$15,230,000 WALKER COUNTY DEVELOPMENT AUTHORITY (GEORGIA) Economic Development Taxable Revenue Bonds, Series 2015

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1 NEW ISSUE BOOK ENTRY ONLY OFFICIAL STATEMENT RATING: S&P AA (stable outlook) (insured) See MISCELLANEOUS, -Rating herein. Interest on the Bonds is included in gross income for federal income tax purposes and therefore is not exempt from federal income taxation. Interest on the Bonds is, however, exempt from State of Georgia income taxation. See LEGAL MATTERS Certain Tax Consequences of Owning Bonds herein. Dated: Delivery Date $15,230,000 WALKER COUNTY DEVELOPMENT AUTHORITY (GEORGIA) Economic Development Taxable Revenue Bonds, Series 2015 Principal Due: August 1, as shown on inside front cover The Walker County Development Authority ( Authority ) Economic Development Taxable Revenue Bonds, Series 2015 ( Bonds ) will be issued in registered form in the name of Cede and Co., as the nominee for The Depository Trust Company ( DTC ), New York, New York. Individual purchases of the Bonds must be made in book-entry form only in authorized denominations of $5,000 or any integral multiple thereof. Individual purchasers ( Beneficial Owners ) of the Bonds will not receive physical delivery of the Bonds. Transfers of the Bonds will be effected through a book-entry system as described herein. Interest on the Bonds will be payable on February 1 and August 1 of each year (each an Interest Payment Date ), beginning February 1, So long as DTC or its nominee is the registered owner of the Bonds, disbursements of payments of principal of and interest on the Bonds to DTC is the responsibility of U.S. Bank National Association, Atlanta, Georgia, as Trustee; disbursements of such payments to DTC Participants is the responsibility of DTC; and disbursements of such payments to the Beneficial Owners is the responsibility of Direct and Indirect Participants as more fully described herein. See THE BONDS, -Book Entry Only System of Delivery of the Bonds herein. The Bonds are subject to redemption prior to their respective maturities as described herein. See The Bonds Optional Redemption herein. The Bonds are being issued to provide funds (1) to repay a promissory note outstanding in the principal amount of $450,000 obtained by the Authority from Walker County, Georgia ( County ) to finance the costs of acquiring and improving land for use as two industrial parks owned by the Authority, known as Rock Spring Industrial Park and Walker County Industrial Park (collectively, Industrial Parks ), (2) to finance approximately $5,260,000 to be used to improve the Industrial Parks, (3) to refund the Authority s Taxable Revenue Bond (Ohio Logistics Project), Series 2011, outstanding in the principal amount of $643,300, (4) to finance the costs of acquiring from the County (a) its Civic Center at an approximate cost of $2,063,039 and its Agricultural Center located at North Highway 27 in Rock Spring, Georgia, at an approximate cost of $1,099,475 and (b) its Mountain Cove Resort Properties located on Dougherty Gap Road in an unincorporated area of the County at an approximate cost of $4,875,659, (5) to finance the costs of issuing the Bonds, including to purchase a Build America Mutual municipal bond insurance policy related to the Bonds. See THE BONDS, -Estimated Sources and Uses of Funds; and -The Projects herein. The Bonds are special limited obligations of the Authority secured by and payable solely from a first lien on and pledge of the Contract Payments (defined below). The Bonds do not constitute a charge, lien or encumbrance, legal or equitable, on any other property of the Authority. The Authority and the County, have entered into an Intergovernmental Economic Development Contract, dated as of September 1, 2015 ( Contract ) in connection with the issuance of the Bonds. Pursuant to the terms of the Contract, the County will pay to the Authority amounts sufficient to enable the Authority to pay the debt service on the Bonds ( Contract Payments ). The County has agreed to levy an ad valorem property tax, limited to one (1) mill, on all property in the County subject to taxation for such purposes in order to make the Contract Payments. The Authority has assigned and pledged to the Trustee, and has granted a first priority security interest in, all of its right, title, and interest in the Contract (except for the Unassigned Rights, as defined herein) and all revenues, payments, receipts, and moneys to be received and held thereunder, pursuant to a Trust Indenture and Security Agreement, dated as of September 1, 2015 ( Indenture ), between the Authority and U.S. Bank National Association ( Trustee ). See THE BONDS Security and Sources of Payment of the Bonds. The scheduled payment of 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 Build America Mutual. THE BONDS DO NOT CONSTITUTE A DEBT OR A PLEDGE OF THE FAITH AND CREDIT OF THE STATE OF GEORGIA, THE COUNTY OR ANY OTHER POLITICAL SUBDIVISION OF THE STATE OF GEORGIA. NEITHER THE STATE OF GEORGIA, THE COUNTY NOR ANY OTHER POLITICAL SUBDIVISION OF THE STATE OF GEORGIA IS OBLIGATED TO LEVY OR TO PLEDGE ANY FORM OF TAXATION WHATEVER FOR THE PAYMENT OF THE BONDS. THE AUTHORITY HAS NO TAXING POWER. HOWEVER, THE COUNTY S TAXING POWER HAS BEEN PLEDGED TO THE PAYMENT OF THE CONTRACT PAYMENTS. THIS COVER PAGE CONTAINS CERTAIN INFORMATION FOR QUICK REFERENCE ONLY. IT IS NOT A SUMMARY OF THE BONDS OR THE SECURITY THEREFOR. INVESTORS MUST READ THE ENTIRE OFFICIAL STATEMENT TO OBTAIN INFORMATION ESSENTIAL TO THE MAKING OF AN INFORMED INVESTMENT DECISION. The Bonds are offered when, as and if issued by the Authority and accepted by the Underwriter, subject to the approval of legality of the Bonds by Dentons US LLP, Atlanta, Georgia, Bond Counsel. Certain legal matters relating to the Bonds will be passed on for the County by its counsel, Donald F. Oliver, LaFayette, Georgia, and for the Underwriter by its counsel, Parker Poe Adams & Bernstein LLP. Delivery of the Bonds in definitive form is expected to be made through DTC in New York, New York, on or about September 24, Dated: September 17, 2015

2 MATURITIES, PRINCIPAL AMOUNTS, INTEREST RATES AND YIELDS Maturity Principal Rate Yield CUSIP¹ 8/1/ , % 2.030% AA0 8/1/ , % 2.450% AB8 8/1/ , % 2.800% AC6 8/1/ , % 3.180% AD4 8/1/ , % 3.580% AE2 8/1/ , % 3.810% AF9 8/1/ , % 3.960% AG7 8/1/ , % 4.150% AH5 8/1/ , % 4.250% AJ1 8/1/ , % 4.450% AK8 8/1/ , % 4.630% AL6 8/1/ , % 4.780% AM4 8/1/ , % 4.930% AN2 8/1/ , % 5.080% AP7 8/1/ , % 5.200% AQ5 8/1/ , % 5.300% AR3 8/1/ , % 5.400% AS1 8/1/ , % 5.500% AT9 8/1/2035 1,005, % 5.580% AU6 8/1/2036 1,060, % 5.630% AV4 8/1/2037 1,120, % 5.670% AW2 ¹ The CUSIP numbers are included in this Official Statement for the convenience of the holders and potential holders of the Bonds. No assurance can be given that the CUSIP numbers for a particular maturity of Bonds will remain the same after the date of issuance and delivery of the Bonds. None of the parties involved in this transaction assume any responsibility for the accuracy of such numbers.

3 WALKER COUNTY DEVELOPMENT AUTHORITY Virgil Sperry, Chairperson Robert Wardlaw, Vice-Chairperson Evitte Parrish, Secretary Bebe Heiskell Pete Moore Terry Toole WALKER COUNTY, GEORGIA Elected Governing Body Bebe Heiskell, Commissioner Appointed Officials David Ashburn, County Coordinator Gregory H. McConnell, CPA, Financial Officer 101 S. Duke Street P.O. Box 445 LaFayette, Georgia (706) County Attorney Donald F. Oliver LaFayette, Georgia FINANCIAL ADVISOR Piper Jaffray & Company Atlanta, Georgia UNDERWRITER Stifel, Nicolaus & Company, Incorporated Atlanta, Georgia BOND COUNSEL Dentons US LLP Atlanta, Georgia UNDERWRITER S COUNSEL Parker Poe Adams & Bernstein LLP Columbia, South Carolina

4 TABLE OF CONTENTS INTRODUCTION... 1 The Authority... 1 The County... 1 Security and Sources of Payment for the Bonds... 1 Purpose of the Bonds... 1 Description of the Bonds... 2 Tax Status... 2 Trustee... 2 Professionals Involved in the Offering... 2 Terms of the Offering... 2 Continuing Disclosure... 3 Additional Information... 3 THE BONDS... 4 General Provisions... 4 Book-Entry Only System of Delivery of Bonds... 4 Discontinuance of Book-Entry System... 6 Authority for Issuance of the Bonds... 7 Validation of the Bonds... 7 Estimated Sources and Uses of Funds... 7 The Projects... 7 Investment of Moneys... 8 Project Fund Disbursements... 8 Security and Sources of Payment for the Bonds... 7 Optional Redemption Bond Insurance Build America Mutual Assurance Company WALKER COUNTY DEVELOPMENT AUTHORITY Introduction Authority Members WALKER COUNTY, GEORGIA Introduction Government Format and Principal Officials Government Services and Facilities Employees/Employee Relations Employee Benefits Governmental Immunity and Insurance Coverage Population Per Capita Personal Income Median Home Values Bank Deposits Industry and Employment Building Permits Commuting Patterns DEBT STRUCTURE OF WALKER COUNTY Summary of County Indebtedness by Category Debt Limitation Long and Short Term Indebtedness Indebtedness of Overlapping Governmental Entities Debt Service Schedule WALKER COUNTY AD VALOREM TAXATION Introduction Property Subject to Taxation Assessed Value Annual Tax Levy Property Tax Collections Tax Reform Ten Largest Taxpayers Tax Digest Millage Rates iv Page

5 M&O Tax Levies and Collections FINANCIAL INFORMATION CONCERNING WALKER COUNTY Five Year General Fund Operating History Management Discussion and Analysis Accounting Policies Independent Auditors Reports, Budgetary Process GENERAL FUND BUDGET AND PROJECTED BUDGETS LEGAL MATTERS Litigation Legal Proceedings Certain Tax Consequences of Owning Bonds MISCELLANEOUS Rating Underwriting Continuing Disclosure Independent Auditor; Financial Statements Miscellaneous Approval of Official Statement Appendix A: Appendix B: Appendix C: AUDITED FINANCIAL STATEMENTS OF WALKER COUNTY, GEORGIA FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2014 DEFINITIONS AND SUMMARIES OF PRINCIPAL DOCUMENTS PROPOSED FORM OF LEGAL OPINION OF BOND COUNSEL Appendix D: DISCLOSURE DISSEMINATION AGENT AGREEMENT Page Appendix E: SPECIMEN MUNICIPAL BOND INSURANCE POLICY No dealer, broker, salesman or other person has been authorized by the Authority, the County, or Stifel, Nicolaus & Company, Incorporated, Atlanta, Georgia ( Underwriter ), or any other person to give any information or to make any representations other than those contained in this Official Statement, and, if given or made, such other information or representation must not be relied upon as having been authorized by the Authority, the County, the Underwriter, or any other person. This Official Statement is not to be construed as a contract or agreement between the County or the Authority and the purchasers or holders of any of the Bonds. All quotations from and summaries and explanations of provisions of laws and documents herein do not purport to be complete, and reference is made to such laws and documents for full and complete statements of their provisions. All estimates and assumptions contained herein are believed to be reasonable, but no representation is made that such estimates or assumptions are correct or will be realized. Except where otherwise indicated, all information contained in this Official Statement has been obtained from representatives of the Authority, The Depository Trust Company, public documents, records and other sources considered to be reliable. The Underwriter has provided the following sentence for inclusion in this Official Statement. The Underwriter has reviewed the information in this Official Statement in accordance with, and as a part of, its responsibilities under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. The delivery of this Official Statement at any time does not imply that any information herein is correct as of any time subsequent to its date. Any statements in this Official Statement involving estimates, assumptions and matters of opinion, whether or not so expressly stated, are intended as such and not representations of fact. Build America Mutual Assurance Company ( BAM:) makes no representation regarding the Bonds or the advisability of investing in the Bonds. In addition, BAM has not independently verified, makes no v

6 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 BAM supplied by BAM and presented under the headings THE BONDS BOND INSURANCE, THE BONDS BUILD AMERICA MUTUAL ASSURANCE COMPANY and APPENDIX E - Specimen Municipal Bond Insurance Policy. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation, or sale. The Bonds have not been registered under the Securities Act of 1933, and neither the Contract nor the Indenture has been qualified under the Trust Indenture Act of 1939, in reliance on exemptions contained in such Acts. The Bonds have not been recommended by any federal or state securities commission or regulatory authority. Furthermore, the foregoing authorities have not confirmed the accuracy or determined the adequacy of this Official Statement. Any representation to the contrary is a criminal offense. Cautionary Statements Regarding Forward-Looking Statements in This Official Statement Certain statements included or incorporated by reference in this Official Statement constitute forward-looking statements. Such statements are generally identifiable by the terminology used such as expects, forecasts, projects, intends, anticipates, estimates, or similar words. THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS DESCRIBED TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. NEITHER THE COUNTY NOR THE AUTHORITY PLANS TO ISSUE ANY UPDATES OR REVISIONS TO THOSE FORWARD-LOOKING STATEMENTS IF OR WHEN CHANGES TO ITS EXPECTATIONS, OR EVENTS, CONDITIONS OR CIRCUMSTANCES ON WHICH SUCH STATEMENTS ARE BASED, OCCUR. vi

7 OFFICIAL STATEMENT $15,230,000 WALKER COUNTY DEVELOPMENT AUTHORITY (GEORGIA) ECONOMIC DEVELOPMENT TAXABLE REVENUE BONDS, SERIES 2015 INTRODUCTION This Official Statement of the Walker County Development Authority, Georgia ( Authority ), which includes the cover page and the Appendices hereto, sets forth information concerning the Authority, Walker County, Georgia ( County ) and the proposed WALKER COUNTY DEVELOPMENT AUTHORITY ECONOMIC DEVELOPMENT TAXABLE REVENUE BONDS, SERIES 2015 ( Bonds ). The information contained in this section entitled INTRODUCTION is a brief description of the terms of and security for the Bonds and does not purport to be comprehensive or definitive. A full review of the entire Official Statement, as well as the documents summarized or described herein, should be made. This Official Statement speaks only as of its date, and the information contained herein is subject to change. All references herein to, or summaries of, the Indenture (hereinafter defined) or other documents or official acts are qualified in their entirety by the exact terms of such documents or official acts, copies of which are available from the Authority. All references herein to, or summaries of, the Bonds are qualified in their entirety by the definitive form thereof and the provisions with respect thereto included in the Indenture. All undefined, capitalized terms used herein shall have the meaning ascribed to such terms in the Indenture unless the context requires otherwise. The Authority The Authority is a public body corporate and politic and a development authority created by local amendment to the Georgia Constitution, Ga. L. 1962, p. 912, duly ratified at a general election held in 1962, as amended by Ga. L. 1964, p. 1013, and continued by local act of the Georgia General Assembly, Ga. L. 1985, p. 4169, as implemented by local act of the Georgia General Assembly, Ga. L. 1964, p. 3104, as amended by Ga L. 1978, p (collectively, Act ). The Act provides that the Authority is created for the public purpose, among other purposes, of developing, promoting and expanding for the public good and general welfare, industry, agriculture, commerce, natural resources and vocational training and the making of long-range plans for the coordination of such development, promotion and expansion within the County. For more detailed information, see WALKER COUNTY DEVELOPMENT AUTHORITY. The County The County is a political subdivision of the State, created and existing under the laws of the State of Georgia ( State ). The County is located in northwest Georgia, approximately 150 miles northwest of Atlanta, Georgia and 26 miles south of Chattanooga, Tennessee. The County had a population of 68,756 according to the 2010 census compiled by the U.S. Department of Commerce, Bureau of the Census. For more detailed information, see WALKER COUNTY, GEORGIA. Security and Sources of Payment for the Bonds The Bonds are special limited obligations of the Authority secured by and payable solely from a first lien on and pledge of the Contract Payments. The Bonds do not constitute a charge, lien or encumbrance, legal or equitable, on any other property of the Authority. The Authority and the County, have entered into the Contract in connection with the issuance of the Bonds. Pursuant to the terms of the Contract, the County will pay to the Authority the Contract Payments which amounts are sufficient to enable the Authority to pay the debt service on the Bonds. The County has agreed to levy an ad valorem property tax, limited to one (1) mill, on all property in the County subject to taxation for such purposes in order to make the Contract Payments. The Authority has assigned and pledged to the Trustee, and has granted a first priority security interest in, all of its right, title, and interest in the Contract (except for the Unassigned Rights, as defined herein) and all revenues, payments, receipts, and moneys to be received and held thereunder, pursuant to the Indenture. Purpose of the Bonds The Bonds are being issued to provide funds (1) to repay a promissory note outstanding in the principal amount of $450,000 obtained by the Authority from the County to finance the costs of acquiring and improving land for use as two industrial parks owned by the Authority, known as Rock Spring Industrial Park and Walker County Industrial Park (collectively, Industrial Parks ), (2) to finance approximately $5,260,000 to be used to improve the Industrial Parks, (3) to refund the Authority s Taxable Revenue Bond (Ohio Logistics Project), Series 2011, outstanding in the principal amount of $643,300, (4) to finance the costs of acquiring from the County (a) its Civic Center at an approximate cost of $2,063,039 and its 1

8 Agricultural Center located at North Highway 27 in Rock Spring, Georgia, at an approximate cost of $1,099,475 and (b) its Mountain Cove Resort Properties located on Dougherty Gap Road in an unincorporated area of the County at an approximate cost of $4,875,659, (5) to finance the costs of issuing the Bonds, including to purchase a BAM municipal bond insurance policy related to the Bonds. See THE BONDS, -Estimated Sources and Uses of Funds; and -The Projects herein. Description of the Bonds Redemption. The Bonds are subject to redemption by the Authority prior to their respective maturities, as more fully described herein. See The Bonds Optional Redemption. Denominations. Individual purchases of the Bonds may be made in book entry form only in denominations of $5,000 or any integral multiple thereof. Registration and Transfer. The Bonds will be registered in the name of Cede & Co., as registered owner and nominee of The Depository Trust Company, New York, New York ( DTC ). DTC will serve as securities depository for the Bonds. Manner of Making Payments. Interest on the Bonds will be payable on February 1 and August 1 of each year (each an Interest Payment Date ), commencing February 1, The Bonds bear interest at the rates per annum, and mature in the years and amounts, as set forth on the front cover page hereof. So long as DTC or its nominee is the registered owner of the Bonds, the payments of principal of and interest on Bonds are payable by wire transfer by the Trustee to Cede & Co., as nominee for DTC which, in turn, will remit such amounts to DTC Participants (as defined herein) for subsequent disbursement to the Beneficial Owners (as defined herein). Tax Status For more detailed information on the Bonds, see THE BONDS. Interest on the Bonds is included in gross income for federal income tax purposes and therefore is not exempt from federal income taxation. Interest on the Bonds is, however, exempt from State of Georgia income taxation. For a more complete discussion of the tax consequences of owning the Bonds, see LEGAL MATTERS - Certain Tax Consequences of Owning Bonds herein. Trustee U.S. Bank National Association, Atlanta, Georgia, will serve as Trustee for the Bonds. Professionals Involved in the Offering Certain legal matters pertaining to the County and the authorization and issuance of the Bonds are subject to the approving legal opinion of Dentons US LLP, Atlanta, Georgia, as Bond Counsel; see Appendix C for the proposed form of Bond Counsel s opinion to be delivered in connection with the issuance of the Bonds. Certain other legal matters will be passed upon for the Authority and the County by its counsel, Donald F. Oliver, Esq., LaFayette, Georgia, and for the Underwriter by its counsel, Parker Poe Adams & Bernstein LLP, Columbia, South Carolina. The general purpose financial statements of the County as of September 30, 2014, and for the fiscal year then ended, attached hereto as Appendix A, have been audited by Johnson, Hickey, & Murchison, P.C., Chattanooga, Tennessee, independent certified public accountants, to the extent and for the period indicated in their report thereon which appears in Appendix A hereto. Terms of the Offering Authority for Issuance. The Authority is authorized by the Act to issue its revenue bonds to acquire projects (as defined in the Act) to be located in the County, which revenue bonds are to be issued and validated under and in accordance with the applicable provisions of the Revenue Bond Law (O.C.G.A , et seq.). Offering. The Bonds are offered when, as, and if issued by the Authority and accepted by the Underwriter, subject to prior sale and to withdrawal or modification of the offer without notice, and to approval of legality by Dentons US LLP, Bond Counsel. Delivery. The Bonds in definitive form are expected to be delivered through DTC in New York, New York on or about September 24,

9 Continuing Disclosure On the date of the issuance and delivery of the Bonds, the County will sign a Continuing Disclosure Certificate which will allow the Underwriter to comply with Securities and Exchange Commission Rule 15c2-12(b)(5). See MISCELLANEOUS, -Continuing Disclosure and Appendix D: DISCLOSURE DISSEMINATION AGENT AGREEMENT. Additional Information This Official Statement and the Appendices hereto contain brief descriptions of, among other matters, the Bonds, the Authority, the County, the Indenture, and the security and sources of payment for the Bonds. Such descriptions and information do not purport to be comprehensive or definitive. The summaries of various constitutional provisions, statutes, the Resolution, and other documents are intended as summaries only and are qualified in their entirety by reference to such documents, and references herein to the Bonds are qualified in their entirety to the form thereof included in the Resolution. Copies of the Resolution and other documents and information are available upon request, prior to the delivery of the Bonds, from Stifel, Nicolaus & Company, Incorporated, One Buckhead Plaza, 3060 Peachtree Road, N.W., Suite 1700, Atlanta, Georgia 30305, telephone (404) , and after delivery of the Bonds, upon payment to the Authority of a charge for copying, mailing and handling, from Walker County Development Authority, 101 South Duke Street, LaFayette, Georgia 30728, telephone (706) , Attention: Chairperson. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 3

10 General Provisions THE BONDS The Bonds, dated as of their delivery date, will be executed and delivered in the aggregate principal amount specified on the front cover page of this Official Statement. Interest with respect to the Bonds will be payable on each Interest Payment Date, commencing February 1, Interest on the Bonds will be at the rates per annum, and the principal of the Bonds will mature in the amounts and in the years, set forth on the inside front cover page of this Official Statement (computed on a basis of a 360-day year of twelve 30-day months). Book-Entry Only System of Delivery of Bonds Beneficial ownership interests in the Bonds will be available only in book-entry form. Beneficial owners of the Bonds ( Beneficial Owners ) will not receive a physical bond certificate representing their interests in the Bonds purchased. Unless and until the book-entry system has been discontinued, the Bonds will be available only in book-entry form in principal amounts of $5,000, or any integral multiple thereof. SO LONG AS CEDE & CO., AS NOMINEE FOR DTC, OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC, IS THE REGISTERED OWNER OF THE BONDS, REFERENCES IN THIS OFFICIAL STATEMENT TO THE OWNERS OF THE BONDS SHALL MEAN DTC OR ITS NOMINEE AND SHALL NOT MEAN THE BENEFICIAL OWNERS. THE FOLLOWING DESCRIPTION OF DTC, ITS PROCEDURES AND RECORDKEEPING ON BENEFICIAL OWNERSHIP INTEREST IN THE BONDS, PAYMENT OF INTEREST AND OTHER PAYMENTS ON THE BONDS TO DTC PARTICIPANTS (AS DEFINED BELOW) OR TO BENEFICIAL OWNERS OF THE BONDS, CONFIRMATION AND TRANSFER OF BENEFICIAL OWNERSHIP INTERESTS IN THE BONDS, AND OF OTHER TRANSACTIONS BY AND BETWEEN DTC, DTC PARTICIPANTS AND BENEFICIAL OWNERS IS BASED SOLELY ON INFORMATION FURNISHED BY DTC TO THE AUTHORITY AND THE COUNTY FOR INCLUSION IN THIS OFFICIAL STATEMENT. ACCORDINGLY, NEITHER THE AUTHORITY NOR THE COUNTY MAKE ANY REPRESENTATIONS CONCERNING THESE MATTERS DTC will act as securities depository for the Bonds. The Bonds will be issued as fully registered bonds 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 fully registered Bond in the aggregate principal amount of each maturity of the Bonds 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 1934, as amended. 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 certificated bonds. 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 the Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC s records. The ownership interest of each 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 with respect to the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Bonds, unless the use of the book-entry system for the Bonds is discontinued. 4

11 To facilitate subsequent transfers, all of the Bonds deposited by Direct Participants with DTC are registered in the name of DTC s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not 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 the Bonds may wish to take certain steps to augment transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the enabling 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 are being redeemed, DTC s practice is to determine by lot the amount of the interest of each Direct Participant in the Bonds 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 Trustee as soon as possible after the record date. The omnibus proxy assigns Cede & Co. s consenting and voting rights to those Direct Participants to whose accounts the Bonds are credited on the record date (identified in a listing attached to the omnibus proxy). BECAUSE DTC IS TREATED AS THE OWNER OF THE BONDS FOR SUBSTANTIALLY ALL PURPOSES, BENEFICIAL OWNERS MAY HAVE A RESTRICTED ABILITY TO INFLUENCE IN A TIMELY FASHION REMEDIAL ACTION OR THE GIVING OR WITHHOLDING OF REQUESTED CONSENTS OR OTHER DIRECTIONS. IN ADDITION, BECAUSE THE IDENTITY OF THE BENEFICIAL OWNERS IS UNKNOWN TO THE AUTHORITY AND THE COUNTY, TO DTC OR TO THE TRUSTEE, IT MAY BE DIFFICULT TO TRANSMIT INFORMATION OF POTENTIAL INTEREST TO BENEFICIAL OWNERS IN AN EFFECTIVE AND TIMELY MANNER. BENEFICIAL OWNERS SHOULD MAKE APPROPRIATE ARRANGEMENTS WITH THEIR BROKER OR DEALER REGARDING DISTRIBUTION OF INFORMATION REGARDING THE BONDS THAT MAY BE TRANSMITTED BY OR THROUGH DTC. Payments of principal, interest and any redemption premiums 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 Trustee, on the 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 (nor its nominee), the Trustee, the Authority, or the County, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal, premium, if any, and interest to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the Trustee s responsibility, 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. NEITHER THE AUTHORITY NOR THE COUNTY CAN GIVE ANY ASSURANCE THAT DIRECT AND INDIRECT PARTICIPANTS WILL PROMPTLY TRANSFER PAYMENTS TO BENEFICIAL OWNERS. DTC may discontinue providing its service as depository with respect to the Bonds at any time by giving reasonable notice to the Trustee or the Authority. Under such circumstances, in the event that a successor depository is not obtained, Bond certificates are required to be printed and delivered. The Authority may decide to discontinue the 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. None of the Authority, the County, and the Trustee have any responsibility or obligation to DTC, the Direct Participants, the Indirect Participants or the Beneficial Owners with respect to (1) the accuracy of any records maintained by DTC or any Participant, or the maintenance of any records; (2) the payment by 5

12 DTC or any Participant of any amount due to any Beneficial Owner in respect of the Bonds, or the sending of any transaction statements; (3) the delivery or timeliness of delivery by DTC or any Participant of any notice to any Beneficial Owner which is required or permitted under the Resolution to be given to Owners; (4) the selection of the Beneficial Owners to receive payments upon any partial redemption of the Bonds; or (5) any consent given or other action taken by DTC or its nominee as the registered owner of the Bonds, including any action taken pursuant to an omnibus proxy. The information in this section concerning DTC and DTC s book-entry system has been obtained from sources the Authority and the County believe to be reliable, but neither the Authority nor the County take any responsibility for the accuracy thereof. None of the Authority, the County, and the Trustee give and cannot give any assurances that DTC, Direct Participants or Indirect Participants will distribute to the Beneficial Owners of the Bonds (1) payments of principal of, premium, if any, and interest with respect to the Bonds, (2) confirmations of their ownership interests in the bonds or (3) prepayment or other notices sent to DTC or Cede & Co., its partnership nominee, as the registered owner of the Bonds, or that they will do so on a timely basis, or that DTC, Direct Participants or Indirect Participants will serve and act in the manner described in this Official Statement. Beneficial Owners of the Bonds may experience some delay in their receipt of distributions of principal and interest on the Bonds since such distributions will be forwarded by the Trustee to DTC and DTC will credit such distributions to the accounts of Direct Participants, which will thereafter credit them to the accounts of Beneficial Owners either directly or indirectly through Indirect Participants. Issuance of the Bonds in book-entry form may reduce the liquidity of the Bonds in the secondary trading market since investors may be unwilling to purchase Bonds for which they cannot obtain physical certificates. In addition, because transactions in the Bonds can be effected only through DTC, Direct Participants, Indirect Participants and certain banks, the ability of a Beneficial Owner to pledge Bonds to persons or entities that do not participate in the DTC system, or otherwise to take action in respect of such Bonds, may be limited due to the lack of a physical certificate. Discontinuance of Book-Entry System In the event that the Bonds are no longer in book-entry-only form, the certificates held by DTC or a successor securities depository will be canceled and the Authority will execute and deliver the Bonds in fully registered form to the Beneficial Owners of the Bonds as shown on the records of the DTC Participants or the nominee of a successor securities depository. If no other securities depository is named, interest on the Bonds will be paid by check or draft of the Trustee, mailed to the person in whose name the Bond is registered as of the close of business on the fifteenth day of each month immediately preceding such payment, and principal shall be payable to the registered owner at maturity upon presentation and surrender thereof to the Trustee at its principal corporate trust office. In such event, the Authority will maintain through the Trustee books of registry for the purpose of registering ownership and transfer of the Bonds. The Bonds would be transferable by the registered owner in person or by his duly authorized attorney upon surrender of the Bond to be transferred together with a written instrument of transfer duly executed by the registered owner or his duly authorized attorney. The Trustee will, upon receipt thereof, authenticate and deliver a new Bond or Bonds in like principal amount as the Bond so presented. The Authority and the Trustee will deem and treat the person in whose name each Bond is registered as the absolute owner thereof for all purposes. The foregoing information concerning DTC and its book-entry system has been obtained from DTC. None of the Authority, the County, and the Underwriter make any representation or warranty or take any responsibility for the accuracy or completeness of such information. SO LONG AS CEDE & CO. OR SUCH OTHER DTC NOMINEE, AS NOMINEE FOR DTC, IS THE SOLE BONDHOLDER, THE AUTHORITY AND THE TRUSTEE WILL TREAT CEDE & CO. OR SUCH OTHER NOMINEE AS THE ONLY OWNER OF THE BONDS FOR ALL PURPOSES UNDER THE RESOLUTION, INCLUDING RECEIPT OF ALL PRINCIPAL OF AND PREMIUM, IF ANY, AND INTEREST ON THE BONDS, RECEIPT OF NOTICES, VOTING, AND REQUESTING OR DIRECTING THE AUTHORITY OR THE TRUSTEE TO TAKE OR NOT TO TAKE, OR CONSENTING TO, CERTAIN ACTIONS UNDER THE RESOLUTION. NEITHER THE AUTHORITY NOR THE COUNTY HAVE ANY RESPONSIBILITY OR OBLIGATION TO THE DIRECT OR INDIRECT PARTICIPANTS OR THE BENEFICIAL OWNERS WITH RESPECT TO (A) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC OR ANY DIRECT OR INDIRECT PARTICIPANT; (B) THE PAYMENT OR ANY DIRECT OR INDIRECT PARTICIPANT OF ANY AMOUNT DUE TO ANY BENEFICIAL OWNER IN RESPECT OF THE PRINCIPAL OF AND PREMIUM, IF ANY, AND INTEREST ON THE BONDS; (C) THE DELIVERY OR TIMELINESS OF DELIVERY BY ANY DIRECT OR INDIRECT PARTICIPANT OF ANY NOTICE TO ANY BENEFICIAL OWNER WHICH IS REQUIRED OR PERMITTED UNDER THE TERMS OF THE RESOLUTION TO BE GIVEN TO BONDHOLDERS; OR (D) OTHER ACTION TAKEN BY DTC OR CEDE & CO. OR SUCH OTHER DTC NOMINEE, AS OWNER. Beneficial Owners of the Bonds may experience some delay in their receipt of distributions of principal and interest on the Bonds since such distributions will be forwarded by the Paying Agent to DTC, 6

13 and DTC will credit such distributions to the accounts of Direct Participants which will thereafter credit them to the accounts of Beneficial Owners either directly or indirectly through Indirect Participants. Authority for Issuance of the Bonds The Authority is a public corporation created and existing under the laws of the State and is authorized by the Act to issue its revenue bonds to acquire projects (as defined in the Act) to be located in the County, which revenue bonds are to be issued and validated under and in accordance with the applicable provisions of the Revenue Bond Law (O.C.G.A , et seq.). The County is a governmental body as described in the Revenue Bond Law, O.C.G.A , et seq. and is authorized to undertake projects described therein which include the Projects. Article IX, Section III, Paragraph I(a) of the Constitution of the State authorizes, among other things, any county, municipality or other political subdivision of the State to contract, for a period not exceeding fifty years, with other county, municipality or political subdivision or with any other public agency, public corporation or public authority for joint services, for the provision of services, or for the provision or separate use of facilities or equipment, provided that such contract deals with activities, services or facilities which the contracting parties are authorized by law to undertake or to provide. The Authority and the County have determined that each of them is authorized by law to provide for the development of industrial and commercial facilities and that it is in their best interests to enter into the Contract for the joint provision of the Projects in furtherance of the purposes for with the Authority was created and for the benefit of the County and its citizens. Validation of the Bonds The Bonds and the security therefor were confirmed and validated on September 15, 2015 by the Superior Court of Walker County in accordance with the procedures of Article 3 of Chapter 82 of Title 36 of the Official Code of Georgia Annotated. Estimated Sources and Uses of Funds The Projects Sources of Funds: Uses of Funds: Proceeds from Sale of Bonds 1... $15,082,811 Total Sources of Funds:... $15,082,811 Industrial Parks Improvements $5,260,000 Repay Promissory Note 450,000 Refund Series 2011 Bond 643,300 Acquire Civic Center 2,063,039 Acquire Agricultural Center 1,099,475 Acquire Mountain Cover Resort Properties 4,875,659 Total Costs of Projects... $14,391,473 Costs of Issuance 2...$691,338 Total Uses of Funds:... $15,082,811 1 Includes net aggregate original issue discount of $147, Includes underwriter s discount, initial Trustee s fee, legal and accounting fees, advisory fees, municipal bond insurance premium, cost of printing, and other estimated miscellaneous fees and expenses associated with the issuance of the Bonds. The Authority intends to use the proceeds of the Bonds to provide funds (1) to repay a promissory note outstanding in the principal amount of $450,000 obtained by the Authority from Walker County, Georgia to finance the costs of acquiring and improving land for use as the Industrial Parks, (2) to finance approximately $5,260,000 to be used to improve the Industrial Parks, (3) to refund the Authority s Taxable Revenue Bond (Ohio Logistics Project), Series 2011, outstanding in the principal amount of $643,300, (4) to finance the costs of acquiring from the County (a) its Civic Center at an approximate cost of $2,063,039 and its Agricultural Center located at North Highway 27 in Rock Spring, Georgia, at an approximate cost of $1,099,475 and (b) its Mountain Cove Resort Properties located on Dougherty Gap Road in an unincorporated area of the County at an approximate cost of $4,875,659, (5) to finance the costs of issuing the Bonds, including to purchase a BAM municipal bond insurance policy related to the Bonds. The 7

14 Authority at delivery of the Bonds will have covenanted and agreed that it will apply the proceeds derived from the sale of the Bonds as specified in Section 508 of the Indenture. The 2015 Project shall be constructed substantially in accordance with the Plans and Specifications as described in the Contract. Investment of Moneys Project Fund Moneys. The moneys in the Project Fund will be held by and under the control of the Trustee and will be disbursed by the Trustee to pay the costs of the Projects. Moneys in the Project Fund which are not needed at the time to pay current obligations during the construction and equipping of the Projects may be invested, upon direction to the Trustee from the County, in obligations in which the Authority is permitted to invest moneys of the Authority pursuant to applicable law, which have (or are collateralized by obligations which have) a Rating by any Rating Agency that is equal to or greater than the third highest long-term Rating of such Rating Agency, or which bears (or are collateralized by obligations which bear) the second highest short-term Rating of such Rating Agency, or which consist of negotiable or non-negotiable certificates of deposit issued by or interest-bearing time or demand deposits in banks, provided that any such deposits are (a) fully insured by the Federal Deposit Insurance Corporation or (b) fully secured by Government Obligations. Obligations in which the Authority is permitted to invest proceeds of Bonds are described, as of the date of execution of the Indenture, in Section of the Official Code of Georgia Annotated. Project Fund Disbursements Disbursements from the Project Fund will be made only upon the execution and filing with the Trustee of a requisition and certificate signed by an Authorized County Representative and Authorized Authority Representative (each term as defined in the Indenture) certifying (i) the amount to be paid or reimbursed and the name of the person, firm or corporation to whom payment is due, (ii) that an obligation has been incurred by the County, that the same is a proper charge and has not been paid or reimbursed, (iii) that the Authorized County Representative has no notice of any liens or rights to liens which should be satisfied before such payment is made, (iv) that the necessary permits and approvals, if any, required for that portion of the Project for which such withdrawal is to be made have been issued and are in full force and effect; and (v) that the withdrawal and use of the Project Fund moneys for the purpose intended will not cause any of the representations or certifications contained in the Contract to be untrue. Security and Sources of Payment for the Bonds The Bonds are special limited obligations of the Authority secured by and payable solely from a first lien on and pledge of the Contract Payments. The Bonds do not constitute a charge, lien or encumbrance, legal or equitable, on any other property of the Authority. The Authority and the County, have entered into the Contract in connection with the issuance of the Bonds. Pursuant to the terms of the Contract, the County will pay to the Authority the Contract Payments which amounts shall be sufficient to enable the Authority to pay the debt service on the Bonds. The County has agreed to levy an ad valorem property tax, limited to one (1) mill, on all property in the County subject to taxation for such purposes in order to make the Contract Payments. The Authority has assigned and pledged to the Trustee, and has granted a first priority security interest in, all of its right, title, and interest in the Contract (except for the Unassigned Rights, as defined herein) and all revenues, payments, receipts, and moneys to be received and held thereunder, pursuant to the Indenture. County s Payment Obligations. In order to provide financial assistance to the Authority for the purpose of developing trade, commerce, industry, and employment opportunities, the County agrees that: (a) It shall pay to the Authority, by making such payments directly to the Trustee for the account of the Authority for deposit in the Bond Fund held under the Indenture on or before January 25 th of each year, an amount sufficient, when added to funds held at the time of such payment in the Bond Fund, to cause the balance held therein to equal the full amount of principal of, premium, if any, and interest on the Bonds coming due during the then current Bond Year. (b) The provisions of paragraph (a) above to the contrary notwithstanding, if, for any reason, on the third business day preceding any interest payment date and any redemption date with respect to the Bonds, there is not on deposit in the Bond Fund moneys sufficient to pay the total principal, interest, and premium coming due on the Bonds on such interest payment date or redemption date (whether by mandatory redemption, maturity, or otherwise), the County shall on such date pay to the Authority, by making such payments directly to the Trustee for the account of the Authority for deposit into the Bond Fund, an amount equal to the amount by which the total principal, interest, and premium coming due on the Bonds (whether by mandatory redemption, maturity, or otherwise) on the next interest payment date or redemption date exceeds the amount in the Bond Fund (and not being held for the payment of Bonds not yet presented for payment or interest checks not cashed). 8

15 (c) It shall also pay to the Authority an amount equal to (i) any costs incurred by the Authority in connection with the issuance of any series of Bonds to the extent such costs are not paid from proceeds of such Bonds and (ii) the fees and expenses of the Trustee if the Authority is unable to pay such fees and expenses from the revenues derived from the Industrial Parks. Source of Funds for County s Payment Obligations; Limitations on Additional Contracts. The obligation of the County to make payments under the Contract shall constitute a general obligation of the County, payable out of any funds lawfully available to it for such purpose, from whatever source derived (including general funds). The County covenants and agrees that it shall, to the extent necessary, levy an annual ad valorem tax on all taxable property located within the territorial limits of the County, as now existent and as the same may hereafter be extended, at such rate or rates within the one (1) mill limit authorized pursuant to Section (20) of the Official Code of Georgia Annotated or within such greater millage as may hereafter be prescribed by applicable law, as may be necessary to produce in each year revenues that will be sufficient to fulfill the County s obligations under the Contract, from which revenues the County agrees to appropriate sums sufficient to pay in full when due all of the County s obligations under the Contract. The County has created and granted a lien in favor of the Authority on any and all revenues realized by the County from such tax, to make the payments that are required under the Contract, which lien is superior to any that can hereafter be created, except that the lien may be extended to cover any Additional Contracts, as permitted by Section 5.2(d) of the Contract. Nothing contained in the Contract, however, shall be construed as limiting the right of the County to make the payments called for by the Contract out of any funds lawfully available to it for such purpose, from whatever source derived (including general funds). The County s obligation to levy an annual ad valorem tax within the one (1) mill limit authorized by Section (20) of the Official Code of Georgia Annotated, or such greater millage hereafter authorized by law, for the purpose of providing funds to meet the County s payment obligations under the Contract shall not be junior and subordinate, but shall be superior or equal to the County s obligation to levy an annual ad valorem tax at such rate or rates within such one (1) mill limit or such greater millage as hereinafter prescribed by law pursuant to the provisions of any Additional Contract. It is expressly provided in the Contract that the County will not be required to levy a tax in any year at a rate or rates exceeding in the aggregate the maximum one (1) mill now authorized by Section (20) of the Official Code of Georgia Annotated, or any greater millage hereafter prescribed by law, in order to meet its obligations under all contracts. So long as any of the Bonds are Outstanding (as defined in the Indenture), the County will not: (1) enter into an Additional Contract that creates a lien on the revenues to be derived from the tax to be levied under the Contract by the County to fulfill its obligations thereunder, which is superior to the lien created under the Contract; (2) enter into any other contract or agreement creating a lien on such tax revenues for any purpose other than debt service payments (including creation and maintenance of reasonable reserves therefor) superior to or on a parity with the lien created thereon to fulfill the obligations of the County under the Contract; and (3) enter into any Additional Contract that provides for payment to be made by the County from moneys derived from the levy of a tax within the maximum millage now or hereafter authorized by law if each annual payment of all amounts payable with respect to debt service or that are otherwise fixed in amount or currently budgeted in amount under all Contracts then in existence, together with each annual payment to be made under the proposed Additional Contract, in each future calendar year, would exceed the amount then capable of being produced by a levy of a tax within the maximum millage now or hereafter authorized by law on the taxable value of property located within the territorial limits of the County subject to taxation for such purposes, as shown by the latest tax digest available immediately preceding the execution of any such Additional Contract. It is further expressly provided in the Contract that so long as any of the Bonds are Outstanding, the County will not enter into any Additional Contract for the purpose of debt service payments (including creation and maintenance of reserves therefor), unless the amount then capable of being produced by the levy of an ad valorem tax within the maximum millage then authorized under Section (20) of the Official Code of Georgia Annotated or any successor provision on all taxable property within the territorial limits of the County, as shown by the latest tax digest available immediately preceding the execution of such Additional Contract, is equal to at least one and twenty hundredths (1.20) times the maximum combined amount payable in any future calendar year with respect to debt service under all existing Contracts and any such Additional Contract. Debt service for these purposes means required payments of principal, including principal to be paid through mandatory redemption, interest, and amounts required to be paid for creation and maintenance of reasonable debt service reserves and to establish and maintain mandatory investment programs, less principal and interest received or to be received from investment of any of the foregoing amounts (except funds on hand or to be on hand in any debt service reserve) required to be applied to debt service in each calendar year. The County will furnish the Authority, not less than five (5) nor more than sixty (60) days prior to the date of execution and delivery of any such Additional Contract, a report of an independent certified public accountant to the effect that, based upon an affidavit of the Tax Commissioner of Walker County as to the taxable value of property located within the territorial limits of the County, then these requirements have been met. 9

16 Optional Redemption The Bonds maturing on and after August 1, 2021, are subject to redemption at the Authority s option, prior to maturity, on or after August 1, 2020, as a whole or in part, on any Business Day, as defined in the Indenture, and if in part in Authorized Denominations, as defined in the Indenture, in order of maturities selected by the Trustee, at a redemption price equal to the par amount thereof (to the extent not previously redeemed), plus accrued interest to the redemption date. Bond Insurance Policy Concurrently with the issuance of the, Build America Mutual Assurance Company ( BAM ) will issue its Municipal Bond Insurance Policy for the Bonds ( 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 Exhibit 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. Build America Mutual Assurance Company BAM is a New York domiciled mutual insurance corporation. BAM provides credit enhancement products solely to issuers in the U.S. public finance markets. BAM will only insure obligations of states, political subdivisions, integral parts of states or political subdivisions or entities otherwise eligible for the exclusion of income under section 115 of the U.S. Internal Revenue Code of 1986, as amended. No member of BAM is liable for the obligations of BAM. The address of the principal executive offices of BAM is: 200 Liberty Street, 27th Floor, New York, New York 10281, its telephone number is: , and its website is located at: BAM is licensed and subject to regulation as a financial guaranty insurance corporation under the laws of the State of New York and in particular Articles 41 and 69 of the New York Insurance Law. BAM s financial strength is rated AA/Stable by Standard and Poor s Ratings Services, a Standard & Poor s Financial Services LLC business ( S&P ). An explanation of the significance of the rating and current reports may be obtained from S&P at The rating of BAM should be evaluated independently. The rating reflects the S&P s current assessment of the creditworthiness of BAM and its ability to pay claims on its policies of insurance. The above rating is not a recommendation to buy, sell or hold the Bonds, and such rating is subject to revision or withdrawal at any time by S&P, including withdrawal initiated at the request of BAM in its sole discretion. Any downward revision or withdrawal of the above rating may have an adverse effect on the market price of the Bonds. BAM only guarantees scheduled principal and scheduled interest payments payable by the issuer of the Bonds 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 Policy), and BAM does not guarantee the market price or liquidity of the Bonds, nor does it guarantee that the rating on the Bonds will not be revised or withdrawn. Capitalization of BAM BAM s total admitted assets, total liabilities, and total capital and surplus, as of June 30, 2015 and as prepared in accordance with statutory accounting practices prescribed or permitted by the New York State Department of Financial Services were $472.1 million, $31.0 million and $441.1 million, respectively. BAM is party to a first loss reinsurance treaty that provides first loss protection up to a maximum of 15% of the par amount outstanding for each policy issued by BAM, subject to certain limitations and restrictions. BAM s most recent Statutory Annual Statement, which has been filed with the New York State Insurance Department and posted on BAM s website at is incorporated herein by reference and may be obtained, without charge, upon request to BAM at its address provided above (Attention: Finance Department). Future financial statements will similarly be made available when published. BAM makes no representation regarding the Bonds or the advisability of investing in the Bonds. In addition, BAM has not independently verified, makes no representation regarding, and does not accept any 10

17 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 BAM, supplied by BAM and presented under the headings THE BONDS BOND INSURANCE and THE BONDS BUILD AMERICA MUTUAL ASSURANCE COMPANY. Additional Information Available from BAM Credit Insights Videos. For certain BAM-insured issues, BAM produces and posts a brief Credit Insights video that provides a discussion of the obligor and some of the key factors BAM s analysts and credit committee considered when approving the credit for insurance. The Credit Insights videos are easily accessible on BAM's website at buildamerica.com/creditinsights/. Obligor Disclosure Briefs. Prior to the pricing of bonds that BAM has been selected to insure, BAM may prepare a pre-sale Obligor Disclosure Brief for those bonds. These pre-sale Obligor Disclosure Briefs provide information about the sector designation (e.g. general obligation, sales tax); a preliminary summary of financial information and key ratios; and demographic and economic data relevant to the obligor, if available. Subsequent to closing, for any offering that includes bonds insured by BAM, any pre-sale Obligor Disclosure Briefs will be updated and superseded by a final Obligor Disclosure Brief to include information about the gross par insured by CUSIP, maturity and coupon. BAM pre-sale and final Obligor Disclosure Briefs are easily accessible on BAM's website at buildamerica.com/obligor/. BAM will produce an Obligor Disclosure Brief for all bonds insured by BAM, whether or not a pre-sale Obligor Disclosure Brief has been prepared for such bonds. Disclaimers. The Obligor Disclosure Briefs and the Credit Insights videos and the information contained therein are not recommendations to purchase, hold or sell securities or to make any investment decisions. Credit-related and other analyses and statements in the Obligor Disclosure Briefs and the Credit Insights videos are statements of opinion as of the date expressed, and BAM assumes no responsibility to update the content of such material. The Obligor Disclosure Briefs and Credit Insight videos are prepared by BAM; they have not been reviewed or approved by the issuer of or the underwriter for the Bonds, and the issuer and underwriter assume no responsibility for their content. BAM receives compensation (an insurance premium) for the insurance that it is providing with respect to the Bonds. Neither BAM nor any affiliate of BAM has purchased, or committed to purchase, any of the Bonds, whether at the initial offering or otherwise. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 11

18 Introduction WALKER COUNTY DEVELOPMENT AUTHORITY The Authority is a public body corporate and politic created by the Act. The Act provides that the Authority is created for the public purpose, among other purposes, of developing, promoting and expanding for the public good and general welfare, industry, agriculture, commerce, natural resources and vocational training and the making of long-range plans for the coordination of such development, promotion and expansion within the County. Authority Members Board Member Original Appointment Date Term Ends Virgil Sperry, Chairperson 01/ /31/2017 Robert Wardlaw, Vice-Chairperson 03/10/ /31/2016 Evitte Parrish, Secretary 02/14/ /31/2018 Pete Moore 9/11/ /31/2016 Terry Toole 8/31/ /31/2017 Bebe Heiskell 1/1/ /31/2016 (automatic as County Commissioner) Introduction WALKER COUNTY, GEORGIA Walker County is located in northwest Georgia, approximately 76 miles northwest of Atlanta, Georgia. The northern county line is contiguous to Chattanooga, Tennessee. The County is bordered on the north by Tennessee, on the east by Catoosa and Whitfield Counties, on the south by Gordon, Floyd, and Chattooga Counties, and on the west by Dade County and Dekalb County, Alabama. The City of LaFayette is the county seat and serves as the economic and retail center for the surrounding area. The population of the County grew approximately 21.8% during the 30 year period from 1980 to 2010, from 56,470 residents in 1980 to 68,756 residents in This compares with Georgia s total population growth of 77.3% during the same 30 year period. The estimated population of the County in 2014 was 68,218. At 447 square miles, the County is the 45 th largest of Georgia s 159 counties. Set forth below are the percentages of land use for various categories within the territorial limits of the County, computed based upon the acres of land for the various categories set forth in the tax digest for each respective year. Residential Agricultural Preferential Conservation Use Commercial Industrial Timber % Government Format and Principal Officials % Commissioner. The County is a political subdivision of the State of Georgia. The affairs of the County are legislated and administered by a sole commissioner who is elected by the qualified voters of the County for four-year terms. Bebe Heiskell, the current sole commissioner, was elected in the November 2000 General Election and is serving her 15 th year in office, the third year of her fourth term. Ms. Heiskell s background is 27 years in public administration before taking office as sole commissioner. Her position is full time and she serves as the CEO of the County. She was appointed in 2003 by Governor Perdue to the Georgia Department of Community Affairs Board of Directors and to the Governor s Workforce Investment Board and the Executive Committee of that Board in She serves as Chair of the Walker County Water and Sewerage Authority, Vice Chair of the Walker County Board of Health, Council of Chief Elected % % %

19 Officials and Board of Coosa Valley Regional Development Commission; member of the Southeast Development District and its Executive Committee; Past Chair of the Chattanooga Metropolitan Planning Organization and Transportation Planning Organization; Vice Chair of the Association of County Commissioners of Georgia Revenue and Finance Committee, where has served on the Transportation, Economic Development, and General County Government committees; member of the Georgia Region 1 Regional Water Resources Partnership; and a member of the Walker County Development Authority. She was called to Washington, D.C. by the U.S. Chamber of Commerce to testify before the U.S. Senate Subcommittee on Air Quality in June She received one of only three grants in Georgia for $2.5 million from the U.S. Congress for transportation needs. Ms. Heiskell is responsible for receiving state and federal funding and built a primary care center in Walker County to provide medical services to the indigent and uninsured. She has been able to preserve 3,500 acres of green space, and has been successful in getting the State of Georgia to purchase an additional 2,000 acres of land at beautiful Mountain Cove Farms for preservation. In addition, she initiated the second phase of the Highway 27 Tourism Project and it has now been designated a State Tourism Route with opportunities for welcome stations and funding to market the route for tourism. County Coordinator. The County Coordinator is appointed by the Commissioner and is the Chief Operating Officer of the County. David Ashburn was appointed in 2001 to this position and is responsible for the day-to-day operations of most of the departments under the responsibility of the governing authority of the County. He serves as E911 Director, County Police Chief, and Training Coordinator for the National Cave Rescue Commission. He also serves as an advisor for the office of Planning and the Fire Department. Mr. Ashburn worked in private industry prior to 2001 while also serving as Emergency Management Director under the prior administration. He was appointed Walker County Sheriff in May 1996 by the County s probate judge, upon death of the former sheriff, and served for a six-month period until an election could be held to elect a new sheriff. Mr. Ashburn received an Associate of Paramedical Science degree from the University of Tennessee in 1974, and a Bachelor s Degree in Emergency Management from the University of the State of New York in He received his Master s Degree in Public Administration from Columbus State University, Columbus, Georgia in He also received the Georgia Governor s Public Safety Award in 2002, and is an author and instructor on public safety and emergency rescue issues. Financial Officer. The Financial Officer of Walker County is appointed by the Commissioner and is responsible for providing accurate and relevant financial and operational information to the various County departments. Gregory H. McConnell, Certified Public Accountant, has been serving as Financial Officer for Walker County since August He has over 25 years of experience in financial accounting and received a Bachelor of Science degree in Textile Management from Auburn University in 1970 and a Bachelor of Science degree in Business Administration from the University of Tennessee at Chattanooga in Government Services and Facilities The County Sheriff s department has one office, 75 sworn law enforcement officers, 46 civilian employees, and 92 vehicles. The Sheriff s Department maintains a 24-hour uniformed patrol. The County has an Emergency Service, which is a combination fire and rescue department, comprised of 18 stations, approximately 182 personnel (84 career suppression and Emergency Medical Services, 10 part time and 98 volunteers) operating suppression and command vehicles and seven transport Advanced Life Support ambulances. The National Board of Fire Underwriters fire insurance rating countywide is an ISO rating of 3. The County maintains approximately 1,400 miles of roads. The public services department has 112 vehicles and 38 employees, who perform road maintenance and other public works. There are 3 public libraries in the county with approximately 145,000 volumes. Employees/Employee Relations As of August 2015 the County had approximately 425 employees. No employees belong to labor unions or other collective bargaining groups and the County has no knowledge of any union organizing efforts. The County believes that employee relations are good. Employee Benefits General. The County provides a full range of employee benefits for County employees, including a defined benefit pension plan, group hospitalization, medical and dental, and group life insurance. All employees are covered by Social Security, workers compensation, and unemployment insurance. All County employees receive vacation leave of 10 days prior to 15 years of service, and thereafter, 15 days. They receive three days funeral leave each year. With a few exceptions, there is no carryover of unused leave. Pension Plan. The County contributes to a single employer, noncontributory, defined benefit pension plan which is self-administered for all those employed prior to January 1, The plan provides after three years of service and are 100% vested after seven years of service. Employees entering employment January 1, 2006, and thereafter are not part of the defined benefit pension plan, but are included in a 401(k) type plan where the County funds the entire cost of the plan. 13

20 In June 2004, the Governmental Accounting Standards Board ( GASB ) approved the final set of accounting standards applicable to Other Post-Employment Benefits ( OPEB ), which are non-pension benefits provided after a person leaves employment. The standards are explained in GASB Statement Nos. 43 and 45. The new GASB accounting standards were implemented and took effect with respect to the County s financial statements during the fiscal year ended June 30, A report was issued by Buck Consultants, LLC, dated January 1, 2014 ( 2014 Report ) that identified an Unfunded Accrued Liability of $2,834,089 as of January 1, The Recommended Contribution was determined to be $551,476 per year. The benefit expenditure at September 30, 2014, was $41,555 net of any participant contributions. Twenty-two retirees were receiving benefits as of September 30, For more detailed discussion of the County s Pension Plan and additional historical information, see Note E of Appendix A: AUDITED FINANCIAL STATEMENTS OF WALKER COUNTY, GEORGIA FOR THE FISCAL YEAR ENDED SEPTEMBER 30, Governmental Immunity and Insurance Coverage Governmental Immunity. Article I, Section II, Paragraph IX of the Constitution of the State of Georgia extends sovereign immunity to the County, as a political subdivision of the State of Georgia, except as to actions for the breach of written contracts. Except as specifically provided by the General Assembly of the State of Georgia in a State Tort Claims Act, all officers and employees of the County may be subject to suit and may be liable for injuries and damages caused by the negligent performance of, or negligent failure to perform, their ministerial functions and may be liable for injuries and damages if they act with actual malice or with actual intent to cause injury in the performance of their official functions. Except as provided in the previous sentence, officers and employees of the County shall not be subject to suit or liability, and no judgment shall be entered against them, for the performance or nonperformance of their official functions. The County, however, may be unable to rely upon the defense of sovereign immunity and may be subject to liability in the event of suits alleging causes of action founded upon various federal laws, such as suits filed pursuant to 42 U.S.C. 1983, alleging the deprivation of federal constitutional or statutory rights of an individual and suits alleging anti-competitive practices and violations of the federal antitrust laws by the County in the exercise of its delegated powers. Insurance Coverage. The County carries liability insurance for the types of claims and in amounts that are customary for similar entities for those categories of claims that are not subject to the defense of sovereign immunity. The County obtains workers compensation insurance through the Association County Commissioners of Georgia Group Self-Insured Workers Compensation Fund. The County also carries property and casualty damage insurance on its buildings and other physical assets. Population The following table sets forth the population, including percentage of annual increase, in the County, the State, and the United States. The estimated population of the County in 2013 was 68,198. Year Walker County 45,264 50,691 56,470 58,340 61,053 68,756 Percentage Change % Georgia 3,943,116 4,589,575 5,463,105 6,478,216 8,186,453 9,687,653 Source: U.S. Department of Commerce, Bureau of the Census. Percentage Change % [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] United States 179,323, ,211, ,545, ,709, ,421, ,745,538 Percentage Change %

21 Per Capita Personal Income The following table sets forth the per capita personal income in Walker County, the State of Georgia, and the United States for the years 2009 through Data for 2014 is not yet available. Year Walker County 25,138 25,842 26,889 27,912 28,224 Georgia 34,348 34,341 36,422 37,229 37,845 United States 39,379 40,144 42,332 44,200 44,765 Source: U.S. Department of Commerce, Bureau of Economic Analysis, Regional Accounts Data. Median Home Values The following table sets forth the median home values for the County, the State, and the United States for the census years 1980, 1990, 2000, and Year Bank Deposits Walker County $27,600 45,800 71, ,700 Georgia $36,900 71, , ,300 Source: U.S. Department of Commerce, Bureau of the Census United States $47,200 79, , ,700 As of August 6, 2015, nine financial institutions with a total of thirteen branch offices provided banking services within the County. The following are the total deposits in the County s financial institutions as of June 30 in each of the years 2010 through Percentage Change Year Amount ,000, ,000, ,000,000 (2.46) ,000,000 (7.38) ,000,000 (5.45) Source: State of Georgia, Department of Banking and Finance. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 15

22 Industry and Employment Employers. Set forth below are the ten largest employers located in Walker County as of August, 2015, their type of business, and their approximate number of employees. There can be no assurance that any employer listed below will continue to be located in the County or will continue employment at the level stated. No independent investigation has been made of, and no representation can be made as to, the stability or financial condition of the companies listed. Employer Roper SI, Inc. Walker County Board of Education Hutcheson Medical Center¹ Shaw Industries Walker County Government Blue Bird of North Georgia Wal-Mart Yates Bleachery Color Spectrum, Inc. Type of Business Appliance Manufacturer Textile Manufacturer Local Government Healthcare Textile Manufacturer Local Government Automotive Manufacturer Retail Textile Manufacturer Textile Manufacturer 16 Employees 1,800 1,600 1, Source: Walker County Development Authority ¹ In November 2014, Hutchenson Medical Center filed for bankruptcy reorganization under Chapter 11. The Hospital Authority of the County and, Dade and Catoosa counties owns Hutcheson Medical Center s main campus and leases the campus to Hutcheson Medical Center, as a nonprofit organization, to operate the facilities. For a description of the County s potential liability regarding the bankruptcy, please see Note 14 of the audited financial statements of the County for the fiscal year ended September 30, 2014, which are included in this Official Statement as Appendix A. Economic Sector Distribution. The following table shows the annual average percentage of persons who worked in each major sector of the local economy in Walker County in 2010 through Data for 2015 is not yet available. Figures are based on employees covered under the state unemployment insurance program. Industry Agriculture, Forestry, & Fishing Construction Manufacturing Transportation and Warehousing Wholesale Trade Retail Trade Finance, Insurance, and Real Estate Service and Other Industries Federal, State, and Local Government Total: % % % Source: State of Georgia, Department of Labor, Labor Information Systems % % Civilian Employment Statistics of Walker County. Employment includes nonagricultural wage and salary employment, self-employed, unpaid family and private household workers, and agricultural workers. Persons in labor disputes are counted as employed. The use of rounded data does not imply that the numbers are exact. Employment Unemployment Total Labor Force County Unemployment Rate State Unemployment Rate U.S. Unemployment Rate ,019 3,154 33, % 10.2% 9.6% ,126 2,906 33, % 9.9% 8.9% ,016 2,491 32, % 9.0% 8.1% Source: State of Georgia, Department of Labor, Labor Information Systems ,908 2,284 32, % 8.2% 7.4% ,392 2,114 29, % 7.2% 6.2%

23 Building Permits The following table shows a summary of residential and commercial building permits in the County for the last five calendar years and January through July, Commercial/Industrial Residential Total Year Permits Value Permits Value Permits Value $80, ,347, $9,427, $1,172, ,347, $10,519, $17,319, ,329, $22,648, $1,875, ,137, $22,012, $1,801, ,739, $14,540, * 41 6,969,116 Source: Walker County Planning & Development and Georgia Department of Labor * Residential permits from January 1, 2015 through July 31, Commuting Patterns The following two tables show a summary of commuting patterns in the County as of Census year Employed Residents of Walker County County of Employment Number Percent of Total Walker, GA 11, Hamilton, TN 9, Catoosa, GA 2, Whitfield, GA 2, Chattooga, GA Murray, GA Gordon, GA Bradley, TN Other Total Residents: 27, Persons working in Walker County County of Residence Number Percent of Total Walker, GA 11, Catoosa, GA 1, Hamilton, TN 1, Chattooga, GA 1, Dade, GA Whitfield, GA Marion, TN DeKalb, AL Other Total Residents: 17, Source: U.S. Census Bureau [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 17

24 Summary of County Indebtedness by Category DEBT STRUCTURE OF WALKER COUNTY Set forth below is information concerning debt of the County as of June 30, 2015, and as of the anticipated date of issuance of the Bonds. The information set forth below should be read in conjunction with the County s financial statements included as Appendix A hereto. Category of Obligation 1 These are general obligations of the County to which its full faith and credit and taxing power are pledged. The debt service on the general obligation bonds, however, are payable first from a 1% Special Purpose Local Option Sales Tax. 2 Represents general obligations of the governmental entity to which its full faith and credit and taxing power are pledged. Does not constitute debt for purposes of the constitutional debt limit. Loans from the Georgia Environmental Finance Authority are secured by the full faith and credit of the County. 3 The financial obligations of the County under these capital leases do not constitute a general obligation of the County to which its full faith, credit, and taxing power are pledged, but are subject to and dependent upon lawful appropriations of general revenues being made by the Commissioner to pay the payments due in each fiscal year under the leases. The County s obligations under the leases do not constitute debt for purposes of the constitutional debt limit described in DEBT STRUCTURE OF WALKER COUNTY, -Debt Limitation herein and, thus, do not count against the County s debt limitation. Reference is made to Note I of the financial statements of the County for the fiscal year ended September 30, 2014, included in Appendix A, for further discussion of these and other commitments and contingent liabilities of the County. Debt Limitation Amount Authorized or Issued The Constitution of the State provides two limitations on the ability of the County to incur long term debt. The County may not issue long term debt (other than refunding obligations) secured by a pledge to levy general ad valorem taxes without the approval of a majority of the qualified voters of the County voting in a referendum on the debt. In addition, the amount of such long term debt may not exceed 10% of the assessed value of all taxable property within the County. Short-term obligations (those payable within the same calendar year in which they are incurred), lease and installment purchase obligations subject to annual appropriation, and intergovernmental obligations are not subject to the legal limitations described above. As computed in the following table, based upon assessed values for as of January 1, 2014, the County could incur, upon necessary voter approval, immediately after the issuance of the Bonds, approximately $123,124,681 of long-term obligations payable out of general property taxes. Computation of Legal Debt Margin Gross Tax Digest for the County as of January 1, $1,495,246,817 1 Debt Limit (10% of Gross Tax Digest)...$149,524,681 Less Amount of 10% Debt Outstanding, Applicable to Debt Limit... (26,400,000) Legal Debt Margin...$123,124,681 1 Includes M&O exemptions. Source: State of Georgia Department of Revenue. Amount Outstanding as of July 30, 2015 Amount to be Outstanding Upon Issuance of the Bonds Direct Debt Sales Tax Bonds, Series 2014 (1) $26,400,000 $26,400,000 $26,400,000 Contract-Backed Indebtedness (2) The Bonds GEFA Loan $15,230, ,000 $0 750,000 $15,230, ,000 Capital Leases 3 General Fund Leases $4,320,261 $4,320,261 $4,320,261 TOTAL $46,700,261 $31,470,261 $46,700,,261 18

25 Debt Ratios The following table sets forth certain debt ratios of the County following the issuance of the Bonds. Per Capita Debt 1 Percentage of Gross Tax Digest 2 Percentage of Fair Market Value 3 Per Capita Debt as a Percentage of Per Capita Income 4 1 Based upon estimated 2014 population of 68, Based upon 2014 Gross Tax Digest of $1,495,246, Based upon 2014 Estimated Actual Value of $3,738,117, Based upon 2013 Per Capita Personal Income of $28,224. Long and Short Term Indebtedness Direct Debt $ % 1.25% 2.41% Overlapping Debt $ % 0.42% 0.78% Total Tax Supported Debt $ % 1.67% 3.19% The County has notes payable of $10,000,000 bearing interest at 4.50% due on December 31, The notes are short term obligations and were issued by the County to (i) provide for general fund operations in anticipation of property tax receipts, and (ii) pay a note due on behalf of the Hospital Authority of Walker Catoosa and Dade Counties. The County anticipates paying the notes with a combination of ad valorem taxes levied and due on or before December 20, 2015, and proceeds of the Bonds. The County has a note with the Georgia Environmental Finance Authority outstanding in the principal amount of $750,000, the proceeds of which were used to help develop a construction and demolition landfill. The County anticipates issuing one or more tax anticipation notes in an as-yet-undetermined amount during calendar year The County effected an interfund transfer of $1,200,929 from the Walker County Water and Sewer Authority in August 2015 and expects to repay this transfer from future ad valorem property tax collections. The County may bear some potential liability regarding the Hutchinson Medical Center bankruptcy. For a description of the County s potential liability, please see Note 14 of the audited financial statements of the County for the fiscal year ended September 30, 2014, which are included in this Official Statement as Appendix A. Except as noted in the prior paragraph, the County has no plans to issue any other short term obligations and no plans to issue any other long term indebtedness. Indebtedness of Overlapping Governmental Entities Property owners in the County are responsible for both the County s debt obligations and any debt obligations of other taxing entities in the proportion to which the jurisdiction of the County overlaps such entities. Set forth below are the estimated overlapping general obligation debt and overlapping property tax supported contractual obligations, if any, as of July 1, Although the County has attempted to obtain accurate information as to the overlapping debt, it does not guarantee its completeness or accuracy, as there is no central reporting entity which has this information available, and the amounts are based on information supplied by others. Name of Overlapping Entity Amount of Outstanding Debt as of July 1, 2015 Percent of Outstanding Debt Chargeable to Persons or Property in the County Amount of Outstanding Debt Chargeable to Persons or Property in the County Walker County School District General Obligation Bonds Capital Leases $11,005,000 4,100, % 100% $11,005,000 4,100,000 TOTALS: $15,105,000 $15,105,000 1 The percentage of each overlapping entity s outstanding debt chargeable to property in the County is calculated by dividing the gross assessed valuation of taxable real and personal property in the County by the gross assessed valuation of taxable real and personal property of the overlapping entity. 19

26 Debt Service Schedule Set forth below are the principal and interest payment requirements of the County with respect to the Contract and the Bonds. FYE 9/30 Principal Interest Total Value of 1 Mill Debt Service Coverage $ - $ 591,201 $ 591,201 $1,306, x , ,265 1,183,265 1,306, , ,465 1,183,465 1,306, , ,590 1,181,590 1,306, , ,565 1,182,565 1,306, , ,765 1,180,765 1,306, , ,865 1,181,865 1,306, , ,145 1,181,145 1,306, , ,815 1,183,815 1,306, , ,615 1,179,615 1,306, , ,678 1,183,678 1,306, , ,185 1,180,185 1,306, , ,585 1,179,585 1,306, , ,215 1,181,215 1,306, , ,455 1,180,455 1,306, , ,455 1,181,455 1,306, , ,430 1,179,430 1,306, , ,710 1,179,710 1,306, , ,745 1,181,745 1,306, ,005, ,175 1,180,175 1,306, ,060, ,900 1,179,900 1,306, ,120,000 61,600 1,181,600 1,306, TOTAL $ 15,230,000 $ 10,168,425 $ 25,398,425 $ 28,732,000 1 Based on the County s certified Net M&O tax digest for calendar year The County s uncertified Net M&O tax digest for calendar year 2015 is anticipated to be $1,273,705,895. If certified as such, debt service coverage for fiscal year ending September 30, 2016, would be 2.15x and debt service coverage of the maximum annual debt service on the Bonds would be 1.08x. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 20

27 Introduction WALKER COUNTY AD VALOREM TAXATION Ad valorem property taxes are levied annually in mills (one tenth of one percent) upon each dollar of assessed property value. Ad valorem property taxes accounted for an annual average of approximately 40.7% of the General Fund revenues of the County for the fiscal years ended September 30, 2010 through September 30, 2014, and are budgeted to account for 53.8% of General Fund revenues for the year ending September 30, The ad valorem property tax levied by the County was increased from mills to mills in September Property Subject to Taxation Ad valorem property taxes are levied, based upon value, on real and personal property within the County. There are, however, certain classes of property which are exempt from taxation, including public property, religious property, charitable property, property of nonprofit hospitals, nonprofit homes for the aged, and nonprofit homes for the mentally handicapped, college and certain educational property, public library property, certain farm products, certain air and water pollution control property, and personal effects. In addition, the County allows exemptions from ad valorem taxation purposes for: (1) The home of each resident of Georgia that is actually occupied and used as the primary residence by the owner in the amount of $2,000, (2) Individuals 65 years of age and older with a joint net income of less than $10,000 may claim a $4,000 Exemption, (3) Disabled veteran, surviving spouse, or an unremarried surviving spouse of U.S. Service Member killed in action may be granted an exemption of $50,000, (4) an unremarried surviving spouse of a peace officer or firefighter killed in the line of duty will be granted a homestead exemption for the full value of the homestead, and (5) a local exemption for age 70+ will be granted for 100% of the home and up to 5 acres of land so long as the applicant & spouse s net income is less than $15,000. A Freeport exemption is available to companies that manufacture or warehouse goods in the County. Assessed Value Assessed valuation, which represents the value upon which ad valorem property taxes are levied, is calculated as a percentage of fair market value. Georgia law requires all counties to assess taxable tangible property, with certain exceptions, at 40% of its fair market value and to tax such property on a levy made by each tax jurisdiction according to 40% of the property s fair market value. Georgia law requires certain agricultural real property to be assessed for ad valorem property tax purposes at 75% of the value of which other real property is assessed and requires certain historical property to be valued at a lower fair market value for ad valorem property tax purposes. The chief appraiser of the County is required to submit a certified list of assessments for all taxable property, except motor vehicles, mobile homes, and property owned by public utilities, within the County to the Walker County Board of Tax Assessors. The Tax Commissioner of the County is required to present the tax returns to the Walker County Board of Tax Assessors by April 11 of each year. The Board of Tax Assessors is required to complete its revision and assessment of returns by June 1 of each year. The Tax Commissioner then certifies the digest and forwards a copy of the completed digest to the State of Georgia Revenue Commissioner for examination and approval. The Revenue Commissioner has the authority to examine the digest for the purpose of determining if the valuations of property are reasonably uniform and equalized between and within counties. Assessments may also be subject to review at various stages by the Walker County Board of Equalization and by state courts. The State of Georgia Motor Vehicle Tax Unit assesses the value of all motor vehicles by make, model, and year and provides this information to each county s tax office. The State of Georgia Property Tax Unit assesses the value of the property of public utilities and divides the assessment into two parts, assessed value of property and assessed value of franchise, and provides these amounts to the county which bills these taxes to the utilities. Annual Tax Levy The County determines a rate of levy for each fiscal year by computing a rate which, when levied upon the assessed value of taxable property within the territorial limits of the County, will produce the necessary amount of property tax revenues. The County then levies its ad valorem property taxes. Under Georgia law, there is no limitation on the annual rate of levy for the payment of principal of and interest on bonded indebtedness of the County. Ad valorem property taxes received for the payment of debt service on general obligation bonds of the County are required by law to be held and accounted for separately from other funds of the County. Pursuant to the Indenture and the Contract, the County will pay to the Trustee on or before each March 31 st an amount equal to the Contract Payments coming due during that year. 21

28 Property Tax Collections Walker County bills and collects its own property taxes. Real and personal property taxes are levied on January 1 of each year on the assessed value listed as of January 1. Taxes levied by the County on January 1 are normally billed by October 20 and are normally payable on or before December 20. Interest of 12% per annum is applied to taxes paid after December 20. In addition, late payment of taxes of $100 or less incurs a $5.00 penalty. Late payment of taxes on non-homestead property over $100 incurs a $10.00 penalty plus a 10% penalty if paid on or after 90 days from December 20. All taxes levied on real and personal property, together with interest thereon and penalties for late payment, constitute a perpetual lien on and against the property tax arising after January 1 in the year in which taxed. The lien becomes enforceable 30 days after notification. Georgia law provides that taxes must be paid before any other debt, lien, or claim of any kind, except for certain claims against the estate of a decedent and except that the title and operation of a security deed is superior to the taxes assessed against the owner of property when the tax represents an assessment upon property of the owner other than the property specifically subject to the title and operation of the security deed. Collection of delinquent real property taxes is enforceable by tax sale of such realty. Delinquent personal property taxes are similarly enforceable by seizure and sale of the taxpayer s personal property. There can be no assurance, however, that the value of the property sold, in the event of a tax sale, will be sufficient to produce the amount required to pay in full the delinquent taxes, including any interest or penalties thereon. When the last day for the payment of taxes has arrived, the tax collector notifies the taxpayer in writing of the fact that the taxes have not been paid and that, unless paid, an execution will be issued. At any time after 30 days from giving the notice described in the preceding sentence, the Sheriff may issue an execution for nonpayment of taxes. The Sheriff then publishes a notice of the sale in a local newspaper weekly for four weeks and gives the taxpayer ten days written notice by registered or certified mail. A public sale of the property is then made by the Sheriff at the Walker County Courthouse on the first Tuesday of the month after the required notices are given. Tax Reform HB 386 eliminated the ad valorem taxation of vehicles and replaced it with a one-time title tax ( Title Tax ) that is levied whenever the title to a vehicle is registered to a new owner (except if a transfer is made between immediate family members). The Title Tax is based upon the value of the vehicle and will be levied at a rate of 6.75% in 2014 and 7.0% in The revenues will be shared among the State and local governments by formula. In addition, HB 48 gives the County the option to exempt some or all of business inventory from ad valorem taxation. See LEGAL MATTERS Tax Reform. Ten Largest Taxpayers Set forth below is information concerning the ten largest taxpayers in the County in calendar year Information for 2015 is not yet available Taxes Levied County-Wide 2014 Taxes as % of Total Taxes Levied Taxpayer Type of Business 2014 Gross Assessed Value 1 Ropcor Inc. Appliance Manufacturer $24,631,445 $556, % 2 Shaw Industries Textile Manufacturer $50,818,714 $514, % 3 North Georgia EMC Utility $12,416,676 $313, % 4 Georgia Power Company Utility $6,223,482 $153, % 5 Electric Power Board of Chattanooga Utility $5,463,516 $143, % 6 Morgan Stanley Capital Group Investments $5,531,929 $139, % 7 Wal-Mart Stores Retail $4,842,570 $134, % 8 Georgia Windstream Inc. Telecom $3,375,852 $89, % 9 Comcast of the South Telecom $3,091,983 $77, % 10 AT&T Mobility LLC Telecom $2,842,074 $70, % $119,238,241 $2,193, % Source: Walker County Tax Commissioner. 22

29 Tax Digest Set forth below is information concerning the assessed and estimated actual value of taxable property within the County for the past five calendar years. As of January ASSESSED VALUES: Real and Personal Property 1 Public Utilities 2 Motor Vehicles 3 Mobile Homes 4 Timber 100% Gross Tax Digest Less Bond Exemptions Net Tax Digest for Bonds 5 Gross Tax Digest Less Maintenance & Operations ( M&O ) Exemptions Net M&O Tax Digest 6 ESTIMATED ACTUAL VALUE: $1,358,201,031 33,146, ,753,830 17,149,112 71,949 $1,530,322,124 0 $1,530,322,124 $1,530,322,124 (160,525,231) $1,369,796,893 $3,825,805,310 $1,345,314,115 37,963, ,616,810 13,242, ,168 $1,516,512,686 0 $1,516,512,686 $1,516,512,686 (160,790,438) $1,355,722,248 $3,791,281,715 $1,325,796,645 34,462, ,616,810 13,242, ,188 $1,493,494,049 0 $1,493,494,049 $1,493,494,049 (171,813,992) $1,321,680,057 $3,733,735,123 $1,314,596,671 39,646, ,545,750 13,472, ,972 $1,500,847,320 0 $1,500,847,320 $1,500,847,320 (172,793,937) $1,328,053,383 $3,752,118,300 $1,328,878,381 39,181, ,942,900 12,941, ,209 $1,495,246,817 0 $1,495,246,817 $1,495,246,817 (189,084,518) $1,306,162,299 $3,738,117,043 1 The State of Georgia requires all counties to assess real estate and personal property at the rate of at least 40% of estimated actual value, with the exception of timber, which is assessed at 100%. 2 The State of Georgia Property Tax Unit assesses the value of the property of public utilities at the percentage of fair market value used by the County. The Property Tax Unit then divides the assessment into two parts, assessed value of property and assessed value of franchise, and provides these figures to the County which bills these taxes to the utilities with the amount of tax for each. 3 The State of Georgia Motor Vehicle Tax Unit assesses the value of motor vehicles by make, model, and year by county and provides this information to each county tax office. The State of Georgia assesses the value of motor vehicles at the percentage of fair market value used by the County. 4 The State of Georgia assesses the value of mobile homes at the percentage of fair market value used by the County. 5 Total assessed value, after deducting exemptions, for purposes of levying tax for the County s general obligation bonds. 6 Total assessed value, after deducting exemptions, for purposes of levying tax for the M&O of the County. Sources: State of Georgia Department of Revenue, Property Tax Division Millage Rates Set forth below is information concerning the rate of levy of property taxes per $1,000 of assessed value, or millage rates, of the County and all overlapping governments for calendar years 2010 through Year Debt Service Walker County Unincorporated M&O Incorporated M&O School District State of Georgia County-Wide Unincorporated Total Incorporated Total The annual rate of levy for payment of general obligation debt of the County is without limitation as to rate or amount. 2 In addition to the County-Wide Incorporated Totals, most incorporated cities in the County have their own millage rates for property within their city limits. The City of Chickamauga also has an independent school system which has its own millage levy for property within the Chickamauga city limits. Source: Walker County Tax Assessor 23

30 M&O Tax Levies and Collections Set forth below is information concerning total real and personal property tax collections of the County reported as of calendar years ended December 31, 2010 through December 31, Taxes levied by the County are normally billed by October 20 and are normally payable on or before December 20 of the same calendar year, therefore collection data for 2015 is not yet available. Calendar Years Current Year s M&O Tax Levy 1 $7,663,664 $7,507,808 $7,343,772 $7,205,990 $11,106,157 Tax Collections 2 Collection of Current Year s Taxes $5,704,542 $5,675,305 $5,359,066 $5,235,229 $8,423,866 Collection of Prior Years Taxes $1,010,600 $1,280,256 $1,012,233 $1,331,679 $1,226,757 Total Tax Collections $6,715,142 $6,955,561 $6,371,299 $6,566,908 $9,650,622 Current Year s Tax Collections as a Percent of Current Year s Levy 74.4% 75.6% 73.0% 72.7% 75.9% Total Tax Collections as Percent of Current Year s Levy 87.6% 92.6% 86.8% 91.1% 86.9% Uncollected Current Year s Taxes $1,959,122 $1,832,503 $1,984,706 $1,970,761 $2,682, Current Year s M & O Tax Levy is derived from the County s five year history of the tax digest and current year s digest values published pursuant to O.C.G.A. Section and is prior to adjustments and property not on the digest. 2 Collections reflect receipts during the calendar year shown. 3 As of June 30, 2015, $1,492,105 (13.4%) of the calendar year 2014 tax levy remains uncollected. Total tax collections as of June 30, 2015, were equal to $10,964,962 (98.7%) of the calendar year 2014 tax levy. Source: Walker County Tax Commissioner. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 24

31 FINANCIAL INFORMATION CONCERNING WALKER COUNTY Five Year General Fund Operating History The following table sets forth an historical, comparative summary of revenues, expenditures, and changes in fund balance of the County s General Fund for the past five fiscal years. Information in the table has been extracted from audited financial statements of the County for the fiscal years ended September 30, 2010 through September 30, Although taken from audited financial statements, no representation is made that the information is comparable from year to year, or that the information as shown, taken by itself, presents fairly the financial condition of the County for the fiscal years shown. For more complete information, reference is made to the audited financial statements of the County for fiscal year 2014, which are included in this Official Statement as Appendix A, and to the audited financial statements of the County for the fiscal years 2010 through 2013, copies of which are available from the County upon request. Fiscal Years Ended September 30 9mo 9mo /30/2014 6/30/2015 REVENUES Property Taxes 7,288,582 7,734,184 7,934,289 7,638,287 9,338,537 7,665,862 11,093,962 Other Taxes 7,533,949 7,670,017 7,859,099 7,827,837 7,239,702 6,155,804 6,064,527 Licenses and Permits 107, , , , , ,164 98,695 Charges for Services 842, , , , , , ,386 Intergovernmental 362, , , , , , ,759 Fines and Forfeitures 1,696,210 1,645,240 1,429,030 1,724,548 1,566,564 1,145, ,588 Investment Earnings 53,464 59,570 11,269 76,716 14,968 49,411 22,398 Miscellaneous 3,498, , , , , , ,757 Total Revenues 21,382,979 19,309,447 19,062,144 18,950,638 19,788,334 16,259,465 19,355,072 EXPENDITURES General Government 4,524,841 3,662,114 3,491,551 4,004,917 4,091,842 2,922,034 3,189,671 Judicial 2,594,515 2,487,603 2,716,046 2,880,712 3,046,466 2,200,334 2,421,387 Sheriff 6,622,593 6,783,832 6,723,033 7,389,848 7,165,508 5,456,767 5,556,187 Public Safety 1,113,636 1,602, , , , , ,757 Public Works 4,480,796 2,719,319 3,320,666 3,037,331 2,522,374 1,876,935 1,946,257 Culture and Recreation 500, , , , , , ,925 Health and Welfare 515, , , , , ,639 4,947,376 Housing and 438, , , , , , ,279 Development Debt Service 473, , , , ,828 79, ,898 Total Expenditures 21,263,517 19,293,044 18,716,549 19,740,067 19,292,701 14,103,712 19,501,737 REVENUES OVER (UNDER) EXPENDITURES 119,462 16, ,595 (789,429) 495,633 2,155,753 (146,665) OTHER FINANCING SOURCES (USES) Proceeds from Sale of Assets Proceeds from Capital Lease Transfers from other funds Transfers to other funds Total Other Financing Sources (Uses) Net Change in Fund Balance 14,701 26,400 2,500,000 1,000, , , , , ,795 (2,884,811) (1,618,946) (2,884,828) (3,512,254) (3,224,109) (297,323) (3,412,232) (1,882,599) (1,592,546) (384,828) (1,983,459) (3,011,899) (85,113) (3,177,398) (1,763,137) (1,576,143) (39,233) (2,772,888) (2,516,266) 2,070,640 (3,324,063) FUND BALANCE: Beginning of Year 7,093,190 5,330,053 3,753,910 3,714, , ,789 (1,574,477) Prior Period Adjustment End of Year 5,330,053 3,753,910 3,714, ,789 (1,574,477) 3,012,429 (4,898,540) 25

32 Management Discussion and Analysis For a narrative overview and analysis of the financial activities of the County for fiscal year ended September 30, 2014, see Management s Discussion and Analysis included in the audited financial statements of the County for fiscal year 2014, which are included in this Official Statement as Appendix A. The Management s Discussion and Analysis is not a required part of the basic financial statements of the County, but is supplementary information required by the Governmental Accounting Standards Board, and has not been audited by the County s external auditor. The County s General Fund Balance has declined from $7,007,558 at the beginning of fiscal year ended September 30, 2010 to ($1,574,477) at the fiscal year ended September 30, The decrease was due to (i) having to repay the State of Georgia Department of Revenue in approximately $500,000 in Local Option Sales Tax that was over charged during prior fiscal years; (ii) transfers to the Special Facilities Fund for operations of the Mountain Cove Resort Properties; (iii) transfers to the Fire and Rescue Fund; and (iv) a reluctance on County management to raise property taxes. The County projects an ending General Fund Balance at fiscal year ending September 30, 2015 of $36,046. Significant events for fiscal year ending September 30, 2015 were (i) the increase of property taxes by 3 mills to raise an additional approximately $3,900,000; (ii) the payment of approximately $4,800,000 on a debt of the Hospital Authority of Walker Dade and Catoosa Counties that the County guaranteed; (iii) the write-off of Interfund receivables totaling approximately $1,900,000; (iv) the sale of the Cove to the Authority for approximately $4,875,659; (v) the sale of the Agricultural Center to the Authority for approximately $1,099,475; (vi) the sale of the Civic Center to the Authority for approximately $2,063,039; and (vii) the receipt of payment from the Authority on a previous Promissory Note in the amount of approximately $450, In an effort to restore the General Fund Balance and bring revenues in line with expenses, the County plans to do the following for fiscal year ending September 30, 2016: (i) increase property taxes by 1 mill to fund annual debt service on the Bonds; (ii) raise the Fire and Rescue fee from $65 per parcel to $100 per parcel increasing annual revenues by approximately $700,000. The actions taken between fiscal year ended September 30, 2015, and fiscal year ending September 30, 2016, are intended to reduce the transfers that occurred in previous years and allow the General Fund to receive approximately $8,038,000. The projected fiscal year ending September 30, 2016, Budget is projected to have an ending final balance of approximately $521,000 or approximately 6.8% of the County s annual budget. No assurance can be given, however, that the General Fund Balance will equal or exceed the amount presently estimated. Accounting Policies The accounting policies of the County conform in all respects to generally accepted accounting principles ( GAAP ) as applicable to government units. The County uses individual funds and account groups, each of which is considered a separate accounting entity, to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain government functions or activities. The operations of each fund are accounted for with a self-balancing set of accounts. An account group is a financial reporting device designed to provide accountability for certain assets and liabilities that are not recorded in the funds because they do not directly affect expendable available financial resources. The County uses the following fund categories and account groups: Governmental Funds. This category accounts for all or most of the County s general activities and consists of the following fund types: The General Fund is the principal operating fund of the County and is used to account for all revenues and expenditures of the County not otherwise accounted for in another fund. The Special Revenue Funds are used to account for the proceeds of specific revenue sources (other than special assessments, expendable trusts, or major capital projects) that are legally restricted to expenditures for specific purposes. The Capital Projects Funds are used to account for major capital expenditures financed by the Special Sales Tax and grant funds. Proprietary Funds. This category accounts for activities similar to those found in the private sector, where the intent is that the operations will be self-supporting through user charges. The County maintains one Enterprise Fund and one Internal Service Fund. Fiduciary Funds. This category is used to account for assets held by the County in a trustee capacity 26

33 or as an agent for individuals, private organizations, other governments, and/or other funds, and consist of Trust Funds and Agency Funds. Account Groups. The County uses the General Fixed Assets Account Group to account for general fixed assets acquired principally for general purposes and excludes fixed assets of the proprietary funds. The County uses the General Long-Term Debt Account Group to account for the outstanding principal balances of general obligation bonds and other long-term debt not reported in proprietary funds. All Governmental Funds and Agency Funds use the modified accrual basis of accounting. Under this basis of accounting, revenues are recorded when they become both measurable and available. Expenditures are recorded when they have used, or are expected to use, current expendable financial resources, except that unmatured interest on general long-term debt is recorded when due. Note 1 of the County s financial statement, included as Appendix A to this Official Statement, contains a detailed discussion of the County s significant accounting policies. Independent Auditors Reports, Johnson, Hickey & Murchison, P.C., Chattanooga, Tennessee, independent certified public accountants, acted as the County s auditors for the fiscal years ended September 30, 2010 through September 30, The auditors state that the general purpose financial statements of the County for the fiscal years ended September 30, 2010 through September 30, 2014 present fairly, in all material respects, the financial position of the County as of each respective fiscal year, and the results of its operations and cash flows of its proprietary fund types for each respective fiscal year in conformity with GAAP. With respect to the ninemonth periods ended June 30, 2014 and 2015, the auditors reviewed, as of September 4, 2015, unaudited statement of revenues and expenditures of the County s General Fund and agreed the amounts contained therein with the County s accounting records as of June 30, 2014 and 2015, and inquired of certain County officials who have responsibility for financial and accounting matters whether the unaudited statements of revenues and expenditures for the period referred to in the prior sentence conform with generally accepted accounting principles applied on a basis substantially consistent with that of the County s audited financial statements as reflected elsewhere in this Official Statement. Budgetary Process General Description. The County s budget process begins when a proposed operating budget is prepared for all Governmental Funds for the next fiscal year. A public hearing is conducted to obtain taxpayer comments. The budgets are then legally enacted through approval by the Commissioner. Budgets are adopted on a modified accrual basis of accounting which is consistent with GAAP. The County prepares a budget for the Special Sales Tax using projected total Special Sales Tax revenues and projected capital outlays. Pursuant to O.C.G.A (b), the annual budgets approved by the Commissioner for the General Fund and each Special Revenue Fund must be balanced. A budget is balanced when the sum of estimated net revenues and appropriated fund balances is equal to appropriations. The Commissioner has the authority under O.C.G.A (d), however, to amend the budget as follows: (1) Any increase in appropriation at the legal level of control of the County, whether accomplished through a change in anticipated revenues in any fund or through a transfer of appropriations among departments, requires the approval of the Commissioner. Such amendment shall be adopted by ordinance or resolution; (2) Transfers of appropriations within any fund below the County s legal level of control requires only the approval of the budget officer; and (3) The Commissioner may amend the legal level of control to establish a more detailed level of budgetary control at any time during the budget period. Said amendment shall be adopted by ordinance or resolution. General Fund Budgets. Set forth on the following page is a summary of the County s General Fund budget for the fiscal year ending September 30, 2015 and a projection of the County s general fund budget for fiscal year 2016 and The budget for fiscal year 2015 and projected budgets for fiscal 2016 and 2017 are based upon certain assumptions and estimates of the County s management regarding future events, transactions, and circumstances. Realizations of the results projected in the budget for fiscal year 2015 will depend upon implementation by management of policies and procedures consistent with the assumptions. Accordingly, the actual results achieved could materially vary from those projected in the budget for fiscal year 2015 shown below. 27

34 GENERAL FUND BUDGET AND PROJECTED BUDGETS Budget 2015 Projected 2015 Projected 2016 Projected 2017 Revenues: Property Taxes 12,108,064 11,700,000 13,000,000 13,000,000 Other Taxes 7,312,000 7,312,000 7,330,572 7,261,088 Licenses and Permits 150, , , ,433 Charges for Services 833, , , ,146 Intergovernmental Revenue 321, , , ,885 Fines and Forfeitures 1,604,050 1,604,050 1,570,809 1,559,343 Investment Earnings 14,400 14,400 15,000 15,000 Miscellaneous 162, , , ,000 Total Revenues 22,506,774 22,098,710 23,689,111 23,620,895 Expenditures: General Government 4,174,827 4,174,827 4,260,439 4,260,439 Judicial 2,939,778 2,939,778 3,134,277 3,134,277 Sheriff 7,706,340 7,706,340 7,788,250 7,788,250 Public Safety 751, , , ,753 Public Works 3,227,571 3,227,571 3,119,332 3,119,332 Culture and Recreation 368, , , ,689 Health and Welfare 644,871 5,166, , ,970 Housing and Development 388, , ,013 1,651,013 Debt Service 707, , , ,793 Total Expenditures 20,909,809 25,431,037 21,162,516 22,462,516 Excess of Revenues Over (Under) Expenses 1,596,965 (3,332,327) 2,526,595 1,158,379 Other Financing Sources (Uses): Proceeds from Sale of Assets ¹8,273,007 Other Intergovernmental Revenue 450,000 Transfers to Other Funds (1,596,758) (3,780,157) (1,100,000) (1,100,000) Total Other Financing Sources (Uses) (1,596,758) 4,942,850 (1,100,000) (1,100,000) Net Change in Fund Balance 207 1,610,523 1,426,595 58,379 Fund Balance, Beginning of Year (1,574,477) (1,574,477) 36,046 1,462,641 Fund Balance, End of Year (1,574,270) 36,046 1,462,641 1,521,020 ¹ The County anticipates effecting the transfer of the assets at the delivery of the Bonds. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 28

35 Litigation LEGAL MATTERS The County, like other similar bodies, is subject to a variety of suits and proceedings arising in the ordinary conduct of its affairs. The County, after reviewing the current status of all pending and threatened litigation with its counsel, Donald F. Oliver, Esq., LaFayette, Georgia, believes that, while the outcome of litigation cannot be predicted, the final resolution of any lawsuits which have been filed and of any actions or claims pending or threatened against the County or its officials in such capacity are adequately covered by insurance or sovereign immunity or will not otherwise have a material adverse impact upon the financial position or results of operations of the County. It is a condition of closing that the County certify that there is no action, suit, proceeding, controversy or litigation of any nature pending or, to the knowledge of the County, threatened against or affecting the County before or by any court, public board or body: (i) in any way affecting or questioning the validity of the Bonds or the provisions of the security therefor, or restraining or enjoining or seeking to restrain or enjoin the execution, delivery, or sale of the Bonds, (ii) questioning or contesting the existence of the County, the title of any of the officers thereof to their respective offices, or (iii) wherein an unfavorable decision, ruling or finding would have a material adverse effect on the financial condition of the County.] Legal Proceedings Validation of Bonds. In accordance with the law of the State, the Bonds and the security therefor were confirmed and validated on September 15, 2015, by judgment of the Superior Court of Walker County, Georgia. Under Georgia law, the judgment of validation will be forever conclusive against the County. Opinions of Counsel. All legal matters incidental to authorization and issuance of the Bonds are subject to the approval of Dentons US LLP, Bond Counsel. It is anticipated that the approving opinion will be in substantially the form attached hereto as Appendix C. Certain legal matters will be passed upon for the County by its counsel, Donald F. Oliver, Esq., LaFayette, Georgia, and for the Underwriter by its counsel, Parker Poe Adams & Bernstein LLP, Columbia, South Carolina. The payment of legal fees is contingent upon issuance of the Bonds. The various legal opinions to be delivered concurrently with the delivery of the Bonds express the professional judgment of the attorneys or law firms rendering the opinion as to the legal issues explicitly addressed therein. By rendering a legal opinion, the attorney or law firm does not become an insurer or guarantor of the transaction opined upon, or of the future performance of parties to such transaction. Nor does the rendering of an opinion guarantee the outcome of any legal dispute that may arise out of the transaction. Certain Tax Consequences of Owning Bonds The following constitutes a discussion of certain of the federal and State of Georgia income tax consequences of the purchase, ownership, and disposition of the Bonds. This summary is presented for informational purposes only and is intended to be a discussion primarily of the federal and State of Georgia income tax consequences to individual owners who are citizens or residents of the United States. It is not practicable to comment on all aspects of the federal, state, and local tax laws that may affect an individual owner s purchase of the Bonds. Therefore, state (other than State of Georgia), local, and foreign tax consequences are not discussed, nor are the tax consequences to owners other than individuals. Such tax consequences will vary with each purchaser, depending upon his or her individual situation. The following summary should not be considered as legal or tax advice to prospective purchasers of the Bonds. Taxability The interest on the Bonds is included in gross income of the United States citizen and resident owners thereof for federal income tax purposes and therefore is not exempt from federal income taxation. The interest on the Bonds is, however, exempt from State of Georgia income taxation. Bond Premium and Discount. The Bonds maturing on August 1, 2020 ( Premium Bonds ) are being sold at a price in excess of the principal amount thereof. Under the Internal Revenue Code of 1986, as amended ( Code ), the excess of an owner s cost basis of a Premium Bond over the principal amount payable at maturity of such bond (other than a bond held as inventory, stock in trade, or for sale to customers in the ordinary course of business) is 29

36 generally characterized as amortizable bond premium. Owners may elect to treat amounts of amortizable bond premium as offsetting the amount of stated interest on Premium Bonds otherwise includable in gross income in a taxable year to the extent such amount is allocable to that taxable year. In general, the amount of amortizable bond premium so allocable is determined based on the owner s yield to maturity of the Premium Bond. The amount so allocable also reduces the owner s adjusted basis in the Premium Bond. If such an election is made, it is generally applicable for the taxable year in which it is made and for all subsequent tax years. This election will apply to all bonds then held or thereafter acquired by the owner. Certain procedures govern the time and manner in which such an election is made. Any purchaser of the Premium Bond should consult the purchaser s own tax advisors with respect to the determination for federal and State of Georgia income tax purposes of the treatment of amortizable bond premium thereon. Although the Bonds maturing August 1, 2017, through 2019, and 2021 through 2037, inclusive (collectively, Discount Bonds ) have been issued at a discount, the amount of such discount is de minimis under the applicable federal income tax rules. Consequently, there is no amount that will be treated as original issue discount to be accrued with respect to the Discount Bonds. Purchasers of Discount Bonds in the initial public offering at the initial offering price will experience gain for federal income tax purposes upon the payment of such Discount Bonds at maturity or earlier redemption equal to the amount of de minimis discount. Backup Withholding and Reporting Requirements. Interest payments with respect to the Bonds will be reported to the owners and the Internal Revenue Service ( IRS ). Such amounts will normally not be subject to withholding of federal income tax. However, the Issuer or its agent may be required to withhold federal income tax at a rate of 28% from payments to certain owners ( backup withholding ) in accordance with Section 3406 of the Code. This tax may be withheld from certain payments if (i) an owner fails to furnish the Issuer or its agent with his or her tax identification number ( TIN ) certified under penalties of perjury, (ii) the Issuer or its agent is notified by the IRS that the TIN furnished by an owner is incorrect, (iii) the IRS notifies the Issuer or its agent that an owner has failed to report properly certain income to the IRS, or (iv) when required to do so, an owner fails to certify under penalty of perjury that he or she is not subject to backup withholding. Other Tax Consequences to Investors. There may be other federal, state, local, or foreign tax considerations applicable to the circumstances of a particular investor. Prospective investors are urged to consult their own tax advisors before determining whether to purchase Bonds. Purchasers of Bonds who are nonresident alien individuals, corporations that are not incorporated in the United States or under the laws of the United States or of any state of the United States, or other non-united States persons should consult their own tax advisors with respect to the possible applicability of United States withholding and other taxes on income realized in respect to the Bonds. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 30

37 Rating MISCELLANEOUS Standard & Poor s Ratings Services, A Division of The McGraw-Hill Companies, Inc., has assigned the rating of AA (stable outlook) to the Bonds based upon the issuance of the Policy securing the payment when due of the principal of and interest on the Bonds by BAM at the time of delivery of the Bonds. The rating reflects only the views of the rating agency. The Bonds do not have an underlying rating. Generally, a rating agency bases its rating on the information and materials furnished to it and on investigations, studies, and assumptions of its own. An explanation of the significance of the rating may be obtained from the rating agency furnishing such rating. The rating agency may be contacted as follows: Standard & Poor s, A Division of The McGraw-Hill Companies, Ratings Services, 55 Water Street, 38th Floor, New York, New York 10041, telephone (212) There is no assurance that the rating will remain unchanged for any given period of time or that the rating will not be revised downward or withdrawn entirely by the rating agency, if, in its judgment, circumstances so warrant. Any such downward revision or withdrawal of the rating may have an adverse effect on the liquidity and market price of the Bonds. Underwriting Pursuant to a bond purchase agreement executed by and between the County and the Underwriter on September 17, 2015, the Underwriter has agreed to purchase the Bonds at an aggregate purchase price of $14,884, (consisting of $15,230, par amount of the Bonds, less an aggregate original issue discount of $147,188.65, and less underwriter s discount of $197,990.00). The obligations of the Underwriter to accept delivery of the Bonds are subject to numerous conditions set forth in the bond purchase agreement. The Underwriter may offer and sell the Bonds to other dealers and other purchasers at prices lower than the public offering prices stated on the cover hereof. The initial public offering prices may be changed from time to time by the Underwriter. Continuing Disclosure In connection with the issuance of the Bonds and in accordance with the Securities and Exchange Commission Rule 15c2-12(b)(5), the County, as the obligated entity, will execute and deliver prior to closing a Disclosure Dissemination Agent Agreement ( Disclosure Undertaking ), in substantially the form attached hereto as Appendix D. Pursuant to the Disclosure Undertaking, the County will provide to the Digital Assurance Certification, L.L.C., as disclosure dissemination agent, certain financial information and operating data relating to the County ( Annual Report ) by not later than June 1 of the year following the end of the preceding fiscal year of the County, commencing with the fiscal year ending September 30, 2015, and to provide notices of the occurrence of certain enumerated events. The specific nature of the information to be contained in the Annual Report or the notices of enumerated events is set forth in the form of the Disclosure Undertaking. These covenants have been made for the benefit of the holders and beneficial owners of the Bonds and in order to assist the Underwriter in complying with Securities and Exchange Commission Rule 15c2-12(b)(5). The sole remedy for failure by County to comply the provisions of the Disclosure Undertaking, is an action to compel performance by the County. In connection with prior issuance of the County s $8,630,000 General Obligation Sales Tax Bonds, Series 2008 and $15,355,000 General Obligation Sales Tax Bonds, Series 2009 (collectively Prior Bonds ), which respectively matured on January 1, 2015 and January 1, 2014, the County executed a continuing disclosure instrument ( Prior Undertaking ) in which the County covenanted to file with certain national repositories by not later than one year following the end of the preceding fiscal year annual reports, consisting of the following financial and operating data with respect to the preceding fiscal year: 1. the County s audited financial statements; 2. collections from the special 1% sales and use tax levied in the County s territorial limit which secured the principal and interest due on the Prior Bonds ( Special Tax Collections ); 3. computation of the County s legal debt margin; 4. the County s property tax digest; 5. County s millage rate; 6. the property tax levies and collections in the County; 7. ten largest taxpayers in the County; 8. a statement of direct and overlapping general obligation supported debt of the County ( Direct and Overlapping Debt ); and 31

38 9. the future debt service obligations of the County. The County also covenanted to file notices of certain enumerated events, including ratings changes. In the past five years, pursuant to the Prior Undertaking, the County has had an obligation to file annual reports with respect to fiscal years ending September 30, 2010, through September 30, The last maturity of the Prior Bonds was January 1, Thus, the Prior Undertaking terminated according to its terms. The County s obligation to file annual reports pursuant to the Prior Undertaking likewise terminated and no annual report will be filed with respect to fiscal year end September 30, For the annual reports due with respect to fiscal years ending September 30, 2011, through and including September 30, 2013, the County timely filed annual reports which complied with the requirements of the Prior Undertaking. For the annual report due with respect to fiscal year end September 30, 2010, on April 4, 2011, the County filed its audited financials, and on April 9, 2012, operating data consisting of the Special Tax Collections, the County s property tax digest, the County s millage rate, and the property tax levies and collections in the County. On September 2, 2014, the County filed the ten largest taxpayers in the County, a statement of the Direct and Overlapping Debt, and the future debt service obligations of the County. The County filed a computation of the County s legal debt margin on September 15, On August 6, 2014, the County filed a notice of a downgrade to its rating by Moody s Investors Service on July 30, On June 25, 2014, the County filed a notice of Standard & Poor s Rating Services withdrawal, at the County s request, of the County s rating on May 12, On September 14, 2015, the County filed a notice of Standard & Poor s Rating Services downgrade of the County s rating on May 6, In the past five years there have been numerous rating actions reported by Moody s Investors Service, Standard & Poor s Rating Services and Fitch Ratings affecting Assured Guaranty Corp., which insured a portion of the Prior Bonds. Due to widespread knowledge of these rating actions, material event notices were not filed by the County in each case. Independent Auditor; Financial Statements Johnson, Hickey & Murchison, P.C., Certified Public Accountants, Chattanooga, Tennessee, have been employed by the County as its independent auditor. The financial statements of the County as of September 30, 2014, and for the year then ended, attached hereto as Appendix A, have been audited by Johnson, Hickey & Murchison, P.C., Certified Public Accountants, Chattanooga, Tennessee, to the extent and for the period indicated in their report thereon which appears in such appendix. Such financial statements have been included herein in reliance upon the report of Johnson, Hickey & Murchison, P.C., given upon the authority of such firm as experts in accounting and auditing. Miscellaneous Insofar as any statement in this Official Statement involves matters of opinion or of estimates, whether or not expressly stated, they are set forth as such and not as representations of fact. No representation is made that any of the statements will be realized. Neither this Official Statement nor any statement which may have been made orally or in writing is to be construed as a contract with the holders of the Bonds. Use of the words shall, must, or will in summaries of documents or laws in this Official Statement to describe future events or continuing obligations is not intended as a representation that such event will occur or obligation will be fulfilled but only that the document or law contemplates or requires such event to occur or obligation to be fulfilled. 32

39 Approval of Official Statement The execution and delivery of this Official Statement, and its distribution and use by the Underwriter, have been duly authorized and approved by the County. WALKER COUNTY, GEORGIA By: /s/ Bebe Heiskell Commissioner WALKER COUNTY DEVELOPMENT AUTHORITY By: /s/ Virgil Sperry Chairperson, Board of Directors 33

40 (THIS PAGE LEFT BLANK INTENTIONALLY)

41 Appendix A AUDITED FINANCIAL STATEMENTS OF WALKER COUNTY, GEORGIA FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2014

42 (THIS PAGE LEFT BLANK INTENTIONALLY)

43 WALKER COUNTY, GEORGIA LaFayette, Georgia ANNUAL FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION Year Ended September 30, 2014 JOHNSON, HICKEY & MURCHISON, P.C. Certified Public Accountants Chattanooga, Tennessee

44 TABLE OF CONTENTS P a g e FINANCIAL SECTION: INDEPENDENT AUDITORS REPORT MANAGEMENT S DISCUSSION AND ANALYSIS iii vi BASIC FINANCIAL STATEMENTS: GOVERNMMENT WIDE FINANCIAL STATEMENTS: Statement of Net Position 1 Statement of Activities 2 FUND FINANCIAL STATEMENTS: Governmental Funds Balance Sheet 3 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position 4 Statement of Revenues, Expenditures, and Changes in Fund Balances 5 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 6 Proprietary Funds Statement of Net Position 7 Statement of Revenues, Expenses, and Changes in Fund Net Position 8 Statement of Cash Flows 9 Fiduciary Funds Statement of Fiduciary Net Position 10 Statement of Changes in Fiduciary Net Position 11 NOTES TO THE BASIC FINANCIAL STATEMENTS 12 REQUIRED SUPPLEMENTARY INFORMATION: Budgetary Comparison Schedule General Fund 40 Budgetary Comparison Schedule Fire and Rescue Fund 44 Schedule of Funding Progress Retirement Plan 45 Schedule of Employer Contributions Retirement Plan 46 Notes to Required Supplementary Information 47 SUPPLEMENTARY INFORMATION: Combining Financial Statements Nonmajor Governmental - Special Revenue Funds Combining Balance Sheet 49 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 50 i

45 TABLE OF CONTENTS P a g e SUPPLEMENTARY INFORMATION (Continued): Agency Funds - Combining Statement of Fiduciary Assets and Liabilities 51 Combining Statement of Changes in Assets and Liabilities 52 Statement of Changes in Assets and Liabilities Tax Commissioner 53 Statement of Changes in Assets and Liabilities Clerk of Courts 54 Statement of Changes in Assets and Liabilities Probate Judge 55 Statement of Changes in Assets and Liabilities Magistrate Judge 56 Statement of Expenditures to Budget Family Connection Program 57 Budgetary Comparison Schedules: E Law Library 59 Multiple Grant Fund 60 Court Supervision 61 Connection 62 Transportation 63 COMPLIANCE: Federal Compliance and Internal Control Reports Independent Auditors' Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 65 Independent Auditors' Report on Compliance for Each Major Program and on Internal Control over Compliance Required by OMB Circular A Schedule of Expenditures of Federal Awards 69 Summary Schedule of Prior Audit Findings and Questioned Costs 71 Schedule of Findings and Questioned Costs 72 State Compliance Schedule of Projects Constructed with 2008 Special Purpose Local Option Sales Tax Proceeds 75 Schedule of Projects Constructed with 2013 Special Purpose Local Option Sales Tax Proceeds 76 CORRECTIVE ACTION PLAN 77 ii

46

47 accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, based on our audit and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of Walker County, Georgia, as of September 30, 2014, and the respective changes in financial position, and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter As described in Note 14 to the financial statements, in 2014, the County adopted new accounting guidance, GASB Statement No. 70, Accounting and Financial Reporting for Nonexchange Financial Guarantees. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis and other required supplementary information on page vi through xiv and 40 through 47 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting 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. We and the other auditors have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise Walker County, Georgia s basic financial statements. The schedule of grant activities on page 62, the combining and individual nonmajor fund financial statements and schedules listed in the table of contents are presented for purposes of additional analysis and are not a required part of the basic financial statements. The schedule of expenditures of federal awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and the Schedule of Projects iv

48 Constructed with Special Purpose Local Option Sales Tax Proceeds as required by Georgia code section OCGA are also not a required part of the basic financial statements. The schedule of grant activities on page 62, the combining and individual nonmajor fund financial statements, the schedule of expenditures of federal awards, and the Schedule of Projects Constructed with Special Purposes Local Option Sales Tax Proceeds are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, based on our audit and the report of the other auditors, the schedule of grant activities, the combining and individual nonmajor fund financial statements, the schedule of expenditures of federal awards, and the Schedule of Projects Constructed with Special Purpose Local Option Sales Tax Proceeds are fairly stated in all material respects in relation to the basic financial statements taken as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated July 24, 2015, on our consideration of Walker County, Georgia s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Walker County, Georgia s internal control over financial reporting and compliance. July 24, 2015 Chattanooga, Tennessee v

49 WALKER COUNTY, GEORGIA MANAGEMENT S DISCUSSION AND ANALYSIS The following discussion and analysis of Walker County s financial performance provides an overview of the County s financial activities for the fiscal year ended September 30, Please read it in conjunction with the County s financial statements which follow this analysis. FINANCIAL HIGHLIGHTS The assets of Walker County exceeded its liabilities and deferred inflow of resources at September 30, 2014 by $66,370,716 (Net Position), a decrease of $15,773,434 from the prior year. Of the net position, $67,696,820 is restricted as to what the funds may be expended for. The remaining deficit balance, $1,326,104, is what is available to meet the ongoing obligations to citizens and creditors. In the County s business-type activities, expenditures exceeded revenues by $1,543,456. Revenues were insufficient to recoup costs largely due to high depreciation expense, accrued postclosure costs, and operating losses. An operating transfer from the General fund was made to cover most of the loss.. The County s governmental activities reported combining ending net position of $62,192,132, a decrease of $15,645,194 from the prior year net position. Of this amount, $519,252 remains in the various funds as unrestricted.. Debt increased by $25,369,143. This was primarily due to the issuance of SPLOST bonds in the amount of $26,400,000, a bond payment of $4,282,459, a net decrease in leases of $667,919, retirement of a tax anticipation note for $4,000,000, and the addition of a tax anticipation note for $7,720,000. Local Options Sales Tax distribution with the local municipalities was renegotiated resulting in a decrease in the county s portion from 80% to 72.5% OVERVIEW OF THE FINANCIAL STATEMENTS This annual report consists of a series of financial statements. The Statement of Net Position and the Statement of Activities provide information about the activities of the County as a whole and present a longer-term view of the County s finances. Fund financial statements start on page 3. For governmental activities, these statements tell how these services were financed in the short-term as well as what remains for future spending. Fund financial statements also report the County s operations in more detail than the government-wide statements by providing information about the County s most significant funds. The remaining statements provide financial information about activities for which the County acts solely as trustee or agent for the benefit of those outside the government. GOVERNMENT-WIDE FINANCIAL STATEMENTS The government-wide statements report information about the County as a whole using accounting methods similar to those used by private-sector companies. One of the most important questions asked about the County s finances is, Is the County as a whole better off or worse off as a result of the year s activities? The Statement of Net Position and the Statement of Activities, which are the government-wide statements, report information about the County as a whole and about its activities in a way that helps answer this question. These statements include all assets, liabilities and deferred inflows of resources using the accrual basis of accounting, which is similar to the accounting used by most private-sector companies. All of the current year s revenues and expenses are taken into account regardless of when cash is received or paid. The Statement of Net Position and the Statement of Activities report the County s net position and changes in net position. One can think of the County s net position the difference between assets and liabilities and deferred inflow of resources as one way to measure the County s financial health, or financial position. Over time, increases or decreases in the County s net position are one indicator of whether its financial health is improving or deteriorating. However, other nonfinancial factors will need to be considered, such as changes in the County s property tax base and the condition of the County s roads, to assess the overall health of the County. vi

50 WALKER COUNTY, GEORGIA MANAGEMENT S DISCUSSION AND ANALYSIS (Continued) In the Statement of Net Position and the Statement of Activities, we divide the County into the following: Governmental activities Most of the County s basic services are reported here: public safety (law enforcement and traffic control, fire and rescue services, and corrections and detention); health and welfare (health and social services); recreation and culture (including libraries); community development (planning, environmental management and cooperative extension); public works (roads); and general government administration (legislative, general and financial, elections and judicial). Property taxes, other local taxes, and state and federal grants finance most of these activities. Business-type activities The County charges fees to customers to cover the cost of operations for its enterprise funds. The county maintains two enterprise funds. The Landfill maintains the County transfer station, the construction and demolition landfill, and the solid waste landfill, which was closed in Under federal guidelines, the County must maintain the solid waste landfill for 30 years after it is closed. The Special Facilities fund operates the Mountain Cove convention and recreation area. It is being developed to host weddings, small conventions, and leisure outings. Component unit The County includes the following separate entity in its report Walker County Health Department. Although legally separate, this component unit is included because the County is financially accountable and provides operating and capital funding as well as oversight. The Health Department has a June 30 year end. Complete financial statements of the Health Department can be obtained from their office: 603 E. Villanow St., LaFayette, Georgia FUND FINANCIAL STATEMENTS Traditional users of government financial statements will find the fund financial statement presentation more familiar. The focus is now on the County s most significant funds. The fund financial statements provide more information about these individual funds not the County as a whole. The County has three kinds of funds: Governmental funds Most of the County s basic services are included in governmental funds, which focus on balances left at year end that are available for spending. Consequently, the governmental funds statements provide a detailed short-term view that helps the reader determine whether there are more or fewer financial resources that can be spent in the near future to finance the County s programs. Because this information does not encompass the additional long-term focus of the government-wide statements, additional information is provided in an accompanying schedule of the governmental funds statement that explains the relationship (or differences) between them. Proprietary funds These funds are used to account for operations that are financed in a manner similar to private business enterprises. The proprietary fund measurement focus is upon determination of net income, financial position and cash flows. Cash and temporary investments related to these proprietary funds are all highly liquid cash equivalents. The County s proprietary fund types consist of the Walker County Landfill and the Special Facilities fund. The operation of these funds are generally intended to be self-supporting. Fiduciary Funds These funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the County s own programs. The accounting used for fiduciary funds is much like that used for proprietary funds. Notes to the financial statement The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. vii

51 WALKER COUNTY, GEORGIA MANAGEMENT S DISCUSSION AND ANALYSIS (Continued) Other information In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the County s schedule of budgetary comparisons, progress in funding its obligation to provide pension benefits to its employees, and employer pension contributions. GOVERNMENT-WIDE FINANCIAL ANALYSIS Net Position may serve over time as a useful indicator of a government s financial position. At the end of the current fiscal year, the County s assets exceeded its liabilities and deferred inflow of resources by $66,370,716. This excess is divided into three net position categories. Investment in capital assets less any outstanding debt used to acquire these assets is one of the components of net position. Walker County uses these assets to provide service to its citizens; consequently, these assets are not available for future spending. Although the County s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources since the capital assets themselves cannot be used to liquidate these liabilities. Another component is restricted net position, the balance of which is subject to external restrictions. The final component is unrestricted net position. The amount in this category normally represents amounts that may be used to meet the ongoing obligations to its citizens and creditors. The balance at September 30, 2014, is a deficit balance of $1,326,104, which may be used to meet the County s ongoing obligations. Net Position September 30, 2014 and 2013 Total Governmental Business -type Primary Activities Activities Government Assets Current and other assets $ 36,949,487 $ 19,414,052 $ 128,620 $ 183,129 $ 37,078,107 $ 19,597,181 Capital assets 78,566,738 81,384,081 6,029,054 6,231,124 84,595,792 87,615,205 Total assets $ 115,516,225 $ 100,798,133 $ 6,157,674 $ 6,414,253 $ 121,673,899 $ 107,212,386 Liabilities Long-term liabilities $ 45,367,642 $ 20,080,285 $ 1,910,023 $ 1,828,307 $ 47,277,665 $ 21,908,592 Other liabilities 7,349,598 2,171,949 69,067 59,498 7,418,665 2,231,447 Total liabilities $ 52,717,240 $ 22,252,234 $ 1,979,090 $ 1,887,805 $ 54,696,330 $ 24,140,039 Deferred inflow of resources Unavailable revenue $ 606,853 $ 708, , ,573 Total deferred inflows $ 606,853 $ 708,573 $ - $ - $ 606,853 $ 708,573 Net position Invested in capital assets, net of related debt $ 56,741,404 $ 68,329,627 $ 6,023,940 $ 6,115,382 $ 62,765,344 $ 74,445,009 Restricted 4,931,476 5,431,906 4,931,476 5,431,906 Unrestricted 519,252 4,075,793 (1,845,356) (1,808,558) (1,326,104) 2,267,235 Total net position $ 62,192,132 $ 77,837,326 $ 4,178,584 $ 4,306,824 $ 66,370,716 $ 82,144,150 Net position of the County s governmental activities decreased by $15,645,194 while the net position of the business type activities decreased by $128,240. The County s two business activities are the Walker County Landfill and the Special Facilities recreation area. The landfill operated at a loss due to closure and depreciation expense while the Special Facilities had a loss due to operating costs. Walker County s overall revenue was up 14% in 2014 compared to Property tax revenue increased 52%, and sales tax revenue decreased 14%. Approximately 35% of the County s total revenue from governmental activities viii

52 WALKER COUNTY, GEORGIA MANAGEMENT S DISCUSSION AND ANALYSIS (Continued) came from property taxes and 32% from other taxes. Charges for services amounted to about 22% of governmental revenue with grants and contributions contributing approximately 9%. The County s largest expenditures are for public works (18% of total governmental expenses), public safety (18%), sheriff (15%), general government (14%), and health and welfare (12%). Changes in Net Position For the Years Ended September 30, 2014 and 2013 Total Governmental Business-type Primary Activities Activities Government Revenues: Program Revenues: Charges for Services $ 7,855,811 $ 7,978,224 $ 1,626,708 $ 1,421,861 $ 9,482,519 $ 9,400,085 Operating Grants & Contributions 1,613,229 1,363,501 1,613,229 1,363,501 Capital Grants & Contributions 1,812,611 74,231 1,812,611 74,231 General Revenues: Property Taxes 12,600,164 8,283,206 12,600,164 8,283,206 Other Taxes 11,480,950 11,829,847 11,480,950 11,829,847 Other 1,013,874 2,263,380 38, ,128 1,052,611 2,443,508 Total Revenues $ 36,376,639 $ 31,792,389 $ 1,665,445 $ 1,601,989 $ 38,042,084 $ 33,394,378 Expenses: General government $ 7,317,432 $ 4,563,778 $ 7,317,432 $ 4,563,778 Judicial 3,215,122 3,069,632 3,215,122 3,069,632 Sheriff 7,615,482 7,235,458 7,615,482 7,235,458 Public Safety 9,253,587 8,571,310 9,253,587 8,571,310 Public Works 8,858,166 4,869,588 8,858,166 4,869,588 Health and Welfare 6,279,687 2,356,461 6,279,687 2,356,461 Recreation and Culture 1,377, ,699 1,286, ,317 2,664,317 1,242,016 Housing and Development 5,315, ,432 5,315, ,432 Intergovernment Payments - - Interest on Long Term Debt 1,374, ,409 1,374, ,409 Solid Waste 1,922,132 2,108,072 1,922,132 2,108,072 Total Expenses $ 50,606,617 $ 32,548,767 $ 3,208,901 $ 2,465,389 $ 53,815,518 $ 35,014,156 Increase (decrease) in net position (14,229,978) (756,378) (1,543,456) (863,400) (15,773,434) (1,619,778) before transfers Transfers (1,415,216) (1,448,073) 1,415,216 1,448,073 Increase (decrease) in net position (15,645,194) (2,204,451) (128,240) 584,673 (15,773,434) (1,619,778) Net position - October 1 77,837,326 80,041,777 4,306,824 3,722,151 82,144,150 83,763,928 Prior period adjustment - - Net position beginning of year as adjusted 77,837,326 80,041,777 4,306,824 3,722,151 82,144,150 83,763,928 Net position - September 30 $ 62,192,132 $ 77,837,326 $ 4,178,584 $ 4,306,824 $ 66,370,716 $ 82,144,150 ix

53 WALKER COUNTY, GEORGIA MANAGEMENT S DISCUSSION AND ANALYSIS (Continued) Total government wide revenue of $38,042,084 was comprised of governmental activities ($36,376,639) and business type activities ($1,665,445). The revenue of the business type activity was almost solely charges for services. The following graph illustrates the distribution of the governmental activities revenue. The predominate sources of revenue are property taxes and the Other Tax category, which is primarily Local Option Sales Tax, Special Purpose Local Option Sales Tax, and business taxes. Special Purpose Local Option Sales Tax revenue, which totaled $6,521,616, is specifically earmarked and cannot be used to finance the normal operations of the County. REVENUE BY SOURCE FOR GOVERNMENTAL ACTIVITIES Property Taxes 35% Other Taxes 32% Other 1% Charges for Services 22% Operating Grants and Contribution 4% In Lieu of Taxes 1% Capital Grants and Contributions 5% x

54 WALKER COUNTY, GEORGIA MANAGEMENT S DISCUSSION AND ANALYSIS (Continued) Government-wide expenses totaled $53,815,518 for fiscal year 2014, including governmental activity expense of $50,606,617 and business type activity expense of $3,208,901. The following graph provides a visual depiction of expenditures of the governmental activities by function for fiscal year EXPENSES BY FUNCTION GOVERNMENTAL ACTIVITIES Public Works 18% Interest on Long Term Debt 3% General government 14% Health and Welfare 12% Judicial 6% Public Safety 18% Housing and Development 11% Sheriff 15% Recreation and Culture 3% FINANCIAL ANALYSIS OF THE COUNTY S FUNDS Governmental Funds The focus of the County s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the County s financing requirements. In particular, unassigned fund balance may serve as a useful measure of a government s net resources available for spending at the end of the fiscal year. xi

55 WALKER COUNTY, GEORGIA MANAGEMENT S DISCUSSION AND ANALYSIS (Continued) As the County completed the year, its governmental funds reported a combined fund balance of $16,146,299. Restricted fund balance is $17,720,776 which represents funds that are subject to externally enforceable legal restrictions. The difference represents a deficit general fund balance. The General fund is the chief operating fund of Walker County. At the end of the current fiscal year, the unassigned fund balance of the General fund was a deficit $1,574,477. The unassigned fund balance decreased by $2,516,266 during the current year. This decrease included operating transfers of $3,224,109 made to supplement operations of other funds. Among the operating transfers were $743,043 to Fire and Rescue, $539,669 to E911, $442,366 to the County transportation system, $381,650 to Landfill, $1,033,566 to Special Facilities, and $83,815 required by federal and/or state grants as the County s matching share. The focus of the fund financial statements is on major funds which generally represent the government s most important funds. Non-major funds are aggregated and presented in single columns. The major funds of Walker County, other than the General fund, of Walker County and their fund balances at year-end are: Fire and Rescue, ($0.00), SPLOST 2008, $4,488,013 and SPLOST 2013, $13,083,770. The fund balance in Fire and Rescue decreased by $408,399 due to a large adjustment for uncollected accounts receivable and a large operating transfer from the general fund. The fund balance in SPLOST 2008 decreased by $414,217 due to bond payments made in excess of taxes collected. SPLOST 2013 is a new fund in the current fiscal year. The fund balance of $13,083,770 is the result of the proceeds of a bond issue of $26,400,000 and expenditures on SPLOST projects of $11,234,454, distributions to municipalities of $2,837,846, and bond issue and debt service costs of $765,969. Proprietary Funds Walker County s proprietary funds provide the same type of information as the business-type activities in the government-wide financial statements; therefore, the discussion of current year activity in the government-wide section is not duplicated here. GENERAL FUND BUDGETARY HIGHLIGHTS The County adopted a final budget after the end of the fiscal year. This amendment was primarily to account for the General fund actual revenues exceeding budgeted revenues by $575,722 and fund actual expenditures and other financing uses exceeding budgeted expenditures by $1,008,188. The excess of revenues over budgeted revenues was primarily due to tax revenues exceeding budgeted revenues by $531,899 and contribution revenue exceeding budgeted revenue by $64,776. The County does not normally budget for contributions unless it is certain that the contribution will be made and the amount is determinable. The excess of expenditures over budgeted expenditures was primarily due to operating transfers exceeding budgeted operating transfers by $1,194,675. Operating transfers differences were mainly, Transporation, $124,082 and Special Facilities, $1,033,566. CAPITAL ASSET AND DEBT ADMINISTRATION Capital assets The County s investment in capital assets for its governmental funds as of September 30, 2014, totaled $78,566,738, net of accumulated depreciation. This investment in capital assets includes land, buildings and building improvements, machinery and equipment, and infrastructure. The County s investment in capital assets for the current fiscal year decreased by $2,817,343, net of accumulated depreciation. This was comprised primarily of depreciation expense of $4,164,074. There was a minimal amount of spending on significant tangible items. Major capital asset events during the current fiscal year included the following purchases:. Purchase of land for industrial park Installation of water and sewer lines Road paving under LMIG program Purchase of emergency equipment xii

56 WALKER COUNTY, GEORGIA MANAGEMENT S DISCUSSION AND ANALYSIS (Continued) Capital Assets at Year-end September 30, 2014 and 2013 Total Governmental Business-type Primary Activities Activities Government Non-depreciable assets: Land $ 2,597,299 $ 2,597,299 $ 1,943,284 $ 1,943,284 $ 4,540,583 $ 4,540,583 Building - - Construction in progress 751,383 2,132,924 1,265 36, ,648 2,169,012 - Depreciable assets: - Buildings and improvements 23,064,970 22,986,896 2,675,754 2,439,819 25,740,724 25,426,715 Machinery and equipment 26,196,243 25,450,951 2,306,736 2,211,256 28,502,979 27,662,207 Infrastructure 95,330,762 95,270,584 95,330,762 95,270,584 C&D Landfill 4,985,021 4,985,021 4,985,021 4,985,021 Total 147,940, ,438,654 11,912,060 11,615, ,852, ,054,122 Less: accumulated depreciation (69,373,919) (67,054,573) (5,883,006) (5,384,344) (75,256,925) (72,438,917) Net capital assets $ 78,566,738 $ 81,384,081 $ 6,029,054 $ 6,231,124 $ 84,595,792 $ 87,615,205 Additional information on the County s capital assets can be found in Note 4 to the financial statements in this report. Debt At the end of the current fiscal year, the County had total debt outstanding of $47,277,665. This consisted of general obligation bonds, lease obligations, a tax anticipation note, landfill closure and postclosure costs and compensated absences. Outstandstanding Debt at Year End September 30, 2014 and 2013 Governmental Busniess -type Activities Activities Totals General Obligation Bonds $ 30,884,244 $ 8,766,703 $ 30,884,244 $ 8,766,703 Lease Obligations 3,730,390 4,287,751 5, ,672 3,735,504 4,403,423 Notes Payable 7,720,000 4,000,000 7,720,000 4,000,000 Compensated Absences 793, ,046 8,300 7, , ,532 Landfill Closure Costs 2,239,310 2,328,785 1,896,609 1,705,079 4,135,919 4,033,864 Totals $ 45,367,642 $ 20,080,285 $ 1,910,023 $ 1,828,237 $ 47,277,665 $ 21,908,522 Additional information on the County s debt can be found in Note 8 to the financial statements in this report. xiii

57 WALKER COUNTY, GEORGIA MANAGEMENT S DISCUSSION AND ANALYSIS (Continued) ECONOMIC FACTORS AND THE 2014 BUDGET Local Option Sales Tax was down from the prior years. This was primarily due to the reduction in the County s portion of sales tax receipts from 80% to 72.5% due to renegotiation with county municipalities. The property tax net M&O digest remained fairly constant with a less than 1% decrease. The net millage rate in the unincorporated areas of the County increased by mills while the millage rate in the incorporated areas increased by mills. The unemployment rate for the County was at 6.7%, lower than the state s rate of 6.9% REQUESTS FOR INFORMATION This financial report is designed to provide our citizens, taxpayers, customers, and investors and creditors with a general overview of the County s finances and to demonstrate the County s accountability for the money it receives. If you have questions about this report or need additional financial information, contact the Walker County Accounting Department, P.O. Box 445, LaFayette, Georgia xiv

58 WALKER COUNTY, GEORGIA STATEMENT OF NET POSITION SEPTEMBER 30, 2014 Component Primary Government Unit Governmental Business-Type Health Activities Activities Total Department ASSETS: Cash and cash equivalents $ 2,265,898 $ 337,368 $ 2,603,266 $ 1,263,716 Restricted cash 499, ,599 - Investments 17,423,369-17,423,369 - Taxes receivable 10,000,827-10,000,827 - Accounts receivable 867,186 64, , Due from (to) other funds 273,487 (273,487) - - Due from other governments 4,506,766-4,506, ,158 Inventory ,352 Prepaid expenses 247, ,555 - Net pension asset 864, ,800 - Land and other nondepreciable assets 3,348,682 1,944,549 5,293,231 - Other capital assets, net of accumulated depreciation 75,218,056 4,084,505 79,302,561 19,365 Total assets 115,516,225 6,157, ,673,899 1,463,075 LIABILITIES: Accounts payable and accrued expenses 6,586,911 69,067 6,655, Due to other governments 174, ,213 70,353 Due to heirs, litigants and others 324, ,021 - Accrued interest payable 264, ,453 - Long-term liabilities - Due within one year: Bonds payable 4,484,244-4,484,244 - Capital leases 581,033 5, ,147 - Notes payable 7,720,000-7,720,000 - Compensated absences 454,115 8, ,415 - Landfill closure and postclosure care costs 124, ,406 - Due greater than one year: Bonds payable 26,400,000-26,400,000 - Capital leases 3,149,357-3,149,357 - Compensated absences 339, ,583 61,175 Landfill closure and postclosure care costs 2,114,904 1,896,609 4,011,513 - Total liabilities 52,717,240 1,979,090 54,696, ,899 DEFERRED INFLOWS OF RESOURCES: Unearned revenue 606, ,853 - Total deferred inflows of resources 606, ,853 - NET POSITION: Net investment in capital assets 56,741,404 6,023,940 62,765,344 19,365 Restricted for - SPLOST projects 4,782,483-4,782,483 - Program purposes 148, ,993 - Unrestricted (deficit) 519,252 (1,845,356) (1,326,104) 1,311,811 Total net position $ 62,192,132 $ 4,178,584 $ 66,370,716 $ 1,331,176 (The accompanying notes are an integral part of these statements.) 1

59 WALKER COUNTY, GEORGIA STATEMENT OF ACTIVITIES YEAR ENDED SEPTEMBER 30, 2014 Program Revenues Net (Expense) Revenue and Changes in Net Position Primary Government Operating Grants, Capital Charges Contributions Grants and Governmental Business-Type Component Functions/Programs Expenses for Service and Interest Contributions Activities Activities Total Unit PRIMARY GOVERNMENT: Governmental activities: General government $ 7,317,432 $ 978,410 $ - $ 22,672 $ (6,316,350) $ - $ (6,316,350) $ - Judicial 3,215,122 1,592, ,525 - (1,462,996) - (1,462,996) - Sheriff 7,615,482 96,884 8,989 17,243 (7,492,366) - (7,492,366) - Public safety 9,253,587 5,035, ,570 20,627 (3,921,057) - (3,921,057) - Public works 8,858, ,045 1,503,370 (7,232,751) - (7,232,751) - Health and welfare 6,279, ,823 1,046, ,699 (4,873,065) - (4,873,065) - Culture and recreation 1,377,548 40, (1,336,788) - (1,336,788) - Housing and development 5,315, (5,315,005) - (5,315,005) - Interest 1,374, (1,374,588) - (1,374,588) - Total governmental activities 50,606,617 7,855,811 1,613,229 1,812,611 (39,324,966) - (39,324,966) - Business-type activities: Landfill 1,922,132 1,265, (656,773) (656,773) Special Facilities Fund 1,286, , (925,420) (925,420) - Total business-type activities 3,208,901 1,626, (1,582,193) (1,582,193) - Total primary government 53,815,518 9,482,519 1,613,229 1,812,611 (39,324,966) (1,582,193) (40,907,159) - COMPONENT UNIT: Walker County Health Department $ 1,245,868 $ 290,325 $ 869,709 $ (85,834) GENERAL REVENUES: Taxes: General property taxes 12,600,164-12,600,164 - General sales and use tax 8,548,151-8,548,151 - Selective sales and use taxes 286, ,490 - Business taxes 2,646,309-2,646,309 - Penalties and interest on delinquent taxes 341, ,040 - In lieu of taxes 331, ,206 - Intergovernmental subsidy Payment from Walker County - 38,555 38, ,339 Unrestricted investment earnings 15,197-15,197 9,969 Gain on sale of capital assets 95,223-95,223 - Miscellaneous 231, ,390 1,650 Total general revenues 25,094,988 38,737 25,133, ,958 TRANSFERS (1,415,216) 1,415, CHANGE IN NET POSITION (15,645,194) (128,240) (15,773,434) 81,124 NET POSITION: Beginning, as previously stated 77,837,326 4,526,448 82,363,774 1,250,052 Prior period adjustment - (219,624) (219,624) - Beginning, restated 77,837,326 4,306,824 82,144,150 1,250,052 Ending $ 62,192,132 $ 4,178,584 $ 66,370,716 $ 1,331,176 (The accompanying notes are an integral part of these statements.) 2

60 WALKER COUNTY, GEORGIA BALANCE SHEET GOVERNMENTAL FUNDS SEPTEMBER 30, 2014 Other Total General Fire and SPLOST SPLOST Governmental Governmental Fund Rescue Funds Funds ASSETS: Cash $ 1,619,894 $ 534,839 $ - $ - $ 111,165 $ 2,265,898 Restricted cash 499, ,599 Investments 324,158-4,309,911 12,789,300-17,423,369 Taxes receivable 10,000, ,000,827 Accounts receivable 186, ,139-18, , ,186 Due from other funds 1,976, ,076,496 10,926 3,063,978 Due from other governments 3,151, , ,465 4,506,766 Total assets $ 17,758,725 $ 1,055,978 $ 5,262,351 $ 13,884,073 $ 666,496 $ 38,627,623 LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES: Liabilities: Accounts payable and accrued expenses $ 1,835,133 $ 213,266 $ - $ 202,641 $ 157,448 $ 2,408,488 Due to other funds 1,087, , , ,744 2,790,491 Due to other governments 30,807-96,286-47, ,213 Due to heirs, litigants, and others 324, ,021 Tax anticipation note 7,720, ,720,000 Total liabilities 10,997, , , , ,312 13,417,213 Deferred inflows of resources: Unavailable revenue 8,335, , ,662 9,191 9,064,111 Fund balances: Restricted for - SPLOST capital projects - - 4,488,013 13,083,770-17,571,783 Law library expenditures ,010 52,010 Grant purposes ,148 20,148 Juvenile court supervision ,706 28,706 Family connection program ,802 17,802 Transportation ,327 30,327 Unassigned (1,574,477) (1,574,477) Total fund balances (1,574,477) - 4,488,013 13,083, ,993 16,146,299 Total liabilities, deferred inflows of resources and fund balances $ 17,758,725 $ 1,055,978 $ 5,262,351 $ 13,884,073 $ 666,496 $ 38,627,623 (The accompanying notes are an integral part of these statements.) 3

61 WALKER COUNTY, GEORGIA RECONCILIATION OF GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION SEPTEMBER 30, 2014 Total fund balances - governmental fund types $ 16,146,299 Total net position reported for governmental activities in the statement of net position is different because: Net pension asset is not recorded on the fund financial statements 864,800 Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. However, in the statement of net position the cost of these are capitalized and expensed over their estimated lives through annual depreciation expense. Cost of capital assets 147,940,657 Less accumulated depreciation (69,373,919) 78,566,738 Some of the County's expenditures are charged directly to the statement of revenues and expenditures under the modified accrual basis of accounting. Under the full accrual basis, these expenditures are reported as prepaid. 247,555 Other long-term assets are not available to pay for current period expenditures and therefore are deferred in the funds: Property taxes 8,457,258 Long-term liabilities applicable to the County's governmental activities are not due and payable in the current period and accordingly are not reported as fund liabilities. Interest on long-term debt is not accrued in governmental funds, but rather is recognized as an expenditure when due. All liabilities - both current and long-term - are reported in the statement of net position. Balances at September 30, 2014, are: Accounts payable (4,178,423) Accrued interest (264,453) Bonds payable (30,884,244) Capital leases (3,730,390) Compensated absences (793,698) Landfill closure and postclosure care costs (2,239,310) Total long-term liabilities (42,090,518) TOTAL NET POSITION OF GOVERNMENTAL ACTIVITIES $ 62,192,132 (The accompanying notes are an integral part of these statements.) 4

62 WALKER COUNTY, GEORGIA STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDED SEPTEMBER 30, 2014 Other Total General Fire and SPLOST SPLOST Governmental Governmental Fund Rescue Funds Funds REVENUES: General property taxes $ 9,338,537 $ - $ - $ - $ - $ 9,338,537 Other taxes 7,239,702-5,018, ,257,948 Licenses and permits 237, ,024 Intergovernmental 331, ,503,370 1,899,798 3,734,374 Charges for services 815,091 3,877, ,164,937 5,857,986 Fines and forfeitures 1,566, ,037 1,592,601 Investment income 14, ,003 18, ,869 Contributions and donations 64,776 1, ,510 75,286 Rental income 55, ,837 Other 124,629 72, ,970 Total revenues 19,788,334 3,951,306 5,022,249 1,522,039 3,100,504 33,384,432 EXPENDITURES: Current - General government 4,091,842-2, ,094,542 Judicial 3,046, ,921 3,182,387 Sheriff 7,165, ,250 7,199,758 Public safety 869,968 5,154, ,662,054 7,686,270 Public works 2,522, ,043 2,666,417 Health and welfare 352, ,808,153 2,160,952 Culture and recreation 430, , ,457 Housing and development 461, ,970 Capital outlay ,816 11,234,454-11,579,270 Debt service - Principal 202, ,377 4,270, ,881 4,837,523 Interest 100,563 68, , ,607 54, ,773 Issuance cost 48, , ,362 Intergovernmental ,501 2,837,846-3,423,347 Total expenditures 19,292,701 5,370,794 5,436,466 14,838,269 4,129,798 49,068,028 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES 495,633 (1,419,488) (414,217) (13,316,230) (1,029,294) (15,683,596) OTHER FINANCING SOURCES (USES): Proceeds from sale of assets 212, , ,990 Proceeds from bond issue ,400,000-26,400,000 Transfers from other funds - 743, ,067,584 1,810,627 Transfers to other funds (3,224,109) (1,734) (3,225,843) Total other financing sources (uses) (3,011,899) 1,011,089-26,400,000 1,067,584 25,466,774 NET CHANGE IN FUND BALANCES (2,516,266) (408,399) (414,217) 13,083,770 38,290 9,783,178 FUND BALANCES: Beginning 941, ,399 4,902, ,703 6,363,121 Ending $ (1,574,477) $ - $ 4,488,013 $ 13,083,770 $ 148,993 $ 16,146,299 (The accompanying notes are an integral part of these statements.) 5

63 WALKER COUNTY, GEORGIA RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES SEPTEMBER 30, 2014 Net changes in fund balances - total governmental funds $ 9,783,178 Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which depreciation exceeded capital outlay in the current period. Capital outlay for the period was $1,733,498 and the related depreciation expense was $4,164,074. (2,430,576) The net effect of various transactions involving capital assets (i.e. sales, trade-ins, and donations) decreases net assets. (386,767) Property taxes not reported as revenue under the modified accrual basis, but susceptible to accrual in the statement of net position. Deferred at 9/30/14 8,335,819 Deferred at 9/30/13 (5,510,150) 2,825,669 Fire fees reported as revenue under the modified accrual basis, but susceptible to accrual in the statement of net position. 71,315 The issuance of long-term debt (e.g., bonds, leases) provide current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net position. Also, governmental funds report the effect of premiums, discounts, and similar items when debt is first issued, whereas these amounts are deferred and amortized in the statement of activities. This amount is the net effect of these differences in the treatment of long-term debt and related items. Issuance of general obligation bonds (26,400,000) Bond principal payments 4,270,000 Amortization of bond premiums 12,459 Capital lease obligation payments 557,361 (21,560,180) Expenditures recognized under the modified accrual basis of accounting for governmental funds, but recorded as prepaid expenses under the accrual basis. (4,899) Under the modified accrual basis of accounting used in the governmental funds, expenditures are not recognized for transactions that are not normally paid with expendable available financial resources. In the statement of activities, however, which is presented on the accrual basis, expenses and liabilities are reported regardless of when financial resources are available. In addition, interest on long-term debt is not recognized under the modified accrual basis of accounting until due, rather than as it accrues. Accounts payable (4,178,423) Compensated absences (96,652) Accrued interest (105,750) Change in net pension asset 348,416 Landfill closure and postclosure care costs 89,475 CHANGE IN NET POSITION OF GOVERNMENTAL ACTIVITIES $ (15,645,194) (The accompanying notes are an integral part of these statements.) 6

64 WALKER COUNTY, GEORGIA STATEMENT OF NET POSITION PROPRIETARY FUNDS SEPTEMBER 30, 2014 Business-Type Activities Major Enterprise Funds Landfill Special Facilities Fund Total Enterprise Funds ASSETS CURRENT ASSETS: Cash $ 416 $ 336,952 $ 337,368 Receivables, net of allowances 64,739-64,739 Total current assets 65, , ,107 NONCURRENT ASSETS: Capital assets, net 1,434,554 4,594,500 6,029,054 Total noncurrent assets 1,434,554 4,594,500 6,029,054 Total assets 1,499,709 4,931,452 6,431,161 LIABILITIES AND NET POSITION CURRENT LIABILITIES: Accounts payable - 45,747 45,747 Accrued expenses 5,602 17,718 23,320 Compensated absences 8,300-8,300 Due to other funds - 273, ,487 Capital lease payable 5,114-5,114 Total current liabilities 19, , ,968 LONG-TERM LIABILITIES: Landfill closure and postclosure care costs 1,896,609-1,896,609 Total long-term liabilities 1,896,609-1,896,609 Total liabilities 1,915, ,952 2,252,577 NET POSITION: Net investment in capital assets 1,429,440 4,594,500 6,023,940 Unrestricted (deficit) (1,845,356) - (1,845,356) Total net position $ (415,916) $ 4,594,500 $ 4,178,584 (The accompanying notes are an integral part of these statements.) 7

65 WALKER COUNTY, GEORGIA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION PROPRIETARY FUNDS YEAR ENDED SEPTEMBER 30, 2014 Business-Type Activities Major Enterprise Funds Landfill Special Facilities Fund Total Enterprise Funds OPERATING REVENUES: Charges for services $ 1,265,359 $ 361,349 $ 1,626,708 OPERATING EXPENSES: Salaries 415, , ,268 Employee benefits 223,304 82, ,948 Purchased services 506,676 53, ,881 Landfill closure/postclosure care costs 121, ,458 Professional fees 204,096 10, ,566 Repairs and maintenance 97,040 12, ,075 Depreciation 255,754 93, ,111 Supplies 96, , ,311 Total operating expenses 1,919,849 1,286,769 3,206,618 OPERATING LOSS (654,490) (925,420) (1,579,910) NONOPERATING REVENUES (EXPENSES): Contributions - 38,555 38,555 Miscellaneous Interest expense on capital leases (2,283) - (2,283) Total nonoperating revenues (expenses) (2,201) 38,655 36,454 TRANSFERS IN 381,650 1,033,566 1,415,216 CHANGE IN NET POSITION (275,041) 146,801 (128,240) NET POSITION: Beginning, as previously reported 78,749 4,447,699 4,526,448 Prior period adjustment (219,624) - (219,624) Beginning, restated (140,875) 4,447,699 4,306,824 Ending $ (415,916) $ 4,594,500 $ 4,178,584 (The accompanying notes are an integral part of these statements.) 8

66 WALKER COUNTY, GEORGIA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS YEAR ENDED SEPTEMBER 30, 2014 Business-Type Activities Major Enterprise Funds Landfill Special Facilities Fund Total Enterprise Funds CASH FLOWS FROM OPERATING ACTIVITIES: Receipts from customers $ 1,283,325 $ 361,349 $ 1,644,674 Payments to suppliers (904,292) (333,727) (1,238,019) Payments to employees (645,620) (568,541) (1,214,161) Net cash used by operating activities (266,587) (540,919) (807,506) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: Miscellaneous revenues Contributions - 38,555 38,555 Transfers from other funds 381,650 1,033,566 1,415,216 Net cash provided by noncapital financing activities 381,732 1,072,221 1,453,953 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Acquisition and construction of capital assets (2,234) (294,358) (296,592) Principal paid on capital lease obligations (110,628) - (110,628) Interest paid on capital lease obligations (2,283) - (2,283) Net cash used by capital and related financing activities (115,145) (294,358) (409,503) NET CHANGE IN CASH AND CASH EQUIVALENTS - 236, ,944 CASH AND CASH EQUIVALENTS: Beginning , ,424 Ending $ 416 $ 336,952 $ 337,368 RECONCILIATION OF OPERATING LOSS TO NET CASH USED BY OPERATING ACTIVITIES: Operating loss $ (654,490) $ (925,420) $ (1,579,910) Adjustments to reconcile operating loss to net cash used by operating activities - Depreciation 255,754 93, ,111 Provisions for losses on accounts receivable Landfill closure/postclosure care costs 121, ,458 Changes in assets and liabilities - Increase in accounts receivable (6,234) - (6,234) Increase in due to/from other funds 23, , ,787 Increase in accounts payable - 7,219 7,219 Increase in accrued expenses (7,275) 10,438 3,163 Net cash used by operating activities $ (266,587) $ (540,919) $ (807,506) (The accompanying notes are an integral part of these statements.) 9

67 WALKER COUNTY, GEORGIA STATEMENT OF FIDUCIARY NET POSITION FIDUCIARY FUNDS SEPTEMBER 30, 2014 Pension Trust Fund Agency Funds ASSETS: Cash $ - $ 1,642,297 Investments, at fair value: Guaranteed fixed income account 3,458,867 - Mutual funds 1,498,019 - Total assets 4,956,886 1,642,297 LIABILITIES: Accounts payable - 43,445 Due to other governments - 832,273 Due to heirs, litigants, and others - 766,579 Total liabilities - 1,642,297 NET POSITION - RESTRICTED FOR PENSION BENEFITS $ 4,956,886 $ - (The accompanying notes are an integral part of these statements.) 10

68 WALKER COUNTY, GEORGIA STATEMENT OF CHANGES IN FIDUCIARY NET POSITION FIDUCIARY FUND YEAR ENDED SEPTEMBER 30, 2014 Pension Trust Fund ADDITIONS: Employer contributions $ 780,000 Investment appreciation in fair value of investments 459,645 Less investment expense 42,375 Net appreciation in fair value of investments 417,270 Total additions 1,197,270 DEDUCTIONS: Benefits 2,861,086 Insurance premiums 33,583 Total deductions 2,894,669 NET DECREASE IN PLAN NET POSITION (1,697,399) NET POSITION - RESTRICTED FOR PENSION BENEFITS: Beginning 6,654,285 Ending $ 4,956,886 (The accompanying notes are an integral part of these statements.) 11

69 WALKER COUNTY, GEORGIA NOTES TO THE BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2014 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Reporting Entity Walker County, Georgia was established under the laws of the State of Georgia and operates under an elected Sole Commissioner form of government. As required by accounting principles generally accepted in the United States of America, the financial statements of the reporting entity include those of Walker County (the primary government) and its component unit. The component unit discussed below is included in the County s reporting entity because of the significance of its operational or financial relationship with the County. In conformity with generally accepted accounting principles, the financial statements of the component unit have been included in the financial reporting entity as a discretely presented component unit. Discretely Presented Component Unit The Walker County Health Department, an entity legally separate from the County, is governed by a seven-member board which includes the Commissioner of Walker County and several members appointed jointly by the area government s governing bodies. For financial reporting purposes, the Health Department is reported as if it were part of the County s operations because its purpose is to provide health care services and health education to the citizens of the County. Complete financial statements of the Health Department can be obtained from their office: 603 E. Villanow St., LaFayette, Georgia, Related Organizations The following related organizations are excluded from the financial reporting entity: Walker County Water and Sewerage Authority: This is an entity legally separate from the County and is governed by a five-member board appointed by the County Commissioner. The Authority provides water and sewerage services to citizens in a portion of Walker County. The Authority is excluded because the County s accountability does not extend beyond making appointments. The Authority selects its own management staff, sets user charges, establishes budgets, issues debt, and controls all aspects of the daily operations. Walker County Board of Education: The Board of Education has a separate board elected by the public and provides services to residents within the geographic boundary of the County. It is excluded because the County does not have the ability to exercise influence or control over the daily operations, approve budgets, or provide funding. Walker County Department of Family and Children s Services: This organization s board has been appointed solely by the County Commissioner. It is an independent unit that selects management staff, sets user charges, establishes budgets, and controls all aspects of its daily activities. 12

70 WALKER COUNTY, GEORGIA NOTES TO THE BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2014 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued): Basis of Presentation Government-wide Statements: The statement of net position and the statement of activities display information about the primary government (The County) and its component unit. These statements include the financial activities of the overall government, except for fiduciary activities. Eliminations have been made to minimize the double-counting of internal activities. These statements distinguish between the governmental and business-type activities of the County. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions. Business-type activities are financed in whole or in part by fees charged to external parties. The statement of activities presents a comparison between direct expenses and program revenues for the different business-type activities of the County and for each function of the County s governmental activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Program revenues include (a) fees, fines, and charges paid by the recipients of goods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues. The net costs (by function or business-type activity) are normally covered by general revenue (property, sales or gas taxes, intergovernmental revenues, interest income, etc.). The County does not allocate indirect costs. This government-wide focus is more on the sustainability of the County as an entity and the change in the County s net position resulting from the current year s activities. Fund Financial Statements: The financial transactions of the County are reported in individual funds in the fund financial statements. Each fund, including fiduciary funds, are accounted for by providing a separate set of self-balancing accounts that comprise its assets, liabilities, reserves, fund equity, revenues, and expenditures/expenses. The various funds are reported by generic classification within the financial statements. The emphasis of fund financial statements is on the major funds in either the governmental or business-type activities categories. GASB No. 34 sets minimum criteria (percentage of the assets, liabilities, revenues, or expenditures/expenses of either fund category or the governmental and enterprise combined) for the determination of major funds. The nonmajor funds by category are combined in a single column in the fund financial statements. The County reports the following major governmental funds: General Fund This fund is established to account for resources devoted to financing the general services that the County performs for its citizens. General tax revenues and other sources of revenue used to finance the fundamental operations of the County are included in this fund. The fund is charged with all costs of operating the government for which a separate fund has not been established. 13

71 WALKER COUNTY, GEORGIA NOTES TO THE BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2014 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued): Basis of Presentation (continued) Fire and Rescue Fund This fund is used to account for fees collected by the Tax Commissioner on behalf of the County that are specifically restricted to providing fire and rescue services. This fund also provides an ambulance service on a charge for service basis to all Walker County residents. SPLOST 2008 Bond Construction Fund This fund is used to account for the construction of numerous County projects. The advance bond issued from the 2008 special purpose local option sales tax (SPLOST) referendum, SPLOST revenues and State grant revenues are used to finance these projects. SPLOST 2013 Bond Construction Fund This fund is used to account for the construction of numerous County projects. The advance bond issued from the 2013 special purpose local option sales tax (SPLOST) referendum, SPLOST revenues and State grant revenues are used to finance these projects. The County reports the following major enterprise funds: Landfill This fund accounts for the operation, maintenance and development of the County s transfer station and construction and demolition landfill. Special Facilities Fund This fund accounts for the operation and maintenance of the Mountain Cove convention and recreation property which has cabins, a meeting area and kitchen available for rental to the public. The County reports the following fund types: Pension Trust Fund The Pension Trust Fund accounts for the activities of the Walker County defined benefit pension plan. Agency Funds The agency funds are custodial in nature and do not present results of operations or have a measurement focus. These funds are used to account for assets that the County holds for others in an agency capacity. Accounting Period: All funds of Walker County, Georgia, are on fiscal year basis with the year ending September 30, 2014, except for the Health Department component unit. The component unit operates on a fiscal year ending June 30, Measurement Focus, Basis of Accounting The basis of accounting determines when transactions and economic events are reflected in financial statements, and measurement focus identifies which transactions and events should be recorded. 14

72 WALKER COUNTY, GEORGIA NOTES TO THE BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2014 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued): Measurement Focus, Basis of Accounting (continued) Government-wide, Proprietary, and Fiduciary Fund Financial Statements: The government-wide, proprietary, and fiduciary fund 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 at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the County gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, grants, entitlements, and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from grants, entitlements, and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. Governmental Fund Financial Statements: Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. The County considers all revenues reported in the governmental funds to be available if the revenues are collected within sixty days after year-end. Property taxes, sales taxes, franchise taxes, licenses, and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, claims and judgments, and compensated absences, which are recognized as expenditures to the extent they have matured. General capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general longterm debt and acquisitions under capital leases are reported as other financing sources. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund s principal ongoing operations. The principal operating revenues of the proprietary funds are charges to customers for sales and services. Operating expenses for enterprise funds include the cost of landfill operations, maintaining the property at Mountain Cove and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. Budgetary Data The County Commissioner prepares a proposed budget for the upcoming fiscal year and makes it available for public inspection at the county courthouse. After two public hearings on the proposed budget are held, the proposed budget is adopted by resolution of the Commissioner. The budget amounts for the fiscal year may be amended by the County Commissioner to actual operating figures. Walker County prepares annual operating budgets for all governmental funds. At the fund level, actual expenditures cannot exceed budgeted appropriations; however, with proper approval by the Commissioner, budgetary transfers between departments can be made. The legal level of budgeting control is at the department level or elected office level. All appropriations lapse at the end of each fiscal year. 15

73 WALKER COUNTY, GEORGIA NOTES TO THE BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2014 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued): Budgetary Data (continued) The capital project funds have a project length budget, which was adopted when the fund was formed. The Special Purpose Local Option Sales Tax (SPLOST) budget was prepared from the projected total SPLOST tax revenues and capital outlays. Encumbrances Encumbrance accounting, under which purchase orders, contracts and other commitments for the expenditure of funds are recorded in order to reserve that portion of the applicable appropriation, is not used by Walker County. Assets, Liabilities, and Net Position Cash and Investments: Cash in excess of current requirements is invested in certificates of deposit with various maturities, transferred to interest-bearing savings accounts, invested in the Georgia Local Government Investment Pool, or invested in any corporation of the U.S. government. Deposits in excess of federally insured amounts are required to be collateralized by securities of the depository bank. For purposes of the statement of cash flows, the County considers all highly liquid investments, including restricted cash, with a maturity of three months or less when purchased to be cash equivalents. Investments in the Local Government Investment Pool are specifically invested in Georgia Fund 1. Georgia Fund 1, created by OCGA , is a stable net asset value investment pool which follows Standard and Poor s criteria for AAAf rated money market funds. However, Georgia Fund 1 operates in a manner consistent with Rule 2a-7 of the Investment Company Act of 1940 and is considered to be a 2a-7 like pool. The pool is not registered with the SEC as an investment company, but is under the regulatory oversight of the Office of the State Treasurer. The pool s primary objectives are safety of capital, investment income, liquidity and diversification while maintaining principal ($1.00 per share value). Net asset value is calculated weekly to ensure stability. The pool distributes earnings (net of management fees) on a monthly basis and determines participant s shares sold and redeemed based on $1.00 per share. Investments of the County are reported at fair value. The fair values of investments in external investment pools are the same as the value of the pool shares. The County has no custodial credit risk policy, however, the County is permitted under state law to invest in obligations of Georgia or any other state, obligations issued by the U.S. government, obligations fully insured or guaranteed by the U.S. government, or by a government agency of the United States, obligations of any corporation of the U.S. government, prime bankers acceptances, the local Government Investment Pool established by Code Section , repurchase agreements, and obligations of other political subdivisions of Georgia. It is the County s policy to follow State guidelines for investments. 16

74 WALKER COUNTY, GEORGIA NOTES TO THE BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2014 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued): Assets, Liabilities, and Net Position (continued) Cash and Investments (continued): The County does not have a formal investment policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. Receivables: All receivables are reported at their gross value and, where appropriate, are reduced by the estimated portion that is expected to be uncollectible. The amounts estimated to be uncollectible from property taxes receivable and accounts receivable for fire and rescue fees are $548,000 and $105,000, respectively. Estimated uncollectible accounts receivable in the landfill proprietary fund are $11,000. Amounts estimated to be uncollectible from ambulance services accounts receivable are $7,010,000. Interfund Receivables and Payables: During the course of operations, numerous transactions occur between individual funds that may result in amounts owed between funds. Those related to goods and services type transactions are classified as due to and from other funds. Interfund receivables and payables between funds within governmental activities are eliminated in the Statement of Net Position. Amounts receivable from or payable to fiduciary funds are included in the Statement of Net Position as receivable from and payable to external parties, not as internal balances. Any residual balances outstanding between governmental activities and business-type activities are reported in the government-wide financial statements as internal balances. Prepaid Expenses: Prepaid assets are not recorded in the governmental funds; all amounts are expended as paid. Capital Assets: Capital assets, which include property, plant, equipment, and infrastructure assets (e.g. roads, bridges, sidewalks, and similar items), are reported in the applicable governmental or businesstype activities columns in the government-wide financial statements. Capital assets are defined by the government as assets with an initial, individual cost of more than $5,000 and an estimated useful life in excess of two years. An exception to the $5,000 threshold is capital lease assets. The County capitalizes all capital lease assets. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair value at the date of donation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not capitalized. Upon sale or retirement of land, buildings, and equipment, the cost and related accumulated depreciation, if applicable, are eliminated from the respective accounts and any resulting gain or loss is included in the results of operations. For the fiscal year ended September 30, 2007, the County implemented GASB Statement No. 34 requirements of retroactive reporting of major general infrastructure assets. This 17

75 WALKER COUNTY, GEORGIA NOTES TO THE BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2014 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued): Assets, Liabilities, and Net Position (continued) Capital Assets (continued): category is the largest asset class of the County. Historically, the financial statements have not reflected this asset category or the depreciation expense for the systematic allocation of its consumption. Infrastructure assets include roads, bridges, curbs and gutters, streets and sidewalks, drainage systems and lighting systems. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of proprietary fund capital assets is included as part of the capitalized value of the assets constructed. There was no interest expense capitalized for the fiscal year ending September 30, Property, plant and equipment of the primary government, as well as the component unit, is depreciated using the straight-line method over the following estimated useful lives: Assets Infrastructure Buildings Site Improvements Furniture Equipment Vehicles Years 30 years 50 years 20 years 20 years 5 to 15 years 6 years Amortization expense for capital lease assets has been included in depreciation expense. Other Assets: Other assets held are recorded and accounted for at cost. Accounts Payable and Accrued Liabilities: All payables and accrued liabilities are reported on the government-wide financial statements. All payable and accrued liabilities from the enterprise funds are reported on the enterprise fund financial statements. In general, governmental fund payables and accrued liabilities are recognized as fund liabilities when incurred. However, compensated absences that are paid from governmental funds are reported as liabilities on the fund financial statements only to the extent that they are due for payment during the current year. Deferred Revenues: The government-wide financial statements use the accrual basis of accounting and all revenue is recognized when earned. Deferred revenues reported in governmental fund financial statements represent unearned revenues or revenues which are measurable but not available and, in accordance with the modified accrual basis of accounting, are reported as unavailable revenues. 18

76 WALKER COUNTY, GEORGIA NOTES TO THE BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2014 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued): Assets, Liabilities, and Net Position (continued) Long-term Obligations: The County reports long-term debt of governmental activities at face value in the governmentwide statement of net position. Long-term debt is not reported for governmental activities in the fund financial statements. Long-term debt and other obligations financed by the proprietary fund are reported as liabilities in both the government-wide and fund financial statements. Net Position: Net position represent the difference between assets and deferred outflows of resources and liabilities and deferred inflows of resources. Net investment in capital assets consist of capital assets, net of accumulated depreciation, reduced by the outstanding balance of any borrowing used for the acquisition, construction, or improvement of those assets. Net position is reported as restricted when there are limitations imposed on its use either through constitutional provisions or enabling legislation adopted by the County or through external restrictions imposed by creditors, grantors, or laws or regulations of other governments. The County s policy is to first apply restricted resources when an expense is incurred for purposes for which both restricted and unrestricted net position are available. Governmental Fund Balance: Beginning with fiscal year 2011, the County implemented GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions. This Statement provides more clearly defined fund balance categories to make the nature and extent of the constraints placed on a government s fund balances more transparent. The following classifications describe the relative strength of the spending constraints: Nonspendable fund balance amounts that are not in a spendable form (such as inventory) or are required to be maintained intact. Restricted fund balance amounts constrained to specific purposes by their providers (such as grantors, bondholders, and higher levels of government), through constitutional provisions, or by enabling legislation. Committed fund balance amounts constrained to specific purposes by the County itself, using its highest level of decision-making authority (i.e., Sole Commissioner). To be reported as committed, amounts cannot be used for any other purpose unless the County takes the same highest level action to remove or change the constraint. Assigned fund balance amounts the County intends to use for a specific purpose. Intent can be expressed by the Sole Commissioner or by an official or body to which the Commissioner delegates the authority. 19

77 WALKER COUNTY, GEORGIA NOTES TO THE BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2014 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued): Assets, Liabilities, and Net Position (continued) Governmental Fund Balance (continued) Unassigned fund balance amounts that are available for any purpose. Positive amounts are reported only in the general fund. For unrestricted amounts of fund balance, it is the County s policy to use fund balance in the following order: committed, assigned, unassigned. Deferred Outflows/Inflows of Resources In fiscal year 2013, the County adopted the provisions of GASB Statement Number 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position and Number 65, Items Previously Reported as Assets and Liabilities. Under these Statements, GASB has defined deferred outflows of resources and deferred inflows of resources as follows: Deferred outflows of resources represent a consumption of net position or fund balance that applies to future period(s) and thus, will not be recognized as an outflow of resources (expense/expenditure) until then. Deferred inflows of resources represent acquisitions of net position or fund balance that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The County has no items that qualify for reporting as deferred outflows of resources. Deferred inflows of resources reported in the governmental funds for deferred revenues are as follows: Nonmajor General Fire and SPLOST Governmental Property taxes $ Fund Rescue 8,335,819 $ 121,439 $ $ Funds -- $ Total 8,457,258 Grant revenue $ -- $ -- $ 597,662 $ 9,191 $ 606,853 Revenues and Expenditures and Expense Property Tax Revenues: Property taxes are generally levied around July 31 st for the following fiscal year based on the assessed value of property as listed on the previous January 1. The billings are considered past due 60 days after the respective tax billing date, at which time the applicable property is subject to lien, and penalties and interest are assessed. Assessed values are an approximation of market value. Revaluation of real property must be made when the average assessed value falls below 40% of the sales price on property sold within the previous year. The last valuation date was January 1, 2002 for residential property, January 1, 2005 for other real property, and January 1, 1998 for commercial property. Valuations were reassessed for all city property, most major subdivisions, and a partial reassessment of rural land as of January 1,

78 WALKER COUNTY, GEORGIA NOTES TO THE BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2014 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued): Revenues and Expenditures and Expense (continued) Property Tax Revenues (continued) Property taxes are recognized as revenue when they are levied because they are considered to be both measurable and available. Proper allowances are made for estimated uncollectible and delinquent accounts. The property tax calendar applicable to the current fiscal year is as follows: Lien date January 1, 2014 Levy date September 11, 2014 Due date October 20, 2014 Delinquency date December 20, 2014 Interfund Transactions: Transfers between governmental and business-type activities on the government-wide financial statements are reported in the same manner as general revenues. Exchange transactions between funds are reported as revenues in the seller funds and as expenditures/expenses in the purchaser funds. Flows of cash or goods from one fund to another without a requirement for repayment are reported as interfund transfers. Interfund transfers are reported as other financing sources/uses in governmental funds and after nonoperating revenues/expenses in enterprise funds. Repayments from funds responsible for particular expenditures/expenses to the funds that initially paid for them are not presented in the financial statements. Payments Between the County and Component Units: Resource flows (except those that effect the statement of net position/balance sheet only, such as loans and repayments) between a primary government and its discretely presented component units are reported as external transactions that is, as revenues and expenses. Payments from the County consist of funds necessary to sustain the operations of the component unit. Estimates The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. (2) CASH AND INVESTMENTS: Primary Government The cash and investments of the County were fully collateralized at September 30, The following schedules classify the cash and investments into three categories to give an indication of the level of risk assumed by the County at year end. 21

79 WALKER COUNTY, GEORGIA NOTES TO THE BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2014 (2) CASH AND INVESTMENTS: (Continued): Deposit Categories of Custodial Credit Risk: 1. Insured or collateralized with securities held by the County or by its agent in the County s name. 2. Collateralized with securities held by the pledging financial institution s trust department or agent in the County s name. 3. Uncollateralized or collateralized with securities held by the pledging financial institution or by its trust department or agent, but not in the County s name. Investment Categories of Custodial Credit Risk: 1. Insured or registered with securities held by the County or its agent in the County s name. 2. Uninsured and unregistered, with securities held by the counterpart s trust department or agent in the County s name. 3. Uninsured and unregistered, with securities held by the counterpart or by its trust department or agent but not in the County s name. The following schedule of cash and investments of all of the County s funds (including fiduciary funds) as of September 30, 2014, is categorized by custodial credit risk: Category Carrying Bank Cash Amount Balance Deposits with financial institutions $ 1,131,907 $ 5,485,486 $ -- $ 4,745,162 $ 6,617,393 Weighted Average Category Carrying Credit Maturity Investment Type Amount Rating Maturities Days Primary Government less than Georgia Fund 1 $ -- $ 17,423,369 $ -- $ 17,423,369 AAAf 6 months 66 Fiduciary Fund Guaranteed fixed less than income account $ -- $ 3,458,867 $ -- $ 3,458,867 N/A 6 months N/A Open end mutual less than funds -- 1,498, ,498,019 N/A 6 months N/A $ -- $ 4,956,886 $ -- $ 4,956,886 22

80 WALKER COUNTY, GEORGIA NOTES TO THE BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2014 (2) CASH AND INVESTMENTS (Continued): Investment Categories of Custodial Credit Risk (continued) : The deposits of the County are included in the following classifications at September 30, Primary Government: Cash and cash equivalents $ 2,603,266 Restricted cash 499,599 Agency funds: Cash 1,642,297 Total deposits with financial institutions $ 4,745,162 Component Unit: Walker County Health Department The Health Department s cash and cash equivalents are considered to be demand deposits. All deposits were entirely insured or collateralized as of June 30, At June 30, 2014, cash consisted of the following: Cash and cash equivalents $ 1,263,716 (3) INTERFUND BALANCES AND ACTIVITY: Balances Due To/From Other Funds Summary of balances due to/from other funds reported in the fund financial statements: Due from: SPLOST 2008 to general fund $ 678,052 Fire and rescue to general fund 721,273 Nonmajor governmental funds to general fund 303,744 General fund to SPLOST ,076,496 General fund to nonmajor governmental funds 10,926 Special facilities fund from general fund 273,487 Total $ 3,063,978 Due to: Other funds, balance sheet governmental funds $ 2,790,491 Special facilities fund to general fund 273,487 Total $ 3,063,978 23

81 WALKER COUNTY, GEORGIA NOTES TO THE BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2014 (3) INTERFUND BALANCES AND ACTIVITY (Continued): Balances Due To/From Other Funds (continued) Interfund balances in the general fund are created mainly from payment of invoices on behalf of other funds. Interfund balances in the nonmajor governmental funds are created mainly by local matching requirements of grants and from payment of invoices on behalf of other funds. Transfers To/From Other Funds: Transfers to/from other funds for the year ended September 30, 2014, consist of the following: From the general fund to the fire and rescue fund for operating expenditures $ 743,043 From the general fund to the E911 fund for operating expenditures 539,669 From the general fund to the multiple grant fund for county matching requirements 83,815 From the general fund to the transportation fund for operating expenditures 442,366 From the general fund to the landfill fund for operating expenditures 381,650 From the general fund to the special facilities fund for operating expenditures 1,033,566 From the fire and rescue fund to the multiple grant fund for matching requirements 1,734 Total $ 3,225,843 (4) CAPITAL ASSETS: Capital asset activity for the fiscal year ended September 30, 2014, was as follows: Beginning Ending Balances Increases Decreases Reclassifications Balances GOVERNMENTAL ACTIVITIES: Capital assets not being depreciated: Land $ 2,597,299 $ -- $ -- $ -- $ 2,597,299 Construction in progress 2,132, , (1,699,348) 751,383 Total capital assets not being depreciated 4,730, , (1,699,348) 3,348,682 Capital assets being depreciated and amortized: Infrastructure 95,270,584 60, ,330,762 Buildings and improvements 22,986,896 78, ,064,970 Equipment 6,458, , ,954 1,478,084 7,914,250 Vehicles 14,652, ,176 1,783, ,264 13,768,940 Trucks and construction equipment 4,340, , ,513,053 Total capital assets being depreciated and amortized 143,708,431 1,415,691 2,231,495 1,699, ,591,975 24

82 WALKER COUNTY, GEORGIA NOTES TO THE BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2014 (4) CAPITAL ASSETS (Continued): Beginning Ending Balances Increases Decreases Reclassifications Balances Less accumulated depreciation for: Infrastructure 41,791,512 86, ,878,274 Buildings and improvements 6,447,453 2,119, ,567,100 Equipment 4,287, , , ,916,577 Vehicles 10,831,979 1,082,556 1,604, ,310,225 Trucks and construction equipment 3,695,856 5, ,701,743 Total accumulated depreciation and amortization 67,054,573 4,164,074 1,844, ,373,919 Total capital assets being depreciated, net 76,653,858 (2,748,383) 386,767 1,699,348 75,218,056 Governmental activity capital assets, net $ 81,384,081 $ (2,430,576) $ 386,767 $ -- $ 78,566,738 Depreciation expense was charged to governmental functions as follows: General government $ 150,478 Judicial 56,328 Sheriff 389,675 Public safety 1,365,968 Public works 1,888,760 Health and welfare 218,367 Culture and recreation 77,072 Housing and development 17,426 $ 4,164,074 BUSINESS-TYPE ACTIVITIES: Landfill: Capital assets being depreciated and amortized: C & D Landfill $4,985,021 $ -- $ -- $ -- $ 4,985,021 Buildings & improvements 306, ,771 Machinery & equipment 1,754,041 2, ,756,275 Vehicles 49, ,148 Furniture and fixtures 2, ,172 Software 1, ,508 Computers, radios, & electronics 20, ,342 Total capital assets being depreciated and amortized 7,119,003 2, ,121,237 25

83 WALKER COUNTY, GEORGIA NOTES TO THE BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2014 (4) CAPITAL ASSETS (Continued): Beginning Ending Balances Increases Decreases Reclassifications Balances Less accumulated depreciation and amortization for: C & D Landfill 3,788, , ,988,017 Buildings & improvements 121,783 7, ,523 Machinery & equipment 1,459,510 46, ,505,618 Vehicles 40,959 1, ,404 Furniture and fixtures Software 1, ,508 Computers, radios, & electronics 17, ,727 Total accumulated depreciation and amortization 5,430, , ,686,683 Total capital assets being depreciated, net 1,688,074 (253,520) ,434,554 Landfill capital assets, net $ 1,688,074 $ (253,520) $ -- $ -- $ 1,434,554 Special Facilities Fund: Capital assets not being depreciated: Land $ 1,943,284 $ -- $ -- $ -- $ 1,943,284 Construction in progress 36,088 1, (36,088) 1,265 Total capital assets not being depreciated 1,979,372 1, (36,088) 1,944,549 Capital assets being depreciated and amortized: Buildings & improvements 2,133, , ,088 2,368,983 Furniture and fixtures 361,359 37, ,237 Computers, radios, & electronics 22,686 55, ,054 Total capital assets being depreciated and amortized 2,517, , ,088 2,846,274 Less accumulated depreciation and amortization for: Buildings & improvements 92,473 55, ,694 Furniture and fixtures 8,657 27, ,454 Computers, radios, & electronics 1,836 10, ,175 Total accumulated depreciation and amortization 102,966 93, ,323 Total capital assets being depreciated, net 2,414, , ,088 2,649,951 Special Facilities Fund capital assets, net $ 4,393,499 $ 201,001 $ -- $ -- $ 4,594,500 26

84 WALKER COUNTY, GEORGIA NOTES TO THE BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2014 (4) CAPITAL ASSETS (Continued): Beginning Ending Balance Increases Decreases Balance COMPONENT UNIT: Health Department: Capital assets being depreciated: Machinery and equipment $ 32,749 $ 17,992 $ -- $ 50,741 Less accumulated depreciation for: Machinery and equipment 27,432 3, ,376 Health Department capital assets, net $ 5,317 $ 14,048 $ -- $ 19,365 (5) DEFINED BENEFIT PENSION PLAN: Plan Description: One hundred fifty five (155) of the County s full time employees are covered by the Pension Plan for Employees of the Walker County Commissioner and Sheriff s Department. This selfadministered plan is a single employer, noncontributory, defined benefit plan established January 1, 1973, restated effective January 1, 1984 and amended effective December 31, Authority to establish, amend or discontinue the plan is assigned to Walker County. The plan is included in this report because the County has oversight responsibility as prescribed by the Governmental Accounting Standards Board. The plan does not issue separate financial statements but includes the financial statements and required supplementary information in the County s annual financial report. The plan provides retirement, disability and death benefits to all employees hired prior to December 31, 2005, and their beneficiaries, that have been employed full time for one year. Employees begin vesting after 3 years of service and are fully vested after 7 years. Members may retire at age 65 with 3 years of service, age 60 with 20 years of service, or age 55 with 25 years of service. Benefits are calculated at 1.10% of five years average earnings multiplied by credited service plus 0.65% of average earnings in excess of $10,000 multiplied by credited service up to 35 years. The plan was amended effective December 31, 2005, and participation was frozen for individuals who were not active employees or participants on that date and who were hired or rehired after that date. Funding Policy and Pension Cost: Contribution requirements are actuarially determined and may be amended by the County. Plan members are not allowed to contribute to the plan. The funding policy for the plan is to make annual contributions at least equal to the minimum contribution required for public retirement systems under Section of the Official Code of Georgia Annotated. This minimum contribution is equal to the normal cost for the year plus annual payments to amortize increases (decreases) in the unfunded actuarial accrued liability over various prescribed periods. The normal cost for the County s Plan for 2014 has increased as a percentage of covered payroll from 4.44% in 2013 to 4.58% in The unfunded actuarial accrued liability is amortized over 30 years from 1/1/92. These amortization periods, if applicable, are closed for this plan year. The contributions to the plan during the year ended December 31, 2013 were $941,295 and were made 27

85 WALKER COUNTY, GEORGIA NOTES TO THE BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2014 (5) DEFINED BENEFIT PENSION PLAN (Continued): Funding Policy and Pension Cost (continued): in accordance with contribution requirements determined by an actuarial valuation as of January 1, 2014, (the most recent actuarial valuation date). The County s covered payroll for the plan year ended January 1, 2014, was $5,347,289, and the total payroll was $15,182,141. Summary of Significant Accounting Policies: The plan s financial statements are prepared on the accrual basis of accounting. Contributions from the County are recognized when due and the County has made a formal commitment to provide the contributions. Investment income is recognized as earned by the plan. The net appreciation (depreciation) in the fair value of investments held by the plan is recorded as an increase (decrease) to investment income based on the valuation of investments as of the date of the balance sheet. All funds are invested in accordance with state statute and are valued at fair value. There are no investments in, loans to, or leases with parties related to the pension plan. Funded Status: The County s annual pension costs, percentage of annual pension cost contributed and net pension obligation for the most recent three years is presented below. The required schedule of funding progress immediately following the notes to the financial statements presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits. Three-Year Trend Information Employer Percentage Net (EOY) Annual Pension Annual of APC Pension Cost (APC) Contribution Contributed Obligation December 31, 2011 $796,609 1,290, % (685,282) December 31, , , % (516,384) December 31, , , % (864,800) The County s annual pension cost and net pension asset for the current year were as follows: Annual required contribution $ 570,681 Interest on net pension asset (30,983) Adjustments to annual required contribution 53,181 Annual pension cost 592,879 Less - contributions made 941,295 Decrease in net pension asset (348,416) Net pension asset beginning of year (516,384) Net pension asset end of year $ (864,800) 28

86 WALKER COUNTY, GEORGIA NOTES TO THE BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2014 (5) DEFINED BENEFIT PENSION PLAN (Continued): Funded Status (continued): Funded Status of Plans as of January 1, 2014 Unfunded Actuarial Actuarial Actuarial Accrued Accrued Valuation Liability Unfunded Liability For Actuarial Frozen Actuarial as % of Plan Year Value of Entry Age Accrued Funded Covered Covered Beginning Assets Cost Method Liability Ratio Payroll Payroll January 1, (a) (b) (b-a) (a/b) (c) (b-a/c) 2014 $7,012,927 $9,847,016 $2,834, % $5,347, % Significant Actuarial Assumptions: The significant actuarial assumptions used to compute the actuarial accrued liability and the annual recommended contribution to the plans meet the Actuarial Standard of Practice No. 4, Measuring Pension Obligations, establishing generally accepted principles and practices. The significant actuarial assumptions used in the current valuation are: Investment rate of return 6.0% Projected salary increase 4.0% Inflation rate 4.0% Actuarial methods: Actuarial cost method Entry age normal Amortization method Level dollar for 15 years Asset valuation method Market value Valuation cost method Entry age actuarial cost method Plan Membership Data: As of January 1, 2014, the current plan membership includes the following categories of participants: Plan Participants: Retirees, beneficiaries and disabled 20 Terminated employees entitled to benefits but not yet receiving them 44 Active participants below retirement age 138 Active participants at or above retirement age 17 Total

87 WALKER COUNTY, GEORGIA NOTES TO THE BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2014 (5) DEFINED BENEFIT PENSION PLAN (Continued): Investments: The investments in the pension plan are held by the Lincoln Financial Group and invested in compliance with the pension document. Summary of Investments as of September 30, 2014 Fair Value % of Total Lincoln Financial Group: Guaranteed fixed income $ 3,458, % Balanced funds 300, % Government/Corporate bond funds 697, % Equity growth funds 500, % $ 4,956, % (6) DEFINED CONTRIBUTION PLAN: Effective January 1, 2007, the County established the Walker County Commissioner Employees 401(a) plan. The County began funding the plan in May Payments made during fiscal year ended September 30, 2014, were for prior year employer contribution liability. This plan covers employees who are not covered under the defined benefit pension plan and have attained age 18 and completed one year of service. The County will contribute a percentage of gross wages based on the following contribution schedule: Percent of Age Contribution Up to and up 7 Plan participants vest 50% after five years of service and 100% after ten years of service. Forfeited funds are distributed equitably to all remaining participants in the plan. The Walker County Deferred Compensation Plan is a defined contribution plan under Code Section 457(b) established by the County to provide benefits at retirement to all employees. Membership in the plans is voluntary. Employees can contribute up to the maximum allowed by law. The County makes no contributions to the plans. Plan provisions and contribution requirements are established and may be amended by the County Commissioner. 30

88 WALKER COUNTY, GEORGIA NOTES TO THE BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2014 (6) DEFINED CONTRIBUTION PLAN (Continued): The Plan is administered by Lincoln Financial Group. Participants and contributions for the 2014 plan year are: Number of participants 30 Participant contributions $103,917 (7) TERMINATION BENEFITS: Over the past several years, the County has offered post-employment benefits to a select group of employees. These employees had attained age 60 with at least twenty years of service, and retired from the County with no other medical insurance. The retired employee will be allowed to continue the medical insurance coverage they were receiving as of the date of retirement, with the County continuing to pay the employer portion of the cost until the employee attains age 65. The employee must contribute the amount that would be withheld from payroll if still employed. These benefits are financed on a pay-as-you-go basis. The benefit expenditure at September 30, 2014, was $41,555 net of any participant contributions. Twenty-two retirees were receiving benefits at September 30, Although these benefits fall under the definition of other post-employment benefits according to governmental reporting standards, the annual expenditures made by the County are immaterial to the financial statements. (8) LONG-TERM DEBT: Long-term Obligation Activity The following is a summary of the County s long-term debt transactions for the year ended September 30, 2014: Balance Balance Amounts Due Accrued 9/30/2013 Additions Reductions 9/30/2014 in One Year Interest Governmental Activities: Capital leases $ 4,287,751 $ -- $ 557,361 $ 3,730,390 $ 581,033 $ 87,252 Bonds payable 8,766,703 26,400,000 4,282,459 30,884,244 4,484, ,361 Notes payable - tax anticipation 4,000,000 8,220,000 4,500,000 7,720,000 7,720,000 31,840 Compensated absences 697, ,380 16, , , Estimated landfill closure 2,328, ,475 2,239, , $ 20,080,285 $34,733,380 $ 9,446,023 $45,367,642 $ 13,363,798 $ 264,453 Balance Balance Amounts Due Accrued 9/30/2013 Additions Reductions 9/30/2014 in One Year Interest Business-Type Activities: Landfill: Capital leases $ 115,672 $ 12,274 $ 122,832 $ 5,114 $ 5,114 $ -- Compensated absences 7, ,300 8, Landfill closure costs 1,775, , ,896, $ 1,898,309 $ 134,546 $ 122,832 $ 1,910,023 $ 13,414 $ -- 31

89 WALKER COUNTY, GEORGIA NOTES TO THE BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2014 (8) LONG-TERM DEBT: Long-term Obligation Activity (continued) Compensated absences typically have been liquidated in the general and other governmental funds. The capital lease debt is paid by the fund leasing the corresponding assets. The bonds payable will be paid by the 2008 and 2013 Special Purpose Local Option Sales Tax. The MSW landfill closure/postclosure costs will be liquidated in the general fund, and the C&D landfill closure/postclosure costs will be liquidated in the landfill proprietary fund. Future debt service requirements on bonds payable at September 30, 2014 are as follows: Governmental Activities Bonds Principal Premium Interest Year ending September 30, 2015 $ 4,480,000 $ 4,244 $ 504, ,285, , ,380, , ,485, , ,590, , ,695, , ,965, ,216 $ 30,880,000 $ 4,244 $ 1,787,132 On December 20, 2013, the County issued Walker County, Georgia General Obligation Bonds, Series 2013 in the amount of $26,400,000 maturing January 1, 2021 with an average interest rate of 1.625%. Principal payments due range in amounts from $4,285,000 to $3,965,000. Principal payments will begin January 2016 and mature in January Interest is due semi-annually while principal payments are due on an annual basis. The bonds are payable from proceeds of the 2013 Special Purpose Local Option Sales Tax referendum. The County issued $8,630,000 in series 2008 general obligation sales tax bonds and $15,355,000 in series 2009 general obligation sales tax bonds for capital outlay projects outlined in the Special Purpose Local Option Sales Tax referendum on December 11, The interest rates on the bonds range from 2.2% to 5.0% with principal payments due in amounts ranging from $1,250,000 to $3,785,000. Principal payments began January 2009 and mature in January Interest is due semi-annually while principal payments are due on an annual basis. The bonds are payable from proceeds of the 2008 Special Purpose Local Option Sales Tax referendum. On March 27, 2014, the County obtained tax anticipation notes in the amounts of $5,950,000 and $1,770,000. The proceeds of the tax anticipation notes were provided to the general fund as operating resources for the County. As of September 30, 2014, the County had drawn $7,720,000. The tax anticipation notes are both due and payable on December 31,

90 WALKER COUNTY, GEORGIA NOTES TO THE BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2014 (8) LONG-TERM DEBT (Continued): Capital Leases The County leases building improvements, vehicles and equipment with a historical cost and accumulated amortization under capital lease arrangements as follows: Business-type Governmental Activities Activities Landfill Total Building improvements $ 987,511 $ -- $ 987,511 Vehicles and equipment 2,957, ,990 3,132,769 Total capital lease assets 3,945, ,990 4,120,280 Accumulated amortization 912,957 36, ,413 Capital lease assets, net $ 3,032,333 $ 138,534 $ 3,170,867 Future minimum lease payments at September 30, 2014, are as follows: Governmental Activities Year ending September 30, 2015 $ 738, , , , , ,593 Total minimum lease payments 4,314,860 Less: deferred interest 584,470 Present value minimum lease payments $ 3,730,390 The interest rates on the capitalized leases range from 3.67% to 5.69% and are imputed based on the County s incremental borrowing rate at the inception of the lease. All capital leases have a bargain purchase option for a nominal amount. Amortization expense for assets recorded under capital lease is included with depreciation expense. (9) STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY: Compliance with Finance Related Legal and Contractual Provisions The County incurred no material violations of finance related legal and contractual provisions. 33

91 WALKER COUNTY, GEORGIA NOTES TO THE BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2014 (9) STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY (Continued): Excess of Expenditures Over Appropriations in Individual Funds For the year ended September 30, 2014, the County had no material excess of expenditures over appropriations in individual funds. (10) RISK MANAGEMENT: Walker County, Georgia, is exposed to various risks of loss related to tort; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. Being unable to obtain workers compensation insurance at a cost it considered to be economically justifiable, the County joined together with other counties in the State in participation in the Association of County Commissioners of Georgia Group Self-Insured Workers Compensation Fund (the Fund ). These are public entity risk pools currently operating as a common risk management and insurance program for many of the counties in the State. The County pays an annual premium to the Fund for workers compensation insurance coverage. The agreement between the members of the public entity risk pools provides that members may be required to pay additional assessments as shall be established by the Board of the pool. However, no additional assessments have been required of the members since formation of the pools. The County is obligated to cooperate with the pools agents and attorneys, to follow loss reduction procedures established by the Fund, and to report as promptly as possible, and in accordance with any coverage descriptions issued, all incidents which could result in the Fund being required to pay any claim of loss. The County is also to allow the pools agents and attorneys to represent the County in investigation, settlement discussions and all levels of litigation arising out of any claim made against the County within the scope of loss protection furnished by the funds. The Fund is to defend and protect the members of the Fund against liability or loss as prescribed in the member government s contracts and in accordance with the workers compensation laws of Georgia. The Fund is to pay all cost taxed against members in any legal proceeding defended by the members, all interest accruing after entry of judgment, and all expenses incurred for investigation, negotiation or defense. The County continues to carry commercial insurance for general liability, employee health and accident insurance. Settled claims resulting from these risks have not exceeded commercial insurance coverage in any of the past three years. The County maintains a medical benefit plan to self-insure claims up to $90,000 per year for each individual covered; claims above $90,000 are covered by a stop-loss insurance policy. The County also had an aggregate stop-loss insurance policy which covers claims above $198,763 monthly and $2,385,000 annually. The County and its covered employees contribute to the fund to pay the claims and stop-loss insurance premiums. At September 30, 2014, management believes that the County has made provisions sufficient to cover estimated claims, including claims incurred but not yet reported. 34

92 WALKER COUNTY, GEORGIA NOTES TO THE BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2014 (10) RISK MANAGEMENT (Continued): A summary of the changes in claims liability for the last two fiscal years: Unpaid claims September 30, 2012 $ 96,054 Incurred claims (including claims incurred but not reported) 3,016,456 Claims paid during fiscal year ,936,945 Unpaid claims September 30, ,565 Incurred claims (including claims incurred but not reported) 3,131,791 Claims paid during fiscal year ,165,239 Unpaid claims September 30, 2014 $ 142,117 (11) CLAIMS AND JUDGMENTS: The County participates in a number of federal, state, and county programs that are fully or partially funded by grants received from other governmental units. Expenditures financed by grants are subject to audit by the appropriate grantor government. If expenditures are disallowed due to noncompliance with grant program regulations, the County may be required to reimburse the grantor government. As of September 30, 2014, significant amounts of grant expenditures have not been audited, but the County believes that disallowed expenditures discovered in subsequent audits, if any, will not have a material effect on any of the individual funds or the overall financial position of the County. Litigation The County is subject to claims and suits arising principally in the normal course of operations. In the opinion of management, the ultimate resolution of such pending legal proceedings has been adequately provided for in the basic financial statements. (12) LANDFILL CLOSURE AND POSTCLOSURE CARE COSTS: Walker County currently owns a solid waste landfill and a construction and demolition disposal area. State and federal laws and regulations require the County to close the landfills once capacity is reached and to monitor and maintain the site for thirty subsequent years. Although certain closure and postclosure care costs will be paid only near or after the date that the landfills stop accepting waste, the County reports a portion of these closure and postclosure care costs as an operating expense in each period based on landfill capacity used as of each balance sheet date. At September 30, 2014, the County had incurred a liability of approximately $1,896,609 for the construction and demolition disposal area which represents the amount of costs reported to date based on approximately 80 percent of landfill capacity used to date. The remaining estimated liability for these costs is $474,152 which will be recognized as the remaining capacity is used (estimated to be approximately three years). 35

93 WALKER COUNTY, GEORGIA NOTES TO THE BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2014 (12) LANDFILL CLOSURE AND POSTCLOSURE CARE COSTS (Continued): The estimated costs of closure and postclosure care, as determined by the Georgia Environmental Protection Division, are subject to change including the effects of inflation, revision of laws, changes in technology, actual sequence of landfill development and closure, and other variables. The County also owns a solid waste landfill which discontinued operations in June The solid waste is accepted at a transfer station and transported to a location out of the County by an outside contractor. The landfill will continue to incur costs associated with the closing of the landfill in order to comply with EPA requirements. In addition, the County will be required to monitor various wells for a period of time. At September 30, 2014, a liability for postclosure care costs is recorded in the amount of $2,239,310, which is based on engineering reports, for maintaining the landfill site in future years. However, management s estimate of postclosure costs is contingent upon its ability to satisfy EPA requirements, and costs could be significantly higher if full compliance is not achieved. These costs will be met with future County revenues. (13) JOINT VENTURE: Walker County is a member of the Northwest Georgia Regional Commission (RC). The RC was created under the laws of the State of Georgia. Cities and Counties in the area served by the RC are required to be members under the Official Code of Georgia Annotated Section The membership of the RC includes 15 counties and 49 municipalities. The County has no equity interest in the RC. The County contributes $1.05 per capita yearly to the RC. The Official Code of Georgia Annotated Section states that in the event the RC ceases operation, the members can be assessed for any debt or obligation for the RC. Separate financial statements may be obtained from Northwest Georgia Regional Commission, P. O. Box 1798, Rome, Georgia (14) COMMITMENTS AND CONTINGENCIES: The County has a contract with the Hospital Authority of Walker, Dade and Catoosa Counties (the Authority ) to ensure medical care and hospitalization is provided to indigent individuals residing in the County. Catoosa County and Dade County are also parties to the same contract. The Authority owns or leases certain hospital buildings and related facilities (the Hospital ), including, but not limited to, Hutcheson Medical Center. Hutcheson Medical Center, Inc., ( HMC ) a nonprofit corporation organized under the laws of the State of Georgia, currently leases from the Authority and operates the Hospital. The Authority, in order to obtain additional funding for the operation and maintenance of the Hospital, entered into a line of credit note (the Note ) with Chattanooga-Hamilton County Hospital Authority d/b/a Erlanger Health System, a hospital authority organized under the Tennessee Hospital Authority Law. The line of credit may not exceed $20,000,000 in principal with loan proceeds being paid to Hutcheson Medical Center, Inc. The Authority agreed to execute and deliver to the holder a Deed to Secure Debt and Security Agreement (the Security Deed ) to 36

94 WALKER COUNTY, GEORGIA NOTES TO THE BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2014 (14) COMMITMENTS AND CONTINGENCIES (Continued): which it shall grant security title to its interest in certain real estate (the Property ) on which the Hospital is located as security for repayment of the Note. In order to assist the Authority in obtaining the necessary funding provided under the Note, the County along with the Board of Commissioners of Catoosa County has guaranteed the line of credit in the event of an uncured default by the Authority. Each of the Counties separately agreed to pay the Authority, or its assigns, an amount equal to one-half of the principal and interest then due and payable on the note with a maximum liability of $10,000,000 each. To the extent necessary, the County may levy an annual tax on taxable property located within the boundaries of the County for the purpose of providing medical care or hospitalization for the indigent sick and others entitled to use of the Hospital, at such rate or rates, within the limits now prescribed or such higher limits as may hereafter be prescribed by the Hospital Authorities Law, as may be necessary to make the payments called for by the agreement. However, the Counties cannot be held liable for any amount under the Erlanger line of credit note until and unless Erlanger first forecloses on the hospital real estate, then successfully sues the hospital for a deficiency judgment. The County Attorney opines that a deficiency judgment is highly unlikely, as it must be based upon a showing that the property was worth less than the debt. As the maximum two County combined liability on the line of credit totals $20,000,000 (maximum of $10,000,000 each), and as Erlanger itself appraised the real estate at $35,000,000, even if the property sold for less than the $20,000,000 note plus interest, a successful deficiency judgment suit would seem impossible. Also, Erlanger and the Hospital Authority are in a lawsuit, wherein the Authority has sued Erlanger for over $100,000,000 in damage, with a set off claim against the $20,000,000 line of credit. There is also within that litigation an injunction against any foreclosure. During 2014, the County implemented GASB Statement No. 70, Accounting and Financial Reporting for Nonexchange Financial Guarantees, which applies to financial guarantees that are nonexchange transactions extended or received by a government ("nonexchange financial guarantees"). Nonexchange financial guarantees are guarantees of obligations of individuals or legally separate entities in which a guarantor agrees to indemnify a third-party obligation holder under specific conditions. As a result of implementing GASBS No. 70, the County reported a liability of $4,178,423 since the Regions loan for HMC matures in December 2014 and the financial condition of the Hospital doesn't allow for payment. Prior periods were not restated because the Hospital employed a management company to operate the hospital in an effort to improve the operating results. In prior years it was not evident that the County would be required to make a payment on the loan. In December 2014, Walker County received request for payment on the County's nonexchange financial guarantee for the Regions loan to Hutcheson Medical Center. This amount was paid in March

95 WALKER COUNTY, GEORGIA NOTES TO THE BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2014 (15) RELATED PARTY TRANSACTIONS: Organizations for which a primary government is accountable because the County Commissioner appoints the members of the board, but is not financially accountable, are considered to be related organizations. The Walker County Water and Sewerage Authority is a related organization of the County. The County Commissioner appoints each of the five members of the board but has no further accountability. During the fiscal year ended September 30, 2014, Walker County, Georgia paid the Walker County Water and Sewerage Authority $1,188,194 for various water and sewer projects. The County also had a payable to the Authority of $152,435 at September 30, 2014 for the ongoing water and sewer projects. (16) PRIOR PERIOD ADJUSTMENTS: During the current year, an error was identified with the landfill usage report from 2011 provided by a third party resulting in an increase of accumulated depreciation for the C & D landfill. To correct this item, the beginning net position for the landfill of $4,526,448 as originally reported, has been decreased to $4,306,824. (17) SUBSEQUENT EVENTS: During March 2015, the County obtained a tax anticipation note for 10,000,000. A portion of the funds were used to pay the nonexchange financial guarantee for Hutcheson Medical Center. The remainder of the funds will be used for the day-to-day operations of the County. Management has evaluated subsequent events through July 24, 2015, the date which this financial statement was available for issue. 38

96 REQUIRED SUPPLEMENTARY INFORMATION 39

97 WALKER COUNTY, GEORGIA BUDGETARY COMPARISON SCHEDULE GENERAL FUND YEAR ENDED SEPTEMBER 30, 2014 Variance Budget with Final Original Final Actual Budget REVENUE: Taxes $ 8,057,397 $ 9,338,537 $ 9,338,537 $ - Other taxes 7,988,943 7,239,702 7,239,702 - Licenses and permits 208, , ,024 - Intergovernmental 227, , ,206 - Charges for services 922, , ,091 - Fines and forfeitures 1,541,724 1,566,564 1,566,564 - Investment earnings 63,932 14,968 14,968 - Contributions and donations - 64,776 64,776 - Rental income 54,932 55,837 55,837 - Other 147, , ,629 - Total revenue 19,212,612 19,788,334 19,788,334 - EXPENDITURES: General Government - Governing body 725, , ,762 - Elections 264, , ,246 - Election Poll Workers 46, Accounting 275, , ,668 - Licensing 7,938 7,965 7,965 - Legal 180, , ,849 - Data processing 81,141 83,359 83,359 - Tax commissioner 995,318 1,030,726 1,030,726 - Tax assessor 809, , ,070 - Board of equalization 2,485 2,863 2,863 - General government buildings and plant 395, , ,031 - Marsh Warthen house 10,080 9,554 9,554 - Records management 69,339 68,133 68,133 - General administration fees 68, , ,029 - Special projects 76,755 75,587 75,587 - Total general government 4,008,574 4,091,842 4,091,842 - Judicial - Clerk of courts 631, , ,862 - Superior court 138, , ,779 - District attorney 474, , ,578 - State court 334, , ,216 - State court solicitor 264, , ,129 - Magistrate court 322, , ,136 - Probate court 211, , ,630 - Juvenile court 310, , ,663 - Public defender 231, , ,593 - Court reporter 53,811 54,880 54,880 - Total judicial 2,972,633 3,046,466 3,046,466-40

98 WALKER COUNTY, GEORGIA BUDGETARY COMPARISON SCHEDULE GENERAL FUND FOR THE YEAR ENDED SEPTEMBER 30, 2014 Variance Budget with Final Original Final Actual Budget Sheriff - Law enforcement administration 1,010, , ,894 - Criminal investigation 740, , ,429 - Vice control 149, , ,407 - Patrol 1,689,272 1,684,912 1,684,912 - Custody of prisoners 2,280,917 2,350,606 2,350,606 - Champs program 197, , ,754 - Training 115,975 98,723 98,723 - Special detail services 2,274 2,095 2,095 - Sheriff's office and building 97,847 97,354 97,354 - Court services 863, , ,462 - Bailiff 3,401 4,872 4,872 - Total sheriff 7,151,355 7,165,508 7,165,508 - Public Safety - County police 520, , ,711 - Coroner/medical examiner 83,894 83,081 83,081 - Animal control 254, , ,176 - Total public safety 858, , ,968 - Highways and Streets - Highways and streets administration 456, , ,078 - Paved streets 939, , ,492 - Other maintenance 438, , ,655 - Traffic engineering 38,886 37,835 37,835 - Closure and postclosure costs 90,000 64,433 64,433 - Maintenance and shop 638, , ,881 - Total highways and streets 2,601,337 2,522,374 2,522,374-41

99 WALKER COUNTY, GEORGIA BUDGETARY COMPARISON SCHEDULE GENERAL FUND FOR THE YEAR ENDED SEPTEMBER 30, 2014 Variance Budget with Final Original Final Actual Budget Health and welfare - Public health administration 120, , ,224 - Children's crisis center 12,000 10,000 10,000 - Health department building and plant 30,442 32,993 32,993 - Intergovernmental welfare payments 27,939 30,367 30,367 - Other welfare payments ,754 41,754 - DFACS building and plant 20,688 18,896 18,896 - Meals on wheels 87,944 87,440 87,440 - Senior center 4,884 5,125 5,125 - Total health and welfare 304, , ,799 - Culture and Recreation - Civic center 242, , ,898 - Other recreational facilities - 13,771 13,771 - Agricultural center 21,794 21,350 21,350 - Historical preservation 4,761 4,252 4,252 - Community center Library administration 153, , ,825 - Total culture and recreation 422, , ,946 - Housing and Development - County agent 60,143 63,703 63,703 - Forest resources 15,013 15,628 15,628 - Planning and zoning 182, , ,495 - Economic development 231, , ,144 - Total housing and development 488, , ,970 - Debt Service - Principal 670, , ,265 - Interest - 100, ,563 - Issuance costs - 48,000 48,000 - Total debt service 670, , ,828 - Total expenditures 19,479,188 19,292,701 19,292,701 - EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES (266,576) 495, ,633-42

100 WALKER COUNTY, GEORGIA BUDGETARY COMPARISON SCHEDULE GENERAL FUND FOR THE YEAR ENDED SEPTEMBER 30, 2014 Variance Budget with Final Original Final Actual Budget OTHER FINANCING SOURCES (USES): Proceeds from sale of assets - 212, ,210 - Transfers to other funds (2,029,434) (3,224,109) (3,224,109) - Total other financing sources (uses) (2,029,434) (3,011,899) (3,011,899) - EXCESS (DEFICIENCY) OF REVENUES AND OTHER SOURCES OVER EXPENDITURES AND OTHER USES (2,296,010) (2,516,266) (2,516,266) - FUND BALANCES: Beginning 941, , ,789 - Ending $ (1,354,221) $ (1,574,477) $ (1,574,477) $ - 43

101 WALKER COUNTY, GEORGIA BUDGETARY COMPARISON SCHEDULE FIRE & RESCUE FUND YEAR ENDED SEPTEMBER 30, 2014 Variance Budget with Final Original Final Actual Budget REVENUES $ 5,952,980 $ 3,951,306 $ 3,951,306 $ - EXPENDITURES 5,769,559 5,370,794 5,370,794 - EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES 183,421 (1,419,488) (1,419,488) - OTHER FINANCING SOURCES (USES): Proceeds from capital lease - 269, ,780 - Transfer to other funds - (1,734) (1,734) - Transfer from other funds - 743, ,043 - Total other financing sources (uses) - 1,011,089 1,011,089 - EXCESS (DEFICIENCY) OF REVENUES AND OTHER SOURCES OVER EXPENDITURES 183,421 (408,399) (408,399) - FUND BALANCES: Beginning 408, , ,399 - Ending $ 591,820 $ - $ - $ - 44

102 WALKER COUNTY, GEORGIA DEFINED BENEFIT PENSION PLAN SCHEDULE OF FUNDING PROGRESS RETIREMENT PLAN SEPTEMBER 30, 2014 Actuarial Actuarial Accrued Unfunded* UAAL as a Percentage Actuarial Value of Liability AAL Funded Covered of Covered Valuation Assets (AAL) (UAAL) Ratio Payroll Payroll Date (a) (a) + (b) (b) a/(a+b) (c) (b/c) 01/01/05 5,472,256 6,041, , % 7,394, % 01/01/06 5,999,645 6,528, , % 7,426, % 01/01/07 5,129,238 5,612, , % 7,312, % 01/01/08 6,051,086 6,274, , % 7,266, % 01/01/09 5,658,617 5,981, , % 7,317, % 01/01/10 5,537,935 5,921, , % 7,087, % 01/01/11 6,424,689 7,360, , % 6,531, % 01/01/12 5,837,536 6,711, , % 6,354, % 01/01/13 6,381,844 9,324,526 2,942, % 5,682, % 01/01/14 7,012,927 9,847,016 2,834, % 5,347, % All annual contributions presented in these required supplementary schedules were determined as part of the actuarial valuations at the dates indicated. The 01/01/2011 actuarial report was revised in October 2012 and the above schedule was updated with the revised numbers. *Unfunded frozen actuarial liability was reestablished as of January 1,

103 WALKER COUNTY, GEORGIA DEFINED BENEFIT PENSION PLAN SCHEDULE OF EMPLOYER CONTRIBUTIONS RETIREMENT PLAN SEPTEMBER 30, 2014 Plan Year Ended Annual Required Conribution Actual Contributions Percentage Contributed 12/31/04 771, , % 12/31/05 884, , % 12/31/06 918, , % 12/31/07 978,839 1,195, % 12/31/08 774,137 1,078, % 12/31/09 777,960 1,124, % 12/31/10 826,330 1,017, % 12/31/11 796,609 1,290, % 12/31/12 565, , % 12/31/13 167, , % The information presented in the required supplementary schedule was determined as part of the actuarial valuation at the date indicated. Additional information as of the latest actuarial valuation follows: Valuation date Actuarial cost method 1/1/2014 Entry Age Normal Amortization method Level dollar for 15 years Asset valuation method Market value Actuarial assumptions: Investment rate of return 6.0% Projected salary increases 4.0% Change in funding method to Entry Age Normal prospectively while all liabilities prior to 1/1/2013 used Frozen Entry Age. 46

104 WALKER COUNTY, GEORGIA NOTES TO REQUIRED SUPPLEMENTARY INFORMATION SEPTEMBER 30, 2014 (1) BUDGETARY BASIS OF ACCOUNTING: The County adopted a budget on the modified accrual basis of accounting, which is the same basis of accounting as that used to reflect actual revenues and expenditures in the fund financial statements. At September 30, 2014, the General Fund had a deficit fund balance of $1,574,477. This fund deficit will be alleviated through increased millage rate for current year property tax bills. 47

105 SUPPLEMENTARY INFORMATION 48

106 WALKER COUNTY, GEORGIA COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL - SPECIAL REVENUE FUNDS SEPTEMBER 30, 2014 Law Multiple Court E911 Library Grand Fund Supervision Connection Transportation Total ASSETS: Cash $ - $ 52,010 $ - $ 54,941 $ 1,000 $ 3,214 $ 111,165 Restricted cash Accounts receivable 140, ,940 Due from other funds ,651 5,275 10,926 Due from other governments ,717-11,151 39, ,465 Total assets $ 140,940 $ 52,010 $ 352,717 $ 54,941 $ 17,802 $ 48,086 $ 666,496 LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES: Liabilities: Accounts payable $ 15,490 $ - $ 124,199 $ - $ - $ 17,759 $ 157,448 Due to other funds 125, ,059 26, ,744 Due to other governments , ,120 Total liabilities 140, ,378 26,235-17, ,312 Deferred inflows of resources: Unavailable revenue - - 9, ,191 Total deferred inflows of resources - - 9, ,191 Fund balances: Restricted - 52,010 20,148 28,706 17,802 30, ,993 Total fund balances - 52,010 20,148 28,706 17,802 30, ,993 Total liabilities, deferred inflows of resources and fund balances $ 140,940 $ 52,010 $ 352,717 $ 54,941 $ 17,802 $ 48,086 $ 666,496 49

107 WALKER COUNTY, GEORGIA COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL - SPECIAL REVENUE FUNDS YEAR ENDED SEPTEMBER 30, 2014 Law Multiple Court E911 Library Grant Fund Supervision Connection Transportation Total REVENUES: Intergovernmental $ - $ - $ 1,390,676 $ - $ 44,476 $ 464,646 $ 1,899,798 Charges for services 1,053, ,823 1,164,937 Fines and forfeitures - 22,159-3, ,037 Investment income Contributions and donations - - 9, ,510 Total revenues 1,053,114 22,159 1,400,186 4,100 44, ,469 3,100,504 EXPENDITURES: Current - Judicial - 18, ,516 9, ,921 Sheriff , ,250 Public safety 1,323, , ,662,054 Public works , ,043 Health and welfare ,678-44, ,934 1,808,153 Culture and recreation , ,511 Debt service - Principal 216, ,881 Interest 54, ,985 Total expenditures 1,595,769 18,980 1,483,149 9,425 44, ,934 4,129,798 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES (542,655) 3,179 (82,963) (5,325) (65) (401,465) (1,029,294) OTHER FINANCING SOURCES: Transfer from other funds 539,669-85, ,366 1,067,584 Total other financing sources 539,669-85, ,366 1,067,584 NET CHANGE IN FUND BALANCES (2,986) 3,179 2,586 (5,325) (65) 40,901 38,290 FUND BALANCES: Beginning 2,986 48,831 17,562 34,031 17,867 (10,574) 110,703 Ending $ - $ 52,010 $ 20,148 $ 28,706 $ 17,802 $ 30,327 $ 148,993 50

108 WALKER COUNTY, GEORGIA COMBINING STATEMENT OF FIDUCIARY ASSETS AND LIABILITIES AGENCY FUNDS SEPTEMBER 30, 2014 Tax Clerk of Probate Magistrate Commissioner Courts Judge Judge Total ASSETS: Cash $ 796,318 $ 830,203 $ 2,063 $ 13,713 $ 1,642,297 Total assets $ 796,318 $ 830,203 $ 2,063 $ 13,713 $ 1,642,297 LIABILITIES: Accounts payable $ 43,445 $ - $ - $ - $ 43,445 Due to other governments 752,873 73,102 1,796 4, ,273 Due to heirs, litigants and others - 757, , ,579 Total liabilities 796, ,203 2,063 13,713 1,642,297 NET POSITION $ - $ - $ - $ - $ - 51

109 WALKER COUNTY, GEORGIA COMBINING STATEMENT OF CHANGES IN ASSETS AND LIABILITIES AGENCY FUNDS YEAR ENDED SEPTEMBER 30, 2014 Beginning Additions Deductions Ending ASSETS: Cash $ 1,474,519 $ 38,913,912 $ 38,746,134 $ 1,642,297 Total assets $ 1,474,519 $ 38,913,912 $ 38,746,134 $ 1,642,297 LIABILITIES: Accounts payable $ 16,254 $ 265,735 $ 238,544 $ 43,445 Due to other governments 809,127 41,820,333 41,797, ,273 Due to heirs, litigants and others 649, , , ,579 Total liabilities 1,474,519 42,484,571 42,316,793 1,642,297 NET POSITION $ - $ (3,570,659) $ (3,570,659) $ - 52

110 WALKER COUNTY, GEORGIA STATEMENT OF CHANGES IN ASSETS AND LIABILITIES TAX COMMISSIONER YEAR ENDED SEPTEMBER 30, 2014 Beginning Additions Deductions Ending ASSETS: Cash $ 752,555 $ 35,870,142 $ 35,826,379 $ 796,318 Total assets $ 752,555 $ 35,870,142 $ 35,826,379 $ 796,318 LIABILITIES: Accounts payable $ 16,254 $ 265,735 $ 238,544 $ 43,445 Due to other governments 736,301 39,431,108 39,414, ,873 Total liabilities 752,555 39,696,843 39,653, ,318 NET POSITION $ - $ (3,826,701) $ (3,826,701) $ - 53

111 WALKER COUNTY, GEORGIA STATEMENT OF CHANGES IN ASSETS AND LIABILITIES CLERK OF COURTS YEAR ENDED SEPTEMBER 30, 2014 Beginning Additions Deductions Ending ASSETS: Cash $ 697,384 $ 2,677,213 $ 2,544,394 $ 830,203 Total assets $ 697,384 $ 2,677,213 $ 2,544,394 $ 830,203 LIABILITIES: Due to other governments $ 68,613 $ 2,220,487 $ 2,215,998 $ 73,102 Due to heirs, litigants, and others 628, , , ,101 Total liabilities 697,384 2,522,791 2,389, ,203 NET POSITION $ - $ 154,422 $ 154,422 $ - 54

112 WALKER COUNTY, GEORGIA STATEMENT OF CHANGES IN ASSETS AND LIABILITIES PROBATE JUDGE YEAR ENDED SEPTEMBER 30, 2014 Beginning Additions Deductions Ending ASSETS: Cash $ 10,710 $ 105,238 $ 113,885 $ 2,063 Total assets $ 10,710 $ 105,238 $ 113,885 $ 2,063 LIABILITIES: Due to other governments $ 1,059 $ 126,044 $ 125,307 $ 1,796 Due to heirs, litigants, and others 9,651 $ - 9, Total liabilities 10, , ,691 2,063 NET POSITION $ - $ (20,806) $ (20,806) $ - 55

113 WALKER COUNTY, GEORGIA STATEMENT OF CHANGES IN ASSETS AND LIABILITIES MAGISTRATE JUDGE YEAR ENDED SEPTEMBER 30, 2014 Beginning Additions Deductions Ending ASSETS: Cash $ 13,870 $ 261,319 $ 261,476 $ 13,713 Total assets $ 13,870 $ 261,319 $ 261,476 $ 13,713 LIABILITIES: Due to other governments $ 3,154 $ 42,694 $ 41,346 $ 4,502 Due to heirs, litigants, and others 10,716 96,199 97,704 9,211 Total liabilities 13, , ,050 13,713 NET POSITION $ - $ 122,426 $ 122,426 $ - 56

114 WALKER COUNTY, GEORGIA STATEMENT OF EXPENDITURES TO BUDGET FAMILY CONNECTION PROGRAM CONTRACT CONTRACT PERIOD: JULY 1, JUNE 30, 2014 Family Variance Connection Contract with Budget Expenditures Budget EXPENDITURES: Personal services $ - $ - $ - Regular operating 1,500 1, Travel - staff Equipment Per diem, fees and contracts 43,000 43,040 (40) Telecommunications (90) Other support to customers $ 45,000 $ 44,907 $ 93 57

115 WALKER COUNTY, GEORGIA BUDGETARY COMPARISON SCHEDULE E911 YEAR ENDED SEPTEMBER 30, 2014 Variance Budget with Final Original Final Actual Budget REVENUES $ 1,553,605 $ 1,053,114 $ 1,053,114 $ - EXPENDITURES 1,553,605 1,595,769 1,595,769 - EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES - (542,655) (542,655) - OTHER FINANCING SOURCES: Transfer from other funds - 539, ,669 - Proceeds from capital lease Total other financing sources - 539, ,669 - NET CHANGE IN FUND BALANCES - (2,986) (2,986) - FUND BALANCES: Beginning 2,986 2,986 2,986 - Ending $ 2,986 $ - $ - $ - 58

116 WALKER COUNTY, GEORGIA BUDGETARY COMPARISON SCHEDULE LAW LIBRARY YEAR ENDED SEPTEMBER 30, 2014 Variance Budget with Final Original Final Actual Budget REVENUES $ 40,000 $ 22,159 $ 22,159 $ - EXPENDITURES 40,000 18,980 18,980 - EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES - 3,179 3,179 - FUND BALANCES: Beginning 48,831 48,831 48,831 - Ending $ 48,831 $ 52,010 $ 52,010 $ - 59

117 WALKER COUNTY, GEORGIA BUDGETARY COMPARISON SCHEDULE MULTIPLE GRANT FUND YEAR ENDED SEPTEMBER 30, 2014 Variance Budget with Final Original Final Actual Budget REVENUES $ 1,874,570 $ 1,400,186 $ 1,400,186 $ - EXPENDITURES 1,874,570 1,483,149 1,483,149 - EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES - (82,963) (82,963) - OTHER FINANCING SOURCES: Transfer from other funds - 85,549 85,549 - NET CHANGE IN FUND BALANCES - 2,586 2,586 - FUND BALANCES: Beginning 17,562 17,562 17,562 - Ending $ 17,562 $ 20,148 $ 20,148 $ - 60

118 WALKER COUNTY, GEORGIA BUDGETARY COMPARISON SCHEDULE COURT SUPERVISION YEAR ENDED SEPTEMBER 30, 2014 Variance Budget with Final Original Final Actual Budget REVENUES $ 5,250 $ 4,100 $ 4,100 $ - EXPENDITURES 10,000 9,425 9,425 - EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES (4,750) (5,325) (5,325) - FUND BALANCES: Beginning 34,031 34,031 34,031 - Ending $ 29,281 $ 28,706 $ 28,706 $ - 61

119 WALKER COUNTY, GEORGIA BUDGETARY COMPARISON SCHEDULE CONNECTION YEAR ENDED SEPTEMBER 30, 2014 Variance Budget with Final Original Final Actual Budget REVENUES $ 45,000 $ 44,476 $ 44,476 $ - EXPENDITURES 45,000 44,541 44,541 - EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES - (65) (65) - FUND BALANCES: Beginning 17,867 17,867 17,867 - Ending $ 17,867 $ 17,802 $ 17,802 $ - 62

120 WALKER COUNTY, GEORGIA BUDGETARY COMPARISON SCHEDULE TRANSPORTATION YEAR ENDED SEPTEMBER 30, 2014 Variance Budget with Final Original Final Actual Budget REVENUES $ 708,596 $ 576,469 $ 576,469 $ - EXPENDITURES 708, , ,934 - EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES - (401,465) (401,465) - OTHER FINANCING SOURCES: Transfer from other funds - 442, ,366 - NET CHANGE IN FUND BALANCES - 40,901 40,901 - FUND BALANCES: Beginning (10,574) (10,574) (10,574) - Ending $ (10,574) $ 30,327 $ 30,327 $ - 63

121 COMPLIANCE 64

122

123 financial statements will not be prevented, or detected and corrected on a timely basis. We consider the deficiency 07-1 described in the accompanying schedule of findings and questioned costs to be a material weakness. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. We consider the deficiency 14-2 described in the accompanying schedule of findings and questioned costs to be a significant deficiency. Compliance and Other Matters As a part of obtaining reasonable assurance about whether Walker County, Georgia s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed instances of noncompliance or other matters that are required to be reported under Government Auditing Standards and which are described in the accompanying schedule of findings and questioned costs as item Walker County, Georgia s Response to Findings Walker County, Georgia s response to the findings identified in our audit is described in the accompanying schedule of findings and questioned costs. Walker County, Georgia s response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Chattanooga, Tennessee July 24,

124

125 We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of Walker County, Georgia s compliance. Opinion on Each Major Federal Program In our opinion, Walker County, Georgia, complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended September 30, Report on Internal Control Over Compliance Management of Walker County, Georgia, is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered Walker County, Georgia s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of Walker County, Georgia s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be a material weaknesses. However, material weaknesses may exist that have not been identified. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of OMB Circular A-133. Accordingly, this report is not suitable for any other purpose. Chattanooga, Tennessee July 24,

126 WALKER COUNTY, GEORGIA SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED SEPTEMBER 30, 2014 Pass-Through Federal Entity Grantor/Pass-Through CFDA Identifying Federal Grantor/Program Title Number Number Expenditures U.S. Department of Justice: Passed through State Criminal Justice Coordinating Council - Juvenile Accountability N ,800 Juvenile Accountability JBR ,518 Crime Victim Assistance C , ,330 Direct Award - Bulletproof Vest Partnership Program ,961 Total U. S. Department of Justice 131,291 U.S. Department of Transportation: Passed through Georgia Department of Transportation Highway Planning and Construction CSHPP ,415 Passed through State Department of Justice - Capital Improvement Assistance GA-18-X ,723 Transit Operating Assistance GA , ,208 Total U. S. Department of Transportation 569,623 U.S. Department of Health and Human Services: Direct Award - Comprehensive Community Mental Health Services for Children with Serious Emotional Disturbances ,678 U.S. Department of Homeland Security: Passed through Georgia Emergency Management Agency Homeland Security EMW-2012-SS ,900 Citizens Corp Program EMW-2011-SS ,654 26,554 Direct Award - Disaster Grants - Public Assistance (Presidentially Declared Disasters) ,464 Emergency Management Performance Grants ,203 Staffing for Adequate Fire and Emergency Response (SAFER) , ,410 Total U. S. Department of Homeland Security 393,964 JAG Program Cluster: U.S. Department of Justice Direct Award - ARRA - Officer Safety and Education Program ,329 Passed through State Criminal Justice Coordinating Council - Justice Assistance Grant DJ-BX Justice Assistance Grant DJ-BX-0173 (2,231) (1,314) Total JAG Program Cluster 15,015 $ 1,895,571 69

127 WALKER COUNTY, GEORGIA SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED SEPTEMBER 30, 2014 NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS (1) BASIS OF PRESENTATION: The schedule of expenditures of federal awards includes the federal grant activity of Walker County, Georgia and is presented on the modified accrual basis of accounting. The information in this schedule is presented in accordance with the requirements of OMB Circular A-133, Audits of States, Local Governments and Non-Profit Organizations. Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the basic financial statements. (2) SUB-RECIPIENTS: The County provided federal awards to sub-recipients as follows: Federal CFDA Amount Program Title Number Provided Comprehensive Community Mental Health Services for Children with Serious Emotional Disturbances $ 785,678 70

128 WALKER COUNTY, GEORGIA SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS AND QUESTIONED COSTS YEAR ENDED SEPTEMBER 30, 2014 PRIOR YEAR FINDINGS AND QUESTIONED COSTS Finding Control Number and Status 07-1 The County has failed to implement the corrective action plan. Journal entries were made during the audit to adjust balance sheet accounts due to there again being a delay in receipt of the necessary information by the accounting department. 71

129 WALKER COUNTY, GEORGIA SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED SEPTEMBER 30, 2014 SECTION I SUMMARY OF AUDITORS RESULTS Financial Statements Type of auditors report issued: Unmodified Internal control over financial reporting: Material weaknesses identified X Yes No Significant deficiencies identified that are not considered to be material weakness X Yes None reported Noncompliance material to financial statements noted? X Yes No Federal Awards Internal Control over major programs: Material weakness identified Yes X No Significant deficiencies identified that are not considered to be material weakness Yes X None reported Type of auditor s report issued on compliance for major programs: Unmodified Any audit finding disclosed that are required to be reported in accordance with Section 510(a) of Circular A-133 Yes X No Identification of major programs: CFDA Number(s) Name of Federal Program Comprehensive Community Health Services for Children with Serious Emotional Disturbances GA DOT Formula Grants for Other Than Urbanized Areas Dollar threshold used to distinguish between Type A and Type B programs: $300,000 Auditee qualified as low-risk auditee: Yes X No 72

130 WALKER COUNTY, GEORGIA SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED SEPTEMBER 30, 2014 SECTION II FINANCIAL STATEMENT FINDINGS Finding 07-1 Condition: Some material balance sheet accounts were not reconciled to supporting documentation at year end. In these instances, the ending balances were identified and supporting worksheets were prepared, however, circumstances prevented the accounting department from having all pertinent information necessary to determine the correct balance in a timely manner. This condition was a prior year finding. Criteria: Accounting tasks such as monthly and annual reconciliations play a key role in providing the accuracy of accounting data and information included in the financial statements. Effect: Balance sheet accounts that are not reconciled could result in undetected material misstatements in the financial statements. Appropriate account reconciliations could avoid errors being undetected in the financial statements that management uses as part of its decision making process and provide management with more confidence in the financial statements. Recommendation: A reconciliation of all balance sheet accounts should be prepared to determine that all transactions have been recorded and to discover any potential errors. These reconciliations will ensure meaningful and accurate financial statements. Views of the Responsible Officials: The officials concur with the finding. Planned Corrective Plan: Management s response is located on pages Finding 14-1 Condition: Road projects are underway that were to be funded by SPLOST revenues and state grants. The projects were performed in the SPLOST 2013 fund, however, all of the grant funds allocated to the project had been deposited into the general fund. Those funds were not transferred to the SPLOST 2013 fund as required. This resulted in a due from the general fund in the SPLOST fund. Criteria: SPLOST funds are not to be expended for the portion of a project that was outside the SPLOST 2013 referendum. Effect: SPLOST 2013 was out of compliance with Georgia state law. Recommendation: Any time grant funds are going to be used in conjunction with a SPLOST project, these grant funds should be transferred into a bank account within the SPLOST fund prior to beginning the project. Views of the Responsible Officials: The officials concur with the finding. Planned Corrective Plan: Management s response is located on pages

131 WALKER COUNTY, GEORGIA SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED SEPTEMBER 30, 2014 Finding 14-2 Condition: A project worksheet was not provided to the finance office resulting in an understatement of grant receivables. Criteria: All grant funding requests should be recorded as receivable if funds have not been received by the end of the year. Effect: Grant receivables were understated for the current fiscal year. Recommendation: Design and implement centralized grant procedures which are issued to each department of the County requiring a copy of all grant applications to be forwarded to the finance office. This will allow for more complete reporting of all grant receivables. Views of the Responsible Officials: The officials concur with the finding. Planned Corrective Plan: Management s response is located on pages SECTION III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS None reported. 74

132 WALKER COUNTY, GEORGIA SCHEDULE OF PROJECTS CONSTRUCTED WITH 2008 SPECIAL PURPOSE LOCAL OPTION SALES TAX PROCEEDS YEAR ENDED SEPTEMBER 30, 2014 ORIGINAL EXPENDITURES PERCENTAGE CUMULATIVE ESTIMATED PRIOR CURRENT OF OTHER PROJECT COST YEARS YEAR TOTAL COMPLETION FUNDING Water and sewer projects $ 5,000,000 $ 2,771,112 $ - $ 2,771,112 55% $ - Solid waste and stormwater management 1,000, % - Emergency services 5,800,000 5,530,668-5,530,668 95% - Technology 2,000,000 1,244,107-1,244,107 62% - Animal shelter 30, % - Historical projects 100,000 35,384-35,384 35% - Recreation 2,000, , ,759 21% - Roads, bridges, and road department equipment 5,000,000 4,701,407-4,701,407 94% 1,187,913 Building construction and improvements 2,500,000 2,809,668-2,809, % - Industrial and economic development 3,570,000 3,289,566-3,289,566 92% - Public library 1,500,000 1,155, ,816 1,500, % - Payments to Cities: LaFayette 4,434,600 3,108, ,501 3,694,438 83% - Rossville 2,394,000 1,688,057-1,688,057 71% - Chickamauga 1,432,600 1,010,940-1,010,940 71% - Lookout Mountain 1,090, , ,451 71% - Ft. Oglethorpe 148, , ,171 70% - $ 38,000,000 $ 28,633,411 $ 930,317 $ 29,563,728 $ 1,187,913 Reconciliation of SPLOST expenditures per financial statements to schedule of projects: SPLOST 2008 expenditures per financial statements $ 5,436,466 Less debt service: Principal 4,270,000 Interest and fiscal agent fees 236,149 Less grant receivable written off - SPLOST 2008 expenditures per schedule of projects $ 930,317 75

133 WALKER COUNTY, GEORGIA SCHEDULE OF PROJECTS CONSTRUCTED WITH 2013 SPECIAL PURPOSE LOCAL OPTION SALES TAX PROCEEDS YEAR ENDED SEPTEMBER 30, 2014 ORIGINAL EXPENDITURES PERCENTAGE CUMULATIVE ESTIMATED PRIOR CURRENT OF OTHER PROJECT COST YEARS YEAR TOTAL COMPLETION FUNDING Industrial Park $ 6,600,000 $ - $ 4,268,831 $ 4,268,831 65% $ - Road resurfacing and other capital roadwork improvements 9,100,000-2,600,003 2,600,003 29% 1,503,370 Equipment and vehicles for law enforcement 1,900,000-8,119 8,119 0% - Bridges and right of way acquisitions and maintenance 250,000-45,960 45,960 18% - Emergency services equipment including vehicles, fire hydrants and radio repeater for E-911 1,000, , ,367 95% - Shooting range for Sheriff's office 30, % - State patrol bar code readers and 10 assault rifles 30,000-30,000 30, % - Industrial Park Development 1,300, , ,330 46% - Library-LaFayette project 300, , , % - Library-Rossville project 600, % - Multipurpose emergency facility-mt. Pleasant community 400, % - Multipurpose emergency facility-hinkle community 250,000-26,326 26,326 11% - Emergency facility and community center-cedar Grove 1,500,000-23,527 23,527 2% - Recreational facilities 1,000, , ,970 39% - Water and Sewer improvements, including Armuchee 2,000,000-1,948,902 1,948,902 97% - Office equipment and furnishings 100, % - Payments to Cities: LaFayette 2,904, % - Rossville 1,674,420-1,282,825 1,282,825 77% - Chickamauga 1,265, , ,860 77% - Lookout Mountain 653, , ,291 78% - Ft. Oglethorpe 102,300-74,871 74,871 73% - $ 32,960,000 $ - $ 14,072,300 $ 14,072,300 $ 1,503,370 Reconciliation of SPLOST expenditures per financial statements to schedule of projects: SPLOST 2013 expenditures per financial statements $ 14,838,269 Less debt service: Principal - Interest and issuance costs 765,969 SPLOST 2013 expenditures per schedule of projects $ 14,072,300 76

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137 Appendix B DEFINITIONS AND SUMMARIES OF THE PRINCIPAL DOCUMENTS

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139 DEFINITIONS AND SUMMARIES OF PRINCIPAL DOCUMENTS DEFINITIONS Certain words and terms used in this Official Statement are defined herein. In addition to the words and terms defined elsewhere herein, the following words and terms are defined terms in this Official Statement Project means the initial capital improvements to be made to the Industrial Park known as Walker County Industrial Park. Additional Bonds means the additional parity Bonds authorized to be issued by the Authority pursuant to the terms and conditions of the Indenture. Additional Contract means a contract or supplemental agreement (including, without limitation, any amendment or supplement to the Contract) between the County and the Authority or any other development authority that is now existing or that may hereafter be created or activated, pursuant to the terms of which a payment obligation from the County to any such authority is created or expanded. Affiliate of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, (i) control when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the power to appoint and remove its directors, the ownership of voting securities, by contract, membership, or otherwise, and (ii) the terms controlling and controlled have meanings correlative to the foregoing. Authority means the Walker County Development Authority, a public corporation created and existing under the laws of the State, and its successors and assigns. Authorized Authority Representative means the person at the time designated to act on behalf of the Authority by written certificate furnished to the County and the Trustee, containing the specimen signature of such person and signed on behalf of the Authority by the Chairman or Vice Chairman of the Authority. Such certificate or any subsequent or supplemental certificate so executed may designate an alternate or alternates. Authorized County Representative means the person at the time designated to act on behalf of the County by written certificate furnished to the Authority and the Trustee, containing the specimen signature of such person and signed on behalf of the County by the Commissioner of the County. Such certificate or any subsequent or supplemental certificate so executed may designate an alternate or alternates. Bond Counsel means any firm of nationally recognized bond counsel experienced in matters relating to tax-exempt financing, selected by the County and reasonably acceptable to the Trustee. Bond Documents means, collectively, the Contract and the Indenture. Bond Fund means the trust fund so designated, which is created pursuant to the Indenture. Bond Year means the twelve-month period beginning on August 2 of each calendar year and ending on August 1 of the next succeeding calendar year. Bondholders means the Persons in whose names any of the Bonds are registered on the books kept and maintained by the Trustee as bond registrar.

140 Bonds means the Series 2015 Bonds and all series of Additional Bonds from time to time authenticated and delivered under the Indenture. Capitalized Interest Account means the separate account so designated in the Bond Fund, which is created and established therein pursuant to the Indenture. Contract means the Intergovernmental Economic Development Contract, dated as of September 1, 2015, between the County and the Authority, as it may be supplemented and amended from time to time in accordance with the provisions thereof. Contracts means the Contract and all Additional Contracts. Counsel means an attorney duly admitted to practice law before the highest court of any state in the United States of America or the District of Columbia, or any law firm, who or which, as the case may be, is not unsatisfactory to any recipient of the opinion required to be rendered by such Counsel. County means Walker County, Georgia, and its successors and assigns. Engineer means an Independent Person who is a registered engineer in the State, who or which is appointed by the Authority for the purpose of passing on questions relating to the design or construction of any particular Project, has all licenses and certifications necessary for the performance of such services, and, in the good faith opinion of the Authority, has a favorable reputation for skill and experience in performing similar services in respect of capital improvements of a comparable size and nature. herein. Event of Default means the events specified under THE INDENTURE - Events of Default Extraordinary Services of the Trustee and Extraordinary Expenses of the Trustee mean all services rendered and all expenses incurred by the Trustee under the Indenture, including reasonable counsel fees and expenses, other than Ordinary Services of the Trustee and Ordinary Expenses of the Trustee. Fitch means Fitch, Inc. or, if such corporation is dissolved or liquidated or otherwise ceases to perform securities rating services, such other nationally recognized securities rating agency as may be designated in writing by the County. Fund means any of the funds established pursuant to the Indenture. Government Obligations means: (a) direct general obligations of the United States of America (including obligations issued or held in book-entry form on the books of the Department of Treasury of the United States of America) or obligations the payment of the principal of and interest on which when due are fully and unconditionally guaranteed by the United States of America; (b) receipts or certificates that evidence an undivided ownership interest in the right to the payment of the principal of or interest on obligations described in clause (a) above, provided that such obligations are held in the custody of a bank or trust company acceptable to the Trustee, in a special account separate from the general assets of such custodian; and B-2

141 (c) bonds, notes, or other obligations of any Governmental Issuer the timely payment of the principal of and interest on which is fully provided for (without reinvestment) by the deposit in trust or escrow of cash or non-callable obligations described in clauses (a) or (b) above. Governmental Issuer means the State, any other state of the United States, any agency or instrumentality of the State, and any county, municipal corporation, or political subdivision of the State. Indenture means the Trust Indenture and Security Agreement, dated as of September 1, 2015, between the Authority and the Trustee, as the same may be supplemented and amended from time to time in accordance with the provisions thereof. Independent, when used with respect to any specified Person, means such a Person who (i) does not have any direct financial interest in the County, other than the payment to be received under the contract for services to be performed by such Person; (ii) is not an officer, employee, underwriter, partner, Affiliate, subsidiary, or person performing similar functions for the County; and (iii) when used with respect to any Person other than Counsel, is not a trustee or director of the County. Industrial Parks means collectively the two industrial parks owned by the Authority, known as Rock Spring Industrial Park and Walker County Industrial Park. Interest Account means the separate account so designated in the Bond Fund, which is created and established therein pursuant to the Indenture. Interest Payment Date means each February 1 and August 1, commencing February 1, 2016, in the case of Series 2015 Bonds, and the dates on which interest is scheduled to be paid, in the case of Additional Bonds. Issuance Cost Fund means the trust fund so designated, which is created pursuant to the Indenture. Joint Written Request means a Written Request of the Authority and the County. Moody s means Moody s Investors Service, Inc. or, if such corporation is dissolved or liquidated or otherwise ceases to perform securities rating services, such other nationally recognized securities rating agency as may be designated in writing by the County. Officer s Certificate means a certificate in writing signed by the Authorized County Representative. Ordinary Services of the Trustee and Ordinary Expenses of the Trustee mean those reasonable services rendered and those reasonable expenses incurred by the Trustee in the performance of its duties under the Indenture of the type ordinarily performed by corporate trustees under like indentures, including reasonable counsel fees and expenses. Outstanding Bonds or Bonds Outstanding or Outstanding means all Bonds that have been duly authenticated and delivered by the Trustee under the Indenture, except: (a) Bonds theretofore cancelled or required to be cancelled by the Trustee, (b) Bonds that are deemed to have been paid in accordance with the defeasance provisions of the Indenture, and B-3

142 (c) Bonds in substitution for which other Bonds have been authenticated and delivered under the Indenture. If the Indenture is discharged pursuant to the defeasance provisions thereof, no Bonds will be deemed to be Outstanding within the meaning of this provision. Permitted Investments means obligations in which the Authority is permitted to invest moneys of the Authority pursuant to applicable law, which have (or are collateralized by obligations which have) a Rating by any Rating Agency that is equal to or greater than the third highest long-term Rating of such Rating Agency, or which bears (or are collateralized by obligations which bear) the second highest short-term Rating of such Rating Agency, or which consist of negotiable or non-negotiable certificates of deposit issued by or interest-bearing time or demand deposits in banks, provided that any such deposits are (a) fully insured by the Federal Deposit Insurance Corporation or (b) fully secured by Government Obligations. Obligations in which the Authority is permitted to invest proceeds of Bonds are described, as of the date of execution of the Indenture, in Section of the Official Code of Georgia Annotated. Person means an individual, a corporation, a partnership, a limited liability company, an association, a joint stock company, a joint venture, a trust, an unincorporated organization, a governmental unit or an agency, a political subdivision or instrumentality thereof, or any other group or organization of individuals. Plans and Specifications means the detailed plans and specifications for the construction of any Project prepared by an Engineer or by engineers acceptable to an Engineer and approved by such Engineer, as amended from time to time by the Authority, a copy of which is or will be on file with the Trustee. Principal Account means the separate account so designated in the Bond Fund, which is created and established therein pursuant to the Indenture. Prior Bond means the Authority s Taxable Revenue Bond (Ohio Logistics Project), Series 2011, presently outstanding in the principal amount of $643,300. Prior Note means the Authority s Promissory Note, dated May 20, 1997, in the principal amount outstanding of $450,000, payable to the County and evidencing the Authority s obligation to repay a loan made by the County to the Authority to finance the costs of acquiring and improving the Industrial Parks. Project means the 2015 Project or any future capital improvements to the Industrial Parks or the Properties. Project Fund means the trust fund so designated, which is created pursuant to the Indenture. Properties means, collectively, the County s (a) Civic Center and its Agricultural Center located at North Highway 27 in Rock Spring, Georgia and (b) its Mountain Cove Resort Properties located on Dougherty Gap Road in unincorporated Walker County that will be acquired by the Authority. Rating means a rating in one of the categories by a Rating Agency, disregarding pluses, minuses, and numerical gradations. Rating Agencies or Rating Agency means Fitch, Moody s, and Standard & Poor s or any successors thereto and any other nationally recognized credit rating agency then maintaining a rating on any Bonds at the request of the County. If at any time a particular Rating Agency does not have a rating outstanding with respect to the relevant Bonds, then a reference to Rating Agency or Rating Agencies will not include such Rating Agency. B-4

143 Redemption Account means the separate account so designated in the Bond Fund, which is created and established therein pursuant to the Indenture. Series 2015 Bonds means the revenue bonds designated Walker County Development Authority Economic Development Taxable Revenue Bonds, Series 2015, to be dated the date of their issuance and delivery, in the original aggregate principal amount of $15,230,000, to be issued pursuant to the Indenture. Series 2015 Insurer means Build America Mutual Assurance Company, or any successor thereto. Series 2015 Policy means the Municipal Bond Insurance Policy issued by the Series 2015 Insurer that guarantees the scheduled payment of principal of and interest on the Series 2015 Bonds when due. Standard and Poor s or S&P means Standard & Poor s Ratings Services, a division of The McGraw-Hill Companies, Inc., or, if such corporation is dissolved or liquidated or otherwise ceases to perform securities rating services, such other nationally recognized securities rating agency as may be designated in writing by the County. State means the State of Georgia. Trust Estate means any and all property subject to the operation of the granting clauses of the Indenture. Trustee means the trustee or the co-trustee at the time serving as such under the Indenture. U.S. Bank National Association, Atlanta, Georgia, is the initial Trustee. Unassigned Rights means all of the rights of the Authority to receive reimbursements and payments pursuant to the Contract and more specifically described in subparagraph (d) and (e) of THE CONTRACT - County s Payment Obligations herein. Underwriter means, for purposes of the Series 2015 Bonds, Stifel, Nicolaus & Company, Incorporated. Written Request means with reference to the Authority, a request in writing signed by the Authorized Authority Representative, and with reference to the County, a request in writing signed by the Authorized County Representative. Introduction SUMMARIES OF PRINCIPAL DOCUMENTS THE CONTRACT The Contract, dated as of September 1, 2015, between the County and the Authority, provides security for the Authority s obligations under the Series 2015 Bonds. The following is a summary, which does not purport to be comprehensive or definitive, of certain provisions of the Contract. Reference is made to the Contract in its entirety for a complete recital of the detailed provisions thereof, copies of which are available from the Authority upon request. B-5

144 County s Payment Obligations In order to provide financial assistance to the Authority for the purpose of developing trade, commerce, industry, and employment opportunities, the County agreed in the Contract that: (a) It will pay to the Authority, by making such payments directly to the Trustee for the account of the Authority for deposit in the Bond Fund held under the Indenture on or before January 25 of each year, an amount sufficient, when added to funds held at the time of such payment in the Bond Fund, to cause the balance held therein to equal the full amount of principal of, premium, if any, and interest on the Bonds coming due during the then current Bond Year. (b) The provisions of paragraph (a) above to the contrary notwithstanding, if, for any reason, on the third business day preceding any Interest Payment Date and any redemption date with respect to the Bonds, there is not on deposit in the Bond Fund moneys sufficient to pay the total principal, interest, and premium coming due on the Bonds on such Interest Payment Date or redemption date (whether by mandatory redemption, maturity, or otherwise), the County will on such date pay to the Authority, by making such payments directly to the Trustee for the account of the Authority for deposit into the Bond Fund, an amount equal to the amount by which the total principal, interest, and premium coming due on the Bonds (whether by mandatory redemption, maturity, or otherwise) on the next Interest Payment Date or redemption date exceeds the amount in the Bond Fund (and not being held for the payment of Bonds not yet presented for payment or interest checks not cashed). (c) It will also pay to the Authority an amount equal to all amounts payable by the Authority to the Series 2015 Insurer pursuant to the Indenture. (d) It will also pay to the Authority an amount equal to (i) any costs incurred by the Authority in connection with the issuance of any series of Bonds to the extent such costs are not paid from proceeds of such Bonds, and (ii) the fees and expenses of the Trustee if the Authority is unable to pay such fees and expenses from the revenues derived from the Industrial Parks or the Properties. In addition to and over and above the sums described in paragraphs (a), (b), (c), and (d) above, the County agreed to pay additional monthly payments to the Authority as may be necessary to assure the continuous operation of the Properties and to provide reasonable reserves for contingencies and for the maintenance and repair of the properties constituting, and the services provided by, the Properties. Source of Funds for County s Payment Obligations The Contract provides that the obligation of the County to make payments under the Contract will constitute a general obligation of the County, payable out of any funds lawfully available to it for such purpose, from whatever source derived (including general funds). The County agreed that it will, to the extent necessary, levy an annual ad valorem tax on all taxable property located within the territorial limits of the County, as now existent and as the same may hereafter be extended, at such rate or rates within the one (1) mill limit authorized pursuant to Section (20) of the Official Code of Georgia Annotated or within such greater millage as may hereafter be prescribed by applicable law, as may be necessary to produce in each year revenues that will be sufficient to fulfill the County s obligations under the Contract, from which revenues the County agreed to appropriate sums sufficient to pay in full when due all of the County s obligations under the Contract. The County created and granted a lien in favor of the Authority on any and B-6

145 all revenues realized by the County from such tax, to make the payments that are required under the Contract, and agreed the lien will be superior to any that can hereafter be created, except that this lien may be extended to cover any Additional Contracts. Nothing contained in the Contract, however, may be construed as limiting the right of the County to make the payments called for by the Contract out of any funds lawfully available to it for such purpose, from whatever source derived (including general funds). The County s obligation to levy an annual ad valorem tax within the one (1) mill limit authorized by Section (20) of the Official Code of Georgia Annotated, or such greater millage hereafter authorized by law, for the purpose of providing funds to meet the County s payment obligations under the Contract may not be junior and subordinate, but must be superior or equal to the County s obligation to levy an annual ad valorem tax at such rate or rates within such one (1) mill limit or such greater millage as hereafter prescribed by law pursuant to the provisions of any Additional Contract. The Contract provides that the County will not be required to levy a tax in any year at a rate or rates exceeding in the aggregate the maximum one (1) mill now authorized by Section (20) of the Official Code of Georgia Annotated, or any greater millage hereafter prescribed by law, in order to meet its obligations under all Contracts. Additional Contracts The County agreed in the Contract that it would not: (1) enter into an Additional Contract that creates a lien on the revenues to be derived from the tax to be levied under the Contract by the County to fulfill its obligations under the Contract, which is superior to the lien created under the Contract, (2) enter into any other contract or agreement creating a lien on such tax revenues for any purpose other than debt service payments (including creation and maintenance of reasonable reserves therefor) superior to or on a parity with the lien created thereon to fulfill the obligations of the County under the Contract, and (3) enter into any Additional Contract that provides for payment to be made by the County from moneys derived from the levy of a tax within the maximum millage now or hereafter authorized by law if each annual payment of all amounts payable with respect to debt service or that are otherwise fixed in amount or currently budgeted in amount under all Contracts then in existence, together with each annual payment to be made under the proposed Additional Contract, in each future calendar year, would exceed the amount then capable of being produced by a levy of a tax within the maximum millage now or hereafter authorized by law on the taxable value of property located within the territorial limits of the County subject to taxation for such purposes, as shown by the latest tax digest available immediately preceding the execution of any such Additional Contract. The Contract also provides that the County may not hereafter enter into any Additional Contract for the purpose of debt service payments (including creation and maintenance of reserves therefor), unless the amount then capable of being produced by the levy of an ad valorem tax within the maximum millage then authorized under Section (20) of the Official Code of Georgia Annotated or any successor provision on all taxable property within the territorial limits of the County, as shown by the latest tax digest available immediately preceding the execution of such Additional Contract, is equal to at least one and twenty hundredths (1.20) times the maximum combined amount payable in any future calendar year with respect to debt service under all existing Contracts and any such Additional Contract. Debt service for purposes of this provision means required payments of principal, including principal to be paid through mandatory redemption, interest, and amounts required to be paid for creation and maintenance of reasonable debt service reserves and to establish and maintain mandatory investment programs, less principal and interest received or to be received from investment of any of the foregoing amounts (except funds on hand or to be B-7

146 on hand in any debt service reserve) required to be applied to debt service in each calendar year. The County agreed to furnish the Authority, not less than five (5) nor more than sixty (60) days prior to the date of execution and delivery of any such Additional Contract, a report of an independent certified public accountant to the effect that, based upon an affidavit of the Tax Commissioner of Walker County as to the taxable value of property located within the territorial limits of the County, the requirements described in this paragraph have been met. Term The term of the Contract will commence with the execution and delivery thereof and will extend until 91 days after the principal of, premium, if any, and interest on the Bonds and all other amounts payable under the Indenture have been paid in full or until provision has been duly made therefor, but in no event may the term of the Contract exceed thirty (30) years from the date of the Contract. The obligations of the County described in subparagraph (c) of THE CONTRACT - County s Payment Obligations herein will survive the termination of the Contract, but in no event will extend beyond fifty years from the date thereof. Obligations Absolute The Contract provides that it will constitute security for the benefit of the Bondholders and the Series 2015 Insurer that the obligations of the County under the Contract will be absolute and unconditional irrespective of any defense or any rights of setoff, recoupment, or counterclaim, except for payment, it may otherwise have against the Authority. The County agrees that it will not (i) withhold, suspend, abate, reduce, abrogate, diminish, postpone, modify, or discontinue any payments provided for in the Contract, (ii) fail to observe any of its other agreements contained in the Contract, or (iii) terminate its obligations under the Contract for any contingency, act of God, event, or cause whatsoever. Amendments See the caption THE RESOLUTION - Amendment of the Contract in this Appendix B. Introduction THE INDENTURE The Trust Indenture and Security Agreement, dated as of September 1, 2015, between the Authority and the Trustee, is a contract for the benefit of the Bondholders that specifies the terms and details of the Series 2015 Bonds and which defines the security for the Series 2015 Bonds. The following is a summary, which does not purport to be comprehensive or definitive, of certain provisions of the Indenture. Reference is made to the Indenture in its entirety for a complete recital of the detailed provisions thereof. Pledge and Assignment Pursuant to the Indenture, the Authority has pledged and assigned to the Trustee, and granted a first priority security interest in, all of its right, title, and interest in and to the Contract (except for the Unassigned Rights) and certain funds established and held under the Indenture, as security for the obligations of the Authority under the Indenture and the Bonds. Payment of Principal and Interest The Authority covenanted that it will promptly pay or cause to be paid the principal of, premium, if any, and interest on every Series 2015 Bond issued under the Indenture at the place, on the dates, and in the B-8

147 manner provided therein and in the Series 2015 Bonds according to the true intent and meaning thereof, but solely from the amounts pledged therefore, which are from time to time held by the Trustee in the various accounts of the Bond Fund. The principal of, premium, if any, and interest on the Series 2015 Bonds are payable solely from the sources provided in the Indenture, which sources are specifically pledged to the payment of the Series 2015 in the manner and to the extent specified in the Indenture, and nothing in the Series 2015 Bonds or in the Indenture will be construed as pledging any other funds or assets of the Authority. Rights Under and Possession of the Contract The Contract, a duly executed counterpart of which has been filed with the Trustee, sets forth the covenants and obligations of the Authority and the County, including provisions that subsequent to the initial issuance of the Series 2015 Bonds and prior to their payment in full or provision for payment thereof in accordance with the provisions of the Contract, the Contract may not be effectively amended, changed, modified, altered, or terminated (other than as provided in the Indenture) without the written consent of the Trustee, and reference is made to the Contract for a detailed statement of such covenants and obligations of the County under the Contract, and the Trustee in its own name or in the name of the Authority may enforce all rights of the Authority and all obligations of the County under and pursuant to the Contract and may enforce all rights of the Authority for and on behalf of the Bondholders, whether or not the Authority is in default under the Indenture. Establishment of Funds Under the terms of the Indenture, the Authority created and established with the Trustee the following trust funds: (1) the Bond Fund and therein the following four accounts: (a) (b) (c) (d) the Interest Account, the Principal Account, the Redemption Account, and the Capitalized Interest Account; (2) the Issuance Cost Fund; and (3) the Project Fund. Application of Series 2015 Bond Proceeds (a) The Trustee has agreed to apply the proceeds received from the sale of the Series 2015 Bonds as follows: (1) $691, will be deposited into the Issuance Cost Fund; (2) $450, will be applied to prepay the Prior Notes; (3) $643, will be applied to redeem the Prior Bond; (4) $8,038, shall be paid to the County as purchase price for the Properties; and (5) the balance of the proceeds received from the sale of the Series 2015 Bonds will be deposited into the Series 2015 Account of the Project Fund. B-9

148 Bond Fund General The Bond Fund is a trust fund used as a sinking fund to pay when due the principal of, premium, if any, and interest on the Bonds. There are four accounts within the Bond Fund to be designated the Interest Account, the Principal Account, the Redemption Account, and the Capitalized Interest Account. Interest Account The Trustee must promptly deposit into the Interest Account, as and when received, all payments specified in the Contract corresponding to interest on the Bonds. Moneys in the Interest Account must be used solely to pay interest on the Bonds when due. Principal Account The Trustee must promptly deposit into the Principal Account, as and when received, all payments specified in the Contract corresponding to principal of the Bonds. Moneys in the Principal Account must be used solely (i) for the payment of principal of the Bonds as the same become due and payable at maturity and (ii) to redeem the Bonds in accordance with the mandatory sinking fund redemption schedule set forth in the Indenture. Redemption Account In the event of deposit with the Trustee by the Authority or the County of moneys from any source for redeeming Bonds (other than mandatory sinking fund redemptions), such moneys must be deposited in the Redemption Account. Moneys on deposit in the Redemption Account must be used first to make up any deficiencies existing in the Interest Account or the Principal Account (in the order listed), and then for the purchase or redemption (other than mandatory sinking fund redemptions) of Bonds in accordance with the provisions of the Indenture. Capitalized Interest Account Moneys in the Capitalized Interest Account must be transferred to the Interest Account at the Joint Written Request of the Authority and the County and used solely to pay interest on the Bonds when due. Issuance Cost Fund Any moneys received by the Trustee from any series of Bonds for the purpose of paying the costs of issuing any Bonds will be deposited in the Issuance Cost Fund. The moneys in the Issuance Cost Fund will be held in trust by the Trustee and will be applied to the payment of the costs of issuing the Bonds or transferred to the related accounts of the Project Fund, upon the written request of the County. Project Fund The Authority will establish within the Project Fund a separate account for each Project. Any moneys received by the Trustee from any series of Bonds or from the County from any other source for the purpose of paying the costs of acquiring, constructing, and installing any Project will be deposited in the related account of the Project Fund. The moneys in each account of the Project Fund must be held in trust by the Trustee, must be applied to the payment of the costs of the Project for which such account was established, and, pending such application, must be held as trust funds under the Indenture. B-10

149 Moneys deposited in the Project Fund will be paid out from time to time by the Trustee on the Joint Written Request of the Authority and the County, in order to pay, or as reimbursement for payment made, for the costs of any Project, in each case within three (3) banking days, or as soon as Project Fund investments can be liquidated, after receipt by the Trustee of a Joint Written Request described in the Indenture with bills of sale, invoices, or other evidence satisfactory to the Trustee that such costs are due and owing or have been incurred and previously paid by or on behalf of the Authority or the County. The completed construction on the Project must be reviewed (at the time each Joint Written Request is submitted) by the Engineer, and the Engineer must certify, to the best of its knowledge, information, and belief, to the Trustee as to (A) the cost of completed construction, (B) the percentage of completion, and (C) compliance with the Plans and Specifications. Investments Any moneys held as part of the Funds or other special trust funds created under the Indenture, or other accounts or funds held by the Trustee under the Indenture, to the extent permitted by law, will be invested and reinvested by the Trustee, but only at the Written Request of the Authority in such Permitted Investments as may be specified in such Written Request. Any such investments will be held by or under the control of the Trustee and will be deemed at all times a part of the Funds, other special trust fund, or other account or fund, as the case may be, and the interest accruing thereon and any profit realized from such investments will be credited as set forth in the Indenture, and any loss resulting from such investments will be charged to such fund or account. Such investments will be made only as follows: (1) moneys in the Bond Fund and all accounts of the Bond Fund, other than the Capitalized Interest Account, only in Permitted Investments maturing or redeemable at the option of the holder not later than the next-succeeding principal payment date, mandatory redemption payment date, or Interest Payment Date of the Bonds; and (2) moneys in any other Funds or accounts, including the Capitalized Interest Account, only in Permitted Investments maturing or redeemable at the option of the holder in such amounts and on such dates as may be necessary to provide moneys to meet the payments from each such respective fund or account. All interest accruing from investments of moneys in the Funds and other funds and accounts and any profit realized therefrom must be allocated as follows: (a) interest and profits from the investment of moneys of each account (except the Capitalized Interest Account) held in the Bond Fund must be retained in the account of the Bond Fund to which such investments relate; (b) interest and profits from the investment of moneys in the Capitalized Interest Account must be deposited in the Interest Account; (c) interest and profits from the investment of moneys of each account held in the Project Fund must be retained in the account of the Project Fund to which such investments relate; (d) interest and profits from the investment of moneys in the Issuance Cost Fund must be retained in the Issuance Cost Fund; and (e) interest and profits from the investment of moneys in any other funds must, upon Written Request of the Authority, be retained in the respective funds or deposited in the Interest Account. B-11

150 Issuance of Additional Bonds So long as no Event of Default under the Indenture is then existing, the Authority at the request of the County for the purposes and in the manner specified in the Contract and to the extent permitted by law in effect at the time thereof may in its sole discretion issue Additional Bonds on a parity with the Series 2015 Bonds and any Additional Bonds theretofore or thereafter issued and payable from the Bond Fund from time to time. Before any Additional Bonds are registered and authenticated, there must be delivered to the Trustee the items required therefor by the Indenture. Such Additional Bonds will be issued in such series and principal amounts, will be dated, will bear interest at such rate or rates, will be subject to redemption at such times and prices, and will mature in such years as the indenture supplemental to the Indenture authorizing the issuance thereof will fix and determine and will be deposited with the Trustee for authentication and delivery. Delivery of Additional Bonds Upon the execution and delivery in each instance of an appropriate indenture supplemental to the Indenture, the Authority must execute and deliver to the Trustee, and the Trustee will register and authenticate, Additional Bonds and deliver them to the purchaser or purchasers as may be directed by the Authority, as provided in the Indenture. Prior to the delivery by the Trustee of any such Additional Bonds, there must be filed with the Trustee: (a) a valid and effective amendment to the Contract, providing for an increase in the payment obligations of the County in accordance with the Contract and providing any other changes required by the issuance of Additional Bonds; (b) a valid and effective supplemental indenture providing for the issuance of such new series of Additional Bonds and subjecting to the lien and security interest of the Indenture and pledging and assigning the additional payments provided for in the amendment to the Contract and the amendment to the Contract, to the payment of the Bonds; (c) the items, including the opinion of Bond Counsel, required to be furnished to the Underwriter pursuant to the purchase agreement for such Additional Bonds before the delivery of such Additional Bonds; (d) a request and authorization to the Trustee on behalf of the Authority, signed by the Chairman or Vice Chairman of the Authority, to authenticate and deliver such Additional Bonds to the purchasers therein identified upon payment to the Trustee, but for the account of the Authority, of the purchase price therein specified (including accrued interest); (e) an Officer s Certificate to the effect that no Event of Default under the Indenture or the Contract is then existing or will result from the issuance of such Additional Bonds; (f) the items required by the Contract; (g) a certified copy of an order of the Superior Court of Walker County, Georgia validating and confirming such Additional Bonds and the security therefor; and (h) such other documents, certificates, and instruments in connection with the transactions contemplated by this Indenture, in form and substance satisfactory to the Trustee, as the Trustee may reasonably request. B-12

151 Events of Default Remedies Each of the following is an Event of Default within the meaning of the Indenture: (1) default in the due and punctual payment of any interest on any Bond; (2) default in the due and punctual payment of the principal of any Bond (or premium thereon, if any), whether at the stated maturity thereof, or upon proceedings for redemption thereof; (3) any breach by the Authority of any representation or warranty made in the Indenture or default in the performance or observance of any other of the covenants, agreements, or conditions on the part of the Authority in the Indenture or in the Bonds contained, subject to certain provisions of the Indenture; (4) the issuance of an order of relief by the Bankruptcy Court of the United States District Court having valid jurisdiction, granting the Authority or the County relief under federal bankruptcy law, or the issuance by any other court having valid jurisdiction of an order or decree under applicable federal or state law providing for the appointment of a receiver, liquidator, assignee, trustee, or sequestrator (or other similar official) of the Authority or the County or any substantial part of its property, affairs, or assets, and the continuance of any such decree or order is unstayed and in effect for a period of sixty consecutive days; (5) the consent by the Authority or the County to the institution of proceedings in bankruptcy against it, or to the institution of any proceeding against it under any federal or state insolvency laws, or to the filing of any petition, application, or complaint seeking the appointment of a receiver, liquidator, assignee, trustee, or sequestrator (or other similar official) of the Authority or the County or of any substantial part of its property, affairs, or assets; (6) failure by the County to pay any of the amounts owed under the Contract described in subparagraphs (a), (b), or (c) of THE CONTRACT - County s Payment Obligations herein, when and as the same become due and payable; or (7) the County s breach in any material respect of any representation or warranty contained in the Contract or the County s failure in any material respect to observe, perform, or comply with any covenant, condition, or agreement in the Contract on the part of the County to be observed or performed, other than as described in paragraph (f) above, for a period of thirty (30) days after written notice specifying such breach or failure and requesting that it be remedied, given to the County by the Trustee, unless the Trustee will agree in writing to an extension of such time prior to its expiration. In the case of any such breach or default that cannot with due diligence be cured within such thirty (30) day period but can be wholly cured within a period of time not materially detrimental to the rights of the Trustee and the Bondholders, to be determined conclusively by the Trustee, it will not constitute an Event of Default if corrective action is instituted by the County within the applicable period and diligently pursued until the breach or default is corrected in accordance with and subject to any directions or limitations of time established by the Trustee. (a) Upon the occurrence of an Event of Default, the Trustee may exercise any rights, powers, or remedies it may have as a secured party under the Uniform Commercial Code of the State, or other similar laws in effect, and will have the power to proceed with any available right or remedy granted by the Bond Documents or the laws of the State, as it may deem best, including any suit, action, mandamus, or special proceeding in equity or at law or in bankruptcy or otherwise for the collection of all amounts due and unpaid B-13

152 under the Bonds and the Bond Documents, for specific performance of any covenant or agreement contained therein or in the Indenture, or for the enforcement of any proper legal or equitable remedy as the Trustee deems most effective to protect the rights aforesaid, insofar as such may be authorized by law, and may enforce its right to the appointment of a receiver pursuant to the Indenture. The Trustee, as the assignee of all of the right, title, and interest of the Authority in and to the Contract (except for the Unassigned Rights), will enforce each and every right granted to the Authority under the Contract (except for the Unassigned Rights). Upon the occurrence of an Event of Default, the Trustee, in its own name and as trustee of an express trust, or in the name of the Authority without the necessity of joining the Authority, will be entitled to institute any action or proceedings at law or in equity and may prosecute any such action or proceedings to judgment or final decree and may enforce any such judgment or final decree against any obligor thereon and collect in the manner provided by law, but limited as provided in the Bond Documents, out of the property of any obligor thereon wherever situated the moneys adjudged or decreed to be payable for the benefit of the Bondholders, or on behalf of the Authority. The rights specified in the Indenture are to be cumulative to all other available rights, remedies, or powers and will not exclude any such rights, remedies, or powers. In case there are pending proceedings for the bankruptcy or for the reorganization of any obligor under the Contract under federal bankruptcy law or any other applicable law, or in the case a receiver or trustee has been appointed for the property of any such obligor, or in the case of any other judicial proceedings relative to any obligor under the Contract or relative to the creditors or property of any such obligor, the Trustee (irrespective of whether the principal of the Bonds is then due and payable as therein expressed or otherwise and irrespective of whether the Trustee has made any demand pursuant to the power vested in it by the Indenture) will be entitled and empowered, by intervention in such proceedings or otherwise, to file and prove a claim or claims for the whole amount owing and unpaid and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for reasonable compensation to the Trustee, its agents, attorneys, and counsel and for reimbursement of all expenses and liabilities incurred and all advances made by the Trustee except as a result of its negligence or bad faith) and of the Bondholders allowed in any such judicial proceedings relative to the County or any other obligor under the Contract or relative to the creditors or property of the County, or relative to any such other obligor, as the case may be, and to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute all amounts received with respect to the claims of the Bondholders and of the Trustee on their behalf. Any receiver, assignee, or trustee in bankruptcy or reorganization is authorized under the Indenture by each of the Bondholders to make payments to the Trustee and in the event that the Trustee consents to the making of payments directly to the Bondholders, to pay to the Trustee such amount as will be sufficient to cover reasonable compensation to the Trustee, its agents, attorneys, and counsel and all other expenses and liabilities incurred and all advances made by the Trustee except as a result of its negligence or bad faith. (b) If an Event of Default occurs and is continuing, and if requested so to do by the owners of not less than twenty five percent (25%) in aggregate principal amount of Bonds then Outstanding and if indemnified as provided in the Indenture, the Trustee will be obligated to exercise such one or more of the rights and powers conferred by the Indenture as the Trustee, being advised by counsel, deems most expedient in the interests of the Bondholders. (c) No lien, right, or remedy by the terms of the Indenture conferred upon or reserved or otherwise available to the Trustee or to the Bondholders is intended to be or may be construed to be exclusive of any other available lien, right, or remedy, but each and every such lien, right, or remedy will be cumulative and will be in addition to any other lien, right, or remedy given to the Trustee or to the Bondholders under the Indenture or now or hereafter existing at law or in equity or by statute. (d) No delay or omission to exercise any right, power, or remedy accruing upon any default or Event of Default will impair any such right, power, or remedy or may be construed to be a waiver of any such B-14

153 default or Event of Default or an acquiescence therein, but every such right, power, or remedy may be exercised from time to time and as often as may be deemed expedient. (e) No waiver of any default or Event of Default under the Indenture, whether by the Trustee or by the Bondholders, will extend to or will affect any subsequent default or Event of Default or will impair any rights or remedies consequent thereon. The giving, taking, or enforcement of any other or additional security, collateral, or guaranty for the payment of the Bonds will not operate to prejudice, waive, or affect the Trust Estate or any rights, powers, or remedies under the Indenture, nor will the Trustee be required to first look to, enforce, or exhaust such other additional security, collateral, or guarantors. (f) When the Trustee incurs costs or expenses or renders services after the occurrence of an Event of Default, such costs and expenses and the compensation for such services are intended to constitute expenses of administration under any federal or state bankruptcy, insolvency, arrangement, moratorium, reorganization, or other debtor relief law. Application of Moneys After Default Upon an Event of Default and if moneys held by the Trustee are insufficient to pay the principal of, premium, if any, and interest on the Bonds, all moneys received and held by the Trustee pursuant to the Indenture and all moneys received by the Trustee pursuant to any right given or action taken under the provisions of the Indenture will, after payment of the costs and expenses of the proceedings resulting in the collection of such moneys and of the expenses, liabilities, and advances incurred or made by the Trustee, be applied as follows: (a) Unless the principal of all the Bonds has become due and payable, all such moneys must be applied: FIRST - to the payment of the fees for Ordinary Services of the Trustee and Extraordinary Services of the Trustee and the Ordinary Expenses and Extraordinary Expenses of the Trustee and the costs and compensation of any advances made by the Trustee and any receiver and the reasonable attorneys fees of the Trustee or any receiver; SECOND - to the payment to the persons entitled thereto of all installments of interest then due on the Bonds, with interest on overdue installments, if lawful, at the rate per annum borne by the Bonds, in the order of the maturity of the installments of such interest and, if the amount available is not sufficient to pay in full any particular installment, then to the payment ratably, according to the amounts due on such installment, to the persons entitled thereto, without any discrimination or privilege; THIRD - to the payment to the persons entitled thereto of the unpaid principal of and premium, if any, on any of the Bonds that will have become due (other than Bonds matured or called for redemption for the payment of which moneys are held pursuant to the provisions of the Indenture), in the order of their due dates, with interest at the same rate as the interest on such Bonds from the respective dates upon which they became due and, if the amount available is not sufficient to pay in full principal of, premium, if any, and interest on the Bonds due on any particular date, then to the payment ratably, according to the amount of the principal, interest, and premium, if any, due on such date, to the persons entitled thereto without any discrimination or privilege; AND B-15

154 Cross Default FOURTH - to be held for the payment to the Bondholders entitled thereto as the same become due of the principal of, premium, if any, and interest on the Bonds that may thereafter become due either at maturity or upon call for redemption prior to maturity and, if the amount available is not sufficient to pay in full Bonds due on any particular date, together with interest and premium, if any, then due and owing thereon, payment will be made ratably according to the amount of principal, premium, if any, and interest due on such date to the Bondholders entitled thereto without any discrimination or privilege. (b) If the principal of all the Bonds has become due and payable, all such moneys will be applied first to the items described in paragraph FIRST of the preceding subsection (a) and then to the payment to the persons entitled thereto of the principal, premium, if any, and interest then due and unpaid upon the Bonds, without preference or priority of principal over interest or of interest over principal, or of any installment of interest over any other installment of interest or of any Bond over any other Bond, ratably, according to the amounts due respectively for principal, premium, if any, and interest, to the persons entitled thereto without any discrimination or privilege. (c) Whenever moneys are to be applied pursuant to the provisions of this section, such moneys will be applied at such times and from time to time as the Trustee will determine, having due regard to the amount of such moneys available for such application and the likelihood of additional money becoming available for such application in the future. Whenever the Trustee applies such funds, it will fix the date (which will be an Interest Payment Date unless it deems another date more suitable) upon which such application is to be made, and upon such date interest on the amounts of principal to be paid on such date will cease to accrue. The Trustee will give such notice as it may deem appropriate of the deposit with it of any such moneys and of the fixing of any such date, but in accordance with the provisions of the Indenture, and will not be required to make payment to the owner of any Bond until such Bond is presented to the Trustee for appropriate endorsement or for cancellation if fully paid. (d) Whenever all principal of, premium, if any, and interest on all Bonds have been paid under the provisions of the Indenture and whenever all fees, expenses, and charges of the Trustee have been paid, any Trust Estate remaining under the Indenture will be paid, transferred, and assigned to the County. If an event of default occurs under any agreement pursuant to which any Obligation of the County has been incurred or issued and that permits the holder of such Obligation or trustee to accelerate the Obligation or otherwise exercise rights or remedies that are adverse to the interest of the holders of the Series 2015 Bonds or the Series 2015 Insurer, as the Series 2015 Insurer may determine in its sole discretion, then an event of default will be deemed to have occurred under the Indenture and the related Bond Documents for which the Series 2015 Insurer or the Trustee, at the direction of the Series 2015 Insurer, will be entitled to exercise all available remedies under the Bond Documents, at law and in equity. For purposes of the foregoing, Obligation means any bonds, loans, certificates, installment or lease payments, or similar obligations that are payable or secured on a parity or subordinate basis to the payments due under the Contract. Trustee Qualifications The Indenture provides that there must at all times be a trustee under the Indenture which is a corporation or association with trust powers duly organized and existing under the laws of the United States of America or any state or territory thereof and authorized by law to perform all the duties imposed upon it B-16

155 by the Indenture and is (1) a bank or trust company, (2) a wholly-owned subsidiary of a bank or trust company, or (3) a wholly-owned subsidiary of a bank holding company the principal banking subsidiary of which is a bank or trust company, which bank or trust company, in case of (1), (2), or (3) of this paragraph, is subject to examination by federal or state authority and has a reported capital and surplus of not less than $75,000,000, if there be such an institution willing, qualified, and able to accept the trusts imposed under the Indenture upon reasonable or customary terms. Resignation by the Trustee The Trustee and any successor trustee may at any time resign from the trusts created by the Indenture by executing an instrument in writing resigning such trusts and specifying the date when such resignation will take effect, and filing the same with the Authority and the County not less than 30 days before the date specified in such instrument when such resignation will take effect, and by giving notice of such resignation by first class mail, postage prepaid, not less than 20 days prior to such resignation date, to each Bondholder shown on the registration records maintained pursuant to the Indenture, and such resignation will only take effect at the appointment of a successor trustee pursuant to the provisions of the Indenture and acceptance by the successor trustee of such trusts. Removal of the Trustee The Trustee may be removed at any time by the Authority, by an instrument in writing delivered to the Trustee, for any breach of the trusts set forth in the Indenture or for failure or refusal to act as trustee, or by an instrument or concurrent instruments in writing delivered to the Trustee, the Authority, and the County and signed by the owners of a majority in aggregate principal amount of all Bonds then Outstanding; provided, however, that no such removal will be effective until a successor trustee has been appointed and qualified. Amendment of the Indenture The Authority and the Trustee may, without the consent of or notice to any of the Bondholders, but with the consent of the County, enter into an indenture or indentures supplemental to the Indenture as will not be inconsistent with the terms and provisions thereof for any one or more of the following purposes: (1) to cure any ambiguity or formal defect or omission in, or to correct or supplement any defective provision of, the Indenture; (2) to add to the covenants and agreements of, and limitations and restrictions upon, the Authority in the Indenture other covenants, agreements, limitations, and restrictions to be observed by the Authority for the protection of the Bondholders; (3) to evidence the appointment of a separate trustee or a co-trustee, or the succession of a new trustee or the appointment of a new or additional paying agent or bond registrar; (4) to grant to or confer upon the Trustee for the benefit of the Bondholders any additional rights, remedies, powers, benefits, security, liabilities, duties, or authority that may lawfully be granted to or conferred or imposed upon the Bondholders or the Trustee or either of them; (5) to subject to the lien and security interest of the Indenture additional revenues, properties, or collateral; (6) to modify, amend, or supplement the Indenture or any indenture supplemental thereto in such manner as to permit the qualification thereof under the Trust Indenture Act of 1939, B-17

156 as amended, or any similar federal statute hereafter in effect or to permit the qualification of the Bonds for sale under the securities laws of any state, and, if they so determine, to add to the Indenture or any indenture supplemental thereto such other terms, conditions, and provisions as may be permitted by the Trust Indenture Act of 1939, as amended, or any similar federal statute; (7) to reflect a change in applicable law provided that the Trustee determines that such supplemental indenture does not materially prejudice the rights of Bondholders; (8) in connection with any other change in the Indenture which, in the judgment of the Trustee, does not materially prejudice or materially adversely affect the Bondholders or impair the Trust Estate; or (9) to provide for certificated Bonds or for the issuance of coupons and bearer Bonds or Bonds registered only as to principal, if permitted by law. Exclusive of indentures supplemental to the Indenture described above and not otherwise, the owners of not less than a majority in aggregate principal amount of the Bonds then Outstanding with the prior written consent of the County, have the right, from time to time, anything contained in the Indenture to the contrary notwithstanding, to consent to and approve the execution by the Authority and the Trustee of such indenture or indentures supplemental to the Indenture as are deemed necessary and desirable by the Authority for the purpose of modifying, altering, amending, adding to, or rescinding, in any particular, any of the terms or provisions contained in the Indenture or in any supplemental indenture; provided, however, that nothing described above will permit, or be construed as permitting, (a) an extension of the stated maturity or reduction in the principal amount of, or a reduction in the rate or an extension of the time of payment of interest on, or a reduction of any premium payable on the redemption of, any Bonds, without the consent of every owner of such Bonds; or (b) the creation of any lien or security interest prior to or on a parity with the lien and security interest of the Indenture or the deprivation of any Bondholders of the lien created by the Indenture, without the consent of the owners of all the Bonds at the time Outstanding that would be affected by the action to be taken; or (c) a reduction in the amount, or an extension of the time of any payment, required by the mandatory sinking fund redemption provisions of the Indenture, without the consent of the owners of all the Bonds at the time Outstanding that would be affected by the action to be taken; or (d) a reduction in the aforesaid aggregate principal amount of Bonds the owners of which are required to consent to any such supplemental indenture, without the consent of the owners of all the Bonds at the time Outstanding that would be affected by the action to be taken; or (e) the modification of the trusts, powers, obligations, remedies, privileges, rights, duties, or immunities of the Trustee, without the written consent of the Trustee; or (f) a privilege or priority of any Bond or Bonds over any other Bond or Bonds; or (g) the release of or requirements for the release of the Indenture, without the consent of the owners of all the Bonds at the time Outstanding which would be affected by the action to be taken. Amendments of Other Bond Documents The Authority and the Trustee are required, without the consent of or notice to the Bondholders, to consent to any amendment, change, or modification of the Bond Documents other than the Indenture as may be required (i) by the provisions of the Indenture and the Contract; (ii) for the purpose of curing any ambiguity or formal defect or omission therein; (iii) so as to add rights acquired in accordance with the provisions of the Bond Documents; (iv) in connection with the issuance of Additional Bonds as provided in the Indenture; or (v) in connection with any other change therein that, in the judgment of the Trustee, does not prejudice the Trustee or materially adversely affect the owners of the Bonds. Except for the amendments, changes, or modifications as described in the preceding paragraph, neither the Authority nor the Trustee may consent to any other amendment, change, or modification of the Bond Documents other than the Indenture without giving notice to and obtaining the written approval or B-18

157 consent of the owners of not less than a majority in aggregate principal amount of the Bonds at the time Outstanding; provided, however, that nothing described above may permit or may be construed as permitting, (a) an extension of the time for payment of any amounts payable under the Contract or a reduction in the amount of any payment or in the total amount due under the Contract, without the consent of every owner of Bonds affected thereby; or (b) a reduction in the aforesaid aggregate principal amount of Bonds the owners of which are required to consent to any such amendment, change, or modification of such other Bond Documents, without the consent of the owners of all the Bonds at the time Outstanding that would be affected by the action to be taken. Defeasance Any Bond will be deemed to be paid for all purposes of the Indenture when (a) payment of the principal of, premium, if any, and interest on such Bond to the due date thereof (whether such due date is by reason of maturity or upon redemption as provided in the Indenture) has been (i) made or caused to be made in accordance with the terms thereof, or (ii) provided for by irrevocably depositing with the Trustee, in trust and irrevocably set aside exclusively for such payment, (1) moneys sufficient to make such payment or (2) non-callable Government Obligations maturing as to principal and interest in such amounts and at such times as will ensure, without further investment or reinvestment thereof, in the written opinion of an independent certified public accounting firm of national reputation in form and substance satisfactory to the Trustee, the availability of sufficient moneys to make such payment, and (b) all necessary and proper fees, compensation, and expenses of the Trustee pertaining to such Bond have been paid or the payment thereof have been provided for to the satisfaction of the Trustee. At such time as a Bond is deemed to be paid under the Indenture, it will no longer be secured by or entitled to the benefits of the Indenture, except for the purposes of any such payment from such moneys or Government Obligations. The investments in the defeasance escrow relating to Series 2015 Bonds shall be limited to noncallable, direct obligations of the United States of America and securities fully and unconditionally guaranteed as to the timely payment of principal and interest by the United States of America, or as otherwise may be authorized under State law and approved by the Series 2015 Insurer. Rights of the Series 2015 Insurer The Series 2015 Bond Insurer s prior written consent is required for all amendments and supplements to the Bond Documents, with the exceptions noted below. (1) to cure any ambiguity or formal defect or omission or to correct any inconsistent provisions in the Bond Documents or in any supplement thereto; or (2) to grant or confer upon the holders of the Series 2015 Bonds any additional rights, remedies, powers, authority, or security that may lawfully be granted to or conferred upon the holders of the Series 2015 Bonds; or (3) to add to the conditions, limitations, and restrictions on the issuance of Additional Bonds other conditions, limitations, and restrictions thereafter to be observed; or (4) to add to the covenants and agreements of the Authority or the County in the Bond Documents other covenants and agreements thereafter to be observed by the Authority or the County or to surrender any right or power therein reserved to or conferred upon the Authority or the County. Any amendment, supplement, modification to, or waiver of, any of the Bond Documents that requires the consent of holders of the Series 2015 Bonds or adversely affects the rights or interests of the Series 2015 Insurer shall be subject to the prior written consent of the Series 2015 Insurer. Any B-19

158 reorganization or liquidation plan with respect to the Authority or the County must be acceptable to the Series 2015 Insurer. In the event of any reorganization or liquidation of the Authority or the County, the Series 2015 Insurer shall have the right to vote on behalf of all holders of the Series 2015 Bonds absent a continuing failure by the Series 2015 Insurer to make a payment under the Series 2015 Policy. Anything in the Bond Documents to the contrary notwithstanding, upon the occurrence and continuance of a default or an event of default, the Series 2015 Insurer shall be entitled to control and direct the enforcement of all rights and remedies granted to the holders of the Series 2015 Bonds or the Trustee or Paying Agent for the benefit of the holders of the Series 2015 Bonds under any Bond Document. No default or event of default may be waived without the Series 2015 Insurer s written consent. Upon the occurrence and continuance of a default or an event of default, the Series 2015 Insurer shall be deemed to be the sole owner of the Series 2015 Bonds for all purposes under the Bond Documents, including, without limitation, for purposes of exercising remedies and approving amendments. No grace period for a covenant default shall exceed thirty (30) days without the prior written consent of the Series 2015 Insurer. B-20

159 Appendix C PROPOSED FORM OF LEGAL OPINION OF BOND COUNSEL The form of Legal Opinion included in this Appendix C has been prepared by Dentons US LLP, Atlanta, Georgia, Bond Counsel, and is substantially the form to be given in connection with the delivery of the Bonds.

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161 FORM OF OPINION OF BOND COUNSEL September 24, 2015 Walker County Development Authority Lafayette, Georgia Re: $15,230,000 Walker County Development Authority Economic Development Taxable Revenue Bonds, Series 2015 Ladies and Gentlemen: We have acted as Bond Counsel in connection with the issuance and delivery on this date by the Walker County Development Authority (the Authority ) of $15,230,000 in original aggregate principal amount of revenue bonds designated Walker County Development Authority Economic Development Taxable Revenue Bonds, Series 2015, dated the date hereof (the Bonds ). We have examined the law and such certified proceedings and other papers authorizing and relating to the Bonds as we deem necessary to render this opinion, including the following: 1. An amendment to Article VII, Section V, Paragraph I of the Constitution of the State of Georgia of 1945 (1962 Ga. Laws 912 to 914, inclusive, as amended by 1964 Ga. Laws 1013 to 1014, inclusive), now specifically continued as a part of the Constitution of the State of Georgia of 1983 pursuant to Article XI, Section I, Paragraph IV of the Constitution of the State of Georgia of 1983 and an Act of the General Assembly of the State of Georgia (1985 Ga. Laws 4169 to 4170, inclusive), as implemented by Acts of the General Assembly of the State of Georgia (1964 Ga. Laws 3104 to 3116, inclusive, as amended by 1978 Ga. Laws 4360 to 4363, inclusive) (collectively the Act ). 2. Certified copy of a Series 2015 Bond Resolution of the Authority adopted on August 31, 2015, as supplemented by a Supplemental Series 2015 Bond Resolution of the Authority adopted on September 17, 2015 (collectively the Bond Resolution ). 3. Certified transcript of validation proceedings in the Superior Court of Walker County, Georgia, resulting in a final judgment validating and confirming the Bonds and the security therefor. 4. Certified copy of an Authorizing Resolution of Walker County, Georgia (the County ) adopted on September 10, Fully executed counterpart of the Trust Indenture and Security Agreement, dated as of September 1, 2015 (the Indenture ), between the Authority and U.S. Bank National Association, as trustee (the Trustee ). 6. Fully executed counterpart of the Intergovernmental Economic Development Contract, dated as of September 1, 2015 (the Contract ), between the County and the Authority. C-1

162 The Bonds are being issued under and pursuant to the Act, and the Bond Resolution for the purposes of obtaining funds (1) to repay loans obtained by the Authority from the County to finance the costs of acquiring and improving land for use as two industrial parks owned by the Authority, known as Rock Spring Industrial Park and Walker County Industrial Park (collectively the Industrial Parks ), (2) to finance the costs of improving the Industrial Parks, (3) to refund the Authority s Taxable Revenue Bond (Ohio Logistics Project), Series 2011, presently outstanding in the principal amount of $643,300, (4) to finance the costs of acquiring from the County (a) its Civic Center and its Agricultural Center located at North Highway 27 in Rock Spring, Georgia and (b) its Mountain Cove Resort Properties located on Dougherty Gap Road in unincorporated Walker County, and (5) to finance the costs of issuing the Bonds. As to questions of fact material to our opinion, we have relied upon the following items, without undertaking to verify any of them by independent investigation: (a) certified proceedings and other certifications of public officials furnished to us, (b) certifications furnished to us by or on behalf of the Authority and the County, and (c) representations of the Authority and the County contained in such proceedings and in documents delivered in connection with the issuance of the Bonds. In our capacity as Bond Counsel, we have not been engaged or undertaken to review the accuracy, completeness, or sufficiency of the Official Statement or any other offering material relating to the Bonds (except to the extent, if any, stated in the Official Statement), and we express no opinion relating thereto (excepting only the matters set forth as our opinion in the Official Statement). Based upon the foregoing, it is our opinion, as of the date hereof and under existing law, that: (1) The Authority was duly created and is validly existing as a public corporation under the Constitution and statutes of the State of Georgia, including particularly the Act, and has all requisite power and authority (i) to adopt the Bond Resolution; (ii) to issue, sell, and deliver the Bonds and use the proceeds thereof for the purposes and upon the terms and conditions set forth in the Contract and the Indenture; and (iii) to enter into and perform its obligations under the Contract and the Indenture. (2) The Contract and the Indenture have been duly authorized, executed, and delivered by the Authority and constitute the legal, valid, and binding obligations of the Authority enforceable upon the Authority. The Indenture creates a valid lien on the Trust Estate (as defined in the Indenture). (3) The Bonds have been duly authorized, executed, issued, and delivered by the Authority and are the legal, valid, and binding special of limited obligations of the Authority, payable solely from the amounts pledged under the Indenture. (4) The Contract has been duly authorized, executed, and delivered by the County and constitutes the legal, valid, and binding obligation of the County enforceable upon the County. (5) The Bonds are exempt from local property taxes in the State of Georgia and the interest on the Bonds is exempt from State of Georgia income taxation, although the Bonds and the interest thereon may be included in the measure of certain State of Georgia business excise and franchise taxes. (6) The Bonds are exempt from registration under the Securities Act of 1933, and the Indenture is exempt from qualification under the Trust Indenture Act of The rights of the owners of the Bonds and the enforceability of the Bonds, the Indenture, and the Contract (i) may be limited by bankruptcy, insolvency, reorganization, moratorium, and other similar laws affecting the enforcement of creditors rights; (ii) may be subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law); and (iii) may also be subject to the exercise of judicial discretion in appropriate cases. C-2

163 This opinion is limited to the matters expressly set forth above, and no opinion is implied or may be inferred beyond the matters so stated. We expressly disclaim any duty to update this opinion in the future for any changes of fact or law that may affect any of the opinions expressed herein. Very truly yours, DENTONS US LLP By: Earle R. Taylor, III, Partner C-3

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165 Appendix D FORM OF DISCLOSURE DISSEMINATION AGENT AGREEMENT

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167 DISCLOSURE DISSEMINATION AGENT AGREEMENT This Disclosure Dissemination Agent Agreement ( Disclosure Agreement ), dated as of September 27, 2015, is executed and delivered by Walker County, Georgia ( County ) and Digital Assurance Certification, L.L.C., as exclusive Disclosure Dissemination Agent ( Disclosure Dissemination Agent or DAC ) for the benefit of the Holders (hereinafter defined) of the Bonds (defined below) and in order to provide certain continuing disclosure with respect to the Bonds in accordance with Rule 15c2-12 of the United States Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time ( Rule ). The services provided under this Disclosure Agreement solely relate to the execution of instructions received from the County through use of the DAC system and do not constitute advice within the meaning of the Dodd-Frank Wall Street Reform and Consumer Protection Act ( Act ). DAC will not provide any advice or recommendation to the County or anyone on the County s behalf regarding the issuance of municipal securities or any municipal financial product as defined in the Act and nothing in this Disclosure Agreement shall be interpreted to the contrary. SECTION 1. Definitions. Capitalized terms not otherwise defined in this Disclosure Agreement shall have the meaning assigned in the Rule or, to the extent not in conflict with the Rule, in the Official Statement (hereinafter defined). The capitalized terms shall have the following meanings: Annual Report means an Annual Report described in and consistent with Section 3 of this Disclosure Agreement. Annual Filing Date means the date, set in Sections 2(a) and 2(f), by which the Annual Report is to be filed with the MSRB. Annual Financial Information means annual financial information as such term is used in paragraph (b)(5)(i) of the Rule and specified in Section 3 of this Disclosure Agreement. Audited Financial Statements means the financial statements (if any) of the County for the prior fiscal year, certified by an independent auditor as prepared in accordance with generally accepted accounting principles or otherwise, as such term is used in paragraph (b)(5)(i) of the Rule and specified in Section 3 of this Disclosure Agreement. Bonds means the bonds as listed on the attached Exhibit A, with the 9-digit CUSIP numbers relating thereto. Certification means a written certification of compliance signed by the Disclosure Representative stating that the Annual Report, Audited Financial Statements, Notice Event notice, Failure to File Event notice, Voluntary Event Disclosure or Voluntary Financial Disclosure delivered to the Disclosure Dissemination Agent is the Annual Report, Audited Financial Statements, Notice Event notice, Failure to File Event notice, Voluntary Event Disclosure or Voluntary Financial Disclosure required to be submitted to the MSRB under this Disclosure Agreement. A Certification shall accompany each such document submitted to the Disclosure Dissemination Agent by the County and include the full name of the Bonds and the 9-digit CUSIP numbers for all Bonds to which the document applies. Disclosure Representative means the [], or his or her designee, or such other person as the County shall designate in writing to the Disclosure Dissemination Agent from time to time as the person responsible for providing Information to the Disclosure Dissemination Agent. D-1

168 Disclosure Dissemination Agent means Digital Assurance Certification, L.L.C, acting in its capacity as Disclosure Dissemination Agent hereunder, or any successor Disclosure Dissemination Agent designated in writing by the County pursuant to Section 9 hereof. Failure to File Event means the County s failure to file an Annual Report on or before the Annual Filing Date. Force Majeure Event means: (i) acts of God, war, or terrorist action; (ii) failure or shut-down of the Electronic Municipal Market Access system maintained by the MSRB; or (iii) to the extent beyond the Disclosure Dissemination Agent s reasonable control, interruptions in telecommunications or utilities services, failure, malfunction or error of any telecommunications, computer or other electrical, mechanical or technological application, service or system, computer virus, interruptions in Internet service or telephone service (including due to a virus, electrical delivery problem or similar occurrence) that affect Internet users generally, or in the local area in which the Disclosure Dissemination Agent or the MSRB is located, or acts of any government, regulatory or any other competent authority the effect of which is to prohibit the Disclosure Dissemination Agent from performance of its obligations under this Disclosure Agreement. Holder means any person (a) having the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries) or (b) treated as the owner of any Bonds for federal income tax purposes. Information means, collectively, the Annual Reports, the Audited Financial Statements (if any), the Notice Event notices, the Failure to File Event notices, the Voluntary Event Disclosures and the Voluntary Financial Disclosures. MSRB means the Municipal Securities Rulemaking Board established pursuant to Section 15B(b)(1) of the Securities Exchange Act of Notice Event means any of the events enumerated in paragraph (b)(5)(i)(c) of the Rule and listed in Section 4(a) of this Disclosure Agreement. Obligated Person means any person, including the County, who is either generally or through an enterprise, fund, or account of such person committed by contract or other arrangement to support payment of all, or part of the obligations on the Bonds (other than providers of municipal bond insurance, letters of credit, or other liquidity facilities), as shown on Exhibit A. Official Statement means that Official Statement prepared by the County in connection with the Bonds, as listed on Appendix A. Trustee means the institution, if any, identified as such in the document under which the Bonds were issued. Voluntary Event Disclosure means information of the category specified in any of subsections (e)(vi)(1) through (e)(vi)(11) of Section 2 of this Disclosure Agreement that is accompanied by a Certification of the Disclosure Representative containing the information prescribed by Section 7(a) of this Disclosure Agreement. Voluntary Financial Disclosure means information of the category specified in any of subsections (e)(vii)(1) through (e)(vii)(9) of Section 2 of this Disclosure Agreement that is accompanied by a D-2

169 Certification of the Disclosure Representative containing the information prescribed by Section 7(b) of this Disclosure Agreement. SECTION 2. Provision of Annual Reports. (a) The County shall provide, annually, an electronic copy of the Annual Report and Certification to the Disclosure Dissemination Agent, together with a copy for the Trustee, not later than the Annual Filing Date. Promptly upon receipt of an electronic copy of the Annual Report and the Certification, the Disclosure Dissemination Agent shall provide an Annual Report to the MSRB not later than June 1 after the end of each fiscal year of the County, commencing with the June 1 following the fiscal year ending September 30, Such date and each anniversary thereof is the Annual Filing Date. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may crossreference other information as provided in Section 3 of this Disclosure Agreement. (b) If on the fifteenth (15th) day prior to the Annual Filing Date, the Disclosure Dissemination Agent has not received a copy of the Annual Report and Certification, the Disclosure Dissemination Agent shall contact the Disclosure Representative by telephone and in writing (which may be by ) to remind the County of its undertaking to provide the Annual Report pursuant to Section 2(a). Upon such reminder, the Disclosure Representative shall either (i) provide the Disclosure Dissemination Agent with an electronic copy of the Annual Report and the Certification no later than two (2) business days prior to the Annual Filing Date, or (ii) instruct the Disclosure Dissemination Agent in writing that the County will not be able to file the Annual Report within the time required under this Disclosure Agreement, state the date by which the Annual Report for such year will be provided and instruct the Disclosure Dissemination Agent that a Failure to File Event has occurred and to immediately send a notice to the MSRB in substantially the form attached as Exhibit B, accompanied by a cover sheet completed by the Disclosure Dissemination Agent in the form set forth in Exhibit C-1. (c) If the Disclosure Dissemination Agent has not received an Annual Report and Certification by 6:00 p.m. Eastern time on Annual Filing Date (or, if such Annual Filing Date falls on a Saturday, Sunday or holiday, then the first business day thereafter) for the Annual Report, a Failure to File Event shall have occurred and the Issuer irrevocably directs the Disclosure Dissemination Agent to immediately send a notice to the MSRB in substantially the form attached as Exhibit B without reference to the anticipated filing date for the Annual Report, accompanied by a cover sheet completed by the Disclosure Dissemination Agent in the form set forth in Exhibit C-1. (d) If Audited Financial Statements of the County are prepared but not available prior to the Annual Filing Date, the County shall, when the Audited Financial Statements are available, provide in a timely manner an electronic copy to the Disclosure Dissemination Agent, accompanied by a Certification, together with a copy for the Trustee, for filing with the MSRB. (e) The Disclosure Dissemination Agent shall: (i) (ii) (iii) (iv) verify the filing specifications of the MSRB each year prior to the Annual Filing Date; upon receipt, promptly file each Annual Report received under Sections 2(a) and 2(b) with the MSRB; upon receipt, promptly file each Audited Financial Statement received under Section 2(d) with the MSRB; upon receipt, promptly file the text of each Notice Event received under Sections 4(a) and 4(b)(ii) with the MSRB, identifying the Notice Event as instructed by the D-3

170 (v) (vi) County pursuant to Section 4(a) or 4(b)(ii) (being any of the categories set forth below) when filing pursuant to Section 4(c) of this Disclosure Agreement: 1. Principal and interest payment delinquencies; 2. Non-Payment related defaults, if material; 3. Unscheduled draws on debt service reserves reflecting financial difficulties; 4. Unscheduled draws on credit enhancements reflecting financial difficulties; 5. Substitution of credit or liquidity providers, or their failure to perform; 6. Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the security, or other material events affecting the tax status of the security; 7. Modifications to rights of securities holders, if material; 8. Bond calls, if material; 9. Defeasances; 10. Release, substitution, or sale of property securing repayment of the securities, if material; 11. Rating changes; 12. Tender offers; 13. Bankruptcy, insolvency, receivership or similar event of the obligated person; 14. Merger, consolidation, or acquisition of the obligated person, if material; and 15. Appointment of a successor or additional trustee, or the change of name of a trustee, if material; upon receipt (or irrevocable direction pursuant to Section 2(c) of this Disclosure Agreement, as applicable), promptly file a completed copy of Exhibit B to this Disclosure Agreement with the MSRB, identifying the filing as Failure to provide annual financial information as required when filing pursuant to Section 2(b)(ii) or Section 2(c) of this Disclosure Agreement; upon receipt, promptly file the text of each Voluntary Event Disclosure received under Section 7(a) with the MSRB, identifying the Voluntary Event Disclosure as instructed by the County pursuant to Section 7(a) (being any of the categories set forth below) when filing pursuant to Section 7(a) of this Disclosure Agreement: 1. amendment to continuing disclosure undertaking; 2. change in obligated person; 3. notice to investors pursuant to bond documents; 4. certain communications from the Internal Revenue Service; 5. secondary market purchases; 6. bid for auction rate or other securities; 7. capital or other financing plan; D-4

171 8. litigation/enforcement action; 9. change of tender agent, remarketing agent, or other on-going party; 10. derivative or other similar transaction; and 11. other event-based disclosures; (vii) upon receipt, promptly file the text of each Voluntary Financial Disclosure received under Section 7(b) with the MSRB, identifying the Voluntary Financial Disclosure as instructed by the County pursuant to Section 7(b) (being any of the categories set forth below) when filing pursuant to Section 7(b) of this Disclosure Agreement: 1. quarterly/monthly financial information; 2. change in fiscal year/timing of annual disclosure; 3. change in accounting standard; 4. interim/additional financial information/operating data; 5. budget; 6. investment/debt/financial policy; 7. information provided to rating agency, credit/liquidity provider or other third party; 8. consultant reports; and 9. other financial/operating data. (viii) provide the County evidence of the filings of each of the above when made, which shall be by means of the DAC system, for so long as DAC is the Disclosure Dissemination Agent under this Disclosure Agreement. (f) The County may adjust the Annual Filing Date upon change of its fiscal year by providing written notice of such change and the new Annual Filing Date to the Disclosure Dissemination Agent, Trustee (if any) and the MSRB, provided that the period between the existing Annual Filing Date and new Annual Filing Date shall not exceed one year. (g) Any Information received by the Disclosure Dissemination Agent before 6:00 p.m. Eastern time on any business day that it is required to file with the MSRB pursuant to the terms of this Disclosure Agreement and that is accompanied by a Certification and all other information required by the terms of this Disclosure Agreement will be filed by the Disclosure Dissemination Agent with the MSRB no later than 11:59 p.m. Eastern time on the same business day; provided, however, the Disclosure Dissemination Agent shall have no liability for any delay in filing with the MSRB if such delay is caused by a Force Majeure Event provided that the Disclosure Dissemination Agent uses reasonable efforts to make any such filing as soon as possible. D-5

172 SECTION 3. Content of Annual Reports. Each Annual Report shall contain the County s Annual Financial Information, consisting of Audited Financial Statements and the following operating data, each with respect to the County for its most recently completed fiscal year: (i) summary of County indebtedness by category in a form similar to that presented in the Official Statement, (ii) information regarding the County s debt limitation in a form similar to that presented in the Official Statement; (iii) total outstanding general obligation bonds and maximum annual debt service; (iv) amount of any Contract Payment made by the County pursuant to the Intergovernmental Economic Development Contract, dated as of September 1, 2015, between the County and the Walker County Development Authority; (v) maintenance and operation tax levies and collections in a form similar to that presented in the Official Statement; (vi) County s ten largest taxpayers; (vii) County tax digest in a form similar to that presented in the Official Statement, and (viii) County budget in a form similar to that presented in the Official Statement. (b) If Audited Financial Statements are not available by the Annual Filing Date, then, unaudited financial statements, prepared in accordance with GAAP as described in the Official Statement will be included in the Annual Report. Audited Financial Statements (if any) will be provided pursuant to Section 2(d). Any or all of the items listed above may be included by specific reference from other documents, including official statements of debt issues with respect to which the County is an obligated person (as defined by the Rule), which have been previously filed with the Securities and Exchange Commission or available on the MSRB Internet Website. If the document incorporated by reference is a final official statement, it must be available from the MSRB. The County will clearly identify each such document so incorporated by reference. Any Annual Financial Information containing modified operating data or financial information is required to explain, in narrative form, the reasons for the modification and the impact of the change in the type of operating data or financial information being provided. SECTION 4. Reporting of Notice Events. (a) Notice Event: The occurrence of any of the following events with respect to the Bonds constitutes a 1. Principal and interest payment delinquencies; 2. Non-payment related defaults, if material; 3. Unscheduled draws on debt service reserves reflecting financial difficulties; 4. Unscheduled draws on credit enhancements reflecting financial difficulties; 5. Substitution of credit or liquidity providers, or their failure to perform; 6. Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 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; 7. Modifications to rights of Bond holders, if material; 8. Bond calls, if material, and tender offers; 9. Defeasances; 10. Release, substitution, or sale of property securing repayment of the Bonds, if material; D-6

173 11. Rating changes; 12. Bankruptcy, insolvency, receivership or similar event of the Obligated Person; Note to subsection (a)(12) of this Section 4: For the purposes of the event described in subsection (a)(12) of this Section 4, the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for an Obligated Person in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the Obligated Person, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the Obligated Person. 13. 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 14. Appointment of a successor or additional trustee or the change of name of a trustee, if material. The County shall, in a timely manner not in excess of ten business days after its occurrence, notify the Disclosure Dissemination Agent in writing of the occurrence of a Notice Event. Such notice shall instruct the Disclosure Dissemination Agent to report the occurrence pursuant to subsection (c) and shall be accompanied by a Certification. Such notice or Certification shall identify the Notice Event that has occurred (which shall be any of the categories set forth in Section 2(e)(iv) of this Disclosure Agreement), include the text of the disclosure that the County desires to make, contain the written authorization of the County for the Disclosure Dissemination Agent to disseminate such information, and identify the date the County desires for the Disclosure Dissemination Agent to disseminate the information (provided that such date is not later than the tenth business day after the occurrence of the Notice Event). (b) The Disclosure Dissemination Agent is under no obligation to notify the County or the Disclosure Representative of an event that may constitute a Notice Event. In the event the Disclosure Dissemination Agent so notifies the Disclosure Representative, the Disclosure Representative will within two business days of receipt of such notice (but in any event not later than the tenth business day after the occurrence of the Notice Event, if the County determines that a Notice Event has occurred), instruct the Disclosure Dissemination Agent that (i) a Notice Event has not occurred and no filing is to be made or (ii) a Notice Event has occurred and the Disclosure Dissemination Agent is to report the occurrence pursuant to subsection (c) of this Section 4, together with a Certification. Such Certification shall identify the Notice Event that has occurred (which shall be any of the categories set forth in Section 2(e)(iv) of this Disclosure Agreement), include the text of the disclosure that the County desires to make, contain the written authorization of the County for the Disclosure Dissemination Agent to disseminate such information, and identify the date the County desires for the Disclosure Dissemination Agent to disseminate the information (provided that such date is not later than the tenth business day after the occurrence of the Notice Event). (c) If the Disclosure Dissemination Agent has been instructed by the County as prescribed in subsection (a) or (b)(ii) of this Section 4 to report the occurrence of a Notice Event, the Disclosure Dissemination Agent shall promptly file a notice of such occurrence with MSRB in accordance with Section 2 D-7

174 (e)(iv) hereof. This notice will be filed with a cover sheet completed by the Disclosure Dissemination Agent in the form set forth in Exhibit C-1. SECTION 5. CUSIP Numbers. Whenever providing information to the Disclosure Dissemination Agent, including but not limited to Annual Reports, documents incorporated by reference to the Annual Reports, Audited Financial Statements, Notice Event notices, Failure to File Event notices, Voluntary Event Disclosures and Voluntary Financial Disclosures, the County shall indicate the full name of the Bonds and the 9-digit CUSIP numbers for the Bonds as to which the provided information relates. SECTION 6. Additional Disclosure Obligations. The County acknowledges and understands that other state and federal laws, including but not limited to the Securities Act of 1933 and Rule 10b-5 promulgated under the Securities Exchange Act of 1934, may apply to the County, and that the duties and responsibilities of the Disclosure Dissemination Agent under this Disclosure Agreement do not extend to providing legal advice regarding such laws. The County acknowledges and understands that the duties of the Disclosure Dissemination Agent relate exclusively to execution of the mechanical tasks of disseminating information as described in this Disclosure Agreement. SECTION 7. Voluntary Filing. (a) The County may instruct the Disclosure Dissemination Agent to file a Voluntary Event Disclosure with the MSRB from time to time pursuant to a Certification of the Disclosure Representative. Such Certification shall identify the Voluntary Event Disclosure (which shall be any of the categories set forth in Section 2(e)(vi) of this Disclosure Agreement), include the text of the disclosure that the County desires to make, contain the written authorization of the County for the Disclosure Dissemination Agent to disseminate such information, and identify the date the County desires for the Disclosure Dissemination Agent to disseminate the information. If the Disclosure Dissemination Agent has been instructed by the County as prescribed in this Section 7(a) to file a Voluntary Event Disclosure, the Disclosure Dissemination Agent shall promptly file such Voluntary Event Disclosure with the MSRB in accordance with Section 2(e)(vi) hereof. This notice will be filed with a cover sheet completed by the Disclosure Dissemination Agent in the form set forth in Exhibit C-2. (b) The County may instruct the Disclosure Dissemination Agent to file a Voluntary Financial Disclosure with the MSRB from time to time pursuant to a Certification of the Disclosure Representative. Such Certification shall identify the Voluntary Financial Disclosure (which shall be any of the categories set forth in Section 2(e)(vii) of this Disclosure Agreement), include the text of the disclosure that the County desires to make, contain the written authorization of the County for the Disclosure Dissemination Agent to disseminate such information, and identify the date the County desires for the Disclosure Dissemination Agent to disseminate the information. If the Disclosure Dissemination Agent has been instructed by the County as prescribed in this Section 7(b) to file a Voluntary Financial Disclosure, the Disclosure Dissemination Agent shall promptly file such Voluntary Financial Disclosure with the MSRB in accordance with Section 2(e)(vii) hereof. This notice will be filed with a cover sheet completed by the Disclosure Dissemination Agent in the form set forth in Exhibit C-2. (c) The parties hereto acknowledge that the County is not obligated pursuant to the terms of this Disclosure Agreement to file any Voluntary Event Disclosure pursuant to Section 7(a) hereof or any Voluntary Financial Disclosure pursuant to Section 7(b) hereof. (d) Nothing in this Disclosure Agreement shall be deemed to prevent the County from disseminating any other information through the Disclosure Dissemination Agent using the means of dissemination set forth in this Disclosure Agreement or including any other information in any Annual Report, Audited Financial Statements, Notice Event notice, Failure to File Event notice, Voluntary Event Disclosure or Voluntary Financial Disclosure, in addition to that required by this Disclosure Agreement. If D-8

175 the County chooses to include any information in any Annual Report, Audited Financial Statements, Notice Event notice, Failure to File Event notice, Voluntary Event Disclosure or Voluntary Financial Disclosure in addition to that which is specifically required by this Disclosure Agreement, the County shall have no obligation under this Disclosure Agreement to update such information or include it in any future Annual Report, Audited Financial Statements, Notice Event notice, Failure to File Event notice, Voluntary Event Disclosure or Voluntary Financial Disclosure. SECTION 8. Termination of Reporting Obligation. The obligations of the County and the Disclosure Dissemination Agent under this Disclosure Agreement shall terminate with respect to the Bonds upon the legal defeasance, prior redemption or payment in full of all of the Bonds, when the County is no longer an obligated person with respect to the Bonds, or upon delivery by the Disclosure Representative to the Disclosure Dissemination Agent of an opinion of counsel expert in federal securities laws to the effect that continuing disclosure is no longer required. SECTION 9. Disclosure Dissemination Agent. The County has appointed Digital Assurance Certification, L.L.C. as exclusive Disclosure Dissemination Agent under this Disclosure Agreement. The County may, upon thirty days written notice to the Disclosure Dissemination Agent and the Trustee, replace or appoint a successor Disclosure Dissemination Agent. Upon termination of DAC s services as Disclosure Dissemination Agent, whether by notice of the County or DAC, the County agrees to appoint a successor Disclosure Dissemination Agent or, alternately, agrees to assume all responsibilities of Disclosure Dissemination Agent under this Disclosure Agreement for the benefit of the Holders of the Bonds. Notwithstanding any replacement or appointment of a successor, the County shall remain liable until payment in full for any and all sums owed and payable to the Disclosure Dissemination Agent. The Disclosure Dissemination Agent may resign at any time by providing thirty days prior written notice to the County. SECTION 10. Remedies in Event of Default. In the event of a failure of the County or the Disclosure Dissemination Agent to comply with any provision of this Disclosure Agreement, the Holders rights to enforce the provisions of this Agreement shall be limited solely to a right, by action in mandamus or for specific performance, to compel performance of the parties obligation under this Disclosure Agreement. Any failure by a party to perform in accordance with this Disclosure Agreement shall not constitute a default on the Bonds or under any other document relating to the Bonds, and all rights and remedies shall be limited to those expressly stated herein. SECTION 11. Duties, Immunities and Liabilities of Disclosure Dissemination Agent. (a) The Disclosure Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Agreement. The Disclosure Dissemination Agent s obligation to deliver the information at the times and with the contents described herein shall be limited to the extent the County has provided such information to the Disclosure Dissemination Agent as required by this Disclosure Agreement. The Disclosure Dissemination Agent shall have no duty with respect to the content of any disclosures or notice made pursuant to the terms hereof. The Disclosure Dissemination Agent shall have no duty or obligation to review or verify any Information or any other information, disclosures or notices provided to it by the County and shall not be deemed to be acting in any fiduciary capacity for the County, the Holders of the Bonds or any other party. The Disclosure Dissemination Agent shall have no responsibility for the County s failure to report to the Disclosure Dissemination Agent a Notice Event or a duty to determine the materiality thereof. The Disclosure Dissemination Agent shall have no duty to determine, or liability for failing to determine, whether the County has complied with this Disclosure Agreement. The Disclosure Dissemination Agent may conclusively rely upon Certifications of the County at all times. The obligations of the County under this Section shall survive resignation or removal of the Disclosure Dissemination Agent and defeasance, redemption or payment of the Bonds. D-9

176 (b) The Disclosure Dissemination Agent may, from time to time, consult with legal counsel (either in-house or external) of its own choosing in the event of any disagreement or controversy, or question or doubt as to the construction of any of the provisions hereof or its respective duties hereunder, and shall not incur any liability and shall be fully protected in acting in good faith upon the advice of such legal counsel. The reasonable fees and expenses of such counsel shall be payable by the County. (c) All documents, reports, notices, statements, information and other materials provided to the MSRB under this Agreement shall be provided in an electronic format and accompanied by identifying information as prescribed by the MSRB. SECTION 12. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Agreement, the County and the Disclosure Dissemination Agent may amend this Disclosure Agreement and any provision of this Disclosure Agreement may be waived, if such amendment or waiver is supported by an opinion of counsel expert in federal securities laws acceptable to both the County and the Disclosure Dissemination Agent to the effect that such amendment or waiver does not materially impair the interests of Holders of the Bonds and would not, in and of itself, cause the undertakings herein to violate the Rule if such amendment or waiver had been effective on the date hereof but taking into account any subsequent change in or official interpretation of the Rule; provided neither the County or the Disclosure Dissemination Agent shall be obligated to agree to any amendment modifying their respective duties or obligations without their consent thereto. Notwithstanding the preceding paragraph, the Disclosure Dissemination Agent shall have the right to adopt amendments to this Disclosure Agreement necessary to comply with modifications to and interpretations of the provisions of the Rule as announced by the Securities and Exchange Commission from time to time by giving not less than 20 days written notice of the intent to do so together with a copy of the proposed amendment to the County. No such amendment shall become effective if the County shall, within 10 days following the giving of such notice, send a notice to the Disclosure Dissemination Agent in writing that it objects to such amendment. SECTION 13. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the County, the Trustee of the Bonds, the Disclosure Dissemination Agent, the underwriter, and the Holders from time to time of the Bonds, and shall create no rights in any other person or entity. SECTION 14. Governing Law. This Disclosure Agreement shall be governed by the laws of the State of Georgia (other than with respect to conflicts of laws). SECTION 15. Counterparts. This Disclosure Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. The Disclosure Dissemination Agent and the County have caused this Continuing Disclosure Agreement to be executed, on the date first written above, by their respective officers duly authorized. DIGITAL ASSURANCE CERTIFICATION, L.L.C., as Disclosure Dissemination Agent By: Diana O Brien Vice President D-10

177 WALKER COUNTY, GEORGIA as Obligated Person By: Bebe Heiskell Commissioner D-11

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179 EXHIBIT A NAME AND CUSIP NUMBERS OF BONDS Name of Issuer Obligated Person(s) Name of Bond Issue: Walker County Development Authority Walker County, Georgia $15,390,000 Walker County Development Authority (Georgia) Economic Development Taxable Revenue Bonds Series 2015 Date of Issuance: September 27, 2015 Date of Official Statement : September17, 2015 CUSIP Number: D-A-1

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181 EXHIBIT B NOTICE TO MSRB OF FAILURE TO FILE ANNUAL REPORT Name of Issuer Obligated Person(s) Name of Bond Issue: Walker County Development Authority Walker County, Georgia $15,390,000 Walker County Development Authority (Georgia) Economic Development Taxable Revenue Bonds Series 2015 Date of Issuance: September 27, 2015 Date of Official Statement : September17, 2015 NOTICE IS HEREBY GIVEN that the County has not provided an Annual Report with respect to the above-named Bonds as required by the Disclosure Agreement between the County and Digital Assurance Certification, L.L.C., as Disclosure Dissemination Agent. [The County has notified the Disclosure Dissemination Agent that it anticipates that the Annual Report will be filed by ]. Date: Digital Assurance Certification, L.L.C., as Disclosure Dissemination Agent, on behalf of the Issuer cc: County as Obligated Person D-B-1

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183 EXHIBIT C-1 EVENT NOTICE COVER SHEET This cover sheet and accompanying event notice will be sent to the MSRB, pursuant to Securities and Exchange Commission Rule 15c2-12(b)(5)(i)(C) and (D). Issuer s and/or Other Obligated Person s Name: Walker County, Georgia Issuer s Six-Digit CUSIP Number: or Nine-Digit CUSIP Number(s) of the bonds to which this event notice relates: Number of pages attached: Description of Notice Events (Check One): 1. Principal and interest payment delinquencies; 2. Non-Payment related defaults, if material; 3. Unscheduled draws on debt service reserves reflecting financial difficulties; 4. Unscheduled draws on credit enhancements reflecting financial difficulties; 5. Substitution of credit or liquidity providers, or their failure to perform; 6. Adverse tax opinions, IRS notices or events affecting the tax status of the security; 7. Modifications to rights of securities holders, if material; 8. Bond calls, if material; 9. Defeasances; 10. Release, substitution, or sale of property securing repayment of the securities, if material; 11. Rating changes 12. Tender offers; 13. Bankruptcy, insolvency, receivership or similar event of the obligated person; 14. Merger, consolidation, or acquisition of the obligated person, if material; and 15. Appointment of a successor or additional trustee, or the change of name of a trustee, if material. Failure to provide annual financial information as required. I hereby represent that I am authorized by the issuer or its agent to distribute this information publicly: Signature: Name: Title: Digital Assurance Certification, L.L.C. 390 N. Orange Avenue Suite 1750 Orlando, FL Date: D-C-1-1

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185 EXHIBIT C-2 VOLUNTARY EVENT DISCLOSURE COVER SHEET This cover sheet and accompanying voluntary event disclosure will be sent to the MSRB, pursuant to the Disclosure Dissemination Agent Agreement dated as of September 27, 2015, between the County and DAC. Issuer s and/or Other Obligated Person s Name: Walker County, Georgia Issuer s Six-Digit CUSIP Number: or Nine-Digit CUSIP Number(s) of the bonds to which this notice relates: Number of pages attached: Description of Voluntary Event Disclosure (Check One): 1. amendment to continuing disclosure undertaking; 2. change in obligated person; 3. notice to investors pursuant to bond documents; 4. certain communications from the Internal Revenue Service; 5. secondary market purchases; 6. bid for auction rate or other securities; 7. capital or other financing plan; 8. litigation/enforcement action; 9. change of tender agent, remarketing agent, or other on-going party; 10. derivative or other similar transaction; and 11. other event-based disclosures. I hereby represent that I am authorized by the issuer or its agent to distribute this information publicly: Signature: Name: Title: Digital Assurance Certification, L.L.C. 390 N. Orange Avenue Suite 1750 Orlando, FL Date: D-C-2-1

186 EXHIBIT C-3 VOLUNTARY FINANCIAL DISCLOSURE COVER SHEET This cover sheet and accompanying voluntary financial disclosure will be sent to the MSRB, pursuant to the Disclosure Dissemination Agent Agreement dated as of September 27, 2015, between the County and DAC. Issuer s and/or Other Obligated Person s Name: Walker County, Georgia Issuer s Six-Digit CUSIP Number: or Nine-Digit CUSIP Number(s) of the bonds to which this notice relates: Number of pages attached: Description of Voluntary Financial Disclosure (Check One): 1. quarterly/monthly financial information; 2. change in fiscal year/timing of annual disclosure; 3. change in accounting standard; 4. interim/additional financial information/operating data; 5. budget; 6. investment/debt/financial policy; 7. information provided to rating agency, credit/liquidity provider or other third party; 8. consultant reports; and 9. other financial/operating data. I hereby represent that I am authorized by the issuer or its agent to distribute this information publicly: Signature: Name: Title: Digital Assurance Certification, L.L.C. 390 N. Orange Avenue Suite 1750 Orlando, FL Date: D-C-2-2

187 Appendix E SPECIMEN MUNICIPAL BOND INSURANCE POLICY

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189 MUNICIPAL BOND INSURANCE POLICY ISSUER: [NAME OF ISSUER] Policy No: MEMBER: [NAME OF MEMBER] BONDS: $ in aggregate principal amount of [NAME OF TRANSACTION] [and maturing on] Effective Date: Risk Premium: $ Member Surplus Contribution: $ Total Insurance Payment: $ BUILD AMERICA MUTUAL ASSURANCE COMPANY ( BAM ), for consideration received, hereby UNCONDITIONALLY AND IRREVOCABLY agrees to pay to the trustee (the Trustee ) or paying agent (the Paying Agent ) for the Bonds named above (as set forth in the documentation providing for the issuance and securing of the Bonds), for the benefit of the Owners or, at the election of BAM, 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 first Business Day following the Business Day on which BAM shall have received Notice of Nonpayment, BAM will disburse (but without duplication in the case of duplicate claims for the same Nonpayment) to or for the benefit of each Owner of the Bonds, the face amount of principal of and interest on the Bonds that is then Due for Payment but is then unpaid by reason of Nonpayment by the Issuer, but only upon receipt by BAM, in a form reasonably satisfactory to it, of (a) evidence of the Owner s right to receive payment of such 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 BAM. 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 BAM is incomplete, it shall be deemed not to have been received by BAM for purposes of the preceding sentence, and BAM shall promptly so advise the Trustee, Paying Agent or Owner, as appropriate, any of whom may submit an amended Notice of Nonpayment. Upon disbursement under this Policy in respect of a Bond and to the extent of such payment, BAM shall become the owner of such Bond, any appurtenant coupon to such Bond and right to receipt of payment of principal of or interest on such Bond and shall be fully subrogated to the rights of the Owner, including the Owner s right to receive payments under such Bond. Payment by BAM either to the Trustee or Paying Agent for the benefit of the Owners, or directly to the Owners, on account of any Nonpayment shall discharge the obligation of BAM under this Policy with respect to said Nonpayment. 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 (as defined herein) 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 BAM 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 made to an Owner by or on behalf of the Issuer of principal or interest that is Due for Payment, which payment has been recovered from such Owner pursuant to the United States Bankruptcy Code in accordance with a final, nonappealable order of a court having competent jurisdiction. Notice means delivery to BAM of a notice of claim and certificate, by certified mail, or telecopy as set forth on the attached Schedule or other acceptable electronic delivery, in a form satisfactory to BAM, from and signed by an Owner, the Trustee or the Paying Agent, which notice shall specify (a) the person or entity making the claim, (b) the Policy Number, (c) the claimed amount, (d) payment instructions and (e) the date such claimed amount becomes or became Due for Payment. Owner means, in respect of a Bond, the person or entity who, at the time of Nonpayment, is entitled under the terms of such Bond to payment thereof, except that Owner shall not include the Issuer, the Member or any other person or entity whose direct or indirect obligation constitutes the underlying security for the Bonds.