Raymond James & Associates, Inc.

Transcription

1 New Issue Rating: S&P: "AA" (See "Rating" herein) In the opinion of Peck, Shaffer & Williams LLP, Bond Counsel, under existing law, (i) interest on the Bonds will be excludible from gross income of the holders thereof for purposes of federal income taxation, (ii) interest on the Bonds will not be a specific item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, (iii) interest on the Bonds is not includable in determining adjusted current earnings for purposes of the federal alternative minimum tax imposed on corporations, and (iv) the Bonds, the transfer thereof, and the income therefrom, including any profit made on the sale thereof, are exempt from taxation within the State of Ohio, all subject to the qualifications described herein under the heading "TAX STATUS." The Bonds are designated "qualified tax-exempt obligations" with respect to investments by certain financial institutions under Section 265 of the Code. OFFICIAL STATEMENT of the CITY OF SIDNEY, OHIO $9,920,000 VARIOUS PURPOSE LIMITED TAX GENERAL OBLIGATION BONDS, SERIES 2013 Dated: Date of Issuance Due: December 1, as stated below Interest on the above-captioned bonds (the "Bonds") will be payable, from the date of issuance, on June 1 and December 1 of each year, commencing December 1, 2013, until the entire principal amount of the Bonds has been paid. The Bonds shall mature on December 1 of each year, as set forth in the maturity schedule on the inside cover hereof. The Bonds are subject to redemption at the times, in the manner and at the redemption prices described herein. The Bonds are unvoted general obligation debt of the City of Sidney, Ohio (the "City"). The basic security for the Bonds is the City s ability to levy an ad valorem tax on all real and personal property in the City subject to ad valorem taxation by the City, within the ten-mill limitation imposed by Ohio law (See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS" herein), at a rate sufficient to pay debt service on the Bonds. The Bonds will be issued in fully registered form under a book entry method, registered initially in the name of The Depository Trust Company or its nominee ("DTC"). There will be no distribution of Bonds to the ultimate purchasers. The Bonds in certificated form as such will not be transferable or exchangeable, except for transfer to another nominee of DTC or as otherwise described in this Official Statement. See "INTRODUCTION - Book Entry Method." Book entry interests in the Bonds will be available for purchase in principal amounts of $5,000 or any integral multiple thereof. The City has deemed this Official Statement to be final for the purposes of Securities and Exchange Commission Rule 15c2-12(b)(3). THIS COVER PAGE CONTAINS CERTAIN INFORMATION FOR QUICK REFERENCE ONLY. IT IS NOT A SUMMARY OF THIS ISSUE. INVESTORS MUST READ THE ENTIRE OFFICIAL STATEMENT TO OBTAIN INFORMATION ESSENTIAL TO THE MAKING OF AN INFORMED INVESTMENT DECISION. $6,890,000 Serial Bonds Year Principal Amount Maturing Interest Rate Per Annum Reoffering Price CUSIP (1) 2013 $300, % % HR , HS , HT , HU , HV , HW , HX , HY , HZ , JA , JB , JC9 $3,030,000 Term Bonds $375, % Term Bond maturing December 1, 2026 Price % CUSIP JD7 $400, % Term Bond maturing December 1, 2028 Price % CUSIP JE5 $430, % Term Bond maturing December 1, 2030 Price % CUSIP JF2 $720, % Term Bond maturing December 1, 2033 Price % CUSIP JG0 $530, % Term Bond maturing December 1, 2035 Price % CUSIP JH8 $575, % Term Bond maturing December 1, 2037 Price % CUSIP JJ4 Raymond James & Associates, Inc. Official Statement dated August 29, 2013 (1) CUSIP is a registered trademark of the American Bankers Association. The CUSIP numbers listed above are being provided solely for the convenience of bondholders only, and neither the Paying Agent, the School District nor the Underwriter makes any representation with respect to such numbers or undertakes any responsibility for their accuracy. The CUSIP numbers are subject to being changed after the issuance of the Bonds as a result of various subsequent actions including, but not limited to, a defeasance in whole or in part of the Bonds.

2 REGARDING THIS OFFICIAL STATEMENT This Official Statement does not constitute an offering of any security other than the original offering of the bonds (the "Bonds") of the City of Sidney, Ohio (the "City") identified on the cover hereof. No dealer, broker, salesman or other person has been authorized by the City to give any information or to make any representation, other than those contained in this Official Statement, and, if given or made, such other information or representations must not be relied upon as having been authorized by the City. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. The information and expressions of opinion herein are subject to change without notice. Neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City since the date hereof. Upon issuance, the Bonds will not be registered by the City under any federal or state securities law, and will not be listed on any stock or other securities exchange. Neither the Securities and Exchange Commission nor any other federal, state, municipal or other governmental entity or agency except the City will have, at the request of the City, passed upon the accuracy or adequacy of this Official Statement or approved the Bonds for sale. All financial and other information presented in this Official Statement has been provided by the City from its records, except for information expressly attributed to other sources. The presentation of information, including tables of receipts from taxes and other sources, is intended to show recent historic information, and is not intended to indicate future or continuing trends in the financial position or other affairs of the City. No representation is made that past experience, as is shown by that financial and other information, will necessarily continue or be repeated in the future. Insofar as the statements contained in this Official Statement involve matters of opinion or estimates, even if not expressly stated as such, such statements are made as such and not as representations of fact or certainty, no representation is made that any of such statements have been or will be realized, and such statements should be regarded as suggesting independent investigation or consultation of other sources prior to the making of investment decisions. Certain information may not be current; however, attempts were made to date and document sources of information. Neither this Official Statement nor any oral or written representations by or on behalf of the City preliminary to sale of the Bonds should be regarded as part of the City s contract with the successful bidder or the holders from time to time of the Bonds. Certain information contained in this Official Statement is attributed to the Ohio Municipal Advisory Council (OMAC). OMAC compiles information from official and other sources. OMAC believes the information it compiles is accurate and reliable, but OMAC does not independently confirm or verify the information and does not guaranty its accuracy. OMAC has not reviewed this Official Statement to confirm that the information attributed to it is information provided by OMAC or for any other purpose.

3 References herein to provisions of Ohio law, whether codified in the Ohio Revised Code (the "Revised Code") or uncodified, or to the provisions of the Ohio Constitution or the City s Charter or ordinances, are references to such provisions as they presently exist. Any of these provisions may from time to time be amended, repealed or supplemented. As used in this Official Statement, "debt service" means principal of, interest and any premium on, the obligations referred to; "City" means Sidney, Ohio; and "State" or "Ohio" means the State of Ohio.

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5 TABLE OF CONTENTS INTRODUCTION...1 The Issuer...1 Sources of Payment for the Bonds...1 Purpose of the Bonds...1 Plan of Refunding...1 Verification of Mathematical Accuracy...2 The Bonds - General Terms...2 Source and Uses of Funds...3 Accrued Interest and Premium...3 Authorization of Bonds...3 Bond Counsel and Delivery of the Bonds...3 REDEMPTION OF THE BONDS...4 Mandatory Sinking Fund Redemption...4 Optional Redemption...5 Selection of Bonds to be Redeemed...5 Registration, Payment and Transfer Book Entry Method...6 Disclaimer by the City...8 Revision of Book Entry Only Transfer System; Replacement of Bonds...9 General...9 Tax Status...10 CONTINUING DISCLOSURE...10 Continuing Disclosure Compliance...11 SECURITY AND SOURCES OF PAYMENT FOR THE BONDS...12 INVESTMENT CONSIDERATIONS...13 GENERAL INFORMATION CONCERNING THE CITY...14 Location and Population...14 Municipal and Other Public Services and Facilities...15 Overlapping Governmental Entities...17 Economic Activity and Employment...18 Governmental Organization...23 Employee Relations...24 FINANCIAL MATTERS...25 Introduction...25 Budgeting, Tax Levy and Appropriations Procedures...25 Financial Reports and Examinations of Accounts...27 Investment Policies of the City and County...27 State Legislation Relative to Municipal Fiscal Emergencies...32 Insurance...33 AD VALOREM TAX REVENUES...34 Ad Valorem Tax Base...34 Assessed Valuation of the City...37 Largest Taxpayers...37 Collections and Delinquencies of Ad Valorem Taxes...38 Unvoted and Voted Taxes for Local Purposes...39 Page i

6 OTHER MAJOR REVENUE SOURCES...40 Municipal Income Tax...40 Local Government Fund...42 CITY DEBT AND OTHER LONG-TERM OBLIGATIONS...42 Security For and Sources of Payment of General Obligation Debt...43 Direct Debt Limitations...44 Indirect Debt Limitation...44 OUTSTANDING GENERAL OBLIGATION DEBT...46 OTHER OBLIGATIONS...47 Loans Payable...47 Pension Plans...47 Accrued Fringe Benefits...50 Sick Leave...51 FUTURE FINANCINGS...51 LITIGATION...51 LEGAL MATTERS...52 TRANSCRIPT AND CLOSING DOCUMENTS...52 TAX STATUS...52 Premium...54 RATING...54 FINANCIAL ADVISOR...54 CONCLUDING STATEMENT...55 APPENDICES APPENDIX A - Selected Financial Information for the Years 2010, 2011 and A-1 APPENDIX B - Financial Statement...B-1 APPENDIX C - Draft Opinion of Bond Counsel...C-1 APPENDIX D - Official Notice of Sale and Bid Form...D-1

7 INTRODUCTION The purpose of this Official Statement, which includes the cover page and appendices hereto, is to provide certain information with respect to the issuance by the Issuer of the Various Purpose Bonds identified on the cover page hereof (the "Bonds"). The introduction is not a summary of this Official Statement. It is only a brief description of and guide to, and is qualified by, more complete and detailed information contained in the entire Official Statement, including the cover page and appendices hereto, and the documents summarized or described herein. A full review should be made of the entire Official Statement. The offering of Bonds to potential investors is made only by means of the entire Official Statement. The Issuer The Bonds are being issued by the City, a municipal corporation and political subdivision of the State of Ohio. The City covers approximately 11.7 square miles in west central Ohio, approximately 37 miles north of Dayton and 35 miles south of Lima along Interstate 75 (see "GENERAL INFORMATION CONCERNING THE CITY" herein). Sources of Payment for the Bonds The Bonds are unvoted general obligations of the City. Principal of and interest on the Bonds, unless paid from other sources, are payable from a limited ad valorem tax on all real and personal property in the City subject to ad valorem taxation by the City, within the ten-mill limitation imposed by Ohio law (See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS," herein). Purpose of the Bonds The Bonds are being issued as a consolidated issue pursuant to Section of the Ohio Revised Code in order to achieve certain cost savings. The Bonds are being issued in the aggregate principal amount of $9,920,000 to (i) current refund outstanding Police Station Improvement Limited Tax General Obligation Bonds, Series 2004 (the "2004 Bonds"), originally issued to construct a new police station for the City and improvements related thereto, (ii) finance a portion of improvements to the City's wastewater treatment plant and collection system (the "Wastewater Project") and (iii) pay certain costs related to the issuance of the Bonds. Plan of Refunding A portion of the proceeds of the Bonds remaining after depositing $5,000,000 into the project fund for the Wastewater Project and the payment of issuance costs will be placed in an escrow account (the "Escrow Account") with The Huntington National Bank, Columbus, Ohio (the "Escrow Trustee") and will be held in cash or invested in non-callable direct obligations of the United States of America (the "Escrow Obligations") or other Substituted Obligations, as defined in the Escrow Deposit Agreement (the "Escrow Agreement"), dated as of September 17, 2013, between the City and the Escrow Trustee until required (i) to optionally redeem on

8 December 1, 2013 the Series 2004 Bonds maturing on and after December 1, 2014 (the "Bonds To Be Refunded") at a price of 100% of the par amount of such Bonds To Be Refunded then outstanding. Any funds remaining in the Escrow Account after the Bonds To Be Refunded have been redeemed shall be returned to the City and deposited in the City's general fund. Verification of Mathematical Accuracy Causey, Demgen & Moore Inc. will verify from the information provided to them the mathematical accuracy as of the date of the closing on the Bonds of (1) the computations contained in the provided schedules to determine that the anticipated receipts from the securities and cash deposits listed in the underwriter s schedules, to be held in escrow, will be sufficient to retire the Bonds To Be Refunded on December 1, 2013 and (2) the computations of yield on both the securities and the Bonds contained in the provided schedules used by Bond Counsel in its determination that the interest on the Bonds is exempt from tax. Causey, Demgen & Moore Inc. will express no opinion on the assumptions provided to them, nor as to the exemption from taxation of the interest on the Bonds. The Bonds - General Terms The Bonds are issued in fully registered form under a book entry only method with DTC as a securities depository. The Bonds are dated September 17, 2013 and bear interest at the rates and mature in the amounts and on the dates set forth on the cover page of this Official Statement. Principal, and any premium, on all Bonds are payable upon presentation and surrender by the registered owners thereof at the principal office of The Huntington National Bank, Columbus, Ohio, as paying agent, registrar and transfer agent for the Bonds (the "Paying Agent and Registrar"). Semiannual interest on the Bonds is payable each June 1 and December 1, by transmittal by the Paying Agent and Registrar to the registered owner as shown in the registration records maintained by the Paying Agent and Registrar as Bond registrar on the 15th day preceding such interest payment date; provided that, so long as the Bonds remain in book entry form with DTC, the Paying Agent and Registrar will make payment for such Bonds by wire transfer of funds on the applicable payment dates. The Bonds are subject to optional redemption prior to maturity as set forth herein (See, "Redemption of Bonds," herein). [This Space Intentionally Left Blank] 2

9 Source and Uses of Funds Sources: Proceeds from Sale of Bonds: Par Value of Bonds $9,920, Net Premium 74, City Contribution for Costs of Issuance 65, Total $10,059, Uses: Deposit to Escrow Account $4,879, Deposit to Project Fund 5,000, Other Costs of Issuance (Including Underwriter's Discount) 179, Total $10,059, Raymond James & Associates, Inc. has agreed to purchase the Bonds at an aggregate purchase price of $9,920,000, pursuant to the Official Notice of Sale attached hereto as Appendix D. The aggregate initial public offering price is $9,994,068.70, which includes purchaser's compensation. Accrued Interest and Premium Accrued interest and premium paid to the City, if any, on the Bonds will be deposited in the City s Bond Retirement Fund and used to pay debt service on the Bonds. Authorization of Bonds The Bonds are to be issued pursuant to the general laws of the State of Ohio, particularly Chapter 133 of the Ohio Revised Code (the "Uniform Public Securities Law"), the Charter of the City and the ordinances which were adopted by the City Council on August 12, 2013 (collectively, the "Authorizing Legislation"). Bond Counsel and Delivery of the Bonds Legal matters incident to the issuance of the Bonds and with regard to the tax-exempt status of the interest thereon are subject to the approving legal opinion of Peck, Shaffer & Williams LLP, Columbus, Ohio, Bond Counsel. The Bonds are offered when, as and if issued subject to the Official Notice of Sale. The Bonds will be delivered against payment in Federal Reserve Funds on or about September 17,

10 Mandatory Sinking Fund Redemption REDEMPTION OF THE BONDS The Bonds due December 1, 2026 are subject to mandatory sinking fund redemption. The mandatory sinking fund redemption is to occur on December 1, 2025, at 100% of the principal amount thereof plus accrued interest to the date of redemption according to the following schedule: Year Principal Amount to be Redeemed 2025 $185,000 Unless otherwise called for redemption, the remaining $190,000 principal amount of the Bonds due December 1, 2026 is to be paid at stated maturity. The Bonds due December 1, 2028 are subject to mandatory sinking fund redemption. The mandatory sinking fund redemption is to occur on December 1, 2027, at 100% of the principal amount thereof plus accrued interest to the date of redemption according to the following schedule: Year Principal Amount to be Redeemed 2027 $195,000 Unless otherwise called for redemption, the remaining $205,000 principal amount of the Bonds due December 1, 2028 is to be paid at stated maturity. The Bonds due December 1, 2030 are subject to mandatory sinking fund redemption. The mandatory sinking fund redemption is to occur on December 1, 2029, at 100% of the principal amount thereof plus accrued interest to the date of redemption according to the following schedule: Year Principal Amount to be Redeemed 2029 $210,000 Unless otherwise called for redemption, the remaining $220,000 principal amount of the Bonds due December 1, 2023 is to be paid at stated maturity. The Bonds due December 1, 2033 are subject to mandatory sinking fund redemption. The mandatory sinking fund redemption is to occur on December 1, 2031, at 100% of the principal amount thereof plus accrued interest to the date of redemption according to the following schedule: Year Principal Amount to be Redeemed 2031 $230, ,000 Unless otherwise called for redemption, the remaining $250,000 principal amount of the Bonds due December 1, 2033 is to be paid at stated maturity. 4

11 The Bonds due December 1, 2035 are subject to mandatory sinking fund redemption. The mandatory sinking fund redemption is to occur on December 1, 2034, at 100% of the principal amount thereof plus accrued interest to the date of redemption according to the following schedule: Year Principal Amount to be Redeemed 2034 $260,000 Unless otherwise called for redemption, the remaining $270,000 principal amount of the Bonds due December 1, 2035 is to be paid at stated maturity. The Bonds due December 1, 2037 are subject to mandatory sinking fund redemption. The mandatory sinking fund redemption is to occur on December 1, 2036, at 100% of the principal amount thereof plus accrued interest to the date of redemption according to the following schedule: Year Principal Amount to be Redeemed 2036 $280,000 Unless otherwise called for redemption, the remaining $295,000 principal amount of the Bonds due December 1, 2037 is to be paid at stated maturity. Optional Redemption The Bonds maturing on and after December 1, 2019 are subject to redemption at the option of the City, on or after December 1, 2018, in whole or in part (in the amount of $5,000 or any integral multiple thereof) on any date at the redemption price equal to 100% of the principal amount to be redeemed, plus accrued interest to the date fixed for redemption. Selection of Bonds to be Redeemed If fewer than all of the outstanding Bonds of a single maturity are called for redemption, the selection of Bonds to be redeemed, or portions thereof in amounts of $5,000 or any integral multiple thereof, shall be made by lot by the Paying Agent and Registrar in any manner which the Paying Agent and Registrar may determine. The notice of the call for redemption of Bonds shall identify (i) by designation, letters, numbers or other distinguishing marks, the Bonds or portions thereof to be redeemed, (ii) the redemption price to be paid, (iii) the date fixed for redemption, and (iv) the place or places where the amounts due upon redemption are payable. The notice shall be given by the Paying Agent and Registrar on behalf of the Issuer by mailing a copy of the redemption notice by first class mail, postage prepaid, at least 30 days prior to the date fixed for redemption, to the registered holder s address shown on the Bond registration records on the fifteenth day preceding that mailing. Failure to receive notice by mailing or any defect in the proceedings regarding any Bond, however, shall not affect the validity of the proceedings for the redemption of any Bond. Notice having been mailed in the manner provided above, the Bonds and portion therefor called for redemption shall become due and payable on the redemption date and on such redemption date, interest on such Bonds or portions thereof so called shall cease to accrue; and upon 5

12 presentation and surrender of such Bonds or portions thereof at the place or places specified in that notice, such Bonds or portions thereof shall be paid at the redemption price, including interest accrued to the redemption date. Registration, Payment and Transfer Book Entry Method Owners of book entry interests in the Bonds will not receive or have the right to receive physical delivery of the Bonds and will not be or be considered to be, and will not have any rights as, registered owners ("Holders") of Bonds. The following information on the Book Entry Only System applicable to the Bonds has been supplied by The Depository Trust Company, New York, New York, and neither the County or Bond Counsel make any representations, warranties or guarantees with respect to its accuracy or completeness. 1. The Depository Trust Company ("DTC"), New York, NY, will act as securities depository for the Bonds (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 for each maturity will be issued in the aggregate principal amount of the Bonds, and will be deposited with DTC. 2. DTC, the world's largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-u.s. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of Bonds. 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 a Standard & Poor's rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at 3. 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 6

13 of each actual purchaser of each Bond ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive Bonds representing their ownership interests in Bonds, except in the event that use of the book-entry system for the Bonds is discontinued. 4. 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. 5. 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 Bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them. 6. Redemption notices shall be sent to DTC. If less than all of the Bonds within an issue are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. 7. 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 mails an Omnibus Proxy to Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). 8. Redemption proceeds, distributions, and dividend payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from Issuer or Agent, on payable date in accordance with their 7

14 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, Agent, or Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of Issuer or Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. 9. A Beneficial Owner shall give notice to elect to have its Bonds purchased or tendered, through its Participant, to the Agent, and shall effect delivery of such Bonds by causing the Direct Participant to transfer the Participant's interest in the Bonds, on DTC's records, to the Agent. The requirement for physical delivery of Bonds in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Bonds are transferred by Direct Participants on DTC's records and followed by a book-entry credit of tendered Bonds to the Agent's DTC account. 10. DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to Issuer or Agent. Under such circumstances, in the event that a successor depository is not obtained, Bonds are required to be printed and delivered. 11. Issuer may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Bonds will be printed and delivered to DTC. 12. The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that Issuer believes to be reliable, but Issuer takes no responsibility for the accuracy thereof. Disclaimer by the City The City does not have any responsibility or liability for any aspect of the records relating to, or payments made on account of book entry interest ownership, or for maintaining, supervising or reviewing any records relating to that ownership. The City cannot and does not give any assurances that DTC, DTC Participants or others will distribute to the Beneficial Owners (i) payments of Bond Service Charges on the Bonds paid or (ii) redemption or other notices sent to DTC as the Holder or that they will do so on a timely basis, or that DTC or DTC Participants will serve and act in the manner described in this Official Statement. The City has been advised by DTC that the current "Rules" applicable to DTC and its Participants are on file with the Securities and Exchange Commission and that the current "Procedures" of DTC to be followed in dealing with DTC Participants are on file with DTC. 8

15 Revision of Book Entry Only Transfer System; Replacement of Bonds The Authorizing Legislation, which authorizes the issuance of the Bonds, will provide for issuance of fully registered replacement Bonds ("Replacement Bonds") directly to persons other than DTC or its nominee only in the event that DTC determines not to continue to act as securities depository for the Bonds or the City determines that continuation of the book entry only system with DTC is not in the best interests of the City or the best interests of the Beneficial Owners. Upon a discontinuance of the book entry only system with DTC, the County may in its discretion attempt to have established a securities depository/book entry only relationship with another qualified securities depository. If the City is unable to do so, or desires not to do so, and after the Trustee has made provisions for notification of the Beneficial Owners of the Bonds by appropriate notice to DTC, the City and the Paying Agent shall authenticate and deliver Replacement Bonds in the denomination of $5,000 any integral multiple thereof to or at the direction of, and, if the event is not the result of City action or inaction, at the expense (including printing costs), of DTC's assigns. Principal of, premium, if any, and interest on Replacement Bonds will be payable when due without deduction for the services of the Paying Agent. Principal of any Replacement Bonds will be payable to the registered owner thereof upon presentation and surrender thereof at the principal corporate trust office of the Paying Agent. Interest thereon will be payable by the Paying Agent by check, draft or wire transfer, mailed to the registered owner of record on the registration books maintained by the Paying Agent (the "Register") as of the 15th day of the calendar month preceding the Interest Payment Date. Replacement Bonds will be exchangeable for Replacement Bonds of authorized denominations, and transferable, at the designated office of the Registrar, without charge (except taxes or other governmental fees). Exchange or transfer of then redeemable Replacement Bonds is not required to be made (i) between the 15th day preceding the mailing of notice of Replacement Bonds to be redeemed and the date of that mailing, (ii) during the period from the day following the Regular Record Date through the day preceding the ensuing Interest Payment Date, or (iii) of a particular Replacement Bond selected for redemption (in whole or in part) until redemption. General This Official Statement speaks only as of its date, and the information contained herein is subject to change. Copies of the basic documentation relating to the Bonds, including the Authorizing Legislation, are available from Ginger S. Adams, CPA, CPFO, Finance Officer, 201 West Poplar Street, Sidney, Ohio (937) The City has deemed this Preliminary Official Statement to be final for the purposes of Securities and Exchange Commission Rule 15c2-12(b)(1), except for certain information which has been omitted in accordance with such Rule and which will be supplied in the final Official Statement. 9

16 Tax Status In the opinion of Bond Counsel, based upon present laws, regulations, rulings and decisions in effect on the date of delivery of the Bonds, and assuming continuing compliance with certain covenants made by the City, interest on the Bonds is excludible from gross income for federal income tax purposes upon the conditions and subject to the limitations set forth herein under "TAX STATUS." Interest on the Bonds held by corporations is includable in the computation of such corporations adjusted current earnings and modified alternative minimum taxable income. Receipt of interest on the Bonds may result in other federal income tax consequences to certain holders of the Bonds. The City has designated the Bonds as "qualified tax-exempt obligations" with respect to certain financial institutions under Section 265 of the Internal Revenue Code of 1986, as amended. See Appendix C hereto for the form of the opinion Bond Counsel proposes to deliver in connection with the Bonds. CONTINUING DISCLOSURE In accordance with the Securities and Exchange Commission Rule 15c2-12 (the "Rule") and so long as the Bonds are outstanding the City (the "Obligated Person") has agreed pursuant to a Continuing Disclosure Certificate dated as of September 17, 2013, to be delivered on the date of delivery of the Bonds, to cause the following information to be provided: (i) to the Municipal Securities Rulemaking Board through the Electronic Municipal Market Access System ("EMMA") as the nationally recognized municipal securities information repository, certain annual financial information and operating data, including financial statements, generally consistent with the information contained under the headings "GENERAL INFORMATION CONCERNING THE CITY", "FINANCIAL MATTERS", "AD VALOREM TAX REVENUES" and "CITY DEBT AND OTHER LONG-TERM OBLIGATIONS" such information shall be provided on or before September 1 of each year for the fiscal year ending on the preceding December 31, commencing September 1, (ii) to EMMA, in a timely manner, not in excess of ten business days after the occurrence of the event, notice of the occurrence of the following events with respect to the Bonds: (a) (b) (c) (d) (e) Principal and interest payment delinquencies; Non-payment related defaults, if material; 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; 10

17 (f) (g) (h) (i) (j) (k) (l) (m) Adverse tax opinions or events affecting the tax-exempt status of the security; Modifications to rights of security holders, if material; Bond calls, if material, and tender offers (except for mandatory scheduled redemptions not otherwise contingent upon the occurrence of an event); Defeasances; Release, substitution or sale of property securing repayment of the securities, if material; Rating changes; Failure to file continuing disclosure by deadline; Bankruptcy, insolvency, receivership or similar event of the obligated person; (n) The consummation of a merger, consolidation, or acquisition involving an obligated person, or the sale of all or substantially all of the assets of the obligated person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and (o) Appointment of a successor or additional trustee or the change of name of a trustee, if material. (iii) to EMMA, notice of a failure (of which the Obligated Person or Disclosure Agent has knowledge) of an Obligated Person to provide the required annual financial information on or before the date specified in its written continuing disclosure undertaking. The Continuing Disclosure Certificate provides bondholders with certain enforcement rights in the event of a failure by the Obligated Person to comply with the terms thereof; however, a default under the Continuing Disclosure Certificate does not constitute a default under the Bond Legislation. The Continuing Disclosure Certificate may also be amended or terminated under certain circumstances in accordance with the Rule as more fully described therein. Bondholders are advised that the Continuing Disclosure Certificate, copies of which are available at the office of the Issuer, should be read in its entirety for more complete information regarding its contents. For purposes of this transaction with respect to events as set forth in the Rule: (a) (b) (c) there are no debt service reserve funds applicable to the Bonds; there are no liquidity providers applicable to the Bonds; and there is no property securing the repayment of the Bonds. Continuing Disclosure Compliance Rule 15c2-12 (the "Rule"), promulgated by the Securities and Exchange Commission, requires continuing disclosure with respect to new offerings of municipal securities of 11

18 $1,000,000 or more. The Issuer is obligated to provide such continuing disclosure with respect to one or more previously issued and currently outstanding bond or note issues. The Issuer has complied with its obligations in the past in a timely manner. The Issuer's latest disclosure was filed in 2012 for fiscal year ending December 31, SECURITY AND SOURCES OF PAYMENT FOR THE BONDS The Bonds will be unvoted general obligations of the City. The basic security for the unvoted general obligation debt of the City, including the Bonds, is the City s ability to levy, and its pledge to levy, an ad valorem tax on all the taxable property in the City within the ten-mill limitation imposed by the Ohio Constitution and laws, for the City and overlapping political subdivisions (described in detail under "CITY DEBT AND OTHER LONG-TERM OBLIGATIONS - Security For and Sources of Payment of General Obligation Debt - Unvoted Debt"), in sufficient amount to pay, as the same become due, the debt service on the bonds in anticipation of which the Bonds are issued as well as the debt service on all other outstanding unvoted general obligation bonds and bond anticipation notes of the City and the overlapping subdivisions (see "INVESTMENT CONSIDERATIONS" herein). State law requires that the levy for debt service has priority over any levy for current expenses within such ten-mill limitation, subject however, to the applicable provisions of the Federal Bankruptcy Code and other laws affecting creditors rights. The City will be required by Ohio law to levy and collect such limited ad valorem tax to pay debt service on the Bonds as the same becomes due unless such debt service is paid from other sources. The Authorizing Legislation provides further security by making a pledge of the full faith and credit of the City for the payment of the debt service on the Bonds as it becomes due. Included in that pledge are all funds of the City, except those specifically limited to another use or prohibited from use for that debt service by the Ohio Constitution, or Ohio or federal law, or revenue bond trust agreements; such exceptions include tax levies voted for specific purposes, special assessments pledged to bonds or notes, and certain utility revenues. A similar pledge is made in each City ordinance authorizing voted and unvoted general obligation debt. Chapter 9 of the Federal Bankruptcy Code contains provisions relating to the adjustment of debts of a State s political subdivisions, public agencies and instrumentalities (each an "eligible entity"), such as the City. For the Wastewater System Improvement Limited Tax General Obligation Bonds, the debt service is expected to be paid from the revenues of the City s sewer system after payment of costs of operation and maintenance. Under the Bankruptcy Code and in certain circumstances described therein, an eligible entity may be authorized to initiate Chapter 9 proceedings without prior notice to or consent of its creditors, which proceedings may result in a material and adverse modification or alteration of the rights of its secured and unsecured creditors, including holders of its bonds and notes. All Bonds being issued are subject to the provisions of the Federal Bankruptcy Code and other laws affecting creditors rights. Section of the Ohio Revised Code permits a political subdivision, such as the City, for the purpose of enabling such subdivision to take advantage of the provisions of the Federal Bankruptcy Code, and for that purpose only, and upon approval of the State Tax Commissioner, to file a petition stating that the subdivision is insolvent or unable to meet its debts as they mature, and that it desires to effect a plan for the composition or readjustment of its 12

19 debts, and to take such further proceedings as are set forth in the Bankruptcy Code as they relate to such subdivision. The taxing authority of such subdivision may, upon like approval of the State Tax Commissioner, refund its outstanding securities, whether matured or unmatured, and exchange refunding bonds for the securities being refunded. In its order approving such refunding, the State Tax Commissioner shall fix the maturities of the bonds to be issued, which shall not exceed thirty years. No taxing subdivision is permitted, in availing itself of the provisions of the Bankruptcy Code, to scale down, cut down or reduce the principal sum of its securities except that interest thereon may be reduced in whole or in part. The Federal Bankruptcy Code and Section of the Ohio Revised Code also permit the County to initiate Chapter 9 proceedings, which, because the County collects certain revenues on behalf of the City (particularly, ad valorem property taxes), may adversely affect the financial condition of the City. (See "FINANCIAL MATTERS" herein.) INVESTMENT CONSIDERATIONS The Bonds, like all obligations of state and local government, are subject to changes in value due to changes in the condition of the market for tax-exempt obligations or changes in the financial position of the City. It is possible under certain market conditions, or if the financial condition of the City should change, that the market price of the Bonds could be adversely affected. In recent years, the IRS has increased the frequency and scope of its examination and other enforcement activities regarding tax-exempt bonds. Currently, the primary penalty available to the IRS under the Code is the determination that interest on tax-exempt bonds is subject to federal income taxation. In addition, although the IRS has only infrequently taxed the interest received by holders of bonds that were represented to be tax-exempt, the IRS has examined a number of bond issues and concluded that such bond issues did not comply with applicable provisions of the Code and related regulations. No assurance can be given that the IRS will not examine the Underwriter, a Bondholder, the City or the Bonds. If the Bonds are examined, it may have an adverse impact on their price and marketability. Based on the stated use of proceeds from the sale of the Bonds as described herein, and on representations, warranties and covenants of the City, Bond Counsel will deliver its opinion as to the taxexemption of interest on the Bonds in the form set forth in APPENDIX C hereto. There are or may be pending in the Congress of the United States legislative proposals, including some that carry retroactive effective dates, that, if enacted, could alter or amend the federal tax matters with respect to the Bonds or affect the market value of the Bonds. It cannot be predicted whether or in what form any such proposal might be enacted or whether, if enacted, it would apply to bonds issued prior to enactment. Prospective purchasers of the Bonds should consult their own tax advisors regarding any pending or proposed federal tax legislation. Bond Counsel expresses no opinion regarding any pending or proposed federal tax legislation. 13

20 Location and Population GENERAL INFORMATION CONCERNING THE CITY The City contains approximately 11.7 square miles and is located in west central Ohio approximately 37 miles north of Dayton and 35 miles south of Lima; 85 miles west of Columbus and 100 miles south of Toledo. The City is serviced by Interstate 75 and State Routes 29 and 47, as well as CSX and Conrail railroads. Sidney is the largest city in Shelby County and is the county seat. The City was incorporated in 1834, and in 1954 adopted its charter implementing a council-manager form of government. The City averaged a 15.5% increase per decade from 1950 to The 2010 Census reported a total population of 21,229, an increase of 5.0% from the 2000 census. The 2012 population estimate from the U.S. Bureau of Census is 21,031. Source: U.S. Bureau of Census POPULATION Year Population , , , , , , ,229 14

21 Municipal and Other Public Services and Facilities The City is a total service community providing a range of government services for the citizens of the City, including: police and fire protection, emergency medical/ambulance services; water treatment and distribution, sanitary sewer and wastewater treatment services; stormwater monitoring and management; street reconstruction and maintenance; refuse/garbage collection and disposal; park and recreation facilities and programs; operation and maintenance of municipal cemetery; operation and maintenance of a county-wide transit system; and municipal airport facilities and operation services. The City operates and maintains a water supply system that serves some 9,200 customers in and around the City. The Water Treatment Plant was constructed in 1975 at a design capacity of 10 MGD (million gallons per day) which is considered sufficient capacity for future industrial growth. Current usage is estimated at 4.3 MGD. Nearly 123 miles of water lines make up the transmission and distribution system. Sidney gets most of its drinking water from the Great Miami River, Tawawa Creek and four (4) bedrock wells. The capacity of the bedrock wells have been declining over the past decade. "Surface water" sources, such as the Great Miami River and Tawawa Creek, are susceptible to contamination and drought and are difficult to treat. It is likely that the OEPA will require additional and expensive treatment processes in the future unless another source of water is found. The City has searched for an alternative source for the past 50 years and, in 2004, located a very promising site. The City completed its evaluation of this new potential source in early 2010 and found the project to be desirable. All indications are that this site a sand and gravel quarry located about 8 miles from Sidney holds good quality water in sufficient quantities to meet all of the City s needs for the foreseeable future. The largest portion of the water source property acquisition was finalized during mid The remainder is expected to be finalized in mid-2013 with funding provided by lower cost Recovery Zone Economic Development bonds issued in late The total project cost for the new water source (including about 9 miles of transmission lines) is estimated at approximately $23 million. Absent grant awards, water utility rates would have to be increased significantly in order to pay the debt service requirements of such an extensive project. In 2007, the City began to build a reserve that could then be used to fund the long-term new water source project. Initially begun in 2007 with funds totaling $300,000. This reserve has grown to approximately $1.4 million at December 31, Annual transfers from the Water Fund to the Water Source Reserve Fund were budgeted over the past few years. The intent is to use this Fund as a "down payment" when the construction of the water source is financed. In 2013, a 14% water rate increase was implemented to pay for water source protection and other water system and plant improvements. To date, the City has invested over $700,000 in testing and initial water source design and issued bonds totaling $2.54 million dedicated to water source property acquisition. To proceed with the final design and construction of the new water source, another rate increase is necessary. Council had previously postponed proceeding with the remainder of the project until either grant proceeds were received or the economy improved. 15

22 Should Council decide to complete this project prior to 2017, the most recently approved Five- Year Plan included a 29% revenue increase in the year The City also operates and maintains a sanitary sewerage collection system and a wastewater treatment facility. The collection system contains some 125 miles of lines, ranging in size from 6" to 36" in diameter, and serves 8 drainage areas with 6 lift stations. The wastewater treatment facility has a current capacity of approximately 7.0 MGD. Estimated current utilization is 5.0 MGD. Limited industrial expansion and growth can presently be accommodated. In 2011, Sidney was put on notice by the Ohio EPA that the City does not comply with EPA regulations and that considerable capital improvements would be needed to avoid potential fines and barriers to development. Specifically, the Ohio EPA is disallowing bypass during wet weather events and requiring other system changes to handle disinfection. Rather than expand the current plant to handle all bypass events (which would essentially require a new plant be built), a three-pronged approach has been designed to achieve Ohio EPA compliance. This approach includes (1) implementing a new program to reduce inflow and infiltration (I&I) from private property, (2) increasing the removal of I&I from public property sources, and (3) expanding the wastewater treatment plant s capacity to handle 25 MGD during wet weather flows (up from current capacity of 13.5 MGD). A significant sewer flow rate of 14% and a new flat monthly sewer fee of $22 were initiated in 2013 to begin to pay for these capital improvements. In the future, significant annual rate increases are anticipated to in order to pay the debt service requirements of such an extensive project. The City operates, manages and maintains a variety of other services/facilities: (1) A storm sewer network that includes miles of storm sewers, ranging in size from 6" to 113" in diameter, eight storm water detention basins and two storm water pump stations; (2) A wide range of recreation facilities and programs that occupy some 450 acres, including 16 neighborhood playgrounds, 5 baseball fields, 12 soccer fields, a municipal swimming pool complex, a 16.2-mile walk/bikeways, a 173-acre civic park and a 29-acre nature area; (3) A network of city highways, including about 110 miles of streets and 16.5 miles of alleys, requiring snow removal, street sweeping, maintenance, and reconstruction; (4) 24-hour full-time, paid police and fire protection personnel and equipment, including emergency medical and ambulance facilities/services; (5) A demand response public transportation service (Shelby Public Transit) providing county-wide transit service pursuant to a joint venture with Shelby County; 16

23 (6) A Municipal Airport with 2 runways, terminal and hangar facilities, and a full range of operational services; (7) A Municipal Cemetery including operation and maintenance services; and (8) An Administrative Staff to assist residents with day-to-day problems. The City also benefits from the following services and facilities provided by public and semi-public agencies and private organizations: (1) Public schools are within the jurisdiction of the Sidney City School District, which provides public education for children from kindergarten through the twelfth grade level. The Sidney City School District participates in the Upper Valley Joint Vocational School System for vocational agricultural and technical education programs. (2) One daily newspaper, the Sidney Daily News, is published in Sidney and a local AM-FM radio station, WMVR, is located just outside of Sidney. (3) The Amos Memorial Library, Wilson Memorial Hospital and Sidney- Shelby County YMCA are modern facilities providing services to the community. Overlapping Governmental Entities The major political subdivisions overlapping all or a portion of the territory of the City, and the approximate percentages of the assessed valuation of such subdivisions located within the City are as follows: % of Assessed Subdivision Valuation Within City Shelby County 35.58% Clinton Township 94.85% Franklin Township 16.35% Orange Township 0.04% Turtle Creek Township 11.66% Washington Township 0.06% Sidney City School District 78.61% Hardin-Houston Local School District 4.72% Upper Valley Joint Vocational School District 15.70% Source: Ohio Municipal Advisory Council Each of these entities operates independently under and is governed by Ohio law with its own budget, tax rate and sources of revenue. All such entities except the Upper Valley Joint Vocational School District may levy unvoted ad valorem property taxes without the "ten-mill limitation" discussed herein at "CITY DEBT AND OTHER LONG-TERM OBLIGATIONS Indirect Debt Limitation". 17

24 Economic Activity and Employment Based upon a 2009 Comprehensive Plan Update, the City is zoned and has developed into a balanced community serving the residential, commercial, industrial, and public/semipublic sections. A 2007 existing land use survey revealed the following analysis: LAND USE CATEGORY ACREAGE PERCENT Undeveloped/Agriculture % Wooded % Single-Family Residential 3, % Multi-Family % Manufactured Housing % Office % Central Business District % Industrial % Parks and Recreation % Public % Vacant/Undeveloped 1, % TOTAL 7, % Source: City of Sidney Comprehensive Plan Update, 2009 The following table is a comparison of the results of the 1997 and 2002 and 2007 inventories. Land Use Percent in 1997 Percent in 2002 Percent in 2007 Percentage Change Undeveloped / Agriculture 22.0% 21.0% 25.6% 3.6% Residential 37.0% 34.0% 43.1% 6.1% Commercial 5.0% 6.0% 6.5% 1.5% Industrial 9.0% 13.0% 12.6% 3.6% Public/Semi-Public 4.0% 4.0% 7.2% 3.6% Parks and Recreation 7.0% 7.0% 7.2% 3.2% Transportation/River 17.0% 15.0% * * Total 100.0% 100.0% Note: * Right of way included in Land Use Totals Source: City of Sidney Comprehensive Plan Update,

25 The City has a strong industrial base that is diversified and not totally dependent upon one sector of the economy. The ten largest employers operating within the City in 2012 were: Employer Average Number of Employees Products or Services 1. Emerson Climate Technologies* 1,595 Air compressor manufacturing 2. CenturyLink 1,512 Telephone & Internet provider 3. Wilson Memorial Hospital* 842 Acute care facility 4. NK Parts Industries* 574 Test, assemble and ship auto parts 5. Cargill, Inc.* 426 Soybean refining, meal &oil 6. Sidney Board of Education* 398 Public education 7. Freshway Foods* 360 Distributor of fresh vegetables, salads 8. American Trim, LLC** 335 Auto & appliance stamping 9. Wal-Mart SuperCenter ** 283 Retail store 10. Mama Rosa s Pizza, LLC 268 Frozen pizza manufacturer Source: West Ohio Development Council *Operating within the City for more than 20 years. **Operating within the City for more than 10 years but less than 20 years. ***Operating within the City for less than 10 years. The City has been successful in attracting new businesses, as well as encouraging existing businesses to grow and expand within the City s boundaries. These successes over the past five years include the following: The CM Cole Property containing nearly 253 acres was annexed into the City. This site serves as one of the few sites available in West-Central Ohio large enough for a major industrial or distribution location. In 2008 Ross Castings and Innovation LLC along with BENSAR Developments constructed a new 120,000 square foot industrial building. The new facility allowed the company to consolidate operations from Shelby County and Piqua. Approximately 250 jobs were retained. In 2012 the City granted an Enterprise Zone abatement to Reliable Castings, a long-time Sidney manufacturer specializing in aluminum, sand, and permanent mold castings, and tooling design and fabrication. Reliable Castings expanded its facility with a new building addition to provide additional space for new equipment to expand production. The entire project was expected to result in about $2 million invested in building, machinery & equipment and added 50 new jobs in the community. Honda of America Mfg., Inc. operates a major auto engine plant just 8 miles outside of the City. This operation benefits the City s industrial, commercial, residential and income tax bases. Honda is a major source of income tax revenue for the City because it employs a large number of Sidney residents. Honda withholds City income tax on its employees that reside in the City. Honda is ranked fifth in the dollars of City of Sidney income tax withheld. To further economic growth, the City has reserved vacant acreage considered to be choice industrial sites in an Industrial Zoning Classification. These sites generally have all 19

26 utilities within connection distance. The City is served by a major east/west Conrail line and a north/south Chessie System line, thus establishing the potential for continued industrial growth in the area. According to Labor Department statistics, Shelby County realizes a net gain of 5,587 workers on a daily basis. While Sidney and Shelby County import a significant portion of their workers, surrounding counties export workers. Miami County sustains a net loss of 5,421 workers per day, Darke County loses 5,432 workers, and Auglaize County loses a net 2,123 workers each day. Based on a recent survey which rates certain Quality of Life Costs in Southwest Ohio communities, Sidney ranked the lowest cost out of 34 area cities. "Quality of Life Costs" ranked in this survey included such expenses as household property & income taxes; refuse, storm water and license plate fees; and water and sewer costs. Tipp City conducted a similar study in 2009 and Sidney ranked the lowest cost city when compared to 27 area cities. To fund multi-million dollar capital and operating upgrades required by Environmental Protection Agency (EPA) mandates, significant utility rate increases were implemented in Fortunately, Sidney s utility rates were so low compared with area communities that even after these increases the City s rates compare reasonably with area communities. Based on the City of Oakwood s 2013 survey of 63 area communities, Sidney s combined water and sewer was 46th lowest, coming in at 8% above survey average, 19% more than neighboring City of Troy and 6% less than neighboring City of Piqua. Since many area communities are likely to experience the same regulatory burden and mandated cost outlays in upcoming years, it is anticipated that once those cities raise their rates to comply, Sidney s rates will once again rank lower compared to peer communities. To ensure the economic viability of the City, the following actions have been taken: A lodging tax was implemented effective January 1, This is a tax of 6% on all lodging transactions provided by the local hotels and motels. By state law, 25% of these proceeds must be set aside for the operation of a convention and visitors bureau (CVB). The City contracted with the Chamber of Commerce to administer the CVB, which promotes Sidney for tourism. The lodging tax generated $687,875 for the CVB and $2,063,712 for General Fund operations from its inception through December 31, All of the revenue is derived from non-residents. Effective January 1, 2002, Sidney City Council repealed many local traffic and criminal ordinances that duplicated state law. Because violators are now charged under state law instead of local ordinance, the City of Sidney is no longer responsible for the costs of incarceration. A change took effect in 2002 that decreased costs for prisoner boarding from approximately $800,000 in 2001 to $463,000 in 2002 down to only $136,000 in 2003 and $114,000 in In 2012, these costs totaled $24,075. Effective July 1, 2003, the City implemented a fee for emergency medical services (EMS) provided by the Sidney Department of Fire and Emergency Services. This revenue source generated approximately $525,000, $476,000 and $519,010 for General Fund operations for 2010, 2011 and 2012, respectively. The revenue is collected almost 20

27 exclusively from insurance and Medicare. City residents with insurance or Medicare are not billed for their co-payments, nor are uninsured residents billed. In early 2012, the City revised its Municipal Job Creation Income Tax Credit program. This program allows negotiation of income tax credits in order for the City to encourage economic development in the community. Another economic development tool utilized by Sidney where appropriate is the creation of Community Reinvestment Act (CRA) areas and related CRA tax abatements. The most recent example of that is a ten-year 90% CRA property tax abatement awarded in 2013 to a property owner who will be investing approximately $4.8 million to construct a hotel. In April 2006, the City entered into its first tax increment financing (TIF) arrangement to open up approximately 43 acres on the west end of the City for commercial development. The TIF arrangement is an economic development tool which, in this case, will finance the elimination of the sewer pump station at the corner of Vandemark Road and Fair Road and the construction of a 24" extension of the Southwest Sanitary Sewer Interceptor. In 2007, the City arranged its second TIF arrangement to finance the construction of water and sewer infrastructure that not only allowed an area manufacturer to relocate its operations within the City, but also opened up an additional 290 acres for possible future industrial development. In 2009, another TIF arrangement was approved to finance future construction of public infrastructure to serve the Echo Business Center subdivision located on Vandemark Road. Where appropriate, the City will continue to utilize this economic development tool to help grow our community. It has been the practice of this community to devote more than 20% to capital. This was done by transferring additional funds each year from the General Fund to the Capital Improvement Fund. As a result, effectively 25% or more of income tax dollars were devoted to capital improvements from 1996 through 2000 and again in 2007 and For 2007 and 2008, additional transfer of $600,000 and $850,000, respectively, were made from the General Fund to the Capital Improvement Fund. As a result of the last national recession, this practice was discontinued from 2009 through The practice will not be resumed until economic recovery is achieved. With the implementation of the stormwater utility fee in 2007, the Stormwater Fund is no longer 100% subsidized by income tax dollars. This saved the General Fund subsidy to this fund over $200,000 yearly. Stormwater capital projects continue to be supported by income tax collections. The City staff actively pursues grant funding and other awards. The benefit of receiving such awards is that it eases the burden of local residents paying for such capital projects, in the form of increased fees and utility charges. In 2009, the City was awarded funding as a result of the American Recovery and Reinvestment Act of 2009 (ARRA) for various water meter and water distribution system improvements. The total project award was roughly $7.3 million with approximately 40%, or $2.9 million, in the form of federal grant funding and the remaining $4.4 million funded via a 0% loan to be repaid over a 20-year period. 21

28 Shelby County initially received an allocation of $2,542,000 for Recovery Zone Economic Development Bonds (RZEDBs). The County then re-allocated 100% of their share to the City in order to allow the City to issue the Bonds to finance the acquisition of the water source property and improvements related thereto. These bonds were issued during September of Recently, the Federal Aviation Administration awarded the City nearly $2.3 million to relocate and extend a runway and make other improvements at the Sidney Municipal Airport. The result will increase air traffic flow to and from Sidney. Employment statistics for the City are not available; however, civilian labor force statistics for the County, as well as State and national figures, are as follows: Shelby County Year Labor Force Employed Unemployed ,500 22,900 3, ,500 22,500 3, ,800 22,500 2, ,200 22,600 1, * 24,600 24,000 1,500 Average Unemployment Rates Year County State Nation % 10.2% 9.3% % 10.0% 9.6% % 8.6% 8.9% % 7.2% 8.1% 2013* 6.0% 7.3% 7.7% *As of July Source: "Ohio Labor Market Information" "lmi.state.oh.us" The degree of building activity within the City is evidenced by the following data relating to the issuance of building permits by the City for the years indicated: Year Number of Building Permits Valuation $5,437, ,991, ,211, ,533, ,165,233 Source: City of Sidney - Building Inspection Department 22

29 Governmental Organization The City operates under a Council-Manager form of government pursuant to its Charter, but is also subject to the general laws of the State which are applicable to all municipalities in the State. In addition, the City may exercise all powers of local self-government under the Ohio Constitution to the extent not in conflict with applicable general laws of the State. The legislative authority of the City is vested in a seven member Council; three members are elected at large and four represent specific wards of the City. Council members are elected for over-lapping four year terms. Every two years three or four members are elected. The Council enacts legislation to provide for City services, adopt a budget, levy taxes, borrow money, make appropriations, fix salaries of City officials and employees, license and regulate businesses and trades, and perform such other duties and exercise such other rights, not inconsistent with the Charter, as may be granted to the legislative authority of any municipality in Ohio. The presiding officer of the Council is the Mayor who is a member of the Council elected to that position by the Council members. It is a part-time position like the other Council positions. The chief executive and administrative officer of the City is the City Manager, who is appointed for an indefinite term and serves at the pleasure of Council. The City Manager is the appointing and removal authority of all City employees, subject to civil service regulations, except City Law Director and City Clerk. The Manager directs the administration of all departments, offices and agencies of the City except as provided by Charter, and is the contracting officer for the City. The Finance Officer is the principal fiscal officer of the City and head of the Department of Finance and is appointed by the City Manager. The Finance Officer also serves as auditor and treasurer of the City pursuant to the Charter, exercising the powers of such offices under the laws of Ohio, and as such, is charged with the responsibility of receiving, disbursing, and maintaining custody of all funds of the City. The Finance Officer also advises the Manager and Council concerning financial conditions and assists the Manager in the preparation of the budget. The City Law Director is appointed by Council and serves at their pleasure. The City Law Director is the legal advisor, attorney and counsel for the City and performs duties as provided under the Charter and general laws of the State pertaining to municipal legal advisors. 23

30 The current elected officials and the principal appointed officials of the City are: Elected Officials Incumbent Term Expires Occupation/Employer Mayor Michael Barhorst 11/30/15 Lehman High School Vice Mayor Martha Milligan 11/30/13 Homemaker Members of Council Steven Wagner 11/30/13 Self-employed Janet Born 11/30/15 n/a Katie McMillan 11/30/13 Cargill Thomas R. Miller 11/30/13 Retired Rufus "Rick" Sims 11/30/15 CenturyLink Appointed Officials Incumbent Term Expires Occupation City Manager Mark S. Cundiff Pleasure of Council Full-time position Assistant City Manager Public Works Finance Officer Gary Clough Pleasure of City Manager Full-time position Ginger S. Adams, Pleasure of City Full-time position CPA Manager Clerk of Council/ Joyce Goubeaux Pleasure of Council Full-time position City Clerk City Law Director Jeffrey Amick Pleasure of Council Attorney-at-law Employee Relations The City has 184 full-time employees, 24 part-time employees (excluding elected officials) and 45 seasonal employees. Seventy employees are classified employees subject to the City s civil service system. The City has labor agreements with the following unions: Union Type of Personnel Covered Number of Employees Covered Date Contract Commenced Date Contract Expires AFSCME Public Works FOP Police Officers Police Supervisors Communications Technician IAFF Firefighters

31 FINANCIAL MATTERS Introduction The City s fiscal year corresponds with the calendar year. The responsibilities for the major financial functions of the City are divided among the City Manager, the Finance Officer and the Council. The Finance Officer is the head of the Department of Finance and is appointed by the City Manager. The Finance Officer also serves as auditor and treasurer of the City, exercising the powers of such offices under the laws of Ohio, and as such, is charged with the responsibility of receiving, disbursing, and maintaining custody of all funds of the City. The Finance Officer also advises the Manager and Council concerning financial conditions and assists the Manager in the preparation of the budget. Other important financial functions relating to the City include: (a) General financial recommendations and planning, and budget and annual appropriation preparation by the City Manager with the assistance of the Finance Officer; (b) Council; Express approval of all budgeting and appropriations of moneys by the City (c) Examinations of accounts by the Bureau of Inspection and Supervision of Public Offices (the "Bureau of Inspection") in the office of the Auditor of the State, which by law is required to inspect and supervise the accounts and reports of the offices of each taxing district or public institution of the State, including the City; (d) Assessment of real property by the County Auditor, who is elected at large within the County, subject to supervision by the Ohio Tax Commissioner (the "Tax Commissioner") who is appointed by the Governor and confirmed by the Ohio General Assembly; (e) Assessment of public utility property and tangible personal property by the Tax Commissioner; and (f) Billing and collection of property taxes and assessments by the County Treasurer, who is elected at large within Shelby County. Budgeting, Tax Levy and Appropriations Procedures Detailed provisions for City budgeting, tax levies and appropriations are made in the Revised Code. 25

32 The City follows procedures prescribed by State law in establishing its budgets as follows: (1) The County Budget Commission has suspended the requirement to prepare a tax budget. In lieu of the tax budget, about January 1 of each year, the City will submit to the Budget Commission a report of estimated revenue and actual unencumbered cash balances by fund. Thereafter, the County Budget Commission will issue an Official Certificate of Estimated Resources (OCER). (2) Unencumbered appropriations lapse at year-end. State law provides that no contract, agreement or other obligation involving the expenditure of money shall be entered into unless the Finance Officer first certifies that the money required for such contract, agreement, obligation or expenditure is in the treasury, or is anticipated to come into the treasury, before the maturity of such contract. (3) All funds of the City have annual budgets legally adopted by the City Council. The exception is that when the City receives federal or state grant funds to aid in paying the cost of any program, activity, or function of the City, the amount received is deemed appropriated for such purpose. In addition to the procedure discussed above, Ohio law provides for amendments to the amounts certified by the County Budget Commission, and for supplemental appropriation measures by the City Council to reflect changes in the amounts of estimated receipts and expenditures of the City as the fiscal year progresses. City Council has adopted a comprehensive set of financial policies covering subjects such as fund balance reserves, debt, user charge coverage, and budget-balancing strategies. City Council and staff review these policies each year. One such policy is that the City will maintain a long-term focus in its financial planning activities. Toward that end, City Council adopts an annual update to a five-year capital and operating financial plan. The product of the five-year financial plan is a set of strategies for maintaining financial stability and compliance with our financial policies. The City has used this planning process to make early identification of financial trends and timely implementation of financial strategies to counteract the impact of recent economic difficulties. With recent economic conditions, the City now conducts a mid-year fiscal review annually in order to make mid-year budget adjustments as necessary. The goal is to make timely expenditure reductions as necessary to maintain fiscal stability for now and the future. (See "Municipal Income Tax" section for further discussion of the City s response to declining income tax collection.) 26

33 Financial Reports and Examinations of Accounts The City maintains its accounts, appropriations and other fiscal records in accordance with the procedure established and prescribed by the Office of Local Government Services. The Office of Local Government Services is charged by Ohio law with responsibility for inspecting and supervising the accounts and reports of all taxing districts and public institutions in the State, including the City. The Office of Local Government Services conducts its examinations of the City on an annual basis and the most recent examination of the City, which was conducted by an independent public accounting firm under the auspices of the Auditor of State, was completed through December 31, No material adverse findings were made during the period audited. Except for the above-described audit by the Office of Local Government Services and the federal government s review of the City s records regarding certain federal program requirements, no examination or audit of the City s records is made. The City's financial systems support financial reporting both on the cash-encumbrance budgetary basis, as prescribed by the Auditor of State, and financial statements in accordance with Accounting Principles Generally Accepted in the United States of America (GAAP). Appendix A presents selected financial information of the City for the years 2010, 2011 and The information in such Appendix has been derived from the City s annual reports prepared by the Finance Officer on the basis of generally accepted government accounting principles, as described above. Such annual reports are required to be filed with the Office of Local Government Services within 180 days after the close of each fiscal year unless an extension is granted by the Office of Local Government Services; the City has filed such reports by the required time. Investment Policies of the City and County City It is the policy of the City to invest all public funds in a manner which will provide maximum safety and preservation of principal, while meeting all liquidity and operating demand. The City strives to achieve a market rate of return that is consistent with the limited risk tolerance of its portfolio. All investment activities must conform to all applicable local, state and federal statutes governing the investment of public funds, including Chapter 135 of the Ohio Revised Code. The City consolidates cash balances from all funds to maximize investment earnings. Investment income is allocated to various funds in accordance with generally accepted accounting principles and the City s Statement of Financial Policy. 27

34 The primary objectives of the City s investment activities, in order of priority, are safety, liquidity and yield: A. Safety Safety of principal is the foremost objective of the City s investment program. Investments are undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio. This is accomplished by: 1. Limiting investments to the securities authorized by its policy; 2. Pre-qualifying the financial institutions, broker/dealers and advisors with which the City does business; 3. Diversifying the investment portfolio so that potential losses on individual securities will not significantly affect the safety of the portfolio; 4. Structuring the investment portfolio so that securities mature to meet cash requirements for ongoing operations, thereby avoiding the need to sell securities on the open market prior to maturity; and 5. Committing to a staggered-maturity ("laddered") portfolio to provide an opportunity to regularly reinvest as well as to enhance liquidity. B. Liquidity C. Yield The investment portfolio remains sufficiently liquid to meet all operating requirements that may be reasonably anticipated. This is accomplished by: 1. Structuring the portfolio so that securities mature concurrent with cash needs to meet anticipated demands; 2. The portfolio consists largely of securities with active secondary or resale markets; and 3. A portion of the portfolio is placed in money market funds or local government pools (Star Ohio) which offer same-day liquidity for shortterm funds. The investment portfolio is designed with the object of attaining a market rate of return throughout budgetary and economic cycles, taking into account the investment risk constraints and liquidity needs. Return on investment is of secondary importance compared to the safety and liquidity objectives described above. Any financial institution, as defined by ORC , is eligible to serve as an approved depository and/or investment provider for the City. Eligible securities dealers and brokers must be members of the National Association of Securities Dealers (NASD), meet a minimum capital requirement of $10,000,0000, and have been in operation for at least five years. 28

35 The Finance Officer may invest on behalf of and in the name of the City in the following instruments at a price not exceeding their fair market value: A. U.S. Government Securities Direct obligations of the Department of Treasury of the United States of America (bills, bonds and notes) B. U.S. Government Agency Securities and U.S. Government Instrumentality Securities Bonds, notes, debentures or other obligations or securities issued by any U.S. government agency or instrumentality, including but not limited to, the Federal National Mortgage Association, Federal Home Loan Bank, Federal Farm Credit Bank, Federal Home Loan Mortgage Corporation, Government National Mortgage Association, or the Small Business Administration. All federal agency or instrumentality securities must be direct issuances of the federal agency or instrumentality. C. Interest-Bearing Certificates of Deposits Eligible certificates of deposit of any financial institution eligible to become a public depository in accordance with Section of the Ohio Revised Code. D. Commercial Paper Commercial paper which is rated at the time of purchase in the single highest classification by Moody s or Standard and Poor s. E. Bankers Acceptances Bankers acceptances which are eligible for purchase by the Federal Reserve System and which are issued by institutions which are ranked nationally as being in the top fifty in asset and deposit size within their industry. F. Repurchase Agreements Repurchase agreements of a bank or savings and loan association organized under the laws of the U.S. or State of Ohio for negotiable direct obligations of the United States of U.S. federal agencies. If any repurchase agreement obligations do not have the backing of the full faith and credit of the United States, any such investments shall be secured by the appropriate collateral. G. Money Market Funds Money market funds whose portfolios consist of the foregoing (A-F). 29

36 H. State Treasury Asset Reserve of Ohio The State Treasury Asset Reserve of Ohio ("Star Ohio") is a statewide investment pool managed by the Treasurer of the State of Ohio, similar in concept to a money market fund. It is available exclusively to political subdivisions of Ohio. I. NOW Accounts NOW Accounts, Super-NOW Accounts, or any similar account authorized by the Federal Reserve s Depository Institutions Deregulation Committee. Investment in derivatives is strictly forbidden. A derivative is defined in Chapter 135 of the Ohio Revised Code as a financial instrument, contract or obligation whose value is based upon or linked to another asset or index or both, separate from the financial instrument, contract or obligation itself. The City s investment policy sets forth the following parameters for diversification and maturity: A. Diversification The investment portfolio shall be diversified by: 1. Avoiding over-concentration in securities from a specific issuer or business sector (excluding securities issued by the United States government, or an agency or instrumentality thereof). The following maximum allocations have been established: a. Certificates of Deposit no more than 40% of the total market value of the portfolio; b. Commercial Paper and Bankers Acceptances no more than 25% of the total market value of the portfolio may be committed to these two classifications combined; c. Repurchase agreements, money market funds, STAR Ohio, and NOW accounts no more than 50% of the total market value of the portfolio may be committed to these classifications combined; 2. Investing in securities with varying maturities; and 3. Continuously investing a portion of the portfolio in readily available funds such as money market funds, overnight repurchase agreements for local government investment pools to ensure appropriate liquidity is maintained in order to meet ongoing obligations. 30

37 B. Maximum Maturities To the extent possible, the City attempts to match its investments with anticipated cash flow requirements. Unless matched to a specific cash flow requirement, the City will not directly invest in securities maturing more than five (5) years from the date of purchase. County The following deposit/investment objectives will be applied in the management of the funds of the County of Shelby in accordance to Sec ORC , with the priorities being safety, liquidity & yield in that order: A. Ensure the preservation of capital and the protection of investment principal while earning investment interest. B. Maintain sufficient liquidity to meet the fiscal operating requirements of the County of Shelby. C. To ensure that all entities conducting business with the investing authority strive to attain the best and safest return or yield on active and/or inactive monies for the County of Shelby and are knowledgeable of ORC 135 and this investment policy. D. To limit market risk and ensure reliable return on investments through diversity and management of securities held in the investment portfolio. E. The portfolio is not for speculation and will not be leveraged under any circumstances. U.S. Treasury and Agency securities purchased outright shall be purchased only through financial institutions located within the State of Ohio or through "primary securities dealers" as designated by the Federal Reserve Board. To maintain the portfolio s desired characteristics and/or enhance its yield or liquidity, swapping or trading (the simultaneous sale of one security and purchase of another) will be permitted provided that the loss, if any, on the sale is recovered in half the time remaining to the maturity date of the security sold. The Treasurer may invest in any instrument or security authorized in ORC as amended. Permissible Investments include: U.S. Treasury Bills, Notes, Bonds, or other obligation or Securities issued by the U.S. Treasury. Also included are Federal Government Agencies such as: Federal National Mortgage Association, Federal Home Loan Bank, Federal Farm Credit Bank, Federal Home Loan Mortgage Corporation, Government National Mortgage Association, and Student Loan Marketing Association. 31

38 Star Ohio is eligible as long as the fund maintains the highest letter rating provided by at least one nationally recognized standard rating service as outlined in Interim deposits (such as Certificates of Deposit) in the eligible institutions applying for interim moneys as provided in ORC are also permissible. Written repurchase agreements (repos) with any eligible public depository mentioned in ORC or with any dealer who is a member of the NASD. The market value of the securities subject held as collateral for an overnight repo (including sweep accounts) or term repo must exceed the principal by at least 2%, and the securities must be marked to market daily. Term repurchase agreements may not exceed 30 days. Any repurchase agreement with an eligible securities dealer must be transacted on a delivery versus payment basis. All securities purchased pursuant to a repurchase agreement must be delivered into the custody of the treasurer or an agent designated by the treasurer. Such institution or dealer must agree in writing to unconditionally repurchase any of the securities used for any repo transaction. State Legislation Relative to Municipal Fiscal Emergencies The Ohio General Assembly enacted Chapter 118 of the Revised Code (hereinafter in this section the "Act") providing methods for dealing with fiscal emergencies of municipal corporations in Ohio. The Act applies only to those municipal corporations which are determined to have circumstances that constitute the existence of a fiscal emergency condition and, therefore, a fiscal emergency pursuant to Sections and of the Revised Code, as set forth in the Act. Section of the Revised Code sets forth a series of circumstances that are defined "fiscal emergency conditions." If the Auditor of State determines that a fiscal emergency condition exists, then the municipality is subjected to state oversight through a seven-member Financial Planning and Supervision Commission (hereinafter in this section of this Official Statement the "Commission"). The Commission is assisted by certified public accountants designated as the Financial Supervisor to be engaged by the Commission. The Auditor of State may also be required to assist the Commission. A municipal corporation subject to the Act must develop and submit a detailed financial plan for the approval or rejection of the Commission. Among other matters, the financial plan must show the actions to be taken by such a municipal corporation to eliminate existing fiscal emergency conditions, avoid future fiscal emergency conditions, and to restore the municipality s ability to market long-term debt obligations under state laws generally applicable to Ohio municipalities. The Commission must approve the amount and purpose of any issue of debt obligations. The Commission or, when authorized by the Commission, the Financial Supervisor must require the municipal corporation to establish monthly levels of expenditures and encumbrances consistent with the financial plan and must monitor such monthly levels and require justification to substantiate any departure from an approved level. The Commission must disapprove the issuance of debt obligations if: the issuance would impede the purposes of the financial plan or be inconsistent with the financial plan or the Act; debt limits would be exceeded; the ability of 32

39 overlapping subdivisions to issue unvoted faith and credit debt obligations would be impaired; or their issuance would be likely to lead to the reallocation of minimum levies of other political subdivisions. Expenditures may not be made contrary to a proposed financial plan after it is submitted to the Commission and before it is approved or disapproved; and if it is disapproved, no expenditures may be made which are inconsistent with the reasons given for disapproval. The Act provides, among other requirements and provisions, that: a municipality subject to the Act must develop an effective financial accounting and reporting system; budgets, appropriations and expenditures must be consistent with the purposes of the financial plan; and Local Government Fund Bonds may be issued, payable solely from the municipal corporation s share of the local government fund pursuant to restrictions imposed by the Act. The municipal corporation may include certain covenants in its debt obligations, including a state pledge not to repeal the Act. The Act also permits the municipality to issue current revenue notes and advanced tax payment notes pursuant to the authorization and subject to the restrictions of the Act. The Finance Officer has reviewed applicable portions of the Act and has reviewed records pertaining to the City s circumstances with respect to the Act. Based upon the Finance Officer s understanding of the Act, the Finance Officer is of the opinion that, with respect to the City, no circumstances or conditions exist that will cause a fiscal emergency condition to be determined to exist under the Act. Insurance The City is a member of the Miami Valley Risk Management Association ("MVRMA"). MVRMA is a consortium of municipalities located in southwest Ohio which, beginning in 1988, formed an association under Section of the Ohio Revised Code to act collectively in addressing its members risk management and risk financing needs. The City of Sidney joined MVRMA in MVRMA provides a combination of self-insurance and commercial reinsurance for its members property/casualty exposures; provides a companion workers compensation group rating program for qualified members; administers a claim/litigation management program; provides extensive safety/loss control consulting and training; and acts as a clearing house for risk related information and financial reporting services for its members. MVRMA now consists of twenty (20) municipalities. Pursuant to statutes enacted in November, 1985, the liability of political subdivisions, including cities in Ohio, has been significantly reduced. As a general rule, Ohio law provides that political subdivisions such as the City have immunity from liability in damages for injury, death, or loss to persons or property allegedly caused by an act or omission of such political subdivisions or their employees in connection with governmental and proprietary functions, as defined in the Ohio statutes. The statutes have no effect on any liability imposed by federal law or other federal cause of action. Pursuant to Ohio law, there are, however, five areas in which a city may be held liable for such loss. These include the negligent operation of a motor vehicle on public roads, highways or streets; negligent performance of proprietary functions; failure to keep public roads, highways, streets, sidewalks, bridges or public grounds open, in repair, and free from nuisance; negligence of employees within or upon the grounds of buildings used in the performance of governmental functions, excluding jails, juvenile detention workhouses and other 33

40 detention facilities; and liability specifically imposed by statute. Ohio law also imposes a two-year statute of limitations and puts limits on the damages which may be recovered from such political subdivisions. No punitive or exemplary damages can be recovered, and any insurance benefits are deducted from any award against a political subdivision. Although there is no limitation with respect to compensatory damages representing a person s economic loss, there is a $250,000 per person ceiling on the compensatory damage that represents a person s non-economic loss in cases other than wrongful death, in which case there is no maximum limitation. Ad Valorem Tax Base AD VALOREM TAX REVENUES During valuation year 2011 (for collection year 2012), the City, along with all other properties in the County, experienced the statutory sexennial reappraisal of real property, whereby the true value of real property was adjusted to reflect current market values. Ohio law requires that the County Auditor reassess real property at any time he finds that the true or taxable value thereof has changed, and in the third calendar year following the year in which a sexennial reappraisal is completed if ordered by the Tax Commissioner. The next sexennial reappraisal will occur during valuation year 2017 (for collection year 2018). The last triennial reappraisal was completed in valuation year Ohio law requires that taxable real property be assessed at not more than 35% of its true value except that taxable real property devoted exclusively to agricultural use is to be assessed at not more than 35% of its current agricultural use value as determined by the County Auditor in accordance with rules adopted by the Tax Commissioner. The assessment ratio has been fixed at 35% under existing rules of the Tax Commissioner. Any taxable real property which the owner thereof, under rules and regulations promulgated by the Chief of the State Division of Forestry, declares is devoted exclusively to forestry or timber growing is taxed at 50% of the local tax rate upon its true value. Given the standard assessment base determined under the provisions noted above, Ohio law provides for the following two-phase tax reduction of real property taxes, with respect to taxes other than taxes levied at a rate required to produce a specified amount of tax money (such as taxes for the payment of debt service charges), taxes levied inside the ten-mill limitation, or taxes authorized by a municipal charter: 1. The County Auditor must annually classify all real property into two classes: (a) residential/agricultural real property, and (b) commercial, industrial and mineral. The Tax Commissioner then determines the amount of carryover property in each such case for each taxing district, "carryover property" being defined as all real property on the current year s tax list except: (a) land and improvements that were not taxed by the district in both the preceding year and the current year, and (b) land and improvements that were not in the same class in both the preceding year and the current year. The Tax Commissioner must determine annually by what percent (the "Tax Reduction Factor"), if any, the sums that would otherwise be levied by each tax against the carryover property in each class would have to 34

41 be reduced to equal the amount that would be levied if the full rate thereof were imposed against the total taxable value of such property in the preceding tax year. Thereafter, the County Auditor must reduce the sum to be levied by such tax against each parcel of real property in the district by the Tax Reduction Factor certified by the Tax Commissioner for its class. However, if said reduction for either class of property could cause the total taxes charged and payable for current expenses of a school district, other than a joint vocational school district, prior to the statutory ten percent reduction discussed hereinafter, to be less than two percent of the taxable value of all real property in that class that is subject to taxation, the Tax Commissioner, upon notification thereof by the County Auditor, must adjust the Tax Reduction Factor so that the rate levied is not less than 2%. 2. The County Auditor must reduce the sums remaining thereafter to be levied against parcels of real property by ten percent; such reduction is reimbursed by the State to the County for distribution to the affected subdivisions. The taxes remaining after such reduction constitute the real and public utility property tax chargeable and payable on such property. In addition, Ohio law provides real property tax reductions for certain owner-occupied properties and to certain elderly or disabled property owners. Any such reductions are reimbursed by the State to the County for distribution to the affected subdivisions. While the aforesaid tax reductions may not affect the determination of the principal amount of notes that may be issued in anticipation of any tax levies or the amount of notes or bonds for any planned improvements, if funds for the payment of debt service charges on notes or bonds payable from taxes so reduced are insufficient for such purpose, then the reduction of taxes is adjusted to the extent necessary to provide sufficient funds from real property taxes for the payment of such debt charges. Failure of the County Auditor to supply to the Tax Commissioner the information required to determine the Tax Reduction Factor may result in substantial withholding of State revenues to the local government until such time as the County Auditor supplies such information. Current law further provides that tangible personal property (except public utility tangible personal property) is listed and assessed for ad valorem taxation at 25% of true value or average value. Public utility tangible personal property is generally assessed at 88% of true value (50% of true value for rural electric companies), except taxable production equipment of electric companies is assessed at 100% of true value. A corporation with taxable property in more than one county must also make, directly to the Tax Commissioner, a single combined return, listing all taxable property. Distribution of the funds so generated is normally made by the Tax Commissioner to the respective county auditors during the last quarter of each calendar year. 35

42 Recent changes to the assessment of tangible personal property enacted by the Ohio General Assembly include: (a) Beginning in 2006, taxation affecting three classes of tangible personal property used in business changed. Tangible personal property taxes on (i) manufacturing equipment, (ii) furniture and fixtures and (iii) inventory was phased-out over a four year period, ending in A portion of the newly implemented commercial activities tax (the "CAT tax") replaced the tax on business tangible personal property. As part of the CAT tax, gross rents and royalties from tangible personal property, as well as gross receipts from the sale of tangible personal property (among several other categories of receipts) are credited to the State s general revenue fund and to reimburse school districts and other local taxing units for the phase-out of taxes on business tangible personal property. The division of CAT tax revenue among these sources was eliminated in 2011, with the State s general fund receiving 100% of the CAT tax revenues. (b) Beginning with tax year 2006, the percentages used to determine the assessed value of electric company personal property used in the production of electricity were reduced to 24% of true value; taxable transmission and distribution property are assessed at 85% of true value (50% of true value for rural electric companies). The State is to reimburse local taxing districts for a portion of the revenues lost due to this reduction in tax valuation with proceeds of a new kilowatt-hour excise tax imposed on electricity consumers. For tax levies which are to produce a given dollar amount each year (such as debt service levies), the reimbursement is to be generally the amount that would have otherwise been collected from the utility property less an amount equal to one-fourth of a mill. For all other non-school district tax levies, the State reimbursement is to be, in general, a percentage of the amount that would have otherwise been collected from the utility property, which percentage is to decline from 100% in 2002 to 0% in 2017 and thereafter; all such school district tax levies are to be reimbursed at generally an amount sufficient to produce the same revenues that would have otherwise been collected but taking into account State education aid. Tax levies which were (i) not in effect for the 1998 tax year or (ii) approved by the voters after June 30, 1999 are not eligible for reimbursement by the State. Sections and of the Ohio Revised Code provide for tax credits to encourage investment in property used in manufacturing and other tangible personal property. The Ohio General Assembly has exercised from time to time its power to revise Ohio law applicable to the determination of assessed valuation of property subject to ad valorem taxation and the amount of tax proceeds produced by ad valorem taxation against such property. It is anticipated that the General Assembly will continue to make similar revisions. 36

43 Assessed Valuation of the City The assessed valuation of property within the City subject to levy of ad valorem taxes over the last five years is indicated in the following table: Collection Year Real Estate (Other Than Public Utility) ASSESSED VALUATION Tangible Personal (Including Public Utility) Public Utility Real Percentage Increase Over Previous Year Total 2009 $366,763,000 $ 9,548,400 $64,550 $376,375,950 (4.80%) ,648,750 8,981,800 74, ,705, % ,423,020 8,987,850 80, ,491,650 (0.06%) ,724,680 9,189,050 91, ,004,730 (6.19%) ,897,660 11,380,820 75, ,354,130 (0.18%) Source: Shelby County Auditor Largest Taxpayers The ten largest taxpayers and public utilities within the City for the 2013 collection year (2012 tax year) are: LARGEST TAXPAYERS Taxpayer Products or Services Tax Valuation (Real and Personal Property) 1. Bensar* Warehousing $13,980, NK Parts* Manufacturing 5,654, Cargill, Inc.* Grain Processing 3,662, West Towne Ltd (Walmart)* Retail 3,450, Stolle Corporation (Alcoa)* Manufacturing 2,876, Emerson Climate Manufacturing 2,450,000 Technologies* (formerly Copeland Refrigeration) 7. Color Composite Plastic Resins 2,333, Dayton Power & Light* Utility 2,215, Tolson Investments Retail 2,075, American Trim** Manufacturing 2,015,780 Source: Shelby County Auditor * Operating within the City for more than 20 years. ** Operating within the City for more than 10 but less than 20 years. *** Operating within the City for less than 10 years. 37

44 Collections and Delinquencies of Ad Valorem Taxes Real property taxes which remain unpaid for a period of one year after they are due are certified delinquent. Foreclosure proceedings to enforce collection are required to be instituted if delinquent taxes have not been paid within the year following the certification of delinquent taxes. In addition to foreclosure proceedings, delinquent real property taxes may be collected by the appointment of a receiver or by forfeiture of the property. Another law provides for notice by publication and mass foreclosure proceedings and sales after three years, delinquency and may facilitate the County Auditor s method of collecting delinquencies under the circumstances covered by the law. Taxes other than those in real estate are, in general, certified delinquent if they remain unpaid for one year. In addition to the remedies of foreclosure, receivership and forfeiture, such delinquent taxes may be collected through civil actions in the local courts. The delinquent taxes that are collected become part of the current collection and are distributed as current collections to the respective subdivisions. Special assessments levied by the various subdivisions are collected with the real property taxes; upon collection, delinquent special assessments are remitted to the levying subdivisions. The preceding is a general description of such procedures which may vary in practice among Ohio counties. The following tables set forth the amounts billed for ad valorem real estate and public utility taxes and tangible personal property taxes for the City on the tax duplicate for the collection years 2008 through 2012 (valuation years 2007 through 2011): REAL ESTATE AND PUBLIC UTILITY TAX COLLECTION PERCENTAGES Collection Year Taxes Billed Taxes Collected Percentage Collected Current Delinquent* Accumulated Delinquent 2008 $1,142,537 $1,148, % $26,733 $18, ,166,377 1,196, % 29,548 20, ,178,841 1,191, % 19,620 33, ,131,895 1,205, % 31,665 61, ,129, % - - * Delinquent collections include penalties and interest TANGIBLE PERSONAL PROPERTY TAX COLLECTION PERCENTAGES Collection Year Taxes Billed Taxes Collected Percentage Collected Current Delinquent* Accumulated Delinquent 2008 $109,645 $109, % $3,381 $39, ,550 10, % 8,178 29, ,742 26, % 2, N/A N/A - - * Delinquent collections include penalties and interest 38

45 Unvoted and Voted Taxes for Local Purposes To meet current expenses of subdivisions, the laws of Ohio authorize two types of ad valorem tax levies - unvoted and voted. Unvoted ad valorem tax levies are permitted by the State Constitution and the Revised Code so long as all such unvoted taxes do not exceed one percent (ten mills) of any property s assessed valuation. This limitation is known as the "ten-mill limitation" and such unvoted taxes are referred to as the "inside millage". See "CITY DEBT AND OTHER LONG-TERM OBLIGATIONS - Indirect Debt Limitation" herein for a discussion of the effect of the ten-mill limitation on borrowings by subdivisions. Ohio law permits voted ad valorem tax levies outside the one percent limitation when approved by a majority of the electors of a taxing district voting on the proposition. A voted tax levy for a municipality is generally initiated by a resolution of the municipality s council to place such a levy on the ballot at a general, primary or special election. The following chart lists the rates of taxation for the General Fund and Bond Retirement Fund of the City for the valuation years 2008 through 2012 (collection years 2009 through 2013): RATES OF TAXATION (Effective Rate) MILLS Year MILLS-GENERAL FUND BOND RETIREMENT FUND Inside Outside Total Inside Outside Total 2008 Valuation 2009 Collection Valuation 2010 Collection Valuation 2011 Collection Valuation 2012 Collection Valuation 2013 Collection Source: Shelby County Auditor 39

46 The ad valorem tax rates in mills for the City and its overlapping taxing subdivisions are as follows for the valuation years indicated: OVERLAPPING AD VALOREM TAX RATES (in mills) Tax Year City County Township School District MRDD & Tri-County Total Source: Shelby County Auditor Municipal Income Tax OTHER MAJOR REVENUE SOURCES Ohio law authorizes the levy of a municipal income tax at a rate not to exceed 1% by councilmanic action without a vote of the electors. Municipal income taxes at a rate in excess of 1% must be for a specified purpose and must first be approved by a vote of the electors. The City, pursuant to council action, levies a 1% municipal income tax and an additional 1/2% income tax which was first approved by the electors effective January 1, 1984, renewed in 1987, 1991 and 1996 for five years each time. In 1999, the electors approved the 1/2% income tax as a continuing levy, effective January 1, 2002, immediately upon the expiration of the current fiveyear levy. The 1-1/2% income tax is used 80% for general operations and 20% for capital improvements. The City s income tax is levied upon the net income of corporations and other business entities and on the wages, salaries and compensation of individuals. The income tax is collected and administered by the Finance Officer. The City s annual collections of the income tax for the five-year period 2008 through 2012 were: Year Amount Collected (Net) Tax Rate (%) Resident Credit (%) (a) Estimated (b) Delinquency (%) 2008 $12,522, % 1.00% 1% ,918, % 1.00% 1% ,091, % 1.00% 1% ,863, % 1.00% 1% ,379, % 1.00% 1% (a) City residents are granted, as credit against their tax liability to the City, the amount paid to other Ohio municipal corporations, to the extent of the tax assessed (1-1/2%) by the City of Sidney. (b) Approximately 74% of all collections are withholding payments and therefore a relatively small amount is estimated as delinquent. 40

47 Emerson Climate Technologies (formerly Copeland Corporation) is the largest employer in Sidney. Withholding taxes received from them amounted to approximately 14% of the total 2012 withholding taxes received by the City. In 1995, withholding taxes from Emerson made up 17% of the total withholding taxes collected. This is an example of the continued diversification of industry in Sidney. The recession resulted in the loss of nearly 20% of the City s tax base from 2007 to Since 2009, the City s income tax collections have steadily returned to near 2007-levels. In 2010, the City s income tax collections were $1.2 million, or 10.7%, over 2009 with the growth due in large part to growth in taxes collected based on the taxable net profits of the City s businesses. In 2011, growth of 6.4% over 2010 was realized. For the year ended December 31, 2012, growth of 4.0% over 2011 was recorded. Beginning in 2011 unemployment rates began to drop and withholding receipts increased ending the year 3.7%, or approximately $344,000, over For 2012, taxes withheld from employees rose 4.1% or approximately $388,000 over 2011 levels. Taxes withheld by employers on behalf of their employees generally makes up about 75-80% of our total income tax collections. While income tax collections have returned to near 2007 levels, the City of Sidney must continue to manage the loss of state-generated shared revenues. In order to balance the State of Ohio s budget shortfall for the biennial period from July 2011 to June 2013, the State s budget included a reduction of Local Government Fund distributions to Ohio municipalities of 25% for the period from July 2011 to June 2012, followed by another 25% reduction effective July The State also eliminated the estate tax effective Finally, the State s budget bill effectively eliminated in 2012 the State s reimbursement of tangible personal property tax to Sidney, which was to have continued through All told, the recently approved State of Ohio budget will reduce the City of Sidney s operating revenue by approximately $440,000 in 2012 and $825,000 in Given the uncertainty of future income tax levels and reduction in local government distributions, the City is continuing the following budget strategies initially implemented during the last recession: o Maintaining the reduced workforce achieved primarily through attrition and targeted reductions. Staffing in 2012 remained at 206 full-time equivalents (FTE s), a 15% reduction from 2008 staffing levels of 243 FTE s. Since 2008, there has been a reduction of 27 seasonal/part-time positions (approximately 8 FTEs) and 28 full-time positions. The reductions have been accomplished through attrition of full-time positions, reductions in seasonal labor, layoffs of some part-time personnel, and an abolishment of four positions following the reorganization of the Engineering Division. The expectation is that most vacated positions will remain vacant in the foreseeable future. In 2013, three positions have been added to the Sewer Fund to operate the new inflow and infiltration reduction program as required by the Ohio EPA. These positions are being funded entirely by the addition of the new flat monthly EPA fee charged to every Sidney sewer customer. 41

48 o Limited wage increases. As wages and benefits are by far the City s largest operating cost, it is anticipated that, given current and expected revenue levels, employee wage increases will be minimal for the next five years. o Reduced training budgets & curtailed overtime. o Deferral of maintenance, improvements and non-essential purchases. Many vehicle and large purchases continue to be deferred until finances improve. This is an effective short-term strategy, but the benefit decreases over time as aging equipment becomes expensive to maintain. At all times during this process, the financial planning has been based upon a five-year future time period and maintenance of cash reserves in accordance with the City s cash reserves policy over the five-year planning period. Local Government Fund The Ohio local government fund was created by statute and is comprised of designated State revenues which are distributed among counties, cities, villages and townships. Receipts by the City from the Ohio local government fund in recent years were as follows: RECEIPTS FROM LOCAL GOVERNMENT FUND Year Amount 2008 $968, , , , ,384 As discussed above, the most recent State of Ohio biennial budget begun on July 1, 2011 includes a 50% reduction of Local Government Fund distributions by the year CITY DEBT AND OTHER LONG-TERM OBLIGATIONS The following describes the security for the City s general obligation debt such as the Bonds, applicable statutory and constitutional debt limitations, and outstanding and projected bond and note indebtedness and certain other long term financial obligations of the City. As further discussed and described below, the Bonds are unvoted general obligations of the City and are subject to both the direct and indirect debt limitations. The City is not and has never been in default in the payment of debt service on any of its general obligation bonds or notes, or in a condition of default under any revenue bonds which are obligations of the City or any related financing documents. 42

49 Security For and Sources of Payment of General Obligation Debt Unvoted Debt. The basic security for unvoted City general obligation debt is the City s ability to levy, and its levy pursuant to constitutional and statutory requirements, ad valorem taxes on all real and tangible personal property subject to ad valorem taxation by the City, within the ten-mill limitation imposed by Ohio law (see "Indirect Debt Limitation" below). This tax must be in sufficient amount to pay (to the extent not paid from other sources) as it becomes due the debt service on unvoted City general obligation bonds, both outstanding and in anticipation of which notes are outstanding. The law provides that the levy necessary for debt service has priority over any levy for current expenses within the ten-mill limitation; however, that priority may be subject to the provisions of federal bankruptcy law and other laws affecting creditors rights. See the discussion in this Section, under "Indirect Debt Limitation", of the ten-mill limitation, and the priority of claim thereon for debt service on unvoted general obligation debt of the City and all overlapping taxing subdivisions. Voted Debt. The basic security for voted City general obligation debt is the authorization by the electors for the City to levy, ad valorem taxes without limitation as to rate or amount on all real and tangible personal property subject to ad valorem taxation by the City. This tax is outside of the tax limitations referred to above under "Unvoted Debt", and is calculated to be in sufficient amount to pay (to the extent not paid from other sources) as it becomes due the debt service on voted City general obligation bonds, both outstanding and in anticipation of which notes are outstanding, subject to the provisions of federal bankruptcy law and other laws affecting creditors rights. The City has no voted general obligation debt outstanding. Notes in Anticipation of Bonds. While general obligation bond anticipation notes run, Ohio law requires the City to levy ad valorem property taxes in an amount not less than that which would have been levied if bonds had been issued without the prior issuance of the notes, provided that such levy need not actually be collected if payment of debt service on such notes is, in fact, to be provided from other sources, such as utility revenues, income tax receipts and proceeds from the sale of renewal notes or bonds. In general, such notes, including renewals of such notes, may be issued and outstanding from time to time up to a maximum period of twenty years from the date of issuance of the original notes, except that the maximum maturity for notes issued in anticipation of general obligation bonds payable from special assessments is five years. Any period in excess of five years must be deducted from the permitted maximum maturity of the bonds anticipated, and portions of the principal amount of notes outstanding for more than five years must be retired in amounts at least equal to, and payable not later than, those principal maturities that would have been required if the bonds had been issued at the expiration of the initial five year period. Bond anticipation notes may be retired at maturity from the proceeds of the sale of renewal notes or of the bonds anticipated by the notes, or available funds of the City, or a combination of these sources. The ability of the City to retire its outstanding bond anticipation notes from the proceeds of the sale of either bonds or renewal notes will be dependent upon the marketability of those obligations under market conditions prevailing at the time of such sale. 43

50 Direct Debt Limitations The Revised Code provides that the aggregate principal amount of voted and unvoted "net indebtedness" of a municipal corporation, such as the City, may not exceed 10-1/2% of the total value of all property in such municipal corporation as listed and assessed for taxation, and that the aggregate principal amount of unvoted "net indebtedness" of such municipal corporation may not exceed 5-1/2% of such value. In calculating "net indebtedness", the Revised Code provides that certain obligations of a municipality are not to be considered, including self-supporting obligations, special assessment debt and mortgage revenue bonds. Other infrequently-issued types of obligations are also excluded from the calculation of net indebtedness; the City has no such obligations outstanding. Bonds issued in anticipation of bonds excluded from the calculation of net indebtedness are also excluded from such calculation. In calculating net indebtedness, amounts in a municipality s bond retirement fund allocable to the principal amount of bonds otherwise included in the amount of net indebtedness are deducted from the total net indebtedness of such municipality. APPENDIX B of this Preliminary Official Statement is a Financial Statement for the City, certified by the Finance Officer, calculating the amount of the outstanding obligations of the City (including the Bonds) which are subject to the total direct debt limit (10-1/2% limit) and the unvoted direct debt limit (5-1/2% limit). The total principal amount of voted and unvoted general obligation debt that could be issued by the City, subject to the 10-1/2% total direct debt limitation is approximately $37.31 million and the City s net debt subject to such 10-1/2% limitation presently outstanding including the Bonds) as indicated by APPENDIX B is $6.625 million, leaving a balance of approximately $ million borrowing capacity issuable within the 10-1/2% limitation on combined voted and unvoted non-exempt debt. The City has no voted debt outstanding which is subject to such limitation. The total unvoted City general obligation debt that could be issued subject to the 5-1/2% unvoted direct debt limitation is approximately $19.54 million. The net City debt subject to such 5-1/2% limitation presently outstanding, as indicated by APPENDIX B is $6.625 million, leaving a balance of approximately $ million of additional unvoted non-exempt debt that could be issued by the City under such 5-1/2% limitation. However, as described below, the City s ability to incur debt in these amounts is restricted by the indirect debt limitation. In the case of unvoted general obligation debt, both the direct and the indirect debt limitations must be met. Indirect Debt Limitation Ohio municipalities may issue voted general obligation debt within the direct debt limitation described above; ad valorem taxes, without limitation as to rate or amount, to pay debt service on such voted bonds are authorized by the electors at the same time the bonds are authorized. Certain other subdivisions may also issue voted debt. 44

51 The Ohio Constitution and the Revised Code, by limiting the amount of ad valorem taxes which may be levied without a vote to one percent (or ten mills) of the valuation of the property to be taxed, while requiring that an ad valorem tax sufficient to pay debt service be levied whenever general obligation indebtedness is incurred, operate to indirectly limit the amount of unvoted bonds that may be issued. This indirect limitation on the amount of unvoted general obligation indebtedness is commonly known as the "ten-mill limitation". Typically, the various taxing subdivisions levy the full ten mills of unvoted taxes permitted by Ohio law (which is sometimes referred to as the "inside millage"), regardless of whether such millage is needed for debt service, and this inside millage is allocated by the County Budget Commission among the overlapping subdivisions pursuant to a formula contained in the Revised Code. The current allocation of the inside millage is 3.20 mills for the City, 2.70 mills for the County 0.10 mills for the Township and 4.00 mills for the School District. This allocation has remained constant for at least the last five years. The inside millage allocated to a taxing subdivision is required by Ohio law to be used first for the payment of debt service on unvoted general obligation debt of the subdivision, unless provision has been made for its payment from other sources, and the balance may be used for general fund purposes of the subdivision. To the extent that this inside millage is required for debt service of a taxing subdivision (which may exceed the formula allocation for that subdivision), the amount that would otherwise be available to that subdivision for general fund purposes is reduced. Since the inside millage that may actually be required to pay debt service on unvoted general obligation debt of a subdivision may exceed the formula allocation of inside millage to such subdivision, such excess reduces the amount of inside millage available to overlapping subdivisions. In the case of municipalities, such as the City, however, Ohio law requires that any lawfully available receipts from a municipal income tax or from voted property tax levies be allocated to pay debt service before the formula allocations of the inside millage to overlapping subdivisions can be invaded. In determining whether additional unvoted bonds may be issued within this indirect debt limitation, the outstanding unvoted general obligation indebtedness of the issuing municipality and all overlapping political subdivisions must be considered, including general obligation indebtedness which is expected to be paid from sources other than ad valorem taxes. Since the indirect debt limit results from tax limitations and the requirement to levy taxes to pay bonds, it has application only to bonds that are payable from taxes either initially or in the event other non-tax revenues pledged to pay such bonds prove to be insufficient. This indirect debt limitation does not have any application where the bonds being issued do not pledge the credit of the municipality or when bonds are payable solely out of the revenues of non-tax sources, such as utility income or property, as in the case of mortgage revenue bonds. Unlike the direct debt limitations, the test for applying the indirect debt limitation may not be expressed in terms of a percentage of tax valuation. The amount of bonds that may be issued under this indirect debt limitation is determined by whether the amount required for debt service on the proposed bonds in a given year is greater than the number of dollars that will be produced by a tax levy equal to the inside millage available. The inside millage available is determined by subtracting from ten mills the number of mills required for unvoted outstanding general obligation bonds of the issuing municipality and all other political subdivisions that 45

52 overlap such municipality. In arriving at the available inside millage, the inside millage that is actually being used by the overlapping subdivision at the time to pay debt service on unvoted general obligation debt is not considered; instead, it is the inside millage that could be required to pay all such debt and the inside millage that could be required to retire the proposed issue, if no funds were available from other sources, that is considered. A constitutional amendment designed to remove this indirect debt limitation was defeated by the voters of Ohio at an election held on June 8, In connection with the issuance of the Bonds, the County Auditor has completed a Ten-Mill Certificate, calculating the tax rate, in mills, required to pay debt service for unvoted general obligation debt of the City and its overlapping political subdivisions for the fiscal year in which the debt service will be the highest. In the case of notes issued in anticipation of unvoted general obligation bonds, the highest annual debt service estimated for the anticipated bonds is used to calculate the millage required. Shelby County is the only overlapping political subdivision that has outstanding unvoted general obligation debt. Such debt theoretically requires mills, with the City s outstanding unvoted general obligation debt requiring mills. It is currently estimated that the Bonds will require approximately mills to be levied, if they are not paid from other sources, thus leaving approximately free for allocation to overlapping political subdivisions for additional unvoted debt. OUTSTANDING GENERAL OBLIGATION DEBT After the issuance of the Bonds, the City will have the following general obligation bond issues outstanding: Purpose Date of Issue BONDS Original Principal Amount Interest Rate Principal Amount Outstanding Final Maturity Police Station Imp. 07/13/04 $7,600, % $345,000** 12/01/13 Various Purpose 06/22/10 1,650, % 1,540,000 12/01/40 Water Source 09/21/10 2,542, %* 2,492,000 12/01/40 Various Purpose 11/01/11 7,105, % 6,445,000 12/01/22 Various Purpose 09/17/13 9,920, % 9,920,000 12/01/33 *Rate before Federal subsidy **$4,775,000 principal amount current refunded with proceeds of the Bonds 46

53 OTHER OBLIGATIONS Loans Payable During 2009, the City was awarded funding as a result of the American Recovery and Reinvestment Act of 2009 (ARRA) for various water meter and water distribution system improvements. The total project funding award was $7,327,066 with approximately 40%, or $2,930,864, in the form of federal grant funding and the remainder ($4,396,202) funded via a 0% loan to be repaid to the Ohio Environmental Protection Agency (OEPA) over a 20-year period. As of December 31, 2012, $4,396,202 had been drawn on the loan. Semi-annual payments of $109,905 began on July 1, The amount outstanding as of December 31, 2012 was $3,721,272. The loan is backed solely by the revenue generated by water charges and does not pledge the general resources or the general credit of the City. The projects that were paid for with this funding source include: Purchase and installation of a new automated water meter read system. The new system uses radio technology to automatically read the meters and transmit data to the City s Utility Billing Office. The project reduced the necessary meter reading staff by two positions permitting those staff persons to fill other vacancies within the City. Eventually, this system will permit customers to monitor their water usage via the internet and pay their bill online. Monthly billing will be possible with this system. Various water distribution system improvements including: o Looping of water mains to improve fire flows o Installation of a Riverside Drive transmission main o Purchase and installation of new high service pumps and controls at the Water Treatment Plant o Purchase of a new screening device at raw water pump station On behalf of the owners of the Northbrook Mobile Home Park (NMHP), the City received ARRA funding for their new water distribution system improvements. Grant funding is $252,000. The remaining $315,540 is in the form of a zero-percent, twenty year loan. The loan is backed solely by the revenue generated by water charges and does not pledge the general resources or the general credit of the City. In accordance with an agreement between the City and the owners of NMHP, the owners are responsible for the debt payments, which began in As collateral, the City is holding a first mortgage for $200,000 and a personal guaranty for $100,000. Pension Plans Substantially all of the City s employees are covered under one of two statewide multiple-employer public pension and retirement systems, namely the Ohio Police and Fire Pension Fund (P&FPF) or the Ohio Public Employees Retirement System (PERS). For the year ended December 31, 2012 the payroll paid to employees covered by PERS was $6,845,699 and P&FPF was $5,034,214, while total payroll paid was $12,016,

54 On September 12, 2012, the General Assembly passed SB 343 and SB 340 modifying PERS and PFDPF respectively. The Governor signed both bills on September 26, Each bill becomes effective January 7, The above mentioned bills changed multiple aspects of PERS and PFDPF in ways expected to enhance their ability to amortize their unfunded actuarial accrued liabilities within thirty years. Some of the changes made include: (1) minimum age and service requirements with respect to certain employees and (2) a change in disability benefits with respect to certain employees. The below mentioned funds are created and operated pursuant to Ohio law. The General Assembly could determine to amend the format of the funds and could revise rates or methods of contributions to be made by the City into pension funds and revise benefits or benefit levels. Ohio Public Employees Retirement System Ohio Public Employees Retirement System (PERS) administers three separate pension plans as described below: 1) The Traditional Pension Plan a cost-sharing, multiple-employer defined benefit pension plan. All employees that participate in PERS and retire at or after age 60 with 5 years of credited service are entitled to a retirement benefit, payable monthly for life, equal to 2.2% of their final average salary for each year of credited service. Members are entitled to 2.5% of final average salary for each year of service over 30 years. Final average salary is the employee s average salary over the highest three years earnings. Benefits fully vest upon reaching 5 years of service. Employees may retire at any age, with 30 years of service, at age 60 with a minimum of 5 years of credited service and at age 55 with a minimum of 25 years of service. Those individuals who retire with less than 30 years of service or less than age 65 receive reduced retirement benefits. Benefits are established by State statute. 2) The Member-Directed Plan a defined contribution plan in which the member invests both member and employer contributions (employer contributions vest over five years at 20% per year). Under the Member-Directed, Plan members accumulate retirement assets equal to the value of member and (vested) employer contributions plus any investment earnings thereon. Members choosing this plan may retire at age 55 regardless of number of years of service. 3) The Combined Plan a cost-sharing, multiple-employer defined benefit pension plan. Under the Combined Plan, employer contributions are invested by the retirement system to provide a formula retirement benefit similar in nature to the Traditional Plan benefit described above. Member contributions, the investment of which is selfdirected by the members, accumulate retirement assets in a manner similar to the Member-Directed Plan. 48

55 The Ohio Revised Code provides PERS statutory authority for employee and employer contributions. Rates are established by the retirement board upon recommendation by an actuary. For PERS, contribution rates for all three plans are presently 10.0% of gross salary for employees and 14.00% of covered payroll for employers. Each year, the Ohio PERS Retirement Board determines the portion of the employer contribution rate that will be set aside for funding of post-employment health care benefits. The portion of employer contribution allocated to the health care for members in the Traditional Plan was 4.00% during calendar year The portion of employer contributions allocated to the health care for members in the Combined Plan was 6.05% during calendar year Members of the Member-Directed Plan do not qualify for ancillary benefits, including post-employment health care coverage. Contributions made to fund the PERS pension obligation for the year ended December 31, 2012 were $705,314 from employees and $958,398 from the City; the employees contributions represented 10.0% of covered payroll. The "pension benefit obligation" is the actuarial present value of credited benefits, adjusted for the effects of projected salary increases and any step rate benefits, estimated to be payable in the future as a result of the employee s service to date. The measure is intended to help users assess the PERS funding status on a going concern basis, assess progress made in accumulating sufficient assets to pay benefits when due, and make comparisons among PERS and employers. PERS Comprehensive Annual Financial Reports contain historical trend information for one year only. PERS does not hold any securities in the form of notes, bonds or other instruments of any of the entities contributing to the system. Ohio Police and Fire Pension Fund - All employees that participate in P&FDPF are eligible for retirement benefits equal to 2.5% of annual earnings for each of the first 25 years of service and 2.1% for each year of service thereafter. According to the proposed changes in S.B. 343, the minimum age and years of service requirement for a participant to receive an unreduced benefit varies based on three groups formed according to the date the participant will retire (for more details on the groups, please visit the OPERS website at Early retirement with reduced benefits is available according to a three-tier group based on the participant s date of retirement. The Ohio Revised Code provides P&FDPF statutory authority for employee and employer contributions. Rates are established by the retirement board upon recommendation by an actuary. During the most recent actuarial study there was no change in actuarial assumptions, benefit provisions, actuarial funding method, or other significant factors. During 2012, the employees contributed 10% (for policemen) and 10% (for firemen) of their annual salary to this plan and the City contributed 19.5% of gross salary for policemen and 24% for firemen of which 6.75% of the combined contribution in each case was applied toward the health care program for participating individuals. The annual payroll for covered police officers and firefighters is $5,171,004. The City s 2012 pension expenditure was $1,125,198 and the employees contributions were $517,101. The Fund does not determine separately the City s and the employees contribution requirement to fund the pension benefit obligations. 49

56 The combined statutorily determined contribution requirement expressed as a percentage of total current year actuarially determined contribution requirements for all participating employers was 19.5% for police officers and 24% for firefighters as of December 31, The total employer and employee statutory contribution rates for P&FPF of 29.50% for police and 34% for firefighters are less than the actuarially determined total contribution rates of 31.39% and 29.63% for police and firefighters, respectively. P&FDPF s Comprehensive Annual Financial Reports contain historical trend information for one year only. P&FDPF does not hold any securities in the form of notes, bonds or other instruments of any of the entities contributing to the system. The City has passed legislation allowing for federal and state tax reductions on an employee s share of P&FPF contributions, applicable to union and non-union employees. Deferred Compensation Plan - The City offers its employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457. The plan, available to all City employees, permits them to defer a portion of their salary until future years. The deferred compensation is not available to employees until termination, retirement, death, or unforeseeable emergency. All amounts of compensation deferred under the plan, all property and rights purchased with those amounts, and all income attributable to those amounts, property, or rights are (until paid or made available to the employee or other beneficiary) solely the property and rights of the City (without being restricted to the provision of benefits under the plan), subject only to the claims of the City s general creditors. Participants rights under the plan are equal to those of general creditors of the City in an amount equal to the fair market value of the deferred account for each participant. The plans agreements stated that the City has no liability for losses under the plans with the exception of fraud or wrongful taking. Accrued Fringe Benefits Vacation eligibility becomes effective when the employee has been hired as a full-time, salaried employee. Each full-time salaried employee of the City shall be entitled after one year of completed service, to the equivalent of two calendar week s vacation with full pay; for seven to thirteen completed years of service, shall be entitled to three calendar weeks vacation with full pay; fourteen to twenty-four completed years of service, shall be entitled to four calendar weeks vacation with full pay; and for twenty-five or more completed years of service, shall be entitled to five calendar weeks vacation with full pay. Each employee entitled to vacation time under the provisions of this section shall be entitled to carry over unused vacation from one calendar year to the next calendar year except that the maximum accumulation for any employee shall be twice the amount of vacation available to the employee in that year. When a regular employee s service is terminated by the employer either through resignation or retirement, the City Manager shall compute the employee s accrued vacation to the date of his daily rate of pay times the number of accrued vacation hours. Current vacation 50

57 hours accrued but unpaid as of December 31, 2012 are $32,557. hours equal $796,141. At current pay rates, those The City accumulates resources in a Separation Payment Fund in order to pay the eligible vacation balances to employees at retirement. Transfers to this Fund are made from the operating fund from which the employee is paid. During the annual budget process, an estimated separation payout is calculated for those employees with either twenty-five (25) years or more of public employment or who are over the age of 60. The estimated amounts are compared to the actual amounts already funded. Any differences represent the amounts to be transferred by the particular operating fund (e.g. General, Street, Water, Sewer) to the Separation Payment Fund. Sick Leave Each full-time salaried employee, whose salary or wage is paid in whole or in part by the City, shall be entitled for each completed month of service, to sick leave of one and one-half work days with pay. Permanent employees shall be entitled to unlimited accumulation of sick leave on the basis of their basic hourly work week. All such sick leave and the accumulation thereof shall be in a unit of hours. All employees who retire after 10 years of continuous service and generally are eligible for retirement benefits under the retirement program, in which they were enrolled, shall be entitled to payment for 30% of accumulated sick leave. As of December 31, 2012, the total sick leave accumulated to 173,277 hours. At current pay rates, 30% of those hours is equal to $1,310,440. The City accumulates resources in a Separation Payment Fund in order to pay the eligible sick leave balances to employees at retirement. Transfers to this Fund are made from the operating fund from which the employee is paid. During the annual budget process, an estimated separation payout is calculated for those employees with either twenty-five (25) years or more of public employment or who are over the age of 60. The estimated amounts are compared to the actual amounts already funded. Any differences represent the amounts to be transferred by the particular operating fund (e.g. General, Street, Water, Sewer) to the Separation Payment Fund. FUTURE FINANCINGS The City does not plan to issue additional debt at this time. LITIGATION To the knowledge of the appropriate City officials, no litigation or administrative action or proceeding is pending or threatened restraining or enjoining, or seeking to restrain or enjoin, the issuance and delivery of the Bonds, or the levy and collection of taxes or other revenues to pay the debt service on the Bonds, or contesting or questioning the proceedings and authority under which the Bonds have been authorized and are to be issued, sold, executed or delivered, or the validity of the Bonds. The City will deliver to the successful bidder for the Bonds a certificate to that effect at the time of original delivery of the Bonds to such bidder. 51

58 The City is a party to various legal proceedings seeking damages or injunctive or other relief and generally incidental to its operations. These proceedings are unrelated to the Bonds or the security for the Bonds. The ultimate disposition of these proceedings is not now determinable, but will not have a material adverse effect on the Bonds or the security for the Bonds. LEGAL MATTERS Legal matters incident to the issuance of the Bonds and with regard to the tax-exempt status of the interest thereon (see "TAX STATUS" below) are subject to the approving legal opinion of Peck, Shaffer & Williams LLP, whose legal services as Bond Counsel have been retained by the City. A signed copy of that opinion, dated and premised on facts and law existing as of the date of original delivery of the Bonds, will be delivered to the successful bidder for the Bonds at the time of original delivery of the Bonds. A draft of that opinion is attached hereto as APPENDIX C. Bond Counsel has drafted those portions of this Official Statement under the captions "Introduction" (except the information under the captions "The Issuer", "Sources and Uses of Funds" and "Book Entry Method"), "Security and Source of Payment for the Bonds" and "Tax Status". Bond Counsel has assisted the City with its preparation of certain other portions of this Official Statement. Bond Counsel, however, has not been engaged to confirm or verify, and expresses and will express no opinion as to, the accuracy, completeness or fairness of, any statements in this Official Statement, including the appendices, or in any other reports, financial information, offering or disclosure documents or other information pertaining to the City or the Bonds that may be prepared or made available by the City or others to the successful bidder for the Bonds, purchasers or holders of the Bonds, or others. In addition to rendering the approving legal opinion, Bond Counsel will assist in the preparation of and advise the City concerning documents for the bond transcript. Peck, Shaffer & Williams LLP, also serves and has served in a bond counsel capacity for one or more of the political subdivisions that territorially overlap the City. TRANSCRIPT AND CLOSING DOCUMENTS A complete transcript of proceedings, including a certificate relating to litigation (described above under "LITIGATION") and other appropriate closing documents, will be delivered by the City when the Bonds are delivered to the successful bidder. The City at that time will also provide to the successful bidder for the Bonds a certificate of the City addressed to the successful bidder relating to the accuracy and completeness of this Official Statement. TAX STATUS In the opinion of Bond Counsel, based upon an analysis of existing laws, regulations, rulings and court decisions, interest on the Bonds is excludible from gross income for Federal income tax purposes. Bond Counsel is also of the opinion that interest on the Bonds is not a specific item of tax preference under Section 57 of the Internal Revenue Code of 1986 (the "Code") for purposes of the Federal individual or corporate alternative minimum taxes. 52

59 Furthermore, Bond Counsel is of the opinion that interest on the Bonds is exempt from taxation, including personal income taxation, by the State of Ohio and its political subdivisions, and is excludible from the net income base used in calculating the Ohio corporate franchise tax. The City has designated the Bonds as "qualified tax-exempt obligations" under Section 265 of the Code. A copy of the opinion of Bond Counsel for the Bonds is set forth in APPENDIX C attached hereto. The Code imposes various restrictions, conditions, and requirements relating to the exclusion from gross income for Federal income tax purposes of interest on obligations such as the Bonds. The City has covenanted to comply with certain restrictions designed to ensure that interest on the Bonds will not be includable in gross income for Federal income tax purposes. Failure to comply with these covenants could result in interest on the Bonds being includable in income for Federal income tax purposes and such inclusion could be required retroactively to the date of issuance of the Bonds. The opinion of Bond Counsel assumes compliance with these covenants. However, Bond Counsel has not undertaken to determine (or to inform any person) whether any actions taken (or not taken) or events occurring (or not occurring) after the date of issuance of the Bonds may adversely affect the tax status of the interest on the Bonds. Certain requirements and procedures contained or referred to in the Authorizing Legislation and other relevant documents may be changed and certain actions (including, without limitation, defeasance of the Bonds) may be taken or omitted under the circumstances and subject to the terms and conditions set forth in such documents. Bond Counsel expresses no opinion as to any Bonds or the interest thereon if any such change occurs or action is taken or omitted upon the advice or approval of bond counsel other than Peck, Shaffer & Williams LLP. Although Bond Counsel has rendered an opinion that interest on the Bonds is excludible from gross income for Federal and Ohio income tax purposes, the ownership or disposition of, or the accrual or receipt of interest on, the Bonds may otherwise affect a Bondholder s Federal, state or local tax liabilities. The nature and extent of these other tax consequences may depend upon the particular tax status of the Bondholder or the Bondholder s other items of income or deduction. Bond Counsel expresses no opinions regarding any tax consequences other than what is set forth in its opinion and each Bondholder or potential Bondholder is urged to consult with tax counsel with respect to the effects of purchasing, holding or disposing the Bonds on the tax liabilities of the individual or entity. For example, corporations are required to include all tax-exempt interest in determining "adjusted current earnings" under Section 56(c) of the Code, which may increase the amount of any alternative minimum tax owed. Similarly, tax-exempt interest may also increase the amount of any environmental tax owed under Section 59 of the Code, which is based on the alternative minimum taxable income of any corporation subject to that tax. Receipt of tax-exempt interest, ownership or disposition of the Bonds may result in other collateral Federal, state or local tax consequence for certain taxpayers. Such effects include, without limitation, increasing the federal tax liability of certain foreign corporations subject to the branch profits tax imposed by Section 884 of the Code, increasing the federal tax liability of certain insurance companies, 53

60 under Section 832 of the Code, increasing the federal tax liability and affecting the status of certain S Corporations subject to Sections 1362 and 1375 of the Code, increasing the federal tax liability of certain individual recipients of Social Security or Railroad Retirement benefits, under Section 86 of the Code and, for tax years beginning in 1996, limiting the use of the Earned Income Credit under Section 32 of the Code that might otherwise be available. Ownership of any Bonds may also result in the limitation of interest and certain other deductions for financial institutions and certain other taxpayers, pursuant to Section 265 of the Code. Finally, residence of the holder of Bonds in a state other than Ohio or being subject to tax in a state other than Ohio, may result in income or other tax liabilities being imposed by such states or their political subdivisions based on the interest or other income from the Bonds. Premium "Acquisition Premium" is the excess of the cost of a bond over the stated redemption price of such bond at maturity or, for bonds that have one or more earlier call dates, the amount payable at the next earliest call date. The Bonds that mature on December 1, 2013 through December 1, 2019, both inclusive (the "Premium Bonds"), are being initially offered and sold to the public at an Acquisition Premium. For federal income tax purposes, the amount of Acquisition Premium on each bond the interest on which is excludable from gross income for federal income tax purposes ("tax-exempt bonds") must be amortized and will reduce the bondholder s adjusted basis in that bond. However, no amount of amortized Acquisition Premium on tax-exempt bonds may be deducted in determining bondholder s taxable income for federal income tax purposes. The amount of any Acquisition Premium paid on the Premium Bonds, or on any of the Bonds, that must be amortized during any period will be based on the "constant yield" method, using the original bondholder s basis in such bonds and compounding semiannually. This amount is amortized ratably over that semiannual period on a daily basis. Holders of any Bonds, including any Premium Bonds, purchased at an Acquisition Premium should consult their own tax advisors as to the actual effect of such Acquisition Premium with respect to their own tax situation and as to the treatment of Acquisition Premium for state tax purposes. RATING Standard & Poor's, a division of The McGraw Hill Companies, Inc. ("S&P") has assigned a rating of "AA" to the Bonds. This rating reflects only the views of the rating agency. Any explanation of the significance of the rating may only be obtained from the rating agency. The City presently expects to furnish the rating agency with information and material that they may requested. However, the City assumes no obligation to furnish requested information and materials, and may issue debt for which a rating is not requested. Failure to furnish requested information and materials, or the issuance of debt for which a rating is not requested, may result in the suspension or withdrawal of the rating assigned by the rating agencies. FINANCIAL ADVISOR The City has retained Sudsina & Associates, LLC (the "Financial Advisor") in connection with the preparation of the City s issuance of the Bonds. The Financial Advisor is 54

61 not obligated to undertake, and has not undertaken to make, an independent verification or to assume responsibility for the accuracy, completeness, or fairness of the information contained in the Official Statement. The Financial Advisor is an independent advisory firm and is not engaged in the business of underwriting trading or distributing municipal securities or other public securities. CONCLUDING STATEMENT This Official Statement has been duly authorized and prepared by, and executed and delivered for and on behalf of, the City by its Finance Officer. CITY OF SIDNEY, OHIO By: /s/ Ginger S. Adams, CPA, CPFO Finance Officer Dated: August 29,

62 APPENDICES

63 APPENDIX A SELECTED FINANCIAL INFORMATION FOR THE YEARS 2010, 2011 AND 2012 A-1

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97 APPENDIX B FINANCIAL STATEMENT FINANCIAL STATEMENT FOR MUNICIPALITY Section , O.R.C. STATE OF OHIO ) ) SS: COUNTY OF SHELBY ) I, Ginger S. Adams, Finance Officer of the Municipality of Sidney State of Ohio, do hereby certify that the following statements concerning the finances of said Municipality are true and correct as they appear from the records in my office: 1. ASSESSED VALUATION of the taxable property of the municipality, as shown on the tax duplicate for the year 2012: $ 355,354, Total of all bonds and notes or other evidence of indebtedness issued and outstanding, INCLUDING THE PRESENT ISSUE of $9,920,000: $ 20,742, Exempt Debt: (A) Securities issued under Chapter 122., 140., 165., 725., or 761., or Section , O.R.C.: $ (B) Securities issued to pay costs of permanent improvements to the extent they are issued in anticipation of the receipt of, and are payable as to principal from, federal or state grants for that principal or for the costs of those permanent improvements. $ (C) Securities issued to evidence loans from the state capital improvements fund pursuant to Chapter 164, O.R.C. $ (D) Other securities, including self-supporting securities, excepted by law from the calculation of net indebtedness for from the application of Chapter 133, O.R.C. $ (E) Any other securities outstanding on October 30, 1989, and then excepted from the calculation of net indebtedness or from the application of Chapter 133, O.R.C., and securities issued at any time to fund or refund those securities $ (F) Self-supporting securities issued for any purposes including, without limitations, any of the following general purposes: $ (a) Water systems or facilities; $ 3,277,000 (b) Sanitary sewerage systems or facilities, or surface and storm water drainage and sewerage systems or facilities or a combination of those systems or facilities; $ 10,840,000 (c) Electric plants and facilities and steam or cogeneration facilities that generate or supply electricity, or steam and electrical or steam distribution systems and lines; $ (d) Airports or landing fields or facilities; $ (e) Railroads, rapid transit and other mass transit systems; $ (f) Off-street parking lots facilities or buildings or on-street parking facilities, or any combination of off-street and on-street parking facilities; $ (g) Facilities for the care or treatment of the sick or infirm, and for housing and persons providing such care or treatment and their families; $ (h) Solid waste or hazardous waste collection or disposal facilities, or resource recovery and solid or hazardous waste recycling facilities, or any combination of those facilities; $ (i) Urban redevelopment projects; $ (j) Recreational, sports, convention, auditorium, museum, trade show, and other public attraction facilities; $ (k) Facilities for natural resources exploration, development, recovery, use, and sale; $ (l) Correctional and detention facilities, including multicounty municipal jails, and related rehabilitation facilities. $ (G) Securities issued for the purpose of purchasing, constructing, improving, or extending water or sanitary or surface and storm water sewerage systems or facilities, or a combination of those systems or facilities, to the extent that an agreement entered into with another subdivision requires the other subdivision to pay to the municipal corporation amounts equivalent to debt charges on the securities $ (H) Securities issued under order of the director of health or director of environmental protection under Section , O.R.C. $ (I) Securities issued under Section 3, 10, or 12 of the Article XVIII, Ohio Construction $ (J) Securities that are not general obligations of the municipal corporation $ (K) Voted securities issued for the purposes of urban redevelopment to the extent that their principal amount does not exceed an amount equal to two percent of the tax valuation of the municipal corporation $ B-1

98 (L) Unvoted general obligation securities to the extent that the legislation authorizing them includes covenants to appropriate annually from lawfully available municipal income taxes or other municipal excises or taxes, including taxes referred to in section of the Revised Code but not including ad valorem property taxes, and to continue to levy and collect municipal income taxes or other applicable excise taxes in, amounts necessary to meet the debt charges on those securities. $ (M) Self-supporting securities issued prior to July 1, 1997, under Chapter 133, O.R.C. for the purpose of municipal university residence halls to the extent that revenues of the successor state university allocated to debt charges on those securities, from sources other than municipal excises and taxes, are sufficient to pay those debt charges $ (N) Securities issued for the purpose of acquiring or constructing roads, Highways, bridges or viaducts or acquiring or making other highway permanent improvements or for the purpose of procuring and maintaining computer systems for the office of the clerk of the Municipal Court to the extent that the legislation authorizing the issuance of the securities includes a covenant to appropriate from money distributed to the municipal corporation pursuant to Chapter 4501., 4503., 4504., or of the Revised Code a sufficient amount to cover debt charges on and financing costs relating to the securities as they become due $ (O) Securities issued for the purpose of providing some or all of the funds required to satisfy the municipal corporation s obligation under an agreement with the board of trustees of the police and fireman s disability and pension fund under section of the Revised Code $ (P) Securities issued for the acquisition, construction, equipping, and improving of a municipal educational and cultural facility under division (B)(2) of section of the Revised Code $ (Q) Securities issued for energy conservation measures under section O.R.C. $ (R) Securities that are obligations issued to pay costs of a sports facility under section O.R.C. $ (S) Special assessment bonds or notes issued in anticipation of the levy or collection of special assessments, either in original or refunded form $ (T) Securities issued in anticipation of the collection of current revenue for the fiscal year or other period not to exceed twelve consecutive months, or securities issued in anticipation of the collection of the proceeds from the specifically identified voter approved tax levy $ (U) General Obligation Securities issued purposes under Section , O.R.C. $ (V) Bonds issued to pay final judgment or court approved settlements under authorizing laws and securities issued under Section , O.R.C. $ (W) Other types of exempt debt: Specify: $ TOTAL $ 14,117, Total bonds and notes subject to 10 ½% limitation (2 minus 3) $ 6,625,000 (A) Amount in sinking fund or bond retirement fund applicable to the payment of principal: $ -0- (B) Net amount subject to 10 ½% limitation:: $ 6,625, Bonds and notes included in item 4 above but issued WITHOUT AUTHORITY OF AN ELECTION $ 6,625,000 (A) Amount in sinking fund or bond retirement fund applicable to the payment of principal: $ -0- (B) Net amount subject to 5 ½% limitation: $ 6,625, Bonds and notes included in items 4 and 5 above, issued during PRESENT CALENDAR YEAR WITHOUT AUTHORITY OF AN ELECTION $ 5,045,000 I FURTHER CERTIFY (a) that the income from the waterworks, sewer system, off-street parking and other revenue producing facilities for which bonds were issued as included in item 3(F) above is sufficient to cover all operating expenses of such facilities and interest charges on such bonds and to provide a sufficient amount for retirement of sinking fund to retire $ principal amount of such bonds as they become due, and (B) that revenues of the municipal university or of the municipal recreational facilities, from sources other than taxation, are sufficient to pay all operating expenses of the residence halls or recreational facilities, and the principal of and interest on $-0- principal amount of bonds included in item 3(M) above, as they become due. IN WITNESS WHEREOF, I have hereunto set my hand this 29 th day of August, Rev. 1/2001 /s/ Ginger S. Adams, CPA, CPFO Finance Officer Peck, Shaffer & Williams LLP BOND ATTORNEYS CINCINNATI AND COLUMBUS, OHIO B-2

99 APPENDIX C DRAFT OPINION OF BOND COUNSEL [the closing date] Raymond James & Associates, Inc. Memphis, Tennessee We have served as bond counsel to our client, the City of Sidney, Ohio (the "Issuer") and in that capacity we have examined the transcript of proceedings (the "Transcript") relating to the Issuer s $9,920,000 Various Purpose Limited Tax General Obligation Bonds, Series 2013 (the "Bonds"), dated September 17, In our capacity as bond counsel we have also examined other documents, matters and law as we have deemed necessary to render the opinion below. We have relied on the certified matters contained in the Transcript and certifications of public officials and others that have been furnished to us regarding questions of fact material to our opinions, without undertaking to verify the same by independent investigation. In addition, we have assumed the due and legal authorization, execution and delivery of the documents we have examined, and the valid, binding and enforceable nature of those documents upon the parties, other than the Issuer. Based on that examination and on the laws, regulations, rulings and judicial decisions in effect on the date hereof, and subject to the limitations stated below, we are of the opinion that: 1. The Bonds have been duly authorized and executed by the Issuer, and constitute valid general obligations of the Issuer in accordance with their terms. Unless paid from other sources, Bonds are payable from an ad valorem tax to be levied upon all the taxable property in the Issuer, within the limitations prescribed by law. 2. Interest on the Bonds is excludible from gross income for federal income tax purposes, pursuant to the Internal Revenue Code of 1986, as amended (the "Code"). Furthermore, interest on the Bonds will not be treated as a specific item of tax preference in computing the alternative minimum tax for individuals and corporations under the Code. In rendering the opinions in this paragraph, we have assumed continuing compliance with certain covenants designed to meet the requirements of Section 103 of the Code. Failure to comply with certain of such requirements may cause interest on the Bonds to be includible in gross income for federal income tax purposes retroactively to the date of issuance of the Bonds. 3. Interest on the Bonds is exempt from taxes levied by the State of Ohio and its subdivisions, including the Ohio personal income tax, the Ohio commercial activity tax, Ohio municipal, school district and joint economic development district income taxes and is also excludible from the net income base used in calculating the Ohio corporate franchise tax. The Issuer has designated the Bonds as "qualified tax-exempt obligations" under Section 265 of the Code. C-1

100 It is to be understood that the rights of the owners of the Bonds and the enforceability of the Bonds are subject to (i) bankruptcy, insolvency, arrangement, fraudulent conveyance or transfer, reorganization, moratorium and other laws in effect from time to time affecting creditors rights, (ii) the application of equitable principles, whether considered at law or in equity, (iii) the exercise of judicial discretion and (iv) limitations on legal remedies against public entities. We express no opinion herein regarding the accuracy, adequacy, or completeness of any offering material relating to the Bonds. Further, we express no opinion regarding tax consequences arising with respect to purchasing, holding or disposing of the Bonds other than as expressly set forth herein. The opinions rendered in this letter are given as of the date hereof, and no other opinion shall be implied or inferred as a result of anything contained in or omitted from this letter. We assume no obligation to revise or supplement the opinions in this letter to reflect any facts or circumstances that may hereafter come to our attention, or any changes in law that may occur hereafter. Our engagement as bond counsel with respect to the Bonds has concluded on this date. Very truly yours, PECK, SHAFFER & WILLIAMS LLP C-2

101 APPENDIX D OFFICIAL NOTICE OF SALE AND BID FORM D-1

102 OFFICIAL NOTICE OF SALE $9,920,000 CITY OF SIDNEY, OHIO VARIOUS PURPOSE LIMITED TAX GENERAL OBLIGATION BONDS, SERIES 2013 NOTICE IS HEREBY GIVEN that the City of Sidney, Ohio (the "City") will accept sealed, facsimile and electronic bids (as explained below) for the purchase of all, but not less than all, of the entire principal amount of Various Purpose Limited Tax General Obligation Bonds, Series 2013 (the "Bonds") until 11:00 o'clock a.m., at the then prevailing standard time in Ohio, on August 29, The City, the City's financial advisor (Sudsina & Associates, LLC) and the City's bond counsel (Peck, Shaffer & Williams LLP) shall not be responsible for any failure, misdirection or error in the means of transmission selected by the bidder. Sealed and Facsimile Bidding Procedures Sealed and facsimile bids must be submitted on the Bid Form furnished by the City (attached). Sealed bids should be sealed in an envelope and endorsed: "Bid for $9,920,000 Bonds City of Sidney) and mailed to both the City's Finance Officer, 201 West Poplar Street, Sidney, Ohio and Mr. Stephen Szanto, Sudsina & Associates, LLC, 8095 Wisteria Lane, Bainbridge Township, Ohio Facsimile bids should not be preceded by a cover sheet and should be sent to (937) You may confirm receipt of your facsimile bid by calling Ginger S. Adams at (937) and/or Stephen Szanto at (440) Electronic Bidding Procedures Electronic bids must be submitted via PARITY and in accordance with the provisions of this Official Notice of Sale. No other form of electronic bid or provider of electronic bidding services will be accepted. For purposes of the electronic bidding process, the time as maintained by PARITY shall constitute the official time with respect to all bids submitted electronically. To the extent any instructions or directions set forth in PARITY conflict with this Official Notice of Sale, the terms of this Official Notice of Sale shall control. Each bidder submitting an electronic bid agrees that: (i) it is solely responsible for all arrangements with PARITY; (ii) PARITY is not acting as the agent of the City; and (iii) the City is not responsible for ensuring or verifying bidder compliance with any of the procedures of PARITY. The City assumes no responsibility for, and each bidder expressly assumes the risks of and responsibility for, any incomplete, inaccurate or untimely bid submitted by the bidder through PARITY. Each bidder shall be solely responsible for making necessary arrangements to access the PARITY system for the purpose of submitting its bid in a timely manner and in compliance with the requirements of this Official Notice of Sale. The City shall not: (i) have any duty or obligation to provide or assure such access to PARITY to any bidder; or (ii) be responsible for the proper operation of, or have any liability for, any delays or interruptions of, or any damages caused by, PARITY. D-2

103 Prospective bidders who intend to submit their bid electronically must be contracted customers of i-deal LLC s BiDCOMP Competitive Bidding System. If you do not have a contract with BiDCOMP, call (212) By submitting a bid for the Bonds, a prospective bidder represents and warrants to the City that such bidder s bid for the purchase of the Bonds (if a bid is submitted in connection with the sale) is submitted for and on behalf of such prospective bidder by an officer or agent who is duly authorized to bind the prospective bidder to a legal, valid, binding and enforceable contract for the purchase of the Bonds. By contracting with BiDCOMP, a prospective bidder is not obligated to submit a bid in connection with the sale. Terms of Bonds The Bonds will be dated September 17, 2013, will be in the denominations of five thousand dollars ($5,000) or integral multiples thereof, will bear interest from their date until paid at the annual rate or rates specified by the successful bidder, payable semi-annually on each June 1 and December 1, commencing December 1, Interest will be computed on the basis of a 360-day year of twelve 30-day months and will be rounded pursuant to the rules of the Municipal Securities Rulemaking Board (the "MSRB"). The Bonds will mature on December 1, in the following years and principal amount: Year Amount Year Amount 2013 $300, $190, , , , , , , , , , , , , , , , , , , , , , , ,000 Term Bond Option Bidders for the Bonds have the option of specifying that the principal amount of the Bonds in any two or more consecutive years, as given in the above maturity schedule, may, in lieu of maturing in each of such years, be considered to comprise one maturity of a Term Bond scheduled to mature in the latest of such years and be subject to mandatory redemption by lot at par in each of the years and in the principal amounts as given in the above schedule. D-3

104 Optional Redemption Bonds maturing on or after December 1, 2019 are subject to redemption on or after December 1, 2018 at the sole option of the City, in whole or in part or any date, in such manner as the City determines, at a redemption price equal to 100% of the principal amount redeemed, plus accrued interest to the date fixed for redemption. Interest Rates Bidders must specify the rate or rates of interest the Bonds shall bear according to the following restrictions: (1) all Bonds having the same maturity must bear the same rate of interest throughout their life; (2) each interest rate specified must be a multiple of 1/20th of one percent of 1/8th of one percent; (3) the interest rate specified for any maturity shall not be lower than the interest rate specified for any previous maturity; and (4) the difference between the lowest interest rate assigned to any maturity and the highest interest rate assigned to any maturity shall not exceed 400 basis points. Basis of Award The Bonds will be awarded to the responsible bidder whose bid results in the lowest true interest cost (TIC) to the City. The TIC will be nominal interest rate which, when compounded semiannually and used to discount all debt service payment on the Bonds (computed at the interest rates specified in the bid and on the basis of a 360-day year of twelve 30-day months) to the Dated Date of the Bonds, results in an amount equal to the price bid for the Bonds. If two or more bids provide for the lowest TIC, the City shall determine by lot which shall be accepted, and such determination shall be final. Any bid for less than 100% of the principal amount of the Bonds, plus accrued interest to the Delivery Date, will be rejected. Premium may not exceed $80,000. Any bid containing premium in excess of $80,000 will be rejected. The City reserves the right to reject any and all bids and to waive formalities in any or all bids. The successful bidder will be notified no later than 3:00 p.m. (Ohio Time) on the day the bids are opened and the Bonds will be formally awarded or all bids will be rejected at that time. Good Faith Deposit Rating A good faith deposit is not required. The Bonds have been rated "AA" by Standard & Poor's. This rating reflects only the views of the rating agency and any explanation of the significance of the rating may only be obtained from the rating agency. The City did not apply for a rating from any other rating agency. D-4

105 Authorization and Security The Bonds are being issued under authority of the general laws of the State of Ohio, particularly Chapter 133 of the Ohio Revised Code (the "Uniform Public Securities Law"), the Charter of the City and ordinances adopted by City Council on August 12, The Bonds are unvoted general obligations of the City. Principal of and interest on the Bonds, unless paid from other sources, are payable from a limited ad valorem tax on all real and personal property in the City subject to ad valorem taxation by the City, within the ten-mill limitation imposed by Ohio law. Purpose The Bonds are being issued as a consolidated issue pursuant to Section of the Ohio Revised Code in order to achieve certain cost savings. The Bonds are being issued in the aggregate principal amount of $9,920,000 to (i) current refund outstanding Police Station Improvement Limited Tax General Obligation Bonds, Series 2004 (the "2004 Bonds"), originally issued to construct a new police station for the City and improvements related thereto, (ii) finance a portion of improvements to the City's wastewater treatment plant and collection system (the "Wastewater Project") and (iii) pay certain costs related to the issuance of the Bonds. The Depository Trust Company The Bonds will be issued in fully registered form, one for each maturity, under a book entry system (with no distribution of Bonds to the ultimate purchasers) registered in the name of The Depository Trust Company, New York, New York ("DTC"), or its nominee, and immobilized in DTC's custody. Any application and/or fees associated with DTC's services are the responsibility of the successful bidder. Principal and semiannual interest on the Bonds will be paid by The Huntington National Bank, Columbus, Ohio, as bond registrar and paying agent. So long as DTC or its nominee, CEDE & Co., is the bondholder, such payments will be made to CEDE & Co., which in turn will remit such payments to the DTC Direct Participants (as defined in the Official Statement relative to the Bonds) and DTC Indirect Participants (as defined in the Official Statement relative to the Bonds) for subsequent disbursements to the beneficial owners of the Bonds. CUSIP Numbers It is anticipated that CUSIP identification numbers will be printed on the Bonds, but neither the failure to print such number on any Bond nor any error with respect there to shall constitute caused for a failure or refusal by the purchaser thereof to accept delivery of an pay for the Bonds. The successful bidder is responsible for the fee associated with the assignment of CUSIP numbers. D-5

106 Official Statement The preliminary Official Statement, dated August 21, 2013, is in a form "deemed final" by the City for purposes of Rule 15c2-12(b)(1) of the Securities and Exchange Commission, except for certain information which has been omitted in accordance with such Rule and which will be provided in the final Official Statement. The successful bidder, within seven (7) business days of the day of award, will be furnished with a signed copy of the final Official Statement, as well as not more than five (5) conformed copies thereof, and may reproduce and circulate at its expense additional copies of the preliminary or final Official Statement for its use and in order to provide copies thereof to purchasers from such bidder. Legal Opinion The legal approving opinions of Peck, Shaffer & Williams LLP, bond attorneys, who have prepared and supervised the proceedings relative to the Bonds, will be furnished to the successful bidder at the expense of the City. As bond counsel, Peck, Shaffer & Williams LLP has performed certain functions to assist the City in preparation by the City of the Official Statement with respect to the Bonds. However, except for its review of certain portions of such Official Statement as set forth therein, said firm assumes no responsibility for and will express no opinion regarding the accuracy of completeness of any information relating to the City, its finances or the Bonds that may be made available by the City or others to the bidders or holders of the Bonds or others. Tax Matters The City will certify in the no-arbitrage certificate to be delivered at the closing that the Bonds will not constitute "private activity bonds" as defined in the Internal Revenue Code of 1986, as amended (the "Code"); and the City covenants in legislation authorizing the Bonds to do all things necessary to retain the deductibility from gross income for federal income tax purposes of interest on the Bonds. The City has designated the bonds as "qualified tax-exempt" obligations pursuant to Section 265(b)(3) of the Code. At or before delivery, the purchaser of the Bonds shall provide a certificate to the City in a form acceptable to bond counsel stating the information necessary to enable the City to determine the issue price of the Bonds as defined in Sections 1273 or 1274 of the Code. Delivery and Payment The City expects to deliver the Bonds to the purchaser against payment in Federal Reserve funds on or about September 17, 2013, together with the usual delivery papers, including a no-arbitrage certificate and the other certificates referred to in the Official Statement, and a complete, certified transcript of the proceedings, showing the Bonds to have been legally issued. If delivery is made within the State of Ohio, either to the purchaser or to a bank designated by the purchaser, such delivery will be made without delivery charge. The expense of such delivery shall not be considered in determining the highest bidder for the Bonds. Delivery of the Bonds to any other place shall be at the expense of the purchaser. D-6

107 Expenses Except for the fees of DTC and CUSIP, the City shall pay for all professional fees and expenses it incurs in connection with the issuance of the Bonds, including the fee of the Ohio Municipal Advisory Council. As previously stated, if the successful bidder wishes to insure the Bonds, all such fees and expenses relating thereto shall be the sole responsibility of the successful bidder. Continuing Disclosure In order to assist bidders in complying with Rule 15c2-12(b)(5), the City will undertake, pursuant to a Continuing Disclosure Certificate, to provide annual reports and notices of certain material events. Additional Information Copies of the Preliminary Official Statement, Notice of Sale, and Bid Form are available electronically from Thomson Prospectus. Hard copies of such information are also available upon request from the City's Financial Advisor, Stephen Szanto, Sudsina & Associates, LLC, 8095 Wisteria Lane, Bainbridge Township, Ohio (440) CITY OF SIDNEY, OHIO Ginger S. Adams, CPA, CPFO Finance Officer 201 West Poplar Street Sidney, Ohio Telephone: (937) Dated: August 21, 2013 D-7

108 OFFICIAL BID FORM FACSIMILE: (937) Confirmation and Receipt: Ginger S. Adams (937) Stephen Szanto (440) TO THE CITY OF SIDNEY, OHIO For all but not part of your legally issued and properly executed $9,920,000 City of Sidney, Ohio Various Purpose Limited Tax General Obligation Bonds, Series 2013, in all respects as more fully described in your Official Notice of Sale, dated August 21, 2013, which is made a part of this bid by reference, we bid as follows: We will pay the sum of $ in Federal Funds plus accrued interest from the date of the Bonds to the date of delivery to us. Note: Premium must not exceed $80,000. Said bonds shall be in book-entry only form in the denomination of $5,000 or any integral multiple thereof. Term bonds are identified by bracketing the maturities to be accumulated into each term bond. Said Bonds shall bear interest as follows: Year Principal Amount Interest Rate Year Principal Amount Interest Rate 2013 $300,000 % 2026 $190,000 % ,000 % ,000 % ,000 % ,000 % ,000 % ,000 % ,000 % ,000 % ,000 % ,000 % ,000 % ,000 % ,000 % ,000 % ,000 % ,000 % ,000 % ,000 % ,000 % ,000 % ,000 % ,000 % ,000 % D-8

109 This bid is made subject to delivery of the Bonds and the unqualified approving opinion of Peck, Shaffer & Williams LLP, Columbus, Ohio, Bond Counsel. The following is for information only and is not a part of this bid. Total interest from Dated Date to maturity: $ TIC % Respectfully submitted, By: Contact Name: Title: Phone: D-9

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