$6,540,000 Gettysburg Municipal Authority (Adams County, Pennsylvania) Guaranteed Sewer Revenue Bonds - Series of 2016

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1 NEW ISSUE BOOK-ENTRY ONLY Ratings: (See Ratings herein) In the opinion of Bond Counsel, under existing statutes, regulations and judicial decisions, interest on the Bonds is excludable from gross income for purposes of federal income taxation, is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, and need not be taken into account in determining adjusted current earnings of corporations (as defined for federal income tax purposes) for purposes of such alternative minimum tax. This opinion of Bond Counsel is given in reliance upon certain representations made by the Authority and is subject to continuing compliance by the Authority with its covenants in the Indenture and other documents to comply with requirements of the Internal Revenue Code of 1986, as amended, and applicable regulations thereunder. Bond Counsel is also of the opinion that under the laws of the Commonwealth of Pennsylvania (the Commonwealth ) as presently enacted and construed, the Bonds are exempt from personal property taxes in the Commonwealth and the interest on the Bonds is exempt from the Commonwealth s Personal Income Tax and the Commonwealth s Corporate Net Income Tax. The Bonds are qualified tax-exempt obligations, for purposes and effect contemplated by Section 265 of the Internal Revenue Code of 1986, as amended (relating to expenses and interest relating to tax-exempt income of certain financial institutions). For further information concerning federal and state tax matters relating to the Bonds, see Tax Exemption and Other Tax Matters herein. $6,540,000 Gettysburg Municipal Authority (Adams County, Pennsylvania) Guaranteed Sewer Revenue Bonds - Series of 2016 Bonds Dated: Date of Delivery Principal Due: November 15 (as shown herein) Interest Payable: May 15 and November 15 First Interest Payment: November 15, 2016 The Guaranteed Sewer Revenue Bonds - Series of 2016, in the aggregate principal amount of $6,540,000 (the Bonds ) are being issued by the Gettysburg Municipal Authority (the Authority ), located in Adams County, Pennsylvania. Interest on each of the Bonds is payable semiannually on May 15 and November 15 of each year, commencing initially on November 15, 2016, until the maturity date of such Bond or, if such Bond is subject to redemption prior to maturity, until the date fixed for redemption thereof, if payment of the redemption price has been duly made or provided for. The Bonds will be registered in the name of Cede & Co., as nominee for The Depository Trust Company, New York, New York ( DTC ), which will act as securities depository for the Bonds. Beneficial ownership interests in the Bonds will be recorded in book-entry only form in denominations of $5,000 principal amount, and integral multiples thereof. While Cede & Co., as nominee for DTC, is the registered owner of the Bonds, payments of the principal of, redemption premium, if any, and interest on the Bonds, when due for payment will be made directly to DTC by the Trustee (hereinafter defined), and DTC will in turn remit such payments to DTC Participants for subsequent disbursement to the Beneficial Owners of the Bonds. If the use of the book-entry only system for the Bonds is ever discontinued, the principal on each of the Bonds will be payable, when due, upon surrender of such Bond to the Trustee at its designated corporate trust office (or any successor Trustee at its designated office(s)) and interest on such Bond will be payable by check and mailed to the person(s) in whose name(s) such Bond is registered as of the Record Date preceding the particular interest payment date (See The Bonds, infra). The Bonds are subject to redemption prior to their stated maturity dates, as provided herein. The Bonds are being issued pursuant to a Second Supplemental Indenture, to be dated the date of the Bonds (the Second Supplemental Indenture ), amending and supplementing a Trust Indenture, dated December 7, 2010, as amended and supplemented by a First Supplemental Indenture, dated June 11, 2015 (collectively, the Indenture ) to be entered into between the Authority and TD Bank, National Association, as trustee thereunder (the Trustee ). The Bonds are secured under the Indenture by an assignment, pledge and security interest in the Receipts and Revenues from the Sewer System, as such phrase is defined in the Indenture, and by money held in the Sewer Funds created under the Indenture. Such pledge and security interest are on a parity (pro rata) basis with other existing and future sewer revenue bonds issued under the Indenture, including the Authority s $5,335,000 outstanding Guaranteed Sewer Revenue Bonds - Series of 2015, that were issued on June 11, As additional security, the Borough of Gettysburg (the Borough ), in Adams County, Pennsylvania has unconditionally guaranteed the payments of principal and interest on the Bonds when due. For such payment the Borough has pledged its full faith, credit and taxing power. The Bonds are limited revenue obligations of the Authority payable solely from such Receipts and Revenues from the Sewer System. The guaranty of the Bonds is a general obligation of the Borough, to pay in the event of a deficiency in available revenues of the Authority. The Bonds are not obligations of the Commonwealth of Pennsylvania or any political subdivision thereof except the Borough pursuant to its guaranty. The scheduled payment of principal of and interest on the Bonds when due will be guaranteed under an insurance policy to be issued concurrently with the delivery of the Bonds by MUNICIPAL ASSURANCE CORP. MATURITY SCHEDULE (See inside front cover) The Bonds are offered when, as and if issued subject to withdrawal or modification of the offer without notice, and subject to the approving legal opinion of Rhoads & Sinon LLP, Harrisburg, Pennsylvania, as Bond Counsel to the Authority, to be furnished upon delivery of the Bonds. Related matters will be passed upon for the Authority by its Solicitor, Hartman & Yannetti, Gettysburg, Pennsylvania, and for the Borough by its Solicitor, Harold A. Eastman, Jr., Esquire, Gettysburg, Pennsylvania. It is expected that the Bonds will be available for delivery to DTC or its agent on or about July 13, Dated: June 8, 2016

2 $6,540,000 Gettysburg Municipal Authority (Adams County, Pennsylvania) Guaranteed Sewer Revenue Bonds Series of 2016 BOND MATURITY SCHEDULE Maturity Date (November 15) Principal Amount Interest Rate Yield Initial Offering Price CUSIP** 2016 $20, % 0.750% % FV , % 1.000% % FW , % 1.200% % FX , % 1.400% % FY , % 1.550% % FZ , % 1.700% % GA , % 1.850% %* GB , % 2.000% % GC , % 2.090% % GD , % 2.220% % GE ,005, % 2.320% % GF ,030, % 2.470% % GG ,055, % 2.530% % GH ,080, % 2.580% % GJ0 * Priced to first optional redemption date of November 15, **The above CUSIP (Committee on Uniform Securities Identification Procedures) numbers have been assigned by an organization not affiliated with the Authority and the Authority is not responsible for the selection or use of the CUSIP numbers. The CUSIP numbers are included solely for the convenience of bondholders and no representation is made as to the correctness of such CUSIP numbers. CUSIP numbers assigned to securities may be changed during the term of such securities based on a number of factors including, but not limited to, the refunding or defeasance of such issue or the use of secondary market financial products. The Authority has not agreed to, and there is no duty or obligation to, update this Official Statement to reflect any change or correction in the CUSIP numbers set forth above. Municipal Assurance Corp. ( MAC ) makes no representation regarding the Bonds or the advisability of investing in the Bonds, In addition, MAC has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding MAC supplied by MAC and presented under the heading Bond Insurance and Appendix G Specimen Municipal Bond Insurance Policy.

3 Gettysburg Municipal Authority (Adams County, Pennsylvania) AUTHORITY BOARD MEMBERS AND OFFICERS Name Office Term Expires Dorothy K. Puhl Chairperson December 31, 2020 Susan C. Naugle Vice Chair December 31, 2017 Timothy N. Good Secretary December 31, 2016 Max Felty Assistant Secretary/Treasurer December 31, 2019 Susan Cipperly Treasurer December 31, 2018 AUTHORITY MANAGER Mark Guise AUTHORITY SOLICITOR AUTHORITY AUDITOR Hartman & Yannetti Smith Elliott Kearns & Company, LLC Gettysburg, Pennsylvania Chambersburg, Pennsylvania BOROUGH COUNCIL MEMBERS AND OFFICERS Name Office Term Expires William E. Troxell* 1 Mayor January 2018 Robert Krummerich President January 2018 Scot Pitzer Vice President January 2018 Susan Naugle Council Member January 2020 Wesley Heyser Council Member January 2020 Jacob Schindel Council Member January 2020 Amy Beth Hodges Council Member January 2020 Graham Weaver Council Member January 2018 BOROUGH ADMINISTRATION Charles Gable, Borough Manager Sara L. Stull, Secretary Nicolette James, Finance Director BOROUGH SOLICITOR BOROUGH AUDITOR Harry A. Eastman, Jr., Esquire Smith Elliott Kearns & Company, LLC Gettysburg, Pennsylvania Chambersburg, Pennsylvania BOND COUNSEL Rhoads & Sinon LLP Harrisburg, Pennsylvania BOND TRUSTEE TD Bank National Association Harrisburg, Pennsylvania FINANCIAL ADVISOR Financial S&Lutions LLC Reading, Pennsylvania UNDERWRITERS PNC Capital Markets, LLC Pittsburgh, Pennsylvania and Boenning & Scattergood, Inc. West Conshohocken, Pennsylvania AUTHORITY ADDRESS 601 East Middle Street Gettysburg, Pennsylvania * Mayor Troxell resigned as Mayor effective at midnight May 31, Council intends to appoint a new mayor at its June 2016 meeting.

4 This Official Statement does not constitute an offer to sell or a solicitation of an offer to buy, nor shall there be any sale of the Bonds in any jurisdiction to any person to whom it is unlawful to make such offer in such jurisdiction. No dealer, broker, salesman or any other person has been authorized by the Authority, the Borough or the Underwriters to give any information or make any representation, other than those contained in this Official Statement, in connection with the offering of or solicitation of offers for the Bonds. If given or made, such information or representation must not be relied upon as having been authorized by the Authority, the Borough or the Underwriters. Information contained in this Official Statement was obtained in part from officials of the Authority and the Borough, including from the financial statements and records of the Authority and the Borough, from trade and statistical services, and from other sources which are deemed to be reliable. Such sources are not guaranteed as to accuracy or completeness. Such information is not intended to be, and should not be relied upon as, a complete report or analysis; it is not to be construed as a representation by the Underwriters or, as to information from sources other than the Authority or the Borough. All quotations from and summaries and explanations of provisions of laws and documents in this Official Statement do not purport to be complete and reference is made to such laws and documents for full and complete statements of their provisions. Any statements made in this Official Statement involving estimates or matters of opinion, whether or not expressly so stated, are intended merely as estimates or opinions and not as representations of fact. The information and expressions of opinion herein are subject to change without notice; neither the delivery of this Official Statement nor any sale of the Bonds shall under any circumstances create any implication that there has been no change in the affairs of the Authority or the Borough since the date of this Official Statement. Municipal Assurance Corp. ( MAC ) makes no representation regarding the Bonds or the advisability of investing in the Bonds, In addition, MAC has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding MAC supplied by MAC and presented under the heading Bond Insurance and Appendix G Specimen Municipal Bond Insurance Policy. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT A LEVEL ABOVE THAT WHICH OTHERWISE MAY PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME WITHOUT PRIOR NOTICE.

5 TABLE OF CONTENTS Page INTRODUCTION 1 POWER TO ISSUE THE BONDS 1 PURPOSE OF THE ISSUE 2 SOURCES AND USES OF FUNDS 2 DEBT SERVICE SCHEDULE 3 THE BONDS 3 BOOK-ENTRY ONLY SYSTEM 5 SECURITY FOR THE BONDS 7 BOND INSURANCE 9 BOND INSURANCE RISK FACTORS 10 THE AUTHORITY 11 AUTHORITY SEWER SYSTEM 12 TAX EXEMPTION AND OTHER TAX MATTERS 14 CONTINUING DISCLOSURE UNDERTAKING 16 FUTURE FINANCING 17 MUNICIPAL BANKRUPTCY LAW 17 RATINGS 18 UNDERWRITING 18 FINANCIAL ADVISOR 18 CERTIFICATION OF OFFICIAL STATEMENT 18 MISCELLANEOUS 19 SUMMARY OF LEGAL DOCUMENTS DESCRIPTION OF THE BOROUGH AND FINANCIAL FACTORS FORM OF OPINION OF BOND COUNSEL FORM OF CONTINUING DISCLOSURE CERTIFICATE AUDITED FINANCIAL STATEMENTS OF THE AUTHORITY FOR THE FISCAL YEAR ENDED 12/31/2015 AUDITED FINANCIAL STATEMENTS OF THE BOROUGH FOR THE FISCAL YEAR ENDED 12/31/2014 SPECIMEN MUNICIPAL BOND INSURANCE POLICY APPENDIX A APPENDIX B APPENDIX C APPENDIX D APPENDIX E APPENDIX F APPENDIX G (i)

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7 OFFICIAL STATEMENT $6,540,000 Gettysburg Municipal Authority (Adams County, Pennsylvania) Guaranteed Sewer Revenue Bonds Series of 2016 INTRODUCTION This Official Statement, including the cover page and appendices, sets forth information with regard to the offering by the Gettysburg Municipal Authority (the Authority ), of its $6,540,000 aggregate principal amount of Guaranteed Sewer Revenue Bonds Series of 2016 (the Bonds or 2016 Bonds ), to be dated the date of their issuance and delivery (the Date of Delivery ). The Bonds are being issued pursuant to a Second Supplemental Indenture, to be dated the Date of Delivery (the Second Supplemental Indenture ), amending and supplementing a Trust Indenture, dated December 7, 2010 (the Original Indenture ), as amended and supplemented by a First Supplemental Indenture, dated June 11, 2015 (collectively, the Indenture ) to be entered into between the Authority and TD Bank, National Association, as trustee thereunder (the Trustee ). The Authority s $5,335,000 Guaranteed Sewer Revenue Bonds - Series of 2015, dated June 11, 2015 (the 2015 Bonds ) are also outstanding, and the Authority may issue future bonds (the Additional Bonds ) that will be secured by the Indenture, all on a parity (pro rata) basis with the Bonds, for the purposes and under the conditions set forth in the Indenture. The Bonds are limited revenue obligations of the Authority, payable from and secured by a pledge, lien and security interest in and to the Receipts and Revenues from the Sewer System, as such phrase is defined in the Indenture and from money held in the Sewer Funds created under the Indenture. As additional security, the Borough of Gettysburg (the Borough or Municipality ), located in Adams County, Pennsylvania has guaranteed the principal and interest due on the Bonds, pursuant to a Guaranty Agreement, to be dated the Date of Delivery (the Guaranty Agreement ), between the Borough, the Authority and the Trustee. For such guaranty the Borough has pledged its full faith, credit and taxing power, which constitutes a general obligation of the Borough. The guaranty of the Bonds is a general obligation of the Borough, to pay in the event of a deficiency in available revenues of the Authority. The Bonds are not obligations of the Commonwealth of Pennsylvania or any political subdivision thereof, except the Borough pursuant to its guaranty. Neither the delivery of the Official Statement nor any sale of the Bonds shall, under any circumstances, create an implication that there have been no changes in the affairs of the Authority or the Borough, the customers served by the Authority or the taxpayers of the Borough, since the date of this Official Statement or the earliest date as of which certain information contained herein is given. This Official Statement contains descriptions of the Bonds and summaries of provisions of the Indenture, the Guaranty Agreement and applicable laws. Such descriptions are qualified by reference to the complete texts of such provisions, instrument and documents, copies of which are available at the offices of the Authority and the Borough. POWER TO ISSUE THE BONDS The Bonds are being issued by the Authority pursuant to the Pennsylvania Municipality Authorities Act, 53 Pa. C.S. Chpt. 56, et seq. as amended (the Authorities Act ) and the Indenture. The Bonds and related documents were authorized by a resolution adopted by the Board of the Authority on May 16,

8 PURPOSE OF THE ISSUE The proceeds of the Bonds will provide funds for the following purposes: (1) currently refund all of the Authority s $6,285,000 outstanding Guaranteed Sewer Revenue Bonds - Series of 2010 (the 2010 Bonds ), and (2) pay the costs of issuing and insuring the Bonds. Upon issuing the Bonds, proceeds of the Bonds will be deposited with the Trustee in an amount which is sufficient, without investment earnings, to pay the optional redemption price of the 2010 Bonds on or within 90 days of the Date of Delivery of the Bonds. The following sets forth the sources and uses of funds: SOURCES AND USES OF FUNDS Sources of Funds: Par Amount of Bonds $6,540, Less: Net Original Issue Discount _ (52,829.35) Total Sources of Funds $6,487, Uses of Funds: 2010 Bonds Refunding Deposit $6,325, Costs of Issuance (1) 161, Total Uses of Funds $6,487, (1) Includes rating, legal fees and expenses, underwriting discount, trustee fee, financial advisor fees, bond insurance premium, printing of preliminary and final Official Statements, rounding and other related expenses. 2

9 DEBT SERVICE SCHEDULE $6,540,000 GETTYSBURG MUNICIPAL AUTHORITY (Adams County, Pennsylvania) Guaranteed Sewer Revenue Bonds - Series of 2016 Bonds Dated: Date of Delivery Principal Due: November 15, as shown below Date Principal Interest Rate Interest Total Principal and Interest Fiscal Year Debt Service (Year Ending 12/31) 11/15/2016 $20, % $50, $70, $70, /15/ , , /15/ , % 73, , , /15/ , , /15/ , % 73, , , /15/ , , /15/ , % 72, , , /15/ , , /15/ , % 72, , , /15/ , , /15/ , % 71, , , /15/ , , /15/ , % 71, , , /15/ , , /15/ , % 70, , , /15/ , , /15/ , % 69, ,034, ,104, /15/ , , /15/ , % 60, ,050, ,110, /15/ , , /15/2026 1,005, % 49, ,054, ,104, /15/ , , /15/2027 1,030, % 38, ,068, ,106, /15/ , , /15/2028 1,055, % 26, ,081, ,107, /15/ , , /15/2029 1,080, % 13, ,093, ,107, TOTALS $6,540, $1,575, $8,115, $8,115, General Description THE BONDS The Bonds will be issued in the aggregate principal amount of $6,540,000 in denominations of $5,000 principal amount and integral multiples thereof, and will be dated the Date of Delivery when interest will begin to accrue. The Bonds mature on November 15 of the years and in the principal amounts shown on the inside cover page, subject, however, to optional and mandatory redemption as hereinafter described. When issued, the Bonds will be registered in the name of Cede & Co., as nominee for The Depository Trust Company ( DTC ), New York, New York. Purchasers of the Bonds (the Beneficial Owners ) will not receive any physical delivery of the bond certificates, and beneficial ownership of the Bonds will be evidenced only by electronic book entries (see Book-Entry Only System below. So long as Cede & Co., as nominee of DTC, is the registered owner of the Bonds, payments of principal of redemption premium, if any, and interest on the Bonds, when due, are to be made to DTC and all such payments shall be valid and effective to satisfy fully and to discharge the obligations of the Authority with respect to, and to the extent of principal, redemption premium, if any, and interest so paid. If the use of the book-entry only system for the 3

10 Bonds is discontinued for any reason, bond certificates will be issued to the Beneficial Owners of the Bonds and payments of principal of and interest on the Bonds shall be made as described in the following paragraphs: The principal of certificated Bonds, when due upon maturity or upon any earlier redemption, will be paid to the registered owners of the Bonds, or registered assigns upon surrender of such Bonds to the Trustee, at its designated corporate trust office (or to any successor Trustee at its designated office(s)). The Bonds will bear interest payable on May 15 and November 15 of each year (each an Interest Payment Date ), beginning on November 15, Each Bond shall bear interest from the Interest Payment Date next preceding the date of registration and authentication of such Bonds, unless (a) such Bonds are registered and authenticated as of an Interest Payment Date, in which event such Bonds shall bear interest from said Interest Payment Date; or (b) the Bonds are registered and authenticated after a Regular Record Date (hereinafter defined) and before the next succeeding Interest Payment Date, in which event such Bonds shall bear interest from such Interest Payment Date, or (c) the Bonds are registered and authenticated on or prior to the Regular Record Date preceding November 15, 2016 in which event such Bonds shall bear interest from the Date of Delivery, or (d) as shown by the records of the Trustee, interest on such Bonds shall be in default, in which event such Bonds shall bear interest from the date on which interest was last paid on such Bonds. Interest on a certificated Bond will be payable by check drawn on the Trustee, which shall be mailed to the registered owner whose name and address shall appear, at the close of business on the fifteenth (15th) day (whether or not a day on which the Trustee is open for business) next preceding each interest payment date (the Record Date ), on the registration books maintained by the Trustee, irrespective of any transfer or exchange of the Bonds subsequent to such Record Date and prior to such interest payment date, unless the Authority shall be in default in payment of interest due on such interest payment date. If the Authority shall be in default in payment of interest due on any Interest Payment Date, such defaulted interest shall be payable to the person in whose name the Bonds are registered at the close of business on a special record date for the payment of such defaulted interest established by notice mailed by the Trustee to the registered owner of the Bond not less than fifteen (15) days preceding such special record date. Such notice shall be mailed to the person in whose name the Bond is registered at the close of business on the fifth (5th) day preceding the date of mailing. If the date for payment of the principal of or interest on any Bonds shall be a Saturday, Sunday, legal holiday or a day on which banking institutions in the Commonwealth are authorized or required by law or executive order to close, then the date for payment of such principal or interest shall be the next succeeding day which is not a Saturday, Sunday, legal holiday or a day on which such banking institutions are authorized or required to close, and payment on such date shall have the same force and effect as if made on the nominal date established for such payment. Registration, Exchange, and Transfer of Bonds Subject to the provisions described below under Book-Entry Only System, a certificated Bond is transferable or exchangeable by the registered owner thereof upon surrender of such Bond to the Trustee, accompanied by a written instrument or instruments in form, with instructions, and with guaranty of signature satisfactory to the Trustee, duly executed by the registered owner of such Bond or his attorney-in-fact or legal representative. The Trustee shall enter any transfer of ownership of such Bond in the registration books and shall authenticate and deliver at the earliest practicable time in the name of the transferee or transferees a new fully registered bond or bonds of authorized denominations of the same series, maturity and interest rate for the aggregate principal amount which the registered owner is entitled to receive. The Authority and the Trustee may deem and treat the registered owner of any certificated Bond as the absolute owner thereof (whether or not a Bond shall be overdue) for the purpose of receiving payment of or on account of principal and interest and for all other purposes, and the Authority and the Trustee shall not be affected by any notice to the contrary. The Authority and the Trustee shall not be required: (i) to issue or to register the transfer of or exchange any Bonds then considered for redemption during a period beginning at the close of business on the fifteenth (15th) day next preceding any date of selection of Bonds to be redeemed and ending at the close of business on the day on which the applicable notice of redemption is given, or (ii) to register the transfer of or exchange any portion of any Bond selected for redemption, in whole or in part until after the date fixed for redemption. Bonds may be exchanged for a like aggregate principal amount of Bonds or other authorized denominations of the same maturity and interest rate. Certificated Bonds shall be transferable or exchangeable by the registered owner thereof upon surrender thereof to the Trustee, at its designated corporate trust office or corporate trust agency office, accompanied by a written instrument or instruments in form, with instructions, and with guaranty of signature satisfactory to the Trustee, duly executed by the registered owner thereof or his attorney-in-fact or legal representative. The Trustee shall enter any transfer of ownership of the Bonds in the registration books of the Authority maintained by the Trustee and shall authenticate and deliver in the name of the transferee or transferees new fully registered Bonds of authorized denominations of the same maturity for the aggregate amount that the transferee or transferees are entitled to receive at the earliest practicable time. 4

11 Redemption Optional Redemption. The Bonds maturing on or after November 15, 2022 shall be subject to redemption, prior to maturity, at the option of the Authority, in whole or in part, in any order of maturities or portion of a maturity selected by the Authority, at any time on or after November 15, 2021 at a price equal to100% of the principal amount of the Bonds to be redeemed and accrued interest thereon to the date fixed for redemption. In the event that less than all of the Bonds of a maturity are to be redeemed, the Bonds of such maturity to be redeemed shall be drawn by lot by the Trustee. Any such redemption shall be upon application of money available for the purpose in the Mandatory Sinking Fund established under the Indenture. In lieu of such mandatory redemption, the Paying Agent, on behalf of the Authority, may purchase from money in the Mandatory Sinking Fund, at a price not to exceed the principal amount plus accrued interest, or the Authority may tender to the Trustee, all or part of the Bonds subject to being drawn for mandatory redemption on any such date. If any maturity of the Bonds which is subject to mandatory sinking fund redemption shall be called for optional redemption in part, the Authority shall be entitled to designate whether the principal amount redeemed is to be credited against the principal amount of Bonds of such maturity required to be called for mandatory sinking fund redemption on any particular future date or dates or shall be credited against the principal amount of such Bonds to be due and payable at stated maturity, in each case in a whole multiple of $5,000 principal amount. Manner of Redemption. So long as Cede & Co., as nominee of DTC, is the registered owner of the Bonds, payment of the redemption price shall be made to Cede & Co. in accordance with the existing arrangements by and among the Authority, the Trustee and DTC and, if less than all of the Bonds of any particular maturity are to be redeemed, the amount of the interest of each DTC Participant, Indirect Participant and Beneficial Owner on such Bonds to be redeemed shall be determined by the governing arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. See Book-Entry Only System herein for further information regarding redemption of Bonds registered in the name of Cede & Co. If a Bond is of a denomination larger than $5,000, a portion of such Bond may be redeemed. For the purposes of redemption, a Bond shall be treated as representing that number of Bonds that is obtained by dividing the principal amount thereof by $5,000, each $5,000 portion of such Bond being subject to redemption. In the case of partial redemption of a Bond, payment of the redemption price shall be only upon surrender of such Bond in exchange for Bonds of authorized denominations in aggregate principal amount equal to the unredeemed portion of the principal amount thereof. Notice of Redemption. So long as Cede & Co., as nominee of DTC, is the registered owner of the Bonds, the Authority and the Trustee shall send redemption notices only to Cede & Co. See BOOK-ENTRY ONLY SYSTEM herein for further information regarding conveyance of notices to Beneficial Owners. As provided more fully in the Indenture and in the Bonds, notice of redemption of Bonds shall be given by mailing a copy of the redemption notice by first class mail, postage prepaid, not less than 30 days prior to the redemption date to the Registered Owners of Bonds to be redeemed at the addresses which appear in the Bond Register. Neither failure to mail such notice nor any defect in the notice so mailed or in the mailing thereof with respect to any one Bond will affect the validity of the proceedings for the redemption of any other Bond. If at the time of mailing of the notice of redemption the Authority shall not have deposited with the Trustee moneys sufficient to redeem all the Bonds called for redemption, such notice may state that it is conditional, that is, subject to the deposit of the redemption moneys with the Trustee no later than the redemption date, and such notice shall be of no effect unless such moneys are so deposited. On the date designated for redemption and upon deposit with the Trustee of funds sufficient for the payment of the principal of and interest to be due on the Bonds so called for redemption, interest on the Bonds or portions thereof so called for redemption shall cease to accrue and the Bonds or portions thereof so called for redemption shall cease to be entitled to any benefit of security under the Indenture, and Registered Owners of the Bonds so called for redemption shall have no rights with respect to the Bonds or portions thereof so called for redemption, except to receive payment of the principal amount redeemed and accrued interest thereon so called for redemption to the date fixed for redemption. BOOK-ENTRY ONLY SYSTEM The Depository Trust Company ( DTC ), New York, NY, will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Bond will be issued for each maturity of the Bonds, in the aggregate principal amount of such maturity, and will be deposited with DTC. SO LONG AS CEDE & CO. IS THE REGISTERED OWNER OF THE BONDS, AS NOMINEE OF DTC, REFERENCES HEREIN TO THE BONDHOLDERS, BONDOWNERS OR REGISTERED OWNERS OF THE BONDS SHALL MEAN CEDE & CO. AND SHALL NOT MEAN THE BENEFICIAL OWNERS OF THE BONDS. 5

12 DTC, the world s largest depository, is a limited-purpose trust company organized under the New York Banking Law, a banking organization within the meaning of the New York Banking Law, a member of the Federal Reserve System, a clearing corporation within the meaning of the New York Uniform Commercial Code, and a clearing agency registered pursuant to the provisions of Section 17A of the Securities Exchange Act of DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-u.s. equity issues, corporate and municipal debt issues, and money market instruments from over 100 countries that DTC s participants ( Direct Participants ) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ( DTCC ). DTCC, is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ( Indirect Participants ). DTC has Standard & Poor s highest rating: AAA. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at and Purchases of the Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC s records. The ownership interest of each actual purchaser of each Bond ( Beneficial Owner ) is in turn to be recorded on the Direct and Indirect Participants records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Bonds, except in the event that use of the book-entry system for the Bonds is discontinued. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not affect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Securities may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Securities, such as redemptions, tenders, defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of Securities may wish to ascertain that the nominee holding the Securities for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them. Redemption notices shall be sent to DTC. If less than all of the Bonds within an issue are being redeemed, DTC s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Bonds unless authorized by a Direct Participant in accordance with DTC s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co. s consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Redemption proceeds, distributions, and dividend payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC s practice is to credit Direct Participants accounts upon DTC s receipt of funds and corresponding detail information from Issuer or the Trustee, on payable date in accordance with their respective holdings shown on DTC s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as if the case with securities held for the accounts of customers in bearer form or registered in street name, and will be the responsibility of such Participant and not of DTC, the Trustee, or Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions and dividend 6

13 payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of Issuer or the Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the Issuer or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, Bond certificates are required to be printed and delivered. The Issuer may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered. The information in this section concerning DTC and DTC s book-entry system has been obtained from sources that the Issuer believes to be reliable, but the Issuer takes no responsibility for the accuracy thereof. Disclaimer of Liability for Failures of DTC THE AUTHORITY, THE FINANCIAL ADVISOR AND THE TRUSTEE CANNOT AND DO NOT GIVE ANY ASSURANCES THAT DTC, THE DTC PARTICIPANTS OR THE INDIRECT PARTICIPANTS WILL DISTRIBUTE TO THE BENEFICIAL OWNERS OF THE BONDS (I) PAYMENTS OF PRINCIPAL OR REDEMPTION PRICE OF OR INTEREST ON THE BONDS, (II) CERTIFICATES REPRESENTING AN OWNERSHIP INTEREST OR OTHER CONFIRMATION OF BENEFICIAL OWNERSHIP INTERESTS IN BONDS, OR (III) REDEMPTION OR OTHER NOTICES SENT TO DTC OR CEDE & CO., ITS NOMINEE, AS THE REGISTERED OWNER OF THE BONDS, OR THAT THEY WILL DO SO ON A TIMELY BASIS OR THAT DTC, DTC PARTICIPANTS OR INDIRECT PARTICIPANTS WILL SERVE AND ACT IN THE MANNER DESCRIBED IN THIS OFFICIAL STATEMENT. THE CURRENT RULES APPLICABLE TO DTC ARE ON FILE WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE CURRENT PROCEDURES OF DTC TO BE FOLLOWED IN DEALING WITH DTC PARTICIPANTS ARE ON FILE WITH DTC. NEITHER THE AUTHORITY, THE FINANCIAL ADVISOR NOR THE TRUSTEE WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO ANY DTC PARTICIPANT, INDIRECT PARTICIPANT OR BENEFICIAL OWNER OR ANY OTHER PERSON WITH RESPECT TO: (1) THE BONDS; (2) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC OR ANY DTC PARTICIPANT OR INDIRECT PARTICIPANT; (3) THE PAYMENT BY DTC OR ANY DTC PARTICIPANT OR INDIRECT PARTICIPANT OF ANY AMOUNT DUE TO ANY BENEFICIAL OWNER IN RESPECT OF THE PRINCIPAL OR REDEMPTION PRICE OF OR INTEREST ON THE BONDS; (4) THE DELIVERY BY DTC OR ANY DTC PARTICIPANT OR INDIRECT PARTICIPANT OF ANY NOTICE TO ANY BENEFICIAL OWNER WHICH IS REQUIRED OR PERMITTED UNDER THE TERMS OF THE INDENTURE TO BE GIVEN TO BONDHOLDERS; (5) THE SELECTION OF THE BENEFICIAL OWNERS TO RECEIVE PAYMENT IN THE EVENT OF ANY PARTIAL REDEMPTION OF THE BONDS; OR (6) ANY OTHER ACTION TAKEN BY DTC AS BONDHOLDER. So long as Cede & Co. is the registered owner of the Bonds, as nominee of DTC, references herein to the bondholders or registered owners of the Bonds (other than under the caption Tax Exemption and Other Tax Matters ) shall mean Cede & Co. and shall not mean the beneficial owners of the Bonds. Payments made by the Trustee to DTC or its nominee shall satisfy the Authority s obligations with respect to the Bonds to the extent of such payments. Pledge of the Receipts and Revenues from the Sewer System SECURITY FOR THE BONDS The Bonds are issued by the Authority pursuant to, and are secured by, the Indenture, including the Second Supplemental Indenture to be entered into at the time of the issuance of the Bonds. The Bonds, and any future (parity) Sewer Revenue Bonds issued under the Indenture ( Additional Bonds ), to undertake new Capital Additions or for refunding purposes, are secured by an assignment and pledge under the Indenture to the Trustee of the Receipts and Revenues from the Sewer System, and by money in the Sewer Funds established by the Indenture, as defined below. See Appendix A Summary of Legal Documents. Receipts and Revenues from the Sewer System shall mean: (a) All sewer rentals, rates and other charges collected by the Authority from owners of improved properties which shall be connected to the Sewer System for use thereof and for services rendered by the Authority in connection therewith, and the proceeds thereof; and 7

14 (b) All other receipts, revenues and money derived in any manner, from any source, from or in connection with the Sewer System, by the Authority or on behalf of the Authority, including Receipts from Tapping Fees (except as described in the Indenture); and (c) Subject to the prior payment of costs and expenses, including legal fees, engineering fees and administrative costs and expenses, of charging and collecting assessments, filing municipal claims or liens therefor and collecting such claims or liens or collecting other Receipts from Assessments and to the prior lien of borrowings contemplated by paragraph (b) above, the Receipts from Assessments. Sewer Funds shall mean the Settlement Fund, the Construction Fund, the Debt Service Fund, the Bond Redemption and Improvement Fund, the Debt Service Reserve Fund, the Operating Account, and any other funds, accounts or subaccounts therein containing Receipt and Revenues from the Sewer System or proceeds thereof, held by the Trustee or, in the case of the Operating Account, another depositary. The Bonds are not secured by a Debt Service Reserve Fund. Borough Guaranty The Bonds are additionally secured by a pledge of the full faith, credit and taxing power of the Borough under the Guaranty Agreement, which is applicable only to the Bonds. Under the Guaranty Agreement, the Borough has covenanted to and with the holders of the Bonds from time to time that are Outstanding as defined in the Indenture, that the Borough shall, subject to annual credits for funds available, or to be available to the Authority under the Indenture to: (1) include the Debt Service on the Bonds payable in respect of its guaranty, for each fiscal year in which such sums shall be payable, in its budget for that year; (2) appropriate such amounts from its general revenues for payment to the Trustee of its obligations under the Guaranty Agreement; and (3) duly and punctually pay or cause to be paid from its sinking fund created for the purpose or any other of its revenues or funds the amount payable in respect of such guaranty, at the dates and place and in the manner provided for in the Guaranty Agreement, according to the true intent and meaning of such Guaranty Agreement. For such budgeting, appropriation and payment, the Borough has pledged irrevocably, its full faith, credit and taxing power. The Local Government Unit Debt Act (the Debt Act ) of the Commonwealth of Pennsylvania (governing direct debt and guarantees by various municipal entities with taxing power) provides that such a covenant shall be specifically enforceable. The Guaranty Agreement shall remain in full force and effect until the principal and interest on the Bonds has been paid in full. Sewer Rate Covenant The Authority has covenanted in the Indenture that it has adopted resolutions establishing sewer rentals, rates and other charges payable by owners of improved property connected to the Sewer System, for the services rendered by the Authority. The Authority also covenants in the Indenture to keep such resolutions in full force and effect continuously during the time any Sewer Revenue Bonds, including the Bonds, shall remain outstanding. The Authority covenants that such sewer rentals, rates and other charges imposed pursuant to the resolutions in effect at the time shall be at least such that the estimated annual amounts to be received by the Authority therefrom, will be sufficient: A. To pay the reasonable Administrative expenses of the Authority in connection with the Sewer System and in connection with the Bonds (2015 Authority Bonds and Additional Bonds), in each Fiscal Year, to the extent that such Administrative Expenses otherwise shall not be provided for under the Indenture; and B. To pay reasonable Operating Expenses of the Authority, in each Fiscal Year, to the extent that such Operating Expenses otherwise shall not be provided for under the Indenture; and C. To provide an amount, in each Fiscal Year equal to at least 105% of the Debt Service Requirements, as such phrase is defined in the Indenture, in such Fiscal Year, on the Bonds (and the 2015 Authority Bonds), then outstanding, to the extent that such Debt Service Requirements otherwise shall not be provided for under the Indenture; and D. To provide an amount, in each Fiscal Year in which (future)additional Bonds constituting Sewer Revenue Bonds shall be Outstanding, beginning with the first such Fiscal Year in which Debt Service Requirements on such Additional Bonds shall be payable solely from the Receipts and Revenues from the Sewer System, equal to at least 105% of such Debt Service Requirements, in such Fiscal Year, on such Additional Bonds, plus mandatory payments, if any, required to be made in such Fiscal Year to any Sewer Fund created under the Indenture 8

15 (including under any supplement thereto in accordance with provisions thereof) to the extent that such Debt Service Requirements or such mandatory payments otherwise shall not be provided for under the Indenture; and E. To provide an amount, in each Fiscal Year in which general obligation bonds of the Borough were issued in connection with the Sewer System and which are payable by the Authority under a Subsidy Agreement, equal to not less than 105% of the principal and interest due on such general obligation bonds in such Fiscal Year, as specified in such Subsidy Agreement, to the extent not otherwise provided for. BOND INSURANCE POLICY BOND INSURANCE Concurrently with the issuance of the Bonds, Municipal Assurance Corp. ("MAC") will issue its Municipal Bond Insurance Policy for the Bonds (the "Policy"). The Policy guarantees the scheduled payment of principal of and interest on the Bonds when due as set forth in the form of the Policy included as an exhibit to this Official Statement. The Policy is not covered by any insurance security or guaranty fund established under New York or Connecticut insurance law. MUNICIPAL ASSURANCE CORP. MAC is a New York domiciled financial guaranty insurance company and an indirect subsidiary of Assured Guaranty Ltd. ( AGL ), a Bermuda-based holding company whose shares are publicly traded and are listed on the New York Stock Exchange under the symbol AGO. AGL, through its operating subsidiaries, provides credit enhancement products to the U.S. and global public finance, infrastructure and structured finance markets. Neither AGL nor any of the shareholders or affiliates of AGL, other than MAC, is obligated to pay any debts of MAC or any claims under any insurance policy issued by MAC. MAC is wholly owned by Municipal Assurance Holdings Inc., which, in turn, is owned 61% by Assured Guaranty Municipal Corp. and 39% by Assured Guaranty Corp. MAC s financial strength is rated "AA" (stable outlook) by S&P Global Ratings, a business unit of Standard & Poor s Financial Services LLC ( S&P ) and "AA+" (stable outlook) by Kroll Bond Rating Agency, Inc. ( KBRA ). Each rating of MAC should be evaluated independently. An explanation of the significance of the above ratings may be obtained from the applicable rating agency. The above ratings are not recommendations to buy, sell or hold any security, and such ratings are subject to revision or withdrawal at any time by the rating agencies, including withdrawal initiated at the request of MAC in its sole discretion. In addition, the rating agencies may at any time change MAC s long-term rating outlooks or place such ratings on a watch list for possible downgrade in the near term. Any downward revision or withdrawal of any of the above ratings, the assignment of a negative outlook to such ratings or the placement of such ratings on a negative watch list may have an adverse effect on the market price of any security guaranteed by MAC. MAC only guarantees scheduled principal and scheduled interest payments payable by the issuer of bonds insured by MAC on the date(s) when such amounts were initially scheduled to become due and payable (subject to and in accordance with the terms of the relevant insurance policy), and does not guarantee the market price or liquidity of the securities it insures, nor does it guarantee that the ratings on such securities will not be revised or withdrawn. Current Financial Strength Ratings On June 29, 2015, S&P issued a credit rating report in which it affirmed MAC s financial strength rating of AA (stable outlook). MAC can give no assurance as to any further ratings action that S&P may take. On August 3, 2015, KBRA issued a credit rating report in which it affirmed MAC s insurance financial strength rating of AA+ (stable outlook). MAC can give no assurance as to any further ratings action that KBRA may take. For more information regarding MAC s financial strength ratings and the risks relating thereto, see AGL s Annual Report on Form 10-K for the fiscal year ended December 31,

16 Capitalization of MAC As of March 31, 2016, MAC s policyholders surplus and contingency reserve were approximately $1,031 million and its unearned premium reserve was approximately $440 million, in each case, determined in accordance with statutory accounting principles. Incorporation of Certain Documents by Reference Portions of the following documents filed by AGL with the Securities and Exchange Commission (the SEC ) that relate to MAC are incorporated by reference into this Official Statement and shall be deemed to be a part hereof: (i) the Annual Report on Form 10-K for the fiscal year ended December 31, 2015 (filed by AGL with the SEC on February 26, 2016); and (ii) the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2016 (filed by AGL with the SEC on May 5, 2016). All financial statements of MAC and all other information relating to MAC included in, or as exhibits to, documents filed by AGL with the SEC pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, excluding Current Reports or portions thereof furnished under Item 2.02 or Item 7.01 of Form 8-K, after the filing of the last document referred to above and before the termination of the offering of the Bonds shall be deemed incorporated by reference into this Official Statement and to be a part hereof from the respective dates of filing such documents. Copies of materials incorporated by reference are available over the internet at the SEC s website at at AGL s website at or will be provided upon request to Municipal Assurance Corp.: 31 West 52 nd Street, New York, New York 10019, Attention: Communications Department (telephone (212) ). Except for the information referred to above, no information available on or through AGL s website shall be deemed to be part of or incorporated in this Official Statement. Any information regarding MAC included herein under the caption BOND INSURANCE Municipal Assurance Corp. or included in a document incorporated by reference herein (collectively, the MAC Information ) shall be modified or superseded to the extent that any subsequently included MAC Information (either directly or through incorporation by reference) modifies or supersedes such previously included MAC Information. Any MAC Information so modified or superseded shall not constitute a part of this Official Statement, except as so modified or superseded. Miscellaneous Matters MAC makes no representation regarding the Bonds or the advisability of investing in the Bonds. In addition, MAC has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding MAC supplied by MAC and presented under the heading BOND INSURANCE. BOND INSURANCE RISK FACTORS The Authority has received a commitment for a bond insurance policy to guarantee the scheduled payment of principal and interest on the Bonds. The following are risk factors relating to bond insurance. In the event of default in the payment of principal or interest with respect to the Bonds when all or some becomes due, any owner of the Bonds shall have a claim under the applicable bond insurance policy (the Policy ) for payment of such amount in default. However, if the date for payment of such principal or interest was advanced by reason of mandatory or optional redemption of Bonds (or any portion thereof) or an acceleration of Bonds (or any portion thereof) resulting from default or otherwise, other than an advancement of maturity pursuant to a mandatory sinking fund redemption, payments under the Policy are to be made in such amounts and at such times as the defaulted principal or interest would have been due had there not been any such advancement. The Policy does not insure the payment of any redemption premium. Any payment of principal and interest in connection with a mandatory or optional redemption of the Bonds which is recovered from the bond owner as a 10

17 voidable preference under applicable bankruptcy law is covered by the Policy, however, the issuer or obligor under the Policy (the Bond Insurer ) is not obligated to make payment of the amounts so recovered except at such times and in such amounts as the recovered principal and interest would have been due absent such redemption. In the event the Bond Insurer becomes obligated to make payments with respect to the Bonds, no assurance is given that such event will not adversely affect the market price of the Bonds or the marketability (liquidity) of the Bonds. The long-term rating(s) on the Bonds is (are) dependent, in part, on the financial strength of the Bond Insurer and its claims paying ability. The Bond Insurer s financial strength and claims paying ability are predicated upon a number of factors which could change over time. No assurance is given that the long-term ratings of the Bond Insurer and the ratings on the Bonds insured by the Bond Insurer will not be subject to downgrade or withdrawal, and such event could adversely affect the market price of the Bonds or the marketability (liquidity) of the Bonds. See RATINGS herein. The obligations of the Bond Insurer under the Policy are general obligations of the Bond Insurer, and in an event of default by the Bond Insurer the remedies available to the Bondholders may be limited by applicable bankruptcy law or other similar laws related to insolvency. Neither the Authority nor the Borough nor the Financial Consultant nor the Underwriters have made any independent investigation into the claims paying ability of the Bond Insurer, and no assurance or representation regarding the financial strength or projected financial strength of the Bond Insurer is given General THE AUTHORITY The Authority is a body corporate and politic incorporated on June 18, 1948 by the Borough, pursuant to the Pennsylvania Municipality Authorities Act. The Authority s Articles of Incorporation were amended to provide that the Authority shall exist for the purpose of any projects permitted under the Authorities Act (including the ownership and operation of sanitary sewer facilities). The Authority also owns and operates municipal drinking water system serving customers in and about the Borough (the Water System ). Revenues from the Water System are separately pledged and not available to pay debt service on the Bonds. The Authority is governed by its Board, consisting of five members appointed by the Borough Council to serve five-year terms on a staggered basis. The Board meets monthly and is responsible for managing the business of the Authority in conjunction with its professional Manager and staff employed by the Board. Officers of the Board are elected annually by vote of its members. Name Office Term Expires Dorothy K. Puhl Chairperson December 31, 2020 Susan Naugle Vice Chairperson December 31, 2017 Timothy N. Good Secretary December 31, 2016 Max Felty Assistant Secretary /Treasurer December 31, 2019 Susan Cipperly Treasurer December 31, 2018 Other Outstanding Debt Payable by the Authority 2015 Authority Bonds (Sewer): The Authority issued its $5,335,000 Guaranteed Sewer Revenue Bonds, Series of 2015 (the 2015 Authority Bonds ), on June 11, 2015, all of which remain outstanding. The 2015 Authority Bonds are secured by and payable from the Authority s Sewer System revenues, and are guaranteed by the Borough. The Borough was classified its guaranty of the 2015 Bonds as self-liquidating debt under the Debt Act and, therefore, excluded from the Borough s borrowing capacity limits Borough Bonds (Sewer): The Borough issued for the benefit of the Authority $8,135,000 General Obligation Bonds, Series of 2012 (the 2012 Borough Bonds ), which were used to currently refund the Borough s General Obligation Bonds Series of 2007, that relating to the Sewer System. The 2012 Borough Bonds, which are currently outstanding in the principal amount of $6,580,000, are 100% paid from Sewer System revenues collected by the Authority and transferred to the Borough under the terms of a Subsidy Agreement, (Sewer System), dated as of June 12, 2012 (the Sewer System Subsidy 11

18 Agreement ). The Borough qualified the 2012 Borough Bonds as constituting subsidized debt under the Debt Act, from such payments under the Sewer System Subsidy Agreement, which is excluded from the Borough s borrowing capacity limits Borough Bonds (Water): The Borough issued, for the benefit of the Authority, $10,045,000 of General Obligation Bonds, Series of 2010 (the 2010 Borough Bonds ), a portion of which was used to currently refund: (i) the Borough s General Obligation Bonds Series A of 2004, relating to the Sewer System; and (ii) the General Obligation Bonds, Series B of 2004, relating to the Authority s public water system (the Water System ). $1,325,000 principal amount of the 2010 Borough Bonds ( 2010 Borough Water Bonds ) is paid from Water System revenues collected by the Authority and transferred to the Borough under the terms of a Subsidy Agreement, (Water System), dated as of May 15, 2010 (the Water System Subsidy Agreement ). The Borough qualified that portion of the 2010 Borough Bonds as constituting subsidized debt under the Debt Act, from such payments under the Water System Subsidy Agreement, which is excluded from the Borough s borrowing capacity limits. The portion of the 2010 Borough Bonds payable from Sewer System revenues has been retired. Neither the Borough, nor the Authority, has defaulted on any debt. Existing Sewer System of the Authority AUTHORITY SEWER SYSTEM Portions of the Authority s Sewer System were originally constructed in the 1890 s and have been expanded and improved on several occasions In 1985, an improvement and expansion project to the wastewater treatment plant increased treatment capacity by approximately 50%. The Authority has also maintained an ongoing improvement and replacement program for portions of its sewage collection system. The Sewer System now includes approximately 145,000 linear feet of service connections ranging from 4 to 6 inches in diameter, 160,000 feet of gravity sewers ranging from 6 to 48 inches in diameter, seven pumping stations and a 3,000,000 GPD secondary wastewater treatment plant south of Middle Street on the west bank of Rock Creek in the Borough. The Sewer System contains one wet weather bypass at the influent end of the wastewater treatment plant. The Authority also owns and operates a 232,000 GPD sequential batch reactor type wastewater treatment plant located five miles north of Gettysburg near the Village of Hunterstown. Operations of the Sewer System Historical Usage. Historical usage of the Sewer System for the years ended December 31 of the years 2012 to 2016 by the number of customers is presented below * Total Customers 2,998 3,008 3,011 3,020 3,024 Source: Authority Officials. *Year to Date Customer Characteristics. The Authority s Manager estimates that approximately 38% of the Sewer System s customer usage (based on metered water consumption) is residential, 57% is commercial, 4% is municipal and 1% percent is industrial. Data on estimated customer usage and revenues for the 12-month period ended December 31, 2015 are as follows: Usage (1,000 gals.) Estimated Billings Residential 375,820 1,093,997 Commercial 544,335 2,021,279 Municipal 32,719 93,617 Industrial 5,148 20,877 Totals $958,022 $3,229,770 Source: Authority Officials 12

19 Largest Sewer System Customers. The largest customers 12 months ended December 31, 2015 by usage for the Sewer System are listed below: Usage (1) Customer (Gallons/Year) Gettysburg College 44,900,044 Gettysburg Hospital 10,278,268 Gettysburg Lutheran Home 9,785,336 Wyndham Gettysburg Hotel 7,178,556 Courtyard by Marriott 5,424,496 Heritage Valley Healthcare 3,990, Inn of Gettysburg 3,466,232 Transition Healthcare 3,298,680 Gettysburg Hotel 3,205,928 Hilton Garden Hotel 3,193,960 Total 94,722,080 Source: Authority Officials. (1) Based on metered usage in cubic feet converted to gallons Current Rate Schedule. The current rate schedule for quarterly use of the Sewer System is shown below Number of Cubic Feet Current Rates Borough Rate: First 1,000 or less (minimum) $75.79 Next 5, /100 cubic feet Over 6, /100 cubic feet Flat Rate $ Straban/Cumberland Township Rate: First 1,000 or less (minimum) $83.37 Next 5, /100 cubic feet Over 6, /100 cubic feet Flat Rate $ Source: Authority Officials The projected annual sewer bill under current rates for an average residential customer (defined by the Authority s Manager as consumption of approximately 1,800 cubic feet of water per quarter) is $ per quarter or $ annually for Gettysburg Borough and $ per quarter or $ annually for Straban/Cumberland rate payers. 13

20 GETTYSBURG MUNICIPAL AUTHORITY Summary of Revenues and Expenses of the Sewer Fund Fiscal Years Ended December 31, OPERATING REVENUES: Service Fees $2,807,144 $2,692,962 $3,128,501 $3,162,342 Connection fees Miscellaneous income 0 11,141 9,979 12,237 Penalties 27,476 28,717 30,633 33,429 Hunterstown fees 211, , , ,424 Total Operating Revenues 3,045,875 2,986,742 3,374,219 3,404,432 OPERATING EXPENSES: Collection system 283, , , ,961 Pumping station 58,919 63,214 66,405 95,492 Disposal system 976, , , ,722 General Operation 346, , , ,175 Professional fees 58,980 48,725 48,137 26,204 Depreciation and amortization 1,320,978 1,784,069 1,569,394 1,359,728 Hunterstown depreciation 82,470 82,470 82,470 82,470 Hunterstown expenses 147, , , ,521 Total Operating Expenses 3,275,562 3,747,051 3,485,722 3,300,273 Operating Income (loss) (229,687) (760,309) (111,503) 104,159 NONOPERATING REVENUES (EXPENSES) Tapping fees 32,220 35,961 9,660 37,481 Investment income 8,127 3,302 3,023 2,841 Gain on sale of capital assets (60,201) 0 0 1,948 Health Insurance reimbursement 29,528 12, ,423 Bond Issuance Costs (133,721) Interest expense (424,625) (460,866) (449,372) (433,936) Total Non-operating revenues (expenses) (414,951) (409,405) (436,689) (477,964) Income (loss) before contributions and transfers (644,638) (1,169,714) (548,192) (373,805) Capital contributions/grants 202, ,600 0 Change in Net Position (442,257) (1,169,7,14) (340,592) (373,805) Total Net Position - beginning 27,826,778 27,384,521 26,214,807 25,787,811 Total net Position - ending $27,384,521 $26,214,807 $25,874,215 $25,414,006 Source: Annual Financial Statements of the Authority Federal Income Tax Matters TAX EXEMPTION AND OTHER TAX MATTERS On the date of delivery of the Bonds, Rhoads & Sinon LLP, Harrisburg, Pennsylvania, as Bond Counsel to the Authority, will issue an opinion to the effect that under existing statutes, regulations and judicial decisions, interest on the Bonds is excluded from gross income for purposes of federal income taxation and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, although in the corporations (as defined for federal income tax purposes) such interest is taken into account in determining adjusted current earnings for purposes of such alternative minimum tax. This opinion of Bond Counsel will assume the accuracy of representations made by the Authority and will be subject to the condition that the Authority will comply with all requirements of the Internal Revenue Code of 1986, as amended, that must be satisfied subsequent to the issuance of the Bonds in order that the interest thereon be, and continue to be, excluded 14

21 from gross income for federal income tax purposes (see the proposed form of such opinion in an Appendix to this Official Statement). The Authority has covenanted to comply with all such requirements, which include, among others, restrictions upon the yield at which proceeds of the Bonds and other money held for the payment of the Bonds and deemed to be proceeds thereof may be invested and the requirement to calculate and rebate any arbitrage that may be generated with respect to investments allocable to the Bonds. Failure to comply with such requirements could cause the interest on the Bonds to be included in gross income retroactive to the date of issuance of the Bonds. Certain maturities of the Bonds may be sold to the public in the initial offering at a price less than the stated redemption price of such Bonds at maturity (that is, at less than par or the stated principal amount), the difference being original issue discount. Generally, original issue discount accruing on a tax-exempt obligation is treated as interest excludable from gross income for federal income tax purposes. In addition, original issue discount that has accrued on a tax-exempt obligation is treated as an adjustment to the issue price of the obligation for the purpose of determining taxable gain upon sale or other disposition of such obligation prior to maturity. The Code provides specific rules for the accrual of original issue discount on tax-exempt obligations for federal income tax purposes. Prospective purchasers of Bonds being sold with original issue discount should consult their tax advisors for further information. Ownership of the Bonds may result in collateral federal income tax consequences to certain taxpayers, including, without limitation, financial institutions, property and casualty insurance companies, certain subchapter S corporations with substantial passive income and Subchapter C earnings and profits, individual recipients of Social Security or Railroad Retirement benefits and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry the Bonds. Bond Counsel will express no opinion as to such collateral tax consequences, and prospective purchasers of the Bonds should consult their tax advisors. No representation is made or can be made by the Authority or any other party associated with the issuance of the Bonds as to whether or not any legislation now or hereafter introduced and enacted will be applied retroactively so as to subject interest on the Bonds to inclusion in gross income for Federal income tax purposes or so as to otherwise affect the marketability or market value of the Bonds. Enactment of any legislation that subjects the interest on the Bonds to inclusion in gross income for federal income tax purposes or otherwise imposes taxation on the Bonds or the interest paid thereon may have an adverse effect on the market value or marketability of the Bonds. Pennsylvania Tax Matters On the date of delivery of the Bonds, Bond Counsel will issue an opinion to the effect that under the laws of the Commonwealth as presently enacted and construed, the Bonds are exempt from personal property taxes within the Commonwealth and the interest on the Bonds is exempt from the Commonwealth s Personal Income Tax and the Commonwealth s Corporate Net Income Tax (see the proposed form of such opinion in an Appendix to this Official Statement). Profits, gains or income derived from the sale, exchange or other disposition of the Bonds are subject to state and local taxation within the Commonwealth, in accordance with Pennsylvania Act No Certain maturities of the Bonds may be sold to the public in the initial offering at a price less than their stated redemption price at maturity (that is, at an original issue discount ). For Pennsylvania Personal Income Tax purposes, original issue discount on publicly offered obligations is treated under current regulations of the Pennsylvania Department of Revenue as interest and, for purposes of determining taxable gain upon sale or other disposition of an obligation the interest on which is exempt from income taxation by the Commonwealth, as an adjustment to basis. For Pennsylvania Corporate Net Income Tax purposes, original issue discount is to be accorded similar treatment, according to a Private Letter Ruling issued by the Office of the Chief Counsel of the Pennsylvania Department of Revenue dated December 2, 1993, but such Private Letter Ruling may be relied upon only by the taxpayer to whom it was addressed. No representation is made or can be made by the Authority or any other party associated with the issuance of the Bonds as to whether or not any legislation now or hereafter introduced and enacted in the Commonwealth will be applied retroactively so as to subject interest on the Bonds to Pennsylvania state or local taxes or so as to otherwise tax the Bonds or affect the marketability or market value of the Bonds. Enactment of any legislation that subjects the interest on the Bonds to Pennsylvania state or local taxes or otherwise imposes taxation on the Bonds or the interest paid thereon may have an adverse effect on the market value or marketability of the Bonds. Prospective purchasers of Bonds issued with original issue discount should consult their tax advisors for further information and advice concerning the reporting of profits, gains or other income related to a sale, exchange or other disposition of such bonds for Pennsylvania tax purposes. 15

22 Federal Income Tax Interest Expense Deductions for Financial Institutions Under Section 265 of the Internal Revenue Code of 1986, as amended (the Code ), no deduction is allowed for the portion of a financial institution s interest expense which is allocable to tax-exempt interest, such portion being an amount which bears the same ratio to the financial institution s interest expense as the financial institution s average adjusted bases (within the meaning of Section 1016 of the Code) of tax-exempt obligations acquired after August 7, 1986, bears to such average adjusted bases for all assets of the financial institution. An exception that reduces the amount of the interest expense disallowance under Section 265 of the Code is provided for certain tax-exempt obligations that are designated or deemed designated by the issuer as qualified tax-exempt obligations under Section 265 of the Code. Each of the Bonds has been designated, or is deemed designated, as a qualified tax-exempt obligation for purposes and effect contemplated by Section 265 of the Code (relating to expenses and interest relating to tax-exempt income of certain financial institutions). Financial institutions intending to purchase Bonds should consult with their professional tax advisors to determine the effect of the interest expense disallowance on their federal income tax liability. Proposed Changes in Tax Laws From time to time, there are presidential and gubernatorial proposals, proposals of various federal and state legislative 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 Bonds or otherwise prevent holders of the 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 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 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 Bonds would be impacted thereby. Purchasers of the Bonds should consult their tax advisors regarding any pending or proposed legislation, regulatory initiatives or litigation. The disclosures and opinions expressed herein are based upon existing legislation and regulations as interpreted by relevant judicial and regulatory authorities as of the date of this Official Statement, and no opinion is expressed as of any date subsequent thereto or with respect to any proposed or pending legislation, regulatory initiatives or litigation. Original Issue Premium The Bonds that mature on November 15, 2016 to 2022, inclusive (the Premium Bonds ) were sold at an original issue premium (the Acquisition Premium ). Under the Code, the premium on the Premium Bonds is an adjustment to basis and must be amortized. No deduction is allowable on account of such premium. The method of amortization may be the method regularly employed by the taxpayer if such method is reasonable, or, in all other cases, must be the method prescribed by applicable Treasury Regulations, which provide that the amortizable bond premium is an amount which bears the same ratio to the bond premium on the Premium Bonds as the number of months in the taxable year during which the bond was held by the taxpayer bears to the number of months from the beginning of the taxable year (or, if the bond was acquired in the taxable year, from the date of acquisition) to the date of maturity. The basis of the Premium Bond is reduced by the amount of the amortizable bond premium. Holders of any Premium Bonds purchased at an Acquisition Premium should consult their own tax advisors as to the actual effect of such Acquisition Premium with respect to their own tax situation and as to the treatment of Acquisition Premium for state tax purposes. CONTINUING DISCLOSURE UNDERTAKING The Gettysburg Municipal Authority has entered into a Disclosure Dissemination Agent Agreement ( Disclosure Dissemination Agreement ) with/engaged Digital Assurance Certification, L.L.C. ( DAC ) as its Disclosure Dissemination Agent for the purpose of assisting it with the above-described remedial filings ongoing compliance with its continuing disclosure filing requirements. DAC provides its clients with automated filing of rating events, templates consolidating all outstanding filing requirements that accompany reminder notices of annual or interim mandatory filings, review of all template filings by professional accountants, as well as a time and date stamp record of each filing along with the unique ID from EMMA 16

23 accompanying the copy of the actual document filed. DAC also offers its clients a series of training webinars each year qualified for NASBA certified CPE credits, as well as model secondary market compliance policies and procedures. In accordance with the requirements of Rule 15c2-12 (the Rule ) promulgated by the Securities and Exchange Commission (the SEC ), both the Authority and Borough will sign a Continuing Disclosure Certificate in accordance with the Rule (the Disclosure Certificate ). The form of the Disclosure Certificate is set forth in Appendix to this Official Statement. Past Five Year Compliance with Prior Disclosure Certificates The Borough failed to timely file its audited financial statements for its fiscal (calendar) years ending December 31, 2009, 2010, 2011, 2012 and The Authority failed to timely file its audited financial statements for the fiscal (calendar) years ending December 31, 2009, 2010, 2011 and Both the Borough and the Authority also failed to timely file other financial information, operating data and notices of listed events required by previous Disclosure Certificates during the past five years. The Authority and the Borough have adopted policies and procedures intended to facilitate timely compliance with the Rule, including appointing a compliance officer that is a full time employee of each entity, and entering into an agreement with DAC, to assist the Borough and Authority in complying with their continuing disclosure obligations. Litigation LEGAL MATTERS As a condition of issuing the Bonds, the Authority will deliver a certificate, and the Authority s Solicitor will include in his opinion, a statement that there is no litigation of any nature now pending, or to the signor s knowledge threatened, seeking to restrain or enjoin the issuance of the Bonds, or contesting the validity of the Bonds or any proceedings of the Authority with respect to the issuance or sale thereof, or the payment of the Bonds or existence or relevant powers of the Authority. As another condition of issuing the Bonds, the Borough s Solicitor will include in his opinion a statement that there is no litigation of any nature, now pending, or to his knowledge threatened, seeking to restrain or enjoin the guaranty of the Bonds by the Borough, or contesting the validity of the Guaranty or any proceedings of the Borough with respect to the Guaranty, or existence or relevant powers of the Borough. Legal Opinions Legal matters pertaining to the enforceability of the Bonds and federal and state income tax status of the interest to be paid on the Bonds, will be passed upon by Rhoads & Sinon, Bond Counsel to the Authority, Harrisburg, Pennsylvania whose approving legal opinion will be attached to the Bonds. (See Appendix C hereto). Additional legal matters pertaining to the Authority will be passed upon by its Solicitor, Hartman & Yannetti, Gettysburg, Pennsylvania and matters pertaining to the Borough will be passed upon by its Solicitor, Harold A. Eastman, Jr., Esquire, Gettysburg, Pennsylvania. FUTURE FINANCING The Authority does not expect to issue additional long-term, non-refunding debt within the next three years payable from Sewer System revenues. MUNICIPAL BANKRUPTCY LAW The undertakings of the Authority and the Borough and the security for the Bonds should be considered with reference to Chapter IX of the Bankruptcy Act, United States Code Title 2, Section 301, et seq., as amended by Public Law , approved April 8, 1978, effective October 1, 1979, and other laws affecting creditor s rights and municipalities in general. The amendments of P.L replace the former Chapter IX Legislation and permit a State, and if authorized by State law, a political subdivision, public agency or instrumentality that is insolvent or unable to meet its debts, to file with the Bankruptcy Court a list if its creditors; provides that a petition filed under Chapter IX shall operate as a stay of the commencement or continuation of any judicial or other proceedings against the petitioner; grant priority to debts owed for service or materials actually provided within three months of the filing of the petition; direct a petitioner to file a plan for the adjustment of its debts; and provide that the plan must be accepted in writing by or on behalf of creditors holding at least two-thirds in amount and more than one-half in number of the listed claims. 17

24 Act No ( Act 47 ) of the Commonwealth known as the Distressed Municipalities Act, governs the ability of the Borough to declare bankruptcy under the Federal Bankruptcy Code. Act 47 provides that no municipality may file a municipal debt adjustment action pursuant to the Bankruptcy Code unless one of the following conditions exists: (1) filing is recommended by a plan coordinator appointment by the Pennsylvania Department of Community and Economic Development (the Department ); (2) there is imminent jeopardy of an action by a creditor that is likely to substantially interrupt or restrict the continued ability of the Borough to provide health or safety services; (3) creditors have rejected a plan and unsuccessful negotiations have continued for 10 days; (4) a condition of financial distress is potentially soluble only by using a remedy exclusively available through the Federal Municipal Debt Readjustment Act; or (5) the governing body of a municipality determined by the Department to be financially distress has failed to adopt a plan or carry out the recommendations of such a plan coordinator. Act 47 also contains provisions and circumstances under which a municipality may be declared to be in financial distress making it eligible for interest free loans, grants and/or administrative assistance through the Department. The Department would have the authority to recommend a plan to increase taxes or other sources of revenues, reducing services, rescheduling obligations or merging municipalities. Any reference herein to Act 47 or the United States Bankruptcy Code should not be taken as any indication that the Borough or the Authority intend to proceed under either of those statutes. RATINGS Standard & Poor s Ratings Services ( S&P or the Rating Agency ) is expected to assign its municipal bond rating of AA (stable outlook) to this issue of Bonds with the understanding that upon delivery of the Bonds, a policy insuring the payment when due of the principal of and interest on the Bonds will be issued by MAC. In addition, S&P has assigned an underlying rating of A+ (stable outlook) to the Bonds. Any explanation of the significance of this rating may be obtained only from the rating agency furnishing the same. The Authority and the Borough have provided to the Rating Agency certain information and materials respecting the Bonds and itself. Generally, a rating agency bases its rating on such information and materials and its own investigations, studies and assumptions. There is no assurance that a rating will be maintained for any given period of time or that it may not be lowered or withdrawn entirely by the Rating Agency, if, in its judgment, circumstances so warrant. Any such downward change in or withdrawal of the rating may have an adverse effect on the market price of the Bonds. UNDERWRITING The Bonds are being purchased for reoffering by PNC Capital Markets, LLC, Pittsburgh, Pennsylvania and Boenning & Scattergood, Inc., West Conshohocken, Pennsylvania (the Underwriters ). The Underwriters have agreed to purchase the Bonds at a purchase price of $6,451, (consisting of the par amount of the Bonds less Net Original Issue Discount of $52, and less Underwriting Discount of $35,970), plus accrued interest, if any, to the date of Closing. The purchase contract for the Bonds provides that the Underwriters will purchase all the Bonds, if any are purchased, and that the obligation to make such purchase is subject to certain terms and conditions set forth in the purchase contract. The Underwriters may offer and sell certain Bonds to certain dealers and others (including sales for deposit into investment trusts) at prices lower than the public offering price stated on the cover page hereof. The Underwriters may over allot or effect transactions which stabilize or maintain the market price of the Bonds at levels above those which might otherwise prevail in the open market; such stabilizing, if commenced, may be discontinued at any time without prior notice. FINANCIAL ADVISOR The Authority has retained Financial S&Lutions LLC, Reading, Pennsylvania as Financial Advisor (the Financial Advisor ) in connection with the financial terms of the Bonds. The Financial Advisor is not obligated to undertake, and has not undertaken to make, an independent verification or to assume responsibility for the accuracy, completeness, or fairness, of the information contained in the Official Statement. The Financial Advisor is an independent consulting firm and is not engaged in the business of underwriting, trading, or distributing municipal securities or other public securities. CERTIFICATION OF OFFICIAL STATEMENT The Chairman of the Authority will certify at closing for the Bonds that to his knowledge the information in this Official Statement, as of its date, is true and correct in all material respects and does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements herein, in light of the circumstances under which they were made, not misleading. All other information has been obtained from sources which the Authority considers to be reliable and it makes no warrant, guaranty or other representation with respect to the accuracy and completeness of such information. 18

25 Rights of Bond Insurer MISCELLANEOUS The Indenture, the Guaranty Agreement and related documents grant specific rights to the Bond Insurer in connection with the Bonds, while the Bond Insurer is observing its obligations under the Policy, which may affect or limit consents, rights and remedies, otherwise available to the Trustee, the bondholders or their representatives and give the Bond Insurer additional rights to receive information from the Authority or the Borough. Remedies of Bondholders Bondholder remedies against the Authority for its failure to pay principal or interest on the Bonds when due, are prescribed by the Indenture. Remedies against the Borough under the Guaranty Agreement are prescribed by the Debt Act. If such failure should continue for 30 days, a Registered Owner will (subject to certain priorities) have the right to bring suit for the amount due him in the Court of Common Pleas for Adams County, Pennsylvania. The Debt Act provides that any judgment shall have an appropriate priority upon the moneys next coming into the treasury of the Borough. If the Authority or the Borough default in the payment of principal of or interest on the Bonds and such default continues for 30 days, or if the Authority or the Borough fail to comply with any provision of the Bonds or of the Indenture, or the Guaranty Agreement, the Registered Owners of 25% in aggregate principal amount of the Bonds may also appoint a trustee (who may be the Trustee) to represent the Registered Owners. Such trustee may, and upon written request of the owners of 25% in aggregate principal amount of the Bonds and being furnished with satisfactory indemnity shall, take one or more of the following actions: (i) bring suit to enforce all rights of the Registered Owners, (ii) bring suit on the Bonds, (iii) require the Authority and the Borough to account as if it were a Trustee of an express trust for the Registered Owners of the Bonds for any pledged revenues received, (iv) petition the court to levy, on property subject to ad valorem taxation, the amount due on the Bonds, (v) after 30 days prior written notice to the Authority and the Borough, declare the unpaid principal of the Bonds to be immediately due and payable with interest to the date of payment (which may be annulled as described in the Debt Act), and (vi) by suit in equity, enjoin any acts or things which may be unlawful or in violation of the rights of the Registered Owners all as set forth more fully in the Debt Act. The taking of such action by such trustee shall preclude the taking of similar action by individual Registered Owners of the Bonds. Assumptions and Documents All information, estimates and assumptions herein have been obtained from officials of the Authority and the Borough, other governmental bodies, trade and statistical services and other sources which are believed to be reliable, but no representations whatsoever are made that such estimates or assumptions are correct or will be realized. So far as any statements herein involve matters of opinion, whether or not expressly so stated, they are intended as such and not as representations of fact. This Official Statement, including the appendices attached hereto, has been duly approved by the Authority and its distribution has been authorized in connection with the offering for sale of the Bonds. GETTYSBURG MUNICIPAL AUTHORITY By: /s/ Dorothy K. Puhl Dorothy K. Puhl, Chairperson 19

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27 APPENDIX A SUMMARY OF LEGAL DOCUMENTS

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29 SUMMARY OF THE INDENTURE The following is a summary of various provisions of the Indenture (including the Second Supplemental Indenture), to which reference is made to the entire document. Capitalized words and phrases used in this summary are defined in the Indenture. Use of the words shall, will, must, or other words of similar import or meaning in this Summary to describe future events or continuing obligations is not intended as a representation that such event will occur or such obligations will be fulfilled, but only that the document or law requires or contemplates such event to occur or such obligation to be fulfilled. Operating Account The Indenture requires the Authority to establish and maintain a Sewer Fund with the Trustee or other banks or trust companies designated as its Operating Account and to deposit in such Operating Account all Receipts and Revenues from the Sewer System by daily deposit so far as practicable. The money from time to time on deposit in the Operating Account may be used by the Authority exclusively for the payment of Operating Expenses, capital and repair costs related to the Sewer System as set forth in the Annual Budget, debt service requirements under any Subsidy Agreement, and Debt Service Requirements on Sewer Revenue Bonds, all as provided in the Indenture, and for other purposes permitted by the Indenture. The Indenture requires the Authority to transfer funds from the Operating Account to the Trustee for deposit in the Debt Service Fund in the amounts required to make timely payment of principal and interest on the Outstanding Sewer Revenue Bonds and to make any mandatory payments to Sewer Funds created under the Indenture. Any money held by the Authority in the Operating Account at the end of any Fiscal Year not required to pay accrued expenses for such Fiscal Year and not required to be retained as a reserve in such amount as the Authority may deem prudent, shall be transferred to the Trustee and deposited by the Trustee in the Bond Redemption and Improvement Fund created under the Indenture. Money in the Operating Account and other Sewer Funds may be invested in Permitted Investments (as defined in the Indenture). Debt Service Fund The Indenture provides for a Sewer Fund to be known as the Debt Service Fund to be created and to be held by the Trustee. Money shall be transferred to the Trustee at least 10 days prior to each interest or principal payment date by the Authority from the Operating Account or other sources with respect to the Sewer System, which the Trustee shall deposit in the Debt Service Fund to pay Debt Service Requirements on all Outstanding Sewer Revenue Bonds (including the 2015 Authority Bonds and the 2016 Bonds). If Additional Bonds constituting Sewer Revenue Bonds are issued in the future, the Indenture requires additional funds to be paid by the Authority from the Operating Account to the Trustee for deposit into the Debt Service Fund as necessary to pay the principal of and interest on such Additional Bonds as the same become due and payable. Money held in the Debt Service Fund is a Sewer Fund pledged irrevocably for the payment of principal of and interest on all Sewer Revenue Bonds; subject, however, to provisions of the Indenture with respect to transfer to other Sewer Funds of interest earned on investment of money in the Debt Service Fund. The Trustee is authorized to pay from the Debt Service Fund, without further direction from the Authority, the principal and interest becoming due on Sewer Revenue Bonds issued and Outstanding under the Indenture as the same shall become due and payable. Bond Redemption and Improvement Fund The Indenture provides for a Sewer Fund to be known as the Bond Redemption and Improvement Fund to be created and to be held by the Trustee, as trustee under the Indenture. The Indenture further provides that on or before November 16 of each Fiscal Year, the Trustee shall transfer to the Bond Redemption and Improvement Fund any money remaining in the Debt Service Fund not required to pay or provide for the payment of the principal of or interest on all Outstanding Sewer Revenue Bonds. If a deficiency shall exist in the Debt Service Fund (including any sinking fund) the Trustee, without further direction from the Authority, shall transfer a sufficient amount or amounts, as money shall be available, from the Bond Redemption and Improvement Fund to eliminate such deficiency. A-1

30 Money in the Bond Redemption and Improvement Fund may be used or applied by the Authority, from time to time, provided there is no deficiency in the Debt Service Fund and provided that no Event of Default has occurred that is continuing (as evidenced by an Officers Certificate of the Authority), for any of the following purposes: A. For or toward costs of Extraordinary Repairs; or B. For or toward Costs, Costs of Acquisition or Costs of Construction of Capital Additions and, if necessary, for or toward Costs, Costs of Acquisition or Costs of Construction; or C. For redemption of Sewer Revenue Bonds of such series and in such aggregate principal amounts as the Board of the Authority, from time to time, shall determine; or for redemption of any general obligation debt of a Municipality incurred in connection with the Sewer System with respect to which the Authority is obligated under a Subsidy Agreement; or for supplementing money in other appropriate Funds under the Indenture in order to retire all Sewer Revenue Bonds then Outstanding; or for purchasing Outstanding Sewer Revenue Bonds of any Series At not more than the then current redemption price applicable to such Sewer Revenue Bonds or at not more than the first available redemption price applicable to such Sewer Revenue Bonds if the same at the time shall not be subject to redemption; provided, however, that the Bonds shall be purchased at not more than the principal amount thereof together with accrued interest to the date of purchase; or D. To pay, as and when the same shall become due and payable, any expenses, debts, liabilities and obligations of the Authority (including bonds, notes and/or certificates of indebtedness of the Authority issued under provisions of the Indenture), except such as shall be payable only out of Receipts from Assessments, required or authorized to be paid under terms of the Indenture and for payment of which provision otherwise shall not have been made, including payment of costs and expenses or such parts thereof, if any, as the Board of the Authority shall determine not to fund, that may be incurred in connection with issuance of Additional Bonds constituting Sewer Revenue Bonds, and including, in the case of Additional Bonds constituting Sewer Revenue Bonds issued for refunding purposes, redemption premiums, accrued interest and expenses of payment or redemption; or to fund any account or escrow account required in connection with the construction, operation or maintenance of the Sewer System or any part thereof, to the extent required by, or as a condition to the issuance or renewal of, any required permit or approval of a governmental authority; or E. To pay, as and when the same shall become due and payable, any amounts required to be rebated (paid) or reimbursed to the United States as arbitrage earnings on gross proceeds of Sewer Revenue Bonds; or F. For repayment to the Borough of any amount or amounts theretofore paid by such Municipality to the Trustee pursuant to any guaranty agreement with respect to Sewer Revenue Bonds that shall not have been repaid to such Municipality. Construction Fund The Indenture provides for a separate fund or account to be known as the Construction Fund to be created and to be held by the Trustee, as trustee under the Indenture, into which proceeds of Additional Bonds issued for Capital Additions and other money made available for the purposes shall be deposited and from which money may be requisitioned by the Authority for payment or reimbursement of Costs, Costs of Acquisition, or Costs of Construction relating to any Capital Additions or property in the nature of Capital Additions. Covenants of the Authority In addition to the rate covenant described in this Official Statement under the heading SECURITY FOR THE BONDS - Rate Covenant, the Indenture contains the following covenants: Payment of Bonds. The Authority covenants that it promptly will pay or will cause to be paid, but only from the Receipts and Revenues from the Sewer System, or from money that may be made available by the Borough pursuant to any guaranty agreement, if and to the extent applicable, and other receipts, revenues and money of the Authority available for such purposes, as provided in the Indenture, the principal of, premium, if any, and interest on Sewer Revenue Bonds at the place, on the dates and in the manner specified in the Indenture and in Sewer Revenue Bonds, according to the true intent thereof. A-2

31 Operation, Maintenance and Repair of Sewer System. The Authority covenants, among other things, that it at all times will: (a) Maintain the Sewer System and every part thereof in good repair, working order and condition; (b) Continuously operate the same; and (c) Make all necessary and proper repairs, renewals, replacements and improvements thereto in order to maintain adequate service. Insurance. The Authority covenants to keep the Sewer System insured against such risks, including public liability and property damage, and in such amounts as are usually carried on or with respect to like properties, or as a competent appraiser or insurance consultant shall recommend. Consulting Engineer. The Authority covenants to employ continuously Consulting Engineers who shall, among other things, make inspections of the operating methods and policies of the Authority and make reports to the Authority containing such recommendations on operating procedures, maintenance, repairs, replacements and renewals, as the Consulting Engineers shall consider appropriate. The Consulting Engineers also have additional duties and responsibilities under terms of the Indenture relating, among other things,, to the certifications of need and available revenues prior to the issuance of Additional Bonds. Payment of Taxes; Discharge of Liens. The Authority covenants that it will pay, out of Receipts and Revenues from the Sewer System, all taxes and assessments that now or hereafter properly may be levied or assessed by the United States, the Commonwealth or any municipal government against the Authority, or upon the Sewer System, or upon any franchises, businesses, transactions, income, earnings or receipts (gross, net or otherwise) of the Authority in connection with the Sewer System, for payment or collection of which the Authority may be liable or accountable under any lawful authority whatever by reason of its ownership of, or its earnings, profits or receipts from, the Sewer System. The Authority covenants that it will not create and will not permit to be created any lien or charge upon the Sewer System or upon any part thereof or upon Receipts and Revenues from the Sewer System, except the lien and charge of the Indenture and of Bonds, as appropriate, and except subordinated liens and charges permitted under the Indenture. Operating Budget. The Authority covenants to prepare an annual budget and to file a copy thereof with the Trustee not less than 10 days before the first day of each Fiscal Year. The Indenture requires each annual budget to be approved by a Certified Resolution of the Board of the Authority and by a Consulting Engineers Certificate. The Annual Budget for the remainder of any then current Fiscal Year may be amended or supplemented, at any time, but such amended or supplemented annual budget shall not supersede any prior annual budget until it shall have been filed with the Trustee and also shall have been approved by a Certified Resolution of the Board of the Authority and by a Consulting Engineers Certificate. Annual Audit. The Authority covenants to employ continuously a Certified Public Accountant to perform the accounting functions and duties required by the Indenture. Said accountant shall make an annual audit of the operations, records and accounts of the Authority, including those held by the Trustee. Tax Covenants. The Authority covenants in the Indenture to make no use of the proceeds of the Bonds, or of other obligations deemed to be part of the same issue under the Code and Treasury Regulations, or revenues held for payment of debt service on the Bonds or such other obligations, that will cause the Bonds to be or to become arbitrage bonds within the meaning of Section 103(b)(2) and Section 148 of the Code, and the Authority further covenants that it will comply with all other requirements of applicable provisions of the Code, and with regulations implementing said provisions, throughout the term of the Bonds to the extent required to maintain the Federal income tax exemption of the interest on the Bonds to the extent that such exemption was applicable at the time of original issuance thereof. In furtherance of such covenants, the Authority specifically covenants in the Indenture to comply with the arbitrage rebate provisions of Section 148(f) of the Code and applicable Treasury Regulations, if and to the extent applicable to the Bonds, and neither to make nor to permit any use of the facilities financed with the proceeds of the Bonds that may cause the Bonds to be or be deemed to be private activity bonds, as that phrase is defined in Sect ion 141 of the Code an d Treasury Regulations implementing said Section. A-3

32 Additional (Parity) Bonds The Authority may issue, from time to time, Additional Bonds (secured on a parity basis with the 2015 Authority Bonds, the 2016 Bonds and future Sewer Revenue Bonds) for the purposes of paying costs relating to Capital Additions, including reimbursement for expenditures made by it or paying any indebtedness incurred by it for such purposes, all in accordance with the provisions of the Indenture. The Authority also may issue Additional Bonds, from time to time, to provide funds necessary to refund all, or any part, of any one or more series of then outstanding Sewer Revenue Bonds and any obligations incurred which are evidenced by a Subsidy Agreement. In connection with the issuance of Additional Bonds constituting Sewer Revenue Bonds, the Indenture requires that the Trustee receive, at the time of issuance of such Additional Bonds, a Consulting Engineers Certificate to the effect that, among other things, the amounts estimated to be received by the Authority from collection of sewer rentals, rates and other charges, together with other estimated Receipts and Revenues from the Sewer System, and together with money otherwise estimated to be available under provisions of the Indenture for the purposes, will be sufficient in each Fiscal Year to meet requirements of the rate covenant contained in the Indenture, after giving effect to issuance of the Additional Bonds constituting Sewer Revenue Bonds and to purchase, payment or redemption of Sewer Revenue Bonds or indebtedness evidenced by a Subsidy Agreement, as the case may be, to be refunded. While the Bonds are Outstanding, however, the Indenture requires that the net Receipts and Revenues from the Sewer System available to pay the Debt Service Requirements on Sewer Revenue Bonds be at least 105% of the Debt Service Requirements on all proposed and Outstanding Sewer Revenue Bonds prior to issuance of any Additional Bonds constituting Sewer Revenue Bonds. Subordinate Debt of the Authority Under the terms of the Indenture, the Authority, from time to time, if other funds are not available, may issue bonds, notes or other certificates of indebtedness which shall not rank on a parity with and which shall be subordinate to Bonds issued under the Indenture for the purpose of raising funds to be used for purposes specified in subparagraphs A and B of the third paragraph under Bond Redemption and Improvement Fund above; provided, however, that the aggregate principal and interest due on such subordinated bonds, notes or certificates of indebtedness outstanding from time to time shall not exceed the amount that, in the opinion of either the Consulting Engineers (as evidenced by a Consulting Engineers Certificate) or the Certified Public Accountant, will be available as surplus funds, from time to time, in the Bond Redemption an and Improvement Fund or other Sewer Fund, as applicable, to pay the principal of and interest (if not funded otherwise) on the same, as due and payable; provided further, however, that borrowings in anticipation of the receipt of Tapping Fees or Receipts from Assessments related to any Capital Additions may be secured by a separate pledge and hypothecation of such Tapping Fees or Receipts from Assessments, any interest to be earned thereon and proceeds of issuance of any such borrowings, in which event the same shall be excluded from Receipts and Revenues from the Sewer System and shall be excluded from the lien and pledge of the Indenture. No other borrowings shall be entitled to any lien on the Receipts and Revenues from the Sewer System or any Sewer Fund created under the Indenture except subordinate to the lien of the Indenture. The Indenture also contemplates that the Authority may enter into arrangements with the Borough whereby the Borough may incur general obligation indebtedness for the purpose of financing the acquisition and/or construction by the Authority of Capital Additions to the Sewer System or for the purpose of refunding any prior indebtedness incurred by the Authority or the Borough in connection with the Sewer System, and the Authority shall agree unconditionally, under the terms of a Subsidy Agreement with the Borough to make payments to the Borough from the Operating Account sufficient to pay the interest on and principal of such general obligation indebtedness. Defaults and Remedies The following are defined as Events of Default under the Indenture: A. Payment of interest upon any Bond shall not be made at the due date expressed therefor; or B. Payment of any part of the principal of or premium, if any, on any Bond shall not be made at maturity as therein expressed or when the same shall have become due upon call for redemption or otherwise; or C. The Authority shall fail or refuse to comply with any provision of the Authorities Act or shall be rendered incapable of fulfilling its obligations under the Indenture or under the Authorities Act; or D. Any contractor or any surety shall fail or neglect to perform any contract for construction relating to the Sewer System in accordance with the terms thereof or shall fail to provide for completion of such construction or other work in accordance with the terms of such contract and the Authority shall fail to otherwise complete the same; or A-4

33 E. The Sewer System or any part thereof necessary for its efficient operation shall be wholly or partially destroyed or damaged and shall not be repaired, replaced or rebuilt promptly for any reason whatsoever; or F. The Authority or the Borough shall default in performance of any agreement made with or for the benefit of Holders of Bonds; or G. An order or decree shall be entered with consent or acquiescence of the Authority appointing a receiver of the Sewer System or of any part thereof or of receipts, revenues and money derived therefrom, or if such order or decree, having been entered without consent or acquiescence of the Authority, shall not be vacated, discharged or stayed on appeal within 30 days after entry; or H. The Authority shall make default in due and punctual performance of any covenant, condition, agreement or provision contained in Bonds or in the Indenture on the part of the Authority required to be performed and such default shall have continued for a period of 30 days after written notice specifying such default and requiring the same to be remedied shall have been given to the Authority by the Trustee, which may give such notice in its discretion and shall give such notice upon written request of Holders of not less than 25% in aggregate principal amount of Bonds then Outstanding; or I. The Borough shall default in performance of the Guaranty Agreement or any additional guaranty agreement with respect to Sewer Revenue Bonds issued under the Indenture. Under the Indenture, upon the happening and during continuance of any Event of Default, the Trustee may enforce, and upon the written request of the holders of not less than 25% in aggregate principal amount of the Bonds then Outstanding, and upon receipt of indemnity to its satisfaction, shall proceed to protect and enforce its rights and the rights of the Bondholders under the Indenture and the Authorities Act by the exercise of any proper legal or equitable right or remedy as the Trustee, being advised by counsel, shall deem most effectual. Neither the Trustee nor any receiver which may be appointed at the request of the Trustee, however, may sell, assign, mortgage or otherwise dispose of any assets of the Authority. For a more complete statement of rights and remedies of the Bondholders and of the limitations thereon, reference is made to the Indenture and the Authorities Act. Modifications and Amendments of the Indenture The Authority and the Trustee, from time to time may enter into additional supplements to the Indenture as shall not adversely affect rights of Holders of Bonds Outstanding under the Indenture for any of the following purposes: A. To cure any ambiguity, formal defect or omission in the Indenture or in any supplemental indenture; or B. To grant to or to confer upon the Trustee, for benefit of Holders of Bonds, additional rights, remedies, powers, authority or security that lawfully so may be granted or conferred; or C. To add to covenants and agreements of the Authority contained in the Indenture other covenants and agreements thereafter to be observed or to surrender any right or power reserved to or conferred upon the Authority in the Indenture. With consent of the Bond Insurer, or Holders of not less than 66 2/3% in aggregate principal amount of all Bonds then Outstanding, the Authority and the Trustee, from time to time, may enter into indentures supplemental to the Indenture for the purpose of adding provisions to the Indenture or of changing in any manner or eliminating provisions of the Indenture, or of modifying in any manner rights of Holders of Bonds; Provided, however, that no such supplemental indenture may: (i) extend the fixed maturity date of any Bond, or reduce the principal amount thereof, or reduce the rate or extend the time of payment of interest thereon, or reduce any premium payable upon redemption thereof; or (ii) permit creation by the Authority of any lien or encumbrance prior to or on a parity with the lien of the Indenture upon the Receipts and Revenues from the Sewer System; or (iii) affect rights of Holders of less than all Sewer Revenue Bonds; or (iv) reduce the aforesaid percentage of Holders in principal amount of Bonds then Outstanding that shall be required to consent to any such supplemental indenture, without the consent of Holders of all Bonds then Outstanding. A-5

34 Discharge of the Indenture The lien of the Indenture against the Receipts and Revenues from the Sewer System may be terminated by the Authority by depositing with the Trustee funds sufficient for payment or redemption of the Bonds then Outstanding and interest thereon to the date of maturity or redemption. Such requirements may be satisfied by deposit with the Trustee of a sum of money which, together with interest to be earned thereon when invested in Defeasance Obligations, will be sufficient to pay the principal and interest on the Bonds then Outstanding. The Defeasance Obligations shall mature as to principal and interest in such amounts, at such times and upon such other terms as shall assure the availability of sufficient money to timely provide for payment of the Bonds. Defeasance Obligations include (i) cash, (ii) Government Obligations, (iii) evidences of ownership of a proportionate interest in specified Government Obligations, which Government Obligations are held by a bank or trust company organized and existing under the laws of the United States of America or any state thereof in the capacity of custodian, (iv) Defeased Municipal Obligations, or (v) evidences of ownership of a proportionate interest in specified Defeased Municipal Obligations, which Defeased Municipal Obligations are held by a bank or trust company organized and existing under the laws of the United States of America or any state thereof in the capacity of custodian. Government Obligations means direct obligations of (including obligations issued or held in book entry form on the books of) the Department of the Treasury the United States, other obligations the principal of and the interest on which are unconditionally guaranteed by the United States, or Resolution Funding Corporation interest strips the payment of which is backed by the Treasury or the United States under 12 U.S.C.S. 1441b(f)(2)(E), or subsequent similar provision of law. Defeased Municipal Obligations means obligations of state or local government municipal bond issuers which are rated in the highest rating category established by S&P or Moody s, provision for the payment of the principal of and interest on which shall have been made by deposit with a trustee or escrow agent of (i) Government Obligations or (ii) evidences of ownership of a proportionate interest in specified Government Obligations which Government Obligations.are held by a bank or trust company organized and existing under the laws of the United States of America or any state thereof in the capacity of custodian, the maturing principal of and interest on such Government Obligations or evidences of ownership, when due and payable, shall provide sufficient money to pay the principal of, premium, if any, and interest on such obligations of state or local government municipal bond issuers. Investment of Funds Under the terms of the Indenture, the Authority may invest money in the Operating Account in any lawful investments for money of the Authority under the provision of the Authorities Act, provided that such investment is consistent with sound business practice and the standard of prudence applicable to the State Employees Retirement System, as required by the Authorities Act. Under the provisions of the Indenture, money in the Construction Fund, the Debt Service Fund, and the Bond Redemption and Improvement Fund may be retained by the Trustee uninvested, as trust funds, and to the extent not insured, secured continuously for the benefit of the Authority and Bondholders as required by the laws of the Commonwealth of Pennsylvania, or, upon request of the Authority, shall be wholly or partially invested and reinvested by the Trustee in Permitted Investments (hereinafter defined). Securities purchased with moneys from any Fund shall be a part of such Fund, and interest and income received from such securities and any profits realized or losses sustained upon disposition thereof shall be considered, except as provided in the Indenture, a part of or charge against the appropriate Fund, as applicable. The Indenture provides that whenever the investment is in deposits in banks or trust companies, the same shall be subject to withdrawal upon not more than 91 days notice in the case of the Debt Service Fund, not more than 6 months notice in the case of the Construction Fund, and not more than 1 year s notice in the case of the Bond Redemption and Improvement Fund. Whenever the investment of money is in obligations that are Permitted Investments (other than deposits in banks or trust companies), the Indenture provides that such obligations shall have maturity dates or, in lieu of maturity dates, shall be subject to redemption at the option of the holder, at a price not less than the principal amount thereof or the cost of acquisition, whichever is the lesser, upon dates no later than such maturity dates as follows: A. In the case of the Construction Fund, 2 years from the date of investment or the estimated date when money will be required to be expended or transferred, as appropriate, whichever shall be earlier; A-6

35 B. In the case of the Debt Service Fund and the Sewer Assessment Fund, 180 days from the date of investment or the date when money will be needed for payments, whichever shall be the earlier; provided, however, that such obligations shall not be purchased at a premium and the amount payable upon maturity or upon redemption thereof shall not be less than the cost of acquisition; and C. In the case of the Bond Redemption and Improvement Fund, 5 years from the date of investment or the date the date when such money shall be required in be expended, as specified by the Authority, whichever shall be the earlier. A-7

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37 APPENDIX B DESCRIPTION OF THE BOROUGH AND FINANCIAL FACTORS

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39 BOROUGH OF GETTYSBURG General Description The Borough was incorporated in 1806, and covers a total area of approximately 1.6 square miles. The Borough, the county seat and most populous municipality in Adams County (the County ), is approximately 30 miles south of Harrisburg, 25 miles west of York, Pennsylvania, and 50 miles north of Baltimore, Maryland. The Borough is bounded by the Township of Cumberland on three sides, with the remaining east side bordered by Straban Township. Also surrounding the Borough is the Gettysburg National Military Park which is bordered in part by the Eisenhower National Historic Site. Both the park and the Eisenhower National Historic Site are operated by the National Park Service. Form of Government The Borough operates under a Council-Mayor form of local government under the Borough Code. The Borough Manager, the chief administrator, appointed by the Council, is responsible for the day-to-day operations of Borough. The Borough Manager also serves as the Borough Treasurer. The Borough Manager is assisted by the Borough Secretary, Code Enforcement Officer, Police Chief, Highway Superintendent and Finance Director. There are seven council members, each serving a four year term, six council members are elected from three wards and an At Large council member is elected from the entire borough. The Mayor is elected at large and serves a four-year term. History The Borough of Gettysburg is located on the site of Samuel Gettys farmstead, originally part of the Marsh Creek Settlement. This settlement in the County was created between 1736 and 1760 by the Scots-Irish in the north and Germans in the south. After the Revolutionary War, James Gettys purchased a portion of his father s land where he laid out a town of 210 lots, which is the center of town today. Gettysburg, located on a crossroads, became a center along a primary agricultural transportation corridor between south central Pennsylvania and Baltimore. Many educational and religious institutions were established there in the first half of the nineteenth century. These include the Gettysburg Lutheran Theological Seminary and Pennsylvania College, now Gettysburg College. Light industry was introduced to the area between 1830 and 1850, including the carriage and wagon making industry. In 1858 the Gettysburg Railroad was extended into town, linking Gettysburg with other markets. On July 1, 1863 the Union and Confederate armies met and engaged north and west of the town. By the end of the day the Confederate army occupied Gettysburg, holding it through July 2 and July 3, while the battle continued south and east of town. Following the battle, townspeople provided medical assistance, buried the dead, and began preserving the battleground. This extraordinary experience gave Gettysburg s citizens and citizens of the entire nation perception of its unique and important place in history. Parks and Recreation Gettysburg s Civil War history is the focus for many of the area s recreation venues. Over 3,500 acres of the Gettysburg National Military Park, with its 3,000 markers and monuments and the quiet cemetery where Lincoln spoke on November 19, 1863, have long been shrines for the American nation and the world. Adjoining Gettysburg National Military Park is the Eisenhower National Historic Site. This farm was the only home General Dwight D. Eisenhower, the 34th president, ever owned. Other area attractions include the Appalachian Trail and Caledonia State Park, which offers camping, biking, hiking and swimming, and the many private and public golf courses. Transportation Highways. Gettysburg is situated at the crossroads of two major U.S. Highways-U.S. Route 15, running north and south and connecting Harrisburg and Washington D.C., and U.S. Route 30, running east and west and connecting Philadelphia and Pittsburgh. Additionally, State Routes 116, 97, 34 and 134 all provide access to Gettysburg, and there are approximately 605 miles of secondary and municipal roads. Railway Service. Adams County is served by two railroads. They are CSXT and Gettysburg Railway Company, Inc. CSXT runs between Baltimore and Hagerstown with connections to the south and west. Gettysburg Railway runs north through Adams and Cumberland counties to Mt. Holly Springs, where it connects to the Norfolk Southern system. Gettysburg Railway serves a number of Adams County industries along its line. Air Service. Commercial air and air freight service is available at nearby Harrisburg International Airport. The airports in York, Baltimore, and Washington, D.C. are also within easy reach. Gettysburg has a small airport, with paved runways and lights, located on Route 30. B-1

40 Bus Service. The bus service is operated by the Adams County Transit Authority and is called the Freedom Transit. Freedom Transit provides public transportation on three fixed routes which serve the Gettysburg area. Utilities and Communications Sewer & Water: Sewer and water service is provided by the Authority to residents of the Borough. Electricity & Gas: Electricity is provided by GPU Energy and Adams Electric Coop., Inc. Natural Gas is provided by Columbia Gas Company. Telephone: Telephone service is available from CenturyLink Education. Public Schools: The Borough is served by the Gettysburg Area School District. The School District has four elementary schools, one middle school and one high school. The School District s current enrollment is approximately 2,827* students for the school year. Higher Education: Residents of the Borough benefit from a number of cultural and economic advantages provided by the educational institutions located within the Borough. These include Gettysburg College, the oldest Lutheran-affiliated college, which offers 4-year liberal arts degrees and has an estimated student enrollment of 2,600; the Lutheran Theological Seminary, was founded in 1826, a professional school for the Lutheran ministry and America s oldest Lutheran institution of its kind, which has approximately 303 degree-seeking students; and the Gettysburg Campus of Harrisburg Area Community College, offering associate degree and certificate program curriculum. The Harrisburg Area Community College has campuses in Harrisburg, Gettysburg, Lancaster, Lebanon and York with total estimated enrollment of 15,000 students. There are several other post-secondary institutions in the surrounding area. Medical Facilities There is one general acute care hospital that serves Adams County. Hanover Hospital, located in neighboring York County, also serves the eastern and southeastern portions of Adams County. These hospitals, their licensed bed capacities and number of employees (full time and part-time) are as follows: Institution Location Licensed Beds Full-Time Staff Part-Time Staff Adams County Gettysburg Hospital Gettysburg York County Hanover Hospital Hanover Memorial Hospital - York York York Hospital York 578 3, Source: Pennsylvania Department of Health, Bureau of Health Statistics, 2015 reporting period. Population The population trends of the Borough, County and the Commonwealth of Pennsylvania are shown below. Land Area Population Square Miles Gettysburg Borough 1.6 7,025 7,490 7,605 7,633 Adams County ,274 91, , ,714 Pennsylvania 44, ,881,643 12,281,054 12,702,379 12,787,209 Gettysburg Borough, Adams County and the Commonwealth of Pennsylvania data from: 2014 QuickFacts from the US Census Bureau *Enrollment has decreased 477 students since the school year. B-2

41 Age Composition (2014) A breakdown of age composition for the Borough, County and the Commonwealth of Pennsylvania, population is provided below: Total Population Median Age Under 5 Years Over 18 Years 65+ Years Gettysburg Borough 7, , Adams County 101, ,338 79,882 17,214 Pennsylvania 12,758, ,941 10,018,509 2,041,558 Source: U.S. Census Bureau, American Community Survey 5-Year Estimates Family Income (2014) Recent per capita income trends in the Borough, County, and the Commonwealth of Pennsylvania are presented below: Average Family Size Per Capita Income Median Family Income Median Household Income Total Persons Gettysburg Borough 7, $15,595 $40,045 $31,158 Adams County 101, $27,701 $69,850 $60,068 Pennsylvania 12,758, $28,912 $67,521 $53,115 Source: U.S. Census Bureau, American Community Survey 5-Year Estimates; 2010 Census Occupied Housing Units A description of housing units for the Borough, County and the Commonwealth of Pennsylvania is provided below: Total Housing Units Owner Occupied Housing Units Average Household Size Median Value Gettysburg Borough 2, $199, Adams County 41,078 29,200 $194, Pennsylvania 5,578,393 3,446,230 $164, Source: U.S. Census Bureau, American Community Survey 5-Year Estimates; 2010 Census B-3

42 Distribution of Employment The Borough of Gettysburg is part of the Gettysburg Metropolitan Statistical Area. The following table shows the latest non-farm employment statistics. Gettysburg Metropolitan Statistical Area (Adams County) December 2015 Nonfarm Jobs - Not Seasonally Adjusted Establishment Industry Employment Net Change From: Data Dec Oct Nov Dec Nov Dec Total Nonfarm 35,100 35,200 35,000 34, Total Private 30,900 31,100 31,000 30, Goods Producing 8,500 8,600 8,600 8, Mining, Logging, & Construction 1,500 1,500 1,500 1, Manufacturing 7,000 7,100 7,100 7, Service-Providing 26,600 26,600 26,400 26, Private Service-Providing 22,400 22,500 22,400 22, Trade, Transportation & Utilities: 6,000 5,900 5,900 6, Retail Trade 3,700 3,600 3,700 3, Education & Health Services 7,000 7,200 7,300 6, Leisure & Hospitality 4,300 4,700 4,500 4, Government 4,200 4,100 4,000 4, Data benchmarked to March 2014 *** Data changes of 100 may be due to rounding *** Source: Pennsylvania Department of Labor & Industry Workforce Information News Release 2/2/2016 Recent Trends in Labor Force, Employment and Unemployment The following chart shows recent trends in employment and unemployment for Adams County, the Commonwealth of Pennsylvania and the United States of America: Gettysburg Metropolitan Statistical Area (Adams County) Total Civilian Labor Force, Employment, Unemployment and Unemployment Rate By Place of Residence (1) Time Period Labor Force Employment (2) Unemployment Rate %(3) Labor Force Employment (2) Unemployment Rate %(3) January ,000 52,800 2, ,300 53,400 1, December 54,700 53,100 1, ,100 53,100 1, January ,300 52,600 2, ,600 53,300 2, January Pennsylvania 6,432,000 6,099, , ,448,000 6,153, , United States 157,347, ,037,000 8,309, ,335, ,544,000 7,791, All data are on 2014 benchmarks. Source: the Bureau of Labor Statistics, U.S. Department of Labor (1) Workers are counted where they live only once regardless of the number of jobs they may hold. All in-depth inquiries relative to the estimating methodology should be addressed to the Bureau of Labor Statistics, U.S. Department of Labor. All data are subject to revision during annual benchmarking. (2) Includes wage and salary workers (including agriculture), self-employed persons, and unpaid family workers (including agriculture), domestic workers, and persons involved in labor-management disputes. (3) Unemployed as percent of civilian labor force, computed using unrounded data. B-4

43 Comparative Economic Statistics Recent economic statistics for Adams County as well as surrounding Counties and the State are shown below: 2014 Population (1) With Earnings 2014 Number of (2) Households Estimate 2014 Mean Income (1) Per Capita 2014 Mean Earnings (2) Per Household County Adams 57,103 37,956 $51,920 $72,454 Cumberland 137,050 95,835 $60,314 $78,710 Franklin 78,397 58,298 $48,425 $64,629 York 240, ,278 $55,550 $72,536 Commonwealth of PA 6,711,010 4,957,736 $59,166 $72,210 (1) Source: S ACS, United States Census Bureau. (2) Source: S ACS, United States Census Bureau. Employment Major Employers within Adams County Company Products/Services Knouse Foods Co-Op, Incorporated Food Production, Processing Gettysburg College Education Gettysburg Hospital Health Care Federal Government Government The Brethren Home Community Retirement Care Hain Pure Protein Corp. Poultry Processing Tim-Bar Corp. Paper and Allied Products Manufacturing Adams County County Government C & J Clark America Inc. Shoe Retail Gettysburg Area School District Public Education Source: Pennsylvania Department of Labor and Industry (L&I) Center for Workforce Information and Analysis, February L&I does not report employee numbers due to employer privacy. Labor Relations Gettysburg Borough has 31 full-time and 17 part-time employees, including the Police Department s 11 full-time and 9 part-time police officers. The 11 full-time police officers and 9 part- time police officers are represented by the Teamster s. The most recent labor contract expires December 31, 2017 The non-uniform employees have elected to be represented by the Teamster s. The most recent labor contract expires December 31, There has never been a strike or work stoppage by any Borough employee. Source: Borough Officials Pension Plans The Borough maintains two separate pension funds for its employees. The Police Pension Fund was established under Act 600 specifically for full time uniformed police officers. Funds for this pension come from several sources: the Commonwealth contributes funds and the Borough contributes additional moneys as needed to keep the fund actuarially sound. The pension moneys are currently invested with the Municipal Retirement Trust. The portfolio is a variety of investments including stock equities, mutual funds and treasury notes. As of December 31, 2015, the market value of the fund totals approximately, $4,718,246. The pension benefit is a defined benefit, and is determined by the individual employee s final 36 months average salary. Normal retirement age is 50 and 25 years service. A pension is also provided for other full time employees under the Non-Uniformed Pension Fund, also with the Municipal Retirement Trust. It is funded similarly to the police pension. With a Commonwealth contribution and the Borough B-5

44 as required. As of December 31, 2015 the fund totals approximately $2,738,623. This pension is also a defined benefit based on the employee s salary and length of service. Source: Borough Officials Taxing Powers and Procedures TAXING POWERS OF THE BOROUGH Under the Borough Code, P.L of 1965, and Act 511, P.L of 1965, boroughs have authority to levy a number of taxes. The types of levies and the statutory authority and rate limits are given below: a. 30 mills for general purposes (an additional 5 mills for general purposes with court approval); (NOTE: A Borough may levy a higher millage on the assessed value of land than on the assessed value of improvements; however, revenues collected under a split rate tax may not exceed the revenues which would have been generated by 30 mills on the total assessed value of all taxable properties) b. for interest and principal on any indebtedness (including guarantees) incurred pursuant to the Local Government Debt Act or any other act governing indebtedness; c. 1/2 mill for employees pension or retirement fund; d. 1/10 mill for shade trees; e. 8 mills for lighting streets, highways and other public places (after favorable referendum); f. 8 mills for gas, water and electric light after referendum; g. 3 mills (or higher after favorable referendum) for fire equipment, fire apparatus, fire training, fire training school; h. 2 mills for building fire house, lock-up and/or a municipal building (after favorable referendum); i. unlimited millage for library purposes (after a favorable referendum); j. 1/2 or 2 mills by referendum for support of ambulance and rescue squads; k. unlimited millage for special levy for debt by permission of court of common pleas; l. 5 mills for street improvements; m. unlimited millage for operating expenses of recreational places; n. not to exceed 5 mills of the market value of real property for community college. Under Act of December 1, 1965, P.L. 1257, No. 511, effective January 1, 1966 (The Local Tax Enabling Act), additional taxes may be levied by Boroughs (subject to division among political subdivisions to levy similar taxes on the same person, subject, business, transaction or privilege) subject to the following limitations: Per Capita Tax $10.00 Local Services Tax $52.00 Mercantile License Tax: Gross Receipts of Wholesalers 1 mill Gross Receipts of Retailers (Including Restaurants 1.5 mills Wages, Salaries, Commissions and Other Earned Income of Individuals 1.7% Real Property Transfer Tax 1% Amusement (Except Motion Picture Theaters) 10% The Local Tax Enabling Act sets no occupation tax rate limit if a millage or percentage of the assessed valuation of occupations is used as a base. Source: Borough Officials B-6

45 Trend in Assessed Valuation The assessed valuation and market values in the Borough for the last eight years as reported by the Pennsylvania Tax Equalization Division are shown below: Year Assessed Valuation Market Value Ratio 2015 $504,517,900 $385,327, % ,611, ,277, ,426, ,173, ,185, ,558, ,329, ,090, ,871, ,309, ,522, ,762, ,101, ,972, ,467, ,689, ,849, ,266, ,781, ,948, Source: Pennsylvania Tax Equalization Division. Largest Taxpayers in Borough The taxpayers owning the parcels of real estate having the 10 highest assessed values in the Borough, and the 2015 assessed values of such parcels, are as follows: Taxpayer Product/Service 2015 Assessed Valuation Gettysburg College Higher Education $6,916,259 Gettysburg Hotel Investors Hotel $3,207,315 Wellspan Properties Medical Institution $1,929,342 PG & JE Corp Motel $1,734,662 Recreational Holdings Motel $1,617, Baltimore Street Inn of Gettysburg Motel $1,446,434 Times Square LLC Real Estate Development $1,256,124 First Diamond Development of PA Motel $990,774 Adams County National Bank Financial Institution $840,379 Kelaco Grocery Store $832,135 TOTAL $20,771,049 As a percentage of the Total 2015 Borough Assessed Tax Value $504,517,600 (1) 4.12% Source: Borough Officials (1) Borough of Gettysburg 2015 Budget. B-7

46 Real Property Tax Collection Record Current collections and total collections of real property taxes for the past nine years are analyzed below in relation to the levy for the year. Current Year Collections Percent Collected (Current) Prior Years Collections Percent Collected (Total) Year Total Mills Tax Levy Total Collections $1,826,506 $1,757, % 57,253 $1,814, % ,837,553 1,750, ,926 1,810, ,796,703 1,727, ,161 1,795, ,792,332 1,681, ,064 1,765, ,813,958 1,697, ,020 1,746, ,812,857 1,688, ,507 1,737, ,715,773 1,612, ,556 1,643, ,691,385 1,665, ,299 1,704, ,689,187 1,638, ,770 1,683, ,661,837 1,616, ,916 1,645, ,436,911 1,396, ,302 1,423, Source: Borough of Gettysburg Officials. Current and Historical Tax Rates Year Real Estate Tax (Mills) Earned Income Real Estate Transfer Per Capita Occupational Privilege/EMST $5.00 $ *Source: PA Department of Community and Economic Development, Tax Rate Summary Information 2016 Tax Rate Summary Borough School District County Total Amusement (%) 5.0% 5.0% % Earned Income (%) 0.5% 1.2% 0 1.7% Local Services Tax ($) $47.00 $ $52.00 Mechanical Devices ($) $ $50.00 Occupation (mills) Per Capita ($) $ $5.00 $10.00 Real Estate General Purpose (Mills) (1) Fire Protection Services (Mills) Realty Transfer (%) 0.5% 0.5% 0 1.0% Source: PA Department of Community and Economic Development, Tax Rate Summary Information; Borough Officials. (1) School District Year Budgetary Data The Borough s budget is prepared on a modified accrual basis of accounting. Budgets are approved by Borough Council and contain estimated revenues adequate to fully fund appropriations. Annual operating budgets are legally adopted for the General Fund, Capital Projects Fund, Highway Aid fund and Capital Reserve Fund. Budgetary and actual comparison data B-8

47 for these funds are presented in the combined statement of revenue, expenditures and changes in fund balances-budget and actual-general and special revenue funds. Source: Borough of Gettysburg, Financial Statements and Supplementary Information, year ended December 31, Financial History The Borough has not defaulted on the payment of interest or principal on any of the Borough s obligations, or on any lease rental obligations due any municipal authority, nor has the Borough, at any time, issued refunding obligations in order to avoid a default on an existing obligation. Litigation The Borough has one (1) litigation matter and one (1) anticipated litigation matter. The pending litigation matter involves a claim of constitutional violations, physical injury and loss of liberty made by a plaintiff involving his arrest and detention made by a Gettysburg Borough police officer in Suit against the police officer is currently pending in the United States District Court for the Middle District of Pennsylvania. The Borough and the police officer's defense is being provided by insurance defense counsel appointed by the Borough's insurance carrier. Defense counsel has filed a dispositive motion with the Court requesting that the plaintiff's suit be dismissed with prejudice in favor of the Borough police officer and its Police Department. The second matter involves anticipated civil claims of an individual in connection with an arrest of that individual by a police officer of the Gettysburg Borough Police Department made on May 12, 2015 and the use of force by the police officer in making that arrest. Although suit has not been filed against the Borough and its police officer, the individual claimant has retained legal counsel and is pursuing pre-complaint discovery from the Borough and its police department in anticipation of filing a civil suit in federal district court against the Borough and its police officer for violation of the claimant's civil rights. The Borough and its police officer's defense is being provided by separately assigned insurance defense attorneys appointed by the Borough's insurance carrier. FINANCIAL REVIEW The following schedules on page B-12 and B-13 are summaries only and are not intended to be a complete report. For more complete information, the individual financial statements and the 2016 Budget of the Borough should be reviewed at the Offices of the Borough of Gettysburg, Gettysburg, Pennsylvania. Financial Information The Schedule listed in page B-11 is a summary of the Borough s financial condition for the years ending December 31, 2012 through 2015 (unaudited) and Page B-12 is a summary of the Borough s 2016 Budget. The Borough s Annual Audit and Financial Report filed with the Department of Community and Economic Development are audited by a firm of independent certified public accountants. The firm of Smith Elliott Kearns and Company LLC located in Chambersburg, Pennsylvania serves as the Borough s auditor. B-9

48 Borough of Gettysburg Adams County, Pennsylvania Statement of Revenues, Expenditures and Changes in Fund Balances General Funds Years Ended December * REVENUES: Taxes $2,719,544 $2,767,875 $2,867,187 $2,809,941 Licenses and Permits 75,095 64,297 59, ,167 Fines and Forfeits 232, , , ,906 Investment Earnings/Rents 12,899 13,634 1,675 1,546 Intergovernmental Revenues 286, , , ,444 Charges for Services 1,006,726 1,106,837 1,081,281 1,039,357 Donations 21,265 16,885 12,242 7,800 Miscellaneous 19,372 10,293 4,092 19,326 Total Revenues 4,373,641 4,604,387 4,738,997 4,601,487 EXPENDITURES: General Government 976, , , ,252 Public Safety 2,093,572 2,047,637 2,005,840 1,994,623 Health and Human Services 25,063 19,911 5,000 1,000 Public Works 831, , ,804 1,305,355 Culture and Recreation 145, ,704 89,573 88,271 Community Development 64,999 32,598 25,000 31,000 Debt Service 491, , ,698 0 Total Expenditures 4,628,931 4,603,862 4,742,395 4,207,501 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES (255,290) 525 (3,398) 393,986 OTHER FINANCING SOURCES (USES) Proceeds from refinance of debt Refinance debt payment Proceeds from sale of assets , Issuance of long term financing Operating Transfers In (Out) 0 54,952 (240,080) (698,569) Total Other Financing Sources and 0 54, ,500 (698,155) NET CHANGES IN FUND BALANCES (255,290) ,102 (304,169) FUND BALANCE - BEGINNING OF YEAR 1,493,271 1,237,981 1,227,560** 1,483,662 FUND BALANCE - END OF YEAR $1,237,981 $1,238,506 $1,483,662 1,179,493 *Unaudited **Fund Balance Restated Source: Annual Audit and Financial Reports of the Borough B-10

49 Borough of Gettysburg Adams County, Pennsylvania 2016 BUDGET Description Total ALL Budgeted Funds Real Property Tax 2,019,791 Occupation Tax 13,600 Local Tax Enabling Act ,000 Business Licenses/Permits 81,900 Non-Business Licenses/Permits 17,050 Fines and Forfeits 207,800 Interest Earnings 2,295 Rents and Royalties 15,000 Federal Capital Grants 146,342 State Operating Grants 883,950 State Shared Revenue 389,500 Charges for Services 27,550 Highways and Streets (Parking) 936,300 Culture and Recreation 6,000 Contributions and Donations 15,195 Other Financing Sources 176,656 Interfund Transfers In 507,873 Proceeds from Long Term Debt 366,000 TOTAL Revenues 6,747,802 Legislative 19,239 Executive 178,934 Finance 260,346 Tax Collection 24,112 Human Resources/Secretary 89,306 General Government 331,128 Police 1,553,762 Fire 195,900 Code Enforcement 52,000 Planning 155,567 Emergency Management 1,500 Health 1,200 Public Works 987,223 Winter Maintenance Services 25,000 Traffic Control Devices 55,000 Street Lighting 85,000 Sidewalks/Crosswalks 352,000 Storm Sewers and Drains 17,400 Bridges 54,000 Roads and Alleys 667,000 Parking 236,043 Parks and Recreation 73,314 Shade Tree 18,150 HUD-Community Development 146,342 Community Development 55,525 Debt Principal 397,092 Debt Interest 117,319 Interfund Transfers Out 507,873 TOTAL Expenditures 6,657,275 Revenue Over (Under) Expenditure $ 90,527 B-11

50 BOROUGH BORROWING CAPACITY The statutory borrowing limit of the Borough under the Pennsylvania Local Government Unit Debt Act, 53 Pa.C.S.Chs , as amended (the Debt Act ) is computed as a percentage of the Borough s Borrowing Base. The Borrowing Base, defined in the Debt Act, is calculated as the annual arithmetic average of the Total Revenues (as defined by the Debt Act) of the Borough for the three full fiscal years ended next preceding the date of incurring debt. The Borough s present Borrowing Base, calculated based upon Total Revenues for the fiscal years ending December 31, 2007, 2008 and 2009 is $4,188,460. Under the Debt Act as currently in effect, (i) the Borough may not incur new nonelectoral debt if the aggregate net principal amount of such new nonelectoral debt plus all outstanding net nonelectoral debt would cause total net nonelectoral debt to exceed 250% of the Borrowing Base and (ii) the Borough may not incur new lease rental debt or new nonelectoral debt if the aggregate net principal amount of such new debt plus all outstanding net nonelectoral debt and aggregate net principal amount of lease rental debt would cause the total net nonelectoral plus net lease rental debt to exceed 350% of the Borrowing Base. The borrowing base and borrowing capacity of the Borough are as follows: Calculation of Borough Borrowing Base Fiscal Year Ending December 31: Unaudited 2015 Total Revenue received from all sources $ 4,838,305 $ 5,919,639 $ 4,990,422 Deductions or Exceptions: (1) State and Federal subsidies and reimbursements related to a particular project financed by debt (2) Revenues, receipts, assessments pledged for self-liquidating debt (3) Interest earnings on sinking funds (4) Grants and gifts in aid 564, , ,297 (5) Nonrecurring receipts 499, ,581 Total Deductions or Exceptions $ 1,063,670 $ 113,627 $ 1,049,878 Total Net Revenues $ 4,855,969 $ 4,876,815 $ 4,885,381 Total Net revenues for the three years ending December 31, 2015 $ 14,440,631 Borrowing Base Total Net Revenues Divided by 3 $ 4,813,544 Legal Limit Net Debt Outstanding (1) Remaining Borrowing Capacity Net Nonelectoral Debt Limit (250% of Borrowing Base) Net Nonelectoral & Lease Rental Debt Limit (350% of Borrowing Base) $ 12,033,859 $8,812,377 $ 3,221,482 $ 16,847,403 $8,812,377 $8,035,026 (1) Excludes debt that is deemed to be self-liquidating. B-12

51 Outstanding Debt (as of 6/1/2016) General Obligation Bonds: Date of Issue Original Amount Final Maturity Amount Outstanding G.O. Note, Series of /30/09 $300,000 2/8/20 $135,185 G.O. Bonds, Series of 2010 (to be refunded) 5/19/10 $10,045,000 11/15/23 $4,245,000 G.O. Bonds, Series of /12/12 $8,135,000 8/15/23 $6,580,000 G.O. Note, Series of /13/2015 $392,192 12/13/2025 $392,192 Total $11,352,377 Outstanding Direct and Overlapping Debt After Issuance of the Bonds Residents of the Borough are responsible for the following debt as of settlement of the Bonds. Direct Debt (1) : Amount Outstanding General Obligation Debt: General Obligation Note, Series of 2009 $135,185 General Obligation Bonds, Series of 2012 $6,580,000 General Obligation Note, Series of 2015 $392,192 General Obligation Bonds, Series of 2016* $8,285,000 Total Direct Debt $15,392,377 Guaranteed Debt: Guaranteed Sewer Revenue Bonds Series of 2015 $5,335,000 Guaranteed Sewer Revenue Bonds Series of 2016 $6,540,000 Total Guaranteed Debt $11,875,000 Total Direct Debt and Guaranteed Debt $27,267,377 Less: Self-Liquidating Debt General Obligation Bonds, Series of 2012 (Portion payable from sewer revenues) $6,580,000 Guaranteed Sewer Revenue Bonds, Series of 2015 $5,335,000 Guaranteed Sewer Revenue Bonds, Series of 2016 $6,540,000 Total Self -- Liquidating Debt $18,455,000 Total Net Direct Debt $8,812,377 Overlapping Debt: Adams County (2) $3,850,266 Gettysburg Area School District (3) 8,072,137 Total Overlapping Debt 11,922,403 Total Net Direct and Overlapping Debt 20,734,780 (1) Includes the Bonds issued herein. (2) The Net Direct Debt of Adams County as of April 1, 2016 is $69,252, The Borough s proportionate share, (5.56%) is determined by dividing the Borough s 2014 assessed value by the 2014 assessed value of the County as certified by the Pennsylvania Tax Equalization Division. (3) The Net Direct Debt of the Gettysburg Area School District totals $45,305,000 of as April 1, The Borough s proportionate share, (17.82%), is determined by dividing the Borough s stated 2014 assessed value, by the 2014 assessed value of the School District of as reported by the Pennsylvania Tax Equalization Division. * Preliminary, subject to change. B-13

52 SUMMARY OF FINANCIAL FACTORS Market Value of Taxable Real Estate 2014 (1) $385,327,048 Assessed Valuation of Taxable Real Estate 2014 (1) 507,283,200 Ratio of Assessed Valuation to Market Value % Population: 2010 U.S. Census 7, U.S. Census 7,490 Overlapping Debt: : Total Direct Debt, Guaranteed Debt and Overlapping Debt 39,189,780 Total Net Direct Debt and Overlapping Debt 20,734,780 Ratio of Direct, Guaranteed and Overlapping Debt to: Market Value of Real Estate 10.17% Assessed Valuation of Real Estate 7.73% Population (2010) $5,143 Net Direct Debt 8,812,377 Ratio of Total Debt After Reimbursement to: Market Value of Taxable Real Estate % Assessed Valuation of Taxable Real Estate % Population (2010) 1,156 Ratio of Population (2010) of: Market Value of Real Estate $50,568 Assessed Valuation of Real Estate $66,573 (1) As reported by the Pennsylvania Tax Equalization Division. (2) Includes self-liquidating debt. (3) The Borough s proportionate share, (5.56%) is determined by dividing the Borough s 2014 assessed value by the 2014 assessed value of the County as certified by the Pennsylvania Tax Equalization Division. (4) The Borough s proportionate share, (17.82%), is determined by dividing the Borough s stated 2014 assessed value, by the 2014 assessed value of the School District of as reported by the Pennsylvania Tax Equalization Division. B-14

53 APPENDIX C FORM OF OPINION OF BOND COUNSEL

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55 [LETTERHEAD OF BOND COUNSEL] [Date of Delivery] Re: Gettysburg Municipal Authority $6,540,000 Aggregate Principal Amount Guaranteed Sewer Revenue Bonds - Series of 2016 OPINION We have acted as Bond Counsel to the Gettysburg Municipal Authority (the Authority ), a municipality authority incorporated by the Borough of Gettysburg (the Borough ), in Adams County, Pennsylvania, and existing under the Municipality Authorities Act, 53 Pa.C.S. Ch. 56, of the Commonwealth of Pennsylvania (the Commonwealth ), in connection with the issuance of its Guaranteed Sewer Revenue Bonds - Series of 2016 (the Bonds ), dated the delivery date of the Bonds, in the aggregate principal amount of $6,540,000. The Bonds are secured by a Trust Indenture, dated December 7, 2010, as amended and supplemented by a First Supplemental Indenture, dated June 11, 2015, and as amended and supplemented by a Second Supplemental Indenture, dated the delivery date of the Bonds (collectively, the Indenture ), between the Authority and TD Bank, National Association (the Trustee ), as trustee. The proceeds of the Bonds are to be used to currently refund and retire all of the Authority s outstanding Guaranteed Sewer Revenue Bonds Series of 2010, and pay the costs of issuing the Bonds. The Authority heretofore acquired and constructed sanitary sewage collection, transmission and treatment system facilities, which facilities, together with all appurtenant facilities and properties that the Authority has acquired or hereafter shall acquire in connection therewith, including all property, real, personal and mixed, rights, powers, licenses, easements, rights of way, privileges, franchises and any and all other property or interests in property of whatsoever nature used or useful in connection with such facilities, and together with all additions, extensions, alterations, replacements and improvements that, from time to time, may be acquired or may be made thereto, are referred to as the Sewer System. The Authority, under the Indenture, has assigned to and pledged with the Trustee the Receipt and Revenues from the Sewer System and money in the Sewer Funds, as those phrases are defined in the Indenture, as security, to the extent provided in the Indenture, to secure the Bonds and other parity Sewer Revenue Bonds which may be authorized for issuance thereunder, from time to time. The principal of, premium, if any, and interest on the Bonds, and any additional Sewer Revenue Bonds which may be authorized for issuance under the Indenture from time to time, are payable only from such Receipts and Revenues from the Sewer System and any other receipts, revenues and money available for such purposes described in the Indenture. The Indenture provides for the issuance of Additional Bonds, as

56 [Date of Delivery] Page 2 defined therein, for purposes and under conditions therein contained, including to refund Sewer Revenue Bonds then outstanding under the Indenture. The Borough, as guarantor, and the Authority and the Trustee have entered into a Guaranty Agreement, dated the delivery date of the Bonds (the Guaranty Agreement ), which sets forth the Debt Service Requirements, as that phrase is defined in the Indenture, on the Bonds that are guaranteed by the Borough and to money that may be available for the payment of the principal of and interest on the Bonds upon specified terms and conditions. The Indenture contains covenants of the Authority to comply with the Internal Revenue Code of 1986, as amended (the Code ), and applicable regulations promulgated thereunder to preserve the Federal income tax exemption of the interest on the Bonds. The Authority has taken action to designate, or deem designated, each of the Bonds as a qualified tax-exempt obligation, as defined in Section 265(b)(3)(B) of the Code. As Bond Counsel, we have examined, among other things: a certified photostatic copy of the Articles of Incorporation and related documents and a Subsistence Certificate, all with respect to the Authority, as issued by the Secretary of the Commonwealth; an executed Bond; the executed Guaranty Agreement; the executed documents constituting the Indenture; certain documents required by the Indenture to be furnished to the Trustee as conditions precedent to the authentication and delivery by the Trustee of the Bonds; certifications of no litigation; a nonarbitrage and rebate compliance certificate of the Authority; and usual and required closing certificates and documents. We have also relied upon the legal opinions rendered this date by the solicitors of the Authority and the Borough. As to questions of fact material to our opinion, we have relied upon the certified proceedings and other certifications of public officials furnished to us without undertaking to verify such facts by independent investigation. Based on our examination, we are of the opinion that: 1. The Authority is existing validly under laws of the Commonwealth and has power to issue the Bonds and to own and to operate the Sewer System, as contemplated by the Indenture. 2. The Indenture has been duly authorized, executed and delivered by the Authority and is a valid and enforceable instrument. 3. The Borough has power to enter into the Guaranty Agreement and to obligate itself to the extent and in the manner therein provided; execution of the Guaranty Agreement by the Borough has been authorized by an ordinance duly enacted under the Local Government Unit Debt Act (the Debt Act ) of the Commonwealth; execution of the Guaranty Agreement by the Authority has been authorized by a resolution duly adopted; execution and delivery of the Guaranty Agreement by the Borough has been approved by the Secretary of the Community and Economic Development of the Commonwealth under provisions of the Debt Act; the Guaranty Agreement duly has been executed and delivered and is a valid and enforceable instrument of the

57 [Date of Delivery] Page 3 Borough; the Borough has the power to guaranty the payment of the principal of and interest on the Bonds to the extent provided in the Guaranty Agreement; and the Borough, under the Guaranty Agreement, has duly guaranteed the payment of the principal of and interest on the Bonds to the extent that the Bonds shall be Outstanding, as that term is defined in the Indenture, from time to time, under the Indenture, and for such payment, the Borough has pledged its full faith, credit and taxing power. 4. The principal of and the interest on the Bonds are payable only from Receipts and Revenues from the Sewer System, as that phrase is defined in the Indenture, and from other receipts, revenues and money specified in the Indenture, and, under certain conditions described in the Guaranty Agreement, from revenues and money of the Borough in respect of the guaranty of the Borough, as provided in the Guaranty Agreement. 5. Under the laws of the Commonwealth as presently enacted and construed, the Bonds are exempt from personal property taxes within the Commonwealth and the interest on the Bonds is exempt from the Commonwealth s Personal Income Tax and the Commonwealth s Corporate Net Income Tax. 6. The Bonds do not pledge the credit or taxing power of the Commonwealth. 7. The Bonds, upon authentication thereof by the Trustee, are valid and binding obligations of the Authority and are enforceable in accordance with terms thereof and of the Indenture. 8. Assuming investment and application of the proceeds of the Bonds as set forth in the Indenture and the aforementioned non-arbitrage and rebate compliance certificate, the Bonds are not presently arbitrage bonds, as described in Section 103(b)(2) and Section 148 of the Code and applicable regulations promulgated thereunder. 9. Each of the Bonds is a qualified tax-exempt obligation for purposes and effect contemplated by Section 265 of the Code (relating to expenses and interest relating to tax-exempt income of certain financial institutions). The opinion expressed in the preceding sentence is subject to the condition that interest on the Bonds is, and continues to be, excluded from gross income for federal income tax purposes under the Code. 10. Under present statutes, regulations and judicial decisions, interest on the Bonds is excluded from gross income for purposes of federal income taxation and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, although it should be noted that in the case of corporations (as defined for federal income tax purposes) such interest is taken into account in determining adjusted current earnings for purposes of such alternative minimum tax. The opinions expressed in this paragraph are subject to the condition that the Authority comply with all requirements of the Code that must be satisfied subsequent to the issuance of the Bonds in order that the interest thereon be, or continue to be, excluded from gross income for federal income tax purposes, as the Authority has covenanted to do in the Indenture and other aforementioned documents. Failure to comply with certain of such

58 [Date of Delivery] Page 4 requirements may cause the inclusion of interest on the Bonds in gross income retroactive to the date of issuance of the Bonds. We express no opinion regarding other federal tax consequences arising with respect to the Bonds. It is to be understood that rights of the holders of the Bonds and the enforceability of the Bonds, of the Indenture and of the Guaranty Agreement may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors rights heretofore or hereafter enacted and that their enforcement may be subject to the exercise of judicial discretion in accordance with general principles of equity. Very truly yours,

59 APPENDIX D FORM OF CONTINUING DISCLOSURE CERTIFICATE

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61 CONTINUING DISCLOSURE CERTIFICATE This CONTINUING DISCLOSURE CERTIFICATE, dated [Date of Delivery] (the Disclosure Certificate ) is executed and delivered by: (1) the GETTYSBURG MUNICIPAL AUTHORITY (the Issuer ) in connection with the issuance of its $6,540,000 aggregate principal amount of Guaranteed Sewer Revenue Bonds - Series of 2016, dated [Date of Delivery] (the Bonds ), and (2) the BOROUGH OF GETTYSBURG, in Adams County, Pennsylvania (the Guarantor ), as guarantor of the Bonds (and an obligated person under the Rule, defined below) under a Guaranty Agreement, of even date herewith (the Guaranty ), among the Issuer, the Guarantor and the Trustee (hereinafter defined). The Bonds are being issued pursuant to a Second Supplemental Trust Indenture, dated [Date of Delivery], amending and supplementing a Trust Indenture, dated December 7, 2010, as amended and supplemented by a First Supplemental Trust Indenture, dated June 11, 2015, between the Issuer and the Trustee, as trustee (collectively, the Indenture ). The Issuer and the Guarantor make the following agreements, certifications and representations as an inducement to the Participating Underwriters and others to purchase the Bonds: Section 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the Issuer and the Guarantor for the benefit of the holders and beneficial owners of the Bonds and in order to assist the original underwriters of the Bonds to comply with Rule 15c2-12(b)(5) (the Rule ) promulgated by the Securities and Exchange Commission (the Commission ) pursuant to the Securities Exchange Act of 1934, and to fulfill one of the terms of the contract pursuant to which the Bonds are being sold to such underwriters. Section 2. Definitions. In addition to the definitions set forth in the Indenture, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms shall have the following meanings: Annual Report shall mean any Annual Report provided by the Issuer pursuant to, and as described in, Section 3 and Section 4 of this Disclosure Certificate. Business Day shall mean a day other than a Saturday, a Sunday, or a day on which the New York Stock Exchange is closed or a day on which banks located in the Commonwealth are authorized by law to be closed. Commonwealth shall mean the Commonwealth of Pennsylvania. Listed Events shall mean any of the events listed in Section 5 of this Disclosure Certificate. MSRB shall mean the Municipal Securities Rulemaking Board and its Electronic Municipal Market Access (EMMA) system on the internet at Official Statement shall mean the final official statement relating to the Bonds prepared by or on behalf of the Issuer and distributed in connection with the offering and sale of the Bonds by the Participating Underwriters

62 Participating Underwriter shall mean any of the original underwriters of the Bonds required to comply with the Rule in connection with offering of the Bonds. Rule shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. Sewer System shall mean the Sewer System, as that phrase is defined in the Indenture. Section 3. Provision of Annual Reports. The Issuer and the Guarantor shall, by October 1 of each year beginning on October 1, 2016, file with the MSRB an Annual Report that is consistent with the requirements of Section 4 of this Disclosure Certificate. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross-reference other information as provided in Section 4 of this Disclosure Certificate. Section 4. Content of Annual Reports. The Issuer's and Guarantor s Annual Reports shall contain or incorporate by reference the following financial information and operating data with respect to the Issuer and the Guarantor: Issuer s Information and Data: a copy of the annual financial statements of the Issuer pertaining to the Sewer System, audited in accordance with generally accepted auditing standards Guarantor s Information and Data: a copy of the annual financial statements of the Guarantor, audited in accordance with generally accepted auditing standards Any or all of the items listed above may be incorporated by reference from other documents, including official statements of debt issues of the Issuer, the Guarantor or related public entities which have been filed with MSRB or with the Securities and Exchange Commission. If the document incorporated by reference is a final official statement, it must be available from the MSRB. The Issuer and the Guarantor shall identify each other document so incorporated by reference. If the audited financial statements of the Issuer or the Guarantor are not available at the time of filing the Annual Report, the Annual Report shall include unaudited financial statements, if available, in place of such audited financial statements, and a statement of the date by which it is expected that audited financial statements of such entity will be available. The Issuer and the Guarantor shall file such audited financial statements promptly after they become available, and shall file further notices with the MSRB if they do not become available in time to file by the date previously stated in the Issuer's and Guarantor s filings with the MSRB. Section 5. Covenant to Provide Notice of Listed Events. In a timely manner not in excess of ten (10) Business Days after the occurrence of the event, the Authority and/or the - 2 -

63 Guarantor will file with the MSRB notice of the occurrence of any of the following events with respect to the Bonds: (1) principal and interest payment delinquencies; (2) non-payment related defaults, if material; (3) unscheduled draws on debt service reserves reflecting financial difficulties; (4) unscheduled draws on credit enhancements reflecting financial difficulties; (5) substitution of credit or liquidity providers, or their failure to perform; (6) adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax-exempt status of the Bonds, or other material events affecting the tax-exempt status of the Bonds; (7) modifications to rights of holders of the Bonds, if material; (8) bond calls, if material, and tender offers; (9) defeasances; (10) release, substitution, or sale of property securing repayment of the Bonds, if material; (11) rating changes; (12) bankruptcy, insolvency, receivership or similar event of the Borough; (13) the consummation of a merger, consolidation, or acquisition involving the Authority or the Guarantor or the sale of all or substantially all of the assets of the, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and (14) appointment of a successor or additional trustee, or the change of name of a trustee, if material. Section 6. The Issuer and the Guarantor may from time to time choose to provide notice of the occurrence of certain other events, in addition to those listed above, if, in the judgment of the Issuer and the Guarantor, such other event is material with respect to the Bonds, but the Issuer and the Guarantor do not commit to provide or to continue to provide any such notice of the occurrence of any material event except those events listed above. Section 7. Notice of Failure to File. If the Issuer or Guarantor is unable to file an Annual Report with the MSRB within the time set forth in Section 3, the Issuer or the Guarantor will file a notice with the MSRB advising of such fact and, if appropriate, the date by which the Issuer expects to file the Annual Report. Section 8. Manner of Filing with MSRB. Whenever the Issuer or the Guarantor is required by this Disclosure Certificate to file information or notices with the MSRB, such notice and information will be filed with the MSRB in such electronic format as it may prescribe and shall be accompanied by such identifying information as prescribed by the MSRB (such as information identifying the Bonds by CUSIP number). As of the date of this Disclosure - 3 -

64 Certificate, filings with the MSRB for purposes of this Disclosure Certificate are to be made electronically at the MSRB s Electronic Municipal Market Access website, Section 9. Beneficiaries; Limited Remedies for Default. The Issuer and the Guarantor certify that their undertakings pursuant to the Rule set forth in this Disclosure Certificate is intended to be for the benefit of the registered owners and beneficial owners of the Bonds. In the event of a failure of the Issuer or the Guarantor to comply with any provision of this Disclosure Certificate, any registered owner or beneficial owner of the Bonds or the Trustee may (and, at the request of the holders or beneficial owners of at least 25% in aggregate principal amount of Bonds Outstanding under and as defined in the Indenture, the Trustee shall), take such actions as may be necessary and appropriate, including seeking mandamus or specific performance by court order, to cause the Issuer or the Guarantor to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Indenture, and the sole remedy under this Disclosure Certificate in the event of any failure of the Issuer or the Guarantor to comply with this Disclosure Certificate shall be an action to compel performance. Section 10. Dissemination Agent. The Issuer or the Guarantor may, at any time and from time to time, appoint or engage another person (the Dissemination Agent ) to assist it in carrying out its obligations under the Disclosure Certificate, and may discharge such Dissemination Agent, with or without appointing a successor, and without notice to holders of the Bonds. Section 11. Termination of this Disclosure Certificate. The Issuer and the Guarantor reserve the right to terminate its obligation to file financial information and notices of material events, as set forth above, if and when the Issuer or the Guarantor no longer remains an obligated person with respect to the Bonds within the meaning of the Rule. Section 12. Counterparts. This Disclosure Certificate may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument

65 IN WITNESS WHEREOF, The Authority has caused this Disclosure Certificate duly to be executed and delivered, all as of the date above written, but effective as of the date provided below. GETTYSBURG MUNICIPAL AUTHORITY ATTEST: By: Chairperson Secretary (SEAL)

66 IN WITNESS WHEREOF, The Guarantor has caused this Continuing Disclosure Certificate duly to be executed and delivered, all as of the date above written. BOROUGH OF GETTYSBURG, Adams County, Pennsylvania ATTEST: By: President of Council (SEAL) Secretary of the Borough

67 APPENDIX E AUDITED FINANCIAL STATEMENTS OF THE AUTHORITY FOR THE FISCAL YEAR ENDED 12/31/2015

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69 Audited Financial Statements December 31, 2015 Gettysburg Municipal Authority

70 CONTENTS PAGE INDEPENDENT AUDITORS REPORT 1 3 MANAGEMENT S DISCUSSION AND ANALYSIS (UNAUDITED) 4 7 FINANCIAL STATEMENTS Water and Sewer Funds Statement of Net Position 8 Statement of Revenues, Expenses, and Changes in Fund Net Position 9 Statement of Cash Flows 10 Pension Fund Statement of Fiduciary Net Position 11 Statement of Changes in Fiduciary Net Position 12 Notes to the Financial Statements REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED) Schedule of Changes in the Authority s Net Pension Liability and Related Ratios 29 Schedule of Authority Contributions 30 Schedule of Investment Returns 31 OTHER SUPPLEMENTARY INFORMATION Budgetary Comparison Schedule 32

71 Members of the Board Gettysburg Municipal Authority Gettysburg, Pennsylvania INDEPENDENT AUDITOR S REPORT We have audited the accompanying financial statements of the business type activities and the aggregate remaining fund information of the Gettysburg Municipal Authority, a component unit of the Borough of Gettysburg, as of and for the year ended December 31, 2015, and the related notes to the financial statements, which collectively comprise the Authority s basic financial statements as listed in the table of contents. MANAGEMENT S RESPONSIBILITY FOR THE FINANCIAL STATEMENTS Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. 1

72 OPINIONS In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the business type activities and the aggregate remaining fund information of the Gettysburg Municipal Authority as of December 31, 2015, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. EMPHASIS OF MATTER As discussed in Note 2 and Note 14 to the financial statements, the Authority adopted new accounting guidance, Governmental Accounting Standards Board ( GASB ) Statement No. 68, Accounting and Financial Reporting for Pensions, as of January 1, Our opinion has not been modified with respect to this matter. OTHER MATTERS Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis on pages 4 through 7, the Schedule of Changes in the Authority s Net Pension Liability and Related Ratios on page 29, the Schedule of Authority Contributions on page 30, and the Schedule of Investment Returns on page 31 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Gettysburg Municipal Authority s basic financial statements. The budgetary comparison schedule is presented for purposes of additional analysis and is not a required part of the basic financial statements. 2

73 The budgetary comparison schedule is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic 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 basic financial statements as a whole. Compliance with Trust Indenture In connection with our audit, nothing came to our attention that caused us to believe that the Authority failed to comply with the terms, covenants, provisions or conditions of sections 4.07 to 6.04, inclusive, of the Trust Indentures dated December 7, 2010, and applicable supplemental indentures with the Trustees, insofar as they relate to accounting matters. However, our audit was not directed primarily toward obtaining knowledge of such noncompliance. Accordingly, had we performed additional procedures, other matters may have come to our attention regarding the Authority's noncompliance with the above referenced terms, covenants, provisions, or conditions of the Indenture, insofar as they relate to accounting matters. Restricted Use Relating to Other Matters Compliance with Trust Indenture The communication related to the compliance with the aforementioned Indenture described in the Other Matters Compliance with Trust Indenture paragraph is intended solely for the information and use of the Authority members and management of the Gettysburg Municipal Authority and the Trustee, and is not intended to be and should not be used by anyone other than these specified parties. Chambersburg, Pennsylvania May 13,

74 GETTYSBURG MUNICIPAL AUTHORITY Management s Discussion and Analysis Year Ended December 31, 2015 Our discussion and analysis of the Gettysburg Municipal Authority s financial performance provides an overview of the Authority s financial activities for the fiscal year ended December 31, Readers should also review the auditor s report, financial statements and related footnotes to the financial statements to further enhance their understanding of the Authority s financial performance. FINANCIAL HIGHLIGHTS The replacement of commercial meters is in the final stage of completion. The upgrading of the meters will greatly enhance the ability of the Authority to accurately monitor the usage. Stream well #1 rebuild was completed in 2015 due to the previous well pump breaking and the well bore collapsing not allowing the pump to be pulled and repaired. A new well needed to be drilled and developed. East Middle Street rehabilitation project was completed in the fall of The sewer lines were repaired as the Borough of Gettysburg repaved East Middle Street. The Interceptor Project was substantially completed and operational, with roads, sidewalks, curbing, and yard restoration still outstanding and to be completed in revenues in the water fund increased due to a water rate increase in The total sewer fund expenses decreased 5% overall from the 2014 level. The major reason for the decrease was due to a decrease in depreciation expense. The total water fund expenses decreased 8% due to a decrease in depreciation and the painting of the Baltimore Street water tower and the demolition and restoration of the grounds at the old water treatment plant that were completed in Change in net position for the sewer fund decreased in comparison to last year as a result of bond issuance costs. There was an increase in operating income, tapping fees, and health insurance reimbursement but these increases were offset with no capital contributions in the current year. Change in net position for the water fund increased in comparison to last year due to the rate increase, tapping fees and health insurance reimbursement, but was offset in expenses from repairs to East Middle Street in the current year. USING THE ANNUAL REPORT This annual report consists of a series of financial statements. The Statement of Net Position and the Statement of Revenues, Expenses and Changes in Fund Net Position provide information about the activities of the Authority as a whole and present a longer term view of the Authority s finances. The statements are fund financial statements that focus on individual parts of the Authority s operations in detail. These proprietary fund statements offer short and long term information about the activities the Authority operates like a business. For the Authority, this business like activity is the Water Fund and Sewer Fund. The financial statements also include notes that explain some of the information in the financial statements and provide more detailed data. The notes are an integral part of the basic financial statements. 4

75 GETTYSBURG MUNICIPAL AUTHORITY Management s Discussion and Analysis Year Ended December 31, 2015 OVERVIEW OF FINANCIAL STATEMENTS Fund Financial Statements Proprietary funds These funds are used to account for the Authority activities that are similar to business operations in the private sector; or where the reporting is on determining net income, financial position, changes in financial position, and a significant portion of funding through user charges. When the Authority charges customers for services it provides, these services are generally reported in proprietary funds and are business type activities. The Authority s fund financial statements provide detailed information about the individual funds of the Authority as a whole using accounting methods similar to those used by private sector companies. The Statement of Net Position includes all of the Authority s assets and liabilities. All of the current year s revenues and expenses are accounted for in the Statement of Revenues, Expenses and Changes in Fund Net Position regardless of when cash is received or paid. Fiduciary Fund This fund is used to account for the pension plan for the Authority employees. The financial statement for the Fiduciary Fund uses the accrual basis of accounting. Revenues and expenses are accounted for in the Statement of Changes in Fiduciary Net Position. Notes to the Financial Statements The notes provide additional information that is essential to a full understanding of the data provided in the basic financial statements. The Statement of Net Position and the Statement of Revenues, Expenses and Changes in Net Position Our analysis of the Authority as a whole begins with the Statement of Net Position. One of the most important questions regarding the Authority s finances asks Is the Authority as a whole better off or worse as a result of the year s activities? The Statement of Net Position and the Statement of Revenues, Expenses and Changes in Net Position report information about the Authority as a whole and about its activities in a way that helps answer this question. These statements include all assets and liabilities using the accrual basis of accounting, which is similar to accounting used by most privatesector companies. Accrual of the current year s revenues and expenses are taken into account regardless of when cash is received or paid. These two statements report the Authority s net position and changes in them. You can think of the Authority s net position (the difference between assets, what the Authority owns, and liabilities, what the Authority owes) as one way to measure the Authority s financial health, or financial position. Over time, increases or decreases in the Authority s net position are one indicator of whether its financial health is improving or deteriorating. 5

76 GETTYSBURG MUNICIPAL AUTHORITY Management s Discussion and Analysis Year Ended December 31, 2015 FINANCIAL ANALYSIS The following table s present condensed information on the statements of net position as of December 31, 2014 and 2015, and the changes in net position for the years then ended: Table 1 Statements of Net Position as of December 31, 2014 and Current and other assets $ 6,972,526 $ 9,023,775 Capital assets 50,980,287 53,625,248 Deferred outflows of resources 329, ,235 Total assets and deferred outflows of resources $ 58,282,128 $ 63,089,258 Current liabilities $ 1,576,061 $ 2,531,000 Long term obligations 14,137,184 18,488,123 Total liabilities $ 15,713,245 $ 21,019,123 NET POSITION Net investment in capital assets $ 35,802,508 $ 35,173,890 Unrestricted 6,766,375 6,896,245 Total net position $ 42,568,883 $ 42,070,135 TOTAL LIABILITIES & NET POSITION $ 58,282,128 $ 63,089,258 Table 2 Changes in Fund Net Position for 2014 and Operating Revenues: Charges for services $ 5,271,968 $ 5,448,054 Tapping and connection fees 42, ,628 Other 190, ,374 Total revenues $ 5,504,965 $ 5,825,056 Expenses: Operating expenses $ 5,911,345 $ 5,524,594 Other 532, ,695 Total expenses $ 6,444,039 $ 6,168,289 Capital Contributions 207,600 CHANGE IN NET POSITION $ (731,474) $ (343,233) 6

77 GETTYSBURG MUNICIPAL AUTHORITY Management s Discussion and Analysis Year Ended December 31, 2015 Capital Assets Activity The Water Fund added capital assets of $ 91,666 of building, wells and equipment (including $50,833 of transfers from construction in progress) Construction in progress decreased $ 1,855. These additions are comprised of equipment purchases and the rebuild of Stream well #1. The Sewer Fund saw activity which added capital assets in the amount of $ 42,892 in building and equipment, and an increase of $ 4,664,336 in construction in progress. The additions to capital assets were the SCADA additions and improvements to East Middle Street. Construction in progress increased due to the Interceptor project. For a detailed breakdown of capital assets see Note 5, Capital Assets. Debt Administration As of December 31, 2015 the Authority had outstanding bonds payable of $ 19,566,497. During the year the Authority increased the balance by $ 4,062,723. This was due to the addition of the 2015 sewer bond of $ 5,359,047 and payments of $ 1,296,324 during the year. For a detailed breakdown of bonds payable see Note 6, Long Term Debt. The following shows the total bond debt at December 31, 2014 and 2015: Table 3 Bonds Payable Sewer Fund $ 13,690,909 $ 18,275,918 Water Fund 1,812,865 1,290,579 Total Bonds Payable $ 15,503,774 $ 19,566,497 Next Year s Budget and Economic Impact The Gettysburg Municipal Authority operating revenues and expenses budget for 2016 Water Fund remains stable from Capital projects are planned for 2016 and will be funded from the cash on hand. The meter upgrade and relocation of Route 116 bridge projects represent the largest projects. The 2016 Sewer Fund budget operating revenues had a 5% rate increase. The expenses budgeted for 2016 increased due to additional debt service. The remainder of expenses are anticipated to remain at 2015 levels. The Interceptor Project is expected to be completed in 2016 along with approximately 400 feet of 8 VCP sewer pipe to be replaced in Zerfing Alley with 8 PVC pipe. Request for Information The financial reports are available for review Monday through Friday, between the hours of 8:00 AM and 2:00 PM. This financial report is designed to provide our citizens, investors, creditors, taxpayers and ratepayers with an overview of the Authority s finances. If you have questions or need additional financial information, please contact the Finance Director, Gettysburg Municipal Authority, 601 East Middle Street, Gettysburg, Pennsylvania

78 GETTYSBURG MUNICIPAL AUTHORITY Statement of Net Position Proprietary Funds December 31, 2015 Water Fund Sewer Fund Total ASSETS Current assets Cash and cash equivalents $ 2,382,195 $ 3,769,162 $ 6,151,357 Investments certificates of deposit 1,008,716 1,008,716 Accounts receivable net 322, , ,728 Interfund balances (396,069) 396,069 Interest receivable 2,145 2,145 Unbilled revenue 236, , ,524 Inventory 46,015 3,464 49,479 Prepaid expenses 43,082 52,309 95,391 Total current assets 3,645,230 4,948,110 8,593,340 Noncurrent assets Accounts receivable 200, , ,023 Bond issue costs net 70,412 70,412 Capital assets, not being depreciated: Land and easements 353,238 39, ,360 Construction in progress 446,707 5,120,495 5,567,202 Capital assets, being depreciated: Buildings and infrastructure 7,299,123 31,520,737 38,819,860 Wells 3,308,306 3,308,306 Lift stations 775, ,711 Equipment and lines 15,462,797 28,156,348 43,619,145 Less accumulated depreciation (12,626,950) (26,230,386) (38,857,336) Total capital assets 14,243,221 39,382,027 53,625,248 Total noncurrent assets 14,443,221 39,612,462 54,055,683 Total assets 18,088,451 44,560,572 62,649,023 DEFERRED OUTFLOWS OF RESOURCES Deferred charge on refunding 291, ,075 Deferred outflows related to pension liability 66,287 82, ,160 Total deferred outflows of resources 66, , ,235 Total assets and deferred outflows of resources $ 18,154,738 $ 44,934,520 $ 63,089,258 LIABILITIES Current liabilities Accounts payable $ 30,017 $ 977,063 $ 1,007,080 Accrued interest 56,645 56,645 Accrued payroll and related liabilities 7,261 14,986 22,247 Consumer deposits 29,795 19,673 49,468 Current portion of bonds payable 13,149 13,149 Current portion of due to Borough bonds payable 554, ,497 1,382,411 Total current liabilities 621,987 1,909,013 2,531,000 Noncurrent liabilities Bonds payable 11,587,391 11,587,391 Due to Borough bonds payable 735,665 5,847,881 6,583,546 Net pension obligation 140, , ,186 Total noncurrent liabilities 876,622 17,611,501 18,488,123 Total liabilities 1,498,609 19,520,514 21,019,123 NET POSITION Net investment in capital assets 12,952,642 22,221,248 35,173,890 Unrestricted 3,703,487 3,192,758 6,896,245 Total net position 16,656,129 25,414,006 42,070,135 Total liabilities and net position $ 18,154,738 $ 44,934,520 $ 63,089,258 The Notes to Financial Statements are an integral part of this statement. 8

79 GETTYSBURG MUNICIPAL AUTHORITY Statement of Revenues, Expenses, and Changes in Net Position Proprietary Funds Year Ended December 31, 2015 Water Fund Sewer Fund Total OPERATING REVENUES Service fees $ 2,014,567 $ 3,162,342 $ 5,176,909 Connection fees 4,066 4,066 Penalties 19,910 33,429 53,339 Other operating revenue 9,145 12,237 21,382 Hunterstown fees 196, ,424 Total operating revenues 2,047,688 3,404,432 5,452,120 OPERATING EXPENSES Purification system 708, ,945 Distribution system 340, ,975 Collection system 265, ,961 Pumping station 95,492 95,492 Disposal system 889, ,722 General operating 428, , ,794 Professional fees 26,166 26,204 52,370 Depreciation and amortization 719,616 1,359,728 2,079,344 Hunterstown depreciation 82,470 82,470 Hunterstown expenses 164, ,521 Total operating expenses 2,224,321 3,300,273 5,524,594 Operating income (loss) (176,633) 104,159 (72,474) NONOPERATING REVENUES (EXPENSES) Tapping fees 98,081 37, ,562 Investment income 11,385 2,841 14,226 Rental income 124, ,406 Health insurance reimbursement 47,423 47,423 94,846 Gain on sale of capital assets 1,948 1,948 3,896 Refund of previous year tap fee (11,560) (11,560) Bond issuance costs (133,721) (133,721) Interest expense (64,478) (433,936) (498,414) Total nonoperating revenues (expenses) 207,205 (477,964) (270,759) Change in net position 30,572 (373,805) (343,233) Total net position beginning, as restated 16,625,557 25,787,811 42,413,368 Total net position ending $ 16,656,129 $ 25,414,006 $ 42,070,135 The Notes to Financial Statements are an integral part of this statement. 9

80 GETTYSBURG MUNICIPAL AUTHORITY Statement of Cash Flows Proprietary Funds Year Ended December 31, 2015 Water Fund Sewer Fund Total Cash flows from operating activities: Receipts from customers $ 2,188,472 $ 3,423,056 $ 5,611,528 Payments to suppliers (433,532) (934,231) (1,367,763) Payments to and on behalf of employees (902,868) (1,125,198) (2,028,066) Net cash provided (used) by operating activities 852,072 1,363,627 2,215,699 Cash flows from capital and related financing activities: Purchase of capital assets (89,811) (3,673,747) (3,763,558) Proceeds from sale of assets 1,948 1,948 3,896 Proceeds from tap fees 98,081 37, ,562 Payment to refund previous year tap fee (11,560) (11,560) Proceeds from capital grants/contributions 100, ,000 Proceeds from capital debt 5,335,000 5,335,000 Principal paid on debt (540,000) (765,000) (1,305,000) Interest and fiscal charges paid on debt (52,232) (617,924) (670,156) Net cash provided (used) by capital and related financing activities (493,574) 317,758 (175,816) Cash flows from investing activities: Purchase of investments (8,716) (8,716) Investment income 11,980 2,841 14,821 Net cash provided (used) by investing activities 3,264 2,841 6,105 Net increase (decrease) in cash and cash equivalents 361,762 1,684,226 2,045,988 Cash and cash equivalents beginning of the year 2,020,433 2,084,936 4,105,369 Cash and cash equivalents end of the year $ 2,382,195 $ 3,769,162 $ 6,151,357 Reconciliation of income (loss) from operations to net cash provided (used) by operating activities Operating income (loss) $ (176,633) $ 104,159 $ (72,474) Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation and amortization expense 719,616 1,442,198 2,161,814 Nonoperating income (rental income) 124, ,406 Health insurance surplus 47,423 47,423 94,846 (Increase) decrease in: Accounts and other receivables (47,362) (202,379) (249,741) Inventories 1,105 (780) 325 Prepaid expenses (4,583) (974) (5,557) Increase (decrease) in: Accounts payable 9,976 (14,431) (4,455) Accrued payroll and other expenses (17,041) (18,832) (35,873) Net pension liability and related items 5,559 6,952 12,511 Deferred revenue and deposits 189, ,897 Net cash provided (used) by operating activities $ 852,072 $ 1,363,627 $ 2,215,699 The Notes to Financial Statements are an integral part of this statement. 10

81 GETTYSBURG MUNICIPAL AUTHORITY Statement of Fiduciary Net Position December 31, 2015 Pension Trust Fund ASSETS Current assets Cash and cash equivalents $ 12,875 Mutual funds 2,031,715 Equities 18,304 Interest receivable 1,391 Total assets $ 2,064,285 NET POSITION Held in trust for employee benefits and other purposes 2,064,285 Total net position $ 2,064,285 The Notes to Financial Statements are an integral part of this statement. 11

82 GETTYSBURG MUNICIPAL AUTHORITY Statement of Changes in Fiduciary Net Position Year Ended December 31, 2015 Pension Trust Funds ADDITIONS Employer contributions $ 146,154 Investment earnings Interest 93,107 Net increase (decrease) in fair value of investments ( 95,648) Total net investment earnings ( 2,541) Total additions 143,613 DEDUCTIONS Benefits 34,671 Administrative 16,145 Total deductions 50,816 Change in net position 92,797 Total net position beginning 1,971,488 Total net position ending $ 2,064,285 The Notes to Financial Statements are an integral part of this statement. 12

83 GETTYSBURG MUNICIPAL AUTHORITY Notes to Financial Statements December 31, 2015 NOTE 1 DESCRIPTION OF ENTITY Description of Operations The Gettysburg Municipal Authority (the Authority) operates under a board manager form of government and provides water and sewer services to the general public of the Borough of Gettysburg and surrounding areas. Reporting Entity The Authority was created by the Borough of Gettysburg (the Borough) on June 18, 1948, under the provisions of the Municipality Authorities Act of 1945, to provide water and sewer services to the residents of the Borough. Under criteria promulgated by the Governmental Accounting Standards Board (GASB), management has determined the Authority is a component unit of the Borough reporting entity. The basis for this determination is the governing body s ability to exercise oversight responsibility. The most significant manifestation of this ability is financial interdependency. Other manifestations include the selection of governing authority, the ability to significantly influence operations and accountability for fiscal matters. NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Accounting The Authority s financial statements are presented on the full accrual basis of accounting and conform to accounting principles generally accepted in the United States of America. Water and Sewer Funds The water and sewer funds of the Authority are considered proprietary fund types, specifically enterprise funds. The activities of these funds are accounted for with a separate set of self balancing accounts that comprise the Authority s assets, deferred outflow of resources, liabilities, net position, revenues and expenses. Enterprise funds account for activities (i) that are financed with debt that is secured solely by a pledge of the net revenues from fees and charges of the activity; or (ii) that are required by laws or regulations that the activity s costs of providing services, including capital costs (such as depreciation or debt service), be recovered with fees and charges, rather than with taxes or similar revenues; and (iii) that the pricing policies of the activity establish fees and charges designed to recover its costs, including capital costs (such as depreciation or debt service). The accounting and financial reporting treatment applied to the Authority is determined by its measurement focus. The transactions of the Authority s water and sewer funds are accounted for on a flow of economic resources measurement focus. With this measurement focus, all assets and all liabilities associated with the operations are included on the statements of net position. Net position (i.e., total assets net less total liabilities) are segregated into net investment in capital assets; restricted; and unrestricted components. 13

84 GETTYSBURG MUNICIPAL AUTHORITY Notes to Financial Statements December 31, 2015 NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Basis of Presentation and Accounting (Continued) Pension Plan The Authority has a separate pension plan for its employees. The plan is recorded as a Fiduciary Fund which focuses on net position and changes in net position. The financial statements related to the pension plan are prepared using the accrual basis of accounting. Employer contributions to the plan are recognized when due and the employer has made a formal commitment to provide the contributions. Benefits and refunds are recognized when due and payable in accordance with the plan provisions. In June 2013, the GASB issued Statement No. 68, Accounting and Financial Reporting for Pension Plans. The objective of this statement is to improve financial reporting by state and local government plans by providing decision useful information, supporting assessments of accountability and interperiod equity, and creating additional transparency. The financial statements incorporate the changes required by Statement No. 68. Cash and Cash Equivalents For purposes of the statements of cash flows, the Authority considers all highly liquid unrestricted assets with an original maturity of three months or less when purchased to be cash equivalents. Accounts Receivable and Concentration of Credit Risk The Authority provides water and sewer service to customers within the Gettysburg area. Receivables are recorded at face amount. An allowance for doubtful accounts has been recorded using management s estimates which are based on historical collections and the ability to file liens against property, as described in Note 4. Unbilled Revenue During the year, customer water meters are read quarterly and water/sewer bills rendered throughout quarterly periods. Because not every meter is read on the same date, revenue for services rendered but not yet billed is accrued at year end to match revenues with related expenses. Inventory Inventory is valued at the lower of cost, using the first in, first out method, or market. The cost of inventory is recorded as an expense when consumed rather than when purchased. Investments All investments are reported at fair value based on quoted market prices except for certificates of deposit, which are reported at face amount (which approximates fair value). 14

85 GETTYSBURG MUNICIPAL AUTHORITY Notes to Financial Statements December 31, 2015 NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Bond Issue Costs, Bond Discount, and Deferred Charges on Refundings Insurance costs associated with the issuance of new bonds are recorded as assets and amortized over the lives of the various bonds. Other bond issue costs are expensed as incurred. Gains or losses (difference between reacquisition price and carrying value of old debt) occurring from refundings of debt are recognized as deferred inflows or outflows and amortized to interest expense over the remaining life of the old bonds, or the life of the new bonds, whichever is shorter. Bond discounts are netted against the bonds payable on the statement of net position. Compensated Absences Full time employees are granted vacation leave after completing twelve months of employment. The amount of vacation days awarded is based on the number of continuous service years. Vacation is awarded to employees on their anniversary dates, rather than the year end of the Authority. With few exceptions, employees may not accumulate and carryover any unused vacation leave. Capital Assets Capital assets consist of property and equipment and are stated at cost or, if contributed, at the estimated fair value at time of contribution. Depreciation is charged as an expense against operations. The Authority maintains a capitalization threshold of $ 1,000. Depreciation has been provided over the estimated useful lives using the straight line method. The estimated useful lives are as follows: Buildings and plants Office equipment Transportation equipment Mains and collecting stations Wells and springs Meters Pumping and treatment General property and equipment years 10 years 6 years years 25 years 15 years years years Use of Estimates Management uses estimates and assumptions in preparing financial statements in accordance with accounting principles generally accepted in the United States of America. Those estimates and assumptions affect the reported amounts of assets and liabilities, and the reported revenues and expenses. Actual results could vary from the estimates in preparing the financial statements. 15

86 GETTYSBURG MUNICIPAL AUTHORITY Notes to Financial Statements December 31, 2015 NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Deferred Outflows and Inflows of Resources In addition to assets, the statement of financial position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense) until then. The Authority has several items that qualify for reporting in this category, including the deferred charge on bond refunding and those related to the Authority s pension plan. These amounts will be amortized over future periods. A deferred charge on bond refunding results from the difference in the carrying value of refunding debt and its reacquisition price. This amount is deferred and amortized over the shorter of the life of the old or new debt. In addition to liabilities, the statement of financial position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to future period(s) and also will not be recognized as an inflow of resources (revenue) until that time. The Authority does not have any items that qualify for reporting in this category. Net Position Net position is comprised of the various net earnings from operating income and expenses, nonoperating revenues and expenses, and capital contributions and grants. Net position is classified in the following components: Net investment in capital assets This component consists of capital assets, net of accumulated depreciation and reduced by the outstanding balances of any bonds, mortgages, notes, accounts payable or other borrowings that are attributable to the acquisition, construction or improvement of those capital assets. If there are significant unspent related debt proceeds at year end, the portion of the debt attributable to the unspent proceeds is not included in the calculation of net investment in capital assets. Rather, that portion of the debt is included in the same net position component as the unspent proceeds. Deferred outflows of resources and deferred inflows of resources that are attributable to the acquisition, construction, or improvement of those assets or related debt are also included in this component of net position. Restricted This component of net position consists of restricted assets and deferred outflows of resources reduced by liabilities and deferred inflows of resources related to those assets. These restrictions could include constraints imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments or constraints imposed by law through constitutional provisions or enabling legislation. Unrestricted This component of net position is the net amount of assets, deferred outflows of resources, liabilities, and deferred inflows of resources that are not included in the determination of net investment in capital assets or the restricted component of net position. 16

87 GETTYSBURG MUNICIPAL AUTHORITY Notes to Financial Statements December 31, 2015 NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Net Position (Continued) Net Position Flow Assumption Sometimes the government will fund outlays for a particular purpose from both restricted (e.g. restricted bond or grant proceeds) and unrestricted resources. In order to calculate the amounts to report as restricted net position and unrestricted net position, a flow assumption must be made about the order in which the resources are considered to be applied. It is the government s policy to consider restricted net position to have been depleted before unrestricted net position is applied. Classification of Revenues The Authority has classified its revenues as either operating or non operating revenues according to the following criteria: Operating Revenues Operating revenues include activities that have the characteristics of exchange transactions, such as sales and services of the Authority. Nonoperating Revenues Nonoperating revenues include activities that have the characteristics of non exchange transactions (in which the Authority receives value without directly giving equal value in return), such as gifts and contributions, grants, and investment income. Tap fees are also considered nonoperating because they are not assessed to cover current operating costs, but to fund future expansion of the sewer and water systems. NOTE 3 DEPOSITS AND INVESTMENTS The Authority is authorized to invest in the following types of investments for the water and sewer funds: 1. United States treasury bills 2. Short term obligations of the U.S. government and federal agencies 3. Savings and checking accounts and certificates of deposit in banks, savings and loan associations and credit unions when such funds are insured by the FDIC and NCUSIF and for any amounts above the insured maximum if approved collateral as provided by law is pledged by the depository. 4. General obligation bonds of the federal government, the Commonwealth of Pennsylvania or any state agency, or of any Pennsylvania political subdivision backed by the full faith and credit of the political subdivision. 5. Shares of mutual funds whose investments are restricted to the above categories. Pension fund allowable investment types are dictated by Pennsylvania probate, estate and fiduciary code. 17

88 GETTYSBURG MUNICIPAL AUTHORITY Notes to Financial Statements December 31, 2015 NOTE 3 DEPOSITS AND INVESTMENTS (CONTINUED) Custodial Credit Risk Deposits Custodial credit risk is the risk that in the event of a bank failure, the Authority's deposits may not be returned to it. The Authority does not have a written policy for custodial credit risk. As of December 31, 2015, $ 5,939,402 of the Authority s bank balance of $ 6,439,402 is exposed to custodial credit risk. Included in this amount is $ 1,008,714 of certificates of deposit, which are classified as investments on the statement of net position. Deposits of $ 5,939,402 were uninsured and collateralized with securities held by the pledging bank s trust department, but not in the Authority s name. Investments The Authority also has accounts where the trustee has invested $ 1,633,206 in US Treasury money market securities, which are classified as cash and cash equivalents on the statement of net position. These securities are not covered by FDIC insurance and are uncollateralized; however they are backed by the full faith and credit of the US government. The money market securities do not have credit quality ratings. Pension Trust Fund Policy The Authority does not have a formal policy regarding pension investments. Interest Rate Risk As of December 31, 2015, the Authority had the following investments and maturities within its pension accounts: Investment Maturities (in Years) Market Value Less Than More Than 10 Fixed Income Mutual Funds $ 701,378 $ $ 331,418 $ 173,350 $ 196,610 Other Investments: Equity Mutual Funds $ 1,330,337 Equities 18,304 Total Investments $ 2,050,019 Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. The Authority does not have a written policy for interest rate risk. 18

89 GETTYSBURG MUNICIPAL AUTHORITY Notes to Financial Statements December 31, 2015 NOTE 3 DEPOSITS AND INVESTMENTS (CONTINUED) Pension Trust Fund (Continued) Credit Risk As of December 31, 2015, the Authority s pension investments in cash equivalents were rated AAA by Moody s. Additionally, the Authority s pension investments in Fixed Income Mutual Funds as of December 31, 2015 were rated as follows: Rating Amount % AAA $ 321,536 46% AA 32,626 5% A 81,514 12% BBB 121,363 17% BB 67,377 10% B 54,516 8% Below B 11,251 1% Not Rated 11,195 1% $ 701, % Credit risk is the risk that an issuer of debt securities or other counterparty to an investment will not fulfill its obligations. The Authority does not have a written policy for credit risk. Foreign Currency Risk Foreign currency risk is the risk that the fair value of such securities will be adversely affected by changes in exchange rates. The pension trust fund is exposed to foreign currency risk through $ 169,686 investments in an international equity mutual fund as of December 31, NOTE 4 ACCOUNTS RECEIVABLE The accounts receivable are shown net of an allowance for doubtful accounts as follows: Water $ 17,534 Sewer 37,718 Total $ 55,252 19

90 GETTYSBURG MUNICIPAL AUTHORITY Notes to Financial Statements December 31, 2015 NOTE 5 CAPITAL ASSETS The following details capital asset activity for the year ended December 31, Beginning Ending Balance Additions Retirements Balance Water Cost: Land and easements $ 353,238 $ $ $ 353,238 Buildings and infrastructure 7,299,123 7,299,123 Wells 3,255,234 53,072 3,308,306 Equipment and lines 15,424,203 38,594 15,462,797 Construction in progress 448,562 89,811 (91,666) 446,707 (1) Total cost 26,780, ,477 (91,666) 26,870,171 Less accumulated depreciation: Buildings and infrastructure (3,320,682) (276,941) (3,597,623) Wells (1,354,527) (111,465) (1,465,992) Equipment and lines (7,237,593) (325,742) (7,563,335) Total accumulated depreciation (11,912,802) (714,148) (12,626,950) Capital assets, net $ 14,867,558 $ (532,671) $ (91,666) $ 14,243,221 Beginning Ending Balance Additions Retirements Balance Sewer Cost: Land and easements $ 39,122 $ $ $ 39,122 Buildings and infrastructure 31,506,153 14,584 31,520,737 Lift stations 775, ,711 Equipment and lines 28,128,040 28,308 28,156,348 Construction in progress 456,159 4,664,336 5,120,495 (1) Total cost 60,905,185 4,707,228 65,612,413 Less accumulated depreciation: Buildings and infrastructure (13,936,039) (822,463) (14,758,502) Lift stations (529,501) (28,146) (557,647) Equipment and lines (10,326,916) (587,321) (10,914,237) Total accumulated depreciation (24,792,456) (1,437,930) (26,230,386) Capital assets, net $ 36,112,729 $ 3,269,298 $ $ 39,382,027 (1) Construction in progress consists of the following projects as of December 31, 2015: Water York Water Pipeline $ 168,087 Water meters 4,149 Future water sources 245,203 GIS mapping 17,800 Water tank storage 4,752 Well automation $ 6, ,707 Sewer Interceptor (See Note 13) $ 5,120,495 20

91 GETTYSBURG MUNICIPAL AUTHORITY Notes to Financial Statements December 31, 2015 NOTE 6 LONG TERM DEBT The following details activity for the Authority s long term debt for the year ended December 31, 2015: Beginning Ending Current Long term Balance Additions Reductions Balance Portion Portion Bonds (C) 2010 Sewer revenue bonds $ 6,295,000 $ $ (10,000) $ 6,285,000 $ 10,000 $ 6,275,000 Unamortized bond discount/bond loss (45,873) 3,089 (42,784) (3,089) (39,695) 6,249,127 (6,911) 6,242,216 6,911 6,235,305 (D) 2015 Sewer revenue bonds 5,335,000 5,335,000 5,000 5,330,000 Unamortized bond discount/bond loss 24,047 (723) 23,324 1,238 24,562 5,359,047 (723) 5,358,324 6,238 5,352,086 Total bonds payable 6,249,127 5,359,047 (7,634) 11,600,540 13,149 11,587,391 Due to Borough (A) 2010 GO Bonds Water 1,865,000 (540,000) 1,325, , ,000 Other bond related costs (52,135) 17,714 (34,421) (86) (34,335) 1,812,865 (522,286) 1,290, , ,665 (B) 2012 GO Bonds Sewer 7,335,000 (755,000) 6,580, ,000 5,810,000 Other bond related costs 106,782 (11,404) 95,378 57,497 37,881 7,441,782 (766,404) 6,675, ,497 5,847,881 Total due to Borough 9,254,647 (1,288,690) 7,965,957 1,382,411 6,583,546 Total debt $ 15,503,774 $ 5,359,047 $ (1,296,324) $ 19,566,497 $ 1,395,560 $ 18,170,937 Due to Borough The Borough of Gettysburg has issued several general obligation bond issues on behalf of the Authority. Pursuant to subsidy agreements between the Authority and the Borough, the Authority has agreed to pay the principal and interest on these bonds from the revenues of the water and sewer system. The bonds are further secured by the receipts and revenues of the water and sewer system and guaranteed by the Borough through the pledge of its full faith, credit and taxing paper. These liabilities, shown as "Due to Borough" on the statement of net position, are detailed below. In May 2010 General Obligation Bonds were issued by the Borough of Gettysburg. A portion of the proceeds were used to currently refund the 2004A and 2004B GO Bonds. The bonds are ultimately payable from the revenues of the Authority. (A) $ 4,370,000 General Obligation Bonds Water Series of 2010 payable in annual principal installments ranging from $ 200,000 to $ 570,000 through November 15, 2018, interest ranging from 1.00% to 3.30%. In May 2012 General Obligation Bonds were issued by the Borough of Gettysburg. The proceeds were used to advance refund the 2007 GO Bonds. The bonds are ultimately payable from the revenues of the Authority. (B) $ 8,135,000 General Obligation Bonds Sewer Series of 2012 payable in annual principal installments ranging from $ 60,000 to $ 865,000 through August 15, 2023, interest ranging from 0.50% to 2.50%. 21

92 GETTYSBURG MUNICIPAL AUTHORITY Notes to Financial Statements December 31, 2015 NOTE 6 LONG TERM DEBT (CONTINUED) Bonds In December 2010 Sewer Revenue Bonds were issued by the Authority. The proceeds of the bonds were used to construct capital improvements to the Authority s public sewer system and to pay the costs and expenses related to the issuance of the Bonds. The Borough guaranteed the payment of the bonds by pledging its full faith, credit and taxing power. (C) $ 6,355,000 Sewer Revenue Bonds Series of 2010 payable in annual principal installments ranging from $ 10,000 to $ 1,130,000 through November 15, 2029, interest ranging from 3.00% to 4.00%. In May 2015 Sewer Revenue Bonds were issued by the Authority. The proceeds of the bonds are to be used to construct capital improvements to its public sanitary sewer system and to pay the costs of issuing and insuring the Bonds. The Borough guaranteed the payment of the bonds by pledging its full faith, credit and taxing power. (D) $ 5,355,000 Sewer Revenue Bonds Series of 2015 payable in annual principal installments ranging from $ 5,000 to $ 1,315,000 through November 15, 2034, interest ranging from 2.00% to 4.00%. Future debt service requirements as of December 31, 2015 are as follows: 2010 GO Bonds Water 2010 Sewer Revenue Bonds 2012 GO Bonds Sewer 2015 Sewer Revenue Bonds Total Principal Interest Principal Interest Principal Interest Principal Interest Principal Interest 2016 $ 555,000 $ 39,810 $ 10,000 $ 250,674 $ 770,000 $ 138,012 $ 5,000 $ 197,158 $ 1,340,000 $ 625, ,000 24,270 10, , , ,612 10, ,058 1,375, , ,000 6,600 10, , , ,912 5, ,858 1,020, , , , ,000 90,814 5, , , , , , ,000 74,512 5, , , , ,965,000 1,199,650 2,570, ,776 35, ,312 4,570,000 2,299, ,260, ,600 1,200, ,362 5,460,000 1,409, ,070, ,926 4,070, ,926 $ 1,325,000 $ 70,680 $ 6,285,000 $ 2,884,000 $ 6,580,000 $ 652,638 $ 5,335,000 $ 3,269,090 $ 19,525,000 $ 6,876,408 Bond issue costs (insurance) on Authority debt are shown net of accumulated amortization as follows: Water Sewer Bond issue costs (insurance) $ $ 89,723 Accumulated amortization (19,311) $ $ 70,412 Total interest costs for 2015 amounted to $ 606,947. Interest of $ 108,533 was capitalized (sewer fund) and recorded as a capital asset and the remaining balance of $ 498,414 was expensed. NOTE 7 INTERFUND ACTIVITY Due To/Due From At December 31, 2015, the water fund owed the sewer fund $ 396,069 for expenses paid by the sewer fund on behalf of the water fund. 22

93 GETTYSBURG MUNICIPAL AUTHORITY Notes to Financial Statements December 31, 2015 NOTE 8 RENTAL INCOME The Authority has several leases with cell phone companies to lease space on water towers to the companies for the placement of cell phone antennas. Rental income from these leases was $ 122,491 for the year ended December 31, In addition to the previously mentioned leases, the Authority also received $ 1,915 in 2015 from Gettysburg Tours Inc. for several parking spots. Minimum rental income under long term leases for the next five years is as follows: 2016 $ 122, , , , ,304 $ 652,404 NOTE 9 LONG TERM ACCOUNTS RECEIVABLE During 2013, the Water Fund had capital contribution revenue of $ 550,000 related to an agreement entered into with a contractor. The agreement stated that once certain improvements were made to Well #10, the contractor would then pay the Authority $ 50,000 in 2013 and $ 100,000 a year for the next five years, beginning in Based on the fact that the Authority does not have to perform any additional services, the entire amount of the agreement ($ 550,000) was recognized as revenue in The portion of the receivable that will not be received within the next year will be recorded as a long term accounts receivable. Consequently, $ 100,000 is current accounts receivable and $ 200,000 is long term accounts receivable at December 31, In addition, the Sewer Fund has a long term receivable of $ 160,023 at December 31, 2015 related to Act 537 Facility Planning Assistance. 23

94 GETTYSBURG MUNICIPAL AUTHORITY Notes to Financial Statements December 31, 2015 NOTE 10 PENSION PLAN Summary of Significant Accounting Policies Plan Description The Authority sponsors a single employer defined benefit pension plan for its employees, which is funded solely by the employer. Plan Membership At January 1, 2016, pension plan membership consisted of the following: Benefits Provided Active Plan Members 17 Retirees and beneficiaries currently receiving benefits 2 Fully vested former members 4 Total 23 All full time employees who have completed three years of service at any January 1 st are eligible to participate in the plan. Participants are eligible for retirement benefits at age 62. Accrued benefits are 100% vested after ten full years of service. The plan provides retirement benefits to plan members and their beneficiaries. Benefit provisions are established and may be amended by the Authority and approved through the union agreement. The pension amount will be 38% of the participant s final annual compensation with the amount being reduced by 1/26 th for each year of service at age 62 less than 26 years. The Authority s policy is to fund normal service cost currently. Financial Reports The Gettysburg Municipal Authority does not issue stand alone financial reports for its pension plans, as all necessary information is disclosed herein. Contributions Act 205 of the Commonwealth requires that annual contributions be based upon the calculation of the Minimum Municipal Obligation (MMO). The MMO calculation is based upon the biennial actuarial valuation also required by Act 205. Employees are not required to contribute under Act 205. For the year ended December 31, 2015, the Authority s contribution was $ 146,154 and the average contribution rate was percent of annual payroll. Investments Method Used to Value Investments Investments are reported at fair value. Fair value is determined by quoted market prices. Short term investments in cash equivalents are reported at cost, which approximates fair value. 24

95 GETTYSBURG MUNICIPAL AUTHORITY Notes to Financial Statements December 31, 2015 NOTE 10 PENSION PLAN (CONTINUED) Investments (Continued) Investment Policy The investment objective is to achieve the long term investment objectives and produce a total return commensurate with the portfolio s risk, client constraints, governing instruments and funding policy. In addition, the objective is to comply with all applicable trust, fiduciary and due diligence requirements that experienced investment professionals would reasonably be expected to follow, and comply with all applicable federal, state and local laws, rules, and regulations. Rate of Return For the year ended December 31, 2015, the annual money weighted rate of return on pension plan investments, net of pension plan investment expense, was (0.95%). The money weighted rate of return expresses investment performance, net of investment expense, adjusted for the changing amounts actually received. Net Pension Liability, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions At December 31, 2015, the Authority reported a liability of $ 317,186 in the Statement of Net Position. The net pension liability was measured as of December 31, 2015, and the total pension liability used to calculate the net pension liability was based upon the actuarial valuation of January 1, For the year ended December 31, 2015, the Authority recognized pension expense of $ 158,665. The following is the changes in the total pension liability, the plan fiduciary net position, and the net position liability as of December 31, 2015: Total Pension Liability (a) Balances as of December 31, ,127,003 Increase (Decrease) Plan Fiduciary Net Position (b) Net Position Liability (a) (b) Plan Fiduciary Net Position as a % of Total Pension Liability $ $ 1,971,488 $ 155, % Changes for the year: Service cost 66,623 66,623 Interest 138, ,255 Changes in benefits Changes of assumptions Differences in expected and actual experience 84,260 84,260 Contributions employer 146,154 (146,154) Contributions employee Net investment income (2,542) 2,542 Transfers Benefit payments, including refunds of member contributions (34,671) (34,671) Administrative expenses (16,145) 16,145 Other Net Changes 254,467 92, ,671 Balances as of December 31, 2015 $ 2,381,470 $ 2,064,284 $ 317, % 25

96 GETTYSBURG MUNICIPAL AUTHORITY Notes to Financial Statements December 31, 2015 NOTE 10 PENSION PLAN (CONTINUED) Net Pension Liability, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions (Continued) At December 31, 2015, the Authority reported deferred outflows of resources related to pensions from the following sources: Deferred Outflows of Resources Differences between expected and actual experience $ 42,130 Net difference between projected and actual earnings on pension plan investments $ 107, ,160 The amounts reported as deferred outflows of resources related to pensions will be recognized in pension expense as follows: Actuarial Methods and Assumptions Year ended December 31: 2016 $ 68, , , ,758 $ 149,160 Valuation Date: 1/1/2016 Actuarial Cost Method: Entry age normal Actuarial Asset Valuation Method: Market value Amortization Method: Level Dollar Closed Amortization Period: Actuarial Assumptions: Investment rate of return: 6.50% Projected salary increases: 3.50% Includes inflation at: N/A 15 years for 2013 bases and prior 11 years for 2015 bases and after Post retirement benefit increases: None Mortality rates were based on the UP 1984 unisex mortality table. The actuarial assumptions used in the January 1, 2016 valuation were based on an actual experience study for the period January 1, 2015 through December 31,

97 GETTYSBURG MUNICIPAL AUTHORITY Notes to Financial Statements December 31, 2015 NOTE 10 PENSION PLAN (CONTINUED) Actuarial Methods and Assumptions (Continued) The long term expected rate of return on pension plan investments was determined using a building block method in which best estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The pension plan s policy in regard to the allocation of invested assets is established and may be amended by the Authority. Best estimates of arithmetic real rates of return for each major asset class included in the pension plan s target asset allocation as of December 31, 2015 are summarized in the following table: Discount Rate Long Term Asset Class Target Allocation Expected Real Rate of Return Domestic Equity 65% 8% International Equity 65% 8% Fixed Income 35% 4% Real Estate 0% 7% Cash 0%.05% The discount rate used to measure the total pension liability was 6.50%. The projection of cash flows used to determine the discount rate assumed that the Authority contributions will be made at rates equal to the difference between actuarially determined contribution rates and the member rate. Based on those assumptions, the pension plan s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. Sensitivity of the Net Pension Liability to Changes to the Discount Rate The following presents the net pension liability of the Authority, calculated using the discount rate of 6.50%, as well as what the Authority s net pension liability would be if it were calculated using a discount rate that is 1 percentage point lower (5.50 percent) and 1 percentage point higher (7.50 percent) than the current rate: 1% Decrease Current Discount Rate 1% Increase (5.50%) (6.50%) (7.50%) Authority s net pension liability $ 701,258 $ 317,186 $ 150,392 27

98 GETTYSBURG MUNICIPAL AUTHORITY Notes to Financial Statements December 31, 2015 NOTE 11 RISK MANAGEMENT The Authority 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. The Authority purchases commercial insurance coverage for these types of losses, including workers compensation and accident insurance. Settlement amounts resulting from these risks have not exceeded coverage in the current year or the three prior years. The Authority is part of the Pennsylvania Municipal Health Insurance Cooperative (PMHIC). This trust consists of a group of municipalities that have pooled their interests together in order to establish a self funded insurance plan in order to better control insurance rates. The Authority pays a premium to PMHIC that consists of a portion for actual claim expenses, administrative costs, reinsurance costs and a reserve account. At year end, the actual claims of the Authority are reviewed and the reserve account is used to fund any excess claims for the Authority over the premiums paid during the year. If any funds remain in the reserve account, 15% of the total reserve balance could possibly be used to fund claim overages of the trust. A reinsurance policy is used to pay any additional excess claims. Therefore, the expense recognized by the Authority is limited to the premiums incurred during the year. Any potential refund of the reserve account is calculated and received by the Authority several months after year end. Total payments by the Authority to PMHIC for the year were $ 596,233. The Authority also received refunds from Pennsylvania Municipal Health in the amount of $ 94,846 during the year. NOTE 12 RELATED PARTY TRANSACTIONS The Authority utilizes the administrative services of the Borough of Gettysburg. The Authority reimburses the Borough for the costs and time associated with the assistance of the Authority. This reimbursement was $ 18,000 in NOTE 13 COMMITMENTS AND CONTINGENCIES The Authority entered into an agreement with a contractor related to the sewer interceptor construction project in prior years at a cost of $ 4,454,420. The Authority incurred costs of $ 4,125,730 in relation to this contract as of December 31, The remaining outstanding commitment as of December, 31, 2015 amounted to $ 328,690. NOTE 14 RESTATEMENTS During the year ended December 31, 2015, the Authority adopted GASB Statement No. 68, Accounting and Financial Reporting for Pensions, which required the Authority to record the net pension liability, deferred outflows and inflows of resources, and pension expense associated with its pension plan. As a result, the beginning net position amounts reflect the change at December 31, 2014 resulting from the addition of the previously unrecorded information. Water Fund Sewer Fund Net position, as originally stated December 31, 2014 $ 16,694,668 $ 25,874,215 Net pension liability (69,111) (86,404) Net position, as restated December 31, 2014 $ 16,625,557 $ 25,787,811 28

99 REQUIRED SUPPLEMENTARY INFORMATION

100 GETTYSBURG MUNICIPAL AUTHORITY Schedule of Changes in the Authority's Net Position Liability and Related Ratios (Unaudited) Total pension liability Service cost $ 66,623 $ 47,674 Interest 138, ,126 Differences in expected and actual experience 84,260 (1,592) Changes in assumptions Benefit payments, including refunds of member contributions (34,671) (34,761) Net change in total pension liability 254, ,447 Total pension liability beginning 2,127,003 1,986,556 Total pension liability ending 2,381,470 2,127,003 Plan fiduciary net position Contributions employer 146, ,425 Contributions employee Net investment income (2,542) 109,317 Benefit payments, including refunds of member contributions (34,671) (34,671) Administrative expenses (16,145) (14,628) Other Net change in plan fiduciary net position 92, ,443 Plan fiduciary net position beginning 1,971,488 1,766,045 Plan fiduciary net position ending $ 2,064,284 $ 1,971,488 Authority's net pension liability $ 317,186 $ 155,515 Plan fiduciary net position as a percentage of the total pension liability 86.68% 92.69% Covered employee payroll $ 1,007,800 $ 925,038 Net pension liability as a percentage of covered employee payroll 31.47% 16.81% This schedule will be expanded to show multi year trends as additional information becomes available in the future. 29

101 GETTYSBURG MUNICIPAL AUTHORITY Schedule of Authority Contributions Last 10 Fiscal Years (Unaudited) Actuarially determined contribution $ 146,154 $ 145,425 $ 145,733 $ 137,430 $ 126,134 $ 114,727 $ 74,680 $ 71,759 $ 83,000 $ 85,115 Contributions in relation to the actuarially determined contribution 146, , , , ,861 74,680 71,759 83,000 85,115 Contribution deficiency (excess) $ $ $ $ $ (114,727) $ 114,727 $ $ $ $ Covered employee payroll $ 1,007,800 $ 925,038 $ 962,847 $ 929,486 $ 888,118 $ 808,493 $ 703,354 $ 684,611 $ 653,154 $ 595,764 Contributions as a percentage of coveredemployee payroll 14.50% 15.72% 15.14% 14.79% 14.20% 14.19% 10.62% 10.48% 12.71% 14.29% Notes to Schedule Valuation date: Actuarially determined contribution rate are calculated as of December 31, two years prior to the end of the fiscal year in which contributions are reported. Methods and assumptions used to determine contribution rates: Actuarial cost method Entry age normal Amortization method Level dollar closed Amortization period 13 years for 2013 base and prior 11 years for 2015 base and after Asset valuation method Market value Inflation Based on long term historical average rates Salary increases 3.50% Investment rate of return 6.50% Retirement age 62 Mortality Based on UP 1984 mortality table 30

102 GETTYSBURG MUNICIPAL AUTHORITY Schedule of Investment Returns (Unaudited) Annual money weighted rate of return, net of investment expense for the Pension Plan (0.95%) 5.20% This schedule will be expanded to show multi year trends as additional information becomes available in the future. 31

103 OTHER SUPPLEMENTARY INFORMATION

104 GETTYSBURG MUNICIPAL AUTHORITY Other Supplementary Information Budgetary Comparison Schedule Year Ended December 31, 2015 Water Fund Sewer Fund Original/Final Original/Final Budget Actual Variance Budget Actual Variance Revenues Service fees $ 1,989,020 $ 2,014,567 $ 25,547 $ 3,054,000 $ 3,162,342 $ 108,342 Connection and fees 5,000 4,066 (934) 300 (300) Penalties 19,000 19, ,000 33,429 3,429 Other operating revenues 1,000 9,145 8,145 12,237 12,237 Hunterstown revenues 198, ,424 (1,976) Total revenues 2,014,020 2,047,688 33,668 3,282,700 3,404, ,732 Expenses Purification system 721, ,945 12,085 Distribution system 347, ,975 6,360 Collection system 258, ,961 (7,683) Pumping station 77,939 95,492 (17,553) Disposal system 938, ,722 48,897 General operating 410, ,619 (18,549) 410, ,175 (5,459) Professional fees 38,450 26,166 12,284 44,450 26,204 18,246 Hunterstown expenses 164, , Total operating expenses 1,516,885 1,504,705 12,180 1,894,818 1,858,075 36,743 Operating income 497, ,983 45,848 1,387,882 1,546, ,475 Nonoperating revenue (expenses) Tapping fees 54,828 98,081 43,253 27,048 37,481 10,433 Interest income 6,000 11,385 5,385 3,000 2,841 (159) Rental income 110, ,406 13,906 Health insurance surplus 47,423 47,423 47,423 47,423 Gain (loss) on disposal of capital assets 1,948 1,948 1,948 1,948 Refund of previous year tap fee (11,560) (11,560) Principal payments (540,000) (540,000) (765,000) (765,000) Bond issuance cost (133,721) (133,721) Interest expense (52,230) (64,478) (12,248) (404,188) (433,936) (29,748) Total nonoperating revenue (expenses) (420,902) (332,795) 88,107 (1,139,140) (1,242,964) (103,824) Income before contibutions 76, , , , ,393 54,651 Capital contributions/grants 100,000 (100,000) Change in Net Position Budgetary Basis $ 176,233 $ 210,188 $ 33,955 $ 248,742 $ 303,393 $ 54,651 Reconciliation to Statement of Revenues, Expenses and Changes in Fund Net Position Depreciation and amortization ($ 719,616) ($ 1,359,728) Hunterstown depreciation 0 ( 82,470) Principal payments on debt 540, ,000 Change in net position GAAP Basis $ 30,572 ($ 373,805) Note: The Budget prepared by the Authority is prepared on the modified cash basis and does not include depreciation expense; however it does include principal payments on long term debt. These items are shown above to reconcile to the Statement of Revenues, Expenses and Changes in Fund Net Position. 32

105 APPENDIX F AUDITED FINANCIAL STATEMENTS OF THE BOROUGH FOR THE FISCAL YEAR ENDED 12/31/2014

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107 Audited Financial Statements December 31, 2014 Borough of Gettysburg