$7,640, CITY OF BEDFORD, OHIO GENERAL OBLIGATION (Limited Tax) VARIOUS PURPOSE IMPROVEMENT AND REFUNDING BONDS, SERIES 2013

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1 NEW ISSUE; BOOK-ENTRY ONLY Ratings: Moody s: Aa2 Standard & Poor s: AA See Ratings In the opinion of Squire Sanders (US) LLP, Bond Counsel, under existing law: (i) assuming continuing compliance with certain covenants and the accuracy of certain representations, interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, and the Bonds are qualified tax-exempt obligations as defined in Section 265(b)(3) of the Internal Revenue Code of 1986, as amended; and (ii) interest on, and any profit made on the sale, exchange or other disposition of, the Bonds are exempt from the Ohio personal income tax, the Ohio commercial activity tax, the net income base of the Ohio corporate franchise tax, and municipal, school district and joint economic development district income taxes in Ohio. Interest on the Bonds may be subject to certain federal taxes imposed only on certain corporations including the corporate alternative minimum tax on a portion of that interest. For a more complete discussion of the tax aspects, see Tax Matters. $7,640, CITY OF BEDFORD, OHIO GENERAL OBLIGATION (Limited Tax) VARIOUS PURPOSE IMPROVEMENT AND REFUNDING BONDS, SERIES 2013 Dated: Date of Issuance The Bonds. The Bonds are unvoted general obligations of the City, issued to finance certain permanent improvements and to refund certain securities issued previously to finance permanent improvements, as described under Authorization and Purpose. Principal and interest, unless paid from other sources, are to be paid from the proceeds of the City s levy of ad valorem property taxes, which taxes are within the 10-mill limitation provided by the City Charter. Book-Entry Only. The Bonds will be initially issued only as fully-registered bonds, one for each maturity, issuable under a book-entry system, registered initially in the name of The Depository Trust Company or its nominee (DTC). There will be no distribution of Bonds to the ultimate purchasers. The Bonds in certificated form as such will not be transferable or exchangeable, except for transfer to another nominee of DTC or as otherwise described in this Official Statement. See Appendix E. Payment. (See Maturity Schedule on inside cover.) Principal and interest will be payable to the registered owner (DTC), principal upon presentation and surrender at the designated corporate trust office of U.S. Bank National Association (the Bond Registrar) and interest transmitted by the Bond Registrar on each interest payment date (June 1 and December 1 of each year, beginning December 1, 2013) to the registered owner (DTC) as of the 15th day preceding that interest payment date. Prior Redemption. Bonds maturing on or after December 1, 2022 are subject to optional redemption by the City prior to maturity, beginning December 1, 2021, and Term Bonds are subject to mandatory redemption, as described in this Official Statement. See Prior Redemption. The Bonds are offered when, as and if issued, subject to the opinion on certain legal matters relating to their issuance of Squire Sanders (US) LLP, Bond Counsel to the City. The Bonds are expected to be available for delivery to DTC or its agent on May 15, This Official Statement has been prepared by the City in connection with its original offering for sale of the Bonds. The Cover includes certain information for quick reference only. It is not a summary of the Bond issue. Investors should read the entire Official Statement to obtain information as a basis for making informed investment judgments. The date of this Official Statement is May 8, 2013, and the information herein speaks only as of that date.

2 PRINCIPAL MATURITY SCHEDULE ON DECEMBER 1 $6,960,000 SERIAL BONDS Year Amount Interest Rate Price CUSIP (a) No $265, % % UR , US , UT , UU , UV , UW , UX , UY , UZ , VA , VB , VC , VD , VE , VF , VG , VH , VJ , VK , VL4 $360, % TERM BONDS DUE 2034, Price % CUSIP (a) No VM2 $320, % TERM BONDS DUE 2038, Price % CUSIP (a) No VN0 (a) Copyright 2013, CUSIP Global Services (see Regarding This Official Statement).

3 CITY OF BEDFORD, OHIO CITY OFFICIALS City Manager: Henry J. Angelo Director of Finance: Frank. C. Gambosi Director of Law/Prosecutor: Kenneth A. Schuman, Esq. Director of Economic and Community Development: Michael S. Mallis Clerk of Council: Lorree Villers CITY COUNCIL Daniel S. Pocek, Mayor and President of Council Warner Batten, Ward 1 Stanley Koci, Ward 2 Marilyn B. Zolata, Ward 3 Paula Mizsak, Ward 4 Gregory Pozar, Ward 5 Donald A. Saunders, Ward 6 PROFESSIONAL SERVICES Bond Counsel: Bond Registrar: Underwriter: Squire Sanders (US) LLP U.S. Bank National Association Stifel, Nicolaus & Company, Incorporated Verification Agent: Causey Demgen & Moore P.C.

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5 REGARDING THIS OFFICIAL STATEMENT This Official Statement does not constitute an offering of any security other than the original offering of the Bonds identified on the Cover (as defined herein). No dealer, broker, sales person or other person has been authorized by the City to give any information or to make any representation other than as contained in this Official Statement, and if given or made, such other information or representation must not be relied upon as having been given or authorized by the City. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, and there shall not be any sale of the Bonds by any person, in any jurisdiction in which it is unlawful to make that offer, solicitation or sale. The information in this Official Statement is provided by the City in connection with the original offering of the Bonds. Reliance should not be placed on any other information publicly provided, in any format including electronic, by the City for other purposes, including general information provided to the public or to portions of the public. The information in this Official Statement is subject to change without notice. Neither the delivery of this Official Statement nor any sale made under it shall, under any circumstances, give rise to any implication that there has been no change in the affairs of the City since its date. This Official Statement contains statements that the City believes may be forwardlooking statements. Words such as plan, estimate, project, budget, anticipate, expect, intend, believe and similar terms are intended to identify forward-looking statements. The achievement of results or other expectations expressed or implied by such forward-looking statements involves known and unknown risks, uncertainties and other factors that are difficult to predict, may be beyond the City s control and could cause actual results, performance or achievements to be materially different from any results, performance or achievements expressed or implied by such forward-looking statements. The City undertakes no obligation, and does not plan, to issue any updates or revisions to such forward-looking statements. UPON ISSUANCE, THE BONDS WILL NOT BE REGISTERED BY THE CITY UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAW, AND WILL NOT BE LISTED ON ANY STOCK OR OTHER SECURITIES EXCHANGE. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER FEDERAL, STATE OR OTHER GOVERNMENTAL ENTITY OR AGENCY WILL HAVE AT THE REQUEST OF THE CITY PASSED UPON THE ACCURACY OR ADEQUACY OF THIS OFFICIAL STATEMENT OR APPROVED OR DISAPPROVED THE BONDS FOR SALE. CUSIP is a registered trademark of the American Bankers Association. CUSIP Global Services (CGS) is managed on behalf of the American Bankers Association by Standard & Poor s. CUSIP data herein are provided by Standard & Poor s, CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc. CUSIP numbers have been assigned by an independent company not affiliated with the City and are included solely for the convenience of the holders of the Bonds. The City, the Bond Counsel and the Underwriter are not responsible for the selection or use of these CUSIP numbers and make no representation as to their correctness on the Bonds or the Cover or as indicated above. The CUSIP number for a specific maturity is subject to being changed after the issuance of the Bonds as a result of various subsequent actions and events. The Ohio Municipal Advisory Council (OMAC) has requested that this paragraph be included in this Official Statement. Certain information contained in the Official Statement is attributed to OMAC. OMAC compiles information from official and other sources. OMAC 1

6 believes the information it compiles is accurate and reliable, but OMAC does not independently confirm or verify the information and does not guaranty its accuracy. OMAC has not reviewed this Official Statement to confirm that the information attributed to it is information provided by OMAC or for any other purpose. In connection with this offering, the Underwriter may overallot or effect transactions that stabilize or maintain the market price of the Bonds at a level above that which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time. The Underwriter may offer and sell the Bonds to certain dealers and dealer banks and banks acting as agent at prices lower than the public offering price stated on the Cover, which public offering price may be changed from time to time by the Underwriter. The Underwriter has provided the following sentence for inclusion in this Official Statement. The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of its responsibility to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guaranty the accuracy or completeness of such information. [The Remaining Portion of This Page Is Intentionally Left Blank.] 2

7 TABLE OF CONTENTS Page Regarding This Official Statement...1 Introductory Statement...5 The Bonds...7 Authorization and Purpose...7 Use of Proceeds Refunding...7 Certain Terms of the Bonds...8 General; Book-Entry System...8 Prior Redemption...8 Mandatory Redemption...8 Optional Redemption...8 Selection of Bonds and Book-Entry Interests to be Redeemed...9 Notice of Call for Redemption; Effect...9 Security and Sources of Payment...9 Basic Security...10 Additional Sources of Payment...10 Enforcement of Rights and Remedies...10 Bankruptcy...11 Refunding...11 Litigation...12 Opinion of Bond Counsel...12 Tax Matters...13 Original Issue Discount and Original Issue Premium...15 Eligibility for Investment and as Public Money Security...16 Underwriting...16 Ratings...16 Transcript and Closing Certificates...17 Continuing Disclosure Agreement...17 Verification of Mathematical Computations...17 Bond Registrar and Escrow Agent...18 The City...19 General Information...19 City Government...20 Employees...22 Retirement Expenses...22 City Facilities; Insurance...23 Economic and Demographic Information...24 Population...24 Industry and Commerce...25 Employment and Income...27 Housing and Building Permits...29 Utilities; Public Safety and Services...29 Financial Matters...30 Introduction...30 Budgeting, Property Tax Levy and Appropriations Procedures...30 Financial Reports and Audits...31 Investments...32 Financial Outlook...33 General Fund

8 TABLE OF CONTENTS (continued) Page Ad Valorem Property Taxes and Special Assessments...35 Assessed Valuation...35 Overlapping Governmental Entities...38 Tax Rates...38 Tax Table A Overlapping Tax Rates...39 Tax Table B City Tax Rates...41 Collections...41 Special Assessments...42 Delinquencies...43 Municipal Income Tax...44 State Local Government Assistance Funds...45 Nontax Revenues...46 City Debt and Other Long-Term Obligations...47 Security for General Obligation Debt; Bonds and BANs...48 Statutory Direct Debt Limitations...48 Indirect Debt and Unvoted Property Tax Limitations...50 Debt Outstanding...52 Bond Anticipation Notes...52 Bond Retirement Fund...52 Future Financings...53 Long-Term Financial Obligations Other Than Bonds and Notes...53 Concluding Statement...55 Debt Tables A: Principal Amounts of Outstanding General Obligation (GO) Debt; Leeway for Additional Debt within Direct Debt Limitations... DT-1 B: Various City and Overlapping GO Debt Allocations (Principal Amounts)... DT-2 C: Projected Debt Charges Requirements on City GO Debt... DT-3 D: Outstanding GO Bonds... DT-4 Appendix A: Comparative Cash-Basis Summary of General Fund Receipts and Expenditures for Fiscal Years 2008 through 2012 and Estimated Fiscal Year 2013 Appendix B: All-Funds Summary for Fiscal Years 2011 and 2012 Appendix C: Basic Financial Statements from the City s Financial Report for Fiscal Year 2011 (Audited) Appendix D: Appendix E: Appendix F: Proposed Text of Opinion of Bond Counsel Book-Entry System; DTC Proposed Form of Continuing Disclosure Agreement 4

9 INTRODUCTORY STATEMENT This Official Statement has been prepared by the City of Bedford, Ohio (the City) in connection with its original issuance and sale of the Bonds identified on the Cover (the Bonds). Certain information concerning the Bonds, including their authorization, purpose, terms and security and sources of payment, and the City is provided in this Official Statement. This Introductory Statement briefly describes certain information relating to the Bonds and supplements certain information on the Cover. It is not intended as a substitute for the more detailed discussions in this Official Statement. Investors should read the entire Official Statement to obtain information as a basis for making informed investment judgments. All financial and other information in this Official Statement has been provided by the City from its records, except for information expressly attributed to other sources and except for certain information on the Cover and under Underwriting. The presentation of information, including tables of receipts from taxes and other sources, is intended to show recent historical information, and is not intended to indicate future or continuing trends in the financial position or other affairs of the City. No representation is made that past experience, as is shown by that financial and other information, will necessarily continue or otherwise be predictive of future experience. See also Regarding This Official Statement. This Official Statement should be considered in its entirety and no one subject should be considered less important than another by reason of location in the text. Reference should be made to laws, reports or documents referred to for more complete information regarding their contents. References to provisions of Ohio law, including the Revised Code and the Ohio Constitution, and of the City Charter (the Charter) are references to those current provisions. Those provisions may be amended, repealed or supplemented. As used in this Official Statement: Beneficial Owner means the owner of a book-entry interest in the Bonds, as defined in Appendix E. Council means the Council of the City. County means County of Cuyahoga. County Fiscal Officer means the Fiscal Officer of the County. Cover means the cover page and the inside cover of this Official Statement. Debt charges means the principal (including any mandatory sinking fund deposits and mandatory redemption payments), interest and any redemption premium payable on the obligations referred to as those payments come due and payable; debt charges may also be referred to as debt service. Fiscal Year means the 12-month period ending December 31, and reference to a particular Fiscal Year (such as Fiscal Year 2012 ) means the Fiscal Year ending on December 31 in that year. Revised Code means the Ohio Revised Code. State or Ohio means the State of Ohio. 5

10 State Budget Act means Amended Substitute House Bill No. 153, passed by the Ohio General Assembly and signed by the Governor on June 30, 2011, providing State appropriations for its biennium (beginning July 1, 2011 through June 30, 2013) and enacting other statutory provisions. The Bonds are issued by the City of Bedford, Ohio. They are authorized by Chapter 133 of the Revised Code, the City Charter and legislation passed by the Council. The Bonds are issued to pay costs of the various permanent improvements described herein and to refund certain of the City s currently outstanding bonds. See Authorization and Purpose. The Bonds are general obligations of the City, the full faith and credit and general property taxing power of which are pledged to the payment of debt charges. Unless paid from other sources, debt charges are to be paid from the proceeds of the City s levy of ad valorem property taxes, which taxes are within the 10-mill limitation provided by the City Charter. The City expects that a portion of the debt charges will be paid from revenues of the water and sewer system. See Security and Sources of Payment. The Authorizing Legislation (see Authorization and Purpose) provides that the Bonds will be issued in the denomination of $5,000 or in whole multiples of $5,000. The Bonds will be initially issued only as fully-registered bonds, one for each maturity, issuable under a book-entry system and registered initially in the name of The Depository Trust Company, New York, New York, or its nominee (DTC). See General; Book-Entry System and Appendix E. Principal and interest will be payable to the registered owner (DTC). Principal will be payable on presentation and surrender at the designated corporate trust office of the Bond Registrar. See Bond Registrar. Interest will be transmitted by the Bond Registrar on each interest payment date (June 1 and December 1, beginning December 1, 2013) to the registered owner as of the 15th day preceding that interest payment date. The Bonds maturing on or after December 1, 2022 are subject to prior redemption on any date, by and at the sole option of the City, in whole or in part as selected by the City (in whole multiples of $5,000), on or after December 1, 2021, at a redemption price equal to 100% of the principal amount redeemed, plus interest accrued to the redemption date. The Bonds maturing in 2034 and 2038 are subject to mandatory prior redemption, as described in this Official Statement. See Prior Redemption. The opinion as to the validity of the Bonds and the tax-exempt status of the interest on the Bonds will be rendered by Squire Sanders (US) LLP (Bond Counsel). See Opinion of Bond Counsel and Tax Matters and Appendix D. [The Remaining Portion of This Page Is Intentionally Left Blank.] 6

11 THE BONDS AUTHORIZATION AND PURPOSE The Bonds are to be issued pursuant to Chapter 133 of the Revised Code, the Charter and ordinances passed by the Council and a certificate of award provided for by those ordinances (collectively, the Authorizing Legislation). The Bonds are being issued as a consolidated issue, and a portion of the proceeds of the Bonds will be used for the following improvements: the same; $1,475,000 to improve various City streets by resurfacing and otherwise improving $3,405,000 to improve the City s sanitary sewer system by improving sanitary sewage pump station and sewage treatment plant facilities; and, $1,500,000 to improve and renovate the City s water distribution system by replacing water main, valves, connection and fire hydrants. Use of Proceeds Refunding A portion of the proceeds from the sale of the Bonds will be used to refund the Refunded Bonds and will be deposited in an Escrow Fund held by U.S. Bank National Association (the Escrow Agent), pursuant to an Escrow Agreement between the City and the Escrow Agent dated May 15, 2013 (the Escrow Agreement). The money deposited in the Escrow Fund will be (a) held in cash to the extent not needed to make the investments described in (b) below, and (b) invested in direct obligations of or obligations guaranteed as to payment by the United States (within the meaning of Section (D) of the Revised Code) that mature or are subject to redemption by and at the option of the holder, in amounts sufficient, together with any uninvested cash in the Escrow Fund but without further investment or reinvestment, for the payment of the principal amount of the Refunded Bonds (as defined below) upon their prior optional redemption on June 14, 2013, as provided in the Authorizing Legislation. The Authorizing Legislation provides for an irrevocable call for optional redemption of the Refunded Bonds on June 14, 2013, at a redemption price equal to 100% of the principal amount redeemed, plus interest accrued to the redemption date. The Refunded Bonds are the outstanding bonds of the City: - Certain outstanding Various Purpose General Obligation Bonds, Series 2002, dated as of June 1, 2002, in the aggregate principal amount of $920,000 and scheduled to mature on December 1 in the years 2013 through Certain outstanding Various Purpose General obligations Bonds, Series , dated as of December 1, 2002, in the aggregate principal amount of $830,000 and scheduled to mature on December 1 in the years 2013 through Any premium received by the City on the sale of the Bonds in excess of that necessary to fully fund the Escrow Fund as described above and to pay costs of issuing the Bonds and refunding the Refunded Bonds and any interest accrued on the Bonds will be deposited in the Bond Retirement Fund. Money in that Fund is used to pay debt charges on City debt obligations. See also the discussion under Verification of Mathematical Computations. 7

12 General; Book-Entry System CERTAIN TERMS OF THE BONDS The Bonds will be dated their date of original issuance, will be payable in the principal amounts and on the dates and will bear interest (computed on the basis of a 360-day year and day months) at the rates and be payable on the dates, at the place and in the manner, all as described on the Cover. The Bond Registrar will act as the paying agent for the Bonds and will keep all books and records necessary for registration, exchange and transfer of the Bonds. See Bond Registrar. The Bonds will be delivered in book-entry-only form and, when issued, registered in the name of The Depository Trust Company (DTC), New York, New York, or its nominee Cede & Co., which will act as securities depository for the Bonds. For discussion of the bookentry system and DTC and the replacement of Bonds in the event that the book-entry system is discontinued, see Appendix E. Prior Redemption The Bonds are subject to mandatory and optional redemption as follows. Mandatory Redemption The Bonds maturing on December 1, 2034 (the 2034 Term Bonds) and December 1, 2038 (the 2038 Term Bonds, and, together with the 2034 Term Bonds, collectively, the Term Bonds), are subject to mandatory sinking fund redemption in part by lot pursuant to the terms of the mandatory sinking fund redemption requirements of the Authorizing Legislation, at a redemption price equal to 100% of the principal amount redeemed, plus interest accrued to the redemption date, on December 1 of the years shown in, and according to, the following schedule Term Bonds 2038 Term Bonds Year Amount Year Amount 2033 $285, $75, ,000(a) , , ,000(a) (a) Remaining principal balance scheduled to be paid at the stated maturity of the corresponding Term Bonds. Term Bonds redeemed by other than mandatory redemption, or purchased for cancellation, may be credited against the applicable mandatory redemption requirement for the corresponding Term Bonds. Optional Redemption The Bonds maturing on or after December 1, 2022 are subject to prior redemption, by and at the sole option of the City, in whole or in part as selected by the City (in whole multiples of $5,000), on any date on or after December 1, 2021, at a redemption price equal to 100% of the principal amount redeemed, plus interest accrued to the redemption date. 8

13 Selection of Bonds and Book-Entry Interests to be Redeemed If fewer than all outstanding Bonds are called for optional redemption at one time, the Bonds to be called will be called as selected by, and selected in a manner as determined by, the City. If less than all of an outstanding Bond of one maturity under a book-entry system is to be called for redemption (in the amount of $5,000 or any whole multiple), the Bond Registrar will give notice of redemption only to DTC as registered owner. The selection of the book-entry interests in that Bond to be redeemed is discussed below under Notice of Call for Redemption; Effect. If bond certificates are issued to the ultimate owners, and if fewer than all of the Bonds of a single maturity are to be redeemed, the selection of Bonds (or portions of Bonds in the amount of $5,000 or any whole multiple) to be redeemed will be made by lot in a manner determined by the Bond Registrar. In the case of a partial redemption by lot when Bonds of denominations greater than $5,000 are then outstanding, each $5,000 unit of principal will be treated as if it were a separate Bond of the denomination of $5,000. Notice of Call for Redemption; Effect The Bond Registrar is to cause notice of the call for redemption, identifying the Bonds or portions of Bonds to be redeemed, to be sent by first-class mail, at least 30 days prior to the redemption date, to the registered owner (initially, DTC) of each Bond to be redeemed at the address shown on the Register on the 15th day preceding that mailing. Any defect in the notice or any failure to receive notice by mailing will not affect the validity of any proceedings for the redemption of any Bonds. On the date designated for redemption, Bonds or portions of Bonds called for redemption shall become due and payable. If the Bond Registrar then holds sufficient money for payment of debt charges payable on that redemption date, interest on each Bond (or portion of a Bond) so called for redemption will cease to accrue on that date. So long as all Bonds are held under a book-entry system by a securities depository (such as DTC), a call notice is to be sent by the Bond Registrar only to the depository or its nominee. Selection of book-entry interests in the Bonds called, and giving notice of the call to the owners of those interests called, is the sole responsibility of the depository and of its Direct Participants and Indirect Participants. Any failure of the depository to advise any Direct Participant, or of any Direct Participant or any Indirect Participant to notify the Beneficial Owners, of any such notice and in its content or effect will not affect the validity of any proceedings for the redemption of any Bonds or portions of Bonds. See Appendix E. SECURITY AND SOURCES OF PAYMENT The Bonds will be unvoted general obligation debt of the City payable from the sources described, subject to bankruptcy laws and other laws affecting creditors rights and to the exercise of judicial discretion. 9

14 Basic Security The basic security for payment of the Bonds is the requirement of the levy by the City of ad valorem property taxes within the 10-mill limitation provided by the City Charter. The State constitution specifically prohibits a subdivision such as the City from incurring general obligation indebtedness unless the authorizing legislation makes provision for levying and collecting annually by taxation an amount sufficient to pay the debt charges on the bonds. (Ohio Constitution Article XII Section 11.) The Ohio Supreme Court has stated: Section 11 of Article XII of the Constitution of Ohio imposes a mandatory duty upon the State and its political subdivisions to pay the interest and principal of their indebtedness before provisions are to be made for current operating expenses. State ex rel. Nat l City Bank v. Bd. of Ed. of the Cleveland City School District, 52 Ohio St. 2d 81, 85 (1977). Under State law, and expressly under the City Charter, the levy for debt charges on unvoted general obligations of the City is to be placed before and in preference to all other levies and for the full amount of those debt charges. See the further discussions under Ad Valorem Property Taxes and City Debt and Other Long-Term Obligations. Ohio law [Section (A)] requires the City to levy and collect that property tax to pay debt charges on the Bonds as they come due, unless and to the extent those debt charges are paid from other sources, such as described below. The Authorizing Legislation provides further security by making a pledge of the full faith and credit and the general property taxing power of the City for the payment of debt charges on the Bonds as they come due. All funds of the City are included in that pledge, except those specifically limited to another use or prohibited from that use by the Ohio Constitution, or Ohio or federal law, or revenue bond trust agreements. Those exceptions as to portions of the Bonds include certain utility revenues. A similar pledge is made in each ordinance authorizing voted or unvoted general obligation debt. Additional Sources of Payment Sources (such as special assessments, income tax, utility revenues, highway use receipts, etc.) specifically pledged to and/or expected to pay all or portions of the Bonds as set forth below. The City expects that the debt charges on the $4,905,000 portion of the Bonds relating to water works system improvements ($1,500,000) and sanitary sewer system improvements ($3,405,000) will in fact be paid, to the extent available, from revenue of the City s water works system and sewer system, respectively. Enforcement of Rights and Remedies In addition to the right of individual bondholders to sue upon their particular Bonds, Ohio law authorizes the holders of not less than 10% in principal amount of the outstanding Bonds, whether or not then due and payable or reduced to judgment, to bring mandamus or other actions to enforce all contractual or other rights of the bondholders, including the right to require the City to assess, levy, charge, collect and apply the unvoted property taxes and other pledged receipts to pay debt charges and to perform its duties under law. Those bondholders may, in the 10

15 case of any default in payment of debt charges, bring action to require the City to account as if it were the trustee of an express trust for the bondholders or to enjoin any acts that may be unlawful or in violation of bondholder rights. [Section (C)] See also Appendix E. Bankruptcy The State has pledged to and agreed with holders of securities such as the Bonds that the state will not, by enacting any law or adopting any rule, repeal, revoke, repudiate, limit, alter, stay, suspend, or otherwise reduce, rescind, or impair the power or duty of a subdivision to exercise, perform, carry out, and fulfill its responsibilities or covenants under this chapter [Chapter 133, the State s Uniform Public Securities Law] or legislation or agreements as to its Chapter 133. securities, including a credit enhancement facility, passed or entered into pursuant to this chapter, or repeal, revoke, repudiate, limit, alter, stay, suspend, or otherwise reduce, rescind, or impair the rights and remedies of any such holders fully to enforce such responsibilities, covenants, and agreements or to enforce the pledge and agreement of the State contained in this division, or otherwise exercise any sovereign power materially impairing or materially inconsistent with the provisions of such legislation, covenants, and agreements. (Section (D) of the Revised Code.) Federal and State laws provide procedures for the adjustment of indebtedness of political subdivisions, such as the City. Chapter 9 of the U.S. Bankruptcy Code would permit the City to make such an adjustment if (i) it were insolvent (i.e., the City was not paying its debt charges as they came due or it was unable to pay those debt charges as they became due), (ii) it met certain other criteria (e.g., having negotiated in good faith with its creditors and failed to reach agreement or such negotiation was impractical because of time restrictions, the number of creditors or other reasons) and (iii) it were authorized under State law (by legislation or by a governmental officer) to seek relief under Chapter 9. The State s Uniform Public Securities Law provides that the City or any other subdivision must obtain the approval of the State Tax Commissioner in order to file a bankruptcy petition stating that it is insolvent and that it desires to effect a plan for the composition or adjustment of its debts and to take such further proceedings under the Bankruptcy Code. That law also states: No taxing subdivision shall be permitted, in availing itself of such acts of congress [the Bankruptcy Code], to scale down, cut down, or reduce the principal sum of its securities, except that interest thereon may be reduced in whole or in part. (Section of the Revised Code.) The County may also initiate proceedings under the Bankruptcy Code. Because it collects, distributes or otherwise provides revenues to the City, the City s financial condition could be affected by such an action. Refunding State law authorizes the refunding and advance refunding of all or a portion of the Bonds. If the City places in escrow either money or direct obligations of, or obligations guaranteed as to payment by, the United States, or a combination of both, that with investment income thereon will be sufficient for the payment of debt charges on the refunded Bonds, those Bonds will no longer be considered to be outstanding. They will also not be considered in determining any direct or indirect limitation on City indebtedness, and the levy of taxes to pay 11

16 debt charges on them will not be required. For this purpose, direct obligations of or obligations guaranteed by the United States include rights to receive payments or portions of payments of the principal of or interest or other investment income on (i) those U.S. obligations and (ii) other obligations fully secured as to payment by those U.S. obligations and the interest or other investment income on those obligations. LITIGATION To the knowledge of the appropriate City officials, no litigation or administrative action or proceeding is pending restraining or enjoining, or seeking to restrain or enjoin, the issuance and delivery of the Bonds, or the levy and collection of taxes or the charge and collection of any applicable rates, fees or charges, to pay the debt charges on the Bonds, or contesting or questioning the proceedings and authority under which the Bonds have been authorized and are to be issued, sold, signed or delivered, or the validity of the Bonds. No petitions for referendum with respect to the Authorizing Legislation or any other measure authorizing the payment of or security for the Bonds, or the carrying out of the government purposes to which the Bond proceeds are to be applied, and no petitions seeking to initiate any measure affecting the same or the proceedings therefor, have been filed. The City will deliver to the Underwriter a certificate to that effect at the time of original delivery of the Bonds to the Underwriter. The City is a party to various legal proceedings seeking damages or injunctive or other relief and generally incidental to its operations. These proceedings are unrelated to the Bonds or the security for the Bonds, or the permanent improvements being financed. The ultimate disposition of these proceedings is not now determinable, but will not, in the opinion of the Director of Law, have a material adverse effect on the Bonds, the security for the Bonds, or those improvements or the City s operating revenues. Under current Ohio law, City money, accounts and investments are not subject to attachment to satisfy tort judgments in State courts against the City. See also City Facilities; Insurance. OPINION OF BOND COUNSEL Certain legal matters incident to the issuance of the Bonds and with regard to the tax-exempt status of the interest on the Bonds (see Tax Matters) are subject to the opinion of Squire Sanders (US) LLP, Bond Counsel to the City. The signed legal opinion of Bond Counsel, substantially in the form attached hereto as Appendix D, dated and premised on law in effect on the date of issuance of the Bonds, will be delivered on the date of issuance of the Bonds. The text of the opinion to be delivered may vary from the text as set forth in Appendix D if necessary to reflect facts and law on the date of delivery. The opinion will speak only as of its date, and subsequent distribution of it by recirculation of this Official Statement or otherwise shall create no implication that Bond Counsel has reviewed or expresses any opinion concerning any of the matters referred to in the opinion subsequent to its date. The opinion of Bond Counsel and any other legal opinions and letters of counsel to be delivered concurrently with the delivery of the Bonds express the professional judgment of the attorneys rendering the opinions or advice regarding the legal issues and other matters expressly addressed therein. By rendering a legal opinion or advice, the giver of such opinion or advice does not become an insurer or guarantor of the result indicated by that opinion, or the transaction on which the opinion or advice is rendered, or of the future performance of parties to the 12

17 transaction. Nor does the rendering of an opinion guarantee the outcome of any legal dispute that may arise out of the transaction. Bond Counsel has drafted those portions of this Official Statement under the captions Certain Terms of the Bonds (excluding the information concerning the book-entry system there and in Appendix E), Security and Sources of Payment and Tax Matters. Bond Counsel and others, including the Underwriter have assisted the City with its preparation of certain other portions of this Official Statement. Bond Counsel and the Underwriter, however, have not been engaged to, and will not, independently confirm or verify that information or any other information provided by the City or others, and will not express an opinion as to the accuracy, completeness or fairness of any such information or any other reports, financial information, offering or disclosure documents or other information pertaining to the Bonds that may be prepared or made available by the City or others to potential or actual purchasers of the Bonds, to owners of the Bonds, including Beneficial Owners, or to others. In addition to rendering its opinion, Bond Counsel will assist in the preparation of and advise the City concerning documents for the bond transcript. The City has also retained the legal services of that law firm from time to time as special counsel in connection with matters that do not relate to City financings. Squire Sanders (US) LLP also serves and has served as bond counsel for one or more of the political subdivisions that the City territorially overlaps and has also served as counsel to the Underwriter in connection with matters that do not relate to the City. TAX MATTERS In the opinion of Squire Sanders (US) LLP, Bond Counsel to the City, under existing law: (i) interest on the Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986, as amended (the Code), and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations and the Bonds are qualified tax-exempt obligations as defined in Section 265(b)(3) of the Code; and (ii) interest on, and any profit made on the sale, exchange or other disposition of, the Bonds are exempt from the Ohio personal income tax, the Ohio commercial activity tax, the net income base of the Ohio corporate franchise tax, and municipal, school district and joint economic development district income taxes in Ohio. Bond Counsel expresses no opinion as to any other tax consequences regarding the Bonds. The opinion on tax matters will be based on and will assume the accuracy of certain representations and certifications, and continuing compliance with certain covenants, of the City contained in the transcript of proceedings and that are intended to evidence and assure the foregoing, including that the Bonds are and will remain obligations the interest on which is excluded from gross income for federal income tax purposes. Bond Counsel will not independently verify the accuracy of the City s certifications and representations or the continuing compliance with the City s covenants. The opinion of Bond Counsel is based on current legal authority and covers certain matters not directly addressed by such authority. It represents Bond Counsel s legal judgment as to exclusion of interest on the Bonds from gross income for federal income tax purposes but is not a guaranty of that conclusion. The opinion is not binding on the Internal Revenue Service (IRS) or any court. Bond Counsel expresses no opinion about (i) the effect of future changes in the Code and the applicable regulations under the Code or (ii) the interpretation and the enforcement of the Code or those regulations by the IRS. 13

18 The Code prescribes a number of qualifications and conditions for the interest on state and local government obligations to be and to remain excluded from gross income for federal income tax purposes, some of which require future or continued compliance after issuance of the obligations. Noncompliance with these requirements by the City may cause loss of such status and result in the interest on the Bonds being included in gross income for federal income tax purposes retroactively to the date of issuance of the Bonds. The City has covenanted to take the actions required of it for the interest on the Bonds to be and to remain excluded from gross income for federal income tax purposes, and not to take any actions that would adversely affect that exclusion. After the date of issuance of the Bonds, Bond Counsel will not undertake to determine (or to so inform any person) whether any actions taken or not taken, or any events occurring or not occurring, or any other matters coming to Bond Counsel s attention, may adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds or the market value of the Bonds. A portion of the interest on the Bonds earned by certain corporations may be subject to a federal corporate alternative minimum tax. In addition, interest on the Bonds may be subject to a federal branch profits tax imposed on certain foreign corporations doing business in the United States and to a federal tax imposed on excess net passive income of certain S corporations. Under the Code, the exclusion of interest from gross income for federal income tax purposes may have certain adverse federal income tax consequences on items of income, deduction or credit for certain taxpayers, including financial institutions, certain insurance companies, recipients of Social Security and Railroad Retirement benefits, those that are deemed to incur or continue indebtedness to acquire or carry tax-exempt obligations, and individuals otherwise eligible for the earned income tax credit. The applicability and extent of these and other tax consequences will depend upon the particular tax status or other tax items of the owner of the Bonds. Bond Counsel will express no opinion regarding those consequences. Payments of interest on tax-exempt obligations, including the Bonds, are generally subject to IRS Form 1099-INT information reporting requirements. If a Bond owner is subject to backup withholding under those requirements, then payments of interest will also be subject to backup withholding. Those requirements do not affect the exclusion of such interest from gross income for federal income tax purposes. Legislation affecting tax-exempt obligations is regularly considered by the United States Congress and may also be considered by the State legislature. Court proceedings may also be filed, the outcome of which could modify the tax treatment of obligations such as the Bonds. There can be no assurance that legislation enacted or proposed, or actions by a court, after the date of issuance of the Bonds will not have an adverse effect on the tax status of interest or other income on the Bonds or the market value or marketability of the Bonds. These adverse effects could result, for example, from changes to federal or state income tax rates, changes in the structure of federal or state income taxes (including replacement with another type of tax), or repeal (or reduction in the benefit) of the exclusion of interest on the Bonds from gross income for federal or state income tax purposes for all or certain taxpayers. For example, both the American Jobs Act of 2011 proposed by President Obama on September 12, 2011, and introduced into the Senate on September 13, 2011, and the federal budget for fiscal year 2013 as proposed by President Obama on February 13, 2012, contain provisions that could, among other things, result in additional federal income tax for tax years beginning after 2012 on taxpayers that own tax-exempt obligations, including the Bonds, if they have incomes above certain thresholds. Prospective purchasers of the Bonds should consult their own tax advisers regarding pending or proposed federal and state tax legislation and court proceedings, and prospective purchasers of the Bonds at other than their original issuance at the respective prices indicated on 14

19 the Cover should also consult their own tax advisers regarding other tax considerations such as the consequences of market discount, as to all of which Bond Counsel expresses no opinion. Bond Counsel s engagement with respect to the Bonds ends with the issuance of the Bonds, and, unless separately engaged, Bond Counsel is not obligated to defend the City or the owners of the Bonds regarding the tax status of interest thereon in the event of an audit examination by the IRS. The IRS has a program to audit tax-exempt obligations to determine whether the interest thereon is includible in gross income for federal income tax purposes. If the IRS does audit the Bonds, under current IRS procedures, the IRS will treat the City as the taxpayer and the Beneficial Owners of the Bonds will have only limited rights, if any, to obtain and participate in judicial review of such audit. Any action of the IRS, including but not limited to selection of the Bonds for audit, or the course or result of such audit, or an audit of other obligations presenting similar tax issues, may affect the market value of the Bonds. Original Issue Discount and Original Issue Premium Certain of the Bonds ( Discount Bonds ) as indicated on the Cover were offered and sold to the public at an original issue discount ( OID ). OID is the excess of the stated redemption price at maturity (the principal amount) over the issue price of a Discount Bond. The issue price of a Discount Bond is the initial offering price to the public (other than to bond houses, brokers or similar persons acting in the capacity of underwriters or wholesalers) at which a substantial amount of the Discount Bonds of the same maturity is sold pursuant to that offering. For federal income tax purposes, OID accrues to the owner of a Discount Bond over the period to maturity based on the constant yield method, compounded semiannually (or over a shorter permitted compounding interval selected by the owner). The portion of OID that accrues during the period of ownership of a Discount Bond (i) is interest excluded from the owner s gross income for federal income tax purposes to the same extent, and subject to the same considerations discussed above, as other interest on the Bonds, and (ii) is added to the owner s tax basis for purposes of determining gain or loss on the maturity, redemption, prior sale or other disposition of that Discount Bond. The amount of OID that accrues each year to a corporate owner of a Discount Bond is taken into account in computing the corporation s liability for federal alternative minimum tax. A purchaser of a Discount Bond in the initial public offering at the price for that Discount Bond stated on the Cover who holds that Discount Bond to maturity will realize no gain or loss upon the retirement of that Discount Bond. Certain of the Bonds ( Premium Bonds ) as indicated on the Cover were offered and sold to the public at a price in excess of their stated redemption price at maturity (the principal amount). That excess constitutes bond premium. For federal income tax purposes, bond premium is amortized over the period to maturity of a Premium Bond, based on the yield to maturity of that Premium Bond (or, in the case of a Premium Bond callable prior to its stated maturity, the amortization period and yield may be required to be determined on the basis of an earlier call date that results in the lowest yield on that Premium Bond), compounded semiannually. No portion of that bond premium is deductible by the owner of a Premium Bond. For purposes of determining the owner s gain or loss on the sale, redemption (including redemption at maturity) or other disposition of a Premium Bond, the owner s tax basis in the Premium Bond is reduced by the amount of bond premium that is amortized during the period of ownership. As a result, an owner may realize taxable gain for federal income tax purposes from the sale or other disposition of a Premium Bond for an amount equal to or less than the amount paid by the owner for that Premium Bond. A purchaser of a Premium Bond in the initial public offering at the price for that Premium Bond stated on the Cover who holds that Premium Bond to maturity (or, in the case of a callable Premium Bond, to its earlier call date that results in the lowest yield on that Premium Bond) will realize no gain or loss upon the retirement of that Premium Bond. 15

20 Owners of Discount and Premium Bonds should consult their own tax advisers as to the determination for federal income tax purposes of the amount of OID or bond premium properly accruable or amortizable in any period with respect to the Discount or Premium Bonds and as to other federal tax consequences and the treatment of OID and bond premium for purposes of state and local taxes on, or based on, income. ELIGIBILITY FOR INVESTMENT AND AS PUBLIC MONEY SECURITY To the extent that the matter as to the particular investor is governed by Ohio law, and subject to any applicable limitations under other provisions of Ohio law, the Bonds are lawful investments for banks, savings and loan associations, credit union share guaranty corporations, trust companies, trustees, fiduciaries, insurance companies (including domestic for life and domestic not for life), trustees or other officers having charge of sinking and bond retirement or other funds of the State and State subdivisions and taxing districts, the Commissioners of the Sinking Fund, the Administrator of Workers Compensation, and State retirement systems (Teachers, Public Employees, Public School Employees, and Police and Fire), notwithstanding any other provisions of the Revised Code or rules adopted pursuant to those provisions by any State agency with respect to investments by them. The Bonds are acceptable under Ohio law as security for the repayment of the deposit of public money. Beneficial Owners of the Bonds should make their own determination as to such matters as legality of investment in or pledgability of book-entry interests. UNDERWRITING The Bonds are being purchased by Stifel, Nicolaus & Company, Incorporated (the Underwriter), at a price of $7,655,698.15, plus any interest accrued on the Bonds, resulting in a gross underwriting spread of $168, from the public offering prices of the Bonds set forth on the Cover (the Offering Prices). Of that gross underwriting spread, the Underwriter will use $111, to pay for costs of issuance other than the Underwriter s discount. In its bond purchase agreement with the City, the Underwriter has agreed to pay certain costs of issuance of the Bonds. The Underwriter has provided the information in this Official Statement pertaining to the Offering Prices and to the offering of the Bonds in the seventh paragraph of Regarding This Official Statement. As noted in that paragraph, the Underwriter may offer and sell the Bonds to certain dealers (including dealers depositing into investment trusts) and others at prices lower than the Offering Prices. The Offering Prices may be changed after the initial offering by the Underwriter. The purchase of the Bonds by the Underwriter is subject to certain conditions and requires that the Underwriter will purchase all of the Bonds, if any are purchased. RATINGS The Bonds have been rated Aa2 by Moody s Investors Service and AA by Standard & Poor s Ratings Services. The ratings assigned are shown on the Cover. No application for a rating has been made by the City to any other rating service. On April 26, 2010, Moody s revised the City s rating from A1 to Aa2 pursuant to its recalibration of ratings to its global scale and has subsequently reaffirmed such rating in connection with this bond issuance. The ratings reflect only the respective views of the rating services, and any explanation of the meaning or significance of the ratings may only be obtained from the 16

21 respective rating service. The City furnished to each rating service certain information and materials, some of which may not have been included in this Official Statement, relating to the Bonds and the City. Generally, rating services base their ratings on such information and materials and on their own investigation, studies and assumptions. There can be no assurance that a rating when assigned will continue for any given period of time or that it will not be lowered or withdrawn entirely by a rating service if in its judgment circumstances so warrant. Any lowering or withdrawal of a rating may have an adverse effect on the marketability or market value of the Bonds. The City expects to furnish the rating services with information and materials that may be requested. The City, however, assumes no obligation to furnish requested information and materials, and may issue debt for which a rating is not requested. Failure to furnish requested information and materials, or the issuance of debt for which a rating is not requested, may result in the suspension or withdrawal of a rating on the Bonds. TRANSCRIPT AND CLOSING CERTIFICATES A complete transcript of proceedings and a certificate (described under Litigation) relating to litigation will be delivered by the City when the Bonds are delivered by the City to the Underwriter. The City at that time will also provide to the Underwriter a certificate, signed by the City officials who sign this Official Statement and addressed to the Underwriter, relating to the accuracy and completeness of this Official Statement and to its being a final official statement in the judgment of the City for purposes of SEC Rule 15c2-12(b)(3). CONTINUING DISCLOSURE AGREEMENT The City has agreed, for the benefit of the holders and Beneficial Owners from time to time of the Bonds, in accordance with SEC Rule 15c2-12 (the Rule), to provide or cause to be provided to the Municipal Securities Rulemaking Board such annual financial information and operating data, audited financial statements and notices of the occurrence of certain events in such manner as may be required for purposes of paragraph (b)(5)(i) of the Rule (the Continuing Disclosure Agreement). See Appendix F for the proposed form of the Continuing Disclosure Agreement. The foregoing information, data and notices can be obtained from Frank C. Gambosi, Director of Finance, City of Bedford, 165 Center Street, Ohio (telephone ; fgambosi@bedfordoh.gov). The performance by the City of the Continuing Disclosure Agreement will be subject to the annual appropriation by the City of any funds that may be necessary to perform it. The Continuing Disclosure Agreement will remain in effect only for such period that the Bonds are outstanding in accordance with their terms and the City remains an obligated person with respect to the Bonds within the meaning of the Rule. Within the last five years, the City has in a timely manner made all filings and given all notices required under its prior continuing disclosure agreements. VERIFICATION OF MATHEMATICAL COMPUTATIONS Prior to the delivery of the Bonds, Causey Demgen & Moore P.C., an independent public accounting firm, will deliver a report on the mathematical accuracy of certain computations contained in schedules provided to them by the Underwriter. These computations will relate to the adequacy of the money and maturing principal amounts of the direct obligations of or obligations guaranteed as to payment by the United States held in the Escrow Fund for the 17

22 payment of the principal of the Refunded Bonds being called for prior optional redemption on June 14, 2013 (at a redemption price of 100% of the principal amount optionally redeemed), all in accordance with the terms of the Escrow Agreement. BOND REGISTRAR AND ESCROW AGENT U.S. Bank National Association will act as bond registrar, paying agent, transfer agent and authenticating agent for the Bonds (the Bond Registrar) and as escrow agent for the Refunded Bonds (the Escrow Agent). The Bond Registrar will keep all books and records necessary for registration, exchange and transfer of the Bonds, in accordance with the terms of agreements between it and the City. The Bond Registrar is a national banking association. [The Remaining Portion of This Page Is Intentionally Left Blank.] 18

23 THE CITY GENERAL INFORMATION The City is located in Cuyahoga County in northeastern Ohio, approximately 10 miles southeast of Cleveland. It was incorporated as a village in 1837, and became a city in In the 2010 Census classifications, the City was in the Cleveland-Elyria-Mentor Metropolitan Statistical Area (MSA), comprised of the five counties of Cuyahoga, Geauga, Lake, Lorain and Medina. It was also in the Cleveland-Akron Consolidated Statistical Area (CSA). Only limited statistics are now available for the new MSA and CSA The City s 2010 population was 13,074. Information Population. See Economic and Demographic The City s area is approximately 5.6 square miles. Land use, as measured by the assessed value of real property, is presented in the following table. Percent of Assessed Valuation of Real Property Residential 55.82% Commercial/Industrial Public Utility 0.04 Agricultural 0.00 Undeveloped (a) (a) Included in above categories. Source: County Fiscal Officer. The City is served by diversified transportation facilities, including three State and U.S. highways and I-480 and I-271. It is served by Conrail and adjacent to areas served by Amtrak, and is served by nearby Cleveland Hopkins International, Burke Lakefront and Cuyahoga County airports. Banking and financial services are provided to the City area by offices of eight commercial banks and savings banks, all of which have their principal offices elsewhere. One daily newspaper, one bi-weekly newspaper and one monthly newspaper serve the City. The City is within the broadcast area of five television stations and numerous AM and FM radio stations. Multichannel cable TV service, including educational, governmental and public access channels, is provided by Time Warner Cable, Inc. The educational systems and institutions discussed below operate independently of the City government. The City is not involved in the operation or financial matters of any educational system or institution. The Bedford City School District (the School District) is the principal school system in the City. It serves approximately 3,900 pupils in six elementary, middle, junior high and senior high schools. The Board of Education of the School District administers an annual operating budget of approximately $46 million. There are also five private preschools and one parochial school in the City. 19

24 Within commuting distance are several public and private two year and four year colleges and universities providing a wide range of educational facilities and opportunities. These include Cleveland State University, Kent State University, Case Western Reserve University, Baldwin Wallace College, Notre Dame College of Ohio, John Carroll University, Ursuline College and Cuyahoga Community College. Thirty-nine acute-care hospitals with a total capacity in excess of 11,790 beds serve the PMSA. City residents are served by Community Hospital of Bedford which is located within the City, and two other hospitals located in nearby cities: Marymount Hospital in Garfield Heights and Meridia South Point Hospital in Warrensville Heights. These three hospitals have a total capacity of approximately 600 beds. In addition, the main facilities of the Cleveland Clinic Foundation and University Hospitals Health Systems, with a total capacity in excess of 10,700 beds, serve the PMSA. Within a half-hour drive of the City are the locations of the world class Cleveland Orchestra, the Cleveland Museum of Art, the Natural History Museum, the Western Reserve Historical Society (including the Crawford Auto Museum), the Cleveland Play House, and Karamu House (a multi-racial performing arts group). These and other facilities in the area offer a variety of cultural and educational programs available to the community. Other recreational and community assets in the PMSA include four professional sports teams (the Cleveland Browns, the Cleveland Cavaliers, the Cleveland Indians and the Lake Erie Monsters (minor league hockey)), offering year-round entertainment at different locations in the PMSA, and the Cleveland Metroparks System (Metroparks), which consists of nearly 19,000 acres of natural beauty with many scenic, historic and geologic features in Cuyahoga, Lorain and Medina counties. Over 100 miles of parkways provide easy access to the Metroparks facilities designed in accordance with the park s conservation goals: wildlife management areas and waterfowl sanctuaries; picnic areas and playfields; hiking, bridle, allpurpose and physical fitness trails; six golf courses; swimming, boating and fishing areas; stables; tobogganing, sledding, skating and cross-country skiing areas; and four nature centers offering nature exhibits and programs. A principal asset of the Metroparks is the Cleveland Zoo counting over 3,000 animals occupying 165 rolling, wooded acres, and which is accredited by the American Association of Zoological Parks and Aquariums. City Government The City operates under and is governed by its Charter, adopted by the voters in 1932 and which has been and may be amended by the voters from time to time. The Charter provides for a Council-City Manager form of government. The City is also subject to some general laws applicable to all cities. Under the Ohio Constitution, the City may exercise all powers of local self-government, and police powers to the extent not in conflict with applicable general laws. Legislative authority is vested in a seven member Council, of whom one is elected at large and six are elected from wards, for four year terms. The Council fixes compensation of City officials and employees, and enacts ordinances and resolutions relating to the City services, tax levies, appropriating and borrowing money, licensing and regulating businesses and trades, and other municipal purposes. The presiding officer is the Mayor, who is elected by the voters for a four year term. The Charter establishes certain administrative departments; the Council may establish divisions of those departments and may establish additional departments. The City s chief executive and administrative officer is the City Manager, who is appointed by the Council to serve at its pleasure. The City Manager may be removed, after a public hearing, if requested, by a vote of the majority of all the members of Council. 20

25 The City Manager appoints and removes employees of the City pursuant to the Charter s civil service provisions. The Charter provides that the City Manager, the Director of Finance, the Director of Law and the Clerk of Council shall be appointed by and responsible to Council. All elected officials serve part-time. The current elected officials, and some of the major appointed officials, are: ELECTED Office Name Years in Office Term Expires Vocation in Private Life Mayor(a) Daniel S. Pocek 26 December 31, 2013 Marketing Specialist Members of Council Ward 1 Warner Batten 27 December 31, 2013 Retired Ward 2 Stanley Koci 11 December 31, 2015 Retired Ward 3 Marilyn B. Zolata 20 December 31, 2013 Retired Ward 4 Paula Mizsak 16 December 31, 2015 Retired Ward 5 Gregory Pozar 20 December 31, 2013 Financial Consultant Ward 6 Donald A. Saunders 14 December 31, 2013 Zoning Inspector (a) President of Council. APPOINTED Office Name Years in Position Years of Service with the City Vocation in Private Life City Manager Henry J. Angelo 3 3 Full-Time Position Director of Finance Frank. C. Gambosi Full-Time Position Director of Kenneth A Attorney Law/Prosecutor Schuman Clerk of Council Lorree Villers 2 2 Full-Time Position Building Commissioner Larry Stouffer 1 2 Full-Time Position Service Director Clint E. Bellar Full-Time Position Superintendent of Public Shawn Francis <1 12 Full-Time Position Works Chief of Fire David V. Nagy 7 18 Full-Time Position Police Chief Gregory A. Duber 9 32 Full-Time Position Director of Recreation Randall J. Lewis Full-Time Position Director of Economic and Community Development Michael S. Mallis 5 13 Full-Time Position As discussed above, the City Manager, Director of Finance, Director of Law and Clerk of Council serve at the pleasure of Council. The other appointed officials serve at the pleasure of the City Manager. 21

26 Employees The City has 166 full time and 180 part time seasonal employees. A statewide public employee collective bargaining law applies generally to public employee relations and collective bargaining. Full-time employees are represented by the following bargaining units: Bargaining Unit Agreement Duration Number of Employees Ohio Council 8 and Local 2007 American Federation of State, County and Municipal Employees AFL-CIO 03/01/ /01/ Bedford Firefighter Association Local 1683 of IAFF 01/01/ /31/ Bedford Police Fraternal Order of Police George Murray Lodge No.67 Lieutenants and Sergeants Bedford Police Fraternal Order of Police George Murray Lodge No.67 Patrolman 01/01/ /31/ /01/ /31/ The remaining full-time City employees have not elected to join a bargaining unit. The Council by ordinance establishes salaries, wages and other economic benefits for City employees, the terms of which generally are the products of negotiations with representatives of the employees or bargaining unit. In the City s judgment, its employee relations are good. The City has elected to provide employee hospitalization/medical, prescription, dental, and vision insurance benefits through a partially self-insured program. The City established a health insurance internal service fund to account for and finance the cost of this program. Medical Mutual of Ohio serves as the third party administrator that reviews and processes medical, prescription, dental and vision claims which the City then pays after discounts are applied. The City has stop-loss coverage of $100,000 per individual. The departments are charged an annual amount equal to the estimated costs for the year divided by the number of qualified covered employees. The claims liability of $342,245 as estimated by the third party administrator and reported in the health insurance internal service fund on December 31, 2012, is based on the requirements of GASB statement No. 30 which requires a liability for unpaid claims costs, including estimates of costs relating to incurred but not reported claims, be reported if information prior to the issuance of the financial statements indicates that it is probable that a liability has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. Retirement Expenses Present and retired employees of the City are covered under two statewide public employee retirement (including disability retirement) systems. The Ohio Police and Fire Pension Fund (OP&F) covers uniformed members of the police and fire departments. All other eligible City employees are covered by the Ohio Public Employees Retirement System (OPERS). 22

27 In 2012, employees covered by OPERS contributed at a statutory rate of 10.0% of earnable salary or compensation. As the employer, the City s statutory contribution rate for those employees was 14.0% of the same base. In 2012, employees covered by OP&F contributed at a statutory rate of 10.0% of gross salary. As the employer, the City s statutory contribution rates, applied to the same base, were 19.5% for police personnel and 24.0% for fire personnel. These employee and employer contribution rates are the maximums permitted under current State law. For further information on these pension plans, see the Notes to the Basic Financial Statements included in Appendix C. Financial and other information for OPERS and OP&F can also be found on the respective website for each retirement system including its Comprehensive Annual Financial Report. OPERS and OP&F are two of five statewide public employee retirement systems created by and operating pursuant to Ohio law, all of which currently have unfunded actuarial accrued liabilities. The General Assembly has the power to amend the format of those systems and to revise rates and methods of contributions to be made by public employers and their employees and eligibility criteria, benefits or benefit levels for employee members. On September 12, 2012, the General Assembly passed five separate pension reform bills intended to assist each of the five retirement systems in addressing its unfunded actuarial accrued liabilities. The Governor signed those bills on September 26, and became effective on January 7, The bills passed with respect to OPERS and OP&F provide for (i) no change in the City contribution rates with respect to its employees earnable salaries, (ii) no change in OPERS employee contribution rate, and (iii) an increase in the OP&F employee contribution rate from 10% to 12.25% in annual increments of 0.75% beginning on July 2, With certain transition provisions applicable to certain current employees, the bills increase minimum age and service requirements for retirement and disability benefits, revise the calculation of an employee s final average salary on which pension benefits are based to include the five highest years (rather than the three highest years), provide for OPERS pension benefits to be calculated on a lower, fixed formula, change provisions with respect to future cost of-living adjustments to limit those adjustments to the lesser of any increase in the Consumer Price Index or three percent, and make other changes. The OP&F bill also authorizes the OP&F board to further adjust member contribution rates or further adjust age and service requirements after November 1, 2017, if, after an actuarial investigation, the board determines that an adjustment is appropriate. The City s current employer contributions to OPERS and OP&F, and the payments toward the accrued OP&F liability, have been treated as current expenses and included in the City s operating expenditures, except to the extent paid from the proceeds of the Police and Fire Pension levy referred to under Tax Rates. Federal law requires City employees hired after March 31, 1986 to participate in the federal Medicare program, which requires matching employer and employee contributions, each being 1.45% of the wage base. Otherwise, City employees who are covered by a State retirement system are not currently covered under the federal Social Security Act. OPERS and OP&F are not subject to the funding and vesting requirements of the federal Employee Retirement Income Security Act of City Facilities; Insurance The City s facilities include: 23

28 Category of Facilities Estimated Value(a) City Hall/Court/Fire/Police Complex $20,123,955 City Garage/Street Department 2,400,643 Park and Recreation Facilities, including pool 6,001,923 Cemetery 205,545 Sewer Facilities 8,059,198 Misc. Property 1,954,130 Total $38,745,394 (a) For insurance purposes. The City will use a portion of the proceeds of the Bonds to construct facility improvements to its sewer facilities, which is expected to increase insurance values of such facilities. The City currently carries real property and contents casualty insurance in the amount of $47,315,224, with a deductible of $1,000. The City also maintains a variety of liability insurance coverages with varying deductibles. The liability insurance on City vehicles has a combined single-limit bodily injury and property damage coverage in the amount of $5,000,000 per occurrence with a $1,000 deductible. The City also carries public official and employee liability insurance coverage with a $5,000,000 aggregate limit of liability and a $2,500 deductible for each loss. Other liability insurance coverage is maintained by the City as presented in Appendix C -- Note 17 Risk Management. Economic and Demographic Information Recent Census population has been: Population Year City County PMSA/MSA ,552 1,720,835 2,063,729(a) ,056 1,498,400 1,898,825(a) ,822 1,412,140 1,831,122(a) ,214 1,393,978 2,250,871(a) ,074 1,280,122 2,077,240(b) (a) (b) Numbers are for the prior PMSA. In 2003, the PMSA was reclassified as an MSA excluding Ashtabula County. Comparable historical Census numbers for the new MSA are not available population represents the current MSA Census figures show the following breakdown by age groups of the population of the City: Under Total 703 2,378 2,282 1,705 2,124 1,657 2,225 13,074 24

29 Educational attainment for the District s, the City s, the County s and the MSA s population (25 years or older) is set forth in the following table. City County MSA Less than 9th Grade % 30, % 45, % 9th to 12th Grade (no diploma) , , High School graduate (includes GED) 3, , , Some college, no degree 2, , , Associate degree , , Bachelor degree 1, , , Graduate or professional degree , , Source: U.S. Census Bureau Selected Source Characteristics in the United States Industry and Commerce The City established an Enterprise Zone, which included all land within the boundaries of the City of Bedford in April of The City established a Community Reinvestment area in 1997 and updated this in 2005, which included all land within the boundaries of the City of Bedford. The establishment of the Enterprise Zone and the Community Reinvestment area gave the City the ability to maintain and expand business located in the City and created new jobs. The City is in the process of obtaining new tenants, within a new industrial development in cooperation with the Hemisphere Corporation on the site designated as the Tinkers Creek Commerce Park. The City is pursuing interested parties to buy the vacated Taylor Chair Corporation headquarters built at a cost of $4,115,000. The Hemisphere Corporation and Hull & Associates have completed building a new headquarters on this site at a cost of $3.2 million. This was constructed on a Brownfield site and the site is to be developed with grants from the Cuyahoga County Brownfield Fund, Brush Wellman, prior owners of the site, the State of Ohio 629 Fund and the Federal Housing and Urban Development Fund (Brownfield Economic Development Initiative Grant, BEDI). Within a period of 5 years after completion of construction, Hemisphere will create new jobs and has already transferred 5 jobs to the site. Hull & Associates will create 16 new jobs and has transferred 29 jobs to the site and, in total, both companies will create additional payroll. Current combined annual payroll of all companies is $2,115,952. In 2008, a Wal-Mart Super Store was completed at a cost of $7.5 million dollars. The Wal-Mart store created 700 new jobs at a payroll of $6,776,862. Overall income tax dollars received by the City was $152,480, real estate value was placed at $6.6 million dollars and real estate taxes for 2011 were over $500,000. The total estimated revenue to be received by the City is over $275,000 annually. University Hospitals Health Systems, the second largest employer in the City, has spent over $12,500,000 over the past 15 years for improvements to their facilities within the City, including a newly certified cardiovascular center and a certified senior citizen emergency care center. U.S. Bank National Association has significantly increased its presence in the City over the past five years from 270 employees in 2008 to 416 employees in

30 Ben Venue Ben Venue, the largest employer in the City, has a history of continued growth. In 1995, Ben Venue employed 419 employees and operated within their 250,000 square foot facility. At year end, 2012, headcount has increased to 1,343 and they are now operating within 1 million square foot of manufacturing area. Ben Venue added a laboratory and administrative office area in recent years. On November 2, 2006, Ben Venue signed a Community Reinvestment Area Agreement with the City to construct a 90,000 square feet free standing office building complex now known as the Quality and Development Center. The total amount of project investment was $17.5 million with building costs of $14.8 million and an investment of new machinery at a cost of $1.5 million. The City offered incentives in the form of an abatement of real estate only at 50 percent for 15 years. This project was completed by mid-2008 and received Silver Certification by LEED standards through the US Green Building Coalition in In November 2009, Cuyahoga County was the recipient of a $2.5 million Clean Ohio Revitalization Fund grant that will be used to conduct remediation activities at the Ben Venue site. This was a tremendous success that comes as a result of the collaborative efforts of the County, City and Ben Venue officials working together for the betterment of our community. According to published reports, in January 2013 a federal judge approved a consent decree of permanent injunction against Ben Venue and three of its corporate officers levied by the U.S. Food and Drug Administration (FDA), for failing to comply with current good manufacturing practice requirements as required by federal law. The actions restrain Ben Venue from manufacturing and distributing drugs from its facility in the City until the FDA determines that its operations are compliant with the Federal Food, Drug, and Cosmetic Act. Under the decree, the FDA may order Ben Venue to stop manufacturing, recall products, and take other corrective action as necessary to ensure that patients receive safe and effective drugs. According to a press release from Ben Venue dated January 22, 2013, under the terms of the consent decree, Ben Venue is permitted to continue to manufacture and distribute more than one hundred important drugs that are essential for patient care. Ben Venue is also permitted to continue drug-development activities, and may file abbreviated new drug applications (ANDAs), and, as remediation progresses to the FDA s satisfaction, receive ANDA approvals and manufacture other products. Approvals of new drugs would allow the company to meet future patient needs Ben Venue, in partnership with the FDA, is committed to addressing drug shortage and ensuring critical medicines reach the people who need them. We continue to work closely with the FDA and share the goal of returning to production to manufacture safe and effective medicines. The Penske Auto Group The Penske Automotive Group (Penske) has collectively decided to continue their commitment to the Bedford Automile and gentrify over 22 acres of automotive retail space bridging Audi, Toyota, Scion, Smart and Mercedes Benz of Bedford. Additionally, Penske intends to double the size of their Bedford Collision center through the acquisition of the long abandoned facility formerly known as Sterling Auto Body. Penske had the opportunity to relocate their entire footprint, but given the natural gravity of the Automile, the expense of rebuilding, and their intent to reinvest, Penske is planning to put nearly $10,000,000 of capital expenditure into their existing facilities. This will ensure five fully factory compliant facilities are in the City for the foreseeable future. Penske s employment and revenue projections will increase by nearly 15% in the first year and by as much as 30% in the subsequent two years. 26

31 The Ganley Auto Group Bedford, Ohio In July 2012, Ganley Chrysler Jeep Dodge Ram moved into newly-renovated facilities that previously housed Ganley Lincoln of Bedford (closed in Janaury, 2012.) The cost of renovations, excluding investments in equipment, furniture and signage, amounted to over $1,400,000. In July 2013, Ganley Subaru of Bedford will be relocating to 123 Broadway, the former Chrysler Dodge Jeep Ram store. The facility is currently being renovated and is expected to be the first eco-friendly Subaru store in Northeast Ohio. The cost of renovations is currently estimated at $1.5 million. Once Ganley Subaru relocates from its current location at 240 Broadway, the existing building will become a Certified Used Vehicle Sales and Service Center for Ganley Volkswagen of Bedford. The above projects will expand employment in the City over the next several years by 20 to 30 additional full time employees. Employment and Income The following table shows comparative employment and unemployment statistics for the indicated periods. Employed in Unemployment Rate Year(a) County MSA County MSA State U.S ,100 1,034, % 6.1% 5.6% 4.6% ,700 1,026, , , , , , , , , Jan. 566, , Feb. 565, , (a) Not seasonally adjusted. Source: Ohio Department of Job and Family Services Bureau of Labor Market Information. The following table lists the employers (private and public) having the largest work forces within the City (as of December 31, 2012). 27

32 Employer Nature of Activity or Business Approximate Number of Employees Ben Venue Laboratories Inc. Pharmaceuticals 1,477 University Hospitals Health Systems Healthcare 915 Wal-Mart Associates Inc. Retail sales 618 Bedford City School District Education 473 US Bank National Association Bank 416 The City Government 346 HB Employee Services, LLC Recruitment firm 222 Jay Pontiac Inc. Automobile dealership 195 Alliance Scientific Solutions Recruitment firm 181 Riser Foods Company Grocery store 181 Tim Lally Chevrolet Automobile dealership 143 Source: The City s Tax Department. The 2011 median family and household incomes, as reported by the Census Bureau in its American Community Survey 5-Year Estimates, are set forth in the following table Median Income Family Household City County $51,488 59,213 $42,474 44,088 MSA 63,729 49,024 State United States 60,762 64,293 48,071 52,762 According to the Ohio Department of Taxation, the average federal adjusted gross income for residents within the Bedford City School District (which overlaps the City) filing Ohio personal income tax returns for calendar year 2010 was $39,409, compared to the averages of $64,761 for all Ohio school districts (for all tax returns filed, the 2010 State average for tax returns that indicated school districts was $52,327) and $56,240 for all school districts in the County. The income per household in the District, City, County and the MSA is estimated to be distributed as set forth in the following table. Income and Benefits(a) City County MSA Less than $10, % 55, % 71, % $10,000 to $14, , , $15,000 to $24, , , $25,000 to $34, , , $35,000 to $49,999 1, , , $50,000 to $74,999 1, , , $75,000 to $99, , , $100,000 to $149, , , $150,000 to $199, , , $200,000 or more , ,

33 (a) In 2011 inflation-adjusted dollars. Source: U.S. Census Bureau Selected Source Characteristics in the United States The U.S. Census Bureau also estimates that 14.1% of people in the City, 26.0% of people in the County, and 14.4% of the people in the MSA have incomes that fall below the poverty level. Housing and Building Permits The following is U.S. Census Bureau information concerning housing in the City, with comparative County and State statistics Median Value of Owner- Occupied Homes(a) % Constructed Prior to 1940(a) Number of Housing Units % Change (b) City $103, % 7,062 6, % County 134, , , State 134, ,783,051 5,127, (a) Source: U.S. Census Bureau Selected Source Characteristics in the United States (b) Source: U.S. Census Bureau American Fact-Finder 2010 Census Redistricting Data (Public Law ) Summary File. County Fiscal Officer figures for average sale prices of residential property in the County and the City are shown in the following table. Year County City 2008 $129,797 $93, ,358 66, ,804 70, ,300 61, ,129 57,479 The number and value of all building permits (including commercial, industrial, residential and public, and both remodeling and new construction) issued by the City are shown in the following table. Year Number Value $6,321, ,438, ,457, ,608, ,198,734 Utilities; Public Safety and Services Water service within the City is provided by the City. Water is purchased from the City of Cleveland. The City then sells the water directly to the consumers in the City (on a retail basis) and the water is distributed through City mains to its consumers. Sewage collection and disposal is provided by the City through its own wastewater treatment plant. The City adopts its 29

34 own rate structure and bills customers based upon water usage each month. Electricity is obtained from The Illuminating Company and natural gas is supplied by Dominion East Ohio Gas. Fire protection is provided by the City. Solid waste collection and disposal is provided by Waste Management Inc. The City is currently in discussions with neighboring communities regarding sharing certain services such as a regional 911 Dispatch Center in order to create efficiencies and reduce costs to residents. Introduction FINANCIAL MATTERS The City s Fiscal Year corresponds with the calendar year. The main sources of City revenue have been and are property taxes, income taxes and State distributions, as described below. The responsibilities for the major financial functions of the City are divided among the City Manager, the Director of Finance and the Council. Other important financial functions include general financial recommendations and planning by the City Manager; budget preparation by the City Manager with the assistance of the Director of Finance; and express approval of appropriations by the Council. The Director of Finance is the City s fiscal and chief accounting officer. Among that officer s duties are to keep the books and accurate statements of all money received and expended and of all taxes and assessments; at the end of each month and at Fiscal Year end. The Finance Department prepares monthly reports of revenues and expenditures for all accounts, and reconciled cash balances of all funds. Expenditure reports and purchase order reports are printed after check runs, thus allowing examination of appropriate expenditure accounts by City officers and departments in order; to not allow the amount set aside for any appropriation to be overdrawn, or the amount appropriated for any one item of expense to be drawn upon for any other purpose, or a voucher to be paid unless sufficient funds are in the City treasury to the credit of the fund on which the voucher is drawn. The Director of Finance is responsible for receiving, maintaining custody of and disbursing all City funds. The Director of Finance has charge of the financial affairs of the City, including the keeping and supervision of all City accounts and the custody and disbursements of all City funds and money. The Director of Finance is appointed by the Council. For property taxation purposes, assessment of real property is by the County Auditor subject to supervision by the State Tax Commissioner, and assessment of public utility and tangible personal property is by the State Tax Commissioner. Property taxes and assessments are billed and collected by County officials. Budgeting, Property Tax Levy and Appropriations Procedures Detailed provisions for budgeting, property tax levies and appropriations are made in the Revised Code, including a requirement that the City levy a property tax in a sufficient amount, with any other money available for the purpose, to pay the debt charges on securities payable from property taxes. 30

35 The law requires generally that a subdivision prepare, and then adopt after a public hearing, a tax budget approximately six months before the start of the next Fiscal Year. The tax budget then is presented for review by the county budget commission, which is comprised of the county auditor, treasurer and prosecuting attorney in non-charter counties. A county budget commission may, however, waive the requirement for a tax budget and require more limited information. In October 2002, the Cuyahoga County Budget Commission voted to waive the requirement for future Fiscal Years and prescribed an alternative form of a tax budget information document to be used by the City and other subdivisions in the County. Under provisions of the new Cuyahoga County Charter that took effect in January 2011, the Cuyahoga County Budget Commission is comprised of the County Executive, the County Fiscal Officer and the County Prosecuting Attorney. Under the current requirements, City budgeting for each Fiscal Year formally begins in the prior July with the preparation and submission to the Cuyahoga County Budget Commission of tax budget information for that Fiscal Year and the following calendar year. For debt charges, the information is to include the net amounts of debt charges for which property tax levies must be made (after application of estimated receipts from other sources) and the portions of those levies to be inside and outside the ten-mill limitation. That tax budget information will then be reviewed by the County Budget Commission. As part of that review, the County Budget Commission is to determine and approve levies for debt charges outside and inside the ten-mill limitation. The Revised Code provides that if any debt charge is omitted from the budget, the commission shall include it therein. The County Budget Commission is to then certify to the Board its action together with the estimate by the County Fiscal Officer of the tax rates outside and inside the ten-mill limitation. Thereafter, and before the end of the then Fiscal Year, the Board is to approve the tax levies and certify them to the proper County officials. The approved and certified tax rates are then to be reflected in the tax bills sent to property owners in the following calendar year. Real property taxes are payable in two equal installments, the first usually in January and the second in July. The Council adopts an annual appropriation measure by December 31 effective for January 1 of the next year, thus creating a permanent appropriation measure for that Fiscal Year. Although called permanent, the annual appropriation measure may be, and often is, amended during the Fiscal Year. Annual appropriations may not exceed the County Budget Commission s official estimates of resources, (file as of January 1) and the County Auditor must certify that the City s appropriation measures do not appropriate money in excess of the amounts set forth in those estimates. Financial Reports and Audits The City maintains its accounts, appropriations and other fiscal records in accordance with the procedures established and prescribed by the Ohio Auditor of State (the State Auditor). The State Auditor is charged by law with the responsibility of inspecting and supervising the accounts and records of each taxing subdivision and most public agencies and institutions. City receipts and expenditures are compiled on a cash basis, pursuant to accounting procedures prescribed by the State Auditor that are generally applicable to all Ohio political subdivisions. The records of these cash receipts and expenditures are converted annually for reporting purposes to a modified accrual basis of accounting for governmental funds and an accrual basis for proprietary funds. These accounting procedures conform to generally accepted 31

36 accounting principles as prescribed by the Governmental Accounting Standards Board (GASB). Those principles, among other things, provide for a modified accrual basis of accounting for the general fund, all special revenue funds and the debt service (bond retirement) fund and for a full accrual basis of accounting for all other funds, and for the preparation for each fund of balance sheets, statements of revenues and expenditures and statements showing changes in fund balances. The City has issued a Comprehensive Annual Financial Report (CAFR), including Basic (or General Purpose) Financial Statements (Financial Statements), for each of the Fiscal Years 1990 through The CAFRs through Fiscal Year 2011 were awarded the Government Finance Officers Association s Certificate of Achievement for Excellence in Financial Reporting, which is awarded to those governmental reporting agencies that comply with the GFOA reporting standards. The City has submitted its 2012 CAFR to GFOA for consideration. Audits are made by the State Auditor, or by private auditing firms (CPAs) at the direction of that officer, pursuant to Ohio law and under certain federal program requirements. No other independent examination or audit of the City s financial records is made. The most recent audit (including compliance audit) of the City s accounts was completed through Fiscal Year The Basic Financial Statements of the City for Fiscal Year 2011 are set forth as Appendix C; they have been audited by Ciuni & Panichi, independent auditors, as stated in their report appearing in those statements. No material findings, citations or items for adjustment, or material weaknesses in internal controls, were noted as part of the audit. An audit for Fiscal Year 2012 has commenced but not yet completed. Annual financial reports are prepared by the City and are filed as required by law with the State Auditor after the close of each Fiscal Year. See Appendix A for an unaudited comparative cash-basis summary, prepared by the City, of General Fund receipts and expenditures for the last five Fiscal Years and estimated for Fiscal Year All funds receipts and expenditures for the two prior Fiscal Years are set forth in Appendix B. See Appendix C for the audited Basic Financial Statements for Fiscal Year 2011, including the audit letter/independent accountant s report. The audited financial statements are public records, no consent to their inclusion is required, and no bring-down procedures have been undertaken by the Ciuni & Panichi since their date. Investments Investments and deposits of City funds are governed by the Uniform Depository Law (Chapter 135 of the Revised Code) applicable to all subdivisions, and by the City Charter and ordinances. The Director of Finance is responsible for those investments and deposits. Under recent and current practices, and the City s adopted investment policy (Ordinance ), in addition to deposits evidenced by interest-bearing certificates of deposit, investments are made in the State Treasurer s subdivision investment pool (STAR Ohio), federal or federal agency securities, repurchase agreements (with the underlying federal or agency securities held on the City s behalf by the various financial institutions invested), and mutual funds consisting of federal or agency securities. See also Notes to the Basic Financial Statements in Appendix C Listed below are the year-end unexpended cash balances and investments for 2008 to 32

37 As of December General Fund: Cash and Investments $ 7,903,304 $ 6,283,294 $ 6,598,329 $ 7,817,680 $ 8,424,031 Debt Charges Funds: Cash and Investments 248,695 52,360 62, , ,442 Enterprise Funds: Cash and Investments 3,781,593 3,730,268 6,204,419 5,137,428 5,299,693 All Other Funds: Cash and investments 5,878,811 5,250,389 6,154,973 5,742,484 4,723,818 Total Cash and Investments $ 17,812,403 $ 15,316,311 $ 19,020,184 $ 18,804,985 $ 18,629,984 The Director of Finance is responsible for the City s investments and is charged with the day-to-day responsibility of carrying out the investment objectives and practices of the City. Under recent and current practices, investments are made in direct obligations of the United States, obligations guaranteed by the United States (including obligations of certain federal agencies), certificates of deposit, repurchase agreements (with the underlying securities held on the City s behalf by third-party institutions or in the customer safekeeping account of the Federal Reserve account of the City s depository institutions), and certain of the City s own bonds and notes. The City does not invest in any securities that would be characterized as derivatives or in reverse repurchase agreements and purchases all investments with the intent to hold to maturity. The weighted average maturity of the entire portfolio is 387 days. The following table presents a summary of the City s investment portfolio as of December 31, Investments % of Portfolio State Investment Pool (STAR Ohio) $ 312, % Repurchase Agreements 8,677, Interest Bearing Checking Accounts 4,500, Federal Agency Securities 3,550, City bonds and notes 1,747, Total(a) $18,787, % Financial Outlook The City s General Fund cash balance as of December 31 for each of the years 2009 through 2012 and estimated for 2013 are shown in Appendix A. The City experienced a loss of $2.7 million of revenues for all funds in Fiscal Year The major contributing factors were a $2.0 million loss of tax receipts from the City s largest employers, and an annual loss of $700,000 from various State revenue sources. In response, the City Council asked the voters to pass a permanent 8.9-mill Safety Forces Levy on November 3, The levy passed with 71% of the vote. The City is expected 33

38 to receive $2.3 million per year from this levy beginning in Fiscal Year Despite the troubling economic environment of the past two years, due to conservative fiscal management and the decisions and actions mentioned above, the City was able to prepare a balanced budget for Fiscal Year 2010 and thereafter. GENERAL FUND The General Fund is the City s main operating fund, from which most expenditures are paid and into which most revenues are deposited. The General Fund receives money from many sources, but primarily from ad valorem property taxes and income taxes levied by the City and State local government assistance distributions. Appendices A and B provide further information regarding other revenue sources for the General Fund and other City funds. [The Remaining Portion of This Page Is Intentionally Left Blank.] 34

39 AD VALOREM PROPERTY TAXES AND SPECIAL ASSESSMENTS Assessed Valuation The following table shows the recent assessed valuations of property subject to ad valorem taxes levied by the City. Collection Year Real(a) Tangible Personal(b)(c)(d) Public Utility(c)(d) Total Assessed Valuation 2009 $280,730,230 $13,493,980 $6,468,910 $300,693, (e) 266,891, ,869, ,760, ,407, ,037, ,445, ,783, ,358, ,141, (f) 230,069, ,103, ,173,220 (a) Other than real property of railroads. The real property of public utilities, other than railroads, is assessed by the County Fiscal Officer. Real property of railroads is assessed, together with tangible personal property of all public utilities, by the State Tax Commissioner. (b) Other than public utility. (c) The State reduced the valuation of tangible personal property of general businesses and railroads in increments beginning in 2006 to zero in 2009 and reduced the valuation of tangible personal property of telecommunications companies in increments beginning in 2007 to zero in 2011; see the discussion of those reductions and related State makeup payments below. (d) Tangible personal property of all public utilities and real property of railroads; see footnotes (a), (b) and (c). Beginning in 2008, tangible personal property of telecommunications companies was reclassified from Public Utility to Tangible Personal. (e) (f) Reflects triennial adjustment. Reflects sexennial reappraisal. Source: County Fiscal Officer. Taxes collected on Real in one calendar year are levied in the preceding calendar year on assessed values as of January 1 of that preceding year. Taxes collected on Tangible Personal in one calendar year were levied in the same calendar year on assessed values during and at the close of the taxpayer s most recent fiscal year that ended on or before December 31 of the preceding calendar year, and at the tax rates determined in the preceding year. Public Utility (real and tangible personal) taxes collected in one calendar year are levied in the preceding calendar year on assessed values determined as of December 31 of the second year preceding the tax collection year. Based on County Fiscal Officer records of assessed valuations for the 2012 collection year, the largest City ad valorem property tax payers are: 35

40 Name of Taxpayer Nature of Business Total Assessed Valuation % of Total Assessed Valuation Ben Venue Laboratories Inc. Pharmaceuticals $8,420, % Cleveland Electric Illuminating Co. Electric utility 6,801, Bedford Colony Club Apartments Apartments 6,595, Wal-Mart Associates Inc. Retail sales 4,605, Bear Creek Properties Shopping center 3,795, CSH-ING Woodside Village Apartments 3,612, Hin, LLC Office buildings 2,275, University Hospitals Health Systems Healthcare 2,218, Brandybrook LLC Bank 1,804, Nextgen group, Ltd. Apartments 1,765, Galahad LLC Automobile dealership 1,457, Bedford Place Apartments Apartments 1,286, Outlot Devel. Co. LLC Restaurant 1,242, Fourteen Plus LLC Automobile dealership 1,217, ECHO GETGO Partners 2004 Service station 1,161, Pursuant to statutory requirements for sexennial reappraisals, in 2012, the County Fiscal Officer adjusted the true value of taxable real property to reflect current fair market values. These adjustments are first reflected in the 2012 duplicate (collection year 2013) and in the ad valorem taxes distributed to the City in 2013 and thereafter. The collection year 2013 assessed valuation figures are shown in the first table under Assessed Valuation above. The County Fiscal Officer is required to adjust (but without individual appraisal of properties except in the sexennial reappraisal), and has adjusted, taxable real property value triennially to reflect true values. The assessed valuation of real property is fixed at 35% of true value and is determined pursuant to rules of the State Tax Commissioner. An exception is that real property devoted exclusively to agricultural use is to be assessed at not more than 35% of its current agricultural use value. Real property devoted exclusively to forestry or timber growing is taxed at 50% of the local tax rate upon its assessed value. The taxation of all tangible personal property used in general businesses (excluding certain public utility tangible personal property) was phased out over tax years 2006 to Previously, machinery and equipment and furniture and fixtures were generally taxed at 25% of true value, and inventory was taxed at 23%. The taxation of all tangible personal property used by telephone, telegraph or interexchange telecommunications companies ( telecommunications property ) was phased out over tax years 2007 to Previously, telecommunications property was taxed at 25% or 46% of true value (depending on the type of equipment and when it was placed into service). The percentages of true value of such property taxed have been, and are being, reduced to those set forth in the following table. 36

41 Tax Year General Business Property Telecommunications Property % (a) % (b) (a) 25% or 46%; see discussion above. (b) And thereafter. To compensate for tax revenue losses as the tangible personal property taxes have been phased out, the State in 2006 commenced making distributions to taxing subdivisions (such as the City) from revenue generated by the State s commercial activity tax (the CAT). The CAT is levied annually on all persons or entities doing business in the State with taxable gross receipts from their business activities greater than $150,000. The State Budget Act established new thresholds for municipalities to qualify for those distributions that reduce or eliminate the amount of that reimbursement related to: (a) current expense levies to zero for most municipalities and (b) non-current expense levies to 50% in Fiscal Year 2012, and 25% thereafter, of the amount received with respect to such levies in Fiscal Year Reimbursements for taxes levied for debt purposes within the ten-mill limitation or pursuant to a municipal charter ( unvoted debt levies ) are to continue at the same amount as received in Fiscal Year 2010 through Fiscal Year 2017; thereafter no such reimbursement will be made. The State s Cat Tax reimbursement payment to the City for The Fire and Police Pension levied millage for Fiscal Year 2012 was $11,377 and for Fiscal Year 2013 is expected to be $ 11,377. The application of the CAT to certain types of business receipts has been the subject of litigation. On September 17, 2009, the Ohio Supreme Court held that the CAT is not an excise tax upon the sale or purchase of food and does not violate the State s constitutional prohibitions against such a tax. On July 26, 2011, an Ohio appellate court held that the CAT is not a tax upon motor vehicle fuel and, thus, upheld the constitutionality of the application of the CAT to gross receipts from the sales of motor fuels. On December 7, 2012, this decision was reversed by the Ohio Supreme Court, which held that CAT revenues derived from an excise tax measured by the gross receipts from the sale of motor-vehicle fuel must be considered to be related to fuels used for propelling motor vehicles on a highway, within the meaning of Section 5a [of Article XII of the Ohio Constitution] and, consequently, the excise tax at issue violates the Ohio Constitution to the extent that the revenue raised is used for purposes other than those specified in Section 5a. Accordingly, the allocation under [Ohio Revised Code Section] of the commercial-activity-tax revenues derived from the gross receipts of the sale of motorvehicle fuel to nonhighway purposes violates the Ohio Constitution, Article XII, Section 5a. The case has been remanded to the appellate court for further proceedings. Public utility tangible personal property (with some exceptions) is currently assessed (depending on the type of property) from 25% to 88% of true value. Effective for collection year 2002, the assessed valuation of electric utility production equipment was reduced from 100% and natural gas utility property from 88% of true value, both to 25% of true value. The City has been receiving reimbursement payments from the State to compensate for tax revenue losses as a result of those reductions. The State Budget Act reduces the amount of those payments in generally the same manner as described above for reimbursements from the CAT, except that reimbursement payments related to unvoted debt levies would end after Fiscal Year

42 As indicated herein, the General Assembly has from time to time exercised its power to revise the laws applicable to the determination of assessed valuation of taxable property and the amount of receipts to be produced by ad valorem taxes levied on that property and may continue to make similar revisions. Ohio law grants tax credits to offset increases in taxes resulting from increases in the true value of real property. Legislation classifies real property as between residential and agricultural property and all other real property, and provides for tax reduction factors to be separately computed for and applied to each class. These tax credits apply only to certain voted levies on real property, and they do not apply to unvoted levies or to voted levies to provide a specified dollar amount or to pay debt charges on general obligation debt. None of the City s tax levies are affected by these credits. These credits are discussed further following Tax Table A. Overlapping Governmental Entities The major political subdivisions or other governmental entities that overlap all or a portion of the territory of the City are listed below. The ( %) figure is that approximate percentage of a recent assessed valuation of the overlapping entity that is located within the City. The County (functions allocated to counties by Ohio law, such as elections, health and human services and judicial). (0.86%) Bedford City School District that includes 100% of the territory within the City (K-12 educational responsibilities). (35.59%) Greater Cleveland Regional Transit Authority (the RTA) (public mass transit). (0.86%) Cleveland Cuyahoga County Port Authority (public port facilities in the Cleveland port). (0.86%) Cuyahoga Community College District (two-year public higher education institution). (0.86%) Source: OMAC. Cleveland Metropolitan Park District (park and recreation areas). (0.85%) Cuyahoga County Library District (public library). (1.39%) Each of these entities operates independently, with its own separate budget, taxing power and sources of revenue. Only the County, school district and the RTA may, as may the City, levy ad valorem property taxes within the ten-mill limitation (subject to available statutory allocation of the 10 mills) described under Indirect Debt and Unvoted Property Tax Limitations. Tax Rates All references to tax rates under this caption are in terms of stated rates in mills per $1.00 of assessed valuation. 38

43 The Charter provides that the maximum total tax rate that may be levied without a vote of the electors for all purposes is mills. See Indirect Debt and Unvoted Property Tax Limitations. The following are the rates at which the City and overlapping taxing subdivisions have in recent years levied ad valorem property taxes. TAX TABLE A Overlapping Tax Rates Collection Year City County(a) School District Total (b) (a) Includes levies for the County, the Greater Cleveland Regional Transit Authority, the Cleveland-Cuyahoga County Port Authority, and Cuyahoga Community College District, all of which are coterminous with the County, and the Cleveland Metropolitan Park District and the Cuyahoga County Library District (see Overlapping Governmental Entities above). (b) The voters of the City authorized a 8.9-mill Safety Forces tax levy in November, 2009, for first collection in Source: County Fiscal Officer. Statutory procedures limit, by the application of tax credits, the amount realized by each taxing subdivision from real property taxation to the amount realized from those taxes in the preceding year plus both: the proceeds of any new taxes (other than renewals) approved by the electors, calculated to produce an amount equal to the amount that would have been realized if those taxes had been levied in the preceding year; and amounts realized from new and existing taxes on the assessed valuation of real property added to the tax duplicate since the preceding year. These procedures were instituted initially in 1976 [Section of the Revised Code (HB 920 and later acts); Ohio Const. Art. XII, Sec. 2a] to limit in part the effect of increasing property values on the growth of those property taxes. The tax credit provisions do not apply to amounts realized from taxes levied at whatever rate is required to produce a specified amount or an amount to pay debt charges, or from taxes levied inside the ten-mill limitation or any applicable charter tax rate limitation. To calculate the limited amount to be realized, a reduction factor is applied to the stated rates of the levies subject to these tax credits. A resulting effective tax rate reflects the aggregate of those reductions, and is the rate based on which real property taxes are in fact collected. As an example, the total overlapping tax rate for the 2013 tax collection year of mills within the City (in the portion overlapping Bedford City School District) is reduced by reduction factors of for residential/agricultural property and for all other real property, which results in effective tax rates of mills for residential and agricultural property and mills for all other real property. See Tax Table A. 39

44 Residential and agricultural real property tax amounts are generally further reduced by an additional 10% (12.5% in the case of owner-occupied residential property). See Collections for a discussion of the reimbursement by the State for this reduction. The following are the rates at which the City levied property taxes for the general categories of purposes for the years shown, both inside and outside the Charter tax rate limitation. [The Remaining Portion of This Page Is Intentionally Left Blank.] 40

45 TAX TABLE B City Tax Rates Inside the Limitation Collection Year Operating Police and Fire Pension Total See the discussion of the Charter tax limitation, and the priority of claim on that millage for debt charges on unvoted general obligation debt, under Indirect Debt and Unvoted Property Tax Limitations. Collections The following are the amounts billed and collected for City ad valorem property taxes for the tax collection years shown. Collection Year Current Billed Current Collected Current % Collected Delinquent Current Accumulated Real and Public Utility Property 2008 $3,605,768 $3,338, % $240,266 $443, ,695,369 3,465, , , ,838,928 5,509, , , ,861,322 5,301, , , ,832,805 5,353, , ,604 Tangible Personal Property 2008 $170,760 $169, % $821 $24, ,812 7, , ,055 7, , , ,663 Source: County Fiscal Officer. 41

46 Included in the Billed, Collected and Current % Collected figures above are payments made from State revenue sources under two Statewide real property tax relief programs the Homestead Exemption and the Property Tax Rollback Exemption. Homestead exemptions are available for (i) persons 65 years of age or older, (ii) persons who are totally or permanently disabled and (iii) surviving spouses of persons who were totally or permanently disabled or 65 years of age or older, had applied and qualified for a reduction of property taxes in the year of death, so long as the surviving spouses were not younger than 59 or older than 65 years of age on the date of their deceased spouses deaths. The Homestead Exemption exempts $25,000 of the homestead s market value from taxation, thereby reducing the property owner s ad valorem property tax liability. The Property Tax Rollback Exemption applies to all nonbusiness properties, and reduces each property owner s ad valorem property tax liability by either 12.5% (for owner-occupied non-business properties) or 10% (for non-owner non-business occupied properties). Payments to taxing subdivisions have been made in amounts equal to approximately 10% (12.5% with respect to owner-occupied residential property) of all ad valorem real property taxes levied. This State assistance reflected in the City s tax collections for 2012 was $171,958 for the elderly/disabled homestead payment and $387,832 for the rollback payment. Real property taxes are payable in two installments, the first usually by February and the second in July. Special Assessments The City on occasion conducts residential and other street improvements, which can include paving, resurfacing, draining, planting shade trees and constructing curbs, sidewalks, storm sewers, sanitary sewers and water lines. The cost of these improvements is paid in part from special assessments levied against the property benefiting from those improvements; the remaining cost is paid by the City. Unless all of the benefiting property owners petition to pay all costs, State law requires the City to pay at least 2% (plus the cost associated with intersections) of the total cost of the improvements. Owners of benefiting properties may commence a street improvement project by filing a petition with City Council requesting the improvement. Alternatively, Council, with a three-quarter majority, may by resolution declare the necessity for such an improvement. The special assessment proceedings provide for notice to property owners and an opportunity for property owners to object to the special assessments. At the commencement of construction of the improvement, bond anticipation notes are issued to pay the property owners portion of the project cost. Following completion of the work and determination of final costs, the special assessments are levied by Council against the benefiting property. Special assessments not paid within 30 days are certified to the County Auditor for collection over a period of time (usually 10 to 20 years for most projects). Special assessments are billed by the County Auditor and collected by the County Treasurer along with and at the same time as real property taxes. The real property taxes levied on any property against which special assessments have been levied are not to be paid unless those special assessments are also paid. Bonds are issued in anticipation of the collection of the special assessments to refund (together with any cash payments of special assessments) those notes. The special assessments certified for collection bear the same interest as the bonds. Under State law, those bonds are to be paid from the anticipated special assessments, but they are also general obligations of the City, payable from ad valorem property taxes to the extent not paid from those special assessments. See City Debt and Other Long-Term Obligations Statutory Direct Debt Limitations, Indirect Debt and Unvoted Property Tax Limitations and Debt Tables A and B. The City has never been required to levy an ad valorem property tax for debt charges on bonds issued in 42

47 anticipation of the collection of special assessments because special assessments have been collected as required and sufficient balances have been available in the Bond Retirement Fund to cover any temporary shortfall. The City conducts annual programs for the provision of street lighting and street cleaning services (including sprinkling, sweeping and removing snow and leaves) for its streets, alleys and other public ways. A portion of the cost of these programs is paid by the City from general funds; the remaining portion is financed by the levy each year of special assessments upon the benefited properties (based upon property valuation). Notes may be issued in anticipation of those special assessments to fund these programs. If issued, these notes generally have a maturity of one year or less and are payable solely from those special assessments. The notes are not general obligations of the City. By statute, no property tax may be pledged or used for their payment. The following are the amounts billed and collected for City special assessments for the tax collection years shown. Collection Year Current Billed Current Collected Current % Collected Delinquent Current Accumulated 2008 $492,063 $474, % $ 46,338 $278, , , , , , , , , , , , , , , , ,903 Source: County Fiscal Officer. Delinquencies The following is a general description of delinquency procedures under Ohio law, the implementation of which may vary in practice among the counties. Under the Revised Code, taxes become a lien of the State on the first day of January, annually, and continue until the taxes, including any penalties, interest or other charges, are paid. [Section ] Real estate taxes and special assessments that are not paid in the year they are due are to be certified by the county auditor s office as delinquent. Any amount of a previous tax bill not paid before new tax bills are mailed for the next half of the year is considered delinquent and becomes subject to a 10% penalty. A list of delinquent properties is compiled by the county auditor (the delinquent land duplicate ). If delinquent taxes (and special assessments) are not paid within 60 days after a copy of the county auditor s delinquent land duplicate is delivered to the county treasurer, then the county treasurer is to enforce the lien of the State that attached on January 1 of the year the taxes first became payable. Under State law (Section of the Revised Code), the county treasurer is to enforce the lien in the same way mortgage liens are enforced, that is, by an action in the court of common pleas for foreclosure and sale of the property in satisfaction of the delinquency. If the county treasurer fails to bring an action to enforce the lien, then the State Tax Commissioner is to do so. [Section ] In addition, one year after certification of a delinquent land list, the county prosecuting attorney is authorized to institute foreclosure proceedings in the name of the county treasurer to foreclose the lien. The property owner may arrange a payment plan with the county treasurer providing for payments over a period not to exceed five years. If payments are made when due under the plan, no further interest will be assessed against delinquent balances covered by the plan; a default in any payment under the plan or in the payment of current taxes will invalidate the 43

48 taxpayer s participation in the plan. If a payment plan is not adhered to or if none is arranged, foreclosure proceedings may be initiated by the county. Mass foreclosure proceedings and sales are permitted after three years delinquency. Proceeds from delinquent property foreclosure sales become part of and are distributed as current collections to the taxing subdivisions. In recent years, the State legislature has enacted several programs with respect to forestalling the foreclosure process or the forfeiture of property due to tax delinquency that may have the effect of delaying or eliminating the collection of certain property taxes. Notwithstanding the delay or loss of the tax revenues from those properties, an issuer of general obligation notes or bonds, such as the City, remains obligated to pay the debt charges on those notes or bonds from the available revenues. See Security and Sources of Payment. There were 5,264 nonexempt parcels in the City for collection year 2012, and five foreclosure proceedings were commenced against those parcels. The total number of delinquent parcels was not available from the County Auditor s office. These taxpayers accounted for more than 5% of the delinquencies identified above for collection year 2012: Taxpayer Current Status Amount Due Tangible Personal Property Adelphia of the Midwest Uncollectible $15,713 AMES Merchandising Corp. Bankrupt 66,260 Independent Furniture Sales No payment has been made 11,770 Target Corp. State reevaluation and redetermination procedures that could result in a reduction of the amount owed 72,356 Real Property University Hospital No payment has been made $682,635 Source: County Fiscal Officer. MUNICIPAL INCOME TAX Ohio law authorizes a city or village to levy a municipal income tax on both corporate income and employee wages and salaries at a rate of up to 1% without voter authorization. An income tax rate in excess of 1% requires approval by the voters. In 1991 and 2000, City electors authorized an income tax at the rates of 1% and an additional 0.25%. The City, pursuant to Council action and that voter authorization, currently levies the tax at the rate of 2.25%. This tax on business income and individuals salaries and wages is collected and administered by the City. The tax is in effect for a continuing period of time. It could be reduced or terminated by action of the Council, or by vote of the electors initiated by petition of 10% of the number of electors of the City who voted for governor at the next preceding election, following initiated ordinance procedures. Under current law, the Council could reimpose a 1% tax without authorization by the electors. Income tax proceeds, after payment of collection expenses, have been allocated by the Council for 2013 as follows: 90% to the General Fund, 7% to the Debt Service Fund for 44

49 payment of debt charges, and 3% to the Wastewater Fund for payment of debt charges. The ¼% income tax was passed by voters in November 1999 for collection in 2000 and beyond to pay the for the construction and debt service on the municipal complex including City Hall, and the construction and debt service associated with wastewater improvements constructed to the wastewater plant in Annual income tax receipts (all at 2.25%) have been and for 2013 are estimated to be: Year Receipts Accumulated Delinquencies as of 4/2/2013 Accumulative Outstanding Delinquent Balance 4/2/2013 Outstanding Delinquency Balance by Year Outstanding Delinquency % of Receipts as of 4/2/ ,771,628 $1,227,283 $649,648 $157, % ,218,353 1,190, , , ,724,277 1,210,110 1,186, , ,294,721 1,125,793 1,262,340 75,386(b) ,218,060(a) 1,262,340(a) 1,262,340(a) - - (a) Actual, As of April 2, (b) Filing deadline for returns is April 15, Residents are currently permitted a credit against their City income tax liability for amounts equal to 100% of the income tax paid (at the rate of up to 1.50%) on the same income to another municipal corporation. Based on employer payments of corporate and withheld personal income taxes, the following employer contributed more than 5% of the City income taxes collected in 2012: Employer Ben Venue Laboratories Nature of Business Manufacturing of Injectable Pharmaceuticals and Lyophilized (freeze dried) injectable drugs Certain of the income subject to the municipal income tax is also subject to the State income tax. The City has recently increased collection efforts by hiring a tax collection law firm to assist with delinquencies, and contracting with the City of Cleveland s Central Collection Agency to match Federal tax return information to the City of Bedford s in order to enhance full collection efforts. STATE LOCAL GOVERNMENT ASSISTANCE FUNDS Statutory state-level local government assistance funds, comprised of designated State revenues, are another source of revenue to the General Fund. Most are distributed to each county and then allocated on a formula basis, or in some cases on an agreement basis, among the county and cities, villages and townships, and in some cases park districts, in the county. City receipts from those funds were and for 2013 are estimated to be as shown in the following table. 45

50 Year Receipts 2008 $758, , , , , (est.) 366,000 The amounts of and formula for distribution of these funds may be revised. The State also historically distributed significant portions of a State estate tax to decedents communities of residence. Due to the nature of this tax, the annual amounts received have varied significantly. The City received $187,773 and $164,628 from this source in 2011 and The City has credited these distributions to its General Fund. The Director of Finance currently intends to assume the receipt of $0.00 from that source for budgeting purposes for 2013 based on actual filings; however, the State Budget Act has eliminated the State estate tax for decedents dying on or after January 1, NONTAX REVENUES The City s General Fund also receives significant revenues from nontax sources (Nontax Revenues). The City s Nontax Revenues include: (a) certain grants from the United States of America and the State; (b) fines and forfeitures that are deposited in the General Fund; (c) fees deposited in the General Fund from properly imposed licenses and permits; (d) investment earnings that are credited or transferred to the General Fund; (e) proceeds from the sale of assets that are deposited in the General Fund; (f) rental income that is deposited in the General Fund; (g) gifts and donations; and (h) charges for services and payments received in reimbursement for services. The following table summarizes historical collections for the past five years of the revenues identified by the City from its General Fund as Nontax Revenues. No assurance can be given that the collection of such Nontax Revenues will remain at the levels historically collected by the City. Year Licenses & Permits Historical Collections General Fund Nontax Revenues (Cash Basis) Charges for Fines & Investment Intergovernmental Services Forfeitures Earnings(a) Other Total 2008 $195,650 $308,437 $1,536,398 $145,000 $2,213,445 $ 17,766 $4,416, , ,227 1,478,807 37,424 2,217, ,717 4,748, , ,622 1,492,097 10,748 1,991,294 31,701 4,488, , ,211 1,492,312 12,223 1,890,828 75,565 4,364, , ,247 1,679,291 12,310 1,353, ,287 3,920,494 (a) 4.54% 12.35% 35% 0.99% 44.06% 3.05% 100% (a) Approximate percentage of the total General Fund Nontax Revenues averaged over the years shown. Licenses and Permits. Revenue in this category is derived from the issuance of occupancy permits and a variety of inspection permits. Fees charged to contractors for examinations, building plan reviews and various zoning fees are included in this category. Revenue is also generated from the issuance of operating licenses, including licenses for 46

51 mechanical, burglar alarms, carnivals, birth and death certificates, and contractor registrations. Fees vary with the type of license or permit and are set by City ordinance. Charges for Services. This category of revenue includes a variety of fees and charges collected by the City for the provision of services. The major services provided are ambulance runs, and housing of county prisoners. Fines and Forfeitures. These revenues are derived from the Bedford Municipal Court fines and court fees, City fines, and parking violations. Investment Earnings. The Director of Finance invests City funds pursuant to the Ohio Revised Code and the City s Investment Policy. See Financial Matters Investments. The City uses the General Fund to record all investment earnings and then distributes the earnings proportionately to various funds by their cash balances; whereby, most interest is allocated to the General Fund. Intergovernmental. Revenues from this category include revenues from other governments (State and other Local agencies). This category of revenues includes: (STATE) trailer and homestead taxes, estate tax, cigarette tax, liquor tax, local government, State utility tax, (Local) Bedford Municipal Court reimbursement of expenditures, Lawn Cutting assessments, housing improvement assessments, and housing of County Prisoners. Beginning 2013, the estate tax will no longer be collected by the State of Ohio. Other. This category includes a wide variety of types of revenue collected by City divisions. Due to the nature of these revenues, which frequently includes one time receipt of revenues, the total may fluctuate from year to year. Included in these totals are refunds, rental payments from leased land, and expenditure recoveries -revenue in this category is derived from reimbursements to the General Fund for costs and expenses it has incurred on behalf of other funds. These other funds include the Water and Wastewater Funds. CITY DEBT AND OTHER LONG-TERM OBLIGATIONS The following describes the security for general obligation debt such as the Bonds, applicable debt and ad valorem property tax limitations, and outstanding and projected bond and note indebtedness and certain other long-term financial obligations of the City. As used in the discussions that follow, the term BANs refers to notes issued in anticipation of the issuance of general obligation bonds. As further described below, the Bonds are: unvoted general obligations of the City, subject to the indirect debt and related property tax limitation (the Charter tax limitation) subject to the direct debt limitations in part ($2,735,000) because the remaining portion is exempt debt. The City does not have any outstanding industrial development revenue bonds or hospital facility revenue bonds for hospital facilities used by private nonprofit corporation from any of its funds. 47

52 The City is not, and to the knowledge of current City officials has not ever been, in default in the payment of debt charges on any of the bonds or notes on which the City is obligor or in a condition of default under any financing documents relating to any issue of revenue bonds. Security for General Obligation Debt; Bonds and BANs The following describes the security for City general obligation debt: bonds (such as the Bonds) and bond anticipation notes (BANs). Voted Bonds. The basic security for voted City general obligation bonds is the authorization by the electors for the City to levy, and its levy pursuant to constitutional and statutory requirements of, ad valorem taxes, without limitation as to rate or amount, on all real and tangible personal property subject to ad valorem taxation by the City. These taxes are outside of the Charter tax limitation and are to be sufficient in amount to pay (to the extent not paid from other sources) as they come due the debt charges on the voted bonds (subject to the provisions of bankruptcy laws and other laws affecting creditors rights and to the exercise of judicial discretion). The City has no voted general obligation bonds and notes outstanding. Unvoted Bonds. The basic security for unvoted City general obligation bonds is the City s ability to levy, and its levy pursuant to constitutional and statutory requirements of, ad valorem taxes on all real and tangible personal property subject to ad valorem taxation by the City, within the Charter tax limitation described below. These taxes are to be sufficient in amount to pay (to the extent not paid from other sources) as they come due the debt charges on unvoted general obligation bonds. The law provides that the levy necessary for debt charges has priority over any levy for other purposes within that tax limitation; that priority may be subject to the provisions of bankruptcy laws and other laws affecting creditors rights and to the exercise of judicial discretion. See Security and Sources of Payment and the discussion under Indirect Debt and Unvoted Property Tax Limitations of the Charter tax limitation, and the priority of claim on it for debt charges on unvoted general obligation debt of the City. BANs. While BANs are outstanding, Ohio law requires the levy of ad valorem property taxes in an amount not less than what would have been levied if bonds had been issued without the prior issuance of the BANs. That levy need not actually be collected if payment in fact is to be provided from other sources, such as the proceeds of the bonds anticipated or of renewal BANs. BANs, including renewal BANs, may be issued and outstanding from time to time up to a maximum period of 240 months from the date of issuance of the original notes (the maximum maturity for special assessment BANs is five years). Any period in excess of five years must be deducted from the permitted maximum maturity of the bonds anticipated. Portions of the principal amount of BANs outstanding for more than five years must be retired in amounts at least equal to, and payable not later than, those principal maturities that would have been required if the bonds had been issued at the expiration of the initial five-year period. The City has no outstanding BANs. Statutory Direct Debt Limitations The Revised Code provides two debt limitations on general obligation debt that are directly based on tax (assessed) valuation, applicable to all municipal corporations, including the City. The net principal amount of both voted and unvoted debt of the City, excluding exempt debt (discussed below), may not exceed 10½% of the 48

53 total tax (assessed) valuation of all property in the City as listed and assessed for taxation. The net principal amount of unvoted debt of the City, excluding exempt debt, may not exceed 5½% of that valuation, as discussed below. These two limitations, which are referred to as the direct debt limitations, may be amended from time to time by the General Assembly. The City s ability to incur unvoted debt (whether or not exempt from the direct debt limitations) is also restricted by the indirect debt limitation discussed under Indirect Debt and Unvoted Property Tax Limitations. Certain debt (including $4,905,000 of the Bonds) that the City may issue is exempt from the direct debt limitations (exempt debt). Exempt debt includes, among others, the following categories. General obligation debt: That is self-supporting debt (i.e., nontax revenues from the facility or category of facilities are sufficient to pay operating and maintenance expenses and related debt charges and other requirements) issued for facilities for city utility systems, airports, railroads, mass transit systems, parking, health care, solid waste, urban development, recreation, sports, convention, museum and other public attractions, natural resource exploration, development, recovery, use or sale, correctional and other related rehabilitation. To the extent debt charges are expected to be paid from tax increment financing payments in lieu of taxes pledged to the payment of those debt charges (subject to certain limitations). [Section (B)(8)] For highway improvements if the municipality has covenanted to pay debt charges and financing costs from distributions of motor vehicle license and fuel taxes. Issued in anticipation of the levy or collection of special assessments. To pay final judgments or court-approved settlements. Securities issued to improve water or sanitary or storm water sewerage facilities to the extent that another subdivision has agreed to pay to the City amounts equal to debt charges on those securities. Unvoted general obligation bonds to the extent that debt charges will be met from lawfully available municipal income taxes, to be applied to debt charges pursuant to ordinance covenants. [Section (B)(7)] Revenue debt and mortgage revenue bonds to finance municipal utilities. Notes issued in anticipation of (i) the collection of current revenues (which have a latest maturity of the last day of the Fiscal Year in which issued) or (ii) the proceeds of a specific tax levy. 49

54 Notes issued for certain energy conservation improvements or certain emergency purposes. Debt issued in anticipation of the receipt of federal or State grants for permanent improvements, or to evidence loans from the State capital improvements fund or State infrastructure bank. Voted debt for urban redevelopment purposes not in excess of 2% of the City s assessed valuation. Debt issued to make a single payment on certain accrued liability to the statewide Police and Fire Pension Fund. Debt issued for certain municipal educational and cultural facilities and sports facilities. BANs issued in anticipation of exempt bonds also are exempt debt. The City may incur debt for operating purposes, such as current tax revenue anticipation notes or tax anticipation notes, only under certain limited statutory authority. In the calculation of debt subject to the direct debt limitations, the amount in a city s bond retirement fund allocable to the principal amount of nonexempt debt is deducted from gross nonexempt debt. Without consideration of amounts in the Bond Retirement Fund, and based on outstanding debt and the Bonds and the current tax (assessed) valuation, the City s voted and unvoted nonexempt debt capacities are: Limitation Nonexempt Debt Outstanding Additional Debt Capacity Within Limitation 10½% = $25,008,188 $6,681,800 $18,326,388 5½% = $13,099,527 $6,681,800 $ 6,417,727 This is further detailed in Debt Table A. Indirect Debt and Unvoted Property Tax Limitations Voted general obligation debt may be issued by the City if authorized by vote of the electors. Ad valorem taxes, without limitation as to amount or rate, to pay debt charges on voted bonds are authorized by the electors at the same time they authorize the issuance of the bonds. General obligation debt such as the Bonds also may be issued by the City without a vote of the electors. This unvoted debt may not be issued unless the ad valorem property tax for the payment of debt charges on (a) those bonds (or the bonds in anticipation of which BANs are issued) and (b) all outstanding unvoted general obligation bonds (including bonds in anticipation of which BANs are issued) of the City resulting in the highest tax required for such debt charges, in any year is mills or less per $1.00 of assessed valuation. This indirect debt limitation is imposed by the Charter. In lieu of the ten-mill limitation briefly discussed below, the electors of a charter municipality such as the City may authorize the levy of a tax at a rate subject to a different limitation. The electors of the City have authorized the Council to levy each year a tax of up to 50

55 the Charter tax limitation on all the taxable property in the City without further authorization from the electors, but subject to change by further action of the electors. See Tax Rates. In the case of BANs issued in anticipation of unvoted general obligation bonds, an estimate of the highest annual debt charges for the anticipated bonds is used to calculate the millage required. Revenue bonds and notes and mortgage revenue bonds are not included in debt subject to the indirect limitation since they are not general obligations, and the full faith and credit of the City is not pledged for their payment. The indirect limitation applies to all outstanding unvoted general obligation debt even if debt charges on some of it is expected to be paid in fact from special assessments, income taxes, utility revenues or other sources. The estimated highest requirement for debt charges in any year for all City debt subject to the Charter tax limitation is estimated to be $1,960, That debt includes the Bonds and unvoted general obligation bonds outstanding (see Debt Table D). The payment of those annual debt charges would require a levy of an estimated mills based on current assessed valuation. Of this maximum annual requirement, $1,204, is expected by the City to be paid from sources other than ad valorem taxes, such as municipal income taxes, special assessments and utility revenues (see Debt Table C). The total millage theoretically required by the City for its outstanding unvoted bonds is mills for the year of the highest potential debt charges. There thus remains mills within the Charter tax limitation that has yet to be allocated to debt charges by the City and that is available to the City in connection with the issuance of additional unvoted general obligation debt. In the absence of the Charter tax limitation, the applicable indirect debt limitation would be the product of what is commonly referred to as the ten-mill limitation imposed by a combination of provisions of the Ohio Constitution and of the Revised Code. The ten-mill limitation is the maximum aggregate millage for all purposes that may be levied without elector approval on a single piece of property by all overlapping taxing subdivisions, with the 10 mills being allocated among certain overlapping taxing subdivisions (including the cities) pursuant to a statutory formula. The inside millage so allocated is required by Ohio law to be used first for the payment of debt charges on unvoted general obligation debt of the subdivisions (unless provision has been made for its payment from other sources) and the balance may be used for other purposes of the subdivisions. If the ten-mill limitation applied to the City (that is, if the City did not have the Charter tax limitation), unvoted obligations could not be issued by the City unless the tax required to be imposed in any one year would be 10 mills or less per $1.00 of assessed valuation for payment of annual debt charges on those obligations (if BANs, the bonds in anticipation of which the BANs are issued) and all outstanding unvoted general obligation bonds (including bonds in anticipation of which BANs are issued) of the combination of overlapping taxing subdivisions, including the City, resulting in the highest tax rate required for those debt charges. To the extent that this inside millage is required for debt charges of a taxing subdivision (which may exceed the formula allocation for that subdivision), the amount that would otherwise be available to that subdivision or to other overlapping subdivisions for general fund purposes would be reduced. In the case of the City, however, a law applicable to all Ohio cities and villages requires that any lawfully available receipts from a municipal income tax or from voted property tax levies be allocated to pay debt charges on City unvoted debt before the formula allocations of the inside millage to overlapping subdivisions can be invaded for that purpose. 51

56 Debt Outstanding The Debt Tables attached provide information concerning the City s outstanding debt represented by bonds and notes, City and overlapping subdivisions general obligation debt allocations and projected debt charges on the City s general obligation debt, including the Bonds. See Debt Tables. The following table shows the principal amount of City general obligation debt (bonds and notes) outstanding as of December 31 in the years shown. Bond Anticipation Notes Year Exempt Total, all Unvoted 2008 $10,668,500 $13,650, ,179,700 13,050, ,385,900 17,280, ,600,400 16,370, ,708,200 15,215,000 None of the debt of the City is currently in the form of BANs. BANs may be retired at maturity from the proceeds of the sale of renewal notes or of the bonds anticipated by the BANs, or available funds of the City, or a combination of these sources. Bond Retirement Fund The following table is an unaudited summary of Bond Retirement Fund receipts and disbursements for prior years and budgeted for the current year. Year Receipts Disbursements December 31 Balance (a) 2008 $ 842,259 $1,051,220 $ 20, ,028,034 1,047, ,054,699 1,049,768 5, ,173,766 1,136,967 42, ,347,041 1,276, , (a) 1,305,280 1,274, ,769 Budgeted. The City has historically paid debt service on bonds issued in anticipation of the collection of special assessments from the Special Assessment Bond Retirement Fund. If, as is often the case, collections of special assessments are insufficient to pay that debt service, those debt service payments are made from moneys advanced from the General Bond Retirement Fund. The Special Assessment Bond Retirement Fund is funded from special assessments collected from property owners benefited by the improvements financed. After certification by the City to the County Auditor, the special assessments, including interest on them at the rate borne by the bonds, are to be collected by the County Auditor during each year in which the bonds are payable. The following table is a summary of special assessment bond retirement fund receipts and disbursements for prior years and budgeted for the current year. 52

57 Year Receipts Disbursements December 31 Balance 2008 $115,127 $100,705 $228, , ,440 51, ,819 82,735 56, ,251 89,030 65, ,275 84,700 69, (a) 66,020 65,370 70,363 (a) Budgeted. Future Financings In summer of 2013, in the event of a qualifying action related to the federal direct payment subsidy of Build America Bonds (BABs), the city may issue general obligation bonds for the purpose of currently refunding at a lower rate the then currently outstanding Series 2010B Bonds, dated September 9, 2010, which were issued as BABs, the proceeds of which were used for sanitary sewers, repaired streets, vehicles and water improvements. Long-Term Financial Obligations Other Than Bonds and Notes The City has entered into a loan agreement with the Ohio Public Works Commission (OPWC) pursuant to which OPWC provided funds to the City for improving Broadway Avenue over Wood Creek-Culvert Replacement. The final loan amount from OPWC was $518,349. The principal amount of the City s obligations under that loan agreement will require an annual principal payment amount of $25,917 per year for 20 years with zero interest. These payments are required to be made from City s General Obligation Bond Retirement Fund after transfers are made from the General Fund. The loan agreement grants no security or property interest to OPWC in any property of the City, and does not pledge the general credit of the City, or create a debt subject to the direct or indirect debt limitations, or require the application of the general resources of the City for repayment. The City entered into a loan agreement with OPWC pursuant to which OPWC provided funds to the city for improving Grand Boulevard, Franklin Avenue, and Magnolia Avenue waterlines. The final loan from OPWC was $454,000. The principal payment amount will be $22,700 per year for 20 years with zero interest. These payments are required to be paid from the city s water fund. The loan agreement grants no security or property interest to OPWC in any property of the city, and does not pledge the general credit of the city, or create a debt service subject to the direct or indirect limitations, or require the application of the general resources of the city for repayment. The city s 1993 Ohio Water Development Authority (OWDA) loan agreement for sewer improvements will be paid in full as of December 1, The current year principal and interest amount due for payoff is $861,930 which represents 57% of the city s total enterprise debt and 31% of the overall debt for the city in the year Completion of this 20 year loan positions the city s wastewater fund in a positive outlook for future capital needs. See Notes 2, 9 and 13 to the City s Basic Financial Statements in Appendix C for discussion of compensated absences. 53

58 above. The City has no other long-term debt obligations, other than the bonds described [The Remaining Portion of This Page Is Intentionally Left Blank.] 54

59 CONCLUDING STATEMENT To the extent that any statements made in this Official Statement involve matters of opinion or estimates, whether or not expressly stated to be such, they are made as such and not as representations of fact or certainty and no representation is made that any of those statements have been or will be realized. Information in this Official Statement has been derived by the City from official and other sources and is believed by the City to be accurate and reliable. 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. Neither this Official Statement nor any statement that may have been or that may be made orally or in writing is to be construed as or as part of a contract with the original purchasers or subsequent holders or Beneficial Owners of the Bonds. This Official Statement has been prepared and delivered by the City and signed for and on behalf of the City by its officials identified below. CITY OF BEDFORD, OHIO By /s/ Henry J. Angelo City Manager /s/ Frank. C. Gambosi Director of Finance 55

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61 DEBT TABLE A Principal Amounts of Outstanding General Obligation (GO) Debt; Leeway for Additional Debt within Direct Debt Limitations A. Total debt including the Bonds (but excluding Refunded Bonds being refunded with the Bonds): $21,105,000 B. Exempt debt: Category Income Tax Sewer Special Assessment Water Outstanding Principal Amount $5,685,000 4,985, ,000 3,583,200 Total exempt debt: $14,423,200 C. Total nonexempt debt [A minus B]: $ 6,681,800 D. 5½% of tax (assessed) valuation (unvoted nonexempt debt limitation): $13,099,527 E. Total nonexempt limited tax bonds and notes outstanding: Bonds (including a portion of the Bonds) Notes F. Debt leeway within 5½% unvoted debt limitation [D minus E]: $6,681,800 0 $ 6,681,800 $ 6,417,727(a) G. 10½% of tax (assessed) valuation (voted and unvoted debt limitation): $25,008,188 H. Total nonexempt bonds and notes outstanding: Bonds (including a portion of the Bonds) Notes I. Debt leeway within 10½% debt limitation [G minus H]: $6,681,800 0 $ 6,681,800 $18,326,388(a) (a) Debt leeway in this table determined without considering money in the Bond Retirement Fund. DT-1

62 DEBT TABLE B Various City and Overlapping GO Debt Allocations (Principal Amounts) Amount Per Capita(a) % of City s Current Assessed Valuation(b) City Nonexempt GO Debt $ 6,681,800 $ % Total City GO Debt (exempt and nonexempt) 21,105,000 1, Highest Total Overlapping GO Debt(c) 26,003,181 1, (a) Based on 2010 population of 13,074. (b) The City s current assessed valuation is $238,173,220. (c) Includes, in addition to Total City GO Debt, allocations of total GO debt of overlapping debt issuing subdivisions (as of May 15, 2013) resulting in the calculation of highest total overlapping debt based on percent of tax (assessed) valuation of territory of the subdivisions located within the City (% figures are resulting percent of total debt of subdivisions allocated to the City in this manner), as follows: $2,865,741 County (0.86%); $ 918,783 Bedford City School District (35.59%); and $1,113,657 Greater Cleveland Regional Transit Authority (0.86%). Source of tax (assessed) valuation and confirmation of GO debt figures for overlapping subdivisions: OMAC. DT-2

63 Federal Direct Payment Relating To The Taxable Bonds(a) (a) Payments expected to be received by the City from the Secretary of the United States Treasury with respect to bonds of the City that have been designated as Build America Bonds pursuant to Section 6431 of the Internal Revenue Code of 1986, as amended. These amounts are currently anticipated to be used to pay debt service on the Taxable Bonds and should be netted against anticipated revenues. DEBT TABLE C Projected Debt Charges Requirements on City GO Debt Debt Charges on Portion of Total Anticipated to be Paid from Year The Bonds Outstanding Bonds Total Limited, Ad Valorem Taxes Special Assessments Sewer System Revenue Income Tax Revenue Water System Revenue DT $358, $1,230, $1,589, $628, $65, $155, $552, $186, $54, , ,231, ,960, , , , , , , , ,231, ,960, , , , , , , , ,165, ,898, , , , , , , ,432, ,914, , , , , , , ,431, ,890, , , , , , , ,420, ,884, , , , , , , ,112, ,541, , , , , , , ,109, ,534, , , , , , , ,065, ,491, , , , , , , ,007, ,435, , , , , , , ,005, ,435, , , , , , , , ,423, , , , , , , , ,425, , , , , , , , ,159, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

64 DEBT TABLE D Outstanding GO Bonds(a) The following debt is reflected in Debt Tables A, B and C. Issue Bonds Date of Issuance Final Maturity Principal Amount Outstanding Principal Amount Various Purpose General Obligation 08/01/ $1,095,000 $ 170,000 Bonds, Series 1995 Various Purpose Improvement Bonds, 11/01/ ,890,000 8,425,000 Series 2006 Various Purpose Bonds, Series /09/ ,090,000 4,870,000 The Bonds 05/15/ ,640,000 7,640,000 (a) Not included in this Table are City bond issues that have been refunded but have yet to be paid until they mature or are called for redemption in accordance with provisions of a related escrow agreement. DT-4

65 APPENDIX A Comparative Cash-Basis Summary of General Fund Receipts and Expenditures for Fiscal Years 2008 through 2012 and Estimated Fiscal Year Estimated 2013 Revenues Income Tax $ 8,758,168 $ 7,894,494 $ 8,284,517 $ 8,751,895 $ 9,265,250 $ 9,136,220 General Property Tax - Real Estate 2,297,500 2,413,786 2,239,111 2,216,183 1,965,462 1,793,965 Tangible Personal Property Tax 135,687 9,864 1, CAT Tax 267, , , , Trailer & Homestead Tax 268, , , , , ,690 Inheritance Tax 272,634 61,395 98, , ,628 0 Local Government & Revenue Assistance 758, , , , , ,000 Franchise Fee CABLE 136, , , , , ,950 Court Reimbursement & Fines 1,959,088 1,941,425 1,974,360 2,049,274 2,091,609 2,116,050 Ambulance Fees 120, , , , , ,000 Interest Earned 145,000 37,425 5,537 10,728 12,310 28,000 Building Department Fees 180, , , , , ,440 Police Department fees 150, ,542 98,536 41,275 70,270 96,965 Other 227, , , , , ,270 Total Operating Revenues $15,677,674 $14,765,441 $14,727,407 $15,073,630 $15,252,701 $14,636,550 Non Operating Revenues Advances in 0 300, , ,725 80, ,000 Special Assessments/Indirect Costs 0 321, , , ,500 Total Revenues $15,677,674 $15,386,549 $15,147,407 $15,882,355 $15,484,245 $15,159,050 Expenditures Police/Police Admin 2010 $ 4,396,755 $ 4,292,374 $ 1,555,626 $ 1,797,621 $ 1,950,268 $ 1,857,695 Health Contract 51,170 52,592 52,592 52,592 50,204 50,204 Parks & Public Land 193, , , , , ,806 Planning Commission 2,286 1,785 2,594 2,234 2,573 2,375 Board of Zoning Appeals Building 433, , , , , ,420 Refuse 733, , , , , ,000 Service 1,603,385 1,582,291 1,598,279 1,590,422 1,659,011 1,705,188 Council 288, , , , , ,140 Finance 720, , , , , ,195 Income Tax 250, , , , , ,292 City Manager 332, , , , , ,505 Law Department 252, , , , , ,155 Engineering 59,224 52,138 32,903 32,622 44,174 44,200 Municipal Court 1,967,808 2,022,230 1,974,014 2,026,788 2,067,412 2,173,610 Special Projects Fireworks 89,330 65,626 73,254 85, , ,775 Civil Service Commission 5,668 1,616 11,689 1,190 12,803 33,060 Lands & Buildings 613, , , , , ,967 County Auditor Deductions 69,409 55, , , , ,000 Tax Refunds 123, ,226 99, , , ,000 Transfers/Advances Out 4,859,889 5,061,929 5,711,899 5,199,306 4,920,909 5,403,520 Total Expenditures $17,047,483 $17,006,558 $14,832,373 $14,663,004 $14,877,894 $15,631,107 Difference revenue over(under) expenses (1,369,809) (1,620,009) 315,034 1,219, ,351 (472,057) Cash Balance Beginning of Year $ 9,273,113 $ 7,903,304 $ 6,283,295 $ 6,598,329 $ 7,817,680 $ 8,424,031 Cash Balance End of Year $ 7,903,304 $ 6,283,295 $ 6,598,329 $ 7,817,680 $ 8,424,031 $ 7,951,975 A-1

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67 APPENDIX B All-Funds Summary 2011 (Cash Basis) FUND DESCRIPTION BEGINNING BALANCE REVENUE EXPENSE UNEXPENDED BALANCE OUTSTANDING ENCUMBRANCE ENDING BALANCE GENERAL FUND $ 798, $15,882, $14,663, $ 2,017, $51, $ 1,966, GENERAL FUND RESERVE 5,800, ,800, ,800, CDBG 264, , , , , , ECONOMIC DEVELOPMENT 139, , , , , STATE HIGHWAY 151, , , , , INDIGENT DRIVERS ALC 114, , , , , RECREATION 312, ,135, ,161, , , , SEALE NARCOTICS TASK 161, , , , , , CEMETERY 92, , , , , ENFORCEMENT & EDUCAT , , STREET LIGHTING 314, , , , , STREET M & R 563, , , , , , LAW ENFORCEMENT TRUS 23, , , , MOTOR VEHICLE LICENS 174, , , , , FIRE EQUIPMENT 251, , , , , , GRANTS FUND 112, , , , , , FIRE MEDIC LEVY 372, ,872, ,880, , , , HOUSING REHABILITATI , , MUNI COURT SPECIAL P 726, , , , , HUD HOUSING REHABILI 37, , , , , INDIGENT INTERLOCK & 18, , , , SAFETY FORCES LEVY 74, ,632, ,579, , , BOND RET. GEN OBLIG 5, ,173, ,136, , , BOND RET. S.A. 56, , , , , MUNI COURT CAPITAL I 357, , , , , CAPITAL IMPROVEMENTS 1,150, , ,137, , , , WATER 3,346, ,455, ,687, ,114, ,032, ,082, WASTEWATER 2,855, ,534, ,367, ,023, , ,392, HEALTH INSURANCE RES 400, ,370, ,370, , , CEMETERY TRUST 43, , , POLICE PENSION 146, , , , , FIRE PENSION 151, , , , , STATE INSPECTION FEE TOTAL: $19,020, $38,350, $38,566, $18,804, $2,135, $16,669, B-1

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69 APPENDIX B All-Funds Summary 2012 (Cash Basis) FUND DESCRIPTION BEGINNING BALANCE REVENUE EXPENSE UNEXPENDED BALANCE OUTSTANDING ENCUMBRANCE ENDING BALANCE GENERAL FUND $ 2,017, $15,484, $14,877, $ 2,624, $ 92, $ 2,531, GENERAL FUND RESERVE 5,800, ,800, ,800, CDBG 90, , , , , , ECONOMIC DEVELOPMENT 141, , , , , STATE HIGHWAY 132, , , , , INDIGENT DRIVERS ALC 117, , , , , RECREATION 287, ,049, ,136, , , , SEALE NARCOTICS TASK 381, , , , , CEMETERY 109, , , , , ENFORCEMENT & EDUCAT 1, , , STREET LIGHTING 280, , , , , STREET M & R 685, , , , , , LAW ENFORCEMENT TRUS 6, , , , MOTOR VEHICLE LICENS 166, , , , , FIRE EQUIPMENT 312, , , , , , GRANTS FUND 92, , , , , FIRE MEDIC LEVY 363, ,842, ,140, , , , HOUSING REHABILITATI , , MUNI COURT SPECIAL P 755, , , , , HUD HOUSING REHABILI 4, , , , , INDIGENT INTERLOCK & 33, , , , , SAFETY FORCES LEVY 126, ,626, ,480, , , BOND RET. GEN OBLIG 42, ,347, ,276, , , BOND RET. S.A. 65, , , , , MUNI COURT CAPITAL I 236, , , B.M.C. C.O.C. COMPUTERS , , , , CAPITAL IMPROVEMENTS 686, , , , , , WATER 3,114, ,432, ,748, ,797, , ,729, WASTEWATER 2,023, ,691, ,212, ,502, , ,335, HEALTH INSURANCE RES 400, ,934, ,032, , , CEMETERY TRUST 43, , , POLICE PENSION 130, , , , , FIRE PENSION 156, , , , , STATE INSPECTION FEE TOTAL: $18,804, $38,436, $38,611, $18,629, $357, $18,272, B-2

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71 APPENDIX C Basic Financial Statements from the City s Financial Report for Fiscal Year 2011 (Audited) C-1

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73 Members of Council City of Bedford 165 Center Road Bedford, Ohio We have reviewed the Independent Auditor s Report of the City of Bedford, Cuyahoga County, prepared by Ciuni & Panichi, Inc., for the audit period January 1, 2011 through December 31, Based upon this review, we have accepted these reports in lieu of the audit required by Section , Revised Code. The Auditor of State did not audit the accompanying financial statements and, accordingly, we are unable to express, and do not express an opinion on them. Our review was made in reference to the applicable sections of legislative criteria, as reflected by the Ohio Constitution, and the Revised Code, policies, procedures and guidelines of the Auditor of State, regulations and grant requirements. The City of Bedford is responsible for compliance with these laws and regulations. Dave Yost Auditor of State July 16, East Broad Street, Fifth Floor, Columbus, Ohio Phone: or Fax:

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75 Independent Auditor s Report Members of the City Council Bedford, Ohio We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Bedford, Ohio (the City ) as of and for the year ended December 31, 2011, which collectively comprise the City s basic financial statements as listed in the table of contents. These financial statements are the responsibility of the City s management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City, as of December 31, 2011, and the respective changes in financial position, and, where applicable, cash flows, thereof and the respective budgetary comparison for the General and Public Safety Funds for the year then ended in conformity with accounting principles generally accepted in the United States of America. As described in Note 18, during the year ended December 31, 2011, the City implemented Governmental Accounting Standards Board (GASB) Statement No. 59, Financial Instruments Omnibus. In accordance with Government Auditing Standards, we have also issued our report dated June 4, 2012, on our consideration of the City s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.

76 Members of the City Council Bedford, Ohio Accounting principles generally accepted in the United States of America require that the management's discussion and analysis on pages 3 through 16 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City's financial statements as a whole. The introductory section, combining and individual nonmajor fund financial statements and schedules, and statistical section, are presented for purposes of additional analysis and are not a required part of the financial statements. The combining and individual nonmajor fund financial statements and schedules are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. Cleveland, Ohio June 4,

77 City of Bedford, Ohio Statement of Net Assets December 31, 2011 Governmental Business-Type Activities Activities Total Assets Equity in Pooled Cash and Cash Equivalents $13,819,718 $5,137,431 $18,957,149 Accounts Receivable 244,524 1,727,144 1,971,668 Accrued Interest Receivable 12, ,488 Intergovernmental Receivable 1,211, ,211,491 Internal Balances 3,814 (3,814) 0 Income Taxes Receivable 2,922, ,922,455 Materials and Supplies Inventory 173, , ,565 Prepaid Items 34, ,914 Loans Receivable 50, ,000 Property Taxes Receivable 5,774, ,774,409 Special Assessments Receivable 922, ,795 Unamortized Bond Issuance Costs 221, , ,548 Assets Held for Resale 963, ,546 Nondepreciable Capital Assets 3,022, ,862 3,740,440 Depreciable Capital Assets, Net 30,178,371 13,725,400 43,903,771 Total Assets 59,556,030 21,631,209 81,187,239 Liabilities Accounts Payable 228, , ,885 Accrued Wages 374,670 43, ,019 Intergovernmental Payable 602,046 41, ,259 Vacation Benefits Payable 697,718 83, ,116 Claims Payable 180, ,709 Deferred Revenue 5,528, ,528,767 Accrued Interest Payable 41,458 87, ,136 Long-Term Liabilities: Due Within One Year 1,402,523 1,351,487 2,754,010 Due In More Than One Year 12,568,381 7,470,974 20,039,355 Total Liabilities 21,625,073 9,737,183 31,362,256 Net Assets Invested in Capital Assets, Net of Related Debt 20,968,797 5,917,802 26,886,599 Restricted for: Capital Projects 241, ,731 Debt Service 513, ,704 Municipal Courts 774, ,291 Streets 1,227, ,227,043 Community Development 627, ,065 Street Lighting 555, ,255 Drug Force Violations 409, ,517 Other Purposes 301, ,073 Unrestricted 12,312,481 5,976,224 18,288,705 Total Net Assets $37,930,957 $11,894,026 $49,824,983 See accompanying notes to the basic financial statements

78 City of Bedford, Ohio Statement of Activities For the Year Ended December 31, 2011 Program Revenues Charges for Services and Operating Operating Grants Capital Grants Expenses Assessments and Contributions and Contributions Governmental Activities General Government $5,091,308 $2,083,696 $585,887 $0 Security of Persons and Property Police 5,290,725 64, ,038 0 Fire 3,779, , ,242 0 Public Health and Welfare 194,643 14,892 25,779 0 Leisure Time Activities 1,324, ,829 4,325 0 Community Development 843, , ,616 0 Basic Utility Services 1,010, , Transportation 4,303, ,471 97,583 Interest and Fiscal Charges 560, Total Governmental Activities 22,398,571 3,376,682 2,171,358 97,583 Business-Type Activities Water 4,131,949 4,417, ,182 Wastewater 1,958,932 2,233, Total Business-Type Activities 6,090,881 6,651, ,182 Total $28,489,452 $10,028,090 $2,171,358 $525,765 General Revenues Property Taxes Levied for: General Purposes Debt Service Public Safety Municipal Income Taxes Levied for: General Purposes Debt Service Wastewater Grants and Entitlements not Restricted to Specific Programs Investment Income Gain on Sale of Capital Assets Miscellaneous Total General Revenues Change in Net Assets Net Assets Beginning of Year Net Assets End of Year See accompanying notes to the basic financial statements

79 Net (Expense) Revenue and Changes in Net Assets Governmental Business-Type Activities Activities Total ($2,421,725) $0 ($2,421,725) (4,795,713) 0 (4,795,713) (2,946,984) 0 (2,946,984) (153,972) 0 (153,972) (1,165,954) 0 (1,165,954) (375,552) 0 (375,552) (721,078) 0 (721,078) (3,611,548) 0 (3,611,548) (560,422) 0 (560,422) (16,752,948) 0 (16,752,948) 0 714, , , , , ,709 (16,752,948) 988,709 (15,764,239) 2,263, ,263,682 32, ,714 3,003, ,003,234 9,277, ,277, , , , ,679 1,131, ,131, ,763 81, ,344 17, , ,756 27, ,005 16,928, ,509 17,329, ,738 1,389,218 1,564,956 37,755,219 10,504,808 48,260,027 $37,930,957 $11,894,026 $49,824,

80 City of Bedford, Ohio Balance Sheet Governmental Funds December 31, 2011 Other Total Public Governmental Governmental General Safety Funds Funds Assets Equity in Pooled Cash and Cash Equivalents $8,793,053 $778,021 $3,847,903 $13,418,977 Property Taxes Receivable 2,235,276 3,273, ,114 5,774,409 Income Taxes Receivable 2,922, ,922,455 Accounts Receivable 244, ,524 Intergovernmental Receivable 631, , ,525 1,211,491 Interfund Receivable 473, ,500 Accrued Interest Receivable 12, ,488 Materials and Supplies Inventory 166,317 7, ,900 Prepaid Items 34, ,914 Loans Receivable ,000 50,000 Special Assessments Receivable 149, , ,795 Assets Held for Resale , ,546 Total Assets $15,664,105 $4,219,005 $6,319,889 $26,202,999 Liabilities and Fund Balances Liabilities Accounts Payable $97,490 $18,082 $111,966 $227,538 Accrued Wages 189, ,127 5, ,670 Intergovernmental Payable 238, ,275 5, ,046 Interfund Payable , ,500 Deferred Revenue 4,840,397 3,433,401 1,531,534 9,805,332 Total Liabilities 5,365,367 3,989,885 2,127,834 11,483,086 Fund Balances Nonspendable 201,231 7,583 43, ,870 Restricted 0 221,537 3,714,559 3,936,096 Committed 16, , ,498 Assigned 61, , ,081 Unassigned (Deficit) 10,019,811 0 (22,443) 9,997,368 Total Fund Balances 10,298, ,120 4,192,055 14,719,913 Total Liabilities and Fund Balances $15,664,105 $4,219,005 $6,319,889 $26,202,999 See accompanying notes to the basic financial statements

81 City of Bedford, Ohio Reconciliation of Total Governmental Fund Balances to Net Assets of Governmental Activities December 31, 2011 Total Governmental Fund Balances $14,719,913 Amounts reported for governmental activities in the statement of net assets are different because Capital assets used in governmental activities are not financial resources and therefore are not reported in the funds. 33,200,949 Other long-term assets are not available to pay for current-period expenditures and therefore are deferred in the funds: Property Taxes $525,642 Income Taxes 1,973,937 Special Assessments 922,795 Intergovernmental 854,191 Total 4,276,565 An internal service fund is used by management to charge the costs of insurance to individual funds. The assets and liabilities of the internal service fund are included in governmental activities in the statement of net assets. Net Assets 218,769 Internal Balances 3,814 Total 222,583 In the statement of activities, bond issuance costs are amortized over the term of the bonds, whereas in governmental funds a bond issuance expenditure is reported when bonds are issued. 221,027 In the statement of activities, interest is accrued on outstanding bonds, whereas in governmental funds, an interest expenditure is reported when due. (41,458) Vacation benefits payable is not expected to be paid with expendable available financial resources and therefore not reported in the funds. (697,718) Long-term liabilities, such as bonds payable and compensated absences, are not due and payable in the current period and therefore are not reported in the funds: General Obligation Bonds (11,392,905) Special Assessment Bonds (240,000) OPWC Loans (807,359) Police Pension (181,428) Capital Leases (12,915) Compensated Absences (1,336,297) Total (13,970,904) Net Assets of Governmental Activities $37,930,957 See accompanying notes to the basic financial statements

82 City of Bedford, Ohio Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds For the Year Ended December 31, 2011 Other Total Public Governmental Governmental General Safety Funds Funds Revenues Property Taxes $2,217,431 $2,911,025 $8,480 $5,136,936 Municipal Income Taxes 8,990, ,703 9,671,215 Charges for Services 1,024, ,024,848 Fees, Licenses and Permits 248, ,260 Fines and Forfeitures 1,493, ,314 1,761,228 Intergovernmental 1,938, ,119 1,118,211 3,417,329 Special Assessments , ,548 Contributions and Donations ,317 48,317 Interest 78,974 4,977 22, ,187 Rentals 24, ,632 Other 54,053 1, , ,241 Total Revenues 16,071,123 3,278,015 2,866,603 22,215,741 Expenditures Current: General Government 4,562, ,049 4,638,074 Security of Persons and Property: Police 1,817,056 3,051, ,792 5,303,242 Fire 205,532 3,415,627 22,820 3,643,979 Public Health and Welfare 166, , ,914 Leisure Time Activities 1,300, ,922 1,316,961 Community Development 741, , ,349 Basic Utility Services 688, ,092 1,010,797 Transportation 1,580, ,485 2,390,859 Capital Outlay 0 0 1,230,803 1,230,803 Debt Service: Principal Retirement 14, , ,062 Interest and Fiscal Charges 7, , ,162 Total Expenditures 11,083,471 6,467,021 4,285,710 21,836,202 Excess of Revenues Over (Under) Expenditures 4,987,652 (3,189,006) (1,419,107) 379,539 Other Financing Sources (Uses) Sale of Capital Assets 11, ,294 49,041 OPWC Loans Issued , ,349 Transfers In 0 3,176, ,519 4,018,869 Transfers Out (3,874,469) 0 (144,400) (4,018,869) Total Other Financing Sources (Uses) (3,862,722) 3,176,350 1,253, ,390 Net Change in Fund Balances 1,124,930 (12,656) (165,345) 946,929 Fund Balances Beginning of Year 9,173, ,776 4,357,400 13,772,984 Fund Balances End of Year $10,298,738 $229,120 $4,192,055 $14,719,913 See accompanying notes to the basic financial statements

83 City of Bedford, Ohio Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities For the Year Ended December 31, 2011 Net Change in Fund Balances - Total Governmental Funds $946,929 Amounts reported for governmental activities in the statement of activities are different because Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives as depreciation expense. This is the amount by which depreciation exceeded capital outlay in the current period. Capital Outlay $1,452,216 Depreciation (2,670,291) Total (1,218,075) Governmental funds only report the disposal of capital assets to the extent proceeds are received from the sale. In the statement of activities, a gain or loss is reported for each disposal. (84,883) Revenues in the statement of activities that do not provide current financial resources are not reported as revenues. Property Taxes 162,694 Income Taxes 286,730 Special Assessments (69,834) Intergovernmental (65,154) Total 314,436 OPWC proceeds are other financing sources in the governmental funds that increase long-term liabilities in the statement of net assets and are not reported as revenues in the statement of activities. (518,349) Repayment of long-term obligations is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the statement of net assets. 722,062 Some expenses reported in the statement of activities do no require the use of current financial resources and therefore are not reported as expenditures in governmental funds. Accrued Interest on Bonds 5,043 Amortization of Premium 5,233 Amortization of Discount (2,589) Amortization of Loss on Refunding (21,257) Amortization of Issuance Costs (20,690) Total (34,260) Some expenses reported in the statement of activities, such as compensated absences and intergovernmental payable (which represent contractually required pension contributions) do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds. Compensated Absences 60,892 Vacation Benefits Payable 20,579 Total 81,471 The internal service fund used to charge the costs of insurance to individual funds is not reported in the City-wide statement of activities. Governmental fund expenditures and related internal service fund revenue are eliminated. The net revenue (expense) of the internal service fund is allocated among the governmental and business-type activities. Change in Net Assets (40,069) Change in Internal Balance 6,476 Total (33,593) Change in Net Assets of Governmental Activities $175,738 See accompanying notes to the basic financial statements

84 City of Bedford, Ohio Statement of Revenues, Expenditures and Changes in Fund Balance - Budget (Non-GAAP Basis) and Actual General Fund For the Year Ended December 31, 2011 Variance with Budgeted Amounts Final Budget Positive Original Final Actual (Negative) Revenues Property Taxes $2,322,920 $2,322,920 $2,217,431 ($105,489) Municipal Income Taxes 8,509,020 8,509,020 8,751, ,875 Charges for Services 621, , ,211 37,536 Fees, Licenses and Permits 170, , ,717 63,377 Fines and Forfeitures 1,582,700 1,582,700 1,492,312 (90,388) Intergovernmental 1,882,613 1,741,425 1,890, ,403 Interest 78,109 78,109 12,223 (65,886) Rentals 15,480 15,480 24,632 9,152 Other 34,000 34,000 50,933 16,933 Total Revenues 15,216,632 15,076,669 15,334, ,513 Expenditures Current: General Government 5,011,190 5,023,005 4,624, ,880 Security of Persons and Property: Police 1,857,022 1,869,017 1,813,158 55,859 Fire 251, , ,694 17,799 Public Health and Welfare 52,595 52,595 52,592 3 Leisure Time Activities 223, , ,420 96,050 Community Development 488, , ,007 29,551 Basic Utility Services 687, , ,387 1,113 Transportation 1,728,253 1,730,403 1,590, ,981 Total Expenditures 10,300,074 10,341,041 9,601, ,236 Excess of Revenues Over Expenditures 4,916,558 4,735,628 5,732, ,749 Other Financing Sources (Uses) Sale of Capital Assets 25,000 25,000 6,384 (18,616) Advances In 144, , ,500 (77,405) Advances Out 0 (11,000) (11,000) 0 Transfers Out (3,838,790) (3,899,469) (3,874,469) 25,000 Total Other Financing Sources (Uses) (3,668,885) (3,140,564) (3,211,585) (71,021) Net Change in Fund Balance 1,247,673 1,595,064 2,520, ,728 Fund Balance Beginning of Year 6,788,321 6,788,321 6,788,321 0 Prior Year Encumbrances Appropriated 61,696 61,696 61,696 0 Fund Balance End of Year $8,097,690 $8,445,081 $9,370,809 $925,728 See accompanying notes to the basic financial statements

85 City of Bedford, Ohio Statement of Revenues, Expenditures and Changes in Fund Balance - Budget (Non-GAAP Basis) and Actual Public Safety Fund For the Year Ended December 31, 2011 Variance with Budgeted Amounts Final Budget Positive Original Final Actual (Negative) Revenues Property Taxes $2,980,697 $2,980,697 $2,911,025 ($69,672) Fees, Licenses and Permits (35) Intergovernmental 454, , ,119 (83,887) Interest 1,000 1,000 4,977 3,977 Other 0 0 1,844 1,844 Total Revenues 3,435,788 3,425,788 3,278,015 (147,773) Expenditures Current: Security of Persons and Property: Police 2,994,490 3,054,645 3,049,905 4,740 Fire 3,410,616 3,458,416 3,392,903 65,513 Total Expenditures 6,405,106 6,513,061 6,442,808 70,253 Excess of Revenues Under Expenditures (2,969,318) (3,087,273) (3,164,793) (77,520) Other Financing Sources Transfers In 3,176,350 3,176,350 3,176,350 0 Net Change in Fund Balance 207,032 89,077 11,557 (77,520) Fund Balance Beginning of Year 744, , ,970 0 Prior Year Encumbrances Appropriated Fund Balance End of Year $952,187 $834,232 $756,712 ($77,520) See accompanying notes to the basic financial statements

86 City of Bedford, Ohio Statement of Fund Net Assets Proprietary Funds December 31, 2011 Enterprise Internal Water Wastewater Total Service Assets Current Assets Equity in Pooled Cash and Cash Equivalents $3,114,327 $2,023,104 $5,137,431 $400,741 Accounts Receivable 1,268, ,401 1,727,144 0 Materials and Supplies Inventory 137,816 45, ,665 0 Total Current Assets 4,520,886 2,527,354 7,048, ,741 Noncurrent Assets Unamortized Bond Issuance Costs 87,788 55, ,521 0 Nondepreciable Capital Assets 170, , ,862 0 Depreciable Capital Assets, Net 4,491,576 9,233,824 13,725,400 0 Total Noncurrent Assets 4,749,938 9,836,845 14,586,783 0 Total Assets 9,270,824 12,364,199 21,635, ,741 Liabilities Current Liabilities Accounts Payable 634,753 24, ,084 1,263 Accrued Wages 17,559 25,790 43,349 0 Intergovernmental Payable 15,870 25,343 41,213 0 Vacation Benefits Payable 31,818 51,580 83,398 0 Compensated Absences Payable 1,235 27,711 28,946 0 Accrued Interest Payable 9,441 78,237 87,678 0 General Obligation Bonds Payable 262,200 80, ,200 0 OPWC Loans Payable 20,000 55,294 75,294 0 OWDA Loans Payable 0 905, ,047 0 Claims Payable ,709 Total Current Liabilities 992,876 1,273,333 2,266, ,972 Long-Term Liabilities (net of current portion) Compensated Absences Payable 53,423 51, ,928 0 General Obligation Bonds Payable 2,343,831 1,722,134 4,065,965 0 OPWC Loans Payable 330, ,536 1,017,536 0 OWDA Loans Payable 0 2,282,545 2,282,545 0 Total Long-Term Liabilities 2,727,254 4,743,720 7,470,974 0 Total Liabilities 3,720,130 6,017,053 9,737, ,972 Net Assets Invested in Capital Assets, Net of Related Debt 1,804,423 4,113,379 5,917,802 0 Unrestricted 3,746,271 2,233,767 5,980, ,769 Total Net Assets $5,550,694 $6,347,146 11,897,840 $218,769 Net assets reported for business-type activities in the statement of net assets are different because they include accumulated overpayments to the internal service fund: (3,814) Net assets of business-type activities $11,894,026 See accompanying notes to the basic financial statements

87 City of Bedford, Ohio Statement of Revenues, Expenses and Changes in Fund Net Assets Proprietary Funds For the Year Ended December 31, 2011 Enterprise Internal Water Wastewater Total Service Operating Revenues Charges for Services $4,417,995 $2,233,413 $6,651,408 $2,343,643 Other 27, ,249 24,515 Total Operating Revenues 4,445,244 2,233,413 6,678,657 2,368,158 Operating Expenses Personal Services 598,864 1,003,053 1,601,917 0 Contractual Services 3,130,453 5,199 3,135, ,522 Materials and Supplies 141, , ,690 0 Depreciation 96, , ,459 0 Claims ,090,281 Other 167 1,575 1,742 0 Total Operating Expenses 3,968,208 1,618,252 5,586,460 2,410,803 Operating Income (Loss) 477, ,161 1,092,197 (42,645) Non-Operating Revenues (Expenses) Interest 46,175 35,406 81,581 2,576 Municipal Income Taxes 0 291, ,679 0 Grants 428, ,182 0 Interest and Fiscal Charges (161,386) (336,559) (497,945) 0 Total Non-Operating Revenues (Expenses) 312,971 (9,474) 303,497 2,576 Change in Net Assets 790, ,687 1,395,694 (40,069) Net Assets Beginning of Year 4,760,687 5,741, ,838 Net Assets End of Year $5,550,694 $6,347,146 $218,769 Some amounts reported for business-type activities in the statement of activities are different because a portion of the change in net assets of the internal service fund is reported with business-type activities: (6,476) Change in net assets of business-type activities $1,389,218 See accompanying notes to the basic financial statements

88 City of Bedford, Ohio Statement of Cash Flows Proprietary Funds For the Year Ended December 31, 2011 Increase (Decrease) in Cash and Cash Equivalents Enterprise Internal Water Wastewater Total Service Cash Flows from Operating Activities Cash Received from Customers $4,381,620 $2,207,752 $6,589,372 $0 Cash Received from Interfund Services Provided ,343,643 Other Cash Receipts 27, ,249 24,515 Cash Payments to Employees for Services (587,199) (996,076) (1,583,275) 0 Cash Payments for Goods and Services (3,342,215) (427,847) (3,770,062) (319,259) Cash Payments for Claims (2,051,174) Other Cash Payments (167) (1,575) (1,742) 0 Net Cash Provided by (Used for) Operating Activities 479, ,254 1,261,542 (2,275) Cash Flows from Noncapital Financing Activities Cash Received from Municipal Income Taxes 0 291, ,679 0 Cash Flows from Capital and Related Financing Activities Principal Paid on General Obligation Notes (210,500) (40,000) (250,500) 0 Interest Paid on General Obligation Notes (137,906) (94,352) (232,258) 0 Principal Paid on OWDA Loans 0 (864,063) (864,063) 0 Interest Paid on OWDA Loans 0 (173,759) (173,759) 0 Principal Paid on OPWC Loans (20,000) (55,294) (75,294) 0 Payments for Capital Acquisitions (389,336) (714,582) (1,103,918) 0 Net Cash Used for Capital and Related Financing Activities (757,742) (1,942,050) (2,699,792) 0 Cash Flows from Investing Activities Interest on Investments 46,175 35,406 81,581 2,576 Net Increase (Decrease) in Cash and Cash Equivalents (232,279) (832,711) (1,064,990) 301 Cash and Cash Equivalents Beginning of Year 3,346,606 2,855,815 6,202, ,440 Cash and Cash Equivalents End of Year $3,114,327 $2,023,104 $5,137,431 $400,741 (continued)

89 City of Bedford, Ohio Statement of Cash Flows Proprietary Funds (continued) For the Year Ended December 31, 2011 Reconciliation of Operating Income (Loss) to Net Cash Provided by (Used for) Operating Activities Enterprise Internal Water Wastewater Total Service Operating Income (Loss) $477,036 $615,161 $1,092,197 ($42,645) Adjustments: Depreciation 96, , ,459 0 (Increase) Decrease in Assets: Accounts Receivable (36,375) (25,661) (62,036) 0 Materials and Supplies Inventory 5,290 1,435 6,725 0 Increase (Decrease) in Liabilities: Accounts Payable (75,287) (99,158) (174,445) 1,263 Accrued Wages 2, ,954 0 Compensated Absences Payable 4,711 6,707 11,418 0 Vacation Benefits Payable 1,462 (4,272) (2,810) 0 Intergovernmental Payable 3,150 3,930 7,080 0 Claims Payable ,107 Total Adjustments 2, , ,345 40,370 Net Cash Provided by (Used for) Operating Activities $479,288 $782,254 $1,261,542 ($2,275) See accompanying notes to the basic financial statements

90 City of Bedford, Ohio Statement of Fiduciary Assets and Liabilities Agency Funds December 31, 2011 Assets Equity in Pooled Cash and Cash Equivalents $37 Cash and Cash Equivalents in Segregated Accounts 203,330 Total Assets $203,367 Liabilities Deposits Held and Due to Others $203,367 See accompanying notes to the basic financial statements

91 N OTES TO N B ASIC OTES TO F INANCIAL B ASIC S TATEMENTS F INANCIAL What: 2012 Chalk Art When: Sat. June 2nd Where: Broadway Ave. Municipal Lot side Time: 10:00 2:00 S Chalk Art TATEMENTS NOTES TO BASIC FINANCIAL STATEMENTS All ages are welcome Come experience the fun!

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93 City of Bedford, Ohio Notes to the Basic Financial Statements For the Year Ended December 31, 2011 Note 1 Description of the City and Reporting Entity The City of Bedford (the City) was incorporated as a village in In 1932, the residents of the City adopted the City s first charter. The City is a home rule municipal corporation under the laws of the State of Ohio which operates under the Council-Manager form of government with the Council appointing the City Manager, Finance Director, Law Director and Clerk of Council. The legislative power of the City is vested in the seven-member Council. Reporting Entity A reporting entity is comprised of the primary government, component units, and other organizations that are included to ensure that the financial statements are not misleading. The primary government of the City consists of all funds, agencies, departments and offices that are not legally separate from the City. For the City of Bedford this includes the agencies and departments that provide the following services: police, fire, rescue, recreation programs, street maintenance and repairs, sanitation, water, wastewater treatment, storm water, municipal court and general administrative services. The City purchases its water from the City of Cleveland and in turn bills its customers. The City of Bedford owns and operates its own wastewater treatment facility. Except for water and sewage, the major utilities are provided by private entities. The clerk of courts is appointed by the presiding Judge of the Bedford Municipal Court and has a fiduciary responsibility for the collection and distribution of court fees and fines. The Municipal Court Judges are elected by residents of the participating cities and work under the authority of the Chief Justice of the Supreme Court of Ohio. Component units are legally separate organizations for which the City is financially accountable. The City is financially accountable for an organization if the City appoints a voting majority of the organization s governing board and (1) the City is able to significantly influence the programs or services performed or provided by the organization; or (2) the City is legally entitled to or can otherwise access the organization s resources; the City is legally obligated or has otherwise assumed the responsibility to finance the deficits of, or provide financial support to, the organization; or the City is obligated for the debt of the organization. Component units may also include organizations which are fiscally dependent on the City in that the City approves the budget, the issuance of debt, or the levying of taxes. The reporting entity of the City does not include any component units. Note 2 - Summary of Significant Accounting Policies The financial statements of the City of Bedford have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The City also applies Financial Accounting Standards Board (FASB) statements and interpretations issued on or before November 30, 1989, to its governmental and business-type activities and to its proprietary funds unless those pronouncements conflict with or contradict GASB pronouncements. The City has elected not to apply FASB statements and interpretations issued after November 30, 1989 to its business-type activities and to its enterprise funds. The more significant of the City s accounting policies are described below. Basis of Presentation The City s basic financial statements consist of government-wide statements, including a statement of net assets and a statement of activities, and fund financial statements, which provide a more detailed level of financial information

94 City of Bedford, Ohio Notes to the Basic Financial Statements For the Year Ended December 31, 2011 Government-wide Financial Statements The statement of net assets and the statement of activities display information about the City as a whole. These statements include the financial activities of the primary government, except for fiduciary funds. The activity of the internal service fund is eliminated to avoid doubling up revenues and expenses. The statements distinguish between those activities of the City that are governmental and those that are considered business-type. The statement of net assets presents the financial condition of the governmental and business-type activities of the City at year-end. The statement of activities presents a comparison between direct expenses and program revenues for each program or function of the City s governmental activities and for the business-type activities of the City. Direct expenses are those that are specifically associated with a service, program or department and therefore clearly identifiable to a particular function. Program revenues include charges paid by the recipient of the goods or services offered by the program, grants and contributions that are restricted to meeting the operational or capital requirements of a particular program and interest earned on grants that is required to be used to support a particular program. Revenues which are not classified as program revenues are presented as general revenues of the City, with certain limited exceptions. The comparison of direct expenses with program revenues identifies the extent to which each governmental program or business activity is self-financing or draws from the general revenues of the City. Fund Financial Statements During the year, the City segregates transactions related to certain City functions or activities in separate funds in order to aid financial management and to demonstrate legal compliance. Fund financial statements are designed to present financial information of the City at this more detailed level. The focus of governmental and enterprise fund financial statements is on major funds. Each major fund is presented in a separate column. Nonmajor funds are aggregated and presented in a single column. The internal service fund is presented in a single column on the face of the proprietary fund statements. Fiduciary funds are reported by type. Fund Accounting The City uses funds to maintain its financial records during the year. A fund is defined as a fiscal and accounting entity with a self balancing set of accounts. There are three categories of funds: governmental, proprietary and fiduciary. Governmental Funds Governmental funds are those through which most governmental functions are financed. Governmental fund reporting focuses on the sources, uses and balances of current financial resources. Expendable assets are assigned to the various governmental funds according to the purposes for which they may or must be used. Current liabilities are assigned to the fund from which they will be paid. The difference between governmental fund assets and liabilities is reported as fund balance. The following are the City's major governmental funds: General Fund The general fund accounts for and reports all financial resources except those required to be accounted for and reported in another fund. The general fund balance is available to the City for any purpose provided it is expended or transferred according to the charter of the City of Bedford and/or the general laws of Ohio. Public Safety Fund The public safety special revenue fund accounts for and reports the property tax revenue restricted for the police and fire departments, paramedic services and police and fire pension contributions and the long-term accounting liability. The other governmental funds of the City account for grants and other resources whose use is restricted, committed or assigned to a particular purpose

95 City of Bedford, Ohio Notes to the Basic Financial Statements For the Year Ended December 31, 2011 Proprietary Funds Proprietary fund reporting focuses on the determination of operating income, changes in net assets, financial position and cash flows. Proprietary funds are classified as either enterprise or internal service. Enterprise Funds Enterprise funds may be used to account for any activity for which a fee is charged to external users for goods or services. The following are the City s major enterprise funds. Water Fund The water fund accounts for the provision of water service to the residents and commercial users located within the City. Wastewater Fund The wastewater fund accounts for the provision of sanitary sewer service to the residents and commercial users located within the City. Internal Service Fund Internal service funds account for the financing of services provided by one department or agency to other departments or agencies of the City on a cost-reimbursement basis. The City s only internal service fund is a health fund that accounts for vision, dental, prescription drug and hospital/medical claims of the City employees. Fiduciary Funds Fiduciary fund reporting focuses on net assets and changes in net assets. The fiduciary fund category is split into four classifications: pension trust funds, investment trust funds, private-purpose trust funds and agency funds. Trust funds are used to account for assets held by the City under a trust agreement for individuals, private organizations, or other governments and are therefore not available to support the City s own programs. Agency funds are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations. The City s agency funds account for the State inspection fee program and the amounts collected by the municipal court that are paid to other governments. Measurement Focus Government-wide Financial Statements The government-wide financial statements are prepared using a flow of economic resources measurement focus. All assets and all liabilities associated with the operation of the City are included on the Statement of Net Assets. The Statement of Activities presents increases (e.g. revenues) and decreases (e.g. expenses) in total net assets. Fund Financial Statements All governmental funds are accounted for using a flow of current financial resources measurement focus. With this measurement focus, only current assets and current liabilities generally are included on the balance sheet. The statement of revenues, expenditures and changes in fund balances reports on the sources (i.e., revenues and other financing sources) and uses (i.e., expenditures and other financing uses) of current financial resources. This approach differs from the manner in which the governmental activities of the government-wide financial statements are prepared. Governmental fund financial statements therefore include a reconciliation with brief explanations to better identify the relationship between the government-wide statements and the statements for governmental funds. Like the government-wide statements, all proprietary funds are accounted for on a flow of economic resources measurement focus. All assets and all liabilities associated with the operation of these funds are included on the statement of fund net assets. The statement of revenues, expenses and changes in fund net assets presents increases (i.e., revenues) and decreases (i.e., expenses) in total net assets. The statement of cash flows provides information about how the City finances and meets the cash flow needs of its proprietary activities

96 City of Bedford, Ohio Notes to the Basic Financial Statements For the Year Ended December 31, 2011 Basis of Accounting Basis of accounting determines when transactions are recorded in the financial records and reported on the financial statements. Government-wide financial statements are prepared using the accrual basis of accounting; proprietary and fiduciary funds also use the accrual basis of accounting. Governmental funds use the modified accrual basis of accounting. Differences in the accrual and modified accrual basis of accounting arise in the recognition of revenue, the recording of deferred revenue and in the presentation of expenses versus expenditures. Revenues - Exchange and Nonexchange Transactions Revenue resulting from exchange transactions, in which each party gives and receives essentially equal value, is recorded on the accrual basis when the exchange takes place. On a modified accrual basis, revenue is recorded in the year in which the resources are measurable and become available. Available means that the resources will be collected within the current year or are expected to be collected soon enough thereafter to be used to pay liabilities of the current year. For the City, available means expected to be received within sixty days of year-end. Nonexchange transactions, in which the City receives value without directly giving equal value in return, include income taxes, property taxes, grants, entitlements and donations. On an accrual basis, revenue from income taxes is recognized in the year in which the income is earned. Revenue from property taxes is recognized in the year for which the taxes are levied (See Note 7). Revenue from grants, entitlements and donations is recognized in the year in which all eligibility requirements have been satisfied. Eligibility requirements include timing requirements, which specify the year when the resources are required to be used or the year when use is first permitted, matching requirements, in which the City must provide local resources to be used for a specified purpose, and expenditure requirements, in which the resources are provided to the City on a reimbursement basis. On the modified accrual basis, revenue from nonexchange transactions must also be available before it can be recognized. Under the modified accrual basis, the following revenue sources are considered to be both measurable and available at year-end: income tax, state-levied locally shared taxes (including gasoline tax and motor vehicle license fees), fines and forfeitures, interest and grants and entitlements. Deferred Revenue Deferred revenue arises when assets are recognized before revenue recognition criteria have been satisfied. Property taxes for which there is an enforceable legal claim as of December 31, 2011, but which were levied to finance year 2012 operations, have been recorded as deferred revenue. Grants and entitlements received before the eligibility requirements are met are also recorded as deferred revenue. On governmental fund financial statements, receivables that will not be collected within the available period have also been reported as deferred revenue. Expenses/Expenditures On the accrual basis of accounting, expenses are recognized at the time they are incurred. The measurement focus of governmental fund accounting is on decreases in net financial resources (expenditures) rather than expenses. Expenditures are generally recognized in the accounting period in which the related fund liability is incurred, if measurable. Allocations of cost, such as depreciation and amortization, are not recognized in governmental funds

97 City of Bedford, Ohio Notes to the Basic Financial Statements For the Year Ended December 31, 2011 Pooled Cash and Cash Equivalents To improve cash management, cash received by the City is pooled. Monies for all funds are maintained in this pool. Individual fund integrity is maintained through the City s records. Interest in the pool is presented as equity in pooled cash and cash equivalents. The City has segregated bank accounts for monies held separate from the City s central bank account. These interest bearing depository accounts are presented as cash and cash equivalents in segregated accounts since they are not required to be deposited into the City Treasury. During 2011, investments were limited to repurchase agreements, nonnegotiable certificates of deposit, municipal bonds, federal home loan mortgage corporation notes, federal national mortgage association notes, federal mortgage corporation notes, federal home loan bank bonds and STAR Ohio, the State Treasurer s Investment Pool. Except for nonparticipating investment contracts, investments are reported at fair value which is based on quoted market prices. Nonparticipating investment contracts such as nonnegotiable certificates of deposit and repurchase agreements are reported at cost. STAR Ohio is an investment pool managed by the State Treasurer s Office which allows governments within the State to pool their funds for investment purposes. STAR Ohio is not registered with the SEC as an investment company, but does operate in a manner consistent with Rule 2a7 of the Investment Company Act of Investments in STAR Ohio are valued at STAR Ohio s net asset value per share which is the price the investment could be sold at December 31, Investment procedures are restricted by the provisions of the Ohio Revised Code. Interest revenue credited to the general fund during 2011 amounted to $78,974, of which $469 was assigned from other funds. Investments of the cash management pool and investments with original maturities of three months or less at the time they are purchased by the City are presented on the financial statements as cash equivalents. Materials and Supplies Inventory Inventories are presented at cost on a first-in, first-out basis and are expended/expensed when used. Inventory consists of expendable supplies held for consumption. Prepaid Items Payments made to vendors for services that will benefit periods beyond December 31, 2011 are recorded as prepaid items using the consumption method by recording a current asset for the prepaid amount and reflecting the expenditure/expense in the year in which services are consumed. Assets Held for Resale Assets held for resale represents assets consisting of homes purchased and repaired which will be resold under the Community Development in-fill housing project. Capital Assets General capital assets are capital assets which are associated with and generally arise from governmental activities. They generally result from expenditures in the governmental funds. General capital assets are reported in the

98 City of Bedford, Ohio Notes to the Basic Financial Statements For the Year Ended December 31, 2011 governmental activities column of the government-wide statement of net assets but are not reported in the fund financial statements. Capital assets utilized by the enterprise funds are reported both in the business-type activities column of the government-wide statement of net assets and in the respective funds. All capital assets are capitalized at cost (or estimated historical cost) and updated for additions and retirements during the year. The City was able to estimate the historical cost for the initial reporting of infrastructure by backtrending (i.e., estimating the current replacement cost of the infrastructure to be capitalized and using an appropriate price-level index to deflate the cost to the acquisition year or estimated acquisition year). Donated capital assets are recorded at their fair market values as of the date received. The City maintains a capitalization threshold of two thousand five hundred dollars. Improvements are capitalized; the costs of normal maintenance and repairs that do not add to the value of the asset or materially extend an asset s life are not. Interest incurred during the construction of proprietary fund capital assets is also capitalized. All capital assets are depreciated except for land and construction in progress. Improvements are depreciated over the remaining useful lives of the related capital assets. Useful lives for infrastructure were estimated based on the City s historical records of necessary improvements and replacement. Depreciation is computed using the straightline method over the following useful lives: Description Governmental Activities Estimated Lives Business-Type Activities Estimated Lives Buildings and Improvements 50 years 50 years Machinery and Equipment 5-20 years 5-20 years Furniture and Fixtures 10 years 10 years Vehicles 5-10 years 7-10 years Infrastructure years 50 years The City s infrastructure consists of roads, traffic signals, storm sewers and water and sewer lines and includes infrastructure acquired prior to December 31, Interfund Balances On the fund financial statements, receivables and payables resulting from transactions between funds for services provided or goods received and from short-term interfund loans are classified as interfund receivables/payables. Interfund balance amounts are eliminated in the statement of net assets, except for any net residual amounts due between governmental and business-type activities, which are presented as internal balances. Compensated Absences Vacation benefits are accrued as a liability as the benefits are earned if the employees' rights to receive compensation are attributable to services already rendered and it is probable that the employer will compensate the employees for the benefits through paid time off or some other means. The City records a liability for all accumulated unused vacation time when earned for all employees. Since the City s policy limits the accrual of vacation time to one year from the employee s anniversary date, the outstanding liability is recorded as vacation benefits payable on the statement of net assets rather than as a long-term liability

99 City of Bedford, Ohio Notes to the Basic Financial Statements For the Year Ended December 31, 2011 Sick leave benefits are accrued as a liability using the vesting method. The liability includes the employees who are currently eligible to receive termination benefits and those that the City has identified as probable of receiving payment in the future (those employees who will be eligible to receive termination payments in the next twenty years). The amount is based on accumulated sick leave and employee wage rates at year end taking into consideration any limits specified in the City's termination policy. The City records a liability for accumulated unused sick leave for all employees after ten years of service and for employees who have met retirement standards of age and/or years of service. Accrued Liabilities and Long-term Obligations All payables, accrued liabilities and long-term obligations are reported in the government-wide financial statements, and all payables, accrued liabilities and long-term obligations payable from proprietary funds are reported on the proprietary fund financial statements. In general, governmental fund payables and accrued liabilities that, once incurred, are paid in a timely manner and in full from current financial resources, are reported as obligations of the funds. However, claims and judgments, compensated absences, special termination benefits and contractually required pension contributions that will be paid from governmental funds are reported as a liability in the fund financial statements only to the extent that they are due for payment during the current year. Bonds, capital leases and long-term loans are recognized as a liability on the governmental fund financial statements when due. Net Assets Net assets represent the difference between assets and liabilities. Net assets invested in capital assets, net of related debt consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of any borrowing used for the acquisition, construction or improvement of those assets. Net assets are reported as restricted when there are limitations imposed on their use either through enabling legislation adopted by the City or through external restrictions imposed by creditors, grantors or laws or regulations of other governments. Net assets restricted for other purposes include security of persons and property through the police and fire departments and recreational activities. The City applies restricted resources when an expense is incurred for purposes for which both restricted and unrestricted net assets are available. Fund Balance Fund balance is divided into five classifications based primarily on the extent to which the City is bound to observe constraints imposed upon the use of the resources in the governmental funds. The classifications are as follows: Nonspendable: The nonspendable fund balance category includes amounts that cannot be spent because they are not in spendable form, or legally or contractually required to be maintained intact. The not in spendable form criterion includes items that are not expected to be converted to cash. It also includes the long-term amount of loans receivable, as well as property acquired for resale, unless the use of the proceeds from the collection of those receivables or from the sale of those properties is restricted, committed, or assigned. Restricted: Fund balance is reported as restricted when constraints placed on the use of resources are either externally imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments or is imposed by law through constitutional provisions or enabling legislation (City ordinances)

100 City of Bedford, Ohio Notes to the Basic Financial Statements For the Year Ended December 31, 2011 Enabling legislation authorizes the City to assess, levy, charge, or otherwise mandate payment of resources (from external resource providers) and includes a legally enforceable requirement that those resources be used only for the specific purposes stipulated in the legislation. Legal enforceability means that the City can be compelled by an external party-such as citizens, public interest groups, or the judiciary to use resources created by enabling legislation only for the purposes specified by the legislation. Committed: The committed fund balance classification includes amounts that can be used only for the specific purposes imposed by a formal action (ordinance or resolution) of City Council. Those committed amounts cannot be used for any other purpose unless City Council removes or changes the specified use by taking the same type of action (ordinance or resolution) it employed to previously commit those amounts. In contrast to fund balance that is restricted by enabling legislation, committed fund balance classification may be redeployed for other purposes with appropriate due process. Constraints imposed on the use of committed amounts are imposed by City Council, separate from the authorization to raise the underlying revenue; therefore, compliance with these constraints are not considered to be legally enforceable. Committed fund balance also incorporates contractual obligations to the extent that existing resources in the fund have been specifically committed for use in satisfying those contractual requirements. Assigned: Amounts in the assigned fund balance classification are intended to be used by the City for specific purposes but do not meet the criteria to be classified as restricted or committed. In governmental funds other than the general fund, assigned fund balance represents the remaining amount that is not restricted or committed. In the general fund, assigned amounts represent intended uses established by City Council or a City official delegated that authority by City Charter or ordinance, or by State Statute. Unassigned: Unassigned fund balance is the residual classification for the general fund and includes all spendable amounts not contained in the other classifications. In other governmental funds, the unassigned classification is used only to report a deficit fund balance resulting from overspending for specific purposes for which amounts had been restricted, committed, or assigned. The City applies restricted resources first when expenditures are incurred for purposes for which either restricted or unrestricted (committed, assigned, and unassigned) amounts are available. Similarly, within unrestricted fund balance, committed amounts are reduced first followed by assigned, and then unassigned amounts when expenditures are incurred for purposes for which amounts in any of the unrestricted fund balance classifications could be used. Operating Revenues and Expenses Operating revenues are those revenues that are generated directly from the primary activity of the proprietary funds. For the City, these revenues are charges for services for water and sewer services and self-insurance programs. Operating expenses are necessary costs that have been incurred in order to provide the good or service that is the primary activity of the fund. All revenues and expenses not meeting this definition are reported as nonoperating. Bond Issuance Costs Bond issuance costs for underwriting fees and bond insurance for the City Hall and capital improvements general obligation bonds and various water and sewer enterprise funds general obligation bonds are being amortized using the straight-line method over the life of the bonds on the government-wide statements and in the City s enterprise funds. The straight-line method of amortization is not materially different from the effective-interest method

101 City of Bedford, Ohio Notes to the Basic Financial Statements For the Year Ended December 31, 2011 As permitted by State statute, the City paid bond issuance costs from the bond proceeds and therefore does not consider that portion of the debt to be capital-related debt. That portion of the debt was offset against the unamortized bond issuance costs, which were included in the determination of unrestricted net assets. Reporting both within the same element of net assets prevents one classification from being overstated while another is understated by the same amount. Deferred Loss on Refunding The difference between the reacquisition price (funds required to refund the old debt) of various refunding bonds and the net carrying amount of the old debt, the deferred amount (loss) on refunding, is being amortized as a component of interest expense. This accounting loss is amortized over the remaining life of the old debt or the life of the new debt whichever is shorter and is presented net of the general obligation bonds payable and OWDA loan payable on the statement of net assets. Bond Premiums and Discounts On the government-wide financial statements, bond premiums and discounts are deferred and amortized over the term of the bonds using the straight line method. Bond premiums are presented as an increase of the face amount of the general obligation bonds payable. On fund financial statements, bond premiums are receipted in the year the bonds are issued. On the government-wide financial statements, bond discounts are presented as a decrease of the face amount of the general obligation bonds payable. On fund financial statements, bond discounts are expended in the year the bonds are issued. Interfund Activity Transfers between governmental and business-type activities on the government-wide statements are reported in the same manner as general revenues. Transfers between governmental activities are eliminated on the government wide financial statements. Internal allocations of overhead expenses from one function to another or within the same function are eliminated on the Statement of Activities. Interfund payments for services provided and used are not eliminated. Exchange transactions between funds are reported as revenues in the seller funds and as expenditures/expenses in the purchaser funds. Flows of cash or goods from one fund to another without a requirement for repayment are reported as interfund transfers. Interfund transfers are reported as other financing sources/uses in governmental funds and after nonoperating revenues/expenses in proprietary funds. Repayments from funds responsible for particular expenditures/expenses to the funds that initially paid for them are not presented on the financial statements. Extraordinary and Special Items Extraordinary items are transactions or events that are both unusual in nature and infrequent in occurrence. Special items are transactions or events that are within the control of the City Administration and that are either unusual in nature or infrequent in occurrence. Estimates The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates

102 City of Bedford, Ohio Notes to the Basic Financial Statements For the Year Ended December 31, 2011 Budgetary Data All funds, except agency funds, are legally required to be budgeted and appropriated. The major documents prepared are the tax budget, the certificate of estimated resources, and the appropriations resolution, all of which are prepared on the budgetary basis of accounting. The tax budget demonstrates a need for existing or increased tax rates. The certificate of estimated resources establishes a limit on the amount Council may appropriate. The appropriations resolution is Council s authorization to spend resources and sets annual limits on expenditures plus encumbrances at the level of control selected by Council. The legal level of control has been established by Council at the department level and personal services and other for all funds. Budgetary modifications may only be made by resolution of the City Council at the legal level of control. Authority to further allocate Council appropriations within departments has been given to the Director of Finance. The certificate of estimated resources may be amended during the year if projected increases or decreases in revenue are identified by the Finance Director. The amounts reported as the original and final budgeted amounts on the budgetary statements reflect the amounts on the certificate of estimated resources when the original and final appropriations were enacted by Council. The appropriation resolution is subject to amendment throughout the year with the restriction that appropriations cannot exceed estimated resources. The amounts reported as the original budgeted amounts reflect the first appropriation resolution for that fund that covered the entire year, including amounts automatically carried forward from prior years. The amounts reported as the final budgeted amounts represent the final appropriation amounts passed by Council during the year. Note 3 Fund Balances Fund balance is classified as nonspendable, restricted, committed, assigned and/or unassigned based primarily on the extent to which the City is bound to observe constraints imposed upon the use of the resources in the government funds. The constraints placed on fund balance for the major governmental funds and all other governmental funds are presented below: Nonmajor Public Governmental Fund Balances General Fund Safety Funds Total Nonspendable: Prepaids $34,914 $0 $0 $34,914 Inventory 166,317 7, ,900 Cemetery Endowments ,056 43,056 Total Nonspendable $201,231 $7,583 $43,056 $251,

103 City of Bedford, Ohio Notes to the Basic Financial Statements For the Year Ended December 31, 2011 Nonmajor Public Governmental Fund Balances General Fund Safety Funds Total Restricted for: Public Safety $0 $221,537 $6,254 $227,791 Community Development , ,065 State Highway , ,900 Indigent Drivers , ,501 Seale Narcotics , ,517 Enforcement and Education 0 0 1,407 1,407 Street Lighting , ,649 Street Construction, Maintenance and Repair , ,995 Municipal Court Special Programs , ,291 Indigent Interlock ,227 35,227 Debt service payments , ,394 Capital Improvements , ,731 Other Purposes ,628 96,628 Total Restricted 0 221,537 3,714,559 3,936,096 Committed to: Capital Improvements , ,465 Other Purposes 16, ,033 Total Committed 16, , ,498 Assigned to: Loans Receivable ,000 25,000 Capital Improvements , ,418 Other Purposes 61, ,663 Total Assigned 61, , ,081 Unassigned (Deficit) 10,019,811 0 (22,443) 9,997,368 Total Fund Balances $10,298,738 $229,120 $4,192,055 $14,719,913 Note 4- Budgetary Basis of Accounting While the City is reporting financial position, results of operations, and changes in fund balances on the basis of generally accepted accounting principles (GAAP), the budgetary basis as provided by law is based upon accounting for certain transactions on a basis of cash receipts, disbursements, and encumbrances. The Statement of Revenues, Expenditures and Changes in Fund Balances - Budget (Non-GAAP Basis) and Actual presented for the general and public safety funds is presented on the budgetary basis to provide a meaningful comparison of actual results with the budget. The major differences between the budget basis and the GAAP basis are that: 1. Revenues are recorded when received in cash (budget) as opposed to when susceptible to accrual (GAAP). 2. Expenditures are recorded when paid in cash (budget) as opposed to when the liability is incurred (GAAP)

104 City of Bedford, Ohio Notes to the Basic Financial Statements For the Year Ended December 31, Encumbrances are treated as expenditures (budget) rather than restricted, committed, or assigned fund balance (GAAP). 4. Unreported cash represents amounts received but not included as revenue on the budgetary statements, but which are reported on the operating statements prepared using GAAP. 5. Investments are reported at cost (budget) rather than fair value (GAAP). 6. Advances-In and Advances-Out are operating transactions (budget) as opposed to balance sheet transactions (GAAP). 7. Budgetary revenues and expenditures of the enterprise zone, cemetery and recreation funds are classified to the general fund for GAAP reporting. Adjustments necessary to convert the results of operations at the end of the year on the GAAP basis to the Budget basis are as follows: Net Change in Fund Balances General and Public Safety Special Revenue Funds Public General Safety GAAP Basis $1,124,930 ($12,656) Net Adjustment for Revenue Accruals 861,277 0 Beginning Fair Value of Adjustments for Investments (64,074) 0 Ending Fair Value of Adjustments for Investments (4,273) 0 Beginning Unrecorded Cash 118,754 0 Ending Unrecorded Cash (120,356) 0 Net Adjustment for Expenditure Accruals 20,233 45,522 Advances In 667,500 0 Advances Out (11,000) 0 Excess of Revenues Over (Under) Expenditures Enterprise Zone (2,496) 0 Cemetery (17,259) 0 Recreation 27,688 0 Encumbrances (80,132) (21,309) Budget Basis $2,520,792 $11,557 Note 5 - Deposits and Investments The City has chosen to follow State statute and classify monies held by the City into three categories. Active monies are public monies determined to be necessary to meet current demands upon the City treasury. Active monies must be maintained either as cash in the City treasury, in commercial accounts payable or withdrawable on demand, including negotiable order of withdrawal (NOW) accounts, or in money market deposit accounts

105 City of Bedford, Ohio Notes to the Basic Financial Statements For the Year Ended December 31, 2011 Inactive deposits are public deposits that Council has identified as not required for use within the current five year period of designation of depositories. Inactive deposits must either be evidenced by certificates of deposit maturing not later than the end of the current period of designation of depositories, or by savings or deposit accounts including, but not limited to, passbook accounts. Interim deposits are deposits of interim monies. Interim monies are those monies which are not needed for immediate use but which will be needed before the end of the current period of designation of depositories. Interim deposits must be evidenced by time certificates of deposit maturing not more than one year from the date of deposit or by savings or deposit accounts including passbook accounts. Interim monies held by the City can be deposited or invested in the following securities: 1. United States Treasury bills, bonds notes, or any other obligation or security issued by the United States Treasury, or any other obligation guaranteed as to principal and interest by the United States; 2. Bonds, notes, debentures, or any other obligations or securities issued by any federal government agency or instrumentality, including, but not limited to, Federal National Mortgage Association, Federal Home Loan Bank, Federal Farm Credit Bank, Federal Home Loan Mortgage Corporation, Government National Mortgage Association, and Student Loan Marketing Association. All federal agency securities shall be direct issuances of federal government agencies or instrumentalities; 3. Written repurchase agreements in securities listed above; 4. Bonds and other obligations of the State of Ohio; 5. Time certificates of deposit or savings or deposit accounts including, but not limited to, passbook accounts; 6. No-load money market mutual funds consisting exclusively of obligations described in division (1) or (2); 7. The State Treasurer's investment pool (STAR Ohio); and 8. Commercial paper and bankers acceptances if training requirements have been met. Investments in stripped principal or interest obligations, reverse repurchase agreements and derivatives are prohibited. The issuance of taxable notes for the purpose of arbitrage, the use of leverage and short selling are also prohibited. Investments may only be made through specified dealers and institutions. The City may also invest monies not required to be used for a period of six months or more in the following: 1. Bonds of the State of Ohio; 2. Bonds of any municipal corporation, village, county, township, or other political subdivision of this State, as to which there is no default of principal, interest or coupons; and 3. Obligations of the City

106 City of Bedford, Ohio Notes to the Basic Financial Statements For the Year Ended December 31, 2011 Deposits Custodial Credit Risk Custodial credit risk for deposits is the risk that in the event of bank failure, the City will not be able to recover deposits or collateral securities that are in possession of an outside party. At year end, $3,406,783 of the City s bank balance of $5,442,654 was uninsured and uncollateralized. Although the securities were held by the pledging financial institutions trust department and all statutory requirements for the deposit of money had been followed, noncompliance with Federal requirements could potentially subject the City to a successful claim by the Federal Deposit Insurance Corporation. The City has no deposit policy for custodial risk beyond the requirements of State statute. Ohio law requires that deposits be either insured or be protected by eligible securities pledged to and deposited either with the City or a qualified trustee by the financial institution as security for repayment, or by a collateral pool of eligible securities deposited with a qualified trustee and pledged to secure the repayment of all public monies deposited in the financial institution whose market value at all times shall be at least one hundred five percent of the deposits being secured. Investments Investments are reported at fair value. As of December 31, 2011, the City had the following investments: Percent of Moody Total Fair Value Maturity Rating Investments Repurchase Agreements $9,749,947 Less than 30 days AAAm 69.30% Municipal Bonds 1,008,231 Less than three years AAA 7.17% Federal Home Loan Mortgage Corporation Notes 500,000 Less than five years AAA 3.55% Federal National Mortgage Association Notes 900,000 Less than five years AAA 6.40% Federal Mortgage Corporation Notes 300,000 Less than five years AAA 2.13% Federal Home Loan Bank Bonds 1,300,000 Less than five years AAA 9.24% STAR Ohio 311, days AAAm N/A Total Investments $14,069,966 Interest Rate Risk As a means of limiting its exposure to fair value losses caused by rising interest rates, the City s investment policy requires that operating funds be invested primarily in short-term investments maturing within five years from the date of purchase and that the City s investment portfolio be structured so that securities mature to meet cash requirements for ongoing operations and/or long-term debt payments. The stated intent of the policy is to avoid the need to sell securities prior to maturity. Repurchase agreements are limited to 30 days and the market value of the securities must exceed the principal value of the agreement by at least 2 percent and be marked to market daily. Custodial Credit Risk For an investment, custodial credit risk is the risk that, in the event of the failure of the counterparty, the City will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. The securities underlying the repurchase agreements are exposed to custodial credit risk in that they are uninsured, unregistered and held by the counterparty. The City has no investment policy

107 City of Bedford, Ohio Notes to the Basic Financial Statements For the Year Ended December 31, 2011 dealing with investment custodial credit risk beyond the requirement in State statute that requires securities shall be delivered into the custody of the finance director or governing board or an agent designated by the finance director or governing board. Credit Risk All investments of the City carry a rating of AAA and AAAm by Standard & Poor s. The City has no investment policy that addresses credit risk. Concentration of Credit Risk The City places no limit on the amount it may invest in any one issuer. Note 6 - Contingencies Grants The City receives financial assistance from federal and state agencies in the form of grants. The disbursements of funds received under these programs generally require compliance with terms and conditions specified in the grant agreements and is subject to audit by the grantor agencies. Any disallowed claims resulting from such audits could become a liability of the general fund or other applicable funds. However, in the opinion of management, any such disallowed claims will not have a material effect on the overall financial position of the City at December 31, Litigation The City is a party to various legal proceedings seeking damages. The City management is of the opinion that ultimate disposition of these claims and legal proceedings will not have a material effect, if any, on the financial condition of the City. Investigation On April 6, 2011, the City of Bedford Police Department, with assistance from the Cuyahoga County Prosecutor s office, started an investigation into the City of Bedford s Home Rehabilitation Program and possible improprieties related to administering the grant. The City feels it is highly unlikely that an adverse outcome will materially affect the fair presentation of the City s basic financial statements. The matter is still under investigation. However, based on the City s internal review of the program, the City believes the likelihood of the investigation resulting in any material potential loss or liability, including the possibility of significant disallowance findings related to Federal grant programs, is remote, and that any adverse outcome from those charges would pertain to the City officials and employees subject to the investigation. Note 7 - Receivables Receivables at December 31, 2011, consisted primarily of municipal income taxes, property taxes, intergovernmental receivables arising from entitlements and shared revenues, special assessments, loans, accrued interest on investments, and accounts (billings for utility service). No allowance for doubtful accounts has been recorded because uncollectible amounts are expected to be insignificant. All receivables except property taxes, special assessments, and loans receivable are expected to be received within one year. Property taxes, although ultimately collectible, include some portion of delinquencies that will not be collected within one year

108 City of Bedford, Ohio Notes to the Basic Financial Statements For the Year Ended December 31, 2011 Special assessments expected to be collected in more than one year amount to $397,580 in the special assessment bond retirement fund. At December 31, 2011, the amount of delinquent special assessments was $400,948. The loans receivable at December 31, 2011, are revolving loans made to private enterprises under the United States Department of Housing and Urban Development Community Development Block Grant Program. The loans are due on various dates with a large portion not due until the related property is sold or the debtor becomes deceased. Loans expected to be collected in more than one year amount to $25,000. Property Taxes Property taxes include amounts levied against all real and public utility property located in the City. Property tax revenue received during 2011 for real and public utility property taxes represents collections of 2010 taxes real property taxes were levied after October 1, 2011, on the assessed value as of January 1, 2011, the lien date. Assessed values are established by State law at 35 percent of appraised market value real property taxes are collected in and intended to finance Real property taxes are payable annually or semi-annually. If paid annually, payment is due December 31; if paid semi-annually, the first payment is due December 31, with the remainder payable by June 20. Under certain circumstances, State statute permits later payment dates to be established. Public utility tangible personal property currently is assessed at varying percentages of true value; public utility real property is assessed at 35 percent of true value public utility property taxes which became a lien December 31, 2010, are levied after October 1, 2011, and are collected in 2012 with real property taxes. The full tax rate for all City operations for the year ended December 31, 2011, was $21.70 per $1,000 of assessed value. The assessed values of real property and public utility tangible property upon which 2011 property tax receipts were based are as follows: Real Property Residential/Agricultural $151,467,810 Commercial Industrial/Public Utility 109,940,100 Tangible Personal Property Public Utility 7,037,960 Total $268,445,870 The County Treasurer collects property taxes on behalf of all taxing districts in the county, including the City. The County Auditor periodically remits to the City its portion of the taxes collected. Property taxes receivable represents real and public utility property taxes and outstanding delinquencies which were measurable as of December 31, 2011, and for which there was an enforceable legal claim. In the governmental funds, the entire receivable has been deferred since current taxes were not levied to finance 2011 operations and the collection of delinquent taxes during the available period is not subject to reasonable estimation. On the accrual basis, collectible delinquent property taxes have been recorded as revenue while on the modified accrual basis the revenue has been deferred. Income Taxes The City levies an income tax of 2.25 percent on all income earned within the City as well as income of residents earned outside the City. The City allows a credit of 1.50 percent on the income earned outside the City and paid to

109 City of Bedford, Ohio Notes to the Basic Financial Statements For the Year Ended December 31, 2011 another municipality. Employers within the City are required to withhold income tax on employee earnings and remit the tax to the City at least quarterly. Corporations and other individual taxpayers are also required to pay their estimated tax at least quarterly and file a final return annually. Intergovernmental Receivables A summary of the principal items of intergovernmental receivables follows: Amount Governmental Activities Local Government $404,728 Homestead and Rollback 282,950 Gasoline Tax 211,087 Grants 117,921 Estate Tax 117,327 Permissive Tax 40,609 Motor Vehicle License Tax 36,869 Total Governmental Activities $1,211,491 Note 8 Compensated Absences Vacation leave is earned at rates which vary depending upon length of service and standard work week. Current policy permits vacation leave to be accumulated up to one year from the one year anniversary date of hire, thereafter, all vacation must be used by December 31. City employees are paid for earned, unused vacation leave at the time of termination of employment. Sick leave is earned at the rate of one and one quarter days per month of service. Employees with accumulated sick leave in excess of 120 days at November 1 of each year receive payment for the excess over 120 days at the rate of one half the accumulated sick leave over 120 days. Upon retirement, employees are paid one half of the accumulated sick leave. Note 9 Assets Held for Resale Assets held for resale represents homes purchased and repaired to be resold under the Community Development infill housing project. During fiscal year 2011, the City sold one home. As of December 31, 2011, the City has ten homes remaining which are being held for resale. Note 10 Accountability At December 31, 2011, the HUD Rehabilitation Program special revenue fund had a deficit fund balance of $22,443. The deficit is the result of the recognition of expenditures on a modified accrual basis of accounting which are substantially greater than the expenditures recognized on a cash basis. The general fund is liable for any deficit in these funds and provides transfers when cash is required, not when accruals occur

110 City of Bedford, Ohio Notes to the Basic Financial Statements For the Year Ended December 31, 2011 Note 11 - Interfund Transfers and Balances Interfund Transfers Transfer From Other Governmental Transfer To General Funds Total Major Funds: Public Safety $3,176,350 $0 $3,176,350 Other Governmental Funds: Community Development Block Grant 53, ,599 Street Construction, Maintenance and Repair 275, ,000 Grants 15, ,000 General Obligation Bond Retirement 319, , ,920 Capital Improvement 35, ,000 Total Other Governmental Funds 698, , ,519 Total $3,874,469 $144,400 $4,018,869 The general fund transfers to the major and nonmajor governmental funds were made to provide additional resources for current operations. The transfer from the municipal court special programs special revenue fund to the general obligation bond retirement fund was to pay the court s portion of the principal and interest due on the bonds issued to build the Court. Interfund Balances The interfund balance at December 31, 2011, consists of an interfund receivable/payable between the general fund and the nonmajor governmental funds in the amount of $473,500. These loans were made to support housing rehabilitation programs and projects pending the receipt of grant money that will be used to repay the loans. These loans are expected to be repaid in one year. Note 12 Capital Assets A summary of changes in capital assets during 2011 follows: Balance Balance 12/31/10 Additions Deletions 12/31/11 Governmental Activities Capital Assets Not Being Depreciated Land $2,908,079 $0 $0 $2,908,079 Construction in Progress 37, ,036 (24,856) 114,499 Total Capital Assets Not Being Depreciated $2,945,398 $102,036 ($24,856) $3,022,

111 City of Bedford, Ohio Notes to the Basic Financial Statements For the Year Ended December 31, 2011 Balance Balance 12/31/10 Additions Deletions 12/31/11 Governmental Activities Capital Assets Being Depreciated Buildings and Improvements $17,672,063 $6,816 ($70,090) $17,608,789 Machinery and Equipment 4,070, ,423 (100,685) 4,189,232 Furniture and Fixtures 933,732 33, ,046 Vehicles 4,273, ,267 (91,443) 4,420,113 Infrastructure: Roads 40,511, ,069 (294,818) 40,365,089 Traffic Signals 1,588, ,588,375 Rubberized Railroad Crossings 28, ,478 Storm Sewers 2,754, , ,483,789 Total Capital Assets Being Depreciated 71,832,911 1,375,036 (557,036) 72,650,911 Less Accumulated Depreciation: Buildings and Improvements (3,326,368) (382,694) 31,054 (3,678,008) Machinery and Equipment (2,967,497) (208,624) 54,838 (3,121,283) Furniture and Fixtures (814,560) (19,537) 0 (834,097) Vehicles (3,200,360) (238,170) 91,443 (3,347,087) Infrastructure: Roads (28,579,167) (1,699,998) 294,818 (29,984,347) Traffic Signals (528,242) (63,535) 0 (591,777) Rubberized Railroad Crossings (12,460) (1,424) 0 (13,884) Storm Sewers (845,748) (56,309) 0 (902,057) Total Accumulated Depreciation (40,274,402) (2,670,291) * 472,153 (42,472,540) Total Capital Assets Being Depreciated, Net 31,558,509 (1,295,255) (84,883) 30,178,371 Governmental Activities Capital Assets, Net $34,503,907 ($1,193,219) ($109,739) $33,200,949 Business-Type Activities Capital Assets Not Being Depreciated Land $28,620 $0 $0 $28,620 Construction in Progress 436, ,621 (359,746) 689,242 Total Capital Assets Not Being Depreciated 464, ,621 (359,746) 717,862 Capital Assets, Being Depreciated Buildings and Improvements 10,043,169 80, ,123,788 Machinery and Equipment 6,347,878 90, ,438,396 Furniture and Fixtures 93, ,772 Vehicles 456, , ,010 Infrastructure: Water Lines 4,735, , ,311,193 Sanitary Sewer Lines 3,153, ,153,541 Total Capital Assets Being Depreciated $24,830,657 $851,043 $0 $25,681,

112 City of Bedford, Ohio Notes to the Basic Financial Statements For the Year Ended December 31, 2011 Balance Balance 12/31/10 Additions Deletions 12/31/11 Business-Type Activities (continued) Less Accumulated Depreciation: Buildings and Improvements ($3,363,852) ($199,673) $0 ($3,563,525) Machinery and Equipment (6,190,223) (32,848) 0 (6,223,071) Furniture and Fixtures (93,772) 0 0 (93,772) Vehicles (234,588) (40,187) 0 (274,775) Infrastructure: Water Lines (908,147) (69,193) 0 (977,340) Sanitary Sewer Lines (785,259) (38,558) 0 (823,817) Total Accumulated Depreciation (11,575,841) (380,459) 0 (11,956,300) Total Capital Assets Being Depreciated, Net 13,254, , ,725,400 Total Business-Type Capital Assets, Net $13,719,803 $1,083,205 ($359,746) $14,443,262 * Depreciation expense was charged to governmental functions as follows: General Government $258,235 Security of Persons and Property Police 144,886 Fire 176,044 Public Health and Welfare 497 Leisure Time Activities 105,928 Community Development 9,525 Transportation 1,975,176 Total $2,670,291 Note 13 - Capital Leases In prior years, the City entered into lease agreements for a copier and postage meter. The City s lease obligation meets the criteria of a capital lease as defined by Statement of Financial Accounting Standards No. 13 Accounting for Leases, and has been recorded on the government-wide statements. The original amounts capitalized for the capital lease and the book value as of December 31, 2011 follows: Amounts Asset: Equipment $57,495 Less: Accumulated Depreciation (41,157) Current Book Value $16,338 The following is a schedule of the future long-term minimum lease payments required under the capital lease and present value of the minimum lease payments is as follows:

113 City of Bedford, Ohio Notes to the Basic Financial Statements For the Year Ended December 31, 2011 Year Ending December 31, 2012 $7, ,935 Present Value of Minimum Lease $12,915 Capital lease payments have been reclassified and reflected as debt service in the fund financial statement for the general fund. These expenditures are reflected as program expenditures on a budgetary basis. Note 14 - Long-term Obligations The original issue date, maturity date, interest rate and original issuance amount for each of the City s bonds and loans follows: Original Issue Maturity Interest Issue Date Date Rate Amount Governmental Activities General Obligation Bonds Various Purpose % $8,929,000 City Hall (Refunded $3,035,000) ,200,000 City Hall Court (Refunded $905,000) ,000,000 Capital Improvements ,145,000 Special Assessment Bonds Northfield and Rockside Resurfacing ,000 Northfield and Rockside Resurfacing # ,000 Ohio Public Works Commission Loans Willard Avenue ,200 Wandle Avenue ,579 Broadway Culvert N/A Police Pension ,922 Business-Type Activities General Obligation Bonds Water Water Refunding # ,000 Water Refunding # ,165,000 Washington Street Water ,000 Capital Improvements ,625,000 Wastewater Sewer Improvement Refunding Bonds ,000 Sewer Improvement (Refunded $290,000) ,000 Capital Improvements ,320,000 Ohio Water Development Loans Wastewater Sewer System ,002,916 Rapid Sandfilter ,427,

114 City of Bedford, Ohio Notes to the Basic Financial Statements For the Year Ended December 31, 2011 Original Issue Maturity Interest Issue Date Date Rate Amount Business-Type Activities (continued) Ohio Public Works Commission Loans Water Northfield Road Water Line $400,000 Wastewater Flow Control ,265 Oxidation Tower Improvements ,286 Sludge Thickener ,336 Changes in long-term obligations during the year ended December 31, 2011, consisted of the following: Amounts Balance Balance Due in 12/31/10 Increase Decrease 12/31/11 One Year Governmental Activities General Obligation Bonds Various Purpose Bonds $8,349,100 $0 $359,500 $7,989,600 $367,800 Premium on Various Purpose Bonds 48, ,862 45,324 0 Discount on Various Purpose Bonds (43,588) 0 (2,589) (40,999) 0 Loss on Refunding (357,826) 0 (21,257) (336,569) 0 Total Various Purpose Bonds 7,995, ,516 7,657, ,800 City Hall 1,110, , , ,000 City Hall Court 690, , ,000 65,000 Capital Improvement Bonds Serial 1,295, ,295, ,000 Build America Bonds - Term 850, ,000 0 Premium on Capital Improvement Bonds 22, ,371 20,549 0 Total Capital Improvement Bonds 2,167, ,371 2,165, ,000 Total General Obligation Bonds 11,963, ,887 11,392, ,800 Special Assessment Bonds Northfield and Rockside Resurfacing 40, ,000 20,000 20,000 Northfield and Rockside Resurfacing #2 270, , ,000 50,000 Total Special Assessment Bonds 310, , ,000 70,000 Ohio Public Works Commission Loans Willard Avenue 77, ,260 55,650 22,260 Wandle Avenue 259, , ,360 25,929 Broadway Culvert 0 518, ,349 25,917 Total Ohio Public Works Commission Loans 337, ,349 48, ,359 74,106 Other Long-Term Obligations Police Pension 185, , ,428 4,634 Capital Leases Payable 22, ,930 12,915 7,980 Compensated Absences Payable 1,397, , ,056 1,336, ,003 Total Other Long-Term Obligations 1,605, , ,429 1,530, ,617 Total Governmental Activities $14,216,896 $856,513 $1,102,505 $13,970,904 $1,402,

115 City of Bedford, Ohio Notes to the Basic Financial Statements For the Year Ended December 31, 2011 Amounts Balance Balance Due in 12/31/10 Increase Decrease 12/31/11 One Year Business-Type Activities General Obligation Bonds Water Refunding #1 $370,000 $0 $50,000 $320,000 $50,000 Unamortized Loss (14,297) 0 (2,043) (12,254) 0 Total Water Refunding #1 355, , ,746 50,000 Water Refunding #2 275, , , ,000 Unamortized Loss (9,222) 0 (4,612) (4,610) 0 Total Water Refunding #2 265, , , ,000 Washington Street Water 555, , ,400 27,200 Unamortized Premium 3, ,351 0 Unamortized Discount (3,212) 0 (191) (3,021) 0 Total Washington Street Water 556, , ,730 27,200 Capital Improvement Bonds Serial 455, ,000 45,000 Build America Bonds - Term 1,170, ,170,000 0 Unamortized Premium 7, ,165 0 Total Capital Improvement - Water 1,632, ,632,165 45,000 Sewer Improvement Refunding 310, , ,000 5,000 Unamortized Premium Unamortized Discount (641) 0 (38) (603) 0 Unamortized Loss (15,034) 0 (893) (14,141) 0 Total Sewer Improvement Refunding 295, , ,164 5,000 Sewer Improvement 220, , ,000 35,000 Capital Improvement Bonds Serial 375, ,000 40,000 Build America Bonds - Term 945, ,000 0 Unamortized Premium 6, ,970 0 Total Capital Improvement - Sewer 1,326, ,325,970 40,000 Total General Obligation Bonds 4,652, ,509 4,408, ,200 OWDA Loans Sewer System 2,381, ,568 1,625, ,319 Unamortized Loss (184,399) 0 (73,762) (110,637) 0 Total Sewer System 2,197, ,806 1,514, ,319 Rapid Sandfilter 1,780, ,495 1,672, ,728 Total OWDA Loans $3,977,893 $0 $790,301 $3,187,592 $905,

116 City of Bedford, Ohio Notes to the Basic Financial Statements For the Year Ended December 31, 2011 Business-Type Activities Amounts Balance Balance Due in 12/31/10 Increase Decrease 12/31/11 One Year OPWC Loans Northfield Road Water Line $370,000 $0 $20,000 $350,000 $20,000 Flow Control 16, ,163 12,492 4,163 Oxidation Tower Improvements 596, , ,044 41,114 Sludge Thickener 185, , ,294 10,017 Total OPWC Loans 1,168, ,294 1,092,830 75,294 Other Long-Term Liabilities Compensated Absences 122,456 26,707 15, ,874 28,946 Total Business-Type Activites $9,921,147 $26,707 $1,125,393 $8,822,461 $1,351,487 General obligation bonds will be paid from the general obligation bond retirement debt service fund as well as user charges from the appropriate enterprise fund. Special assessment bonds will be paid from the proceeds of special assessments against benefited property owners. Special assessment monies will be received in and the debt will be retired from the special assessment debt service fund. In the event that property owners fail to make their special assessment payments, the City is responsible for providing the resources to meet the annual principal and interest payments. The OPWC loans will be paid from the general bond retirement debt service fund as well as user charges from the appropriate enterprise fund and income tax. The OWDA loans will be paid from user charges and income tax in the enterprise funds. A line of credit has been established with the Ohio Public Works Commission in the amount of $518,349 for improvements to the Broadway Culvert; however, since this loan is not finalized, the repayment schedule is not included in the schedule of debt service payments. This loan will be paid from the bond retirement debt service fund. Compensated absences will be paid from the general fund, recreation, street construction maintenance and repair and public safety special revenue funds and water and wastewater enterprise funds. The capital leases payable will be paid from the general fund. The police pension loan will be paid from the police pension special revenue fund. In 2003, the City defeased a 1991 water construction mortgage revenue bond issue and a 1997 water construction general obligation bond issue in order to take advantage of lower interest rates. The proceeds of the new bonds were placed in an irrevocable trust to provide for all future debt service payments on the old bonds. Accordingly, the trust account assets and liabilities for the defeased bonds are not included in the City s financial statements. On December 31, 2011, $455,000 of the defeased bonds are still outstanding. In 2006, the City defeased a 1999 city hall general obligation bond issue, a 2000 city hall general obligation bond issue, a 2000 city hall court general obligation bond issue and a 2002 sewer improvement general obligation bond issue in order to take advantage of lower interest rates. The proceeds of the new bonds were placed in an irrevocable trust to provide for all future debt service payments on the old bonds. Accordingly, the trust account assets and liabilities for the defeased bonds are not included in the City s financial statements. On December 31, 2011, $6,840,000 of the defeased bonds are still outstanding

117 City of Bedford, Ohio Notes to the Basic Financial Statements For the Year Ended December 31, 2011 The City has pledged future revenues, net of operating expenses, to repay OWDA and OPWC loans in the wastewater fund. The debt is payable solely from net revenues through Annual principal and interest payments on the debt issues are expected to require.85 percent of net revenues. The total principal and interest remaining to be paid on the debt is $4,927,382. Principal and interest paid for the current year and total net revenues available were $1,093,116 and $934,067, respectively. The City has pledged future revenues, net of operating expenses, to repay OPWC loans in the water fund. The debt is payable solely from net revenues through Annual principal payments on the debt issues are expected to require percent of net revenues. The total principal remaining to be paid on the debt is $350,000. Principal paid for the current year and total net revenues available were $20,000 and $620,170, respectively. During 2010, the City issued $5,090,000 in Capital Improvement Bonds. The issue consisted of tax exempt bonds (serial and term) and Build America Bonds (BABs). The bonds were issued for the purpose of street and bridge/culvert construction, the purchase of an ambulance and a loader, as well as water and sewer infrastructure construction. As part of the American Recovery and Reinvestment Act of 2009, Congress added Sections 54AA and 6431 to the Code, which permit state or local governments to obtain certain tax advantages when they issue BABs. Under Section 6431 of the Code, the City may elect to receive payments directly from the Secretary of the United States Treasury equal to 35 percent of the corresponding interest payable on this issue. The bonds will be repaid from the bond retirement debt service fund and the water and sewer enterprise funds. The 2010 BABs term bonds maturing on December 1, 2025, 2030 and 2036, respectively, are subject to optional and extraordinary optional sinking fund redemption. Optional redemption BABs are subject to prior redemption by and at the sole option of the City, either in whole or in part on any date on or after December 1, 2019, at a redemption price equal to 100 percent of the principal amount redeemed, plus accrued interest to the redemption date. Extraordinary optional redemption BABs are also subject to maturity by and at the sole option of the City, either in whole or in part on any date, at a redemption price equal to 100 percent of the principal amount redeemed plus accrued interest to the redemption date, in the event that the BAB direct payments cease or are reduced. The respective principal amounts are as follows: Issue Year $1,205,000 $815,000 $945, $260,000 $0 $ , , , , , , , , , , , ,000 Total $960,000 $670,000 $775,000 Stated Maturity 12/1/ /1/ /1/2036 The remaining principal amount of the term bonds ($245,000, $145,000 and $170,000) will mature at the stated maturity

118 City of Bedford, Ohio Notes to the Basic Financial Statements For the Year Ended December 31, 2011 The City s overall legal debt margin was $23,459,472 at December 31, Principal and interest requirements to retire the long-term obligations outstanding at December 31, 2011, are as follows: Governmental Activities General Obligation Bonds Special Assessment Bonds Police Pension OPWC Year Principal Interest Principal Interest Principal Interest Loan 2012 $607,800 $389,409 $70,000 $14,700 $4,634 $7,662 $48, , ,780 55,000 10,370 4,833 7,463 48, , ,840 55,000 7,015 5,041 7,255 37, , ,286 60,000 3,660 5,257 7,039 25, , , ,483 6,813 25, ,216, , ,159 30, , ,552, , ,449 23, ,000 20, ,449 14, ,123 3,360 0 Total $9,559,600 $3,086,174 $240,000 $35,745 $181,428 $107,010 $289,010 Build America Bonds (BABs) Serial and Term Year Principal Interest Subsidy Total 2012 $135,000 $70,253 ($14,592) $190, ,000 67,552 (14,591) 187, ,000 64,853 (14,592) 185, ,000 62,152 (14,591) 187, ,000 59,353 (14,592) 189, , ,875 (72,958) 938, , ,312 (38,959) 712, ,000 8,275 (2,896) 55,379 Total $2,145,000 $690,625 ($187,771) $2,647,

119 City of Bedford, Ohio Notes to the Basic Financial Statements For the Year Ended December 31, 2011 Business-Type Activities General Obligation Bonds OWDA Loans OPWC Year Principal Interest Principal Interest Loan 2012 $257,200 $60,896 $905,047 $132,774 $75, ,200 50, ,185 89,639 75, ,900 45, ,701 55,189 75, ,600 39, ,455 50,436 71, ,600 35, ,395 45,495 71, , , , , , ,500 28, ,280 16, , ,043 Total $1,480,400 $368,207 $3,298,229 $536,323 $1,092,830 Capital Improvement Bonds - Build America Bonds (BABs) Serial and Term Year Principal Interest Subsidy Total 2012 $85,000 $131,682 ($39,675) $177, , ,983 (39,675) 175, , ,282 (39,675) 178, , ,483 (39,675) 176, , ,682 (39,675) 175, , ,813 (198,376) 883, , ,500 (172,025) 879, , ,078 (117,627) 883, , ,295 (48,054) 879,241 Total $2,945,000 $2,197,798 ($734,457) $4,408,341 Note 15 - Defined Benefit Pension Plans Ohio Public Employees Retirement System Plan Description The City participates in the Ohio Public Employees Retirement System (OPERS). OPERS administers three separate pension plans. The Traditional Pension Plan is a cost-sharing, multiple-employer defined benefit pension plan. The Member-Directed Plan is a defined contribution plan in which the member invests both member and employer contributions (employer contributions vest over five years at 20 percent per year). Under the Member-Directed Plan, members accumulate retirement assets equal to the value of the member and vested employer contributions plus any investment earnings. The Combined Plan is a cost-sharing, multipleemployer defined benefit pension plan. Under the Combined Plan, OPERS invests employer contributions to provide a formula retirement benefit similar in nature to, but less than, the Traditional Pension Plan benefit. Member contributions, the investment of which is self-directed by the members, accumulate retirement assets in a manner similar to the Member-Directed Plan

120 City of Bedford, Ohio Notes to the Basic Financial Statements For the Year Ended December 31, 2011 OPERS provides retirement, disability, survivor and death benefits, and annual cost-of-living adjustments to members of the Traditional Pension and Combined Plans. Members of the Member-Directed Plan do not qualify for ancillary benefits. Authority to establish and amend benefits is provided by Chapter 145 of the Ohio Revised Code. OPERS issues a stand-alone financial report. Interested parties may obtain a copy by visiting writing to OPERS, 277 East Town Street, Columbus, Ohio , or by calling or Funding Policy The Ohio Revised Code provides statutory authority for member and employer contributions and currently limits the employer contribution to a rate not to exceed 14 percent of covered payroll for state and local employer units and 18.1 percent of covered payroll for law enforcement and public safety employer units. Member contribution rates, as set forth in the Ohio Revised Code, are not to exceed 10 percent of covered payroll for members in State and local divisions and 12 percent for law enforcement and public safety members. For the year ended December 31, 2011, members in state and local divisions contributed 10 percent of covered payroll while public safety and law enforcement members contributed 11.0 percent and 11.6 percent, respectively. While members in the state and local divisions may participate in all three plans, law enforcement and public safety divisions exist only within the Traditional Pension Plan. For 2011, member and employer contribution rates were consistent across all three plans. The City s 2011 contribution rate was 14.0 percent, except for those plan members in law enforcement or public safety, for whom the City s contribution was percent of covered payroll. The portion of employer contributions used to fund pension benefits is net of post-employment health care benefits. The portion of employer contribution allocated to health care for members in the Traditional Plan was 4.00 percent for The portion of employer contributions allocated to health care for members in the Combined Plan was 6.05 percent for Employer contribution rates are actuarially determined. The City s required contributions for pension obligations to the Traditional Pension and Combined Plans for the years ended December 31, 2011, 2010 and 2009 were $645,200, $570,404 and $445,897, respectively. For 2011, percent has been contributed with the balance being reported as an intergovernmental payable. The full amount has been contributed for 2010 and Contributions to the Member-Directed Plan for 2011 were $6,616 made by the City and $4,726 made by plan members. Ohio Police and Fire Pension Fund Plan Description The City contributes to the Ohio Police and Fire Pension Fund (OP&F), a cost-sharing multipleemployer defined benefit pension plan. OP&F provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. Benefit provisions are established by the Ohio State Legislature and are codified in Chapter 742 of the Ohio Revised Code. OP&F issues a publicly available financial report that includes financial information and required supplementary information for the plan. That report may be obtained by writing to OP&F, 140 East Town Street, Columbus, Ohio Funding Policy The Ohio Revised Code requires plan members to contribute 10.0 percent of their annual covered salary, while employers are required to contribute 19.5 percent for police officers and 24.0 percent for firefighters. The OP&F Pension Fund is authorized by the Ohio Revised Code to allocate a portion of the employer contributions to retiree health care benefits. The portion of employer contributions used to fund pension benefits was percent of covered payroll for police officers and percent of covered payroll for firefighters. The City s contributions to OP&F for police and firefighters pension were $324,035 and $352,786 for the year ended December 31, 2011, $328,694 and $355,107 for the year ended December 31, 2010, and $302,735 and $326,883 for the year ended December 31, 2009, respectively. For 2011, percent for police and percent for

121 City of Bedford, Ohio Notes to the Basic Financial Statements For the Year Ended December 31, 2011 firefighters has been contributed with the balance for both police and firefighters being report as an intergovernmental payable. The full amount has been contributed for 2010 and Note 16 Postemployment Benefits Ohio Public Employees Retirement System Plan Description Ohio Public Employees Retirement System (OPERS) administers three separate pension plans: The Traditional Pension Plan a cost-sharing, multiple-employer defined benefit pension plan; the Member- Directed Plan a defined contribution plan; and the Combined Plan a cost-sharing, multiple-employer defined benefit pension plan that has elements of both a defined benefit and defined contribution plan. OPERS maintains a cost-sharing multiple-employer defined benefit post-employment health care plan for qualifying members of both the Traditional Pension and the Combined Plans. Members of the Member-Directed Plan do not qualify for ancillary benefits, including post-employment health care coverage. The plan includes a medical plan, prescription drug program and Medicare Part B premium reimbursement. In order to qualify for post-employment health care coverage, age-and-service retirees under the Traditional Pension and Combined Plans must have 10 or more years of qualifying Ohio service credit. Health care coverage for disability benefit recipients and qualified survivor benefit recipients is available. The Ohio Revised Code permits, but does not mandate, OPERS to provide health care benefits to its eligible members and beneficiaries. Authority to establish and amend benefits is provided in Chapter 145 of the Ohio Revised Code. Disclosures for the health care plan are presented separately in the OPERS financial report which may be obtained by visiting writing to OPERS, 277 East Town Street, Columbus, Ohio , or by calling or Funding Policy The post-employment health care plan was established under, and is administrated in accordance with, Internal Revenue Code 401(h). The Ohio Revised Code provides the statutory authority requiring public employers to fund post-retirement health care through contributions to OPERS. A portion of each employer s contribution to OPERS is set aside for the funding of post-retirement health care. Employer contribution rates are expressed as a percentage of the covered payroll of active members. In 2011, state and local employers contributed at a rate of 14.0 percent of covered payroll, and public safety and law enforcement employers contributed at percent. These are the maximum employer contribution rates permitted by the Ohio Revised Code. Each year, the OPERS Retirement Board determines the portion of the employer contribution rate that will be set aside for funding of post-employment health care benefits. The portion of employer contributions allocated to health care for members in the Traditional Plan was 4.0 percent for The portion of employer contributions allocated to health care for members in the Combined Plan was 6.05 percent for The OPERS Retirement Board is also authorized to establish rules for the payment of a portion of the health care benefits provided, by the retiree or their surviving beneficiaries. Payment amounts vary depending on the number of covered dependents and the coverage selected. Active members do not make contributions to the postemployment health care plan

122 City of Bedford, Ohio Notes to the Basic Financial Statements For the Year Ended December 31, 2011 The City s contributions allocated to fund post-employment health care benefits for the years ended December 31, 2011, 2010 and 2009 were $258,080, $326,162 and $380,091, respectively. For 2011, percent has been contributed with the balance being reported as an intergovernmental payable. The full amount has been contributed for 2010 and The Health Care Preservation Plan (HCPP) adopted by the OPERS Retirement Board on September 9, 2004, was effective January 1, Member and employer contribution rates increased on January 1 of each year from 2006 to Rates for law enforcement and public safety employers increased over a six year period beginning on January 1, 2006, with a final rate increase on January 1, These rate increases allowed additional funds to be allocated to the health care plan. Ohio Police and Fire Pension Fund Plan Description The City contributes to the Ohio Police and Fire Pension Fund (OP&F) sponsored health care program, a cost-sharing multiple-employer defined post-employment health care plan administered by OP&F. OP&F provides health care benefits including coverage for medical, prescription drugs, dental, vision, Medicare Part B Premium and long-term care to retirees, qualifying benefit recipients and their eligible dependents. OP&F provides access to post-retirement health care coverage for any person who receives or is eligible to receive a monthly service, disability, or survivor benefit check or is a spouse or eligible dependent child of such person. The health care coverage provided by OP&F meets the definition of an Other Post-Employment Benefit (OPEB) as described in GASB Statement No. 45. The Ohio Revised Code allows, but does not mandate OP&F to provide OPEB benefits. Authority for the OP&F Board of Trustees to provide health care coverage to eligible participants and to establish and amend benefits is codified in Chapter 742 of the Ohio Revised Code. OP&F issues a publicly available financial report that includes financial information and required supplementary information for the plan. That report may be obtained by writing to OP&F, 140 East Town Street, Columbus, Ohio Funding Policy The Ohio Revised Code provides for contribution requirements of the participating employers and of plan members to the OP&F defined benefit pension plan. Participating employers are required by Ohio Revised Code to contribute to the pension plan at rates expressed as percentages of the payroll of active pension plan members, currently, 19.5 percent and 24.0 percent of covered payroll for police and fire employers, respectively. Active members do not make contributions to the OPEB Plan. OP&F maintains funds for health care in two separate accounts. One for health care benefits under an IRS Code Section 115 trust and one for Medicare Part B reimbursements administrated as an Internal Revenue Code 401(h) account, both of which are within the defined benefit pension plan, under the authority granted by the Ohio Revised Code to the OP&F Board of Trustees. The Board of Trustees is authorized to allocate a portion of the total employer contributions made into the pension plan to the Section 115 trust and the Section 401(h) account as the employer contribution for retiree health care benefits. For the year ended December 31, 2011, the employer contribution allocated to the health care plan was 6.75 percent of covered payroll. The amount of employer contributions allocated to the health care plan each year is subject to the Trustees primary responsibility to ensure that pension benefits are adequately funded and is limited by the provisions of Sections 115 and 401(h)

123 City of Bedford, Ohio Notes to the Basic Financial Statements For the Year Ended December 31, 2011 The OP&F Board of Trustees also is authorized to establish requirements for contributions to the health care plan by retirees and their eligible dependents, or their surviving beneficiaries. Payment amounts vary depending on the number of covered dependents and the coverage selected. The City s contributions to OP&F which were allocated to fund post-employment health care benefits for police and firefighters were $171,548 and $138,047 for the year ended December 31, 2011, $174,015 and $138,955 for the year ended December 31, 2010, and $173,912 and $135,782 for the year ended December 31, For 2011, percent has been contributed for police and percent has been contributed for firefighters with the balance for both police and firefighters being report as an intergovernmental payable. The full amount has been contributed for 2010 and Note 17 - Risk Management The City is exposed to various risks of loss related to torts; theft, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. During the year, the City contracted with the Ohio Municipal League Joint Insurance Group for all insurance. The coverage and deductibles are as follows: Type of Coverage Coverage Deductible Automobile Liability $5,000,000 $0 General Liability 5,000,000 per occurrence 1,000 Property Liability 47,315,224 1,000 Boiler and Machinery 10,000,000 1,000 Firefighters Errors and Omissions 5,000,000 per occurrence 1,000 Ambulance Professional 5,000,000 per occurrence 1,000 Law Enforcement Liability 5,000,000 per occurrence 2,500 Public Officials Liability 5,000,000 aggregate 2,500 Employee Benefit Liability 1,000,000 aggregate 1,000 Uninsured Motorists 25,000 0 Stop Gap 1,000,000 aggregate 1,000 Municipal Attorney and Law Director Liability 1,000,000 2,500 Fire Damage Liability 100,000 1,000 Settled claims have not exceeded this commercial coverage in any of the past three years and there was no significant reduction in coverage from the prior year. The City has elected to provide employee hospital/medical, prescription, dental, and vision insurance benefits through a partially self insured program. The City established a health insurance internal service fund to account for and finance the cost of this program. Medical Mutual of Ohio serves as the third party administrator who reviews and processes medical, prescription, dental and vision claims which the City then pays after discounts are applied. The City has stop loss coverage of $75,000 per individual except in high claim designations in which the stop loss coverage is $175,000 per designated individual. The departments are charged an amount annually equal to the estimated costs for the year divided by the number of qualified covered employees. The claims liability of $180,709 as estimated by the third party administrator and reported in the health insurance internal service fund at December 31, 2011, is based on the requirements of GASB Statement No. 30 which requires a liability for unpaid claims costs, including estimates of costs relating to incurred but not reported claims,

124 City of Bedford, Ohio Notes to the Basic Financial Statements For the Year Ended December 31, 2011 be reported if information prior to the issuance of the financial statements indicates that it is probable that a liability has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. The estimate was not affected by incremental claims adjustment expenses and does not include other allocated or unallocated claim adjustment expenses. Changes in the funds claims liability amount in 2010 and 2011 were as follows: Balance at Current Year Claim Balance at Beginning of Year Claims Payments End of Year 2010 $160,661 $1,654,780 $1,673,839 $141, ,602 2,090,281 2,051, ,709 Workers compensation coverage is provided by the State of Ohio. The City pays the State Workers Compensation System a premium based on a rate per $100 of salaries. This rate is calculated based on accident history and administrative costs. Note 18 Change in Accounting Principles For 2011, the City has implemented Governmental Accounting Standard Board (GASB) Statement No. 59, Financial Instruments Omnibus. GASB Statement No. 59 addresses significant practice issues that have arisen when accounting for financial instruments by updating and improving existing standards regarding financial reporting of certain financial instruments and external investment pools. The implementation of this statement did not result in any change in the City s financial statements

125 Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Members of the City Council City of Bedford, Ohio We have audited the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Bedford, Ohio (the City ) as of and for the year ended December 31, 2011, which collectively comprise the City s basic financial statements and have issued our report thereon dated June 4, 2012, wherein we noted the City adopted GASB Statement No. 59, as disclosed in Note 18. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control over Financial Reporting Management of the City is responsible for establishing and maintaining effective internal control over financial reporting. In planning and performing our audit, we considered the City s internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City s internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the City s internal control over financial reporting. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the City s financial statements will not be prevented, or detected and corrected on a timely basis. Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies, or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. 1