NEW ISSUE - BOOK-ENTRY-ONLY Standard & Poor s: A+ Moody s: A1 See MISCELLANEOUS Ratings herein.

Transcription

1 NEW ISSUE - BOOK-ENTRY-ONLY RATINGS: Standard & Poor s: A+ Moody s: A1 See MISCELLANEOUS Ratings herein. In the opinion of Bond Counsel, assuming continuing compliance by the Authority with certain covenants, interest on the Series 2015B Bonds is excludable from gross income for federal income tax purposes under existing statutes, regulations and judicial decisions. Interest on the Series 2015B Bonds is not an item of tax preference in computing the alternative minimum taxable income of individuals or corporations. Interest on the Series 2015B Bonds will, however, be included in the computation of certain taxes including alternative minimum tax for corporations. Interest on the 2015A Bonds is not exempt from gross income for federal tax purposes. See LEGAL MATTERS herein for a brief description of alternative minimum tax treatment and certain other federal income tax consequences to certain recipients of interest on the Series 2015 Bonds. The Series 2015 Bonds and the interest thereon will be exempt from all State, county, municipal and school district and other taxes or assessments imposed within the State of South Carolina, except estate, transfer and certain franchise taxes. $5,965,000 LUGOFF WATER DISTRICT OF KERSHAW COUNTY, SOUTH CAROLINA WATERWORKS SYSTEM REFUNDING REVENUE BONDS, SERIES 2015A (TAXABLE) $13,325,000 LUGOFF WATER DISTRICT OF KERSHAW COUNTY, SOUTH CAROLINA WATERWORKS SYSTEM REFUNDING REVENUE BONDS, SERIES 2015B Dated: Date of Issuance Due: July 1, as shown on the inside cover The Lugoff Water District of Kershaw County, South Carolina d/b/a the Lugoff-Elgin Water Authority (the Authority ) is issuing its $5,965,000 Waterworks System Refunding Revenue Bonds, Series 2015A (Taxable) (the Series 2015A Bonds ) and its $13,325,000 Waterworks System Refunding Revenue Bonds, Series 2015B (the Series 2015B Bonds, and together with the Series 2015A Bonds, the Series 2015 Bonds ), as fully registered bonds in denominations of $5,000 and integral multiples thereof initially in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ( DTC ), which will act as securities depository for the Series 2015 Bonds under a book-entry-only system, as described herein. So long as the Series 2015 Bonds are held in bookentry form, beneficial owners of Series 2015 Bonds will not receive physical delivery of bond certificates. Interest on the Series 2015 Bonds is payable initially on July 1, 2015, and semiannually thereafter on January 1 and July 1 of each year through maturity or prior redemption. U.S. Bank National Association is serving as Trustee, Registrar and Paying Agent with respect to the Series 2015 Bonds. THE SERIES 2015B BONDS ARE SUBJECT TO OPTIONAL REDEMPTION PRIOR TO MATURITY AS MORE FULLY DESCRIBED HEREIN. The Series 2015A Bonds are being issued by the Authority to (1) provide funds for the advance refunding of a portion of the Authority s Waterworks System Refunding Revenue Bonds, Series 2005, and (2) pay the costs of issuance of the Series 2015A Bonds. The Series 2015B Bonds are being issued by the Authority to (1) provide funds for the advance refunding of a portion of the Authority s Waterworks System Revenue Bonds, Series 2007, and (2) pay the costs of issuance of the Series 2015B Bonds. See INTRODUCTION Purpose ; also see PLAN OF FINANCE The Refunding herein. The Series 2015 Bonds are being issued under: the authority of the Constitution and laws of the State of South Carolina, including Chapter 17 of Title 6, and Chapter 21 of Title 11, Code of Laws of South Carolina, 1976, as amended; a bond resolution adopted by the Lugoff Water District Board of Kershaw County (the Board ), the governing body of the Authority, on November 4, 1999 (the Bond Resolution ); and a ninth supplemental resolution adopted by the Board on October 23, The Series 2015 Bonds are payable from and secured by a pledge of and lien on the Revenues (as defined in the Bond Resolution), after provision has been made for payment of the Expenses of Operating and Maintaining the System (as defined in the Bond Resolution), on a parity with any Outstanding Bonds (as defined in the Bond Resolution) and additional Bonds (as defined in the Bond Resolution) hereafter issued. See SECURITY FOR THE SERIES 2015 BONDS herein. The Series 2015 Bonds shall not constitute an indebtedness of the Authority within the meaning of any provision, limitation or restriction of the Constitution or the laws of the State of South Carolina, other than those provisions authorizing indebtedness payable solely from a revenue-producing project not involving revenues from any tax or license. The Authority is not obligated to pay any of the Series 2015 Bonds or the interest thereon except from the Revenues and neither the full faith and credit nor the taxing power of the Authority shall be deemed to be pledged to the payment of the Series 2015 Bonds. See SECURITY FOR THE SERIES 2015 BONDS herein. This cover page contains certain information for quick reference only. It is not a summary of the issue. Investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision. The Series 2015 Bonds are offered when, as, and if issued and accepted by the Underwriter, subject to the approval of legality by Haynsworth Sinkler Boyd, P.A., Charleston, South Carolina, Bond Counsel. Certain legal matters will be passed upon for the Underwriter by Pope Zeigler, LLC and for the Authority by Baker, Ravenel & Bender, L.L.P. It is expected that the Series 2015 Bonds will be available in definitive form for delivery through the facilities of DTC on or about March 26, 2015, in New York, New York, against payment therefor. Stephens Inc. Dated: March 5, 2015

2 MATURITY SCHEDULES SERIES 2015A BONDS MATURITIES, AMOUNTS, INTEREST RATES, YIELDS, AND CUSIPS Due Principal Interest CUSIP Due Principal Interest CUSIP July 1 Amount Rate Yield No. July 1 Amount Rate Yield No $110, % 0.921% DV $730, % 2.556% EA , DW , EB , DX , EC , DY , ED , DZ0 SERIES 2015B BONDS MATURITY, AMOUNT, INTEREST RATE, YIELD, AND CUSIPS Due Principal Interest CUSIP Due Principal Interest CUSIP July 1 Amount Rate Yield No. July 1 Amount Rate Yield No $145, % 0.400% EE $495, % 2.240% EK , EF , EL , EG , EM , EH , EN , EJ5 $3,250, % Term Bond* Maturing July 1, 2030, Priced at % to Yield 3.100%, CUSIP No EP1 $4,085, % Term Bond* Maturing July 1, 2035, Priced at % to Yield 3.320%, CUSIP No EQ9 $1,890, % Term Bond* Maturing July 1, 2037, Priced at % to Yield 3.850%, CUSIP No ER7 * Price to optional par call on or after July 1, 2026.

3 This Official Statement does not constitute an offering of any security other than the original offering of the Series 2015 Bonds identified on the front cover hereof. No dealer, broker, salesman or other person has been authorized to give any information or to make any representations, other than those contained in this Official Statement, and if given or made, such other information or representations must not be relied upon as having been authorized by the Lugoff Water District of Kershaw County d/b/a the Lugoff-Elgin Water Authority (the Authority ) or Stephens Inc. (the Underwriter ). 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 Series 2015 Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. The Underwriter has provided the following sentence for inclusion in this Official Statement. The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. Except for information with respect to U.S. Bank National Association (the Trustee ), the Trustee has not provided, or undertaken to determine the accuracy of, any of the information contained in this Official Statement and makes no representation or warranty, express or implied, as to (i) the accuracy or completeness of such information, (ii) the validity of the Series 2015 Bonds, or (iii) the tax-exempt status of the interest on the Series 2015B Bonds. Upon execution and delivery, the Series 2015 Bonds will not be registered under the Securities Act of 1933, as amended, or any state securities law, and will not be listed on any stock or other securities exchange. Neither the United States Securities and Exchange Commission nor any other federal, state or other governmental entity or agency will have passed upon the accuracy or adequacy of this Official Statement or approved the Series 2015 Bonds for sale, and any representation to the contrary is a criminal offense. CERTAIN INFORMATION CONTAINED IN THIS OFFICIAL STATEMENT MAY HAVE BEEN OBTAINED FROM SOURCES OTHER THAN RECORDS OF THE AUTHORITY AND, WHILE BELIEVED TO BE RELIABLE, IS NOT GUARANTEED AS TO COMPLETENESS OR ACCURACY. THE INFORMATION AND EXPRESSIONS OF OPINION IN THIS OFFICIAL STATEMENT ARE SUBJECT TO CHANGE, AND NEITHER THE DELIVERY OF THIS OFFICIAL STATEMENT NOR ANY SALE MADE UNDER SUCH DOCUMENT SHALL CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE AUTHORITY OR THE SYSTEM. Reference herein to laws, rules, regulations, agreements, reports and other documents do not purport to be comprehensive or definitive. All references to such documents are qualified in their entirety by reference to the particular document, the full text of which may contain qualifications of and exceptions to statements made therein. Where full texts have not been included as appendices to the Official Statement, they will be furnished upon request. CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS IN THIS OFFICIAL STATEMENT Certain statements included or incorporated by reference in this Official Statement constitute forward-looking statements. Such statements are generally identifiable by the terminology used such as plan, expect, estimate, budget, forecast, project or similar words. Such forward-looking statements are included in, among other portions of this Official Statement, FINANCIAL INFORMATION Forecasted Revenues and Debt Service Coverage, - Future Debt, and - Operating Budget herein.

4 THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES, AND OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE, OR ACHIEVEMENTS DESCRIBED TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE, OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THE AUTHORITY DOES NOT PLAN TO ISSUE ANY UPDATES OR REVISIONS TO THESE FORWARD-LOOKING STATEMENTS IF OR WHEN CHANGES TO ITS EXPECTATIONS, OR EVENTS, CONDITIONS, OR CIRCUMSTANCES ON WHICH SUCH STATEMENTS ARE BASED, OCCUR.

5 LUGOFF WATER DISTRICT OF KERSHAW COUNTY d/b/a LUGOFF-ELGIN WATER AUTHORITY 88 Boulware Road Lugoff, South Carolina BOARD MEMBERS / AUTHORITY PERSONNEL Rev. Dr. Chuck Everett, Chairman of the Board Danny Tyner, Vice Chairman of the Board Clyde Smith, Treasurer Gordon Chip McCaa, Board Member Dean Watts, Board Member Joel Schmalzel, Board Member Anna Stewart, Board Member Michael E. Hancock, General Manager COUNSEL TO THE AUTHORITY Baker, Ravenel & Bender, L.L.P. Columbia, South Carolina BOND COUNSEL Haynsworth Sinkler Boyd, P.A. Charleston, South Carolina CERTIFIED PUBLIC ACCOUNTANTS Sheheen, Hancock & Godwin, L.L.P. Camden, South Carolina UNDERWRITER S COUNSEL Pope Zeigler, LLC Columbia, South Carolina ENGINEERS Brown and Caldwell Columbia, South Carolina FORECASTING CONSULTANT Raftelis Financial Consultants, Inc. Orlando, Florida

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7 TABLE OF CONTENTS INTRODUCTION... 1 Authorization... 1 Purpose... 1 THE SERIES 2015 BONDS... 2 Form and Denomination... 2 Redemption... 2 Registration, Transfers and Exchanges... 3 Book-Entry-Only System... 3 PLAN OF FINANCE... 6 Sources and Uses of Funds... 6 The Refunding... 6 SECURITY FOR THE SERIES 2015 BONDS... 7 Special Obligations... 7 Rate Covenant... 8 Additional Bonds... 8 Junior Lien Bonds and Special Facilities Bonds... 8 Funds and Accounts Held Under Resolution... 8 THE SYSTEM Creation and Establishment Governance of the System Employees and Employee Relations Service Area Annexation; Boundary Changes; and Dissolution Water System Comparative Charges Outstanding Indebtedness with Respect to the System Outstanding General Obligation Indebtedness Fringe Benefits, Retirement and Health Insurance Other Post-Employment Benefits Liability Insurance Environmental/Regulatory Matters LEGAL MATTERS State Tax Exemption Federal Income Tax Series 2015B Bonds Original Issue Discount Original Issue Premium Federal Income Tax Series 2015A Bonds U.S. Holders Non-U.S. Holders Information Reporting and Backup Withholding. 31 Recently Enacted United States Legislation UNITED STATES BANKRUPTCY CODE MISCELLANEOUS Ratings Underwriting Independent Certified Public Accountants Litigation Relating to the Series 2015 Bonds Legal Matters Enforceability of Remedies Continuing Disclosure Verification of Mathematical Computations Concluding Statement APPENDIX A Audited Financial Statements for the Authority for the Fiscal Year Ended June 30, 2014 APPENDIX B Copy of Bond Resolution and Ninth Supplemental Resolution APPENDIX C Economic and Demographic Data for Kershaw County APPENDIX D Form of Opinions of Bond Counsel APPENDIX E Form of Disclosure Dissemination Agent Agreement FINANCIAL INFORMATION Five-Year Operating History Interim Financial Results Management s Discussion and Analysis Historical Revenues and Expenditures Forecasted Revenues and Debt Service Coverage Debt Service Requirements Future Debt Operating Budget... 26

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9 SUMMARY STATEMENT The following Summary Statement is qualified in its entirety by the more detailed information and financial statements contained elsewhere in this Official Statement and the Appendices hereto (collectively, this Official Statement ). Unless otherwise defined in this Summary Statement, all capitalized terms shall have those meanings ascribed to them in the Official Statement, the Resolutions (as herein defined) and in APPENDIX B Copy of Bond Resolution and Ninth Supplemental Resolution attached hereto. The offering of the Series 2015 Bonds to potential investors is made only by means of this entire Official Statement, and no person is authorized to detach this Summary Statement from the Official Statement or to otherwise use it without the entire Official Statement. The Issuer The Series 2015 Bonds The Lugoff Water District of Kershaw County, South Carolina d/b/a the Lugoff-Elgin Water Authority (the Authority ) is a special purpose district of the State of South Carolina (the State ) created pursuant to Act No. 784 of the Acts and Joint Resolutions of the General Assembly of the State of South Carolina for the year 1964, as amended. The Authority is located primarily within Kershaw County, South Carolina, and provides waterworks services (the System ) within portions of Kershaw, Fairfield and Richland Counties. The Authority is operated and managed by the Lugoff Water District Board of Kershaw County. See THE SYSTEM herein. The Series 2015 Bonds will be dated and bear interest from the date of issuance. It is expected that the Series 2015 Bonds will be available for delivery through the facilities of The Depository Trust Company in New York, New York, and shall be dated the date of delivery thereof. Interest Payments Interest on the Series 2015 Bonds is payable on each January 1 and July 1, commencing July 1, Maturities Redemption The Series 2015 Bonds mature as indicated on the inside front cover page. The Series 2015A Bonds are not subject to optional redemption prior to maturity. The Series 2015B Bonds are subject to redemption prior to maturity, at the option of the Authority on and after July 1, 2026, in whole or in part (and if in part, by lot within a maturity) at any time upon 30 days notice, at par, as further set forth in THE SERIES 2015 BONDS Redemption Optional Redemption herein. The Series 2015 Bonds maturing on July 1, 2030, July 1, 2035, and July 1, 2037 are subject to mandatory sinking fund redemption as set forth in THE SERIES 2015 BONDS Redemption Mandatory Sinking Fund Redemption herein. Source of Payment Purposes of the Issues The Series 2015 Bonds are secured by a pledge of and a lien upon the Revenues (as defined in the Bond Resolution), after provision has been made for payment of the Expenses of Operating and Maintaining the System (as defined in the Bond Resolution) on a parity in all respects with the pledge of and lien securing Outstanding Bonds (as defined in the Bond Resolution) and any additional Bonds. See SECURITY FOR THE SERIES 2015 BONDS herein. The Series 2015A Bonds are being issued by the Authority to (1) provide funds for the advance refunding of a portion of the Authority s Waterworks System Refunding Revenue Bonds, Series 2005, and (2) pay the costs of issuance of the Series 2015A Bonds. See PLAN OF FINANCE-The Refunding herein. The Series 2015B Bonds are being issued by the Authority to (1) provide funds for the advance refunding of a portion of the Authority s Waterworks System Revenue Bonds, Series 2007, and (2) pay the costs of issuance of the Series 2015B Bonds. See PLAN OF FINANCE-The Refunding herein. i

10 Tax Status of Interest on the Series 2015 Bonds Interest on the Series 2015A Bonds is not exempt from gross income for federal tax purposes. See LEGAL MATTERS herein for a brief description of alternative minimum tax treatment and certain other federal income tax consequences to certain recipients of interest on the Series 2015A Bonds and Series 2015B Bonds. In the opinion of Haynsworth Sinkler Boyd, P.A., Charleston, South Carolina, Bond Counsel, assuming continuing compliance by the Authority with certain covenants, interest on the Series 2015B Bonds is excludable from gross income for federal income tax purposes under existing statutes, regulations and judicial decisions. Interest on the Series 2015B Bonds is not an item of tax preference in computing the alternative minimum taxable income of individuals or corporations. Interest on the Series 2015B Bonds will, however, be included in the computation of certain taxes, including alternative minimum tax for corporations. The Series 2015 Bonds and the interest thereon will be exempt from all State, county, municipal and school district and other taxes or assessments imposed within the State of South Carolina, except estate, transfer and certain franchise taxes. Professionals Authority for the Issuance Continuing Disclosure General Haynsworth Sinkler Boyd, P.A., Charleston, South Carolina, is serving as Bond Counsel. Certain legal matters will be passed upon for the Authority by its counsel, Baker, Ravenel & Bender, L.L.P., Columbia, South Carolina, and for the Underwriter by its counsel, Pope Zeigler, LLC, Columbia, South Carolina. The audited financial statements of the Authority for the fiscal year ended June 30, 2014, included as APPENDIX A to this Official Statement, have been audited by Sheheen, Hancock & Godwin, LLP, Camden, South Carolina. The Underwriter is Stephens Inc. U.S. Bank National Association, Columbia, South Carolina, is serving as Trustee, Paying Agent and Registrar. The Series 2015 Bonds are issued pursuant to the provisions of the Constitution and laws of the State, including particularly Title 6, Chapter 17, and Title 11, Chapter 21, of the Code of Laws of South Carolina, 1976, as amended, the Master Bond Resolution dated November 4, 1999 and the Ninth Supplemental Resolution dated October 23, See INTRODUCTION Authorization herein. The Authority has undertaken, pursuant to an agreement to comply with Rule 15c2-12 promulgated under the Securities Exchange Act of 1934, as amended, for the benefit of holders and beneficial owners of the Series 2015 Bonds, to provide annually certain financial information and operating data including audited financial statements relating to the Authority by not later than seven months after the end of the Authority s fiscal year, commencing February 1, 2016 (the Annual Information ), and to provide notices of the occurrence of certain enumerated events. The Annual Information will be filed by or on behalf of the Authority with the Municipal Securities Rulemaking Board s (the MSRB ) Electronic Municipal Market Access ( EMMA ) system. Notice of certain events will also be provided by or on behalf of the Authority to the MSRB through EMMA. See MISCELLANEOUS Continuing Disclosure herein and APPENDIX E Form of Disclosure Dissemination Agent Agreement attached hereto. This Official Statement speaks only as of its date, and the information contained herein is subject to change. Copies of this Official Statement will be deposited with the MSRB, 1818 N Street, N.W., Washington, D.C Copies of the Preliminary Official Statement and the Official Statement and other relevant documents and information regarding the documents are available from the Underwriter through Lyman Wray, Stephens Inc., 3344 Peachtree Road, Suite 1650, Atlanta, Georgia 30326, (404) ii

11 This Official Statement, including the cover page and the attached Appendices, contains specific information relating to the Series 2015 Bonds, the Authority and the System and other information pertinent to this issue. See THE SYSTEM, FINANCIAL INFORMATION herein and APPENDIX A Audited Financial Statements for the Authority for the fiscal year Ended June 30, 2014 for financial information relating to the Authority and APPENDIX C Economic and Demographic Data for Kershaw County for certain demographic information relating to the Authority and the majority of its service area. All information included herein has been provided by the Authority except where attributed to other sources. The summaries and references to all documents, statutes, reports and other instruments referred to herein do not purport to be complete, comprehensive or definitive, and each such reference or summary is qualified in its entirety by reference to each such document, statute, report or other instrument. [Remainder of Page Intentionally Left Blank] iii

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13 OFFICIAL STATEMENT $5,965,000 LUGOFF WATER DISTRICT OF KERSHAW COUNTY, SOUTH CAROLINA WATERWORKS SYSTEM REFUNDING REVENUE BONDS, SERIES 2015A (TAXABLE) $13,325,000 LUGOFF WATER DISTRICT OF KERSHAW COUNTY, SOUTH CAROLINA WATERWORKS SYSTEM REFUNDING REVENUE BONDS, SERIES 2015B INTRODUCTION This Official Statement of the Lugoff Water District of Kershaw County, South Carolina d/b/a Lugoff-Elgin Water Authority (the Authority ), which includes the cover page, summary statement and the appendices hereto, provides information relating to the Authority and its $5,965,000 Waterworks System Refunding Revenue Bonds, Series 2015A (Taxable) (the Series 2015A Bonds ) and its $13,325,000 Waterworks System Refunding Revenue Bonds, Series 2015B (the Series 2015B Bonds and together with the Series 2015A Bonds, the Series 2015 Bonds ). The Authority is a special purpose district of the State of South Carolina (the State ), created and established as a body politic and corporate pursuant to Act No. 784 of the Acts and Joint Resolution of the General Assembly of the State of South Carolina for the year 1964, as amended (the Act ). See THE SYSTEM Creation and Establishment herein. By the terms of the Act, the Authority is authorized to own, operate and maintain its waterworks system (the System ) and borrow money in its own name. The Authority currently provides water service to portions of Kershaw County, Fairfield County and Richland County. The Series 2015 Bonds, any Outstanding Bonds (as such term is defined in the Bond Resolution, which is defined and described below) and any additional Bonds are referred to herein as the Bonds. Included in this Official Statement are brief descriptions of the Series 2015 Bonds and the security therefor, the System, the Authority and its surrounding area and the resolutions pursuant to which the Series 2015 Bonds are authorized and issued by the Authority. Also included is certain financial information relating to the System. For a more complete description of the terms and conditions of the Series 2015 Bonds, reference is made to the Resolutions (as defined below), copies of which are included in their entirety as APPENDIX B Copy of Bond Resolution and Ninth Supplemental Resolution attached hereto. Authorization The Series 2015 Bonds are issued pursuant to the Constitution and laws of the State, including particularly Title 6, Chapter 17, and Title 11, Chapter 21 of the Code of Laws of South Carolina, 1976, as amended (together, the Enabling Act ), a bond resolution adopted by the Lugoff Water District Board of Kershaw County (the Board ), the governing body of the Authority, on November 4, 1999 (the Bond Resolution ), and a ninth supplemental resolution adopted by the Board on October 23, 2014 (the Ninth Supplemental Resolution, and together with the Bond Resolution, the Resolutions ). Purpose The Series 2015A Bonds are being issued by the Authority to (1) provide funds for the advance refunding of a portion of the Authority s Waterworks System Refunding Revenue Bonds, Series 2005 (the Series 2005 Bonds ), and (2) pay the costs of issuance of the Series 2015A Bonds. See PLAN OF FINANCE-The Refunding herein. The Series 2015B Bonds are being issued by the Authority to (1) provide funds for the advance refunding of a portion of the Authority s Waterworks System Revenue Bonds, Series 2007 (the Series 2007 Bonds and collectively with the Series 2005 Bonds, the Refunded Bonds ), and (2) pay the costs of issuance of the Series 2015B Bonds. See PLAN OF FINANCE - The Refunding herein. 1

14 THE SERIES 2015 BONDS Form and Denomination The Series 2015 Bonds will be dated the date of issuance thereof, and will bear interest in the amounts and at the rates per annum set forth on the inside front cover page of this Official Statement, payable on January 1 and July 1 of each year (the Bond Payment Dates ) beginning July 1, The Series 2015 Bonds will mature on July 1 in the years and in the principal amounts set forth on the inside front cover page of this Official Statement. The Series 2015 Bonds will be issued in fully registered form without coupons, in denominations of $5,000 (or integral multiples thereof) not exceeding the principal amount of the Series 2015 Bonds maturing in each year, in the name of the registered owner as set forth on the registration books of the Authority maintained at the corporate trust office of U.S. Bank National Association (the Trustee ). As part of its duties as Trustee, U.S. Bank National Association will also act as paying agent (the Paying Agent ) and registrar ( Registrar ) with respect to the Series 2015 Bonds. The Series 2015 Bonds initially will be held in a book-entry-only system administered by The Depository Trust Company, New York, New York ( DTC ), whose nominee, Cede & Co., will be the initial registered owner of the Series 2015 Bonds. Principal of and redemption premium, if any, and interest on, the Series 2015 Bonds held in book-entry form shall be payable as described herein in THE SERIES 2015 BONDS Book-Entry-Only System. Redemption Optional Redemption. The Series 2015A Bonds are not subject to optional redemption prior to maturity. The Series 2015B Bonds maturing on or after July 1, 2030 are subject to redemption prior to maturity, at the option of the Authority on and after July 1, 2026, in whole or in part at any time, upon 30 days notice, in such manner as will be determined by the Authority, and by lot (or by such DTC procedure as is customary if the book-entry-only system is still in effect) within a maturity at par, plus accrued interest to the redemption date. Mandatory Sinking Fund Redemption. The Series 2015B Bonds maturing on July 1, 2030 are subject to mandatory sinking fund redemption prior to their maturity at a redemption price equal to 100% of the principal amount thereof being redeemed, plus accrued interest, on July 1 of the following years and in the following amounts: * Final Maturity. Year Amount 2026 $585, , , , ,000* The Series 2015B Bonds maturing on July 1, 2035 are subject to mandatory sinking fund redemption prior to their maturity at a redemption price equal to 100% of the principal amount thereof being redeemed, plus accrued interest, on July 1 of the following years and in the following amounts: * Final Maturity. Year Amount 2031 $745, , , , ,000* 2

15 The Series 2015B Bonds maturing on July 1, 2037 are subject to mandatory sinking fund redemption prior to their maturity at a redemption price equal to 100% of the principal amount thereof being redeemed, plus accrued interest, on July 1 of the following years and in the following amounts: * Final Maturity. Year Amount 2036 $930, ,000* At its option, to be exercised on or before the 45th day next preceding such scheduled maturity redemption date, the Authority, may (a) receive a credit with respect to its scheduled mandatory redemption obligation for any Series 2015B Bonds subject to scheduled mandatory redemption which are delivered to the Trustee for cancellation and not theretofore applied as a credit against a scheduled mandatory redemption obligation or (b) receive a credit with respect to its scheduled mandatory redemption obligation for any Series 2015B Bonds which prior to said date have been redeemed (otherwise than through scheduled mandatory redemption) and canceled by the Trustee and not theretofore applied as a credit against said scheduled mandatory redemption obligation. Each Series 2015B Bond so delivered or previously redeemed shall be credited by the Trustee, at the principal amount thereof to the obligation of the Authority on such scheduled mandatory redemption date and the principal amount of the Series 2015B Bonds to be redeemed by operation of such scheduled mandatory redemption on such date shall be accordingly reduced. Notice of Redemption. The Trustee shall send notice of redemption of any Series 2015B Bonds, in the name of the Authority, by registered or certified mail, not less than 30 days and not more than 60 days prior to the date fixed for redemption to DTC or its nominee, or if DTC or its nominee is no longer the registered owner of the Series 2015B Bonds, to the registered owners (the Owners ) of the Series 2015B Bonds or portions thereof to be redeemed as shown on the books of registration and transfer (the Register ) of the Authority by first-class mail, postage prepaid. Failure to give notice, or any defect in the notice, shall not effect the validity of any proceedings for the redemption of any other Series 2015B Bonds. Selection of Series 2015B Bonds for Redemption. If less than all of the Series 2015B Bonds are called for redemption, the Authority will select the maturity or maturities of the Series 2015B Bonds to be redeemed. If less than all of the Series 2015B Bonds of any maturity are to be redeemed, the Series 2015B Bonds shall be selected (1) by DTC pursuant to its rules and procedures, or (2) if a book-entry system is no longer in effect, by the Trustee by lot or in such manner as the Trustee in its discretion may deem fair and appropriate. If the Series 2015B Bonds are to be redeemed in part, they may be redeemed only in integral multiples of $5,000. If a portion of the Series 2015B Bonds is called for redemption, a new Series 2015B Bond in the principal amount equal to the unredeemed portion thereof shall be issued to the Owner thereof upon surrender thereof. Effect of Call for Redemption. If notice is properly given and if moneys for the payment of the Series 2015B Bonds are the then applicable redemption price or together with the then applicable redemption premium, if any, and the interest to accrue to the redemption date on such Series 2015B Bonds are held for the purpose of such payment by the Trustee, the Series 2015B Bonds or portions thereof so called for redemption shall become due and payable on the redemption date, and interest on such Series 2015B Bonds or portions thereof shall cease to accrue from and such date. Registration, Transfers and Exchanges Series 2015 Bonds Subject to the Book-Entry-Only System. The Authority has arranged for the Register of the Series 2015 Bonds to be maintained by the Registrar. For as long as DTC acts as security depository for the Series 2015 Bonds, the registration, transfer and exchange of ownership interests in the Series 2015 Bonds shall be accomplished by book entries made by DTC and the Direct Participants and, where applicable, the Indirect Participants, as described in THE SERIES 2015 BONDS Book-Entry-Only System herein. Book-Entry-Only System DTC will initially act as securities depository for the Series 2015 Bonds. The Series 2015 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 3

16 be requested by an authorized representative of DTC. One fully-registered Series 2015 Bond certificate will be issued for each maturity and will be deposited with DTC. DTC, the world s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a banking organization within the meaning of the New York Banking Law, a member of the Federal Reserve System, a clearing corporation within the meaning of the New York Uniform Commercial Code and a clearing agency registered pursuant to the provisions of Section 17A of the Securities Exchange Act of DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-u.s. equity issues, corporate and municipal debt issues, and money market instruments from over 100 countries that DTC s participants ( Direct Participants ) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities through electronic computerized book-entry transfers and pledges between Direct Participants accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ( DTCC ). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-u.s. securities brokers and dealers, banks, trust companies and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ( Indirect Participants ). DTC has Standard & Poor s rating: 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 and Purchases of Series 2015 Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Series 2015 Bonds on DTC s records. The ownership interest of each actual purchaser of each Series 2015 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 Series 2015 Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Series 2015 Bonds, except in the event that use of the book-entry system for the Series 2015 Bonds is discontinued. To facilitate subsequent transfers, all Series 2015 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 Series 2015 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 Series 2015 Bonds; DTC s records reflect only the identity of the Direct Participants to whose accounts such Series 2015 Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Series 2015 Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Series 2015 Bonds, such as redemptions, tenders, defaults, and proposed amendments to the security documents. For example, Beneficial Owners of Series 2015 Bonds may wish to ascertain that the nominee holding the Series 2015 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. Redemption notices shall be sent to DTC. If less than all of the Series 2015 Bonds within a maturity are being redeemed, DTC s practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed. 4

17 Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Series 2015 Bonds unless authorized by a Direct Participant in accordance with DTC s procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Authority as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co. s consenting or voting rights to those Direct Participants to whose accounts the Series 2015 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Redemption proceeds (if any) and principal and interest payments on the Series 2015 Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC s practice is to credit Direct Participants accounts upon DTC s receipt of funds and corresponding detail information from the Authority or the Trustee on each payable date in accordance with their respective holdings shown on DTC s records. Payments by Direct Participants or Indirect Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in street name, and will be the responsibility of such Participant and not of DTC, the Trustee or the Authority, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest and redemption proceeds to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Authority and the Trustee, 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. DTC may discontinue providing its services as securities depository with respect to the Series 2015 Bonds at any time by giving reasonable notice to the Authority and the Trustee. Under such circumstances, in the event that a successor securities depository is not obtained Series 2015 Bond certificates are required to be printed and delivered to DTC. The Authority may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Series 2015 Bond certificates will be printed and delivered to DTC. The information in this section concerning DTC and DTC s book-entry system has been obtained from sources that the Authority believes to be reliable, but the Authority takes no responsibility for the accuracy thereof. NEITHER THE AUTHORITY NOR THE TRUSTEE WILL HAVE ANY RESPONSIBILITY OR OBLIGATIONS TO DTC, THE DIRECT PARTICIPANTS, THE INDIRECT PARTICIPANTS OR THE BENEFICIAL OWNERS WITH RESPECT TO: (1) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC OR ANY DIRECT PARTICIPANT OR INDIRECT PARTICIPANT; (2) THE PAYMENT BY DTC OR ANY DIRECT PARTICIPANT OR INDIRECT PARTICIPANT OF ANY AMOUNT DUE TO ANY BENEFICIAL OWNER IN RESPECT OF THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON THE SERIES 2015 BONDS; (3) THE DELIVERY BY DTC OR ANY DIRECT PARTICIPANT OR INDIRECT PARTICIPANT OF ANY NOTICE TO ANY BENEFICIAL OWNER THAT IS REQUIRED OR PERMITTED TO BE GIVEN TO OWNERS OF THE SERIES 2015 BONDS UNDER THE TERMS OF THE RESOLUTIONS; (4) THE SELECTION OF THE BENEFICIAL OWNERS TO RECEIVE PAYMENT IN THE EVENT OF ANY PARTIAL REDEMPTION OF THE SERIES 2015 BONDS; OR (5) ANY CONSENT GIVEN OR OTHER ACTION TAKEN BY DTC. 5

18 PLAN OF FINANCE Sources and Uses of Funds The following table sets forth the estimated sources and uses of funds in connection with the sale of the Series 2015 Bonds: Series 2015A Bonds Series 2015B Bonds Total Sources: Par Amount of Series 2015 Bonds $5,965, $13,325, $19,290, Plus: Original Issue Premium ,704, ,704, Plus: 2005 Debt Service Fund Monies 100, , Plus: 2007 Debt Service Fund Monies , , Total Sources $6,065, $15,137, $21,203, Uses: Deposit to Escrow Accounts $5,968, $14,916, $20,885, Costs of Issuance 1 96, , , Total Uses $6,065, $15,137, $21,203, Includes Underwriter s discount, printing costs, and expenses of Bond Counsel, Underwriter s Counsel, Local Counsel, rating agency fees, accounting fees and other miscellaneous costs. The Refunding The Series 2015A Bonds will be issued to effect a refunding of the Series 2005 Bonds maturing in years 2016 to To effect the refunding of such Series 2005 Bonds, a portion of the proceeds of the Series 2015A Bonds, together with other available funds, will be deposited with U.S. Bank National Association, as escrow agent (the Escrow Agent ). The Series 2015B Bonds will be issued to effect a refunding of the Series 2007 Bonds maturing in years 2018 to To effect the refunding of such Series 2007 Bonds, a portion of the proceeds of the Series 2015B Bonds, together with other available funds, will be deposited with the Escrow Agent. The Escrow Agent will enter into an escrow deposit agreement (the Escrow Agreement ) with the Authority upon the issuance of the Series 2015 Bonds. A portion of the proceeds of the Series 2015A Bonds, together with other amounts, if any, deposited with the Escrow Agent, will be invested in direct general obligations of the United States of America, which are not subject to redemption (the Government Obligations ) by the issuer thereof prior to the date of redemption, the principal of and interest on which will be sufficient, together with other moneys, if any, deposited with the Escrow Agent, to redeem the Series 2005 Bonds described above on October 1, The Government Obligations and other moneys deposited with the Escrow Agent will be deposited in an irrevocable escrow account (the 2015A Escrow Account ) established under the Escrow Agreement and pledged to secure the payment of the principal of and interest on the Series 2005 Bonds described above. In the opinion of Bond Counsel, upon the deposit of such Government Obligations and moneys in the 2015A Escrow Account, compliance with the other provisions relating to the defeasance of the Series 2005 Bonds described above, and the receipt of the verification report described in the final paragraph below, the Series 2005 Bonds described above will be deemed paid and will cease to be entitled to any benefit or security under the Bond Resolution pursuant to which they were issued, and all covenants, agreements, and obligations of the Authority to the holders of such Series 2005 Bonds described above shall cease and determine. A portion of the proceeds of the Series 2015B Bonds, together with other amounts, if any, deposited with the Escrow Agent, will be invested in Government Obligations, the principal of and interest on which will be sufficient, together with other moneys, if any, deposited with the Escrow Agent, to redeem the Series 2007 Bonds described above on July 1,

19 The Government Obligations and other moneys deposited with the Escrow Agent will be deposited in an irrevocable escrow account (the 2015B Escrow Account ) established under the Escrow Agreement and pledged to secure the payment of the principal of and interest on the Series 2007 Bonds described above. In the opinion of Bond Counsel, upon the deposit of such Government Obligations and moneys in the 2015B Escrow Account, compliance with the other provisions relating to the defeasance of the Series 2007 Bonds described above, and the receipt of the verification report described in the following paragraph, the Series 2007 Bonds described above will be deemed paid and will cease to be entitled to any benefit or security under the Bond Resolution pursuant to which they were issued, and all covenants, agreements, and obligations of the Authority to the holders of such Series 2007 Bonds described above shall cease and determine. An independent verification agent as described in MISCELLANEOUS Verification of Mathematical Computations herein, will verify to the Authority the mathematical calculations of the Underwriter relating to the sufficiency of the Government Obligations and other moneys, if any, to pay, when due, the principal of, and interest on the Series 2005 Bonds described above and the Series 2007 Bonds described above are accurate and, at the time of the delivery of the Series 2015 Bonds, will deliver its verification report. Special Obligations SECURITY FOR THE SERIES 2015 BONDS The Series 2015 Bonds will be limited obligations of the Authority, solely secured by and payable from the Revenues (as described and defined below). Specifically, principal of and interest on the Series 2015 Bonds shall be payable from the Revenues which remain after provision has been made for payment of the Expenses of Operating and Maintaining the System (as defined and described below). See THE SYSTEM herein. As defined in the Bond Resolution, Revenues means all fees, tolls, rates, rentals, and charges to be levied and collected in connection with, and all other income and receipts of whatever kind or character derived from, the operation of the System, except (i) the proceeds of grants, (ii) customer deposits, (iii) special assessments or taxes for water or sewer improvements, or (iv) any amounts collected by the Authority representing sales taxes or user fees which are required by law or agreement to be paid to the State of South Carolina or any of its political subdivisions. As defined in the Bond Resolution, Expenses of Operating and Maintaining the System means the current expenses, paid or accrued, of operation, maintenance, and current repair of the System, as calculated in accordance with sound accounting practice, and shall include, without limiting the generality of the foregoing, salaries, wages, employee benefits, cost of materials and supplies, cost of water, cost of power, cost of gas, cost of routine repairs, renewals, replacements, and alterations occurring in the usual course of business, cost of billings and collections, cost of insurance, cost of audits, taxes, if any, and a properly allocable share of the Authority s administrative and overhead expenses. Expenses of Operating and Maintaining the System shall not include debt service on Indebtedness (as defined in the Bond Resolution) or any allowance for depreciation or renewals or replacements of capital assets of the System. Subsequent to the delivery of the Series 2015 Bonds, the Authority shall have the following Series of Bonds Outstanding: $585,000 of the Series 2005 Bonds; $1,215,000 of the Series 2007 Bonds; and $1,840,000 of the Authority s originally issued $2,035,000 Waterworks System Refunding Revenue Bond, Series 2013 (the Series 2013 Bond ). THE SERIES 2015 BONDS SHALL NOT CONSTITUTE AN INDEBTEDNESS OF THE AUTHORITY WITHIN THE MEANING OF ANY PROVISION, LIMITATION OR RESTRICTION OF THE CONSTITUTION OR THE LAWS OF THE STATE OF SOUTH CAROLINA, OTHER THAN THOSE PROVISIONS AUTHORIZING INDEBTEDNESS PAYABLE SOLELY FROM A REVENUE-PRODUCING PROJECT NOT INVOLVING REVENUES FROM ANY TAX OR LICENSE. THE AUTHORITY IS NOT OBLIGATED TO PAY ANY OF THE SERIES 2015 BONDS OR THE INTEREST THEREON EXCEPT FROM THE REVENUES AND NEITHER THE FULL FAITH AND CREDIT NOR THE TAXING POWER OF THE AUTHORITY SHALL BE DEEMED TO BE PLEDGED TO THE PAYMENT OF THE SERIES 2015 BONDS. 7

20 Rate Covenant Under the Bond Resolution, the Authority specifically covenants and agrees to maintain rates and charges for all services furnished by the System which shall at all times be sufficient: (1) to pay all current Expenses of Operating and Maintaining the System; (2) to produce at least 120% of the annual Principal and Interest Requirements on the Outstanding Bonds (less payments made from the proceeds of the Bonds); (3) to maintain the Debt Service Reserve Fund Requirement, if any, for a Series of Bonds; (4) to build up any reserve for depreciation and to build up any reserve for improvements, betterments and extensions to the System; (5) to comply in all respects with the terms of the Enabling Act and the Resolutions or any other contract or agreement with the Holders of the Bonds; and (6) to meet any other obligations of the Authority which are charges, liens or encumbrances on the Revenues. Additional Bonds Under the conditions described in the Resolutions and without the approval or consent of the Owners, the Authority can occur additional indebtedness secured by a lien on the Revenues and issued on a parity with the Outstanding Bonds. For more information regarding the issuance of additional Bonds, see APPENDIX B Copy of Bond Resolution and Ninth Supplemental Resolution, particularly Section 2.03 of the Bond Resolution. For the purpose of refunding any Bonds, the Authority, in lieu of satisfying the requirements of the preceding paragraph, may issue a Series of Bonds if the present value of the Principal and Interest Requirements on all Bonds to be Outstanding after the issuance of the refunding Bonds shall not be greater than would have been the present value of the Principal and Interest Requirements were the refunding not to occur. See APPENDIX B - Copy of Bond Resolution and Ninth Supplemental Resolution attached hereto. Junior Lien Bonds and Special Facilities Bonds The Bond Resolution provides that the Authority may at any time, and without limitation and free of all conditions, issue Junior Bonds and Special Facilities Bonds on the terms and conditions set forth therein. See APPENDIX B - Copy of Bond Resolution and Ninth Supplemental Resolution attached hereto. The Authority has no Junior Bonds or Special Facilities Bonds outstanding and does not have any present intent to issue any series of Junior Bonds or Special Facilities Bonds. Funds and Accounts Held Under Resolution Generally. The Bond Resolution establishes several separate funds and accounts for the custody and application of Bond proceeds, Revenues, and certain other funds. The Authority will cause all Revenues to be deposited into the Revenue Fund as such Revenues are received by the Authority. Under the Bond Resolution, there shall be transferred from the Revenue Fund to other funds and accounts, including funds and accounts to be used for payment of Expenses of Operating and Maintaining the System, debt service on the Bonds, and for payment of other contractual obligations related to the System. Revenue Fund. The Revenue Fund, which shall be kept under the complete control and custody of the Authority, shall be maintained so as to reflect accurately the Revenues of the System. All Revenues shall be deposited in the Revenue Fund and the Authority shall establish, from an accounting standpoint, proper records of receipts and disbursements for the Revenue Fund. 8

21 Transfers from the Revenue Fund shall be made monthly, on or before the 15 th day of each month, or as otherwise provided in the Bond Resolution in the following order of priority: (1) to the Operation and Maintenance Fund the amounts budgeted for Expenses of Operating and Maintaining the System; (2) to the Debt Service Fund the amounts necessary to pay principal, redemption premium, if any, and interest on each Series of Outstanding Bonds; (3) after valuing the amount of money and securities on deposit in any Debt Service Reserve Fund, the amount necessary to make the amount of money and securities then on deposit therein equal to the respective Reserve Requirement (within 12 months succeeding any determination that such fund is underfunded); (4) to the Renewal and Replacement Fund the sum which has been currently determined by the Authority to be the estimated requirements therefor for said month; and (5) to the payment of any other lawful purpose, as determined from time to time by the Authority, including payments on Junior Bonds. Operating and Maintenance Fund. The Operation and Maintenance Fund is intended to provide for the payment of all Expenses of Operating and Maintaining the System. Withdrawals from this fund are made by the Authority in accordance, as nearly as may be practicable, with the Authority s annual budget. Debt Service Fund. The Bond Resolution requires the establishment of a Debt Service Fund for the Bonds. The Debt Service Fund is intended to provide for the timely payment of the principal of and interest on the Bonds as the same respectively fall due. There is deposited into the Debt Service Fund the monthly fraction of the aggregate amount of interest to become due on the respective Series of Bonds on the succeeding interest payment date and the monthly fraction of the aggregate amount of the principal of the respective Series of Bonds becoming due and payable (whether at stated maturity or by sinking fund installment) on the next ensuing principal maturity date. Debt Service Reserve Funds. A supplemental resolution may (but is not required to) provide for the establishment of a Debt Service Reserve Fund Account within the Debt Service Reserve Fund for any Series of Bonds. Each Debt Service Reserve Fund Account so established shall be maintained in an amount equal to the respective Debt Service Reserve Fund Requirement, if any, for the applicable Series of Bonds. Funds in a particular Debt Service Reserve Fund will be available to secure only the payment of the Series of Bonds for which such fund has been established. In connection with the issuance of the Series 2015 Bonds, the Authority will not be establishing a Debt Service Reserve Fund Account for either the Series 2015A Bonds or the Series 2015B Bonds. See APPENDIX B Copy of Bond Resolution and Ninth Supplemental Resolution attached hereto for a full description of all funds and accounts established with respect to operation of the System. Renewal and Replacement Fund. The Renewal and Replacement Fund is intended to provide moneys for (1) paying the cost of extensions, additions and capital improvements to, or the renewal and replacement of capital assets of, or purchasing and installing new equipment for the System, (2) repaying debt incurred in connection with capital improvements to the System, and (3) transfers to the Debt Service Fund to make up any deficiency therein. Monies in the Renewal and Replacement Fund shall be used solely for these purposes, but shall be transferred to the Debt Service Fund whenever necessary in order to prevent defaults on any Bonds after monies in the Debt Service Fund and the Debt Service Reserve Fund have been applied to that purpose. 2015A Escrow Account. Pursuant to Section 3.2 of the Ninth Supplemental Resolution and the Escrow Agreement, a portion of the proceeds of the Series 2015A Bonds shall be deposited, together with other available monies into the 2015A Escrow Account held by the Trustee. Funds in such account are pledged to secure the payment of the principal of, redemption premium, and interest on the Series 2005 Bonds to be refunded. 2015B Escrow Account. Pursuant to Section 3.2 of the Ninth Supplemental Resolution and the Escrow Agreement, a portion of the proceeds of the Series 2015B Bonds shall be deposited, together with other available monies into the 2015B Escrow Account held by the Trustee. Funds in such account are pledged to secure the payment of the principal of, redemption premium, and interest on the Series 2007 Bonds to be refunded. Rebate Fund. Section 4.1 of the Ninth Supplemental Resolution authorizes the creation of the Rebate Fund for the purpose of payment to the governmental of the United State of America for all amounts due in respect of arbitrage rebate under Section 148(f) of the Internal Revenue Code of 1986, as amended (the Code ). 9

22 Cost of Issuance Account. Section 4.2 of the Ninth Supplemental Resolution authorizes the establishment of the Costs of Issuance Account as a special account of the Revenue Fund. From this account, the Authority is authorized to pay costs of issuance for the Series 2015 Bonds. Creation and Establishment THE SYSTEM The Authority was created by Act No. 784 of the Acts and Joint Resolutions of the General Assembly of the State of South Carolina for the year 1964 (as amended to the date hereof, Act No. 784 ), as a special purpose district of perpetual succession. The purpose of the Authority is to to construct, purchase, maintain and operate a water system. By the terms of a Merger Agreement dated February 24, 1993 (the Merger Agreement ), the Town of Elgin (the Town ) and the Authority agreed to merge the Town of Elgin s water system with the Lugoff Water District of Kershaw County s water system, thus forming what is known today as the Authority. The System serves all of Kershaw County west of the Wateree River, and also extends further west into Richland County and Fairfield County along Lake Wateree. See - Service Area hereinbelow. The System provides water service to approximately 7,975 customers; of the Authority s 7,975 customers, 7,873 are located in Kershaw County, 101 are located in Fairfield County and 1 is located in Richland County. Act No. 784 provides that the Authority is to be operated, managed, and governed by the Lugoff Water District Board of Kershaw County (the Board ). Formerly, under the provisions of Act No. 784, members of the Board were appointed by the Governor of South Carolina upon the recommendation of the Kershaw County legislative delegation. The delegation could only recommend those persons who were nominated at a meeting of the customers of the Authority. Act No. 291 of the Acts and Joint Resolutions of the General Assembly of the State of South Carolina for the year 1989 ( Act No. 291 ) amended Act No. 784 to provide that members of the Board are to be elected at the annual meeting 1 of the Authority by the residents therein (maintaining the original 6 year staggered terms). While Act No. 291 was approved by the South Carolina General Assembly, it is subject to challenge under the South Carolina Constitution in that it may violate the Home Rule amendments 2 to the South Carolina Constitution ( Home Rule ) by affecting a single county and may further violate the South Carolina constitutional prohibition against special legislation. Baker, Ravenel & Bender, L.L.P., as Local Counsel to the Authority, will deliver an opinion that, under the laws of the State, Act No. 291 is enforceable until an appropriate judicial declaration to the contrary, and that in the event the provisions of Act No. 291 are declared to be unconstitutional, the members of the Board validly serve in a de facto capacity. Additionally the composition of the Board was further amended by the provisions of the Merger Agreement, wherein the Board was expanded from its original five members to the current seven members. Absent a judicial determination as to the authorization of the Authority to expand the Board, there is some question as to the Authority s authorization to expand the number of Board members from five to current seven under the provisions of the Merger Agreement. Baker, Ravenel & Bender, L.L.P., as Local Counsel, will further opine that the provisions of the Merger Agreement are enforceable and the Board, as currently constituted, is authorized to act on behalf of the Authority and bind the Authority to a valid course of action. 1 Always the third Tuesday of September. 2 The Home Rule amendments to the South Carolina Constitution were ratified on March 7,

23 Governance of the System The Authority is governed by the Board. As described in -Creation and Establishment above, the Board has seven members elected by the voting membershipship (tap holders) of the System for staggered six year terms. The present members of the Board, their occupations, number of years on the Board and expiration of their current terms are as follows: Number of Years Name Occupation on Board Expiration of Term Rev. Dr. Chuck Everett, Chairman Baptist Minister Danny Tyner, Vice Chairman Retired Executive Clyde Smith, Treasurer Educator/Career Military Gordon Chip McCaa, Board Member Office Manager/Minister of Music Dean Watt, Board Member Law Enforcement Joel Schmalzel, Board Member Building Contractor Anna Stewart, Board Member Banking Officer System. The Authority is administered by a general manager hired by the Board to oversee day-to-day operations of the Mr. Michael E. Hancock is the General Manger of the Authority with authority to oversee the staff and its billing and collection, water treatment plant operations and distribution system operation and maintenance. Mr. Hancock has been the General Manager since For three years before becoming General Manager, Mr. Hancock was the Economic Development Manager for the Pee Dee Electric Cooperative, Inc., a public utility serving five South Carolina counties and over 25,900 customers. Mr. Hancock was a career officer in the United States Air Force. He holds a BS degree in professional aeronautics from Embry-Riddle Aeronautics University and a MA degree in management from Webster University. Employees and Employee Relations As of June 30, 2014, the Authority had 20 full-time employees, and is fully staffed. The employees are not unionized and there is currently no movement to unionize known to the Authority. The General Manager is of the opinion that employee relations are very good. Service Area Generally. The System serves all of Kershaw County west of the Wateree River. In 1998, the South Carolina legislature approved local legislation allowing the Authority to extend the System outside of Kershaw County. Several years ago, the System extended service to customers in adjoining Fairfield County along Lake Wateree and into certain parts of Richland County with respect to the development of a 400-home subdivision. A regional map of the service area of the Authority, as prepared by Brown and Caldwell, the Authority s Engineer, is shown below. [Remainder of Page Intentionally Left Blank] 11

24 Limitations Regarding the Authority s Service Area Pursuant to Section 2 of Act No. 784, as amended by Act No. 418 of the Acts and Joint Resolutions of the General Assembly of the State of South Carolina for the year 1971 and by Act No. 279 of the Acts and Joint Resolutions of the General Assembly of the State of South Carolina for the year 1985 ( Act No. 279 ), the Authority was granted certain territory to comprise its service area. Additionally, Section 3(23) of Act No. 784 provided that the Authority was authorized to extend its System beyond the defined limits of the statutory service area, so long as any such extension was within Kershaw County and the Board determined such expansion to be feasible and practicable. Thereafter, by Act No. 479 of the Acts and Joint Resolutions of the General Assembly of the State of South Carolina for the year 1998 ( Act No. 479 ), the South Carolina General Assembly amended Section 3(23) of Act No. 784, removing the restriction that extensions of the System outside the Authority s statutory service area be limited to Kershaw County. While Act No. 279 and Act No. 479 were approved by the South Carolina General Assembly, they are subject to challenge under the South Carolina Constitution in that they may violate Home Rule by affecting a single county and may further violate the South Carolina constitutional prohibition against special legislation. However, the Authority has been advised by its Local Counsel, Baker, Ravenel & Bender, L.L.P., that the enactment of Act No. 479 confirms that General Assembly s intention for the Authority to be considered a multi-county special purpose district. See -Annexation; Boundary Changes; and Dissolution Alteration of Boundaries herein. Local Counsel has advised that as a multicounty special purpose district, any amendment or provision changing the boundaries of the Authority would not violate the Constitutional prohibition on special legislation. Baker, Ravenel & Bender, L.L.P., as Local Counsel to the Authority, will deliver an opinion that, under the South Carolina Constitution and the laws of the State, Act No. 279 and Act No. 479 were validly authorized and enacted by the South Carolina General Assembly and therefore the Authority is legally authorized to provide service to all of its current customers, including those located outside of Kershaw County 1. 1 As previously noted, the Authority currently provides service in Kershaw, Fairfield and Richland counties. However, the Authority was not granted any rights to serve in Fairfield County or Richland County by their respective county councils. See - Annexation; Boundary Changes; and 12

25 Pursuant to a referendum held in the Town on February 2, 1993, the voters of the Town authorized the conveyance of the Town s water system to the Authority (the Referendum ). By the terms fo the Referendum and the Merger Agreement, the Town granted the Authority an exclusive franchise for the furnishing of water in the Town for a period of thirty years, expiring in Baker, Ravenel & Bender, L.L.P, as local counsel to the Authority, will further deliver an opinion that the provisions of the Referendum and Merger Agreement provided the Authority with an exclusive franchise to serve the Town and its former service area. Annexation; Boundary Changes; and Dissolution Annexation Procedure. The Code of Laws of South Carolina, 1976, as amended, provides that the boundaries of a special purpose district, like the Authority, may be altered by the annexation of area within a special purpose district by an adjacent municipality. When all or part of a special purpose district is annexed into a municipality, Sections through of the Code of Laws of South Carolina, 1976, as amended, provide that: 1. At the time of annexation or at any time thereafter the municipality may elect at its sole option to provide the service formerly provided by the special purpose district within the annexed area. The transfer of service rights must be made pursuant to an Annexation Plan (as defined hereinbelow). 2. Until the municipality, upon reasonable written notice, elects to displace the special purpose district's service, the district must be allowed to continue providing service within the special purpose district's annexed area. 3. Annexation does not divest the special purpose district of any property; however, subject to the provisions of item (4) below, real or tangible personal property located within the area annexed must be transferred to the municipality pursuant to an Annexation Plan. 4. In any case in which the municipality annexes less than the total service area of the special purpose district, the special purpose district may, at its sole discretion, retain ownership and control of any asset, within or without the annexed area, used by or intended to be used by residents within the special purpose district's unannexed area or used or intended to be used to provide service to residents in the unannexed area of the special purpose district. 5. Upon annexation of less than the total area of the district, the district's boundaries must be modified, if at all, pursuant to an Annexation Plan. Such Annexation Plan must specify the new boundaries of the special purpose district. Annexation Plan. The Annexation Plan is required to balance the equities and the interests of the residents and taxpayers of the annexed area and of the area of the special purpose district not subject to annexation. If the municipality and the special purpose district cannot agree on an Annexation Plan within 90 days following a favorable annexation referendum, the special purpose district and the municipality must appoint a committee to formulate an Annexation Plan. Within 60 days thereafter, such committee must formulate an Annexation Plan. The Annexation Plan may take into account any of the equities and interests involved, provided it complies with the following: 1. The Annexation Plan may provide for certain service contracts to be entered into between the municipality and the district. The municipality has the right, in its sole discretion, to determine whether the municipality will provide service to the area annexed directly or by contract with the special purpose district. At the option of the special purpose district, the Annexation Plan may provide for service contracts by which the municipality will provide service to residents of unannexed areas of the special purpose district. Dissolution Alteration of Boundaries herein. The Authority relies solely upon the provisions of Act No. 479 for its service rights in Fairfield and Richland counties. 13

26 2. In any case in which less than the total service area of the special purpose district is annexed by the municipality, the Annexation Plan must: a. protect the special purpose district's ability to serve the residents of the district's unannexed area economically and efficiently and protect the special purpose district's ability to continue to expand or otherwise make service available throughout its unannexed area; b. protect the ability of the municipality to serve residents of the annexed area of the district economically and efficiently; and c. protect the rights of the special purpose district s bondholders. 3. To carry out the requirements of subitem (a) of item (2) above, the Annexation Plan shall require the municipality to assume contractually the obligation to pay debt service on an amount of the district's bonded indebtedness or other obligations including lease purchase obligations adequate to offset the district's loss of net service revenue or tax revenue from the area annexed, in accordance with the following: a. specifically included within this amount must be revenues, if any, projected under the provisions of any governmentally approved plan promulgated pursuant to federal pollution control legislation; b. as the special purpose district retires bonded indebtedness existing at the time of annexation, the municipality's payment obligation under this provision must be reduced by the proportion which the principal amount of the indebtedness retired bears to the total principal amount of bonded indebtedness of the district at the time of annexation; c. as used herein, net service revenue means revenue from fees, charges, and all other sources, attributable to service provided in the area annexed, less the actual cost of operating and maintaining the system or facilities needed to serve that area; however, debt service or other payments required to finance capital assets may not be considered to be part of such operating and maintenance expenses. Tax revenue means taxes collected from property owners within the annexed area; and 4. In no event may any provision be incorporated in any plan which will impair the rights of bondholders. If either the municipality or the special purpose district objects to the Annexation Plan created by the committee, it may appeal, within 30 days of receipt of the Annexation Plan, to the court of common pleas for the county in which the annexed area lies. The court may modify the plan forwarded by the committee only upon finding an error of law, abuse of discretion, or arbitrary or capricious action by the committee. The fact that a plan has not been finalized may not in any way alter or delay the effective date of annexation; however, the special purpose district retains the right to operate its existing system, collect revenues, and collect taxes from or within the area annexed until such time as the municipality and the special purpose district agree on a plan or a plan is presented to the municipality and the special purpose district as described above. In the event a plan is appealed to the courts, the court of common pleas for the county in which the annexed area or any part thereof lies may enter such orders under its general equitable powers as are necessary to protect the rights of parties pending final resolution of any appeal. Effect. The service area of the Authority, and accordingly, its ability to generate revenues and pay debt service on the Series 2015 Bonds (as well as the Bonds Outstanding and any additional Bonds), could be affected by municipal annexation proceedings or a change in boundaries. In addition, the Authority s service area could be impacted if nearby municipalities commenced service within the Authority s service area. The service area of a special purpose district, however, is protected by the provisions of S.C. Code Ann (1976), which provides that a municipality, absent annexation of new territory, may extend its utility lines beyond its boundaries by contract, except within a designated service area of a special purpose district. A designated service area under this section is one within which a special purpose district is then providing a service, has budgeted to provide a service or expended funds in furtherance of providing such service. 14

27 Alteration of Boundaries. Pursuant to Sections through , of the Code of Laws of South Carolina, 1976, as amended, the governing bodies of the several counties of the State are authorized to enlarge and diminish the boundaries of special purpose districts located within their respective boundaries and to consolidate two or more special purpose districts located within their respective boundaries. As previously discussed herein, the Authority s boundaries were not expanded through the provisions of Section through See Service Area herein. While the issue is not completely free from doubt, case law in the State seems to support the position that multicounty special purpose districts, like the Authority, can implement legislative changes through the South Carolina General Assembly without violating the provision of Article VIII, Section 7 of the South Carolina Constitution, 1895, as amended, which prohibits laws pertaining to a single county to be enacted. Because of the regional nature of the Authority, the Authority believes, and its local counsel shall opine (see Service Area Limitations Regarding the Authority s Service Area hereinabove), that any amendment or provision changing the boundaries of the Authority would not violate the prohibition against special legislation in Article VIII, Section 7 of the Constitution. Similar to Act No. 479, should the Authority later determine to expand (or reduce) its service area and alter its boundaries, they could petition the South Carolina General Assembly to implement legislation to authorize such adjustment. A case interpreting whether multi-county special purpose districts can implement changes through the South Carolina General Assembly without violating the provisions of the Constitution is currently pending in the Court of Common Pleas for Florence County. In Florence County v. West Florence Fire District, Florence County is challenging the validity and constitutionality of Act 183 of 2014 (now codified as Section et seq. of the Code of Laws of South Carolina, 1976, as amended), the provisions of which created the West Florence Fire District, a multi-county special purpose district located in Florence and Darlington counties. Dissolution of the Authority. A procedure for dissolving special purpose districts was adopted by the state legislature in This procedure requires that prior to circulation of a petition for dissolution (which must be signed by 40% of the qualified electors in the Authority), a successor service provider must agree to provide all services and also be responsible to fully pay or defease all outstanding bonds of the Authority. If a petition obtains the requisite number of signatures, a referendum then must be held at which two-thirds of the qualified electors voting must approve the dissolution. Water System Description. The Authority s water treatment plant (the Treatment Facility ) was completed and permitted for operations in The Treatment Facility is located on Lake Wateree, which serves as the surface water withdrawal source therefor. Completion of the projects financed with the proceeds of the Series 2007 Bonds increased the finished water delivery capacity from the Treatment Facility from 4.0 to 6.0 million gallons per day (MGD). The Treatment Facility is currently rated for 6.0 MGD, and, subject to regulatory approval, is capable of being further expanded to 8.0 MGD. Groundwater wells used by the System in the past are still operable and are now only used in emergency situations. The Authority maintains five emergency wells with pumping capabilities described in the table below. The wells are routinely run for maintenance purposes. Number Designation Capacity (gallons per minute) 1 Boulware Road 60 2 Elgin # Elgin # Elgin # Elgin #

28 The Authority s distribution system consists of over 259 miles of water lines ranging in size from 1-inch to 24- inches in diameter. Two transmission mains deliver water from the Treatment Facility to the distribution system. Storage is provided by four elevated tanks and one standpipe as described in the table below. Usage. Name Designation Capacity (gallons) Pine Grove Elevated 500,000 Conifer Acres Elevated 150,000 U.S. 601 Standpipe 1,000,000 Elgin #1 Elevated 250,000 Elgin #2 Elevated 250,000 Total 2,150,000 The following table shows the System s total annual and daily average potable water flows, peak daily flows and peak monthly flows for the fiscal years ended June 30, 2010 through Such amounts reflect gallons treated or pumped by the Authority and not actual gallons sold to customers. Year Total Annual Flow (MG) Daily Average Flow (MG) Peak Daily Flow (MG) Peak Monthly Flow (MG) Source: Authority data. Number of Water Customers. The table below provides information relating to the total number of customers of the System by year. Year Number of Customers Increase Percentage of Increase (%) , % , , , , Source: Audited Financial Statements of the Authority for the fiscal year ended June 30,

29 Major Water Users. The ten largest users of the System for fiscal year ended June 30, 2014, total charges paid by each and their percentage of the Authority s total water revenues are shown below: Customer Name Type of Business Water Charges % of Revenues Weylchem Chemical Company $236, % Kershaw County Schools Government 77, HBD Thermoid Manufacturing 32, Pine Ridge Apartments Apartment 31, Mancor Fabrication 30, Hallmark at Truesdale Apartment 28, TB Kawashima Textile Fabrication 28, Kershaw County Government 25, UTI Integrated Logistics Warehousing 25, Target Distribution 23, Source: Audited Financial Statements of the Authority for the fiscal year ended June 30, Water Service Rates. In accordance with the provisions of Act No. 784 and S.C. Code Ann. Section , the Authority offers no free service and is empowered to adjust its rates at any time. Rates are examined annually in connection with the Authority s annual budget preparation. The Authority s rates are not subject to approval by any governmental or regulatory body. The following table provides the current monthly charges for each size meter as specified. The below described rates have been in effect since July In each case, the charge for the first number of gallons is a minimum charge regardless of the amount of water consumed (base charge) and the charge for the number of gallons in excess thereof is per l,000 gallons consumed (volumetric charge). The minimum charge (as show on the table and dependent on meter size) consists of a base charge equal to $15.64, plus a volume charge of $4.80 per 1,000 gallons of water (multipled by the minimum volumetric amount for that meter size). At its February 5, 2015 meeting, the Board adopted its Fiscal Year 2016 budget; per the terms of that budget, as of July 1, 2015 the base charge will increase to $16.64 (a $1.00 increase) and the volumetric charge will increase to $4.805 per 1,000 gallons of water (an increase of $0.005 per 1,000 gallons). METER SIZE CURRENT RATES RATES EFFECTIVE 7/1/15 ¾ inch / 2,000 gallons $25.24 Minimum $26.15 Minimum All over 2,000 gallons $4.80 Per 1,000 gal $4.80 Per 1,000 gal 1 inch / 25,000 gallons $ Minimum $ Minimum All over 25,000 gallons $4.80 Per 1,000 gal $4.80 Per 1,000 gal 1 1/2 inch / 30,000 gallons $ Minimum $ Minimum All over 30,000 gallons $4.80 Per 1,000 gal $4.80 Per 1,000 gal 2 inch / 50,000 gallons $ Minimum $ Minimum All over 50,000 gallons $4.80 Per 1,000 gal $4.80 Per 1,000 gal 3 Inch / 200,000 gallons $ Minimum $ Minimum All over 200,000 gallons $4.80 Per 1,000 gal $4.80 Per 1,000 gal 4 Inch / 400,000 gallons $1, Minimum $1, Minimum All over 400,000 gallons $4.80 Per 1,000 gal $4.80 Per 1,000 gal 6 inch / 1,850,000 gallons $8, Minimum $8, Minimum All over 1,850,000 gallons $4.80 Per 1,000 gal $4.80 Per 1,000 gal 17

30 Water Service Deposit Fees. As security for payment of all bills for water service, each customer is required to submit a sum of money to be held in escrow and returned to the customer when service is discontinued and the final bill paid. Service charges are as follows: Meter Size Deposit $30.00 application fee for homeowner; ¾ Meter $ Deposit for tenant 1 Meter $ ½ Meter $ Meter $ Meter $ Meter $ Meter $ Water Tap Fees. The following table sets forth water tap fees charged to hook onto the System: Meter Size Fee ¾ Meter $ Meter $ ½ Meter $1, Meter $1, Meter $2, Meter $2, compound / $5,000 read flange type 6 Meter $5, compound / $5,000 read flange type 8 Meter $11, compound Impact Fee. In addition to the water tap fees shown above, each new connection to the System is also assessed an impact fee of $1.85 per gallon per day of projected water use calculated using the South Carolina Department of Health and Environmental Control s Unit Contributory Loadings Chart. Impact fees are used to help fund future expansions of the System. Impact fees for customers are provided in the table below. Meter Size Meter Equivalency Ratio Fee ¾ inch 1 $740 1 inch 2.5 $1,850 1½ inch 5 $3,700 2 inch 8 $5,920 3 inch 16 $11,840 4 inch 25 $18,500 6 inch 50 $37,700 8 inch 80 $59,200 Sprinkler Fee. The following table sets forth the annual charges for sprinklers used for industrial fire protection: Number of Sprinklers Annual Fee 1 to 25 Sprinkler Heads $ Per Year 26 to 50 Sprinkler Heads $ Per Year 51 to 100 Sprinkler Heads $ Per Year Whichever is greater: 101 to 500 Sprinkler Heads $ Minimum or $1.00/Head/Year 501 to 999 Sprinkler Heads $ Minimum or $0.50/Head/Year 1000 to 5,000 Sprinkler Heads $ Minimum or $0.25/Head/Year All Over 5000 $0.10/Head/Year 18

31 Comparative Charges The Authority s current residential water rates and impact fees compared with those of comparable providers in the area for average users of 6,000 gallons on a monthly basis: Utility Monthly Residential Water Bill Current Impact Fees Authority $44.62 $ Cassatt Water (Non-Lake) Cassatt Water (Lake) Alligator Water and Sewer Company Bethune Rural Water Company Town of Bethune (out of Town) City of Bishopville (out of City) City of Camden (in City) City of Camden (out of City) City of Columbia (in City) , City of Columbia (out of City) , Fee paid monthly per account. Source: Various utility websites Outstanding Indebtedness with Respect to the System The Authority s outstanding indebtedness with respect to the System includes: (a) the Series 2005 Bonds; (b) the Series 2007 Bonds; and (c) the Series 2013 Bond. Upon the issuance of the Series 2015 Bonds, $585,000 of the Series 2005 Bonds and $1,215,000 of the Series 2007 Bonds shall remain outstanding and the remainder of the Series 2005 Bonds and the Series 2007 Bonds shall be advance refunded and legally defeased. Outstanding General Obligation Indebtedness General obligation debt is defined by the South Carolina Constitution as any indebtedness of the debtor that is secured in whole or in part by a pledge of its full faith and credit; therefore, general obligation bonds must be secured by ad valorem property taxes and are generally paid from such taxes. Under State law general obligation bonds are payable from an ad valorem tax levied upon all taxable property in the Authority without limitation as to rate or amount. If issued, any general obligation bonds shall not be payable from the Revenues, nor do the holders thereof have a lien upon the Revenues. The Authority currently has no general obligation bonds outstanding, nor any plans to issue general obligation bonds in the future. Fringe Benefits, Retirement and Health Insurance The Authority contributes to the South Carolina Retirement System (the Retirement System ), a cost-sharing, multiple-employer, public employee retirement system administered by the South Carolina Budget and Control Board. The Retirement System provides both retirement and death benefits on an employee and employer contribution basis. Member employees currently contribute 7.5% of their annual compensation. Employer contribution is 10.45% of each member s employee s annual compensation and the entire cost of group life insurance for covered employees is included at the rate of 0.15% of salaries. Total employer retirement contributions to the Retirement System paid on behalf of the employees of the Authority amounted to $101,620 for the fiscal year ended June 30, The Authority has paid all required contributions for fringe benefits and insurance as they come due and there are no liabilities for underfunding of such benefits. 19

32 Other Post-Employment Benefits In June 2004, the Governmental Accounting Standards Board approved the final set of accounting standards applicable to Other Post-Employment Benefits ( OPEB ), which are non-pension benefits provided after a person leaves employment. The Authority has no outstanding OPEB liabilities. Liability Insurance Subject to specific immunity set forth in the South Carolina Tort Claims Act, special purpose districts including the Authority are liable for damages not to exceed $300,000 per incident/person and $600,000 per occurrence/aggregate. No punitive or exemplary damages are permitted under the Tort Claims Act. Insurance protection to units of local government is provided from either the South Carolina Insurance Reserve Fund established by the South Carolina Budget and Control Board, private carriers, self insurance or pooled self insurance funds. The Authority currently maintains liability insurance coverage with Arthur J. Gallagher Risk Management Service, Inc. with Brit Global Speciality USA. In the opinion of the General Manager, the amount of liability coverage maintained by the Authority is sufficient to provide protection against any loss arising under the Tort Claims Act. In the judgment of legal counsel for the Authority, there is no litigation pending or threatened against the Authority which is not adequately insured by such coverage. Environmental/Regulatory Matters The Authority is subject to regulation as to solid waste, water and air quality by the United States Environmental Protection Agency ( EPA ) and the South Carolina Department of Health and Environmental Control ( DHEC ) under Federal and State laws and regulations. The System currently is in compliance with all regulatory requirements of EPA and DHEC and all permits required to operate the System are in order for all parts of the System. The Authority is in full compliance with the Federal Safe Drinking Water Act (enacted in 1974, as amended in 1986 and 1996). The Authority currently meets all established limits for drinking water quality and more information about quality of the water supplied, including existing contaminants is available in the Annual Drinking Water Quality Report and a copy of the most recent report (June 2014) can be made available upon request. The Authority was recented awarded its 11 th Area Wide Optimization Program (AWOP) certificate from the DHEC. An AWOP certification means that the Treatment Facility met certain higher than average operating standards as determined by DHEC. Five-Year Operating History FINANCIAL INFORMATION A summary of revenue and expenses of the System for the fiscal years ended June 30, 2010 through 2014 is provided in the table following on the next page. The summary of fiscal years ended 2010 through 2014 was derived from the audited financial statements of the System, copies of which are available from the Underwriter upon request. The financial statements for the fiscal year ended June 30, 2014 were audited by Sheheen Hancock & Godwin, LLP, Camden, South Carolina, and are attached as APPENDIX A to this Official Statement. Although the information for fiscal years 2010 through 2014 was taken from audited financial statements, no representation is made that the information is comparable from year to year, or that the information as shown by itself presents fairly the complete operations of the System for the periods shown. 20

33 Fiscal Year Ended June 30, Program Revenues Charges for Services Water Charges $ 4,048,948 $ 4,288,916 $ 4,480,772 $ 4,388,890 $ 4,451,205 Impact Fees 144,472 75,234 99,559 97,043 79,410 Service and Administrative Fees 86,432 33,134 36,796 38,483 39,207 Late Charges and Reconnections 101, , , , ,051 Tap Fees 12,680 12,701 31,685 72,727 74,318 Other 24,489 22,396 31,746 33,687 25,820 Total Program Revenues $ 4,418,800 $ 4,596,473 $ 4,841,926 $ 4,803,289 $ 4,843,011 Operating Expenses Advertising 891 7,166 5, ,622 Auto Expense 37,015 50,620 62,780 58,508 59,668 Bad Debts 10,085 24,146 14,041 15,855 14,278 Bank Charges 10,540 10,328 10,620 12,890 11,674 Casual Labor 8,750 9,100 9,100 11,721 11,700 Chemicals and Supplies 162, , , , ,078 Directors Fees 14,075 16,500 13,500 13,725 14,025 Depreciation 1,213,871 1,218,300 1,225,973 1,227,830 1,267,308 Dues and Subscriptions 8,418 9,225 11,181 9,717 11,816 Employee Benefits 83,953 85,852 88,060 94, ,579 Employee Awards 10,000 10,000 10,000 10,000 9,500 Equipment Rental Insurance 171, , , , ,541 Legal and Professional 82,015 64,190 52,343 55,996 55,883 Miscellaneous 14,626 12,231 12,378 22,182 24,270 Office Supplies 17,518 17,374 15,226 15,492 22,405 Payroll Taxes 69,527 69,706 70,572 72,733 77,575 Postage 25,824 20,572 23,475 22,890 25,101 Repairs and Maintenance 47,258 44,408 26,863 21,591 45,568 Refunds 11,456 2,712 3, Salaries and Wages 909, , , , ,242 System Maintenance and Supplies 108,751 87,240 99,464 41,140 52,758 Tank Maintenance 9, Taxes and Licenses 2,328 1,960 2,012 2,643 2,009 Telephone 18,454 16,017 15,909 13,975 4,037 Testing 31,607 22,198 22,769 24,560 27,415 Travel Training Uniforms 8,947 10,967 9,580 10,272 11,251 Utilities 134, , , , ,977 Total Operating Expenses $ 3,224,492 $ 3,277,849 $ 3,200,088 $ 3,268,425 $ 3,455,572 Operating Income $ 1,194,308 $ 1,318,624 $ 1,641,838 $ 1,534,864 $ 1,387,439 Non-Operating Revenues (Expenses) General Revenues: Interest Income 204, ,069 11,398 56,992 8,238 Insurance Proceeds - 17, Interest Expense (1,356,243) (1,333,964) (1,303,298) (1,257,882) (1,040,796) Bond Issuance Cost (5,000) Amortization of Bond Refunding Cost (100,084) (100,084) (100,084) (100,084) (68,989) Total Non-Operating Revenues (Expenses) ($ 1,252,144) ($ 1,245,653) ($ 1,291,984) ($ 1,300,974) ($ 1,106,547) Income Before Contributions (57,836) Capital Contributions 176,273-63, Change in Net Position 118,437 72, , , ,892 Net Position, Beginning of Year as Restated 8,872,248 8,990,685 9,063,666 9,476,644 8,988,013 Net Position, End of Year $ 8,990,685 $ 9,063,656 $ 9,476,644 $ 9,710,534 $ 9,268,905 21

34 Interim Financial Results The following table sets forth comparative statements of revenues, expenses and changes in net assets with respect to the System for the six months ended December 31, 2013 and December 31, 2014 which have been compiled for the Authority by Sheheen Hancock & Godwin, LLP. This comparison does not include monthly accruals and reversals for payroll accruals and compensated absences and has not been adjusted for actual depreciation. Six Months Ended December 31, Program Revenues Charges for Services Water Charges $2,245,859 $2,386,393 Impact Fees 33,930 55,400 Service and Administrative Fees 90,251 21,326 Late Charges and Reconnections 17,928 92,404 Tap Fees 11,711 35,864 Other 1,577 1,250 Total Program Revenues $2,401,256 $2,592,637 Operating Expenses Advertising $1,376 $448 Auto Expense 31,125 27,651 Bad Debts 7,341 14,139 Bank Charges 6,146 9,848 Casual Labor 6,075 6,265 Chemicals and Supplies 109,053 96,788 Director s fees 7,750 9,575 Depreciation 633, ,883 Dues and Subscriptions 6,898 9,087 Employee Benefits 53,729 56,809 Employee Rewards 9,500 10,000 Equipment Rental Insurance 117, ,076 Legal and Professional 34,809 40,441 Miscellaneous 11,375 14,805 Office Supplies 7,227 5,200 Payroll Taxes 38,755 39,921 Postage 12,366 12,855 Repairs and Maintenance 11,479 11,874 Refunds - 63 Salaries and Wages 508, ,212 System Maintenance and Supplies 30,901 48,564 Tank Maintenance - - Taxes and Licenses Telephone 8,207 7,779 Testing 25,012 25,697 Travel - - Training - - Uniforms 5,523 5,346 Utilities 74,761 81,775 Total Operating Expenses $1,760,853 $1,813,362 Operating Income $640,403 $779,275 Nonoperating Income (Expenses) General Revenues Interest Income $9,217 $8,792 Insurance Proceeds - - Interest Expense (552,615) (521,627) Bond Issuance Cost - (800) Amortization of Bond Refunding Cost (34,494) (34,494) Total Non-Operating Revenues (Expenses) $(577,892) $(548,129) Change in Net Position Net Position, Beginning of Year (Restated) 62, ,146 Net Position, End of Compilation Period 8,903,012 9,268,905 $8,965,523 $9,500,051 22

35 Management s Discussion and Analysis The Authority s service area borders the high-growth area of northeast Richland County in South Carolina. The City of Columbia, South Carolina s capital, is located 30 miles from the Authority s administration building. The Authority also maintains close proximity to Fort Jackson and Shaw Air Force Base. Many military families and state employees are served by the Authority. In addition to serving as a bedroom community to Columbia, the Authority provides service to several industrial clients and business parks. The Authority provides water to the Central Midlands Mega-Site. This is a 1,400 acre tract of land with gas, electricity, water, sewer, interstate and rail access. The Mega-Site is marketed as the ideal location for industry in the midlands of South Carolina. Operating Revenues. Operating revenues increased by 9.1 percent from fiscal year 2010 to This trend averages 2.2 percent per year. Operating Expenses. Operating expenses increased by 6.7 percent from fiscal year 2010 to This trend averages 1.7 percent higher each year. The largest variables were chemicals used for water treatment and the fuel surcharges, vehicle expense itself with the swings in fuel prices, employee and property insurance premiums, office supplies and maintenance on the system. Non-Operating Revenues. Non-Operating revenues, mainly interest earning on reserve funds, declined from $204,183 in fiscal year 2010 to $ 8,238 in fiscal year 2014; this decline is attributable to the lower interest rates on insured investments. Net Assets. Net assets increased 3.0 percent from $8,990,685 in fiscal year 2010 to $9,268,905 in fiscal year 2014 as a result of increases in net revenue and new capital projects. Operating Reserves. As of June 30, 2014, the Authority had approximately $3,449,194 in operating reserves not including inventory, customer deposits and other restricted funds. This reflects an increase from previous reserves of approximately $3,397,824. Summary. It is anticipated that operating expenses and customer factors affecting revenues will stabilize in the future. If such occurs, future rate increases are expected to be tied only to inflation as current levels of revenues have been determined by management as being sufficient to pay debt service and exceed coverage requirements. [Remainder of Page Intentionally Left Blank] 23

36 Historical Revenues and Expenditures The following table shows the historical net revenues and expenditures for the System (business activities) for the fiscal years ended June 30, 2010 through For purposes of this summary, Gross Revenues, Operation and Maintenance Expenses and Net Earnings have been determined in accordance with the provisions of the Bond Resolution. See generally, SECURITY FOR THE SERIES 2015 BONDS and APPENDIX B Copy of Bond Resolution and Ninth Supplemental Resolution. As a consequence, certain numbers may differ from the numbers provided in the Authority s audited financial statements. Fiscal Year Ended June 30, Revenues 1 $4,622,983 $4,767,542 $4,853,324 $4,860,281 $4,851,249 Expenses of Operating and Maintaining the System 2 2,010,621 2,059,549 1,974,115 2,040,595 2,188,264 Net Earnings 3 2,612,362 2,707,993 2,879,209 2,819,686 2,662,985 Debt Service 4 1,986,243 1,978,964 2,303,298 2,292,882 2,150,796 Debt Service Coverage Ratio Calculated pursuant to the provisions of the Bond Resolution; different than Operating Revenues as provided - Five-Year Operating History. 2 Calculated pursuant to the provisions of the Bond Resolution; different than Operating Expenses as provided - Five-Year Operating History. 3 Calculated pursuant to the Bond Resolution and as otherwise provided in SECURITY FOR THE SERIES 2015 BONDS Rate Covenant herein. 4 Based on historical debt service for the Bonds Outstanding at that time. Forecasted Revenues and Debt Service Coverage The forecasting consultant for the Authority, Raftelis Financial Consultants, Inc. (the Forecasting Consultant ), forecasted revenues, expenses, debt service and debt service coverage of the System for each of the fiscal years ending June 30, 2015 through The financial forecast contained is based on assumptions made by the Forecasting Consultant. There will usually be differences between the forecast and actual results because events and circumstances frequently do not occur as expected, and those differences may be material. In addition, the financial forecast is only for the current year and the six fiscal years ending June 30, 2021, and consequently, does not cover the whole period during which the Series 2015 Bonds may be outstanding. For purposes of this financial forecast, Revenues, Expenses of Operating and Maintaining the System, Net Earnings and Annual Principal and Interest Requirements have been determined according to the provisions of the Bond Resolution. Debt service on the Series 2015 Bonds has been estimated by the Forecasting Consultant, in consultation with the Underwriter. Fiscal Year Ended June 30, Revenues 1 $5,000,551 $5,168,632 $5,222,598 $5,227,336 $5,385,588 $5,494,519 $5,605,855 Expenses of Operating and Maintaining the System 2 2,307,107 2,311,081 2,398,800 2,489,800 2,584,800 2,683,100 2,785,300 Net Earnings 3 2,693,444 2,857,551 2,823,798 2,787,536 2,800,788 2,811,419 2,820,555 Annual Principal and Interest Requirements 4 2,028,741 2,081,917 2,082,635 2,086,891 2,077,131 2,070,366 2,061,306 Coverage Ratio Calculated pursuant to the provisions of the Bond Resolution; different than Program Revenues as provided - Five-Year Operating History. Includes rates adjustment implemented for FY 2016 and assumes rate adjustment of 1% in Fiscal Years 2018 through Calculated pursuant to the provisions of the Bond Resolution; different than Operating Expenses as provided - Five-Year Operating History. Assumes minimal customer growth and inflation. 3 Calculated pursuant to the Bond Resolution and as otherwise provided in SECURITY FOR THE SERIES 2015 BONDS Rate Covenant herein. 4 Includes the projected remaining Series 2005 Bonds, the projected remaining Series 2007 Bonds, the Series 2013 Bond and the projected Series 2015 Bonds; because debt service on the unrefunded portions of the Series 2005 Bonds, the unrefunded portions of the Series 2007 Bonds and the Series 2015 Bonds was projected, Annual Principal and Interest Requirements may not tie out with - Debt Service Requirements herein. 24

37 Debt Service Requirements The following table sets forth, on a fiscal year basis, the debt service on the Series 2005 Bonds, the Series 2007 Bonds, the Series 2013 Bond, and the Series 2015 Bonds. Upon the issuance of the Series 2015 Bonds, the Series 2005 Bonds (which remain outstanding), the Series 2007 Bonds (which remain outstanding), the Series 2013 Bond, and the Series 2015 Bonds will be the only outstanding debt of the Authority having a lien on the Revenues of the System. Fiscal Year Ending June 30 Debt Service on Series 2005 Bonds Debt Service on Series 2007 Bonds Debt Service on Series 2013 Bond Debt Service on Series 2015A Bonds Debt Service on Series 2015B Bonds Total Annual Debt Service 2015 $719, $1,087, $222, $ 0.00 $ 0.00 $2,028, , , , , , ,080, , , , , ,077, , , , , ,081, , , ,036, ,077, , , ,033, ,071, , , ,029, ,061, , , ,020, ,058, , , ,016, ,047, , ,013, ,821, ,012, ,012, ,008, ,008, ,008, ,008, ,008, ,008, ,016, ,016, ,007, ,007, ,008, ,008, ,001, ,001, , , , , , , , , , , , , Total $1,317, $2,063, $2,004, $6,727, $21,965, $34,404, Note: Totals may not add due to rounding. Future Debt Absent extraordinary circumstances, the Authority does not contemplate any new indebtedness in the next five years. Any improvements, maintenance or repairs to the System are anticipated to be paid from cash on hand. 25

38 Operating Budget The Authority operates on a July 1 to June 30 fiscal year. Budgetary preparations generally begin at the end of the second quarter of each fiscal year. The General Manager prepares and submits a preliminary budget to the Board for its review, discussion, revision (as necessary) and approval. Set forth below is the operating budget of the Authority for the fiscal year ending June 30, 2016, which was adopted by the Board on February 5, Operating Budget Fiscal Year 2016 * Program Revenues Charges for Services Water Charges $4,600,863 Impact Fees 79,000 Service and Administrative Fees 16,000 Late Charges and Reconnections 170,000 Tap Fees n/a Other 10,000 Total Program Revenues 4,875,863 Operating Expenses Advertising 1,000 Auto Expense 60,000 Bad Debts 14,300 Bank Charges 12,000 Casual Labor 12,000 Chemicals and Supplies 233,000 Directors Fees 14,500 Depreciation n/a Dues and Subscriptions 12,000 Employee Benefits 114,061 Employee Awards 10,000 Equipment Rental 1,000 Insurance 240,000 Legal and Professional 60,000 Miscellaneous 24,000 Office Supplies 23,000 Payroll Taxes 86,100 Postage 26,000 Repairs and Maintenance 20,000 Refunds n/a Salaries and Wages 1,076,039 System Maintenance and Supplies 45,000 Tank Maintenance n/a Taxes and Licenses 2,100 Telephone 5,000 Testing 30,000 Travel 2,000 Training n/a Uniforms 11,300 Water Fund 3,681 Utilities 160,000 Total Operating Expenses 2,298,081 Operating Income $2,577,782 * Some line items may not match to - Five-Year Operating History due to reclassifications. 26

39 LEGAL MATTERS State Tax Exemption Bond Counsel is of the opinion that the Series 2015 Bonds and the interest thereon are exempt from all taxation by the State of South Carolina, its counties, municipalities and school districts except estate, transfer or certain franchise taxes. Interest paid on the Series 2015 Bonds is currently subject to the tax imposed on banks by Section , Code of Laws of South Carolina 1976, as amended, which is enforced by the South Carolina Department of Revenue as a franchise tax. The opinion of Bond Counsel is limited to the laws of the State of South Carolina and federal tax laws. No opinion is rendered by Bond Counsel concerning the taxation of the Series 2015 Bonds or the interest thereon under the laws of any other jurisdiction. Federal Income Tax Series 2015B Bonds Generally. On the date of issuance of the Series 2015B Bonds, Bond Counsel will render an opinion that, assuming continuing compliance by the Authority with the requirements of the Code, and the applicable regulations promulgated thereunder (the Regulations ) and further subject to certain considerations described in - Collateral Federal Tax Considerations below, under existing statutes, regulations and judicial decisions, interest on the Series 2015B Bonds is excludable from the gross income of the registered owners thereof for federal income tax purposes. Interest on the Series 2015B Bonds will not be treated as an item of tax preference in calculating the alternative minimum taxable income of individuals or corporations; however, interest on the Series 2015B Bonds will be included in the calculation of adjusted current earnings in determining the alternative minimum tax liability of corporations. The Code contains other provisions that could result in tax consequences, upon which no opinion will be rendered by Bond Counsel, as a result of (i) ownership of the Series 2015B Bonds or (ii) the inclusion in certain computations of interest that is excluded from gross income. The opinion of Bond Counsel will be limited to matters relating to the authorization and validity of the Series 2015B Bonds and the tax-exempt status of interest on the Series 2015B Bonds as described herein. Bond Counsel makes no statement regarding the accuracy and completeness of this Official Statement. The opinion of Bond Counsel is based on current legal authority, covers certain matters not directly addressed by such authorities, and represents Bond Counsel s judgment as to the proper treatment of the Series 2015B Bonds for federal income tax purposes. Bond Counsel s opinions are based upon existing law, which is subject to change. Such opinions are further based on factual representations made to Bond Counsel as of the date thereof. Bond Counsel assumes no duty to update or supplement its opinions to reflect any facts or circumstances that may thereafter come to Bond Counsel s attention or to reflect any changes in law that may thereafter occur or become effective. Moreover, Bond Counsel s opinions are not a guarantee of a particular result, and are not binding on the Internal Revenue Service (the IRS ) or the courts; rather, such opinions represent Bond Counsel s professional judgment based on its review of existing law, and in reliance on the representations and covenants that it deems relevant to such opinions. The opinion of Bond Counsel described above is subject to the condition that the Authority comply with all requirements of the Code and the Regulations, including, without limitation, certain restrictions on the use, expenditure and investment of the gross proceeds of the Series 2015B Bonds and the obligation to rebate certain earnings on investments of such gross proceeds to the United States Government, that must be satisfied subsequent to the issuance of the Series 2015B Bonds in order that interest thereon be, or continue to be, excluded from gross income for federal income tax purposes. The Authority has covenanted to comply with each such requirement. Failure to comply with certain of such requirements may cause the inclusion of interest on the Series 2015B Bonds in gross income for federal income tax purposes retroactive to the date of issuance of the Series 2015B Bonds. The opinion of Bond Counsel delivered on the date of issuance of the Series 2015B Bonds is conditioned on compliance by the Authority with such requirements and Bond Counsel has not been retained to monitor compliance with the requirements subsequent to the issuance of such Series 2015B Bonds. Collateral Federal Tax Considerations. Prospective purchasers of the Series 2015B Bonds should be aware that ownership of tax-exempt obligations may result in collateral federal income tax consequences to certain taxpayers, including, without limitation, financial institutions, property and casualty insurance companies, life insurance companies, certain foreign corporations, certain S corporations, individual recipients of Social Security or Railroad Retirement benefits and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry tax-exempt 27

40 obligations. The Series 2015B Bonds have not been designated bank qualified tax exempt obligations under Section 265(b)(3) of the Code. Bond Counsel expresses no opinion concerning such collateral income tax consequences and prospective purchasers of Series 2015B Bonds should consult their tax advisors as to the applicability thereof. Future legislation, if enacted into law, or clarification of the Code may cause interest on the Series 2015B Bonds to be subject, directly or indirectly, to federal income taxation, or otherwise prevent owners from realizing the full current benefit of the tax status of such interest. The introduction or enactment of any such future legislation or clarification of the Code may also affect the market price for, or marketability of, the Series 2015B Bonds. Prospective purchasers of the Series 2015B Bonds should consult their own tax advisers regarding any pending or proposed federal tax legislation, as to which Bond Counsel expresses no opinion. The IRS has established an ongoing program to audit tax-exempt obligations to determine whether interest on such obligations is includable in gross income for federal income tax purposes. Bond Counsel cannot predict whether the IRS will commence an audit of the Series 2015B Bonds. Bond Counsel s engagement with respect to the Series 2015B Bonds ends with the issuance of the Series 2015B Bonds, and, unless separately engaged, Bond Counsel is not obligated to defend the Authority or the owners regarding the tax-exempt status of the Series 2015B Bonds in the event of an audit examination by the IRS. Under current procedures, parties other than the Authority and their appointed counsel, including the owners of the Series 2015B Bonds, would have little, if any, right to participate in the audit examination process. Moreover, because achieving judicial review in connection with an audit examination of taxexempt bonds is difficult, obtaining an independent review of IRS positions with which the Authority legitimately disagrees may not be practicable. Any action of the IRS, including but not limited to selection of the Series 2015B Bonds for audit, or the course or result of such audit, or an audit of bonds presenting similar tax issues may affect the market price for, or the marketability of, the Series 2015B Bonds, and may cause the Authority or the owners of the Series 2015B Bonds to incur significant expense, regardless of the ultimate outcome. Original Issue Discount The Series 2015B Bonds maturing on July 1, 2037 have been sold at initial public offering prices which are less than the amount payable at maturity (the 2015B Discount Bonds ). The difference between the initial public offering prices to the public (excluding bond houses and brokers) at which price a substantial amount of each maturity of the 2015B Discount Bonds is sold and the amount payable at maturity constitutes original issue discount, which will be treated as interest on such 2015B Discount Bonds and to the extent properly allocable to particular owners who acquire such 2015B Discount Bonds at the initial offering thereof, will be excludable from gross income for federal income tax purposes to the same extent as other interest on such 2015B Discount Bonds. As discount is accrued, the purchaser s basis in such 2015B Discount Bond is increased by a corresponding amount, resulting in a decrease in the gain (or an increase in the loss) to be recognized for federal income tax purposes upon a sale or disposition of such Discount Bond prior to its maturity. A portion of the original issue discount that accrues in each year to an owner that is a corporation which owns a 2015B Bond that is a Discount Bond will be included in the calculation of such corporation s federal alternative minimum tax liability. Consequently, an owner that is a corporation which owns a Series 2015B Bond that is a Discount Bond should be aware that the accrual of original issue discount in each year may result in an alternative minimum tax liability although such owner of such Series 2015B Bond that is a Discount Bond has not received cash attributable to such original issue discount in such year. The Code contains certain provisions relating to the accrual of original issue discount in the case of subsequent purchasers of obligations such as the 2015B Discount Bonds. Owners who do not purchase 2015B Discount Bonds in the initial offering at the initial offering price at which a substantial amount of such 2015B Discount Bonds were sold should consult their own tax advisors with respect to the tax consequences of the ownership of the 2015B Discount Bonds. Owners who may acquire Series 2015B Bonds that are 2015B Discount Bonds should consult their tax advisors with respect to the determination for federal income tax purposes of the amount of original issue discount or interest properly accruable with respect to such Series 2015B Bonds, other tax consequences of owning 2015B Discount Bonds and the state and local tax consequences of owning 2015B Discount Bonds. 28

41 Original Issue Premium The Series 2015B Bonds maturing on July 1 in the years 2015, 2018 through 2025, inclusive, 2030 and 2035, have been sold at an initial public offering price which is greater than the amount payable at maturity (the 2015B Premium Bonds ). An amount equal to the excess of the purchase price of the 2015B Premium Bonds over their stated redemption prices at maturity constitutes premium on such Series 2015B Bonds. A purchaser of a Premium Bond must amortize any premium over such Series 2015B Bond s term using constant yield principles, based on the purchaser s yield to maturity. As premium is amortized, the purchaser s basis in such Premium Bond is reduced by a corresponding amount, resulting in an increase in the gain (or decrease in the loss) to be recognized for federal income tax purposes upon a sale or disposition of such Premium Bond prior to its maturity. Even though the purchaser s basis is reduced, no federal income tax deduction is allowed. Purchasers of any Series 2015B Bonds at a premium, whether at the time of initial issuance or subsequent thereto, should consult with their own tax advisors with respect to the determination and treatment of premium for federal income tax purposes and with respect to state and local tax consequences of owning such Series 2015B Bonds. Federal Income Tax - Series 2015A Bonds Federal Income Tax Generally. INTEREST ON THE SERIES 2015A BONDS IS NOT EXCLUDED FROM GROSS INCOME FOR FEDERAL INCOME TAX PURPOSES. OWNERS OF THE SERIES 2015A BONDS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE FEDERAL, STATE AND LOCAL TAX CONSEQUENCES AND FOREIGN TAX CONSEQUENCES OF THEIR ACQUISITION, OWNERSHIP AND DISPOSITION OF THE SERIES 2015A BONDS. The following is a summary of certain U.S. federal income tax considerations of the purchase, ownership and disposition of the Series 2015A Bonds. This summary applies to holders only if they are a beneficial owner of a Series 2015A Bond and acquire a Series 2015A Bond in this offering for a price equal to the issue price of the Series 2015A Bond. The issue price of the Series 2015A Bond is the first price at which a substantial amount of the Series 2015A Bonds is sold other than to bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers. For purposes of this discussion, a U.S. Holder means a beneficial owner of a Series 2015A Bond that, for U.S. federal income tax purposes, is: a citizen or resident alien individual of the United States; a corporation (including for this purpose any other entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States or any State thereof or the District of Columbia; an estate the income of which is subject to U.S. federal income taxation regardless of its source; or a trust (i) that is subject to the primary supervision of a court within the United States and under the control of one or more United States persons (as defined for U.S. federal income tax purposes), or (ii) that has a valid election in effect under applicable U.S. Treasury regulations to be treated as a United States person. For the purposes of this discussion, a non-u.s. Holder means a beneficial owner of a Series 2015A Bond that, for U.S. federal income tax purposes, is an individual, corporation (including for this purpose any other entity treated as a corporation for U.S. federal income tax purposes), trust or estate that is not a U.S. Holder. This summary is based on provisions of the Code, Treasury regulations issued thereunder, and administrative and judicial interpretations thereof, all as of the date of this Official Statement and all of which are subject to change or differing interpretation (perhaps retroactively), and is for general information only. This summary addresses only beneficial owners of the Series 2015A Bonds that hold the Series 2015A Bonds as capital assets within the meaning of Section 1221 of the Code and does not represent a detailed description of the U.S. federal income tax consequences to prospective purchasers of the Series 2015A Bonds in light of their particular circumstances. In addition, it does not represent a detailed description of the U.S. federal income tax consequences applicable to prospective purchasers of the Series 2015A Bonds that are subject to special treatment under the U.S. federal income tax laws, such as taxpayers subject to the alternative minimum tax, the U.S. federal estate and gift tax, U.S. expatriates, financial institutions, partnerships or other pass-through entities, or investors in such entities, individual retirement and other tax deferred accounts, dealers and traders in securities or currencies, insurance companies, tax-exempt organizations, persons holding the Series 2015A Bonds as part of a conversion, constructive sale, wash sale or other integrated transaction or a hedge, straddle or synthetic security, and U.S. Holders whose functional currency is other than the U.S. dollar. The Authority cannot assure holders that a change in law will not alter significantly the tax considerations that are described in this summary. 29

42 If a U.S. or non-u.s. partnership (including for this purpose an entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds the Series 2015A Bonds, the tax treatment of a partner generally will depend upon the status of the partner, the activities of the partnership and certain determinations made at the partner level. Non- U.S. partnerships also generally are subject to special tax documentation requirements. U.S. Holders Interest. It is expected and this discussion assumes that either the issue price of the Series 2015A Bonds will equal the stated principal amount thereof or the Series 2015A Bonds will be issued with less than a de minimis amount of original issue discount ( OID ). Therefore, a U.S. Holder will have ordinary interest income equal to the amount of interest paid or accrued on a Series 2015A Bond, includable in accordance with the U.S. Holder s regular method of tax accounting for U.S. federal income tax purposes. Disposition of the Series 2015A Bonds. Unless a nonrecognition provision of the Code applies, the sale, exchange, redemption, defeasance, retirement or other disposition of a Series 2015A Bond will result in capital gain or loss equal to the difference, if any, between the amount realized on the disposition (excluding amounts attributable to accrued and unpaid interest, which, as described above, will be taxed as ordinary income to the extent not previously included in gross income by the U.S. Holder) and the U.S. Holder s tax basis in the Series 2015A Bonds. Generally, the U.S. Holder s tax basis for determining gain or loss on the disposition of the Series 2015A Bond will equal the purchase price paid by the U.S. Holder for the Series 2015A Bond, (i) increased by the amount of OID previously included in income by such U.S. Holder with respect to such Series 2015A Bond, if any, and (ii) decreased by any payments previously made on such Series 2015A Bond (other than payments of qualified stated interest), and further decreased by any amortized premium (if any). A U.S. Holder s tax basis for determining gain or loss on the disposition of a Series 2015A Bond generally will equal the purchase price of such Series 2015A Bond to such U.S. Holder. Such gain or loss will be long-term capital gain or loss if the Series 2015A Bond is held for more than one year as of the time of the disposition. The deductibility of capital losses is subject to limitations. U.S. Holders should consult their tax advisors regarding the treatment of capital gains and losses. Non-U.S. Holders Interest. The United States generally imposes a 30% withholding tax on payments of interest to non-u.s. persons. The 30% (or lower applicable treaty rate) U.S. federal withholding tax will not apply to a non-u.s. Holder in respect of any payment of interest on the Series 2015A Bonds that is not effectively connected with the conduct of a U.S. trade or business provided that such non-u.s. Holder is not a bank whose receipt of interest on the Series 2015A Bonds is described in section 881(c)(3)(A) of the Code; and (a) provides identifying information (i.e., name and address) to the Authority or its paying agent on IRS Form W-8BEN (or successor form), and certifies, under penalty of perjury, that such non-u.s. Holder is not a U.S. person or (b) a financial institution holding the Series 2015A Bonds on behalf of such non-u.s. Holder certifies, under penalty of perjury, that it has received the applicable IRS Form W-8BEN (or successor form) from the beneficial owner and provides the Authority or its paying agent with a copy. If a non-u.s. Holder cannot satisfy the requirements described above, payments of interest made to such non- U.S. Holder will be subject to the 30% U.S. federal withholding tax, unless such non-u.s. Holder provides the Authority or its paying agent with a properly executed (i) IRS Form W-8BEN (or successor form) claiming an exemption from or reduction in withholding under the benefit of an income tax treaty or (ii) IRS Form W 8ECI (or successor form) stating that interest paid on the Series 2015A Bond is not subject to withholding tax because it is effectively connected with such non-u.s. Holder s conduct of a trade or business in the United States. If a non-u.s. Holder is engaged in a trade or business in the United States and interest on the Series 2015A Bonds is effectively connected with the conduct of that trade or business (and, if required by an applicable income tax treaty, is attributable to a permanent establishment in the United States maintained by such non-u.s. Holder), such non- U.S. Holder, although exempt from the 30% withholding tax, generally will be subject to U.S. federal income tax on that interest on a net income basis in the same manner as if such non-u.s. Holder were a United States person as defined under the Code. In addition, if a non-u.s. Holder is a non-u.s. corporation, it may be subject to a branch profits tax equal to 30% (or lower applicable treaty rate) of its earnings and profits for the taxable year, subject to adjustments, that are effectively connected with the conduct by it of a trade or business in the United States. For this purpose, effectively connected interest on the 20l5A Bond will be included in earnings and profits. 30

43 Disposition of the Series 2015A Bonds. Any gain realized on the disposition of a Series 2015A Bond by a non- U.S. Holder generally will not be subject to U.S. federal income or withholding tax unless (i) that gain is effectively connected with the non-u.s. Holder s conduct of a trade or business in the United States (and, if required by an income tax treaty, is attributable to a U.S. permanent establishment maintained by such non-u.s. Holder), (ii) such non-u.s. Holder is an individual who is present in the United States for 183 days or more in the taxable year of that disposition and certain other conditions are met, or (iii) in the case of disposition proceeds representing accrued interest, the non- U.S. Holder cannot satisfy the requirements of the complete exemption from withholding tax described above (and the non-u.s. Holder s U.S. federal income tax liability has not otherwise been fully satisfied through the U.S. federal withholding tax described above). If a non-u.s. Holder s gain is effectively connected with such non-u.s. Holder s U.S. trade or business (and, if required by an applicable income tax treaty, is attributable to a U.S. permanent establishment maintained by such non- U.S. Holder), such non-u.s. Holder generally will be required to pay U.S. federal income tax on the net gain derived from the sale in the same manner as if it were a United States person as defined under the Code. If such a non-u.s. Holder is a corporation, such non-u.s. Holder may also, under certain circumstances, be subject to a branch profits tax at a 30% rate (or lower applicable treaty rate). If a non-u.s. Holder is subject to the 183-day rule described above, such non-u.s. Holder generally will be subject to U.S. federal income tax at a flat rate of 30% (or a reduced rate under an applicable treaty) on the amount by which capital gains allocable to U.S. sources (including gains from the sale, exchange, retirement or other disposition of the Series 2015A Bonds) exceed capital losses allocable to U.S. sources, even though the non-u.s. Holder is not considered a resident alien under the Code. Information Reporting and Backup Withholding In general, information reporting requirements apply to interest paid to, and to the proceeds of a sale or other disposition of a Series 2015A Bond (including a redemption) by, certain U.S. Holders. In addition, backup withholding (currently at a rate of 28%) may apply to a U.S. Holder unless such holder provides a correct taxpayer identification number and otherwise complies with applicable requirements of the backup withholding rules. Backup withholding generally does not apply to payments made to certain exempt U.S. persons. In general, a non-u.s. Holder will not be subject to backup withholding and information reporting with respect to interest payments made to such holder provided that the Authority or its paying agent has received from such holder the certification described above under -Non-U.S. Holders-Interest and neither the Authority nor its paying agent has actual knowledge or reason to know that the non-u.s. Holder is a U.S. Holder. However, the Authority or its paying agent may be required to report to the IRS and the non-u.s. Holder payments of interest on the Series 2015A Bonds and the amount of tax, if any, withheld with respect to those payments. Copies of the information returns reporting such interest payments and any withholding may also be made available to the tax authorities in the country in which the non- U.S. Holder resides under the provisions of a treaty or agreement. Payments of the proceeds of a sale or other disposition (including a redemption) of the Series 2015A Bonds made to or through a non-u.s. office of non-u.s. financial intermediaries that do not have certain enumerated connections with the United States generally will not be subject to information reporting or backup withholding. In addition, a non-u.s. Holder will not be subject to backup withholding or information reporting with respect to the proceeds of the sale or other disposition of a Series 2015A Bond within the United States or conducted through non-u.s. financial intermediaries with certain enumerated connections with the United States, if the payor receives the certification described above under -Non-U.S. Holders-Interest or such holder otherwise establishes an exemption, provided that the payor does not have actual knowledge or reason to know that the non-u.s. Holder is a United States person or the conditions of any other exemption are not, in fact, satisfied. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules will be allowed as a refund or credit against a holder s U.S. federal income tax liability provided the required information is furnished by such holder to the IRS in a timely manner. 31

44 Recently Enacted United States Legislation The Code generally imposes a tax of 3.8% on the net investment income of certain individuals, trusts and estates for taxable years beginning after December 31, Among other items, net investment income generally includes gross income from interest and net gain attributable to the disposition of certain property, less certain deductions. Prospective purchasers should consult their own tax advisors regarding the possible implications of this legislation in their particular circumstances. UNITED STATES BANKRUPTCY CODE The obligation of the Authority under the Resolutions should be considered with reference to Chapter 9 of the United States Bankruptcy Code, 11 U.S.C. 901, et seq., as amended (the Bankruptcy Code ) and other laws affecting creditors rights and public instrumentalities generally. Chapter 9 permits a municipality, political subdivision, public agency, or other instrumentality of a state that is insolvent or unable to meet its debts as such debts mature to file a petition in the United States Bankruptcy Court for the purpose of effecting a plan to adjust its debts; directs such a petitioner to file with the court a list of its creditors; provides that the filing of the petition under that Chapter operates as a stay of the commencement or continuation of any judicial or other proceeding against the petitioner but does not limit or impair the power of the state to control a municipality by legislation; directs a petitioner to file a plan for the adjustment of its debts; permits the petitioner in its plan to modify the rights to payment of its creditors; and provides that the plan must be accepted in writing by or on behalf of the creditors of each class of claims holding at least twothirds in amount and more than one-half in number of the creditors which have accepted or rejected the plan. The plan may be confirmed notwithstanding the negative vote of one or more classes of claims if the court finds that the plan is in the best interest of creditors, is feasible, and is fair and equitable with respect to the dissenting classes of creditors. A petitioner has the right to reinstate or otherwise modify indebtedness under its plan varying from the original maturity schedule of such indebtedness notwithstanding any provision in the documents under which the indebtedness arose relating to the insolvency or financial condition of the debtor before the confirmation of the plan, the commencement of a case under the Bankruptcy Code, or the appointment of or taking possession by a trustee in a case under the Bankruptcy Code or by a receiver or other custodian prior to the commencement of a case under the Bankruptcy Code. Ratings MISCELLANEOUS Standard & Poor s Rating Service ( S&P ) has issued a municipal bond rating of A+ to the Series 2015 Bonds. Such rating reflects only the view of S&P and any desired explanation of the significance of the rating should be obtained only from S&P at the following address: Standard & Poor s Ratings Services, 55 Water Street, New York, New York There is no assurance that the rating will remain in effect for any given period of time or that such rating may not be lowered or withdrawn entirely by S&P, if in its judgment circumstances so warrant. Any such downgrade in or withdrawal of such rating may have an adverse effect on the market price of the Series 2015 Bonds. Moody s Investors Service, Inc. ( Moody s ) has issued a municipal bond rating of A1 to the Series 2015 Bonds. Such rating reflects only the view of Moody s and any desired explanation of the significance of the rating should be obtained only from Moody s at the following address: Moody s Investors Service, Inc., 7 World Trade Center, 250 Greenwich Street, New York, New York There is no assurance that the rating will remain in effect for any given period of time or that such rating may not be lowered or withdrawn entirely by Moody s, if in its judgment circumstances so warrant. Any such downgrade in or withdrawal of such rating may have an adverse effect on the market price of the Series 2015 Bonds. Underwriting The Series 2015 Bonds are being purchased for reoffering by Stephens Inc. (the Underwriter ). The Underwriter has agreed to purchase the Series 2015A Bonds at an aggregate purchase price of $5,920, (representing the par amount of the Series 2015A Bonds less underwriter s discount of $44,219.67). The Underwriter has agreed to purchase the Series 2015B Bonds at an aggregate purchase price of $14,930, (representing the par amount of the Series 2015B Bonds plus net original issue premium of $1,704, and less underwriter s discount of $98,780.78). 32

45 The initial public offering prices are set forth on the inside front cover page of this Official Statement. The Underwriter may offer and sell the Series 2015 Bonds to certain dealers and others (including sales for deposit into investment trusts, certain of which may be sponsored or managed by the Underwriter) at a price lower than the offering prices stated on the inside front cover page hereof. The offering prices may be changed from time to time by the Underwriter without prior notice. The Underwriter is obligated to purchase all of the Series 2015 Bonds, if any are purchased, such obligation being subject to certain conditions. Independent Certified Public Accountants The financial statements of the Authority attached as APPENDIX A hereto have been examined by Sheheen, Hancock & Godwin, LLP, Camden, South Carolina, independent certified public accountants, to the extent and for the periods indicated in their report thereon which appears in APPENDIX A attached hereto. Litigation Relating to the Series 2015 Bonds No litigation is currently pending or, to the knowledge of the Authority, threatened in any court to restrain or enjoin the issuance or delivery of any of the Series 2015 Bonds or the collection of revenues pledged or to be pledged to pay the principal of and interest on the Series 2015 Bonds, or in any way contesting or affecting the validity of the Series 2015 Bonds or the Resolutions or contesting the power or authority of the Authority to issue the Series 2015 Bonds. Legal Matters All of the legal proceedings in connection with the authorization and issuance of the Series 2015 Bonds are subject to the approval of Haynsworth Sinkler Boyd, P.A., Charleston, South Carolina, Bond Counsel. The final approving opinions of Bond Counsel, in substantially the forms attached hereto as APPENDIX D Form of Opinions of Bond Counsel will be furnished without charge to the purchasers of the Series 2015 Bonds at the time of their delivery. Certain legal matters in connection with the Series 2015 Bonds will be passed on for the Authority by its counsel, Baker, Ravenel & Bender, L.L.P., Columbia, South Carolina. Certain legal matters in connection with the Series 2015 Bonds will be passed on for the Underwriter by its counsel, Pope Zeigler, LLC, Columbia, South Carolina. The various legal opinions to be delivered concurrently with the delivery of the Series 2015 Bonds express the professional judgment of the attorneys rendering the opinions as to the legal issues explicitly addressed therein. By rendering a legal opinion, the opinion giver does not become an insurer or guarantor of that expression of professional judgment, of the transaction opined upon, or of the future performance of parties to the transaction. Nor does the rendering of an opinion guarantee the outcome of any legal dispute that may arise out of the transaction. Enforceability of Remedies The remedies available to the owners of the Series 2015 Bonds upon an event of default under the Resolutions are in many respects dependent upon judicial actions which are often subject to discretion and delay. Under existing constitutional and statutory law and judicial decisions, including specifically Title 11 of the United States Code, the remedies specified by the federal bankruptcy code, the Resolutions and the Series 2015 Bonds may not be readily available or may be limited. The various legal opinions to be delivered concurrently with the delivery of the Series 2015 Bonds (including Bond Counsel s approving opinion) will be qualified, as to the enforceability of the various legal instruments, by limitations imposed by bankruptcy, reorganization, insolvency or other similar laws affecting the rights of credits enacted before or after such delivery. 33

46 Continuing Disclosure The Authority has entered into an Disclosure Dissemination Agent Agreement (the Disclosure Agreement ), with Digital Assurance Certification, L.L.C. (the Dissemination Agent ) for the benefit of the holders of the Series 2015 Bonds, pursuant to which the Authority has agreed to provide certain financial information and operating data relating to the Authority by not later than seven months after the end of the Authority s last fiscal year (the Annual Report ), and to provide notices of the occurrences of certain enumerated events (the Material Events ). The form of the Disclosure Agreement is attached hereto as APPENDIX E. Such covenant shall only apply so long as the Series 2015 Bonds remain Outstanding under the Resolutions. The Annual Report will be filed by the Authority with the Municipal Securities Rulemaking Board s Electronic Municipal Market Access ( EMMA ) system as described in the Disclosure Agreement attached hereto as APPENDIX E, as well as any state information depository that is subsequently established in the State (the State Information Depository ). The notices of Material Events will be filed by the Authority through the Dissemination Agent with EMMA and with the State Information Depository, if any. The specific nature of the information to be contained in the Annual Report and the notices of Material Events are described in APPENDIX E, which shall be executed by the Authority and the Dissemination Agent at the time of issuance of the Series 2015 Bonds. These agreements have been made in order to assist the Underwriter in complying with Securities and Exchange Commission Rule 15c2-12. No party other than the Authority through the Dissemination Agent is obligated to provide, nor is expected to provide, any continuing disclosure information with respect to the Series 2015 Bonds. The Authority previously entered into continuing disclosure undertakings with respect to its bonds, the terms of which require the filing of the Annual Report (or documentation similar thereto). The Authority was required to provide continuing disclosure with respect to its (i) $6,135,000 Waterworks System Revenue Bonds, Series (the Series 2003 Bonds ) 2 ; (ii) Series 2005 Bonds; and (iii) Series 2007 Bonds. The undertakings for the Series 2003 Bonds, the Series 2005 Bonds and the Series 2007 Bonds required that certain financial and operating information, including the audited financial statements of the Authority, be filed within 210 days of the end of the Authority s fiscal year (January 26 of each year) for the Series 2007 Bonds and seven months following the end of the Authority s fiscal year (February 1 of each year) for the Series 2003 Bonds and Series 2005 Bonds; other events related to the Series 2003 Bonds, Series 2005 Bonds and the Series 2007 Bonds, if material, were required to be disclosed in as soon as reasonably practicable. Respecting the Series 2003 Bonds, Series 2005 Bonds and the Series 2007 Bonds, the Authority failed to properly disclose certain required operating data for fiscal years 2009, 2010, 2011, 2012 and [Remainder of Page Intentionally Left Blank] 1 The Series 2003 Bonds were recently refunded by the Series 2013 Bond. However, Rule 15c2-12(f)(3) provides that an issuer shall disclose any instances in the previous five years in which the Authority failed to comply with its continuing disclosure undertaking. Although the Series 2003 Bonds have been redeemed, they were outstanding during the required five year look-back and therefore have been included in this section entitled -Continuing Disclosure. 2 The Authority was not required to provide continuing disclosure under Rule 15c2-12 with respect to the Series 2013 Bond. 34

47 Specific information concerning the Authority s compliance with its continuing disclosure undertakings for the Series 2003 Bonds, Series 2005 Bonds and the Series 2007 Bonds is provided in the table below. Series of Bonds Fiscal Year End (June 30) Annual Filing Date Annual Report Submission Date Audited Financials Submission Date Series 2003 Bonds * /1/2010 Not filed 1/4/ /1/ /15/ /15/ /1/2012 Not filed 10/11/ /1/ /2/ /2/ Series 2005 Bonds /1/2010 Not filed 1/4/ /1/ /15/ /15/ /1/2012 Not filed 10/11/ /1/ /2/ /2/ /1/ /10/ /10/ /1/ /06/ ; 02/12/ /23/2014 Series 2007 Bonds /26/2010 Not filed 1/4/ /26/ /15/ /15/ /26/2012 Not filed 10/11/ /26/ /2/ /2/ /26/ /10/ /10/ /26/ /06/ ; 02/12/ /23/2014 * Bonds redeemed on July 8, Mislabeled as annual report; audit contains some operating information, but omits other required information. 2 Incomplete. 3 Audit contains some operating information, but omits other required information. 4 Substantially complete; however certain information regarding major water users was not filed. 5 Revised. Information complete but filed after annual filing date. Since 2008, the rating agencies have periodically implemented rating changes to insurers and issuers without providing notice to issuers like Authority. The Authority has learned of some changes through general media sources and, thereafter, filed the notices of certain Material Events. In particular, the Series 2003 Bonds, the Series 2005 Bonds and the Series 2007 Bonds were all insured by MBIA Insurance Corporation ( MBIA ). MBIA received a number of ratings downgrades and upgrades between April, 2008 and May, According to the Dissemination Agent, the Authority provided notice of MBIA s rating changes to certain of the Nationally Recognized Municipal Securities Information Repositories on 06/16/2008 (event occurred 06/11/2008), 07/23/2008 (event occurred 07/22/2008), 12/11/2008 (event occurred 12/12/2008), and 06/26/2009 (event occurred 06/26/2009). Verification of Mathematical Computations The arithmetical accuracy of certain computations included in the schedules provided by the Underwriter on behalf of the Authority relating to the sufficiency of the amounts deposited in the Escrow Account to pay the principal of and interest on the Refunded Bonds to their respective redemption dates was examined by Bingham Arbitrage Rebate Services, Inc., Richmond, Virginia. Such computations were based solely upon assumptions and information supplied by the Underwriter on behalf of the Authority. Bingham Arbitrage Rebate Services, Inc., Richmond, Virginia has restricted its procedures to examining the arithmetical accuracy of certain computations and has not made any study or evaluation of the assumptions and information upon which the computations are based and, accordingly, has not expressed an opinion on the data used, the reasonableness of the assumptions, or the achievability of future events. 35

48 Concluding Statement All the summaries of the provisions of the Act, the Enabling Act, the Series 2015 Bonds, and the Resolutions and all summaries and references to other documents, instruments, and materials not purported to be quoted in full are only brief outlines of certain provisions thereof and are not intended to be and do not constitute complete statements of the Enabling Act or such documents or provisions. Reference is made hereby to the complete documents relating to such matters for the complete terms and provisions thereof, or for the information contained therein. The attached Appendices are integral parts of this Official Statement and should be read in their entirety together with all foregoing statements. Certain of the information set forth in the Official Statement and in the appendices hereto has been obtained from sources other than the Authority that are believed to be reliable but is not guaranteed as to accuracy or completeness by the Underwriter or the Authority. The agreement between the Authority and holders of the Series 2015 Bonds is fully set forth in the Resolutions and neither any advertisement for the Series 2015 Bonds nor this Official Statement is to be construed as constituting an agreement with the holders of the Series 2015 Bonds. The execution and delivery of this Official Statement have been duly authorized and this Official Statement has been deemed final by the Authority. LUGOFF WATER DISTRICT OF KERSHAW COUNTY D/B/A LUGOFF-ELGIN WATER AUTHORITY /s/ Rev. Dr. Chuck Everett Chairman of the Board 36

49 APPENDIX A Audited Financial Statements for the Authority for the fiscal year Ended June 30, 2014

50 [THIS PAGE INTENTIONALLY LEFT BLANK]

51 A-1

52 A-2

53 A-3

54 A-4

55 A-5

56 A-6

57 A-7

58 A-8

59 A-9

60 A-10

61 A-11

62 A-12

63 A-13

64 A-14

65 A-15

66 A-16

67 A-17

68 A-18

69 A-19

70 A-20

71 A-21

72 A-22

73 A-23

74 A-24

75 A-25

76 A-26

77 A-27

78 A-28

79 A-29

80 A-30

81 A-31

82 A-32

83 A-33

84 A-34

85 A-35

86 [THIS PAGE INTENTIONALLY LEFT BLANK]

87 APPENDIX B Copy of Bond Resolution and Ninth Supplemental Resolution

88 [THIS PAGE INTENTIONALLY LEFT BLANK]

89 B-1

90 B-2

91 B-3

92 B-4

93 B-5

94 B-6

95 B-7

96 B-8

97 B-9

98 B-10

99 B-11

100 B-12

101 B-13

102 B-14

103 B-15