$3,200,000 CITY OF ESCANABA COUNTY OF DELTA, STATE OF MICHIGAN CAPITAL IMPROVEMENT BONDS, SERIES

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1 NEW ISSUE Book Entry Only RATING1* Standard & Poor s Ratings Services: AA- Miller, Canfield, Paddock and Stone P.L.C, Bond Counsel, is of the opinion that, under existing law, the interest on the Bonds is not excluded from gross income for federal income tax purposes as described in TAX MATTERS herein. See TAX MATTERS herein and APPENDIX D hereto. $3,200,000 CITY OF ESCANABA COUNTY OF DELTA, STATE OF MICHIGAN CAPITAL IMPROVEMENT BONDS, SERIES 2010 (Limited Tax General Obligation) (Taxable Recovery Zone Economic Development Bonds) Dated: Date of Delivery Due: May 1, as shown below Proceeds of the Capital Improvement Bonds, Series 2010 (Limited Tax General Obligation) (Taxable Recovery Zone Economic Development Bonds) (the Bonds ) of the City of Escanaba, County of Delta, State of Michigan (the City ), will be used to pay (i) a portion of the cost of certain improvements to the City s water supply system (the Project ) and (ii) a portion of the costs of issuing the Bonds. The Bonds were authorized by the City Council of the City by resolution adopted on October 21, 2010, as amended on November 4, 2010 (together, the Resolution ). The City has pledged its limited tax full faith and credit for the prompt payment of the Bonds. Each year the City shall budget the amount of the debt service coming due in the next fiscal year on the principal of and interest on the Bonds and shall advance as a first budget obligation from its general funds, or from other funds available therefor, or, if necessary, levy taxes upon all taxable property in the City subject to applicable constitutional, statutory and charter tax rate limitations, such sums as may be necessary to pay such debt service in such fiscal year. The City has designated the Bonds as recovery zone economic development bonds under Section 1400U-2 of the Internal Revenue Code of 1986, as amended (the Code), and elected under Code Section 54AA(g) to receive a direct pay interest credit from the United States Treasury equal to 45% of the stated interest paid on the Bonds as provided in Code Section The Bonds are issuable only as fully registered bonds without coupons and, when issued, will be registered in the name of Cede & Co., as Bondholder and nominee for The Depository Trust Company ( DTC ), New York, New York. DTC will act as securities depository for the Bonds. Purchases of beneficial interests in the Bonds will be made in book entry only form in the denomination of $5,000 or any integral multiple thereof. Purchasers of beneficial interests in the Bonds (the Beneficial Owners ) will not receive certificates representing their beneficial interest in Bonds purchased. So long as Cede & Co. is the Bondholder, as nominee of DTC, references herein to the Bondholders or registered owners shall mean Cede & Co., as aforesaid, and shall not mean the Beneficial Owners of the Bonds. See THE BONDS- Book Entry Only System herein. Principal of and interest on the Bonds will be paid by The Bank of New York Mellon Trust Company, N.A., Detroit, Michigan (the Transfer Agent ). So long as DTC or its nominee, Cede & Co., is the Bondholder, such payments will be made directly to such Bondholder. Disbursement of such payments to the DTC Participants is the responsibility of DTC and disbursement of such payments to the Beneficial Owners is the responsibility of the DTC Participants and Indirect Participants, as more fully described herein. Interest will be payable semiannually on May 1 and November 1, commencing May 1, 2011, to the Bondholders of record as of the applicable record dates herein described. Maturity Amount $125, , , , , , , , , ,000 Interest Rate 2.50% Price 100% CUSIP (296205) AL1 AM9 AN7 AP2 AQ0 AR8 AS6 AT4 AU1 AV9 Maturity Amount $155, , , , , , , , , ,000 Interest Rate 5.60% Price 100% CUSIP (296205) AW7 AX5 AY3 AZ0 BA4 BB2 BC0 BD8 BE6 BF3 THE BONDS MATURING ON OR AFTER MAY 1, 2021 ARE SUBJECT TO OPTIONAL REDEMPTION BEGINNING MAY 1, 2020, IN THE MANNER AND AT THE TIMES DESCRIBED HEREIN. SEE THE BONDS Optional Redemption HEREIN. The Bonds are also subject to extraordinary optional redemption as set forth herein. See THE BONDS Extraordinary Optional Redemption herein. The Bonds will be offered when, as and if issued by the City and accepted by the Underwriter subject to the approving legal opinion of Miller, Canfield, Paddock and Stone, P.L.C., Detroit, Michigan, Bond Counsel. It is expected that the Bonds will be available for delivery through The Depository Trust Company on or about December 7, This cover page contains certain information for quick reference only. It is not a summary of this issue. Investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision. The date of this Official Statement is November 18, 2010 For an explanation of the rating, see RATING herein. * As of date of delivery. Copyright 2010 Standard & Poor s, A Division of The McGraw-Hill Companies, Inc. CUSIP is a registered trademark of the American Bankers Association. 1

2 No dealer, broker, salesperson or other person has been authorized to give any information or to make any representation other than as contained in this Official Statement in connection with the offer made hereby and, if given or made, such other information or representation must not be relied upon as having been authorized by the City or the Underwriter. This Official Statement and the information contained herein are subject to completion and amendment. These securities may not be sold nor may an offer to buy these securities be accepted prior to the time the Official Statement is delivered in final form. Under no circumstances shall this Official Statement constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Bonds, in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. Information herein has been obtained from the City, The Depository Trust Company, and other sources believed to be reliable. The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information (except for information under the section captioned "UNDERWRITING" which was obtained from the Underwriter). Upon issuance, the Bonds will not be registered under the Securities Act of 1933, as amended, or any state securities law and will not be listed on any stock or other securities exchange. Neither the Securities and Exchange Commission nor any other federal, state, municipal or other governmental entity or agency will have passed upon the adequacy of this Official Statement, or, except for the City, and the Department of Treasury of the State of Michigan, approved the Bonds for sale. IN CONNECTION WITH THE 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. IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION AND ANALYSIS OF THE INFORMATION PRESENTED IN THIS OFFICIAL STATEMENT CONCERNING THE CITY AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

3 CITY OF ESCANABA 410 Ludington Sreet Escanaba, Michigan (906) MAYOR AND CITY COUNCIL Gilbert X. Cheves, Mayor Leo J. Evans, Mayor Pro-Tem and Councilperson Walter A. Baker, Councilperson Brady L. Nelson, Councilperson Patricia A. Baribeau, Councilperson ADMINISTRATIVE STAFF James V. O Toole, City Manager Michael Dewar, City Controller Robert S. Richards, City Clerk Robert Valentine, City Treasurer BOND COUNSEL Miller, Canfield, Paddock and Stone, P.L.C. Detroit, Michigan FINANCIAL ADVISOR Stauder, Barch & Associates, Inc. Ann Arbor, Michigan i

4 TABLE OF CONTENTS Page INTRODUCTION... 1 PURPOSE AND SECURITY... 1 ESTIMATED SOURCES AND USES OF FUNDS... 2 THE BONDS... 2 Description and Form of the Bonds... 2 Book-Entry-Only System... 2 Transfer Outside Book-Entry-Only System... 4 Optional Redemption... 4 Extraordinary Optional Redemption... 5 Notice of Redemption and Manner of Selection... 5 TAX PROCEDURES... 5 LITIGATION... 6 TAX MATTERS... 6 Circular BOND COUNSEL S RESPONSIBILITY... 8 APPROVAL BY MICHIGAN DEPARTMENT OF TREASURY... 8 RATING... 9 UNDERWRITING... 9 FINANCIAL ADVISOR'S OBLIGATION... 9 CONTINUING DISCLOSURE OTHER MATTERS APPENDIX A APPENDIX B: APPENDIX C: APPENDIX D: APPENDIX E: General Financial and Economic Information for the City General Fund Budget Summaries Audited Financial Statements and Notes to Financial Statements of the City for the Year Ended June 30, 2009 Draft Legal Opinion of Bond Counsel Form of Continuing Disclosure Undertaking ii

5 OFFICIAL STATEMENT relating to $3,200,000 CITY OF ESCANABA COUNTY OF DELTA, STATE OF MICHIGAN CAPITAL IMPROVEMENT BONDS, SERIES 2010 (Limited Tax General Obligation) (Taxable Recovery Zone Economic Development Bonds) INTRODUCTION The purpose of this Official Statement, which includes the cover page and Appendices, is to furnish information in connection with the issuance and sale by City of Escanaba, County of Delta, State of Michigan (the "City") of its Capital Improvement Bonds, Series 2010 (Limited Tax General Obligation) (Taxable Recovery Zone Economic Development Bonds) (the "Bonds") in the amount of $3,200,000. PURPOSE AND SECURITY Proceeds of the Bonds will be used to pay (i) a portion of the cost of certain improvements to the City s water supply system st (the Project ) and (ii) a portion of the costs of issuing the Bonds. The Bonds were authorized by the City Council of the City by resolution adopted on October 21, 2010, as amended on November 4, 2010 (together, the Resolution ). The Bonds will be issued by the City pursuant to the provisions of Act 34, Public Acts of Michigan, 2001, as amended. The Bonds are a full faith and credit limited tax general obligation of the City. The City has pledged its limited tax full faith and credit for the prompt payment of the Bonds. Each year the City shall budget the amount of the debt service coming due in the next fiscal year on the principal of and interest on the Bonds and shall advance as a first budget obligation from its general funds, or from other funds available therefor, or, if necessary, levy taxes upon all taxable property in the City subject to applicable constitutional, statutory and charter tax rate limitations, such sums as may be necessary to pay such debt service in such fiscal year. The City has reserved the right to issue additional bonds of equal standing to the Bonds. The City has designated the Bonds as "recovery zone economic development bonds" under Section 1400U-2 of the Internal Revenue Code of 1986, as amended (the Code), and elected under Section 54AA(g) of the Code to receive the credits allowable to issuers of qualified "recovery zone economic development bonds" pursuant to the Code (i.e., direct cash payments to the Issuer in lieu of tax credits to bondholders). Under current law, a cash payment is payable by the United States Treasury directly to any electing issuer of qualified recovery zone economic development bonds in an amount equal to 45% of the interest payable by the City on each interest payment date, provided that certain requirements are continuously satisfied by the City. The City has not covenanted to maintain the status of the Bonds as recovery zone economic development bonds. 1

6 ESTIMATED SOURCES AND USES OF FUNDS SOURCES Par Amount of Bonds $3,200,000 City Contribution 43,925 Total Sources $3,243,925 USES Deposit to Construction Fund $3,138,000 Underwriter s Discount 51,925 Estimated Costs of Issuance 54,000 Total Uses $3,243,925 Description and Form of the Bonds THE BONDS The Bonds will be issued in book-entry-only form as one fully registered Bond per maturity, without coupons, in the aggregate principal amount for each maturity set forth on the cover page hereof and may be purchased in denominations of $5,000 or any integral multiple thereof. The Bonds will be dated as of and bear interest from the date of delivery. Interest on the Bonds shall be payable semiannually each May 1 and November 1 to maturity or early redemption, commencing May 1, Interest on the Bonds shall be computed using a 360-day year with twelve 30-day months, and the Bonds will mature on the dates and in the principal amounts and will bear interest at the rates as set forth on the cover of this Official Statement. The Bank of New York Mellon Trust Company, N.A., Detroit, Michigan, or its successor will serve as the Transfer Agent (the "Transfer Agent") and also as bond registrar and transfer agent if the Bonds cease to be held in book-entry-only form. For a description of payment of principal and interest, transfers and exchanges and notice of redemption on the Bonds, which are held in the book-entry-only system, see "Book-Entry-Only System" below. In the event the Bonds cease to be held in the book-entryonly system, then interest on the Bonds shall be payable when due by check or draft to the person or entity who or which is, as of the 15th day of the month preceding each interest payment date (the "Record Date"), the registered owner of record, at the owner's registered address. See "Transfer Outside Book- Entry-Only System" below. Book-Entry-Only System The information in this section has been furnished by The Depository Trust Company, New York, New York ("DTC"). No representation is made by the City, the Transfer Agent or the Underwriter as to the completeness or accuracy of such information or as to the absence of material adverse changes in such information subsequent to the date hereof. No attempt has been made by the City, the Transfer Agent or the Underwriter to determine whether DTC is or will be financially or otherwise capable of fulfilling its obligations. Neither the City nor the Transfer Agent will have any responsibility or obligation to DTC Participants, Indirect Participants (both as defined below) or the persons for which they act as nominees with respect to the Bonds, or for any principal, premium, if any, or interest payment thereof. DTC will act as securities depository for the Bonds. The Bonds will be issued as fully registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully registered Bond certificate will be issued for each maturity of the Bonds, each in the aggregate principal amount of such maturity and will be deposited with DTC. 2

7 DTC, the world's largest depository, is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-u.s. equity, corporate and municipal debt issues, and money market instruments from over 100 countries that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities through electronic computerized book-entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has Standard & Poor's highest rating: AAA. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at and Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC's records. The ownership interest of each actual purchaser of each Bond ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Bonds, except in the event that use of the book-entry system for the Bonds is discontinued. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co. or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take certain steps to augment transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults and proposed amendments to the Bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of the notices be provided directly to them. 3

8 Redemption notices shall be sent to DTC. If less than all of the Bonds within a maturity are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed. Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC's Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the City as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Payments of principal, interest and redemption amounts, if any, on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from the City or the Transfer Agent, on the payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC (nor its nominee), Transfer Agent, or City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payments of principal, interest and redemption amounts, if any, to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) are the responsibility of the City or Transfer Agent, disbursement of such payments to Direct Participants shall be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as securities depository with respect to the Bonds at any time by giving reasonable notice to the City or the Transfer Agent. Under such circumstances, in the event that a successor securities depository is not obtained, Bond certificates are required to be printed and delivered. The City may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered to the Beneficial Owners. The information in this section concerning DTC and DTC's book-entry-only system has been obtained from sources that the City believes to be reliable, but the City takes no responsibility for the accuracy thereof. Transfer Outside Book-Entry-Only System In the event that the book-entry-only system is discontinued, the following provisions would apply to the Bonds. The Transfer Agent shall keep the registration books for the Bonds at its corporate trust office. Any Bond may be transferred upon such registration books by the registered owner of record, in person or by the registered owner s duly authorized attorney, upon surrender of the Bond for cancellation, accompanied by delivery of a duly executed written instrument of transfer in a form approved by the Transfer Agent. Whenever any Bond or Bonds shall be surrendered for transfer, the City shall execute and the Transfer Agent shall authenticate and deliver a new Bond or Bonds, for like aggregate principal amount. The Transfer Agent shall require the payment by the bondholder requesting the transfer of any tax or other governmental charge required to be paid with respect to the transfer. Optional Redemption The Bonds or portions of Bonds in multiples of $5,000, maturing on or after May 1, 2021, are subject to redemption prior to maturity at the option of the City in such order as the City may determine and by lot within any maturity, on any date occurring on or after May 1, 2020, at par and accrued interest to the date fixed for redemption. 4

9 Extraordinary Optional Redemption If the United States Department of Treasury or any agency of the United States of America at any time cease to remit to the City all or any part of the interest rate subsidy payable with respect to the Bonds in accordance with Section 54AA of the Code, for any reason other than one attributable to the action or inaction of the City, the City has the right to redeem and retire all or any part of the principal amount of the Bonds then outstanding in multiples of $5,000 within a single maturity in such order of maturity as the City shall determine and within a single maturity by lot on any date at a redemption price of 103% of par plus accrued interest to the redemption date. Notice of Redemption and Manner of Selection Notice of redemption of any Bond shall be given not less than 30 days and not more than 60 days prior to the date fixed for redemption by mail to the registered owner at the registered address shown on the registration books kept by the Transfer Agent. The Bonds shall be called for redemption in multiples of $5,000 and Bonds of denominations of more than $5,000 shall be treated as representing the number of Bonds obtained by dividing the face amount of the Bond by $5,000 and such Bonds may be redeemed in part. The notice of redemption for Bonds redeemed in part shall state that upon surrender of the Bond to be redeemed a new Bond or Bonds in an aggregate face amount equal to the unredeemed portion of the Bond surrendered shall be issued to the registered owner thereof. If less than all of the Bonds of any maturity shall be called for redemption prior to maturity, unless otherwise provided, the particular Bonds or portions of Bonds to be redeemed shall be selected by lot by the Transfer Agent, in the principal amounts designated by the City. Any Bonds selected for redemption will cease to bear interest on the date fixed for redemption, whether presented for redemption or not, provided funds are on hand to redeem said Bonds. Upon presentation and surrender of such Bonds at the corporate trust office of the Transfer Agent, such Bonds shall be paid and redeemed. So long as the book-entry-only system remains in effect, in the event of a partial redemption the Transfer Agent will give notice to Cede & Co., as nominee of DTC, only, and only Cede & Co. will be deemed to be a holder of the Bonds. DTC is expected to reduce the credit balances of the applicable DTC Participants in respect of the Bonds and in turn the DTC Participants are expected to select those Beneficial Owners whose ownership interests are to be extinguished or reduced by such partial redemption, each by such method as DTC or such DTC Participants, as the case may be, deems fair and appropriate in its sole discretion. TAX PROCEDURES Article IX, Section 3, of the Michigan Constitution provides that the proportion of true cash value at which property shall be assessed shall not exceed 50% of true cash value. The Michigan Legislature by statute has provided that property shall be assessed at 50% of its true cash value, except as described below. The Michigan Legislature or the electorate may at some future time reduce the percentage below 50% of true cash value. On March 15, 1994, the electors of the State approved an amendment to the Michigan Constitution permitting the Legislature to authorize ad valorem taxes on a non-uniform basis. The legislation implementing this constitutional amendment added a new measure of property value known as "Taxable Value." Beginning in 1995, taxable property has two valuations -- State equalized valuation ("SEV") and Taxable Value. Property taxes are levied on Taxable Value. Generally, Taxable Value of property is the lesser of (a) the Taxable Value of the property in the immediately preceding year, adjusted for losses, and increased by the lesser of the inflation rate or 5%, plus additions, or (b) the property's current SEV. Under certain circumstances, therefore, the Taxable Value of property may be different from the same property's SEV. 5

10 When property is sold or transferred, Taxable Value is adjusted to the SEV, which under existing law is 50% of the current true cash value. The Taxable Value of new construction is equal to current SEV. Taxable Value and SEV of existing property are also adjusted annually for additions and losses. Responsibility for assessing taxable property rests with the local assessing officer of each township and city. Any property owner may appeal the assessment to the local assessor, to the local board of review and ultimately to the Michigan Tax Tribunal. The Michigan Constitution also mandates a system of equalization for assessments. Although the assessors for each local unit of government within a county are responsible for actually assessing at 50% of true cash value, adjusted for Taxable Value purposes, the final SEV and Taxable Value are arrived at through several steps. Assessments are established initially by the municipal assessor. Municipal assessments are then equalized to the 50% levels as determined by the county's department of equalization. Thereafter, the State equalizes the various counties in relation to each other. SEV is important, aside from its use in determining Taxable Value for the purpose of levying ad valorem property taxes, because of its role in the spreading of taxes between overlapping jurisdictions, the distribution of various State aid programs, State revenue sharing and in the calculation of debt limits. Property that is exempt from property taxes, e.g., churches, government property, public schools, is not included in the SEV and Taxable Value data in the Official Statement. Property granted tax abatements under Act 198, Public Acts of Michigan, 1974, amended, is recorded on a separate tax roll while subject to tax abatement. The valuation of tax-abated property is based upon SEV but is not included in either the SEV or Taxable Value data in the Official Statement except as noted. LITIGATION The City has not been served with any litigation, administrative action or proceeding, and to the knowledge of the appropriate officials of the City no litigation or administrative action or proceeding has been threatened against it, seeking to restrain or enjoin the issuance and delivery of the Bonds, or questioning or contesting the validity of the Bonds or the proceedings or authorities under which they are authorized to be issued, sold, executed and delivered. A certificate to such effect will be delivered to the Underwriter at the time of the original delivery of the Bonds. TAX MATTERS In the opinion of Miller, Canfield, Paddock and Stone, P.L.C. ("Bond Counsel"), the interest on the Bonds is not excluded from gross income for federal income tax purposes under the Internal Revenue Code of 1986, as amended (the "Code"). Bond Counsel expresses no opinion regarding any other federal or state tax consequences relating to the ownership or disposition of, or the accrual or receipt of interest on, the Bonds. The following is a summary of certain of the United States federal income tax consequences of the ownership of the Bonds as of the date hereof. Each prospective investor should consult with its own tax advisor regarding the application of United States federal income tax laws, as well as any state, local, foreign or other tax laws, to its particular situation. This summary is based on the Code, as well as the Treasury Regulations and administrative and judicial rulings and practice. Legislative, judicial and administrative changes may occur, possibly with retroactive effect, that could alter or modify the continued validity of the statements and conclusions set forth herein. This summary is intended as a general explanatory discussion of the consequences of holding the Bonds generally and does not purport to furnish information in the level of detail or with the investor's specific tax circumstances that would be provided by an investor's own tax advisor. For example, it generally is addressed only to original purchasers of the Bonds that are "U.S. holders" (as 6

11 defined below), deals only with those Bonds held as capital assets within the meaning of Section 1221 of the Code and does not address tax consequences to holders that may be relevant to investors subject to special rules, such as individuals, trusts, estates, tax-exempt investors, foreign investors, cash method taxpayers, dealers in securities, currencies or commodities, banks, thrifts, insurance companies, electing large partnerships, mutual funds, regulated investment companies, real estate investment trusts, FASITs, S corporations, persons that hold the Bonds as part of a straddle, hedge, integrated or conversion transaction, and persons whose "functional currency" is not the U.S. dollar. In addition, this summary does not address alternative minimum tax issues or the indirect consequences to a holder of an equity interest in a holder of the Bonds. As used herein, a "U.S. holder" is a "U.S. person" that is a beneficial owner of a Bond. A "non U.S. holder" is a holder (or beneficial owner) of a Bond that is not a U.S. person. For these purposes, a "U.S. person" is a citizen or resident of the United States, a corporation or partnership created or organized in or under the laws of the United States or any political subdivision thereof (except, in the case of a partnership, to the extent otherwise provided in the Treasury Regulations), an estate the income of which is subject to United States federal income taxation regardless of its source or a trust if (i) a United States court is able to exercise primary supervision over the trust's administration and (ii) one or more United States persons have the authority to control all of the trust's substantial decisions. The Bonds will be treated, for federal income tax purposes, as a debt instrument. Accordingly, interest will be included in the income of a holder as it is paid (or, if the holder is an accrual method taxpayer as it is accrued) as interest. Bondholders that have a basis in the Bonds that is greater than the principal amount of the Bonds should consult their own tax advisors with respect to whether or not they should elect to amortize such premium under Section 171 of the Code. If a Bondholder purchases the Bonds for an amount that is less than the adjusted issue price of the Bonds, and such difference is not considered to be de minimis, then such discount will represent market discount. Absent an election to accrue market discount currently, upon a sale or exchange of a Bond, a portion of any gain will be ordinary income to the extent it represents the amount of any such market discount that was accrued through the date of sale. In addition, absent an election to accrue market discount currently, the portion of any interest expense incurred or continued to carry a market discount bond that does not exceed the accrued market discount for any taxable year, will be deferred. Although the Bonds are expected to trade "flat," that is, without a specific allocation to accrued interest, for federal income tax purposes, a portion of the amount realized on sale attributed to the Bonds will be treated as accrued interest and thus will be taxed as ordinary income to the seller (and will not be subject to tax in the hands of the buyer). The Bonds may be issued with original issue discount ("OID"). Accordingly, Bondholders will be required to include OID in gross income as it accrues under a constant yield method, based on the original yield to maturity of the Bond. Thus, Bondholders will be required to include OID in income as it accrues, prior to the receipt of cash attributable to such income. U.S. holders, however, would be entitled to claim a loss upon maturity or other disposition of such notes with respect to interest amounts accrued and included in gross income for which cash is not received. Such a loss generally would be a capital loss. Bondholders that purchase a Bond for less than its adjusted issue price (generally its accreted value) will have purchased such Bond with market discount unless such difference is considered to be de minimis. Absent an election to accrue market discount currently, upon sale or exchange of a Bond, a portion of any gain will be ordinary income to the extent it represents the amount of any such market discount that was accrued through the date of sale. In addition, absent an election to accrue market 7

12 discount currently, the portion of any interest expense incurred or continued to carry a market discount bond that does not exceed the accrued market discount for any taxable year will be deferred. A Bondholder that has a basis in the Bond that is greater than its adjusted issue price (generally its accreted value), but that is less than or equal to its principal amount, will be considered to have purchased the Bond with "acquisition premium." The amount of OID that such Bondholder must include in gross income with respect to such Bonds will be reduced in proportion that such excess bears to the OID remaining to be accrued as of the acquisition of the Bond. A Bondholder may have a basis in its pro rata share of the Bonds that is greater that the principal amount of such Bonds. Bondholders should consult their own tax advisors with respect to whether or not they should elect to amortize such premium, if any, with respect to such Bonds under Section 171 of the Code. Upon a sale, exchange or retirement of a Bond, a holder generally will recognize taxable gain or loss on such Bond equal to the difference between the amount realized on the sale, exchange or retirement (less any accrued qualified stated interest which will be taxable as such) and the Bondholder's adjusted tax basis in such Bond. Defeasance of the Bonds may result in a reissuance thereof, in which event an owner will also recognize taxable gain or loss as described in the preceding sentence. Such gain or loss generally will be capital gain (although any gain attributable to accrued market discount of the Bond not yet taken into income will be ordinary). The adjusted basis of the holder in a Bond will (in general) equal its original purchase price and decreased by any principal payments received on the Bond. In general, if the Bond is held for longer than one year, any gain or loss would be long term capital gain or loss, and capital losses are subject to certain limitations. Payments on the Bonds to a non-u.s. holder that has no connection with the United States other than holding its Bond generally will be made free of withholding tax, as long as that holder has complied with certain tax identification and certification requirements. Circular 230 Investors are urged to obtain independent tax advice based upon their particular circumstances. The tax discussion above was not intended or written to be used, and cannot be used, for the purposes of avoiding taxpayer penalties. The advice was written to support the promotion or marketing of the Bonds. BOND COUNSEL S RESPONSIBILITY Legal matters incident to the authorization, issuance and sale of the Bonds are subject to the approving legal opinion of Miller, Canfield, Paddock and Stone P.L.C., Bond Counsel. A copy of the opinion of Bond Counsel will be provided with the Bonds, which opinion will be in substantially the form set forth in APPENDIX D. Bond Counsel has participated only in the preparation of those portions of this Official Statement captioned "PURPOSE AND SECURITY", "THE BONDS" (except under the portion captioned "Book-Entry-Only System"), "TAX MATTERS," "BOND COUNSEL'S RESPONSIBILITY," "APPROVAL BY MICHIGAN DEPARTMENT OF TREASURY" and "CONTINUING DISCLOSURE" (except the last paragraph thereof). Bond Counsel accordingly expresses no opinion as to other portions of this Official Statement or as to the financial statements contained herein and in the appendices hereto. The legal fees to be paid to Bond Counsel in connection with the issuance of the Bonds are expected to be paid from proceeds of the Bonds. APPROVAL BY MICHIGAN DEPARTMENT OF TREASURY The City has received a letter from the Department of Treasury of the State of Michigan stating that the City is in material compliance with the criteria of Act 34, Public Acts of Michigan, 2001, as 8

13 amended, for a municipality to be granted qualified status. The City may therefore proceed to issue the Bonds without further approval from the Department of Treasury of the State of Michigan. RATING Standard & Poor s Ratings Services, a division of The McGraw-Hill Companies, Inc. ( S&P ), will assign, as of the date of delivery of the Bonds, its municipal bond rating of AA- to the Bonds. No application has been made to any other ratings service for a rating on the Bonds. The City furnished to S&P certain materials and information in addition to that provided here. Generally, rating agencies base their ratings on such information and materials, and on investigations, studies and assumptions. There is no assurance that such rating will prevail for any given period of time or that it will not be revised downward or withdrawn entirely by S&P if, in its judgment, circumstances so warrant. Any such downward revision or withdrawal of such ratings may have an adverse affect on the market price of the Bonds. Any rating assigned represents only the view of S&P. Further information is available upon request from: Standard & Poor s Ratings Services 55 Water Street New York, NY (212) UNDERWRITING Edward D. Jones & Co. L.P. (the "Underwriter"), has agreed, subject to the terms of the Bond Purchase Agreement, to purchase the Bonds from the City. The Bond Purchase Agreement provides, in part, that the Underwriter, subject to certain conditions, will purchase from the City the aggregate principal amount of Bonds for a purchase price as set forth therein. The Underwriter has further agreed to offer the Bonds to the public at the approximate initial offering prices as set forth on the cover hereto. The Underwriter may offer and sell the Bonds to certain dealers and others at prices lower than the offering prices stated on the cover hereto. The offering prices may be changed from time to time by the Underwriter. The Underwriter has agreed to purchase the Bonds at an underwriter s discount of $51,925 from the prices set forth on the cover of this Official Statement. The Bond Purchase Agreement provides that the obligations of the Underwriter are subject to certain conditions, including, among other things, that proceedings relating to the Bonds are not pending or threatened by the Securities and Exchange Commission. The Bond Purchase Agreement further provides that the City will provide to the Underwriter within five business days of the date of the Bond Purchase Agreement sufficient copies of the Official Statement to enable the Underwriter to comply with the requirements of Rule 15c2-12(b)(4) under the Securities Exchange Act of 1934, as amended. FINANCIAL ADVISOR'S OBLIGATION Stauder, Barch & Associates, Inc., Ann Arbor, Michigan (the "Financial Advisor") has been retained by the City to provide certain financial advisory services. The information contained in the Official Statement was prepared in part by the Financial Advisor and is based on information supplied by various officials from records, statements and reports required by various local, county or state agencies of the State of Michigan in accordance with constitutional or statutory requirements. To the best of the Financial Advisor's knowledge, all of the information contained in the Official Statement, which it assisted in preparing, while it may be summarized is (i) complete and accurate; (ii) does not contain any untrue statement of a material fact; and (iii) does not omit any material fact, or make 9

14 any untrue statement which would be misleading in light of the circumstances under which these statements are being made. However, the Financial Advisor has not or will not independently verify the completeness and accuracy of the information contained in the Official Statement. The Financial Advisor's duties, responsibilities and fees arise solely as financial advisor to the City, and it has no underwriting, secondary market obligations or other responsibility to the City. The Financial Advisor's fees are expected to be paid from Bond proceeds. Further information concerning the Bonds may be secured from Stauder, Barch & Associates, Inc., 3989 Research Park Drive, Ann Arbor, Michigan 48108, (734) , Financial Advisor to the City or from City of Escanaba, 410 Ludington Street, Escanaba, Michigan, 49829, (906) CONTINUING DISCLOSURE Prior to delivery of the Bonds, the City will execute a Continuing Disclosure Undertaking (the "Undertaking") for the benefit of the holders of the Bonds and the Beneficial Owners (as hereinafter defined under this caption only) to send certain information annually and to provide notice of certain events to certain information repositories pursuant to the requirements of Rule 15c2-12(b)(5) (the "Rule") adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended. "Beneficial Owner" means, under this caption only, any person who has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including any person holding Bonds through nominees, depositories or any other intermediaries). The information to be provided on an annual basis, the events which will be noticed on an occurrence basis, and the other terms of the Undertaking, are set forth in APPENDIX E, "Form of Continuing Disclosure Undertaking." A failure by the City to comply with the Undertaking will not constitute an event of default under the Resolution and holders of the Bonds or Beneficial Owners are limited to the remedies described in the Undertaking. A failure by the City to comply with the Agreement must be reported in accordance with the Rule and must be considered by any broker, dealer or municipal securities dealer before recommending the purchase or sale of the Bonds in the secondary market. Consequently, such a failure may adversely affect the transferability and liquidity of the Bonds and their market price. Further, the City has not, in the previous five years, failed to comply, in all material respects, with any previous continuing disclosure undertakings executed by the City pursuant to the Rule. OTHER MATTERS All information contained in this Official Statement, in all respects, is subject to the complete body of information contained in the original sources thereof. In particular, no opinion or representation is rendered as to whether any projection will approximate actual results, and all opinions, estimates and assumptions, whether or not expressly identified as such, should not be considered statements of fact. CITY OF ESCANABA COUNTY OF DELTA STATE OF MICHIGAN By: Its: /s/ James V. O Toole James V. O Toole City Manager 10

15 APPENDIX A¹ CITY OF ESCANABA GENERAL FINANCIAL INFORMATION AREA POPULATION The City of Escanaba encompasses an area of square miles. The estimated population for the City and the U.S. Census reported is as follows: *Estimate City-Data.com City of Year Escanaba 2010 (estimate) 12,121* 2000 U.S. Census 13, U.S. Census 13, U.S. Census 14,355 PROPERTY VALUATIONS In accordance with Act 539, Public Acts of Michigan, 1982, as amended, and Article IX, Section 3 of the Michigan Constitution, the ad valorem State Equalized Valuation (SEV) represents 50% of true cash value. SEV does not include any value of tax exempt property (e.g. churches, governmental property) or property granted tax abatements under Act 198, Public Acts of Michigan, 1974, as amended. As a result of Proposal A, ad valorem property taxes are assessed on the basis of taxable value, which is subject to assessment caps. SEV is used in the calculation of debt margin and true cash value. See TAX PROCEDURES herein for more information. Taxable property in the City is assessed by the local municipal assessor and is subject to review by the County Equalization Department. Historical Valuations Total Year Taxable Valuation 2010 $274,022,679* ,156, ,334, ,326, ,122,513 * The 2010 State Equalized Valuation is $311,601, Taxable Valuation $274,022,679 Plus: 2010 IFT Taxable Valuation** 5,199, Act 146 (OPRA) 599, Act 513 (DNR) 9,315 Total 2010 Equivalent Valuation $279,830,905 Less: 2010 DDA Capture $9,226, Brownfield Capture 1,688,977 TOTAL Net Equivalent Valuation $268,915,886 ** Millage is levied at half rate against the IFT taxable valuation. See PROPERTY VALUATIONS - Industrial Facilities Tax (IFT) herein. ¹ Information included in this Official Statement under the headings General Financial Information and General Economic Information. was provided by the City of Escanaba unless otherwise stated. A-1

16 Per Capita Valuation Industrial Facilities Tax (IFT) 2010 Per Capita Taxable Valuation $22, Per Capita State Equalized Valuation $25, Per Capita Estimated True Cash Valuation $51, Act 198, Public Acts of Michigan, 1974, as amended ( Act 198 ), provides significant property tax incentives to industry to renovate and expand aging plants and to build new industrial facilities in Michigan. Under the provisions of Act 198, qualifying cities, villages and townships may establish districts in which industrial firms are offered certain property tax incentives to encourage the restoration or replacement of obsolete industrial facilities and to attract new industrial facilities. Property tax owners situated in such districts pay an Industrial Facilities Tax ( IFT ) in lieu of ad valorem taxes on the facility and equipment for a period of up to 12 years. For rehabilitated plants and equipment, the IFT is determined by calculating the product of the state equalized valuation of the replacement facility in the year before the effective date of the abatement certificate multiplied by the total mills levied by all taxing units in the current year. New plants and equipment receiving their abatement certificate prior to January 1, 1994 are taxed at one-half the total mills levied by all taxing units, other than mills levied for local and intermediate school district operating purposes or under the State Education Tax Act, plus one-half of the number of mills levied for school operating purposes in For new facility abatements granted after 1993, new plants and equipment are taxed at one-half of the total mills levied as ad valorem property taxes by all taxing units except mills levied under the State Education Tax Act, plus the number of mills levied under the State Education Tax Act. For new facility abatements granted after 1993, the State Treasurer may permit abatement of all, none or one-half of the mills levied under the State Education Tax Act. It must be emphasized, however, that ad valorem property taxes on land are not reduced in any way since land is specifically excluded under Act 198. The City has granted a total taxable valuation of $5,199,804 in IFT abatements in 2010 Tax Increment Authorities Act 450 of the Public Acts of Michigan, 1980, as amended, (the TIFA Act ), Act 197 of the Public Acts of Michigan, 1975, as amended, (the DDA Act ), and Act 281 of the Public Acts of Michigan, 1986, as amended, (the LDFA Act ) (together the TIF Acts ) authorize the designation of specific districts known as Tax Increment Finance Authority ( TIFA ) Districts, Downtown Development Authority ( DDA ) Districts, Local Development Finance Authority ( LDFA ) Districts or Brownfield Redevelopment Authority ( BRDA ) Districts. Such districts are authorized to formulate tax increment financing plans for public improvements, economic development, neighborhood revitalization and historic preservation within the district. Tax increment financing permits the TIFA, DDA, LDFA, or BRDA to capture tax revenues attributable to increases in value ( TIF Captured Value ) of real and personal property located within an approved development area while any tax increment financing plans by an established district are in place. These captured revenues are used by the District and are not passed on to the local taxing jurisdictions. A DDA was established within the City in 1988, under the authority contained in the Downtown Development Authority Act. For the 2010 tax year, there was $9,226,042 of Captured Value in the DDA. A BRDA was established within the City in 1998, under the authority contained in the Brownfield Redevelopment Authority Act. For the 2010 tax year, there was $1,688,977 of Captured Value in the BRDA. A-2

17 TAX BASE COMPOSITION A breakdown of the City s 2010 Taxable Valuation by municipality, class and use is as follows: Taxable Percent of Class Valuation Total Real $254,436, % Personal 19,585, TOTAL $274,022, % Use Taxable Valuation Percent of Total Commercial $94,105, % Industrial 4,301, Residential 155,988, Developmental 40, Commercial Personal 15,460, Industrial Personal 2,781, Utility Personal 1,344, TOTAL $274,022, % MAJOR TAXPAYERS The ten largest taxpayers in the City and their 2010 Taxable Valuations and Industrial Facilities Tax Valuations are as follows: Taxable IFT Total Taxpayer Product/Service Valuation + Valuation = Valuation EMP Inc. Industrial $2,060,717 $4,453,429 $6,514,146 Wal-Mart Retail sales 5,306, ,306,476 Rubloff Delta LLC Shopping center 4,144, ,144,274 UP Enterprises LLC/Dagenais Real estate 4,075, ,075,236 Menards, Inc.* Retailer 5,306, ,306,476 Dagenais Real Estate Commercial real estate 3,695, ,695,480 UP State Bank Banking 2,430, ,430,209 Elmer s County Market Inc. Grocery retailer 2,167, ,167,925 Shopko Properties Retail sales 1,787, ,787,107 Bosk Properties Commercial real estate 1,750, ,750,613 TOTAL $30,154,873 $4,453,429 $34,608,302 * Menards, Inc. has filed a real property tax appeal with the State of Michigan Tax Tribunal. The Taxable Valuations of the major taxpayers represent 11.00% of the City s 2010 Taxable Valuation of $274,022,679. The Total Valuations represent 12.87% of the City s Net Equivalent Evaluation of $268,915,886. Source: City of Escanaba TAX RATE LIMITATION The City is authorized to levy the following tax rates: Millage Maximum Allowable Millage Levied Expiration Authorized Millage after Rollback July 1 Date of Levy Operating In Perpetuity Band Operating In Perpetuity Library Operation In Perpetuity Pension (Act 345) Unlimited N/A N/A A-3

18 TAX RATES - (Per $1,000 of Valuation) Each school district, county, township, special authority and city has a geographical definition which constitutes a tax district. Since local school districts and the county overlap either a township or a city, and intermediate school districts overlap local school districts and county boundaries, the result is many different tax rate districts. Escanaba City Operating Pension TOTAL Other Major Taxing Units State Education Tax¹ Delta County * Escanaba Area Public Schools Non-homestead Homestead Delta Schoolcraft I/S/D 2, Bay DeNoc Community College * Summer Levy ¹ The State of Michigan levies 6.00 mills for school operating purposes on all homestead and non-homestead property located within the School District except industrial personal property which is exempt. Source: Delta County Apportionment Report and Respective Units REVENUES FROM THE STATE OF MICHIGAN The City receives revenue sharing payments from the State of Michigan under the State Constitution and the State Revenue Sharing Act of 1971, as amended (the "Revenue Sharing Act"). The table appearing at the end of this section shows State revenue sharing distributions received by the City during the City's past four fiscal years, and the estimated receipts for the City's current fiscal year. In addition to payments of revenue sharing moneys, the State pays the City to support judges' salaries, as well as other miscellaneous state grants. Revenue sharing payments and other moneys paid to municipalities (other than the portion that is mandated by the State Constitution) are subject to annual appropriation by the State Legislature, and may be reduced or delayed by Executive Order during any fiscal year in which the Governor, with the approval of the Legislature's appropriation committees, determines that actual revenues will be less than the revenue estimates on which appropriations were based. The Legislature and Governor have modified the appropriations at various times over the past several years in order to balance the State s general fund budget and may do so in the future. If revenue sharing dollars received by the State are less than anticipated and the City's revenue sharing distribution is reduced, the City intends to make certain adjustments as necessary to balance its fiscal year 2011 budget. Purchasers of the Bonds should be alert to further modifications to revenue sharing payments to Michigan local governmental units, to the potential consequent impact upon the City's general fund condition, and to the potential impact upon the market price or marketability of the Bonds resulting from changes in revenues received by the City from the State. The following table sets forth the annual revenue sharing payments and other moneys received by the City for the fiscal years ended June 30, 2007 through June 30, 2009, the unaudited 2010 revenue and the currently anticipated revenue sharing payments to be received in the fiscal year ending June 30, A-4

19 Fiscal Year Revenue Sharing Ended June 30 Payments¹ 2011 (budgeted) $1,266, (unaudited) 1,266, ,423, ,475, ,475,386 ¹Amounts do not include state gas and weight tax distributions. Source: Web site TAX LEVIES AND COLLECTIONS The City s fiscal year begins July 1 and ends June 30. City property taxes are due July 1 of each fiscal year and are payable without interest or penalty on or before the following September 14. All real property taxes remaining unpaid on March 1st of the year following the levy are turned over to the County Treasurer for collection. Delta County (the County) annually pays from its Tax Payment Fund delinquent taxes on real property to all taxing units in the Counties, including the City, shortly after the date delinquent taxes are returned to the County Treasurers for collection. A history of tax levies and collections for the City is as follows: Year Ended Operating Collections to Collections Plus Funding June 30 Tax Levy March 1 of Following Year To June 30 of Following Year 2011 $4,527,371 $4,085, %* N/A ,598,600 $4,579, $4,598, % ,362,889 4,346, ,361, ,247,875 4,231, ,247, ,071,825 4,057, ,066, ,883,469 3,869, ,881, * Collection to November 8, 2010 The Tax Payment Fund is financed through the issuance of General Obligation Limited Tax Notes (GOLTNs) by Delta County. Although the City anticipates the continuance of this program by the County, the ability of the County to issue such GOLTNs is subject to market conditions at the time of offering. In addition, Act 206 of 1893, as amended, provides in part that: The primary obligation to pay to the county the amount of taxes and interest thereon shall rest with the local taxing units, and if the delinquent taxes which are due and payable to the county are not received by the county for any reason, the county has full right of recourse against the taxing unit to recover the amount thereof and interest thereon... On the first Tuesday in May in each year, a tax sale is held by the County at which lands delinquent for taxes assessed in the third year preceding the sale, or in a prior year, are sold for the total of the unpaid taxes of those years. LABOR FORCE A breakdown of the number of employees of the City and their affiliations with organized groups is as follows: Full Time Part Time/Seasonal Bargaining Contract Employees Number Number Unit Expiration Department Heads 12 0/0 NA N/A Other Non-Union Employees 11 18/11 N/A N/A Municipal Employees 32 1/0 Teamsters-Local 486 6/30/12 Public Safety Command 10 0/0 POLC 6/30/11 Public Safety Officers 20 0/0 POLC 6/30/11 Public Safety Dispatchers 7 3/0 POLC 6/30/11 Electricians 10 0/0 IBEW Local 979 6/30/11 Water/Wastewater 15 0/0 Teamsters-Local 486 6/30/12 TOTAL STAFF /11 The City has not experienced a strike by any of its bargaining units within the past ten years. A-5

20 PENSION FUND Michigan Municipal Employees Retirement System All full time and part time employees of the City except sworn public safety officers are covered by the Michigan Municipal Employees Retirement System ( MERS ). The City contributes to MERS, a multiple-employer public retirement system that acts as a common investment and administrative agent for municipalities in the State of Michigan. The plan issues a stand-alone financial report. MERS is a cost-sharing, multi-employer, statewide plan. Pension benefits are established by law and funded through employer contributions. Contributions required and contributions made are as follows: Annual Year ended Required Percent June 30 Contribution Contributed 2006 $611, % , , , , Pubic Safety Pension Plan The plan is a single employer public employee retirement system established and administered by the City to provide pension benefits exclusively for all of its sworn public safety officers. The Pension Fund is accounted for as a separate Pension Trust Fund. At June 30, 2008, the date of the most recent actuarial valuation, membership in the Pension Fund consisted of 32 current employees and 53 retirees and beneficiaries currently receiving benefits, one terminated employee entitled to but not yet receiving benefits, and two deferred retirement plan option participates. Contributions required and contributions made are as follows: Annual Year ended Required Percent June 30 Contribution Contributed 2006 $465, % , , , , OTHER POST-EMPLOYMENT BENEFITS In addition to providing pension benefits, the City currently provides certain health care benefits for retired employees under provisions of applicable salary or union contracts. The City is currently in the process of doing their GASB 45 actuarial. The only retiree benefit the City provides is allowing retires to purchase health/dental/vison at 100% of the cost. Source: Audited financial statements. A-6

21 DEBT STATEMENT (As of November 1, 2010 and including the Bonds described herein) DIRECT DEBT Dated Interest Amount Date Purpose Type Spread Maturities Outstanding General Obligation 11/23/99 Authority LTGO /01/10-14 $200,000 05/11/04 Authority LTGO /01/ ,940,000 12/07/10 Capital Impv., Series 2010 Taxable LTGO /01/ ,200,000 6,340,000 Revenue 9/24/92 Utilities Water Waste Rev /01/ ,000 9/29/98 Utilities Water Waste Rev /1/ ,000 6/27/02 Utilities Water Rev /1/ ,935,000 3/29/07 Utilities Water Rev /1/ ,585,000 5,215,000 TOTAL DIRECT DEBT 11,555,000 Less: Self Supporting Bonds (200,000) Revenue Bonds (5,215,000) NET DIRECT DEBT $6,140,000 OVERLAPPING DEBT Amount District Percent Municipality Outstanding Share Escanaba School District $37,030,000 $16,833, Delta County 2,785, , Bay De No Community College 9,910,000 2,433,896 NET OVERLAPPING DEBT 19,951,730 NET DIRECT AND OVERLAPPING DEBT $26,091,730 Source: Municipal Advisory Council of Michigan. DEBT RATIOS Per Capita (12,121) Net Direct Debt $ Net Direct and Overlapping Debt $2, Ratio to 2010 Taxable Valuation ($274,022,679) Net Direct Debt 2.24% Net Direct and Overlapping Debt 9.52% Ratio to 2010 State Equalized Valuation ($311,601,869) Net Direct Debt 1.97% Net Direct and Overlapping Debt 8.37% Ratio to 2010 Estimated True Cash Valuation ($623,203,738) Net Direct Debt 0.99% Net Direct and Overlapping Debt 4.19% A-7

22 DEBT HISTORY The City has no record of default. FUTURE FINANCING The City does not anticipate additional capital financing in the foreseeable future. LEGAL DEBT MARGIN The net indebtedness of the City shall not be in excess of 10% of the state equalized valuation of all real and personal property. Obligations which are not included in the computation of legal debt margin according to the statutes incorporating the unit of government are: (1) Special assessment Bonds; (2) Mortgage Bonds; (3) Michigan Transportation Fund Bonds; (4) Revenue Bonds; (5) Bonds issued, or contracts or assessment obligations, incurred, to comply with an order of the Water Resources Commission (now the Department of Environmental Quality) or a court of competent jurisdiction; (6) Other obligations incurred for water supply, sewage, drainage or refuse disposal projects necessary to protect the public health by abating pollution State Equalized Valuation - excluding IFT values $311,601,869 Plus: Equivalent 2010 valuation of Act 198 exemptions 2,599,681 Total Valuation $314,201,550 Debt Limit - 10% of State Equalized Valuation $31,420,155 Amount of Direct Debt Outstanding $11,555,000 Less: Revenue Bonds (5,215,000) Total Subject to Debt Limit 6,340,000 Additional Debt Which Could Be Legally Incurred $25,080,155 A-8

23 GENERAL ECONOMIC INFORMATION LOCATION AND AREA The City of Escanaba is located on the shore of Little Bay de Noc in the south central portion of Michigan s upper peninsula. The City is located the following distances from these commercial and industrial areas: 58 miles northeast of Menominee 60 miles south of Marquette 60 miles east of Iron Mountain 116 miles northwest of Cheboygan 250 miles northeast of Milwaukee, Wisconsin 313 miles north of Chicago, Illinois 430 miles northwest of Detroit POPULATION BY AGE The 2000 U.S. Census estimate of population by age for Delta County is as follows: Number Percent Total Population 38, % 0 through 19 years 10, through 64 years 21, years and over 6, Median age 40.4 years INCOME The 2000 U.S. Census estimate of household income for Delta County is as follows: Number Percent HOUSEHOLDS BY INCOME 15, % Less than $10,000 1, $10,000 to $14,999 1, $15,000 to $24,999 2, $25,000 to $34,999 2, $35,000 to $49,999 2, $50,000 to $74,999 3, $75,000 to $99,999 1, $100,000 to $149, $150,000 to $199, $200,000 or more Median Income $35,511 A-9

24 EMPLOYMENT CHARACTERISTICS The following employers located in the City and surrounding communities offer employment opportunities. Approx. No. Employer Product/Service Employed* Within the City and surrounding area (100 or more employees) Newpage Corp.(formerly Escanaba Paper Co.) Paper 1,140 Chip In Island Resort & Casino Hotel, casino 1,000 St. Francis Hospital Health care 750 Engineered Machined Products, Inc. Corporate hdqtrs/oil management systems for diesel eng. 390 Escanaba Area School District Education 328 Wal-Mart Stores Inc. Department store 310 Pinecrest Medical Care Facility Medical care 227 Bay de Noc Community College Education 203 Wisconsin Central Transportation Corp. Ore dock loading from rail to vessel 200 Canadian National Railroad Switching term services 200 Christian Park Skilled nursing care facility 180 Great Lakes Gas Transmission Co. Utility 180 Community Action Agency Government 175 ShopKo Stores Inc. Retail men s & women s clothing store & accessories 165 Menards Hardware Plus Retail hardware store 150 Elmer s County Market Inc. Retail grocery store with pharmacy & florists 150 Andex Industries, Inc. Blister cards & printed skin board 110 USDA Forest Service Hiawatha National Forest 134 Besse Forest Products Group Manufactures spliced hardwood veneers & plywood 120 Miner s Inc. Retail grocery 120 Kmart Discount department store 120 Pathways to Healthy Living Provides mental health & psychiatric counseling services 120 City of Escanaba Executive offices 117 Delta Co. Community Mental Health Center Public mental health services 113 United Assn. Journeyman Apprentice PLM Labor organizations 111 MFC First National Bank (now Wells Fargo) National commercial bank 107 Bishop Noa Home Senior Citizens Skilled nursing care facility 105 Upper Peninsula Commission Elderly & disabled persons social services 100 AM Express Inc. Trucking operator-nonlocal 100 Skerbeck Carnival Provides maintenance services 100 Lakestate Industries, Inc. Wooden survey states & pallet stock 100 *The approximate number of employees listed above are as reported in the sources indicated below. Because of reporting time lags and other factors inherent in collecting and reporting such information, the numbers may not reflect recent changes in employment levels, if any. Source: 2010 Michigan Manufacturers Directory, Manta Company Intelligence website, the Michigan Economic Development Corporation ( MEDC ), and individual employers. A-10

25 EMPLOYMENT BREAKDOWN The 2000 U. S. Census reports the occupational breakdown of persons 16 years and over for Delta County as follows: Number Percent PERSONS BY OCCUPATION 17, % Professional Specialty Occupations 4, Service Occupations 3, Sales & Office Occupations 4, Farming, Fishing, & Forestry Occupations Construction & Maintenance Occupations 1, Transportation & Material Moving Occupations 3, The 2000 U.S. Census reports the occupational breakdown by industry for persons 16 years and over in Delta County is as follows: Number Percent PERSONS BY INDUSTRY 17, % Agriculture, Forestry, Fishing, Hunting & Mining Construction 1, Manufacturing 3, Wholesale Trade Retail Trade 2, Transportation 1, Information Finance, Insurance, & Real Estate Professional & Management Services Educational, Health & Social Services 3, Arts, Entertainment, Recreation & Food Services 1, Other Professional and Related Services Public Administration UNEMPLOYMENT* The Michigan Employment Security Agency, Research and Statistical Division, reports unemployment averages for Delta County as compared to the State of Michigan as follows: County of State of Delta Michigan 2010 YTD Average (Sept. ) 11.3% 12.3% 2009 Annual Average Annual Average Annual Average Annual Average * not seasonally adjusted A-11

26 RETAIL SALES A breakdown of retail sales (000 s omitted) for the City of Escanaba and Delta County as compared to the State of Michigan, as reported in the 2006 Editor & Publishers Market Guide, is as follows: NUMBER OF STORES ESTIMATE OF RETAIL SALES (000 s omitted) City of County of State of City of County of State of Product/Service Escanaba Delta Michigan Escanaba Delta Michigan Auto ,234 $40,419 $140,393 $44,214,183 Furniture 2 7 1,970 3,972 13,764 4,554,363 Electrical Appliance ,589 5,393 20,893 4,090,927 Lumber & Hardware ,421 20,086 77,728 13,641,603 Food ,973 27,319 98,454 17,543,450 Drugs ,861 7,903 29,054 9,652,260 Gasoline ,201 23,624 78,188 14,280,459 Apparel ,792 6,193 25,329 7,370,355 General Merchandise 3 8 1,450 34, ,324 27,621,916 TOTALS ,491 $169,523 $618,127 $142,969,516 BANKING The following banks have branches located within the City s boundaries. Deposits are as reported in the Accuity American Financial Directory. Total State-Wide Bank Main Office* Deposits Baybank Gladstone $74,488,000 Citizens Bank Flint 8,627,790,000 Northern Michigan Bank & Trust Escanaba 201,460,000 Upper Peninsula State Bank Escanaba 133,023,000 Wells Fargo Bank, National Association Sioux Falls, SD N/A First Bank, Upper Michigan Gladstone 118,204,000 m Bank Manistique 429,824,000 * Unless otherwise noted office location is in Michigan. A-12

27 APPENDIX B General Fund Budget Summaries City of Escanaba General Fund Budget Summaries For Fiscal Years Ending June 30, 2010 and / /11 Unaudited Adopted REVENUE Budget Budget Taxes $4,621,372 $4,588,300 Licenses and permits 1,575 1,400 Intergovernmental 1,421,569 1,324,500 Charges for services/fines 239, ,150 Electric utility fund contribution 463, ,624 Miscellaneous 255, ,700 TOTAL REVENUE 7,002,982 6,802,674 Incoming Transfers & Other Transactions 245, ,500 TOTAL REVENUE 7,248,742 7,047,174 EXPENDITURES General Government 1,990,262 1,768,121 Public safety 3,659,689 3,893,277 Highways, streets and public works 532, ,801 Sanitation 583, ,983 Community services 21,148 21,148 Recreation 528, ,365 Cultural 38,524 38,659 Other functions 36,636 40,222 TOTAL EXPENDITURES 7,391,559 7,495,576 Outgoing Transfers & Other Transactions 619, ,825 Less: Overhead to Utilities (855,331) (871,740) TOTAL EXPENDITURES $7,155,286 $7,388,661 REVENUE OVER (UNDER) EXPENDITURES 93,456 (341,487) BEGINNING FUND BALANCE, JULY 1 4,409,493 4,502,949 ESTIMATED ENDING FUND BALANCE, JUNE 30 $4,502,949 $4,161,462 B-1

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29 C-1 APPENDIX C

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