$2,630,000 CITY OF WOODLAND, WASHINGTON LIMITED TAX GENERAL OBLIGATION IMPROVEMENT AND REFUNDING BONDS, 2012

Transcription

1 OFFICIAL STATEMENT (Dated May 7, 2012) BOOK-ENTRY ONLY NEW ISSUE - BANK QUALIFIED STANDARD AND POOR S RATING: A In the opinion of Bond Counsel, under existing federal law and assuming compliance with applicable requirements of the Internal Revenue Code of 1986, as amended (the Code ), that must be satisfied subsequent to the issue date of the Bonds, interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the alternative minimum tax applicable to individuals. However, while interest on the Bonds also is not an item of tax preference for purposes of the alternative minimum tax applicable to corporations, interest on the Bonds received by corporations is taken into account in the computation of adjusted current earnings for purposes of the alternative minimum tax applicable to corporations, interest on the Bonds received by certain S corporations may be subject to tax, and interest on the Bonds received by foreign corporations with United States branches may be subject to a foreign branch profits tax. Receipt of interest on the Bonds may have other federal tax consequences for certain taxpayers. See TAX EXEMPTION and CERTAIN OTHER FEDERAL TAX CONSEQUENCES herein. $2,630,000 CITY OF WOODLAND, WASHINGTON LIMITED TAX GENERAL OBLIGATION IMPROVEMENT AND REFUNDING BONDS, 2012 DATED: Date of Initial Delivery DUE: December 1, as shown below The City of Woodland, Washington (the City ) is issuing its Limited Tax General Obligation Improvement and Refunding Bonds, 2012 (the Bonds ) in fully registered form in the denomination of $5,000 or integral multiples thereof within a single maturity. The Bonds will be registered in the name of Cede & Co., as bond owner and nominee for The Depository Trust Company ( DTC ). DTC will act as securities depository for the Bonds. Purchasers will not receive certificates representing their interest in the Bonds purchased. Interest on the Bonds is payable on December 1, 2012 and semiannually thereafter on June 1 and December 1 of each year to the maturity or earlier redemption of the Bonds. Principal of and interest on the Bonds are payable by the fiscal agent of the State of Washington (the State ), currently The Bank of New York Mellon in New York, New York (the Bond Registrar ), as further described herein. For so long as the Bonds remain in a bookentry only transfer system, the Bond Registrar will make such payments only to DTC, which in turn is obligated to remit such principal and interest to DTC participants for subsequent disbursement to Beneficial Owners of the Bonds as further described herein in Appendix B. MATURITY SCHEDULE Due Principal Interest Due Principal Interest Dec. 1 Amount Rate % Yield % CUSIP Dec. 1 Amount Rate % Yield % CUSIP 2012 $ 85, AR $ 90, AW , AS2 *** *** *** *** *** , AT0 *** *** *** *** *** , AU , BA , AV , BB8 $305,000 Term Bonds due December 1, 2020 at 3.00% (Yield 2.40%) CUSIP No AZ6 $390,000 Term Bonds due December 1, 2027 at 3.50% (Yield 3.15%*) CUSIP No BC6 $560,000 Term Bonds due December 1, 2032 at 4.00% (Yield 3.55%*) CUSIP No BD4 $600,000 Term Bonds due December 1, 2036 at 4.10% (Yield 3.80%*) CUSIP No BE2 *Priced to the par call date of June 1, The Bonds are subject to redemption prior to maturity as described herein under the heading DESCRIPTION OF THE BONDS -- Redemption of Bonds Prior to Maturity. The City has designated the Bonds as Qualified Tax-Exempt Obligations for banks, thrift institutions and other financial institutions. See the heading CERTAIN OTHER FEDERAL TAX CONSEQUENCES herein. For as long as any of the Bonds are outstanding, the City has irrevocably pledged to levy taxes annually within the constitutional and statutory tax limitations provided by law without a vote of the electors of the City on all taxable property within the City in an amount sufficient, together with other money of the City legally available for such purposes, to pay when due the principal of and interest on the Bonds. The full faith, credit and resources of the City have been pledged irrevocably for the annual levy and collection of those taxes and the prompt payment of that principal of and interest on the Bonds. State law limits the amount of property taxes the City can levy. See the heading PROPERTY TAX LIMITATIONS AND OTHER TAXING AUTHORITY. The City has also pledged to the payment of the Bonds proceeds that the City receives from imposing an additional 0.1% sales and use tax approved by voters. See the heading SECURITY FOR THE BONDS herein. The Bonds do not constitute a debt or indebtedness of the State of Washington, or any political subdivision thereof other than the City. See the heading SECURITY FOR THE BONDS herein. The Bonds are offered by Martin Nelson & Co., Inc. (the Underwriter ) when, as and if issued, subject to the final approving legal opinion of Foster Pepper PLLC of Seattle, Washington, Bond Counsel. It is anticipated that the Bonds will be ready for delivery through DTC by Fast Automated Securities Transfer on or about May 22, This cover page contains certain information for quick reference only. It is not a summary of this issue. Investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision.

2 No dealer, broker, sales representative or other person has been authorized by the Underwriter or the City to give any information or to make any representations with respect to the Bonds other than those contained herein and, if given or made, such other information or representations must not be relied upon as having been authorized by any of the foregoing. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor will there be any sale of the Bonds by any person, in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. The information set forth herein has been obtained from City officials and other sources which the City believes to be reliable, but is not guaranteed as to accuracy or completeness, and is not to be construed as a representation, by the Underwriter. The information and expression of opinions herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder will, under any circumstances, create any implication that there has been no change in the affairs of the City or any other person described herein since the date thereof. References to certain provisions of the Bond Ordinance and other documents and agreements which are included in this Official Statement are intended to be solely summary in nature and do not purport to be comprehensive or definitive. References should be made to each of such documents in their entirety for further information in connection therewith. Copies of the aforementioned documents are available from the Finance Director, City of Woodland, 230 Davidson Avenue, PO Box 9, Woodland, Washington 98674, upon request and payment to the City for charges of copying and mailing. This Official Statement is not to be construed as a contract or agreement between the City and registered owners of any of the Bonds. Any statements made in this Official Statement or any Appendices hereto involving matters of opinion, whether or not expressly so stated, and any estimates, are intended as such and not as representations of fact. The Underwriter has provided the following sentence for inclusion in this Official Statement. The Underwriter has reviewed the information set forth in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. In connection with the offering of the Bonds, the Underwriter may effect transactions that stabilize or maintain the market price of the Bonds at a level above that which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time without prior notice to any person. The Bonds have not been registered under the Securities Act of 1933, as amended, in reliance upon a specific exemption contained in such act. The exemption from registration or qualification of the Bonds cannot be regarded as a recommendation thereof. No state or any of their agencies have passed upon the merits of the Bonds or the accuracy or completeness of this Official Statement. Any representation to the contrary may be a criminal offense. CUSIP is a registered trademark of the American Bankers Association. The CUSIP data herein is provided by CUSIP Global Services (CGS), which is managed on behalf of the American Bankers Association by Standard and Poor s, CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc. The CUSIP numbers are not intended to create a database and do not serve in any way as a substitute for the CUSIP Service. CUSIP numbers have been assigned by an independent company not affiliated with the City and are provided solely for convenience and reference. The CUSIP numbers for specific maturity are subject to change after the issuance of the Bonds. Neither the City nor the Underwriter takes responsibility for the accuracy of the CUSIP numbers. The achievement of certain results or other expectations contained in forward-looking statements in this Official Statement involves known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements described to be materially different from any future results, performance or achievements expressed or implied by such forwardlooking statements. The City does not plan to issue any updates or revisions to those forward-looking statements if or when its expectations or events, conditions or circumstances on which such statements are based occur. ii

3 CITY OF WOODLAND, WASHINGTON 230 Davidson Avenue PO Box 9 Woodland, Washington Phone: (360) Fax: (360) Webpage: City Council Grover B. Laseke John J. Burke (Position 1) Al Swindell (Position 2) Marilee McCall (Position 3) Marshall Allen (Position 4) Susan Humbyrd (Position 5) Benjamin Fredricks (Position 6) Scott Perry (Position 7) Mayor Mayor Pro Tem Council Member Council Member Council Member Council Member Council Member Council Member City Officials Mari Ripp Carolyn Johnson Rob Stephenson Mike Jackson Bart Stepp William Eling Clerk-Treasurer Community Development Planner Police Chief Fire Chief Public Works Director City Attorney Bond Counsel Foster Pepper PLLC Seattle, Washington Underwriter Public Finance Department Seattle, Washington The City s website is not part of this Official Statement, and investors should not rely on information presented in the City s website in determining whether to purchase the Bonds. This inactive textual reference to the City s website is not a hyperlink and does not incorporate the City s website by reference. iii

4 TABLE OF CONTENTS DESCRIPTION OF THE BONDS... 1 Principal Amount, Dates, Interest Rates and Maturities... 1 Registration Features and Bond Registrar... 1 Redemption of Bonds Prior to Maturity... 2 Notice of Redemption... 3 Failure to Pay Bonds... 3 Refunding or Defeasance of the Bonds... 3 PURPOSE AND USE OF PROCEEDS... 4 Purpose... 4 Refunded Bonds... 4 Sources and Uses of Funds... 5 SECURITY FOR THE BONDS... 5 CITY DEBT AND DEBT LIMITATIONS... 5 Authorization of Debt... 5 Statutory Limits on Indebtedness... 6 Debt Payment Record... 6 Future Financings... 6 PROPERTY TAX LIMITATIONS AND OTHER TAXING AUTHORITY... 9 Regular Property Tax Limitations Property Tax Valuation and Collections Levy Rates within the City Collection of Other Taxes THE CITY Government Organization Administration Labor Relations Pensions and Other Post Employment Benefits Risk Management Financial Information Authorized Investments Local Government Investment Pool Authorized Investments for Bond Proceeds ECONOMIC AND DEMOGRAPHIC INFORMATION INITIATIVES AND REFERENDA TAX EXEMPTION CERTAIN OTHER FEDERAL TAX CONSEQUENCES UNDERTAKING TO PROVIDE CONTINUING DISCLOSURE UNDERWRITING AND LEGAL Underwriting Agreement Rating Absence of Material Litigation Legal Opinion Conflicts of Interest Official Statement Certificate FORM OF THE LEGAL OPINION... Appendix A BOOK-ENTRY ONLY SYSTEM... Appendix B AUDIT REPORT... Appendix C iv

5 OFFICIAL STATEMENT CITY OF WOODLAND, WASHINGTON $2,630,000 LIMITED TAX GENERAL OBLIGATION IMPROVEMENT AND REFUNDING BONDS, 2012 INTRODUCTION The City of Woodland, Washington (the City ), a municipal corporation duly organized and existing under and by virtue of the laws of the State of Washington (the State ), furnishes this Official Statement in connection with the offering of $2,630,000 principal amount of its Limited Tax General Obligation Improvement and Refunding Bonds, 2012 (the Bonds ). The City operates under the laws of the State applicable to optional code cities (Title 35A RCW) with a mayor-council form of government. The Bonds are being issued pursuant to Ordinance No.1237 (the Bond Ordinance ) passed on May 7, 2012, by the City Council of the City (the City Council ) and under the provisions of the Constitution and laws of the State, including chapters and RCW. This Official Statement provides information concerning the City and the Bonds. Capitalized terms used but not defined herein have the meanings given in the Bond Ordinance. Principal Amount, Dates, Interest Rates and Maturities DESCRIPTION OF THE BONDS The Bonds will be issued in the aggregate principal amount of $2,630,000 and will be dated and bear interest from their date of initial delivery to the Underwriter. The Bonds will mature on the dates and in the principal amounts and will bear interest (payable commencing on December 1, 2012 and semi-annually thereafter on each June 1 and December 1) at the respective rates set forth on the cover of this Official Statement, until maturity or prior redemption. Interest on the Bonds will be calculated on the basis of a 360-day year consisting of twelve 30-day months. Registration Features and Bond Registrar Book-Entry System. The Bonds will be fully registered as to both principal and interest, and will be in the denomination of $5,000 each or any integral multiple thereof within a single maturity ( Authorized Denominations ). The Bonds, when issued, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ( DTC ). DTC will act as securities depository for the Bonds. Individual purchases may be made in book-entry form only. Purchasers will not receive certificates representing their interest in the Bonds purchased. So long as Cede & Co. is the Registered Owner of the Bonds, as nominee of DTC, references herein to Registered Owners will mean Cede & Co. and will not mean the Beneficial Owners of the Bonds. In this Official Statement, the term Beneficial Owner will mean the person for whom a DTC participant acquires an interest in the Bonds. See Appendix B attached hereto for additional information regarding the Book-Entry Only System. Bond Registrar. Principal of and interest on the Bonds will be payable by the State fiscal agent, currently The Bank of New York Mellon in New York, New York, or such other fiscal agency or agencies as the State may designate from time to time (the Bond Registrar ). So long as Cede & Co. is the registered owner of the Bonds, principal of and interest on the Bonds are payable by wire transfer by the State fiscal agent to DTC, which in turn is obligated to remit such principal and interest to DTC participants for subsequent disbursement to Beneficial Owners of the Bonds, as further described under Book-Entry Only System in Appendix B. Procedure in the Event of Discontinuation of Book-Entry Transfer System. If DTC resigns as the securities depository and the City is unable to retain a qualified successor to DTC, or the City determines that the Bonds are to be in certificated form, the City will execute, authenticate and deliver, at no cost to the Beneficial Owners of the Bonds or their nominees, Bonds in fully registered form, in Authorized Denominations. Thereafter, the principal of the Bonds will be payable upon presentment and surrender thereof to the Bond Registrar, and interest on the Bonds will be payable by check or draft mailed on the interest 1

6 payment date to the Registered Owners at the address appearing on the Bond Register on the 15 th day of the month preceding the interest payment date or by electronic transfer on the interest payment date. The City is not required to make electronic transfers except to a Registered Owner of Bonds pursuant to a request in writing (and at the sole expense of that Registered Owner) received at least 10 days before an interest payment date. Redemption of Bonds Prior to Maturity Optional Redemption. The City reserves the right and option to redeem the Bonds maturing on or after December 1, 2022 prior to their stated maturity dates at any time on or after June 1, 2022, as a whole or in part (within one or more maturities selected by the City), at par plus accrued interest to the date fixed for redemption. Mandatory Redemption. If not previously redeemed by optional redemption or purchased in the open market under the provisions set forth in the Bond Ordinance, the Term Bonds due on December 1 in the years 2020, 2027, 2032 and 2036 will be called for redemption at a price of par, plus accrued interest, on December 1 in the years and amounts as follows: 2020 Term Bond Mandatory Mandatory Redemption Dates Redemption Amounts 2018 $ 95, , (Maturity) 110, Term Bond Mandatory Mandatory Redemption Dates Redemption Amounts 2023 $65, , , , (Maturity) 90, Term Bond Mandatory Mandatory Redemption Dates Redemption Amounts 2028 $ 95, , , , (Maturity) 130, Term Bond Mandatory Mandatory Redemption Dates Redemption Amounts 2033 $135, , , (Final Maturity) 165,000 If the City redeems under the optional redemption provisions, purchases in the open market or defeases Term Bonds, the par amount of the Term Bonds so redeemed, purchased or defeased (irrespective of their actual redemption or purchase prices) will be credited against one or more scheduled mandatory redemption amounts for those Term Bonds. The City will 2

7 determine the manner in which the credit is to be allocated and will notify the Bond Registrar in writing of its allocation prior to the earliest mandatory redemption date for that maturity of Term Bonds for which notice of redemption has not already been given. Partial Redemption. Portions of the principal amount of any Bond, in Authorized Denominations thereof, may be redeemed. If less than all of the principal amount of any Bond is redeemed, upon surrender of that Bond to the Bond Registrar, there will be issued to the Registered Owner, without charge therefor, a new Bond (or Bonds, at the option of the Registered Owner) of the same maturity and interest rate in any Authorized Denomination in the aggregate principal amount remaining unredeemed. Selection of Bonds for Redemption. If fewer than all of the outstanding Bonds within a maturity are to be optionally redeemed prior to maturity, Bonds will be selected for optional redemption randomly within a maturity in such manner as the Bond Registrar determines. Notwithstanding the foregoing, for as long as the Bonds are registered in the name of DTC or its nominee, selection of Bonds for redemption will be in accordance with the Letter of Representations. Effect of Redemption. Interest on Bonds called for redemption will cease to accrue on the date fixed for redemption, unless the notice of redemption is rescinded as described below. Open Market Purchase. The City has further reserved the right and option to purchase any or all of the Bonds in the open market at any time at any price acceptable to the City plus accrued interest to the date of purchase. Cancellation of Bonds. All Bonds purchased or redeemed will be canceled. Notice of Redemption While the Bonds are held by DTC in book-entry only form, any notice of redemption will be given at the time, to the entity and in the manner required by DTC in accordance with the Letter of Representations. If the Bonds cease to be in book-entry only form, unless waived by any Registered Owner of the Bonds to be redeemed, the City will cause notice of any intended redemption of Bonds to be given by the Bond Registrar not less than 20 nor more than 60 days prior to the date fixed for redemption by first-class mail, postage prepaid, to the Registered Owner of any Bond to be redeemed at the address appearing on the Bond Register at the time the Bond Registrar prepares the notice, and the requirements of this sentence shall be deemed to have been fulfilled when notice has been mailed as so provided, whether or not it is actually received by the Owner of any Bond. In the case of an optional redemption, the notice may state that the City retains the right to rescind the redemption notice and the related optional redemption of Bonds by giving a notice of rescission to the affected Registered Owners at any time on or prior to the scheduled optional redemption date. Any notice of such optional redemption that is so rescinded will be of no effect, and the Bonds for which the notice of optional redemption has been rescinded will remain outstanding. Failure to Pay Bonds If any Bond is not paid when properly presented at its maturity or date fixed for redemption, the City will be obligated to pay interest on that Bond at the same rate provided in the Bond from and after its maturity or date set for redemption until that Bond, both principal and interest, is paid in full or until sufficient money for its payment in full is on deposit in the Bond Fund and the Bond has been called for payment by giving notice of that call to the Registered Owner of that Bond. The Bonds are not subject to acceleration under any circumstances. Refunding or Defeasance of the Bonds The City may issue refunding bonds pursuant to the laws of the State or use money available from any other lawful source to pay the principal of and interest on the Bonds, or such portion thereof included in a refunding or defeasance plan, as the same become due and payable and to redeem and retire, release, refund or defease all such then outstanding Bonds (the defeased Bonds ) and to pay the costs of such refunding or defeasance. In the event that money and/or government obligations (as defined in chapter RCW, as it now reads or hereafter may be amended) sufficient in amount, together with known earned income from the investments thereof, to redeem and retire, release, refund or defease the defeased Bonds in accordance with their terms, are set aside irrevocably in a special fund for and pledged irrevocably to such redemption, retirement or defeasance (the trust account ), then all right and interest of the owners of the defeased Bonds in the covenants of the Bond Ordinance and in the funds and accounts obligated to the payment of such defeased Bonds, other than the right to 3

8 receive the funds so set aside and pledged, thereafter will cease and become void. Such owners thereafter will have the right to receive payment of the principal of and interest on the defeased Bonds from the trust account. As currently defined in chapter RCW, government obligations means (a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America and bank certificates of deposit secured by such obligations; (b) bonds, debentures, notes, participation certificates or other obligations issued by the Banks for Cooperatives, the Federal Intermediate Credit Bank, the Federal Home Loan Bank System, the Export-Import Bank of the United States, federal land banks or the Federal National Mortgage Association; (c) public housing bonds and project notes fully secured by contracts with the United States; and (d) obligations of financial institutions insured by the Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance Corporation, to the extent insured or guaranteed as permitted under any other provision of State law. Purpose PURPOSE AND USE OF PROCEEDS Proceeds of the Bonds will be used to (1) finance the construction and equipping of a new police station, which will also include a multi-purpose community meeting room (the Project ); and (2) currently refund the City s outstanding Limited Tax General Obligation Bonds, 2005 (maturities 2012 through 2020, inclusive) in the principal amount of $635,000 (the Refunded Bonds ). In addition, a portion of the proceeds of the Bonds will be used to pay the costs of issuance of the Bonds. Refunded Bonds Upon closing, the City will deposit with The Bank of New York Mellon (the Refunding Trustee ), or its duly appointed successor, proceeds of the Bonds, together with other money of the City, if any, in an amount sufficient to carry out the current refunding of the Refunded Bonds. The Refunding Trustee will use the proceeds so deposited to purchase certain direct United States Government Obligations (the Acquired Obligations ) and will hold the Acquired Obligations in trust for the benefit of the owners of the Refunded Bonds pursuant to a Refunding Trust Agreement between the City and the Refunding Trustee. The maturing principal of the Acquired Obligations, interest earned thereon, and cash balance, if any, will provide for the payment of principal of and interest on the Refunded Bonds when due, up to and including June 27, 2012, and the call, payment and redemption on June 27, 2012, of all the Refunded Bonds at a price of par. The Underwriter will certify the accuracy of the mathematical computations concerning the adequacy of the maturing principal amounts of and interest earned on the Acquired Obligations to be purchased with Bond proceeds and placed, together with other escrowed money in the escrow account, to pay when due, pursuant to the call for redemption, the principal of and interest on the Refunded Bonds. Refunded Bonds Redemption Date of June 27, 2012 at 100% of Par Maturity Years Principal Amount Interest Rate CUSIP No $85, % AG , AH , AJ , AK , AL , AM , AN , AP , AQ6 4

9 Sources and Uses of Funds Sources of Funds: Par Amount of Bond Issue $2,630, Original Issue Premium 63, City Contribution 17, Total Sources of Funds $2,710, Uses of Funds: Deposit to Project Fund $2,004, Deposit to Refunding Trust Account 651, Costs of Issuance 1 54, Total Uses of Funds $2,710, Includes Underwriter s fee, Bond Counsel fee, rating agency fee, Refunding Trustee fee and other costs of issuance. SECURITY FOR THE BONDS The Bonds are limited tax general obligations of the City. For as long as any of the Bonds are outstanding, the City has irrevocably pledged in the Bond Ordinance to include in its budget and levy taxes annually within the constitutional and statutory tax limitations provided by law without a vote of the electors of the City, on all taxable property within the City in an amount sufficient, together with other money of the City which may be legally available to be used therefor, to pay when due the principal of and interest on the Bonds. The full faith, credit and resources of the City are pledged irrevocably for the annual levy and collection of those taxes and the prompt payment of that principal of and interest on the Bonds. State law contains limitations on the amount of taxes the City can levy. See PROPERTY TAX LIMITATIONS AND OTHER TAXING AUTHORITY. The City has also pledged to the payment of the Bonds allocated to pay the cost of the Project the proceeds that the City receives from imposing an additional 0.1% sales and use tax pursuant to RCW (the Additional Sales Tax ). By Ordinance No. 1216, passed by the City Council on August 1, 2011, a proposition was submitted to the qualified voters of the City to authorize the City to fix and impose pursuant to RCW an additional sales and use tax of 0.1% and for the City to use its share of the resulting proceeds to construct and a equip a new police facility with a multi-purpose community meeting room and to pay other criminal justice and fire protection costs. That proposition was approved by 54.15% of the voters and the City began imposing the sales and use tax within the boundaries of the City as of April 1, Fifteen percent of the Additional Sales Tax is required to be distributed to Cowlitz County and Clark County and the remaining 85% is pledged to the payment of the Bonds. The City expects to receive proceeds from the Additional Sales Tax in the amount of $65,000 in 2012 and $125,000 in See the heading PROPERTY TAX LIMITATIONS AND OTHER TAXING AUTHORITY Collection of Other Taxes herein. The City has also pledged to the payment of the Bonds allocated to the current refunding of the Refunded Bonds the proceeds of real estate excise taxes imposed by the City under chapter RCW. See the heading PROPERTY TAX LIMITATIONS AND OTHER TAXING AUTHORITY Collection of Other Taxes herein. The express pledge of real estate excise taxes applies only to the extent the proceeds of the Refunded Bonds were used to acquire land for a public safety building. The Bonds do not constitute a debt or indebtedness of the State or any political subdivision thereof other than the City. Authorization of Debt CITY DEBT AND DEBT LIMITATIONS The power of the City to contract debt of any kind is controlled and limited by State law. All debt must be set forth in accordance with detailed budget procedures and paid for out of identifiable receipts and revenues. The budget must be balanced for each fiscal year. It is unlawful for an officer or employee of the City to incur liabilities in excess of budgetary appropriations. 5

10 Statutory Limits on Indebtedness Non-Voted Debt. Under existing State law, the City may incur limited tax general obligation indebtedness and issue limited tax general obligation bonds, such as the Bonds, without authorization by the voters in an amount which, together with other outstanding general obligation indebtedness not authorized by the voters, does not exceed 1.5% of the assessed valuation, based on the actual value of the taxable property within the City as determined by the last preceding property tax assessment. See PROPERTY TAX LIMITATIONS AND OTHER TAXING AUTHORITY herein. The principal of and interest on non-voted general obligation indebtedness is payable from regular property tax levies, subject to limitations described below under the caption Regular Property Tax Limitations, or from other available revenues of the City. Voted Debt. With the assent of 60% of those voting at an election at which the total number of persons voting is not less than 40% of the total votes cast at the last preceding State general election, the City may issue unlimited tax general obligation debt in an amount which does not exceed 2.5% of the actual value of taxable property within the City for general purposes, 2.5% for utilities and 2.5% for open space/park facilities and capital facilities for economic development. The principal of and interest on voted general obligation indebtedness is typically payable from property taxes levied in excess of regular property tax levies, without limitation as to rate or amount. Combined Debt Limits. The total combined outstanding unlimited (voted) and limited (non-voted) tax general obligation debt for general purposes may not exceed 2.5% of the City s assessed valuation. The total combination of unlimited and limited tax general obligation debt for all purposes may not exceed 7.5% of the City s assessed valuation. Debt Payment Record The City has always promptly met principal and interest payments on outstanding bonds, notes and warrants when due. Additionally, no bonds have been issued by the City for the purpose of preventing an impending default. Future Financings The City has no plans for issuing additional bonds in the next 12 months. 6

11 City of Woodland, Washington Computation of Statutory and Constitutional Debt Limitations (as of May 7, 2012) 2012 Assessed Valuation ("AV") 1 $ 586,345,222 General Purpose - Non-Voted Limited Tax (Non-voted) General Obligation Debt Capacity (1.50% of AV) $ 8,795,178 Less: Outstanding Limited Tax General Obligation Debt (482,189) 2 Less: The Bonds (2,630,000) Remaining Non-Voted General Obligation Debt Capacity $ 5,682,989 Percent of Limited Tax Debt Capacity Used 35.39% General Purposes - Requires Voter Approval Unlimited Tax (Voted) General Obligation Debt Capacity (2.50% of AV) $ 14,658,631 Less: Outstanding Unlimited Tax General Obligation Debt - Less: Outstanding Limited Tax General Obligation Debt (482,189) 2 Less: The Bonds (2,630,000) Remaining Voted Debt Capacity for General Purposes $ 11,546,442 Percent of Total Debt Capacity Used 21.23% Parks, Open Space and Economic Development Purposes - Requires Voter Approval Unlimited Tax (Voted) General Obligation Debt Capacity (2.50% of AV) $ 14,658,631 Less: Outstanding Unlimited Tax General Obligation Debt - Remaining Voted Debt Capacity for Parks, Open Space and Economic Development Purposes $ 14,658,631 Utility Purpose - Requires Voter Approval Unlimited Tax (Voted) General Obligation Debt Capacity (2.50% of AV) $ 14,658,631 Less: Outstanding Unlimited Tax General Obligation Debt - Remaining Voted Debt Capacity for Utility Purposes $ 14,658,631 Remaining Voted Debt Capacity for All Purposes $ 40,863,703 Net Direct and Estimated Overlapping Debt Net Direct Debt: Outstanding General Obligation Debt: Outstanding Unlimited Tax General Obligation Debt $ - Outstanding Limited Tax General Obligation Debt 482,189 1 The Bonds 2,630,000 Total Net Direct Debt $ 3,112,189 Estimated Overlapping Debt: Cowlitz County $ 1,030,679 Clark County 1,802,376 Port of Woodland 487,212 Woodland School District No ,228,613 Total Estimated Overlapping Debt $ 6,548,880 Total Net Direct and Estimated Overlapping Debt $ 9,661,069 1 For 2012 tax collections, assessed value used for regular levies. 2 Public Works Trust Fund Loans ( PWTF Loans ) outstanding in the amount of $482,189. Source: Cowlitz County and Clark County Assessor s and Treasurer s Offices 7

12 Bonded Debt Ratios 2012 Assessed Valuation ("AV") 1 $ 586,345,222 Estimated 2011 Population 5,550 Ratio of: Net Direct Debt to Assessed Value 0.53% Net Direct Debt and Estimated Overlapping Debt to Assessed Value 1.65% Per Capita: Net Direct Debt $ 561 Net Direct Debt and Estimated Overlapping Debt $ 1,741 Assessed Value $ 105,648 1 For 2012 tax collections, assessed value used for regular levies. Source: Cowlitz County and Clark County Assessor s and Treasurer s Offices Other Debt Payable From the General Fund Original Dated Maturity Interest 2011 Outstanding Total Outstanding Obligation Principal Amount Date Year Rate Principal Principal Public Works Trust Fund Loans ("PWTF Loans") Loan #1 - TIM/203 $ 1,162,875 7/6/ % $ 373,817 Loan #2 /Road - TIM/ ,437 9/7/ % 108,372 $ 482,189 GRAND TOTAL OUTSTANDING $ 482,189 8

13 City of Woodland, Washington Summary of General Obligation Bonds Debt Service Requirements Year Annual Ending 2001 Principal Interest Debt Service 2012 $ 85,000 $ 42,213 $ 127, ,000 79, , ,000 79, , ,000 77, , ,000 76, , ,000 74, , ,000 73, , ,000 70, , ,000 67, , ,000 63, , ,000 62, , ,000 60, , ,000 58, , ,000 55, , ,000 53, , ,000 50, , ,000 47, , ,000 43, , ,000 39, , ,000 34, , ,000 29, , ,000 24, , ,000 19, , ,000 13, , ,000 6, ,765 #REF! Totals $ 2,630,000 $ 1,302,783 $ 3,932,783 Notes: Excludes PWTF Loans. PROPERTY TAX LIMITATIONS AND OTHER TAXING AUTHORITY RCW allows a city to levy up to $3.375 per $1,000 of the value of taxable property in the city. In addition, for any city that has annexed into a library district and/or fire district, this rate limitation is adjusted to $3.600 per $1,000, less the rate or rates levied by the library district and/or fire district in any given year. Library services are provided to the City by the Fort Vancouver Regional Library District and the City has not annexed into a fire district. The regular levy is also subject to other significant limitations described under the caption Regular Property Tax Limitations. Regular property tax levy receipts may be used for the payment of the principal of and interest on non-voted general obligation bonds, such as the Bonds, for costs of maintenance and operation, or for any other lawful City purposes. The City s regular property tax levy rate for collection in 2012 is $ per $1,000 of assessed value. The principal of and interest on limited tax general obligation bonds, including the Bonds, is payable from these taxes or other revenue sources of the City legally available therefor. Regular Property Tax Limitations The authority of the City to levy taxes without a vote of the people for general City purposes, including the payment of debt service on the Bonds and any other limited tax general obligation indebtedness, is subject to the limitations described below. 9

14 Information relating to regular property tax limitations is based on existing statues and constitutional provisions. Changes in such laws could alter the impact of other interrelated tax limitations on the City. EMS Regular Property Tax Levy: RCW authorizes cities to impose an additional regular property tax levy in an amount up to $0.50/$1,000 of the assessed value to pay the costs of emergency medical services ( EMS ), including personnel, training, equipment, supplies, vehicles and structures, upon voter approval. The City does not impose an EMS Levy at this time. Levy Amount Limitation. Chapter RCW limits a taxing district s regular levy to an amount equal to 100% of the district s highest prior levy amount allowed, multiplied by a limit factor, plus a full value adjustment for new construction. Substantively, this means that a taxing district s regular levy payable in a given year (other than new construction and improvements, and State-assessed property adjustments) may not exceed the highest amount previously levied by the taxing district multiplied by the limit factor. Revenue generated due to new construction and certain other adjustments is added after the levy lid is applied. The limit factor is defined as (i) the lesser of 101% or 100% plus inflation (measured by the implicit price deflator or IPD), or (ii) up to 101%, regardless of inflation, if approved by a super-majority of the legislative authority of the taxing district upon a finding of substantial need. For taxing districts with a population of less than 10,000, the limit factor is 101% regardless of inflation, and no finding of substantial need is required. RCW allows the regular property tax levy to be set at the amount that would be allowed if the tax levy for taxes due in each year since 1986 had been set at the full amount allowed under chapter RCW. Thus, if in any year a taxing district levies an amount that is less than the maximum allowed under the limit described above, the amount that was not levied will nevertheless be included in the base for determining levy limit in future years. This is sometimes referred to as banked levy capacity. The City has no banked levy capacity at this time. With a majority vote of its electors, a taxing district may levy a greater amount than what otherwise would be allowed by the regular levy limit. This increase may be imposed indefinitely or for a limited period, and revenues may be (but are not required to be) dedicated to satisfy a limited purpose, all as allowed by RCW This is known as a levy lid lift. A levy lid lift may not be used to increase the levy if it would cause the taxing district s levy to exceed the rate limitations described below. Since the regular levy limit applies to the total dollar amount levied rather than to levy rates, increases in the assessed value of all property in the taxing district (excluding new construction, improvements and State-assessed property) which exceed the rate of growth in taxes allowed by the limit factor result in decreased regular tax levy rates unless voters authorize a higher levy or the taxing district uses banked levy capacity. Decreases in the assessed value of all property in the taxing district (including new construction, improvements and State-assessed property) or increases in such assessed value that are less than the rate of growth in taxes imposed, among other events, may result in increased regular tax levy rates. The One Percent Aggregate Regular Levy Limitation. Article VII, Section 2 of the State Constitution limits the aggregate of the regular property tax levy rates imposed by the State and all taxing districts, except port districts and public utility districts, to one percent of the true and fair value of property. RCW provides the same limitation by statute. $5.90/$1,000 Aggregate Regular Levy Limitation. Within the one percent limitation under RCW described above, RCW (2) imposes an aggregate limitation on regular tax levies by all taxing districts other than the State, of $5.90/$1,000 of assessed valuation. The following levies are excluded from this limitation: levies for any port district or public utility district; excess levies authorized in Article VII, Section 2 of the State Constitution; certain levies for acquiring conservation futures; levies for emergency medical services or care; levies to finance affordable housing; certain metropolitan park district levies; ferry district levies; certain levies for criminal justice purposes; a portion of certain levies by fire protection districts; transit levies by certain counties; and the protected portion of levies by flood control zone districts in certain counties. Uniformity Requirement. Article VII, Section 1 of the State Constitution requires that property taxes be levied at a uniform rate upon the same class of property within the territorial limits of a taxing district levying such taxes. All real estate constitutes one class. It is possible due to different overlapping taxing districts in different areas of the City that the maximum permissible levy may vary within the City. In that event, to comply with the constitutional requirement for uniformity of taxation, the lowest permissible rate for any part of the City would be applied to the entire City. Prioritization of Levies. RCW provides that if aggregate levies certified by all taxing districts exceed the aggregate levy limitations described above, levies certified by junior taxing districts are reduced or eliminated in order to bring the aggregate levy into compliance with those limitations. RCW defines junior taxing districts as all 10

15 taxing districts other than the state, counties, road districts, cities, towns, port districts, and public utility districts. The City is not a junior taxing district. Authorization of Excess Levies. RCW authorizes the levying of taxes in excess of the $5.90/$1,000 and one percent limits imposed by RCW and , respectively, by any taxing district except school districts, when a larger levy is necessary in order to prevent the impairment of the obligation of contracts. Any such taxing district may also levy taxes in excess of the rates specified by statute when authorized to do so by the voters of such taxing district. The City does not have an excess property tax levy rate. Property Tax Valuation and Collections Because 98.38% of the City is located in Cowlitz County (the County ) and only 1.62% of the City is located in Clark County, the information below is generally presented only for Cowlitz County and not Clark County. Assessed Valuation Determination. The County Assessor (the Assessor ) determines the value of all real and personal property throughout the County (including the City) that is subject to ad valorem taxation with the exception of certain public service properties for which values are determined by the State Department of Revenue. The Assessor is an elected official whose duties and methods of determining value are prescribed and controlled by statute and by detailed regulations promulgated by the State Department of Revenue. For tax purposes the assessed value of property is 100% of its actual value. All property values are updated annually with physical inspections once every six years. The revaluation occurs in cycles, and one-sixth of the property is physically inspected and revalued every year, while the remaining property is updated based on analyzed market sales. The property is listed by the Assessor on a roll at its current assessed value and the roll is filed in the Assessor s office. The Assessor s determinations are subject to revisions by the County Board of Equalization and, for certain property, subject to further revisions by the State Board of Equalization. After all administrative procedures are completed, the Board of County Commissioners receives the Assessor s final certificates of assessed value of property within the County. Assessed Valuation of Cowlitz County and the City 1 Collection Year The City Cowlitz County $586,345,222 $9,196,853, ,958,723 9,299,798, ,315,465 9,363,185, ,426,303 9,391,876, ,735,333 8,470,203,553 1 Assessed values for purposes of regular tax levies. 2 Includes the City. 3 Increase in the County s assessed value due to approximately $ million in new construction. Source: Cowlitz County Assessor s Offices Tax Collection Procedure. Property taxes are levied in specific amounts, and the rates for all taxes levied for all taxing districts in the County (including the City) are determined, calculated and fixed by the Assessor based upon the assessed valuation of the property within the various taxing districts. The Assessor extends the taxes to be levied within each taxing district upon a tax roll that contains the total amount of taxes to be so levied and collected. The tax roll is delivered to the County Treasurer (the Treasurer ) by January 15 of each year, and an abstract of the tax roll, showing the total amount of taxes collectible in each of the taxing districts for the year, is delivered to the County Auditor (the Auditor ) at the same time. The Auditor issues to the Treasurer his/her warrant authorizing the collection of taxes listed on the Assessor s certified tax roll. The Treasurer creates a tax account for each taxpayer and is responsible for the collection of taxes due. All such taxes are due and payable on April 30 of each year, but if the amount due from a taxpayer exceeds fifty dollars, one-half may be paid then and the balance no later than October 31 of such year. The entire amount or first half must be paid on or before April 30, or else the total amount becomes delinquent on May 1. The second half of the tax is payable on or before October 31, becoming delinquent November 1. The method of giving notice of payment of taxes due, the Treasurer s accounting for the money collected, the division of the taxes among the various taxing districts, notices of delinquency, and collection procedures are all covered by detailed statutes. Subject to U.S. Internal Revenue Service ( IRS ) liens on personal property filed prior to the levy of taxes by the 11

16 City and possibly the Homestead Exemption, the lien for property taxes is prior to all other liens or encumbrances of any kind on real or personal property subject to taxation. By law the Treasurer may commence foreclosure of a tax lien on real property after three years have passed since the first delinquency. State courts have not made a determination whether or not the homestead law (chapter 6.13 RCW) gives the occupying homeowner a right to retain the first $125,000 of proceeds of the forced sale of a family residence for delinquent general property taxes. In Algona vs. Sharp, 30 Wn. App. 837, 638 P. 2d 627 (1982), the State Court of Appeals held the homestead right superior to liens for local improvement district assessments but was silent regarding liens for property taxes. The U.S. Bankruptcy Court for the Western District of Washington has held that the Homestead Exemption applies to the liens for property taxes, while the State Attorney General has taken the position that it does not. Delinquent taxes are subject to 12% per annum interest computed on a monthly basis from the date of delinquency until paid. Interest is calculated at the rate in effect at the time of payment of the tax, regardless of when the taxes were first delinquent. Additional penalties are: 1) a three percent penalty on amounts delinquent on May 31 of the year in which the tax is due; and 2) an additional eight percent penalty of the total amount of tax delinquent on November 30 of the year in which the tax is due. Levy Rates Within the City The following table shows the overlapping rates levied in a representative area of the City, which has the highest total tax rate per $1,000 for 2012: City of Woodland, Washington 2012 Highest Representative Levy Rates 1 1 Includes regular and excess levies. Source: Cowlitz County Assessor s Office State $ Cowlitz County School District No City of Woodland Port of Woodland Cemetery District No Fort Vancouver Regional Library District Total $ City of Woodland, Washington Tax Levy Collection Record For the General Fund Collected in the Collection As of Collection Year of the Levy December 31, 2011 Year Taxes Levied Amount Percent Amount Percent 2011 $1,139,088 $1,076, % $1,090, % ,116,742 1,036, ,084, ,078,517 1,007, ,067, ,031, , ,030, , , , Source: Cowlitz County Treasurer s Office 12

17 City of Woodland Principal Property Taxpayers 2012 Assessed Percent of City Name of Owner Type of Business Value 1 Assessed Value 2 Columbia River Carbonates Chemicals $25,298, % Columbia Colstor Inc. Cold Storage 21,158, Peri Formwork Systems Forms/Scaffolding Manufacturing 17,630, E/B Work (American Paper Converting) Paper Manufacturing 15,342, WalMart Stores Inc. Retail 12,003, Behnken Properties Inc. Pet Products 11,303, Safeway Inc. Retail Grocery 9,659, General Steel Steel Mill 9,244, Lifeport Aircraft Interiors Manufacturing 7,900, Oliva Stephen/Janice Retail Grocery, Pharmacy 6,852, Total $136,392, % 1 Assessed values for 2012 tax collection year. 2 Based on Assessed Value of $586,345,222. Source: Cowlitz County Assessor s Office Collection of Other Taxes In addition to its regular property tax levy, the City also collects various other taxes, including a retail sales tax (also known as a local sales and use tax ), real estate excise tax, and utility tax, among others. Local Sales and Use Tax. The State first levied a retail sales tax and a corresponding use tax on taxable retail sales and uses of personal property in Sales taxes currently are imposed on the purchase by consumers (including businesses and governmental entities) of a broad base of tangible personal property and selected services, including construction (labor and materials), machinery and supplies, services and repair of real and personal property and many other transactions not taxed in other states. The use tax supplements the sales tax by taxing the use of certain services and by taxing personal property on which a sales tax has not been paid (such as items purchased in a state that imposes no sales tax). Among the various items not currently subject to sales and use taxes are most personal services, motor vehicle fuel, most food for off-premises consumption, trade-ins and purchases for resale. Sales taxes upon applicable retail sales are collected by the seller from the consumer. Use taxes are payable by the consumer upon applicable rendering of services or uses of personal property. Each seller is required to hold taxes collected in trust until remitted to the State Department of Revenue, which usually occurs on a monthly basis. The City s sales and use tax is collected by the State Department of Revenue and remitted on a monthly basis under a contract that provides for a deduction of 1% of the tax collected for administration costs. Distribution to the City lags approximately two months behind collection. In 2003, the State Legislature approved legislation authorizing the State s membership in the national Streamlined Sales and Use Tax Agreement (the SSUTA ), in an effort to make sales and use taxes in the State more uniform with other states. Congress has required that state sales taxes be more uniform before Congress will permit taxation of interstate catalog and internet sales. In 2007, the State Legislature adopted legislation fully conforming to the SSUTA. Effective July 1, 2008, the sales tax system changed in the State from an origin-based system to a destination-based system. Under destination sourcing, sales taxes are credited to the taxing jurisdiction where the purchaser takes delivery of the goods (which may differ from the point of sale with respect to goods delivered to the purchaser). The rate of the tax is now determined by the local rate in the destination taxing jurisdiction. The State Legislature, and the voters through the initiative process, have changed the base of the sales and use tax on occasion, and this may occur again in the future. See the heading INITIATIVES AND REFERENDA. As of April 1, 2012, a sales and use tax of 7.7% is charged on all gross retail sales in the City (excluding food products for off-premise consumption and certain other exempt items). After the State Department of Revenue deducts 1% from the local government share to pay for administration costs, the resulting tax revenues are allocated as follows: 6.5% to the State. 13

18 1.0% for general county/city purposes (basic and optional sales and use tax under RCW ). The City receives 85% of the revenue from transactions that occur in the City and the County receives the remaining 15%. 0.1% for criminal justice purposes (RCW ). Cowlitz County and Clark County receive 10% of the revenues collected within those counties and the remaining 90% of revenues are distributed to all cities within those counties, including the City, on a per capita basis. 0.1% for criminal justice and fire protection purposes (voter-approved) (RCW ). Cowlitz County and Clark County receive 15% of the revenues collected within the City and the remaining 85% of revenues are distributed to the City. Taxable Retail Sales Year City of Woodland Cowlitz County $ 46,117,094 $ 574,612, ,831,396 1,331,067, ,253,130 1,235,240, ,828,396 1,279,364, ,633,825 1,407,593, ,379,590 1,337,394,181 1 Includes City of Woodland. 2 Data through second quarter; most current information available. Source: Washington State Department of Revenue Hotel/Motel Tax. The regular hotel/motel tax is for a local option tax of 2% on sales of hotel/motel rooms. The regular hotel/motel tax is not paid in addition to other state and local sales taxes. Instead, it is credited against the state s 6.5% retail sales tax. A city can also levy a special hotel/motel tax of 2% on sales of hotel/motel rooms for continuous periods of less than one month. Unlike the regular hotel/motel tax, this special hotel/motel tax is paid in addition to other state and local sales taxes. Cities can levy the hotel/motel taxes within their corporate limits and counties can levy the tax in unincorporated areas and within cities that do not levy the tax. Revenues from the hotel/motel taxes must be used for the promotion of tourism or the construction and operation of tourism related facilities. The City levies the regular hotel/motel tax, but does not levy the special hotel/motel tax. Real Estate Excise Tax. The real estate sale excise tax ( REET ) is levied on each sale of real property within the City at the rate of 0.25% (1 st Quarter REET) and 0. 25% (2 nd Quarter REET) for a total of 0.5% of the selling price. (This is in addition to the REET imposed by the State at the rate of 1.28%.) The 1st Quarter REET as originally imposed pursuant to RCW may be used solely for financing certain capital projects specified in a capital facilities plan element of the City s comprehensive plan. Eligible capital projects for 1st Quarter REET include streets, roads, highways, sidewalks, street and road lighting systems, traffic signals, bridges, domestic water systems, storm and sanitary sewer systems, parks, recreational facilities, law enforcement facilities, fire protection facilities, trails, libraries, administrative and judicial facilities. The 2nd Quarter REET, as originally imposed pursuant to RCW (2), may be used solely for the following capital projects specified in a capital facilities plan element of the City s comprehensive plan: streets, roads, highways, sidewalks, street and road lighting systems, traffic signals, bridges, domestic water systems, storm and sanitary sewer systems, and planning, construction, reconstruction, repair, rehabilitation, or improvement of parks. 2nd Quarter REET cannot be used to acquire land for parks. In 2011, the State Legislature amended chapter RCW to permit cities and counties to use revenues from 1st Quarter REET and 2nd Quarter REET taxes (up to the greater of $100,000 or 35% of such revenues, not to exceed $1 million per year) to pay operations and maintenance of existing capital projects (as capital projects are described above). The authority to use revenue from 1st Quarter REET and 2nd Quarter REET taxes for certain maintenance and operation costs expires on December 31,

19 The City imposes both 1st Quarter REET and 2nd Quarter REET taxes. These revenues must be tracked separately. Real estate excise taxes are collected by the Treasurer of the county within which the property is located and distributed to the City periodically. Distributions may be suspended if the City is in noncompliance under RCW 36.70A.340 (relating to growth management planning). The City currently believes it is in compliance with this statute. Leasehold Excise Tax. The Leasehold Excise Tax is a tax on the use of public property by private or commercial businesses. This tax is in lieu of the property tax. A tax of 12.84% is levied by the State, of which 6.0% is remitted to the City. Utility Tax. The City is authorized to impose a utility business and occupation tax on the gross receipts of investor-owned and public utilities providing service to customers within the City. Except for storm and surface water, the utility tax on gross receipts of City owned utilities applies to all customers within City limits. The maximum rate is 6% on electrical, natural gas and telephone businesses, unless a higher rate is approved by the voters. There is no limit on the rate for other utilities. The City s utility tax rates are as follows: 6% on electricity, 6% on natural gas, 6% brokered natural gas use tax, 6% on network telephone services, and 6% on cellular phone services. Gambling Tax. The City imposes a gambling tax on the gross receipts derived by operators of gambling activities, including punchboards, pulltabs, bingo, raffles, amusement games, and social card games. Pursuant to RCW fund-raising activities of charitable and nonprofit organizations that involve games of chance are subject to local taxes. (Taxable receipts from bingo, raffles, and amusement games are net of the amount paid as prizes.) The rates imposed by the City range from 2% to 11%, depending on the classification of the gambling operation subject to the tax. In 2011 the City imposed an additional tax for Commercial Public Card Rooms at the rate of 4% for 2012 and 5% for The proceeds are dedicated to public safety purposes. Motor Vehicle Fuel Tax. The City receives a distribution of State revenues collected on each gallon of motor vehicle fuel which is imported, produced, or delivered in the State. The State currently levies several taxes totaling $0.375 per gallon on motor vehicle fuel and on special fuel (diesel) under RCW and Cities receive about 10.7% of the $0.23 per gallon of the motor vehicle fuel tax and about 8.3% of $0.06 per gallon of the motor vehicle fuel tax. The remaining motor vehicle fuel tax proceeds are distributed to various public agencies for public transportation purposes. The term motor vehicle fuel includes gasoline and other flammable gas or liquids that are used to propel motor vehicles or boats, except that it does not include special fuels such as diesel and propane, which are subject to the special fuel tax. Funds are distributed monthly on a per capita basis and are to be placed in a city street fund to be spent for: salaries and wages, material, supplies, equipment, purchase or condemnation of right-of-way, engineering or any other proper highway or street purpose in connection with the construction, alteration, repair, improvement or maintenance of any city street or bridge, or viaduct or underpass along, upon or across such streets. Cities are required to spend 0.42% of their gas tax receipts on paths and trails, unless that amount is $500 or less. Business License Fees and Franchise Fees. Another source of revenue for the City includes business licensing fees and franchise fees. The largest single revenue source in this category is the cable franchise fee imposed on cable TV firms. The cable franchise fee is 5%. There is also a franchise with an internet provider in the City which is 6%. For business licenses, the City has a $60 annual fee for businesses inside the City and a $100 annual fee for those outside the City. There are other various categories within the fee structure that relate to doing business in the City. Excise Tax Distribution Record Annual Distribution for the City s Portion Local Sales and Use Tax 1 $920,650 $902,497 $850,218 $984,051 $1,091,465 Criminal Justice Tax 2 69,632 71,544 63,780 68,820 72,303 Hotel/Motel Tax 24,472 25,397 27,749 39,194 40,825 Real Estate Excise Tax 101,124 78, , , ,193 Utility Tax 657, , , , ,650 Gambling Tax 25,554 12,418 20,007 8,278 9,206 Motor Vehicle Fuel Tax 115, , , , ,933 Business License and Franchise Fees 112, , ,475 94,632 85,092 1 Includes basic and optional taxes under RCW Includes criminal justice taxes under RCW Source: State of Washington Department of Revenue and City of Woodland 15

20 Government Organization THE CITY The City was incorporated on March 26, 1906 and operates under the laws of the State applicable to a code city with a Mayor-Council form of government. The City is served by a mayor and seven council members. The Council holds regular meetings on the 1 st and 3 rd Mondays of each month and special meetings as needed. All meetings are open to the public as provided by law and agenda items are prepared in advance. As a general-purpose government, the City provides major services such as: public safety, fire protection, street improvements, parks, and general administrative services. In addition, the City operates a sewer and water system and contracts for garbage service. Conversely, other government agencies provide the City with jail and court services through interlocal agreement. City residents receive library services from the Fort Vancouver Regional Library District. Cowlitz County provides public health, transit, courts of general jurisdiction and felony prosecution and defense services throughout the County, including the City. The current Mayor and Council members and their terms of office are: Labor Relations Council Members Grover Laseke (Mayor) December 31, 2015 John J. Burke (Position 1) (Mayor Pro Tem) December 31, 2013 Al Swindell (Position 2) December 31, 2013 Marilee McCall (Position 3) December 31, 2013 Marshall Allen (Position 4) December 31, 2015 Susan Humbyrd (Position 5) December 31, 2015 Benjamin Fredricks (Position 6) December 31, 2013 Scott Perry (Position 7) December 31, 2015 The City currently employs over 35 full time employees and a number of part-time and temporary employees. The majority of employees who are eligible under State laws to be represented by a labor organization are employed under provision of negotiated contracts with labor organizations. The City enters into written bargaining agreements with each of the bargaining organizations; agreements contain provisions on such matters as salaries, vacation, sick leave, medical and dental insurance, working conditions, and grievance procedures. Expiration dates of negotiated agreements with bargaining groups are as follows: Bargaining Group Expiration Date Woodland Police Officers Association (WPOA) Teamsters, Public Works Teamsters, Clerical International Association of Firefighters (IAFF) The City strives to complete agreements with all groups in a timely manner, consistent with all applicable State law and to promote labor relation policies mutually beneficial to management and employees. The City considers its relationships with the bargaining units to be excellent. Pensions and Other Post Employment Benefits State-Administered Retirement Plans. The City provides most of its public employee pensions through a statewide costsharing multiple-employer plan administered by Washington State s Department of Retirement Systems (DRS). City employees participate in one of two systems: Public Employees Retirement System. Substantially all of the City s full-time and qualifying part-time employees, other than firefighters, law enforcement officers and those covered under union plans, participate in the Public Employees Retirement System ( PERS ). PERS includes three plans: participants joining on or before September 30, 1977 are Plan 1 members, and those joining thereafter are Plan 2 or Plan 3 members, based on an election made by the employee. PERS Plan 1 and Plan 2 are defined benefit plans; PERS Plan 3 is a combination defined benefit and defined contribution plan. 16

21 Retirement benefits are financed from both employee and employer contributions and investment earnings. Retirement benefits under Plans 1 and 2 are vested after completion of five years of eligible service. Plan 3 members are vested after 10 years of eligible service. Participants enrolled in Plan 2 may elect to transfer to Plan 3, during the specified transfer window period that occurs in January of each year. Once employees transfer to Plan 3, they may not return to Plan 2 membership. In addition, new PERS eligible employees after September 1, 2002 who do not specify a plan choice will transfer automatically to Plan 3. Law Enforcement Officers and Fire Fighters Retirement System. Membership in the Law Enforcement Officers and Fire Fighters ( LEOFF ) retirement system includes all full-time, fully compensated local law enforcement officers and fire fighters. The LEOFF system includes two plans. Participants who joined the system by September 30, 1977, are LEOFF Plan 1 members. Those joining thereafter are enrolled in LEOFF Plan 2. Historical trend information regarding all of these plans is presented in DRS annual financial report, which may be obtained at: Department of Retirement Systems, PO Box 48380, Olympia, WA (phone: ) or on the web at (which website is not incorporated by this reference). A summary of these plans, as of June 30, 2010, the date of the last actuarial valuation, is provided below. Statewide Overview of State-Administered Retirement Plans As of June 30, 2010 Retirement System/Plan Administered by Benefit Type Active & Terminated Vested Members Members Receiving Benefits Closed in Public Employees Retirement System ( PERS ) PERS 1 Defined Benefit 10,986 53, PERS 2/3 Dept of Retirement Systems Defined Benefit/ Hybrid 174,400 23,157 Open Law Enforcement Officers and Fire Fighters Retirement System ( LEOFF ) LEOFF 1 Defined Benefit 302 8, LEOFF 2 Dept of Retirement Systems Defined Benefit 17,556 1,639 Open Source: Department of Retirement Systems Plan Funding, Contribution Rates and Amounts. All State-administered retirement plans are funded by a combination of funding sources: (1) contributions from the State; (2) contributions from employers (including the State as employer and other governmental employers); (3) contributions from employees; and (4) investment returns. Retirement funds are invested by the Washington State Investment Board, a 15-member board created by the Legislature in Employers and employees contribute to pensions at the level established in accordance with chapters 41.26, and RCW. Contributions by employees and employers are based on gross wages (covered payroll). The aggregate dollar amount of contributions to pension plans made by the City and by its employees for the past three years were as follows: Historical Aggregate City and Employee Pension Contributions Plan Name Employer Employees Employer Employees Employer Employees PERS 2 $64,462 47,345 $82,970 $56,738 $91,290 $60,675 PERS 3 2,469 4,651 3,615 5,325 3,788 5,244 LEOFF 2 51,931 83,843 43,086 70,036 43,513 70,307 Total $118,863 $135,839 $128,671 $132,099 $138,591 $136,226 Source: The City 17

22 Under State statute, contribution rates are adopted by the Pension Funding Council (and, for LEOFF Plan 2, by the LEOFF 2 Board) in even-numbered years for the next ensuing biennium. The rate-setting process begins with an actuarial valuation by the Office of the State Actuary, who makes non-binding recommendations to the Select Committee on Pension Policy who then recommends contribution rates to the Pension Funding Council and LEOFF 2 Board. No later than the end of July in even-numbered years, the Pension Funding Council (the PFC ) and LEOFF 2 Board adopt contribution rates, which are subject to revision by the Legislature. The following table outlines the contribution rates of employees and employers currently in effect. Historical contribution rates may be obtained from DRS. Current Employer and Employee Contribution Rates (effective September 1, 2011) System Name Employer Contribution Rates Employee Contribution Rates Plan 1 1 Plan 2 Plan 3 PERS 7.25% % 4.64% LEOFF / Members contribution rates are set by statute and are not subject to the rate setting process described above. 2 Employer contribution rates are the same for all PERS plans. Includes a 0.16% administration fee and a portion dedicated to amortizing the local government share of the PERS Plan 1 unfunded actuarial accrued liability. 3 PERS 3 members make defined contributions varying from 5.0% minimum to 15.0% maximum, based on rate selected by the PERS 3 member. 4 LEOFF 1 is fully funded; the employer contribution rate reflects a 0.16% administration fee. LEOFF 2 employer contribution rate is 5.24% of covered payroll. Source: Department of Retirement Systems Future rates are expected to be adjusted to meet system needs. The State Actuary s website (osa.leg.wa.gov), which is not incorporated into this Official Statement by reference, includes information regarding the values and funding levels of these retirement plans. It is expected that the contribution rates will increase in the coming years. Plan Funding Status and Unfunded Actuarial Liability. While the City s contributions represent its full current liability under the retirement systems, any unfunded pension benefit obligations could be reflected in future years as higher contribution rates. According to the Office of the State Actuary, as of June 30, 2010, PERS Plans 2 and 3 had no unfunded actuarial accrued liability. However, during the years 2001 through 2009 the rates adopted by the Legislature were lower than those that would have been required to produce actuarially required contributions to PERS Plan 1, a closed plan with a large proportion of the retirees. According to a report issued by the Office of the State Actuary in October 2011, the total unfunded actuarial accrued liability of PERS 1 is $3.238 billion as of June 30, In 2005 and 2006, the State Legislature enacted and authorized the PFC to adopt changes in contribution rates to PERS intended to amortize the PERS 1 unfunded actuarial liability by The employer contribution rates effective July 1, 2008 include a component dedicated to amortizing the local government share of the PERS Plan 1 unfunded actuarial liability, and a component of 0.16% for administrative expenses. During its 2011 session, the State Legislature eliminated the automatic benefit increase for PERS Plan 1 retirees, except for those retirees who currently receive benefits that fall below a minimum level. Eliminating the automatic benefit increases reduces the underfunded actuarial accrued liability of PERS Plan 1. Litigation challenging this legislation has been filed. These rates are also subject to change by future legislation enacted by the State Legislature to address future changes in actuarial and economic assumptions and investment performance. Deferred Compensation. The City offers its employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457. The plan permits employees to defer a portion of their salary until future years. The deferred compensation is not available to employees or their beneficiaries until termination, retirement, or unforeseeable emergency or upon death. 18

23 Other Post Employment Benefits. The City provides certain medical and disability benefits to retired firefighters and police officers who were hired prior to 1978 as required by RCW Entry into this system is now closed. Since the City s financial reporting is done on a cash-basis, the estimated liability of the City s Other Post Employment Benefits are not reflected in its financial statements. Risk Management The City is a member of the Cities Insurance Association of Washington (the CIAW ). Chapter RCW authorizes the governing body of any one or more governmental entities to form together into or join a pool or organization for the joint purchasing of insurance, and/or joint self-insuring, and/or joint hiring or contracting for risk management services to the same extent that they may individually purchase insurance, self-insure, or hire or contract for risk management services. An agreement to form a pooling arrangement was made pursuant to the provisions of chapter RCW, the Interlocal Cooperation Act. The pool was formed on September 1, 1988 when 34 cities in the State joined together by signing an Interlocal Governmental Agreement to pool their self-insured losses and jointly purchase insurance and administrative services. Currently, the CIAW has 110 member cities and 172 associate members. The pool allows members to jointly purchase insurance coverage and provide related services, such as administration, risk management, claims administration, etc. Coverage for Public Officials Liability is on a claims made basis. All other coverage is on an occurrence basis. The pool provides the following forms of group purchased insurance coverage for its members: property, liability, vehicle liability, other mobile equipment, boiler and machinery, bonds of various types, excess liability and public official liability. The pool acquires liability insurance from unrelated underwriters that are subject to a per-occurrence deductible of $100,000. Members are responsible for the first $1,000 of the deductible amount of each claim, while the pool is responsible for the remaining $99,000. Insurance carriers cover insured losses over $100,000 to the limits of each policy. Since the pool is a cooperative program, there is a joint liability among the participating members towards the sharing of the $99,000 portion of the deductible. The pool purchases a stop loss policy in the amount of $5,200,000 to eliminate any risk to members and in addition, fully funds the stop loss in the budget. Property insurance is subject to a per-occurrence deductible of $10,000. Members are responsible for the first $1,000 of the deductible amount of each claim, while the pool is responsible for the remaining $9,000. Boiler and machinery insurance is subject to a per-occurrence deductible of $2,500. Members are responsible for the deductible amount of each claim. Each new member now pays an admittance fee. This amount covers the member s share of unrestricted reserves. Members contract to remain in the pool for a minimum of one year, and must give notice before August 31 before terminating participation on the following September 1. The Interlocal Governmental Agreement is renewed automatically each year. Even after termination, a member remains responsible for contributions to the pool for any unresolved, unreported, and inprocess claims for the period they were a signatory to the Interlocal Governmental Agreement. The pool is fully funded by its member participants. Claims are filed by members with Canfield & Associates, which has been contracted to perform pool administration, claims adjustment and administration and loss prevention for the pool. On January 12, 2010, CIAW was issued a Cease and Desist Order by the State Office of Financial Management ( OFM ) based upon new revisions to the Washington Administrative Code affecting pool operations that went into effect that day. The CIAW Board approved a funding plan that included a retroactive assessment of full members during the period. On August 10, 2010, OFM approved the CIAW funding plan and vacated the Cease and Desist Order. During this time, CIAW continued to provide its members with its services and the daily operations were not affected. CIAW will collect an additional $197, during the next five years by reassessment, which will be calculated on an individual basis and will be invoiced separately from regular dues. Affected members, including the City, will have to pay approximately three to six percent of their premiums. Financial Information Basis of Accounting. The accounting and reporting policies of the City conform to the Budgeting, Accounting and Reporting System (BARS) as prescribed by the State Auditor. The accounts of the City are organized by fund and account group, each of which is considered a separate accounting entity. Each fund has a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues and expenditures or expenses, as appropriate. The City s resources are allocated to, 19

24 and accounted for in, individual funds according to the purposes for which they are spent and the means by which spending activities are controlled. The Budget Process. State law describes the procedure for presentation and adoption of the City s annual budget. The final budget for each calendar year is to be adopted before the end of the previous year. Prior to November of each year, the compiled budget requests for each department are presented to the City Council for review. The compiled budget requests are analyzed and developed, with the help of the Finance Department, into the expenditure program for the ensuing year. The budget includes all funds, revenues and reserves; is divided into programs and objects of expense; and includes all supporting data deemed advisable by the City Council or required by ordinance or state statute. The expenditures included in the budget for the ensuing year may not exceed the estimated revenues. The City Council is required to hold public hearings prior to budget adoption. Auditing of City Finances. The State Auditor is required to examine the affairs of cities comparable to the size of the City on an annual basis. The examination must include, among other things, the financial conditions and resources of the City, whether the laws and constitution of the state are being complied with, and the methods and accuracy of the accounts and reports of the City. Reports of the auditor s examinations are required to be filed in the office of the State Auditor and in the auditing department of the City. The most recent audit of the City covers the period January 1, 2009 through December 31, 2010 and is attached hereto as APPENDIX C. Authorized Investments Chapter RCW limits the investment of public funds to the following authorized investments: bonds of the State and any local government in the State, which bonds are rated at the time of investment in one of the three highest credit ratings by a nationally recognized rating agency; general obligation bonds of other states and subdivisions thereof so long as those bonds are rated in one of the three highest categories; registered warrants of a local government within the same county as the entity making the investment; and any investment authorized by law for the treasurer of the State or any local government exclusive of certificates of deposit of banks or bank branches not located in the State. Under chapter RCW, the State Treasurer may invest in non-negotiable certificates of deposit in designated qualified public depositories; in obligations of the U.S. government, its agencies and wholly owned corporations; in bankers acceptances; in commercial paper; in repurchase agreements; in the obligations of the federal home loan bank, federal national mortgage association and other government corporations subject to statutory provisions. Utility revenue bonds and warrants of any city and bonds or warrants of a local improvement district are also eligible investments (RCW ). Money available for investment may be invested on an individual fund basis or may, unless otherwise restricted by law, be commingled within one common investment portfolio. All income derived from such investment may be either apportioned to and used by the various participating funds or for the benefit of the general government in accordance with city ordinances or resolutions. Funds derived for the sale of bonds or other instruments of indebtedness will be invested or used in such manner as the authorizing ordinances, resolutions or bond covenants may lawfully prescribe. Local Government Investment Pool The State Treasurer s Office administers the Washington State Local Government Investment Pool (the LGIP ), a $5 to $8 billion dollar fund that invests money on behalf of more than 460 cities, counties and special taxing districts. In its management of the LGIP, the State Treasury adheres, at all times, to the principles appropriate for the prudent investment of public funds. These are, in priority order, (i) the safety of principal; (ii) the assurance of sufficient liquidity to meet cash flow demands; and (iii) to attain the highest possible yield within the constraints of the first two goals. Historically, the LGIP has had sufficient liquidity to meet all cash flow demands. The LGIP, authorized by chapter RCW, is a voluntary pool that provides its participants the opportunity to benefit from the economies of scale inherent in pooling. It is also intended to offer participants increased safety of principal and the ability to achieve a higher investment yield than would otherwise be available to them. The LGIP is a conservatively managed, highly liquid money market fund. The pool is restricted to investments with maturities of one year or less, and the average investment life typically is less than 90 days. Permissible investments include U.S. government and agency securities, bankers acceptances, high quality commercial paper, repurchase and reverse repurchase agreements, and certificates of deposit issued by qualified State depositories. As of February 29, 2012, the City's investments at market value totaled $1,838,278 of which $237,157 was cash, $1,590,826 was US Government Agency Bonds held in Washington State banks and $10,295 was invested in the LGIP. 20

25 Authorized Investments for Bond Proceeds Bond proceeds may be invested in mutual funds with portfolios consisting of U.S. government and guaranteed agency securities with average maturities of less than four years; municipal securities rated in one of the four highest categories; and money market funds consisting of the same, so long as municipal securities held in the fund(s) are in one of the two highest rating categories of a nationally recognized rating agency. Bond proceeds may also be invested in shares of money market funds with portfolios of securities otherwise authorized by law for investment by local governments (RCW ). Budgeted Unaudited Audited Audited Audited REVENUES Taxes $ 3,515,626 $ 2,947,607 $ 2,801,385 $ 2,071,067 $ 2,135,344 Licenses and Permits 242, , , , ,958 Intergovernmental 2,099,983 1,941, , , ,077 Charges for Goods and Services 113, , , ,204 22,144 Fines and Forfeitures 99,000 90, , , ,187 Miscellaneous 211, ,666 71,179 53, ,126 Other Financing Sources 1,548,838 1,514,530 1,896,171 1,081, ,100 TOTAL REVENUES $ 7,831,207 $ 7,038,940 $ 5,735,695 $ 3,819,523 $ 3,914,936 EXPENDITURES General Governmental $ 1,165,037 $ 1,189,657 $ 1,121,593 $ 1,150,038 $ 1,088,367 Security of Persons and Property 2,299,489 2,170,143 2,154,009 1,990,947 1,939,883 Physical Environment 17,983 17,417 18,709 14,876 14,792 Transportation 752, , , Economic Environment 195, , , , ,602 Mental and Physical Health - 1,327 1,296 1,226 1,145 Culture and Recreation 127, , , Debt Service 182, , , ,384 - Capital Outlay 1,368,995 2,652, , , ,777 Other Financing Uses 1,105,713 1,038, ,207, , ,978 TOTAL EXPENDITURES $ 7,214,763 $ 8,065,178 $ 6,082,212 $ 3,760,507 $ 3,931,544 Excess of Revenues Over (Under) Expenses $ 616,444 $ (1,026,238) $ (346,517) $ 59,016 $ (16,608) OTHER FINANCING SOURCES (USES) City of Woodland, Washington Combined Statement of Revenues and Expenditures For the Current Expense Fund (for the Year Ended December 31) Non Revenues $ 126,200 $ 305,747 1 $ 124,986 $ 136,565 $ 189,968 Non Expenditures (182,800) (209,466) (323,514) 1 (174,963) (147,354) TOTAL OTHER FINANCING $ (56,600) $ 96,282 $ (198,528) $ (38,398) $ 42,614 Excess of Revenues & Other Sources Over (Under) Expenditures & Other Uses $ 559,844 $ (929,956) $ (545,045) $ 20,618 $ 26,006 Beginning Fund Balance, Jan. 1 $ 614,666 $ 1,577,071 $ 2,106,468 $ 29,210 $ 3,204 Prior Year Adjustments $ - $ - $ - $ - $ - Ending Fund Balance, Dec. 31 $ 1,174,510 $ 647,115 $ 1,561,423 $ 49,828 $ 29, See footnotes on the following page. 21

26 1 Increase in Intergovernmental Revenues due to audit reporting change of managerial funds and rolling into one General Fund. 2 Increase in Charges for Goods and Services due to audit reporting change of managerial funds and rolling into one General Fund and transportation related to pass-through fees for professional services. 3 Increase in Capital Outlay due to Fund 316 SR-503 street improvements. 4 Decrease in Other Financing Uses due to 2010 transfer to close a prior CLID account that is paid in full. 5 Decrease in Other Financing Uses due to City Council approving a temporary reduction in transfer from Sales Tax (due to decreased revenues) to the General Reserve, Equipment Reserve, Fire Reserve and Street Funds. Source: Washington State Audit Reports and the City. 1 Decrease in Parks Reserve Fund due to purchase of new parkland at Scott Hill Road. 2 Decrease in Fire Department Reserve Fund due to purchase of capital items for Fire Department. 3 Decrease in Equipment Reserve Fund due to decrease in sales tax revenues due to economic downturn and also capital purchase of police vehicles. 4 Increase in General Fund Balance due to new accounting standards prescribed by the Washington State Auditor s Office to combine all managerial funds into one General Fund. 5 Decrease in Capital Project Reserve Fund General due to a downturn in the economy, decrease in Real Estate Excise Tax, decrease in Sales Tax Revenues and short-term interfund loans for street projects and fire debt/impact fees. 6 Decrease in Fire Department Reserve Fund due to payment on debt and capital outlay items for the Fire Department. 7 Decrease in Fire Department Reserve Fund due to retirement of debt on a fire truck. 8 Decrease in Bond Reserve Fund due to closing fund as bond was retired and no longer required. 9 Decrease in Capital Projects Reserve Fund Utilities due to a decrease in Revenues because of the economy (Water and Sewer Assessments), $326,285 contribution to the Water Fund with a portion for debt $138,710 and Water Sewer refurbishment project of $150,000. Source: Washington State Audit Reports and the City City of Woodland, Washington Ending Fund Balance Detail for the General Fund (For the Year Ended December 31) General Fund Balance $ 420,400 $ 885,454 Unaudited Actual Actual Actual Actual $ 49,829 $ 29,210 $ 3,204 Parks Reserve Fund 6, , , , ,284 Capital Projects Reserve Fund - General 198, , , , ,063 Capital Projects Reserve Fund - Utilities 266, , , , ,053 Fire Department Reserve Fund , , ,663 64,328 Equipment Reserve Fund 21, ,903 60,534 50,148 38,153 Bond Reserve Fund ,691 26,330 Total Fund Balance Available $ 913,298 $ 1,744,359 $ 1,581,041 $ 1,799,884 $ 2,459,415 City of Woodland ECONOMIC AND DEMOGRAPHIC INFORMATION The City of Woodland, located 20 miles north of Vancouver, Washington, is the southern gateway to Mt. St. Helens % of the City is located in Cowlitz County and 1.62% of the City is located in Clark County. The City is located at the junction of Interstate 5 and State Highway 503 covering approximately 4 square miles and is one of the oldest communities in the State serving as a gateway to Mt. St. Helens and the Lewis River recreational areas. The City has become a center for nurseries, bulb farms, manufacturing of various goods and products including fishing rod manufacturers, paper products, carbonate products, cold storage, and other industries. 22

27 Cowlitz County The County is home to approximately 100,000 residents. Roughly 58% of those live in the incorporated cities of Castle Rock, Kelso, Longview, Kalama, and Woodland. The remaining 42% live in rural, unincorporated communities such as Ryderwood, Toutle, Yale, Silver Lake, Lexington, Ariel and Cougar. The County covers 1,139 square miles within the southwestern region of Washington. The County shares a border with Skamania County to the east, Lewis County to the north and Wahkiakum County to the west. The County produces a large supply of logs and finished lumber for domestic and international markets, but has become more diversified. Adjacent transportation corridors including Interstate 5, the Columbia River and a major rail line have allowed Cowlitz County to access major markets throughout the world. Three ports contribute significantly to the County s position as a regional trade center. Source: Washington State Office of Financial Management Population Estimates City of Year Woodland Cowlitz County , , , , ,195 99, ,135 99, ,960 97,800 Per Capita Personal Income Cowlitz Washington State Nation County Metropolitan Non-Metro Metropolitan Non-Metro $30,859 $44,324 $32,439 $41,223 $31, ,646 45,258 32,681 42,430 31, ,704 43,725 31,125 41,310 30, ,719 41,083 28,819 39,548 28, ,779 38,121 27,061 37,082 27,061 1 Most current information available. Source: United States Bureau of Economic Analysis Cowlitz County Major Employers No. of Employer Product or Service Employees Peace Health/St. John Medical Center Healthcare 1,874 Weyerhaeuser Wood products 1,580 Longview Fibre Company Kraft paper 1,020 Longview School District Education 900 Kelso School District Education 832 Foster Farms Chicken processing 800 Lower Columbia College Community college 738 J.H. Kelly Contractor 600 Cowlitz County Government 570 Safeway Grocery 550 Source: Cowlitz-Lewis Economic Development District 23

28 Resident Civilian Labor Force and Employment Data (Annual Averages) State of Washington Civilian Labor Force 3,487,820 3,484,820 3,516,470 3,522,800 3,472,120 Total Employed 3,172,690 3,165,350 3,167,400 3,193,290 3,283,920 Total Unemployed 315, , , , ,200 % Unemployed 9.0% 9.2% 9.9% 9.4% 5.4% Cowlitz County Civilian Labor Force 42,980 43,270 44,500 44,920 44,170 Total Employment 37,970 38,040 38,700 38,910 40,580 Total Unemployment 5,010 5,230 5,800 6,010 3,590 % Unemployed 11.7% 12.1% 13.0% 13.4% 8.1% 1 Data through January, Source: Washington State Department of Employment Security Non-Agricultural Wage and Salary Workers Employed in the Longview Metropolitan Statistical Area (Cowlitz County) (Annual Averages) Total Nonfarm 35,900 35,500 35,800 35,800 37,600 Total Private 29,800 29,500 30,00 29,900 31,600 Mining, Logging and Construction 2,500 2,900 3,100 2,800 3,500 Manufacturing 5,800 6,000 6,000 6,000 6,600 Private Service Providing 21,500 20,700 20,900 21,100 27,500 Trade, Transp., Warehousing & Utilities 7,400 7,300 7,400 7,500 7,900 Education & Health Services 5,500 5,400 5,300 5,300 5,100 Leisure & Hospitality 3,100 3,200 3,200 3,200 3,400 Government 6,100 5,900 5,800 5,900 6,000 1 Data through January, Source: Washington State Department of Employment Security INITIATIVES AND REFERENDA Under the State Constitution, the voters of the State have the ability to initiate legislation through the power of initiative and referendum. Initiatives to the State Legislature and initiatives to the voters are submitted upon receipt of petitions signed by at least 8% of the number of voters registered and voting for the office of Governor at the preceding regular gubernatorial election. Referendum petitions require the signature by at least 4% of the number of voters voting for the office of Governor in the preceding regular gubernatorial election. Qualifying initiatives to the voters and qualifying referenda are submitted at the next state general election and must be approved by a majority of voters to be enacted into law. Qualifying initiatives to the Legislature must be submitted to the State Legislature at its regular session each January. Once submitted, the State Legislature must either adopt the initiative as proposed, reject the proposed initiative (in which case the initiative must be placed on the ballot at the next state general election) or approve an amended version of the proposed initiative (in which case both the amended version and the original proposal must be placed on the next state general election ballot). Any initiative approved by a majority of voters may not be amended or repealed by the State Legislature within a period of two years following enactment, except by a vote of two thirds of all the members elected to each house of the State Legislature; after two years, the law is subject to amendment or repeal by the State Legislature in the same manner as other laws. 24

29 TAX EXEMPTION Exclusion From Gross Income. In the opinion of Bond Counsel, under existing federal law and assuming compliance with applicable requirements of the Internal Revenue Code of 1986, as amended (the Code ), that must be satisfied subsequent to the issue date of the Bonds, interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the alternative minimum tax applicable to individuals. Continuing Requirements. The City is required to comply with certain requirements of the Code after the date of issuance of the Bonds in order to maintain the exclusion of the interest on the Bonds from gross income for federal income tax purposes, including, without limitation, requirements concerning the qualified use of Bond proceeds and the facilities financed or refinanced with Bond proceeds, limitations on investing gross proceeds of the Bonds in higher yielding investments in certain circumstances, and the requirement to comply with the arbitrage rebate requirement to the extent applicable to the Bonds. The City has covenanted in the Bond Ordinance to comply with those requirements, but if the City fails to comply with those requirements, interest on the Bonds could become taxable retroactive to the date of issuance of the Bonds. Bond Counsel has not undertaken and does not undertake to monitor the City's compliance with such requirements. Corporate Alternative Minimum Tax. While interest on the Bonds also is not an item of tax preference for purposes of the alternative minimum tax applicable to corporations, under Section 55 of the Code, tax exempt interest, including interest on the Bonds, received by corporations is taken into account in the computation of adjusted current earnings for purposes of the alternative minimum tax applicable to corporations (as defined for federal income tax purposes). Under the Code, alternative minimum taxable income of a corporation will be increased by 75% of the excess of the corporation's adjusted current earnings (including any tax exempt interest) over the corporation's alternative minimum taxable income determined without regard to such increase. A corporation's alternative minimum taxable income, so computed, that is in excess of an exemption of $40,000, which exemption will be reduced (but not below zero) by 25% of the amount by which the corporation's alternative minimum taxable income exceeds $150,000, is then subject to a 20% minimum tax. A small business corporation is exempt from the corporate alternative minimum tax for any taxable year beginning after December 31, 1997, if its average annual gross receipts during the three-taxable-year period beginning after December 31, 1993, did not exceed $5,000,000, and its average annual gross receipts during each successive three-taxable-year period thereafter ending before the relevant taxable year did not exceed $7,500,000. Tax on Certain Passive Investment Income of S Corporations. Under Section 1375 of the Code, certain excess net passive investment income, including interest on the Bonds, received by an S corporation (a corporation treated as a partnership for most federal tax purposes) that has Subchapter C earnings and profits at the close of the taxable year may be subject to federal income taxation at the highest rate applicable to corporations if more than 25% of the gross receipts of such S corporation is passive investment income. Foreign Branch Profits Tax. Interest on the Bonds may be subject to the foreign branch profits tax imposed by Section 884 of the Code when the Bonds are owned by, and effectively connected with a trade or business of, a United States branch of a foreign corporation. Possible Consequences of Tax Compliance Audit. The IRS has established a general audit program to determine whether issuers of tax-exempt obligations, such as the Bonds, are in compliance with requirements of the Code that must be satisfied in order for interest on those obligations to be, and continue to be, excluded from gross income for federal income tax purposes. Bond Counsel cannot predict whether the IRS would commence an audit of the Bonds. Depending on all the facts and circumstances and the type of audit involved, it is possible that commencement of an audit of the Bonds could adversely affect the market value and liquidity of the Bonds until the audit is concluded, regardless of its ultimate outcome. CERTAIN OTHER FEDERAL TAX CONSEQUENCES Bonds Qualified Tax-Exempt Obligations for Financial Institutions. Section 265 of the Code generally provides that 100% of any interest expense incurred by banks and other financial institutions allocable to tax-exempt obligations acquired after August 7, 1986, will be disallowed as a tax deduction. However, if the tax-exempt obligations are obligations other than private activity bonds, are issued by a governmental unit that, together with all entities subordinate to it, does not reasonably anticipate issuing more than $10,000,000 of tax-exempt obligations (other than certain private activity bonds and other obligations not required to be included in such calculation) in the current calendar year, and are designated by the governmental unit as qualified tax-exempt obligations, only 20% of any interest expense deduction allocable to those obligations will be disallowed. 25

30 The City is a governmental unit that, together with all subordinate entities, reasonably anticipates issuing less than $10,000,000 of tax-exempt obligations (other than private activity bonds and other obligations not required to be included in such calculation) during the current calendar year, and has designated the Bonds as qualified tax-exempt obligations for purposes of the 80% financial institution interest expense deduction. Therefore, only 20% of the interest expense deduction of a financial institution allocable to the Bonds will be disallowed for federal income tax purposes. Original Issue Premium. The Bonds maturing in 2017, 2020, 2022, 2027, 2032 and 2036 have been sold at prices reflecting original issue premium ( Premium Bonds ). An amount equal to the excess of the purchase price of a Premium Bond over its stated redemption price at maturity constitutes premium on such Premium Bond. A purchaser of a Premium Bond must amortize any premium over such Premium Bond's term using constant yield principles, based on the purchaser's yield to maturity. The amount of amortizable premium allocable to an interest accrual period for a Premium Bond will offset a like amount of qualified stated interest on such Premium Bond allocable to that accrual period, and may affect the calculation of alternative minimum tax liability described above. 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 Premium Bonds, 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 Premium Bonds. Reduction of Loss Reserve Deductions for Property and Casualty Insurance Companies. Under Section 832 of the Code, interest on the Bonds received by property and casualty insurance companies will reduce tax deductions for loss reserves otherwise available to such companies by an amount equal to 15% of tax exempt interest received during the taxable year. Effect on Certain Social Security and Retirement Benefits. Section 86 of the Code requires recipients of certain Social Security and certain Railroad Retirement benefits to take receipts or accruals of interest on the Bonds into account in determining gross income. Other Possible Federal Tax Consequences. Receipt of interest on the Bonds may have other federal tax consequences as to which prospective purchasers of the Bonds may wish to consult their own tax advisors. Potential Future Federal Tax Law Changes. From time to time, there are legislative proposals in Congress which, if enacted, could require changes in the description of federal tax matters relating the Bonds set forth above or adversely affect the market value of the Bonds. It cannot be predicted whether future legislation may be proposed or enacted that would affect the federal tax treatment of interest received on the Bonds. Prospective purchasers of the Bonds should consult with their own tax advisors regarding any proposed or pending legislation that would change the federal tax treatment of interest on the Bonds. UNDERTAKING TO PROVIDE CONTINUING DISCLOSURE Basic Undertaking to Provide Annual Financial Information and Notice of Listed Events. To meet the requirements of United States Securities and Exchange Commission ( SEC ) Rule 15c2-12(b)(5) (the Rule ), as applicable to a participating underwriter for the Bonds, the City will undertake (the Undertaking ) for the benefit of holders of the Bonds to provide or cause to be provided, either directly or through a designated agent, to the Municipal Securities Rulemaking Board (the MSRB ), in an electronic format as prescribed by the MSRB, accompanied by identifying information as prescribed by the MSRB: (1) Annual financial information and operating data of the type included in this Official Statement as generally described below ( annual financial information ); and (2) Timely notice (not in excess of ten business days after the occurrence of the event) of the occurrence of any of the following events with respect to the Bonds: principal and interest payment delinquencies; non-payment related defaults, if material; unscheduled draws on debt service reserves reflecting financial difficulties; 26

31 unscheduled draws on credit enhancements reflecting financial difficulties; substitution of credit or liquidity providers, or their failure to perform; adverse tax opinions, the issuance by the IRS of proposed or final determinations of taxability, Notice of Proposed Issue (IRS Form 5701 TEB) or other material notices or determinations with respect to the tax status of the Bonds; modifications to rights of holders of the Bonds, if material; Bond calls (other than scheduled mandatory redemptions of Term Bonds), if material, and tender offers; defeasances; release, substitution, or sale of property securing repayment of the Bonds, if material; rating changes; bankruptcy, insolvency, receivership or similar event of the City, as such Bankruptcy Events are defined in Rule 15c2-12; the consummation of a merger, consolidation, or acquisition involving the City or the sale of all or substantially all of the assets of the City, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and appointment of a successor or additional trustee or the change of name of a trustee, if material. The City also will provide to the MSRB timely notice of a failure by the City to provide required annual financial information on or before the date specified below. Type of Annual Financial Information Undertaken to be Provided. The annual financial information that the City undertakes to provide will consist of: (i) (ii) (iii) (iv) (v) annual financial statements prepared (except as noted in the financial statements) in accordance with generally accepted accounting principles applicable to State local governmental units, as such principles may be changed from time to time, which statements shall not be audited, except, however, that if and when audited financial statements are otherwise prepared and available to the City they will be provided; outstanding general obligation debt; assessed valuation for the fiscal year; regular property tax levy rate and regular property tax levy rate limit for the fiscal year; and general fund revenues from other major tax sources. The annual financial information will be provided to the MSRB not later than the last day of the ninth month after the end of each fiscal year of the City (currently, a fiscal year ending December 31), as such fiscal year may be changed as required or permitted by State law, commencing with the City s fiscal year ending December 31, The annual financial information may be provided in a single or multiple documents, and may be incorporated by specific reference to documents available to the public on the Internet Website of the MSRB or filed with the SEC. Amendment of Undertaking. The Undertaking is subject to amendment after the primary offering of the Bonds without the consent of any holder of any Bond, or of any broker, dealer, municipal securities dealer, participating underwriter, rating agency or the MSRB, under the circumstances and in the manner permitted by the Rule. 27

32 The City will give notice to the MSRB of the substance (or provide a copy) of any amendment to the Undertaking and a brief statement of the reasons for the amendment. If the amendment changes the type of annual financial information to be provided, the annual financial information containing the amended financial information will include a narrative explanation of the effect of that change on the type of information to be provided. Termination of Undertaking. The City s obligations under this Undertaking shall terminate upon the legal defeasance of all of the Bonds. In addition, the City s obligations under this Undertaking shall terminate if those provisions of the Rule which require the City to comply with this Undertaking become legally inapplicable in respect of the Bonds for any reason, as confirmed by an opinion of nationally recognized bond counsel or other counsel familiar with federal securities laws delivered to the City, and the City provides timely notice of such termination to the MSRB. Remedy for Failure to Comply with Undertaking. If the City or any other obligated person fails to comply with the Undertaking, the City will proceed with due diligence to cause such noncompliance to be corrected as soon as practicable after the City learns of any failure. No failure by the City or other obligated person to comply with the Undertaking shall constitute a default in respect of the Bonds. The sole remedy of any holder of a Bond shall be to take such actions as that holder deems necessary, including seeking an order of specific performance from an appropriate court, to compel the City or other obligated person to comply with the Undertaking. Prior Compliance. The City is in compliance with its previous undertakings to provide continuing disclosure under the Rule. Underwriting Agreement UNDERWRITING AND LEGAL The Bonds are being purchased by Martin Nelson & Co., Inc., acting as the Underwriter. The purchase contract provides that the Underwriter will purchase all of the Bonds, if any are purchased, at a price of % of the par value of the Bonds. The Bonds will be reoffered at an average price of % of the par value of the Bonds, resulting in an underwriting spread of 1.10%. After the initial public offering, the public offering prices may be varied from time to time. Rating Standard & Poor s Ratings Services has assigned a rating of A to the Bonds. The rating reflects only the view of the rating agency and an explanation of the significance of the rating may be obtained from the rating agency. There is no assurance that the rating will be retained for any given period of time or that the rating will not be revised downward or withdrawn entirely by the rating agency if, in its judgment, circumstances so warrant. Any such downward revision or withdrawal of the rating will be likely to have an adverse effect on the market price of the Bonds. Absence of Material Litigation There is no litigation pending questioning the validity of the Bonds, or the power and authority of the City to issue the Bonds. Legal Opinion Legal matters incident to the authorization, issuance and sale of the Bonds by the City are subject to the approving legal opinion of Foster Pepper PLLC, Seattle, Washington, Bond Counsel. The form of the opinion of Bond Counsel with respect to the Bonds is attached as Appendix A. The opinion of Bond Counsel is given based on factual representations made to Bond Counsel, and under existing law, as of the date of initial delivery of the Bonds, and Bond Counsel assumes no obligation to revise or supplement its opinion to reflect any facts or circumstances that may thereafter come to its attention, or any changes in law that may thereafter occur. The opinion of Bond Counsel is an expression of its professional judgment on the matters expressly addressed in its opinion and does not constitute a guarantee of result. Bond Counsel will be compensated only upon the issuance and sale of the Bonds. Conflicts of Interest Some of or all of the fees of the Underwriter and Bond Counsel are contingent upon the issuance and sale of the Bonds. None of the City Council members or other officials of the City have interests in the issuance of the Bonds that are prohibited by applicable law. Bond Counsel from time to time may serve as counsel to the Underwriter with respect to bonds issued by issuers other than the City. 28

33 Official Statement Certificate At the time of delivery of the Bonds, one or more officials of the City will furnish a certificate stating that to the best of his, her or their knowledge, the Official Statement, as of its date and as of the date of delivery of the Bonds, does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained herein, in light of the circumstances under which they were made, not misleading. The City has authorized the delivery of this Official Statement. CITY OF WOODLAND, WASHINGTON By: /s/ Grover B. Laseke Mayor 29

34 Appendix A FORM OF LEGAL OPINION

35 [FORM OF BOND COUNSEL OPINION] City of Woodland, Washington Re: City of Woodland, Washington $2,630,000 Limited Tax General Obligation Improvement and Refunding Bonds, 2012 We have served as bond counsel to the City of Woodland, Washington (the City ), in connection with the issuance of the above-referenced bonds (the Bonds ), and in that capacity have examined such law and such certified proceedings and other documents as we have deemed necessary to render this opinion. As to matters of fact material to this opinion, we have relied upon representations contained in the certified proceedings and other certifications of public officials furnished to us, without undertaking to verify the same by independent investigation. The Bonds are issued by the City pursuant to Ordinance No (the Bond Ordinance ) for general City purposes to provide the funds to (i) finance the cost of constructing and equipping a new police facility and certain other improvements, (ii) currently refund the City s outstanding Limited Tax General Obligation Bonds, 2005, and (iii) pay the administrative costs of such refunding and the costs of issuance and sale of the bonds, all as set forth in the Bond Ordinance. Reference is made to the Bonds and the Bond Ordinance for the definitions of capitalized terms used and not otherwise defined herein. We have not been engaged to review and thus express no opinion concerning the completeness or accuracy of any official statement, offering circular or other sales or disclosure material relating to the issuance of the Bonds or otherwise used in connection with the Bonds. Under the Internal Revenue Code of 1986, as amended (the Code ), the City is required to comply with certain requirements after the date of issuance of the Bonds in order to maintain the exclusion of the interest on the Bonds from gross income for federal income tax purposes, including, without limitation, requirements concerning the qualified use of Bond proceeds and the facilities financed or refinanced with Bond proceeds, limitations on investing gross proceeds of the Bonds in higher yielding investments in certain circumstances and the arbitrage rebate requirement to the extent applicable to the Bonds. The City has covenanted in the Bond Ordinance to comply with those requirements, but if the City fails to comply with those requirements, interest on the Bonds could become taxable retroactive to the date of issuance of the Bonds. We have not undertaken and do not undertake to monitor the City s compliance with such requirements. Based upon the foregoing, as of the date of initial delivery of the Bonds to the purchaser thereof and full payment therefor, it is our opinion that under existing law: 1. The City is a duly organized and legally existing code city under the laws of the State of Washington. TEL: FAX: THIRD AVENUE, SUITE 3400 SEATTLE, WASHINGTON SEATTLE WASHINGTON SPOKANE WASHINGTON

36 City of Woodland, Washington [Date] Page 2 2. The Bonds have been duly authorized and executed by the City and are issued in full compliance with the provisions of the Constitution and laws of the State of Washington and the ordinances of the City relating thereto. 3. The Bonds constitute valid and binding general obligations of the City payable from annual ad valorem taxes to be levied within the constitutional and statutory tax limitations provided by law without a vote of the electors of the City on all of the taxable property within the City, except only to the extent that enforcement of payment may be limited by bankruptcy, insolvency or other laws affecting creditors rights and by the application of equitable principles and the exercise of judicial discretion in appropriate cases. 4. Assuming compliance by the City after the date of issuance of the Bonds with applicable requirements of the Code, the interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the alternative minimum tax applicable to individuals; however, while interest on the Bonds also is not an item of tax preference for purposes of the alternative minimum tax applicable to corporations, interest on the Bonds received by corporations is to be taken into account in the computation of adjusted current earnings for purposes of the alternative minimum tax applicable to corporations, interest on the Bonds received by certain S corporations may be subject to tax, and interest on the Bonds received by foreign corporations with United States branches may be subject to a foreign branch profits tax. We express no opinion regarding any other federal tax consequences of receipt of interest on the Bonds. This opinion is given as of the date hereof, and we assume no obligation to revise or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention, or any changes in law that may hereafter occur. We bring to your attention the fact that the foregoing opinions are expressions of our professional judgment on the matters expressly addressed and do not constitute guarantees of result. Respectfully submitted,

37 Appendix B BOOK-ENTRY ONLY SYSTEM

38 The Depository Trust Company A subsidiary of The Depository Trust & Clearing Corporation Sample Offering Document Language Describing DTC and Book-Entry-Only Issuance 1. The Depository Trust Company ( DTC ), New York, NY, will act as securities depository for the securities (the Securities ). The Securities will be issued as fully-registered securities registered in the name of Cede & Co. (D TC s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Security certificate will be issued for [each issue of] the Securities, [each] in the aggregate principal amount of such issue, and will be deposited with DTC. [If, however, the aggregate principal amount of [any] issue exceeds $500 million, one certificate will be issued with respect to each $500 million of principal amount, and an additional certificate will be issued with respect to any remaining principal amount of such issue.] 2. DTC, the world s largest securities de pository, 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 m illion 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 a Standard & Poor s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at 3. Purchases of Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the Securities on DTC s records. The ownership interest -i- SOL

39 of each actual purchaser of each Security ( 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 Securities 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 Securities, except in the event that use of the book-entry system for the Securities is discontinued. 4. To facilitate subsequent transfers, all Securities 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 Securities 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 Securities; DTC s records reflect only the identity of the Direct Participants to whose accounts such Securities are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. 5. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. [Beneficial Owners of Securities may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Securities, such as redemptions, tenders, defaults, and proposed amendments to the Security documents. For example, Beneficial Owners of Securities may wish to ascertain that the nominee holding the Securities for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them.] 6. Redemption notices shall be sent to DTC. If less than all of the Securities within an issue are being redeemed, DTC s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. 7. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Securities unless authorized by a Direct Participant in accordance with DTC s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co. s consenting or voting rights to those Direct Participants to whose accounts Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy). 8. Redemption proceeds, distributions, and dividend payments on the Securities 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 -ii- SOL

40 corresponding detail information from Issuer or Agent, on payable date in accordance with their respective holdings shown on DTC s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in street name, and will be the responsibility of such Participant and not of DTC, Agent, or Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of Issuer or Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursem ent of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. 9. A Beneficial Owner shall give notice to elect to have its Securities purchased or tendered, through its Participant, to [Tender/Remarketing] Agent, and shall effect delivery of such Securities by causing the Direct Participant to transfer the Participant s interest in the Securities, on DTC s records, to [Tender/Remarketing] Agent. The requirement for physical delivery of Securities in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Securities are transf erred by Direct Participants on DTC s records and followed by a book-entry credit of tendered Securities to [Tender/Remarketing] Agent s DTC account. 10. DTC may discontinue providing its services as depository with respect to the Securities at any time by giving reasonable notice to Issuer or Agent. Under such circumstances, in the event that a successor depository is not obtained, Security certificates are required to be printed and delivered. 11. Issuer may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Security certificates will be printed and delivered to DTC. 12. The information in this section concerning DTC and DTC s book-entry system has been obtained from sources that Issuer believes to be reliable, but Issuer takes no responsibility for the accuracy thereof. -iii- SOL

41 Appendix C AUDIT REPORT

42 Washington State Auditor s Office Financial Statements Audit Report City of Woodland Cowlitz County Audit Period January 1, 2009 through December 31, 2010 Report No Issue Date March 26, 2012

43 Washington State Auditor Brian Sonntag March 26, 2012 Mayor and City Council City of Woodland Woodland, Washington Report on Financial Statements Please find attached our report on the City of Woodland s financial statements. We are issuing this report in order to provide information on the City s financial condition. Sincerely, BRIAN SONNTAG, CGFM STATE AUDITOR Insurance Building, P.O. Box Olympia, Washington (360) TDD Relay (800) FAX (360)