$42,245,000 CITY OF JACKSONVILLE, FLORIDA EXCISE TAXES REVENUE BONDS, SERIES 2007

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1 NEW ISSUE FULL BOOK ENTRY ONLY RATINGS: See RATINGS herein. In the opinion of Livermore, Freeman & McWilliams, P.A., Bond Counsel, assuming continuing compliance with certain tax covenants, under existing laws, regulations, rulings and court decisions, interest on the 2007 Bonds is excluded from gross income for federal income tax purposes and is not treated as an item of tax preference for purposes of the federal alternative minimum tax on individuals and corporations. See TAX EXEMPTION herein. $42,245,000 CITY OF JACKSONVILLE, FLORIDA EXCISE TAXES REVENUE BONDS, SERIES 2007 Dated: Date of Delivery Due: As shown on inside cover The City of Jacksonville, Florida Excise Taxes Revenue Bonds, Series 2007 (the 2007 Bonds ) are being issued by the City of Jacksonville, Florida (the City ) in fully registered form in denominations of $5,000 or any integral multiple thereof. Interest on the 2007 Bonds will be payable semiannually on April 1 and October 1 of each year, commencing April 1, 2008, to the Registered Owners of the 2007 Bonds shown on the registration books of the City held by Wells Fargo Bank, National Association, as Deputy Registrar and Paying Agent (the Deputy Registrar and Paying Agent ) on the fifteenth day (whether or not a business day) of the calendar month next preceding an interest payment date, by check or draft mailed to such Registered Owners by the Deputy Registrar and Paying Agent. The principal of the 2007 Bonds will be payable upon presentation and surrender of the 2007 Bonds at the principal corporate trust office of the Deputy Registrar and Paying Agent in Jacksonville, Florida. Upon initial issuance, the 2007 Bonds will be registered in the name of and held by Cede & Co., as nominee for The Depository Trust Company ( DTC ), an automated depository for securities and clearinghouse for securities transactions. So long as DTC, or its nominee, is the registered owner of the 2007 Bonds, payment of the principal of and interest on the 2007 Bonds will be provided directly to DTC, or its nominee, which is to remit such payments to the DTC Participants which in turn are to remit such payments to Beneficial Owners (as defined herein) of the 2007 Bonds. See DESCRIPTION OF THE 2007 BONDS Book-Entry Only System herein. The 2007 Bonds are subject to redemption prior to their stated maturities as described herein. The 2007 Bonds are being issued to provide funds which, together with other available funds of the City, will be used to provide sufficient moneys to: (1) finance, or reimburse the City for expenses previously incurred in connection with certain general municipal capital improvements, (2) make a cash deposit to the Reserve Account in an amount, which when added to the Reserve Account Credit Facilities currently on deposit therein shall equal the Reserve Requirement upon delivery of the 2007 Bonds, and (3) pay the costs of issuance of the 2007 Bonds. For additional information, see PLAN OF FINANCE herein. The 2007 Bonds are special limited obligations of the City payable exclusively from the Pledged Revenues, as herein described, on a parity with the Parity Bonds (as defined herein). See Security and Source of payment of the 2007 Bonds herein. The 2007 Bonds shall not be or constitute a general indebtedness of the City within the meaning of any constitutional, statutory or charter provision or limitation, but shall be payable solely from and secured by a lien upon and pledge of the Pledged Revenues as described herein. The full faith and credit of the City is not pledged to the payment of the principal of, or interest on the 2007 Bonds. No owner of any of the 2007 Bonds shall ever have the right to require or compel the exercise of the ad valorem taxing power of the City for the payment thereof, and the 2007 Bonds shall not constitute a lien upon property owned by or situated within the corporate territory of the City. The scheduled payment of principal of and interest on the 2007 Bonds when due will be guaranteed under a Bond Insurance Policy to be issued concurrently with the delivery of the 2007 Bonds by MBIA Insurance Corporation. For a discussion of the terms and provisions of such policy, including the limitations thereof, see MUNICIPAL BOND INSURANCE herein. THIS COVER PAGE, INCLUDING THE INSIDE COVER PAGE HERETO, CONTAINS CERTAIN INFORMATION FOR QUICK REFERENCE ONLY. IT IS NOT AND IS NOT INTENDED TO BE A SUMMARY OF THIS ISSUE. INVESTORS MUST READ THE ENTIRE OFFICIAL STATEMENT TO OBTAIN INFORMATION ESSENTIAL TO THE MAKING OF AN INFORMED INVESTMENT DECISION. The 2007 Bonds are offered when, as and if issued and received by the Underwriter, subject to prior sale, withdrawal or modification of the offer without notice and subject to the unqualified approval of legality by Livermore, Freeman & McWilliams, P.A., Jacksonville Beach, Florida, Bond Counsel. Certain legal matters will be passed on for the City by its Office of General Counsel and by Bryant Miller Olive P.A., Jacksonville, Florida and Lawrence & Parker, P.A., Jacksonville, Florida, Co-Disclosure Counsel. Public Financial Management, Inc., Orlando, Florida served as financial advisor to the City in connection with the issuance of the 2007 Bonds. It is expected that the 2007 Bonds in definitive form will be available for delivery in New York, New York, on or about September 27, Dated: September 19, UBS INVESTMENT BANK

2 $42,245,000 CITY OF JACKSONVILLE, FLORIDA EXCISE TAXES REVENUE BONDS, SERIES 2007 MATURITIES, AMOUNTS, INTEREST RATES, PRICES, YIELDS AND CUSIPS $29,580,000 Serial Bonds Maturity (October 1) Amount Interest Rate Price Yield Initial CUSIP 2008 $950, % % A ,015, A ,060, A ,105, A ,145, A ,190, A ,235, A ,285, B ,335, B ,390, B ,445, B ,505, B ,560, B ,640, B ,720, B ,810, C ,900, C ,995, C ,095, C ,200, C68 $12,665,000 Term Bonds $4,720, % Term Bonds due October 1, Price 98.50% -- Yield 4.609% -- Initial CUSIP Number* C76 $7,945, % Term Bonds due October 1, Price % -- Yield 4.580% -- Initial CUSIP Number* C84 The City is not responsible for the use of the CUSIP Numbers, nor is a representation made as to their correctness. The CUSIP Numbers are included solely for the convenience of the readers of this Official Statement. Yield to first call date.

3 CITY OF JACKSONVILLE, FLORIDA 117 W. Duval Street Suite M-150, City Hall Jacksonville, Florida (904) MAYOR John Peyton COUNCIL MEMBERS Daniel J. Davis, President Ronnie Fussell, Vice President William Bishop Kevin Hyde E. Denise Lee Richard Clark Jay Jabour Don Redman Michael Corrigan Glorious J. Johnson Art Shad Dr. Johnny Gaffney Mia Jones Clay Yarborough Arthur Graham Warren A. Jones Jack Webb Ray Holt Stephen Joost CHIEF OPERATING OFFICER Alan Mosley DEPARTMENT OF ADMINISTRATION AND FINANCE Chief Financial Officer City Treasurer G. Michael Miller Michael R. Givens GENERAL COUNSEL Richard A. Mullaney, Esq. Jacksonville, Florida BOND COUNSEL Livermore, Freeman & McWilliams, P.A. Jacksonville Beach, Florida CO-DISCLOSURE COUNSEL Bryant Miller Olive P.A. Jacksonville, Florida Lawrence & Parker P.A. Jacksonville, Florida FINANCIAL ADVISOR Public Financial Management, Inc. Orlando, Florida

4 This Official Statement does not constitute a contract between the City and any one or more owners of 2007 Bonds nor does it constitute an offer to sell or the solicitation of an offer to buy the 2007 Bonds in any jurisdiction to any person to whom it is unlawful to make such an offer in such jurisdiction. No dealer, salesman or any other person has been authorized by the City to give any information or to make any representations, other than those contained herein, in connection with the offering of the 2007 Bonds, and if given or made, such information or representations must not be relied upon as having been authorized by the City or any other person. The information set forth herein, including in the appendices, has been obtained from the City and other sources which are believed to be reliable. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create the implication that there has been no change in the matters described herein since the date hereof. IN CONNECTION WITH THE OFFERING OF THE 2007 BONDS, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE 2007 BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE 2007 BONDS HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR HAS THE BOND ORDINANCE BEEN QUALIFIED UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED, IN RELIANCE UPON EXEMPTIONS CONTAINED IN SUCH ACTS. THE REGISTRATION OR QUALIFICATION OF THE 2007 BONDS IN ACCORDANCE WITH APPLICABLE PROVISIONS OF THE SECURITIES LAWS OF THE STATES, IF ANY, IN WHICH THE 2007 BONDS HAVE BEEN REGISTERED OR QUALIFIED AND THE EXEMPTION FROM REGISTRATION OR QUALIFICATION IN CERTAIN OTHER STATES CANNOT BE REGARDED AS RECOMMENDATION THEREOF. NEITHER THESE STATES NOR ANY OF THEIR AGENCIES HAVE PASSED UPON THE MERITS OF THE 2007 BONDS OR THE ACCURACY OR COMPLETENESS OF THIS OFFICIAL STATEMENT. ANY REPRESENTATION TO THE CONTRARY MAY BE A CRIMINAL OFFENSE. All summaries herein of documents and agreements are qualified in their entirety by reference to such documents and agreements, and all summaries herein of the 2007 Bonds are qualified in their entirety by reference to the form thereof included in the aforesaid documents and agreements.

5 TABLE OF CONTENTS INTRODUCTION... 1 General... 1 The 2007 Bonds... 1 Purpose of Issue... 2 Security and Source of Payment of the 2007 Bonds... 2 THE CITY OF JACKSONVILLE... 3 DESCRIPTION OF THE 2007 BONDS... 3 General... 3 Transfer and Payment... 4 Book-Entry Only System... 5 Optional Redemption... 7 Mandatory Redemption... 7 Notice of Redemption... 8 Application of Pledged Revenues... 8 Reserve Account... 8 Additional Parity Obligations... 9 Covenants Concerning Excise Taxes Defeasance SECURITY AND SOURCE OF PAYMENT OF THE 2007 BONDS Authority Pledged Revenues Utilities Services Taxes Occupational License Taxes RESERVE ACCOUNT CREDIT FACILITIES Financial Guaranty Reserve Policy Financial Guaranty Insurance Company Financial Guaranty's Credit Ratings Ambac Assurance Surety Bond Ambac Assurance Corporation Available Information Incorporation of Certain Documents by Reference Financial Security Reserve Policy Financial Security Assurance Inc MUNICIPAL BOND INSURANCE General The MBIA Insurance Corporation Insurance Policy MBIA Insurance Corporation Regulation Financial Strength Ratings of MBIA MBIA Financial Information Incorporation of Certain Documents by Reference SOURCES AND USES OF FUNDS COMBINED DEBT SERVICE SCHEDULE Page i

6 THE CITY OF JACKSONVILLE Government Property Tax Reform Fiscal Policy Financial Overview FUTURE DEBT INVESTMENT AND DEBT POLICIES FINANCIAL ADVISOR UNDERWRITING RATINGS LEGALITY TAX EXEMPTION Original Issue Discount Original Issue Premium LITIGATION CONTINGENCY OF FEES ANNUAL FINANCIAL REPORTS CONTINUING DISCLOSURE SOURCES OF INFORMATION DISCLOSURE REQUIRED BY FLORIDA BLUE SKY REGULATIONS AUTHORIZATION OF AND CERTIFICATION CONCERNING OFFICIAL STATEMENT EXECUTION APPENDIX A - GENERAL INFORMATION - CITY OF JACKSONVILLE APPENDIX B - EXTRACT OF MATERIAL PROVISIONS OF BOND ORDINANCE APPENDIX C - FORM OF BOND COUNSEL OPINION APPENDIX D - SPECIMEN RESERVE ACCOUNT CREDIT FACILITY OF FINANCIAL GUARANTY INSURANCE COMPANY APPENDIX E - SPECIMEN RESERVE ACCOUNT CREDIT FACILITY OF AMBAC ASSURANCE CORPORATION APPENDIX F - SPECIMEN RESERVE ACCOUNT CREDIT FACILITY OF FINANCIAL SECURITY ASSURANCE INC. APPENDIX G - SPECIMEN RESERVE ACCOUNT CREDIT FACILITY OF AMBAC ASSURANCE CORPORATION APPENDIX H - SPECIMEN RESERVE ACCOUNT CREDIT FACILITY OF AMBAC ASSURANCE CORPORATION APPENDIX I - SPECIMEN MBIA BOND INSURANCE POLICY ii

7 OFFICIAL STATEMENT relating to $42,245,000 CITY OF JACKSONVILLE, FLORIDA EXCISE TAXES REVENUE BONDS, SERIES 2007 INTRODUCTION General The purpose of this Official Statement of the City of Jacksonville, Florida (the "City"), including the cover page and appendices, is to provide information with respect to the City's $42,245,000 Excise Taxes Revenue Bonds, Series 2007 (the "2007 Bonds"). The 2007 Bonds are being issued pursuant to the provisions of Chapter , Laws of Florida, Special Acts of 1992, as amended and supplemented, and other applicable provisions of law, including Chapters 166, 125, 202 and 205, Florida Statutes, and pursuant to Ordinance of the City enacted on June 28, 1977, as supplemented and amended, Ordinance , preserved thereby, enacted on June 24, 1970, as supplemented, amended and restated prior to March 25, 2003 (collectively, the "Original Ordinance"), and as further supplemented by Ordinance E of the City enacted on December 14, 2004, and as amended by Ordinance E enacted on October 25, 2005 (collectively, the "Bond Ordinance"). The Original Ordinance and the Bond Ordinance are referred to herein collectively as the "Ordinance." Composite extracts of material provisions of the Bond Ordinance are appended hereto as APPENDIX B. For a complete description of the terms and conditions of the 2007 Bonds, reference is made to the Bond Ordinance. The description of the 2007 Bonds and the documents authorizing and securing the same and the information from reports contained herein do not purport to be comprehensive or definitive. All references herein to such documents and reports are qualified in their entirety by reference to such documents. Copies of documents and reports not reproduced in this Official Statement and further information with regard to the City and the 2007 Bonds may be obtained from the City's Chief Financial Officer, Suite 300, 117 West Duval Street, Jacksonville, Florida 32202, telephone number (904) or from Public Financial Management, Inc., the City's Financial Advisor, 300 South Orange Avenue, Suite 1170, Orlando, Florida 32801, telephone number (407) All terms used in this Official Statement in capitalized form and not otherwise defined herein shall have the meanings ascribed to such terms in the Bond Ordinance. The 2007 Bonds The 2007 Bonds are being issued in fully registered form in denominations of $5,000 and integral multiples thereof. Interest on the 2007 Bonds is payable semiannually on April 1 and 1

8 October 1 in each year, commencing April 1, 2008 until maturity. The 2007 Bonds shall mature at the times and in the amounts shown on the inside cover of this Official Statement. The 2007 Bonds may be exchanged or transferred as provided in the Ordinance and as described herein. The 2007 Bonds are subject to redemption prior to maturity as described herein. See "DESCRIPTION OF THE 2007 BONDS" herein for further details. Purpose of Issue The City is issuing the 2007 Bonds in order to provide funds, which will be used to (1) finance or reimburse the City for expenses previously incurred in connection with certain general municipal capital improvements, (2) make a cash deposit to the Reserve Account in an amount, which when added to the Reserve Account Credit Facilities currently on deposit therein shall equal the Reserve Requirement upon delivery of the 2007 Bonds, and (3) pay the costs of issuance of the 2007 Bonds. Security and Source of Payment of the 2007 Bonds The principal of and the interest on the 2007 Bonds will be payable from and secured by a lien upon and pledge of the proceeds of (i) the Excise Taxes, as that term is defined herein and (ii) income received from investments of funds in the Sinking Fund and Reserve Account, such lien being on a parity as to the lien on the Pledged Revenues with the following Outstanding obligations of the City: the Excise Taxes Revenue Bonds, Series 1993, currently outstanding in the amount of $7,545,140, (the "1993 Bonds"), the Excise Taxes Revenue Refunding Bonds, Series 1995A, currently outstanding in the amount of $16,415,000, (the "1995A Bonds"), the Excise Taxes Revenue Refunding Bonds, Series 1996A, currently outstanding in the amount of $14,000,000, (the "1996A Bonds"), the Excise Taxes Revenue Refunding and Improvement Bonds, Series 1999A, currently outstanding in the amount of $26,900,000, (the "1999A Bonds"), the Excise Taxes Revenue Refunding and Improvement Bonds, Series 1999B, currently outstanding in the amount of $28,520,000, (the "1999B Bonds"), the Excise Taxes Revenue Refunding Bonds, Series 2001A, currently outstanding in the amount of $22,635,000, (the "2001A Bonds"), the Excise Taxes Revenue Bonds, Series 2001B, currently outstanding in the amount of $45,005,000, (the "2001B Bonds"), the Excise Taxes Revenue Refunding and Improvement Bonds, Series 2002A, currently outstanding in the amount of $36,820,000, (the "2002A Bonds"), the Excise Taxes Revenue Bonds, Series 2002B, currently outstanding in the amount of $62,005,000, (the "2002B Bonds"), the Excise Taxes Revenue Bonds, Series 2003A, currently outstanding in the amount of $18,745,000, (the "2003A Bonds"), the Excise Taxes Revenue Refunding and Improvement Bonds, Series 2003B, currently outstanding in the amount of $15,550,000, (the "2003B Bonds"), the Excise Taxes Revenue Refunding Bonds, Series 2003C, currently outstanding in the amount of $33,445,000, (the "2003C Bonds") and the Excise Taxes Revenue Bonds, Series 2005A, currently outstanding in the amount of $44,820,000, (the "2005A Bonds") and the Excise Taxes Revenue Bonds, Series 2006A, currently outstanding in the amount of $36,540,000, (the "2006A Bonds"), the Excise Taxes Revenue Refunding Bonds (AMT), Series 2006B, currently outstanding in the amount of $9,255,000 (the "2006B Bonds") and the Taxable Excise Taxes Revenue Bonds, Series 2006C, currently outstanding in the amount of $23,555,000 (the "2006C Bonds"). The 1993 Bonds, the 1995A Bonds, the 1996A Bonds, the 1999A Bonds, the 1999B 2

9 Bonds, the 2001A Bonds, the 2001B Bonds, the 2002A Bonds, the 2002B Bonds, the 2003A Bonds, the 2003B Bonds, the 2003C Bonds, the 2006A, the 2006B and the 2006C Bonds are collectively referred to herein as the "Parity Bonds." See "SECURITY AND SOURCE OF PAYMENT FOR THE 2007 BONDS" herein. The Bond Ordinance permits the issuance of Additional Parity Obligations secured by a lien upon and pledge of the Pledged Revenues on a parity with the Bonds outstanding under the Bond Ordinance as described under the caption "SECURITY AND SOURCE OF PAYMENT FOR THE 2007 BONDS Additional Bonds" herein. The scheduled payment of principal of and interest on the 2007 Bonds when due will be guaranteed under a Bond Insurance Policy to be issued concurrently with the delivery of the 2007 Bonds by MBIA Insurance Corporation. See "MUNICIPAL BOND INSURANCE" herein. The 2007 Bonds shall not be or constitute a general indebtedness of the City within the meaning of any constitutional, statutory or charter provision or limitation, but shall be payable solely from and secured by a lien upon and pledge of the Pledged Revenues as described herein. The full faith and credit of the City is not pledged to the payment of the principal of or interest on the 2007 Bonds. No owner of any of the 2007 Bonds shall ever have the right to require or compel the exercise of the ad valorem taxing power of the City for payment thereof, and the 2007 Bonds shall not constitute a lien upon any property owned by or situated within the corporate territory of the City, except as provided in the Bond Ordinance. THE CITY OF JACKSONVILLE On August 8, 1967, the electors of Duval County, Florida approved by referendum a charter of a consolidated government of the City of Jacksonville. Such consolidated government went into effect on October 1, 1968, and extends throughout Duval County, except that the Cities of Jacksonville Beach, Atlantic Beach and Neptune Beach and the Town of Baldwin (referred to as the Second, Third, Fourth and Fifth Urban Services Districts, respectively) remain as urban services districts and each retains its individual municipal charter. The City of Jacksonville, as so consolidated, is herein referred to as the "City." For additional information concerning the City, see "APPENDIX A - GENERAL INFORMATION - CITY OF JACKSONVILLE" appended hereto. General DESCRIPTION OF THE 2007 BONDS The 2007 Bonds shall be issued in such principal amounts as provided on the inside cover page hereof, will be dated the date of delivery thereof, and are issuable in fully registered form, in denominations of $5,000 and integral multiples thereof. The 2007 Bonds will bear interest at the rates per annum set forth on the inside cover page of this Official Statement, payable semiannually on April 1 and October 1 of each year (each an "Interest Payment Date"), commencing April 1, 2008, and mature on October 1 in the years and principal amounts set forth on the inside cover page of this Official Statement. Payment of interest on the 2007 Bonds shall be made by check or draft mailed to the person in whose name such 2007 Bond is registered at such person's address on the registration books maintained by Wells Fargo Bank, National Association, as Deputy Registrar and Paying Agent (the "Deputy Registrar and Paying Agent"), on behalf of the City at the close of 3

10 business on the fifteenth (15th) day of the month (whether or not a Business Day) next preceding each Interest Payment Date (the "Record Date"), irrespective of any transfer or exchange of such 2007 Bonds subsequent to the Record Date and prior to such Interest Payment Date, unless the City shall default in payment of interest due on such Interest Payment Date. In the event of any such default, such defaulted interest shall be payable to the person in whose name such 2007 Bond is registered at the close of business on a special record date which date shall be established by notice mailed on behalf of the City to the Registered Owners of the 2007 Bonds at the close of business on the fifth (5th) day preceding the date of mailing. Payment of the principal of and interest due at maturity or upon redemption on the 2007 Bonds shall be made as the same shall become due and payable upon the presentation and surrender of such 2007 Bonds to the Deputy Registrar and Paying Agent at its office in Jacksonville, Florida. If the date for payment of the principal of, premium, if any, or interest on the 2007 Bonds shall be a Saturday, Sunday, legal holiday or a day on which banking institutions in the city where the principal corporate trust office of the Deputy Registrar and Paying Agent is located are authorized by law or executive order to close, then the date for such payment shall be the next succeeding day which is not a Saturday, Sunday, legal holiday or day on which banking institutions in such city are authorized to close, and payment on such date shall have the same force and effect as if made on the nominal date of payment. The 2007 Bonds shall have all of the qualities and incidents of negotiable instruments under the Uniform Commercial Code and Investment Securities Law of the State of Florida. Each Registered Owner, in accepting any of the 2007 Bonds, shall be conclusively deemed to have agreed that the 2007 Bonds shall be and shall have all of the qualities and incidents of negotiable instruments. Transfer and Payment In the event the Book-Entry-Only System (as defined below) is discontinued, the following provisions will apply. The 2007 Bonds may be registered as transferred by the registered owner thereof or such owner's attorney or legal representative duly authorized in writing, upon presentation thereof accompanied by a written instrument or instruments of transfer or authorization for exchange, in form and with guaranty of signature satisfactory to the Deputy Registrar and Paying Agent, duly executed by the registered owner or by such owner's duly authorized attorney or legal representative. Any 2007 Bond may be exchanged at the designated office of the Deputy Registrar and Paying Agent for a like aggregate principal amount of 2007 Bonds of the same series and maturity and of other authorized denominations. The Deputy Registrar and Paying Agent and the City may charge a fee covering taxes, fees or other governmental charges required to be paid in connection with any exchange or registration of transfer of any 2007 Bond, except in the case of issuance of a 2007 Bond for the unredeemed portion of a 2007 Bond surrendered for redemption. Neither the City nor the Deputy Registrar and Paying Agent will be required to register the transfer of or exchange of any 2007 Bond (i) after notice calling such 2007 Bond or portion thereof for redemption has been mailed or (ii) during the 15-day period 4

11 next preceding the mailing of a notice of redemption of 2007 Bonds. For a description of the registration of transfer procedures while the Bonds are in the book-entry only system, see "DESCRIPTION OF THE 2007 BONDS Book-Entry-Only System" herein. Book-Entry Only System The information in this caption concerning The Depository Trust Company, New York, New York, ("DTC") and DTC's book-entry system has been obtained from DTC and the City makes no representation or warranty or takes any responsibility for the accuracy or completeness of such information. DTC will act as securities depository for the 2007 Bonds. The 2007 Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered 2007 Bond certificate will be issued for each maturity of the 2007 Bonds as set forth in the inside cover page of this Official Statement, each in the aggregate principal amount of such maturity and will be deposited with DTC. DTC, the world's largest depository, is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of DTC holds and provides asset servicing for over 2.2 million issues of U.S. and non-u.s. equity, corporate and municipal debt issues, and money market instruments from over 100 countries that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC, in turn, is owned by a number of Direct Participants of DTC and Members of the National Securities Clearing Corporation, Fixed Income Clearing Corporation, and Emerging Markets Clearing Corporation, (NSCC, FICC, and EMCC, also subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc., the American Stock Exchange LLC, and the National Association of Securities Dealers, Inc. 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"). The DTC Rules applicable to its Participants are on file with the Securities Exchange Commission (the "SEC"). More information about DTC can be found at and Purchases of 2007 Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the 2007 Bonds on DTC's records. The ownership interest of each actual purchaser of each 2007 Bond ("Beneficial Owner") is in turn to be recorded on 5

12 the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the 2007 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 2007 Bonds, except in the event that use of the book-entry system for the 2007 Bonds is discontinued. To facilitate subsequent transfers, all 2007 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 the 2007 Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the 2007 Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such 2007 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 2007 Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the 2007 Bonds, such as redemptions, tenders, defaults, and proposed amendments to the security documents. For example, Beneficial Owners of 2007 Bonds may wish to ascertain that the nominee holding the 2007 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 Deputy Registrar and Paying Agent and request that copies of notices be provided directly to them. Redemption notices shall be sent to DTC. If less than all of the 2007 Bonds within a series or maturity of a series are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such series or maturity to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to 2007 Bonds unless authorized by a Direct Participant in accordance with DTC's procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the City as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the 2007 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Principal, premium, if any, and interest payments on the 2007 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 City or the Deputy Registrar and Paying Agent on the payment date in 6

13 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 Deputy Registrar and Paying Agent, or the City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal, premium, if any, and interest on the 2007 Bonds, as applicable, to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the City and/or the Deputy Registrar and Paying Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as securities depository with respect to the 2007 Bonds at any time by giving reasonable notice to the City or the Paying Agent. Under such circumstances, in the event that a successor securities depository is not obtained, 2007 Bond certificates are required to be printed and delivered. The City may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In such event, 2007 Bonds will be printed and delivered to DTC. Optional Redemption The 2007 Bonds maturing prior to October 1, 2018 are not subject to optional redemption prior to maturity. The 2007 Bonds maturing on and after October 1, 2018 are subject to redemption in whole or in part, at any time, on or after October 1, 2017, in such order of maturities as may be determined by the City (less than all of a single maturity to be selected by lot) at a redemption price equal to 100% of the principal amount of the 2007 Bonds to be redeemed plus accrued interest to the date fixed for redemption. Mandatory Redemption The 2007 Bonds maturing on October 1, 2029, are subject to mandatory sinking fund redemption, prior to maturity in part, by lot on October 1, 2028, at a redemption price equal to the principal amount of such 2007 Bonds or portions thereof to be redeemed, plus interest accrued thereon to the date of redemption, with the remaining principal amount due at maturity on October 1, 2029, as set forth below: Year Amortization Installments 2028 $2,310, * 2,410,000 * Maturity. 7

14 The 2007 Bonds maturing on October 1, 2032, are subject to mandatory sinking fund redemption, prior to maturity in part, by lot on October 1, 2030 and on each October 1 thereafter, at a redemption price equal to the principal amount of such 2007 Bonds or portions thereof to be redeemed, plus interest accrued thereon to the date of redemption, on October 1 in the following years and in the following Amortization Installments: Year Amortization Installments 2030 $2,520, ,645, * 2,780,000 * Maturity. Notice of Redemption At least 30 days and not more than 45 days prior to the redemption date, notice of such redemption is required to be (i) filed with the Deputy Registrar and Paying Agent; and (ii) mailed, postage prepaid, to all Registered Owners of the 2007 Bonds to be redeemed at their addresses as they appear of record on the registration books of the Deputy Registrar and Paying Agent as of the date 45 days prior to the date fixed for redemption. Each notice of redemption shall be provided at least 5 days prior to publication by registered or certified mail or overnight delivery service or telecopy to registered securities depositories then in the business of holding substantial amounts of obligations of types comprising the 2007 Bonds. Application of Pledged Revenues All of the proceeds received from the Excise Taxes shall, at the beginning of each fiscal year, be deposited by the City to the Sinking Fund (including the Bond Amortization Fund therein) and the Reserve Account in amounts which shall equal (1) all interest becoming due on any Outstanding 2007 Bonds, Parity Bonds and Additional Parity Obligations hereafter issued, on April 1 of the current fiscal year and on October 1 of the next ensuing fiscal year and the principal and Amortization Installments becoming due on October 1 of the next ensuing fiscal year, and (2) the amount required to maintain the Reserve Requirement in the Reserve Account. The balance of any Pledged Revenues collected or received by the City after the above described payments have been made may be used for any lawful purpose. Reserve Account Pursuant to the Bond Ordinance, the City is required to maintain in the Reserve Account created thereunder an amount equal to the maximum amount of principal and interest on all Bonds Outstanding thereunder becoming due and payable in any ensuing Bond Year (the "Reserve Requirement"), which sum must be fully funded upon the issuance of any Additional Parity Obligations. Moneys in the Reserve Account may be used only for the purposes of paying maturing principal of or interest on the Bonds (1) when the other moneys in the Sinking Fund are 8

15 insufficient therefor, or (2) when moneys in the Reserve Account exceed the amount required to be deposited therein, and for no other purpose. Any deficiencies in the Reserve Account shall be subsequently made up from the first Pledged Revenues available after all required current payments to the Sinking Fund, including deficiencies for prior payments, have been made in full. As of the date of issuance of the 2007 Bonds, the Reserve Requirement with respect to the Parity Bonds and the 2007 Bonds will be $57,172,680, which represents the Maximum Annual Debt Service on the 2007 Bonds and the Parity Bonds. The Bond Ordinance provides that the Reserve Account shall be applicable pro rata to all Bonds, and that the payments to be made into the Reserve Account shall be increased proportionately to provide a reserve equal to the Reserve Requirement established in the Bond Ordinance for Bonds. The Bond Ordinance further provides that notwithstanding the foregoing, in lieu of the required deposits of Pledged Revenues into the Reserve Account, the City may deposit therein any combination of cash and Reserve Account Credit Facilities aggregating the Reserve Requirement, calculated on an aggregate basis, for the equal benefit of the Registered Owners of the 2007 Bonds, the Parity Bonds and any Additional Parity Obligations issued thereafter. A Reserve Account Credit Facility issued by Financial Guaranty Insurance Company ("Financial Guaranty"), in the amount of $45,246,649 is currently on deposit in the Reserve Account. Three Reserve Account Credit Facilities issued by Ambac Assurance Corporation ("Ambac Assurance") in the amounts of $4,994,980, $1,469,512 and $1,104,219 respectively, are currently on deposit in the Reserve Account. Additionally, a Reserve Account Credit Facility issued by Financial Security Assurance Inc. ("Financial Security") in the amount of $1,439, is currently on deposit in the Reserve Account. Concurrently with the delivery of the 2007 Bonds, the City shall make a cash deposit to the Reserve Account equal to $2,917,774 (the "Cash Deposit"), which when added to the available amounts under the Reserve Account Credit Facilities currently on deposit therein shall equal the Reserve Requirement. The Cash Deposit and all five Reserve Account Credit Facilities secure the Parity Bonds, the 2007 Bonds and any Additional Parity Obligations issued hereafter. For additional terms of the Bond Ordinance related to the Reserve Account Credit Facilities and requirements and qualifications for Reserve Account Credit Facilities, see "APPENDIX B MATERIAL PROVISIONS OF BOND ORDINANCE" and "RESERVE ACCOUNT CREDIT FACILITIES," herein. Additional Parity Obligations The City has covenanted that no debt may be issued having a lien on the Pledged Revenues prior to the lien of the Parity Bonds, the 2007 Bonds and any Additional Parity Obligations. The City will not issue any Additional Parity Obligations payable from the Pledged Revenues on a parity with the Parity Bonds and the 2007 Bonds then Outstanding unless: 9

16 There shall have been obtained and filed with the Secretary of the Council of the City a certificate of an independent certified public accountant of suitable experience and responsibility: (a) stating that the books and records of the City relating to the collection and receipt of the proceeds of the Pledged Revenues have been audited by him or her; (b) setting forth the amount of Pledged Revenues received by the City for twelve (12) consecutive months within the twenty-four (24) consecutive months immediately preceding the date of delivery of such Additional Parity Obligations with respect to which such certificate is made; and (c) stating that the Pledged Revenues, for such twelve (12) consecutive months, equal or exceed 1.40 times the Maximum Annual Debt Service coming due in any ensuing Bond Year on the Bonds then outstanding and the Additional Parity Obligations proposed to be issued plus, so long as any Reserve Account Credit Facility is in effect, 100% of the amount drawn on a Reserve Account Credit Facility and related reasonable expenses incurred by the issuer thereof, plus interest on all such amounts (the "Policy Costs") then unpaid. For purposes of this paragraph, Pledged Revenues consisting of income received from investments in the Sinking Fund and Reserve Account shall be computed at the lowest of (i) the actual yield on such investments, or (ii) a yield equal to the bond equivalent yield on United States Treasury obligations having a maturity as nearly as possible equal to 180 days from the date of the certificate, as quoted daily in The Wall Street Journal, or (iii) 5.5% per annum on the funds on deposit in the Reserve Account. The Pledged Revenues for such twelve (12) consecutive month period may be adjusted by the independent certified public accountant to reflect changes in the rates of the Excise Taxes and in the application of the laws and ordinances imposing the Excise Taxes. Each ordinance authorizing the issuance of Additional Parity Obligations must recite that all of the covenants contained in the Ordinance will be applicable to such Additional Parity Obligations. The City shall not be in default in performing any of the covenants and obligations assumed under the Ordinance, and all payments therein required to have been made into the accounts and funds, as provided thereunder, shall have been made to the full extent required, including, without limitation, payment of Policy Costs then due and owing. The Additional Parity Obligations may be issued for any purpose authorized by the Act, shall bear interest payable semiannually (except for Capital Appreciation Bonds) on April 1 and October 1 of each year (or, in the case of variable rate indebtedness at more frequent intervals) and shall mature on October 1 of the year of maturity thereof. The City shall, from a portion of the proceeds of such Additional Parity Obligations, deposit into the Reserve Account an amount (and/or a Reserve Account Credit Facility which equals such amount) necessary to comply with the requirements of the Ordinance with respect to such deposits. If any Policy Costs shall be then due and owing, the prior written consent of the issuer of the related Reserve Account Credit Facility shall have been obtained. 10

17 Bonds for refunding and/or other purposes may be issued as Additional Parity Obligations without obtaining the certificate of an independent certified public accountant described above, if the City Treasurer shall certify that, after issuance of the Bonds of such series, the aggregate principal and interest coming due in each Bond Year on all Bonds of all series shall be the same or less than such aggregate principal and interest in such Bond Year prior to the issuance of such Additional Parity Obligations. Covenants Concerning Excise Taxes The City has covenanted that it will not repeal the ordinances now in effect levying the Excise Taxes comprising the Pledged Revenues and will not amend or modify such ordinances in any manner so as to impair or adversely affect the power and obligations of the City to levy and collect such Excise Taxes or impair or adversely affect in any manner the pledge of such Excise Taxes or the rights of the holders of the Parity Bonds, the 2007 Bonds and any Additional Parity Obligations (collectively, the "Bonds") or, so long as any Reserve Account Credit Facility is in effect, the rights of the issuer of the Reserve Account Credit Facility, or, except as provided below, reduce or revise the rates or the bases of the Excise Taxes. The City shall be unconditionally and irrevocably obligated, so long as any of the Bonds or interest thereon are outstanding and unpaid, to levy and collect such Excise Taxes, at the maximum rates permitted by law, to the extent necessary to pay the principal of and interest on the Bonds, and to make the other payments provided for in the Ordinance, including without limitation, Policy Costs. Reasonable revisions of the bases or the rates of Excise Taxes are permitted so long as the amount of Pledged Revenues in each fiscal year thereafter will be at least equal to 140% of the maximum amount of the principal of and interest on the Bonds becoming due and payable in any ensuing Bond Year, plus 100% of any Policy Costs then due and owing in such Bond year. See "SECURITY AND SOURCE OF PAYMENT OF THE 2007 BONDS" herein. Defeasance If, at any time, the City shall have paid, or shall have made provision for payment of the principal of and interest and redemption premium, if any, due or to become due on all or any portion of the 2007 Bonds at the times and in the manner stipulated in the Bond Ordinance, the pledge of and lien on the Pledged Revenues in favor of the Registered Owners of such 2007 Bonds shall no longer be in effect. For purposes of the preceding sentence, deposit of cash or Securities (or other investments approved by the Bond Insurer) in irrevocable trust with a banking institution or trust company for the sole benefit of the Registered Owners of the 2007 Bonds, the principal of and interest on which when received will be sufficient to make timely payments of the principal of and interest on all or a portion of the Outstanding 2007 Bonds, when due, shall be considered "provision for payment" for such 2007 Bonds. For additional information on defeasance requirements see "APPENDIX B MATERIAL PROVISIONS OF BOND ORDINANCE." 11

18 SECURITY AND SOURCE OF PAYMENT OF THE 2007 BONDS Authority The 2007 Bonds are being issued pursuant to the provisions of Chapter , Laws of Florida, Special Acts of 1992, as amended and supplemented, and other applicable provisions of law, including Chapters 166, 125, 202 and 205, Florida Statutes, and pursuant to Ordinance of the City enacted on June 28, 1977, as supplemented and amended, Ordinance , preserved thereby, enacted on June 24, 1970, as supplemented, amended and restated prior to March 25, 2003 (collectively, the "Original Ordinance"), and as further supplemented by Ordinance E of the City enacted on December 14, 2004, and as amended by Ordinance E enacted on October 25, 2005 (collectively, the "Bond Ordinance"). The Original Ordinance and the Bond Ordinance are referred to herein collectively as the "Ordinance." Composite extracts of material provisions of the Bond Ordinance are appended hereto as APPENDIX B. Pledged Revenues The 2007 Bonds are payable solely from and secured by a lien upon and pledge of the proceeds of the Utilities Services Taxes (as described below) and the Occupational License Taxes (as described below) imposed, collected and received by the City. Such Utilities Services Taxes and Occupational License Taxes are herein collectively referred to as the "Excise Taxes." The payment of the principal of and interest on the 2007 Bonds are additionally secured by a lien upon and pledge of the income received by the City from the investment of funds in the Sinking Fund and the Reserve Account. The Excise Taxes, such investment income and such available funds on deposit in the Construction Fund, if any, are collectively referred to herein as the "Pledged Revenues." The 2007 Bonds shall not be or constitute a general indebtedness of the City within the meaning of any constitutional, statutory or charter provision or limitation, but shall be payable solely from and secured by a lien upon and pledge of the Pledged Revenues. The full faith and credit of the City is not pledged to the payment of the principal of or interest on the 2007 Bonds. No owner of any of the 2007 Bonds shall ever have the right to require or compel the exercise of the ad valorem taxing power of the City for payment thereof and the 2007 Bonds shall not constitute a lien upon any property owned by or situated within the corporate territory of the City, except as provided in the Ordinance. The 2007 Bonds shall for all purposes be considered to be Additional Parity Obligations issued under the authority of the Original Ordinance, and shall be entitled to all the protection and security provided therein for Additional Parity Obligations. Utilities Services Taxes General. The Utilities Services Taxes are levied and collected under Section , Florida Statutes (the "Utilities Tax Statute"), Chapter 202, Florida Statutes and Chapters 790 and 792 of the Ordinance Code of the City, as amended and supplemented (the "UST Ordinances"). 12

19 The term "Utilities Services Taxes" includes (1) the tax as levied and collected by the City on every purchase of electricity, gas (natural, liquefied petroleum gas or manufactured) and water service within the corporate limits of the City, except within the Second, Third, Fourth and Fifth Urban Services Districts, under the authority of Section , Florida Statutes; (2) the tax levied and collected by the City on every purchase of grades No. 1 (kerosene), No. 2 and No. 3 fuel oil within the corporate limits of the City except within the Second, Third, Fourth and Fifth Urban Services Districts (the "Fuel Oil Tax"); and (3) the Discretionary Communications Services Tax (as defined below) levied and collected by the City on communications services, as discussed below. The rate of the tax imposed on all utilities services (other than fuel oil and communications services) is 10% of the payments received by the seller of the utility services from the purchaser of such utility services, which tax, in every case, is required to be collected from the purchaser of such utility services within the City and paid by such purchaser at the time of the purchaser's paying the seller's charge, but not less often than monthly (except said tax on water service which may be collected on a quarterly basis). There are imposed on every purchase of fuel oil the Fuel Oil Tax at a rate of not to exceed four cents per gallon and taxes on communications services as described in "Communications Services Simplified Tax Act" below. The UST Ordinances provide that it is unlawful for any seller of utility services to collect the price of any such sale without, at the same time, collecting the tax thereby imposed and levied in respect to such purchaser. Any seller failing to collect such tax at the time of collecting the price of any purchase shall be liable to the City for the amount of such tax in like manner as if the same had actually been paid to the seller. The Utilities Tax Statute prohibits the imposition of the Utilities Services Taxes on (and the UST Ordinances exempt from taxation) any fuel adjustment charge, which includes any increase in the cost of utility services to the ultimate consumer resulting from an increase in the cost of fuel to the utility subsequent to October 1, Fuel adjustment charges are required to be separately stated on bills for utility services. Also pursuant to the Utilities Tax Statute, purchases of natural gas or fuel oil by a public or private utility, either for resale or for use as fuel in the generation of electricity, are exempt from taxation. Pursuant to the UST Ordinances, sales of bottled water, purchases of fuel oil or kerosene for use as an aircraft engine fuel or propellant or for use in internal combustion engines, purchases by the United States, the State of Florida, the City and agencies, boards, commissions and authorities thereof, and purchases by recognized churches for exclusively church purposes are exempted from the Utilities Services Taxes. In addition, the Utilities Tax Statute, permits municipalities to exempt any amount, up to, and including, the first 500 kilowatt hours of electricity purchased per month for residential use and not less than 50 percent of the Utilities Services Taxes imposed on certain purchases of electrical energy located in enterprise zones. The City has implemented a 50 percent exemption from the Utilities Services Taxes imposed on electrical purchases by certain qualified businesses in a designated enterprise zone located in the northeast downtown section of the City for a period of five (5) years beginning not less than 30 days following notification to the applicable utility company 13

20 that an exemption has been authorized by the Department of Revenue in accordance with Section , Florida Statutes, and Ordinance of the City (collectively, the "Enterprise Zone Act"). Pursuant to the Enterprise Zone Act, the City may grant additional exemptions from the Utilities Services Taxes imposed on electrical purchases to additional qualified businesses that locate within the City's northeast downtown enterprise zone, or other enterprise zones in the City hereafter designated as such pursuant to Florida law. The Utilities Services Taxes pledged to the payment of the Parity Bonds and the 2007 Bonds do not include the similar taxes levied in the Second, Third, Fourth and Fifth Urban Services Districts. Communications Services Simplified Tax Act. The Communications Services Tax Simplification Act, enacted by Chapter , Laws of Florida, as amended by Chapter , Laws of Florida, and now codified in part as Chapter 202, Florida Statutes (the "CSTA") established, effective October 1, 2001, a communications services tax on the sale of communications services as defined in Section , Florida Statutes, and as of the same date repealed Section (9), Florida Statutes, which previously granted municipalities the authority to levy a utility services tax on the purchase of telecommunication services. Section , Florida Statutes, authorizes counties and municipalities to levy a discretionary communications services tax (i.e., the "Discretionary Communications Services Tax") on communications services, the revenues from which (i.e., the "Communications Services Tax Revenues") may be pledged for the repayment of current or future bonded indebtedness. Pursuant to Section , Florida Statutes, the Communications Services Tax was automatically levied at a statutory rate of 4.8% on October 1, 2001 without any action necessary by the City and automatically decreased to 4.5% on October 1, The City increased its rate to 5.1% pursuant to Ordinance E enacted on July 3, 2001 (the "CST Ordinance"). The CSTA also permits various add-on rates, which effectively permit municipalities to increase the rate. A municipality may increase its rates by 0.12% if the municipality does not charge permit fees for the installation and maintenance of wires in its rights-of-way (as is the case for the City). The City has elected in the CST Ordinance to impose this increase. Thus, the total Discretionary Communications Services Tax levied by the City is 5.22%. The Discretionary Communications Services Tax is levied on the purchase of "telecommunications service" which originated or terminated within the City of Jacksonville, with certain exemptions. "Telecommunications service" was defined to be local telephone service, toll telephone service, telegram or telegraph service, teletypewriter service, private communication service, cellular mobile telephone or telecommunication service or specialized mobile radio, pagers and paging service, but excluding Internet access service, cable service, electronic mail service, electronic bulletin board service, or similar on-line computer service. Those portions of the Utilities Services Taxes which were formerly derived from telecommunications services and television cable services were impacted by the CSTA. The new local option tax on communication services provided for in the CSTA replaced those and other revenues previously received by governmental entities from the imposition of taxes and fees on telecommunication services. The CSTA does not, however, provide for a method of allocation of the 14

21 Discretionary Communications Services Tax between the portion thereof which replaced those portions of the Utilities Services Tax which were derived from telecommunications services and television cable services and the portion thereof which replaced other fees previously collected by the City, including franchise fees imposed upon telecommunications and cable television service providers ("Communications Franchise Fees"). The City has previously pledged its revenues from certain utility franchise fees, including Communications Franchise Fees, to the payment of its Capital Improvement Revenue Bonds, Series 1994 (Gator Bowl Project), its Capital Improvement Revenue Bonds, Series 1995 (Gator Bowl Project), its Capital Improvement Revenue Bonds, Series 1997 (Gator Bowl Project), its Capital Improvement and Refunding Revenue Bonds, Series 1998 (Stadium Project), its Capital Improvement Revenue Bonds, Series 2002A, its Capital Improvement and Refunding Revenue Bonds, Crossover Series 2002B, its Capital Improvement and Refunding Revenue Bonds, Crossover Series 2002C and all bonds issued on a parity therewith (the "Franchise Fee Bonds"). It was necessary, therefore, that the City provide for an allocation of the Discretionary Communications Services Tax between the portion allocable to the replacement of the Utilities Services Tax (which is pledged to the payment of the Bonds) and the portion allocable to the replacement of the Communications Franchise Fees (which is pledged to the payment of the Franchise Fee Bonds). Because the CST Law provides no guidance related to such allocation, and no such guidance has been provided by regulation or court interpretation, the City, in Ordinance No E enacted on November 13, 2001, created an allocation based upon a proration of the total aggregate amount of Utilities Services Tax and Communications Franchise Fees received in calendar year 1999, which is the "base year" utilized in the CSTA for the calculation of initial rates for the Discretionary Communications Services Tax. It is possible that the CSTA could be amended to provide for some other allocation or that a court, in the future, could interpret the CST Law to require a different allocation. In such case, the City will apply the allocation mandated by law. Because of the adoption of the CSTA, and in order to establish the allocation described in the preceding paragraph, the definition of "Utilities Services Taxes" in the Bond Ordinance has been amended to read as follows: "Utilities Services Taxes" shall mean the proceeds of: (a) The tax as levied and collected by the City pursuant to Chapter 790 of the Ordinance Code of the City, now entitled "Public Service Tax General," on every purchase of electricity, gas (natural, liquefied petroleum gas or manufactured) and water service within the corporate limits of the First Urban Services District under the authority of Section (formerly Section ), Florida Statutes; (b) The tax on such above-described utilities services as extended, levied and imposed throughout the remainder of the County, except the Second, Third, Fourth and Fifth Urban Services Districts, pursuant to Chapter 790 of the Ordinance Code of the City; (c) The Fuel Oil Tax; and 15

22 (d) The Pledged Discretionary Communications Services Tax. The Bond Ordinance defines the term "Pledged Discretionary Communications Services Tax" as 85% of the proceeds of the Discretionary Communications Services Tax. The Bond Ordinance also pledges the Pledged Discretionary Communications Services Tax to the Parity Bonds and the Additional Parity Obligations. The following outlines certain of the provisions of the CST Law. As noted above, the CST Law is extensive and the following descriptions are not, and are not intended to be, comprehensive or definitive. The full text of the CST Law has been codified as Chapter 202, Florida Statutes. One effect of the CSTA was to replace the former telecommunications tax, including prepaid calling arrangements, as well as any revenues from franchise fees on cable and telecommunication service providers and permit fees relating to placing or maintaining facilities in rights-of-way collected from providers of certain telecommunications services, with the local communications services tax. This change in law was intended to be revenue neutral to the counties and municipalities. The Communications Services Tax is applied to a broader base of communications services than the former telecommunications tax. "Communication services" are defined as the transmission, conveyance, or routing of voice, data, audio, video, or any other information or signals, including cable services, to a point, or between or among points, by or through any electronic, radio, satellite, cable, optical, microwave, or other medium or method now in existence or hereafter devised, regardless of the protocol used for such transmission or conveyance. The term does not include: (a) (b) (c) (d) (e) (f) (g) Information services. Installation or maintenance of wiring or equipment on a customer's premises. The sale or rental of tangible personal property. The sale of advertising, including, but not limited to, directory advertising. Bad check charges. Late payment charges. Billing and collection services. (h) Internet access service, electronic mail service, electronic bulletin board service, or similar on-line services. However, such services have historically been taxed if the charges for such services are not stated separately, on a customer's bill, from the charges for communications services. 16

23 The sale of communications services to (i) the federal government, or any instrumentality or agency thereof, or any entity that is exempt from state taxes under federal law, (ii) the state or any county, municipality or political subdivision of the state when payment is made directly to the dealer by the governmental entity, and (iii) any educational institution (which includes state taxsupported and nonprofit private schools, colleges and universities and nonprofit libraries, art galleries and museums, among others) or religious institutions (which includes, but is not limited to, organizations having an established physical place for worship at which nonprofit religious services and activities are regularly conducted) that is exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the "Code") is exempt from the Communications Services Tax. The CSTA provides that, to the extent that a provider of communications services is required to pay a tax, charge, or other fee under any franchise agreement or ordinance with respect to the services or revenues that are also subject to the Communications Services Tax, such provider is entitled to a credit against the amount of such Communications Services Tax payable to the State in the amount of such tax, charge, or fee with respect to such service or revenues. Under the CSTA, local governments must work with the Florida Department of Revenue (the "FDOR") to properly identify service addresses to each municipality and county. If a jurisdiction fails to provide the FDOR with accurate service address information, the local government risks losing tax proceeds that it should properly receive. The City believes it has provided the FDOR with all information that the FDOR has requested as of the date hereof and that such information is accurate. Providers of communications services collect the local Communications Services Tax and may deduct 0.75% as a collection fee (or 0.25% in the case of providers who do not employ an enhanced zip code database or a data base that is either supplied or certified by the FDOR). The communications providers remit the remaining proceeds to the FDOR for deposit into the Local Communications Services Tax Clearing Trust Fund (the "Trust Fund"). The FDOR then makes monthly contributions from the Trust Fund to local governments after deducting up to 1% of the total revenues generated as an administrative fee. The Communications Services Tax which the City has pledged does not include revenues received pursuant to Section , Florida Statutes. Federal Legislation Affecting the Discretionary Communications Services Tax. The federal Internet Tax Freedom Act ("ITFA") imposes a moratorium on taxation of Internet access by states and political subdivisions. As amended by the Internet Tax Nondiscrimination Act ("ITNA"), the ITFA may have a material adverse effect upon future collections of the Communications Services Tax Revenues. Signed by President George W. Bush on December 3, 2004, the ITNA extends the ITFA until November 1, The ITFA expired November 1, 2003, but the changes in the ITNA were made retroactively effective to that date. Federal legislation has been proposed to permanently eliminate the expiration date of the ITFA. However, no such legislation has been passed. "Internet access" as amended by the ITNA now includes telecommunications services "purchased, used, or sold by a provider of Internet access to provide Internet access." Additionally, the ITFA allows 17

24 providers of communication services to exclude from taxation charges for Internet access services which are bundled for a single price with taxable communication services. Providers opting to exempt these charges can do so based on their books and records kept in the normal course of business. Prior to December 3, 2004, under the CSSA, according to the Florida Department of Revenue, when charges for Internet access services are not separately stated on a customer's bill, the entire charge is taxed, regardless of whether the charge includes Internet access or telecommunications services used to provide Internet access. The negative impact on future collections of Communications Services Tax Revenues because of the ITNA cannot be determined at this time; however, the City believes that it will not affect its ability to pay principal and interest on the 2007 Bonds. The amount of Communications Services Tax Revenues received by the City is subject to increase or decrease due to (i) increases or decreases in the dollar volume of taxable sales within the City, (ii) legislative changes, and/or (iv) technological advances which could affect consumer preferences, such as Voice over Internet Protocol ("VoIP"). VoIP is a less expensive technology that allows telephone calls to be made in digital form using a broadband Internet connection, rather than an analog phone line, and has the potential to supplant traditional telephone service. It is possible that VoIP could either reduce the dollar volume of taxable sales within the City or will be a nontaxable service altogether. Regarding any potential legislative changes, the contract clause of the Florida and United States Constitutions should prevent the State from adopting legislation to amend the CSSA in a manner that would impair the contractual obligations of the City to Bondholders pursuant to the Ordinance. Following is a record of Utilities Services Taxes, excluding the Fuel Oil Tax, collected by the City for the five fiscal years and for the first nine months of the and fiscal years: Utilities Services Taxes (1) (in thousands) Audited JEA (Electric) (2) $42,858 $45,982 $45,740 $46,851 $48,131 JEA (Water) 5,393 5,660 6,162 6,384 7,748 Telecommunications 34,588 35,186 34,896 36,844 38,229 Peoples Gas ,230 Miscellaneous 2,111 1,954 1,911 2,093 2,025 Total $85,544 $89,459 $89,363 $92,848 $97,363 (1) Excludes Fuel Oil Tax. (2) Electricity purchases only. Source: City of Jacksonville, Comprehensive Annual Financial Report for the Fiscal Year ended September 30,

25 First 9 Months FY First 9 Months FY Percent Change JEA (Electric) $29,039 $28,974 (0.22)% JEA (Water) 5,489 6, Telecommunications 24,678 22,046 (10.67) Peoples Gas 803 1, Miscellaneous 1,639 1,395 (14.89) Total $61,648 $60,103 (2.50)% Source: City of Jacksonville, Department of Administration and Finance. The JEA, an independent authority which provides electric and water and sewer utilities services, recently approved a series of electric base rate increases, the first in over a decade. The increases will be phased in, beginning with a 6.5% increase effective October 1, 2007, followed by 5.5%, 5.3%, and 3% increases respectively effective on October 1 in the years 2009 through In addition, on October 1, 2007, the JEA will implement the last of three 7% annual water and sewer rate increases. The Utilities Services Taxes are levied on payments received by the seller of utility services, accordingly to the extent these rate increases generate additional revenues to the JEA, the Utilities Services Taxes may also increase. Following is a record of the Fuel Oil Tax portion of the Utilities Services Taxes collected by the City during the past five fiscal years and for the first nine months of the and fiscal years: Fuel Oil Tax (1) Audited Fuel Oil Tax $164,199 $162,835 $107,075 $112,633 $149,827 First 9 Months Collections Percentage Change FY $74, FY , % Source: City of Jacksonville, Department of Administration and Finance. (1) The Fuel Oil Tax revenues for the Fiscal Years and include amounts remitted and now disputed by a fuel oil distributor. See "LITIGATION" herein for additional information. Over the past years there has been a significant decrease in fuel oil consumption. Through conservation methods and the modernization of heating and air conditioning systems by residents and industry, the reliance upon fuel oil-based systems has been greatly reduced. Most existing residential and industrial systems, as well as systems associated with new construction, now rely on electric power. 19

26 Occupational License Taxes The Occupational License Taxes authorized by Chapters 166 and 205, Florida Statutes, are composed of the proceeds of the tax levied and collected by the City pursuant to Sections and , Florida Statutes, and Chapters 770 and 772 of the Ordinance Code of the City, as amended and supplemented, imposing occupational license taxes upon businesses, professions and occupations operated and conducted within the corporate limits of the City, except all such municipal occupational license taxes which are collected with respect to businesses operated in the Second, Third, Fourth and Fifth Urban Services Districts. The Occupational License Taxes are imposed annually at various rates for different businesses, professions and occupations. Chapters 770 and 772 of the Ordinance Code of the City prohibit a person from engaging in or managing a business, profession or occupation in the City for which an occupational license is required pursuant to such chapters unless such a license is procured from the Tax Collector. The occupational licenses are sold by September 1 of each year, the taxes for which are due and payable October 1 of each year. Such licenses expire on September 30 of the succeeding year. A person not liable for a tax in the first half of the year may obtain a license for the second half of the year at one-half of the applicable tax rate. Excluded from the Occupational License Taxes are customary religious, charitable or educational activities of non-profit religious, charitable and educational institutions in the State. Disabled persons physically incapable of manual labor, widows with dependent minors and persons 65 years of age or older, with not more than one employee or helper, who reside in the City and use their own capital not in excess of $1,000, are exempt from the Occupational License Tax except with respect to engaging in certain specified activities. Disabled military veterans of armed conflict and unremarried widows of deceased disabled military veterans of armed conflict are exempt from Occupational License Taxes to the extent of $50. All farm, aquaculture, grove, horticultural, floricultural, tropical piscicultural and tropical fish farm products and products manufactured therefrom, except intoxicating liquors, wine or beer, are also exempt from Occupational License Taxes when being offered or sold by the farmer or grower producing the products. Managers of wholesale farm produce markets and operators of flea markets have the right to pay an Occupational License Tax of $200, which will entitle each tenant to operate without obtaining an individual license. Occupational License Taxes are not imposed upon the practicing of the religious tenets of a church. Charitable, religious, fraternal, youth, civic, service or other organizations making occasional sales or engaging in fund raising projects performed exclusively by the members, the proceeds of which are used exclusively for charitable, religious, fraternal, youth, civic or other service activities are also exempt from Occupational License Taxes, as are college and high school students selling pennants, badges, insignias and other novelties of schools with the approval of the athletic association or school. Pursuant to Chapter 205, Florida Statutes, no Occupational License Tax may be required of any licensed mobile home dealer or manufacturer to engage in setup operations. Chapter 205, Florida Statutes, also permits an exemption of 50% of the Occupational License Tax for businesses with permanent locations within an enterprise zone. 20

27 Following is a record of the Occupational License Taxes (excluding municipal occupational license tax collections from the Second, Third, Fourth and Fifth Urban Services Districts) collected during the past five fiscal years and for the first nine months of the and fiscal years: Occupational License Taxes (in thousands) Audited Occupational License Taxes $7,089 $7,493 $7,320 $8,143 $8,809 First 9 Months Collections Percentage Change FY $7, FY ,176 (9.96)% Source: City of Jacksonville, Department of Administration and Finance. Financial Guaranty Reserve Policy RESERVE ACCOUNT CREDIT FACILITIES General. Financial Guaranty Insurance Corporation ("Financial Guaranty") has previously issued a Reserve Account Credit Facility covering the Parity Bonds and any Additional Parity Obligations that may be issued (which includes the 2007 Bonds). Such Reserve Account Credit Facility is in the amount of $45,246,649. Reference is made to APPENDIX D for a copy of such Reserve Account Credit Facility issued by Finance Guaranty (the "Financial Guaranty Reserve Policy"). The Financial Guaranty Reserve Policy unconditionally guarantees the payment of that portion of the principal of and interest on the Bonds which has become due for payment, but shall be unpaid by reason of nonpayment by the City; provided that the aggregate amount paid under the Financial Guaranty Reserve Policy may not exceed the maximum amount set forth therein. Financial Guaranty will make such payments to the Deputy Registrar and Paying Agent for the Bonds on the later of the date on which such principal and interest is due or on the business day next following the date on which Financial Guaranty shall have received telephonic or telegraphic notice subsequently confirmed in writing or written notice by registered or certified mail from the Deputy Registrar and Paying Agent of the nonpayment of such amount by the City. The term "nonpayment" in respect of a Bond includes any payment of principal or interest made to an owner of a Bond which has been recovered from such owner pursuant to the United States Bankruptcy Code by a trustee in bankruptcy in accordance with a final nonappealable order of a court having competent jurisdiction. The Financial Guaranty Reserve Policy is non-cancellable, and the premium has been fully paid. The Financial Guaranty Reserve Policy covers failure to pay principal of the Bonds on their 21

28 respective stated maturity dates, or dates on which the same shall have been called for mandatory sinking fund redemption, and not on any other date on which the Bonds may have been accelerated, and cover the failure to pay an installment of interest on the stated date for its payment. The Financial Guaranty Reserve Policy shall terminate on October 1, Reference is made to APPENDIX D for a copy of the Financial Guaranty Reserve Policy. Generally, in connection with its issuance of a reserve policy, Financial Guaranty requires, among other things, (i) that, so long as it has not failed to comply with its payment obligations under the Reserve Policy, it be granted the power to exercise any remedies available at law or under the authorizing document other than (A) acceleration of the Bonds or (B) remedies which would adversely affect holders in the event that the City fails to reimburse Financial Guaranty for any draws on the Reserve Policy; and (ii) that any amendment or supplement to or other modification of the principal legal documents be subject to Financial Guaranty's consent. The Financial Guaranty Reserve Policy is not covered by the Property/Casualty Insurance Security Fund specified in Article 76 of the New York Insurance Law. The Financial Guaranty Reserve Policy is not covered by the Florida Insurance Guaranty Association (Florida Insurance Code et seq.) Financial Guaranty Insurance Company Financial Guaranty is a New York stock insurance corporation that writes financial guaranty insurance in respect of public finance and structured finance obligations and other financial obligations, including credit default swaps. Financial Guaranty is licensed to engage in the financial guaranty insurance business in all 50 states, the District of Columbia, the Commonwealth of Puerto Rico, the U.S. Virgin Islands and the United Kingdom. Financial Guaranty is a direct, wholly owned subsidiary of FGIC Corporation, a Delaware corporation. At June 30, 2007, the principal owners of FGIC Corporation and the approximate percentage of its outstanding common stock owned by each were as follows: The PMI Group, Inc. 42%; affiliates of the Blackstone Group L.P. 23%; and affiliates of the Cypress Group L.L.C. 23%. Neither FGIC Corporation nor any of its stockholders or affiliates is obligated to pay any debts of Financial Guaranty or any claims under any insurance policy, including the Policy, issued by Financial Guaranty. Financial Guaranty is subject to the insurance laws and regulations of the State of New York, where Financial Guaranty is domiciled, including New York's comprehensive financial guaranty insurance law. That law, among other things, limits the business of each financial guaranty insurer to financial guaranty insurance (and related lines); requires that each financial guaranty insurer maintain a minimum surplus to policyholders; establishes limits on the aggregate net amount of exposure that may be retained in respect of a particular issuer or revenue source (known as single risk limits) and on the aggregate net amount of exposure that may be retained in respect of particular types of risk as compared to the policyholders' surplus (known as aggregate risk limits); and establishes contingency, loss and unearned premium reserve requirements. In addition, 22

29 Financial Guaranty is also subject to the applicable insurance laws and regulations of all other jurisdictions in which it is licensed to transact insurance business. The insurance laws and regulations, as well as the level of supervisory authority that may be exercised by the various insurance regulators, vary by jurisdiction. At June 30, 2007, Financial Guaranty had net admitted assets of approximately $4.040 billion, total liabilities of approximately $2.944 billion, and total capital and policyholders' surplus of approximately $1.096 billion, determined in accordance with statutory accounting practices ("SAP") prescribed or permitted by insurance regulatory authorities. The unaudited financial statements as of June 30, 2007, and the audited consolidated financial statements of Financial Guaranty and subsidiaries, on the basis of U.S. generally accepted accounting principles ("GAAP"), as of December 31, 2006 and December 31, 2005, which will be filed with the Nationally Recognized Municipal Securities Information Repositories ("NRMSIRs"), are hereby included by specific reference in this Official Statement. Any statement contained herein under the heading "RESERVE ACCOUNT CREDIT FACILITIES," or in any documents included by specific reference herein, shall be modified or superseded to the extent required by any statement in any document subsequently filed by Financial Guaranty with such NRMSIRs, and shall not be deemed, except as so modified or superseded, to constitute a part of this Official Statement. All financial statements of Financial Guaranty (if any) included in documents filed by Financial Guaranty with the NRMSIRs subsequent to the date of this Official Statement and prior to the termination of the offering of the Bonds shall be deemed to be included by specific reference into this Official Statement and to be a part hereof from the respective dates of filing of such documents. The New York State Insurance Department recognizes only SAP for determining and reporting the financial condition and results of operations of an insurance company, for determining its solvency under the New York Insurance Law, and for determining whether its financial condition warrants the payment of a dividend to its stockholders. Although Financial Guaranty prepares both GAAP and SAP financial statements, no consideration is given by the New York State Insurance Department to financial statements prepared in accordance with GAAP in making such determinations. A discussion of the principal differences between SAP and GAAP is contained in the notes to Financial Guaranty's audited SAP financial statements. Copies of Financial Guaranty's most recently published GAAP and SAP financial statements are available upon request to: Financial Guaranty Insurance Company, 125 Park Avenue, New York, NY 10017, Attention: Corporate Communications Department. Financial Guaranty's telephone number is (212) Financial Guaranty's Credit Ratings The financial strength of Financial Guaranty is rated "AAA" by Standard & Poor's, a Division of The McGraw-Hill Companies, Inc., "Aaa" by Moody's Investors Service, and "AAA" by Fitch Ratings. Each rating of Financial Guaranty should be evaluated independently. The ratings reflect the respective ratings agencies' current assessments of the insurance financial strength of 23

30 Financial Guaranty. Any further explanation of any rating may be obtained only from the applicable rating agency. These ratings are not recommendations to buy, sell or hold the Bonds, and are subject to revision or withdrawal at any time by the rating agencies. Any downward revision or withdrawal of any of the above ratings may have an adverse effect on the market price of the Bonds. Financial Guaranty does not guarantee the market price or investment value of the Bonds nor does it guarantee that the ratings on the Bonds will not be revised or withdrawn. Neither Financial Guaranty nor any of its affiliates accepts any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure that is provided to potential purchasers of the 2007 Bonds, or omitted from such disclosure, other than with respect to the accuracy of information with respect to Financial Guaranty or the Financial Guaranty Reserve Policy. In addition, Financial Guaranty makes no representation regarding the 2007 Bonds or the advisability of investing in the 2007 Bonds. Ambac Assurance Surety Bond General. Ambac Assurance Corporation ("Ambac Assurance") has previously issued three Surety Bonds (collectively, the "Existing Ambac Surety Bonds") in the amount of $4,994,980, $1,469,512 and $1,104,219 respectively, for the purpose of funding a portion of the Reserve Account. The Existing Ambac Surety Bonds provide that upon the later of (i) one (1) day after receipt by Ambac Assurance of a demand for payment executed by the Deputy Registrar and Paying Agent certifying that provision for the payment of principal of or interest on the Bonds when due has not been made or (ii) the interest payment date specified in the demand for payment submitted to Ambac Assurance, Ambac Assurance will promptly deposit funds with the Deputy Registrar and Paying Agent sufficient to enable the Deputy Registrar and Paying Agent to make such payments due on the Bonds but in no event exceeding the Surety Bond Coverage, as defined in the Existing Ambac Surety Bonds. Reference is made to APPENDICES E, G and H for a copy of the Existing Ambac Surety Bonds. Pursuant to the terms of the Existing Ambac Surety Bonds, the Surety Bond Coverage is automatically reduced to the extent of each payment made by Ambac Assurance under the terms of the Existing Ambac Surety Bonds and the City is required to reimburse Ambac Assurance for any draws under the Existing Ambac Surety Bonds with interest at a market rate. Upon such reimbursement, the Existing Ambac Surety Bonds are reinstated to the extent of each principal reimbursement up to but not exceeding the Surety Bond Coverage. The reimbursement obligation of the City is subordinate to the City's obligations with respect to the Bonds. The Existing Ambac Surety Bonds terminate on October 1, 2026, October 1, 2032 and October 1, 2032, respectively. In the event the amount on deposit, or credited to the Reserve Account, exceeds the amount of the Existing Ambac Surety Bonds, any draw on the Existing Ambac Surety Bonds shall be made only after all the funds in the Reserve Account have been expended. In the event that the amount on deposit in, or credited to, the Reserve Account, in addition to the amount available under the Existing Ambac Surety Bonds, includes amounts available under a letter of credit, insurance policy, or surety bond, such as the Financial Guaranty Reserve Policy, and the Financial Security Policy (as 24

31 defined below) or other such funding instrument (the "Additional Funding Instrument"), draws on the Existing Ambac Surety Bonds and the Additional Funding Instrument shall be made on a pro rata basis to fund the insufficiency. The Existing Ambac Surety Bonds do not insure against nonpayment caused by the insolvency or negligence of the Deputy Registrar and Paying Agent. The insurance provided by the Existing Ambac Surety Bonds is not covered by the Florida Insurance Guaranty Association. Ambac Assurance Corporation Ambac Assurance is a Wisconsin-domiciled stock insurance corporation regulated by the Office of the Commissioner of Insurance of the State of Wisconsin, and is licensed to do business in 50 states, the District of Columbia, the Territory of Guam, the Commonwealth of Puerto Rico and the U.S. Virgin Islands, with admitted assets of approximately $10,391,000,000 (unaudited) and statutory capital of approximately $6,730,000,000 (unaudited) as of June 30, Statutory capital consists of Ambac Assurance's policyholders' surplus and statutory contingency reserve. Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc., Moody's Investors Service, Inc. and Fitch Ratings have each assigned a triple-a financial strength rating to Ambac Assurance. Ambac Assurance has obtained a ruling from the Internal Revenue Service to the effect that the insuring of an obligation by Ambac Assurance will not affect the treatment for federal income tax purposes of interest on such obligation and that insurance proceeds representing maturing interest paid by Ambac Assurance under policy provisions substantially identical to those contained in the Financial Guaranty Insurance Policy shall be treated for federal income tax purposes in the same manner as if such payments were made by the Obligor. Ambac Assurance makes no representation regarding the Bonds or the advisability of investing in the Bonds and makes no representation regarding, nor has it participated in the preparation of, this Official Statement other than the information supplied by Ambac Assurance and presented under the heading "RESERVE ACCOUNT CREDIT FACILITIES Ambac Assurance Surety Bond". Available Information The parent company of Ambac Assurance, Ambac Financial Group, Inc. (the "Company"), is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports, proxy statements and other information with the Securities and Exchange Commission (the "SEC"). These reports, proxy statements and other information can be read and copied at the SEC's public reference room at 100 F Street, N.E., Room 1580, Washington, D.C Please call the SEC at SEC-0330 for further information on the public reference room. The SEC maintains an internet site at that contains reports, proxy and information statements and other information regarding companies that file 25

32 electronically with the SEC, including the Company. These reports, proxy statements and other information can also be read at the offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, New York Copies of Ambac Assurance's financial statements prepared in accordance with statutory accounting standards are available from Ambac Assurance. The address of Ambac Assurance's administrative offices is One State Street Plaza, 19th Floor, New York, New York 10004, and its telephone number is (212) Incorporation of Certain Documents by Reference The following documents filed by the Company with the SEC (File No ) are incorporated by reference in this Official Statement: 1. The Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2006 and filed on March 1, 2007; 2. The Company's Current Report on Form 8-K dated and filed on April 25, 2007; 3. The Company's Quarterly Report on Form 10-Q for the fiscal quarterly period ended March 31, 2007 and filed on May 10, 2007; 4. The Company's Current Report on Form 8-K dated and filed on July 25, 2007; 5. The Company's Current Report on Form 8-K dated and filed on August 3, 2007; and 6. The Company's Quarterly Report on Form 10-Q for the fiscal quarterly period ended June 30, 2007 and filed on August 9, All documents subsequently filed by the Company pursuant to the requirements of the Exchange Act after the date of this Official Statement will be available for inspection in the same manner as described above in "Available Information." Financial Security Reserve Policy General. Financial Security Assurance Inc. ("Financial Security") has previously issued a Reserve Account Credit Facility in the amount of $1,439, for the purpose of funding a portion of the Reserve Account (the "Financial Security Policy"). The Financial Security Policy provides that Financial Security will make payment as on the later of the Business Day on which such principal and interest becomes due for payment or the Business Day next following the Business Day on which Financial Security shall have received Notice of Nonpayment to the Deputy Registrar and Paying Agent. The amount available under the Financial Security Policy shall not exceed $1,439, and shall automatically be reduced by any payment under the Financial Security Policy and by the reduction in Reserve Requirement. However, after such payment, the amount available shall be reinstated in full or in part, but only up to $1,439,546.25, to the extent of the 26

33 reimbursement of such payment (exclusive of interest and expenses) to Financial Security. The Policy terminates on October 1, Reference is made to APPENDIX F for a copy of the Financial Security Policy. The Financial Security Policy is not covered by the Property/Casualty Insurance Security Fund specified in Article 76 of the New York Insurance Law. Financial Security Assurance Inc. Financial Security is a New York domiciled financial guaranty insurance company and a wholly owned subsidiary of Financial Security Assurance Holdings Ltd. ("Holdings"). Holdings is an indirect subsidiary of Dexia, S.A., a publicly held Belgian corporation, and of Dexia Credit Local, a direct wholly-owned subsidiary of Dexia, S.A. Dexia, S.A., through its bank subsidiaries, is primarily engaged in the business of public finance, banking and asset management in France, Belgium and other European countries. No shareholder of Holdings or Financial Security is liable for the obligations of Financial Security. At June 30, 2007, Financial Security's combined policyholders' surplus and contingency reserves were approximately $2,642,612,000 and its total net unearned premium reserve was approximately $2,116,401,000 in accordance with statutory accounting principles. At June 30, 2007, Financial Security's consolidated shareholder's equity was approximately $2,686,026,000 and its total net unearned premium reserve was approximately $1,655,217,000 in accordance with generally accepted accounting principles. The consolidated financial statements of Financial Security included in, or as exhibits to, the annual and quarterly reports filed after December 31, 2005 by Holdings with the Securities and Exchange Commission are hereby incorporated by reference into this Official Statement. All financial statements of Financial Security included in, or as exhibits to, documents filed by Holdings pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 after the date of this Official Statement and before the termination of the offering of the 2007 Bonds shall be deemed incorporated by reference into this Official Statement. Copies of materials incorporated by reference will be provided upon request to Financial Security Assurance Inc.: 31 West 52nd Street, New York, New York 10019, Attention: Communications Department (telephone (212) ). The Financial Security Policy does not protect investors against changes in market value of the Bonds, which market value may be impaired as a result of changes in prevailing interest rates, changes in applicable ratings or other causes. Financial Security makes no representation regarding the Bonds or the advisability of investing in the Bonds. Financial Security makes no representation regarding the Official Statement, nor has it participated in the preparation thereof, except that Financial Security has provided to the Issuer the information presented under this caption for inclusion in the Official Statement. 27

34 MUNICIPAL BOND INSURANCE General THE FOLLOWING INFORMATION UNDER THIS HEADING HAS BEEN FURNISHED BY MBIA INSURANCE CORPORATION (THE "INSURER") FOR USE IN THIS OFFICIAL STATEMENT. REFERENCE IS MADE TO APPENDIX I FOR A SPECIMEN OF THE INSURER'S BOND INSURANCE POLICY (THE "BOND INSURANCE POLICY"). NO REPRESENTATION IS MADE BY THE CITY AS TO THE ACCURACY OR ADEQUACY OF SUCH INFORMATION OR THAT THERE HAS NOT BEEN ANY MATERIAL ADVERSE CHANGE IN SUCH INFORMATION SUBSEQUENT TO THE DATE OF SUCH INFORMATION. THE CITY HAS NOT MADE ANY INVESTIGATION INTO THE FINANCIAL CONDITION OF THE INSURER, AND NO REPRESENTATION IS MADE AS TO THE ABILITY OF THE INSURER TO MEET ITS OBLIGATIONS UNDER THE BOND INSURANCE POLICY. The Insurer 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 the Bond Insurance Policy and the Insurer set forth under the heading "MUNICIPAL BOND INSURANCE." Additionally, the Insurer makes no representation regarding the 2007 Bonds or the advisability of investing in the 2007 Bonds. The MBIA Insurance Corporation Insurance Policy The Bond Insurance Policy unconditionally and irrevocably guarantees the full and complete payment required to be made by or on behalf of the City to the Deputy Registrar and Paying Agent or its successor of an amount equal to (i) the principal of (either at the stated maturity or by an advancement of maturity pursuant to a mandatory sinking fund payment) and interest on, the 2007 Bonds as such payments shall become due but shall not be so paid (except that in the event of any acceleration of the due date of such principal by reason of mandatory or optional redemption or acceleration resulting from default or otherwise, other than any advancement of maturity pursuant to a mandatory sinking fund payment, the payments guaranteed by the Bond Insurance Policy shall be made in such amounts and at such times as such payments of principal would have been due had there not been any such acceleration, unless the Insurer elects in its sole discretion, to pay in whole or in part any principal due by reason of such acceleration); and (ii) the reimbursement of any such payment which is subsequently recovered from any Owner of the 2007 Bonds pursuant to a final judgment by a court of competent jurisdiction that such payment constitutes an avoidable preference to such Owner within the meaning of any applicable bankruptcy law (a "Preference"). The Bond Insurance Policy does not insure against loss of any prepayment premium which may at any time be payable with respect to any 2007 Bonds. The Bond Insurance Policy does not, under any circumstance, insure against loss relating to: (i) optional or mandatory redemptions (other than mandatory sinking fund redemptions); (ii) any payments to be made on an accelerated 28

35 basis; (iii) payments of the purchase price of 2007 Bonds upon tender by an owner thereof; or (iv) any Preference relating to (i) through (iii) above. The Bond Insurance Policy also does not insure against nonpayment of principal of or interest on the 2007 Bonds resulting from the insolvency, negligence or any other act or omission of the Deputy Registrar and Paying Agent or any other paying agent for the 2007 Bonds. Upon receipt of telephonic or telegraphic notice, such notice subsequently confirmed in writing by registered or certified mail, or upon receipt of written notice by registered or certified mail, by the Insurer from the Deputy Registrar and Paying Agent or any owner of a 2007 Bond the payment of an insured amount for which is then due, that such required payment has not been made, the Insurer on the due date of such payment or within one business day after receipt of notice of such nonpayment, whichever is later, will make a deposit of funds, in an account with U.S. Bank Trust National Association, in New York, New York, or its successor, sufficient for the payment of any such insured amounts which are then due. Upon presentment and surrender of such 2007 Bonds or presentment of such other proof of ownership of the 2007 Bonds, together with any appropriate instruments of assignment to evidence the assignment of the insured amounts due on the 2007 Bonds as are paid by the Insurer, and appropriate instruments to effect the appointment of the Insurer as agent for such owners of the 2007 Bonds in any legal proceeding related to payment of insured amounts on the 2007 Bonds, such instruments being in a form satisfactory to U.S. Bank Trust National Association, U.S. Bank Trust National Association shall disburse to such owners or the Deputy Registrar and Paying Agent payment of the insured amounts due on such 2007 Bonds, less any amount held by the Deputy Registrar and Paying Agent for the payment of such insured amounts and legally available therefor. MBIA Insurance Corporation MBIA Insurance Corporation ("MBIA") is the principal operating subsidiary of MBIA Inc., a New York Stock Exchange listed company (the "Company"). The Company is not obligated to pay the debts of or claims against MBIA. MBIA is domiciled in the State of New York and licensed to do business in and subject to regulation under the laws of all 50 states, the District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands, the Virgin Islands of the United States and the Territory of Guam. MBIA, either directly or through subsidiaries, is licensed to do business in the Republic of France, the United Kingdom and the Kingdom of Spain and is subject to regulation under the laws of those jurisdictions. In February 2007, MBIA Corp. incorporated a new subsidiary, MBIA México, S.A. de C.V. ("MBIA Mexico"), through which it intends to write financial guarantee insurance in Mexico beginning in The principal executive offices of MBIA are located at 113 King Street, Armonk, New York and the main telephone number at that address is (914) Regulation As a financial guaranty insurance company licensed to do business in the State of New York, MBIA is subject to the New York Insurance Law which, among other things, prescribes 29

36 minimum capital requirements and contingency reserves against liabilities for MBIA, limits the classes and concentrations of investments that are made by MBIA and requires the approval of policy rates and forms that are employed by MBIA. State law also regulates the amount of both the aggregate and individual risks that may be insured by MBIA, the payment of dividends by MBIA, changes in control with respect to MBIA and transactions among MBIA and its affiliates. The Policy is not covered by the Property/Casualty Insurance Security Fund specified in Article 76 of the New York Insurance Law. Financial Strength Ratings of MBIA Moody's Investors Service, Inc. rates the financial strength of MBIA "Aaa." Standard & Poor's, a division of The McGraw-Hill Companies, Inc., rates the financial strength of MBIA "AAA." Fitch Ratings rates the financial strength of MBIA "AAA." Each rating of MBIA should be evaluated independently. The ratings reflect the respective rating agency's current assessment of the creditworthiness of MBIA and its ability to pay claims on its policies of insurance. Any further explanation as to the significance of the above ratings may be obtained only from the applicable rating agency. The above ratings are not recommendations to buy, sell or hold the 2007 Bonds, and such ratings may be subject to revision or withdrawal at any time by the rating agencies. Any downward revision or withdrawal of any of the above ratings may have an adverse effect on the market price of the 2007 Bonds. MBIA does not guaranty the market price of the 2007 Bonds nor does it guaranty that the ratings on the 2007 Bonds will not be revised or withdrawn. MBIA Financial Information As of December 31, 2006, MBIA had admitted assets of $10.9 billion (audited), total liabilities of $6.9 billion (audited), and total capital and surplus of $4.0 billion (audited) determined in accordance with statutory accounting practices prescribed or permitted by insurance regulatory authorities. As of June 30, 2007, MBIA had admitted assets of $10.8 billion (unaudited), total liabilities of $6.8 billion (unaudited), and total capital and surplus of $4.0 billion (unaudited) determined in accordance with statutory accounting practices prescribed or permitted by insurance regulatory authorities. For further information concerning MBIA, see the consolidated financial statements of MBIA and its subsidiaries as of December 31, 2006 and December 31, 2005 and for each of the three years in the period ended December 31, 2006, prepared in accordance with generally accepted accounting principles, included in the Annual Report on Form 10-K of the Company for the year ended December 31, 2006 and the consolidated financial statements of MBIA and its subsidiaries as of June 30, 2007 and for the six month periods ended June 30, 2007 and June 30, 2006 included in the 30

37 Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2007, which are hereby incorporated by reference into this Official Statement and shall be deemed to be a part hereof. Copies of the statutory financial statements filed by MBIA with the State of New York Insurance Department are available over the Internet at the Company's web site at and at no cost, upon request to MBIA at its principal executive offices. Incorporation of Certain Documents by Reference The following documents filed by the Company with the Securities and Exchange Commission (the "SEC") are incorporated by reference into this Official Statement: (1) The Company's Annual Report on Form 10-K for the year ended December 31, 2006; and (2) The Company's Quarterly Report on Form 10-Q for the quarter ended June 30, Any documents, including any financial statements of MBIA and its subsidiaries that are included therein or attached as exhibits thereto, filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of the Company's most recent Quarterly Report on Form 10-Q or Annual Report on Form 10-K, and prior to the termination of the offering of the 2007 Bonds offered hereby shall be deemed to be incorporated by reference in this Official Statement and to be a part hereof from the respective dates of filing such documents. Any statement contained in a document incorporated or deemed to be incorporated by reference herein, or contained in this Official Statement, shall be deemed to be modified or superseded for purposes of this Official Statement to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Official Statement. The Company files annual, quarterly and special reports, information statements and other information with the SEC under File No Copies of the Company's SEC filings (including (1) the Company's Annual Report on Form 10-K for the year ended December 31, 2006, and (2) the Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, 2007 and June 30, 2007) are available (i) over the Internet at the SEC's web site at (ii) at the SEC's public reference room in Washington D.C.; (iii) over the Internet at the Company's web site at and (iv) at no cost, upon request to MBIA at its principal executive offices. The insurance provided by the Bond Insurance Policy is not covered by the Florida Insurance Guaranty Association created under chapter 631, Florida Statutes. 31

38 SOURCES AND USES OF FUNDS Principal Amount of the 2007 Bonds $42,245, Plus: Net Original Premium 1,147, TOTAL $43,392, Uses: Costs of the Project (1) $40,000, Deposit to Reserve Account 2,917, Underwriter's Discount (2) 285, Costs of Issuance (3) 189, TOTAL $43,392, (1) To be deposited to Project Fund for application to payment of Costs of the Project. (2) Includes the premium for the Bond Insurance Policy issued in connection with the issuance of the 2007 Bonds, the purchase of which was at the option and the expense of the Underwriter. (3) Includes legal fees and other costs of issuance. 32

39 COMBINED DEBT SERVICE SCHEDULE 2007 BONDS AND OUTSTANDING PARITY BONDS Bond Year Ending October 1, Principal Interest Total 2007 Debt Service Net Debt Service on Outstanding Parity Bonds (1) Total Debt Service 2007 $53,149,938 $53,149, $950,000 $1,967,774 $2,917,774 54,254,906 57,172, ,015,000 1,903,400 2,918,400 51,901,677 54,820, ,060,000 1,857,725 2,917,725 37,258,767 40,176, ,105,000 1,815,325 2,920,325 42,406,247 45,326, ,145,000 1,771,125 2,916,125 38,199,533 41,115, ,190,000 1,731,050 2,921,050 38,398,457 41,319, ,235,000 1,683,450 2,918,450 35,410,431 38,328, ,285,000 1,634,050 2,919,050 35,633,079 38,552, ,335,000 1,582,650 2,917,650 32,069,266 34,986, ,390,000 1,529,250 2,919,250 26,716,052 29,635, ,445,000 1,473,650 2,918,650 26,945,969 29,864, ,505,000 1,415,850 2,920,850 27,197,178 30,118, ,560,000 1,355,650 2,915,650 25,236,956 28,152, ,640,000 1,277,650 2,917,650 17,177,431 20,095, ,720,000 1,195,650 2,915,650 17,173,259 20,088, ,810,000 1,109,650 2,919,650 17,175,275 20,094, ,900,000 1,019,150 2,919,150 15,582,013 18,501, ,995, ,150 2,919,150 15,578,875 18,498, ,095, ,400 2,919,400 13,408,738 16,328, ,200, ,650 2,919,650 10,587,838 13,507, ,310, ,650 2,919,650 9,470,144 12,389, ,410, ,700 2,915,700 9,466,600 12,382, ,520, ,250 2,917,250 9,468,675 12,385, ,645, ,250 2,916,250 9,466,806 12,383, ,780, ,000 2,919,000 9,464,244 12,383,244 TOTAL $42,245,000 $30,714,099 $72,959,099 $678,798,353 $751,757,452 (1) This column represents the net debt service on outstanding Parity Bonds. This debt service is net of the capitalized interest associated with the 2003A Bonds and the 2005A Bonds. Interest is capitalized on the 2003A Bonds until October 1, Interest is capitalized on the 2005A Bonds until November 10,

40 CITY OF JACKSONVILLE ANALYSIS OF DEBT SERVICE COVERAGE FROM PLEDGED REVENUES Bond Year Ending October 1, Utilities Services Taxes (1) Fuel Oil Tax (1) Occupational License Taxes (1) Pledged Revenues Combined Debt Service (2) Pledged Revenues Coverage 2007 $97,363,000 $149,827 $8,809,000 $106,321,827 $53,149, ,363, ,827 8,809, ,321,827 57,172, ,363, ,827 8,809, ,321,827 54,820, ,363, ,827 8,809, ,321,827 40,176, ,363, ,827 8,809, ,321,827 45,326, ,363, ,827 8,809, ,321,827 41,115, ,363, ,827 8,809, ,321,827 41,319, ,363, ,827 8,809, ,321,827 38,328, ,363, ,827 8,809, ,321,827 38,552, ,363, ,827 8,809, ,321,827 34,986, ,363, ,827 8,809, ,321,827 29,635, ,363, ,827 8,809, ,321,827 29,864, ,363, ,827 8,809, ,321,827 30,118, ,363, ,827 8,809, ,321,827 28,152, ,363, ,827 8,809, ,321,827 20,095, ,363, ,827 8,809, ,321,827 20,088, ,363, ,827 8,809, ,321,827 20,094, ,363, ,827 8,809, ,321,827 18,501, ,363, ,827 8,809, ,321,827 18,498, ,363, ,827 8,809, ,321,827 16,328, ,363, ,827 8,809, ,321,827 13,507, ,363, ,827 8,809, ,321,827 12,389, ,363, ,827 8,809, ,321,827 12,382, ,363, ,827 8,809, ,321,827 12,385, ,363, ,827 8,809, ,321,827 12,383, ,363, ,827 8,809, ,321,827 12,383, (1) This table is based upon Pledged Revenues for the twelve month period ended September 30, 2006 (unaudited) and assumes such revenues will remain constant through the year See "SECURITY FOR AND SOURCE OF PAYMENT OF THE 2007 BONDS - Utilities Services Taxes" for a complete description of Pledged Revenues. (2) Includes debt service for 2007 Bonds and Parity Bonds as referenced on the Combined Debt Service Schedule. Government THE CITY OF JACKSONVILLE The City of Jacksonville established a consolidated government on October 1, 1968, which extends throughout the county land area, except that the cities of Atlantic Beach, Neptune Beach, Jacksonville Beach (the "Beaches Communities") and the Town of Baldwin retain their local governments for the performance of certain municipal functions. The City has grown from 39 square miles to 841 square miles and is the largest city in land area located in the contiguous United States. 34

41 The territory of the consolidated government is divided into a General Services District, consisting of the total area of Duval County, and five urban services districts consisting of the areas within each of the Beaches Communities, the Town of Baldwin and the territory of the former, preconsolidation City of Jacksonville. The consolidated government furnishes certain services in the General Services District, including airports, courts, electricity, fire protection, hospital, libraries, police protection, recreation and parks, schools, streets and highways and welfare; and all of the usual municipal services in the First Urban Services District (the pre-consolidation former City of Jacksonville) and the former unincorporated area of Duval County, but specifically excluding the Beaches Communities and the Town of Baldwin. The charter for the consolidated government provides for the following elected officials: a mayor, 19 council members (14 elected by districts and 5 at large but residing in specified districts) who form the City's legislative body (the "Council"), seven school board members (elected by district), a sheriff as chief law enforcement officer, a property appraiser, a tax collector, a clerk of the circuit and county courts, and a supervisor of elections. The Mayor is the chief executive and administrative officer of the consolidated government and is responsible for the appointment of city department heads who must be confirmed by the City Council. The Council has legislative powers, which are subject to veto by the Mayor. Property Tax Reform The Florida Legislature completed its special session on June 14, During this session the legislature passed legislation which could significantly impact the amount and rate of ad valorem taxes that may be levied by local governments, other than school districts. Among other things, the new legislation statutorily requires each county, municipality, and special district to roll back their millage rates for Fiscal Year to a level that, with certain adjustments and exceptions, will generate the same level of ad valorem tax revenue as in Fiscal Year ; provided, however, depending upon the relative growth of each local government's own ad valorem tax revenues from 2001 to 2006, such rolled back millage rates will be determined after first reducing Fiscal Year ad valorem tax revenues by zero to nine percent. The City falls under the 3% budget reduction category. The City believes that it can balance its Fiscal Year 2008 budget through a combination of expenditure reductions and introduction of three new fees: (1) a residential solid waste fee; (2) a stormwater fee and; (3) a franchise fee on electric, water and sewer utility rates phased in during the second half of the fiscal year. These new fees will: (1) partially offset the cost of residential solid waste; (2) provide operational and capital related support for storm water management and; (3) partially address both the and, when fully implemented, the budgetary challenges addressed below. In addition, the legislation limits the growth of ad valorem tax levies in future years (except those levied by school districts) based upon the growth in a jurisdiction's population, as measured by new construction, and the statewide growth in per capita personal income. Notwithstanding the foregoing, the governing body of a county, municipality, or special district may levy a millage rate in excess of the then applicable rolled back millage rate upon a two-thirds or unanimous vote of 35

42 such governing body (or three-fourths vote for jurisdictions such as the City that have a governing body comprised of nine or more members) depending on the level of the proposed increase. The rolled back millage rate may also be exceeded based on an affirmative vote of the voters in such jurisdiction. The legislation provides that in the event a county or municipality fails to comply with certain requirements of the legislations, such county or municipality will forfeit its distribution of the half-cent sales tax revenue sharing for the 12-months following the determination of noncompliance. The legislation also provides for several constitutional amendments, contingent on the constitutional amendments being approved by the voters of the State on January 29, Such proposed amendments include: (i) a new homestead exemption equal to 75% of the first $200,000 in value and 15% of the just value between $200,000 and $500,000, with a minimum homestead exemption of $50,000, except with respect to low income seniors would have a $100,000 minimum exemption; (ii) targeted preferential assessment methodologies for various types of property including affordable housing, working waterfronts and tangible personal property; (iii) a $25,000 property tax exemption for tangible personal property; and (iv) a "grandfather" clause that will allow persons with a homestead as of January 1, 2008, whose benefits are larger under the current homestead exemption and "Save Our Homes" provisions than under the new homestead exemption to continue to receive the Save Our Homes benefits for as long as they own their current homestead property. With respect to item (iv), if a current owner of a homestead property purchases a new homestead property he or she would be subject to the new homestead exemption system implemented by the constitutional amendments. The constitutional amendments will only become effective if at least 60% of the electors voting in the election approve. It is impossible to predict whether the proposed constitutional amendments will be approved by the voters. If approved, they will become effective for the 2008 tax year (Fiscal Year ). Various analyses indicate that the aggregate taxable values of real property in the State are likely to be reduced significantly if the constitutional amendments become effective. Accordingly, ad valorem tax revenues for all local governments would also likely be adversely impacted. The Pledged Revenues securing the 2007 Bonds will not be affected by the legislation. It is impossible to predict whether certain of the proposed constitutional amendments will be approved by voters and what effect, if any, such approval will have on the City's finances. Pension and OPEB The City of Jacksonville sponsors two employer public employee retirement systems (PERS), administered by two separate and distinct pension boards of trustees, that provide retirement, death, and disability benefits: the City of Jacksonville Retirement System and the Police and Fire Retirement Pension Plan. Substantially all employees of the City participate in one of these plans. In addition, less than 1% of city employees participate in the State of Florida Retirement System. The City of Jacksonville Retirement System, as amended, encompasses the General Employees Retirement Plan and the Corrections Officers Retirement Plan. 36

43 Both systems have adopted Governmental Accounting Standards Statement 25, Financial Reporting for Defined Benefit Pension Plans and Statement 27, Accounting for Pensions by State and Local Governmental Employers. These Statements collectively require the City to report pension obligations on the statements of the PERS, and not within the City's General Fund. The State of Florida requires both systems to make Plan contributions based on actuarial valuations (done annually based on City policy) and any contribution shortfalls are the responsibility of the City. Governmental Accounting Standards Board Statements 43 and 45 establish standards for the measurement, recognition, and display of Other Post Employment Benefits (OPEB) expenses/expenditures and related assets/liabilities. The Statements also provide a required implementation schedule, for the City. Basic post-employment benefits such as health care, including dental, vision, hearing, and long term disability, are provided through the two pension plans. However, since the City is required by State law to offer health insurance to retirees at a non-discriminatory rate, not greater than the cost of coverage available to active employees, the City, not the pension plans, has an OPEB obligation that has come to be called the "implicit rate subsidy." The City historically has provided this benefit to its retirees on a pay-as-you-go basis. The City has engaged an actuary to calculate the impact of this benefit for financial reporting purposes. The City has not decided which of the funding alternatives allowed in Statement 45 it will use. For more information regarding the City's Pension Plans see Note 9 in the Notes to the Financial Statements contained in the City's Comprehensive Annual Financial Report for the Fiscal Year ended September 30, Fiscal Policy The Mayor and City Council adopted new financial management/budgetary policies for the City to be implemented with the budget, as follows: Require for to balance the budget using only related year revenues; Establish a separate $40 million emergency reserve and prior to use of the reserves, the Mayor defines and declares the emergency and receives approval by a twothirds vote of City Council; Require an annual Actuarial Report for each pension plan, and thereby eliminate the use of Prior Excess Contributions (PEC) to make the annual Pension Fund contribution as well as requiring a minimum 90% funded status prior to consideration of benefit enhancements; and Restructure the City's Capital Improvement Program to require a financially feasible program which equally addresses/estimates the resultant operating cost impact at the point of initial planning. During and in the development of the budget the City accomplished each of these targeted objectives. To balance the budget, the City: 37

44 Did not follow the 3% local advisory referendum. Reduced the number of non-public safety staff by 246. Benefited from 14% increase in appraised value growth, which exceeded (a) last year's property tax revenue by $45 million and (b) exceeded the forecasted budget of 5.6% by $25.4 million. Financial Overview The City's General Fund provides basic governmental services, such as public safety, public works, parks and recreation, and libraries, as well as typical county services, such as jails, courts, and indigent medical care. The City's four primary sources of revenue are property taxes, utilities services (excise) taxes, sales taxes, and an "in lieu of tax" contribution from the JEA, an independent authority which provides electric and water and sewer utilities services. The following table shows the revenues and expenditures of the General Fund for the last three years, unaudited revenues and expenditures for the first 9 months of the fiscal year ending 2007, and a budgetary comparison for the fiscal year ending 2007, the latest year shown. Although this schedule includes all General Fund revenues, only the Pledged Revenues are pledged to the 2007 Bonds. [Remainder of page intentionally left blank] 38

45 CITY OF JACKSONVILLE, FLORIDA GENERAL FUND SCHEDULE OF REVENUES AND EXPENDITURES WITH BUDGETARY COMPARISON FOR 2007 (in thousands) AUDITED UNAUDITED ACTUAL ACTUAL ACTUAL ACTUAL BUDGET Year ended Year ended Year ended 9 mos ended Year ended REVENUE: 9/30/2004 9/30/2005 9/30/2006 6/30/2007 9/30/2007 Property taxes $338,758 $360,768 $400,667 $451,785 $445,597 Utility service taxes 95,629 99, ,259 64, ,011 Licenses and permits 8,524 9,045 10,509 7,974 10,208 Intergovernmental 135, , , , ,034 Charges for services 57,735 55,257 61,469 42,947 64,278 Fines and forfeitures 8,294 5,135 5,671 2,834 5,227 Payment in lieu of taxes 83,188 85,938 88,688 47,169 92,888 Interest 15,601 5,049 13,123 11,271 12,629 Other 9,798 15,756 19,250 16,701 21,602 Total Revenue 753, , , , ,474 EXPENDITURES AND ENCUMBRANCES: Administration and Finance 12,195 11,677 14,610 7,914 12,516 Agriculture 1,224 1,316 1,006 1,211 1,502 City Council 7,347 7,738 8,020 6,020 8,577 Clerk of the Courts 13,077 4,543 4,157 2,545 5,367 Courts 6,272 2,332 2, ,067 Community Services 30,212 37,612 34,180 22,769 35,482 Environmental Resource Management 8,844 9,187 12,089 8,515 13,218 Fire/Rescue 105, , , , ,943 General Counsel ,064 1,823 Health Administrator 3,384 3,379 3,028 1,786 2,260 Housing and Neighborhoods 6,133 5,221 7,552 Human Resources 3,266 5,448 Jacksonville Economic Development Commission 326 8,446 Jacksonville Human Rights Commission 933 1,118 1, ,227 Mayor 2,749 3,189 2,619 1,880 2,543 Mayor's Boards and Commissions Medical Examiner 1,790 2,037 2,077 1,777 2,433 Metropolitan Planning Organization 14 Department of Neighborhoods 17,118 19, Property Appraiser 5,857 7,243 8,006 6,787 9,696 Public Defender

46 Planning and Development 6,399 5,733 5,594 4,559 7,339 Pension Funds Public Libraries 24,854 30,946 31,409 25,496 35,174 Parks, Recreation and Entertainment 23,876 25,298 30,419 22,698 33,769 Procurement & Supplies 2,057 3,269 3,279 2,883 4,035 Public Works 59,067 61,594 64,313 46,800 67,777 State Attorney 2, Supervisor of Elections 6,065 7,195 5,352 7,006 10,599 Office of the Sheriff 226, , , , ,420 Tax Collector 10,584 12,701 13,485 11,040 16,775 Federal Program Reserve 218 Contribution to Shands- Jacksonville 23,776 23,776 23,776 23,776 23,776 Jacksonville Miscellaneous Citywide Activities 26,538 31,573 26,365 20,153 39,996 Total Expenditures 629, , , , ,481 EXCESS OF REVENUE OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES): 123,829 86, , , ,993 Transfers in 38,848 15,588 6,886 2,944 4,412 Transfers out (131,314) (128,339) (147,646) (70,541) (109,401) Long term debt issued 2,292 14,261 Total Other Financing Sources (Uses) (92,466) (112,751) (140,760) (65,305) (90,728) EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES $31,363 $(26,114) $14,914 $118,644 $27,265 FUTURE DEBT The City intends to issue the remaining approximately $37,755,000 of Bonds authorized under the Bond Ordinance. Such Bonds will be issued for the purpose of funding the remaining costs of the general municipal capital improvements authorized under the Bond Ordinance and shall be payable from the Pledged Revenues and on a parity with the Parity Bonds and the 2007 Bonds. INVESTMENT AND DEBT POLICIES Pursuant to Section , Florida Statutes, the City has adopted an Investment Policy (the "Investment Policy"). The original Investment Policy was adopted on March 1, 2004 and later amended to reflect its current form on August 21, The Investment Policy applies to all funds under the control of the City in excess of those required to meet short-term expenses, including funds related to the issuance of debt by the City, including bonds issued under the Ordinance. The Investment Policy does not apply to any financial assets of the Jacksonville Retirement System, the Police and Fire Pension Fund, certain Constitutional Officers of Duval County, or various 40

47 independent authorities. The Investment Policy may be amended from time to time by the City Council. The City's Investment Policy provides that its investment portfolio shall be managed with the primary objective of safety of capital, the secondary objective of liquidity, and the third objective of income realization in excess of stated benchmarks. Pursuant to the Investment Policy, the City will strive to meet earning expectations while protecting the safety of capital, maintaining the liquidity of the portfolio, and following prudent investment principles. The Investment Policy states that the structure of the portfolio should be based on an understanding of the variety of risks and the basic principle of diversification, imposed by the policy, on the structure of the portfolio. It is the position of the City that the interest of the citizens of the City of Jacksonville can best be served by actively managing the City funds, through the assumption of a prudent level of risk, in order to achieve a total return commensurate with the level of risk assumed. The City, in adopting the Investment Policy, recognizes that the goal of total return portfolio management is to add economic value to a portfolio under circumstances prevailing from time to time. This may necessitate the sale of securities at a loss in order to reduce portfolio risk (without a material reduction in return) or to achieve a greater overall return (without assuming any material amount of additional risk) that could have been obtained if the original position had been held. The City, upon approval of the Investment Policy, began the process of hiring external money managers to manage its aggregate and liquidity portfolios. Under the Investment Policy the following classes of securities are deemed suitable for investment by the City and may be purchased up to the limits and subject to standards defined within the Investment Policy for each asset type: U.S. Government and Agency Debt Obligations, U.S. Government Instrumentality Debt Obligations, High Grade Corporate Debt, Mortgage-Backed Securities, Bank Certificates of Deposit, Repurchase Agreements, Money Market Mutual/Trust Funds, State and Local Taxable and/or Tax Exempt Debt, Fixed Income Mutual Funds, Other Externally Managed Funds, Derivative Securities, Specialty Risk Investments, and Reverse Repurchase Agreements. The City also has a Debt and Swap Policy (the "Debt and Swap Policy"). The Debt and Swap Policy was adopted on October 1, 2003 and later amended to reflect its current form on April 27, The Debt and Swap Policy applies to all current and future debt and related hedging instruments issued by the City, except those related to the bonds issued under the Better Jacksonville Plan and any other entity created and approved by the City Council. Pursuant to the Debt and Swap Policy, the City's debt is to be managed with an overall philosophy of taking a long term approach to borrowing funds at the lowest possible interest cost while adhering to the objectives of the City's Investment Policy. The Debt and Swap Policy sets forth parameters and provides guidelines regarding capital structure, credit ratings, compliance with tax regulations, management of floating interest rate risk, and management of hedging instruments. Subject to the stated overall philosophy, the goals of the Debt and Swap Policy are to maintain cost of capital consistent with other similarly rated municipalities, maintain steady credit ratings, establish and maintain debt service reserve funds, reduce floating rate debt "put" risk, and maintain diversification of debt. 41

48 FINANCIAL ADVISOR Public Financial Management, Inc., Orlando, Florida, is acting as Financial Advisor to the City in connection with the issuance of the 2007 Bonds. The Financial Advisor will not engage in any underwriting activities with regard to the issuance and sale of the 2007 Bonds. The Financial Advisor is not obligated to undertake and has not undertaken to make an independent verification or to assume responsibility for the accuracy, completeness or fairness of the information contained in this Official Statement and is not obligated to review or ensure compliance with the undertaking by the City to provide continuing secondary market disclosure. UNDERWRITING UBS Securities LLC, the Underwriter, has agreed, subject to certain conditions, to purchase the 2007 Bonds from the City at a price equal to $43,107, ($42,245,000 par amount, plus net original issue premium of $1,147,429.70, less Underwriter's Discount in the amount of $285,154.07). The Underwriter's Discount includes the premium for the Bond Insurance Policy issued in connection with the issuance of the 2007 Bonds, the purchase of which was at the option and the expense of the Underwriter. The offer of the Underwriter to purchase the 2007 Bonds, accepted by the City, provides for the purchase of all of the 2007 Bonds. The 2007 Bonds are being offered for sale to the public at the prices shown on the cover hereof. The Underwriter may offer and sell the 2007 Bonds to certain dealers and others at prices lower than the public offering prices and following the initial public offering such public offering price may be changed, from time to time, by the Underwriter. RATINGS Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. ("Standard & Poor's") and Fitch, Inc., d/b/a Fitch Ratings ("Fitch"), are expected to assign their municipal bond ratings of "Aaa," "AAA" and "AAA" respectively to the 2007 Bonds with the understanding that upon delivery of the 2007 Bonds, the Bond Insurance Policy guaranteeing the timely payment of the principal of and interest on the 2007 Bonds will be issued by the Insurer. Moody's, Standard & Poor's and Fitch have also assigned underlying ratings of "Aa3," "A+" and "AA," respectively, to the 2007 Bonds without regard to the issuance of the Bond Insurance Policy. Such ratings reflect the view of such organizations and an explanation of the significance of such respective ratings may only be obtained from the rating agencies furnishing the same. Generally, rating agencies base their ratings on the information and materials furnished to them and, in addition, on investigations, studies and assumptions made by the rating agencies themselves. There is no assurance that the ratings mentioned above will continue for any given period of time or that they may not be lowered or withdrawn entirely by the rating agencies or either of them, if in their or its judgment, circumstances so warrant. Any such downward revision in or withdrawal of any of such ratings may have an adverse effect on the market price of the 2007 Bonds. For any additional description of the ratings and their meanings, Moody's, Standard & Poor's and Fitch should be contacted. 42

49 LEGALITY Legal matters incident to the validity of the 2007 Bonds including their authorization, issuance and sale by the City, are subject to the unqualified approving legal opinion of Livermore, Freeman & McWilliams, P.A., Jacksonville Beach, Florida, Bond Counsel. Certain legal matters will be passed upon for the City by its Office of General Counsel. Certain legal matters will be passed on for the City by its co-disclosure Counsel Bryant Miller Olive P.A., Jacksonville, Florida and Lawrence & Parker P.A., Jacksonville, Florida. A certified, true and complete copy of the legal opinion of Bond Counsel will be printed on the back of the 2007 Bonds. The form of Bond Counsel opinion appears as APPENDIX C to this Official Statement. TAX EXEMPTION The Code includes requirements which the City must continue to meet after the issuance of the 2007 Bonds in order that interest on the 2007 Bonds not be included in gross income for federal income tax purposes. The failure of the City to meet these requirements may cause interest on the 2007 Bonds to be included in gross income for federal income tax purposes retroactive to their date of issuance. The City has agreed to take the actions required by the Code in order to maintain the exclusion from gross income for federal income tax purposes of interest on the 2007 Bonds. In the opinion of Bond Counsel, assuming continuing compliance by the City with the tax covenants referred to above, under existing statutes, regulations, rulings and court decisions, interest on the 2007 Bonds is excluded from gross income for federal income tax purposes. Interest on the 2007 Bonds is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; however, interest on the 2007 Bonds is taken into account in determining adjusted current earnings for purposes of computing the alternative minimum tax imposed on corporations. Except as described above, Bond Counsel will express no opinion regarding the federal income tax consequences resulting from the ownership of, receipt or accrual of interest on, or disposition of the 2007 Bonds. Prospective purchasers of 2007 Bonds should be aware that the ownership of 2007 Bonds may result in other collateral federal tax consequences, including (i) the denial of a deduction for interest on indebtedness incurred or continued to purchase or carry 2007 Bonds or, in the case of a financial institution, that portion of the owner's interest expense allocable to interest on 2007 Bonds, (ii) the reduction of the loss reserve deduction for property and casualty insurance companies by 15 percent of certain items, including interest on 2007 Bonds, (iii) the inclusion of interest on 2007 Bonds in the earnings of certain foreign corporations doing business in the United States for purposes of a branch profits tax, (iv) the inclusion of interest on 2007 Bonds in the passive income subject to federal income taxation of certain Subchapter S corporations with Subchapter C earnings and profits at the close of the taxable year and (v) the inclusion in gross income of certain Social Security and Railroad Retirement benefits by reason of receipt of interest on the 2007 Bonds. 43

50 Original Issue Discount In the opinion of Bond Counsel, under existing law, the original issue discount in the selling price of the 2007 Bonds maturing on October 1 in the years 2012, 2019 and 2029 to the extent properly allocable to each owner of a 2007 Bond, is excluded from gross income for federal income tax purposes to the same extent that any interest payable on such 2007 Bonds is or would be excluded from gross income for federal income tax purposes. The original issue discount is the excess of the stated redemption price at maturity of such 2007 Bond, which price equals the principal amount of such 2007 Bonds over the initial offering price to the public at which price a substantial amount of such 2007 Bonds were sold (the "Issue Price"). Under Section 1288 of the Code, original issue discount on tax-exempt bonds accrues on a compound interest basis. The amount of original issue discount that accrues to an owner of a 2007 Bond during any accrual period generally equals (a) the Issue Price of such 2007 Bond plus the amount of original issue discount accrued in all prior accrual periods multiplied by (b) the yield to maturity of such 2007 Bond (determined on the basis of compounding at the close of each accrual period) less (c) any interest payable on such 2007 Bond during such accrual period. The amount of original issue discount so accrued in a particular accrual period will be considered to be received ratably on each day of the accrual period, and will increase the owner's tax basis on such 2007 Bond. The adjusted tax basis in a 2007 Bond will be used to determine taxable gain or loss upon a disposition (e.g., sale, exchange, redemption, or payment at maturity) of such 2007 Bond. Owners of the 2007 Bonds who did not purchase such 2007 Bonds in the initial offering at the Issue Price should consult their own tax advisors with respect to the tax consequences of owning such 2007 Bonds. Owners of the 2007 Bonds should consult their own tax advisors with respect to the state and local tax consequences of the 2007 Bonds. It is possible that under the applicable provisions governing the determination of state and local income taxes, accrued original issue discount on the 2007 Bonds may be deemed to be received in the year of accrual, even though there will not be a corresponding cash payment until a later year. Original Issue Premium The 2007 Bonds maturing on October 1 in the years 2008 through and including 2011, 2013 through and including 2017, 2020 through and including 2027, and 2032 were offered and sold to the public at an Issue Price in excess of their stated redemption price at maturity. That excess constitutes bond premium. For federal income tax purposes, bond premium is amortized over the period to maturity of a 2007 Bond, based on the yield to maturity of such 2007 Bond, compounded semiannually. No portion of that bond premium is deductible by the owner of a 2007 Bond. For purposes of determining the owner's gain or loss on the sale, redemption (including redemption at maturity) or other disposition of a 2007 Bond, the owner's tax basis in the 2007 Bond is reduced by the amount of bond premium that accrues during the period of ownership. As a result, an owner 44

51 may realize taxable gain for federal income tax purposes upon the sale or other disposition of a 2007 Bond for an amount equal to or less than the amount paid by that owner for the 2007 Bond. A purchaser of a 2007 Bond at its Issue Price in the initial public offering who holds that Bond to maturity will realize no gain or loss upon the retirement of that 2007 Bond. Owners of 2007 Bonds should consult their own tax advisors with respect to the determination for federal income tax purposes of the amount of bond premium properly accruable in any period with respect to the 2007 Bonds and as to other federal tax consequences and state and local tax consequences of the 2007 Bonds. A proposed form of the Opinion of Bond Counsel is attached hereto as APPENDIX C. LITIGATION With the exception of the matters disclosed in the following paragraphs of this section, in the opinion of the Office of General Counsel of the City, there is no pending litigation against the City which would have any material adverse effect upon the Pledged Funds or contesting the validity of the 2007 Bonds or the right of the City to issue the 2007 Bonds. The Office of General Counsel is not aware of any threatened litigation contesting the validity of the 2007 Bonds or the right of the City to issue the 2007 Bonds or which would have any material adverse effect upon the Pledged Funds. In March 2005, UPS Fuel Services, Inc. filed a Public Service Tax registration form with the City's Office of the Tax Collector indicating that they were a "Motor Fuel Distributor" and began filing returns with the City. UPS Fuel Services, Inc. remitted Fuel Oil Taxes and other amounts related to other taxes to the City until October 23, UPS Fuel Services, Inc. has submitted a request for a $310, refund that is currently being reviewed and evaluated by the Office of the General Counsel of the City. The $310, refund requested by UPS Fuel Services, Inc. includes amounts remitted to the City as payment for other taxes, in addition to the Fuel Oil Taxes. Additionally, the $310, includes Fuel Oil Tax Revenues allocable to fiscal year ended September 30, 2005, fiscal year ended September 30, 2006 and possibly fiscal year ending September 30, At this time, the City cannot quantify if and how much of the requested refund shall be granted. However, the City is confident that any refunded amounts will not have a material impact on the Pledged Revenues nor the security of the 2007 Bonds. On May 5, 2003, and thereafter through amendment, approximately 4,000 individual plaintiffs filed a complaint against the City of Jacksonville, the Duval County School Board and JEA alleging facts relating to the existence of various incinerator ash sites presently under the jurisdiction of federal and state environmental agencies. The parties have resolved the law suit without an admission of liability. Pursuant to the terms of the settlement, the City has obtained approximately 4,000 covenants not to sue and has paid a total of $25 million. Plaintiffs will have received a consent judgment for $75 million, with the remaining money over $25 million being collected, if at all against the City's insurers. 45

52 The City is pursuing indemnification by the insurers of this amount in the United States District Court for the Middle District of Florida, with Plaintiff's counsel taking over the responsibility as lead counsel. Pursuant to the settlement, the City will receive 10% of the first $40 million of coverage and 60% of amounts over $40 million and up to $75 million. Under the terms of the settlement, once the City recovers the indemnification sought from insurers, in the federal action, the plaintiffs' will thereafter obtain 15% of any proceeds over $75 million. The City is unable to quantify the amount, if any, that may be recovered in the federal action and a partial summary judgment (which will be appealed) has been entered against the City. Trial in the federal action is presently scheduled for October 1, Additionally, there may be some environmental cleanup required by the Department of Environmental Protection to the incinerator ash sites. At this time, the City does not know the cost or the extent of the clean up, but estimates the cleanup costs to be approximately $98.4 million for Jax Ash & Brown's Dump Sites ( 4 sites in total) and estimates cleanup costs at $30.25 million for the Pope Place/Gold Merit, Southside Generator Site and Burke Street Ash sites. However, the City expects to pay any required costs for cleanup over a period of years and expects to budget such amounts from sources other than Pledged Revenues. CONTINGENCY OF FEES The City has retained Bond Counsel, the Financial Advisor, and Co-Disclosure Counsel with respect to the authorization, sale, execution and delivery of the 2007 Bonds. Payment of the fees of such professionals and an underwriting discount to the Underwriter (which includes the fees of underwriter's counsel) are each contingent upon the issuance of the 2007 Bonds. ANNUAL FINANCIAL REPORTS The information in the Basic Financial Statements for the fiscal year ended September 30, 2006 (the "Basic Financial Statements") included in the City's Comprehensive Annual Financial Report for such fiscal year (the "Comprehensive Annual Financial Report") is an integral part of this Official Statement and is hereby incorporated by reference thereto. Copies of the Comprehensive Annual Financial Report may be obtained from the City upon request to the Director of Administration and Finance, Suite 300, 117 West Duval Street, Jacksonville, Florida 32202, telephone number (904) , or from the City's website described below. The Comprehensive Annual Financial Report is available for viewing and downloading from the City's website ( by selecting "Department," then selecting "Administration and Finance," then selecting "Accounting" and then selecting "Comprehensive Annual Financial Report FY " as denoted in blue print. EXCEPT FOR THE BASIC FINANCIAL STATEMENTS, NONE OF THE REMAINDER OF THE COMPREHENSIVE ANNUAL FINANCIAL REPORT OR OTHER INFORMATION CONTAINED IN THE CITY'S WEBSITE IS INCLUDED BY REFERENCE INTO THIS OFFICIAL STATEMENT. The physical appearance of the printed version of the Comprehensive Annual Financial Report may differ from the electronic version available on the City's website for various reasons including electronic transmission difficulties or particular user 46

53 equipment. Users relying on the electronic version assume the risk of resulting discrepancies between it and the printed version. CONTINUING DISCLOSURE Pursuant to the Bond Ordinance, the City has covenanted, for the benefit of the Registered Owners of the 2007 Bonds to provide certain financial information relating to City and the 2007 Bonds in each year, and to provide notices of the occurrence of certain enumerated material events. Pursuant to the Bond Ordinance, the City will file annual financial information and operating data and its audited financial statements with each nationally recognized municipal securities information repository then approved by the Securities and Exchange Commission (the "NRMSIRs"), any state information depository that is established in the State (the "SID"). Currently, there are no such SIDs. Pursuant to the Bond Ordinance, the City will also file notices of certain enumerated material events, when and if they occur, with the NRMSIRs or the Municipal Securities Rulemaking Board, and with the SIDs, if any. The specific nature of the financial information, operating data, and of the type of events which trigger a disclosure obligation, and other details of the undertaking are described in the Bond Ordinance. No party other than the City is obligated to provide, nor is expected to provide, any continuing disclosure information with respect to the 2007 Bonds and the Rule. The City has previously entered into continuing disclosure obligations with respect to several series of bonds payable from revenue sources other than the Pledged Revenues. The City has been in full compliance with its undertakings since 2002 and has undertaken measures to ensure its future compliance with such undertakings. SOURCES OF INFORMATION The Basic Financial Statements of the City as of September 30, 2006 and for the year ended, included in the Comprehensive Annual Financial Report of the City that has been incorporated herein by reference (See "ANNUAL FINANCIAL REPORTS" herein), have been audited by Ernst & Young LLP, independent certified public accountants, as stated in their report dated January 19, 2007 appearing therein. Ernst & Young LLP has not participated in the preparation or review of this Official Statement. Any statements in this Official Statement, involving matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact. DISCLOSURE REQUIRED BY FLORIDA BLUE SKY REGULATIONS Florida law requires the City to make a full and fair disclosure of any bonds or other debt obligations which it has issued or guaranteed and which are or have been in default as to principal or interest at any time after December 31, 1975 (including bonds or other debt obligations for which it has served as a conduit issuer). The City, since December 31, 1975, has not been in default as to 47

54 principal and interest on bonds or other debt obligations which it has issued, whether as the principal obligor or as a conduit. AUTHORIZATION OF AND CERTIFICATION CONCERNING OFFICIAL STATEMENT This Official Statement has been authorized by the City of Jacksonville, Florida. Concurrent with the delivery of the 2007 Bonds, the undersigned will furnish their certificate to the effect that, to the best of their knowledge, this Official Statement did not as of its date, and does not as of the date of delivery of the 2007 Bonds, contain any untrue statement of a material fact or omit to state a material fact which should be included herein for the purposes for which this Official Statement is to be used, or which is necessary in order to make the statements contained herein, in the light of the circumstances in which they were made, not misleading. EXECUTION The execution and delivery of this Official Statement has been duly authorized and approved by the City. CITY OF JACKSONVILLE, FLORIDA /s/ John Peyton Mayor /s/ G. Michael Miller Chief Financial Officer /s/ Michael R. Givens City Treasurer Signature Page to Official Statement 48

55 APPENDIX A GENERAL INFORMATION CITY OF JACKSONVILLE

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57 APPENDIX A GENERAL INFORMATION ON THE CITY OF JACKSONVILLE, FLORIDA Government The City has provided all of the information set forth below. The City of Jacksonville established a consolidated government on October 1, 1968, which extends throughout the county land area, except that the cities of Atlantic Beach, Neptune Beach, Jacksonville Beach (the "Beaches Communities") and the Town of Baldwin retain their local governments for the performance of certain municipal functions. The City has grown from 39 square miles to 841 square miles and is the largest city in land area located in the contiguous United States. The territory of the consolidated government is divided into a General Services District, consisting of the total area of Duval County, and five urban services districts consisting of the areas within each of the Beaches Communities, the Town of Baldwin and the territory of the former, preconsolidation City of Jacksonville. The consolidated government furnishes certain services in the General Services District, including airports, courts, electricity, fire protection, hospital, libraries, police protection, recreation and parks, schools, streets and highways and welfare; and all of the usual municipal services in the First Urban Services District (the pre-consolidation former City of Jacksonville) and the former unincorporated area of Duval County, but specifically excluding the Beaches Communities and the Town of Baldwin. The charter for the consolidated government provides for the following elected officials: a mayor, 19 council members (14 elected by districts and 5 at-large but residing in specified districts) who form the City's legislative body (the "Council"), seven school board members (elected by district), a sheriff as chief law enforcement officer, a property appraiser, a tax collector, a clerk of the circuit and county courts, and a supervisor of elections. The Mayor is the chief executive and administrative officer of the consolidated government and is responsible for the appointment of city department heads who must be confirmed by the City Council. The Council has legislative powers, which are subject to veto by the Mayor. Pension and OPEB The City of Jacksonville sponsors two employer public employee retirement systems (PERS), administered by two separate and distinct pension boards of trustees, that provide retirement, death, and disability benefits: the City of Jacksonville Retirement System and the Police and Fire Retirement Pension Plan. Substantially all employees of the City participate in one of these plans. In addition, less than 1% of city employees participate in the State of Florida Retirement System. The City of Jacksonville Retirement System, as amended, encompasses the General Employees Retirement Plan and the Corrections Officers Retirement Plan. A-1

58 Both systems have adopted Governmental Accounting Standards Statement 25, Financial Reporting for Defined Benefit Pension Plans and Statement 27, Accounting for Pensions by State and Local Governmental Employers. These Statements collectively require the City to report pension obligations on the statements of the PERS, and not within the City's General Fund. The State of Florida requires both systems to make Plan contributions based on actuarial valuations (done annually based on City policy) and any contribution shortfalls are the responsibility of the City. Governmental Accounting Standards Board Statements 43 and 45 establish standards for the measurement, recognition, and display of Other Post Employment Benefits (OPEB) expenses/expenditures and related assets/liabilities. The Statements also provide a required implementation schedule, for the City. Basic post-employment benefits such as health care, including dental, vision, hearing, and long term disability, are provided through the two pension plans. However, since the City is required by State law to offer health insurance to retirees at a nondiscriminatory rate, not greater than the cost of coverage available to active employees, the City, not the pension plans, has an OPEB obligation that has come to be called the "implicit rate subsidy." The City historically has provided this benefit to its retirees on a pay-as-you-go basis. The City has engaged an actuary to calculate the impact of this benefit for financial reporting purposes. The City has not decided which of the funding alternatives allowed in Statement 45 it will use. For more information regarding the City's Pension Plans see Note 9 in the Notes to the Financial Statements contained in the City's Comprehensive Annual Financial Report for the Fiscal Year ended September 30, Population Growth Based on the 2000 United States Census, the consolidated City of Jacksonville is the most populated city in Florida. The following record of population is for the entire area of Duval County, which is now the area of the City of Jacksonville, the Beaches Communities and the Town of Baldwin. Year Population , , , , , , , , , , , , (1) 886,945 Source: U.S. Census Bureau (1) Projected 2011 population value provided by the Jacksonville Regional Chamber of Commerce courtesy of Decision Data. A-2

59 Downtown Jacksonville Downtown Jacksonville is the business, cultural and entertainment center of Duval County. A revitalization effort has been launched in downtown Jacksonville with over $2.1 billion in development currently proposed or under construction, and over $510 million in development completed in the last four years. These include a new entertainment arena, baseball stadium, main library, and a planned federal courthouse, as well as over 1,432 housing units completed since An additional 690 housing units under construction and over 2,800 units proposed for development. The largest sub market in the region, Downtown Jacksonville has over 5.6 miles of riverfront and is home to over 1,300 residents and 1,200 businesses with over 55,000 employees. It has over 7.5 million net rentable square feet of commercial space, and 10,956 off-street parking spaces available for lease by the public. In 2005, Jacksonville hosted the Super Bowl XXIX football game and festivities. The event was considered an economic and cultural success and provided global exposure to the City. Expressway System The Jacksonville Expressway System, an urban limited-access highway system managed and maintained by the JTA, provides direct access to all federal and state highways entering the City and direct connections to local industrial areas. The expressway system consists of seven bridges, and 59 miles of highway, of which 16 miles are Interstate Systems, and 65 miles feeder roads. Rail Service The City is a railroad center serviced by three Class I lines. Florida East Coast Railway Company (headquarters in St. Augustine, Florida) and Norfolk Southern terminate in Jacksonville. The headquarters for CSX Corporation and its principal operating company, CSX Transportation, are located in the City, and locally employs approximately 4,400 people. Air Service The Jacksonville International Airport ("JIA") is a growing medium hub airport serving Northeast Florida and Southeast Georgia. JIA is approximately 7,800 acres, located in the northern portion of the City, approximately eighteen miles north of downtown, just off of Interstate 95. The airfield facilities consist of two precision instrument runways, one 7,700 feet long and the other 10,000 feet long, together with associated taxiways, aircraft parking aprons (approximately 200,000 square feet in total), and an air traffic control tower. The passenger terminal is approximately 618,000 square feet, consisting of landside baggage and ticketing area, a central concourse housing concessions and central passenger screening, and three airside concourses. There are twenty-two full service gates, one international/charter gate, one regional gate, and eight ground loaded gates. Nineteen of the gates are under exclusive lease with Signatory Airlines, and the remainder are leased on an as-needed basis. As of 2006, JIA had scheduled passenger service provided by seventeen U.S. carriers and had scheduled cargo service provided by four all cargo carriers. Scheduled service is provided by twelve A-3

60 of the nation's sixteen major passenger airlines, which represent the largest group of passenger airlines in terms of their total annual revenues. These airlines include AirTran, American, American Eagle, Comair, Continental, Delta, ExpressJet, JetBlue, Northwest, SkyWest, Southwest, and US Airways. In calendar year 2006, there were approximately 2,924,527 enplaned passengers, an increase of 75,697 enplanements over Annual cargo and airmail loads have increased from approximately 4,238,358 pounds in 2005 to 4,279,841 pounds in On September 30, 1999, the Jacksonville Aviation Authority ("JAA") took title to 6,081 acres of land at Cecil Field, now named Cecil Commerce Center, which includes eight hangers and three runways with lengths of 8,000 feet and one runway at 12,400 feet. This property is being converted into a commercial aviation facility for aircraft maintenance, manufacturing, repair and related development. The Boeing Company, Northrop Grumman Corp., Logistics Services International and Jet Turbine Services are among a few organizations that have signed long-term leases to operate aviation maintenance and support services at Cecil Commerce Center. JAA recently signed a 40-year lease agreement with Florida Community College at Jacksonville to establish an Aviation Center of Excellence. As of October 1, 2001, JAA manages the City's three general aviation airports, including Cecil Field, Craig Airport and Herlong Airport. Port Cargo Service On October 1, 2001, the Jacksonville Port Authority was split into two entities: the Jacksonville Aviation Authority, which now manages the City's airports, and the Jacksonville Port Authority, which continues to manage the City's public seaport facilities. The Jacksonville Port Authority, or JAXPORT, is governed by a seven-member board; three appointed by Florida's Governor and four appointed by Jacksonville's Mayor. JAXPORT, a dependent special district of the City of Jacksonville, has about 150 employees. In terms of total cargo handled, the Jacksonville Port Authority (JAXPORT) is one of the largest ports on the South Atlantic seaboard and is a natural river harbor with a maintained depth of 38 to 41-feet from the downtown area to the Atlantic Ocean. More than $31 million was spent, in 2002 and 2003, to deepen 14.7 miles of the shipping channel from 38 to 41 feet. For the fiscal year ended September 30, 2006, approximately 1,799 vessels used JAXPORT's facilities. Several hundred additional vessels and barges used private cargo handling areas of the river not affiliated with JAXPORT's public facilities. Jacksonville ranks third among the largest container ports in Florida. For the fiscal year ended September 30, 2006 JAXPORT's facilities handled over 8.7 million metric tons of cargo and handled 610,000 vehicles; making JAXPORT one of the largest vehicle handling ports in the country. JAXPORT committed more than $200 million towards port capital construction between 1998 and Jacksonville's maritime industry has an annual economic impact of $2.7 billion, with more than 45,000 local jobs either directly or indirectly reliant on port facilities. A-4

61 JAXPORT owns three marine terminals between the downtown area and the mouth of the St. John's River, and one cruise terminal. JAXPORT's largest container facility is the 754-acre Blount Island Marine Terminal in Northeast Jacksonville. The main and west channels of Blount Island are now 41 feet deep. The terminal consists of 700 paved acres, 6,630 feet of berthing space, 9 container cranes, and over 240,000 square feet of dockside warehousing. The Blount Island terminal loads and unloads cargo from all over the world. JAXPORT successfully negotiated the sale of 137 acres of property at the Blount Island Marine Terminal to the US Navy. This will allow the U.S. Marine Corps' military operations and JAXPORT's commercial business to continue to work in close proximity as they have for many years. JAXPORT also owns and operates a 173-acre facility known as the Talleyrand Marine Terminal, located on Talleyrand Avenue about four miles north of downtown Jacksonville. This complex consists of 713,000 square feet of warehouse space, including 120,000 square feet of refrigerated space, and six container cranes. The terminal's on-dock rail capacity has been expanded by adding four new rail spurs totaling 4,800 linear feet, and two rubber-tired gantry cranes. More than 600 ships each year use the Talleyrand terminal, primarily to move goods to and from Latin America and the Caribbean. JAXPORT'S Dames Point Marine Terminal is 12 miles from the Atlantic Ocean, about one mile west of Blount Island, and mostly unimproved riverfront property. JAXPORT owns about 600 acres of property in this area. The Southeastern corner of this terminal is being used to handle imported bulk aggregate cargo of limestone, granite and aragonite. Construction of a 131-acre containerhandling facility is expected to be completed in The new facility will include two 1,200-foot berths, 6 container cranes and other infrastructure, and is expected to generate 1,600 direct jobs. In 2003, JAXPORT constructed a 63,000-square foot temporary cruise facility near the northwest corner of the Dames Point Marine Terminal. Currently, Carnival Cruise Lines provides year-round service from Jacksonville to the Caribbean and Bahamas. The cruise ships now serving Jacksonville create more than 400 area jobs and more than $36 million in new economic impact, with the potential of creating 2,700 jobs and infusing more than $1.5 billion into the local economy over the next 20 years. JAXPORT transported 257,065 passengers in fiscal year ending September On August 6, 2005, officials with Mitsui OSK Lines, Ltd, (MOL) a Tokyo-based logistics and ocean Transportation Company, signed a 30-year lease agreement with the Jacksonville Port Authority (JAXPORT). The agreement provides the City with direct container ship service between Jacksonville and Asia. An economic impact study conducted by the consultant firm of Martin Associates predicts that the new agreement will create more than 1,800 new private sector port jobs in Jacksonville. Supporting operations in trucking, distribution and related services could generate a total of 5,600 direct and indirect local jobs. The economic impact from this new business for the Jacksonville community is predicted to be $870 million annually, including wages paid to private sector port workers; local and state taxes paid by area companies engaged in the service; revenue earned by businesses involved in the A-5

62 operations; and local services and supplies purchased by maritime-related companies related to Asian trade. Motor Freight Major transportation and logistics services companies, including Landstar System, Inc., are headquartered in Jacksonville. Nearly 125 truck lines maintain terminals in the area, which is a major hub of the Interstate highway network in Florida. The development of "piggyback" transportation has benefited the City. The City's location and port facilities have caused it to become a "break-bulk" center. Many piggyback shipments move into the area via rail cars or ships, after which the trailers are unloaded and forwarded by highway. Industry The principal industries in Jacksonville are food, printing, lumber and machinery. Manufacturing industries are shipbuilding, paper and cigars. Major industrial plants are operated by Smurfit-Stone Container Corporation, American Body Armor & Equipment, Swisher International Inc. (King Edward Cigars), Anheuser-Busch, Inc., Allied-Signal, Inc. (Bendix Engine Products Division), Florida Machine and Foundry Company, Florida Steel Corporation, General Foods Corporation, Maxwell House Division, B.F. Goodrich, North Florida Shipyards, Inc., Duplex Products, Inc., SCM Corporation, Irvington-Moore (Division of U.S. Natural Resources, Inc.), TTX Company, General Electric, Johnson & Johnson, Vistakon and Florida Publishing Company. [Remainder of page intentionally left blank] A-6

63 The following table illustrates the 2006 manufacturing employment for the Jacksonville MSA: Manufacturing Employment by Category Category Employment % of Total Wood product manufacturing Nonmetallic mineral product manufacturing 1, Primary metal manufacturing Fabricated metal product manufacturing 3, Machinery manufacturing 1, Computer Electronic product manufacturing Electrical equipment and appliance mfg Transportation equipment mfg. 4, Furniture and related product mfg Miscellaneous manufacturing 4, Food manufacturing 2, Beverage and tobacco product manufacturing 2, Textile Mills Textile product mills Apparel manufacturing Leather and allied product mfg Paper manufacturing 2, Printing and related support activities 1, Petroleum and coal products manufacturing Chemical manufacturing 1, Plastics and rubber products manufacturing Total Manufacturing 32, Source: Florida Research and Economic Database, Florida Agency for Workforce Innovation, Quarterly Census of Employment. Insurance Jacksonville is headquarters for several insurance companies; Blue Cross/Blue Shield of Florida and FPIC Insurance Group, Inc. The City is also regional headquarters for Aetna U.S. Healthcare. The following have regional offices in Jacksonville: Allstate Financial Workplace Division, State Farm Mutual, United Insurance Company of America, Title Insurance Company of Minnesota, Continental Insurance Companies, Prudential and Humana. Banking and Finance There are 25 commercial banks and 4 savings institutions within Duval County, as well as the Jacksonville branch of the Federal Reserve Bank of Atlanta. Bank deposits in the County were approximately $21.3 billion as of June 30, A-7

64 TheCityisalsoaleaderinthemortgagebankingindustryandishometooneofthestate's largest firms; Washington Mutual. HomeSide Lending, a subsidiary of Washington Mutual, is based in Jacksonville. In addition, the mortgage industry's largest provider of data processing services, Fidelity National Financial, Inc., has moved its headquarters to Jacksonville. Credit Unions are a growing financial presence in Jacksonville. There are approximately a dozen active credit unions responsible for deposits in excess of $4.4 billion. VyStar Credit Union, formerly Jax Navy Federal Credit Union, is the most active with 900 employees and assets over $3.2 billion. Other financial service companies with a presence in Jacksonville include JP Morgan Chase Manhattan Bank and Merrill Lynch's division headquarters. Tourism An estimated 5.6 million people visited the Jacksonville area in Visitors to Northeastern Florida provided more than $4.9 billion in direct economic impact to our area, jobs for more than 90,000 of our residents, and generated more than $14 million annually in bed tax revenue and local option sales tax revenue for the City. Direct spending includes lodging, dining, shopping, transportation and entertainment. The average convention delegate spends $266 per day for an average of 3.6 days. The average leisure traveler spends $ per day for an average of 5.3 days. Jacksonville has 68 miles of beaches, over 50 golf courses and hundreds of tennis courts. Annual events include the St. Johns River Mug Cup sailboat race, the Gator Bowl, and the Greater Jacksonville Kingfish Tournament. Locally headquartered is the Association of Tennis Professionals, which hosts the ATP Tour Classic, at Amelia Island Plantation. There is the Bausch & Lomb Tennis Championships and the PGA Tour Players Championship in Ponte Vedra. Jacksonville has greyhound racing, major sporting events and an emerging nightlife. Jacksonville hosted Superbowl XXXIX, and is the home of the NFL Jacksonville Jaguars, Jacksonville Symphony Orchestra and the Jacksonville Zoo. Starting December 3, 2005, Jacksonville is the host city to the ACC Football Championships. A new baseball stadium, home of the Jacksonville Suns, opened in April Many festivals are held throughout the year, including the Jacksonville Jazz Festival in Metropolitan Park and the International Sea & Air Spectacular featuring the Blue Angels. Other festivals are World of Nations Celebration, Springing the Blues Festival, Fiesta Playera, The Kuumba Festival, Caribbean Carnival, and the Scottish Highland Games which celebrate the area's cultural diversity through art and music. A new state-of-the-art entertainment arena opened in November Military Three military installations in the City combine to make Jacksonville the second largest Naval Complex on the East Coast. The largest of these installations, Jacksonville Naval Air Station, covers 3,800 acres on the west bank of the St. Johns River. Its Naval Aviation Depot, renamed to Naval Air Depot (NADEP) Jacksonville in 2001, is the largest industrial employer in northeast Florida with over 3,700 employees, and one of only three such facilities remaining in the Navy. Most recently, NADEP A-8

65 Jacksonville received ISO 9001:2000 certification; it is the first command in NAVAIR and the Department of Defense to receive comprehensive ISO 9001:2000 certification. Naval Station Mayport is homeport for guided missile cruisers, destroyers, guided missile destroyers and guided missile frigates, a total of 22 ships, plus six helicopter squadrons. NS Mayport covers 3,409 acres and employs nearly 16,000 military and civilians, making the station the third largest naval facility in the continental United States. The Marine Corps Blount Island Command is located on the east end of Blount Island and employs several hundred people, mostly civilians, including contractors. Its location on Blount Island in the St. Johns River makes it a premium facility for the worldwide support of the Marine Corps through its Maritime Prepositioning Program. Although not listed as one of the three military installations in Jacksonville, the Navy's $1.7 billion Trident Nuclear Submarine Base, located 35 miles north of the City in Kings Bay, Georgia and covering approximately 16,000 acres, is considered a part of the Jacksonville military community. It is the only base in the Navy capable of supporting the Trident II (D-5) Missile. Currently, the base berths eight submarines and employs more than 9,000 military and civilian personnel. Education The public educational system is administered on a County-wide basis and consequently ranks as the sixteenth largest in the nation. Approximately 127,500 pupils attend classes taught by more than 7,500 instructors in 152 schools: 106 elementary schools; 27 middle schools; 19 high schools; two academies of technology; three exceptional student centers; five special schools; and seven charter schools. The Duval County School Board has constructed new facilities and renovated other facilities under a $199 million voter approved bond issue in In addition, 29,942 pupils are enrolled in 166 local private schools. Higher education facilities are provided by Jacksonville University, a private four-year liberal arts college; Edward Waters College, a four-year private college; Florida Community College at Jacksonville, with four campuses, a public institution; Jones College, a nonprofit junior college of business; the University of North Florida, a state university; Florida Coastal Law School, a private law school; and the newly opened Art Institute of Jacksonville, a private college. Over 3,700 students receive higher education degrees each year. Medical Facilities Medical facilities in Jacksonville include several general hospitals, totaling approximately 4,605 beds, and many special clinics and laboratories. More than 2,500 doctors and 500 dentists serve the Jacksonville community. Because of the large and growing number of medical specialists located in the city, Jacksonville is recognized throughout the southeast as a major medical center. Shands Jacksonville is an urban campus extension of the University of Florida and provides extensive medical education and comprehensive care. Shands Jacksonville was created in 1999 after Shands Healthcare, the University of Florida, University Medical Center and Methodist Medical Center merged. It is a 760-bed facility, and is one of six level one-trauma centers in Florida. Shands' commitment to the latest in clinical care, research advances and state of the art technology elevates its A-9

66 prominence in the national medical community. Shands Jacksonville has developed Florida's first and the nation's third proton beam cancer treatment facility. The $125-million project, which officially opened in October 2006, is the only such facility in the Southeast Shands Jacksonville is also a major provider of medical care to indigent citizens. The Mayo Clinic of Rochester, Minnesota chose Jacksonville for its first satellite clinic and opened in October 1986 with 62 physicians and 346 support personnel in a $29 million 140,000 square foot facility. Mayo's $373 million expansion that will employ 8,500 personnel in a comprehensive medical campus setting by the year 2020 is well underway. In 1998, Mayo Clinic Jacksonville began a $30 million expansion adding 175,000 square feet to the Outpatient Surgery Center, Radiation Oncology Center, Davis Building and the Northeast Building. On March 4, 2002, Mayo Clinic opened a new cardiopulmonary rehabilitation program in the Joe Adams Building on the St. Luke's Hospital campus. Baptist Health has served the Jacksonville community for nearly 50 years. It currently operates through five different facilities: Downtown, Beaches, Nassau, Wolfson Children's Hospital and South. Baptist Health Downtown is a full tertiary medical facility in downtown Jacksonville on the St. Johns River. Baptist Medical Center Beaches is a 122-bed community hospital. In 2004, Baptist Medical Center Beaches completed a new three story East Pavilion. Baptist Medical Center Nassau is a 54-bed acute care hospital located in Amelia Island. In 2002, it was included in the listing of 100 top hospitals in the nation. In 2003, Baptist Medical Center Nassau embarked upon a massive three phase expansion program. All three phases will be completed by late Wolfson Children's Hospital is a 180-bed facility. It recently received a $5 million donation being used to establish the region's first pediatric neurosurgery center. In February 2005, Baptist Medical Center South opened its doors to primarily serve Southern Duval and Northern St. Johns County. Baptist South is a 248,000 square foot hospital with 92 suites. Originally founded in 1916 by the Daughters of Charity, St. Vincent's Healthcare, a faithbased, not-for-profit health system, operates several facilities, including St. Vincent's Medical Center, a 528-bed hospital, St. Catherine Laboure Manor, a 240-bed long-term nursing center, the Orange Park Health Center, 16 First Coast Primary Care locations, two pharmacies, and a new, state-of-the-art Family Care Center which services 30,000 patients per year. St. Vincent's heart hospital has been rated as one of the top heart hospitals in the country. Effective April 2008, St. Vincent's will expand its services when St. Luke's Hospital, Jacksonville's first hospital established over 135 years ago, transitions into the St. Vincent's Healthcare system. [Remainder of page intentionally left blank] A-10

67 TOP 15 EMPLOYERS The following table lists the 15 largest employers in the Jacksonville MSA and the approximate size of their respective work forces as of June 1, Name of Employer Product or Service Employees Naval Air Station Jacksonville U.S. Navy 25,245 Naval Station Mayport U.S. Navy 15,293 Duval County Public Schools Public Education 14,284 City of Jacksonville Municipal Government 8,828 Baptist Health Hospital 7,000 Blue Cross & Blue Shield of Florida Health Insurance 7,000 Mayo Clinic Multi-Specialty Health Care 5,000 CSX Railroad Corporate HDQ 4,400 Citibank (Citi-Cards) Credit Card Company 4,200 Bank of America (FL) Banking Systems Regional HDQ 4,000 United Parcel Service Worldwide Parcel Delivery 3,800 U.S. Postal Service Processing and Delivery of Mail 3,797 Fleet Readiness Center Maintenance/Repair Overhaul 3,766 St. Vincent's Medical Center Healthcare 3,726 Shands Jacksonville Hospital-Healthcare 3,500 Source: Jacksonville Regional Chamber of Commerce, Research Department. A-11

68 EMPLOYMENT BY SECTOR The table below shows the estimated non-agricultural wage and salary employment by sector for the Jacksonville MSA as of September 30, Number of Employees Percent of Distribution Trade, Transportation, and Utilities 136, % Professional and Business Services 95, % Government (Federal, State and Local) 74, % Education and Health Services 74, % Leisure and Hospitality 62, % Financial Activities 60, % Construction 49, % Transportation, Warehousing, and Utilities 32, % Wholesale Trade 29, % Other Services 27, % Information 11, % Total Non-Agricultural Employment (Except Domestics, Self-Employed and Unpaid Family Workers) 652, % Source: Florida Research and Economic Database, Florida Agency for Workforce Innovation. A-12

69 LABOR FORCE The following table sets forth the civilian labor force, employment and unemployment figures for the Jacksonville MSA and comparative unemployment for the State of Florida and the United States as of May Labor Force Unemployment Unemployment Year (Civilian) Employment Total Rate Florida U.S , ,397 25, , ,159 30, , ,375 33, , ,345 27, , ,928 25, , ,139 18, , ,200 16, , ,612 16, , ,509 14, , ,342 16, , ,489 16, , ,181 23, , ,153 27, , ,604 30, , ,979 28, , ,330 23, , ,844 21, (1) 660, ,868 20, Source: Bureau of Labor Statistics. (1) As of May, A-13

70 Miscellaneous Jacksonville Statistics Building Permits (1) (000s Omitted) Bank Deposits (000s Omitted) Gross Sales (000s Omitted) Year ,043,770 6,808,440 23,568, ,426,588 10,492,946 25,099, ,534,290 13,158,836 25,414, ,450,335 8,417,853 26,928, ,715,594 8,034,115 28,906, ,686,316 8,729,153 30,375, ,821,618 11,049,146 31,348, ,039,545 13,705,522 33,615, ,147,248 16,383,621 33,307, ,563,940 21,334,437 38,136, ,380,430 23,200,454 N/A (1) Does not include the three Beach Communities and Baldwin. Sources: Building Permits from City of Jacksonville Building and Zoning Division as of December 31, Bank Deposits for Duval County from Federal Deposit Insurance Corporation as of June 30 of each year. Gross Sales from University of Florida, Bureau of Economic and Business Research. Ad Valorem Taxation The following information regarding millage rates and ad valorem tax revenues for the fiscal year ending September 30, 2006 is provided for informational purposes. Ad valorem tax revenues are not pledged to the payment of the Bonds. Millage Rates FY ended 9/30/2006 Taxing Entity: Mills General Services District: General Government Florida Inland Navigational District Schools Water Management District Total General Services District Source: Property Appraisers Office, City of Jacksonville, Florida. A-14

71 Ad Valorem Taxes FY ended 9/30/2006 Levied Collected Percent Collected General Fund 426,353, ,600, % Duval County 859,169, ,361, % Source: Tax Collector's Office. Values include all of Duval County (including Beach Communities and Town of Baldwin). Ten Largest Taxpayers Total 2006 Percentage Assessments Total Assessments Bell South Telecommunication $406,459, % Anheuser-Busch/Metal Container 308,597, % Vistakon/Johnson & Johnson 246,775, % Flagler Development Company 235,454, % Blue Cross & Blue Shield 206,435, % Wal-Mart Prop/Stores 162,620, % Cedar Bay Generating 162,354, % Liberty Property Ltd 143,248, % First States Investors 142,336, % Mid America Apartments 137,493, % TOTAL $2,151,776, % Source: Duval County Tax Collector's Office. A-15

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73 APPENDIX B EXTRACT OF MATERIAL PROVISIONS OF BOND ORDINANCE

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75 APPENDIX B EXTRACT OF MATERIAL PROVISIONS OF BOND ORDINANCE BE IT ORDAINED by the Council of the City of Jacksonville: Section 1. Authority for Ordinance. This ordinance is enacted pursuant to the Act and the Original Ordinance, and supplements the Original Ordinance. Section 2. Definitions. Words importing singular number shall include the plural number in each case and vice versa, and words importing the masculine gender shall include the feminine gender, and words importing persons shall include firms and corporations. Except as otherwise provided herein, words used herein and not otherwise defined shall have the same meaning as set forth in the Original Ordinance. The following terms shall have the following meanings herein. "Accreted Value" shall mean, as of the date of computation with respect to any Capital Appreciation Bonds, an amount equal to the principal amount of such Bonds (the principal amount at the date of issuance) plus the interest accrued on such Bonds from the date of original issuance of such Bonds to the Interest Payment Date next preceding the date of computation or the date of computation if an Interest Payment Date, such interest to accrue in accordance with a Table of Accreted Values to be set forth in a Supplemental Instrument or Contract of Purchase of the City providing for the sale of such Capital Appreciation Bonds, compounded on each Interest Payment Date, plus, if such date of computation is not an Interest Payment Date, a portion of the difference between the Accreted Value shown on the Table of Accreted Values as of the immediately preceding Interest Payment Date (or the date of original issuance if the date of computation is prior to the first Interest Payment Date succeeding the date of original issuance) and the Accreted Value shown on the Table of Accreted Values as of the immediately succeeding Interest Payment Date, such portion to be calculated based on the assumption that Accreted Value accrues between Interest Payment Dates in equal daily amounts on the basis of a 360-day year consisting of twelve (12) thirty (30) day months. "Act" shall mean Chapter , Laws of Florida, Special Acts of 1992, as amended and supplemented and other applicable provisions of law, including Chapters 166, 125, 202 and 205, Florida Statutes. "Additional Parity Obligations" shall mean additional obligations issued in compliance with this ordinance and the Original Ordinance and which all have an equal lien on the Pledged Revenues and rank equally with the Authorized Bonds and the Parity Bonds as to source and security for payment. "Agent Member" shall mean a member of, or participant in, the Securities Depository. "Amortization Installment" with respect to any Term Bonds shall mean the amount required to be deposited in the Amortization Fund in a given year for payment B-1

76 or redemption of Term Bonds so designated by Contract of Purchase or Supplemental Instrument of the City providing for the issuance of such Term Bonds. "Authorized Bonds" shall mean, collectively, the Authorized Project Bonds and the Authorized Refunding Bonds authorized to be issued pursuant to Section 6 of this ordinance. "Authorized City Representative" shall mean such person at the time, and from time to time, designated by written certificate of the Mayor of the City. Authorized Denominations shall mean such denominations for each series of Authorized Bonds as are specified by Mayor s Certificate. Authorized Project Bonds shall mean the Bonds authorized to be issued pursuant to Section 6(a) of this ordinance. Authorized Refunding Bonds shall mean the Bonds authorized to be issued pursuant to Section 6(b) of this ordinance. "Bond Amortization Fund" shall mean the fund of the name created and established in the Sinking Fund pursuant to Section 15 hereof. "Bond Counsel" shall mean a firm of nationally recognized attorneys at law experienced in the issuance of tax-exempt bonds and approved by the City. "Bond Insurance Policy" shall mean the municipal bond new issue insurance policy or policies, if any, issued by the Bond Insurer that guarantee payment of principal of and interest on the Authorized Bonds when due. "Bond Insurer" shall mean an insurance company or companies, if any, named by the City at the time of sale of an installment of the Authorized Bonds. "Bond Year" shall mean the period beginning with October 2 of each calendar year and ending on October 1 of the next succeeding calendar year; provided that the initial Bond Year as to each series of Bonds herein authorized shall commence on the date of issuance of such series of Bonds and shall end on the next ensuing October 1. "Bonds" shall mean the Parity Bonds, the Authorized Bonds and any Additional Parity Obligations. "Capital Appreciation Bonds" shall mean those Bonds issued under this ordinance as to which interest is compounded periodically on each of the applicable periodic dates designated for compounding and payable in an amount equal to the then current Accreted Value only at the maturity or earlier redemption thereof, all as so designated by Contract of Purchase or Supplemental Instrument of the City providing for the issuance thereof. "Capitalized Interest Account" shall mean any or all of the Capitalized Interest Accounts established by the City pursuant to Section 17(a)(1)(B) of this ordinance. B-2

77 "Certified Interest Rate" shall mean, with respect to a series of Variable Rate Bonds maturing on a particular date, the Certified Interest Rate, as determined in accordance with the provisions of the next sentence. A Certified Interest Rate shall be that rate of interest determined by an investment banking or financial advisory institution or firm selected by the City, (i) in the case of Variable Rate Bonds, as the rate of interest such Variable Rate Bonds would bear if, assuming the same maturity date, terms and provisions (other than interest rate) as the proposed Variable Rate Bonds of such maturity, such proposed Variable Rate Bonds of such maturity were issued at a fixed interest rate, or (ii) in the case of a Hedge Obligation which is a variable rate, at the rate of interest a fixed bond issue would bear, assuming an amount equal to the notional amount, and the same maturity date, terms and provisions (other than variable payments) as the Hedge Obligation. "City" shall mean the City of Jacksonville, Florida. "Code" shall mean the United States Internal Revenue Code of 1986, as the same may be amended from time to time, and the regulations thereunder, whether proposed, temporary or final, promulgated by the Department of the Treasury, Internal Revenue Service, and all other promulgations of said service pertaining thereto. "Contract of Purchase" shall mean one or more Bond Purchase Agreements for the Authorized Bonds as described in Section 16 hereof. "Cost of Issuance," when used in connection with an installment of the Authorized Bonds, shall mean costs and expenses incidental to the issuance of the Authorized Bonds including bond insurance premium, rating agency fees and the fees and expenses of any auditors, Deputy Registrar and Paying Agent, Credit Bank, Credit Facility, Reserve Account Credit Facility or depository, bond discount, if any, legal expenses, fiscal expenses, expenses for estimates of costs and of revenues, expenses for verification reports, administrative expenses and any other costs properly attributable to the issuance of such Authorized Bonds. "Council" shall mean the Council of the City as created by the Act. "County" shall mean Duval County, Florida. "Credit Bank" shall mean any person (other than a Bond Insurer) providing a letter of credit, a line of credit or another credit or liquidity enhancement facility as to the Authorized Bonds, as designated by Contract of Purchase, Supplemental Instrument, or Mayor's Certificate. "Credit Facility" shall mean any letter of credit, line of credit or another credit or liquidity enhancement facility as to the Authorized Bonds (other than the Bond Insurance Policy issued by the Bond Insurer), approved by Contract of Purchase, Supplemental Instrument or Mayor's Certificate. "Current Interest Paying Bonds" shall mean those Bonds of any series which bear interest (computed on the basis of a 360-day year consisting of twelve (12) thirty (30) day months) payable semi-annually on such dates as are specified by Contract of B-3

78 Purchase, Supplemental Instrument or Mayor's Certificate at time of sale of the Bonds, and continuing until the Bonds are paid. Debt Service Requirement means, for any Bond Year, the sum of: (1) the amount required to pay the interest becoming due on the Current Interest Paying Bonds during such Bond Year; (2) the aggregate amount required to pay the principal becoming due on Current Interest Paying Bonds for such Bond Year; (3) the aggregate amount required to pay the Maturity Amount due on any Capital Appreciation Bonds maturing in such Bond Year; and (4) except as provided in clauses (E) and (F) below, cumulative net Hedge Obligations resulting from fluctuation in hedged interest rates or value of an index under all Hedge Agreements identified with the Bonds as payable on a parity therewith (excluding Hedge Charges). In calculating the Debt Service Requirement for any period: (A) the City shall deduct from the amounts calculated in Subparagraphs (1) through (4) above: (i) any capitalized interest deposited into the Sinking Fund for such period from the proceeds of the sale of Bonds or otherwise, (ii) any investment earnings to be received on moneys on deposit in the Sinking Fund and accounts therein and required by the terms of this Ordinance to be retained in such Sinking Fund, and (iii) except as provided in clauses (E) and (F) below, cumulative net Hedge Receipts resulting from fluctuation in hedged interest rates or value of an index under all Hedge Agreements identified with the Bonds as payable on a parity therewith; (B) the interest due in any ensuing Bond Year on Variable Rate Bonds and payments in any ensuing Bond Year on any Hedge Obligation which is not a fixed amount shall be calculated at the greater of (1) the actual rate of interest then borne by the Variable Rate Bonds or actual payments then due on such Hedge Obligation or (2) the Certified Interest Rate; (C) the stated maturity date of any Current Interest Paying Term Bonds shall be disregarded and the Amortization Installments applicable to such Current Interest Paying Term Bonds in such Bond Year shall be deemed to mature in such Bond Year; (D) the stated maturity date of any Capital Appreciation Term Bonds shall be disregarded and the Amortization Installments applicable to such Capital Appreciation Term Bonds in such Bond Year shall be deemed to mature in such Bond Year; (E) If an Interest Rate Agreement and an issue of Variable Rate Bonds are designated by the Mayor as part of a common plan of finance and become effective at substantially the same time, and have substantially the same amortization, and the net effect of the Debt Service on such Bonds and the interest receipts and interest B-4

79 payments under such Interest Rate Agreement is expected to be substantially a single fixed rate obligation of the City, then the Debt Service Requirement for such combined Bonds and Interest Rate Agreement shall be calculated at the expected net fixed rate; (F) If an Interest Rate Agreement and an issue of fixed rate Bonds are designated by the Mayor as part of a common plan of finance and become effective at substantially the same time, and have substantially the same amortization, and the net effect of the Debt Service on such Bonds and the interest receipts and interest payments under such Interest Rate Agreement is expected to be substantially a variable rate obligation of the City, then the Debt Service Requirement for such combined Bonds and Interest Rate Agreement shall be calculated as specified in clause (B) above; and (G) For the purposes of calculating the requirements of Section 15(b)(12) hereof for the issuance of Additional Parity Obligations (but not for purposes of determining the amount of the Reserve Requirement), the amount of investment earnings on moneys on deposit in the Sinking Fund as provided in subparagraph (A)(ii) above for the applicable Bond Year shall be calculated using the lower of (i) the current interest rate in effect for such investments, or (ii) the average interest rate in effect for such investments during any 12 consecutive calendar months of the 15 consecutive calendar months immediately preceding the date of calculation. Such income shall not be double-counted and therefore shall be disregarded in determining Pledged Revenues for purposes of such Section 15(b)(12). "Deputy Registrar and Paying Agent" with respect to each installment of the Authorized Bonds shall mean the party designated as such by Contract of Purchase, Supplemental Instrument or Mayor's Certificate which shall serve as Deputy Registrar and Paying Agent, performing the duties set forth in this ordinance and any agreement between the City and such Deputy Registrar and Paying Agent, and its successors or assigns, and any other person added or substituted therefor by the City. "Discretionary Communications Services Tax" shall mean the discretionary communications services tax imposed under the Communications Services Tax Simplification Law, Chapter 202, Florida Statutes. "Excise Taxes" shall mean, collectively, the Utilities Services Taxes and the Occupational License Taxes. "Escrow Deposit Agreement" shall mean an escrow deposit agreement in the form approved by Mayor's Certificate and executed and delivered in connection with the delivery of a series of Authorized Refunding Bonds pursuant to which a portion of the proceeds of the Authorized Refunding Bonds, together with certain other funds, will be held in irrevocable escrow for the payment of the principal of and interest on and premium, if any, with respect to a series of the Refunded Bonds. "Federal Securities" shall mean direct noncallable obligations of the United States of America and obligations the timely payment of principal of and interest on which are fully and unconditionally guaranteed by the United States of America, to which direct obligation or guarantee the full faith and credit of the United States has been pledged or REFCORP interest strips, CATS, TIGRS, or STRPS. B-5

80 "Fitch shall mean Fitch, Inc., its successors and assigns. "Former City" shall mean the City of Jacksonville prior to consolidation under the Act, encompassing the First Urban Services District. "Fuel Oil Tax" shall mean the tax levied and collected by the City pursuant to Chapter 792 of the Ordinance Code of the City, as amended, on every purchase of grades No. 1 (kerosene), No. 2 and No. 3 fuel oil within the corporate limits of the City except within the Second, Third, Fourth and Fifth Urban Services Districts. "Hedge Agreement" shall mean and include an interest rate exchange agreement, an Interest Rate Agreement, forward purchase contract, put option contract, call option contract or other financial product, any of which is used by the City as a hedging device, entered into between the City and a counterparty; provided that such counterparty shall be an entity whose long-term debt obligations, or whose payment obligations under the Hedge Agreement are guaranteed by an entity whose senior long-term debt obligations, in either case meet the requirements of Section , Ordinance Code of the City, and the City s Debt and Swap Policy; and further provided that such arrangement shall be specifically designated in a certificate of the Authorized City Representative of the City as a "Hedge Agreement" for purposes of this ordinance. "Hedge Charges" shall mean charges payable by the City to a counterparty upon the execution, renewal or termination of any Hedge Agreement and any periodic fee payable by the City to keep such Hedge Agreement in effect and other payments required thereby, exclusive of Hedge Obligations. "Hedge Obligations" shall mean net payments required to be made by the City under a Hedge Agreement from time to time as a result of fluctuation in hedged interest rates, or fluctuation in the value of any index of payment. "Hedge Receipts" shall mean net regularly scheduled payments received by the City from a counterparty under a Hedge Agreement, and shall exclude off-market up-front payments and termination payments received by the City. Interest Payment Date shall mean, except for Variable Rate Bonds, April 1 and October 1 and for Variable Rate Bonds such date as is provided by Mayor s Certificate, in each case commencing on the date provided by Mayor s Certificate at the time of sale of the Authorized Bonds. "Interest Rate Agreement" shall mean an agreement between the City and a counterparty under which the City is obligated to make periodic payments on a "notional amount" to the counterparty and the counterparty is obligated to make periodic payments to the City on such "notional amount" on a different basis or formula, and under which the amounts so payable by the City and such counterparty on the same date are netted against each other with the party owing the larger amount making a net payment to the other party. B-6

81 Maximum Annual Debt Service shall mean, as of any particular date of calculation, the Debt Service Requirement for the future Bond Year which is greatest in dollar amount with respect to all Outstanding Bonds. "Mayor's Certificate" means a certificate executed by the Mayor or other Authorized City Representative at the time of execution of a Contract of Purchase, containing marketing and other features of the Authorized Bonds, substantially in the form attached hereto as Exhibit A. "Moody's" shall mean Moody's Investors Service, a corporation organized and existing under the laws of the State of Delaware, its successors and assigns, and if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, "Moody's" shall be deemed to refer to any other nationally recognized statistical rating organization designated by the Authorized City Representative. "Occupational License Taxes" shall mean the proceeds of the tax levied and collected by the City pursuant to sections and , Florida Statutes, and Chapters 770 and 772 of the Ordinance Code of the City, as amended and supplemented, imposing occupational license taxes upon businesses, professions and occupations operated and conducted within the corporate limits of the City. "Original Ordinance" shall mean, collectively, Ordinance , as amended and supplemented, including specifically all ordinances and resolutions authorizing the issuance and sale of the Parity Bonds. "Parity Bonds" shall mean, as to any installment of Authorized Bonds, the outstanding Bonds of the following series: the 1993 Bonds; the 1993A Bonds; the 1995 Basic Loan Payments; the 1995A Bonds; the 1996A Bonds; the 1996C Bonds; the 1999A Bonds; the 1999B Bonds; the 2001A Bonds; the 2001B Bonds; the 2002A Bonds; the 2002B Bonds; the 2003A Bonds; the 2003B Bonds; the 2003C Bonds; and any Additional Parity Obligations issued before the issuance of such installment of the Authorized Bonds. "Permitted Investments" shall mean any of the following, which shall be authorized from time to time by applicable laws of the State for deposit or purchase by the City for the investment of its funds: (1) 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, provided, that the full faith and credit of the United States of America must be pledged to any such direct obligation or guarantee ("Direct Obligations"); (2) Direct obligations and fully guaranteed certificates of beneficial interest of the Export-Import Bank of the United States; consolidated debt obligations and letter of credit-backed issues of the Federal Home Loan Banks; participation certificates and senior debt obligations of the Federal Home Loan Mortgage Corporation ("FHLMCs"); debentures of the Federal Housing Administration; mortgage-backed securities (except stripped mortgage securities which are valued greater than par on the B-7

82 portion of unpaid principal) and senior debt obligations of the Federal National Mortgage Association ("FNMAs"); participation certificates of the General Services Administration; guaranteed mortgage-backed securities and guaranteed participation certificates of the Government National Mortgage Association ("GNMAs"); guaranteed participation certificates and guaranteed pool certificates of the Small Business Administration; debt obligations and letter of credit-backed issues of the Student Loan Marketing Association; local authority bonds of the U.S. Department of Housing & Urban Development; guaranteed Title XI financings of the U.S. Maritime Administration; guaranteed transit bonds of the Washington Metropolitan Area Transit Authority; and Resolution Funding Corporation securities; (3) direct obligations of any state of the United States of America or any subdivision or agency thereof whose unsecured, uninsured and unguaranteed general obligation debt is rated, at the time of purchase, "A" or better by Moody's and "A" or better by S&P, or any obligation fully and unconditionally guaranteed by any state, subdivision or agency whose unsecured, uninsured and unguaranteed general obligation debt is rated, at the time of purchase, "A" or better by Moody's and "A" or better by S&P; (4) commercial paper (having original maturities of not more than 270 days) rated, at the time of purchase, "P-1" by Moody's and "A-1" or better by S&P; (5) Federal funds, unsecured certificates of deposit, time deposits or bankers acceptances (in each case having maturities of not more than 365 days) of any domestic bank including a branch office of a foreign bank which branch office is located in the United States, provided legal opinions are received to the effect that full and timely payment of such deposit or similar obligation is enforceable against the principal office or any branch of such bank, which, at the time of purchase, has a short-term "Bank Deposit" rating of "P-1" by Moody's and a "Short-Term CD" rating of "A-1" or better by S&P. (6) deposits of any bank or savings and loan association which has combined capital, surplus and undivided profits of not less than $3 million, provided such deposits are continuously and fully insured by the Bank Insurance Fund or the Savings Association Insurance Fund of the Federal Deposit Insurance Corporation; S&P; (7) investments in money-market funds rated "AAAm" or "AAAm-G" by (8) repurchase agreements collateralized by Direct Obligations, GNMAs, FNMAs or FHLMCs with any registered broker/dealer subject to the Securities Investors' Protection Corporation jurisdiction or any commercial bank insured by the FDIC, if such broker/dealer or bank has an uninsured, unsecured and unguaranteed obligation rated "P-1" or "A3" or better by Moody's, and "A-1" or "A-" or better by S&P, and provided: a. a master repurchase agreement or specific written repurchase agreement governs the transaction; and B-8

83 b. the securities are held free and clear of any lien, by an independent third party acting solely as agent ("Agent") for the City, and such Agent is (i) a Federal Reserve Bank, (ii) a bank which is a member of the Federal Deposit Insurance Corporation and which has combined capital, surplus and undivided profits of not less than $50 million or (iii) a bank approved in writing for such purpose by the Bond Insurer, and the City shall have received written confirmation from the Agent that it holds such securities, free and clear of any lien, as Agent for the City; and c. a perfected first security interest under the Uniform Commercial Code, or book entry procedures prescribed at 31 C.F.R et seq. or 31 C.F.R et seq. in such securities is created for the benefit of the City; and d. the repurchase agreement has a term of one hundred eighty (180) days or less, and the City Treasurer will value the collateral securities no less frequently than weekly and will liquidate the collateral securities if any deficiency in the required collateral percentage is not restored within two (2) business days of such valuation; and e. the fair market value of the securities in relation to the amount of the repurchase obligation, including principal and interest, is equal to at least 103%. (9) Investments under the "Investment of Local Government Surplus Funds Act," being Part IV, Chapter 218, Florida Statutes, as amended. "Pledged Discretionary Communications Services Tax" shall mean 85% of the proceeds of the Discretionary Communications Services Tax. "Pledged Revenues" shall mean the Excise Taxes and all income received from investments of funds in the Sinking Fund and Reserve Account. "Policy Costs" shall mean the amount of each draw under a Reserve Account Credit Facility and related reasonable expenses incurred by the issuer thereof, plus interest on all such amounts until reimbursed at the Repayment Rate. "Prerefunded Obligations" shall mean any bonds or other obligations of any state of the United States of America or of any agency, instrumentality or local governmental unit of any such state (1) which are (a) not callable prior to maturity or (b) as to which irrevocable instructions have been given to the fiduciary for such bonds or other obligations by the obligor to give due notice of redemption and to call such bonds for redemption on the date or dates specified in such instructions, (2) which are fully secured as to principal, redemption premium, if any, and interest by a fund consisting only of cash and/or Federal Securities, secured in the manner set forth in Section 21 hereof, which fund may be applied only to the payment of such principal of, redemption premium, if any, and interest on such bonds or other obligations on the maturity date or dates thereof or the specified redemption date or dates pursuant to such irrevocable instructions, as the case may be, (3) as to which the principal of and interest on such Federal Securities deposited in such fund, together with any cash on deposit in such fund, are sufficient, as verified by an independent certified public accountant, to pay the principal of, redemption premium, if any, and interest on such bonds or other B-9

84 obligations on the maturity date or dates thereof or on the redemption date or dates specified in such irrevocable instructions, and (4) which are rated "AAA" by S&P or "Aaa" by Moody's; provided, however, that the escrow agreements providing for the refunding of such bonds or other obligations (1) shall permit the deposit solely of cash and/or Federal Securities and shall permit substitution for such Federal Securities only other Federal Securities, and only upon the receipt by the escrow agent of (A) a new verification of the sufficiency of the escrowed securities (assuming such substitution has been made) to provide for the payment of the Prerefunded Obligations in accordance with the terms of the escrow agreements and (B) an opinion of Bond Counsel to the effect that such substitution shall not affect the tax-exempt status of the interest payable on the Prerefunded Obligations and (2) shall require the consent of the holders of 100% of the principal amount of the Prerefunded Obligations to amendments to such escrow agreements, except amendments severing illegal provisions, or construing ambiguous provisions with no substantial consequences adverse to the holders of the Prerefunded Obligations, or granting additional security to the holders of the Prerefunded Obligations. "Project" shall mean those capital projects described on Exhibit B annexed hereto, as the same may be modified from time to time by Supplemental Instrument of the Council. "Rebate Fund" shall mean any or all of the Rebate Funds established by the City pursuant to Section 19(b) hereof. "Record Date" shall mean, with respect to any Interest Payment Date on the Authorized Bonds, the fifteenth (15th) day of the month (whether or not a business day) preceding such Interest Payment Date. "Redemption Date," when used with respect to any Authorized Bond to be redeemed, shall mean the date fixed for such redemption as to which notice has been given to the Deputy Registrar and Paying Agent. "Redemption Price" shall mean the principal amount and accrued interest on any Current Interest Paying Bonds and the Accreted Value of any Capital Appreciation Bond, plus the applicable redemption premium, if any. "Refunded Bonds" shall mean that portion of the outstanding bonds of any issue of Parity Bonds that are to be refunded from a portion of the proceeds of Authorized Refunding Bonds together with other monies of the City, all as designated by Mayor's Certificate. "Registered Owner" shall mean the owner of any Bond as his name appears on the registration books of the Deputy Registrar and Paying Agent. "Repayment Rate" shall mean a rate of interest equal to the lower of (i) such rate as is specified by Supplemental Instrument, by Mayor's Certificate, or by the Reserve Account Credit Facility, or (ii) the highest rate permitted by law. "Reserve Account" shall mean the account of that name created and established in Section 15(b)(3)(B) of this ordinance and which is a part of the Sinking Fund. B-10

85 "Reserve Account Credit Facility" shall mean any Credit Facility meeting the requirements of Section 15(b)(3)(B)(iv) hereof. "Reserve Requirement" shall mean Maximum Annual Debt Service. "Securities" shall mean Federal Securities and Prerefunded Obligations. "Securities Depository" shall mean The Depository Trust Company and its successors and assigns or if (i) the then-securities Depository resigns from its functions as depository of the Bonds or (ii) the City discontinues use of the then-securities Depository pursuant to Section 7B hereof, any other Securities Depository which agreed to follow the procedures required to be followed by a Securities Depository in connection with the Bonds and which is selected by the City. "Securities Depository Nominee" shall mean, as to any Securities Depository, such Securities Depository or the nominee of such Securities Depository in whose name there shall be registered on the registration books maintained by the Deputy Registrar and Paying Agent the Bond certificates to be delivered to and immobilized at such Securities Depository during the continuation with such Securities Depository of participation in its book-entry system. "Serial Bonds" shall mean all Bonds except Term Bonds. "Sinking Fund" shall mean the fund of that name created and established in the Original Ordinance and referred to in Section 15(b)(3)(A) of this ordinance. "Standard & Poor's" or "S&P" shall mean Standard & Poor's, a division of The McGraw Hill Companies, Inc., a corporation organized and existing under the laws of the State of New York, its successors and assigns, and, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, "S&P" shall be deemed to refer to any other nationally recognized securities rating organization designated by the Authorized City Representative. "State" shall mean the State of Florida. "Supplemental Instrument" shall mean any ordinance or resolution of the City amending or supplementing this ordinance, duly enacted or adopted in accordance with the Act and becoming effective prior to the issuance of the Bonds or in accordance with the terms of Sections 22 or 23 hereof. "Term Bonds" shall mean the Bonds of a series, all of which shall be stated to mature on one date, and which shall be subject to mandatory redemption by operation of the Bond Amortization Fund. "Urban Services Districts" shall mean those services districts, including the First, Second, Third, Fourth and Fifth Urban Services Districts of the City which contain the respective territorial areas of the Former City (as defined in the Original Ordinance), and the cities of Jacksonville Beach, Atlantic Beach, and Neptune Beach and the Town of Baldwin, respectively. B-11

86 "Utilities Services Taxes" shall mean the proceeds of: 1. The tax as levied and collected by the City pursuant to Chapter 790 of the Ordinance Code of the City, now entitled "Public Service Tax - General," on every purchase of electricity, gas (natural, liquefied petroleum gas or manufactured) and water service within the corporate limits of the First Urban Services District under the authority of Section (formerly Section ), Florida Statutes; 2. The tax on such above-described utilities services as extended, levied and imposed throughout the remainder of the County, except the Second, Third, Fourth and Fifth Urban Services Districts, pursuant to Chapter 790 of the Ordinance Code of the City; 3. The Fuel Oil Tax; and 4. The Pledged Discretionary Communications Services Tax. Variable Rate Bonds shall mean Bonds, the interest rate on which is subject to periodic adjustment, at intervals equal to or less than two years. The Mayor is authorized to execute and deliver agreements, certificates and other documents evidencing the terms by which interest on Variable Rate Bonds is determined. For purposes of calculating the Reserve Requirement, Variable Rate Bonds shall be assumed to bear interest at the Certified Rate, as certified on the date of calculation. For purposes of any rate or other covenant measuring actual debt service coverage during a test period, Variable Rate Bonds and any net Hedge Obligation which is not a fixed amount shall be deemed to bear interest or be calculated at the actual rate per annum applicable during the test period. "1993 Bonds" shall mean the outstanding bonds of an issue of Excise Taxes Revenue Bonds, Series 1993, dated February 1, 1993 and the date of delivery for capital appreciation bonds, of the City, and originally issued in the principal amount of $43,605, "1993A Bonds" shall mean the outstanding bonds of an issue of Excise Taxes Revenue Refunding Bonds, Series 1993A, dated July 15, 1993, of the City, and originally issued in the principal amount of $49,865, Basic Loan Payments shall mean the Basic Payments due under the Loan Agreement between the City and the Sunshine State Governmental Financing Commission, dated September 1, 1995 and originally issued in the principal amount of $24,995, A Bonds shall mean the outstanding bonds of an issue of Excise Taxes Revenue Refunding Bonds, Series 1995A, dated December 1, 1995, of the City, and originally issued in the principal amount of $19,850, A Bonds shall mean the outstanding bonds of an issue of Excise Taxes Revenue Refunding Bonds, Series 1996A dated February 1, 1996 of the City and originally issued in the principal amount of $19,965,000. B-12

87 1996C Bonds shall mean the outstanding bonds of an issue of Excise Taxes Revenue Bonds, Series 1996C, dated October 1, 1996 of the City and originally issued in the principal amount of $4,055,000. "1999A Bonds" shall mean the outstanding bonds of an issue of Excise Taxes Revenue Refunding and Improvement Bonds, Series 1999A, dated February 15, 1999 of the City and originally issued in the principal amount of $75,890,000. "1999B Bonds" shall mean the outstanding bonds of an issue of Excise Taxes Revenue Refunding and Improvement Bonds, Series 1999B dated September 1, 1999 of the City and originally issued in the principal amount of $40,835,000. "2001A Bonds" shall mean the City's outstanding bonds of an issue of Excise Taxes Revenue Refunding Bonds, Series 2001A, dated July 1, 2001, and issued on July 3, 2001 in the amount of $42,485,000. "2001B Bonds" shall mean the City's outstanding bonds of an issue of Excise Taxes Revenue Bonds, Series 2001B, dated April 1, 2002 and originally issued on April 9, 2002 in the principal amount of $46,735,000. "2002A Bonds" shall mean the City's outstanding bonds of an issue of Excise Taxes Revenue Refunding and Improvement Bonds, Series 2002A, dated July 3, 2002 and originally issued on July 3, 2002 in the principal amount of $56,685, B Bonds shall mean the City s outstanding bonds of an issue of Excise Taxes Revenue Bonds, Series 2002B, dated November 26, 2002, and originally issued on November 26, 2002 in the principal amount of $68,475, A Bonds shall mean the City s outstanding bonds of an issue of Excise Taxes Revenue Bonds, Series 2003A, dated December 29, 2003 and originally issued on December 29, 2003, in the principal amount of $18,745, B Bonds shall mean the City s outstanding bonds of an issue of Excise Taxes Revenue Refunding and Improvement Bonds, Series 2003B dated July 3, 2003 and issued on July 3, 2003 in the principal amount of $27,065, C Bonds shall mean the City s outstanding bonds of an issue of Excise Taxes Revenue Refunding Bonds, Series 2003C, dated July 3, 2003 and issued on July 3, 2003 in the principal amount of $34,540,000. *** Section 6. Authorization of Authorized Bonds. (a) Subject and pursuant to the provisions hereof, Authorized Project Bonds of the City to be known as "Excise Taxes Revenue Bonds, Series," are authorized to be issued in the aggregate principal amount of not exceeding the principal amount stated in the title of this ordinance. Each installment of Authorized Project Bonds shall be given an appropriate series designation as provided by Mayor's Certificate. B-13

88 (b) Subject and pursuant to the provisions hereof, and in accordance with the applicable terms of Section of the Ordinance Code of the City and the City s Debt and Swap Policy, Authorized Refunding Bonds to be known as Excise Taxes Revenue Refunding Bonds, Series are authorized to be issued from time to time for the purpose of refunding all or any part of the City s Parity Bonds as defined herein, provided that: 16 hereof; (1) the Contract of Purchase complies with the requirements of Section (2) the Director of Administration and Finance certifies that the issuance of the Authorized Refunding Bonds will comply with the City s Debt and Swap Policy, expressly including Part VIII thereof relating to Debt Refunding; and (3) the amount of each issue of Authorized Refunding Bonds does not exceed the amount necessary to achieve the purpose of such issue and is consistent with the requirements of this ordinance. *** Section 9. Negotiability and Registration of Authorized Bonds. (a) The Authorized Bonds shall be and shall have all of the qualities and incidents of negotiable instruments under the Uniform Commercial Code and Investment Securities Law of the State of Florida. Each successive Registered Owner, in accepting any of such Bonds, shall be conclusively deemed to have agreed that such Bonds shall be and shall have all of the qualities and incidents of negotiable instruments under the Uniform Commercial Code and Investment Securities Law of the State of Florida. (b) The Deputy Registrar and Paying Agent shall keep books for the registration of and for the registration of transfers of the Authorized Bonds as provided in this ordinance. The transfer of any such Bonds may be registered only upon such books upon surrender thereof to the Deputy Registrar and Paying Agent accompanied by a written instrument or instruments of transfer in form and with guarantee of signature satisfactory to the Deputy Registrar and Paying Agent duly executed by the Registered Owner or his attorney or legal representative in such form as shall be satisfactory to the Deputy Registrar and Paying Agent. Upon any such registration of transfer the City shall execute and the Deputy Registrar and Paying Agent shall authenticate and deliver in exchange for such Bond, a new Bond or Bonds registered in the name of the transferee, in Authorized Denominations, of the same maturity and interest rate, and in an aggregate principal amount equal to the principal amount of such Bond so surrendered. In all cases in which Authorized Bonds shall be exchanged, the City shall execute and the Deputy Registrar and Paying Agent shall authenticate and deliver, at the earliest practicable time, Authorized Bonds in accordance with provisions of this ordinance. All Authorized Bonds surrendered in any such exchange or registration of transfer shall forthwith be cancelled by the Deputy Registrar and Paying Agent. B-14

89 The City or the Deputy Registrar and Paying Agent may make a reasonable charge for every transfer sufficient to reimburse it for any expenses incurred by it. (c) TheregistrationbooksoftheCityshallbemadeavailabletoany Credit Bank, the issuer of any Reserve Account Credit Facility, and any Bond Insurer, and each of their respective designated agents, upon the occurrence of any default that could give rise to a payment obligation under the Credit Facility, the Reserve Account Credit Facility, and the Bond Insurance Policy, respectively. (d) The person in whose name any fully registered Authorized Bond is registered shall, subject to the provisions of the immediately following sentence, be deemed and regarded as the absolute owner thereof for all purposes, and payment of principal of any such Bond and the payment of interest on any such fully registered Bond, shall be made only to or upon the order of the Registered Owner thereof or his legal representative, but such registration may be changed as hereinabove provided. In the event that any of the Authorized Bonds are registered in the name of a Securities Depository which uses a book entry system, the standing of the Registered Owner to enforce any of the covenants herein may be established through the books and records of such Securities Depository or a participant therein. All such payments shall be valid and effectual to satisfy and discharge the liability upon such Bond to the extent of the sumorsumssopaid. Section 10. Authorized Bonds Mutilated, Apparently Destroyed, Wrongfully Taken or Lost. (a) In case any Authorized Bond shall become mutilated or apparently destroyed, wrongfully taken or lost, the City, may, in its discretion, cause to be executed, and the Deputy Registrar and Paying Agent shall authenticate and deliver, a new Authorized Bond of like date and tenor as the Authorized Bond so mutilated, apparently destroyed, wrongfully taken or lost, in exchange and substitution for such mutilated Bond, upon surrender and cancellation of such mutilated Bond or, in lieu of and in substitution for the Authorized Bond apparently destroyed, wrongfully taken or lost, upon the Registered Owner furnishing to the City and the Deputy Registrar and Paying Agent proof of his ownership thereof and satisfactory indemnity and complying with such other reasonable regulations and conditions as the City and the Deputy Registrar and Paying Agent may prescribe, and paying such expenses as the City and the Deputy Registrar and Paying Agent may incur. All such Bonds surrendered shall be cancelled by the City. If any of the Authorized Bonds shall have matured or be about to mature, instead of issuing a substitute Authorized Bond, the City may pay the principal of and interest on such Bond upon being indemnified as aforesaid, and, if any such Bond be destroyed, stolen or lost, without surrender thereof. (b) All such duplicate Authorized Bonds issued pursuant to this section shall constitute original, additional, contractual obligations on the part of the City, whether or not the destroyed, stolen or lost Bonds be at any time found by anyone, and such duplicate Authorized Bonds shall be entitled to equal and proportionate benefits and rights as to lien on and source and security for payment from the funds, as hereinafter pledged, to the same extent as all other obligations issued hereunder. B-15

90 Section 11. Provisions for Redemption of Authorized Bonds. (a) Terms. The Authorized Bonds may be made redeemable prior to their respective stated dates of maturity, at the option of the City, at the Redemption Price and with such premium as shall be determined by Contract of Purchase, Supplemental Instrument or Mayor's Certificate of the City at or prior to the sale thereof. If Term Bonds are issued, the Authorized Bonds may be made redeemable prior to their maturity pursuant to Amortization Installments by operation of the Bond Amortization Fund, at the Redemption Price, and without premium. In the case of the redemption of Term Bonds redeemable prior to maturity by operation of the Bond Amortization Fund, the Deputy Registrar and Paying Agent shall, in each year in which such Term Bonds are to be redeemed, select the Term Bonds to be so redeemed by lot or such other method as it deems equitable, and shall give notice of such redemption as provided in subsection (b) hereof without further notification or instruction from the City. (b) Notice. Notice of such redemption shall, at least thirty (30) days and not more than forty-five (45) days prior to the redemption date, be (i) filed with the Deputy Registrar and Paying Agent; and (ii) mailed, postage prepaid, to all Registered Owners of Bonds to be redeemed, at their addresses as they appear of record on the registration books of the Deputy Registrar and Paying Agent as of the date forty-five (45) days prior to the date fixed for redemption. Such notice shall include: (i) the CUSIP numbers of all Bonds being redeemed; (ii) the date of issue of the Bonds as originally issued; (iii) the rate of interest or approximate yield borne by each Bond being redeemed; (iv) the maturity date of each Bond being redeemed; (v) the publication date of the official notice of redemption; (vi) the name and address of the Deputy Registrar and Paying Agent; and (vii) any other descriptive information needed to identify accurately the Bonds being redeemed. Each notice of redemption shall be provided at least five (5) days prior to publication by registered or certified mail or overnight delivery service or telecopy to registered securities depositories then in the business of holding substantial amounts of obligations of types comprising the Bonds including, without limitation, The Depository Trust Company, New York, New York, and to one or more national information services that disseminate notices of redemption of obligations such as the Bonds. Upon the payment of the Redemption Price of Bonds being redeemed, each check or other transfer of funds issued for such purpose shall bear the CUSIP number identifying, by issue and maturity, the Bonds being redeemed with the proceeds of such check or other transfer. Failure to so file or mail any such notice of redemption shall not affect the validity of the proceedings for such redemption with respect to Registered Owners of Bonds to whom notice was duly mailed hereunder. Interest shall cease to accrue on any Bond duly called for redemption on the redemption date, if payment thereof has been duly provided as described in Section 21 of this ordinance. The privilege of transfer or exchange of any of the Bonds so called for redemption is suspended for a period commencing fifteen (15) days preceding the mailing of the notice of redemption and ending on the date fixed for redemption. (c) Denominations. Authorized Bonds in denominations greater than a minimum Authorized Denomination shall be deemed to be an equivalent number of Authorized Bonds in the denomination of a minimum Authorized Denomination. If an Authorized Bond is of a denomination larger than a minimum Authorized B-16

91 Denomination, a portion of such Bond may be redeemed, in the amount of such minimum Authorized Denomination or integral multiples thereof. (d) Notice Regarding Available Funds for Redemption. Notice of any redemption of Authorized Bonds shall either (i) explicitly state that the proposed redemption is conditioned on there being on deposit in the applicable fund or account on the redemption date sufficient money to pay the full redemption price of the Authorized Bonds to be redeemed, or (ii) be sent only if sufficient money to pay the full redemption price of the Authorized Bonds to be redeemed is on deposit in the applicable fund or accounts. *** Section 15. Bond Security and Covenants. (a) Security. The payment of the principal of and interest and premium, if any, on the Bonds shall be secured by a pledge of and a lien on the Pledged Revenues, which pledge and lien shall rank equally with the pledge and lien securing payments of all Bonds under the Original Ordinance and any Additional Parity Obligations, and the City does hereby irrevocably pledge the Pledged Revenues to the payment of the principal of and interest and premium, if any, on the Bonds, for reserves therefor and for all other payments required hereunder. The Bonds shall not be or constitute a general obligation or indebtedness of the City within the meaning of the Constitution of the State, but shall be payable solely from and secured by a lien upon and pledge of the Pledged Revenues. The full faith and credit of the City are not pledged to the payment of the principal of, or premium, if any, or interest on the Bonds. No Registered Owner of any of the Bonds shall ever have the right to require or compel the exercise of the ad valorem taxing power of the City for payment thereof, and the Bonds shall not constitute a lien upon any property (except as provided in this ordinance) owned by or situated within the corporate territory of the City. (b) Preservation of Covenants. Additionally, for as long as any of the principalofandinterestandpremium,ifany,onanyofthebondsshallbeoutstanding and unpaid, or until payment has been provided for as herein permitted, or until there shall have been set apart in the Sinking Fund, including the Reserve Account, a sum sufficient to pay when due the entire principal of and interest on the Bonds remaining unpaid, together with interest accrued or to accrue thereon, the City covenants with the Registered Owners of any and all Bonds as follows: (1) Utility Tax Fund. From the Utilities Services Taxes collected by the City, there shall be deposited by the City into the Sinking Fund such amounts which shall, together with the other funds pledged hereunder, be sufficient to meet the requirements for such Sinking Fund and the Reserve Account therein as set forth in Section 15(b)(3). (2) Occupational License Taxes. The proceeds of the Occupational License Taxes, as soon as the same are collected by the City, shall be forthwith deposited into the Sinking Fund, in such amounts which shall, together with the other funds pledged hereunder, be sufficient to meet the requirements for such Sinking Fund and the Reserve Account therein as set forth in Section 15(b)(3). B-17

92 (3) Flow of Funds. The City, following the delivery of any Bonds and at the beginning of each Fiscal Year thereafter, shall forthwith from the moneys on deposit in the Utility Tax Fund and from the proceeds of the Occupational License Taxes deposit into the Sinking Fund, which is created and established by the Original Ordinance, such sums as will be necessary to meet the following requirements: (A) First, for the payment of interest becoming due and payable on the Bonds on the Interest Payment Dates during the then current Fiscal Year and the principal becoming due and payable on Serial Bonds and the Amortization Installment becoming due on Term Bonds, each on the maturity dates during such Fiscal Year and on the October 1 of the next ensuing Fiscal Year, and handling charges thereon, and any deficiencies for prior Fiscal Years. Amortization Installments deposited into the Sinking Fund shall be applied to the retirement of Term Bonds as follows: (i) Subject to the provisions of paragraph (iii) below, the City shall endeavor to purchase Term Bonds then outstanding, at the most advantageous price obtainable with reasonable diligence, such price not to exceed the principal of such Term Bonds and the redemption premium which would be applicable if the moneys applied to such purchase were otherwise applied to the redemption of Term Bonds under paragraphs (ii) and (iii) below. The City shall pay the interest accrued on such Term Bonds to the date of delivery thereof from the Sinking Fund and the purchase price from the Amortization Installments, but no such purchase shall be made by the City within the period of forty-five (45) days immediately preceding any interest payment date on which such Term Bonds are subject to call for redemption except from moneys in excess of the amounts set aside or deposited for the redemption of Term Bonds. (ii) Subject to the provisions of paragraph (iii) below, the City shall call for redemption on each interest payment date on which Term Bonds are subject to redemption from Amortization Installments such amount of Term Bonds then subject to redemption as will exhaust the Amortization Installments then held in Sinking Fund as nearly as may be practicable. (iii) Amortization Installments in the Sinking Fund shall be applied by the City in each Bond Year to the retirement of Term Bond then outstanding, first, to the Term Bonds of each series to the extent of the Amortization Installment, if any, for such Bonds Year for the Term Bonds of each such series then outstanding and, if the amount available in such Bond Year shall not be sufficient therefor, then in proportion to the Amortization Installment, if any, for such Bond Year for the Term Bonds of each such series then outstanding, provided, however, that if the Term Bonds of any series shall not then be subject to redemption from Amortization Installments in the Sinking Fund and if the City shall at any time be unable to exhaust the moneys applicable to the Term Bonds of such series under the provisions of this clause in the purchase of such Term Bonds under the provisions of paragraph (i) above, such moneys or the balance of such moneys, as the case may be, shall be retained in the Sinking Fund and, as soon as it is feasible, applied to the retirement of Term Bonds of such series; and. B-18

93 (iv) The City shall deposit into the Sinking Fund, Amortization Installments for the amortization of the principal of the Term Bonds, together with any deficiencies for prior required deposits into the Sinking Fund, such Amortization Installments to be in such amounts and to be due in such years as shall be determined by Contract of Purchase or Supplemental Instrument of the City prior to thesaleofeachseriesofbonds. The Issuer shall pay from the Sinking Fund all expenses in connection with any such purchase or redemption. (B) Second, for the maintenance of a Reserve Account in the Sinking Fund equal to the Reserve Requirement such sum shall be fully funded upon the issuance of any Bonds. (i) Moneys in the Reserve Account shall be used only for the purpose of the payment of maturing principal of or interest on the Bonds (1) when the other moneys in the Sinking Fund are insufficient therefor, or (2) when moneys in the Reserve Account exceed the Reserve Requirement and for no other purpose. (ii) Any deficiencies in the Reserve Account shall be subsequently made up from the first Pledged Revenues available after all required current payments for the Sinking Fund, including all deficiencies for prior payments, have been made in full. (iii) Notwithstanding the provisions of (B)(i) and (ii) above, in lieu of the required deposits of Pledged Revenues into the Reserve Account, the City may deposit therein any combination of cash and Reserve Account Credit Facilities aggregating the Reserve Requirement, calculated on an aggregate basis, for the benefit of the Registered Owners of the Bonds, Parity Bonds and Additional Parity Obligations. (iv) The following requirements shall be fulfilled in the event the Reserve Requirement as to any Parity Bonds, the Bonds, or any Additional Parity Obligations, is fulfilled in whole or in part by a deposit of a Reserve Account Credit Facility in lieu of cash: (1) A surety bond or insurance policy issued to the entity serving as trustee or paying agent (the "Fiduciary"), as agent of the bondholders, by a company licensed to issue an insurance policy guaranteeing the timely payment of debt service on such bonds (a "municipal bond insurer") may be deposited in the Reserve Account to meet all or a part of the Reserve Requirement if the claims paying ability of the issuer thereof shall be rated "AAA" or "Aaa" by S&P and Moody's, respectively. (2) A surety bond or insurance policy issued to the Fiduciary, as agent of the bondholders, by an entity other than a municipal bond insurer may be deposited in the Reserve Account to meet all or a part of the Reserve Requirement if the form and substance of such instrument and the issuer thereof shall be approved by the Bond Insurer. B-19

94 (3) An unconditional irrevocable letter of credit issued to the Fiduciary, as agent of the bondholders, by a bank may be deposited in the Reserve Account to meet all or a part of the Reserve Requirement if the issuer thereof is rated at least "AA" by S&P. The letter of credit shall be payable in one or more draws upon presentation by the beneficiary of a sight draft accompanied by its certificate that it then holds insufficient funds to make a required payment of principal or interest on the bonds. The draws shall be payable within two (2) days of presentation of the sight draft. The letter of credit shall be for a term of not less than three (3) years. The issuer of the letter of credit shall be required to notify the City and the Fiduciary, not later than thirty (30) months prior to the stated expiration date of the letter of credit, as to whether such expiration date shall be extended, and if so, shall indicate the new expiration date. If such notice indicates that the expiration date shall not be extended, the City shall deposit in the Reserve Account an amount sufficient to cause the cash or Permitted Investments on deposit in the Reserve Account together with any other qualifying Reserve Account Credit Facilities held in the Reserve Account, to equal the Reserve Requirement on all outstanding Parity Bonds, Bonds, and Additional Parity Obligations, such deposit to be paid in equal installments on at least a semi-annual basis over the remaining term of the letter of credit, unless the letter of credit is replaced by a Reserve Account Credit Facility meeting the requirements in any of (1)-(3) herein. The letter of credit shall permit a draw in full not less than two (2) weeks prior to the expiration or termination of such letter of credit if the letter of credit has not been replaced or renewed. The ordinance shall, in turn, direct the Fiduciary to draw upon the letter of credit prior to its expiration or termination unless an acceptable replacement is in place or the Reserve Account is fully funded in its required amount. (4) The use of any Reserve Account Credit Facility pursuant to this paragraph shall be subject to receipt of an opinion of counsel acceptable to the Bond Insurer and in form and substance satisfactory to the Bond Insurer as to the due authorization, execution, delivery and enforceability of such instrument in accordance with its terms, subject to applicable laws affecting creditors' rights generally, and, in the event the issuer of such credit instrument is not a domestic entity, an opinion of foreign counsel in form and substance satisfactory to the Bond Insurer. In addition, the use of an irrevocable letter of credit shall be subject to receipt of an opinion of counsel acceptable to the Bond Insurer and in form and substance satisfactory to the Bond Insurer to the effect that payments under such letter of credit would not constitute avoidable preferences under Section 547 of the U.S. Bankruptcy Code or similar state laws with avoidable preference provisions in the event of the filing of a petition for relief under the U.S. Bankruptcy Code or similar state laws by or against the issuer of the bonds (or any other account party under the letter of credit). (5) The obligation to reimburse the issuer of a Reserve Account Credit Facility for any Policy Costs shall be subordinate to the payment of debt service on the Bonds. The right of the issuer of a Reserve Account Credit Facility to payment or reimbursement for that portion of the Policy Costs constituting fees and expenses shall be subordinated to cash replenishment of the Reserve Account and subject to the second succeeding sentence, its right to reimbursement for claims or draws shall be on a parity with the cash replenishment of the Reserve Account and shall enjoy the same priority of payment from Pledged B-20

95 Revenues as the obligation to maintain and refill the Reserve Account pursuant to the third unnumbered paragraph of Section 3.03D(2) of Ordinance , as preserved by the Original Ordinance. The Reserve Account Credit Facility shall provide for a revolving feature under which the amount available thereunder will be reinstated to the extent of any reimbursement of draws or claims paid. If the revolving feature is suspended or terminated for any reason, the right of the issuer of the Reserve Account Credit Facility to reimbursement will be subordinated to cash replenishment of the Reserve Account to an amount equal to the difference between the full original amount available under the Reserve Account Credit Facility and the amount then available for further draws or claims. If (a) the issuer of a Reserve Account Credit Facility becomes insolvent or (b) the issuer of a Reserve Account Credit Facility defaults in its payment obligations thereunder or (c) the claims-paying ability of the issuer of the insurance policy or surety bond falls below a S&P "AAA" or a Moody's "Aaa" or (d) the rating of the issuer of the letter of credit falls below a S&P "AA" or a Moody's "Aa," the obligation to reimburse the issuer of the Reserve Account Credit Facility shall be subordinate to the cash replenishment of the Reserve Account. (6) If (a) the revolving reinstatement feature described in the preceding paragraph is suspended or terminated or (b) the rating of the claims paying ability of the issuer of the surety and/or insurance policy falls below a S&P "AAA" or a Moody's "Aaa" or (c) the rating of the issuer of the letter of credit falls below a S&P "AA," the City shall either (i) deposit into the Reserve Account an amount sufficient to cause the cash or Permitted Investments on deposit in the Reserve Account to equal the Reserve Requirement on all outstanding Parity Bonds, Bonds and Additional Parity Obligations, such amount to be paid over the ensuing five (5) years in equal installments deposited at least semi-annually or (ii) replace such instrument with a surety bond, insurance policy or letter of credit meeting the requirements in any of (1)-(3) above within six (6) months of such occurrence. In the event (a) the rating of the claims-paying ability of the issuer of the surety bond or insurance policy falls below "A" or (b) the rating of the issuer of the letter of credit falls below "A" or (c) the issuer of the Reserve Account Credit Facility defaults in its payment obligations or (d) the issuer of the Reserve Account Credit Facility becomes insolvent, the City shall either (I) deposit into the Reserve Account an amount sufficient to cause the cash or Permitted Investments on deposit in the Reserve Account to equal the Reserve Requirement on all outstanding Parity Bonds, Bonds, and Additional Parity Obligations, such amount to be paid over the ensuing year in equal installments on at least a monthly basis or (II) replace such instrument with a surety bond, insurance policy or letter of credit meeting the requirements in any of (1)-(3) above within six (6) months of such occurrence. (7) Where applicable, the amount available for draws or claims under the Reserve Account Credit Facility may be reduced by the amount of cash or Permitted Investments, as applicable, deposited in the Reserve Account pursuant to clause (I) of the preceding subparagraph (6). (8) If the City chooses the above described alternatives to a cash-funded Reserve Account, any amounts owed by the City to the issuer of such credit instrument as a result of a draw thereon or a claim thereunder, as appropriate, shall be included in any calculation of debt service requirements required to be made pursuant to the ordinance for any purpose, e.g., rate covenant or additional bonds test. B-21

96 (9) The Fiduciary shall ascertain the necessity for a claim or draw upon the Reserve Account Credit Facility and to provide notice to the issuer of the Reserve Account Credit Facility in accordance with its terms not later than three (3) days (or such longer period as may be necessary depending on the permitted time period for honoring a draw under the Reserve Account Credit Facility) prior to each interest payment date. (10) Cash on deposit in the Reserve Account shall be used (or investments purchased with such cash shall be liquidated and the proceeds applied as required) for the benefit of the Bonds, Parity Bonds and the Additional Parity Obligations secured thereby on a parity basis. Any cash on deposit (or investments purchased with such cash shall be liquidated and the proceeds applied as required) shall be used prior to any drawing on any Reserve Account Credit Facility. If and to the extent that more than one Reserve Account Credit Facility is deposited in the Reserve Account, drawings thereunder and repayments of costs associated therewith shall be made on a pro rata basis, calculated by reference to the maximum amounts available thereunder. (v) Repayment of Policy Costs shall commence in the first month following each draw, and each such monthly payment shall be in an amount at least equal to 1/12 of the aggregate of all Policy Costs. In addition, so long as an amount equal, when added to the amount available for drawings under all Reserve Account Credit Facilities, to the Reserve Requirement on the Parity Bonds, Additional Parity Obligations and the Bonds for the succeeding twelve (12) months is on deposit in the Reserve Account, then, unless such amounts were previously paid pursuant to the preceding sentence, the issuer of a Reserve Account Credit Facility shall be repaid all of its previously unreimbursed expenses related to any draw and previously unreimbursed interest accrued thereon at the Repayment Rate. (vi) If the Issuer shall fail to repay any Policy Costs in accordance with the requirements of paragraphs (iv) and (v) above, the issuer of a Reserve Account Credit Facility shall be entitled to exercise any and all remedies available at law or under this ordinance other than (A) acceleration of the maturity of the Bonds or (B) remedies which would adversely affect Registered Owners of the Bonds. (vii) This ordinance shall not be discharged or defeased in accordance with Section 21 hereof until all Policy Costs owing with respect to all Reserve Account Credit Facilities shall have been paid in full. (viii) As security for the City's repayment obligations with respect to any Reserve Account Credit Facility, the issuer thereof is hereby granted a pledge of and lien on and security interest (subordinate only to that of the Registered Owners of the Parity Bonds, the Bonds and any Additional Parity Obligations) in the Pledged Revenues. (ix) Neither the Original Ordinance nor this ordinance shall be modified without the prior written consent of each issuer of a Reserve Account Credit Facility. B-22

97 (x) Each issuer of a Reserve Account Credit Facility shall be provided with written notice of the appointment and the resignation or removal of the Deputy Registrar and Paying Agent for the Bonds and the appointment of a successor thereto and of the issuance of any Additional Parity Obligations of the City at an address provided to the City in writing for such purpose. (xi) Should any Policy Costs be past due and owing with respect to any Reserve Account Credit Facility: (1) No Additional Parity Obligations shall be issued without the prior written consent of the issuer of such Reserve Account Credit Facility; and (2) No Additional Parity Obligations shall be issued unless the amount of Pledged Revenues during the relevant period stated in the certificate of the independent certified public accountant shall be at least equal to the amount of such Policy Costs in addition to all other requirements. (C) Upon the issuance of any Additional Parity Bonds under the terms, limitations and conditions as herein provided, the payments into the Sinking Fund and the Reserve Account shall be increased in such amounts as are necessary to make the payments required above for the principal of and interest on, and reserves for such Additional Parity Bonds, on the same basis as herein provided with respect to the outstanding Bonds. (D) The City shall not be required to make any further payments into the Sinking Fund or into the Reserve Account in the Sinking Fund when the aggregate amount of moneys in both the Sinking Fund and the Reserve Account are at least equal to the aggregate principal amount of Bonds then outstanding, plus the amount of interest then due and thereafter to become due on such Bonds then outstanding. (E) Whenever by reason of the insufficiency of the Pledged Revenues, the City is not able to make promptly the current payments hereinabove required to be made into the Sinking Fund and Reserve Account, the deficiency shall be made up in the subsequent payments in addition to the payments which would otherwiseberequiredtobemadethereinonthesubsequentpaymentdates. (F) The balance of any Pledged Revenues collected or received by the City after the above-required payments have been made may be used for any lawful purpose. (4) Levy of Excise Taxes. The City will not repeal the ordinances now in effect levying the Excise Taxes and will not amend or modify such ordinances in any manner so as to impair or adversely affect the power and obligation of the City to levy and collect such Excise Taxes or impair or adversely affect in any manner the pledge of such Excise Taxes made herein or the rights of the holders of the Bonds or, so long as any Reserve Account Credit Facility is in effect, the rights of the issuer of the Reserve Account Credit Facility, or, except as provided below, reduce or revise the rates or the B-23

98 bases of the Excise Taxes. The City shall be unconditionally and irrevocably obligated, so long as any of the Parity Bonds, the Bonds or the Additional Parity Obligations, or the interest thereon are outstanding and unpaid, to levy and collect such Excise Taxes, at the maximum rates permitted by law, to the extent necessary to pay the principal of and interest on the Bonds and to make the other payments provided for herein, including without limitation, Policy Costs. This provision shall not be construed to prevent reasonable revisions of the bases or the rates of such Excise Taxes as long as the amount of Pledged Revenues, in each Fiscal Year thereafter, will be at least equal to 140% of the Maximum Annual Debt Service on the Parity Bonds, the Authorized Bonds and any Additional Parity Obligations becoming due and payable in any ensuing Bond Year, plus 100% of any Policy Costs then due and owing in such Bond Year." (5) Investments. (1) The monies deposited in the Construction Fund shall be invested and reinvested solely in Permitted Investments. The monies deposited in the Reserve Account and the Sinking Fund shall be invested solely in Permitted Investments. (2) Investments made with moneys in the Construction Fund and the Sinking Fund must mature not later than the date that the moneys therein will be needed. Investments made with moneys in the Reserve Account shall have a maximum maturity of five (5) years. (3) All income from the investments of moneys in the Sinking Fund and in the Reserve Account shall be deposited into and become a part of the Sinking Fund. All income from the investments of moneys in the Construction Fund shall be deposited into and become a part of the Construction Fund. (6) Excise Taxes Not Subject To Repeal. The City has full power to irrevocably pledge the Excise Taxes to the payment of the principal of and interest on the Bonds, and the pledging of the Excise Taxes in the manner provided herein shall not be subject to repeal, modification, or impairment by any subsequent ordinance, resolution or other proceedings of the Council or by any subsequent act of the Legislature of Florida. The pledge of the Pledged Revenues herein made shall be for the benefit of any Additional Parity Obligations payable on a parity with the outstanding Bonds from the proceeds of the Pledged Revenues to the same extent as if such Additional Parity Obligations had been originally issued hereunder or under the Original Ordinance. (7) Books and Records. The City shall also keep books and records of the collection of the Pledged Revenues, which books and records shall be kept separate and apart from all other books, records and accounts of the City, and the Registered Owners of not less than ten per centum (10%) of the Bonds shall have the right at all reasonable times to inspect all records, accounts and data of the City relating thereto. (8) Annual Audit. The City shall also, at least once a year, after the close of its Fiscal Year, cause the books, records and accounts relating to the Pledged Revenues to be properly audited by an independent firm of certified public accountants. B-24

99 Such audits shall contain a complete report of the collection and application of all proceeds of the Excise Taxes, a schedule of reserves, investments and investment income, and a certificate by the auditors stating no default on the part of the City of any covenant herein has been disclosed by reason of such audit. A copy of such annual audit shall regularly be furnished to any holder of a Bond who shall have requested in writing that a copy of such audits be furnished by him. (9) Enforcement of Collections. The City will diligently enforce and collect the Excise Taxes herein pledged; will take all steps, actions and proceedings for the enforcement and collection of such Excise Taxes as shall become delinquent to the full extent permitted or authorized by law; and will maintain accurate records thereof. All such Excise Taxes herein pledged shall, as collected, be held in trust to be applied as herein provided and not otherwise. (10) Remedies. Any Registered Owner of Bonds or any trustee acting for the Registered Owner of such Bonds may by suit, action, mandamus or other proceedings in any court of competent jurisdiction, protect and enforce any and all rights, including the right to the appointment of a receiver, existing under the laws of the state of Florida, or granted and contained herein, and may enforce and compel the performance of all duties herein required or by any applicable statutes to be performed by the City or by any officer thereof, including the collection of the Pledged Revenues. Nothing herein, however, shall be construed to grant to any Registered Owner of such Bonds any lien on any property of or in the City except the Pledged Revenues as provided in this ordinance. (11) Issuance of Other Obligations. The City will not issue any other obligations, except under the conditions and in the manner provided herein, payable from the Pledged Revenues, nor voluntarily create or cause to be created any debt, lien, pledge, assignment, encumbrance or other charge having priority to or being on a parity with the lien of the Bonds issued pursuant to this ordinance and the interest thereon, upon the Pledged Revenues. Any other obligations issued by the City in addition to the Bonds herein authorized or Additional Parity Obligations provided for in paragraph (12) below, payable from such Pledged Revenues, shall contain an express statement that such obligations are junior and subordinate in all respects to the Bonds, herein authorized, as to lien on and source and security for payment from such Pledged Revenues. (12) Issuance of Additional Parity Obligations. The City will not issue any Additional Parity Obligations payable on a parity from the Pledged Revenues with the Bonds then outstanding unless there shall have been obtained and filed with the Secretary of the Council a certificate of an independent certified public accountant of suitable experience and responsibility: (a) stating that the books and records of the City relating to the collection and receipt of the proceeds of the Pledged Revenues have been audited by him; (b) setting forth the amount of Pledged Revenues, as defined herein, received by the City for twelve (12) consecutive months within the twenty four (24) consecutive months immediately preceding the date of delivery of such Additional Parity Obligations with respect to which such certificate is made; and (c) stating that the Pledged Revenues, for such twelve (12) consecutive months, will equal or exceed 1.40 times the Maximum Annual Debt Service coming due in any B-25

100 ensuing Bond Year on the Bonds and the Additional Parity Obligations then outstanding and the Additional Parity Obligations proposed to be issued plus, so long as any Reserve Account Credit Facility is in effect, 100% of the Policy Costs then unpaid. For purposes of this paragraph, Pledged Revenues consisting of income received from investments in the Sinking Fund and Reserve Account shall be computed at the lowest of (a) the actual yield on such investments or (b) a yield equal to the bond equivalent yield on United States Treasury obligations having a maturity as nearly as possible equal to one hundred eighty (180) days from the date of the certificate, as quoted daily in The Wall Street Journal, or (c) 5.5% per annum on the funds on deposit in the Reserve Account. The Pledged Revenues for such twelve (12) consecutive month period may be adjusted by the independent certified public accountant to reflect changes in the rates of the Excise Taxes and in the application of the laws and ordinances imposing the Excise Taxes. Each ordinance authorizing the issuance of Additional Parity Obligations will recite that all of the covenants herein contained will be applicable to such Additional Parity Obligations. The City shall not be in default in performing any of the covenants and obligations assumed hereunder, and all payments herein required to have been made into the accounts and funds, as provided hereunder, shall have been made to the full extent required, including, without limitation, payment of Policy Costs then due and owing. The Additional Parity Obligations may be issued for any purpose authorized by the Act, shall bear interest payable semi-annually (except for Capital Appreciation Bonds) on April 1 and October 1 of each year, (or, in the case of variable rate indebtedness at more frequent intervals) and shall mature on October 1 of the year of maturity hereof. The City shall, from a portion of the proceeds of such Additional Parity Obligations, deposit into the Reserve Account an amount necessary to comply with the requirements of Section 15(b)(3)(B) herein. If any Policy Costs shall be then due and owing, the prior written consent of the issuer of the related Reserve Account Credit Facility shall have been obtained. Authorized Refunding Bonds, or other Bonds of a series for refunding and/or other purposes may be issued as Additional Parity Obligations without obtaining the certificate of an independent certified public accountant described above, if the City Treasurer shall certify that after issuance of the Bonds of such series, the aggregate principal and interest becoming due in each Bond Year on all Bonds of all series shall be the same or less than such aggregate principal and interest in each Bond Year prior to the issuance of the Additional Parity Obligations of such series. *** B-26

101 Section 19. Arbitrage. (a) The City covenants that so long as any of the Authorized Bonds remain outstanding, it shall comply with the requirements of the Code, including the covenants related thereto contained in the City's closing certificates delivered in connection with the issuance of the Authorized Bonds, so as to ensure that interest payable on the Authorized Bonds will not be included in gross income for Federal income tax purposes to the Registered Owners thereof under the Code, except to the extent that failure to so comply would not, in the opinion of Bond Counsel, result in the interest payable on the Authorized Bonds being included in gross income for Federal income tax purposes to the Registered Owners thereof under the Code. The Director of Administration and Finance is hereby authorized to execute such certifications and the General Counsel is authorized to retain the services of Bond Counsel and to enter into such future amendments to such certifications as may be necessary to protect the exclusion of interest on the Authorized Bonds from gross income for federal income tax purposes to the Registered Owners thereof under the Code and for purposes of subsection (b) immediately below. (b) The City covenants and agrees to establish separate funds to be known as the "[insert appropriate series denomination] City of Jacksonville Excise Taxes Revenue Bonds Rebate Fund"." Amounts on deposit in each Rebate Fund shall be held in trust by the City and used solely to make required rebates to the United States Treasury (except to the extent the same may be transferred to the Sinking Fund). The City agrees to undertake all actions required of it in its arbitrage certificates, dated the date of issuance of each installment of the Authorized Bonds, and dated the date of issuance of each installment of the Authorized Bonds, relating to such Authorized Bonds. The provisions of such arbitrage certificates may be amended from time to time as shall be necessary, in the opinion of Bond Counsel, to comply with the provisions of the Code. Section 20. Tax Covenant. The City hereby covenants and agrees that it shall neither take any action nor fail to take any action, nor, to the extent that it may do so, permit any person to take any action which, if either taken or not taken, would adversely affect the exclusion of interest on the Authorized Bonds from gross income for purposes of federal income taxation. Section 21. Defeasance. If, at any time, the City shall have paid, or shall have made provision for payment of, the principal of and interest and redemption premium, if any, on, all or any portion of the Bonds, then and in that event the pledge of and lien on the Pledged Revenues in favor of the Registered Owners of such Bonds shall no longer be in effect. For purposes of the preceding sentence, deposit of cash or Securities (or other investments approved by the Bond Insurer with respect to defeasance of Bonds which are insured by the Bond Insurer) in irrevocable trust with a banking institution or trust company for the sole benefit of the Registered Owners of the Bonds, the principal and interest on which when received will be sufficient to make timely payment of the principal of and interest and redemption premium, if any, on all or a portion of the outstanding Bonds, when due or upon redemption in accordance with irrevocable instructions of the City to effect such redemption, shall be considered "provision for payment" for such Bonds. Nothing herein shall be deemed to require the City to call any of the outstanding Bonds for redemption prior to maturity pursuant to any applicable optional redemption provisions, or to impair the discretion of the City in determining whether to exercise any such option for early redemption. In the event of B-27

102 an advance refunding, the City shall obtain and cause to be delivered to the Bond Insurer a verification report of an independent nationally recognized certified public accountant. If a forward supply contract is employed in connection with the refunding, (i) such verification report shall expressly state that the adequacy of the escrow to accomplish the refunding relies solely on the initial escrowed investments and the maturing principal thereof and interest income thereon and does not assume performance under or compliance with the forward supply contract, and (ii) the applicable escrow agreement shall provide that in the event of any discrepancy or difference between the terms of the forward supply contract and the escrow agreement (or the authorizing document, if no separate escrow agreement is utilized), the terms of the escrow agreement or authorizing document, if applicable, shall be controlling. Notwithstanding anything herein to the contrary, in the event that the principal and/or interest due on the Bonds shall be paid by the Bond Insurer pursuant to the Bond Insurance Policy, the Bonds shall remain outstanding for all purposes, not be defeased or otherwise satisfied and not be considered paid by the City and the assignment and pledge of the Pledged Revenues and all covenants, agreements and other obligations of the City to the Registered Owners shall continue to exist and shall run to the benefit of the Bond Insurer, and the Bond Insurer shall be subrogated to the rights of such Registered Owners. Section 22. Supplemental Instruments. The City may, from time to time and at any time, with the prior written consent of the Bond Insurer, but without the consent or concurrence of any Registered Owner of any Bond, enact or adopt by ordinance or resolution of the Council such Supplemental Instruments: (a) To cure any ambiguity, defect or omission in this ordinance, (b) To secure, extend or renew to the Registered Owners of the Bonds the pledges made herein for the payment of the Bonds and the interest to accrue thereon, (c) To assure compliance with federal "arbitrage" provisions in effect from time to time and applicable to the Bonds, (d) To grant to or confer upon the Registered Owners of the Bonds any additional right, remedies, powers, authority or security that lawfully may be granted to or conferred upon them, or (e) To modify or amend the ordinance in any respect not materially adverse to the rights of the Registered Owners of the Bonds. Section 23. Modification or Amendment. (a) This ordinance may be modified or amended at any time prior to the issuance of the Bonds pursuant to a Supplemental Instrument enacted or adopted by the Council prior to the issuance of the Bonds including without limitation, any modification by resolution required in connection with the issuance of a Bond B-28

103 Insurance Policy, a Reserve Account Credit Facility or a Credit Facility. Except as permitted by Section 22 hereof, no modification or amendment of this ordinance or the Original Ordinance, or of any Supplemental Instrument (except for any additions, deletions or changes in the Project) which is materially adverse to the rights of the Registered Owners of the Bonds may be made after the issuance of the Bonds without the consent in writing of (1) the Bond Insurer with respect to Bonds insured by a Bond Insurance Policy and the Credit Bank with respect to Bonds secured by a Credit Facility, and (2) the Registered Owners of two-thirds (2/3) or more of the aggregate principal amount (Accreted Value for Capital Appreciation Bonds) of the Bonds then outstanding which are not insured under a Bond Insurance Policy or secured by a Credit Facility, provided however that no modification or amendment shall permit a change in the maturity of such Bonds or a reduction in the rate of interest thereon or in the amount of the principal obligation thereof or affecting the promise of the City to pay the principal of and interest on the Bonds as the same shall become due from the Pledged Revenues, to the extent pledged therefor, or reduce the percentage of the Registered Owners of the Bonds required to consent to any material modification or amendment hereto without the consent of the Registered Owners of all such Bonds; and further provided that no such modification or amendment shall allow or permit any acceleration of the payment of principal of or interest on the Bonds upon a default in the payment thereof whether or not the Registered Owners of the Bonds consent thereto. (b) Notwithstanding anything to the contrary contained in this ordinance, if the Bonds are insured by a Bond Insurance Policy or secured by a Credit Facility, the City agrees that the consent of the Bond Insurer or Credit Bank, respectively, shall be obtained with respect to any modifications or amendments made under this Section 23 and that an original, executed copy of each modification or amendment made pursuant to Section 22 or this Section 23 of this ordinance shall be provided to the Bond Insurer or Credit Bank, respectively. Section 24. Bond Insurance. A. Information. The Bond Insurer shall be provided with the following information: (1) Budget for each year and annual audited financial statements, preferably within two hundred ten (210) days after the end of the City's fiscal year; and (2) Official Statement, or other disclosure document if any, prepared in connection with the issuance of additional debt, whether or not it is on a parity with the Bonds, within thirty (30) days of the sale of the additional debt; (3) Notice of any drawing upon or deficiency due to market fluctuation in the amount, if any, on deposit in the Reserve Account; (4) Notice of the redemption, other than mandatory Sinking Fund redemption, of any of the Bonds, including the principal amount, maturities and CUSIP numbers thereof; and (5) Such additional information as the Bond Insurer may reasonably request from time to time. B-29

104 B. Claims Procedure for Bond Insurance Policy. The City shall adopt by Contract of Purchase or Supplemental Instrument or agreement with the Bond Insurer at the time of sale of the Bonds a claim procedure for claims under the Bond Insurance Policy which is mutually acceptable to the City and the Bond Insurer. C. Notice of Default. The Bond Insurer shall receive immediate notice of any payment default and notice of any other default known to the Deputy Registrar and Paying Agent or the City within thirty (30) days of the Deputy Registrar and Paying Agent's knowledge or the City's knowledge thereof. D. Successor Deputy Registrar and Paying Agent. Any successor Deputy Registrar and Paying Agent must have combined capital, surplus and undivided profits of at least $50 million, unless the Bond Insurer shall otherwise approve. No resignation or removal of the Deputy Registrar and Paying Agent shall become effective until a successor has been appointed and has accepted the duties of Deputy Registrar and Paying Agent. The Bond Insurer shall be furnished with written notice of the resignation or removal of the Deputy Registrar and Paying Agent and the appointment of any successor thereto. The City shall remove the Deputy Registrar and Paying Agent at any time, at the request of the Bond Insurer, for breach of its duties. E. Amendments. Any amendment or supplement to this ordinance or the Bonds shall be subject to the prior written consent of the Bond Insurer. Any rating agency rating the Bonds shall receive notice of each amendment and a copy thereof at least fifteen (15) days in advance of its execution or adoption. F. Supplemental Proceedings. The Bond Insurer shall be provided with a full transcript of all proceedings relating to the execution of any Supplemental Instrument to this ordinance. G. Remedies. The Bond Insurer shall determine to its satisfaction the nature and scope of remedies available to Bondholders upon a payment or other default under the Bonds or this ordinance. In determining whether a payment default has occurred, or whether a payment on the Bonds has been made, no effect shall be given to payments made under the Bond Insurance Policy. For all purposes of exercising and enforcing any rights or remedies of the Bondholders upon a default, the Bond Insurer shall be deemed to be the sole holder of the Bonds it has insured for so long as it has not failed to comply with its payment obligations under the Bond Insurance Policy. H. Books and Records. The City will permit the Bond Insurer to discuss the affairs, finances and accounts of the City or any information the Bond Insurer may reasonably request regarding the security for the Bonds with appropriate officers of the City. The City will permit the Bond Insurer to have access to and to make copies of all books and records relating to the Bonds at any reasonable time. I. Accounting. The Bond Insurer shall have the right to direct an accounting of the Pledged Revenues at the City's expense, and the City's failure to comply with such direction within thirty (30) days after receipt of written notice of the direction from the Bond Insurer shall be deemed a default hereunder; provided, however, that if compliance cannot occur within such period, then such period will be B-30

105 extended so long as compliance is begun within such period and diligently pursued, but only if such extension would not materially adversely affect the interests of any Registered Owner of the Bonds. Section 25. Secondary Market Disclosure. (a) Information To Be Provided to the Public. The City hereby covenants with the Registered Owners and beneficial owners of any and all of the Authorized Bonds to make public and file the information set forth in subsections (1), (2), (3) and (4) below. Such undertaking is made to comply with Rule 15c2-12 (the Rule ) of the Securities and Exchange Commission (the SEC ) and is intended to be construed to satisfy the requirements of said Rule. Such undertaking may be modified in order to meet the requirements of then-current law by a continuing disclosure certificate executed by the Mayor and delivered to the underwriters of any installment of the Authorized Bonds at the time of delivery of such installment. (1) Annual Financial Information and Operating Data. On or before April 30, 2004 and on or before each April 30 thereafter, annual financial information and operating data of the City for the prior fiscal year, consistent with the type of financial information and operating data included in the Official Statement for the Authorized Bonds, including an update of all tables contained in the section entitled SECURITY FOR AND SOURCE OF REPAYMENT OF THE [insert appropriate series designation] BONDS in the Official Statement for each installment of the Authorized Bonds, as applicable, and a table showing coverage of Pledged Revenues for the fiscal year most recently ended to annual debt service on all Bonds for the Bond Year most recently ended. (2) Audited Financial Information. On or before the April 30 next following the date of issuance of any series of Authorized Bonds and on or before each April 30 thereafter, a copy of the City s annual audited financial statements for the prior fiscal year prepared in accordance with generally accepted accounting principles. If audited financial statements are not available at the time required to be made public (and filed) as set forth herein, unaudited financial statements shall be made public (and filed) pending the availability of audited financial statements. (3) Material Events Notices. In a timely manner, notice of the following events relating to the Authorized Bonds, if material: (i) (ii) (iii) reflecting financial difficulties; (iv) reflecting financial difficulties; Principal and interest payment delinquencies; Nonpayment related defaults; Unscheduled draws on debt service reserves Unscheduled draws on credit enhancements their failure to perform; (v) Substitution of credit or liquidity providers, or B-31

106 Adverse tax opinions or events affecting tax- (vi) exempt status of the Authorized Bonds; the Authorized Bonds; (vii) Modifications to rights of Registered Owners of (viii) Authorized Bond calls (except mandatory scheduled redemption, not otherwise contingent upon the occurrence of an event); (ix) Defeasances; (x) Release, substitution or sale of property securing repayment of the Authorized Bonds; and (xi) Rating changes. (4) Notice of Failure to Provide Annual Financial Information. In a timely manner, notice of the failure of the City to provide the information required by subsections (1) or (2) above within the times specified therefor. (b) Means of Making Information Public. (1) Information to be made public by the City shall be transmitted to one or more of the following entities as required by subsection (2) below: (i) to each nationally recognized municipal securities information repository (as such term is used in SEC Release No ), designated from time to time by the SEC ( NRMSIR ), by (1) electronic facsimile transmissions confirmed by first class mail, postage prepaid, or (2) first class mail, postage prepaid; or (3) by whatever other means as are mutually acceptable to the City and the NRMSIR; and (ii) to the state information depository, as such term is used in SEC Release No ( SID ), if and when a SID is created for the State, by (1) electronic facsimile transmissions confirmed by first class mail, postage prepaid, or (2) first class mail, postage prepaid, or (3) by whatever other means as are mutually acceptable to the City and the SID; and (iii) to the Municipal Securities Rulemaking Board ( MSRB ) by (1) electronic facsimile transmission confirmed by first class mail, postage prepaid, or (2) first class mail, postage prepaid, or (3) by whatever other means as are mutually acceptable to the Issuer and the MSRB. (2) Information shall be transmitted to the following: (i) all annual financial information and operating data described in subsection (a)(1) above and the annual audited financial information described in subsection (a)(2) above shall be sent to all NRMSIR s and to the SID (if a SID is established for the State); and B-32

107 (ii) all material event notices described in subsection (a)(3) above and notices of failure to provide annual financial information described in subsection (a)(4) above, and amendments related to such information made pursuant to subsection (c) hereof, shall be sent to each NRMSIR or to the MSRB, and to the SID (if a SID is established for the State). Nothing in this subsection (b)(2) shall be construed to relieve the City of its obligation to provide notices to the Registered Owners of all Authorized Bonds if such notice is otherwise required by this ordinance. (c) Amendment or Modification; Termination. (1) This Section may be amended or modified from time to time only if (i) the amendment is made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of the City, or type of business conducted, (ii) the undertaking, as amended, would have complied with the requirements of the Rule at the time of the issuance of the Authorized Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances, and (iii) the amendment does not materially impair the interests of the Registered Owners and beneficial owners of the Authorized Bonds, as applicable, as determined either by a written opinion of Bond Counsel, or by approving vote of bondholders pursuant to the terms of this ordinance at the time of the amendment. The annual financial information containing the amended operating data or financial information shall explain, in narrative form, the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided. If an amendment is made to an undertaking specifying the accounting principles to be followed in preparing financial statements, the annual financial information for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison shall include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information, in order to provide information to investors to enable them to evaluate the ability of the City to meet its obligations. To the extent reasonably feasible, the comparison also should be quantitative. (2) The City reserves the right to terminate its obligation to provide the information described in subsection (a), above if and when the City no longer remains an obligated person within the meaning of the Rule. (3) The City s obligation to provide the information described in subsection (a) above shall terminate when no Authorized Bond remains outstanding under the terms of Section 21 of this ordinance. B-33

108 (d) Default. In the event of a failure of the City to comply with the above described disclosure provisions, any Registered Owner or beneficial owner of a Authorized Bond may take such actions as may be necessary and appropriate, including seeking mandamus or specific performance by court order, to cause the City to comply with its obligations under this Section. Default under this Section shall not be deemed an event of default under this ordinance for any other purpose, and the sole remedy under this Section in the event of any failure of the City to comply with any provision of this Section shall be an action to compel performance. Section 26. Severability of Invalid Provisions. If any one or more of the covenants, agreements or provisions herein contained shall be held contrary to any express provision of law or contrary to the policy of express law, though not expressly prohibited, or against public policy, or shall for any reason whatsoever be held invalid, then such covenants, agreements or provisions shall be null and void and shall be deemed separable from the remaining covenants, agreements or provisions and shall in no way affect the validity of any of the other provisions hereof or of the Authorized Bonds issued hereunder. *** Section 30. Effective Date. This ordinance shall become effective upon signature by the Mayor or upon becoming effective without the Mayor's signature. B-34

109 APPENDIX C FORM OF BOND COUNSEL OPINION

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111 LIVERMORE, FREEMAN & M C WILLIAMS, P.A. Attorneys at Law Daniel U. Livermore, Jr. 320 N. First Street, Suite 603 Judson Freeman, Jr. Jacksonville Beach, Florida John L. McWilliams, III Telephone: (904) Facsimile: (904) lfm@lfmlaw.net Mayor and Council City of Jacksonville, Florida Appendix C Form of Bond Counsel Opinion Series 2007 Bonds, 2007 $42,245,000 CITY OF JACKSONVILLE, FLORIDA EXCISE TAXES REVENUE BONDS, SERIES 2007 We have acted as bond counsel in connection with the issuance by the City of Jacksonville, Florida (the "Issuer"), of its $42,245,000 Excise Taxes Revenue Bonds, Series 2007 (the "Bonds"), pursuant to the Constitution and laws of the State of Florida, particularly Chapter , Laws of Florida, Special Acts of 1992, as amended and supplemented, and other applicable provisions of law, including Chapters 166, 125 and 205, Florida Statutes, and Chapter , Laws of Florida, and pursuant to Ordinance of the Issuer, enacted on June 28, 1977, as supplemented and amended, and Ordinance , preserved thereby, enacted on June 24, 1970, as supplemented, amended and restated prior to March 25, 2003 (collectively, the Original Ordinance ), and as further supplemented by Ordinance E of the Issuer enacted on December 14, 2004, as amended (the Bond Ordinance ). The Original Ordinance and the Bond Ordinance are collectively referred to herein as the "Ordinance". We have examined the law and such certified proceedings of the Issuer and other proofs, as we deem necessary to render this opinion. As to questions of fact material to our opinion, we have relied upon representations of the Issuer contained in the Ordinance and in the certified proceedings and other certifications of public officials furnished to us, without undertaking to verify the same by independent investigation. We have not been engaged or undertaken to review the accuracy, completeness or sufficiency of the Official Statement or other offering material relating to the Bonds and we express no opinion relating thereto (except to the extent stated in our supplemental opinion addressed solely to the Underwriters and addressees stated therein). The opinions set forth below are expressly limited to, and we opine only with respect to, the laws of the State of Florida and the federal income tax laws of the United States of America. With respect to the opinions expressed below, we have relied upon the opinion of even date herewith of the Office of General Counsel for the Issuer, as to the matters referred to therein other than as to the same matters expressly addressed herein. C-1

112 In our capacity as bond counsel we have examined such documents and records of the Issuer and other instruments, as we deem necessary to enable us to express the opinions set forth below. We have assumed that the proceeds of the Bonds will be applied in accordance with the Bond Ordinance for the purposes described therein. As of the date hereof, and based on our examination of the foregoing and the law and proceedings in this matter, we are of the opinion that: 1. The Issuer is duly created and validly existing as a municipal corporation and political subdivision of the State of Florida, with the power to enact the Ordinance and to perform the agreements on its part contained therein and to issue the Bonds. 2. The Ordinance has been duly enacted by the appropriate governing body of the Issuer and constitutes a valid and binding obligation of the Issuer enforceable upon the Issuer in accordance with its terms, except as stated below. The Ordinance creates a valid lien upon and pledge of the Pledged Revenues as defined in the Ordinance. The lien on and pledge of Pledged Revenues securing the Bonds ranks on a parity with the lien on and pledge of such Pledged Revenues securing payment of certain Parity Bonds described in the Bond Ordinance and of the outstanding Authorized Bonds described in the Bond Ordinance. 3. Under existing laws, regulations, rulings and court decisions, the interest on the Bonds is excluded from gross income for federal income tax purposes. Interest on the Bonds is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; however, interest on the Bonds is included as a component of adjusted current earnings for purposes of computing the alternate minimum tax imposed on corporations. The opinions set forth in the preceding sentences are subject to the condition that the Issuer comply with all requirements of the Code, as amended, that must be satisfied subsequent to the issuance of the Bonds in order that interest thereon be, or continue to be, excluded from gross income for federal income tax purposes. The Issuer has covenanted to comply with each such requirement. Failure to comply with certain of such requirements may cause the inclusion of interest on the Bonds in gross income for federal income tax purposes to be retroactive to the date of issuance of the Bonds. We express no opinion regarding other federal tax consequences arising with respect to the Bonds. It is to be understood that the rights of the holders of the Bonds, and the enforceability of the Ordinance and the Bonds, may be subject to the exercise of judicial discretion in accordance with general principles of equity, to the valid exercise of the sovereign police powers of the State of Florida, and of the constitutional powers of the United States of America and to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights heretofore or hereafter enacted. Respectfully submitted, C-2

113 APPENDIX D SPECIMEN RESERVE ACCOUNT CREDIT FACILITY OF FINANCIAL GUARANTY INSURANCE COMPANY

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115 D-1

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117 APPENDIX E SPECIMEN RESERVE ACCOUNT CREDIT FACILITY OF AMBAC ASSURANCE CORPORATION

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119 E-1

120 E-2

121 E-3

122 E-4

123 E-5

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125 APPENDIX F SPECIMEN RESERVE ACCOUNT CREDIT FACILITY OF FINANCIAL SECURITY ASSURANCE INC.

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127 F-1

128 F-2