MORGAN KEEGAN & COMPANY, INC.

Transcription

1 OFFICIAL STATEMENT DATED DECEMBER 15, 2009 NEW ISSUES Book-Entry OFFICIAL STATEMENT Rating: Aaa/AAA Moody's/Standard & Poor s (See Miscellaneous Rating ) In the opinion of Bass, Berry & Sims PLC, Bond Counsel, based on existing law and assuming compliance with certain tax covenants of the City, (i) interest on the Series 2009A Bonds will be excluded from gross income for federal income tax purposes; will not be an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; and, will not be included in adjusted current earnings under the federal corporate alternative minimum tax; and (ii) interest on the Series 2009B Bonds will be included in gross income of the owners thereof for federal income tax purposes. For an explanation of certain tax consequences under federal law which may result from ownership of the Bonds, see the discussion under the heading TAX MATTERS herein. Under existing law, the Bonds and the income therefrom will be exempt from all state, county and municipal taxation in the State of Tennessee, except inheritance, transfer and estate taxes, and Tennessee franchise and excise taxes. (See TAX MATTERS herein). $13,375,000 General Obligation Public Improvement Bonds Series 2009A $44,000,000 CITY OF FRANKLIN, TENNESSEE $30,625,000 General Obligation Public Improvement Bonds Series 2009B (Federally Taxable Build America Bonds Direct Payment) Dated: As of the Date of Delivery Bonds Due: As set forth on the inside front cover The $13,375,000 General Obligation Public Improvement Bonds, Series 2009A ( Series 2009A Bonds ) and $30,625,000 General Obligation Public Improvement Bonds, Series 2009B (Federally Taxable Build American Bonds Direct Payment) ( Series 2009B Bonds ) are collectively referred to herein as the Bonds. The Bonds are issuable as fully registered bonds and, when issued, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company ( DTC ), New York, New York, to which principal and interest payments on the Bonds will be made so long as Cede & Co. is the registered owner of the Bonds. Individual purchases of the Bonds will be made in Book-Entry Only form, and individual purchasers ( Beneficial Owners ) of the Bonds will not receive physical delivery of bond certificates. Interest will be payable on the Bonds as described herein. U.S. Bank National Association has been designated as paying agent and bond registrar (the Registration Agent ). The Bonds will be issued and registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ( DTC ). DTC will act as securities depository for the Bonds. Purchasers will not receive certificates representing their ownership interest in the Bonds. Accordingly, principal, interest and premium, if any, on the Bonds will be paid by U.S. Bank National Association as Registration Agent, directly to DTC or Cede & Co., it nominee. DTC will in turn remit such principal, interest or premium to the DTC Participants (as defined herein) for subsequent distribution to the Beneficial Owners (as defined herein) of the Bonds. The Bonds will be issued in denominations of $5,000 each or integral multiples thereof. The Bonds will be direct general obligations of the City of Franklin, Tennessee (the City ). The full faith, credit and taxing power of the City are irrevocably pledged for the prompt payment of the principal of, premium, if any, and interest on the Bonds. The Bonds are payable from taxes levied on all taxable property of the City without limitation as to rate or amount. The Series 2009A Bonds are not subject to optional redemption prior to maturity. The Series 2009B Bonds will be subject to optional redemption as described herein. FOR MATURITIES, INTEREST RATES AND PRICES/YIELDS, PLEASE REFER TO THE INSIDE OF THIS COVER PAGE This cover page contains certain information for quick reference only. It is not a summary of these issues. Investors must read the entire Official Statement to obtain information essential to make an informed investment decision. The Bonds are offered when, as and if issued, subject to the approval of the legality thereof by Bass, Berry & Sims PLC, Nashville, Tennessee, Bond Counsel, whose opinions will be provided with the Bonds. Certain legal matters will be passed upon for the City by Shauna Billingsly, Esq. as interim City Attorney. It is expected that the Bonds will be available for delivery through the facilities of The Depository Trust Company, New York, New York on or about December 29, MORGAN KEEGAN & COMPANY, INC.

2 MATURITIES, AMOUNTS, INTEREST RATES PRICES AND/OR YIELDS $13,375,000 General Obligation Public Improvement Bonds Series 2009A Maturity March 1 st Amount Interest Rate Price/ Yield CUSIP ,575, % 0.350% VQ ,845, VR ,895, VS ,940, VT ,990, VU ,040, VV ,090, VW0 $30,625,000 General Obligation Public Improvement Bonds Series 2009B (Federally Taxable Build America Bonds Direct Payment) Maturity March 1 st Amount Interest Rate Price/ Yield CUSIP ,140, % 4.200% VX ,205, VY ,270, VZ ,340, WA ,410, WB ,490, WC ,565, WD ,650, WE ,740, WF ,835, WG ,935, WH ,045, WJ8 1 Priced to the March 1, 2019 par call.

3 No dealer, salesperson or other person has been authorized to give any information or to make any representations other than those in this Official Statement in connection with the offering contained herein; and if given or made, such information or representations must not be relied upon. This Official Statement does not constitute an offer of the securities offered hereby to any jurisdiction where such offer or solicitation of such offer would be unlawful. The information set forth herein has been provided by the City and other sources that are believed to be reliable, but the accuracy or completeness of the information is not guaranteed by and is not to be construed as a representation by the Financial Advisor of the City. The delivery of this Official Statement at any time does not imply that information herein is correct as of any time subsequent to its date. This Official Statement is not to be construed as a contract or agreement between the City and any purchaser of any of the Bonds. Any statements made herein involving matters of opinion, whether or not expressly so stated, are intended merely as opinion and not as representations of fact. The information contained herein is subject to change without notice and neither the delivery hereof nor any sale made hereunder shall, under any circumstances, create any implication that there has not been any change in the affairs of the City, or its agencies and authorities, since the date hereof. This Official Statement has been prepared only in connection with the initial offering and sale of the Bonds and may not be reproduced or used in whole or in part for any other purpose.

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5 TABLE OF CONTENTS Part I CITY OFFICIALS... 1 SUMMARY OF THE OFFERING... 2 INTRODUCTION... 4 THE BONDS... 4 DESCRIPTION... 4 BOOK-ENTRY SYSTEM... 4 DISCOUNTENANCE OF BOOK-ENTRY SYSTEM... 6 REDEMPTION PRIOR TO MATURITY... 6 SELECTION OF SERIES 2009 B BONDS FOR REDEMPTION... 7 NOTICE OF REDEMPTION... 8 AUTHORITY FOR ISSUANCE OF THE BONDS... 8 SECURITY AND REMEDIES... 8 USE OF BOND PROCEEDS... 8 BUILD AMERICA BONDS... 9 GENERAL DESCRIPTION... 9 INTEREST SUBSIDY PAYMENT... 9 THE SERIES 2009B BONDS AS BUILD AMERICA BONDS... 9 ESTIMATED SOURCES AND USES OF FUNDS LONG TERM DEBT SERVICE REQUIREMENTS STATEMENT OF DEBT RATINGS CONTINUING DISCLOSURE LITIGATION TAX MATTERS SALE OF THE BONDS THE SERIES 2009A BONDS THE SERIES 2009B BONDS FINANICAL ADVISOR ADDITIONAL INFORMATION MISCELLANEOUS CERTIFICATE AS TO OFFICIAL STATEMENT Yearly Information Statement... Part II General Purpose Financial Statements... Appendix A Forms of Bond Counsel Opinions...Appendix B Form of Continuing Disclosure Certificate...Appendix C

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7 CITY OFFICIALS MEMBERS OF THE BOARD OF MAYOR AND ALDERMEN John Schroer, Mayor Clyde Barnhill Beverly Burger Margaret Martin Dana McLendon Pearl Bransford Vice Mayor Ken Moore Michael Skinner Ann Peterson CITY OFFICIALS Eric S. Stuckey, City Administrator Russ Truell, Assistant City Administrator for Finance & Administration/CFO Shauna Billingsley, Esq., Interim City Attorney BOND COUNSEL Bass, Berry & Sims PLC Nashville, Tennessee FINANCIAL ADVISOR Public Financial Management, Inc. Memphis, Tennessee REGISTRATION AGENT AND PAYING AGENT U.S. Bank National Association I-1

8 SUMMARY OF THE OFFERING This Summary Statement is not intended to be complete. Before purchasing the Bonds, the purchaser should refer to the Official Statement in its entirety. THE BONDS... BOOK ENTRY SYSTEM... DENOMINATION... DATE OF ISSUE; DELIVERY... The $13,375,000 General Obligation Public Improvement Bonds, Series 2009A ( Series 2009A Bonds ) and the $30,625,000 General Obligation Public Improvement Bonds Series 2009B (Federally Taxable Build America Bonds Direct Payment) ( Series 2009B Bonds) (collectively, the Bonds ), are issued in fully registered form without coupons. The Bonds will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ( DTC ). DTC will act as securities depository of the Bonds. So long as Cede & Co. is the registered owner of the Bonds, as the nominee for DTC, principal and interest shall be payable to Cede & Co., as nominee for DTC, which will, in turn, remit such principal and interest to the DTC participants for subsequent disbursements to the beneficial owners of the Bonds. Individual purchases of Bonds by the public may be made through the DTC participants in principal amounts of $5,000 or integral multiples thereof. Beneficial Owners of the Bonds will not receive physical delivery of Bond certificates. See The Bonds - Book-Entry System herein. Fully registered bonds, $5,000 or any integral multiple thereof. The Bonds will be delivered on or about December 29, 2009 and will be dated the delivery date. PRINCIPAL PAYMENTS... Principal on the Series 2009A Bonds is payable on March 1, 2011 through March 1, Principal on the Series 2009B Bonds is payable on March 1, 2018 through March 1, INTEREST PAYMENTS... OPTIONAL REDEMPTION... Interest is payable on March 1 and September 1, commencing September 1, The Series 2009A Bonds are not subject to optional or mandatory redemption. The Series 2009B Bonds maturing on or prior to March 1, 2019 are not subject to redemption prior to maturity. The Series 2009B Bonds maturing on or after March 1, 2020 shall be subject to optional redemption prior to maturity on or after March 1, 2019 as described herein. I-2

9 EXTRAORDINARY OPTIONAL. REDEMPTION The Series 2009B Bonds are subject to redemption prior to maturity at the option of the City in whole or in part on any date in the event that the government of the United States of America evidences, in the sole judgment of the City by action or failure to act, that it will not provide for direct payments to be made to the City in an amount equal to or greater thirty-five percent (35%) as to the Build America Bonds of the interest payable on the Series 2009B Bonds on any Interest Payment Date. The redemption price (the Extraordinary Redemption Price ) will be determined as described in this Official Statement. PURPOSE... The Bonds are being issued to provide monies to: (i) design, construct and improve a public safety headquarters building and parking deck; (ii) design, construct and improve streets and roads, and acquire rights-of-way in connection therewith; (iii) design, construct and improve parks and recreational facilities; (iv) reimburse the appropriate fund of the Municipality for prior expenditures for certain of the foregoing costs; and (v) pay costs of issuance of the Bonds. SECURITY... BOND COUNSEL... TAX STATUS... FINANCIAL ADVISOR... REGISTRATION AGENT... FINANCIAL STATEMENTS... The Bonds will be direct general obligations of the City of Franklin, Tennessee. The full faith, credit and taxing power of the City of Franklin, Tennessee, are irrevocably pledged for the prompt payment of the principal of, premium, if any, and interest on the Bonds. Bass, Berry & Sims PLC, Nashville, Tennessee. In the opinion of Bass, Berry & Sims PLC, bond counsel, based on existing law and assuming compliance with certain tax covenants of the City, (i) interest on the Series 2009A Bonds will be excluded from gross income for federal income tax purposes; will not be an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; and, will not be included in adjusted current earnings under the federal corporate alternative minimum tax; and (ii) interest on the Series 2009B Bonds will be included in gross income of the owners thereof for federal income tax purposes. For an explanation of certain tax consequences under federal law which may result from ownership of the Bonds, see the discussion under the heading TAX MATTERS herein. Under existing law, the Bonds and the income therefrom will be exempt from all state, county and municipal taxation in the State of Tennessee, except inheritance, transfer and estate taxes, and Tennessee franchise and excise taxes. (See TAX MATTERS herein). Public Financial Management, Inc. Memphis, Tennessee. U.S. Bank National Association. Independent auditors have audited financial statements for the year ending June 30, 2008 and June 30, Information presented herein is derived from these audited financial statements I-3

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11 OFFICIAL STATEMENT Regarding CITY OF FRANKLIN, TENNESSEE $13,375,000 General Obligation Public Improvement Bonds, Series 2009A $30,625,000 General Obligation Public Improvement Bonds, Series 2009B (Federally Taxable Build America Bonds Direct Payment) INTRODUCTION This OFFICIAL STATEMENT which includes the cover page and the appendices attached hereto contains information concerning (a) the $13,375,000 General Obligation Public Improvement Bonds, Series 2009A ( Series 2009A Bonds ), the $30,625,000 General Obligation Public Improvement Bonds, Series 2009B (Federally Taxable Build America Bonds Direct Payment) ( Series 2009B Bonds ) (collectively, the Bonds ), and (b) City of Franklin, Tennessee (the City ), a political subdivision of the State of Tennessee. Part II of this Official Statement is the Supplemental Information Statement of the City. The following appendix is attached to Part II hereof: APPENDIX A City of Franklin, Tennessee, Financial Statements, dated June 30, 2008 and June 30, DESCRIPTION THE BONDS The Bonds will be issued under and subject to the terms and conditions contained in a resolution adopted by the City on November 10, 2009 (the Resolution ). The Bonds are being issued to provide monies together with other legally available funds of the City: (i) design, construct and improve a public safety headquarters building and parking deck; (ii) design, construct and improve streets and roads, and acquire rights-of-way in connection therewith; (iii) design, construct and improve parks and recreational facilities (collectively, the Projects ); (iv) reimburse the appropriate fund of the Municipality for prior expenditures for certain of the foregoing costs; and (v) pay costs of issuance of the Bonds.. The Bonds will be dated, will mature and will bear interest, all as set forth on the cover of this Official Statement. Interest on the Bonds will be payable semiannually on March 1 and September 1 each year beginning September 1, The Bonds will be issued as fully registered bonds without coupons, in the denomination of principal amounts of $5,000 or integral multiples thereof. Interest on all Bonds will be calculated on the basis of a 360-day year of twelve 30-day months. The City currently intends to elect to treat the Series 2009B Bonds as Build America Bonds (Direct Payment) for purposes of the American Recovery and Reinvestment Tax Act of 2009 and to receive a cash subsidy from the United States Treasury in connection therewith. See Build America Bonds herein. BOOK-ENTRY SYSTEM The description which follows of the procedures and record keeping with respect to beneficial ownership interests in the Bonds, payment of interest and principal on the Bonds to Direct Participants, Indirect Participants or Beneficial Owners (as such terms are defined in this Official Statement) of the Bonds, confirmation and transfer of beneficial ownership interests in the Bonds and other related transactions by and between DTC, the Direct Participants, the Indirect Participants and Beneficial Owners of the Bonds is based solely on information furnished by DTC to the City for inclusion in this Official Statement. Accordingly, the City cannot make any representations concerning these matters. DTC, New York, New York, will act as securities depository for the Bonds. The Bonds will be issued as fully registered bonds, 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. DTC, the world's largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a clearing agency registered pursuant to the provisions of Section 17A of the Securities Exchange Act of DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-u.s. equity issues, corporate and municipal debt issues and money market investments (from over 100 countries) that its DTC's I-4

12 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 Participant's records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Direct and Indirect Beneficial Owners are, however, expected to receive written confirmation 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 interest in Bonds, except in the event that use of the book entry system for the Bonds is discontinued. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not 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 the transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the security 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 Registration Agent and request that copies of notices be provided directly to them. Redemption notices shall be sent to DTC. If less than all of the Bonds are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC's MMI Procedures. Under its usual procedures, DTC will mail 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). I-5

13 Principal and interest payments on the Bonds will be made to Cede & Co. or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detailed information from the City or the Paying 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, the Paying Agent, or the City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal, and interest to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the City or the Paying Agent, disbursement of such payments to Direct Participants shall be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants. The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that the City believes to be reliable, but the City takes no responsibility for the accuracy of such information. THE CITY WILL NOT HAVE ANY RESPONSIBILITY OR OBLIGATION TO THE PARTICIPANTS OR THE BENEFICIAL OWNERS WITH RESPECT TO (1) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC OR ANY PARTICIPANT, (2) THE PAYMENT BY DTC OR ANY PARTICIPANT OF ANY AMOUNT DUE TO ANY BENEFICIAL OWNER IN RESPECT OF THE PRINCIPAL AMOUNT OF OR INTEREST ON THE BONDS, (3) THE DELIVERY BY DTC OR ANY PARTICIPANT OF ANY NOTICE TO ANY BENEFICIAL OWNER WHICH IS PERMITTED OR REQUIRED TO BE GIVEN TO BONDHOLDERS UNDER THE TERMS OF THE BOND RESOLUTION, OR (4) ANY CONSENT GIVEN OR OTHER ACTION TAKEN BY CEDE & CO., AS THE NOMINEE OF DTC, AS REGISTERED OWNER. SO LONG AS CEDE & CO. IS THE REGISTERED OWNER OF THE BONDS, AS NOMINEE OF DTC, REFERENCES IN THIS OFFICIAL STATEMENT TO THE BONDHOLDERS OR REGISTERED HOLDERS OF THE BONDS SHALL MEAN CEDE & CO. AND SHALL NOT MEAN THE BENEFICIAL OWNERS OF THE BONDS. DISCOUNTENANCE OF BOOK-ENTRY SYSTEM DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the City or the Registration 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 County may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered. In either of the situations described in this paragraph, definitive replacement Bonds shall be issued only upon surrender to the City or an agent appointed by the City of the Bonds by DTC, accompanied by registration instructions for the definitive replacement Bonds from DTC. The City shall not be liable for any delay in delivery of such instructions and conclusively may rely on and shall be protected in relying on such instruction of DTC. REDEMPTION PRIOR TO MATURITY Series 2009A Bonds The Series 2009A Bonds are not subject to optional redemption. Series 2009B Bonds Optional Redemption The Series 2009B Bonds maturing on or prior to March 1, 2019 are not subject to redemption prior to maturity. The Series 2009B Bonds maturing on or after March 1, 2020 shall be subject to optional redemption prior to maturity on or after March 1, 2019 in whole or in part at any at a price equal to par plus accrued interest to the redemption date. Extraordinary Optional Redemption The Series 2009B Bonds are issued as Build America Bonds (Direct Payment) (the Build America Bonds ). The Series 2009B Bonds are subject to extraordinary optional redemption prior to maturity at the option of the City in whole or in part at the Extraordinary Redemption Price, as described below, upon the occurrence of an Extraordinary Event, as defined below. The Extraordinary Redemption Price is equal to the greater of: (A) the issue price of the Federally Taxable Direct Subsidy Bonds, as described in the Federal Tax Certificate (but not less than 100%) to be redeemed or (B) the sum of the present values of the remaining scheduled payments of principal and interest on the Series 2009B Bonds to be redeemed to the first optional redemption date treating any principal payments due after the I-6

14 optional redemption date as if such principal payments were due on such optional redemption date, not including any portion of those payments of interest accrued and unpaid as of the date on which the Series 2009B Bonds are to be redeemed, discounted to the date on which the Series 2009B Bonds are to be redeemed on a semi-annual basis, assuming a 360-day year consisting of twelve 30-day months, at the Treasury Rate (as defined below) plus 100 basis points (1.00%); plus in each case accrued interest on the Series 2009B Bonds to be redeemed to the redemption date. An Extraordinary Event shall have occurred if the City determines that a material adverse change has occurred to Section 54AA or Section 6431 of the Code (as such sections were added by America Recovery and Reinvestment Act, pertaining to Build America Bonds) with respect to the Series 2009B Bonds or Section 1400U-1, Section 1400U-2 or there is any guidance published by the Internal Revenue Service or the Department of the Treasury with respect to such sections or any other determination by the Internal Revenue Service of the Department of the Treasury, which determination is not the result of an act or omission by the City to satisfy the requirements to receive the Interest Subsidy Payments, as described herein under Build America Bonds Interest Subsidy Payment, pursuant to which the Interest Subsidy Payments are reduced or eliminated. "Treasury Rate" means, with respect to any redemption date for any Series 2009B Bond, the rate per annum, expressed as a percentage of the principal amount, equal to the semiannual equivalent yield to maturity or interpolated maturity of the Comparable Treasury Issue, assuming that the Comparable Treasury Issue is purchased on the redemption date for a price equal to the Comparable Treasury Price, as calculated by the Designated Investment Banker. For the purposes of determining the Treasury Rate, the following definitions shall apply: "Comparable Treasury Issue" means, with respect to any redemption date for a particular Series 2009B Bond, the United States Treasury security or securities selected by the Designated Investment Banker which has or have an actual or interpolated maturity comparable to the remaining life of the applicable Series 2009B Bonds to be redeemed, and that would be utilized in accordance with customary financial practice in pricing new issues of debt securities of comparable maturity to the remaining average life of the applicable Series 2009B Bonds to be redeemed. "Comparable Treasury Price" means, with respect to any redemption date for a particular Series 2009B Bond, (1) the average of the Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest Reference Treasury Dealer Quotations, or (2) if the Designated Investment Banker obtains fewer than four such Reference Treasury Dealer Quotations, the average of all such quotations. "Designated Investment Banker" means one of the Reference Treasury Dealers appointed by the City. "Reference Treasury Dealer" means three firms, specified by the City from time to time, that are primary U.S. Government securities dealers in City of New York, New York (each a "Primary Treasury Dealer"); provided, however, that if any of them ceases to be a Primary Treasury Dealer, the City shall substitute another Primary Treasury Dealer. "Reference Treasury Dealer Quotations" means, with respect to each Reference Treasury Dealer and any redemption date for a particular Series 2009B Bond, the average, as determined by the Designated Investment Banker, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Designated Investment Banker by such Reference Treasury Dealer at 3:30 p.m., New York City time, on the third business day preceding such redemption date. SELECTION OF SERIES 2009 B BONDS FOR REDEMPTION With respect to Series 2009B Bonds maturing serially other than extraordinary optional redemption, if less than all the Series 2009B Bonds shall be called for redemption, the maturities to be redeemed shall be selected by the Governing Body in its discretion. If less than all of the Series 2009B Bonds within a single maturity shall be called for redemption, the interests within the maturity to be redeemed shall be selected as follows: (A) if the Series 2009B Bonds are being held under a Book-Entry System by DTC, or a successor Depository, the Series 2009B Bonds to be redeemed shall be determined by DTC, or such successor Depository, by lot or such other manner as DTC, or such successor Depository, shall determine; or I-7

15 (B) if the Series 2009B Bonds are not being held under a Book-Entry System by DTC, or a successor Depository, the Series 2009B Bonds within the maturity to be redeemed shall be selected by the Registration Agent by lot or such other random manner as the Registration Agent in its discretion shall determine. With respect to Series 2009B Bonds subject to extraordinary optional redemption upon the occurrence of an Extraordinary Event such Series 2009B Bonds shall be selected on a pro-rata basis. Pro-rata basis is determined in connection with any partial optional redemption of Series 2009B Bonds by multiplying the principal amount of such maturity to be redeemed on the applicable redemption date by a fraction, the numerator of which is equal to the principal amount of such maturity owned by a registered owner, and the denominator of which is equal to the principal amount of such maturity then outstanding immediately prior to such redemption date, and then rounding the product down to the next lower integral of $5,000, provided that the portions being redeemed are required to be in multiples of $5,000, and all the Series 2009B Bonds of a maturity to remain outstanding following any redemption are required to be in multiples of $5,000. NOTICE OF REDEMPTION Notice of any redemption of the Series 2009B Bonds shall specify the Series 2009B Bonds to be redeemed, the redemption date and the place where the amount due will be payable. Such notice shall also state that upon the date fixed for redemption the principal amount thereof plus the premium, if any, due on the redemption date together with the accrued interest thereon shall become due and payable. The City shall cause the Registration Agent for the Series 2009B Bonds to mail a copy of such notice at least 30 days before the redemption date to the registered owners of the Series 2009B Bonds at their address appearing on the registration books as of the 45th day preceding the date fixed for redemption. As long as a book-entry system is used to determine ownership of the Bonds, the City shall send notice of redemption to DTC. Any failure of DTC to mail such notice to any DTC participant will not affect the sufficiency or the validity of the redemption of the Series 2009B Bonds. AUTHORITY FOR ISSUANCE OF THE BONDS The City, pursuant to Section , et seq., of the Tennessee Code annotated ( T.C.A. ), has the power and is authorized to issue by resolution general obligation bonds for public improvement projects. SECURITY AND REMEDIES The Bonds will be direct general obligations of the City and the City has pledged its full faith and credit and unlimited taxing power to the punctual payment of the principal of and interest on the Bonds. A tax sufficient to pay when due such principal and interest shall be levied annually and assessed, collected and paid, in like manner with the other taxes of the City and shall be in addition to all the other taxes authorized or limited by law. It shall be the duty of the Board of Mayor and Alderman of Franklin, Tennessee (the Board ) to include in the annual levy tax sufficient to pay the interest on and principal of the Bonds as the same become due. When any part of the principal of or interest on the Bonds shall not be paid when due there shall be levied and assessed by said Board and collected by the proper collecting officers at the first assessment, levy and collection of taxes in the City, after such omission or failure, a tax sufficient to pay the same. Any owner or owners of the Bonds, including a trustee or trustees for holders of the Bonds, shall have the right, in addition to all other rights: (a) by mandamus or other suit, action or proceeding in any court of competent jurisdiction to enforce his or their rights against the City and the Board and any officer, agent or employee of the City, including, but not limited to, the right to require the City and its Board and any proper officer, agent or employee of the City to assess, levy and collect taxes to carry out any agreement as to, or pledge of, such taxes and to require the City and Board and any officer, agent or employee of the City to carry out any other covenants and agreements and to perform its and their duties under the provisions of the T.C.A. and (b) by action or suit in equity to enjoin any acts or things which may be unlawful or a violation of the rights of such owner or owners of the Bonds. USE OF BOND PROCEEDS The City will use the proceeds received from the sale of the Bonds to as described herein under THE BONDS DESCRIPTION. I-8

16 BUILD AMERICA BONDS GENERAL DESCRIPTION In February 2009, as part of the American Recovery and Reinvestment Act of 2009 ( ARRA ), Congress added Sections 54AA and 6431 to the Internal Revenue Code of 1986, as amended (the Code ) which permit state or local governments to obtain certain tax advantages when issuing taxable obligations that meet certain requirements of the Code and the related Treasury regulations. Such bonds are referred to as Build America Bonds. A Build America Bond is a qualified bond under Section 54AA(g) of the Code if it meets certain requirements of the Code and the related Treasury Regulations and the issuer has made an irrevocable election to have the special rule for qualified bonds apply. Interest on Build America Bonds is not excluded from gross income for purposes of the federal income tax, and beneficial owners of Build America Bonds will not receive any tax credits as a result of ownership of such Build America Bonds of the City, because the City will elect to receive the Interest Subsidy Payment (as defined herein) when the Series 2009B Bonds are issued. INTEREST SUBSIDY PAYMENT Under Section 6431 of the Code, an issuer of a Build America Bond may apply to receive payments (the Interest Subsidy Payment ) directly from the Secretary of the United States Treasury (the Secretary ). The amount of an Interest Subsidy Payment is set in Section 6431 of the Code at thirty-five percent (35%) of the corresponding interest payable on the portion of related Series 2009B Bonds designated Build America Bonds by City on any interest payment date. To receive an Interest Subsidy Payment, under currently existing procedures, the City will have to file a tax return (now designated as Form 8038-CP) between 90 and 45 days prior to the corresponding bond interest payment date. The City should expect to receive the Interest Subsidy Payment contemporaneously with the interest payment date with respect to the Build America Bond. Depending on the timing of the filing and other factors, the Interest Subsidy Payment may be received before or after the corresponding interest payment date. In the Resolution, the City stated that the Series 2009B Bonds will be additionally payable from but not secured by the Interest Subsidy Payment. THE SERIES 2009B BONDS AS BUILD AMERICA BONDS The City expects to make an irrevocable election to treat the Series 2009B Bonds as Build America Bonds. As a result of such election, interest on the Series 2009B Bonds treated as Build America Bonds will be includable in gross income of the beneficial owners thereof for federal income tax purposes and the beneficial owners of such Series 2009B Bonds will not be entitled to any tax credits as a result of either ownership of such Series 2009B Bonds or receipt of any interest payments on such Series 2009B Bonds. Beneficial owners of such Series 2009B Bonds should consult their tax advisors with respect to the inclusion of interest on such Series 2009B Bonds in gross income for federal income tax purposes. In the case of the Series 2009B Bonds, the City intends to apply for Interest Subsidy Payments from the Secretary under the Build America Program pursuant to Section 6431 of the Code. No assurances are provided that the City will receive the Interest Subsidy Payment. The amount of any Interest Subsidy Payment is subject to legislative changes by Congress. For the Series 2009B Bonds to be and remain Build America Bonds, the City must comply with certain covenants and the City must establish certain facts and expectations with respect to the Series 2009B Bonds, the use and investment of proceeds thereof and the use of property financed thereby. There are currently no procedures for requesting an Interest Subsidy Payment after the 45th day prior to an interest payment date; therefore, if the City fails to file the necessary tax return in a timely fashion, it is possible that the City will never receive such Interest Subsidy Payment. Also, the Interest Subsidy Payments are subject to offset against certain amounts that may, for unrelated reasons, be owed by the City to an agency of the United States of America. In the Resolution, the City stated that the Series 2009B Bonds will be additionally payable from but not secured by the Interest Subsidy Payment. I-9

17 ESTIMATED SOURCES AND USES OF FUNDS The sources and uses of funds for the plan of financing are as follows (rounded to the nearest whole dollar): Sources of Funds 2009A 2009B Total Principal amount of Bonds $ 13,375, $ 30,625, $ 44,000, Net Premium 469, , , $ 44,576, Total $ 13,844, $ 30,732, Uses of Funds Project Fund $ 13,759, $ 30,531, $ 44,291, Underwriter s Discount 30, , , Costs of Issuance 54, , , Total $ 13,844, $ 30,732, $ 44,576, [Balance of Page Left Intentionally Blank] Includes fees for the financial advisors, bond counsel, rating agencies, printing, and other expenses associated with issuance of the Bonds. I-10

18 LONG TERM DEBT SERVICE REQUIREMENTS General Obligation Debt Service As of June 30, 2009 Existing Debt Service 1 This Issue (Series 2009A & 2009B) 2 Combined Debt Service % of Fiscal Principal Years Principal Interest 3 Total Principal Interest Total Principal Interest Total Retired 2010 $ 6,805,000 $ 5,715,247 $ 12,520,247 $ - $ 2,220,541 $ 2,220,541 $ 6,805,000 $ 7,935,788 $ 14,740, ,166,000 6,106,676 13,272,676 1,575,000 1,854,925 3,429,925 8,741,000 7,961,601 16,702, ,387,000 5,869,021 13,256,021 1,845,000 1,808,800 3,653,800 9,232,000 7,677,821 16,909, ,764,000 5,606,557 13,370,557 1,895,000 1,761,425 3,656,425 9,659,000 7,367,982 17,026, ,028,000 5,352,447 12,380,447 1,940,000 1,712,925 3,652,925 8,968,000 7,065,372 16,033, % ,712,000 5,096,623 11,808,623 1,990,000 1,663,175 3,653,175 8,702,000 6,759,798 15,461, ,480,000 4,850,753 11,330,753 2,040,000 1,612,175 3,652,175 8,520,000 6,462,928 14,982, ,747,000 4,606,149 11,353,149 2,090,000 1,559,925 3,649,925 8,837,000 6,166,074 15,003, ,939,000 4,352,267 10,291,267 2,140,000 1,464,695 3,604,695 8,079,000 5,816,962 13,895, ,981,000 4,124,959 10,105,959 2,205,000 1,364,368 3,569,368 8,186,000 5,489,327 13,675, % ,180,000 3,893,973 10,073,973 2,270,000 1,258,813 3,528,813 8,450,000 5,152,786 13,602, ,363,000 3,657,569 10,020,569 2,340,000 1,146,493 3,486,493 8,703,000 4,804,062 13,507, ,177,000 3,422,141 9,599,141 2,410,000 1,027,198 3,437,198 8,587,000 4,449,339 13,036, ,633,000 3,185,933 8,818,933 2,490, ,188 3,395,188 8,123,000 4,091,121 12,214, ,701,000 2,982,110 8,683,110 2,565, ,938 3,341,938 8,266,000 3,759,048 12,025, % ,348,000 2,777,140 8,125,140 2,650, ,125 3,291,125 7,998,000 3,418,265 11,416, ,071,000 2,599,097 6,670,097 2,740, ,850 3,233,850 6,811,000 3,092,947 9,903, ,273,000 2,477,150 6,750,150 2,835, ,925 3,172,925 7,108,000 2,815,075 9,923, ,457,000 2,349,495 6,806,495 2,935, ,565 3,108,565 7,392,000 2,523,060 9,915, ,647,000 2,216,815 6,863,815 3,045,000-3,045,000 7,692,000 2,216,815 9,908, % ,921,000 2,077,840 4,998,840-2,921,000 2,077,840 4,998, ,525, ,790 2,007,790-1,525, ,790 2,007, ,575, ,943 1,996,943-1,575, ,943 1,996, ,650, ,100 2,009,100-1,650, ,100 2,009, ,725, ,265 2,018,265-1,725, ,265 2,018, % ,800, ,437 2,024,437-1,800, ,437 2,024, ,875, ,618 2,027,618-1,875, ,618 2,027, ,950,000 77,805 2,027,805-1,950,000 77,805 2,027, % Total $ 135,880,000 $ 85,331,920 $ 221,211,920 $ 44,000,000 $ 23,784,046 $ 67,784,046 $ 179,880,000 $ 109,115,966 $ 288,995,966 (1) (2) (3) Existing Debt Service includes projected debt service for $6,882,319 of undrawn debt at June 30, Does not reflect Interest Subsidy Payments expected to be received from the U. S. Treasury Department with respect to the Series 2009 B Bonds. Variable rate interest included above is based on budgeted interest rates which are historical average interest rates. NOTE: Totals may not foot due to rounding. I-11

19 STATEMENT OF DEBT (As of June 30, 2009; unless otherwise footnoted) General Obligation Bonded Debt Existing (1) $ 135,880,000 This Issue (2) 44,000,000 Total Bonded Debt 179,880,000 Less Self Supporting Debt (53,020,000) Net Bonded Debt 126,860,000 Overlapping Bonded Debt $ 188,247,675 Less Self-Supporting Bonded Debt (11,037,310) Net Overlapping Bonded Debt 177,210,365 Bonded Debt Outstanding Including Overlapping Bonded Debt $ 368,127,675 Net Bonded Debt Outstanding Including Net Overlapping Bonded Debt 304,070,365 City of City and Net Franklin Overlapping Bonded Debt Per Capita $3,076 $6,295 Net Direct Bonded Debt Per Capita $2,169 $5,199 Bonded Debt / Actual Value 1.87% 3.82% Net Bonded Debt / Actual Value 1.32% 3.16% Bonded Debt / Assessed Value 7.15% 14.63% Net Bonded Debt / Assessed Value 5.04% 12.08% Franklin Williamson County 2008 Assessed Value $ 2,516,989, $ 6,963,314, Appraised Value $ 9,637,668,952 $ 28,693,128, Population (3) 58, ,452 Williamson County's Bonded Debt as of November 1, 2009 (4) Bonded Debt $ 520,792,000 Self Supporting Bonded Debt (30,535,000) Net Bonded Debt $ 490,257,000 Franklin's Assessed Value as a Percentage of Williamson County's Assessed Value: % (1) General Obligation and Self Supporting Debt is as of June 30, (2) Inclusive of Series 2009A and Series 2009B Bonds. (3) Source: U.S Bureau of Census (for comparability to County data, the same source is used for the City's population; in the City's annual report certified populations from the State are used because they include special census results) (4) Source: Williamson County I-12

20 RATINGS Moody s and Standard & Poor s have assigned ratings of Aaa and AAA, respectively, to the Bonds. Further explanation of the significance of these ratings may be obtained from Moody's and Standard & Poor's. Any ratings are not a recommendation to buy, sell or hold the Bonds. The City furnished to each rating agency certain information and materials, some of which may not be included in this Official Statement. There is no assurance that any such ratings will not be withdrawn or revised downward by Moody s and Standard & Poor's. Such action, if taken, could have an adverse effect on the market price of the Bonds. The City makes no representation as to the appropriateness of the ratings. CONTINUING DISCLOSURE The City will at the time the Series 2009A and Series 2009B Bonds are delivered execute a Continuing Disclosure Certificate under which it will covenant for the benefit of holders and beneficial owners of the Series 2009A and Series 2009B Bonds to provide certain financial information and operating data relating to the City and to provide notice of the occurrence of certain enumerated events, if determined by the City to be material under applicable federal securities laws. The notices of material events will be filed by the City with the Municipal Securities Rulemaking Board ( MSRB ) at and with any State Information Depository which may hereafter be established in Tennessee. The specific nature of the information to be contained in the Annual Report or the notices of material events can be found in the form of the Continuing Disclosure Certificate is attached hereto as Appendix C. These covenants have been made in order to assist the Underwriter in complying with Securities and Exchange Commission Rule 15c2-12(b), as it may be amended from time to time (the "Rule"). The City has never failed to comply with a previous undertaking with respect to the Rule. LITIGATION At the time of delivery of the Series 2009A and 2009B Bonds, the City will certify that there is no litigation or other proceedings of any nature pending or to the knowledge of the City threatening to restrain or enjoin the sale, execution, issuance or delivery of the Series 2009A and Series 2009B Bonds or in any way contesting the validity of the Bonds or affecting corporate existence or the boundaries of the City or the titles of its officers to the respecting offices or the power of the City to levy and collect taxes to pay the Bonds. TAX MATTERS General. Bass, Berry & Sims PLC, Nashville, Tennessee, is Bond Counsel for the Bonds. Their opinion under existing law, relying on certain statements by the County and assuming compliance by the County with certain covenants, is that interest on the Series 2009A Bonds is: excluded from a bondholder s federal gross income under the Internal Revenue Code of 1986, not a preference item for a bondholder under the federal alternative minimum tax, and not included in the adjusted current earnings of a corporation under the federal corporate alternative minimum tax. Interest on the Series 2009B Bonds is not excluded from gross income for federal income tax purposes and so will be fully subject to federal income taxation. Under existing law, the Bonds and the income therefrom are exempt from all present state, county and municipal taxes in Tennessee except (a) inheritance, transfer and estate taxes, (b) Tennessee excise taxes on interest on the Bonds during the period the Bonds are held or beneficially owned by any organization or entity, or other than a sole proprietorship or general partnership doing business in the State of Tennessee, and (c) Tennessee franchise taxes by reason of the inclusion of the book value of the Bonds in the Tennessee franchise tax base of any organization or entity, other than a sole proprietorship or general partnership, doing business in the State of Tennessee. I-13

21 Series 2009A Bonds The Internal Revenue Code of 1986 (the Code ) imposes requirements on the Series 2009A Bonds that the City must continue to meet after the Series 2009A Bonds are issued. These requirements generally involve the way that Tax-Exempt Bond proceeds must be invested and ultimately used. If the City does not meet these requirements, it is possible that a bondholder may have to include interest on the Series 2009A Bonds in its federal gross income on a retroactive basis to the date of issue. The City has covenanted to do everything necessary to meet these requirements of the Code. A bondholder who is a particular kind of taxpayer may also have additional tax consequences from owning the Series 2009A Bonds. This is possible if a bondholder is: an S corporation, a United States branch of a foreign corporation, a financial institution, a property and casualty or a life insurance company, an individual receiving Social Security or railroad retirement benefits, an individual claiming the earned income credit or a borrower of money to purchase or carry the Series Bonds. If a bondholder is in any of these categories, it should consult its tax advisor. Bond Counsel is not responsible for updating its opinion in the future. It is possible that future events or changes in applicable law could change the tax treatment of the interest on the Series 2009A Bonds or affect the market price of the Series 2009A Bonds. See also Miscellaneous below in this heading. Bond Counsel expresses no opinion on the effect of any action taken or not taken in reliance upon an opinion of other counsel on the federal income tax treatment of interest on the Series 2009A Bonds, or under State, local or foreign tax law. Bond Premium. If a bondholder purchases a Tax-Exempt Bond for a price that is more than the principal amount, generally the excess is bond premium on that Tax-Exempt Bond. The tax accounting treatment of bond premium is complex. It is amortized over time and as it is amortized a bondholder s tax basis in that Tax-Exempt Bond will be reduced. The holder of a Tax-Exempt Bond that is callable before its stated maturity date may be required to amortize the premium over a shorter period, resulting in a lower yield on such Bonds. A bondholder in certain circumstances may realize a taxable gain upon the sale of a Tax-Exempt Bond with bond premium, even though the Tax-Exempt Bond is sold for an amount less than or equal to the owner s original cost. If a bondholder owns any Series 2009A Bonds with bond premium, it should consult its tax advisor regarding the tax accounting treatment of bond premium. Series 2009B Bonds The Series 2009B Bonds are expected to be issued as taxable Build America Bonds authorized by Section 54AA of the Code. Pursuant to Section 54AA of the Code, the County will receive cash subsidy payments from the United States Treasury equal to 35% of the interest payable on the Series 2009B Bonds. The Code imposes requirements on the Series 2009B Bonds that the City must continue to meet after the Series 2009B Bonds are issued in order to receive the cash subsidy payments. These requirements generally restrict the way that Taxable Bond proceeds must be invested and ultimately used. If the County does not meet these requirements, it is possible that the County may not receive the cash subsidy payments. The following is a summary of certain anticipated United States federal income tax consequences of the purchase, ownership and disposition of the Series 2009B Bonds. The summary is based upon the provisions of the Code, the regulations promulgated thereunder and the judicial and administrative rulings and decisions now in effect, all of which are subject to change. The summary generally addresses Series 2009B Bonds held as capital assets and does not purport to address all aspects of federal income taxation that may affect particular investors in light of their individual circumstances or certain types of investors subject to special treatment under the federal income tax laws, including but not limited to financial institutions, insurance companies, dealers in securities or I-14

22 currencies, persons holding such Bonds as a hedge against currency risks or as a position in a straddle for tax purposes, or persons whose functional currency is not the United States dollar. Potential purchasers of the Series 2009B Bonds should consult their own tax advisors in determining the federal, state or local tax consequences to them of the purchase, ownership and disposition of the Series 2009B Bonds. Interest on the Series 2009B Bonds is not excluded from gross income for federal income tax purposes and so will be fully subject to federal income taxation. Purchasers other than those who purchase Series 2009B Bonds in the initial offering at their stated principal amounts will be subject to federal income tax accounting rules affecting the timing and/or characterization of payments received with respect to such bonds. In general, interest paid on the Series 2009B Bonds, accrual of original issue discount and market discount, if any, will be treated as ordinary income to an owner of Series 2009B Bonds and, after adjustment for the foregoing, principal payments will be treated as a return of capital. Original Issue Discount. The following summary is a general discussion of certain federal income tax consequences of the purchase, ownership and disposition of Series 2009B Bonds issued with original issue discount ( Discount Series 2009B Bonds ). A Taxable Bond will be treated as having original issue discount if the excess of its stated redemption price at maturity (defined below) over its issue price (defined as the initial offering price at which a substantial amount of the Series 2009B Bonds of the same maturity have first been sold to the public, excluding bond houses and brokers) equals or exceeds one quarter of one percent of such Taxable Bond s stated redemption price at maturity multiplied by the number of complete years to its maturity. A Discount Taxable Bond s stated redemption price at maturity is the total of all payments provided by the Discount Taxable Bond that are not payments of qualified stated interest. Generally, the term qualified stated interest includes stated interest that is unconditionally payable in cash or property (other than debt instruments of the issuer) at least annually at a single fixed rate. In general, the amount of original issue discount includible in income by the initial holder of a Discount Taxable Bond is the sum of the daily portions of original issue discount with respect to such Discount Taxable Bond for each day during the taxable year in which such holder held such Discount Taxable Bond. The daily portion of original issue discount on any Discount Taxable Bond is determined by allocating to each day in any accrual period a ratable portion of the original issue discount allocable to that accrual period. An accrual period may be of any length, and may vary in length over the term of a Discount Taxable Bond, provided that each accrual period is not longer than one year and each scheduled payment of principal or interest occurs at the end of an accrual period. The amount of original issue discount allocable to each accrual period is equal to the difference between (i) the product of the Discount Taxable Bond s adjusted issue price at the beginning of such accrual period and its yield to maturity (determined on the basis of compounding at the close of each accrual period and appropriately adjusted to take into account the length of the particular accrual period) and (ii) the amount of any qualified stated interest payments allocable to such accrual period. The adjusted issue price of a Discount Taxable Bond at the beginning of any accrual period is the sum of the issue price of the Discount Taxable Bond plus the amount of original issue discount allocable to all prior accrual periods minus the amount of any prior payments on the Discount Taxable Bond that were not qualified stated interest payments. Under these rules, holders will have to include in income increasingly greater amounts of original issue discount in successive accrual periods. Holders utilizing the accrual method of accounting may generally, upon election, include all interest (including stated interest, acquisition discount, original issue discount, de minimis original issue discount, market discount, de minimis market discount, and unstated interest, as adjusted by any amortizable bond premium or acquisition premium) on the Discount Taxable Bond by using the constant yield method applicable to original issue discount, subject to certain limitations and exceptions. I-15

23 Market Discount. Any owner who purchases a Taxable Bond at a price which includes market discount in excess of a prescribed de minimis amount (i.e., at a purchase price that is less than its adjusted issue price in the hands of an original owner) will be required to recharacterize all or a portion of the gain as ordinary income upon receipt of each scheduled or unscheduled principal payment or upon other disposition. In particular, such owner will generally be required either (a) to allocate each such principal payment to accrued market discount not previously included in income and to recognize ordinary income to that extent and to treat any gain upon sale or other disposition of such a Taxable Bond as ordinary income to the extent of any remaining accrued market discount (under this caption) or (b) to elect to include such market discount in income currently as it accrues on all market discount instruments acquired by such owner on or after the first day of the taxable year to which such election applies. The Code authorizes The Treasury Department to issue regulations providing for the method for accruing market discount on debt instruments the principal of which is payable in more than one installment. Until such time as regulations are issued by the Treasury Department, certain rules described in the legislative history of the Tax Reform Act of 1986 will apply. Under those rules, market discount will be included in income either (a) on a constant interest basis or (b) in proportion to the accrual of stated interest. An owner who acquires a Taxable Bond at a market discount also may be required to defer, until the maturity date of such Series 2009B Bonds or the earlier disposition in a taxable transaction, the deduction of a portion of the amount of interest that the owner paid or accrued during the taxable year on indebtedness incurred or maintained to purchase or carry a Taxable Bond in excess of the aggregate amount of interest (including original issue discount) includable in such owner s gross income for the taxable year with respect to such Taxable Bond. The amount of such net interest expense deferred in a taxable year may not exceed the amount of market discount accrued on the Taxable Bond for the days during the taxable year on which the owner held the Taxable Bond and, in general, would be deductible when such market discount is includable in income. The amount of any remaining deferred deduction is to be taken into account in the taxable year in which the Taxable Bond matures or is disposed of in a taxable transaction. In the case of a disposition in which gain or loss is not recognized in whole or in part, any remaining deferred deduction will be allowed to the extent gain is recognized on the disposition. This deferral rule does not apply if the bondowner elects to include such market discount in income currently as described above. Bond Premium. A purchaser who purchases a Taxable Bond at a cost greater than its then principal amount (or, in the case of a Taxable Bond issued with original issue premium, at a price in excess of its adjusted issue price) will have amortizable bond premium. If the holder elects to amortize the premium under Section 171 of the Code (which election will apply to all bonds held by the holder on the first day of the taxable year to which the election applies, and to all bonds thereafter acquired by the holder), such a purchaser must amortize the premium using constant yield principles based on the purchaser s yield to maturity. Amortizable bond premium is generally treated as an offset to interest income, and a reduction in basis is required for amortizable bond premium that is applied to reduce interest payments. Purchasers of any Series 2009B Bonds who acquire such Bonds at a premium (or with acquisition premium) should consult with their own tax advisors with respect to the determination and treatment of such premium for federal income tax purposes and with respect to state and local tax consequences of owning such Series 2009B Bonds. Sale or Redemption of Series 2009B Bonds. A bondowner s tax basis for a Taxable Bond is the price such owner pays for the Taxable Bond plus the amount of any original issue discount and market discount previously included in income, reduced on account of any payments received (other than qualified stated interest payments) and any amortized bond premium. Gain or loss recognized on a sale, exchange or redemption of a Taxable Bond, measured by the difference between the amount realized and the basis of the Taxable Bond as so adjusted, will generally give rise to capital gain or loss if the Taxable Bond is held as a capital asset (except as discussed above under Market Discount ). The legal defeasance of Series 2009B Bonds may result in a deemed sale or exchange of such Bonds under certain circumstances; owners of such Bonds should consult their tax advisors as to the Federal income tax consequences of such an event. Backup Withholding. A bondowner may, under certain circumstances, be subject to backup withholding (currently the rate of this withholding obligation is 28%, but the rate may change in the future) with respect to interest or original issue discount on the Series 2009B Bonds. This withholding generally applies if the owner of a Taxable Bond (a) fails to furnish the Trustee or other payor with its taxpayer identification number, (b) furnishes the Trustee or other payor an incorrect taxpayer identification number, (c) fails to report properly interest, dividends or other reportable payments as defined in the Code; or (d) under certain circumstances, fails to provide the Trustee I-16

24 or other payor with a certified statement, signed under penalty of perjury, that the taxpayer identification number provided is its correct number and that the holder is not subject to backup withholding. Backup withholding will not apply, however, with respect to certain payments made to bondowners, including payments to certain exempt recipients (such as certain exempt organizations) and to certain Nonresidents (as defined below). Owners of the Series 2009B Bonds should consult their tax advisors as to their qualification for exemption from backup withholding and the procedure for obtaining the exemption. Backup withholding is not an additional tax. Any amount paid as backup withholding would be credited against the bondholder s U.S. federal income tax liability, provided that the requisite information is timely provided to the IRS. The amount of reportable payments for each calendar year and the amount of tax withheld, if any, with respect to payments on the Series 2009B Bonds will be reported to the bondowners and to the Internal Revenue Service. Nonresident Borrowers. Under the Code, interest and original issue discount income with respect to Series 2009B Bonds held by nonresident alien individuals, foreign corporations or other non-united States persons ( Nonresidents ) generally will not be subject to the United States withholding tax (or backup withholding) if the County (or other person who would otherwise be required to withhold tax from such payments) is provided with an appropriate statement that the beneficial owner of the Taxable Bond is a Nonresident. Notwithstanding the foregoing, if any such payments are effectively connected with a United States trade or business conducted by a Nonresident bondowner, they will be subject to regular United States income tax, but will ordinarily be exempt from United States withholding tax. ERISA. The Employees Retirement Income Security Act of 1974, as amended ( ERISA ), and the Code generally prohibit certain transactions between a qualified employee benefit plan under ERISA or tax-qualified retirement plans and individual retirement accounts under the Code (collectively, the Plans ) and persons who, with respect to a Plan, are fiduciaries or other parties in interest within the meaning of ERISA or disqualified persons within the meaning of the Code. All fiduciaries of Plans, in consultation with their advisors, should carefully consider the impact of ERISA and the Code on an investment in any Series 2009B Bonds. The opinion of Bond Counsel is not intended or written by Bond Counsel to be used and cannot be used by an owner of the Series 2009B Bonds for the purpose of avoiding penalties that may be imposed on the owner of the Series 2009B Bonds. The opinion of Bond Counsel is provided to support the promotion or marketing of the Series 2009B Bonds. In all events, all investors should consult their own tax advisors in determining the Federal, state, local and other tax consequences to them of the purchase, ownership and disposition of the Series 2009B Bonds. Miscellaneous. Tax legislation, administrative actions taken by tax authorities, and court decision, whether at the Federal or state level, may adversely affect the tax-exempt status of interest on the Series 2009A Bonds under Federal or state law or affect the receipt of the cash subsidy payments on the Series 2009B Bonds and could affect the market price or marketability of the Tax-Exempt and Series 2009B Bonds. Prospective bondholders should consult their own tax advisors regarding the foregoing matters. SALE OF THE BONDS THE SERIES 2009A BONDS The Series 2009A Bonds were sold by the City at a competitive bid on December 15, Details concerning the sale of the Series 2009A Bonds were provided to bidders in the Official Notice of Sale dated December 4, 2009, as revised on December 14, 2009, relating to the Series 2009A Bonds, which was distributed with the Official Statement. The successful bidder on the Series 2009A Bonds, Morgan Keegan & Company, Inc. (the Purchaser ), has agreed, subject to the conditions of Closing set forth in the Official Notice of Sale, to purchase the Series 2009A Bonds at a purchase price of $13,813, (or %), which includes original issue premium of $469, and a Purchaser s discount of $30,375.29, and re-offer the Series 2009A Bonds at an initial offering price of $13,844, ( %). The Purchaser has agreed to purchase all of the Series 2009A Bonds if any Series 2009A Bonds are purchased. I-17

25 THE SERIES 2009B BONDS The Series 2009B Bonds were sold by the City at a competitive bid on December 15, Details concerning the sale of the Series 2009B Bonds were provided to bidders in the Official Notice of Sale dated December 4, 2009, as revised on December 14, 2009 relating to the Series 2009B Bonds, which were distributed with the Official Statement. The successful bidder on the Series 2009B Bonds, Morgan Keegan & Company, Inc. (the Purchaser ), has agreed, subject to the conditions of Closing set forth in the Official Notice of Sale, to purchase the Series 2009B Bonds at a purchase price of $30,656, (or %), which includes net original issue premium of $107, and a Purchaser s discount of $76,716.54, and re-offer the Series 2009B Bonds at an initial offering price of $30,732, ( %). The Purchaser has agreed to purchase all of the Series 2009B Bonds if any Series 2009B Bonds are purchased. FINANICAL ADVISOR This Official Statement has been prepared under the direction of the City and with the assistance of Public Financial Management, Inc. ( PFM ), employed by the City to perform professional services in the capacity of financial advisor. In the role as financial advisor, PFM have provided advice on the plan of financing and structure of the issue, reviewed and commented on certain legal documents, drafted certain portions of the Official Statement based upon information provided by the City and reviewed the pricing of the Bonds by the Purchasers thereof. The information set forth herein has been obtained from the City and other sources, which are believed to be reliable. PFM have not verified the factual information contained in the Official Statement but relied on the information supplied by the City and the City's certificate as to the Official Statement. ADDITIONAL INFORMATION For further information with respect to the Bonds, contact Mr. Russ Truell, Assistant City Administrator and Finance & Administration/CFO Director (telephone: (615) ) or Lauren Lowe (telephone: (901) ), Financial Advisor. MISCELLANEOUS The foregoing summaries do not propose to be complete and are expressly made subject to the exact provisions of the complete documents. For details of all terms and conditions, purchasers are referred to the Resolution, a copy of which may be obtained from the City. Any statement made in this Official Statement involving matters of opinion and estimates, whether or not so expressly stated, are set forth as such and not as representations of fact, and no representation is made that any of the estimates will be realized. The execution and delivery of this Official Statement was duly authorized by the City. I-18

26 CERTIFICATE AS TO OFFICIAL STATEMENT At the time of payment for and delivery of the Bonds, the City will furnish the purchaser a certificate, signed by the Mayor, to the effect that (a) the descriptions and statements of or pertaining to the City contained in its Official Statement and any addendum thereto, for its Bonds, on the date of such Official Statement, on the date of sale of the Bonds and the acceptance of the best bid therefore and on the date of the delivery, were and are true and correct in all material respects; (b) insofar as the City and its affairs, including its financial affairs, are concerned, such Official Statement did not and does not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of circumstances under which they were made, not misleading; (c) insofar as the descriptions and statements, including financial data of or pertaining to entities other than the City, and their activities contained in such Official Statement are concerned, such statements and data have been obtained from sources which the City believes to be reliable and that the City has no reason to believe that they are untrue in any material respect; and (d) there has been no material adverse change in the financial condition of the City since June 30, 2009, the date of the last audited financial statements of the City appearing in Appendix A. Approved by the Resolution of the Board of Mayor and Aldermen of the City of Franklin, Tennessee, on November 10, /s/ John Schroer Mayor ATTEST: /s/ Eric S. Stuckey City Administrator/Recorder ATTEST: /s/ Russ Truell Chief Financial Officer I-19

27 PART II SUPPLEMENTAL INFORMATION STATEMENT

28 CITY OF FRANKLIN, TENNESSEE YEARLY INFORMATION STATEMENT In addition to providing information as of and for the year ended June 30, 2009, the City of Franklin, Tennessee intends that this Yearly Information Statement will be used, together with information to be specifically provided by the City for that purpose, in connection with the offering and issuance by the City of its securities. The City of Franklin has prepared a comprehensive annual financial report for fiscal year 2009 containing additional financial statements and other information for the periods covered by this Yearly Information Statement. Although the City of Franklin does not contract to do so, and does not represent that it will do so, it may maintain, from time to time, a mailing list of parties wishing to receive annual and other information regarding the City. Please contact Mr. Russ Truell, Chief Financial Officer, 109 3rd Avenue South, Franklin, Tennessee ( ) for questions regarding information in this Yearly Information Statement, copies of the Annual Financial Report or placement on the mailing list for the Yearly Information Statement. The date of this Yearly Financial Statement is June 30, The information included in this statement is dated June 30, 2009, unless otherwise indicated. The Preliminary Official Statement contained audited financial statements for fiscal year ended June 30, 2008 and unaudited data for fiscal year ending June 30, The Preliminary Official Statement noted that the audited financial statements for fiscal year ended June 30, 2009 were expected to be made available after the sale fo the Bonds. The audited financial statements for fiscal year ended June 30, 2009 have been made available and are included. There is no material difference between the audited data and the unaudited data previously reported for fiscal year ending June 30, No person, except as noted on the cover page, has been authorized by the City to give any information or to make any representations not contained in this Yearly Information Statement or any supplement which may be issued hereto, and if given or made, such other information or representations must not be relied upon as having been authorized. The information, estimates and expressions of opinion in this Yearly Information Statement are subject to change without notice. The delivery of this Yearly Information Statement shall not, under any circumstances, create any implication that there has been no material change in the affairs of the City since the date of this Yearly Information Statement. [Remainder of Page Intentionally Left Blank]

29 TABLE OF CONTENTS If used in conjunction with an Official Statement or Offering Memorandum, this Table of Contents will relate only to this Supplemental Information Statement. A separate Table of Contents should be included for such Official Statement or Offering Memorandum. THE CITY OF FRANKLIN, TENNESSEE... 1 Introduction... 1 Governmental Structure... 2 Organizational Chart... 3 FINANCIAL MANAGEMENT... 4 Department of Finance... 4 Fiscal Year... 4 Accounting System... 4 Basis of Accounting... 4 Budgeting And Appropriations Procedures... 4 Budget for Cash Management... 6 Financial Reporting... 6 Fund Structure... 6 Retirement System... 6 Other Post Employment Benefits... 6 General Government Operations... 7 Current Operations FY Governmental Funds Reserves... 8 Fund Balances/Fund Equity/Net Assets... 8 FINANCIAL INFORMATION... 8 Local Option Sales Tax... 8 State Tax Revenues (Local Share)... 8 Property Tax... 9 Values of Taxable Property Property Tax Levies and Collections Largest Taxpayers Hotel/Motel Occupancy Tax Historical Tax Revenue Collections Capital Investment Program Bond Authorization Debt Limit LONG-TERM OBLIGATIONS Compensated Absence Liabilities General Obligation Indebtedness MAJOR FUNDS SUMMARIES general fund Special Revenue Funds Capital Project Fund ECONOMIC AND DEMOGRAPHIC INFORMATION Population trends Income and Buying Power Employment Principal Industries Largest Employers Housing and Construction Financial Institutions ECONOMIC DEVELOPMENT The Economy Trade Area Agribusiness Tourism Central Business District Office Space Residential Development Entertainment/Retail Transportation and Distribution Utilities Education Medical Facilities... 24

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31 INTRODUCTION THE CITY OF FRANKLIN, TENNESSEE The City of Franklin was founded October 26, 1799 and was named after Benjamin Franklin, a close friend of Dr. Hugh Williamson, a member of the Continental Congress for whom Williamson County was named. The City, the county seat of Williamson County, is located 15 miles south of Nashville. Williamson County is located in a rich agricultural area, and, before the Civil War, was the wealthiest county in Tennessee, a status it still holds. Laid out on a portion of a 640-acre tract owned by Major Anthony Sharpe, a Revolutionary War Veteran, Franklin originally consisted of 109 acres that contained 200 lots. The original town plan was designed by Abram Maury, a surveyor and planter who came from Virginia in Franklin was the site of one of the bloodiest battles of the Civil War on November 30, 1864, when 20,000 Confederate soldiers made a series of charges over two miles of open ground. More than 8,000 northern and southern soldiers fell in little more than five hours. Today, Franklin has a diversified economy. The City is known to attract Fortune 500 companies, and has a large commercial area on its east side which includes retail outlets, a mall, and several corporate and regional headquarters, including Primus (Ford Motor Credit), Clarcor, Cigna Health Care, Big Idea Productions, Coventry Health Care, Community Health Systems (CHS), Healthways, Mars Petcare, Verizon and Nissan North America. The area is also home to three conference centers and several major hotel chains, including Hyatt Place, the Marriott, and Embassy Suites. Main Street in downtown Franklin has been carefully preserved and contains many buildings from the 19th century. Recent additions to the Downtown area include a Judicial Center and two parking facilities which greatly increased the amount of parking available to visitors and employees. The City has won numerous awards and honors including the National Main Street Award from the National Trust of Historic Preservation; Number One Small Town in Tennessee; and being designated a Preserve America Community by former First Lady Laura Bush. Earlier this year, the city received other community recognitions including: the National Trust for Historic Preservation identifying Franklin as one of America s Distinctive Destinations, the readers of Southern Living magazine placed Franklin in the top ten Best Small Towns list, Business Week named Franklin one of the top cities to start a small business and the American Planning Association named Downtown Franklin one of ten Great Neighborhoods. II - 1

32 GOVERNMENTAL STRUCTURE The City of Franklin was chartered by the Tennessee General Assembly in 1815 and incorporated in The City has operated under a Mayor/Board of Aldermen form of government since its incorporation in Policy-making and legislative authority are vested in a governing body consisting of the Mayor and eight (8) Aldermen. The Mayor serves a term of four years. The Aldermen are representative citizens who are elected on a non-partisan basis. Board members serve four year staggered terms, with four Aldermen elected at large and the remaining four are elected two years later by political divisions of the City called wards. The Aldermen elected by wards must live within the ward in which they represent. The Board is responsible for, among other things, passing ordinances, adopting the budget, appointing committees, and hiring the government s City Administrator. The City Administrator s responsibilities include carrying out the policies and ordinances of the governing board, preparing an annual budget, overseeing day-to-day operations and management of the government. The City government is organized under four primary operating units which include: Governance & Management, which is comprised of Elected Officials, Administration, Human Resources, Law, Communications, and Project and Facilities Management; Finance & Administration, which consolidates the administration of seven departments: Finance, Revenue / Recorder s Office, Information Technology, Purchasing, Water Department, Solid Waste Department and City Court; Community & Economic Development, which is comprised of Building and Neighborhood Services, Planning and Sustainability, Streets, Engineering, Parks and the Community Development Block Grant Program; and Public Safety, which includes the Police and Fire Departments and Drug Fund Operations. The City provides a full range of services, including police and fire protection; the construction and maintenance of highways, streets, and other infrastructure; pickup and disposal of solid waste, planning and codes; operation of a city court; implementation of storm water regulations and remedies; an inner-city trolley system, and a city-wide park system. The City also owns and operates its own water, sewer, and reclaimed water system. [Remainder of Page Intentionally Left Blank] II - 2

33 ORGANIZATIONAL CHART II-3

34 DEPARTMENT OF FINANCE FINANCIAL MANAGEMENT The Finance Department is responsible for overseeing the security and management of the City's financial and property interests and the collection of most revenues, including property and business taxes. The Department helps the City Administrator prepare, implement and monitor the City's annual capital and operating budgets. The Department also plans and executes the issuance of bonds and other financing mechanisms available to municipalities. Other responsibilities include producing the City s line item document, monthly and quarterly financial monitoring and reporting, fiscal forecasting and planning, and financial and policy analysis. FISCAL YEAR The City operates on a fiscal year that commences July 1 and ends June 30. ACCOUNTING SYSTEM The City s accounting system is maintained by the Finance Department. In addition, the City retains an independent certified public accounting firm to provide annual audits of all City funds. BASIS OF ACCOUNTING The City of Franklin follows accounting principles set forth in Audits of State and Local Governments, published by the American Institute of Certified Public Accountants, and in statements and interpretations issued by the GASB. Accounting records for general governmental operations, expendable trust funds and agency funds are maintained on a modified accrual basis. Under the modified accrual basis of accounting, revenues are recorded when susceptible to accrual, that is, both measurable and available. Expenditures, other than interest on general long-term debt, are recorded when the liability is incurred, if measurable. The accrual basis of accounting is used by Proprietary Funds and the Pension Fund. The City implemented GASB 34 for financial reporting under the government-wide and fund financial statements in fiscal year In addition, the City implemented GASB 45 and GASB 50, financial reporting of Other Post Employment Benefits ( OPEB ) and Pension Disclosure for fiscal year end, June 30, BUDGETING AND APPROPRIATIONS PROCEDURES The financial plans of the City are included in the annual capital and operating budgets. These budgets project all receipts and disbursements, and present the level of governmental services and the method of distributing costs to the various segments of the community through the collection of taxes and fees. The annual budget serves as the foundation for the City s financial planning and control. All departments of the City are required to submit requests for budget appropriations to the Administrator in the first quarter of the calendar year. The City Administrator, in concert with the Chief Financial Officer, uses these requests as a starting point for developing a proposed budget. After numerous meetings with department heads, the Administrator presents the budget to the Board of Mayor and Aldermen for approval. Three meetings of the full board and a public hearing are necessary for approving the budget. Budgets are amended by resolution of the Board of Mayor and Aldermen authorizing expenditures of various funds received within the total dollar limitations of the Budget Ordinance. At any time during the year, the Mayor may make transfers of appropriations within a department. A transfer of appropriations between departments requires three more readings by the Board and a public hearing. The City formed a performance measure team with representatives from every department. In the budget, each department identified key performance measures related to their service delivery efforts and sustainability initiatives. Departments within the City participate in peer group studies and continue to review and adopt best practices that are recommended by the International City Managers Association, the Government Finance Officers Association, American Public Works Association, American Planning Association, and other national and international organizations. II - 4

35 OPERATING BUDGET. The Annual Operating Budget is enacted annually by ordinance by the Board of Mayor and Aldermen by June 30. The budgets of these funds constitute legal spending limits. The final budget is available to the Board, the staff and all citizens via the City s website ( The Government Finance Officers Association of the United States and Canada (GFOA) presented a Certificate of Recognition for Budget Preparation to the City for its operating budget for the fiscal year beginning July 1, 2008 through June 30, The Distinguished Budget Presentation Award is evidence that the City's budget documents are of the highest quality that meets the needs of decision-makers and citizens. The City will continue to submit its budget to the GFOA's budget awards program. CAPITAL BUDGET. The Capital Investment Program is prepared annually to detail the capital expenditures planned for each of the next five fiscal years. The total costs of each project and the sources of funding (local, state, federal and private) required to finance each project are estimated. The Capital Investment Program is prepared by the City Administrator and presented to the Board of Mayor and Aldermen for adoption. The Capital Investment Program authorizes in detail the capital expenditures to be made or incurred in the next five fiscal years and is then adopted by the Board of Mayor and Aldermen concurrently with the Capital Budget. BUDGET FOR A summary of the 2010 approved budget is as follows: General Fund - Adopted Budget for Fiscal Year Ending June 30, 2010 Revenue Estimates Local Taxes $ 36,746, % Licenses and Permits 2,954, % Intergovernmental 8,586, % Charges for Services 55, % Fines & Forfeitures 1,108, % Use of Money & Property 1,109, % Capital Allocation from Fund Balance 980, % Total Revenues $ 51,539, % Appropriations Public Safety $ 26,390, % General Government & Agencies 6,438, % Streets & Street Aid 4,537, % Public Works 4,398, % Other 3,214, % Department of Parks 2,356, % Capital Outlay 2,345, % Information & Technology 1,856, % Total Appropriations $ 51,539, % II - 5

36 CASH MANAGEMENT The City strives to keep abreast of current trends and procedures for cash management and forecasting so as to ensure efficient and profitable use of the City's cash resources. State statutes, however, restrict the City's ability to incorporate as policy many investment methods. Cash temporarily idle during the year is invested in commercial banks and savings and loan certificates of deposit as well as various instruments guaranteed by the United States Government. These instruments have terms ranging from one week to one year. Cash idle for a longer period of time is invested in longer-term government securities. FINANCIAL REPORTING The City maintains a financial reporting system which provides timely and accurate reports of revenues, expenditures, and financial position. The City's financial statements are audited annually by independent certified public accountants. The City has received the GFOA Certificate of Achievement for Excellence in Financial Reporting for its Comprehensive Annual Financial Report for the past 18 years. This certificate evidences conformance with the high financial reporting standards promulgated by the Government Accounting Standards Board (GASB). The report of the certified public accountants with respect to the City's General Purpose Financial Statements for the fiscal year ended June 30, 2009, is included in the Yearly Information Statement of the Official Statement in its final form as Appendix A. FUND STRUCTURE The City utilizes the fund types and account groups recommended by GASB Statement 1. Each fund is considered to be a separate fiscal and accounting entity. They are: Governmental Funds to account for most general governmental functions; Proprietary Funds to account for ongoing activities and organizations that are similar to private enterprises; Fiduciary Funds to account for assets held by the City in a trust capacity for the benefit of parties outside the government. RETIREMENT SYSTEM The City provides retirement benefits through a single-employer defined benefit pension plan, The City of Franklin Employees Pension Plan and Trust, which covers all full-time employees with the exception of certain department heads who have opted out of the plan (i.e. the Police Director, the Parks Director and the MIT Director.) The Human Resources Director, under the direction of the City Administrator, administers the pension program. OTHER POST EMPLOYMENT BENEFITS The Governmental Accounting Standards Board ( GASB ) issued GASB Statement No. 45 which requires governmental employers to disclose the liabilities and costs associated with their retiree healthcare and other benefits, commonly known as Other Post Employment Benefits ( OPEB ). The statement had an effective date of fiscal year ended June 30, 2008 for the City. Based on the City s actuarial valuation of OPEB liabilities, the estimated cost if pre-funded has been determined to be $2.089 million. The City has an OPEB Subaccount that holds at a minimum of two percent of the General Fund budgeted expenditures. If a Trust Fund is later established pursuant to the OPEB liability, the OPEB Subaccount can be extinguished from the Financial Stabilization Fund Account. For June 30, 2008, the City s annual required contribution is $204,800. Total contributions to date total $1,102,900 toward OPEB liabilities, leaving a net OPEB obligation of $1,789,910, per an actuarial study. II - 6

37 GENERAL GOVERNMENT OPERATIONS The following schedules present a summary of combined, unaudited revenues of the General Fund, Special Revenue Funds and Capital Projects Funds (expressed in thousands) for the fiscal year ended June 30, 2009 and the amount and percentage of increases or decreases in relation to the prior year. Increase From Amount Percent of (Decrease) FY 2008 Revenues (000s) Total Amount as % Local Taxes $ 40, % $ (3,537) -8.1% Licenses and Permits 3, % (2,737) -42.1% Intergovernmental 15, % (2,880) -16.0% Charges for Services 6, % 1, % Fines & Forfeitures 1, % % Use of Money & Property 1, % (1,235) -43.7% Miscellaneous % % Total Revenues $ 68, % $ (8,457) -10.9% Other Financing Sources Issuance of Debt/Transfers* $ 25, % $ 20, % Total Revenues & Other Financing Sources $ 94, % $ 11, % *Issuance of Debt/Transfers line item was represented as part of the Use of Money & Property line item in the Preliminary Official Statement. The amount and changes in levels of expenditures (expressed in thousands) for major functions of the City for fiscal year ended June 30, 2009 and the amount and percentage of increases or decreases in relation to the prior year are shown in the table below. Increase From Amount Percent of (Decrease) FY 2008 Expenditures (000s) Total Amount as % General Government $ 2, % $ (583) -17.5% Public Safety 25, % (578) -2.3% Highways & Streets 6, % 2, % Public Works 9, % % Parks 2, % % Debt Service 6, % % Capital Outlay 42, % (162) -0.4% Other 7, % % Total Expenditures $102, % $ 1, % II - 7

38 CURRENT OPERATIONS FY 2009 Like most governments during this down economy, Franklin experienced less revenue during fiscal year Within local taxes above, local sales tax, the City s largest revenue source, was $21.2 million in This was down 9% from $23.2 million in Recognizing the impending shortfall, the City adjusted its General Fund expenditures budget from $59 million to $57 million during the year. Once the year was complete, actual expenditures (including transfers to other funds) in the General Fund for 2009 were $52 million due primarily to additional cost constraint measures implemented by City departments. Also, within local taxes, the City s facilities tax charged to new developments was $1.1 million in 2009 compared to $3.0 million in Under licenses and permits above, road impact fees charged to new developments in addition to facilities taxes was $1.3 million compared to $1.7 million in With the present economy, there was less new development during the past year. GOVERNMENTAL FUNDS RESERVES The operating budget will provide funding of certain reserves considered necessary to the continued financial health of the City. The City s Undesignated/Unreserved Fund consists of two accounts: the Financial Stabilization Account and the Surplus Account as outlined below: Financial Stabilization Account consists of 33 percent of General Fund Expenditures and several subaccounts: Contingency, Emergency, Cash Flow Stabilization, Debt Service, Property/Casualty/Health Insurance and Other Post Employment Benefits subaccounts. A full description of the Financial Stabilization Account and the related subaccounts can be located in the City s formally adopted Reserve Policy. The Supplemental Reserve Account will be used for new programs or positions desired outside of the current and established budget or for onetime capital investments upon approval by the Board of Mayor and Alderman. There is no minimum percentage requirement for this account. All additional net revenues, after establishing that all other components of the General Fund Balance are sufficient, may flow into this account. FUND BALANCES/FUND EQUITY/NET ASSETS (In Thousands of Dollars) General Fund $ 28,763 $ 30,764 $ 30,384 $ 27,424 $ 24,944 $ 27,051 Other Governmental Funds 4,678 12,595 13,408 13,713 8,099 7,416 Capital Projects Fund (11,992) (13,849) 9,120 (1,216) 9,042 1,691 Total $ 21,449 $ 29,509 $ 52,912 $ 39,920 $ 42,084 $ 36,157 LOCAL OPTION SALES TAX FINANCIAL INFORMATION The Local Option Sales Tax is the City s primary revenue source and accounts for approximately half of General Fund revenue. In accordance with the 1963 Local Option Revenue Act (the Act ) Title 67, Chapter 6, Part 7 of the Tennessee Code Annotated, as amended, the City and the County have adopted a Local Option Sales Tax. Pursuant to the Act, the levy of the sales tax by a county precludes any City within that county from levying a sales tax, but a City may levy a sales tax in addition to the county sales tax at a rate not exceeding the difference between the county sales tax rate and the maximum allowable local sales tax rate which is currently 2.75 percent. The total local option tax is currently levied at a rate of 2.25%, which is levied on the first $1,600 of a sale of any single item, of which the City receives ½ for sales within the City and the other half is directed to K-12 education. STATE TAX REVENUES (LOCAL SHARE) The City receives funds from the State of Tennessee which are briefly described below: II - 8

39 (1) State Income Tax This is a 6% tax on income from dividends on stocks or interest on certain bonds. 3/8 of the revenue is distributed to the local government by situs. (2) State Sales Tax A 7% sales tax is imposed on the gross proceeds from retail sale or use of tangible personal property and some services. Over 60% of total state shared revenue that the City receives is derived from this source. (3) State Gasoline Taxes The City receives a pro-rata share of the State Gasoline Tax of $.20 per gallon and the State Motor Vehicle Tax (Diesel) of $.17 per gallon that is earmarked for Tennessee municipalities. Allocation among Tennessee cities is determined on a per capita basis. These funds are used for street maintenance and for debt service on bond proceeds used for street capital improvement projects. (4) Other State Taxes The City also receives State revenues derived from the Beer Tax, Alcoholic Beverage Tax, Liquor by the Drink Tax, TVA in Lieu-of-Tax Payments, and Bank Excise Tax. The City has received local option sales tax receipts, expressed in thousands, for the most recent ten years as follows: PROPERTY TAX Fiscal Year Total Local Option Tax ,595, ,962, ,037, ,318, ,296, ,785, ,005, ,885, ,185, ,152,554 The Property Tax (Real Estate and Personal Property) provides the City with its second largest source of revenue. The Property Tax levy is without legal limit but has not increased in for twenty consecutive years. All real and personal property within the City is assessed in accordance with the State constitutional and statutory provisions by the County Property Assessor except most utility property, which is assessed by the State Public Service Commission. All property taxes are due on October 1 of each year based upon appraisals as of January 1 of the same calendar year. All property taxes are delinquent on March 1 of the subsequent calendar year. Delinquent taxes begin accumulating interest and penalties on that date. Additional costs are incurred and attached to real estate after delinquent tax lawsuits are filed in Chancery Court by the City one year after taxes are delinquent. State law mandates that after June 1, 1989, all property in the State will be re-appraised on a continuous six (6) year or four (4) year cycle as determined by the assessor with the approval of the local governing body, the director of the division of property assessments and approved by the state board of equalization composed of an on-sight review of each parcel of property over a five (5) year period or a three (3) year period, respectively, followed by reevaluation of all such property in the year following the completion of the review. The next countywide reappraisal of property is scheduled for the 2011 tax year. The County Assessor assesses property values. The Property Assessment and Classification Act of 1993 provides for assessing properties at varying percentages of actual value as follows: Residential and Farms real property at 25 percent of the current market value; Commercial and Industrial real property at 40 percent of the current market value; Utilities real and personal property at 55 percent of the current value; and, Personal Property at 30 percent of the current market value. II - 9

40 The tables set forth below describe the assessed and estimated actual value of taxable property within the City for the last ten fiscal years, the property tax levies and collections for the last ten fiscal years, and the top ten taxpayers for the most recent fiscal year. VALUES OF TAXABLE PROPERTY Appraised Value Assessed Value Calendar Total Assessed to Estimated Year Real & Personal Public Utilities Appraised Value Value Actual Value ,576,530,483 44,890,624 2,621,421, ,853, % ,996,974,813 43,381,296 3,040,356, ,825, % ,323,606,101 52,996,184 3,376,602,285 1,037,036, % ,313,677,179 70,761,193 4,384,438,372 1,381,145, % ,508,807,480 71,250,342 4,580,057,822 1,433,680, % ,704,994,349 66,414,458 4,771,408,807 1,478,940, % ,970,397,793 69,467,343 5,039,865,136 1,551,200, % ,514,330,572 69,464,614 5,583,795,186 1,696,054, % ,329,617,163 82,197,509 7,411,814,672 2,259,868, % ,829,612,977 83,877,787 7,913,490,764 2,399,581, % ,524,087, ,581,345 9,637,668,952 2,516,989, % PROPERTY TAX LEVIES AND COLLECTIONS Subsequent Year Collections Collections as Percent of Levy Fiscal Year Total Tax Levy Current Collections Percent Collected Total Collections Outstanding Delinquent ,520,819 6,393, % 121,538 6,514, % 216, % ,161,095 6,944, % 210,594 7,154, % 278, % ,596,518 7,398, % 184,939 7,583, % 283, % ,874,904 7,660, % 202,070 7,862, % 311, % ,134,453 7,970, % 160,520 8,130, % 269, % ,619,512 8,468, % 148,699 8,616, % 261, % ,328,587 9,152, % 173,215 9,325, % 271, % ,611,622 9,435, % 169,335 9,604, % 276, % ,212,816 10,042, % 112,362 10,155, % 262, % ,739,928 10,429, % - 10,429, % 310, % Delinquent as Percent of Levy II - 10

41 LARGEST TAXPAYERS As of June 30, % of Assessed Taxpayer Business Assessment Valuation Galleria Associates Retail Shopping Center 47,035, % Carothers Office Office Buildings 26,064, % Wyndchase at Aspen Grove Apartment Complexes 20,000, % Landings F C LP Apartment Complexes 19,022, % Williams W. Fred Trust Office Buildings 18,519, % Atmos Energy Corp Natural Gas Public Utility 17,932, % Williamson Farms Corp Realty 16,843, % Alara Franklin Corp Apartment Complexes 13,862, % Franklin Cool Springs Corp Realty 13,689, % Crescent Resources Realty 13,607, % Lightman Cool Springs Realty 12,992, % Middle TN Electric Membership Corp Electric Public Utility 10,632, % Total for Principal Taxpayers 230,201, % All Other Taxpayers 2,286,787, % Total for All Taxpayers 2,516,989, % HOTEL/MOTEL OCCUPANCY TAX This tax is currently 4.0% of gross occupancy revenues of hotels and funds debt payments on the Conference Center and Harlinsdale and Eastern Flank park expansions. The City has the ability to increase the tax rate to 5%. Please see the table below which provides a history of all tax collections across the board including the hotel/motel tax. HISTORICAL TAX REVENUE COLLECTIONS The table below provides a ten year history of tax revenue collections across all governmental funds. Fiscal Year Property Tax Sales Tax Business Tax Alcoholic Beverage Taxes (1) Facilities Tax Hotel/Motel Tax Other (2) Total ,575,952 12,595,463 1,275,015 1,371,277 1,947, , ,895 24,490, ,104,574 13,962,912 1,341,386 1,528,846 1,706, , ,918 26,478, ,584,062 15,037,556 1,525,414 1,729,646 1,164, , ,590 27,999, ,861,996 16,318,730 2,011,630 1,923,952 1,169, , ,878 30,305, ,099,274 18,296,971 2,142,900 2,031,561 1,367, , ,300 32,989, ,571,710 19,785,941 1,697,570 2,108,144 1,857, , ,161 35,475, ,395,723 22,005,703 2,363,300 2,310,739 2,415,678 1,293, ,125 40,358, ,726,100 23,885,264 2,777,563 2,465,375 3,616,202 1,424,754 59,174 43,954, ,337,833 23,185,434 2,927,635 2,593,632 2,956,284 1,571,657 50,634 43,623, ,598,592 21,152,554 2,939,829 2,574,048 1,115,914 1,518, ,757 40,086,682 1 Includes beer, beer privilege, wholesale liquor, liquor privilege & mixed drink taxes. 2 Includes penalty and interest on property taxes, in lieu of taxes, and special assessments. II - 11

42 CAPITAL INVESTMENT PROGRAM Each year the City develops and formally adopts a long range, five-year Capital Investment Program ( CIP ). Annually, as part of the CIP process, the City departments are asked to review and prioritize their capital needs for the next five years. The capital projects for the first fiscal year of the five-year CIP form the basis of the capital budget for that fiscal year. The Board of Mayor and Alderman prioritize the capital projects through a ranking system. When the capital budget projects are finalized for the fiscal year, those projects are formally adopted by the Board of Mayor and Aldermen. The capital budget is funded each year from a variety of sources including debt proceeds, City appropriations and Federal and State aid as set forth below. Since departmental needs often change over time, the CIP is considered preliminary and subject to change until a capital budget is formally adopted by the City Council for a given fiscal year. The CIP for fiscal years is as follows: PROJECT Funds Spent and/or Committed by Contract/Budget CIP FY 2010 CIP FY 2011 CIP FY 2012 CIP FY 2013 CIP FY 2014 TOTAL Mack Hatcher Parkw ay Extension 2,172,979 $13,560,000 $1,412,500 $37,500,000 $37,500,000 $92,145,479 Hillsboro Road Widening Hw y 96 to Mack Hatcher 1,324,221 $3,000,000 $10,850,712 $10,850,712 $26,025,645 Carothers Pkw y, Phase II - Liberty Pike to McEw en Dr 5,015,500 $2,570,000 $7,585,500 Columbia Ave - 5-Points to Fow lkes St 1,500,101 $3,951,000 $835,200 $6,286,301 South Carothers Pkw y Improvements from Falcon Creek to Harpeth 1,570,020 $2,906,000 $5,847,300 $7,146,700 $17,470,020 Third Avenue North Extension to Hillsboro Rd 0 $606,000 $3,100,000 $3,706,000 Carlisle Lane/Boyd Mill Highw ay 96 West Signalization 157,155 $2,045,000 $2,202,155 Corridor & Connector Streets Economic Development - Franklin Rd, 1st Ave, Bridge St & Main Street to Harpeth 682,000 $1,712,000 $6,669,000 $9,063,000 Mack Hatcher Pkw y Widening from Franklin Rd to Columbia Ave TDOT $15,800,000 $15,800,000 McEw en Dr Improvements, Phase III from Carothers Pkw y to Cool Springs Blvd 4,787,076 $9,676,800 $2,419,200 $16,883,076 Franklin Corridor & Connector St, Segment 2-3rd & 4th Ave 866,750 $6,481,000 $2,160,700 $9,508,450 Police Headquarters Bldg & Furnishings 32,619,670 $32,619,670 II - 12

43 BOND AUTHORIZATION Bonds are authorized on behalf of the City by an initial resolution of the Board of Mayor and Aldermen which requires a simple majority. The initial resolution must be published one time in a newspaper of general circulation in the City. Unless 10% of the registered voters of the City protest the issuance of the bonds within twenty days of publication, the bonds may be issued as authorized. DEBT LIMIT Tennessee Code Annotated Title 9, Chapter 21, as amended, provides that bonds may be issued by a municipality without regard to any limit on indebtedness. COMPENSATED ABSENCE LIABILITIES LONG-TERM OBLIGATIONS GASB Statement 16 requires recognition of the liability for compensated absences that has been earned and is reasonably expected to be paid to existing employees. The City of Franklin has recognized the non-current portion of this liability for general City employees in its Statement of General Long-Term Debt in the amount of $5,121,579 as of June 30, GENERAL OBLIGATION INDEBTEDNESS Percentage Percentage Amount of Per of Assessed of Full Indebtedness Capita 1 Valuation 2 Valuation 3 Gross Direct Indebtedness 4 $ 135,880,000 $ 2, % 1.41% Net Direct Indebtedness 5 $ 82,860,000 $ 1, % 0.86% Net Direct and Gross Overlapping Indebtedness 6 $ 513,167,000 $ 9, % 5.32% Net Direct and Net Overlapping Indebtedness 6 $ 238,400,585 $ 4, % 2.47% Notes: (1) The City s population in 2009 was estimated at 56,219. (2) The City s assessed valuation of taxable property as of June 30, 2009 was $2,516,989,203. (3) The City s estimated full valuation of taxable property as of June 30, 2009 was $9,637,668,952. (4) Includes undrawn GO and WS debt of $6,887,319 at June 30, (5) Includes undrawn GO debt of $110,372 at June 30, (6) The County s net overlapping indebtedness is $430,307,000. The City s share is $155,540,585. (36.15%). II - 13

44 GENERAL FUND MAJOR FUNDS SUMMARIES Summary of Revenues, Expenditures, and Changes in Fund Balance For the Fiscal Years Ended June 30 (In Thousands of Dollars) Revenues and other Sources Taxes $ 37,452 $ 39,095 $ 38,913 $ 36,650 $ 32,739 Licenses and Permits 3,339 4,794 4,273 3,446 2,739 Fines and Fees 1, , Charges for Services Intergovernmental 6,854 7,802 7,616 4,592 3,995 Use of Money & Property 1,148 2,048 1,236 1, Miscellaneous and Other Total Revenues 50,062 54,798 52,980 47,168 41,157 Expenditures and Other Uses General Government 4,968 5,448 3,904 7,914 7,757 Public Safety 24,893 25,528 22,945 18,333 17,223 Information & Technology 1,813 1,585 1, Highways, Streets & Public Works 9,581 9,226 6,977 5,533 5,614 Parks & Community Service 2,252 2,064 1,814 1,324 1,030 Debt Service 2,390 2,198 2,005 1, Capital Outlay 2,887 2,899 6,190 4,834 8,265 Total Expenditures 48,784 48,948 45,163 40,322 41,063 Revenues and Other Sources Over (Under) Expenditures and Other Uses 1,278 5,850 7,818 6, Other Financing Sources Bond Proceeds 1,760 Operating Transfers In Operating Transfers Out (3,279) (5,470) (5,041) (4,366) (4,440) (3,279) (5,470) (5,041) (4,366) (2,200) Fund Balance at Beginning of Year 30,764 30,384 27,424 24,944 27,050 Prior Period Adjustment Fund Balance Restated 30,764 30,384 27,607 24,944 27,050 Fund Balance at End of Year $ 28,763 $ 30,764 $ 30,384 $ 27,424 $ 24,944 NOTE: Totals may not foot due to rounding. II - 14

45 SPECIAL REVENUE FUNDS Summary of Revenues, Expenditures, and Changes in Fund Balance For the Fiscal Years Ended June 30 (In Thousands of Dollars) Revenues and other Sources Taxes $ 2,635 $ 4,528 $ 5,041 $ 1,294 $ 879 Licenses and Permits 427 1,709 2,259 5,878 3,738 Fines and Fees Charges for Services 6,628 5,226 4,623 4,292 3,043 Intergovernmental 2,851 3,122 1,717 2,447 2,273 Use of Money & Property , Miscellaneous and Other ,661 Total Revenues 13,094 15,547 14,488 16,862 12,059 Expenditures and Other Uses General Government Public Safety Highways, Streets & Public Works 2, ,169 Storm Water , Sanitation 6,129 6,439 5,955 5,548 4,745 Transit 1,026 1, Parks Debt Service 3,706 3,583 3,294 2,740 2,428 Capital Outlay 10,139 9,163 8,023 20,889 19,481 Total Expenditures 24,244 21,419 19,703 30,188 30,551 Revenues and Other Sources Over (Under) Expenditures and Other Uses (11,150) (5,872) (5,215) (13,326) (18,492) Other Financing Sources Transfer to Bond Escrow (2,504) Bond Proceeds ,315 25,207 Operating Transfers In 3,234 5,245 5,041 9,674 4,443 Operating Transfers Out (4,091) (483) 3,234 5,245 5,041 9,898 26,663 Fund Balance at Beginning of Year 12,594 13,407 13,712 17,140 9,106 Prior Period Adjustment - (186) (130) - (137) Fund Balance Restated 12,594 13,221 13,582 17,140 8,969 Fund Balance at End of Year $ 4,678 $ 12,594 $ 13,407 $ 13,712 $ 17,140 NOTE: Totals may not foot due to rounding. II - 15

46 CAPITAL PROJECT FUND Summary of Revenues, Expenditures, and Changes in Fund Balance For the Fiscal Years Ended June 30 (In Thousands of Dollars) Revenues and other Sources Intergovernmental $ 5,395 $ 7,057 $ 913 Not Not Use of Money & Property 14 (135) 213 Applicable Applicable Miscellaneous and Other Total Revenues 5,669 6,937 1,472 Expenditures and Other Uses General Government Debt Service Capital Outlay 29,048 30,177 11,353 Total Expenditures 29,443 30,426 11,493 Not Applicable Not Applicable Revenues and Other Sources Over (Under) Expenditures and Other Uses (23,774) (23,489) (10,020) Other Financing Sources Bond Proceeds 25, ,357 Operating Transfers In Operating Transfers Out , ,357 Fund Balance at Beginning of Year (13,849) 9,120 (1,216) Prior Period Adjustment Fund Balance Restated (13,849) 9,120 (1,216) Fund Balance at End of Year $ (11,992) $ (13,849) $ 9,120 Not Applicable Not Applicable Not Applicable Not Applicable NOTE: Totals may not foot due to rounding. II - 16

47 POPULATION TRENDS ECONOMIC AND DEMOGRAPHIC INFORMATION Between 1990 and 2000, the population of the nation is estimated to have increased by 12.73%; the estimate for the increase in the population of the State of Tennessee is 16.65%; and the population of Williamson County is estimated to have shown a population increase of 56.3%. The 2000 Census certified the population at 41,842. The current state certified population of Franklin is 58,841. Population: City, County, State and Nation (In Thousands) Percent Change l l City of Franklin 56* % % Williamson County % % Tennessee 6,215 5,689 4,877 4,540 3, % 44.91% United States 304, , , , , % 38.43% Source: U.S. Bureau of the Census * Current certified population as reported in the 2008 Comprehensive Annual Financial Report. INCOME AND BUYING POWER Since Franklin is an incorporated area within Williamson County, the following is presented for general information. It is expected that, in general, incomes of families residing within the Franklin City limits will exceed by approximately 141% those of the State of Tennessee. Per Capita Year Income Percent Change , , % , % , % , % , % , % , % , % , % Source: U. S. Bureau of Economic Analysis. II - 17

48 2008 PERCENTAGE OF HOUSEHOLDS BY EFFECTIVE BUYING INCOME City of Williamson State of United Franklin County Tennessee States $20,000 - $34, % 11.4% 22.7% 20.7% $35,000 - $49, % 14.3% 18.9% 18.7% $50,000 and over 56.2% 65.6% 33.6% 44.0% Median Household EBI $ 57,066 $ 69,455 $ 37,127 $ 42,303 Source: Claritas Inc., Survey of Buying Power, September RETAIL SALES BY STORE GROUP Williamson County (In Millions) Automotive 885,056 1,369,810 1,131, , ,060 General Merchandise 627, , , , ,394 Food & Beverages 752, , , , ,767 Eating & Drinking Places 251, , , , ,157 Furniture and Appliances 214, , , , ,573 All Other 2,981,730 2,788,008 2,304,379 1,951,656 1,162,159 Total Retail Sales (000 s) 5,712,613 5,848,005 5,054,242 4,360,751 3,640,110 Source: Claritas Inc., Survey of Buying Power, September 2005-September EMPLOYMENT According to the Tennessee Department of Employment Security, the unemployment rate for Williamson County as of October 2009 was 7.4%. Annualized employment and unemployment trends for Williamson County from l999 to 2008 are presented below. LABOR FORCE TRENDS Persons in Williamson County Unemployment Rate Williamson Employed Unemployed County Tennessee USA ,060 1, ,650 1, ,510 2, ,150 2, ,150 2, ,840 2, ,380 3, ,490 3, ,450 3, ,450 3, (1) 78,670 6, Source: Tennessee Department of Employment Security website (1) As of October II - 18

49 PRINCIPAL INDUSTRIES The economy of Franklin and Williamson County are comprised of many industries. Major industries include: retailers, medical and healthcare, automotive, finance, insurance, real estate, telecommunication, biomedical, music and service industries. LARGEST EMPLOYERS The following table presents major employers from all employment sectors in Williamson County Employees * Rank Percentage of Total City Employer Employment Cool Springs Galleria Mall 3, % Williamson Medical Center 1, % Nissan North America 1, % Verizon Wireless 1, % Healthways 1, % AIM Healthcare % Community Health Systems % Progeny Marketing Innovations % Lee Co % Vanderbilt Medical Group % Civil Constructors, Inc % Total 12, % * Williamson County Office of Economic Development HOUSING AND CONSTRUCTION The demand for housing in Williamson County promoted the building of over 34,500 housing units between 1990 and Of this number, approximately 14,074 were built in the City of Franklin. While the number of owner-occupied housing units in Williamson County represents approximately 83.1% of the total housing units in 2000, more than 68% of the total housing units in the City of Franklin are owner-occupied. The number of housing units in Williamson County since 1980 has steadily increased. Between 1980 and 2005, an increase of approximately 71% was experienced in the total number of housing units. Source: U.S. Bureau of the Census, 1970, 1980, 1990 and TOTAL BUILDING PERMITS Fiscal Valuation Year Number (In $000 s) $200, , , , , , ,256 Source: Williamson County Chamber of Commerce. II - 19

50 FINANCIAL INSTITUTIONS Institution WILLIAMSON COUNTY AREA BANKS Deposits (000s) Market Share 1 Tennessee Commerce Bank $ 1,205, % 2 Fifth Third Bank NA 671, % 3 Suntrust Bank 611, % 4 Regions Bank 562, % 5 Bank Of America NA 555, % 6 First Tennessee Bank NA 348, % 7 Pinnacle National Bank 303, % 8 Reliant Bank 256, % 9 Franklin Synergy Bank 189, % 10 U S Bank National Assn 171, % 11 Greenbank 159, % 12 Bancorpsouth Bank 101, % 13 Farmers Bank&Trust Co 96, % 14 Wachovia Bank National Assn 87, % 15 Cadence Bank NA 83, % 16 Community First Bank & Trust 70, % 17 First Bank 67, % 18 Bank of Nashville 57, % 19 Magna Bank 43, % 20 Capstar Bank 25, % 21 Renasant Bank 24, % 22 Avenue Bank 23, % 23 Peoples Stb of Commerce 20, % 24 First Farmers&Merchants Bank 19, % 25 First-Citizens Bank & Trust Co 13, % 26 Community South Bank 12, % 27 First Federal Bank 8, % 28 First Citizens National Bank 6, % $ 5,800, % Source: Federal Deposit Insurance Corporation, June 30, II - 20

51 ECONOMIC DEVELOPMENT Historic Franklin, Tennessee, the county seat of Williamson County, was founded in 1799 and is built around a restored historic downtown. The largest city in the county, Franklin is a charming suburb just eighteen miles south of Nashville, Tennessee and was named to Southern Living's "Best Small Town" top ten list, and is a beautiful blend of upscale urban development and cultural history rich with upscale shopping and eating establishments as well as historic attractions that tell the story of the Civil War's Battle of Franklin. Franklin's quaint downtown offers a Great American Main Street experience and boasts everything from locally owned antiques to trendy boutiques and restaurants, in a pedestrian-friendly setting. The City of Franklin and Williamson County, along with other municipalities within the county, have combined their development efforts into one unit under Williamson County Office of Economic Development. The Williamson County Office of Economic Development is the single point of contact for the coordination and facilitation of the continued development of the economy of Williamson County and its six municipalities. The purpose of the office is to grow the county s economy and improve the quality of life of its residents by partnering with the public and private sector to encourage job and wealth creation. As an additional means to promote business expansion, business relocation and industrial development throughout the, Williamson County and many municipalities within the County offers a Payment in Lieu of Tax (PILOT) program which could qualify industries for tax breaks in lieu of ad valorem taxes. Applicants are encouraged to make a significant long-term commitment to the community in terms of capital investment, job creation and strength of wages. Terms of PILOT agreements are decided by the Industrial Development Board of Williamson County (IDBWC) based on the industry's economic needs. THE ECONOMY As county seat, the City of Franklin has always served as the focal point for retail shopping, legal affairs and government. With the advent of Cool Springs Mall in the early 1990 s, substantial office development and hotels began to cluster in Franklin. Large companies, such as Ford Motor Credit Corporation, filled office buildings as they were built. Throughout the decade, Franklin continued to grow its retail and office base culminating with the move in 2007 of Nissan North America Headquarters to its 500,000 square foot home. Community Health Systems, Healthways, Mars Petcare and Verizon Wireless brought their corporate or regional headquarters to Cool Springs the preceding year. The influx of jobs from these corporate community members brought a substantial boost to the economy, particularly in housing and retailing. TRADE AREA The trade area for regional shopping includes the entire Middle Tennessee area, with shoppers coming from a number of counties (including Williamson) and states such as Alabama to the south and Kentucky on the north Cool Springs Mall and nearby shopping centers contain stores that attract shoppers from over 100 miles away. The downtown area is known for its quaint and unique shops, including a wide variety of antiques and one-of-a-kind products. A renovated stove factory, simply called The Factory, contains dozens of stores and restaurants and includes open areas for farmers market produce on the weekends. Despite the current economic slowdown, the City has maintained a relatively low retail vacancy rate of approximately 4%. AGRIBUSINESS In addition to the produce of the Farmers market and other local produce shopping, agriculture continues to play a role in history and prosperity of Franklin. Horse farms abound in the county surrounding the City and the County maintains an Agricultural Expo Center within the City limits. Each year, a county fair is held to promote and acknowledge the agricultural base of the surrounding area. II - 21

52 TOURISM The City s tourism industry has shown considerable growth since Among the principal reasons for the growth, has been the investment of public funds into tourism development projects. Started in 1996 and opened in 1998 was the jointly owned Franklin/Williamson County Conference Center. Constructed adjacent to the Cool Springs Marriott Hotel, the Center is the home of many statewide and regional conventions each year. It is widely used by the corporate headquarters than are congregated around the Center, just off I-65. Also in the immediate vicinity is an Embassy Suites hotel with substantial meeting space. Few hotels were built in the years between 1998 and 2007, but recently there has been a burst of construction with six new hotels built and several more in the process of being permitted or waiting for final financing. By 2011, the number of rooms available will have doubled since the opening of the Conference Center. All of the newly built or pending hotels are upscale and provide amenities like meeting space and ballrooms. CENTRAL BUSINESS DISTRICT Downtown Franklin is famous for its friendliness, walkability and small town feel. As one of the original State of Tennessee Main Street programs, it has been carefully preserved and enhanced with streetscape appointments. Most of the buildings are listed on the historic register. Many restaurants fill the space between unique retail shops, and they are rewarded with foot traffic on nights and weekends, as well as normal shopping hours. The City has recently expanded the streetscape elements to include side streets and two of the major entrances to the historic downtown. Plans for additional streetscape projects envision an expansion of enhancements to all five major entrances over a fifteen year period. OFFICE SPACE In addition to the Class A office space that exists in the Cool Springs area, numerous projects are currently underway. Berry Farms is a massive project that will cover three of the four interstate intersection quadrants at I-65 and Goose Creek Bypass. Boyle Investments is managing the project that will bring over one million square feet of office space to the City. Closer to Cool Springs and adjacent to the McEwen Drive Interchange is McEwen Towne Centre, a mixed use development that will include over 100,000 square feet of Class A office space surrounding by condominiums, apartments, and a town-center/main street-like lifestyle center with retail shopping, restaurants and entertainment. There is currently a large amount of office-zoned property owned and development ready by Crescent. A portion of the available space is located within the City s Tax Increment Financing District. RESIDENTIAL DEVELOPMENT At one point, there were over 8,000 platted lots for residential building within the City limits. Many of those are traditional half-acre lots in subdivisions. But many are in mixed use developments that characterize the new urbanism design concepts. Twice in the last six years, Franklin was selected by the Seaside Institute to hold its annual convention. One of the focal points of the conference was to tour Westhaven, a 2,500 home city within a city that is said to be patterned after planned communities like Celebration, Florida. The project, developed by Southern Land Company, contained a wide variety of housing types, an eighteen hole golf course, and a central shopping area filled with grocery stores, medical offices, and neighborhood shops. Although subdued by the financial difficulties that began in 2008, many of the proposed residential projects continue to make progress in their development, albeit at a much slower pace. Because of the desirability of living in Middle Tennessee generally and in Franklin specifically, improvements in loan availability will make local development some of the first residential properties to take advantage of an economic rebound ENTERTAINMENT/RETAIL Like its larger neighbor to the north, Franklin benefits from the music industry with access to wonderful live music in many of its restaurants. Dozens of homes in the Franklin area contain recording studios and attract Music City personalities. Music printing and licensing companies are among those occupying office space in the Cool Springs office district. Downtown also houses some of the music industry s performing and songwriting members TRANSPORTATION AND DISTRIBUTION Air Service Franklin is conveniently located approximately 25 miles from Nashville International Airport. Nashville International Airport offers domestic and international flights through several major airlines. Southwest is a low cost provider and is the largest airline provider at Nashville International Airport. II - 22

53 Highway - Franklin is connected to the rest of the nation by I-65, the major north/south federal interstate highway that stretches from Mobile, Alabama through Tennessee, Kentucky, Indiana and Michigan. There are also three state highway systems that intersect in the Historic Downtown area. These highways make Franklin readily accessible to its surrounding communities. Major Road Projects include: SR Completion of SR 840 is slated for The final section runs approximately ten miles in length from Bending Chestnut Road to east of Thompson Station Road. Once completed, the road will be 78 miles in total improving access to communities to the east and west. Mack Hatcher Memorial Parkway - Construction to start in early Being the primary transportation concern in the City of Franklin, completion of Mach Hatcher would create a complete loop around the city, avert traffic away from downtown Franklin and provide motorists access to other major routes in the area. I-65 - Widening from Murfreesboro Rd (exit 65) to Saturn Parkway/TN 396. Construction date to be determined. Carothers Parkway - Phase 2 - McEwen Lane to Liberty Pike. Completion date fall Public Transit The City has a Transit Authority that provides three scheduled routes throughout the City and provides transportation on demand to those that have disabilities or unusual scheduling needs. Interstate Bus Lines - Greyhound Bus Lines is the major interstate bus line servicing Franklin, offering bus to various parts of the continental United States. UTILITIES Middle Tennessee Electric Membership Corporation ( MTEMC ) founded, funded and built in 1936 by local farmers and homeowners after being told by urban power companies that rural electricity was infeasible, MTEMC has grown to become the state's largest electric cooperative and the sixth largest in the United States. MTEMC supplies electricity to about 182,000 residential and business members in a four-county area south of Nashville including Williamson, Wilson, Rutherford, and Cannon. All electric power is purchased from the Tennessee Valley Authority ( TVA ) services a system that is approximately 10,221 miles of line with 32 distribution substations distributing 5.3 billion kilowatt hours of TVAgenerated electricity annually. EDUCATION The City of Franklin is served by two public school districts: Franklin Special School District, K-8 school system, and Williamson County Schools, K-12 school system. Both public school districts are among the highest rated in the State of Tennessee. The community is also served by a wide variety of high-quality private and faithbased educational institutions. Franklin Special School District ( FSSD ) is a K-8 school system with approximately 3,850 students enrolled. Students are served by seven schools: four elementary schools, one intermediate school, one middle school, and a balanced calendar K-8 school. The FSSD Board of Education has proudly committed itself to meeting and/or exceeding the state's teacherpupil ratio requirements, with ratios at: 1 to 20 in kindergarten through third grade, 1 to 22 in fourth grade, and 1 to 25 in grades 5-8. All schools and the Central Office are accredited by the Southern Association of Colleges and Schools Council on Accreditation and School Improvement (SACS CASI), one of the oldest and most esteemed school accreditation agencies in the country. The SACS CASI Review Team wrote in its latest report that the FSSD is "an exemplary school system led by an extraordinary professional staff, highly committed and knowledgeable board of education, educated and involved parents, and an extremely supportive community that collectively encourage and support student success at all levels of the system. It is evident throughout the system that instructional improvement that results in improving student achievement is the highest priority." II - 23

54 The Franklin Special School District gets its unique name from a Special Act of the state legislature that provides the Board of Education its own taxing authority, enabling the schools to be funded appropriately in order to maintain "Excellence in Teaching and Learning for All." Williamson County Schools has over 30,700 students enrolled county-wide. There are currently 37 school sites: eight high schools, seven middle schools, 21 elementary schools, and one K-8 school. All schools and the Central Office are accredited by the Southern Association of Colleges and Schools Council on Accreditation and School Improvement (SACS CASI), one of the oldest and most esteemed school accreditation agencies in the country. Six of Williamson County s public high schools, including three serving the City of Franklin, were listed among the top high schools in the nation by Newsweek. All high schools have advanced placement programs with 24 different courses offered. Franklin High School was named as the State s first International Baccalaureate school with implementation of the program beginning during the school year. The district has experienced consistent average growth of approximately 1400 students per year of the past five years. Colleges and Universities in the Franklin area are: Columbia State Community College has a facility in Franklin, as do several of the four year universities with main campus facilities in Nashville. The Franklin/Williamson County area is served by 25 four year institutions. 49.1% of residents 25 years of age or older have a bachelor s degree which ranks in the top 20. SCHOOLS OF HIGHER EDUCATION IN THE MIDDLE TENNESSEEAREA American Baptist College Fisk University Tennessee State University Aquinas College Free Will Baptist Bible College Tennessee Technological University Argosy University Lipscomb University Trevecca Nazarene University Austin Peay State University Meharry Medical College Troy University - Clarksville Campus Belmont University Middle Tennessee State University University of Phoenix Bethel College Nashville O'More College of Design Vanderbilt University Blair School of Music Remington College Watkins College of Art & Design Cumberland University Strayer University Williamson Christian College DeVry University MEDICAL FACILITIES Franklin is home to Williamson County Medical Center, a 500 bed full service hospital. The Center is surrounded by numerous medical office buildings that serve as home base for physician practices. Vanderbilt University has a substantial presence in Franklin, with walk-in clinics, medical offices and a radiation treatment center. Franklin is currently being considered, and zoning has been approved, for a proton cancer therapy center. II - 24

55 APPENDIX A GENERAL PURPOSE FINANICAL STATEMENTS For Fiscal Years Ended 2009 and 2008

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169 APPENDIX B FORMS OF BOND COUNSEL OPINIONS

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171 FORM OF SERIES 2009A BOND COUNSEL OPINION December 29, 2009 Board of Mayor and Aldermen City of Franklin, Tennessee P.O. Box 305 City Hall Franklin, Tennessee Morgan Keegan & Co., Inc. 50 Front Street Memphis, Tennessee Ladies and Gentlemen: We have acted as bond counsel to the City of Franklin, Tennessee (the "Issuer") in connection with the issuance of $13,375,000 General Obligation Public Improvement Bonds, Series 2009A, dated December 29, 2009 (the "Bonds"). We have examined the law and such certified proceedings and other papers as we deemed necessary to render this opinion. As to questions of fact material to our opinion, we have relied upon the certified proceedings and other certifications of public officials furnished to us without undertaking to verify such facts by independent investigation. Based on our examination, we are of the opinion, as of the date hereof, as follows: 1. The Bonds have been duly authorized, executed and issued in accordance with the constitution and laws of the State of Tennessee and constitute valid and binding general obligations of the Issuer. 2. The resolution of the Board of Mayor and Aldermen of the Issuer authorizing the Bonds has been duly and lawfully adopted, is in full force and effect and is a valid and binding agreement of the Issuer enforceable in accordance with its terms. 3. The Bonds constitute general obligations of the Issuer for the payment of which the Issuer has validly and irrevocably pledged its full faith and credit. The principal of and interest on the Bonds are payable from unlimited ad valorem taxes to be levied on all taxable property within the corporate limits of the Issuer. 4. Interest on the Bonds is excluded from gross income for federal income tax purposes, is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, and, for purposes of computing the alternative minimum tax imposed on certain corporations (as defined for federal income tax purposes), such interest is not taken into account in determining adjusted current earnings. The opinion set forth in the preceding sentence is subject to the condition that the Issuer comply with all requirements of the Internal Revenue Code of 1986, as amended, that must be satisfied subsequent to the issuance of the Bonds in order that interest thereon be, or continue to be, excluded from gross income for federal income tax purposes. Failure to comply with certain of such requirements could cause interest on the Bonds to be so included in gross income retroactive to the date of issuance of the Bonds. The Issuer has covenanted to comply with all such requirements. Except as set forth in this Paragraph 4, we express no opinion regarding other federal tax consequences arising with respect to the Bonds. B-1

172 5. Under existing law, the Bonds and the income therefrom are exempt from all present state, county and municipal taxes in Tennessee except (a) inheritance, transfer and estate taxes, (b) Tennessee excise taxes on all or a portion of the interest on any of the Bonds during the period such Bonds are held or beneficially owned by any organization or entity, other than a sole proprietorship or general partnership, doing business in the State of Tennessee, and (c) Tennessee franchise taxes by reason of the inclusion of the book value of the Bonds in the Tennessee franchise tax base of any organization or entity, other than a sole proprietorship or general partnership doing business in the State of Tennessee. It is to be understood that the rights of the owners of the Bonds and the enforceability of the Bonds and the resolution authorizing the Bonds may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights heretofore or hereafter enacted and that their enforcement may be subject to the exercise of judicial discretion in accordance with general principles of equity. We express no opinion herein as to the accuracy, adequacy or completeness of any offering circular distributed relating to the Bonds. This opinion is given as of the date hereof, and we assume no obligation to update or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention or any changes in law that may hereafter occur. Yours truly, B-2

173 FORM OF SERIES 2009B BOND COUNSEL OPINION December 29, 2009 Board of Mayor and Aldermen City of Franklin, Tennessee P.O. Box 305 City Hall Franklin, Tennessee Morgan Keegan & Co., Inc. 50 Front Street Memphis, Tennessee Ladies and Gentlemen: We have acted as bond counsel to the City of Franklin, Tennessee (the "Issuer") in connection with the issuance of $30,625,000 General Obligation Public Improvement Bonds, Series 2009B (Federally Taxable Build America Bonds Direct Payment), dated December 29, 2009 (the "Bonds"). We have examined the law and such certified proceedings and other papers as we deemed necessary to render this opinion. As to questions of fact material to our opinion, we have relied upon the certified proceedings and other certifications of public officials furnished to us without undertaking to verify such facts by independent investigation. Based on our examination, we are of the opinion, as of the date hereof, as follows: 1. The Bonds have been duly authorized, executed and issued in accordance with the constitution and laws of the State of Tennessee and constitute valid and binding obligations of the Issuer. 2. The resolution of the Board of Mayor and Aldermen of the Issuer authorizing the Bonds has been duly and lawfully adopted, is in full force and effect and is a valid and binding agreement of the Issuer enforceable in accordance with its terms. 3. The Bonds constitute general obligations of the Issuer for the payment of which the Issuer has validly and irrevocably pledged its full faith and credit. The principal of, premium, if any, and interest on the Bonds are payable from unlimited ad valorem taxes to be levied on all taxable property within the corporate limits of the Issuer. 4. Interest on the Bonds is includible in gross income for federal income tax purposes. Except as set forth in this Paragraph 4, we express no opinion regarding other federal tax consequences arising with respect to the Bonds. 5. Under existing law, the Bonds and the income therefrom are exempt from all present state, county and municipal taxes in Tennessee except (a) inheritance, transfer and estate taxes, (b) Tennessee excise taxes on all or a portion of the interest on any of the Bonds during the period such Bonds are held or beneficially owned by any organization or entity, other than a sole proprietorship or general partnership, doing business in the State of Tennessee, and (c) Tennessee franchise taxes by reason B-3

174 of the inclusion of the book value of the Bonds in the Tennessee franchise tax base of any organization or entity, other than a sole proprietorship or general partnership doing business in the State of Tennessee. It is to be understood that the rights of the owners of the Bonds and the enforceability of the Bonds and the resolutions authorizing the Bonds may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights heretofore or hereafter enacted and that their enforcement may be subject to the exercise of judicial discretion in accordance with general principles of equity. We express no opinion herein as to the accuracy, adequacy or completeness of the Official Statement relating to the Bonds. This opinion is given as of the date hereof, and we assume no obligation to update or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention or any changes in law that may hereafter occur. Yours truly, B-4

175 APPENDIX C FORM OF CONTINUING DISCLOSURE CERTIFICATE

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177 FORM OF CONTINUING DISCLOSURE CERTIFICATE CITY OF FRANKLIN, TENNESSEE $13,375,000 GENERAL OBLIGATION PUBLIC IMPROVEMENT BONDS, SERIES 2009A $30,625,000 GENERAL OBLIGATION PUBLIC IMPROVEMENT BONDS, SERIES 2009B (FEDERALLY TAXABLE BUILD AMERICA BONDS DIRECT PAYMENT) DISCLOSURE CERTIFICATE This Disclosure Certificate (this "Disclosure Certificate") is executed and delivered this 29 th day of December, 2009 by the City of Franklin, Tennessee (the "Issuer") in connection with the issuance of $13,375,000 in aggregate principal amount of its General Obligation Public Improvement Bonds, Series 2009A (the Series 2009A Bonds ) and $30,625,000 in aggregate principal amount of its General Obligation Public Improvement Bonds, Series 2009B (Federally Taxable Build America Bonds Direct Payment) (the Series 2009B Bonds and together with the Series 2009A Bonds the Bonds ). The Issuer hereby covenants and agrees as follows: SECTION 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the Issuer for the benefit of the Beneficial Owners (as herein defined) of the Bonds and in order to assist the Participating Underwriter(s) (as herein defined) in complying with the Rule (as herein defined). SECTION 2. Definitions. In addition to the definitions set forth in the Resolution (as herein defined), which apply to any capitalized terms used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms shall have the following meanings: "Annual Report" shall mean any Annual Report provided by the Issuer pursuant to the Rule and this Disclosure Certificate. "Beneficial Owner" shall mean any person who (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries) or (b) is treated as the owner of any Bonds for federal income tax purposes. "Dissemination Agent" means the Issuer, or any successor designated in writing by the Issuer and which has filed with the Issuer a written acceptance of such designation. "Fiscal Year" shall mean any period of twelve consecutive months adopted by the Issuer as its fiscal year for financial reporting purposes and shall initially mean the period beginning on July of each calendar year and ending June 30 of the following calendar year. "Listed Events" shall mean any of the events listed in Section 5(a) of this Disclosure Certificate. "MSRB" shall mean the Municipal Securities Rulemaking Board, or any successor thereto. "Official Statement" shall mean the Official Statement of the Issuer, dated December 17, 2009, relating to the Bonds. "Participating Underwriter(s)" shall mean Morgan Keegan & Co., Inc. C-1

178 "Resolution" shall mean the Resolution of the Issuer pursuant to which the Bonds were issued, adopted November 10, "Rule" shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. "State" shall mean the State of Tennessee. "State Repository" shall mean any public or private repository or entity designated by the State as a state repository for the purpose of the Rule. As of the date of this Disclosure Certificate, there is no State Repository. SECTION 3. Provision of Annual Reports. Not later than 180 days after the end of the Fiscal Year, commencing with Fiscal Year ending June 30, 2010, the Issuer shall provide an Annual Report to the MSRB and to the State Depository, if any. In each case, the Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross-reference other information as provided in Section 4 of this Disclosure Certificate. Notwithstanding the foregoing, the audited financial statements of the Issuer may be submitted separately from the balance of the Annual Report when such audited financial statements are available. In the event that the audited financial statements are not included with the Annual Report and will be submitted at a later date, the Issuer shall include unaudited financial statements of the Issuer in the Annual Report and shall indicate in the Annual Report the date on which the audited financial statements of the Issuer will be submitted. The audited financial statements of the Issuer, when available, will be provided to the MSRB and to the State Depository, if any. If the Annual Report (or audited financial statements which were to be separately submitted) is not timely filed, the Issuer shall send a notice to the MSRB and to the State Depository, if any, in substantially the form attached as Exhibit A. SECTION 4. Content of Annual Reports. The Issuer s Annual Report shall contain or incorporate by reference the following: (a) If audited financial statements of the Issuer are not yet available, the unaudited financial statements of the Issuer, and when audited financial statements are available, the audited financial statements of the Issuer, both such types of financial statements to be prepared in conformity with generally accepted accounting principles, as in effect from time to time. Such financial statements shall be accompanied by an audit report resulting from an audit conducted by an independent certified public accountant or firm of independent certified public accountants in conformity with generally accepted auditing standards. (b) If the accounting principles changed from the previous Fiscal Year, a description of the impact of the change as required by Section 8 of this Disclosure Certificate. (c) A statement indicating that the Fiscal Year has not changed, or, if the Fiscal Year has changed, a statement indicating the new Fiscal Year. (d) An update of the information in Appendix D of the Official Statement under the following headings: 1. Long-Term Debt Service Requirements; 2. Statement of Debt; C-2

179 3. General Government Operations; 4. Fund Balances/Fund Equity/Net Assets; 5. Local Option Sales Tax Receipts for the Fiscal Year; 6. Value of Taxable Property for the Fiscal Year; 7. Property Tax Levies and Collections; 8. Largest Taxpayers; 9. Historical Tax Revenue Collections for the Fiscal Year; 10. General Obligation Indebtedness; and 11. Major Funds Summaries. Any or all of the items listed above may be incorporated by reference from other documents, including official statements of debt issues with respect to which the Issuer is an obligated person (as defined by the Rule), which have been filed in accordance with the Rule and the other rules of the Securities and Exchange Commission. If the document incorporated by reference is a final official statement, it must be available from the MSRB. The Issuer shall clearly identify each such other document so incorporated by reference. SECTION 5. Reporting of Significant Events. (a) following events: This Section 5 shall govern the giving of notices of the occurrence of any of the (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) (x) Principal and interest payment delinquencies. Non-payment related defaults. Unscheduled draws on debt service reserves reflecting financial difficulties. Unscheduled draws on credit enhancements reflecting financial difficulties. Substitution of credit or liquidity providers, or their failure to perform. Adverse tax opinions or events affecting the tax-exempt status of the Security. Modifications to rights of the security holders. Bond calls. Defeasances. Release, substitution or sale of property securing repayment of the security. C-3

180 (xi) Rating changes. (b) Whenever the Issuer obtains knowledge of the occurrence of a Listed Event, the Issuer shall, within five business days, determine if such event would constitute material information for Beneficial Owners of the Bonds. (c) If the Issuer determines that knowledge of the occurrence of a Listed Event would be material, the Issuer shall file a notice of such occurrence with the MSRB and each State Repository. Notice of Listed Events described in subsections (a)(viii) and (ix) shall be disseminated automatically, and need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to the Beneficial Owners of affected Bonds pursuant to the Resolution. SECTION 6. Termination of Reporting Obligation. The Issuer s obligations under this Disclosure Certificate shall terminate upon the defeasance (within the meaning of the Rule), prior redemption or payment in full of all of the Bonds. The Issuer shall notify the MSRB and each State Repository that the Issuer s obligations under this Disclosure Certificate have terminated. If the Issuer s obligations are assumed in full by some other entity, such person shall be responsible for compliance with this Disclosure Certificate in the same manner as if it were the Issuer, and the original Issuer shall have no further responsibility hereunder. SECTION 7. Dissemination Agent. The Issuer may, from time to time, appoint a dissemination agent to assist it in carrying out its obligations under this Disclosure Certificate, and the Issuer may, from time to time, discharge the dissemination agent, with or without appointing a successor dissemination agent. If at any time there is not a designated dissemination agent, the Issuer shall be the dissemination agent. SECTION 8. Amendment. This Disclosure Certificate may not be amended unless independent counsel experienced in securities law matters has rendered an opinion to the Issuer to the effect that the amendment does not violate the provisions of the Rule. In the event that this Disclosure Certificate is amended or any provision of the Disclosure Certificate is waived, the notice of a Listed Event pursuant to Section 5(a)(vii) hereof shall explain, in narrative form, the reasons for the amendment or wavier and the impact of the change in the type of operating data or financial information being provided in the Annual Report. If an amendment or waiver is made in this Disclosure Certificate which allows for a change in the accounting principles to be used in preparing financial statements, the Annual Report for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison shall include a qualitative discussion of the differences in the accounting principles and impact of the change in the accounting principles on the presentation of the financial information. A notice of the change in the accounting principles shall be deemed to be material and shall be sent to the MSRB and each State Repository. SECTION 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the Issuer from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the Issuer chooses to include any information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is specifically required by this Disclosure Certificate, the Issuer shall have no obligation under this Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. C-4

181 SECTION 10. Default. In the event of a failure of the Issuer to comply with any provision of this Disclosure Certificate, the Participating Underwriter or any Beneficial Owner may take such actions as may be necessary and appropriate, including seeking specific performance by court order, to cause the Issuer to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Resolution, and the sole remedy under this Disclosure Certificate in the event of any failure of any party to comply with this Disclosure Certificate shall be an action to compel performance. The cost to the Issuer of performing its obligations under the provisions of this Disclosure Certificate shall be paid solely from funds lawfully available for such purpose. SECTION 11. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and the Issuer agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which they may incur arising out of or in the exercise or performance of their powers and duties hereunder, including the costs and expenses (including attorneys fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent s gross negligence or willful misconduct. The Dissemination Agent may consult with counsel (who may, but need not, be counsel for any party hereto or the Issuer), and the opinion of such Counsel shall be full and complete authorization and protection in respect of any action taken or suffered by it hereunder in good faith and in accordance with the opinion of such Counsel. The obligations of the Issuer under this Section shall survive resignation or removal of the Dissemination Agent and payment of the 2009 Bonds. SECTION 12. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the Issuer, the Participating Underwriter, and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity. SECTION 13. Intermediaries; Expenses. The Dissemination Agent is hereby authorized to employee intermediaries to carry out its obligations hereunder. The Dissemination Agent shall be reimbursed immediately for all such expenses and any other reasonable expense incurred hereunder (including, but not limited to, attorney s fees). SECTION 14. Counterparts. This Disclosure Certificate may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. SECTION 15. Governing Law. This Disclosure Certificate shall be governed by and construed in accordance with the laws of the State. SECTION 16. Severability. In case any one or more of the provisions of this Disclosure Certificate shall for any reason be held to be illegal or invalid, such illegality or invalidity shall not affect any other provision of this Disclosure Certificate, but this Disclosure Certificate shall be construed and enforced as if such illegal or invalid provision had not been contained herein. SECTION 17. Filings with the MSRB. All filings required to be made with the MSRB shall be made electronically at pursuant to, and in accordance with, SEC Release No CITY OF FRANKLIN, TENNESSEE By: Mayor C-5

182 EXHIBIT A NOTICE OF FAILURE TO FILE ANNUAL REPORT Name of Issuer: City of Franklin, Tennessee Name of Bond Issues: General Obligation Public Improvement Bonds, Series 2009A and General Obligation Public Improvement Bonds, Series 2009B (Federally Taxable Build America Bonds Direct Payment) CUSIP Number 1 : Date of Issuance: December 29, 2009 NOTICE IS HEREBY GIVEN that the Issuer has not provided an Annual Report due with respect to the above-named Bonds as required by its Disclosure Certificate, dated December 29, The Issuer anticipates that the Annual Report will be filed by. This notice is based on the best information available at the time of dissemination. Any questions regarding this notice should be directed to. Dated: CITY OF FRANKLIN, TENNESSEE By: Mayor No representation is made as to the correctness of the CUSIP number either as printed on the bonds or as contained herein, and reliance may only be placed on other bond identification contained herein. C-6

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