OFFICIAL STATEMENT $5,705,000 CITY OF DODGE CITY, KANSAS GENERAL OBLIGATION BONDS SERIES 2016-A

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1 OFFICIAL STATEMENT NEW ISSUE BOOK-ENTRY ONLY RATINGS (S&P): A+ (UNDERLYING) AA/Stable (INSURED) See Bond Ratings herein In the opinion of Gilmore & Bell, P.C., Bond Counsel to the Issuer, under existing law and assuming continued compliance with certain requirements of the Internal Revenue Code of 1986, as amended (the Code ): (1) the interest on the Bonds (including any original issue discount properly allocable to an owner thereof) is excludable from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; (2) the interest on the Bonds is exempt from income taxation by the State of Kansas; and (3) the Bonds have not been designated as qualified tax-exempt obligations within the meaning of Code 265(b)(3). See TAX MATTERS Opinion of Bond Counsel in this Official Statement. $5,705,000 CITY OF DODGE CITY, KANSAS GENERAL OBLIGATION BONDS SERIES 2016-A Dated: February 3, 2016 Due: September 1, As shown on the inside cover The General Obligation Bonds, Series 2016-A (the Bonds ) will be issued by the City of Dodge City, Kansas (the Issuer ), as fully registered bonds, without coupons, and, when issued, will be registered in the name of Cede & Co., as registered owner and nominee for The Depository Trust Company ( DTC ), New York, New York. DTC will act as securities depository for the Bonds. Purchases of the Bonds will be made in book-entry form, in the denominations of $5,000 or any integral multiple thereof (the Authorized Denomination ). Purchasers will not receive certificates representing their interests in Bonds purchased. So long as Cede & Co. is the registered owner of the Bonds, as nominee of DTC, references herein to the Bond owners or registered owners shall mean Cede & Co., as aforesaid, and shall not mean the Beneficial Owners (as herein defined) of the Bonds. Principal will be payable annually on September 1, beginning in 2016, and semiannual interest will be payable on March 1 and September 1, beginning on September 1, 2016 (the Interest Payment Dates ). Principal will be payable upon presentation and surrender of the Bonds by the registered owners thereof at the office of the Treasurer of the State of Kansas, Topeka, Kansas, as paying agent and bond registrar (the Paying Agent and Bond Registrar ). Interest payable on each Bond shall be paid to the persons who are the registered owners of the Bonds as of the close of business on the fifteenth day (whether or not a business day) of the calendar month preceding each interest payment date by check or draft of the Paying Agent mailed to such registered owner, or in the case of an interest payment to a registered owner of $500,000 or more in aggregate principal amount of Bonds, by electronic transfer. So long as DTC or its nominee, Cede & Co., is the Owner of the Bonds, such payments will be made directly to DTC. DTC is expected, in turn, to remit such principal and interest to the DTC Participants (herein defined) for subsequent disbursement to the Beneficial Owners. The Bonds and the interest thereon will constitute general obligations of the Issuer, payable from ad valorem taxes which may be levied without limitation as to rate or amount upon all the taxable tangible property, real and personal, within the territorial limits of the Issuer. MATURITY SCHEDULE LISTED ON INSIDE COVER PAGE The scheduled payment of principal of and interest on the Bonds when due will be guaranteed under a municipal bond insurance policy to be issued concurrently with the delivery of the Bonds by BUILD AMERICA MUTUAL ASSURANCE COMPANY. See BOND INSURANCE herein. At the option of the Issuer, Bonds maturing on September 1, 2024, and thereafter will be subject to redemption and payment prior to maturity on September 1, 2023, or thereafter as described herein. The Term Bonds are also subject to mandatory redemption as described herein. See THE BONDS - Redemption Provisions herein. The Bonds are offered when, as and if issued by the Issuer, subject to the approval of legality by Gilmore & Bell, P.C., Wichita, Kansas, Bond Counsel to the Issuer. Certain other legal matters will be passed upon by the City Attorney. It is expected that the Bonds will be available for delivery through the facilities of DTC on or about February 3, THE COVER PAGE CONTAINS CERTAIN INFORMATION FOR QUICK REFERENCE ONLY. THE COVER PAGE IS NOT A SUMMARY OF THIS ISSUE. INVESTORS MUST READ THE ENTIRE OFFICIAL STATEMENT, INCLUDING ALL APPENDICES ATTACHED HERETO TO OBTAIN INFORMATION ESSENTIAL TO THE MAKING OF AN INFORMED INVESTMENT DECISION. APPENDIX C SUMMARY OF FINANCING DOCUMENTS CONTAINS DEFINITIONS USED IN THIS OFFICIAL STATEMENT. The date of this Official Statement is January 19, 2016.

2 $5,705,000 CITY OF DODGE CITY, KANSAS GENERAL OBLIGATION BONDS SERIES 2016-A Stated Maturity September 1 MATURITY SCHEDULE SERIAL BONDS Principal Amount Annual Rate of Interest Price 2016 $285, % % VE , % % VF , % % VG , % % VH , % % VJ , % % VK , % % VL , % % VM , % % VN , % % VP , % % VQ , % % VR , % % VS , % % VT , % % VW , % % VX , % % VY , % % VZ 5 TERM BOND CUSIP (1) Base: Stated Maturity Principal Annual Rate CUSIP (1) September 1 Amount of Interest Price Base: $640, % % VV 4 (All plus accrued interest, if any) (1) CUSIP numbers have been assigned to this issue by Standard & Poor's CUSIP Service Bureau, a division of McGraw Hill Financial Inc., and are included solely for the convenience of the Owners of the Bonds. Neither the Issuer nor the Underwriter shall be responsible for the selection or correctness of the CUSIP numbers set forth above. Build America Mutual Assurance Company ( BAM ) makes no representation regarding the Bonds or the advisability of investing in the Bonds. In addition, BAM has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding BAM supplied by BAM and presented under the heading BOND INSURANCE and APPENDIX D SPECIMEN MUNICIPAL BOND INSURANCE POLICY.

3 IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE BONDS AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE BONDS HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE BONDS ARE OFFERED PURSUANT TO AN EXEMPTION FROM REGISTRATION WITH THE SECURITIES AND EXCHANGE COMMISSION. THE REGISTRATION, QUALIFICATION OR EXEMPTION OF THE BONDS IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAW PROVISIONS OF THE JURISDICTIONS IN WHICH THESE SECURITIES HAVE BEEN REGISTERED, QUALIFIED OR EXEMPTED SHOULD NOT BE REGARDED AS A RECOMMENDATION THEREOF. NEITHER THESE JURISDICTIONS NOR ANY OF THEIR AGENCIES HAVE GUARANTEED OR PASSED UPON THE SAFETY OF THE BONDS AS AN INVESTMENT, UPON THE PROBABILITY OF ANY EARNINGS THEREON OR UPON THE ACCURACY OR ADEQUACY OF THIS OFFICIAL STATEMENT. ANY REPRESENTATION TO THE CONTRARY MAY BE A CRIMINAL OFFENSE. THIS OFFICIAL STATEMENT CONTAINS STATEMENTS THAT ARE FORWARD-LOOKING STATEMENTS AS DEFINED IN THE PRIVATE SECURITIES LITIGATION REFORM ACT OF WHEN USED IN THIS OFFICIAL STATEMENT, THE WORDS ESTIMATE, INTEND, EXPECT AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. SUCH STATEMENTS ARE SUBJECT TO RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTEMPLATED IN SUCH FORWARD-LOOKING STATEMENTS. READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE HEREOF. IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED.

4 CITY OF DODGE CITY, KANSAS City Hall 806 2nd Avenue Dodge City, Kansas (620) ELECTED OFFICIALS Joyce Warshaw, Mayor & Commissioner Rick Sowers, Vice Mayor & Commissioner Brian Delzeit, Commissioner Jan Scoggins, Commissioner E. Kent Smoll, Commissioner ADMINISTRATIVE OFFICERS CITY MANAGER Cherise Tieben DIRECTOR OF FINANCE, CITY CLERK AND TREASURER Nannette Pogue CITY ATTORNEY Bradley C. Ralph, Esq. PUBLIC WORKS SUPERINTENDENT Corey Keller FINANCIAL ADVISOR Stifel Nicolaus & Company, Inc. Wichita, Kansas BOND COUNSEL Gilmore & Bell, P.C. Wichita, Kansas CERTIFIED PUBLIC ACCOUNTANTS Kennedy, McKee & Company, LLP Dodge City, Kansas UNDERWRITER Robert W. Baird & Co., Inc. Red Bank, New Jersey (i)

5 No dealer, broker, salesman or other person has been authorized by the Issuer or the Underwriter to give any information or to make any representations with respect to the Bonds other than those contained in this Official Statement, and, if given or made, such other information or representations must not be relied upon as having been authorized by any of the foregoing. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy the Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. The information set forth herein concerning the Issuer has been furnished by the Issuer and other sources which are believed to be reliable, but such information is not guaranteed as to accuracy or completeness. The Underwriter has reviewed the information in this Official Statement in accordance with, and as a 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. The information and expressions of opinion herein are subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Issuer since the date hereof. This Official Statement does not constitute a contract between the Issuer or the Underwriter and any one or more of the purchasers, Owners or Beneficial Owners of the Bonds. TABLE OF CONTENTS INTRODUCTION... 1 CONTINUING DISCLOSURE... 1 THE BONDS... 2 THE DEPOSITORY TRUST COMPANY... 7 THE PROJECTS... 8 SOURCES AND USES OF FUNDS... 8 RISK FACTORS AND INVESTMENT CONSIDERATIONS... 9 BOND INSURANCE BOND RATINGS ABSENCE OF LITIGATION LEGAL MATTERS TAX MATTERS FINANCIAL ADVISOR UNDERWRITING AUTHORIZATION OF OFFICIAL STATEMENT APPENDIX A INFORMATION CONCERNING THE ISSUER... A-1 General... A-1 Economic Information... A-3 Financial Information... A-6 Debt Structure... A-13 APPENDIX B FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS (FOR THE FISCAL YEAR ENDED 12/31/2014)... B-1 APPENDIX C SUMMARY OF FINANCING DOCUMENTS... C-1 APPENDIX D SPECIMEN MUNICIPAL BOND INSURANCE POLICY... D-1 [BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK] Page (ii)

6 OFFICIAL STATEMENT $5,705,000 CITY OF DODGE CITY, KANSAS GENERAL OBLIGATION BONDS SERIES 2016-A INTRODUCTION General Matters The purpose of this Official Statement is to furnish information relating to the City of Dodge City, Kansas (the Issuer or the City ), and the General Obligation Bonds, Series 2016-A (the Bonds ), of the Issuer, dated February 3, 2016 (the Dated Date ). The Appendices to this Official Statement are integral parts of this document, to be read in their entirety. The Issuer is a municipal corporation duly organized and existing under the laws of the State of Kansas (the State ). Additional information regarding the Issuer is contained in APPENDIX A to this Official Statement. The materials contained on the cover page, in the body and in the Appendices to this Official Statement are to be read in their entirety. All financial and other information presented herein has been compiled by the Issuer. The presentation of information herein, including tables of receipts from various taxes, is intended to show recent historic information, and is not intended to indicate future or continuing trends in the financial position or other affairs of the Issuer. No representation is made that past experience, as might be shown by such financial or other information, will necessarily continue or be repeated in the future. Except to the extent described under the section captioned LEGAL MATTERS, Bond Counsel expresses no opinion as to the accuracy or sufficiency of any other information contained herein. Other than with respect to information concerning the Bond Insurer contained under the captions BOND INSURANCE and APPENDIX D SPECIMEN BOND INSURANCE POLICY herein, none of the information in this Official Statement has been supplied or verified by the Bond Insurer. Accordingly, the Bond Insurer makes no representation or warranty, express or implied, as to: (a) the accuracy or completeness of such information; (b) the validity of the Bonds; or (c) the exclusion of interest on the Bonds from Federal or State income taxation. Definitions Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in APPENDIX C SUMMARY OF FINANCING DOCUMENTS. Additional Information Additional information regarding the Issuer or the Bonds may be obtained from the Issuer s Director of Finance at the address set forth in the preface to this Official Statement, or from the Financial Advisor, Stifel Nicolaus & Company, Inc., Wichita, Kansas, Attention: Patricia A. Hinojos, via phone ((316) ) or (hinojosp@stifel.com). CONTINUING DISCLOSURE The Securities and Exchange Commission (the SEC ) has promulgated amendments to Rule 15c2-12 (the Rule ), requiring continuous secondary market disclosure. In 2013 the Issuer adopted an Omnibus Continuing Disclosure Undertaking, as may be amended and supplemented (the Disclosure Undertaking ) wherein the Issuer covenants to provide annually certain Financial Information and Operating Data and other information necessary to comply with the Rule, and to transmit the same to the Municipal Securities Rulemaking Board. The Disclosure Undertaking modified previous undertakings the Issuer entered into pursuant to the Rule (the Prior Undertakings ). In the Bond Resolution, hereinafter defined, the Issuer covenants with the Underwriter and the Beneficial Owners to apply the provisions of the Disclosure Undertaking to the Bonds. This covenant is for the benefit of and is enforceable by the Beneficial Owners of the Bonds. In certain prior years, the Issuer has failed to file its Annual Report within the time period prescribed by the Prior Undertakings. With respect to these instances, the Issuer did not file notices of the failure to provide its Annual Reports by the due date. The statistical information included in the Annual Reports contains the information described as Operating 1

7 Data in the Disclosure Undertaking and contains most, but may not contain all, of the information described as Operating Data in the Prior Undertakings. In 2015 the Issuer hired a third-party firm to assist the Issuer in meeting its continuing disclosure obligations. The Issuer s filings with respect to fiscal years 2010 through 2014 are set forth on the table below. Fiscal Year Ending December 31 Filing Time Period (Days) Due Date Financial Information Filing Date Operating Data Filing Date /29/ /20/ /20/ /28/ /18/ /18/ /29/ /28/ /28/ /29/2014 / 08/28/ /28/ /28/ /29/2014 / 08/28/ /29/ /29/ Portions of the Issuer s Operating Data were omitted in these filings. The Issuer subsequently filed an incorporation by reference on December 19, 2014, which incorporated additional Operating Data included in official statements that had previously been filed with, and publicly available on, EMMA, but which may or may not have been timely available on EMMA and were not explicitly referenced in a continuing disclosure filing. The Issuer failed to file financial information and operating data for its Waterworks and Wastewater Utility System Revenue Bonds, Series 2003 (the Series 2003 Bonds ) on EMMA for the fiscal years ended December 31, 2010 and The Series 2003 Bonds were defeased on August 1, Additionally, certain sales tax revenue operating data related to the Sales Tax Revenue Bonds, Series 2009, was inadvertently not filed on EMMA; however, such information for the years 2010 through 2014 has subsequently been filed with EMMA and is also included in APPENDIX A Economic Information Local Option Sales Tax. 2 The 240 day deadline gives effect to the Disclosure Undertaking, dated October 21, 2013, which was intended to consolidate the Issuer s disclosure obligations and extend the deadline for the Issuer to submit Financial Information and Operating Data to 240 days after the Issuer s fiscal year end. Bonds issued by the City in 2013 and after are subject to the Disclosure Undertaking which requires the information to be filed within 240 days of the Issuer s fiscal year end. 3 Unaudited financial statements filed this date; final audited financial statements filed August 28, While the Issuer had the filing deficiencies referred to above, it issued general obligation bonds and temporary notes in the years 2009 through 2015 which contained updated Financial Information and Operating Data. The official statements for such general obligation bonds and temporary notes were filed with the MSRB, but (other than as described above) were not incorporated by reference in the filings made by the Issuer with respect to one or more series of then outstanding bonds and/or temporary notes. During the past five years, the Issuer has made filings of event notices on EMMA with respect to bond calls, defeasances, and rating changes, however, during said time period, the Issuer may not have made timely filings of event notices on EMMA relating to all bond calls, defeasances or rating changes. The Issuer believes this information was disseminated or available through other sources. For more information regarding the Disclosure Undertaking, see APPENDIX C SUMMARY OF FINANCING DOCUMENTS THE DISCLOSURE UNDERTAKING. Authority for the Bonds THE BONDS The Bonds are being issued pursuant to and in full compliance with the Constitution and statutes of the State, including K.S.A to , inclusive, K.S.A et seq., and K.S.A et seq., as amended and supplemented from time to time (collectively the Act ), an ordinance passed by the governing body of the Issuer and a resolution adopted by the governing body of the Issuer on January 19, 2016 (collectively the Bond Resolution ). Security for the Bonds The Bonds shall be general obligations of the Issuer payable as to both principal and interest from ad valorem taxes which may be levied without limitation as to rate or amount upon all the taxable tangible property, real and personal, within the territorial limits of the Issuer. The full faith, credit and resources of the Issuer are irrevocably pledged for the prompt payment of the principal of and interest on the Bonds as the same become due. 2

8 Levy and Collection of Annual Tax, Transfer to Debt Service Account The governing body of the Issuer shall annually make provision for the payment of principal of, premium, if any, and interest on the Bonds as the same become due by, to the extent necessary, levying and collecting the necessary taxes upon all of the taxable tangible property within the Issuer in the manner provided by law. Such taxes shall be extended upon the tax rolls in each of the several years, respectively, and shall be levied and collected at the same time and in the same manner as the other ad valorem taxes of the Issuer are levied and collected. The proceeds derived from said taxes shall be deposited in the Bond and Interest Fund, shall be kept separate and apart from all other funds of the Issuer, shall thereafter be transferred to the Debt Service Account and shall be used solely for the payment of the principal of and interest on the Bonds as and when the same become due, taking into account any scheduled mandatory redemptions, and the fees and expenses of the Paying Agent. Description of the Bonds The Bonds shall consist of fully registered book-entry-only bonds in an Authorized Denomination and shall be numbered in such manner as the Bond Registrar shall determine. All of the Bonds shall be dated as of the Dated Date, become due in the amounts on the Stated Maturities, subject to redemption and payment prior to their Stated Maturities, and shall bear interest at the rates per annum set forth on the inside cover page of this Official Statement (computed on the basis of twelve 30-day months) from the later of the Dated Date or the most recent Interest Payment Date to which interest has been paid, on the Interest Payment Dates in the manner hereinafter set forth. Designation of Paying Agent and Bond Registrar The Issuer will at all times maintain a paying agent and bond registrar meeting the qualifications set forth in the Bond Resolution. The Issuer reserves the right to appoint a successor paying agent or bond registrar. No resignation or removal of the paying agent or bond registrar shall become effective until a successor has been appointed and has accepted the duties of paying agent or bond registrar. Every paying agent or bond registrar appointed by the Issuer shall at all times meet the requirements of Kansas law and shall be approved by the Bond Insurer. The Treasurer of the State of Kansas, Topeka, Kansas (the Bond Registrar and Paying Agent ) has been designated by the Issuer as paying agent for the payment of principal of and interest on the Bonds and bond registrar with respect to the registration, transfer and exchange of Bonds. Method and Place of Payment of the Bonds The principal of, or Redemption Price, and interest on the Bonds shall be payable in any coin or currency which, on the respective dates of payment thereof, is legal tender for the payment of public and private debts. The principal or Redemption Price of each Bond shall be paid at Maturity to the Person in whose name such Bond is registered on the Bond Register at the Maturity thereof, upon presentation and surrender of such Bond at the principal office of the Paying Agent. The interest payable on each Bond on any Interest Payment Date shall be paid to the Owner of such Bond as shown on the Bond Register at the close of business on the Record Date for such interest (a) by check or draft mailed by the Paying Agent to the address of such Owner shown on the Bond Register or at such other address as is furnished to the Paying Agent in writing by such Owner; or (b) in the case of an interest payment to Cede & Co. or any Owner of $500,000 or more in aggregate principal amount of Bonds, by electronic transfer to such Owner upon written notice given to the Bond Registrar by such Owner, not less than 15 days prior to the Record Date for such interest, containing the electronic transfer instructions including the bank, ABA routing number and account number to which such Owner wishes to have such transfer directed. Notwithstanding the foregoing, any Defaulted Interest with respect to any Bond shall cease to be payable to the Owner of such Bond on the relevant Record Date and shall be payable to the Owner in whose name such Bond is registered at the close of business on the Special Record Date for the payment of such Defaulted Interest, which Special Record Date shall be fixed as hereinafter specified. The Issuer shall notify the Paying Agent in writing of the amount of Defaulted Interest proposed to be paid on each Bond and the date of the proposed payment (which date shall be at least 30 days after receipt of such notice by the Paying Agent) and shall deposit with the Paying Agent an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest. Following receipt of such funds the Paying Agent shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 nor less than 10 days prior to the date of the proposed payment. The Paying Agent shall notify the Issuer of such Special Record Date and shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, by first class mail, postage prepaid, to each Owner of a Bond entitled to such notice not less than 10 days prior to such Special Record Date. 3

9 SO LONG AS CEDE & CO., REMAINS THE REGISTERED OWNER OF THE BONDS, THE PAYING AGENT SHALL TRANSMIT PAYMENTS TO THE SECURITIES DEPOSITORY, WHICH SHALL REMIT SUCH PAYMENTS IN ACCORDANCE WITH ITS NORMAL PROCEDURES. See THE BONDS Book-Entry Bonds; Securities Depository. Payments Due on Saturdays, Sundays and Holidays In any case where a Bond Payment Date is not a Business Day, then payment of principal, Redemption Price or interest need not be made on such Bond Payment Date but may be made on the next succeeding Business Day with the same force and effect as if made on such Bond Payment Date, and no interest shall accrue for the period after such Bond Payment Date. Book-Entry Bonds; Securities Depository The Bonds shall initially be registered to Cede & Co., the nominee for the Securities Depository, and no Beneficial Owner will receive certificates representing their respective interests in the Bonds, except in the event the Bond Registrar issues Replacement Bonds. It is anticipated that during the term of the Bonds, the Securities Depository will make bookentry transfers among its Participants and receive and transmit payment of principal of, premium, if any, and interest on, the Bonds to the Participants until and unless the Bond Registrar authenticates and delivers Replacement Bonds to the Beneficial Owners as described in the following paragraphs. The Issuer may decide, subject to the requirements of the Operational Arrangements of DTC (or a successor Securities Depository), and the following provisions of this section to discontinue use of the system of book-entry transfers through DTC (or a successor Securities Depository): (a) If the Issuer determines (1) that the Securities Depository is unable to properly discharge its responsibilities, or (2) that the Securities Depository is no longer qualified to act as a securities depository and registered clearing agency under the Securities and Exchange Act of 1934, as amended, or (3) that the continuation of a book-entry system to the exclusion of any Bonds being issued to any Owner other than Cede & Co. is no longer in the best interests of the Beneficial Owners of the Bonds; or (b) if the Bond Registrar receives written notice from Participants having interest in not less than 50% of the Bonds Outstanding, as shown on the records of the Securities Depository (and certified to such effect by the Securities Depository), that the continuation of a book-entry system to the exclusion of any Bonds being issued to any Owner other than Cede & Co. is no longer in the best interests of the Beneficial Owners of the Bonds, then the Bond Registrar shall notify the Owners of such determination or such notice and of the availability of certificates to owners requesting the same, and the Bond Registrar shall register in the name of and authenticate and deliver Replacement Bonds to the Beneficial Owners or their nominees in principal amounts representing the interest of each, making such adjustments as it may find necessary or appropriate as to accrued interest and previous calls for redemption; provided, that in the case of a determination under (a)(1) or (a)(2) of this paragraph, the Issuer, with the consent of the Bond Registrar, may select a successor securities depository in accordance with the following paragraph to effect book-entry transfers. In such event, all references to the Securities Depository herein shall relate to the period of time when the Securities Depository has possession of at least one Bond. Upon the issuance of Replacement Bonds, all references herein to obligations imposed upon or to be performed by the Securities Depository shall be deemed to be imposed upon and performed by the Bond Registrar, to the extent applicable with respect to such Replacement Bonds. If the Securities Depository resigns and the Issuer, the Bond Registrar or Owners are unable to locate a qualified successor of the Securities Depository, then the Bond Registrar shall authenticate and cause delivery of Replacement Bonds to Owners, as provided herein. The Bond Registrar may rely on information from the Securities Depository and its Participants as to the names of the Beneficial Owners of the Bonds. The cost of printing, registration, authentication, and delivery of Replacement Bonds shall be paid for by the Issuer. In the event the Securities Depository resigns, is unable to properly discharge its responsibilities, or is no longer qualified to act as a securities depository and registered clearing agency under the Securities and Exchange Act of 1934, as amended, the Issuer may appoint a successor Securities Depository provided the Bond Registrar receives written evidence satisfactory to the Bond Registrar with respect to the ability of the successor Securities Depository to discharge its responsibilities. Any such successor Securities Depository shall be a securities depository which is a registered clearing agency under the Securities and Exchange Act of 1934, as amended, or other applicable statute or regulation that operates a securities depository upon reasonable and customary terms. The Bond Registrar upon its receipt of a Bond or Bonds for cancellation shall cause the delivery of the Bonds to the successor Securities Depository in appropriate denominations and form as provided in the Bond Resolution. 4

10 Registration, Transfer and Exchange of Bonds As long as any of the Bonds remain Outstanding, each Bond when issued shall be registered in the name of the Owner thereof on the Bond Register. Bonds may be transferred and exchanged only on the Bond Register as hereinafter provided. Upon surrender of any Bond at the principal office of the Bond Registrar, the Bond Registrar shall transfer or exchange such Bond for a new Bond or Bonds in any authorized denomination of the same Stated Maturity and in the same aggregate principal amount as the Bond that was presented for transfer or exchange. Bonds presented for transfer or exchange shall be accompanied by a written instrument or instruments of transfer or authorization for exchange, in a form and with guarantee of signature satisfactory to the Bond Registrar, duly executed by the Owner thereof or by the Owner's duly authorized agent. In all cases in which the privilege of transferring or exchanging Bonds is exercised, the Bond Registrar shall authenticate and deliver Bonds in accordance with the provisions of the Bond Resolution. The Issuer shall pay the fees and expenses of the Bond Registrar for the registration, transfer and exchange of Bonds. Any additional costs or fees that might be incurred in the secondary market, other than fees of the Bond Registrar, are the responsibility of the Owners of the Bonds. In the event any Owner fails to provide a correct taxpayer identification number to the Paying Agent, the Paying Agent may make a charge against such Owner sufficient to pay any governmental charge required to be paid as a result of such failure. The Issuer and the Bond Registrar shall not be required (a) to register the transfer or exchange of any Bond that has been called for redemption after notice of such redemption has been mailed by the Paying Agent and during the period of 15 days next preceding the date of mailing of such notice of redemption; or (b) to register the transfer or exchange of any Bond during a period beginning at the opening of business on the day after receiving written notice from the Issuer of its intent to pay Defaulted Interest and ending at the close of business on the date fixed for the payment of Defaulted Interest. Mutilated, Lost, Stolen or Destroyed Bonds If (a) any mutilated Bond is surrendered to the Bond Registrar or the Bond Registrar receives evidence to its satisfaction of the destruction, loss or theft of any Bond, and (b) there is delivered to the Issuer and the Bond Registrar such security or indemnity as may be required by each of them, then, in the absence of notice to the Issuer or the Bond Registrar that such Bond has been acquired by a bona fide purchaser, the Issuer shall execute and, upon the Issuer's request, the Bond Registrar shall authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Bond, a new Bond of the same Stated Maturity and of like tenor and principal amount. If any such mutilated, destroyed, lost or stolen Bond has become or is about to become due and payable, the Issuer, in its discretion, may pay such Bond instead of issuing a new Bond. Upon the issuance of any new Bond, the Issuer may require the payment by the Owner of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Paying Agent) connected therewith. Nonpresentment of Bonds If any Bond is not presented for payment when the principal thereof becomes due at Maturity, if funds sufficient to pay such Bond have been made available to the Paying Agent all liability of the Issuer to the Owner thereof for the payment of such Bond shall forthwith cease, determine and be completely discharged, and thereupon it shall be the duty of the Paying Agent to hold such funds, without liability for interest thereon, for the benefit of the Owner of such Bond, who shall thereafter be restricted exclusively to such funds for any claim of whatever nature on his part under this Bond Resolution or on, or with respect to, said Bond. If any Bond is not presented for payment within four (4) years following the date when such Bond becomes due at Maturity, the Paying Agent shall repay to the Issuer the funds theretofore held by it for payment of such Bond, and such Bond shall, subject to the defense of any applicable statute of limitation, thereafter be an unsecured obligation of the Issuer, and the Owner thereof shall be entitled to look only to the Issuer for payment, and then only to the extent of the amount so repaid to it by the Paying Agent, and the Issuer shall not be liable for any interest thereon and shall not be regarded as a trustee of such money. Redemption Provisions Optional Redemption. At the option of the Issuer, Bonds maturing on September 1 in the years 2024, and thereafter, will be subject to redemption and payment prior to their Stated Maturity on September 1, 2023, and thereafter, as a whole or in part (selection of maturities and the amount of Bonds of each maturity to be redeemed to be determined by the Issuer in such equitable manner as it may determine) at any time, at the Redemption Price of 100% (expressed as a percentage of the principal amount), plus accrued interest to the Redemption Date. Mandatory Redemption. The Term Bonds shall be subject to mandatory redemption and payment prior to Stated Maturity pursuant to the mandatory redemption requirements hereinafter set forth at a Redemption Price equal to 100% of the principal amount thereof plus accrued interest to the Redemption Date. The payments which are to be deposited into the 5

11 Debt Service Account shall be sufficient to redeem, and the Issuer shall redeem on September 1 in each year, the following principal amounts of such Term Bonds: *Final Maturity Principal Amount Year $315, , * Selection of Bonds to be Redeemed. Bonds shall be redeemed only in an Authorized Denomination. When less than all of the Bonds are to be redeemed and paid prior to their Stated Maturity, such Bonds shall be redeemed in such manner as the Issuer shall determine, Bonds of less than a full Stated Maturity shall be selected by the Bond Registrar in minimum Authorized Denomination in such equitable manner as the Bond Registrar may determine. In the case of a partial redemption of Bonds by lot when Bonds of denominations greater than a minimum Authorized Denomination are then Outstanding, then for all purposes in connection with such redemption each minimum Authorized Denomination of face value shall be treated as though it were a separate Bond of a minimum Authorized Denomination. If it is determined that one or more, but not all, of the minimum Authorized Denomination value represented by any Bond is selected for redemption, then upon notice of intention to redeem such minimum Authorized Denomination, the Owner or the Owner's duly authorized agent shall forthwith present and surrender such Bond to the Bond Registrar: (1) for payment of the Redemption Price and interest to the Redemption Date of such minimum Authorized Denomination value called for redemption, and (2) for exchange, without charge to the Owner thereof, for a new Bond or Bonds of the aggregate principal amount of the unredeemed portion of the principal amount of such Bond. If the Owner of any such Bond fails to present such Bond to the Paying Agent for payment and exchange as aforesaid, such Bond shall, nevertheless, become due and payable on the redemption date to the extent of the minimum Authorized Denomination value called for redemption (and to that extent only). Notice and Effect of Call for Redemption. Unless waived by any Owner of Bonds to be redeemed, if the Issuer shall call any Bonds for redemption and payment prior to the Stated Maturity thereof, the Issuer shall give written notice of its intention to call and pay said Bonds to the Bond Registrar, the Bond Insurer and the Underwriter. In addition, the Issuer shall cause the Bond Registrar to give written notice of redemption to the Owners of said Bonds. Each of said written notices shall be deposited in the United States first class mail not less than 30 days prior to the Redemption Date. All official notices of redemption shall be dated and shall contain the following information: (a) the Redemption Date; (b) the Redemption Price; (c) if less than all Outstanding Bonds are to be redeemed, the identification (and, in the case of partial redemption of any Bonds, the respective principal amounts) of the Bonds to be redeemed; (d) a statement that on the Redemption Date the Redemption Price will become due and payable upon each such Bond or portion thereof called for redemption and that interest thereon shall cease to accrue from and after the Redemption Date; and (e) the place where such Bonds are to be surrendered for payment of the Redemption Price, which shall be the principal office of the Paying Agent. The failure of any Owner to receive notice given as heretofore provided or an immaterial defect therein shall not invalidate any redemption. Prior to any Redemption Date, the Issuer shall deposit with the Paying Agent an amount of money sufficient to pay the Redemption Price of all the Bonds or portions of Bonds that are to be redeemed on such Redemption Date. Official notice of redemption having been given as aforesaid, the Bonds or portions of Bonds to be redeemed shall become due and payable on the Redemption Date, at the Redemption Price therein specified, and from and after the Redemption Date (unless the Issuer defaults in the payment of the Redemption Price) such Bonds or portion of Bonds shall cease to bear interest. For so long as the Securities Depository is effecting book-entry transfers of the Bonds, the Bond Registrar shall provide the notices specified to the Securities Depository. It is expected that the Securities Depository shall, in turn, notify its Participants and that the Participants, in turn, will notify or cause to be notified the Beneficial Owners. Any failure on the part of the Securities Depository or a Participant, or failure on the part of a nominee of a Beneficial Owner of a Bond (having been mailed notice from the Bond Registrar, the Securities Depository, a Participant or otherwise) to notify the Beneficial Owner of the Bond so affected, shall not affect the validity of the redemption of such Bond. In addition to the foregoing notice, the Issuer shall provide such notices of redemption as are required by the Disclosure Undertaking. The Paying Agent is also directed to comply with any mandatory or voluntary standards then in effect for processing redemptions of municipal securities established by the State or the Securities and Exchange Commission. Failure to comply with such standards shall not affect or invalidate the redemption of any Bond. 6

12 THE DEPOSITORY TRUST COMPANY 1. The Depository Trust Company ( DTC ), New York, New York, will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered bond certificate will be issued for each scheduled maturity of the Bonds, and will be deposited with DTC. 2. DTC, the world s largest depository, is a limited-purpose trust company organized under the New York Banking Law, a banking organization within the meaning of the New York Banking Law, a member of the Federal Reserve System, a clearing corporation within the meaning of the New York Uniform Commercial Code, and a clearing agency registered pursuant to the provisions of Section 17A of the Securities Exchange Act of DTC holds and provides asset servicing for over 3.6 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 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 3. 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. 4. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. 5. 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. 6. Redemption notices shall be sent to DTC. If less than all of the Bonds within an issue are being redeemed, DTC s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. 7. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Bonds unless authorized by a Direct Participant in accordance with DTC s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co. s consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). 8. Redemption proceeds, distributions, and dividend 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 the Issuer or Paying Agent, on the payment 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 7

13 not of DTC nor its nominee, the Paying Agent, or the Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the 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. 9. A Beneficial Owner shall give notice to elect to have its Bonds purchased or tendered, through its Participant, to the Paying Agent, and shall effect delivery of such Bonds by causing the Direct Participant to transfer the Participant s interest in the Bonds, on DTC s records, to the Paying Agent. The requirement for physical delivery of the Bonds in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Bonds are transferred by Direct Participants on DTC s records and followed by a book-entry credit of tendered Bonds to the Paying Agent s DTC account. 10. DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the Issuer or Paying Agent. Under such circumstances, in the event that a successor securities depository is not obtained, Bond certificates are required to be printed and delivered. 11. The Issuer may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered to DTC. 12. The information in this section concerning DTC and DTC s book-entry system has been obtained from sources that the Issuer believes to be reliable, but the Issuer takes no responsibility for the accuracy thereof. THE PROJECTS The Bonds are being issued for the purpose of providing permanent financing for the construction of certain main trafficway improvements (collectively the Improvements ), more specifically described as follows: Project Description Ord./Res. No. Authority (K.S.A.) Project Cost Main Trafficway Central Avenue widening from Layton Ord. 3169/ et seq. $1,475,000 Street to approx. 450 south of US 50, storm drainage modifications and installation of traffic signal Res Main Trafficway U.S. 50 & Fairway Drive Intersection Ord. 3569/ et seq. 150,000 Res Main Trafficway Central Avenue reconstruction from Ord. 3169/ et seq. 8,360,000 1 Wyatt Earp Boulevard to Comanche Res Total $9,985,000 1 Bonds to finance a portion of this project in the amount of $4,100,000. SOURCES AND USES OF FUNDS The following table summarizes the sources and uses of funds associated with the issuance of the Bonds: Sources of Funds: Principal Amount of the Bonds $5,705, Original Issue Premium 197, Original Issue Discount -18, Total $5,884, Uses of Funds: Deposit to Improvement Fund $5,725, Central Ave. Widening 1,475, U.S. 50/Fairway Intersection 150, Central Ave. Reconstruction 4,100, Deposit to Costs of Issuance Account 74, Net Underwriter s Compensation 70, Bond Insurance Premium 14, Total $5,884,

14 RISK FACTORS AND INVESTMENT CONSIDERATIONS A PROSPECTIVE PURCHASER OF THE BONDS DESCRIBED HEREIN SHOULD BE AWARE THAT THERE ARE CERTAIN RISKS ASSOCIATED WITH THE BONDS WHICH MUST BE RECOGNIZED. THE FOLLOWING STATEMENTS REGARDING CERTAIN RISKS ASSOCIATED WITH THE OFFERING SHOULD NOT BE CONSIDERED AS A COMPLETE DESCRIPTION OF ALL RISKS TO BE CONSIDERED IN THE DECISION TO PURCHASE THE BONDS. PROSPECTIVE PURCHASERS OF THE BONDS SHOULD ANALYZE CAREFULLY THE INFORMATION CONTAINED IN THIS OFFICIAL STATEMENT AND ADDITIONAL INFORMATION IN THE FORM OF THE COMPLETE DOCUMENTS SUMMARIZED HEREIN, COPIES OF WHICH ARE AVAILABLE AND MAY BE OBTAINED FROM THE ISSUER OR THE UNDERWRITER. Legal Matters Various state and federal laws, regulations and constitutional provisions apply to the obligations created by the Bonds. There is no assurance that there will not be any change in, interpretation of, or addition to such applicable laws, provisions and regulations which would have a material effect, either directly or indirectly, on the Issuer or the taxing authority of the Issuer. Limitations on Remedies Available to Owners of Bonds The enforceability of the rights and remedies of the owners of Bonds, and the obligations incurred by the Issuer in issuing the Bonds, are subject to the following: the federal Bankruptcy Code and applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or affecting the enforcement of creditors' rights generally, now or hereafter in effect; usual equity principles which may limit the specific enforcement under state law of certain remedies; the exercise by the United States of America of the powers delegated to it by the United States Constitution; and the reasonable and necessary exercise, in certain unusual situations, of the police power inherent in the State of Kansas and its governmental subdivisions in the interest of serving a legitimate and significant public purpose. Bankruptcy proceedings, or the exercise of powers by the federal or state government, if initiated, could subject the owners of the Bonds to judicial discretion and interpretation of their rights in bankruptcy and otherwise, and consequently may involve risks of delay, limitation or modification of their rights. Kansas Public Employees Retirement System As described in APPENDIX A FINANCIAL INFORMATION Pension and Employee Retirement Plans, the Issuer participates in the Kansas Public Employees Retirement System ( KPERS ), as an instrumentality of the State to provide retirement and related benefits to public employees in Kansas. KPERS administers three statewide defined benefit retirement plans for public employees which are separate and distinct with different membership groups, actuarial assumptions, experience, contribution rates and benefit options. The Issuer participates in the Public Employees Retirement System Local Group and the Police and Firemen s Retirement System ( KP&F ) (the Plan ). Under existing law, employees make contributions and the Issuer makes all employer contributions to the Plan; neither the employees nor the Issuer are directly responsible for any unfunded accrued actuarial liability ( UAAL ); however, Plan contribution rates may be adjusted by legislative action over time to address any UAAL. According to KPERS Valuation Report, dated as of December 31, 2014, the Local Group had an UAAL of $1.488 billion and KP&F had an UAAL of $726 million. Taxation of Interest on the Bonds An opinion of Bond Counsel will be obtained to the effect that interest earned on the Bonds is excludable from gross income for federal income tax purposes under current provisions of the Internal Revenue Code of 1986, as amended (the Code ), and applicable rulings and regulations under the Code; however, an application for a ruling has not been made and an opinion of counsel is not binding upon the Internal Revenue Service. There can be no assurance that the present provisions of the Code, or the rules and regulations thereunder, will not be adversely amended or modified, thereby rendering the interest earned on the Bonds includable in gross income for federal income tax purposes. The Issuer has covenanted in the Bond Resolution and in other documents and certificates to be delivered in connection with the issuance of the Bonds to comply with the provisions of the Code, including those which require the Issuer to take or omit to take certain actions after the issuance of the Bonds. Because the existence and continuation of the excludability of the interest on the Bonds depends upon events occurring after the date of issuance of the Bonds, the opinion of Bond Counsel described under TAX MATTERS assumes the compliance by the Issuer with the provisions of the Code described above and the regulations relating thereto. No opinion is expressed by Bond Counsel with respect to the excludability of the interest on the Bonds in the event of noncompliance with such provisions. The failure of the Issuer to comply with the provisions described above may cause the interest on the Bonds to become includable in gross income as of the date of issuance. 9

15 Premium on Bonds The initial offering prices of certain maturities of the Bonds that are subject to optional redemption are in excess of the respective principal amounts thereof. Any person who purchases a Bond in excess of its principal amount, whether during the initial offering or in a secondary market transaction, should consider that the Bonds are subject to redemption at par under the various circumstances described under THE BONDS Redemption Provisions. No Additional Interest or Mandatory Redemption upon Event of Taxability The Bond Resolution does not provide for the payment of additional interest or penalty on the Bonds or the mandatory redemption thereof if the interest thereon becomes includable in gross income for federal income tax purposes. Likewise, the Bond Resolution does not provide for the payment of any additional interest or penalty on the Bonds if the interest thereon becomes subject to income taxation by the State. Suitability of Investment The tax exempt feature of the Bonds is more valuable to high tax bracket investors than to investors who are in low tax brackets, and so the value of the interest compensation to any particular investor will vary with individual tax rates. Each prospective investor should carefully examine this Official Statement, including the Appendices hereto, and its own financial condition to make a judgment as to its ability to bear the economic risk of such an investment, and whether or not the Bonds are an appropriate investment. Market for the Bonds Bond Rating. The Bonds have been assigned the financial ratings set forth in the section hereof entitled BOND RATINGS. There is no assurance that a particular rating will remain in effect for any given period of time or that it will not be revised, either downward or upward, or withdrawn entirely, if in the judgment of the agency originally establishing such rating, circumstances so warrant. Any downward revision or withdrawal of any rating may have an adverse effect on the market price of the Bonds. Secondary Market. There is no assurance that a secondary market will develop for the purchase and sale of the Bonds. Prices of bonds traded in the secondary market, though, are subject to adjustment upward and downward in response to changes in the credit markets. From time to time it may be necessary to suspend indefinitely secondary market trading in the Bonds as a result of financial condition or market position of broker-dealers, prevailing market conditions, lack of adequate current financial information about the Issuer, or a material adverse change in the financial condition of the Issuer, whether or not the Bonds are in default as to principal and interest payments, and other factors which may give rise to uncertainty concerning prudent secondary market practices. Bond Insurance and Ratings of the Bond Insurer If the Issuer fails to make payment of the principal of and interest on the Bonds when the same become due, any Owner of Bonds will have recourse against the Bond Insurer for such payments. The Bond Insurance Policy does not, however, insure payment of the principal of or interest on the Bonds coming due by reason of acceleration or redemption (other than mandatory sinking fund redemption), nor does it insure the payment of any redemption premium payable upon the redemption of the Bonds. Under no circumstances, including the situation in which interest on the Bonds becomes subject to federal taxation for any reason, can the maturities of the Bonds be accelerated except with the consent of the Bond Insurer. Furthermore, so long as the Bond Insurer performs its obligations under the Bond Insurance Policy, the Bond Insurer may direct, and its consent must be obtained before the exercise of, any remedies to be undertaken under the Bond Resolution. If the Bond Insurer is unable to make payments of principal and interest on the Bonds as those payments become due, the Bonds are payable solely from sources pledged by the Issuer pursuant to the Bond Resolution. See BOND INSURANCE for further information concerning the Bond Insurer, the Bond Insurance Policy and any financial ratings assigned to bonds insured by the Bond Insurer. Moody s, Standard & Poor s, Fitch Ratings and Kroll Bond Rating Agency have issued press releases concerning their analyses of the effect on financial guarantors (including the Bond Insurer) of the ongoing deterioration in the performance of residential mortgage-backed securities and collateralized debt obligations with exposure to residential mortgage-backed securities. The rating agencies have re-assessed and are continuing to re-assess their required capital adequacy ratios for bond insurers, and also have revised the stress tests they apply in their ratings analyses of bond insurers to reflect higher potential losses for exposures to residential mortgage-backed securities and certain collateralized debt obligations. 10

16 A rating downgrade of the Bond Insurer by any rating agency may result in a rating downgrade of the Bonds. A rating downgrade of the Bonds could lower the price of the Bonds in the secondary market, and could affect the liquidity for the Bonds in the secondary market. Prospective purchasers of the Bonds are urged to check the websites of the rating agencies and the public announcements by the Bond Insurer for any future developments relating to the ratings of the Bond Insurer and the Bonds. Bond Insurance Policy BOND INSURANCE Concurrently with the issuance of the Bonds, Build America Mutual Assurance Company ( BAM ) will issue its Municipal Bond Insurance Policy for the Bonds (the Policy ). The Policy guarantees the scheduled payment of principal of and interest on the Bonds when due as set forth in the form of the Policy included as an exhibit to this Official Statement. The Policy is not covered by any insurance security or guaranty fund established under New York, California, Connecticut or Florida insurance law. Build America Mutual Assurance Company BAM is a New York domiciled mutual insurance corporation. BAM provides credit enhancement products solely to issuers in the U.S. public finance markets. BAM will only insure obligations of states, political subdivisions, integral parts of states or political subdivisions or entities otherwise eligible for the exclusion of income under section 115 of the U.S. Internal Revenue Code of 1986, as amended. No member of BAM is liable for the obligations of BAM. The address of the principal executive offices of BAM is: 200 Liberty Street, 27 th Floor, New York, New York 10281, its telephone number is: , and its website is located at: BAM is licensed and subject to regulation as a financial guaranty insurance corporation under the laws of the State of New York and in particular Articles 41 and 69 of the New York Insurance Law. BAM s financial strength is rated AA/Stable by Standard and Poor s Ratings Services, a Standard & Poor s Financial Services LLC business ( S&P ). An explanation of the significance of the rating and current reports may be obtained from S&P at The rating of BAM should be evaluated independently. The rating reflects the S&P s current assessment of the creditworthiness of BAM and its ability to pay claims on its policies of insurance. The above rating is not a recommendation to buy, sell or hold the Bonds, and such rating is subject to revision or withdrawal at any time by S&P, including withdrawal initiated at the request of BAM in its sole discretion. Any downward revision or withdrawal of the above rating may have an adverse effect on the market price of the Bonds. BAM only guarantees scheduled principal and scheduled interest payments payable by the issuer of the Bonds on the date(s) when such amounts were initially scheduled to become due and payable (subject to and in accordance with the terms of the Policy), and BAM does not guarantee the market price or liquidity of the Bonds, nor does it guarantee that the rating on the Bonds will not be revised or withdrawn. Capitalization of BAM BAM s total admitted assets, total liabilities, and total capital and surplus, as of September 30, 2015 and as prepared in accordance with statutory accounting practices prescribed or permitted by the New York State Department of Financial Services were $480.1 million, $41.5 million and $438.6 million, respectively. BAM is party to a first loss reinsurance treaty that provides first loss protection up to a maximum of 15% of the par amount outstanding for each policy issued by BAM, subject to certain limitations and restrictions. BAM s most recent Statutory Annual Statement, which has been filed with the New York State Insurance Department and posted on BAM s website at is incorporated herein by reference and may be obtained, without charge, upon request to BAM at its address provided above (Attention: Finance Department). Future financial statements will similarly be made available when published. BAM makes no representation regarding the Bonds or the advisability of investing in the Bonds. In addition, BAM has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding BAM, supplied by BAM and presented under the heading BOND INSURANCE. 11

17 Additional Information Available from BAM Credit Insights Videos. For certain BAM-insured issues, BAM produces and posts a brief Credit Insights video that provides a discussion of the obligor and some of the key factors BAM s analysts and credit committee considered when approving the credit for insurance. The Credit Insights videos are easily accessible on BAM's website at buildamerica.com/creditinsights/. (The preceding website address is provided for convenience of reference only. Information available at such address is not incorporated herein by reference.) Obligor Disclosure Briefs. Subsequent to closing, BAM posts an Obligor Disclosure Brief on every issue insured by BAM, including the Bonds. BAM Obligor Disclosure Briefs provide information about the gross par insured by CUSIP, maturity and coupon; sector designation (e.g. general obligation, sales tax); a summary of financial information and key ratios; and demographic and economic data relevant to the obligor, if available. The Obligor Disclosure Briefs are also easily accessible on BAM's website at buildamerica.com/obligor/. (The preceding website address is provided for convenience of reference only. Information available at such address is not incorporated herein by reference.) Disclaimers. The Obligor Disclosure Briefs and the Credit Insights videos and the information contained therein are not recommendations to purchase, hold or sell securities or to make any investment decisions. Credit-related and other analyses and statements in the Obligor Disclosure Briefs and the Credit Insights videos are statements of opinion as of the date expressed, and BAM assumes no responsibility to update the content of such material. The Obligor Disclosure Briefs and Credit Insight videos are prepared by BAM and have not been reviewed or approved by the issuer of or the underwriter for the Bonds, and they assume no responsibility for their content. BAM receives compensation (an insurance premium) for the insurance that it is providing with respect to the Bonds. Neither BAM nor any affiliate of BAM has purchased, or committed to purchase, any of the Bonds, whether at the initial offering or otherwise. BOND RATINGS Standard & Poor s Ratings Services, a division of McGraw Hill Financial Inc., has assigned an independent rating of A+ to the Bonds, and has also assigned the rating of AA/Stable to the Bonds with the understanding that upon delivery of the Bonds, a policy insuring the payment when due of the principal of and interests on the Bonds will be issued by the Bond Insurer. Such ratings reflect only the view of such rating agency, and an explanation of the significance of such rating may be obtained therefrom. No such rating constitutes a recommendation to buy, sell, or hold any bonds, including the Bonds, or as to the market price or suitability thereof for a particular investor. The Issuer furnished such rating agency with certain information and materials relating to the Bonds that have not been included in this Official Statement. Generally, rating agencies base their ratings on the information and materials so furnished and on investigations, studies and assumptions by the rating agencies. There is no assurance that a particular rating will remain in effect for any given period of time or that it will not be revised, either downward or upward, or withdrawn entirely, if in the judgment of the agency originally establishing such rating, circumstances so warrant. Any downward revision or withdrawal of any rating may have an adverse effect on the market price of the Bonds. Moody s Investors Service, Standard & Poor s, Fitch Ratings and Kroll Bond Rating Agency have issued press releases concerning their analyses of the effect on financial guarantors (including the Bond Insurer) of the ongoing deterioration in the performance of residential mortgage-backed securities and collateralized debt obligations with exposure to residential mortgage-backed securities. All three rating agencies have re-assessed and are continuing to re-assess their required capital adequacy ratios for bond insurers, and also have revised the stress tests they apply in their ratings analyses of bond insurers to reflect higher potential losses for exposures to residential mortgage-backed securities and certain collateralized debt obligations. See Bond Insurance and Ratings of the Bond Insurer under RISK FACTORS for additional information regarding the potential impact of these developments on the ratings of the Bond Insurer and the Bonds. ABSENCE OF LITIGATION The Issuer, in the ordinary course of business, is a party to various legal proceedings. In the opinion of management of the Issuer, any judgment rendered against the Issuer in such proceedings would not materially adversely affect the financial position of the Issuer. The Issuer certifies that there is no controversy, suit or other proceeding of any kind pending or threatened wherein or whereby any question is raised or may be raised, questioning, disputing or affecting in any way the legal organization of the Issuer or its boundaries, or the right or title of any of its officers to their respective offices, or the legality of any official act or the constitutionality or validity of the indebtedness represented by the Bonds or the validity of said Bonds, or any of the proceedings had in relation to the authorization, issuance or sale thereof, or the levy and collection of a tax to pay the principal and interest thereof. 12

18 LEGAL MATTERS Approval of Bonds All matters incident to the authorization and issuance of the Bonds are subject to the approval of Gilmore & Bell, P.C., Wichita, Kansas ( Bond Counsel ), bond counsel to the Issuer. The factual and financial information appearing herein has been supplied or reviewed by certain officials of the Issuer and its certified public accountants, as referred to herein. Bond Counsel has participated in the preparation of the Official Statement but expresses no opinion as to the accuracy or sufficiency thereof, except for the matters appearing in the sections of this Official Statement captioned THE BONDS, LEGAL MATTERS, TAX MATTERS and APPENDIX C SUMMARY OF FINANCING DOCUMENTS. Payment of the legal fee of Bond Counsel is contingent upon the delivery of the Bonds. Certain legal matters have been passed on for the Issuer by the City Attorney. TAX MATTERS The following is a summary of the material federal and State of Kansas income tax consequences of holding and disposing of the Bonds. This summary is based upon laws, regulations, rulings and judicial decisions now in effect, all of which are subject to change (possibly on a retroactive basis). This summary does not discuss all aspects of federal income taxation that may be relevant to investors in light of their personal investment circumstances or describe the tax consequences to certain types of holders subject to special treatment under the federal income tax laws (for example, dealers in securities or other persons who do not hold the Bonds as a capital asset, tax-exempt organizations, individual retirement accounts and other tax deferred accounts, and foreign taxpayers), and, except for the income tax laws of the State of Kansas, does not discuss the consequences to an owner under state, local or foreign tax laws. The summary does not deal with the tax treatment of persons who purchase the Bonds in the secondary market at a premium or a discount. Prospective investors are advised to consult their own tax advisors regarding federal, state, local and other tax considerations of holding and disposing of the Bonds. Opinion of Bond Counsel In the opinion of Bond Counsel, under the law existing as of the issue date of the Bonds: Federal Tax Exemption. The interest on the Bonds (including any original issue discount properly allocable to an owner thereof) is excludable from gross income for federal income tax purposes. Alternative Minimum Tax. Interest on the Bonds is not an item of tax preference for purposes of computing the federal alternative minimum tax imposed on individuals and corporations, but is taken into account in determining adjusted current earnings for the purpose of computing the alternative minimum tax imposed on certain corporations. Bank Qualification. The Bonds have not been designated as qualified tax-exempt obligations for purposes of Code 265(b). Kansas Tax Exemption. The interest on the Bonds is exempt from income taxation by the State of Kansas. Bond Counsel s opinions are provided as of the date of the original issue of the Bonds, subject to the condition that the Issuer comply with all requirements of the Code that must be satisfied subsequent to the issuance of the Bonds in order that interest thereon be, or continue to be, excludable from gross income for federal income tax purposes. The Issuer has covenanted to comply with all of these requirements. Failure to comply with certain of these requirements may cause the inclusion of interest on the Bonds in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. Bond Counsel is expressing no opinion regarding other federal, state or local tax consequences arising with respect to the Bonds. Other Tax Consequences Original Issue Discount. For Federal income tax purposes, original issue discount ( OID ) is the excess of the stated redemption price at maturity of a Bond over its issue price. The issue price of a Bond is the first price at which a substantial amount of the Bonds of that maturity have been sold (ignoring sales to bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters, placement agents, or wholesalers). Under Code 1288, OID on taxexempt bonds accrues on a compound basis. The amount of OID that accrues to an owner of a Bond during any accrual period generally equals: (a) the issue price of that Bond, plus the amount of OID accrued in all prior accrual periods; 13

19 multiplied by (b) the yield to maturity on that Bond (determined on the basis of compounding at the close of each accrual period and properly adjusted for the length of the accrual period); minus (c) any interest payable on that Bond during that accrual period. The amount of OID accrued in a particular accrual period will be considered to be received ratably on each day of the accrual period, will be excludable from gross income for Federal income tax purposes, and will increase the owner s tax basis in that Bond. Prospective investors should consult their own tax advisors concerning the calculation and accrual of OID. Original Issue Premium. If a Bond is issued at a price that exceeds the stated redemption price at maturity of the Bond, the excess of the purchase price over the stated redemption price at maturity constitutes premium on that Bond. Under Code 171, the purchaser of that Bond must amortize the premium over the term of the Bond using constant yield principles, based on the purchaser s yield to maturity. As premium is amortized, the owner s basis in the Bond and the amount of tax-exempt interest received will be reduced by the amount of amortizable premium properly allocable to the owner. This will result in an increase in the gain (or decrease in the loss) to be recognized for Federal income tax purposes on sale or disposition of the Bond prior to its maturity. Even though the owner s basis is reduced, no Federal income tax deduction is allowed. Prospective investors should consult their own tax advisors concerning the calculation and accrual of bond premium. Sale, Exchange or Retirement of Bonds. Upon the sale, exchange or retirement (including redemption) of a Bond, an owner of the Bond generally will recognize gain or loss in an amount equal to the difference between the amount of cash and the fair market value of any property received on the sale, exchange or retirement of the Bond (other than in respect of accrued and unpaid interest) and such owner s adjusted tax basis in the Bond. To the extent the Bonds are held as a capital asset, such gain or loss will be capital gain or loss and will be long-term capital gain or loss if the Bond has been held for more than 12 months at the time of sale, exchange or retirement. Reporting Requirements. In general, information reporting requirements will apply to certain payments of principal, interest and premium paid on Bonds, and to the proceeds paid on the sale of Bonds, other than certain exempt recipients (such as corporations and foreign entities). A backup withholding tax will apply to such payments if the owner fails to provide a taxpayer identification number or certification of foreign or other exempt status or fails to report in full dividend and interest income. The amount of any backup withholding from a payment to an owner will be allowed as a credit against the owner s federal income tax liability. Collateral Federal Income Tax Consequences. Prospective purchasers of the Bonds should be aware that ownership of the Bonds may result in collateral federal income tax consequences to certain taxpayers, including, without limitation, financial institutions, property and casualty insurance companies, individual recipients of Social Security or Railroad Retirement benefits, certain S corporations with excess net passive income, foreign corporations subject to the branch profits tax, life insurance companies, and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry or have paid or incurred certain expenses allocable to the Bonds. Bond Counsel expresses no opinion regarding these tax consequences. Purchasers of Bonds should consult their tax advisors as to the applicability of these tax consequences and other federal income tax consequences of the purchase, ownership and disposition of the Bonds, including the possible application of state, local, foreign and other tax laws. FINANCIAL ADVISOR Stifel Nicolaus & Company, Inc., Wichita, Kansas, has acted as Financial Advisor to the Issuer in connection with the sale of the Bonds. The Financial Advisor is a municipal advisor as defined in the Dodd-Frank Wall Street Reform and Consumer Protection Act of The Financial Advisor has assisted the Issuer in the preparation of this Official Statement and in other matters relating to the issuance of the Bonds. The Financial Advisor will not be a manager or a member of any underwriting group submitting a proposal for the purchase of the Bonds. The fees of the Financial Advisor are contingent upon the issuance of the Bonds. UNDERWRITING The Bonds have been sold at public sale by the Issuer to Robert W. Baird & Co., Inc., Red Bank, New Jersey (the Underwriter ) on the basis of lowest true interest cost. Two (2) bids were received by the Issuer. The Underwriter has agreed, subject to certain conditions, to purchase the Bonds at a price equal to the principal amount of the Bonds, plus accrued interest from the Dated Date to the Issue Date, plus a bid premium of $94, The Bonds will be offered to the public initially at the prices determined to produce the yield to maturity or applicable redemption date set forth on the inside cover page of this Official Statement. The Underwriter may offer and sell the Bonds to certain dealers (including dealers depositing the Bonds into investment trusts) at prices other than the price 14

20 stated on the inside cover page hereof and may change the initial offering price from time to time subsequent to the date hereof. In connection with the offering, the Underwriter may overallot or effect transactions which stabilize or maintain the market price of the Bonds at a level above that which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time. AUTHORIZATION OF OFFICIAL STATEMENT The preparation of this Official Statement and its distribution has been authorized by the governing body of the Issuer as of the date on the cover page hereof. This Official Statement is submitted in connection with the issuance of the Bonds and may not be reproduced or used as a whole or in part for any other purpose. This Official Statement does not constitute a contract between the Issuer or the Underwriter and any one or more of the purchasers, Owners or Beneficial Owners of the Bonds. CITY OF DODGE CITY, KANSAS By: /s/ Joyce Warshaw Joyce Warshaw, Mayor By: /s/ Nannette Pogue Nannette Pogue, Director of Finance [BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK] 15

21 APPENDIX A INFORMATION CONCERNING THE ISSUER GENERAL Size and Location The City of Dodge City, Kansas (the City or the Issuer ) is the county seat of Ford County, Kansas (the County ) and is located approximately 150 miles west of Wichita and approximately 112 miles east of the Colorado-Kansas state line. The City encompasses approximately 14 square miles and has a current estimated population of approximately 28,117 persons. Government and Organization of the Issuer The City was incorporated in 1875 and became a city of the first class in The City operates under a Commission-Manager form of government. The five members of the City Commission are elected to four-year terms, with not more than three elected in each even-numbered year. The City Commissioners annually elect a Mayor and Vice Mayor, which shall be commissioners. The City Manager is appointed by the Commission and is charged with the efficient and effective administration of the City. The City Manager is the chief executive officer of the City. Cherise Tieben currently serves as the City Manager. Ms. Tieben has been with the City for 25 years, serving in several positions including the Human Resource Director for 5 years, as well as Administrative Assistant to the City Manager, Administrative Assistant to the Economic Development Director, the City s Risk Manager, ADA Coordinator, Race Track Director and several other capacities. She graduated with a BS Degree in Accounting from Saint Mary of the Plains College in Dodge City. Ms. Tieben holds several certificates from the Municipal Leadership Academy and Council on Education in Management and has attended numerous job related continuing education programs. Municipal Services and Utilities The City is a full service city and has 217 employees. The City operates a fire department of 25 full-time fire fighters. The police department employs 50 officers. The public works department handles all street maintenance, as well as the garbage and refuse collection. The City operates both the water utility and sewage treatment plant. The City maintains the infrastructure in all 8,367 acres of the City, including 24 parks and 160 miles of streets. Transportation and Communication Facilities The City has access to excellent ground and air transportation facilities. The main line of the Atchison, Topeka, and the Burlington Northern Santa Fe Railroad runs through the City and is joined by a spur of the Cotton Belt Railroad. Amtrak serves Dodge City twice daily. U.S. Highways 50, 56, 283 and 400 provide additional surface transportation routes for truck transport, passenger buses and automobile travel. The Dodge City Regional Airport provides convenient air transportation service including commercial, private aircraft and air charter services. Great Lakes regional feeder airline has daily scheduled local and long distance flights to major cities and smaller communities as well. Educational Institutions and Facilities The City is the location of offices for Unified School District No. 443, with thirteen attendance centers providing complete educational facilities for pre-kindergarten through high school, with a total enrollment of over 6,946. Sacred Heart Cathedral School provides parochial education for approximately 250. Dodge City Community College was founded in 1935 and moved to its present modern campus in The Community College has an enrollment of over 1,900 students. Outreach services are provided in several smaller communities throughout the region. DCCC has joined with some colleges and universities that offer bachelor s degrees including Fort Hays State University, Friends University and Kansas Newman College. A-1

22 Medical and Health Facilities Western Plains Medical Complex is a Joint Commission (JCAHO) accredited 99-bed hospital that serves as a regional referral center for southwest Kansas. Western Plains provides health services that include Diagnostic and Interventional Cardiology, a Cardiac Cath Lab and Cardiac Rehabilitation. There is a wide variety of medical professionals and services available in Dodge City. Home health care is available to the community through Trinity Association. Hospice of the Prairie provides assistance to the terminally ill. Tourism Dodge City's Boot Hill and the replica of Front Street are a primary tourist attraction in Kansas. It is estimated that approximately 150,000 tourists visit each year and that at least three million dollars is added to the local economy from the Boot Hill and Front Street operation. This historic site is located on Wyatt Earp Boulevard, between Third and Fifth Avenues, and occupies approximately eight acres of land. The Boot Hill Museum has a Visitors Center which houses a theater, conference area, offices, and a gift shop. The Museum features an outstanding collection of photographs and artifacts from the pioneer Beeson family. Front Street, which comprises the main section of buildings on the site, was constructed in 1958 and features fully restored working replicas of the 1870's stores, saloons and shops found at the foot of Boot Hill when the main street of Dodge City was frequented by such famous people as Wyatt Earp, Doc Holiday and Bat Masterson. The Hardesty House, Santa Fe Depot, steam locomotive and country schoolhouse complete the Front Street complex. In addition to Boot Hill and Front Street, six national historic sites are located in the area. The Carnegie Art Center, Sacred Heart Cathedral, Lora Locke Hotel, and the Home of Stone are located in the heart of downtown Dodge City; wagon tracks of the Santa Fe Trail may be viewed 11 miles west of the City; and Hennessy Hall is located on the former Saint Mary of the Plains Campus. Several other historic buildings are located in and near Downtown Dodge City. The newly remodeled historic Santa Fe Depot is home to the Boothill Repertory Company. In early August each year, the City hosts a 10-day long celebration of western heritage. The Dodge City Days PRCA Rodeo draws many top cowboys and stock producers and is one of the top ranked rodeos in the nation. Nineteen motels with 750 rooms, including a convention center facility, and over 40 restaurants, provide accommodations for tourist and convention needs. Currently one new motel is planned downtown as part of the Heritage District Plan which includes an outdoor regional aquatics facility. In June, 1997, the voters of Dodge City and Ford County approved a retailer sales tax issue to fund the construction and operation of several recreation and quality of life facilities. This included air conditioning at the Civic Center to provide year around use of the facility; Legends Field, a four-plex softball/baseball complex; Saint Mary s Complex, a soccer complex with 6 fields; and Dodge City Raceway Park, an outdoor motor sports complex. The final project, constituting the construction of a Special Events Center named United Wireless Arena/Magouirk Conference Center, opened in February The United Wireless Arena is a state of the art, multi-purpose facility that hosts concerts, sporting events, family shows, motorsports, trade shows, rodeos, equestrian events and community events. The Magouirk Conference Center features 10,000 square feet of meeting space with multiple room configurations to accommodate a wide variety of events, large and small. The Special Events Center is located adjacent to the Boothill Casino and Resort, a destination casino. The State legislature approved legislation that allowed voters in Ford County to vote whether or not they wanted a destination casino. The voters approved the destination casino and the committee for the State Gaming Commission selected Butler National as the Casino s manager and operator. Phase 1 of the Casino opened in 2009 and Phase 2 opened in The Casino is the State s first State-owned casino, and the City looks forward to the opportunities and growth this will bring to the community. A Hampton Inn is located adjacent to the casino and opened in March, Dodge City Raceway Park is a premier dirt track that hosts weekly car races as well as national car race events. A-2

23 ECONOMIC INFORMATION Major Employers Listed below are the major employers located in the City and the number employed by each: Source: City Clerk Labor Force Major Employers Product/Service Number of Full- & Part-time Employees 1. National Beef Processed Beef 2, Cargill Meat Solutions Processed Beef 2, Unified School District #443 Education 1, Walmart Super Center Retail Sales Western Plains Medical Complex Health Care Boot Hill Casino & Resort Casino Ford County Government Center Public Service City of Dodge City Public Service Crust Buster/Speedking Manufacturer Dillons Super Store Grocery 140 The following table sets forth labor force figures for Ford County and the State of Kansas: Source: Kansas Department of Labor Retail Sales Tax Collections FORD COUNTY Year Total Labor Force Employed Unemployed Unemployed Rate ,114 17, % ,274 17, % ,807 18, % ,639 17, % ,486 17, % STATE OF KANSAS Year Total Labor Force Employed Unemployed Unemployed Rate ,500,764 1,394, , % ,491,258 1,394,230 97, % ,484,016 1,398,681 85, % ,486,764 1,407,562 79, % ,500,353 1,432,359 67, % The following table lists State of Kansas sales tax collections (for calendar years listed) and per capital sales tax collections (for fiscal years listed) for sales occurring in Ford County, Kansas: Per Capita State Year State Sales Tax Collections (in Ford County) Sales Tax Collections (in Ford County) 2010 $25,915,668 $ ,089, ,957, ,099, ,248, A-3

24 The statewide sales and use tax was increased from 4.25% to 4.90% effective July 1, It was subsequently increased to 6.3%, effective July 1, 2010, and decreased to 6.15%, effective July 1, Effective July 1, 2015, the statewide sales and use tax was increased to 6.50%. Source: Kansas Statistical Abstract Local Option Sales Tax The following table provides the amount of local sales tax (including compensating use tax) collected and received (on a cash-basis method) by County and the City during the years indicated. Year Ford County 1 City of Dodge City $ 8,249,601 $4,870, ,867,315 5,192, ,640,054 5,374, ,810,374 5,544, ,179,438 5,613, * 6,542,700 4,184,588 *As of September Ford County imposes countywide retailers sales taxes in the aggregate amount of one and one-half percent (1.5%). The first one percent was approved by the voters of Ford County in 1997 and the remaining one-half percent was approved by the voters of Ford County in Amount represents the aggregate amount of County sales taxes, including the amounts allocated to the County and each of the cities located in the County. 2 The City imposes citywide retailers sales taxes in the aggregate amount of one percent (1%). Amount represents the aggregate amount of sales tax moneys received by the City from its one percent retailers sales tax. Source: Kansas Department of Revenue Of the amounts and the sales taxes described above, a portion of the amounts included under the headings Ford County and City of Dodge City were jointly authorized by the City and the County electorates to finance the costs of constructing, equipping and operating certain public projects authorized at the 1997 election and/or recommended by a Project Review and Advisory Committee (collectively the Public Projects ), including bonds issued to pay the costs of the Public Projects. The only such bonds currently outstanding are the City s Sales Tax Revenue Bonds, Series 2009, and Sales Tax Revenue Bonds, Series The following table lists the aggregate amount (on a cash-basis method) of the one-half percent City sales tax and the portion of the one-half percent County sales tax received by the City and dedicated to such Public Projects: * As of September 2015 Source: City Clerk Oil Production Aggregate Sales Tax Revenues Year Dedicated to the Public Projects 2010 $5,082, ,426, ,795, ,902, ,086, ,520,811 The oil production (in number of barrels) for Ford County for the years listed is indicated in the following table: Source: Kansas Geological Survey Year Oil Production , , , , ,808 A-4

25 Financial and Banking Institutions There are currently 11 banks located in Ford County. For the years listed, bank deposits of the County's banks are as follows: Source: Kansas Statistical Abstract Building Permits Year Total Bank Deposits 2010 $464,000, ,952, ,000, ,000, ,000,000 The following table indicates the number of building permits and total valuation of these permits issued within the City for the years indicated. These numbers reflect permits issued either for new construction or for major renovation. *As of the 3 rd Quarter, 2015 Source: Dodge City Building Department Population Trends Year Number of Permits Issued Value of Permits ,343 $40,910, ,333 33,000, ,747, ,745, * 33,557,410 The following table shows the approximate population of City and Ford County in the years indicated: Year City Population Ford County Population ,340 33, ,921 34, ,075 34, ,159 34, ,117 34,795 Census. The median age of persons in Ford County and the State of Kansas is 30.4 and 36, respectively, per the 2010 Source: U.S. Census Bureau; 2009 & Kansas Division of Budget Personal Income Trends Ford County personal (in thousands of dollars) and per capita income and the State of Kansas per capita income are listed for the years indicated, in the following table. Ford County Personal Income Ford County Per Capita Income State of Kansas Per Capita Income Year 2009 $1,012,654 $30,540 $38, ,068,765 31,383 38, ,151,227 33,487 42, ,224,217 35,305 43, ,244,145 35,732 44,417 Source: U.S. Department of Commerce Bureau of Economic Analysis A-5

26 Accounting, Budgeting and Auditing Procedures FINANCIAL INFORMATION The City follows a modified accrual basis of accounting for all tax supported funds of the City, including the General Fund. An accrual basis of accounting is utilized for proprietary funds. An annual budget of estimated receipts and disbursements for the coming calendar year is required by statute to be prepared for all funds (unless specifically exempted). The budget is prepared utilizing the modified accrual basis which is further modified by the encumbrance method of accounting. For example, commitments such as purchase orders and contracts, in addition to disbursements and accounts payable, are recorded as expenditures. The budget lists estimated receipts by funds and sources and estimated disbursements by funds and purposes. The proposed budget is presented to the governing body of the City prior to August 1, with a public hearing required to be held prior to August 15, with the final budget to be adopted prior to August 25 of each year. Budgets may be amended upon action of the governing body after notice and public hearing, provided that no additional tax revenues may be raised after the original budget is adopted. The City may levy taxes in accordance with the requirements of its adopted budget. Property tax levies are based on the adopted budget of the City and the assessed valuations provided by the County appraiser. The 2015 Kansas Legislature passed legislation that, among other things, imposes an additional limit on the aggregate amount of property taxes that may be imposed by cities and counties, without a majority vote of qualified electors of the city or county (the Tax Lid ). The Tax Lid has an effective date of January 1, The Tax Lid provides that, subject to certain exceptions, no city or county may increase the amount of ad valorem tax to be levied over the amount levied in the prior year by an amount greater than the consumer price index without a majority vote of electors. Specific exceptions provided in the Tax Lid include increases in the ad valorem tax due to: (i) costs for new infrastructure or improvements to existing infrastructure to support new improvements to property exempt from property taxation pursuant to the provisions of K.S.A et seq., and amendments thereto, such as hospitals, schools and churches, or exempt additions to or improvements to property so exempt from property taxation; (ii) bond and interest payments; (iii) an increase in property subject to taxation as the result of the expiration of any abatement of property from property tax; (iv) increases in road construction costs when such construction has been once approved by a resolution of the governing body of the city or county; (v) special assessments; (vi) judgments levied against the city or county or expenses for legal counsel and for defense of legal actions against the city or county or officers of the city or county; (vii) new expenditures that are specifically mandated by federal or state law; or (viii) an increase in property subject to taxation as the result of new construction. Because of ambiguities in the Tax Lid, it is unclear how the various exceptions will be interpreted and how the Tax Lid will be implemented. As a result, is unclear how the Tax Lid will impact the City However, as described above, there is a specific exception in the Tax Lid for ad valorem tax increases necessary for bond and interest payments. This language has been interpreted in other contexts to include general obligation bonds and general obligation temporary notes. Therefore, the City is permitted under the Tax Lid to levy unlimited ad valorem taxes as necessary to pay principal of and interest on the Bonds, as required by the Bond Resolution. The City cannot predict the impact of the Tax Lid on the ratings on the Bonds, or the general rating of the City. A change in the rating on the Bonds or a change in the general rating of the City may adversely impact the market price of the Bonds in the secondary market. Kansas law prohibits governmental units from creating indebtedness unless there are funds on hand in the proper accounts and unencumbered by previous action with which to pay such indebtedness. An exception to this cash-basis operation is made where provision has been made for payment of obligations by bonds or other specific debt obligations authorized by law. The financial records of the City are audited annually by a firm of independent certified public accountants in accordance with generally accepted auditing standards. In recent years, the annual audit has been performed by Kennedy McKee & Company LLP, Dodge City, Kansas. Copies of the audit reports for the past five (5) years are on file in the Clerk's A-6

27 office and are available for review. The audit for the Fiscal Year ended December 31, 2014, is attached hereto as APPENDIX B. The City does not anticipate any material adverse change in the financial condition of the City from the information contained in APPENDIX B attached hereto. The Governmental Accounting Standards Board (GASB) issued Statement No. 34, Basic Financial Statements and Management s Discussion and Analysis for State and Local Governments in June 1999 ( Statement 34 ), which established new requirements for the annual financial reports of state and local governments. Among the major changes embodied in Statement 34, governments will now be required to: (a) report on the overall state of the government s financial health, not just its overall funds in a newly required Management s Discussion and Analysis (MD&A), (b) provide the most complete information available about the cost of delivering services to their citizens in the annual report which will now also include financial statements prepared using full accrual accounting for all of the government s activities, (c) include information about the government s public infrastructure assets such as bridges, roads and storm sewers, and (d) prepare an introductory narrative section analyzing the government s financial performance. The City implemented Statement No. 34 for its financial statements for the fiscal year ending on December 31, The financial information contained in the Appendices to this Official Statement are an integral part of this document and are intended to be read in conjunction herewith. Sources of Revenue The City finances its general operations through the local property tax levy, various other taxes, a variety of license and permit fees, and other miscellaneous sources as indicated below for the Fiscal Year ended December 31, 2014: Source: Clerk Property Valuations Source Percent Local property tax 18.54% Delinquent taxes.46% Motor vehicle taxes 2.60% State shared revenues & other taxes 4.55% Expanded Lottery Tax 1.50% Gasoline tax 1.80% Liquor and drug tax.73% Special assessments.63% Grants 4.75% Sales 27.09% Franchise fees 4.81% Fines 1.95% User fees, licenses and sales 2.49% Golf fees.69% Sanitation fees 4.58% Water fees 10.28% Interest.17% Drainage fees.53% Wastewater 11.85% Total % The determination of assessed valuation and the collection of property taxes for all political subdivisions in the state of Kansas is the responsibility of the various counties under the direction of state statutes. The Ford County Appraiser's office determines the fair market value of all taxable property within Ford County and the assessed valuation thereof that is to be used as a basis for the mill levy on property located in the Issuer. Property subject to ad valorem taxation is divided into two classes, real property and personal property. Real property is divided into seven subclasses; there are six subclasses of personal property. The real property (Class 1) subclasses are: (i) real property used for residential purposes including multi-family mobile or manufactured homes and the real property on which such homes are located, assessed at 11.5%, (ii) agricultural land, valued on the basis of agricultural income or productivity, assessed at 30%, (iii) vacant lots, assessed at 12%, (iv) real property, owned and operated by a not-for-profit organization not subject to federal income taxation, pursuant to Code 501, assessed at 12%, (v) public utility real property, except railroad real property, assessed at the average rate that all other commercial and industrial property is assessed, assessed at 33%, (vi) real property used for commercial and industrial purposes and buildings and other A-7

28 improvements located on land devoted to agricultural use, assessed at 25%, and (vii) all other urban and real property not otherwise specifically classified, assessed at 30%. Tangible personal property (Class 2) subclasses are: (i) mobile homes used for residential purposes, assessed at 11.5%, (ii) mineral leasehold interests, except oil leasehold interests, the average daily production from which is 5 barrels or less, and natural gas leasehold interests, the average daily production from which is 100 mcf or less, which shall be assessed at 25%, assessed at 30%, (iii) public utility tangible personal property, including inventories thereof, except railroad personal property, including inventories thereof, which shall be assessed at the average rate all other commercial and industrial property is assessed, assessed at 33%, (iv) all categories of motor vehicles not defined and specifically valued and taxed pursuant to law enacted prior to January 1, 1985, assessed at 30%, (v) commercial and industrial machinery and equipment which if its economic life is 7 years or more, shall be valued at its retail cost, when new, less seven-year straight-line depreciation, or which, if its economic life is less than 7 years, shall be valued at its retail cost when new, less straight-line depreciation over its economic life, except that, the value so obtained for such property, notwithstanding its economic life and as long as such property is being used, shall not be less than 20% of the retail cost when new of such property, assessed at 25%, and (vi) all other tangible personal property not otherwise specifically classified, assessed at 30%. All property used exclusively for state, county, municipal, literary, educational, scientific, religious, benevolent and charitable purposes, farm machinery and equipment, merchants' and manufacturers' inventories, other than public utility inventories included in subclass (3) of class 2, livestock, and all household goods and personal effects not used for the production of income, shall be exempted from property taxation. The Kansas Legislature (the Legislature ) reduced the applicable assessment rates on motor vehicles from 30% of market value to 20% of market value as of January 1, The 2006 Legislature exempted from all property or ad valorem property taxes levied under the laws of the State all commercial, industrial, telecommunications and railroad machinery and equipment acquired by qualified purchase or lease after June 30, 2006 or transported into the State after June 30, 2006 for the purpose of expanding an existing business or creation of a new business. Fair Market Value years: The following table shows the fair market value of the taxable and exempt property within the City for the following Year Fair Market Value 2011 $1,100,412, ,156,800, ,166,080, ,215,720, ,229,687,150 1 Preliminary 2015 fair market valuation. Source: County Clerk Assessed Valuation years: The following table shows the assessed valuation of the taxable tangible property within the City for the following Year Real Property Personal Property Utilities Motor Vehicles Total Valuation 2011 $114,432,362 $7,895,531 $ 7,400,387 $21,767,860 $151,496, ,852,497 7,456,509 10,322,094 21,844, ,476, ,682,680 7,398,534 10,651,563 21,983, ,715, ,477,299 5,580,073 9,809,806 21,505, ,373, ,217,213 7,634,420 10,916,916 21,505, ,274,519 1 Preliminary 2015 assessed valuation figures used for budgeting purposes motor vehicle valuation not yet available; 2014 data used for estimation purposes only. Source: County Clerk A-8

29 Property Tax Levies and Collections Tax Collections: Tax statements are mailed November 1 each year and may be paid in full or one-half on or before December 20 with the remaining one-half due on or before May 10 of the following year. Taxes that are unpaid on the due dates are considered delinquent and accrue interest at a per annum rate established by State law until paid or until the property is sold for taxes. Real estate bearing unpaid taxes is advertised for sale on or before August 1 of each year and is sold by the County for taxes and all legal charges on the first Tuesday in September. Properties that are sold and not redeemed within two years after the tax sale are subject to foreclosure sale, except homestead properties which are subject to foreclosure sale after three years. Personal taxes are due and may be paid in the same manner as real estate taxes, with the same interest applying to delinquencies. If personal taxes are not paid when due, and after written notice, warrants are issued and placed in the hands of the Sheriff for collection. If not paid on or before October 1, legal judgment is entered and the delinquent tax becomes a lien on the property. Unless renewed, a non-enforced lien expires five years after it is entered. Motor vehicle taxes are collected periodically throughout the year concurrently with the renewal of motor vehicle tags based upon the value of such vehicles. Such tax receipts are distributed to all taxing subdivisions, including the State of Kansas, in proportion to the number of mills levied within each taxpayer's tax levy unit. Tax Rates: The City may levy taxes in accordance with the requirements of its adopted budget. Property tax levies are based on the adopted budget of the City and the assessed valuations provided by the County appraiser. The following table shows the City's mill levies by fund (per $1000 of assessed valuation) for each of the years indicated and the current year: Source: County Clerk Year General Fund Library Fund Liability Fund G.O. Bonds Misc. Funds Total Levy 2011/ / / / / Aggregate Tax Levies: The aggregate tax levies (per $1000 assessed valuation) of the City and overlapping for the years indicated are included in the following table: Source: County Clerk Year City Ford County School District Dodge City Comm. College State Total Levy 2011/ / / / / A-9

30 Tax Collection Record: The following table sets forth tax collection information for the City for the years indicated: Current Taxes Collected Current & Delinquent Taxes Collected Year Total Taxes Levied Amount Percentage Amount Percentage 2010/11 $6,461,944 $6,588, % $6,690, % 2011/12 6,613,021 6,664, % 6,831, % 2012/13 7,066,277 7,014, % 7,187, % 2013/14 7,326,731 7,245, % 7,404, % 2014/15 7,218,316 7,073, % 7,271, % 2015/16 7,765,280 In Process In Process In Process In Process Source: County Clerk Major Taxpayers: The following table sets forth the ten largest taxpayers in the City for taxes levied in the tax collection period 2014/2015: Taxpayer Assessed Valuation Taxes Levied 1. BHC Development $4,945,127 $1,221, Victory Electric 5,266, , Western Plains Regional Hospital 2,570, , Cargill Meat Solutions 2,088, , Wal-Mart 1,809, , BHC 1,736, , Black Hills Utility 1,414, , Kansas Lodging 1,258, , Southwestern Bell 1,218, , BNSF 1,059, ,996 Source: County Clerk Risk Management The City is insured against the risks arising from general liability, property insurance and Workmen s Compensation by Traveler s Insurance. The City offers employee health insurance through Blue Cross/Blue Shield of Kansas. History of Employment The following table indicates the history of the Issuer's employment for the years indicated. Source: City Clerk Employee Relations Total Full- Year Time Employees The City maintains and updates its Job Classification Plan on an annual basis. Wages and salaries for each job class are reviewed with peer group cities as well as throughout the community in order to maintain competitive wages. This aids in attracting and maintaining quality employees to serve the efficiency of all operations of the City. A number of employees in each department and division are also reviewed and compared with peer groups. In 2007, the City Commission hired a A-10

31 consultant to conduct a wage and salary survey. The results of this survey were implemented over a 3 year period beginning in Additions of employees are always reviewed by the City Commission and are predicated somewhat on budgetary considerations as well as efficiency of the organization. Budget shortfalls have not yet impacted numbers of employees. In May, 2002, the City Commission voted to recognize employee groups who are interested in negotiating a contract with the City. To date, only one employee group, the Police Department, has negotiated a contract. The FOP is the bargaining unit for the Police Department contract. Pension and Employee Retirement Plans The Issuer participates in the Kansas Public Employees Retirement System ( KPERS ) established in 1962, as an instrumentality of the State, pursuant to K.S.A et seq., to provide retirement and related benefits to public employees in Kansas. KPERS is governed by a board of trustees consisting of nine members, including four members appointed by the Governor subject to confirmation by the State Senate, one appointed by the President of the Senate, one appointed by the Speaker of the House of Representatives, two elected by members and retirants of the retirement system, which must be members of such system, and the State Treasurer. Members of the board of trustees serve four-year terms and elect a chairperson annually. The board of trustees appoints an Executive Director to serve as the managing officer of KPERS and employs a staff of approximately 95 people. As of December 31, 2014, KPERS serves over 295,000 members and approximately 1,500 participating employers, including the State, school districts, counties, cities, public libraries, hospitals and other governmental units. KPERS administers the following three statewide, defined benefit retirement plans for public employees: (a) Kansas Public Employees Retirement System; (b) Kansas Police and Firemen s Retirement System; and (c) Kansas Retirement System for Judges. These three plans are separate and distinct with different membership groups, actuarial assumptions, experience, contribution rates and benefit options. The Kansas Public Employees Retirement System is the largest of the three plans, accounting for more than 95% of the members. The Kansas Public Employees Retirement System is further divided into two separate groups, as follows: (a) State/School Group - includes members employed by the State, school districts, community colleges, vocational-technical schools and educational cooperatives. The State of Kansas makes all employer contributions for this group, 85% of which comes from the State General Fund. State legislation enacted in 2003 made certain pre-1962 Board employees (which are part of a small group of pre-1962 Board and University of Kansas Hospital Authority employees known as the TIAA Group ), special members of the State/School Group. (b) Local Group - all participating cities, counties, library boards, water districts and political subdivisions are included in this group. Local employers contribute at a different rate than the State/School Group rate. State legislation enacted in 2003 made certain pre-1962 employees of the University of Kansas Hospital Authority (which are a part of a small group of pre-1962 Board and University of Kansas Hospital Authority employees known as the TIAA Group ), special members of the Local Group. KPERS is currently a qualified, governmental, 401(a) defined benefit pension plan, and has received IRS determination letters attesting to the plan s qualified status dated October 14, 1999 and March 5, KPERS is also a contributory defined benefit plan, meaning that employees make contributions to the plan. This contrasts it from noncontributory pension plans, which are funded solely by employer contributions. The Issuer's employees currently annually contribute: (a) 4% of their gross salary to the plan if such employees are KPERS Tier 1 members (covered employment prior to July 1, 2009), or (b) 6% of their gross salary to the plan if such employees are KPERS Tier 2 members (covered employment on or after July 1, 2009). In 2012, the Legislature created a new KPERS Tier 3 category (covered employment on or after January 1, 2015) based on a cash balance plan. Each Tier 3 participant shall have a retirement annuity account to which such participant shall contribute 6% of their gross salary to the plan. The employer or State contribution varies based on longevity of participant service: (a) 3% for less than 5 years; (b) 4% for at least 5 years but less than 12 years; (c) 5% for at least 12 years but less than 24 years; and (d) 6% for 24 or more years. Such account shall receive an interest credit of 5.25% per annum, and under certain circumstances, shall receive additional interest credits. Subject to certain exceptions, a Tier 3 participant, upon retirement, shall receive a single life annuity benefit. Also in 2012, the Legislature adopted a number of other changes to KPERS including: (a) increasing the statutory maximum employer contribution annual increase from 0.6% per year (status quo) to 0.9% per year in 2014, 1.0% in 2015, 1.1% in 2016 and 1.2% per year in 2017 and thereafter, (b) eliminating COLA adjustments for Tier 2 member with corresponding benefit adjustments (effective January 1, 2014), (c) providing additional flexibility for alternative investments A-11

32 for the plan, and (d) providing additional contribution flexibility for Tier 1 members with corresponding benefit adjustments effective January 1, 2014, subject to approval by the IRS (the IRS issued a private letter ruling stating the election granted to Tier 1 members was impermissible; therefore, employee contributions for Tier 1 members increased to 5% of compensation effective January 1, 2014, and to 6% of compensation effective January 1, 2015). In 2015, the Legislature authorized, subject to certain conditions, the issuance of revenue bonds in an amount not to exceed $1 billion (plus associated costs of issuance) (the Revenue Bonds ), the proceeds of which must be applied to the unfunded actuarial pension liability as directed by KPERS. The repayment of the Revenue Bonds shall be subject to legislative annual appropriation, shall not be an obligation of the KPERS system, and the full faith and credit or taxing power of the State shall not be pledged to the repayment of the Revenue Bonds. Additionally, the statutory maximum annual increases to employer contributions for State/School Group and certain employees of the State department of corrections were modified as follows: (a) if the Revenue Bonds are issued and finance capitalized interest, an increase of 1.1% in 2015 and 1.2% in 2016 and thereafter; or (b) if such Revenue Bonds are not issued to finance capitalized interest, such rate of contribution shall be 10.91% in 2015 and 10.81% in The Revenue Bonds in the aggregate principal amount of $1,005,180,000 were issued on August 20, 2015, to finance a portion of the unfunded actuarial pension liability and costs of issuance, but did not finance capitalized interest. The Issuer's contribution varies from year to year based upon the annual actuarial valuation and appraisal made by KPERS, subject to legislative caps on percentage increases. The Issuer's contribution is 9.48% of the employee s gross salary for calendar year The rate is scheduled to change to 9.18% beginning January 1, In addition, the Issuer contributes 1% of the employee s gross salary for Death and Disability Insurance for covered employees for the period beginning July 1, 2015, through June 30, According to the Valuation Report as of December 31, 2014 (the 2014 Valuation Report ) the KPERS Local Group, of which the Issuer is a member, carried an unfunded accrued actuarial liability ( UAAL ) of $1.487 billion at the end of The 2014 Valuation Report includes additional information relating to the funded status of the KPERS Local Group, including recent trends in the funded status of the KPERS Local Group, and is available on the KPERS website at kpers.org/about/reports.html. The Issuer has no means to independently verify any of the information set forth on the KPERS website or in the 2014 Valuation Report, which is the most recent financial and actuarial information available on the KPERS website relating to the funded status of the KPERS Local Group. The 2014 Valuation Report sets the employer contribution rate for the period beginning January 1, 2017, for the KPERS Local Group, and KPERS actuaries identified that an employer contribution rate of 8.46% of covered payroll would be necessary, in addition to statutory contributions by covered employees, to eliminate the UAAL by 2033, the end of the actuarial period. The statutory contribution rate of employers currently equals the 2014 Valuation Report s actuarial rate. As a result, members of the Local Group are adequately funding their projected actuarial liabilities and the UAAL can be expected to diminish over time. KPERS actuaries project the required employer contribution rate to increase by the maximum statutorily allowed rate, which is currently 0.9% in fiscal year 2014, then 1.0% in fiscal year 2015, 1.1% in fiscal year 2016 and 1.2% in fiscal year 2017 and thereafter. The Issuer has established membership in the Kansas Police and Fire Retirement System ( KP&F ) for its police and fire personnel. KP&F is a division of and is administered by KPERS. Annual contributions are adjusted annually based on actuarial studies, subject to legislative caps on percentage increases. According to the 2014 Valuation Report, KP&F carried an UAAL of $726 million at the end of For the year beginning January 1, 2015, employees contributed 7.15% of gross compensation and the Issuer contributed 26.95% of employees gross compensation. Beginning January 1, 2016, the Issuer s contribution will change to 26.01% of gross compensation. In 2013, the Legislature adopted a number of changes to the KP&F which included (a) raising the cap on maximum KP&F benefits from 80% to 90% of final average salary and (b) permitting certain active KP&F members to pay a lump sum amount prior to or on their retirement date to enhance the individual retirement benefit at their own cost. In 2015, the Issuer is required to implement GASB 68 Accounting and Financial Reporting for Pensions. According to KPERS Schedule of Employer and Nonemployer Allocations and Schedules of Pension Amounts by Employer and Nonemployer for the fiscal years ended June 30, 2014 and 2013 (the GASB 68 Report ), the net pension liability allocated to the Issuer as of June 30, 2014, is $9,555,575. The GASB 68 Report is available on the KPERS website at kpers.org/about/reports.html. The Issuer has no means to independently verify any of the information set forth on the KPERS website or in the GASB 68 Report. It is important to note that under existing State law, the Issuer has no legal obligation for the UAAL or the net pension liability calculated by KPERS, and such figures are for informational purposes only. A-12

33 DEBT STRUCTURE Debt Summary The following table summarizes certain key statistics with respect to the Issuer's general obligation debt, including the Bonds: Less Self Debt Summary (As of February 3, 2016) City Debt Supporting Debt Fair Market Value of Taxable and Exempt Property 1... $1,229,687,150 $1,229,687,150 Equalized Assessed Valuation of Tangible Valuation for Computation of Bonded Debt Limitations 2... $174,274,519 $174,274,519 Legal limitation of Bonded Debt 3... $52,282,356 $52,282,356 Outstanding General Obligation Debt... $42,835,000 $42,835,000 Statutory Exempt Debt... $16,923, Net Debt against Debt Limit Capacity... $25,911, Additional Debt Capacity... $26,370, Less Self Supporting Debt $10,380,000 Non Self Supporting Debt $32,455,000 Direct Debt Per Capita (Population =28,117)... $1,523 $1,154 Direct and Overlapping Debt Per Capita... $4,293 $3,924 Direct Debt as a Percentage of Assessed Valuation % 18.62% Direct and Overlapping Debt as a Percentage of Assessed Valuation % 63.31% Statutory Direct Debt as a Percentage of Assessed Valuation % --- Direct Debt as a Percentage of Actual Fair Market Value % 2.64% Direct and Overlapping Debt as a Percentage of Actual Fair Market Value % 8.97% 1 See Property Valuations infra. 2 The assessed value of all tangible taxable property within the City, as certified to the County Clerk on the preceding August 25. Also includes the taxable value of motor vehicles within the City motor vehicle valuation not yet available; 2014 data used for estimation purposes only. See K.S.A et seq. 3 See K.S.A et seq. 4 Series 2012-A Bonds (Waterworks and Wastewater Utility System revenues). Current Indebtedness of the Issuer Bonds: The following tables set forth as of February 3, 2016, all of the outstanding obligations of the Issuer, including the GENERAL OBLIGATION BONDS Description of Indebtedness Series Dated Date Final Maturity Original Principal Amount Amount Outstanding Subject to Debt Limit G.O. Bonds 2008-A 12/01/08 09/01/18 $ 1,155,000 $ 390,000 $ 390,000 G.O. Refunding & Improvement Bonds 2009-A 10/21/09 09/01/29 6,280,000 3,510,000 2,806,596 G.O. Waterworks and Wastewater Utility 2012-A 08/01/12 09/01/24 13,200,000 10,380,000 0 System Refunding Bonds G.O. Refunding & Improvement Bonds 2012-B 08/01/12 09/01/32 21,285,000 17,100,000 11,484,405 G.O. Refunding & Improvement Bonds 2013-A 12/12/13 09/01/28 6,235,000 5,115,000 5,115,000 G.O. Bonds 2014-A 12/01/14 09/01/29 675, , ,879 G.O. Bonds (this issue) 2016-A 02/03/16 09/01/35 5,705,000 5,705,000 5,705,000 Total $42,835,000 $25,911,880 A-13

34 TEMPORARY NOTES NONE REVENUE OBLIGATIONS Description of Indebtedness Series Dated Date Final Maturity Original Principal Amount Amount Outstanding Sales Tax Revenue Bonds /01/09 06/01/34 $40,300,000 $36,180,000 Sales Tax Revenue Bonds /17/15 06/01/35 9,840,000 9,840,000 Sales Tax Special Obligation Revenue /22/15 12/01/35 $13,150,000 13,150,000 Bonds (Heritage Project Area) Total $59,170,000 Source: Clerk History of General Obligation Indebtedness The following table sets forth general obligation debt information pertaining to the Issuer as of the end of each of the years indicated: Source: Clerk Year Total Debt Debt As % of Assessed Value Debt Per Capita 2011 $22,770, % $ ,785, % ,907, % ,242, % ,931, % The Issuer has never in its history defaulted on the payment of any of its debt obligations. Lease Obligations In addition to the foregoing debt obligations, the City has entered into the following lease obligations. Lease obligations of the City constitute valid and binding obligations of the City in accordance with their terms subject to funds budgeted and appropriated for that purpose during the City's current budget year or funds made available from any lawfully operated revenue producing source as per K.S.A b. Source: Clerk State Loans Purpose of Dated Final Original Amount Indebtedness Date Payment Date Principal Amount Outstanding Airport Hangar 04/05/13 04/05/23 $349,878 $287,922 Fire Truck 04/12/13 03/01/18 427, ,118 Total $548,040 The City has entered into a loan agreement (the Loan ) with the Kansas Department of Health and Environment to finance improvements to the City's wastewater utility system. The term of the Loan is 20 years and provides for approximately level annual debt service payments. Purpose of Indebtedness Dated Date Final Payment Date Original Principal Amount Amount Outstanding 1 Wastewater Treatment Plant 09/22/09 09/22/31 $29,532,000 $20,407,830 1 Current principal advanced. The Loan is secured by a pledge of revenues of the City s wastewater utility system on the same basis of lien to the Issuer s Series 2012-A Bonds, together with a pledge of unlimited ad valorem property tax levies of the City. Source: Clerk A-14

35 Overlapping Indebtedness The following table sets forth overlapping indebtedness as of February 3, 2016, and the percent attributable (on the basis of assessed valuation and not including motor vehicle valuation) to the City: Outstanding General Obligation Indebtedness Percent Applicable to Issuer Amount Applicable to Issuer Taxing Jurisdiction Assessed Valuation Ford County $289,190,493 $ 15,385, % $ 8,127,322 U.S.D. No ,226,907 99,215, % 69,138,099 Dodge City Community College 289,190, % 0 Total $77,265,421 1 Includes USD 443 s $85,600,000 General Obligation Bonds, Series 2015-A, and $9,475,000 General Obligation Refunding Bonds, Series 2015-B, issued November 17, Future Indebtedness The City regularly issues temporary notes and/or general obligation bonds in order to finance infrastructure improvements to serve the City. The City anticipates issuing temporary notes or general obligation bonds within the next 12 months to finance street improvements and is also evaluating a possible expansion of its waterworks and wastewater utility system that may result in the issuance of utility revenue bonds. The City is also evaluating the issuance of sales tax refunding revenue bonds. Additionally, the City periodically evaluates the merits of refunding outstanding general obligation and/or utility revenue bonds; however the timing and/or feasibility of any such refinancings are not available at this time. [BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK] A-15

36 APPENDIX B FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS (FOR THE FISCAL YEAR ENDED 12/31/2014)

37 CITY OF DODGE CITY, KANSAS BASIC FINANCIAL STATEMENTS with INDEPENDENT AUDITOR'S REPORT YEAR ENDED DECEMBER 31, 2014

38 CITY OF DODGE CITY, KANSAS TABLE OF CONTENTS Independent Auditor's Report... 1 Management s Discussion and Analysis... 4 BASIC FINANCIAL STATEMENTS Government-wide Financial Statements Statement of Net Position Statement of Activities Fund Financial Statements Balance Sheet Governmental Funds Statement of Revenue, Expenditures and Changes in Fund Balances Governmental Funds Statement of Net Position Proprietary Funds Statement of Revenue, Expenses and Changes in Fund Net Position Proprietary Funds Statement of Cash Flows Proprietary Funds Component Unit Financial Statements Statement of Net Position Major Component Units Statement of Activities Major Component Units Budgetary Comparison Statements General Fund Sales Tax Fund Budget to GAAP Reconciliation Notes to Basic Financial Statements SUPPLEMENTARY INFORMATION COMBINING FINANCIAL STATEMENTS Combining Balance Sheet Nonmajor Governmental Funds Combining Balance Sheet Nonmajor Governmental Funds Special Revenue Funds Combining Balance Sheet Nonmajor Governmental Funds Capital Projects Funds Combining Statement of Revenue, Expenditures and Changes in Fund Balances Nonmajor Governmental Funds Combining Statement of Revenue, Expenditures and Changes in Fund Balances Nonmajor Governmental Funds Special Revenue Funds Page

39 TABLE OF CONTENTS (CONTINUED) SUPPLEMENTARY INFORMATION COMBINING FINANCIAL STATEMENTS (CONTINUED) Combining Statement of Revenue, Expenditures and Changes in Fund Balances Nonmajor Governmental Funds Capital Projects Funds Statement of Fiduciary Net Assets Agency Funds APPENDICES Independent Auditor's Report on Internal Control over Financial Reporting and on Compliance and other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Independent Auditor's Report on Compliance for Each Major Program and on Internal Control over Compliance Required by OMB Circular A Schedule of Expenditures of Federal Awards Schedule of Findings and Questioned Costs OTHER AUDIT Dodge City Public Library Page

40 Kennedy McKee & Company LLP Certified Public Accountants 1100 W. Frontview P. O. Box 1477 Dodge City, Kansas Tel. (620) Fax (620) JAMES W. KENNEDY, CPA JAMES R. SHIRLEY, CPA LU ANN WETMORE, CPA ROBERT C. NEIDHART, CPA PATRICK M. FRIESS, CPA JOHN W. HENDRICKSON, CPA INDEPENDENT AUDITOR'S REPORT The Honorable Mayor and City Commissioners Dodge City, Kansas We have audited the accompanying financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Dodge City, Kansas, as of and for the year ended December 31, 2014, and the related notes to the financial statements, which collectively comprise the City s basic financial statements as listed in the table of contents. We did not audit the financial statements of the Dodge City Housing Authority and Special Events Center Special Revenue Fund. Those financial statements were audited by other auditors whose report thereon has been furnished to us, and our opinion, insofar as it relates to the amounts included for the Dodge City Housing Authority and Special Events Center Special Revenue Fund, is based on the reports of the other auditors. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America, the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States and the Kansas Municipal Audit and Accounting Guide. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. 1

41 An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, based on our audit and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Dodge City, Kansas, as of December 31, 2014, and the respective changes in financial position and, where applicable, cash flows thereof and the respective budgetary comparison for the General Fund and the Sales Tax Fund for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis as listed in the table of contents be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Dodge City, Kansas basic financial statements. The combining and individual nonmajor fund financial statements are presented for purposes of additional analysis and are not a required part of the basic financial statements. The schedule of expenditures of federal awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and is also not a required part of the basic financial statements. 2

42 The combining and individual nonmajor fund financial statements and the schedule of expenditures of federal awards are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual nonmajor fund financial statements and the schedule of expenditures of federal awards are fairly stated in all material respects in relation to the basic financial statements taken as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated July 28, 2015 on our consideration of the City of Dodge City, Kansas internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering City of Dodge City, Kansas internal control over financial reporting and compliance. Kennedy McKee & Company LLP July 28,

43 MANAGEMENT S DISCUSSION AND ANALYSIS

44 CITY OF DODGE CITY MANAGEMENT S DISCUSSION AND ANALYSIS (UNAUDITED) December 31, 2014 MANAGEMENT S DISCUSSION AND ANALYSIS Our discussion and analysis of the City of Dodge City s financial performance provides an overview of the City s financial activities for the year ended December 31, It should be read in conjunction with the City s basic financial statements, listed in the table of contents. USING THIS ANNUAL REPORT This annual report consists of a series of financial statements. The government-wide statements consist of the Statement of Net Position and the Statement of Activities. These provide information about the activities of the City as a whole and present a longer-term view of the City s finances. Fund financial statements follow the government-wide statements. For governmental activities, these statements tell how the services of the City were financed in the short term as well as what remains for future spending. Fund financial statements report the City s operations in more detail than the government-wide statements by providing information about the City s most significant funds. The Statement of Net Position and the Statement of Activities One of the most important questions asked about the City s finances is this: Is the City as a whole better off or worse off as a result of the year s activities? The Statement of Net Position and the Statement of Activities report information about the City as a whole and about its activities in a way that helps provide answers to this question. These statements include all assets and liabilities using the accrual basis of accounting, which is similar to the accounting used by most private-sector companies. All of the current year s revenues and expenses are taken into account regardless of when cash is received or paid. These two statements report the City s net position and the changes in them. The net position represents the difference between assets and liabilities. Net position is one way to measure the financial position of the City. Over time, increases or decreases in the City s net position is one indicator of whether its financial health is improving or deteriorating. Other factors, such as changes in the property tax base, and economic conditions at the state and local level must also be considered when assessing the overall financial health of the City. In the Statement of Net Position and in the Statement of Activities, the information is divided into three kinds of activities: Governmental activities Many of the City s basic services are reported here, including general government, public safety, public works, culture and recreation and community services. Property taxes, sales tax, franchise fees, service charges and fees, other types of governmental revenues and taxes, and federal and state grants finance most of these activities. Business-type-activities The City charges a fee to residents to cover the cost of utility services it provides. These services are water wastewater, solid waste, and drainage utilities. Component units The City includes three separate legal entities in its report: the Dodge City Public Library, the Dodge City-Ford County Development Corporation, and the Dodge City Housing Authority. Although legally separate, these component units are important because of their relationship with the City. 4

45 USING THIS ANNUAL REPORT (CONTINUED) The Statement of Net Position and the Statement of Activities (continued) To assist in the understanding of the Statement of Activities some additional explanation is given. Of particular interest is the format that is significantly different from a typical Statement of Revenue, Expenditures, and Changes in Fund Balance. The expenses are listed in the first column with revenues from that particular program reported to the right. The result is a net (expense)/revenue. The reason for this kind of format is to highlight the relative financial burden of each of the functions on the City s taxpayers. It also identifies how much each function draws from the general revenues and how much it is self-financing through fees and grants. Fund Financial Statements Our analysis of the City s major funds follows in this discussion. The fund financial statements provide detailed information about the most significant funds not the City as a whole. Some funds are required to be established by state law or by contract. However, the City Commission establishes many other funds to help control and manage money for particular purposes, or to show that it is meeting legal responsibilities for using certain taxes, grants, and other money. The City s two kinds of funds governmental and proprietary use different accounting approaches. Governmental funds Many of the City s basic services are reported in governmental funds. The focus is on how money flows into and out of those funds and on the balances left at year-end that are available for spending. These funds are reported using an accounting method called modified accrual accounting, which measures cash and all other financial assets that can be readily converted to cash. The governmental fund statements provide a detailed short-term view of the City s general government operations and the basic services it provides. Governmental fund information helps to determine whether there are more or fewer financial resources that can be spent in the near future to finance the City s programs. A reconciliation between the governmental funds reported here and the overall governmental activities column of the Statement of Net Position is provided. Proprietary funds The City maintains two types of proprietary funds. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. Internal service funds are an accounting device used to accumulate and allocate costs internally among the City s various functions. The City uses an internal service fund to account for its vehicle and equipment maintenance activities. Proprietary funds are reported using the same accounting approach that all activities use in the Statement of Net Position and in the Statement of Activities. Since the Enterprise funds use the same accounting approach in all statements, no reconciliation is necessary among the statements. Notes to the Financial Statements The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. 5

46 THE CITY AS A WHOLE Government-Wide Statements Overview The City s overall financial position and operations for the past two years are summarized as follows based on the information included in the government-wide financial statements: Governmental activities Business-type activities Total Current and other assets $ 36,665,668 $ 38,453,926 $ 7,534,732 $ 8,599,727 $ 44,200,400 $ 47,053,653 Capital assets 101,617, ,055,283 66,157,681 67,125, ,775, ,180,887 Total assets 138,283, ,509,209 73,692,413 75,725, ,975, ,234,540 Long-term liabilities 62,436,932 65,805,915 39,154,773 41,534, ,591, ,340,446 Other liabilities 2,918,562 2,568,664 2,017,502 1,752,884 4,936,064 4,321,548 Total liabilities 65,355,494 68,374,579 41,172,275 43,287, ,527, ,661,994 Deferred inflows of resources 7,896,755 7,929, , ,920 8,195,327 8,254,840 Net Position: Invested in capital assets net of related debt 43,680,855 49,620,333 27,002,905 25,591,073 70,683,760 75,211,406 Restricted 19,010,716 12,752, ,010,716 12,752,487 Unrestricted 2,339,587 7,831,890 5,218,661 6,521,923 7,558,248 14,353,813 Total net position $ 65,031,158 $ 70,204,710 $ 32,221,566 $ 32,112,996 $ 97,252,724 $ 102,317,706 For the years ended December 31, 2014 and 2013, net position changed as follows: Governmental activities Business-type activities Total Beginning net position $ 70,204,710 $ 76,090,461 $ 32,112,996 $ 33,199,506 $ 102,317,706 $ 109,289,967 Increase (decrease) in net position (5,173,552) (5,885,751) 108,570 (1,086,510) (5,064,982) (6,972,261) Ending net position $ 65,031,158 $ 70,204,710 $ 32,221,566 $ 32,112,996 $ 97,252,724 $ 102,317,706 Governmental current assets decreased from 2013 to 2014 because the cash balance in the project fund was spent for a major street project during the year. The cash balance in the General Fund continues to remain strong because of a concerted effort to focus on increasing the cash balance to a level described in the financial policies. Capital assets decreased because of the normal depreciation on capital infrastructure and capital assets exceeded the addition of capital assets. Current assets decreased in the business-type activities from 2013 to 2014 because of the repayment on the KDH&E Water Loan for the construction of the water reclamation facility which decreased cash assets, and the timing of receivables. Receivables decreased significantly from 2013 to The capital assets decreased because the depreciation expense exceeded the addition of capital assets. 6

47 THE CITY AS A WHOLE (CONTINUED) Government-Wide Statements Overview (continued) Governmental activities Business-type activities Total primary government Revenue: Program revenue: Charges for services $ 3,982,576 $ 4,444,523 $ 11,011,315 $ 11,256,752 $ 14,993,891 $ 15,701,275 Operating grants 2,860,320 3,050, , ,262 3,686,917 3,881,581 Capital grants 1,964, ,761-10,527 1,964, ,288 General revenue: Property taxes, levied for general purposes 6,768,975 6,914, ,768,975 6,914,050 Property taxes and special assessments levied for debt service 2,468,438 2,015, ,468,438 2,015,536 Sales taxes 11,195,087 10,615, ,195,087 10,615,596 Franchise taxes 1,871,660 1,683, ,871,660 1,683,180 Expanded lottery tax 604, , , ,413 Grants and contributions 117, , , ,748 Gain on assets - (1,557,441) - - (1,557,441) Contributed capital 189 1,588,222 57,073 (1,588,222) 57,262 - Investment earnings 92,556 (17,548) 68,167 68, ,723 51,076 Transfers (188,909) 33,366 (1,065,540) (1,263,720) (1,254,449) (1,230,354) Miscellaneous 233, , , ,666 Total revenue 31,970,196 30,451,391 10,897,612 9,315,223 42,867,808 39,766,614 Program expenses: General government 3,684,889 3,615, ,684,889 3,615,223 Public safety 8,262,534 8,149, ,262,534 8,149,112 Public works 3,425,434 3,164, ,425,434 3,164,765 Culture and recreation 9,804,166 9,111, ,804,166 9,111,736 Community services 1,631,388 1,653, ,631,388 1,653,106 Indirect depreciation 7,810,930 8,098, ,810,930 8,098,867 Interest on long-term debt 2,524,407 2,544, ,524,407 2,544,333 Water/Wastewater - - 8,828,454 8,585,304 8,828,454 8,585,304 Solid waste - - 1,706,985 1,669,498 1,706,985 1,669,498 Drainage , , , ,930 Total expenses 37,143,748 36,337,142 10,789,042 10,401,732 47,932,790 46,738,874 Increase (decrease) in net assets $ (5,173,552) $ (5,885,751) $ 108,570 $ (1,086,509) $ (5,064,982) $ (6,972,260) The charges for services decreased from 2013 to The charges for services in the areas of public safety, public works, culture and recreation and community services all increased slightly from The general government revenue decreased significantly and was the reason for the overall decrease of the charges for services in the governmental activities. The reason for this decrease was in the medical insurance fund. In 2013 the reimbursed expenditures in the medical insurance fund totaled $629,000 and in 2014 it was $12,000. Operating grants and capital grants in 2014 included: FAA funding at the airport for the parking lot and wildlife hazard assessment; the award of historic grants for the depot and other historic places; expanded public transportation program and busses; and main traffic way improvement projects. The franchise taxes increased by 11.2% because the gas and electric are variable depending mostly on the weather and normal rate increases. The sales tax increased 5.46% and the expanded lottery tax decreased 2.12%. The most notable changes in the program expenses were the culture and recreation expenses. This area increased in the sales tax projects funds due to increased expenses at the Special Events Center. Governmental Activities The most significant governmental activities are general government, public safety, public works, culture and recreation and community services. The main sources of revenue are property taxes, sales tax, franchise fees, charges for services, other governmental revenue and taxes, and operating grants and contributions. Total governmental revenues for the year were $31,970,196, and total expenses were $37,143,748. The percentage increase in revenue was 4.99%, while the total increase in expense was 2.22%. 7

48 THE CITY AS A WHOLE (CONTINUED) Governmental Activities (continued) The following charts reflect a comparison among all the governmental sources of revenue and expense categories for the years ended December 31, 2014, 2013, 2012, 2011, and 2010 based on the information included in the government-wide financial statements. 25,000,000 Governmental Activities - Revenues 20,000,000 15,000,000 10,000,000 5,000,000 0 Charges Operating Grants Capital Grants and Contributions Taxes Miscellaneous Governmental Activities - Expenses 12,000,000 10,000,000 8,000,000 6,000,000 4,000,000 2,000,000 0 General Government Public Safety Public Works Culture and Recreation Community Services Indirect Depreciation Interest on Long Term Debt

49 THE CITY AS A WHOLE (CONTINUED) Business-Type Activities The business-type activities of the City are the water/wastewater, solid waste, and drainage utilities. These activities derive most of their revenue from charges for services. Total business-type program revenues are $11,837,912 and operating expenses are $10,789,042. The charts below compare program revenues and changes in net assets for the years ended December 31, 2014, 2013, 2012, 2011, and 2010 based on the information included in the government-wide financial statements. Business-Type Activities - Program Revenues 15,000,000 10,000,000 5,000,000 0 Water/Wastewater Solid Waste Drainage Business Type Activities - Change in Net Assets before Transfers 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000, ,000,000 Water/Wastewater Solid Waste Drainage

50 THE CITY S FUND BALANCES Governmental Activities As the City completed the year, the governmental funds reported a combined fund balance of $25,691,831, as reflected in the Balance Sheet - Governmental Funds. This balance represents a decrease of $2,076,517 (7.48%) from last year s ending balance. This decrease in fund balance is primarily due to expended project funds from the 2013 GO Bond issue that were not expended in A concerted effort has been made to increase the fund balances, with the exception of project funds, to a level that would cover future replacement costs as well as a target of 15-25% of current budgeted expenses in the general fund to be able to fund operations at all times, especially if an emergency situation would exist. A comparison of fund balances based on information included in the fund financial statements is presented below: Governmental Fund Balances 18,000,000 16,000,000 14,000,000 12,000,000 10,000,000 8,000,000 6,000,000 4,000,000 2,000,000 0 General Sales Tax Debt Service Other Governmental Funds Following is an analysis of General Fund and Sales Tax Fund revenue and expenditures compared to the previous year: The percentage of revenue that funded the General Fund in 2014 is sales tax at 33.35%, property tax at 26.75%, franchise fees at 13.41%, licenses, charges and rentals at 7.09%, fines at 5.45% with other revenues representing the remainder of the funding. General Fund revenue remained relatively the same as 2013, with a.0013% decrease. Property tax collections remain very stable. The chart below lists the percentage of property tax collected compared to the amount that was levied. Year % of Property Tax Collected compared to the amount Levied % of Property Tax Collected plus Delinquent amount compared to the amount Levied % 98.5% % % % 99.34% % % % % 10

51 THE CITY S FUND BALANCES (CONTINUED) Governmental Activities (continued) The Sales Tax Fund is funded primarily by sales tax and partially by user fees and charges. The overall revenue in the sales tax fund remained stable. Governmental Activities - Revenues 25,000,000 20,000,000 15,000,000 10,000,000 5,000, ,000,000 Taxes Intergovernmental Licenses, Charges and Rentals Fines and Forfeitures Investment Earnings Miscellaneous Governmental Activities - Expenditures 45,000,000 40,000,000 35,000,000 30,000,000 25,000,000 20,000,000 15,000,000 10,000,000 5,000,000 0 General Government Public Safety Public Works Culture and Recreation Community Services Debt Service

52 BUDGETARY HIGHLIGHTS The governmental funds included in the published budget are the General Fund, Special Liability, Library, Library Employee Benefits, Sales Tax, Convention and Visitors, Special Streets and Highways, Special Park and Recreation, Special Alcohol and Drug, Alcohol and Drug Safety Action, All 4 Fun, GO Bond and Interest Funds, and Development and Growth. Budgeted business-type funds are as follows: Water/Wastewater, Solid Waste and Drainage Utility Funds. The internal service fund is the Vehicle Maintenance Fund. The statutes allow for the governing body to increase the originally adopted budget for previously unbudgeted increases in revenue other than ad valorem property taxes. Budgets were amended for the following funds: Original Amended budget budget Sales Tax Fund Special Projects Convention and Visitors $ 5,719, ,117 $ 6,297, ,100 Capital Improvement 531, ,020 Special Alcohol and Drug 100, ,000 Transportation 348, ,740 The following charts show expenditures by category compared with the published budget for the current year. General Fund Comparison to Budget ,000,000 8,000,000 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 0 General Government Public Safety Public Works Culture and Recreation Community Services Budget Actual Enterprise Funds Comparison to Budget ,000,000 10,000,000 8,000,000 6,000,000 4,000,000 2,000,000 0 Water Solid Waste Drainage Budget Actual 12

53 CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets The City has invested $167.8 million in capital assets (net of depreciation). Approximately 60.57% of this investment is related to governmental activities and includes infrastructure, buildings, equipment and land. Governmental capital assets decreased by approximately 5.9%, while capital assets held for business-type activities have decreased 1.4% from the previous year. Capital assets held by the City at the end of the current and previous year is summarized as follows: Capital Assets (Net of Depreciation, in Thousands) Governmental activities Business-type activities Total Land $ 5,582 $ 5,582 $ 1,527 $ 1,527 $ 7,109 $ 7,109 Buildings and improvements 45,003 45,815 23,439 23,955 68,442 69,770 Machinery and equipment 11,473 12, ,063 12,298 13,593 Infrastructure 35,247 43,058 36,495 37,369 71,742 80,425 Water rights - - 3,037 3,099 3,037 3,099 Construction in progress 4,313 1, ,148 1,184 Totals $ 101,618 $ 108,055 $ 66,158 $ 67,125 $ 167,776 $ 175,180 The City of Dodge City has a five-year capital improvement program, which includes the street program, and a five year municipal equipment replacement program. In each program, capital improvements are completed annually, equipment is scheduled for replacement, and street improvements are completed annually. The additions to the capital assets in the governmental funds are a result of improvements scheduled during the year. Vehicles were replaced according to the schedule in the Police, Parks, Golf Course, Cemetery, Public Transportation and Convention & Visitors Departments. Other capital improvements include turf on Cavalier baseball field and water and sewer line extension to the Marriott Hotel on the west end of town. Additional information about the City s capital assets is presented in Note F of the financial statements. Long-Term Liabilities At the end of the current year, the City had long-term liabilities related to governmental activities of $61,831,683. This includes $22,941,800 in general obligation bonds, $742,706 in capital lease obligations, $190,000 in notes payable, $887,177 in compensated absences, and $37,070,000 in revenue bonds. 13

54 CAPITAL ASSET AND DEBT ADMINISTRATION (CONTINUED) Long-Term Liabilities (continued) The total amount of debt related to business-type activities at the end of the current year was $39,277,187, which was a decrease of $2,372,730 from the previous year. The debt position of the City is summarized below and is more fully analyzed in Note I of the financial statements. Long-Term Obligations Governmental activities Business-type activities Total General obligation bonds $ 22,941,800 $ 24,492,200 $ 17,838,200 $ 19,147,800 $ 40,780,000 $ 43,640,000 Capital lease obligations 742, , , ,056 Notes payable 190, , , ,500 Compensated absences 887, , , ,387 1,009, ,440 Revenue bonds 37,070,000 37,895, ,070,000 37,895,000 Other obligations - 630,000 21,316,574 22,386,730 21,316,574 23,016,730 Totals $ 61,831,683 $ 65,088,809 $ 39,277,187 $ 41,649,917 $ 101,108,870 $ 106,738,726 RELEVANT CURRENT ECONOMIC FACTORS, DECISIONS AND CONDITIONS Expenses, such as employee costs, utilities, and commodities continue to increase. The use type taxes including the sales tax, transient guest tax and expanded lottery tax, increased modestly at 3.75%. Other revenue sources have remained stable. The City continues to maintain quality services. The General Fund fund balance increased from The City of Dodge City has applied for and received a STAR Bond designation from the State of Kansas. The ideal outcome of this designation is to assist in attracting retail development to Dodge City. This will entail a retail district as well as the historic downtown district. The City continues to work on the Main Street project which may increase the viability of the downtown district. Included in this district will be the construction of a regional outdoor waterpark. Construction of this water park began in the spring of The City continues to work on several housing projects to improve the number and quality of the housing stock in Dodge City and authorizes incentives when necessary. Because of wind farm development in Ford County and existing business growth, the community continues to see modest growth. The City of Dodge City continues its efforts to be the entertainment capital of Southwest Kansas. Because of the ½% sales tax authorized in 1997, the four projects on the ballot have been completed, are operational and have proved successful. These projects are: a motor sport race track; a softball/baseball complex and other athletic fields in the community; the air conditioning of the Civic Center; and a special events center. The City continues to enhance the original projects and has added onto these facilities with additional sports fields to appeal to all types of sports venues. With the addition of the State of Kansas's first destination casino which has been operational since December of 2009, the area west of Dodge City continues to grow. The Special Events Center is located adjacent to the casino, and a hotel opened in early 2011 at the same location. This whole area continues to be an entertainment district for Dodge City and Southwest Kansas. As Dodge City and Ford County continues to grow, the City and its partners are working on the downtown area, the housing and recruitment of retail and industry to expand on what we have and to diversify the tourism and agriculture industry. 14

55 CONTACTING THE CITY S FINANCIAL MANAGEMENT This financial report is designed to provide various interested parties with a general overview of the City s finances and to show the City s accountability for the money it receives. If you have questions about this report or need additional financial information, contact the City Clerk and Finance Officer, 806 Second Avenue, Dodge City, Kansas The separately issued financial statements of the component units may be obtained from administrative offices as follows: Dodge City Public Library 1001 Second Avenue Dodge City, KS Dodge City/Ford County Development Corporation 311 W. Spruce Dodge City, KS Dodge City Housing Authority 407 E. Bend Dodge City, KS

56 BASIC FINANCIAL STATEMENTS

57 CITY OF DODGE CITY, KANSAS STATEMENT OF NET POSITION December 31, 2014 Primary government Governmental Business-type Component activities activities Total units ASSETS Cash and cash equivalents $ 9,416,853 $ 5,190,292 $ 14,607,145 $ 1,160,344 Investments ,600 Property taxes receivable 7,218,316-7,218,316 - Receivables, net 1,799, ,571 2,407,804 72,223 Due from other governments 209, ,332 - Inventories 91, , , ,089 Notes receivable ,337 Prepaid expense ,129 Restricted cash and investments 16,636, ,719 17,386,230 - Capital assets, net 101,617,739 66,157, ,775,420 9,585,136 Other noncurrent assets 1,293, ,812 1,713,488 22,395 Total assets 138,283,407 73,692, ,975,820 11,798,253 LIABILITIES Accounts payable 1,369, ,681 2,046, ,989 Salaries and benefits payable 252,538 45, ,725 - Accrued interest payable 409, , , ,611 Other accrued liabilities - 776, ,755 54,454 Deferred revenue ,866 Compensated absences payable 886, ,413 1,008, ,802 Noncurrent liabilities: Due within one year 3,440,065 2,428,953 5,869,018 - Due in more than one year 58,996,867 36,725,820 95,722, ,000 Total liabilities 65,355,494 41,172, ,527,769 1,667,722 DEFERRED INFLOWS OF RESOURCES Property taxes 7,218,316-7,218,316 - Deferred gain on refunding 141, , ,792 - Contractual obligations 537, ,219 - Total deferred inflows of resources 7,896, ,572 8,195,327 - NET POSITION Invested in capital assets, net of related debt 43,680,855 27,002,905 70,683,760 8,823,136 Restricted (expendable): Debt service 5,001,507-5,001,507 - Construction 5,660,586-5,660,586 - Projects 8,348,623-8,348,623 - Housing Authority ,176 Prospects and housing ,400 Unrestricted 2,339,587 5,218,661 7,558,248 1,165,819 Total net position $ 65,031,158 $ 32,221,566 $ 97,252,724 $ 10,130,531 The accompanying notes are an integral part of the basic financial statements. 16

58 CITY OF DODGE CITY, KANSAS STATEMENT OF ACTIVITIES Year ended December 31, 2014 Functions/programs Program revenue Operating Capital Charges for grants and grants and Expenses services contributions contributions Primary government: Governmental activities: General government $ 3,684,889 $ 86,726 $ 713,642 $ - Public safety 8,262,534 1,290,890 19,101 35,999 Public works 3,425, ,175 1,067,666 1,394,492 Culture and recreation 9,804,166 2,267, , ,013 Community services 1,631, , , Indirect depreciation 7,810, Interest on long-term debt 2,524, Total governmental activities 37,143,748 3,982,576 2,860,320 1,964,185 Business-type activities: Water/wastewater 8,828,454 8,948, ,597 - Solid waste 1,706,985 1,850, Drainage 253, , Total business-type activities 10,789,042 11,011, ,597 - Total primary government $ 47,932,790 $ 14,993,891 $ 3,686,917 $ 1,964,185 Component units $ 3,946,335 $ 1,048,280 $ 1,367,518 $ 42,842 General revenues: Taxes: Property taxes, levied for general purposes Property taxes and special assessments, levied for debt service Sales taxes Franchise taxes Expanded lottery taxes Grants and contributions not restricted to specific programs Contributed capital, net Investment earnings Transfers Miscellaneous Total general revenues, special items, and transfers Change in net assets Net position - beginning Net position - ending The accompanying notes are an integral part of the basic financial statements. 17

59 Changes in net position Primary government Governmental Business-type Component activities activities Total units $ (2,884,521) $ - $ (2,884,521) $ - (6,916,544) - (6,916,544) - (750,101) - (750,101) - (6,852,088) - (6,852,088) - (598,076) - (598,076) - (7,810,930) - (7,810,930) - (2,524,407) - (2,524,407) - (28,336,667) - (28,336,667) , , , , (41,448) (41,448) - - 1,048,870 1,048,870 - (28,336,667) 1,048,870 (27,287,797) (1,487,695) 6,768,975-6,768,975-2,468,438-2,468,438-11,195,087-11,195,087-1,871,660-1,871, , , , , ,073 57,262-92,556 68, ,723 4,121 (188,909) (1,065,540) (1,254,449) 1,254, , ,104 16,871 23,163,115 (940,300) 22,222,815 1,275,441 (5,173,552) 108,570 (5,064,982) (212,254) 70,204,710 32,112, ,317,706 10,342,785 $ 65,031,158 $ 32,221,566 $ 97,252,724 $ 10,130,531

60 CITY OF DODGE CITY, KANSAS BALANCE SHEET - GOVERNMENTAL FUNDS December 31, 2014 ASSETS General Sales tax Cash and investments $ 3,088,210 $ - Property taxes receivable 3,586,620 - Sales taxes receivable 398, ,943 Due from other governments - - Other receivables 560, Due from other funds 193,607 - Inventories 34,594 - Restricted cash and investments - 3,328,400 Total assets $ 7,862,074 $ 3,727,638 LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES Liabilities: Accounts payable $ 457,961 $ 15,565 Payroll liabilities 228,454 2,937 Due to other funds - - Total liabilities 686,415 18,502 Deferred inflows of resources: Property tax 3,586,620 - Contractual obligations - - Revolving loans - - Total deferred inflows of resources: 3,586,620 - Fund balances: Nonspendable: Endowment - - Inventory 34,594 - Long-term receivables - - Restricted: Debt service - - Capital projects - - Grants - - Committed: Projects - 3,709,136 Assigned: Encumbrances 41,776 - Other capital expenditures - - Community service and promotion - - Other purposes - - Designated for subsequent year's expenditures 1,861,921 - Unassigned 1,650,748 - Total fund balances 3,589,039 3,709,136 Total liabilities, deferred inflows of resources and fund balances $ 7,862,074 $ 3,727,638 The accompanying notes are an integral part of the basic financial statements. 18

61 Special events Other Total GO bond center governmental governmental and interest revenue bonds funds funds $ - $ - $ 10,956,758 $ 14,044,968 1,748,625-1,883,071 7,218, , , , , , , ,289 75, ,516 4,527,991 3,660,420 11,990,327 $ 2,222,141 $ 4,527,991 $ 17,191,822 $ 35,531,666 $ - $ - $ 881,115 $ 1,354, , , , , ,093,280 1,798,197 1,748,625-1,883,071 7,218, , , , ,103 1,748,625-2,706,393 8,041, , , , , , ,516 4,527,991-5,001, ,118,723 3,118, ,977 9, ,709, , , ,521,409 5,521, , , ,704,594 5,566, (342,896) 1,307, ,516 4,527,991 13,392,149 25,691,831 $ 2,222,141 $ 4,527,991 $ 17,191,822 $ 35,531,666

62 CITY OF DODGE CITY, KANSAS RECONCILIATION OF THE BALANCE SHEET OF THE GOVERNMENTAL FUNDS TO THE STATEMENT OF NET ASSETS December 31, 2014 Total fund balances on the balance sheet $ 25,691,831 Amounts reported for governmental activities in the statement of net assets are different because of the following: Capital assets used in governmental activities are not financial resources and therefore are not reported in the fund financial statements. 101,617,739 Other long-term assets are not available to pay for current-period expenditures and therefore are not reported in the fund financial statements or they are reported as deferred. 1,293,676 Certain liabilities are not required to be accrued in the fund financial statements. (409,825) Only the current portion of compensated absences is shown as an expenditure in the fund financial statements. (886,285) Economic development revolving loans are considered deferred revenue in the fund financial statements. 286,103 Long-term liabilities, including bonds payable and deferred gain on refunding, are not due and payable in the current period and therefore are not reported in the fund financial statements. (62,578,152) Internal service funds are used by management to charge the costs of certain activities, such as vehicle maintenance, to individual funds. The assets and liabilities of the internal service fund are included in governmental activities in the statement of net position. 16,071 Net position of governmental activities $ 65,031,158 19

63 CITY OF DODGE CITY, KANSAS STATEMENT OF REVENUE, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS Year ended December 31, 2014 General Sales tax Revenue: Taxes $ 11,161,295 $ 6,103,310 Intergovernmental 127,127 - Licenses, fees and permits 272,321 - Charges for services 544,073 27,988 Rentals 190,340 5,895 Fines and forfeitures 1,003,788 - Investment earnings 5,483 1,517 Contribution from property owners - - Miscellaneous 42,748 5,000 Total revenue 13,347,175 6,143,710 Expenditures: General government 1,499,769 - Public safety 7,865,121 - Public works 1,554,712 - Culture and recreation 1,952,902 1,192,412 Community services 465,678 - Debt service: Principal - - Interest and commissions - - Total expenditures 13,338,182 1,192,412 Excess (deficiency) of revenue over expenditures 8,993 4,951,298 Other financing sources (uses): Debt issue proceeds - - Transfers in 1,275,540 - Transfers out (420,255) (4,736,825) Transfers to component units - - Total other financing sources and uses 855,285 (4,736,825) Net change in fund balances 864, ,473 Fund balances, beginning of year 2,724,761 3,494,663 Fund balances, end of year $ 3,589,039 $ 3,709,136 The accompanying notes are an integral part of the basic financial statements. 20

64 Special events Other Total GO bond center governmental governmental and interest revenue bonds funds funds $ 2,302,289 $ - $ 2,737,266 $ 22,304, ,000-3,953,033 4,310, , ,938,171 2,510, , ,003,788-72,920 12,636 92, , , , ,708 2,532,289 72,920 9,622,615 31,718,709 20,108-2,174,666 3,694, ,152 8,128, ,906,257 6,460, ,014,930 7,160, ,158,967 2,624,645 2,855, ,000-3,680, ,392 1,703,840-2,536,232 3,707,900 2,528,840 13,517,972 34,285,306 (1,175,611) (2,455,920) (3,895,357) (2,566,597) 678, , ,984 2,772,454 2,577,325 7,085,303 (26,192) - (836,492) (6,019,764) - - (1,254,448) (1,254,448) 1,112,781 2,772, , ,080 (62,830) 316,534 (3,408,972) (2,076,517) 536,346 4,211,457 16,801,121 27,768,348 $ 473,516 $ 4,527,991 $ 13,392,149 $ 25,691,831

65 CITY OF DODGE CITY, KANSAS RECONCILIATION OF THE STATEMENT OF REVENUE, EXPENDITURES AND CHANGES IN FUND BALANCES OF THE GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES Year ended December 31, 2014 Net change in fund balances, total governmental funds $ (2,076,517) Amounts reported for governmental activities in the statement of activities are different because of the following: Capital assets: Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives as depreciation expense. This is the amount by which depreciation expense exceeded capital outlays in the current period. (6,274,605) Long-term liabilities: Long-term liabilities are reported in the statement of net assets. This is the amount by which repayments exceeded proceeds. 3,088,911 Bond issue costs are included in expenditures in the fund financial statements. 20,108 Amortization of bond issuance costs and deferred amounts. 3,801 Accrued interest is an expense in the statement of activities. 11,825 Capital lease payments are recorded as expenditures in the fund financial statements. 30,520 Other: Principal received on economic development revolving loans provides current financial resources to governmental funds, and loans made are included in expenditures. This is the amount by which principal repayments exceeded loans made. 48,255 Only the current portion of compensated absences is shown as an expenditure in the fund financial statements. (25,056) Internal service funds are used by management to charge the cost of certain activities, such vehicle maintenance, to individual funds. The net revenue (expense) of the internal service fund is reported with governmental activities. (790) Rounding. (4) Change in net position of governmental activities $ (5,173,552) 21

66 CITY OF DODGE CITY, KANSAS STATEMENT OF NET POSITION PROPRIETARY FUNDS December 31, 2014 Business-type activities Enterprise funds Water/ wastewater Solid waste ASSETS Current assets: Cash and cash equivalents $ 4,160,949 $ 696,641 Receivables, net 497,314 99,108 Inventories 566,338 - Total current assets 5,224, ,749 Noncurrent assets: Restricted cash and cash equivalents 749,719 - Capital assets: Land 1,508,692 18,200 Buildings and improvements 36,104,284 64,804 Furniture and equipment 3,853,067 2,586,575 Utility systems 49,578,356 - Water rights 3,542,614 - Construction in progress 834,549 - Less accumulated depreciation and amortization (30,057,924) (2,507,656) Deferred bond issue costs 419,812 - Total noncurrent assets 66,533, ,923 Total assets $ 71,757,770 $ 957,672 LIABILITIES Current liabilities: Accounts payable $ 634,330 $ 37,868 Payroll liabilities 29,178 14,357 Accrued interest payable 396,466 - GO bonds payable 374,000 - Revenue bonds payable 980,000 - Loan payable 1,074,953 - Total current liabilities 3,488,927 52,225 Noncurrent liabilities: GO bonds payable 6,104,200 - Revenue bonds payable 10,380,000 - Loan payable 20,241,620 - Deferred gain on bond refunding 298,572 - Bond premium 776,755 - Compensated absences payable 60,024 60,575 Total noncurrent liabilities 37,861,171 60,575 Total liabilities 41,350, ,800 22

67 Business-type activities Enterprise funds Governmental activities Drainage Internal utility Total service fund $ 332,702 $ 5,190,292 $ 18,069 12, , ,338 15, ,851 6,365,201 33, , ,526, ,169,088-4,865 6,444,507 65,770 1,126,682 50,705, ,542, ,549 - (499,427) (33,065,007) (64,294) - 419, ,120 67,327,212 1,476 $ 976,971 $ 73,692,413 $ 35,409 $ 4,483 $ 676,681 $ 15,273 1,652 45,187 2, , , , ,074,953-6,135 3,547,287 17,862-6,104, ,380, ,241, , ,755-1, ,413 11,376 1,814 37,923,560 11,376 7,949 41,470,847 29,238

68 CITY OF DODGE CITY, KANSAS STATEMENT OF NET POSITION PROPRIETARY FUNDS (CONTINUED) December 31, 2014 Business-type activities Enterprise funds Water/ wastewater Solid waste NET POSITION Invested in capital assets, net of related debt $ 26,208,863 $ 161,922 Unrestricted 4,198, ,950 Total net position 30,407, ,872 Total liabilities and net position $ 71,757,770 $ 957,672 The accompanying notes are an integral part of the basic financial statements. 23

69 Business-type activities Enterprise funds Governmental activities Drainage Internal utility Total service fund $ 632,120 $ 27,002,905 $ 3, ,902 5,218,661 2, ,022 32,221,566 6,171 $ 976,971 $ 73,692,413 $ 35,409

70 CITY OF DODGE CITY, KANSAS STATEMENT OF REVENUE, EXPENSES, AND CHANGES IN FUND NET ASSETS PROPRIETARY FUNDS Year ended December 31, 2014 Business-type activities Enterprise funds Water/ wastewater Solid waste Operating revenue: Charges for services $ 8,948,956 $ 1,850,204 Operating expenses: Personal services 1,301, ,197 Contractual services 3,878, ,293 Repairs and maintenance 151,327 93,703 Other supplies and expenses 489, ,884 Capital outlay 28, Other expense 62,092 6,769 Depreciation 1,705, ,009 Total operating expense 7,617,482 1,706,985 Operating income (loss) 1,331, ,219 Nonoperating revenue (expense): Operating grants 826,597 - Interest and investment revenue 67, Interest expense (1,210,972) - Total nonoperating revenue (expense) (316,722) 349 Income (loss) before other revenue, expenses and transfers 1,014, ,568 Other revenue, expenses and transfers: Contributed capital, net 57,073 - Transfers out (850,660) (177,800) Change in net assets 221,165 (34,232) Total net position beginning of year 30,186, ,104 Total net position end of year $ 30,407,672 $ 844,872 The accompanying notes are an integral part of the basic financial statements. 24

71 Business-type activities Enterprise funds Governmental activities Drainage Internal utility Total service fund $ 212,155 $ 11,011,315 $ 380,784 56,704 2,166, , ,742 4,487, ,030 71,096 9, , ,373 3,461 32, ,316-41,180 1,860,446 2, ,603 9,578, ,763 (41,448) 1,433,245 (979) - 826, , (1,210,972) (316,208) - (41,283) 1,117,037 (979) - 57, (37,080) (1,065,540) - (78,363) 108,570 (790) 1,047,385 32,112,996 6,961 $ 969,022 $ 32,221,566 $ 6,171

72 CITY OF DODGE CITY, KANSAS STATEMENT OF CASH FLOWS PROPRIETARY FUNDS Year ended December 31, 2014 Business-type activities Enterprise funds Water/ wastewater Solid waste Cash flows from operating activities: Receipts from customers $ 9,619,945 $ 1,845,251 Payments for goods and services (4,189,006) (781,169) Payments to employees (1,299,829) (801,317) Net cash provided (used) by operating activities 4,131, ,765 Cash flows from noncapital financing activities: Operating grants 826,597 - Operating subsidies to other funds (850,660) (177,800) Net cash provided (used) by noncapital financing activities (24,063) (177,800) Cash flows from capital and related financing activities: Proceeds of capital debt 264,596 - Purchases of capital assets (834,480) (971) Principal paid on capital debt (2,644,352) - Interest paid on capital debt (1,331,225) - Net cash provided (used) by capital and related financing activities (4,545,461) (971) Cash flows from investing activities: Interest and dividends 67, Net increase (decrease) in cash and cash equivalents (370,761) 84,343 Balances, beginning of year 5,281, ,298 Balances, end of year $ 4,910,668 $ 696,641 Cash and cash equivalents $ 4,160,949 $ 696,641 Restricted cash and cash equivalents 749,719 - Total balance, end of year $ 4,910,668 $ 696,641 25

73 Business-type activities Enterprise funds Governmental activities Drainage Internal utility Total service fund $ 211,644 $ 11,676,840 $ 380,783 (152,736) (5,122,911) (265,336) (55,635) (2,156,781) (112,036) 3,273 4,397,148 3, ,597 - (37,080) (1,065,540) - (37,080) (238,943) , (835,451) - - (2,644,352) - - (1,331,225) - - (4,546,432) ,167 - (33,642) (320,060) 3, ,344 6,260,071 14,658 $ 332,702 $ 5,940,011 $ 18,069 $ 332,702 $ 5,190,292 $ 18, ,719 - $ 332,702 $ 5,940,011 $ 18,069

74 CITY OF DODGE CITY, KANSAS STATEMENT OF CASH FLOWS (CONTINUED) PROPRIETARY FUNDS Year ended December 31, 2014 Business-type activities Enterprise funds Water/ wastewater Solid waste Reconciliation of operating income to net cash provided by operating activities: Operating income $ 1,331,474 $ 143,219 Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation expense 1,705, ,009 Prepaid expense 136,178 - Change in assets and liabilities: Receivables, net 670,989 (4,953) Inventories (99,131) - Accounts and other payables 386,343 10,490 Net cash provided (used) by operating activities $ 4,131,110 $ 262,765 Noncash transaction: Contributed capital $ 57,073 $ - The accompanying notes are an integral part of the financial statements. 26

75 Business-type activities Enterprise funds Governmental activities Drainage Internal utility Total service fund $ (41,448) $ 1,433,245 $ (979) 41,180 1,860,446 2, ,178 - (511) 665, (99,131) (4,134) 4, ,885 6,226 $ 3,273 $ 4,397,148 $ 3,411 $ - $ 57,073 $ -

76 CITY OF DODGE CITY, KANSAS STATEMENT OF NET POSITION MAJOR COMPONENT UNITS December 31, 2014 Dodge City- Ford County Dodge City Dodge City Development Housing Public Library Corporation Authority Total ASSETS Cash and cash equivalents $ 623,992 $ 317,551 $ 218,801 $ 1,160,344 Investments , ,600 Accounts receivable, net ,723 35,723 Grants receivable, net - 36,500-36,500 Inventory - 152,116 39, ,089 Notes receivable - 116,135 59, ,337 Prepaid expense - - 9,129 9,129 Other noncurrent assets - 22,395-22,395 Capital assets, net 970,322 1,062,068 7,552,746 9,585,136 Total assets $ 1,594,314 $ 1,706,765 $ 8,497,174 $ 11,798,253 LIABILITIES Accounts payable $ 4,922 $ 24,602 $ 82,465 $ 111,989 Accrued interest payable - 556, ,611 Compensated absences payable 72,062 24,928 20, ,802 Deposits and deferred revenue - 58,359 6,507 64,866 Other accrued liabilities ,454 54,454 Long-term liabilities: Due in more than one year - 762, ,000 Total liabilities 76,984 1,426, ,238 1,667,722 NET POSITION Invested in capital assets, net of related debt 970, ,068 7,552,746 8,823,136 Restricted: Housing Authority - - 7,176 7,176 Temporarily restricted - 134, ,400 Unrestricted 547,008 (154,203) 773,014 1,165,819 Total net position 1,517, ,265 8,332,936 10,130,531 Total liabilities and net position $ 1,594,314 $ 1,706,765 $ 8,497,174 $ 11,798,253 The accompanying notes are an integral part of the basic financial statements. 27

77 CITY OF DODGE CITY, KANSAS STATEMENT OF ACTIVITIES MAJOR COMPONENT UNITS Year ended December 31, 2014 Program revenues Operating Capital Charges for grants and grants and Expenses services contributions contributions Dodge City Public Library Culture and recreation $ 1,214,330 $ 28,548 $ 65,785 $ - Depreciation 101, Total Dodge City Public Library 1,316,110 28,548 65,785 - Dodge City-Ford County Development Corporation Community services 572, , ,337 9,250 Depreciation 2, Total Dodge City-Ford County Development Corporation 575, , ,337 9,250 Dodge City Housing Authority Operations 1,531, , ,396 33,592 Depreciation 523, Total Dodge City Housing Authority 2,054, , ,396 33,592 Total component units $ 3,946,335 $ 1,048,280 $ 1,367,518 $ 42,842 General revenues: Investment earnings Transfer from primary government Miscellaneous Total general revenues Change in net assets Net position - beginning Net position - ending The accompanying notes are an integral part of the basic financial statements. 28

78 Changes in net position Dodge City- Ford County Dodge City Dodge City Development Housing Public Library Corporation Authority Totals $ (1,119,997) $ - $ - $ (1,119,997) (101,780) - - (101,780) (1,221,777) - - (1,221,777) - 164, ,878 - (2,941) - (2,941) - 161, , ,735 95, (523,590) (523,590) - - (427,855) (427,855) (1,221,777) 161,937 (427,855) (1,487,695) 584-3,537 4,121 1,254, ,254,449 3,483-13,388 16,871 1,258,516-16,925 1,275,441 36, ,937 (410,930) (212,254) 1,480, ,328 8,743,866 10,342,785 $ 1,517,330 $ 280,265 $ 8,332,936 $ 10,130,531

79 CITY OF DODGE CITY, KANSAS BUDGETARY COMPARISON STATEMENT GENERAL FUND Year ended December 31, 2014 Variance with final budget Budgeted amounts Actual amounts positive Original Final (budgetary basis) (negative) Budgetary fund balance, beginning of year $ 1,575,123 $ 1,575,123 $ 1,807,920 $ 232,797 Resources (inflows): Taxes 10,734,637 10,734,637 11,130, ,817 Intergovernmental 120, , ,127 6,827 Licenses, fees and permits 220, , ,321 51,671 Charges for services 574, , ,073 (30,627) Rentals 80,000 80, , ,340 Fines and forfeitures 1,159,500 1,159, ,964 (198,536) Investment earnings 20,000 20,000 5,483 (14,517) Miscellaneous 5,000 5,000 36,476 31,476 Transfers from other funds 1,365,540 1,365,540 1,275,540 (90,000) Amounts available for appropriation 15,855,450 15,855,450 16,350, ,248 Charges to appropriations (outflows): General government 3,368,210 3,368,210 1,515,989 1,852,221 Public safety 8,090,028 8,090,028 8,029,263 60,765 Public works 1,606,673 1,606,673 1,704,752 (98,079) Culture and recreation 1,711,905 1,711,905 2,073,544 (361,639) Community services 633, , , ,129 Transfers to other funds 444, , ,981 Total charges to appropriations 15,855,450 15,855,450 13,797,072 2,058,378 Budgetary fund balance, end of year $ - $ - $ 2,553,626 $ 2,553,626 The accompanying notes are an integral part of the basic financial statements. 29

80 CITY OF DODGE CITY, KANSAS BUDGETARY COMPARISON STATEMENT SALES TAX FUND Year ended December 31, 2014 Variance with final budget Budgeted amounts Actual amounts positive Original Final (budgetary basis) (negative) Budgetary fund balance, beginning of year $ 4,607,651 $ 3,115,914 $ 3,115,914 $ - Resources (inflows): Taxes 5,947,000 5,947,000 6,083, ,115 Charges for services 25,000 25,000 27,988 2,988 Rentals - - 5,895 5,895 Investment earnings 5,000 5,000 1,517 (3,483) Miscellaneous - - 4,705 4,705 Amounts available for appropriation 10,584,651 9,092,914 9,239, ,220 Charges to appropriations (outflows): Culture and recreation 2,439,845 2,862,845 1,202,912 1,659,933 Transfers to other funds 3,280,000 3,435,140 4,736,825 (1,301,685) Total charges to appropriations 5,719,845 6,297,985 5,939, ,248 Budgetary fund balance, end of year $ 4,864,806 $ 2,794,929 $ 3,299,397 $ 504,468 The accompanying notes are an integral part of the basic financial statements. 30

81 CITY OF DODGE CITY, KANSAS BUDGETARY COMPARISON STATEMENT BUDGET TO GAAP RECONCILIATION Year ended December 31, 2014 General fund Sales tax fund Sources/inflows of resources: Actual amounts available for appropriation from the budgetary comparison statement $ 16,350,698 $ 9,239,134 Differences, budget to GAAP: The fund balance at the beginning of the year is a budgetary resource, but is not a current-year revenue for financial reporting purposes. (1,807,920) (3,115,914) Current year sales tax and other receivable amounts are not a budgetary resource, but they are revenues for financial reporting purposes. 959, ,238 Prior year sales tax and other receivable amounts are a budgetary resource, but they are not revenues for financial reporting purposes. (879,106) (378,748) Transfers from other funds are inflows of budgetary resources, but are not revenues for financial reporting purposes. (1,275,540) - Total revenue as reported on the statement of revenue, expenditures, and changes in fund balances, governmental funds $ 13,347,175 $ 6,143,710 Uses/outflows of resources: Actual amounts of charges to appropriations from the budgetary comparison statement $ 13,797,072 $ 5,939,737 Differences, budget to GAAP: Current year encumbrances are included as a budgetary outflow. (41,776) (10,500) Transfers to other funds are outflows of budgetary resources, but are not expenditures for financial reporting purposes. - (4,736,825) Certain transfers were reclassified to expenditures for budgetary purposes. (420,255) - Inventory purchases are included as a budgetary outflow, but are reported as expense when the inventory is sold for financial reporting purposes. 3,141 - Total expenditures as reported on the statement of revenue, expenditures, and changes in fund balances, governmental funds $ 13,338,182 $ 1,192,412 The accompanying notes are an integral part of the basic financial statements. 31

82 NOTES TO FINANCIAL STATEMENTS

83 CITY OF DODGE CITY, KANSAS NOTES TO FINANCIAL STATEMENTS December 31, 2014 A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The City of Dodge City was incorporated under the laws of the State of Kansas and operates under a City Manager-Commission form of government. The City s major operations include police and fire protection, water wastewater, solid waste and drainage utility services, airport and recreational facilities. The City s financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The Governmental Accounting Standards Board (GASB) is responsible for establishing GAAP for state and local governments through its pronouncements (statements and interpretations). Governments are also required to follow the pronouncements of the Financial Accounting Standards Board (FASB) issued through November 30, 1989 (when applicable) that do not conflict with or contradict GASB pronouncements. Although the City has the option to apply FASB pronouncements issued after that date to its business-type activities, the City has chosen not to do so. The more significant accounting policies established in GAAP and used by the City is discussed below. 1. Financial reporting entity These financial statements present the City of Dodge City (the primary government) and its component units. As defined by GASB Statement No. 14 and clarified by GASB Statement No. 39, component units are legally separate entities that are included in the City s reporting entity because of the significance of their operating or financial relationships with the City. Component units. In conformity with generally accepted accounting principles, the financial statements of component units have been included in the financial reporting entity as discretely presented component units. Discretely presented component units. The component units column in the government-wide financial statements includes the financial data of the City s major component units. These units are reported in a separate column to emphasize that they are legally separate from the City. Dodge City Public Library: The members of the governing board of the Public Library are appointed by the City Commissioners. The Public Library is fiscally dependent on the City because the budget is approved by the City Commissioners. In addition, the Public Library is prohibited from issuing bonded debt without the approval of the City Commission. Dodge City - Ford County Development Corporation: Two members of the Corporation's board of directors are appointed by the City Commissioners. The Corporation is fiscally dependent on the City because nearly all employees of the Corporation are paid by the City and are accountable to the City Manager and Commissioners. 32

84 A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 1. Financial reporting entity (continued) Dodge City Housing Authority: The members of the governing board of the Housing Authority are appointed by the City Commission. Although the City does not have the authority to approve or modify the Housing Authority's operational and capital budgets, and the Housing Authority has the authority to issue bonded debt, the City is fiscally responsible for the Housing Authority since it was created as an agent of the City. The Housing Authority uses the accrual basis of accounting and consists of one enterprise fund. The Housing Authority has a fiscal year ending September 30, and the financial data included in the discrete presentation are as of and for the year ended September 30, Complete financial statements of each of the individual major component units can be obtained directly from their administrative offices. Administrative Offices: Dodge City Public Library 1001 Second Avenue Dodge City, Kansas Dodge City - Ford County Development Corporation 311 W. Spruce Dodge City, Kansas Dodge City Housing Authority 407 E. Bend Dodge City, Kansas Basic financial statements - government-wide statements The City s basic financial statements include both government-wide (reporting the City as a whole) and fund financial statements (reporting the City s major funds). Both the government-wide and fund financial statements categorize primary activities as either governmental or business-type. The City s general government, public safety, public works, culture and recreation and community services functions are classified as governmental activities. The water/wastewater, solid waste and drainage utility services are classified as business-type activities. In the government-wide Statement of Net Position, both the governmental and business-type activities columns (a) are presented on a consolidated basis by column, and (b) are reported on a full accrual, economic resource basis which recognizes all long-term assets and receivables as well as long-term debt and obligations. The City s net position is reported in three parts: invested in capital assets, net of related debt; restricted net position; and unrestricted net position. Restricted net position includes those restricted for debt service, construction and sales tax projects. The City first utilizes restricted resources to finance qualifying activities. 33

85 A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2. Basic financial statements - government-wide statements (continued) The government-wide Statement of Activities reports both the gross and net cost of each of the City s governmental functions and business-type activities. The functions are also supported by general government revenues (property taxes and certain intergovernmental revenues). The Statement of Activities reduces gross expenses (including depreciation) by related program revenues, operating and capital grants. Program revenues must be directly associated with the governmental function or business-type activity. Governmental charges for services include licenses, fees and permits, rentals, fines and forfeitures, and charges for recreational activities. Business-type charges (operating revenue) include charges for utility services. Operating grants include operating-specific and discretionary (either operating or capital) grants while the capital grants column reflects capital-specific grants. All internal activity has been eliminated. The net costs (by governmental function or business-type activity) are normally covered by general government revenues such as property taxes, intergovernmental revenues, and interest income. The City does not allocate indirect costs. The direct costs of General Fund services provided such as finance, personnel, purchasing, legal, technology management, etc. are included in the governmental functions categories. This government-wide focus is on the sustainability of the City as an entity and the change in the City s net position resulting from the current year s activities. 3. Basic financial statements - fund financial statements The financial transactions of the City are reported in individual funds in the fund financial statements. Each fund is accounted for by providing a separate set of self-balancing accounts that comprises its assets and deferred outflows of resources, liabilities and deferred inflows of resources, reserves, fund equity, revenues and expenditures/expenses. The various funds are reported by generic classification within the financial statements. The following funds are used by the City: a. Governmental Funds: The focus of the governmental funds measurement in the fund statements is upon determination of financial position and changes in financial position (sources, uses, and balances of current financial resources) rather than upon net income. The following is a description of the governmental funds of the City. General fund is the primary operating fund of the City. It is used to account for and report all financial resources except those required to be accounted for in another fund. Special revenue funds are used to account for the proceeds of specific revenue sources that are legally restricted to expenditures for specified purposes. Debt service funds are established for the purpose of accumulating resources for the payment of interest and principal on long-term debt other than that payable from enterprise funds. Capital projects funds are used to account for major capital expenditures not financed by enterprise funds. 34

86 A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3. Basic financial statements - fund financial statements (continued) a. Governmental Funds (continued): The activities reported in these funds are reported as governmental activities in the government-wide financial statements. b. Proprietary Funds: The focus of proprietary fund measurement is upon determination of operating income, changes in net position, financial position, and cash flows. The generally accepted accounting principles applicable are those similar to businesses in the private sector. The following is a description of the proprietary funds of the City. Enterprise funds are required to be used to account for operations for which a fee is charged to external users for goods or services and the activity (a) is financed with debt that is solely secured by a pledge of the net revenues, (b) has third party requirements that the cost of providing services, including capital costs, be recovered with fees and charges or (c) establishes fees and charges based on a pricing policy designed to recover similar costs. Operating revenues include charges for services; non-operating revenues include investment income, operating grants and contributions. Internal service funds are used to account for the financing of goods or services provided by an activity to other departments or funds of the City on a cost-reimbursement basis. Because the principal users of the internal services are the City s governmental activities, the financial statement of the internal service fund is consolidated into the governmental column when presented in the government-wide financial statements. To the extent possible, the cost of these services is reported in the appropriate governmental functional activity (general government, public safety, public works, etc.). Internal services are provided through the Vehicle Maintenance Fund. c. Fiduciary Funds: Fiduciary funds are used to report assets held in a trustee or agency capacity for others and therefore are not available to support City programs. The reporting focus is on net assets and changes in net position and are reported using accounting principles similar to proprietary funds. The City s fiduciary funds are presented in the fund financial statements by type (pension, private purpose and agency). Because by definition these assets are being held for the benefit of a third party (other local governments, private parties, pension participants etc.) and cannot be used to address activities or obligations of the government, these funds are not incorporated into the government-wide statements. 35

87 A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3. Basic financial statements - fund financial statements (continued) The emphasis in fund financial statements is on the major funds in either the governmental or business-type activities categories. Nonmajor funds by category are summarized into a single column. GASB Statement No. 34 sets forth the minimum criteria (percentage of the assets and deferred outflows of resources, liabilities and deferred inflows of resources, revenues or expenditures/expenses of either fund category or the governmental and enterprise combined) for the determination of major funds. The City may electively add funds as major funds. The nonmajor funds are combined in one column in the fund financial statements. Major governmental funds are the General, Sales Tax and GO Bond and Interest Funds. The major business-type fund is the Water/Wastewater Fund. The City has elected to include the Special Events Center Revenue Bonds, Solid Waste, and Drainage Utility Funds as major funds, which either had debt outstanding or specific community focus. 4. Measurement focus and basis of accounting Measurement focus is a term used to describe which transactions are recorded within the various financial statements. Basis of accounting refers to when transactions are recorded regardless of the measurement focus applied. Measurement Focus On the government-wide Statement of Net Position and the Statement of Activities, both governmental and business-type activities are presented using the economic resources measurement focus as defined in item b. below. In the fund financial statements, the current financial resources measurement focus or the economic resources measurement focus is used as appropriate: a. All governmental funds utilize a current financial resources measurement focus. Only current financial assets, deferred inflows of resources, liabilities and deferred outflows of resources are generally included on their balance sheets. Their operating statements present sources and uses of available spendable financial resources during a given period. These funds use fund balance as their measure of available spendable financial resources at the end of the period. b. The proprietary funds utilize an economic resources measurement focus. The accounting objectives of this measurement focus are the determination of operating income, changes in net position (or cost recovery), financial position, and cash flows. All assets and liabilities (whether current or noncurrent) associated with their activities are reported. Proprietary fund equity is classified as net position. Basis of Accounting In the government-wide Statement of Net Position and Statement of Activities, both governmental and business-type activities are presented using the accrual basis of accounting. Under the accrual basis of accounting, revenues are recognized when earned and expenses are recorded when the liability is incurred or economic asset used. Revenues, expenses, gains, losses, assets, and liabilities resulting from exchange and exchange-like transactions are recognized when the exchange takes place. 36

88 A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 4. Measurement focus and basis of accounting (continued) Basis of Accounting (continued) In the fund financial statements, governmental funds are presented on the modified accrual basis of accounting. Under this modified accrual basis of accounting, revenues are recognized when measurable and available. Measurable means knowing or being able to reasonably estimate the amount. Available means collectible within the current period or soon enough thereafter to pay current liabilities. The City considers revenues to be available if they are expected to be collected within 60 days of the end of the year. Expenditures (including capital outlay) are recorded when the related fund liability is incurred, except for general obligation bond principal and interest which are reported when due. All proprietary funds utilize the accrual basis of accounting. Under the accrual basis of accounting, revenues are recognized when earned and expenses are recorded when the liability is incurred or economic asset used. 5. Encumbrances Encumbrances represent commitments related to unperformed contracts for goods or services. Encumbrance accounting, under which purchase orders, contracts and other commitments for the expenditure of resources are recorded to reserve that portion of the applicable appropriation, is used in the governmental funds. For budgetary purposes, appropriations lapse at fiscal year-end, except for the portion related to encumbered amounts. Encumbrances outstanding at yearend are reported as reservations of fund balances and do not constitute expenditures or liabilities because the commitment will be honored during the subsequent year. 6. Budgetary control Kansas statutes require that an annual operating budget be legally adopted for the general fund, special revenue funds (unless specifically exempted by statute), debt service funds and enterprise funds. The statutes provide for the following sequence and timetable in the adoption of the legal annual operating budget: a. Preparation of the budget for the succeeding calendar year on or before August 1 st. b. Publication in local newspaper on or before August 5 th of the proposed budget and notice of public hearing on the budget. c. Public hearing on or before August 15 th, but at least ten days after publication of notice of hearing. d. Adoption of the final budget on or before August 25 th. The statutes allow for the governing body to increase the originally adopted budget for previously unbudgeted increases in revenue other than ad valorem property taxes. To do this, a notice of public hearing to amend the budget must be published in the local newspaper. At least ten days after publication the hearing may be held and the governing body may amend the budget at that time. Budgets were amended for the following funds: 37

89 A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 6. Budgetary control (continued) Original Amended Fund budget budget Sales Tax Fund Special Projects $ 5,719,845 $ 6,297,985 Convention and Visitors 875, ,100 Capital Improvement 531, ,020 Special Alcohol & Drug Transportation 100, , , ,740 The statutes permit transferring budgeted amounts between line items within an individual fund. However, such statutes prohibit expenditures in excess of the total amount of the adopted budget of expenditures of individual funds. Budget comparison statements are presented for the General Fund and major special revenue funds showing actual receipts and expenditures compared to legally budgeted receipts and expenditures. All legal annual operating budgets are prepared using the statutory basis of accounting, in which revenues are recognized when cash is received and expenditures include disbursements, accounts payable, and encumbrances, with disbursements being adjusted for prior year's accounts payable and encumbrances. Encumbrances are commitments by the municipality for future payments and are supported by a document evidencing the commitment, such as a purchase order or contract. Any unused budgeted expenditure authority lapses at year-end. A legal operating budget is not required for state and federal grant funds, donation funds, reserve funds, capital projects funds, agency funds and the following special revenue funds: Special Revenue: Building Sales Tax Organizations Special Law Enforcement Trust Economic Development Revolving Hoover Trust Roof Insurance Repairs Medical Insurance Reserve Capital Equipment Reserve Underage Alcohol Abuse DARE Fire CPR Training Meadowlark House Special Events Center SMPC Trust Municipal Band Sales Tax Event Rural Housing Incentive District Transient Guest Tax 2% Spending in funds which are not subject to the legal annual operating budget requirement is controlled by federal regulations, other statutes, or by the use of internal spending limits established by the governing body. 38

90 A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 7. Pension plan Substantially all full-time employees are members of the State of Kansas Public Employees' Retirement System (KPERS) or the Kansas Police and Firemen s Retirement System (KP&F), both of which are cost-sharing multiple-employer state-wide pension plans. The City's policy is to fund all pension costs accrued; such costs to be funded are determined annually by the system's actuary. 8. Section 125 plan The City offers a section 125 flexible benefit plan to employees electing to participate. It is used for health insurance premiums, other medical costs and child care costs. The plan is administered by the health insurance provider. 9. Health savings account The City offers eligible employees a health savings account administered by Fidelity State Bank. It is optional for employees to participate in the City s high deductible health plan. The City s match for the HSA is $750 for family and $250 for single. 10. Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. 11. Financial statement amounts a. Pooled cash To facilitate better management of the City s cash resources, excess cash is combined in pooled operating accounts. Each fund s portion of total cash is based on its equity in the pooled cash amount. Cash in excess of current operating needs is invested on a pooled investment basis and earnings thereon are distributed to the appropriate funds based on the average monthly balance of cash and temporary investments included in the combined pool of cash and temporary investments. b. Investments and restricted cash Investments consist of time deposits, certificates of deposit, the State Municipal Investment Pool and repurchase agreements. The investment pool is administered by a board consisting of the State Treasurer and four additional members appointed by the Governor of the State of Kansas. Investments are reported at fair value (which is the same as cost) in the statement of net position. Unrealized gains and losses are included in the change in net position. Enterprise funds and sales tax revenue bond project funds, based on certain bond covenants, are required to establish and maintain a prescribed amount of resources (consisting of cash and temporary investments) that can be used only to service outstanding debt. These amounts are restricted cash. Cash in capital projects funds and the Sales Tax Fund is restricted for the corresponding project. 39

91 A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 11. Financial statement amounts (continued) c. Cash and cash equivalents The City has defined cash and cash equivalents to include cash on hand, demand deposits, and all highly liquid investments, including restricted assets, with a maturity of three months or less when purchased. d. Receivables In the government-wide statements, receivables consist of all revenues earned at year-end and not yet received. Major receivable balances for the governmental activities include trade accounts receivable for miscellaneous charges, and receivables from other governments for grant funding. Business-type activities report utility service charges as accounts receivable. An allowance for doubtful receivables is not considered necessary because receivables are written off when they become uncollectible. The determination of assessed valuation and the collections of property taxes for all political subdivisions in the State of Kansas is the responsibility of the various counties. The County Appraiser s Office annually determines assessed valuation and the County Clerk allocates the annual assessment to the taxing units. Taxes are levied by November 1, and a lien for all taxes attaches on that same date until the taxes are paid. One-half of the property taxes is due December 20 and distributed by January 20 and the second half is due May 10 and distributed by June 5. Consequently, current year property taxes receivable are not available as a resource that can be used to finance the current year operations of the City. Accruals of uncollected current year property taxes have been deferred and are not reflected in revenue. It is not practicable to apportion delinquent taxes held by the County Treasurer at the end of the year and, further, the amounts thereof are not material in relation to the financial statements taken as a whole. In applying GASB Statement No. 33 to grant revenues, the provider recognizes liabilities and expenses and the recipient recognizes receivables and revenue when the applicable eligibility requirements, including time requirements, are met. Resources transmitted before the eligibility requirements are met are reported as advances by the provider and deferred revenue by the recipient. Subsidies and grants to proprietary funds, which finance either capital or current operations, are reported as nonoperating revenue. e. Inventories Inventories in the general fund consist of merchandise held for resale and are carried at the lower of cost (first-in, first-out) or market. Inventories in the proprietary funds consist of expendable supplies held for the City s use and are carried at the lower of cost (first-in, first-out) or market. Dodge City - Ford County Development Corporation abandoned housing inventory consists of lots and houses in process of rehabilitation and are stated at the lower of cost or market, determined by the specific identification method. 40

92 A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 11. Financial statement amounts (continued) f. Capital assets Capital assets purchased or acquired with an original cost of $1,000 or more are reported at historical cost or estimated historical cost. Contributed assets are reported at fair value as of the date received. Additions, improvements and other capital outlays that significantly extend the useful life of an asset are capitalized. Other costs incurred for repairs and maintenance are expensed as incurred. Depreciation/amortization on all assets is provided on the straight-line basis over the following estimated useful lives: Buildings and improvements Furniture and equipment Utility systems General infrastructure Water rights years 5-10 years years years 50 years 12. Deferred bond issue costs Deferred bond issue costs are being amortized on the straight-line basis over the respective lives of the bonds. 13. Deferred outflows of resources In addition to assets, the statement of position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents decreases in net position that relates to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. No deferred outflows of resources affect the governmental funds or enterprise funds financial statements in the current year. 14. Deferred inflows of resources In addition to liabilities, the statement of net position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an increase in net position that applies to the future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The City has nonexchange revenue transactions where a receivable has been recorded because property taxes were levied, but the resources cannot be used until a future period. In addition, the City has a deferred gain on refunding. A deferred gain on refunding results from the difference in the carrying value of refunded debt and its reacquisition price. This amount is deferred and amortized over the life of the refunded or refunding debt. The City also has contractual obligations reported in the government-wide statement of net position. The contractual obligations will be met in the subsequent period. On the modified accrual basis of accounting, the City has recorded revolving loan receivables where the related revenue is unavailable. Unavailable revenues have been reported as deferred inflows of resources on the governmental fund balance sheet. 41

93 A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 15. Compensated absences The City's policies regarding vacation permit an employee to accumulate a maximum of 20 to 30 days of vacation, depending on years of experience. These amounts are paid to the employee upon retirement or if the employee left on good standing. A maximum accumulation of 120 days of sick leave is allowed. Upon retirement or termination, 25% of the accumulated sick leave is paid to employees in good standing and with twelve continuous months of service. The City has a sick leave bank whereby employees can transfer excess sick leave to a bank to be used by employees who are on extended sick leave and have exhausted their own sick leave accumulation. The sick leave bank is administered by a committee of City employees. All employees are given credit for holidays worked, which is then accumulated for additional time off. This holiday time must be taken within the same year in which earned or the time is lost. The liabilities for accrued vacation, sick leave and holiday time have been recorded in the respective funds, representing the City's commitment to fund such costs from future operations. The liabilities are based on current salary costs and the vested portion of accumulated benefits. 16. Government-wide and proprietary fund net position Government-wide and proprietary fund net position is divided into three components: a. Net investment in capital assets consist of the historical cost of capital assets less accumulated depreciation and less any debt that remains outstanding that was used to finance those assets plus deferred outflows of resources less deferred inflows of resources related to those assets. b. Restricted net position consist of net position that is restricted by creditors, by state enabling legislation, by grantors, and by other contributors. c. Unrestricted net position all other net position is reported under this category. 17. Governmental fund balances In the governmental fund financial statements, fund balances are classified as follows: d. Nonspendable Amounts that cannot be spent either because they are in a nonspendable form or because they are legally or contractually required to be maintained intact. e. Restricted Amounts that can be spent only for specific purposes due to City resolutions, state or federal laws, or externally imposed conditions by grantors and creditors. f. Committed Amounts that can be used only for specific purposes determined by a formal action by City Commissioners resolution. g. Assigned Amounts that are designated by the City Commissioners or management for a particular purpose but are not spendable until there is formal approval. h. Unassigned All amounts not included in other spendable classifications. 42

94 A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 18. Special assessments Projects financed in part by special assessments are financed through issuance of general obligation bonds of the City and are retired from the bond and interest fund. Special assessments paid prior to the issuance of bonds are recorded as revenue in the appropriate project fund. Special assessments received after the issuance of bonds are recorded as revenue in the bond and interest fund or the appropriate capital project fund. 19. Interfund activity Interfund activity is reported as loans, reimbursements or transfers. Loans are reported as interfund receivables and payables and are subject to elimination upon consolidation. Reimbursements occur when one fund incurs a cost, charges the appropriate benefiting fund and reduces its related cost as a reimbursement. All other interfund transactions are treated as transfers. Transfers between governmental or proprietary funds are netted as part of the reconciliation to the government-wide financial statements. 20. Other post employment benefits As provided by K.S.A , the City allows eligible retirees to participate in the group health insurance plan. While each retiree pays the full amount of the applicable premium, conceptually, the City is subsidizing the retirees because each participant is charged a level of premium regardless of age. However, the cost of this subsidy has not been quantified in these financial statements, because it is not considered material. Under the Consolidated Omnibus Budget Reconciliation Act (COBRA), the City makes health care benefits available to eligible former employees and eligible dependents. Certain requirements are outlined by the federal government for this coverage. The premium is paid in full by the insured. There is no cost to the City under this program. B. COMPLIANCE WITH KANSAS LAW References made herein to the statutes are not intended as interpretations of law, but are offered for consideration to the Director of Accounts and Reports, Kansas Department of Administration, and interpretation by the legal representatives of the City. The budget law provided by K.S.A prohibits the expenditure of funds in excess of that allowed by budget. Budgeted and actual expenditures for the year ended December 31, 2014 are as follows: 43

95 B. COMPLIANCE WITH KANSAS LAW (CONTINUED) Fund Budget Actual Variance General $ 15,855,450 $ 13,779,052 $ 2,076,398 Special Liability 914, , ,151 Library 948, ,174 - Library Employee Benefits 306, ,275 - Sales Tax 6,297,985 5,939, ,249 Convention and Visitors 905, ,924 19,176 Special Streets and Highways 889, , ,877 Special Park and Recreation 90,000 90,000 - Special Alcohol and Drug 106, ,000 (1,000) Alcohol and Drug Safety Action 16,908 12,827 4,081 All 4 Fun 75,000 3,576 71,424 Development & Growth 950, ,842 60,158 GO Bond and Interest 3,172,210 3,049, ,448 Water/Wastewater 10,942,746 9,371,386 1,571,360 Solid Waste 1,937,859 1,757, ,890 Drainage Utility 428, , ,090 Vehicle Maintenance 408, ,534 27,206 The cash basis law provided by K.S.A prohibits the creation of indebtedness in excess of available monies in a fund. Although certain special revenue federal grant funds overspent their cash balances, according to K.S.A , the City is not prohibited from financing the federal share of a local program from current funds if available. Funds in the category are as follows: FAA Parking Lot $ 150,000 Wildlife Hazard Assessment 35,250 CDBG Boothill District Grant 105 Minibus Grant ,824 Municipal Band 2,428 C. DEPOSITS AND INVESTMENTS Policy. The City does not have a formal policy for bank account deposits; however it does follow state statutes. K.S.A establishes the depositories which may be used by the City. The statute requires banks eligible to hold the City s funds to have a main or branch bank in the county in which the City is located, or in an adjoining county if such institution has been designated as an official depository, and the banks to provide an acceptable rate of return on funds. In addition, K.S.A requires the City's deposits in financial institutions to be entirely covered by federal depository insurance, by a corporate surety bond, or by collateral held under a joint custody receipt issued by a bank within the State of Kansas, the Federal Reserve Bank of Kansas City, or the Federal Home Loan Bank of Topeka. The investment policy of the City includes money market accounts and certificates of deposit which are considered deposits for financial accounting purposes. It also includes financial instruments such as U.S. Government obligations, money markets and the State Municipal Investment Pool. This policy requires the City to follow state statutes for investments. Statutes name the types of investments allowed and also require depository security coverage and that securities be titled in the name of the municipality. 44

96 C. DEPOSITS AND INVESTMENTS (CONTINUED) K.S.A limits the City s investment of idle funds to time deposits, open accounts, and certificates of deposit with allowable financial institutions; U.S. government securities; temporary notes; no-fund warrants; repurchase agreements; and the Kansas Municipal Investment Pool. Additionally, K.S.A (a)(6) authorizes the City to invest proceeds of bonds in obligations of the Federal National Mortgage Association, Federal Home Loan Banks, or the Federal Home Loan Mortgage Corporation. State statutes place no limit on the amount the City may invest in any one issuer as long as the investments are adequately secured under K.S.A and Custodial credit risk - deposits. Custodial credit risk is the risk that, in the event of a bank failure, the City s deposits may not be returned to it. At year-end the carrying amount of the City s deposits, including certificates of deposit, was $13,572,224 and the bank balance was $13,669,505. Of the bank balance, $750,000 was covered by FDIC insurance, and $12,919,505 was collateralized by pledged securities held under joint custody receipts issued by a third-party bank in the City s name. Investments. As of December 31, 2014, the City had the following investments and maturities. Investment Type Fair Value Maturity Rating Kansas Municipal Investment Pool $ 13,790,541 (See below) AAAf Federal Home Loan Mortgage Corp. 1,128,263 03/18/17 AAA Federal National Mortgage Assn. 1,132,526 12/20/17 AAA Escrow Accounts Dreyfus 2,267,203 N/A AAAm Money Market Funds UMB 116,611 N/A AAAm $ 18,435,144 At December 31, 2014, the City had invested $13,790,541 in the State s Municipal Investment Pool. The Municipal Investment Pool is under the oversight of the Pooled Money Investment Board. The board is comprised of the State Treasurer and four additional members appointed by the State Governor. The board reports annually to the Kansas legislature. State pooled monies may be invested in direct obligations of, or obligations that are insured as to principal and interest, by the U.S. government or any agency thereof, with maturities up to four years. No more than ten percent of those funds may be invested in mortgage-backed securities. In addition, the State pool may invest in repurchase agreements with Kansas banks or with primary government securities dealers. Separately issued financial statements of the Municipal Investment Pool may be obtained from the Pooled Money Investment Board, 900 S.W. Jackson, Suite 209, Topeka, Kansas Credit quality risk. Investment quality ratings given above are per Standard & Poor s, and they are as of December 31, Concentration of credit risk. Investment types and percents at cost are as follows: Kansas Municipal Investment Pool 75%, U.S. Government Securities 12%, Dreyfus escrow accounts 12%, and UMB money market funds 1%. Interest Rate Risk. The City s investment policy does not limit investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. 45

97 D. RECEIVABLES Receivables at December 31, 2014 consist of the following: Governmental Business-type activities activities Total Miscellaneous charges receivable Water charges receivable $ 665,300 - $ 142, ,218 $ 807, ,218 Wastewater charges receivable - 181, ,084 Solid waste charges receivable - 96,227 96,227 Drainage utility charges receivable - 11,892 11,892 Loans receivable Sales tax receivable 286, , , ,886 Expanded lottery tax receivable 49,944-49,944 Net receivables $ 1,799,233 $ 608,571 $ 2,407,804 E. LOANS RECEIVABLE Loans receivable of the Economic Development Revolving Fund are as follows: In 2006, the City issued $70,000 and $192,500 revolving loans to two local companies from funds paid in retirement of original Community Development Block Grant revolving loans. In 2007, $35,000 was added to the $70,000 loan. The loans at six percent are to be repaid over a period of eleven years. At December 31, 2014 the loan balances were $64,950 and $50,276, respectively. In 2007, the City issued a $90,000 revolving loan to a local company from funds paid in retirement of original Community Development Block Grant revolving loans. The loan at six percent is to be repaid over a period of nine years. At December 31, 2014, the loan balance was $38,501. In 2008, the City issued a $75,000 revolving loan to a local company from funds paid in retirement of original Community Development Block Grant revolving loans. The loan at six percent is to be repaid over a period of seven years. At December 31, 2014 the loan balance was $14,779. In 2010, the City issued a $30,000 revolving loan to a local company from funds paid in retirement of original Community Development Block Grant revolving loans. The loan at six percent is to be repaid over a period of seven years. At December 31, 2014 the loan balance was $13,671. In 2011, the City issued a $21,200 revolving loan to a local company from funds paid in retirement of original Community Development Block Grant revolving loans. The loan at six percent is to be repaid over a period of seven years. At December 31, 2014 the loan balance was $10,637. In 2014, the City issued a $100,000 revolving loan to a local company from funds paid in retirement of original Community Development Block Grant revolving loans. The loan at six and one-half percent is to be repaid over a period of seven years. At December 31, 2014 the loan balance was $93,

98 F. CAPITAL ASSETS A summary of changes in property and equipment of primary government follows: Primary government Beginning Ending balance Increases Decreases balance Governmental activities: Land $ 5,582,267 $ - $ - $ 5,582,267 Buildings and improvements 56,183, ,590 60,737 56,470,187 Machinery and equipment 23,557, , ,571 23,911,409 Infrastructure 221,964, ,964,197 Construction in progress 1,070,720 3,241,785-4,312,505 Total capital assets at historical cost 308,358,139 4,259, , ,240,565 Less accumulated depreciation for: Buildings and improvements 10,368,016 1,121,988 22,776 11,467,228 Machinery and equipment 11,027,980 1,714, ,446 12,437,808 Infrastructure 178,906,860 7,810, ,717,790 Total accumulated depreciation 200,302,856 10,647, , ,622,826 Governmental activities capital assets, net $ 108,055,283 $ (6,387,458) $ 50,086 $ 101,617,739 Primary government Beginning Ending balance Increases Decreases balance Business-type activities: Land $ 1,526,892 $ - $ - $ 1,526,892 Buildings and improvements 36,156,242 12,846-36,169,088 Machinery and equipment 6,415,708 36,436 7,637 6,444,507 Infrastructure 50,580, ,865-50,705,038 Water rights 3,542, ,542,614 Construction in progress 114, , ,550 Total capital assets at historical cost 98,336, ,263 7,637 99,222,689 Less accumulated depreciation/ amortization for: Buildings and improvements 12,200, ,885-12,729,785 Machinery and equipment 5,352, ,252 5,897 5,620,344 Infrastructure 13,212, ,282-14,208,759 Water rights 444,093 62, ,120 Total accumulated depreciation 31,210,459 1,860,446 5,897 33,065,008 Business-type activities capital assets, net $ 67,125,604 $ (966,183) $ 1,740 $ 66,157,681 Depreciation and amortization expense was charged to functions as follows: Governmental activities: General government $ 53,137 Public safety 269,536 Public works 227,185 Culture and recreation 2,236,689 Community services 47,418 Indirect depreciation 7,810,930 Internal service 2,297 Total governmental activities $10,647,192 47

99 F. CAPITAL ASSETS (CONTINUED) Business-type activities: Water wastewater Solid waste $ 1,705, ,009 Drainage 41,180 Total business-type activities $ 1,860,446 A summary of changes in property and equipment of material governmental component units follows: Beginning Ending Dodge City Public Library balance Increases Decreases balance Governmental activities: Culture and recreation: Land $ 338,171 $ - $ - $ 338,171 Buildings and improvements 1,965, ,965,741 Furniture and equipment 620,992 12,242 7, ,736 Total capital assets at historical cost 2,924,904 12,242 7,498 2,929,648 Less accumulated depreciation for: Buildings and improvements 1,392,447 69,107-1,461,554 Furniture and equipment 472,597 32,673 7, ,772 Total accumulated depreciation 1,865, ,780 7,498 1,959,326 Governmental activities capital assets, net $ 1,059,860 $ (89,538) $ - $ 970,322 Beginning Ending Development Corporation balance Increases Decreases balance Governmental activities: Community services: Industrial park land and improvements $ 1,053,282 $ - $ - $ 1,053,282 Furniture and equipment 63,497 3,150-66,647 1,116,779 3,150-1,119,929 Less accumulated depreciation for furniture and equipment 54,920 2,941-57,861 Governmental activities capital assets, net $ 1,061,859 $ 209 $ - $ 1,062,068 The industrial park land and improvements represent lots at the industrial park which are held for sale and are carried at cost. The cost includes improvements to the land to provide roads and utility access. These improvements were financed with funds from a Community Development Block Grant which flowed through the City of Dodge City, Kansas, and they are not being depreciated. Beginning Ending Housing Authority balance Increases Decreases balance Governmental activities: Community services: Land $ 363,865 $ - $ - $ 363,865 Buildings and equipment 14,684, ,743-15,464,571 Construction in progress 1,047,010 33, , ,881 16,095, , ,721 16,132,317 Less accumulated depreciation for buildings and equipment 8,055, ,590-8,579,571 Governmental activities capital assets, net $ 8,039,722 $ 289,745 $ 776,721 $ 7,552,746 48

100 G. INTERFUND RECEIVABLES AND PAYABLES Interfund balances are used when one fund has an obligation to transfer funds to another. The following is a summary of interfund receivables and payables at December 31, 2014: Amount Due to Due from $ 150,000 General Fund Airport Parking Lot Grant 35,250 General Fund Wildlife Hazard Assessment 5,824 General Fund Minibus Grant 105 General Fund CDBG Boothill District Grant 2,428 General Fund Municipal Band $ 193,607 The General Fund made advances to grant funds that operate on a reimbursement basis that will be repaid when the reimbursement is received. H. INTERFUND TRANSACTIONS During the course of normal operations, the City has numerous transactions between funds including expenditures and transfers of resources to provide services, construct assets and service debt. The governmental and proprietary funds financial statements generally reflect such transactions as transfers. The internal service funds record charges for service to City departments as operating revenue. All City funds record these payments to the internal service fund as operating expenses. Interfund transfers are made either for operating purposes or to transfer residual equity balances. A summary of interfund transfers for 2014 is as follows: Statutory From To Amount authority Transfers: General All 4 Fun $ 6,747 K.S.A. Contract General Capital Equipment 413,508 K.S.A g Sales Tax ST Depreciation and Replacement 345,000 Resolution No Sales Tax SEC Revenue Bond Fund 2,568,048 Resolution No Sales Tax Special Events Center Fund 963,776 Resolution No Sales Tax Sales Tax Organizations 710,000 Resolution No Sales Tax General 150,000 Resolution No Development and Growth GO Bond and Interest 450,000 K.S.A. 12-1,118 Temporary Notes GO Bond and Interest 9,984 Resolution No GO Bond & Interest Temporary Notes 26,192 Resolution No Convention & Visitors General 60,000 K.S.A d Water/wastewater General 850,660 K.S.A d Solid Waste General 177,800 K.S.A d Drainage General 37,080 K.S.A d Convention & Visitors Sales Tax Organizations 70,000 K.S.A. Contract Special Event Center SEC Revenue Bond Fund 204,406 Resolution No GO Bonds 2013 GO Bonds Resolution No GO Bonds 2012 GO Bonds ,855 Resolution No GO Bonds 2007 GO Bonds ,854 Resolution No A summary of transfers to component units follows: 49 $ 7,085,303 From To Amount Library Fund Dodge City Public Library $ 948,174 Library Employee Benefits Fund Dodge City Public Library 306,274 $1,254,448

101 I. LONG-TERM LIABILITIES Long-term obligations The City s long-term liabilities are segregated between amounts to be repaid from governmental activities and amounts to be repaid from business-type activities. Debt Debt outstanding Retirements outstanding January 1, and December 31, Interest 2014 Additions repayments 2014 expense Governmental activities To be paid with tax levies: General obligation bonds $ 24,492,200 $ 675,000 $ 2,225,400 $ 22,941,800 $ 810,408 Temporary notes 630, ,000-12,303 Capital lease obligations 934, , ,706 20,452 Note payable 277,500-87, ,000 - Compensated absences 860,053 49,511 22, ,177 - To be paid with sales tax revenue: Revenue bonds 37,895, ,000 37,070,000 1,701,696 65,088, ,511 3,981,637 61,831,683 2,544,859 Business-type activities To be paid with utility revenues: General obligation bonds 19,147,800-1,309,600 17,838, ,643 Loans 22,386, ,409 1,319,565 21,316, ,991 Compensated absences 115,387 15,186 8, ,413-41,649, ,595 2,637,325 39,277,187 1,199,634 $ 106,738,726 $ 989,106 $ 6,618,962 $ 101,108,870 $ 3,744,493 Added and deleted amounts for compensated absences do not include the current cost as such amounts are not readily determinable. Governmental activities General obligation bonds: General obligation bonds are serial bonds to be retired through calendar year At December 31, 2014 the bonds consist of the following: Interest Maturity Bonds Rates dates outstanding Internal improvements, issued December 1, 2008 in the amount of $1,155, % to 4.25% $ 510,000 Internal improvements, issued October 7, 2009 in the amount of $6,280, % to 4.25% ,715,000 Internal improvements, issued August 1, 2012 in the amount of $14,105, % to 4.00% ,386,800 Internal improvements, Issued December 12, 2013 in the amount of $6,235, % to 4.00% ,655,000 Internal improvements, Issued December 1, 2014 in the amount of $675, % to 3.25% ,000 $ 22,941,800 50

102 I. LONG-TERM LIABILITIES (CONTINUED) Governmental activities (continued) Principal and interest payments of general obligation bonds required to be made in the following years are: Principal Interest Total due due due $ 2,255,400 $ 1,981, ,085 $ 3,061, ,627 2,722, ,037, ,562 2,714, ,998, ,294 2,613, ,929,650 8,561, ,569 1,758,050 2,477,219 10,319, ,069, ,962 4,690, ,800 50, ,261 $ 22,941,800 $ 5,816,610 $ 28,758,410 The amount of long-term debt that can be incurred by the City is limited by K.S.A Total outstanding bonded indebtedness during a year can be no greater than 30% of the assessed value of taxable tangible property as certified to the county clerk on the preceding August 25. As of December 31, 2014, the amount of outstanding bonded indebtedness was equal to 16.23% of property assessments as of July 1, Capital leases: The following is a description of capital lease obligations of the City: Interest Maturity Outstanding rates date balance Fire Truck, dated May 20, 2011, in the original amount of $388, % $ 79,373 Airport Hangar, dated April 5, 2013 in the amount of $349, % ,358 Fire Truck, dated April 12, 2013 in the amount of $427, % ,975 Totals $ 742,706 Assets recorded under capital leases were $1,165,407 and corresponding accumulated depreciation at December 31, 2014 was $185,173. The following is a schedule of future minimum lease payments under capital leases, together with the net present value of the minimum lease payments as of December 31, Year ending December 31, Amount 2015 $ 211, , , , ,016 Thereafter 164,064 $ 808,839 51

103 I. LONG-TERM LIABILITIES (CONTINUED) Governmental activities (continued) Capital leases (continued): Total lease payments $ 808,839 Less: Amount representing interest 66,133 Present value of lease payments $ 742,706 For purposes of comparing actual expenditures to budget, only the amounts actually due in the current period are included in accordance with K.S.A b. Note payable: The City entered into an agreement during 2006 to purchase $500,000 of property and equipment, at zero percent interest, with title deeded to the City upon execution of the agreement. The agreement contains a reconveyance option commencing January 1, 2007 and expiring December 31, The City has the absolute and unconditional right to reconvey the property and equipment back to the seller during the option period. If the City elects to exercise the reconveyance option, it will provide written notice to the seller within 30 days. The seller will retain all payments received prior to the reconveyance and all payments due at the time of such reconveyance. The following is a schedule of future minimum payments as of December 31, 2014: Revenue bonds: , ,000 Total $ 190,000 Revenue bonds to be paid from sales tax revenue consist of the following: Interest Maturity Bonds rates dates outstanding Series 2009 sales tax projects 4.10% to 5.0% $ 37,070,000 The aggregate annual principal and interest payments of revenue bonds required to be made in the following years are: Principal Interest Total due due due 2015 $ 890,000 $ 1,678,115 $ 2,568, ,000 1,650,440 2,605, ,020,000 1,620,815 2,640, ,095,000 1,587,721 2,682, ,170,000 1,540,678 2,710, ,345,000 6,830,127 14,175, ,250,000 4,943,816 15,193, ,345,000 1,899,075 16,244,075 $ 37,070,000 $ 21,750,787 $ 58,820,787 52

104 I. LONG-TERM LIABILITIES (CONTINUED) Revenue bonds (continued): The revenue bond ordinance for the above bonds provides for deposits to the principal and interest account each year to provide for the payment of principal and interest on the bonds as they become due and payable. Business-type activities General obligation bonds: General obligation bonds, secured by revenues derived from the operations of the applicable enterprise fund types, consist of the following: Interest Maturity Bonds rates dates outstanding Series 2012-A waterworks and waterworks utility system refunding bonds 2.00% to 4.00% $ 11,360,000 Series 2012-B refunding and improvement bonds 2.00% to 4.00% ,478,200 $ 17,838,200 The aggregate annual principal and interest payments required to be made in the following years are: Series Series Interest Total 2012-A 2012-B due due , , ,121 1,947, ,020, , ,388 1,939, ,060, , ,853 1,929, ,095, , ,521 1,923, ,120, , ,884 1,915, ,085,000 2,049, ,202 9,056, ,430, ,569 1,547, ,200 25, ,432 $ 11,360,000 $ 6,478,200 $ 3,412,770 $ 21,250,970 General obligation bond ordinances for the above bonds provide for deposits to principal and interest accounts each year to provide for the payment of principal and interest on the bonds as they become due and payable. 53

105 I. LONG-TERM LIABILITIES (CONTINUED) Loans: The City approved a loan agreement effective September 22, 2009, with the State of Kansas Department of Health and Environment for a water reclamation facility in the amount of $29,532,000. The interest rate is 2.83% per annum. The loan repayment schedule will be established upon completion of the project with semi-annual payments over a twenty year period. The loan balance at December 31, 2014 was $21,316,574. Sales tax projects revenue bond disclosures Insurance is carried through St. Paul Travelers Insurance Company on the Special Events Center in the amount of $33,990,000 with an additional $4,200,000 for personal property effective January 1, 2014 through January 1, The premium for this coverage was $45,868 plus $5,668 for personal property. The balance sheet of the Series 2009 Sales Tax Revenue Bonds is on page eighteen and the Special Events Center Project Fund is on page sixty three. The statement of revenue, expenditures, and changes in fund balance of the Series 2009 Sales Tax Revenue Bonds Fund is on page twenty and the Special Events Center Project Fund is on page seventy. The City complied with Rebate Covenants outlined in Section 1202 of Resolution The City completed the disclosure requirements outlined in Section 1301 of Resolution Waterworks and wastewater utility system refunding bond disclosures Insurance is carried through St. Paul Travelers Insurance Company on the Wastewater Treatment Plant in the amount of $4,955,724 and the Water Reclamation Facility in the amount of $16,480,000 with an additional $1,050,000 for personal property effective January 1, 2014 through January 1, The premium for this coverage was $6,688 on the plant and $22,239 on the facility plus $1,417 for personal property. The balance sheet of the Water/Wastewater Fund is on page twenty two. The statement of revenue, expenditures, and changes in net assets of the Water/Wastewater Fund is on page twenty four. The water and wastewater systems had 8,143 and 7,762 customers at the beginning of the year and 8,177 and 7,792 customers at the end of the year, respectively. 54

106 J. LONG-TERM DEBT - COMPONENT UNITS Development Corporation - note payable The note payable is due to a private company. It is payable upon the sale of the land and industrial park improvements with no set termination date. Upon the sale of any property, seventy-five percent of the net sales price of the first $50,000 and all net sales price over $50,000 is payable for interest accumulated to that date and then as a reduction to principal. If at termination, the Organization elects not to pay the principal and interest due, all land and industrial park improvements will be transferred to the lender. Interest is computed annually from July 1 through June 30 using the New York prime rate on June 30 of the prior year. Interest compounds as of June 30 of each year. Accrued interest on the note plus the amount of the note payable has been limited to a prior year estimated fair value of the property. During 2014 no additional interest was accrued on the note. No appraisal of the property has been done in order to assess whether the accrued interest recorded plus the related debt accurately reflect the Organization's liability on this property. K. CONDUIT DEBT OBLIGATIONS From time to time, the City has issued Industrial Revenue Bonds to provide financial assistance to private-sector entities for the acquisition and construction of industrial and commercial facilities deemed to be in the public interest. The bonds are secured by the property financed and are payable solely from payments received on the underlying mortgage loans. Upon repayment of the bonds, ownership of the acquired facilities transfers to the private-sector entity served by the bond issuance. Neither the City, the State, nor any political subdivision thereof is obligated in any manner for repayment of the bonds. Accordingly, the bonds are not reported as liabilities in the accompanying financial statements. As of December 31, 2014, there were Industrial Revenue Bonds outstanding with an aggregate principal amount payable of $119,070,374. L. SPECIAL OBLIGATION BONDS The City approved a designated zone of the City as a Rural Housing Incentive District. The District is designated to reduce housing construction costs incurred by contractors through incentives that are passed on to home buyers making housing more affordable. On May 30, 2014, the City issued $705,000 of special obligation bonds. The repayment of these bonds will be repaid with ad valorem taxes pledged as special assessments. The City is not obligated in any manner for repayment of the bonds. Accordingly, the debt service transactions have been accounted for in an agency fund and the bonds are not reported as liabilities in the accompanying financial statements. 55

107 M. DEFINED BENEFIT PENSION PLAN Plan description. The City of Dodge City contributes to the Kansas Public Employees Retirement System (KPERS) and the Kansas Police and Firemen s Retirement System (KP&F). Both are cost-sharing multiple-employer defined benefit pension plans as provided by K.S.A , et seq. KPERS and KP&F provide retirement benefits, life insurance, disability income benefits, and death benefits. Kansas law establishes and amends benefit provisions. KPERS and KP&F issue a publicly available financial report that includes financial statements and required supplementary information. Those reports may be obtained by writing to KPERS (611 South Kansas, Suite 100, Topeka, KS 66603) or by calling Funding Policy. K.S.A establishes the KPERS member-employee contribution rates. Effective July 1, 2009 KPERS has two benefit structures and funding depends on whether the employee is a Tier 1 or Tier 2 member. Tier 1 members are active and contributing members hired before July 1, Tier 2 members were first employed in a covered position on or after July 1, Kansas law establishes the KPERS member-employee contribution rate at 5% of covered salary for Tier 1 members and at 6% of covered salary for Tier 2 members. K.S.A establishes KP&F member-employee contribution rate at 7% of covered salary. The employer collects and remits member-employee contributions according to the provisions of section 414(h) of the Internal Revenue Code. State law provides that the employer contribution rates be determined annually based on the results of an annual actuarial valuation. KPERS and KP&F are funded on an actuarial reserve basis. Kansas law sets a limitation on annual increases in the contribution rates. The KPERS employer rate established for the year, 2014 is 9.69%. The City of Dodge City s employer contributions to KPERS for the years ending December 31, 2014, 2013, and 2012 were $551,673, $503,661, and $474,983, respectively, equal to the required contributions for each year. The KP&F employer rate established for fiscal years beginning in 2014 is 19.92%. Employers participating in KP&F also make contributions to amortize the liability for past service costs, if any, which is determined separately for each participating employer. The City of Dodge City s contributions to KP&F for the years ending December 31, 2014, 2013, and 2012 were $892,314, $778,871, and $756,525, respectively, equal to the required contributions for each year. The Dodge City Public Library, the Dodge City - Ford County Development Corporation and the Dodge City Housing Authority all participate in KPERS. The actuarially determined contribution requirements of these component units were met. N. RISK MANAGEMENT The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; natural disasters; and medical needs of employees. The City participates in a public entity risk pool to cover worker s compensation claims. The City purchases commercial insurance to cover property, liability and medical needs of employees. There have been no significant reductions in coverage from the prior year. Settled claims have not exceeded coverage in any of the past three years. O. CONTINGENCIES The City receives significant financial assistance from numerous federal and state governmental agencies in the form of grants and state pass-through aid. The disbursement of funds received under these programs generally requires compliance with terms and conditions specified in the grant agreements and are subject to audit. Any disallowed claims resulting from such audits could become a liability of the General Fund or other applicable funds. However, in the opinion of management, any such disallowed claims will not have a material effect on any of the financial statements of the City at December 31,

108 P. JOINT VENTURES On January 1, 1993, the City of Dodge City, Kansas, entered into a joint venture with Ford County, Kansas, for the operation of a communications center. By joint resolution the Dodge City/Ford County Emergency Communications Board was created to operate the Dodge City/Ford County Communications Department. The Board consists of equal membership of City and County personnel. The department provides emergency communications for City and County agencies and is physically located in the Ford County Government Center. The budgeted operating expenditures are shared equally by the two governments. The joint venture assets of $35,099 are fully depreciated. On July 21, 1997, the City of Dodge City, Kansas entered into a joint venture with Ford County, Kansas, for the construction and operation of certain public projects. On June 10, 1997, the voters of Dodge City and of Ford County approved a one-half percent city-wide and a one-half percent county-wide retailer s sales tax to finance these projects. The projects included but were not limited to the following: airconditioning at the Civic Center building; an outdoor motor sports complex; field sport facilities, including a baseball/softball complex and additional soccer facilities and renovation of existing facilities; and a special events center. All City sales tax revenues for these projects are deposited into the Sales Tax Fund. County sales tax revenues which are designated for Ford County and the City of Dodge City are transferred to the City and deposited into the same fund. All expenditures from the Sales Tax Fund are subject to approval of the City Commission. All real estate acquired for the projects is titled to the City. The interlocal agreement was amended on August 10, The agreement created a Community Facilities Advisory Board (CFAB) to serve as the project review and advisory committee. There are seven members on the Board: one City Commissioner, one County Commissioner, four at-large members and the Chairperson of the Board of Directors of the Dodge City/Ford County Development Corporation or his designee. On November 18, 2010, the City of Dodge City, Kansas entered into a joint venture with Venuworks of Dodge City, LLC. The agreement calls for Venuworks to operate and manage the Special Events Center. The City retains title and ownership of the Center. Venuworks receives a flat monthly management fee plus variable management fees for food and beverage sales, contractually obligated incomes and fulfillment fees. Variable commissions are capped on an annual basis. On November 5, 2012, the City of Dodge City, Kansas entered into a joint venture with Young Men s Christian Association of Southwest Kansas (YMCA). The agreement calls for YMCA to operate and manage the Parks and Recreation Department. The City retains title to all Parks and Recreation property. The City reimburses the YMCA for a percentage of payroll and also for large property purchases and repairs. Q. SUBSEQUENT EVENTS Management has evaluated subsequent events through July 28, 2015, the date on which the financial statements were available to be used. Management's evaluation concluded that there are no subsequent events that are required to be recognized or disclosed in these financial statements. 57

109 SUPPLEMENTARY INFORMATION

110 COMBINING FINANCIAL STATEMENTS

111 ASSETS Total Special Capital nonmajor revenue projects governmental funds funds funds Cash and investments $ 10,623,674 $ 333,084 $ 10,956,758 Property taxes receivable 1,591, ,647 1,883,071 Due from other governments 259, ,276 Other receivables 391, ,008 Inventories 41,289-41,289 Restricted cash and investments - 3,660,420 3,660,420 Total assets $ 12,906,671 $ 4,285,151 $ 17,191,822 LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES CITY OF DODGE CITY, KANSAS COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS December 31, 2014 Liabilities: Accounts payable $ 332,226 $ 548,889 $ 881,115 Payroll liabilities 17, ,558 Due to other funds 193, ,607 Total liabilities 543, ,781 1,093,280 Deferred inflows of resources: Property tax 1,591, ,647 1,883,071 Contractual obligations 537, ,219 Revolving loans 286, ,103 Total deferred inflows of resources 2,414, ,647 2,706,393 Fund balances: Nonspendable: Endowment 100, ,000 Long-term receivables 242, ,537 Restricted: Capital projects - 3,118,723 3,118,723 Grants 9,977-9,977 Assigned: Encumbrances 396, ,598 Other capital expenditures 5,196, ,000 5,521,409 Community service and promotion Other purposes 640, ,412 Designed for subsequent year's expenditures 3,704,594-3,704,594 Unassigned (342,896) - (342,896) Total fund balances 9,948,426 3,443,723 13,392,149 Total liabilities, deferred inflows of resources and fund balances $ 12,906,671 $ 4,285,151 $ 17,191,822 58

112 CITY OF DODGE CITY, KANSAS COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS December 31, 2014 Library Special employee liability Library benefits Building ASSETS Cash and investments $ 261,551 $ 20,647 $ 10,252 $ 12,997 Property taxes receivable 479, , ,416 - Due from other governments Other receivables ,007 Inventories Total assets $ 740,576 $ 867,630 $ 275,668 $ 18,004 LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES Liabilities: Accounts payable $ 2,288 $ - $ - $ - Payroll liabilities Due to other funds Total liabilities 2, Deferred inflows of resources: Property tax 479, , ,416 - Contractual obligations Revolving loans Total deferred inflows of resources 479, , ,416 - Fund balances: Nonspendable: Endowment Long-term receivables Restricted for grants Assigned: Encumbrances Other capital expenditures Community service and promotion Other purposes 159,785 19,475 10,252 18,004 Designed for subsequent year's expenditures 99,478 1, Unassigned Total fund balances 259,263 20,647 10,252 18,004 Total liabilities, deferred inflows of resources and fund balances $ 740,576 $ 867,630 $ 275,668 $ 18,004 59

113 Special Special Special Alcohol and Convention streets and park and alcohol drug safety and visitors highways recreation and drug action $ 847,936 $ 596,784 $ 115,548 $ 101,000 $ 15, (1,200) $ 847,936 $ 596,784 $ 115,548 $ 101,000 $ 14,467 $ 4,380 $ 6,481 $ - $ 101,000 $ (315) 7,043 5, ,423 11, ,000 (315) , , , ,513 64, ,548-11, , , ,548-14,782 $ 847,936 $ 596,784 $ 115,548 $ 101,000 $ 14,467

114 CITY OF DODGE CITY, KANSAS COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS (CONTINUED) December 31, 2014 Sales tax Development Sales tax depreciation and All 4 Fun and growth organizations replacement ASSETS Cash and investments $ 3,576 $ 492,118 $ 124,085 $ 4,646,184 Property taxes receivable Due from other governments - 49, Other receivables Inventories Total assets $ 3,576 $ 542,062 $ 124,085 $ 4,646,184 LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES Liabilities: Accounts payable $ 405 $ 75,497 $ 5,855 $ - Payroll liabilities - - 1,619 - Due to other funds Total liabilities ,497 7,474 - Deferred inflows of resources: Property tax Contractual obligations Revolving loans Total deferred inflows of resources Fund balances: Nonspendable: Endowment Long-term receivables Restricted for grants Assigned: Encumbrances Other capital expenditures - 110,592-4,646,184 Community service and promotion Other purposes 2, Designed for subsequent year's expenditures , ,611 - Unassigned Total fund balances 3, , ,611 4,646,184 Total liabilities, deferred inflows of resources and fund balances $ 3,576 $ 542,062 $ 124,085 $ 4,646,184 60

115 Special law Rural housing Economic d enforcement Sales tax incentive development Hoover trust event district revolving trust $ 29,452 $ 155,066 $ 57,055 $ 243,672 $ 119, , $ 29,452 $ 155,066 $ 57,055 $ 529,775 $ 119,128 $ 2,425 $ - $ - $ 1,135 $ , , , , , , , ,066 57,055-19, , ,066 57, , ,128 $ 29,452 $ 155,066 $ 57,055 $ 529,775 $ 119,128

116 CITY OF DODGE CITY, KANSAS COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS (CONTINUED) December 31, 2014 Roof Medical Capital insurance insurance equipment Fire CPR repairs reserve reserve training ASSETS Cash and investments $ 174,445 $ 2,092,193 $ 265,188 $ 795 Property taxes receivable Due from other governments Other receivables - 5, Inventories Total assets $ 174,445 $ 2,097,825 $ 265,188 $ 795 LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES Liabilities: Accounts payable $ - $ 37,643 $ - $ - Payroll liabilities Due to other funds Total liabilities - 37, Deferred inflows of resources: Property tax Contractual obligations Revolving loans Total deferred inflows of resources Fund balances: Nonspendable: Endowment Long-term receivables Restricted for grants Assigned: Encumbrances Other capital expenditures 174, ,188 - Community service and promotion Other purposes Designed for subsequent year's expenditures - 2,060, Unassigned Total fund balances 174,445 2,060, , Total liabilities, deferred inflows of resources and fund balances $ 174,445 $ 2,097,825 $ 265,188 $

117 FAA Wildlife DJ-BX Mobility parking hazard grant manager DARE lot assessment 2011 grant $ 10,082 $ - $ - $ - $ 3, ,000 35, , $ 10,841 $ 150,000 $ 35,250 $ 100 $ 9,732 $ 353 $ - $ - $ - $ ,000 35, ,000 35, , , , ,732 $ 10,841 $ 150,000 $ 35,250 $ 100 $ 9,732

118 CITY OF DODGE CITY, KANSAS COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS (CONTINUED) December 31, 2014 CDBG Minibus Minibus Minibus Boothill grant grant grant district grant ASSETS Cash and investments $ 306 $ 475 $ - $ - Property taxes receivable Due from other governments , Other receivables Inventories Total assets $ 306 $ 475 $ 17,330 $ 105 LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES Liabilities: Accounts payable $ - $ - $ 8,515 $ - Payroll liabilities ,846 - Due to other funds - - 5, Total liabilities $ 17,185 $ 105 Deferred inflows of resources: Property tax Contractual obligations Revolving loans Total deferred inflows of resources Fund balances: Nonspendable: Endowment Long-term receivables Restricted for grants Assigned: Encumbrances Other capital expenditures Community service and promotion Other purposes Designed for subsequent year's expenditures Unassigned Total fund balances Total liabilities, deferred inflows of resources and fund balances $ 306 $ 475 $ 17,330 $

119 Total Special nonmajor Meadowlark events SMPC Municipal special house center trust band revenue funds $ 12,109 $ 146,956 $ 65,222 $ - $ 10,623, ,591, ,276-94, ,008-41, ,289 $ 12,109 $ 282,952 $ 65,222 $ - $ 12,906,671 $ 363 $ 86,201 $ - $ - $ 332, , , , ,201-2, , ,591, , , , , ,414, , , , , ,196, ,746-22, , ,922-3,704,594 - (340,468) - (2,428) (342,896) 11,746 (340,468) 65,222 (2,428) 9,948,426 $ 12,109 $ 282,952 $ 65,222 $ - $ 12,906,671

120 CITY OF DODGE CITY, KANSAS COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS CAPITAL PROJECTS FUNDS December 31, 2014 Special Temp notes obligation Capital 2012 GO bonds bond project improvement Candletree ASSETS Cash and investments $ 333,084 $ - $ - $ - Property taxes receivable 291, Restricted cash and investments - 24,458 3,522,753 53,051 Total assets $ 624,731 $ 24,458 $ 3,522,753 $ 53,051 LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES Liabilities: Accounts payable $ 7,192 $ 8,250 $ 533,447 $ - Payroll liabilities Total liabilities 8,084 8, ,447 - Deferred inflows of resources: Property tax 291, Total deferred inflows of resources 291, Fund balances: Restricted for capital projects - 16,208 2,989,306 53,051 Assigned to other capital expenditures 325, Total fund balances 325,000 16,208 2,989,306 53,051 Total liabilities, deferred inflows of resources and fund balances $ 624,731 $ 24,458 $ 3,522,753 $ 53,051 63

121 Special Total obligation nonmajor bond project capital 2014 projects funds $ - $ 333, ,647 60,158 3,660,420 $ 60,158 $ 4,285,151 $ - $ 548, , , ,647 60,158 3,118, ,000 60,158 3,443,723 $ 60,158 $ 4,285,151

122 CITY OF DODGE CITY, KANSAS COMBINING STATEMENT OF REVENUE, EXPENDITURES, AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS Year ended December 31, 2014 Total Special Capital nonmajor revenue projects governmental funds funds funds Revenue: Taxes $ 2,412,940 $ 324,326 $ 2,737,266 Intergovernmental 3,293, ,648 3,953,033 Charges for services 1,938,171-1,938,171 Investment earnings 12, ,636 Contribution from property owners - 679, ,549 Miscellaneous 301, ,960 Total revenue 7,959,084 1,663,531 9,622,615 Expenditures: General government 1,466, ,496 2,174,666 Public safety 263, ,152 Public works 1,551,848 3,354,409 4,906,257 Culture and recreation 3,616, ,803 4,014,930 Community services 2,158,967-2,158,967 Total expenditures 9,056,264 4,461,708 13,517,972 Excess (deficiency) of revenue over expenditures (1,097,180) (2,798,177) (3,895,357) Other financing sources (uses): Transfers in 2,509,031 68,294 2,577,325 Transfers out (580,000) (256,492) (836,492) Transfers to component units (1,254,448) - (1,254,448) Total other financing sources and uses 674,583 (188,198) 486,385 Net change in fund balances (422,597) (2,986,375) (3,408,972) Fund balances, beginning of year 10,371,023 6,430,098 16,801,121 Fund balances, end of year $ 9,948,426 $ 3,443,723 $ 13,392,149 64

123 CITY OF DODGE CITY, KANSAS COMBINING STATEMENT OF REVENUE, EXPENDITURES, AND CHANGES IN FUND BALANCES - NONMAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS Year ended December 31, 2014 Library Special employee liability Library benefits Building Revenue: Taxes $ 737,997 $ 945,662 $ 301,292 $ - Intergovernmental Charges for services Investment earnings Miscellaneous ,500 Total revenue 737, , ,292 15,504 Expenditures: General government 585, Public safety Public works Culture and recreation Community services Total expenditures 585, Excess (deficiency) of revenue over expenditures 152, , ,292 15,504 Other financing sources (uses): Transfers in Transfers out Transfers to component units - (948,174) (306,274) - Total other financing sources and uses - (948,174) (306,274) - Net change in fund balances 152,154 (2,512) (4,982) 15,504 Fund balances, beginning of year 107,109 23,159 15,234 2,500 Fund balances, end of year $ 259,263 $ 20,647 $ 10,252 $ 18,004 65

124 Special Special Special Alcohol and Convention streets and park and alcohol drug safety and visitors highways recreation and drug action $ - $ - $ - $ - $ - 785, ,623 98,860 99,579-40, (50) , , ,623 98,860 99,579 (50) , , , , , , ,544 90, ,000 12,827 94, ,079 8,860 (7,421) (12,877) (130,000) (130,000) (35,977) 358,079 8,860 (7,421) (12,877) 872, , ,688 7,421 27,659 $ 836,513 $ 584,926 $ 115,548 $ - $ 14,782

125 CITY OF DODGE CITY, KANSAS COMBINING STATEMENT OF REVENUE, EXPENDITURES, AND CHANGES IN FUND BALANCES - NONMAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS (CONTINUED) Year ended December 31, 2014 Sales tax Development Sales tax depreciation and All 4 Fun and growth organizations replacement Revenue: Taxes $ - $ - $ - $ - Intergovernmental - 604, Charges for services Investment earnings Miscellaneous Total revenue - 604, Expenditures: General government - 439, Public safety Public works Culture and recreation 3, ,590 Community services ,088 - Total expenditures 3, , , ,590 Excess (deficiency) of revenue over expenditures (3,576) 164,493 (906,042) (347,590) Other financing sources (uses): Transfers in 6, , ,000 Transfers out - (450,000) - - Transfers to component units Total other financing sources and uses 6,747 (450,000) 780, ,000 Net change in fund balances 3,171 (285,507) (126,042) (2,590) Fund balances, beginning of year - 752, ,653 4,648,774 Fund balances, end of year $ 3,171 $ 466,565 $ 116,611 $ 4,646,184 66

126 Rural housing Transient Special law Economic Sales tax incentive guest enforcement development event district tax trust revolving $ - $ 166,149 $ 261,840 $ - $ - 25, , , ,745 25, , ,840 13,110 64, , , , , ,961 9, , ,840 13, ,961 15,685 28,619 - (33) (37,752) ,685 28,619 - (33) (37,752) 139,381 28,436-27, ,289 $ 155,066 $ 57,055 $ - $ 27,027 $ 242,537

127 CITY OF DODGE CITY, KANSAS COMBINING STATEMENT OF REVENUE, EXPENDITURES, AND CHANGES IN FUND BALANCES - NONMAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS (CONTINUED) Year ended December 31, 2014 Roof Medical Capital Hoover insurance insurance equipment trust repairs reserve reserve Revenue: Taxes $ - $ - $ - $ - Intergovernmental Charges for services ,410 - Investment earnings Miscellaneous Total revenue 53-12,410 - Expenditures: General government , ,704 Public safety ,822 Public works ,011 Culture and recreation ,029 Community services Total expenditures , ,566 Excess (deficiency) of revenue over expenditures 53 - (166,736) (535,566) Other financing sources (uses): Transfers in ,508 Transfers out Transfers to component units Total other financing sources and uses ,508 Net change in fund balances 53 - (166,736) (122,058) Fund balances, beginning of year 119, ,445 2,226, ,246 Fund balances, end of year $ 119,128 $ 174,445 $ 2,060,182 $ 265,188 67

128 Underage FAA Wildlife alcohol Fire CPR parking hazard abuse DARE training lot assessment $ - $ - $ - $ - $ ,886 81, , ,772 4,520-6, ,658 86, ,250 7,324 (670) ,658 86, ,250 7,324 (670) 328,658 86,081 (3,250) (1,033) (3,250) (1,033) ,250 11, $ - $ 10,488 $ 795 $ - $ -

129 CITY OF DODGE CITY, KANSAS COMBINING STATEMENT OF REVENUE, EXPENDITURES, AND CHANGES IN FUND BALANCES - NONMAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS (CONTINUED) Year ended December 31, 2014 DJ-BX DJ-BX DJ-BX Mobility grant grant grant manager grant Revenue: Taxes $ - $ - $ - $ - Intergovernmental ,702 13,896 55,979 Charges for services Investment earnings Miscellaneous ,583 Total revenue ,702 13,896 62,562 Expenditures: General government Public safety ,602 13,896 - Public works ,280 Culture and recreation Community services Total expenditures ,602 13,896 62,280 Excess (deficiency) of revenue over expenditures Other financing sources (uses): Transfers in Transfers out Transfers to component units Total other financing sources and uses Net change in fund balances Fund balances, beginning of year ,450 Fund balances, end of year $ - $ 100 $ - $ 9,732 68

130 Public CDBG Minibus Minibus Minibus transportation Boothill grant grant grant buses district grant grant $ - $ - $ - $ - $ , , , ,477 26,233 57, , , , , , , , , , , , (1,615) (15,187) (1,615) (15,187) ,615 15, $ - $ - $ 145 $ - $ -

131 CITY OF DODGE CITY, KANSAS COMBINING STATEMENT OF REVENUE, EXPENDITURES, AND CHANGES IN FUND BALANCES - NONMAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS (CONTINUED) Year ended December 31, 2014 KHRC Special abandoned Meadowlark events SMPC housing house center trust Revenue: Taxes $ - - $ - $ - Intergovernmental 26, ,300 Charges for services - - 1,871,820 - Investment earnings Miscellaneous - 11,742 5,396 - Total revenue 26,153 11,742 1,877,323 22,300 Expenditures: General government Public safety - (4) - - Public works Culture and recreation - - 3,033,207 - Community services 26, Total expenditures 26,153 (4) 3,033,207 - Excess (deficiency) of revenue over expenditures - 11,746 (1,155,884) 22,300 Other financing sources (uses): Transfers in ,776 - Transfers out Transfers to component units Total other financing sources and uses ,776 - Net change in fund balances - 11,746 (192,108) 22,300 Fund balances, beginning of year - - (148,360) 42,922 Fund balances, end of year $ - $ 11,746 $ (340,468) $ 65,222 69

132 Municipal band Total nonmajor special revenue funds $ - $ 2,412,940-3,293,385-1,938,171-12, ,960-7,959,084 - $ 1,466, ,152-1,551,848 22,410 3,616,127-2,158,967 22,410 9,056,264 (22,410) (1,097,180) - 2,509,031 - (580,000) - (1,254,448) - 674,583 (22,410) (422,597) 19,982 10,371,023 $ (2,428) $ 9,948,426

133 CITY OF DODGE CITY, KANSAS COMBINING STATEMENT OF REVENUE, EXPENDITURES, AND CHANGES IN FUND BALANCES - NONMAJOR GOVERNMENTAL FUNDS CAPITAL PROJECTS FUNDS Year ended December 31, 2014 Special events Capital GO bonds GO bonds center improvement project Revenue: Taxes $ 324,326 $ - $ - $ - Intergovernmental 15, Investment earnings Contribution from property owners Total revenue 339, Expenditures: General government 52, Public works 109,630-28,595 - Culture and recreation 398, Total expenditures 560,578-28,595 - Excess (deficiency) of revenue over expenditures (221,252) - (28,595) - Other financing sources (uses): Transfers in Transfers out - (18,854) - (204,406) Total other financing sources and uses - (18,854) 393 (204,406) Net change in fund balances (221,252) (18,854) (28,202) (204,406) Fund balances, beginning of year 546,252 18,854 28, ,406 Fund balances, end of year $ 325,000 $ - $ - $ - 70

134 Special Special Total Temp notes obligation obligation nonmajor 2012 GO bonds GO bonds bond project bond project capital Candletree projects funds $ - $ - $ - $ - $ - $ 324, , , , , , ,553 1,663, , , , ,216, ,354, , ,216,184 36, ,395 4,461, (2,571,536) (36,952) 60,158 (2,798,177) 26,192-41, ,294 (9,984) (22,855) (393) - - (256,492) 16,208 (22,855) 41, (188,198) 16,208 (22,855) (2,530,220) (36,952) 60,158 (2,986,375) - 22,855 5,519,526 90,003-6,430,098 $ 16,208 $ - $ 2,989,306 $ 53,051 $ 60,158 $ 3,443,723

135 CITY OF DODGE CITY, KANSAS STATEMENT OF FIDUCIARY NET ASSETS AGENCY FUND December 31, 2014 Special Community obligation improvement debt service district 2014 Total ASSETS Cash $ 13,841 $ 3,402 $ 17,243 LIABILITIES Due to bondholders $ 13,841 $ 3,402 $ 17,243 The accompanying notes are an integral part of the basic financial statements. 71

136 APPENDICES

137 Kennedy McKee & Company LLP Certified Public Accountants 1100 W. Frontview P. O. Box 1477 Dodge City, Kansas Tel. (620) Fax (620) JAMES W. KENNEDY, CPA JAMES R. SHIRLEY, CPA LU ANN WETMORE, CPA ROBERT C. NEIDHART, CPA PATRICK M. FRIESS, CPA JOHN W. HENDRICKSON, CPA INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS The Honorable Mayor and City Commissioners Dodge City, Kansas We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund and the aggregate remaining fund information of the City of Dodge City, Kansas, as of and for the year ended December 31, 2014, and the related notes to the financial statements, which collectively comprise the City of Dodge City's basic financial statements and have issued our report thereon dated July 28, 2015 Our report was modified to include a reference to other auditors. The financial statements of the Special Events Center, a special revenue fund, the Dodge City Public Library and the Dodge City-Ford County Development Corporation were not audited in accordance with Government Auditing Standards. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the City of Dodge City's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City of Dodge City s internal control. Accordingly, we do not express an opinion on the effectiveness of the City of Dodge City s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. We did identify certain deficiencies in internal control, described as item in the accompanying schedule of findings and questioned costs that we consider to be a significant deficiency. 72

138 Compliance and Other Matters As part of obtaining reasonable assurance about whether the City of Dodge City's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. City of Dodge City's Response to Findings The City of Dodge City s response to the findings identified in our audit is described in the accompanying schedule of findings and questioned costs. We did not audit the City of Dodge City s response and, accordingly, we express no opinion on it. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Kennedy McKee & Company LLP July 28,

139 Kennedy McKee & Company LLP Certified Public Accountants 1100 W. Frontview P. O. Box 1477 Dodge City, Kansas Tel. (620) Fax (620) JAMES W. KENNEDY, CPA JAMES R. SHIRLEY, CPA LU ANN WETMORE, CPA ROBERT C. NEIDHART, CPA PATRICK M. FRIESS, CPA JOHN W. HENDRICKSON, CPA INDEPENDENT AUDITOR S REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY OMB CIRCULAR A-133 The Honorable Mayor and City Commissioners Dodge City, Kansas Report on Compliance for Each Major Federal Program We have audited the City of Dodge City, Kansas' compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on each of the City of Dodge City, Kansas major federal programs for the year ended December 31, The City of Dodge City's major federal programs are identified in the summary of auditor's results section of the accompanying schedule of findings and questioned costs. Management's Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal programs. Auditor's Responsibility Our responsibility is to express an opinion on compliance for each of the City of Dodge City, Kansas' major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the City's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of the City's compliance. The City of Dodge City s basic financial statements include the operations of the Housing Authority of Dodge City, which expended $799,988 in federal awards which is not included in the schedule during the year ended December 31, Our audit described below, did not include the operations of the Housing Authority of Dodge City because they engaged other auditors to perform an audit in accordance with OMB Circular A

140 Opinion on Each Major Federal Program In our opinion, the City of Dodge City, Kansas complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended December 31, Report on Internal Control over Compliance The management of the City of Dodge City, Kansas, is responsible for establishing and maintaining effective internal control over compliance with the requirements referred to above. In planning and performing our audit, we considered the City's internal control over compliance with the requirements that could have a direct and material effect on a major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the City s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be deficiencies, significant deficiencies, or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of OMB Circular A-133. Accordingly, this report is not suitable for any other purpose. Kennedy McKee & Company LLP July 28,

141 CITY OF DODGE CITY, KANSAS SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Year ended December 31, 2014 Federal grantor/ Federal Pass-through Expenditures pass-through grantor/ CFDA grantor s of federal program title number number awards U.S. Department of Justice Direct program: Edward Byrne Memorial Justice Grant ARRA DJ-BX-0369 $ 962 Edward Byrne Memorial Justice Grant JD-BX ,602 Edward Byrne Memorial Justice Grant DJ-BX ,896 Total U.S. Department of Justice 35,460 U.S. Department of Transportation Federal Aviation Administration Direct programs: Airport Parking Lot ,225 Wildlife Hazard Assessment ,777 Total U.S. Department of Transportation FAA 394,002 U.S. Department of Transportation Passed through Kansas Department of Transportation: Formula Grants for other than Urbanized Areas Mini-Bus Operating Grant ,665 Mini-Bus Operating Grant ,581 Mobility Manager Grant ,472 Federal Transit Capital Investments Grants ARRA ,932 Alcohol Traffic Safety and Drunk Driving Prevention Incentive Grants Impaired Driving Deterrence Program (DUI) ,940 Total U.S. Department of Transportation 444,590 U.S. Department of Homeland Security Passed through Kansas Adjunct General Disaster Grants Public Assistance ,767 Total federal awards $ 881,819 Note: The schedule of expenditures of federal awards was prepared using the accrual basis of accounting. 76

142 CITY OF DODGE CITY KANSAS SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year ended December 31, 2014 A. SUMMARY OF AUDITOR'S RESULTS 1. The auditor's report expresses an unmodified opinion on the financial statements of the City of Dodge City, Kansas. 2. One significant deficiency relating to the audit of the financial statements is reported in the Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards. The deficiency is not reported as a material weakness. 3. No instances of noncompliance material to the financial statements of the City of Dodge City, Kansas, which would be required to be reported in accordance with Government Auditing Standards, were disclosed during the audit. 4. No significant deficiencies relating to the audit of the major federal award programs is reported in the Report on Compliance for Each Major Program and on Internal Control over Compliance Required by OMB Circular A The auditor's report on compliance for the major federal award programs for the City of Dodge City, Kansas expresses an unmodified opinion on all major programs. 6. Audit findings required to be reported in accordance with Section 510(a) of OMB A-133 are reported in this schedule. 7. The programs tested as a major program included: Airport Improvement Program Airport Parking Lot CFDA Airport Improvement Program Wildlife Hazard Assessment CFDA Federal Transit Capital Investment Grant CFDA The threshold for distinguishing Type A and Type B programs was $300, The City of Dodge City did not qualify as a low-risk auditee. 77

143 CITY OF DODGE CITY KANSAS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (CONTINUED) Year ended December 31, 2014 B. FINDINGS--FINANCIAL STATEMENTS AUDIT Proposed Audit Adjustments Condition: During the course of the audit, correcting entries were proposed in the area of interest expense on long-term debt. Criteria: Internal controls should be in place to provide reasonable assurance that long-term debt costs are properly recorded. Effect: Adjustments were necessary after the audit was started. Recommendation: We recommend that personnel review the general ledger after year-end adjustments are made for completeness. The review process will provide additional assurance that long-term debt costs are reported accurately. Response: City personnel will review the general ledger after year-end adjustments are made for completeness. The City will comply with the recommendation. C. FINDINGS AND QUESTIONED COSTS--MAJOR FEDERAL AWARD PROGRAMS AUDIT None noted. 78

144 CITY OF DODGE CITY KANSAS SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS Year ended December 31, 2014 None noted. 79

145 APPENDIX C SUMMARY OF FINANCING DOCUMENTS The following is a summary of certain provisions contained in the Bond Resolution authorizing the issuance of the Bonds and the Disclosure Undertaking. This summary does not purport to be complete and is qualified by reference to the entirety of the foregoing documents. DEFINITIONS THE BOND RESOLUTION In addition to words and terms defined elsewhere in this Official Statement, the following words and terms as used herein shall have the meanings hereinafter set forth. Unless the context shall otherwise indicate, words importing the singular number shall include the plural and vice versa, and words importing persons shall include firms, associations and corporations, including public bodies, as well as natural persons. Act means the Constitution and statutes of the State of Kansas including K.S.A to , inclusive, K.S.A et seq. and K.S.A et seq., as amended and supplemented. Authorized Denomination means $5,000 or any integral multiples thereof. Beneficial Owner of the Bonds includes any Owner of the Bonds and any other Person who, directly or indirectly has the investment power with respect to such Bonds. Bond and Interest Fund means the Bond and Interest Fund of the Issuer for its general obligation bonds. Bond Counsel means the firm of Gilmore & Bell, P.C., or any other attorney or firm of attorneys whose expertise in matters relating to the issuance of obligations by states and their political subdivisions is nationally recognized and acceptable to the Issuer. Bond Insurance Policy means the municipal bond insurance policy issued by the Bond Insurer concurrently with the delivery of the Bonds guaranteeing the scheduled payment when due of the principal of and interest on the Bonds. Bond Insurer means BAM with respect to the Bonds. Bond Payment Date means any date on which principal of or interest on any Bond is payable. Bond Register means the books for the registration, transfer and exchange of Bonds kept at the office of the Bond Registrar. Bond Registrar means the State Treasurer, and its successors and assigns. Bond Resolution means collectively the Ordinance passed by the governing body of the Issuer and the resolution adopted by the governing body of the Issuer authorizing the issuance of the Bonds, as amended from time to time. Bonds means the General Obligation Bonds, Series 2016-A, authorized and issued by the Issuer pursuant to the Bond Resolution. Business Day means a day other than a Saturday, Sunday or any day designated as a holiday by the Congress of the United States or by the Legislature of the State and on which the Paying Agent is scheduled in the normal course of its operations to be open to the public for conduct of its operations. Cede & Co. means Cede & Co., as nominee of DTC and any successor nominee of DTC with respect to the Bonds. City means the City of Dodge City, Kansas. Clerk means the duly appointed and acting Clerk of the Issuer or, in the Clerk's absence, the duly appointed Deputy, Assistant or Acting Clerk of the Issuer. C-1

146 Code means the Internal Revenue Code of 1986, as amended, and the applicable regulations promulgated thereunder of the United States Department of the Treasury. Compliance Account means the account by that name created by the Bond Resolution. Consulting Engineer means an independent engineer or engineering firm, or architect or architectural firm, having a favorable reputation for skill and experience in the construction, financing and operation of public facilities, at the time employed by the Issuer for the purpose of carrying out the duties imposed on the Consulting Engineer by the Bond Resolution. Costs of Issuance means all costs of issuing the Bonds, including but not limited to all publication, printing, signing and mailing expenses in connection therewith, registration fees, financial advisory fees, all legal fees and expenses of Bond Counsel and other legal counsel, expenses incurred in connection with compliance with the Code, all expenses incurred in connection with receiving ratings on the Bonds, and any premiums or expenses incurred in obtaining municipal bond insurance on the Bonds. Costs of Issuance Account means the account by that name created by the Bond Resolution. Dated Date means February 3, Debt Service Account means the account by that name created within the Bond and Interest Fund by the Bond Resolution. Debt Service Requirements means the aggregate principal payments (whether at maturity or pursuant to scheduled mandatory sinking fund redemption requirements) and interest payments on the Bonds for the period of time for which calculated; provided, however, that for purposes of calculating such amount, principal and interest shall be excluded from the determination of Debt Service Requirements to the extent that such principal or interest is payable from amounts deposited in trust, escrowed or otherwise set aside for the payment thereof with the Paying Agent or other commercial bank or trust company located in the State and having full trust powers. Defaulted Interest means interest on any Bond which is payable but not paid on any Interest Payment Date. Defeasance Obligations means any of the following obligations: or (a) United States Government Obligations that are not subject to redemption in advance of their maturity dates; (b) obligations of any state or political subdivision of any state, the interest on which is excluded from gross income for federal income tax purposes and which meet the following conditions: (1) the obligations are (i) not subject to redemption prior to maturity or (ii) the trustee for such obligations has been given irrevocable instructions concerning their calling and redemption and the issuer of such obligations has covenanted not to redeem such obligations other than as set forth in such instructions; (2) the obligations are secured by cash or United States Government Obligations that may be applied only to principal of, premium, if any, and interest payments on such obligations; (3) such cash and the principal of and interest on such United States Government Obligations (plus any cash in the escrow fund) are sufficient to meet the liabilities of the obligations; (4) such cash and United States Government Obligations serving as security for the obligations are held in an escrow fund by an escrow agent or a trustee irrevocably in trust; (5) such cash and United States Government Obligations are not available to satisfy any other claims, including those against the trustee or escrow agent; and (6) such obligations are rated in a rating category by Moody's or Standard & Poor's that is no lower than the rating category then assigned by that Rating Agency to United States Government Obligations. Derivative means any investment instrument whose market price is derived from the fluctuating value of an underlying asset, index, currency, futures contract, including futures, options and collateralized mortgage obligations. C-2

147 Director of Finance means the duly appointed and acting Director of Finance of the Issuer or, in the Director's absence, the duly appointed Deputy, Assistant or Acting Director of Finance of the Issuer. Disclosure Undertaking means the Issuer s Omnibus Continuing Disclosure Undertaking, as may be amended and supplemented, relating to certain obligations contained in the SEC Rule. DTC means The Depository Trust Company, New York, New York. Event of Default means each of the following occurrences or events: (a) Payment of the principal and of the redemption premium, if any, of any of the Bonds shall not be made when the same shall become due and payable, either at Stated Maturity or by proceedings for redemption or otherwise; due; or (b) Payment of any installment of interest on any of the Bonds shall not be made when the same shall become (c) The Issuer shall default in the due and punctual performance of any other of the covenants, conditions, agreements and provisions contained in the Bonds or in the Bond Resolution (other than the covenants relating to continuing disclosure contained in the Bond Resolution and the Disclosure Undertaking) on the part of the Issuer to be performed, and such default shall continue for thirty (30) days after written notice specifying such default and requiring same to be remedied shall have been given to the Issuer by the Owner of any of the Bonds then Outstanding. Federal Tax Certificate means the Issuer's Federal Tax Certificate for the Bonds, dated as of the Issue Date, as the same may be amended or supplemented in accordance with the provisions thereof. Financeable Costs means the amount of expenditure for an Improvement which has been duly authorized by action of the governing body of the Issuer to be financed by general obligation bonds, less: (a) the amount of any temporary notes or general obligation bonds of the Issuer which are currently Outstanding and available to pay such Financeable Costs; and (b) any amount of Financeable Costs which has been previously paid by the Issuer or by any eligible source of funds unless such amounts are entitled to be reimbursed to the Issuer under State or federal law. Fiscal Year means the twelve month period ending on December 31. Funds and Accounts means funds and accounts created by or referred to in the Bond Resolution. Improvement Fund means the fund by that name created in the Bond Resolution. Improvements means the improvements referred to in the preamble to the Ordinance and any Substitute Improvements. Independent Accountant means an independent certified public accountant or firm of independent certified public accountants at the time employed by the Issuer for the purpose of carrying out the duties imposed on the Independent Accountant by the Bond Resolution. Insurer's Fiscal Agent means the agent designated by the Bond Insurer pursuant to the Bond Insurance Policy. Interest Payment Date(s) means the Stated Maturity of an installment of interest on any Bond which shall be March 1 and September 1 of each year, commencing September 1, Price. Issue Date means the date when the Issuer delivers the Bonds to the Purchaser in exchange for the Purchase Issuer means the City and any successors or assigns. Maturity when used with respect to any Bond means the date on which the principal of such Bond becomes due and payable as therein and in the Bond Resolution provided, whether at the Stated Maturity thereof or call for redemption or otherwise. Mayor means the duly elected and acting Mayor of the Issuer, or in the Mayor's absence, the duly appointed and/or elected Vice Mayor or Acting Mayor of the Issuer. C-3

148 Moody's means Moody's Investors Service, a corporation organized and existing under the laws of the State of Delaware, and 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 securities rating agency designated by the Issuer with notice to the Bond Insurer. Official Statement means the Issuer s Official Statement relating to the Bonds. Outstanding means, when used with reference to the Bonds, as of a particular date of determination, all Bonds theretofore, authenticated and delivered, except the following Bonds: and (a) (b) (c) (d) Bonds theretofore canceled by the Paying Agent or delivered to the Paying Agent for cancellation; Bonds deemed to be paid in accordance with the provisions of the Bond Resolution; Bonds in exchange for or in lieu of which other Bonds have been authenticated and delivered hereunder; Bonds, the principal or interest of which has been paid by the Bond Insurer. Owner when used with respect to any Bond means the Person in whose name such Bond is registered on the Bond Register. Whenever consent of the Owners is required pursuant to the terms of the Bond Resolution, and the Owner of the Bonds, as set forth on the Bond Register, is Cede & Co., the term Owner shall be deemed to be the Beneficial Owner of the Bonds. Participants means those financial institutions for whom the Securities Depository effects book-entry transfers and pledges of securities deposited with the Securities Depository, as such listing of Participants exists at the time of such reference. Paying Agent means the State Treasurer, and any successors and assigns. Permitted Investments shall mean the investments hereinafter described, provided, however, no moneys or funds shall be invested in a Derivative: (a) investments authorized by K.S.A and amendments thereto; (b) the municipal investment pool established pursuant to K.S.A a, and amendments thereto; (c) direct obligations of the United States Government or any agency thereof; (d) the Issuer's temporary notes issued pursuant to K.S.A and amendments thereto; (e) interest-bearing time deposits in commercial banks or trust companies located in the county or counties in which the Issuer is located which are insured by the Federal Deposit Insurance Corporation or collateralized by securities described in (c); (f) obligations of the federal national mortgage association, federal home loan banks, federal home loan mortgage corporation or government national mortgage association; (g) repurchase agreements for securities described in (c) or (f); (h) investment agreements or other obligations of a financial institution the obligations of which at the time of investment are rated in either of the three highest rating categories by Moody's or Standard & Poor's; (i) investments and shares or units of a money market fund or trust, the portfolio of which is comprised entirely of securities described in (c) or (f); (j) receipts evidencing ownership interests in securities or portions thereof described in (c) or (f); (k) municipal bonds or other obligations issued by any municipality of the State as defined in K.S.A which are general obligations of the municipality issuing the same; or (l) bonds of any municipality of the State as defined in K.S.A which have been refunded in advance of their maturity and are fully secured as to payment of principal and interest thereon by deposit in trust, under escrow agreement with a bank, of securities described in (c) or (f); or (m) other investment obligations authorized by the laws of the State and approved in writing by the Bond Insurer, all as may be further restricted or modified by amendments to applicable State law. Person means any natural person, corporation, partnership, joint venture, association, firm, joint-stock company, trust, unincorporated organization, or government or any agency or political subdivision thereof or other public body. Purchaser means the financial institution or investment banking firm that is original purchaser of the Bonds. Rating Agency means any company, agency or entity that provides, pursuant to request of the Issuer, financial ratings for the Bonds. Rebate Fund means the fund by that name created by the Bond Resolution. Record Dates for the interest payable on any Interest Payment Date means the fifteenth day (whether or not a Business Day) of the calendar month next preceding such Interest Payment Date. C-4

149 Redemption Date means, when used with respect to any Bond to be redeemed, the date fixed for the redemption of such Bond pursuant to the terms of the Bond Resolution. Redemption Price means, when used with respect to any Bond to be redeemed, the price at which such Bond is to be redeemed pursuant to the terms of the Bond Resolution, including the applicable redemption premium, if any, but excluding installments of interest whose Stated Maturity is on or before the Redemption Date. Replacement Bonds means Bonds issued to the Beneficial Owners of the Bonds in accordance with the Bond Resolution. SEC Rule means Rule 15c2-12 adopted by the Securities and Exchange Commission under the Securities Exchange Act of Securities Depository means, initially, DTC, and its successors and assigns. Special Record Date means the date fixed by the Paying Agent for the payment of Defaulted Interest. Standard & Poor's means Standard & Poor s Ratings Services, a division of McGraw Hill Financial Inc., a corporation organized and existing under the laws of the State of New York, and 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, Standard & Poor's shall be deemed to refer to any other nationally recognized securities rating agency designated by the Issuer with notice to the Bond Insurer. State means the state of Kansas. State Treasurer means the duly elected Treasurer of the State or, in the Treasurer's absence, the duly appointed Deputy Treasurer or acting Treasurer of the State. Stated Maturity when used with respect to any Bond or any installment of interest thereon means the date specified in such Bond and the Bond Resolution as the fixed date on which the principal of such Bond or such installment of interest is due and payable. Substitute Improvements means the substitute or additional improvements of the Issuer described in the Bond Resolution. Term Bonds means the Bonds scheduled to mature in the year Treasurer means the duly appointed and/or elected Treasurer of the Issuer or, in the Treasurer's absence, the duly appointed Deputy Treasurer or acting Treasurer of the Issuer. United States Government Obligations means bonds, notes, certificates of indebtedness, treasury bills or other securities constituting direct obligations of, or obligations the principal of and interest on which are fully and unconditionally guaranteed as to full and timely payment by, the United States of America, including evidences of a direct ownership interest in future interest or principal payment on obligations issued by the United States of America (including the interest component of obligations of the Resolution Funding Corporation), or securities which represent an undivided interest in such obligations, which obligations are rated in the highest rating category by a nationally recognized rating service and such obligations are held in a custodial account for the benefit of the Issuer. ESTABLISHMENT OF FUNDS AND ACCOUNTS; DEPOSIT AND APPLICATION OF BOND PROCEEDS Creation of Funds and Accounts. Simultaneously with the issuance of the Bonds, there shall be created within the Treasury of the Issuer the following Funds and Accounts: (a) (b) (c) (d) (e) Improvement Fund. Debt Service Account (within the Bond and Interest Fund). Costs of Issuance Account. Compliance Account. Rebate Fund. The above Funds and Accounts shall be administered in accordance with the provisions of the Bond Resolution so long as the Bonds are Outstanding. C-5

150 Deposit of Bond Proceeds. The net proceeds received from the sale of the Bonds shall be deposited simultaneously with the delivery of the Bonds as follows: (a) An amount necessary to pay Costs of Issuance shall be deposited in the Costs of Issuance Account. (b) The remaining balance of the proceeds derived from the sale of the Bonds shall be deposited in the Improvement Fund. Application of Moneys in the Improvement Fund. Moneys in the Improvement Fund shall be used for the sole purpose of: (a) paying the costs of the Improvements; (b) paying interest on the Bonds during construction of the Improvements; (c) paying Costs of Issuance; and (d) transferring any amounts to the Rebate Fund. Withdrawals from the Improvement Fund shall be made only when authorized by the governing body of the Issuer. Each authorization for costs of the Improvements shall be supported by a certificate executed by the Clerk (or designate) stating that such payment is being made for a purpose within the scope of the Bond Resolution and that the amount of such payment represents only the contract price of the property, equipment, labor, materials or service being paid for or, if such payment is not being made pursuant to an express contract, that such payment is not in excess of the reasonable value thereof. Authorizations for withdrawals for other authorized purposes shall be supported by a certificate executed by the Clerk (or designate) stating that such payment is being made for a purpose within the scope of the Bond Resolution. Upon completion of the Improvements, any surplus remaining in the Improvement Fund shall be deposited in the Debt Service Account. Substitution of Improvements; Reallocation of Proceeds. The Issuer may elect for any reason to substitute or add other public improvements to be financed with proceeds of the Bonds provided the following conditions are met: (a) the Substitute Improvement and the issuance of general obligation bonds to pay the cost of the Substitute Improvement has been duly authorized by the governing body of the Issuer in accordance with the laws of the State; (b) a resolution authorizing the use of the proceeds of the Bonds to pay the Financeable Costs of the Substitute Improvement has been duly adopted by the governing body of the Issuer pursuant to this Section, (c) the Attorney General of the State has approved the amendment made by such resolution to the transcript of proceedings for the Bonds to include the Substitute Improvements; and (d) the use of the proceeds of the Bonds to pay the Financeable Cost of the Substitute Improvement will not adversely affect the tax status of the Bonds under State or federal law. The Issuer may reallocate expenditure of Bond proceeds among all Improvements financed by the Bonds; provided the following conditions are met: (a) the reallocation is approved by the governing body of the Issuer; (b) the reallocation shall not cause the proceeds of the Bonds allocated to any Improvement to exceed the Financeable Costs of the Improvement; and (c) the reallocation will not adversely affect the tax status of the Bonds under State or federal law. Application of Moneys in the Debt Service Account. All amounts paid and credited to the Debt Service Account shall be expended and used by the Issuer for the sole purpose of paying the principal or Redemption Price of and interest on the Bonds as and when the same become due and the usual and customary fees and expenses of the Bond Registrar and Paying Agent. The Treasurer is authorized and directed to withdraw from the Debt Service Account sums sufficient to pay both principal or Redemption Price of and interest on the Bonds and the fees and expenses of the Bond Registrar and Paying Agent as and when the same become due, and to forward such sums to the Paying Agent in a manner which ensures that the Paying Agent will receive immediately available funds in such amounts on or before the Business Day immediately preceding the dates when such principal, interest and fees of the Paying Agent will become due. If, through the lapse of time or otherwise, the Owners of Bonds are no longer entitled to enforce payment of the Bonds or the interest thereon, the Paying Agent shall return said funds to the Issuer. All moneys deposited with the Paying Agent shall be deemed to be deposited in accordance with and subject to all of the provisions contained in the Bond Resolution and shall be held in trust by the Paying Agent for the benefit of the Owners of the Bonds entitled to payment from such moneys. Any moneys or investments remaining in the Debt Service Account after the retirement of the Bonds shall be transferred and paid into the Bond and Interest Fund. Payments Due on Saturdays, Sundays and Holidays. In any case where a Bond Payment Date is not a Business Day, then payment of principal, Redemption Price or interest need not be made on such Bond Payment Date but may be made on the next succeeding Business Day with the same force and effect as if made on such Bond Payment Date, and no interest shall accrue for the period after such Bond Payment Date. Application of Moneys in the Rebate Fund. There shall be deposited in the Rebate Fund such amounts as are required to be deposited therein pursuant to the Federal Tax Certificate. All money at any time deposited in the Rebate Fund shall be held in trust, to the extent required to satisfy the Rebate Amount (as defined in the Federal Tax Certificate), for payment to the United States of America, and neither the Issuer nor the Owner of any Bonds shall have any rights in or claim to such money. C-6

151 Application of Moneys in the Costs of Issuance Account. Moneys in the Costs of Issuance Account shall be used by the Issuer to pay the Costs of Issuance. Any funds remaining in the Costs of Issuance Account, after payment of all Costs of Issuance, but not later than the later of 30 days prior to the first Stated Maturity of principal or one year after the date of issuance of the Bonds, shall be transferred to the Compliance Account or Debt Service Account. Application of Moneys in the Compliance Account. Moneys in the Compliance Account shall be used by the Issuer to pay the to pay fees and expenses relating to compliance with federal arbitrage law and state or federal securities laws. Any funds remaining in the Compliance Account on the sixth anniversary of the Issue Date shall be transferred to the Debt Service Account. DEPOSIT AND INVESTMENT OF MONEYS Deposits. Moneys in each of the Funds and Accounts shall be deposited in a bank, savings and loan association or savings bank which are members of the Federal Deposit Insurance Corporation, or otherwise as permitted by State law, and which meet certain guidelines of State law. All such deposits shall be held in cash or invested in Permitted Investments or shall be adequately secured as provided by the laws of the State. Investments. Moneys held in any Fund or Account may be invested in accordance with the Bond Resolution and the Federal Tax Certificate, in Permitted Investments; provided, however, that no such investment shall be made for a period extending longer than to the date when the moneys invested may be needed for the purpose for which such fund was created. All earnings on any investments held in any Fund or Account shall accrue to and become a part of such Fund or Account; provided that, during the period of construction of the Improvements, earnings on the investment of such funds shall be credited to the Debt Service Account. DEFAULT AND REMEDIES Remedies. The provisions of the Bond Resolution, including the covenants and agreements herein contained, shall constitute a contract between the Issuer and the Owners of the Bonds. If an Event of Default occurs and shall be continuing, the Owner or Owners of not less than 10% in principal amount of the Bonds at the time Outstanding shall have the right for the equal benefit and protection of all Owners of Bonds similarly situated: (a) by mandamus or other suit, action or proceedings at law or in equity to enforce the rights of such Owner or Owners against the Issuer and its officers, agents and employees, and to require and compel duties and obligations required by the provisions of the Bond Resolution or by the Constitution and laws of the State; (b) by suit, action or other proceedings in equity or at law to require the Issuer, its officers, agents and employees to account as if they were the trustees of an express trust; and (c) by suit, action or other proceedings in equity or at law to enjoin any acts or things which may be unlawful or in violation of the rights of the Owners of the Bonds. The Paying Agent shall notify the Owners and Bond Insurer of any Event of Default of which it has actual notice. Limitation on Rights of Owners. The covenants and agreements of the Issuer contained in the Bond Resolution and in the Bonds shall be for the equal benefit, protection, and security of the Owners of any or all of the Bonds, all of which Bonds of any series shall be of equal rank and without preference or priority of one Bond over any other Bond in the application of the Funds and Accounts pledged to the payment of the principal of and the interest on the Bonds, or otherwise, except as to rate of interest, date of maturity and right of prior redemption as provided in the Bond Resolution. No one or more Owners secured hereby shall have any right in any manner whatever by his or their action to affect, disturb or prejudice the security granted and provided for in the Bond Resolution, or to enforce any right, except in the manner provided in the Bond Resolution, and all proceedings at law or in equity shall be instituted, had and maintained for the equal benefit of all Owners of such Outstanding Bonds. Remedies Cumulative. No remedy conferred upon the Owners is intended to be exclusive of any other remedy, but each such remedy shall be cumulative and in addition to every other remedy and may be exercised without exhausting and without regard to any other remedy conferred. No waiver of any default or breach of duty or contract by the Owner of any Bond shall extend to or affect any subsequent default or breach of duty or contract or shall impair any rights or remedies thereon. Control of Remedies By Bond Insurer Upon an Event of Default and Event of Insolvency. Upon the occurrence and continuance of an Event of Default, the Bond Insurer, provided the Bond Insurance Policy is in full force and effect and the Bond Insurer shall not be in default thereunder, shall be entitled to control and direct the enforcement of all rights and C-7

152 remedies granted to the Owners under the Bond Resolution. Any reorganization or liquidation plan with respect to the Issuer must be acceptable to the Bond Insurer. In the event of any reorganization or liquidation, the Bond Insurer shall have the right to vote on behalf of all Owners who hold the Bonds insured by the Bond Insurer absent a default by the Bond Insurer under the applicable Bond Insurance Policy insuring such Bonds. DEFEASANCE When any or all of the Bonds, redemption premium, if any, or scheduled interest payments thereon have been paid and discharged, then the requirements contained in the Bond Resolution and all other rights granted thereby shall terminate with respect to the Bonds or scheduled interest payments thereon so paid and discharged. Bonds, redemption premium, if any, or scheduled interest payments thereon shall be deemed to have been paid and discharged within the meaning of the Bond Resolution if there has been deposited with the Paying Agent, or other commercial bank or trust company located in the State and having full trust powers, at or prior to the Stated Maturity or Redemption Date of said Bonds or the interest payments thereon, in trust for and irrevocably appropriated thereto, moneys and/or Defeasance Obligations which, together with the interest to be earned on any such Defeasance Obligations, will be sufficient for the payment of the principal or Redemption Price of said Bonds and/or interest accrued to the Stated Maturity or Redemption Date, or if default in such payment has occurred on such date, then to the date of the tender of such payments. If the amount to be so deposited is based on the Redemption Price of any Bonds, no such satisfaction shall occur until: (a) the Issuer has elected to redeem such Bonds, and (b) either notice of such redemption has been given, or the Issuer has given irrevocable instructions, or shall have provided for an escrow agent to give irrevocable instructions, to the Bond Registrar to give such notice of redemption. The Issuer shall notify the Bond Insurer of any defeasance of the Bonds. Notwithstanding anything in the Bond Resolution 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 Issuer and the covenants, agreements and other obligations of the Issuer to the 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 Owners. TAX COVENANTS General Covenants. The Issuer covenants and agrees that it will comply with: (a) all applicable provisions of the Code necessary to maintain the exclusion from gross income for federal income tax purposes of the interest on the Bonds; and (b) all provisions and requirements of the Federal Tax Certificate. The Issuer will take such actions as may be necessary to comply with the Code and with all other applicable future laws, regulations, published rulings and judicial decisions, in order to ensure that the interest on the Bonds will remain excluded from federal gross income, to the extent any such actions can be taken by the Issuer. Survival of Covenants. The covenants contained in the Bond Resolution and in the Federal Tax Certificate shall remain in full force and effect notwithstanding the defeasance of the Bonds or any other provision of the Bond Resolution until such time as is set forth in the Federal Tax Certificate. CONTINUING DISCLOSURE REQUIREMENTS Disclosure Requirements. The Issuer covenants in the Bond Resolution with the Purchaser and the Beneficial Owners to provide and disseminate such information as is required by the SEC Rule and as further set forth in the Disclosure Undertaking and to make the provisions of the Disclosure Undertaking applicable to the Bonds. Such covenant shall be for the benefit of and enforceable by the Purchaser and the Beneficial Owners. Failure to Comply with Continuing Disclosure Requirements. In the event the Issuer fails to comply in a timely manner with its continuing disclosure covenants contained in the Bond Resolution, the Purchaser and/or any Beneficial Owner may make demand for such compliance by written notice to the Issuer. In the event the Issuer does not remedy such noncompliance within 10 days of receipt of such written notice, the Purchaser or any Beneficial Owner may in its discretion, without notice or demand, proceed to enforce compliance by a suit or suits in equity for the specific performance of such covenant or agreement or for the enforcement of any other appropriate legal or equitable remedy, as the Purchaser and/or any Beneficial Owner shall deem effectual to protect and enforce any of the duties of the Issuer under such preceding section. The Purchaser or Beneficial Owner shall provide a copy of any such demand or notice to the Bond Insurer. Notwithstanding any other provision of the Bond Resolution, failure of the Issuer to comply with its continuing disclosure covenants contained in the Bond Resolution shall not be considered an Event of Default under the Bond Resolution. C-8

153 PROVISIONS RELATING TO THE BOND INSURANCE POLICY Payment Procedure Pursuant to Bond Insurance Policy. As long as the Bond Insurance Policy shall be in full force and effect, the Issuer and the Paying Agent agree to comply with the following provisions: (a) In the event that 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 Issuer, the assignment and pledge of the trust estate and all covenants, agreements and other obligations of the Issuer 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 including, without limitation, any rights that such owners may have in respect of securities law violations arising from the offer and sale of the Bonds. (b) In the event that on the second (2nd) business day prior to the payment date on the Bonds, the Paying Agent has not received sufficient moneys to pay all principal of and interest on the Bonds due on the second (2nd) following business day, the Paying Agent shall immediately notify the Bond Insurer or its designee on the same business day by telephone or electronic mail, of the amount of the deficiency. (c) If any deficiency is made up in whole or in part prior to or on the payment date, the Paying Agent or Trustee shall so notify the Bond Insurer or its designee. (d) In addition, if the Paying Agent has notice that any Bondholder has been required to disgorge payments of principal of or interest on the Bonds pursuant to a final, non-appealable order by a court of competent jurisdiction that such payment constitutes an avoidable preference to such Bondholder within the meaning of any applicable bankruptcy law, then the Paying Agent shall notify the Bond Insurer or its designee of such fact by telephone or electronic mail, or by overnight or other delivery service as to which a delivery receipt is signed by a person authorized to accept delivery on behalf of the Bond Insurer. (e) The Paying Agent shall irrevocably be designated, appointed, directed and authorized to act as attorney-infact for holders of the Bonds as follows: (1) If there is a deficiency in amounts required to pay interest and/or principal on the Bonds, the Paying Agent or Trustee shall (i) execute and deliver to the Bond Insurer, in form satisfactory to the Bond Insurer, an instrument appointing the Bond Insurer as agent for such holders of the Bonds in any legal proceeding related to the payment of and an assignment to the Bond Insurer of the claims for interest on the Bonds, (ii) receive as designee of the respective holders (and not as Paying Agent) in accordance with the tenor of the Bond Insurance Policy payment from the Bond Insurer with respect to the claims for interest so assigned, and (iii) disburse the same to such respective holders; and (2) If there is a deficiency in amounts required to pay principal of the Bonds, the Paying Agent shall (i) execute and deliver to the Bond Insurer, in form satisfactory to the Bond Insurer, an instrument appointing the Bond Insurer as agent for such holder of the Bonds in any legal proceeding related to the payment of such principal and an assignment to the Bond Insurer of the Bond surrendered to the Bond Insurer (but such assignment shall be delivered only if payment from the Bond Insurer is received), (ii) receive as designee of the respective holders (and not as Paying Agent) in accordance with the tenor of the Bond Insurance Policy payment therefore from the Bond Insurer, and (iii) disburse the same to such holders. (f) Payments with respect to claims for interest on and principal of Bonds disbursed by the Paying Agent from proceeds of the Bond Insurance Policy shall not be considered to discharge the obligation of the Issuer with respect to such Bonds, and the Bond Insurer shall become the owner of such unpaid Bond and claims for the interest in accordance with the tenor of the assignment made to it under the provisions of the preceding paragraph (e) or otherwise. (g) Irrespective of whether any such assignment is executed and delivered, the Issuer and the Paying Agent shall agree for the benefit of the Bond Insurer that: (1) They recognize that to the extent the Bond Insurer makes payments directly or indirectly (e.g., by paying through the Paying Agent), on account of principal of or interest on the Bonds, the Bond Insurer will be subrogated to the rights of such holders to receive the amount of such principal and interest from the Issuer, with interest thereon, as provided and solely from the sources stated in the transaction documents and the Bonds; and (2) They will accordingly pay to the Bond Insurer the amount of such principal and interest, with interest thereon as provided in the transaction documents and the Bonds, but only from the sources and in the C-9

154 manner provided therein for the payment of principal of and interest on the Bonds to holders, and will otherwise treat the Bond Insurer as the owner of such rights to the amount of such principal and interest. Notices to the Bond Insurer. (a) While the Bond Insurance Policy is in effect, the Issuer shall, in addition to the other notice requirements contained in the Bond Resolution, furnish to the Bond Insurer: (1) As soon as practicable after the filing thereof, a copy of any financial statement, audit and/or annual report of the Issuer; (2) A copy of any notice to be given to the Owners, including, without limitation, notice of any redemption of or defeasance of Bonds, and any certificate rendered pursuant to this Bond Resolution relating to the security for the Bonds; (3) Copies of any filings or notices required to be given by the Issuer pursuant to the Disclosure Undertaking; (4) Notice of an Event of Default within five business days after the occurrence of such event; and (5) Such additional information as the Bond Insurer may reasonably request. etc. (b) The Issuer shall notify the Bond Insurer of any failure of the Issuer to provide relevant notices, certificates, (c) Notwithstanding any other provision of this Bond Resolution, the Issuer shall immediately notify the Bond Insurer if at any time there are insufficient moneys to make any payments of principal and/or interest as required and immediately upon the occurrence of any Event of Default hereunder. Suspension of Bond Insurer's Rights. Rights of the Bond Insurer to direct or consent to actions granted under this Bond Resolution shall be suspended during any period in which the Bond Insurer is in default in its payment obligations under the Bond Insurance Policy (except to the extent of amounts previously paid by the Bond Insurer and due and owing to the Bond Insurer) and shall be of no force or effect in the event the Bond Insurance Policy is no longer in effect or the Bond Insurer asserts that the Bond Insurance Policy is not in effect or the Bond Insurer shall have provided written notice that it waives such rights. MISCELLANEOUS PROVISIONS Annual Audit. Annually, promptly after the end of the Fiscal Year, the Issuer will cause an audit to be made of the financial statements of the Issuer for the preceding Fiscal Year by an Independent Accountant. Within 30 days after the completion of each such annual audit, a copy thereof shall be filed in the office of the Clerk, and a duplicate copy of the audit shall be mailed to the Bond Insurer. Such audits shall at all times during the usual business hours be open to the examination and inspection by any Owner of any of the Bonds, or by anyone acting for or on behalf of such user or Owner. Levy and Collection of Annual Tax. The governing body of the Issuer shall annually make provision for the payment of Debt Service Requirements on the Bonds as the same become due by levying and collecting the necessary taxes upon all of the taxable tangible property within the Issuer in the manner provided by law. The taxes referred to above shall be extended upon the tax rolls in each of the several years, respectively, and shall be levied and collected at the same time and in the same manner as the other ad valorem taxes of the Issuer are levied and collected. The proceeds derived from said taxes shall be deposited in the Bond and Interest Fund, shall be kept separate and apart from all other funds of the Issuer shall thereafter be deposited in the Debt Service Account and shall be used solely for the payment of the principal of and interest on the Bonds as and when the same become due, taking into account any scheduled mandatory redemptions, and the fees and expenses of the Paying Agent. If at any time said taxes are not collected in time to pay the principal of or interest on the Bonds when due, the Treasurer is hereby authorized and directed to pay said principal or interest out of the general funds of the Issuer and to reimburse said general funds for money so expended when said taxes are collected. Amendments. The rights and duties of the Issuer and the Owners, and the terms and provisions of the Bonds or of the Bond Resolution, may be amended or modified at any time in any respect by resolution of the Issuer with the written consent of the Bond Insurer and the Owners of not less than a majority in principal amount of the Bonds then Outstanding, such consent to be evidenced by an instrument or instruments executed by the Bond Insurer and such Owners and duly acknowledged or proved in the manner of a deed to be recorded, and such instrument or instruments shall be filed with the Clerk, but no such modification or alteration shall: (a) extend the maturity of any payment of principal or interest due upon any Bond; (b) effect a reduction in the amount which the Issuer is required to pay as principal of or interest on any Bond; (c) C-10

155 permit preference or priority of any Bond over any other Bond; or (d) reduce the percentage in principal amount of Bonds required for the written consent to any modification or alteration of the provisions of the Bond Resolution. Any provision of the Bonds or of the Bond Resolution may, however, be amended or modified by resolution duly adopted by the governing body of the Issuer at any time in any legal respect with the written consent of the Bond Insurer and the Owners of all of the Bonds at the time Outstanding. Without notice to or the consent of any Owners, the Issuer may amend or supplement the Bond Resolution for the purpose of curing any formal defect, omission, inconsistency or ambiguity, to grant to or confer upon the Owners any additional rights, remedies, powers or authority that may lawfully be granted to or conferred upon the Owners, to more precisely identify the Improvements, to reallocate proceeds of the Bonds among Improvements, to provide for Substitute Improvements, to conform the Bond Resolution to the Code or future applicable federal law concerning tax-exempt obligations, or in connection with any other change therein which is not materially adverse to the interests of the Owners. Notices, Consents and Other Instruments by Owners. Any notice, request, complaint, demand or other communication required or desired to be given or filed under the Bond Resolution shall be in writing, and shall be deemed duly given or filed if the same shall be: (a) duly mailed by registered or certified mail, postage prepaid; or (b) communicated via fax, with electronic or telephonic confirmation of receipt. Copies of such notices shall also be given to the Paying Agent and the Bond Insurer. The Issuer, the Paying Agent, the Bond Insurer and the Purchaser may from time to time designate, by notice given hereunder to the others of such parties, such other address to which subsequent notices, certificates or other communications shall be sent. All notices given by: (a) certified or registered mail as aforesaid shall be deemed duly given as of the date they are so mailed; (b) fax as aforesaid shall be deemed duly given as of the date of confirmation of receipt. If, because of the temporary or permanent suspension of regular mail service or for any other reason, it is impossible or impractical to mail any notice in the manner herein provided, then such other form of notice as shall be made with the approval of the Paying Agent shall constitute a sufficient notice. Electronic Transactions. The issuance of the Bonds and the transactions related thereto and described herein may be conducted and documents may be stored by electronic means. Severability. If any section or other part of the Bond Resolution, whether large or small, is for any reason held invalid, the invalidity thereof shall not affect the validity of the other provisions of the Bond Resolution. Governing Law. The Bonds and the Bond Resolution shall be governed exclusively by and construed in accordance with the applicable laws of the State. THE DISCLOSURE UNDERTAKING The Issuer has adopted an Omnibus Continuing Disclosure Undertaking, as may be amended and supplemented (the Disclosure Undertaking ) in which the Issuer covenants to provide certain financial and other information with respect to its outstanding obligations, including the Bonds, in order to assist the Participating Underwriter in complying with the provisions of the SEC Rule. In the Bond Resolution, the Issuer covenants to apply the provisions of the Disclosure Undertaking to the Bonds. Such covenants are for the benefit of and enforceable by the Participating Underwriter and the Beneficial Owners. The Issuer is the only obligated person with responsibility for continuing disclosure with respect to the Bonds. DEFINITIONS In addition to the definitions set forth in this APPENDIX C THE BOND RESOLUTION Definitions unless otherwise defined herein, the following capitalized terms shall have the following meanings: Annual Report means any Annual Report filed by the Issuer pursuant to, and as described in the Disclosure Undertaking, which may include the Issuer's CAFR, so long as the CAFR contains the Financial Information and Operating Data. Beneficial Owner means, with respect to a series of Bonds, any registered owner of any Bonds of such series and any person which: (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds of such series (including persons holding Bonds through nominees, depositories or other intermediaries); or (b) is treated as the owner of any Bonds of such series for federal income tax purposes. Bond Insurer means the provider of the bond insurance policy, if any, for any series of Bonds. C-11

156 Bonds means all bonds, notes, installment sale agreements, leases or certificates intended to be a debt obligation of the Issuer identified in the Disclosure Undertaking, including the Bonds. CAFR means the Issuer's Comprehensive Annual Financial Report, if any. Designated Agent means Gilmore & Bell, P.C. or one or more other entities designated in writing by the Issuer to serve as a designated agent of the Issuer for purposes of the Disclosure Undertaking. Dissemination Agent means any entity designated in writing by the Issuer to serve as dissemination agent pursuant to the Disclosure Undertaking and which has filed with the Issuer a written acceptance of such designation. EMMA means the Electronic Municipal Market Access system for municipal securities disclosures established and maintained by the MSRB, which can be accessed at Financial Information means the financial information of the Issuer described under the heading PROVISION OF ANNUAL REPORTS Financial Information. Material Events means any of the events listed under the heading REPORTING OF MATERIAL EVENTS. MSRB means the Municipal Securities Rulemaking Board, or any successor repository designated as such by the Securities and Exchange Commission in accordance with the SEC Rule. Official Statement means collectively the Issuer's Official Statement(s) for each series of the Bonds, including all appendices and exhibits thereto. Operating Data means the operating data of the Issuer described under the heading PROVISION OF ANNUAL REPORTS Operating Data. Participating Underwriter means each of the original underwriters of a series of Bonds required to comply with the SEC Rule in connection with the offering of such Bonds. Repository means the MSRB via EMMA. SEC means the Securities and Exchange Commission of the United States. PROVISION OF ANNUAL REPORTS The Issuer shall, or shall cause the Dissemination Agent to, not later than 240 days after the end of the Issuer's Fiscal Year, commencing with the Fiscal Year ended in 2013, file with the Repository the Issuer's Annual Report, consisting of the Financial Information and Operating Data described as follows: Financial Information. The audited financial statements of the Issuer for such prior Fiscal Year, prepared in accordance with generally accepted auditing standards, in substantially the format contained in Appendix B to the Official Statement. If audited financial statements are not available by the time the Annual Report is required to be filed, the Annual Report shall contain summary unaudited financial information and the audited financial statements shall be filed in the same manner as the Annual Report promptly after they become available. The accounting basis and the method of preparation of the financial statements of the Issuer are contained in Appendix B to the Official Statement. The method of preparation and basis of accounting of the Financial Information may not be changed to a basis less comprehensive than contained in the Official Statement, unless the Issuer provides notice of such change in the same manner as for a Material Event. Operating Data. Updates as of the end of the Fiscal Year of certain financial information and operating data described in the Official Statement (with such modifications to the formatting and general presentation thereof as deemed appropriate by the Issuer) generally described as follows: Sources of Revenue Assessed Valuation Tax Rates Aggregate Tax Levies Tax Collection Record Local Option Sales Tax* Major Taxpayers Current Indebtedness of the Issuer Lease Obligations State Loans Overlapping Indebtedness C-12

157 * This portion of the operating data is only required to be included in the annual reports for the Sales Tax Revenue Bonds, Series 2009 and Sales Tax Revenue Bonds, Series Additionally, the Issuer shall provide updates as of the end of the Fiscal Year for any material adverse changes in the portions of the final Official Statement concerning Property Valuations and Pension and Employee Retirement Plans. Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues with respect to which the Issuer is an obligated person (as defined by the SEC Rule), which have been filed with the Repository, the MSRB or the SEC. If the document included by reference is a final official statement, it must be available from the Repository. The Issuer shall clearly identify each such other document so included by reference. In each case, the Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross-reference other information as provided in this Section; provided that the audit report and accompanying financial statements may be submitted separately from the balance of the Annual Report and later than the date required above for the filing of the Annual Report if they are not available by that date. If the Issuer's Fiscal Year changes, it shall give notice of such change in the same manner as for a Material Event. From and after such time that Section (b)(5) of the SEC Rule applies to any series of Bonds, if the Annual Report is not filed within the time period specified in subsection (a) hereof, the Issuer shall send a notice to the Repository in a timely manner. Pursuant to Section (d)(3) of the SEC Rule, filing of an Annual Report shall not apply to any Bonds with a stated maturity of 18 months or less. REPORTING OF MATERIAL EVENTS No later than 10 Business Days after the occurrence of any of the following Material Events, the Issuer shall give, or cause to be given, to the Repository notice of the occurrence of any of the following Material Events with respect to the Bonds, with copies to the Bond Insurer: (1) principal and interest payment delinquencies; (2) non-payment related defaults, if material; (3) unscheduled draws on debt service reserves reflecting financial difficulties; (4) unscheduled draws on credit enhancements reflecting financial difficulties; (5) substitution of credit or liquidity providers, or their failure to perform; (6) adverse tax opinions; the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds; (7) modifications to rights of bondholders, if material; (8) bond calls, if material, and tender offers; (9) defeasances; (10) release, substitution or sale of property securing repayment of the Bonds, if material; (11) rating changes; (12) bankruptcy, insolvency, receivership or similar event of the Issuer (which shall be deemed to occur as provided in the SEC Rule); (13) the consummation of a merger, consolidation, or acquisition involving the Issuer or the sale of all or substantially all of the assets of the Issuer, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and (14) appointment of a successor or additional paying agent or trustee or the change of name of the paying agent or trustee, if material. Notwithstanding the foregoing, notice of Material Events described in (8) and (9) need not be given any earlier than the notice (if any) of the underlying event is given to the Owners of affected Bonds pursuant to the Bond Resolution. DISSEMINATION AGENT General. The Issuer may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under the Disclosure Undertaking, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent may resign as Dissemination Agent at any time upon 30 days prior written notice to the Issuer. The Dissemination Agent shall not be responsible in any manner for the content of any notice or report (including without limitation the Annual Report) prepared by the Issuer pursuant to the Disclosure Undertaking. C-13

158 Annual Reports. If a Dissemination Agent shall be appointed, not later than 15 Business Days prior to the date specified for providing the Annual Report to the Repository, the Issuer shall provide the Annual Report to the Dissemination Agent or the Repository; provided that an Annual Report shall not be required for any series of Bonds that has a stated maturity of 18 months or less. The Dissemination Agent shall file a report with the Issuer certifying that the Annual Report has been filed pursuant to the Disclosure Undertaking, stating the date it was filed, or that the Issuer has certified to the Dissemination Agent that the Issuer has filed the Annual Report with the Repository. If the Dissemination Agent has not received an Annual Report or has not received a written notice from the Issuer that it has filed an Annual Report to the Repository, by the date required in the Disclosure Undertaking, the Dissemination Agent shall send a notice to the Repository. Material Event Notices. (1) The Dissemination Agent shall, promptly after obtaining actual knowledge of the occurrence of any event that it believes may constitute a Material Event, contact the chief financial officer of the Issuer or his or her designee, or such other person as the Issuer shall designate in writing to the Dissemination Agent from time to time, inform such person of the event, and request that the Issuer promptly notify the Dissemination Agent in writing whether or not to report the event. (2) The Issuer will promptly respond in writing to any such request. Whenever the Issuer obtains knowledge of the occurrence of a Material Event, because of a notice from the Dissemination Agent or otherwise, the Issuer shall promptly determine if such event constitutes a Material Event and shall promptly notify the Dissemination Agent in writing. Such notice shall instruct the Dissemination Agent to report the occurrence. If the Issuer has determined that knowledge of an event is listed in (2), (7), (10) or (13) of the definition of a Material Event, is not material, the Issuer shall notify the Dissemination Agent in writing not to report the occurrence. (3) If the Dissemination Agent has been given written instructions by the Issuer to report the occurrence of a Material Event, the Dissemination Agent shall file a notice of such occurrence with the Repository within 10 Business Days after the occurrence, with copies to the Issuer and the Bond Insurer. Notwithstanding the foregoing, notice of Material Events described in paragraphs (8) and (9) need not be given any earlier than the notice (if any) of the underlying event is given to the Owners of affected Bonds pursuant to the Bond Resolution. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in the Disclosure Undertaking. The Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by the Issuer. Other Designated Agents. The Issuer may, from time to time, appoint or designate a Designated Agent to submit Annual Reports, Material Event notices, and other notices or reports pursuant to the Disclosure Undertaking. The Issuer hereby appoints the Dissemination Agent and the Designated Agent(s) solely for the purpose of submitting Issuer-approved Annual Reports, Material Event notices, and other notices or reports pursuant to the Disclosure Undertaking. The Issuer may revoke this designation at any time upon written notice to the Designated Agent. MISCELLANEOUS PROVISIONS Termination of Reporting Obligation. The Issuer's obligations under the Disclosure Undertaking for a particular series of Bonds shall terminate upon the legal defeasance, prior redemption or payment in full of that series of Bonds. If the Issuer's obligations hereunder are assumed in full by some other entity as permitted in the Bond Resolution, such person shall be responsible for compliance with under the Disclosure Undertaking in the same manner as if it were the Issuer, and the Issuer shall have no further responsibility hereunder. If such termination or assumption occurs prior to the final maturity of such Bonds, the Issuer shall give notice of such termination or assumption in the same manner as for a Material Event. Amendment; Waiver. In conjunction with the public offering of any series of Bonds, the Issuer and the Dissemination Agent, if any, may amend the categories of Operating Data to be updated to conform to the operating data included in the final Official Statement for such series of Bonds, in conformance with the requirements and interpretations of the SEC Rule as of the date of such final Official Statement, without further amendment to the Disclosure Undertaking. Thereafter, the Operating Data to be filed by the Issuer with the Repository with respect to the Bonds (and all other series of Bonds then subject to the Disclosure Undertaking) shall be deemed to be amended to reflect the requirements of the revised Operating Data for the new series of Bonds. The Issuer may amend and any other provision of the Disclosure Undertaking may be waived, provided that Bond Counsel or other counsel experienced in federal securities law matters provides the Issuer with its written opinion that the undertaking of the Issuer contained therein, as so amended or after giving effect to such waiver, is in compliance with the SEC Rule and all current amendments thereto and interpretations thereof that are applicable to the Disclosure Undertaking; provided, however, that the Disclosure Undertaking, may be amended for the purpose of (a) extending the coverage of the C-14

159 Disclosure Undertaking to any additional series of Bonds or (b) removing reference to any series of Bonds for which the Issuer s reporting obligations have terminated, each without the provision of a written opinion as otherwise required by this paragraph. If a provision of the Disclosure Undertaking is amended or waived with respect to a series of Bonds pursuant to this paragraph, the Issuer shall describe such amendment or waiver in the next Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or, in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the Issuer. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements: (a) notice of such change shall be given in the same manner as for a Material Event; and (b) the Annual Report for the year in which the change is made should present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. Additional Information. Nothing shall be deemed to prevent the Issuer from disseminating any other information, using the means of dissemination set forth in the Disclosure Undertaking or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Material Event, in addition to that which is required by the Disclosure Undertaking. If the Issuer chooses to include any information in any Annual Report or notice of occurrence of a Material Event, in addition to that which is specifically required by the Disclosure Undertaking, the Issuer shall have no obligation under the Disclosure Undertaking to update such information or include it in any future Annual Report or notice of occurrence of a Material Event. Noncompliance. In the event of a failure of the Issuer or the Dissemination Agent, if any, to comply with any provision of the Disclosure Undertaking with respect to a series of Bonds, any Participating Underwriter or any Beneficial Owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandamus or specific performance by court order, to cause the Issuer or the Dissemination Agent, if any, as the case may be, to comply with its obligations under the Disclosure Undertaking. Noncompliance with the provisions of the Disclosure Undertaking shall not be deemed an Event of Default under the Bond Resolution or the Bonds, and the sole remedy under the Disclosure Undertaking in the event of any failure of the Issuer or the Dissemination Agent, if any, to comply with the Disclosure Undertaking shall be an action to compel performance. Electronic Transactions. Actions taken under the Disclosure Undertaking and the arrangements described therein may be conducted and related documents may be stored by electronic means. Beneficiaries. The Disclosure Undertaking shall inure solely to the benefit of the Issuer, the Dissemination Agent, if any, each Participating Underwriter and Beneficial Owners from time to time with respect to a series of Bonds, and shall create no rights in any other person or entity. State. Governing Law. The Disclosure Undertaking shall be governed by and construed in accordance with the laws of the [BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK] C-15

160 APPENDIX D SPECIMEN MUNICIPAL BOND INSURANCE POLICY

161 MUNICIPAL BOND INSURANCE POLICY ISSUER: [NAME OF ISSUER] Policy No: MEMBER: [NAME OF MEMBER] BONDS: $ in aggregate principal amount of [NAME OF TRANSACTION] [and maturing on] Effective Date: Risk Premium: $ Member Surplus Contribution: $ Total Insurance Payment: $ BUILD AMERICA MUTUAL ASSURANCE COMPANY ( BAM ), for consideration received, hereby UNCONDITIONALLY AND IRREVOCABLY agrees to pay to the trustee (the Trustee ) or paying agent (the Paying Agent ) for the Bonds named above (as set forth in the documentation providing for the issuance and securing of the Bonds), for the benefit of the Owners or, at the election of BAM, directly to each Owner, subject only to the terms of this Policy (which includes each endorsement hereto), that portion of the principal of and interest on the Bonds that shall become Due for Payment but shall be unpaid by reason of Nonpayment by the Issuer. On the later of the day on which such principal and interest becomes Due for Payment or the first Business Day following the Business Day on which BAM shall have received Notice of Nonpayment, BAM will disburse (but without duplication in the case of duplicate claims for the same Nonpayment) to or for the benefit of each Owner of the Bonds, the face amount of principal of and interest on the Bonds that is then Due for Payment but is then unpaid by reason of Nonpayment by the Issuer, but only upon receipt by BAM, in a form reasonably satisfactory to it, of (a) evidence of the Owner s right to receive payment of such principal or interest then Due for Payment and (b) evidence, including any appropriate instruments of assignment, that all of the Owner s rights with respect to payment of such principal or interest that is Due for Payment shall thereupon vest in BAM. A Notice of Nonpayment will be deemed received on a given Business Day if it is received prior to 1:00 p.m. (New York time) on such Business Day; otherwise, it will be deemed received on the next Business Day. If any Notice of Nonpayment received by BAM is incomplete, it shall be deemed not to have been received by BAM for purposes of the preceding sentence, and BAM shall promptly so advise the Trustee, Paying Agent or Owner, as appropriate, any of whom may submit an amended Notice of Nonpayment. Upon disbursement under this Policy in respect of a Bond and to the extent of such payment, BAM shall become the owner of such Bond, any appurtenant coupon to such Bond and right to receipt of payment of principal of or interest on such Bond and shall be fully subrogated to the rights of the Owner, including the Owner s right to receive payments under such Bond. Payment by BAM either to the Trustee or Paying Agent for the benefit of the Owners, or directly to the Owners, on account of any Nonpayment shall discharge the obligation of BAM under this Policy with respect to said Nonpayment. Except to the extent expressly modified by an endorsement hereto, the following terms shall have the meanings specified for all purposes of this Policy. Business Day means any day other than (a) a Saturday or Sunday or (b) a day on which banking institutions in the State of New York or the Insurer s Fiscal Agent (as defined herein) are authorized or required by law or executive order to remain closed. Due for Payment means (a) when referring to the principal of a Bond, payable on the stated maturity date thereof or the date on which the same shall have been duly called for mandatory sinking fund redemption and does not refer to any earlier date on which payment is due by reason of call for redemption (other than by mandatory sinking fund redemption), acceleration or other advancement of maturity (unless BAM shall elect, in its sole discretion, to pay such principal due upon such acceleration together with any accrued interest to the date of acceleration) and (b) when referring to interest on a Bond, payable on the stated date for payment of interest. Nonpayment means, in respect of a Bond, the failure of the Issuer to have provided sufficient funds to the Trustee or, if there is no Trustee, to the Paying Agent for payment in full of all principal and interest that is Due for Payment on such Bond. Nonpayment shall also include, in respect of a Bond, any payment made to an Owner by or on behalf of the Issuer of principal or interest that is Due for Payment, which payment has been recovered from such Owner pursuant to the United States Bankruptcy Code in accordance with a final, nonappealable order of a court having competent jurisdiction. Notice means delivery to BAM of a notice of claim and certificate, by certified mail, or telecopy as set forth on the attached Schedule or other acceptable electronic delivery, in a form satisfactory to BAM, from and signed by an Owner, the Trustee or the Paying Agent, which notice shall specify (a) the person or entity making the claim, (b) the Policy Number, (c) the claimed amount, (d) payment instructions and (e) the date such claimed amount becomes or became Due for Payment. Owner means, in respect of a Bond, the person or entity who, at the time of Nonpayment, is entitled under the terms of such Bond to payment thereof, except that Owner shall not include the Issuer, the Member or any other person or entity whose direct or indirect obligation constitutes the underlying security for the Bonds.