Assessed Valuation(2) Outstanding General Obligation Debt Outstanding General Obligation Debt Attributable to the District Percent(3) Amount Apex Park & Recreation District $1,523,428,007 $ 4,965, % $ 46,671 Jefferson County School District No. R-1 8,128,937, ,370, ,266 Total $851,937 (1) The following entities also overlap with the District but they have no reported general obligation debt outstanding: City of Arvada, Arvada Fire Protection District, Jefferson County, Regional Transportation District, Urban Drainage and Flood Control District, and Urban Drainage and Flood Control District South Platte. (2) The 2015 assessed valuations are certified by the County Assessor for collection of ad valorem property taxes in (3) The percentage of each entity s outstanding debt chargeable to District property owners is calculated by comparing the assessed valuation of the portion overlapping the District to the total assessed valuation of the overlapping entity. To the extent the District s assessed valuation changes disproportionately with the assessed valuation of the overlapping entities, the percentage of debt for which District property owners are responsible will also change. Sources: Jefferson County Assessor s Office; and individual taxing entities. 33

42 DISTRICT DEBT STRUCTURE Required Elections Various State constitutional and statutory provisions require voter approval prior to the incurrence of general obligation indebtedness by the District. Among such provisions, Article X, Section 20 of the Colorado Constitution (the Taxpayers Bill of Rights, or TABOR ) requires that, except for refinancing bonded debt at a lower interest rate, the District must have voter approval in advance for the creation of any multiple-fiscal year direct or indirect district debt or other financial obligation whatsoever without adequate present cash reserves pledged irrevocably and held for payments in all future fiscal years. For a discussion of TABOR, see LEGAL MATTERS Certain Constitutional Limitations. The Bonds do not require an election under TABOR because the Bonds constitute a refinancing of the Refunded Bonds at a lower interest rate. General Obligation Debt Statutory Debt Limit. The District is subject to a statutory debt limitation established pursuant to (6), C.R.S. This limitation provides that, with certain exceptions listed below, the total principal amount of general obligation debt issued by a special district after 1991 shall not at the time of issuance exceed the greater of $2 million or 50% of the special district s assessed valuation. Based upon the District s 2015 certified assessed valuation of $14,405,086, the District s debt limitation is $7,202,543. Exceptions from the debt limitation statute include obligations which are: rated in certain rating categories (the Bonds fall within this exception); determined by the board of the special district to be necessary to construct improvements ordered by a federal or state regulatory agency for public health or environmental reasons; secured by a letter of credit issued by certain qualified financial institutions; or issued to financial institutions or institutional investors. Special districts are also permitted to issue general obligation debt payable from a limited mill levy not exceeding fifty mills. Outstanding General Obligation Debt of the District. Upon issuance of the Bonds, the Bonds will be the only outstanding general obligation indebtedness of the District. The debt service schedule for the Bonds is set forth in DEBT SERVICE REQUIREMENTS. Authorized but Unissued Debt The Indenture limits the District s ability to issue additional debt as described in SECURITY FOR THE BONDS Additional Bonds. If the District does issue any additional general obligation indebtedness while the Bonds are outstanding, such additional debt would have a parity claim to the ad valorem tax revenue from which the Bonds will be payable. At the Election, the District s electors authorized the District to issue up to $16,700,000 in general obligation bonds. Currently, $10,357,848 of this authorization remains unissued. The Board currently has no plans to seek voter approval for general obligation indebtedness in excess of this amount. 34

43 Revenue and Other Financial Obligations The District has the statutory authority to issue revenue obligations payable from the net revenue of District facilities to enter into obligations which do not extend beyond the current fiscal year, and to incur certain other obligations. Other than the obligations of the District described in THE DISTRICT - District Agreements, the District presently has no such obligations outstanding. Selected Debt Ratios The following table sets forth ratios of direct debt of District (after giving effect to the issuance of the Bonds) and overlapping debt within the District (only for those entities which currently pay their general obligation debt through a mill levy assessed against property within the District) to assessed valuation and statutory actual value of the District: Selected Debt Ratios of the District as of the Date of this Official Statement (Unaudited) Amount Direct Debt (Consisting of the Bonds)... $ 7,420,000 Overlapping Debt (1) ,937 Total Direct Debt and Overlapping Debt... 8,271, Assessed Valuation (3)... $ 14,405,086 Direct Debt to 2015 Assessed Valuation % Direct Debt Plus Overlapping Debt to 2015 Assessed Valuation % 2015 Statutory Actual Value (2)... $ 179,415,209 Direct Debt to 2015 Statutory Actual Value % Direct Debt Plus Overlapping Debt to 2015 Statutory Actual Value % (1) Figure is estimated based on information supplied by other taxing authorities and does not include self-supporting general obligation debt. See PROPERTY TAXATION, ASSESSED VALUATION AND OVERLAPPING DEBT Estimated Overlapping General Obligation Debt and the footnote regarding the type of overlapping debt which is included. (2) This figure has been calculated using a statutory formula under which estimated assessed valuation is calculated at 7.96% of the statutory actual value of residential property in the District, and 29% of the statutory actual value of other property within the District (with certain specified exceptions). Statutory actual value is not intended to represent market value. See PROPERTY TAXATION, ASSESSED VALUATION AND OVERLAPPING DEBT Ad Valorem Property Taxes. (3) Figure represents the 2015 certified assessed valuation. Sources: County Assessor s Office, the District, and information obtained from individual overlapping entities. 35

44 THE DISTRICT Organization and Description Organization. The District is a quasi-municipal corporation and political subdivision of the State created pursuant to the Special District Act. The purpose of the District is to plan for, design, acquire, construct, install, relocate, redevelop and finance the Public Improvements as generally described in the Special District Act. The District was formed pursuant to an Order and Decree of the Jefferson County District Court issued on June 14, Formation of the District was preceded by approval by the Board of County Commissioners of Jefferson County, Colorado (the County ) of a Service Plan for the District on October 9, 1990, as amended and restated March 2003 (as amended and restated, the Service Plan ) consisting of a financial plan, including proposed funding therefor, and a preliminary engineering survey detailing the proposed improvements within the District. The District was initially organized with the name Eldorado Hills Metropolitan District, which was subsequently changed to Spring Mesa Metropolitan District in 2003 when the property within the District s boundaries was annexed into the City of Arvada, Colorado (the City ). General Description. The District consists of approximately 305 acres of property located west of Quaker Road, south of 80th Avenue and north of 70th Avenue in the City. Pursuant to the Service Plan, the District is authorized to finance the construction of public infrastructure related to the Spring Mesa development. To date, the District has constructed (a) streets, including all interior roads within the District, (b) sewer mains, sewer service to pump houses, storm sewer and storm water facilities and water lines, and (c) recreational amenities, including landscaping, wall, main entry feature, streetscapes, equestrian trails and open space areas. Development in the District The Development consists of 272 single family lots, all of which contain completed homes. The Development contains approximately 175 acres of open space and parks and approximately 130 acres of single family lots. Residential units were constructed between 2006 and According to the District, no extraordinary capital improvements are presently proposed for the District; however, ongoing maintenance and replacement of infrastructure are anticipated to be required in the ordinary course of operating the District. The District s responsibilities include repair and maintenance, e.g., mowing, fertilizing, weed suppression, pruning, and snow removal on sidewalks within the District and sidewalks immediately adjacent to the District (which are not owned by the homeowners or the City), in addition to park ponds and detention pond maintenance and repair. The City is responsible for maintaining the Spring Mesa Park and the native areas adjacent to the District that are owned by the City including areas around Quaker Acres Park to 77th Drive and around Tucker Lake. In addition, the City maintains the Spring Mesa horse trails and the area adjacent to the sidewalks within the Development. The City owns and maintains all streets within the District, in addition to a pump house located on 77th Drive. The District s Manager (defined below in Administration ), collects the monthly Operations Fee (as defined in DISTRICT FINANCIAL INFORMATION Sources of District 36

45 Revenues ) and provides grounds maintenance supervision and support. The Manager is the primary and initial contact for all homeowner questions and issues, which are communicated to the Board, as needed. Inclusion, Exclusion, Consolidation and Dissolution Inclusion of Property. The Special District Act provides that the boundaries of a special district may be altered by the inclusion of additional real property under certain circumstances. After its inclusion, the included property is subject to all of the taxes and charges imposed by the special district and shall be liable for its proportionate share of existing bonded indebtedness of the special district. The District has never included property, and at the present time, no inclusions are pending or expected. Exclusion of Property. The Special District Act provides that the boundaries of a special district also may be altered by the exclusion of real property from the special district under certain circumstances. After its exclusion, the excluded property is no longer subject to the special district s operating mill levy, and is not subject to any debt service mill levy for new debt issued by the special district. The excluded property, however, remains subject to the special district s debt service mill levy for that proportion of the special district s outstanding indebtedness and the interest thereon existing immediately prior to the effective date of the exclusion order. The District has never excluded any property, and at the present time, no additional exclusions are pending or expected. Consolidation With Other Districts. Two or more special districts may consolidate into a single district upon the approval of the District Court and of the electors of each of the consolidating special districts. The District Court order approving the consolidation can provide that the consolidated district assumes the debt of the districts being consolidated. If so, separate voter authorization of the debt assumption is required. If such authorization is not obtained, then the territory of the prior district will continue to be solely obligated for the debt after the consolidation. At the present time, no consolidations with other districts are pending or expected. Dissolution of the District. The Special District Act allows a special district board of directors to file a dissolution petition with the District Court. The District Court must approve the petition if the special district s plan for dissolution meets certain requirements, generally regarding the continued provision of services to residents and the payment of outstanding debt. Dissolution must also be approved by the special district s voters. If the special district has debt outstanding, the district may continue to exist for only the limited purpose of levying its debt service mill levy and discharging the indebtedness. District Powers The rights, powers, privileges, authorities, functions and duties of the District are established by the laws of the State, particularly the Special District Act, which provides that the Board has certain powers including, but not limited to, the power: to have perpetual existence; to sue and be sued; to enter into contracts and agreements; to incur indebtedness and revenue obligations; to acquire, dispose of, and encumber real and personal property; to have the 37

46 management, control, and supervision of all the business and affairs of the special district and all construction, installation, operation, and maintenance of special district improvements; to appoint, hire, and retain agents, employees, engineers, and attorneys; to fix and from time to time increase or decrease fees, rates, tolls, penalties or charges for services, programs or facilities furnished by or available from the District, and to pledge such revenue for the payment of any indebtedness of the District; to furnish services and facilities without the boundaries of the special district and to establish fees, rates, tolls, penalties, or charges for such services and facilities; to have and exercise all rights and powers necessary or incidental to or implied from the specific powers granted to special districts by statute; to enter into contracts with public utilities, cooperative electric associations and municipalities for the purpose of providing street lighting service; to erect and maintain, in providing safety protection services, traffic and safety controls and devices; to finance line extension charges for new telephone construction in nonresidential special districts; to establish, maintain, and operate a system to transport the public by bus, rail, or any other means of conveyance; and to exercise the power of eminent domain and dominant eminent domain for the special district s authorized purposes. In addition, the Board has the power to furnish security services for any area within the District, if the District has provided written notification to, consulted with, and obtained the written consent of all local law enforcement agencies having jurisdiction within the area and any applicable master association or similar body having authority to furnish security services. The Board is further authorized to furnish covenant enforcement and design review services pursuant to the Special District Act. The District does not provide security services or covenant enforcement. Governing Board The District is governed by a board of directors (the Board ) which, pursuant to State law, may consist of up to five members. In order to be eligible for nomination to the Boards, prospective members must be eligible electors of the District as defined by State law. Each of the Directors resides in the District. Directors are elected to staggered four year terms of office at successive biennial elections. Vacancies on the Board are filled by appointment of the remaining directors, the appointee to serve until the next regular election, at which time the vacancy is filled by election for any remaining unexpired portion of the term. Director Sikkema was appointed to the Board to fill a vacancy on October 20, The directors hold regular meetings and special meetings, as needed. Each director is entitled to one vote on all questions before the Board when a quorum is present. Directors receive no compensation for attending meetings. Pursuant to the State constitution, directors are limited to two terms in office unless the District s voters have approved a waiver or modification of this limit. In November 2000, the District s electors approved an election question which exempts the District from State constitutional term limitations. The present directors, their positions on the Board, occupations and terms of office are as follows: 38

47 Name Office Occupation Term Began Current Term Expires Mark Entman President Retired May 2012 May 2016 Sharon Miner Vice President Federal Government Contract May 2014 May 2018 Negotiator Devon Ostendorf Secretary Software Engineer May 2012 May 2016 Richard Wallace Treasurer Marketing and Account May 2012 May 2016 Development, Executive Search Firm Don Sikkema Assistant Secretary Real Estate Broker October 2014 May 2018 Conflicts of Interest State law requires directors to disqualify themselves from voting on any issue in which they have a conflict of interest unless the applicable director has disclosed the conflict in a certificate filed with the Secretary of State and with the Boards at least 72 hours in advance of any meeting of which the conflict may arise. Additionally, no contract for work or material, including a contract for services, regardless of the amount, may be entered into between a special district and a board member, or between a special district and the owner of 25% or more of the territory within the special district, unless a notice is published for bids and such board member or owner submits the lowest responsible and responsive bid. Administration The Board is responsible for the overall management and administration of the affairs of the District. The District has no employees, and all administrative functions are provided by third parties pursuant to contracts with the District. The District retains CliftonLarsonAllen LLP, CPAs, Consultants and Advisors, Greenwood Village, Colorado (the Manager ) as its administrative manager. The Manager provides a range of administrative services to the District, including the preparation of meeting agendas and financial reports, bookkeeping duties, bimonthly billing, collecting the Operations Fee, grounds maintenance supervision and support, and assisting the board with budgets, elections and other matters. The District is represented by Spencer Fane LLP, Denver, Colorado. Simmons & Wheeler P.C., Certified Public Accountants, Centennial, Colorado, serves as the District s accountants. District Agreements The Special District Act authorizes the District to enter into agreements and contracts affecting the affairs of the District. According to the District s general counsel, the District is not a party to any agreements which materially affect its financial status or operations, except for the following: 39

48 On or about July 6, 2005, Eldorado Hills LLC, ( Eldorado ) entered into an Infrastructure Acquisition Agreement (the IAA ), pursuant to which Eldorado, as developer, agreed to design and construct certain improvements (the IAA Improvements ) of the District. The District issued its Refunded 2006 Bonds for the purpose of repaying the Developer pursuant to the IAA. The improvements, after completion, were conveyed by Eldorado to the District or the appropriate political subdivision. In accordance with a Settlement Agreement dated November 30, 2010 (the Settlement Agreement ), among Eldorado, 305 S Corporation, TI Companies, Inc. and Tarco Inc. (collectively Developer ) and the District, in consideration of the District accepting the IAA Improvements in their as-is condition, and release of the Developer of any liability relating to the IAA Improvements, the District and the Developer agreed that the District would pay the Developer a reduced amount for the IAA Improvements, through the issuance by the District of the Refunded 2010 Bonds to the Developer. The Developer agreed to forgive the remaining balance of $860,000 and a portion of the amounts owed under a certain funding and reimbursement agreement dated November 15, 2006 between the District and 305 S Corporation (the FRA ). The District agreed not to file a lawsuit on or before December 31, 2049 against the Developer for claims arising or relating to the construction of the IAA Improvements. Pursuant to the Settlement Agreement, if the District or the Spring Mesa Homeowners Association (the HOA ) file a lawsuit on or before December 31, 2049 (defined as a Triggering Event in the Settlement Agreement), then the Developer shall have the right to assert a claim within one year of the Triggering Event for the remaining $860,000 as a valid and binding obligation of the District that the Developer may enforce through any appropriate means, including payment through a judgment imposing up to an additional 10 mills on the property within the boundaries of the District. The District and the HOA are parties to a maintenance agreement related to drain lines. Until January 1, 2015 (with the exception of any projects approved in 2014 that carried over into 2015 for completion), the District paid to maintain these lines, and was reimbursed for 25% of this cost by the HOA. On and after January 1, 2015 (with the exception of any projects approved in 2014 that carried over into 2015 for completion), the District is responsible for 100% of this cost. Insurance Coverage The Board acts to protect the District against loss and liability by maintaining certain insurance coverage. Currently, the District maintains insurance through the Colorado Special Districts Property and Liability Pool ( CSDPLP ). CSDPLP was established by the Special District Association of Colorado in 1988 to provide special districts with general liability, auto/property liability, public officials liability and workers compensation insurance coverage as an alternative to the traditional insurance market. CSDPLP provides insurance coverage to over one thousand special districts and is governed by a nine-member board of special district representatives. The District s current policy expires on January 1, 2016, and provides $1,000,000 of coverage (per occurrence) for public entity liability insurance, which includes general liability, employee benefits administration liability, public officials liability and employment practices liability, cyber liability up to $200,000 per occurrence, fiduciary liability up to $200,000 per occurrence, medical payments up to $10,000 per occurrence, no-fault water 40

49 and sewer backup up to $15,000 per occurrence and pre loss legal assistance up to $2,000 per occurrence. In addition, the District carries $170,189 of property coverage, $250,000 of business income coverage, and auto physical damage coverage of up to $2,500 for employee deductible reimbursement. Sources of District Revenues DISTRICT FINANCIAL INFORMATION General. Ad valorem property taxes, described below and in PROPERTY TAXATION, ASSESSED VALUATION AND OVERLAPPING DEBT, constitute the largest source of District revenue. Additional sources of revenue include the Operations Fee (defined below), investment income and specific ownership taxes (a State tax on motor vehicle registrations which is shared with local governments, including the District). Operations Fee. In order to defray the costs of providing operation and maintenance services, including District administrative costs, the District imposes a monthly fee, currently in the amount of $80 (the Operations Fee ). The Operations Fee is determined by the Board and may be increased or decreased as the Board deems necessary. All 272 lots within the Development pay the same monthly Operations Fee. The Board anticipates that it will continuously monitor both the expense and revenue ledgers to determine changes, if any, that may be necessary with respect to the amount of the monthly Operations Fee, including the need to impose a special fee for unexpected expenses. The Manager bimonthly bills, collects, and remits the Operations Fee to the District. Unpaid Operations Fees constitute perpetual liens against each home, and the District has the power to foreclose on such liens. The liens run with the property, and unpaid Operations Fees continue to accumulate until paid. A delinquency charge of $15 per month is assessed for unpaid Operations Fees that are not paid within five days after the monthly due date. Interest also accrues on the outstanding fees Budget Process The District is required by law to adopt an annual budget setting forth: all proposed expenditures for the administration, operations, maintenance, debt service, and capital projects to be undertaken during the budget year of all offices, units, departments, boards, commissions, and institutions of the District; anticipated revenues; estimated beginning and ending fund balances; actual figures for the prior fiscal year and estimated figures projected through the end of the current fiscal year; a written budget message describing the important features of the proposed budget; and explanatory schedules or statements classifying the expenditures by object and the revenues by source. No budget shall provide for expenditures in excess of revenues by source. No later than October 15 of each year, the persons appointed to prepare the budgets must submit proposed budgets to the Board for the ensuing year. The Board must cause to be published a notice that such proposed budget is open for inspection by the public. Prior to adoption, any electors of the District may register his or her objections to the proposed budgets. The District must adopt its budget by December 15. After adoption of the budget, the Board must enact a corresponding appropriation resolution before the beginning of the fiscal year. If 41

50 the District fails to file a certified copy of its budget within thirty days following the beginning of the fiscal year (i.e., by the following January 30) with the Colorado Division of Local Government in the Department of Local Affairs, the division may authorize the County Treasurer to prohibit release of the District s tax revenues and other moneys held by the County Treasurer until the District files its budgets. In general, the District cannot expend money for any of the purposes set out in the appropriation resolution in excess of the amount appropriated. However, in the case of an emergency or some contingency which was could not have been reasonably foreseen, the Board may authorize the expenditure of funds in excess of the budget by adopting a resolution. If the District receives revenues which were unanticipated at the time of adoption of the budget (other than property taxes), the Board may authorize the expenditure of such revenues by adopting supplemental budgets after notice and hearing. Financial Statements The District s 2016 Budget is scheduled to be adopted on December 10, Under State law, the Board is required to have the financial statements of the District audited annually. The audited financial statements must be filed with the Board by June 30 of each year and with the State Auditor 30 days later. If the District fails to file its audit report with the State Auditor, the State Auditor may, after notice to the District, authorize the County Treasurer to prohibit release of the District s tax revenues and other moneys held by the County Treasurer until the District files the audit report. The audited financial statements of the District for the year ended December 31, 2014 and the report of the certified public accountants are included in this Official Statement in Appendix A. The audited financial statements included in Appendix A represent the most recent audited financial statements of the District. District Funds The District uses three fund groups to account for its activities. The General Fund is the general operating fund of the District. It is used to account for all financial resources except those required to be accounted for in another fund. The Debt Service Fund is used to account for financial resources that are restricted, committed or assigned to expenditures for principal, interest and related costs. The Capital Projects Fund, which the District began using in the current fiscal year, is used to account for financial resources that are used for the acquisition of major capital facilities. History of District Revenue and Expenditures Set forth below are five-year comparative statements of revenues, expenditures and changes in fund balance for the District s General Fund and Debt Service Fund. The figures in the charts below have been derived from the District s audited financial statements for the years 2010 through 2014 and are set forth in accordance with generally accepted accounting principles. See FORWARD-LOOKING STATEMENTS. The following information should be read together with the District s 2014 audited financial statements which appear in 42

51 Appendix A. Preceding years financial statements may be obtained from the sources noted in INTRODUCTION - Additional Information. Statement of Revenue, Expenditures and Changes in Fund Balance General Fund Years Ended December 31, REVENUES Assessments(1) $248,145 $ 264,766 $ 263,464 $256,398 $265,445 Reimbursements ,076 Interest Income Miscellaneous 9,636 5,897 4, Total 258, , , , ,551 EXPENDITURES Legal 79,545 32,196 17,391 9,743 22,561 Accounting and audit 10,429 11,113 9,163 10,245 10,243 Insurance 2,921 2,189 3,499 3,192 4,403 Elections , ,866 Miscellaneous expenses 2,116 1, Projects maintenance/replacement , ,800 34,416 66,682 Landscape maintenance 77,474 51,152 76,926 43,818 88,721 Irrigation repair ,238 Snow removal ,000 Utilities 27,525 20,090 32,104 22,346 20,520 District management/admin 14,515 13,289 14,678 20,389 19,506 Administration ,465 Forgiveness of Developer debt(2) 25, Total 240, , , , ,786 CHANGE IN FUND BALANCE 17,821 18,364 (38,583) 111,542 23,765 FUND BALANCE - BEGINNING OF YEAR 72,034 89, ,219 69, ,178 FUND BALANCE - END OF YEAR $ 89,855 $ 108,219 $ 69,636 $ 181,178 $ 204,943 (1) Although the District s audited financial statements refer to this revenue source as Assessments, the District does not impose any special assessments. This revenue source consists of the Operations Fee described above under Sources of District Revenues. (2) See THE DISTRICT District Agreements. Sources: The District s audited financial statements for the years ended December 31,

52 Statement of Revenue, Expenditures and Changes in Fund Balance Debt Service Fund Years Ended December 31, REVENUES Property taxes $ 340,074 $ 351,544 $ 400,136 $ 404,548 $411,841 Specific ownership taxes 22,786 22,519 28,422 30,045 32,395 Interest income 1,723 1,016 1,986 1, Total 364, , , , ,119 EXPENDITURES Bond principal 60, ,000 90, ,000 Bond interest 217, , , , ,800 Sub-bond interest -- 3, Paying agent fees Treasurers fees 5,102 5,275 6,004 6,069 6,178 Total 282, , , , ,578 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES 82,281 (64,396) (16,860) (91,213) (91,459) FUND BALANCE - BEGINNING OF YEAR 684, , , , ,893 FUND BALANCE - END OF YEAR $ 766,362 $701,966 $ 685,106 $ 593,893 $ 502,434 Sources: The District s audited financial statements for the years ended December 31,

53 Budget Summary and Comparison Set forth hereafter are statements of the District s 2014 and 2015 budget for the General Fund and the Debt Service Fund as compared to the District s audited 2014 actual figures and unaudited 2015 actual figures for the nine months ended September 30, 2015, and the District s 2015 budget for the Capital Projects Fund as compared to unaudited 2015 actual figures for the nine months ended September 30, See FORWARD-LOOKING STATEMENTS. 45

54 Budget Summary and Comparison General Fund Budget Audited 12/31/2014 Variance Budget Unaudited 9/30/2015(1) Variance REVENUES Assessments(2) $ 261,120 $ 265,445 $ 4,325 $ 261,120 $ 216,073 $(45,047) Reimbursements -- 14,076 14, Interest Income Total 261, ,551 18, , ,096 (45,024) EXPENDITURES Legal 35,000 22,561 12,439 20,000 5,449 14,551 Accounting and audit 15,000 10,243 4,757 15,000 8,620 6,380 Insurance 6,000 4,403 1,597 6,000 4,258 1,742 Elections 15,000 1,866 13, Miscellaneous expenses 1, ,000 1,522 (522) Projects Maintenance/ replacement 70,000 66,682 3,318 70,000 63,889 6,111 Landscape maintenance 50,000 88,721 (38,721) 50,000 72,376 (22,376) Irrigation repair 15,000 5,238 9,762 15,000 30,871 (15,871) Snow removal 15,000 4,000 11,000 15,000 3,513 11,487 Utilities 35,000 20,520 14,480 25,000 11,609 13,391 District management 20,000 19, ,000 18,106 6,894 Administration 5,000 11,465 (6,465) 5,000 7,859 (2,859) Emergency 8, ,460 7, ,410 Capital replacement fund ,000 12, Contingency 111, , , ,344 Total 401, , , , , ,682 CHANGE IN FUND BALANCE (140,750) 23, ,515 (173,634) (23,976) 149,658 FUND BALANCE BEGINNING 140, ,178 40, , ,943 31,310 FUND BALANCE END $ -- $ 204,943 $ 204,943 $ -- $ 180,967 $ 180,967 (1) Unaudited information for the nine months ended September 30, (2) Assessment revenue is derived from the Operations Fee. See -- Sources of District Revenues above. Sources: The District s 2014 and 2015 budgets, the District s audited financial statements for 2014, and the District s unaudited financial statements for the nine months ended September 30,

55 Budget Summary and Comparison Debt Service Fund Budget Audited 12/31/2014 Variance Budget Unaudited 9/30/2015(1) Variance REVENUES Property taxes $ 411,841 $ 411,841 $ -- $ 422,032 $ 422,032 $ -- Specific ownership taxes 28,829 32,395 3,566 29,542 25,980 (3,562) Interest income 1, (117) 1, (247) Total 441, ,119 3, , ,765 (3,809) EXPENDITURES Bond principal 105, , , ,000 Bond interest 424, , , , ,250 Miscellaneous Paying agent fees 1, , Treasurer s fees 6,178 6, ,330 6,331 (1) Total 537, , , , ,149 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES (95,862) (91,459) 4,403 (83,756) 232, ,340 FUND BALANCE BEGINNING 587, ,893 5, , ,434 4,509 FUND BALANCE END $ 492,110 $ 502,434 $ 10,324 $ 414,169 $ 735,018 $ 320,849 (3) Unaudited information for the nine months ended September 30, Sources: The District s 2014 and 2015 budgets, the District s audited financial statements for 2014, and the District s unaudited financial statements for the nine months ended September 30,

56 Budget Summary and Comparison Capital Projects Fund 2015(1) Budget Unaudited 9/30/2015 Variance REVENUES Transfer from General Fund $ 12,000 $ 12,000 $ -- Miscellaneous income (HOA)(2) 3,000 5,790 2,790 Total 15,000 17,790 2,790 EXPENDITURES Toe and interceptor drains 12,000 14,983 (2,983) Total 12,000 14,983 (2,983) EXCESS OF REVENUES OVER (UNDER) EXPENDITURES 3,000 2,807 (193) FUND BALANCE BEGINNING FUND BALANCE END $ 3,000 $ 2,807 $ (193) (1) Unaudited information for the nine months ended September 30, (2) In the past, the District was reimbursed by the HOA for 25% of the cost of maintaining drain lines. As of January 1, 2015 (with the exception of any projects approved in 2014 that carried over into 2015 for completion), the District will pay 100% of such maintenance costs. Sources: The District s 2015 budget and the District s unaudited financial statements for the nine months ended September 30,

57 ECONOMIC AND DEMOGRAPHIC INFORMATION This portion of the Official Statement contains general information concerning historic economic and demographic conditions in and surrounding the City and County. It is intended only to provide prospective investors with general information regarding the District s community. The information was obtained from the sources indicated and is limited to the time periods indicated. The District makes no representation as to the accuracy or completeness of data obtained from parties other than the District. The information is historic in nature; it is not possible to predict whether the trends shown will continue in the future. Population and Age Distribution The following table sets forth population statistics for the City of Arvada, Jefferson County, Denver-Aurora-Lakewood Metropolitan Based Statistical Area ( Denver- Aurora MSA ) and the State. Denver-Aurora MSA is comprised of six metro counties and four bordering counties: Jefferson, Arapahoe, Broomfield, Clear Creek, Denver, Douglas, Elbert, Gilpin, Jefferson and Park counties. Between 2000 and 2010, the population of the City increased by 4.2% and Jefferson County increased 1.4%. During the same time period, the population of Denver-Aurora MSA and the State increased approximately 16.7% and 16.9%, respectively. Population City of Arvada Jefferson County Denver-Aurora MSA Colorado Percent Percent Percent Percent Year Population Change Population Change Population Change Population Change , , ,118, ,209, , % 371, % 1,450, % 2,889, % , , ,650, ,294, (1) 102, , ,179, ,301, , , ,543, ,029, , , ,601, ,120, , , ,647, ,191, , , ,698, ,270, , , ,753, ,353, (1) Denver Aurora MSA population adjusted to reflect the 2001 consolidation of Broomfield County. Sources: United States Department of Commerce, Bureau of the Census ( ); and Colorado State Demography Office ( estimates which are subject to revision and 2000 Denver- Aurora MSA population adjusted estimate). The following table sets forth a projected age profile for the City of Arvada, Jefferson County, Denver-Aurora MSA, the State and the United States as of January 1,

58 Age Distribution Percent of Population Age City of Arvada Jefferson County Denver-Aurora MSA Colorado United States % 20.7% 23.8% 23.3% 23.0% and Older Source: 2015 The Nielsen Company, SiteReports. Income The following two tables reflect the Median Household Effective Buying Income ( EBI ), and also the percentage of households by EBI groups. EBI is defined as money income (defined below) less personal tax and nontax payments. Money income is defined as the aggregate of wages and salaries, net farm and nonfarm self-employment income, interest, dividends, net rental and royalty income, Social Security and railroad retirement income, other retirement and disability income, public assistance income, unemployment compensation, Veteran Administration payments, alimony and child support, military family allotments, net winnings from gambling, and other periodic income. Deductions are made for personal income taxes (federal, state and local), personal contributions to social insurance (Social Security and federal retirement payroll deductions), and taxes on owner-occupied nonbusiness real estate. The resulting figure is known as disposable or after-tax income. Median Household Effective Buying Income Estimates (1) Year City of Arvada Jefferson County Denver-Aurora MSA Colorado United States 2012 $48,583 $51,001 $46,394 $43,515 $41, ,185 51,024 47,096 43,718 41, ,413 53,448 49,480 47,469 43, ,859 56,870 53,691 49,949 45, ,451 59,544 56,042 52,345 46,738 (1) The difference between consecutive years is not an estimate of change from one year to the next; separate combinations of data are used each year to identify the estimated mean of income from which the median is computed. Source: The Nielsen Company, SiteReports,

59 Percent of Households by Effective Buying Income Groups 2016 Estimates Effective Buying Income Group City of Arvada Jefferson County Denver-Aurora MSA Colorado United States Less than $24, % 16.3% 18.6% 20.4% 24.8% $25,000-49, $50,000-74, $75,000-99, $100, , $125, , $150,000 or More Source: 2015 The Nielsen Company, SiteReports. The following table sets forth annual per capita personal income levels for Jefferson County, Denver-Aurora MSA, the State, and the nation. Per Capita Personal Income Year(1) Jefferson County Denver-Aurora MSA Colorado United States 2010 $43,082 $46,068 $41,877 $40, ,671 48,953 44,349 42, ,392 51,524 46,402 44, ,917 51,603 46,746 44, ,264 53,983 48,869 46,049 (1) County and MSA figures posted November 2015; state and national figures posted September All figures are subject to periodic revisions. Source: United States Department of Commerce, Bureau of Economic Analysis. Employment The following table presents information on employment within Jefferson County, Denver-Aurora MSA, the State and the nation for the time period indicated. 51

60 Labor Force and Employment Jefferson County (1) Denver-Aurora MSA (1) Colorado (1) United States Year Labor Force Percent Unemployed Labor Force Percent Unemployed Labor Force Percent Unemployed Percent Unemployed , % 1,423, % 2,724, % 9.6% , ,430, ,734, , ,448, ,757, , ,470, ,779, , ,495, ,817, Month of October , % 1,508, % 2,836, % 6.7% 2015 (2) 313, ,503, ,814, (1) Figures are subject to change. Figures for Jefferson County, Denver-Aurora MSA and the State are not seasonally adjusted. (2) Preliminary. Sources: State of Colorado, Department of Labor and Employment, Labor Market Information, Colorado Areas Labor Force Data and U.S. Department of Labor, Bureau of Statistics. 52

61 The following table sets forth the number of individuals employed within selected Jefferson County industries which are covered by unemployment insurance. In 2014, the largest employment sector in Jefferson County was government (comprising approximately 15.6% of the county s work force), followed, in order, by health care and social assistance; retail trade; accommodation and food services; and professional and technical services. For the twelvemonth period ended December 31, 2014, total average employment in Jefferson County increased by 2.8% as compared to the same twelve-month period ending December 31, 2013, and total average weekly wages increased 3.5% during the same time period. Average Number of Employees Within Selected Industries Jefferson County Industry (1) Agriculture, Forestry, Fishing, Hunting Mining Utilities Construction 10,733 10,532 10,927 11,962 13,567 13,693 Manufacturing 17,339 17,314 17,410 16,977 16,870 17,309 Wholesale Trade 6,610 6,604 6,679 6,932 7,277 7,198 Retail Trade 28,047 28,261 28,367 28,362 28,444 27,976 Transportation & Warehousing 2,244 2,283 2,385 2,474 2,511 2,635 Information 3,641 3,580 3,712 3,677 3,948 4,042 Finance & Insurance 7,767 7,434 7,487 7,648 7,646 7,523 Real Estate, Rental & Leasing 3,470 3,449 3,428 3,237 3,350 3,368 Professional & Technical Services 19,480 19,918 20,029 20,865 21,261 21,713 Management of Companies/Enterprises 2,581 2,678 2,496 2,379 2,293 2,322 Administrative & Waste Services 10,970 11,164 11,736 11,826 12,352 11,706 Educational Services 2,733 2,761 2,823 2,979 3,021 3,046 Health Care & Social Assistance 22,142 23,965 28,508 29,794 31,242 32,384 Arts, Entertainment & Recreation 2,718 2,590 2,517 2,734 2,762 2,562 Accommodation & Food Services 19,335 19,863 20,591 21,610 22,437 21,807 Other Services 6,157 6,296 6,562 6,346 6,703 6,941 Non-classifiable Government 35,024 34,705 34,539 34,554 34,615 34,531 Total (2) 202, , , , , ,507 (1) Averaged figures through 1st quarter (2) Figures may not equal the total figure when added, due to the rounding of averages. Source: State of Colorado, Department of Labor and Employment, Labor Market Information, Quarterly Census of Employment and Wages (QCEW). 53

62 The following table shows the number of individuals employed within selected Denver-Aurora MSA industries which are covered by unemployment insurance. In 2014, the largest employment sector in the Denver-Aurora MSA was government (comprising approximately 13.9% of the metro area s work force), followed in order by health care and social assistance; retail trade; accommodations and food services; and professional and technical services. For the twelve month period ending December 31, 2014, total average employment in the Denver-Aurora MSA increased by approximately 3.9% as compared to the same twelve month period ending December 31, 2013, and average weekly wages increased by 3.9% during the same time period. Average Number of Employees Within Selected Industries Denver-Aurora MSA Industry (1) Agriculture, Forestry, Fishing, 1,646 1,714 1,979 2,051 2,452 2,203 Hunting Mining 9,043 10,159 11,088 11,295 12,452 12,794 Utilities 3,731 3,617 3,571 3,512 3,689 3,676 Construction 60,659 59,244 62,113 69,234 77,834 78,525 Manufacturing 61,170 62,135 63,182 63,790 65,329 66,958 Wholesale Trade 61,370 62,433 63,631 65,231 67,695 69,075 Retail Trade 120, , , , , ,877 Transportation & Warehousing 39,934 39,834 41,208 43,510 45,010 46,378 Information 44,715 44,963 42,892 44,089 44,636 44,705 Finance & Insurance 64,907 65,124 66,499 69,191 69,635 70,944 Real Estate, Rental & Leasing 23,073 22,947 23,372 23,913 24,912 25,147 Professional & Technical Services 99, , , , , ,636 Management of 23,584 24,314 25,857 28,351 29,173 29,811 Companies/Enterprises Administrative & Waster Services 79,899 82,648 89,309 89,621 93,353 91,287 Educational Services 19,215 19,844 20,721 20,810 21,551 21,771 Health Care & Social Assistance 121, , , , , ,325 Arts, Entertainment & Recreation 20,593 20,685 21,530 21,527 22,263 20,214 Accommodation & Food Services 106, , , , , ,199 Other Services 35,870 36,718 37,929 38,829 40,781 41,285 Non-Classifiable Government 176, , , , , ,056 Total All Industries (2) 1,175,168 1,195,571 1,231,565 1,277,012 1,326,750 1,343,007 (1) Averaged figures through 1st quarter (2) Figures may not equal totals when added, due to the rounding of averages. Source: State of Colorado, Department of Labor and Employment, Labor Market Information, Quarterly Census of Employment and Wages (QCEW). The following table sets forth major employers in Jefferson County. No independent investigation of the stability or financial condition of the employers listed hereafter has been conducted; therefore, no representation can be made that these employers will continue to maintain their status as major employers in Jefferson County. 54

63 Major Employers in Jefferson County Employer Product or Service Estimated Numbers of Employees (1) Lockheed Martin Aerospace/Defense Related Systems 5,500 MillerCoors Brewing Company Beverages 2,500 Lutheran Medical Center Healthcare 2,060 Terumo BCT Inc. Medical Devices/Technology 2,020 Centura: St. Anthony s Central Hospital Healthcare 1,770 CoorsTek Ceramic Components 1,300 Ball Corporation Aerospace/Containers 1,250 FirstBank Holding Co. of Colorado Financial Services 1,180 HomeAdvisor Home Improvement/Repair 830 Kaiser Permanente Healthcare 680 (1) Updated May Source: Development Research Partners as posted by Metro Denver Economic Development Corp. Retail Sales Annual retail sales figures for the City of Arvada, Jefferson County, Denver- Aurora MSA and the State are set forth below. Retail Sales (in thousands) Year City of Arvada Percent Change Jefferson County Percent Change Denver- Aurora MSA Percent Change Colorado Percent Change 2010 $2,060, $12,507, $77,587, $143,670, ,078, % 13,439, % 83,602, % 154,697, % ,325, ,978, ,013, ,387, ,408, ,609, ,217, ,362, ,545, ,602, ,854, ,374, (1) 606, ,010, ,964, ,405, (1) As of April 30, Source: State of Colorado, Department of Revenue, Sales Tax Statistics, , and 2015 Q1. Building Permit Activity The following tables set forth a history of building permits issued for new structures in the City of Arvada and unincorporated Jefferson County. 55

64 Building Permits Issued for New Structures in City of Arvada Total Residential Valuation Total Commercial Valuation Year Single-Family Permits Multi-Family Permits(1) Commercial Permits $ 59,829, $24,503, ,175, ,599, ,489, ,957, ,074, ,281, ,697, ,102, (2) ,111, ,937,814 (1) Includes duplex and single family attached. (2) As of October 5, Source: City of Arvada Public Works Department. Building Permit Issuance for New Structures in Unincorporated Jefferson County New Single Family New Multi-Family New Non-Residential(1) Year Permits Valuation Permits Valuation Permits Valuation $40,513, $ 5,132, $ 5,370, ,305, ,735, ,620, ,927, ,535, ,239, ,908, ,082, ,136, ,313, ,713, ,859, (2) ,269, ,613, ,611,336 (1) Also includes new residential non-housekeeping buildings (hotels, etc.) (2) As of October 31, Source: Jefferson County Building Department. Foreclosure Activity The following table sets forth data on the number of foreclosures filed in the Jefferson County for the time period indicated. Such information does not take into account the number of foreclosures which were filed and subsequently redeemed or withdrawn. 56

65 History of Foreclosures Jefferson County Year Number of Foreclosures Filed Percent Change , ,856 (25.8)% ,650 (7.2) ,303 (50.8) (23.4) 2015 (1) (1) New foreclosure filings as of October 31, 2015, which reflect a 37.5% decrease from the same time period in 2014 (840 filings). Sources: Colorado Division of Housing ( ) and Jefferson County Public Trustee Office (2015). 57

66 TAX MATTERS In the opinion of Bond Counsel, assuming continuous compliance with certain covenants described below, interest on the Bonds is excluded from gross income under federal income tax laws pursuant to Section 103 of the Internal Revenue Code of 1986, as amended to the date of delivery of the Bonds (the Tax Code ), interest on the Bonds is excluded from alternative minimum taxable income as defined in Section 55(b)(2) of the Tax Code except that such interest is required to be included in calculating the adjusted current earnings adjustment applicable to corporations for purposes of computing the alternative minimum taxable income of corporations as described below, and interest on the Bonds is excluded from Colorado taxable income and Colorado alternative minimum taxable income under Colorado income tax laws in effect on the date of delivery of the Bonds. For purposes of this paragraph and the succeeding discussion, interest includes the original issue discount on certain of the Bonds only to the extent such original issue discount is accrued as described herein. The Tax Code and Colorado law impose several requirements which must be met with respect to the Bonds in order for the interest thereon to be excluded from gross income, alternative minimum taxable income (except to the extent of the aforementioned adjustment applicable to corporations), Colorado taxable income and Colorado alternative minimum taxable income. Certain of these requirements must be met on a continuous basis throughout the term of the Bonds. These requirements include: (a) limitations as to the use of proceeds of the Bonds; (b) limitations on the extent to which proceeds of the Bonds may be invested in higher yielding investments; and (c) a provision, subject to certain limited exceptions, that requires all investment earnings on the proceeds of the Bonds above the yield on the Bonds to be paid to the United States Treasury. The District will covenant and represent in the Indenture that it will take all steps to comply with the requirements of the Tax Code and Colorado law (in effect on the date of delivery of the Bonds) to the extent necessary to maintain the exclusion of interest on the Bonds from gross income and alternative minimum taxable income (except to the extent of the aforementioned adjustment applicable to corporations) under such federal income tax laws and Colorado taxable income and Colorado alternative minimum taxable income under such Colorado income tax laws. Bond Counsel s opinion as to the exclusion of interest on the Bonds from gross income, alternative minimum taxable income (to the extent described above), Colorado taxable income and Colorado alternative minimum taxable income is rendered in reliance on these covenants, and assumes compliance therewith. The failure or inability of the District to comply with these requirements could cause the interest on the Bonds to be included in gross income, alternative minimum taxable income, Colorado taxable income or Colorado alternative minimum taxable income, or a combination thereof, from the date of issuance. Bond Counsel s opinion also is rendered in reliance upon certifications of the District and other certifications furnished to Bond Counsel. Bond Counsel has not undertaken to verify such certifications by independent investigation. Section 55 of the Tax Code contains a 20% alternative minimum tax on the alternative minimum taxable income of corporations. Under the Tax Code, 75% of the excess of a corporation s adjusted current earnings over the corporation s alternative minimum taxable income (determined without regard to this adjustment and the alternative minimum tax net operating loss deduction) is included in the corporation s alternative minimum taxable income 58

67 for purposes of the alternative minimum tax applicable to the corporation. Adjusted current earnings includes interest on the Bonds. With respect to any Bonds that are sold in the initial offering at a discount (the Discount Bonds ), the difference between the stated redemption price of the Discount Bonds at maturity and the initial offering price of those bonds to the public (as defined in Section 1273 of the Tax Code) will be treated as original issue discount for federal income tax purposes and will, to the extent accrued as described below, constitute interest which is excluded from gross income, alternative minimum taxable income, Colorado taxable income, or Colorado alternative minimum taxable income under the conditions and subject to the exceptions described in the preceding paragraphs. The original issue discount on the Discount Bonds is treated as accruing over the respective terms of such Discount Bonds on the basis of a constant interest rate compounded at the end of each six-month period (or shorter period from the date of original issue) ending on June 1 and December 1 with straight line interpolation between compounding dates. The amount of original issue discount accruing each period (calculated as described in the preceding sentence) constitutes interest which is excluded from gross income, alternative minimum taxable income, Colorado taxable income, and Colorado alternative minimum taxable income under the conditions and subject to the exceptions described in the preceding paragraphs and will be added to the owner s basis in the Discount Bonds. Such adjusted basis will be used to determine taxable gain or loss upon disposition of the Discount Bonds (including sale or payment at maturity). Owners should consult their own tax advisors with respect to the tax consequences of the ownership of the Discount Bonds. Owners who purchase Discount Bonds after the initial offering or who purchase Discount Bonds in the initial offering at a price other than the initial offering price (as defined in Section 1273 of the Tax Code) should consult their own tax advisors with respect to the federal tax consequences of the ownership of the Discount Bonds. Owners who are subject to state or local income taxation (other than Colorado state income taxation) should consult their tax advisor with respect to the state and local income tax consequences of ownership of the Discount Bonds. It is possible that, under the applicable provisions governing determination of state and local taxes, accrued original issue discount on the Discount Bonds may be deemed to be received in the year of accrual even though there will not be a corresponding cash payment. The Tax Code contains numerous provisions which may affect an investor s decision to purchase the Bonds. Owners of the Bonds should be aware that the ownership of taxexempt obligations by particular persons and entities, including, without limitation, financial institutions, insurance companies, recipients of Social Security or Railroad Retirement benefits, taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry tax-exempt obligations, foreign corporations doing business in the United States and certain subchapter S corporations may result in adverse federal and Colorado tax consequences. Under Section 3406 of the Tax Code, backup withholding may be imposed on payments on the Bonds made to any owner who fails to provide certain required information, including an accurate taxpayer identification number, to certain persons required to collect such information pursuant to the Tax Code. Backup withholding may also be applied if the owner underreports reportable payments (including interest and dividends) as defined in Section 3406, or fails to provide a certificate that the owner is not subject to backup withholding in circumstances where such a certificate is required by the Tax Code. Certain of the Bonds were sold at a premium, 59

68 representing a difference between the original offering price of those Bonds and the principal amount thereof payable at maturity. Under certain circumstances, an initial owner of such bonds (if any) may realize a taxable gain upon their disposition, even though such bonds are sold or redeemed for an amount equal to the owner s acquisition cost. Bond Counsel s opinion relates only to the exclusion of interest (and, to the extent described above for the Discount Bonds, original issue discount) on the Bonds from gross income, alternative minimum taxable income, Colorado taxable income and Colorado alternative minimum taxable income as described above and will state that no opinion is expressed regarding other federal or Colorado tax consequences arising from the receipt or accrual of interest on or ownership of the Bonds. Owners of the Bonds should consult their own tax advisors as to the applicability of these consequences. The opinions expressed by Bond Counsel are based on existing law as of the delivery date of the Bonds. No opinion is expressed as of any subsequent date nor is any opinion expressed with respect to pending or proposed legislation. Amendments to the federal or state tax laws may be pending now or could be proposed in the future that, if enacted into law, could adversely affect the value of the Bonds, the exclusion of interest (and, to the extent described above for the Discount Bonds, original issue discount) on the Bonds from gross income or alternative minimum taxable income or both from the date of issuance of the Bonds or any other date, the tax value of that exclusion for different classes of taxpayers from time to time, or that could result in other adverse tax consequences. In addition, future court actions or regulatory decisions could affect the tax treatment or market value of the Bonds. Owners of the Bonds are advised to consult with their own tax advisors with respect to such matters. The Internal Revenue Service (the Service ) has an ongoing program of auditing tax-exempt obligations to determine whether, in the view of the Service, interest on such taxexempt obligations is includable in the gross income of the owners thereof for federal income tax purposes. No assurances can be given as to whether or not the Service will commence an audit of the Bonds. If an audit is commenced, the market value of the Bonds may be adversely affected. Under current audit procedures, the Service will treat the District as the taxpayer and the Owners may have no right to participate in such procedures. The District has covenanted in the Indenture not to take any action that would cause the interest on the Bonds to lose its exclusion from gross income for federal income tax purposes or lose its exclusion from alternative minimum taxable income except to the extent described above for the owners thereof for federal income tax purposes. None of the District, the Underwriter, Bond Counsel, General Counsel, or Counsel to the Underwriter is responsible for paying or reimbursing any Bond holder with respect to any audit or litigation costs relating to the Bonds. FINANCIAL INSTITUTION INTEREST DEDUCTION The Tax Code generally provides that a financial institution may not deduct that portion of its interest expense which is allocable to tax-exempt interest. The interest expense which is allocable to tax-exempt interest is an amount which bears the same ratio to the institution s interest expense as the institution s average adjusted basis of tax-exempt obligations acquired after August 7, 1986 bears to the average adjusted basis of all assets of the institution. Tax-exempt obligations may be treated as if issued prior to August 7, 1986 (and therefore are not subject to this rule), if they are qualified tax-exempt obligations as defined in the Tax Code and are designated for this purpose by the District. 60

69 The District has designated the Bonds for this purpose; however, under provisions of the Tax Code dealing with financial institution preference items, certain financial institutions, including banks, are denied 20% of their otherwise allowable deduction for interest expense with respect to obligations incurred or continued to purchase or carry the Bonds. In general, interest expense with respect to obligations incurred or continued to purchase or carry the Bonds will be in an amount which bears the same ratio as the institution s average adjusted basis in the Bonds bears to the average adjusted basis of all assets of the institution. Amendments to the Tax Code could be enacted in the future and there is no assurance that any such future amendments which may be made to the Tax Code will not adversely affect the ability of banks or other financial institutions to deduct any portion of its interest expense allocable to tax-exempt interest. 61

70 LEGAL MATTERS Litigation The District and its general counsel state that no litigation of any nature is now pending or, to the best of their knowledge, threatened, seeking to restrain or to enjoin the execution, issuance, or delivery of the Bonds or the Indenture, or the levy or collection of any taxes to pay the principal of or interest on the Bonds, or in any manner questioning the authority or proceedings for the Election, or the issuance of the Bonds, the execution of the Indenture, or the levy or collection of said taxes, or affecting the validity of the Election, the Bonds, the Indenture, or the levy or collection of said taxes; and no litigation of any nature is now pending or, to the best of our knowledge, threatened, which, if determined adversely to the District, would have a material adverse effect upon the District s ability to comply with its obligations under the Resolution or the Indenture, or to consummate the transactions contemplated thereby. Sovereign Immunity The Colorado Governmental Immunity Act, Title 24, Article 10, Part 1, C.R.S. (the Immunity Act ), provides that, with certain specified exceptions, sovereign immunity acts as a bar to any action against a public entity, such as the District, for injuries which lie in tort or could lie in tort. The Immunity Act provides that sovereign immunity is waived by a public entity for injuries occurring as a result of certain specified actions or conditions, including: the operation of a non-emergency motor vehicle (including a light rail car), owned or leased by the public entity; the operation of any public hospital, correctional facility or jail; a dangerous condition of any public building; certain dangerous conditions of a public highway, road or street; and the operation and maintenance of any public water facility, gas facility, sanitation facility, electrical facility, power facility or swimming facility by such public entity. In such instances, the public entity may be liable for injuries arising from an act or omission of the public entity, or an act or omission of its public employees, which are not willful and wanton, and which occur during the performance of their duties and within the scope of their employment. The maximum amounts that may be recovered under the Immunity Act, whether from one or more public entities and public employees, are as follows: (a) for any injury to one person in any single occurrence, the sum of $350,000; (b) for an injury to two or more persons in any single occurrence, the sum of $990,000; except in such instance, no person may recover in excess of $350,000. These amounts increase every four years pursuant to a formula based on the Denver- Boulder-Greeley Consumer Price Index, with the first such increase to occur in The District may increase any maximum amount that may be recovered from the District for certain types of injuries. However, the District may not be held liable either directly or by indemnification for punitive or exemplary damages unless the District voluntarily pays such damages in accordance with State law. The District has not acted to increase the damage limitations in the Immunity Act. The District may be subject to civil liability and damages including punitive or exemplary damages under federal laws, and it may not be able to claim sovereign immunity for actions founded upon federal laws. Examples of such civil liability include suits filed pursuant 62

71 to Section 1983 of Title 42 of the United States Code, alleging the deprivation of federal constitutional or statutory rights of an individual. In addition, the District may be enjoined from engaging in anti-competitive practices which violate federal and State antitrust laws. However, the Immunity Act provides that it applies to any State court having jurisdiction over any claim brought pursuant to any federal law, if such action lies in tort or could lie in tort. Approval of Certain Legal Proceedings Legal matters relating to the issuance of the Bonds, as well as the treatment of interest on the Bonds for purposes of federal and State income taxation, are subject to the approving legal opinion of Spencer Fane LLP, Denver, Colorado, as Bond Counsel. Such opinion, the form of which is attached hereto as Appendix D, will be dated as of and delivered at closing. Certain legal matters pertaining to the organization and operation of the District will be passed upon by its general counsel, Spencer Fane LLP. Legal fees to Bond Counsel and Underwriter s counsel are contingent upon the sale and delivery of the Bonds. Certain Constitutional Limitations In 1992, the voters of Colorado approved a constitutional amendment which is codified as Article X, Section 20, of the Colorado Constitution (the Taxpayers Bill of Rights or TABOR ). In general, TABOR restricts the ability of the State and local governments to increase revenues and spending, to impose taxes, and to issue debt and certain other types of obligations without voter approval. TABOR generally applies to the State and all local governments, including the District ( local governments ), but does not apply to enterprises, defined as government owned businesses authorized to issue revenue bonds and receiving under 10% of annual revenue in grants from all state and local governments combined. Because some provisions of TABOR are unclear, litigation seeking judicial interpretation of its provisions has been commenced on numerous occasions since its adoption. Additional litigation may be commenced in the future seeking further interpretation of TABOR. No representation can be made as to the overall impact of TABOR on the future activities of the District, including its ability to generate sufficient revenues for its general operations, to undertake additional programs or to engage in any subsequent financing activities. Voter Approval Requirements and Limitations on Taxes, Spending, Revenues, and Borrowing. TABOR requires voter approval in advance for: (a) any new tax, tax rate increase, mill levy above that for the prior year, valuation for assessment ratio increase, extension of an expiring tax, or a tax policy change causing a net tax revenue gain; (b) any increase in a local government s spending from one year to the next in excess of the limitations described below; (c) any increase in the real property tax revenues of a local government from one year to the next in excess of the limitations described below; or (d) creation of any multiplefiscal year direct or indirect debt or other financial obligation whatsoever, subject to certain exceptions such as the refinancing of obligations at a lower interest rate. TABOR limits increases in government spending and property tax revenues to, generally, the rate of inflation and a local growth factor which is based upon, for school districts, the percentage change in enrollment from year to year, and for non-school districts, the actual 63

72 value of new construction in the local government. Unless voter approval is received as described above, revenues collected in excess of these permitted spending limitations must be rebated. Debt service, however, including the debt service on the Bonds, can be paid without regard to any spending limits, assuming revenues are available to do so. TABOR s tax increase limitations could cause the District s property tax revenues to decrease if the assessed valuation of taxable real property in the District should decline, absent voter approval to increase the District s property tax mill levy as explained above. At an election held November 4, 2003, the District s voters approved an election question which authorizes the District to retain excess revenues which may otherwise be required by TABOR to be refunded to taxpayers. Because the interest rate on the Bonds is lower than the interest rate on the Refunded Bonds, no election is required by TABOR to issue the Bonds. Emergency Reserve Funds. TABOR also requires local governments to establish emergency reserve funds. The reserve fund must consist of at least 3% of fiscal year spending, excluding bonded debt service. TABOR allows local governments to impose emergency taxes (other than property taxes) if certain conditions are met. Local governments are not allowed to use emergency reserves or taxes to compensate for economic conditions, revenue shortfalls, or local government salary or benefit increases. The District has budgeted emergency reserves as required by TABOR. Other Limitations. TABOR also prohibits new or increased real property transfer tax rates and local government income taxes. TABOR allows local governments to enact exemptions and credits to reduce or end business personal property taxes; provided, however, the local governments spending is reduced by the amount saved by such action. With the exception of K-12 public education and federal programs, TABOR also allows local governments (subject to certain notice and phase out requirements) to reduce or end subsidies to any program delegated for administration by the general assembly; provided, however, the local governments spending is reduced by the amount saved by such action. Police Power The obligations of the District are subject to the reasonable exercise in the future by the State and its governmental bodies of the police power inherent in the sovereignty of the State and to the exercise by the United States of America of the powers delegated to it by the Federal Constitution, including bankruptcy. RATINGS Standard & Poor s Rating Services, a Division of The McGraw-Hill Companies, Inc. ( S&P ) is expected to assign the Bonds the ratings shown on the cover hereof, based on the issuance of the Policy by the Bond Insurer at the time of delivery of the Bonds. See SECURITY FOR THE BONDS Bond Insurance Assured Guaranty Municipal Corp. Moody s Investors Services, Inc. ( Moody s ) has also given the Bonds the underlying rating shown on the cover hereof, without giving regard to the Policy. An explanation of the significance of the respective ratings may be obtained from S&P at 55 Water Street, New York, New York and from Moody s at 99 Church Street, New York, New York

73 The ratings reflects only the views of such rating agencies, and there is no assurance that either rating will be obtained or will continue for any given period of time after obtained, or that the either rating will not be revised downward or withdrawn entirely by the applicable rating agency if, in its judgment, circumstances so warrant. Other than pursuant to the Continuing Disclosure Agreement, neither the District nor the Underwriter have undertaken any responsibility either to bring to the Participants attention any proposed change in or withdrawal of such rating or to oppose any such proposed revision. Any such change in or withdrawal of either or both of the ratings could have an adverse effect on the market price of the Bonds. UNDERWRITING D.A. Davidson & Co., Denver, Colorado (the Underwriter ) has agreed to purchase the Bonds from the District under a Bond Purchase Agreement at a purchase price equal to $7,752, (which is equal to the par amount of the Bonds of $7,420,000.00, less Underwriter s discount of $37,100.00, plus net original issue premium of $370,019.40). The Underwriter is committed to take and pay for all of the Bonds if any are taken. INDEPENDENT AUDITORS The financial statements of the District as of December 31, 2014 and for the year then ended, included herein as Appendix A, have been audited by L. Paul Goedecke, P.C., Certified Public Accountants, Lakewood, Colorado, as stated in its report appearing herein. VERIFICATION OF MATHEMATICAL COMPUTATIONS Prior to the delivery of the Bonds, Simmons & Wheeler P.C., Certified Public Accountants, Centennial, Colorado, will deliver a report on the mathematical accuracy of certain computations contained in schedules provided to them by the Underwriter, relating to (i) the adequacy of the maturing principal amounts of and interest due on the United States government obligations held in the Escrow Account and interest to be earned thereon to pay all of the principal of and interest on the Refunded Bonds, and (ii) the computations of actuarial yields supporting Bond Counsel s opinion relating to federal tax matters. See USES OF PROCEEDS. 65

74 OFFICIAL STATEMENT CERTIFICATION The preparation of this Official Statement and its distribution have been authorized by the District. This Official Statement is hereby duly approved by the District as of the date on the cover page hereof. SPRING MESA METROPOLITAN DISTRICT By /s/ Mark Entman Mark Entman, President 66

75 APPENDIX A AUDITED FINANCIAL STATEMENTS OF THE DISTRICT FOR THE FISCAL YEAR ENDED DECEMBER 31, 2014 A-1

76 Spring Mesa Metropolitan District Financial Statements Year Ended December 31, 2014 with Independent Auditors' Report

77 C O N T E N T S Page Independent Auditors' Report I Basic Financial Statements Governmental Funds Balance Sheet/Statement of Net Position 1 Statement of Governmental Fund Revenues, Expenditures and Changes in Fund Balances/Statement of Activities 2 Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual - General Fund 3 Notes to Financial Statements 4 Supplemental Information Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual - Debt Service Fund 15 Schedule of Debt Service Requirements to Maturity 16 Summary of Assessed Valuation, Mill Levy and Property taxes Collected 17

78 L. PAUL GoEDECKE P.C. CERTIFIED PUBLIC ACCOUNTANTS 950 WADSWORTH BLVD. SUITE 204 LAKEWOOD, COLORADO TELEPHONE (303) FAX (303) net Independent Auditor's Report Board of Directors Spring Mesa Metropolitan District Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities and each major fund of Spring Mesa Metropolitan District as of and for the year ended December 31, 2014, and the related notes to the financial statements, which collectively comprise the District's basic financial statements, as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these fmancial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opm10n on these fmancial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the fmancial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fmancial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the fmancial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the respective. financial position of the governmental activities and each major fund of the Spring Mesa Metropolitan District as of December 31, 2014, and the respective changes in financial position and the respective budgetary comparison for the general fund for the year then ended in conformity with accounting principles generally accepted in the United States of America. MEMBER OF AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTf'NTS AND COLORADO SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS

79 Other Matters Management has omitted the management's discussion and analysis that accounting principles generally accepted in the United States of America require to be presented to supplement the basic financial statements. Such missing information, although not a part of the basic financial statements, is required by the Governmental AccoUiiting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. Our opinion on the basic financial statements are not affected by this missing information. Our audit was conducted for the. purpose of forming an opinion on the financial statements that collectively comprise the District's financial statements as a whole. The supplementary information as listed in the table of contents is presented for purposes of legal compliance and additional analysis and is not a required part of the financial statements. The supplementary information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the fmancial statements and certain additional procedures, including comparing and reconciling such information directly to the. underlying accounting and other records used to prepare the financial statements or to the fmancial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the fmancial statements as a whole. L. Paul Goedecke, P.C. July 27, 2015 II

80 Spring Mesa Metropolitan District BALANCE SHEET/STATEMENT OF NET POSITION GOVERNMENTAL FUNDS December 31, 2014 Statement Debt of Net General Service Total Adjustments Position ASSETS Cash and investments $ 207,322 $ - $ 207,322 $ - $ 207,322 Cash and investments - restricted 8, , , ,835 Receivable County Treasurer - 3,059 3,059-3,059 Property taxes receivable - 422, , ,032 Prepaid expenses Total Assets $ 216,686 $ 924,466 $ 1,141,152-1,141,152 LIABILITIES Accounts payable $ 7,428 $ - $ 7,428-7,428 Prepaid assessments 4,315-4,315-4,315 Accrued interest on bonds ,025 37,025 Long-term liabilities Due within one year , ,000 Due in more than one year ,671,190 7,671,190 Total Liabilities 11,743-11,743 7,818,215 7,829,958 DEFERRED INFLOWS OF RESOURCES Deferred property taxes - 422, , ,032 Total Deferred Inflows of Resources - 422, , ,032 FUND BALANCE Nonspendable: Prepaids (904) - Restricted: Emergencies 8,460-8,460 (8,460) - Debt service - 502, ,434 (502,434) - Assigned: Project maintenance 70,000 70,000 (70,000) - Unassigned: 125, ,579 (125,579) - Total Fund Balances 204, , ,377 (707,377) - Total Liabilities, Deferred Inflows of Reources and Fund Balances $ 216,686 $ 924,466 $ 1,141,152 NET POSITION Restricted for: Emergencies 8,460 8,460 Debt service 502, ,434 Unrestricted: (7,621,732) (7,621,732) Total Net Position (Deficit) $ (7,110,838) $ (7,110,838) The notes to the financial statements are an integral part of these statements. -1-

81 Spring Mesa Metropolitan District STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE/STATEMENT OF ACTIVITIES For the Year Ended December 31, 2014 Statement Debt of General Service Total Adjustments Activities EXPENDITURES Legal $ 22,561 $ - $ 22,561 $ - $ 22,561 Accounting and Audit 10,243-10,243-10,243 Insurance 4,403-4,403-4,403 Elections 1,866-1,866-1,866 Miscellaneous expenses Projects-maintenance/replacement 66,682-66,682-66,682 Landscape Mtn 88,721-88,721-88,721 Irrigation repair 5,238-5,238-5,238 Snow Removal 4,000-4,000-4,000 Utilities 20,520-20,520-20,520 District Mgmt 19,506-19,506-19,506 Admin 11,465 11,465-11,465 Bond Principal - 105, ,000 (105,000) - Bond Interest - 424, ,800 (525) 424,275 Sub-bond interest ,755 45,755 Paying Agent Fees Treasurer Fees - 6,178 6, ,178 Total Expenditures 255, , ,364 (59,770) 732,594 PROGRAM REVENUES Assessment revenues 265, , ,445 Total Program Revenues 265, , ,445 Net Program Income (Expense) 9,659 (536,578) (526,919) 59,770 (467,149) GENERAL REVENUES Reimbursements 14,076-14,076-14,076 Interest income Property Taxes - 411, , ,841 Specific Ownership Taxes - 32,395 32, ,395 - Total General Revenues 14, , , ,225 CHANGE IN FUND BALANCE 23,765 (91,459) (67,694) 67,694 CHANGE IN NET POSITION (7,924) (7,924) FUND BALANCE/NET POSITION BEGINNING OF YEAR 181, , ,071 (7,877,985) (7,102,914) END OF YEAR $ 204,943 $ 502,434 $ 707,377 $ (7,818,215) $ (7,110,838) The notes to the financial statements are an integral part of these statements. -2-

82 Spring Mesa Metropolitan District STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL - GENERAL FUND For the Year Ended December 31, 2014 Variance Original/Final Favorable Budget Actual (Unfavorable) REVENUES Assessments $ 261,120 $ 265,445 4,325 Reimbursements - 14,076 14,076 Interest Income Total Revenues 261, ,551 18,431 - EXPENDITURES - Legal 35,000 22,561 12,439 Accounting and Audit 15,000 10,243 4,757 Insurance 6,000 4,403 1,597 Elections 15,000 1,866 13,134 Miscellaneous expenses 1, Projects-maintenance/replacement 70,000 66,682 3,318 Landscape Mtn 50,000 88,721 (38,721) Irrigation repair 15,000 5,238 9,762 Snow Removal 15,000 4,000 11,000 Utilities 35,000 20,520 14,480 District Mgmt 20,000 19, Admin 5,000 11,465 (6,465) Emergency 8,460-8,460 Contingency 111, ,410 - Total Expenditures 401, , ,084 CHANGE IN FUND BALANCE (140,750) 23, ,515 FUND BALANCE - BEGINNING OF YEAR $ 140,750 $ 181,178 $ 40,428 FUND BALANCE - END OF YEAR $ - $ 204,943 $ 204,943 The notes to the financial statements are an integral part of these statements. -3-

83 Spring Mesa Metropolitan District Notes to Financial Statements December 31, 2014 Note 1: Summary of Significant Accounting Policies The accounting policies of the Spring Mesa Metropolitan District, ( the District ), located in the City of Arvada, in Jefferson County, Colorado, conform to the accounting principles generally accepted in the United States of America ( GAAP ) as applicable to governmental units. The Governmental Accounting Standards Board ( GASB ) is the accepted standard setting body for establishing governmental accounting and financial reporting principles. The following is a summary of the more significant policies consistently applied in the preparation of financial statements. Definition of Reporting Entity The District was originally formed as the Eldorado Hills Metropolitan District in October 1990, as a quasi-municipal organization established under the State of Colorado Special District Act. The District legally changed its name to Spring Mesa Metropolitan District in March The District was established to finance and construct certain public infrastructure improvements that benefit the citizens of the District. The District's primary revenues are property taxes and assessments. The District is governed by an elected Board of Directors. As required by GAAP, these financial statements present the activities of the District, which is legally separate and financially independent of other state and local governments. The District follows the GASB pronouncements, which provide guidance for determining which governmental activities, organizations and functions should be included within the financial reporting entity. GASB sets forth the financial accountability of a governmental organization s elected governing body as the basic criterion for including a possible component governmental organization in a primary government s legal entity. Financial accountability includes, but is not limited to, appointment of a voting majority of the organization s governing body, ability to impose its will on the organization, a potential for the organization to provide specific financial benefits or burdens and fiscal dependency. The pronouncements also require including a possible component unit if it would be misleading to exclude it. The District is not financially accountable for any other organization. The District has no component units as defined by the GASB. The District has no employees and all operations and administrative functions are contracted. Basis of Presentation The accompanying financial statements are presented per GASB Statement No

84 Spring Mesa Metropolitan District Notes to Financial Statements December 31, 2014 The government-wide financial statements (i.e. the governmental funds balance sheet/statement of net position and the governmental funds statement of revenues, expenditures, and changes in fund balances/statement of activities) report information on all of the governmental activities of the District. The statement of net position reports all financial and capital resources of the District. The difference between the (a) assets and deferred outflows of resources and the (b) liabilities and deferred inflows of resources of the District is reported as net position. The difference between the assets and liabilities of the District is reported as net assets. The statement of activities demonstrates the degree to which expenditures/expenses of the governmental funds are supported by general revenues. For the most part, the effect of interfund activity has been removed from these statements. The statement of activities demonstrates the degree to which the direct and indirect expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. Major individual governmental funds are reported as separate columns in the fund financial statements. Measurement Focus, Basis of Accounting and Financial Statement Presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of the related cash flows. Property taxes are recognized as revenues in the year for which they are collected. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the District considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. The material sources of revenue subject to accrual are property taxes and interest. Expenditures, other than interest on long-term obligations, are recorded when the liability is incurred or the long-term obligation is paid. The District reports the following major governmental funds: General Fund - The General Fund is the general operating fund of the District. It is used to account for all financial resources not accounted for in another fund

85 Spring Mesa Metropolitan District Notes to Financial Statements December 31, 2014 Debt Service Fund The Debt Service Fund is used to account for all financial resources that are restricted, committed or assigned to expenditures for principal, interest and other debt related costs. Budgetary Accounting Budgets are adopted on a non-gaap basis for the governmental funds. In accordance with the State Budget Law of Colorado, the District's Board of Directors holds public hearings in the fall of each year to approve the budget and appropriate the funds for the ensuing year. The District's Board of Directors can modify the budget by line item within the total appropriation without notification. The appropriation can only be modified upon completion of notification and publication requirements. The budget includes each fund on its basis of accounting unless otherwise indicated. The appropriation is at the total fund expenditures level and lapses at year end. Assets, Liabilities and Net Position Fair Value of Financial Instruments The District s financial instruments include cash and cash equivalents, accounts receivable and accounts payable. The District estimates that the fair value of all financial instruments at December 31, 2014, does not differ materially from the aggregate carrying values of its financial instruments recorded in the accompanying balance sheet. The carrying amount of these financial instruments approximates fair value because of the short maturity of these instruments. Deposits and Investments The District s cash and cash equivalents are considered to be cash on hand and short-term investments with maturities of three months or less from the date of acquisition. Investments for the government are reported at fair value. The District follows the practice of pooling cash and investments of all funds to maximize investment earnings. Except when required by trust or other agreements, all cash is deposited to and disbursed from a minimum number of bank accounts. Cash in excess of immediate operating requirements is pooled for deposit and investment flexibility. Investment earnings are allocated periodically to the participating funds based upon each fund s average equity balance in the total cash. Estimates The preparation of these financial statements in conformity with GAAP requires the District management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates

86 Spring Mesa Metropolitan District Notes to Financial Statements December 31, 2014 Deferred Outflows/Inflows of Resources In addition to assets, the statement of financial position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. The District does not have any items that qualify for reporting in this category. In addition to liabilities, the statement of financial position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The District has one item that qualifies for reporting in this category. Deferred property taxes are deferred and recognized as an inflow of resources in the period that the amounts become available. Long-Term Obligations In the government-wide financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities. Capital Assets Prior to the year ended December 31, 2010, the District conveyed all of the capital assets acquired with bond proceeds to the City of Arvada. Property Taxes Property taxes are levied by the District s Board of Directors. The levy is based on assessed valuations determined by the County Assessor generally as of January 1 of each year. The levy is normally set by December 15 by certification to the County Commissioners to put the tax lien on the individual properties as of January 1 of the following year. The County Treasurer collects the determined taxes during the ensuing calendar year. The taxes are payable by April or if in equal installments, at the taxpayers' election, in February and June. Delinquent taxpayers are notified in July or August and the sales of the resultant tax liens on delinquent properties are generally held in November or December. The County Treasurer remits the taxes collected monthly to the District. Property taxes, net of estimated uncollectible taxes, are recorded initially as deferred inflows in the year they are levied and measurable since they are not normally available nor are they budgeted as a resource until the subsequent year. The deferred property taxes are recorded as revenue in the subsequent year when they are available or collected

87 Spring Mesa Metropolitan District Notes to Financial Statements December 31, 2014 Fund Equity Fund balance of governmental funds is reported in various categories based on the nature of any limitations requiring the use of resources for specific purposes. Because circumstances differ among governments, not every government or every governmental fund will present all of these components. The following classifications make the nature and extent of the constraints placed on a government s fund balance more transparent: Nonspendable Fund Balance Nonspendable fund balance includes amounts that cannot be spent because they are either not spendable in form (such as inventory or prepaids) or are legally or contractually required to be maintained intact. The nonspendable fund balance in the General Fund in the amount of $904 represents prepaid insurance. Restricted Fund Balance The restricted fund balance includes amounts restricted for a specific purpose by external parties such as grantors, bondholders, constitutional provisions or enabling legislation. The restricted fund balance in the General Fund represents Emergency Reserves that have been provided as required by Article X, Section 20 of the Constitution of the State of Colorado. A total of $8,460 of the General Fund balance has been restricted in compliance with this requirement. The restricted fund balance in the Debt Service Fund in the amount of $502,434 is restricted for the payment of the debt service costs associated with the General Obligation Refunding Bonds Series 2006 (see Note 3). Committed Fund Balance The portion of fund balance that can only be used for specific purposes pursuant to constraints imposed by a formal action of the government s highest level of decision-making authority, the Board of Directors. The constraint may be removed or changed only through formal action of the Board of Directors. Assigned Fund Balance Assigned fund balance includes amounts the District intends to use for a specific purpose. Intent can be expressed by the District s Board of Directors or by an official or body to which the Board of Directors delegates the authority. The assigned fund balance in the General Fund represents the amount appropriated for project maintenance or repairs in the budget for the year ending December 31,

88 Spring Mesa Metropolitan District Notes to Financial Statements December 31, 2014 Unassigned Fund Balance Unassigned fund balance includes amounts that are available for any purpose. Positive amounts are reported only in the General Fund. For the classification of Governmental Fund balances, the District considers an expenditure to be made from the most restrictive first when more than one classification is available. Net Position Net Position represents the difference between assets and deferred outflows of resources less liabilities and deferred inflows of resources. The District can report three categories of net position, as follows: Net investment in capital assets consists of net capital assets, reduced by outstanding balances of any related debt obligations and deferred inflows of resources attributable to the acquisition, construction, or improvement of those assets and increased by balances of deferred outflows or resources related to those assets. At December 31, 2014 the District did not have any amount to report in this category. Restricted net position net position is considered restricted if their use is constrained to a particular purpose. Restrictions are imposed by external organizations such as federal or state laws. Restricted net position is reduced by liabilities and deferred inflows of resources related to the restricted assets. Unrestricted net position consists of all other net position that does not meet the definition of the above two components and is available for general use by the District. When an expense is incurred for purposes for which both restricted and unrestricted net position are available, the District will use the most restrictive net position first. Note 2: Cash and Investments As of December 31, 2014, cash and investments are classified in the accompanying financial statements as follows: Statement of Net Position: Cash and investments $ 207,322 Cash and investments restricted 507,835 $ 715,

89 Spring Mesa Metropolitan District Notes to Financial Statements December 31, 2014 Cash and investments as of December 31, 2014 consist of the following: Deposits with financial institutions $ 208,099 Investments COLOTRUST 507,058 $ 715,157 Deposits Custodial Credit Risk The Colorado Public Deposit Protection Act, ( PDPA ) requires that all units of local government deposit cash in eligible public depositories. State regulators determine eligibility. Amounts on deposit in excess of federal insurance levels must be collateralized. The eligible collateral is determined by the PDPA. PDPA allows the institution to create a single collateral pool for all public funds. The pool is to be maintained by another institution, or held in trust for all the uninsured public deposits as a group. The market value of the collateral must be at least equal to 102% of the aggregate uninsured deposits. The State Commissioners for banks and financial services are required by statute to monitor the naming of eligible depositories and reporting of the uninsured deposits and assets maintained in the collateral pools. The District follows state statutes for deposits. None of the District s deposits were exposed to custodial credit risk. Investments Credit Risk The District has not adopted a formal investment policy; however the District follows state statutes regarding investments. Colorado statutes specify the types of investments meeting defined rating and risk criteria in which local governments may invest. These investments include obligation of the United States and certain U.S. Government agency entities, certain money market funds, guaranteed investment contracts, and local government investment pools. Custodial and Concentration of Credit Risk None of the District s investments are subject to custodial or concentration of credit risk Interest Rate Risk Colorado revised statutes limit investment maturities to five years or less unless formally approved by the Board of Directors. As of December 31, 2014, the District had the following investments:

90 Spring Mesa Metropolitan District Notes to Financial Statements December 31, 2014 COLOTRUST The local government investment pool, Colorado Local Government Liquid Asset Trust ( COLOTRUST ) is rated AAAm by Standard & Poor s with a weighted average maturity of under 60 days. COLOTRUST is an investment trust/joint ventures established for local government entities in Colorado to pool surplus funds. The trusts operate similarly to a money market fund with each share maintaining a value of $1.00. The Trust offers shares in two portfolios, COLOTRUST PRIME and COLOTRUST PLUS+. Both investments consist of U.S. Treasury bills and notes and repurchase agreements collateralized by U.S. Treasury securities. COLOTRUST PLUS+ may also invest in certain obligations of U.S. government agencies, highest rated commercial paper and repurchase agreements collateralized by certain obligations of U.S. government agencies. Designated custodian banks provide safekeeping and depository services to the trusts. Substantially all securities owned by the trusts are held by the Federal Reserve Bank in the accounts maintained for the custodian banks. The custodians internal records identify the investments owned by COLOTRUST. At December 31, 2014, the District had $507,058 invested in COLOTRUST. Note 3: Long Term Debt A description of the long-term obligations as of December 31, 2014, is as follows: Convertible Capital Appreciation Limited Tax General Obligation Bonds Series On May 17, 2006 the District issued $5,702,152 of Convertible Capital Appreciation Limited Tax General Obligation Bonds Series 2006 bearing interest at 6.0% for the purpose of repaying the Developer pursuant to the Infrastructure Acquisition Agreement dated July 6, The Bonds have a maturity date of December 1, The Bond s accrue interest until June 1, 2010 when they convert to current interest bonds with an accreted value of $7,240,000. Commencing on December 1, 2010, the Bonds pay interest semi-annually on June 1 and December 1 at the rate of 6.00% per annum and principal payments on December 1 through December 1, The Bonds are subject to redemption prior to maturity, at the option of the District, in whole or in part, on June 1, 2016, and on any interest payment date thereafter, upon payment of par, accreted interest and accrued interest. The Bonds maturing on December 1, 2036, also are subject to mandatory sinking fund redemption, in part, by lot, on December 1, 2010 and on each December 1 thereafter through December 1, The Bonds are payable from property taxes from a required mill levy of mills to be imposed upon all taxable property within the District, specific ownership taxes, and investment income earned on the accounts created under the indenture. The required mill levy can reduce should a surplus fund have more than $700,000. The mill levy is capped at mills

91 Spring Mesa Metropolitan District Notes to Financial Statements December 31, 2014 Subordinate Limited Tax General Obligation Bonds, Series 2010 On December 1, 2010; the District entered into a Settlement Agreement with Eldorado Hills LLC, 305 S Corporation, TI Companies, Inc. and Tarco Inc. (collectively Developer ). The District issued $640,000 of Subordinate Limited Tax General Obligation Bonds, Series The Developer agreed to forgive the remaining balance of $860,000 and the amounts owed under the Funding and Reimbursement Agreement. The District has agreed not to file a lawsuit on or before December 31, 2049 against the Developer for claims arising or relating to the construction of the District improvements. The Series 2010 Bonds are subordinate to the Series 2006 Bonds. The Bonds accrue interest at 6.00% annually. Interest and principal are payable annually on December 15 should funds in the Surplus Fund for the Series 2006 Bonds exceed $700,000. The Series 2010 Bonds are also subject to a required mill levy of mills and a mill levy cap of mills. The following is an analysis of changes in long-term debt for the period ending December 31, 2014: Balance Balance Current 1/1/14 Additions Deletions 12/31/2014 Portion General Obligation Bonds - Series 2006 $ 7,080,000 $ - $ 105,000 $ 6,975,000 $ 110,000 Subordinate Limited Tax General Obligation Bonds - Series ,557 45, ,190 - $ 7,840,557 $ 45,633 $ 105,000 $ 7,781,190 $ 110,000 The following is a summary of the annual long-term debt principal and interest requirements for the Series 2006 Bonds. Principal Interest Total , , , , , , , , , , , , , , , ,095,000 1,764,000 2,859, ,630,000 1,374,900 3,004, ,360, ,400 3,163, ,195, ,900 1,303,900 $ 6,975,000 $ 6,068,400 $ 13,043,

92 Spring Mesa Metropolitan District Notes to Financial Statements December 31, 2014 As of December 31, 2014, the District had remaining voted debt authorization of approximately $10,997,848. The District has not budgeted to issue any additional debt in Per the District s Service Plan, the District cannot issue debt in excess of $10,500,000 for capital costs. Note 4: Tax, Spending and Debt Limitations Article X, Section 20 of the Colorado Constitution, commonly known as the Taxpayer Bill of Rights ( TABOR ), contains tax, spending, revenue and debt limitations which apply to the State of Colorado and all local governments. Spending and revenue limits are determined based on the prior year s Fiscal Year Spending adjusted for allowable increases based upon inflation and local growth. Fiscal Year Spending is generally defined as expenditures plus reserve increases with certain exceptions. Revenue in excess of the Fiscal Year Spending limit must be refunded unless the voters approve retention of such revenue. TABOR requires local governments to establish Emergency Reserves. These reserves must be at least 3% of Fiscal Year Spending (excluding bonded debt service). Local governments are not allowed to use the emergency reserves to compensate for economic conditions, revenue shortfalls, of salary or benefit increases. The District s management believes it is in compliance with the provisions of TABOR. However, TABOR is complex and subject to interpretation. Many of the provisions, including the interpretation of how to calculate Fiscal Year Spending limits will require judicial interpretation. On November 4, 2003, a majority of the District s electors authorized the District to collect and spend or retain in a reserve all currently levied taxes and fees of the District without regard to any limitations under Article X, Section 20 of the Colorado Constitution. Note 5 Risk Management Except as provided in the Colorado Governmental Immunity Act, , et seq., CRS, the District may be exposed to various risks of loss related to torts, theft of, damage to, or destruction of assets; errors or omissions; injuries to agents; and natural disasters. The District has elected to participate in the Colorado Special Districts Property and Liability Pool ( Pool ) which is an organization created by intergovernmental agreement to provide common liability and casualty insurance coverage to its members at a cost that is considered economically appropriate. Settled claims have not exceeded this commercial coverage in any of the past three fiscal years

93 Spring Mesa Metropolitan District Notes to Financial Statements December 31, 2014 The District pays annual premiums to the Pool for auto, public officials liability, and property and general liability coverage. In the event aggregated losses incurred by the Pool exceed its amounts recoverable from reinsurance contracts and its accumulated reserves, the District may be called upon to make additional contributions to the Pool on the basis proportionate to other members. Any excess funds which the Pool determines are not needed for purposes of the Pool may be returned to the members pursuant to a distribution formula. Note 6: Reconciliation of Government-Wide Financial Statements and Fund Financial Statements The Government Funds Balance Sheet/Statement of Net Position includes an adjustments column. The adjustments have the following elements: 1) Long-term liabilities such as bonds payable and accrued bond interest payable, are not due and payable in the current period and, therefore, are not in the funds. The Statement of Governmental Fund Revenues, Expenditures, and Changes in Fund Balances/Statement of Activities includes an adjustments column. The adjustments have the following elements: 1) Governmental funds report interest expense on the modified accrual basis; however, interest expense is reported on the full accrual method on the Statement of Activities; and 2) governmental funds report long-term debt payments as expenditures, however, in the statement of activities, the payment of long-term debt is recorded as a decrease of long-term liabilities

94 SUPPLEMENTAL INFORMATION

95 Spring Mesa Metropolitan District SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL - DEBT SERVICE FUND For the Year Ended December 31, 2014 Variance Original & Final Favorable Budget Actual (Unfavorable) REVENUES Property taxes $ 411,841 $ 411,841 $ - Specific ownership taxes 28,829 32,395 3,566 Interest income 1, (117) Total Revenues 441, ,119 3,449 EXPENDITURES Bond Principle 105, ,000 - Bond interest 424, ,800 - Misc Paying agent fees 1, Treasurers' fees 6,178 6,178 - Total Expenditures 537, , EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES (95,862) (91,459) 4,403 FUND BALANCE - BEGINNING OF YEAR 587, ,893 5,921 FUND BALANCE - END OF YEAR $ 492,110 $ 502,434 $ 10,324 The notes to the financial statements are an integral part of these statements. -16-

96 Spring Mesa Metropolitan District SCHEDULE OF DEBT SERVICE REQUIREMENTS TO MATURITY General Obligation Bonds Series 2006 For the Year Ended December 31, 2014 Interest Payable June 1 and December 1 Principal Due December 1 Year Ended December 31, Principal Interest Total 2014 $ 105,000 $ 424,800 $ 529, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,000 71, , ,000 37, ,200 $ 7,080,000 $ 6,493,200 $ 13,573,200 The notes to the financial statements are an integral part of these statements

97 Spring Mesa Metropolitan District SUMMARY OF ASSESSED VALUATION, MILL LEVY AND PROPERTY TAXES COLLECTED December 31, 2014 Prior Year Assessed Valuation for Current Percent Year Ended Year Property Mills Levied Total Property Tax Collected December 31, Tax Levy General Fund Debt Service Levied Collected to Levied 2006 $ 2,270, $ 68,118 $ 68, % 2007 $ 1,010, $ 34,869 $ 34, % 2008 $ 6,978, $ 240,769 $ 240, % 2009 $ 9,360, $ 322,923 $ 323, % 2010 $ 9,857, $ 340,075 $ 340, % 2011 $ 10,172, $ 350,951 $ 351, % 2012 $ 11,618, $ 400,841 $ 400, % 2013 $ 11,730, $ 404,700 $ 404, % 2014 $ 11,937, $ 411,841 $ 411, % Estimated for year ending December 31, 2015 $ 12,232, $ 422,032 NOTE Property taxes collected in any one year include collection of delinquent property taxes levied and/or abatements or valuations in prior years. Information received from the County Treasurer does not permit identification of specific year assessment. The notes to the financial statements are an integral part of these statements

98 APPENDIX B BOOK-ENTRY ONLY SYSTEM DTC will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fullyregistered Bond certificate will be issued for each maturity of the Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC. DTC, the world s largest securities 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 regulated 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 of 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 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 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 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 B-1

99 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 affect 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. Beneficial Owners of Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the Trustee and request that copies of notices be provided directly to them. Redemption notices shall be sent to DTC. If less than all of the Bonds within an issue are being redeemed, DTC s practice is to determine by lot the amount of the interest of each Direct Participant in such issue 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 District 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 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Principal, interest and redemption proceeds 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 District 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 Trustee or the District, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal, interest or redemption proceeds to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the District 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. B-2

100 DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the District 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 District 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 the District believes to be reliable, but the District takes no responsibility for the accuracy thereof. SO LONG AS CEDE & CO., AS NOMINEE OF DTC, IS THE REGISTERED OWNER OF THE BONDS, REFERENCES IN THIS LIMITED OFFERING MEMORANDUM TO THE REGISTERED OWNERS OF THE BONDS WILL MEAN CEDE & CO. AND WILL NOT MEAN THE BENEFICIAL OWNERS. The District and the Trustee may treat DTC (or its nominee) as the sole and exclusive owner of the Bonds registered in its name for the purpose of payment of the principal of or interest or premium, if any, on the Bonds, giving any notice permitted or required to be given to registered owners under the Indenture, including any notice of redemption, registering the transfer of Bonds, obtaining any consent or other action to be taken by registered owners and for all other purposes whatsoever, and will not be affected by any notice to the contrary. The District and the Trustee will not have any responsibility or obligation to any DTC Participant, any person claiming a beneficial ownership interest in the Bonds under or through DTC or any DTC Direct Participant, Indirect Participant or other person not shown on the records of the Trustee as being a registered owner with respect to: the accuracy of any records maintained by DTC, any DTC Direct Participant or Indirect Participant regarding ownership interests in the Bonds; the payment by DTC, any DTC Direct Participant or Indirect Participant of any amount in respect of the principal of or interest or premium, if any, on the Bonds; the delivery to any DTC Direct Participant, Indirect Participant or any Beneficial Owner of any notice which is permitted or required to be given to registered owners under the Authorizing Document, including any notice of redemption; the selection by DTC, any DTC Direct Participant or any Indirect Participant of any person to receive payment in the event of a partial redemption of the Bonds; or any consent given or other action taken by DTC as a registered owner. As long as the DTC book-entry system is used for the Bonds, the Trustee will give any notice of redemption or any other notices required to be given to registered owners of Bonds only to DTC or its nominee. Any failure of DTC to advise any DTC Direct Participant, of any DTC Direct Participant to notify any Indirect Participant, of any DTC Direct Participant or Indirect Participant to notify any Beneficial Owner, of any such notice and its content or effect will not affect the validity of the redemption of the Bonds called for redemption or of any other action premised on such notice. B-3

101 APPENDIX C FORM OF CONTINUING DISCLOSURE AGREEMENT Spring Mesa Metropolitan District General Obligation Refunding Bonds, Series 2015 This Continuing Disclosure Agreement (the Disclosure Agreement ) is executed and delivered by Spring Mesa Metropolitan District (the District ), and UMB Bank, n.a. (the Dissemination Agent ), in connection with the issuance of the Spring Mesa Metropolitan District (the District ) General Obligation Refunding Bonds, Series 2015, dated as of their date of delivery in the aggregate principal amount of $7,420,000 (the Bonds ). The Bonds are being issued pursuant to an Indenture of Trust dated as of December 1, 2015 (the Indenture ), between the District and UMB Bank, n.a., as trustee (the Trustee ). The District and the Dissemination Agent covenant and agree as follows: SECTION 1. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered by the District and the Dissemination Agent for the benefit of the holders and beneficial owners of the Bonds and in order to assist the Participating Underwriter in complying with Rule 15c2-12(b)(5) of the Securities and Exchange Commission (the SEC ). SECTION 2. Definitions. In addition to the definitions set forth in the Indenture or parenthetically defined herein, which apply to any capitalized terms used in this Disclosure Agreement unless otherwise defined in this Section, the following capitalized terms shall have the following meanings: Annual Report means any Annual Report provided by the District pursuant to, and as described in, Sections 3 and 4 hereof. Bond Insurer means Assured Guaranty Municipal Corp., a New York stock insurance company, or any successor thereto and assigns. Dissemination Agent means, initially, UMB Bank, n.a., or any successor Dissemination Agent designated in writing by the District and which has filed with the District a written acceptance of such designation. Material Events means any of the events listed in Section 5 hereof. MSRB means the Municipal Securities Rulemaking Board. As of the date hereof, the MSRB s required method of filing is electronically via its Electronic Municipal Market Access (EMMA) system available on the Internet at Participating Underwriter means the original underwriter of the Bonds required to comply with the Rule in connection with an offering of the Bonds. Rule means Rule 15c2-12(b)(5) adopted by the SEC under the Securities Exchange Act of 1934, as the same may be amended from time to time. C-1

102 SECTION 3. Provision of Annual Reports. A. The District shall, or shall cause the Dissemination Agent to, not later than nine (9) months following the end of each of the District s fiscal years, commencing with the ninth (9 th ) month following the end of the District s fiscal year ending December 31, 2014, provide to the MSRB (in an electronic format as prescribed by the MSRB), an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Agreement. Not later than ten (10) business days prior to said date, the District shall provide the Annual Report to the Dissemination Agent. 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 4 hereof; provided that the audited financial statements of the District may be submitted separately from the balance of the Annual Report. The District shall include with each submission of the Annual Report to the Dissemination Agent a written representation addressed to the Dissemination Agent to the effect that such Annual Report is the Annual Report required by this Disclosure Agreement and that it complies with the requirements hereof. B. The Dissemination Agent shall provide the Annual Report to the MSRB within three (3) business days of its receipt from the District. C. If the District is unable to provide to the Dissemination Agent an Annual Report by the date required in subsection A, which results in the Dissemination Agent s inability to provide an Annual Report to the MSRB by the date required, the Dissemination Agent shall file or cause to be filed a notice in substantially the form attached as Exhibit A with the MSRB. D. The Dissemination Agent shall: (1) determine prior to the date of each filing of an Annual Report the appropriate electronic format prescribed by the MSRB; (2) send written notice to the District at least 45 days prior to the date an Annual Report is due stating that the Annual Report is due as provided in Section 3A hereof; and (3) file a report with the District certifying that the Annual Report has been provided pursuant to this Disclosure Agreement, stating the date it was provided and listing all the entities to which it was provided. SECTION 4. Content of Annual Reports. The Annual Report shall contain or incorporate by reference the following: A. A copy of the District s annual financial statements prepared in accordance with generally accepted accounting principles audited by a firm of certified public accountants. If audited annual financial statements are not available by the time specified in Section 3A above, unaudited financial statements will be provided as part of the Annual Report and audited financial statements will be provided when and if available. C-2

103 B. An update of the type of information identified in Exhibit B hereto, which is contained in the tables in the Official Statement with respect to the Bonds. Any or all of the items listed above may be incorporated by reference from other documents, including official statements of debt issues of the District or related public entities, which are available to the public on the MSRB s Internet Web Site or filed with the SEC. The District shall clearly identify each such document incorporated by reference. SECTION 5. Reporting of Material Events. The District shall file or cause to be filed with the MSRB, in a timely manner not in excess of ten business days after the occurrence of the event, notice of any of the events listed below with respect to the Bonds: A. Principal and interest payment delinquencies; B. Non-payment related defaults, if material; difficulties; difficulties; C. Unscheduled draws on debt service reserves reflecting financial D. Unscheduled draws on credit enhancements reflecting financial E. Substitution of credit or liquidity providers or their failure to perform; F. Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds; G. Modifications to rights of bondholders, if material; H. Bond calls, if material, and tender offers; I. Defeasances; if material; J. Release, substitution or sale of property securing repayment of the Bonds, K. Rating changes; person; * L. Bankruptcy, insolvency, receivership or similar event of the obligated * For the purposes of the event identified in subparagraph (b)(5)(i)(c)(12) of the Rule, 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 C-3

104 M. The consummation of a merger, consolidation, or acquisition involving an obligated person or the sale of all or substantially all of the assets of the obligated person, 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; and N. Appointment of a successor or additional trustee or the change of name of a trustee, if material. SECTION 6. Format; Identifying Information. All documents provided to the MSRB pursuant to this Disclosure Agreement shall be in the format prescribed by the MSRB and accompanied by identifying information as prescribed by the MSRB. As of the date of this Disclosure Agreement, all documents submitted to the MSRB must be in portable document format (PDF) files configured to permit documents to be saved, viewed, printed and retransmitted by electronic means. In addition, such PDF files must be word-searchable, provided that diagrams, images and other non-textual elements are not required to be word-searchable. SECTION 7. Notice to Bond Insurer. So long as the Bond Insurer is not in default under the Policy, any notices required to be given by the Dissemination Agent under this Disclosure Agreement shall also be provided to the Bond Insurer. Notices to the Bond Insurer shall be sent to it as follows: Assured Guaranty Municipal Corp., Attn: Managing Director, Public Finance Surveillance Group, 31 West 52 nd Street, New York, New York, SECTION 8. Termination of Reporting Obligation. The District s and Dissemination Agent s obligations under this Disclosure Agreement shall terminate upon the earliest of: (A) the date of legal defeasance, prior redemption or payment in full of all of the Bonds; (B) the date that the District shall no longer constitute an obligated person within the meaning of the Rule; or (C) the date on which those portions of the Rule which require this written undertaking are held to be invalid by a court of competent jurisdiction in a nonappealable action, have been repealed retroactively or otherwise do not apply to the Bonds. SECTION 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Agreement, the District and the Dissemination Agent may amend this Disclosure Agreement and may waive any provision of this Disclosure Agreement, without the consent of the holders and beneficial owners of the Bonds, if such amendment or waiver does not, in and of itself, cause the undertakings herein (or action of any Participating Underwriter in reliance on the undertakings herein) to violate the Rule, but taking into account any subsequent change in or official interpretation of the Rule. The Dissemination Agent will provide notice of such amendment or waiver to the MSRB. the obligated person, or if such jurisdiction has been assumed by leaving the existing governing body and official 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. C-4

105 SECTION 10. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the District 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 Material Event, in addition to that which is required by this Disclosure Agreement. If the District chooses to include any information in any Annual Report or notice of occurrence of a Material Event in addition to that which is specifically required by this Disclosure Agreement, the District shall have no obligation under this Disclosure Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Material Event. SECTION 11. Default. In the event of a failure of the District to comply with any provision of this Disclosure Agreement, any holder or beneficial owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandamus or specific performance by court order, to cause the District 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 Indenture, and the sole remedy under this Disclosure Agreement in the event of any failure of the District to comply with this Disclosure Agreement shall be an action to compel performance. SECTION 12. Resignation or Removal of Dissemination Agent. The present or any future Dissemination Agent may resign at any time upon 30 days prior written notice to the District. The District may remove the present or any future Dissemination Agent upon 30 days prior written notice to the Dissemination Agent. Such resignation or removal shall take effect upon the appointment by the District of a successor Dissemination Agent or upon the execution by the District of a written undertaking in which the District agrees to assume all of the obligations of the Dissemination Agent hereunder, but in no event earlier than 30 days after such written notice of resignation or removal has been given. If the Dissemination Agent also serves as the Registrar and Paying Agent under the Indenture, the Dissemination Agent may resign or be removed under this Disclosure Agreement without also resigning or being removed as Registrar and Paying Agent under the Indenture. SECTION 13. Compensation. As compensation for its services under this Disclosure Agreement, the Dissemination Agent shall be compensated or reimbursed by the District for its reasonable fees and expenses in performing the services specified under this Disclosure Agreement. SECTION 14. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the District, the Dissemination Agent, the Participating Underwriter, the Bond Insurer and the holders and beneficial owners from time to time of the Bonds, and shall create no rights in any other person or entity. C-5

106 IN WITNESS WHEREOF, the District and the Dissemination Agent have caused this Disclosure Agreement to be executed in their respective names, all as of the date first above written. SPRING MESA METROPOLITAN DISTRICT By: Name: Title: UMB BANK, n.a. By: Name: Title: C-6

107 EXHIBIT A NOTICE OF FAILURE TO FILE ANNUAL REPORT Name of District: Spring Mesa Metropolitan District Name of Bond Issue: Spring Mesa Metropolitan District General Obligation Bonds, Series 2015, dated as of December, 2015, in the original aggregate principal amount of $7,420,000. CUSIP: 84986P Date of Issuance: December, 2015 NOTICE IS HEREBY GIVEN that the District has not provided an Annual Report with respect to the above-named Bonds as required by the Continuing Disclosure Agreement executed December, 2015, by the District. The District anticipates that the Annual Report will be filed by. Dated:, UMB Bank, n.a., as Dissemination Agent By: Its: C-7

108 EXHIBIT B INDEX OF OFFICIAL STATEMENT TABLES TO BE UPDATED History of Assessed Valuations and Mill Levies for the District Property Tax Collections in the District Ten Largest Owners of Taxable Property within the District 2015 Assessed Valuation of Classes of Property in the District Selected Debt Ratios of the District as of the Date of this Official Statement (Unaudited) (1) Statement of Revenue, Expenditures and Changes in Fund Balance General Fund Statement of Revenue, Expenditures and Changes in Fund Balance Debt Service Fund Statement of Revenue, Expenditures and Changes in Fund Balance Capital Projects Fund (2) Budget Summary and Comparison General Fund Budget Summary and Comparison Debt Service Fund Budget Summary and Comparison Capital Projects Fund (1) Only those portions of the table pertaining to the direct debt of the District are required to be updated. (2) Statement of Revenue, Expenditures and Changes in Fund Balance Capital Projects Fund does not exist in the Official Statement since the District began using such fund in the current fiscal year. C-8

109 APPENDIX D FORM OF BOND COUNSEL OPINION December, 2015 Spring Mesa Metropolitan District Arvada, Colorado $7,420,000 Spring Mesa Metropolitan District General Obligation Refunding Bonds, Series 2015 Ladies and Gentlemen: We have acted as bond counsel to the Spring Mesa Metropolitan District (the District ), located in Arvada, Colorado, in connection with the issuance of its General Obligation Refunding Bonds, Series 2015, in the aggregate principal amount of $7,420,000 (the Bonds ), dated the date hereof. In such capacity, we have examined the District s certified proceedings and such other documents and such laws of the State of Colorado and of the United States of America as we have deemed necessary to render this opinion letter. The Bonds are issued and secured pursuant to an authorizing resolution of the Board of Directors of the District adopted on December 1, 2015 (the Bond Resolution ), and pursuant to that certain Indenture of Trust dated as of December 1, 2015 (the Indenture ) between the District and UMB Bank, n.a., as trustee. Capitalized terms not otherwise defined herein shall have the meanings ascribed to them by the Indenture. Regarding questions of fact material to our opinions, we have relied upon the District s certified proceedings and other representations and certifications of public officials and others furnished to us without undertaking to verify the same by independent investigation. Based upon such examination, it is our opinion as bond counsel that: 1. The Bonds constitute valid and binding general obligations of the District. 2. All of the taxable property of the District is subject to the levy of an ad valorem tax to pay the Bonds without limitation of rate and in an amount sufficient to pay the Bonds when due. 3. The Indenture has been duly authorized by the District, duly executed and delivered by authorized officers of the District, and, assuming valid authorization, execution and D-1

110 delivery by the Trustee, is a valid and legally binding obligation of the District enforceable against the District in accordance with its terms. The Indenture creates a valid lien on the Trust Estate, subject to the provisions, conditions, and limitations contained in the Indenture. We express no opinion regarding the priority of the lien on the Trust Estate created by the Indenture. 4. Interest on the Bonds is excluded from gross income under federal income tax laws pursuant to Section 103 of the Internal Revenue Code of 1986, as amended to the date hereof (the Tax Code ), interest on the Bonds is excluded from alternative minimum taxable income as defined in Section 55(b)(2) of the Tax Code except that such interest is required to be included in calculating the adjusted current earnings adjustment applicable to corporations for purposes of computing the alternative minimum taxable income of corporations, and interest on the Bonds is excluded from Colorado taxable income and Colorado alternative minimum taxable income under Colorado income tax laws in effect as of the date hereof. The opinions expressed in this paragraph assume continuous compliance with the covenants and continued accuracy of the representations contained in the District s certified proceedings and in certain other documents and certain other certifications furnished to us. The opinions expressed in this opinion letter are subject to the following: The obligations of the District pursuant to the Bonds, the Bond Resolution, and the Indenture are subject to the application of equitable principles, to the reasonable exercise in the future by the State of Colorado and its governmental bodies of the police power inherent in the sovereignty of the State of Colorado, and to the exercise by the United States of America of the powers delegated to it by the Federal Constitution, including without limitation, bankruptcy powers. The Bonds have been designated by the District as qualified tax-exempt obligations for purposes of Section 265(b)(3) of the Tax Code. In this opinion letter issued in our capacity as bond counsel, we are opining only upon those matters set forth herein, and we are not passing upon the accuracy, adequacy or completeness of the Official Statement dated December 2, 2015, relating to the Bonds or any other statements made in connection with any offer or sale of the Bonds or upon any federal or state tax consequences arising from the receipt or accrual of interest on or the ownership or disposition of the Bonds, except those specifically addressed herein. This opinion letter is issued as of the date hereof and we assume no obligation to revise or supplement this opinion letter to reflect any facts or circumstances that may hereafter come to our attention or any changes in law that may hereafter occur. Respectfully submitted, D-2

111 APPENDIX E SPECIMEN BOND INSURANCE POLICY E-1

112 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