$8,810,000 GENERAL OBLIGATION REFUNDING BONDS, ISSUE OF 2009, SERIES B

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1 OFFICIAL STATEMENT DATED SEPTEMBER 24, 2009 REFUNDING AND NEW ISSUE MOODY S RATING: Aa3 STANDARD & POOR S RATING: AA- In the opinion of Bond Counsel, based on existing statutes and court decisions and assuming continuing compliance with certain covenants and procedures relating to requirements of the Internal Revenue Code of 1986, as amended (the Code ), interest on the Bonds is excluded from gross income for federal income tax purposes and is not treated as an item of tax preference for purposes of computing the federal alternative minimum tax. Interest on the Series A Bonds is not taken into account in the calculation of adjusted current earnings for purposes of the federal alternative minimum tax imposed on corporations. Interest on the Series B Bonds may be includable in the calculation of certain taxes under the Code, including the federal alternative minimum tax imposed on certain corporations. In the opinion of Bond Counsel, based on existing statutes, interest on the Bonds is excluded from Connecticut taxable income for purposes of the Connecticut income tax on individuals, trusts and estates, and is excluded from amounts on which the net Connecticut minimum tax is based in the case of individuals, trusts and estates required to pay the federal alternative minimum tax. See Tax Matters herein. In the opinion of Bond Counsel, based on existing statutes, interest on the Notes is included in the gross income of the owners thereof for purposes of federal income tax pursuant to the Code, is excluded from Connecticut taxable income for purposes of the Connecticut income tax on individuals, trusts and estates, and is excluded from amounts on which the net Connecticut minimum tax is based in the case of individuals, trusts and estates required to pay the federal alternative minimum tax. See Tax Matters herein. CITY OF GROTON, CONNECTICUT $7,525,000 GENERAL OBLIGATION BONDS, ISSUE OF 2009, SERIES A DATED DUE October 1, 2009 MATURITY SCHEDULE October 1, as shown below Due Principal Due Principal October 1 Amount Coupon Yield CUSIP October 1 Amount Coupon Yield CUSIP 2010 $405, % 0.600% WE $405, % 2.720% WR , % 0.800% WF ,000 * 5.000% 2.860% WS , % 1.100% WG ,000 * 4.500% 3.000% WT , % 1.360% WH , % 3.150% WU , % 1.360% WJ , % 3.250% WV , % 1.670% WK ,000 * 4.000% 3.300% WW , % 1.920% WL , % 3.450% WX , % 2.160% WM , % 3.550% WY , % 2.400% WN , % 3.630% WZ , % 2.580% WP , % 3.720% XA , % 2.580% WQ , % 3.800% *Priced assuming redemption on October 1, 2019; however redemption is at the election of the City. See Optional Redemption herein XB7 Interest on the Series A Bonds will be payable on April 1, 2010 and semiannually thereafter on October 1 and April 1 in each year until maturity. $8,810,000 GENERAL OBLIGATION REFUNDING BONDS, ISSUE OF 2009, SERIES B DATED DUE Date of Delivery MATURITY SCHEDULE January 15, 2010 and July 15, Due Principal Due Principal July 15 Amount Coupon Yield CUSIP July 15 Amount Coupon Yield CUSIP 1/15/2010 ** $100, % 0.500% XC $515, % 2.400% XM , % 0.600% XD , % 2.400% XN , % 0.800% XE , % 2.580% XP , % 1.080% XF , % 2.720% XQ ,005, % 1.340% XG , % 2.720% XR , % 1.650% XH ,000 * 5.000% 2.860% XS , % 1.900% XJ ,000 * 4.500% 3.000% XT , % 2.150% XK ,000 * 3.250% 3.150% XU , % 2.150% XL5 *Priced assuming redemption on July 15, 2019; however redemption is at the election of the City. See Optional Redemption herein. ** First principal payment is on January 15, Interest on the Series B Bonds will be payable on January 15, 2010 and semiannually thereafter on July 15 and January 15 in each year until maturity. The Series A Bonds and Series B Bonds (the Bonds ) are subject to optional redemption prior to maturity as more fully described herein. See Optional Redemption herein. MOODY S RATING: MIG-1 STANDARD & POOR S RATING: SP-1+ $18,500,000 GENERAL OBLIGATION BOND ANTICIPATION NOTES, (FEDERALLY TAXABLE) DATED DUE October 8, 2009 February 1, 2010 Amount Coupon Yield CUSIP $18,500, % 0.850% XV3 The Notes are not subject to redemption prior to maturity. The Bonds and the Notes will be issued by means of a book-entry-only system and registered in the name of Cede & Co., as nominee for The Depository Trust Company ( DTC ), New York, New York. DTC will act as securities depository for the Bonds and the Notes. Purchasers of the Bonds and the Notes will not receive certificates representing their ownership interest in the Bonds and the Notes. Principal of, redemption premium, if any, and interest on the Bonds and the Notes will be payable by the City or its agent to DTC or its nominee as registered owner of the Bonds and the Notes. Ownership of the Bonds and the Notes may be in principal amounts of $5,000 or integral multiples thereof. See Book- Entry-Only Transfer System herein. The Bonds and the Notes will be general obligations of City of Groton, Connecticut (the City ), and the City will pledge its full faith and credit to pay the principal of and interest on the Bonds and the Notes when due. See Security and Remedies herein. U.S. Bank National Association, 225 Asylum Street, 23 rd Floor, Hartford, Connecticut will certify the Bonds and the Notes and act as Registrar, Transfer Agent and Paying Agent for the Bonds and the Notes, and as Escrow Agent for the Series B Bonds. The Bonds and the Notes are offered for delivery when, as and if issued, subject to the approving opinion of Robinson & Cole LLP, Bond Counsel, of Hartford, Connecticut. Certain matters will be passed upon for the Underwriter by Shipman & Goodwin LLP, of Hartford, Connecticut, Underwriter s Counsel. It is expected that delivery of the Bonds and the Notes in book-entry-only form will be made to DTC in New York, New York on or about October 8, Underwriter ROOSEVELT & CROSS, INC. This cover page contains certain information for quick reference only. It is NOT a summary of these issues. Investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision

2 TABLE OF CONTENTS Page Series A Bond Issue Summary Series B Bond Issue Summary Note Issue Summary I. Bond and Note Information Introduction... 1 Description of the Bonds... 2 Optional Redemption... 2 Description of the Notes... 3 Book-Entry-Only Transfer System... 3 DTC Practices... 5 Security and Remedies... 5 Qualification of Financial Institutions... 6 Availability of Continuing Disclosure... 6 Authorization... 6 Use of Proceeds Series A Bonds and the Notes... 6 Plan of Refunding Series B Bonds... 7 Sources and Uses of Bond and Note Proceeds... 7 Verification of Mathematical Computations... 7 Ratings... 8 Tax Matters... 8 II. The Issuer Description of the City Economic Development Form of Government Principal City Officials Summary of Municipal Services City Employees Municipal Employee Bargaining Units III. Economic and Demographic Information Population and Density Age Distribution of the Population Income Distribution Income Levels Educational Attainment Major Employers Employment by Industry Employment Data Age Distribution of Housing Housing Inventory Owner-Occupied Housing Values Building Permits IV. Tax Base Data Assessments Property Tax Collection Procedures Comparative Assessed Valuations Property Tax Levies and Collections Ten Largest Taxpayers Page V. Financial Information Fiscal Year Accounting Policies Budgetary Procedures Annual Audit Pension Plan Other Post Employment Benefits Investment Policies and Practices General Fund Revenues and Expenditures Analysis of General Fund Equity Statement of Revenues, Expenses and Changes In Net Assets Proprietary Funds Debt Service Coverage Groton Utilities VI. Debt Summary Principal Amount of Indebtedness Annual Bonded Debt Maturity Schedule General Government Annual Bonded Debt Maturity Schedule Enterprise Funds Overlapping/Underlying Debt Debt Statement Current Debt Ratios Bond Authorization Temporary Financing Limitation of Indebtedness Statement of Statutory Debt Limitation Authorized But Unissued Debt Principal Amount of Outstanding Debt Ratio of Direct Debt to Valuation, Population, and Income Ratio of Annual Debt Service Expenditures to Total General Fund Expenditures and Transfers Out VII. Legal and Other Litigation Litigation Underwriter Transcript and Closing Documents Concluding Statement Appendix A Basic Financial Statements Appendix B-1 Form of Opinion of Bond Counsel, Series A Bonds Appendix B-2 Form of Opinion of Bond Counsel, Series B Bonds Appendix B-3 Form of Opinion of Bond Counsel, Notes Appendix C-1 Continuing Disclosure Agreement, Series A Bonds Appendix C-2 Continuing Disclosure Agreement, Series B Bonds Appendix C-3 Continuing Disclosure Agreement, Notes No dealer, broker, salesman or other person has been authorized by the City of Groton, Connecticut (the City ) to give any information or to make any representations, other than those contained in this Official Statement; and if given or made, such other information or representation must not be relied upon as having been authorized by the City. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Bonds and the Notes by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. This Official Statement has been prepared only in connection with the initial offering and sale of the Bonds and the Notes and may not be reproduced or used in whole or in part for any other purpose. The information, estimates and expressions of opinion in this Official Statement are subject to change without notice. Neither the delivery of this Official Statement nor any sale of the Bonds and the Notes shall, under any circumstances, create any implication that there has been no material change in the affairs of the City since the date of this Official Statement.

3 SERIES A BOND ISSUE SUMMARY The information in this Series A Bond Issue Summary and the front cover page is qualified in its entirety by the detailed information and financial statements appearing elsewhere in this Official Statement. This Official Statement speaks only as of its date and the information herein is subject to change. Issuer: City of Groton, Connecticut (the City ). Issue: $7,525,000 General Obligation Bonds, Issue of 2009, Series A, (the Series A Bonds ). Dated Date: October 1, Interest Due: April 1 and October 1 in each year until maturity or earlier redemption, commencing April 1, Principal Due: Purpose: Redemption: Security: Credit Ratings: Bond Insurance: Tax Exemption: Bank Qualification: Continuing Disclosure: Registrar, Transfer Agent, Certifying Agent and Paying Agent: Legal Opinion: Delivery and Payment: Issuer Official: Serially, October 1, 2010 through 2029, as detailed on the cover page of this Official Statement. A portion of the proceeds of the Series A Bonds will be used to permanently finance a bond anticipation note of the City maturing on October 8, 2009 and to provide a new money borrowing for additions and renovations to the Headquarters Fire Station; the acquisition of a tower ladder truck and a pumper engine, tools and equipment, and capital improvements to the City s electric system. The Series A Bonds are subject to optional redemption prior to maturity, as more fully described herein. See Optional Redemption herein. The Series A Bonds will be general obligations of the City of Groton, Connecticut and the City will pledge its full faith and credit to the payment of principal of and interest on the Series A Bonds when due. The City received a credit rating of Aa3 from Moody s Investors Service, Inc. ( Moody s ) and AA- from Standard and Poor s, a division of McGraw-Hill Companies, Inc. ( S&P ) on the Series A Bonds. See Ratings herein. The City does not expect to direct purchase a credit enhancement facility. See Tax Matters herein. The Series A Bonds shall be designated by the City as qualified tax-exempt obligations under the provisions of Section 265 (b) of the Internal Revenue Code of 1986, as amended, for purposes of the deduction by financial institutions for interest expense incurred to carry the Series A Bonds. In accordance with the requirements of Rule 15c2-12 promulgated by the Securities and Exchange Commission, the City will agree to provide, or cause to be provided, (i) annual financial information and operating data (ii) timely notices of the occurrence of certain material events and (iii) timely notice of a failure by the City to provide the required annual financial information on or before the date specified in the Continuing Disclosure Agreement, with respect to the Series A Bonds pursuant to a Continuing Disclosure Agreement to be executed by the City substantially in the form of Appendix C-1 to this Official Statement. U.S. Bank National Association, Corporate Trust Services, 225 Asylum Street, 23 rd Floor, Hartford, Connecticut. Robinson & Cole LLP of Hartford, Connecticut will act as Bond Counsel. It is expected that delivery of the Series A Bonds in book-entry-only form will be made to The Depository Trust Company on or about October 8, 2009 against payment in Federal Funds. Questions concerning the Official Statement should be directed to Mr. Michael S. Hillsberg, Director of Finance, City of Groton, City Hall, 295 Meridian Street, Groton, Connecticut 06340, Telephone: Financial Advisor: First Southwest Company, 628 Hebron Avenue, Suite 306, Glastonbury, Connecticut Attention: Janette J. Marcoux, Senior Vice President, Telephone:

4 SERIES B BOND ISSUE SUMMARY The information in this Series B Bond Issue Summary and the front cover page is qualified in its entirety by the detailed information and financial statements appearing elsewhere in this Official Statement. This Official Statement speaks only as of its date and the information herein is subject to change. Issuer: City of Groton, Connecticut (the City ). Issue: Dated Date: Interest Due: Principal Due: Purpose: Redemption: Security: Credit Ratings: Bond Insurance: Tax Exemption: Bank Qualification: Continuing Disclosure: Registrar, Transfer Agent, Certifying Agent, Paying Agent and Escrow Agent: Legal Opinion: Delivery and Payment: Issuer Official: $8,810,000 General Obligation Refunding Bonds, Issue of 2009, Series B, (the Series B Bonds ). Date of Delivery. July 15 and January 15 in each year until maturity or earlier redemption, commencing January 15, First payment on January 15, 2010, then serially thereafter on July 15, 2010 through 2022, as detailed on the cover page of this Official Statement. The proceeds of the Series B Bonds will be used refund at or prior to maturity any or all of the principal amounts outstanding of the City s General Obligation Bonds, Issues of 1998 and 2002, including applicable interest and redemption premium, if any. See Authorization and Plan of Refunding Series B Bonds herein. The Series B Bonds are subject to optional redemption prior to maturity, as more fully described herein. See Optional Redemption herein. The Series B Bonds will be general obligations of the City of Groton, Connecticut and the City will pledge its full faith and credit to the payment of principal of and interest on the Series B Bonds when due. The City received a credit rating of Aa3 from Moody s Investors Service, Inc. ( Moody s ) and AA- from Standard and Poor s, a division of McGraw-Hill Companies, Inc. ( S&P ) on the Series B Bonds. See Ratings herein. The City does not expect to direct purchase a credit enhancement facility. See Tax Matters herein. The Series B Bonds shall be designated by the City as qualified tax-exempt obligations under the provisions of Section 265 (b) of the Internal Revenue Code of 1986, as amended, for purposes of the deduction by financial institutions for interest expense incurred to carry the Series B Bonds. In accordance with the requirements of Rule 15c2-12 promulgated by the Securities and Exchange Commission, the City will agree to provide, or cause to be provided, (i) annual financial information and operating data (ii) timely notices of the occurrence of certain material events and (iii) timely notice of a failure by the City to provide the required annual financial information on or before the date specified in the Continuing Disclosure Agreement, with respect to the Series B Bonds pursuant to a Continuing Disclosure Agreement to be executed by the City substantially in the form of Appendix C-2 to this Official Statement. U.S. Bank National Association, Corporate Trust Services, 225 Asylum Street, 23 rd Floor, Hartford, Connecticut. Robinson & Cole LLP of Hartford, Connecticut will act as Bond Counsel. It is expected that delivery of the Series B Bonds in book-entry-only form will be made to The Depository Trust Company on or about October 8, 2009 against payment in Federal Funds. Questions concerning the Official Statement should be directed to Mr. Michael S. Hillsberg, Director of Finance, City of Groton, City Hall, 295 Meridian Street, Groton, Connecticut 06340, Telephone: Financial Advisor: First Southwest Company, 628 Hebron Avenue, Suite 306, Glastonbury, Connecticut Attention: Janette J. Marcoux, Senior Vice President, Telephone:

5 NOTE ISSUE SUMMARY The information in this Note Issue Summary and the front cover page is qualified in its entirety by the detailed information and financial statements appearing elsewhere in this Official Statement. This Official Statement speaks only as of its date and the information herein is subject to change. Issuer: Issue: City of Groton, Connecticut (the City ). $18,500,000 General Obligation Bond Anticipation Notes, (Federally Taxable), (the Notes ). Dated Date: October 8, Interest Due: At maturity, February 1, Principal Due: At maturity, February 1, Purpose: Redemption: Security: Credit Ratings: Tax Exemption: Continuing Disclosure: Registrar, Transfer Agent, Certifying Agent and Paying Agent: Legal Opinion: Delivery and Payment: Issuer Official: The proceeds of the Notes will be used refund $18,500,000 Bond Anticipation Notes maturing on October 8, 2009, which were issued to finance the construction of a hybrid-fiber coaxial network to provide the community antenna television and internet services. The Notes are not subject to redemption prior to maturity. The Notes will be general obligations of the City of Groton, Connecticut and the City will pledge its full faith and credit to the payment of principal of and interest on the Notes when due. The City received a credit rating of MIG-1 from Moody s Investors Service, Inc. ( Moody s ) and SP-1+ from Standard and Poor s, a division of McGraw-Hill Companies, Inc. ( S&P ) on the Notes. See Ratings herein. See Tax Matters herein. In accordance with the requirements of Rule 15c2-12 promulgated by the Securities and Exchange Commission, the City will agree to provide, or cause to be provided, notices of material events with respect to the Notes pursuant to a Continuing Disclosure Agreement to be executed by the City substantially in the form of Appendix C-3 to this Official Statement. U.S. Bank National Association, Corporate Trust Services, 225 Asylum Street, 23 rd Floor, Hartford, Connecticut. Robinson & Cole LLP of Hartford, Connecticut will act as Bond Counsel. It is expected that delivery of the Notes in book-entry-only form will be made to The Depository Trust Company on or about October 8, 2009 against payment in Federal Funds. Questions concerning the Official Statement should be directed to Mr. Michael S. Hillsberg, Director of Finance, City of Groton, City Hall, 295 Meridian Street, Groton, Connecticut 06340, Telephone: Financial Advisor: First Southwest Company, 628 Hebron Avenue, Suite 306, Glastonbury, Connecticut Attention: Janette J. Marcoux, Senior Vice President, Telephone:

6 I. BOND AND NOTE INFORMATION INTRODUCTION This Official Statement, including the cover page and appendices, is provided for the purpose of presenting certain information relating to the City of Groton, Connecticut (the City ) in connection with the original issuance and sale of $7,525,000 General Obligation Bonds, Issue of 2009, Series A (the Series A Bonds ), $8,810,000 General Obligation Refunding Bonds, Issue of 2009, Series B (the Series B Bonds and together with the Series A Bonds, the Bonds ) and $18,500,000 General Obligation Bond Anticipation Notes (the Notes ) of the City. This Official Statement is not to be construed as a contract or agreement between the City and the purchasers or holders of any of the Bonds and the Notes. Any statements made in this Official Statement involving matters of opinion or estimates are not intended to be representations of fact, and no representation is made that any such opinion or estimate will be realized. Neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City since the date hereof. All quotations from and summaries and explanations of provisions of statutes, charters, or other laws and acts and proceedings of the City contained herein do not purport to be complete and are qualified in their entirety by reference to the original official documents, and all references to the Bonds and the Notes and the proceedings of the City relating thereto are qualified in their entirety by reference to the definitive form of the Bonds and the Notes and such proceedings. The presentation of information is intended to show recent historical trends and is not intended to indicate future or continuing trends in the financial or other positions of the City. First Southwest Company, as Financial Advisor to the City, has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to the City and, as applicable, to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Financial Advisor does not guarantee the accuracy or completeness of such information. An agreement between the City and First Southwest Company has been entered into to conform to Municipal Securities Rulemaking Board (MSRB) Rule G-23. Set forth in Appendix A Basic Financial Statements hereto is a copy of the report of the independent auditors for the City with respect to the financial statements of the City included in that appendix. The report speaks only as of its date, and only to the matters expressly set forth therein. The auditors have not been engaged to review this Official Statement or to perform audit procedures regarding the post-audit period, nor have the auditors been requested to give their consent to the inclusion of their report in Appendix A. Except as stated in their report, the auditors have not been engaged to verify the financial information set out in Appendix A and are not passing upon and do not assume responsibility for the sufficiency, accuracy or completeness of the financial information presented in that appendix. Bond Counsel is not passing upon and does not assume responsibility for the accuracy or adequacy of the statements made in this Official Statement (other than matters expressly set forth as their opinions in Appendices B- 1, B-2 and B-3 Form of Opinion of Bond Counsel herein) and they make no representation that they have independently verified the same. The City considers this Official Statement to be final for purposes of Securities and Exchange Commission Rule 15c2-12(b)(1), but is subject to revision or amendment. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT LEVELS ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. 1

7 DESCRIPTION OF THE BONDS The Series A Bonds will be dated October 1, 2009 and will mature in annual installments on October 1 in each of the years and in the principal amounts set forth on the cover page hereof. Interest on the Series A Bonds will be payable on April 1, 2010 and semiannually thereafter on October 1 and April 1 in each year until maturity and will be payable to the registered owners of the Series A Bonds as of the close of business on the fifteenth day of September and March in each year, or the preceding business day if such fifteenth day is not a business day. The Series B Bonds will be dated as of the date of delivery and will mature in annual installments on July 15 in each of the years and in the principal amounts set forth on the cover page hereof with the exception of the first installment which will mature on January 15, Interest on the Series B Bonds will be payable on January 15, 2010 and semiannually thereafter on July 15 and January 15 in each year until maturity and will be payable to the registered owners of the Series B Bonds as of the close of business on the last business day of December and June in each year. Interest on the Bonds will be calculated on the basis of a 360-day year, consisting of twelve 30-day months. A book-entry-only transfer system will be employed evidencing ownership of the Bonds with transfers of ownership on the records of The Depository Trust Company, New York, New York ( DTC ), and its participants pursuant to rules and procedures established by DTC and its participants. See Book-Entry-Only Transfer System herein. The Certifying Agent, Paying Agent, Registrar, and Transfer Agent for the Bonds and Escrow Agent for the Series B Bonds will be U.S. Bank National Association, Corporate Trust Services, 225 Asylum Street, 23 rd Floor, Hartford, Connecticut ( ctmuniservices@usbank.com). The legal opinions on the Bonds will be rendered by Robinson & Cole LLP, in substantially the forms set forth in Appendices B-1 and B-2 to this Official Statement. The Bonds are subject to optional redemption prior to maturity as more fully described herein. OPTIONAL REDEMPTION The Series A Bonds maturing on or before October 1, 2019 are not subject to redemption prior to maturity. The Series B Bonds maturing on or before July 15, 2019 are not subject to redemption prior to maturity. The Series A Bonds maturing on October 1, 2020 and thereafter and the Series B Bonds maturing on July 15, 2020 and thereafter, are subject to redemption prior to maturity, at the option of the City, for the Series A Bonds on and after October 1, 2019, and for the Series B Bonds on and after July 15, 2019, at any time in whole or in part, and by lot within a maturity in such amounts and in such order of maturity as the City may determine, at the redemption price (expressed as a percentage of the principal amount of the Bonds to be redeemed) set forth in the following table, plus accrued interest, to the redemption date: Series Redemption Date Redemption Price Series A Bonds October 1, 2019 and thereafter 100% Series B Bonds July 15, 2019 and thereafter 100% Notice of redemption shall be given by the City or its agent by mailing a copy of the redemption notice by first-class mail not less than thirty (30) days prior to the redemption date to the registered owner of such Bonds at the address of such registered owner as the name shall last appear on the registration books for the Bonds kept for such purpose. Failure to give such notice by mailing to any registered owner, or any defect therein, shall not affect the validity of the redemption of any other Bonds. Upon the giving of such notice, if sufficient funds available solely for redemption are on deposit with the Paying Agent, the Bonds or portions thereof so called for redemption will cease to bear interest after the specified redemption date. So long as Cede & Co., as nominee of the Depository Trust Company ( DTC ), is the registered owner of the Bonds, notice of redemption will be sent only to DTC (or a successor securities depository) or its successor nominee. If less than all the Bonds of any one maturity shall be called for redemption, the particular Bonds or portions of Bonds of such maturity to be redeemed shall be selected by lot in such manner as the City in its discretion may determine, provided, however, that the portion of any Bonds to be redeemed shall be in the principal amount of $5,000 or integral multiples thereof and that, in selecting Bonds for redemption, each Bond shall be considered as representing that number of Bonds which is obtained by dividing the principal amount of such Bond by $5,000. The City, so long as a book-entry system is used for the Bonds, will send any notice of redemption only to DTC (or a successor securities depository) or its nominee. Any failure of DTC to advise any DTC Participant, or of any DTC Participant or Indirect Participant to notify any Indirect Participant or Beneficial Owner, of any such notice and its content or effect will not affect the validity of the redemption of such Bonds called for redemption. Redemption of a portion of the Bonds of any maturity by the City will reduce the outstanding principal amount of 2

8 Bonds of such maturity held by DTC. In such event it is the current practice of DTC to allocate by lot, through its book-entry system, among the interests held by DTC Participants in the Bonds to be redeemed, the interest to be reduced by such redemptions in accordance with its own rules or other agreements with DTC Participants. The DTC Participants and Indirect Participants may allocate reductions of the interest in the Bonds to be redeemed held by the Beneficial Owners. Any such allocation of interests in the Bonds to be redeemed will not be governed by the determination of the City authorizing the issuance of the Bonds and will not be conducted by the City or be the responsibility of, the City, the Registrar or Paying Agent. DESCRIPTION OF THE NOTES The Notes will be dated October 8, 2009, will be due and payable as to both principal and interest at maturity, February 1, The Notes will be issued as fully-registered notes in denominations of $5,000 or any integral multiples thereof. Interest will be calculated on the basis of a 360-day year consisting of twelve 30-day months. A book-entry-only transfer system will be employed evidencing ownership of the Notes with transfers of ownership on the records of DTC, and its participants pursuant to rules and procedures established by DTC and its participants. See Book-Entry-Only Transfer System herein. The Certifying Agent, Paying Agent, Registrar and Transfer Agent will be U.S. Bank National Association, Corporate Trust Services, 225 Asylum Street, 23 rd Floor, Hartford, Connecticut ( ctmuniservices@usbank.com). The legal opinion on the Notes will be rendered by Robinson & Cole LLP, in substantially the form set forth in Appendix B-3 to this Official Statement. The Notes are not subject to redemption prior to maturity. BOOK-ENTRY-ONLY TRANSFER SYSTEM This section describes how ownership of the Bonds and the Notes is to be transferred and how the principal of, premium, if any and interest on the Bonds and the Notes are to be paid to and accredited by DTC while the Bonds and the Notes are registered in its nominee name. The information in this section concerning DTC and the Book- Entry-Only Transfer System has been provided by DTC for use in disclosure documents such as this Official Statement. The City believes the source of such information to be reliable, but takes no responsibility for the accuracy or completeness thereof. The City cannot and does not give any assurance that (1) DTC will distribute payments of debt service on the Bonds and the Notes, or redemption or other notices, to DTC Participants, (2) DTC Participants or others will distribute debt service payments paid to DTC or its nominee (as the registered owner of the Bonds and the Notes), or redemption or other notices, to the Beneficial Owners, or that they will do so on a timely basis, or (3) DTC 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. DTC will act as securities depository for the Bonds and the Notes. The Bonds and the Notes will be issued as fullyregistered securities registered in the name of Cede & Co. (DTC s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Bond certificate will be issued for each maturity of the Bonds in the aggregate principal amount of each maturity and one fully-registered Note certificate will be issued for each interest rate of the Notes, and will be deposited with DTC. DTC, the world s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a banking organization within the meaning of the New York Banking Law, a member of the Federal Reserve System, a clearing corporation within the meaning of the New York Uniform Commercial Code, and a clearing agency registered pursuant to the provisions of Section 17A of the Securities Exchange Act of DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-u.s. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC s participants ( Direct Participants ) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities through electronic computerized bookentry 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 3

9 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 Bonds and Notes under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds and the Notes on DTC s records. The ownership interest of each actual purchaser of each Bond and Note ( 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 transactions, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owners entered into the transaction. Transfers of ownership interest in the Bonds and the Notes 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 and the Notes, except in the event that use of the book-entry system for the Bonds and the Notes is discontinued. To facilitate subsequent transfers, all Bonds and Notes 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 and Notes with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds and the Notes; DTC s records reflect only the identity of the Direct Participant to whose account such Bonds and Notes 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. 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 and the Notes unless authorized by a Direct Participant in accordance with DTC s procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the City as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co. s consenting or voting rights to those Direct Participants to whose accounts the Bonds and the Notes are credited on the record date (identified in a listing attached to the Omnibus Proxy). Principal and interest payments on, and redemption premium, if any, with respect to the Bonds and the Notes will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC s practice is to credit Direct Participants accounts, upon DTC s receipt of funds and corresponding detail information from the City or the Paying Agent/Registrar on payable dates 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 in 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 Paying Agent or the City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest and redemption premium, if any, to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the City or the Paying Agent, disbursement of such payments to Direct Participants shall be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as depository with respect to the Bonds and the Notes at any time by giving reasonable notice to the City and the Paying Agent/Registrar. Under such circumstances, in the event that a successor depository is not obtained, bond and/or note certificates are required to be printed and delivered. The City may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, bond and/or note certificates will be printed and delivered to DTC. 4

10 Use of Certain Terms in Other Sections of this Official Statement. In reading this Official Statement it should be understood that while the Bonds and the Notes are in the Book-Entry-Only System, references in other sections of this Official Statement to registered owners should be read to include the person for which the Participant acquires an interest in the Bonds and the Notes, but (i) all rights of ownership must be exercised through DTC and the Book- Entry-Only System, and (ii) except as described above, notices that are to be given to registered owners under the Order will be given only to DTC. Information concerning DTC and the Book-Entry-Only System has been obtained from DTC and is not guaranteed as to accuracy or completeness by, and is not to be construed as a representation by the City, the Financial Advisor or the Underwriter. DTC PRACTICES The City can make no assurances that DTC, Direct Participants, Indirect Participants or other nominees of the Beneficial Owners of the Bonds and the Notes will act in a manner described in this Official Statement. DTC is required to act according to rules and procedures established by DTC and its participants which are on file with the Securities and Exchange Commission. SECURITY AND REMEDIES The Bonds and the Notes will be general obligations of the City of Groton, Connecticut and the City will pledge its full faith and credit to pay the principal of and interest on the Bonds and the Notes when due. Unless paid from other sources, the Bonds and the Notes are payable from general property tax revenues. The City has the power under Connecticut General Statutes to levy ad valorem taxes on all taxable property in the City without limit as to rate or amount, except as to certain classified property such as certified forest land taxable at a limited rate and dwelling houses of qualified elderly persons of low income or qualified disabled persons taxable at limited amounts. There was however, no such classified property on the last completed grand list of the City, and under existing statutes, the State of Connecticut is obligated to pay the City the amount of tax revenue that the City would have received except for the limitation upon its power to tax such dwelling houses. Payment of the Bonds and the Notes is not limited to property tax revenues or any other revenue source, but certain revenues of the City may be restricted as to use and therefore may not be available to pay debt service on the Bonds and the Notes. There are no statutory provisions for priorities in the payment of general obligations of the City. There are no statutory provisions for a lien on any portion of the tax levy or other revenues to secure the Bonds and the Notes, or judgments thereon, in priority to other claims. The City is subject to suit on its general obligation debt and a court of competent jurisdiction has the power in appropriate proceedings to render a judgment against the City. Courts of competent jurisdiction also have the power in appropriate proceedings to order payment of a judgment on such debt from funds lawfully available therefor or, in the absence thereof, to order the City to take all lawful action to obtain the same, including the raising of the required amount in the next annual tax levy. In exercising their discretion as to whether to enter such an order, the courts may take into account all relevant factors including the current operating needs of the City and the availability and adequacy of other remedies. Enforcement of a claim for payment of principal of or interest on the debt would also be subject to the applicable provisions of Federal bankruptcy laws as well as other bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors rights heretofore or hereafter enacted and to the exercise of judicial discretion. Under the Federal bankruptcy code, the City may seek relief only, among other requirements, if it is specifically authorized, in its capacity as a municipality or by name, to be a debtor under Chapter 9 of Title 11 of the United States Code, by State law or by a governmental officer or organization empowered by State law to authorized such entity to become a debtor under such Chapter. Section of the Connecticut General Statutes, as amended, provides that no Connecticut municipality shall file a petition in bankruptcy without the express prior written consent of the Governor. This prohibition applies to any town, city, borough, metropolitan district and any other political subdivision of the State having the power to levy taxes and issue bonds or other obligations. 5

11 QUALIFICATION OF FINANCIAL INSTITUTIONS The Bonds shall be designated by the City as qualified tax-exempt obligations under the provisions of Section 265(b) of the Internal Revenue Code of 1986, as amended, for purposes of the deduction by financial institutions for interest expense allocable to the Bonds. AVAILABILITY OF CONTINUING DISCLOSURE The City of Groton prepares, in accordance with state law, annual audited financial statements and files such annual audits with the State Office of Policy and Management within six months of the end of its fiscal year. The City provides, and will continue to provide to the rating agencies ongoing disclosure in the form of annual audited financial statements, adopted budgets and other materials relating to its management and financial condition as may be necessary or requested. In accordance with the requirements of Rule 15c2-12 promulgated by the Securities and Exchange Commission, the City will agree to provide, or cause to be provided, (i) annual financial information and operating data with respect to the Bonds, (ii) timely notice of the occurrence of certain material events with the respect to the Bonds and the Notes; and (iii) timely notice of a failure by the City to provide the required annual financial information on or before the date specified in the Continuing Disclosure Agreements with respect to the Bonds, pursuant to the Continuing Disclosure Agreements to be executed by the City substantially in the forms of Appendices C-1, C-2 and C-3 to this Official Statement. The Underwriter s obligation to purchase the Bonds and the Notes shall be conditioned upon its receiving, at or prior to the delivery of the Bonds and the Notes, executed copies of the Continuing Disclosure Agreements. The City has previously undertaken in continuing disclosure agreements entered into for the benefit of holders of certain of its general obligation bonds and notes to provide annual financial information event notices pursuant to Rule 15c2-12. To date the City has not failed to meet its undertakings under such agreements. AUTHORIZATION The Series A Bonds and the Notes are issued pursuant to the General Statutes of Connecticut, as amended, the Charter of the City of Groton, and certain bond resolutions adopted by the Mayor and City Council and approved at Special City Meetings. The Series B Bonds are being issued to advance refund all or any portion of the aggregated principal amount outstanding of certain City of Groton General Obligation Bonds listed below (the Refunded Bonds ). See Plan of Refunding herein. USE OF PROCEEDS - SERIES A BONDS AND THE NOTES Amount Previously Other Funds Notes Due Series A The Authorized/ Project Authorized Bonded Applied 10/8/2009 Bonds Notes Unissued 1992 Electric System Improvements $6,750,000 $2,805,000 $295,000 $1,295,000 $2,650, Electric System Improvements 7,869,500 4,993,000 $1,506, , , , Electric Improvements 11,897,000 7,212, ,000 1,525,000 3,160, Electric System Improvements 4,840,000 2,218, , ,000 1,797, Electric System Improvements 7,156,139 2,560, ,000 1,180,000 3,416, Broadband Project 10,000,000 10,000,000 $10,000, Broadband Project 8,500,000 8,500,000 8,500, Fire Dept. Enhancement Program 1,727, ,725,000 2,500 Totals $58,740,139 $19,788,000 $1,506,700 $21,800,000 $7,525,000 $18,500,000 $11,420,439 1 The total appropriation for this project is $2,500,000 which will be funded with the receipt of a grant in the amount of $772,500 and the issuance of bonds/notes not to exceed $1,727,500. 6

12 PLAN OF REFUNDING SERIES B BONDS The Series B Bonds are being issued to advance refund all or any portion of the aggregate principal amount outstanding of the Refunded Bonds as set forth below: Principal Dated Amount Maturities Redemption Redemption Issue Date Refunded Refunded Date Price General Obligation Bonds, Issue of /15/1998 $1,750,000 10/15/ /16/ % General Obligation Bonds, Issue of /15/2002 6,875,000 07/15/ /15/ % Total. $8,625,000 The refunding is contingent upon delivery of the Series B Bonds. Upon delivery of the Series B Bonds, a portion of proceeds of the Series B Bonds will be placed in an irrevocable escrow fund (the Escrow Deposit Fund ) established with U.S. Bank National Association, as escrow agent (the Escrow Agent ) under an Escrow Agreement (the Escrow Agreement ) dated as of October 8, 2009, between the Escrow Agent and the City. The Escrow Agent will use such proceeds to purchase a portfolio of non-callable direct obligations of or obligations guaranteed by the government of the United States of America, including United States Treasury State and Local Government Series ( SLGS ) securities, Federal National Mortgage Association ( FNMA ) securities and any other securities permitted by Section of the Connecticut General Statutes, all of which shall not be callable or prepayable at the option of the issuer of the securities (the Escrow Securities ), the principal of and interest on which, when due, will provide amounts sufficient to pay the principal, interest and redemption premium on the Refunded Bonds to the redemption dates or maturity (the Escrow Requirements ). All investment income on and maturing principal of the Escrow Securities held in the Escrow Deposit Fund and needed to pay the principal, interest and redemption premium on the Refunded Bonds will be irrevocably deposited by the City for payment of the Refunded Bonds. The balance of the proceeds of the Series B Bonds will be used to pay costs of issuance and Underwriter s discount. SOURCES AND USES OF BOND AND NOTE PROCEEDS Series A Series B Bonds Bonds Notes Sources of Funds Par Amount.. $7,525, $8,810, $18,500, Net Original Issue Premium 182, , , Accrued Interest 4, Total Sources $7,711, $9,285, $18,525, Uses of Funds Deposit to Escrow Deposit Fund $9,180, Project Fund Deposits $7,677, $18,501, Underwriter's Discount 30, , , Costs of Issuance 65, Accrued Interest 4, Contingency 4, Total Uses $7,711, $9,285, $18,525, VERIFICATION OF MATHEMATICAL COMPUTATIONS The accuracy of the mathematical computations relating to (i) the adequacy of the maturing principal amounts of the Escrow Securities together with the interest income thereon and uninvested cash, if any, to pay when due, the principal of and interest income on the Refunded Bonds and (ii) the yield on the Series B Bonds and on the Escrow Securities for purposes of determining compliance with certain requirements of the Internal Revenue Code of 1986, as amended, will be verified by Grant Thornton LLP. Such verification will be based upon information and assumptions supplied by the Underwriter and the City, and such verification, information and assumptions will be relied on by Bond Counsel in rendering its opinions described herein. 7

13 RATINGS The City received a credit rating of Aa3 from Moody s Investors Service, Inc. ( Moody s ) and AA- from Standard and Poor s, a division of McGraw-Hill Companies, Inc. ( S&P ) on the Bonds. The City furnished to the rating agencies certain information and materials, some of which may not have been included in this Official Statement. The City received a credit rating of MIG-1 from Moody s Investors Service, Inc. ( Moody s ) and SP-1+ from Standard and Poor s, a division of McGraw-Hill Companies, Inc. ( S&P ) on the Notes The ratings reflect only the views of the rating agencies and an explanation of the significance of the ratings may be obtained from Moody s Investors Service, Inc., 7 World Trade Center at 250 Greenwich Street, New York, New York or Standard & Poor s, 55 Water Street, New York, New York 10041, respectively. Generally, a rating agency bases its ratings on the information and materials furnished to it and on investigations, studies and assumptions of its own. There is no assurance that the ratings will continue for any given period of time or that it will not be revised or withdrawn entirely by such rating agencies if, in the judgment of such rating agencies, circumstances so warrant. A revision or withdrawal of the ratings may have an effect on the market price of the City s bonds and notes, including the Bonds and the Notes. TAX MATTERS Federal Income Tax Bonds The Internal Revenue Code of 1986, as amended (the Code ), imposes certain requirements which must be met at and subsequent to delivery of the Bonds in order that interest on the Bonds be and remain excluded from gross income for federal income tax purposes. Non-compliance with such requirements could cause interest on the Bonds to be included in gross income retroactive to the date of issuance of the Bonds. The Tax Regulatory Agreement, which will be executed and delivered by the City concurrently with the Bonds, contains representations, covenants and procedures relating to compliance with such requirements of the Code. Pursuant to the Tax Regulatory Agreement, the City also covenants and agrees that it shall perform all things necessary or appropriate under any valid provision of law to ensure interest on the Bonds shall be excluded from gross income for federal income tax purposes under the Code. In the opinion of Bond Counsel, based on existing statutes and court decisions and assuming continuing compliance by the City with its covenants and the procedures contained in the Tax Regulatory Agreement, interest on the Series A Bonds is excluded from gross income for federal income tax purposes and is not treated as an item of tax preference for purposes of computing the federal alternative minimum tax and is not taken into account in the calculation of adjusted current earnings for purposes of computing the federal alternative minimum tax imposed on corporations. Interest on the Series B Bonds, however, is includable in adjusted current earnings for purposes of computing the federal alternative minimum tax imposed on certain corporations. Ownership of the Bonds may also result in certain collateral federal income tax consequences to certain taxpayers, including, without limitation, financial institutions, property and casualty insurance companies, certain foreign corporations doing business in the United States, certain S corporations with excess passive income, individual recipients of Social Security and Railroad Retirement benefits, taxpayers utilizing the earned income credit and taxpayers who have or are deemed to have incurred indebtedness to purchase or carry tax exempt obligations, such as the Bonds. Prospective purchasers of the Bonds, particularly those who may be subject to special rules, are advised to consult their own tax advisors regarding the federal tax consequences of ownership and disposition of, or receipt of interest on, the Bonds. 8

14 Original Issue Discount The initial public offering price of the Bonds may be less than the principal amount payable on such Bonds at maturity. The excess of the principal amount payable at maturity over the initial public offering price at which a substantial amount of these Bonds is sold constitutes original issue discount. The prices set forth on the cover page of the Official Statement may or may not reflect the prices at which a substantial amount of the Bonds were ultimately sold to the public. Under Section 1288 of the Code, the amount of original issue discount treated as having accrued with respect to any Bond during each day it is owned by a taxpayer is added to the owner's adjusted basis for purposes of determining gain or loss upon the sale or other disposition of such Bonds by such owner. Accrued original issue discount on the Bonds is excluded from gross income for federal income tax purposes. Original issue discount on any bond is treated as accruing on the basis of economic accrual for such purposes, computed by a constant semiannual compounding method using the yield to maturity on such Bond. The original issue discount attributable to any bond for any particular semiannual period is equal to the excess of the product of (i) one-half of the yield to maturity of such bond, and (ii) the amount which would be the adjusted basis of the bond at the beginning of such semiannual period if held by the original owner and purchased by such owner at the initial public offering price, over the interest paid during such period. The amount so treated as accruing during each semiannual period is apportioned in equal amounts among the days in that period to determine the amount of original issue discount accruing for such purposes during each such day. Prospective purchasers in the Bonds should consult their tax advisors with respect to the federal income tax consequences of the disposition of, and receipt of interest on, such Bonds. Original Issue Premium The initial public offering price of the Bonds may be greater than the principal amount payable on such Bonds at maturity. The excess of the initial public offering price at which a substantial amount of these Bonds is sold over the principal amount payable at maturity or on earlier call date constitutes original issue premium. The prices set forth on the cover page of the Official Statement may or may not reflect the prices at which a substantial amount of the Bonds were ultimately sold to the public. Under Sections 1016 and 171 of the Code, the amount of original issue premium treated as amortizing with respect to any Bond during each day it is owned by a taxpayer is subtracted from the owner's adjusted basis for purposes of determining gain or loss upon the sale or other disposition of such Bonds by such owner. Amortized original issue premium on the Bonds is not treated as a deduction from gross income for federal income tax purposes. Original issue premium on any bond is treated as amortizing on the basis of the taxpayer's yield to maturity using the taxpayer's cost basis and a constant semiannual compounding method. Prospective investors in the Bonds should consult their tax advisors with respect to the federal income tax consequences of the disposition of, and receipt of interest on, the Bonds. Notes In the opinion of Bond Counsel, under existing law, interest on the Notes is included in gross income of the owners thereof for federal income tax purposes pursuant to the Code. Prospective purchasers of the Notes, particularly nonresident alien individuals, foreign corporations or other non-u.s. persons, should consult their own tax advisors regarding the application of withholding tax to interest on the Notes, the tax consequences of purchasing the Notes at a discount or premium at the issue date or thereafter, and the tax consequences of the ownership and disposition of, or receipt of interest on, the Notes. State of Connecticut In the opinion of Bond Counsel, based on existing statutes, interest on the Bonds and the Notes is excluded from Connecticut taxable income for purposes of the Connecticut income tax on individuals, trusts and estates, and is excluded from amounts on which the net Connecticut minimum tax is based in the case of individuals, trusts and estates required to pay the federal alternative minimum tax. Prospective purchasers of the Bonds and the Notes are advised to consult their own tax advisors regarding the State and local tax consequences of ownership and disposition of, or receipt of interest on, the Bonds and the Notes. The opinion of Bond Counsel is rendered as of its date and is based on existing law, which is subject to change. Bond Counsel assumes no obligation to update or supplement its opinion to reflect any facts or circumstances that may come to their attention, or to reflect any changes in law that may thereafter occur or become effective. 9

15 II. THE ISSUER DESCRIPTION OF THE CITY The City of Groton is located in southeastern Connecticut on the east bank of the Thames River and encompasses an area of 3.06 square miles. The City lies entirely within the Town of Groton and is an independent municipal entity. It was incorporated to provide utilities, highways, fire and police protection and sanitation. The City accounts for twenty-five percent of the Town s population, according to 2000 Census Data and approximately 33.1% of the Grand List as of October 1, Groton is astride Interstate 95, a major highway between New York, Providence and Boston. Numerous state routes connect Groton with all points in Connecticut and with neighboring states. Passenger service is provided by Amtrak in New London and by a number of intrastate bus companies. Air service is provided by the Groton-New London Airport. The Thames River provides a deep water harbor with terminal and berth facilities for water transportation available at the New London State Pier. Rocky soil limited the City s early agricultural possibilities; therefore, the early inhabitants turned to the sea for fishing, trade, and shipbuilding. This seafaring heritage continues today in Groton, the self-proclaimed Submarine Capital of the World. Nuclear-powered submarines, built in the City by Electric Boat, a division of General Dynamics, are home ported at the U.S. Naval Submarine Base here. ECONOMIC DEVELOPMENT The world research headquarters facility of Pfizer, Incorporated, a pharmaceutical and research and development firm, is located in the City of Groton. The company completed a $43.0 million expansion of a Drug Safety Technology Center in early The facility now totals 592,000 square feet and includes a library, a 180-seat cafeteria, a health services center, and 11 conference rooms. Other projects include a new 53,000 square foot Corporate Information Technology Building; and a multimillion dollar Aurora facility, which is a computerized/mechanized pharmaceutical compound retrieval system. The company s properties in Groton are assessed in excess of $578.7 million as of October 1, 2008; this number reflects a three-year phase-in of increased real estate values as of that date. Pfizer is currently undergoing a substantial campus wide renovation that includes utility redundancy projects, building/structure demolition and building conversions as it converts its production operation to research and development. As of July 2008, a new 19,000 square foot receiving area was issued a certificate of occupancy. In 10

16 September of 2009, a new 12,000 square foot Gas Turbine Generator Plant with an estimated value of $14 million is scheduled for completion. Renovations to existing buildings continue as the corporation provides space for 1,000 new employees from the Wyeth merger. Electric Boat continues with major renovations to its facilities. Graving Dock 3 was totally refurbished including $1.4 million of mechanical and electrical infrastructure. Graving Docks 1 and 2 were refurbished with new mechanical and electrical improvements. Projects for which permits have been issued are two mezzanines in Building 260 at a cost of $10 million, new exterior doors in Building 260 at a cost of $2 million, and a new 15k substation inside Building 260 at a cost of $1.5 million. New infrastructure improvements include $2 million of steam lines, and a new South Yard entrance. The Electric Boat Research and Development annex was moved from the Town of Groton to the City, increasing the City s taxable base by approximately $3 million. Housing growth is reflected in the approval of new multi-family developments totaling 61 new condominium units. The estimated average gross assessed value of each unit is $110,000; the project is 50% complete. A new 12 lot waterfront subdivision has been approved, with underground utilities and road work already complete. Each lot has an estimated average gross assessed value of $350,000; a number of lots are sold. FORM OF GOVERNMENT The City of Groton operates under a Charter and is administered under a Mayor-City Council form of government. The Mayor serves as the Chief Executive Officer of the City. Elections for Mayor, Council and other City elected officials are held on the first Monday of May of each odd numbered year for a term of two years. The Mayor is elected separately from the Council and presides as its Chairperson. The City Council and Mayor, which act as a board, also serve as the Water Pollution Control Authority. In addition to all the powers and privileges conferred in the Charter, the inhabitants have the powers and privileges conferred and granted to towns and cities under the Constitution and General Statutes of Connecticut. The legislative power of the City is vested exclusively in the Council except as otherwise provided for electors. The Council has the power to enact, amend, or repeal ordinances consistent with the General Statutes or the Charter, which requires legal notice. The electors have the power to approve or reject ordinances, by referendum, as provided in the Charter. The Mayor, as the Chief Executive Officer of the City, recommends the budget to the City Council which may also consider the proposed budget and make recommendations. Electors approve the budget at an annual meeting held on the first Monday of June. PRINCIPAL CITY OFFICIALS Manner of Years in Current Office Name Selection Office Term Mayor Dennis L. Popp Elected 10 Years Deputy Mayor Marian K. Galbraith 1 Elected 1 Year Councilor David L. Hale Elected 8 Years Councilor Lisa M. Luck Elected 1 Year Councilor William E. Jervis Elected 1 Year Councilor James L. Streeter Elected 1 Year Councilor Celeste G. Duffy Elected 4 Years City Clerk Debra J. Patrick Elected 10 Years City Treasurer Janice Waller-Brett Elected 4 Years Director of Finance Michael S. Hillsberg 2 Appointed 1 Year Indefinite Director of Utilities Paul Yatcko Appointed 2 Years Indefinite Chief of Police Bruno L. Giulini Appointed 8 Years Indefinite Director of Parks & Recreation Mary K. Hill Appointed 4 Years Indefinite Building & Zoning Official Carlton Smith Appointed 5 Years Indefinite Fire Chief Nicholas Delia Appointed 12 Years Indefinite City Planner Barbara Goodrich Appointed 3 Years Indefinite Previously served as a councilor for 7 years. 2 Previously served as Director of Finance in the Towns of Hebron and Montville. Source: City Officials, City of Groton. 11

17 SUMMARY OF MUNICIPAL SERVICES Police Protection: Within the Town of Groton, three governmental units provide police services, the City of Groton being one. The City Police Department is comprised of a Chief, an Administrative Assistant, 2 Lieutenants, 5 Sergeants, 3 Corporals, 4 Detectives (with one as a Sergeant), 16 Patrol Officers, 2 Clerks, 4 Civil Dispatchers and 1 Maintenance Person. Functions performed include Criminal Records, Criminal Investigation, Uniformed Patrol, Traffic Control, and Harbor Patrol. The City Police Department is a member of the Town-wide 911 Emergency System. All patrol personnel are qualified as emergency responders and are trained in CPR. Fire Protection: Fire protection and emergency services are provided by a combination fire department operating out of two firehouses. The Department is comprised of a Chief, a Deputy Chief, 3 Captains, and 12 Firemen augmented by 2 companies of volunteers. The Department conducts active fire investigation and fire education programs. The Fire Department is also a member of the Town-wide 911 Emergency System. The City has a Class 4 insurance rating. Public Works: The Public Works Department is comprised of a Superintendent, a Foreman, a secretary, 2 Civil Engineers, and 20 other personnel. The Department maintains over 27 miles of City streets and sidewalks, and provides twice weekly trash pickup. The City performs all road work, from engineering through repair and new construction. The City is also participating in a mandatory recycling program instituted by the Town of Groton over 20 years ago. This program requires the separation of all recyclable materials prior to disposal at the Town landfill. Solid Waste: The City provides its residents with curbside pickup for solid waste and disposes of the solid waste at a nearby regional resource recovery facility. Pollution Abatement: Wastewater treatment services are provided via a 4.1 MGD secondary treatment plant and 9 pump stations. The City is 99.9% sewered and serves residential, commercial, and industrial users. The City Pollution Abatement Facility (PAF) serves a population of approximately 10,000. The operation of the PAF is the responsibility of the Director of Utilities who reports to the Water Pollution Control Authority which is comprised of the Mayor and City Council. Recreation: Under the direction of a full-time Director of Parks and Recreation, the City offers full summer and winter recreation programs at Washington Park (30.4 acres) and Eastern Point Beach (9.4 acres). Programs run from sports activities to education trips. The City has a Parks Maintenance Department, comprised of 3 employees, which performs all maintenance. In addition there is a full time secretary who services both the recreation and parks divisions. Groton Utilities Department: A Board of Utilities Commissioners, consisting of the Mayor as Chairperson and four Commissioners, makes all operating policy decisions for the three divisions of Groton Utilities: water, electric and cable television. This Board was created under the City Charter; the four Commissioners are appointed for four-year staggered terms by the Mayor and Council. The Director of Utilities reports to the Mayor and is responsible for carrying out the policies of the Board. Water Division: The same group of citizens residing in Groton Bank that formed the Groton Electric Lighting Company in the early 1890 s also formed the Groton Water Company and invested about $100,000 to purchase a small dam and a pond of water in Poquonnock Bridge and to install a water main, standpipe, and pumping station. In 1904 when the Borough of Groton was created, these facilities were purchased from the Company by the Borough. On July 1, 1996, the City acquired from the Southeastern Connecticut Water Authority (SCWA) its Bel-Aire service area for the aggregate purchase price of $700,000. On June 5, 2000, the City Council authorized the formation of Thames Valley Water Bottling Company, DBA Mattatuck Spring Water, a Connecticut taxable stock corporation to be wholly-owned by the City for the purpose of purchasing all the assets and the business and the assumption of specific liabilities of the Manitock Spring Water Company, Inc., a bottled water business. On November 3, 2003, the electors and qualified citizens of the City of Groton authorized the Mayor or the President of Thames Valley Bottling Water Company, Inc., to enter into (1) an Agreement for the sale of the business known as Manitock Spring Water Company to Crystal Rock Water Company, excluding the real estate owned by the company, and (2) for the sale of substantially all of the assets of the business which included the accounts receivable and the assumption by the buyer of outstanding vehicle leases, 12

18 together with a short term lease of the premises. The sale yielded a return greater than fifteen percent (15%) on the original investment excluding future sale of the real estate. The Water Division maintains its tradition of water quality and continues to look for ways to improve it. The Division is in 100 percent regulatory compliance. The Division purchased and became certified on new highly sophisticated laboratory equipment. In addition, the Water Division recently upgraded its Supervisory Control and Data Acquisition (SCADA) System to operate over radio frequencies to improve reliability of system wide communications. A new Utilities Operations Complex was completed in the fall of The complex includes offices for the Project Management sections for both the Water and Electric Divisions, facilities for the Water Division s Operations section, a garage for Water Division vehicles, a work shop area, and administrative offices. The project was funded by the Water Bond Funds at a cost of $1,364,500. From its modest beginning with a water system capacity of approximately 1,000 gallons per day, Groton developed a water system which consists of approximately 150 miles of pipe and has the capacity to pump up to 14,000,000 gallons of water each day. The Water Department operates the water treatment plant and during the past fiscal year, pumped an average of 6.0 million gallons of treated water per day to approximately 6,700 metered customers. These metered customers represent a population of more than 40,000 persons in the City of Groton, parts of the Town of Groton, Groton Long Point, the Noank Fire District, all of the Town of Montville including a portion of the Mohegan Sun Casino, a section of the Town of Ledyard along with large industrial users such as Pfizer, Inc., the Electric Boat Division of General Dynamics Corporation, and the United States Submarine Base and its housing complexes. In addition, the City of Groton recently entered into an agreement with the Town of Ledyard for the sale of up to 350,000 gallons of water per day to service Ledyard s Route 117 corridor. A pump station in the Town of Montville was constructed in the Town of Montville to provide water from the Montville system to the Mohegan Sun Resort Casino; the City of Groton is delivering.8 to 1 million gallons of water per day to Montville at the present time. Delivery of approximately 1.7 million gallons per day is reserved for the Town of Montville and its major customers: the Mohegan Sun Resort and Corrigan-Radgowski Correctional Facility. A Regional Water Line Interconnection under the Thames River has been completed. In conjunction with the interconnection, two water standpipes (water tanks) have also been constructed: the first tank is located in the Town of Waterford (1.5 million gallons) and the second tank is located in the Town of Ledyard (1.25 million gallons). This water transmission line allows the connection of water systems and municipalities on both sides of the river Electric Division: The Groton Electric Lighting Company was established in the early 1890 s to provide street lighting of the main streets of the then Groton Bank. In 1904, following the adoption of a charter from the Connecticut legislature, the Borough of Groton was created, providing for, among other things, a Department of Utilities which immediately sold notes to purchase the facilities of the Groton Electric Company. On May 5, 1995, the City acquired all of the issued and outstanding capital stock of Bozrah Light and Power Company, now a wholly-owned subsidiary of the City of Groton, at an aggregate purchase price of $4,700,000, pursuant to an Agreement and Plan of Merger, dated December 23, 1994, by and among the City, Groton Acquired Corporation, a wholly-owned subsidiary of the City, and Bozrah Light and Power Company ( BL&P). The Board of Directors of BL&P consists of the City of Groton Board of Utilities Commissioners. The City, by ordinance, has established the Bozrah Utilities Commission consisting of the City of Groton Board of Utilities Commissioners and four other persons designated by the Towns of Bozrah and Lebanon. Annual sales currently exceed $20.8 million. The Electric Department is operated by the Director of Utilities under the direction of a Board of Utilities Commissioners. The electric energy is purchased from the Connecticut Municipal Electric Energy Cooperative, of which the City of Groton is a member. The Department serves approximately 16,400 customers in two-thirds of the Town of Groton which includes the City of Groton, Poquonnock Bridge, Groton Center, Pleasant Valley, and Groton Long Point areas. The Department also sells electric power at wholesale to the Fishers Island, New York, Electric Corporation. The Department s three largest customers are the Electric Boat Division of General Dynamics Corporation, Pfizer, Inc., and the United States Submarine Base. The Electric Division continues to upgrade and improve its infrastructure to increase service reliability, increase capacity for future load growth and provide its customers with a high level of service. Costs associated with the 13

19 Electric Division s infrastructure improvement projects have been approved by the Utility Commission, City Council and the Freemen in the form of the 2001, 2002 and 2005 Electric Bond Funds. The 2005 Bond Fund program calls for the rebuilding of two of the Electric Boat Substations, continued infrastructure and pole replacements, the constructing of fiber optic connection between all electric substations to improve switching reliability and facilitate SCADA coordinating, and rebuilding of the 115 KV portion of the main transmission feeder substation. Demand for power is projected to increase throughout Groton Utilities service area. In order to meet this demand, the distribution voltage throughout the service area will be increased from the present voltage of 8.32 kv to 13.8 kv. By increasing the voltage of the distribution system, primary conductors will be capable of distributing more power, more effectively. The entire conversion project is scheduled to take seven years to complete. Total operating revenues for fiscal year ended June 30, 2008 were $71,747,273. The Electric Division returned $2,835,900 to the City of Groton s general fund during the same fiscal period. Cable Television Division: The City of Groton, through its Groton Utilities Department, has invested time and money in the development of a broadband (cable television and internet services) business. The new enterprise enhances the value of services provided to the Groton Utilities customers and improves its financial stability. The broadband business means Groton Utilities now offers cable television, high speed data transmission and internet services, including telephone services to its businesses, municipalities, education communities and the general public. The Groton City Council authorized the formation of Thames Valley Communications, Inc., a Connecticut taxable stock corporation to be wholly-owned by the City, and approved a total of $6.9 million for the development of this new enterprise. An additional $28.5 million has since been approved for further development of this enterprise. On January 1, 2004, the Connecticut Department of Public Utilities issued Thames Valley Communication, Inc. its Franchise Agreement to operate as a cable television company for a period of nine (9) years. The Division recently signed its 8,390 th customer up for service. CITY EMPLOYEES The following table illustrates the permanent full and part-time City employees for the last five fiscal years: Fiscal Year Total Includes seasonal employees. The following is a breakdown by category of the City s current full-time and permanent part-time employees: Department Non-Bargaining Bargaining Municipal: Administration 8 5 Police Fire 2 14 Public Works WPCA 0 6 Parks & Recreation Total Utilities: Administration Engineering 0 9 Water 2 29 Electric Total Includes seasonal employees. Source: Director of Finance, City of Groton 14

20 MUNICIPAL EMPLOYEE BARGAINING UNITS Positions Current Contract Bargaining Groups Covered Expiration Date Water Division/Water Pollution Control Authority - United Steel Workers Association - Local June 30, 2010 Highway, Parks and Recreation - United Steel Workers Association - Local June 30, 2010 Fire - International Association of Firefighters Local 1964A 14 June 30, Utilities - AFSCME Local Utilities Employees 12 September 30, 2009 Police - United Electrical Local 222-P8, CILU-CIPU 29 June 30, 2012 Supervisors, Utilities - Groton Utilities Supervisor Employee Association AFSCME Local September 30, 2010 City Hall - Connecticut State Employee Association 8 June 30, 2010 Utilities - AFSCME Local Utilities Employees 33 September 30, In Negotiation. Source: City of Groton. Connecticut General Statutes Sections 7-473c, 7-474, and a to n provide a procedure for binding arbitration of collective bargaining agreements between municipal employers and organizations representing municipal employees, including certified teachers and certain other employees. The legislative body of an affected municipality may reject an arbitration panel's decision by a two-thirds majority vote. The State and the employee organization must be advised in writing of the reasons for rejection. The State will then appoint a new panel of either one or three arbitrators to review the decisions on each of the rejected issues. The panel must accept the last best offer of either party. In reaching its determination, the arbitration panel shall give priority to the public interest and the financial capability of the municipal employer, including consideration of other demands on the financial capability of the municipal employer. For binding arbitration of teachers contracts, in assessing the financial capability of a municipal entity, there is an irrefutable presumption that a budget reserve of 5% or less is not available for payment of the cost of any item subject to arbitration. In the light of the employer's financial capability, the panel considers prior negotiations between the parties, the interests and welfare of the employee group, changes in the cost of living, existing employment conditions, and the wages, salaries, fringe benefits, and other conditions of employment prevailing in the labor market, including developments in private sector wages and benefits. 15

21 III. ECONOMIC AND DEMOGRAPHIC INFORMATION POPULATION AND DENSITY Year Population % Increase Density , % 3, ,4 9,288 (5.6) 3, ,837 (2.5) 3, , , , , , ,407 1 Per square mile: 3.06 square miles. 2 Represents approximately 25.1% of the Town of Groton s population as published by the Connecticut Department of Health Services, Estimate U.S. Department of Commerce, Bureau of Census, 2000, City of Groton. Population numbers for the City were not previously reported separately. 4 In October 2003, the City received a letter from the U.S. Department of Commerce, Bureau of Census revising the population from 10,010 to 9, Represents approximately 22% of the Town of Groton s population as published by the U.S. Department of Commerce, Bureau of Census, AGE DISTRIBUTION OF THE POPULATION City of Groton State of Connecticut Number Percent Number Percent Under % 223, % , % 702, % , % 1,220, % , % 789, % % 405, % 85 and over % 64, % Totals 10, % 3,405, % Median Age (years) In October 2003, the City received a letter from the U.S. Department of Commerce, Bureau of Census revising the population from 10,010 to 9,288. Source: U.S. Department of Commerce, Bureau of Census, INCOME DISTRIBUTION City of Groton State of Connecticut Families Percent Families Percent $ 0 - $ 9, % 33, % 10,000-14, % 23, % 15,000-24, % 63, % 25,000-34, % 75, % 35,000-49, % 120, % 50,000-74, % 198, % 75,000-99, % 141, % 100, , % 132, % 150, , % 42, % 200,000 and over % 54, % Totals 2, % 885, % Source: U.S. Department of Commerce, Bureau of Census,

22 INCOME LEVELS City of State of Groton Connecticut Per Capita Income, $22,239 $28,776 Per Capita Income, ,454 20,189 Per Capita Income, ,008 8,598 Median Family Income, $43,859 $65,521 Median Family Income, ,897 49,199 Median Family Income, ,394 23,151 Percent Below Poverty Level, % 7.9% Source: 1 U.S. Department of Commerce, Bureau of Census, U.S. Department of Commerce, Bureau of Census, 1990, 1980, for the Town of Groton. Data unavailable for City of Groton prior to EDUCATIONAL ATTAINMENT Years of School Completed Age 25 and Over City of Groton State of Connecticut Number Percent Number Percent Less than 9th grade % 132, % 9th to 12th grade % 234, % High School graduate 2, % 653, % Some college, no degree 1, % 402, % Associate's degree % 150, % Bachelor's degree % 416, % Graduate or professional degree % 304, % Totals 6, % 2,295, % Total high school graduate or higher (%) Total bachelor's degree or higher (%) Source: U.S. Department of Commerce, Bureau of Census, % 84.0% 18.8% 31.4% MAJOR EMPLOYERS As of September 2009 Estimated Number Employer Product of Employees General Dynamics, Electric Boat Division Submarines 7,800 Pfizer, Inc Pharmaceuticals 4,000 1 Information from website: 2 Pfizer is currently renovating its Groton location to accommodate an estimated 1,000 new employees from the Wyeth merger. 1,2 17

23 EMPLOYMENT BY INDUSTRY City of Groton State of Connecticut Sector Number Percent Number Percent Agriculture, forestry, fishing and hunting, and mining % 7, % Construction % 99, % Manufacturing... 1, % 246, % Wholesale Trade % 53, % Retail Trade % 185, % Transportation and warehousing, and utilities % 64, % Information % 55, % Finance, insurance, real estate, and rental and leasing % 163, % Professional, scientific, management, administrative and waste management services % 168, % Educational, health and social services % 366, % Arts, entertainment, recreation, accommodation and food services 1, % 111, % Other services (except public administration) % 74, % Public Administration % 67, % Total Labor Force, Employed 4, % 1,664, % Source: U.S. Department of Commerce, Bureau of Census, EMPLOYMENT DATA 1 Town of Groton Percentage Unemployed Town of New London State of Period Employed Unemployed Groton Labor Market Connecticut July ,571 1, % 7.4% 8.0% June ,201 1, May ,939 1, March ,733 1, January ,779 1, Annual Averages ,470 1, % 5.5% 5.7% , , , , , , , , , Information not available for the City of Groton. 2 Not seasonally adjusted. Source: Department of Labor, State of Connecticut.. 18

24 AGE DISTRIBUTION OF HOUSING City of Groton State of Connecticut Year Built Units Percent Units Percent 1939 or earlier 1, % 308, % 1940 to , % 571, % 1970 to % 203, % 1980 to % 183, % 1990 to March, % 119, % Total housing units, , % 1,385, % Percent Owner Occupied, % 66.8% Source: U.S. Department of Commerce, Bureau of Census, HOUSING INVENTORY City of Groton State of Connecticut Type Units Percent Units Percent 1 unit detached 1, % 816, % 1 unit attached % 71, % 2 to 4 units 1, % 246, % 5 to 9 units % 76, % 10 or more units % 162, % Mobile home, trailer, other 6 0.1% 12, % Total Inventory 4, % 1,385, % 1 In October 2003, the City received a letter from the U.S. Department of Commerce, Bureau of Census revising the Housing Inventory Units from 4,547 to 4,569. Source: U.S. Department of Commerce, Bureau of Census, OWNER-OCCUPIED HOUSING VALUES City of Groton State of Connecticut Specified Owner-Occupied Units Number Percent Number Percent Less than $50, % 5, % $50,000 to $99, % 85, % $100,000 to $149, % 212, % $150,000 to $199, % 156, % $200,000 to $299, % 137, % $300,000 to $499, % 79, % $500,000 to $999, % 38, % $1,000,000 or more 6 0.4% 13, % Totals 1, % 728, % Median Sales Price Median Sales Price 1 1 Median Sales Price, The Warren Group, Source: U.S. Department of Commerce, Bureau of Census, $124,300 $166,900 $225,000 $300,640 19

25 BUILDING PERMITS Fiscal Year Residential Commercial/Industrial All Other 1 Total Ending 6/30 Number Value Number Value Number Value Number Value $2,717, $33,642, $36,644,878 1,215 $73,005, ,879, ,501, ,279, ,661, ,220, ,425, ,647,048 1,333 27,292, ,198, ,630, ,649,743 1,478 21,478, ,085, ,261,969 1,220 7,179,444 1,450 17,526, ,184, ,629, ,677,176 1,005 41,490, ,702, ,593, ,584, ,880, ,043, ,523, ,255, ,821, ,767, ,447, ,020, ,235,621 1 All Other represents the number of electrical, plumbing, heating, air conditioning, and sprinkler permits which, while technically a part of the building permit, are paid separately and, therefore, are not included in the figures for residential and non-residential building permits. Source: Building Department, City of Groton. 20

26 IV. TAX BASE DATA ASSESSMENTS The City of Groton lies entirely within the Town of Groton and accounts for approximately 33.1% of the Town s Grand List as of October 1, The Town of Groton had a general property revaluation effective October 1, Under Section of the General Statutes, as amended in 2006, the Town must do a revaluation every five years and the assessor must fully inspect each parcel, including measuring or verifying the exterior dimensions of a building and entering and examining the interior of the building, once every ten years. Section also imposes a penalty on municipalities that fail to effect revaluations as required, with certain exceptions. Municipalities may chose to phase-in real property assessment increases resulting from a revaluation, but such phase-in must be implemented in less than five assessment years. The Town did phase-in assessment increases from the most recent revaluation over a period of three years. Public Act allows a municipality not to implement a revaluation for the 2008, 2009 and 2010 assessment years upon approval of its legislative body. In addition, any municipality that is currently in the process of phasing in a real property assessment increase, or a portion of such increase, may suspend such phase-in for a period of time, but not later than the 2011 assessment year. Any required revaluation subsequent to any delayed revaluation shall re-commence at the point in the schedule required prior to such delay. The maintenance of an equitable tax base, and the location and appraisal of all real and personal property within the Town and City of Groton for inclusion onto the Grand List are the responsibilities of the Town s Assessor s Office. The Grand List represents the total of assessed values for all taxable real and personal property and motor vehicles located within the Town and City on October 1. A Board of Assessment Appeals determines whether adjustments to the Assessor s list on assessments under appeal are warranted. Assessments for real property are computed at 70 percent of the estimated market value at the time of the last general revaluation. When a new structure or modification to an existing structure is undertaken, the Assessor's Office receives a copy of the permit issued by the Building Inspector. A physical inspection is then completed and the structure classified and priced from a schedule developed at the time of the last revaluation. Property depreciation and obsolescence factors are also considered when arriving at an equitable value. All personal property (furniture, fixtures, equipment, and machinery) is valued annually. An assessor s check and audit is completed periodically. Assessments for personal property are computed at 70 percent of present value. Motor vehicle lists are furnished to the City by the State of Connecticut Department of Motor Vehicles and appraisals of motor vehicles are valued in accordance with an automobile price schedule recommended by the State of Connecticut Office of Policy and Management. Section 12-71b of the Connecticut General Statutes provides that motor vehicles which are registered with the Commissioner of Motor Vehicles after the October 1 assessment date but before the next August 1 are subject to a property tax as if the motor vehicle had been included on the October 1 Grand List. The tax is prorated, and the proration is based on the number of months of ownership between October 1 and the following July 31. Motor vehicles purchased in August and September are not taxed until the next October 1 Grand List. If the motor vehicle replaces a motor vehicle that was taxed on the October 1 Grand List, the taxpayer is entitled to certain credits. Assessments for motor vehicles are computed at 70 percent of the annual appraisal of market value. PROPERTY TAX COLLECTION PROCEDURES Taxes for the fiscal year are levied on the grand list of the prior October 1. Real estate and personal property taxes are payable in two installments, on July 1 and January 1. Motor vehicle taxes are due in one installment on July 1 with supplemental bills payable in full on January 1. Payments not received by August 1 and February 1, respectively, become delinquent, with interest charged at the rate of 1.50% per month from the due date of the tax. In accordance with State law, the oldest outstanding tax is collected first. Outstanding real estate tax accounts are liened each year prior to April 30 with legal demands and alias tax warrants used in the collection of personal property, motor vehicle and real estate tax bills. Delinquent motor vehicle and personal property accounts are transferred to a suspense account when deemed uncollectable at which time they cease to be carried as receivables. Real estate accounts are transferred to suspense 15 years after the due date in accordance with State Statutes. 21

27 COMPARATIVE ASSESSED VALUATIONS Grand List Real Personal Motor Gross Taxable Less Net Taxable % of 10/1 Property (%) Property (%) Vehicle (%) Grand List Exemptions 1 Grand List Growth % 27.4% 2.7% $1,584,601,970 $226,075,864 $1,358,526, % ,586,943, ,578,873 1,305,364, % ,574,656, ,337,885 1,176,318, % ,341,310, ,035,200 1,045,275, % ,366,836, ,466, ,370, % ,347,356, ,262, ,093, % ,304,911, ,544, ,366, % ,240,348, ,733, ,614, % ,183,047, ,486, ,560, % ,037,792, ,796, ,996, % 1 Connecticut General Statutes Section (72) exempts new manufacturing equipment from property taxation by municipalities. The State of Connecticut will directly reimburse the City for 80% of the foregone taxes effective for the City s October 1, 2000 Grand List. 2 Revaluation year. Data shown reflects a three year phase-in of real estate properties beginning October 1, Revaluation year. Source: Assessor's Office, Town of Groton. PROPERTY TAX LEVIES AND COLLECTIONS Uncollected Percent Percent Percent Grand Fiscal Year Net Annual Levy Annual Levy Annual Levy List of Year Taxable Mill Adjusted Collected End of Uncollected Uncollected 10/1 Ending 6/30 Grand List Rate Levy Fiscal Year End of Fiscal Year as of 6/30/ $1,358,526, $5,535,211 -To Be Collected 7/1/09-1/1/ ,305,364, ,537,940 -Unaudited ,176,318, ,192, % 0.9% 0.9% ,045,275, ,148, % 0.9% 0.3% ,370, ,680, % 0.7% 0.1% ,093, ,457, % 1.0% 0.0% ,366, ,420, % 1.1% 0.0% ,614, ,244, % 1.1% 0.0% ,560, ,773, % 1.2% 0.0% ,996, ,730, % 1.2% 0.0% Source: Tax Collector's Office, City of Groton. TEN LARGEST TAXPAYERS 1 Assessed Percent of Net Name of Taxpayer Nature of Business Valuation Taxable Grand List Pfizer, Inc... Pharmaceutical Mfg/ R&D $578,707, % Electric Boat Corp Submarine Mfg/ R&D 187,461, % Groton Estates LLC Colonial Manor Apartments 13,066, % Branford Manor Associates Branford Manor Apartments 10,101, % CSC Outsourcing, Inc Computer Sciences Corp 9,185, % The North South Harbor Ltd Partnership Apartments 7,990, % Amerada Hess Corporation Petroleum Products Mfg/ Dist. 6,295, % Ansonia Acquisitions I LLC Apartments 5,271, % Groton Townhouse Apartments LLC Apartments 4,739, % Bishops Court LLC Apartments 3,751, % Total $826,570, % 1 Based on a 10/1/08 Net Taxable Grand List of $1,358,526,10. Source: Assessor's Office, City of Groton. 22

28 FISCAL YEAR V. FINANCIAL INFORMATION The City s fiscal year begins July 1 and ends June 30. ACCOUNTING POLICIES The financial statements of the City of Groton, Connecticut have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) as applied to government units. The Governmental Accounting Standards Board (GASB) is the accepted standard setting body for establishing governmental accounting and financial reporting principles. The City has changed its financial reporting to comply with GASB Statement No. 34 beginning with its financial report for Fiscal Year ended June 30, Please refer to Appendix A Notes to Basic Financial Statements herein for compliance and implementation details. The new reporting model includes the following segments: Management s Discussion and Analysis provides summary information on basic financial statements and an analytical overview of the City s financial activities. Government-wide financial statements consist of a statement of net assets and a statement of activities, which are prepared on the accrual basis of accounting. These statements distinguish between governmental activities and business-type activities and exclude fiduciary (employee retirement system). Capital assets, including infrastructure and long-term obligations are included along with current assets and liabilities. Fund financial statements provide information about the City s governmental, proprietary and fiduciary fund. These statements emphasize major fund activity and, depending on the fund type, utilize different basis of accounting. Required supplementary information in addition to the MD&A, the schedule of funding progress for the Groton Retirement System is presented. Please refer to Appendix A ( Notes to Basic Financial Statements ) herein for measurement focus and basis of accounting of the government-wide financial statements as well as the fiduciary fund financial statements of the City of Groton. BUDGETARY PROCEDURES The Charter requires all agencies of the City to submit requests for appropriations to the Mayor on or before the second Monday in March of each year. The budget is prepared for the General Fund by function and activity within departments, and includes information on the past year, current-year estimates, and requested appropriations for the next fiscal year. The Mayor submits a proposed budget to the City Council for review on the first Monday in April. The City Council may only consider the proposed budget and make recommendations. Subsequent to publication of the proposed budget, a Public Hearing is held on the third Monday in May to solicit comments from the citizens of the City. An Annual City Budget Meeting is held on the first Monday in June for adoption of the City s Annual Budget. The budget for the ensuing fiscal year may be reduced by a majority vote of the citizens. The mill rate is also set at the Annual City Budget Meeting. ANNUAL AUDIT Pursuant to Connecticut law, the City is required to undergo an annual examination by an independent certified public accountant. The audit must be conducted under the guidelines issued by the State of Connecticut, Office of Policy and Management and a copy of the report must be filed with such Office within six months of the end of the fiscal year. For the fiscal year ended June 30, 2008, the examination was conducted by the firm of Kostin, Ruffkess & Company, LLC, independent certified public accountants, of Farmington, Connecticut. 23

29 Certificate of Achievement for Excellence in Financial Reporting: The Government Finance Officers Association of the United States and Canada (GFOA) has awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Groton for its Comprehensive Annual Financial Reports for the eighteenth consecutive year. The Certificate of Achievement is a prestigious national award recognizing conformance with the highest standards for preparation of state and local government financial reports. In order to be awarded a Certificate of Achievement, a government unit must publish an easily readable and efficiently organized comprehensive annual financial report. The comprehensive annual financial report must satisfy both generally accepted accounting principles and applicable legal requirements. PENSION PLAN The City of Groton is the administrator of a single-employer, contributory, defined benefit plan established and administered by the City to provide pension benefits for its employees. The plan covers all City employees. Employees are fully vested after five years of service, except Police, Firefighters and Utility (GUSEA) union are vested after ten years of service. If an employee leaves covered employment or dies before being vested, accumulated employee contributions and related investment earnings are refunded. Benefits and contributions are established by Collective Bargaining and may be amended only by the City Council. Please refer to Exhibit L Note IV D in the attached Notes to Basic Financial Statements included herein in Appendix A for additional information of the City s plan. OTHER POST EMPLOYMENT BENEFITS The City provides health and life insurance coverage to retirees based on collective bargaining agreements; the retirees contribution toward this coverage also varies based on collective bargaining agreements. The health insurance coverage consists of hospitalization, medical, surgical and major medical with various limits. The life insurance coverage consists of various limits computed based upon each $1,000 of salary. The following is coverage provided, number of employees and costs as of June 30, 2007: Number of Employees Cost Health Insurance: Age 62 to $146,917 Age 65 and over 19 97,393 Life Insurance 88 12,241 Total Post Retirement Benefits Cost $256,551 These amounts are funded on an annual basis by General Fund appropriation. A recent Actuarial Valuation of Post-Retirement Medical/Life Benefits as of July 1, 2007 and for Fiscal Year reflects the following: "PayGo" Cost ARC - "PayGo" Cost 1 City $93,000 $163,900 Utility 201, ,300 Police 24, ,800 Fire 53,800 57,700 Total $372,800 $660,700 1 Since the pay-go cost reflects benefit payments currently being paid by the City, the cash impact of funding an OPEB trust is the ARC (calculated on a funded plan basis) less the benefit payments that will be paid from that trust. Source: Hooker and Holcombe, Inc., June On September 1, 2008, the City approved a resolution for the transfer of the City s contributions into an irrevocable trust fund dedicated to providing benefits to retirees. A transfer of $650,000 from the City s Health Plan Fund, in the Internal Service Funds, will provide the initial funding for this new Trust Fund. 24

30 INVESTMENT POLICIES AND PRACTICES The City Charter and Sections and of the Connecticut General Statutes govern the investments the City is permitted to acquire. Generally, the City may invest in certificates of deposit, municipal bonds and notes, obligations of the United States of America, including joint and several obligations of the Federal Home Loan Mortgage Association, the Federal Savings and Loan Insurance Corporation, obligations of the United States Postal Service, all the Federal Home Loan Banks, all Federal Land Banks, the Tennessee Valley Authority, or any other agency of the United States government, and money market mutual funds. The City of Groton s investment practices are in compliance with its Charter and the Connecticut General Statutes. The City s investment policies and investments related to the City s Retirement and Deferred Compensation Funds are available upon request to the Director of Finance. 25

31 GENERAL FUND REVENUES AND EXPENDITURES Summary of Audited Revenues and Expenditures (GAAP Basis) Budget Budget Actual Actual Actual Actual Actual REVENUES: Property Taxes $5,557,211 $5,559,940 $5,220,845 $5,253,193 $4,762,481 $4,487,668 $4,673,090 Licenses and permits 304, , Intergovernmental 5,340,986 5,348,254 4,947,401 4,851,151 5,206,856 4,891,188 4,963,567 Charges for Services 128, ,300 1,754,220 1,274,518 1,342,932 1,340,509 1,104,094 Inderpedartmental 3,741,854 3,717, Miscellaneous. 245, , , , , , ,852 Transfers in 808, , ,835,900 2,465,034 2,143,508 1,863,920 1,620,819 Total Revenues and Transfers In $16,126,061 $16,236,847 $15,168,092 $14,169,449 $13,789,083 $12,790,512 $12,482,422 EXPENDITURES: Current: General Government $1,727,967 $1,976,120 $1,433,598 $1,448,768 $1,258,889 $1,158,978 $1,063,159 Public Safety 7,314,165 7,216,829 6,770,864 6,787,229 6,144,847 5,826,522 5,337,595 Public Works 4,721,278 4,755,148 3,858,879 3,791,862 3,734,613 3,545,589 3,462,357 Parks & Recreation 1,037, , , , , , ,607 Non Departmental 106, ,305 54,665 64,105 38,697 46,675 58,142 Contingency 115, , Debt Service: Bond Principal 946, , , , , , ,600 Bond and Note Interest 157, , , , , , ,007 Transfers Out , , , , ,663 Total Expenditures and Transfers Out $16,126,061 $16,236,847 $14,667,987 $14,142,066 $13,317,780 $12,561,189 $12,061,130 Results from Operations 4 $500,105 $27,383 $471,303 $229,323 $421,292 Fund Balance, July 1 $3,462,429 $3,435,046 $2,963,743 $2,734,420 $2,313,128 Fund Balance, June 30 $3,962,534 $3,462,429 $3,435,046 $2,963,743 $2,734,420 1 Budgetary basis. 2 Includes $690,208 appropriated from prior years surplus in fiscal year Includes $808,410 appropriated from prior years surplus in fiscal year City officials anticipate that revenues and transfers in will exceed expenditures and transfers out by approximately $600,000 for Fiscal Year ended June 30, The appropriation from prior years surplus was not used. The undesignated fund balance at July 1, 2009 is estimated at approximately $3.75 million. Source: Audit Reports ; Budgets 2009 and 2010 ANALYSIS OF GENERAL FUND EQUITY (GAAP BASIS) Budget Budget Actual Actual Actual Actual Actual Reserved for encumbrances/inventories N/A N/A $122,172 $33,609 $52,003 $26,793 $93,850 Designated for subsequent year 690, , , , ,026 Unreserved and Undesignated 3,150,154 2,769,282 2,808,146 2,157,856 2,170,544 Total Fund Balance N/A N/A $3,962,534 $3,462,429 $3,435,046 $2,963,743 $2,734,420 Undesignated Fund Balance As % of Total Expenditures 21.48% 19.58% 21.09% 17.18% 18.00% Source: Audit Reports ; Budgets 2009 and

32 STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS PROPRIETARY FUNDS GOVERNMENT WIDE BASIS Summary of Audited Operating Revenues and Expenses (GAAP Basis) Actual Actual Actual Actual Actual Operating Revenues $79,329,636 $78,157,925 $72,435,356 $57,689,518 $52,054,612 Operating Expenses Direct Expenses Purchased Power $57,717,013 $58,220,152 $52,462,561 $39,155,202 $35,329,058 Other 5,388,016 5,406,251 4,653,874 4,121,373 3,699,054 Overhead Expenses Customer account 1,725,105 1,426,448 1,213, , ,726 Administrative and general 6,657,450 6,704,099 6,206,914 6,105,880 5,593,047 Taxes 1,306,883 1,356,715 2,124,789 1,544,740 1,433,504 Depreciation 2,358,181 2,235,551 1,751,145 1,887,745 1,858,247 Total Operating Expenses $75,152,648 $75,349,216 $68,412,476 $53,799,764 $48,757,636 Operating Income $4,176,988 $2,808,709 $4,022,880 $3,889,754 $3,296,976 Non-operating Revenues (Expenses) Investment revenue $2,337,626 $2,138,106 $1,604,629 $1,136,522 $789,234 Other expense 59,173 0 (361,376) (9,335) (9,336) Interest expense (2,806,665) (2,411,064) (1,581,996) (1,589,125) (1,124,266) Net Non-operating Revenues (Exp.) ($409,866) ($272,958) ($338,743) ($461,938) ($344,368) Income before Operating Transfers 3,767,122 2,535,751 3,684,137 3,427,816 2,952,608 Transfers Out.. (2,835,900) (2,465,034) (2,143,508) (1,863,920) (1,620,819) Net Income (Loss) $931,222 $70,717 $1,540,629 $1,563,896 $1,331,789 Adjustment ,578 4,819 (46,881) Change in Net Assets $931,222 $70,717 $1,800,207 $1,568,715 $1,284,908 Net Assets - July 1 $44,896,201 1 $45,462,283 1 $43,856,668 $42,287,953 $41,003,045 Adjustment 510, ,202 Net Assets - June 30 $46,337,667 $45,981,202 2 $45,656,875 $43,856,668 $42,287,953 1 Restated. 2 Reflects consolidation of Internal Service Fund Activities. Source: Audit Reports DEBT SERVICE COVERAGE - GROTON UTILITIES Actual Actual Actual Actual Actual Gross Revenues $79,329,636 $78,157,925 $72,435,356 $57,689,518 $52,054,612 Operating Income 4,176,988 2,808,709 4,022,880 3,889,754 3,296,976 Income Average for Debt 6,535,169 5,044,260 5,774,025 5,777,499 5,155,223 Debt Service 4,188, ,035, ,236,496 3,477,525 3,017,666 Debt Service Coverage 1.56% 1.25% 1.78% 1.66% 1.71% 1 Excludes principal payments on the Thames Valley Communications, Inc.(TVC), a corporation wholly-owned by the City. Source: Audit Reports

33 VI. DEBT SUMMARY PRINCIPAL AMOUNT OF INDEBTEDNESS As of October 8, 2009 (Pro Forma) Long-Term Debt 1 - Bonds Debt Date of Original Outstanding Fiscal Year Date Purpose Rate % Issue As of 10/8/09 Maturity General Purpose 06/01/91 Various Improvements 6.61% $550,000 $54, /15/98 Various Refunding Bonds 3.82% 135,000 10, /15/98 Various Improvements 3.88% 925,000 70, /15/02 Various Improvements 3.93% 1,610, , /01/07 Various Improvements - Series A 3.97% 880, , /01/09 Various Improvements - Series A This Issue 1,725,000 1,725, /08/09 Gen. Purpose Refunding - Series B This Issue 849, , $6,674,000 $3,623,000 Sewers 06/01/91 Sewer Improvements 6.61% $360,000 $35, /15/93 Sewer Improvements 5.24% 470,000 80, /15/98 Sewers Refunding Bonds 3.82% 775,000 60, /15/98 Sewer Improvements 3.88% 3,010, , /15/03 Sewers Refunding Bonds 2.94% 1,385, , /15/06 Sewer Improvements - LOT A 3.89% 1,140, , /08/09 Sewer Refunding - Series B This Issue 665, , $7,805,000 $2,200,000 Enterprise - Self-Supporting Debt 06/01/91 Electric 6.61% $725,000 $71, /01/91 Water 6.61% 4,265, , /15/93 Electric 5.24% 2,335, , /15/93 Water 5.24% 2,715, , /15/98 Electric Refunding Bonds 3.82% 1,745, , /15/98 Water Refunding Bonds 3.82% 715,000 60, /15/98 Water 4.09% 1,990, , /15/02 Water 4.21% 1,315, , /15/02 Electric 4.21% 9,190, , /15/03 Water Refunding Bonds 3.14% 4,170,000 2,115, /15/03 Electric Refunding Bonds 3.14% 400, , /15/06 Electric - LOT A 3.89% 4,293,000 3,648, /15/06 Water - LOT A 3.89% 1,662,000 1,422, /15/06 Broadband - LOT B 5.46% 6,555,000 5,500, /01/07 Electric - Series A 3.97% 3,500,000 3,150, /01/07 Water - Series A 3.97% 1,490,000 1,340, /01/07 Broadband - Series B (Taxable) 5.78% 10,000,000 9,000, /01/09 Electric - Series A This Issue 5,800,000 5,800, /08/09 Water Refunding Bonds - Series B This Issue 1,656,000 1,656, /08/09 Electric Refunding - Series B This Issue 5,640,000 5,640, $70,161,000 $42,277,000 Total Long-Term Debt $84,640,000 $48,100,000 Short-Term Debt: Amount Previously Other Funds The Authorized/ Legal Renewable Project Authorized Bonded Applied Notes Unissued Limit Taxable 2007 Broadband Project $10,000,000 $0 $0 $10,000,000 $0 2/14/ Broadband Project 8,500, ,500, /11/2018 Total. $18,500,000 $0 $0 $18,500,000 $0 Other Long-Term Debt 1 Excludes the Refunded Bonds. None 28

34 ANNUAL BONDED DEBT MATURITY SCHEDULE 1 As of October 8, 2009 (Pro Forma) General Government Cumulative Percent Fiscal Year Series A Series B Principal Ending 6/30 Principal 1,2 Interest 2 Total 2 Bonds Bonds Retired 2010 $924,500 $157,758 $1,082,258 $29, % ,500 92, ,300 $115, , % ,000 73, , , , % ,000 38, , , , % ,000 28, , , , % ,000 20, , , , % ,000 12, , , , % ,000 5,100 90, , , % ,000 1,700 86, , , % , % , % , % , % , % , % , % Totals $2,789,000 $430,197 $3,219,197 $1,725,000 $1,514,000 1 Includes $205,000 in principal payments made in Fiscal Year Excludes the Refunded Bonds. Enterprise Fund Cumulative Percent Fiscal Year Series A Series B Principal Ending 6/30 Principal 1,2 Interest 2 Total 2 Bonds Bonds Retired 2010 $3,040,500 $1,766,486 $4,806,986 $71, % ,735,500 1,588,951 4,324,451 $290, , % ,505,000 1,454,533 3,959, , , % ,975,000 1,076,060 3,051, , , % ,720, ,060 2,695, , , % ,735, ,104 2,623, , , % ,730, ,491 2,390, , , % ,425, ,890 2,146, , , % ,425, ,190 2,076, , , % ,425, ,840 2,007, , , % ,425, ,028 1,939, , , % ,425, ,752 1,869, , , % ,425, ,640 1,799, , , % ,425, ,065 1,729, , , % ,425, ,028 1,658, , % ,050, ,778 1,211, , % ,050, ,590 1,160, , % ,000 59, , , % ,000 19, , , % , % , % Totals $30,431,000 $12,587,326 $43,018,326 $5,800,000 $7,296,000 1 Includes $1,250,000 in principal payments made in Fiscal Year Excludes the Refunded Bonds. 29

35 The City of Groton has no underlying debt. OVERLAPPING/UNDERLYING DEBT The City of Groton lies totally within the Town of Groton and consequently is considered overlapping to the Town. Town of Groton s net debt $47,470,797 (as of June 30, 2009 Unaudited) The City of Groton s overlapping portion 33.10% $15,712,834 Source: Finance Office, City of Groton. DEBT STATEMENT 1 As of October 8, 2009 (Pro Forma) LONG TERM DEBT Bonds: General Purpose (Including the Bonds) $3,623,000 Sewers(Including the Bonds) 2,200,000 Enterprise(Including the Bonds) 42,277,000 TOTAL LONG TERM DEBT: $48,100,000 SHORT TERM DEBT: ( Including The Notes) $18,500,000 TOTAL DIRECT DEBT $66,600,000 Less: Self-supporting Enterprise Bonds $42,277,000 Less: Self-supporting Enterprise Notes 18,500,000 NET DIRECT INDEBTEDNESS $5,823,000 NET OVERLAPPING DEBT Town of Groton as of 6/30/08 $ 15,712,834 TOTAL OVERALL NET DEBT $21,535,834 1 Does not include the authorized but unissued debt.. CURRENT DEBT RATIOS October 8, 2009* (Pro Forma) Population 1 10,623 Net Taxable Grand List - 70% of full value $1,358,526,106 Estimated Full Value $1,940,751,580 Equalized Net Taxable Grand List $2,060,078,037 Money Income per Capita $22,239 Total Total Net Total Overall Direct Debt Direct Debt Net Debt $66,600,000 $5,823,000 $21,535,834 Per Capita $6, $1, $3, Ratio to Net Taxable Grand List 4.90% 0.43% 1.59% Ratio to Estimated Full Value 3.43% 0.30% 1.11% Ratio to Equalized Grand List 3.23% 0.28% 1.05% Debt per Capita to Money Income per Capita 28.12% 7.94% 14.59% 1 State of Connecticut Department of Health Services, 2007 Estimate of Population. 2 Represents 35.4% of Town of Groton s Equalized Grand List as published by the Office of Policy and Management, State of Connecticut. 3 U.S. Department of Commerce, Bureau of Census,

36 BOND AUTHORIZATION The City of Groton has the power to incur indebtedness by issuing its bonds or notes as authorized by the General Statutes of the State of Connecticut subject to statutory debt limitations and the procedural requirements of the City Charter. Bond and note issues must be approved by the legal voters and electors of the City, except for refunding bonds, which only need to be approved by the City Council. TEMPORARY FINANCING When general obligation bonds have been authorized, bond anticipation notes may be issued maturing in not more than two years (CGS Sec ). Temporary notes may be renewed up to ten years from their original date of issue as long as all project grant payments are applied toward project costs or payment of temporary notes when they become due and payable and the legislative body schedules principal reductions by the end of the third year and for all subsequent years during which such temporary notes remain outstanding in an amount equal to a minimum of 1/20th (1/30th for sewer projects) of the estimated net project cost (CGS Sec a). The term of the bond issue is reduced by the amount of time temporary financing exceeds two years, or, for sewer projects, by the amount of time temporary financing has been outstanding. Temporary notes must be permanently funded no later than ten years from the initial borrowing date except for sewer notes issued in anticipation of State and/or Federal grants. If a written commitment exists, the municipality may renew the notes from time to time in terms not to exceed six months until such time that the final grant payments are received (CGS Sec b). Temporary notes may also be issued for up to fifteen years for certain capital projects associated with the operation of a waterworks system (CGS Sec a) or a sewage system (CGS Sec a). In the first year following the completion of the project(s), or in the sixth year (whichever is sooner), and in each year thereafter, the notes must be reduced by at least 1/15 of the total amount of the notes issued by funds derived from certain sources of payment. Temporary notes may be issued in one year maturities for up to fifteen years in anticipation of sewer assessments receivable, such notes to be reduced annually by the amount of assessments received during the preceding year (CGS Sec a). LIMITATION OF INDEBTEDNESS Municipalities shall not incur indebtedness through the issuance of bonds or notes which will cause aggregate indebtedness by class to exceed the following: General Purposes: School Purposes: Sewer Purposes: Urban Renewal Purposes: Pension Obligation Purposes: 2.25 times annual receipts from taxation 4.50 times annual receipts from taxation 3.75 times annual receipts from taxation 3.25 times annual receipts from taxation 3.00 times annual receipts from taxation In no case however, shall total indebtedness exceed seven times the base. Annual receipts from taxation, (the base, ) are defined as total tax collections (including interest, penalties and late payment of taxes and state payments for revenue loss under CGS Sections d and 7-528). The statutes also provide for exclusion from the debt limit calculation debt (i) issued in anticipation of taxes; (ii) issued for the supply of water, gas, electricity; for electric demand response; for conservation and load management; for distributed generation; for renewable energy projects; for the construction of subways for cables, wires and pipes; for the construction of underground conduits for cables, wires and pipes; for the construction and operation of a municipal community antenna television system; and for two or more of such purposes; (iii) issued in anticipation of the receipt of proceeds from assessments levied upon property benefited by any public improvement; (iv) issued in anticipation of the receipt of proceeds from State or Federal grants evidenced by a written commitment or for which allocation has been approved by the State Bond Commission or from a contract with the state, state agencies or another municipality providing for the reimbursement of costs but only to the extent such indebtedness can be paid from such proceeds; (v) issued for certain water pollution control projects; and (vi) upon placement in an escrow of the proceeds of refunding bonds, notes or other obligations or other funds of the municipality in an amount sufficient to provide for the payment when due of principal of and interest on such bond, note or other evidence of indebtedness. 31

37 STATEMENT OF STATUTORY DEBT LIMITATION As of October 8, 2009 (Pro Forma) TOTAL TAX COLLECTIONS (including interest and lien fees) received by the Treasurer for the year ended June 30, 2008 $5,201,200 REIMBURSEMENT FOR REVENUE LOSS ON: Tax Relief for Elderly 306 BASE... $5,201,506 General DEBT LIMITATION: Purposes Sewers 2¼ times base $11,703,389 3¾ times base $19,505,648 Total debt limitation $11,703,389 $19,505,648 INDEBTEDNESS: Bonds Payable 1 $3,623,000 $2,200,000 Notes Payable Authorized but Unissued Debt 2 697,500 0 TOTAL DIRECT INDEBTEDNESS 3,4 $4,320,500 $2,200,000 DIRECT NET INDEBTEDNESS $4,320,500 $2,200,000 DEBT LIMITATION IN EXCESS OF OUTSTANDING AND AUTHORIZED DEBT $7,382,889 $17,305,648 1 Excludes $42,277,000 in bonds and $18,500,000 in notes in outstanding water, electric and broadband project bonds and notes as allowed under Connecticut General Statutes. The repayment of this debt is supported totally by the respective Enterprise Funds. 2 Does not include $13,215,085 in authorized but unissued water and electric projects debt. An authorization of $18,000,000 for the construction of a natural gas line is also excluded. 3 Excludes overlapping debt of the Town of Groton. See Debt Statement page 30 herein. Also excludes Enterprise Funds Debt which is self-supporting. 4 Excludes the Refunded Bonds. Note: In no case shall total indebtedness exceed seven times annual receipts from taxation or $36,410,542. AUTHORIZED BUT UNISSUED DEBT 1 As of October 8, 2009 Debt Authorized but Unissued Bonded/ General Project Authorized Other Funds Purpose Sewers Total 1996 Beach & Park Improvements $1,500,000 $1,085,000 $415,000 $0 $415,000 Costa Property Acquisition 1,160, , , , Fire Dept Program 1,727,500 1,725,000 2, ,500 Totals $4,387,500 $3,690,000 $697,500 $0 $697,500 1 Does not include authorized but unissued water, electric, gas and broadband project debt to be repaid by the respective enterprise funds when issued. 32

38 PRINCIPAL AMOUNT OF OUTSTANDING DEBT 1 Last Five Fiscal Years Long-Term Debt 2009 Est Bonds $4,239,000 $5,169,500 $5,130,000 $5,990,500 $5,596,000 Short-Term Debt Bond Anticipation Notes 18,500,000 14,500, , Totals $22,739,000 $19,669,500 $6,010,000 $5,990,500 $5,596,000 1 Does not include self-supporting water, electric and broadband project bonds and notes, and overlapping debt reflected on page 30. Source: Annual Audited Financial Statements ; Estimate 2009 RATIO OF DIRECT DEBT TO VALUATION, POPULATION AND INCOME Ratio of Ratio of Direct Ratio of Direct Debt Fiscal Net Debt to Direct Debt Direct per Capita to Year Assessed Estimated Direct Assessed to Estimated Debt per Per Capita Ended 6/30 Value Full Value Debt 1 Value (%) Full Value (%) Population 2 Capita Income (%) Est. $1,305,364,628 $1,864,806,611 $22,739, % 1.22% 9,920 $2, % ,176,318,845 1,680,455,493 19,669, % 1.17% 9,920 1, % ,045,275,054 1,493,250,077 6,010, % 0.40% 9, % ,370,249 1,360,528,927 5,990, % 0.44% 10, % ,093,687 1,290,133,839 5,596, % 0.43% 10, % 1 Does not include self-supporting water, electric and broadband project debt and overlapping debt. 2 Represents 25.1% of population estimates for Town of Groton as published by the State of Connecticut, Department of Health Services. 3 Income per Capita: $22,239 City of Groton: U.S. Department of Commerce, Bureau of Census, RATIO OF ANNUAL DEBT SERVICE EXPENDITURES TO TOTAL GENERAL FUND EXPENDITURES AND TRANSFERS OUT 1 (GAAP Basis) Ratio of General Total Fund Debt Service Fiscal Year General Fund to Total General Ended 6/30 Principal Interest Total Expenditures Fund Expenditures % Est. $952,000 $195,035 $1,147,035 $16,236, % , ,355 1,074,372 14,667, % , ,668 1,090,406 14,142, % , , ,806 13,317, % , ,669 1,010,565 12,561, % , ,007 1,045,607 12,061, % 1 Does not reflect self-supporting water, electric and broadband project debt supported by the respective enterprise funds. Source: Annual Audited Financial Statements ; Estimate THE CITY OF GROTON HAS NEVER DEFAULTED IN THE PAYMENT OF PRINCIPAL OR INTEREST ON ITS BONDS OR NOTES. 33

39 VII. LEGAL AND OTHER LITIGATION LITIGATION The City of Groton, its officers, employees, boards and commissions, are parties in various lawsuits or proceedings. The City Attorney is of the opinion that pending litigation will not be finally determined so as to result individually or in the aggregate in a final judgment against the City which would have a materially adverse effect upon its financial position. UNDERWRITER Roosevelt & Cross, Incorporated (the Underwriter ) has agreed, subject to certain conditions, to purchase the Series A Bonds from the City at a net aggregate purchase price of $7,681, (consisting of the principal amount of $7,525,000, plus original issue premium of $182, and accrued interest of $4,362.97, less underwriter s discount of $30,100.) The Underwriter has agreed, subject to certain conditions, to purchase the Series B Bonds from the City at a net aggregate purchase price of $9,250, (consisting of the principal amount of $8,810,000, plus original issue premium of $475,993.75, less underwriter s discount of $35,240.) The Underwriter has agreed, subject to certain conditions, to purchase the Notes from the City at a net aggregate purchase price of $18,501,295 (consisting of the principal amount of 18,500,000, plus original issue premium of $25,900, less underwriter s discount of $24,605.) The Underwriter will be obligated to purchase all of such Bonds and Notes, if any such Bonds and Notes are purchased. The Underwriter may offer and sell the Bonds and the Notes to certain dealers (including unit investment trusts and other affiliated portfolios of certain underwriters and other dealers depositing the Bonds and the Notes into investment trusts) at prices lower than the public offering prices stated on the cover page of this Official Statement, and such public offering prices may be changed, from time to time, by the Underwriter. TRANSCRIPT AND CLOSING DOCUMENTS Upon delivery of the Bonds and the Notes, the Underwriter will be furnished with the following: 1. A Signature and No Litigation Certificate stating that at the time of delivery no litigation is pending or threatened affecting the validity of the Bonds and the Notes or the levy or collection of taxes to pay them. 2. A Certificate on behalf of the City signed by the Mayor and Director of Finance, which will be dated the date of delivery and attached to a signed copy of the Official Statement, and which will certify, to the best of said officials' knowledge and belief, that at the time the Contracts of Purchases for the Bonds and the Notes were executed, the descriptions and statements in the Official Statement relating to the City of Groton and its finances were true and correct in all material respects and did not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and that there has been no material adverse change in the financial condition of the City from that set forth in or contemplated by the Official Statement. 3. A receipt for the purchase price of the Bonds and the Notes. 4. The approving opinions of Robinson & Cole LLP, Bond Counsel, of Hartford, Connecticut substantially in the forms attached hereto as Appendices B-1, B-2 and B Executed Continuing Disclosure Agreements for the Bonds and Notes substantially in the forms attached hereto as Appendices C-1, C-2 and C Any other documents required by the Contract of Purchase. 7. The City of Groton Connecticut has prepared a final Official Statement for the Bonds and the Notes which is dated September 24, The City deems such Official Statement final as of its date for purposes of SEC Rule 15c2-12 (b)(i), but is subject to revision or amendment. 34

40 A transcript of the proceedings taken by the City in authorizing the Bonds and the Notes will be kept on file at the offices of U.S. Bank National Association, Corporate Trust Services, 225 Asylum Street, 23 rd Floor, Hartford, Connecticut and will be available for examination upon reasonable request. CONCLUDING STATEMENT This Official Statement is not to be construed as a contract or agreement between the City and the purchasers or holders of any of the Bonds and the Notes. Any statements made in this Official Statement involving matters of opinion or estimates are not intended to be representations of fact, and no representation is made that any of such opinion or estimate will be realized. No representation is made that past experience, as might be shown by financial or other information herein, will necessarily continue or be repeated in the future. Neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City since the date hereof. References to statutes, charters, or other laws herein may not be complete and such provisions of law are subject to repeal or amendment. Information herein has been derived by the City from various officials, departments and other sources and is believed by the City to be reliable, but such information, other than that obtained from official records of the City, has not been independently confirmed or verified by the City and its accuracy is not guaranteed. This Official Statement has been duly prepared and delivered by the City, and executed for and on behalf of the City by the following officials: CITY OF GROTON, CONNECTICUT By: By: /s/ Dennis L. Popp Dennis L. Popp, Mayor /s/ Michael S. Hillsberg Michael S. Hillsberg, Director of Finance September 24,

41 APPENDIX A - BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2008 Page Independent Auditor s Report 10 Management Discussion and Analysis 12 Basic Financial Statements Exhibits: Government-Wide Financial Statements: A Statement of Net Assets B Statement of Activities Fund Financial Statements: C D E Balance Sheet Governmental Funds and Reconciliation of Fund Balance to Net Assets of Governmental Activities Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities F Statement of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual General Fund G Statement of Net Assets Proprietary Funds H Statement of Revenue, Expenses and Changes in Fund Net Assets Proprietary Funds I Statement of Cash Flows Proprietary Funds J Statement of Fiduciary Net Asset K Statement of Changes in Fiduciary Net Assets L Notes to Basic Financial Statements Required Supplementary Information: Schedule of Funding Progress Groton Retirement System Appendix A Basic Financial Statements - is taken from the Annual Report of the City of Groton for the Fiscal Year ended June 30, 2008 as presented by the Auditors and does not include all of the schedules or management letter made in such report. A copy of the complete report is available upon request to the First Selectman, City of Groton, Connecticut. 36

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