$14,870,000 School District of the City of Allentown

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1 NEW ISSUE BOOK-ENTRY ONLY RATINGS: S&P: 2014 A Bonds: AA (Stable Outlook) (Insured) S&P: 2014A & 2014B Bonds: A (Developing Outlook) (Underlying) (See RATINGS herein) In the opinion of Bond Counsel, under existing statutes, regulations and judicial decisions, interest on the 2014A Bonds is excluded from gross income for purposes of federal income taxation and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, although in the case of corporations (as defined for federal income tax purposes) such interest is taken into account in determining adjusted current earnings for purposes of such alternative minimum tax. This opinion of Bond Counsel is subject to continuing compliance by the School District with its covenants in the Resolution and other documents to comply with requirements of the Internal Revenue Code of 1986, as amended, and applicable regulations hereunder. In the opinion of Bond Counsel, interest on the 2014B Bonds is not excludable from gross income for purposes of federal income taxation. Bond Counsel is also of the opinion that under the laws of the Commonwealth of Pennsylvania (the Commonwealth ) as presently enacted and construed, the Bonds (both series) are exempt from personal property taxes in the Commonwealth and the interest on Bonds is exempt from the Commonwealth s Personal Income Tax and the Commonwealth s Corporate Net Income Tax. For further information concerning federal and state tax matters relating to the Bonds, see Tax Exemption and Other Tax Matters herein. $14,870,000 School District of the City of Allentown Lehigh County, Pennsylvania $12,020,000 General Obligation Bonds, Series A of 2014 $2,850,000 General Obligation Bonds, Series B of 2014 (Federally Taxable) Dated: May 20, 2014 Principal Due: March 15, as shown on inside cover Interest Due: March 15 and September 15 First Interest Payment: September 15, 2014 The Bonds described herein consist of $12,020,000 General Obligation Bonds, Series A of 2014 (the 2014A Bonds ) and $2,850,000 General Obligation Bonds, Series B of 2014 (Federally Taxable) (the 2014B Bonds and, together with the 2014A Bonds, the Bonds ). The Bonds will be registered in the name of Cede & Co., as the registered owner and nominee of The Depository Trust Company ( DTC ), New York, New York. Beneficial ownership of the Bonds may be acquired in denominations of $5,000 or any integral multiple thereof only under the book-entry only system maintained by DTC through its brokers and dealers who are, or act through, DTC Participants. The purchasers of the Bonds will not receive physical delivery of the Bonds. For so long as any purchaser is the beneficial owner of a Bond, that purchaser must maintain an account with a broker or a dealer who is, or acts through, a DTC Participant to receive payment of principal of and interest on the Bonds. See BOOK-ENTRY ONLY SYSTEM herein. If, under the circumstances described herein, Bonds are ever issued in certificated form, the Bonds will be subject to registration of transfer, exchange and payment as described herein. The principal of the Bonds will be paid to the registered owners or assigns, when due, upon presentation and surrender of the Bonds to Manufacturers and Traders Trust Company (the Paying Agent ), acting as paying agent and sinking fund depository, at its corporate trust office in Harrisburg, Pennsylvania (or any successor paying agent at its designated office(s)). Interest on the Bonds is payable initially on September 15, 2014 and thereafter semiannually on March 15 and September 15 of each year, until the principal sum thereof is paid. Payment of interest on the Bonds will be made by check drawn on the Paying Agent mailed to the registered owners of the Bonds as of the Record Date (see THE BONDS infra). The Bonds are not subject to optional redemption prior to maturity as described herein. The Bonds are general obligations of the School District of the City of Allentown, Lehigh County, Pennsylvania (the School District ), payable from its tax and other general revenues. The School District has covenanted that it will provide in its budget in each year, and will appropriate from its general revenues in each such year, the amount of the debt service on the Bonds for such year and will duly and punctually pay or cause to be paid from the sinking fund established under the Resolution or any other of its revenues or funds the principal of every Bond and the interest thereon on the dates, at the place and in the manner stated in the Bonds, and for such budgeting, appropriation and payment the School District irrevocably has pledged its full faith, credit and taxing power, which taxing power presently includes the power to levy ad valorem taxes on all taxable real property within the School District within the limitations established by the Commonwealth of Pennsylvania (See Security and Act 1 of 2006 (The Taxpayer Relief Act) herein). Proceeds of the 2014A Bonds will be applied towards: (1) currently refunding the School District s General Obligation Bonds, Series of 2003; and (2) paying the costs and expenses associated with issuing the 2014A Bonds. Proceeds of the 2014B Bonds will be applied towards: (1) funding a portion of an unfunded actuarial accrued liability; and (2) paying the costs and expenses associated with issuing the 2014B Bonds. The Bonds are an authorized investment for fiduciaries in the Commonwealth of Pennsylvania pursuant to the Pennsylvania Probate, Estate and Fiduciaries Code, Act of June 30, 1972, No. 164, P.L. 508, as amended and supplemented. The scheduled payment of principal of and interest on the 2014A Bonds when due will be guaranteed under an insurance policy to be issued concurrently with the delivery of the Bonds by Assured Guaranty Municipal Corp. ( AGM ). MATURITIES, AMOUNTS, INTEREST RATES, INITIAL OFFERING YIELDS AND CUSIPS (As Shown on Inside Cover) The Bonds are offered when, as and if issued, subject to withdrawal or modification of the offer without notice, and subject to the approving legal opinion of King, Spry, Herman, Freund, & Faul, LLC, Bethlehem, Pennsylvania, Bond Counsel, to be furnished upon delivery of the Bonds. Certain matters will be passed upon for the School District by John E. Freund, III, Esquire, King, Spry, Herman, Freund, & Faul, LLC, Bethlehem, Pennsylvania, School District Solicitor. Public Financial Management, Inc., Harrisburg, Pennsylvania, serves as Financial Advisor to the School District in connection with the issuance of the Bonds. It is expected that the Bonds will be available for delivery in New York, New York, on or about May 20, Boenning & Scattergood, Inc. Official Statement Dated: April 15, 2014

2 $14,870,000 School District of the City of Allentown Lehigh County, Pennsylvania $12,020,000 General Obligation Bonds, Series A of 2014 $2,850,000 General Obligation Bonds, Series B of 2014 (Federally Taxable) Dated: May 20, 2014 Principal Due: March 15, as shown below Interest Due: March 15 and September 15 First Interest Payment: September 15, 2014 BOND MATURITY SCHEDULE FOR: $12,020,000 General Obligation Bonds, Series A of 2014 Year of Maturity Principal Maturity Interest Initial Offering (March 15) Amount Rate Yields CUSIP No. (1) 2015 $5, KZ , LA ,085, LB , LC ,150, LE ,020, LD ,790, LF , LG , LH , LJ , LK ,040, LL4 $2,850,000 General Obligation Bonds, Series B of 2014 (Federally Taxable) Year of Maturity Principal Maturity Interest Initial Offering (March 15) Amount Rate Yields CUSIP No. (1) 2015 $890, % 1.186% LM ,310, LN , LP5 (1) The above CUSIP (Committee on Uniform Securities Identification Procedures) numbers have been assigned by an organization not affiliated with the School District or the Underwriter, and such parties are not responsible for the selection or use of the CUSIP numbers. The CUSIP numbers are included solely for the convenience of bondholders and no representation is made as to the correctness of such CUSIP numbers. CUSIP numbers assigned to securities may be changed during the term of such securities based on a number of factors including, but not limited to, the refunding or defeasance of such issue or the use of secondary market financial products. Neither the School District nor the Underwriter has agreed to, and there is no duty or obligation to, update this Official Statement to reflect any change or correction in the CUSIP numbers set forth above.

3 SCHOOL DISTRICT OF THE CITY OF ALLENTOWN Lehigh County, Pennsylvania BOARD OF SCHOOL DIRECTORS Robert E. Smith, Jr.... Debra H. Lamb... Scott Armstrong... Ellen B. Bishop, M.D.... Ce-Ce Gerlach... Joanne E. Bauer... Charles F. Thiel... Michael E. Welsh... David F. Zimmerman... President Vice President Member Member Member Member Member Member Member SUPERINTENDENT DR. C. RUSSELL MAYO, Ed.D. CHIEF FINANCIAL OFFICER/TREASURER JOHN R. CLARK, ED.D. SCHOOL DISTRICT SOLICITOR JOHN E. FREUND, III, ESQUIRE KING, SPRY, HERMAN, FREUND & FAUL, LLC Bethlehem, Pennsylvania BOND COUNSEL KING, SPRY, HERMAN, FREUND & FAUL, LLC Bethlehem, Pennsylvania FINANCIAL ADVISOR PUBLIC FINANCIAL MANAGEMENT, INC. Harrisburg, Pennsylvania PAYING AGENT MANUFACTURERS AND TRADERS TRUST COMPANY Harrisburg, Pennsylvania UNDERWRITER BOENNING & SCATTERGOOD, INC. West Conshocken, Pennsylvania SCHOOL DISTRICT ADDRESS 31 South Penn Street P.O. Box 328 Allentown, Pennsylvania

4 No dealer, broker, salesman or other person has been authorized by the School District to give information or to make any representations, other than those contained in this Official Statement, and if given or made, such other information or representations must not be relied upon. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Bonds in any jurisdiction in which it is unlawful to make such offer, solicitation or sale. The information set forth herein has been obtained from the School District and from other sources which are believed to be reliable but the School District does not guarantee the accuracy or completeness of information from sources other than the School District. The information and expressions of opinion herein are subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in any of the information set forth herein since the date hereof. IN CONNECTION WITH THIS OFFERING OF SUCH BONDS, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS THAT STABLILIZE OR MAINTAIN THE MARKET PRICE OF SUCH BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE PUBLIC OFFERING PRICES STATED ON THE COVER HEREOF MAY BE CHANGED FROM TIME TO TIME BY THE UNDERWRITER WITHOUT PRIOR NOTICE. THE UNDERWRITER HAS PROVIDED THE FOLLOWING SENTENCE FOR INCLUSION IN THIS OFFICIAL STATEMENT. THE UNDERWRITER HAS REVIEWED THE INFORMATION IN THIS OFFICIAL STATEMENT IN ACCORDANCE WITH, AND AS PART OF, ITS RESPONSIBILITIES TO INVESTORS UNDER THE FEDERAL SECURITIES LAWS AS APPLIED TO THE FACTS AND CIRCUMSTANCES OF THIS TRANSACTION, BUT THE UNDERWRITER DOES NOT GUARANTEE THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION. Assured Guaranty Municipal Corp. ( AGM ) makes no representation regarding the Bonds or the advisability of investing in the Bonds. In addition, AGM has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding AGM supplied by AGM and presented under the heading Bond Insurance and Appendix C - Specimen Municipal Bond Insurance Policy. INTRODUCTION... 1 PURPOSE OF THE ISSUE... 1 Sources and Uses of Bond Proceeds... 1 THE BONDS... 2 Description... 2 Payment of Principal and Interest... 2 Transfer, Exchange and Registration of Bonds... 2 State Enforcement of Debt Service Payments... 3 SECURITY... 3 Security... 3 Sinking Funds... 3 BOOK-ENTRY ONLY SYSTEM... 4 BOND INSURANCE... 5 BOND INSURANCE POLICY... 5 ASSURED GUARANTY MUNICIPAL CORP REDEMPTION OF BONDS... 6 Optional Redemption... 6 THE SCHOOL DISTRICT... 7 Introduction... 7 Administration... 7 School Facilities... 7 Enrollment Trends... 8 SCHOOL DISTRICT FINANCES... 8 Introduction... 8 Financial Reporting... 8 General Fund Revenue and Expenditures TAXING POWERS OF THE SCHOOL DISTRICT The Taxpayer Relief Act (Act 1) The 2014A Bonds are eligible for Act 1 Exception The 2014B Bonds are not eligible for Act 1 Exception Act 48 of 2003 Limitation on Fund Balances Other Taxes Commonwealth Aid to School Districts DEBT AND DEBT LIMITS Debt Statement Debt Limit and Remaining Borrowing Capacity Debt Service Requirements Future Financing TABLE OF CONTENTS Page Page LABOR RELATIONS School District Employees Pension Program Other Post-Employment Benefits DEFAULTS AND REMEDIES TAX EXEMPTION AND OTHER TAX MATTERS Opinion of Bond Counsel Federal Income Taxation of Interest on the 2014B Bonds Pennsylvania Tax Matters Federal Income Tax Interest Expense Deductions for Financial Institutions CONTINUING DISCLOSURE UNDERTAKING RATINGS UNDERWRITING LEGAL OPINION FINANCIAL ADVISOR MISCELLANEOUS APPENDIX A - DEMOGRAPHIC AND ECONOMIC INFORMATION RELATING TO THE SCHOOL DISTRICT OF THE CITY OF ALLENTOWN Population... A-1 Income... A-1 Employment... A-2 Industry... A-3 Retail Sales... A-4 Public Utilities and Services... A-4 Emergency Services... A-4 APPENDIX B - OPINIONS OF BOND COUNSEL APPENDIX C - SPECIMEN MUNICIPAL BOND INSURANCE POLICY APPENDIX D - DRAFT AUDITED FINANCIAL STATEMENTS

5 OFFICIAL STATEMENT $14,870,000 School District of the City of Allentown Lehigh County, Pennsylvania $12,020,000 General Obligation Bonds, Series A of 2014 $2,850,000 General Obligation Bonds, Series B of 2014 (Federally Taxable) INTRODUCTION This Official Statement, including the cover page hereof, is furnished by the School District of the City of Allentown, Lehigh County, Pennsylvania (the "School District") in connection with the offering of its $12,020,000 General Obligation Bonds, Series A of 2014 (the 2014A Bonds ), and $2,850,000 General Obligation Bonds, Series B of 2014 (Federally Taxable)(the 2014B Bonds ), all to be dated as of May 20, 2014 (collectively, the Bonds ). The Bonds are being issued pursuant to a Resolution of the Board of School Directors of the School District adopted on February 27, 2014 (the Resolution ), and pursuant to the Local Government Unit Debt Act, 53 Pa. C.S. Chs (the Act ), of the Commonwealth of Pennsylvania (the Commonwealth ). PURPOSE OF THE ISSUE Proceeds of the 2014A Bonds will be applied towards: (1) currently refunding the School District s General Obligation Bonds, Series of 2003 currently outstanding in the principal amount of $12,730,000 (the 2003 Bonds ); and (2) paying the costs and expenses associated with issuing the 2014A Bonds. Upon issuance of the 2014A Bonds a portion of the proceeds of the 2014A Bonds after payment of a portion of the costs and expenses of issuance of the Bonds will be deposited with Manufacturers and Traders Trust Company, as successor paying agent, to be used to redeem the outstanding 2003 Bonds at a redemption price of 100% of principal amount plus accrued interest, pursuant to the optional redemption provisions applicable to the 2003 Bonds on or about May 20, Proceeds of the 2014B Bonds will be applied towards: (1) funding a portion of an unfunded actuarial accrued liability; and (2) paying the costs and expenses associated with issuing the 2014B Bonds. Sources and Uses of Bond Proceeds The following is a summary of the sources and uses of the proceeds from the issuance of the Bonds. Source of Funds 2014A Bonds 2014B Bonds Total Bond Proceeds... $12,020, $2,850, $14,870, Net Original Issue Premium , , Total Source of Funds... $13,008, $2,850, $15,858, Use of Funds Amount Required to Redeem the 2003 Bonds... $12,827, $0.00 $12,827, Unfunded Actuarial Accrued Liability ,805, ,805, Costs of Issuance (1) , , , Total Use of Funds... $13,008, $2,850, $15,858, (1) Includes legal, financial advisor, printing, rating, total bond discount, CUSIP, paying agent, municipal bond insurance and miscellaneous costs. 1

6 THE BONDS Description The Bonds will be issued only as fully registered book-entry only form in the denominations of $5,000 and integral multiples thereof. The Bonds will be issued as one fully registered Bond for each maturity of the Bonds in the name of Cede & Co., as nominee of the Depository Trust Company, New York, New York ( DTC ), as registered owner of all Bonds. See BOOK-ENTRY ONLY SYSTEM herein. The Bonds will be dated as of May 20, 2014, and will bear interest at the rates and mature in the amounts and on the dates set forth on the inside front cover of this Official Statement. Interest on the Bonds will be payable initially on September 15, 2014 and semiannually thereafter on March 15 and September 15 until the principal sum thereof is paid. Payment of Principal and Interest Subject to the provisions described under BOOK-ENTRY ONLY SYSTEM herein, principal of the Bonds will be paid to the registered owners thereof or assigns, when due, upon surrender of the Bonds at the specified corporate trust office of the Paying Agent. Interest is payable to the registered owner of a Bond from the interest payment date next preceding the date of registration and authentication of the Bond, unless: (a) such Bond is registered and authenticated as of an interest payment date, in which event such Bond shall bear interest from said interest payment date, or (b) such Bond is registered and authenticated after a Record Date (hereinafter defined) and before the next succeeding interest payment date, in which event such Bond shall bear interest from such interest payment date, or (c) such Bond is registered and authenticated on or prior to the Record Date preceding September 15, 2014, in which event such Bond shall bear interest from May 20, 2014 or (d) as shown by the records of the Paying Agent, interest on such Bond shall be in default, in which event such Bonds shall bear interest from the date to which interest was last paid on such Bond. Interest shall be paid initially on September 15, 2014, and thereafter, semiannually on March 15 and September 15 of each year, until the principal sum is paid. Interest on each Bond is payable by check drawn on the Paying Agent, which shall be mailed to the registered owner whose name and address shall appear, at the close of business on the last day of the month (whether or not a day on which the Paying Agent is open for business) next preceding each interest payment date (the "Record Date"), on the registration books maintained by the Paying Agent, irrespective of any transfer or exchange of the Bond subsequent to such Record Date and prior to such interest payment date, unless the School District shall be in default in payment of interest due on such interest payment date. In the event of any such default, such defaulted interest shall be payable to the person in whose name the Bond is registered at the close of business on a special record date for the payment of such defaulted interest established by notice mailed by the Paying Agent to the registered owners of such Bonds not less than fifteen (15) days preceding such special record date. Such notice shall be mailed to the persons in whose names such Bonds are registered at the close of business on the fifth (5th) day preceding the date of mailing. If the date for payment of the principal of or interest on any Bonds shall be a Saturday, Sunday, legal holiday or a day on which banking institutions in the Commonwealth are authorized by law or executive order to close, then the date for payment of such principal or interest shall be the next succeeding day which is not a Saturday, Sunday, legal holiday or a day on which such banking institutions are authorized to close, and payment on such date shall have the same force and effect as if made on the nominal date established for such payment. Transfer, Exchange and Registration of Bonds The School District and the Paying Agent shall not be required (a) to register the transfer of or exchange any Bonds then considered for redemption during a period beginning at the close of business on the fifteenth (15th) day next preceding any date of selection of Bonds to be redeemed and ending at the close of business on the day on which the applicable notice of redemption is mailed or (b) to register the transfer of or exchange any portion of any Bond selected for redemption until after the redemption date. Bonds may be exchanged for a like aggregate principal amount of Bonds of other authorized denominations of the same series, maturity, and interest rate. Bonds are transferable or exchangeable by the registered owners thereof upon surrender of Bonds to the Paying Agent, at its specified corporate trust office, accompanied by a written instrument or instruments in form, with instructions, and with guaranty of signature satisfactory to the Paying Agent, duly executed by the registered owner of such Bond or his attorney-in-fact or legal representative. The Paying Agent shall enter any transfer of ownership of Bonds in the registration books and shall authenticate and deliver at the earliest practicable time in the name of the transferee or transferees a new fully registered Bond or Bonds of authorized denominations of the same series, maturity and interest rate for the aggregate principal amount which the registered owner is entitled to receive. The School District and the Paying Agent may deem and treat the registered owner of any Bond as the absolute owner thereof (whether or not a Bond shall be overdue) for the purpose of receiving payment of or on account of principal and interest and for all other purposes, and the School District and the Paying Agent shall not be affected by any notice to the contrary. 2

7 State Enforcement of Debt Service Payments Section 633 of the Pennsylvania Public School Code of 1949, as amended by Act 158 of 1998 (the Public School Code ), presently provides that in all cases where the board of school directors of any school district fails to pay or to provide for the payment of any indebtedness at date of maturity or date of mandatory redemption, or any interest due on such indebtedness on any interest payment date, in accordance with the schedule under which the Bonds were issued, the Secretary of Education shall notify such board of school directors of its obligation and shall withhold out of any State appropriation due such school district an amount equal to the sum of the principal amount maturing or subject to mandatory redemption and interest owing by such school district, and shall pay over the amount so withheld to the bank or other person acting as sinking fund depository for such Bond issue. These withholding provisions are not part of any contract with the holders of the Bonds, and may be amended or repealed by future legislation. There can be no assurance, however, that any payments pursuant to this withholding provision will be made by the date on which such payments are due to the Bondholders. The effectiveness of Section 633 of the Public School Code may be limited by the application of other withholding provisions contained in the Public School Code, such as provisions for withholding and paying over of appropriations for payment of unpaid teachers' salaries. Enforcement may also be limited by bankruptcy, insolvency, or other laws or equitable principles affecting the enforcement of creditors' rights generally. Security SECURITY The Bonds will be general obligations of the School District, payable from its tax and other general revenues. The School District has covenanted that it will provide in its budget for each year, and will appropriate from its general revenues in each such year, the amount of the debt service on the Bonds for such year, and will duly and punctually pay or cause to be paid from its Sinking Fund, as hereinafter defined, or any other of its revenues or funds, the principal of each of the Bonds and the interest thereon at the dates and place and in the manner stated on the Bonds, and for such budgeting, appropriation and payment the School District irrevocably has pledged its full faith, credit and available taxing power, which taxing power presently includes the power to levy ad valorem taxes on all taxable property within the School District, within limitations provided by law. See Act 1 of 2006 ( The Taxpayer Relief Act ) for a discussion of certain possible limitations on the School District s taxing powers. Sinking Funds Sinking funds for the payment of debt service on the Bonds, designated "Sinking Fund, General Obligation Bonds, Series A of 2014" and Sinking Fund, General Obligation Bonds, Series B of 2014 (Federally Taxable) (the "Sinking Funds"), have been created under the Resolution and are maintained by the Paying Agent, as sinking fund depository. The School District shall deposit in the Sinking Funds a sufficient sum not later than the date when interest and/or principal is to become due on the Bonds so that on each payment date the Sinking Funds will contain an amount which, together with any other funds available therein, is sufficient to pay, in full, interest and/or principal then due on the Bonds. The Sinking Funds shall be held by the Paying Agent, as sinking fund depository, and invested by the Paying Agent in such securities or shall be deposited in such funds or accounts as are authorized by the Act, upon direction of the School District. Such deposits and securities shall be in the name of the School District, but subject to withdrawal or collection only by the Paying Agent, as sinking fund depository, and such deposits and securities, together with the interest thereon, shall be a part of the Sinking Funds. The Paying Agent, as sinking fund depository, is authorized without further order from the School District to pay from the Sinking Funds the principal of and interest on the Bonds, as and when due and payable. 3

8 BOOK-ENTRY ONLY SYSTEM The information in this section has been obtained from materials provided by DTC for such purpose. The School District (herein referred to as the Issuer ) and the Underwriter do not guaranty the accuracy or completeness of such information and such information is not to be construed as a representation of the School District or the Underwriter. The Depository Trust Company ( DTC ), New York, NY, will act as securities depository for the Bonds. The Bonds will be issued as fully-registered Bonds registered in the name of Cede & Co. (DTC s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Bond certificate will be issued for each maturity and series of the Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC. DTC, the world s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a banking organization within the meaning of the New York Banking Law, a member of the Federal Reserve System, a clearing corporation within the meaning of the New York Uniform Commercial Code, and a clearing agency registered pursuant to the provisions of Section 17A of the Securities Exchange Act of DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non- U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC s participants ( Direct Participants ) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ( DTCC ). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has a Standard & Poor s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC s records. The Ownership interest of each actual purchaser of each Bond ( Beneficial Owner ) is in turn to be recorded on the Direct and Indirect Participants records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Bonds, except in the event that use of the book-entry system for the Bonds is discontinued. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not affect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them. Redemption notices shall be sent to DTC. If less than all of the Bonds within a series and maturity are being redeemed, DTC s practice is to determine by lot the amount of the interest of each Direct Participant in such series and maturity to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co. s consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). 4

9 Principal, interest and redemption payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC s practice is to credit Direct Participants accounts upon DTC s receipt of funds and corresponding detail information from Issuer or Agent, on payable date in accordance with their respective holdings shown on DTC s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in street name, and will be the responsibility of such Participant and not of DTC, Agent, or Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal, interest and redemption payments on the Bonds to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of Issuer or 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 depository with respect to the Bonds at any time by giving reasonable notice to Issuer or Paying Agent. Under such circumstances, in the event that a successor depository is not obtained, Bond certificates are required to be printed and delivered. Issuer may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered to DTC. The information in this section concerning DTC and DTC s book-entry system has been obtained from sources that Issuer believes to be reliable, but Issuer takes no responsibility for the accuracy thereof. NEITHER THE ISSUER NOR THE PAYING AGENT WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO ANY DTC PARTICIPANT, INDIRECT PARTICIPANT OR BENEFICIAL OWNER OR ANY OTHER PERSON WITH RESPECT TO: (1) THE BONDS; (2) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC OR ANY DTC PARTICIPANT OR INDIRECT PARTICIPANT; (3) THE PAYMENT BY DTC OR ANY DTC PARTICIPANT OR INDIRECT PARTICIPANT OF ANY AMOUNT DUE TO ANY BENEFICIAL OWNER IN RESPECT OF THE PRINCIPAL OR REDEMPTION PRICE OF OR INTEREST ON THE BONDS; (4) THE DELIVERY TO ANY BENEFICIAL OWNER BY DTC OR ANY DTC PARTICIPANT OR INDIRECT PARTICIPANT OF ANY NOTICE WHICH IS REQUIRED OR PERMITTED UNDER THE TERMS OF THE RESOLUTION TO BE GIVEN TO BONDHOLDERS; (5) THE SELECTION OF THE BENEFICIAL OWNERS TO RECEIVE PAYMENT IN THE EVENT OF ANY PARTIAL REDEMPTION OF THE BONDS; OR (6) ANY OTHER ACTION TAKEN BY DTC AS BONDHOLDER. The Issuer and the Paying Agent cannot give any assurances that DTC or the Participants will distribute payments of the principal or redemption price of and interest on the Bonds paid to DTC or its nominee, as the registered owner of the Bonds, or any redemption or other notices, to the Beneficial Owners or that they will do so on a timely basis, or that DTC will serve and act in the manner described in this Official Statement. BOND INSURANCE POLICY BOND INSURANCE Concurrently with the issuance of the 2014A Bonds, Assured Guaranty Municipal Corp. ("AGM") will issue its Municipal Bond Insurance Policy for the 2014A Bonds (the "Policy"). The Policy guarantees the scheduled payment of principal of and interest on the 2014A Bonds when due as set forth in the form of the Policy included as an appendix to this Official Statement. The Policy is not covered by any insurance security or guaranty fund established under New York, California, Connecticut or Florida insurance law. ASSURED GUARANTY MUNICIPAL CORP. AGM is a New York domiciled financial guaranty insurance company and an indirect subsidiary of Assured Guaranty Ltd. ( AGL ), a Bermuda-based holding company whose shares are publicly traded and are listed on the New York Stock Exchange under the symbol AGO. AGL, through its operating subsidiaries, provides credit enhancement products to the U.S. and global public finance, infrastructure and structured finance markets. Neither AGL nor any of its shareholders or affiliates, other than AGM, is obligated to pay any debts of AGM or any claims under any insurance policy issued by AGM. AGM s financial strength is rated AA (stable outlook) by Standard and Poor s Ratings Services, a Standard & Poor s Financial Services LLC business ( S&P ) and A2 (stable outlook) by Moody s Investors Service, Inc. ( Moody s ). Each rating of AGM should be evaluated independently. An explanation of the significance of the above ratings may be obtained from the applicable rating agency. The above ratings are not recommendations to buy, sell or hold any security, and such ratings are subject to revision or withdrawal at any time by the rating agencies, including withdrawal initiated at the request of AGM in its sole discretion. In addition, the rating agencies may at any time change AGM s long-term rating outlooks or place such ratings on a watch list for possible downgrade in the near term. Any downward revision or withdrawal of any of the above ratings, the assignment of a negative outlook to such ratings or the placement of such ratings on a negative watch list may have an adverse effect on the market price of any security guaranteed by AGM. AGM only guarantees scheduled principal and scheduled interest payments payable by the issuer of bonds insured by AGM on the date(s) when such amounts were initially scheduled to become due and payable (subject to and in accordance with the terms of the relevant insurance policy), and does not guarantee 5

10 the market price or liquidity of the securities it insures, nor does it guarantee that the ratings on such securities will not be revised or withdrawn. Current Financial Strength Ratings On March 18, 2014, S&P published a Research Update report in which it upgraded AGM s financial strength rating to AA (stable outlook) from AA- (stable outlook). AGM can give no assurance as to any further ratings action that S&P may take. On February 10, 2014, Moody s issued a press release stating that it had affirmed AGM s insurance financial strength rating of A2 (stable outlook). AGM can give no assurance as to any further ratings action that Moody s may take. For more information regarding AGM s financial strength ratings and the risks relating thereto, see AGL s Annual Report on Form 10-K for the fiscal year ended December 31, Capitalization of AGM At December 31, 2013, AGM s policyholders surplus and contingency reserves were approximately $3,529 million and its net unearned premium reserve was approximately $1,891 million. Such amounts represent the combined surplus, contingency reserves and net unearned premium reserve of AGM and its wholly owned subsidiary Assured Guaranty (Europe) Ltd., plus 60.7% of the contingency reserve and net unearned premium reserve of AGM s indirect subsidiary, Municipal Assurance Corp. Incorporation of Certain Documents by Reference Portions of the following document filed by AGL with the Securities and Exchange Commission (the SEC ) that relate to AGM are incorporated by reference into this Official Statement and shall be deemed to be a part hereof: the Annual Report on Form 10-K for the fiscal year ended December 31, 2013 (filed by AGL with the SEC on February 28, 2014). All consolidated financial statements of AGM and all other information relating to AGM included in, or as exhibits to, documents filed by AGL with the SEC pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, excluding Current Reports or portions thereof furnished under Item 2.02 or Item 7.01 of Form 8-K, after the filing of the last document referred to above and before the termination of the offering of the 2014A Bonds shall be deemed incorporated by reference into this Official Statement and to be a part hereof from the respective dates of filing such documents. Copies of materials incorporated by reference are available over the internet at the SEC s website at at AGL s website at or will be provided upon request to Assured Guaranty Municipal Corp.: 31 West 52nd Street, New York, New York 10019, Attention: Communications Department (telephone (212) ). Except for the information referred to above, no information available on or through AGL s website shall be deemed to be part of or incorporated in this Official Statement. Any information regarding AGM included herein under the caption BOND INSURANCE Assured Guaranty Municipal Corp. or included in a document incorporated by reference herein (collectively, the AGM Information ) shall be modified or superseded to the extent that any subsequently included AGM Information (either directly or through incorporation by reference) modifies or supersedes such previously included AGM Information. Any AGM Information so modified or superseded shall not constitute a part of this Official Statement, except as so modified or superseded. Miscellaneous Matters AGM or one of its affiliates may purchase a portion of the 2014A Bonds or any uninsured bonds offered under this Official Statement and such purchases may constitute a significant proportion of the bonds offered. AGM or such affiliate may hold such 2014A Bonds or uninsured bonds for investment or may sell or otherwise dispose of such 2014A Bonds or uninsured bonds at any time or from time to time. AGM makes no representation regarding the 2014A Bonds or the advisability of investing in the 2014A Bonds. In addition, AGM has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding AGM supplied by AGM and presented under the heading BOND INSURANCE. Optional Redemption The Bonds are not subject to redemption prior to maturity. REDEMPTION OF BONDS 6

11 THE SCHOOL DISTRICT Introduction The School District boundaries are nearly coterminous with the boundaries of the City of Allentown (the City ) the School District is located 65 miles north of the City of Philadelphia, 80 miles east of the City or Harrisburg, and 110 miles west of New York City. Administration The governing body of the School District is a board of nine school directors (the "School Board ) who are elected on a staggered basis. The daily operations and management of the School District are carried out by the administrative staff of the School headed by the Superintendent of Schools who is appointed by the School Board. School Facilities The School District is currently organized on the following grade level structure: Pre K-K, K-5, 1-5, 5-8, 6-8 and The following table depicts the component elements of the existing physical plants of the School District. TABLE 1 THE SCHOOL DISTRICT OF THE CITY OF ALLENTOWN SCHOOL FACILITIES Original Addition/ Rated Construction Renovation Pupil Building Date Date(s) Grades Capacity Enrollment Elementary: Central K-5 1, Cleveland Dodd K Jackson (1) Jefferson Pre K-5 1, Lehigh Parkway K Lincoln (2) Pre K-K McKinley Midway Manor (3) Mosser Pre K-5 1, Muhlenberg K Ramos Pre K-5 1, Ritter K Roosevelt Pre K-5 1, Sheridan , Union Terrace K-5 1, Washington Elementary/Secondary: F. Raub Middle , Harrison-Morton Middle , South Mountain Middle ,980 1,087 Trexler Middle , Secondary: Louis E. Dieruff High ,880 1,890 William Allen High ,590 2,842 (1) On November 1, 2010, the building re-opened as the district s new IBEAM Academy (Inspire, Believe, Educate, Advocate, Mentor). The IBEAM Academy provides alternative short term (45 days) placement for Allentown School District secondary students to receive targeted instruction. (2) Half-day programs. (3) This building is being utilized for students arriving in Allentown from other countries each year, Allentown School District is introducing the concept of a Newcomer Academy which will be housed at the Midway Manor building and will serve as a first-year high school experience for students new to the United States. Newcomer Academies have been successful in cities throughout the U.S., but the ASD program will be the first comprehensive academic program for immigrant students in the Lehigh Valley. The program went into effect for the school year. (1)(3) Enrollment numbers included in secondary numbers listed above. Source: School District Officials. 7

12 Enrollment Trends The following Table 2 presents recent trends in school enrollment for and projections of enrollment for the next three years. TABLE 2 THE SCHOOL DISTRICT OF THE CITY OF ALLENTOWN ENROLLMENT TRENDS Actual Enrollments Projected Enrollments (2) School School Year K Total Year K Total ,607 3,766 5,452 17, ,015 3,945 4,508 18, ,992 4,010 5,123 18, ,222 4,108 4,610 18, (1) 8,798 3,856 4,975 17, ,459 4,259 4,627 19, ,530 3,804 4,853 17, ,816 3,257 3,705 15, ,744 3,761 4,721 17, ,674 3,298 3,446 15,418 (1) Based on October 1, 2011 PIMS submission. (2) Based on the PDE enrollment projections and may vary from a more calculated method at the district level. Source: School District officials. Introduction SCHOOL DISTRICT FINANCES The School District budgets and expends funds according to procedures mandated by the Pennsylvania Department of Education. An annual operating budget is prepared by the Superintendent and Business Manager and submitted to the School Board for approval prior to the beginning of the fiscal year on July 1. Financial Reporting The School District has organized its accounts on the basis of funds or groups of funds, each of which is a separate accounting entity. It maintains a General Fund for instructional, operation and administrative expenses, a Food Service Fund, and various school activity funds. Federal funds are appropriated by the School Board during the fiscal year and grant commitments and project approvals are received. The School District keeps the books and prepares the financial reports for the General Fund according to a modified accrual basis of accounting. Major accrual items are payrolls, payroll taxes and pension fund contributions payable, loans receivable from other funds, and revenues receivable from other governmental units. Taxes are credited when received. The School District financial statements are audited annually by independent certified public accountants, as required by State law. The firm of Barbacane Thornton & Company, of Wilmington, Delaware, currently serves as the independent auditor for the School District. [THIS SECTION INTENTIONALLY LEFT BLANK] 8

13 Budgeting Process as modified by Act 1 of 2006 (Taxpayer Relief Act) In General. School districts budget and expend funds according to procedures mandated by the Pennsylvania Department of Education. An annual operating budget is prepared by school district administrative officials on a uniform form furnished by such Department and submitted to the board of school directors for approval prior to the beginning of the fiscal year on July 1. Procedures for Adoption of the Annual Budget. Under the Taxpayer Relief Act, all school districts of the first class A, second class, third class and fourth class (except as described below) must adopt a preliminary budget proposal (which must include estimated revenues and expenditures and proposed tax rates) no later than 90 days prior to the date of the election immediately preceding the fiscal year. The preliminary budget proposal must be printed and made available for public inspection at least 20 days prior to its adoption; the board of school directors may hold a public hearing on the budget; and the board must give at least 10 days public notice of its intent to adopt the final budget. If the adopted preliminary budget includes an increase in the rate of any tax levy, the preliminary budget must be submitted to the Pennsylvania Department of Education (PDE) no later than 85 days prior to the date of the election immediately preceding the fiscal year. PDE is to compare the proposed percentage increase in the rate of any tax with the school district s Index (see The Taxpayer Relief Act herein) and within 10 days, but not later than 75 days prior to the upcoming election, inform the school district whether the proposed percentage increase is less than or equal to the Index. If PDE determines that a proposed tax increase will exceed the Index, the school district must reduce the proposed tax increase, seek voter approval for the tax increase at the upcoming election, or seek approval to utilize one of the referendum exceptions authorized under The Taxpayer Relief Act. With respect to the utilization of any of the Taxpayer Relief Act referendum exceptions for which PDE approval is required (see The Taxpayer Relief Act herein), the school district must publish notice of its intent to seek PDE approval not less than one week before submitting its request for approval to PDE and, if PDE determines to schedule a public hearing on the request, a notice of the date, time and place of such hearing. PDE is required by the Taxpayer Relief Act to rule on the school district s request and inform the school district of its decision no later than 55 days prior to the upcoming election so that, if PDE denies the school district s request, the school district may submit a referendum question to the local election officials at least 50 days before the upcoming election, if it so chooses. If a school district seeks voter approval to increase taxes at a rate higher than the applicable Index, whether or not it first seeks approval to utilize one of the referendum exceptions available under the Taxpayer Relief Act, and the referendum question is not approved by a majority of the voters voting on the question, the board of school directors may not approve an increase in the tax rate greater than the applicable Index. Simplified Procedures in Certain Cases. The above budgetary procedures will not apply to a school district if the board of school directors adopts a resolution no later than 110 days prior to the election immediately preceding the upcoming fiscal year declaring that it will not increase any tax at a rate that exceeds the Index and that a tax increase at or below the rate of the Index will be sufficient to balance its budget. In that case, the Taxpayer Relief Act requires only that the proposed annual budget be prepared at least 30 days, and made available for public inspection at least 20 days, prior to its adoption, and that at least ten (10) days public notice be given of the board s intent to adopt the annual budget. No referendum exceptions are available to a school district adopting such a resolution. [THIS SECTION INTENTIONALLY LEFT BLANK] 9