CITY OF DRAPER, UTAH

Transcription

1 NEW ISSUE Issued in Book-Entry Only Form RATING: S&P AA See RATING herein. In the opinion of Ballard Spahr LLP, Bond Counsel to the City, interest on the Series 2012 Bonds is excludable from gross income for purposes of the federal income tax, assuming continuing compliance with the requirements of the federal tax laws. Interest on the Series 2012 Bonds is not a preference item for purposes of either individual or corporate federal alternative minimum tax; however, interest paid to corporate holders of the Series 2012 Bonds may be indirectly subject to alternative minimum tax under certain circumstances. Bond Counsel is also of the opinion that interest on the Series 2012 Bonds is exempt from State of Utah individual income tax under currently existing law. See TAX MATTERS, herein. CITY OF DRAPER, UTAH $4,915,000 SALES TAX REVENUE BONDS, SERIES 2012A Dated: Date of Initial Delivery $7,115,000 SALES TAX REVENUE REFUNDING BONDS, SERIES 2012B Due: May 1, as shown on the inside cover The Series 2012 Bonds are issued by the City as fully registered bonds, and when initially issued, will be registered in the name of Cede & Co., as nominee of DTC, New York, New York, which will act as securities depository for the Series 2012 Bonds. Purchases of Series 2012 Bonds will be made in book-entry form only, in the principal amount of $5,000 or any integral multiple thereof. Interest on the Series 2012 Bonds is payable on May 1 and November 1 of each year, commencing May 1, 2013, by U.S. Bank National Association, as Paying Agent, all as more fully described herein. Payment of the principal of and interest on such Series 2012 Bonds will be made directly to DTC or its nominee. Disbursement of such payments to DTC participants is the responsibility of DTC and disbursement of such payments to the beneficial owners is the responsibility of DTC participants. See THE SERIES 2012 BONDS Book-Entry Only System herein. The Series 2012 Bonds are subject to optional and mandatory sinking fund redemption prior to maturity as described herein. See THE SERIES 2012 BONDS Redemption Provisions herein. The proceeds of the Series 2012A Bonds will be used by the City for the purpose of (i) financing the acquisition of recreational open space property, constructing trails and trail-related improvements and related improvements and (ii) paying a portion of the costs of issuance with respect to the Series 2012 Bonds. The proceeds of the Series 2012B Bonds will be used by the City for the purpose of (i) refunding certain outstanding lease revenue bonds of the Municipal Building Authority of the City of Draper and certain outstanding sales tax revenue bonds of the City and (ii) paying a portion of the costs of issuance with respect to the Series 2012 Bonds. The Series 2012 Bonds are special limited obligations of the City, payable solely from the Revenues, moneys, securities and certain funds and accounts pledged therefor in the Indenture. The Revenues consist of amounts received by the City from the imposition of the Pledged Sales and Use Taxes. No assurance can be given that the Revenues derived from the Pledged Sales and Use Taxes will remain sufficient for the payment of the principal or interest on the Series 2012 Bonds and the City is limited by Utah law in its ability to increase the rate of such taxes. See RISK FACTORS herein. The Series 2012 Bonds do not constitute a general obligation indebtedness, and are not secured by a pledge of the ad valorem taxing power or the full faith and credit of the City, and are not obligations of the State of Utah or any other agency or other political subdivision or entity of the State of Utah. The City will not mortgage or grant any security interest in the improvements financed with the proceeds of the Series 2012 Bonds or any portion thereof to secure payment of the Series 2012 Bonds. See SECURITY FOR THE BONDS herein. The Series 2012 Bonds are offered when, as and if issued by the City and subject to the approval of their legality by Ballard Spahr LLP, Bond Counsel to the City. Certain matters relating to disclosure will be passed upon for the City by Ballard Spahr LLP, Disclosure Counsel to the City. Certain legal matters will be passed upon for the City by Doug Ahlstrom, Esq., City Attorney. It is expected that the Series 2012 Bonds, in book-entry only form, will be available for delivery to DTC or its agent on or about October 30, This cover page contains certain information for quick reference only. It is not a summary of this issue. Investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision. Capitalized terms used on this cover page shall have the meanings given such terms in the body of this Official Statement. This Official Statement is dated October 24, 2012, and the information contained herein speaks only as of that date.

2 MATURITIES, AMOUNTS, INTEREST RATES, AND PRICES OR YIELDS $4,915,000 CITY OF DRAPER, UTAH SALES TAX REVENUE BONDS, SERIES 2012A Due Principal Interest (May 1) Amount Rate Yield CUSIP No. ** 2028 $600, % 2.80% c 26145T BA4 $1,640, % Term Bonds due May 1, 2027; Price: % c ; CUSIP No T AZ0** $2,675, % Term Bonds due May 1, 2032; Price: % c ; CUSIP No 26145T BE6** $7,115,000 CITY OF DRAPER, UTAH SALES TAX REVENUE REFUNDING BONDS, SERIES 2012B Due (May 1) Principal Amount Interest Rate Yield CUSIP No. ** 2013 $210, % 0.40% 26145T BF , T BG , T BH , T BJ , T BK , T BL , T BM , T BN , T BP , T BQ , c 26145T BR , c 26145T BS5 c Yield or priced to par call on May 1, ** The above-referenced CUSIP number(s) have been assigned by an independent company not affiliated with the parties to this bond transaction and are included solely for the convenience of the holders of the Series 2012 Bonds. None of the City, the Trustee or the Underwriter is responsible for the selection or uses of such CUSIP numbers, and no representation is made as to its correctness on the particular Series 2012 Bonds or as indicated above. The CUSIP number for a specific maturity is subject to being changed after the issuance of the Series 2012 Bonds as a result of various subsequent actions including, but not limited to, a refunding in whole or in part of such maturity or as a result of the procurement of secondary market portfolio insurance or other similar enhancement by investors that is applicable to all or a portion of certain maturities.

3 The information set forth herein has been obtained from the City, DTC, and other sources that are believed to be reliable. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made thereafter shall under any circumstances create any implication that there has been no change in the affairs of the City, or in any other information contained herein since the date hereof. No dealer, broker, salesman or any other person has been authorized by the City or the Underwriter to give any information or to make any representations, other than those contained in this Official Statement, in connection with the offering contained herein, and, if given or made, such information or representations must not be relied upon. This Official Statement does not constitute an offer to sell or solicitation of an offer to buy nor shall there be any sale of the Series 2012 Bonds by any person in any jurisdiction in which it is unlawful for such offer, solicitation or sale. Certain statements included or incorporated by reference in this Official Statement constitute forwardlooking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Such statements are generally identifiable by the terminology used such as plan, expect, estimate, project, budget or other similar words. Forward-looking statements are included (among other places) in the Official Statement under the captions THE SERIES 2012A PROJECT, PLAN OF REFUNDING, ESTIMATED SOURCES AND USES OF FUNDS, and DEBT STRUCTURE OF THE CITY Outstanding Municipal Indebtedness of the City and SECURITY FOR THE BONDS Future Obligations Payable from Revenues. The forward-looking statements in this Official Statement are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in or implied by such statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. The yields at which the Series 2012 Bonds are offered to the public may vary from the initial reoffering yields on the inside front cover page of this Official Statement. In connection with this offering, the Underwriter may engage in transactions that stabilize, maintain or otherwise affect market prices of the Series 2012 Bonds. Such transactions, if commenced, may be discontinued at any time. The City maintains a website; however, the information presented there is not a part of this Official Statement and should not be relied upon in making an investment decision with respect to the Series 2012 Bonds. THE SERIES 2012 BONDS WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAW AND WILL NOT BE LISTED ON ANY STOCK OR OTHER SECURITIES EXCHANGE. THE SERIES 2012 BONDS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS OFFICIAL STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

4 CITY OF DRAPER, UTAH $4,915,000 SALES TAX REVENUE BONDS, SERIES 2012A $7,115,000 SALES TAX REVENUE REFUNDING BONDS, SERIES 2012B City of Draper 1020 East Pioneer Road Draper, Utah (801) (801) (Fax) MAYOR AND CITY COUNCIL Darrell Smith... Mayor William Colbert... Councilmember William Rappleye... Councilmember Jeff Stenquist... Councilmember Alan Summerhays... Councilmember Troy Walker... Councilmember CITY ADMINISTRATION David Dobbins... Acting City Manager Danyce Steck... Finance Director Tracy Norr... City Recorder Doug Ahlstrom... City Attorney TRUSTEE, PAYING AGENT, REGISTRAR AND ESCROW AGENT U.S. Bank National Association 170 South Main Street, Suite 200 Salt Lake City, Utah (801) (801) (Fax) FINANCIAL ADVISOR Lewis Young Robertson & Burningham, Inc. 41 North Rio Grande, Suite 101 Salt Lake City, Utah (801) (801) (Fax) BOND AND DISCLOSURE COUNSEL UNDERWRITER Ballard Spahr LLP George K. Baum & Company 201 South Main Street, Suite West South Temple, Suite 1090 Salt Lake City, Utah Salt Lake City, Utah (801) (801) (801) (Fax) (801) (Fax) i

5 TABLE OF CONTENTS INTRODUCTION... 1 The City... 1 Authorization and Purpose of the Series 2012 Bonds... 1 Security and Source of Payment... 2 Pledged Sales and Use Taxes... 2 Outstanding Parity Obligations... 2 No Debt Service Reserve... 2 State Pledge of Nonimpairment... 3 Redemption Provisions... 3 Registration, Denominations and Manner of Payment... 3 Tax Exemption... 3 Conditions of Delivery, Anticipated Date, Manner and Place of Delivery... 3 Continuing Disclosure Agreement... 4 Basic Documentation... 4 Contact Persons... 4 THE SERIES 2012 BONDS... 5 General... 5 Redemption Provisions... 5 Book-Entry Only System... 6 Registration, Transfer and Exchange... 6 SECURITY FOR THE BONDS... 7 Flow of Funds... 7 Pledged Sales and Use Taxes... 8 Largest Sales Tax Payers Sources of Revenue (by Sector) Debt Service Coverage on the Bonds No Debt Service Reserve Additional Parity Debt Future Obligations Payable from Revenues RISK FACTORS Uncertainty of Sales and Use Tax Revenues Series 2012 Bonds are Limited Obligations Limitation on Increasing Rates for Pledged Sales and Use Taxes THE SERIES 2012A PROJECT PLAN OF REFUNDING ESTIMATED SOURCES AND USES OF FUNDS DEBT SERVICE SCHEDULE THE CITY General Information Form of Government Employee Workforce and Retirement System Other Postemployment Benefits Risk Management Investment of Funds DEBT STRUCTURE OF THE CITY Outstanding Municipal Indebtedness of the City Outstanding Municipal Indebtedness of the Municipal Building Authority No Defaulted Bonds Other Financial Considerations FINANCIAL INFORMATION REGARDING THE CITY Five-Year Financial Summaries Sources of General Fund Revenues Taxable and Fair Market Value of Property Historical Summary of The City s Taxable Value LEGAL MATTERS General Litigation TAX MATTERS Federal Income Tax State of Utah Income Tax Changes in Federal and State Tax Law UNDERWRITING FINANCIAL ADVISOR RATING CONTINUING DISCLOSURE ESCROW VERIFICATION MISCELLANEOUS Independent Accountants Additional Information APPENDIX A AUDITED BASIC FINANCIAL STATEMENTS WITH INDEPENDENT AUDITOR S REPORT FOR THE YEAR ENDED JUNE 30, A-1 APPENDIX B EXTRACTS OF CERTAIN PROVISIONS OF THE GENERAL INDENTURE OF TRUST... B-1 APPENDIX C ECONOMIC AND DEMOGRAPHIC INFORMATION REGARDING THE CITY AND SALT LAKE COUNTY... C-1 APPENDIX D FORM OF CONTINUING DISCLOSURE AGREEMENT... D-1 APPENDIX E FORM OF OPINION OF BOND COUNSEL... E-1 APPENDIX F PROVISIONS REGARDING BOOK-ENTRY ONLY SYSTEM... F-1 ii

6 OFFICIAL STATEMENT RELATING TO CITY OF DRAPER, UTAH $4,915,000 SALES TAX REVENUE BONDS, SERIES 2012A $7,115,000 SALES TAX REVENUE REFUNDING BONDS, SERIES 2012B INTRODUCTION This Official Statement, including the cover page, introduction, and appendices, provides information in connection with the issuance and sale by City of Draper, Utah (the City ) of its $4,915,000 Sales Tax Revenue Bonds, Series 2012A (the Series 2012A Bonds ) and its $7,115,000 Sales Tax Revenue Refunding Bonds, Series 2012B (the Series 2012B Bonds and together with the Series 2012A Bonds, the Series 2012 Bonds ), initially issued in book-entry form only. This introduction is not a summary of this Official Statement. It is only a brief description of and guide to, and is qualified by more complete and detailed information contained in the entire Official Statement, including the cover page and appendices hereto, and the documents summarized or described herein. A full review should be made of the entire Official Statement. The offering of Series 2012 Bonds to potential investors is made only by means of the entire Official Statement. Capitalized terms used herein and not otherwise defined shall have the meaning given to such terms in the hereinafter defined General Indenture, extracts of which, including definitions contained therein, are included in Appendix B hereto. See also the following appendices attached hereto: APPENDIX A AUDITED BASIC FINANCIAL STATEMENTS WITH INDEPENDENT AUDITOR S REPORT FOR THE YEAR ENDED JUNE 30, 2011; APPENDIX B EXTRACTS OF CERTAIN PROVISIONS OF THE GENERAL INDENTURE OF TRUST; APPENDIX C ECONOMIC AND DEMOGRAPHIC INFORMATION REGARDING THE CITY AND SALT LAKE COUNTY; APPENDIX D FORM OF CONTINUING DISCLOSURE AGREEMENT; APPENDIX E-1 FORM OF OPINION OF BOND COUNSEL; and APPENDIX F PROVISIONS REGARDING BOOK-ENTRY ONLY SYSTEM. The City The City, incorporated in 1978, covers an area of approximately 30 square miles and is located in the southeast portion of Salt Lake County ( Salt Lake County ) in the state of Utah (the State ). In addition, a small portion of the City is located in Utah County ( Utah County ). The City had 42,274 residents according to the 2010 U.S. Census. For more complete information, see THE CITY, DEBT STRUCTURE OF THE CITY, FINANCIAL INFORMATION REGARDING THE CITY, and APPENDICES A and C herein. Authorization and Purpose of the Series 2012 Bonds The Series 2012 Bonds are being issued pursuant to (i) the Local Government Bonding Act, Title 11, Chapter 14, Utah Code Annotated 1953, as amended, and the Utah Refunding Bond Act, Title 11, Chapter 27, Utah Code Annotated 1953, as amended (collectively the Act ) and other applicable provisions of law; (ii) a resolution adopted by the City on September 4, 2012 (the Resolution ) which provide for the issuance of the Series 2012 Bonds; and (iii) a General Indenture of Trust, dated March 1, 2004, as heretofore amended and supplemented (the General Indenture ), and as further supplemented by a Second Supplemental Indenture of Trust dated as of October 1, 2012 (the Second Supplemental Indenture and together with the General Indenture, the Indenture ) each by and between the City and U.S. Bank National Association, as trustee (the Trustee ). The proceeds of the Series 2012A Bonds will be used by the City for the purpose of (i) financing the acquisition of recreational open space property, constructing trails and trail-related improvements and related improvements (the Series 2012A Project ) and (ii) paying a portion of the costs of issuance with respect to the Series 2012 Bonds. The proceeds of the Series 2012B Bonds will be used by the City for the purpose of (i) refunding certain outstanding lease revenue bonds of the Municipal Building Authority of the City of Draper and

7 certain outstanding sales tax revenue bonds of the City and (ii) paying a portion of the costs of issuance with respect to the Series 2012 Bonds. See THE SERIES 2012A PROJECT, PLAN OF REFUNDING, and ESTIMATED SOURCES AND USES OF FUNDS herein. Security and Source of Payment General. The Series 2012 Bonds will be special limited obligations of the City, payable solely from and secured solely by a pledge of the hereinafter defined Revenues and certain funds and accounts established by the Indenture. The Revenues consist of all the revenues produced by local sales and use taxes levied by the City under the Local Sales and Use Tax Act, Title 59, Chapter 12, Part 2, Utah Code Annotated 1953, as amended (the Pledged Sales and Use Taxes ). No assurance can be given that the Revenues derived from the Pledged Sales and Use Taxes will remain sufficient for the payment of the principal or interest on the Series 2012 Bonds and the City is limited by State law in its ability to increase the rate of such taxes. See RISK FACTORS herein. The Series 2012 Bonds do not constitute a general obligation indebtedness, a pledge of the ad valorem taxing power or the full faith and credit of the City, and are not obligations of the State or any other agency or other political subdivision or entity of the State. The City will not mortgage or grant any security interest in the improvements financed with the proceeds of the Series 2012 Bonds or any portion thereof to secure payment of the Series 2012 Bonds. See SECURITY FOR THE BONDS herein. Pledged Sales and Use Taxes The City presently levies a local sales and use tax (representing all of the Pledged Sales and Use Taxes) at the rate of 1.00% on all taxable sales of goods and services. The local sales and use tax is collected by the Utah State Tax Commission and distributed monthly to the City and all other counties and municipalities in the State. Those distributions are based on formulas that take into account the population of and taxable sales in all local governments in the State that impose a sales and use tax. The City estimates that the Pledged Sales and Use Taxes by fiscal year 2014 will be approximately $8,350,000 and, holding such estimate constant through the maturity of the Series 2012 Bonds, provide projected coverage of approximately 3.99 times the estimated maximum aggregate annual debt service for the Series 2012 Bonds, the anticipated issuance of the Series 2012C Bonds (defined below), and the hereinafter referred to Outstanding Parity Obligations, assuming that Revenues from Pledged Sales and Use Taxes remain at their estimated 2013 level over the life of the Series 2012 Bonds. See SECURITY FOR THE BONDS Pledged Sales and Use Taxes and Debt Service Coverage below for additional information. Outstanding Parity Obligations The City has previously issued its Sales Tax Revenue Bonds, Series 2004 (the Series 2004 Bonds ) currently outstanding in the principal amount of $2,820,000. Proceeds from the Series 2012B Bonds will be used to redeem prior to their maturity the outstanding Series 2004 Bonds maturing on and after May 1, 2015 (the Refunded City Bonds ). The remaining Series 2004 Bonds (sometimes referred to herein as the Outstanding Parity Bonds ) are secured by a parity lien on the Pledged Sales and Use Taxes. The City may issue Additional Bonds payable on a parity with the Series 2012 Bonds upon complying with certain requirements set forth in the Indenture. The City currently anticipates issuing in calendar year 2012 approximately $13.5 million dollars of Additional Bonds (the Series 2012C Bonds ) to finance an aquarium and related improvements. Any Additional Bonds together with the Series 2012 Bonds and the Outstanding Parity Bonds are sometimes collectively referred to herein as the Bonds. See SECURITY FOR THE BONDS Additional Parity Debt herein. No Debt Service Reserve There is no Debt Service Reserve Requirement with respect to the Series 2012 Bonds. 2

8 State Pledge of Nonimpairment In accordance with Section , Utah Code Annotated 1953, as amended, the State pledges and agrees with the holders of the Series 2012 Bonds that it will not alter, impair or limit the excise taxes in a manner that reduces the amounts to be rebated to the City which are devoted or pledged for the payment of the Series 2012 Bonds until the Series 2012 Bonds, together with applicable interest, are fully met and discharged; provided, however, that nothing shall preclude such alteration, impairment or limitation if and when adequate provision shall be made by law for the protection of the holders of the Series 2012 Bonds. The City notes that this provision has not been interpreted by a court of law and, therefore, the extent that such provision would (i) be upheld under constitutional or other legal challenge, (ii) protect the current tax rates and collection of all Pledged Sales and Use Taxes, or (iii) impact any other aspect of Pledged Sales and Use Taxes, cannot be predicted by the City. Redemption Provisions The Series 2012 Bonds are subject to optional and mandatory sinking fund redemption prior to maturity as described herein. See THE SERIES 2012 BONDS Redemption Provisions herein. Registration, Denominations and Manner of Payment The Series 2012 Bonds are issuable only as fully registered bonds without coupons and, when initially issued, will be registered in the name of Cede & Co., as nominee for The Depository Trust Company, New York, New York ( DTC ). DTC will act as securities depository of the Series 2012 Bonds. Purchases of Bonds will be made in book-entry form only, in the principal amount of $5,000 or any integral multiple thereof, through brokers and dealers who are, or who act through, DTC Participants. Beneficial Owners of the Series 2012 Bonds will not be entitled to receive physical delivery of bond certificates so long as DTC or a successor securities depository acts as the securities depository with respect to the Series 2012 Bonds. Principal of and interest on the Series 2012 Bonds (interest payable May 1 and November 1 of each year, commencing May 1, 2013) are payable by U.S. Bank National Association, as paying agent (the Paying Agent ), to the Registered Owners of the Series 2012 Bonds. So long as DTC is the Registered Owner, it will, in turn, remit such principal and interest to its Participants, for subsequent disbursements to the Beneficial Owners of the Series 2012 Bonds, as described under THE SERIES 2012 BONDS Book-Entry Only System herein. Tax Exemption Federal Income Tax. In the opinion of Ballard Spahr LLP, Bond Counsel to the City, interest on the Series 2012 Bonds is excludable from gross income for purposes of federal income tax, assuming continuing compliance with the requirements of federal tax laws. Interest on the Series 2012 Bonds is not a preference item for purposes of either individual or corporate federal alternative minimum tax; however, interest paid to corporate holders of the Series 2012 Bonds may be indirectly subject to alternative minimum tax under certain circumstances. State Income Tax. Bond Counsel is also of the opinion that, under currently existing laws, interest on the Series 2012 Bonds is exempt from State of Utah individual income taxes. See TAX MATTERS herein. No Further Opinion. Bond Counsel expresses no opinion regarding any other tax consequences relating to ownership or disposition of or the accrual or receipt of interest on the Series 2012 Bonds. Conditions of Delivery, Anticipated Date, Manner and Place of Delivery The Series 2012 Bonds are offered, subject to prior sale, when, as and if issued and received by George K. Baum & Company, as underwriter for the Series 2012 Bonds (the Underwriter ) subject to approval of legality by Ballard Spahr LLP, Bond Counsel to the City, and certain other conditions. Certain matters relating to disclosure will be passed upon for the City by Ballard Spahr LLP, Disclosure Counsel to the City. Certain legal matters will be passed on for the City by Doug Ahlstrom, Esq., City Attorney. It is expected that the Series 2012 Bonds in book-entry form will be available for delivery and for deposit with DTC or its agent on or about October 30,

9 Continuing Disclosure Agreement The City will enter into a Continuing Disclosure Agreement at the time of the issuance of the Series 2012 Bonds for the benefit of the Owners and the beneficial owners of the Series 2012 Bonds to provide (i) certain annual financial information and operating data to the Municipal Securities Rulemaking Board (the MSRB ) and (ii) notice of certain material events to the MSRB all in order to assist the Underwriter in complying with Rule 15c2-12(b)(5) of the Securities and Exchange Commission (the Rule ). See APPENDIX D attached hereto and incorporated herein by reference for a form of the Continuing Disclosure Agreement that will be executed and delivered by the City. The City has been in compliance with each undertaking it has entered into pursuant to the Rule during the past five years. Basic Documentation This Official Statement speaks only as of its date, and the information contained herein is subject to change. Brief descriptions of the City, the Series 2012 Bonds, and the Indenture are included in this Official Statement. Such descriptions do not purport to be comprehensive or definitive. All references herein to the Indenture are qualified in their entirety by reference to such document, and references herein to the Series 2012 Bonds are qualified in their entirety by reference to the form thereof included in the Indenture and the information with respect thereto included in the aforementioned document, copies of which are available for inspection at the principal office of the Trustee on or after the delivery of the Series 2012 Bonds. Descriptions of the Indenture and the Series 2012 Bonds are qualified by reference to bankruptcy laws affecting the remedies for the enforcement of the rights and security provided therein and the effect of the exercise of the police power by any entity having jurisdiction. During the period of the offering of the Series 2012 Bonds, copies of the preliminary forms of any of the aforementioned documents will be available from the contact persons as indicated below. Also see APPENDIX B EXTRACTS OF CERTAIN PROVISIONS OF THE GENERAL INDENTURE OF TRUST herein. The basic documentation, which includes the Resolution, the Indenture and other documentation authorizing the issuance of the Series 2012 Bonds and establishing the rights and responsibilities of the City and other parties to the transaction, may be obtained from the contact persons as indicated below. Contact Persons The chief contact person for the City concerning the Series 2012 Bonds is: Danyce Steck City of Draper 1020 East Pioneer Road Draper, Utah (801) (801) (Fax) daynce.steck@draper.ut.us The chief contact person for the Underwriter concerning the Series 2012 Bonds is: John Crandall, Executive Vice President George K. Baum & Company 15 West South Temple, Suite 1090 Salt Lake City, Utah (801) (801) (Fax) crandall@gkbaum.com 4

10 THE SERIES 2012 BONDS General The Series 2012 Bonds are dated their date of delivery and except as otherwise provided in the Indenture, shall bear interest from said date. Interest on the Series 2012 Bonds will be payable semiannually on May 1 and November 1 of each year commencing May 1, The Series 2012 Bonds are issued as fully registered bonds in denominations of $5,000 or any integral multiple thereof. The Series 2012 Bonds shall bear interest at the rates and shall mature in each of the years as described inside the front cover page hereof. Interest on the Series 2012 Bonds will be calculated on the basis of a 360-day year consisting of twelve 30-day months. Interest on the Series 2012 Bonds will be payable either by wire transfer or by check or draft mailed by the Trustee to the Registered Owner thereof (initially DTC) as of the Regular Record Date. The Series 2012 Bonds are special limited obligations of the City, payable solely from the Revenues, moneys, securities and certain funds and accounts pledged therefor in the Indenture. The Revenues consist of amounts received by the City from the imposition of the Pledged Sales and Use Taxes. No assurance can be given that the Revenues derived from the Pledged Sales and Use Taxes will remain sufficient for the payment of the principal or interest on the Series 2012 Bonds and the City is limited by State law in its ability to increase the rate of such taxes. See RISK FACTORS herein. The Series 2012 Bonds do not constitute a general obligation indebtedness, and are not secured by a pledge of the ad valorem taxing power or the full faith and credit of the City, and are not obligations of the State or any other agency or other political subdivision or entity of the State. The City will not mortgage or grant any security interest in the improvements financed with the proceeds of the Series 2012 Bonds or any portion thereof to secure payment of the Series 2012 Bonds. See SECURITY FOR THE BONDS herein. Redemption Provisions Optional Redemption. The Series 2012 Bonds maturing on or prior to May 1, 2022 are not subject to optional redemption prior to maturity. The Series 2012 Bonds maturing on or after May 1, 2023 are subject to optional redemption prior to maturity on any Business Day on or after May 1, 2022, at the option of the City, in whole or in part, upon not less than thirty (30) nor more than sixty (60) days prior notice at a redemption price equal to 100% of the Principal amount of the Series 2012 Bonds to be redeemed plus accrued interest to the date of redemption. Mandatory Sinking Fund Redemption. The Series 2012A Bonds maturing on May 1, 2027, are subject to mandatory sinking fund redemption at a redemption price equal to 100% of the principal amount thereof, plus accrued interest thereon to the date of redemption on the dates and in the principal amounts as follows: * Final maturity Redemption Date (May 1) Principal Amount 2025 $525, , * 570,000 5

11 The Series 2012A Bonds maturing on May 1, 2032 are subject to mandatory sinking fund redemption at a redemption price equal to 100% of the principal amount thereof, plus accrued interest thereon to the date of redemption on the dates and in the principal amounts as follows: * Final maturity Redemption Date (May 1) Principal Amount 2029 $620, , , * 720,000 Upon redemption of any Series 2012A Bond maturing on May 1, 2027 or May 1, 2032, other than by application of such mandatory sinking fund redemption, an amount equal to the principal amount so redeemed will be credited toward a part or all of any one or more of such mandatory sinking fund redemption amounts for the Series 2012 Bonds maturing on May 1, 2027 or May 1, 2032, in such order of mandatory sinking fund date as shall be directed by the City. Notice of Redemption. In the event any of the Series 2012 Bonds are to be redeemed, the Registrar shall cause notice of redemption to be mailed by first class mail, postage prepaid, to all Registered Owners of Series 2012 Bonds to be redeemed at their addresses as they appear on the registration books of the Registrar at least thirty (30) days but not more than sixty (60) days prior to the date fixed for redemption. Such notice will include the information required by the Indenture, including, but not limited to, the complete name and CUSIP numbers of the Bonds being redeemed, the redemption price, and the place where such Bonds are to be surrendered for payment of the redemption price. If at the time of mailing of any notice of redemption there is not on deposit with the Trustee moneys sufficient to redeem all the Series 2012 Bonds called for redemption, such notice will state that such redemption is subject to the deposit of the redemption moneys with the Trustee not later than the opening of business on the redemption date and that such notice shall be of no effect unless such moneys are so deposited. Partially Redeemed Fully Registered Series 2012 Bonds. In case any Series 2012 Bond shall be redeemed in part only, upon the presentation of such Series 2012 Bond for such partial redemption, the City shall execute and the Trustee shall authenticate and shall deliver or cause to be delivered to or upon the written order of the Registered Owner thereof, at the expense of the City, a Series 2012 Bond or Series 2012 Bonds of the same interest rate and maturity, in aggregate principal amount equal to the unredeemed portion of such registered Series 2012 Bond. A portion of any Series 2012 Bond of a denomination of more than $5,000 to be redeemed will be in the principal amount of $5,000 or an integral multiple thereof and in selecting portions of such Series 2012 Bonds for redemption, the Trustee will treat each such Bond as representing that number of Series 2012 Bonds of $5,000 denomination which is obtained by dividing the principal amount of such Series 2012 Bonds by $5,000. Book-Entry Only System The Series 2012 Bonds originally will be issued solely in book-entry form to The Depository Trust Company ( DTC ), New York, NY, or its nominee, Cede & Co., to be held in DTC s book-entry system. So long as such Series 2012 Bonds are held in the book-entry only system, DTC or its nominee will be the Registered Owner of such Series 2012 Bonds for all purposes of the Indenture, the Series 2012 Bonds and this Official Statement. Purchases of beneficial ownership interests in the Series 2012 Bonds may be made in denominations described above. For a description of the book-entry only system for the Series 2012 Bonds, see APPENDIX F PROVISIONS REGARDING BOOK-ENTRY ONLY SYSTEM. Registration, Transfer and Exchange In the event that the book-entry only system has been terminated, the Series 2012 Bonds, upon surrender thereof at the principal corporate trust office of the Trustee with a written instrument of transfer satisfactory to the 6

12 Trustee, duly executed by the Bondowner or his duly authorized attorney, may be exchanged for an equal aggregate principal amount of Bonds of the same series, designation, interest rate, and maturity and of any other authorized denominations. For every such exchange or transfer of the Series 2012 Bonds, the Trustee may make a charge sufficient to reimburse it for any tax or governmental charge required to be paid with respect to such exchange or transfer of the Series 2012 Bonds, but may impose no other charge therefor. The City and the Trustee are not be required to transfer or exchange any Series 2012 Bond (i) during the period from and including any Regular Record Date (i.e., the fifteenth day immediately preceding each Interest Payment Date), to and including the next succeeding Interest Payment Date, (ii) during the period from and including the day fifteen days prior to any Special Record Date (i.e., the date fixed for the payment of defaulted interest on the Bonds in accordance with the Indenture), to and including the date of the proposed payment pertaining thereto, (iii) during the period from and including the day fifteen days prior to the mailing of notice calling any Series 2012 Bonds for redemption, to and including the date of such mailing, or (iv) at any time following the mailing of notice calling such Series 2012 Bond for redemption. SECURITY FOR THE BONDS The Series 2012 Bonds are special limited obligation of the City, and are payable solely from the Revenues, moneys, securities and funds pledged therefor in the Indenture. The Series 2012 Bonds will not be a general obligation of the City or the State or any agency, instrumentality or political subdivision thereof. Neither the full faith and credit nor the taxing power of the City or the State or any agency, instrumentality or political subdivision thereof will be assigned or pledged for payment of principal of, premium, if any, and interest on the Series 2012 Bonds. The issuance of the Series 2012 Bonds shall not directly, indirectly or contingently obligate the City or the State or any agency, instrumentality or political subdivision thereof to levy any form of taxation therefor or to make any appropriation for the payment of the Series 2012 Bonds. The City will not mortgage or grant a security interest in the improvements financed or refinanced with the proceeds of the Series 2012 Bonds or any portion thereof to secure payment of the Series 2012 Bonds. Pursuant to the Indenture, Revenues means 100% of the local sales and use tax revenues received by the City pursuant to Title 59, Chapter 12, Part 2, Utah Code Annotated 1953, as amended. Flow of Funds The City has pledged and assigned to the Trustee the Revenues and all moneys in the funds and accounts established by the Indenture to secure the timely payment of the principal of and interest on the Bonds. The Indenture establishes a Construction Fund, a Bond Fund, a Debt Service Reserve Fund and Rebate Fund to be held by the Trustee and a Revenue Fund to be held by the City. The Indenture provides that all Revenues shall be accounted for and maintained by the City separate and apart from all other moneys of the City and applied as follows. (a) So long as any Bonds are Outstanding and as a first charge and lien on the Revenues, the City shall on or before the tenth day of each month deposit with the Trustee in the Bond Fund from the Revenue Fund an amount equal to: (i) approximately one-sixth of the interest falling due on the Bonds on the next succeeding Interest Payment Date established for the Bonds (provided, however, that so long as there are moneys representing capitalized interest on deposit with the Trustee to pay interest on the Bonds next coming due, the City need not allocate to the Revenue Fund to pay interest on the Bonds); plus (ii) if principal is due on the Bonds within the next succeeding twelve (12) months, approximately one-twelfth of the principal and premium, if any, falling due on the next succeeding principal payment date established for the Bonds; plus 7

13 (iii) if a Sinking Fund Installment is due on the Bonds within the next succeeding twelve (12) months, approximately one-twelfth of the Sinking Fund Installments falling due on the next succeeding Sinking Fund Installment payment date, the sum of which shall be sufficient, when added to the existing balance in the Bond Fund, to pay the principal of, premium, if any, and interest on the Bonds promptly on each such Interest Payment Date as the same become due and payable. (b) As a second charge and lien on the Revenues, the City shall make the following transfers to the Trustee on or before the fifteenth day of each month of each year: (i) To the extent the Debt Service Reserve Requirement, if any, is not funded with a Reserve Instrument or Instruments, (A) to the accounts in the Debt Service Reserve Fund any amounts required by the Indenture to accumulate therein the applicable Debt Service Reserve Requirement at the times and in the amounts provided in the Indenture and (B) if funds shall have been withdrawn from an account in the Debt Service Reserve Fund to pay debt service or Sinking Fund Installments, the City shall deposit Revenues in such account in the Debt Service Reserve Fund sufficient in amount to restore such moneys so withdrawn within the period required by the Supplemental Indenture governing the applicable Debt Service Reserve Requirement; or a ratable portion (based on the amount to be transferred pursuant to Subparagraph (ii) of this Paragraph) of remaining Revenues if less than the amount necessary, and (ii) Equally and ratably to the accounts of the Reserve Instrument Fund, with respect to all Reserve Instruments which are in effect and are expected to continue in effect after the end of such month, such amount of the remaining Revenues, or a ratable portion (based on the amount to be transferred pursuant to Subparagraph (i) of this Paragraph) of the amount so remaining if less than the amount necessary, that is required to be paid, on or before the next such transfer or deposit of Revenues into the Reserve Instrument Fund, to the Reserve Instrument Provider pursuant to any Reserve Instrument Agreement, other than Reserve Instrument Costs, in order to cause the Reserve Instrument Coverage to equal the Reserve Instrument Limit. (c) The Revenues remaining after the foregoing deposits and transfers and not required to be used for remedying any deficiencies in payments previously made into the Funds established in the Indenture, may be used at any time for any other lawful purpose. Pledged Sales and Use Taxes The Local Sales and Use Tax Act, Title 59, Chapter 12, Part 2, Utah Code Annotated 1953, as amended (the Local Sales and Use Tax Act ), provides that each county, city and town in the State may levy a local sales and use tax of up to 1.00% on the purchase price of taxable goods and services. Although local governments may elect to levy sales and use taxes at rates less than 1.00%, various provisions of the Local Sales and Use Tax Act encourage them to levy these taxes at the rate of 1.00%. The legislative intent contained in the Local Sales and Use Tax Act is to provide an additional source of revenues to counties and municipalities that is to be used to finance their capital outlay requirements and to service their bonded indebtedness. The local sales and use taxes discussed in this paragraph and received by the City are the Pledged Sales and Use Taxes from which Revenues are derived. The City has levied the Pledged Sales and Use Taxes at 1.00% since the enactment of the Local Sales and Use Tax Act and currently does not anticipate that it will reduce the rate of or repeal the imposition of the Pledged Sales and Use Taxes. The local sales and use tax is levied in addition to a statewide sales and use tax (the Statewide Tax ) which is currently imposed at a rate of 4.70% of the purchase price of taxable goods and services (except that only 1.75% is levied on unprepared food and food ingredients), with sales of natural gas, electricity and fuel oil for residential use being taxed at a statewide rate of 2.00%. The taxable transactions and the exemptions under the Local Sales and Use Tax Act conform to those of the statewide sales and use tax. Sales tax is imposed on the amount paid or charged for sales of tangible personal property in the State, including food items, and for services rendered in the State for the repair, renovation or installation of tangible 8

14 personal property. Use tax is imposed on the amount paid or charged for the use, storage or other consumption of tangible personal property in the State, including services for the repair, renovation or installation of such tangible personal property. Sales and use taxes also apply to leases and rentals of tangible personal property if the tangible personal property is in the State, the lessee takes possession in the State or the tangible personal property is stored, used or otherwise consumed in the State. In addition to the sales and use taxes described above, the counties and cities in the State are authorized to impose sales and use taxes totaling up to 0.80% to fund a public transportation system, 0.10% for zoo, art and parks purposes and 0.25% at the option of the county, which sales and use taxes do not constitute Pledged Sales and Use Taxes. The total sales and use tax imposed in the City is 6.85%. Local sales and use taxes, including the Pledged Sales and Use Taxes, are collected by the Utah State Tax Commission and distributed on a monthly basis to each county, city and town. The distributions are based on a formula, which provides that (i) 50% of sales tax collections will be distributed on the basis of the population of the local government and (ii) 50% of sales tax collections will be distributed on the basis of the point of sale (the 50/50 Distribution ). The 50/50 Distribution formula is subject to the provision that through fiscal year , certain qualifying counties, cities and towns may be eligible to receive an annual distribution equal to their distribution in fiscal year or , whichever is greater (the Minimum Distribution ). However, any local government not receiving the Minimum Distribution for three consecutive fiscal years shall receive the 50/50 Distribution for the following fiscal year. Beginning in fiscal year and ending with fiscal year , a local government shall receive the Minimum Distribution for such fiscal year if for fiscal year the 50/50 Distribution is less than or equal to the product of the Minimum Distribution and 0.9. A sales and use tax due and unpaid constitutes a debt due from the vendor and may be collected, together with interest, penalty, and costs, by appropriate judicial proceeding within three years after the vendor is delinquent. Furthermore, if a sales and use tax is not paid when due and if the vendor has not followed the procedures to object to a notice of deficiency, the Utah State Tax Commission may issue a warrant directed to the sheriff of any county commanding him to levy upon and sell the real and personal property of a delinquent taxpayer found within such county for the payment of the tax due. The amount of the warrant shall have the force and effect of an execution against all personal property of the delinquent taxpayer and shall become a lien upon the real property of the delinquent taxpayer in the same manner as a judgment duly rendered by any district court. While any of the Bonds remain outstanding and unpaid, any ordinance, resolution or other enactment of the City implementing the Pledged Sales and Use Taxes or applying the Revenues for the payment of the Bonds shall not be amended or modified in any manner which would impair the rights of the holders of the Bonds or which would in any way jeopardize the timely payment of principal or interest when due. The City currently does not anticipate that it will reduce the rate of or repeal the imposition of the Pledged Sales and Use Taxes. The following table shows the amounts of Pledged Sales and Use Taxes received by the City from the Utah State Tax Commission in the last ten fiscal years: Fiscal Year Pledged Sales and Use Taxes % Change From Prior Year 2013 (1) $7,600, % ,434, ,815, ,574, ,794, ,442, ,764, ,580, ,504, ,863, ,595,705 n/a (1) Estimated; subject to change. (Source: The City.) 9

15 Largest Sales Tax Payers State law prohibits disclosure of information relating to specific payers of sales and use taxes. However, with regard to specific sources of Pledged Sales and Use Tax Revenues for the fiscal year ended June 30, 2011, the ten largest sales tax payers located within the City accounted for approximately 36.58% of the Pledged Sales and Use Tax Revenues. Of these, four are grocery stores, three are automobile/rv dealerships, two are retail stores, and one is an industrial/building supply provider. Sources of Revenue (by Sector) The following table sets forth a break-out of taxable sales by sector for calendar year 2011 upon which the Pledged Sales and Use Taxes are imposed. Percent of Total Sector Taxable Sales Taxable Sales Miscellaneous Retail $180,424, % Motor Vehicles & Transportation 147,469, Food and Beverage Stores 83,581, Building, Garden, Construction, and Wholesale Goods 67,690, Eating & Drinking 64,386, Services 60,681, Manufacturing, Mining, Agriculture, Forestry 52,654, & Fishing General Merchandise 43,170, Electric & Gas 37,000, Information 33,413, Total $770,473, % (Source: Utah State Tax Commission.) (The remainder of this page left intentionally blank.) 10

16 Debt Service Coverage on the Bonds The following table sets forth projected Pledged Sales and Use Taxes, debt service for the Series 2012 Bonds, and the Outstanding Parity Bonds and calculations of the respective debt service coverage factor for each of the given fiscal years: Pro Forma Schedule of Pledged Sales and Use Taxes, Debt Service and Coverage Pledged Remaining Series 2002B Fiscal Sales Tax Series Estimated Series 2004 MBA Total Debt Service Year Revenues (1) 2012 A & B Series C (2) Debt Service Debt Service (3) Debt Service Coverage 2011 $ 6,815,929 $ - $ - $ 307,175 $ 586,366 $ 893, x ,434, , , , x ,600, , , , , x ,350, , , ,288-1,598, x ,350,000 1,037,300 1,047, ,084, x ,350,000 1,035,650 1,047, ,082, x ,350,000 1,033,550 1,046, ,080, x ,350,000 1,035,150 1,045, ,080, x ,350,000 1,040,750 1,048, ,089, x ,350,000 1,035,150 1,045, ,080, x ,350,000 1,038,750 1,046, ,085, x ,350,000 1,036,150 1,046, ,083, x ,350,000 1,037,550 1,046, ,083, x ,350,000 1,042,750 1,049, ,092, x ,350, ,550 1,046, ,802, x ,350, ,925 1,048, ,801, x ,350, ,400 1,049, ,802, x ,350, ,750 1,048, ,806, x ,350, ,750 1,045, ,799, x ,350, ,750 1,047, ,800, x ,350, ,250 1,047, ,802, x ,350, ,000 1,044, ,800, x Notes (1) 2012 figure unaudited. Projected figures based on City estimates through 2014 and holding such estimate constant through the maturity of the Series 2012 Bonds. (2) The City anticipates the issuance of approximately $13.5 million additional sales tax revenue bonds (the "Series C" Bonds) for an aquarium project. Estimated debt service assumes capitalized interest through 5/1/2014. (3) The Series 2002B MBA debt service is included in this coverage table for fiscal years 2011 and 2012 due to the City's refunding of the 2002B MBA Bonds with the Series 2012B Bonds. (Source: The City and the Underwriter.) No Debt Service Reserve There is no Debt Service Reserve Requirement with respect to the Series 2012 Bonds. Additional Parity Debt No additional indebtedness, bonds or notes of the City payable on a senior lien priority to the pledge of Revenues for the payment of the Bonds and the Security Instrument Repayment Obligations authorized under the Indenture shall be created or incurred without the prior written consent of the Owners of 100% of the Outstanding Bonds and the Security Instrument Issuers. In addition, no Additional Bonds or other indebtedness, bonds or notes of the City payable on a parity with the Bonds authorized under the Indenture out of Revenues will be created or incurred, unless the following requirements have been met: 11

17 (a) No Event of Default shall have occurred and be continuing under the Indenture on the date of authentication of any Additional Bonds. This paragraph (a) shall not preclude the issuance of Additional Bonds if (i) the issuance of such Additional Bonds otherwise complies with the provisions of the Indenture and (ii) such Event of Default will cease to continue upon the issuance of Additional Bonds and the application of the proceeds thereof; and (b) A certificate shall be delivered to the Trustee by an Authorized Representative to the effect that the Revenues for any consecutive twelve (12) month period in the twenty-four (24) months immediately preceding the proposed date of issuance of such Additional Bonds were at least equal to 200% of the sum of (x) the maximum Aggregate Annual Debt Service Requirement on all Bonds and Additional Bonds to be Outstanding following the issuance of the Additional Bonds plus (y) the maximum annual installments due on all Reserve Instrument Repayment Obligations to be outstanding following the issuance of such Additional Bonds; provided, however, that such Revenue coverage test set forth above shall not apply to the issuance of any Additional Bonds to the extent they are issued for the purpose of refunding Bonds issued under the Indenture and the Average Aggregate Annual Debt Service for such Additional Bonds does not exceed the then remaining Average Aggregate Annual Debt Service for the Bonds being refunded therewith; and (c) All payments required by the Indenture to be made into the Bond Fund must have been made in full, and there must be in the Debt Service Reserve Fund (taking into account any Reserve Instrument Coverage) the full amount required by the Indenture to be accumulated therein at such time; and The proceeds of the Additional Bonds must be used (i) to refund Bonds issued under the Indenture or other obligations of the Issuer (including the funding of necessary reserves and the payment of costs of issuance) or (ii) to finance or refinance a Project (including the funding of necessary reserves and the payment of costs of issuance). Future Obligations Payable from Revenues Other than the Series 2012C Bonds, the City does not anticipate the issuance of any Additional Bonds in the next three years, but reserves the right to do so as its capital needs require. RISK FACTORS The purchase of the Series 2012 Bonds involves certain investment risks. Accordingly, each prospective purchaser of the Series 2012 Bonds should make an independent evaluation of all of the information presented in this Official Statement in order to make an informed investment decision. Certain of these risks are described below; however, it is not intended to be a complete representation of all the possible risks involved. Uncertainty of Sales and Use Tax Revenues The amount of Revenues received from Pledged Sales and Use Taxes by the City is dependent on a number of factors beyond the control of either the City or the State, including, but not limited to, the state of the U.S. economy and the economy of the State. Any one or more of these factors could result in the City receiving less Revenues from Pledged Sales and Use Taxes than anticipated. Due to a national and local economic downturn, the City may collect less Revenues from Pledged Sales and Use Taxes in future years than previously anticipated. During periods in which economic activity declines, Revenues from Pledged Sales and Use Taxes may fall as compared to an earlier year. Series 2012 Bonds are Limited Obligations The Series 2012 Bonds are special limited obligations of the City, payable solely from the Revenues, moneys, securities and funds pledged therefor in the Indenture. The Revenues consist of moneys received by the City from the levy of the Pledged Sales and Use Taxes. No assurance can be given that the Pledged Sales and Use Taxes will remain sufficient for the payment of the principal or interest on the Series 2012 Bonds and the City is limited by State law in its ability to increase the rate of such taxes. The Series 2012 Bonds do not constitute a 12

18 general obligation indebtedness nor are they secured by a pledge of the ad valorem taxing power or the full faith and credit of the City, and are not obligations of the State or any other agency or other political subdivision or entity of the State. The City will not mortgage or grant any security interest in the improvements financed with the proceeds of the Series 2012 Bonds or any portion thereof to secure payment of the Series 2012 Bonds. Limitation on Increasing Rates for Pledged Sales and Use Taxes The City currently levies the maximum rates allowed under State law for the Pledged Sales and Use Taxes. No assurance can be given that the Pledged Sales and Use Taxes will continue to generate sufficient Revenues for the payment of the principal or interest on the Series 2012 Bonds and the City is limited by State law in its ability to increase the rate of such taxes. THE SERIES 2012A PROJECT A portion of the proceeds from the Series 2012A Bonds will be used to finance the acquisition of recreational open space property, constructing trails and trail-related improvements and related improvements. The City is not mortgaging any security interest in the Series 2012A Project to secure payment of the Series 2012 Bonds. PLAN OF REFUNDING The Municipal Building Authority of Draper City (the Authority ) has previously issued its Lease Revenue and Refunding Bonds, Series 2002B (the Authority Bonds ) originally issued in the aggregate principal amount of $7,770,000 and currently outstanding in the aggregate principal amount of $5,310,000. In order to produce an economic savings for the City, proceeds from the Series 2012B Bonds will be deposited with the trustee for the Authority Bonds and used to redeem prior to their maturity the outstanding Authority Bonds maturing on and after May 15, 2013 (the Refunded Authority Bonds ) on November 15, 2012 (the Refunded Authority Bonds Redemption Date ). Maturity (May 15) Refunded Authority Bonds Principal Interest Rate 2013 $345, % , , , , , , , , , , , In addition, proceeds of the Series 2012B Bonds will be used to redeem prior to their maturity the City s Sales Tax Revenue Bonds, Series 2004 maturing on and after May 1, 2015 (the Refunded City Bonds and together with the Refunded Authority Bonds, the Refunded Bonds ) on May 1, 2014 (the Refunded City Bonds Redemption Date ). A portion of the Series 2012B Bonds will be deposited with U.S. Bank National Association, as escrow agent (the Escrow Agent ), in an escrow account established for the Refunded City Bonds (the Escrow Account ) under an Escrow Deposit Agreement between the City and the Escrow Agent dated as of October 1, The amounts so deposited in the Escrow Account will be invested in governmental obligations of the United States of America or obligations whose principal and interest are unconditionally guaranteed by the United States of America maturing in amounts and at rates sufficient to pay, when due the principal of and interest on all of the 13

19 Refunded City Bonds through the Refunded City Bonds Redemption Date and to pay the redemption price of the Refunded City Bonds on the Refunded City Bonds Redemption Date. The following table sets forth the maturity dates, principal amounts, and interest rates of the Refunded City Bonds: Maturity (May 1) Refunded City Bonds Principal Interest Rate 2015 $200, % , , , , , ,105, The notice of redemption relating to the Refunded Bonds will state that the redemption of the Refunded Bonds is conditioned upon the receipt by the respective paying agent for the Refunded Bonds, on or prior to the date fixed for such redemption, of moneys sufficient to pay the principal of and interest on the Refunded Bonds and that if such moneys have not been so received said notice will be of no force and effect and the City will not be required to redeem the Refunded Bonds. Certain mathematical computations regarding the sufficiency of and the yield on the investments held in the Escrow Account for the Refunded City Bonds will be verified by Grant Thornton LLP. See ESCROW VERIFICATION herein. ESTIMATED SOURCES AND USES OF FUNDS The estimated sources and uses of funds for the Series 2012A Bonds are shown below: Sources of Funds Par amount of Series 2012A Bonds... $4,915, Plus reoffering premium , Total... $5,652, Uses of Funds Deposit Series 2012A Construction Account... $5,600, Costs of issuance (1)... 52, Total... $5,652, (1) Costs of issuance include Underwriter s discount, legal fees, rating agency fees, Trustee fees, financial advisor fees, and other costs and expenses related to the issuance of the Series 2012 Bonds. 14

20 The estimated sources and uses of funds for the Series 2012B Bonds are shown below: Sources of Funds Par amount of Series 2012B Bonds... $7,115, Plus reoffering premium , Transfers from Refunded Bonds debt service funds , Total... $8,154, Uses of Funds Refunding of Refunded Authority Bonds... $5,432, Deposit to Escrow Account... 2,647, Costs of issuance (1)... 74, Total... $8,154, (1) Costs of issuance include Underwriter s discount, legal fees, rating agency fees, Trustee and Escrow Agent and escrow verification fees, financial advisor fees, and other costs and expenses related to the issuance of the Series 2012 Bonds. (The remainder of this page left intentionally blank.) 15

21 DEBT SERVICE SCHEDULE The following table sets forth the debt service schedule for the Series 2012 Bonds and the Outstanding Parity Bonds. (1) Payment Dates Principal Interest Outstanding Parity Bonds (1) Fiscal Year Total 5/1/2013 $210,000 $249,956 $200,688 $660,644 11/1/ ,475 5/1/ , , ,288 1,051,238 11/1/ ,150 5/1/ , ,150 1,037,300 11/1/ ,825 5/1/ , ,825 1,035,650 11/1/ ,275 5/1/ , ,275 1,033,550 11/1/ ,575 5/1/ , ,575 1,035,150 11/1/ ,375 5/1/ , ,375 1,040,750 11/1/ ,575 5/1/ , ,575 1,035,150 11/1/ ,375 5/1/ , ,375 1,038,750 11/1/ ,575 5/1/ , ,575 1,036,150 11/1/ ,275 5/1/ , ,275 1,037,550 11/1/ ,375 5/1/ , ,375 1,042,750 11/1/ ,775 5/1/ , , ,550 11/1/ ,963 5/1/ , , ,925 11/1/ ,700 5/1/ ,000 91, ,400 11/1/ ,875 5/1/ ,000 78, ,750 11/1/ ,875 5/1/ ,000 66, ,750 11/1/ ,375 5/1/ ,000 51, ,750 11/1/ ,125 5/1/ ,000 35, ,250 11/1/ ,000 5/1/ ,000 18, ,000 TOTAL $12,030,000 $5,689,031 $403,976 $18,123,007 Assumes that the Series 2012 Bonds are issued and outstanding and that the Refunded City Bonds have been refunded. Amounts are as of fiscal year end of the year given. (Source: The Underwriter.) 16

22 THE CITY General Information The City, incorporated in 1978, covers an area of approximately 30 square miles and is located in the southeast portion of Salt Lake County. In addition, a small portion of the City is located in Utah County. The City had 42,274 residents according to the 2010 U.S. Census. The City is a suburb of metropolitan Salt Lake City within Salt Lake County and is the eighth city in a line of eight cities located directly south of Salt Lake City along Interstate Highway I-15. These cities constitute a portion of a continuous area of development from the north end of the County through the City. The City is approximately 20 miles south from metropolitan Salt Lake City and can best be characterized as residential/suburban in nature since many City residents commute to work in Salt Lake City and other nearby business and industrial areas. Form of Government State statutes detail the functions to be performed by State municipalities. Title 10, Utah Code, generally sets out laws to provide for the incorporation, organization, and classification of cities and towns based upon population. The City is categorized as a city of the third class. Utah law allows cities of the third class to choose government either by mayor and city council or by mayor, council, and city manager. The City is organized under general law and governed by a Council-Manager form of government (by ordinance), with five Council members serving four-year terms (who are elected at large). The Mayor, who is elected at large by voters for a four-year term, chairs the city council and votes to break a tie and has some statutory, legislative, judicial, and ex officio powers. City Manager powers are described and governed by an ordinance or resolution passed by the City Council. The City Council is charged with the responsibility of performing the legislative functions of the City. The principal powers and duties of Utah municipalities are to maintain law and order, abate nuisances, guard public health and sanitation, promote recreation, provide fire protection, and to construct and maintain streets, sidewalks, waterworks, and sewers. Municipalities also regulate commercial and residential development within their boundaries by means of zoning ordinances, building codes, and licensing procedures. Office Person Years of Service in Current Position Expiration of Term Mayor Darrell Smith 11 January 2014 Councilmember William Colbert 13 January 2016 Councilmember William Rappleye 2 January 2014 Councilmember Jeff Stenquist 7 January 2014 Councilmember Alan Summerhays 4 January 2016 Councilmember Troy Walker 4 January 2016 Acting City Manager David Dobbins 3* Appointed Finance Manager Danyce Steck 8 Appointed City Attorney Douglas Ahlstrom 6 Appointed City Recorder Tracy Norr 3 Appointed * Mr. Dobbins has worked as Assistant City Manager for the past three years and recently became Acting City Manager. Prior to becoming Assistant City Manager, he worked as the City s Community Development Director for three years. 17

23 Employee Workforce and Retirement System The City currently employs approximately 148 full-time and approximately 27 part-time and seasonal employees for a total employment of approximately 175 employees. The City contributes to the Local Governmental Noncontributory Retirement System and Public Safety Noncontributory Retirement System and participates in a deferred compensation plan. The contributions were equal to the required contributions for each year. For further information on City s retirement benefits, see APPENDIX A AUDITED BASIC FINANCIAL STATEMENTS WITH INDEPENDENT AUDITOR S REPORT FOR THE YEAR ENDED JUNE 30, 2011 Notes to Financial Statements Note 11. Retirement Plans herein. Other Postemployment Benefits The City has undertaken a review of the post-employment benefits funding status of the City. Based upon such undertaking, the City reports that it does not have any post-employment benefit liabilities that require disclosure. 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; and natural disasters for which the City carries commercial insurance. This insurance covers all of these risks except natural disasters. The City is self-insured for risk of loss involving employees, which amounts are based on work risk factors and experience as set forth by worker s compensation insurance. During the years ended June 30, 2009, 2010, and 2011, there were approximately $86,000, $65,000 and $70,790, respectively, paid out in claims. The City is also a member of the Utah Risk Management Association which is an insurance pool of municipalities in the State for liability insurance. The pool purchases umbrella insurance against large claims, and each city has a $7,500 deductible before the pool pays from its reserves and/or policy. The City has not incurred claims in excess of its deductible during the preceding three fiscal years. Investment of Funds Investment of Operating Funds: The Utah Money Management Act. The Utah Money Management Act, Title 51, Chapter 7, Utah Code Annotated 1953, as amended (the Money Management Act ), governs the investment of all public funds held by public treasurers in the State. It establishes criteria for investment of public funds with an emphasis on safety, liquidity, yield, matching strategy to fund objectives, and matching the term of investments to the availability of funds. The Money Management Act provides a limited list of approved investments including qualified in-state and permitted out-of-state financial institutions, approved government agency securities and investments in corporate securities carrying top credit ratings. The Money Management Act also provides for pre-qualification of broker dealers by requiring that broker dealers agree in writing to comply with the Money Management Act and certify that they have read and understand the Money Management Act. The Money Management Act establishes the Money Management Council (the Money Management Council ) to exercise oversight of public deposits and investments. The law requires all securities to be delivered versus payment to the public treasurer s safekeeping bank. It requires diversification of investments, especially in securities of corporate issuers. Not more than 5% of the portfolio may be invested with any one issuer. Investments in mortgage pools and mortgage derivatives or any security making unscheduled periodic principal payments are prohibited. The Money Management Act also defines the State s prudent investor rules. The Money Management Council is comprised of five members appointed by the Governor of the State for terms of four years, after consultation with the State Treasurer and with the advice and consent of the State Senate. The City is currently complying with all of the provisions of the Money Management Act for all City operating funds. Approximately 70% of the City funds are invested in the Utah Public Treasurers Investment Fund (the Utah Treasurers Fund ), as discussed below. The Utah Public Treasurers Investment Fund. The Utah Treasurers Fund is a public treasurers investment fund, established in 1981, and is managed by the Treasurer of the State of Utah. The Utah Treasurers Fund invests to ensure safety of principal, liquidity and a competitive rate of return on short-term investments. All moneys transferred to the Utah Treasurers Fund are promptly invested in securities authorized by the Money 18

24 Management Act. Safe-keeping and audit controls for all investments owned by the Utah Treasurers Fund must comply with the Money Management Act. All investments in the Utah Treasurers Fund must comply with the Money Management Act and rules of the Money Management Council. The Utah Treasurers Fund invests primarily in money market securities including time certificates of deposit, top rated commercial paper, treasuries and certain agencies of the U.S. Government. The maximum weighted average adjusted life of the portfolio, by policy, is not to exceed 90 days. The maximum final maturity of any security purchased by the Utah Treasurers Fund is limited to three years, except for a maximum maturity of five years is allowed for treasury or agency securities whose rate adjusts at least annually. By law, investment transactions are conducted only through certified dealers, qualified depositories or directly with issuers of the securities. All securities purchased are delivered via payment to the custody of the State Treasurer or the State Treasurer s safekeeping bank, assuring a perfected interest in the securities. Securities owned by the Utah Treasurers Fund are completely segregated from securities owned by the State. The State has no claim on assets owned by the Utah Treasurers Fund except for any investment of State moneys in the Utah Treasurers Fund. Deposits are not insured or otherwise guaranteed by the State. Securities in the Utah Treasurers Fund include certificates of deposit, commercial paper, short-term corporate notes, obligations of the U.S. Treasury and securities of certain agencies of the U.S. Government. These short-term securities must be rated first tier ( A-1, P1, for short-term investments and A or better for longterm investments) by two nationally recognized statistical rating organizations, one of which must be Moody s Investors Service, Inc. or Standard & Poor s Ratings Group, a division of The McGraw-Hill Companies, Inc. These securities represent limited risks to governmental institutions investing with the Utah Treasurers Fund. Variable rate securities in the Utah Treasurers Fund must have an index or rate formula that has a correlation of at least 94% of the effective Federal Funds rate. Investment activity of the State Treasurer in the management of the Utah Treasurers Fund is reviewed monthly by the State s Money Management Council and audited by the State Auditor. See APPENDIX A AUDITED BASIC FINANCIAL STATEMENTS WITH INDEPENDENT AUDITOR S REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2011 Notes to Financial Statements Note 2. Cash and Investments below. Outstanding Municipal Indebtedness of the City DEBT STRUCTURE OF THE CITY The following tables present the outstanding municipal indebtedness of the City as of September 1, OUTSTANDING SALES TAX REVENUE BONDS Series Purpose Original Amount Final Maturity Date Current Principal Amount Outstanding 2004 (1) Street Improvements $4,100,000 May 1, 2014 $380, A (1) Open Space 4,915,000 May 1, ,915, B (1) Refunding 7,115,000 May 1, ,115,000 Total... $12,410,000 (1) Assumes that the Series 2012 Bonds are issued and outstanding and the Refunded City Bonds have been refunded. Note: The City anticipates the issuance within the next three months of approximately $13,500,000 Sales Tax Revenue Bonds, Series 2012C to fund a portion of an aquarium in the City. 19

25 OUTSTANDING GENERAL OBLIGATION BONDS Series Purpose Original Amount Final Maturity Date Current Principal Amount Outstanding 2005 Open Space $7,000,000 February 1, 2025 $5,095,000 Total... $5,095,000 Outstanding Municipal Indebtedness of the Municipal Building Authority The Municipal Building Authority of Draper City, Utah is a body politic and corporate, organized and existing pursuant to the Local Building Authority Act, Title 17D, Chapter 2, Utah Code Annotated 1953, as amended (the Building Authority Act ). The Authority was created for the purpose of acquiring, constructing, improving, or extending one or more projects on behalf of the City pursuant to the Building Authority Act. The Authority s debt does not constitute legal debt within the meaning of any constitutional provision of statutory limitation of the City. The Authority has entered into an annual lease with the City for each project. The lease may be terminated by the City in any year and payments made by the City may be made only from moneys which are annually budgeted and appropriated by the City for such purpose. OUTSTANDING LEASE REVENUE BONDS OF THE AUTHORITY Series Purpose Original Amount Final Maturity Date Current Principal Amount Outstanding 2003 Public Works Building $1,187,000 September 1, 2013 $300, Park and Recreation 6,080,000 November 1, ,735, Fire Station and Refunding 3,355,000 March 1, ,640,000 Total... $7,675,000 (1) (1) Assumes that the Series 2012 Bonds are issued and outstanding and the Refunded Authority Bonds have been refunded. No Defaulted Bonds The City has never failed to pay principal and interest when due on any of its bonds, notes or other financial obligations. Other Financial Considerations Other than the City s municipal debt as discussed above in DEBT STRUCTURE OF THE CITY, the present value amount of the City s minimum lease payments under outstanding capital leases as of June 30, 2011, is $1,471,431. See APPENDIX A AUDITED BASIC FINANCIAL STATEMENTS WITH INDEPENDENT AUDITOR S REPORT FOR THE YEAR ENDED JUNE 30, 2011 Notes to Financial Statements Note 9. Long- Term Debt Capital Lease Obligations. Five-Year Financial Summaries FINANCIAL INFORMATION REGARDING THE CITY The following tables set forth a summary of certain financial information regarding the City and have been extracted from the City s audited general purpose financial statements for the fiscal years ended June 30, 2008 through June 30, 2011, and the City s unaudited, preliminary financial statements for the fiscal year ended June 30, These summaries have not been audited. See APPENDIX A AUDITED BASIC FINANCIAL STATEMENT WITH INDEPENDENT AUDITOR S REPORT FOR FISCAL YEAR ENDED JUNE 30, 2011 herein. 20

26 CITY OF DRAPER Statement of Net Assets Governmental and Business-Type Activities (This summary has not been audited.) Fiscal Year Ended June 30, 2012 (1) ASSETS: Cash and cash equivalents $19,034,914 $14,519,188 $16,424,105 $11,120,865 $16,773,298 Investments 2,594,038 4,999,045 1,543,031 2,007,235 Receivables: Accounts, net 4,107,995 1,306,110 1,283, ,857 1,239,165 Property taxes 10,125,944 10,166,166 10,821,681 11,207,723 11,724,951 Other taxes 2,048,314 1,767,452 1,588,498 Prepaids 53,412 4,699 2,000 2,000 93,879 Restricted cash and cash equivalents 17,844,001 20,304,542 22,402,580 26,390,676 15,523,504 Deferred charges 388, , , , ,600 Equity investment in joint venture 1,755,346 1,755,346 1,667,490 1,525,013 1,546,663 Capital assets, not being depreciated: Land and rights of way 306,701, ,569, ,556, ,523, ,804,010 Intangible asset - water tank capacity 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 Construction in progress 9,351,262 21,247,471 11,254,301 8,588,905 17,512,166 Water shares 131, , , , ,907 Capital assets (net of depreciation): Buildings 14,250,512 12,972,112 13,393,765 13,133,683 9,156,052 Improvements other than buildings 47,233,715 36,700,849 36,988,426 37,267,514 33,707,294 Machinery and equipment 4,768,560 4,824,906 4,851,918 2,721,414 2,231,630 Furniture and fixtures 1,524 34, , ,759 Infrastructure 54,566,514 46,342,126 47,599,104 49,676,125 37,682,221 Total assets $496,956, ,033,585 $477,979,913 $472,731,195 $454,803,099 LIABILITIES: Accounts payable 1,446,685 2,585,637 1,802,869 1,252,281 1,175,057 Liabilities payable from restricted assets 447, , , ,635 1,289,137 Accrued liabilities 293, , , , ,608 Accrued interest payable 224, , , , ,730 Developer and customer deposits 1,779,981 7,624,574 1,571,717 1,192,619 1,939,381 Unearned revenue 10,125,944 4,207,516 10,699,815 9,621,792 9,703,064 Noncurrent liabilities: Due within one year 2,348,018 2,219,866 1,852,731 1,270,000 1,326,000 Due in more than one year: 23,411,015 25,037,562 23,962,847 23,566,926 24,892,179 Total liabilities 40,077,532 42,993,461 40,626,542 37,744,746 40,982,156 NET ASSETS: Invested in capital assets, net 415,434, ,693, ,994, ,305, ,056,360 Restricted for: Debt service 756, , , , ,752 Future development 14,699,092 25,158,837 20,988,445 24,583,865 10,307,718 Perpetual care Nonexpendable 174, , , , ,727 MBA projects 51, ,083 1,790,706 RDA projects 1,282, ,861 1,117,215 Grants 6,622 11,089 62,023 TRSSD projects 111, , , ,120 Unrestricted 25,814,672 9,739,673 19,077,788 14,488,639 21,529,345 Total net assets 456,878, ,040, ,353, ,986, ,820,943 Total Liabilities and Net Assets $496,956,449 $485,033,585 $477,979,913 $472,731,195 $454,803,099 (1) Preliminary; unaudited. (Source: Information extracted from the City s audited basic financial statements and the City s unaudited, preliminary financial statements for the fiscal year ended June 30, This summary has not been audited.) 21

27 CITY OF DRAPER Balance Sheet Governmental Funds General Fund (This summary has not been audited.) Fiscal Year Ended June 30, 2012 (1) Assets Cash and cash equivalents $2,576,275 $2,946,578 $3,055,819 $1,909,210 $4,077,695 Investments 1,543,031 2,007,235 Restricted cash and cash equivalents 4,940,396 6,460,397 10,451,572 14,375,407 2,013,954 Receivables: Property taxes 5,938,576 5,958,650 6,038,919 7,493,124 7,846,146 Other taxes 2,048,314 1,767,452 1,588,498 Accounts, net 242,263 Other, net 404, , , ,728 Notes receivable 63,301 Prepaids 13,538 4,699 2,000 2,000 93,879 Total assets $15,921,958 $17,507,899 $23,069,609 $25,979,704 $14,337,238 Liabilities Accounts payable 548, , , , ,028 Payables from restricted assets 1,011 16,566 15,636 59,475 37,160 Accrued liabilities 237, , , , ,368 Developer and customer deposits 1,395,379 1,376,318 1,369,793 1,019,953 1,687,857 Unearned revenue 5,938,576 5,958,650 5,917,053 5,907,193 5,824,259 Total liabilities 8,120,472 8,423,673 8,507,564 7,987,727 8,576,672 Fund balances: Nonspendable - Prepaids 13,538 4,699 Reserved for: Debt service 51,800 51,800 77,001 77,001 77,372 Grants 6,622 11,089 62,023 B and C roads 3,492,206 5,087,750 10,373,587 14,168,774 1,899,422 Long-term note receivable 63,301 Unassigned/Unreserved, reported in General Fund 4,243,942 3,933,355 4,100,368 3,684,179 3,720,471 Total fund balances 7,801,486 9,084,226 14,562,045 17,991,977 5,760,566 Total liabilities and fund balances $15,921,958 $17,507,899 $23,069,609 $25,979,704 $14,337,238 (1) Preliminary; unaudited. (Source: Information extracted from the City s audited basic financial statements and the City s unaudited, preliminary financial statements for the fiscal year ended June 30, This summary has not been audited.) 22

28 CITY OF DRAPER Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds General Fund (This summary has not been audited.) Fiscal Year Ended June 30, 2012 (1) Revenues: Taxes: Property $7,247,469 $6,719,571 $6,900,441 6,436,347 6,321,181 Sales 7,434,613 6,815,929 6,574,579 6,794,978 7,442,507 Franchise 4,412,562 4,254,768 4,068,090 4,078,070 3,938,829 Licenses and permits 2,100,542 1,620,627 1,381,240 1,184,133 2,288,703 Intergovernmental 1,528,473 1,810,323 1,931,459 12,619,889 1,748,356 Charges for services, 2,140,575 1,943,230 1,683,917 1,127,309 1,533,260 Fines and forfeitures 632, , , , ,808 Interest income 124, , , , ,146 Miscellaneous 28,085 33, ,147 99,321 85,552 Total revenues 25,649,175 23,958,962 23,535,906 33,268,110 24,516,342 Expenditures: Current: General government 6,644,769 7,617,440 6,626,011 6,662,269 7,569,084 Public safety 9,555,069 8,461,058 8,757,905 8,937,592 8,631,638 Highways and public improvements 4,233,370 2,727,583 4,519,078 2,861,449 2,001,772 Parks, recreation and public property 2,573,320 2,247,215 2,065,936 1,922,880 1,583,271 Capital outlay 585, , , , ,853 Debt service: Principal 470, , , , ,781 Interest 383, , , , ,340 Total expenditures 24,445,207 22,402,268 23,147,006 21,728,441 21,263,739 Excess of revenues over (under) expenditures 1,203,968 1,556, ,900 11,539,669 3,252,603 Other Financing Sources (Uses): Transfers in 1,257,992 1,032,820 1,021,855 1,976,284 Transfers out (3,760,092) (8,110,363) (4,852,459) (1,305,000) (831,095) Sale of capital assets 15,392 43,030 11,772 20,458 4,500 Total other financing sources (uses) (2,486,708) (7,034,513) (3,818,832) 691,742 (826,595) Net change in fund balance (1,282,740) (5,477,819) (3,429,932) 12,231,411 2,426,008 Fund balance at beginning of year 9,084,226 14,562,045 17,991,977 5,760,566 3,334,558 Fund balance at end of year $7,801,486 $9,084,226 $14,562,045 $17,991,977 $5,760,566 (1) Preliminary; unaudited. (Source: Information extracted from the City s audited basic financial statements and the City s unaudited, preliminary financial statements for the fiscal year ended June 30, This summary has not been audited.) 23

29 Sources of General Fund Revenues Set forth below are brief descriptions of the various sources of revenues available to the City s general fund. The percentage of total general fund revenues represented by each source is based on the City s unaudited financial statements for the June 30, 2012 fiscal year period. Taxes Approximately 28% of general fund revenues are from property taxes, 29% from sales and use taxes, and 17% franchise and other taxes. Intergovernmental Revenues Approximately 6% of general fund revenues are from State shared revenues. Charges for Services Approximately 8% of general fund revenues are from charges for services. Licenses and Permits Approximately 8% of general fund revenues are from licenses and permits fees. Fines and Forfeitures Approximately 3% of general fund revenues are from Fines and Forfeitures. Interest Income and Miscellaneous Revenues Less than 1% of general fund revenues are from interest income and miscellaneous revenues. Taxable and Fair Market Value of Property Tax Estimated Year (1) Taxable Value (2) Fair Market Value % increase of Estimated Fair Market Value ,861,859,228 5,633,637,018 (2.22) ,943,574,965 5,761,650,262 (16.12) ,567,387,704 6,869,020, ,079,989,160 6,143,490, ,247,403,929 4,818,205, ,620,235,434 3,832,905, ,256,355,678 3,264,961, ,113,041,410 3,021,135, ,932,484,113 2,744,008, (1) The tax year lags one year behind the City s fiscal year; that is, the 2010 tax year is equivalent for purposes of this table to the City s 2011 fiscal year. (2) Includes age-based and fee-in-lieu motor vehicle values. (Source: The City.) 24

30 Historical Summary of The City s Taxable Value Real Property Primary Residential $2,029,669,287 $2,165,506,188 $2,222,092,030 $2,813,106,199 $2,522,056,612 Other Residential 193,614, ,173, ,868, ,461, ,699,180 Commercial and Industrial 977,422, ,879, ,562,790 1,056,013, ,983,460 FAA 33,251 30,678 28,332 27,277 28,431 Unimproved Non FAA 1,970,020 2,405,912 1,474,270 1,378,960 1,303,430 Agricultural 473, ,730 1,516, , ,390 Total Real Property 3,203,183,732 3,380,515,560 3,491,542,268 4,136,694,126 3,658,944,503 Personal Property: Primary Mobile Homes 500, , , , ,967 Secondary Mobile Homes 152, , , , ,364 Other Business Personal 161,332, ,360, ,474, ,612, ,427,059 Total Personal Property 161,986, ,123, ,165, ,342, ,061,390 Total Locally Assessed 3,365,170,100 3,548,639,376 3,651,708,169 4,283,036,962 3,806,005,893 Total Centrally Assessed 126,176, ,045,247 81,509,228 68,797,346 58,447,508 Total Taxable Value $3,491,347,053 $3,653,684,623 $3,733,217,397 $4,351,834,308 $3,864,453,401 (1) Includes both Salt Lake County and Utah County. Does not include age-based and fee-in-lieu vehicle values. (Source: Utah State Tax Commission.) (The remainder of this page left intentionally blank.) 25

31 LEGAL MATTERS General The authorization and issuance of the Series 2012 Bonds is subject to the approval of legality by Ballard Spahr LLP, Bond Counsel to the City. Certain matters relating to disclosure will be passed upon for the City by Ballard Spahr LLP, Disclosure Counsel to the City. Certain legal matters will be passed upon for the City by Doug Ahlstrom, Esq., City Attorney. The approving opinion of Bond Counsel will be delivered with the Series 2012 Bonds. A copy of the form of the opinion of Bond Counsel is set forth in APPENDIX E FORM OF OPINION OF BOND COUNSEL of this Official Statement. Litigation A non-litigation certificate issued by the City Attorney, dated the date of closing, will be provided stating, among other things, that to the best of his knowledge, after due inquiry, no action, suit, proceeding, inquiry, or any other litigation or investigation at law or in equity, before or by any court, public board or body, has been served on the City or is threatened, challenging the creation, organization, or existence of the City or the titles of its officers to their respective offices or seeking to restrain or enjoin the issuance, sale, or delivery of the Series 2012 Bonds or for the purpose of restraining or enjoining the levy and collection of taxes or assessments by the City, or directly or indirectly contesting or affecting the proceedings or the authority by which the Series 2012 Bonds are issued or the validity of the Series 2012 Bonds or the issuance thereof. Federal Income Tax TAX MATTERS Excludability of Interest. In the opinion of Ballard Spahr LLP, Bond Counsel to the City, interest on the Series 2012 Bonds is excludable from gross income for purposes of federal income tax under existing laws as enacted and construed on the date of initial delivery of the Series 2012 Bonds, assuming the accuracy of the certifications of the City and continuing compliance by the City with the requirements of the Internal Revenue Code of Interest on the Series 2012 Bonds is not an item of tax preference for purposes of either individual or corporate federal alternative minimum tax; however, interest on Series 2012 Bonds held by a corporation (other than an S corporation, regulated investment company, or real estate investment trust) may be indirectly subject to federal alternative minimum tax because of its inclusion in the adjusted current earnings of a corporate holder. Original Issue Discount. Certain of the Series 2012 Bonds may be offered at a discount ( original issue discount ) equal generally to the difference between public offering price and principal amount. Original issue discount on a Series 2012 Bond accrues as tax-exempt interest periodically over the term of the Series 2012 Bond. The accrual of original issue discount increases the holder s tax basis in the Series 2012 Bond for determining taxable gain or loss from sale or from redemption prior to maturity. Series 2012 Bondholders should consult their tax advisers for an explanation of the accrual rules. Original Issue Premium. Certain of the Series 2012 Bonds may be offered at a premium ( original issue premium ) over their principal amount. For federal income tax purposes, original issue premium is amortizable periodically over the term of a Series 2012 Bond through reductions in the holder s tax basis for the Series 2012 Bond for determining taxable gain or loss from sale or from redemption prior to maturity. Amortization of premium does not create a deductible expense or loss. Series 2012 Bondholders should consult their tax advisers for an explanation of the amortization rules. State of Utah Income Tax Bond Counsel is also of the opinion that interest on the Series 2012 Bonds is exempt from State of Utah individual income taxes under currently existing law. 26

32 No Further Opinion Bond Counsel expresses no opinion regarding any other federal tax consequences relating to ownership or disposition of, or the accrual or receipt of interest on, the Series 2012 Bonds. Changes in Federal and State Tax Law From time to time, there are Presidential proposals, proposals of various federal committees, and legislative proposals in the Congress and in the states that, if enacted, could alter or amend the federal and state tax matters referred to herein or adversely affect the marketability or market value of the Series 2012 Bonds or otherwise prevent holders of the Series 2012 Bonds from realizing the full benefit of the tax exemption of interest on the Bonds. Further, such proposals may impact the marketability or market value of the Series 2012 Bonds simply by being proposed. It cannot be predicted whether or in what form any such proposal might be enacted or whether if enacted it would apply to bonds issued prior to enactment. In addition, regulatory actions are from time to time announced or proposed and litigation is threatened or commenced which, if implemented or concluded in a particular manner, could adversely affect the market value, marketability or tax status of the Series 2012 Bonds. It cannot be predicted whether any such regulatory action will be implemented, how any particular litigation or judicial action will be resolved, or whether the Series 2012 Bonds would be impacted thereby. Purchasers of the Series 2012 Bonds should consult their tax advisors regarding any pending or proposed legislation, regulatory initiatives or litigation. The opinions expressed by Bond Counsel are based upon existing legislation and regulations as interpreted by relevant judicial and regulatory authorities as of the date of issuance and delivery of the Series 2012 Bonds, and Bond Counsel has expressed no opinion as of any date subsequent thereto or with respect to any proposed or pending legislation, regulatory initiatives or litigation. UNDERWRITING George K. Baum & Company, as underwriter of the Series 2012 Bonds (the Underwriter ), has agreed, subject to certain conditions, to purchase all of the Series 2012 Bonds from the City at an aggregate price of $13,568, (representing the aggregate principal amount of the Series 2012 Bonds, plus a reoffering premium of $1,601, and less an Underwriter s discount of $63,157.50). The Underwriter has advised the City that the Series 2012 Bonds may be offered and sold to certain dealers at prices lower than the initial public offering prices set forth inside the front cover of this Official Statement and that such public offering prices may be changed from time to time. Although the Underwriter expects to maintain a secondary market in the Series 2012 Bonds after the initial offering, no guarantee can be given concerning the future existence of such a secondary market or its maintenance by the Underwriter or others. FINANCIAL ADVISOR The City has entered into an agreement with Lewis Young Robertson & Burningham, Inc., Salt Lake City, Utah (the Financial Advisor ) whereunder the Financial Advisor provides financial recommendations and guidance to the City respect to preparation for sale of the Series 2012 Bonds, timing of sale, tax-exempt bond market conditions, costs of issuance and other factors related to the sale of the Series 2012 Bonds. The Financial Advisor has read and participated in the drafting of certain portions of this Official Statement. The Financial Advisor has not audited, authenticated or otherwise verified the information set forth in this Official Statement, of any other related information available to the City, with respect to accuracy and completeness of disclosure of such information, and the Financial Advisor makes no guaranty, warranty or other representation respecting accuracy and completeness of this Official Statement of any other matter related to this Official Statement. 27

33 RATING Standard & Poor s Ratings Services ( S&P ) has assigned a rating of AA to the Series 2012 Bonds. Any explanation of the significance of this outstanding rating should be obtained from the rating agency furnishing the same. There is no assurance that the rating given to the outstanding obligations will be maintained for any period of time or that the rating may not be lowered or withdrawn entirely by the rating agency if, in its judgment, circumstances so warrant. Any such downward change or withdrawal of such rating may have an adverse effect on the market price of the Series 2012 Bonds. CONTINUING DISCLOSURE The City has undertaken for the benefit of the Bondholders and the beneficial owners of the Series 2012 Bonds to provide certain annual financial information and operating data and to provide notice of certain material events to the Municipal Securities Rulemaking Board all in order to assist the Underwriter in complying with Rule 15c2-12(b)(5) of the Securities and Exchange Commission (the Rule ). See APPENDIX D attached hereto and incorporated herein by reference for a form of the Continuing Disclosure Agreement that will be executed and delivered by the City. The City has represented that as of the date of this Official Statement it has been in compliance with each and every continuing disclosure agreement previously entered into by it pursuant to the Rule for the past five years. A failure by the City to comply with the Continuing Disclosure Agreement will not constitute a default under the Indenture and beneficial owners of the Series 2012 Bonds are limited to the remedies described in the Continuing Disclosure Agreement. See APPENDIX D FORM OF CONTINUING DISCLOSURE AGREEMENT Default. A failure by the City to comply with the Continuing Disclosure Agreement must be reported in accordance with the Rule and must be considered by any broker, dealer or municipal securities dealer before recommending the purchase or sale of the Series 2012 Bonds in the secondary market. Consequently, such a failure may adversely affect the transferability and liquidity of the Series 2012 Bonds and their market price. ESCROW VERIFICATION Grant Thornton LLP, will verify the accuracy of the mathematical computations concerning the adequacy of the maturing principal amounts of and interest earned on the obligations of the United States of America, together with other escrowed moneys to be placed in the Escrow Account to pay when due pursuant to prior redemption the redemption price of, and interest on the Refunded City Bonds and the mathematical computations of the yield on the Series 2012 Bonds and the yield on the government obligations purchased with a portion of the proceeds of the sale of the Series 2012 Bonds. Such verifications shall be based in part upon information supplied by the Underwriter. Independent Accountants MISCELLANEOUS The financial statements of the City as of June 30, 2011, and for the year then ended, included in this Official Statement, have been audited by Jensen & Keddington, P.C., Salt Lake City, Utah, as stated in their report in APPENDIX A to this Official Statement. Jensen & Keddington has not been asked to consent to the use of its name and audited financial report of the City for fiscal year ended June 30, 2011, in this Official Statement. Copies of the City s comprehensive annual financial report may be obtained upon request from the City Finance Director, 1020 East Pioneer Road, Draper, Utah Additional Information All quotations from and summaries and explanations of the Utah Constitution, statutes, programs, laws of the State of Utah, court decisions, and the Indenture, which are contained herein, do not purport to be complete, and reference is made to said Constitution, statutes, programs, laws, court decisions, and the Indenture for full and complete statements of their respective provisions. 28

34 Any statement in this Official Statement involving matters of opinion, whether or not expressly so stated, is intended as such and not as representations of fact. The appendices attached hereto are an integral part of this Official Statement, and should be read in conjunction with the foregoing material. The delivery of the Official Statement has been duly authorized by the City. CITY OF DRAPER, UTAH By: /s/ Darrell Smith Mayor 29

35 APPENDIX A AUDITED BASIC FINANCIAL STATEMENTS WITH INDEPENDENT AUDITOR S REPORT FOR THE YEAR ENDED JUNE 30, 2011 A-1

36 CITY OF DRAPER, UTAH 1020 East Pioneer Road Draper, Utah COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2011 Prepared by: Draper City Finance Department 2

37 Table of Contents INTRODUCTORY SECTION Letter of Transmittal....6 Certificate of Achievement for Excellence in Financial Reporting...10 Principal City Officials Other Bodies under the Direction of the City Council Organizational Structure FINANCIAL SECTION Report of Independent Certified Public Accountants. 15 Management s Discussion and Analysis Basic Financial Statements: Government-wide Financial Statements: Statement of Net Assets Statement of Activities 33 Governmental Fund Financial Statements: Balance Sheet..35 Reconciliation of the Balance Sheet to the Statement of Net Assets..36 Statement of Revenues, Expenditures, and Changes in Fund Balances..37 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities.38 Statement of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual General Fund...39 Statement of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual Redevelopment Fund..41 Proprietary Fund Financial Statements: Statement of Net Assets..43 Statement of Revenues, Expenditures, and Changes in Fund Net Assets...45 Statement of Cash Flows.46 Notes to the Financial Statements.49 Supplementary Section: Schedule of Revenues, Expenditures, and Changes in Fund Balances Budget to Actual Major Capital Projects Funds...76 Combining Balance Sheet Non-major Governmental Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Non-major Governmental Funds..80 3

38 FINANCIAL SECTION (continued) Table of Contents (continued) Schedules of Revenues, Expenditures, and Changes in Fund Balance Budget to Actual Non-major Special Revenue Funds: Municipal Building Authority Special Revenue Fund...81 Non-major Fire Impact Fee Special Revenue Fund...82 Non-major Transportation Impact Fee Special Revenue Fund..83 Non-major Park Impact Fee Special Revenue Fund Non-major Police Impact Fee Special Revenue Fund Non-major Traverse Ridge Special Service District Special Revenue Fund Non-major Historic Preservation Special Revenue Fund STATISTICAL SECTION Schedule 1: Net Assets by Component.91 Schedule 2: Changes in Net Assets...92 Schedule 3: Fund Balances of Governmental Funds 97 Schedule 4: Changes of Fund Balances of Governmental Funds.99 Schedule 5: Tax Revenue by Source Schedule 6: Assessed Value and Actual Value of Taxable Property..102 Schedule 7: Direct and Overlapping Property Tax Rates 103 Schedule 8: Property Tax Levied and Collection 107 Schedule 9: Principal Property Tax Payers..108 Schedule 10: Direct and Overlapping Sales Tax Rates Schedule 11: Principal Sales Tax Payers.110 Schedule 12: Ratios of General Bonded Debt Outstanding 111 Schedule 13: Ratios of Outstanding Debt by Type Schedule 14: Computation of Direct and Overlapping Debt Schedule 15: Legal Debt Margin Information Schedule 16: Pledged Revenue Coverage by Bond Type Schedule 17: Demographic and Economic Statistics Schedule 18: Principal Employers Schedule 19: Full Time Equivalent City Government Employees by Function..120 Schedule 20: Operating Indicators by Function / Program Governmental Funds Operating Indicators by Function / Program Proprietary Funds

39 Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise the City of Draper s financial statements as a whole. The introductory section, combining and individual nonmajor fund financial statements, and statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual nonmajor fund financial statements are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. December 29,

40 CITY OF DRAPER CITY MANAGEMENT S DISCUSSION AND ANALYSIS For The Year Ended June 30, 2011 As management of the City of Draper (the City), we offer readers of the City's financial statements this narrative overview and analysis of the financial activities of the City for the fiscal year ended June 30, We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in the financial statements and notes to the financial statements. Financial Highlights The assets of the City of Draper exceeded its liabilities at the close of 2011 by $442.0 million (net assets). This represents an increase of $4.7 million (or 1.0%) during the fiscal year. Of this amount, $9.7 million (unrestricted net assets) is available to meet ongoing obligations to citizens and creditors, which is a decrease of $9.3 million (or 51.1%). The majority of this decrease is attributed to the use of the one-time additional transportation funding provided by the State of Utah in the prior fiscal year. The total net assets increased by $7.1 million (or 1.6%) from the prior year. Of this amount $2.8 million was associated with governmental and $4.3 million with business-type activities. As of the close of the current fiscal year, the City of Draper s governmental funds reported combined ending fund balance of $30.1 million, a decrease of $3.5 million from the prior year. Of this amount, $14.8 million is in non-spendable form or has been legally restricted by parties outside the financial reporting entity. Remaining funds are available for spending, with $11.4 million assigned for specific use and $3.9 million unassigned. At the end of the current fiscal year, unassigned fund balance for the General Fund was $3.9 million, or 18% The unreserved and undesignated fund balance of the General Fund at June 30, 2011 was $3.9 million, or 18% of the estimated non-restricted General Fund revenue. The City is in compliance with the State of Utah law fund balance limitation of 5%-18% of estimated non-restricted General Fund revenue. The City issued $2,015,000 in low-interest water revenue bonds to the State of Utah Division of Drinking Water for the construction of a 2.3 million gallon water storage tank. Report Overview This discussion and analysis is intended to serve as an introduction to the City of Draper s basic financial statements. The City of Draper s basic financial statements comprise three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves that will help the reader to gain a more in-depth understanding of the City. Government-wide Financial Statements The government-wide financial statements are designed to provide readers with a broad overview of the City of Draper s financial position as well as changes in financial position. This is similar to consolidated financial statements in a private sector business. The statements consist of the Statement of Net Assets and the Statement of Activities. The Statement of Net Assets presents information on all of the City of Draper s assets and liabilities, with the difference between the two reported as net assets. An increase or decrease in net assets over time may be used as an indicator of whether the financial condition of the City is improving or declining. 17

41 CITY OF DRAPER CITY MANAGEMENT S DISCUSSION AND ANALYSIS (Continued) For The Year Ended June 30, 2011 The Statement of Activities presents information on how the City of Draper s net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses reported in this statement for some items will result in cash flows in future fiscal periods (e.g., debt interest payment when the fiscal year ends between interest payments). Both of the government-wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (Governmental Activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (Business-type Activities). The Governmental Activities of the City include general government, public safety (police & fire), streets, planning, economic development, and parks and recreation. The Business-type Activities of the City of include culinary water, storm drain, and sanitation. The government-wide financial statements include not only the City of Draper (the primary government), but also three legally separate component units, Traverse Ridge Special Service District, the Municipal Building Authority of the City of Draper, and the Redevelopment Agency of the City of Draper, for which the City is financially accountable. Financial information for these blended component units are presented with the financial statements for the City. The government-wide financial statements are found immediately following this discussion and analysis. Fund Financial Statements A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. Some funds are required to be established by State law and/or bond covenants, however, City Council establishes other funds to help control and manage money for particular purposes (i.e. Historical Preservation Fund). All of the City s funds can be divided into two categories: Governmental Funds and Proprietary Funds. Governmental Funds - Most of the City s basic services are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at year-end that are available for spending. The funds are reported using an accounting method called modified accrual accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental funds statements provide a detailed short-term view to cash, as well as to the basic services and operations of the governmental funds. Governmental fund information helps to determine whether there are changes in the financial resources available to finance the City s programs in the near future. The relationship (or differences) between governmental activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental funds are described in the reconciliations after the fund financial statements. The City maintains the following ten (10) individual governmental funds: General Historic Preservation Municipal Building Authority Capital Improvement Projects Fire Impact Fee Transportation Impact Fee Park Impact Fee Police Impact Fee Redevelopment Agency Traverse Ridge Special Service District Proprietary Funds - When the City charges customers for the services it provides whether to outside customers or to other units of the City these services are generally reported in proprietary funds. Proprietary 18

42 CITY OF DRAPER CITY MANAGEMENT S DISCUSSION AND ANALYSIS (Continued) For The Year Ended June 30, 2011 funds are reported in the same way that all activities are reported in the Statement of Net Assets and the Statement of Activities. In fact, the City s enterprise funds (a component of proprietary funds) are the same as the business-type activities reported in the government-wide statements but with additional detail, such as cash flows. The City maintains the following three individual proprietary funds: Water (includes Impact Fees) Storm Water (includes Impact Fees) Solid Waste (Sanitation) Notes to the Financial Statement - The notes provide additional information which is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found immediately after the statements for major funds. Other Information - In addition to the basic financial statements and accompanying notes, this report also presents the combining statements referred to earlier in connection with non-major Governmental Funds. Combining and individual fund statements and schedules can be found after the Notes in the financial section. As noted earlier, net assets may serve over time as a useful indicator of a government s financial position. In the case of the City of Draper, assets exceeded liabilities by $442.0 million at the close of By far, the largest portion of the City s net assets (83.3%) reflects its investment in capital assets less any related outstanding debt. Capital assets are used to provide services to citizens; and as such, they are not available for future spending. Although the investment in capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources since the capital assets themselves cannot be used to liquidate these liabilities. Unrestricted net assets may be used to meet the City s ongoing obligations to residents and creditors. The City continues to report positive balances in all three categories of net assets - the government as a whole, as well as for its separate Governmental and Business-type Activities. Governmental Activities 2011 Governmental Business-type Activities Activities Business-type Activities 2010 Current and other assets $ 46,014,066 $ 47,771,425 $ 9,229,548 $ 8,397,973 Capital assets 388,713, ,172,464 41,076,447 37,638,051 Total Assets 434,727, ,943,889 50,305,995 46,036,024 Current and other liabilities 36,686,268 36,532,783 4,087,327 2,241,028 Long-term liabilities 1,784,089 1,431, , ,564 Total Liabilities 38,470,357 37,963,950 4,523,104 2,662,592 Net assets: Invested in capital assets, net of related debt 366,814, ,249,757 37,879,103 35,745,175 Restricted 24,737,866 19,761,376 2,868,937 2,519,275 Unrestricted 4,704,822 13,968,806 5,034,851 5,108,982 Total Net Assets $ 396,257,233 $ 393,979,939 $ 45,782,891 $ 43,373,432 19

43 CITY OF DRAPER CITY MANAGEMENT S DISCUSSION AND ANALYSIS (Continued) For The Year Ended June 30, 2011 Analysis of the City s Operations The following table provides a summary of the City s operations for the year-ended June 30, Net assets for governmental activities increased $ 2,279,770 which is $1.4 million (518.6%) more than the previous year s increase. This increase is attributable to an increase in sales and property tax collections as well increased development activity. Business-type activities increased $2.4 million, which is $ 482,106 more than the previous year s increase. The change in business-type activities is attributable to increased utility sales as well as increased development. In addition, expenditures were reduced due to increased efficiencies such as in-house garbage collection services. Overall, the City s revenues of $40.7 million exceeded expenses of $36.0 million, translating into an increase in net assets of $4.7 million. Draper City's Changes in Net Assets Governmental Governmental Business-type Business-type Activities Activities Activities Activities Revenues: Program revenues: Charges for services $ 4,454,321 $ 3,910,800 $ 6,815,745 $ 6,491,901 Operating grants and contributions 1,789,624 1,793, Capital grants and contributions 3,104,535 2,689,054 2,381,659 1,975,405 General revenues: Property taxes 10,764,481 10,236, Sales and franchise taxes 11,070,697 10,642, Unrestricted investment earnings 193, ,815 69,594 45,204 Gain (loss) on disposition of assets 27, Total Revenues 31,404,769 29,522,764 9,266,998 8,512,510 Expenses: General government 8,760,840 8,236, Public safety 10,083,937 9,072, Highways and public improvements 6,539,451 8,224, Parks and recreation 2,702,567 2,468, Interest on long-term debt 1,040,680 1,079, Water - - 3,532,503 3,405,643 Storm drain - - 1,704,534 1,415,147 Solid waste - - 1,620,502 1,764,367 Total Expenses 29,127,475 29,083,195 6,857,539 6,585,157 Increase in net assets before transfers 2,277, ,569 2,409,459 1,927,353 Transfers Increase in Net Assets 2,277, ,569 2,409,459 1,927,353 Net Assets - Beginning 393,979, ,540,370 43,373,432 41,446,079 Net Assets - Ending $ 396,257,233 $ 393,979,939 $ 45,782,891 $ 43,373,432 20

44 CITY OF DRAPER CITY MANAGEMENT S DISCUSSION AND ANALYSIS (Continued) For The Year Ended June 30, 2011 In 2009, the City received an $11.0 million distribution from the State of Utah to be dedicated to the maintenance and improvements of its transportation system which was reported under operating grants and contributions in the government-wide Statement of Activities. This revenue source dramatically changed the government-wide revenues and as such, the reader should be aware this was a one-time revenue source and will not be received in future years. However, these funds will continue to have an impact on government-wide operations for several years to come. Capital grants consist primarily of developer-donated infrastructure assets and change from year to year based on acceptance of such infrastructure by the City. The primary source of charges for services was utility fees in the government-wide revenues, while taxes contributed the majority of general fund revenue. The following two graphs display Draper City s government-wide revenues and expenses for the fiscal year-ended June 30, Financial Analysis of the Government's Funds The City s Governmental Funds are accounted for using the modified accrual basis of accounting. The governmental funds provide information on the short-term resource inflows and outflows and account balances at the end of the fiscal year. The total fund balance is a measure of total available resources and the unassigned portion of this total fund balance is a measure of the available resources at June 30, As the City completed the year, its Governmental Funds reported a combined fund balance of $30.1 million, which is a decrease of $3.4 million compared to the prior fiscal year. Of that available fund balance, $15.3 million is available for spending; however, $11.4 million has been assigned by the City Council for subsequent years capital expenditures and other uses, leaving an unassigned amount of $3.9 million. The remaining $14.8 million combined fund balance total is non-spendable in form ($ 4,699) or is legally restricted by parties outside the financial reporting entity for 1) capital improvement projects ($13.9 million), 2) perpetual care of the City s cemetery ($174,259), 3) debt service ($599,771) and 4) public safety grant expenditures ($ 6,622). General Fund The General Fund as reported consists of both the General Government Fund and Class B&C Roads Fund. 21

45 CITY OF DRAPER CITY MANAGEMENT S DISCUSSION AND ANALYSIS (Continued) For The Year Ended June 30, 2011 At June 30, 2011, the fund balance of the combined General Fund was $9.0 million. General Government Fund - The General Government Fund accounts for all of the general services provided by the City of Draper. At June 30, 2011, the unassigned fund balance of the General Fund was $3.9 million. Revenues exceeded expenditures by $ 1.6 million. The current General Fund unassigned fund balance is 18% of estimated non-restricted General Fund revenue. Given the current economy, the City s General Fund ended FY 2011 in a strong financial position. As a whole, revenue sources remained stable in 2011 with an increase of $425,532 (or 1.8%). Despite the fluctuating national economic environment, this atmosphere was not reflected in the City s revenue sources. This was a direct result of the City s management identifying alternative revenue sources to compensate for projected revenue losses. Taxes continued to be the largest source of revenue in the General Government Fund and represented 74 percent of total general fund revenues. This category was made up of sales tax, property tax, and energy and franchise tax. Tax rates remained constant, but revenues increased $247,158 (or 1.4%) when compared to the prior year. Sales tax revenues were the largest tax revenue contributor in 2011, and increased by $ 241,350 (or 3.6%) as compared to This increase is the direct result of a change in tax distribution by the State of Utah for online and/or indirect sales. Property tax revenues decreased $180,870 (or 2.3%) in The majority of this decrease was from a 25 percent decrease in delinquent property tax collections. It is critical to note the property tax rate has not increased since Franchise and energy tax increased by $186,678 (or 4.6%) from the previous year. Tax rates remained constant, and the increase is attributed to increased sales. Fines and forfeitures decreased by $86,931 (or 12%). Intergovernmental revenue decreased $118,660 from the prior year. This is entirely due to a decrease in Class B&C road funds distributed by the State of Utah. This revenue is based on a calculation of population and total lane miles of the municipality. Interest rates continued to decline in 2011 which resulted in a revenue decrease of $42,862, or 30 percent from Finally, charges for services recognized an increase of 15.4 percent, or $259,313. The majority of this increase ($133,681) came from a change in the administrative fee charged to other funds of the City based on revenues received in those funds. This fee is intended to reimburse the cost of providing management, administration, and overhead without allocating actual personnel and facilities to those funds. In May 2010, the City began offering passport issuance services. This service generated $78,472 of additional charges for services in The remaining increase was attributed to an increase of $58,891 in recreation registration fees over The following charts illustrate General Fund Revenues by Source and Type. 22

46 CITY OF DRAPER CITY MANAGEMENT S DISCUSSION AND ANALYSIS (Continued) For The Year Ended June 30, 2011 General fund expenditures decreased from $23.1 million in 2010 to $22.4 million in 2011, which represents a 3% decrease. Expenditures for general government activity increased $991,429 from the prior year, however it is important to note this increase is entirely due to the creation of the insurance recovery internal service fund ($1.1 million). In 2011, the City decided to utilize one-time revenues to fund an insurance recovery internal service fund to provide for those legal claims recorded as settled by the City s insurance agency. Excluding this decision, the general government activity actually decreased by over $200,000. Public safety expenditures decreased by $296,847 from the prior year. This is due to personnel vacancies and decreased public safety grant activity as compared to Highway and public improvements expenditures decreased by $1.8 million in This is due to the completion of several large reconstruction and overlay projects in The City continues to prioritize the repair and maintenance of its roadway system. Expenditures in parks, recreation and public property also saw an increase of $181,279 as compared to This is substantially the result of increased participation in the City s recreation program. Of this amount, almost $50,000 was recovered through increased registration revenues. The City created a recreation department in 2009 and continues to invest in the creation of community-oriented events and activities. The remaining amount is attributed to increased utility costs. Class B&C Roads Fund The Class B&C Roads Fund accounts for funds received from the State of Utah which are restricted for use for the construction and maintenance of roads classified as B or C. In April 2008, Utah State House Bill 242 redirected a portion of the bond proceeds from the $10 vehicle registration surcharge for corridor preservation to specific road projects in local communities. The City of Draper was awarded $11.0 million of the total $37.75 million. Funds were received in March At June 30, 2011, the restricted fund balance was $7.5 million, with $5.4 million held in the general fund and $2.1 held in the capital improvement projects fund for projects currently in progress. In 2011, the City spent 23

47 CITY OF DRAPER CITY MANAGEMENT S DISCUSSION AND ANALYSIS (Continued) For The Year Ended June 30, 2011 $5.0 million on an underpass construction project, $1.0 million on road maintenance, and $665,000 on road reconstruction projects. General Fund Budgetary Highlights During the fiscal year, the General Fund budget (not including transfers) was increased by $273,288 to a final budget of $25.7 million. The original budget was prepared using the most conservative of revenue forecasts for the economic environment in which it was prepared. Services were maintained, capitalized and non-capitalized vehicle and equipment budgets were fully funded, and a schedule of information system infrastructure was approved. At the end of the fiscal year, the City decided to dedicate one-time revenues to the fund an insurance recovery internal service fund to reduce the demand on future budgets for claims that have already settled. This significantly increased the budget for legal services and is anticipated to be a one-time increase. Future budgets will be prepared based on regular insurance premiums, and will use one-time revenues to fund current year claim settlement as available. All departments monitor their budgets closely and are required to stay within their allotment. Budget adjustments made during the year can be summarized as follows: Revenue budgets were increased by $632,105 (or 2.7 %) during the year. These changes were made at year end when it became apparent that revenues were stronger than originally estimated. The majority of these revenues (approximately 80%) were used to increase the budgeted expenditures for one-time needs such as funding the insurance recovery internal service fund. General government increased by $625,772. This change is attributed to the decision to fund the insurance recover internal service fund ($501,000) contracting of federal and state lobbyists ($77,000) and an increase in banking service fees based on increased fees in addition to increased usage ($35,000). Public safety increased $100,000. This change was initiated by the receipt of several grants that required spending in order to receive reimbursement, as well as the approval to purchase non-capitalized equipment. Highways and public improvements increased by $159,000. This change was initiated by the receipt of the Energy Efficiency Community Block Grant that required spending in order to receive reimbursement, as well as the approval to purchase non-capitalized equipment. 24

48 CITY OF DRAPER CITY MANAGEMENT S DISCUSSION AND ANALYSIS (Continued) For The Year Ended June 30, 2011 Parks, recreation and public property, and capital outlay remained unchanged. Differences between the original and final amended budgets amount to a total increase in appropriations of $905,000, much of which is accounted for above. During the year, actual revenues received exceeded budgeted revenues by $387,468 (or 1.6%). The entire difference is attributed to increased tax collections. Actual expenditures were less than budgeted by $3.3 million or 12.9 percent. Approximately 75 percent of this difference was in road maintenance and repairs and is attributed to the timing of the award of contract for the work. The remaining amount was spread throughout the departments and services. As the fiscal year unfolded, the City continued to prioritize spending while seeking to understand the financial impact of the economic environment. Management continued to request all departments delay expenditures as much as possible without impacting service levels. While these funds were necessary to support services, any delay allowed the City the time to assess financial projections and create new forecasts. Of this surplus, $2.5million was transferred to capital projects to assist in fulfilling the capital needs of the City. General government expenditures include all administrative functions of the City (i.e. Council, Recorder, Manager, Finance, Human Resources, Development Services and Municipal Facilities). All recommended amendments for budget changes came through the Finance Department, to City Council via Resolution, as required by State statute. The statute requires a public hearing and the opportunity for public discussion. The City, per State law, does allow small intra-departmental budget changes that modify line items within departments within the same fund. Other Governmental Funds Capital Improvement Projects Fund The Capital Projects Fund has a total fund balance of $12.7 million at June 30, 2011, all of which is either reserved for restricted assets or assigned for unfinished projects. Redevelopment Fund Property tax collections from the four previously established redevelopment areas increased 24.3 percent from the prior year to a total of $3.3 million. All four areas had increased collections reflecting increased property valuations in This is due in part to the Redevelopment Agency s continued investment in the areas to maintain value. Interest income decreased significantly due to reduced balances in the fund along with nationally reduced interest rates. Traverse Ridge Special Service District Specially assessed property tax collections from the District are used to provide increased services due to high elevation. Property tax collections increased from $682,934 in 2010 to $748,746 in This difference is attributed to increased collections of current property taxes. It is important to note the property tax rate remained unchanged with the exception of adjustment required by the Utah Truth-in-Taxation law. Expenditures for that same period increased $185,168 over the prior year. This increase was due to the demand for snow removal services on an increased number of lane miles serviced in the District. In 2010, the District plowed approximately 22 lane miles, compared to 49 lane miles in Impact Fee Funds Impact fee revenues increased for the first time following two years of decline. The total increase for all impact fees was $362,939 (or 45%). This is a direct result of the increased commercial development and a limited increase of residential development. Since impact fees are meant to provide the necessary infrastructure to support new development, budgets are developed using current resources. 25

49 CITY OF DRAPER CITY MANAGEMENT S DISCUSSION AND ANALYSIS (Continued) For The Year Ended June 30, 2011 Municipal Building Authority Fund Lease revenue is intended to offset debt service. Revenues and expenditures remained constant in this fund. Proprietary (Enterprise) Funds Water Fund Unrestricted net assets in the Water Fund decreased by $143,946 when compared to the previous year. The unrestricted fund balance at June 30, 2011 was $1.2 million. This decrease is attributed to the decrease in capital contributions. Demand in 2011 was still lower than usual but was more normalized than Storm Water Fund Unrestricted net assets in the Storm Water Fund decreased by 24% (or $318,695) which left a balance of $1.0 million at June 30, It is also important to note the City has received a federal grant from the National Resources Conservation Service for emergency watershed construction which was necessitated by a large brush fire that created the potential for erosion on a local mountainside. This reimbursable grant award was in excess of $1.7 million and was completed will continue through 2012 which will continue to temporarily increase both revenue and expenditures in this fund. The decrease in net assets are attributed to the City s contribution to emergency watershed construction. Solid Waster Fund Unrestricted net assets in the Solid Waste Fund increased $388,510 leaving a balance of $2.7 million at June 30, The City began providing collection services in December 2009 in an effort to contain costs. These services were previously contracted to an outside provider. The following chart illustrates program revenues to expenses per the Statement of Activities and includes capital contributions from developers. It does not represent the changes in unrestricted net assets. Capital Assets and Debt Administration The City s investment in capital assets for its government and business type activities totaled $429.8 million net of combined depreciation and amortization at June 30, Types of assets included in this category are land, right of ways, land improvements, buildings, machinery and equipment, park and other recreation facilities, roads (including 26